diff --git a/parsed_sections/prospectus_summary/1997/APT_alpha-pro_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/APT_alpha-pro_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..123cafcfccd12e7e78c5b736e5b2ba74c1b765b3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/APT_alpha-pro_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements contained elsewhere in this Prospectus. Investors should carefully consider information set forth under the heading "Risk Factors". THE COMPANY The Company develops, manufactures and markets disposable protective apparel, food industry, infection control, wound care and consumer products for the cleanroom, food services, industrial, medical, dental and consumer markets. The Company operates through four divisions: apparel; food industry; mask and shield; and wound care. The Company's products are primarily sold under the "Alpha Pro Tech" brand names but are also sold for use under private label. The Company's products are classified into five groups: disposable protective apparel consisting of a complete line of shoecovers, headcovers, gowns, coveralls and labcoats; food industry apparel consisting of a line of automated shoecovers, sleeve protectors, aprons, coveralls and bus boy jackets; infection control products consisting of a line of facial masks and facial shields; wound care products consisting of a line of mattress overlays, wheelchair covers, geriatric chair surfaces, operating room table surfaces and pediatric surfaces; consumer products consisting of a line of pet bedding and pet toys. The Company's strategy is to grow its cleanroom division through its exclusive Agreement with VWR Scientific Products ("VWR") (formerly Baxter Scientific), by increasing its manufacturing capabilities to meet VWR's needs. The Company entered into an exclusive distribution agreement with a major supplier to the food industry to launch a line of innovative new products to help solve a major problem in the food industry: accidents that occur because of employees slipping and falling on wet slippery surfaces found in restaurants and food processing plants and to help decrease the number of burns caused by frying and grilling. The Company intends to also maintain its core business in the medical, dental, industrial and health related markets by using its existing distributors. The Company's products are used primarily in hospitals, clean rooms, laboratories and dental offices and are distributed principally in the United States through a network presently consisting of four purchasing groups, ten major distributors, approximately 200 additional distributors, approximately 30 independent sales representatives and a Company sales force of 7 people. <TABLE> <CAPTION> <S> <C> The Offering Securities Offered Common Stock 3,626,935 shares of Common Stock. See "Description of Securities". Of the 3,626,935 shares of Common Stock $.01 Par Value per Share being offered hereby, 119,048 shares are to be issued from time to time upon the exercise of certain Warrants described herein and 810,000 shares of Common Stock are to be issued from time to upon the exercise of stock options. Of the 2,697,887 remaining shares being offered hereby, 759,221 shares were issued in connection with private placements, and 1,610,333 shares were issued in connection with the settlement of certain debt obligations of the Company and 195,000 shares were issued in connection with the exercise of consultants options, all pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Shares underlying the Warrants and Options will be sold following exsercise. See "Selling Stockholders". Common Stock Outstanding and to be 24,047,449 shares of Common Outstanding Stock at June 30, 1997 and 25,109,830 shares as adjusted for this Offering (1) (2). Warrants and Options 119,048 Warrants and 3,475,000 Options at June 30, 1997 Outstanding and -0- Warrants and 2,665,000 Options to be outstanding as adjusted for this Offering. Use of Proceeds This Offering is made by Selling Stockholders and the Company will not receive any of the proceeds of such sales. See "Use of Proceeds" and "Selling Stockholders". Risk Factors This Offering involves certain risks. See "Risk Factors". NASD Symbol Common Stock........ APTD </TABLE> (1) Does not include as outstanding 119,048 shares reserved for issuance upon the exercise of Warrants and 3,475,000 shares reserved for issuance upon the exercise of certain Options and treats as to be outstanding the 119,048 shares and 810,000 shares being registered hereby to be issued upon the exercise of Warrants and Options respectively. (2) Does not include 100,000 additional shares reserved for issuance under the Company's stock option plan for directors as of June 30, 1997. - ------------------------ See "The Company",--"Recent Developments"--"Private Placements", "Management--Stock Option Plans", "Description of Securities" and Note 10 of Notes to Consolidated Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CERS_cerus-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CERS_cerus-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a893d3b294e2b81deb5f71c4f579250ccc3b63b9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CERS_cerus-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Except as set forth in the financial statements or as otherwise indicated herein, information in this Prospectus gives effect to (i) the anticipated reincorporation of the Company from California to Delaware to be effected prior to the effective date of this offering, (ii) the 1.47-for-one split of the outstanding Common Stock effected in January 1997, (iii) the conversion of each outstanding share of Preferred Stock into 1.47 shares of Common Stock, which will occur automatically upon the closing of this offering, and assumes the exercise of outstanding warrants, including the net exercise of certain of such warrants, to purchase 47,950 shares of capital stock (on an as-converted basis) (the "Warrant Exercise"), which warrants expire upon the closing of this offering, and assumes that the Underwriters' over-allotment option is not exercised. See "Description of Capital Stock" and "Underwriters." This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Cerus Corporation ("Cerus" or the "Company") is developing systems designed to improve the safety of blood transfusions by inactivating infectious pathogens in blood components used for transfusion (platelets, fresh frozen plasma ("FFP") and red blood cells) and inhibiting the leukocyte (white blood cell) activity that is responsible for certain adverse immune and other transfusion-related reactions. Preclinical studies conducted by the Company have indicated the ability of these systems to inactivate a broad array of viral and bacterial pathogens that may be transmitted in blood component transfusions and to inhibit leukocyte activity. The Company believes that, as a result of the mechanism of action of its proprietary technology, its systems also have the potential to inactivate many new pathogens before they are identified and before tests have been developed to detect their presence in the blood supply. Because the Company's systems are being designed to inactivate rather than merely test for pathogens, the Company's systems also have the potential to reduce the risk of transmission of pathogens that would remain undetected by testing. Despite recent improvements in testing and processing of blood, patients receiving transfusions of blood components face a number of significant risks from blood contaminants, as well as adverse immune and other transfusion-related reactions induced by leukocytes. Viruses such as hepatitis B (HBV), hepatitis C (HCV), human immunodeficiency virus (HIV), cytomegalovirus (CMV) and human T-cell lymphotropic virus (HTLV) can present life-threatening risks. In addition, bacteria, the most common agents of transfusion-transmitted disease, can cause complications such as sepsis, which can result in serious illness or death. Although donor screening and diagnostic testing of donated blood have been successful in reducing the incidence of transmission of many pathogens, diagnostic testing has a number of limitations, such as the inability to detect pathogens prior to the generation of antibodies, ineffectiveness in detecting genetic variants of viruses, and the risk of human error. In addition, emerging or unidentified pathogens for which no tests exist also represent a threat to the blood supply. The continuing risk of transmission of serious diseases through transfusion of contaminated blood components from both known and unknown pathogens, together with the limitations of current approaches to providing a safe blood supply, have created the need for a new approach to blood-borne pathogen inactivation that is safe, easy to implement and cost-effective. The Company is designing its pathogen inactivation systems to provide therapeutically functional platelets, FFP and red cells following the inactivation treatment process. Pathogen inactivation systems being developed by the Company employ proprietary small molecule compounds that act by preventing the replication of nucleic acid (DNA or RNA); platelets, FFP and red blood cells do not contain nuclear DNA or RNA. When the inactivation compounds are introduced into the blood components for treatment, they cross bacterial cell walls or viral membranes, then move into the interior of the nucleic acid structure. When subsequently activated by an energy source, such as light, these compounds bind to the nucleic acid of the viral or bacterial pathogen, preventing its replication. A virus, bacteria or other pathogenic cell must replicate in order to cause infection. The Company's compounds react in a similar manner with the nucleic acid in leukocytes, thereby inhibiting the leukocyte activity that is responsible for certain adverse immune and other transfusion-related reactions. The Company is initially focusing its product development efforts on its platelet pathogen inactivation system. Platelet transfusions are used to prevent or control bleeding in platelet-deficient patients, such as those undergoing cancer chemotherapy or bone marrow transplant. The Company estimates the production of platelets in 1995 to have been 1.8 million transfusion units in North America, 1.4 million transfusion units in Western Europe and 800,000 transfusion units in Japan. The Company's platelet pathogen inactivation system applies a technology to prevent replication of nucleic acid that combines light and the Company's proprietary inactivation compound, S-59, which is a synthetic small molecule from a class of compounds known as psoralens. In September 1996, the Company completed a Phase 1b clinical trial to assess in healthy subjects the safety and tolerability of platelets treated with the Company's platelet pathogen inactivation system. In November 1996, the Company completed a Phase 2a clinical trial to assess post-transfusion recovery and lifespan of platelets treated with the system, including a device designed to reduce the amount of residual S-59 and S-59 breakdown products. The Company plans to conduct a Phase 2b clinical trial to assess the combined effect of treatment with the platelet pathogen inactivation system and gamma irradiation on post-transfusion platelet recovery and lifespan. The Company has recently submitted to the FDA a preliminary protocol for a Phase 3 clinical trial to assess the therapeutic efficacy of treated platelets in patients requiring platelet transfusion. The Company intends to submit in the first quarter of 1997 a preliminary protocol for a Phase 3 clinical trial to ethical committees of institutions that would be conducting such trial in Europe. The Company currently anticipates that such trials will commence by mid-1997. For more information on the clinical development status of this planned product, see "Business -- Products Under Development -- Platelet Program -- Development Status." The Company is also developing pathogen inactivation systems for use with FFP, which is used to control bleeding, and red blood cells, which are frequently administered to patients with anemia, trauma, surgical bleeding or genetic disorders. The Company estimates the production of FFP and red blood cells in 1995 to have been 3.3 million and 13.7 million transfusion units, respectively, in North America, 4.1 million and 14.3 million transfusion units, respectively, in Western Europe and 2.0 million and 3.0 million transfusion units, respectively, in Japan. The Company's FFP pathogen inactivation system is being designed to employ the S-59 compound and other technology similar to that used in the platelet pathogen inactivation system. The Company intends to submit an investigational new drug application to the U.S. Food and Drug Administration to commence Phase 1 clinical trials for its FFP pathogen inactivation system in early 1997. The red cell pathogen inactivation system being designed by the Company is based on the Company's proprietary S-303 compound, which can bind to nucleic acid in a manner similar to that of S-59, but without the need for the introduction of light. The Company has entered into two development and commercialization agreements with Baxter to develop, manufacture and market pathogen inactivation systems for platelets, FFP and red blood cells. The agreements provide for Baxter and the Company to share development expenses. Through December 31, 1996, Baxter has invested $7.0 million in the capital stock of the Company and has paid the Company up-front license fees and milestone and development payments totaling $13.7 million under these agreements. These agreements provide for Baxter's exclusive right and responsibility to market the systems worldwide and for the Company to receive a share of the gross profits from the sale of the systems. THE OFFERING <TABLE> <S> <C> Common Stock offered........................... 2,000,000 shares Common Stock to be outstanding after the offering..................................... 8,885,878 shares(1) Use of proceeds................................ For research and development activities, including continuing clinical trials, general and administrative support, capital expenditures, working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol.................. CERS </TABLE> - --------------- (1) Based upon the number of shares outstanding as of December 31, 1996. (Includes 496,878 shares to be issued in the Baxter Private Placement, assuming an initial public offering price of $15.00 per share.) Excludes, as of December 31, 1996, (i) 407,383 shares of Common Stock subject to outstanding options under the Company's 1996 Equity Incentive Plan and 547,067 shares reserved for future issuance thereunder, (ii) 220,500 shares of Common Stock reserved for future issuance under the Company's Employee Stock Purchase Plan and (iii) 35,478 shares of Preferred Stock subject to outstanding warrants, which will convert into warrants to purchase 52,152 shares of Common Stock upon the closing of this offering. See "Management -- Equity Incentive Plans" and Note 4 of Notes to Financial Statements. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 ------- --------- --------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue........................................................ $ 4,796 $ 6,799 $ 3,609 Operating expenses Research and development..................................... 5,680 8,125 12,080 General and administrative................................... 1,194 1,517 2,200 ------- ---------- ---------- Loss from operations........................................... (2,078) (2,843) (10,671) Other income (expense), net.................................... 278 483 464 ------- ---------- ---------- Net loss....................................................... $(1,800) $ (2,360) $ (10,207) ======= ========== ========== Pro forma net loss per share(1)................................ $(1.55) Shares used in computing pro forma net loss per share(1)....... 6,587,855 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 ------------------------------------------ ACTUAL PRO FORMA(2) AS ADJUSTED(3) -------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................... $ 6,002 $ 6,197 $ 40,028 Working capital......................................... 2,653 2,848 36,679 Total assets............................................ 8,486 8,681 42,512 Accumulated deficit..................................... (20,206) (20,206) (20,206) Stockholders' equity.................................... 4,839 5,034 38,865 </TABLE> - --------------- (1) See Note 1 of Notes to Financial Statements for a description of the method used in computing the pro forma net loss per share. (2) Gives effect to (i) the Warrant Exercise and (ii) the conversion of each outstanding share of Preferred Stock into 1.47 shares of Common Stock upon the closing of this offering. (3) As adjusted to reflect (i) the sale of 2,000,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $15.00 per share and receipt of the estimated net proceeds therefrom and (ii) the Baxter Private Placement. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CHH_choice_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CHH_choice_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c13b13030fea170e56532abdd6e532843809d1cd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CHH_choice_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summarizes certain information contained elsewhere in this Prospectus, including the appendices hereto (the "Prospectus"). Reference is made to, and this summary is qualified in its entirety by, the more detailed information set forth in this Prospectus, which should be read in its entirety. Unless the context otherwise requires, all references herein to Choice and to Franchising shall include their respective subsidiaries and all references herein to Franchising prior to the Distribution Date (as defined herein) shall refer to the Franchising Business (as defined herein) as operated by Choice. Unless otherwise indicated, all statistical information and data relating to the hotel industry in this Prospectus are derived from information provided by Smith Travel Research. Smith Travel Research has not consented to the use of the hotel industry data presented herein or provided any form of consultation, advice, or counsel regarding any aspects of, and is in no way whatsoever associated with, the proposed transaction. BACKGROUND Franchising is currently a wholly owned subsidiary of Choice. On or about October 15, 1997 (the "Distribution Date"), Choice intends to make a special dividend, consisting of the distribution (the "Distribution") to holders of outstanding shares of Choice Common Stock at the close of business on October 7, 1997 (the "Distribution Record Date"), on a share for share basis, of all outstanding shares of Franchising Common Stock. This Distribution will separate Choice's hotel franchising business from its hotel ownership and management business. Upon the Distribution, Choice will change its corporate name to Sunburst Hospitality Corporation (as renamed after the Distribution, "Sunburst") and will continue to own and operate hotel properties in the United States (the "Hotel Business"). Upon the Distribution, Franchising will change its name to Choice Hotels International, Inc. and will engage in the business of franchising hotels under the Clarion, Quality, Comfort, Sleep Inn, Rodeway, Econo Lodge and Mainstay brands and will own and operate 14 hotel properties in France, Germany and the United Kingdom (together, the "Franchising Business"). The Distribution is described in more detail herein. As of the date hereof, the thirty-three Manor Care Employees held options (the "Choice Options") to purchase up to 1,193,571 shares of Choice Common Stock issued in November 1996 as part of the Manor Care Spin-off (as defined herein) pursuant to the Choice Hotels International, Inc. 1996 Long-Term Incentive Plan (the "Choice Plan"). Under the Choice Plan, each outstanding Choice Option will be adjusted as a result of the Distribution in a manner described herein in order to preserve the financial value of such Choice Options prior to the Distribution. On or prior to the Distribution Date, each Manor Care Employee holding nonqualifed Choice Options may make a one-time election to choose a conversion award consisting of any percentage combination of an option to acquire Franchising Common Stock and an adjusted Choice Option, with the number of shares and the exercise price of each option adjusted so as to preserve the financial value of the outstanding Choice Options. The Franchising Options issuable to Manor Care Employees as part of the aforementioned adjustment to Choice Options and the shares of Franchising Common Stock issuable upon exercise of such Franchising Options will be issued pursuant to the Registration Statement of which this Prospectus is a part. <TABLE> <CAPTION> PAGE ---- <S> <C> INDEX TO FINANCIAL STATEMENTS............................................ F-1 ANNEX A: FORM OF RESTATED CERTIFICATE OF INCORPORATION OF CHOICE HOTELS FRANCHISING, INC............................................... A-1 ANNEX B: FORM OF AMENDED AND RESTATED BYLAWS OF CHOICE HOTELS INTERNATIONAL, INC............................................. B-1 ANNEX C: CHOICE HOTELS FRANCHISING, INC. 1997 LONG-TERM INCENTIVE PLAN... C-1 </TABLE> THE COMPANY Franchising is a Delaware corporation and a wholly owned subsidiary of Choice, formed in 1981. Franchising currently conducts a significant portion of the Franchising Business. Immediately prior to the Distribution, Franchising will succeed to that portion of the Franchising Business currently conducted by Choice or Choice's other subsidiaries. Franchising is one of the world's largest franchisors of hotels with 3,344 properties open and operating in 33 countries at May 31, 1997. These properties operate under one of Franchising's brand names: Comfort, Quality, Clarion, Sleep, Rodeway, Econo Lodge and Mainstay Suites. At May 31, 1997, another 820 franchise properties with a total of 72,093 rooms were under development. The principal executive offices of Franchising are located at 10750 Columbia Pike, Silver Spring, Maryland 20901. Its telephone number is (301) 797-5000. For additional information with respect to Franchising and the Franchising Business expected to be conducted by Franchising after the Distribution, see "Certain Information Concerning Franchising." THE OFFERING Securities Offered............ (i) options (the "Franchising Options") to purchase up to 1,193,571 shares of Franchising Common Stock, and (ii) up to 1,193,571 shares of Franchising Common Stock issuable upon exercise of the Franchising Options. Franchising Common Stock Outstanding................... Franchising is currently a wholly owned subsidiary of Choice. Based on the number of shares of Choice Common Stock outstanding on August 5, 1997, it is expected that approximately 60,200,784 shares of Franchising Common Stock will be issued in the Distribution. Use of Proceeds............... The Franchising Options will be issued as part of the adjustments of outstanding Choice Options and Franchising will receive no proceeds from such issuance. The proceeds to Franchising to be received from exercise of the Franchising Options will be used for working capital and other general corporate purposes. Proposed NYSE Symbol.......... CCH. The following portion of the Prospectus Summary presents a summary of the Distribution, Franchising (as its expected to be constituted after the Distribution), and Sunburst. THE DISTRIBUTION Distributed Company........... Choice Hotels Franchising, Inc. ("Franchising"), a Delaware corporation and a wholly owned subsidiary of Choice Hotels International, Inc., a Delaware corporation (the "Choice"), will, on the Distribution Date, own all of the business and assets of, and be responsible for all of the liabilities associated with, the business of franchising hotels under the Clarion(R), Quality(R), Comfort(R), Sleep Inn(R), Rodeway(R), Econo Lodge(R) and MainStay SuitesSM brands currently conducted by Franchising and certain of its subsidiaries as well as all European real estate assets currently held by Choice (the "Franchising Business"). Upon the Distribution, Franchising will change its corporate name to Choice Hotels International, Inc. Distributing Company.......... Choice Hotels International, Inc., a Delaware corporation ("Choice"). Upon the Distribution, Choice will continue to own and operate hotel properties in the U.S. (the "Hotel Business") and will change its corporate name upon the Distribution to Sunburst Hospitality Corporation (as renamed after the Distribution, "Sunburst"). Securities to Be Distributed.................. Approximately 60,200,784 shares of Franchising Common Stock based on 60,200,784 shares of Company Common outstanding as of August 5, 1997 (the "Annual Meeting Record Date"). Conditions to the Distribution................. Choice's stockholders approved the Distribution at Choice's Annual Meeting of Stockholders on September 16, 1997; however, the Choice Board of Directors has conditioned the effectiveness of the Distribution on satisfaction of certain conditions prior to the Distribution Record Date. The Board of Directors will not waive any of the conditions to the Distribution or make any changes in the terms of the Distribution unless the Board of Directors determines that such changes would not be materially adverse to Choice's stockholders. In determining whether any such changes would be materially adverse to Choice's stockholders, the Board of Directors will consider, as appropriate, advice from its outside advisors as well as the recommendation of management as to the potential impact of such changes on the Company and the Company's Stockholders. See "The Distribution-- Conditions; Termination." Distribution Ratio............ One share of Franchising Common Stock for each share of Choice Common Stock. Tax Consequences.............. Choice has conditioned the Distribution on receipt of a ruling from the Internal Revenue Service to the effect that, among other things, for federal income tax purposes, receipt of shares of Franchising Common Stock by Choice stockholders will be tax free. On September 12, 1997, Choice received such a ruling from the Internal Revenue Service. For a discussion of the effects on Choice and Franchising if the Distribution were not to qualify as tax free for federal income tax purposes, see "Risk Factors--Certain Tax Considerations." Risk Factors.................. Manor Care Employees should carefully consider all of the information contained in this Proxy Statement, including the matters described under "Risk Factors." Relationship between Choice and Franchising after the Distribution................. For purposes of governing the ongoing relationships between Choice and Franchising after the Distribution Date and in order to provide for an orderly transfer of the Franchising Business to Franchising and facilitate the transition to two separate publicly traded companies, Choice and Franchising will enter into a Distribution Agreement, a Strategic Alliance Agreement, Franchising Agreements and various other agreements with respect to, among other things, intercompany debt, tax matters, employee benefits, risk management and corporate and administrative services. See "Relationship Between Choice and Franchising After the Distribution." Choice and Franchising may be subject to certain potential conflicts of interest. See "Risk Factors--Potential Conflicts." Accounting Treatment.......... The historical combined financial statements of Franchising present its financial position, results of operations and cash flows as if it were a separate entity for all periods presented. Choice's historical basis in the assets and liabilities of Franchising has been carried over. See "Accounting Treatment," and the combined financial statements of Choice Hotels Franchising, Inc., contained elsewhere herein. Listing and Trading Market.... There is currently no public market for Franchising Common Stock. Choice has been approved to submit an application for listing the Franchising Common Stock on the New York Stock Exchange, subject to satisfaction of certain conditions; however, there can be no assurance that the Franchising Common Stock will ultimately be accepted for listing on the New York Stock Exchange or any other national stock exchange or market. Choice expects that no "when issued" trading market will exist prior to the time that Franchising's Registration Statement on Form 10 is declared effective by the Commission. See "Risk Factors--No Current Market for Franchising Common Stock; and --The Distribution--Listing and Trading of Franchising Common Stock." Record Date................... The Choice Board of Directors set the record date for the Distribution referred to herein as October 7, 1997 (the "Distribution Record Date") provided, however, that the Distribution remains subject to satisfaction of certain conditions prior to the Distribution Record Date. Distribution Date............. The Choice Board of Directors set the Distribution Date, as October 15, 1997. On the Distribution Date, Choice will deliver all outstanding shares of Franchising Common Stock to the Distribution Agent. As soon as practicable thereafter, the Distribution Agent will mail account statements reflecting ownership of the appropriate number of shares of Franchising Common Stock to Choice's stockholders entitled thereto. See "The Distribution--Manner of Effecting the Distribution." Distribution Agent............ ChaseMellon Shareholder Services, L.L.C., the transfer agent for the Company. Reverse Stock Split........... In connection with the Distribution, Choice shall effect a one-for-three reverse stock split of Choice Common Stock whereby every three shares of Choice Common Stock will be aggregated into one share of Choice Common Stock. See "Amendments to the Restated Certification of Incorporation of Choice-- Reverse Stock Split." CHOICE HOTELS FRANCHISING, INC. Business...................... Franchising is presently a wholly owned subsidiary of Choice. Following the Distribution, Franchising will conduct the Franchising Business as now conducted by Franchising, Choice and certain other subsidiaries of Choice. Franchising will be one of the world's largest franchisors of hotels with 3,344 properties open and operating in 33 countries at May 31, 1997. As a franchisor, Franchising will license hotel operators to use Franchising's brand names: Comfort(R), Quality(R), Clarion(R), Sleep(R), Rodeway(R), Econo Lodge(R) and MainStay SuitesSM (collectively, the "Choice Brands"), and will provide to these hotel operators products and services designed to increase their revenues and profitability. Following the Distribution, Franchising will also conduct Choice's European hotel operations, including Choice's indirect investment in Friendly Hotels, PLC. Board of Directors............ Effective as of the Distribution Date, the Board of Directors of Franchising is expected to consist of nine persons: Stewart Bainum, Jr., Stewart Bainum, Barbara Bainum, William R. Floyd, James H. Rempe, Robert C. Hazard, Jr., Gerald W. Petitt, Jerry E. Robertson, Ph.D and Frederic V. Malek. Post-Distribution Dividend Policy....................... The dividend policy of Franchising will be determined by Franchising's Board of Directors following the Distribution. It is expected that the Franchising Credit Facility (as defined below) will restrict Franchising's ability to pay dividends. See "Financing." Certain Restated Certificate of Incorporation and Bylaw Provisions................... The Restated Certificate of Incorporation (the "Franchising Certificate") and the Bylaws (the "Franchising Bylaws") of Franchising are substantially identical to, and contain no material differences from, the Choice Restated Certificate of Incorporation and Bylaws. Certain provisions of the Franchising Certificate and the Franchising Bylaws have the effect of delaying or making more difficult an acquisition of control of Franchising in a transaction not approved by its Board of Directors. These provisions have been designed to enable Franchising, especially in its initial years, to develop its businesses and foster its long-term growth without disruptions caused by the threat of a takeover not deemed by its Board of Directors to be in the best interests of Franchising. Such provisions could, however, deter an offer for Franchising Common Stock at a substantial premium to the then current market price or hinder a potential transaction that may be attractive to stockholders. See "Certain Information Concerning Franchising--Purposes and Effects of Certain Provisions of the Franchising Certificate and Bylaws." The Franchising Certificate would eliminate certain liabilities of directors in connection with the performance of their duties. See "Certain Information Concerning Franchising--Liability and Indemnification of Officers and Directors-- Elimination of Liability in Certain Circumstances." Principal Office.............. 10750 Columbia Pike, Silver Spring, Maryland 20901. Its telephone number is (301) 979-5000. SUNBURST HOSPITALITY CORPORATION Business...................... Following the Distribution, Sunburst will retain Choice's Hotel Business and will own and manage 71 hotels in 25 states, primarily under Franchising's brands, and will be Franchising's largest franchisee. Board of Directors............ Effective as of the Distribution Date, the Board of Directors of Sunburst is expected to consist of seven persons; Stewart Bainum, Jr., Stewart Bainum, Donald J. Landry, Frederic V. Malek, Paul R. Gould, Carole Y. Prest and one additional director to be selected by the Company's Board of Directors prior to the Distribution. The remaining vacancy will be filled by a person who is not a Sunburst employee or employee or director of Franchising. Post-Distribution Dividend Policy....................... The dividend policy of Sunburst will be determined by its Board of Directors following the Distribution. Choice currently is prohibited from paying dividends pursuant to the terms of its loan agreement with MNR Finance Corp. It is expected that the Sunburst Credit Facility will restrict Sunburst's ability to pay dividends. See "Financing." Listing and Trading Market.... The Sunburst Common Stock (formerly Choice Common Stock) is expected to continue to be listed on the New York Stock Exchange following the Distribution. Following the Distribution, Sunburst's financial results will no longer be consolidated with those of Choice's Franchising Business, and Sunburst's revenues, income and other results of operations will be substantially below those of Choice prior to the Distribution. Accordingly, as a result of the Distribution, the trading price range of Sunburst Common Stock immediately after the Distribution (prior to the effect of the Reverse Stock Split) is expected to be significantly lower than the trading range of Choice Common Stock. See "--The Distribution-- Listing and Trading of Sunburst Common Stock; and --Risk Factors--Changes in Trading Prices of Sunburst Common Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CHRW_c-h_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CHRW_c-h_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a5c5cc114e8c6c10c91645781d20e4d2a2eb8bdc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CHRW_c-h_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and the consolidated financial statements of the Company and notes thereto included elsewhere in this Prospectus. Unless the context otherwise indicates, "Company" or "Robinson" refers to C.H. Robinson Worldwide, Inc. (including its predecessors in interest) and its wholly owned subsidiaries. Unless otherwise indicated herein, all information in this Prospectus (i) has been adjusted to give effect to the Company's reincorporation in Delaware upon consummation of this offering, providing for, among other things, an increase in the authorized shares of capital stock of the Company and the conversion of Class A Common Stock and Class B Common Stock into Common Stock, and (ii) assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Founded in 1905, the Company is the largest third-party logistics company in North America with 1996 gross revenues of $1.6 billion. The Company is a global provider of multimodal transportation services and logistics solutions through a network of 116 offices in 38 states and Canada, Mexico, Belgium, the United Kingdom, France, Spain, Italy, Singapore and South Africa. Through contracts with over 14,000 motor carriers, the Company maintains the single largest network of motor carrier capacity in North America and is one of the largest third-party providers of intermodal services in the United States. In addition, the Company regularly provides air, ocean and customs services. As an integral part of the Company's transportation services, the Company provides a wide range of value-added logistics services, such as raw materials sourcing, freight consolidation, cross-docking and contract warehousing. During 1996, the Company handled over 935,000 shipments for more than 8,600 customers, ranging from Fortune 100 companies to small businesses in a wide variety of industries. During the past five years, the Company has increased net revenues at a compound annual growth rate of 18.6 percent. The Company has developed global multimodal transportation and distribution networks to provide seamless logistics services worldwide. As a result, the Company has the capability of managing all aspects of the supply chain on behalf of its customers. As a non-asset based transportation provider, the Company can focus on optimizing the transportation solution for its customer rather than its own asset utilization, using established relationships with motor carriers, railroads (primarily intermodal service providers), air freight carriers and ocean carriers. Through its motor carrier contracts, the Company maintains access to more than 370,000 dry vans, 128,000 temperature-controlled vans and containers and 96,000 flatbed trailers. The Company also has intermodal marketing contracts with 11 railroads, including all of the major North American railroads, which give the Company access to more than 150,000 additional trailers and containers. Throughout its 90-year history, the Company has been in the business of sourcing fresh produce. Much of the Company's logistics expertise can be traced to its significant experience in handling perishable commodities. Due to the time-sensitive nature and quality requirements of the shipments, fresh produce represents a unique logistics challenge, and the distribution and transportation costs are significant compared with, and may exceed, the cost of the produce being shipped. The Company has developed a network of produce sources and maintains access to specialized equipment and transportation modes designed to ensure timely delivery of uniform quality produce. In response to demand from large grocery retailers and food service distributors, the Company has developed its own brand of produce, The Fresh 1(R), which is sourced through various relationships and packed to order through contract packing agreements. The Company has also leveraged its food sourcing and logistics expertise into the sourcing of food ingredients on behalf of food manufacturers. The Company's unique business philosophy has accounted for its strong historical results and has positioned the Company for continued growth. The Company's principal competitive advantage is its large decentralized branch network, staffed by nearly 1,300 salespersons who are employees rather than agents. These branch employees are in close proximity to both customers and carriers which facilitates quick responses to customers' changing needs. Branch employees act as a team in both marketing the Company's services and providing these services to individual customers. The Company compensates its branch employees principally on the basis of their branch's profitability, which in the Company's opinion produces a more service-oriented, focused and creative sales force. The Company is substantially owned by more than 700 of its employees, and, following this offering, these employees will continue to own more than 75% of the Company's Common Stock. The Company's recently adopted Stock Incentive Plan and Stock Purchase Plan will allow for even broader equity participation by employees following this offering. Growth within the logistics industry is being driven by the continuing trend of companies outsourcing their logistics needs in order to focus on their core businesses, better manage just-in-time inventory systems and reduce costs. According to a leading industry consultant, the available domestic market for third-party logistics providers was $421 billion in 1996, only 5.9%, or $25 billion, of which was actually generated by third-party logistics providers. This same consultant predicts the market for third-party logistics to double to $50 billion by the year 2000, representing approximately 10% of the estimated $474 billion domestic market. The Company believes the international logistics market is approximately three to four times the domestic market, and both the domestic and international markets are highly fragmented. The Company's strategy for future growth is to expand the following: . Core transportation business. The Company believes there are significant opportunities to gain more transportation business from both existing and new customers through its existing branch network. The Company also believes it can selectively add domestic branches in response to cus- tomer demand and opportunities to serve new customers in new geographic areas. . International markets. The Company intends to open additional interna- tional branches to serve the local needs of its existing multinational customer base and gain new customers throughout the world. For example, after many years of providing logistics services to an international snack food company in North America, the Company was recently designated as this customer's international logistics partner. The Company has im- plemented a comprehensive logistics solution for this customer in Europe and is currently developing a similar solution in South Africa and South America. . Enhanced logistics services. In recent years, the Company has been pro- viding an expanded range of enhanced logistics services. The Company be- lieves there are significant opportunities to increase the level of lo- gistics services it provides to its customers. The Company intends to offer increasingly sophisticated logistics services to customers in or- der to provide greater efficiencies and reduce costs throughout the cus- tomers' supply chains. The Company was reincorporated in Delaware in 1997 as the successor to a business existing, in various legal forms, since 1905. The Company's corporate office is located at 8100 Mitchell Road, Eden Prairie, Minnesota 55344-2248, and its telephone number is (612) 937-8500. Its web site address is www.chrobinson.com. The Company has recently put up for sale its consumer finance business and its results of operations and net assets are now reflected as discontinued operations in its consolidated financial statements and consolidated financial data included elsewhere herein. Accordingly, this Prospectus does not include information on the historical operations of that business. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling 10,578,396 shares Stockholders....................... Common Stock outstanding after the 41,264,621 shares(1) offering........................... Use of proceeds..................... The Company will not receive any of the proceeds from the sale of the Common Stock by the Selling Stockholders. Proposed Nasdaq National Market sym- CHRW bol ............................... </TABLE> - -------- (1) Excludes (i) 470,417 shares of Common Stock issuable upon exercise of options granted immediately prior to this offering at an exercise price per share equal to the public offering price shown on the cover page of this Prospectus, none of which is currently exercisable, and (ii) an additional 3,529,583 shares of Common Stock reserved for future issuance under the Company's 1997 Omnibus Stock Plan (the "Stock Incentive Plan") and the 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"). See "Management-- New Incentive Plans." DIVIDENDS, STOCK REPURCHASE PROGRAM AND NON-CASH CHARGE The Company's ability to generate substantial amounts of cash flow from operations has enabled it to make annual repurchases of its Common Stock and, for more than 50 years, to pay annual dividends to its stockholders. The Company anticipates that it will pay regular quarterly dividends beginning in December 1997, initially at the rate of $0.06 per share per quarter. The declaration of dividends by the Company is subject to the discretion of the Board of Directors. The Company's Board of Directors has authorized a stock repurchase program under which up to 1,000,000 shares of Common Stock may be repurchased. Shares repurchased will be used to reduce shares outstanding and may be reissued to employees pursuant to the recently adopted Stock Incentive Plan. Such purchases may be made from time to time at prevailing prices in the open market, by block purchase and in private transactions in compliance with the rules of the Securities and Exchange Commission (the "Commission"), including Regulation M. The Company intends to fund repurchases with internally generated funds. See "Dividends, Stock Repurchase Program and Non-Cash Charge." Pursuant to Commission rules related to stock issued or sold to employees at prices below the initial public offering price during the 12 months preceding the effective date of an initial public offering, the Company will record an $18.6 million non-recurring, non-cash compensation charge at the effective date of this offering. This charge relates to 1,237,000 shares sold to employees by retired employees under the Company's book value stock purchase program and 282,000 shares issued under the Company's existing incentive plans, and represents the aggregate difference between book value (the amount expensed by the Company for restricted shares upon issuance or the amount paid by employees upon purchase of stock) and an assumed estimated public offering price of $16.00 per share. See "Management--Existing Incentive Plans." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- ----------------- 1992 1993 1994 1995 1996 1996 1997(1) -------- ---------- ---------- ---------- ---------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Gross revenues......... $968,893 $1,095,815 $1,257,946 $1,445,975 $1,605,905 $775,024 $855,152 Net revenues(2)........ 90,408 108,713 135,599 160,094 179,069 86,920 99,156 Selling, general and administrative expenses.............. 68,030 81,030 95,088 115,114 129,040 62,571 72,465 Income from operations. 22,378 27,683 40,511 44,980 50,029 24,349 26,691 Net income from continuing operations. 14,449 17,844 24,141 29,455 32,442 15,685 17,233 Net income from discontinued operations(3)......... 1,846 2,411 2,964 2,086 2,158 1,083 900 Net income............. 16,295 20,255 27,105 31,541 34,600 16,768 18,133 Net income from continuing operations per share............. $ 0.28 $ 0.36 $ 0.52 $ 0.67 $ 0.78 $ 0.37 $ 0.42 Weighted average number of shares outstanding (in thousands)........ 52,125 48,980 46,296 43,934 41,799 42,182 41,306 Dividends per share.... $ 0.073 $ 0.087 $ 0.108 $ 0.130 $ 0.185 $ 0.010 $ 0.020 OPERATING DATA (AT END OF PERIOD): Branches............... 75 81 89 99 108 104 113 Employees ............. 1,050 1,183 1,403 1,436 1,665 1,563 1,801 Average net revenues per branch............ $ 1,247 $ 1,392 $ 1,597 $ 1,683 $ 1,717 $ 856 $ 901 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------- ACTUAL PRO FORMA(4) -------- ------------ <S> <C> <C> BALANCE SHEET DATA: Working capital......................................... $131,264 $ 80,281 Total assets............................................ 361,160 307,944 Total long-term debt.................................... -- -- Stockholder's investment................................ 171,366 120,383 </TABLE> - -------- (1) Pursuant to Commission rules related to stock issued or sold to employees at prices below the initial public offering price during the 12 months preceding the effective date of an initial public offering, the Company will record an $18.6 million non-recurring, non-cash compensation charge at the effective date of this offering. This charge relates to 1,237,000 shares sold to employees by retired employees under the Company's book value stock purchase program and 282,000 shares issued under the Company's existing incentive plans, and represents the aggregate difference between book value (the amount expensed by the Company for restricted shares upon issuance or the amount paid by employees upon purchase of stock) and an assumed estimated public offering price of $16.00 per share. See "Management--Existing Incentive Plans." If the $18.6 million non-recurring, non-cash compensation expense had been recorded in the six month period ended June 30, 1997, net loss from continuing operations would have been $425,000, or a $0.01 loss per share. (2) Net revenues are determined by deducting cost of transportation and products from gross revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000004828_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000004828_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..24044e81e99500bb9f208c862706850fd0ad589b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000004828_american_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THIS SUMMARY OF CERTAIN PROVISIONS OF THIS PROSPECTUS IS INTENDED ONLY FOR QUICK REFERENCE AND IS NOT A COMPLETE PRESENTATION OF ALL RELEVANT FACTS. IT IS QUALIFIED IN ITS ENTIRETY BY THE OTHER INFORMATION PROVIDED IN THIS PROSPECTUS. AMERICAN CRYSTAL SUGAR COMPANY American Crystal Sugar Company ("American Crystal" or the "Company") is a Minnesota agricultural cooperative corporation owned by approximately 2,586 sugarbeet growers in the Minnesota and North Dakota portions of the Red River Valley. (The Red River Valley, the largest sugarbeet growing area in the United States, forms a band approximately 35 miles wide on either side of the North Dakota and Minnesota border and extends approximately 200 miles south from the border of the United States and Canada.) The Company currently processes sugarbeets from a base level of approximately 440,000 acres, subject to tolerances for overplanting and underplanting established by the Board of Directors each year. By owning and operating five sugarbeet processing facilities in the Red River Valley, the Company provides its shareholders with the ability to process their sugarbeets into sugar and by-products, such as molasses and beet pulp. The sugar is pooled and then marketed through the services of a marketing agent under contract with the Company. The sugar marketing agent, United Sugars Corporation, is a cooperative owned by its members, American Crystal, Southern Minnesota Beet Sugar Cooperative and Minn-Dak Farmers Cooperative. The Company's molasses, beet pulp and Concentrated Separated By-product (a by-product of the molasses desugarization process) are also marketed through a marketing agent, Midwest Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative whose members are the Company, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. The Company is also one of three members of ProGold Limited Liability Company, a joint venture which owns a corn wet-milling plant in Wahpeton, North Dakota. American Crystal was organized in 1973 by sugarbeet growers to acquire the business and assets of American Crystal Sugar Company, then a publicly held New Jersey corporation in operation since 1899. American Crystal's corporate headquarters are located at 101 North Third Street, Moorhead, Minnesota 56560 (telephone number (218) 236-4400). Its fiscal year ends August 31. See "Description of Business." SECURITIES OFFERED The Company is offering a total of 500 shares of its Common Stock, $10 par value, and 61,500 shares of its Preferred Stock, $76.77 par value, for sale to sugarbeet farm operators in the territory in which the Company is engaged in business. To become a member of the Company, each sugarbeet farm operator must acquire (or already own) a share of the Company's Common Stock. During the first portion of the offering, designated as "Pool 1," members of the Company as of July 25, 1997 will be granted the first right to purchase their pro rata portion of 60,000 of the shares of the Preferred Stock offered hereby, with such pro rata portion rounded to the next whole share of Preferred Stock. The application of the rounding procedure increases the number of shares offered from 60,000 to 61,500 shares of Preferred Stock. (Such rights will grant each of the current members the right to purchase an additional number of shares of Preferred Stock, equal to approximately 13.5% of the number of shares of Preferred Stock owned by such member on July 25, 1997 before rounding to the nearest whole share.) If the Company's members as of July 25, 1997 do not purchase all of the Preferred Stock offered to them on a pro rata basis in Pool 1, then current members who have indicated an interest in acquiring additional shares of Preferred Stock and have purchased his or her entire pro rata portion of the shares of Preferred Stock in Pool 1, will be able to purchase shares of Preferred Stock in addition to those which they have purchased under their pro rata purchase rights. In this second portion of the offering, designated as "Pool 2," each member may purchase additional shares in an amount up to two (2) times the number of shares of Preferred Stock which such member is entitled to purchase pursuant to their pro rata purchase rights in Pool 1. If the Company has received indications of interest in purchasing additional shares in Pool 2 which do not exceed the number of shares available for sale in Pool 2, each member will be entitled to purchase all requested shares. If the Company has received indications of interest in purchasing additional shares in Pool 2 which exceed the number of shares available for purchase in Pool 2, the available shares will be allocated proportionally among those members in the manner described in "Plan of Distribution," except that the Company will not issue any fractional shares of its Preferred Stock. Any Preferred Stock available for purchase after completion of the Pool 2 procedures described above will be designated as "Pool 3 Shares". All Pool 3 Shares will be available for purchase by (i) parties who were not members of the Company as of July 25, 1997 and seek to become members of the Company through the purchase of a share of Common Stock and some number of shares of Preferred Stock and (ii) members of the Company as of July 25, 1997 who purchase their pro rata portion of Pool 1 and all shares of Preferred Stock available to them in Pool 2. The Pool 3 Shares will be allocated to such prospective purchasers in a random drawing to be held in December 1997, until no additional shares of Preferred Stock remain for sale or until the Company elects to terminate the Offerings described herein. All of the shares of Common Stock and Preferred Stock purchased in this offering will be issued upon completion of the offering. At the time of execution of a Subscription Agreement for the purchase of shares in Pool 1, each purchaser who was a member of the Company as of July 25, 1997 will be required to provide (i) subject to the conditions and requirements described in the "Plan of Distribution", payment in full for the first forty-two percent (42%) of the shares of Preferred Stock (rounded to the next whole share) available to such member in Pool 1 and (ii) an initial payment of One Hundred Dollars ($100) for each other share of Preferred Stock for which the member has subscribed in Pool 1. Within twenty (20) days after receipt of a notice from the Company that the subscriber is entitled to purchase shares of Preferred Stock in Pool 2, each purchaser who was a member of the Company as of July 25, 1997 will be required to provide (i) subject to the conditions and requirements described in this section, payment in full for forty-two percent (42%) of the shares of Preferred Stock (rounded to the next whole share) available to such member in Pool 2 and (ii) an initial payment of One Hundred Dollars ($100) for each other share of Preferred Stock for which the member has subscribed in Pool 2. Within twenty (20) days after receipt of a notice from the Company that the subscriber is entitled to purchase shares of Preferred Stock in Pool 3, each purchaser will be required to provide, subject to the conditions and requirements described in the "Plan of Distribution", payment in full for the shares of Preferred Stock (rounded to the next whole share) available to such member in Pool 3. Payment for shares of Preferred Stock on the installment basis described above is available to members of the Company as of July 25, 1997 only with respect to that number of shares acquired IN EXCESS of forty two percent (42%) of the shares of Preferred Stock which the member is entitled to purchase in Pool 1 and the number of shares IN EXCESS of forty two percent (42%) of the shares of Preferred Stock which become available to such member due to obtaining the right to purchase such shares in Pool 2. That is, a member who wishes to purchase less than forty two percent (42%) of all shares of Preferred Stock available under that member's pro rata purchase rights will be required to pay for such shares in full upon execution of that member's Subscription Agreement and a member who purchases less than all shares available under that member's pro rata purchase right will be required to pay for forty two percent (42%) of the shares of Preferred Stock available under the member's pro rata purchase rights. A party who was not a member of the Company as of July 25, 1997 will be required, within twenty (20) days after receipt of a notice from the Company that the subscriber is entitled to purchase shares of Preferred Stock in Pool 3, to provide (i) payment for the share of Common Stock required as a condition of membership in the Company, and (ii) subject to the conditions and requirements described in the "Plan of Distribution", payment in full for the shares of Preferred Stock (rounded to the next whole share) to be purchased by such subscriber. The remaining portion of the purchase price for shares of Preferred Stock acquired in Pool 1 and Pool 2 and not paid for in full at the time of subscription will be due and payable in six (6) annual installments, due on each anniversary of the date on which executed Subscription Agreements are required to be returned to the Company, being November 21, 1997. With respect to each share to be paid for by installment payments, the annual installment will be $233.33, exclusive of rounding, the Company will provide the subscriber with an invoice for such amounts 30 days prior to the due date of each such installment. As security for payment of the remaining installments, the Company will retain a security interest in those shares of Preferred Stock for which payment has not yet been made in full. Upon payment of each installment, the Company will release its lien on an additional number of shares of Preferred Stock (rounded down to the nearest whole share), in proportion to the amount of the installment payment. Shares may not be transferred until the Company has received payment in full; in addition, any prepayment of amounts due with respect to shares of Preferred Stock will be applied to the last installment payment then remaining payable. Each member is entitled to one vote, based upon ownership of a share of Common Stock. Ownership of Preferred Stock entitles a member to grow sugarbeets for sale to the Company. Each share of Preferred Stock will entitle the holder to grow one acre of sugarbeets for the Company. (Under the Company's Bylaws, the Board of Directors has the authority to adjust the ratio of Preferred Stock owned by a member to the number of acres of sugarbeets which may be planted by virtue of ownership of those shares. However, it is management's current intention and recommendation to the Board of Directors that the relationship between the shares of Preferred Stock and acres of sugarbeet production be maintained at a ratio of 1 to 1 for the foreseeable future, subject to tolerances for overplanting and underplanting established by the Board each year. Those tolerances can and will vary from year to year; for the 1997 sugarbeet crop, the Board of Directors established a tolerance of plus 8% or minus 2% of the number of acres represented by issued and outstanding shares of Preferred Stock.) In connection with the purchase of Preferred Stock, each purchaser will be required to enter into a Growers' Contract, obligating the member to sell the sugarbeets grown on one acre of farm land to the Company for each share of Preferred Stock owned by such member. However, only those shares of Preferred Stock to be issued in this offering for which the Company has received full payment prior to April 1, 1998 will represent the right and obligation to deliver the sugarbeets grown on an acre of farm land in the 1998 crop season. Shares which have been purchased but for which the Company has not received full payment will represent the right and obligation to deliver the sugarbeets grown on one half ( 1/2) of an acre of farmland during the 1998 crop season. Subject to adjustment by the Board of Directors in accordance with the Company's governing documents and the Growers' Contract, such shares shall represent the right and obligation to deliver the sugarbeets grown on a full acre of farm land in the 1999 crop season and years thereafter. The transfer of both the Common Stock and Preferred Stock is subject to approval by the Board of Directors and may only be transferred to another sugarbeet farm operator. Neither the Common Stock nor the Preferred Stock bear dividends. See "Plan of Distribution" and "Description of Common Stock and Preferred Stock." RISK FACTORS A decision to purchase Preferred Stock subjects the purchaser to certain risks and immediate dilution. Accordingly, a decision to purchase Preferred Stock may not be appropriate for persons who cannot afford to be subjected to such risks. See "Risk Factors." PAYMENTS TO MEMBERS FOR CROPS Sugarbeets delivered to American Crystal by its members are processed and the resulting sugar is marketed on a cooperative basis. A particular member's share of the net proceeds from the sale of sugar is determined by the amount of sugar recoverable from the sugarbeets the member delivers to the Company. All members of American Crystal are credited with the same unit price per hundredweight (100 pounds) of recoverable sugar delivered, a price which is determined when the sugarbeets of all of the members have been processed and most of the sugar has been sold. The price paid for sugarbeets is determined by reducing the adjusted value of recovered sugar from the beets a member delivers by the member's share of the Company's member business operating expenses and any unit retains. Each member also receives a pro rata share of net revenues from by-product sales, based on the tonnage of sugarbeets delivered by the member. See "Description of Business--Growers' Contracts."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000006814_comforce_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000006814_comforce_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9d802d3d12af42045202afa108d25792279d9b0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000006814_comforce_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus concerning the Company's operations is presented on an unaudited pro forma basis as if the following transactions (the "Recent Transactions") had been completed as of January 1, 1994: (i) the transactions (including the acquisition financing transactions) described under "Acquisition History" in this Prospectus Summary including those that have occurred since September 30, 1996 and the proposed RHO Company Incorporated acquisition and acquisition financing, (ii) the amendment of the Company's Certificate of Incorporation in October 1996 to increase the number of authorized shares of Common Stock and Preferred Stock as described under "Description of the Company's Securities," and (iii) the automatic conversion in October 1996 of the Company's Series E Preferred Stock into 887,100 shares of Common Stock as described under "Description of the Company's Securities." References in this Prospectus to the "Company" mean COMFORCE Corporation, its predecessors and its and their subsidiaries, unless the context otherwise requires. THE COMPANY COMFORCE Corporation is a provider of technical staffing, consulting and outsourcing solutions focused on the high technology needs of businesses. The Company provides services to over 725 customers through its highly-skilled labor force that includes computer programmers, engineers, technicians, scientists and researchers. The Company's customers include telecommunication equipment manufacturers, telecommunication service providers (wireline and wireless), computer software and hardware manufacturers, aerospace and avionics firms, utilities and national research laboratories such as Los Alamos National Laboratory, Sandia National Laboratory and Lawrence Livermore National Laboratory. The Company maintains its headquarters in Lake Success, NY and has 31 branch offices in 15 states across the United States to enable it to meet the needs of national as well as local customers. The Company employs approximately 3,700 persons with a ratio of billable to non-billable employees of 18.9 to 1 (as compared to a reported overall industry-wide ratio of 14.2 to 1 for comparably-sized staffing companies), and maintains a proprietary database of over 110,000 prospective employees with expertise in the technical disciplines served by the Company. The Company serves customers in three principal sectors -- telecommunications, information technology ("IT") and technical services -- which represent 14%, 24% and 62%, respectively, of pro forma sales for the nine months ended September 30, 1996. In the telecommunications sector, the Company provides staffing for wireline and wireless communications systems development, satellite and earth station deployment, network management and plant modernization. In the information technology sector, the Company provides staffing for specific projects requiring highly specialized skills such as applications programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. In the technical services sector, the Company provides staffing for national laboratory research in such areas as environmental safety, alternative energy source development and laser technology, and provides highly-skilled labor meeting diverse commercial needs in the avionics and aerospace, architectural, automotive, energy and power, pharmaceutical, marine and petrochemical fields. The Company's objective is to be the leading provider of technical staffing, consulting and outsourcing solutions for the high technology needs of businesses. The Company will seek to achieve its objective by pursuing the following strategy: Focus on High Technology Markets. In the telecommunications, IT and technical service sectors which the Company serves, dynamic technology needs of businesses can effectively be met through the use of staffing, consulting and outsourcing services. The Company is focused on servicing the high technology markets because management believes that providing staffing in the high technology sectors offers greater growth opportunities over providing staffing in the lower-skilled labor sectors, including a higher growth in demand for services, lower turnover rates, generally higher profit margins and more stable customer and employee relationships Pursue Acquisitions as Key Element of Growth. A key element of the Company's expansion strategy is to continue acquiring staffing companies with profitable track records and recognized local or regional presence. Management believes that such acquisitions will enable the Company to more rapidly achieve significant economies of scale and maintain greater financial resources which will allow it to secure larger contracts and enhance its leverage for negotiating contracts. Expand Geographic Presence. The Company will seek to increase revenues and enhance earnings stability by continuing to expand geographically in the United States and internationally. Management believes that further increasing the Company's geographic diversity will better enable it to increase its customer base, weather regional economic and business cycles and provide an advantage when pursuing contracts with national accounts, particularly for customers with a national or international presence and a wide variety of staffing needs. Develop Innovative Staffing Solutions. Management continually seeks to develop new staffing solutions that provide its customers with maximum value and flexibility. By offering innovative and flexible service packages to customers, management believes that it will be better able to attract new customers as well as increase sales to existing customers. Capitalize on Operational Efficiencies. The Company considers its management information systems responsible for administrative, accounting and other "back office" operations to be capable of supporting additional levels of business in the future at low incremental costs. The Company currently intends to integrate the administrative functions of its recent and future acquisitions into the systems of previously acquired companies to improve operating efficiencies. The Company was incorporated in Illinois in 1954 and became a Delaware corporation through its merger with a Delaware subsidiary in 1969. It maintains its headquarters at 2001 Marcus Avenue, Lake Success, New York 11042. The Company's telephone number is (516) 328-7300 and its address on the World Wide Web is www.comforce.com. ACQUISITION HISTORY In October 1995, the Company acquired all of the capital stock of Spectrum Global Services, Inc. (formerly d/b/a YIELD Global and subsequently renamed COMFORCE Telecom, Inc.) ("COMFORCE Telecom"), which was engaged in the telecommunications technical staffing business. COMFORCE Telecom had been formed in 1987 by Michael Ferrentino, currently the President of the Company, and James L. Paterek, currently a principal consultant to the Company. In September 1995, the Company discontinued its then existing jewelry business. As shown in the table below, the Company acquired five additional technical staffing businesses in 1996 and has entered into a definitive agreement to acquire RHO Company Incorporated ("RHO"). Since September 30, 1996, the recent acquisitions have been funded principally from proceeds received by the Company from its sale of 3,250 shares of Series F Preferred Stock and 460,000 shares of Common Stock and related payment rights and its issuance of 111,111 shares of Common Stock upon the exercise of a warrant. See "Description of the Company's Securities." The agreement to acquire RHO requires that the transaction be closed by February 28, 1997. The Company will seek to raise net proceeds of $15.0 million through debt financing to provide the balance of the funds needed to consummate the RHO acquisition. The Company is seeking to raise between $11.4 million to $17.0 million through the private placement of debt instruments bearing interest at 8% per annum. Such private placement of debt will require additional redemption premiums ranging from 2.5% to 15% based upon, among other factors, the timing of the redemptions, which premimums are not reflected in the unaudited pro forma data presented. See "Risk Factors -- Future Capital Needs; Uncertainty of Financing; Potential Dilution" and "Business--Acquisitions" and "Discontinued Operations." <TABLE> <CAPTION> FISCAL 1995 YEAR ACQUISITION REVENUE CURRENT ACQUIRED COMPANY FOUNDED DATE (MILLIONS) OFFICES HEADQUARTERS MARKET SERVED - ---------------- ------- ---- ---------- ------- ------------ ------------- <S> <C> <C> <C> <C> <C> <C> COMFORCE Telecom 1987 October 1995 $11.4 5 Lake Success, Telecommunications NY Williams 1991 March 1996 $ 4.2 1 Englewood, Telecommunications Communications FL Services, Inc. ("Williams") RRA, Inc., Project 1964 May 1996 $52.0 8 Tempe, AZ Technical Services Staffing Support Team, Inc. and DataTech Technical Services, Inc. (collectively, "RRA") Force Five, Inc. 1993 August 1996 $ 7.1 4 Dallas, TX Information Technology ("Force Five") AZATAR Computer 1980 November $ 7.1 2 Rochester, Information Technology Systems, Inc. 1996 NY ("AZATAR") Continental Field 1965 November $ 9.9 2 Elmsford, NY Telecommunications Service Corporation and 1996 Progressive Telecom, Inc. (collectively, "Continental") RHO 1971 Proposed to be $83.6 9 Redmond, Technical Services and February 1997 WA Information Technology </TABLE> THE OFFERING The Company is required under certain agreements it has entered into with stockholders and warrantholders to register the shares of Common Stock held by such persons or issuable upon the exercise of warrants or conversion of convertible Preferred Stock held by them. Existing securityholders of the Company are offering 11,096,157 shares of Common Stock held by them or issuable to them. The Selling Stockholders may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act of 1933 and, as a result, such Selling Stockholders may be subject to the liability provisions of Section 11 thereunder in connection with any sales of shares of Common Stock pursuant to the registration statement of which this prospectus is a part. Common Stock Offered by the Selling Stockholders....... 11,096,157 shares Common Stock Outstanding............................... 12,761,934 shares Common Stock Issuable Under Warrants................... 1,445,608 shares Common Stock Issuable Under Options.................... 2,005,850 shares Common Stock Issuable Upon Conversion of Convertible Preferred Stock........................... 879,695 shares (1) Total Common Stock..................................... 17,093,087 shares (2) American Stock Exchange Symbol..................................... CFS _________________________________ (1) Includes (i) 583,500 shares of Common Stock issuable upon conversion of the outstanding shares of the Company's Series D Preferred Stock based on a conversion price of $12.00 per share and (ii) 296,195 shares of Common Stock issuable upon conversion of the outstanding shares of the Company's Series F Preferred Stock based on a conversion price of 83% of the closing price of the Common Stock on December 31, 1996, $14.25 per share. The number of shares of Common Stock issuable upon conversion of the Series F Preferred Stock is based on a specified percentage of the average closing bid price of the Common Stock for the five trading days preceding conversion. The closing price on December 31, 1996 approximates this average closing bid price. The number of shares of Common Stock issuable upon conversion of shares of Series F Preferred Stock will increase if the closing bid price of the Common Stock decreases and, conversely, will decrease if the closing bid price of the Common Stock increases. See "Description of the Company's Securities -- Preferred Stock." (2) Excludes shares of Common Stock which may become issuable (i) as contingent consideration in connection with the AZATAR and RHO acquisitions, or (ii) at the Company's option (in lieu of making a cash payment) under payment rights on the Common Stock described under "Description of the Company's Securities -- Warrants and Payment Rights." See "Business -- Acquisitions." In addition, dividends on the Company's Series D and F Preferred Stock are payable in cash or Common Stock at the Company's option and any accrued and unpaid amounts are added to the respective conversion values of those shares. See "Description of the Company's Securities -- Preferred Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000016387_capital_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000016387_capital_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..430a00c068efb2f1dbe2ba0e458ec09aaba9b64c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000016387_capital_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the related notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes (i) no exercise of the U.S. Underwriters' over-allotment option, and (ii) an offering price of $12.00 per share, which is the last sale price of the class A common shares of beneficial interest, $1.00 par value, in the Company (the "Class A Common Shares"), reported on the NYSE on November 11, 1997 (the "Offering Price"). See "Underwriters." Potential investors should note, however, that the number of Class A Common Shares offered hereby significantly exceeds the number of Class A Common Shares which are outstanding and held by persons who are not affiliates of the Company and that, consequently, the actual Offering Price will depend on a number of factors in addition to the NYSE trading price on the date such Offering Price is determined, and may be materially lower than such price. Unless the context otherwise requires, all references in this Prospectus to the Company include the Company, its subsidiaries and their respective predecessors. References to the "Offering" shall refer to the offering of the Class A Common Shares in the United States and Canada by the U.S. Underwriters and outside the United States and Canada by the International Underwriters. THE COMPANY Capital Trust (the "Company") is a recently recapitalized specialty finance company designed to take advantage of high-yielding lending and investment opportunities in commercial real estate and related assets. The Company makes investments in various types of income-producing commercial real estate and its current investment program emphasizes senior and junior commercial mortgage loans, preferred equity investments, direct equity investments and subordinated interests in commercial mortgage-backed securities ("CMBS"). The Company believes that a majority of the investments to be held in its portfolio for the long term will be structured so that the Company's investment is subordinate to third-party financing but senior to the owner/operator's equity position. The Company also provides real estate investment banking, advisory and asset management services through its recently acquired subsidiary, Victor Capital Group, L.P. ("Victor Capital"). The Company anticipates that it will invest in a diverse array of real estate and finance-related assets and enterprises, including operating companies, that satisfy its investment criteria. In executing its business plan, the Company believes that it will be able to utilize the extensive real estate industry contacts and relationships of Equity Group Investments, Inc. ("EGI"). EGI is a privately held real estate and corporate investment firm controlled by Samuel Zell, who serves as chairman of the board of trustees of the Company. EGI's affiliates include Equity Office Properties Trust and Equity Residential Properties Trust, the largest U.S. real estate investment trusts operating in the office and multifamily residential sectors, respectively. The Company also expects to draw upon the extensive client roster of Victor Capital for potential investment opportunities. The Company believes that the significant recovery in commercial real estate property values, coupled with fundamental structural changes in the real estate capital markets (primarily related to the growth in CMBS issuance), has created significant market-driven opportunities for finance companies specializing in commercial real estate lending and investing. Such opportunities are expected to result from the following developments: . SCALE AND ROLLOVER. The U.S. commercial mortgage market--a market that is comparable in size to the corporate and municipal bond markets--has approximately $1 trillion in total mortgage debt outstanding, which debt is primarily held privately. In addition, a significant amount of commercial mortgage loans held by U.S. financial institutions is scheduled to mature in the near future. . RAPID GROWTH OF SECURITIZATION. With annual issuance volume of approximately $30 billion, the total amount of CMBS currently outstanding has grown to over $100 billion from approximately $6 billion in 1990. To date, the CMBS market expansion has been fueled in large part by "conduits" which originate whole loans primarily for resale to financial intermediaries, which in turn package the loans as securities for distribution to public and private investors. The Company believes that as securitized lenders replace traditional lenders such as banks and life insurance companies as the primary source for commercial real estate finance, borrowers are often constrained by relatively inflexible underwriting standards, including lower loan-to- value ratios, thereby creating significant demand for mezzanine financing (typically between 65% and 90% of total capitalization). In addition, since many high quality loans may not immediately qualify for securitization, due primarily to rating agency guidelines, significant opportunities are created for shorter-maturity bridge and transition mortgage financings. . CONSOLIDATION. As the real estate market continues to evolve, the Company expects that consolidation will occur and efficiency will increase. Over time, the Company believes that the market leaders in the real estate finance sector will be fully integrated finance companies capable of originating, underwriting, structuring, managing and retaining real estate risk. The Company believes that it is well-positioned to capitalize on the resultant opportunities, which, if carefully underwritten, structured and monitored, represent attractive investments that pose potentially less risk than direct equity ownership of real property. Further, the Company believes that the rapid growth of the CMBS market has given rise to opportunities for the Company to acquire selectively non-investment grade tranches of such securities, which the Company believes are priced inefficiently in terms of their risk/reward profile. The Company currently pursues investment and lending opportunities designed to capitalize on inefficiencies in the real estate capital, mortgage and finance markets. The Company's investment program emphasizes, but is not limited to, the following general categories of real estate and finance-related assets: . MORTGAGE LOANS. The Company pursues opportunities to originate and fund senior and junior mortgage loans ("Mortgage Loans") to commercial real estate owners and property developers who require interim financing until permanent financing can be obtained. The Company's Mortgage Loans are generally not intended to be permanent in nature, but rather are intended to be of a relatively short-term duration, with extension options as deemed appropriate, and typically require a balloon payment of principal at maturity. The Company may also originate and fund permanent Mortgage Loans in which the Company intends to sell the senior tranche, thereby creating a Mezzanine Loan (as defined below). . MEZZANINE LOANS. The Company originates high-yielding loans that are subordinate to first lien mortgage loans on commercial real estate and are secured either by a second lien mortgage or a pledge of the ownership interests in the borrowing property owner. Alternatively, the Company's mezzanine loans can take the form of a preferred equity investment in the borrower with substantially similar terms (collectively, "Mezzanine Loans"). Generally, the Company's Mezzanine Loans have a longer anticipated duration than its Mortgage Loans and are not intended to serve as transitional mortgage financing. . SUBORDINATED INTERESTS. The Company pursues rated and unrated investments in public and private subordinated interests ("Subordinated Interests") in commercial collateralized mortgage obligations ("CMOs" or "CMO Bonds") and other CMBS. . OTHER INVESTMENTS. The Company intends to assemble an investment portfolio of commercial real estate and finance-related assets meeting the Company's target risk/return profile. The Company is not limited in the kinds of commercial real estate and finance-related assets in which it can invest and believes that it is positioned to expand opportunistically its financing business. The Company may pursue investments in, among other assets, construction loans, distressed mortgages, foreign real estate and finance-related assets, operating companies, including loan origination and loan servicing companies, and fee interests in real property (collectively, "Other Investments"). The Company also provides real estate investment banking, advisory and asset management services through its Victor Capital subsidiary. Victor Capital provides services to real estate investors, owners, developers and financial institutions in connection with mortgage financings, securitizations, joint ventures, debt and equity investments, mergers and acquisitions, portfolio evaluations, restructurings and disposition programs. The Company may also acquire operating businesses that the Company believes would complement Victor Capital's existing business. RECAPITALIZATION AND INITIAL INVESTMENTS Prior to July 1997, the Company operated as a real estate investment trust ("REIT"), originating, acquiring, operating or holding income-producing real property and mortgage-related investments. On July 15, 1997, as a result of transactions culminating at the Company's 1997 annual meeting of shareholders (the "1997 Annual Meeting"), the Company experienced, in addition to a change in control, a number of other significant changes, including: . The investment of $33.0 million in the form of preferred equity capital (the "Investment"); . The acquisition of Victor Capital's real estate investment banking and advisory operations (the "Acquisition"); . The appointment of a new management team consisting primarily of officers of Victor Capital; . The implementation of the Company's new business plan emphasizing high- yielding lending and investment opportunities; and . The election of the Company to terminate its REIT status for federal income tax purposes primarily in order to retain earnings and to maximize its investment flexibility. In addition, the Company has entered into a credit agreement, dated as of September 30, 1997, with a commercial lender, that provides for a three-year $150.0 million line of credit ("Credit Facility"); in connection with the Credit Facility, the Company received an advance of approximately $11.7 million from the commercial lender prior to execution of the Credit Facility. Such borrowings, along with cash provided by the Investment and existing cash resources, were used to fund the Company's initial loans and investments. The Company believes that the Credit Facility and the proceeds of the Offering will provide the Company with the capital necessary to expand and diversify its portfolio of investments and will also enable the Company to compete for and consummate larger transactions meeting the Company's target risk/return profile. To date, the Company has identified, negotiated and funded the loan and investment transactions set forth below, all of which the Company believes will provide investment yields within the Company's target range of 400 to 600 basis points above the London Interbank Offered Rate ("LIBOR"). The Company intends to employ leverage on its investments in order to increase its overall return on equity. In the future, the Company may make investments with yields that fall outside of the investment range set forth above, but that correspond with the level of risk perceived by the Company to be inherent in such investments. Recent investments include: . The origination, funding and sale of a participation interest in a $50.3 million subordinated Mortgage Loan. This LIBOR-based loan is secured by a second mortgage on the office tower located at 1325 Avenue of the Americas in New York City which contains approximately 750,000 square feet. A 50% pari passu participation interest was sold to Equity Office Properties Trust, an affiliate of the Company, at closing. . The origination, funding and sale of a participation interest in a $35.0 million subordinated Mortgage Loan. This LIBOR-based loan is secured by a second mortgage on the approximately 1.1 million square foot Chicago Apparel Center located in Chicago, Illinois and two mortgage notes (with an aggregate principal amount of $9.6 million) on nearby development sites. . The origination and funding of a $9.8 million Mortgage Loan. This LIBOR- based loan was primarily secured by an $11.8 million mortgage note on an approximately 281,000 square foot office/warehouse facility located in Philadelphia, Pennsylvania and a pledge of other mortgage collateral in the New York metropolitan area aggregating $6.7 million. In November 1997, the loan was repaid to the Company in full. . The purchase of a portion of an $80.0 million Mezzanine Loan for approximately $15.6 million. This loan is secured by a pledge of the ownership interests in the entities that own the approximately 1.75 million square foot office building located at 277 Park Avenue in New York City. . The origination and funding of a $10.0 million Mezzanine Loan secured by a subordinated mortgage on, and a pledge of the ownership interests in the entity that owns a majority interest in, the approximately 931,000 square foot office building located at 555 West 57th Street in New York City commonly known as the "BMW Building." . The purchase of a Subordinated Interest in the amount of approximately $49.5 million. The investment is secured by 20 short-term commercial mortgage loans with original maturities ranging from two to three years, which loans are secured by properties located throughout the United States. The Company is the named special servicer for the entire $413.0 million loan portfolio of which this Subordinated Interest is a part. THE OFFERING Class A Common Shares offered by the Company: U.S. Offering(1)................ 6,400,000 shares International Offering(1)....... 1,600,000 shares Total(1)..................... 8,000,000 shares Class A Common Shares to be outstanding after the Offering(1)(2)..................... 17,138,325 shares Use of Proceeds..................... The net proceeds to the Company from the issuance and sale of the 8,000,000 Class A Common Shares offered hereby (after deduction of the underwriting discounts and commissions and estimated offering expenses) are estimated to be approximately $ million. The Company intends to use the net proceeds to fund investments and loans made by the Company and for working capital for ongoing operations and potential business acquisitions. Until applied to fund investment or acquisition opportunities, the net proceeds will be used to reduce temporarily the outstanding borrowings under the Credit Facility. Pending such uses, the net proceeds will be invested in short-term investment-grade securities, certificates of deposit or direct or guaranteed obligations of the United States government. See "Use of Proceeds." NYSE symbol......................... "CT" - -------- (1) Assumes the over-allotment option is not exercised. See "Underwriters." (2) Based on the number of Class A Common Shares outstanding as of December 3, 1997. Excludes (i) 12,267,658 Class A Common Shares into which the outstanding Class A Preferred Shares are convertible and (ii) an aggregate of 2,000,000 Class A Common Shares reserved for issuance under the 1997 Long-Term Incentive Share Plan (the "Incentive Share Plan") and the 1997 Non-Employee Trustee Share Plan (the "Trustee Share Plan"), including 657,000 shares as to which share options were then outstanding, none of which were exercisable on such date. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of Capital Shares." BACKGROUND Prior to July 1997, the Company operated as a REIT under the name "California Real Estate Investment Trust," originating, acquiring, operating or holding income-producing real property and mortgage-related investments. On January 3, 1997, CalREIT Investors Limited Partnership ("CRIL"), a partnership controlled by Samuel Zell, the Company's current chairman of the board of trustees (the "Board of Trustees" or the "Board"), purchased the 6,959,593 Class A Common Shares (representing approximately 76% of the then-outstanding Class A Common Shares) then owned by the Company's former parent for an aggregate purchase price of approximately $20.2 million. Prior to the purchase, EGI, a privately held investment firm that is controlled by Mr. Zell and engaged in, among other things, the ownership and management of real estate, and Victor Capital, which was then privately held by John R. Klopp and Craig M. Hatkoff, current trustees of the Company, presented to the Company's then-incumbent Board of Trustees a proposed new business plan in which the Company would cease to be a REIT and instead become a specialty finance company designed primarily to take advantage of high-yielding mezzanine investment opportunities in commercial real estate. EGI and Victor Capital also proposed that they provide the Company with a new management team to implement the business plan and that they invest through an affiliate a minimum of $30.0 million in a new class of preferred shares to be issued by the Company. In connection with the foregoing, the Company subsequently agreed that, concurrently with the consummation of the proposed preferred equity investment, it would acquire for $5.0 million Victor Capital's real estate investment banking, advisory and asset management businesses, including the services of its experienced management and professional team. On July 15, 1997, upon the approval of the Company's shareholders at the 1997 Annual Meeting, the Company closed on the Investment, which consisted of the sale, for $33.0 million, of 12,267,658 class A 9.5% cumulative convertible preferred shares of beneficial interest, $1.00 par value, in the Company ("Class A Preferred Shares") to Veqtor Finance Company, LLC ("Veqtor"), a limited liability company controlled by Samuel Zell, John R. Klopp and Craig M. Hatkoff. Concurrently with the Investment, Veqtor purchased the 6,959,593 Class A Common Shares held by CRIL for an aggregate purchase price of approximately $21.3 million. Veqtor funded the approximately $54.3 million aggregate purchase price for the Class A Common Shares and the Class A Preferred Shares with $5.0 million of capital contributions from its members and $50.0 million of borrowings under 12% convertible redeemable notes (the "Veqtor Notes") issued to BankAmerica Investment Corporation, BancBoston Investments, Inc., First Chicago Capital Corporation and Wells Fargo & Company (collectively, the "Institutional Investors"). The Institutional Investors may in the future convert these notes into preferred interests in Veqtor that, in turn, may be redeemed for an aggregate of approximately 34% of the outstanding shares of the Company after completion of the Offering (assuming, among other things, the sale of 8,000,000 Class A Common Shares in the Offering). As a result of the above transactions, a change in control of the Company occurred, with Veqtor beneficially owning 19,227,251 (or approximately 90%) of the outstanding voting shares of the Company. Also, the Company's shareholders approved the adoption of an amended and restated declaration of trust (the "Restated Declaration") that, among other things, reclassified the Company's outstanding common shares as Class A Common Shares and changed the Company's name to "Capital Trust." The Company immediately commenced full implementation of its new business plan and thereby elected to terminate its status as a REIT for federal income tax purposes. By not operating as a REIT, the Company is positioned to respond more quickly to investment opportunities without the structural limitations inherent in REITs and to expand its portfolio of invested assets on a more highly leveraged basis than most REITs. The Company is also able to retain its cash flows generated from operations for reinvestment, thereby facilitating the Company's growth strategy. In certain cases, the term Class A Common Shares used herein refers to the common shares of beneficial interest, $1.00 par value, in the Company outstanding prior to the reclassification discussed above. The Company is also authorized to issue class B common shares of beneficial interest, $1.00 par value ("Class B Common Shares"), and class B 9.5% cumulative convertible non- voting preferred shares of beneficial interest, $1.00 par value ("Class B Preferred Shares" and together with the Class A Preferred Shares, the "Preferred Shares"), in the Company. The Class B Common Shares and the Class B Preferred Shares, none of which are outstanding on the date hereof, are identical to the Class A Common Shares and the Class A Preferred Shares, respectively, except that neither the Class B Common Shares nor the Class B Preferred Shares entitle the holder thereof to voting rights, except as provided by law. OWNERSHIP STRUCTURE OF THE COMPANY The following diagram depicts the ownership structure of the Company after the Offering: [LOGO DEPICTING OWNERSHIP STRUCTURE OF THE COMPANY] - -------- (1) Capital Trust Investors Limited Partnership (f/k/a CalREIT Investors Limited Partnership ("CTILP")), which is indirectly controlled by Samuel Zell, and V2 Holdings LLC ("V2"), a holding company controlled by John R. Klopp and Craig M. Hatkoff, are each managing members of, and each owns 50% of the common interests in, Veqtor. Messrs. Zell, Klopp and Hatkoff as well as Sheli Z. Rosenberg and Gary R. Garrabrant, who also hold indirect economic ownership interests in Veqtor, are members of the Board of Trustees of the Company. (2) Upon completion of the Offering, Veqtor will own Class A Common Shares and Class A Preferred Shares representing approximately 65% of the outstanding voting shares of the Company (assuming the sale of 8,000,000 Class A Common Shares in the Offering). The Institutional Investors hold the Veqtor Notes and may in the future convert these notes into preferred interests in Veqtor that, in turn, may be redeemed for approximately 50% of Veqtor's holdings of Class A Common Shares and Class A Preferred Shares. (3) Upon completion of the Offering, the public shareholders will own Class A Common Shares representing approximately 35% of the outstanding voting shares of the Company (assuming the sale of 8,000,000 Class A Common Shares in the Offering). Veqtor funded the approximately $54.3 million aggregate purchase price for the 6,959,593 Class A Common Shares and the 12,267,658 Class A Preferred Shares (collectively, "Veqtor's Company Shares") that it purchased on July 15, 1997 with $5.0 million of capital contributions from its members and $50.0 million of borrowings under the Veqtor Notes issued to the Institutional Investors. The Veqtor Notes earn interest at a rate of 12% per annum, except that interest at a rate of 6% per annum is accrued and not payable until maturity or redemption or conversion of the Veqtor Notes as discussed herein. The Veqtor Notes are convertible by the holders thereof into preferred units in Veqtor ("Veqtor Preferred Units") at the rate of $55.59 per unit from and after the earlier of July 15, 2000, the dissolution, liquidation or winding up of the affairs of Veqtor or the sale of any or all of Veqtor's Company Shares. Upon conversion of the Veqtor Notes into Veqtor Preferred Units, at any time after six months from the date of such conversion, the Veqtor Preferred Units are redeemable by the holders thereof in exchange for a portion of Veqtor's Company Shares. The Veqtor Preferred Units are also redeemable by the Company in exchange for a portion of Veqtor's Company Shares at any time after 24 months from their date of issuance provided all such units are redeemed. Upon such redemption, each holder of such Veqtor Preferred Units is entitled to receive a specified portion of Veqtor's Company Shares equal to the ratio of the total number of Veqtor Preferred Units held by such holder to the sum of (i) the total number of Veqtor Preferred Units that would be outstanding if all holders of the Veqtor Notes then outstanding converted their Veqtor Preferred Units at a conversion price of $55.59 per unit and (ii) the total number of Veqtor Common Units then outstanding. Upon redemption of the Veqtor Preferred Units, with respect to holders thereof who are bank holding companies or affiliates thereof within the meaning of the Bank Holding Company Act of 1956, as amended (the "BHCA"), Veqtor is required to convert those of Veqtor's Company Shares allocable to such holders into Class B Common Shares and Class B Preferred Shares, as the case may be. The Class B Common Shares and the Class B Preferred Shares are non-voting shares and are convertible, respectively, into Class A Common Shares and Class A Preferred Shares on a share-for-share basis upon certification by the holder thereof that such shareholder either (a) will not, together with any other person (other than the Company) who previously held voting shares of the Company held by such shareholder, upon the issuance of such shares, own more than 4.9% of any class of voting shares of the Company or (b) is not limited by the BHCA to holding no more than 4.9% of any class or series of voting shares of the Company. Veqtor can redeem the Veqtor Notes for cash at par (plus accrued and unpaid interest) at any time after July 15, 2000, subject to the right of the holders to convert the Veqtor Notes into Veqtor Preferred Units as discussed above. In connection with the Offering, CTILP, V2 and Veqtor have agreed with the Company that upon either the redemption for cash of the Veqtor Notes or the conversion of the Veqtor Notes into Veqtor Preferred Units, and, in the latter case, the subsequent redemption of all such units in exchange for the specified portion of Veqtor's Company Shares, Veqtor shall convert the remaining Class A Preferred Shares owned by it into Class A Common Shares. CTILP, V2 and Veqtor have also agreed that Veqtor shall redeem the Veqtor Preferred Units on the earliest date upon which Veqtor has the right to effect such redemption. Assuming for purposes of demonstration that all of the Veqtor Notes (including accrued and unpaid interest thereon) were converted on the third anniversary of their issuance into Veqtor Preferred Units, and such units were then redeemed for their corresponding specified portion of Veqtor's Company Shares, and assuming further that at that time all 2,000,000 shares reserved for issuance pursuant to the Company's share plans were issued and outstanding, the holders of the Veqtor Notes (the Institutional Investors) would be entitled to receive an aggregate of 3,583,349 Class A Common Shares and 6,316,361 Class A Preferred Shares, which shares would represent in the aggregate approximately 32% of the shares outstanding after consummation of the Offering, and CTILP and V2 would be entitled to receive an aggregate of 3,376,244 Class A Common Shares and 5,951,297 Class A Preferred Shares, which shares would represent in the aggregate approximately 30% of the shares outstanding after consummation of the Offering (assuming in each case the sale of 8,000,000 Class A Common Shares in the Offering and no other issuances of Class A Common Shares prior to the time of such redemption). SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION The following tables present summary historical and pro forma financial data for the business of the Company as of and for the nine months ended September 30, 1997, and for the year ended December 31, 1996. The pro forma statement of operations has been presented to reflect the results of the Company's business operations as if the Acquisition had occurred on January 1, 1996. The as adjusted balance sheet data as of September 30, 1997 is adjusted to reflect the sale of 8,000,000 Class A Common Shares in the Offering at an assumed price of $12.00 per share and the application of the net proceeds therefrom. The information in these tables is qualified by and should be read in conjunction with the "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Combined Financial Information" and the financial statements of the Company and notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> PRO FORMA NINE MONTHS PRO FORMA YEAR ENDED ENDED DECEMBER SEPTEMBER 30, 31, 1996 1997 -------------- ------------- (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE DATA OPERATING DATA: AND SHARE AMOUNTS) <S> <C> <C> Income from investment and lending transactions: Interest and related income..................... $100 $1,863 Interest and related expenses(2)................ 86 759 ---------- ---------- Net income from investment and lending transac- tions.......................................... 14 1,104 ---------- ---------- Other revenues: Advisory and asset management fees.............. 6,940 3,251 Rental income(1)................................ 2,019 313 Interest and investment income.................. 1,369 1,045 ---------- ---------- Total other revenues............................ 10,328 4,609 ---------- ---------- Other expenses: General and administrative...................... 6,324 6,506 Other interest expense.......................... 821 291 Rental property expenses(1)..................... 685 123 Depreciation and amortization................... 131 83 ---------- ---------- Total other expenses............................ 7,961 7,003 ---------- ---------- (Loss) income before gain (loss) on sale or fore- closure of rental properties, provision for pos- sible credit losses and income taxes............ 2,381 (1,290) Gain (loss) on sale or foreclosure of rental properties...................................... 1,069 (432) Provision for possible credit losses(1).......... (1,743) (155) ---------- ---------- (Loss) income before income taxes................ 1,707 (1,877) Provision for income taxes....................... (96) -- ---------- ---------- Net (loss) income................................ 1,611 (1,877) Less: Preferred Share dividend requirement(2).... -- (679) ---------- ---------- Net (loss) income allocable to Class A Common Shares.......................................... $1,611 $(2,556) ========== ========== Per share information: Net (loss) income per Class A Common Share Primary and fully diluted(2).................... $0.09 $(0.15) ========== ========== Weighted average Class A Common Shares outstand- ing Primary and fully diluted(2) ................... 17,138,325 17,138,325 ========== ========== </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 ------------------------- HISTORICAL AS ADJUSTED(2) ---------- -------------- (AUDITED) (UNAUDITED) (IN MILLIONS) <S> <C> <C> BALANCE SHEET DATA: Total assets.......................................... $112 $189 Total liabilities..................................... 57 45 Shareholders' equity.................................. 55 144 </TABLE> - ------- (1) Prior to the 1997 Annual Meeting and the implementation of the Company's new business plan, the Company operated as a REIT holding income-producing property. As of March 31, 1997, the Company had sold its two then-remaining commercial rental properties, and since that time, the Company has derived no revenue from rental operations. The provision for possible credit loss for the year ended December 31, 1996 relates entirely to these two commercial properties. (2) Information for the Company for the nine months ended September 30, 1997 includes (i) the preferred share dividend requirement for the Class A Preferred Shares since their issuance on July 15, 1997 ($679,000) and the Investment and (ii) the income derived from the re-investment of the net proceeds therefrom. Had the Class A Preferred Shares been outstanding for that entire nine-month period, the Preferred Share dividend requirement would have been $2,351,000 (equivalent to $3,135,000 per annum). In addition, an adjustment has been made to reflect the sale of 8,000,000 Class A Common Shares in the Offering and the use of net proceeds therefrom, including the elimination of the $11.7 million borrowed under the Credit Facility. As a result, interest expense thereon for the nine months ended September 30, 1997 was reduced by $31,000. The Class A Preferred Shares were not considered Class A Common Share equivalents for purposes of calculating fully diluted earnings per share as they were antidilutive for the nine months ended September 30, 1997 and were not outstanding during the year ended December 31, 1996.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000022872_advanzeon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000022872_advanzeon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c6d4dd7854c9561aef1ace83f4fc3c3fbdf98939
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000022872_advanzeon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by reference to, and should be read in conjunction with, the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus relating to share and per share data gives retroactive effect to a one-for-ten reverse stock split of the Company's Common Stock effected on October 17, 1994. THE COMPANY Comprehensive Care Corporation(R) ("CompCare" or the "Company")*, is a Delaware corporation organized in 1969. Prior to its fiscal year 1993, the Company principally engaged in the ownership, operation and management of freestanding psychiatric and substance abuse facilities, and the management of in-hospital psychiatric and substance abuse programs located in unaffiliated hospitals. Commencing in fiscal 1993, the Company transitioned itself and redirected its business focus, and through its 86.5% owned subsidiary, Comprehensive Behavioral Care(SM), Inc. ("Comprehensive Behavioral"), provides the delivery of a continuum of psychiatric and substance abuse services on behalf of health maintenance and preferred provider organizations, and other healthcare providers. Unless the context otherwise requires, all references to the "Company" include CompCare, Comprehensive Behavioral and subsidiary corporations. The services provided by Comprehensive Behavioral are effected through management services agreements, administrative service agreements, fee-for-service agreements or capitation contracts through which the primary provider of healthcare services pays a fixed per member per month fee for covered psychiatric and substance abuse services made available to covered members regardless of actual member utilization. Current services include risk based contract capitation of behavioral health expenses for specific populations, and a broad spectrum of inpatient and outpatient mental health and substance abuse therapy and counseling. Programs are provided at freestanding facilities operated by the Company, and at independent general hospitals under contracts with the Company. A wholly-owned subsidiary, Comprehensive Care Integration(SM), Inc. ("CCI"), formerly known as CareUnit(R), Inc., develops, markets and manages the Company's contract programs. For the fiscal year ended May 31, 1996 and for the six months ended November 30, 1996, psychiatric and chemical dependency treatment programs (freestanding operations and CCI contracts) accounted for approximately 43% and 33%, respectively, of the Company's operating revenues. Comprehensive Behavioral (formerly known as AccessCare, Inc.) accounted for approximately 56% and 67%, respectively, of the Company's operating revenues for the fiscal year ended May 31, 1996 and for the six months ended November 30, 1996. The remaining revenues for the respective periods were derived from other activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Freestanding facilities are designated either as psychiatric or chemical dependency based on the license of the facility and the predominant treatment provided. The Company believes that the increasing role of health maintenance organizations ("HMO's"), reduced benefits from employers and indemnity companies, and a shifting to outpatient programs continue to cause a decline in utilization of freestanding facilities. As a result of the foregoing the Company has implemented cost reduction measures, including the closure of selected Company facilities. During the second quarter of fiscal 1996, the Company sold the operations of one facility, representing 83 beds and closed one facility representing 70 beds. During fiscal 1997, the Company closed one facility representing 128 beds. The Company owns and continues to operate one freestanding facility representing 38 available beds. See "Business - Freestanding Operations". The Company's principal executive offices are located at 1111 Bayside Drive, Corona del Mar, California 92625 and its telephone number is (714) 222-2273. - ------------------- *COMPREHENSIVE CARE CORPORATION IS A REGISTERED SERVICE MARK OF THE COMPANY. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1997 370,207 SHARES COMPREHENSIVE CARE CORPORATION COMMON STOCK This Prospectus relates to 370,207 shares of Common Stock, $.01 par value (the "Shares") of Comprehensive Care Corporation (the "Company") being sold by certain shareholders (the "Selling Shareholders"). The Company will not receive any proceeds from the sale of the Shares by the Selling Shareholders. See "Selling Shareholders". The Common Stock of the Company is listed on the New York Stock Exchange ("NYSE") under the trading symbol CMP. The reported closing price of the Common Stock of the Company on the NYSE on February 10, 1997, was $16 1/8 per share. See "Price Range of Common Stock and Certain Market Information". The Selling Shareholders' Shares may be offered from time to time by the Selling Shareholders or by their transferees, through ordinary brokerage transactions on the NYSE, third market transactions, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices. No underwriting arrangements have been entered into by the Selling Shareholders. Usual and customary, or specifically negotiated brokerage fees or commissions may be paid by the Selling Shareholders in connection with sales of the Selling Shareholders' Shares. See "Plan of Distribution". The Selling Shareholders may be deemed to be "underwriters" as that term is defined in the Securities Act of 1933, with respect to their Shares. All costs, expenses and fees in connection with the registration of the Shares offered by Selling Shareholders will be borne by the Company. Brokerage commission, if any, attributable to the sale of the Selling Shareholders' Shares will be borne by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares. All of the Selling Shareholders will be required to represent that they have knowledge of Rules 10b-2 and Regulation M promulgated under the Securities Exchange Act of 1934 as amended which proscribe certain manipulative and deceptive practices in connection with a distribution of securities. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. PLEASE SEE "RISK FACTORS" AT PAGE 13 FOR CERTAIN INVESTMENT CONSIDERATIONS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE- SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS FEBRUARY ____, 1997. RECENT DEVELOPMENTS RECENTLY COMPLETED EXCHANGE OFFER WITH HOLDERS OF 7 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE APRIL 15, 2010, AND RESCISSION BY DEBENTUREHOLDERS OF COMPANY DEFAULT In October 1994, the Company suspended the payment of semi-annual interest on its outstanding 7 1/2% Convertible Subordinated Debentures due April 15, 2010 (the "Debentures"). As a result of such suspended interest payments, the Company became in default with respect to $9,538,000 principal amount of then outstanding Debentures. On November 14, 1996, the Company commenced a consent solicitation pursuant to a proxy statement addressed to its Debentureholders (the "Consent Solicitation"). The Company simultaneously initiated an exchange offer (the "Debenture Exchange Offer") to exchange cash and common stock of the Company for its Debentures, as discussed below. The Consent Solicitation sought a consent of Debentureholders to the rescission of the acceleration of all principal and interest due under the Debentures and the waiver of all defaults thereunder. As of December 30, 1996, (the "Expiration Date" of Exchange Offer) holders of $7,901,000 principal amount of Debentures representing in excess of 82% of issued and outstanding amount of Debentures gave their affirmative written consent to the rescission of the acceleration and to the waiver of the defaults of the Company. The Debenture Exchange Offer, conditioned upon acceleration of payment of the Debentures being rescinded, and the waiver of default being consented to, offered to the holders of Debentures to exchange $500 in cash plus sixteen (16) shares of Common Stock, par value $.01 per share ("Common Shares"), designated aggregately as a payment of principal, plus $80 in cash plus eight (8) shares of Common Stock, designated aggregately as a payment of interest (the combined total of principal and interest herein called "Exchange Consideration") for each $1,000 of the outstanding principal amount of its Debentures and the waiver by the Debentureholder of all interest accrued and unpaid on such principal amount as of the date of the Exchange except for such designated interest payment included in the Exchange Consideration. On December 30, 1996, the Company completed the Debenture Exchange Offer with its Debentureholders. An aggregate of $6,846,000 principal amount of Debentures, representing 72% of the issued and outstanding Debentures, were tendered for exchange to the Company pursuant to the terms of the Debenture Exchange Offer. All such Debentures were accepted for exchange by the Company, and the Company paid an aggregate of $3,970,680 in cash to the tendering Debentureholders and issued an aggregate of 164,304 shares of the Company's Common Stock to such tendering Debentureholders. With respect to an aggregate of $2,692,000 principal amount of Debentures which were not tendered for exchange, the Company paid an aggregate of $552,701 of interest and default interest to such non-tendering Debentureholders. As a result of the Consent Solicitation and the payment by the Company of interest and default interest with respect to all Debentures which have not been tendered for exchange, the Company is no longer in default with respect to such Debentures. The next scheduled semi-annual interest payment to be made on April 15, 1997, by the Company with respect to its currently outstanding Debentures is approximately $101,000. All remaining untendered Debentures remain convertible into shares of the Company's Common Stock at the rate of one share of Common Stock for each $250 principal amount of Debentures, subject to adjustment. As a result of the completion of the Debenture Exchange Offer, the Company's debt obligations have been reduced by $6,846,000, and $2,692,000 of the Company's debt obligations represented by untendered Debentures has been reclassified to long term debt during the third quarter of fiscal 1997. The completion of the Debenture Exchange Offer had the further effect of reducing the amount of stockholders' deficit by approximately $2.2 million. THE FOLLOWING APPEARS ON THE INSIDE FRONT COVER PAGE: AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy and information statements and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: New York Regional Office, Seven World Trade Center, Room 1400, New York, New York 10048; and Chicago Regional Office, Everett McKinley Dirkson Building, 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies of such material may be obtained from the public reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy information statements and other information regarding the Registrant that is filed electronically with the Commission and the address is http://www.sec.gov. The Company distributes to its stockholders annual reports containing financial statements audited by its independent auditors and independent public accountants. FORWARD LOOKING STATEMENTS This Prospectus contains certain forward-looking statements or statements which may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, management's discussion and analysis of financial condition and results of operations, business of the Company, and risk factors. The words "estimate," "project," "intend," "expect," and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve and are subject to known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating), achievements expressed or implied by such forward-looking statement. For a discussion of certain risks and uncertainties, see "Risk Factors" at page 13. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. EXCHANGE OF SECURED CONVERTIBLE NOTE FOR PREFERRED STOCK The Board of Directors has authority to issue its authorized Preferred Stock in one or more series, each series to have such designation and number of shares as the Board of Directors may fix prior to the issuance of any shares of such series. Each series may have such preferences and relative participating, optional or special rights with such qualifications, limitations or restrictions as stated in the resolution or resolutions providing for the issuance of such series as may be adopted from time to time by the Board of Directors prior to the issuance of any such series. The Board of Directors has designated 41,260 shares of Preferred Stock as Series A Non-Voting 4% Cumulative Convertible Preferred Stock, $50 par value (the "Preferred Stock") on January 17, 1997. The Preferred Stock was issued by the Company in exchange for the Secured Convertible Note of the Company due January 9, 1997 in the principal amount of $2.0 million and bearing interest at the rate of 12% per annum and $63,000 of interest accrued thereon. The Preferred Stock pays a cumulative quarterly dividend of 4% per annum, when and as declared by the Board of Directors; is preferred to the extent of $50 per share plus accrued dividends; is convertible into shares of Common Stock of the Company at $6 per share, which was the same price at which the principal of the note was exchangeable; and is not entitled to vote. The shares of Common Stock issuable upon conversion of the Preferred Stock are not registered under the Registration Statement under which the prospectus is a part. As a result of the exchange of the Secured Convertible Note into Preferred Stock, the Company's debt obligations have been reduced by $2.0 million. The completion of the exchange had the further effect of reducing the amount of stockholders' deficit by $2.1 million. THE OFFERING Number of Shares of Common Stock Offered by Selling Stockholders............. 370,207 Shares of Common Stock Outstanding(1)........ 3,265,385 Use of Proceeds.............................. The Company will not receive any proceeds from the sale of Common Stock by the Selling Shareholders New York Stock Exchange Symbol(2)............ CMP - -------------------- (1) Excludes (i) 1,139,255 shares of Common Stock issuable upon exercise of outstanding warrants granted under (a) the Company's 1988 Incentive and Nonstatutory Stock Option Plans, (b) the Company's 1995 Stock Option Plan and (c) the Company's Non-Employee Director Plan; (ii) 35,000 shares of Common Stock issuable pursuant to miscellaneous options granted; (iii) 343,820 shares of Common Stock (subject to adjustment) issuable upon conversion of Series A Non-Voting 4% Cumulative Convertible Preferred Stock; (iv) 100,000 shares of Common Stock issuable to the holder of the 13.5% interest in Comprehensive Behavioral in exchange for such interest; (v) shares of Common Stock that may be issued to stockholders of the Company pursuant to the Rights Agreement between the Company and Continental Stock Transfer & Trust Company dated April 19, 1988 and amended October 21, 1994. (2) The current listing of the Company's shares of Common Stock on the New York Stock Exchange does not assure continued future listing. See "Risk Factors - Continued Listing on NYSE". SUMMARY CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following summary consolidated financial data of the Company has been derived from the financial statements of Comprehensive Care Corporation which have been prepared in accordance with generally accepted accounting principles ("GAAP"). The summary consolidated financial data for the Company as of May 31, 1995 and 1996, and for the years then ended, are derived from the consolidated financial statements of Comprehensive Care Corporation which have been audited by Ernst & Young LLP, independent auditors. Ernst & Young LLP's report on the consolidated financial statements for the years ended May 31, 1995 and 1996, which appears elsewhere herein, includes a description of an uncertainty with respect to the Company's ability to continue as a going concern described in Note 2 to the financial statements. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein. The financial statements as of May 31, 1992, 1993 and 1994 and for the years then ended have been derived from financial statements audited by other accountants. The summary consolidated financial data set forth below for the years ended May 31, 1992, 1993, and 1994 are derived from audited financial statements not included or incorporated by reference herein. The financial data for the six months ended November 30, 1995 and 1996 are derived from unaudited financial statements. The unaudited financial statements include all adjustments consisting of normal recurring accruals, which Comprehensive Care Corporation considers necessary for a fair presentation of the financial position and the results of operations for those periods. Operating results for the six months ended November 30, 1996 are not necessarily indicative of the results that may be expected for the full fiscal year. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein. Financial data presented below does not include statement of operations or balance sheet data for the Debenture Exchange and does not include the exchange of the Secured Convertible Note. See "Pro Forma Financial Information."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000023019_computer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000023019_computer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bb9f98dd1e6c37101b65dfa9b169804af6e6b50c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000023019_computer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and Consolidated Financial Statements and Notes thereto, appearing elsewhere or incorporated by reference in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in such forward-looking statements. THE COMPANY Computer Horizons is a diversified information technology services company that provides IT staffing and solutions services, including Year 2000 services, to major corporations. Founded in 1969 as a provider of IT staffing resources, the Company has expanded through internal growth and acquisitions to become a leading national provider of IT staffing services. The Company also offers its clients various IT solutions services, including application development, conversions/migrations, legacy maintenance outsourcing, enterprise network management and knowledge transfer and training. The Company's Year 2000 solution addresses all phases of Year 2000 projects from assessment through full compliance and is based on its proprietary Signature 2000 Toolset. The Company's Year 2000 services business, which represented approximately 2% of the Company's revenues in the first six months of 1996, accounted for approximately 19% of its revenues in the first six months of 1997. Increasingly, organizations are addressing issues such as the need to improve quality, shorten time to market and reduce costs by utilizing IT solutions that facilitate rapid and flexible collection, analysis and dissemination of information. As a result, an organization's ability to effectively utilize new IT solutions in a cost-effective manner has become critical in today's increasingly competitive business environment. During this time of increasing reliance on IT, rapid technological change and other challenges, such as the need for Year 2000 conversions, have strained the capabilities of the internal IT departments within these organizations. As a result of these factors and the need to focus their resources on core competencies, large corporations are increasingly outsourcing these functions to third party vendors of IT services. International Data Corporation ("IDC") estimates that worldwide outsourcing spending was approximately $86 billion in 1996, and projects that such spending will grow to $140 billion in 2001. Furthermore, the Gartner Group estimates the worldwide cost of fixing the Year 2000 problem to be between $300 and $600 billion. The Company markets its services primarily to Fortune 500 companies with significant information technology budgets and recurring staffing or software development needs. In 1996, the Company provided services to over 450 clients, including AT&T, Chase Manhattan Corporation, Citicorp, Dow Chemical Company, Florida Power & Light Company, Ford Motor Company, International Business Machines Corporation, MCI Communications Corporation, NYNEX Corporation and Prudential Insurance Company of America. The Company has been successful in generating repeat business from existing clients, with more than 90% of revenues in each of 1994, 1995 and 1996 having been generated from clients that were also clients during the prior year. The Company believes that its ability to offer a broad range of staffing and solutions services and its established relationships with many Fortune 500 companies provide it with significant advantages in the IT services market. As of June 27, 1997, the Company had approximately 2,700 billable consultants (including independent contractors). The Company provides staffing and solutions services through a network of 45 branch offices located in 21 states, the District of Columbia, Canada, England and India (including the offices of the Company's India-based joint venture). The Company maintains an internal staff of over 100 recruiters and believes that its ability to attract, motivate and retain highly skilled IT professionals on a large scale is a core competency. The Company's objective is to be the leading provider of comprehensive IT staffing and solutions services to major corporations. To achieve this objective, the Company is seeking to: (i) maintain the Company's leadership position in its core staffing business; (ii) increase its higher margin Year 2000 services business; (iii) develop new strategic solutions offerings; (iv) expand its base of staffing and solutions clients; and (v) expand its geographic presence through opening new offices, acquisitions and strategic partnerships or alliances. The Company's principal executive offices are located at 49 Old Bloomfield Avenue, Mountain Lakes, New Jersey 07046-1495, (973) 402-7400. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,500,000 shares Common Stock offered by the Selling Shareholders............................... 500,000 shares Common Stock to be outstanding after the Offering................................... 27,057,374 shares(1) Use of Proceeds.............................. Working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol................ CHRZ </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 27, ---------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues................... $102,206 $121,550 $152,192 $200,050 $233,858 $113,063 $145,463 Income from operations..... 4,470 7,494 11,011 17,575 18,440 9,110 15,277 Income before income taxes.................... 3,892 6,910 10,373 17,571 19,162 9,429 15,525 Net income................. 2,026 3,704 5,686 9,907 11,232 5,440 8,925 Net income per share(2).... $ 0.10 $ 0.16 $ 0.27 $ 0.42 $ 0.44 $ 0.21 $ 0.35 Weighted average number of shares of Common Stock outstanding(2)........... 20,436 22,491 21,387 23,364 25,461 25,453 25,770 </TABLE> <TABLE> <CAPTION> JUNE 27, 1997 ------------------------ ACTUAL AS ADJUSTED(3) ------- -------------- (UNAUDITED) <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital............................................................ $59,810 $148,066 Total assets............................................................... 96,386 184,642 Long-term debt, including current portion.................................. 1,432 1,432 Shareholders' equity....................................................... 79,919 168,175 </TABLE> - --------------- (1) Includes shares outstanding as of June 27, 1997 and 7,500 shares of Common Stock to be sold in the Offering by a Selling Shareholder upon the exercise of an outstanding warrant. Excludes (i) an aggregate of 2,009,362 shares of Common Stock issuable upon exercise of options outstanding under the Company's 1985 Incentive Stock Option and Appreciation Plan, as amended, 1994 Incentive Stock Option and Appreciation Plan and the 1991 Directors Stock Option Plan, as amended (collectively, the "Plans"), and (ii) 6,005,056 shares of Common Stock reserved for future issuance under the Plans. Also excludes 36,000 shares of Common Stock issuable upon the exercise of outstanding warrants. (2) See Note 1 of Notes to Consolidated Financial Statements incorporated by reference herein. (3) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by the Company at an assumed public offering price of $37.375 per share, after deducting underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000033461_ero_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000033461_ero_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000033461_ero_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000037661_ameristeel_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000037661_ameristeel_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..43268fa1abd00f72f3abc7ef339cdd02979521b9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000037661_ameristeel_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information presented in this Prospectus assumes that the Underwriters' over-allotment options will not be exercised. All references in this Prospectus to the "Company" shall be deemed to refer to AmeriSteel Corporation and all references to fiscal years are to the Company's fiscal years ended on March 31. THE COMPANY The Company operates four non-union minimills located in the southeastern U.S. that produce steel concrete reinforcing bars ("rebar"), light structural shapes such as rounds, squares, flats, angles and channels ("merchant bars") and, to a lesser extent, wire rod ("rods") and billets (which are semi-finished steel products). The Company also operates 13 rebar fabricating plants strategically located in close proximity to its mills. The Company estimates that it currently has annual steel melting capacity of 2.0 million tons per year and finished product rolling capacity of 1.7 million tons per year. The Company believes that it is the second largest producer and the largest fabricator of rebar in the U.S. The Company's minimills use electric arc furnaces to melt recycled scrap steel. The molten steel is then cast into long strands called billets in a continuous casting process. Billets are then reheated and rolled into rebar, merchant bars and rods. The Company's fabricating plants further process approximately 40% of the Company's mill rebar production to meet specific contractor specifications. Rebar is used primarily for strengthening concrete in highway and building construction and other construction applications. Merchant bars are used in a wide variety of applications including floor and roof joists, transmission towers, and farm equipment. Rods are used in a variety of applications, including the manufacture of welded wire fabric and nails. In late 1992, the Company was purchased by Kyoei Steel Ltd. ("Kyoei"), a private Japanese minimill company engaged in the manufacture of commodity grade steel products, primarily rebar and merchant bar products. Kyoei, founded in 1947, operates five minimills in Japan and a rolling mill in Vietnam with a total annual rebar and merchant bar rolling capacity of 2.5 million tons. The Company has benefitted from access to Kyoei's operating, engineering and technical expertise. THE INDUSTRY According to industry sources, United States market demand for rebar was approximately 6.3 million tons in calendar 1996. The Company believes that it is the second largest producer of rebar in the U.S. and estimates it has approximately a 13% share of the U.S. rebar market and approximately a 20% share in the eastern two-thirds of the U.S. According to industry sources, the U.S. market for merchant and other light structural shape bars was estimated to be approximately 8.6 million tons in calendar 1996. The Company estimates that it has approximately a 6% share of this market. For the six months ended September 30, 1997, approximately 24% of the Company's net sales were derived from fabricated rebar, 28% from stock rebar (rebar produced by the mills and sold to third parties), 31% from merchant bars, 5% from rods and 12% from semi-finished billets. The minimill industry is composed of two types of competitors: multi-mill operators and stand-alone minimills. The Company believes that recent growth in the industry (through acquisitions as well as capital expenditures) has been driven by multi-mill operations because stand-alone minimills have not generally been able to achieve the economies of scale or had access to the financial resources to make the investments that larger operators have. The Company believes that further industry consolidation will continue given the significant advantages available to multi-mill operators. Accordingly, the Company is actively investigating potential acquisition opportunities. COMPETITIVE STRENGTHS The primary focus of the Company's business strategy is to continue to be a low cost producer of rebar and merchant bar products in the U.S. and to further grow its business including through acquisitions of steel producing and related assets. The Company believes that the following competitive strengths are key elements of this strategy: DEMONSTRATED COST CONTROL. Since 1994, the Company has reduced its costs of converting scrap steel to finished steel products ("conversion costs") from $146 per ton to $128 per ton for the six months ended September 30, 1997. The Company has achieved these cost reductions through its mill modernization program, high mill utilization, access to competitively priced electric power at its Tennessee and North Carolina mills, and labor incentive programs designed to maximize productivity. In addition, since 1994, the Company has closed unprofitable operations and divested non-core activities. The Company currently has initiatives in place that it believes will further reduce its conversion costs. MODERNIZED PRODUCTION EQUIPMENT IN ATTRACTIVE LOCATIONS. Since 1992, the Company has invested approximately $115 million in mill modernization, including major projects at its Jackson, Tennessee, Jacksonville, Florida and Charlotte, North Carolina mills. The Company believes its recent mill modernization program will lower conversion costs and increase capacity utilization, enhance merchant bar quality and broaden its merchant bar product range. The southeastern U.S. (where all the Company's mills are located) accounts generally for more than one-fourth of U.S. rebar consumption and, due to mild wintertime weather conditions, demonstrates less seasonal demand fluctuations than more northern regions of the U.S. Because of the high cost of freight relative to the value of the Company's products, competition from non-regional producers is limited. MOTIVATED, NON-UNION LABOR FORCE. The Company employs a non-union workforce of approximately 1,860 employees. The Company's compensation programs are designed to allow employees to earn significant incentive bonuses (approximately one-fifth of their total compensation) based on production volumes, sales volumes, cost targets or return on capital employed. These programs have been successfully implemented by the current management team and have resulted in lower costs, higher productivity and increased profitability. Further incentive is provided through equity ownership plans. Approximately 57% of current employees have purchased stock in the Company, including Phillip E. Casey, Chairman and Chief Executive Officer, who beneficially owns approximately 10% of the outstanding shares of the Company's capital stock (approximately 6% after the Offerings). STRONG MARKET POSITIONS. The Company believes that it is the second largest producer of rebar in the U.S. and estimates it has approximately a 13% share in the U.S. rebar market and approximately a 20% share in the eastern two-thirds of the U.S. In addition, the Company believes that it is the largest fabricator of rebar products in the U.S., with fiscal 1997 revenues of $161.2 million, or approximately 26% of the Company's sales. The Company believes its strong market position in both stock rebar shipments and fabricated rebar shipments provides it with competitive market intelligence and other advantages from vertical integration relative to its smaller competitors. The Company estimates it has approximately a 6% share of the U.S. market for merchant and other light structural shape bars. The Company believes it has opportunities to increase its market share in this market, which is generally less cyclical and more profitable than the rebar market. A recent independent survey has ranked the Company first in customer service and on-time delivery in the Company's principal product markets. As evidence of a high degree of customer satisfaction, the Company has had, on average, a relationship of at least 10 years with its top 25 customers. The Company's headquarters are located at 5100 W. Lemon Street, Suite 312, Tampa, Florida 33609, and its telephone number is (813) 286-8383. THE OFFERINGS(1) <TABLE> <S> <C> <C> Class A Common Stock offered by the Company: United States Offering................ 3,160,000 shares International Offering................ 790,000 shares Total......................... 3,950,000 shares Common Stock outstanding after the Offerings: Class A Common Stock.................. 3,950,000 shares Class B Common Stock.................. 10,114,385 shares(2) Total......................... 14,064,385 shares Use of Proceeds......................... To repay approximately $66.3 million in long term debt, to fund working capital and for general corporate purposes. See "Use of Proceeds". Proposed New York Stock Exchange symbol................................ AST </TABLE> - ------------------------ (1) The offerings of Class A Common Stock by the U.S. Underwriters and the International Underwriters are referred to herein as the "Offerings". (2) Excludes 329,762 shares of Class B Common Stock issuable at an average exercise price of $12.71 on the exercise of stock options granted under the Company's option plans and outstanding as of September 30, 1997. See "Management -- Incentive and Benefit Plans" and "Description of Capital Stock". CONCURRENT NOTES OFFERING Concurrent with the Offerings, the Company is planning to offer $100 million aggregate principal amount of its senior unsecured Notes due 2007 (the "Notes", and the offering of such Notes, the "Notes Offering") by a separate offering memorandum. Because the Notes Offering is subject to a variety of market, economic and other factors, there can be no assurance that the Notes Offering will be consummated. The closing of the Notes Offering is conditioned upon the closing of the Offerings, but not vice versa. It is expected that the Notes Offering would be closed shortly after the closing of the Offerings. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". SUMMARY FINANCIAL AND OPERATING DATA The summary statement of operations and balance sheet data for the years ended March 31, 1994, 1995, 1996 and 1997 are derived from the audited financial statements of the Company. The same data for the year ended March 31, 1993 have been compiled from the Company's financial statements, combining the periods for the nine months ended December 31, 1992 which was unaudited, and the three months ended March 31, 1993 which was audited. The data for the six month periods ended September 30, 1996 and 1997 have been derived from the unaudited financial statements for those periods. The results of the six months ended September 30, 1997 are not necessarily indicative of the results to be expected for the fiscal year ending March 31, 1998. The unaudited financial data include, in the opinion of management, all adjustments consisting only of normal recurring accruals necessary to present fairly the data for such periods. Certain reclassifications have been made to the March 31, 1994 financial data to conform with the financial data of the other periods presented. The following financial data for the years ended March 31, 1995, 1996 and 1997, and for the six month period ended September 30, 1996 and 1997 are qualified in their entirety by reference to the more detailed Financial Statements and Notes thereto, included elsewhere in this Prospectus, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations". <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, -------------------------------------------------------------- ----------------------------- 1993 1994 1995 1996 1997 1996 1997 ---------- ---------- ---------- ---------- ---------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS: Net sales........................ $ 479,971 $ 547,118 $ 639,908 $ 628,404 $ 617,289 $327,908 $343,805 Operating expenses: Cost of sales.................. 431,288 498,692 545,725 533,965 531,190 285,173 277,251 Selling and administrative..... 25,285 27,293 29,959 29,605 29,068 14,261 12,834 Depreciation................... 15,496 15,369 14,046 14,619 16,654 8,091 9,643 Amortization of goodwill....... 3,017 4,061 4,130 4,130 4,130 2,065 2,065 Other operating expenses(1).... 9,000 10,920 -- 16,013 -- -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- $ 484,086 $ 556,335 $ 593,860 $ 598,332 $ 581,042 $309,590 $301,793 Income (loss) from operations.... (4,115) (9,217) 46,048 30,072 36,247 18,318 42,012 Other expense: Interest....................... 37,534 21,027 23,330 22,000 19,473 9,898 10,115 Amortization of deferred financing costs.............. 1,548 2,552 2,863 1,956 934 467 353 ---------- ---------- ---------- ---------- ---------- -------- -------- $ 39,082 $ 23,579 $ 26,193 $ 23,956 $ 20,407 $ 10,365 $ 10,468 Income (loss) before income taxes (benefit) & extraordinary item........................... (43,197) (32,796) 19,855 6,116 15,840 7,953 31,544 Income taxes (benefit)........... (13,711) (10,833) 9,354 3,996 7,788 3,907 13,108 ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) before extraordinary item............. $ (29,486) $ (21,963) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436 Extraordinary item, net of income tax benefit(2)................. (4,185) (748) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- Net income (loss)................ $ (33,671) $ (22,711) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436 ========== ========== ========== ========== ========== ======== ======== Earnings (loss) per share(3)..... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 0.40 $ 1.83 ========== ========== ========== ========== ======== ======== BALANCE SHEET DATA (end of period): Working capital.................. $ 88,805 $ 111,666 $ 121,364 $ 114,521 $ 108,727 $ 99,816 $111,852 Total assets..................... 495,884 523,706 561,748 554,896 535,685 534,961 543,400 Current liabilities.............. 59,530 76,006 102,080 85,588 73,792 75,208 80,841 Long-term debt (less current portion)....................... 212,002 247,128 243,030 252,525 237,474 239,245 216,835 Stockholders' equity............. 147,711 124,999 137,750 141,747 150,564 146,192 169,410 SELECTED OPERATING DATA: Shipped Tons Stock rebar.................... 434 466 536 508 472 242 291 Merchant bar................... 427 468 549 544 512 253 283 Rod............................ 144 121 129 133 105 62 48 ---------- ---------- ---------- ---------- ---------- -------- -------- Subtotal mill finished goods... 1,005 1,055 1,214 1,185 1,089 557 622 Fabricated rebar............... 317 330 347 315 326 170 174 Billets........................ 232 263 141 175 281 188 106 ---------- ---------- ---------- ---------- ---------- -------- -------- Total shipped tons............. 1,554 1,648 1,702 1,675 1,696 915 902 ========== ========== ========== ========== ========== ======== ======== Average mill finished goods prices (per ton)............... $ 284 $ 310 $ 342 $ 337 $ 333 $ 332 $ 349 Average scrap cost (per ton)..... 94 119 130 131 130 133 131 Average metal spread (per ton)(4)........................ 190 191 212 206 203 199 218 Average mill conversion costs (per ton)...................... 140 146 135 135 138 140 128 </TABLE> - --------------- (1) In September 1992, the Company recorded a $9.0 million charge for a settlement related to a Florida Department of Transportation epoxy coated rebar claim. In the fiscal year ended March 31, 1994, the Company recorded a $10.3 million charge related to the closing of the Tampa melt shop and a $0.6 million charge related to closing the Fort Myers, Florida and Woodbridge, Virginia fabrication shop facilities. In the fiscal year ended March 31, 1996, the Company recorded a $15.0 million charge related to the closing of the Tampa rolling mill and a $1.0 million charge for the closure of other facilities. (2) In December 1992, the Company repaid $239.6 million of existing debt which had a carrying value of $233.0 million resulting in a loss of $4.2 million net of income tax benefit. In the fiscal year ended March 31, 1994, the Company incurred a charge of $748,000, net of income tax benefits, as a result of redeeming $20 million of the 14.5% subordinated debentures at a premium of 6% or $1.2 million. (3) Earnings (loss) per share for the year ended March 31, 1993 is not presented because ownership of the Company changed in late calendar 1992. For comparative purposes, loss per share for the entire period would have been $(3.37) assuming 10,000,000 shares of stock outstanding throughout the entire year. (4) Average metal spread equals Average mill finished goods prices minus Average scrap costs.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000039135_friendly_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000039135_friendly_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..862cdc642bd1630eee613d22d6951e487f5faa33
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000039135_friendly_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, (I) REFERENCES TO "FRIENDLY'S" OR THE "COMPANY" REFER TO FRIENDLY ICE CREAM CORPORATION, ITS PREDECESSORS AND ITS CONSOLIDATED SUBSIDIARIES, (II) AS USED HEREIN, "NORTHEAST" REFERS TO THE COMPANY'S CORE MARKETS WHICH INCLUDE CONNECTICUT, MAINE, MASSACHUSETTS, NEW HAMPSHIRE, NEW JERSEY, NEW YORK, PENNSYLVANIA, RHODE ISLAND AND VERMONT, (III) THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE COMMON STOCK OFFERING AND (IV) THIS PROSPECTUS GIVES EFFECT TO THE 924-FOR-1 STOCK SPLIT WHICH WILL OCCUR PRIOR TO THE COMMON STOCK OFFERING. THE COMPANY'S FISCAL YEARS ENDED DECEMBER 27, 1992, JANUARY 2, 1994, JANUARY 1, 1995, DECEMBER 31, 1995 AND DECEMBER 29, 1996 ARE REFERRED TO HEREIN AS 1992, 1993, 1994, 1995 AND 1996, RESPECTIVELY. THE COMPANY Friendly's is the leading full-service restaurant operator and has a leading position in premium frozen dessert sales in the Northeast. The Company owns and operates 662 and franchises 34 full-service restaurants and manufactures a complete line of packaged frozen desserts distributed through more than 5,000 supermarkets and other retail locations in 15 states. Friendly's offers its customers a unique dining experience by serving a variety of high-quality, reasonably-priced breakfast, lunch and dinner items, as well as its signature frozen desserts, in a fun and casual neighborhood setting. For the twelve-month period ended September 28, 1997, Friendly's generated $667.0 million in total revenues and $74.9 million in EBITDA (as defined herein) and incurred $44.0 million of interest expense. During the same period, management estimates that over $230 million of total revenues were from the sale of approximately 21 million gallons of frozen desserts. Friendly's restaurants target families with children and adults who desire a reasonably-priced meal in a full-service setting. The Company's menu offers a broad selection of freshly-prepared foods which appeal to customers throughout all day-parts. Breakfast items include specialty omelettes and breakfast combinations featuring eggs, pancakes and bacon or sausage. Lunch and dinner items include a new line of wrap sandwiches, entree salads, soups, super-melts, specialty burgers and new stir-fry, chicken, pot pie, tenderloin steak and seafood entrees. Friendly's is also recognized for its extensive line of ice cream shoppe treats, including proprietary products such as the Fribble-Registered Trademark-, Candy Shoppe-Registered Trademark- Sundaes and the Wattamelon Roll-Registered Trademark-. The Company believes that one of its key strengths is the strong consumer awareness of the Friendly's brand name, particularly as it relates to the Company's signature frozen desserts. This strength and the Company's vertically-integrated operations provide several competitive advantages, including the ability to (i) utilize its broad, high-quality menu to attract customer traffic across multiple day-parts, particularly the afternoon and evening snack periods, (ii) generate incremental revenues through strong restaurant and retail market penetration, (iii) promote menu enhancements and extensions in combination with its unique frozen desserts and (iv) control quality and maintain operational flexibility through all stages of the production process. Friendly's, founded in 1935, was publicly held from 1968 until January 1979, at which time it was acquired by Hershey Foods Corporation ("Hershey"). While owned by Hershey, the Company increased the total number of restaurants from 601 to 849 yet devoted insufficient resources to product development and capital improvements. In 1988, The Restaurant Company ("TRC"), an investor group led by Donald Smith, the Company's current Chairman, Chief Executive Officer and President, acquired Friendly's from Hershey (the "TRC Acquisition"). The high leverage associated with the TRC Acquisition and the Old Credit Facility (as defined herein) severely impacted the liquidity and profitability of the Company and, therefore, limited the scope and implementation of certain of the Company's business and growth strategies. The Company has reported net losses and had earnings that were insufficient to cover fixed charges for each fiscal year since the TRC Acquisition except for the nine months ended September 28, 1997. As a result of subsequent restructurings, and upon completion of the Recapitalization and the Related Transactions (as defined herein) approximately 16.8% and 9.8% of the Common Stock will be owned by the Company's employees and lenders under the Old Credit Facility, respectively. See "Risk Factors," "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Despite the Company's capital constraints, management implemented a number of initiatives to restore and improve operational and financial efficiencies. From the date of the TRC Acquisition through 1994, the Company (i) implemented a major revitalization of its restaurants, (ii) repositioned the Friendly's concept from a sandwich and ice cream shoppe to a full-service, family-oriented restaurant with broader menu and day-part appeal, (iii) elevated customer service levels by recruiting more qualified managers and expanding the Company's training program, (iv) disposed of 123 under-performing restaurants and (v) capitalized upon the Company's strong brand name recognition by initiating the sale of Friendly's unique line of packaged frozen desserts through retail locations. Beginning in 1994, the Company began implementing several growth initiatives including (i) testing and implementing a program to expand the Company's domestic distribution network by selling frozen desserts and other menu items through non-traditional locations, (ii) distributing frozen desserts internationally by introducing dipping stores in South Korea and the United Kingdom and (iii) implementing a franchising strategy to extend profitably the Friendly's brand without the substantial capital required to build new restaurants. As part of this strategy, on July 14, 1997 the Company entered into the DavCo Agreement. See "--Recent Developments." Implementation of these initiatives since the TRC Acquisition has resulted in substantial improvements in revenues and EBITDA. Despite the closing of 152 restaurants (net of restaurants opened) since the beginning of 1989 and periods of economic softness in the Northeast, the Company's restaurant revenues have increased 7.5% from $557.3 million in 1989 to $599.3 million in the twelve months ended September 28, 1997, while average revenue per restaurant has increased 29.8% from $665,000 to $863,000 during the same period. Retail, institutional and other revenues and franchise revenues have also increased from $1.4 million in 1989 to $67.7 million in the twelve months ended September 28, 1997. In addition, EBITDA has increased 58.0% from $47.4 million in 1989 to $74.9 million in the twelve-month period ended September 28, 1997, while operating income has increased from $4.1 million to $42.0 million over the same period. Friendly's intends to utilize the increased liquidity and operating and financial flexibility resulting from consummation of the Recapitalization in order to continue to grow the Company's revenues and earnings by implementing the following key business strategies: (i) continuously upgrade the menu and introduce new products, (ii) revitalize and re-image existing Friendly's restaurants, (iii) construct new restaurants, (iv) enhance the Friendly's dining experience, (v) expand the restaurant base through high-quality franchisees, (vi) increase market share through additional retail accounts and restaurant locations, (vii) introduce modified formats of the Friendly's concept into non-traditional locations and (viii) extend the Friendly's brand into international markets. COMPETITIVE STRENGTHS THE COMPANY BELIEVES THAT, IN THE NORTHEAST, ITS LEADING POSITION IN FULL-SERVICE RESTAURANT AND PREMIUM FROZEN DESSERT SALES IS ATTRIBUTABLE TO THE FOLLOWING COMPETITIVE STRENGTHS: STRONG BRAND NAME RECOGNITION. During the past 60 years, management believes the Friendly's brand name has become synonymous with high-quality food and innovative frozen desserts. The Company believes that the brand name awareness created by its premium frozen dessert heritage drives customer traffic, particularly during the afternoon and evening snack periods, promotes menu enhancement and extension and generates incremental revenues from the Company's retail and non-traditional distribution channels. The Company's independent surveys indicate that, in the Northeast, over 90% of all households recognize the Friendly's brand and that over 30% of these households visit a Friendly's restaurant every three months. SIGNATURE FROZEN DESSERTS. Friendly's produces an innovative line of high-quality freshly-scooped and packaged frozen desserts, which have been cited by customers as a key reason for choosing Friendly's. Accordingly, approximately 50% of all visits to a Friendly's restaurant include a frozen dessert purchase. Freshly-scooped specialties served in Friendly's restaurants include the Jim Dandy and Oreo-Registered Trademark- Brownie sundaes, and the Fribble-Registered Trademark-, the Company's signature thick shake. Packaged goods available for purchase in both restaurant and retail locations include traditional and low-fat ice cream, yogurt and sorbets in half gallons, pints and cups and a wide variety of ice cream cakes, pies and rolls such as the Jubilee Roll-Registered Trademark- and Wattamelon Roll-Registered Trademark-. In addition, the Company licenses from Hershey the rights to feature in its signature desserts certain candy brands such as Almond Joy-Registered Trademark-, Mr. Goodbar-Registered Trademark-, Reeses Pieces-Registered Trademark-, Reeses-Registered Trademark- Peanut Butter Cups and York-Registered Trademark- Peppermint Patties. BROAD, HIGH-QUALITY MENU. The Company has successfully capitalized on Friendly's reputation for high-quality, wholesome foods including the well-known $2.22 Breakfast, Big Beef-Registered Trademark- Hamburger, Fishamajig-Registered Trademark- Sandwich and Clamboat-Registered Trademark- Platter by extending these offerings into a broader product line including freshly-prepared omelettes, SuperMelt-TM- Sandwiches, Colossal Sirloin Burgers-TM-, tenderloin steaks and stir-fry entrees. Reflecting this increased menu variety, food products now account for over 70% of restaurant revenues, and guest check averages have increased significantly over the last five years. Friendly's also has an extensive Kid's Menu which encourages family dining due to the significant appeal to children of the Friendly's concept. MULTIPLE DAY-PART APPEAL. Due to the appeal of Friendly's frozen desserts, the Company generates approximately 35% of its restaurant revenues during the afternoon and evening snack periods (2:00 p.m. to 5:00 p.m. and 8:00 p.m. to closing), providing Friendly's with the highest share of snack day-part sales in the Northeast. Accordingly, the Company endeavors to maximize revenue across multiple day-parts by linking sales of its high-margin frozen desserts with its lunch and dinner entrees. The Company generates approximately 12%, 24% and 29% of restaurant revenues from breakfast, lunch and dinner, respectively. STRONG RESTAURANT AND RETAIL MARKET PENETRATION. The Company has the highest market share among full-service restaurants and a leading position in premium frozen dessert sales in the Northeast. The Company's strong restaurant and retail market penetration provides incremental revenues and cash flow, as multiple levels of visibility and availability provide cross promotion opportunities and enhance consumer awareness and trial of the Company's unique products while effectively targeting consumers for both planned and impulse purchases. For example, the new Colossal Sirloin Burger-TM- was introduced with a new 79 CENTS Caramel Fudge Blast-TM- Sundae during the spring of 1997. In addition to promoting sales of this new entree, this strategy increased consumer awareness and trial of the new sundae combination, which in turn supported the introduction of Caramel Fudge Nut Blast-TM- Sundae half gallons into restaurants and retail locations. VERTICALLY-INTEGRATED OPERATIONS. Friendly's vertically-integrated operations are designed to deliver the highest quality food and frozen desserts to its customers and to allow the Company to adapt to evolving customer tastes and preferences. The Company formulates new products and upgrades existing food and frozen desserts through its research and development group and controls all stages in the production of its frozen desserts through its two manufacturing facilities. In addition, the Company controls cost and product quality and efficiently manages inventory levels from point of purchase through restaurant delivery utilizing its three distribution facilities and fleet of 56 tractors and 81 trailers. Furthermore, Friendly's maximizes its purchasing power when sourcing materials and services for its restaurant and retail operations through its integrated purchasing department. MANAGEMENT EXPERIENCE AND EMPLOYEE RETENTION. The Company has a talented senior management team with extensive restaurant industry experience and an average tenure with the Company of 17 years. In addition, the Company minimizes turnover of both managers and line personnel through extensive employee training and retention programs. In 1996, the Company's turnover among its restaurant salaried management was approximately 24%, which was significantly lower than the industry average. BUSINESS STRATEGIES FRIENDLY'S OBJECTIVE IS TO CAPITALIZE ON ITS COMPETITIVE STRENGTHS TO GROW ITS RESTAURANT AND RETAIL OPERATIONS BY IMPLEMENTING THE FOLLOWING KEY BUSINESS STRATEGIES: UPGRADE MENU AND SELECTIVELY INTRODUCE NEW PRODUCTS. Friendly's strategy is to increase consumer awareness and restaurant patronage by continuously upgrading its menu and introducing new products. As part of this strategy, Friendly's dedicated research and development group regularly formulates proprietary new menu items and frozen desserts to capitalize on the evolving tastes and preferences of its customers. In the fall of 1996, the Company introduced a new dinner line which includes a high-quality steak entree, home-style chicken dinners, pot pies and stir-frys, as well as several premium frozen desserts including the new Oreo-Registered Trademark- Brownie Sundae. Largely as a result of new premium items, guest check averages have increased 7.4% during the first nine months of 1997 as compared to the same period of 1996. REVITALIZE AND RE-IMAGE RESTAURANTS. Friendly's seeks to continue to grow restaurant revenues and cash flow through the ongoing revitalization and re-imaging of existing restaurants and to increase total restaurant revenues through the addition of new restaurants. The Company has revitalized approximately 633 restaurants since the beginning of 1989, increasing average restaurant revenues from $665,000 in 1989 to $863,000 in the twelve months ended September 28, 1997. Further, the Company has initiated its FOCUS 2000 program which includes an advanced re-imaging of restaurants and the installation of custom designed restaurant automation systems in a majority of its restaurants. In addition, as part of its ongoing capital spending program, the Company plans to refurbish substantially all of its restaurants every five to six years to further enhance customer appeal. The Company also expects to increase market share through the opening of four new Company-owned restaurants in 1997 (two of which have opened to date) and 10 new restaurants in 1998. ENHANCE THE FRIENDLY'S DINING EXPERIENCE. In addition to menu upgrades and restaurant re-imaging, the FOCUS 2000 program includes initiatives to improve food presentation and customer service. The Company believes that implementation of this program will create a consistent, enhanced Friendly's restaurant brand image. This strategy recognizes that food quality, dining atmosphere and attentive service all contribute to customer satisfaction. The Company maintains a consistently high standard of food preparation and customer service through stringent operational controls and intensive employee training. To help guarantee that employees perform in this manner, Friendly's maintains a dedicated training and development center where managers are thoroughly trained in customer service. EXPAND RESTAURANT BASE AND MARKET PENETRATION THROUGH HIGH-QUALITY FRANCHISEES. Friendly's is implementing a franchising strategy to further develop the Friendly's brand and grow both revenue and cash flow without the substantial capital required to build new restaurants. This strategy seeks to (i) expand its restaurant presence in under-penetrated markets, (ii) accelerate restaurant growth in new markets, (iii) increase marketing and distribution efficiencies and (iv) preempt the Company's competition from acquiring certain prime real estate sites. Friendly's will receive a royalty based on total franchisee revenues and revenues and earnings from the sale of its frozen desserts and other products to franchisees. INCREASE MARKET SHARE OF PREMIUM FROZEN DESSERTS. Capitalizing on its position as a recognized leader in premium frozen desserts, Friendly's seeks to increase its market share. The Company expects to build market share by expanding distribution beyond its 696 Company-owned and franchised restaurants and its more than 5,000 retail locations by (i) adding new locations, (ii) increasing shelf space in current locations through new product introductions and more prominent freezer displays and (iii) increasing consumer and trade merchandising. INTRODUCE MODIFIED FORMATS INTO NON-TRADITIONAL LOCATIONS. In order to capitalize on both planned and impulse purchases, the Company is leveraging the Friendly's brand name and enhancing consumer awareness by introducing modified formats of the Friendly's concept into non-traditional locations. These modified formats include (i) Friendly's Cafe, a quick service concept offering frozen desserts and a limited menu, (ii) Friendly's branded ice cream shoppes offering freshly-scooped and packaged frozen desserts and (iii) Friendly's branded display cases and novelty carts with packaged single-serve frozen desserts. The first Friendly's Cafe opened in October 1997. The Company supplies frozen desserts to non-traditional locations such as colleges and universities, sports facilities, amusement parks, secondary school systems and business cafeterias directly or through selected vendors pursuant to multi-year license agreements. EXTEND THE FRIENDLY'S BRAND INTERNATIONALLY. The Company's long-term international growth strategy is to utilize local partners and establish master franchise or licensee agreements to extend the brand internationally and to achieve profitable growth while minimizing capital investment. Currently, the Company's Friendly's International, Inc. subsidiary ("FII") participates in a licensing agreement with a South Korean enterprise to develop Friendly's "Great American" ice cream shoppes in that country. As of September 28, 1997, the licensee and its sublicensees were operating 18 ice cream shoppes, and the Company expects such parties to operate 28 ice cream shoppes by the end of 1997. FII also sells the Company's frozen desserts in several chain restaurants, theaters and food courts in the United Kingdom. The Company selects its international markets based on the high quality of the Company's frozen desserts relative to locally-produced frozen desserts and the propensity of consumers in these regions to purchase American-branded products. The principal executive offices of the Company are located at 1855 Boston Road, Wilbraham, Massachusetts 01095, and the telephone number is (413) 543-2400. RECENT DEVELOPMENTS On July 14, 1997, the Company entered into a long-term agreement granting DavCo Restaurants, Inc. ("DavCo"), a franchisor of more than 230 Wendy's restaurants, exclusive rights to operate, manage and develop Friendly's full-service restaurants in the franchising region of Maryland, Delaware, the District of Columbia and northern Virginia (the "DavCo Agreement"). Pursuant to the DavCo Agreement, DavCo has purchased certain assets and rights in 34 existing Friendly's restaurants in this franchising region, has committed to open an additional 74 restaurants over the next six years and, subject to the fulfillment of certain conditions, has further agreed to open 26 additional restaurants, for a total of 100 new restaurants in this franchising region over the next ten years. DavCo will also manage under contract 14 other Friendly's locations in this franchising region with an option to acquire these restaurants in the future. Friendly's received approximately $8.2 million in cash for the sale of certain non-real property assets and in payment of franchise and development fees, and receives (i) a royalty based on franchised restaurant revenues and (ii) revenues and earnings from the sale to DavCo of Friendly's frozen desserts and other products. DavCo is required to purchase from Friendly's all of the frozen desserts to be sold in these restaurants. See "Business--Restaurant Operations--Franchising Program." THE RECAPITALIZATION The Offerings are part of a series of related transactions to refinance all of the indebtedness under the Company's existing credit facilities (the "Old Credit Facility") and thereby lengthen the average maturity of the Company's outstanding indebtedness, reduce interest expense and increase liquidity and operating and financial flexibility. Concurrent with, and contingent upon, the consummation of the Offerings, the Company expects to enter into a new senior secured credit facility consisting of (i) a $105 million term loan facility (the "Term Loan Facility"), (ii) a $55 million revolving credit facility (the "Revolving Credit Facility") and (iii) a $15 million letter of credit facility (the "Letter of Credit Facility" and, together with the Term Loan Facility and the Revolving Credit Facility, the "New Credit Facility"). The Offerings, the New Credit Facility and the application of the estimated net proceeds therefrom are hereinafter referred to as the "Recapitalization." In addition, subsequent to September 28, 1997, the Company (i) has paid $9.6 million of interest on the Old Credit Facility, (ii) will record $1.9 million of net income related to deferred interest no longer payable under the Old Credit Facility, (iii) will record $5.8 million of non-cash stock compensation expense, net of taxes, arising out of the issuance of certain shares of Common Stock to management and the vesting of certain shares of restricted stock previously issued to management, (iv) will write-off $319,000 of deferred financing and debt restructuring costs, net of taxes, related to the Old Credit Facility and (v) will apply $10.0 million of previously restricted cash to be received from Restaurant Insurance Corporation, its insurance subsidiary ("RIC"), in exchange for a letter of credit, toward amounts outstanding under the Old Credit Facility (collectively, the "Related Transactions"). Upon completion of the Recapitalization, Friendly's total available borrowings under the New Credit Facility are expected to be $55.0 million, excluding $2.1 million of letter of credit availability (compared to $27.0 million as of September 28, 1997 under the Old Credit Facility, excluding $2.1 million of letter of credit availability), which borrowings may be used, with certain limitations, for capital spending and general corporate purposes. After giving effect to the Recapitalization and the Related Transactions, the aggregate pro forma net decrease in interest expense would have been $15.3 million for 1996 and $11.4 million for the nine-month period ended September 28, 1997. See "Selected Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of New Credit Facility." The following table sets forth the estimated sources and uses of funds in connection with the Recapitalization after giving effect to the Related Transactions: <TABLE> <CAPTION> AT CLOSING --------------------- <S> <C> (DOLLARS IN THOUSANDS) SOURCES OF FUNDS: Term Loan Facility (a)................................................. $ 105,000 Senior Note Offering (b)............................................... 175,000 Common Stock Offering (c).............................................. 100,000 -------- Total Sources...................................................... $ 380,000 -------- -------- USES OF FUNDS: Working capital........................................................ $ 4,732 Retirement of Old Credit Facility (d).................................. 348,042 Retirement of capital leases........................................... 7,976 Estimated fees and expenses (e)........................................ 19,250 -------- Total Uses......................................................... $ 380,000 -------- -------- </TABLE> - ---------------------------------- (a) Represents borrowing in full under the Term Loan Facility. As part of the Recapitalization, the Company will have a $55,000 Revolving Credit Facility which is expected to be undrawn at closing and $2,093 available under the Letter of Credit Facility. These facilities are expected to be drawn in part, from time to time, to finance the Company's working capital and other general corporate requirements. (b) Represents gross proceeds from the Senior Note Offering. (c) Represents gross proceeds from the sale of 5,000,000 shares of Common Stock at an assumed initial public offering price of $20.00 per share. (d) Represents the balance of all amounts expected to be outstanding under the Old Credit Facility ($358,042 as of September 28, 1997) after giving effect to the application of $10,000 of previously restricted cash and investments of RIC which is expected to be released to the Company in exchange for a $12,907 letter of credit, with the $2,907 of additional released cash and investments increasing the Company's cash balance. (e) Includes estimated underwriting discounts and commissions and other fees and expenses relating to the Offerings and the New Credit Facility of which $8,427 relates to the Common Stock Offering and $10,823 relates to the Senior Note Offering and the New Credit Facility. See "Underwriting." THE SENIOR NOTE OFFERING <TABLE> <S> <C> Issuer....................... Friendly Ice Cream Corporation. Securities Offered........... $175,000,000 aggregate principal amount of % Senior Notes due 2007 (the "Senior Notes"). Maturity Date................ , 2007. Interest Payment Dates....... and of each year, commencing , 1998. Optional Redemption.......... The Senior Notes will be redeemable, in whole or in part, at the option of the Company, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or prior to , 2000, the Company may redeem, at any time and from time to time, up to $60 million of the aggregate principal amount of the Senior Notes at a redemption price of % of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption, with the net cash proceeds from one or more Qualified Equity Offerings (as defined herein); PROVIDED, HOWEVER, that at least $115 million of the aggregate principal amount of the Senior Notes remains outstanding following each such redemption. Subsidiary Guarantees........ The Senior Notes will be fully and unconditionally guaranteed (the "Subsidiary Guarantees"), on an unsecured, senior basis, by Friendly's Restaurants Franchise, Inc., the Company's franchise subsidiary, and will also be guaranteed by each new subsidiary (other than Unrestricted Subsidiaries and Foreign Subsidiaries (as defined herein)) created or acquired after the issue date of the Senior Notes (collectively, the "Subsidiary Guarantors"). See "Description of Senior Notes--Guarantees." Ranking...................... The Senior Notes will be unsecured, senior obligations of the Company, will rank PARI PASSU in right of payment with all existing and future senior indebtedness of the Company and will rank senior in right of payment to all existing and future subordinated indebtedness of the Company. The Senior Notes will be effectively subordinated to all existing and certain future secured indebtedness of the Company, including indebtedness under the New Credit Facility, to the extent of the value of the assets securing such secured indebtedness. The Senior Notes will be structurally subordinated to all existing and future indebtedness of any subsidiary of the Company that is not a Subsidiary Guarantor. As of September 28, 1997, on a pro forma basis after giving effect to the Recapitalization and the Related Transactions, the Company would have had a total of $293.0 million of long-term debt and capital lease obligations outstanding, $115.1 million of which would have been secured and none of which would have been subordinated. The Subsidiary Guarantees will be unsecured, senior obligations of the Subsidiary Guarantors. As of September 28, 1997, on a pro forma basis after giving effect to the Recapitalization and the Related Transactions, non-guarantor subsidiaries of the Company would have had no long-term debt or capital lease obligations outstanding. See "Description of Senior Notes--Ranking." </TABLE> <TABLE> <S> <C> Change of Control............ Upon the occurrence of a Change of Control (as defined herein), each holder of Senior Notes may require the Company to repurchase any or all outstanding Senior Notes owned by such holder at a repurchase price of 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of repurchase. See "Description of Senior Notes--Change of Control." Restrictive Covenants........ The Indenture under which the Senior Notes will be issued will contain certain covenants pertaining to the Company and its Restricted Subsidiaries (as defined herein), including but not limited to covenants with respect to the following matters: (i) limitations on indebtedness and preferred stock, (ii) limitations on restricted payments such as dividends, repurchases of the Company's or subsidiaries' stock, repurchases of subordinated obligations, and investments, (iii) limitations on restrictions on distributions from Restricted Subsidiaries, (iv) limitations on sales of assets and of subsidiary stock, (v) limitations on transactions with affiliates, (vi) limitations on liens, (vii) limitations on sales of subsidiary capital stock and (viii) limitations on mergers, consolidations and transfers of all or substantially all assets. However, all of these covenants are subject to a number of important qualifications and exceptions. Each of Friendly's International, Inc. and its United Kingdom subsidiaries will be an Unrestricted Subsidiary on the Issue Date (as defined herein). See "Description of Senior Notes--Certain Covenants." Concurrent Common Stock Offering................... Concurrent with the Senior Note Offering, the Company is offering to the public 5,000,000 shares of Common Stock at an estimated initial public offering price of between $19.00 and $21.00 per share. Consummation of each of the Senior Note Offering and the Common Stock Offering is contingent upon consummation of the other. Use of Proceeds.............. The Company intends to use up to approximately $356.0 million of the net proceeds from the Offerings and borrowings under the New Credit Facility to refinance indebtedness and thereby lengthen the average maturity of the Company's outstanding indebtedness, reduce interest expense and increase liquidity and operating and financial flexibility. See "Use of Proceeds." Risk Factors................. Prospective purchasers of the Senior Notes offered hereby should carefully consider the information set forth under the caption "Risk Factors" and all other information set forth in this Prospectus before making any investment in the Senior Notes. As set forth more fully in "Risk Factors," the risk factors associated with such an investment include, among others, those relating to the Company's (i) substantial leverage and stockholders' deficit, (ii) history of losses, resulting in its inability to cover fixed charges since the TRC Acquisition, (iii) implementation of new business concepts and strategies, (iv) development of a franchising program beyond the DavCo Agreement, (v) expansion of its international operations in existing and new markets, (vi) geographic concentration in the Northeast, and (vii) highly competitive business environment, as well as factors relating to restrictions imposed under the New Credit Facility, factors affecting the food service industry generally and circumstances potentially impacting the trading markets for, or value of, the Senior Notes offered hereby. </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR (A) ---------------------------- ------------------------------------------------ SEPTEMBER 29, SEPTEMBER 28, 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RESTAURANTS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Restaurant................................. $542,859 $580,161 $589,383 $593,570 $596,675 $ 452,373 $ 455,026 Retail, institutional and other............ 20,346 30,472 41,631 55,579 54,132 39,446 49,173 Franchise.................................. -- -- -- -- -- -- 3,834 -------- -------- -------- -------- -------- ------------- ------------- Total revenues............................... 563,205 610,633 631,014 649,149 650,807 491,819 508,033 -------- -------- -------- -------- -------- ------------- ------------- Non-cash write-downs (b)..................... -- 25,552 -- 7,352 227 -- 607 Depreciation and amortization................ 35,734 35,535 32,069 33,343 32,979 25,127 24,226 Operating income............................. 25,509 8,116 36,870 16,670 30,501 22,848 34,299 Interest expense, net (c).................... 37,630 38,786 45,467 41,904 44,141 33,084 32,972 Cumulative effect of changes in accounting principles, net of income taxes (d)........ -- (42,248) -- -- -- -- 2,236 Net income (loss)............................ $(13,321) $(61,448) $ (3,936) $(58,653) $ (7,772) $ (5,794 ) $ 2,363 -------- -------- -------- -------- -------- ------------- ------------- -------- -------- -------- -------- -------- ------------- ------------- OTHER DATA: EBITDA (e)................................... $ 61,243 $ 69,203 $ 68,939 $ 57,365 $ 63,707 $ 47,975 $ 59,132 Net cash provided by operating activities.... 34,047 42,877 38,381 27,790 26,163 23,637 29,224 Capital expenditures: Cash....................................... 33,577 37,361 29,507 19,092 24,217 18,547 14,656 Non-cash (f)............................... 3,121 7,129 7,767 3,305 5,951 3,570 2,227 -------- -------- -------- -------- -------- ------------- ------------- Total capital expenditures................. $ 36,698 $ 44,490 $ 37,274 $ 22,397 $ 30,168 $ 22,117 $ 16,883 Ratio of earnings to fixed charges (g)....... -- -- -- -- -- -- 1.0 x PRO FORMA DATA: EBITDA (e)(h)................................ $ 64,653 $ 48,685 $ 59,132 Interest expense, net (c)(i)................. 28,804 21,580 21,617 Net income (j)............................... 1,835 1,412 9,062 Net income per share......................... $ 0.26 $ 0.20 $ 1.27 Weighted average shares outstanding (k)...... 7,125 7,125 7,125 Ratio of EBITDA to interest expense, net..... 2.2x 2.3 x 2.7 x Ratio of earnings to fixed charges (g)....... 1.1x 1.1 x 1.4 x Ratio of total long-term debt to EBITDA (e) (l).................................... -- -- 3.8 x RESTAURANT OPERATING DATA: Number of restaurants (end of period) (m).... 764 757 750 735 707 710 662 Average revenue per restaurant (n)........... $ 708 $ 750 $ 783 $ 797 $ 828 -- $ 863 Increase in comparable restaurant revenues (o)........................................ 6.0% 5.4% 3.4% 0.9% 1.8% 0.3% 3.1% </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 28, 1997 --------------------------- <S> <C> <C> ACTUAL AS ADJUSTED -------------- ----------- <CAPTION> (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)....................................................................... $ (17,895) $ (10,949)(p) Total assets.................................................................................... 362,914 358,348(q) Total long-term debt and capital lease obligations, excluding current maturities................ 371,296 288,585(r) Total stockholders' equity (deficit)............................................................ $ (170,684) $ (73,471)(s) </TABLE> (a) All fiscal years presented include 52 weeks of operations except 1993 which includes 53 weeks of operations. (b) Includes non-cash write-downs of approximately $16,337 in 1993 related to a trademark license agreement as a result of new product development and the replacement of certain trademarked menu items and $3,346 in 1995 related to a postponed debt restructuring. All other non-cash write-downs relate to property and equipment disposed of in the normal course of the Company's operations. See Notes 3, 5 and 6 of Notes to Consolidated Financial Statements. (c) Interest expense, net is net of capitalized interest of $128, $156, $176, $62, $49, $44 and $27 and interest income of $222, $240, $187, $390, $318, $273 and $239 for 1992, 1993, 1994, 1995, 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. (d) Includes non-cash items, net of related income taxes, as a result of adoption of accounting pronouncements related to income taxes of $30,968, post-retirement benefits other than pensions of $4,140 and post-employment benefits of $7,140 in 1993 and pensions of $2,236 in 1997. (e) EBITDA represents consolidated Net income (loss) before (i) Cumulative effect of changes in accounting principles, net of income taxes, (ii) (Provision for) benefit from income taxes, (iii) Equity in net loss of joint venture, (iv) Interest expense, net, (v) Depreciation and amortization and (vi) Non-cash write-downs and all other non-cash items, plus cash distributions from unconsolidated subsidiaries, each determined in accordance with generally accepted accounting principles ("GAAP"). The Company has included information concerning EBITDA in this Prospectus because it believes that such information is used by certain investors as one measure of an issuer's historical ability to service debt. EBITDA should not be considered as an alternative to, or more meaningful than, earnings from operations or other traditional indications of an issuer's operating performance. (f) Non-cash capital expenditures represent the cost of assets acquired through the incurrence of capital lease obligations. (g) The Ratio of earnings to fixed charges is computed by dividing (i) income before interest expense, income taxes and other fixed charges by (ii) fixed charges, including interest expense, amortization of debt issuance costs and the portion of rent expense which represents interest (assumed to be one-third). For 1992, 1993, 1994, 1995, 1996 and the nine months ended September 29, 1996 earnings were insufficient to cover fixed charges by $12,249, $30,826, $8,773, $25,296, $13,689 and $10,280, respectively. (h) Represents historical EBITDA adjusted to give effect to the benefit from the change in accounting for pensions related to determining the return-on-asset component of annual pension expense of $946 in 1996 and $710 for the nine months ended September 29, 1996. See Note 10 of Notes to Consolidated Financial Statements. (i) Represents historical interest expense adjusted to give effect to the Recapitalization. Borrowings under the New Credit Facility will bear interest at a floating rate equal to LIBOR plus 2.25% or the Alternative Base Rate (as defined in the New Credit Facility) plus 0.75% per annum for drawings under the Revolving Credit Facility and the Letter of Credit Facility, 0.50% per annum for amounts undrawn under the Revolving Credit Facility, 2.25% per annum for amounts issued but undrawn under the Letter of Credit Facility and a weighted average floating rate equal to LIBOR plus 2.46% or the Alternative Base Rate plus 0.96% for the Term Loan Facility. The following table represents changes to Interest expense, net on a pro forma basis, resulting from the Recapitalization and the Related Transactions: <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR ---------------------------------------- 1996 SEPTEMBER 29, 1996 SEPTEMBER 28, 1997 ------------------- ------------------- ------------------- (IN THOUSANDS) <S> <C> <C> <C> Elimination of interest on Old Credit Facility......... $ (41,827) $ (31,337) $ (31,434) Reduction of interest on capital lease obligations..... (774) (580) (580) Interest on Revolving Credit Facility.................. 779 624 732 Interest on Letter of Credit Facility.................. 268 134 134 Interest on Term Loan Facility......................... 8,279 6,202 6,340 Interest on Senior Notes............................... 17,938 13,453 13,453 -------- -------- -------- Decrease in Interest expense, net.................... $ (15,337) $ (11,504) $ (11,355) -------- -------- -------- -------- -------- -------- </TABLE> In calculating pro forma Interest expense, net, the assumed rates on the Revolving Credit Facility, Letter of Credit Facility, Term Loan Facility and Senior Notes were 7.67%, 2.25%, 7.88%, and 10.25% for 1996, respectively, 7.66%, 2.25%, 7.87% and 10.25% for the nine months ended September 29, 1996, respectively and 7.84%, 2.25%, 8.09% and 10.25% for the nine months ended September 28, 1997, respectively. (j) Represents historical net income adjusted to give effect to (i) the reduction in interest expense, net of income taxes, of $9,049, $6,788 and $6,699 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively, as a result of the Recapitalization and the Related Transactions, and (ii) the benefit, net of income taxes, related to the change in accounting for pensions described in (h) above of $558, $418 and $0 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. (k) Represents historical weighted average shares outstanding adjusted to give effect to the issuance of 27 shares upon consummation of the Recapitalization under the Management Stock Plan (as defined herein) and the return of 375 net shares to the Company in connection with the Recapitalization. Actual weighted average shares outstanding were 2,414, 2,394 and 2,473 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. See "Ownership of Common Stock" and Note 17 of Notes to Consolidated Financial Statements. (l) For purposes of this ratio, EBITDA represents historical EBITDA for the twelve months ended September 28, 1997 adjusted by $236 to give effect to the benefit related to the change in accounting for pensions described in (h) above. (m) The number at September 28, 1997 reflects the acquisition by DavCo of 34 restaurants pursuant to the DavCo Agreement. See "Recent Developments."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000040443_ga_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000040443_ga_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ad289ddf304d8de901bf2ba9abdeb1ec4aa0c591
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000040443_ga_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The discussion in this Prospectus contains trend analysis and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward-looking statements contained in this Prospectus. The following summary information is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The Company General Automation, Inc. (the "Company" or "GA") integrates computer systems, software and services for application solutions. GA has positioned itself as a strong service and support company offering open systems and complementary software products to a worldwide network of value-added resellers. GA's product lines include a broad range of hardware platforms including Intel and Motorola PowerPC based systems, coupled with efficient and cost effective application environments, providing a full range of systems, complementary operating environments and high quality customer services. The Company's products are sold in the United States through over 200 value-added resellers. In addition, it sells its products in Europe, Canada, Mexico, Central and South America, Guam, Taiwan, Australia, New Zealand, Singapore, Hong Kong, Africa and the People's Republic of China through distributors and value-added resellers. The Company provides service and support throughout North America to over 3,000 customers. Recently, the Company has completed transactions which have significantly expanded the Company's business and opportunities. In October 1996, the Company purchased from Sequoia Systems, Inc. ("SSI") substantially all of the assets and business of SSI's Sequoia Enterprise Systems business division ("SES"). SES manufactures, services, integrates and distributes fault-tolerant Motorola-based computer systems operating under SSI's version of UNIX and Intel-based computer systems running SSI's and Alpha Micro's versions of the Pick application environment and database software products, and engages in various related distribution arrangements. In May 1995, the Company and SunRiver Data Systems ("SunRiver") formed a limited liability company ("GAL"), with the Company owning 51% and SunRiver 49%, for the purpose of combining the Company's Pick-based business and SunRiver's Pick-based business. The Offering All of the shares offered by this Prospectus are being offered for the account of one or more shareholders. The Company will receive no part of the proceeds of the sale of such shares. P R O S P E C T U S 831,100 Shares GENERAL AUTOMATION, INC. Common Stock This Prospectus relates to 831,100 shares of common stock (the "Shares") of General Automation, Inc. ("GA" or the "Company"). The Shares may be offered and sold from time to time by and for the account of one or more of the shareholders (the "Selling Shareholders") of the Company identified under the caption "Selling Shareholders." The Company will receive no part of the proceeds of such sales. The Company will bear all of the expenses incurred in connection with the offer and sale of the Shares, other than any commissions, discounts or fees of underwriters, dealers or agents. The sale of the Shares by the Selling Shareholders may be effected from time to time in one or more transactions (which may involve block transactions, purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this Prospectus, ordinary brokerage transactions and transactions in which brokers solicit purchases) on the American Stock Exchange, in special offerings, exchange distributions or secondary distributions pursuant to and in accordance with the rules of such exchange, in negotiated transactions or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. In effecting sales, brokers or dealers engaged by the Selling Shareholders may arrange for other brokers or dealers to participate. Brokers or dealers selected by the Selling Shareholders may receive commissions or discounts from the Selling Shareholders in amounts to be negotiated immediately prior to sale (and which, as to a particular broker, may be in excess of customary commissions). The Selling Shareholders and such brokers or dealers, or any other participating brokers or dealers, may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended, in connection with such sales. The Company's common stock is traded on the American Stock Exchange. On , 1997, the closing price of the Company's common stock on the American Stock Exchange was $ per share. ---------- AN INVESTMENT IN THE COMPANY'S COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BELOW. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------- The date of this Prospectus is___________ , 1997 Summary Financial Data (In thousands, except per share data) The following table sets forth certain selected historical consolidated financial data for the Company for each of the years ended September 30, 1996, 1995, 1994, 1993 and 1992 which has been derived from audited financial statements. The following table also sets forth selected historical financial data at and for the nine months ended June 30, 1997 and 1996 which has been derived from the Company's unaudited financial statements included elsewhere herein. The financial data at and for the nine months ended June 30, 1997 and 1996 is not necessarily indicative of results which might be expected for the full fiscal year. The following table should be read in conjunction with (a) the audited consolidated financial statements of the Company and notes thereto as of and for the three years ended September 30, 1996; (b) the unaudited financial statements at and for the nine months ended June 30, 1997 and 1996; (c) "Management's Discussion and Analysis of Financial Condition and Results of Operations"; (d) the audited consolidated financial statements of SES (the Sequoia Enterprise System division of Sequoia Systems, Inc.), which was acquired by the Company in October 1996; and (e) the pro forma financial statements for the year ended September 30, 1996 and the nine months ended June 30, 1997, included elsewhere herein. <TABLE> <CAPTION> Nine Months Ended June 30 Year Ended ------------------- September 30(3) (Unaudited) ----------------------------------------------------- 1997(7) 1996 1996 1995(6) 1994(5) 1993(4) 1992(1)(2) ------- ---- ---- ------- ------- ------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> Operating Data: Sales, net $ 29,180 $ 19,129 $ 25,460 $ 14,269 $ 34,614 $ 42,878 $ 45,205 -------- -------- -------- -------- -------- -------- -------- Income (loss) from operations 679 1,653 2,247 (1,666) 1,300 (351) 42 -------- -------- -------- -------- -------- -------- -------- Net income (loss) before extraordinary items 484 1,342 1,418 (2,065) 427 (1,477) (964) Extraordinary items 0 0 0 0 0 900 1,108 -------- -------- -------- -------- -------- -------- -------- Net income (loss) $ 484 $ 1,342 $ 1,418 $ (2,065) $ 427 $ (577) $ 144 ======== ======== ======== ======== ======== ======== ======== Earnings per share: Income (loss) before extraordinary items $ .05 $ .18 $ .18 $ (.26) $ .04 $ (.13) $ (.08) Extraordinary items 0 0 0 0 0 .08 .09 -------- -------- -------- -------- -------- -------- -------- Net income (loss) $ .05 $ .18 $ .18 $ (.26) $ .04 $ (.05) $ .01 ======== ======== ======== ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> June 30 At September 30 --------------- ------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- (Unaudited) <S> <C> <C> <C> <C> <C> <C> <C> Balance Sheet Data: Working capital (deficit) $ 289 $ 1,255 $ 1,210 $ (638) $ 2,725 $ 1,457 $ 3,450 Total assets 21,739 9,873 10,271 10,484 18,041 22,456 23,618 Total long term debt and capital lease obligations 1,157 1,087 1,072 1,305 1,453 2,215 1,406 Shareholders' equity(5) 5,328 2,652 2,778 771 3,246 2,264 3,442 </TABLE> - ---------- (1) The Company closed its German subsidiary in the fourth quarter of fiscal 1992. (See Note 8 to the Company's Financial Statements included in this Prospectus.) (2) The Company sold 55% of its share of General Automation, Ltd. (U.K.) to Sanderson Electronics, PLC, ("Sanderson") on June 30, 1990 and sold its remaining 45% interest in General Automation, Ltd. to Sanderson on January 20, 1992. During the period from July 1, 1990 through January 20, 1992, while the Company owned 45% of General Automation, Ltd., the Company accounted for its minority interest in General Automation, Ltd. on an equity basis. (See Note 8 to the Company's Financial Statements included in this Prospectus.) (3) No dividends have been paid on the Company's common stock during any of the periods presented. (See "Dividend Policy.") (4) On October 29, 1993, with retroactive effect to September 30, 1993, the Company divested its European operations. (See Note 8 to the Company's Financial Statements included in this Prospectus.) (5) On November 10, 1994, with retroactive effect to October 1, 1994, the Company divested its Pacific Basin operations. (See Notes 7 and 8 to the Company's Financial Statements included in this Prospectus.) (6) Effective May 22, 1995, the Company and SunRiver Data Systems ("SunRiver") formed a limited liability company ("GAL") for the purpose of combining GA's Pick based business and SunRiver's Pick based business, with the Company owning 51% and SunRiver owning 49% of GAL. (7) Effective October 11, 1996, the Company acquired substantially all of the assets and liabilities of Sequoia Enterprise Systems ("SES"), a division of Sequoia Systems, Inc. The acquisition of SES has been accounted for under the purchase method of accounting. Accordingly, the financial information for the nine months ended June 30, 1997 includes the results of operations for SES from the date of the acquisition.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000046967_herbergers_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000046967_herbergers_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000046967_herbergers_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000091455_snelling_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000091455_snelling_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..61f08111fcecdfd09ea1aa649b99ae8c190bf468
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000091455_snelling_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus, including "Risk Factors," and the consolidated financial statements of the Company, including the notes thereto (the "Consolidated Financial Statements"). Unless otherwise indicated, all references in this Prospectus to "Snelling" or the "Company" shall mean Snelling and Snelling, Inc., and its subsidiaries on a consolidated basis. In addition, unless otherwise indicated, the information in this Prospectus (i) gives effect to the reclassification of Snelling's outstanding common stock into Class B Common Stock, the equivalent of a 5.415067-for-1 split of the outstanding shares of Class B Common Stock and the creation of a new Class A Common Stock, all of which will be effected by amendment and restatement of the Company's Articles of Incorporation upon the effectiveness of the registration statement of which this Prospectus forms a part, (ii) assumes that 5,126,904 shares of Class B Common Stock will be outstanding immediately before this offering and (iii) assumes the Underwriters' over-allotment option will not be exercised. THE COMPANY Snelling is a leading national provider of staffing solutions primarily targeted to small and mid-sized businesses. As of September 30, 1997, the Company operated as Snelling(R) Personnel Services through a network of 289 franchise locations and 29 Company-owned branch locations in 42 states, the District of Columbia and Puerto Rico, as well as three foreign countries, and had executed an agreement for the opening of one additional franchise location. The majority of the Company's franchise and branch locations offer the Company's clients integrated, full-service staffing solutions by providing traditional flexible staffing, single-source management, temp-to-hire, career placement and other staffing services from each location. Founded in 1951, the Company currently provides flexible staffing personnel for office, clerical and light industrial services. The Company also offers career placement services in a number of fields, including accounting and finance, engineering, health care, law, manufacturing, management information systems and office, sales, marketing and technical services. Flexible staffing services (which include traditional flexible staffing, single-source management and temp-to-hire) accounted for approximately 90%, and career placement services accounted for approximately 10%, of the Company's total system-wide sales for both the year ended December 31, 1996, and the nine months ended September 30, 1997. The staffing industry has experienced rapid growth over the past decade as a result of economic trends and changing approaches to staffing and employment. According to Staffing Industry Report(R), the U.S. staffing industry has grown from an estimated $31.4 billion in revenues in 1991 to an estimated $74.4 billion in 1996, representing a compound annual growth rate of approximately 19%. Based on this information, 1996 sales generated by flexible staffing accounted for 66% of the overall staffing market, professional employer organizations ("PEOs") accounted for 23% and career placement accounted for 11%. Traditional flexible staffing for office, clerical and industrial services grew from approximately $12.1 billion in 1991 to approximately $26.4 billion in 1996, representing a compound annual growth rate of approximately 17%. Estimated sales from career placement (in approximate numbers) grew from $3.9 billion in 1991 to $7.2 billion in 1996, representing a compound annual growth rate of 13%. Snelling's goal is to enhance its leading position in the staffing industry through the following business strategy: (i) continue to focus on small and mid-sized businesses; (ii) offer an integrated, full-service approach to staffing solutions from each location; (iii) maintain a strong operating infrastructure; (iv) recruit and retain qualified management and personnel, including flexible staffing personnel; and (v) control costs through a continued emphasis on technology and risk management, especially workers' compensation insurance. Snelling intends to continue to achieve revenue and earnings growth and increase market share through the following focused growth strategy: (i) expand market penetration of its existing franchise and branch locations through intensive training of sales personnel, investments in technology and the aggressive pursuit of cross-selling opportunities; (ii) pursue acquisitions of independent staffing companies and select franchise locations; (iii) establish alternative distribution channels, such as "co-branding" with other services providers or retailers; (iv) develop new services, such as PEO services, internally or through strategic acquisitions of related staffing businesses that are complementary to Snelling's business; and (v) continue to franchise in certain select markets. ACQUISITIONS Consistent with its growth strategy, Snelling began an expansion program in 1994 to acquire independent staffing companies and selected franchise locations. The Company acquired six franchise locations in 1994 with aggregate annual revenues of approximately $5.9 million; four franchise locations in 1995, with aggregate annual revenues of approximately $8.0 million; seven independent staffing locations and nine franchise locations in 1996, with aggregate annual revenues of approximately $43.6 million; one franchise location in the first nine months of 1997, with annual revenues of approximately $3.5 million; one independent staffing location in October 1997, with annual revenues of approximately $14.4 million; and one franchise location in November 1997, with annual revenues of approximately $2.6 million. The aggregate consideration paid with respect to these acquisitions was approximately $29.1 million and was financed using a combination of cash, seller financing and bank loans. After giving effect to the consolidation of certain locations of the acquired companies, the Company's acquisitions have resulted in a net addition of 26 Company-owned branch locations in 13 states. The Company has one pending acquisition of an independent staff location with annual revenues of approximately $2.3 million, which is currently scheduled to be completed in December 1997. On an ongoing basis, the Company evaluates opportunities to acquire companies that are complementary to its business, including independent staffing companies and selected franchises. The Company currently has no plans, arrangements or understandings, and is not participating in negotiations, with respect to any material acquisitions. THE OFFERING <TABLE> <S> <C> Common Stock being offered by: The Company............................. 2,933,333 shares The Selling Shareholder................. 416,667 shares Common Shares to be outstanding after the offering................................ 8,060,237 shares(1) Voting rights............................. The Common Stock is entitled to one vote per share, and the Class B Common Stock is entitled to ten votes per share. See "Risk Factors -- Control of the Company by the Snelling Family" and "Description of Capital Stock." Use of proceeds........................... To repay certain indebtedness, including capital lease commitments, and for working capital and other general corporate purposes. Proposed Nasdaq National Market symbol.... SNEL </TABLE> - --------------- (1) Includes 4,710,237 shares of Class B Common Stock currently issued and outstanding, which are convertible into shares of Common Stock under certain circumstances. See "Description of Capital Stock -- Common Shares" regarding the conversion rights and restrictions on transfer of the Class B Common Stock. Excludes (i) 2,599,238 shares of Class B Common Stock issuable pursuant to outstanding options under the Company's 1996 Stock Option Plan at a weighted average exercise price of $3.85 per share and (ii) 357,974 shares of Class B Common Stock issuable pursuant to options to be granted under the 1996 Stock Option Plan at the initial public offering price upon completion of this offering. See "Management -- Stock Option Plans." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA) <TABLE> <CAPTION> SEVEN FISCAL NINE MONTHS FISCAL YEAR MONTHS YEAR ENDED ENDED ENDED MAY 31, ENDED DEC. 31, SEPTEMBER 30, ------------------------------ DEC. 31, ------------------- ------------------- 1992 1993 1994 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS DATA: Revenues.............................. $ 19,023 $ 30,360 $ 70,202 $ 59,309 $122,701 $168,602 $116,864 $165,686 Cost of services...................... 8,260 16,330 47,456 40,221 87,943 122,945 83,957 123,964 -------- -------- -------- -------- -------- -------- -------- -------- Gross profit.................. 10,763 14,030 22,746 19,088 34,758 45,657 32,907 41,722 Selling, general and administrative expenses............................ 11,878 11,832 14,116 8,859 15,384 19,600 13,624 20,421 Franchises' share of gross profit(1)........................... -- 2,023 8,648 8,659 14,682 19,587 14,835 15,772 -------- -------- -------- -------- -------- -------- -------- -------- Operating profit (loss)....... (1,115) 175 (18) 1,570 4,692 6,470 4,448 5,529 Interest expense...................... 46 34 66 71 379 1,100 602 1,885 Other income.......................... 523 432 348 63 97 105 54 698 -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before income taxes............................... (638) 573 264 1,562 4,410 5,475 3,900 4,342 Income tax expense (benefit).......... (137) 263 152 704 1,720 2,161 1,564 1,727 -------- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss)................... $ (501) $ 310 $ 112 $ 858 $ 2,690 $ 3,314 $ 2,336 $ 2,615 ======== ======== ======== ======== ======== ======== ======== ======== Net earnings (loss) per Common Share............................... $ (0.07) $ 0.04 $ 0.02 $ 0.12 $ 0.38 $ 0.48 $ 0.33 $ 0.38 ======== ======== ======== ======== ======== ======== ======== ======== Weighted average Common Shares outstanding......................... 7,121 7,118 7,068 7,012 7,007 6,966 6,982 6,909 ======== ======== ======== ======== ======== ======== ======== ======== SELECTED OPERATING DATA: System-wide sales (in thousands)(2)... $117,693 $175,747 $225,270 $166,340 $318,858 $372,999 $273,282 $324,932 Hours billed (in thousands)(3)........ -- 1,181 5,016 5,058 9,526 13,141 9,300 13,345 Average bill rate(3).................. -- $ 10.20 $ 10.60 $ 10.54 $ 11.29 $ 11.44 $ 11.57 $ 11.90 Gross margin per flexible employee(3)......................... -- 23.4% 24.6% 23.9% 23.8% 23.2% 23.6% 22.3% Number of branch locations(4)(5)...... 1 1 2 7 9 29 19 29 Number of franchise locations(4)...... 271 253 248 248 274 277 276 289 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ---------------------- AS ACTUAL ADJUSTED(6) ------- ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $13,943 $20,119 Total assets................................................ 55,302 60,385 Total debt.................................................. 27,407 1,004 Shareholders' equity........................................ 14,885 46,371 </TABLE> - --------------- (1) The Company has two types of franchises for purposes of flexible staffing services revenue recognition. With the first type, the Company records franchise royalties, based on a contractual percentage of flexible staffing services billings, in the period in which the franchise collects for the services provided. The second type of franchises participate in the Company's pay/bill processing program. With the second type, the Company has a direct contractual relationship with the clients for the services, holds title to the related receivables and is the legal employer of the flexible staffing employees. Revenues generated by these franchises and the related direct costs of services are included as part of the Company's revenues and costs of services in the period in which the services are provided. The net distribution paid to franchises participating in the pay/bill processing program is an operating expense recorded by the Company as franchises' share of gross profit and is based on either a percentage of the flexible staffing services billings or a percentage of the gross profit generated. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business -- Organization -- Franchises" and "Business -- Operations -- Pay/Bill Processing Services." (2) System-wide sales are equal to the aggregate revenues of all franchise locations and Company-owned branch locations during the period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) Includes franchise locations participating in the Company's pay/bill processing program and Company-owned branch locations. See "Business -- Operations -- Pay/Bill Processing Services."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000101990_unifab_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000101990_unifab_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6583bb954cfa9995b77c9409d3f82f88bc2fb485
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000101990_unifab_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto included elsewhere in this Prospectus. UNIFAB International, Inc. (the "Company") was recently formed to serve, upon completion of the Offering, as the parent corporation of Universal Fabricators Incorporated ("Universal Fabricators"), 51% of the outstanding common stock of which is currently owned by Universal Partners, Inc. ("Universal Partners") and 49% of such stock is owned by McDermott Incorporated ("McDermott"). Immediately prior to the completion of the Offering, Universal Partners will exchange its shares of common stock of Universal Fabricators for shares of the Company's Common Stock (the "Partners Share Exchange"), which will be distributed to the shareholders of Universal Partners upon the dissolution of Universal Partners which is expected to occur promptly after the completion of the Offering. McDermott will also exchange its shares of common stock of Universal Fabricators for shares of the Company's Common Stock (the "McDermott Share Exchange"), all of which will be sold in the Offering. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised and that the Partners Share Exchange and the McDermott Share Exchange each have been completed. As used herein, unless the context requires otherwise, references to the "Company" include Universal Fabricators and its predecessor. Certain technical terms are defined in the "Glossary of Certain Technical Terms" appearing immediately before the Index to Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000103341_quaker_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000103341_quaker_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f09e5d104cb60ae3688efd652808551a04728ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000103341_quaker_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated, the information in this Prospectus assumes that all outstanding options and the Underwriters' over-allotment option will not be exercised. References to financial or statistical data for a particular year refer to the Company's corresponding fiscal year, which is currently a 52 or 53-week period ending on the Saturday closest to January 1. (For example, "1995" means the fiscal year ended December 30, 1995 and "1996" means the fiscal year ended January 4, 1997.) THE COMPANY Quaker is a leading designer, manufacturer and worldwide marketer of woven upholstery fabrics for residential furniture and one of the largest producers of Jacquard upholstery fabrics in the world. The Company is also a leading developer and manufacturer of specialty yarns and management believes it is the world's largest producer of chenille yarns, which Quaker both sells and uses in the production of its fabrics. The Company's vertically integrated operations provide Quaker with important design, cost and delivery advantages. The Company's product line is one of the most comprehensive in the industry and Quaker is well known for its broad range of Jacquard fabrics, including its soft, velvet-like Jacquard chenilles. The Company's revenues have grown from $123.4 million in 1992 to $198.9 million in 1996, a compound annual growth rate ("CAGR") of 12.7%. Quaker has been producing upholstery fabric for over fifty years and is a full service supplier of Jacquard and plain woven upholstery fabric to the furniture market. Quaker's current product line consists of over 3,000 traditional, contemporary, transitional and country fabric patterns intended to meet the styling and design, color, texture, quality and pricing requirements of promotional through middle to higher-end furniture manufacturers, and the Company introduces approximately 700 new products to the market annually. Management believes that Jacquard fabrics, with their detailed designs, provide furniture manufacturers with more product differentiation opportunities than any other fabric construction on the market. In addition, technological advances in the speed and flexibility of the Jacquard loom have reduced the cost of producing Jacquard fabrics, enabling them to compete more effectively with prints, velvets, flocks, tufts and other plain woven products. The Company sells its upholstery fabrics to over 600 domestic furniture manufacturers, including virtually every significant domestic manufacturer of upholstered furniture, such as Furniture Brands International (Action by Lane, Broyhill and Thomasville), Klaussner, La-Z-Boy, Lifestyle Furnishings International (Berkline, Benchcraft and others), Rowe and Simmons. Quaker also distributes its fabrics internationally. In 1996, fabric sales outside the United States of $35.7 million represented approximately 20.2% of gross fabric sales. Quaker's October 1996 introduction of its Whitaker Collection, a branded line of a select group of the Company's better-end products, has resulted in incremental sales to a number of well known higher-end furniture manufacturers, including Baker, Bernhardt, Henredon and Sherrill. Management estimates that approximately 85% of the Company's fabric sales in recent years have been manufactured to customer order. THE INDUSTRY Total domestic upholstery fabric sales, exclusive of automotive applications, are estimated to be approximately $2.0 billion annually. Management estimates the size of the international fabric market to be at least twice that of the domestic market. Due to the capital intensive nature of the fabric manufacturing process and the importance of economies of scale in the industry, the domestic industry is concentrated, with the top 15 upholstery fabric manufacturers, including Quaker, accounting for over 80% of the total market. Most of the largest U.S. fabric producers have expanded their export sales, capitalizing on their size, distribution capabilities, technology advantages and broad product lines. Management believes that over the last several years furniture manufacturers have moved toward more highly styled Jacquard fabrics, at the expense of less distinctive fabrics, such as flocks, plaids, plains, prints, stripes, tufts and velvets. Within the Jacquard segment, price is a more important competitive factor in the promotional-end of the market than it is in the middle to better-end of the market, where fabric styling and design considerations typically play a more important role. GROWTH STRATEGY Quaker's strategy to further its growth and financial performance objectives includes: Increasing Sales to the Middle to Better-End Segment. To capitalize on the consolidation trend in the furniture industry, the Company has positioned itself as a full service supplier of Jacquard and plain woven fabrics by increasing the breadth and depth of its product line. Sales of the Company's middle to better-end fabrics, which the Company first began emphasizing in the early 1990s, have increased from $66.3 million, or 56.3% of total fabric sales in 1992, to $121.7 million, or 69.0% of total fabric sales in 1996, a CAGR of 16.4%. Expanding International Sales. The Company has made worldwide distribution of its upholstery fabrics a key component of its growth strategy. Quaker has built an international sales and distribution network, dedicated significant corporate resources to the development of fabrics to meet the specific styling and design needs of its international customers, and put programs in place to simplify the purchase of product from Quaker. As a result, the Company's international sales have increased from $18.3 million in 1992 to $35.7 million in 1996, a CAGR of 18.2%. Capitalizing on the Growth of the Casual Furniture Segment. Based upon its leading position in the Jacquard market and its own internally produced chenille yarns, management believes Quaker is well positioned to benefit from the growth of the casual furniture segment, where soft, durable, distinctive fabrics, such as Quaker's Jacquard and other chenilles, are in increasing demand. Penetrating Related Fabric Markets. Management believes the superior styling and performance characteristics of the Company's fabrics provide opportunities to penetrate markets related to Quaker's core residential fabric business. The Company has specifically targeted the contract (office and institutional) and recreational vehicle markets, where management believes Quaker's Jacquard chenille fabrics will provide the Company with a clear product advantage. The Company has also targeted additional sales to the decorative jobber (distributors to the interior design trade) market, where management believes the Company's recently introduced Whitaker Collection will have broad appeal. Growing Specialty Yarn Sales. Quaker is a leading producer of specialty yarns and management believes it is the world's largest producer of chenille yarns. Sales of the Company's specialty yarns have increased from $7.8 million in 1992 to $26.8 million in 1996, a CAGR of 36.2%. In addition to the popularity of the Company's current line of specialty yarns, including its proprietary, abrasion-resistant Ankyra chenille yarns, Quaker regularly creates innovative new specialty yarns for use in the Company's fabrics and sale to the Company's growing list of yarn customers. Quaker intends to increase sales by targeting new markets and applications for its specialty yarns. COMPETITIVE STRENGTHS Management believes that the following competitive strengths distinguish Quaker from its competitors and that these strengths serve as a solid foundation for the Company's growth strategy: Product Design and Development Capabilities. Management believes that Quaker's reputation for design excellence and product leadership is, and will continue to be, the Company's most important competitive strength. Focus on Jacquard Fabrics. Management believes the detailed, copyrighted designs of the Company's Jacquard fabrics have enabled it to compete primarily based on superior styling and design, contributing to Quaker's strong gross margin performance. Broad Product Offering. The breadth and depth of Quaker's product line enables the Company to be a full service supplier of Jacquard and plain woven fabrics to virtually every significant domestic manufacturer of upholstered furniture. Vertical Integration. Using Quaker's own specialty yarns in the production of its fabrics provides the Company with significant design, cost and delivery advantages. State-of-the-Art Manufacturing Equipment. Management believes the Company has one of the most modern, efficient and technologically advanced manufacturing bases in the industry. During the past five years, Quaker has invested more than $51 million in new manufacturing equipment to expand its yarn and fabric production capacity, increase productivity, improve product quality and produce the more complex fabrics associated with the Company's successful penetration of the middle to better-end segment of the upholstery fabric market. During 1997, Quaker plans to spend approximately $14.4 million, plus the estimated $4.2 million net proceeds to the Company from this offering, on additional manufacturing equipment to accelerate the growth of its specialty yarn business, respond to anticipated increases in demand for its fabric products, and achieve its marketing, productivity, quality, service and financial objectives. The Company produces all of its yarn and fabric products in its four manufacturing plants in Fall River, Massachusetts, where Quaker has over one million square feet of manufacturing space. In addition to distribution from the Company's facilities in Fall River, Quaker maintains domestic distribution centers in High Point, North Carolina, Tupelo, Mississippi, and Los Angeles, California. To provide better service to its international customers, the Company also has a distribution center in Mexico and maintains inventory in Holland. Quaker's executive offices are located at 941 Grinnell Street, Fall River, Massachusetts 02721 and the Company's telephone number is (508) 678-1951. SELLING STOCKHOLDERS In September 1989, the Company was acquired (the "1989 Acquisition") by a European company and Nortex Holdings, Inc. ("Nortex Holdings"), a corporation owned by three officers of the Company, including Larry A. Liebenow, the President and Chief Executive Officer of the Company. In early 1993, the Company reacquired all of the European company's interest in Quaker in a management-led recapitalization (the "1993 Recapitalization"). To finance the 1993 Recapitalization, the Company issued Common Stock and other securities to MLGA Fund II, L.P. ("MLGA Fund") and other affiliates of Morgan Lewis Githens & Ahn, Inc., an investment banking firm. MLGA Fund and Nortex Holdings are the Selling Stockholders and are selling 3,000,000 and 100,000 shares of Common Stock, respectively. Upon completion of this offering, MLGA Fund and Nortex Holdings will beneficially own 8.1% (2.0% if the Underwriters' over-allotment option is exercised in full) and 23.3% of the outstanding Common Stock, respectively. See "Management" and "Principal and Selling Stockholders." THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company........................... 300,000 shares Common Stock Offered by the Selling Stockholders.............. 3,100,000 shares Common Stock to be Outstanding after the Offering(1).......... 8,321,097 shares Use of Proceeds by the Company................................ To acquire production equipment to expand chenille yarn manufacturing capacity. See "Use of Proceeds." Nasdaq National Market Symbol................................. QFAB </TABLE> - ------------------------ (1) Does not include (i) 918,354 shares of Common Stock which may be issued pursuant to the Company's stock option plans, of which options to purchase 682,848 shares of Common Stock were outstanding on February 24, 1997 (including 330,000 shares which have been granted subject to stockholder approval), (ii) 5,000 shares of Common Stock which may be issued upon exercise of an option granted to a director and (iii) 370,359 shares of Common Stock which may be issued upon exercise of an option issued to Nortex Holdings (the "Nortex Option"). See "Management -- Benefit Plans." Ankyra(TM), Quaker(TM) and Whitaker(TM) are trademarks of the Company. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> FISCAL YEAR ENDED --------------------------------------------------------------------- JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 4, 1993(1) 1994 1994 1995 1997(1) ----------- ----------- ------------ ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE AND PER YARD DATA) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales....................................... $ 123,414 $ 147,867 $180,842 $173,487 $ 198,856 Cost of products sold........................... 92,855 110,753 133,168 137,083 152,787 -------- -------- -------- -------- -------- Gross margin.................................... 30,559 37,114 47,674 36,404 46,069 Selling, general and administrative expenses.... 18,862 22,292 27,560 26,176 29,121 -------- -------- -------- -------- -------- Operating income................................ 11,697 14,822 20,114 10,228 16,948 Interest expense, net........................... 4,148 4,936 3,863 3,898 4,092 Other expenses, net............................. 479 299 34 98 77 -------- -------- -------- -------- -------- Income before provision for income taxes........ 7,070 9,587 16,217 6,232 12,779 Provision for income taxes...................... 2,925 4,218 6,691 712 4,217 -------- -------- -------- -------- -------- Income before extraordinary item................ 4,145 5,369 9,526 5,520 8,562 Extraordinary item: loss on extinguishment of debt.......................................... -- (2,550) -- -- -- Net income...................................... 4,145 2,819 9,526 5,520 8,562 Preferred stock dividends....................... 420 70 -- -- -- -------- -------- -------- -------- -------- Net income applicable to common stock........... $ 3,725 $ 2,749 $ 9,526 $ 5,520 $ 8,562 ======== ======== ======== ======== ======== Earnings per common share before extraordinary item(2)....................................... $ 0.55 $ 0.75 $ 1.15 $ 0.67 $ 1.03 ======== ======== ======== ======== ======== Weighted average shares outstanding(2).......... 8,536 8,536 8,301 8,293 8,332 ======== ======== ======== ======== ======== SELECTED OPERATING DATA: EBITDA(3)....................................... $ 15,597 $ 19,710 $ 25,920 $ 16,821 $ 24,569 Depreciation and amortization................... 4,379 5,019 5,603 6,462 7,437 Net capital expenditures(4)..................... 5,186 10,558 18,727 13,165 11,979 Unit volume (in yards).......................... 32,228 36,289 41,641 40,761 43,552 Average gross sales price per yard.............. $ 3.66 $ 3.87 $ 4.06 $ 3.88 $ 4.05 </TABLE> <TABLE> <CAPTION> JANUARY 4, 1997 ------------------------- ACTUAL AS ADJUSTED(5) --------- -------------- BALANCE SHEET DATA: (IN THOUSANDS) - ----------------------------------------------------------------------------------------- <S> <C> <C> Working capital...................................................................... $ 32,620 $ 32,620 Total assets......................................................................... 148,832 153,039 Long-term debt and capital leases.................................................... 42,235 42,235 Stockholders' equity................................................................. 66,572 70,779 </TABLE> - ------------------ (1) The fiscal years ended January 2, 1993 and January 4, 1997 were 53-week periods. (2) Earnings per share for 1994, 1995 and 1996 is computed using the weighted average number of common shares and common share equivalents outstanding during the year. Earnings per share for 1992 and 1993 gives effect to the 1993 Recapitalization and the use of proceeds from the Company's initial public offering of Common Stock in 1993 (the "1993 Offering") as if both events had occurred at the beginning of 1992. (3) Represents income from continuing operations before extraordinary items plus interest, taxes, depreciation, amortization and other non-cash expenses. Although the Company has measured EBITDA consistently between the periods presented, EBITDA as a measure of liquidity is not governed by generally accepted accounting principles ("GAAP"), and, as such, may not be comparable to other similarly titled measures of other companies. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to either (i) operating income determined in accordance with GAAP as an indicator of operating performance or (ii) cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. (4) Net capital expenditures reflect assets acquired by purchase and capital lease. (5) Adjusted to give effect to the sale of 300,000 shares of Common Stock offered hereby by the Company at an assumed offering price of $16.25 per share (the last reported sales price for the Common Stock on the Nasdaq National Market on February 24, 1997) after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company and the application of the net proceeds to the Company therefrom to purchase production equipment. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000200243_artra_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000200243_artra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bc68c7e4b474e04e1d59a5c1b06c1bb8fbf5b012
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000200243_artra_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain of the information contained in this Prospectus and is qualified in its entirety by the more detailed information and financial statements appearing elsewhere herein. Prospective investors should carefully consider the information set forth under the caption "Risk Factors." The Company ARTRA, through its subsidiary, Bagcraft Corporation of America ("Bagcraft"), currently operates in one industry segment as a manufacturer of packaging products principally serving the food industry. All of the shares of Bagcraft are owned by BCA Holdings, Inc. ("BCA"), which is a wholly owned subsidiary of ARTRA. BCA has no assets other than the shares of Bagcraft. ARTRA is a public company, whose stock is listed on the New York and Pacific Stock Exchanges under the symbol ATA. ARTRA, along with its wholly-owned subsidiary, Fill-Mor Holding, Inc. ("Fill-Mor"), also owns a significant minority interest in COMFORCE Corporation ("COMFORCE"), consisting of 1,727,000 shares or approximately 13% of the outstanding common stock of COMFORCE as of October 16, 1997. COMFORCE provides telecommunications and computer technical staffing services worldwide to Fortune 500 companies and maintains an extensive global database of technical specialists, with an emphasis on wireless communications capabilities. COMFORCE is a public company, whose stock is listed on The American Stock Exchange under the symbol "CFS." On October 16, 1997, the last reported sale price for the Common Stock of COMFORCE was $8.50 per share. Fill-Mor has no assets other than the COMFORCE shares. The Offering ARTRA is required under certain agreements it has entered into with shareholders and warrant holders to register the shares of Common Stock held by such shareholders or issuable upon the exercise of warrants held by such warrantholders. Existing security holders of the Company are offering up to 5,192,471 shares of Common Stock held by them, or issuable to them upon the exercise of options or warrants held by them. Common Stock Offered by the Selling Shareholders.............. 5,192,471 shares* Common Stock Outstanding as of October 16, 1997............... 8,290,182 shares Common Stock Issuable Under Options as of October 16, 1997.... 913,050 shares Common Stock Issuable Under Warrants as of October 16, 1997... 2,558,983 shares - ----------------- *Includes Common Stock issuable under options and warrants. Neither the warrants or options are being registered. The Company is registering shares of common stock issuable upon exercise of the options and warrants, shares issuable upon conversion of certain notes, and shares issued in payment of ARTRA notes and other obligations. See "Selling Shareholders" and "Plan of Distribution." Proceeds From Exercise of Warrants or Options The Company will not receive any proceeds from the sale of the Common Stock offered hereby by the Selling Shareholders. However, if the holders of options or warrants to purchase shares of Common Stock exercise their warrants or options in order to sell the underlying shares, the Company will receive the amount of the exercise prices of any warrants or options so exercised. Neither - 3 - <PAGE> the warrants or options are being registered. The Company is registering shares of common stock issuable upon exercise of the warrants, shares issuable upon conversion of certain notes, and shares issued in payment of ARTRA notes and obligations. The Company cannot predict when or if it will receive proceeds from the exercise of warrants or options, or the amount of any such proceeds. The Company intends to use the proceeds, if any, received from the exercise of warrants or options to retire or reduce indebtedness, to pay certain expenses of the offering and for working capital.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000206030_axsys_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000206030_axsys_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b05761357891a86922056e28a8ed785e1bd02f00
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000206030_axsys_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto, appearing elsewhere in this Prospectus, including information under "Risk Factors." Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. All references to the "Company" in this Prospectus include Axsys Technologies, Inc. and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires. All share and per share amounts appearing in this Prospectus reflect the Company's July 25, 1996 one- for-five reverse Common Stock split. A glossary of terms appears on page 57. THE COMPANY The Company designs, manufactures and sells custom precision optical and positioning components, subsystems and systems for high-performance markets, such as defense, space, high-end digital imaging and electronics capital equipment. The Company also designs, manufactures and sells interconnect devices and distributes precision ball bearings for use in a variety of industrial, commercial and consumer applications. Through its Precision Systems Group ("PSG"), the Company offers its capabilities in magnetics, electronics, optics, precision machining and systems integration to high-performance Original Equipment Manufacturers ("OEMs") and end-users, enabling them to design and utilize systems that meet leading-edge performance requirements. PSG designs, manufactures and sells high-end components such as precision sensors, high-performance motors, precision metal optics and airbearings. These products enable OEMs to improve measurement precision, positioning performance (speed and power), inspection throughput and manufacturing yields. PSG also designs, manufactures and sells subsystems which integrate several of the Company's components. Subsystems include laser autofocus systems which automatically focus microscopes used for optical inspection, airbearing laser scanners and laser imaging systems used in the electronic pre-press market, and direct drive motor and resolver assemblies used in cluster tool robotics for positioning semiconductor wafers. In addition, PSG designs, manufactures and sells systems, such as head stack assembly (HSA) testers used to dynamically test computer disk drive magnetic heads, electrical probers for advanced flat panel displays, and infrared microscopes used to locate defects in microprocessors. Through its Industrial Components Group ("ICG"), the Company designs, manufactures and sells interconnect products. It also distributes and services precision ball bearings used by OEMs in a variety of commercial industries. The interconnect products include safety agency (e.g., U.L.) approved barrier terminal blocks and power connectors which are primarily used to interface industrial or process control computers to sensors, motors and other signal level and power devices. The precision ball bearings distributed by the Company are acquired from various domestic and international sources and are used in machine tools, office automation, semiconductor manufacturing and other motion control applications to provide for smooth and precise rotary motion. The Company's current business reflects a strategic shift that commenced in 1995. In that year, the Company began to expand its PSG business to include not only components for defense and military space applications, but also value- added subsystems and systems for a broad range of industrial and commercial markets. This shift was timed to take advantage of the increased demand for high-performance components, subsystems and systems in these markets as commercial manufacturers began to seek new methods to increase throughput and yield. The Company believes that the change in these markets was the result of several factors, including: (i) the demand on manufacturers to produce smaller, higher-performance products with precise tolerances; (ii) pressures imposed on manufacturers to enhance productivity and quality, which in turn required integration of process control technology directly into the manufacturing process; and (iii) the lowering of costs associated with electronic controls. In furtherance of its shift in strategy, the Company acquired various synergistic technologies and assets. In April 1996, the Company acquired Precision Aerotech, Inc. ("PAI"). PAI's subsidiaries, Speedring, Inc. ("Speedring") and Speedring Systems, Inc. ("Speedring Systems"), are leading manufacturers and suppliers of high-performance laser scanners and optics, as well as suppliers of precision-machined specialty materials, such as beryllium and quartz, for space and other high-technology applications. In October 1996, the Company acquired substantially all of the assets of Lockheed Martin Beryllium Corporation ("LMBC"), a supplier of precision-machined beryllium. Components made of beryllium are significant elements of space telescopes, weather and direct broadcast satellites, and low-earth-orbit satellites used in cellular communication. Most recently, in May 1997, the Company acquired Teletrac, Inc. ("Teletrac") which designs, manufactures and sells laser-based precision measurement systems as well as precision linear and rotary positioning systems for use in the electronics capital equipment industry. The Company's primary goal is to be a leading provider of components, subsystems and systems that enhance throughput and yield to customers requiring high-performance devices in their equipment and to end-users in their manufacturing and quality assurance processes. The Company's strategy is to leverage its resources and capabilities to develop higher-level subsystems and systems, employing its precision optical and positioning technologies, while maintaining and continuing to grow ICG. Key elements of this strategy include: (i) integrating technologies; (ii) capitalizing on cross-selling opportunities; (iii) increasing investment in engineering and manufacturing infrastructure; and (iv) expanding through acquisitions. The Company was originally incorporated in 1959 in New York under the name Vernitron Corporation, was reincorporated in Delaware in 1968 and changed its name to Axsys Technologies, Inc. in December 1996. The Company's principal executive office is located at 645 Madison Avenue, New York, New York 10022, and its telephone number is (212) 593-7900. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 1,064,809 shares Common Stock offered by the Selling Share- holder...................................... 463,741 shares Common Stock to be outstanding after the Of- fering...................................... 4,113,190 shares(1) Use of Proceeds.............................. Repayment of bank debt, repurchase of warrants, working capital and other general corporate purposes, including possible acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol................ AXYS </TABLE> - -------- (1) Based on the number of outstanding shares of Common Stock as of August 15, 1997. Excludes 400,000 shares of Common Stock reserved for issuance under the Company's Long-Term Stock Incentive Plan (as amended), under which options to purchase 48,600 shares of Common Stock were outstanding as of August 15, 1997, and 100,000 shares of Common Stock issuable in the future to the minority shareholders of Teletrac (the "Teletrac Minority Shareholders"). The Company anticipates that, concurrently with the effectiveness of this Offering, options to purchase shares of Common Stock will be granted to a number of the Company's employees, including executive officers, covering a significant part of the shares available for grant under the Long-Term Stock Incentive Plan. See "Management--Stock Incentive Plan," "Certain Transactions," "Description of Capital Stock--Warrants" and "Shares Eligible for Future Sale." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------ ----------------- 1992 1993 1994 1995 1996(1) 1996(1) 1997(2) ------- ------- ------- ------- ------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............... $62,912 $58,649 $62,132 $65,213 $91,301 $ 40,545 $ 58,849 Gross profit............ 15,831 15,311 17,229 17,240 23,818 10,655 15,738 Income (loss) from con- tinuing operations be- fore extraordinary item................... (1,042) (3,856) 27 884 2,855 1,202 2,366 Net income (loss)....... 102 (4,526) 3,681 884 2,682 1,029 2,366 Preferred stock divi- dends.................. 158 375 355 574 847 405 102 Net income (loss) applicable to common shareholders........... (56) (4,901) 3,326 310 1,835 624 2,264 Net income (loss) per share from continuing operations before extraordinary item..... $ (1.15) $ (4.1) $ (0.20) $ 0.12 $ 0.74 $ 0.34 $ 0.69 Net income (loss) per share applicable to common shareholders.... $ (0.05) $ (4.75) $ 1.95 $ 0.12 $ 0.68 $ 0.24 $ 0.69 Weighted average common shares outstanding..... 1,036 1,037 1,702 2,511 2,691 2,615 3,277 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................ $23,180 $25,331 Total assets........................................... 74,695 74,695 Long-term debt and capital lease obligations (less cur- rent portion)......................................... 26,056 3,586 Shareholders' equity................................... 23,594 48,215 </TABLE> - -------- (1) In April 1996, the Company acquired the stock of PAI and, in October 1996, purchased substantially all of the assets of LMBC. These acquisitions have been accounted for under the purchase method of accounting and, accordingly, the results of the continuing operations of PAI and LMBC have been included in the Company's Consolidated Statement of Operations since their respective dates of acquisition. See Note 3 to the Consolidated Financial Statements. (2) In May 1997, the Company acquired the stock of Teletrac. This acquisition was accounted for under the purchase method of accounting and, accordingly, the results of Teletrac's operations have been included in the Company's Consolidated Statement of Operations since the date of acquisition. See Note 3 to the Consolidated Financial Statements. (3) Adjusted to reflect the sale of 1,064,809 shares of Common Stock offered by the Company hereby at an assumed offering price of $34.00 per share and the anticipated application of the estimated net proceeds therefrom, including the repurchase by the Company of warrants representing 314,809 shares of Common Stock concurrently with the consummation of this Offering at a price per share of Common Stock subject to the respective warrant equal to the excess of the public offering price, less the underwriting discount set forth on the cover page of this Prospectus, over the exercise price of such warrant. See "Use of Proceeds," "Capitalization," "Description of Capital Stock--Warrants" and Note 12 to the Consolidated Financial Statements. Recent Developments Third Quarter Charge for Discontinued Operations In the third quarter of 1997, the Company recorded a charge to discontinued operations of $244,000, net of taxes (approximately $0.07 per share), relating to increases in reserves for certain environmental costs associated with a formerly-owned property. See "Risk Factors--Environmental Regulation" and "Business --Environmental Regulation."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000276327_midcoast_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000276327_midcoast_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..efd1187c0fe2a303916fac71441dbf893a8558ea
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000276327_midcoast_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE CAPTION "RISK FACTORS." UNLESS THE CONTEXT INDICATES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "MIDCOAST" ARE TO MIDCOAST ENERGY RESOURCES, INC. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS. CERTAIN TERMS, INCLUDING SEVERAL TECHNICAL TERMS COMMONLY USED IN THE NATURAL GAS INDUSTRY, ARE DEFINED IN THE GLOSSARY CONTAINED HEREIN. UNLESS OTHERWISE INDICATED, ALL INFORMATION SET FORTH IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. THE COMPANY The Company is primarily engaged in the transportation, gathering, processing and marketing of natural gas and other petroleum products. The Company owns and operates an interstate transmission pipeline system, two intrastate transmission systems, 18 end-user systems and 25 gathering systems representing over 1,000 miles of pipeline with an aggregate daily throughput capacity of over 791 Mmcf/d. The Company's principal business consists of providing transportation services through its pipelines to both end-users and natural gas producers, providing natural gas marketing services to these customers and processing natural gas. In connection with these services, the Company acquires and constructs bypass pipelines to supply natural gas directly to industrial and municipal end-users and provides access to pipeline systems for natural gas producers through its gathering systems. The Company's principal assets are located in two core geographic areas: Alabama/Mississippi and Texas. The Company's key operations include (i) a 288-mile interstate transmission pipeline and two end-user pipelines in northern Alabama (collectively, the "AlaTenn Systems"), (ii) the Magnolia system in the Black Warrior Basin of central Alabama which consists of over 111 miles of natural gas transmission and gathering pipelines and a 4,000 horsepower compressor station (the "Magnolia System"), (iii) the Harmony gas processing system in Mississippi which includes a sour gas processing plant and over 150 miles of natural gas gathering pipelines (the "Harmony System") and (iv) the Company's Texas pipeline systems which consist of over 162 miles of gas gathering and bypass pipelines. Since the first quarter of 1994, the Company has grown significantly by acquiring or constructing 32 pipeline systems at an aggregate cost of over $50 million, and increasing its average daily throughput by over twelve-fold to 280 Mmcf/d for the first quarter of 1997 after giving effect to the AlaTenn Acquisition (defined below). Primarily as a result of these acquisitions, the Company's EBITDA (as defined in the Glossary) increased to $12.7 million on a pro forma basis in 1996 for the acquisition of the Harmony System (the "Harmony Acquisition") and the AlaTenn Acquisition, from $0.6 million on a historical basis in 1994. See "Unaudited Pro Forma Consolidated Financial Statements." BUSINESS STRATEGY The Company's principal business strategy is to increase its earnings and cash flow by acquiring or constructing pipeline systems, aggressively pursuing end-user customers, increasing the utilization of its existing pipeline systems and processing plants in order to enhance the Company's profitability and improving cost efficiencies. The Company implements this strategy through the following steps: o ACQUISITION OR CONSTRUCTION OF PIPELINE AND PROCESSING SYSTEMS. The Company seeks to acquire or construct natural gas transmission, end-user, gathering and processing systems which offer the opportunity for increased utilization and expansion of the system due to their proximity to geographic areas where municipal and industrial demand for natural gas is growing or where drilling activity is expected to increase. The Company seeks to acquire or construct additional transmission and gathering systems or processing facilities in its core geographic areas of operation when the Company believes such additional systems will enhance the overall profitability of the area of operation. o FOCUS ON END-USERS. As a result of recent regulatory changes, natural gas customers have more flexibility to negotiate their natural gas purchase and transportation contracts. The Company actively pursues direct sales to these end-users, such as industrial plants and municipalities, which are seeking alternative supplies to meet their energy needs. The Company seeks to build pipeline systems directly connecting these customers to transmission systems and to enter into long-term transportation agreements that provide the Company with more predictable gas throughput and cash flow. The Company also offers gas marketing services to its end-user customers who usually incur a reduced transportation cost by receiving natural gas through a Company-owned pipeline. o UTILIZATION OF EXISTING SYSTEMS' CAPACITY. After a system is acquired or constructed, the Company begins an aggressive marketing effort to fully utilize the system's capacity. As part of this process, the Company focuses on providing quality service to its end-user and natural gas producer customers. Many of the Company's existing intrastate pipeline and processing systems were designed with excess natural gas throughput capacity that provide the Company with opportunities to pursue additional gas volumes with little incremental capital cost and to provide high-margin "swing" sales during periods of increased gas demand. o COST EFFICIENCIES. The Company generally seeks to achieve administrative and operational efficiencies by reducing overhead, increasing utilization of equipment and personnel, capitalizing on the geographic proximity of many of its systems and further integrating gas transmission and marketing services. The Company also seeks to acquire or construct additional transmission and gathering systems or processing facilities in its core geographic areas of operation where it can achieve administrative or operational efficiencies when integrated with the Company's existing systems. The Company emphasizes strict cost controls in all aspects of its business. THE ALATENN ACQUISITION Consistent with the Company's business strategy, in May 1997, Midcoast acquired the AlaTenn Systems and their related pipeline and energy services operations from Atrion Corporation ("Atrion") for cash consideration of approximately $39.4 million and up to $2 million in contingent deferred payments (the "AlaTenn Acquisition"). These operations include (i) a 288-mile interstate transmission pipeline located in northern Alabama, Mississippi and southern Tennessee that transports natural gas to eight industrial and 17 municipal customers (the "MIT System"), (ii) a 38-mile and a one-mile pipeline in northern Alabama that primarily serve two large industrial customers (the "Champion System" and "Monsanto System," respectively) and (iii) a natural gas marketing company which primarily serves customers of the AlaTenn Systems. The AlaTenn Acquisition complements the Company's operations in the Alabama/Mississippi area, which include the Magnolia System, the Harmony System and 11 other gathering and transmission systems. The Company believes there are numerous opportunities for increasing the utilization of the AlaTenn Systems. The Company also intends to pursue new construction and acquisition opportunities in this core geographic area through additional transmission systems that interconnect to or otherwise provide synergies with the AlaTenn Systems and the Company's other pipeline systems in the area. The Company further intends to make these systems more cost effective and emphasize its gas marketing efforts throughout this region. THE OFFERING Common Stock Offered by the Company(1)......................... 2,000,000 shares Common Stock Offered by Selling Stockholder........................ 100,000 shares ---------- Total...................... 2,100,000 shares ========== Common Stock Outstanding(1)(2): Before the Offering............. 2,500,000 shares After the Offering.............. 4,500,000 shares Use of Proceeds...................... The net proceeds from the sale of the Common Stock offered hereby will be used to repay bank indebtedness incurred in connection with the AlaTenn Acquisition. See "Use of Proceeds." AMEX Symbol.......................... MRS - ------------ (1) Excludes 315,000 shares of Common Stock subject to purchase upon exercise of the Underwriters' over-allotment option. See "Underwriting." (2) Based on the number of shares of Common Stock outstanding on May 15, 1997. Does not include (i) 100,000 shares of Common Stock issuable upon exercise of outstanding warrants to purchase Common Stock exercisable at $14.20 per share commencing in August 1998 ("Warrants"), (ii) 34,349 shares issuable upon exercise of outstanding warrants to purchase Common Stock exercisable at $7.85 per share ("Triumph Warrants") and (iii) 280,000 shares of Common Stock reserved for issuance upon the exercise of outstanding stock options under the Company's stock option plans. See "Management -- Executive Compensation" and "Description of Capital Stock -- Outstanding Warrants." SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA The following summary unaudited pro forma consolidated financial and operating data for the year ended December 31, 1996 and the three months ended March 31, 1997 give effect to (i) the Harmony Acquisition under the purchase method of accounting, (ii) the AlaTenn Acquisition under the purchase method of accounting and the related assumptions and adjustments described in the notes to the Unaudited Pro Forma Consolidated Financial Statements, (iii) the incurrence of $39.4 million in bank indebtedness (the "Acquisition Debt") to finance the AlaTenn Acquisition, plus an estimated $475,000 in related financing costs and (iv) the issuance and sale of 2,000,000 shares of Common Stock by the Company pursuant to the Offering and the application of the net proceeds therefrom to repay approximately $28 million of Acquisition Debt. The Unaudited Pro Forma Consolidated Financial Statements have been prepared based upon assumptions deemed appropriate by the Company and may not be indicative of actual results. The summary unaudited pro forma statement of operations data give effect to the Harmony Acquisition, the AlaTenn Acquisition and related financings as if such transactions had occurred as of January 1, 1996. For balance sheet data purposes pro forma adjustments give effect to the AlaTenn Acquisition, the Offering and the application of the net proceeds therefrom (assuming no exercise of the Underwriters' over-allotment option). The summary unaudited pro forma consolidated financial and operating data should be read in conjunction with the "Unaudited Pro Forma Consolidated Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Consolidated Financial Statements" and "Combined Financial Statements" of the three companies acquired from Atrion in the AlaTenn Acquisition (the "AlaTenn Subsidiaries") and the "Historical Summary of Revenue and Direct Operating Expenses" related to the Harmony System included elsewhere in this Prospectus. <TABLE> <CAPTION> YEAR ENDED THREE MONTHS ENDED DECEMBER 31, 1996 MARCH 31, 1997 ------------------------------------ ------------------------------------ HISTORICAL HISTORICAL -------------------- PRO FORMA -------------------- PRO FORMA COMPANY ALATENN AS ADJUSTED COMPANY ALATENN AS ADJUSTED -------- -------- ------------ -------- -------- ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating revenues............... $29,415 $113,429 $146,406 $12,964 $32,055 $ 45,019 Operating income(1).............. 2,573 6,727 11,294 1,299 1,786 3,441 Interest expense................. 413 1 1,620 95 -- 360 Income before income taxes....... 1,914 7,275 9,977 1,132 1,790 3,013 Net income....................... 1,914 4,633 6,883 1,132 1,142 2,037 Net income applicable to common shareholders................... 1,891 4,633 6,860 1,132 1,142 2,037 PER SHARE DATA: Net income applicable to common shareholders................... $ 1.00 -- $ 1.77 $ 0.45 -- $ 0.45 Weighted average number of common shares outstanding............. 1,886 -- 3,886 2,500 -- 4,500 OTHER DATA: Depreciation, depletion and amortization................... $ 818 $ 584 $ 1,614 $ 255 $ 147 $ 437 General and administrative....... 1,223 3,961 3,632 374 873 856 EBITDA(2)........................ 3,193 7,311 12,710 1,494 1,933 3,818 Cash flow from operating activities..................... 2,564 6,257 -- 2,948 542 -- Capital expenditures............. 9,391 331 -- 425 36 -- </TABLE> MARCH 31, 1997 ------------------------- PRO FORMA ACTUAL AS ADJUSTED --------- ------------ (IN THOUSANDS) BALANCE SHEET DATA: Working capital.................. $ 1,722 $ 3,524 Property, plant and equipment, net............................. 17,148 54,356 Total assets..................... 27,653 72,441 Long-term debt, net of current portion(3)...................... 5,943 15,876 Shareholders' equity............. 14,583 42,348 <TABLE> <CAPTION> DECEMBER 31, 1996 MARCH 31, 1997 -------------------------------- -------------------------------- HISTORICAL HISTORICAL ------------------- ------------------- COMPANY ALATENN PRO FORMA COMPANY ALATENN PRO FORMA -------- -------- ---------- -------- -------- ---------- <S> <C> <C> <C> <C> <C> <C> OPERATING DATA: Miles of pipeline(4)............. 584 327 911 702 327 1,029 Operating pipeline systems: Interstate transmission..... -- 1 1 -- 1 1 Intrastate transmission..... 2 -- 2 2 -- 2 End-user.................... 17 2 19 16 2 18 Gathering................... 24 -- 24 25 -- 25 -------- -------- ---------- -------- -------- ---------- Total operating pipeline systems..................... 43 3 46 43 3 46 ======== ======== ========== ======== ======== ========== Natural gas transported or sold, net (Mmcf/d)(5)................ 102 131 233 133 147 280 Daily volume capacity (Mmcf/d)... 574 210 784 581 210 791 </TABLE> - ------------ (1) Operating revenues less operating expenses. (2) See "Glossary" for a definition of EBITDA. EBITDA is not a measure of operating income, operating performance, or liquidity under generally accepted accounting principles. The Company includes EBITDA data because it understands such data is used by certain investors to determine the Company's historical ability to service its indebtedness. (3) See Note 5 to the Company's "Consolidated Financial Statements." (4) Includes all of the miles of pipeline of the various active pipelines that the Company owns an interest in or operates. (5) Includes natural gas volumes contracted for, transported or sold through the Company's pipeline systems. Transported oil volumes have been converted to an equivalent unit basis which is 6 Mcf to 1 Bbl, consistent with industry standards, for the year ended December 31, 1996 and the three-month period ended March 31, 1997. SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA The summary historical consolidated financial and operating data for the fiscal years ended December 31, 1994, 1995 and 1996, and for the three months ended March 31, 1996 and 1997, set forth below, are derived from and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein and the Company's "Consolidated Financial Statements" and the notes thereto included elsewhere in this Prospectus. The data for the three months ended March 31, 1996 and 1997 are derived from and qualified by reference to the Company's "Consolidated Financial Statements" appearing elsewhere herein and, in the opinion of management of the Company, includes all adjustments that are of a normal recurring nature and necessary for a fair presentation. See "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Consolidated Financial Statements." <TABLE> <CAPTION> FOR THE YEARS ENDED THREE MONTHS ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating revenues.................. $ 14,969 $ 15,622 $ 29,415 $ 5,584 $ 12,964 Operating income(1)................. 349 2,569 2,573 533 1,299 Interest expense.................... 189 339 413 120 95 Income before income taxes and cumulative effect of a change in accounting principle.............. 148 2,193 1,914 374 1,132 Net income.......................... 27 2,193 1,914 374 1,132 Net income (loss) applicable to common shareholders............... (32) 2,134 1,891 359 1,132 PER SHARE DATA: Net income (loss) applicable to common shareholders............... $ (0.02) $ 1.48 $ 1.00 $ 0.24 $ 0.45 Weighted average number of common shares outstanding................ 1,391 1,440 1,886 1,466 2,500 OTHER DATA: Depreciation, depletion and amortization...................... $ 259 $ 452 $ 818 $ 151 $ 255 General and administrative.......... 849 785 1,223 199 374 EBITDA(2)........................... 609 3,021 3,193 664 1,494 Cash flow from operating activities........................ (515) 2,361 2,564 1,306 2,948 Capital expenditures................ 1,088 3,885 9,391 1,286 425 </TABLE> <TABLE> <CAPTION> DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT WHERE OTHERWISE INDICATED) <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)........... $ (1,105) $ (99) $ 1,135 $ (441) $ 1,722 Property, plant and equipment, net............................... 4,994 8,206 16,965 8,171 17,148 Total assets........................ 7,272 11,089 27,303 11,887 27,653 Long-term debt, net of current portion(3)........................ 1,781 3,961 4,015 3,442 5,943 Shareholders' equity................ 2,007 4,157 13,593 4,522 14,583 OPERATING DATA: Miles of pipeline(4)................ 35 146 584 233 702 Operating pipeline systems: Intrastate transmission........ 0 1 2 1 2 End-user....................... 11 11 17 12 16 Gathering...................... 5 5 24 11 25 --------- --------- --------- --------- --------- Total operating pipeline systems........................... 16 17 43 24 43 ========= ========= ========= ========= ========= Natural gas volumes transported or sold, net (Mmcf/d)(5)............. 31 44 102 113 133 Daily volume capacity (Mmcf/d)...... 182 302 574 462 581 </TABLE> (FOOTNOTES ON FOLLOWING PAGE) - ------------ (1) Operating revenues less operating expenses. (2) See "Glossary" for a definition of EBITDA. EBITDA is not a measure of operating income, operating performance, or liquidity under generally accepted accounting principles. The Company includes EBITDA data because it understands such data is used by certain investors to determine the Company's historical ability to service its indebtedness. (3) See Note 5 to the Company's "Consolidated Financial Statements." (4) Includes all of the miles of pipeline of the various pipelines that the Company owns an interest in or operates. (5) Includes natural gas volumes contracted for, transported or sold through the Company's pipeline systems. Transported oil volumes have been converted to an equivalent unit basis which is 6 Mcf to 1 Bbl, consistent with industry standards, for each of the years ended December 31, 1994, 1995 and 1996 and the three-month period ended March 31, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000319459_mission_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000319459_mission_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd5679ea7ba16d75b370804ad78a9b7f34b6089f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000319459_mission_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE HEREIN. REFERENCES TO "BELLWETHER" OR THE "COMPANY" HEREIN INCLUDE BELLWETHER EXPLORATION COMPANY AND ITS PREDECESSORS AND SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE REQUIRES. BELLWETHER'S FISCAL YEAR ENDS ON JUNE 30. PRO FORMA INFORMATION REGARDING BELLWETHER GIVES EFFECT TO THE PENDING ACQUISITION, THE OFFERINGS AND THE OTHER TRANSACTIONS DESCRIBED UNDER "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA" (COLLECTIVELY, THE "TRANSACTIONS") AS IF THEY OCCURRED ON THE DATES INDICATED. THE ESTIMATES AS OF JUNE 30, 1996 OF THE COMPANY'S NET PROVED RESERVES ARE BASED ON THE REPORT OF WILLIAMSON PETROLEUM CONSULTANTS INC. ("WILLIAMSON"), AND THE ESTIMATES OF NET PROVED RESERVES OF THE ACQUIRED PROPERTIES (AS HEREINAFTER DEFINED) ARE DERIVED FROM A RESERVE REPORT PREPARED BY THE COMPANY AND AUDITED BY RYDER SCOTT COMPANY PETROLEUM ENGINEERS ("RYDER SCOTT"). UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS IN THE COMMON STOCK OFFERING WILL NOT BE EXERCISED. CERTAIN TERMS RELATING TO THE OIL AND GAS INDUSTRY ARE DEFINED IN "GLOSSARY." THE COMPANY Bellwether is an independent energy company primarily engaged in the acquisition, exploitation, development and exploration of oil and gas properties. The Company has grown and diversified its reserve base through the acquisition of oil and gas properties and the subsequent development of these properties. Bellwether's estimated net proved reserves have increased at a compounded annual growth rate of 65.9%, from 1.6 MMBOE as of June 30, 1993 to 7.3 MMBOE as of June 30, 1996. During this period, average net daily production increased at a compounded annual growth rate of 73.6%, from 618.0 BOE/d in fiscal 1993 to 3,235.0 BOE/d in fiscal 1996, and EBITDA increased at a compounded annual growth rate of 89.0%, from $1.6 million in fiscal 1993 to $10.8 million in fiscal 1996. The Company's net cash flows from operations have increased at a compounded annual growth rate of 67.4%, from $1.6 million in fiscal 1993 to $7.5 million in fiscal 1996. The Company believes its primary strengths are a demonstrated ability to identify and acquire properties which have significant potential for further exploitation, development and exploration, an inventory of development and exploration projects, expertise in the use of advanced technologies such as 3-D seismic and horizontal drilling and a conservative capital structure supportive of continued investment in its core properties as well as additional acquisitions. The Company has recently agreed to acquire (the "Pending Acquisition") the oil and gas properties (the "Acquired Properties") and associated working capital owned by partnerships and other entities (the "Sellers") managed or sponsored by Torch Energy Advisors Incorporated ("Torch"). Bellwether believes that the Pending Acquisition provides the opportunity to significantly increase reserves and cash flow at an attractive price while providing opportunities for future reserve growth through exploitation and exploration activities. On a pro forma basis, Bellwether's estimated net proved reserves as of June 30, 1996 were 46.6 MMBOE (86% developed and 62% natural gas) with a PV-10 Value (pre-tax) of $260.1 million. Pro forma average daily net production was 22.7 MBOE/d for fiscal 1996 and pro forma EBITDA for fiscal 1996 was $74.9 million, excluding non-recurring gas contract settlements payable to the Company aggregating $18.9 million. Following the Pending Acquisition, the Company's properties will be concentrated in Texas, Louisiana, Alabama, California and the Gulf of Mexico. BUSINESS STRATEGY Bellwether's strategy is to maximize long-term shareholder value through aggressive growth in reserves and cash flow using advanced technologies, implementation of a low cost structure and maintenance of a capital structure supportive of growth. Bellwether expects the additional cash flows from the AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission ("SEC"). Reports, proxy and information statements and other information filed by the Company with the SEC pursuant to the informational requirements of the Exchange Act may be inspected at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004, and at the following Regional Offices of the SEC: Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and New York Regional Office, 7 World Trade Center, New York, New York 10048. Copies of such material may also be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed rates. The Registration Statement was filed with the SEC electronically. The SEC maintains a site on the World Wide Web that contains documents filed with the SEC electronically. The address of such site is http://www.sec.gov, and the Registration Statement may be inspected at such site. The Common Stock is traded on the Nasdaq National Market. The Company's registration statements, reports, proxy and information statements, and other information may also be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. This Prospectus constitutes a part of a Registration Statement on Form S-1 filed by the Company with the SEC under the Securities Act of 1933 ("Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement for further information with respect to the Company and the securities offered hereby. Any statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the SEC are not necessarily complete and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. Acquired Properties will finance a significant portion of its growth strategy. Key elements of this strategy are: OPPORTUNISTIC ACQUISITIONS Bellwether seeks to acquire properties that have produced significant quantities of oil and gas and have upside potential which can be exploited using 3-D seismic, computer aided exploration ("CAEX"), horizontal drilling, workovers and other enhanced recovery techniques. Such acquisitions have included the Fausse Pointe field in south Louisiana, the Cove field offshore Texas and the Fort Trinidad field in east Texas. EXPLOITATION AND DEVELOPMENT OF PROPERTIES The Company actively pursues the exploitation of its properties through recompletions, waterfloods and development wells, including horizontal drilling. Examples of recent exploitation successes include a five well workover program and two development wells in the Cove field, which increased Bellwether's average net production in this field from 1.0 MMcf/d in January 1996 to 11.1 MMcf/d in February 1997. In addition, the Company recently drilled a successful horizontal development well into the Buda formation in the Fort Trinidad field which tested in January 1997 at 420 Bbls/d of oil. Bellwether also initiated a waterflood project in the Fort Trinidad field during fiscal 1996. Future planned exploitation projects include in excess of 20 horizontal drilling locations in the Buda and Glen Rose B formations in the Fort Trinidad field and up to three horizontal drilling locations to exploit the Company's exploratory success in the Giddings field in the Austin Chalk formation. In addition, because the Sellers were formed to distribute net cash flows rather than reinvest in the exploitation of the Acquired Properties, the Company believes that such properties will provide significant exploitation and development opportunities. The Company's exploitation budget for fiscal 1997 is $8.6 million, of which approximately $4.8 million had been spent as of December 31, 1996. During fiscal 1997, the capital expenditures on the Acquired Properties are estimated to be $23.2 million of which $5.7 million had been spent as of December 31, 1996. For fiscal 1998, the Company has identified exploitation projects totaling $25.2 million (including amounts to be spent on the Acquired Properties). EXPLORATION ACTIVITIES The Company's exploration activities focus on projects with potential for substantial reserve increases. In January 1997, the Company completed a successful exploration well in the Austin Chalk formation in the Giddings field in central Texas. Exploration projects in the remainder of fiscal 1997 and in fiscal 1998 include multiple wells in the Fausse Pointe field and an exploration well west of the Cove field, both of which are operated by the Company. In addition, the Company also expects the Acquired Properties to present exploration opportunities. For example, in the Ship Shoal complex in the Gulf of Mexico, the Sellers declined to acquire available 3-D seismic surveys and to participate in six offshore exploration or exploitation wells in 1996, all of which were successful. The Company plans to acquire this and other 3-D seismic surveys of the Acquired Properties and to participate in future wells based on its interpretation of the data. During fiscal 1997, the Company has budgeted $4.8 million for exploration, of which $2.1 million had been spent as of December 31, 1996. For fiscal 1998, the Company has identified exploration projects totaling $17.6 million (including amounts to be spent on the Acquired Properties). ADVANCED TECHNOLOGY The Company seeks to improve the efficiency and reduce the risks associated with its exploration and exploitation activities using advanced technologies. These advanced technologies include 3-D seismic, CAEX techniques and horizontal drilling. The Company acquired a 3-D survey on the Cove field, conducted a 3-D survey on the Fausse Pointe field and plans to acquire three 3-D surveys on certain of the Acquired Properties. The Company believes its existing properties and the Acquired Properties will benefit from the application of advanced technologies. PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE HEREIN. REFERENCES TO "BELLWETHER" OR THE "COMPANY" HEREIN INCLUDE BELLWETHER EXPLORATION COMPANY AND ITS PREDECESSORS AND SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE REQUIRES. BELLWETHER'S FISCAL YEAR ENDS ON JUNE 30. PRO FORMA INFORMATION REGARDING BELLWETHER GIVES EFFECT TO THE PENDING ACQUISITION, THE OFFERINGS AND THE OTHER TRANSACTIONS DESCRIBED UNDER "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA" (COLLECTIVELY, THE "TRANSACTIONS") AS IF THEY OCCURRED ON THE DATES INDICATED. THE ESTIMATES AS OF JUNE 30, 1996 OF THE COMPANY'S NET PROVED RESERVES ARE BASED ON THE REPORT OF WILLIAMSON PETROLEUM CONSULTANTS INC. ("WILLIAMSON"), AND THE ESTIMATES OF NET PROVED RESERVES OF THE ACQUIRED PROPERTIES (AS HEREINAFTER DEFINED) ARE DERIVED FROM A RESERVE REPORT PREPARED BY THE COMPANY AND AUDITED BY RYDER SCOTT COMPANY PETROLEUM ENGINEERS ("RYDER SCOTT"). UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS IN THE COMMON STOCK OFFERING WILL NOT BE EXERCISED. CERTAIN TERMS RELATING TO THE OIL AND GAS INDUSTRY ARE DEFINED IN "GLOSSARY." THE COMPANY Bellwether is an independent energy company primarily engaged in the acquisition, exploitation, development and exploration of oil and gas properties. The Company has grown and diversified its reserve base through the acquisition of oil and gas properties and the subsequent development of these properties. Bellwether's estimated net proved reserves have increased at a compounded annual growth rate of 65.9%, from 1.6 MMBOE as of June 30, 1993 to 7.3 MMBOE as of June 30, 1996. During this period, average net daily production increased at a compounded annual growth rate of 73.6%, from 618.0 BOE/d in fiscal 1993 to 3,235.0 BOE/d in fiscal 1996, and EBITDA increased at a compounded annual growth rate of 89.0%, from $1.6 million in fiscal 1993 to $10.8 million in fiscal 1996. The Company's net cash flows from operations have increased at a compounded annual growth rate of 67.4%, from $1.6 million in fiscal 1993 to $7.5 million in fiscal 1996. The Company believes its primary strengths are a demonstrated ability to identify and acquire properties which have significant potential for further exploitation, development and exploration, an inventory of development and exploration projects, expertise in the use of advanced technologies such as 3-D seismic and horizontal drilling and a conservative capital structure supportive of continued investment in its core properties as well as additional acquisitions. The Company has recently agreed to acquire (the "Pending Acquisition") the oil and gas properties (the "Acquired Properties") and associated working capital owned by partnerships and other entities (the "Sellers") managed or sponsored by Torch Energy Advisors Incorporated ("Torch"). Bellwether believes that the Pending Acquisition provides the opportunity to significantly increase reserves and cash flow at an attractive price while providing opportunities for future reserve growth through exploitation and exploration activities. On a pro forma basis, Bellwether's estimated net proved reserves as of June 30, 1996 were 46.6 MMBOE (86% developed and 62% natural gas) with a PV-10 Value (pre-tax) of $260.1 million. Pro forma average daily net production was 22.7 MBOE/d for fiscal 1996 and pro forma EBITDA for fiscal 1996 was $74.9 million, excluding non-recurring gas contract settlements payable to the Company aggregating $18.9 million. Following the Pending Acquisition, the Company's properties will be concentrated in Texas, Louisiana, Alabama, California and the Gulf of Mexico. BUSINESS STRATEGY Bellwether's strategy is to maximize long-term shareholder value through aggressive growth in reserves and cash flow using advanced technologies, implementation of a low cost structure and maintenance of a capital structure supportive of growth. Bellwether expects the additional cash flows from the Acquired Properties will finance a significant portion of its growth strategy. Key elements of this strategy are: OPPORTUNISTIC ACQUISITIONS. Bellwether seeks to acquire properties that have produced significant quantities of oil and gas and have upside potential which can be exploited using 3-D seismic, computer aided exploration ("CAEX"), horizontal drilling, workovers and other enhanced recovery techniques. Such acquisitions have included the Fausse Pointe field in south Louisiana, the Cove field offshore Texas and the Fort Trinidad field in east Texas. EXPLOITATION AND DEVELOPMENT OF PROPERTIES. The Company actively pursues the exploitation of its properties through recompletions, waterfloods and development wells, including horizontal drilling. Examples of recent exploitation successes include a five well workover program and two development wells in the Cove field, which increased Bellwether's average net production in this field from 1.0 MMcf/d in January 1996 to 11.1 MMcf/d in February 1997. In addition, the Company recently drilled a successful horizontal development well into the Buda TORCH RELATIONSHIP The Company operates under an Administrative Services Agreement with Torch. Torch has a staff of 39 geologists, geophysicists, reservoir engineers and landmen and 59 financial personnel and professionals. The Company believes that its relationship with Torch provides it with access to acquisition opportunities and financial and technical expertise that are generally only available to significantly larger companies. In addition, the fees payable to Torch reduce significantly on a BOE basis as the Company's asset base and production grow. LOW COST STRUCTURE The Company's cost structure will benefit from the Pending Acquisition and the Company believes that its larger asset and production base will allow it to maintain a low cost structure prospectively. Because general and administrative costs are spread over higher production, pro forma general and administrative costs per BOE in fiscal 1996 and the six months ended December 31, 1996 were $1.01 and $0.99, respectively, compared with $2.55 and $2.37, respectively, on a historical basis. PENDING ACQUISITION In March 1997, the Company agreed to purchase the Acquired Properties and an estimated $18.0 million of working capital for $188.3 million, plus a contingent payment of up to $9.0 million, the actual amount of which will be based on 1997 gas prices (the "Contingent Payment"). The effective date of the Pending Acquisition is July 1, 1996 and the estimated net adjusted purchase price assuming an April 8, 1997 closing date is $141.9 million plus the Contingent Payment. As of June 30, 1996, estimated net proved reserves attributable to the Acquired Properties were 39.2 MMBOE (89% developed and 59% gas) with a PV-10 Value (pre-tax) of $212.0 million. The Company will finance the cash portion of the Pending Acquisition and related fees, estimated to aggregate $173.8 million, including repayment of an estimated $12.0 million of existing indebtedness with the proceeds of the Offerings (estimated to be $144.6 million) and $29.3 million of borrowings under its new credit facility ("New Credit Facility"). Torch and a subsidiary of Torchmark Corporation ("Torchmark"), the parent corporation of a Selling Stockholder, have interests in the Acquired Properties and will receive an estimated $18.0 million and $12.7 million, respectively, of the purchase price paid for the Acquired Properties. Torch and Torchmark will also receive fees payable in cash and Common Stock in connection with the Pending Acquisition aggregating an estimated $3.3 million. See "Risk Factors -- Conflicts of Interest" and "Transactions with Related Persons." The Pending Acquisition will close simultaneously with the Offerings, except that Bellwether has agreed to acquire the interest of one investor which owns less than $2.2 million of properties on April 15, 1997. See "Business and Properties_-- Structure of the Pending Acquisition." The Company has identified for divestiture non-core properties representing approximately 10% of the estimated net proved reserves attributable to the Acquired Properties as of June 30, 1996. These properties are primarily small working interests in geographically diverse locations, with generally low production rates and cash flows, and limited potential for development. The Company expects to sell these properties during fiscal 1997 and fiscal 1998. The net proceeds from these divestitures, which will be used to repay indebtedness, are currently estimated to be $15 million, but will depend on prevailing market conditions at the time of sale. The Company's address is 1331 Lamar, Suite 1455, Houston, TX 77010, and its phone number is (713) 650-1025. formation in the Fort Trinidad field which tested in January 1997 at 420 Bbls/d of oil. Bellwether also initiated a waterflood project in the Fort Trinidad field during fiscal 1996. Future planned exploitation projects include in excess of 20 horizontal drilling locations in the Buda and Glen Rose B formations in the Fort Trinidad field and up to three horizontal drilling locations to exploit the Company's exploratory success in the Giddings field in the Austin Chalk formation. In addition, because the Sellers were formed to distribute net cash flows rather than reinvest in the exploitation of the Acquired Properties, the Company believes that such properties will provide significant exploitation and development opportunities. The Company's exploitation budget for fiscal 1997 is $8.6 million, of which approximately $4.8 million had been spent as of December 31, 1996. During fiscal 1997, the capital expenditures on the Acquired Properties are estimated to be $23.2 million of which $5.7 million had been spent as of December 31, 1996. For fiscal 1998, the Company has identified exploitation projects totaling $25.2 million (including amounts to be spent on the Acquired Properties). EXPLORATION ACTIVITIES. The Company's exploration activities focus on projects with potential for substantial reserve increases. In January 1997, the Company completed a successful exploration well in the Austin Chalk formation in the Giddings field in central Texas. Exploration projects in the remainder of fiscal 1997 and in fiscal 1998 include multiple wells in the Fausse Pointe field and an exploration well west of the Cove field, both of which are operated by the Company. In addition, the Company also expects the Acquired Properties to present exploration opportunities. For example, in the Ship Shoal complex in the Gulf of Mexico, the Sellers declined to acquire available 3-D seismic surveys and to participate in six offshore exploration or exploitation wells in 1996, all of which were successful. The Company plans to acquire this and other 3-D seismic surveys of the Acquired Properties and to participate in future wells based on its interpretation of the data. During fiscal 1997, the Company has budgeted $4.8 million for exploration, of which $2.1 million had been spent as of December 31, 1996. For fiscal 1998, the Company has identified exploration projects totaling $17.6 million (including amounts to be spent on the Acquired Properties). ADVANCED TECHNOLOGY. The Company seeks to improve the efficiency and reduce the risks associated with its exploration and exploitation activities using advanced technologies. These advanced technologies include 3-D seismic, CAEX techniques and horizontal drilling. The Company acquired a 3-D survey on the Cove field, conducted a 3-D survey on the Fausse Pointe field and plans to acquire three 3-D surveys on certain of the Acquired Properties. The Company believes its existing properties and the Acquired Properties will benefit from the application of advanced technologies. TORCH RELATIONSHIP. The Company operates under an Administrative Services Agreement with Torch. Torch has a staff of 39 geologists, geophysicists, reservoir engineers and landmen and 59 financial personnel and professionals. The Company believes that its relationship with Torch provides it with access to acquisition opportunities and financial and technical expertise that are generally only available to significantly larger companies. In addition, the fees payable to Torch reduce significantly on a BOE basis as the Company's asset base and production grow. LOW COST STRUCTURE. The Company's cost structure will benefit from the Pending Acquisition and the Company believes that its larger asset and production base will allow it to maintain a low cost structure prospectively. Because general and administrative costs are spread over higher production, pro forma general and administrative costs per BOE in fiscal 1996 and the six months ended December 31, 1996 were $1.01 and $0.99, respectively, compared with $2.55 and $2.37, respectively, on a historical basis. THE COMMON STOCK OFFERING <TABLE> <CAPTION> <S> <C> Shares of Common Stock offered by the Company............................ 4,400,000 shares Shares of Common Stock offered by the Selling Stockholders............... 475,000 shares Shares of Common Stock outstanding after the Offerings(a)(b):......... 13,707,979 shares Notes Offering....................... Concurrently with the Common Stock Offering, the Company is offering $100,000,000 aggregate principal amount of Notes to the public. The closings of the Common Stock Offering and the Notes Offering are contingent upon each other and upon the consummation of the Pending Acquisition. See "Notes Offering." Use of Proceeds...................... The Company will use the proceeds of the Common Stock Offering and the Notes Offering, together with bank borrowings under the New Credit Facility (collectively, the "Financing"), to finance the cash portion of the Pending Acquisition, to repay bank borrowings under the Company's existing credit facility and to pay transaction costs. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000351231_dawson_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000351231_dawson_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3f3d0a631ce05fff3031656b9e06acfba30da74b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000351231_dawson_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and the financial statements and related notes appearing elsewhere in this Prospectus. As used herein, the "Company" means Dawson Geophysical Company, the "Selling Shareholder" means L. Decker Dawson, President of the Company, and "Common Stock" means the Company's Common Stock, $.33 1/3 par value per share, unless the context otherwise requires. Unless otherwise indicated, all financial information and share data in this Prospectus assume no exercise of the Underwriters' over-allotment option. Investors should carefully consider the information set forth under "Risk Factors." THE COMPANY Founded in 1952, Dawson Geophysical Company acquires and processes three-dimensional ("3-D") seismic data used in the exploration, development and field management of oil and natural gas reserves. The Company's operations consist of six 3-D seismic data acquisition crews and a seismic data processing center located in Midland, Texas. As a result of an increase in industry-wide demand for 3-D seismic surveys and the Company's competitive position, the Company has experienced increasing demand for its 3-D seismic services. The Company acquires and processes seismic data for its clients, ranging from major oil and gas companies to independent oil and gas operators, who retain exclusive rights to the information obtained. The Company's land-based data acquisition crews operate primarily in the southwestern United States, but have responded to demand from south Texas to North Dakota. As a result of the addition of a sixth crew equipped with the versatile I/O System Two(R)* Remote Seismic Recorder ("RSR"), the Company has expanded its capabilities to accommodate more difficult and remote terrains such as east Texas and the Rocky Mountains. The Company operates five I/O System Two recording systems, one with RSR capability, and one MDS-18X(R)* recording system. The Company's six seismic crews are equipped with an aggregate capacity of 14,200 recording channels and 45 vibrator energy source units, which are configured to meet the demands of specific survey designs. Each crew consists of approximately 40 technicians, 25 associated vehicles with off-road capabilities, 31,000 geophones, a recording system, energy sources, electronic cables and a variety of other equipment. 3-D seismic surveys provide an immense volume of concentrated subsurface information to the oil and gas industry. Detailed subsurface resolution from 3-D seismic data enhances the exploration for new reserves and enables oil and gas companies to better delineate existing fields and to augment reservoir management techniques. Benefits of incorporating 3-D seismic technology into exploration and development programs include reducing drilling risk, decreasing oil and gas finding costs, lowering field development expenditures and recovering a greater portion of reserves in place. The Company believes that it maintains a competitive advantage in the industry by (i) acquiring equipment to expand capacity in response to client demand, (ii) updating its equipment to take advantage of advances in geophysical technology, (iii) maintaining skilled and experienced personnel for its data acquisition and processing operations, (iv) focusing its operations on the domestic onshore seismic industry, and (v) providing integrated in-house operations necessary to complete all phases of 3-D seismic data acquisition and processing, including project design, permitting and surveying. Since fiscal 1990, the Company has spent approximately $57 million to acquire new 3-D telemetry recording systems and associated equipment, including approximately $26 million since fiscal 1995. Consistent with the Company's strategy of maintaining technologically advanced equipment and the financial flexibility to expand its 3-D capacity, the Company intends to use, of the net proceeds it receives from this offering, (i) approximately $10 million to reduce bank debt of the Company, (ii) approximately $8 million to acquire - --------------- * I/O System Two(R) is a registered trademark of Input/Output, Inc. and MDS-18X(R) is a registered trademark of I/O Exploration Products. new equipment and to upgrade existing equipment for the six 3-D seismic crews now operated by the Company, and (iii) the balance to increase working capital of the Company and for general corporate purposes. The Company intends to continue its program of acquiring new seismic equipment and upgrading its existing equipment. The headquarters of the Company, a Texas corporation, are located at 208 South Marienfeld, Midland, Texas 79701, and its telephone number is (915) 682-7356. THE OFFERING Common Stock offered by the Company............................. 1,000,000 shares(1) Common Stock offered by the Selling Shareholder......................... 500,000 shares Common Stock to be outstanding after this offering....................... 5,200,000 shares(1) Use of proceeds..................... Approximately $10 million to reduce bank debt, approximately $8 million to acquire new equipment and to upgrade existing equipment for the Company's six 3-D seismic crews, and the balance to be added to working capital and for general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol....... "DWSN" - --------------- (1) Excludes 89,000 shares of Common Stock issuable upon exercise of outstanding employee stock options. See "Management -- Compensation Plans." SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) The following summary financial information for the five fiscal years ended September 30, 1997 was derived from the audited financial statements of the Company. The following information should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company's financial statements and notes thereto and the other financial data included elsewhere in this Prospectus. <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30, ------------------------------------------------ 1993 1994 1995 1996 1997 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Operating revenues........................ $17,016 $23,027 $28,188 $33,518 $48,227 Operating costs: Operating expenses..................... 12,497 15,478 20,067 23,763 32,293 General and administrative............. 842 887 975 1,299 1,477 Depreciation........................... 1,830 3,016 4,150 5,818 7,321 ------- ------- ------- ------- ------- 15,169 19,381 25,192 30,880 41,091 ------- ------- ------- ------- ------- Income from operations.................... 1,847 3,646 2,996 2,638 7,136 Other income (expense).................... 950 (129) 444 122 (20) Income before extraordinary item.......... $ 1,862 $ 2,266 $ 2,174 $ 1,888 $ 4,570 Net income................................ $ 2,739(1) $ 2,266 $ 2,174 $ 1,888 $ 4,570 PER SHARE DATA: Income per share before extraordinary item................................... $ .62 $ .74 $ .54 $ .45 $ 1.09 Net income per share...................... $ .91 $ .74 $ .54 $ .45 $ 1.09 Weighted average equivalent common shares outstanding............................ 3,008 3,045 3,990 4,183 4,202 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------- HISTORICAL AS ADJUSTED(2) ---------- -------------- <S> <C> <C> BALANCE SHEET DATA (AT PERIOD END): Working capital........................................... $11,048 $ Net property, plant and equipment......................... 35,807 Total assets.............................................. 53,561 Long-term debt, less current maturities................... 7,893 Stockholders' equity...................................... 37,545 </TABLE> - --------------- (1) During 1993, the Company fully utilized its remaining net operating loss carryforwards for federal income tax purposes resulting in an extraordinary benefit of $877,000. (2) As adjusted to reflect the sale by the Company in this offering of 1,000,000 shares of Common Stock and the application of the estimated net proceeds it receives therefrom as described under "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000354242_independen_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000354242_independen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3ed15d087f7d2fcd47854f7a429752d2954e276b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000354242_independen_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The Company The Company was incorporated on December 9, 1980 under the laws of the state of Texas, and is engaged in the business of a life insurance general agency for sales to United States military personnel. The Company has six wholly-owned subsidiaries engaged in the same business in the states of Hawaii, Wyoming, Montana, New York, Nevada, and Alabama respectively. The Company's wholly-owned subsidiary, United Services Planning Association, Inc. ("USPA"), is also a Texas corporation, and is a broker-dealer of securities. The Company's wholly-owned subsidiary, First Command Bank, is a federal savings bank. (See "Business of the Company.") The Company's principal executive offices are located at 4100 South Hulen Street, Fort Worth, Texas 76109. The Offering Type of Securities Class B Nonvoting Common Stock Number of Shares Outstanding Prior to Offering 922,257 Number of Shares Offered to be Sold 150,000 Number of Shares to be Outstanding After Offering assuming that all of the Shares offered hereby are sold 1,072,257 Estimated Net Proceeds to Company assuming that all of the Shares offered hereby are sold $3,981,000 This offer is extended to agents and certain key employees of the Company only, pursuant to a Form S-1 filing with the Securities and Exchange Commission and compliance with state securities laws in the states where offered. Prior to this offering there has been no public market for the common stock of the Company and it is extremely unlikely that a market for the common stock will ever develop. Therefore, the stock price cannot be and is not determined by actions and considerations of any such market. The Company has made prior offerings of Class B Nonvoting Common Stock as follows: a Regulation A offering in 1981 to Company agents, an S-18 offering to this group in 1982, a Regulation A offering to this group in 1984, a Regulation A offering to this group in 1985, a Regulation A offering to this group in 1987, an S-18 offering to this group in 1990, an S-18 offering to this group in 1993, an S-1 offering to this group in 1995, and an S-1 offering to this group in 1996. Presently, the Company has approximately four hundred eighty (480) shareholders, all of whom are required by Texas law to hold licenses as Texas insurance agents. In addition, all holders of common shares are subject to Stock Agreements with the Company. The form of Stock Agreement which first time subscribers to shares of Class B Nonvoting Common Stock will be required to enter into is set forth in "Appendix A" attached hereto. Under this Stock Agreement the holder agrees that, in accordance with Texas law pertaining to incorporated insurance agencies, the holder must be duly licensed as a Texas life insurance agent, and, in the event the holder ceases to be so licensed, the holder and the Company agree that the holder's shares will be repurchased by the Company. The shares will also be repurchased by the Company (1) in the event that the holder ceases to be a duly authorized agent of the Company, (2) in the event of the holder's death, or (3) in the event that the holder desires to sell or otherwise dispose of his/her shares. Upon the receipt of written notice of any such event, the Company has ninety (90) days within which to close the repurchase of such shares. Under the terms of the Stock Agreement, the price at which the Company will repurchase such shares is determined by the Company, in its sole and absolute discretion, at least annually. The Company will determine to pay the repurchase price in cash, by delivery of the Company's unsecured promissory note containing such terms and provisions as the Company shall determine, or by a combination of cash and such a promissory note. Under the Stock Agreement, the holder agrees not to transfer, pledge, assign, or otherwise in any manner encumber any such shares, except pursuant to the terms of the Stock Agreement. (See "Description of Securities.") As a result of these statutory and contractual restrictions on disposal of the Company's Class B Stock, no market, other than the Company, has ever developed for the Stock, and it is very unlikely that such a market ever will develop. Therefore, the stock price cannot be and is not determined by actions and considerations of any such market. While the Company may change its methodology or adjust the Stock price based on other factors at any time in the future, the price at which the Company has purchased Class B Nonvoting Common Stock in the past has been determined from the per share book value* of the Stock at the end of the Company's current fiscal year, reduced by dividends declared for payment on the current year's earnings. In the event that in a given year the entire current year's earnings are not paid as a dividend, the resultant net increase in per share book value over the previous year's similarly computed Stock price is then added incrementally, 1/12th per month for the ensuing 12 months to the current September 30 Stock price (based upon the prior year's computation). The book value per share at the end of the fiscal year ended September 30, 1995, less any dividends declared at the end of fiscal year 1995 resulted in a Class B Stock price at September 30, 1996, of $27.04 per share. The increase in book value per share for the fiscal year ended September 30, 1996, based on the Company's earnings for such fiscal year, was $7.63*, all of which was paid as a dividend on December 2, 1996. Because the Company paid out the full increase in book value between September 30, 1995 and September 30, 1996 as a dividend, the price which the Company will pay throughout fiscal 1997 will remain $27.04 per share. Because there is no public market for the Class B Stock of the Company, this method of determining the price the Company will pay for the Stock may be deemed to be arbitrary. (See "Determination of Offering Price.") The shares will be offered until fully subscribed, but in no event beyond midnight on June 30, 1997 (unless extended by the Company for up to an additional thirty (30) days). Ownership of these shares is limited to those agents executing Stock Agreements and licensed as life insurance agents in Texas. The shares offered are Class B Nonvoting Common Stock. (See "Risk Factors," "Plan of Distribution" and "Description of Securities.")
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000355735_dataflex_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000355735_dataflex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..58bbaca4c60b60857c38e9d5fdc2bb8b76684178
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000355735_dataflex_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of the more detailed information and financial statements appearing elsewhere in this Prospectus. This Prospectus contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the "1934 Act"). The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this Prospectus and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations; (ii) the Company's financing plans; (iii) the Company's business strategies; and (iv) the declaration and payment of dividends. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The accompanying information contained in this Prospectus, including without limitation the information set forth under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as information contained in the Company's 1934 Act filings with the Securities and Exchange Commission (the "Commission"), identify important factors that could cause such differences. THE COMPANY Dataflex Corporation (the "Company"), incorporated in New Jersey in 1976, is a direct marketer of microcomputer equipment, related products and computer services. The Company markets computer equipment and related products supplied primarily by major manufacturers, including Compaq, Hewlett-Packard, IBM and Toshiba. The Company's customers are business organizations with diverse desktop computing requirements located throughout the United States, with a primary concentration in the Southeast. The Company provides its customers with single-source, value-added desktop computing solutions and services, including product sales, system integration, network installations, help desk support, training, consultation services and equipment repair maintenance. The Company is also a certified Novell Education Center and a certified Microsoft Authorized Technical Education Center capable of providing on-site or off-site manufacturer authorized education. The computer services business continues to be the fastest growing segment of the Company's operations and includes dedicated on-site remedial and nonremedial maintenance support to the Company's customers through the Company's Mainsite(TM) program, field service repairs and maintenance, system configuration, asset management, authorized training centers, LAN/WAN consulting and system integration, help desk support through its toll-free support line for all computer and computer related problems, and FlexStaff, which provides dedicated high-end technical support on a contract basis to customers for short and long-term requirements. In addition, the Company is a member of a national network of service partners to enhance its ability to deliver nationwide, on-site services to its customers. The Company focuses its efforts on customer service. The Company conducts ongoing training for its associates, monitors response and repair time regarding customer requests and concerns, measures delivery time for services and conducts customer surveys to determine the level of customer satisfaction. Over the past twelve months, the Company has divested its Eastern (New Jersey-based), Midwestern (Chicago-based), and Western (California- and Arizona-based) regions in a series of transactions. These divestitures are a reversal of the Company's expansion strategy implemented in 1994 and 1995 and resulted from the Company's inability to successfully integrate these acquisitions promptly and effectively. Additionally, management determined that the Company lacked adequate capital (or access to adequate capital) to support its expanded infrastructure, to make necessary additional capital expenditures and to service the significant indebtedness incurred in connection with the acquisitions. Management concluded that it was necessary to reduce the burden of this indebtedness. The divestitures have reduced the Company's indebtedness and allowed it to focus on its core competencies. In particular, management believed that the Company's best opportunities were in the Southeastern United States and therefore concentrated the Company's efforts in this region. As a result, the Company disposed of its other operations, including its Eastern region (the original business of the Company) in 1996. The Company also recently sold its Kindergarten through 12th Grade Education business to Computer Plus, Inc. ("Computer Plus"). The Company has offices in Tallahassee, Maitland (Orlando), Hollywood (Miami-Ft. Lauderdale) and Clearwater (Tampa Bay), Florida, as well as in Smyrna (Atlanta), Georgia. The Company's headquarters are located at 2145 Calumet Street, Clearwater, Florida 34625, and its telephone number is (813) 562-2200. <TABLE> <CAPTION> THE OFFERING <S> <C> Common Stock Offered by the Selling Shareholders . . . . . . . . . . . . . . . . 270,000 shares Common Stock Outstanding(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,847,199 shares Nasdaq National Market Symbol . . . . . . . . . . . . . . . . . . . . . . . . . . DFLX </TABLE> - -------------------- (1) Based upon the number of shares outstanding as of March 31, 1997. Excludes (i) 1,089,222 shares of Common Stock issuable upon the exercise of options outstanding which had a weighted average exercise price of $3.725 per share and of which 421,813 shares were exercisable at a weighted average exercise price of $4.966 per share and (ii) 849,116 shares of Common Stock reserved for future issuance under the Company's Stock Option Plans. See "Description of Capital Stock." SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> For the Nine Months Ended For the Years Ended March 31, December 31, ---------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1996 1995 -------- --------- ---------- -------- ----------- ------------ ------------ (In thousands, except per share data) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenue . . . . . . . . $472,102 $273,851 $ 122,348 $ 77,306 $ 99,031 $ 210,899 $ 340,804 Cost of Revenue . . . . 419,592 242,564 108,818 65,555 80,733 185,327 302,462 -------- -------- --------- --------- ---------- ----------- ----------- Gross Profit . . . . . 52,510 31,287 13,530 11,751 18,298 25,572 38,342 Selling, General and Administrative Expenses . . . . . . 42,995 24,259 10,675 10,272 11,116 21,594 30,632 Amortization of Goodwill . . . . . . 1,265 594 0 0 0 530 932 Restructuring and Other Charges . . . . . . . 5,353 0 0 0 0 0 0 -------- -------- --------- --------- ---------- ----------- ----------- Operating Income . . . 2,897 6,434 2,855 1,479 7,182 3,448 6,778 Interest (Expense) Income . . . . . . . (8,063) (2,677) 4 (13) (123) (4,051) (5,717) Loss on Dispositions of Businesses . . . . . (4,632) 0 0 0 0 (6,230) 0 Litigation Settlement and Related Costs . . 0 0 (847) 0 0 0 0 -------- -------- --------- --------- ---------- ----------- ----------- (Loss) Income Before Income Taxes. . . . . (9,798) 3,757 2,012 1,466 7,059 (6,833) 1,061 (Benefit from) Provision for Income Taxes . . . . (3,463) 1,617 884 653 2,931 (2,412) 456 -------- -------- --------- --------- ---------- ----------- ----------- Net (Loss) Income . . . (6,335) 2,140 1,128 813 4,128 (4,421) 605 ======== ======== ========= ========= ========== =========== =========== (Loss) Earnings per Common Share. . . . . (1.22) .45 .28 .20 .95 (.78) .11 ======== ======== ========= ========= ========== =========== =========== Weighted Average Common Shares . . . . . . . 5,214 4,733 4,085 4,080 4,335 5,644 5,422 ======== ======== ========= ========= ========== =========== =========== </TABLE> <TABLE> <CAPTION> BALANCE SHEET DATA: March 31, December 31, -------------------------------------------------- ------------ 1996 1995 1994 1993 1992 1996 ------------------ ---------- -------------------- ------------ <S> <C> <C> <C> <C> <C> <C> Working Capital . . . . $ 57,531 $ 46,971 $ 22,629 $20,973 $20,722 $ 9,363 Total Assets . . . . . 170,313 146,581 56,337 37,943 42,179 68,982 Long-Term Debt . . . . 54,062 52,510 228 -0- 213 4,687 Total Shareholders' Equity . . . . . . . . 31,849 34,140 26,680 25,338 24,970 27,915 </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000703701_ushealth_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000703701_ushealth_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5beec8658fda602972b94c4d6598ffe0b585da9d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000703701_ushealth_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. All financial information set forth herein is presented in accordance with generally accepted accounting principles ("GAAP"), unless otherwise noted. See "Glossary of Insurance Terms" for definitions of certain terms used in this Prospectus. THE COMPANY Westbridge Capital Corp. ("Westbridge" and, together with its consolidated subsidiaries, the "Company") markets medical expense and supplemental health insurance products and managed care health plans to individuals in 41 states. Since 1992, the Company has grown through a combination of acquisitions and, more recently, increased sales of its underwritten products. Primarily as a result of acquisitions, the Company's total premiums grew from approximately $56.7 million in 1992 to approximately $98.7 million in 1994. During the first quarter of 1995, the Company embarked on a strategy of expanding the number of agents in its marketing distribution system to increase sales of its underwritten products. As a result of this initiative, the Company's net annualized written premiums increased from $19.9 million in 1994 to $79.1 million in 1996 with total premiums increasing 59.0% from $98.7 million in 1994 to $156.8 million in 1996. During the middle of 1996, the Company reduced the marketing of its underwritten products due to statutory capital and surplus constraints caused by its rapid growth. The Company intends to increase the marketing of its underwritten products following the sale of the Notes offered hereby. The Company has taken advantage of its marketing distribution system to market certain managed care health plans which are underwritten by health maintenance organizations ("HMOs") and other non-affiliated managed care organizations. Through this marketing effort, which generates sales commissions, the Company's fee and service income has increased from approximately $2.3 million in 1995 to approximately $9.5 million in 1996. Fee and service income can be generated without regard to the statutory capital and surplus requirements that apply to the Company's underwritten products. The Company's strategy is (i) to expand its underwriting and marketing of medical expense health insurance products in rural areas where managed care health plans are often unavailable, (ii) to increase its fee and service income by continuing to expand its marketing of managed care health plans underwritten primarily by HMOs and other managed care organizations, primarily in urban markets where managed care health plans are readily available, and (iii) to focus on cross-selling its underwritten supplemental health insurance products in connection with its marketing of managed care health plans. The Company believes that its supplemental health insurance products are attractive to managed care consumers who are concerned with the choice limitations of managed care health plans, particularly in the event of serious illness. In addition, the Company intends to evaluate opportunities for further growth through acquisitions. MARKETING DISTRIBUTION SYSTEM The Company markets health insurance products and managed care health plans through a distribution system of (i) general agencies in which the Company has a controlling ownership interest and (ii) independently-owned general agencies which have entered into exclusive contractual arrangements to sell the Company's Medical Expense Products (as defined below). The Company believes that its success in attracting and retaining agents is based on its unique distribution model which (i) begins with focused telemarketing to generate high quality sales leads at a relatively low cost, (ii) includes intensive training programs that yield highly productive agents, (iii) focuses upon the Company having an ownership interest in its major distributors to provide incentives for long-term stability and (iv) offers innovative agent compensation which includes participation in the Company's restricted stock plan. The principal general agencies in which the Company has a controlling ownership interest are LifeStyles Marketing Group, Inc. ("LifeStyles Marketing"), Senior Benefits, LLC ("Senior Benefits"), Health Care- One Insurance Agency, Inc. ("Health Care-One"), and Health Care-One Marketing Group, Inc. ("HCO Marketing"). These general agencies market a variety of insurance products underwritten by the Company, as well as HMO, Preferred Provider Organization ("PPO") and Medicare SELECT products underwritten by managed care organizations such as Blue Cross of California and UniCARE Life and Health Insurance Company ("UniCARE"), each of which are subsidiaries of WellPoint Health Networks, Inc. ("WellPoint"), Foundation Health National Life Insurance Company ("Foundation Health") and MEDFIRST Health Plans of Louisiana, Inc. ("MEDFIRST"). The principal independent general agencies which sell the Company's products are Cornerstone National Marketing Corporation ("Cornerstone") and National Farm & Ranch Group, Inc. ("Farm & Ranch"), each of which currently markets the Company's Medical Expense Products. PRODUCTS The major underwritten product lines currently being marketed by the Company are: - "Medical Expense Products," which include policies providing reimbursement for various costs of medical and hospital care and offering reduced deductibles and coinsurance payments to policyholders which use the Company's contracted PPOs; and - "Critical Care and Specified Disease Products," which include indemnity policies for treatment of specified diseases and "event specific" and "critical care" policies which provide fixed benefits or lump sum payments upon diagnosis of internal cancer or other catastrophic diseases. Within each of these product lines, the Company continues to develop new policies and products to respond to changes in the health care environment. The Company has recently developed its "MSA Major Medical Plan" which allows individuals to take advantage of certain federal tax benefits by purchasing high deductible major medical insurance together with a medical savings account that includes a unique package of additional benefits. Additionally, the Company has developed a new "critical care" product to cross-sell in connection with its marketing of HMO and PPO products. Historically, the Company has also underwritten a significant amount of "Medicare Supplement Products" designed to provide reimbursement for certain expenses not covered by the Medicare program. However, due to the relatively low margins for this product, the Company intends to significantly reduce its underwriting of these products in favor of marketing the Medicare Supplement Products of other insurers. The major managed care products underwritten by HMOs and other managed care organizations which are currently being marketed by the Company are: - HMO products underwritten by Blue Cross of California, MEDFIRST and Foundation Health; - PPO products underwritten by UniCARE; and - Medicare SELECT products underwritten by UniCARE which utilize the Company's network of contracted Medicare SELECT providers. Westbridge was incorporated as a Delaware holding company in September 1982 for its wholly-owned subsidiary, National Foundation Life Insurance Company ("NFL"). NFL has been in the insurance business since 1960. Westbridge's other insurance subsidiaries consist primarily of National Financial Insurance Company ("NFIC"), American Insurance Company of Texas ("AICT") and Freedom Life Insurance Company of America ("FLICA," and together with NFL, NFIC and AICT, the "Insurance Subsidiaries"). The Company's executive offices are located at 777 Main Street, Suite 900, Fort Worth, Texas 76102, and its telephone number is (817) 878-3300. SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1996(1) 1995 1994(2) 1993 1992 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Premiums............................... $ 156,780 $ 120,093 $ 98,703 $ 68,731 $ 56,731 Net investment income.................. 8,736 7,421 5,764 4,120 3,932 Total revenues......................... 175,146 130,032 106,546 75,292 62,634 Net income............................. 8,261 5,324 6,425 3,531 2,896 Preferred stock dividends.............. 1,650 1,650 1,190 -- -- Income applicable to common stockholders......................... $ 6,611 $ 3,674 $ 5,235 $ 3,531 $ 2,896 Net income per share: -- Primary........................... $ 1.08 $ 0.63 $ 1.13 $ 0.78 $ 0.66 -- Fully-diluted..................... $ 0.97 $ 0.65 $ 1.03 $ 0.78 $ 0.66 Weighted average number of shares outstanding: -- Primary........................... 6,131,000 5,836,000 4,617,000 4,555,000 4,381,000 -- Fully-diluted..................... 8,540,000 8,204,000 6,267,000 4,555,000 4,381,000 </TABLE> <TABLE> <CAPTION> AT OR FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------- 1996(1) 1995 1994(2) 1993 1992 ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT SHARE DATA AND RATIOS) <S> <C> <C> <C> <C> <C> SUPPLEMENTARY DATA: Net annualized written premiums(3)........... $79,127 $60,686 $19,909 $11,602 $ 9,674 Loss ratio(4)................................ 60.1% 58.7% 54.3% 48.2% 46.8% Expense ratio(5)............................. 36.9% 40.0% 40.1% 48.7% 54.4% Ratio of earnings to fixed charges(6)........ 3.0x 3.0x 3.0x 2.6x 2.2x Ratio of earnings to combined fixed charges and preferred stock dividends(7)........... 2.3x 2.0x 2.3x Supplemental adjusted ratio of earnings to fixed charges(6)(8)........................ 1.3x Book value per share -- fully diluted........ $ 8.09 $ 7.53 $ 6.93 $ 5.09 $ 4.30 Statutory capital and surplus(9)............. $18,648 $24,038 $23,564 $16,066 $14,265 </TABLE> <TABLE> <CAPTION> AT DECEMBER 31, 1996 --------------------------- ACTUAL(1) AS ADJUSTED(5) --------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Total assets................................................ $220,716 $277,152 Notes payable............................................... 21,210 12,646 Senior subordinated notes................................... 19,350 19,350 Convertible subordinated notes.............................. -- 65,000 Redeemable preferred stock(10).............................. 20,000 20,000 Stockholders' equity........................................ 47,903 47,903 </TABLE> - --------------- (see footnotes on following page) (1) Includes operations of FLICA's parent, Freedom Holding Company ("FHC"), from June 1, 1996. See "Business -- Acquisitions." (2) Includes operations of NFIC and AICT from April 12, 1994. See "Business -- Acquisitions." (3) Represents first-year annualized premiums attributable to policies that have been underwritten and issued by the Company. Excludes net annualized premiums for acquired blocks of business and premiums assumed in connection with coinsurance agreements. (4) Calculated as a percent of premiums and reflects a changing mix of the policies issued by the Company between 1992 and 1996. See "Business -- Products" and "-- Regulation." (5) Expense amounts include level commissions, amortization of goodwill and deferred policy acquisition costs ("DPAC"), general insurance expenses and taxes, licenses and fees for the Company's wholly-owned insurance subsidiaries. The expense ratio is calculated as a percent of premiums and excludes the effects of net investment income, fee and service income, realized gains (losses) and the financial results of the Company's non-insurance operations. (6) In computing the ratio of earnings to fixed charges, fixed charges consist of interest on indebtedness, amortization of debt expense and such portion of rental expense which is estimated to be representative of the interest factor, all on a pre-tax basis. Earnings consist of pre-tax income from continuing operations plus fixed charges. (7) In computing the ratio of earnings to combined fixed charges and preferred stock dividends, fixed charges consist of interest on indebtedness, amortization of debt expense, such portion of rental expense which is estimated to be representative of the interest factor and required preferred stock dividends (preferred stock dividends are applicable only to the years ended December 31, 1996, 1995 and 1994), all on a pre-tax basis. Earnings consist of pre-tax income from continuing operations plus fixed charges. (8) Adjusted to give effect to the receipt of the proceeds of the offering of the Notes hereby and the initial uses thereof. See "Use of Proceeds." (9) Calculated in accordance with statutory accounting practices ("SAP") and applicable solely to the wholly-owned insurance subsidiaries of Westbridge. (10) At December 31, 1996, consists of 20,000 shares of Westbridge's Series A Cumulative Convertible Redeemable Exchangeable Preferred Stock (the "Series A Preferred Stock"), which were convertible, at the option of the holders thereof, into an aggregate of 2,378,120 shares of Common Stock at a conversion price of $8.41 per share of Common Stock. The Series A Preferred Stock is exchangeable, at the option of Westbridge, into that principal amount of Convertible Subordinated Notes due April 12, 2004 of Westbridge (the "Convertible Subordinated Notes") equal to the aggregate liquidation preference of the shares of Series A Preferred Stock to be exchanged. Following the offering of the Notes hereby, the Company intends to call the Series A Preferred Stock for redemption at a time at which the then current market price of the Common Stock will provide an incentive to the holders of the Series A Preferred Stock to convert their shares in accordance with the terms thereof prior to any such redemption. See "Capitalization" and "Description of Capital Stock -- Series A Preferred Stock." THE OFFERING Notes Offered................... $65,000,000 principal amount of % Convertible Subordinated Notes due 2004 (the "Notes"). Maturity Date................... May 1, 2004. Interest Payment Dates.......... May 1 and November 1, commencing November 1, 1997. Interest........................ % per annum. Conversion...................... The Notes are convertible at the option of the holder into Common Stock at any time prior to maturity, unless previously redeemed or repurchased, at a conversion price of $ per share, subject to adjustment in certain circumstances. See "Description of the Notes -- Conversion of the Notes." Redemption at the Option of Westbridge...................... The Notes are not redeemable prior to May 1, 2000. Thereafter, the Notes are redeemable at any time and from time to time at the option of Westbridge, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date fixed for redemption. See "Description of the Notes -- Optional Redemption by Westbridge." Repurchase at the Option of Holders Upon Change of Control....................... Upon a Change of Control (as defined herein), Westbridge will offer to repurchase the Notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. See "Description of the Notes -- Repurchase at the Option of Holders Upon Change of Control." Subordination................... The Notes are unsecured and subordinate to all existing and future Senior Indebtedness (as defined herein). At February 28, 1997, Senior Indebtedness was $40.1 million. The Indenture does not restrict the incurrence of additional indebtedness by Westbridge or any of its subsidiaries. See "Description of the Notes -- Subordination." Use of Proceeds................. Westbridge will use approximately $25.0 million of the proceeds of the offering of Notes hereby to provide additional statutory capital and surplus to the Insurance Subsidiaries and to recapture a block of reinsured insurance policies, with the remainder to be used for general corporate purposes. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000709804_steel_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000709804_steel_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9da4657291822a989268104814e10e2d235f1cf2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000709804_steel_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary; Risk Factors 4. Use of Proceeds . . . . . . . . . . . . . . . . . . Prospectus Summary; Use of Proceeds 5. Determination of Offering Price . . . . . . . . . . Not applicable 6. Dilution . . . . . . . . . . . . . . . . . . . . . Not applicable 7. Selling Security Holders . . . . . . . . . . . . . Principal and Selling Shareholders 8. Plan of Distribution . . . . . . . . . . . . . . . Outside and Inside Front Cover Pages; Plan of Distribution 9. Description of Securities to be Registered . . . . Description of Capital Stock; Description of Notes; Dividend Policy 10. Interests of Named Experts and Counsel . . . . . . Legal Matters; Experts 11. Information with Respect to the Registrant . . . . Outside and Inside Front Cover Pages; Prospectus Summary; Risk Factors; Price Range of Common Stock; Dividend Policy; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Relationships and Related Transactions; Principal Shareholders; Description of Capital Stock; Consolidated Financial Statements; Outside Back Cover Page 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities . . Not applicable </TABLE> information statements, and other information that are filed through the Commission's Electronic Data Gathering, Analysis and Retrieval System. This Web site can be accessed at http://www.sec.gov. The Company has filed with the Commission a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act with respect to the Notes and Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company, the Notes and the Common Stock, reference is made to the Registration Statement and the exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Copies of the Registration Statement, including all exhibits thereto, may be obtained from the Commission's principal office in Washington, D.C. upon payment of the fees prescribed by the Commission, or may be examined without charge at the offices of the Commission described above. Adaptec, EZ-SCSI and SCSIselect are registered trademarks of Adaptec, Inc. This Prospectus also uses trademarks and registered trademarks of companies other than the Company and its subsidiaries. PROSPECTUS Adaptec, Inc. U.S. $230,000,000 4 3/4% Convertible Subordinated Notes due February 1, 2004 and Shares of Common Stock Issuable Upon Conversion Thereof --------------------- This Prospectus relates to $230,000,000 aggregate principal amount of 4 3/4% Convertible Subordinated Notes due February 1, 2004 (the "Notes") of Adaptec, Inc. (the "Company") under the Securities Act of 1933, as amended (the "Securities Act"), and the shares of Common Stock, $.001 par value of the Company, ("Common Stock") issuable upon the conversion of the Notes (the "Conversion Shares"). The Notes registered hereby were issued and sold on February 3, 1997 (the "Original Offering") in transactions exempt from the registration requirements of the Securities Act, to persons reasonably believed by Bear, Stearns & Co. Inc., Lehman Brothers, Robertson Stephens & Company LLC, and Unterberg Harris, as the initial purchasers (the "Initial Purchasers") of the Notes, to be "qualified institutional buyers" (as defined by Rule 144A under the Securities Act) or other institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under Regulation D of the Securities Act) or in compliance with the provisions of Regulation S under the Securities Act. The Notes and the Common Stock issuable upon conversion thereof may be offered and sold from time to time by the holders named herein or by their transferees, pledgees, donees or their successors (collectively, the "Selling Securityholders") pursuant to this Prospectus. The Registration Statement of which this Prospectus is a part has been filed with the Securities and Exchange Commission pursuant to a registration rights agreement dated as of February 3, 1997 (the "Registration Agreement") between the Company and the Initial Purchasers, entered into in connection with the Original Offering. The Notes are convertible at the option of the holder into shares of Common Stock of the Company (at any time on or after May 5, 1997 and prior to redemption or maturity, at a conversion rate of 19.3573 shares per $1,000 principal amount of Notes), subject to adjustment under certain circumstances. Interest on the Notes is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 1997. On June 18, 1997, the closing price of the Common Stock, which is quoted on the Nasdaq National Market under the symbol "ADPT," was $37.00 per share. --------------------- THE NOTES AND THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000718127_cascade_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000718127_cascade_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5982867c1367d41f8b0931a743db55e4e0230e46
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000718127_cascade_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Upon the closing of this offering, all of the Company's issued and outstanding shares of Convertible Preferred Stock will be converted into, and the Company will issue to the holders of such preferred stock, 2,100,000 shares of Common Stock. Prospective investors should consider carefully the information under "Risk Factors." THE COMPANY Cascade Systems Incorporated ("Cascade" or the "Company") designs, develops, markets and supports workflow and content management software solutions for newspapers, magazine and book publishers, commercial printers, retailers and other corporate publishers. The Company's DataFlow system manages the process of publishing information by providing content and data management, tracking, workflow and archiving functionality. The Company's MediaSphere system is designed to meet the archiving, search and retrieval needs of organizations dealing with large amounts of multimedia data. DataFlow and MediaSphere also are designed to permit access to and delivery of content over the Internet. The Company's newspaper customers include The Los Angeles Times, Newsday, The Miami Herald, The Mirror Group PLC (U.K.), The Boston Globe and The Daily Telegraph (U.K.). Other customers include magazine publishers such as The McGraw-Hill Companies, Inc. and Conde Nast Publications Inc., commercial printers such as Bowne & Co., Inc. and R.R. Donnelley & Sons Company, and retailers and catalog publishers including Amway Corporation and Val-Pak Direct Marketing Systems, Inc. The worldwide publishing industry is undergoing significant change in response to competitive pressures. Publishers of newspapers and magazines are consolidating into larger organizations with multiple titles, formats and geographic locations. Publishing enterprises are also facing competition from alternative publishing on new media such as the Internet. Increased competition for subscribers has resulted in a trend toward more demographically targeted editorial, feature and advertising content. As a result, publishers are beginning to view their content assets, such as photos, graphics, illustrations, text and captions, as key competitive differentiators. Newspapers, publishers and other organizations are seeking ways to improve content management and utilization while continuing to meet demanding time schedules and reduce costs. The Company believes it has established a pre-eminent position in the newspaper marketplace for workflow and content management solutions. The Company's products are designed to handle complex data formats and large files associated with the pre-press production process and are able to fit seamlessly with other pre-press applications, while maintaining a record of job status throughout the process. As part of its strategy, the Company intends to continue to leverage opportunities created by its technology and client base to expand its position in the newspaper market in the U.S. and internationally, both for advertising and other editorial applications. The Company also intends to continue to leverage its technology through enhancements to support the Internet and other evolving technologies. In addition, the Company believes that the expertise that it has acquired in developing workflow and content management solutions for time-critical applications in the newspaper industry will permit it to expand to other publishing markets which face similar requirements for workflow and content management solutions, such as magazines, catalogs, and special purpose publishers. The Company is developing a workgroup content management solution to address the requirement of commercial printers and trade shops, and intends to apply its solutions to meet the needs of other organizations, such as retailers and consumer product companies, that manage a high volume of text and images internally. The Company intends to expand its global sales capabilities by increasing the size of its direct sales organization in major markets to target strategic accounts and by developing VAR and OEM relationships to target specific vertical markets. The Company markets its products and services primarily through its own direct sales force and distributors in certain overseas markets. The Company has a sales and marketing organization of 27 persons, as well as a services and support organization of 35 persons. In addition, the Company has established a strategic relationship with Applied Graphics Technologies, Inc. for selling its solutions to corporate customers. The Company was initially incorporated in February 1994 under the name Cascade Systems International Inc., the parent company of Cascade Systems Limited, a United Kingdom based company, and Cascade Systems Incorporated, a Massachusetts corporation, both of which were organized in 1993. In 1996, the Massachusetts corporation was merged into the Company and the Company changed its name to Cascade Systems Incorporated. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............................... 2,250,000 shares Common Stock offered by the Selling Stockholders.................. 550,000 shares Common Stock to be outstanding after the offering................. 7,125,525 shares(1) Use of proceeds................................................... For working capital and other general corporate purposes. Proposed Nasdaq National Market symbol............................ CSCD </TABLE> - --------------- (1) Excludes 1,917,650 shares of Common Stock issuable upon the exercise of options outstanding as of August 31, 1997 at a weighted average exercise price of $4.51 per share, of which options to purchase 311,730 shares were then exercisable. Includes 1,700,000 shares of Common Stock issuable upon conversion of 1,700,000 shares of Series A Preferred Stock and 400,000 shares of Common Stock issuable upon conversion of 400,000 shares of Series B Preferred Stock, effective upon the closing of this offering. See "Capitalization," "Management -- Executive Compensation," and "Description of Capital Stock." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> INCEPTION SIX MONTHS (FEBRUARY 5, 1993) YEAR ENDED ENDED THROUGH DECEMBER 31, JUNE 30, DECEMBER 31, -------------------------- --------------- 1993 1994 1995 1996 1996 1997 ------------------- ------- ------- ------ ------ ------ <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Software license revenues................. $ 494 $ 2,658 $ 4,905 $5,913 $2,558 $4,386 Maintenance and service revenues................. 236 1,177 2,243 4,428 1,653 2,639 Hardware and other revenues................. 2,071 8,238 10,564 8,170 5,067 2,334 ------------------- ------- ------- ------ ------ ------ Total revenues...... 2,801 12,073 17,712 18,511 9,278 9,359 Income (loss) from operations............... (312) (793) (1,390) 4 (204) 172 Net income (loss).......... $ (313) $ (745) $(1,400) $ 93 $ (114) $ 231 Pro forma net income per common and common equivalent share......... $ 0.02 $ 0.04 Weighted average common and common equivalent shares outstanding.............. 6,008 6,066 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------- ACTUAL AS ADJUSTED(1) ------ -------------- <S> <C> <C> BALANCE SHEET DATA: Cash......................................................... $2,071 $ 22,246 Working capital.............................................. 1,260 21,435 Total assets................................................. 6,933 27,108 Total stockholders' equity................................... 2,305 22,480 </TABLE> - --------------- (1) As adjusted to give effect to the sale of the 2,250,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $10.00 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. -------------------- Except as otherwise indicated, all information in this Prospectus (i) reflects the conversion of all outstanding shares of the Company's Series A and Series B Preferred Stock into an aggregate of 2,100,000 shares of Common Stock upon the closing of this offering, (ii) reflects the further amendment and restatement of the Company's Amended and Restated Certificate of Incorporation, to be effective upon the closing of this offering, to remove the Company's existing series of Preferred Stock and to create a class of authorized but undesignated Preferred Stock, and (iii) assumes no exercise of the Underwriters' over-allotment option.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000718573_radyne_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000718573_radyne_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..67f86990e1f9d5cccdba6781f809228782f5ab6c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000718573_radyne_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO UP TO 1,282,042 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT TO THE COMPANY'S 1996 INCENTIVE STOCK OPTION PLAN (THE "PLAN"). THE INFORMATION IN THIS PROSPECTUS RELATING TO SHARES OF COMMON STOCK AND PER SHARE AMOUNTS GIVES EFFECT TO A 1-FOR-5 REVERSE STOCK SPLIT WHICH BECAME EFFECTIVE ON JANUARY 9, 1997. FOR THE MEANINGS OF CERTAIN TECHNICAL TERMS USED IN THIS PROSPECTUS IN REGARD TO THE BUSINESS OF THE COMPANY, PLEASE SEE THE GLOSSARY COMMENCING ON PAGE 58. THE COMPANY Radyne has been involved in the advanced design and production of digital data communications equipment and associated equipment for satellite telecommunications systems for over sixteen years. Since the Company's inception in 1980, Radyne has established itself as a supplier in the satellite ground equipment business. Radyne designs, manufacturers and sells satellite modems, frequency converters, ancillary products and equipment racks containing integrated modems and supporting equipment for data communications. Although the Company was forced to file for Chapter 11 bankruptcy protection in April 1994, it successfully emerged from bankruptcy in December of that year upon the acquisition of approximately 91% of its Common Stock by Engineering and Technical Services, Inc. ("ETS"), then a major customer of Radyne. On August 12, 1996, ETS was acquired by Singapore Technologies Pte Ltd through its indirect wholly owned subsidiary, Stetsys US, Inc. ("ST"). As a result, approximately 91% of the Company's Common Stock is now held by ST. ST is wholly owned by Stetsys Pte Ltd, which is wholly owned by Singapore Technologies Pte Ltd, which is in turn wholly owned by Temasek Holdings (Private) Limited, the sole shareholder of which is the Minister for Finance (Incorporated) of Singapore. See "Principal and Management Stockholders." In 1995, ETS caused Radyne to install a new management team, which promptly moved the Company's operations from New York to Phoenix, Arizona and commenced the hiring of an almost all new staff of engineering, sales and support personnel. With funding provided by ETS, and subsequently ST and its affiliates, the new Radyne team has reinstituted Radyne's research, development and marketing programs and reinvigorated its product line. The Company's engineering staff and support facilities are dedicated to (i) maintaining the state-of-the-art status of Radyne's traditional products for the satellite ground equipment segment of the market, (ii) designing and enhancing products for emerging markets, such as rural telephony for developing areas, high-speed satellite communications, government data equipment and the growing private network market, and (iii) providing special configurations to satisfy customers' special needs. Radyne's modems cover data rates from 2.4 Kilobytes per second to 50 Megabytes per second. The Company's frequency converters handle all three frequency bands used in satellite communications. Radyne believes that most of its current line of modems and converters are smaller and lower priced than the previous generation of products, enabling large system installation in significantly less rack space than the products of the Company's competitors. The Company also markets redundancy switches which operate in conjunction with satellite modems and converters and provide automatic fault monitoring and switch over to standby equipment in the event of modem or converter failure. Radyne's line of frequency converter products is usable in virtually all earth stations for the conversion of intermediate frequencies to microwave frequencies for satellite transmission. These converters are competitively priced, small in size and offer either single, dual or all three bands used in the satellite industry. In addition to being offered to commercial customers, there is a military market for the three-band units. The Company's newer products include a low cost modem with expanded features and super fast acquisition capabilities, making it attractive for use in both private networks and rural telephone systems being offered in China, Indonesia and India, and a line of satellite frequency translators presently used for testing in satellite earth stations. The development of digital compression technology has allowed the transmission of television in a small bandwidth which has made TV transmission by satellite more economical than ever before. Video compression allows 10 to 12 times as many channels on a satellite as before, producing a new market of major interest. This compression technology is or may be used for transmission of TV to all network facilities, distribution of cable TV to cable companies, high definition TV distribution and video teleconferencing. Radyne has developed a modulator product to be used in conjunction with compression equipment and has been shipping this product for the past seven months. Radyne's operating strategy is to (i) continue to build on the experience, skills and customer access of its new management team, (ii) capitalize on its development of smaller, less costly satellite modems, and (iii) expand into market segments, such as rural telephone, private networks and compressed television transmission. See "Business." Notwithstanding the foregoing, investors should be aware that the Company's plans are subject to a number of variables outside of its control, and there can be no assurance that the Company will be able to implement any or all of such plans or that such plans, when and if implemented, will be successful. See "Risk Factors." Radyne was incorporated in the State of New York on November 25, 1980. The Company's current address is 5225 South 37th Street, Phoenix, Arizona 85040 and its telephone number is (602) 437-9620. PURPOSE OF THE RIGHTS OFFERING AND USE OF PROCEEDS The Rights Offering, together with the Rights Options, is intended to raise approximately $5,640,000 of gross proceeds as part of the Company's on-going efforts to improve its ability to fund the growth of its business, in particular the cash needs associated with sharply increased orders for Radyne products. In establishing the size of the Rights Offering, the Board of Directors consulted with management, and considered the Company's need for additional capital. If the Rights Offering is consummated, the maximum gross proceeds to the Company from the Rights Offering, together with the Rights Options, would be approximately $5,640,000 before payment of related fees and expenses estimated to be $260,000. However, although the Company has been informed that ST's affiliate, Stetsys Pte Ltd ("SPL"), intends to fully exercise its ST Rights, no assurance can be given that any or all of the Rights received by others or the Rights Options will be exercised. Shares underlying any unexercised Rights will not be reoffered to the public or otherwise. Therefore, the actual proceeds from the Rights Offering could be somewhat lower. The Company currently expects that the net proceeds from the Rights Offering will be used to repay the Company's indebtedness to ST (approximately $4,142,000 including principal and interest) and either to reduce the Company's short-term bank debt or for general corporate and working capital purposes (including research and development costs), although a final determination as to the use or uses will not be made until after the completion of the Rights Offering. Factors that will be considered at that time in determining how the net proceeds will be used will include: the amount of net proceeds actually generated, the Company's actual and projected working capital requirements at that time, the amount of the Company's bank debt, interest rates in effect at that time and such other factors as the Board of Directors considers to be relevant at that time. For a description of the Company's debt, including interest rates, maturity dates and use of proceeds from such debt, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Subscription Price has been established by the Board of Directors at $2.50 per share, which the Board considers to be the fair market value of the Common Stock. See "Purpose of the Rights Offering and Use of Proceeds." THE RIGHTS OFFERING <TABLE> <S> <C> Shareholder Rights..................... Shareholders, other than ST and residents of California, will receive three Rights for every five shares of Common Stock held on the Record Date, as adjusted by the 1-for-5 reverse stock split approved by the shareholders on January 8, 1997 and effective on January 9, 1997 (the "Reverse Split"). An aggregate of approximately 215,833 Shareholder Rights will be distributed. Holders are entitled to purchase at the Subscription Price one share of Common Stock for each Shareholder Right exercised. The Shareholder Rights will expire on the Expiration Date. The Shareholder Rights will be transferable. No fractional Shareholder Rights will be issued. ST Rights.............................. SPL will receive three Rights for every five shares of Common Stock held by ST on the Record Date (as adjusted for the Reverse Split), a total of 2,040,000 Rights, each entitling the Holder to purchase one share of Common Stock at the Subscription Price. SPL will make available 74,000 of such Rights to employees of its affiliates, including non-employee directors of the Company. The ST Rights will otherwise be nontransferable. The ST Rights will expire on the Expiration Date, except that 280,000 of such Rights will be exercisable, if at all, only during the five business days next following the Expiration Date. See "Rights Options" below. Rights Options......................... Concurrently with the distribution of the Rights, 280,000 options (the "Rights Options") granted under the Company's 1996 Incentive Stock Option Plan will become exercisable at the Subscription Price until the Expiration Date. The Rights Options were granted by the Board on November 13, 1996, and extended on March 3, 1997, at the request of ST. In order to ensure that ST's interest, rather than the other shareholders' interests, in the Company would be diluted by the exercise of the Rights Options, 280,000 of the ST Rights will not be exercisable, if at all, until the Expiration Date. A portion of these 280,000 ST Rights, up to the number of Shareholder Rights and Rights Options, if any, which expire unexercised, will then be exercisable during the five business days following the Expiration Date. See "Management--Stock Option Plan.") Subscription Price..................... $2.50 per Rights Share. </TABLE> <TABLE> <S> <C> Record Date............................ January 15, 1997. Transferability of Shareholder Rights............................... The Shareholder Rights will be transferable, but it is not anticipated that a market will be made in the Rights or that they will be listed for trading on any exchange. Because subscriptions cannot be accepted from residents of California, Shareholder rights may not be transferred to such residents. Expiration Date........................ 5:00 p.m., New York time, on June 16, 1997, unless the Board of Directors determines that a material event has occurred that necessitates one or more extensions of the Expiration Date in order to permit adequate disclosure to Holders of information concerning such event. Procedure for Exercising Rights........ Rights may be exercised by properly completing the certificate evidencing such Rights (a "Subscription Certificate") and forwarding such Subscription Certificate to the Subscription Agent or the Company (or following the Guaranteed Delivery Procedures, referred to below) on or prior to the Expiration Date, together with payment in full of the Subscription Price with respect to such Rights. If the mail is used to forward Subscription Certificates, it is recommended that insured, registered mail be used. The exercise of a Right may not be revoked or amended. If time does not permit a Holder of a Right to deliver its Subscription Certificate to the Subscription Agent or the Company on or before the Expiration Date, such Holder should make use of the Guaranteed Delivery Procedures described under "The Rights Offering-- Exercise of Rights." THE EXERCISE OF RIGHTS IS IRREVOCABLE ONCE MADE. NO INTEREST WILL BE PAID ON THE MONEY DELIVERED IN PAYMENT OF THE SUBSCRIPTION PRICE. If paying by uncertified personal check, please note that the funds paid thereby may take at least five business days to clear. Accordingly, Holders who wish to pay the Subscription Price by means of uncertified personal check are urged to make payment sufficiently in advance of the Expiration Date to ensure that such payment is received and clears by such date and are urged to consider payment by means of certified or cashier's check or money order. A Right may not be exercised in part and fractional Rights Shares will not be issued. Condition to Exercise by Shareholders......................... Any shareholder of record who wishes to exercise a Shareholder Right must submit his Common Stock share certificate(s), either simultaneously with his Subscription Certificate or prior to that time, for exchange into a new share certificate reflecting the Reverse Split. SUBSCRIPTION </TABLE> <TABLE> <S> <C> CERTIFICATES WILL NOT BE ACCEPTED FROM SHAREHOLDERS OF RECORD WHO DO NOT COMPLY WITH THIS REQUIREMENT. However, this requirement will not affect the transferability of Shareholder Rights. Persons Holding Shares, or Wishing to Exercise Rights, Through Others...... Persons holding shares of Common Stock, and receiving Shareholder Rights distributable with respect thereto, through a broker, dealer, commercial bank, trust company or other nominee, as well as persons holding certificates for Common Stock personally who would prefer to have such institutions effect transactions relating to the Shareholder Rights on their behalf, should contact the appropriate institution or nominee and request it to effect the transactions for them. Issuance of Common Stock............... Certificates representing Rights Shares issuable upon exercise of Rights will be delivered to the Holder of such Rights as soon as practicable after such Rights are validly exercised. Funds delivered to the Subscription Agent will be held by the Subscription Agent until the issuance of the related Rights Shares. No interest will be paid to Holders on funds held by the Subscription Agent regardless of whether such funds are applied to the Subscription Price or returned to the Holders. Subscription Agent..................... Continental Stock Transfer & Trust Company Information............................ Any questions regarding the Rights Offering, including the procedure for exercising Rights, and requests for additional copies of this Prospectus, the Subscription Certificate or the notice of guaranteed delivery should be directed to the Company at 5225 South 37th Street, Phoenix, Arizona 85040, Attention: Director of Administration. Telephone: (602) 437-9620. Maximum Shares of Common Stock Outstanding after the Rights Offering............................. 6,015,554 shares based on 3,759,721 shares outstanding on December 31, 1996 after adjustment for the Reverse Split. Does not give effect to the issuance of 1,002,042 shares reserved for issuance upon the exercise of options (other than Rights Options) heretofore granted or that may be granted from time to time under the 1996 Incentive Stock Option Plan. </TABLE> For more information regarding the Rights Offering, including the procedure for exercising Rights, see "The Rights Offering."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000718909_hpsc-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000718909_hpsc-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a3eae9007b93a893514ef3f8bc74d71107d0109c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000718909_hpsc-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, WHEN USED HEREIN "HPSC" REFERS TO HPSC, INC., A DELAWARE CORPORATION, AND THE "COMPANY" REFERS TO HPSC AND ITS SUBSIDIARIES, AS DESCRIBED BELOW. INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATED TO THE PURCHASE OF NOTES OF THE COMPANY. SEE "RISK FACTORS."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000722079_terra_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000722079_terra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..33747992483dc1d6f82ffcd632840c3c10a4888b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000722079_terra_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following is a summary only and should be read in light of the more detailed financial and other information included elsewhere in this Prospectus. Except as otherwise indicated, all financial information is presented on the basis of generally accepted accounting principles. References to the "Company" or "Terra" shall mean Terra Industries Inc., including, where the context so requires, its direct and indirect subsidiaries. Terms defined in this Summary shall have the same meanings when used elsewhere in this Prospectus. Prospective investors are urged to read this Prospectus in its entirety. See "Investment Considerations" for a discussion of certain factors that should be considered by prospective investors in the Common Shares offered hereby. The Company The Company is a leader in each of its three business segments: (i) the distribution of crop production inputs and services, (ii) the manufacture of nitrogen products and (iii) the manufacture of methanol. The Company owns and operates the largest independent farm service center network in North America and is the second largest supplier of crop production inputs in the United States. The Company is also the third largest producer of anhydrous ammonia and the largest producer of nitrogen solutions in the United States and Canada. In addition, the Company is one of the largest U.S. manufacturers and marketers of methanol. In 1996, the Company generated revenues and operating income of $2.3 billion and $295.2 million, respectively. The Company's distribution network for fertilizer, crop protection products and seed has grown over the last several years to 421 farm service centers and about 780 affiliated dealer locations serving the United States and the eastern region of Canada, as of May 30, 1997. This growth generally has been the result of a healthy farm economy, acquisitions, additional facilities and aggressive marketing. The Company's distribution network is supplied by both independent sources and the Company's own production facilities, which presently include one crop protection chemical dry flowable and liquid formulation plant and seven other liquid chemical formulation facilities in addition to its nitrogen production facilities. In 1996, distribution revenues and operating income constituted approximately 67% and 9% of the Company's total revenues and operating income, respectively. Nitrogen fertilizer is a basic crop nutrient which is applied seasonally by farmers to improve crop yield and quality. Nitrogen fertilizer is produced by combining gaseous nitrogen with hydrogen to form anhydrous ammonia, the simplest form of nitrogen fertilizer, which can be further processed or upgraded into other fertilizer products such as urea and nitrogen solutions. The Company presently owns five nitrogen fertilizer facilities with total annual gross production capacity of 2.7 million tons of ammonia. In 1996, approximately 11% of the Company's fertilizer production tonnage was supplied to its farm service center locations for sale to growers, while the rest was sold to other customers. The Company believes that it is among the lowest cost providers of nitrogen fertilizer in the markets it serves, benefiting from favorable transportation logistics and other operating synergies. The Company suffered a major explosion in December 1994 at one of its nitrogen fertilizer facilities, for which it was insured. The Company began producing ammonia again at the facility in late December 1995, and the urea and nitrogen solution upgrading facilities became operational in May 1996. In 1996, nitrogen products revenues (including intercompany sales) and operating income constituted approximately 28% and 85% of the Company's total revenues and operating income, respectively. Methanol is used primarily as a feedstock in the production of other chemical products such as formaldehyde, acetic acid, adhesives and plastics. Methanol is also used as a feedstock in the production of methyl tertiary butyl ether ("MTBE"), an oxygenate and octane enhancer used as an additive in reformulated gasoline to provide cleaner burning fuels. The Company's methanol production capacity is approximately 320 million gallons per year, representing approximately 13% of the total United States rated capacity. The Company's methanol facility in Beaumont, Texas (the "Beaumont Facility") is the second largest such facility in the U.S. In 1996, methanol revenues and operating income constituted approximately 5% and 6% of the Company's total revenues and operating income, respectively. The Company's long-term strategy for growth is to: (i) acquire and upgrade production and distribution facilities, (ii) increase distribution volumes by expanding sales from Company-operated locations and its affiliated dealer network, (iii) change its product mix to include more profitable value-added products and (iv) continue to build customer loyalty by providing value-added services. As part of this strategy, in April 1993, the Company acquired a fertilizer manufacturing facility and 32 farm service centers in Canada; in December 1993, the Company acquired 12 farm service centers in Florida; in September 1994, the Company acquired a minority interest in a 100 location distributor of crop input and protection products in the mid-Atlantic region; in October 1994, the Company acquired Agricultural Minerals and Chemicals Inc. ("AMCI") which provided the Company two fertilizer plants having 1.4 million tons of annual gross production capacity of ammonia as well as the Beaumont Facility; in July 1996, the Company completed a construction project at its Courtright Facility enabling the upgrade of 65,000 tons of ammonia annually into urea and UAN; and in May 1997, the Company acquired 18 farm service centers which include grain operations and are located in or near southern Minnesota. In addition, certain other distribution location acquisitions and manufacturing upgrade projects have been completed during the past few years. The Company will, at an appropriate price, consider a sale or joint venture involving its methanol business. Terra's common shares are traded on the NYSE and the Toronto Stock Exchange under the symbol "TRA." As of May 30, 1997, Minorco, an international natural resources company with operations in gold, base metals, industrial minerals, paper and packaging and agribusiness ("Minorco"), owned through its wholly owned subsidiaries 56.8% of Terra's outstanding common shares. As of May 30, 1997, five of the Company's nine directors were also officers and/or directors of Minorco or its affiliates. Company Structure The following chart substantially represents the organization of the Company and its principal subsidiaries as of the date hereof. Terra Capital Holdings, Inc. ("Terra Holdings") and Terra Capital, Inc. ("Terra Capital") are wholly owned subsidiaries of the Company. Terra International, Inc. ("Terra International") owns three of the Company's five nitrogen fertilizer plants through subsidiaries and also conducts the distribution segment of the Company's business. Terra International (Canada) Inc. ("Terra Canada"), a wholly owned subsidiary of Terra International, owns the Company's Canadian operations. Terra International (Oklahoma) Inc. ("Terra Oklahoma"), a wholly owned subsidiary of Terra International, owns the Company's combined nitrogen and methanol manufacturing facility in Woodward, Oklahoma. Port Neal Corporation ("PNC"), a wholly owned subsidiary of Port Neal Holdings Corp. ("PN Holdings"), owns the Company's nitrogen manufacturing plant located in Iowa. Terra International owns 100% of the common stock of PN Holdings and an unrelated third party owns preferred stock in PN Holdings representing a 25% voting interest. Terra Nitrogen Corporation ("TNC") owns the general partner interest and certain limited partner interests of Terra Nitrogen Company, L.P. ("TNCLP"), for a total 61% equity interest in TNCLP. Approximately 5% of TNCLP is owned by Terra Capital and approximately 34% of TNCLP is publicly traded and owned by others in the form of Common Units. See "Description of Certain Indebtedness and Other Obligations--TNCLP Common Units." All of the operating assets of TNCLP, which include two of the Company's five nitrogen fertilizer plants, are owned by Terra Nitrogen, Limited Partnership ("TNLP"), in which TNC holds a 1% general partner interest and TNCLP holds a 99% limited partner interest. The methanol business of the Company is conducted principally through Beaumont Methanol, Limited Partnership ("BMLP"). BMC Holdings, Inc. ("BMCH") is the sole limited partner of BMLP and holds a 99% limited partner interest in BMLP. Terra Methanol Corporation ("TMC") is the general partner of BMLP and holds a 1% general partner interest in BMLP. Terra Capital Funding LLC ("TCF") is owned 99% by Terra Capital and 1% by Terra Holdings. Terra Funding Corporation ("Funding"), a wholly owned subsidiary of TCF, is a special purpose entity that purchases and sells receivables. Terra Capital owns 100% of the capital stock of Terra International, TNC, BMCH and TMC. --------------- Terra --------------- --------------- Terra Holdings --------------- --------------- Terra Capital --------------- ---------------------------------------------------------------------------- - -------------- ------- -------- ------- ---------- Terra International ------------------ TNC BMCH TMC TCF - -------------- Public Unitholders ------------------ ------- -------- ------- ---------- - ------------ ------------ ------- -------- ---------- Terra Canada Unrelated TNCLP BMLP Funding Third Party - ------------ ------------ ------- -------- ---------- ------------ ------- - -------------- PN Holdings TNLP Terra Oklahoma ------------ ------- - -------------- ------------ PNC ------------ Summary Financial Data The following table presents (i) summary consolidated financial data for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 derived from the Company's audited consolidated financial statements, except Summary Operating Data and Other Data, and (ii) summary consolidated financial data for the three months ended March 31, 1996 and 1997 derived from the Company's unaudited consolidated financial statements for such period. The following information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Financial Data" and the consolidated financial statements of the Company and related notes thereto included elsewhere herein. <TABLE> <CAPTION> Three Months Year Ended December 31, Ended March 31, ---------------------------------------------------------- ---------------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ---- ---- (dollars in thousands) <S> <C> <C> <C> <C> <C> <C> <C> Income Statement Data: Total revenues................................. $1,082,191 $1,238,001 $1,665,947 $2,292,173 $2,316,486 $ 394,741 $ 433,710 Cost of sales.................................. 910,395 1,026,332 1,344,062 1,657,070 1,722,450 277,517 338,052 Selling, general and administrative expenses... 146,077 172,116 207,333 259,295 300,897 62,080 68,309 Operating income............................... 25,719 41,828 115,295 377,702 295,181 54,063 26,326 Net interest expense........................... (7,533) (9,683) (16,541) (51,086) (52,845) (9,234) (12,774) Income from continuing operations before income taxes........................... 18,186 32,145 89,945 279,382 197,851 31,660 6,642 Income tax provision........................... (7,757) (9,300) (33,700) (115,500) (63,900) (13,260) (2,740) Income from continuing operations.............. 10,429 22,845 56,245 163,882 133,951 18,400 3,902 Per Common Share: Income from continuing operations............. $ 0.15 $ 0.33 $ 0.77 $ 2.01 $ 1.72 $ 0.23 $ 0.05 Dividends..................................... -- $ 0.02 $ 0.08 $ 0.10 $ 0.15 $ 0.03 $ 0.04 Summary Operating Data: Net fertilizer production (thousands of tons) Ammonia....................................... 404.2 686.1 780.6 1,040.7 1,204.0 333.9 280.0 Urea.......................................... 126.7 222.6 297.9 560.0 641.5 142.8 166.0 Nitrogen solutions (UAN)...................... 759.8 987.3 1,295.2 2,614.7 3,120.5 738.7 853.0 Methanol production (millions of gallons)...... -- -- 81.2 298.9 311.7 84.3 79.6 Revenues by business segment (1) Distribution.................................. $ 958,725 $1,019,438 $1,318,416 $1,495,166 $1,573,827 $ 222,913 $ 260,543 Nitrogen Products............................. 125,659 228,910 296,557 635,126 654,486 153,067 135,918 Methanol...................................... -- -- 70,274 194,565 132,533 28,896 42,998 Other Data: Number of Distribution locations owned at end of period................................. 299 347 355 382 393 389 403 Balance Sheet Data (at end of period): Net working capital............................ $ 215,817 $ 231,287 $ 273,941 $ 307,873 $ 187,157 $ 285,519 $ 170,325 Net property, plant and equipment.............. 91,969 110,670 552,843 694,358 846,353 747,001 848,404 Total assets................................... 580,192 634,482 1,687,970 1,867,858 1,969,365 2,074,921 2,140,452 Minority interest.............................. -- -- 170,630 182,901 173,893 182,843 170,413 Long-term debt (including current maturities).. 133,679 121,384 558,256 411,573 407,312 410,246 405,976 Total stockholders' equity..................... 221,476 242,980 418,429 571,583 606,092 590,453 590,751 </TABLE> - ----------- (1) Includes intercompany sales and excludes revenues not included in any of the three business segments.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000724522_il_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000724522_il_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fa3fc57ad57d957d046219caf6c63aff20c2f522
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000724522_il_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Except as set forth in the financial statements or as otherwise indicated herein, information in this Prospectus (i) gives effect to the anticipated reincorporation of the Company from California to Delaware to be effected prior to the closing of this offering, (ii) reflects the conversion of all of the Company's outstanding shares of Preferred Stock into shares of Common Stock, which will occur automatically upon the closing of this offering, and (iii) assumes that the Underwriters' over-allotment option is not exercised. See "Description of Capital Stock" and "Underwriting." This Prospectus contains forward-looking statements that involve risks and uncertainties. Actual events or results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Il Fornaio owns and operates 13 full-service, white tablecloth Italian restaurants serving creatively prepared, premium quality Italian cuisine based on authentic regional recipes. The Company's restaurants offer an extensive menu, featuring house-made and imported pasta, poultry and game roasted over a wood-fired rotisserie, meat and fresh fish from a charcoal grill, pizza from a wood-burning oven, soups, salads and desserts. Il Fornaio's menu is distinguished by fresh, hand-made breads, pastries and other baked goods that are produced in the Company's restaurants and five wholesale bakeries. Il Fornaio's wholesale bakeries also sell baked goods to quality grocery stores, specialty retailers, hotels and other fine restaurants. In addition, the Company operates a retail market in each restaurant, which sells baked goods, prepared foods and a variety of Il Fornaio-brand products, allowing guests to recreate the Il Fornaio dining experience at home. The Company's objectives are to offer guests the most authentic Italian dining experience available outside of Italy and to establish a brand identity that provides a competitive advantage in every market in which the Company operates. The Company's strategy to achieve these objectives includes the following key elements: (i) serve premium quality, authentic regional Italian cuisine created by native-born Italian chefs and complemented by hand-made Il Fornaio baked goods; (ii) build brand awareness through its wholesale bakeries and retail markets, which reinforce the Company's image as a provider of premium quality, authentic Italian food and enable guests to recreate the Il Fornaio dining experience at home; (iii) create a distinctive authentic Italian atmosphere with restaurant designs unique to each location; (iv) consistently execute Il Fornaio's high standards of food quality, service and cleanliness through its employee-designed Five Star Service Program; and (v) foster a strong corporate culture which attracts and retains highly qualified management, chefs and hourly employees. The Company believes that these elements, combined with an average check per guest of $20.93, provide an excellent dining value. The Company operates 11 restaurants in California and has most recently opened restaurants in Portland and Las Vegas. The Company believes that its restaurants provide superior unit economics. In 1996, the Company's 10 comparable restaurants generated average sales of approximately $4.5 million and average cash flow of approximately $884,000, or 19.9% of restaurant sales. Since 1991, the Company's total investment per restaurant, net of landlord contributions, has averaged approximately $1.7 million, with additional average pre-opening costs per restaurant of approximately $200,000. The restaurants range in size from 5,000 to 10,900 square feet, seat between 76 and 220 guests and serve both lunch and dinner. Il Fornaio intends to develop restaurants in both existing and new geographic markets and to locate restaurants at sites in affluent urban and suburban areas. The flexibility of the Il Fornaio concept enables the Company to develop successful restaurants in a variety of locations, including residential neighborhoods, shopping centers, office buildings and hotels. The Company intends to open one additional restaurant in 1997 in Denver and three new restaurants in 1998, including locations in Santa Monica and Seattle, for which leases have been signed. The Company expects that its planned future restaurants will generally range in size from 7,000 to 10,000 square feet and will require, on average, a total investment by the Company per restaurant, net [IL FORNAIO LOGO] [Photograph of main dining room [Photograph of exterior of in Beverly Hills restaurant] Las Vegas restaurant] Beverly Hills Las Vegas [Photograph of main dining room [Photograph of retail bakery in and bar area in Irvine restaurant] Burlingame restaurant] Irvine Burlingame [Photograph of main dining room and [Graphic depictions of outdoor patio in Portland restaurant] Il Fornaio's Bakerman logo] Portland of anticipated landlord contributions, of approximately $1.7 million, with additional average pre-opening costs per restaurant of approximately $200,000. Il Fornaio's business and expansion strategy has been developed and implemented by an experienced senior management team with a record of successful restaurant operations. In 1987, Laurence B. Mindel joined the Company as Chairman, Chief Executive Officer and President, after spending over 15 years at Spectrum Foods, where he created and operated innovative restaurants throughout California, including Chianti, MacArthur Park, Harry's Bar and American Grill, Ciao, Prego and Guaymas. In 1995, Michael J. Hislop joined the Company as President and Chief Operating Officer, after serving as Chairman and Chief Executive Officer of Chevy's Mexican Restaurants for four years and guiding its expansion from 17 to 63 restaurants. These individuals, along with the seven other members of senior management, have over 150 years of combined experience in the restaurant and bakery businesses. Because of the experience level of its senior management, the Company believes it has a competitive advantage in its industry with respect to concept development and execution, site selection, unit operations, training, product quality and service. The Company was incorporated in California in June 1980, and intends to reincorporate in Delaware prior to the closing of this offering. The Company's executive office is located at 1000 Sansome Street, Suite 200, San Francisco, California 94111. The Company's telephone number is (415) 986-1505. Il Fornaio(R) and the Il Fornaio logo are registered marks of the Company, and Festa Regionale and Passaporto are marks used and owned by the Company. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............... 1,000,000 shares Common Stock offered by the Selling Stockholders.................................... 500,000 shares Common Stock to be outstanding after the offering........................................ 5,582,891 shares(1) Use of proceeds................................... To finance the development of additional restaurants and for general corporate purposes. Proposed Nasdaq National Market symbol............ ILFO </TABLE> - --------------- (1) Excludes, as of August 15, 1997, outstanding options to purchase 980,295 shares of Common Stock and outstanding warrants to purchase 32,487 shares of Common Stock. See "Management -- Employee Benefit Plans" and "Description of Capital Stock -- Warrants." [Photograph of main dining room [Photograph of the loggia in and sunroom in Carmel restaurant] Sacramento restaurant] Carmel-by-the-Sea Sacramento [Photograph of main dining room [Photograph of bar area in in Corte Madera restaurant] San Jose Restaurant] Corte Madera San Jose [Photograph of main dining room in San Francisco restaurant overlooking outdoor plaza] San Francisco SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE, OPERATING AND FOOTNOTE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED(1) ------------------ ------------------------------------------------------------------------ JUNE DECEMBER 27, DECEMBER 29, DECEMBER 25, DECEMBER 31, DECEMBER 29, JUNE 30, 29, 1992 1993 1994 1995 1996 1996 1997 ------------ ------------ ------------ ------------ ------------ -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues: Restaurants................. $ 30,737 $ 42,402 $ 39,485 $ 43,647 $ 50,599 $ 24,733 $32,116 Wholesale bakeries.......... 4,049 4,328 4,951 5,181 6,016 2,891 3,150 Retail bakeries............. 3,727 4,866 5,208 5,312 4,137 2,600 311 ------- ------- ------- ------- ------- ------- ------- Total revenues....... 38,513 51,596 49,644 54,140 60,752 30,244 35,577 Income (loss) from operations(2)............... 716 (2,670) 2,300 2,013 2,224 1,125 2,111 Income (loss) before provision (benefit) for income taxes....................... 687 (2,820) 2,247 2,072 2,351 1,169 2,220 Provision (benefit) for income taxes(3).................... 6 70 332 (2,432) 898 476 915 Net income (loss)............. 681 (2,890) 1,915 4,504 1,453 693 1,305 Net income (loss) per share (fully diluted)............. $ 0.20 $ (0.67) $ 0.43 $ 1.00 $ 0.32 $ 0.16 $ 0.27 Weighted average common shares outstanding (fully diluted).................... 3,424 4,344 4,477 4,499 4,839 4,809 5,037 OPERATING DATA: Comparable restaurant sales increase (decrease)(4)...... 1.5% (4.8%) (3.4%) (1.7%) 4.8% 2.9% 6.1% Restaurants open at end of period(5)................... 9 9 9 11 12 12 13 Wholesale bakeries open at end of period................... 5 6 6 6 6 6 5 Retail bakeries open at end of period(6)................... 6 9 8 8 4 8 -- </TABLE> <TABLE> <CAPTION> JUNE 29, 1997 ------------------------------ ACTUAL AS ADJUSTED(7) ------------ --------------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital................................................................... $ 1,116 $ 9,333 Total assets...................................................................... 37,180 45,397 Long-term debt (excluding current portion)........................................ -- -- Stockholders' equity.............................................................. 24,489 32,706 </TABLE> - --------------- (1) All years reported include 52 weeks, except the year ended December 31, 1995, which includes 53 weeks. (2) Includes (i)a $2.3 million pre-tax charge recorded in 1993 associated with the Company's decision to dispose of its restaurant in Costa Mesa and a free-standing retail bakery in Los Angeles, (ii) a $932,000 pre-tax charge recorded in 1995 associated with the default by the buyer of the Company's Etrusca restaurant and (iii) a $470,000 pre-tax reversal of the 1993 reserve recorded in the first six months of 1997 associated with the disposition of the Company's Costa Mesa restaurant. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Closure of Non-Core Operations." (3) Includes a tax benefit of $2.7 million recorded in 1995 as a result of the recognition of deferred tax assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations." (4) A new restaurant is included in the calculation of the change in comparable restaurant sales after the first full month following the eighteenth month of that restaurant's operation. (5) During 1993, the Company opened two new restaurants and commenced the disposition of two existing restaurants that differed from the Il Fornaio restaurant concept. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Closure of Non-Core Operations." (6) Reflects the disposition of four of the Company's free-standing retail bakeries in the third quarter of 1996 and the disposition of the Company's four remaining free-standing retail bakeries in the first quarter of 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Closure of Non-Core Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000729979_parisian_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000729979_parisian_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000729979_parisian_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000732935_here-to_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000732935_here-to_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6b125b0ffb72347598bbd03b4a3198e80552aebb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000732935_here-to_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. FOR PURPOSES OF PRESENTING FINANCIAL INFORMATION IN THIS PROSPECTUS (OTHER THAN THE FINANCIAL STATEMENTS), THE COMPANY'S FISCAL YEARS ARE INDICATED AS ENDING ON JANUARY 31, ALTHOUGH BEFORE DECEMBER OF 1996 SUCH PERIODS ACTUALLY ENDED ON THE FRIDAY NEAREST SUCH DATE AND AFTER NOVEMBER OF 1996 SUCH PERIODS ACTUALLY END ON THE SATURDAY NEAREST SUCH DATE.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000745655_china_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000745655_china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9996787eb461cbaa791cdb7786fa22ac46c470b7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000745655_china_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following material is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The Company conducts all its operations through its subsidiaries, Sigma 7 Corporation ("Sigma 7"), Particle Interconnect Corporation ("PI Corp.") and California Tube Laboratory, Inc. ("CTL"). As used in this Prospectus, the term "Company" includes Intercell Corporation and all of its subsidiaries, and references to "Sigma 7" include Sigma 7 and all of its subsidiaries. Certain technical terms used herein are defined in the "GLOSSARY." This Prospectus contains forward-looking statements which involve risks and other uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "RISK FACTORS" and elsewhere in this Prospectus. THE COMPANY GENERAL Intercell Corporation (the "Company") was incorporated under the laws of Colorado on October 4, 1983, and was originally engaged in the marketing of business and cellular telephone equipment. This business was discontinued and all remaining assets of the Company were liquidated or otherwise abandoned during 1991, and all obligations of the Company were paid or otherwise satisfied. From 1991 until the acquisition of Modern Industries, Inc. on July 7, 1995, which subsequently changed its name to Energy Corporation ("Energy"), the Company was generally inactive and reported no operating revenues prior to the fiscal year ending December 31, 1994. During that time period, the Company considered various new business and investment opportunities involving, primarily, companies engaged in specialty lines of business in the wireless communications and electronic technology industries. On July 7, 1995, the Company purchased all of the assets and liabilities of Energy. Energy's principal asset was its wholly owned subsidiary, California Tube Laboratory, Inc. ("CTL"). This transaction was accounted for as an acquisition of the Company by Energy and, as such, the historical financial statements contained herein reflect the financial statements of Energy. The results of operations of the Company have been included only since the date of such acquisition. See "INDEX TO FINANCIAL STATEMENTS" and "PROSPECTUS SUMMARY- Summary Historical Consolidated Financial Data of the Company."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000763099_manufactur_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000763099_manufactur_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..381e587c23593ccb5236c5f595b54d2049400469
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000763099_manufactur_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000769879_recycling_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000769879_recycling_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..60b2a528f5eadf53858274d73c6a4bd355592f9d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000769879_recycling_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Recycling Industries, Inc. is a full-service metals recycler primarily engaged in the collection and processing of various ferrous and non-ferrous metals for resale to domestic and foreign steel producers and other metals producers and processors. The Company operates eight metals recycling facilities in Las Vegas, Nevada ("NRI"); Brownsville, Harlingen, McAllen and San Juan, Texas ("Anglo Iron & Metal"); Ste. Genevieve, Missouri ("Mid-America Shredding"); Waterloo, Iowa ("Weissman Iron & Metal"); and Metter, Georgia ("Addlestone Recycling Corporation"). The Company commenced its metals recycling operations in May 1994 and has increased its revenues from approximately $4.8 million for the year ended September 30, 1994 to $27.6 million for the year ended September 30, 1996. The revenues for the six months ended March 31, 1997 have increased to $ 23.5 million from $ 10.8 million for the six months ended March 31, 1996. Over the same period, the Company's metals shredding capacity increased over 34% and its total metals processing capacity increased over 46%. The largest portion of the Company's operations involves the collection, processing and sale of ferrous scrap, the primary raw material for mini-mill steel producers who utilize electric arc furnace ("EAF") technology. The increase in domestic EAF production from 14.9 million net tons (11.0% of total domestic steel production) in 1966 to 40.6 million net tons (39.4% of total domestic steel production) in 1995 has resulted in strong demand and prices for processed ferrous scrap. According to industry reports, the anticipated continuing increase in EAF production to an estimated 50.0 million net tons by the year 2000 may cause ferrous scrap shortages, resulting in further increases in processed ferrous scrap prices. The Company is also engaged in the processing of non-ferrous materials such as copper, aluminum and brass, which are sold to secondary smelters and other non-ferrous metals processors. The Company's non-ferrous operations complement its ferrous operations, as most unprocessed scrap contains ferrous and non- ferrous components which require separation in preparation for resale. The lower cost of producing non-ferrous metals from scrap relative to the cost of primary smelting has resulted in strong demand for processed non-ferrous scrap. The Company's objective is to become one of the largest metals recyclers in North America through targeted acquisitions of independent metals recyclers. The Company seeks to capitalize on the opportunity presented by the growing demand for processed ferrous scrap, the expanding markets created by the rapid proliferation of new EAF operations and the availability of metals recycling facilities. By pursuing a consolidation strategy within the metals recycling industry, the Company believes that it can significantly enhance the competitive position and profitability of the operations that it acquires through improved managerial and financial resources. The Company also believes that geographic diversity will reduce its vulnerability to the dynamics of any particular local or regional market. Furthermore, as EAF capacity and demand for processed ferrous scrap continue to increase, the Company believes that multi-regional and national EAF operators such as Nucor Corporation, Birmingham Steel Corporation and North Star Steel Co. will increasingly rely on suppliers who can provide a dependable quantity and quality of processed scrap as well as a high degree of service. The Company believes that it is the only metals recycler pursuing a consolidation strategy on a national basis and therefore will be in an ideal position to become a preferred supplier to major EAF operators. The Company estimates that the total revenues generated in the metals recycling markets in 1995 were approximately $19.1 billion, comprised of $8.9 billion attributable to ferrous metals and $10.2 billion attributable to non- ferrous metals. The Company believes that there are over 3,000 independent metals recyclers in North America. Based upon reports published by the Institute for Scrap Recycling Industries ("ISRI"), approximately 200 of these independent metals recyclers operate heavy-duty automotive shredders, which constitute the primary equipment used in processing large volumes of ferrous and non-ferrous scrap for sale to steel and other metals producers. Because of the highly fragmented nature of the industry, the Company believes that no single metals recycler has a significant share of the national processed scrap market, although certain recyclers may have a dominant share of their local or regional market. Similar to the ongoing consolidation within the municipal solid waste industry, the metals recycling industry has recently begun to experience local market consolidation due to: (i) increasing capital requirements caused by more stringent environmental and governmental regulations, and (ii) the exit of aging independent recyclers who desire to sell closely-held businesses in the absence of a successor owner or operator. In implementing its acquisition strategy, the Company seeks to identify potential acquisition targets with: - dominant or strategic positions in local or regional markets; - excess or underutilized capacity; - the ability to supply an existing or planned metals production facility, such as an EAF; - access to rail, water or interstate highway transportation systems; and - either operational shredding equipment, the ability to supply the Company's existing shredding equipment or adequate facilities to permit the installation of such equipment. By continuing to acquire facilities that meet these criteria, the Company believes it can achieve rapid growth and expansion of its customer base. An essential component of the Company's acquisition strategy is improving the operating efficiency, output and capacity of each acquired facility by targeting three phases of the Company's operations: (i) the purchase of raw scrap; (ii) the processing of raw scrap into saleable product; and (iii) the sale of processed scrap. Each acquired facility is integrated into the Company's operations through a comprehensive program that targets these operating phases through the installation of management and financial reporting systems, the implementation of expanded purchasing and marketing programs, the centralization of operating functions to achieve economies of scale, selective reductions in personnel and improved inventory and other financial controls. Where necessary, the Company implements a capital improvements program to repair or replace outdated and inefficient equipment and to improve the facility's scrap processing operations and processed scrap output. Of the Company's revenues for the six months ended March 31, 1997, approximately 62% was attributable to sales of ferrous scrap, 24% was attributable to sales of non-ferrous scrap, and the balance was primarily attributable to paper and plastic recycling, retail finished steel sales and brokerage sales conducted at certain of the Company's facilities. The Company's executive offices are located at 384 Inverness Drive South, Suite 211, Englewood, Colorado 80112, and its telephone number is 303-790-7372. THE OFFERING <TABLE> <S> <C> Common Stock Outstanding before the Offering ...... 13,944,429 shares (1)(2) Common Stock Offered by the Selling Securityholders ................................. 10,189,541 shares (3) Common Stock Outstanding if all Series C Preferred are converted and all Warrants are exercised .... 18,379,491 shares (4) Use of Proceeds ................................... The net proceeds from the exercise of the Warrants, if any, will be used to complete future acquisitions and for working capital purposes. See "Use of Proceeds." NASDAQ National Market Symbol ..................... RECY </TABLE> - ----------- (1) Does not include Common Stock reserved for issuance as follows: (i) 632,411 shares issuable upon conversion of the Series C Preferred; (ii) 4,119,584 shares issuable upon exercise of currently outstanding warrants; (iii) 978,996 shares issuable upon exercise of currently outstanding options; and (iv) shares reserved for additional options to be granted under the Company's stock option plans. See "Description of Capital Stock" and "Shares Eligible for Future Sale." (2) Includes 363,636 shares of Common Stock issued in connection with the acquisition of Weissman and 30,000 shares issued from March 31, 1997 to June 20, 1997 for the exercise of the Company's Series I Warrants. (3) Includes 632,411 shares issuable upon conversion of the Series C Preferred and 3,697,651 shares issuable upon exercise of Common Stock Purchase Warrants and Options. (4) The Company is not aware of any arrangements for the conversion of the Series C Preferred or the exercise of the Warrants and there is no assurance that all or any of the outstanding Series C Preferred will be converted or Warrants will be exercised. SUMMARY FINANCIAL INFORMATION The following information presents, for the periods and dates indicated, summary consolidated financial information of the Company. This information should be read in conjunction with "Selected Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Company's historical and pro forma financial statements and notes thereto included elsewhere herein. <TABLE> FISCAL YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------------------------- PRO FORMA(2) PRO FORMA(2) ------------ ------------ 1992(1) 1993(1) 1994(1) 1995(3) 1995 1996(3) 1996 ------- ------- --------- --------- ---------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA(1): Revenues.......................... $ -0- $ -0- $ 4,831 $ 13,853 $ 69,781 $ 27,623 $ 75,061 Cost of Sales..................... -0- -0- 4,110 10,869 54,381 25,654 61,096 Cost of Brokerage................. -0- -0- -0- -0- 3,075 936 4,310 ------- ------- --------- --------- ---------- -------- --------- Gross Profit.................... -0- -0- 721 2,984 12,325 1,033 9,655 Selling and administrative expenses........................ 2,951 2,335 1,660 2,279 5,638 3,323 6,401 Loss from joint ventures and equity investee.............. 462 467 -0- -0- -0- -0- -0- ------- ------- --------- --------- ---------- -------- --------- Income (loss) from operations..... (3,413) (2,802) (939) 705 6,687 (2,290) 3,254 Interest expense................ (114) (156) (203) (407) (1,528) (732) (2,685) ------- ------- --------- --------- ---------- -------- --------- Income (loss) before income taxes......................... (3,527) (2,958) (1,142) 298 5,159 (3,022) 569 Income tax provision (benefit).. -0- -0- -0- (711) (338) 9 9 ------- ------- --------- --------- ---------- -------- --------- Income (loss) from continuing operations, net of income taxes........................... $(3,527) $(2,958) $ (1,142) $ 1,009 $ 5,497 $ (3,031) $ 560 ------- ------- --------- --------- ---------- -------- --------- ------- ------- --------- --------- ---------- -------- --------- Income (loss) per share from continuing operations, net of income taxes................. $ (1.73) $ (1.24) $ (0.46) $ 0.17 $ 0.76 $ (.30) $ .05 ------- ------- --------- --------- ---------- -------- --------- ------- ------- --------- --------- ---------- -------- --------- Net income (loss) after extraordinary item and income taxes........................... $(1,147) $(2,483) $ (924) $ 1,815 $ 6,303 $ (2,961) $ 630 ------- ------- --------- --------- ---------- -------- --------- ------- ------- --------- --------- ---------- -------- --------- Net income (loss) per share....... $ (0.56) $ (1.04) $ (0.37) $ 0.30 $ .87 $ (.29) $ .06 ------- ------- --------- --------- ---------- -------- --------- ------- ------- --------- --------- ---------- -------- --------- Weighted average shares outstanding.................... 2,043 2,377 2,505 6,100 7,234 10,212 10,755 ------- ------- --------- --------- ---------- -------- --------- ------- ------- --------- --------- ---------- -------- --------- BALANCE SHEET DATA: Working capital (deficit)....... $(2,721) $(3,853) $ (4,175) $ 376 NA $ 1,597 NA Property and equipment.......... 43 30 6,590 6,686 NA 20,492 NA Long-term debt.................. -0- -0- 519 2,152 NA 12,018 NA Total assets.................... 1,865 1,147 9,618 10,297 NA 34,855 NA Total liabilities............... 2,801 3,853 6,852 3,843 NA 19,192 NA Stockholders' equity (deficit).. (936) (2,706) 2,766 6,454 NA 14,163 NA OPERATING AND OTHER DATA: Shipments: Ferrous (tons).................. -0- -0- 24,600 57,100 321,293 141,731 364,398 Non-ferrous (pounds)............ -0- -0- 3,676,300 8,805,600 41,141,343 18,564,412 45,146,218 Average Selling Price(4): Ferrous (per ton)............... NA NA $ 100 $ 120 $ 142 $ 122 $ 129 Net Cash Flow From: Operating activities............ $(1,613) $ (118) $ (862) $ 113 NA $ (1,549) NA Investing activities............ (1,526) (617) (255) (926) NA (12,964) NA Financing activities............ 3,125 735 1,232 882 NA 15,779 NA EBITDA(5)......................... $(2,979) $(2,445) $ (547) $ 1,489 $ 10,007 $ (1,023) $ 5,584 <CAPTION> SIX MONTHS ENDED MARCH 31, ------------------------------ ------------------------- 1996 1997 ---------- ---------- STATEMENT OF OPERATIONS DATA(1): Revenues.......................... $ 10,763 $ 23,537 Cost of Sales..................... 9,352 18,324 Cost of Brokerage................. -0- 1,489 ---------- ---------- Gross Profit.................... 1,411 3,724 Selling and administrative expenses........................ 1,553 2,663 Loss from joint ventures and equity investee.............. -0- -0- ---------- ---------- Income (loss) from operations..... (142) 1,061 Interest expense................ (245) (890) Income (loss) before income taxes......................... $ (387) $ 171 Income tax provision (benefit).. (437) (295) ---------- ---------- Income from continuing operations, net of income taxes........................... 50 466 ---------- ---------- ---------- ---------- Income available to common shareholders before extraordinary item and net of an imputed deemed dividend $ 50 $ 186 ---------- ---------- ---------- ---------- Income per share from continuing operations, net of income taxes and an imputed deemed dividend......... $ 0.01 $ 0.01 ---------- ---------- ---------- ---------- Net income after extraordinary item and income taxes.......................... $ 98 $ 466 ---------- ---------- ---------- ---------- Net income available to common shareholders after extraordinary item and net of an imputed deemed dividend $ 98 $ 186 ---------- ---------- ---------- ---------- Net income per share net of an imputed deemed dividend $ 0.01 $ 0.01 ---------- ---------- ---------- ---------- Weighted average shares outstanding.................... 9,982 14,356 ---------- ---------- ---------- ---------- BALANCE SHEET DATA: Working capital ....... $ 105 $ 2,017 Property and equipment.......... 8,421 20,455 Long-term debt.................. 2,521 11,042 Total assets.................... 19,938 35,582 Total liabilities............... 9,045 18,527 Stockholders' equity .. 10,893 15,555 OPERATING AND OTHER DATA: Shipments: Ferrous (tons).................. 55,500 116,435 Non-ferrous (pounds)............ 6,739,000 16,904,000 Average Selling Price(4): Ferrous (per ton)............... $ 123 $ 126 Net Cash Flow From: Operating activities............ $ (748) $ (114) Investing activities............ (978) (1,362) Financing activities............ 2782 553 EBITDA(5)......................... $ (337) $ 2,137 </TABLE> - ------------- (1) Prior to May 1994, the Company was engaged in the development of the MSW Technology. For comparative purposes, financial data prior to 1994 reflects the Company's efforts to develop such technology. The Company's current operations commenced in May 1994 with the acquisition of NRI. The financial information for fiscal 1994 reflects five months of operating results of NRI. The financial information for fiscal 1995 reflects 12 months of operating results of NRI and reflects the efforts of the Company to acquire other metals recycling facilities. (2) The pro-forma date gives effect to the acquisitions of Anglo Iron & Metal (December 1995), Mid-America Shredding (April 1996), Weissman (August , (1996), Addlestone Recycling Corporation (April 1997) and Addlestone International Corporation (definitive agreement to purchase assets) as if each had occurred at the beginning of the periods presented. In addition, the pro forma information is based upon available information and certain assumptions and adjustments. See notes to the pro forma financial statements. (3) The historical operating results for the year ended September 30, 1996 are not comparable to those of the corresponding period ended September 30, 1995 due to the acquisitions of Anglo Iron & Metal that occurred in December 1995 and Mid-America Shredding that occurred in April 1996 and Weissman that occurred on August 1996. (4) Average selling price for non-ferrous scrap is not meaningful as there are significant differences in the price per pound of the various component non-ferrous metals (e.g., aluminum, copper, brass) produced by the Company. (5) EBITDA ("Earnings Before Interest, Taxes, Depreciation and Amortization") represents operating income plus depreciation and amortization. The Company has included EBITDA (which is not a measure of financial performance under generally accepted accounting principles) because it understands such data is used by certain investors to determine the Company's ability to service its indebtedness. EBITDA is not a substitute for income from continuing operations, net income or cash flows presentation under generally accepted accounting principles.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000773086_mcraes-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000773086_mcraes-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000773086_mcraes-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000775473_greater_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000775473_greater_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b10172a933a8b823a616ceeb26add08e4829e7d0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000775473_greater_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial information appearing elsewhere in this Prospectus. Unless the context clearly suggests otherwise, references to the "Company" include Greater Bay Bancorp and its subsidiaries, collectively, and references to "Greater Bay" include the parent company only. In addition to the historical information contained herein, certain statements in this Prospectus constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995 (the "Reform Act") which involve risks and uncertainties. The Company's actual results may differ significantly from those discussed herein. Factors that might cause such a difference include, but are not limited to, those discussed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Prospectus. See "Risk Factors--Forward-Looking Statements." THE COMPANY Greater Bay is a bank holding company operating Cupertino National Bank & Trust ("CNB") and Mid-Peninsula Bank (separately, "MPB" and together with CNB, the "Banks") with seven regional offices in Cupertino, Palo Alto, San Mateo, San Carlos and San Jose, California. Greater Bay is the result of the merger (the "Merger"), effective November 27, 1996, of Cupertino National Bancorp ("Cupertino") and Mid-Peninsula Bancorp ("Mid-Peninsula"). At December 31, 1996, the Company had total assets of $622.0 million, total net loans of $441.6 million and total deposits of $559.3 million. The Company, through the Banks, provides a wide range of commercial banking services to small and medium-sized businesses, real estate developers and property managers, business executives, professionals and other individuals, primarily in the Santa Clara and San Mateo Counties of California. Services include personal and business checking and savings accounts, time deposits and individual retirement accounts, cash management, international trade services and accounting services and the making of commercial, consumer and real estate loans, which generally do not include long-term residential mortgage loans. Additionally, the Company offers several specialized services including a Small Business Administration ("SBA") Department which makes SBA guaranteed loans to assist smaller businesses, a venture lending division (the "Venture Lending Group") that services companies in their start-up and development phase and a trust department (the "Greater Bay Trust Company") that offers a full range of fee-based trust services directly to its clients. In order to meet the demands of the increasingly competitive banking and financial services industries, management has adopted a business philosophy referred to as the "Super Community Banking Philosophy." The Super Community Banking Philosophy is based on management's belief that banking customers value doing business with locally managed institutions that can provide a full service commercial banking relationship through an understanding of the customer's financial needs and the flexibility to customize products and services to meet those needs. Management further believes that banks are better able to build successful customer relationships by affiliating with a holding company that provides cost effective administrative support services while promoting bank autonomy and flexibility. To implement this philosophy, Greater Bay operates CNB and MPB as separate subsidiaries by retaining their independent names along with their individual Boards of Directors. Both MPB and CNB have established strong reputations and customer followings in their respective market areas through attention to client service and an understanding of client needs. In an effort to capitalize on the identities and reputations of the Banks, the Company will continue to market its services under the CNB and MPB names, primarily through each Bank's relationship managers. The primary focus for the Banks' relationship managers is to cultivate and nurture their client relationships. Relationship managers are assigned to each borrowing client to provide continuity in the relationship. This emphasis on personalized relationships requires that all of the relationship managers maintain close ties to the - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- communities in which they serve, so they are able to capitalize on their efforts through expanded business opportunities for the Banks. While client service decisions and day-to-day operations are maintained at the Banks, Greater Bay offers the advantages of affiliation with a multi-bank holding company by providing improved access to the capital markets and expanded client support services, such as business cash management, international trade services and accounting services. In addition, Greater Bay provides centralized administrative functions, including support in credit policy formulation and review, investment management, data processing, accounting and other specialized support functions, thereby allowing the Banks to focus on client service. The Company's business strategy is to focus on increasing its market share within the communities it serves through continued internal growth. As a result of the Merger, the Company has the opportunity to market the specialized products and services of the Venture Lending Group, the Greater Bay Trust Company and the SBA Department to a larger customer base. The Company believes that these products and services, available prior to the Merger only to customers of CNB, will be attractive to customers and contacts of MPB in the venture capital community and the high net worth customers of MPB. The Company believes that the infrastructure developed by Cupertino to support the Greater Bay Trust Company, the SBA Department and the Venture Lending Group will allow the Company to offer the products and services of these groups without significant additional overhead costs. The Company also will pursue opportunities to expand its market share through select acquisitions that management believes complement the Company's businesses. While management would prefer to make acquisitions which would expand its presence in its current market areas in Santa Clara and San Mateo Counties, it will also pursue opportunities to expand its market through acquisitions in other parts of the South, East, and North Bay Areas of San Francisco. The Company was incorporated in California in 1984 under the name San Mateo County Bancorp. See "Business--History." The Company's principal offices are located at 2860 West Bayshore Road, Palo Alto, California 94303 and its telephone number is (415) 813-8200. GBB CAPITAL GBB Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with the Delaware Secretary of State on March 3, 1997. GBB Capital's business and affairs are conducted by the Property Trustee, Delaware Trustee and three individual Administrative Trustees who are officers of the Company. GBB Capital exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures issued by Greater Bay, and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Trust Securities). Accordingly, the Junior Subordinated Debentures will be the sole assets of GBB Capital, and payments by Greater Bay under the Junior Subordinated Debentures and the Expense Agreement will be the sole revenues of GBB Capital. All of the Common Securities will be owned by Greater Bay. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of Greater Bay as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. See "Description of the Trust Preferred Securities--Subordination of Common Securities of GBB Capital Held by Greater Bay." Greater Bay will acquire Common Securities in an aggregate liquidation amount equal to 3.0% of the total capital of GBB Capital. GBB Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. GBB Capital's principal offices are located at 2860 West Bayshore Road, Palo Alto, California 94303 and its telephone number is (415) 813-8200. - - ------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- THE OFFERING <TABLE> <C> <S> Trust Preferred Securities issuer.......................... GBB Capital Securities offered............... 800,000 Trust Preferred Securities. The Trust Preferred Securities represent undivided beneficial interests in GBB Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. Distributions.................... The Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Trust Preferred Security, will be cumulative, will accrue from the date of issuance of the Trust Preferred Securities, and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on June 15, 1997 (subject to possible deferral as described below). The amount of each Distribution due with respect to the Trust Preferred Securities will include amounts accrued through the date the Distribution payment is due. See "Description of the Trust Preferred Securities--Distributions." Extension periods................ So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, Greater Bay will have the right, at any time, to defer payments of interest on the Junior Subordinated Debentures by extending the interest payment period thereon for a period not exceeding 20 consecutive quarters with respect to each deferral period (each an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. If interest payments are so deferred, Distributions on the Trust Preferred Securities will also be deferred and Greater Bay will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to Greater Bay's capital stock or debt securities that rank pari passu with or junior to the Junior Subordinated Debentures. During an Extension Period, Distributions will continue to accumulate with income thereon compounded quarterly. Because interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law, holders of the Trust Preferred Securities will be required to accrue income for United States federal income tax purposes. See "Description of Junior Subordinated Debentures--Option to Defer Interest Payment Period" and "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." Maturity......................... The Junior Subordinated Debentures will mature on , 2027 which date may be shortened (such date, as it may be shortened, the "Stated Maturity") to a date not earlier than , 2002 if certain conditions are met (including Greater Bay having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve). </TABLE> - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- <TABLE> <C> <S> Redemption....................... The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Junior Subordinated Debentures at their Stated Maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. Subject to Federal Reserve approval, if then required under applicable capital guidelines or policies of the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to maturity at the option of Greater Bay (i) on or after , 2002 in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), upon the occurrence and during the continuance of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Trust Preferred Securities--Redemption" and "Description of Junior Subordinated Debentures-- Redemption." Distribution of Junior Subordinated Debentures......... Greater Bay has the right at any time to terminate GBB Capital and cause the Junior Subordinated Debentures to be distributed to holders of Trust Preferred Securities in liquidation of GBB Capital, subject to Greater Bay having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of the Trust Preferred Securities--Distribution of Junior Subordinated Debentures." Guarantee........................ Taken together, Greater Bay's obligations under various documents described herein, including the Guarantee Agreement, provide a full guarantee of payments by GBB Capital of Distributions and other amounts due on the Trust Preferred Securities. Under the Guarantee Agreement, Greater Bay guarantees the payment of Distributions by GBB Capital and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of Senior and Subordinated Debt of Greater Bay, as defined herein) to the extent of funds held by GBB Capital. If GBB Capital has insufficient funds to pay Distributions on the Trust Preferred Securities (i.e., if Greater Bay has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Greater Bay to enforce payment of such Distributions to such holder. See "Description of Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of the Trust Preferred Securities," "Description of Junior Subordinated Debentures--Debenture Events of Default" and "Description of Guarantee." </TABLE> - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- <TABLE> <C> <S> Ranking.......................... The Trust Preferred Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities of GBB Capital held by Greater Bay, except as described under "Description of the Trust Preferred Securities--Subordination of Common Securities of GBB Capital Held by Greater Bay." The obligations of Greater Bay under the Guarantee, the Junior Subordinated Debentures and other documents described herein are unsecured and rank subordinate and junior in right of payment to all current and future Senior and Subordinated Debt, the amount of which is unlimited. At December 31, 1996, the aggregate outstanding Senior and Subordinated Debt of Greater Bay was approximately $3.0 million. In addition, because Greater Bay is a holding company, all obligations of Greater Bay relating to the securities described herein will be effectively subordinated to all existing and future liabilities of Greater Bay's subsidiaries, including the Banks. Greater Bay may cause additional Trust Preferred Securities to be issued by trusts similar to GBB Capital in the future, and there is no limit on the amount of such securities that may be issued. In this event, Greater Bay's obligations under the Junior Subordinated Debentures to be issued to such other trusts and Greater Bay's guarantees of the payments by such trusts will rank pari passu with Greater Bay's obligations under the Junior Subordinated Debentures and the Guarantee, respectively. Voting rights.................... The holders of the Trust Preferred Securities will generally have limited voting rights relating only to the modification of the Trust Preferred Securities, the dissolution, winding-up or termination of GBB Capital and certain other matters described herein. See "Description of the Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement." Proposed Nasdaq National Market symbol.......................... GBBKP Use of proceeds.................. The proceeds to GBB Capital from the sale of the Trust Preferred Securities offered hereby will be invested by GBB Capital in the Junior Subordinated Debentures of Greater Bay. Greater Bay intends to invest approximately $10.0 million of the net proceeds in the Banks to increase their capital levels to support future growth. Greater Bay intends to use the remaining net proceeds for general corporate purposes, which may include without limitation, funding additional investments in, or extensions of credit to, the Banks and possible future acquisitions. Greater Bay expects the Trust Preferred Securities to qualify as Tier 1 capital under the capital guidelines of the Federal Reserve. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000776194_impact-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000776194_impact-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000776194_impact-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000778165_rock_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000778165_rock_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a73dd9e45639449f7b5870adef44d13cdf271aa7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000778165_rock_prospectus_summary.txt
@@ -0,0 +1 @@
+JOINT PROXY STATEMENT/PROSPECTUS SUMMARY CERTAIN INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS SUMMARIZED BELOW. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. Hanover Gold Company, Inc. Hanover is an exploration stage mining company that holds significant mining claims and leases in the Alder Gulch area of the historic Virginia City Mining District of southwestern Montana. Its efforts, at least since 1995, have been aimed at consolidating its land position in the district in order to facilitate continued exploration and development, and to make its holdings more attractive to potential development partners such as major mining companies. At March 31, 1997, its mining properties consisted of 482 contiguous claims and one state mining lease located in the Alder Gulch area of the district. The company recently entered into a Reorganization Agreement with Easton-Pacific providing for the merger of Easton-Pacific into the company, in exchange for 7,000,000 shares of Hanover's Common Stock. Easton-Pacific owns or controls 36 patented mining claims, 151 unpatented claims and two state mining leases covering the upper part of the Browns Gulch, Hungry Hollow and Barton Gulch areas of the Virginia City Mining District. These properties are generally contiguous to Hanover's mining claims and lease in the Alder Gulch area. The merger has been approved by the boards of directors of Easton-Pacific and Hanover, and is expected to be approved by the shareholders of each company at meetings to be held on September 15 and September 17, 1997, respectively. If the merger is completed, as is expected, Hanover's consolidation efforts in the district will have been largely concluded. Hanover has no established proven or probable reserves, although exploration activities on the properties conducted by it and others support the existence of a potential, significant mineralized gold deposit. A mineralized deposit is a mineralized body which has been delineated by appropriate drilling or underground sampling to support estimates of tonnage and average mineral grade. A mineralized deposit does not qualify as a reserve until a comprehensive evaluation has been completed and the economic feasibility of exploiting the deposit has been determined. Hanover has not yet undertaken a comprehensive evaluation of its mining properties and probably will not do so until it has obtained the financial assistance of a development partner and conducted additional exploration. Hanover was incorporated as a Delaware corporation in 1984. Its principal executive offices are located at 1000 Northwest Boulevard, Suite 100, Coeur d'Alene, Idaho 83814, and its telephone number is (208) 664- 4653. Hanover also maintains a web site at http://wwp.hanovergold.com where additional information can be obtained. More detailed information concerning Hanover and its mining properties is included in the sections of this Joint Proxy Statement/Prospectus entitled "The Company" and "Business". The terms and conditions of Hanover's proposed merger with Easton-Pacific are included in the section entitled "The Easton-Pacific Transaction" and historical and proforma combined financial information concerning Hanover and Easton-Pacific, and the two companies in combination, is included in the section entitled "Supplemental Financial Information" and in the Financial Statements. Information concerning Hanover's management and the ownership of its Common Stock is included in the "Management" and "Principal Stockholders" sections, and a description of the Common Stock is included in the section entitled "Description of Capital Stock". Easton-Pacific and Riverside Mining Company Easton-Pacific is an exploration stage mining company that owns or controls 36 patented mining claims, 151 unpatented claims and two state mining leases covering the upper part of the Browns Gulch, Hungry Hollow and Barton Gulch areas of the Virginia City Mining District. These properties form a contiguous claim block adjacent to the west side of Hanover's mining properties in the Alder Gulch area of the district. The company was incorporated in Montana in 1959 and has conducted only limited exploration activities since inception. Since 1996, it has been in discussions with Hanover regarding the consolidation of their respective land positions in the Virginia City Mining District in order to make these holdings more attractive to potential development partners. These discussions are described below, in the section entitled "The Easton- Pacific Transaction". Easton-Pacific uses the same office as its secretary, which is located at 21 Courthouse Square, St. Cloud, Minnesota 56303. The company pays no rent for this facility. Easton-Pacific also leases a facility in Montana to store ore samples, for which it pays a nonaffiliate rental at the rate of $40 per month. More detailed information concerning Easton-Pacific, its mining properties, its management and the ownership of its capital stock is included in the section of this Joint Proxy Statement/Prospectus entitled "Easton-Pacific". The terms and conditions of Easton-Pacific's proposed merger with Hanover are included in the section entitled "The Hanover/Easton-Pacific Transaction", and historical and proforma combined financial information concerning Easton-Pacific and Hanover, and the two companies in combination, is included in the section entitled "Supplemental Financial Information" and in the Financial Statements. The Offering The securities offered pursuant to this Prospectus consist of: 7,000,000 shares of Common Stock offered by Hanover to the shareholders of Easton-Pacific in connection with the merger of Easton-Pacific into Hanover under the terms of the Reorganization Agreement; up to 2,000,000 shares of Common Stock offered by Hanover for sale to the public for cash; and 6,356,248 previously issued shares of Common Stock, and 205,000 shares of Common Stock issuable upon the exercise of outstanding stock options, which are offered for resale by the Selling Stockholders. This Joint Proxy Statement/Prospectus sets forth important information to be considered by Hanover's and Easton-Pacific's shareholders in conjunction with their shareholder meetings to consider the merger. Assuming Hanover's and Easton-Pacific's shareholders approve the merger, and all other conditions to closing set forth in the Reorganization Agreement are met, these shares will be deemed to have been sold to the Easton-Pacific shareholders as of the effective time set forth in the Reorganization Agreement. Certificates for the Hanover shares are expected to be issued within 45 days of the date the merger is approved. The shares of Common Stock offered by Hanover for sale for cash will be offered and sold on Hanover's behalf by certain of its directors and executive officers, who will not be compensated for such sales, from time- to-time during the twelve month period commencing with the date of this Joint Proxy Statement/Prospectus. The prices received for these shares will equal the closing sales prices of the Common Stock as reported on the Nasdaq SmallCap Market as of the dates of sale. Proceeds from the sale of these shares will be used for general corporate purposes, including additional exploration of the company's mining properties. The shares of Common Stock offered for resale by the Selling Stockholders will also be sold during the twelve month period commencing with the date of this Joint Proxy Statement/Prospectus, in the over-the- counter market, in other permitted public sales or in privately negotiated transactions, at market prices or at negotiated prices. The Selling Shareholders acquired these shares at prices or values per share equal to then-prevailing market prices for the Common Stock for cash, in exchange for their interests in corporations that were formerly affiliated with Hanover and have since been merged into Hanover, as consideration for mining properties and other assets conveyed to Hanover, for services rendered on Hanover's behalf and as consideration for the guarantee of some of Hanover's obligations. Hanover will receive no proceeds from the sale of the shares offered for resale by the Selling Stockholders. Some of the Selling Stockholders whose shares would otherwise be eligible for resale under this Joint Proxy Statement/Prospectus have entered into lock-up agreements with Hanover limiting the number of shares that can be resold. The persons who are parties to these agreements are either present or former affiliates of Hanover, or persons who are affiliates of Easton-Pacific. The present and former Hanover affiliates who are parties to these agreements are generally prohibited from reselling more than 30% of their shares during the six-month period ending September 3, 1997. The Easton-Pacific affiliates who are parties to these agreements are prohibited from reselling any of their shares acquired in the merger prior to December 26, 1997, and are prohibited from thereafter reselling more than one-half of the number of shares they own until July 15, 1998, following which the lock-up prohibitions terminate. See "Selling Stockholders and "Plan of Distribution." As of the date of this Joint Proxy Statement/Prospectus, 23,204,411 shares of Hanover's Common Stock were outstanding or deemed outstanding pursuant to presently exercisable options. See "Management" and "Principal Stockholders." The Merger Transaction THE REORGANIZATION AGREEMENT. Under the terms of the Reorganization Agreement, Hanover will issue 7,000,000 shares of its Common Stock, currently valued at approximately $6.16 million, upon the conversion of, and in exchange for the outstanding capital stock of Easton-Pacific. Assuming the merger is approved by Easton-Pacific's and Hanover's shareholders, each Easton-Pacific shareholder who votes to approve the merger and does not elect to exercise dissenter's appraisal rights will receive 6.721656 shares of Common Stock for each share of Easton-Pacific capital stock registered in such shareholder's name. No fractional shares will be issued and no payment will be made for fractional shares. Rather, fractional shares will be rounded to the nearest whole share of Common Stock into which the Easton-Pacific capital stock is converted. SHAREHOLDER APPROVAL REQUIREMENTS. Completion of the merger is subject to the approval of the Reorganization Agreement by Easton-Pacific's and Hanover's shareholders at meetings to be held prior to September 30, 1997 for such purpose. Pursuant to the Delaware General Corporation Law and Hanover's bylaws, the holders of a majority of Hanover's shares of Common Stock are required to approve the Reorganization Agreement; pursuant to the Montana Business Corporation Act and Easton-Pacific's bylaws, the holders of two-thirds of Easton-Pacific's shares of capital stock are required to give such approval. The holders of 17.8% of the outstanding shares of Easton-Pacific's capital stock have executed irrevocable proxies authorizing their proxies and attorneys-in-fact to vote in favor of the merger, and the holders of 35.6% of the outstanding shares of Common Stock of Hanover have expressed their intention to vote in favor of the merger. RECOMMENDATIONS OF THE BOARDS OF DIRECTORS. Hanover's and Easton- Pacific's boards of directors have approved the Reorganization Agreement and recommend that it be approved by the shareholders of their respective companies. The directors of each company believe that the combination of Easton-Pacific and Hanover will make their mining properties in the Virginia City Mining District more conducive to exploration and development, and more attractive to a potential development partner. If the merger is approved by the shareholders, Hanover's land position in the district will increase to 669 patented and unpatented claims and three state mining leases encompassing a contiguous area of approximately 25 square miles. DISSENTER'S APPRAISAL RIGHTS. Easton-Pacific's shareholders have statutory rights of appraisal under the Montana Business Corporation Act in connection with the merger, meaning that if they vote against the Reorganization Agreement and take other steps to perfect their rights, they will be entitled to receive the fair value of their Easton-Pacific shares in cash. No such rights are available to Hanover's shareholders. TAX CONSEQUENCES OF THE MERGER. Hanover and Easton-Pacific will each treat the merger for federal income tax purposes as a reorganization under section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), meaning that neither Hanover nor Easton-Pacific, nor any of their shareholders, will be required to recognize any gain or other income or loss from the transaction for federal income tax purposes. Easton-Pacific will receive an opinion of counsel to Hanover to such effect at closing. More detailed information concerning the merger transaction is set forth elsewhere in this Joint Proxy Statement/Prospectus, in the section entitled "The Easton-Pacific Transaction". Risk Factors An investment in the Common Stock is extremely risky and is suitable only for persons who can afford a loss of their investment. Hanover is an exploration stage mining company that has lost money in every year since its inception. It has only limited cash resources and no proven or probable reserves. Development of its mining properties and the mining properties it will acquire through the merger of Easton-Pacific is contingent on a number of factors, including additional drilling and other exploratory activities to determine whether a commercially minable ore body exists, the preparation of a comprehensive feasibility study, compliance with all regulatory and environmental permitting requirements, and the procurement of funds or the negotiation of other arrangements, such as a joint venture with a major mining company, to cover the significant costs and expenses of opening and operating a mine. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000779226_diversifie_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000779226_diversifie_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5a6ddc57549a81a39097830065784295370909f5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000779226_diversifie_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE "COMPANY" REFER TO DIVERSIFIED CORPORATE RESOURCES, INC. AND ITS SUBSIDIARIES AND PREDECESSORS COLLECTIVELY. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION OR THE REPRESENTATIVE'S WARRANTS. THE COMPANY Diversified Corporate Resources, Inc. is an employment services firm that provides professional and technical personnel on a permanent, temporary and contract placement basis to high-end niche employment markets with a primary emphasis on the information technology ("IT") market. While the majority of the Company's revenues are derived from providing IT staffing solutions, the Company also fills other high-end niche employment positions in the engineering/technical, accounting/finance and professional/ technical sales disciplines. The Company offers permanent placement, temporary and contract staffing services in this broad variety of disciplines in order to position itself as a single source provider of solutions that meets all the high-end staffing needs of its clients. In addition to maintaining this competitively balanced business model, the Company focuses on recruiting qualified applicants for placement and enhancing its training capabilities. The Company manages its operations as a group of profit centers, each of which is incentivized to share leads and draw from each other's information resources, as well as to achieve strong independent performance. The Company serves its clients, including several Fortune 500 companies, through its network of offices located in Dallas, Houston and Austin, Texas, Atlanta, Georgia, Chicago, Illinois, Kansas City, Missouri and Raleigh, North Carolina. The employment services industry has experienced significant growth. According to a May 16, 1997 Staffing Industry Report, 1995 and 1996 revenues for the U.S. staffing industry and its segments were estimated at $63.7 billion and $74.4 billion, respectively, a 17% increase, and 1997 revenues are projected to be $86.6 billion, a 16% increase. Such growth reflects fundamental changes in the employer-employee relationship which have caused employers to impose heightened hiring criteria for permanent employees and have increased the demand for project-oriented contract hiring. These employers require the ability to outsource their staffing needs and the use of permanent, temporary or contract personnel to help them keep personnel costs variable, achieve maximum flexibility and avoid the negative effects of layoffs. These trends have been compounded by the ever increasing rate at which companies must respond to, and take advantage of, advances in IT, particularly because these advances create a significant corresponding need for access to professionals with up-to-date IT skills. The IT services industry has undergone and continues to undergo rapid evolution and growth. "IT" is a term that now encompasses not only computer and communications systems hardware but also the personnel who design, manage and maintain those systems. According to a May 16, 1997 Staffing Industry Report, 1995 and 1996 revenues for the IT services sector were estimated at $8.9 billion and $11.7 billion, respectively, a 31% increase, and 1997 revenues are projected to be $14.9 billion, a 27% increase. The growth of the IT services industry has been driven by: (i) businesses' increasing reliance on information technology as a strategic tool; (ii) the shift to distributed computing through the movement from mainframe to client/server environments; (iii) the fact that these computer networks are comprised of interdependent hardware and software products produced by a wide variety of independent vendors; and (iv) the integration of telecommunications and computers. As businesses struggle to integrate multiple processing platforms and software applications which serve an increasing number of end-users, systems and applications development has become increasingly challenging. Furthermore, as businesses continue to focus on their core competencies, but at the same time strive to operate more efficiently with fewer people, managing and planning staffing requirements to meet IT needs becomes more difficult. To keep up with these changes, companies are increasingly seeking employment services firms like the Company to provide IT professionals on a permanent, temporary or contract basis. The Company's objective is to become a nationally recognized leader in permanent placement and contract specific personnel solutions for high-end niche employment markets. The Company's business strategy is to: (i) maintain its high margin niche focus; (ii) build on its single source provider strategy for staffing services; (iii) focus on recruiting, management and retention of highly skilled professionals; (iv) improve and expand its training programs; and (v) broaden its geographic coverage. The Company believes that its business strategy will provide it with certain competitive advantages that will enable it to address the demands of the high-end niche employment markets it serves. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company................................. 825,900 shares The Selling Shareholders.................... 314,100 shares Common Stock to be outstanding after the Offering...................................... 2,616,212 shares(1) Use of Proceeds................................. For enhancement of the Company's training facilities, for expansion and improvement of its applicant database capabilities, to retire certain factoring and/or other credit facilities, for possible acquisitions and for general corporate purposes. See "Use of Proceeds." American Stock Exchange symbol.................. "HIR" </TABLE> - ------------------------ (1) Excludes an aggregate 315,000 shares of Common Stock reserved for issuance under options granted to certain members of management under the Company's 1996 Amended and Restated Nonqualified Stock Option Plan (the "1996 Stock Option Plan") and 82,590 shares of Common Stock issuable upon exercise of the Representative's Warrant. See "Management--Stock Option Plans" and "Underwriting." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------------- ---------------------- <S> <C> <C> <C> <C> <C> 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- OPERATING DATA: Net service revenues............................. $ 15,233 $ 19,358 $ 27,430 $ 13,027 $ 15,653 Cost of services................................. 11,132 14,332 19,675 9,250 10,969 ---------- ---------- ---------- ---------- ---------- Gross margin................................... 4,101 5,026 7,755 3,777 4,684 Selling, general and administrative expenses(1).................................... 4,147 4,497 5,703 2,707 3,717 Other income (expenses).......................... 62 (183) (288) (169) (40) ---------- ---------- ---------- ---------- ---------- Income before income taxes and extraordinary item......................................... 16 346 1,764 901 927 Income taxes, net................................ -- (60) (225) (112) (93) Extraordinary item, net.......................... 208 175 246 -- 43 ---------- ---------- ---------- ---------- ---------- Net income(1).................................. $ 224 $ 461 $ 1,785 $ 789 $ 877 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Primary earnings per share(1).................... $ .13 $ .26 $ .98 $ .43 $ .48 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average common and common equivalent shares outstanding............................. 1,758,211 1,758,211 1,814,016 1,853,064 1,828,141 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- <CAPTION> AS OF DECEMBER 31, ---------------------------------- AS OF 1994 1995 1996 JUNE 30, 1997 ---------- ---------- ---------- ---------------------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents........................ $ 46 $ 6 $ 613 $ 272 Working capital (deficit)........................ (1,142) (1,060) 95 297 Total assets..................................... 2,563 3,007 5,204 6,563 Total liabilities................................ 3,476 3,459 4,016 4,535 Stockholders' equity (capital deficiency)........ (913) (452) 1,188 2,028 </TABLE> - ------------------------ (1) Included in selling, general and administrative expenses are litigation expenses of $12,000 and $237,000 for the six month periods ended June 30, 1996 and 1997, respectively. If such litigation expenses were excluded, net income would have been $801,000 and $1,114,000 and primary earnings per share would have been $0.43 and $0.61 for the six month periods ended June 30, 1996 and 1997, respectively.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000785813_century_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000785813_century_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7874a1458a27febbc513dbeefb27842664ee396c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000785813_century_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the term "Company" means Century Bancshares, Inc. and its subsidiary. Unless otherwise indicated, the information contained in this Prospectus (i) assumes that the Underwriter's over-allotment option is not exercised and (ii) reflects the five percent Common Stock dividends declared during 1993, 1994, 1995 and 1997, and the seven percent Common Stock dividend declared during 1996. THE COMPANY Century Bancshares, Inc. (the "Company") is a bank holding company headquartered in Washington, D.C. that was organized in July 1985 as a Delaware corporation to own and control all of the capital stock of Century National Bank, a national banking association (the "Bank"). The Bank opened in 1982 and engages in a general commercial banking business with a particular emphasis on the needs of professionals, entrepreneurs, small to medium-sized businesses and not-for-profit organizations located in the Washington, D.C. metropolitan area. At June 30, 1997, the Company had total assets of $111 million, total loans of $74 million, total deposits of $95 million and total stockholders' equity of $7 million. Net income for the first six months of 1997 was $288,000, or $.21 per share. The Company's strategic plan is directed toward the enhancement of its franchise value and operating profitability through a significant increase in its asset size, further expansion into nearby Virginia and Maryland markets and the development of new commercial accounts. See "Business -- Strategic Plan." Accordingly, the Company has invested significantly in computer and telecommunications systems which have positioned the Company to realize economies of scale as it executes its strategy. One method by which the Company plans to grow is by conducting business in multiple locations in high growth markets in Virginia and Maryland. Although the Company successfully expanded the scope of its operations in downtown Washington, D.C. by acquiring a branch office from the Resolution Trust Corporation in 1994, management believes the Company's most profitable growth opportunities are in the contiguous markets of Fairfax County, Virginia and Montgomery County, Maryland. Both of these markets are characterized by high concentrations of small to medium-sized businesses and professionals. Fairfax County is one of the more densely populated and affluent counties in Virginia. Fairfax County's median household income is the highest in the country at $71,610, which is nearly double the national median, and its population is projected to increase approximately eight percent from 1996 to 2001. The demographic characteristics of Montgomery County are also compelling. Median household income of $61,595 ranks ninth nationwide, and the County's population is projected to increase by approximately six percent between 1996 and 2001. Management executed the first step of the Company's branch expansion strategy in 1996 by establishing a loan production office in Tysons Corner, Virginia, which is Fairfax County's largest business center. The office quickly surpassed management's performance goals, and as a result was converted to a full service branch in April 1997. The Company is following a similar strategy with respect to establishing a foothold in Montgomery County, Maryland. In June 1997, the Company opened a loan production office in Bethesda, Maryland, which is one of Montgomery County's largest business centers. The Company plans to replace this office with a full service branch in downtown Bethesda in early 1998, for which it has already received regulatory approval. In furtherance of its expansion strategy, the Company recently entered into an agreement to assume the deposit liabilities and leasehold interest of a branch of Eastern American Bank, FSB ("Eastern American") located in McLean, Virginia approximately three miles from the Bank's office in Tysons Corner. In conjunction with the assumption of these liabilities, the Company will acquire approximately $9.2 million in mortgage loans from Eastern American's portfolio. The transaction, which has received regulatory approval, is expected to close in October 1997. As of the date of the agreement, there were approximately $34 million in deposits at the Eastern American branch. See "The Eastern American Transaction" and "Use of Proceeds." The Company competes in its markets by providing a breadth of products comparable to a regional bank, while maintaining the quick response and personal service of a locally headquartered bank. Management believes it can solidify the Company's competitive advantage through establishing long-term relationships to foster customer loyalty and by continuing to provide a broad array of commercial account and loan products. The Company's principal executive offices are located at 1275 Pennsylvania Avenue, N.W., Washington, D.C. 20004, and its telephone number is (202) 496-4000. THE OFFERING <TABLE> <S> <C> Securities Offered(1)..................... 850,000 shares of Common Stock. Common Stock Outstanding After the Offering(1)............................. 2,067,429 shares. Use of Proceeds........................... The Company will contribute to the Bank from the net proceeds of this Offering an amount (currently estimated at $4.5 million, or 83% of the estimated net proceeds) sufficient to cause the Bank to continue to be "well capitalized" for bank regulatory purposes in view of the deposit transaction with Eastern American and will use the balance for general corporate purposes. The Bank will use the proceeds contributed to it to fund the future growth of its business and for other general corporate purpose. See "Use of Proceeds." NASDAQ Trading Symbol..................... The Common Stock has been authorized for trading in the Nasdaq SmallCap Market under the symbol "CTRY." Risk Factors.............................. Prospective investors in the Common Stock should consider the information discussed under the caption "Risk Factors." </TABLE> - --------------- (1) Assumes no exercise of the Underwriter's over-allotment option to purchase up to 127,500 shares of Common Stock. See "Underwriting." Excludes approximately 343,787 shares of Common Stock issuable upon exercise of outstanding stock options and warrants exercisable as of June 30, 1997 at a weighted average exercise price of $4.72 per share.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000787784_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000787784_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e8759f6009c130ea5ae5aa628abf3c353574a41f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000787784_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Prospective investors should consider carefully the information set forth under "Risk Factors." Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriter's over-allotment option. Unless the context otherwise requires, references to the Company include the Company, its subsidiary partnerships and corporations, and the Company's predecessor, American Retirement Communities, L.P. ("ARCLP" or the "Predecessor"). Immediately prior to the Company's initial public offering in May 1997 (the "IPO"), the Predecessor was reorganized (the "Reorganization") and all of its assets and liabilities were contributed to the Company. See "The Company -- Reorganization." THE COMPANY The Company is a national senior living and health care services company providing a broad range of care and services to the elderly, including independent living, assisted living, skilled nursing, and home health care services. Established in 1978, the Company believes it ranks among the leading operators in the senior living and health care services industry. Currently, the Company operates 22 senior living communities in 12 states, consisting of 12 owned communities, three leased communities, and seven managed communities, with an aggregate capacity for approximately 5,800 residents. In the fourth quarter of 1997, the Company expects to acquire a long-term leasehold in an additional community located in Richmond, Virginia with capacity for 917 residents. The Company operates 15 home health care agencies, ten of which are owned and five of which are managed. At June 30, 1997, the Company's owned communities had a stabilized occupancy rate of 95%, its leased communities had a stabilized occupancy rate of 94%, and its managed communities had a stabilized occupancy rate of 94% (stabilized communities are generally defined as communities or expansions thereof that have (i) achieved 95% occupancy; or (ii) been open at least 12 months). For the year ended December 31, 1996, and the six months ended June 30, 1997, revenues attributable to the Company's senior living communities accounted for 91.5% and 89.8%, respectively, of the Company's total revenues, and revenues attributable to the Company's home health care agencies accounted for 6.2% and 8.0%, respectively, of the Company's total revenues. Approximately 92.4% of the Company's total revenues for the year ended December 31, 1996 and approximately 89.2% of the Company's total revenues for the six months ended June 30, 1997 were derived from private pay sources. Since 1992, the Company has experienced significant growth, primarily through the acquisition of 14 senior living communities. The Company's revenues have grown from $17.8 million in 1992 to $75.6 million in 1996, an average annual growth rate of 43.5%. During the same period, the Company's income from operations has grown from $2.3 million to $15.6 million, an average annual growth rate of 61.7%. The Company intends to continue its growth by developing senior living networks through a combination of (i) development of free-standing assisted living residences, including special living units and programs for residents with Alzheimer's and other forms of dementia; (ii) selective acquisitions of senior living communities, including assisted living residences; (iii) expansion of existing communities; and (iv) development and acquisition of home health care agencies. As part of its growth strategy, the Company is currently developing 27 free-standing assisted living residences, with an estimated aggregate capacity for approximately 2,400 residents, and is expanding nine of its existing communities to add capacity to accommodate approximately 800 additional residents. The Company was founded by Dr. Thomas F. Frist, Sr. and Jack C. Massey, the principal founders of Hospital Corporation of America. The Company's operating philosophy was inspired by Dr. Frist's and Mr. Massey's vision to enhance the lives of the elderly by providing the highest quality of care and services in well-operated communities designed to improve and protect the quality of life, independence, personal freedom, privacy, spirit, and dignity of its residents. The Company believes that its senior management, led by W.E. Sheriff, its Chairman and Chief Executive Officer, and Christopher J. Coates, its President and Chief Operating Officer, is one of the most experienced management teams in the senior living industry. The Company's 12 senior officers have been employed by the Company for an average of ten years and have an average of 14 years of industry experience. The executive directors of the Company's communities have been employed by the Company for an average of four years and have an average of 11 years of experience in the senior living industry. The Company's target market, which consists of seniors age 75 and older, is one of the fastest growing segments of the United States population. According to the United States Census Bureau, this age group is expected to grow from 13.2 million in 1990 to over 16.6 million by 2000, an increase of 26%. The Company believes that the market for senior living and health care services, including Alzheimer's and dementia care services, will continue to grow as a result of (i) the aging of the U.S. population; (ii) rising public and private cost-containment pressures; (iii) declining availability of traditional nursing home beds as a result of nursing home operators focusing on higher acuity patients; (iv) the quality of life advantages of assisted living residences over traditional skilled nursing facilities; and (v) the decreasing availability of family care as an option for elderly family members. The Company believes that its experience, reputation, and market presence favorably position it to take advantage of opportunities in the rapidly growing senior living and health care industry. THE OFFERING Debentures Offered............ $100,000,000 aggregate principal amount of the Company's % Convertible Subordinated Debentures Due 2002 ($115,000,000 if the Underwriter's over-allotment option is exercised in full). Interest Payment Dates........ and , commencing , 1998. Maturity...................... Due on , 2002. Conversion of Debentures...... The Debentures will be convertible at any time on or after December 31, 1997 and prior to maturity, unless previously redeemed, into shares of Common Stock at a price of $ per share, subject to adjustment in certain events. Optional Redemption........... The Debentures will be redeemable at any time and from time to time on or after , 2000 at the option of the Company, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, together with accrued interest thereon to the redemption date. Ranking....................... The Debentures will be subordinated to all present and future Senior Indebtedness of the Company. In addition, the Debentures will be effectively subordinated to all liabilities of the Company's subsidiaries. The Indenture will not limit the amount of Senior Indebtedness or other liabilities the Company or its subsidiaries may incur from time to time. At June 30, 1997, the Company's outstanding Senior Indebtedness totaled approximately $90.9 million and liabilities of the Company's subsidiaries totaled approximately $85.9 million. Change in Control............. Upon a Change in Control, each holder of the Debentures will have the right, subject to certain conditions and restric- tions, to require the Company to repurchase any or all outstanding Debentures owned by such holder at 101% of the principal amount thereof, plus accrued and unpaid interest. Use of Proceeds............... For general corporate purposes, including the development and construction of free-standing assisted living residences, possible acquisitions of businesses engaged in activities similar or complementary to the Company's business, and the possible prepayment of indebtedness. NYSE symbol................... "ACR02" SUMMARY COMBINED AND CONSOLIDATED FINANCIAL AND OTHER DATA The following summary combined and consolidated financial and other data is qualified in its entirety by the more detailed information in the financial statements and pro forma financial information appearing elsewhere in this Prospectus. The summary financial data for the year ended December 31, 1994 and for the three months ended March 31, 1995 is derived from the combined financial statements of certain affiliated partnerships and corporations (collectively, the "Predecessor Entities"). The summary financial data for the nine months ended December 31, 1995, the six months ended June 30, 1996, and the year ended December 31, 1996 is derived from the consolidated financial statements of the Predecessor. The summary financial data for the six months ended June 30, 1997 is derived from the unaudited consolidated financial statements of the Company and includes the operations of the Predecessor for the period January 1, 1997 through May 28, 1997 and the Company for the period May 29, 1997 through June 30, 1997. See "The Company -- Reorganization" and Note 1 to the Combined and Consolidated Financial Statements. <TABLE> <CAPTION> PREDECESSOR ENTITIES (COMBINED) PREDECESSOR --------------------------- --------------------------------------------------------------- THREE MONTHS NINE MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, 1996 ENDED JUNE 30, 1996 DECEMBER 31, MARCH 31, DECEMBER 31, ----------------------- ---------------------- 1994 1995 1995 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1) ------------ ------------ ------------ -------- ------------ ------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues................ $33,341 $12,356 $48,763 $ 75,617 $ 79,543 $34,806 $38,732 Operating expenses............ 28,126 10,270 38,730 60,066 63,861 27,313 30,685 ------- ------- ------- -------- -------- ------- ------- Income from operations....... 5,215 2,086 10,033 15,551 15,682 7,493 8,047 Other income (expense), net... (5,053) (3,334) (6,682) (10,938) (11,353) (4,609) (5,718) ------- ------- ------- -------- -------- ------- ------- Income (loss) before income taxes and extraordinary item......................... 162 (1,248) 3,351 4,613 4,329 2,884 2,329 Income tax expense (benefit) -- current(2)...... -- 20 55 (920) (920) -- -- Income tax expense -- deferred(3).................. -- -- -- -- -- -- -- ------- ------- ------- -------- -------- ------- ------- Income (loss) before extraordinary item........... 162 (1,268) 3,296 5,533 5,249 2,884 2,329 Extraordinary item(4)......... -- -- -- (2,335) (2,335) (2,335) (2,335) ------- ------- ------- -------- -------- ------- ------- Net income (loss)............. $ 162 $(1,268) $ 3,296 $ 3,198 $ 2,914 $ 549 $ (6) ======= ======= ======= ======== ======== ======= ======= Net income (loss) available for distribution to partners and shareholders............. $ 162 $(1,268) $ 2,171 $ 2,094 $ 2,590 $ (165) $ (330) ======= ======= ======= ======== ======== ======= ======= UNAUDITED PRO FORMA TAX DATA(5): Income before income taxes and extraordinary item........... $ 4,613 $ 4,329 $ 2,884 $ 2,329 Pro forma income tax expense.. 820 712 1,096 886 -------- -------- ------- ------- Pro forma income before extraordinary item........... $ 3,793 $ 3,617 $ 1,788 $ 1,443 ======== ======== ======= ======= Pro forma income before extraordinary item available for distribution to partners and shareholders............. $ 2,689 $ 3,293 $ 1,074 $ 1,119 ======== ======== ======= ======= Pro forma per share data: Income before extraordinary item available for distribution to partners and shareholders........... $ 0.29 $ 0.35 $ 0.11 $ 0.12 ======== ======== ======= ======= Shares used in computing pro forma per share data(7).... 9,375 9,375 9,375 9,375 ======== ======== ======= ======= Pro forma as adjusted per share data(8): Income before extraordinary item available for distribution to partners and shareholders........... $ 0.29 $ 0.10 ======== ======= Shares used in computing pro forma as adjusted per share data(9).................... 11,406 11,406 ======== ======= <CAPTION> SIX MONTHS ENDED JUNE 30, 1997 -------- <S> <C> STATEMENT OF OPERATIONS DATA: Total revenues................ $44,389 Operating expenses............ 35,867 ------- Income from operations....... 8,522 Other income (expense), net... (6,308) ------- Income (loss) before income taxes and extraordinary item......................... 2,214 Income tax expense (benefit) -- current(2)...... 92 Income tax expense -- deferred(3).................. 10,728 ------- Income (loss) before extraordinary item........... (8,606) Extraordinary item(4)......... -- ------- Net income (loss)............. $(8,606) ======= Net income (loss) available for distribution to partners and shareholders............. $(8,606) ======= UNAUDITED PRO FORMA TAX DATA(5): Income before income taxes and extraordinary item........... $ 2,214 Pro forma income tax expense.. 841(6) ------- Pro forma income before extraordinary item........... $ 1,373 ======= Pro forma income before extraordinary item available for distribution to partners and shareholders............. $ 1,373 ======= Pro forma per share data: Income before extraordinary item available for distribution to partners and shareholders........... $ 0.14 ======= Shares used in computing pro forma per share data(7).... 9,752 ======= Pro forma as adjusted per shar Income before extraordinary item available for distribution to partners and shareholders........... $ 0.12 ======= Shares used in computing pro forma as adjusted per share data(9).................... 11,406 ======= </TABLE> <TABLE> <CAPTION> AT JUNE 30, 1997 -------------------------- AS ACTUAL ADJUSTED(10) -------- ------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................... $ 21,863 $118,963 Working capital............................................. 15,472 112,572 Total assets................................................ 246,072 346,072 Long-term debt, including current portion................... 167,259 267,259 Shareholders' equity........................................ 50,122 50,122 </TABLE> <TABLE> <CAPTION> PREDECESSOR ENTITIES (COMBINED) PREDECESSOR --------------------------- ---------------------------------------------------- THREE MONTHS NINE MONTHS YEAR ENDED SIX MONTHS SIX MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, 1996 ENDED ENDED DECEMBER 31, MARCH 31, DECEMBER 31, ---------------------- JUNE 30, JUNE 30, 1994 1995 1995 ACTUAL PRO FORMA(1) 1996 1997 ------------ ------------ ------------ ------- ------------ ---------- ---------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> OTHER FINANCIAL DATA: Adjusted EBITDA(11)............. $8,407 $3,262 $15,815 $23,679 $23,198 $10,782 $12,031 Ratio of Adjusted EBITDA to interest expense(12)........... 1.6x 1.4x 2.1x 2.0x 1.9x 2.3x 1.9x Ratio of earnings to fixed charges(13).................... 1.0x 0.5x 1.4x 1.4x 1.3x 1.6x 1.3x Distribution to partners, including preferred distributions.................. $2,580 $1,400 $ 5,189 $ 7,139 $ 6,359(14) $ 3,546 $ 2,500(15) OPERATING DATA: Revenue mix: Private pay.................... 93.0% 92.2% 91.2% 92.4% 92.5% 91.3% 89.2% Medicare and other(16)......... 7.0 7.8 8.8 7.6 7.5 8.7 10.8 ------ ------ ------- ------- ------- ------- ------- Total.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Resident capacity (at period end): Owned.......................... 2,141 2,386 2,594 3,369 2,886 3,369 3,002 Leased......................... -- -- -- -- 483 -- 573 Managed........................ 3,315 3,079 3,008 2,159 2,159 2,159 2,159 ------ ------ ------- ------- ------- ------- ------- Total.................... 5,456 5,465 5,602 5,528 5,528 5,528 5,734 Average occupancy rate: Owned.......................... 89% 91% 93% 94% 94% 93% 94% Leased......................... -- -- -- -- 89 -- 93 Managed........................ 93 95 91 91 90 90 93 ------ ------ ------- ------- ------- ------- ------- Total.................... 90% 93% 92% 92% 92% 92% 93% </TABLE> - --------------- (1) Gives effect to the following transactions as if they had occurred on January 1, 1996: (a) the May 1996 acquisition (the "Carriage Club Acquisitions") of Carriage Club of Charlotte, L.P. and Carriage Club of Jacksonville, L.P. (collectively, "Carriage Club"), and (b) the January 1997 sale-leaseback by the Company of two communities (the "Sale-Leaseback Transactions") and the application of a portion of the net proceeds therefrom to retire debt. See "Unaudited Pro Forma Condensed Combined Financial Information."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000793720_nationwide_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000793720_nationwide_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..42ef54e6603c5c65a23601f6510f6e70dda7e4c1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000793720_nationwide_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements appearing elsewhere in this Prospectus. The Company was formed in November 1996 as a holding company for Nationwide Life Insurance Company and the other companies within the Nationwide Insurance Enterprise that offer or distribute long-term savings and retirement products. The information contained in this Prospectus gives effect to the contribution by Nationwide Corporation to the Company of Nationwide Life and such other companies and the other transactions described under "Recent History." Except as otherwise indicated, consolidated financial statements and statistical data presented in this Prospectus for the Company (including all data set forth in the "Actual" column of any table contained herein) consist of the consolidated financial statements of Nationwide Life and such other companies and give effect to the transactions described under "Recent History," other than the Special Dividends (as defined herein). Except as otherwise indicated: (i) the information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised and (ii) all financial data and ratios presented herein have been prepared using generally accepted accounting principles ("GAAP"). See "Glossary of Selected Insurance Terms" for the definitions of certain insurance terms used herein. As used in this Prospectus, the "Company" means Nationwide Financial Services, Inc. and, unless the context otherwise requires, its subsidiaries; "Nationwide Life" means Nationwide Life Insurance Company and, unless the context otherwise requires, Nationwide Life and Annuity Insurance Company; "Nationwide Corp." means Nationwide Corporation; "Nationwide Mutual" means Nationwide Mutual Insurance Company; and "Nationwide Insurance Enterprise" means Nationwide Mutual and its subsidiaries and affiliates. Nationwide(R) is a registered service mark of Nationwide Mutual, and The Best of America(R) is a registered service mark of Nationwide Life. THE COMPANY OVERVIEW The Company is a leading provider of long-term savings and retirement products to retail and institutional customers throughout the United States. The Company offers variable annuities, fixed annuities and life insurance as well as mutual funds and pension products and administrative services. By developing and offering a wide variety of products, the Company believes that it has positioned itself to compete effectively in various stock market and interest rate environments. The Company markets its products through a broad spectrum of wholesale and retail distribution channels, including financial planners, pension plan administrators, securities firms, banks and Nationwide Insurance Enterprise insurance agents. The Company is one of the leaders in the development and sale of variable annuities. For the first nine months of 1996, the Company was the third largest U.S. writer of individual variable annuity contracts based on sales, according to The Variable Annuity Research & Data Service ("VARDS"). Its principal variable annuity series, The Best of America, allows the customer to choose from 36 investment options, including mutual funds managed by such well-known firms as Dreyfus, Fidelity, Janus, Neuberger & Berman, Oppenheimer, T. Rowe Price, Templeton, Twentieth Century, Vanguard and Warburg Pincus, as well as mutual funds managed by the Company. The Company is a member of the Nationwide Insurance Enterprise, which is known nationally as a writer of automobile and homeowners' insurance throughout the United States. The property/casualty insurers within the Nationwide Insurance Enterprise are the fifth largest property/casualty insurance group in the United States based on 1995 net premiums written, according to A.M. Best Company, Inc. ("A.M. Best"). In the mid-1970s, to capitalize on anticipated opportunities in the growing market for long-term savings and retirement products, the Company embarked on a specific strategy of broadening its distribution channels and product offerings beyond selling traditional life insurance to the automobile and homeowner customers of the Nationwide Insurance Enterprise. Over a 20-year period, the Company added financial planners, pension plan administrators, securities firms and banks as new distribution channels. Such distribution channels in the aggregate accounted for approximately 93.4% of the Company's sales in 1995. Currently, the Company administers approximately 15,000 pension plans and has distribution arrangements with 125 banks and other financial institutions, over 1,000 broker/dealers and over 30,000 registered representatives. The Company has payroll deduction variable annuity enrollee customers in approximately 6,000 state and local government entities and 1,800 school districts, which have been obtained principally through sponsorship relationships with the National Association of Counties and The United States Conference of Mayors and an exclusive contractual arrangement with The National Education Association of the United States. The Company has grown substantially in recent years as a result of its long- term investment in developing the distribution channels necessary to reach its target customers and the products required to meet the demands of these customers. The Company believes its growth has been further enhanced by favorable demographic trends, the growing tendency of Americans to supplement traditional sources of retirement income with self-directed investments, such as products offered by the Company, and the performance of the financial markets, particularly the U.S. stock markets, in recent years. From 1991 to 1995, the Company's assets grew from $16.8 billion to $37.8 billion, a compound annual growth rate of 22.5%. Asset growth during this period resulted from sales of the Company's products as well as market appreciation of assets in the Company's separate accounts and in its general account investment portfolio. During the same period, the Company's net operating income (i.e., net income excluding realized gains and losses on investments and cumulative effect of accounting changes) grew from $82.0 million to $184.8 million, a compound annual growth rate of 22.5%. The Company's sales of variable annuities grew from $984.0 million in 1991 to $4.40 billion in 1995, a compound annual growth rate of 45.4%. The Company's separate account assets, which are generated by the sale of variable annuities and variable universal life insurance, grew from 27.5% of total assets at December 31, 1991 to 49.3% of total assets at December 31, 1995. During this period of substantial growth, the Company controlled its operating expenses by taking advantage of economies of scale and by increasing productivity through investments in technology. From 1991 to 1995, the Company's total assets increased by 124.9% while operating expenses increased by only 89.5%. As a result, its ratio of operating expenses to total assets fell from 1.00% in 1991 to 0.84% in 1995. The Company believes that demographic trends and shifts in attitudes toward retirement savings will continue to support increased consumer demand for its products. According to U.S. Census Bureau projections, the number of Americans between the ages of 45 and 64 will grow from 55.7 million in 1996 to 71.1 million in 2005, making this "preretirement" age group the fastest growing segment of the U.S. population. The Company believes that Americans increasingly are supplementing traditional sources of retirement income, such as employer-provided defined benefit plans and Social Security, with self- directed investments. Reflecting this shift, industry sales of individual variable annuity products grew from $17.3 billion in 1991 to $51.5 billion in 1995, a compound annual growth rate of 31.4%, according to VARDS. During the same period, industry individual variable annuity assets grew from $176 billion to $401 billion, a compound annual growth rate of 22.9%, according to VARDS. The Company has three product segments: Variable Annuities, Fixed Annuities and Life Insurance. The Variable Annuities segment, which accounted for $67.8 million (or 27.3%) of the Company's operating income before income taxes for the first nine months of 1996, consists of annuity contracts that provide the customer with the opportunity to invest in mutual funds managed by independent investment managers and the Company, with investment returns accumulating on a tax-deferred basis. The Fixed Annuities segment, which accounted for $103.8 million (or 41.7%) of the Company's operating income before income taxes for the first nine months of 1996, consists of annuity contracts that generate a return for the customer at a specified interest rate, fixed for a prescribed period, with returns accumulating on a tax-deferred basis. Such contracts consist of single premium deferred annuities, flexible premium deferred annuities and single premium immediate annuities. The Fixed Annuities segment also includes the fixed option under the Company's variable annuity contracts, which accounted for 69.0% of the Company's fixed annuity policy reserves as of December 31, 1995. For the year ended December 31, 1995, the average crediting rate on contracts (including the fixed option under the Company's variable annuity contracts) in the Fixed Annuities segment was 6.58%. Substantially all of the Company's crediting rates on its fixed annuity contracts are guaranteed for a period not exceeding one year. See "Business--Product Segments--Fixed Annuities." The Life Insurance segment, which accounted for $46.2 million (or 18.6%) of the Company's operating income before income taxes for the first nine months of 1996, consists of insurance products, including variable life insurance, that provide a death benefit and may also allow the customer to build cash value on a tax-deferred basis. BUSINESS STRATEGIES The Company's objective is to continue its record of profitable growth by following the strategies set forth below: Enhance the Company's Leading Position in the Market for Variable Annuities. The Company believes that the variable annuity business is attractive because it generates fee income and requires significantly less capital support than fixed annuities and life insurance. The Company also believes, based on the aging of the U.S. population and recent increases in sales of retirement savings products, that variable annuities will continue to experience high rates of industry sales growth and that the Company possesses distinct competitive advantages that will allow it to continue to benefit from this anticipated growth. Some of the Company's most important advantages include its innovative product offerings and strong relationships with independent, well-known fund managers. For example, the Company's The Best of America IV and The Best of America--America's Vision individual variable annuity contracts allow the customer to choose from 36 investment options, including mutual funds managed by a variety of well-known fund managers and the Company. In the aggregate, the Company's group variable annuity products offer over 100 underlying investment options. The Company works closely with its investment managers and product distributors to adapt the Company's products and services to changes in the retail and institutional marketplace. Capture a Growing Share of Sales in all Distribution Channels. The Company's broad distribution system permits it to offer its products across a wide range of markets and customers. The Company continually seeks to gain a larger share of each of its distributor's sales by offering products that are attractive to its distributors from both a financial perspective and in helping the distributor build relationships with its customers. In addition to providing new products to its distributors, the Company seeks to increase sales in each of its existing distribution channels by cross-selling those products not currently offered through such channel. The Company also seeks to add new distributors to its existing channels and regularly evaluates possible new distribution channels. While many of the Company's competitors employ a variety of distribution channels, the Company believes that few of its competitors have a developed distribution system that is as broad as the Company's and that this distinguishing characteristic provides the Company with an important competitive advantage. Maintain a Diverse Product Portfolio. The Company offers a diverse mix of variable annuity, fixed annuity, mutual fund and life insurance products. Based on its experience, the Company believes that demand for, and financial results of, certain of these products are sensitive to stock market and/or interest rate environments, while some products are relatively insensitive to such factors. The Company emphasizes the sale and development of variable annuities, which tend to experience higher sales growth when interest rates are low, and fixed annuities, which tend to experience higher sales growth when interest rates are high. The Company also sells traditional life insurance products which it believes provide it with a stable source of revenues throughout changing market conditions. The Company's strategy is to rely on a variety of products, each of which may perform differently in given stock market and interest rate environments, so that the Company will be able to grow profitably in a variety of such environments. Emphasize Payroll Deductions and Tax-Qualified and Group Annuities. To further enable it to grow profitably in a variety of stock market and interest rate environments, the Company concentrates on the sale of annuities through payroll deductions and the sale of tax-qualified and group annuities. Annuities sold through payroll deductions are somewhat insulated from changes in market conditions because of the recurring nature of their deposits. In 1995, 41.1% of the Company's total annuity statutory premiums and deposits were attributable to payroll deductions. Group annuities and tax- qualified annuities are also somewhat insulated from changes in market conditions because they usually are provided through employers as a voluntary retirement benefit with a limited number of competing investment options. In addition, tax-qualified annuities subject the customer to a tax penalty for early withdrawal. Tax-qualified annuities accounted for 71.9% and group annuities accounted for 44.1% of the Company's total annuity statutory premiums and deposits in 1995. Build on the Company's Brand Strength. The Company believes that the brand names it uses in connection with its products, such as Nationwide and The Best of America, are well-known and have a strong reputation in the financial services market. The Company intends to extend its brand names across markets, applying The Best of America name across many of its wholesale and retail distribution channels. The Company believes that, as the numbers of products and competitors in its markets grow, consumers, distributors, retirement plan sponsors and other decision makers in the market for long-term savings and retirement products will continue to emphasize nationally known brand names. Continue Commitment to Technological Excellence. The Company has made and is committed to continue making significant investments in information systems to enable it to offer innovative products, to more effectively cross-sell products across distribution channels and to offer high quality service. The information systems that the Company has developed for its variable products are costly to replicate. The Company believes that these systems provide it with a significant competitive advantage and impose a barrier to entry for new competitors. PRINCIPAL STOCKHOLDER Following the Equity Offerings, Nationwide Corp. will be the controlling stockholder of the Company. Upon completion of the Equity Offerings, Nationwide Corp. will own all of the outstanding shares of the Class B Common Stock, representing % and % ( % and % if the Underwriters' over-allotment option is exercised in full) of the total number of shares of Common Stock outstanding and the combined voting power of the stockholders of the Company, respectively. Nationwide Corp. is a subsidiary of Nationwide Mutual. Nationwide Mutual and Nationwide Mutual Fire Insurance Company ("Nationwide Mutual Fire") are mutual companies which are the controlling entities of the Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise is an affiliated group of over 100 companies that offers a wide range of insurance and investment products and services. Nationwide Mutual and Nationwide Mutual Fire control the companies within the Nationwide Insurance Enterprise through a variety of means, including security ownership, management contracts and common directors. The Nationwide Insurance Enterprise had $64.7 billion in total statutory assets as of September 30, 1996. See "Risk Factors--Control by and Relationship with the Nationwide Insurance Enterprise; Conflicts of Interest," "Recent History" and "Certain Relationships and Related Transactions." THE FIXED INCOME OFFERINGS Shortly following the Equity Offerings, the Company expects to consummate the public offering of $300 million aggregate principal amount of Senior Notes (the "Note Offering"), and the NFS Trust expects to consummate the public offering of Capital Securities with an aggregate liquidation amount of $100 million (the "Capital Securities Offering," and together with the Note Offering, the "Fixed Income Offerings"). The consummation of the Equity Offerings is not conditioned on the completion of the Fixed Income Offerings, and there can be no assurance that either one or both of the Fixed Income Offerings will be consummated. See "Use of Proceeds" and "The Fixed Income Offerings." The Fixed Income Offerings are being made pursuant to separate prospectuses. ---------------- The Company's executive offices are located at One Nationwide Plaza, Columbus, Ohio 43215, and its telephone number is (614) 249-7111. THE EQUITY OFFERINGS <TABLE> <CAPTION> <C> <S> Class A Common Stock: U.S. Offering.................................................. shares International Offering......................................... shares Total.................................................... shares Class A Common Stock outstanding after the Equity Offerings(1).. shares Class B Common Stock outstanding after the Equity Offerings..... shares Common Stock outstanding after the Equity Offerings(1).......... shares Voting Rights................................................... On all matters submitted to a vote of stockholders, holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes per share. See "Description of Capital Stock." Use of Proceeds................................................. Of the $ million estimated net proceeds from the Equity Offerings, the Company will contribute approximately $ million to the capital of Nationwide Life and retain the balance for general corporate purposes. The Company expects to contribute all of the net proceeds from the Fixed Income Offerings to the capital of Nationwide Life. See "Use of Proceeds" and "The Fixed Income Offerings." Proposed NYSE symbol............................................ NFS Dividend policy................................................. The Company currently intends to pay quarterly cash dividends of $ per share, subject to declaration by the Company's Board of Directors. The Company anticipates that the first dividend will be declared at the end of the second quarter and paid during the third quarter of 1997. There can be no assurances, however, that this dividend or any dividends will be paid by the Company. See "Dividend Policy." </TABLE> - -------- (1) Does not include million shares of Class A Common Stock reserved for issuance under the Company's Long-Term Equity Compensation Plan. See "Management--Long-Term Equity Compensation Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000798757_edwards-j_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000798757_edwards-j_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e4cd675c90e1a52e386525664aab4bb613ffc5a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000798757_edwards-j_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY J.D. Edwards develops, markets and supports highly functional Enterprise Resource Planning software solutions that operate on multiple computing platforms and are designed to accelerate customers' time to benefit, lower customers' cost of ownership and reduce information systems risks arising from changes in technology and business practices. The Company's integrated software application suites support manufacturing, finance, distribution/logistics and human resources operations for multi-site and multinational organizations. Through its Configurable Network Computing architecture, the Company's ERP software is specifically designed to enable customers to change technology and/or business practices while minimizing costs and business interruptions. The Company provides implementation, training and support services designed to enable customers to rapidly achieve the benefits of the Company's ERP solutions. The Company has developed and marketed ERP solutions for over 20 years, principally for operation on AS/400 and other IBM mid-range systems and, more recently, on leading UNIX and Windows NT servers through Windows- and Internet browser-enabled desktop clients. The Company's family of application suites is designed to improve most organizations' core business processes. In addition, the Company extends its application suites to address certain vertical markets with specific configurations, templates and additional software features designed to meet these industries' needs. The Company offers two versions of its application suites -- WorldSoftware and OneWorld. WorldSoftware operates in a host-centric environment on the AS/400 platform. OneWorld incorporates the Company's CNC architecture and operates on leading UNIX and NT servers, as well as the AS/400 platform. The Company believes its network-centric CNC architecture provides a valuable extension beyond traditional client/server architectures by masking complexity, lowering cost of change and facilitating greater scalability. In addition, WorldSoftware and OneWorld are capable of operating together in a unified enterprise-wide environment. The Company also provides WorldSoftware and OneWorld toolsets to enable rapid implementation, customization and modification of its application suites. The Company distributes, implements and supports its products worldwide through 46 offices and 166 third-party business partners. To date, the Company has more than 4,000 customers with sites in over 90 countries including Amgen, Inc., E&J Gallo Winery, Harley Davidson Europe Ltd., Lexmark International, Inc., Mobil Corporation, Samsonite Corporation and SmithKline Beecham plc. THE OFFERING <TABLE> <S> <C> U.S. offering............................................. 12,640,000 shares International offering.................................... 3,160,000 shares Total............................................. 15,800,000 shares (including 12,500,000 shares by the Company and 3,300,000 shares by the Selling Stockholders) Common Stock to be outstanding after the offering......... 91,684,910 shares(1) Use of proceeds........................................... For general corporate purposes, including working capital. See "Use of Proceeds." Proposed Nasdaq National Market symbol.................... JDEC </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> TEN MONTHS NINE MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, JULY 31, OCTOBER 31, -------------------------------------------- -------------------- 1992(2) 1993 1994 1995 1996 1996 1997 ----------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenue........................... $ 119,513 $196,834 $240,587 $340,766 $478,048 $323,783 $431,209 Total costs and expenses................ 116,154 184,546 223,140 311,888 434,421 308,754 406,751 Operating income........................ 3,359 12,288 17,447 28,878 43,627 15,029 24,458 Net income (loss)....................... (267) 7,380 12,063 18,209 26,326 8,672 14,398 Earnings (loss) per common share(3)..... $ (.00) $ .09 $ .15 $ .22 $ .30 $ .10 $ .15 Weighted average common shares outstanding(3)........................ 81,406 81,935 82,201 82,452 87,615 87,404 95,140 </TABLE> <TABLE> <CAPTION> JULY 31, 1997 --------------------------------------- PRO PRO FORMA AS ACTUAL FORMA(4) ADJUSTED(5) -------- -------- ------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents........................................................... $ 38,649 $ 38,649 $ 297,762 Total assets........................................................................ 300,939 318,126 577,239 Mandatorily redeemable shares, at redemption value.................................. 99,076 -- -- Stockholders' equity (deficit)...................................................... (15,300) 100,963 360,076 </TABLE> --------------------- (1) Based on the number of shares outstanding as of July 31, 1997. Excludes (i) 22,121,540 shares of Common Stock issuable upon exercise of outstanding options as of July 31, 1997, with a weighted average exercise price of $4.53 per share, and (ii) 17,137,190 shares of Common Stock reserved for issuance under the Company's stock plans as of July 31, 1997. Subsequent to July 31, 1997, the Company adopted new employee stock plans. The Company does not anticipate making future grants under stock plans that were in effect prior to July 31, 1997. As a result, as of the date of this offering, there will be 12,000,000 shares of Common Stock reserved for future issuance under all new employee stock plans. See "Management -- Employee Benefit Plans" and Note 7 of Notes to Consolidated Financial Statements. (2) In 1992, the Company changed its fiscal year end from December 31 to October 31. The consolidated statement of operations data for the period ended October 31, 1992 reflects 10 months of operating activity as compared with 12 months for all other fiscal year periods. (3) See Note 1 of Notes to Consolidated Financial Statements for a discussion of the computation of earnings (loss) per common share and weighted average common shares outstanding. (4) Reflects the elimination of the mandatory redemption feature of the mandatorily redeemable shares and the income tax benefits resulting from the lapse of restrictions on certain shares of the Company's outstanding Common Stock, both of which will occur automatically upon the closing of this offering. See "Certain Transactions" and Note 1 of Notes to Consolidated Financial Statements. (5) Pro forma as adjusted to reflect the receipt by the Company of the estimated net proceeds from the sale of the shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $22.00 per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. See "Capitalization" and "Use of Proceeds." - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ------------------------ UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ------------------------ TABLE OF CONTENTS <TABLE> <CAPTION> PAGE ----- <S> <C> Prospectus Summary..................... 3 Risk Factors........................... 4 The Company............................ 16 Use of Proceeds........................ 17 Dividend Policy........................ 17 Capitalization......................... 18 Dilution............................... 19 Selected Consolidated Financial Data... 20 Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 21 Business............................... 31 Management............................. 48 Certain Transactions................... 57 <CAPTION> PAGE ----- <S> <C> Principal and Selling Stockholders..... 59 Description of Capital Stock........... 61 Shares Eligible for Future Sale........ 63 Certain United States Federal Income Tax Considerations for Non-U.S. Holders of Common Stock.............. 65 Underwriters........................... 67 Legal Matters.......................... 70 Experts................................ 70 Change in Accountants.................. 70 Additional Information................. 71 Index to Consolidated Financial Statements........................... F-1 </TABLE> ------------------------ J.D. Edwards & Company, J.D. Edwards and WorldVision are registered trademarks of the Company. WorldSoftware, OneWorld, Genesis and Configurable Network Computing are trademarks of the Company. All other trade names and trademarks referred to in this Prospectus are the property of their respective owners. ------------------------ Unless the context otherwise requires, the "Company" or "J.D. Edwards" refers to J.D. Edwards & Company and its consolidated subsidiaries. Except as otherwise noted herein, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. ------------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000801051_conning_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000801051_conning_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..54b2dc3f7acd8d00276a4c930f1d200d83b95e6c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000801051_conning_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus: (i) reflects the conversion of all outstanding shares of Series A Convertible Preferred Stock into an aggregate of 3,190,000 shares of Common Stock, the conversion of all outstanding shares of Series B Convertible Preferred Stock into an aggregate of 365,000 shares of Common Stock for additional consideration to the Company of $1.67 per share, and the conversion of all outstanding shares of Non-Voting Common Stock into an aggregate of 110,000 shares of Common Stock, upon or prior to the completion of this offering (the "Capital Stock Conversions") and (ii) assumes that the over-allotment option granted to the Underwriters by the Company will not be exercised. The Company is the successor to the business conducted by Conning, Inc. and its operating subsidiary, Conning & Company (collectively, "Conning, Inc."), and Conning Asset Management Company, formerly known as General American Investment Management Company ("GAIMCO"), pursuant to a merger (the "Strategic Merger") effected in August 1995. Prior to the Strategic Merger, Conning, Inc. and GAIMCO were unrelated business entities. Conning, Inc. was an 85-year old Hartford, Connecticut based insurance specialty asset management firm which provided asset management services and research for the insurance industry. GAIMCO was a registered investment adviser which provided investment advisory services primarily to its parent, General American Life Insurance Company ("General American"), and its affiliates. The parties effected the Strategic Merger in order to combine complementary businesses, each with specialties in the insurance industry, to build a platform from which to leverage additional growth. See "Certain Relationships and Related Transactions--The Strategic Merger." Other than historical financial statements and data, information herein concerning the Company regarding periods prior to the date of the Strategic Merger, including without limitation with respect to assets under management and private equity funds, includes the Company and its predecessors unless the context indicates otherwise. The Company is a holding company that conducts its business through three subsidiaries: (i) Conning, Inc. is a wholly-owned subsidiary of the Company and serves as an intermediate holding company; (ii) Conning & Company is a wholly-owned subsidiary of Conning, Inc. and is a registered investment adviser and broker-dealer; and (iii) Conning Asset Management Company is a wholly-owned subsidiary of Conning & Company and is a registered investment adviser. Throughout this Prospectus, the terms "Company" and "Conning" refer to Conning Corporation and its subsidiaries. See "Glossary" for definitions of certain terms used in this Prospectus. THE COMPANY GENERAL Conning is a nationally recognized asset management company providing services to the insurance industry and is also a leading provider of insurance research. As of September 30, 1997, the Company had approximately $26.4 billion of assets under discretionary management and, in total, provided services with respect to approximately $73.6 billion of assets for insurance company clients. The Company believes it is well positioned to take advantage of the continued growth in insurance industry assets and the willingness of insurance companies to consider utilizing external investment management expertise. During the period from 1992 through 1996, assets under discretionary management of the Company increased by an average of 24% per year, on a pro forma basis after giving effect to the Strategic Merger and the inclusion of assets of General American for all years. In 1996, its first full year of operations following the Strategic Merger, the Company had revenues of approximately $53.7 million and net earnings of approximately $6.2 million. During the nine months ended September 30, 1997, the Company had revenues of approximately $46.9 million and net earnings of approximately $6.4 million. The Company believes that it possesses competitive strengths in insurance asset management which may support its prospects for growth: INSURANCE INDUSTRY FOCUS AND KNOWLEDGE. Based upon the Company's extensive work with insurance companies, the Company believes that its focus on the insurance industry allows it to provide substantially all of the services and products that an insurance company seeks from an asset manager. By utilizing its specialized knowledge of insurance company investment considerations, the Company believes, based upon feedback from clients, that it offers a more comprehensive set of asset management services than many of its competitors, including asset allocation, asset and liability matching, cash forecasts, tax modeling and investment accounting & reporting. The Company offers expertise in asset classes that many insurance companies traditionally utilize, including commercial mortgage loans, investment real estate and private placements. NAME RECOGNITION WITHIN THE INSURANCE INDUSTRY. The Company believes that the established reputation of Conning within the insurance industry provides the Company with a marketing advantage. According to a 1996 survey by Eager & Associates of 156 domestic, non-captive insurance companies and 110 groups of insurance companies (representing 692 individual companies) each with assets over $30 million (the "Eager Study"), the Company ranks among the top two insurance asset management firms in terms of name recognition among survey respondents. The Company's in-depth insurance industry research has been targeted to senior executives in the insurance industry for more than 20 years, and its Strategic Studies Series is subscribed to by 44 of the 50 largest U.S. property-casualty insurance companies and 42 of the 50 largest U.S. life-health insurance companies (based on 1996 premiums as reported by OneSource Information Services, Inc. as provided to it by third parties). CLIENT SERVICE AND PERFORMANCE FOCUS. The Company attempts to differentiate itself from competitors through its insurance-specific capabilities, investment performance and frequent, responsive client communication. During the period from 1992 through 1996, the Company retained an average of approximately 95% of unaffiliated clients on an annual basis. EXPERIENCED MANAGEMENT WITH SIGNIFICANT STOCK OWNERSHIP. The Company employs an experienced management team, the members of which have an average of approximately 15 years of experience in the investment or insurance business. In total, the employees of the Company will own in the aggregate approximately 29% of the Common Stock on a fully diluted basis after the offering (including options to be granted upon the closing of this offering). See "Management" and "Principal Shareholders." COMPANY OPERATIONS The Company's business is asset management for insurance companies, which is supplemented by its in-depth research focused on the insurance industry. The Company's asset management services consist of three components: (i) discretionary asset management services, (ii) investment advisory services and (iii) investment accounting & reporting services. In connection with its discretionary asset management services, the Company originates and services commercial mortgages and manages investments in real estate assets. The Company also sponsors and manages private equity funds investing in insurance and insurance-related companies. ASSET MANAGEMENT. The Company's insurance asset management services are designed to optimize investment returns for clients within the guidelines imposed by insurance regulatory, accounting, tax and asset/liability management considerations. As of September 30, 1997, the Company provided services with respect to approximately $73.6 billion in assets, of which approximately (i) $26.4 billion represented assets under discretionary management, (ii) $21.0 billion represented assets serviced under investment advisory agreements and (iii) $26.2 billion represented assets receiving investment accounting & reporting services on a stand-alone basis. As part of its discretionary asset management services, as of September 30, 1997, the Company managed approximately $2.6 billion of commercial mortgage loans and investment real estate. The Company manages private equity funds which invest in insurance and insurance-related companies. Since 1985, the Company has sponsored five private equity funds, raising approximately $360 million in committed capital and investing more than $193 million of these proceeds in 39 portfolio company investments. INSURANCE RESEARCH. The Company believes that Conning & Company is one of the leading insurance industry research firms in the United States. The Company publishes in-depth insurance industry research covering major insurance industry trends, products, markets and business segments. The Company also publishes stock research on a broad group of publicly-traded insurance companies for some of the largest United States institutional money managers as well as pension funds, banks, mutual funds, and insurance companies. Conning & Company also from time to time participates in the underwriting of public offerings of equity securities for insurance and insurance-related companies. The Company's principal executive offices are currently located at 700 Market Street, St. Louis, Missouri 63101 (telephone number: (314) 444-0498) and at CityPlace II, 185 Asylum Street, Hartford, Connecticut 06103 (telephone number: (860) 527-1131). DEVELOPING TRENDS IN THE INSURANCE INDUSTRY Certain key insurance industry trends that also affect the management of insurance company assets are as follows: GROWING INSURANCE COMPANY ASSETS. Insurance company assets have grown over several decades and during the period from 1986 to 1996 grew at an average rate of approximately 9% per year, from approximately $1.3 trillion, to approximately $3.1 trillion, according to a standard industry source. ACCEPTANCE OF OUTSOURCING. The Company believes that many insurance companies are utilizing non-affiliated asset managers in order to respond to competitive product requirements and the pressure to achieve higher returns on investments while maintaining an acceptable level of risk. According to the Eager Study, assets under management by external, non-affiliated managers (which represented approximately 15% of industry assets in 1996) increased at a rate of 17% per year from $300 billion in 1994 to $415 billion in 1996. Based upon information provided by an industry source, insurance company assets increased at a rate of approximately 9% per year, from $2.6 trillion in 1994 to $3.1 trillion in 1996. The authors of the Eager Study concluded that externally managed assets would continue to grow, but believed that the growth rate would lose momentum over the next few years covered by the study. STRATEGY The Company's primary operating strategy is to grow recurring, fee-based asset management-related revenues, cash flow and profits through the following: LEVERAGE ESTABLISHED ASSET MANAGEMENT PLATFORM TO GENERATE GROWTH AND PROFITABILITY. The Company believes that it has established a platform, made up of core investment professionals, product expertise and systems, to support future growth in fee-based asset management revenues. Opportunities for asset management growth are expected to come from new and existing clients, strategic acquisitions and alliances and through General American and its affiliates. GENERATE GROWTH FROM NEW AND EXISTING CLIENTS. The Company intends to take advantage of the growth in insurance industry assets and a trend among insurance companies to seek external investment management expertise. The Company will pursue growth in assets under management from new clients by increasing the Company's sales and marketing efforts and by leveraging the Company's strong name recognition. Additionally, the Company will continue to pursue growth in assets under management from existing clients by seeking to increase its share of its clients' assets and from underlying growth in existing assets. PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES TO EXPAND MARKET PENETRATION. The Company regularly evaluates strategic acquisitions, joint ventures and marketing alliances as a means of increasing assets under management, expanding the range of its product offerings and increasing its sales and marketing capabilities. LEVERAGE STRATEGIC ALLIANCE WITH GROWING PARTNER. The Company's relationship with General American, the Company's principal shareholder, provides opportunities for distribution of the Company's products and services to General American and its affiliates. The Company has benefited from the internal growth and acquisition activity of General American and its affiliates, with assets under management of General American and its affiliates increasing at an average rate of approximately 14% per year, from approximately $5.4 billion as of December 31, 1991 to approximately $10.6 billion as of December 31, 1996. At September 30, 1997, such affiliated assets under management totaled approximately $13.5 billion. RISK FACTORS No assurances can be given that the Company's objectives or strategies will be achieved. Prospective investors should consider carefully the factors discussed in detail elsewhere in this Prospectus under the captions "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors." <TABLE> THE OFFERING <CAPTION> <S> <C> Common Stock offered by the Company..................... 2,500,000 shares Common Stock outstanding after the offering................ 12,875,000 shares<F1> Dividend Policy............... The Company currently intends to pay quarterly cash dividends of approximately $0.04 per share of Common Stock ($0.16 annually), commencing in the first quarter of 1998. However, any dividends will be (i) dependent upon the Company's earnings, capital requirements, operating and financial condition and other relevant factors, (ii) subject to declaration by the Company's Board of Directors, and (iii) subject to certain regulatory constraints. See "Risk Fac- tors--Regulation" and "Dividend Policy." Use of Proceeds............... For general corporate purposes, including possible strategic acqui- sitions or alliances. See "Use of Proceeds." Nasdaq National Market symbol...................... "CNNG" <FN> - -------- <F1> Assumes no exercise of outstanding stock options. As of the date of this Prospectus, there are outstanding options to purchase 1,237,500 shares of Common Stock at a weighted average price of $5.65 per share. In addition, upon the closing of this offering the Company intends to grant options to purchase an additional estimated 1,294,987 shares of Common Stock at the initial public offering price. Does not include an aggregate of an estimated 905,013 shares of Common Stock reserved for future issuance under the Company's employee stock plans. See "Management--Employee Stock Plans" and Note 12 of Notes to the Company's Consolidated Financial Statements. </TABLE> <TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA <CAPTION> YEARS ENDED NINE MONTHS ENDED YEARS ENDED DECEMBER 31,<F1> DECEMBER 31,<F2> SEPTEMBER 30, ------------------------------------------ -------------------- -------------------- 1992 1993 1994 1995 1995 1996 1996 1997 PRO FORMA INCOME STATEMENT DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> Revenues: Asset management and related fees........................... $1,716 $2,446 $3,484 $24,050 $30,675 $40,456 $29,365 $36,018 Research services................ 0 0 0 4,090 9,480 12,148 9,582 10,278 Other income..................... 51 36 57 663 996 1,062 792 629 ------ ------ ------ ------- ------- ------- ------- ------- Total revenues............... 1,767 2,482 3,541 28,803 41,151 53,666 39,739 46,925 ------ ------ ------ ------- ------- ------- ------- ------- Operating income................... 832 1,341 2,112 6,292 7,389 11,792 9,093 10,972 Interest expense................. 0 0 0 521 1,365 729 592 233 ------ ------ ------ ------- ------- ------- ------- ------- Income before provision for income taxes............................ 832 1,341 2,112 5,771 6,025 11,063 8,501 10,739 Provision for income taxes......... 311 507 827 2,359 2,739 4,851 3,762 4,317 ------ ------ ------ ------- ------- ------- ------- ------- Net income................... $ 521 $ 834 $1,285 $ 3,412 $ 3,286 $ 6,212 $ 4,739 $ 6,422 ====== ====== ====== ======= ======= ======= ======= ======= Preferred stock dividends.......... 0 0 0 351 906 906 669 750 ------ ------ ------ ------- ------- ------- ------- ------- Net earnings available to common shareholders..................... $ 521 $ 834 $ 1,285 $ 3,061 $ 2,380 $ 5,306 $ 4,070 $ 5,672 ====== ====== ========= ======= ======= ======= ======= ======= Pro forma net income per common share and common share equivalents <F3>..... $ 0.57 $ 0.58 ======= ======= <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, ----------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1997 1997 AS ADJUSTED <F4> BALANCE SHEET DATA: (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> Total assets....................... $1,395 $1,386 $1,683 $46,177 $50,020 $54,646 $85,255 Long-term debt..................... 0 0 0 9,000 2,000 0 0 Convertible preferred stock........ 0 0 0 17,003 24,782 36,152 0 Total common shareholders' equity........................... 958 792 1,327 4,623 4,368 68 66,829 Number of common shares outstanding end of period.................... 0.1 0.1 0.1 6,710 6,710 6,820 12,875 <CAPTION> ----------------------------------------------------- AS OF 1992 1993 1994 1995 1996 9/30/97 OTHER OPERATING DATA: (IN BILLIONS, EXCEPT AS NOTED) <S> <C> <C> <C> <C> <C> <C> Average assets under discretionary management<F5>: Unaffiliated.............................................. $ 3.3 $ 5.4 $ 6.2 $ 7.7 $ 9.5 $ 12.9 General American & affiliates............................. 5.5 6.0 6.6 7.8 9.6 13.5 --------- --------- --------- --------- --------- --------- Total................................................. 8.8 11.4 12.8 15.5 19.1 26.4 Average assets under advisory services...................... 5.2 10.1 14.7 15.3 18.3 21.0 Average assets under accounting & reporting services........ 0.0 1.3 2.6 4.8 9.2 26.2 --------- --------- --------- --------- --------- --------- Total assets serviced................................. $ 14.0 $ 22.8 $ 30.1 $ 35.6 $ 46.6 $ 73.6 ========= ========= ========= ========= ========= ========= <FN> - --------- <F1> The years 1992 to 1994 reflect the results of GAIMCO only. The year 1995 reflects the results of the consolidated activity from August 1, 1995 to December 31, 1995 and the results of GAIMCO only from January 1, 1995 to July 31, 1995. See Note 1 to the Company's Consolidated Financial Statements. <F2> Pro forma 1995 reflects the consolidated activity for the year assuming the Strategic Merger took place on January 1, 1995. The year 1996 reflects actual consolidated results. See Note 2 to the Company's Consolidated Financial Statements. <F3> Pro forma earnings per share is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents considered outstanding during the period after giving effect to all dilutive common stock and common stock equivalents shares issued within twelve months of the public offering of the Company's common stock and to the Capital Stock Conversions. <F4> Gives effect to the Capital Stock Conversions and the sale of 2,500,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13.50 per share and the receipt of the estimated net proceeds therefrom. <F5> Since January 1, 1995, the assets of the general account of General American have been under contract with GAIMCO (now known as Conning Asset Management Company). General account assets prior to January 1, 1995 were managed by the investment division of General American, a predecessor of GAIMCO, and are included in assets under management for 1992, 1993 and 1994. Data for 1995 and prior periods is presented on a pro forma basis to include both Conning and GAIMCO assets under management. </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (CONTINUED) The following financial information represents certain financial data of Conning, Inc. and its subsidiaries for the years ended December 31, 1992, 1993 and 1994, and for the six months ended June 30, 1995: <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ------------------------------- -------- CONNING, INC. AND SUBSIDIARIES 1992 1993 1994 1995 (IN THOUSANDS) INCOME STATEMENT DATA: <S> <C> <C> <C> <C> Revenues: Asset management and related fees....................... $ 6,643 $ 8,107 $ 9,840 $ 5,662 Research services....................................... 9,487 13,473 8,165 4,564 Other income............................................ 132 1,282 472 275 ------- ------- ------ ------- Total revenues...................................... 16,262 22,862 18,477 10,501 ------- ------- ------- ------- Operating income............................................ 582 4,441 2,751 2,092 Interest expense........................................ 111 85 0 0 ------- ------- ------- ------- Income before provision for income taxes and cumulative effect of accounting change............................... 471 4,356 2,751 2,092 Provision for income taxes.................................. 66 947 1,244 809 ------- ------- ------- ------- Income before cumulative effect of accounting change........ 405 3,409 1,507 1,283 Cumulative effect of accounting change...................... 0 131 0 0 ------- ------- ------- ------- Net income.......................................... $ 405 $ 3,540 $ 1,507 $ 1,283 ======= ======= ======= ======= Preferred stock dividends................................... 53 320 320 160 ------- ------- ------- ------- Net earnings available to common shareholders............... $ 352 $ 3,220 $ 1,187 $ 1,123 ======= ======= ======= ======= <CAPTION> AS OF AS OF DECEMBER 31, JUNE 30, ------------------------------- -------- 1992 1993 1994 1995 (IN THOUSANDS) BALANCE SHEET DATA: <S> <C> <C> <C> <C> Total assets................................................ $10,922 $11,274 $14,228 $16,003 Long-term debt.............................................. 0 0 0 0 Redeemable preferred stock.................................. 5,425 0 0 0 Cumulative preferred stock.................................. 0 3,650 3,650 3,650 Total common shareholders' equity (deficit)................. (2,682) 2,552 4,186 5,426 Number of common shares outstanding end of period........... 446 93 106 108 </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000812890_medialink_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000812890_medialink_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e5667a4f4e7372677b0e1f7c50efce1b30fa105d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000812890_medialink_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. THE COMPANY Medialink is a leading worldwide provider of video and audio production and distribution services for businesses and other organizations seeking to communicate their news through television, radio and other media. The Company's principal services are based on its core business -- satellite distribution of video news releases (VNRs) and the electronic monitoring of their broadcast on television. A VNR is the video equivalent of a conventional press release and is used for the same purposes, such as to introduce a new product or service, explain a technological breakthrough, communicate during a crisis or advocate a position on an issue of public concern. VNRs are produced for easy integration into newscasts and are distributed to the media for their use in complete or edited form. The Company began offering production of video news releases in 1994 and has since developed a full range of video, audio and print services which it now provides on a global basis. Video production, audio services, and print distribution, all introduced since the beginning of 1994, accounted for approximately 27% of revenues for the nine months ended September 30, 1996. Medialink enables its clients to reach more than 3,000 newsrooms at television and radio networks, local stations, cable channels, direct broadcast satellite systems, as well as on-line services, including those available on the Internet. The Company has provided its services to more than 1,100 clients over the last twenty-four months. The Company's clients include corporations such as General Motors, IBM, Johnson & Johnson, Sony and Ciba Geigy/Sandoz; organizations such as the American Association of Retired Persons and the AFL-CIO; and the world's largest marketing communications firms such as Burson-Marsteller, Hill & Knowlton, Edelman Public Relations Worldwide and the Shandwick Group. No single client accounted for more than 4% of the Company's revenues in 1995. Materials distributed by the Company have aired on ABC, CBS, NBC and their affiliates, as well as CNN and CNBC in the United States, and the BBC, CNN International, Sky News, RAI (Italy) and NHK (Japan) internationally. Organizations that conduct public relations campaigns, including most marketing communications agencies, do not generally find it cost-effective to maintain the facilities and personnel necessary to produce material suitable for use on news broadcasts and distribute it to the media, especially on a global basis. As a result, it is often more economical to outsource such services from a specialist firm such as the Company, which can provide the necessary talent and production, distribution and monitoring facilities. The Company serves a global marketplace. Based on a combination of surveys taken by the Company and published reports, the Company estimates that it competes in a market which was approximately $500 million in 1995, considering only the United States and the United Kingdom. Medialink's competitive advantages include its extensive operating history with media outlets, key industry relationships, prominent client base, combination of professional skills, ability to integrate new technology and worldwide distribution and production capabilities. The Company has an exclusive agreement with the Associated Press (the 'AP') to use the AP's dedicated links to notify U.S. television and radio newsrooms of upcoming satellite transmissions. The Company has agreements with the AP and ABC Radio Networks Inc. ('ABC Radio') for satellite transmission of audio services to radio stations in the U.S. The Company uses Nielsen Media Research and Competitive Media Reporting to monitor domestic television station usage of video services. Internationally, the Company has a network of 17 affiliates in Europe, Latin America, South Africa, Asia and the Pacific Rim. International revenues increased approximately 317% from $360,000 in 1993 to $1.5 million in 1995. The Company plans to expand its business by (i) developing new services; (ii) leveraging its client relationships by cross-marketing services to its clients; (iii) continuing its global expansion; and (iv) pursuing acquisitions and strategic alliances with other companies that can add to the Company's service capabilities or geographic scope. In July 1996 the Company, through its wholly owned subsidiary Medialink PR Data Corporation ('Medialink PR Data'), acquired certain assets of PR Data Systems, Inc. (the 'PR Data Acquisition') to expand its research capabilities and to add print news release distribution services. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..................... 2,000,000 shares Common Stock to be outstanding after the Offering....... 5,047,933 shares(1) Use of Proceeds......................................... For general corporate purposes and possible acquisitions. See 'Use of Proceeds.' Nasdaq National Market symbol........................... MDLK </TABLE> SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------------------------------------------- --------------------------------- 1991 1992 1993 1994 1995 1995 1996 -------- -------- -------- -------- ---------------------- --------- --------------------- PRO PRO ACTUAL FORMA(2) ACTUAL ACTUAL FORMA(2) --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................... $ 4,891 $ 5,802 $ 6,065 $ 7,548 $ 10,625 $ 12,237 $ 7,382 $ 11,158 $ 12,014 Gross profit............... 3,024 3,577 3,435 4,509 6,071 7,492 4,100 6,553 7,318 Operating income (loss).... 87 140 (215) 440 698 705 303 1,005 1,011 Net income (loss).......... $ 21(3) $ 144(3) $ (231) $ 1,464(4) $ 381 $ 374 $ 166 $ 579 $ 567 Net income (loss) before tax valuation reversal(4).............. $ 21(3) $ 144(3) $ (231) $ 222(4) $ 381 $ 374 $ 166 $ 579 $ 567 Pro forma net income per share(5)................. $ 0.11 $ 0.05 $ 0.17 Shares used to compute pro forma net income per share(5)................. 3,453 3,453 3,485 OTHER DATA: Number of offices.......... 4 4 5 6 7 8 7 8 8 Average revenues per sales employee................. $326,000 $322,000 $347,000 $414,000 $ 506,000 $532,000 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 --------------------------- ACTUAL AS ADJUSTED(6) ------ ----------------- <S> <C> <C> BALANCE SHEET DATA: Working capital...................................................................... $1,500 $19,250 Total assets......................................................................... 6,551 24,301 Long-term debt, net of current portion............................................... 284 284 Stockholders' equity................................................................. 3,173 20,923 </TABLE> - ------------------ (1) Does not include an aggregate of (i) 569,594 shares of Common Stock issuable upon exercise of options outstanding under the Company's Amended and Restated Stock Option Plan ('Stock Option Plan') and (ii) 62,400 shares of Common Stock reserved for issuance upon exercise of options outstanding under the 1996 Directors Stock Option Plan ('Directors Stock Option Plan'). (2) Gives effect to PR Data Acquisition as if the transaction occurred at the beginning of the period presented. The Company paid for the PR Data Acquisition through the payment of $120,000 cash, the issuance of 24,000 shares of Common Stock and the assumption of certain liabilities not to exceed the book value of the assets acquired by $372,000. The pro forma financial information is not necessarily indicative of the operating results which would have been achieved had the acquisition occurred at the beginning of the period presented or the results to be achieved in the future. (3) Includes a loss of $40,000 from discontinued operations in 1991 and the utilization of net operating losses resulting in tax benefits of $12,000 in 1991 and $49,000 in 1992. (4) In accordance with Statement of Financial Accounting Standards No. 109, the Company reversed its valuation allowance against deferred tax assets in the amount of $1,242,000 in 1994. See Note 5 to the Company's Financial Statements. (5) See Note 9 to the Company's Financial Statements for an explanation of the method used to determine the number of shares. (6) Gives effect to the offering of 2,000,000 shares of Common Stock (at an assumed price of $10.00 per share) and the estimated net proceeds of $17.75 million, as if the offering occurred on September 30, 1996. Medialink is headquartered in New York and maintains offices in Washington, D.C., Chicago, Dallas, Los Angeles, Atlanta and Norwalk, Connecticut. Its international activities are coordinated from its London office. Medialink was incorporated under the laws of the State of Delaware in 1986. The Company maintains its principal offices at 708 Third Avenue, New York, New York 10017. The Company's telephone number is 212-682-8300. The Company's Internet address is www.medialinkworldwide.com. Information contained in the Company's World Wide Web ('Web') site shall not be deemed part of this Prospectus. ------------------------ Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) reflects a 1.2 for 1 stock split of the Common Stock effected in the form of a stock dividend on July 31, 1996 and (iii) gives effect to the automatic conversion of all outstanding shares of Series A, Series B and Series C Preferred Stock into an aggregate of 2,111,669 shares of Common Stock to be effective upon the closing of this offering (the 'Preferred Stock Conversions'). See 'Description of Capital Stock.' Medialink is a service mark of the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000812900_saks-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000812900_saks-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000812900_saks-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000814562_pimco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000814562_pimco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..67703ea13fa59b48fb82b9eb0f853877c929dac2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000814562_pimco_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial data appearing elsewhere or incorporated by reference in this Prospectus and the Annexes hereto. Public Unitholders are urged to read this Prospectus and the Annexes in their entirety and should carefully consider the information set forth under the heading "Risk Factors and Other Considerations." Unless otherwise indicated, all unit information reflects the completion of the Oppenheimer Capital Merger and the 1.67-for-one split of the Partnership Units described in "The Partnership." THE PARTNERSHIP The Partnership is a Delaware limited partnership which as its sole business holds 26.1 million PIMCO Advisors GP Units, representing an approximately 23.9% interest in PIMCO Advisors. PIMCO Advisors is one of the nation's largest investment management firms with approximately $190 billion of assets under management at October 31, 1997 (as adjusted to include the assets under management of Oppenheimer Capital). PIMCO Advisors offers a broad range of investment management services and styles to institutional and retail investors, combining the fixed income-oriented investment management operations of Pacific Investment Management Company ("Pacific Investment Management"), the equity-oriented operations of Oppenheimer Capital and five smaller affiliated domestic and international equity investment management firms, and mutual fund operations. PIMCO Advisors provides investment management services primarily to (i) large institutional clients through separate accounts, (ii) smaller institutional clients and financial intermediaries through the institutional share classes of the PIMCO Funds (described below) and (iii) retail investors through the retail share classes of the PIMCO Funds, which are sold principally through broker-dealers. PIMCO Advisors strategy is to pursue growth by marketing the investment management expertise, performance record and reputation of its seven institutional investment management firms (the "Investment Management Firms"). The Investment Management Firms are six Delaware partnerships: Pacific Investment Management, Oppenheimer Capital, Columbus Circle Investors ("CCI"), Cadence Capital Management ("Cadence"), NFJ Investment Group ("NFJ") and Parametric Portfolio Associates ("Parametric") and one United Kingdom limited partnership, Blairlogie Capital Management ("Blairlogie"). The seven Investment Management Firms are structured as separate subsidiaries. PIMCO Advisors believes this decentralized structure enables the Investment Management Firms to implement their own distinct investment strategies and philosophies, providing financial and other incentives for the managers of each of the firms to render superior performance and client service. The Managing Directors of the Investment Management Firms have a significant profits interest in their respective Investment Management Firms, and a number of them hold substantial direct and indirect economic interests in PIMCO Advisors. The Partnership's business results from the November 30, 1997 merger of Oppenheimer Capital with a subsidiary of PIMCO Advisors (the "Oppenheimer Capital Merger"). Prior to the Oppenheimer Capital Merger, the Partnership's only asset was a 67.6% interest in Oppenheimer Capital. In the Oppenheimer Capital Merger, PIMCO Advisors acquired from the Partnership the remaining 67.6% general partner interest in Oppenheimer Capital it did not own, as a result of which Oppenheimer Capital became a wholly-owned subsidiary of PIMCO Advisors and the Partnership received 26.1 million PIMCO Advisors GP Units. PIMCO Partners, G.P. ("PGP") is the sole general partner of the Partnership and is the controlling general partner of PIMCO Advisors. [PIMCO ADVISORS LETTERHEAD] December , 1997 Dear PIMCO Advisors L.P. Public Unitholder: As you may know, we recently completed a combination of the businesses of PIMCO Advisors L.P. ("PIMCO Advisors") and Oppenheimer Capital. In the combination, Oppenheimer Capital, L.P. ("Opcap LP"), a New York Stock Exchange listed partnership, received 26.1 million PIMCO Advisors units in exchange for its interest in Oppenheimer Capital. As a result of the combination, Oppenheimer Capital became a wholly-owned subsidiary of PIMCO Advisors, and Opcap LP's publicly traded limited partner units became an indirect investment in PIMCO Advisors. The Oppenheimer Capital merger has resulted in two public investment vehicles in PIMCO Advisors: direct investments in PIMCO Advisors and indirect investments through Opcap LP. You may also know that due to recent legislation, publicly traded partnerships like PIMCO Advisors and Opcap LP will become subject to a tax on their gross income from active businesses after December 31, 1997. As a result of that legislation and pursuant to the provisions of our partnership agreement, effective December 31, 1997 the public ownership of PIMCO Advisors and Opcap LP is being combined into a single entity, Opcap LP, which will change its name to PIMCO Advisors Holdings L.P. In the restructuring, all of your PIMCO Advisors limited partner units will be contributed to Opcap LP, and you will be issued an equal number of Opcap LP limited partner units and become a limited partner in Opcap LP. After the restructuring, each Opcap LP unit will represent indirectly the same investment you now have in one PIMCO Advisors unit. The primary purposes of the restructuring are to (i) permit Public Unitholders in PIMCO Advisors to continue to maintain an investment in a publicly traded entity while consolidating all public ownership of PIMCO Advisors into one entity and (ii) allow PIMCO Advisors to become a private partnership, which will not be subject to the new tax on its gross income from active businesses. Management believes that there are several benefits associated with combining the public ownership in the PIMCO Advisors enterprise into a single entity. The number of public holders in the one entity will be greater than the number in either Opcap LP or PIMCO Advisors individually, which should have a favorable impact on market liquidity. Additionally, the combination will simplify the organizational structure of the PIMCO Advisors business and reduce confusion in the marketplace created by two publicly traded securities representing essentially the same investment. Finally, having a single public entity will substantially reduce administrative costs. The restructuring also will benefit the nonpublic unitholders of PIMCO Advisors because they will retain an interest in a partnership (PIMCO Advisors) that will not be subject to a new 3.5% federal tax that will be imposed after December 31, 1997, on the gross income of certain publicly traded partnerships, including Opcap LP. Because each Opcap LP limited partner unit represents an indirect investment in one PIMCO Advisors unit, your economic interest in the PIMCO Advisors business will not be altered or diminished in any way. Also, since our general partner will remain the controlling general partner of both partnerships, the restructuring will not result in a change in the management of your investment. YOU DO NOT NEED TO TAKE ANY ACTION FOR THE RESTRUCTURING TO OCCUR AND YOU ARE NOT BEING ASKED TO VOTE ON ANY ITEMS. On December 31, 1997, you will automatically become a limited partner of Opcap LP and cease to be a limited partner of PIMCO Advisors. A letter of transmittal to be used for surrendering your PIMCO Advisors unit certificates in exchange for Opcap LP unit certificates will be sent to you after December 31, 1997. The restructuring is intended to be a tax-free transaction for holders of PIMCO Advisors units. For further information regarding the tax consequences of the restructuring, you should review the discussion of federal tax matters included in the accompanying Prospectus. The accompanying Prospectus gives detailed information about Opcap LP and the restructuring. We encourage you to read it carefully. Sincerely yours, William D. Cvengros Chief Executive Officer <TABLE> <CAPTION> PAGE ---- <S> <C> Executive Deferred Compensation Plan................................................ 55 RELATIONSHIP BETWEEN THE PARTNERSHIP AND PIMCO ADVISORS............................... 56 Operating Agreement................................................................. 56 Exchange Rights..................................................................... 56 Expense Reimbursement............................................................... 57 CERTAIN RELATIONSHIPS AND TRANSACTIONS................................................ 57 PGP Indebtedness.................................................................... 57 Withdrawal and Removal of a General Partner of the Partnership or PIMCO Advisors.... 58 Indemnification..................................................................... 58 Contribution Agreement.............................................................. 59 Registration Rights Agreements...................................................... 59 RECENT UNIT PRICES AND DISTRIBUTIONS.................................................. 61 SELECTED FINANCIAL DATA OF OPPENHEIMER CAPITAL, L.P................................... 64 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PARTNERSHIP.................................................................. 65 The Partnership..................................................................... 65 Oppenheimer Capital................................................................. 66 SELECTED CONSOLIDATED FINANCIAL DATA OF PIMCO ADVISORS................................ 73 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PIMCO ADVISORS................................................................... 75 Overview............................................................................ 75 Results of Operations............................................................... 75 Capital Resources and Liquidity..................................................... 82 Economic Factors.................................................................... 83 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE PARTNERSHIP..... 84 DESCRIPTION OF THE PARTNERSHIP AGREEMENT.............................................. 86 COMPARISON OF PIMCO ADVISORS LIMITED PARTNER UNITS AND PARTNERSHIP UNITS.............. 90 CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 96 Tax Consequences of the Restructuring............................................... 96 Tax Classification of the Partnership............................................... 96 Tax Allocations..................................................................... 99 Certain Limitations on Losses and Deductions........................................ 100 Disposition of Partnership Units.................................................... 100 Backup Withholding.................................................................. 101 Certain Additional Tax Considerations for Holders of Partnership Units.............. 101 Special Status Taxpayers............................................................ 101 State and Local Taxes............................................................... 102 LEGAL MATTERS......................................................................... 102 EXPERTS............................................................................... 102 AVAILABLE INFORMATION................................................................. 103 INDEX TO FINANCIAL STATEMENTS......................................................... F-1 </TABLE> THE RESTRUCTURING The Restructuring.................. Under the authority conferred by the PIMCO Advisors Partnership Agreement, the general partners, on behalf of each Public Unitholder, will contribute the PIMCO Advisors LP Units held by the Public Unitholders to the Partnership. In exchange for the PIMCO Advisors LP Units, the Partnership will issue an equal number of Partnership Units to the Public Unitholders. Each Partnership Unit represents an indirect investment in a single PIMCO Advisors unit. Accordingly, Public Unitholders will continue to hold the same economic interest in PIMCO Advisors as they did before the Restructuring. Nonpublic Unitholders will continue to maintain a direct interest in PIMCO Advisors. Distribution Ratio................. Each Public Unitholder will receive one Partnership Unit for each PIMCO Advisors LP Unit held as of the Effective Date. Effective Date..................... Following close of business on December 31, 1997. Total Number of Partnership Units to be Issued....................... Up to 20,258,372 million Partnership Units. Trading Market..................... Partnership Units are currently listed for trading on the NYSE under the symbol "OCC" and are expected to be listed for trading under the symbol "PA" after the Effective Date. Risk Factors....................... Unitholders are referred to the matters discussed in "Risk Factors and Other Important Considerations." Primary Purposes of the Restructuring...................... The primary purposes of the Restructuring are to (i) permit Public Unitholders in PIMCO Advisors to continue to maintain an investment in a publicly traded entity while consolidating all public ownership of PIMCO Advisors into one entity and (ii) allow PIMCO Advisors to become a private partnership, which will not be subject to the new tax on its gross income from active businesses. Management believes that there are several benefits associated with combining the public ownership in the PIMCO Advisors enterprise into a single entity. The number of public holders in the one entity will be greater than the number in either the Partnership or PIMCO Advisors individually, which should have a favorable impact on market liquidity. Additionally, the combination will simplify the organizational structure of the PIMCO Advisors business and reduce confusion in the marketplace created by two publicly traded securities representing essentially the same investment. Finally, having a single public entity will substantially reduce administrative costs. The Restructuring also will benefit the Nonpublic Unitholders of PIMCO Advisors because they will retain an interest in a partnership (PIMCO Advisors) that will not be subject to the new federal tax on gross income that INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED DECEMBER 10, 1997 PROSPECTUS OPPENHEIMER CAPITAL, L.P. 800 NEWPORT CENTER DRIVE, SUITE 100 NEWPORT BEACH, CALIFORNIA 92660 ISSUANCE OF UP TO 20,258,372 UNITS OF LIMITED PARTNER INTEREST OF OPPENHEIMER CAPITAL, L.P. TO UNITHOLDERS OF PIMCO ADVISORS L.P. This Prospectus is being furnished to the Public Unitholders (as defined in the partnership agreement of PIMCO Advisors L.P. ("PIMCO Advisors")) of units of limited partner interest ("PIMCO Advisors LP Units") in PIMCO Advisors in connection with the restructuring (the "Restructuring") of the public ownership of PIMCO Advisors. As of December 31, 1997 (the "Effective Date"), all PIMCO Advisors LP Units held by Public Unitholders will be contributed by the general partners of PIMCO Advisors, on behalf of each Public Unitholder, to Oppenheimer Capital, L.P. (the "Partnership") in return for the issuance to the Public Unitholders of an equal number of units of limited partner interest in the Partnership ("Partnership Units"). This action is being taken pursuant to the power granted by the PIMCO Advisors Amended and Restated Agreement of Limited Partnership (the "PIMCO Advisors Partnership Agreement"). The Partnership is a Delaware limited partnership which as its sole business holds general partner units ("PIMCO Advisors GP Units") in PIMCO Advisors. Each Partnership Unit represents an indirect interest in one PIMCO Advisors GP Unit. PIMCO Advisors GP Units are entitled to the same economic benefits as PIMCO Advisors LP Units. Accordingly, after the Restructuring, Public Unitholders will hold the same economic interest in PIMCO Advisors as they did before the transaction. Following the Effective Date, all trading in the PIMCO Advisors Class A LP Units on the New York Stock Exchange ("NYSE") will cease, and thereafter the Partnership Units will be the sole publicly-traded investment in the PIMCO Advisors business. On the Effective Date, Public Unitholders will automatically cease to be limited partners of PIMCO Advisors and will become limited partners of the Partnership. Thereafter, Public Unitholders of record on the Effective Date may receive certificates representing Partnership Units upon surrender of their PIMCO Advisors LP Unit certificates in accordance with the instructions provided herein. Public Unitholders will receive one Partnership Unit for each PIMCO Advisors LP Unit they hold on the Effective Date. Nonpublic Unitholders (as defined in the PIMCO Advisors Partnership Agreement) will continue to maintain a direct interest in PIMCO Advisors. Partnership Units will be traded on the NYSE under the symbol "OCC" until the Effective Date and under the symbol "PA" thereafter. In addition, it is expected that after the Restructuring, the Partnership will change its name to PIMCO Advisors Holdings L.P. PIMCO Advisors Class A LP Units are expected to continue to be traded on the NYSE until the Effective Date under the symbol "PA" and thereafter will not be publicly traded. On November 4, 1997, the last trading day prior to the execution of the agreement and plan of merger relating to the Oppenheimer Capital Merger (as defined herein), the closing sale prices for the Partnership Units and PIMCO Advisors Class A LP Units on the NYSE were $52 3/16 and $30 3/8, respectively. On December 9, 1997, the closing sales prices for the Partnership Units and PIMCO Advisors Class A LP Units on the NYSE were $54 3/8 and $32 15/16, respectively. WE CALL YOUR ATTENTION TO THE FACTORS SPECIFIED UNDER THE CAPTION "RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS" BEGINNING ON PAGE 8, WHICH ADDRESS CERTAIN CONSIDERATIONS RELATING TO AN INVESTMENT IN THE PARTNERSHIP. NO VOTE OF UNITHOLDERS IS REQUIRED IN CONNECTION WITH THE RESTRUCTURING. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY. No person is authorized to give any information or to make any representation not contained in the Prospectus, and any information or representation not contained herein must not be relied upon as having been authorized by PIMCO Advisors or the Partnership. This Prospectus does not constitute an offer of any securities, and does not constitute a solicitation of a consent or an offer to sell to any person in any jurisdiction in which it is unlawful to make such an offer or solicitation. Neither the delivery of this Prospectus nor any issuances made hereunder shall, under any circumstances, create any implication that there has been no change in the assets, properties or affairs of PIMCO Advisors or the Partnership since the date hereof or that information set forth herein is correct as of any time subsequent. ------------------------ THE SECURITIES ISSUABLE PURSUANT TO THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this Prospectus is December , 1997 will apply to certain publicly traded partnerships, including the Partnership, after December 31, 1997. See "The Restructuring -- Reasons for the Restructuring." Tax Consequences................... The Restructuring is intended to be a tax-free transaction for the Public Unitholders. Public Unitholders are, however, encouraged to seek the advice of their tax advisor to determine whether there are any tax consequences that affect them. See "Certain Federal Income Tax Consequences." Relationship with PIMCO Advisors... Following the Restructuring, the Partnership will remain a general partner of PIMCO Advisors. The relationship between the Partnership and PIMCO Advisors is governed by the PIMCO Advisors Partnership Agreement and an operating agreement (the "Operating Agreement") between the two partnerships which, among other things, provides for the maintenance of a one-for-one exchange ratio between the Partnership Units and the PIMCO Advisors units held by the Partnership (excluding the PIMCO Advisors units underlying the general partner interest in the Partnership), and provides for certain exchange rights and registration rights for Nonpublic Unitholders. See "Relationship Between the Partnership and PIMCO Advisors -- Operating Agreement." Distribution Policy................ The Partnership will make quarterly distributions of available cash on each Partnership Unit. The distributions on each Partnership Unit will generally be equal in amount to the distributions received on the underlying PIMCO Advisors units held by the Partnership less any applicable taxes because all of the expenses (other than taxes) of the Partnership will be paid by PIMCO Advisors. STRUCTURE STRUCTURE -- THE RESTRUCTURING AND AFTER THE RESTRUCTURING SUMMARY FINANCIAL DATA OF OPPENHEIMER CAPITAL, L.P. The following table sets forth summary financial data of the Partnership (retroactively restated to reflect a 1.67 to 1 unit split effective December 1, 1997) and Oppenheimer Capital for the three months ended July 31, 1997 and 1996, and each of the five years ended April 30, 1997. This information should be read in conjunction with the Financial Statements of Oppenheimer Capital, L.P. and the Consolidated Financial Statements of Oppenheimer Capital and the related notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Oppenheimer Capital, L.P." <TABLE> <CAPTION> OPPENHEIMER CAPITAL, L.P. ----------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 31, FOR THE YEARS ENDED APRIL 30, ------------------- ----------------------------------------------------------- 1997 1996 1997 1996 1995 1994 1993 ------- ------- -------- -------- ------- ------- ------- (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATING DATA: Revenues............................... $19,585(3) $12,280 $ 56,046(1) $ 61,316(1) $34,282 $35,091 $30,022 Expenses............................... 685 685 2,720 2,720 3,461 4,038 3,704 ------- ------- ------- ------- ------- ------- ------- Net income............................. $18,900(3) $11,595 $ 53,326(1) $ 58,596(1) $30,821 $31,053 $26,318 ======= ======= ======= ======= ======= ======= ======= Net income per unit.................... $ 0.72(3) $ 0.45 $ 2.06(1) $ 2.28(1) $ 1.21 $ 1.22 $ 1.04 Distributions declared per unit........ $ 0.57 $ 0.39 $ 2.10(2) $ 1.90(2) $ 1.30 $ 1.28 $ 1.16 Weighted average number of units outstanding.......................... 25,763 25,656 25,663 24,457 25,277 25,122 25,065 </TABLE> <TABLE> <CAPTION> APRIL 30, JULY 31, ----------------------------------------------------------- 1997 1997 1996 1995 1994 1993 ------------------- -------- -------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> FINANCIAL CONDITION DATA AT: Total assets........................... $118,313 $116,149 $110,099 $96,633 $98,116 $98,365 Total liabilities...................... 14,806 17,858 12,713 10,321 10,319 9,683 ------- -------- -------- ------- ------- ------- Partners' capital...................... $103,507 $ 98,291 $ 97,386 $86,312 $87,797 $88,682 ======== ======== ======= ======= ======= </TABLE> - --------------- (1) Includes revenues and a gain on Quest sale of $1.8 million, or $.07 per unit in fiscal 1997 and $17.7 million, or $.69 per unit in fiscal 1996. (2) Includes a special distribution related to the Quest sale of $.06 per unit in fiscal 1997 and $.33 in fiscal 1996. (3) Includes revenues and a gain on Quest sale of $2.8 million, or $.11 per unit. <TABLE> <CAPTION> OPPENHEIMER CAPITAL -------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 31, FOR THE YEARS ENDED APRIL 30, -------------------- -------------------------------------------------------- 1997 1996 1997 1996 1995 1994 1993 -------- ------- -------- -------- -------- -------- ------- (UNAUDITED) (AMOUNTS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATING DATA: Revenues.................................. $ 55,043 $41,075 $181,974 $158,215 $129,912 $112,290 $94,733 Expenses.................................. 30,302 23,441 103,064 95,551 83,066 64,683 54,707 ------- ------- -------- -------- -------- -------- ------- Operating Income.......................... 24,741 17,634 78,910 62,664 46,846 47,607 40,026 Gain on Quest sale(1)..................... 4,374 -- 2,806 27,725 -- -- -- ------- ------- -------- -------- -------- -------- ------- Income before income taxes and minority interest................................ $ 29,115 $17,634 $ 81,716 $ 90,389 $ 46,846 $ 47,607 $40,026 ======= ======= ======== ======== ======== ======== ======= Assets under management at period end (in billions)............................... $ 60.8 $ 40.4 $ 51.2 $ 40.6 $ 31.8 $ 29.4 $ 26.4 </TABLE> <TABLE> <CAPTION> APRIL 30, JULY 31, -------------------------------------------------------- 1997 1997 1996 1995 1994 1993 -------------------- -------- -------- -------- -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> FINANCIAL CONDITION DATA AT: Total assets............................. $103,055 $ 93,019 $ 76,338 $ 56,129 $ 43,034 $37,677 Total liabilities........................ 54,356 53,044 41,462 41,582 30,557 27,830 Minority interest........................ 396 277 174 87 25 18 -------- -------- -------- -------- -------- ------- Partners' capital........................ $ 48,303 $ 39,698 $ 34,702 $ 14,460 $ 12,452 $ 9,829 ======== ======== ======== ======== ======== ======= </TABLE> - --------------- (1) Reflects the gain realized by Oppenheimer Capital on the sale of the investment advisory and other contracts and business relationship for its twelve Quest for Value mutual funds to Oppenheimer Funds, Inc., on November 22, 1995. SUMMARY CONSOLIDATED FINANCIAL DATA OF PIMCO ADVISORS The following table sets forth summary consolidated financial data of PIMCO Advisors for the nine months ended September 30, 1997 and 1996, and each of the five years ended December 31, 1996. PIMCO Advisors and its subsidiaries were formed on November 15, 1994, when Pacific Financial Asset Management Corporation ("PFAMCo") merged certain of its investment management businesses and substantially all of its assets (the "PFAMCo Group") into Thomson Advisory Group L.P. ("TAG L.P.") (the "Consolidation"). Under generally accepted accounting principles, the Consolidation is accounted for as an acquisition of TAG L.P. by PFAMCo Group, even though the legal form was the reverse. Therefore, the historical financial statements include the operations of PFAMCo Group, in its corporate form, prior to the Consolidation and the combined results of PIMCO Advisors, in its partnership form, for the period since the Consolidation. This information should be read in conjunction with the Consolidated Financial Statements of PIMCO Advisors L.P. and Subsidiaries and the related notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations of PIMCO Advisors." <TABLE> <CAPTION> FOR THE NINE MONTHS ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31, --------------------- ------------------------------------------------------------ 1997 1996 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Total revenues...................... $344,210 $287,161 $392,024 $323,014 $180,263 $165,856 $120,155 Operating expenses.................. 232,572 190,975 261,978 215,271 145,220 131,447 93,011 Amortization of intangibles, options and restricted units.............. 31,000 30,852 41,171 42,723 6,202 -- -- -------- -------- -------- -------- -------- -------- -------- Operating income.................... 80,638 65,334 88,875 65,020 28,841 34,409 27,144 Other income, net................... 3,249 2,401 3,454 3,964 1,083 864 1,115 -------- -------- -------- -------- -------- -------- -------- Income before income tax expense.... 83,887 67,735 92,329 68,984 29,924 35,273 28,259 Income tax expense.................. 1,226 834 1,201 517 10,669 15,556 11,405 -------- -------- -------- -------- -------- -------- -------- Net income.......................... $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255 $ 19,717 $ 16,854 ======== ======== ======== ======== ======== ======== ======== Net income allocated to: General Partner and Class A Limited Partner units........... $ 45,329 $ 39,421 $ 52,916 $ 46,655 $ 4,976 Class B Limited Partner units..... 37,332 27,480 38,212 21,812 1,128 Pre-Consolidation................. -- -- -- -- 13,151 -------- -------- -------- -------- -------- Total............................... $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255 ======== ======== ======== ======== ======== NET INCOME PER UNIT(1): General Partner and Class A Limited Partner units..................... $ 1.06 $ 0.96 $ 1.29 $ 1.16 $ 0.12 Class B Limited Partner units....... $ 1.06 $ 0.76 $ 1.05 $ 0.59 $ 0.03 WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING (POST-CONSOLIDATION): Units outstanding: General Partner................... 800 800 800 800 800 Class A Limited Partner........... 40,146 40,132 40,135 40,108 40,018 Class B Limited Partner........... 32,983 32,961 32,961 32,961 32,961 -------- -------- -------- -------- -------- Total............................... 73,929 73,893 73,896 73,869 73,779 Weighted average effect of unit options........................... 3,906 2,915 3,119 1,684 984 -------- -------- -------- -------- -------- Total............................... 77,835 76,808 77,015 75,553 74,763 ======== ======== ======== ======== ======== DIVIDENDS/DISTRIBUTIONS............. $104,042 $ 97,560 $131,604 $ 89,613 $ 24,384 $ 22,158 $ 12,950 ======== ======== ======== ======== ======== ======== ======== FINANCIAL CONDITION AT END OF PERIOD: Total assets(2)..................... $365,728 $373,545 $358,500 $369,592 $379,708 $ 70,388 $ 43,189 Total liabilities................... 86,752 68,802 62,257 38,035 34,179 44,567 17,686 -------- -------- -------- -------- -------- -------- -------- Total Partners' capital(3).......... $278,976 $304,743 $296,243 $331,557 $345,529 $ 25,821 $ 25,503 ======== ======== ======== ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> FOR THE NINE MONTHS FOR THE YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30, -------------------------------- 1997 1996 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> OTHER STATISTICS: Assets under management (in millions)......................... $130,632 $104,540 $110,022 $ 95,182 $ 72,175 $ 57,182 $ 43,737 Operating Profit Available for Distribution(1)................... 113,830 97,763 132,314 111,205 12,306 -- -- Cash flows provided by operating activities........................ 112,502 119,882 140,446 86,921 25,852 23,620 9,309 Cash flows (used in) provided by investing activities.............. (16,598) (2,983) (2,446) (17,771) 22,401 (436) (1,149) Cash flows used in financing activities........................ (104,042) (97,560) (131,604) (89,238) (2,549) (14,900) (15,800) </TABLE> - --------------- (1) Computed on earnings following the Consolidation. Operating Profit Available for Distribution is defined by the PIMCO Advisors Partnership Agreement as the sum of net income plus non-cash charges from the amortization of intangible assets, non-cash compensation expenses arising from option and restricted unit plans, and losses of any subsidiary which is not a flow-through entity for tax purposes. (2) Upon completion of the Consolidation, approximately $284.9 million of intangible assets were created. See Note 3 in the Notes to the Consolidated Financial Statements of PIMCO Advisors L.P. and Subsidiaries. (3) Stockholders' equity before the Consolidation.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000820221_innova_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000820221_innova_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fb1375ad8a0305f8145f4ffb31a9bee1a52228c4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000820221_innova_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus and the information under "Risk Factors." Unless otherwise indicated, all information in this Prospectus (i) assumes that the Underwriters' over-allotment option will not be exercised; (ii) reflects a 24:1 reverse stock split to be effected by the Company upon consummation of the Offering; (iii) reflects the conversion of all outstanding shares of the Company's Preferred Stock into 8,682,287 shares of Common Stock upon consummation of the Offering; and (iv) the conversion of all outstanding warrants to purchase Preferred Stock into warrants exercisable for an aggregate of 481,977 shares of Common Stock. THE COMPANY Innova designs, manufactures and supports millimeter wave radios for use as short- to medium-distance wireless communication links in developed and developing telecommunications markets. Innova's products enable telecommunications service providers to establish reliable and cost-effective voice, data and video communications links within their networks. Innova's products operate in frequencies ranging from 13-38 GHz and may be used in various applications, including cellular and PCS/PCN networks, broadband communications, local loop services and long distance networks. In recent years, growing demand for telecommunications services has been driven by the emergence of improved technologies and by the recognition that effective communications can enhance business productivity and accelerate economic growth. Regulatory changes, including the privatization of state-run telephone monopolies, allocation of additional radio spectrum and licensing of new entrants to the telecommunications market, have created a competitive environment in which service providers are seeking to meet this demand and capture market share by rapidly establishing new networks and expanding existing networks. Millimeter wave radios have become an increasingly critical component of telecommunications networks. As a result, telecommunications service providers have focused on the quality and lifetime ownership cost of these systems. Innova has combined its expertise in radio frequency ("RF") systems architecture and software design to create reliable, cost-effective, intelligent and feature-rich millimeter wave radio systems that are easy to install, maintain and upgrade. Innova's millimeter wave radio systems are designed to operate at multiple E1/T1 rates in the high frequency bands used for the transmission of voice, data and video traffic. Innova's products are based on a common system architecture and are software configurable. Innova's radio systems consist of an Indoor Unit ("IDU"), which interfaces with the user's network and is digitally linked to an Outdoor Unit ("ODU"), which transmits and receives the RF signal. The common embedded software platform in the IDU and ODU is simple network management protocol ("SNMP") compliant and provides the ability to remotely monitor and manage Innova's radios within a network using the service provider's network management system. Innova's objective is to be a leading provider of digital millimeter wave radios. Innova's strategy is to: (i) continue to focus on enhancing existing and developing new solutions for the point-to-point millimeter wave radio market; (ii) expand the geographic coverage and increase the market penetration of its products by strengthening existing and establishing new strategic distribution relationships; (iii) leverage its existing system architecture to be first-to-market with high-quality, cost-effective radios; and (iv) further automate its product calibration and test processes to promote quality control and cost-effective manufacturing and to improve productivity. Innova markets its products principally to systems integrators with a strong regional presence in Europe, Latin America and Asia. Innova seeks to develop strategic relationships with these systems integrators, which provide field engineering, installation, project financing and support to service providers. To date, Innova has entered into distribution agreements with MAS Technology Limited ("MAS"), NERA ASA ("NERA") and Societe Anonyme de Telecommunications ("SAT"). Innova also markets its products directly to service providers in the U.S. and internationally. To date, the Company has supplied products, either through distribution relationships or directly, to Alestra (Mexico), Associated Communications (U.S.), Avantel (Mexico), Bouygues Telecom (France), Globtel (Slovakia), Northern Telecom Limited ("Nortel") (Canada), PacBell Mobile Services (U.S.) and Telcel (Venezuela), among others. The Company was incorporated in Delaware in 1989 and reincorporated as a Washington corporation in 1991. The Company's headquarters and principal place of business are located at Gateway North, Building 2, 3325 South 116th Street, Seattle, Washington 98168-1974. Its telephone number is (206) 439-9121. THE OFFERING <TABLE> <S> <C> Shares of Common Stock Offered by the Company.......... 2,750,000 Shares of Common Stock Shares of Common Stock Outstanding after the Offering............................................. 12,389,006 Shares of Common Stock(1) Use of Proceeds........................................ Repayment of indebtedness, equipment purchases, working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol.......................... INVA Risk Factors........................................... The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." </TABLE> SUMMARY FINANCIAL DATA <TABLE> <CAPTION> NINE MONTH FISCAL Six Months Ended Years Ended March 31, PERIOD ENDED June 30, ------------------------------------- DECEMBER 31, ----------------------- 1993 1994 1995 1996 1996(2) 1996 1997 ------- ------- ------- ------- ------------------ ---------- ---------- (dollars in thousands, except per share data) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues............... $ 200 $ 877 $ 2,358 $ 1,962 $ 2,104 $ 200 $12,582 Gross profit (loss).......... (464) (1,186) (2,157) (1,980) (1,635) (1,852) 3,012 Loss from operations......... (3,903) (5,234) (6,116) (8,816) (7,186) (5,759) (2,675) Net loss..................... $(5,099) $(5,400) $(6,318) $(9,061) $(7,329) $(5,890) $(3,013) Pro forma net loss per share(3)................... $ (0.73) $ (0.30) Supplementary net loss per share(3)................... $ (0.72) $ (0.27) Shares used in computing pro forma net loss per share(3)................... 10,089,442 10,111,797 Shares used in computing supplementary net loss per share(3)................... 10,128,379 10,543,969 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------ ACTUAL AS ADJUSTED(4) ------- -------------- (in thousands) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents..................................................... $ 3,834 $ 30,806 Working capital............................................................... 4,371 36,819 Total assets.................................................................. 20,208 47,038 Redeemable preferred stock(1)................................................. 47,769 -- Total stockholders' equity (deficit)(1)....................................... (39,297) 40,920 </TABLE> - --------------- (1) As of June 30, 1997. Excludes: (i) 1,655,298 shares of Common Stock issuable upon exercise of stock options issued pursuant to the Company's 1990 Stock Option Plan, at a weighted average exercise price of $2.19 per share; (ii) an additional 377,774 shares of Common Stock reserved for future issuance under the Company's 1990 Stock Option Plan; (iii) 48,263 shares of Common Stock issuable upon exercise of stock options issued pursuant to the Company's Director Stock Option Plan; (iv) an additional 71,737 shares of Common Stock reserved for future issuance under the Company's Director Stock Option Plan; and (v) 2,949,137 shares of Common Stock issuable upon exercise of warrants to purchase Common Stock. See "Management -- Benefit Plans" and "-- Certain Transactions," "Description of Capital Stock" and Notes to Consolidated Financial Statements. (2) Subsequent to March 31, 1996 the Company changed its fiscal year end to December 31. (3) See Note 1(q) to the Consolidated Financial Statements. (4) As adjusted to give effect to the (i) conversion of all outstanding shares of Preferred Stock into shares of Common Stock upon consummation of the Offering, (ii) sale of the shares of Common Stock being offered hereby at an initial public offering price of $13.00 per share (after deducting the underwriting discounts and commissions and estimated expenses of the Offering) and (iii) application of the estimated net proceeds of the Offering. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000820475_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000820475_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b81ef6ff2bf75831addbae1743897c960f306fa0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000820475_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information in this Prospectus. This summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus: (i) assumes that the Over-allotment Option will not be exercised, and (ii) gives effect to a reverse stock split of the issued and outstanding shares of Common Stock on a 1-for-_____ basis to be effectuated on the effective date (the "Effective Date") of the Registration Statement. The Shares offered hereby involve a high degree of risk. Investors should carefully consider the information set forth under the heading "Risk Factors." THE COMPANY The Company designs and develops x86-compatible microprocessors and related components and designs. A microprocessor is an integrated circuit consisting of millions of transistors which executes instructions to perform logical and mathematical operations in electronic devices. Microprocessors serve as the central processing unit or management/control unit of personal computers ("PCs") and other electronic devices utilizing microprocessors (collectively, "microprocessor-based devices"). The microprocessor is responsible for controlling data flowing through the PC or microprocessor-based device, manipulating such data as specified by the related operating software, and coordinating all hardware functions within the system. The demand for higher performance PCs and microprocessor-based devices has driven advances in circuit design and large scale integration process technology. Improvements in the performance of microprocessors, coupled with decreases in costs resulting from advances in design and process technology, have substantially broadened the market and increased the demand for PCs, microprocessor-based devices and microprocessors. The Company's operating strategy seeks to take advantage of a number of emerging trends in the PC and microprocessor-based device industries, including: (i) a focus on the fast growing high performance segments of the PC and custom core microprocessor markets, (ii) maintaining compatibility with widely accepted x86 based software standards, (iii) accessing advanced manufacturing capabilities available by contracting with third-party manufacturers, (iv) providing hardware compatibility to allow for universal product application, and (v) utilizing advanced automated design technologies to lower the cost of design and accelerate the time to market for future versions of its products and products of its customers. The Company's marketing strategy is targeted to the high performance segments of the microprocessor industries. The Company has focused its marketing strategy on four (4) segments of the market: (i) standard products which may serve as replacement upgrade microprocessors for installed PCs which are based on socket-7 pin compatible Pentium-TM- microprocessors (standard products for microprocessor retrofitting), (ii) customized versions of standard microprocessors designed for original equipment manufacturers ("OEMs") who desire to integrate x86 compatible custom microprocessors with their technologies (custom core products), (iii) programmable logic features for the design or manufacture of custom products (design elements), and (iv) the technological expertise and capability of the Company's design team for OEMs to utilize in integrating the Company's custom core products and design elements into the OEMs' customized technologies (design services). The Company's principal executive offices are located at 100 North Sepulveda Boulevard, Suite 601, El Segundo, California 90245, (310) 524-9300. THE OFFERING Securities Offered by the Company...................... _________ Shares of Common Stock. See "Description of Securities" and "Underwriting." Common Stock Outstanding(1): Before the Offering.......... 38,925,941 shares After the Offering........... _________ shares Use of Proceeds............... The Company intends to use the net proceeds of this Offering to fund research and development, administrative expenses, repayment of debt and for working capital and general corporate purposes. See "Use of Proceeds." Risk Factors and Dilution..... The securities offered hereby are highly speculative and involve a high degree of risk and immediate substantial dilution. These factors include, but are not limited to risks related to the Company's historical lack of revenues or profitability, legislative and regulatory restrictions impacting the Company's business operations and industry and the market for the securities offered hereby. An investment in these securities should be made only by investors who can afford the loss of their entire investment. See "Risk Factors" and "Dilution." Proposed NASDAQ/NMS Symbol(2) Common Stock................. IMES __________________________ (1) Does not include shares of Common Stock that are reserved for issuance upon exercise of the Underwriters' Warrants or pursuant to certain stock option plans of the Company, certain other options, warrants and convertible securities of the Company. See "Price Range of Common Stock," "Management - Stock Option Plans," "Certain Relationships and Related Transactions," "Description of Securities" and "Underwriting." (2) The Company's Common Stock is currently listed for trading in the Over-the-Counter Market under the symbol "IMES." The Company has applied for the listing of the Common Stock for trading in the NASDAQ/NMS. See "Risk Factors" and "Price Range of Common Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000825703_platinum_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000825703_platinum_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1d0c40d4d408aa41cb0f4af705f83d1f53b32e6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000825703_platinum_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context suggests otherwise, references in this Prospectus to "PLATINUM" or the "Company" mean PLATINUM technology, inc. and its subsidiaries. THE COMPANY The Company develops, markets and supports software products, and provides related professional services, that help chief information officers ("CIOs") better manage their software infrastructures. The Company's products and services increase the performance and interoperability of computing systems and databases and provide users, primarily in large and data intensive organizations, with more reliable and productive access to and use of critical information. The Company's products typically perform fundamental functions and mission-critical automation, such as maintenance of data integrity, systems security, systems scheduling, project and process management, and end-user specific analysis and reporting. The Company currently develops software products under four business units: database management, systems management, application lifecycle and data warehouse. (During the first quarter of 1997, the Company merged its business intelligence and vertical applications solutions business units into its data warehouse business unit.) Addressing businesses' increasing demand for simplified vendor relationships and complete solutions to information technology ("IT") problems, the Company's goal is to become the leading provider of software infrastructure solutions by offering a comprehensive set of "best of breed" point products, product bundles and integrated product suites. The Company also offers a wide array of professional services, including consulting, systems integration and educational programs, often in conjunction with software product sales. The Company is now leveraging the breadth of its product lines and its professional service capabilities, and is devoting substantial resources to integrating its products and technologies, to provide complete, customized solutions for software infrastructure problems. These solutions include single products; product suites, which are sets of closely integrated products from multiple business units; and product bundles, which are sets of software applications that are packaged together but do not necessarily have the level of integration that defines a suite; as well as design and implementation services provided by the Company's professional services staff. These solutions also include ongoing product upgrades, maintenance and support, sometimes pursuant to multi-year contracts. Evidencing the increasing demand from the Company's customers for comprehensive solutions, the Company executed 55 software license and/or service transactions of over $1 million during 1996, as compared to only two such transactions during 1995. In the first six months of 1997, the Company executed 37 such transactions. Since the beginning of 1996, the Company's software developers have focused on product integration and the bundling of products to satisfy critical customer needs, along with continued expansion and enhancement of the Company's product lines. The Company also is enabling its products and suites for application with intranets, the Internet and the World Wide Web (the "Web"). The cornerstone of the Company's integration efforts is the PLATINUM Open Enterprise Management Solution ("POEMS"), an internally developed integration tool set and method designed to give the Company's products a common look and feel, common installation and distribution and common communication, data and events handling. The Company is creating solutions for general business needs, as well as the needs of specific industries. For example, during 1996, the Company released PLATINUM RiskAdvisor, a data warehouse decision support application developed specifically for the insurance industry. The Company has also released its "Necessities" product suite for building, testing and deploying intranet applications, and has developed a comprehensive solution for the Year 2000 problem. In addition, the Company intends to use a number of its current products and technologies as the foundation for a new, integrated product offering designed to enable companies to simultaneously manage, maintain and deploy multiple Web sites. The Company was incorporated in Delaware on April 16, 1987. Its principal executive offices are located at 1815 South Meyers Road, Oakbrook Terrace, Illinois 60181, and its telephone number is (630) 620-5000. SUMMARY FINANCIAL INFORMATION(1) (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------------------------ ---------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- --------- -------- -------- --------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues.......... $156,721 $190,623 $243,607 $ 326,411 $468,065 $196,256 $ 252,061 Operating income (loss). 3,263 (2) 3,062(3) (517)(4) (127,377)(5) (79,404)(6) (41,882)(7) (110,422)(8) Net income (loss)....... (2,232)(2) 126(3) (1,562)(4) (111,567)(5) (64,922)(6) (29,777)(7) (104,202)(8) Net income (loss) per share.................. $ (0.06)(2) $ -- (3) $ (0.04)(4) $ (2.50)(5) $ (1.14)(6) $ (0.53)(7) $ (1.70)(8) Shares used in computing per share amounts...... 36,911 39,375 41,294 44,671 56,968 56,483 61,212 </TABLE> <TABLE> <CAPTION> DECEMBER 31, -------------------------------------------- JUNE 30, 1992 1993 1994 1995 1996 1997 -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and investments......... $ 61,174 $ 71,148 $126,215 $136,737 $185,673 $128,040 Working capital.......... 40,812 43,672 90,500 127,990 213,660 122,512 Total assets............. 140,487 176,064 273,333 452,267 618,572 556,591 Long-term obligations and acquisition-related payables, less current portion................. 301 3,465 9,080 11,389 118,305 118,911 Total stockholders' equity.................. 84,083 93,350 160,126 290,213 295,760 196,112 </TABLE> - -------- (1) The summary financial information presented in this table is derived from the historical financial statements of the Company and gives retroactive effect to the acquisitions of Australian Technology Resources Pty Limited ("ATR") as of January 31, 1997 and I&S Informationstechnik and Services GmbH ("I&S") as of February 28, 1997, each of which has been accounted for under the pooling-of-interests method for financial reporting purposes. As a result, the financial position and results of operations are presented as if the combining companies had been consolidated for all periods presented. The statement of operations data for the years ended December 31, 1992 and 1993, and for the six months ended June 30, 1996 and 1997, as well as the balance sheet data as of December 31, 1992, 1993 and 1994 and June 30, 1997, are derived from unaudited consolidated financial statements and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for the periods and as of the dates presented. The summary financial information should be read in conjunction with the Selected Financial Data, the Consolidated Financial Statements and the other financial information included in this Prospectus. (2) Reflects a pre-tax charge of $7,873,000 relating to Trinzic Corporation ("Trinzic") restructuring costs. (3) Reflects a pre-tax charge for acquired in-process technology of $8,735,000 relating to the Company's acquisition of the outstanding capital stock of Datura Corporation ("Datura") and a pre-tax charge of $4,659,000 relating to Trinzic and Locus Computing Corporation ("Locus") restructuring costs. (4) Reflects a pre-tax charge for acquired in-process technology of $24,594,000 relating to the Company's acquisitions of the outstanding capital stock of Dimeric Development, Inc. ("Dimeric") and the net assets of Aston Brooke Corporation ("Aston Brooke") and AutoSystems Corporation ("AutoSystems"). (5) Reflects a pre-tax charge for acquired in-process technology of $88,493,000 relating to the Company's acquisitions of: (i) the outstanding capital stock of SQL Software Corporation ("SQL"), RELTECH Group, Inc. ("Reltech"), Advanced Software Concepts, Inc. ("ASC"), AIB Software Corporation ("AIB"), Protellicess Software, Inc. ("Protellicess") and BMS Computer, Inc. ("BMS"); (ii) the net assets of ViaTech Development, Inc. ("Viatech"), BrownStone Solutions, Inc. ("BrownStone") and ProtoSoft, Inc. ("ProtoSoft"); (iii) and certain product technologies. Also reflects a pre- tax charge for merger costs of $30,819,000 relating to the Company's acquisitions of Software Interfaces, Inc. ("SII"), Answer Systems, Inc. ("Answer"), Locus, Altai, Inc. ("Altai"), Trinzic and Softool Corporation ("Softool"). (6) Reflects a pre-tax charge for acquired in-process technology of $48,456,000 relating to the Company's acquisitions of the outstanding capital stock of Advanced Systems Technologies, Inc. ("AST"), Software Alternatives, Inc. (d/b/a System Software Alternatives) ("Software Alternatives"), Grateful Data, Inc. (d/b/a TransCentury Data Systems) ("Grateful Data") and VREAM, Inc. ("VREAM"); substantially all of the assets of the Access Manager business unit of the High Performance Systems division of International Computers Limited ("Access Manager"); and certain product technologies. Also reflects a pre-tax charge for merger costs of $5,782,000 relating primarily to the Company's acquisitions of Prodea Software Corporation ("Prodea"), Paradigm Systems Corporation ("Paradigm") and Axis Systems International, Inc. ("Axis"). (7) Reflects a pre-tax charge for acquired in-process technology of $7,005,000 relating to the Company's acquisition of all of the outstanding capital stock of AST and the purchase of certain product technologies. Also reflects a pre-tax charge for merger costs of $5,782,000 relating primarily to the Company's acquisitions of Prodea, Paradigm and Axis. (8) Reflects a pre-tax charge for acquired in-process technology of $17,164,000 relating to the Company's acquisition of the outstanding capital stock of GEJAC, Inc. ("GEJAC") and the purchase of certain product technologies. Also reflects a pre-tax charge for merger costs of $3,706,000 relating to the Company's acquisitions of ATR and I&S and a pre-tax charge of $57,319,000 for restructuring charges. SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS Certain statements in this Prospectus Summary and under the captions "Risk Factors," "Recent Developments," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," and elsewhere in this Prospectus relate to future events and expectations and as such constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things: the maturation and success of the Company's software infrastructure systems strategy; currency exchange rate fluctuations, collection of receivables, compliance with foreign laws and other risks inherent in conducting international business; risks associated with conducting a professional services business; adverse general economic and business conditions, which may reduce or delay customer purchases of the Company's products and services; charges and costs related to acquisitions; the ability of the Company to develop and market existing and acquired products for the software infrastructure systems market; the ability of the Company to successfully integrate its acquired products, services and businesses; the ability of the Company to adjust to changes in technology, customer preferences, enhanced competition and new competitors in the software infrastructure and professional services markets; and the ability of the Company to protect its proprietary software rights from infringement or misappropriation, to maintain or enhance its relationships with relational database vendors, and to attract and retain key employees. The Company undertakes no obligation to release publicly any revisions to any such forward-looking statements that may reflect events or circumstances after the date of this Prospectus or to reflect the occurrence of unanticipated events. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000826075_brunswick_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000826075_brunswick_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bbd3d1f9590ee47fd0cbb867ffab6b2b1a94ed20
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000826075_brunswick_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Investors should carefully consider the information set forth under the heading "RISK FACTORS." Investors should also refer to a Glossary of Technical Terms on page 56 for a description of certain technical terms used in this Prospectus. Unless otherwise indicated, all Common Stock share and per share data and information in this Prospectus (i) have been adjusted to give effect to a 33:1 stock split to be effected immediately prior to the effectiveness of the registration statement of which this Prospectus is a part, (ii) assume the conversion, upon the closing of the Offering, of all outstanding shares of the Company's preferred stock, no par value (the "Preferred Stock"), into 2,337,192 shares of Common Stock and the issuance to such holders of Preferred Stock of an estimated additional 199,301 shares of Common Stock in payment of an estimated $1,993,010 in accrued cash dividends as of the closing of the Offering (estimated as of January 31, 1997) pursuant to the terms of such Preferred Stock, (iii) assume no exercise of outstanding options to purchase an aggregate of 561,089 shares of Common Stock with a weighted average exercise price of $1.57 per share (assuming a $10.00 offering price ), (iv) assume no exercise of outstanding warrants to purchase an aggregate of 336,200 shares of Common Stock with a weighted average exercise price of $5.41 per share, (v) assume no conversion of a convertible subordinated promissory note into 364,825 shares of Common Stock (assuming a $10.00 Offering price) and (vi) assume the consummation of a recapitalization whereby the Company's no par value common stock is converted into Common Stock, which recapitalization is to be effected immediately prior to the effectiveness of the registration statement of which this Prospectus is a part. THE COMPANY Brunswick Technologies, Inc. (the "Company") is a leading developer and producer of engineered reinforcement fabrics used in the fabrication of composite materials. The Company's technologically advanced stitchbonding equipment and processes prepare glass, carbon and other fibers for combination with resin to produce laminates used in the construction of such diverse items as boats, skis, diving boards, protective helmets and ballistic armor applications, car and truck parts, and industrial tanks and pipes. Since the invention of composite reinforcement fabrics in the early 1940's, these materials have developed broad applicability as substitutes for wood, steel, and concrete. Composite products offer substantial benefits over conventional materials, including: a higher strength-to-weight ratio, greater design flexibility while maintaining structural integrity, chemically inert properties and lower maintenance requirements. As a result of their superior features, composite reinforcement fabrics are increasingly demanded by a growing number of industries and applications, including transportation, infrastructure, recreation, petro-chemical and construction. Management believes the use of engineered composite reinforcement fabrics will continue to grow as the market is made more aware of the positive features of such materials and as the cost of more advanced composite fibers such as carbon continues to decline. The Company's principal strength lies in its innovative quadraxial single-step stitchbonding process. Through use of its proprietary production equipment, the Company can quickly and cost effectively produce engineered composite reinforcement fabrics in sizes and shapes not otherwise generally available. Fabrics created from the Company's proprietary manufacturing process offer characteristics integral to the use of composite materials in infrastructure, industrial and large scale commercial applications. The Company has introduced a number of manufacturing processes that not only more efficiently create composite reinforcement fabrics, but also optimize the performance characteristics of such fabrics. In a proprietary single-step production process, the Company is able to stitchbond fibers in different directions without diminishing the composite fibers' inherent properties, thus dramatically improving the structural strength of the reinforcement fabric. This compares favorably, firstly, with traditional composite fabrics which are woven, and therefore require the use of more resin to achieve the same degree of structural integrity, and secondly, with the more costly multi-step processes of other weft-insertion or stitchbonding manufacturing technologies used by competitors. In addition, the Company's proprietary, high through-put manufacturing processes have the ability to produce heavyweight quadraxial fabrics over 100 3 inches wide in a single-step, which allows for cost-effective fabrication of composite parts of up to 10 inches thick. The combination of these features produces fabrics which enable composite fabricators to manufacture end-products at competitive costs while maintaining the required structural integrity of these products. In a move to accelerate the implementation of its strategic business plan and expand its product line, the Company acquired Advanced Textiles, Inc. ("ATI"), a subsidiary of Burlington Industries, Inc. ("Burlington") on October 30, 1996. ATI, which now operates as a wholly-owned subsidiary of the Company, produces first generation light-weight composite reinforcement fabrics targeted towards specialized niche markets. These light-weight fabrics typically sell for a higher margin than other types of composite reinforcement fabrics. ATI manufactures these fabrics from fiberglass and other higher modulus fibers such as carbon and aramid; therefore, ATI's product line complements that of the Company and provides it with an enhanced ability to offer a broader spectrum of product types. The Company believes that by offering a product line which satisfies a broader range of composite reinforcement fabric requirements, it will be better positioned to be the principal provider of these fabrics to its expanded customer base. The Company believes it will capture additional market share by cross-marketing its existing products to ATI's customers and vice versa. The Company's strategy is to increase revenues and net income through expansion of its domestic and international market share in the composite reinforcement fabric industry, making additional strategic acquisitions for product and market presence, and engaging in joint projects which complement the Company's strategy. The key elements of this strategy include: (i) targeting additional applications for composite reinforcement fabrics in the transportation, offshore petro-chemical and infrastructure sectors; (ii) increasing its international presence; (iii) continuously innovating its state-of-the-art manufacturing processes; (iv) extending its product offerings further along the value-added chain towards net shape products and (v) expanding its manufacturing capacity and broadening its geographic market presence. The Company is currently participating in several significant joint ventures and research and development projects. The Company is working with E.I. DuPont de Nemours and Company, Inc., Hardcore Composites Ltd., The Dow Chemical Company and Johns Hopkins University in an effort to create heavyweight composites for industrial applications such as marine pilings, bridges, rail cars and shipping containers. The Company has also entered into two research agreements with the University of Maine, the first of which is to develop a composite alternative to plywood, and the second of which is to develop composites for very thick applications adaptable to large sub-marine structures. Additionally, the Company is working with ABB Offshore Technology, a division of ASEA Brown Boveri S.A., to develop offshore well-head covers and pipeline protection structures. In December, 1996 the Company entered into an agreement with Norsk Hydro A.S., one of the largest North Sea oil operators pursuant to which the parties will identify opportunities for the application of the Company's technology to new markets, including the use of composite structures in the off-shore oil industry, with the aim of developing strategies to address such opportunities. The Company also has a corporate collaboration with Vetrotex CertainTeed Corp. ("Vetrotex"), the U.S. fiberglass manufacturing arm of Saint Gobain S.A., the largest materials and construction company in Europe. This collaboration includes a significant equity ownership by Vetrotex in the Company and a supply relationship whereby the Company purchases a majority of its fiberglass needs from Vetrotex. The Company is currently developing products and processes to take advantage of a new product developed by Vetrotex and its affiliates. The Company maintains two manufacturing facilities, one in Maine and the other (its recently acquired ATI facility) in Texas. During 1996, the Company moved its Maine operations into a new, state-of-the-art, 50,000 square foot manufacturing facility. The Company was organized as a Maine corporation in 1984 and began operations in 1985. The Company's executive offices are located at 43 Bibber Parkway, Brunswick, Maine 04011 and its telephone number is (207) 729-7792. 4 THE OFFERING Common Stock Offered by the Company............. 1,500,000 shares Common Stock Offered by the Selling Stockholder............. 500,000 shares Common Stock Outstanding(1): Before Offering ........ 2,835,817 shares After Offering ......... 4,335,817 shares Use of Proceeds........... Purchase of capital equipment, repayment of bank debt, research and development expenditures, payment of $3.6 million of the principal amount of the convertible note issued in connection with the acquisition of Advanced Textiles, Inc., potential additional acquisitions, potential purchase of the Company's current manufacturing facilities and general working capital purposes. See "USE OF PROCEEDS." Risk Factors.............. The securities offered hereby involve a high degree of risk and immediate and substantial dilution. See "RISK FACTORS" and "DILUTION." Nasdaq symbol............. "BTIC" ________ (1) Includes an estimated 2,337,192 shares of Common Stock to be issued to holders of outstanding shares of the Company's preferred stock, no par value (the "Preferred Stock") upon the conversion of all of the outstanding shares of the Preferred Stock into Common Stock, 1,000 shares of Common Stock in the aggregate to be issued to two directors-elect of the Company, and an estimated additional 199,301 shares to be issued to the holders of Preferred Stock in payment of accrued dividends (estimated as of January 31, 1997), all to occur concurrently with the consummation of the Offering, but does not include (a) a total of 561,089 shares of Common Stock reserved for issuance upon the exercise of stock options granted under the Company's 1991 Stock Option Plan, 1994 Stock Option Plan and 1997 Equity Incentive Plan (collectively, the "Plans"), (b) a total of 336,200 shares of Common Stock reserved for issuance pursuant to the exercise of warrants to be outstanding as of the closing of the Offering, (c) 371,590 shares reserved for issuance upon the exercise of options or other awards available under the Plans but not yet granted under the Plans and (d) a total of 364,825 shares of Common Stock issuable to Burlington (assuming an Offering price of $10.00 per share) upon conversion (after October 30, 1997) of an outstanding interest-bearing convertible subordinated promissory note (the "Convertible Note") in the principal amount of $3,648,250 (after payment in cash of 50% of the outstanding principal amount of the Convertible Note following the completion of the Offering). The weighted average exercise price of the options and warrants to purchase Common Stock described above is $3.01 per share. See "DIVIDEND POLICY," "BUSINESS -- Acquisition of Advanced Textiles, Inc.," "MANAGEMENT -- Stock Incentive Plans," "CERTAIN TRANSACTIONS," "PRINCIPAL AND SELLING STOCKHOLDERS," "DESCRIPTION OF CAPITAL STOCK AND CERTAIN INDEBTEDNESS," and "UNDERWRITING." 5 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENTS OF INCOME DATA: BRUNSWICK TECHNOLOGIES, INC. <TABLE> <CAPTION> YEAR ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, COMPANY PRO FORMA(1) ------------ ------------- -------------------- NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1991 1992 1993 1994 1995 1995 1996 1995 1996 ---- ---- ---- ---- ---- ---- ---- ---- ---- (UNAUDITED) (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Net sales $2,625 $4,701 $6,376 $9,596 $ 15,476 $11,033 $ 13,423 $26,444 $21,381 Cost of goods sold 2,215 3,700 4,996 7,382 11,979 8,489 10,365 21,218 16,930 ----- ----- ----- ----- ------ ----- ------ ------ ------ Gross profit 410 1,001 1,380 2,214 3,497 2,544 3,058 5,226 4,451 Other operating expenses 736 971 1,258 1,874 2,492 1,787 2,441 3,441 3,069 Moving costs -- -- -- -- 9 -- 248 9 248 Facility repair costs -- -- -- -- 150 -- (148) 150 (148) ----- ----- ----- ----- ------ ----- ------ ------ ------ Operating income (loss) (326) 30 122 340 846 757 517 1,626 1,282 Other income (expense), net (95) (27) (11) (26) (61) (27) 98 (455) (179) ----- ----- ----- ----- ------ ----- ------ ------ ------ Income (loss) before income taxes (421) 3 111 314 785 730 615 1,171 1,103 Income tax benefit (expense) -- -- -- -- 122 113 (222) 1,638 (415) ----- ----- ----- ----- ------ ----- ------ ------ ------ Net income (loss) (421) 3 111 314 907 843 393 2,809 688 Preferred stock dividend -- (269) (332) (450) (450) (338) (338) -- -- Accretion of preferred stock redemption value -- (51) (71) (76) (82) (61) (66) -- -- ----- ----- ----- ----- ------ ----- ------ ------ ------ Net income (loss) attributable to common stock $ (421) $ (317) $ (292) $ (212) $ 375 $ 444 $ (11) $ 2,809 $ 688 ===== ===== ===== ===== ====== ===== ====== ===== ====== Pro forma earnings per common share(2) $ 0.26 $ 0.11 $ 0.81 $ 0.20 ========== ======== ======= ======= Pro forma weighted average common shares outstanding(2) 3,452(2) 3,486(2) 3,457 3,491 ===== ===== ===== ===== </TABLE> ADVANCED TEXTILES, INC. <TABLE> <CAPTION> FISCAL YEAR ENDED ------------------------------------------------------------------------------ OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> Net sales $ 7,959 $8,332 $10,043 $11,169 $10,570 Cost of goods sold 7,324 7,582 9,040 9,574 8,504 ----- ----- ----- ----- ----- Gross profit 635 750 1,003 1,595 2,066 Other operating expenses 747 725 938 890 939 ----- ----- ----- ----- ----- Operating income (loss) (112) 25 65 705 1,127 Other income (expense), net (161) (38) (31) (21) 7 Litigation settlement (3,400) -- -- -- -- ----- ----- ----- ----- ----- Income (loss) before income taxes (3,673) (13) 34 684 1,134 Income tax benefit (expense) -- -- -- 1,493 (429) ----- ----- ----- ----- ----- Net income (loss) $(3,673) $ (13) $ 34 $ 2,177 $ 705 ======= ====== ======= ======= ====== </TABLE> <TABLE> <CAPTION> PRO FORMA COMBINED BALANCE SHEETS: SEPTEMBER 30, 1996 -------------------------------------------------------- BRUNSWICK ADVANCED PRO FORMA(1)(3) TECHNOLOGIES, INC. TEXTILES, INC. COMBINED ------------------ -------------- -------- (UNAUDITED) <S> <C> <C> <C> Working capital $ 808 $2,235 $ 11,794 Total assets 8,738 3,754 26,931 Long-term liabilities 1,359 -- 5,428 Total liabilities 4,647 704 9,586 Preferred stock 6,473 -- -- Stockholders' equity (deficit) $(2,382) $3,050 $17,345 ======= ====== ======= </TABLE> (1) Adjusted to reflect the acquisition of Advanced Textiles, Inc. on October 30, 1996 and the pro forma combination of the results of operations and financial condition of the Company and ATI. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." (2) Calculation is shown in Note 1 of Notes of Financial Statements of the Company. (3) Adjusted to give effect to the sale by the Company of 1,500,000 shares of Common Stock at an assumed Offering price of $10.00 per share and the application of the estimated net proceeds therefrom (after deducting discounts, allowances and Offering expenses). See "USE OF PROCEEDS." 6
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000827056_zevex_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000827056_zevex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e2432abf082ec6606958982ed181bce57c816f10
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000827056_zevex_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY ZEVEX International, Inc. is the issuer of the shares of Common Stock (the "Shares") offered in this Prospectus (the "Offering"). Throughout this Prospectus, ZEVEX International, Inc. and its wholly owned subsidiary, ZEVEX, Inc., are for convenience collectively referred to as "ZEVEX" or the "Company." THE COMPANY ZEVEX designs and manufactures advanced medical devices, including surgical systems, device components, and sensors for medical technology companies. The Company also designs, manufactures, and markets its own medical devices using its proprietary technologies. The Company's design and manufacturing service customers are medical technology companies which sell the Company's systems and devices under private labels or incorporate the Company's devices into their products. The Company applies its extensive engineering and regulatory expertise, developed over its 11-year history, to provide its customers with integrated solutions to the design and manufacture of their medical devices. The Company has grown steadily, achieving 1996 total revenues of $5,663,733 and net income of $345,577. Since 1994, the Company's compound annual revenue growth rate has been approximately 30%. During the first nine months of 1997, the Company's revenues grew to $6,311,490, approximately a 63% increase over the comparable period of the prior year. Today, the Company designs and manufactures over 100 different medical devices for more than 50 different established and emerging medical technology companies, such as Alaris Medical Systems, Inc. (formerly IVAC), Allergan, Paradigm Medical Industries, Inc., various divisions of Baxter Healthcare Corporation, Mentor Corporation, SIMS Deltec, Inc., Staar Surgical Company, and 3M Company Healthcare. The Company's strategy is to augment the continuing growth in its design and manufacturing service business with the development and commercialization of proprietary products which utilize the Company's technologies or engineering expertise or which are complementary to the Company's existing proprietary products. The Company has successfully applied its engineering and regulatory expertise to the development, commercialization, and marketing of EnteraLite(R), the Company's proprietary Ambulatory Enteral Feeding Pump for patients who must receive direct gastrointestinal nutritional therapy. Historically the Company has designed and manufactured medical devices utilizing its core competency in ultrasound technology; however the Company has a wide range of engineering expertise. The Company's objective is to leverage its engineering and regulatory expertise to further expand its business as a designer and manufacturer of a wide variety of customized medical devices for medical technology companies, as well as a designer, manufacturer, and marketer of a variety of its own proprietary products. To accomplish this, management intends to do the following: - Increase the variety of medical devices and systems that the Company designs and manufactures for its existing customers - Expand the number of medical technology companies for which the Company provides design and manufacturing services - Increase sales of the Company's EnteraLite(R) Ambulatory Enteral Feeding Pump - Leverage the Company's design, manufacturing, and regulatory expertise to develop new proprietary products - Acquire other proprietary technologies, products, or manufacturing firms similar or complementary to the Company's existing business Management believes that this two-pronged strategy in the $30 billion medical technology marketplace may allow the Company to benefit from the increasing demand for design and manufacturing of medical devices and systems, as well as from the sale of the Company's own proprietary medical devices. Management of the Company believes that advances in technology, increasing regulatory complexity and intensified competition will lead many medical technology companies to expand their out-sourcing of design and manufacturing services in order to be more efficient. Many emerging medical technology companies simply do not have the engineering, manufacturing, and regulatory expertise necessary to quickly and efficiently bring a medical device from the concept stage to commercial use. Even larger, well-established medical technology companies, which may have the capital resources to develop such expertise, may lack the required expertise or the time to accumulate such expertise in order to meet the market demand for their particular device. Moreover, in some instances, these medical technology companies may simply elect not to devote their resources to the design and manufacture of their medical devices or systems, including obtaining and maintaining the necessary regulatory approvals and industry certifications for their manufacturing facilities. Management believes that the Company is well positioned to benefit from this increasing trend towards out-sourcing. Specifically, the Company may often times be able to profitably design and manufacture medical devices or systems more quickly, at a lower cost, and with higher quality than its medical technology customers are able to achieve. The Company offers its design and manufacturing customers the following advantages: - Broad Experience With Numerous Medical Devices. Over its 11-year history, the Company has manufactured numerous advanced medical devices, including surgical systems, device components, and sensors. - Extensive Expertise. As a result of its broad experience, the Company has developed extensive expertise in addressing the product design, engineering, manufacturing, and regulatory issues associated with a variety of medical devices. - Generally Lower Cost and Higher Quality. The Company provides a wide range of engineering services and has the capability to provide complete device or system design, including engineering, component analysis, testing, and regulatory compliance. The Company strives to increase the quality and lower the overall cost of the devices or systems that it manufactures for its customers by integrating design and engineering work with manufacturing processes, materials acquisitions, quality issues, and regulatory considerations. - Rapid Product Development. The Company believes that, with its engineering and manufacturing capabilities, it can develop and commercialize new products more rapidly than its customers can, which otherwise must expend significant time and financial resources to develop internal engineering expertise and qualified manufacturing facilities. - Regulatory Compliance. The Company is ISO 9001 and EN 46001 certified, and the Company has developed internal systems intended to maintain compliance with the FDA's GMP requirements. The Company devotes significant management time and financial resources to GMP compliance and ISO certification. By using the Company's manufacturing services, customers relieve themselves of many stringent regulatory and industry certification requirements. - Production Flexibility. The Company's broad customer base permits it to offer its customers production flexibility, which enables customers to implement product enhancements and to adjust production volumes in response to fluctuations in market demand. The Company is located at 4314 ZEVEX Park Lane, Salt Lake City, Utah 84123. The Company's telephone number is (801) 264-1001. The Company is incorporated in the State of Delaware. ZEVEX International, Inc., conducts all its operations through its wholly owned subsidiary, ZEVEX, Inc. ZEVEX, Inc. is also incorporated in the State of Delaware. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............................ 1,200,000 shares Common Stock outstanding after this Offering(1)........................ 3,263,826 shares Use of proceeds.................... Expansion of current design and manufacturing services for existing and new customers; marketing of the EnteraLite(R) Ambulatory Enteral Feeding Pump; establishment of higher volume manufacturing capability associated with EnteraLite(R)-related products; development of proprietary products; research and development programs; possible acquisition of other medical products and technologies; possible acquisition of other design and manufacturing service firms. See "USE OF PROCEEDS." AMEX symbol........................ ZVX </TABLE> - --------------- (1) Based on shares outstanding as of September 30, 1997. Excludes 100,000 shares of Common Stock issuable upon the exercise of warrants issued to the Representatives of the Underwriters in connection with the Offering at a price of 120% of the price of the Shares sold in the Offering. See "UNDERWRITING." Also, excludes 314,190 shares of Common Stock issuable upon exercise of options granted and outstanding pursuant to the Company's Amended 1993 Stock Option Plan at a weighted-average exercise price of $12.37 per share. See "DESCRIPTION OF CAPITAL STOCK -- Stock Options." Also excludes 150,000 shares of Common Stock issuable upon the exercise of certain warrants that may be acquired and exercised by the Underwriters upon the exercise of the over-allotment option in this Offering. See "UNDERWRITING." Also, excludes 350,000 shares of Common Stock issuable upon the exercise of certain warrants. See "DESCRIPTION OF CAPITAL STOCK -- Warrants." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, NINE MONTHS ------------------------------------------ ENDED SEPTEMBER 30, 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------ ----------- ------ (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................................ $2,436 $3,116 $3,333 $5,296 $5,664 $ 3,878 $6,311 Cost of sales........................... 1,357 1,600 2,017 3,066 2,936 2,122 3,475 Gross profit............................ 1,079 1,516 1,316 2,230 2,728 1,756 2,836 Operating expenses: Selling, general, and administrative..................... 630 776 1,024 1,325 1,892 1,215 1,727 Research and development.............. 194 199 419 502 528 360 522 Operating income (loss)................. 255 541 (127) 403 308 181 587 Net income (loss)....................... 190 381 (24) 317 346 143 411 Net income (loss) per share............. $ .20 $ .36 $ (.02) $ .24 $ .25 $ .10 $ .18 Weighted-average number of common and common equivalent shares outstanding(1)........................ 938 1,060 1,131 1,306 1,389 1,366 2,316 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------- ACTUAL AS ADJUSTED(2) ------ -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......................... $ 136 $ 12,988 Working capital.................................... 3,588 17,140 Total assets....................................... 9,814 22,666 Revolving credit facility.......................... 700 -- Industrial development bond........................ 2,000 2,000 Stockholders' equity............................... 5,611 19,163 </TABLE> - --------------- (1) See note 1 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used to compute per share amounts. (2) Adjusted to give effect to the sale of 1,200,000 shares of Common Stock by the Company in this Offering at an assumed price of $12.50 per share, less estimated underwriting discounts and expenses of this Offering. Does not include the exercise of the Underwriters' over-allotment option in this Offering to acquire 180,000 shares or the receipt by the Company of $525,000 upon exercise of the warrants to acquire 150,000 of those shares. See "USE OF PROCEEDS" and "UNDERWRITING."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000829044_pluma-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000829044_pluma-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1af5b7672f2238415ce44af4e3f0bee1f94199a1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000829044_pluma-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS OR OTHERWISE NOTED HEREIN, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THERE WILL BE NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND CERTAIN STOCK OPTIONS HELD BY EMPLOYEES AND DIRECTORS OF THE COMPANY. ALSO, UNLESS OTHERWISE INDICATED HEREIN, ALL INFORMATION WITH REGARD TO THE CAPITAL STOCK OF THE COMPANY, INCLUDING SHARE AND PER SHARE DATA AND DIVIDENDS, HAS BEEN RESTATED TO REFLECT ALL STOCK SPLITS THAT OCCURRED PRIOR TO THE DATE OF THIS PROSPECTUS INCLUDING A 0.736 FOR 1 REVERSE STOCK SPLIT RECOMMENDED BY THE COMPANY'S BOARD OF DIRECTORS ON JANUARY 28, 1997. THE COMPANY Pluma is a vertically integrated manufacturer of high quality fleece and jersey activewear and as a result, is directly involved in all of its product manufacturing processes from knitting to packaging and distribution. The Company is focused on increasing sales and profitability by offering high value products to a diverse customer base. Pluma sells its products to companies such as adidas, Nike, Starter and Walt Disney. In addition, the Company sells products under its own "Pluma," "SANTEE" and "SNOWBANK" brand names to retail and wholesale customers such as Sam's Club and Frank L. Robinson Company. Since its incorporation in 1986, Pluma has been an innovator of new products and styles and has focused on delivering higher quality products. The Company was one of the first to introduce heavyweight, fuller cut fleece products at competitive price points and heavyweight cotton jersey products suitable for outerwear. Today, the Company continues to innovate and recently introduced pique fleece, 100% cotton fleece and cotton/SpandexTM five-way stretch fleece. In addition, the Company believes its ability to collaborate with customers in developing new styles provides a distinct competitive advantage. As a result of Pluma's flexible manufacturing capabilities, customers often select the Company as their "manufacturer of choice" for its ability to develop specialized products that meet customers' cost, quality and delivery criteria. The Company competes in the growing $37.6 billion retail activewear sector of the apparel industry. The industry's growth is attributable to several factors. First, the trends toward increased physical fitness and the "casualization of America" have resulted in increased acceptance of fleece and jersey apparel as daily attire. Second, the versatility of fleece and jersey fabric, coupled with technological advances in product development and manufacturing, has significantly improved product design and quality, resulting in increased consumer demand. Finally, basic styles of fleece and jersey activewear are not primarily driven by fashion trends or fads, contributing to the stability of product demand. The Company believes that its business strategy positions it to capitalize on the growth of the activewear sector. The principal elements of this strategy are: PRODUCING HIGH QUALITY PRODUCTS Pluma is recognized as a manufacturer of high quality products across all of its price points by today's value-conscious customers. Pluma's fleece and jersey activewear meet consumer preferences for heavier weights and higher cotton content. In addition, Pluma's emphasis on quality is demonstrated throughout its design and manufacturing processes. INCREASING SALES THROUGH A DIVERSE CUSTOMER BASE Pluma targets a diverse customer base across multiple markets and distribution channels. Currently, Pluma's material customers include branded customers such as adidas, Nike, Reebok and Starter, retailers such as Miller's Outpost and Sam's Club and entertainment customers such as Busch Gardens, Hard Rock Cafe and Walt Disney. In addition, the Company sells to wholesale distributors, screenprinters and embroiderers who sell the Company's products to their customers. The Company's diverse customer base provides product exposure to many consumer markets and enables Pluma to balance its production more evenly throughout the year, thereby improving sales and profitability. See "Business -- Customers." DEVELOPING NEW PRODUCTS AND STYLES Pluma has been an innovator of new products of various fabric weights and blends, as well as unique styles, that are often designed exclusively for its customers to meet their individual needs. Typically, new products and styles command higher prices resulting in better margins. New products manufactured for one customer frequently become popular with other customers. In addition, the ability to customize new product styles that meet stringent customer standards enables the Company not only to attract new customers but also to cross-sell its more basic products. CAPITALIZING ON FLEXIBLE MANUFACTURING CAPABILITIES Using proprietary equipment and advanced manufacturing processes, Pluma has the flexibility to shift its knitting, dyeing and sewing operations between various fabric weights, blends and styles, as well as between fleece and jersey, with minimal downtime. These capabilities allow Pluma to service effectively and efficiently its diverse customer base. INVESTING IN ADVANCED TECHNOLOGIES The Company continues to upgrade its manufacturing, distribution and management information systems as proven cost and quality related advances become available. The Company has made significant investments to improve efficiencies throughout its manufacturing processes including knitting, dyeing, cutting, sewing and distribution. As a result, Pluma believes that its manufacturing and distribution processes are among the most modern in the industry. In addition, the Company is in the process of implementing a new management information system to enhance the timing of financial reporting and accuracy of its controls. Pluma is a North Carolina corporation, incorporated on December 1, 1986. The principal executive offices of the Company are located at 801 Fieldcrest Road, Eden, North Carolina 27288, and its telephone number is (910) 635-4000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000829559_molecular_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000829559_molecular_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..704fe4cbce1ec8e65c301521e8b0731b044d500c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000829559_molecular_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the financial statements and notes thereto appearing elsewhere in this Prospectus. The discussion in this Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" as well as those discussed elsewhere in this Prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000834306_alere-san_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000834306_alere-san_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..04a33a973fcd064f5f99d64517237d134c0e4120
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000834306_alere-san_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes appearing elsewhere in this Prospectus. Except as set forth in the financial statements and notes thereto or otherwise as specified herein, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) reflects the conversion of all outstanding shares of Preferred Stock of the Company into shares of Common Stock upon the closing of this offering and (iii) includes 92,222 shares which will be issued upon conversion of a $1.0 million debenture into shares of Common Stock upon the closing of this offering, assuming an initial public offering price of $12.00 per share and accrued interest on the debenture through January 31, 1997. See "Description of Capital Stock," "Underwriting" and Notes 1, 6 and 7 of Notes to Financial Statements. THE COMPANY Biosite Diagnostics Incorporated ("Biosite" or the "Company") develops, manufactures and markets rapid, accurate and cost-effective diagnostic products that improve the quality of patient care and simplify the practice of laboratory medicine. The Company believes that its Immediate Response Diagnostics can have an important impact on medical decisions, patient care and the cost of medical treatment. The Company's first product, Triage Panel for Drugs of Abuse ("Triage DOA"), a small self-contained test capable of detecting a broad spectrum of commonly overdosed prescription and illicit drugs in approximately 10 minutes, is used by over 2,600 hospitals and emergency departments. Since its introduction in 1992, over 4.2 million Triage DOA panels have been sold worldwide for use in hospital emergency department screening and workplace testing. The Company is developing several additional products for applications where the Company believes its Immediate Response Diagnostics can play an important role in improving patient care. Products under development include tests that are intended to aid in the diagnosis of heart attacks, the dosing of certain therapeutic drugs, the management of certain chronic diseases and the detection of certain bacterial and parasitic infections. In 1995, the worldwide market for immunoassay tests exceeded $5.1 billion. Although early manual immunoassay tests provided high levels of sensitivity for analyte detection, these tests suffered from short shelf lives, long reaction times, a need for radioactive labels and inconsistent results. In response to these limitations, automated immunoassay analyzers have been developed to simplify the performance of antibody-based tests. However, these machines are large and complex, have lengthy turnaround times and require high volumes of sample throughput to justify the significant investment in equipment and technical staff. In recent years, there has been a continuing shift from the use of such analyzers to more technologically advanced point-of-care tests that can be performed in a matter of minutes. Although certain simple single analyte diagnostic tests have been developed, such tests have remained incapable of precise, multi-analyte detection or highly sensitive quantitative measurements. As a result, medical tests that require multiple analytes or precise quantitation of the target analyte have remained the domain of immunoassay analyzers. The Company believes that there is significant market potential for advanced point-of-care diagnostic products that provide quick and accurate diagnosis during a patient visit, shortening the decision time to medical intervention and minimizing the need for additional patient follow-up, thereby reducing overall health care delivery costs. Biosite's Immediate Response Diagnostics technology is based on proprietary advances in several core scientific and engineering disciplines, including antibody development and engineering, analyte cloning and synthesis, signaling chemistry and micro capillary fluidics, which make possible the development and manufacture of rapid, accurate and cost-effective point-of-care diagnostics. The Company has utilized its core technologies to develop two distinct product platforms: the Triage Panel for qualitative visual readings and the Triage CareLink System for quantitative measurements. The Company's products are designed to measure either a single analyte or multiple analytes simultaneously and to allow for the qualitative or quantitative analysis of various samples, including urine, serum, plasma, whole blood and stool. Both of the Company's product platforms are designed to provide rapid results, ease of use, high analytical accuracy and the capability of performing multiple analyses in a reliable and cost-effective testing device. IMMEDIATE RESPONSE DIAGNOSTICS(TM) BIOSITE'S TRIAGE PANELS AND TRIAGE CARELINK SYSTEM PRODUCT ATTRIBUTES TRIAGE(R) PANEL FOR DRUGS OF ABUSE IS USED IN A VARIETY OF SETTINGS FOR RAPID DRUG SCREENING RAPID RESULTS EASE OF USE HIGH ANALYTICAL ACCURACY MULTIPLE ANALYTE DETECTION RELIABILITY COST EFFECTIVENESS [PHOTOGRAPHS OF CERTAIN SETTINGS IN WHICH TRIAGE DOA IS USED (HOSPITAL LABORATORIES, EMERGENCY ROOMS AND WORKPLACE SCREENING)] Triage DOA, based on the Company's Triage Panel platform, is a qualitative, single sample urine screen that identifies eight commonly abused prescription and illicit drugs or drug classes and provides results in approximately 10 minutes. Emergency physicians have estimated that drug abuse is implicated in 5% to 10% of the emergency department visits in the United States each year. The Company believes that it is a leading provider of immunoassays for drug screening in hospitals. In 1995, sales of Triage DOA product lines exceeded $25.1 million. The Company has additional Triage Panel products under development for the qualitative detection of bacterial and parasitic infections. The Triage CareLink System under development is designed to provide rapid, quantitative results for immunoassay tests. The Triage CareLink System consists of two parts: a small single-use test cartridge and a proprietary portable fluorescent meter designed to read the sample at the point-of-care. The Company currently is developing two applications using this technology: Triage Cardiac, to quantify a panel of cardiac markers implicated in acute myocardial infarction ("AMI"), and Triage Transplant, to monitor the concentration of cyclosporine, an immunosuppressant drug prescribed for organ transplant recipients to prevent organ rejection. The Company has entered into several strategic arrangements with major pharmaceutical and diagnostic companies, including Novartis Pharma Inc. ("Novartis," formerly Sandoz Pharma Ltd.) for the development of Triage Transplant; LRE Relais + Electronik GmbH ("LRE") for the development of the fluorescent meter used in the Triage CareLink System; and Merck KGaA ("Merck") and ARKRAY KDK Corporation, formerly known as Kyoto Dai-ichi Kagaku Co., Ltd. ("KDK"), for the development of Triage Cardiac. The products covered by such arrangements are currently under development and have not generated any revenue for the Company. In addition, the Company uses the Curtin Matheson Scientific division of Fisher Scientific Company ("CMS"), to distribute Triage DOA to U.S. hospital-based laboratories and emergency departments and has built a small direct sales force to address the workplace testing segment of the market for Triage DOA. Merck is the exclusive distributor of Triage DOA in certain countries in Europe, Latin America, the Middle East, Asia and Africa. The Company was incorporated in Delaware in 1988. The Company's executive offices are located at 11030 Roselle Street, San Diego, California 92121, and its telephone number is (619) 455-4808. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,000,000 shares Common Stock to be outstanding after the offering................................... 11,894,642 shares(1) Use of proceeds.............................. For expansion of sales and marketing activities, research and development, expansion and development of manufacturing capabilities, working capital and general corporate purposes. Proposed Nasdaq symbol....................... BSTE </TABLE> - --------------- (1) Excludes 1,280,180 shares reserved for issuance upon exercise of stock options outstanding at December 31, 1996. See "Capitalization," "Management -- Executive Compensation" and Note 7 of Notes to Financial Statements. PRODUCTS UNDER DEVELOPMENT TRIAGE(R) PANELS TRIAGE(R) O & P (PARASITE SCREENING) TRIAGE(R) C.DIFF (PATHOGEN DETECTION) TRIAGE(R) ENTERIC (PATHOGEN SCREENING) TRIAGE(R) CARELINK SYSTEM TRIAGE(R) CARDIAC (ACUTE MYOCARDIAL INFARCTION DETECTION) TRIAGE(R) TRANSPLANT (CYCLOSPORINE MONITORING) [PHOTOGRAPHS SHOWING THE COMPANY'S PRODUCTS UNDER DEVELOPMENT] THE COMPANY'S PRODUCTS IN DEVELOPMENT ARE IN VARIOUS STAGES OF RESEARCH OR DEVELOPMENT AND HAVE NOT BEEN APPROVED BY THE UNITED STATES FOOD AND DRUG ADMINISTRATION FOR COMMERCIAL SALE. THERE CAN BE NO ASSURANCE THAT THE COMPANY'S PRODUCTS IN DEVELOPMENT WILL BE SUCCESSFULLY DEVELOPED OR APPROVED BY REGULATORY AUTHORITIES FOR COMMERCIAL SALE. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, ----------------------------------------------- ------------------- 1991 1992 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Net sales............................... $ -- $ 2,920 $ 9,866 $16,320 $25,147 $18,236 $20,225 Cost of sales........................... -- 1,612 3,268 4,416 5,649 3,781 4,318 ------- ------- ------- ------- ------- ------- ------- Gross profit............................ -- 1,308 6,598 11,904 19,498 14,455 15,907 Research and development................ 2,793 2,593 2,796 3,836 6,553 4,602 6,515 Selling, general and administrative..... 1,771 3,622 4,841 5,960 7,134 5,203 6,116 Settlement of patent matters............ -- -- -- 338 1,217 743 2,368 ------- ------- ------- ------- ------- ------- ------- Total operating expenses................ 4,564 6,215 7,637 10,134 14,904 10,548 14,999 Income (loss) from operations........... (4,564) (4,907) (1,039) 1,770 4,594 3,907 908 Interest and other income, net.......... 260 630 613 649 1,647 1,253 1,441 ------- ------- ------- ------- ------- ------- ------- Income (loss) before benefit (provision) for income taxes...................... (4,304) (4,277) (426) 2,419 6,241 5,160 2,349 Benefit (provision) for income taxes.... -- -- -- (63) 1,667 (132) 264 ------- ------- ------- ------- ------- ------- ------- Net income (loss)....................... $(4,304) $(4,277) $ (426) $ 2,356 $ 7,908 $ 5,028 $ 2,613 ======= ======= ======= ======= ======= ======= ======= Net income (loss) per share............. $ (0.61) $ (0.49) $ (0.04) $ 0.22 $ 0.74 $ 0.47 $ 0.24 ======= ======= ======= ======= ======= ======= ======= Common and common equivalent shares used in computing per share amounts(1)..... 7,058 8,754 10,098 10,553 10,766 10,721 10,832 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 -------------------------- ACTUAL AS ADJUSTED(2) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.............................. $10,169 $ 31,789 Working capital................................................................ 13,967 35,667 Total assets................................................................... 28,968 50,588 Notes payable and capital lease obligations, less current portion.............. 3,234 2,234 Stockholders' equity........................................................... 21,181 43,881 </TABLE> - --------------- (1) Computed on the basis described in Note 1 of Notes to Financial Statements. (2) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $12.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000840346_jackson_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000840346_jackson_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c3426087d5450a10112da493617354e04d631b35
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000840346_jackson_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE HEREIN. UNLESS INDICATED OTHERWISE, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND THE CLOSING OF THE PREFERRED STOCK RECAPITALIZATION DESCRIBED IN "RECENT DEVELOPMENTS." REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO JACKSON HEWITT INC. AND ITS SUBSIDIARIES AND REFERENCES TO "JACKSON HEWITT" REFER TO THE COMPANY AND THE COMPANY'S SYSTEM OF FRANCHISED OFFICES. YEARLY REFERENCES THROUGHOUT THIS PROSPECTUS REFER TO THE COMPANY'S FISCAL YEAR ENDING ON APRIL 30. REFERENCES TO THE TERM "TAX SEASON" THROUGHOUT THIS PROSPECTUS REFER TO THE PERIOD FROM JANUARY THROUGH APRIL OF EACH FISCAL YEAR. FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS." THE COMPANY Jackson Hewitt is the second largest tax preparation service in the United States, with a 41 state network comprised of 1,296 franchised and 76 Company-owned offices operating under the trade name "Jackson Hewitt Tax Service." Office locations range from stand-alone store front offices to offices within Wal-Mart Stores, Inc. ("Wal-Mart") and Montgomery Ward & Co., Inc. ("Montgomery Ward") locations. Through the use of proprietary interactive tax preparation software, the Company is engaged in the preparation and electronic filing of federal and state individual income tax returns (collectively referred to in this Prospectus as "tax returns"). During 1997, Jackson Hewitt prepared approximately 875,000 tax returns, which represented an increase of 21.2% from the approximately 722,000 tax returns it prepared during 1996. To complement its tax preparation services, the Company also offers accelerated check requests ("ACRs") and refund anticipation loans ("RALs") (ACRs and RALs, collectively, "Bank Products") to its tax preparation customers. In 1997, Jackson Hewitt customers purchased approximately 472,000 Bank Products, an increase of 20.1% over the approximately 393,000 Bank Products purchased in 1996. In 1997, the Company had total revenues of $31.4 million and net income of $5.0 million, or $0.95 per share, an increase of 25.6%, 107.5%, and 137.5%, respectively, over 1996. Through the innovative use of computers, the Company believes it provides consistent, high quality tax preparation services at prices that allow the Company to compete successfully with other businesses offering similar services. While the quality of service provided by other tax preparers depends largely on the individual preparer's knowledge of tax laws, Jackson Hewitt's service does not depend solely upon the preparer's tax expertise. Jackson Hewitt's proprietary interactive tax software, Hewtax, automatically prompts the preparer with the relevant questions required to accurately complete a tax return. By computerizing the tax preparation process, Jackson Hewitt is able to rapidly and efficiently prepare and file a customer's tax return electronically. Since electronic filings are generally processed by the Internal Revenue Service ("IRS") on a priority basis, customers who file in this manner typically receive refunds more quickly than those who file their tax returns manually. Jackson Hewitt's customer base currently consists primarily of low to middle income taxpayers who typically are entitled to tax refunds and want to receive their refund checks as quickly as possible. During the 1997 tax season, approximately 80% of Jackson Hewitt's customers had annual gross wages under $30,000 and over 62% had annual gross wages under $19,000. Many customers also qualify for an increased refund as a result of the Earned Income Credit ("EIC"), an income tax credit that can generate significant refunds for lower income taxpayers. These customers typically file their tax returns early in the tax season in order to receive their tax refund quickly. The Company believes that customers are attracted to Jackson Hewitt's services because they prefer not to prepare their own tax returns, are unwilling to pay the fees charged by most accountants and tax attorneys, or wish to purchase a Bank Product. As part of its electronic filing service, Jackson Hewitt offers its customers Bank Products in cooperation with selected commercial banks. Bank Products enable Jackson Hewitt customers to receive their tax refunds faster than if they filed their tax returns by mail and to defer the payment of the tax preparation and other fees until their tax refunds are actually received. Through the ACR program, Jackson Hewitt customers are offered the opportunity to have their tax refunds deposited directly into bank accounts established for this purpose. Through the RAL program, Jackson Hewitt customers may apply for loans in an amount up to their anticipated federal income tax refunds. The borrowed funds are generally disbursed to customers within one to three days from the time their tax returns are filed with the IRS. To obtain funds associated with tax refunds processed through the ACR or RAL programs, customers must return to the Jackson Hewitt office when notified that such funds are available. Bank Products have become an increasingly important source of revenue for the Company, accounting for 29.8% of total revenues in 1997, compared to 10.0% in 1993. During the 1997 tax season approximately 54.0% of Jackson Hewitt customers purchased Bank Products. The Company's growth has benefited from its ability to sell relatively inexpensive franchises. The purchase price for a new Jackson Hewitt franchise is currently $20,000. The franchisee receives the right to operate Jackson Hewitt offices within a geographic territory having a population of approximately 50,000. The Company sold 166 new territories during 1997, an increase of 46.9% over the 113 territories sold in 1996. Franchisees are permitted to operate as many offices within a territory as they choose. The net number of franchised offices has increased from 546 in 1993 to 1,296 in 1997. Net fees associated with the sale of franchises in 1997 totaled $3.2 million, or 10.2% of total revenues. Franchisees are required to pay royalties and advertising fees to the Company equal to 18% of revenues generated by the franchised offices. Such fees totaled $13.2 million in 1997, or 42.1% of total revenues. Through the expansion of its franchise operations, the Company has established a national presence, with a primary concentration in the Mid-Atlantic region of the United States. The Company also operates 76 Company-owned offices in selected territories throughout the United States. Historically, the Company-owned offices were located in territories reacquired from franchisees and thereafter were operated on a temporary basis by the Company pending their resale as a franchised territory. Recently, the Company re-evaluated its practice of reselling Company-owned offices and currently plans to operate Company-owned offices as an integral part of its business strategy. Beginning in 1997, the Company began closely reviewing the operations of these stores and intends to close unprofitable offices and improve operating procedures at the remaining offices. Company-owned offices generated tax return preparation fees, net, of $3.3 million in 1997, or 10.5% of total revenues. The Company's objective is to enhance market share through the continued geographic expansion of its system of tax preparation offices. The Company's management team has developed the following key strategic elements to achieve this objective: EXPAND THE FRANCHISE NETWORK. The Company intends to capitalize on the recent financial performance of its franchise network by selling additional territories to existing franchisees, as well as marketing territories to new franchisees with a focus on those who are financially capable of purchasing and operating multiple territories. The Company also intends to open offices in certain territories that will be available for purchase by franchisees who may be interested in purchasing existing businesses rather than undeveloped territories. EXPAND THE CORPORATE OFFICE PROGRAM. Based upon initial test results in two markets, the Company intends to enter new markets by opening multiple Company-owned offices in selected territories. Recognizing the potential profitability of Company-owned offices, the Company believes it can maximize the effectiveness of its marketing campaigns and achieve certain economies of scale by operating clusters of Company-owned offices in target areas. IMPROVE EFFICIENCY OF OPERATIONS. The Company plans to continue to increase the efficiency and consistency of its Company-owned and franchised offices through its integrated computer systems and emphasis on standardization of operating practices. PROMOTE THE JACKSON HEWITT BRAND NAME. To increase market share, the Company intends to focus its marketing efforts on improving the recognition of the Jackson Hewitt brand name. Through its advertising campaigns, the Company intends to expand its existing customer base to include a greater percentage of middle to upper income taxpayers who, the Company's marketing research indicates, tend to file their tax returns late in the tax season. The Company believes that the successful implementation of these initiatives, coupled with the strength of its existing franchised network, will enable it to continue increasing its market share. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........................ 1,150,000 shares Common Stock offered by the Selling Shareholders........... 155,604 shares Total Offering............................................. 1,305,604 shares Common Stock to be outstanding after the Offering.......... 6,405,193 shares(1) Use of Proceeds............................................ To reduce the Company's dependence on its credit facility, and for working capital, general corporate purposes, and possible acquisitions of complementary businesses or product lines. See "Use of Proceeds." Nasdaq National Market symbol.............................. JTAX </TABLE> - --------------- (1) Includes 48,166 shares issued pursuant to exercises of employee stock options subsequent to April 30, 1997. Does not include 461,269 shares issuable upon the exercise of outstanding options as of July 29, 1997, at a weighted average exercise price of $5.66 per share. See "Shares Eligible for Future Sale." SUMMARY FINANCIAL INFORMATION <TABLE> <CAPTION> YEARS ENDED APRIL 30, --------------------------------------------------- 1993 1994 1995 1996 1997 ------- ------- ------- ------- ------- <S> <C> (in thousands, except per share, office and fee data) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenues......................................................... $10,841 $18,640 $18,215 $25,016 $31,432 Income (loss) from operations.......................................... 1,046 1,430 (1,078) 5,278 11,768 Income before extraordinary item....................................... 677 923 840 2,402 6,232 Net income............................................................. 677 923 840 2,402 4,984 INCOME PER COMMON SHARE: Primary: Income before extraordinary item.................................. $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.22 Net income........................................................ $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.95 Fully diluted: Income before extraordinary item.................................. $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.18 Net income........................................................ $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.91 Weighted average shares outstanding.................................... 3,701 4,069 4,252 4,354 4,520 SUPPLEMENTAL PRO FORMA INCOME PER COMMON SHARE(1): Primary: Income before extraordinary item.................................. $ 1.07 Net income........................................................ $ 0.83 Fully diluted: Income before extraordinary item.................................. $ 1.04 Net income........................................................ $ 0.81 OTHER OPERATING DATA: Tax returns prepared(2).............................................. 404 570 618 722 875 Refund anticipation loans (RALs) provided(2)......................... 246 331 108 102 142 Accelerated check requests (ACRs) provided(2)........................ 15 22 192 291 330 Franchised offices................................................... 546 742 1,087 1,246 1,296 Company-owned offices................................................ 68 136 135 96 76 Average tax preparation fees per return(2)........................... $ 67 $ 69 $ 80 $ 93 $ 99 </TABLE> <TABLE> <CAPTION> AS OF APRIL 30, 1997 ------- ACTUAL ------- <S> <C> (in thousands) CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents.............................................. $ 6,324 Working capital........................................................ 5,983 Total assets........................................................... 28,160 Long-term debt......................................................... 1,262 Redeemable convertible preferred stock................................. 3,236 Shareholders' equity................................................... 14,740 <CAPTION> AS ADJUSTED(3) -------------- <S> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents.............................................. $ 26,822 -------------- Working capital........................................................ 26,481 -------------- Total assets........................................................... 48,658 -------------- Long-term debt......................................................... 1,262 Redeemable convertible preferred stock................................. -- Shareholders' equity................................................... 41,722 -------------- </TABLE> - --------------- (1) Assumes the Company's exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock and the cancellation of 82,327 shares of Common Stock delivered by John T. Hewitt to prepay his $1.3 million obligation to the Company had occurred on May 1, 1996. See "Recent Developments," "Certain Transactions," and Note 16 of the Notes to the Consolidated Financial Statements. (2) Includes Company-owned and franchised offices. (3) Assumes (i) the sale of the 1,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $13.625 per share, (ii) the application of the estimated net proceeds thereof as described under the "Use of Proceeds," (iii) the exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock and (iv) the cancellation of 82,327 shares of Common Stock delivered by John T. Hewitt to prepay his $1.3 million obligation to the Company had occurred on April 30, 1997. See "Capitalization," "Recent Developments," "Certain Transactions," and Note 16 of the Notes to the Consolidated Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000844008_consygen_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000844008_consygen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9e70c6926edb235bc1d1057a31772571bf98fd9a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000844008_consygen_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is qualified in its entirety by the more detailed information (including the financial statements and notes thereto) appearing elsewhere in this Prospectus. THE COMPANY The Company's business consists solely of the business of its wholly owned subsidiary, ConSyGen, Inc., an Arizona corporation ("ConSyGen-Arizona"). ConSyGen-Arizona commenced business in 1979 for the purpose of developing and marketing vertical market software for the hotel and airline industries. In addition to providing these software packages, for many of its clients, ConSyGen-Arizona converted these applications from proprietary Honeywell computers to open systems (UNIX-compliant hardware), using an internally-developed approach which automated the conversion process. Until 1995, ConSyGen-Arizona licensed its proprietary computer software, which was used in the hotel and airline industries, and also provided software maintenance services. In 1996, ConSyGen-Arizona discontinued its practice of software licensing and providing software maintenance services. In 1991, in response to growing business demand for migration of older software applications from mainframe computers to open systems, ConSyGen-Arizona commenced development of a fully-automated capability to allow clients to move software applications from mainframes to open systems, while simultaneously performing migration to alternative databases and providing replacement of existing languages (primarily, COBOL). This process, also known as "down-sizing" or "re-hosting", was designed to move application software from expensive, inflexible, proprietary mainframe computers to newly-available, lower-cost open-system computers, thereby opening up more effective environments, while substantially reducing operating costs. After significant research and development, an automated software conversion toolset - ConSyGen Conversion(SM)- was completed. See "Risk Factors Absence of Proven Technology/Market Acceptance." Full automation of this otherwise-manual process offered the significant benefit of eliminating most of the manual conversion tasks, thereby reducing effort, time and expense, while improving accuracy and reducing testing requirements. In early 1996, ConSyGen-Arizona commenced the extension of the existing conversion capability to deal specifically with the Year 2000 problem; that is the inability of a software application to recognize the Year 2000. ConSyGen-Arizona's objective was to develop a fully-automated process for the identification and correction of date occurrences in software applications. Although under continuous development, the Company's ConSyGen 2000(SM) toolset, which provides automated date conversions, has been used to complete several pilot (non-revenue generating) Year 2000 conversion projects, and patents are pending on the technology. See "Risk Factors - Absence of Proven Technology/Market Acceptance." Automation of the process by which software is made compliant for the Year 2000 and beyond, as compared with a manual process, offers the benefits of speed; accuracy; reduced staffing, time and cost; and higher confidence in the delivered result. Client staff involvement is reduced to project-related tasks (such as test planning), and to confirmation of some date origins and cross-references in the software. ConSyGen-Arizona now concentrates on the marketing and provision of services related to its primary software products - ConSyGen 2000 and ConSyGen Conversion. Marketing is performed by ConSyGen directly, through selected teaming partners, and through a representative program. Although the Company is actively marketing its ConSyGen 2000 and ConSyGen Conversion toolsets, the Company is not currently generating any significant revenue, either from its ConSyGen 2000 or its ConSyGen Conversion toolset. See "Risk Factors - Absence of Proven Technology/Market Acceptance." Although the Company has completed several pilot (non-revenue generating) Year 2000 conversion projects, the Company has not yet completed a revenue generating Year 2000 conversion project. The Company did complete several revenue generating migration projects from 1993 to 1995, but the Company has not since completed such a project. Instead, the Company's efforts have been focused on the further development of its ConSyGen Conversion toolset, including extending the toolset to cover new hardware environments. Such further development and extension of the toolset was necessary, as the toolset was limited in application to Honeywell/BULL systems and did not perform conversions with sufficient speed. The Company recently entered into a revenue generating contract with Lender's Service, Inc., a subsidiary of Merrill Lynch, pursuant to which the Company will provide conversion services, including both migration and Year 2000 correction services. - -------------------------------------------------------------------------------- THE OFFERING <TABLE> <CAPTION> <S> <C> Common Stock Offered by the Company (1).................................. 211,416 shares Common Stock Offered by Selling Stockholders............................. 2,687,570 shares Common Stock to be Outstanding after the Offering........................ 15,265,494 shares(2) Use of Proceeds.......................................................... Conversion of long-term debt. See "Use of Proceeds." OTC Bulletin Board Symbol................................................ CSGI </TABLE> - ------------------------- (1) Assumes conversion of $1.0 million of long-term debt, at an assumed conversion rate of $4.73 per share (70% of $6.75, the closing price of the Common Stock, as quoted on the OTC Bulletin Board on November 13, 1997), into approximately 211,416 shares of Common Stock. There can be no assurance that such long-term debt will be converted into Common Stock. (2) Does not include: (i) outstanding warrants to purchase 1,400,000 shares of Common Stock, at an exercise price of $5.00 per share, of which 1,300,000 are currently exercisable; and (ii) outstanding options to purchase 2,270,000 shares of Common Stock, at a weighted average exercise price of $4.01, of which 1,211,250 are currently exercisable. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS YEARS ENDED DECEMBER 31, ENDED AUGUST 31, ------------------------ ---------------- 5 MONTHS ENDED MAY 31, 1997 1996 1995 1994 1993 1992 1997 1996 ------------ ---- ---- ---- ---- ---- ---- ---- CONSOLIDATED INCOME (unaudited) (unaudited) STATEMENT DATA: <S> <C> <C> <C> <C> <C> <C> <C> <C> Revenues $ 20 $ 44 $ 329 $ 790 $ 854 $ 819 $ 6 $ - Net loss (1,648) (6,621) (1,120) (655) (595) (50) (744) (1,351) Weighted average common shares outstanding 13,700,231 9,438,062 6,116,661 5,958,327 3,500,000 1,000,000 13,919,831 8,076,889 Net loss per common share (0.12) (0.70) (0.18) (0.11) (0.17) (0.05) (0.05) (0.17) </TABLE> <TABLE> <CAPTION> AUGUST 31, 1997 DECEMBER 31, ------------------------ MAY 31, 1997 1996 1995 1994 1993 1992 ACTUAL AS ADJUSTED(1)(2) ------------ ---- ---- ---- ---- ---- ------------------------ CONSOLIDATED BALANCE (unaudited) (unaudited) SHEET DATA: <S> <C> <C> <C> <C> <C> <C> <C> <C> Cash and cash equivalents $ 21 $ 83 $3 $14 $1 - $ 51 $ 5,759 Working capital (deficit) (857) (820) (1,460) (795) (3,363) (6,853) (295) 5,159 Total assets 211 222 173 64 230 423 1,004 6,210 Long-term debt 1,000 - - - - - 1,000 - Stockholders' equity (deficit) (1,720) (742) (1,392) (779) (3,325) (6,819) (947) 5,508 </TABLE> ---------------------- (1) Assumes conversion of $1.0 million of long-term debt, at an assumed conversion rate of $4.73 per share (70% of $6.75, the closing price of the Common Stock, as quoted on the OTC Bulletin Board on November 13, 1997), into approximately 211,416 shares of Common Stock. There can be no assurance that such long-term debt will be converted into Common Stock. (2) Gives effect to the following transactions: (i) the receipt of $504,000 (net of finder's fee) in payment of subscription receivable and the issuance of the related 100,000 shares; (ii) the sale in September 1997 of 52,000 shares of Common Stock, for net proceeds of approximately $312,000; (iii) the sale in October 1997 of 900,000 shares of Common Stock at a price of $5.8625 per share, for net proceeds of approximately $5.1 million; (iv) the issuance in October 1997 of 31,000 shares of Common Stock in payment of current indebtedness in the amount of approximately $250,000; and (v) the issuance of 20,000 shares of Common Stock to a consultant of the Company as consideration for services rendered and to be rendered. - --------------------------------------------------------------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000846979_regent_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000846979_regent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..32816038bcaa211224289c474d9538ddcb98713b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000846979_regent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. See "Risk Factors" for certain information that investors should consider prior to acquiring the Shares. Regent Regent is a one bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Regent was incorporated under the laws of the Commonwealth of Pennsylvania on December 22, 1986 and on November 23, 1987 was merged into a New Jersey corporation with the same name (and which was incorporated on November 2, 1987), with the New Jersey corporation being the surviving entity. Regent became a bank holding company on June 2, 1989 when it completed the acquisi tion of all of the authorized capital stock of the Bank, Regent's only subsidiary. The Bank commenced operations on June 5, 1989. Regent provides banking services through the Bank and does not engage in any activities other than banking activities. Regent is regulated by the Board of Governors of the Federal Reserve System. The executive offices of Regent are located at 1430 Walnut Street, Philadelphia, Pennsylvania 19102. Regent's telephone number is (215) 546-6500. The Bank The Bank, a federally-chartered national bank, is regulated by the Office of the Comptroller of the Currency (the "OCC") and is a member of the Federal Reserve System. The deposits held by the Bank are insured by the Bank Insurance Fund (the "BIF") of the Federal Deposit Insurance Corporation (the "FDIC") to the maximum permitted by current law. The Bank was wholly owned by Regent from June 5, 1989 to April 16, 1997. On April 16, 1997, Regent sold 1,120,000 newly issued shares of the Bank's Common Stock at $8.50 per share, an aggregate of $9,520,000, in a private placement (the "Bank Offering"). As a result, Regent currently owns approximately 53% of the Bank's outstanding Common Stock. Regent anticipates that the exchange of the Bank Common Stock for Regent Common Stock will occur promptly following the effectiveness of the registration statement of which this Prospectus forms a part for the resale of the Regent Common Stock issued in exchange for the Bank Common Stock. Upon consummation of the exchange, the Bank will again be wholly owned by Regent. See "Plan of Distribution" and "The Bank Offering." The Bank engages in the commercial banking business, serving the banking needs of its customers with a particular focus on small and medium-sized businesses, professionals and other individuals, with an emphasis on the origination of loans in the $100 thousand to $3.0 million range. The Bank's strategy in providing its services is to attempt to respond to each customer's needs and assure that a customer will deal regularly with the same officer of the Bank. The small and mid-sized business and entrepreneurial market in the Bank's service area is large and the Bank believes it can offer the flexibility, speed and personal attention necessary to serve this large market. The banking and broad business experience of the Bank's officers and directors makes the Bank particularly well-suited to serve the individualized needs of this market. The Bank maintains one office at 1430 Walnut Street, Philadelphia, Pennsylvania 19102, where it conducts all of its banking activities. The Bank currently does not intend to expand by opening new branches or competing for the retail consumer market served by large banks in the region, but rather will pursue alternative means of deposit generation. At June 30, 1997, the Bank had $212.1 million in assets, $174.3 million in deposits and $75.8 million in net loans. The Bank's primary service area for Community Reinvestment Act ("CRA") purposes is the Delaware Valley which includes the greater Philadelphia metropolitan area and various counties in New Jersey, Delaware and Maryland. Reference is made to the map on the next page. The federal and state laws and regulations that are applicable to bank holding companies and banks give regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and generally have been promulgated to protect depositors and deposit insurance funds and not for the purpose of protecting stockholders. Any change in such regulations, whether by an applicable federal or state regulatory authority or federal or state legislative bodies, could have a significant impact on Regent and the Bank. See "Supervision and Regulation." The Bank offers a wide range of deposit products, including checking accounts, interest-bearing NOW accounts, insured money market accounts, certificates of deposit, savings accounts and Individual Retirement Accounts. A broad range of credit facilities is offered by the Bank to the businesses and residents of its service area, including commercial loans, home improvement loans, mortgage loans and home equity lines of credit. At June 30, 1997, the Bank's legal lending limit was approximately $3.3 million per borrower. In addition, the Bank offers safe deposit boxes, travelers' checks, money orders, direct deposit of payroll and Social Security checks, and access to one or more regional or national automated teller networks as well as international services through correspondent institutions. The Bank is also empowered to offer, but does not provide, trust services. The Bank has the power to act as executor of wills and as a trustee for Individual Retirement Accounts, minors and other fiduciaries. Other trust services are provided through correspondent institutions. The Bank has established relationships with correspondent banks and other financial institutions in order to provide other services requested by its customers, including requesting correspondent banks to participate in loans where the loan amount exceeds the Bank's policies or legal lending limit. As of July 15, 1997, Regent and the Bank had a total of 32 employees, excluding temporary employees engaged in the collection of automobile insurance premium finance ("IPF") receivables. There is intense competition among financial institutions in the Bank's service area, although the Bank believes its relatively small size and emphasis on personal service provide it with a competitive advantage. The Bank competes with new and established local commercial banks, as well as numerous regionally based commercial banks. There is also competition from out of state financial institutions, thrifts and mutually owned savings banks and savings and loan associations. As of the date hereof, the Bank had attracted, and believes it will continue to attract, its customers from the deposit base of such existing banks and financial institutions and from growth in the Delaware Valley. Many of such banks and financial institutions are well-established and well-capitalized, allowing them to do more advertising and promotion and to provide a greater range of services, including trust services, than the Bank. The Bank's strategy has been and will continue to be emphasizing personalized service, offering competitive rates to depositors [GRAPHIC OMITTED] In the printed version of this document there appears a map depicting sections of Pennsylvania, New Jersey, Delaware and Maryland. Regent Bancshares Corp. Serving the Wealthy & Populous Delaware Valley Median 1996 Household Population Income Pennsylvania Philadelphia 1,498,085 $29,575 Montgomery 709,047 $52,815 Bucks 577,401 $51,846 Delaware 547,788 $46,770 Lancaster 449,868 $39,876 Chester 405,497 $59,444 Berks 351,468 $37,588 Lehigh 299,809 $39,818 Northampton 257,883 $40,667 New Jersey Camden 507,206 $41,957 Ocean 465,948 $39,757 Burlington 401,107 $52,887 Mercer 330,871 $51,359 Gloucester 245,892 $47,319 Atlantic 234,758 $36,556 Cumberland 138,573 $36,535 Cape May 98,897 $35,042 Salem 64,485 $43,108 Delaware New Castle 472,708 $46,586 Kent 123,130 $36,429 Maryland Cecil 79,235 $40,265 NATIONAL AVERAGE $36,153 and making use of commercial and personal ties of the Bank's stockholders, directors, officers and staff to Delaware Valley businesses and residents. In recent years, intense market demands, economic pressures and significant legislative and regulatory action have eroded traditional banking industry classifications which were once clearly defined and have increased competition among banks, as well as between banks and other financial institutions. As a result, banks and other financial institutions have had to diversify their services, generally increase interest paid on deposits and become more cost effective. These events have resulted in increasing homogeneity in the financial services offered by banks and other financial institutions. Some of the effects on banks and other financial institutions of these market dynamics and legislative and regulatory changes include increased customer awareness of product and service differences among competitors and increased merger activity. The Offering <TABLE> <S> <C> Regent Common Stock to be sold............................ 1,586,659 shares that may be resold by the holders thereof after being issued in exchange for the Bank Common Stock sold in the Bank Offering Regent Common Stock to be offered......................... 564,726 shares issuable upon the conversion of the Regent Preferred Stock Conversion rate for Regent Preferred Stock................ One share of Regent Common Stock for each share of Regent Series A or Series E Preferred Stock and 1.177 shares of Regent Common Stock for each share of Regent Series B, Series C or Series D Preferred Stock Regent Common Stock to be outstanding after the offering(1)................................ 3,423,918 shares </TABLE> (1) Based on the number of shares of Regent Common Stock outstanding on June 30, 1997. Assumes that all of the Shares offered hereby are exchanged and converted as described herein. Excludes an aggregate of 297,000 shares of Regent Common Stock which at June 30, 1997 were (i) reserved for issuance pursuant to the exercise of outstanding options granted under Regent's 1997 Equity Incentive Plan (the "Plan") and (ii) 25,000 shares of Regent Common Stock reserved for issuance upon the exercise of options that may be granted under the Plan in the future. Resale of Regent Common Stock to be Exchanged for the Bank Common Stock Issued in the Bank Offering As a result of the Bank's losses for the year ended December 31, 1995 and through the first nine months of 1996 and the resulting undercapitalization of the Bank, on October 10, 1996, the Bank entered into a written agreement (the "Regulatory Agreement") with the OCC pursuant to 12 U.S.C. (section)1818(b). The Regulatory Agreement required, among other things, that the Bank achieve and maintain a Tier I capital ratio of 6.50% or greater on and after December 31, 1996. At December 31, 1996, the Bank's Tier I capital ratio was 5.65%, and as a result the Bank was no longer in compliance with the Regulatory Agreement. At the direction of the OCC, in February 1997 the Bank filed a revised capital plan with the OCC, the principal element of which was the raising of additional capital for the Bank through the sale of Common Stock of the Bank. Regent's and the Bank's Boards of Directors determined to proceed with the Bank Offering rather than raising capital through the sale of securities by Regent because such Boards of Directors believed Bank Common Stock would be more saleable than Regent Common Stock or Regent Preferred Stock, the Bank Offering could be completed more quickly and the Bank could more quickly achieve compliance with the Regulatory Agreement. On March 27, 1997, the OCC notified the Bank of the OCC's acceptance of the Bank's revised capital plan. On April 8, 1997, the Bank commenced the Bank Offering. On April 16, 1997, the Bank sold 1,120,000 shares of the Bank's Common Stock for net cash proceeds of approximately $8.9 million. See "Description of Capital Stock -- The Bank Common Stock" for a description of the rights of holders of Bank Common Stock. As a result of the Bank Offering, the Bank's Tier I capital ratio increased to approximately 10.12% on a pro forma basis as of March 31, 1997. As a result, the OCC terminated the Regulatory Agreement on June 25, 1997. The Bank Common Stock sold in the Bank Offering is mandatorily exchangeable for Regent Common Stock at the rate of 1.41666 shares of Regent Common Stock for each share of Bank Common Stock at any time after (i) the average of the closing bid price of Regent Common Stock has equaled or exceeded $12 per share for 15 consecutive trading days and (ii) the resale of the Regent Common Stock issuable in exchange for the Bank Common Stock has been registered under the Securities Act of 1933, as amended (the "1933 Act"). Regent, the Bank and each of the holders of the Bank Common Stock issued in the Bank Offering have agreed to enter into an agreement (the "Waiver Agreement"), whereby each of such holders will waive the condition precedent to the exchange relating to the bid price of Regent Common Stock which agreement will permit such exchange of Regent Common Stock for Bank Common Stock to occur promptly after August 15, 1997. See "Plan of Distribution -- The Bank Offering" for information concerning the exchange procedures that will be utilized in connection with the exchange of Regent Common Stock for Bank Common Stock. Shares Issuable Upon the Conversion of the Regent Preferred Stock On June 1, 1989, Regent completed a public offering that included 530,000 shares of Regent's Series A Preferred Stock. Subsequently thereto, Regent has paid annual dividends on the Regent Series A Preferred Stock at the rate of one share of Regent Preferred Stock for each ten outstanding shares of Regent Series A Preferred Stock. Payment of this annual dividend was effected by the issuance of Regent Series B Preferred Stock in 1990, Regent Series C Preferred Stock in 1991, Regent Series D Preferred Stock in 1992 and Regent Series E Preferred Stock in 1993 and subsequent years. In addition, Regent sold 16,364 shares of Regent Series A Preferred Stock in March 1997 in a private placement. All of the Regent Preferred Stock is redeemable at any time at the option of Regent upon not less than 30 days notice at a price of $10.00 per share plus declared but unpaid dividends. All of the Regent Preferred Stock is also convertible into Regent Common Stock at any time at the option of the holder thereof at the rate of one share of Regent Common Stock for each share of Regent Series A Preferred Stock or Regent Series E Preferred Stock and at the rate of 1.177 shares of Regent Common Stock for each share of Regent Series B Preferred Stock, Regent Series C Preferred Stock or Regent Series D Preferred Stock. Since Regent Common Stock has traded at a price in excess of the $10.00 per share redemption price at all times since late April 1997, Regent's Board of Directors has determined to call for redemption during the fourth quarter of 1997 all of the Regent Preferred Stock with the expectation that substantially all of the holders of Regent Preferred Stock will exercise their right to convert their Regent Preferred Stock into Regent Common Stock in order to avoid the diminution in value that would occur if they received the redemption price of $10.00 per share in cash and paid any applicable taxes thereon compared to the current market value of the Regent Common Stock they would receive upon conversion. No fractional shares of Regent Common Stock are issuable upon the conversion of Regent Preferred Stock into Regent Common Stock and, in lieu thereof, an adjustment in cash will be made based upon the last reported sale price of the Regent Common Stock on the date of conversion. See "Description of Capital Stock -- Regent Preferred Stock" for a description of the rights of holders of Regent Preferred Stock, including information relating to the conversion of Regent Preferred Stock into Regent Common Stock and the procedures that will be utilized upon the redemption of Regent Preferred Stock. Under the Certificates of Designation applicable to the Regent Preferred Stock, holders of Regent Preferred Stock will be furnished with not less than 30 days prior written notice of the date of redemption of the Regent Preferred Stock and, during such 30-day period, such holders will continue to have the right to convert Regent Preferred Stock into Regent Common Stock. Any Regent Preferred Stock not converted into Regent Common Stock prior to the redemption date will thereafter represent only the right to receive in cash the redemption price of $10.00 per share plus any declared but unpaid dividends. Recent Developments Under the management of Robert B. Goldstein, who took office as Chief Executive Officer of Regent and the Bank on April 14, 1997, a number of important developments have occurred which, in the opinion of management of Regent, establish the foundation for the resumption of profitable operations by Regent commencing with the third quarter of 1997. These developments are as follows: o On April 16, 1997, the Bank completed the Bank Offering, which resulted in $8.9 million of new capital for the Bank and increased the Bank's Tier 1 capital ratio to approximately 10.1% as of that date. o On June 25, 1997, as a result of the Bank Offering and other improvements in the financial condition and operations of the Bank, the OCC terminated the Regulatory Agreement that had been in effect between the Bank and the OCC since October 10, 1996. o Since June 25, 1997, the Bank has satisfied the OCC criteria for a "well-capitalized" institution. o During the second quarter of 1997, the Bank entered into agreements to sell the Bank's non-performing and non-earning assets of approximately $8.3 million for $6.3 million. At June 30, 1997, the Bank had completed the sale of $3.3 million of these assets, and the sale of the remainder of those non-performing assets and non-earning will be completed during August 1997. After a related $2.0 million charge against its allowance for loan losses in the second quarter of 1997, the Bank's allowance was $1.4 million at June 30, 1997. o During June 1997, the Bank's management determined that the Bank could reduce its full-time personnel level from 45 persons to 32 persons, a reduction of approximately 29%, without disrupting customer service or diminishing new business development efforts. The costs of approximately $110 thousand incurred in connection with the personnel reduction are reflected in the Bank's results of operations for the six months ended June 30, 1997. The personnel reduction will result in annual savings of approximately $600 thousand to the Bank. o Regent recognized $900 thousand of its deferred tax asset of approximately $1.6 million in the second quarter of 1997 in accordance with Statement of Financial Accounting Standards No. 109 since it is more likely than not that Regent will have sufficient projected tax liability in the foreseeable future. o Regent's total assets at June 30, 1997 were $212 million, an increase from total assets of $192 million at March 31, 1997. o Regent's total loans at June 30, 1997 were $77.2 million, an increase from total loans of $75 million at March 31, 1997. On the basis of unaudited financial information at June 30, 1997 that includes all adjustments, consisting only of normal recurring accruals which Regent considers necessary for a fair presentation of its results of operations for the six months ended June 30, 1997 and 1996, capsule financial information is as follows (in thousands): <TABLE> <CAPTION> Six Months Ended June 30, ------------------------------------ 1997 1996 ---- ---- (unaudited) <S> <C> <C> Statement of Operations Data: Interest income........................................... $ 7,879 $ 11,123 Interest expense.......................................... 4,842 6,591 -------- -------- Net interest income..................................... 3,037 4,532 Provision for loan losses................................. 100 4,050 Non-interest income: Service charges and other income........................ 68 56 Gains on sales of assets................................ 568 83 Non-interest expense: Salaries and benefits................................... 1,591 956 Professional services................................... 1,370 431 Occupancy............................................... 284 299 IPF servicing........................................... 551 1,091 Other................................................... 826 596 -------- ------- Total............................................... 4,622 3,373 Loss before income tax benefit............................ (1,049) (2,752) Income tax (benefit)...................................... (900) -- Income (loss) before preferred stock dividends and minority interest......................... (149) (2,752) Loss before minority interest............................. (360) (2,828) Net loss.................................................. (393) (2,828) June 30, 1997 December 31, 1996 -------------- ----------------- (unaudited) Balance Sheet Data: Cash and due from banks................................... $ 3,681 $ 4,410 Overnight investments..................................... 5,247 5,084 Investment securities available for sale.................. 50,474 30,470 Investment securities held to maturity.................... 69,854 75,083 Loans, net of unearned interest and fees.................. 77,220 85,069 Allowance for loan losses................................. (1,371) (3,060) Accrued income receivable................................. 1,416 1,362 Premises and equipment, net............................... 642 696 Prepaid expenses and other assets......................... 4,939 2,790 -------- -------- Total................................................. $212,102 $201,904 ======== ======== Demand deposits........................................... $ 12,076 $ 10,986 NOW and money market deposits............................. 6,608 6,583 Savings deposits.......................................... 42,063 47,830 Certificates of deposit................................... 113,593 119,727 Advances from Federal Home Loan Bank...................... 12,697 203 Subordinated debentures................................... 2,750 2,750 Accrued interest payable.................................. 3,769 4,792 Other liabilities......................................... 1,363 900 Minority interest......................................... 8,932 --- Shareholders' equity...................................... 8,251 8,133 -------- -------- Total................................................. $212,102 $201,904 ======== ======== Six Months Ended June 30, ------------------------------------ 1997 1996 ---- ---- (unaudited) <S> <C> <C> Other Selected Data: Per share data: Loss before minority interest........................... $(.18) $(2.56) Book value at period end*............................... 5.00 3.92 Weighted average shares outstanding (in thousands)...... 2,023 1,105 Financial ratios: Net interest margin..................................... 3.17% 3.52% Return on average assets................................ (.15) (2.10) Return on average equity................................ N/A N/A Tier 1 capital (Bank only).............................. 10.32 6.37 - ---------- * Reflects exchange of Regent Common Stock for Bank Common Stock to occur promptly after the Registration Statement of which this Prospectus is a part becomes effective. </TABLE> Risk Factors The shares of Regent Common Stock offered hereby involve a high degree of risk, including the Bank's recent history of losses, the Bank's recent history of significant undercapitalization, the adverse impact on the Bank's future net interest income of the actions taken by the Bank to improve its regulatory capital ratios, the ability of Regent to achieve profitable results of operations, the risks attendant to the expansion of the Bank's business, the adequacy of the Bank's allowance for loan losses, the supervision and regulation to which the Bank is subject, the intense competition the Bank faces, the effect of prevailing economic conditions on the Bank and the restrictions on the payment of dividends by the Bank. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000849323_cfm_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000849323_cfm_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dc6a5df50efd005e7a4533fc6144d996ea33aaa1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000849323_cfm_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the financial statements and notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, (a) all references to fiscal years of the Company in this Prospectus refer to fiscal years ended on October 31 and (b) the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. This Prospectus contains forward-looking statements that involve risks and uncertainties. See "Special Note Regarding Forward Looking Statements." THE COMPANY CFM Technologies, Inc. ("CFM" or the "Company") designs, manufactures and markets advanced wet processing equipment for sale to the worldwide semiconductor and flat panel display ("FPD") industries. The Company's products are based on its patented Full-Flow enclosed processing and Direct-Displacement drying technologies and are designed to perform various critical cleaning and etching and photoresist stripping process steps in the manufacture of semiconductors and FPDs. According to VLSI Research Inc. ("VLSI"), total sales of semiconductor process equipment grew from $2.2 billion in 1980 to $30.9 billion in 1995, with sales of wet processing equipment totaling approximately $1.4 billion in 1995. As integrated circuits ("ICs") become increasingly complex and linewidths continue to decrease, the cost of advanced fabrication equipment escalates. Therefore, semiconductor manufacturers are increasingly focused on the cost of owning a particular piece of process equipment compared to competing systems. Determining such cost of ownership ("COO") involves measuring a variety of factors, including acquisition and installation costs, yield, throughput and the use of consumables and facility floor space. Similar trends characterize the market for the FPD industry. Manufacturers of FPDs are focused on equipment that can help to achieve higher resolution, lower power consumption, improved brightness and clearer images. The Company believes that its patented Full-Flow enclosed processing and Direct-Displacement drying technologies enable it to provide wet processing systems that address a variety of limitations inherent in conventional systems, including wet benches and spray tools, resulting in a significantly lower COO for the Company's Full-Flow systems. The Company's Full-Flow systems automatically load wafers or FPD substrates into a fully-enclosed, flow- optimized processing vessel, which isolates them during processing from the damaging effects of exposure to cleanroom air and associated contaminants. As a result, particle contamination is substantially reduced, watermark defects and native oxide growth are substantially eliminated and process control is improved. In addition, the fully-enclosed processing vessel substantially reduces the use of water and process chemicals. Also, the modular design of the Full-Flow system enables flush mounting in the cleanroom wall, with the majority of the floor space occupied by the system components located outside the cleanroom environment, minimizing the use of expensive cleanroom floor space. In 1990, the Company sold its first Full-Flow system for use in a semiconductor production line. To date, the Company has sold over 80 Full-Flow systems to more than 25 semiconductor and FPD manufacturers. The Company's customers include: GEC Plessey, LG International (America) and related entities ("LG"), Motorola, National Semiconductor, Samsung, SGS-Thomson Microelectronics, Siemens, Texas Instruments and Tower Semiconductor. Full-Flow systems can currently be configured with either one or two vessels that are capable of processing 50 8-inch wafers each. The Company recently completed development of an enhanced Full-Flow system that provides a two-fold increase in capital productivity by offering vessels capable of processing 100 8-inch wafers. These enhanced systems, which the Company began to ship in April 1996, address the cost-sensitive photoresist strip market as well as other wet processing applications. In addition, the Company believes its Full-Flow technology is well-suited for cleaning and precise etching applications in the manufacture of FPDs, and provides significant COO advantages over competing FPD wet processing technologies. The Company has developed and shipped five FPD processing systems based on its Full-Flow platform. In addition, the Company recently received a $16.1 million order for six FPD systems from LG. The Company's objective is to capitalize on the inherent COO advantages of its Full-Flow systems to become a leading supplier of advanced wet processing equipment to the worldwide semiconductor and FPD industries. The Company's Full-Flow systems are based on a modular design and can be configured using a variety of process and support modules. By basing new process applications on its proprietary Full-Flow platform, the Company can focus primarily on the development and optimization of the applications' process recipes, which the Company believes significantly reduces the time and cost associated with entering new wet processing market segments. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........... 1,500,000 shares Common Stock offered by the Selling Shareholders................................. 170,000 shares Total Offering.............................. 1,670,000 shares Common Stock to be outstanding after the Offering..................................... 7,553,340 shares(1) Use of Proceeds............................... For general corporate purposes, including working capital. See "Use of Proceeds." Nasdaq Stock Market Symbol.................... CFMT </TABLE> SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> TEN MONTHS ENDED FISCAL YEAR ENDED OCTOBER 31, OCTOBER 31, ------------------------------- 1992(2) 1993 1994 1995 1996 ----------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Net sales........................ $5,939 $11,840 $15,937 $23,430 $44,013 Operating income................. 793 2,095 1,573 2,278 4,642 Net income....................... 145 883 538 1,402 2,960 Net income per share(3).......... $ 0.35 $ 0.61 Weighted average common and common equivalent shares(3)..... 3,994 4,831 </TABLE> <TABLE> <CAPTION> OCTOBER 31, 1996 ---------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments...... $12,254 $52,246 Working capital........................................ 27,525 67,517 Total assets........................................... 44,251 84,243 Long-term debt, less current portion................... 2,525 2,525 Shareholders' equity................................... 32,711 72,703 </TABLE> - -------- (1) Excludes 1,060,107 shares of Common Stock issuable upon the exercise of outstanding stock options as of January 23, 1997 of which options to purchase 487,939 shares were then exercisable. See Note 10 of the Notes to Consolidated Financial Statements. (2) In 1992, the Company changed its fiscal year end from December 31 to October 31. (3) See Note 2 of the Notes to Consolidated Financial Statements for an explanation of the computation of net income per share. (4) Adjusted to reflect the sale by the Company of 1,500,000 shares of Common Stock offered hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000849778_cytyc-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000849778_cytyc-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c6978c9d129260e01cab9f1f2548d22949e75a5d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000849778_cytyc-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Cytyc Corporation designs, develops, manufactures and markets a sample preparation system for medical diagnostic applications. The ThinPrep sample preparation system ("ThinPrep System") allows for the automated preparation of cervical cell specimens on microscope slides for use in cervical cancer screening ("ThinPrep Pap Test"), as well as for the automated preparation of other cell specimens on microscope slides for use in non-gynecological testing applications. On May 20, 1996, the Company received premarket approval ("PMA") from the United States Food and Drug Administration ("FDA") to market the ThinPrep System for cervical cancer screening as a replacement for the conventional Pap smear method. On November 6, 1996, the FDA cleared expanded product labeling for the ThinPrep System to include the claim that the ThinPrep System is significantly more effective in detecting Low Grade Squamous Intraepithelial Lesions ("LGSIL") and more severe lesions than the conventional Pap smear method in a variety of patient populations. The expanded labeling also indicates that the specimen quality using the ThinPrep System is significantly improved over that of the conventional Pap smear method. The Company believes that the ThinPrep System improves accuracy in the detection of cervical cancer and precancerous lesions by making the slide more representative of the patient's clinical condition, improving preservation of the sample, standardizing the presentation of cells on the slide, and reducing the presence of mucus, blood and other obscuring debris. The Company intends to commence the full-scale commercial launch of the ThinPrep System for cervical cancer screening in the first quarter of 1997. Cervical cancer is one of the most common cancers among women throughout the world, with approximately 440,000 new cases reported annually. The American Cancer Society estimates that approximately 15,800 new cases of invasive cervical cancer and 65,000 new cases of carcinoma in situ, a precancerous condition, were diagnosed in the United States in 1995. In the same year, an estimated 4,800 women died of cervical cancer in the United States. The Pap smear is currently the most widely-used test for the early detection of cancer in the United States. In the United States, widespread and regular use of the Pap smear as a screening test has contributed to a greater than 70% decrease in mortality from cervical cancer in the past 45 years. In 1994, clinical laboratories in hospitals, commercial laboratories and privately-owned reference laboratories in the United States processed over 50 million Pap smears. The Company believes that laboratories outside the United States processed at least 50 million additional Pap smears in 1994. In spite of the success of the conventional Pap smear method in reducing deaths due to cervical cancer, the test has significant limitations, including inadequacies in sample collection and slide preparation, slide interpretation errors and the inability to use the specimen for additional diagnostic tests. These limitations result in a substantial number of inaccurate test results, including false negative diagnoses (abnormal cells present in the patient that are missed by screening). These inaccurate test results may subject the patient to a more expensive and invasive course of treatment and to the inconvenience and anxiety of return office visits and repeat testing. The Company believes these inaccurate test results ultimately lead to significant unnecessary costs to the health care system. In October 1995, in support of its PMA application, the Company completed a clinical trial of 6,747 patients at six clinical sites in the United States, including three screening centers and three hospital sites. The clinical trial was designed to rigorously compare the effectiveness of the ThinPrep System to the conventional Pap smear method for the detection of cancerous and precancerous lesions of the cervix. Combining the results of all six clinical sites, the ThinPrep method demonstrated an 18% improvement in the detection of disease as compared to the conventional Pap smear. The results from the three screening centers indicated a 65% improvement in the detection of disease, while in the three hospital sites in which patients had historically exhibited high prevalence rates of cervical abnormalities, the ThinPrep method demonstrated a 6% improvement. The Company is currently focusing on activities related to the full-scale commercial launch of the ThinPrep System for cervical cancer screening in the United States. The Company's strategy is to achieve market acceptance of the ThinPrep System through the use of a direct marketing and sales organization. This organization will focus on health care providers, third-party payors and clinical laboratories to stimulate demand for the ThinPrep Pap Test, to facilitate reimbursement and to demonstrate the economic and clinical benefits of the ThinPrep System. On November 20, 1996, United HealthCare Corporation ("United HealthCare") announced that it will expand its health care coverage to include the ThinPrep Pap Test, however, the applicable rate of reimbursement has yet to be negotiated between United HealthCare or its various plans and the specific clinical laboratories servicing such plans. There can be no assurance that third-party payors will provide such coverage, that reimbursement levels will be adequate or that health care providers or clinical laboratories will use the ThinPrep System for cervical cancer screening in lieu of the conventional Pap smear method. The Company has marketed the ThinPrep System for use in non-gynecological testing applications since 1991. The ThinPrep System, consisting of the ThinPrep 2000 Processor and related disposable reagents, filters and other supplies, is also designed to allow for additional diagnostic testing from a single patient sample. The ability to perform multiple tests from a single sample would allow additional testing without the expense, inconvenience and anxiety associated with return office visits. For example, in collaboration with Digene Corporation ("Digene"), the Company completed a joint clinical trial in August 1996 designed to demonstrate that the Company's PreservCyt Solution is an effective transport medium for use in the testing of cervical cell specimens using Digene's Hybrid Capture human papillomavirus ("HPV") test. While the Company and Digene have submitted PMA supplements with respect to this use, the ThinPrep System has not been approved by the FDA for such use or any additional diagnostic testing procedures, and no assurance can be given that any such approvals could be obtained on a timely basis, if at all. Cytyc's objective is to establish the ThinPrep System as the standard of care for the collection, preservation and slide preparation of cervical cell specimens. The key elements of this strategy are to: (i) continue to promote the clinical and patient care benefits of the ThinPrep System; (ii) expand marketing and sales programs to health care providers, third-party payors and clinical laboratories; (iii) establish adequate levels of reimbursement by third-party payors; (iv) expand and leverage the Company's worldwide installed customer base of over 450 ThinPrep 2000 Processors and predecessor instruments; and (v) expand the applications of the ThinPrep technology for use in diagnostic testing. The Company was incorporated in Delaware in 1987. The Company's offices are located at 85 Swanson Road, Boxborough, MA 01719. The Company's telephone number is (508) 263-8000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000854418_landmark_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000854418_landmark_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f7f58b7bbd279ce0b770523a9edd76153e5c0ab0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000854418_landmark_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The shares of the Company's common stock, $.01 par value per share (the "Common Stock"), offered hereby involve a high degree of risk. See "Risk Factors." Unless otherwise indicated, the information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) reflects a 3-for-2 split of the Common Stock to take effect immediately prior to the date of this Prospectus, (iii) reflects the mandatory redemption on November 1, 1997 of 54,944 shares of Series A Preferred Stock, (iv) reflects the conversion, upon the closing of the Offering, of 855,165 shares of Series A Preferred Stock into 648,500 shares of Common Stock and of 395,195 shares of Series B Preferred Stock into 592,793 shares of Common Stock and (v) reflects the lapse, upon the closing of the Offering, of the rights of certain holders of 234,858 shares of Common Stock and options to acquire 194,820 shares of Common Stock to require the Company to repurchase such shares (collectively, the "Redeemable Common Stock Instruments"). References in this Prospectus to "Landmark" or the "Company" mean Landmark Systems Corporation and its subsidiaries. THE COMPANY Landmark is a leading provider of performance management software products which measure, analyze, report and predict performance for both mainframe and client/server computing environments. Landmark's PerformanceWorks product family is distinct in its ability to monitor the key components of a computing environment, provide early warning of potential system problems and enable effective planning for changes in the computing environment. The Company believes these capabilities improve user productivity, reduce computing costs, increase system availability and optimize use of system resources. Landmark's products address performance management across leading hardware platforms, operating systems from DEC, Hewlett-Packard, IBM, Microsoft and Sun and databases consisting of DB2, Oracle, SQL Server and Sybase. As of September 30, 1997, Landmark had licensed over 15,300 copies of its products to over 3,900 customers worldwide. Businesses and other organizations are increasingly relying upon computer systems to run and manage their key business processes. As a result of the growing dependence on, and increasing complexity of, computing environments (consisting of both mainframe systems in which processing is conducted centrally and client/server systems in which processing takes place by both personal computers or workstations and by networked servers) to run business-critical applications, demand has increased for comprehensive software solutions capable of planning, implementing and optimizing these information technology resources. According to International Data Corporation ("IDC"), a leading provider of information technology data, revenues from the overall system management software market are expected to rise to $17 billion by 2000. Performance management is the largest sector of this market and is expected by IDC to grow from $1.8 billion in 1996 to $3.1 billion by 2000. The ability to monitor performance data, or "metrics," from each system component in a complex, heterogeneous computing environment is a key feature of Landmark's software, particularly because performance problems in these environments can originate from any one or a combination of components. The Company's PerformanceWorks products use software agents to gather performance metrics automatically from a system's pressure points -- including the central processing unit ("CPU"), memory and storage, input/output ("I/O"), disk space, workload, operating system and network. The agent-based architectures of the Company's products allow users to manage computing environments that are large-scale, distributed and multi-platform. By monitoring performance data from each component of a system from real-time, recent past and historical perspectives, Landmark's products allow users to identify the source of a problem so a solution can be implemented and to anticipate potential problems so that they can be avoided. Landmark's solutions are based on its "lifecycle" view of performance management and are designed to allow customers to address each stage of the application lifecycle: planning, development and production. The Company's PerformanceWorks products cover a broad range of functionality, including monitoring, reporting, exception handling (notification that a threshold has been exceeded), trend analysis, tuning (adjustment of system resources to optimize performance) and capacity planning. Landmark's products provide its customers with the ability to transform raw data into useful information through an intelligent aggregation and automatic summarization process which collects data on a continuous basis and generates summary information at prescribed intervals. The Company's strategy is to enhance, extend and expand its product offerings, to capitalize on its large installed customer base, to strengthen its distribution capability and to grow through acquisitions and partnering arrangements. The Company's customers consist of organizations across a wide variety of industries that are developing or have deployed business-critical applications in complex, multi-user environments. Representative customers of the Company include ABN-AMRO, Amoco, BMW, Foundation Health, IBM, Kodak, Lockheed Martin, Putnam Investor Services, Wachovia Bank, Wells Fargo Bank and Whirlpool. See "Business -- Customers." Historically, over 90% of Landmark's customers have renewed their maintenance and support arrangements with the Company. The Company was incorporated in Virginia on November 3, 1982. The Company's principal executive offices are located at 8000 Towers Crescent Drive, Vienna, Virginia 22182. Its telephone number is (703) 902-8000. THE OFFERING Common Stock offered by the Company............................. 2,000,000 shares Common Stock offered by the Selling Stockholders...................... 1,200,000 shares Common Stock to be outstanding after the Offering........................ 10,860,161 shares (1) Use of proceeds..................... For general corporate purposes, including sales and marketing, working capital, research and development, capital expenditures and potential acquisitions. See "Use of Proceeds." Nasdaq National Market symbol....... LDMK - --------------- (1) Based on the number of shares of Common Stock outstanding as of September 30, 1997. Excludes a total of 3,140,259 shares subject to outstanding options and warrants and 1,232,363 shares available for future issuance pursuant to the Company's stock option plans as of September 30, 1997. The sale of certain of these shares in the public market is limited by restrictions under the Securities Act of 1933 and lock-up agreements with the Underwriters. See "Shares Eligible for Future Sale," "Management" and Notes 10 and 12 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, ------------------------------- ------------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues........................... $32,674 $34,460 $36,556 $26,200 $30,377 Gross profit........................ 24,830 26,797 27,643 19,185 26,045 Operating expenses Sales and marketing................. 11,716 13,092 11,671 8,522 10,275 Product research and development.... 9,094 12,490 13,924 10,773 10,079 General and administrative.......... 7,800 6,872 4,776 3,501 3,970 ------- ------- ------- ------- ------- Total operating expenses....... 28,610 32,454 30,371 22,796 24,324 ------- ------- ------- ------- ------- Operating (loss) income.................. (3,780) (5,657) (2,728) (3,611) 1,721 Net (loss) income........................ (1,921) (4,169) (1,202) (1,897) 1,222 Pro forma primary net (loss) income per share(1)............................... $ (0.13) $ (0.20) $ 0.12 Shares used to compute pro forma primary net (loss) income per share(1)......... 9,480 9,480 10,253 OTHER FINANCIAL DATA: EBITDA(2)................................ $ 406 $(1,700) $ 3,138 $ 1,214 $ 4,034 Cash flow from operations................ 1,311 (362) 4,144 3,443 4,125 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 -------------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents........................................... $ 4,168 $ 19,648 Working capital (deficit)........................................... (2,578) 12,902 Total assets........................................................ 28,635 44,115 Long-term debt (less current portion)............................... 191 191 Mandatorily redeemable securities(4)................................ 10,333 -- Stockholders' (deficit) equity...................................... (5,860) 19,954 </TABLE> - --------------- (1) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used to compute pro forma primary net (loss) income per share. (2) EBITDA represents earnings before net interest and other income, income taxes, depreciation and amortization expense. EBITDA does not represent cash flows as defined by generally accepted accounting principles and does not necessarily indicate that cash flows are sufficient to fund all the Company's cash needs. EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations or other measures of liquidity determined in accordance with generally accepted accounting principles. EBITDA may not be comparable to other similarly titled measures of other companies. (3) Adjusted to reflect the sale of the 2,000,000 shares offered by the Company hereby at an assumed initial public offering price of $9.00 per share and the application of the estimated net proceeds therefrom as set forth under "Use of Proceeds." Includes the effect of the mandatory redemption on November 1, 1997 of 54,944 shares of Series A Preferred Stock, and, upon the closing of the Offering, the conversion of the Series A and Series B Preferred Stock into Common Stock and the lapse of the rights of holders of the Redeemable Common Stock Instruments to require the Company to repurchase the Redeemable Common Stock Instruments. (4) Includes Series A Preferred Stock, Series B Preferred Stock and Redeemable Common Stock Instruments.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000855309_quantum_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000855309_quantum_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..06813e7b10ad9bde525caa4389694f352da843ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000855309_quantum_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial data appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." The Company Quantum Epitaxial Designs, Inc. ("QED" or the "Company") designs, develops and manufactures compound semiconductor materials using molecular beam epitaxy ("MBE") and is a leading producer of gallium arsenide ("GaAs") based epitaxial wafers supplied to the semiconductor device manufacturing industry. Compound semiconductors, which provide higher performance than silicon semiconductors, are used in a broad range of applications in wireless communications, fiber optic telecommunications, computers, and consumer and automotive electronics. The Company utilizes compound semiconductor materials (such as GaAs, AlGaAs, InGaAs, InAlAs, InSb and InP) that are a combination of elements found in each of columns III and V of the periodic table to produce MBE wafers. MBE wafers are generally used for the most advanced, high performance applications. Since January 1996, the Company's significant customers have included Alpha Industries Inc., Hughes Aircraft, Inc., M/A-COM, Inc., a subsidiary of AMP Incorporated, Motorola, Inc., Raytheon Company, Texas Instruments Incorporated and Watkins Johnson Company. Recent developments in advanced information systems have created a growing need for power efficient, high-performance electronic devices that operate at very high frequencies, have increased storage capacity and computational and display capabilities, and can be produced cost-effectively in commercial volumes. Compound semiconductors produced from epitaxial wafers have emerged as an enabling technology to meet the complex requirements of applications in wireless communications, fiber optic telecommunications, computers, and consumer and automotive electronics. The growth in these markets has increased the demand for GaAs based epitaxial wafers. According to published industry estimates, the market for GaAs based epitaxial wafers in the electronics market segment is expected to grow from approximately $72.5 million in 1996 to $178.8 million in 2000. Compound semiconductors are composed of two or more elements that are found in each of columns III and V of the periodic table. These elements typically include gallium, aluminum, indium, arsenic, phosphorous, antimony and nitrogen. Many compound semiconductor materials have unique physical properties that allow electrons to move many times faster than through silicon. This higher electron mobility enables a compound semiconductor device to operate at much higher speeds than silicon devices with lower power consumption and less noise and distortion. In addition, unlike silicon-based devices, compound semiconductor devices have opto-electronic capabilities that enable them to emit and detect light. The Company utilizes MBE technology to produce compound semiconductor wafers. MBE is an epitaxial crystal growth process by which thin layers of compound semiconductor materials are grown on top of a crystal material called the substrate. The Company believes that the MBE production process allows for the precise control, uniformity and high quality which is essential to produce the electronic results required of semiconductors and integrated circuits used in high performance applications. The Company's goal is to become the leading supplier of MBE based compound semiconductor materials. To attain this goal, the Company intends to increase its capacity to serve growing, high volume commercial markets, maintain its technological leadership, maintain its customer relationships, ensure quality performance, and continue to penetrate the captive market. The Company was incorporated in Pennsylvania in 1988. The Company's executive offices, production facilities and development facilities are located at 119 Technology Drive, Bethlehem, Pennsylvania 18015, and its telephone number is (610) 861-6930. The Offering <TABLE> <S> <C> Common Stock offered by the Company .................... 2,750,000 shares Common Stock to be outstanding after the Offering ...... 6,173,415 shares(1) Use of proceeds ....................................... To repay bank debt, purchase capital equip- ment, and for general corporate purposes including working capital and possible acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol .................. "QEDI" </TABLE> Summary Financial Data (in thousands, except per share data) <TABLE> <CAPTION> Nine Months Ended Year Ended December 31, September 30, --------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- ----------- -------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Total revenues ..................... $2,249 $2,553 $3,633 $5,253 $ 6,902 $4,382 $ 6,474 Operating income (loss) ............ 658 754 867 1,153 115 (299) (317) Income (loss) before income taxes ... 545 674 788 1,088 (98) (415) (722) Pro forma net income (loss)(2) ...... $ 332 $ 411 $ 481 $ 664 $ (62) $(261) $ (446) Pro forma net loss per share(2) ... $ (0.03) $ (0.19) Shares used in computing pro forma net loss per share(2) ............... 1,973 1,973 </TABLE> <TABLE> <CAPTION> September 30, 1997 ---------------------------------------------- Pro Forma Actual Pro Forma(3) As Adjusted(3)(4) -------- -------------- ------------------ <S> <C> <C> <C> Balance Sheet Data: Working capital (deficit) .................. $(490) $ (408) $15,533 Total assets ................................. 9,803 9,780 23,826 Short-term debt .............................. 1,839 1,831 82 Long-term debt, less current portion ......... 2,794 2,794 154 Convertible subordinated notes payable ...... 2,092 -- -- Shareholders' equity ........................ 1,619 2,880 21,434 </TABLE> - ---------------- (1) Excludes shares of Common Stock issuable upon the exercise of outstanding options and shares of Common Stock issuable upon the exercise of the Representatives' Warrants. As of the date of this Prospectus, there were 463,890 shares of Common Stock reserved for issuance upon the exercise of outstanding options with a weighted average exercise price of $0.68 per share, 25,000 shares of Common Stock reserved for issuance upon the exercise of an outstanding option at an exercise price equal to the per share initial public offering price and 142,000 shares of Common Stock reserved for future issuance under the Company's stock option plans. See "Management--Executive Compensation," "--Stock Option Plans," "Underwriting" and Note 10 of Notes to Financial Statements. (2) The Company has operated as a corporation subject to taxation under Subchapter S of the Internal Revenue Code of 1986, as amended (an "S Corporation"), for income tax purposes since its inception in 1988 and will terminate such status in connection with the Offering. Upon termination of the Company's S Corporation status, the Company will record a net deferred tax liability and corresponding income tax expense. This amount would have been approximately $750,000 if the termination occurred on September 30, 1997. Such expense amount is excluded from the above data. See "S Corporation Termination." See Note 3 of Notes to Financial Statements for information concerning the computation of pro forma net loss and pro forma net loss per share. Upon the closing of the Offering, the Company will accelerate the vesting of certain stock options which will result in a special compensation charge. This amount would have been $859,000 if the vesting acceleration occurred on September 30, 1997. Such expense amount is excluded from the above data. See "Management--Stock Option Plans" and Note 10 of Notes to Financial Statements. (3) Reflects the effects of the (i) termination of the Company's S Corporation status, including the Deferred Tax Liability of $750,000 described in "S Corporation Termination," (ii) conversion of convertible subordinated notes payable in the principal aggregate amount of $100,000 into 143,245 shares of Class A Preferred Stock and subsequent conversion into 1,432,450 shares of Common Stock, and the conversion of a convertible subordinated note payable to AMP Incorporated in the principal amount of $2,000,000 less deferred financing costs of $96,669 into 269,905 shares of Class B Preferred Stock and subsequent conversion into 269,905 shares of Common Stock (collectively, the "Convertible Subordinated Notes"), and (iii) exercise of a warrant to purchase 135,710 shares of Common Stock (the "NEPA Warrant") at a total exercise price of $7,886. See "S Corporation Termination," "Certain Transactions" and Note 3 of Notes to Financial Statements. (4) Adjusted to give effect to the sale by the Company of 2,750,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $7.50 per share) and the application of the net proceeds as set forth in "Use of Proceeds." Risk Factors An investment in the Common Stock offered by this Prospectus involves a high degree of risk. Risks involved in an investment in the Common Stock include, without limitation management of growth, changes in business conditions, changes in the compound semiconductor industry and the economy generally, complexity of MBE production systems, adoption of MBE technology, competition, continuing capital requirements, substantial reliance on key customers, dependence on a limited number of equipment manufacturers, dependence on key source materials, limited protection of proprietary technology, and dependence on key personnel. No assurance can be given that the future results will be achieved; actual events or results may differ materially as a result of risks facing the Company. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000856200_kaiser_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000856200_kaiser_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e240798e30e1df3d2c22fb952323213e77a87cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000856200_kaiser_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Company" or "ICF Kaiser" in this Prospectus may refer to ICF Kaiser International, Inc. and/or any of its consolidated subsidiaries. Effective December 31, 1995, the Company changed its fiscal year end from February 28 to December 31. THE COMPANY ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its other operating subsidiaries, is one of the nation's largest engineering, construction, program management and consulting services companies. The Company's Federal Programs, Engineers and Consulting Groups provide fully integrated services to domestic and foreign clients in the private and public sectors of the environment, infrastructure and basic metals and mining industry markets. For the latest nine-month period ended September 30, 1996, ICF Kaiser had gross and service revenue of $1,023.4 million and $433.6 million, respectively. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of income (loss) of joint ventures and affiliated companies. As of November 30, 1996, the Company employed 5,176 people located in more than 80 offices worldwide. In the environmental market, the Company provides services in connection with the remediation of hazardous and radioactive waste, waste minimization and disposal, risk assessment, global warming and acid rain, alternative fuels and clean up of harbors and waterways. Demand for environmental services is driven by a number of factors, including: the need to improve the quality of the environment; federal, state and municipal regulation and enforcement; and increased liability associated with pollution-related injury and damage. ICF Kaiser is well-positioned to take advantage of the growing market arising from the increased awareness internationally of the need for additional and/or initial environmental regulations, studies and remediation. ICF Kaiser also provides services to the infrastructure market. This market is driven by the need to maintain and expand, among other things, ports, roads, highways, mass transit systems and airports. Increasingly, environmental concerns, such as wastewater treatment and reducing automotive air pollutant emissions, are a driving force behind new infrastructure and transportation initiatives. The Company has capitalized on its specialized technical and environmental skills to win projects that provide consulting, planning, design and construction services. Internationally, there is a critical need for infrastructure projects where population growth of major cities has been and will continue to be extremely high. The Company currently provides engineering and construction management services for mass transit and wastewater treatment facilities in many such major cities worldwide. ICF Kaiser assists its basic metals and mining industry clients by providing the engineering and construction skills needed to maintain and retrofit existing plants and replace aging production capacity with newer, more efficient and more environmentally responsible facilities. The Company's engineering and construction skills, as well as its access to process technologies, have helped establish it as a worldwide leader in serving the basic metals and mining industries, especially aluminum and steel. ICF Kaiser is currently expanding its operations internationally, particularly engineering and construction management services related to alumina production from bauxite, aluminum smelting and other basic industry facilities. The Company is currently working on several large, highly visible projects, including, but not limited to, (i) a five-year contract at the U.S. Department of Energy's Rocky Flats Environmental Technology site near Golden, Colorado, (ii) a two-year contract with Nova Hut, an integrated steel maker based in the Czech Republic, (iii) two four-year Total Environmental Restoration Contracts ("TERC") to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers, (iv) a five-year construction management contract for the Boston Harbor wastewater treatment facility and (v) a three-year contract as the project manager at the light rail transit system in Manila. ICF Kaiser International, Inc. was incorporated in Delaware in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1988, the Company acquired the Kaiser Engineers business which dates from 1914. The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, telephone number (703) 934-3600. THE EXCHANGE OFFER The Company is offering to exchange (the "Exchange The Exchange Offer........ Offer") up to $15,000,000 aggregate principal amount of its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), for up to $15,000,000 ag- gregate principal amount of its outstanding 12% Se- nior Notes due 2003, Series A, that were issued and sold in a transaction exempt from registration un- der the Securities Act (the "Old Notes" and to- gether with the Exchange Notes, the "Notes"). The form and terms of the Exchange Notes are substan- tially identical (including principal amount, in- terest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer--Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain additional interest provisions that are ap- plicable to the Old Notes under a registration rights agreement dated as of December 23, 1996 (the "Registration Rights Agreement") between the Com- pany and BT Securities Corporation as initial pur- chaser (the "Initial Purchaser") of the Old Notes. Exchange Notes issued pursuant to the Exchange Of- fer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder that is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activi- ties), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not in- tend to engage in, and have no arrangement or un- derstanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition......... The Exchange Offer is not conditioned upon any min- imum aggregate amount of Old Notes being tendered or accepted for exchange. Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, of March 6, 1997, unless extended (the "Expiration Date"). Exchange Date............. The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer........... The obligation of the Company to consummate the Ex- change Offer is subject to certain conditions. See "The Exchange Offer--Conditions to the Exchange Of- fer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights......... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expira- tion Date. Any Old Notes not accepted for any rea- son will be returned without expense to the tendering holders thereof as promptly as practica- ble after the expiration or termination of the Ex- change Offer. Procedures for Tendering Old Notes................. See "The Exchange Offer--How to Tender." Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old Notes..................... As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Additional Interest." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes." TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $15,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." Securities Offered........ $15,000,000 of 12% Senior Notes due 2003, Series B Maturity Date............. December 31, 2003 Interest Rate and Payment Dates.................... The Exchange Notes will bear interest at a rate of 12% per annum. Interest will accrue from December 31, 1996 and will be paid semiannually on June 30 and December 31 of each year, commencing June 30, 1997. Temporary Interest Rate Increase................. The interest rate on the Exchange Notes will be 13% until (i) the Company achieves and maintains for two consecutive quarters on a trailing twelve-month basis $36 million of earnings after deducting mi- nority interests and before interest, taxes, depre- ciation and amortization calculated in accordance with generally accepted accounting principles ("Earnings") or (ii) March 31, 1998, provided that the Company's Earnings are $36 million as of that date on a trailing twelve-month basis. If the Company's Earnings are not $36 million as of that date on a trailing twelve-month basis, then the in- terest rate will continue at 13% until the Company's Earnings are $36 million for one quarter on a trailing twelve-month basis. See "Description of the Notes--Interest Rate Increase." Optional Redemption....... The Exchange Notes are redeemable, in whole or in part, at the option of the Company on or after De- cember 31, 1998 at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the redemption date. Change of Control......... In the event of a Change of Control, the Company will be required to offer to purchase all of the outstanding Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "De- scription of the Notes--Change of Control." Ranking................... The Exchange Notes will be unsecured obligations of the Company, will rank senior to all subordinated indebtedness of the Company and will rank pari passu in right of payment with all existing and fu- ture senior indebtedness of the Company, including the Old Notes and indebtedness under the Credit Fa- cility (as defined). Guarantees................ The Exchange Notes will be unconditionally guaran- teed by the Subsidiary Guarantors. Certain Covenants......... The Indenture contains certain covenants that, among other things, limit: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the pay- ment of dividends; (iii) the repurchase of capital stock or subordinated indebtedness; (iv) the making of certain other distributions, loans and invest- ments; (v) the sale of assets and the sale of the stock of Restricted Subsidiaries; (vi) the creation of restrictions on the ability of Restricted Sub- sidiaries to pay dividends or make other payments to the Company; and (vii) the ability of the Com- pany and its Restricted Subsidiaries to enter into certain transactions with affiliates or to merge, consolidate or transfer substantially all assets. All of these limitations and restrictions are sub- ject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of the Notes." EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST Pursuant to the Registration Rights Agreement, the Company has agreed (i) to file the Registration Statement on or prior to February 6, 1997 with respect to the Exchange Offer, (ii) to use its best efforts to cause the Registration Statement to become effective under the Securities Act on or prior to April 27, 1997 and (iii) to use its best efforts to consummate the Exchange Offer on or prior to June 11, 1997. In the event that applicable interpretations of the Staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated, the Company will use its best efforts to cause to become effective a shelf registration statement with respect to the resale of the Old Notes and to keep such shelf registration statement effective until December 23, 1999. The Company will be obligated to pay additional interest as liquidated damages to holders of the Old Notes under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Old Notes Registration Rights; Additional Interest."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000858629_trover_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000858629_trover_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..edf001a04e8fc6c6b55b5a7d3c004216b0b041e8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000858629_trover_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information, including risk factors and financial statements and notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) assumes that the Underwriters' overallotment option will not be exercised, (ii) has been adjusted to give effect to a 98,000-for-1 split to occur immediately prior to the consummation of the Offering (the "Stock Split") and (iii) assumes the operation of the Company independently of the Selling Stockholder pursuant to the Separation Agreement. References in this Prospectus to the "Company" and "HRI" refer to Healthcare Recoveries, Inc., except where the context otherwise requires. THE COMPANY The Company believes it is the leading independent provider of health insurance subrogation and related recovery services for private healthcare payors. HRI recovers the value of accident-related healthcare benefits provided by its clients to insureds when a third-party is responsible for such healthcare benefits. The Company offers its services on a nationwide basis to health maintenance organizations, indemnity health insurers, self-funded employee health plans, companies that provide claims administration services to self-funded plans (referred to as "third-party administrators"), Blue Cross and Blue Shield organizations and provider organized health plans. Current clients include United HealthCare, Blue Shield of California, Healthsource, Humana, Kaiser Permanente, Oxford Health Plans, Sears and The Prudential. The Company had 32.6 million lives under contract (or "lives sold") from its clientele at March 31, 1997, more than double the 15.1 million lives under contract at December 31, 1994. The rising costs of healthcare and price competition have contributed to industry consolidation and an increasing trend towards outsourcing for non-core functions, including subrogation. Based on information contained in the Statistical Abstract of the United States 1996, the Company calculates that in 1994 there were approximately 150 million persons covered by private health insurance under insurance policies or similar agreements in states that allow healthcare payors to exercise subrogation and related recovery rights. The Company estimates, based on its experience with accident-related claims, that these 150 million insured persons (or "lives") in 1994 incurred $1.0 to $1.4 billion of medical benefits that were potentially recoverable through subrogation. HRI believes that an increasing number of subrogation claims are being outsourced, since companies are often able to provide specialized services at lower costs, and at similar or higher quality, than could be achieved by the healthcare payor. HRI's services are provided by its highly trained employees in conjunction with a proprietary automated recovery process. The Company's system has greatly automated the complex recovery process from the electronic sourcing and processing of claims data, through process guidance and assistance in correspondence to follow-up and settlement of claims. The use of this system enables HRI's personnel to focus on those matters requiring their expertise, which increases their productivity and allows the Company to pursue claims which would otherwise not be economical to recover. Over the past three fiscal years, the Company's revenues have grown from $16.9 million to $31.4 million, at a compound annual growth rate of approximately 36% (reflecting actual annual growth rates during 1995 and 1996 of approximately 33% and 40%, respectively), and its net income has grown from $1.9 million to $5.1 million, at a compound annual growth rate of approximately 65% (reflecting actual annual growth rates during 1995 and 1996 of approximately 82% and 49%, respectively). Lives installed and gross recoveries in process, two key operating statistics (as defined in footnotes (3) and (4), respectively, in "-- Summary Historical Financial and Other Data") have also grown significantly over this period. Lives installed has grown at a compound annual growth rate of approximately 43% (reflecting actual annual growth rates during 1995 and 1996 of approximately 24% and 66%, respectively) and gross recoveries in process has grown at a compound annual growth rate of approximately 37% (reflecting actual annual growth rates during 1995 and 1996 of approximately 28% and 47%, respectively). These compound annual growth rates may not be indicative of future performance. The Company believes these results are driven by its (i) process automation, (ii) highly specialized and incented labor and (iii) high levels of customer service. HRI plans to continue to grow its business by capitalizing on its operational strengths and increasing its revenues through (i) the addition of lives for existing customers, (ii) broadening its customer base, including private and public sector health plans, INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED MAY 19, 1997 PROSPECTUS 9,800,000 SHARES [HEALTHCARE RECOVERIES, INC. LOGO] HEALTHCARE RECOVERIES, INC. COMMON STOCK ------------------------------ All of the shares of Common Stock, par value $.001 per share (the "Common Stock"), of Healthcare Recoveries, Inc. ("HRI" or the "Company") offered hereby are being sold by its sole stockholder, Medaphis Corporation ("Medaphis" or the "Selling Stockholder"). The Company will not receive any of the proceeds from the sale of Common Stock by the Selling Stockholder. The Company will receive the proceeds of the sale of Common Stock to the extent the Underwriters exercise their over-allotment option. A total of 7,840,000 shares (the "U.S. Shares") are being offered in the United States and Canada (the "U.S. Offering") by the U.S. Underwriters and 1,960,000 shares (the "International Shares") are being offered outside the United States and Canada (the "International Offering") by the Managers. The initial public offering price and the underwriting discount per share are identical for both the U.S. Offering and the International Offering (collectively, the "Offering"). Prior to the Offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public offering price of the Common Stock will be between $13.00 and $15.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock has been approved for inclusion in the Nasdaq National Market under the symbol "HCRI", subject to notice of issuance. ------------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> ======================================================================================================================= PROCEEDS TO PRICE TO UNDERWRITING SELLING PROCEEDS TO PUBLIC DISCOUNT(1) STOCKHOLDER(2) COMPANY(3) - ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Per Share.............................. $ $ $ $ - ----------------------------------------------------------------------------------------------------------------------- Total(3)............................... $ $ $ $ ======================================================================================================================= </TABLE> (1) See "Underwriting" for indemnification arrangements with the U.S. Underwriters and the Managers (collectively the "Underwriters"). (2) Before deducting expenses payable by the Selling Stockholder, estimated at $655,655. If the over-allotment option described below is exercised, the Company will pay a pro-rata portion of such expenses. (3) The Company has granted the Underwriters a 30-day option to purchase up to 1,470,000 shares of Common Stock solely to cover over-allotments, if any. If the option is exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ------------------------------ The U.S. Shares are offered by the several U.S. Underwriters, subject to prior sale, when, as and if delivered to and accepted by them and subject to certain conditions, including the approval of certain legal matters by counsel. The U.S. Underwriters reserve the right to withdraw, cancel or modify the U.S. Offering and to reject orders in whole or in part. It is expected that delivery of the U.S. Shares will be made against payment therefor on or about , 1997, at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167. ------------------------------ BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION THE ROBINSON-HUMPHREY COMPANY, INC. THE DATE OF THIS PROSPECTUS IS , 1997. (iii) seeking opportunities through the identification of other businesses with similar claim recovery opportunities and (iv) the possible acquisitions of companies that provide claim recovery services. HRI is a wholly-owned subsidiary of Medaphis, which is divesting its entire interest in the Company in the Offering. Medaphis is selling HRI as part of its restructuring plan to divest non-core businesses and is required to use the net proceeds from the Offering to retire bank debt. In August 1995, Medaphis acquired HRI for approximately $79.1 million in a stock-for-stock exchange. The Company is incorporated in Delaware. The address of the Company's principal business is 1400 Watterson Tower, Louisville, Kentucky 40218, and its telephone number is (502) 454-1340. THE OFFERING Common Stock offered by the Selling Stockholder(1): U.S. Offering...................... 7,840,000 shares International Offering............. 1,960,000 shares Total......................... 9,800,000 shares Common Stock to be outstanding after the Offering.......................... 10,000,000 shares(2) Use of Proceeds......................... The Company will not receive any of the proceeds from the sale of Common Stock by the Selling Stockholder. The Company will use the net proceeds from the exercise of the Underwriters' over-allotment option, if any, for general corporate purposes, including capital expenditures, working capital or possible future acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol........... HCRI - --------------- (1) The only shares of Common Stock offered by the Company are shares issuable upon the exercise of the Underwriters' over-allotment option. (2) Includes 200,000 shares of Common Stock (2% of shares to be outstanding after the Offering) to be granted by the Company to certain members of the Company's executive management as a Divestiture Bonus upon consummation of the Offering, and excludes 550,000 shares of Common Stock reserved for issuance upon exercise of outstanding stock options that the Company plans to issue to members of its executive management and to non-employee directors exercisable at the initial offering price and 200,000 shares of Common Stock reserved for issuance under the Company's Non-Qualified Stock Option Plan for Eligible Employees. See "Management -- Divestiture Bonus" and "-- Non-Qualified Stock Option Plan for Eligible Employees." [FLOW CHART OF THE SUBROGATION PROCESS] See "Business -- The Recovery Process" for a detailed description of the HRI subrogation system. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS, OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." SUMMARY HISTORICAL FINANCIAL AND OTHER DATA The following table sets forth summary historical financial and other data of the Company as of the dates and for the periods indicated, which have been derived from, and are qualified by reference to, the Company's financial statements and other records. See "Selected Financial Data." <TABLE> <CAPTION> SIX MONTHS THREE MONTHS YEAR ENDED ENDED ENDED JUNE 30, DECEMBER 31, YEAR ENDED DECEMBER 31, MARCH 31, ----------------- ------------ ------------------------------------- --------------- 1992 1993 1993 1993 1994 1995 1996 1996 1997 ------- ------- ------------ ------- ------- ------- ------- ------ ------ (IN THOUSANDS, EXCEPT OTHER DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues: Subrogation........................ $ 5,853 $10,960 $6,915 $12,860 $16,941 $22,496 $30,248 $6,676 $8,917 Other Revenues, net................ 0 0 0 0 0 0 1,171 0 0 ------- ------- ------ ------- ------- ------- ------- ------ ------ Total Revenues............... 5,853 10,960 6,915 12,860 16,941 22,496 31,419 6,676 8,917 Cost of Services..................... 4,754 6,223 3,393 6,321 7,947 10,265 15,026 3,354 4,326 ------- ------- ------ ------- ------- ------- ------- ------ ------ Gross Profit......................... 1,099 4,737 3,522 6,539 8,994 12,231 16,393 3,322 4,591 Support Expenses..................... 3,807 4,527 2,488 4,720 6,066 6,899 8,093 1,871 2,338(1) ------- ------- ------ ------- ------- ------- ------- ------ ------ Operating Income (Loss).............. (2,708) 210 1,034 1,819 2,928 5,332 8,300 1,451 2,253 Interest Income...................... 169 80 69 115 320 580 486 92 114 ------- ------- ------ ------- ------- ------- ------- ------ ------ Income (Loss) Before Taxes........... (2,539) 290 1,103 1,934 3,248 5,912 8,786 1,543 2,367 Income Tax Expense (Benefit)......... 0 (3,008) 462 810 1,363 2,486 3,685 647 992 ------- ------- ------ ------- ------- ------- ------- ------ ------ Net Income (Loss).................... $(2,539) $ 3,298 $ 641 $ 1,124 $ 1,885 $ 3,426 $ 5,101 $ 896 $1,375 ======= ======= ====== ======= ======= ======= ======= ====== ====== Earnings per Common Share(2)......... $ 0.52 $ 0.09 $ 0.14 ======= ====== ====== Pro Forma Earnings (Loss) per Common and Common Equivalent Share(3)..... $ 0.23 $(0.14) ======= ====== </TABLE> <TABLE> <CAPTION> DECEMBER 31, MARCH 31, --------------------------- --------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------ ------ <S> <C> <C> <C> <C> <C> OTHER DATA: Lives Installed (in millions)(4)............................ 14.5 18.0 29.8 25.0 31.9 Gross Recoveries in Process (in millions)(5)................ $ 284.3 $ 364.9 $ 535.0 $448.1 $568.7 Effective Fee Rate.......................................... 28.4% 28.6% 26.9% 27.4% 26.4% Total Employees............................................. 248 300 383 342 403 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 MARCH 31, 1997(6) ----------------- ----------------- <S> <C> <C> BALANCE SHEET DATA: Cash and Cash Equivalents................................... $ 53 $ 125 Working Capital............................................. 1,730 2,632 Total Assets................................................ 23,969 25,337 Total Indebtedness.......................................... 0 0 Stockholders' Equity........................................ $ 4,110 $ 5,360 </TABLE> - --------------- (1) The Company's financial statements for the quarter ending June 30, 1997, will reflect a non-cash charge (not deductible for income tax purposes) in an amount equal to $2.8 million (assuming an initial public offering price of $14.00 per share), less an amount (determined by an independent appraisal) to reflect a discount in the value of the shares due to their transfer restrictions in connection with the Divestiture Bonus (2% of shares to be outstanding after the Offering) to be granted by the Company to certain members of the Company's management upon consummation of the Offering. See "Management -- Divestiture Bonus." (2) Earnings per common share were computed based on the weighted-average number of shares outstanding during the period after giving retroactive effect to the Stock Split. Shares used in computing earnings per common share were 9,800,000 for the year ended December 31, 1996 and the quarters ended March 31, 1996 and 1997. Earnings per common share do not give retroactive effect to the Divestiture Bonus to be granted in connection with the Offering or stock options on 550,000 shares to be granted to members of the Company's executive management and to non-employee directors at the time of the Offering. (3) Pro forma earnings (loss) per common and common equivalent share give effect to the pro forma adjustment to net income related to the non-cash charge of $2.8 million ($0.28 per share) to be recognized in connection with the Divestiture Bonus. Pro forma per share amounts for the year ended December 31, 1996 and the quarter ended March 31, 1997, assume the Divestiture Bonus occurred on January 1, 1996 and January 1, 1997, respectively. Shares used in computing pro forma earnings (loss) per common and common equivalent share were determined using the treasury stock method after giving retroactive effect to the Stock Split and assumes the 200,000 shares to be granted in connection with the Divestiture Bonus and the stock options on 550,000 shares to be granted to members of the Company's executive management and to non-employee directors exercisable at the initial offering price were granted on January 1, 1996. Shares used in computing pro forma earnings (loss) per common and common equivalent share were 10,000,000 for the year ended December 31, 1996 and the quarter ended March 31, 1997. (4) Lives installed represents the number of insured persons ("lives") with respect to which the Company has (i) a contract to provide subrogation and related recovery services and (ii) the necessary electronic data interfaces to service such lives. (5) Gross recoveries in process represents the total dollar amount of potentially recoverable claims that the Company is pursuing on behalf of clients at a certain point in time. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." (6) Because no shares will be sold by the Company in the Offering (unless the Underwriters exercise their over-allotment option), the balance sheet data will be unaffected by the Offering. The Company will continue to make distributions out of net income to Medaphis for the period from January 1, 1997 through the end of the month prior to the consummation of the Offering. As a result, the Company will have a nominal amount of unrestricted cash upon consummation of the Offering and stockholders' equity of $4.1 million as of the end of that month. Distributions to Medaphis subsequent to March 31, 1997 and the Divestiture Bonus affect the Company's capitalization as of March 31, 1997. See "Dividend Policy" and "Capitalization".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000859307_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000859307_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..00839eb81e4690ee85699160abdae57a5caac7ae
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000859307_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES THERETO CONTAINED ELSEWHERE IN THIS PROSPECTUS. CERTAIN TERMS USED IN THE FOLLOWING SUMMARY ARE DEFINED ON THE COVER PAGE OF THIS PROSPECTUS. EXCEPT AS OTHERWISE CITED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. ON OCTOBER 3, 1996, THE COMPANY COMPLETED A CAPITAL RESTRUCTURING (THE "RESTRUCTURING"). FOR INFORMATION REGARDING THE RESTRUCTURING, SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--THE RESTRUCTURING." THE COMPANY OVERVIEW The Company is a leading redistributor of aftermarket aircraft spare parts used primarily for McDonnell Douglas MD-80 and DC-9 aircraft. According to the World Jet Inventory Year-End 1996 (the "World Jet Inventory"), MD-80 and DC-9 aircraft accounted for approximately 15% of the commercial aircraft in service worldwide at December 31, 1996. Management believes that the Company has one of the most extensive inventories of aftermarket MD-80 and DC-9 parts in the industry. In addition, the Company provides aircraft spare parts for Boeing, Lockheed, Airbus and commuter aircraft. The aircraft spare parts distributed by the Company, including avionics, rotable and expendable airframe and engine parts, are sold to a wide variety of domestic and international air cargo carriers, major commercial and regional passenger airlines, maintenance and repair facilities and other redistributors. The wide variety of aircraft spare parts distributed by the Company is acquired through purchase or consignment of surplus or bulk inventories from airlines, purchases from other redistributors and disassembly of older aircraft. In addition to being a provider of aircraft spare parts, the Company leverages its industry expertise to purchase, sell and lease aircraft and engines. The Company has periodically acquired, leased and sold a variety of narrow-body commercial jet aircraft, such as Boeing 727 and 737 and McDonnell Douglas DC-9 aircraft, and has recently increased its focus on these activities. The Company currently leases three Boeing 727 freighter aircraft to a major cargo carrier and four Pratt & Whitney JT8D series engines to a smaller cargo and charter passenger carrier and is holding for lease or sale two newly-acquired DC-9 aircraft. Once leased, the Company derives revenue from lease payments and seeks to sell spare parts to the lessee both for the leased aircraft as well as other aircraft in the lessee's fleet. Upon return of the aircraft, the Company either re-leases, sells or disassembles the aircraft for parts in order to achieve the highest utilization of the asset. The Company believes that the annual worldwide market for aircraft spare parts is approximately $10 billion, of which approximately $1.3 billion represents sales of aircraft spare parts to the redistribution market. The Company believes that this market will continue to grow due to several trends. According to Boeing's 1997 Current Market Outlook (the "Boeing Report"), the demand for aircraft continues to grow with the world fleet of aircraft projected to increase to 17,000 in 2006 from 11,500 in 1996. The Company believes that, over the long term, the growing number of aircraft will increase demand for spare parts. Additionally, according to the World Jet Inventory, the world fleet had an average age of 13.5 years at December 31, 1996, and the Company believes the average age of the world fleet of aircraft will increase in the future, which would increase demand for parts in the aftermarket. Airline cost and availability considerations are causing airlines to decrease their parts inventories and procurement capability and rely on a small group of approved redistributors to meet their parts needs. In addition, the number of approved suppliers is being reduced due to quality concerns. STRATEGY The Company's strategy is to capitalize upon its position as a leading redistributor of MD-80 and DC-9 aircraft spare parts and to broaden its product lines to include other high-use aircraft as the world fleet grows. Key elements of the Company's strategy include: BROADEN PRODUCT LINE. The Company has recently expanded its product line to include aftermarket parts for certain commuter aircraft including Shorts, de Havilland and British Aerospace. In addition, the Company intends to expand its product line to include parts for the McDonnell Douglas DC-10, the Boeing 767, and the Airbus A-300 series aircraft. The Company believes that a significant number of these aircraft types have been or will be converted to cargo use and that its relationship with cargo carriers will provide an advantage in supplying parts for these aircraft to such customers. EXPAND AIRCRAFT AND ENGINE LEASING SERVICES. The Company believes that airlines are becoming increasingly aware of the benefits of financing their fleet equipment on an operating lease basis, including cost reduction and flexibility regarding fleet size and composition. Once leased, the Company derives revenue from lease payments and seeks to sell spare parts to the lessee both for the leased aircraft as well as other aircraft in the lessee's fleet. Upon return of the aircraft, the Company either re-leases, sells or disassembles the aircraft for parts in order to achieve the highest utilization of the asset. INCREASE SALES TO CARGO CARRIERS AND REGIONAL COMMERCIAL AIRLINES. Cargo carriers and regional commercial airlines are among the Company's principal customers. Cargo carriers are important customers because the fleets of such operators typically consist of older aircraft of the type for which the Company maintains an extensive inventory of parts and because such customers typically do not maintain extensive inventories of spare parts. Regional commercial airlines are important customers because such airlines favor narrow-body aircraft, such as MD-80 and DC-9 aircraft, for which the Company is a primary source of spare parts. The Company will direct its marketing activities to broadening its customer base of cargo and regional airlines in order to increase market share and leverage its core competencies. CAPITALIZE ON BULK PURCHASE OPPORTUNITIES. Bulk purchase opportunities arise when airlines, in order to reduce capital requirements, sell large amounts of inventory in a single transaction, when inventories of aircraft spare parts are sold in conjunction with corporate restructuring or reorganization or when an aircraft operator realigns its aircraft fleet, reducing the number of or exiting a particular aircraft model. Bulk inventory purchases allow the Company to obtain large inventories of aircraft spare parts at a lower cost than can ordinarily be obtained by purchasing spare parts on an individual basis, resulting generally in higher gross margins on sales of such parts. Upon completion of this offering, the Company believes its increased borrowing capacity will allow it to respond quickly to bulk purchase opportunities. INCREASE MARKET SHARE OF PARTS FOR MD-80 AND DC-9 AIRCRAFT. The Company intends to increase its market share of parts for MD-80 and DC-9 aircraft. According to the World Jet Inventory, MD-80 and DC-9 aircraft together accounted for approximately 15% of the commercial aircraft in service worldwide at December 31, 1996. The Company intends to capitalize on the limited availability of new parts for such aircraft models by acquiring (i) pools of inventory from airlines that cease to operate such aircraft or that desire to reduce their levels of parts inventory and (ii) aircraft for disassembly when economically justified. The Company believes that its knowledge of the fleets of MD-80s and DC-9s currently in operation and its worldwide contacts in the commercial aviation industry will permit it to acquire other inventory pools and aircraft for disassembly on favorable terms in the future. CONTINUE COMMITMENT TO QUALITY AND TECHNOLOGICAL INNOVATION. The Company emphasizes adherence to high quality standards during each stage of its operations (product acquisition, documentation, inventory control and delivery). In August 1997, the Airline Suppliers Association ("ASA"), an FAA-recognized independent quality assurance organization, accredited the Company as an aftermarket supplier. In addition, the Company believes it was one of the first aftermarket distributors to bar-code its inventory and it has created and sponsors an industry-wide internet parts locator service for its customers, which heightens awareness of the Company, enhances its position in the industry and increases sales of parts. PURSUE STRATEGIC ACQUISITIONS. The Company believes that small aftermarket parts redistributors, many of which are family-owned or capital constrained, are unable to provide the extensive inventory and quality control measures necessary to comply with applicable regulatory and customer requirements, and will provide acquisition opportunities for the Company. Acquisitions are expected to increase the Company's customer base, expand its product line both with respect to aircraft in which the Company currently specializes and into new aircraft types, and to strengthen its relationships with existing customers through availability of additional inventory. COMPANY HISTORY In 1993, the Company commenced a diversification program that included the development of an FAA-approved maintenance and overhaul facility. After sustaining a $17.4 million loss in fiscal 1994, primarily attributable to the operation of this facility and lack of focus on the Company's core business, a management realignment was undertaken pursuant to which Alexius A. Dyer III became President of the Company. Thereafter, the Company sold the maintenance and overhaul facility and returned the Company's focus to the redistribution of aftermarket spare parts. This successful redirection of operations was followed by the Restructuring. The redirection of operations returned the Company to profitability and the Restructuring resulted in a significant reduction in the Company's leverage and interest expense. The Company's strengthened financial condition and profitability can be seen through the expansion of its gross margin as a percent of total revenues, which increased from 29.1% in fiscal 1995 to 43.6% in the quarter ended August 31, 1997, as well as by 11 consecutive profitable quarters following the Company's refocus on its aftermarket spare parts business. ------------------------ The Company's principal executive offices are located at 1954 Airport Road, Suite 200, Atlanta, Georgia 30341. Its telephone number is (770) 455-7575. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 1,750,000 shares Common Stock to be outstanding after the offering................................... 4,213,095 shares(1) Use of proceeds.............................. The net proceeds of the offering will be used to reduce indebtedness. The Company expects to use its resulting borrowing capacity for working capital and general corporate purposes, including the purchase of aircraft and aircraft spare parts, and to finance acquisitions. See "Use of Proceeds." American Stock Exchange symbol............... YLF </TABLE> - ------------------------ (1) Excludes an aggregate of (i) 262,500 shares of Common Stock that may be sold by the Company upon exercise of the Underwriters' over-allotment option, (ii) 175,000 shares of Common Stock issuable upon exercise of the Representatives' Warrants and (iii) 633,782 shares of Common Stock issuable upon exercise of options granted pursuant to the Company's 1996 Long Term Incentive and Share Award Plan (the "Stock Option Plan") and 17,000 shares of Common Stock issuable upon exercise of certain options not granted pursuant to the Stock Option Plan. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS YEAR ENDED MAY 31, ENDED AUGUST 31, ------------------------------- -------------------- 1995 1996 1997(1) 1996 1997 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> (UNAUDITED) STATEMENT OF OPERATIONS DATA: Total revenues.............................................. $ 24,983 $ 23,205 $ 21,232 $ 4,159 $ 5,567 Income from operations...................................... 1,640 4,677 3,809 800 1,184 Interest expense, net....................................... 2,254 2,377 1,550 456 411 Earnings (loss) before income taxes and extraordinary loss...................................................... (614) 2,300 2,259 344 773 Provision for income taxes (benefit)........................ -- 14 -- -- (212) --------- --------- --------- --------- --------- Earnings (loss) before extraordinary loss................... (614) 2,286 2,259 344 985 Extraordinary loss on debt restructuring.................... -- -- 531 -- -- --------- --------- --------- --------- --------- Net earnings (loss)................................... $ (614) $ 2,286 $ 1,729 $ 344 $ 985 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Supplemental pro forma net earnings (2)............... $ 3,339 $ 1,399 --------- --------- --------- --------- PER SHARE DATA: Primary earnings (loss) per common and common equivalent share (3): Earnings (loss) before extraordinary item............... $ (4.10) $ 15.27 $ 1.25 $ 2.30 $ 0.37 Extraordinary item...................................... -- -- (0.29) -- -- --------- --------- --------- --------- --------- Net earnings (loss)................................... $ (4.10) $ 15.27 $ 0.96 $ 2.30 $ 0.37 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Supplemental pro forma net earnings (2)............... $ 0.99 $ 0.33 --------- --------- --------- --------- Weighted average shares outstanding used in primary calculation............................................... 149,696 149,696 1,806,938 149,704 2,696,275 <CAPTION> AUGUST 31, 1997 MAY 31, -------------------- ------------------------------- AS 1995 1996 1997 ACTUAL ADJUSTED(4) --------- --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................... $ (13,489) $ (10,840) $ 9,144 $ 9,201 $ 12,102 Inventory................................................... 6,497 9,277 11,645 10,952 10,952 Accounts receivable......................................... 2,592 2,015 1,354 1,661 1,661 Total assets................................................ 14,511 16,132 21,287 20,748 22,125(5) Total debt.................................................. 20,335 18,144 13,750 12,362 --(5) Stockholders' equity (deficit).............................. (9,702) (7,416) 4,660 5,780 19,519 </TABLE> - ------------------------------ (1) On October 3, 1996, the Company completed the Restructuring. Pursuant to the Restructuring, the Company (i) effected a 1-for-27 reverse split of its Common Stock; (ii) issued approximately 2,245,400 shares of its Common Stock, after giving effect to the reverse split, in exchange for the entire $10.0 million principal amount outstanding of, and related accrued interest on, its 8% Convertible Debentures due 2003 (the "Debentures"); and (iii) redeemed the entire $7.7 million principal amount outstanding of its 12% Senior Notes due July 17, 1997 (the "Senior Notes") with the proceeds of an advance under a credit agreement entered into on October 3, 1996 (the "Credit Agreement"). (2) The supplemental pro forma net earnings and earnings per share reflect the issuance of shares necessary to repay average outstanding indebtedness and the resulting decrease in interest expense of approximately $1.6 million and $413,000 for fiscal 1997 and the three months ended August 31, 1997, respectively, as of the beginning of the period presented. The earnings per share calculation has been adjusted for the number of shares that would be issued by the Company at $8.688 per share (the closing price of the Common Stock on the AMEX on November 25, 1997) to retire these obligations (which are 1,575,580 and 1,502,822 shares for fiscal 1997 and the three months ended August 31, 1997, respectively). (3) Fully diluted earnings per share is the same in all periods presented as primary earnings per share except for fiscal 1996. In fiscal 1996, fully diluted earnings per share was $12.69 based upon 242,228 shares outstanding and assuming the Debentures were converted into Common Stock as of the beginning of the period with a corresponding decrease in interest expense. (4) Adjusted to reflect the sale of 1,750,000 shares of Common Stock offered by the Company hereby (after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company) and the application of the net proceeds to the Company from the offering as set forth herein. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000861875_laser_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000861875_laser_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..993eae36ed5899cbc52755106bf8a83685af0c92
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000861875_laser_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Laser Vision Centers, Inc. is the world's largest provider of access to excimer lasers and related services for the treatment of refractive vision disorders and has 40 excimer lasers currently available for use in the United States, Canada and Europe. The Company is also the world's only operator of mobile excimer laser systems. The excimer laser can be used to treat refractive vision disorders such as nearsightedness and astigmatism to eliminate or reduce the need for corrective lenses. LaserVision Centers(R) operate on a shared- access model, giving individual or group ophthalmic practices use of excimer laser technology without investment risk or maintenance requirements, thereby allowing optimal use of the excimer laser equipment. In addition, the Company provides a broad range of professional services, including physician and staff training, technical support services and maintenance and, through its MarketVision and MedSource divisions, advertising and marketing programs and services. The Company has operated excimer laser centers in Canada and Europe since 1991 and 1993, respectively. Following the recent approval of the excimer laser technology by the United States Food and Drug Administration ("FDA") to treat certain refractive vision disorders, the Company began providing access to excimer lasers in fixed-site centers and to develop means for providing access to its excimer lasers at multiple locations. The Company currently owns 23 excimer lasers approved for use in the United States. The Company currently provides excimer lasers and related services to fixed-site centers in the United States, Canada, the United Kingdom, Finland, Greece, Sweden and Ireland and operates the MobilExcimer(R) in Canada and the United Kingdom. In the United States, fixed-site laser centers are operated in conjunction with Columbia Healthcare Corporation ("Columbia Healthcare"), formerly Columbia/HCA, or by the Company independently or through joint ventures. Photorefractive keratectomy ("PRK") involves the use of an excimer laser to reshape the cornea, thereby adjusting its refractive power, which in turn eliminates or reduces the need for corrective lenses. The excimer laser can also be used to treat a number of pathological superficial corneal disorders in a procedure called phototherapeutic keratectomy ("PTK"). Two manufacturers, VISX, Incorporated ("VISX") and Summit Technology, Inc. ("Summit"), recently received FDA approval for use of their excimer lasers to perform PRK procedures for low to moderate myopia and PTK procedures. In addition to such procedures, excimer lasers can also be used to perform a procedure known as laser in situ keratomileusis ("LASIK"), which may be more predictable in treating high myopia, but which has not been specifically approved in the United States by the FDA. An industry source estimates that 145 million people in the United States currently use eyeglasses and/or contact lenses to correct refractive vision disorders. Of these individuals, an estimated 66 million suffer from nearsightedness, with approximately 60% of nearsighted persons estimated to have vision disorders within the criteria currently approved by the FDA for treatment with excimer lasers. The Company estimates that approximately one-fourth of all sufferers of nearsightedness also experience astigmatism and an additional 23 million people in the United States suffer from astigmatism but do not experience nearsightedness. According to industry sources, consumers in the United States spent approximately $13 billion on eyeglasses, contact lenses and other corrective lenses in 1994. The Company believes that excimer laser surgery will make it possible for many of these people to eliminate or reduce their reliance on corrective lenses. In particular, the Company believes that many of the approximately 26 million contact lens users in the United States will be particularly receptive to laser surgery because they have already chosen to use an alternative to eyeglasses for vision correction. In addition to operating fixed-site centers, the Company has developed a proprietary MobilExcimer system, which is a self-contained mobile refractive laser surgery center duplicating all of the equipment and services typically found in a fixed-site location. The Company has entered into a mutually exclusive agreement with Calumet Coach Company, the world's leading manufacturer of mobile medical systems, to build the MobilExcimer. This proprietary system gives the Company flexibility that the Company believes is not currently available to its competitors and is intended to help the Company achieve broader penetration of both domestic and international markets. The Company plans to use the MobilExcimer to provide laser access and related services to communities where the Company's potential patient base is insufficient to sustain a fixed-site center, thereby enhancing the Company's ability to expand quickly into multiple markets. In June 1996 the Company submitted an application for premarket approval ("PMA") with the FDA for use of the MobilExcimer laser for treatment of low to moderate myopia, which was the first step in seeking approval for the MobilExcimer. In November 1996, the company received FDA approval of its PMA and immediately filed a Supplement with the FDA for approval of the MobilExcimer. In addition to the MobilExcimer, the Company has also developed a strategy of providing access to multiple sites by transporting fixed-site lasers between sites to meet demand. Recently, the Company has undertaken a complementary strategy to create additional ophthalmologist demand for the Company's lasers through its Refractive Management Services Organization ("RMSO"). The RMSO is a management services organization through which the Company will purchase the refractive surgery assets of the practice of ophthalmologists and enter into a management services agreement with the practice. The Company will provide management and marketing services in exchange for a share of the revenues of the refractive practice. In addition, the Company will provide access to its excimer lasers and receive a fee for each procedure performed. The first RMSO was completed in January 1997 with Lindstrom Samuelson & Hartlen Ophthalmology Associates, P.A. (Dr. Lindstrom is a member of the Board of Directors and the medical advisory board.) Additional RMSO's, if any, are not anticipated until fiscal 1998. MarketVision and MedSource comprise the Company's ophthalmic marketing divisions. Both MarketVision and MedSource, which the Company acquired effective February 1996, provide marketing services designed to increase ophthalmic surgical volume. MarketVision operates as an advertising and marketing agency, while MedSource provides services more directly related to planning, training and consulting. Risk factors which should be considered carefully in evaluating an investment in the Common Stock include the absence of profitable operations, the uncertainty of market acceptance of excimer laser surgery, competition, government regulation, the uncertainty of FDA approval of the MobilExcimer, the lack of long-term follow-up data and undetermined medical risks with respect to the effect of excimer laser surgery, product liability and professional liability, the Company's ability to manage its growth and its dependence on current management, the possible need for additional financing and the volatility of the price of the Common Stock. Except for the historical information contained herein, the discussion in this Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Risk Factors" and "Business -- Government Regulation," as well as those discussed elsewhere in this Prospectus. THE OFFERING <TABLE> <S> <C> Common Stock which may be Offered by the Selling Shareholders after this Registration.... 2,717,209 shares Common Stock Outstanding at January 15, 1996...... 8,815,383 shares(1) Purchase Price.................................... Market Prices Use of Proceeds................................... The Shares offered hereby are Shares presently owned by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares. See "Use of Proceeds." Nasdaq National Market Symbol..................... LVCI </TABLE> SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) The following table sets forth summary historical consolidated financial data with respect to the Company for the periods ended and as of the dates indicated. The summary historical consolidated annual financial data is derived from the audited consolidated financial statements of the Company as of April 30, 1995 and 1996 and for the years ended April 30, 1994, 1995, and 1996 included elsewhere in this Prospectus. The summary historical consolidated financial data for the years ended April 30, 1992 and 1993 is derived from audited financial statements of the Company which are not included in this Prospectus. The summary historical consolidated interim financial data is derived from the unaudited Consolidated Condensed Financial Statements of the Company as of and for the six months ended October 31, 1996 included elsewhere in this Prospectus and as of and for the six months ended October 31, 1995 included in the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1995. In the opinion of Company management, the unaudited Consolidated Condensed Financial Statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial position and the results of operations for such period and as of such dates. Operating results for the six months ended October 31, 1996 are not necessarily indicative of results expected for the year ended April 30, 1997. This information should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto appearing elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." See "Selected Consolidated Financial Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000862026_delta_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000862026_delta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01747c8104eb52f657a3b84582ad6c81d47d6c0a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000862026_delta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references herein to the 'Company' or 'Delta' refer to Delta Financial Corporation and its wholly-owned subsidiaries. All financial information gives pro forma effect to the termination in October 1996 of the S corporation status of Delta Funding Corporation, a wholly-owned subsidiary, and the transactions described in 'Selected Consolidated Financial Data' and the related notes thereto and in 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Termination of S Corporation Status and Income Taxes.' THE COMPANY Delta is a specialty consumer finance company that has engaged in originating, acquiring, selling and servicing home equity loans since 1982. Throughout its 15 years of operating history, Delta has focused on lending to individuals who generally have impaired or limited credit profiles or higher debt to income ratios and typically have substantial equity in their homes. Management believes that these borrowers have been largely unsatisfied by the more traditional sources of mortgage credit which underwrite loans to conventional guidelines established by the Federal National Mortgage Association ('FNMA') and the Federal Home Loan Mortgage Corporation ('FHLMC'). The Company makes loans to these borrowers for such purposes as debt consolidation, home improvement, mortgage refinancing or education, and these loans are primarily secured by first mortgages on one- to four-family residential properties. Through its wholly-owned subsidiary, Delta Funding Corporation, the Company originates home equity loans indirectly through licensed brokers and other real estate professionals who submit loan applications on behalf of the borrower ('Brokered Loans') and also purchases loans from mortgage bankers and smaller financial institutions that satisfy Delta's underwriting guidelines ('Correspondent Loans'). Delta Funding Corporation currently originates and purchases the majority of its loans in 21 states, through its network of approximately 1,000 brokers and correspondents. The Company believes that it has a competitive advantage in serving brokers and correspondents in the non-conforming home equity market that stems from its substantial experience in this sector and its emphasis on providing quality service that is prompt, responsive and consistent. The 19 members of Delta Funding Corporation's senior management have an average of over 13 years of non-conforming mortgage loan experience. Management believes this industry-specific experience, coupled with the systems and programs it has developed over the past 15 years, enable the Company to provide quality services that include preliminary approval of most Brokered Loans and certain Correspondent Loans within one day, consistent application of its underwriting guidelines and funding or purchasing of loans within 14 to 21 days of preliminary approval. In addition, the Company seeks to establish and maintain productive relationships with its network of brokers and correspondents by servicing each one with a business development representative, a team of experienced underwriters and, in the case of Brokered Loans, a team of loan officers and processors assigned to specific brokers to process all applications submitted by such brokers. The Company currently originates and purchases the majority of its loans through the Company's main office in Woodbury, New York, its full service office in Atlanta, Georgia, its full processing offices in St. Louis, Missouri, Chicago, Illinois and Warwick, Rhode Island and from seven business development offices located in Michigan (2), New Jersey, Ohio (2), Pennsylvania and Virginia. The Company historically made loans primarily in New York, New Jersey and Pennsylvania. Commencing in 1995, the Company implemented a program to expand its geographic presence into the New England, Mid-Atlantic, Midwest and Southeast regions. As a consequence of its expansion into new markets, as well as its further penetration of existing markets, the Company increased its loan production substantially in 1995 and 1996. Total loan originations and purchases increased $168.1 million, or 140%, from $119.7 million in 1994 to $287.8 million in 1995, and increased $371.0 million, or 129%, in 1996 to $658.8 million. In February 1997, in an effort to broaden its origination sources and to expand its geographic presence in the Company's new markets, the Company acquired two related retail originators of home equity loans, Fidelity Mortgage, Inc., based in Cincinnati, Ohio, and Fidelity Mortgage (Florida), Inc., based in West Palm Beach, Florida (together, 'Fidelity Mortgage'). The Company acquired Fidelity Mortgage with the expectation that the acquisition would result in beneficial synergies, with Fidelity Mortgage providing a dedicated source of mortgage loans for Delta Funding Corporation's securitization pools and for its servicing arm, and Delta Financial Corporation providing capital to Fidelity Mortgage for the expansion of its retail network. Fidelity Mortgage develops retail loan leads primarily through its telemarketing system and its network of nine retail offices located in Florida (2), Georgia, Indiana, Ohio (4) and North Carolina. Four of these offices were opened in the second quarter of 1997, and the Company intends to expand the Fidelity Mortgage network further. The Company has been profitable in each of its 15 years of operation. The Company's results of operations have improved significantly in recent periods as a result of increased loan production and improved operating efficiencies. Total revenues increased $37.4 million, or 103%, to $73.5 million in 1996 from $36.1 million in 1995, and pro forma income before extraordinary item increased 630% to $19.1 million in 1996 from $2.6 million in 1995. During 1995 compared to 1994, the Company's total revenues increased 66% from $21.8 million to $36.1 million and pro forma income increased 128% from $1.1 million to $2.6 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' The Company generates earnings and cash flow primarily through the origination, purchase, securitization and servicing of home equity loans. In a securitization, the Company sells the loans that it originates or purchases to a trust for cash and records certain assets and income based upon (a) the difference between all principal and interest received from the mortgage loans sold and (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on the loans (the 'Excess Servicing') and (b) the difference between the contractual and estimated ancillary servicing revenue with respect to the loans and the estimated cost to service them ('Mortgage Servicing Rights'). At the time of the securitization, the Company estimates these amounts based upon a declining principal balance of the underlying loans, which has been calculated by using an estimated prepayment rate, and capitalizes these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded on the Company's balance sheet as interest-only and residual certificates and capitalized Mortgage Servicing Rights, respectively, and are aggregated and reported on the income statement as net gain on sale of mortgage loans, after being reduced (increased) by (i) loan acquisition premiums paid to correspondents and brokers, (ii) costs of securitization and (iii) any hedge losses (gains). The Company typically begins to receive Excess Servicing cash flow eight to twelve months from the date of securitization, although this time period may be shorter or longer depending upon the structure and performance of the securitization. Prior to such time, a reserve provision is created within the securitization trust which uses Excess Servicing cash flows to retire a portion of the securitization bond debt until the spread between the outstanding principal balance of the mortgage loans in the securitization trust and the securitization bond debt equals 2-3% of the initial securitization principal balance (hereinafter, the 'overcollateralization limit'). Once this overcollateralization limit is met, excess cash flows are distributed to Delta. The Company begins to receive contractual mortgage servicing cash flows in the month following the securitization. Since 1991, Delta has sold approximately $1.7 billion of its mortgage loans through 15 real estate mortgage investment conduit ('REMIC') securitizations. Each of these securitizations has been credit-enhanced by an insurance policy provided through a monoline insurance company to receive ratings of 'Aaa' from Moody's Investors Service, Inc. ('Moody's') and 'AAA' from Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ('Standard & Poor's'). The Company sells loans through securitizations and, from time to time, on a whole loan basis, to enhance its operating leverage and liquidity, to minimize financing costs and to reduce its exposure to fluctuations in interest rates. In addition to the excess cash flow from securitizations and proceeds from whole loan sales, the Company earns the net interest spread on loans held for sale, origination fees on its Brokered Loans and retail loans (which are included in other income) and servicing fees of between 0.50% and 0.65% per annum of the outstanding balance of the loans it services. Since its inception, the Company has serviced substantially all of the loans it has originated and purchased, including all of those that it has subsequently sold through securitizations. Management believes that servicing this loan portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. As of March 31, 1997, Delta had a servicing portfolio of $1.1 billion of loans. See 'Business--Loans.' The Company's business objective is to increase profitably the volume of its loan originations and purchases and the size of its servicing portfolio by implementing the following strategies: Continuing to Provide Quality Service. The Company believes its commitment to service provides it with a competitive advantage in establishing and maintaining productive broker and correspondent relationships. The Company's loan officers and underwriters endeavor to respond promptly and consistently on every loan submission. In addition, through its business development representatives, Delta regularly communicates with brokers and correspondents in order to better understand and respond to their needs. Maintaining Underwriting Standards. The Company believes the depth and experience of its underwriting staff, coupled with the consistent application of its underwriting procedures and criteria, provide the infrastructure needed to manage and sustain the Company's recent growth, while maintaining the quality of loans originated or purchased. The depth and experience in the Company's underwriting department provide two significant competitive advantages. First, they help to ensure that the Company's underwriting standards and subjective judgments required in the non-conforming market are consistently applied, thus enabling the Company to effectively implement a risk-based pricing strategy. Second, they provide the opportunity to expand underwriting activities beyond the Company's headquarters while maintaining consistent underwriting standards. Further Penetrating Existing and Recently Entered Markets and Expanding into New Markets. The Company intends to continue to increase the volume of its loan originations and purchases through a three-pronged strategy that includes greater originations and purchases from its existing brokers and correspondents, establishment of new broker and correspondent relationships in both existing and recently-entered markets and expansion into new markets. Expanding its Retail Origination Capabilities. The Company intends to devote management and capital resources to expanding its retail network in order to continue to broaden its origination capabilities and strengthen its geographic presence. Since the acquisition of Fidelity Mortgage and its five retail offices, the Company has opened additional Fidelity Mortgage branch offices in Atlanta, Georgia, Fort Lauderdale, Florida, Charlotte, North Carolina and Cleveland, Ohio. Expanding Through Acquisitions. Management believes acquisitions can be a means of cost effectively increasing or diversifying the Company's loan production capabilities. The Company continually considers acquisition candidates which operate in geographic or product areas that complement the Company's existing business. Leveraging its Information and Processing Technologies. In recent years, the Company has made significant capital investments to upgrade and expand its information and processing technologies. These investments have included the acquisition and implementation of a new servicing system and have enabled the Company to achieve operating efficiencies and cost savings. The Company's recent and anticipated geographic expansion and growth in originations and servicing portfolio were considered when these systems were designed, and management believes its strategic plans can be met by leveraging its existing systems without substantial additional investment in the near future. See 'Business--Business Strategy.' All of the Company's operations are conducted through its wholly-owned subsidiaries, Delta Funding Corporation, DF Special Holdings Corporation, Fidelity Mortgage, Inc. and Fidelity Mortgage (Florida), Inc. In November 1996, Delta completed the initial public offering of its common stock which trades on the New York Stock Exchange under the symbol 'DFC.' The principal executive offices of the Company are located at 1000 Woodbury Road, Suite 200, Woodbury, New York 11797, and its telephone number is (516) 364-8500. RECENT DEVELOPMENTS On June 18, 1997, Delta Funding Corporation entered into a $100 million syndicated credit agreement (the 'Credit Agreement') with a group of banks for which the First National Bank of Chicago ('First Chicago') acts as agent. The Credit Agreement will be used primarily to finance mortgage loans held for sale and to fund advances to securitization trusts by Delta Funding Corporation. The Credit Agreement provides for a $100 million secured revolving credit facility with various borrowing base sublimits, including, but not limited to, a $15 million secured recoverable servicing advance sublimit. Delta Funding Corporation's obligations under the Credit Facility are guaranteed by the Company. Advances under the Credit Facility are secured by a first priority lien on warehouse collateral and receivables created from recoverable servicing advances. In connection with the Credit Agreement, Delta Funding Corporation has agreed to certain standard affirmative covenants, including corporate existence, maintenance of its properties and insurance coverage, prompt payment of taxes and other claims and maintenance of a standard accounting system. Delta Funding Corporation also made certain negative covenants which, among other things: (i) specify maximum leverage ratios, (ii) limit its ability to incur additional indebtedness, (iii) require a minimum net worth, (iv) limit its ability to pledge, mortgage or encumber its assets and (v) limit its ability to merge with another entity or dispose of more than a specified percentage of its total assets. THE OFFERING <TABLE> <S> <C> Securities Offered........................ $150,000,000 aggregate principal amount of % Senior Notes due 2004. Maturity Date............................. July , 2004. Interest Payment Dates.................... Each , and , commencing , 1997. Guarantees................................ The obligations of the Company under the Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the existing and future Subsidiaries of the Company, other than Subsidiaries designated as 'Unrestricted Subsidiaries' in accordance with the Indenture. See 'Description of the Notes--Guarantees.' Optional Redemption....................... On or after July , 2001, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. See 'Description of the Notes--Optional Redemption.' Change of Control......................... Upon a Change of Control (as defined), each Holder of the Notes may require the Company to repurchase the Notes held by such Holder at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. See 'Description of the Notes--Repurchase at the Option of Holders--Change of Control.' Asset Sales............................... The Indenture relating to the Notes (the 'Indenture') requires that the proceeds of certain Asset Sales (as defined) be applied as specified in the Indenture or be used to repurchase the Notes, at the option of the Holder thereof, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. Ranking................................... The Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future unsecured unsubordinated Indebtedness of the Company and senior in right of payment to all existing and future subordinated Indebtedness of the Company. The Subsidiary Guarantee of each of the Subsidiary Guarantors will rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes and Subsidiary Guarantees will be effectively subordinated to all existing and future secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the value of the collateral securing such indebtedness). As of March 31, 1997, after giving pro forma effect to the Offering, the Company and the Subsidiary Guarantors had approximately $3.3 million of secured Indebtedness outstanding. </TABLE> <TABLE> <S> <C> Certain Covenants......................... The Indenture will contain certain covenants, including, but not limited to, covenants with limitations on the following matters: (i) restricted payments; (ii) incurrence of additional indebtedness; (iii) issuance of preferred stock; (iv) incurrence of additional liens; (v) dividends and other payment restrictions affecting subsidiaries; (vi) restrictions on distributions from subsidiaries; (vii) merger, consolidation or sale of assets; (viii) transactions with affiliates; and (ix) lines of business. However, all these limitations are subject to a number of important exceptions and qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds........................... The net proceeds will be used (i) to pay off all residual financing agreements (approximately $57.5 million at March 31, 1997), (ii) to repay amounts outstanding under certain of the Company's warehouse lines of credit (lines of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans) (approximately $51.8 million as of March 31, 1997), (iii) to fund future loan originations and purchases, (iv) to support securitization transactions, (v) to fund expansion of Fidelity Mortgage's retail network and (vi) for general corporate purposes, including to fund acquisitions. See 'Use of Proceeds' and 'Underwriting.' </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000863739_netmed-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000863739_netmed-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cea6fe6effc0d4d9463b4b59f48285c41c0886bc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000863739_netmed-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF THE PROSPECTUS This summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in the Prospectus. THE COMPANY NetMed, Inc., formerly known as Papnet of Ohio, Inc., is an Ohio corporation engaged in the business of acquiring, developing and marketing medical and health-related technologies. The Company's revenues are currently derived principally from the marketing of the PAPNET(R) Testing System and Service, which are proprietary products of Neuromedical Systems, Inc. ("NSI"). The Company is also currently engaged in the development of an oxygen concentration device that it plans to manufacture and sell in the home healthcare market. The PAPNET(R) Testing System is a semi-automated cancer detection system for the review of cell, tissue or body fluid specimens, including but not limited to cervical cytology specimens. The PAPNET(R) Service permits laboratories to submit slides containing such specimens ("Slides") to one of NSI's central facilities for image processing employing NSI's patented neural network technology. NSI returns the Slides and digital tape or CD-ROM containing processed images for evaluation by NSI-trained cytotechnologists. See "Business - - The PAPNET(R) Testing System." The FDA approved the PAPNET(R) Testing System for commercial use in the United States on November 8, 1995. Prior to that time, it was permitted to be utilized in the United States on an investigational basis only, and NSI was permitted to derive revenue with respect thereto only to recover certain of its costs. Beginning January 1, 1996, the Company and NSI began the task of building a sales force and familiarizing doctors and laboratories with the benefits of the PAPNET(R) Testing System and Service. Beginning in September of 1996, NSI began the commercial launch of the product with a national advertising campaign. On December 5, 1996, the Company's shareholders approved an Agreement and Plan of Merger (the "Merger Agreement") whereby Cytology Indiana, Inc., Indiana Cytology Review Company, ER Group, Inc., CCWP Partners, Inc., and Carolina Cytology, Inc. (the "Predecessor Companies") were merged with and into Papnet of Ohio, Inc. (the "Merger"). The Merger was effective on December 16, 1996, and the Company issued 4,849,988 common shares, without par value, in exchange for the issued and outstanding shares of the Predecessor Companies. Pursuant to the Merger Agreement, the Company changed its name to NetMed, Inc., and its common shares began trading on the American Stock Exchange on December 18, 1996 under the symbol "NMD". See "Business - The Merger." As a result of the Merger, the Company has the marketing rights to the PAPNET(R) Testing System and Service in Ohio, Kentucky, Missouri, Georgia, North Carolina and the Consolidated Statistical Area of Chicago. The Company's marketing rights are exclusive within these territories, subject to the right of NSI to conduct marketing and sales activities therein. However, because the royalties paid to the Company by NSI are based on revenues recognized by NSI from activities (including any sales by NSI) in the licensed territories, NSI's sales activities therein benefit the Company. See "Business - The NSI License." While the Company's primary focus has been, and will continue to be, exploiting its rights under the NSI license, the Company will also consider the acquisition of other healthcare related technologies in the future. In February 1997 the Company entered an agreement with CeramPhysics, Inc. of Westerville, Ohio ("Ceram"), pursuant to which the Company has the right to acquire control of a newly-organized corporation holding a world-wide license to Ceram's patented oxygen generation technology, which is exclusive as to all applications except oxygen sensors and fuel cells. The Company is currently engaged in the development of an oxygen concentration device based on this technology, which it plans to sell in the home healthcare market. The Company's principal offices are located at 6189 Memorial Drive, Dublin, Ohio 43017, and its telephone number at that address is (614) 793-9356. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses relating to the registration of the Shares of Common Stock being offered hereby, other than underwriting discounts and commissions, will be borne by the Company. Such expenses are estimated to be as follows: Item Amount ---- ------ Securities and Exchange Commission Registration Fee $21,656.25 ---------- Legal Fees and Expenses 2,500 Accounting Fees and Expenses 5,000 Miscellaneous Expenses 7,000 ---------- Total $ 36,156 ----------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000864601_modtech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000864601_modtech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b88affc58fc856e004fff56f20b779aaf50a503b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000864601_modtech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus assumes that there has been no exercise of the Underwriters' over-allotment option and options to purchase shares of Common Stock granted or to be granted under the Company's stock option plans. THE COMPANY Modtech designs, manufactures, markets and installs modular relocatable classrooms. Based upon 1996 net sales, the Company believes that it is the largest manufacturer of modular relocatable classrooms in California. The Company's classrooms are sold primarily to California school districts, and to third parties and the State of California principally for lease to California's school districts. Modtech's products include standardized classrooms, as well as customized structures for use as libraries, gymnasiums, computer rooms and bathroom facilities. The Company believes that its modular structures can be substituted for virtually any part of a school. The Company's classrooms are engineered and constructed in accordance with structural and seismic safety specifications adopted by the California Department of State Architects which regulates all school construction on public land, standards which are more rigorous than the requirements for other portable units. In recent years, population growth and demographic and geographic shifts in California student enrollments have necessitated the addition of more classrooms at existing schools and the construction of new schools to serve new residential developments. However, as a consequence of budget shortfalls experienced by the State of California and many California school districts from 1991 through the middle of 1996, the level of funding for the construction of schools declined, even though school enrollments increased annually during this period. As a result, classrooms in many California school districts currently are reported to be among the most crowded in the nation, with an average of 29 students per class, compared to a national average class size of 17. Without the addition of new classrooms, the average class size will continue to grow since the California Department of Finance has estimated that student enrollment in grades kindergarten through 12 will increase by approximately 18% from 1995 through 2005. Funding for new school construction is provided primarily at the State level, (i) through annual budget allocations of funds derived from general revenue sources and (ii) from the sale of statewide bond issues. As the State of California budget deficit has ameliorated, the legislature has increased funding for the addition of classrooms in an effort to reduce the average number of students per classroom. For the 1996 - 1997 school year, the State spent $822 million in funding under the California Class Size Reduction Program adopted in 1996, including $200 million specifically for facilities which may be relocatable classrooms. The Company believes that State funding for the reduction of class sizes during the 1997 - 1998 school year will be as high as $1.5 billion for both general operations and school facilities. In addition to funding out of its annual budget, the State is empowered to issue general obligation bonds to finance, among other things, the construction of school facilities. The California State School Facilities Conference Committee recently adopted a package of bills which, if approved by the Legislature, would, among other things, place an $8.2 billion school construction bond on the June 1998 California ballot. If these proposals are on the ballot and are approved by the voters, $4 billion of the bonds would be sold in 1998, followed by $4.2 billion in 2000, the proceeds of which would be used to construct and modernize existing school facilities, acquire land to build new schools, and construct or add classrooms. See "Business -- Legislation and Funding." These factors have combined to increase the demand for modular relocatable classrooms, which cost significantly less and take much less time to construct and install than conventional school facilities, and which permit a school district to relocate the units as student enrollments shift. In addition, the Company's products provide added flexibility to school districts in financing the costs of adding classroom space, since modular relocatable classrooms are considered personal property which can be financed out of a district's operating budget in addition to its capital budget. In recognition of these advantages, California legislation currently requires, with certain exceptions, that at least 30% of all new classroom space added using State funds must be relocatable structures. See "Business -- Legislation and Funding." The Company currently operates a total of six production lines at four plants, which serve both the Northern and Southern California markets. The Company's manufacturing process is vertically integrated in that the Company fabricates many of the components used in the construction of its classrooms. The Company believes that this capability enables it to be one of the low-cost producers in California of standardized modular relocatable classrooms, and provides it with a competitive advantage over other manufacturers who must use third parties to supply these parts. During recent periods, the Company's net sales and profitability have increased. Net sales increased from $19.4 million for the year ended December 31, 1995, to $49.9 million for the year ended December 31, 1996. During the first six months of 1997, net sales were $58.9 million, as compared to $12.7 million during the same period of 1996. Net income for the year ended December 31, 1996 and the six months ended June 30, 1997 was $4.3 million and $5.2 million, respectively. The Company attributes these recent improved results to the heightened demand for modular relocatable classrooms in California, the Company's ability to increase production capacity to accommodate this demand, its efficient and cost effective manufacturing processes, and the quality and attractive pricing of its classrooms. The Company's strategy is to expand its production capacity to meet the increased demand for modular relocatable classrooms, to increase its share of the California market for such classrooms, and to continue to develop new product designs and manufacturing alternatives. In addition, the Company intends to increase its efforts to expand the market for its classrooms to include neighboring states and to develop and more extensively market additional non-classroom products. Recent diversification initiatives have included the acquisition of a manufacturing operation that enhanced the Company's ability to produce relocatable buildings for sale to commercial customers and modular shelters for electronics used in the telecommunications industry. The Company also recently hired a salesperson to market the Company's relocatable classrooms to customers in the States of Arizona and Nevada and to private schools and child care providers within California. Organized in 1982, the Company is a California corporation whose executive offices are located at 2830 Barrett Avenue, Perris, California 92571, and its telephone number is (909) 943-4014. The Company maintains a website that contains information concerning its products and personnel and copies of its most recent press releases, the address of which is http://www.modt.com. RECENT DEVELOPMENTS The Company issued a press release on October 21, 1997, announcing operating results, for the third quarter ended September 30, 1997. Net sales for the third quarter ended September 30, 1997 were $39.8 million, compared to $14.3 million for the quarter ended September 30, 1996, an increase of 178%. Net sales for the nine months ended September 30, 1997 were $98.7 million, compared to $27.0 million for the nine months ended September 30, 1996, an increase of 266%. Operating income for the third quarter of 1997 was $7.2 million, compared to operating income of $1.5 million for the third quarter of 1996. Net income for the third quarter of 1997 was $4.4 million, or $0.45 per share, compared to $1.3 million, or $0.14 per share, for the third quarter of 1996, and net income for the nine months ended September 30, 1997 was $9.7 million, or $1.00 per share, compared to $2.2 million, or $0.24 per share, for the nine months ended September 30, 1996. Net income per share is computed on a fully diluted basis. At September 30, 1997, the Company's backlog was $85.0 million, compared to $80.4 million at June 30, 1997 and $40.0 million at September 30, 1996. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........... 1,000,000 shares Common Stock offered by the Selling Shareholders................................ 2,000,000 shares Common Stock to be outstanding after the Offering(1)................................. 9,705,836 shares Use of proceeds by the Company................ Debt repayment, additions to working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol................. MODT </TABLE> - --------------- (1) Excludes 1,206,933 shares issuable upon exercise of outstanding options, and 196,667 shares available for the grant of additional options under the Company's stock option plans. See "Management -- Stock Options." SUMMARY FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The historical income statement data, certain of the selected operating data, and the balance sheet data set forth below have been derived from the Company's audited and unaudited financial statements included elsewhere herein and should be read in conjunction with such financial statements and the notes thereto. <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------- ------------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales................................ $20,355 $19,386 $49,886 $12,704 $58,906 Gross profit............................. 2,589 2,985 7,257 1,842 11,218 Income from operations................... 1,035 1,372 4,912 994 9,036 Interest expense, net.................... (471) (387) (422) (107) (549) Net income............................... 602 965 4,269 889 5,195 Net income available for Common Stock(1)............................... 602 799 4,221 841 5,195 Earnings per common share(2)............. $ 0.11 $ 0.12 $ 0.47 $ 0.10 $ 0.55 Weighted average shares outstanding (in thousands)(2)...................... 5,294 6,712 9,041 8,750 9,370 SELECTED OPERATING DATA: Gross margin............................. 12.7% 15.4% 14.5% 14.5% 19.0% Operating margin......................... 5.1% 7.1% 9.8% 7.8% 15.3% Standard classrooms sold(3).............. 680 605 1,610 413 2,066 Backlog at period end(4)................. $ 7,000 $ 4,100 $58,000 $20,400 $80,400 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ------------------------ ACTUAL AS ADJUSTED(6) ------- -------------- <S> <C> <C> BALANCE SHEET DATA Working capital....................................................... $26,647 $ 40,066 Total assets.......................................................... 58,387 71,806 Total liabilities..................................................... 37,800 24,468 Long-term debt, excluding current portion(5).......................... 15,132 1,800 Shareholders' equity.................................................. 20,587 47,338 </TABLE> - --------------- (1) After deduction of preferred stock dividends of $166,000 and $48,000 for the years ended December 31, 1995 and 1996, respectively, and $48,000 for the six months ended June 30, 1996. No preferred stock was outstanding during the six months ended June 30, 1997, and none currently is outstanding. See Note 11 of Notes to Financial Statements. (2) Computed on a fully diluted basis. (3) Determined by dividing the total square footage of floors sold during the year by 960 square feet, the floor area of a standard classroom. See "Business -- Modular Classrooms." (4) The Company manufactures classrooms to fill existing orders only, and not for inventory. Backlog consists of sales orders scheduled for completion during the next 12 months. (5) For a description of the Company's long-term debt, see Notes 5 and 6 of Notes to Financial Statements. (6) Adjusted to reflect the sale of 1,000,000 shares of Common Stock by the Company in the Offering at an assumed offering price of $28.625 per share, and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000864902_visionamer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000864902_visionamer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..07b1e15614eb5ade3a25153011d5e4cd3c94c946
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000864902_visionamer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto, and other financial information, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes: (i) no exercise of Underwriters' over-allotment option, (ii) conversion of all shares of preferred stock, and (iii) no exercise of outstanding options, convertible debt or warrants to purchase Common Stock. See "Risk Factors" for a discussion of certain factors that should be considered in connection with an investment in the Common Stock offered hereby. THE COMPANY Omega is a multi-faceted eye care company that provides a broad range of practice management and other services to ophthalmologists and optometrists to assist in the integration of primary, medical and surgical eye care. The Company emphasizes cooperative professional relationships between ophthalmologists and optometrists in the formation of integrated eye care networks and co-management of patient care. The Company's services allow eye care professionals to devote their time to the delivery of quality primary, medical and surgical eye care and enable them to expand and position their practices effectively in an increasingly competitive eye care environment. Omega manages 18 affiliated ophthalmology practices (the "Affiliated Practices") through which 44 affiliated ophthalmologists provide medical and surgical eye care at the Company's co-management eye care centers (the "Centers"), which include 86 service locations and five ambulatory surgery centers ("ASCs"). In order to assist ophthalmologists and optometrists in accessing managed care patient volume, the Company organizes and manages eye care provider panels, consisting of 8,000 eye care professionals in all 50 states. The Company has related contracts with managed care and other third-party payors covering approximately 2.3 million lives, 1.2 million of which are on a capitated basis. Omega also provides supply and equipment purchasing, mobile surgical equipment and support services, excimer laser support services, and certain administrative services to associated optometrists, ophthalmologists and other eye care providers. The Company believes its Affiliated Practices are attractive referral options for optometrists with patients requiring medical or surgical eye care. Each Center is operated through the joint efforts of affiliated ophthalmologists and an optometrist who serves as a Center Director. Rather than maintaining active primary eye care practices, Omega's Affiliated Practices focus principally on medical and surgical eye care. The Company develops broad cross-referral networks of 50 to 150 optometrists in Center markets who work with affiliated ophthalmologists to co-manage the delivery of quality eye care. To enhance patient and referring optometrist satisfaction, the Centers maintain databases on the referral patterns and treatment preferences of optometrists in such networks, sponsor monthly continuing education presentations and solicit clinical and operating input from advisory boards of local optometrists. Center Directors and affiliated ophthalmologists routinely interact with optometrists in the referral network to improve coordination and quality of patient care. Through this cooperative program, the Company believes that it reduces professional overlap and maximizes the clinical strengths of its affiliated ophthalmologists by allowing them to concentrate on medical and surgical procedures. According to industry sources, total United States expenditures on eye care were $31.2 billion in 1995. Expenditures for medical and surgical eye care services in 1995 were approximately $11.6 billion, while approximately $19.6 billion was spent on primary eye care. Eye care expenditures are expected to grow as the population continues to age and as technological advances make complex ophthalmic procedures more accessible and affordable. There are approximately 15,600 ophthalmologists in the United States, who performed approximately 2.4 million major surgical procedures in 1994, and approximately 28,200 optometrists who are actively involved in patient care. Several factors, such as professional tension between ophthalmologists and optometrists, the competitive pressures from discount optical retailers and the influence of managed care, are motivating eye care providers to re-position their practices to be competitive. The Company believes these trends are influencing independent ophthalmologists and optometrists to affiliate with larger eye care organizations which have the capability to provide services such as financial management, information systems, managed care contracting, volume purchasing, and access to capital based on practice-specific needs. Omega's objective is to develop and provide management and other services to comprehensive eye care networks that deliver quality, cost-effective care in convenient locations through the cooperative efforts of optometrists and ophthalmologists. The Company seeks to achieve this objective by implementing the following strategy: (i) expanding its base of affiliated ophthalmologists in targeted markets; (ii) developing and managing primary care optometric networks; (iii) providing value-added purchasing and related administrative services to enhance the productivity of affiliated ophthalmologists and network optometrists; and (iv) leveraging managed care contracting expertise. The Company believes its strategy of organizing ophthalmologists, optometrists, and related ancillary services into cooperative, integrated eye care networks enhances its ability to manage the delivery of quality eye care services cost-effectively. RECENT DEVELOPMENTS The Company has completed five affiliation transactions in 1997 with a total of nine ophthalmologists generating annualized revenues at the time of the affiliations of approximately $8.4 million. The cash portion of the consideration in the affiliations was funded from the Company's $15.0 million credit facility established in February 1997 with NationsCredit Corporation (the "Credit Facility"). The following summarizes these affiliation transactions: - In March 1997, the Company affiliated with the ophthalmology practice of Sarah J. Hays, M.D., in Birmingham, Alabama ("Hays"). The practice includes one affiliated ophthalmologist and expands Omega's presence in Birmingham with two existing ophthalmology practices. - In May 1997, the Company affiliated with the ophthalmology practice of Joseph F. Faust, M.D. in Marion, Indiana, a suburb of Indianapolis, and acquired a 50% interest in an associated ASC ("Faust"). The practice includes one full-time and one part-time affiliated ophthalmologist. - In June 1997, the Company affiliated with the ophthalmology practice of Nathan L. Lipton, M.D. in Richardson, Texas, a suburb of Dallas, Texas. The practice includes one affiliated ophthalmologist and was integrated with Omega's existing three-ophthalmologist practice in Dallas. - In August 1997, the Company affiliated with the ophthalmology practice of David M. Dillman, M.D. in Danville, Illinois ("Dillman"). The practice includes two affiliated ophthalmologists. - In September 1997, the Company affiliated with the ophthalmology practice of Bruce Golden, M.D. in Janesville, Wisconsin ("Golden"). The practice includes four affiliated ophthalmologists and represents Omega's entry into the southern Wisconsin and Chicago, Illinois markets. In addition, to expand its services offered to optometrists, in May 1997, the Company acquired the Primary Eye Care Network in San Ramon, California, a provider of volume purchasing services for optometric supplies ("PEN"). PEN currently provides discount purchasing and certain management services for approximately 700 member optometrists, primarily in California. Omega intends to cross-sell these purchasing services to network optometrists and to optometric members of its provider panels. THE OFFERING Common Stock offered by the Company..... 3,000,000 shares Common Stock offered by the Selling Stockholders............................ 500,000 shares Common Stock to be outstanding after the Offering................................ 10,712,789 shares(1) Use of proceeds......................... To repay debt, to fund potential affiliations and acquisitions, and for general corporate purposes. See "Use of Proceeds." Nasdaq Small-Cap Market symbol.......... OHSI - --------------- (1) Excludes (i) 515,668 shares of Common Stock issuable upon the exercise of outstanding options with a weighted average exercise price of $4.50 per share, (ii) 1,093,629 shares of Common Stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $5.88 per share and (iii) 225,049 shares of Common Stock issuable upon the conversion of outstanding convertible notes. See Note 7 of Notes to Consolidated Financial Statements of the Company. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, --------------------------------------------------- ------------------------------- PRO FORMA PRO FORMA 1993 1994 1995 1996 1996(1) 1996 1997 1997(1) ------- ------- ------- ------- --------- ------- ------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Total revenues................. $21,761 $27,636 $32,934 $42,737 $90,366 $19,360 $32,773 $48,189 Earnings (loss) from operations................... (29) 270 763 1,753 3,917 602 1,790 2,195 Net earnings................... 359 112 481 1,303 3,559(2) 419 1,287 1,942(2) Net earnings (loss) to common stockholders................. 359 112 481 (171) 2,085 (940) 1,269 $ 1,925 Net earnings (loss) per share........................ $ 0.09 $ 0.02 $ 0.10 $ (0.03)(3) $ 0.21(2)(3) $ (0.19)(3) $ 0.17 $ 0.18(2) Weighted average shares outstanding.................. 3,693 4,591 4,805 5,599 9,744 4,872 7,322 10,761 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------------------- ACTUAL PRO FORMA(4) AS ADJUSTED(5) ------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital.............................. $ 6,324 $ 6,432 $19,185 Total assets................................. 42,022 44,925 57,566 Total debt................................... 13,477 15,500 3,262 Stockholders' equity......................... 19,210 20,090 44,970 </TABLE> <TABLE> <CAPTION> SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------------- --------------- 1993 1994 1995 1996 1996 1997 ------ ------ ------ ------- ------ ------ <S> <C> <C> <C> <C> <C> <C> STATISTICAL DATA: Patient visits........................... 84,964 88,548 88,006 104,195 49,235 57,386 Surgical eyecare procedures.............. 7,921 8,693 10,142 13,702 6,121 7,992 Total eyecare procedures................. 12,692 13,774 15,275 20,733 9,169 12,706 Capitated lives at end of period (000's)................................ 356 512 523 925 869 1,049 Covered lives at end of period (000's)... 377 1,163 1,325 1,950 1,894 2,128 </TABLE> - --------------- (1) Pro forma to give effect, as applicable, to the Company's affiliations with Capital Eye Center ("Capital") in March 1996, EyeCare and Surgery Center of North Texas, P.A., ECSC Retina, P.A. and SurgEye Care, Inc. (collectively, "EyeCare") in September 1996, Hays, Faust, Dillman and Golden, and the acquisition of PEN, as well as completion of the Offering at an assumed public offering price of $9.00 per share and the application of the net proceeds as stated in "Use of Proceeds," as if all had occurred on January 1, 1996. See "Pro Forma Unaudited Consolidated Financial Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000867495_morgan_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000867495_morgan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5f5429648541d18432f83239a03eb57d30e04798
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000867495_morgan_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF THE PROSPECTUS THE DATE OF THIS PROSPECTUS IS , 1997. The following is a summary of this Prospectus. This Prospectus contains more detailed information under the captions referred to below, and this summary is qualified in its entirety by the information appearing elsewhere herein. INVESTMENT REQUIREMENTS The minimum investment for most subscribers is $5,000, except that the minimum investment is: (a) $2,000 in the case of an Individual Retirement Account ("IRA"); or (b) for subscribers who redeem, on or after June 30, 1996, units of limited partnership interest in any other commodity pool for which the General Partner serves as the general partner and commodity pool operator and use the proceeds of such redemption (less any applicable redemption charges) to purchase Units (such purchases are hereinafter referred to as "Exchanges"), the lesser of (i) $5,000 ($2,000 in the case of an IRA), (ii) the proceeds from the redemption of five units (two units in the case of an IRA) from commodity pools other than the Spectrum Series (iii) the proceeds from the redemption of 500 units (200 units in the case of an IRA) from one, or any combination, of the Spectrum Series of commodity pools, or (iv) the proceeds from the redemption of all of a subscriber's units of limited partnership interest in any other commodity pool for which the General Partner serves as general partner and commodity pool operator. Existing Limited Partners who desire to make an additional investment in the Partnership may subscribe for Units at the Closing with a minimum investment of $1,000. Subscribers should be aware that there are minimum net worth and/or annual income suitability standards which must be met in order to subscribe for Units. Each subscriber must represent and warrant in a Subscription and Exchange Agreement and Power of Attorney that such subscriber has received this Prospectus and that such subscriber meets the applicable State minimum financial suitability standard set forth in the Subscription and Exchange Agreement and Power of Attorney (which may require a greater minimum investment), and may be required to provide additional information regarding the subscriber's background and investment history. Dean Witter Reynolds Inc. ("DWR") and its account executives have a duty to determine that this is a suitable investment for the subscriber. Unless otherwise specified in the Subscription and Exchange Agreement and Power of Attorney under "State Suitability Requirements," a subscriber must have either: (a) a net worth of at least $75,000 (exclusive of home, furnishings, and automobiles), or (b) a net worth of at least $30,000 (exclusive of home, furnishings, and automobiles) and an annual income of at least $30,000. Certain jurisdictions impose more restrictive suitability and/or minimum investment requirements than those set forth above, including requirements for a higher net worth, a higher annual income, or both. A list of such jurisdictions and the restrictions imposed is included in the Subscription and Exchange Agreement and Power of Attorney under the heading "State Suitability Requirements." A specimen form of the Subscription and Exchange Agreement and Power of Attorney is annexed hereto as Exhibit B. Separate execution copies of the Subscription and Exchange Agreement and Power of Attorney either accompany this Prospectus or may be obtained, after delivery of this Prospectus, from a local DWR branch office. Subject to certain limited revocation rights (see "Subscription Procedure"), all subscriptions for Units are irrevocable by subscribers, and the General Partner may, in its sole discretion, reject any subscription in whole or in part. There are significant restrictions on the ability of a Limited Partner to redeem Units, and although the Partnership's Amended and Restated Limited Partnership Agreement (the "Limited Partnership Agreement") permits the transfer of Units subject to certain conditions, there is no public market for the Units and none is likely to develop. Therefore, a purchaser of Units must be able to bear the economic risks of an investment in the Partnership for a significant period of time. See "The Limited Partnership Agreement--Restrictions on Transfers or Assignments" and "Redemptions." NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY ANY PERSON WITHIN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE. The Partnership must furnish all Limited Partners annual and monthly reports complying with CFTC requirements. The annual reports will contain audited, and the monthly reports unaudited, financial information. The audited financial statements will be examined and reported upon by independent certified public accountants. UNTIL 40 DAYS FROM THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. The Partnership is subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). These reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at the SEC's office at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the SEC at 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549 and at the regional offices described above, at prescribed rates. The SEC maintains a Web site containing reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of such site is: http://www.sec.gov. The Partnership has filed with the SEC, in Washington, D.C., a Registration Statement on Form S-1 under the Securities Act of 1933 with respect to the Units offered hereby. This Prospectus does not contain all the information included in the Registration Statement, certain items of which are omitted in accordance with the Rules and Regulations of the SEC. For further information about the Partnership and the Units offered hereby, reference is made to the Registration Statement and the exhibits thereto. ADDITIONAL INFORMATION In addition to this Prospectus, a sales brochure and introductory letters prepared by DWR may be delivered with this Prospectus or may be obtained from a DWR account executive or by writing to Dean Witter Reynolds Inc., Two World Trade Center, 62nd Floor, New York, New York 10048. THE INVESTMENT OBJECTIVE The objective of Dean Witter Portfolio Strategy Fund L.P. (the "Partnership") is to generate substantial appreciation of its assets over time through speculative trading. The entire proceeds of the sale of the Units will be deposited in the Partnership's accounts with DWR to be used as margin for the Partnership's trading activities and may be subject to depletion if the Partnership experiences losses from its trading activities. The Partnership will trade futures contracts and forward contracts, and options on futures contracts and on physical commodities, and other futures interests pursuant to the trading approaches utilized by the Trading Advisor. The Partnership's portfolio will normally include contracts for diverse futures interests, including industrial items, metals, agriculturals, currencies, financial instruments, and stock, financial, and economic indexes. The Trading Advisor employs a variety of trading programs in an effort to achieve this objective, and may from time to time, in its discretion, modify its trading programs and add to and delete from the Partnership's portfolio additional futures interests. The General Partner, in consultation with the Trading Advisor, may reallocate the Partnership's funds among the Trading Advisor's various programs. See "Investment Program, Use of Proceeds and Trading Policies - -- Trading Policies" and "The Trading Advisor." Based upon the fees and expenses of the Partnership, the Partnership will be required to earn estimated annual net trading profits of 5.71% of its average annual Net Assets (after taking into account estimated interest income based upon current rates of 5%) in order to avoid depletion or exhaustion of its assets. See "Description of Charges to the Partnership." Investors should see "Break Even Analysis" on page 39 for the effect of redemption charges which are not included in the above figures. By reason of the foregoing, investors should consider an investment in the Partnership as a long-term investment. Distributions of profits, if any, will be made at the sole discretion of the General Partner. It is currently the intention of the General Partner not to make distributions. See "Distributions" in this section. THE PARTNERSHIP The Partnership was organized as a limited partnership on August 28, 1990 under the Delaware Revised Uniform Limited Partnership Act (the "Partnership Act"). The offices of the Partnership are located at Two World Trade Center, 62nd Floor, New York, New York 10048, telephone (212) 392-8899. The Partnership was initially capitalized through the contributions of $1,000 by the General Partner and $1,000 by an initial limited partner. The initial limited partner ceased to be a Limited Partner of the Partnership at the Partnership's initial closing (the "Initial Closing"), which was held on January 31, 1991. The Partnership initially offered 150,000 Units through a public offering, in which Units were sold for $1,040 at the Initial Closing (the "Initial Offering"), including a $40 (4%) selling commission, which commission was subject to reduction based on the number of Units that a subscriber purchased. During the Initial Offering, the Partnership accepted $99,480,090 (net of commissions) and issued 99,480.090 Units at an initial Net Asset Value per Unit of $1,000. In accordance with the Limited Partnership Agreement, the General Partner contributed $1,011,000 (1,011.000 General Partnership Units) to the Partnership. The Partnership was initially structured as a "guaranteed" fund which ensured investors in the initial offering who redeemed their Units on July 31, 1996, the return of their initial principal of $1,000 per Unit. On July 31, 1996, the Net Asset Value per Unit was $1,720.95, which exceeded the guaranteed RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS, SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL BEGINNING AT PAGE 34 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 39. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT BEGINNING AT PAGE 13. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. amount, and the letter of credit which implemented the principal protection feature expired. In connection with the expiration of the principal protection feature, the General Partner changed the Partnership's name from Dean Witter Principal Secured Futures Fund L.P. to Dean Witter Portfolio Strategy Fund L.P., and has determined to have John W. Henry & Company, Inc. (the "Trading Advisor") continue to trade the Partnership's Net Assets in a non-guaranteed format. In connection with these events, the allocation of the Partnership's Net Assets among the Trading Advisor's trading programs has changed and may change in the future. See "The Trading Advisor." Concurrent with the expiration of the letter of credit on July 31, 1996, both the letter of credit fee of 1% of new appreciation paid by the Partnership and the reduction of interest income of 1.125% per annum for the letter of credit fee paid by DWR prior to July 31, 1996, have been eliminated. The Partnership will terminate upon the first to occur of the following: (a) December 31, 2025; (b) the withdrawal, insolvency, bankruptcy, dissolution, liquidation, or termination of the General Partner, unless a new general partner has been elected and the business of the Partnership is continued by the successor general partner; (c) an election to dissolve the Partnership at a specified time by Limited Partners owning more than 50% of the Units then owned by Limited Partners; (d) a decline in the Net Asset Value of a Unit as of the close of business (as determined by the General Partner) on any day to less than $250; (e) a decline in the Partnership's Net Assets as of the close of business (as determined by the General Partner) on any day to $250,000 or less; (f) a determination by the General Partner that the Partnership's Net Assets in relation to the operating expenses of the Partnership make it unreasonable or imprudent to continue the business of the Partnership; (g) the occurrence of any event which shall make it unlawful for the existence of the Partnership to be continued; or (h) a determination by the General Partner to terminate the Partnership following a Special Redemption Date. See "The Limited Partnership Agreement--Termination of the Partnership." The Partnership commenced trading operations on February 1, 1991. The actual performance record of the Partnership from the commencement of trading through December 31, 1996 is set forth under "Performance Record of the Partnership." THE GENERAL PARTNER The general partner and commodity pool operator of the Partnership is Demeter Management Corporation, a Delaware corporation (the "General Partner"). The General Partner and Dean Witter Reynolds Inc. ("DWR"), the selling agent and commodity broker for the Partnership, are each wholly-owned subsidiaries of Dean Witter, Discover & Co. ("DWD"). On February 5, 1997, DWD and Morgan Stanley Group Inc. ("Morgan Stanley") announced a definitive agreement to merge, which merger is expected to be completed in mid-1997, subject to customary closing conditions, including certain regulatory approvals and the approval of shareholders of both companies. See "Conflicts of Interest," "The General Partner," and "The Commodity Broker." The Trading Advisor makes all trading decisions in respect of the funds of the Partnership, except that the General Partner may override the instructions of the Trading Advisor and make trading decisions under certain circumstances. See "The Management Agreement." The General Partner is or has been the general partner and commodity pool operator of 28 commodity pools, five of which have terminated. The General Partner had, in the aggregate, over $1 billion of net assets under management as of December 31, 1996. THE COMMODITY BROKER The principal commodity broker for the Partnership is Dean Witter Reynolds Inc. (in such capacity, the "Commodity Broker"). The Commodity Broker is a wholly-owned subsidiary of DWD and currently acts as commodity broker for all of the commodity pools for which the General Partner acts as general partner and commodity pool operator, as well as for other commodity pools. The General Partner believes that the commissions and charges payable to DWR by the Partnership are competitive with those paid by other public commodity pools, although they may be higher than those paid by certain other customers of DWR. See "Conflicts of Interest," "Description of Charges to the Partnership-- 2. Dean Witter Reynolds Inc.," and "The Commodity Broker." TABLE OF CONTENTS <TABLE> <CAPTION> PAGE <S> <C> Risk Disclosure Statement..................... iii Summary of the Prospectus..................... 1 Investment Requirements..................... 1 Additional Information...................... 2 The Investment Objective.................... 2 The Partnership............................. 2 The General Partner......................... 3 The Commodity Broker........................ 3 The Trading Advisor......................... 4 Risk Factors................................ 4 Conflicts of Interest....................... 6 Description of Charges to the Partnership... 6 Redemptions................................. 8 Distributions............................... 9 Transferability of Units.................... 9 The Offering................................ 9 Interest on Partnership Assets.............. 11 Use of Proceeds............................. 11 Tax Considerations.......................... 11 Risk Factors.................................. 13 Risks Relating to Futures Interests Trading and the Futures Interests Markets.......... 13 Risks Relating to the Partnership and the Offering of Units.......................... 16 Risks Relating to the Trading Advisor....... 17 Taxation and Regulatory Risks............... 19 Conflicts of Interest......................... 20 Relationship of the General Partner to the Commodity Broker........................... 20 Accounts of Affiliates of the General Partner, the Trading Advisor and DWR....... 21 Management of Other Accounts by the Trading Advisor.................................... 22 Customer Agreement with DWR................. 22 Other Commodity Pools....................... 22 Fiduciary Responsibility...................... 22 Performance Record of the Partnership......... 24 Selected Financial Data....................... 27 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 28 Description of Charges to the Partnership..... 34 1. The Trading Advisor...................... 35 2. Dean Witter Reynolds Inc................. 37 3. Other.................................... 38 4. Break Even Analysis...................... 39 Investment Program, Use of Proceeds and Trading Policies............................. 41 Trading Policies............................ 42 Capitalization................................ 44 The General Partner........................... 44 Directors and Officers of the General Partner.................................... 45 The Futures, Options and Forward Markets...... 47 Futures Contracts........................... 47 Forward Contracts........................... 47 Options on Futures.......................... 47 Hedgers and Speculators..................... 48 Commodity Exchanges......................... 48 Speculative Position Limits................. 49 Daily Limits................................ 49 Regulations................................. 50 Margins..................................... 51 General Description of Trading Approaches..... 52 Introduction................................ 52 Systematic and Discretionary................ 52 Technical and Fundamental Analysis.......... 52 Trend-Following............................. 53 Risk Control Techniques..................... 53 The Trading Advisor........................... 54 Introduction................................ 54 <CAPTION> PAGE <S> <C> John W. Henry & Company, Inc................ 54 Legal and Ethical Concerns.................. 59 The JWH Investment Philosophy............... 60 A Disciplined Investment Process............ 61 Program Modifications....................... 61 Leverage.................................... 62 Addition, Redemption and Reallocation of Capital for Commodity Pool or Fund Accounts.................................. 62 Physical or Cash Commodities................ 62 Description of JWH's Trading Programs....... 63 The Commodity Broker.......................... 73 Description of the Commodity Broker......... 74 Brokerage Arrangements...................... 74 Certain Litigation............................ 74 The Management Agreement...................... 75 Term........................................ 75 Liability and Indemnification............... 75 Obligations to the Partnership.............. 75 Redemptions................................... 76 The Limited Partnership Agreement............. 78 Nature of the Partnership................... 78 Management of Partnership Affairs........... 78 Additional Offerings........................ 79 Sharing of Profits and Losses............... 79 Restrictions on Transfers or Assignments.... 79 Amendments; Meetings........................ 80 Indemnification............................. 80 Reports to Limited Partners................. 80 Plan of Distribution.......................... 82 Subscription Procedure........................ 84 Purchases by Employee Benefit Plans--ERISA Considerations............................... 85 Material Federal Income Tax Considerations.... 87 Introduction................................ 87 Partnership Status.......................... 87 Partnership Taxation........................ 87 Cash Distributions and Redemptions.......... 88 Gain or Loss on Trading Activity............ 88 Taxation of Limited Partners................ 91 Tax Audits.................................. 94 State and Local Income Tax Aspects............ 95 Potential Advantages.......................... 95 Legal Matters................................. 100 Experts....................................... 100 Additional Information........................ 100 Glossary...................................... 101 Certain Terms and Definitions............... 101 Blue Sky Glossary........................... 102 Dean Witter Portfolio Strategy Fund L.P. Independent Auditors' Report................ F-1 Statements of Financial Condition........... F-2 Statements of Operations.................... F-3 Statements of Changes in Partners' Capital.................................... F-4 Statements of Cash Flows.................... F-5 Notes to Financial Statements............... F-6 Demeter Management Corporation Independent Auditors' Report................ F-11 Statements of Financial Condition........... F-12 Notes to Statements of Financial Condition (certain information relating to the financial condition of Demeter Management Corporation's parent is contained in "The General Partner").......................... F-13 Exhibit A--Amended and Restated Limited Partnership Agreement........................ A-1 Annex 1--Request for Redemption............... A-22 Exhibit B--Subscription and Exchange Agreement and Power of Attorney........................ B-1 </TABLE> THE TRADING ADVISOR The trading advisor for the Partnership is John W. Henry & Company, Inc. ("JWH" or the "Trading Advisor"). Subject to certain limitations, the Trading Advisor has authority and responsibility for directing the investment and reinvestment in futures interests of the Partnership's Net Assets. See "The Management Agreement." Since the primary purpose of the Partnership is to achieve appreciation of its assets through speculative trading in futures interests, the Partnership's ability to succeed in that endeavor depends on the success of the trading programs of the Trading Advisor. The assets of the Partnership are traded pursuant to technical trading programs developed by the Trading Advisor. Technical programs formulate trading decisions on an analysis of prior historical patterns of price movements and other market indicators such as volume and market behavior. See "The Trading Advisor--Description of JWH's Trading Programs." See also "The Futures, Options and Forward Markets." The General Partner, in consultation with the Trading Advisor, may reallocate the Partnership's funds among the Trading Advisor's various trading programs. The Trading Advisor is not affiliated with the General Partner or DWR. See "The Trading Advisor" and "The Management Agreement." RISK FACTORS As a general matter, an investment in the Partnership is speculative and involves substantial risk, including the risk of loss of a Limited Partner's entire investment. Risks of an investment in the Partnership include: RISKS RELATING TO FUTURES INTERESTS TRADING -Futures interests trading is speculative and volatile. The Partnership's trading has been volatile. Such volatility could result in an investor losing all or a substantial part of his investment. -Futures interests trading is highly leveraged and relatively small price movements can result in significant losses to the Partnership. -Futures interests trading may be illiquid and in certain situations prevent the Partnership from limiting its loss on an unfavorable position. -Trading in forward contracts may subject the Partnership to losses if a counterparty is unable to meet its obligations. -Trading on foreign exchanges may result in the Partnership having less regulatory protection available. In addition, the Partnership may suffer losses due to exchange rate changes. -Trading in futures options can be extremely expensive if market volatility is incorrectly predicted. -The Partnership has credit risk because DWR acts as the futures commission merchant or the sole counterparty with respect to most of the Partnership's assets. -Speculative position limits may result in the Partnership having to liquidate profitable positions. RISKS RELATING TO THE PARTNERSHIP AND OFFERING OF UNITS -Past results are not necessarily indicative of future results. -The Partnership incurs substantial charges regardless of whether it realizes profits. The Partnership must earn estimated annual net trading profits of 5.71% of its average annual Net Assets (after taking into account estimated interest income based upon current rates of 5%) in order to avoid depletion or exhaustion of its assets. Investors should see "Break Even Analysis" on page 39 for the effect of redemption charges which are not included in the above figures. The Partnership had net trading losses in 1994 and 1992. See "Performance Record of the Partnership." -The liquidity of the Units is restricted in that there is an absence of a secondary market, the ability to assign or transfer is restricted, redemptions are limited to monthly after the first six months, and redeemed Units may be subject to redemption charges. -Significant actual and potential conflicts of interest exist among the General Partner, the Trading Advisor and the Commodity Broker. -Limited Partners do not participate in the management of the Partnership or in the conduct of its business. -Limited Partners must rely on the General Partner's selection of a trading advisor. RISKS RELATED TO THE TRADING ADVISOR -The Partnership will not be profitable unless the Trading Advisor is successful with its trading programs. -Market factors may adversely affect or require modifications to the Trading Advisor's programs. -The Management Agreement may not be renewed, may be renewed on less favorable terms to the Partnership, or may be terminated by the Trading Advisor such that the Trading Advisor will no longer be available to the Partnership. -Substantial increase in assets allocated to the Trading Advisor may adversely affect its performance. -The Trading Advisor's primarily technical trading programs have inherent limitations. -Increases in the use of technical trading programs in the futures interests markets could adversely alter trading patterns or affect execution of trades by the Partnership. TAXATION RISKS -If the tax laws and/or certain facts and circumstances change, the Partnership may be taxed as a corporation. -Profits earned during any year will result in taxable income to an investor even though the General Partner does not intend to make distributions. -Deductibility of certain of the Partnership's expenses may be limited. -The Partnership's tax return may be audited by the Internal Revenue Service. Only the General Partner will be liable for Partnership obligations (including margin calls) to the extent that the Partnership's assets, including amounts contributed by the Limited Partners and amounts paid to Limited Partners upon redemptions, distributions or otherwise (together with interest thereon) are insufficient to meet those obligations. See "Risk Disclosure Statement," "Risk Factors," "Conflicts of Interest," "Description of Charges to the Partnership," and "The Limited Partnership Agreement--Nature of the Partnership." CONFLICTS OF INTEREST Significant actual and potential conflicts of interest exist in the structure and operation of the Partnership, principally arising from the affiliation between the General Partner and DWR, and the trading of other accounts of, or managed by, the General Partner, DWR, the Trading Advisor and their affiliates. Such conflicts include the fact that the brokerage arrangements were not agreed upon in arm's-length negotiations due to the affiliation between the General Partner and DWR, and that the General Partner and DWR may have conflicting demands in respect of other commodity pools; that DWR employees selling Units will receive a portion of the brokerage commissions paid to DWR by the Partnership, and thus have a conflict in advising investors whether and when to redeem Units; that the Trading Advisor and DWR, and individuals and entities associated with the General Partner, the Trading Advisor and DWR, may trade futures interests for their own accounts, which trading may compete with the Partnership for positions; that trading by the Trading Advisor for its own account and for other customers could result in application of position limits to restrict the Partnership's trading; that under the customer agreement with DWR, DWR may close out positions and take certain other actions with regard to the Partnership's accounts without the Partnership's consent; and that other commodity pools managed by the General Partner and the Trading Advisor may compete with the Partnership. See "Conflicts of Interest," "The Trading Advisor" "The General Partner," and "The Commodity Broker." DESCRIPTION OF CHARGES TO THE PARTNERSHIP The Partnership is subject to substantial charges which are summarized below and described in detail under "Description of Charges to the Partnership." See also "Risk Factors--Risks Relating to the Partnership and the Offering of Units--Substantial Charges to the Partnership," "Investment Program, Use of Proceeds and Trading Policies," "The Commodity Broker," and "The Management Agreement." <TABLE> <CAPTION> RECIPIENT FORM OF COMPENSATION AMOUNT OF COMPENSATION - ------------------- -------------------------------------------- -------------------------------------------- <S> <C> <C> The Trading Advisor Monthly Management Fee. A flat rate of 1/3 of 1% of Net Assets as of the last day of each month (a 4% annual rate). Quarterly Incentive Fee. 15% of the Trading Profits experienced as of the end of each calendar quarter. The Commodity Brokerage Commissions. Roundturn commissions (the total costs for Broker both the opening and liquidating of a futures interest) at 80% of DWR's published non-member rates (which is equal to an average of approximately $75), which commissions (together with the transaction fees and costs described below) are capped at (i) 13/20 of 1% per month (a maximum 7.8% annual rate) of the Partnership's Net Assets as of the last day of each month, with such cap applied separately on a per trading system basis; and (ii) 14% annually of the Partnership's average monthly Net Assets, aggregated with net excess interest and compensating balance benefits, as described below. Transaction charges for providing forward Forward contract fees average $3-$6 per trading facilities, the execution of roundturn trade, charges for execution of forward contract transactions, the cash contract transactions </TABLE> <TABLE> <CAPTION> RECIPIENT FORM OF COMPENSATION AMOUNT OF COMPENSATION - ------------------- -------------------------------------------- -------------------------------------------- execution of cash contract transactions relating to EFP transactions are ap- relating to exchange of futures for proximately $2.50 per cash contract, and physicals ("EFP") transactions, and the charges for the use of the institutional use of DWR's institutional and overnight trading desk or overnight execution execution facilities. facility are up to $3 per roundturn (the amount of such charges is included in the transaction fees described below under "Other" and is subject to the caps described therein). <S> <C> <C> Financial benefit to Commodity Broker from The aggregate of (i) brokerage commissions interest earned on the Partnership's and transaction fees and costs payable by assets in excess of the interest paid to the Partnership, as described above and the Partnership and from compensating below, and (ii) net excess interest and balance treatment in connection with its compensating balance benefits to DWR designation of a bank or banks in which (after crediting the Partnership with Partnership assets are deposited. interest) are capped at 14% annually of the Partnership's average monthly Net Assets as of the last day of each month during a calendar year. Other Administrative expenses (including legal, Ordinary administrative expenses, which have accounting, and auditing expenses, and been equal to 0.15% of the Partnership's expenses of printing and distributing average annual Net Assets since inception, reports) and all extraordinary expenses of are capped at 0.25% per year of the the Partnership. Partnership's average monthly Net Assets as of the last day of each month. Extraordinary expenses cannot be estimated and are not subject to any cap. All transaction fees and costs incurred in Transaction fees and costs, which have been connection with the Partnership's futures equal to 0.31% of the Partnership's interests trading activities (including average annual Net Assets since inception, floor brokerage fees, exchange fees, are included in: (i) the cap on brokerage clearinghouse fees, NFA fees, "give up" or commissions; and (ii) the cap on aggregate transfer fees (fees charged by one brokerage commissions and net excess clearing brokerage firm to transfer a interest and compensating balance trading position to another clearing benefits, each as described above. firm), and any costs associated with taking delivery of futures interests). </TABLE> As long as redemption charges are imposed, as described under "Redemptions," the management fee, incentive fee and caps on brokerage commissions, transaction fees and costs, ordinary administrative expenses, and net excess interest and compensating balance benefits may not be increased. Thereafter, none of such fees and caps may be increased unless Limited Partners are given prior notice thereof and an opportunity to redeem their Units, subject to additional limits described under "Description of Charges to the Partnership." Based on the annual fees and expenses of the Partnership described above, the Partnership must earn estimated annual net trading profits (after taking into account estimated interest income based upon current rates of 5%) of 5.71% of its average annual Net Assets in order to avoid depletion or exhaustion of its assets. In order for a Limited Partner to pay the redemption charge and recoup its initial investment upon redemption after one year, the Partnership must earn estimated annual net trading profits (after taking into account estimated interest income based upon current rates of 5%) of 9.35% of its average annual Net Assets. This assumes that the Trading Advisor's gross profits equal expenses, such that no incentive fees are earned by the Trading Advisor. For the actual fees and expenses paid by the Partnership during fiscal year 1996, see "Description of Charges to the Partnership." REDEMPTIONS Persons who have been Limited Partners for more than six months may redeem all or part of their Units, regardless of when such Units were purchased, at any month-end in the manner described herein. Such Units may be subject to redemption charges as described herein. Persons who have been Limited Partners for less than six months may first redeem Units effective as of the last day of the sixth month following the Closing in the manner described herein. Such Units may be subject to redemption charges as described herein. Units redeemed on or prior to the last day of the twelfth month after such Units were purchased will be subject to a redemption charge equal to 3% of the Net Asset Value of a Unit on the date of such redemption. Units redeemed after the last day of the twelfth month and on or prior to the last day of the eighteenth month after which such Units were purchased will be subject to a redemption charge equal to 2% of the Net Asset Value of a Unit on the date of such redemption. Units redeemed after the last day of the eighteenth month and on or prior to the last day of the twenty-fourth month after which such Units were purchased will be subject to a redemption charge equal to 1% of the Net Asset Value of a Unit on the date of such redemption. Units redeemed after the last day of the twenty-fourth month after which such Units were purchased will not be subject to a redemption charge. The foregoing redemption charges will be paid to DWR. A limited partner in any of the other commodity pools for which the General Partner serves as the general partner and commodity pool operator who redeemed all or a portion of his interest in one of such other partnerships on or after June 30, 1996 and purchases Units will not be subject to the redemption charges or restrictions under the circumstances described herein. The number of Units, expressed as a percentage of Units purchased, which are not subject to a redemption charge is determined by dividing (a) the dollar amount received upon redeeming an interest in such other partnership and used to purchase Units by (b) the total investment in the Partnership. For example, a limited partner who receives $5,000 upon redeeming all or a part of his interest in a commodity pool operated by the General Partner and invests $10,000 in the Partnership will not be subject to a redemption charge on 50% of his Units. An investor who purchases $500,000 or more of Units will not be subject to the redemption charges described above. Similarly, investors who are Limited Partners in the Partnership immediately prior to the Closing will not be subject to the minimum six-month holding period or the redemption charges, as described above, with respect to Units purchased during the Offering Period. A redemption may be made only in whole Units or in multiples of $1,000 (which may result in the redemption of fractional Units), unless a Limited Partner's entire interest in the Partnership is redeemed. The right to obtain redemption is contingent upon the Partnership having assets sufficient to discharge its liabilities (including any amounts owed to affiliates of the General Partner) as of the month-end, and the General Partner's timely receipt of a properly executed Request for Redemption. The Partnership may be forced to liquidate open positions to satisfy redemptions in the event it does not have sufficient cash on hand. See "Redemptions." In addition to the information and reports described below under "The Limited Partnership Agreement--Reports to Limited Partners," the General Partner will provide Limited Partners with such other information and will comply with any such procedures in connection with redemptions as in the future are specifically required under Securities and Exchange Commission rules and policies for commodity pools and similar investment vehicles. DISTRIBUTIONS Distributions of profits, if any, will be made at the sole discretion of the General Partner (the General Partner has not previously made any distributions of profits and it is currently the intention of the General Partner not to make distributions). It is possible that no distributions will be made in some years in which the Partnership has taxable profits, realized or unrealized. However, a Limited Partner will nevertheless be required to account for his share of such profits as income for federal tax purposes. Distributions may be made by credit to a Limited Partner's customer account with DWR. See "Material Federal Income Tax Considerations." TRANSFERABILITY OF UNITS The assignability or transferability of Units is limited by the Limited Partnership Agreement and no assignee or transferee may become a substituted Limited Partner without the consent of the General Partner, which consent the General Partner may withhold in its sole discretion. See "The Limited Partnership Agreement--Restrictions on Transfers or Assignments." THE OFFERING SECURITIES OFFERED 99,480.090 Units were sold to the public during the Partnership's Initial Offering. The Partnership is currently offering up to 50,000 additional Units for sale. No Units held by existing Limited Partners are being sold in this offering. The General Partner, in its discretion, may register and sell additional Units from time to time. SUBSCRIPTION PROCEDURE The minimum subscription for most subscribers is $5,000, except the minimum subscription is: (a) $2,000 in the case of an IRA; or (b) for subscribers effecting Exchanges, the lesser of (i) $5,000 ($2,000 in the case of IRAs), (ii) the proceeds from the redemption of five units (two units in the case of IRAs) from commodity pools other than the Spectrum Series, (iii) the proceeds from the redemption of 500 units (200 units in the case of IRAs) from one, or any combination, of the Spectrum Series of commodity pools, or (iv) the proceeds from the redemption of all of a subscriber's units of limited partnership interest in any other commodity pool for which the General Partner serves as general partner and commodity pool operator. Existing Limited Partners who desire to make an additional investment in the Partnership may subscribe for Units at the Closing with a minimum investment of $1,000. Certain jurisdictions may impose higher minimum investment requirements; see "State Suitability Requirements" in the Subscription and Exchange Agreement and Power of Attorney. No selling commissions will be charged on subscriptions. No offering expenses will be charged to investors or the Partnership. See "Investment Requirements" above, "Plan of Distribution," and "Subscription Procedure." In order to purchase Units, a subscriber must complete, execute, and deliver an execution copy of the Subscription and Exchange Agreement and Power of Attorney to DWR. In the Subscription and Exchange Agreement and Power of Attorney, a subscriber will (i) authorize the General Partner and DWR to transfer the subscription amount from the subscriber's customer account with DWR to the Dean Witter Portfolio Strategy Fund L.P. Escrow Account, or (ii) in the case of an Exchange, authorize the General Partner to redeem all or a portion of such subscriber's interest in another commodity pool for which the General Partner serves as general partner and commodity pool operator (subject to the terms of the applicable limited partnership agreement) and use the proceeds of such redemption (less any applicable redemption charges) to purchase Units in the Partnership. A subscriber must have the appropriate amount in his customer account with DWR on the first business day following the date that his Subscription and Exchange Agreement and Power of Attorney is received by DWR, and DWR will debit the customer account and transfer such funds to the escrow account with the Escrow Agent on that date. A subscriber may revoke his Subscription and Exchange Agreement and Power of Attorney, and receive a full refund of the subscription amount and any accrued interest thereon (or revoke the redemption of units in the other commodity pool in the case of an Exchange), within five business days after execution of such Agreement or no later than 3:00 p.m., New York City time, on the date of the Closing, whichever comes first, by delivering written notice to his DWR account executive. PLAN OF DISTRIBUTION The Units are being offered and sold by the Partnership through DWR. Pursuant to a Selling Agreement among the Partnership, the General Partner, the Trading Advisor and DWR, DWR will use its best efforts to sell Units, but DWR has not made any commitment to offer and sell a specific amount of Units or to purchase any Units. See "Plan of Distribution." The General Partner, in its sole discretion, may reject a subscription in whole or in part at any time prior to acceptance. Units are being offered to the public at a price per Unit equal to 100% of the Net Asset Value of a Unit as of the close of business on the last day of the month immediately preceding the date of the Closing. Units will be issued at the Closing, which is currently scheduled to held as of October 1, 1997; provided, however, that the General Partner may at its discretion hold the Closing as of the first business day of any month during the Offering Period (the period commencing the date of this Prospectus and ending October 10, 1997). The General Partner shall have the discretion to terminate the offering of Units at any time. Funds with respect to a subscription received during the Offering Period and not immediately rejected by the General Partner will be transferred to, and held in escrow by, The Chase Manhattan Bank (the "Escrow Agent"), as described above, until the General Partner either rejects such subscription prior to the Closing or accepts such subscription at the Closing. The General Partner, DWR, and the Trading Advisor, and their respective principals, directors, officers, employees and affiliates, may subscribe for Units. Subject to certain limited revocation rights (see "Subscription Procedure"), all subscriptions for Units are irrevocable by subscribers. Interest earned on subscriptions deposited into escrow and thereafter rejected by the General Partner will be credited to the subscriber's customer account with DWR. Employees of DWR will receive compensation from DWR, and not from the Partnership, out of the brokerage commissions paid to DWR by the Partnership. Such continuing compensation is in consideration of certain additional services provided to Limited Partners by such persons on a continuing basis and may be deemed to be additional underwriting compensation. See "Plan of Distribution." NO SELLING COMMISSIONS OR OFFERING EXPENSE CHARGE In connection with the offering of Units pursuant to this Prospectus, no selling commissions or offering expenses will be paid by Limited Partners or the Partnership. DWR has previously paid all of the organizational costs and the costs relating to the Initial Offering and will pay all of the costs incurred in connection with this offering of Units, estimated to be approximately $900,000 in the aggregate. The Partnership will not reimburse DWR for any portion of the costs so incurred, and will not be liable for any such costs at any time (although DWR may recoup such costs from brokerage commissions paid by the Partnership). Except as otherwise provided herein, employees of DWR will receive from DWR (solely from its own funds) gross sales credit equal to 3% of the Net Asset Value per Unit as of the Closing for each Unit sold by them and issued at the Closing, and, if properly registered with the CFTC, also will receive from DWR (solely from its own funds) up to 35% of the brokerage commissions that are attributable to outstanding Units sold by them and received by DWR as commodity broker for the Partnership each month, beginning with the eighth month after which such Unit was issued, as described in Note (1) to the table on the front cover page of this Prospectus. See "Plan of Distribution." DWR's employees may have a conflict of interest in rendering advice to Limited Partners as to when and whether to redeem Units because of their interest in receiving certain continuing
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000870345_qualix_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000870345_qualix_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..594a14161557bb6b4628a708f264c068b2c087eb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000870345_qualix_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The discussion in this Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from those discussed in such forward-looking statements. Factors that may cause or contribute to such differences include those discussed in sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this Prospectus. THE COMPANY Qualix is a leading provider of reliability software for UNIX and Windows NT applications and servers in distributed computing environments. The Company's reliability solutions are designed to minimize the impact of system failures on business-critical applications. The Company offers software products for high availability, security and storage management. Although a substantial majority of the Company's historical revenue has come from products licensed from third parties, the Company has recently increased its focus on internally developed or acquired products. As of December 31, 1996, the Company had sold its reliability software to over 900 customers, including over 5,000 server licenses of its high availability software for Windows NT. In recent years, enterprises have begun to deploy their business-critical applications in distributed computing environments based on UNIX and Windows NT operating systems. This has led to a need for a new generation of systems management software for distributed systems, which are inherently more complex and dynamic than host-based systems. Reliability software is a key category of systems management software that is designed to ensure that distributed computing systems are consistently available and secure. The Company believes that the need for reliability software will grow as more business-critical applications are deployed on distributed systems and as applications typically found on UNIX and Windows NT servers, such as e-mail, intranet applications and Internet access, are increasingly considered business-critical. The Company's reliability solutions include high availability products that ensure important applications are continuously available, security products to protect against unauthorized access and storage management products for backing up and quickly restoring data. In August 1996, Qualix merged with Octopus Technologies, Inc., a leading provider of high availability and remote mirroring software for Windows NT. In October 1996, the Company completed the development and introduction of QualixHA+, its next-generation high availability software product for UNIX. The Company currently offers a family of eight owned or licensed reliability products and is developing several additional reliability products. The Company's products are designed to be scalable, easy to install and non-invasive and to work with multiple hardware and software platforms. The Company's strategy is to continue to increase substantially the percentage of revenues derived from internally developed or acquired products that typically have higher gross margins than licensed products. In addition, a key objective of the Company is to expand joint development and marketing relationships with systems management software vendors to provide complementary solutions and to establish relationships with hardware and software OEMs to incorporate reliability solutions in their products. A key component of the Company's strategy is to work closely with customers to establish long-term relationships. The Company markets its software and services primarily through its field sales organization complemented by its own telesales organization, systems integrators, OEMs, resellers and international distributors. The Company plans to sell its lower-priced reliability products for Windows NT through Qualix Direct, its telesales organization for ancillary third party products. The Company has co-marketing relationships with hardware vendors such as Hewlett- Packard, IBM and Sun Microsystems and with major software vendors such as Oracle, Sybase, Informix, CA-Ingres, Microsoft and Tivoli. The Company's customers include AT&T, Dow Jones, Federal Express, Lehman Brothers, Lockheed Martin, MCI and Netscape. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............ 2,000,000 shares Common Stock offered by the Selling Stockholders.................................. 1,000,000 shares Common Stock to be outstanding after the offering...................................... 10,071,768 shares (1) Use of proceeds................................ For general corporate purposes, including working capital and potential acquisitions. Proposed Nasdaq National Market symbol......... QLIX </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ------------------------- ---------------- 1994 1995 1996 1995 1996 ------- ------- ------- ---------------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenue.................... $ 6,053 $ 9,403 $16,535 $ 6,681 $ 15,049 Gross profit..................... 1,891 3,842 8,093 3,156 8,319 Non-recurring items(2)........... -- -- 23 763 (595) Income (loss) from operations.... (2,546) (1,117) (288) 23 681 Net income (loss)(3)............. $(2,562) $(1,180) $ 558 $ 817 $ 711 Pro forma net income per share(4)........................ $ .07 $ .08 Pro forma shares used in per share computation(4)............ 8,177 8,370 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------------------- ACTUAL PRO FORMA(4) AS ADJUSTED(4)(5) ------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash................................... $ 3,084 $3,259 $20,959 Total assets........................... 9,580 9,755 27,455 Long-term obligations, less current portion............................... 303 303 303 Stockholders' equity................... 4,030 4,205 21,905 </TABLE> - -------------------- (1) Based on the number of shares outstanding as of December 31, 1996. Excludes 886,855 shares of Common Stock issuable upon exercise of outstanding options as of December 31, 1996 with a weighted average exercise price of $2.43 per share. See "Capitalization," "Management--1997 Stock Option Plan" and Note 8 of Notes to Consolidated Financial Statements. (2) Represents a $763,000 gain on sale of stock in the quarter ended September 30, 1995; a $740,000 writeoff of purchased in-process technology in the quarter ended June 30, 1996; and $595,000 of merger expenses in connection with the merger with Octopus Technologies, Inc. in the quarter ended September 30, 1996. (3) Excluding non-recurring items, net income for the year ended June 30, 1996 was $535,000, and net income for the six months ended December 31, 1995 and 1996 was $54,000 and $1.3 million, respectively. (4) See Note 1 of Notes to Consolidated Financial Statements for an explanation of pro forma information. (5) Adjusted to reflect the sale of 2,000,000 shares of Common Stock by the Company hereby at an assumed public offering price of $10.00 per share. See "Use of Proceeds" and "Capitalization." ---------------- Except as otherwise specified, all information contained in this Prospectus (i) reflects a 1 for 2.5 reverse split of the Common Stock and a change in the par value per share of the Common Stock to $0.001 effected in January 1997, (ii) except in the Consolidated Financial Statements, reflects the conversion of all outstanding shares of Preferred Stock into shares of Common Stock upon the closing of this offering, (iii) assumes the exercise of warrants to purchase 231,988 shares of Common Stock on a cash basis at the closing of this offering, and (iv) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000871696_informatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000871696_informatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7cb8ff6caf37cad74ba3b8310dadde1d0bec7772
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000871696_informatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Prospective investors should consider carefully the information discussed under "Risk Factors." THE COMPANY The Company develops, markets and supports customer interaction software designed to increase the productivity and revenue-generating capabilities of mid-size to large-scale telephone call centers. The Company's EDGE TeleBusiness software ("EDGE") is a suite of applications and tools that enable businesses to automate telebusiness activities (telemarketing, telesales, account management, customer service and customer support) on an enterprise-wide basis. The Company complements its EDGE products by offering its clients professional consulting, technical support and maintenance services. EDGE has been licensed to over 175 customers in a range of industries, including teleservices outsourcing, telecommunications and financial services. Customers include APAC Teleservices, Inc., AT&T Corp., Belgacom, S.A., Bose Corporation, ING Bank, N.V., SITEL Corporation, Sprint PCS, United Parcel Service General Services Co. and Wells Fargo Bank, N.A. Businesses are increasingly using telephony-based customer interaction, from initial marketing and sales activities to post-sales service and support, as a key competitive component to increase sales, reduce costs, enhance customer service, distinguish products and services and receive and process valuable customer information. Telebusiness activities are generally conducted through call centers that are typically designed and equipped with special telecommunications and computer hardware and software. Businesses are seeking call center customer interaction solutions which are based on an open client/server architecture, provide broad functionality, can be deployed and updated rapidly throughout the organization, are scalable to meet the needs of growing businesses, and seamlessly integrate and leverage telephony technology. Additionally, the Company believes that call center customer interaction solutions will be required to support and incorporate emerging customer interaction channels and computing platforms such as the Internet and corporate-based intranets as such technologies become more commercially significant. In a May 1996 research report, Aberdeen Group, Inc., an independent market research firm, projected that the market for sales and customer support software will grow at an average annual compounded rate of approximately 40%, from $400 million in 1995 to $1.7 billion in 1999. The Company's objective is to become the global leader in providing flexible, technologically advanced, feature-rich customer interaction software and services to mid-size and large-scale call centers. To achieve this objective, the Company is pursuing the following strategies: targeting specific industries by utilizing its knowledge of the business processes and requirements of those industries; extending its call center technology leadership by continuing its product development efforts; broadening its international distribution network including its indirect distribution channels and direct sales force; increasing revenues generated from its existing client relationships; leveraging strategic relationships with leading systems integration and technology companies; and embracing Internet technology to expand the scope of its customer interaction solutions. The Company's EDGE products are designed to provide superior functionality, flexibility, integration, scalability and speed of deployment. Based upon an open systems software architecture, EDGE supports multiple hardware platforms, operating environments, database management systems, network topologies, desktop standards, and legacy system and computer-telephony middleware. The Company's products provide call center agents with real-time data and guidance needed to manage increasingly complex processes for selling products and servicing customers. For example, EDGE offers scripting to support order-taking, cross-selling and up-selling, enables agents to track and resolve customer service problems and facilitates the collection of valuable customer information that can be disseminated on an enterprise-wide basis. The Company's professional consulting, technical support and maintenance services include application development, systems integration, systems and database design and construction and software training. The Company believes that these services significantly differentiate the Company from its competitors and complement its EDGE products to provide a total solution for mid-size and large-scale call centers. The Company markets its software and services in the United States through a direct sales organization. The Company also works closely with strategic consulting and systems integration companies such as Ernst & Young LLP, International Business Machines Corporation ("IBM"), A.T. Kearney, Inc. ("A.T. Kearney"), a subsidiary of Electronic Data Systems Corp. ("EDS"), and dbINTELLECT Technologies ("dbINTELLECT"), a division of EDS, to increase market awareness and acceptance of the Company's products. The Company markets its software internationally in Europe, the Pacific Rim, Canada, Mexico and Latin America through remarketing and distribution relationships which it supplements with a direct sales force in certain regions. Until September 1996, the Company developed, marketed and supported a telemarketing and telesales automation software application called Telemar which runs on the IBM AS/400 platform. Due to the substantial growth in EDGE software license fees and client/server open system software market opportunities, the Company elected to focus exclusively on its EDGE products and sold Telemar and certain related assets and liabilities on September 1, 1996. Currently, substantially all of the Company's revenues are attributable to the licensing of EDGE products and the provision of professional consulting, technical support and maintenance services relating to EDGE. The Company currently expects that the licensing of EDGE products and the provision of such related services will account for substantially all of the Company's revenues for the foreseeable future. The Company was incorporated in Connecticut in 1990. The Company's principal executive office is located at One Corporate Drive, Suite 414, Shelton, Connecticut 06484, and its telephone number is (203) 925-6800. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company............... 2,800,000 shares Common Stock offered by the Selling Shareholders.. 1,100,000 shares Common Stock to be outstanding after the offering. 9,195,782 shares (1) Use of proceeds................................... For repayment of indebtedness, working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol............ IMAA </TABLE> - -------- (1) Based upon the number of shares of Common Stock outstanding as of March 31, 1997. The number of shares outstanding excludes (i) 1,382,241 shares of Common Stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $5.49 per share and (ii) 6,750 shares of Common Stock issuable upon the exercise of outstanding warrants at an exercise price of $4.89 per share. See "Management--Stock Option Plans" and Note 9 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (in thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------------ -------------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------- ------- ------- ------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA (1): Revenues: EDGE revenues: License fees.......... $2,125 $ 5,550 $ 4,703 $ 8,368 $12,180 $ 2,449 $ 3,802 Services and mainte- nance................ 752 2,209 7,872 10,342 11,643 2,612 3,654 ------ ------- ------- ------- ------- --------- --------- Total EDGE revenues.. 2,877 7,759 12,575 18,710 23,823 5,061 7,456 ------ ------- ------- ------- ------- --------- --------- Telemar revenues: License fees.......... 3,636 1,916 2,690 2,457 842 480 -- Services and mainte- nance................ 2,652 3,276 3,087 2,642 1,612 548 -- ------ ------- ------- ------- ------- --------- --------- Total Telemar reve- nues................ 6,288 5,192 5,777 5,099 2,454 1,028 -- ------ ------- ------- ------- ------- --------- --------- Total revenues...... 9,165 12,951 18,352 23,809 26,277 6,089 7,456 Operating income (loss)................ (58) (2,462) (3,034) (2,586) 62 (348) 161 Net loss............... (293) (2,955) (4,083) (3,786) (1,047) (629) (186) Pro forma net loss per share (2)............. $ (0.17) $ (0.10) $ (0.03) Pro forma shares used in net loss per share calculation (2)....... 6,127 6,019 6,668 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED(3) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................. $ 2,541 $25,259 Working capital....................................... 83 28,438 Total assets.......................................... 18,565 40,562 Short-term debt....................................... 5,567 249 Long-term debt........................................ 2,607 315 Senior redeemable convertible preferred stock......... 9,622 -- Redeemable common stock warrants...................... 2,865 -- Total shareholders' equity (deficit).................. (11,385) 31,028 </TABLE> - -------- (1) On September 1, 1996, the Company sold Telemar and certain related assets and liabilities. As a result, the Summary Consolidated Financial Information does not include any Telemar revenues or expenses after this date. (2) Computed as described in Note 2 of Notes to Consolidated Financial Statements. (3) Adjusted to give effect to the receipt and application of the estimated net proceeds of this offering based on an assumed initial public offering price of $12.00 per share. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000872443_frontstep_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000872443_frontstep_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e8b2b14dba0c601b69724811926bb3f26d278b2e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000872443_frontstep_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED HEREIN, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY Symix designs, develops, markets and supports a fully integrated manufacturing, planning and financial software solution that addresses the Enterprise Resource Planning ("ERP") requirements of mid-market (up to $350 million in annual revenues) discrete manufacturers and individual manufacturing sites of larger manufacturers. Historically, manufacturers have implemented ERP systems to achieve improvements in manufacturing operations and related cost reductions. Today, manufacturers increasingly face global competition, the challenges of managing multinational and multi-site operations and more demanding customer service requirements. In response to this complex business environment, manufacturers have begun to focus on customer interaction, which requires further integrating customer requirements into the overall fulfillment cycle. Business software solutions must not only deliver the operational improvements of traditional ERP, but must also provide capabilities to enhance customer interaction and improve revenue performance. Mid-market manufacturers generally are constrained by limited financial and technological resources; nevertheless, they require ERP solutions that offer a high degree of flexibility and functionality and can integrate customers with business processes. Through its Customer Synchronized Resource Planning ("CSRP") approach, the Company delivers to mid-market manufacturers a cost-effective ERP solution that facilitates a shift in focus from manufacturing-centric planning to customer- centric planning. CSRP incorporates and extends traditional ERP functionality to integrate customer requirements into manufacturers' core business processes. The Company's primary ERP product, SyteLine, improves manufacturers' performance with respect to customer service, planning and materials management, production management and enterprise administration. SyteLine operates across a wide range of hardware platforms using the Windows NT and UNIX operating systems. In addition, Symix offers complementary software capabilities including: configuration, which integrates the customer with the order process to increase the quality of complex product orders; field service, which improves the quality and efficient delivery of field service and support; advanced planning and scheduling, which allows manufacturers to optimize scheduling of production operations to improve customer satisfaction and on-time delivery while reducing the manufacturers' and their customers' inventory carrying costs; electronic commerce, which facilitates communication between businesses and their customers and suppliers; on-line analytical processing, which aids in decision-making by providing comprehensive analysis of operational data stored by SyteLine; and enterprise process documentation, which speeds the implementation of ERP systems and facilitates the execution of ISO 9000 quality initiatives. The Company's CSRP approach provides highly integrated, client-focused, software solutions that address the critical business needs of mid-market manufacturers. Symix offers a wide range of services, including project management, implementation, product education, technical consulting, programming services, system integration and maintenance and support. Symix works with consulting firms and third party vendors to deliver integrated CSRP solutions. The Company has focused its products and services on the following vertical markets: industrial equipment, fabricated metals, electronic equipment, furniture/fixtures and packaging and containers. Symix has entered into a definitive agreement to acquire Pritsker Corporation ("Pritsker"), which markets advanced planning and scheduling and simulation software to mid-market manufacturers. Pursuant to this agreement (i) Pritsker will be merged with and into a wholly-owned subsidiary of the Company, (ii) each share of Pritsker common stock will be converted into the right to receive 0.170108 Common Shares of the Company and (iii) each share of Pritsker preferred stock will be converted into the right to receive $5.23 plus accrued and unpaid dividends (the "Merger"). If approved by the Pritsker shareholders, it is expected that the Merger will be consummated on November 21, 1997. See "Risk Factors--Risks Related to Acquisitions" and the Pro Forma Condensed Consolidated Financial Statements (Unaudited) as of June 30, 1997, starting on page F-35 in this Prospectus. The Company has more than 2,900 customer sites, which it services and supports through a worldwide network of 20 offices in 14 countries. The Company was incorporated under the laws of the State of Ohio in 1984. The Company's principal executive offices are located at 2800 Corporate Exchange Drive, Columbus, Ohio 43231, and its telephone number is (614) 523-7000. THE OFFERING <TABLE> <S> <C> Common Shares offered by the Company.................... 1,700,000 Common Shares offered by the Selling Shareholders....... 200,000 Total Common Shares offered......................... 1,900,000 Common Shares to be outstanding after the offering...... 7,556,000 (1) Nasdaq National Market symbol........................... SYMX Use of Proceeds......................................... The net proceeds to the Company from this offering will be used for general corporate purposes, including working capital and potential acquisitions. See "Use of Proceeds." </TABLE> - ------------------------ (1) Based on number of Common Shares outstanding at June 30, 1997. Does not include 1,477,750 Common Shares reserved for issuance under outstanding options as of June 30, 1997. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FOR THE YEAR ENDED JUNE 30, ----------------------------------------------------- HISTORICAL ----------------------------------------------------- PRO 1993 1994 1995 1996 1997 FORMA(1) --------- --------- --------- --------- --------- ----------- <S> <C> <C> <C> <C> <C> <C> OPERATING STATEMENT DATA: Net revenue........................... $ 30,006 $ 35,486 $ 42,828 $ 45,759 $ 65,772 $ 69,527 Cost of revenue....................... 11,560 12,600 14,882 15,678 22,440 24,093 Gross margin........................ 18,446 22,886 27,946 30,081 43,332 45,434 Operating expenses: Selling, general and administrative.................... 15,779 19,505 25,564 22,411 32,601 34,364 Research and product development.... 1,562 2,589 3,744 3,673 5,659 5,736 Restructuring and other unusual charges........................... -- -- -- 506 -- -- Total operating expenses............ 17,341 22,094 29,308 26,590 38,260 40,100 Operating income (loss)............... 1,105 792 (1,362) 3,491 5,072 5,334 Other income, net..................... 56 122 314 221 107 66 Income (loss) before income taxes..... 1,161 914 (1,048) 3,712 5,179 5,400 Provision (benefit) for income taxes............................... 448 330 (410) 1,404 1,916 1,948 Net income (loss)................... $ 713 $ 584 $ (638) $ 2,308 $ 3,263 $ 3,452 Earnings (loss) per share............. $ 0.12 $ 0.10 $ (0.12) $ 0.40 $ 0.52 $ 0.51 Weighted average common and common share equivalents outstanding....... 5,802 5,742 5,424 5,706 6,302 6,802 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ----------------------------------- PRO FORMA PRO AS ACTUAL FORMA(1) ADJUSTED(2) --------- ----------- ----------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital.............................................. $ 7,897 $ 7,571 $ 33,139 Total assets................................................. 44,252 49,130 74,698 Total long-term debt and lease obligations................... 530 1,080 1,080 Total shareholders' equity................................... 23,361 26,149 51,717 </TABLE> - ------------------------ (1) Pro forma data give effect to the Merger. The pro forma information is based on the historical financial statements of Pritsker and Symix giving effect to the proposed transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma financial statements starting on page F-35 of this Prospectus. (2) Pro forma as adjusted data give effect to the Merger and the sale by the Company of 1,700,000 Common Shares in the offering at an assumed public offering price of $16.25 per share, after deducting estimated underwriting discounts and commissions and expenses.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000872901_efax-com_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000872901_efax-com_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..10f776488afc4341829ca3b8aeca3ec91d794d51
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000872901_efax-com_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes: (i) the conversion of all outstanding Preferred Stock into Common Stock except for the Series P Redeemable Preferred Stock, (ii) the redemption of all outstanding shares of Series P Redeemable Preferred Stock, (iii) the issuance of 491,317 shares of Common Stock upon the automatic net exercise in full of certain warrants, (iv) the issuance of 144,623 shares of Common Stock upon the conversion of cumulative unpaid dividends on the Series F Convertible Preferred Stock and (v) that the Underwriters' over-allotment option will not be exercised. Certain terms not otherwise defined herein are defined in the "Glossary." THE COMPANY JetFax, Inc. is a leading developer and provider of integrated embedded system technology, branded products and desktop software solutions for the multifunction product ("MFP") market, which consists of electronic office devices that combine print, fax, copy and scan capabilities in a single unit. The Company focuses on two distinct segments of the MFP market: the small office/home office ("SOHO") segment and the corporate segment. According to CAP Ventures, Inc., the total United States market for MFPs is expected to increase from approximately $1.9 billion in 1996 to $7.6 billion in 2000, representing a compound annual growth rate of more than 40%. Drivers of this growth include the increasing number of SOHO offices and telecommuters, the rising demand for cost, space and production efficiency and the expanding volume of information conveyed through fax, the Internet and e-mail. Rather than making several trips to a fax or copier, queuing for a particular office device or purchasing and maintaining multiple single-function office devices, today's office workers can perform print, fax, copy and scan functions with one device that provides nearly seamless document management directly from their desktops. The Company's embedded system technology consists of proprietary ASICs, software and firmware that reside on a modular controller circuit board (an "embedded system"). This technology provides the intelligence of a MFP and coordinates, controls and optimizes a MFP's printing, faxing, copying and scanning operations. JetFax licenses and manufactures its embedded system and desktop software for a range of MFP solutions sold under the JetFax brand name and the brand names of its OEM customers. With outsourcing becoming increasingly attractive to OEMs, JetFax believes it has a number of advantages over competitive suppliers of MFP technology due to its proven industry expertise and its ability to offer OEMs a variety of advanced solutions. The Company believes its embedded system technology and desktop software enable OEMs to offer more competitive products with improved price/performance, shortened development cycles and reduced development and product costs. The Company currently licenses its embedded system technology or desktop software to 25 licensees worldwide, including Hewlett-Packard Company, Oki Data Corporation, Samsung Electronics Corporation, Xerox Corporation and Intel Corporation. For example, effective in January 1997, the Company entered into a development and license agreement with Hewlett-Packard for the inclusion of JetFax embedded system technology and JetSuite software in a Hewlett-Packard product which is currently under development. Since its inception in 1988, the majority of the Company's revenues have been generated from sales of JetFax branded products and consumables, including the JetFax M5, the Company's current branded product. A substantial portion of the Company's branded products sales is through IKON Office Solutions, one of the leading distributors of office equipment. The Company believes that it offers the most advanced and innovative MFP solutions currently available in its product class. For example, the JetFax M5 was the first MFP to support two telephone lines for simultaneous receiving and sending of faxes, and the Company was one of the first to market a MFP with a high speed 33.6 Kbps modem. JetFax has received a number of highly acclaimed industry awards and distinctions for its innovative contributions to MFP technology, including the following for the JetFax M5: Buyer's Laboratory's "Pick of the Year" in 1996, "Editor's Choice '96 for Premium Laser Fax" by Better Buys for Business and "Win 100" for top computer hardware products in 1996 by Windows Magazine. The Company believes its JetSuite software will define a new category of all- in-one software for MFPs that will replace the piecemeal software applications historically bundled by MFP vendors. JetSuite's portable document software enables a user to view, manage, transmit and process information from the desktop, providing full fax, scan, optical character recognition, print, copy and e-mail functionality. As a result, SOHO and corporate workers can increase productivity and realize substantial time and cost savings relative to traditional office protocols and equipment usage. The Company's JetSuite desktop software can be sold on a stand-alone basis or bundled with the JetFax embedded system to provide a complete, integrated hardware and software solution. The Company plans to release JetSuite with several OEM products in the third quarter of 1997. The Company also offers JetPCL software, which provides high quality conversion of documents encoded in Hewlett-Packard's Printer Control Language ("PCL"), the industry standard. The Company's objective is to become a leading, single source for multifunction products and solutions providing proven embedded system technology, high quality branded products and advanced desktop software. To accomplish this goal, JetFax intends to (i) penetrate the SOHO market through OEM licensing agreements of the JetFax embedded system and JetSuite software, (ii) increase the installed base of JetFax's branded products and related higher margin consumables, upgrades and accessory sales, (iii) establish JetSuite as an industry standard in the MFP market, (iv) leverage the Company's experience and relationships in international markets and (v) continue to anticipate the needs of the MFP market and respond with innovative, complete MFP solutions. The Company's executive offices are located at 1376 Willow Road, Menlo Park, California 94025, and its telephone number is (415) 324-0600. The Company was incorporated in Delaware in August 1988. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company.......... 2,750,000 shares Common Stock Offered by the Selling Stockholders................................ 750,000 shares Common Stock to be Outstanding after the Offering.................................... 10,693,470 shares (1) Use of Proceeds by the Company............... For redemption of Series P Redeemable Preferred Stock, payment of acquisition obligations, repayment of indebtedness, working capital and general corporate purposes. Nasdaq National Market Symbol................ JTFX </TABLE> - -------- (1) Excludes (i) 1,160,635 shares of Common Stock issuable upon exercise of stock options outstanding at March 31, 1997 under the Company's stock option plans with a weighted average exercise price of $1.22 per share, (ii) 401,999 shares of Common Stock issuable upon exercise of options granted outside of the Company's stock option plans with an exercise price of $1.72 per share, (iii) 388,500 shares of Common Stock issuable upon exercise of warrants outstanding at March 31, 1997 with an exercise price of $2.75 per share and (iv) 100,000 shares of Common Stock issuable upon exercise of warrants outstanding at March 31, 1997 with an exercise price of $1.75 per share. See "Management--Incentive Stock Plans," "Certain Transactions" and Note 10 of Notes to Financial Statements. SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED QUARTER ENDED FISCAL YEAR ENDED MARCH 31, DECEMBER 31, MARCH 31, ------------------------------------- ------------------ ---------------- 1993 1994 1995 1996 1995 1996 (1) 1996 1997(1) -------- -------- ------- -------- -------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Product............... $ 4,542 $ 6,086 $ 6,413 $ 11,143 $ 7,336 $ 10,205 $ 3,807 $ 4,250 Development fees...... -- 75 1,200 699 466 1,416 233 743 Software and technology license fees................. -- -- 139 1,345 667 1,241 678 223 -------- -------- ------- -------- -------- -------- ------- ------- Total revenues....... 4,542 6,161 7,752 13,187 8,469 12,862 4,718 5,216 Costs and expenses: Cost of product revenues............. 3,695 5,486 5,249 11,102 7,793 8,495 3,309 2,979 Research and development.......... 1,397 1,311 1,118 1,249 919 1,709 330 1,477(2) Selling and marketing. 633 1,303 1,325 2,710 1,745 2,785 965 972 General and administrative....... 1,019 615 746 750 500 823 250 352 -------- -------- ------- -------- -------- -------- ------- ------- Total costs and expenses............ 6,744 8,715 8,438 15,811 10,957 13,812 4,854 5,780 -------- -------- ------- -------- -------- -------- ------- ------- Loss from operations... (2,202) (2,554) (686) (2,624) (2,488) (950) (136) (564) Interest and other income (expense)...... (18) (5) (68) (270) (192) 13 (78) (27) -------- -------- ------- -------- -------- -------- ------- ------- Loss before extraordinary item and income taxes.......... (2,220) (2,559) (754) (2,894) (2,680) (937) (214) (591) Provision for income taxes................. -- -- -- 35 35 105 -- 45 -------- -------- ------- -------- -------- -------- ------- ------- Loss before extraordinary item.... (2,220) (2,559) (754) (2,929) (2,715) (1,042) (214) (636) Extraordinary item (3). -- -- 349 -- -- -- -- -- -------- -------- ------- -------- -------- -------- ------- ------- Net loss............... $ (2,220) $ (2,559) $ (405) $ (2,929) $ (2,715) $ (1,042) $ (214) $ (636) ======== ======== ======= ======== ======== ======== ======= ======= PRO FORMA DATA (4): Net loss per share..... $ (0.14) $ (0.08) ======== ======= Common and common equivalent shares used in computing net loss per share............. 8,454 8,474 ======== ======= <CAPTION> MARCH 31, 1997 ----------------------- ACTUAL AS ADJUSTED (5) ------- --------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........... $ 1,564 $ 19,867 Total assets.............. 8,020 24,979 Long-term note payable, less current portion..... 181 -- Redeemable preferred stock.................... 2,764 -- Total stockholders' equity................... 101 21,319 </TABLE> - -------- (1) Effective December 31, 1996, the Company changed its fiscal year end from March 31 to a 52-53 week reporting year ending on the first Saturday on or after December 31. The 40-week period from April 1, 1996 to January 4, 1997 is referred to herein as the nine months ended December 31, 1996. For presentation purposes, the Company refers to its reporting year ended January 4, 1997 as ending on December 31, 1996 and the 13-week period from January 5, 1997 to April 5, 1997 is referred to herein as the quarter ended March 31, 1997. (2) Includes $551,000 of expenses related to the acquisition of the Crandell Group, Inc. by the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) Represents a gain on exchange of stockholder debt and receivables for notes payable. See Note 2 of Notes to Financial Statements. (4) For an explanation of the determination of the number of shares used in computing pro forma net loss per share, see Note 1 of Notes to Financial Statements. (5) Reflects (i) the conversion of each of the outstanding shares of convertible preferred stock, except the Series P Redeemable Preferred Stock, upon the closing of the Offering, (ii) the redemption of all outstanding shares of Series P Redeemable Preferred Stock, (iii) the issuance of 491,317 shares of Common Stock upon the automatic net exercise in full of certain warrants upon the closing of the Offering, (iv) the issuance of 144,623 shares of Common Stock upon the conversion of cumulative unpaid dividends on the Series F Convertible Preferred Stock upon the closing of the Offering and (v) the sale by the Company of the 2,750,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.00 per share, after deducting the underwriting discount and commissions and estimated offering expenses, and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000878246_harmony_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000878246_harmony_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..25f4f4d7a0326851c25704ee6671d0fd5b28df0f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000878246_harmony_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Certain capitalized terms used in this summary are defined in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information and financial statements contained in this Prospectus. Each prospective investor is urged to carefully read this Prospectus in its entirety, including but not limited to, the Risk Factors. THE COMPANY The historical business of Harmony Holdings, Inc., and its subsidiaries ("The Company") is the production of television commercials which business continues to represent a preponderance of its revenues. The Company has produced more than 2,500 commercials for national advertisers, Fortune 500 companies and well recognized product lines, such as Acura, Anheuser Busch, AT&T, Bank of America, Blue Cross, Cannon, Cap Cities/ABC, Cellular One, Chrysler, Coca-Cola, Delta Airlines, Disney, Domino's Pizza, Fox, General Mills, Gillette, General Motors, Hallmark, HBO, Hershey Foods, Honda, JC Penney, K-Mart, Kellogg's, Kodak, Kraft Foods, McDonald's, Nabisco, Nike, Nintendo, Nissan, Pepsi, Reebok, Sears, Sony, State Farm, and Visa, among others. See "The Company" and "Business". A small percentage of the Company's business is the production of music videos through its operating subsidiary, The End, Inc. During January 1995, the Company formed Harmony Media Communications, Inc., entering the long-form advertising and infomercial business through this operating subsidiary. See "Business--Expansion into Ancillary Businesses--Music Videos" and "Business-- Expansion into Ancillary Businesses--Infomercials". On July 10, 1996, the Company and Unimedia, S.A., a privately-held French registered company, jointly announced a series of proposed transactions that would result in the acquisition of Unimedia by the Company. The transaction did not proceed as announced and Unimedia commenced litigation with respect thereto. See "The Company--Recent Litigation Related to Proposed Acquisition".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000878612_clearstory_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000878612_clearstory_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ddaeb915f82174e73259029db41c6c8a975d7f21
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000878612_clearstory_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus, including information under "Risk Factors". The Common Stock offered hereby involves a high degree of risk. OVERVIEW OF THE COMPANY INSCI Corp. (INSCI or the "Company") develops, markets, installs and services electronic information and document management systems designed to meet the enterprise-wide needs of organizations which produce large quantities of computer-generated documents and require the storage of and access to a broad array of document types. The Company provides its customers with the ability to electronically capture documents and computer output from a variety of sources, to store information electronically and to access and deliver the information either electronically or via reprints in a fashion that lowers costs, improves quality, improves service and provides greater control to the customer. INSCI's products focus on both the desktop imaging, and document management market and the automated document factory production market. INSCI's software products marketed under the name, COINSERV, utilize a customer's existing host computer and computer network to link powerful "Server" computers, which perform automated document indexing and optical disk storage functions. This is accomplished with the customer's existing network of "client" computers, which are used by the customer's employees to search, retrieve and distribute documents. COINSERV is an optical-disk based client/server computer output to laser disk (COLD) system. The COLD market addresses print and microfiche replacement using digital-based techniques to replace printing and microfiche production and allowing on-line viewing of reports that would otherwise need to be printed. This produces rapid and major savings for users. In fiscal year 1996 (ending March 31), INSCI introduced the COINS-CD product aimed at both the corporate and service bureau markets. The new product combines INSCI's core technology with CD- Recordable media for purposes of electronic information distribution. COINS-CD offers the user the advantage of using low-cost and easily available CDS which can be used for distribution of large quantities of data. Use of this type of technology also offers rapid payback for users and service bureaus. These products are often used in conjunction with optical disk-based products and are particularly useful for low cost - large volume information distribution. During fiscal 1997, the Company announced the addition of six new products to its offerings; WebCOINS, an Internet product, COINSflow, a workflow product, Advanced COINSCAN, an imaging product, Advanced COINSERV, a data archive and retrieval product, COINS Demander, a database interface, and Setup Expert, an application set up interface. The Company also announced a Windows NT product released in June, 1997. These additions to INSCI's product offerings were funded by an increase in the Company's gross expenditures for software products developed and purchased by 59% in fiscal 1997. The Company's product development program has been directed toward creating a suite of complementary products to meet customer and marketplace requirements for a more complete electronic document management solution. INSCI offers numerous services including software installation, training, software maintenance support and systems integration. INSCI's advanced systems integration services division works with its customers to integrate these various technologies into existing technical environments to leverage investments in technology. INSCI's current business strategy is to develop and provide document management solutions in a fully integrated and customized manner that enables customers to improve their business processes and competitive position. - -------------------------------------------------------------------------------- <PAGE> - -------------------------------------------------------------------------------- THE OFFERING Common Stock being registered ........................ 16,769,991 (1) shares of Common Stock $.01 par value per share Common Stocks outstanding and to be outstanding after this registration............. 4,436,107(2) Common Stock to be Outstanding after the registration assuming the exercise of all options and warrants and the conversion of all shares of Preferred Stock issued into common stock. 18,345,533(1),(3) shares Use of Proceeds....................................... INSCI Corp. will not receive any proceeds from the sale of Common Stock pursuant to the offering unless options and warrants are exercised. In that event, proceeds received will be used for working capital, general corporate purposes and acquisitions. NASDAQ(SM) Small Cap Market Symbols................... INSI, Common Stock, INSIW, Warrants Boston Stock Exchange Symbols......................... INI, Common Stock, INIW, Warrants - ---------- (1) Assumes the exercise of all options, and warrants and the conversion of all Preferred Stock. Also assumes dividends issued on 10% Preferred Stock, with an assumed market price of Common Stock at $2.50, and dividends issued on 8% Preferred Stock with a market price of $3.75. (2) Includes 2,860,565 shares previously issued and being registered herein, and does not assume the exercise of any options and warrants or the conversion of any Preferred Stock. (3) Does not include 868,365 shares of Common Stock underlying Stock Options with exercise prices between $.94 and $6.00 granted by the Company as of July 31, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000878731_finlay_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000878731_finlay_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8b02961d0fbd0703d3709b814a76724ef6e1217b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000878731_finlay_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by reference to, the more detailed information and the Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. Unless otherwise specified or the context otherwise requires, in this Prospectus (i) references to 'Finlay Jewelry' mean Finlay Fine Jewelry Corporation, a wholly owned subsidiary of Finlay Enterprises, Inc., (ii) references to 'Finlay' or the 'Company' mean, collectively, Finlay Enterprises, Inc., Finlay Jewelry, their subsidiaries and all predecessor businesses, (iii) all information presented assumes no exercise of the Underwriters' over-allotment option, (iv) all information is presented as of August 2, 1997, the date of the Company's most recent quarterly balance sheet, and (v) all information presented herein gives effect to a two-for-three combination of the Company's common stock, par value $.01 per share (the 'Common Stock'), effected March 7, 1995. Finlay's fiscal year ends on the Saturday closest to January 31 of each year. References to 1992, 1993, 1994, 1995, 1996 and 1997 relate to the fiscal years ending on January 30, 1993, January 29, 1994, January 28, 1995, February 3, 1996, February 1, 1997 and January 31, 1998, respectively. Each of the fiscal years includes 52 weeks except 1995, which includes 53 weeks. All references herein to 'Departments' refer to fine jewelry departments operated pursuant to license agreements or other arrangements with host department stores. THE COMPANY Finlay is one of the leading retailers of fine jewelry in the United States and France. The Company operates leased fine jewelry departments ('Departments') in major department stores for retailers such as May Department Stores ('May'), Federated Department Stores ('Federated'), Galeries Lafayette, Belk, Carson Pirie Scott and Proffitt's. Finlay sells a broad selection of moderately priced fine jewelry, including necklaces, earrings, bracelets, rings and watches, and markets these items principally as fashion accessories with an average sales price of approximately $150 per item. Average sales per Department were $729,000 in 1996 and the average size of a Department is approximately 1,000 square feet. Finlay operates 946 Departments and in 1996 achieved sales of $685.3 million, making Finlay the largest operator of Departments in the United States and France. Management believes that current trends in jewelry retailing, particularly in the department store sector, provide a significant opportunity for Finlay's growth. Consumers spent approximately $41 billion on jewelry (including both fine and costume jewelry) in the United States in 1996, an increase of approximately $17 billion over 1986, according to the United States Department of Commerce. In the department store sector in which Finlay operates, consumers spent $4 billion on fine jewelry in 1996. Management believes that demographic factors such as the maturing of the U.S. population and an increase in the number of working women have resulted in greater disposable income, thus contributing to the growth of the fine jewelry retailing industry. Management also believes that jewelry consumers today increasingly perceive fine jewelry as a fashion accessory, resulting in purchases which augment the Company's gift and special occasion sales. Finlay's Departments are typically located in 'high traffic' areas of leading department stores, enabling Finlay to capitalize on these consumer buying patterns. Host stores benefit from outsourcing the operation of their fine jewelry departments. By engaging Finlay, host stores gain specialized managerial, merchandising, selling, marketing, inventory control and security expertise. Additionally, by avoiding the high working capital investment typically required of the jewelry business, host stores improve their return on investment and can potentially increase their profitability. As a lessee, Finlay benefits from the host stores' reputation, customer traffic, advertising, credit services and established customer base. Finlay also avoids the substantial capital investment in fixed assets typical of stand-alone retail formats, which generally has enabled Finlay's new Departments to achieve profitability within their first twelve months of operation. Finlay further benefits because net sales proceeds are generally remitted to Finlay by each host store on a monthly basis with essentially all customer credit risk borne by the host store. The Company employs a unique merchandising strategy, known as the 'Finlay Triangle', which integrates store management, vendors and Finlay's central office. This alliance enables the Company to capitalize on economies of scale, while allowing store management to tailor merchandising programs to each host store's unique fashion image and customer demographics. Store management, vendors and Finlay's central office coordinate efforts and share access to information, enabling the vendor to assist in identifying fashion trends thereby improving inventory turnover and profitability. As a result of Finlay's strong relationships with its vendors, management believes that the Company's working capital requirements are lower than those of many other jewelry retailers. In recent years, on average, approximately 50% of Finlay's domestic merchandise has been carried on consignment. The use of consignment merchandise also reduces Finlay's inventory exposure to changing fashion trends because unsold consigned merchandise can be returned to the vendor. RECENT DEVELOPMENTS On September 3, 1997, Finlay entered into an agreement to acquire the Diamond Park Fine Jewelers division of Zale Corporation ('Diamond Park'), a leading operator of Departments, for approximately $66 million. By acquiring Diamond Park, Finlay will add 139 Departments that had total sales of $93 million for the twelve months ended February 1, 1997 and will also add new host store relationships with Mercantile Stores, Marshall Field's and Parisian. Management believes that in addition to increasing sales volume, the acquisition of Diamond Park (the 'Diamond Park Acquisition') will improve Finlay's results of operations through the leveraging of expenses and the achievement of other operating synergies. Finlay does not expect the Diamond Park Acquisition to have a material impact on earnings per share in the current fiscal year but expects the transaction to be accretive thereafter. The Company intends to finance the Diamond Park Acquisition with borrowings under its revolving credit facility (as amended, the 'Revolving Credit Facility'). On September 11, 1997, Finlay amended the Revolving Credit Facility by (i) increasing the line of credit from $135 milllion to $175 million, (ii) including eligible international assets in the borrowing base formula, (iii) reducing interest rates, (iv) permitting higher balances during the annual balance reduction period and (v) extending the maturity date from May 1998 to March 2003. Upon completion of the Diamond Park Acquisition, the line of credit will be further increased to $225 million and permitted balances during the annual balance reduction period will be further increased. On June 18, 1997, the Company announced the extension of its lease agreements with Federated for an additional three years. The lease extensions apply to all of Finlay's Departments within Federated stores, including leases for Departments in Burdines, Rich's, Lazarus, Goldsmith's and The Bon Marche which have been extended through February 3, 2001, and the lease for Departments in Stern's which has been extended through February 1, 2003. GROWTH STRATEGY Finlay intends to pursue the following key initiatives to increase sales and earnings: INCREASE COMPARABLE DEPARTMENT SALES. In 1995 and 1996, Finlay achieved comparable Department sales increases of 5.7% and 5.9%, respectively, outpacing the majority of its host stores. These increases were achieved primarily by emphasizing key merchandise items, increasing focus on holiday and event-driven promotions, participating in host store marketing programs and positioning its Departments as a 'destination location' for fine jewelry. Finlay believes that comparable Department sales will continue to benefit from these merchandising and marketing strategies, as well as from increasing demand for fine jewelry. ADD DEPARTMENTS WITHIN EXISTING HOST STORE GROUPS. Finlay's well established relationships with many of its host store groups have enabled the Company to add Departments in new locations opened by existing host stores. Finlay has operated Departments in May stores since 1948 and operates the fine jewelry departments in all of May's 364 department stores. Finlay also has operated Departments in Federated stores since 1983 and operates Departments in 155 of Federated's 411 department stores. Since the beginning of 1992, host store expansion has added 126 net new Departments including 52 net new Departments since the beginning of 1995. Based on expansion plans recently announced by May, Finlay believes it will have the opportunity to open approximately 100 new Departments in May stores alone over the next five years (excluding possible closings). ESTABLISH NEW HOST STORE RELATIONSHIPS. Finlay has an opportunity to grow by establishing new relationships with department stores that presently either lease their fine jewelry departments to Finlay's competitors or operate their own fine jewelry departments. Finlay seeks to establish these new relationships by demonstrating to department store management the potential for improved financial performance. Since the beginning of 1992, Finlay has added such host store groups as Burdines, The Bon Marche, Elder Beerman and Stern's. Over the past two years, Finlay has added 27 Departments in the Hecht's division of May as a result of May's acquisition of John Wanamaker and Strawbridge's. By acquiring Diamond Park, Finlay will add Mercantile Stores, Marshall Field's and Parisian to its host store relationships. EXPAND INTERNATIONAL OPERATIONS. In October 1994, Finlay acquired Societe Nouvelle d'Achat de Bijouterie-S.O.N.A.B. ('Sonab'), the largest operator of Departments in France. In 1996, Finlay expanded in France by adding 26 Departments in Monoprix and plans to open an additional 15 Monoprix Departments in 1997. Finlay operates 138 Departments in France through five host store groups, including Galeries Lafayette, Nouvelles Galeries and Bazar de L'Hotel de Ville. In addition, in 1996, Finlay began operating seven Departments in Debenhams, a department store chain which operates 90 stores throughout the United Kingdom and Ireland. In 1996, the Company also opened a Department in a new Galeries Lafayette store in Berlin, Germany and is exploring additional opportunities in other European countries. CONTINUE TO IMPROVE OPERATING LEVERAGE. Selling, general and administrative expenses as a percentage of sales declined from 44.2% in 1993 to 42.3% in 1996. Finlay seeks to continue to leverage expenses both by increasing sales at a faster rate than expenses and by reducing its current level of certain operating expenses. For example, Finlay has demonstrated that by increasing the selling space (with host store approval) of certain high volume Departments, incremental sales can be achieved without having to incur proportionate increases in selling and administrative expenses. In addition, management believes the Company will benefit from recent investments in technology and refinements of operating procedures designed to allow Finlay's sales associates more time for customer sales and service. Finlay's new distribution and warehouse facility, expected to become fully operational in the Spring of 1998, will permit the Company to improve the flow of merchandise to Departments while reducing payroll and freight costs. Additionally, since 1994 the Company has opened nine domestic stand-alone discount jewelry outlet stores which provide Finlay with a channel to sell discontinued, close-out and certain other merchandise. The Company will seek to identify opportunities to develop additional outlet stores. ------------------------ The principal executive offices of the Company are located at 521 Fifth Avenue, New York, New York 10175 and its telephone number at this address is (212) 808-2060. THE OFFERING <TABLE> <S> <C> Common Stock Offered by: The Company.......................... 2,046,971 Shares The Selling Stockholder.............. 953,029 Shares ------------- Total.............................. 3,000,000 Shares (1) ------------- ------------- Common Stock to be outstanding after the Offering................................ 9,616,449 Shares (1)(2) Use of Proceeds........................... The net proceeds to the Company from the Offering are expected to be used for working capital, repayment of indebtedness or other general corporate purposes. The Company will not receive any proceeds from the sale of the shares being sold by the Selling Stockholder. The Indentures restrict the Company's ability to use the net proceeds from the Offering to repay indebtedness under the Revolving Credit Facility. See 'Risk Factors -- Substantial Leverage' and 'Use of Proceeds'. Nasdaq National Market symbol............. FNLY </TABLE> - ------------------ (1) Excludes up to 450,000 additional shares of Common Stock subject to the over-allotment option granted by the Company and certain existing stockholders of the Company other than the Selling Stockholder (the 'Over-Allotment Selling Stockholders') to the Underwriters. See 'Underwriting'. (2) Excludes 958,734 shares of Common Stock issuable upon exercise of employee stock options outstanding at the date of this Prospectus. See 'Management -- Executive Compensation -- Long-Term Incentive Plans'.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000880935_mca_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000880935_mca_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fd1f20ed3ec7ef2a68fb61b2f8145a3f688333f5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000880935_mca_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus, including information contained under the caption "Risk Factors." Reference is made to, and this summary is qualified in its entirety by, the more detailed information and consolidated financial statements, including the notes thereto, contained elsewhere in this Prospectus. THE COMPANY MCA Financial is a holding company which, through its principal subsidiaries and certain affiliates, engages in mortgage banking, land contract and mortgage syndication, loan originating and servicing and real estate acquisitions, rehabilitation, leasing and sales. MCA Financial is a Michigan corporation which was formed in 1989 and was inactive until 1991 when it became a holding company for its principal subsidiaries. Unless otherwise indictated, MCA Financial and its subsidiaries are hereinafter collectively referred to as the "Company." Currently, MCA Financial operates through the following wholly-owned subsidiaries: - MCA Mortgage Corporation ("MCA Mortgage") is a Michigan corporation that was incorporated in 1985 and has conducted a mortgage banking business since that date. It was known as Primary Mortgage Corporation until that date and was known as Mortgage Corporation of America from August 1985 until March 1993. - Mortgage Corporation of America ("MCA") is a Michigan corporation that was incorporated in 1984 and has conducted a mortgage banking business since that date. It was known as First American Mortgage Corporation, Inc. until September 1989 and as First American Mortgage Associates, Inc. from September 1989 until October 1993. - RIMCO Realty & Mortgage Company, doing business as MCA Realty Corporation ("MCA Realty") is a Michigan corporation that was incorporated in 1993 and was acquired by MCA Financial on January 31, 1995. MCA Realty is engaged in the purchase and sale of residential real estate. - Mortgage Corporation of America, Inc. ("MCA-Ohio") is an Ohio Corporation that was incorporated in 1993 and has conducted a mortgage banking business, emphasizing non-conforming loans, since that date. It was known as Charter 1st Mortgage Banc, Inc. from May 1993 until July 1995 when it was acquired by MCA. As of January 31, 1997, the Company operated 30 offices in the states of Michigan, Illinois, Indiana, Kentucky, Ohio, Florida, North Carolina and California which are engaged in mortgage and land contract origination. The Company's principal executive offices are located at 23999 Northwestern Highway, Southfield, Michigan 48075, and its telephone number is (248) 358-5555. <PAGE> 6 THE OFFERING Securities Offered: $10,000,000 of 11% Subordinated Debentures, Series 1997, Due June 1, 2003. The Series 1997 Debentures are subordinated unsecured obligations of the Company. The minimum subscription amount which the Company will accept in this offering is $1,000. Redemption: The Series 1997 Debentures are redeemable prior to maturity, at the option of the Company, on or after June 1, 1999, in whole or in part, at the prices set forth herein, plus accrued interest to the date of redemption. Such redemption is subject to the payment of or receipt of waivers from all Senior Indebtedness of the Company and is subject to the Company's financial ability to engage in such a redemption. In addition, commencing March 1, 1999, an individual Holder may request the Company to redeem up to $25,000 of Series 1997 Debentures per year, with priority given to requests made on behalf of deceased Holders, but only up to an aggregate of $100,000 per calendar year for all Holders. See "Description of Series 1997 Debentures - Right of Redemption." Subordination: The Series 1997 Debentures are subordinated in right of payment to all Senior Indebtedness of MCA Financial, which as of the date hereof totalled approximately $35.2 million, and will rank on an equal basis with the Company's outstanding 1994 Debentures and 1996 Debentures (except insofar as the 1994 Debentures are secured by specific collateral), of which as of the date hereof, there were outstanding $13.0 million in principal amount. As of the date hereof, the Company's subsidiaries had outstanding indebtedness which totalled approximately $105.5 million, which the Company has guaranteed. There are no limitations on the amount of Senior Indebtedness that may be issued or incurred in the future and since the Company is a holding company, its rights and, indirectly, the rights of the holders of the Series 1997 Debentures, to participate in any distribution of assets of its subsidiaries will be limited. See "Description of Series 1997 Debentures - Subordination." Acceleration: If an Event of Default occurs, then the Trustee or Holders of not less than 25% in principal amount of the Series 1997 Debentures may declare the principal of all Series 1997 Debentures immediately due and payable. Such acceleration would be subject to the payment of or receipt of waivers from all Senior Indebtedness of the Company and is subject to the Company's financial ability to comply with such obligation. See "Description of Series 1997 Debentures - Event of Default; - Subordination." Consolidation: The Company may not consolidate with, merge with or transfer all or substantially all of its assets to another entity unless such other entity assumes the Company's 2 <PAGE> 7 obligations under the Indenture, regardless of whether the transaction is a leveraged buyout initiated or supported by the Company, its management or any of their affiliates. Neither the Company nor the Trustee has the right to waive this covenant. See "Description of Series 1997 Debentures - Consolidation, Merger or Transfer." Trading Market: No market exists at the present time for the Series 1997 Debentures and it is likely that no trading market will develop. As a result, investors will remain as investors for a substantial period of time. See "Risk Factors - Limited Market for Series 1997 Debentures." Use of Proceeds: The net proceeds of the Offering will be used by the Company for general corporate purposes, which will include providing advances to its subsidiaries and certain of its affiliates. See "Use of Proceeds." 3 <PAGE> 8 SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth a summary of selected historical financial data of the Company for each of the periods indicated in the five-year period ended January 31, 1997, which were derived from the audited consolidated financial statements of the Company for the periods in the five-year period ended January 31, 1997. The audited consolidated financial statements of the Company for each of the periods in the three-year period ended January 31, 1997 are included elsewhere in this Prospectus. This table should be read in conjunction with such consolidated financial statements of the Company and the notes thereto. <TABLE> <CAPTION> YEAR ENDED JANUARY 31, ---------------------------------------------------------------- 1997 1996 1995(1) 1994 1993 ---- ---- ------- ----- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> INCOME DATA: Revenues $58,926 $41,951 $33,371 $29,534 $14,393 Expenses 57,522 40,823 33,547 28,562 13,477 Income (loss) before federal income taxes 1,404 1,128 (176) 972 916 Net income (loss) 765 616 (278) 551 586 Net income (loss) per share 0.59 0.30 (1.80) 0.98 2.01 Ratio of earnings to fixed charges(2) Historical 1.11x 1.13x n/a 1.20x 1.82x Pro forma(3) 1.01x 1.01x n/a n/a n/a Earnings (deficiency of earnings) over fixed charges 1,404 1,128 (176) 972 916 BALANCE SHEET DATA: Mortgages held for resale $54,430 $63,306 $15,702 $39,250 $14,084 Total assets 144,992 135,191 77,112 76,845 28,632 Notes payable(4) 83,975 86,598 44,843 54,549 13,824 11% Subordinated Debentures due 1997(5) 4,921 4,921 4,938 4,938 3,171 11% Subordinated Debentures due 2000 10,000 4,253 -- -- -- 11% Subordinated Debentures due 2002 621 -- -- -- -- 10% Subordinated Notes due 2006 15,000 -- -- -- -- Total liabilities 134,087 125,030 67,822 67,982 23,460 Redeemable common stock(6) 256 -- -- 300 300 Stockholders' equity 10,649 10,161 9,290 8,563 4,872 OPERATING DATA: Loan production-- Number of loans originated 10,107 7,928 8,224 8,910 2,448 Average loan balance $80 $80 $69 $77 $83 Total loans originated $809,756 $632,281 $564,235 $687,484 $203,087 Number of full-time employees 433 412 336 448 202 </TABLE> - ----------- (1) On July 19, 1994, the Company purchased substantially all of the revenue producing activities of Liberty National Mortgage Corporation. See Note 15 of Notes to Consolidated Financial Statements. (2) The ratio of earnings to fixed charges was computed by dividing (a) net income (loss) for the period plus fixed charges by (b) fixed charges, which consist of interest expense, amortization of debt expense and that portion of rentals that represents interest. The ratio of earnings over fixed charges and preferred dividends was 1.12x, 1.12x, 1.19x, and 1.79x for the years ended January 31, 1997, 1996, 1994, and 1993, respectively. Earnings were insufficient to cover fixed charges for the year ended January 31, 1995. The deficiency of earnings over fixed charges and preferred dividends was $0.6 million for the year ended January 31, 1995. (3) The pro forma data reflects interest expense on the Series 1997 Debentures, assuming all such debentures are sold, and reflects the amortization of debt issuance costs over a five-year period using the interest method. (4) See Note 3 of Notes to Consolidated Financial Statements. (5) The Subordinated Debentures due 1997 were redeemed in full as of March 17, 1997. (6) See Note 5 of Notes to Consolidated Financial Statements. 4 <PAGE> 9
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000881655_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000881655_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b2a3c95ced9df24a80ec455e7b4655bedc1c0e39
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000881655_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION, SHARE AND PER SHARE DATA IN THIS PROSPECTUS: (I) GIVE EFFECT TO AN EXCHANGE OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE ("COMMON STOCK"), IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY, EFFECTIVE AS OF JANUARY 1, 1996; (II) GIVE EFFECT TO A 13.5 FOR 1 STOCK SPLIT CONSUMMATED ON MAY 31, 1996; AND (III) EXCLUDE 1,388,578 SHARES OF COMMON STOCK OF THE COMPANY ISSUABLE UPON EXERCISE OF OUTSTANDING WARRANTS AND STOCK OPTIONS. AS USED IN THIS PROSPECTUS, THE TERMS "COMPANY" AND "AMERICAN DISPOSAL SERVICES" REFER COLLECTIVELY TO AMERICAN DISPOSAL SERVICES, INC. AND ITS SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE COMPANY American Disposal Services is a regional, integrated, non-hazardous solid waste services company that provides solid waste collection, transfer and disposal services primarily in the Midwest and in the Northeast. The Company owns six solid waste landfills and owns, operates or has exclusive contracts to receive waste from 13 transfer stations. The Company's landfills and transfer stations are supported by its collection operations, which currently serve over 226,000 residential, commercial and industrial customers. The Company has adopted an acquisition-based growth strategy and intends to continue its expansion, generally in its existing and proximate markets. Since January 1993, the Company has acquired 41 solid waste businesses, including five solid waste landfills and 36 solid waste collection companies. The Company began its operations in the Midwest and currently has operations in Arkansas, Connecticut, Illinois, Indiana, Kansas, Massachusetts, Missouri, Ohio, Oklahoma, Pennsylvania and Rhode Island. The Company's principal growth strategy is to identify and acquire solid waste landfills located in markets that are within approximately 125 miles of significant metropolitan centers and to secure dedicated waste streams for such landfills by acquisition or development of transfer stations and acquisition of collection companies. The Company expects the current consolidation trends in the solid waste industry to continue as many independent landfill and collection operators lack the capital resources, management skills and technical expertise necessary to operate in compliance with increasingly stringent environmental and other governmental regulations. Further, several of the national waste management companies have announced their intention to focus on their core markets and have recently begun to divest certain of their non-core solid waste assets, which should present the Company with additional acquisition opportunities. Due in part to these trends, the Company believes that significant opportunities exist to expand and further integrate its operations in each of its existing markets. The Company's operating program generally involves a four-step process: (i) acquiring solid waste landfills in its target markets; (ii) securing captive waste streams for its landfills through the acquisition or development of transfer stations serving those markets, through acquisitions of collection companies and by entering into long-term contracts directly with customers or collection companies; (iii) making "tuck-in" acquisitions of collection companies to further penetrate its target markets; and (iv) integrating these businesses into the Company's operations to achieve operating efficiencies and economies of scale. As part of its acquisition program, the Company has, and in the future may, as specific opportunities arise, evaluate and pursue acquisitions in the solid waste collection and disposal industry that do not strictly conform to the Company's four-step operating program. The implementation of the Company's operating program is substantially complete in its Missouri and Ohio regions. In the Missouri region (which also includes Arkansas, Kansas and Oklahoma), the Company has acquired one landfill and 15 collection companies and has acquired, developed or secured exclusive contracts with six transfer stations. In the Ohio region, the Company has completed the acquisition of one landfill and 12 collection companies and has acquired, developed or secured exclusive contracts with four transfer stations. The Company is in the second phase of its operating program in its Illinois, western Pennsylvania and Rhode Island regions, as well as in the southwestern Indiana region, where the Company began its operations in April 1997. The Company's operating strategy emphasizes the integration of its solid waste collection and disposal operations and the internalization of waste collected. One of the Company's goals is for its captive waste streams (which include the Company's collection operations and third-party haulers operating under long-term collection contracts) to provide in excess of 50% of the volume of solid waste disposed of at each of its landfills. During the year ended December 31, 1996, the Company's captive waste constituted an average of approximately 61% of the solid waste disposed of at its landfills. The Company plans to continue to pursue its acquisition-based growth strategy to increase the internalization of waste collected and expand its presence in its existing and proximate markets. The Company's principal executive offices are located at 745 McClintock Drive, Suite 305, Burr Ridge, Illinois 60521, and its telephone number is (630) 655-1105. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT) <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- <S> <C> <C> <C> <C> <C> 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- <CAPTION> (UNAUDITED) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................................................... $ 18,517 $ 30,004 $ 56,804 $ 11,724 $ 18,511 Cost of operations......................................... 12,647 17,286 30,376 6,108 9,892 Selling, general and administrative expenses............... 4,910 5,882 8,328 1,935 2,685 Depreciation and amortization expense...................... 3,226 6,308 12,334 2,718 3,784 --------- --------- --------- --------- --------- Operating income (loss).................................... (2,266) 528 5,766 963 2,150 Interest expense........................................... (1,497) (3,030) (5,745) (1,539) (1,552) Interest income............................................ 2 189 260 -- -- Other income, net.......................................... -- -- 179 -- 21 --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary item... (3,761) (2,313) 460 (576) 619 Income tax benefit (expense)............................... 1,372 (332) (245) 160 (173) --------- --------- --------- --------- --------- Income (loss) before extraordinary item.................... (2,389) (2,645) 215 (416) 446 Extraordinary item -- loss on early retirement of debt..... -- (908) (476) -- -- --------- --------- --------- --------- --------- Net income (loss).......................................... (2,389) (3,553) (261) (416) 446 Preferred stock dividend................................... -- (190) (109) (63) -- --------- --------- --------- --------- --------- Net income (loss) to common stockholders................... $ (2,389) $ (3,743) $ (370) $ (479) $ 446 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- OTHER DATA: Net cash provided by (used in) operating activities........ $ (1,124) $ 5,601 $ 11,705 $ 1,960 $ 1,326 Net cash used in investing activities...................... (6,180) (68,374) (39,032) (2,674) (40,197) Net cash provided by financing activities.................. 5,718 68,608 23,245 881 38,519 EBITDA(1).................................................. 960 6,836 18,100 3,681 5,934 EBITDA margin(2)........................................... 5.2% 22.8% 31.9% 31.4% 32.1% </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT) <TABLE> <CAPTION> MARCH 31, 1997 ------------------------- <S> <C> <C> <C> AS ADJUSTED DECEMBER 31, 1996 ACTUAL (3) ----------------- --------- -------------- BALANCE SHEET DATA: Cash and cash equivalents.......................................... $ 2,301 $ 1,949 $ 1,949 Working capital.................................................... 1,219 772 772 Property and equipment, net........................................ 93,692 117,471 117,471 Total assets....................................................... 144,986 186,517 186,517 Long-term obligations, net of current portion...................... 65,445 100,511 29,751 Total stockholders' equity......................................... 58,097 58,543 129,303 </TABLE> - ------------------------ (1) EBITDA represents operating income plus depreciation and amortization. While EBITDA data should not be construed as a substitute for operating income, net income (loss) or cash flows from operations in analyzing the Company's operating performance, financial position and cash flows, the Company has included EBITDA data (which are not a measure of financial performance under generally accepted accounting principles) because it understands that such data are commonly used by certain investors to evaluate a company's performance in the solid waste industry. EBITDA, as measured by the Company, might not be comparable to similarly titled measures reported by other companies. Funds depicted by the EBITDA measure are not available for management's discretionary use due to required debt service and other commitments or uncertainties. (2) EBITDA margin represents EBITDA expressed as a percentage of revenues. (3) Adjusted to reflect the sale of 4,600,000 shares of Common Stock on May 13, 1997 and the application of the net proceeds thereof.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000882074_panaco-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000882074_panaco-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..537a5c1a62ac4eb6234fa554d10c6457ae0b85db
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000882074_panaco-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, references in this Prospectus to the "Company" shall mean PANACO, Inc. and its predecessors. An investment in the Common Shares offered hereby involves a high degree of risk. Investors should carefully consider the information set forth under the heading "Risk Factors". See "Glossary of Selected Oil and Gas Terms" for the definitions of certain terms used in this Prospectus. The Company PANACO, INC. (the "Company") is a Delaware corporation, incorporated October 4, 1991. When used herein the word "Company" includes its predecessor Pan Petroleum MLP, which merged into the Company on September 1, 1992. The Company is in the oil and gas business, acquiring, developing and operating offshore oil and gas properties in the Gulf of Mexico. Including the recently acquired Amoco Properties (as defined herein) and excluding the Bayou Sorrel Field (as defined herein) which was recently sold, the Company owned oil and gas properties containing, as of December 31,1996, Proved Reserves of 2,169,000 Bbls of oil and 51,412,000 Mcf of gas. The SEC 10 Value of such Proved Reserves as of December 31, 1996 was $139,946,000. See "Risk Factors -Estimates of Reserves and Future Net Revenue." The Company operates 52 offshore wells and owns interests in 71 offshore wells operated by others. It operates nine of the twenty-five offshore blocks in which it owns an interest. In addition the Company owns and operates some onshore properties which generate less than 4% of its revenues. For a description of the properties owned and the activities conducted by the Company, see "The Company" and "Property." Common Shares are quoted on the NASDAQ-National Market under the symbol "PANA". The Company's Board of Directors consists of nine persons, three of which are employees of the Company. See "Management - Officers and Directors." The Company's headquarters are located at 1050 West Blue Ridge Boulevard, PANACO Building, Kansas City, Missouri 64145-1216, and its telephone number at such offices is (816)942-6300, FAX (816) 942-6305. The Houston office is located at 1100 Louisiana, Suite 5110, Houston, Texas 77002-5220, and the telephone number is (713) 652-5110, FAX (713) 651-0928. Business Strategy The Company's objective is to enhance shareholder value through sustained growth in its reserve base, production levels and resulting cash flows from operations. In pursuing this objective, the Company maintains a geographic focus in the Gulf of Mexico and identifies properties that may be acquired preferably through negotiated transactions or, if necessary, sealed bid transactions. The properties the Company seeks to acquire generally are geologically complex, with multiple reservoirs, have an established production history and are candidates for exploitation. Geologically complex fields with multiple reservoirs are fields in which there are multiple reservoirs at different depths and wells which penetrate more than one reservoir that have the potential for recompletion in more than one reservoir. Once properties are acquired, the Company focuses on reducing operating costs and implementing production enhancements through the application of technologically advanced production and recompletion techniques. Over the past five years, the Company has taken advantage of opportunities to acquire interests in a number of producing properties which fit these criteria. Recent Developments Amoco Acquisition On October 8, 1996, the Company closed on its acquisition of interests in six offshore fields from Amoco Production Company for $40.4 million (the "Amoco Acquisition"). In consideration for such interests, the Company issued Amoco 2,000,000 Common Shares and paid the sum of $32 million in cash. The interests acquired include (1) a 33.3% working interest in the East Breaks 160 Field (2 Blocks) and a 33.3% interest in the High Island 302 Field, both operated by Unocal Corporation; (2) an average 50% interest in the High Island 309 Field (2 Blocks), a 12% interest in the High Island 330 Field (3 Blocks) and a 12% interest in the High Island 474 Field (4 Blocks), all operated by Phillips Petroleum Company; and (3) a 12.5% interest in the West Cameron 180 Field (1 Block) operated by Texaco (collectively the "Amoco Properties"). Current production, for the interests acquired, is 698 barrels of oil per day and 13.4 MMcf of natural gas per day. See "Amoco Acquisition." Explosion and Fire The Company experienced an explosion and fire on April 24, 1996 at Tank Battery #3 in West Delta resulting in the fields being shut-in from April 24th, until resumption of production on October 7, 1996. The loss of 67 days of production in the second quarter and the entire third quarter resulted in lost revenues of approximately $6 million. The fire was the principal contributor to the losses of $.08 per share for the second quarter of 1996 and $.11 per share for the third quarter of 1996. During the second quarter the Company expensed $500,000 for its loss as a result of this explosion. No further losses have been recognized or are anticipated. This $500,000 amount included $225,000 in deductibles under the Company's insurance. The Company has spent $8.5 million on Tank Battery #3 inclusive of the $500,000 expensed during second quarter and has received reimbursement from its insurance company of $3.9 million, after satisfaction of the $225,000 in deductibles. The excess of expenditures over insurance reimbursement will be capitalized. No additional expenditures have been made or are anticipated. The Company is considering filing suits against the employers of the persons who caused the incidents for recovery of these costs and its lost profits. No assurance can be given that the Company will successfully recover any amounts sought in any such suits. Sale of Bayou Sorrel Effective September 1, 1996 the Company sold its interest in the Bayou Sorrel oil and gas field ( the "Bayou Sorrel Field") to National Energy Group, Inc. for $11 million. The Company received $9 million in cash and 477,612 shares of National Energy Group, Inc. common stock, which were valued at $2 million as of the closing date . The Company also retained a 3% overriding royalty interest in the deep rights of the field below 11,000 feet. <TABLE> <CAPTION> The Offering <S> <C> Common Shares offered by the Company................................. 4,500,000 shares minimum (a) 6,000,000 shares maximum (a) Common Shares offered by the Selling Shareholders............... 1,802,479 shares minimum 2,403,305 shares maximum Common Shares offered hereby......................................... 6,302,479 shares minimum (a) 8,403,305 shares maximum (a) Common Shares to be outstanding after this Offering............... 18,850,255 shares minimum (a)(b) 20,350,255 shares maximum (a)(b) Use of Proceeds......................................................For repayment of existing long term debt, development of existing oil and gas properties and acquisition of additional oil and gas properties. The Offering.........................................................This Offering will terminate on March 16, 1997 (the "Offering Termination Date"). Pending receipt of subscriptions for at least 6,302,479, each prospective investor's payment for Common Shares will be deposited in a segregated escrow account with U.S. Trust Company of New York, as escrow agent. If the Company does not receive subscriptions for at least 6,302,479 Common Shares by the Offering Termination Date, subscription proceeds will be returned to investors without interest or penalty. NASDAQ National Market Symbol........................................PANA.. </TABLE> (a) If less than the maximum number of Common Shares offered hereby are sold, then the individual number of shares offered by Company and the Selling Shareholders shall be reduced pro-rata, but in no event below the aggregate minimum offering amount. (b) Excludes 289,365 Common Shares issuable upon the exercise of outstanding warrants, 2,060,606 issuable upon the conversion of the Tranche A Convertible Subordinated Notes, and up to 600,000 Common Shares which would be issuable upon the exercise of warrants to be issued to the Underwriters should all of the Common Shares offered hereby be sold. Summary Financial Data The following table sets forth summaries of certain selected historical financial and reserve information for the Company as of the dates and for the periods indicated. Effective December 31, 1995, the Company changed its method of accounting for oil and gas operations from the full cost method to the successful efforts method. Prior periods have been restated to give effect to this change. Future results may vary significantly from the amounts reflected in the information set forth hereafter because of, among other reasons, normal production declines, acquisitions, and changes in the price of oil and gas. See "Risk Factors - Estimates of Reserves and Future Net Revenues" and "Risk Factors - - General Market Conditions." <TABLE> <CAPTION> As of and For the Nine Months As of and For the Year Ended September 30, Ended December 31, (unaudited) 1996(a) 1995 1995 1994 1993 Operations Data <S> <C> <C> <C> <C> <C> Oil & Gas Sales............... $ 13,257,000 13,660,000 18,447,000 17,338,000 12,605,000 Exploration Expenses.......... 0 2,174,000 8,112,000 0 0 Provision for losses and (gains) on disposition of and write-down of asset....... 0 0 751,000 1,202,000 3,824,000 Depletion, depreciation & amortization.......... 4,981,000 6,277,000 8,064,000 6,038,000 4,288,000 Net income (loss)............. (618,000) (2,492,000) (9,290,000) 1,115,000 (3,986,000) Net Income (loss) per share (0.05) (.21) (.81) .11 (.53) Balance Sheet Data Oil and gas properties, net... $ 20,489,000 21,515,000 29,485,000 23,945,000 19,183,000 Total assets.................. 44,444,000 26,795,000 36,169,000 29,095,000 24,432,000 Long-term debt................ 25,137,000 8,865,000 22,390,000 12,500,000 12,465,000 Stockholders' equity.......... 10,498,000 15,335,000 9,174,000 14,882,000 8,744,000 Book value per share.......... $ .85 1.38 .80 1.46 1.07 Oil and Gas Data Production: Oil and condensates (Bbls)....... 203,000 122,000 170,000 137,000 180,000 Gas (Mcf)..................... 4,590,000 7,578,000 9,850,000 8,139,000 5,586,000 Estimated Proved Reserves: Oil and condensates (Bbls)(c).... 2,169,000 --- 900,000 943,000 745,000 Gas (Mcf)(c).................. 51,412,000 --- 46,711,000 41,582,000 43,696,000 SEC 10 Value(c)..................$ 139,946,000 --- 72,432,000 47,159,000 58,185,000 </TABLE> (a) Results for the period ended September 30, 1996, were substantially affected by the explosion and fire. See "Recent Explosion and Fire". Such results include the results of operations through August 31 for the Bayou Sorrel Field, which the Company sold effective September 1. (b) Funds provided by operations is revenues less lease operating expenses and production and ad valorem taxes. (c)Reserve information was not prepared as of September 30, 1996 and 1995. Information shown is from a reserve report prepared by the Company as of December 31, 1996, which includes the recent effect of the Amoco Acquisition and excludes the Bayou Sorrel Field, which was recently sold. Reserve reports have not yet been prepared as of December 31, 1996 by independent petroleum engineers. The reserve information for the years ended December 31, 1995, 1994 and 1993 was derived by the Company from reports prepared by the Company's independent petroleum engineers. See "Risk Factors - Estimates of Reserves and Future Net Reserves."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000883946_treev-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000883946_treev-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..82853f42263383c10f225406edfe27571d85bf84
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000883946_treev-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." Unless otherwise indicated, all information in this Prospectus regarding stock ownership and voting power of the Company's Common Stock is as of November 13, 1997. THE COMPANY Network Imaging Corporation ("Network Imaging" or the "Company") provides software products supporting storage, management and distribution. These products provide businesses and government organizations with an automated method of electronically storing, managing and distributing large volumes of structured data (text) and unstructured data (diagrams, documents, photos, voice and full-motion video). The Company is a leader in content and storage management for all unstructured information. Its flagship product, the 1View suite, manages the storage, access and distribution of any multimedia (or unstructured) data, such as diagrams, documents, photographs, voice, and full-motion video. 1View is a unique solution for use in distributed, high transaction, high volume mission critical applications across legacy, client/server and Internet/intranet based environments. The Company is also a software developer for mainframe and PC based Computer Output to Laser Disk ("COLD") systems and a developer and marketer of storage management software systems. 1View, InfoAccess(TM), Treev+(TM) and the Company logo are trademarks of Network Imaging Corporation. All other product and brand names are trademarks or registered trademarks of their respective companies. The Company's executive offices are located at 500 Huntmar Park Drive, Herndon, Virginia 20170. The Company's telephone number is (703) 478-2260. SUMMARY FINANCIAL DATA (in thousands, except per share data) STATEMENT OF OPERATIONS DATA Quarter Ended --------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, 1995 1995 1995 1995 Net revenue $ 12,791 $ 16,042 $ 20,270 $ 20,048 Costs and expenses: Costs of revenue 8,103 7,995 12,811 13,555 Product development 1,536 1,448 1,972 2,176 Selling, general and administration 7,048 7,473 10,777 10,247 Settlement with stockholders -- -- 892 750 Gain (loss) on closure and sale of subsidiaries, net -- (147) 9,906 (492) Restructuring costs (396) (946) (286) 195 <PAGE> STATEMENT OF OPERATIONS DATA Quarter Ended -------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, 1995 1995 1995 1995 (Loss) before interest income and income taxes (3,500) 219 (15,802) (6,383) Interest income (expense), net 17 318 (167) 55 (Loss) before income taxes (3,483) 537 (15,969) (6,328) Income tax (benefit) expense (256) 157 72 (253) Net income (loss) (3,227) 380 (16,041) (6,075) Preferred stock preferences (6,874) (1,020) (1,020) (1,020) ======== ======== ======== ======== Net loss applicable to common shares $(10,101) $ (640) $(17,061) $ (7,095) ======== ======== ======== ======== Net loss per common share $ (0.60) $ (0.05) $ (1.25) $ (0.52) ======== ======== ======== ======== Weighted average shares outstanding 16,945 13,780 13,628 13,628 STATEMENT OF OPERATIONS DATA Quarter Ended --------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, 1996 1996 1996 1996 Net revenue $ 10,428 $ 9,379 $ 9,129 $ 10,542 Costs and expenses: Costs of revenue 5,594 5,536 6,838 7,244 Product development 1,401 1,410 1,327 1,734 Selling, general and administration 5,520 5,379 7,453 6,394 Exchange fee and gain on sale of asset, net -- -- -- 619 Loss on closure and sale of subsidiaries, net -- 921 -- -- Restructuring costs -- -- (19) (156) -------- -------- -------- -------- (Loss) before interest income and income taxes (2,087) (3,867) (6,470) (5,293) Interest income (expense), net 121 41 87 59 -------- -------- -------- -------- (Loss) before income taxes (1,996) (3,826) (6,383) (5,234) Income tax (benefit) expense 21 (77) (114) 102 -------- -------- -------- -------- Net (loss) (1,987) (3,749) (6,269) (5,336) Preferred stock preferences (981) (865) (865) (1,020) ======== ======== ======== ======== Net loss applicable to common shares $ (2,968) $ (4,614) $ (7,134) $ (6,356) ======== ======== ======== ======== Net loss per common share $ (0.13) $ (0.22) $ (0.35) $ (0.34) ======== ======== ======== ======== Weighted average shares outstanding 22,470 21,113 20,209 18,911 STATEMENT OF OPERATIONS DATA Quarter Ended, ---------------------------------------- September 30, June 30, Mar. 31, 1997 1997 1997 Net revenue $ 9,944 $ 9,334 $ 9,119 Costs and expenses: Costs of revenue 6,450 6,132 5,840 Product development 1,142 1,266 1,042 Selling, general and administration 5,298 5,329 5,223 Gain from extinguishment of debt -- -- (267) -------- -------- -------- Loss before interest income and income taxes (2,946 (3,393) (2,719) Interest income (expense), net (130) (64) 31 -------- -------- -------- Loss before income taxes (3,076) (3,457) (2,688) Income tax (benefit) expense (142) 61 (6) -------- -------- -------- Net loss (2,934) (3,518) (2,682) Preferred stock preferences (1,704) (930) (976) ======== ======== ======== Net loss applicable to common shares $ (4,638) $ (4,448) $ (3,658) ======== ======== ======== Net loss per common share $ (0.18) $ (0.18) $ (0.15) ======== ======== ======== Weighted average shares outstanding 25,437 24,964 24,464 CERTAIN FORWARD-LOOKING STATEMENTS This Prospectus contains or may contain certain forward-looking statements and information as well as estimates and assumptions made by the Company's management. When used in this Prospectus, words such as "anticipate," "believe," "estimate," "expect," "future," "intend," "plan" and similar expressions, as they relate to the Company or the Company's management, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, shifts in market demand, the timing of product releases, economic conditions in foreign countries, competitive products and pricing and other risks and uncertainties including, in addition to any uncertainties specifically identified in the text surrounding such statements, uncertainties with respect to changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's stockholders, customers, suppliers, business partners, competitors, and legislative, regulatory, judicial and other governmental authorities and officials. Should one or more of these risks or uncertainties materialize, or should the underlying estimates or assumptions prove incorrect, actual results or outcomes may vary significantly from those anticipated, believed, estimated, expected, intended or planned.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000884319_ero-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000884319_ero-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000884319_ero-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000885259_transkaryo_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000885259_transkaryo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6dd12dd3787c327b11a588ace7d6f68dd7ae1ffd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000885259_transkaryo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," and financial statements appearing elsewhere in this Prospectus. All references herein, unless the context otherwise requires, to the "Company" or "TKT" refer to Transkaryotic Therapies, Inc. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Transkaryotic Therapies, Inc. ("TKT" or the "Company") has developed two proprietary technology platforms, Gene Activation and gene therapy. The Company's Gene Activation technology is a proprietary approach to the large scale production of therapeutic proteins which does not require the cloning of genes and their subsequent insertion into nonhuman cell lines. Consequently, the Company believes its Gene Activation technology avoids using patented approaches to protein production associated with such conventional genetic engineering which have served as effective barriers to competition in the $11 billion therapeutic protein market. As a result, the Company believes it will be able to develop and successfully commercialize a broad range of Gene Activated versions of proteins which have proven medical utility, received marketing approval from regulatory authorities and generated significant revenues in major markets. The Company's most advanced Gene Activation development program is for the production of Gene Activated erythropoietin ("GA-EPO"), for which Hoechst Marion Roussel, Inc. ("HMRI"), the Company's collaborative partner, filed an Investigational New Drug application ("IND") in May 1997. In April 1997, Amgen Inc. filed a civil action in the U.S. District Court in Massachusetts against the Company and HMRI. The complaint in the action alleges that GA-EPO and processes for producing GA-EPO infringe Amgen's U.S. Patent Numbers 5,547,933, 5,618,698, and 5,621,080 and requests that TKT and HMRI be enjoined from making, using, or selling GA-EPO and that the court award Amgen monetary damages. In May 1997, TKT and HMRI filed a "Motion To Dismiss, Or, In The Alternative, For Summary Judgment" stating that under 35 U.S.C. sec. 271(e)(1), TKT's and HMRI's activities do not constitute patent infringement and further stating that "(n)either the product created by TKT nor the process used by TKT and HMR infringes any valid claim of any of the Amgen patents in suit." In July 1997, the court denied TKT's and HMRI's motion and stated that the motion instead should be refiled as a Motion for Summary Judgment. The Company can provide no assurance as to the outcome of this litigation. A decision by the court in Amgen's favor, including the issuance of an injunction against the making, use or sale of GA-EPO by the Company and HMRI in the United States, or any other conclusion of the litigation in a manner adverse to the Company and HMRI, would have a material adverse effect on the Company's business, financial condition, and results of operations. The Company's gene therapy technology ("Transkaryotic Therapy") is a non-viral, ex vivo system based on the genetic modification of a patient's cells to produce and deliver therapeutic proteins for extended periods of time. The Company's Transkaryotic Therapy system has produced target proteins at therapeutic levels for the lifetime of animals without any side effects and preliminary clinical testing suggests that the system appears to be well-tolerated. TKT believes that its proprietary Gene Activation technology represents a new wave in the evolution of protein production technology. Gene Activation is based on the observation that essentially all human cells contain genes encoding commercially valuable proteins, but that these genes are generally "turned off" in most cells. As opposed to conventional protein production technology based on the cloning of human genes and their subsequent insertion into bacteria, yeast or mammalian cells, Gene Activation bypasses the genetic "off switch" in the human cell with DNA sequences including an "on switch" that allows the human gene to express the desired protein in its natural setting. These Gene Activated human cells are then grown in large numbers, and the protein of interest is harvested, purified and readied for administration. The Company has successfully applied its Gene Activation technology to the production of GA-EPO and has demonstrated that the properties of cells generated by Gene Activation are predictable and sufficient for scale-up to commercial production levels and that the protein produced by these cells has the expected structural and functional characteristics based on naturally produced erythropoietin. In June 1997, TKT received a broad Gene Activation patent (U.S. Patent Number 5,641,670) covering cells modified by Gene Activation to produce essentially any protein, with more than fifty proteins of therapeutic interest in the claims. In order to rapidly develop and exploit its Gene Activation technology, TKT has entered into two strategic alliances with HMRI, the first in May 1994 and the second in March 1995. HMRI and its pharmaceutical affiliates is one of the largest pharmaceutical groups in the world with significant distribution capabilities in all major markets. The alliances are focused on the development of two products, GA-EPO, a protein hormone which is expected to compete in the $2.9 billion (1995) worldwide market for erythropoietin, and a second, undisclosed protein. In June 1997, HMRI accepted for development the Gene Activated cell line for this second protein. Under the terms of the alliances, if both products are successfully developed, TKT has the potential to receive a total of $125 million in license fees, equity investments, milestone payments and research funding from HMRI. To date, TKT has received a total of $54 million from HMRI in connection with these two alliances, consisting of $20 million in license fees, $20 million in equity investments, $7 million in research funding and $7 million in milestone payments. Under the terms of the agreements, HMRI is responsible for all worldwide development, manufacturing and marketing. TKT has the potential to receive a royalty based on net sales of these two products worldwide. The Company believes that working with Gene Activated proteins having conventional counterparts that are well known to regulatory authorities may allow their clinical development to be accomplished in a focused and timely manner. The Company's gene therapy technology is focused on the commercialization of non-viral gene therapy products for the long-term treatment of a broad range of human diseases. In Transkaryotic Therapy, a small sample of the patient's cells are removed in an out-patient procedure and sent to the Company's pilot manufacturing facility where the cells are genetically engineered to produce the desired therapeutic protein. In Transkaryotic Therapy, DNA is inserted into cells using physical or chemical techniques rather than viruses or other infectious agents. After the cells and the protein have been tested by TKT to ensure both safety and functionality, an appropriate number of the genetically-engineered cells are returned to the physician and injected back into the patient. TKT believes that the entire process will require approximately six weeks to complete, after which the patient should be capable of producing his or her own supply of the therapeutic protein for an extended period of time. TKT believes that its Transkaryotic Therapy gene therapy system is broadly enabling and well-suited to the treatment of chronic protein deficiency states such as hemophilia, diabetes, and hypercholesterolemia. The potential benefits of Transkaryotic Therapy include improved therapeutic outcomes, the elimination of frequent and painful injections and attendant patient compliance problems, a reduction in side effects associated with over and underdosing of proteins, and significant reductions in the total cost of therapy. Preliminary data from an initial Phase I safety study of genetically modified cells indicate that the therapy appears to be well-tolerated. The Company has successfully applied its gene therapy approach in a variety of model systems, using a number of different cell types to express a variety of therapeutically useful proteins. Cells engineered by the Company retain their normal properties, are stably transfected at efficiencies adequate for commercial application, express the proteins of interest at therapeutic levels with natural post-translational modifications, and have delivered the therapeutic protein of interest for the lifetime of experimental animals. The Company is conducting a preclinical program of its Transkaryotic Therapy product for the treatment of both Hemophilia A, based on the production and delivery of coagulation Factor VIII, and for Fabry's disease, a lysosomal storage disorder, based on the production and delivery of the enzyme a-galactosidase. In January 1997, the Company initiated a Phase I trial of the protein lacking in Fabry disease. The Company anticipates that it will file INDs to commence gene therapy clinical trials for both Fabry disease and Hemophilia A in 1997. The Company's initial business strategy is to apply its Gene Activation technology to the development and commercialization of several currently marketed proteins. The Company's two strategic alliances with HMRI are the primary focus of its Gene Activation activities, and TKT is actively pursuing additional Gene Activation product candidates for commercialization either with pharmaceutical partners or independently. In parallel, the Company plans to continue research and development of its Transkaryotic Therapy system to develop a novel class of gene therapy treatments for a variety of protein deficiency diseases. Taken together, the Company believes its Gene Activation and gene therapy platforms are complementary opportunities that offer the potential for the development of powerful product pipelines that may have a significant impact in addressing society's healthcare needs. TKT was incorporated in Delaware in 1988. The Company's principal executive offices are located at 195 Albany Street, Cambridge, Massachusetts 02139, and its telephone number is (617) 349-0200. THE OFFERING <TABLE> <S> <C> Common Stock offered......................... 1,600,000 shares Common Stock to be outstanding after the offering................................... 18,295,419 shares(1) Use of Proceeds.............................. Research, preclinical and clinical product development, and other general corporate purposes Nasdaq National Market Symbol................ TKTX </TABLE> - --------------- (1) Excludes (i) 774,354 shares issuable upon exercise of warrants outstanding as of July 23, 1997; (ii) 2,188,062 shares of Common Stock reserved for issuance under the Company's 1993 Long-term Incentive Plan, of which options to purchase 946,277 shares are outstanding as of July 23, 1997; and (iii) 231,429 shares of Common Stock reserved for issuance under the Company's 1993 Non-Employee Director's Stock Option Plan, none of which have been granted as of July 23, 1997. See "Capital Stock -- Warrants" and "Management -- 1993 Long-term Incentive Plan" and Note 8 of Notes to Financial Statements. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, -------------------------------- ------------------- 1994 1995 1996 1996 1997 ------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: License and contract fee revenues..... $10,000 $15,400 $ 4,225 $ 1,838 $ 300 Costs and expenses: Research and development........... 9,126 10,529 14,019 2,905 3,832 General and administrative......... 4,690 3,828 4,729 765 1,402 Interest income, net.................. 394 1,116 2,551 462 1,141 Provision for income taxes............ -- 85 -- -- -- Net income (loss)..................... $(3,422) $ 2,074 $(11,972) $(1,370) $(3,793) Net income (loss) per share (pro forma in 1995 and 1996)(1)............... $ .14 $ (0.81) $ (.10) $ (.23) Shares used in computing net income (loss) per share (pro forma in 1995 and 1996)(1)....................... 14,633 14,723 14,255 16,641 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 -------------------------- ACTUAL AS ADJUSTED(2) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and marketable securities.................. $82,919 $132,768 Working capital................................................... 82,172 132,021 Total assets...................................................... 87,310 137,159 Accumulated deficit............................................... (40,909) (40,909) Total stockholders' equity........................................ 85,982 135,831 </TABLE> - --------------- (1) Computed on the basis described in Note 2 of Notes to Financial Statements. (2) Adjusted to reflect the sale of 1,600,000 shares of Common Stock at an assumed public offering price of $32.50 per share and the application of the net proceeds therefrom.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000885376_orion_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000885376_orion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..92cea36635d040fae81c5b1ce633c74ca2b72f6e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000885376_orion_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, pro forma financial information, and financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, unless the context otherwise requires, "Orion" or the "Company" refers to (1) the combined operations of the registrant's predecessor, Orion Network Systems, Inc., a Delaware corporation that is an existing public company ("Old ONSI"), prior to the Merger and the Exchange (as defined and discussed below under the caption "The Merger and the Exchange"), and (2) the issuer of the Units, a recently-formed Delaware corporation ("New ONSI") that will be the parent company of Old ONSI following the Merger and the Exchange and will be renamed Orion Network Systems, Inc. simultaneously with the closing of this Offering, in each case together with its subsidiaries. Statements contained in this Prospectus regarding Orion's expectations with respect to Orion 2 and Orion 3, related financing, future operations and other information, which can be identified by the use of forward looking terminology, such as "may," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof or other variations thereon or comparable terminology, are forward looking statements. See "Risk Factors" for cautionary statements identifying important factors with respect to such forward looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from results referred to in forward looking statements. There can be no assurance that Orion's expectations regarding any of these matters will be fulfilled. See "Glossary" beginning at page G-1 for certain defined terms and certain technical terms used in this Prospectus. THE COMPANY Orion is a rapidly growing provider of satellite-based communications services, focused primarily on (i) private communications network services, (ii) Internet services and (iii) video distribution and other satellite transmission services. Orion provides multinational corporations with private communications networks designed to carry high speed data, fax, video teleconferencing, voice and other specialized services. The Orion satellite's ubiquitous coverage reaches all locations within its footprint, enabling the delivery of high speed data to customers in emerging markets and remote locations which lack the necessary infrastructure to support these services. The Company also offers high speed Internet access and transmission services to companies outside the United States seeking to avoid "last mile" terrestrial connections and bypass congested regional Internet network routes. In addition, Orion provides satellite capacity for video distribution, satellite news gathering and other satellite services primarily to broadcasters, news organizations and telecommunications service providers. The Company provides its services directly to customer premises using very small aperture terminals ("VSATs"). The Company commenced operations of Orion 1, a high power Ku-band satellite, in January 1995. As of September 30, 1996, Orion serviced 167 customers through 304 points of service. The Company's customers include Amoco Poland Limited, Amway Corporation, AT&T Corp., BBC, British Telecom, CNN, Citibank, N.A., Deere & Co., Global One, GTECH Corporation, Hungarian Broadcasting, News International Limited, RTL Television, Pepsi-Cola International, Sprint Communications, Viacom International Inc., Westinghouse Communications, World Wide Television News and Xerox Corporation, or certain of their subsidiaries. As of September 30, 1996, Orion's contract backlog was $123 million (after pro forma adjustments for the Exchange). Substantially all of Orion's current contracts with customers are denominated in U.S. Dollars. For the three months ended September 1996, the Company generated revenues of $12.2 million and EBITDA (as defined below) of $1.7 million. For the first nine months of 1996, the Company generated revenues of $30.0 million and EBITDA of $0.1 million. The Company owns and operates the Orion 1 satellite, which provides coverage of 34 European countries, much of the United States and parts of Canada, Mexico and North Africa. Through arrangements with local ground operators, Orion currently has the ability to deliver network ser vices to and among points in 27 European countries, portions of the United States and a limited number of Latin American countries. Orion 2, expected to be launched in the second quarter of 1999, will increase significantly the Company's pan-European capacity and provide coverage of Central and South America. Orion 3, expected to be launched in the fourth quarter of 1998, will cover broad areas of the Asia Pacific region including China, Japan, Korea, India, Southeast Asia, Australia, New Zealand, Eastern Russia and Hawaii. In the aggregate, the footprints of Orion 1, Orion 2 and Orion 3 will cover over 85% of the world's population. The Company believes that demand for satellite-based communications services will continue to grow due to (i) the expansion of businesses beyond the limits of wide bandwidth terrestrial infrastructure, (ii) accelerating demand for high speed data services, (iii) growing demand for Internet and intranet services, especially outside the U.S., (iv) increased size and scope of television programming distribution, (v) worldwide deregulation of telecommunications markets and (vi) continuing technological advancements. Satellites are able to provide reliable, high bandwidth services anywhere in their coverage areas and the Company believes that it is well positioned to satisfy market demand for these services. THE ORION STRATEGY Orion's strategy is to maximize its revenues per satellite transponder through the delivery of value-added services to end users. To quickly establish a stable base of revenues, Orion sells transponder capacity to video broadcasters and telecommunications service providers. However, Orion's long-term strategic focus is on value-added private network services, which include network design, VSAT installation, support and monitoring, in addition to basic satellite capacity service. The implementation of Orion's strategy is based on the following elements: o Focus on Specialized Communications Needs of Multinational Organizations o Bridge to Emerging Markets and Remote Locations o End-to-End Service o Global Coverage o Early Market Entry o Local Presence o Ownership of Facilities FOCUS ON SPECIALIZED COMMUNICATIONS NEEDS OF MULTINATIONAL ORGANIZATIONS Orion targets the needs of multinational businesses and governmental customers for customized private network communications services. Advantages of the Company's satellite-based network services include: (i) transmission over wide areas to multiple dispersed sites including sites in emerging markets; (ii) interconnectivity among all sites; (iii) wide bandwidth and high data speeds; (iv) transmission of data, fax, teleconferencing and voice over the same network; (v) high transmission reliability, quality and security; (vi) Internet access; and (vii) rapid implementation, both for the initial installation and for later network modifications. Due to the flexibility of the network, Orion is able to provide companies with customized solutions to link multiple locations. BRIDGE TO EMERGING MARKETS AND REMOTE LOCATIONS Orion targets customers doing business in emerging markets and remote locations of developed markets which often lack the fiber optic and digital infrastructure required for wide bandwidth, high speed data applications. Terrestrial transmissions in many emerging markets must often pass through local, poorly developed network segments before reaching the customer premises, making it difficult to send and receive high speed data. In contrast, Orion's satellite system completely avoids such "bottlenecks" in local network segments by sending and receiving transmissions directly to and from customers, avoiding the need to interconnect with the local infrastruc ture. A significant portion of Orion's private communications network customers transmit high-speed data to and from locations in Central and Eastern Europe. Orion 2 and Orion 3 will extend coverage to the Commonwealth of Independent States, Latin America and the Asia Pacific Region. [Document Contains A Diagram Of An Orion Customer Network Showing Direct Service To Customer Premises.] END-TO-END SERVICE Orion provides its services directly to and among customer locations using satellite transmission and VSATs installed at customer premises. Offering end-to-end services and bypassing terrestrial infrastructure allows Orion to offer higher reliability and higher quality services than some terrestrial facilities by bypassing multiple telecommunications service providers and local networks and avoiding related toll charges. It also permits Orion to install networks more quickly than many of its competitors, who must deal with multiple vendors and multiple communications technologies. Orion offers its customers one-stop shopping. This includes a single point of contact, an all-inclusive contract and consistent quality of service throughout the network. GLOBAL COVERAGE Orion believes that providing global coverage is a competitive advantage in marketing to multinational corporations. Orion 1 covers 34 European countries, much of the U.S. and portions of Canada, Mexico and North Africa. Orion uses capacity leased from other carriers to supplement its network coverage area (such as to areas of Russia and Latin America). Orion estimates that when Orion 2 (with coverage of Europe, Russia, the eastern United States, Latin America, North Africa and the Middle East) and Orion 3 (with coverage of the Asia Pacific region) are deployed, the satellite footprints in the aggregate will cover an area inhabited by over 85% of the world's population. This coverage will enable Orion to offer its customers a single source for service offerings and a greater measure of network quality control than terrestrial alternatives. EARLY MARKET ENTRY Orion develops an early market presence in targeted geographic areas prior to satellite launch in order to build its customer base. To accomplish this, Orion hires sales people, develops relationships with ground operators, and delivers its services using leased satellite capacity. Orion employed this strategy prior to the commercial operation of the Orion 1 satellite and is pursuing the same approach with Orion 2 and Orion 3. For example, the Company is currently providing service in Latin America and Russia over leased satellite capacity. LOCAL PRESENCE Orion has arrangements with 30 local ground operators covering most countries within the Orion 1 footprint, and is entering into additional arrangements as it offers services in new areas. These ground operators are critical to providing integrated service because they obtain necessary licenses, install and maintain the customers' networks, provide in-country business experience and often facilitate market entry. OWNERSHIP OF FACILITIES Orion believes it is strategically important to own its satellite facilities. Orion believes that over the long-term ownership of satellite facilities provides a cost advantage over resellers and other private service providers that must lease satellite capacity to provide services to customers. The Company's satellite ownership enables it to control the quality and reliability of its network solutions, maintain the flexibility to rapidly add capacity, new locations and new features to its customer networks, and respond quickly to customer requests. BACKGROUND The Company was formed in 1982 to pursue authorization from the U.S. Federal Communications Commission (the "FCC") to operate a transatlantic communications satellite system. Orion and seven limited partners, British Aerospace, Com Dev, Kingston Communications, Lockheed Martin CLS, Matra Hachette, Nissho Iwai and STET, formed International Private Satellite Partners, L.P. ("Orion Atlantic") in 1991 to own and operate Orion 1. The limited partners (including the Company) invested $90 million in Orion Atlantic and provided credit support for the Orion 1 credit facility (the "Orion 1 Credit Facility"). Concurrently with the closing of the Offering, the Company will acquire the remaining interests in Orion Atlantic and Orion Atlantic will become a wholly-owned subsidiary of the Company. RECENT DEVELOPMENTS EXCHANGE AGREEMENT AND RELATED TRANSACTIONS Exchange Agreement. Orion has entered into an Exchange Agreement (the "Exchange Agreement") with all of the existing limited partners in Orion Atlantic (the "Limited Partners"). Orion Atlantic was formed as a limited partnership to comply with then-applicable requirements of the FCC with regard to foreign ownership and control. However, Orion believes the partnership structure limited its access to the capital markets. Accordingly, under the Exchange Agreement, Orion will become the owner of 100% of Orion Atlantic and acquire approximately $37.5 million of obligations of Orion Atlantic to Limited Partners in return for the issuance to the Limited Partners of redeemable convertible preferred stock in Orion and the release of certain credit support obligations of the Limited Partners (the "Exchange"). As a result of the Exchange (and the OAP Acquisition described below), Orion will own 100% of its significant subsidiaries and will have greatly simplified its corporate structure. See "The Merger and The Exchange." $60 million British Aerospace and Matra Marconi Space Investments. Concurrently with the Offering, $50 million of junior subordinated convertible debentures (the "Junior Subordinated Debentures") will be purchased by a subsidiary of British Aerospace Public Limited Company (British Aerospace Public Limited Company collectively with its affiliates, "British Aerospace"), who will be the largest beneficial owner of Orion Common Stock as of the closing of the Offering (the "British Aerospace Investment"). The Junior Subordinated Debentures will mature in 2012, and will bear interest at a rate of 8.75% per annum to be paid semi-annually in arrears solely in Orion Common Stock. The Junior Subordinated Debentures will be subordinated to all other indebtedness of the Company, including the Notes. Also concurrently with the Offering, Matra Marconi Space U.K. Limited ("Matra Marconi Space") will re-invest in Orion $10 million of the $13 million of satellite incentive payments it will receive (as the Orion 1 manufacturer) upon consummation of the Offering. Such re-investment will be in Junior Subordinated Debentures (the "Matra Marconi Investment," and together with the British Aerospace Investment, the "Debenture Investments"). See "Description of Certain Indebtedness." Acquisition of Minority Interest. Orion has entered into an agreement with British Aerospace to acquire the only outstanding minority interest in Orion Asia Pacific (which has rights to certain orbital slots) for approximately 86,000 shares of Orion Common Stock (the "OAP Acquisition") which will close prior to or concurrently with the Offering. ORION 2 AND ORION 3 CONTRACTS Orion 2 and Orion 3 Construction Contracts. Orion has entered into a satellite procurement contract with Matra Marconi Space for Orion 2 (the "Orion 2 Satellite Contract"). Orion has entered into an authorization to proceed with Hughes Space and Communications International, Inc. ("Hughes Space") for Orion 3, commenced construction of Orion 3 in mid-December 1996 and expects to conclude a satellite procurement contract for Orion 3 by mid-January 1997 (the "Orion 3 Satellite Contract"). Orion expects to commence the construction of Orion 2 immediately following completion of this Offering. Pre-Construction Lease on Orion 3. Orion has entered into a contract with DACOM Corp., a Korean communications company ("DACOM"), under which DACOM will, subject to certain conditions, lease eight dedicated transponders on Orion 3 for 13 years, in return for approximately $89 million, payable over a period from December 1996 through seven months following the lease commencement date for the transponders (which is scheduled to occur by January 1999). Payments are subject to refund unless Orion 3 commences commercial operation by June 30, 1999. THE OFFERING The offering of Units made hereby (the "Offering") is conditioned on consummation of the Merger (as defined below), the Exchange, repayment of the Orion 1 Credit Facility with proceeds of the Offering and the Debenture Investments; the Exchange is conditioned on, among other things, the approval of the Orion stockholders, which will occur prior to the closing of the Offering. The pro forma financial information included in this Prospectus gives effect to the Offering and the transactions on which it is conditioned (collectively, the "Transactions"), including the Merger and the Exchange, the Debenture Investments, the OAP Acquisition, the application of the net proceeds of the Offering to repay the Orion 1 Credit Facility and repayment of amounts owed to STET, a former limited partner of Orion Atlantic, and the use of the proceeds of the Debenture Investments to make a $1 million initial payment with respect to construction of Orion 2. See "Pro Forma Condensed Consolidation Financial Statements." THE OFFERING THE UNITS Securities Offered Senior Note Units (the "Senior Note Units"), each consisting of one Senior Note and one Warrant, and Senior Discount Note Units (the "Senior Discount Note Units" and, together with the Senior Note Units, the "Units"), each consisting of one Senior Discount Note and one Warrant. See "Description of Units," "Description of Notes," "Description of Warrants," and "Description of Capital Stock." Separability The Notes and Warrants will become separately transferable on the earlier of (i) six months from the date of issuance, (ii) such date as the Underwriters may, in their discretion, deem appropriate and (iii) in the event of an Offer to Purchase (as defined in "Description of Notes -- Certain Definitions"), the date the Company mails notice thereof to holders of the Notes (the "Separation Date"). Use of Proceeds A substantial majority of the net proceeds from the sale of the Units will be applied to repay the Orion 1 Credit Facility, and the remainder will be used to repay certain indebtedness and other obligations of the Company and for working capital and other general corporate purposes. See "Use of Proceeds." THE NOTES Notes Offered $ principal amount of % Senior Notes due 2007 and $ principal amount at maturity ($ initial accreted value) of % Senior Discount Notes due 2007. Maturity , 2007. Yield and Interest % per annum in the case of the Senior Notes, and % per annum in the case of the Senior Discount Notes. The Senior Discount Notes are being sold at a substantial discount from their principal amount at maturity, and there will not be any payment of interest on the Senior Discount Note prior to , 2002. For a discussion of the federal income tax treatment of the Senior Discount Notes under the original issue discount rules, see "Certain United States Federal Income Tax Consequences." Interest Payment Dates Interest on the Senior Notes will be payable semi-annually in cash on and of each year, commencing , 1997. No interest will be payable on the Senior Discount Notes prior to , 2002. From and after , 2002, the Senior Discount Notes will pay interest semi-annually in cash on and of each year. Guarantees The Notes will have the benefit of the Guarantees issued by each of the Restricted Subsidiaries of the Company. Security The Senior Notes initially will be secured by the Pledged Securities (as defined below) until the Company makes the first six scheduled interest payments on the Senior Notes and thereafter the Senior Notes will be unsecured. The Senior Discount Notes will be unsecured. Pledged Securities The Indenture relating to the Senior Notes (the "Senior Notes Indenture") will provide that on the closing date of the Offering (the "Closing Date"), the Company must purchase and pledge to the Senior Notes trustee (the "Trustee") for the benefit of the holders of the Senior Notes, Pledged Securities (consisting of U.S. government obligations) in such amount as will be sufficient, upon receipt of scheduled interest and principal payments of such securities, to provide for payment in full of the first six scheduled interest payments due on the Senior Notes. The Company expects to use approximately $72 million of the net proceeds of the Offering to acquire the Pledged Securities; however, the precise amount of securities to be acquired will depend upon the interest rate on the Senior Notes and on market interest rates prevailing on the Closing Date. A failure by the Company to pay interest on the Senior Notes in a timely manner through the first six scheduled interest payment dates will constitute an immediate Event of Default under the Senior Notes Indenture, with no grace or cure period. See "Description of Notes -- Security." Optional Redemption The Notes will be redeemable, at the Company's option, in whole or in part, at any time on or after , 2002 at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date. See "Description of Notes -- Optional Redemption." Change of Control In the event of a Change of Control (as defined herein), the Company will be obligated to make an offer to purchase all outstanding Notes at a purchase price equal to 101% of their principal amount (in the case of the Senior Notes) or 101% of their Accreted Value (in the case of the Senior Discount Notes), in each case plus accrued and unpaid interest thereon to the repurchase date. See "Description of Notes -- Repurchase of Notes Upon a Change of Control." If a Change of Control occurs when less than $50 million of the Notes remain outstanding, the holders of the Junior Subordinated Debentures will have the right to sell such securities to the Company. However, the Indentures contain a covenant which will effectively prohibit the Company from honoring such right. See "Description of Certain Indebtedness." Ranking The indebtedness evidenced by the Notes and the Guarantees will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Company and the Guarantors, respectively, and senior in right of payment to all existing and future subordinated indebtedness of the Company and the Guarantors, respectively. After giving pro forma effect to the Transactions, as of September 30, 1996, the Company would have had (on an unconsolidated basis) $60.0 million of indebtedness (other than the Notes) outstanding, all of which would have been subordinated indebtedness, and the Guarantors, collectively, would have had $24.9 million of indebtedness (other than the Guarantees) outstanding, all of which would have been senior indebtedness ($7.2 million of which would have been secured by the Company's satellite control facility) and no subordinated indebtedness. The Guarantees will be effectively subordinated to such secured indebtedness to the extent of the collateral therefor. Certain Covenants The Senior Notes Indenture and the Indenture relating to the Senior Discount Notes (the "Senior Discount Notes Indenture" and collectively, the "Indentures") will contain certain covenants which, among other things, will restrict distributions to stockholders of the Company, the repurchase of equity interests in the Company and the making of certain other investments and restricted payments, the incurrence of additional indebtedness by the Company and its restricted subsidiaries, the creation of certain liens, certain asset sales, transactions with affiliates and related parties, and mergers and consolidations. See "Description of Notes -- Covenants" and "Description of Notes -- Consolidation Merger and Sale of Assets." THE WARRANTS Warrants Offered Senior Note Warrants to purchase an aggregate of shares of Common Stock (the "Senior Note Warrant Shares"), representing approximately % of the fully diluted Common Stock (after giving effect to the Transactions), and Senior Discount Note Warrants to purchase an aggregate of shares of Common Stock (the "Senior Discount Note Warrant Shares" and, together with the Senior Note Warrant Shares, the "Warrant Shares"), representing approximately % of the fully diluted Common Stock (after giving effect to the Transactions). See "Description of Warrants" and "Description of Capital Stock." Exercise Each Warrant shall entitle the holder thereof to purchase shares of Common Stock of Orion at an exercise price of $ per share, subject to adjustment in certain events as provided in the warrant agreement relating to the Warrants (the "Warrant Agreement"). The Warrants are not exercisable prior to six months after the Closing Date. The Warrants will expire on the tenth anniversary of the Closing Date. See "Description of Warrants." Registration Rights The Company is required to use its best efforts to maintain the effectiveness of a registration statement with respect to the issuance of the Warrant Shares until the earlier of the tenth anniversary of the Closing Date and the date all Warrants have been exercised. See "Description of Warrants -- Registration Requirements."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000890175_conseco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000890175_conseco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..92570a9a00b7b1ad95f177b3576f7fbe1777d4af
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000890175_conseco_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in this Summary are defined elsewhere in this Prospectus on the pages indicated in the "Index of Principal Terms" on page 67. Issuer....................... Green Tree Lease Finance 1997-1, LLC, a limited liability company organized under the laws of the State of Delaware. Green Tree Lease Finance II, Inc. (the "SPC"), a wholly owned subsidiary of Green Tree Vendor Services Corporation, is the sole and managing member of the Issuer. See "The Issuer and the SPC." Servicer..................... Green Tree Vendor Services Corporation ("Vendor Services"). See "Green Tree Vendor Services Corporation." Trustee...................... First Trust National Association, in its capacity as trustee under an Indenture (the "Indenture"), dated as of December 1, 1997, between the Issuer and the Trustee. The Notes.................... Pursuant to the Indenture, the Issuer will issue six classes of notes (the "Notes"), consisting of four classes of senior notes, designated as the Lease-Backed Notes, Class A-1, in the original principal amount of approximately $196,466,000, the Lease-Backed Notes, Class A- 2, in the original principal amount of approximately $52,897,000, the Lease-Backed Notes, Class A-3, in the original principal amount of approximately $218,183,000 and the Lease-Backed Notes, Class A-4, in the original principal amount of approximately $32,676,000 (together, the "Class A Notes"), and two classes of subordinated notes, designated as the Lease-Backed Notes, Class B, in the original principal amount of approximately $30,233,000 and the Lease-Backed Notes, Class C, in the original principal amount of approximately $19,239,587. Investments in the respective Classes of Notes will represent substantially different investment risks due primarily to the relative priority of payments from the Trust Assets to which each such Class is entitled. The Class A Notes will be senior in right of payment of interest to the Class B Notes and Class C Notes, and the Class B Notes will be senior in right of payment of interest to the Class C Notes, as described under "Interest" and "Priority of Payments" below. Similarly, the Class A Notes will be senior in right of payment of principal to the Class B Notes and Class C Notes, and the Class B Notes will be senior in right of payment of principal to the Class C Notes, to the extent described under "Principal" below. All principal will be allocated to the Class A-1 Notes until paid in full, and then to the Class A-2 Notes, Class A- 3 Notes, Class A-4 Notes, Class B Notes and Class C Notes, as described under "Principal" below. The Class A-1 Notes will have a Stated Maturity Date that is significantly earlier than the other Classes of Notes, as described under "Stated Maturity Dates" below. See "Description of the Notes." AVAILABLE INFORMATION The Issuer and Green Tree Lease Finance II, Inc. have filed a Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange Commission (the "Commission") with respect to the Notes offered pursuant to this Prospectus. For further information, reference is made to the Registration Statement and amendments thereof and to the exhibits thereto, which are available for inspection without charge at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, 13th Floor, New York, New York 10048; and Northwest Atrium Center, 500 Madison Street, Chicago, Illinois 60661. Copies of the Registration Statement and amendments thereof and exhibits thereto may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains a World Wide Web site which provides on- line access to reports, proxy and information statements and other information regarding registrants that file electronically with the Commission at the address "http://www.sec.gov." REPORTS TO NOTEHOLDERS Unless and until Definitive Notes are issued, monthly unaudited reports containing information concerning the Issuer and the Notes will be sent on behalf of the Issuer to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") as registered holder of the Notes pursuant to the Indenture. See "Description of the Notes--Book-Entry Registration." Such reports will be made available to DTC and its participants to holders of interests in the Notes in accordance with the rules, regulations and procedures creating and affecting DTC. However, such reports will not be sent directly to each beneficial owner while the Notes are in book-entry form. Upon the issuance of fully registered, certificated Notes, such reports will be sent directly to each Noteholder. Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles. The Servicer, on behalf of the Issuer, will file with the Commission periodic reports concerning the Issuer to the extent required under the Exchange Act and the rules and regulations of the Commission thereunder. However, in accordance with the Exchange Act and the rules and regulations of the Commission thereunder, the Servicer expects that the Issuer's obligation to file such reports will be terminated following the end of 1998. Interest..................... Interest on the outstanding principal balance of the Notes of each Class will accrue at the interest rate for such Class of Notes specified on the cover page of this Prospectus (the "Interest Rate" for such Class of Notes) from and including the Closing Date to but excluding February 20, 1998 (in the case of the first interest period), and thereafter for each successive Payment Date from and including the most recent prior Payment Date to which interest has been paid, to but excluding such Payment Date, calculated (i) in the case of the Class A-1 Notes, on the basis of actual days elapsed in a year of 360 days, and (ii) in the case of the Class A-2, Class A-3, Class A-4, Class B and Class C Notes, on the basis of a 360-day year comprised of twelve 30-day months. To the extent the Amount Available is sufficient therefor, the amount of interest to be paid on the Notes on each Payment Date will be equal to the product of (i) the applicable Interest Rate (calculated in the manner described above) and (ii) the Outstanding Principal Amount of such Class of Notes as of such Payment Date (or, in the case of the first interest period, interest accrued on the original principal amount of such Class of Notes from and including the Closing Date to but excluding February 20, 1998). The "Outstanding Principal Amounts" as of a Payment Date shall mean the then unpaid principal amounts of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C Notes (determined prior to payment of any principal in respect thereof on such Payment Date). See "--Priority of Payments" below. Principal.................... For each Payment Date, each of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders will be entitled to receive payments of principal, to the extent funds are available therefor, in the priorities set forth in the Indenture and described herein below and under "--Priority of Payments" below and "Description of the Notes--Principal." On each Payment Date, to the extent funds are available therefor, principal will be paid to the Noteholders in the following priority: (a)(i) to the Class A-1 Noteholders only, until the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the Class A Principal Payment, then (ii) to the Class A-2 Noteholders, Class A-3 Noteholders and Class A-4 Noteholders, sequentially, the Class A Principal Payment, in that order, until the Outstanding Principal Amount of each such Class has been reduced to zero, (b) to the Class B Noteholders, the Class B Principal Payment, (c) to the Class C Noteholders, the Class C Principal Payment, (d) to the extent that the Class B Floor exceeds the Class B Target Investor Principal Amount and the Class C Floor exceeds TABLE OF CONTENTS <TABLE> <CAPTION> SECTION PAGE - ------- ---- <S> <C> INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. i AVAILABLE INFORMATION... ii REPORTS TO NOTEHOLDERS.. ii SUMMARY................. 1 RISK FACTORS............ 16 THE ISSUER AND THE SPC.. 21 GREEN TREE VENDOR SERVICES CORPORATION... 22 THE LEASES.............. 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE ISSUER............. 36 MANAGERS OF THE ISSUER.. 37 WEIGHTED AVERAGE LIFE OF THE NOTES.............. 38 DESCRIPTION OF THE NOTES.................. 39 DESCRIPTION OF THE CONTRIBUTION AND SERVICING AGREEMENT.... 52 CERTAIN LEGAL ASPECTS OF THE LEASES............. 57 FEDERAL INCOME TAX CONSEQUENCES........... 59 ERISA CONSIDERATIONS.... 64 RATINGS OF THE NOTES.... 65 USE OF PROCEEDS......... 65 EXPERTS................. 65 UNDERWRITING............ 65 LEGAL MATTERS........... 66 INDEX OF PRINCIPAL TERMS.................. 67 INDEX TO FINANCIAL STATEMENTS............. F-1 </TABLE> the Class C Target Investor Principal Amount, Additional Principal (defined below) shall be distributed, sequentially, as an additional principal payment on the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C Notes, in that order, until the Outstanding Principal Amount of each such Class has been reduced to zero, and (e) to the extent the Class C Floor exceeds the Class C Target Investor Principal Amount, but the Class B Floor does not exceed the Class B Target Investor Principal Amount, Additional Principal shall be distributed as an additional principal payment on the Class A and Class B Notes, pro rata (and among the Class A Notes, sequentially on the Class A-2, Class A-3 and Class A-4 Notes, in that order), until the Outstanding Principal Amount of each such Class has been reduced to zero. The "Class A Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, (i) on all Payment Dates prior to the January 1999 Payment Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal Amount on the Class A-1 Notes to zero and (2) the Monthly Principal Amount, and (ii) on the January 1999 Payment Date, the entire Outstanding Principal Amount on the Class A-1 Notes and (b) after the Class A-1 Notes have been paid in full, the amount necessary to reduce the aggregate Outstanding Principal Amount of the Class A Notes to the Class A Target Investor Principal Amount. The "Class B Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the Outstanding Principal Amount of the Class B Notes to the greater of the Class B Target Investor Principal Amount and the Class B Floor. The "Class C Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the Outstanding Principal Amount of the Class C Notes to the greater of the Class C Target Investor Principal Amount and the Class C Floor. "Additional Principal" with respect to each Payment Date is an amount equal to (a) the Monthly Principal Amount, less (b) the Class A Principal Payment, the Class B Principal Payment and the Class C Principal Payment to be paid on such Payment Date. The "Class A Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class A Percentage and (b) the Lease Pool Principal Balance as of the last day of the Collection Period related to such Payment Date. The "Class B Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class B Percentage and (b) the Lease Pool Principal Balance as of the last day of the Collection Period related to such Payment Date. The "Class C Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class C Percentage and (b) the Lease Pool Principal Balance as of the last day of the Collection Period related to such Payment Date. The "Class A Percentage" will be 85.994%. The "Class B Percentage" will be 8.559%. The "Class C Percentage" will be 5.447%. The "Class B Floor" with respect to each Payment Date means (a) 3.0% of the Initial Pool Principal Balance, plus (b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the sum of the Outstanding Principal Amount of the Class C Notes as of such Payment Date and the amount on deposit in the Reserve Account after giving effect to withdrawals to be made on such Payment Date. The "Class C Floor" with respect to each Payment Date means (a) 2.0% of the Initial Pool Principal Balance, plus (b) the Cumulative Loss Amount with respect to such Payment Date minus (c) the amount on deposit in the Reserve Account after giving effect to withdrawals to be made on such Payment Date; provided that if the Outstanding Principal Amount of the Class B Notes is equal to the Class B Floor on such Payment Date, the Class C Floor will equal the Outstanding Principal Amount of the Class C Notes for such Payment Date. The "Monthly Principal Amount" for any Payment Date will equal the excess, if any, of (i) the sum of the Outstanding Principal Amounts of the Notes for such Payment Date, over (ii) the aggregate of the Principal Balance of each Lease (the "Lease Pool Principal Balance") as of the last day of the Collection Period relating to such Payment Date. The "Cumulative Loss Amount" with respect to each Payment Date is an amount equal to the excess, if any, of (a) the total of (i) the Outstanding Principal Amount of the Notes for such Payment Date, minus (ii) the lesser of (A) the Monthly Principal Amount and (B) the Amount Available remaining after the payment of amounts owing to the Servicer (other than the Servicing Fee to the extent that Vendor Services is the Servicer) and in respect of interest on the Notes on such Payment Date, over (b) the Lease Pool Principal Balance as of the last day of the Collection Period related to such Payment Date. The "Principal Balance" of any Lease as of the last day of any Collection Period is: (1) in the case of any Lease that does not by its terms permit prepayment or early termination, the present value of the unpaid Scheduled Payments due on such Lease after such last day of the Collection Period (excluding all Scheduled Payments due on or prior to, but not received as of, such last day, as well as any Scheduled Payments due after such last day and received on or prior thereto), after giving effect to any Prepayments received on or prior to such last day, discounted monthly (assuming, for purposes of such calculation, that each Scheduled Payment is due on the last day of the applicable Collection Period) at the rate of % per annum (the "Discount Rate"), which rate is equal to (a) the weighted average Interest Rate of the Class A (utilizing the Class A-4 Interest Rate), Class B and Class C Notes on the Closing Date, plus (b) the Servicing Fee; (2) in the case of any Lease that permits prepayment or early termination only upon payment of a premium that is at least equal to the present value (calculated in the manner described in clause (1) above) of the unpaid Scheduled Payments due on such Lease after the date of such prepayment, the amount specified in clause (1) above; and (3) in the case of any Lease that permits prepayment or early termination without payment of a premium at least equal to the amount specified in clause (2) above, the lesser of (a) the outstanding principal balance of such Lease after giving effect to Scheduled Payments due on or prior to such last day of the Collection Period, whether or not received, as well as any Prepayments, and any Scheduled Payments due after such last day, received on or prior to such last day, and (b) the amount specified in clause (1) above. The "Initial Pool Principal Balance," which is the aggregate Principal Balance of the Leases as of the Initial Cut-Off Date, calculated at the Discount Rate, is $ . "Statistical Discounted Present Value of the Leases" means an amount equal to the future remaining Scheduled Payments (not including delinquent amounts) on the Leases as of December 1, 1997, discounted at a rate equal to 7.0% (the "Statistical Discount Rate"). The Statistical Discounted Present Value of the Leases as of December 1, 1997 is $550,991,889.46. The Principal Balance of any Lease which became a Liquidated Lease during a given Collection Period or which Vendor Services was obligated to purchase as of the end of a given Collection Period due to a breach of representations and warranties, will be deemed to be zero on and after the last day of such Collection Period. A "Liquidated Lease" is any Lease (a) which the Servicer has charged off as uncollectible in accordance with its credit and collection policies and procedures (which shall be no later than the date as of which the Servicer has repossessed and disposed of the related Equipment, or otherwise collected all proceeds which, in the Servicer's reasonable judgment, can be collected under such Lease), or (b) as to which 10% or more of a Scheduled Payment is delinquent 180 days or more. See "Description of the Notes--Principal." The "Collection Period" for any Payment Date will be the calendar month preceding the month in which such Payment Date occurs (except that the Collection Period for the Payment Date in February 1998 will include December 1997 and January 1998). Stated Maturity Dates........ If and to the extent not previously paid, the outstanding principal balance of each Class of Notes will be payable on the Stated Maturity Date of such Class of Notes. The Class A-1 Stated Maturity Date will be January 20, 1999, and the Class A-2 Stated Maturity Date, the Class A-3 Stated Maturity Date, the Class A-4 Stated Maturity Date, the Class B Stated Maturity Date and the Class C Stated Maturity Date will be September 20, 2005. If all payments on the Leases are made as scheduled, however, final payment with respect to the Class A-2, Class A-3, Class A-4, Class B and Class C Notes would occur prior to their Stated Maturity. Denominations................ The Notes will be available for purchase in minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof, except that one Class C Note may be issued in another denomination. Closing Date................. On or about December , 1997. Payment Dates and Record Dates....................... Interest and principal on the Notes will be paid on the 20th day of each month (or, if such 20th day is not a Business Day, the next succeeding Business Day), commencing in February 1998, to Holders of record on the Business Day immediately preceding such Payment Date (so long as the Notes are held in book-entry form), or to Holders of record on the last day of the preceding calendar month (if Definitive Notes have been issued). Subordination................ The likelihood of payment of interest on each Class of Notes will be enhanced by the application of the Amount Available to the payment of such interest prior to the payment of principal on any of the Notes, as well as by the preferential right of the Holders of Class A and Class B Notes to receive such interest (1) in the case of the Class A Notes, prior to the payment of any interest on the Class B Notes and the Class C Notes, and (2) in the case of the Class B Notes, prior to the payment of any interest on the Class C Notes. Likewise, the likelihood of payment of principal, to the extent of the Class A Principal Payment and the Class B Principal Payment on a Payment Date on the Class A and Class B Notes, respectively, will be enhanced by the preferential right of the Holders of Notes of each such Class to receive such principal, to the extent of the Amount Available after payment of interest on the Notes as aforesaid, (i) in the case of the Class A Notes, prior to the payment of any principal due on such Payment Date on the Class B Notes and Class C Notes, and (ii) in the case of the Class B Notes, prior to the payment of any principal due on such Payment Date on the Class C Notes. See "Description of the Notes." Ratings...................... It is a condition of issuance of the Notes that each of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and Fitch I.B.C.A., Inc. ("Fitch") (together, the "Rating Agencies") (i) rate the Class A-1 Notes "A-1+" and "F-1+," respectively, (ii) rate the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes "AAA", (iii) rate the Class B Notes at least "A" and (iv) rate the Class C Notes at least "BBB". The rating of each Class of Notes addresses the likelihood of the timely receipt of interest and payment of principal on such Class of Notes on or before the Stated Maturity Date for such Class of Notes. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating Agency. The ratings of the Notes do not address the likelihood of payment of principal on any Class of Notes prior to the Stated Maturity Date thereof. See "Ratings of the Notes." Trust Assets................. The Trust Assets will consist of: (i)a pool of equipment lease contracts (each, a "Lease") with various lessees, borrowers or other obligors thereunder (each, an "Obligor"), including all monies at any time paid or payable thereon or in respect thereof from and after December 1, 1997 (the "Initial Cut-Off Date") or, in the case of Substitute Leases, the first day of the month of transfer to the Issuer (each such date, or the Initial Cut-Off Date, as applicable to each Lease, a "Cut-Off Date") in the form of (1) Scheduled Payments (including all Scheduled Payments due prior to, but not received as of, the Cut-Off Date, but excluding any Scheduled Payments due on or after, but received prior to, the Cut-Off Date), (2) Prepayments and (3) Liquidation Proceeds (including all net proceeds from the disposition of the related Equipment); (ii) certain rights to Residual Realizations and amounts, if any, on deposit in the Residual Account (described below); (iii) amounts on deposit in (and Eligible Investments allocated to) certain accounts established pursuant to the Indenture and the Contribution and Servicing Agreement, including the Collection Account; (iv) amounts on deposit in the Reserve Account; and (v) certain other property and assets as herein described. On the Closing Date, Vendor Services will contribute to the SPC all of its right, title and interest in the Leases and the related Equipment, pursuant to the Transfer Agreement between Vendor Services and the SPC. The SPC will immediately contribute the Leases to the Issuer and convey to the Issuer certain rights to the Residual Realizations. The Trust Assets will secure payment of the Notes. See "Source of Payment and Security" below and "The Issuer and the SPC." Source of Payment and Security.................... Principal of and interest on the Notes will be paid on each Payment Date solely from, and secured by, the "Amount Available" for such Payment Date, which is equal to the sum of (a) those Pledged Revenues on deposit in the Collection Account as of the last Business Day preceding the related Determination Date (the "Deposit Date") which were received by the Servicer during the related Collection Period or which represent amounts paid by Vendor Services to repurchase Leases as of the end of such Collection Period and investment earnings on funds on deposit in the Collection Account (the "Available Pledged Revenues"), plus (b) Servicer Advances made by the Servicer, plus (c) funds, if any, on deposit in the Residual Account plus (d) funds on deposit in the Reserve Account. "Pledged Revenues" will consist of: (i) "Scheduled Payments" on the Leases (which will consist of all required payments under the Leases other than those portions of such payments which (A) under the Leases, are to be applied by the Servicer to the payment of insurance charges, maintenance, taxes and other similar obligations or (B) under the Contribution and Servicing Agreement, are to be retained by the Servicer in payment of Administrative Fees or are late payments as to which Servicer Advances were made on a Payment Date) received on or after the Cut-Off Date and due during the term of the Leases, without giving effect to end-of-term extensions or renewals thereof (including all Scheduled Payments due prior to, but not received as of, the Cut-Off Date, but excluding any Scheduled Payments due on or after, but received prior to, the Cut-Off Date); (ii) any voluntary prepayments ("Prepayments") of Scheduled Payments received on or after the Cut-Off Date under the Leases; (iii) any amounts paid by Vendor Services to repurchase Leases (to the extent Vendor Services has not delivered Substitute Leases) due to a breach of representations and warranties with respect thereto, as described under "--Mandatory Repurchase or Substitution of Certain Leases" below; (iv) any amounts paid by the SPC to repurchase the Leases as described under "--Optional Repurchase of Leases" below; (v) all net proceeds derived from the liquidation of the Leases and the related Equipment, as described under "--Liquidated Leases" below (unless Vendor Services has substituted a Substitute Lease therefor); and (vi) any earnings on the investment of amounts credited to the Collection Account. Servicer Advances............ Prior to any Payment Date, the Servicer may, but will not be required to, advance to the Trustee an amount sufficient to cover delinquencies in Scheduled Payments on the Leases with respect to the prior Collection Period (a "Servicer Advance"). The Servicer will be reimbursed for Servicer Advances from late payments on the delinquent Leases with respect to which such advances were made and, if the Servicer later determines that such Servicer Advance will not be reimbursed from the recovery on the delinquent Lease (a "Nonrecoverable Servicer Advance"), from the Amount Available on the next Payment Date. Residual Realizations........ Cash flows realized from the sale or re-lease of the Equipment following the scheduled expiration dates or voluntary early termination of the Leases, other than Equipment subject to Liquidated Leases (the "Residual Realizations"), will provide additional credit support to the Notes. During each Collection Period, the Residual Realizations will be deposited in the Residual Account. As provided in the Indenture, funds on deposit in the Residual Account will be available to cover shortfalls in the Available Pledged Revenues to pay interest and principal payments then due on the Notes. As of the Initial Cut-Off Date, the aggregate residual value of the Equipment recorded on the accounting books of Vendor Services (the "Book Value") of the Leases was $49,422,100.38. Actual Residual Realizations may be more or less than the Book Value. The Residual Realizations for a Collection Period not distributed to Noteholders, paid to the Servicer or deposited into the Reserve Account on the related Payment Date will be released to the SPC on such Payment Date, except during the continuation of certain limited circumstances specified in the Indenture (a "Residual Event"). During the continuation of a Residual Event, amounts in the Residual Account that otherwise would be released to the SPC will be retained in the Residual Account for application on future Payment Dates. Upon the termination of a Residual Event, any amounts on deposit in the Residual Account will be (i) deposited into the Reserve Account, to the extent that the amount on deposit in the Reserve Account is less than the Required Reserve Amount, or (ii) released to the SPC and thereafter will not be available to Noteholders under any circumstance. The Residual Events will be established prior to the Closing Date based on criteria prescribed by the Rating Agencies. Such criteria may be amended or otherwise altered after the Closing Date, without the consent of Noteholders, to alter the performance parameters that must occur to cause a Residual Event, so long as doing so would not cause either Rating Agency to reduce, withdraw or qualify any of its ratings on the Notes. Reserve Account.............. The Noteholders will have the benefit of funds on deposit in an account (the "Reserve Account") to the extent that there is a shortfall in the Available Pledged Revenues to make interest and principal payments on the Notes on any Payment Date and amounts on deposit in the Residual Account are insufficient to make up such shortfall. The Reserve Account will be funded by an initial deposit of 2.00% of the Initial Pool Principal Balance. Thereafter, to the extent provided in the Indenture, additional deposits will be made to the Reserve Account to the extent that the amount on deposit in the Reserve Account (the "Available Reserve Amount") is less than the Required Reserve Amount. The "Required Reserve Amount" equals the lesser of (a) 2.00% of the Initial Pool Principal Balance and (b) the Outstanding Principal Amount of the Notes. Amounts on deposit in the Reserve Account in excess of the Required Reserve Amount will be disbursed to the SPC in accordance with the provisions of the Indenture, and thereafter will not be available to Noteholders under any circumstance. The Leases................... The aggregate of the Leases held by the Issuer as part of the Trust Assets, as of any particular date, is referred to as the "Lease Pool," and the Lease Pool, as of the Initial Cut-Off Date, is referred to as the "Cut-Off Date Pool." Unless otherwise noted, the statistical information contained in this Prospectus regarding the Cut-Off Date Pool is calculated based on the Statistical Discounted Present Value of the Leases and the Statistical Discount Rate. "Statistical Discounted Present Value of the Leases" means an amount equal to the future remaining Scheduled Payments (not including delinquent amounts) on the Leases as of the Initial Cut-Off Date, discounted at a rate equal to the Statistical Discount Rate. The Statistical Discounted Present Value of the Leases as of the Initial Cut-Off Date is $550,991,889.46 and will not vary materially from the Initial Pool Principal Balance. The following are the characteristics of the Cut-Off Date Pool as of the Initial Cut-Off Date, based on the Statistical Discounted Present Value of the Leases: (i) There were 54,483 Leases. (ii) The average Principal Balance was approximately $10,113.10. (iii) Approximately 27.06% of such Leases related to data processing equipment; approximately 19.35% of such Leases related to office equipment; approximately 19.20% of such Leases related to telecommunications equipment; and approximately 8.90% of such Leases related to commercial laundry equipment. (iv) The Obligors on approximately 14.27% of the Leases were located in California; approximately 11.14% were located in New York; approximately 7.74% were located in Florida; approximately 7.49% were located in Texas; approximately 5.66% were located in New Jersey; and no other state represented more than 5.0% of the Statistical Discounted Present Value of the Leases. (v) The remaining term of the Leases ranged from 6 months to 82 months. (vi) The weighted average remaining term of the Leases was approximately 35.67 months and the weighted average age of the Leases was approximately 14.93 months. See "The Leases-- Certain Statistics Relating to the Cut-Off Date Pool." (vii) The Leases with a single Obligor having the largest aggregate Principal Balance as of the Cut-Off Date represented no more than 0.20% of the Statistical Discounted Present Value of the Leases. Vendor Services will make certain representations and warranties regarding each Lease in connection with its contribution of the Leases to SPC, and will be obligated to repurchase (or substitute another lease for) any Lease in the event of a breach of any such representation or warranty that materially and adversely affects the value of such Lease. See "Mandatory Repurchase or Substitution of Certain Leases" below. Lease Prepayments............ Vendor Services will represent and warrant that none of the Leases permit the Obligor thereunder to prepay the amounts due under such Lease or otherwise terminate the Lease prior to its scheduled expiration date (except for a de minimis number of Leases which allow for a prepayment or early termination upon payment of an amount which is not less than the Required Payoff Amount). Nevertheless, under the Contribution and Servicing Agreement, the Servicer will be permitted to allow Prepayments of any of the Leases, but only if the amount paid by or on behalf of the Obligor (or, in the case of a partial Prepayment, the sum of such amount and the remaining Principal Balance of the Lease after application of such amount) is at least equal to the Required Payoff Amount for such Lease. The "Required Payoff Amount," with respect to any Collection Period for any Lease, is equal to the sum of: (i) the Scheduled Payment due in such Collection Period, together with any Scheduled Payments due in prior Collection Periods and not yet received, plus (ii) the Principal Balance of such Lease as of the last day of such Collection Period (after taking into account the Scheduled Payment due in such Collection Period). Liquidated Leases............ Liquidation Proceeds (which will consist generally of all amounts received by the Servicer in connection with the liquidation of a Liquidated Lease and disposition of the related Equipment, net of any related out-of- pocket liquidation expenses) will be deposited in the Collection Account and constitute Pledged Revenues to be applied to the payment of interest and principal on the Notes in accordance with the priorities described under "Priority of Payments" below (except that, to the extent that Vendor Services elects to substitute one or more Substitute Leases for all or a portion of the unpaid Principal Balance of the Liquidated Lease, Liquidation Proceeds will be remitted to Vendor Services and will not be available to Noteholders). Servicing.................... The Servicer will be responsible for managing, administering, servicing and making collections on the Leases. Compensation to the Servicer will include a monthly fee (the "Servicing Fee"), which will be payable to the Servicer from the Amount Available on each Payment Date (payable in accordance with the priorities described under "Priority of Payments" below), in an amount equal to the product of one- twelfth of .75% per annum multiplied by the Lease Pool Principal Balance determined as of the last day of the second preceding Collection Period (or, in the case of the Servicing Fee with respect to the Collection Period commencing on the Initial Cut-Off Date, the Initial Pool Principal Balance), plus any late fees, late payment interest, documentation fees, insurance administration charges and other administrative charges and a portion of any extension fees (collectively, the "Administrative Fees") collected with respect to the Leases during the related Collection Period and any investment earnings on collections prior to deposit thereof in the Collection Account. The Servicer may be terminated as Servicer under certain circumstances, in which event a successor Servicer would be appointed to service the Leases. See "Description of the Contribution and Servicing Agreement--Servicing--Events of Termination." Mandatory Repurchase or Substitution of Certain Leases...................... Vendor Services will make certain representations and warranties with respect to each Lease and the related Equipment, as more fully described in "The Leases--Representations and Warranties Made by Vendor Services." The Trustee will be entitled to require Vendor Services to repurchase any Lease and the related Equipment, at a price equal to (i) the Required Payoff Amount, plus (ii) the Book Value (if any) of the related Equipment, if the value of the Lease is materially and adversely affected by a breach of any such representation or warranty which is not cured within a specified period. Vendor Services will have the option to substitute one or more Leases having similar characteristics (each, a "Substitute Lease") for (a) Liquidated Leases, (b) Leases subject to repurchase as a result of a breach of representation and warranty ("Warranty Leases") and (c) Leases following a material modification or adjustment to the terms of such Lease ("Adjusted Leases"). The aggregate Principal Balance of the Liquidated Leases, Warranty Leases or Adjusted Leases for which Vendor Services may substitute Substitute Leases is limited to an amount not in excess of 10% of the Initial Pool Principal Balance. In no event will the Lease Pool Principal Balance after the inclusion of the Substitute Leases, be less than the Lease Pool Principal Balance prior to such substitution. In addition, after giving effect to such substitutions, the aggregate Book Value of the Equipment subject to the Leases will not be materially less than the aggregate Book Value of the Equipment subject to the Leases immediately prior to such substitutions. Additionally, the final payment on each Substitute Lease must be on or prior to September 2004 or, to the extent the final payment on such Lease is due subsequent to September 2004, only scheduled payments due on or prior to such date may be included in calculating the Principal Balance of such Lease. Servicing and Collection The Trustee will establish and maintain a Accounts.................... Servicing Account, into which the Servicer will deposit, no later than the second Business Day after receipt thereof, all Scheduled Payments, Prepayments, Liquidation Proceeds and other amounts received by the Servicer in respect of the Leases on and after the Cut-Off Date. The Trustee will also establish and maintain (i) the Collection Account, into which those amounts deposited in the Servicing Account and constituting Pledged Revenues will be transferred within three Business Days following the deposit thereof in the Servicing Account, and (ii) the Residual Account, into which those amounts deposited in the Servicing Account and constituting Residual Realizations will be transferred within three Business Days following the deposit thereof in the Servicing Account. The Servicer will be permitted to use any alternative remittance schedule for making deposits into such accounts which is acceptable to the Rating Agencies if the effect thereof will not result in a qualification, reduction or withdrawal of any of the ratings then applicable to the Notes. See "Description of the Contribution and Servicing Agreement-- Collections on Leases." Priority of Payments......... On each Payment Date, the Trustee will be required to make the following payments, first, from the Available Pledged Revenues plus any Servicer Advances, second, from amounts on deposit in the Residual Account as described under "Residual Realizations" above and third, from amounts on deposit in the Reserve Account as described under "Reserve Account" above, in the following order of priority (except as otherwise described under "Description of the Notes--Events of Default; Rights Upon Event of Default"): (i) the Servicing Fee (if Vendor Services or an affiliate is no longer the Servicer); (ii) to reimburse the Servicer for unreimbursed Nonrecoverable Servicer Advances made with respect to a prior Payment Date; (iii) interest on the Notes in the following order of priority: (a) interest on the Class A Notes, (b) interest on the Class B Notes, and (c) interest on the Class C Notes; (iv) an amount equal to the Monthly Principal Amount as of such Payment Date, to the Class A, Class B and Class C Notes in the amount and order of priority described under "Principal" above; (v) from Available Pledged Revenues and amounts (if any) on deposit in the Residual Account, to the Reserve Account, an amount equal to the excess of the Required Reserve Amount over the Available Reserve Amount; (vi) from Available Pledged Revenues only, for so long as Vendor Services or an affiliate is the Servicer, the Servicing Fee; and (vii) the remainder of Available Pledged Revenues, if any, to the SPC. Optional Repurchase of The SPC may repurchase all of the Leases on any Leases...................... Payment Date following the date on which the unpaid principal balance of the Notes is less than 10% of the Initial Pool Principal Balance. The purchase price to be paid in connection with such repurchase shall be at least equal to the unpaid principal balance of the Notes as of such Payment Date plus interest to be paid on the Notes on such Payment Date. The proceeds of such repurchase shall be applied on such Payment Date to the payment of the remaining principal balance of the Notes, together with accrued interest thereon. Tax Status................... In the opinion of counsel to the Issuer, the Notes will be characterized as indebtedness and the Issuer will not be characterized as an "association" or "publicly traded partnership" taxable as a corporation for federal income tax purposes. Each Noteholder, by its acceptance of a Note, will agree to treat the Notes as indebtedness for federal, state and local income tax purposes. Prospective investors are advised to consult their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of Notes, and the tax consequences arising under the laws of any state or other taxing jurisdiction. See "Federal Income Tax Consequences." ERISA Considerations......... If the Notes are considered to be indebtedness without substantial equity features under a regulation issued by the United States Department of Labor, the acquisition or holding of Notes by or on behalf of a Benefit Plan will not cause the assets of the Issuer to become plan assets, thereby generally preventing the application of certain prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"), that otherwise could possibly be applicable. Although there can be no assurances in this regard, it appears that the Notes should be treated as indebtedness without substantial equity features for purposes of such regulation. As a result, subject to the considerations described in "ERISA Considerations" herein, the Notes are eligible for purchase with plan assets of any Benefit Plan. However, a fiduciary or other person contemplating purchasing the Notes on behalf of or with plan assets of any Benefit Plan should carefully review with its legal advisors whether the purchase or holding of the Notes could give rise to a transaction prohibited or not otherwise permissible under ERISA or Section 4975 of the Code. See "ERISA Considerations." Legal Investment............. The Class A-1 Notes will be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940. A fund should consult with its advisors regarding the eligibility of the Class A-1 Notes under Rule 2a-7 and the fund's investment policies and objectives. Registration, Clearance and Settlement of Notes......... Each of the Notes will be registered in the name of Cede & Co., as the nominee of The Depository Trust Company ("DTC"), and will be available for purchase only in book-entry form on the records of DTC and participating members thereof. Notes will be issued in definitive form only under the limited circumstances described under "Description of the Notes-- Definitive Notes." All references herein to "Holders" or "Noteholders" shall reflect the rights of beneficial owners of Notes (the "Note Owners"), as they may indirectly exercise such rights through DTC and participating members thereof, except as otherwise specified herein. See "Description of the Notes--Book-Entry Registration."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000891035_concepts_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000891035_concepts_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..990d51bdf5570e94e6a6d796f1c7f7715f19f1b1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000891035_concepts_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and related notes thereto appearing elsewhere in this Prospectus. See "Risk Factors" for a discussion of certain risks associated with an investment in the Common Stock. Unless the context otherwise requires, the terms "Concepts Direct" or the "Company" refer to Concepts Direct, Inc., a Delaware corporation, or, prior to the 1992 spin-off, the Consumer Products Division of Wiland Services, Inc. This Prospectus is being used by the Company and the Selling Stockholders to offer, respectively, 471,404 shares and 1,128,596 shares of Common Stock (the "Offering"). On February 25, 1997, the Company's Board of Directors declared a 2-for-1 split of the Common Stock. Stockholders of record at the close of business on March 14, 1997 were entitled to participate in the stock-split, which was effected in the form of a 100% stock dividend payable on March 31, 1997. All of the share and per share data in this Prospectus has been adjusted to reflect such stock-split. The information set forth herein assumes an offering price of $23.50 per share for the Common Stock offered hereby (the last sale price of the Common Stock as reported on the Nasdaq SmallCap Market on June 9, 1997) and, unless otherwise specified, no exercise of the Underwriters' over-allotment option. THE COMPANY Concepts Direct, Inc. (the "Company") is a direct marketer of personalized labels, paper products, collectibles, gift items, home decorative items and casual apparel (primarily t-shirts and caps) that are selected and designed based on the hobbies, interests and lifestyles of its target customers. The Company markets its merchandise primarily through its three current catalogs, Colorful Images(R), Linda Anderson(R) and Colorful Images Presents Impressions(R) ("Impressions"), which are mailed to prospects derived from rented and exchanged lists and names from its proprietary database. This database includes customers, gift recipients and catalog requestors and had grown to over 6,000,000 names at March 31, 1997, including approximately 1,800,000 customers who had purchased in the prior 12 months. The Company uses a disciplined, analytical approach to marketing and merchandising to target customers. The Company believes that this approach, together with its direct marketing expertise, merchandising capabilities and popular consumable products, have built brand identity and customer loyalty which will serve as a foundation for future growth. The Company mailed approximately 43.5 million catalogs in 1996 (excluding catalogs inserted in product shipments). Colorful Images(R), the Company's flagship catalog, offers over 900 different styles and themes of personalized paper products, as well as t-shirts, collectible figurines and other products that supplement its colorful line of paper products. The Linda Anderson(R) catalog offers a variety of gifts, home decorative items, casual sweaters and sweatshirts, typically at higher price points than Colorful Images(R). Impressions, the Company's third catalog, is dedicated exclusively to personalized gift items. A large segment of the Company's customers are women between the ages of 35 and 54. The Company believes that one of the strengths of its product line is its general appeal to many women. The Company had record net income of $1.9 million and record net sales of $51.1 million in 1996, an increase of 129.8% and 21.4% over 1995. This trend continued in the three month period ended March 31, 1997, when the Company had record first quarter net income of $673,000 and record first quarter net sales of $16.0 million, an increase of 153.3% and 37.7% over the three month period ended March 31, 1996. In addition, net cash provided by operating activities grew to a record $3.6 million in 1996. According to the U.S. Census Bureau, the $46 billion mail order industry has experienced significant growth over the past decade. From 1985 to 1995, the mail order industry surpassed all other retail sectors in growth with a compound annual growth rate of 11.3%, compared to 5.5% growth for the total retail market. Business Strategy -- The Company's goal is to create, build and operate multiple direct marketing concepts that profitably sell merchandise to a targeted customer base. The principal components of its business strategy include effective marketing to the Company's proprietary database and the use of list testing and segment analysis to target mailings to prospective customers. The Company also employs a disciplined approach to merchandise selection and new product development to eliminate products that do not meet expectations and replace them with more popular products. These strategies, together with the Company's emphasis on creative presentation and customer satisfaction, are designed to promote repeat purchases, including consumable reorders, increased spending and gift giving. Growth Strategy -- The Company's growth strategy consists of the following principal components: - INCREASE CATALOG CIRCULATION. Total catalogs mailed has increased from approximately 14.5 million in 1993 to approximately 43.5 million in 1996 (excluding catalogs inserted in product shipments), a 44% compound annual growth rate. The Company believes that its list testing strategy, emphasis on evaluation of performance data and recognition of the long-term value of a new customer have allowed it to expand circulation, achieve acceptable response rates and enlarge its proprietary database. As its catalog titles and proprietary database expands, the Company plans to continue to increase catalog circulation. - EXPAND PAGE COUNT AND MERCHANDISE SELECTION. The Company plans to increase catalog page and product count by introducing new merchandise and adding products tailored to the tastes of its customers and prospects. The Company believes this strategy will enhance the appeal of each catalog and provide additional opportunity for contribution to net sales. - INTRODUCE COMPLEMENTARY NEW CATALOG TITLES. The Company believes that its proprietary database and understanding of the product preferences of its primary audience will enable it to introduce new catalogs focused on historically popular product lines such as collectibles and t-shirts. For example, the Company recently entered into a license agreement through September 2001 authorizing it to design, create and distribute a catalog consisting exclusively of merchandise featuring Snoopy(TM), Charlie Brown(TM) and the other PEANUTS(R) characters. - PROMOTE MERCHANDISE FEATURING POPULAR LICENSED CHARACTERS AND BRANDS. The Company offers personalized labels, collectibles, t-shirts and gift merchandise featuring popular licensed characters and brands, including Snoopy(TM) and the other PEANUTS(R) characters, Coca-Cola(R), Precious Moments(R), Dreamsicles(R) and others. The Company has customers in its proprietary database who are interested in licensed or branded merchandise and plans to seek additional arrangements for such merchandise. - EXPAND FACILITIES AND OPERATIONAL CAPABILITIES. The Company has broken ground on a new facility designed to substantially increase its current operational capacity to approximately 117,000 square feet, providing space for growth and allowing more efficient operations and fulfillment functions. The Company plans to continue enhancing its software, manufacturing and fulfillment systems to support its growth plans. The Company believes its past investment in management, systems and its proprietary database will support the growth of its existing catalogs and the introduction of new catalogs. The Company currently plans to test at least three (3) new catalog titles in 1997. These catalogs will feature historically popular merchandise types and themes and are being designed to capitalize on the Company's proprietary database. The Company has budgeted less than $1.6 million, including inventory, to conduct the initial test of these three new catalogs. The Company is a Delaware corporation incorporated in 1992 and is the continuing operation of the Consumer Products Division of Wiland Services, Inc., which merged with Neodata Corporation in September 1992. The Company's executive offices are located at 1351 South Sunset Street, Longmont, Colorado 80501-6549, and its telephone number is (303) 772-9171. [PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS] THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company................................... 471,404 shares(1) Common Stock Offered by the Selling Stockholders...................... 1,128,596 shares Common Stock to be Outstanding After the Consummation of the Offering............................................................ 4,724,286 shares(1)(2) Use of Proceeds....................................................... Working Capital and General Corporate Purposes Nasdaq SmallCap Market/Proposed Nasdaq National Market Symbol......... CDIR Risk Factors.......................................................... The Common Stock offered hereby involves certain risks. See "Risk Factors." </TABLE> - --------------- (1) Excludes 240,000 shares of Common Stock subject to the Underwriters' over-allotment option. (2) Excludes 19,334 shares of Common Stock subject to options exercisable as of April 1, 1997. ------------------------ Colorful Images(R), Linda Anderson(R) and Colorful Images Presents Impressions(R) are registered service marks of the Company. The Company has applied for registration of its Linda Anderson's Collectibles(SM) service mark. Tradenames and trademarks of other companies appearing in this Prospectus are the property of their respective holders. [PHOTOGRAPHS AND DESCRIPTIONS OF MERCHANDISE FEATURED IN THE COMPANY'S CATALOGS] SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------------------------- ------------------- 1992(1) 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales.................................. $22,631 $15,936 $20,724 $42,147 $51,126 $11,584 $15,952 Gross profit............................... 8,851 5,876 9,318 19,861 24,292 5,643 7,993 Operating income (loss) from continuing operations............................... (5,629) (2,543) 1,403 638 2,562 263 951 Income (loss) from continuing operations before income taxes...................... (5,578) (2,509) 1,490 937 2,808 375 1,052 Income from discontinued operations........ 23,598 -- -- -- -- -- -- Net income (loss).......................... $20,028 $(2,252) $ 1,490 $ 843 $ 1,937 $ 266 $ 673 ======= ======= ======= ======= ======= ======= ======= Earnings (loss) per share from continuing operations............................... $ (0.99) $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15 Net earnings (loss) per share.............. $ 5.56 $ (0.56) $ 0.34 $ 0.19 $ 0.44 $ 0.06 $ 0.15 ======= ======= ======= ======= ======= ======= ======= Weighted average number of common shares and common share equivalents outstanding.............................. 3,604 3,999 4,323 4,404 4,442 4,442 4,482 ======= ======= ======= ======= ======= ======= ======= COMPANY OPERATING DATA: (EXPRESSED AS PERCENTAGES) Net sales growth (decline)................. (29.6)% 30.0% 103.3% 21.3% 37.7% Gross profit growth (decline).............. (33.6) 58.6 113.1 22.3 41.6 Operating profit growth (decline).......... 54.8 155.2 (54.5) 301.6 261.9 Gross margin............................... 36.9 45.0 47.1 47.5 48.7% 50.1 Operating margin........................... (16.0) 6.8 1.5 5.0 2.3 6.0 Net income (loss) margin................... (14.1) 7.2 2.0 3.8 2.3 4.2 SELECTED OPERATING DATA: Total active customers at period end(2).... 804 1,362 1,644 1,474 1,807 </TABLE> <TABLE> <CAPTION> AT MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................................................... $ 4,503 $ 14,603 Total assets.............................................................................. 14,061 24,161 Long-term debt............................................................................ 0 0 Lease obligations......................................................................... 0 0 Total stockholders' equity................................................................ 7,653 17,753 </TABLE> - --------------- (1) On September 30, 1992, Wiland Services, Inc. ("Wiland") completed a merger transaction with Neodata Corporation. Wiland had two business divisions: Consumer Products and Direct Marketing Services. Concepts Direct, Inc., formerly the Consumer Products division of Wiland, was created in connection with the merger and accounting conventions required that Concepts Direct be treated as the continuing operation. For financial reporting purposes, the operations of the Direct Marketing Services division of Wiland are treated as discontinued operations of Concepts Direct, Inc. (2) "Active customers" is defined as database records on customers who have purchased merchandise from the Company one or more times within the 12 months preceding the end of the period indicated. (3) Adjusted to reflect the sale by the Company of 471,404 shares of Common Stock offered hereby at an assumed price of $23.50 per share (the last sale price of the Common Stock as reported on June 9, 1997), less estimated underwriting discounts and offering expenses payable on a pro-rata basis by the Company and Selling Stockholders.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000891293_cti_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000891293_cti_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4583c890295cb67db5d0e0b87a49a0808be85785
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000891293_cti_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. This Prospectus contains forward- looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in these forward- looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." As used in this Prospectus, unless otherwise indicated or the context otherwise requires, all references to "cti" or the "Company" include Cell Therapeutics, Inc. and its wholly-owned subsidiary, CTI Technologies, Inc., and all references to "Johnson & Johnson" include Johnson & Johnson and its wholly-owned subsidiaries Ortho Biotech, Inc., The R.W. Johnson Pharmaceutical Research Institute (a division of Ortho Pharmaceutical Corporation) and Johnson & Johnson Development Corporation, or any of such entities, but does not include any other subsidiary of Johnson & Johnson. THE COMPANY Cell Therapeutics, Inc. ("cti" or the "Company") focuses on the discovery, development and commercialization of small molecule drugs for the treatment of cancer and inflammatory and immune diseases. The Company is conducting Phase III clinical trials for its lead product candidate, Lisofylline, which is being developed to prevent or reduce treatment-related toxicities, specifically serious and fatal infections, mucositis and treatment-related mortality, among cancer patients receiving high dose radiation and/or chemotherapy. In November 1996 cti entered into a Collaboration and License Agreement with Johnson & Johnson for the joint development and commercialization of Lisofylline. The Company has expended approximately $60.9 million from its inception to December 31, 1996 on research and development activities to build a unique drug discovery platform based on its proprietary technology in phospholipid chemistry. Oncology Cancer is the second leading cause of death in the United States, with approximately 1.4 million new cases diagnosed each year. At some point in their disease treatment, 70 percent of all cancer patients will receive radiation therapy and 50 percent of all newly diagnosed cancer patients will receive chemotherapy. Despite their benefits for treating cancer, there are significant limitations of, and complications associated with, radiation and chemotherapy which result in a high rate of treatment failure. The principal causes of treatment failure include treatment-related toxicities, multidrug resistance and tumor resistance to radiation. The Company is focusing its oncology development efforts on a portfolio of drugs that it believes will address the three principal causes of cancer treatment failure: (i) Lisofylline--a supportive care agent being investigated to prevent or reduce the incidence of serious and fatal infections, mucositis (damage to the epithelial cells lining the mouth, stomach and intestinal tract) and treatment-related mortality among cancer patients receiving high dose radiation and/or chemotherapy, (ii) CT- 2584--a novel anti-cancer drug under investigation for the treatment of patients with multidrug resistant tumors and (iii) tumor sensitizing agents being investigated to enhance sensitivity to radiation among tumors that have deleted or mutated tumor suppression genes. Lisofylline. Lisofylline is a synthetic small molecule drug in Phase III clinical trials among cancer patients receiving high dose radiation and/or chemotherapy. Unlike blood cell growth factors or chemotherapy protecting agents, Lisofylline is being developed to prevent or reduce the incidence of serious and fatal infections, mucositis and treatment-related mortality. More than 400 people have participated in over 15 clinical trials of Lisofylline to date. The Company has completed a Phase II trial in which Lisofylline resulted in a statistically significant reduction in mortality and the incidence of serious and fatal infections in cancer patients undergoing high dose radiation and/or chemotherapy followed by bone marrow transplantation ("BMT"). Based on the results of this trial, in the third quarter of 1996 the Company initiated a pivotal Phase III trial to more fully assess the safety and effectiveness of Lisofylline. The Company is also conducting Phase II and Phase III trials to investigate the effects of Lisofylline on the incidence of infection and mortality among patients with newly diagnosed acute myelogenous leukemia ("AML") undergoing high dose induction chemotherapy. Lisofylline is also being developed to prevent or reduce severe mucositis, for which cti is planning to commence a Phase II/III trial in the second half of 1997. CT-2584. CT-2584 is cti's novel small molecule drug under investigation for the treatment of patients with multidrug resistant cancers, including sarcomas, prostate, colon, lung and breast cancer. The Company initiated parallel Phase I trials at the Christie Hospital in the United Kingdom in November 1995 and at the Memorial Sloan Kettering Cancer Research Center in the United States in May 1996 for patients with advanced cancers. As of February 1, 1997, more than 25 patients have been treated with CT-2584 at five different dose levels without exhibiting bone marrow or gastrointestinal toxicity. Based on preliminary results from these trials, the Company currently anticipates starting disease- specific Phase II trials in the United States in the second half of 1997. Inflammatory Disease The Company believes that, in addition to its oncology applications, Lisofylline may be effective as an agent to prevent or reduce the incidence and severity of acute lung injury ("ALI") and mortality among patients requiring mechanical ventilation for respiratory failure following pneumonia, multiple traumatic injuries or sepsis. The Company has completed a Phase II feasibility study in patients suffering from septic shock. In January 1997 the National Heart, Lung and Blood Institute notified the Company that it had selected Lisofylline for investigation in a Phase II/III trial among patients experiencing ALI. This trial is expected to begin in the second half of 1997. Corporate Collaboration In November 1996 the Company entered into a Collaboration and License Agreement with Ortho Biotech, Inc. and The R.W. Johnson Pharmaceutical Research Institute (a division of Ortho Pharmaceutical Corporation), each of which are wholly-owned subsidiaries of Johnson & Johnson (collectively, "Johnson & Johnson"), for the joint development and commercialization of Lisofylline. Johnson & Johnson has committed to fund 60 percent of cti's budgeted development expenses. For each of 1997 and 1998 Johnson & Johnson has agreed, subject to certain termination rights, to fund up to $12.0 million of cti's budgeted development expenses per year. The Company and Johnson & Johnson will co-promote Lisofylline in the United States, and each will share equally in any resulting operating profits and losses. Johnson & Johnson will make additional payments to, and equity investments in, cti if certain milestones are achieved in the development and commercialization of Lisofylline. Johnson & Johnson has the exclusive right to develop and market Lisofylline, at its own expense, for markets other than the United States and Canada, subject to specified royalty payments to cti. Johnson & Johnson paid a $5.0 million license fee to and made a $5.0 million equity investment in cti upon execution of the agreement, and has agreed to purchase, concurrent with the closing of this Offering, a number of shares of Common Stock equal to ten percent of the shares sold at the closing of this Offering. Cell Therapeutics, Inc. was incorporated in Washington in September 1991. The Company has not received any revenue from the sale of products to date and does not expect to receive revenues from the sale of products for at least the next several years. The Company's executive offices are located at 201 Elliott Avenue West, Seattle, Washington 98119, and its telephone number is (206) 282- 7100. ------------ Except as otherwise specified, all information in this Prospectus assumes (i) no exercise of the Underwriters' over-allotment option, (ii) a 1-for-3 1/2 reverse stock split of the Common Stock which will be effected prior to the effective date of this Offering, (iii) the sale of 300,000 shares of Common Stock to Johnson & Johnson concurrent with the closing of this Offering at an assumed price of $15.00 per share, and (iv) the automatic conversion of all of the outstanding shares of the Company's Series A Convertible Preferred Stock and Series B Convertible Preferred Stock (collectively, the "Convertible Preferred Stock") upon the closing of this Offering. See "Underwriting," "Johnson & Johnson Stock Purchase" and "Description of Capital Stock." cti(R) is a registered trademark of the Company. This Prospectus contains trademarks and service marks of companies other than cti. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company................. 3,000,000 shares Johnson & Johnson Stock Purchase.................... 300,000 shares (1) Common Stock Outstanding after this Offering........ 12,846,824 shares (2) Use of Proceeds..................................... For clinical trials and other research and development activities, general corporate purposes and working capital. See "Use of Proceeds." Proposed Nasdaq National Market Symbol.............. CTIC </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> PERIOD FROM SEPTEMBER 4, 1991 (DATE OF YEARS ENDED DECEMBER 31, INCORPORATION) ---------------------------- TO DECEMBER 31, 1994 1995 1996 1996 -------- -------- -------- --------------- <S> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues.................... $ -- $ 100 $ 9,121 $ 9,221 Research and development ex- pense...................... 14,368 14,606 16,109 60,871 General and administrative expense.................... 5,283 6,144 7,602 24,743 -------- -------- -------- -------- Total operating expenses.. 19,651 20,750 23,711 85,614 Loss from operations........ (19,651) (20,650) (14,590) (76,393) Other income (expense)...... 152 658 662 2,321 -------- -------- -------- -------- Net loss.................... $(19,499) $(19,992) $(13,928) $(74,072) ======== ======== ======== ======== Pro forma net loss per share(3)................... $ (1.63) ======== Shares used in computation of pro forma net loss per share...................... 8,527 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ----------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and securities available-for- sale................................................. $30,987 $ 76,487 Working capital....................................... 26,300 71,800 Total assets.......................................... 37,002 82,502 Long-term obligations, less current portion........... 2,005 2,005 Deficit accumulated during development stage.......... (74,083) (74,083) Total shareholders' equity............................ 30,053 75,553 </TABLE> - -------- (1) Johnson & Johnson has agreed to purchase a number of shares of Common Stock equal to ten percent of the shares sold at the closing of this Offering directly from the Company in a private placement that will occur concurrent with the closing of this Offering (the "Johnson & Johnson Stock Purchase") at a per share price equal to the initial per share price to public set forth on the cover of this Prospectus. See "Johnson & Johnson Stock Purchase." (2) Excludes (i) 1,208,608 shares of Common Stock issuable upon exercise of stock options outstanding as of December 31, 1996 at a weighted average exercise price of $11.78 per share and (ii) 77,907 shares of Common Stock issuable upon exercise of warrants outstanding as of December 31, 1996 at a weighted average exercise price of $19.12 per share. See "Management--Stock Option Plans" and "Description of Capital Stock." (3) Computed on the basis described in Note 1 of Notes to Consolidated Financial Statements. (4) As adjusted to reflect the net proceeds from the sale of the 3,000,000 shares of Common Stock offered hereby and receipt by the Company of the estimated net proceeds therefrom, based upon an assumed initial public offering price of $15.00 per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. Also adjusted to reflect the Johnson & Johnson Stock Purchase. See "Use of Proceeds" and "Johnson & Johnson Stock Purchase."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000892286_prime_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000892286_prime_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..411341ca6f3ef139370dfdadbbab3a1b3564e814
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000892286_prime_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used herein are defined in the "Glossary of Terms" commencing on page [ ] hereof or elsewhere in this Prospectus. Unless the context requires otherwise, certain capitalized terms, when used in this Prospectus, relate only to the Certificates. Offered Certificates................. $[ ] Class A Certificates and $[ ] Class B Certificates. The Offered Certificates will be available for purchase in minimum denominations of $1,000 and in integral multiples thereof. The Offered Certificates initially will be represented by one or more certificates registered in the name of Cede, as the nominee of DTC. No Offered Certificate Owner will be entitled to receive a definitive certificate representing such person's interest, except in the event that Definitive Certificates are issued under the limited circumstances described in "Description of the Offered Certificates--Definitive Certificates." The Offered Certificates represent interests in the Trust only and do not represent interests in or recourse obligations of the Transferor, FDS, Federated, or any of their affiliates. Neither the Offered Certificates nor the underlying accounts or receivables are insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The Class B Certificates will be subordinated to fund certain payments with respect to the Class A Certificates as described herein, and therefore will bear more directly the credit and other risks associated with an investment in the Trust. Other Certificates................... $[ ] aggregate principal amount of Class C Certificates. The Class C Certificates are not being offered hereby. Other Series......................... The Trust has previously issued five other Series. See "Annex I: Other Series" for a summary of certain terms of these other Series. Additional Series may be issued from time to time by the Trust. See "Description of the Offered Certificates--Exchanges." Transferor........................... Prime Receivables Corporation, a Delaware corporation, is the Transferor. The principal executive offices of the Transferor are located at 9111 Duke Boulevard, Mason, Ohio 45040-8999, telephone number (513) 573-2037. Servicer............................. FDS National Bank ("FDS"), a federally chartered credit card bank, is the Servicer. The principal executive offices of the Servicer are located at 9111 Duke Boulevard, Mason, Ohio 45040-8999, telephone number (513) 573-2265. Trustee.............................. The Chase Manhattan Bank, a New York banking corporation, is the Trustee. Trust................................ The Trust was formed on December 15, 1992 (the "Initial Closing Date") pursuant to the Pooling and Servicing Agreement, which has been supplemented by the Supplements thereto relating to previously issued Series and which will be supplemented by the Series 1997-1 Supplement relating to the Certificates and the Supplements applicable to any other Series that may be issued in the future. As more fully described below and elsewhere herein, the Trust's assets include the Receivables and the proceeds thereof. Collections on the Receivables are deposited into the Collection Account which is maintained in the name of the Trust and allocated on each business day between Finance Charge Collections and Principal Collections. Finance Charge Collections and Principal Collections are allocated on each business day among the Transferor Interest and the respective interests of the certificateholders of each Series issued and outstanding from time to time in accordance with the Pooling and Servicing Agreement and applicable Supplements. In general, in accordance with such allocations and the provisions of the Pooling and Servicing Agreement and the applicable Supplements, (i) Finance Charge Collections and certain other amounts are applied on each business day to fund interest on the certificates of any Series then outstanding (including through deposits made to the Interest Funding Account), to pay certain fees and expenses, to cover investor default amounts, to reimburse investor charge-offs, and to make required payments to the Transferor, and (ii) Principal Collections and certain other amounts are applied on each business day to fund principal on the certificates of any Series then outstanding (including through deposits made to the Principal Funding Account or the Principal Account) and to make required payments to the Transferor, except that (x) during any revolving period applicable to a Series, except as described below, Principal Collections otherwise allocable to the certificateholders of such Series are paid to the holder of the Exchangeable Transferor Certificate or to the certificateholders of any other Series then outstanding and (y) Principal Collections allocated to the Class B Certificates and Class C Certificates are subject to being reallocated on each Distribution Date to cover shortfalls in amounts payable from Finance Charge Collections. Trust Assets......................... The Trust assets include (i) all Receivables existing from time to time in the Accounts, (ii) all funds collected from cardholders in respect of the Receivables, (iii) all right, title, and interest of the Transferor in, to, and under the Purchase Agreement, and (iv) proceeds of the foregoing. The Class C Certificates will be subordinated to fund payments of principal and interest on the Class A Certificates and the Class B Certificates, and the Class B Certificates will be subordinated to fund payments of principal and interest on the Class A Certificates, in each case as described in "Description of the Offered Certificates--Allocation Percentages," "-- Reallocated Principal Collections," "--Application of Collections," and "--Investor Charge-Offs." On and after the Class B Principal Payment Commencement Date, a portion of the fractional undivided interests in the Trust represented by the Exchangeable Transferor Certificate will be subordinated to fund payments of principal and interest on the Class B Certificates as described in "Description of the Offered Certificates-- Reallocation of Cash Flows," "--Coverage of Interest Shortfalls," and "--Investor Charge-Offs." In September 1993, FDS was organized as a federally chartered credit card bank, replaced Federated as the Servicer under the Pooling and Servicing Agreement, and became an Originator under the Purchase Agreement. Pursuant to the Purchase Agreement, the Transferor purchases all of the Receivables arising from time to time in the Accounts (including Automatic Additional Accounts and any Supplemental Accounts). Substantially all of the Accounts are owned by FDS. However, certain Accounts are owned by the other Originators. See "Federated's Credit Card Business" and "Description of the Receivables Purchase Agreement--Purchases of Receivables." Pursuant to the Pooling and Servicing Agreement, the Transferor automatically transfers to the Trust all of its right, title, and interest in and to the Receivables purchased by it pursuant to the Purchase Agreement. See "Risk Factors--Transfer of the Receivables; Insolvency Risk Considerations" for a discussion of certain legal considerations relating to such transfer. Pursuant to the Pooling and Servicing Agreement, the Transferor has the right under certain circumstances to cause the Receivables in any Removed Accounts to no longer be transferred to the Trust and to accept the transfer from the Trust of all of the Receivables in any Removed Accounts, whether such Receivables are then existing or thereafter created. Receivables.......................... The Receivables consist of amounts charged to the Accounts by holders of Federated Cards for goods and services, and all related monthly finance charges, late charges, returned check fees, proceeds allocable to finance charges, recoveries (net of collection expenses) on Receivables which were previously charged off as uncollectible, and all other fees billed to cardholders on the Accounts for a Monthly Period. All new Receivables arising in the Accounts are purchased by the Transferor pursuant to the Purchase Agreement and thereafter are automatically transferred to the Trust. Accordingly, the amount of Receivables fluctuates from day to day as new Receivables are generated and as existing Receivables are collected, written off as uncollectible, or otherwise adjusted. See "Risk Factors -- Effects of Certain Transactions," "Federated's Credit Card Business," and "The Accounts." The Receivables in the Trust are divided into two components: Principal Receivables and Finance Charge Receivables. At any time, Finance Charge Receivables will equal the product of the Finance Charge Receivable Factor and the aggregate amount of Eligible Receivables as of the date of determination and Principal Receivables will equal the remainder of such Eligible Receivables. Collections.......................... The Servicer deposits all collections of Receivables in the Collection Account. All amounts deposited in the Collection Account are allocated by the Servicer in the manner provided in the Pooling and Servicing Agreement between Principal Collections and Finance Charge Receivable Collections in accordance with the definitions thereof. All such amounts are then allocated in accordance with the respective interests of the Certificateholders, the certificateholders of each other Series, and the holder of the Exchangeable Transferor Certificate in the Principal Receivables and in the Finance Charge Receivables in the Trust. See "Description of the Offered Certificates--Allocation Percentages." Allocation of Trust Assets........... The Trust's assets will be allocated among the Class A Certificateholders' Interest, the Class B Certificateholders' Interest, the Class C Certificateholders' Interest, the interest of the certificateholders of each other Series, and the Transferor Interest. The interest of the certificateholders of any class of any Series in the assets of the Trust will be limited to the certificateholders' interest for such class and Series, and such certificateholders will not have any recourse against any assets of the Trust other than those allocated to such certificateholders' interest pursuant to the Pooling and Servicing Agreement and any applicable Supplement. The principal amount of the Transferor Interest fluctuates as the amount of Receivables in the Trust and the amount on deposit in the Excess Funding Account changes from time to time. The Transferor Interest represents the right to the assets of the Trust not allocated to the Certificateholders' Interest or the interest of the certificateholders of any other Series. The Class A Certificates will evidence undivided interests in the assets of the Trust allocated to the Class A Certificateholders' Interest and will represent the right to receive from such assets funds up to (but not in excess of) the amounts required to make payments of interest on the Class A Certificates at the Class A Certificate Rate and the payment of principal to the extent of the Class A Invested Amount (which may be less than the aggregate unpaid principal amount of the Class A Certificates, in certain circumstances, if the Investor Default Amount exceeds funds allocable thereto and the Class B Invested Amount and the Class C Invested Amount are reduced to zero) and the amounts on deposit in the Pre-Funding Account allocated to the Class A Certificates, if any, at the end of the Funding Period. See "Description of the Offered Certificates--Subordination of the Class B Certificates," "--Allocation Percentages," and "--Investor Charge-Offs." The Class B Certificates will evidence undivided interests in the assets of the Trust allocated to the Class B Certificateholders' Interest and will represent the right to receive from such assets funds up to (but not in excess of) the amounts required to make payments of interest on the Class B Certificates at the Class B Certificate Rate and the payment of principal to the extent of the Class B Invested Amount (which may be less than the aggregate unpaid principal amount of the Class B Certificates, in certain circumstances, if the Investor Default Amount exceeds funds allocable thereto and the Class C Invested Amount and, on and after the Class B Principal Payment Commencement Date, the Transferor Subordination Amount are reduced to zero) and the amounts on deposit in the Pre-Funding Account allocated to the Class B Certificates, if any, at the end of the Funding Period. See "Description of the Offered Certificates--Subordination of the Class B Certificates," "--Allocation Percentages," and "-- Investor Charge-Offs." The Class C Certificates will evidence undivided interests in the assets of the Trust allocated to the Class C Certificateholders' Interest and will represent the right to receive from such assets funds up to (but not in excess of) the amounts required to make the payment of principal to the extent of the Class C Invested Amount (which may be less than the aggregate unpaid principal amount of the Class C Certificates, in certain circumstances, if the Investor Default Amount exceeds funds allocable thereto and, on and after the Class B Principal Payment Commencement Date, the Transferor Subordination Amount is reduced to zero). See "Description of the Offered Certificates--Allocation Percentages," and "--Investor Charge-Offs." The Class C Certificates will not accrue interest and are not being offered hereby. The Invested Amount on the Closing Date will be $__________. The Invested Amount will, except as otherwise described herein, increase up to a maximum amount of $__________ (the "Full Invested Amount") during the Funding Period, remain fixed at the Full Invested Amount during the Revolving Period, and decline thereafter during any Amortization Period or Early Amortization Period as principal is paid on the Certificates. The Invested Amount is subject to increase during the Funding Period to the extent amounts are withdrawn from the Pre-Funding Account and paid to the Transferor. The aggregate principal amount of the Certificates will, except as otherwise described herein, remain fixed at the initial amount thereof during the period beginning on the Closing Date and ending with the commencement of the Accumulation Period or Early Amortization Period. Except for pro rata distributions of any amounts on deposit on the first day of the __________ Monthly Period in the Pre-Funding Account as described below in "Funding Period," no payment of principal with respect to the Class B Certificates may be made until the final principal payment of the Class A Invested Amount with respect to the Class A Certificates has been made. No payment of principal with respect to the Class C Certificates may be made until the final principal payment of the Class A Invested Amount with respect to the Class A Certificates and the final principal payment of the Class B Invested Amount with respect to the Class B Certificates have been made. See "Description of the Offered Certificates--Principal Payments." The Class A Certificateholders' Interest, the Class B Certificateholders' Interest, and the Class C Certificateholders' Interest will each include the right to receive (but only to the extent needed to make required payments under the Pooling and Servicing Agreement) varying percentages of Total Finance Charge Collections and Net Principal Collections during each Monthly Period. Finance Charge Collections prior to the occurrence of a Pay Out Event, and the amount of Receivables in Defaulted Accounts at all times, will be allocated on each business day to the Class A Certificateholders' Interest, the Class B Certificateholders' Interest, and the Class C Certificateholders' Interest based on the Class A Floating Allocation Percentage, the Class B Floating Allocation Percentage, and the Class C Floating Allocation Percentage, respectively. On and after the occurrence of a Pay Out Event, Finance Charge Collections will generally be allocated on each business day to the Certificateholders' Interest based on the Fixed/Floating Allocation Percentage. During the Revolving Period, except as described below under "--Reallocation of Principal Collections," all Net Principal Collections that would otherwise be allocated to the Certificateholders will be allocated on each business day and paid to the holder of the Exchangeable Transferor Certificate (except for Shared Principal Collections used to make payments to other Series). All Principal Collections allocated to the Certificateholders will generally be allocated on each business day on and prior to the Class B Principal Payment Commencement Date to the Class A Certificateholders' Interest based on the Fixed/Floating Allocation Percentage; provided, however, that during the Accumulation Period only, if the amount on deposit in the Principal Funding Account exceeds the Controlled Distribution Amount for the related Distribution Date, such excess will be treated as Shared Principal Collections. On and after the Class B Principal Payment Commencement Date, all Principal Collections allocated to the Certificateholders will generally be allocated on each business day to the Class B Certificateholders' Interest based on the Fixed/Floating Allocation Percentage. See "Description of the Offered Certificates--Allocation Percentages." Exchanges............................ The Pooling and Servicing Agreement provides that the Trustee may issue two types of certificates: (i) investor certificates in one or more Series, each of which may have multiple classes of certificates, of which one or more of such classes may be transferable, and (ii) the Exchangeable Transferor Certificate. The Exchangeable Transferor Certificate will evidence the Transferor Interest, will be held by the Transferor and will be transferable only as provided in the Pooling and Servicing Agreement. The Pooling and Servicing Agreement also provides that, pursuant to any one or more Supplements, the holder of the Exchangeable Transferor Certificate may tender the Exchangeable Transferor Certificate or, if provided in the relevant Supplement, certificates comprising any Series and the Exchangeable Transferor Certificate, to the Trustee in exchange for certificates comprising one or more new Series and a reissued Exchangeable Transferor Certificate. However, at all times, the interest in the Principal Receivables in the Trust and amounts on deposit in the Excess Funding Account represented by the Transferor Interest must equal or exceed the Minimum Transferor Interest. Under the Pooling and Servicing Agreement, the Transferor may define, with respect to any Series, the Principal Terms of the Series. See "Description of the Offered Certificates-- Exchanges." The Transferor may offer any Series, or any class of any Series, for sale in transactions either registered under the Securities Act or exempt from registration thereunder, directly or through the Underwriters or one or more other underwriters or placement agents, in fixed-price offerings or in negotiated transactions or otherwise. The Trust has previously issued five Series: Series 1992-1; Series 1992-2; Series 1992-3; Series 1995-1; and 1996-1. The Transferor may from time to time cause the Trust to issue additional Series. Under the Pooling and Servicing Agreement, an Exchange of the Exchangeable Transferor Certificate for certificates comprising one or more Series and a reissued Exchangeable Transferor Certificate may occur only upon delivery to the Trustee of the following: (i) a Supplement specifying the Principal Terms of each Series to be issued in connection therewith, (ii) an opinion of counsel to the effect that the certificates of such Series will be characterized as indebtedness or as partnership interests for federal income tax purposes under existing law, and that the issuance of such Series will not have a material adverse effect on the federal income tax characterization of any outstanding Series, (iii) if required by such Supplement, the form of Enhancement and an appropriate Enhancement agreement with respect thereto, (iv) written confirmation from each Rating Agency that the Exchange will not result in such Rating Agency reducing or withdrawing its rating on any then outstanding Series rated by it, (v) an officer's certificate of the Transferor stating that, after giving effect to such Exchange, the Transferor Interest would be at least equal to the Minimum Transferor Interest, and (vi) the existing Exchangeable Transferor Certificate and, if applicable, the certificates representing the Series to be exchanged. See "Description of the Offered Certificates--Exchanges." Interest............................. Interest on the Offered Certificates will be payable on [ ] and on each Distribution Date thereafter, in an amount equal to (i) with respect to the Class A Certificates, one-twelfth of the product of the Class A Certificate Rate and the outstanding principal balance of the Class A Certificates as of the preceding Record Date (or in the case of the first Distribution Date, the initial principal amount of the Class A Certificates) and (ii) with respect to the Class B Certificates, one-twelfth of the product of the Class B Certificate Rate and the outstanding principal balance of the Class B Certificates as of the preceding Record Date (or in the case of the first Distribution Date, the initial principal amount of the Class B Certificates). Interest for the first Distribution Date will include accrued interest at the applicable Certificate Rate from the Closing Date through [ ] (calculated as though there were only 30 days in [ ]). Interest will be calculated on the basis of a 360-day year of twelve 30-day months. Interest payments on the Class A Certificates on each Distribution Date will be funded from the portion of Total Finance Charge Collections during the preceding Monthly Period and from certain other funds allocated as set forth in the Pooling and Servicing Agreement to the respective classes of the Certificates and deposited on each business day during such Monthly Period in the Interest Funding Account. See "Description of the Offered Certificates--Interest Payments." Subject to the prior payment of interest on the Class A Certificates (and, as to a portion thereof, to the prior payment of certain other amounts), interest payments on the Class B Certificates on each Distribution Date will be funded from the portion of Total Finance Charge Collections during the preceding Monthly Period and from certain other funds allocated as set forth in the Pooling and Servicing Agreement to the respective classes of the Certificates and deposited on each business day during such Monthly Period in the Interest Funding Account. See "Description of the Offered Certificates--Interest Payments" and "--Application of Collections." Expected Principal Payment Date...... Principal is scheduled to be paid in full on the [ ] Distribution Date (the "Class A Expected Final Payment Date") for the Class A Certificates, and on the [ ] Distribution Date (the "Class B Expected Final Payment Date") for the Class B Certificates, but may be paid earlier in certain circumstances described in "Description of the Offered Certificates--Pay Out Events." However, no payment of principal to the Class B Certificateholders will be made until the Class A Invested Amount has been paid in full. Unpaid principal, together with interest, will be payable monthly to Class A Certificateholders following the Class A Expected Final Payment Date to the extent principal has not been paid in full on the Class A Expected Final Payment Date, and unpaid principal, together with interest, will be payable monthly to Class B Certificateholders following the Class B Expected Final Payment Date to the extent principal has not been paid in full on the Class B Expected Final Payment Date. However, no payments of principal or interest will be made on the Certificates after the Series 1997-1 Termination Date, regardless of whether principal and interest have been paid in full with respect thereto. See "Description of the Offered Certificates--Final Payment of Principal; Termination." Revolving Period..................... During the Revolving Period, collections of Principal Receivables otherwise allocable to the Certificateholders' Interest (other than any Shared Principal Collections allocated to the certificateholders' interests of other Series) will, subject to certain limitations, be paid from the Trust to the holder of the Exchangeable Transferor Certificate. See "Description of the Offered Certificates--Pay Out Events" for a discussion of the events which might lead to the termination of the Revolving Period for the Series 1997-1 Certificates prior to the end of the [ ] Monthly Period. The Accumulation Period is scheduled to begin with the [ ] Monthly Period. Subject to the conditions set forth herein under "Description of the Offered Certificates--Postponement of Accumulation Period," the day on which the Revolving Period ends and the Accumulation Period begins may be delayed to no later than the close of business on the last day of the [ ] Monthly Period. Principal Payments; Accumulation Period................ Unless a Pay Out Event shall have occurred with respect to the Series 1997-1 Certificates, on each business day during the Accumulation Period an amount equal to the lesser of (i) Net Principal Collections allocable to the Class A Certificateholders' Interest plus Shared Principal Collections, if any, from other Series allocable to the Class A Certificates, plus certain other amounts comprising Class A Monthly Principal, and (ii) the Controlled Amortization Amount for such Monthly Period plus any Accumulation Shortfall arising from prior Monthly Periods, will be deposited in the Principal Funding Account. On any business day when the amount on deposit in the Principal Funding Account equals or exceeds the Class A Controlled Distribution Amount for the related Distribution Date, the balance of all such funds remaining on deposit in the Collection Account will be treated as Shared Principal Collections and may be used to make payments on other Series or classes of such Series which may be accumulating or amortizing. The funds then on deposit in the Principal Funding Account will be paid to the Class A Certificate holders on the Class A Expected Final Payment Date. If the funds available for distribution to the Class A Certificateholders on the Class A Expected Final Payment Date are insufficient to pay the Class A Invested Amount in full, all such funds will be distributed to the Class A Certificateholders at such time. Thereafter, until the Class A Invested Amount has been paid in full or the Series 1997-1 Termination Date has occurred, principal and interest will be payable to Class A Certificateholders monthly on each Special Payment Date. Upon the payment in full of the Class A Invested Amount and on each business day thereafter, an amount equal to the lesser of (i) Net Principal Collections allocable to the Class B Certificateholders' Interest plus Shared Principal Collections, if any, from other Series allocable to the Class B Certificates, plus certain other amounts comprising Class B Monthly Principal, and (ii) the Class B Invested Amount, will be deposited in the Principal Account. On any business day when the amount on deposit in the Principal Account equals or exceeds the Class B Invested Amount, the balance of all such funds remaining on deposit in the Collection Account will be treated as Shared Principal Collections and may be used to make payments on other Series or classes of such Series which may be accumulating or amortizing. The funds then on deposit in the Principal Account will be paid to the Class B Certificateholders on the Class B Expected Final Payment Date. If the funds available for distribution to the Class B Certificateholders on the Class B Expected Final Payment Date are insufficient to pay the Class B Invested Amount in full, all such funds will be distributed to the Class B Certificateholders at such time. Thereafter, until the Class B Invested Amount has been paid in full or the Series 1997-1 Termination Date has occurred, principal and interest will be payable to Class B Certificateholders monthly on each Special Payment Date. Principal will be distributable to the Class B Certificateholders only after the Class A Invested Amount has been paid in full, and principal will be distributed to the Class C Certificateholders only after the Class A Invested Amount and the Class B Invested Amount have been paid in full. See "Description of the Offered Certificates--Application of Collections--Payments of Principal." [ ] of the [ ] other Series previously issued by the Trust have accumulation or amortization periods that are scheduled to begin prior to the date on which the Accumulation Period is scheduled to begin, and all [ ] of such other Series are subject to early amortization periods similar to the Early Amortization Period. Other Series which may be offered by the Trust in the future may or may not have amortization periods like the Accumulation Period or the Early Amortization Period, and such periods may have different lengths and begin on different dates than the Accumulation Period or the Early Amortization Period. Thus, certain Series may be in their revolving periods, while others are in periods during which collections of Principal Receivables are distributed to such other Series. In addition, other Series may allocate Principal Receivables based upon different investor percentages. See "Description of the Offered Certificates--Exchanges" for a discussion of the potential terms of other Series and "Annex I: Other Series" for a summary of certain terms of each previously issued Series. Early Amortization Period............ During any Early Amortization Period, Net Principal Collections allocable to the Certificateholders' Interest and certain other amounts (including Shared Principal Collections from any other Series) will no longer be reinvested in the Trust or otherwise used to maintain the Certificateholders' Interest, but instead will be distributed monthly on each Distribution Date beginning with the first Special Payment Date (which will be the first Distribution Date following the Monthly Period in which a Pay Out Event occurs or is deemed to have occurred) as principal payments to the Class A Certificateholders in respect of the Class A Invested Amount and, following the payment in full of the Class A Invested Amount, to the Class B Certificateholders in respect of the Class B Invested Amount and, following the payment in full of the Class B Invested Amount, to the Class C Certificateholders in respect of the Class C Invested Amount until the Class C Invested Amount is paid in full. See "Description of the Offered Certificates--Pay Out Events." Paired Series........................ During the Funding Period, Series 1997-1 will be paired with Series 1992-1. For a description of the principal terms of Series 1992-1, see "Annex I--Other Series." Series 1997-1 will be prefunded from the proceeds of the sale of the Offered Certificates with an initial deposit to the Pre-Funding Account in an amount up to the excess of the outstanding principal balance of the Series 1997-1 Certificates over the amount on deposit in the principal funding account for the benefit of Series 1992-1 on the Closing Date. It is estimated that the excess of the outstanding principal balance of the Series 1997-1 Certificates over the amount on deposit in the principal funding account for the benefit of Series 1992-1 will be approximately $____ million on the Closing Date. As principal is paid or deposited in the principal funding account established for the benefit of the Series 1992-1 Certificates (the "Series 1992-1 Principal Funding Account") an equal amount of funds on deposit in the Pre-Funding Account will be released (which funds will be distributed to the Transferor) and the Invested Amount of Series 1997-1 will increase by a corresponding amount. The expected final payment date for Series 1992-1 is February 17, 1998. If a Pay Out Event occurs with respect to Series 1992-1 or Series 1997-1 during the Funding Period for Series 1997-1, the numerators used in the Fixed/Floating Allocation Percentage for each of Series 1997-1 and Series 1992-1 will be reset to be equal to the respective invested amounts of each such Series at the end of the last day prior to the occurrence of such Pay Out Event resulting in a possible reduction of the percentage of Principal Collections allocated to Series 1992-1 if such event allowed the payment of principal at such time to Series 1997-1 and required reliance by Series 1992-1 on clause (b) of the denominator of the Fixed/Floating Allocation Percentage for Series 1992-1. See "Risk Factors--Master Trust Considerations" and "Description of the Offered Certificates--Paired Series." Funding Period....................... During the period (the "Funding Period") from and including the Closing Date to and including the earliest of (i) the first day on which the amount on deposit in the Pre-Funding Account is reduced to zero as a result of increases in the aggregate amount of Principal Receivables in the Trust; (ii) the day immediately preceding the day on which a Pay Out Event is deemed to occur; and (iii) the first day of the _______ Monthly Period, the Pre-Funded Amount will be maintained in a trust account to be established with the Trustee (the "Pre-Funding Account"). The "Pre-Funded Amount" will equal the amount of the initial deposit to the Pre-Funding Account, less the amounts of any increases in the Invested Amount pursuant to the Series 1997-1 Supplement as principal is paid on or deposited in the principal funding account for the benefit of the Series 1992-1 Certificates. (See "--Paired Series" above.) Funds on deposit in the Pre-Funding Account will be invested by the Trustee at the direction of the Servicer in Eligible Investments that by their terms convert into cash within a finite period of time. Investment earnings on such funds will not be treated as amounts on deposit in the Pre-Funding Account for purposes of the distributions described below. For a discussion of the treatment of investment earnings on such funds, see "Description of the Offered Certificates-- Application of Collections-- Payment of Fees, Interest, and Other Items." During the Funding Period, funds on deposit in the Pre-Funding Account will be withdrawn and paid to the Transferor to the extent of any increases in the Invested Amount. Although no assurance can be given with respect thereto, the Transferor expects that the funds on deposit in the Pre-Funding Account will be fully invested in Receivables by the ___________ Monthly Period. Following the occurrence of an Early Amortization Event during the Funding Period, the amounts remaining on deposit in the Pre-Funding Account will be payable as principal first to the Class A Certificateholders until the sum of the Class A Invested Amount and the Class A Percentage of the Pre-Funded Amount on the date of the occurrence of the Pay Out Event (the "Class A Pre-Funded Amount") is paid in full and then to the Class B Certificateholders. In the absence of a Pay Out Event, any amount in the Pre-Funding Account at the end of the Funding Period will be withdrawn and distributed on the next succeeding Distribution Date to the Class A Certificateholders and the Class B Certificateholders pro rata based on the Class A Invested Amount and the Class B Invested Amount. [In certain circumstances, a Prepayment Premium will also be payable in connection with the distribution of any Pre-Funded Amount to the Class A Certificateholders and the Class B Certificateholders. See "Description of the Offered Certificates--Pre-Funding Account."] Shared Principal Collections......... To the extent that Principal Collections and other amounts that are allocated to the certificateholders' interest of any class of any Series are not needed to make payments to the certificateholders of such class or required to be deposited in the principal funding account for a Series, they may be applied to cover principal payments due to or for the benefit of certificateholders of another Series, including principal payments which the Transferor elects to make with respect to the Variable Funding Certificate. Any such reallocation will not result in a reduction in the certificateholders' interest of the Series to which such Principal Collections were initially allocated. See "Description of the Offered Certificates--Application of Collections." Excess Funding Account............... At any time during which no Series is in an accumulation or amortization period (including any early amortization period), or the principal funding account for a Series is fully funded for an applicable period, and the Transferor Interest is less than the Minimum Transferor Interest, funds (to the extent available therefor as described herein) otherwise payable to the Transferor will be deposited in the Excess Funding Account on each business day until the Transferor Interest is equal to the Minimum Transferor Interest. Funds on deposit in the Excess Funding Account will be withdrawn and paid to the Transferor to the extent that on any day the Transferor Interest exceeds the Minimum Transferor Interest as a result of the addition of new Receivables to the Trust or allocated to one or more Series when they are in accumulation or amortization periods (including any early amortization period). The Transferor may, at its option on any business day, deposit funds in the Excess Funding Account to the extent necessary to maintain the Minimum Transferor Interest or the Minimum Aggregate Principal Receivables or to permit the designation of Removed Accounts. Any funds on deposit in the Excess Funding Account at the beginning of the Accumulation Period will be deposited in the Principal Funding Account to the extent of Class A Monthly Principal, Class B Monthly Principal, or Class C Monthly Principal, as applicable, with respect to any Distribution Date. No funds will be deposited in the Excess Funding Account during any accumulation period, amortization period, or early amortization period for any Series until the principal funding account for such Series has been fully funded with respect to any Distribution Date or the investor certificates of such Series have been paid in full. See "Description of the Offered Certificates--Excess Funding Account." Distribution of Finance Charge Collections Allocable to Certificateholders................. Available Series Finance Charge Collections allocable to the Certificateholders' Interest on each business day will be applied in the following order of priority: (i) an amount equal to the amount of Class A Monthly Interest and any overdue Class A Monthly Interest not previously deposited in the Interest Funding Account for such Monthly Period, together with interest on any overdue interest amounts, will be deposited in the Interest Funding Account for distribution to the Class A Certificateholders; (ii) an amount equal to the amount of Class B Monthly Interest and any overdue Class B Monthly Interest not previously deposited in the Interest Funding Account for such Monthly Period, together with interest on any overdue interest amounts, will be deposited in the Interest Funding Account for distribution to the Class B Certificateholders; (iii) an amount equal to the Monthly Servicing Fee plus any Monthly Servicing Fee that was due but not paid on any prior business day will be paid to the Servicer; (iv) an amount equal to the Investor Default Amount on such business day and, to the extent not previously paid, the Investor Default Amount for each prior business day in such Monthly Period, will be (a) during the Revolving Period, treated as Shared Principal Collections, (b) during the Amortization Period, on or prior to the Class B Principal Payment Commencement Date, deposited for distribution to the Class A Certificateholders, (c) during the Amortization Period, on and after the Class B Principal Payment Commencement Date, deposited for distribution to the Class B Certificateholders, or (d) during the Amortization Period, on and after the Class C Principal Payment Commencement Date, deposited for distribution to the Class C Certificateholders; (v) an amount equal to unreimbursed Class A Investor Charge-Offs on such business day will be (a) treated as Shared Principal Collections during the Revolving Period, (b) deposited for distribution to Class A Certificateholders to the extent included in Class A Monthly Principal during the Accumulation Period, (c) deposited for distribution to the Class A Certificateholders during any Early Amortization Period, or (d) deposited for distribution to the Class B Certificateholders on and after the Class B Principal Payment Commencement Date; (vi) an amount equal to the accrued and unpaid interest on the outstanding aggregate principal amount of the Class B Certificates not previously deposited in the Interest Funding Account for such Monthly Period will be deposited in the Interest Funding Account for distribution to the Class B Certificateholders; (vii) an amount equal to unreimbursed Class B Investor Charge-Offs on such business day and any reductions of the Class B Invested Amount due to Reallocated Class B Principal Collections will be (a) during the Revolving Period, treated as Shared Principal Collections, (b) during the Amortization Period, on or prior to the Class B Principal Payment Commencement Date, deposited for distribution to Class A Certificateholders, or (c) during the Amortization Period, on and after the Class B Principal Payment Commencement Date, deposited for distribution to Class B Certificateholders; (viii) an amount equal to unreimbursed Class C Investor Charge-Offs on such business day and any reductions of the Class C Invested Amount due to Reallocated Class C Principal Collections will be (a) during the Revolving Period, treated as Shared Principal Collections, (b) during the Amortization Period, on or prior to the Class B Principal Payment Commencement Date, deposited for distribution to Class A Certificateholders, (c) during the Amortization Period, on and after the Class B Principal Payment Commencement Date and on or prior to the Class C Principal Payment Commencement Date, deposited for distribution to Class B Certificateholders, or (d) during the Amortization Period, on and after the Class C Principal Payment Commencement Date, deposited for distribution to the Class C Certificateholders; and (ix) the remainder will be treated as Excess Finance Charge Collections. See "Description of the Offered Certificates--Application of Collections--Payment of Fees, Interest, and Other Items." Coverage of Interest Shortfalls From Transferor Finance Charge Collections........................ To the extent of any shortfall in the amount of Total Finance Charge Collections allocable to the Certificateholders' Interest due to the accumulation of principal in the Principal Funding Account or cash in the Excess Funding Account, on each business day the Servicer will apply Transferor Finance Charge Collections in an amount equal to the excess of (i) the product of (a) the Base Rate and (b) the product of (x) the sum of the amounts on deposit in the Excess Funding Account and the Principal Funding Account and (y) the number of days elapsed since the previous business day divided by the actual number of days in such year over (ii) the aggregate amount of all earnings since the previous business day available from the Cash Equivalents in which funds on deposit in the Excess Funding Account and the Principal Funding Account are invested in the manner specified for application of Total Finance Charge Collections. Sharing of Excess Finance Charge Collections......... Total Finance Charge Collections allocable to any Series on any business day in excess of the amounts necessary to make required payments with respect to such Series on such business day will be applied to cover any shortfalls with respect to amounts payable from Finance Charge Collections allocable to any other Series then outstanding, pro rata based upon the amount of the shortfall, if any, with respect to such other Series. Any Excess Finance Charge Collections remaining after covering shortfalls with respect to all outstanding Series will be paid to the holder of the Exchangeable Transferor Certificate; provided, however, that on any business day during any early amortization period relating to any Series, the Trustee will deposit any such remaining Excess Finance Charge Collections from such Series into the Collection Account and will add such funds to the amounts allocated to Finance Charge Collections for such Series on each subsequent business day in such Monthly Period until the last business day of the related Monthly Period, when the aggregate amount of such remaining Finance Charge Collections will be distributed as Excess Finance Charge Collections. Reallocation of Principal Collections.............. On each Determination Date, to the extent that (i) the aggregate amount to be paid for the related Monthly Period in respect of interest on the Class A Certificates, reimbursements of Class A Investor Charge-Offs, and certain other items, or (ii) the aggregate amount to be paid in respect of interest on the Class B Certificates, reimbursements of Class B Investor Charge-Offs and reductions in the Class B Invested Amount due to Reallocated Class B Principal Collections, and certain other items, exceeds the amount of Available Series Finance Charge Collections applied with respect thereto, Principal Collections otherwise allocable to the Class C Certificateholders' Interest with respect to the related Monthly Period and, if necessary, Principal Collections otherwise allocable to the Class B Certificateholders' Interest with respect to the related Monthly Period will be applied to the payment of such items in accordance with the priorities set forth in the Pooling and Servicing Agreement. The Class C Invested Amount will be reduced (but not below zero) by the amount of such Reallocated Principal Collections. If the Class C Invested Amount is reduced to zero, the Class B Invested Amount will be reduced (but not below zero) by the amount by which such Reallocated Principal Collections exceeded the Class C Invested Amount. See "Description of the Offered Certificates--Reallocated Principal Collections." The Class B Invested Amount and the Class C Invested Amount will thereafter be increased (but not in excess of the respective unpaid principal balances thereof) on any business day by the amount of Available Series Finance Charge Collections allocated and available for such purposes as described in clauses (vii) and (ix), respectively, of "--Distribution of Finance Charge Collections Allocable to Certificateholders." Transferor Subordination Amount............................. On and after the Class B Principal Payment Commencement Date, to the extent of any shortfall in the amount available to make required payments of interest accrued with respect to the outstanding aggregate principal amount of the Class B Certificates or to cover the Investor Default Amount or any Class B Investor Charge-Offs which remain unpaid after the application of Transferor Finance Charge Collections and Excess Finance Charge Collections, Principal Collections and any remaining Finance Charge Collections allocated to the holder of the Exchangeable Transferor Certificate in an amount not to exceed the least of the Transferor Subordination Amount, the Transferor Interest on such day, and the amount of such shortfall, will be treated as Finance Charge Collections allocable to the payment of such shortfall on the Class B Certificates. Investor Default Amount; Investor Charge-Offs............... If on any Determination Date the aggregate Investor Default Amount, if any, for each business day in the preceding Monthly Period exceeded the sum of (i) the aggregate amount of Available Series Finance Charge Collections applied to the payment thereof as described in clause (iv) of "--Distribution of Finance Charge Collections Allocable to Certificateholders," (ii) the aggregate amount of Transferor Finance Charge Collections, Excess Finance Charge Collections, and on and after the Class B Principal Payment Commencement Date, collections allocated to the holder of the Exchangeable Transferor Certificate to the extent of the Transferor Subordination Amount, in each case to the extent applied to the payment thereof as described in "--Coverage of Interest Shortfalls from Transferor Finance Charge Collections," "--Sharing of Excess Finance Charge Collections," and "--Transferor Subordination Amount," respectively, and (iii) any Reallocated Principal Collections applied with respect thereto, then a portion of the Class C Invested Amount equal to such insufficiency (but not in excess of the aggregate Investor Default Amount for such Monthly Period) will be deducted from the Class C Invested Amount to avoid a charge-off with respect to the Class A Certificates and the Class B Certificates. The Class C Invested Amount will thereafter be increased (but not in excess of the unpaid principal balance of the Class C Certificates) on any business day by the amount of Available Series Finance Charge Collections allocated and available for such purpose as described in clause (ix) of "--Distribution of Finance Charge Collections Allocable to Certificateholders." If the Class C Invested Amount is reduced to zero, prior to the Class B Principal Payment Commencement Date, a portion of the Class B Invested Amount equal to the remaining insufficiency (but not in excess of the aggregate Investor Default Amount for such Monthly Period) will be deducted from the Class B Invested Amount to avoid a charge-off with respect to the Class A Certificates. The Class B Invested Amount will thereafter be increased (but not in excess of the unpaid principal balance of the Class B Certificates) on any business day by the amount of Available Series Finance Charge Collections allocated and available for that purpose as described in clause (vii) of "--Distribution of Finance Charge Collections Allocable to Certificateholders." On and after the Class B Principal Payment Commencement Date, if the Class C Invested Amount is reduced to zero, a portion of the Transferor Subordination Amount equal to the remaining insufficiency (but not in excess of the aggregate Investor Default Amount for such Series for such Monthly Period) will be deducted from the Transferor Subordination Amount to avoid a charge-off with respect to the Class B Certificates. If the Class B Invested Amount is reduced to zero prior to the Class B Principal Payment Commencement Date, a portion of the Class A Invested Amount equal to the remaining insufficiency (but not in excess of the aggregate Investor Default Amount for such Monthly Period) will be deducted from the Class A Invested Amount. The Class A Invested Amount will thereafter be increased (but not in excess of the unpaid principal balance of the Class A Certificates) on any business day by the amount of Available Series Finance Charge Collections allocated and available for that purpose as described in clause (v) of "--Distribution of Finance Charge Collections Allocable to Certificateholders." See "Description of the Offered Certificates--Investor Charge-Offs." Subordination of the Class B Certificates and the Class C Certificates....................... The Class B Certificates will be subordinated to fund payments of principal and interest on the Class A Certificates. The Class C Certificates will be subordinated to fund payments of principal and interest on the Class A Certificates and the Class B Certificates. To the extent the Class B Invested Amount or the Class C Invested Amount is reduced, the percentage of collections of Finance Charge Receivables allocated to the Class B Certificateholders or the Class C Certificateholders, as applicable, in subsequent Monthly Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class B Invested Amount or the Class C Invested Amount is not reimbursed, the amount of principal distributable to the Class B Certificateholders or the Class C Certificateholders, as applicable, will be reduced. Principal payments with respect to the Class B Certificates will not be made until the final payment of the Class A Invested Amount has been made to the Class A Certificateholders. Principal payments with respect to the Class C Certificates will not be made until the final payment of the Class A Invested Amount has been made to the Class A Certificateholders and the final payment of the Class B Invested Amount has been made to the Class B Certificateholders. See "Description of the Offered Certificates--Subordination of the Class B Certificates," "--Allocation Percentages," "--Reallocated Principal Collections," "--Application of Collections," and "--Investor Charge-Offs." Optional Repurchase.................. The Class A Certificates, the Class B Certificates, and the Class C Certificates will be subject to optional repurchase by the Transferor on any Distribution Date after the Invested Amount is reduced to an amount less than or equal to 20% of the highest Invested Amount outstanding at any time, if certain conditions set forth in the Pooling and Servicing Agreement are met. The Certificates are also subject to optional repurchase by the Transferor on the second Distribution Date following the Class A Expected Final Payment Date. The repurchase price will be equal to the Invested Amount plus accrued and unpaid interest on the Class A Certificates and the Class B Certificates through the day preceding the Distribution Date on which the repurchase occurs. Tax Status........................... In the opinion of Tax Counsel, the Class A Certificates and the Class B Certificates will be characterized as debt of the Transferor for federal income tax purposes. Under the Pooling and Servicing Agreement, the Transferor, the Servicer, the Class A Certificateholders, and the Class B Certificateholders will agree to treat the Class A Certificates and the Class B Certificates as debt of the Transferor for federal, state, and other tax purposes. See "Certain Federal Income Tax Consequences" for additional information concerning the application of federal income tax laws. ERISA Considerations................. Under regulations issued by the Department of Labor, if the Trust's assets were deemed to be "plan assets" of an employee benefit plan, there is uncertainty as to whether existing exemptions from the "prohibited transaction" rules of ERISA and the Code would apply to all transactions involving the Trust's assets. The Trust's assets would not be deemed "plan assets" of an employee benefit plan holding interests in the Class A Certificates if certain conditions are met, including that interests in the Class A Certificates be held by at least 100 persons independent of the Transferor and each other. The Class A Underwriters expect, although no assurance can be given, that the Class A Certificates will be held by at least 100 such persons, and the Transferor anticipates that the other conditions of the "publicly offered security" exemption contained in the regulations will be met. However, no monitoring or other measures will be taken to ensure that any such conditions will be met. Accordingly, employee benefit plans contemplating purchasing the Class A Certificates should consult their counsel before making a purchase. See "Employee Benefit Plan Considerations." The Class B Certificates may not be acquired directly or indirectly by any employee benefit plan subject to ERISA, by any individual retirement account, or by certain other employee benefit accounts. The Pooling and Servicing Agreement and each Class B Certificate will provide that by accepting and holding a Class B Certificate, each Class B Certificateholder will be deemed to have represented and warranted that it is not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii) an entity whose underlying assets include plan assets by reason of a plan's investment in the entity. Offered Certificate Rating........... It is a condition to the issuance of the Class A Certificates that they have an initial rating of "AAA" or its equivalent from the Rating Agencies. It is a condition to the issuance of the Class B Certificates that they have an initial rating of at least "A" or its equivalent from the Rating Agencies. See "Risk Factors--Certificate Rating." Risk Factors......................... See "Risk Factors" commencing on page 23 hereof for a description of certain factors that should be considered carefully in evaluating any investment in the Certificates offered hereby. RISK FACTORS LIMITED LIQUIDITY There is currently no market for the Offered Certificates. The Underwriters intend to make a market in each class of the Offered Certificates purchased by them from the Transferor, but are not obligated to do so. There is no assurance that a secondary market will develop or, if it does develop, that it will provide Offered Certificate Owners with liquidity of investment or that it will continue until the Offered Certificates are paid in full. TRANSFER OF THE RECEIVABLES; INSOLVENCY RISK CONSIDERATIONS The Purchase Agreement provides that the Originators transfer all of their respective right, title, and interest in and to the Receivables owned by each of them from time to time to the Transferor. However, a court could treat such transactions as an assignment of collateral as security for the benefit of the Transferor. Accordingly, each of the Originators has granted a security interest in the Receivables to the Transferor pursuant to the Purchase Agreement and has taken certain actions required to perfect the Transferor's security interest in the Receivables. In addition, each of the Originators has warranted that if the transfer to the Transferor is deemed to be a grant of a security interest in the Receivables, the Transferor will have a perfected security interest therein, subject only to Permitted Liens. If the transfer of the Receivables to the Transferor is deemed to create a security interest therein under the UCC, a tax or government lien on the property of any of the Originators arising before the subject Receivables came into existence may have priority over the Transferor's interest in the Receivables. In the event of the insolvency of any of the Originators, certain administrative expenses may also have priority over the Transferor's interest in such Receivables. Although the Transferor has transferred and will transfer interests in the Receivables to the Trust, a court could treat such transactions as an assignment of collateral as security for the benefit of holders of certificates issued by the Trust. It is possible that the risk of such treatment may be increased by the retention by the Transferor of the Exchangeable Transferor Certificate and any class of certificates of any Series that the Transferor may hold from time to time. The Transferor has represented and warranted in the Pooling and Servicing Agreement that the transfer of the Receivables to the Trust is either a valid transfer and assignment of the Receivables to the Trust or the grant to the Trust of a security interest in the Receivables. The Transferor has taken certain actions required to perfect the Trust's security interest in the Receivables, and has warranted that if the transfer to the Trust is deemed to be a grant to the Trust of a security interest in the Receivables, the Trustee will have a perfected security interest therein, subject only to Permitted Liens. If the transfer of the Receivables to the Trust is deemed to create a security interest therein under the UCC, a tax or government lien on property of the Transferor arising before Receivables come into existence may have priority over the Trust's interest in such Receivables. In the event of the insolvency of the Transferor, certain administrative expenses may also have priority over the Trust's interest in such Receivables. See "Certain Legal Aspects of the Receivables--Transfer of Receivables." To the extent that the Originators and the Transferor have granted security interests in the Receivables to the Transferor and the Trust, respectively, and such security interests were validly perfected before any bankruptcy, insolvency, receivership, or conservatorship of the Originators or the Transferor and were not granted or taken in contemplation of bankruptcy, insolvency, receivership, or conservatorship or with the intent to hinder, delay, or defraud the Originators or the Transferor or their respective creditors, such security interests should not be subject to avoidance in the event of bankruptcy, insolvency, receivership, or conservatorship of the Originators or the Transferor, and payments to the Trust with respect to the Receivables should not be subject to recovery by a bankruptcy trustee, conservator, or receiver for the Transferor. If, however, such a bankruptcy trustee, conservator, or receiver were to assert a contrary position (or, in the case of a conservator or receiver for FDS, were to require the Trustee to establish its right to those payments by submitting to and completing the administrative claims procedure established under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or were to request a stay of proceedings with respect to FDS as provided under FIRREA), delays in payments on the Offered Certificates and possible reductions in the amount of those payments could occur. In Octagon Gas System, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.), cert. denied, 114 S. Ct. 554 (1993), the court determined that the interest acquired by a purchaser of "accounts," which as defined under the UCC would likely include the Receivables, is treated as a security interest under the UCC. As described above, the treatment of the transfers of the Receivables to the Transferor or the Trust as grants of security interests could have consequences to the Offered Certificate Owners that would be less advantageous than the treatment of such transfers as outright sales. The circumstances under which the Octagon ruling would apply are not fully known and the extent to which the Octagon decision will be followed in other courts or outside of the Tenth Circuit is not certain. Although most of the Originators' and the Transferor's respective business activities are conducted outside the geographic area subject to the jurisdiction of the Tenth Circuit, a portion of such business activities are conducted within such geographic area. See "Certain Legal Aspects of the Receivables--Certain Matters Relating to Bankruptcy or Insolvency." If a conservator or receiver were appointed for the Servicer, and no Servicer Default other than such receivership or insolvency of the Servicer exists, the conservator or receiver may have the power to prevent either the Trustee or the majority of the Certificateholders from effecting a transfer of servicing to a successor Servicer. If a bankruptcy trustee or receiver were appointed for the Transferor, causing a Pay Out Event with respect to all Series then outstanding, new Principal Receivables would not be transferred to the Trust pursuant to the Pooling and Servicing Agreement and the Trustee would sell the portion of the Receivables allocable in accordance with the Pooling and Servicing Agreement to each Series (unless holders of more than 50% of the principal amount of each class of each Series instruct otherwise), thereby causing early termination of the Trust and a loss to the Certificateholders if the net proceeds allocable to the Certificateholders from such sale, if any, were insufficient to pay the Certificateholders in full. The net proceeds of any such sale of the portion of the Receivables allocated in accordance with the Pooling and Servicing Agreement to each Series will first be used to pay amounts due to the Class A Certificateholders, will thereafter be used to pay amounts due to the Class B Certificateholders, and will thereafter be used to pay amounts due to the Class C Certificateholders. If the only Pay Out Event to occur is either the insolvency of the Transferor or the appointment of a bankruptcy trustee or receiver for the Transferor, the bankruptcy trustee or receiver may have the power to continue to require the Transferor to transfer new Receivables to the Trust and to prevent the early sale, liquidation, or disposition of the Receivables and the commencement of the Early Amortization Period. In addition, a bankruptcy trustee or receiver for the Transferor may have the power to cause early payment of the Certificates. See "Certain Legal Aspects of the Receivables--Certain Matters Relating to Bankruptcy or Insolvency." EFFECTS OF CERTAIN TRANSACTIONS Subsequent to its acquisition of Broadway Stores, Inc. ("Broadway") in October 1995, Federated integrated Broadway's businesses with the businesses of Federated's other subsidiaries, converting most of the department stores operated by Broadway at the time of such acquisition under the names "Broadway," "Emporium," and "Weinstocks" into Bloomingdale's and Macy's stores, operating several such stores as clearance centers, and selling or attempting to sell or otherwise dispose of the remaining stores. Consequently, as described in "The Accounts," in February 1996, FDS began establishing and continues to establish new credit card accounts (the "FDS/Broadway Accounts") for qualified applicants who were or become customers of the department stores operated by Broadway following the conversion of such stores to Federated nameplates, and all of the credit card accounts owned by Broadway (the "Broadway Accounts"), which historically had its own proprietary credit card program, have been closed to further purchasing activity. In May 1996, the receivables then outstanding under the FDS/Broadway Accounts and the Broadway Accounts were transferred to the Transferor for inclusion in the Trust. As a result of the foregoing matters and various other factors, the historical performance of the Federated Portfolio may not be comparable to or indicative of the current or future performance of the Federated Portfolio. Subsequent to its acquisition of R.H. Macy & Co., Inc. ("Macy's") in December 1994, Federated consolidated its Abraham & Straus/Jordan Marsh division with its Macy's East division. Consequently, as described in "The Accounts," accounts bearing the "Abraham & Straus" and "Jordan Marsh" tradenames have been closed or converted into accounts bearing the "Macy's" tradename. As a result of the foregoing matters and various other factors, the historical performance of the Federated Portfolio may not be comparable to or indicative of the current or future performance of the Federated Portfolio. DEPENDENCE ON CERTAIN AFFILIATES OF THE TRANSFEROR The Federated Cards currently can be used to purchase merchandise and services only from department stores and a mail-order catalog business operated by the Federated Subsidiaries. The Federated Subsidiaries, including Broadway, currently operate such stores and catalog business under the names "Bloomingdale's," "Bloomingdale's By Mail," "Burdines," "Goldsmith's," "Lazarus," "Rich's," "Stern's," "The Bon Marche," and, in the case of certain stores formerly operated under other nameplates, "Macy's." See "Federated's Credit Card Business" and "The Accounts." Accordingly, although cards issued by FDS under the "Macy's" name are accepted by all Macy's stores (including Macy's stores that are not Federated Stores), the Trust is almost entirely dependent upon the Federated Stores and Bloomingdale's By Mail for the generation of Receivables. The retailing industry, in general, and the department store business, in particular, are and will continue to be intensely competitive. The Federated Stores and Bloomingdale's By Mail will face increasing competition not only with other department stores in the geographic areas in which they operate, but also with numerous other types of retail formats, including specialty stores, general merchandise stores, off-price and discount stores, new and established forms of home shopping (including mail order catalogs, television, and computer services), and manufacturer outlets. Moreover, the Pooling and Servicing Agreement does not prohibit Federated from transferring all or any portion of the business or assets of the Federated Subsidiaries. Accordingly, there can be no assurance that the Federated Subsidiaries will continue to generate Receivables at the same rate as in prior years. The competitors of the Federated Stores and Bloomingdale's By Mail include department stores operated by subsidiaries of Federated under the name "Macy's" and specialty stores operated by subsidiaries of Federated under the names "Aeropostale" and "Charter Club." Pursuant to a proprietary credit card program established prior to Federated's acquisition of Macy's in December 1994, a third-party financial institution owns and establishes most of the revolving credit card accounts of customers of such stores. To the extent that Federated may from time to time deem it desirable to cause the stores or businesses included in or conducted through the Federated Stores and Bloomingdale's By Mail to be operated under such other names, the receivables generated in the revolving credit card accounts of the customers of such stores or businesses may no longer be available for purchase by the Transferor and transfer to the Trust. Similar consequences could result from such stores or businesses being sold to third parties. The Transferor has been advised by Federated that decisions with respect to the foregoing and other aspects of Federated's business operations will be based upon the best interests of Federated and its stockholders from time to time, which interests may differ from those of the Offered Certificate Owners. USE OF OTHER CREDIT CARDS The Federated Stores and Bloomingdale's By Mail accept, in addition to the Federated Cards, other cards, including American Express charge cards, MasterCard and Visa credit cards, and, in the case of former Broadway, Emporium, Weinstocks, Abraham & Straus, and Jordan Marsh stores currently operated under the "Macy's" nameplate, Macy's cards issued by a third-party financial institution. Accordingly, not all credit sales of merchandise and services by the Federated Stores and Bloomingdale's By Mail generate Receivables. See "Federated's Credit Card Business--Creation of Account Balances" and "The Accounts." There can be no assurance that the Federated Cards will continue to maintain their historic percentage of retail sales against competition from such other credit and charge cards. SOCIAL, LEGAL, AND ECONOMIC FACTORS Changes in card use and payment patterns by cardholders may result from a variety of social, legal, and economic factors. The Transferor, however, is unable to determine and has no basis to predict whether, or to what extent, social, legal, or economic factors will affect future card use or repayment patterns. POSSIBLE CHANGES TO THE TERMS OF THE RECEIVABLES Pursuant to the Purchase Agreement, the Originators do not transfer the Accounts to the Transferor, but only the Receivables arising in the Accounts. Pursuant to the Pooling and Servicing Agreement, the Transferor does not transfer the Accounts to the Trust, but only such Receivables. The Originators have the right to determine the monthly periodic finance charges and other fees that will be applicable from time to time to the Accounts, to alter the minimum monthly payment required on the Accounts, and to change various other terms with respect to the Accounts. Among other factors, competitive conditions in the retailing and consumer credit card industries could cause the Originators to consider from time to time reducing periodic finance charges and other fees or changing other terms with respect to the Accounts. A decrease in the monthly periodic finance charge and other fees would decrease the effective yield on the Accounts and could result in the occurrence of a Pay Out Event and the commencement of the Early Amortization Period. Under the Purchase Agreement, any Originator may change the terms of the contracts relating to the Accounts or its policies and procedures with respect to the servicing thereof (including without limitation the reduction of the required minimum monthly payment and the calculation of the amount or the timing of finance charges, fees and charge-offs), if such change would not, in the reasonable belief of such Originator, cause a Pay Out Event to occur and (i) if such Originator owns a comparable segment of credit card accounts, such change is made applicable to the comparable segment of the revolving credit card accounts owned by such Originator, if any, which have characteristics the same as, or substantially similar to, the Accounts that are the subject of such change and (ii) if such Originator does not own such a comparable segment, it will not make any such change with the intent to materially benefit such Originator over the Certificateholders, except as otherwise restricted by an endorsement, sponsorship, or other agreement between such Originator and an unrelated third party or by the terms of the Charge Account Agreements. There can be no assurance that changes in applicable law, changes in the marketplace, or prudent business practice might not result in a determination by any Originator to take actions which would change the terms of the Accounts. CHANGES IN DISCOUNT FACTOR During the continuance of a Discount Trigger Event (which will not occur without the consent of the Rating Agencies) with respect to Series 1997-1, certain collections allocable to Series 1997-1 which would otherwise have been treated as Principal Collections will be subtracted from Principal Collections to determine Net Principal Collections and will be added to Finance Charge Collections to determine Total Finance Charge Collections. Any increase in the Discount Factor would result in the allocation to Series 1997-1 of a higher yield on the Receivables originated under the Accounts and a slower payment rate of Net Principal Collections than otherwise would occur. Conversely, any decrease in the Discount Factor would result in the allocation to Series 1997-1 of a lower yield on such Receivables and a faster payment rate of Net Principal Collections than otherwise would occur. The Discount Factor will change from month to month as a result of changes in the Base Rate for any Series, the Net Finance Charge Portfolio Yield for any Series, or the Annual Portfolio Turnover Rate. CONSUMER AND DEBTOR PROTECTION LAWS The Accounts and the Receivables are subject to numerous federal and state consumer protection laws which impose requirements on the making and collection of consumer loans. Such laws, as well as any new laws or rulings which may be adopted, may adversely affect the Servicer's ability to collect on the Receivables or maintain previous levels of finance charges, late fees, and other fees. Any failure by the Servicer to comply with such legal requirements also could adversely affect the Servicer's ability to collect on the Receivables. Although the Transferor has made certain representations and warranties relating to the validity and enforceability of the Accounts and the Receivables, the Trustee has not made and will not make any examination of the Receivables or the records relating thereto for the purpose of establishing the presence or absence of defects or compliance with such representations and warranties, or for any other purpose. In the event of a breach of certain representations and warranties, the Transferor may be obligated to accept the reassignment and transfer of all Receivables in the Accounts. See "Description of the Offered Certificates--Representations and Warranties" and "Certain Legal Aspects of the Receivables--Consumer and Debtor Protection Laws." Application of federal and state bankruptcy and debtor relief laws to the obligations represented by the Receivables could adversely affect the interests of the Class A Certificateholders and Class B Certificateholders in the Receivables, if such laws result in any Receivables being written off as uncollectible. See "Description of the Offered Certificates--Defaulted Receivables; Rebates and Fraudulent Charges." Congress and state legislatures from time to time consider legislation that would limit the finance charges and fees that may be charged on credit card accounts or that would otherwise further regulate the credit card industry. The potential effect of any legislation which limits the amount of finance charges or fees that may be charged on credit card balances could be to reduce the Portfolio Yield on the Accounts. If the Portfolio Yield were reduced, a Pay Out Event with respect to a Series could occur. See "Description of the Offered Certificates -- Pay Out Events." There can be no assurance as to whether any federal or state legislation will be enacted that would impose additional limitations on the monthly periodic finance charges or fees relating to the Accounts. REINVESTMENT RISK; PAYMENTS AND MATURITY The Receivables may be paid at any time and there is no assurance that there will be additional Receivables created in the Accounts (or that new Accounts will be created) or that any particular pattern of cardholder repayments will occur. The commencement and continuation of the Accumulation Period and the collection of the Controlled Amortization Amount with respect to the Class A Certificates, and the occurrence of the Class B Principal Payment Commencement Date, will be dependent upon the continued generation of new Receivables to be conveyed to the Trust. A significant decline in the amount of Receivables generated could result in the occurrence of a Pay Out Event and the commencement of the Early Amortization Period. In addition, changes in periodic finance charges can alter cardholder monthly payment rates. A significant decrease in the cardholder monthly payment rate could slow the return of principal during the Early Amortization Period, the collection of the Controlled Amortization Amount with respect to the Class A Certificates during the Accumulation Period, or the occurrence of the Class B Principal Payment Commencement Date. See "Maturity Assumptions." See "Description of the Offered Certificates--Pay Out Events" for a discussion of other Pay Out Events. If a Pay Out Event occurs, the Early Amortization Period will commence and the average life and maturity of the Offered Certificates may be significantly reduced. There can be no assurance in that event that the Class A Certificateholders and the Class B Certificateholders would be able to reinvest any accelerated distributions on account of such Offered Certificates in other suitable investments having a comparable yield. EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS The Class B Certificates will be subordinated in right of payment of principal to the Class A Certificates. Payments of principal in respect of the Class B Certificates will not commence until after the final principal payment with respect to the Class A Certificates has been made and the Class A Invested Amount has been paid in full. Moreover, the Class B Invested Amount is subject to reduction on any Determination Date if (i) the Class A Required Amount or the Class B Required Amount, if any, cannot be fully funded through Reallocated Principal Collections assessed solely against the Class C Invested Amount or (ii) the aggregate Investor Default Amount, if any, for each business day in the preceding Monthly Period exceeds the aggregate Available Series Finance Charge Collections applied to the payment thereof and is not funded from Excess Finance Charge Collections, Transferor Finance Charge Collections, or Reallocated Principal Collections and is not assessed solely against the Class C Invested Amount or, on and after the Class B Principal Payment Commencement Date, the Transferor Interest to the extent of the Transferor Subordination Amount. If the Class B Invested Amount suffers such a reduction, collections of Finance Charge Receivables allocable to the Class B Certificateholders' Interest in future Monthly Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class B Invested Amount is not reimbursed, the amount of principal distributable to the Class B Certificateholders will be reduced. See "Description of the Offered Certificates--Subordination of the Class B Certificates," "--Allocation Percentages," "--Reallocated Principal Collections," "--Application of Collections," and "--Investor Charge-Offs." CONTROL Subject to certain exceptions, the investor certificateholders of each Series may take certain actions, or direct certain actions to be taken, under the Pooling and Servicing Agreement or the related Supplement. In determining whether the required percentage of certificateholders have given their approval or consent, except as otherwise specified, the Class A Certificateholders and the Class B Certificateholders will be treated as a single Series. So long as the Class C Certificates are retained by the Transferor or an affiliate of the Transferor, the interest represented by the Class C Certificates will be disregarded in the giving of any request, demand, authorization, direction, notice, consent, or waiver under the Pooling and Servicing Agreement. As a result of the greater aggregate principal amount of the Class A Certificates, the Class A Certificateholders will have the power to determine whether any such action is taken without regard to the position or interests of the Class B Certificateholders relating to such action. The Class B Certificateholders will not have similar power. In order to make such determinations, the Class B Certificateholders will need the approval or consent of Class A Certificateholders owning a substantial portion of the Class A Certificateholders' Interest. However, under certain circumstances the consent or approval of a specified percentage of the aggregate invested amount of all Series outstanding or of the invested amount of each class of each Series will be required to direct certain actions, including requiring the appointment of a successor Servicer following a Servicer Default, amending the Pooling and Servicing Agreement in certain circumstances, and directing a repurchase of all outstanding Series upon the breach of certain representations and warranties by the Transferor. MASTER TRUST CONSIDERATIONS The Trust, as a master trust, in addition to Series 1997-1, has issued other Series (see "Annex I: Other Series") and may issue additional Series from time to time in the future. While the Principal Terms of any additional Series will be specified in a Supplement, the provisions of such Supplement and, therefore, the terms of any additional Series, are not subject to the prior review or consent of holders of the certificates of any previously issued Series. Such Principal Terms may include methods for determining applicable investor percentages and allocating collections, whether such new Series will be paired with an existing Series, provisions creating security or Enhancements, different classes of certificates (including subordinated classes of certificates), provisions subordinating such Series to another Series (if the Supplement relating to such Series so permits) or another Series to such Series (if the Supplement for such other Series so permits), and any other amendment or supplement to the Pooling and Servicing Agreement which is made applicable only to such Series. See "Description of the Offered Certificates--Exchanges" and "--Paired Series." In addition, the provisions of any Supplement may give the holders of the certificates issued pursuant thereto consent, approval, or other rights that could result in such holders having the power to cause the Transferor, the Servicer, or the Trustee to take or refrain from taking certain actions, including without limitation actions with respect to the exercise of certain rights and remedies under the Pooling and Servicing Agreement, without regard to the position or interest of the certificateholders of any other Series. Similar rights may also be given to the provider of any Enhancement for any Series. It is a condition precedent to issuance of any additional Series that each Rating Agency that has rated any outstanding Series deliver written confirmation to the Trustee that the Exchange will not result in such Rating Agency reducing or withdrawing its rating on any outstanding Series. There can be no assurance, however, that the Principal Terms of any other Series, including any Series previously issued or issued from time to time hereafter, might not have an adverse impact on the timing and amount of payments received by a Certificateholder or the value of Certificates even if there is no change in the rating of any outstanding Series. See "Description of the Offered Certificates--Exchanges" and "Annex I: Other Series." CERTIFICATE RATING It is a condition to the issuance of the Class A Certificates that they have an initial rating of "AAA" or its equivalent from each Rating Agency. It is a condition to the issuance of the Class B Certificates that they have an initial rating of "A" or its equivalent from each Rating Agency. The Rating Agencies do not evaluate, and the ratings of the Offered Certificates do not address, the likelihood that the principal of the Class A Certificates will be paid by the Class A Expected Final Payment Date or that the principal of the Class B Certificates will be paid by the Class B Expected Final Payment Date. The Class C Certificates initially will not be rated. The ratings are not a recommendation to purchase, hold, or sell the Class A Certificates or the Class B Certificates, inasmuch as such ratings do not comment as to the market price or suitability for a particular investor. There can be no assurance that the ratings will remain in effect for any given period of time or that either rating will not be lowered or withdrawn by either Rating Agency if in its judgment circumstances so warrant. BOOK-ENTRY REGISTRATION The Offered Certificates initially will be represented by one or more Certificates registered in the name of Cede, the nominee for DTC, and will not be registered in the names of the Class A Certificate Owners or the Class B Certificate Owners or their nominees. Unless and until Definitive Certificates are issued, Class A Certificate Owners and Class B Certificate Owners will not be recognized by the Trustee as Certificateholders, as that term is used in the Pooling and Servicing Agreement. Hence, until such time, Class A Certificate Owners and Class B Certificate Owners will be able to exercise the rights of Certificateholders only indirectly through DTC and its participating organizations. In addition, the holders of beneficial interests in the Class A Certificates and the Class B Certificates may experience delays between distributions of interest and principal to the record holder of such Certificates and the redistribution of such amounts to the holders of such beneficial interests. See "Description of the Offered Certificates--Book-Entry Registration" and "--Definitive Certificates." REPORTS TO CERTIFICATEHOLDERS Unless and until Definitive Certificates are issued, monthly and annual reports, containing information concerning the Trust and prepared by the Servicer, will be sent on behalf of the Trust to Cede, as nominee for DTC and the registered holder of the Offered Certificates. Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles and will not be sent by the Servicer or the Trustee to the Class A Certificate Owners and Class B Certificate Owners. See "Description of the Offered Certificates--Book-Entry Registration," "--Definitive Certificates," and "--Reports to Certificateholders." PRE-FUNDING ACCOUNT AND THE FUNDING PERIOD During the Funding Period, Series 1997-1 will be paired with Series 1992-1. As principal is paid or deposited in the Series 1992-1 Principal Funding Account, an equal amount of funds on deposit in the Pre-Funding Account will be released (which funds will be distributed to the Transferor) and the Invested Amount of Series 1997-1 will increase by a corresponding amount. It is anticipated that principal of the Series 1992-1 Certificates will be accumulated commencing with the September 1997 Monthly Period in an amount sufficient to increase the Invested Amount of Series 1997-1 to the Full Invested Amount prior to the end of December 1997 Monthly Period; however, there can be no assurance that a sufficient amount of Principal Collections will be available for such purpose. Should a Pay Out Event occur during the Funding Period, the amounts remaining on deposit in the Pre-Funding Account will be payable as principal first to the Class A Certificateholders until the sum of the Class A Invested Amount and the Class A Pre-Funded Amount is paid in full and then to the Class B Certificateholders until the sum of the Class B Invested Amount and the Class B Pre-Funded Amount is paid in full. In the absence of a Pay Out Event, the amount remaining on deposit in the Pre-Funding Account at the end of the Funding Period will be withdrawn and distributed on the next succeeding Distribution Date to the Class A Certificateholders and the Class B Certificateholders pro rata based on the Class A Invested Amount and the Class B Invested Amount. See "Description of the Offered Certificates--Paired Series" and "--Pre-Funding Account." THE TRUST The Trust was formed, in accordance with the laws of the State of New York, pursuant to the Pooling and Servicing Agreement. The Trust was formed for the transactions relating to the issuance of Series 1992-1, Series 1992-2, Series 1992-3, Series 1995-1, Series 1996-1, the transaction described herein, and similar transactions, as contemplated by the Pooling and Servicing Agreement, and prior to formation had no assets or obligations. See "Annex I: Other Series." The Trust will not engage in any business activity, other than as described herein, but rather will only acquire and hold the Receivables, issue (or cause to be issued) the Certificates, the Exchangeable Transferor Certificate, and certificates representing additional Series and related activities (including, with respect to any Series, entering into any Enhancement and Enhancement agreement relating thereto) and make payments thereon. As a consequence, the Trust is not expected to have any need for additional capital resources. FEDERATED'S CREDIT CARD BUSINESS GENERAL FDS is a federally chartered credit card bank and an indirect wholly owned subsidiary of Federated. Following its formation in September 1993, FDS was added as a party to the Purchase Agreement and Federated caused substantially all of the then-existing Accounts (other than the Broadway Accounts) to be transferred from the other Federated Subsidiaries to FDS. Although substantially all of the Accounts (other than the Broadway Accounts) established subsequent to such transfer have been established by FDS, the other Federated Subsidiaries remain parties to the Purchase Agreement and may from time to time establish Accounts and sell Receivables to the Transferor pursuant thereto. In February 1996, FDS began establishing and continues to establish the FDS/Broadway Accounts for qualified applicants who were or become customers of the department stores operated by Broadway following the conversion of such stores to other Federated nameplates. In May 1996, Broadway was added as a party to the Purchase Agreement and, concurrently therewith, the receivables then outstanding under the Broadway Accounts and the FDS/Broadway Accounts were transferred to the Transferor for inclusion in the Trust. Substantially all of the Broadway Accounts were transferred to FDS during fiscal 1996 and, following such transfer, the terms thereof were conformed to the terms of the Accounts established by FDS. See "Risk Factors--Effects of Certain Transactions." Pursuant to the Purchase Agreement, the Originators sell Receivables to the Transferor; those Receivables are, upon purchase by the Transferor, automatically transferred to the Trust pursuant to the Pooling and Servicing Agreement. The Accounts under which the Receivables arise are created by the respective Originators (currently FDS in substantially all cases except in respect of the Broadway Accounts) and enable the holders of the credit cards issued by the Originators under department store tradenames (the "Federated Cards") to purchase virtually all of the various types of merchandise and services offered by the Federated Stores. Cards bearing the Bloomingdale's tradename may be used to purchase merchandise from Bloomingdale's By Mail, Federated's nationwide catalog business, and cards bearing the Goldsmith's or Rich's tradename may be used to purchase merchandise at both Goldsmith's and Rich's stores. Although subject to change, all other Federated Cards may be used only to make purchases at stores bearing the same nameplate as the tradename on the card. Financial and Credit Services Group ("FACS"), a subsidiary of Federated located in Mason, Ohio, Tampa, Florida, and Tempe, Arizona, monitors credit policies and provides credit services for FDS pursuant to a servicing agreement. These services currently include credit authorizations, new account development and processing, customer service, collections, statement processing and mailing, and remittance processing. FACS may from time to time subcontract with other parties for the performance of such functions by such other parties. In addition to the Federated Stores (which include a limited number of Macy's stores which were formerly operated under other nameplates) and Bloomingdale's By Mail, subsidiaries of Federated currently operate other department stores under the name "Macy's" and specialty stores under the names "Aeropostale" and "Charter Club." Pursuant to a proprietary credit card program (the "Macy's Credit Card Program") established by Macy's prior to Federated's acquisition of Macy's in December 1994, a third-party financial institution owns and establishes most of the revolving credit card accounts of customers of such other stores. Such third-party financial institution also owns the revolving credit card accounts of customers of certain former Broadway, Emporium, Weinstocks, Abraham & Straus, and Jordan Marsh stores that also held credit cards bearing the "Macy's" tradename prior to the conversion of such stores to Macy's stores. See "The Accounts." The initial term of the Macy's Credit Card Program expires in 2006, and is subject to automatic one-year renewal periods and certain termination rights. The receivables arising in accounts subject to the Macy's Credit Card Program are not (and, absent modifications to such program, will not be) purchased by the Transferor or transferred to the Trust. NEW ACCOUNT UNDERWRITING New accounts have been, and are anticipated to be, generated both by account applications made at the stores currently operated by the Originators under the names "Bloomingdale's," "Burdines," "Goldsmith's," "Lazarus," "Rich's," "Stern's," "The Bon Marche," and, in the case of certain stores formerly operated under other nameplates, "Macy's" (collectively, the "Federated Stores"), and as a result of direct mail solicitations on a preapproved credit basis to a prescreened group of individuals based on information obtained from credit services and other entities in the business of selling customer lists. See "The Accounts." At the present time, FDS does not use non-prescreened or "blind" mailings to solicit new accounts. Before an account is opened in response to an unsolicited application, the prospective cardholder's application is reviewed for completeness and creditworthiness. A credit report issued by an independent credit reporting agency is generally obtained. In the case of prescreened mailings, consumer credit records are reviewed by the credit reporting agency maintaining such records to identify the individuals that meet the standards for receiving a preapproved account solicitation. Prospective cardholders, whether unsolicited or preapproved, generally are evaluated through the use of computerized credit scoring systems. These systems assign point values to the credit bureau information of potential preapproved solicitation recipients or the application information and credit bureau records of unsolicited applicants. Point values, in turn, are based on statistical analyses of empirical data concerning the performance of sample populations of applicants in various geographic regions served by the Originators. The total of the values obtained for a prospective cardholder determines both the decision whether to offer or open an account and the initial credit guideline. FDS has also found that it can open accounts for applicants for whom no credit service information is available at a level of risk deemed acceptable by FDS by independently verifying the information contained in the application and establishing low initial credit guidelines. FDS may change its credit evaluation policies or screening methods at any time. Each cardholder is subject to an agreement governing the terms and conditions of such cardholder's account. Pursuant to each such agreement, FDS reserves the right, subject to applicable law, to change or terminate any terms, conditions, services, or features of the related account (including increasing or decreasing finance charges, other charges, or minimum payments). Credit guidelines are maintained by FDS and are revised upward or downward based on changes in credit scoring formulas and on cardholders' purchase and payment histories. Each charge to an account is entered and approved at the time the charge is made through direct communication with the central processing system maintained by FACS for the purpose of monitoring credit guidelines and possible fraudulent activity. CREATION OF ACCOUNT BALANCES Account balances are created through the use of the Federated Cards to charge purchases of merchandise and services from the Federated Stores and Bloomingdale's By Mail, and ancillary services such as credit life insurance and travel services. Consequently, the Trust will depend on the continued ability of the Federated Stores and Bloomingdale's By Mail to generate credit sales. See "Risk Factors--Dependence on Certain Affiliates of the Transferor." In addition, because the Federated Stores and Bloomingdale's By Mail accept, in addition to the Federated Cards, other cards, including American Express charge cards and MasterCard and Visa credit cards (and, in the case of Federated Stores operated under the "Macy's" nameplate, Macy's cards issued by a third-party financial institution), the Trust also will depend upon decisions of customers purchasing merchandise and services to use the Federated Cards rather than such other cards or cash. See "Risk Factors--Use of Other Credit Cards." Federated Cards may be used to make both major purchase plan charges and regular plan charges. Major purchase plan charges are charges of certain categories of merchandise, including furniture and fine jewelry, generally over $100 per purchase. Regular plan charges consist of all other charges except for charges to a small number of accounts opened under a discontinued credit program under which the entire outstanding balance is due monthly. The regular plan payment schedule is the greater of $5.00 or 5% of the new balance rounded up to the next whole dollar amount, not to exceed the entire new balance. The following payments schedule is typical for major purchase plan charges under the Accounts: MAJOR PURCHASE PLAN CHARGES HIGHEST NEW BALANCE MINIMUM PAYMENT ------------------- --------------- $ 0.01 - $ 4.99 New Balance $ 5.00 - $ 200.00 $ 5.00 $ 200.01 - $ 320.00 $ 5.00 plus $0.50 for each $20.00 increment or portion thereof over $200.01 $ 320.01 - $ 360.00 $ 9.00 $ 360.01 - $ 400.00 $10.00 $ 400.01 - $ 440.00 $11.00 $ 440.01 - $ 480.00 $12.00 $ 480.01 - $ 520.00 $13.00 $ 520.01 - $ 560.00 $14.00 $ 560.01 - $ 600.00 $15.00 $ 600.01 and over $16.00 plus $2.50 for each $100.00 increment or portion thereof over $600.01 From time to time, FDS offers promotional incentives to solicit new accounts and to encourage the use of previously issued Federated Cards, including the waiver of finance charges for a specified initial period (typically ranging from three to twelve months) on major purchase plan charges made during the course of the promotion. Balances due with respect to both regular plan charges and major purchase plan charges are and will be included in the Receivables. Federated may change the terms applicable to, or may eliminate, either category of charges at any time. REVENUE AND YIELD EXPERIENCE The following table shows average receivables outstanding, finance charges and other fees billed, and the yield therefrom for the portfolio of accounts owned by the Originators, including Broadway (the "Federated Portfolio"), for each of the periods shown. The fiscal year of the current Federated Subsidiaries ends on the Saturday nearest January 31. REVENUE AND YIELD EXPERIENCE FOR THE FEDERATED PORTFOLIO (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> 26 WEEKS FISCAL YEAR ENDED --------------------------- -------------------------------------------- ENDED AUGUST ENDED AUGUST FEBRUARY 3, JANUARY 28, 2, 1997 3, 1996 FEBRUARY 1, 1997 1996 1995 ------------ ------------ ---------------- ----------- ----------- <S> <C> <C> <C> <C> <C> Average Receivables Outstanding(1)........... $2,473,816 $2,650,114 $2,381,081 Finance Charges and Fees Billed(2)........... 593,205 587,869 521,884 Yield from Finance Charges and Fees(3)...... 23.98% 22.18% 21.92% </TABLE> - ---------------------- (1) Average Receivables Outstanding is the arithmetic average of receivables outstanding at the beginning of each fiscal month during the period indicated. (2) Finance Charges and Fees Billed are based on beginning of the month balances. (3) Yield from Finance Charges and Fees is the result of dividing Finance Charges and Fees Billed by Average Receivables Outstanding. Revenue figures are calculated on an as-billed basis and represent amounts billed to obligors before deductions for charge-offs, reductions due to fraud, returned goods, consumer disputes, or other expenses. The revenue figures in the foregoing table are presented on a sum of cycles basis pursuant to which each billing cycle is included once in each fiscal month, regardless of the length of the fiscal month. At its inception, and upon acquiring substantially all of the Accounts from the other Originators, FDS established terms for its various credit card programs which differed from those of the other Originators and which had a significant effect on the yield of the Federated Portfolio. The principal differences included (i) the assessment of late fees of up to $15.00 per month on past due accounts and (ii) a reduction in the amount of minimum required payments. As a result of these factors and others, the revenue and yield information set forth above is not necessarily comparable from period to period. The terms of the Broadway Accounts were conformed to the terms established by FDS following the transfer thereof to FDS during fiscal 1996. Although such changes to the terms of the Broadway Accounts have resulted in an increase in the fees billed in respect of the Broadway Accounts, they also have had the effect of increasing charge-offs in respect of such fees. See "Risk Factors--Effects of Certain Transactions." Cash collections on the Receivables may not reflect the historical experience shown in the table. See "Risk Factors--Effects of Certain Transactions." During periods of increasing delinquencies, billings of monthly finance charges and fees may exceed cash receipts as amounts collected on credit card receivables lag behind amounts billed to obligors. Conversely, as delinquencies decrease, cash receipts may exceed billings of monthly finance charges and fees as amounts collected in a current period may include amounts billed during prior periods. However, the Transferor believes that during the periods shown, revenues on an as-billed basis closely approximated revenues on a cash basis. Revenues from monthly finance charges and fees on both an as-billed and a cash basis will be affected by numerous factors, including the monthly finance charges and fees on principal receivables, the fluctuation of the principal receivables portfolio, the amount of other fees paid by obligors, the percentage of obligors who pay off their balances in full each month and do not incur monthly finance charges on purchases, promotional programs at the Federated Stores and Bloomingdale's By Mail, and changes in the delinquency rate on the Receivables. Revenue from monthly finance charges and fees also varies somewhat within a fiscal year due to the seasonal nature of the Federated Subsidiaries' businesses. LOSS AND DELINQUENCY EXPERIENCE All of the Receivables in a particular Account are considered to become delinquent immediately upon the failure of any payment due thereon to be made in full on or prior to the date due. Efforts to collect delinquent credit card receivables are made by FACS personnel and collection agencies and attorneys retained by FACS. Under current procedures, FACS automatically prints a statement message on all customer statements after a scheduled payment has been missed. If payment has not been made 14 days after the billing date, a reminder letter is sent to the cardholder. If payment still has not been received by the next billing date, the account is eligible for assignment to a FACS collector, who may send additional letters and initiate telephone contact with the cardholder in an effort to make payment arrangements. The current policy of the Originators is generally to recognize losses no later than the eighth month of delinquency (or, in the case of certain major purchase plan accounts, no later than the ninth month of delinquency), although charge-offs may be made earlier in certain circumstances. The charge-off policies and collection practices with respect to the Broadway Accounts were conformed to those of the other Originators in February 1996. The Originators may change their charge-off policies and collection practices at any time in accordance with their business judgment and applicable law. Under the terms of the Pooling and Servicing Agreement, any Recoveries received in respect of Receivables in charged-off Accounts, net of the estimated expenses of collection, will be paid to the Trust. The following table sets forth the loss experience with respect to payments by cardholders for each of the periods shown for the Federated Portfolio. Because losses are affected by a number of factors, including competitive and general economic conditions and consumer debt levels, there can be no assurance that the loss experience for the Receivables in the future will be similar to the historical experience set forth below. See "Risk Factors--Effects of Certain Transactions." LOSS EXPERIENCE FOR THE FEDERATED PORTFOLIO (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> 26 WEEKS ENDED FISCAL YEAR ENDED ---------------------- ---------------------------------------------- AUGUST 2, AUGUST 3, FEBRUARY 3, JANUARY 28, 1997 1996 FEBRUARY 1, 1997 1996 1995 --------- --------- ---------------- ----------- ----------- <S> <C> <C> <C> <C> <C> Average Receivables Outstanding(1)............ $2,473,816 $2,650,114 $2,381,081 Net Charge-offs(2).......... 200,033 152,538 95,916 Net Charge-offs as a Percentage of Average Receivables Outstanding... 8.09% 5.76% 4.03% </TABLE> (1) Average Receivables Outstanding is the arithmetic average of receivables outstanding as of the beginning of each fiscal month during the period indicated. (2) Net Charge-offs are the sum of merchandise, finance charge, and late fee charge-offs minus recoveries, and do not include the amount of any reductions in Average Receivables Outstanding due to fraud or customer disputes. The following table sets forth the delinquency experience with respect to payments by cardholders that were more than 29 days past due for each of the periods shown for the Federated Portfolio. Because delinquencies are affected by a number of factors, including competitive and general economic conditions and consumer debt levels, there can be no assurance that the delinquency experience for the Receivables in the future will be similar to the historical experience set forth below. See "Risk Factors--Effects of Certain Transactions." AVERAGE DELINQUENCIES FOR THE FEDERATED PORTFOLIO (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> AVERAGE OF 26 WEEKS ENDED AVERAGE OF FISCAL YEAR ENDED -------------------- ------------------------------------------------------------------------ AUGUST 2 AUGUST 3 FEBRUARY 1, 1997 FEBRUARY 3, 1996 JANUARY 28, 1995 1997 1996 ---------------- ---------------- ---------------- -------- -------- AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) ------ ------------- ------ ------------- ------ ------------- <S> <C> <C> <C> <C> <C> <C> Retail Age 2 (30-59 days past due)......... $86,394 3.55% $98,648 3.55% $80,225 2.95% Retail Age 3 (60-89 days past due)......... 40,854 1.68 38,760 1.39 28,498 1.05 Retail Age 4 and higher (90 days or more past due)......... 85,045 3.49 80,872 2.91 47,573 1.75 ------ ---- ------ ---- ------ ---- Total....... $212,293 8.72% $218,280 7.85% $156,296 5.75% ======== ===== ======== ===== ======== ===== </TABLE> (1) The percentages are the quotients obtained by dividing the delinquent Amount by Average Receivables Outstanding as of the billing date for each billing cycle during the applicable period. For purposes of this table, the Average Receivables Outstanding balance includes closed accounts. THE ACCOUNTS The Accounts consist of substantially all of the Federated Card accounts existing at the close of business on the Initial Cut-Off Date, plus Federated Card accounts thereafter originated in accordance with the Originators' credit and collection policies or acquired in connection with certain business acquisitions. Because the Accounts include substantially all of the Federated Card accounts, some of the accounts are recently solicited, unseasoned accounts and the Receivables include delinquent Receivables and may include obligations of cardholders who are or are about to become bankrupt or insolvent, as well as Accounts already charged off (although the Receivables in such charged-off Accounts are considered to have a zero balance). Additional accounts originated in the normal operation of the credit card business of the Originators are generally added on a daily basis as Automatic Additional Accounts. In addition, subject to the provisions of the Pooling and Servicing Agreement, certain accounts relating to acquired businesses have been and may in the future be added as Automatic Additional Accounts. See "Risk Factors--Effects of Certain Transactions" and "Description of the Offered Certificates--Automatic Addition of Accounts." Federated acquired Broadway in October 1995 and has integrated Broadway's businesses with the businesses of Federated's other subsidiaries. Of the 82 department stores operated by Broadway at the time of such acquisition under the names "Broadway," "Emporium," and "Weinstocks," five have been converted to Bloomingdale's stores, approximately 50 have been converted to Macy's stores, several are being operated as clearance centers, and the remaining stores have been or are expected to be sold or otherwise disposed of. Consequently, in February 1996, FDS began establishing and continues to establish the FDS/Broadway Accounts for qualified applicants who were or become customers of the department stores operated by Broadway following the conversion of such stores to other Federated nameplates, and all of the Broadway Accounts have been closed to further purchasing activity. In May 1996, Broadway was added as a party to the Purchase Agreement and, concurrently therewith, the receivables then outstanding under the FDS/Broadway Accounts and the Broadway Accounts were transferred to the Transferor for inclusion in the Trust. Substantially all of the Broadway Accounts were transferred to FDS during fiscal 1996. In connection with the conversion of certain Broadway, Emporium, and Weinstocks stores to Macy's stores, the issuance by FDS of cards bearing the Macy's tradename to customers of such stores and the closure of certain Broadway Accounts have been effected on the same basis as described below with respect to the conversion of A&S stores to Macy's stores. In April 1995, the operations of Federated's Abraham & Straus ("A&S") and Jordan Marsh subsidiaries were consolidated with those of Federated's Macy's East subsidiary, with nine A&S stores being converted to Macy's stores, six A&S stores being converted to Stern's stores, and the remaining A&S store being converted to a Bloomingdale's store. In connection with such conversions, FDS issued cards bearing the "Macy's" tradename to holders of Accounts in good standing bearing the "A&S" tradename who did not already hold a Macy's card. All other Accounts bearing the "A&S" tradename were closed to further purchasing activity. Pursuant to an agreement with the third-party financial institution that owns the Macy's Credit Card Program (the "Macy's Program Owner"), FDS establishes new accounts for qualified applicants who are customers of the former A&S stores that were converted to Macy's stores and issues cards bearing the "Macy's" tradename to the holders of such new accounts. Under certain circumstances, the Macy's Program Owner may become entitled to establish such new accounts or, conversely, FDS may become entitled to establish new accounts at other Macy's stores. During the first quarter of 1996, all 16 Jordan Marsh stores were converted to Macy's stores. The issuance by FDS of cards bearing the "Macy's" tradename to the holders of certain Accounts, the closure by FDS of other Accounts, and the establishment by FDS of new accounts for customers of the Jordan Marsh stores so converted was effected on the same basis as described above with respect to the conversion of A&S stores to Macy's stores (although a substantially smaller percentage of Accounts were closed in connection with the conversion of the Jordan Marsh stores due to the substantially smaller percentage of Jordan Marsh customers who already held Macy's cards). Further realignment of the operations, corporate structure, and/or assets of Federated's subsidiaries may be effected from time to time, and the names under which the stores or businesses included in or conducted through the Federated Stores and Bloomingdale's By Mail are operated may be changed from time to time. See "Risk Factors--Dependence on Certain Affiliates of the Transferor." See "Federated, the Transferor, and FDS--Federated" for additional information regarding the current business operations of Federated and its subsidiaries. The Receivables arising from the Accounts as of the Cut-Off Date totaled $[ ]. As of the Cut-Off Date, the Accounts had an average credit guideline of $[ ], and the percentage of the aggregate total Receivable balance to the aggregate total credit guideline was approximately [ ]%. As of the Cut-Off Date, approximately [ ]% of the Accounts had been opened prior to _____________. Billing addresses for the Accounts include 50 states and the District of Columbia. The following tables summarize the Federated Portfolio by various criteria as of the Cut-Off Date. Because the composition of the Federated Portfolio changes from time to time, these tables are not necessarily indicative of the character of the Trust at any time after the Cut-Off Date. See "Risk Factors--Effects of Certain Transactions," "The Accounts," and "Description of the Offered Certificates--Automatic Addition of Accounts" and "--Removal of Accounts." COMPOSITION OF ACCOUNTS BY ACCOUNT BALANCE <TABLE> <CAPTION> PERCENTAGE PERCENTAGE OF TOTAL OF TOTAL NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING <S> <C> <C> <C> <C> Credit Balance(3)......... No Balance(4)............. $ 0.01 to $ 500.00.... $ 500.01 to $1,000.00.... $1,000.01 to $2,000.00.... $2,000.01 to $3,000.00.... $3,000.01 to $4,000.00.... More than $4,000.00....... Total............... </TABLE> (1) Inactive revolving accounts are purged after five years (two if never used), and inactive installment accounts are purged after three years (one if never used). Purging began in 1994. (2) The figures for Number of Accounts and Receivables Outstanding are compiled from data as of the last cycle billing date of each Federated Subsidiary preceding the Cut-Off Date. (3) Credit balances are a result of cardholder payments and credit adjustments applied in excess of an Account's unpaid balance. Accounts currently having a credit balance are included, as Receivables may be generated with respect thereto in the future. (4) Accounts currently having no balance are included, as Receivables may be generated with respect thereto in the future. COMPOSITION OF ACCOUNTS BY CREDIT GUIDELINE <TABLE> <CAPTION> PERCENTAGE PERCENTAGE OF TOTAL OF TOTAL NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING <S> <C> <C> <C> <C> Under $500.00............. $ 500.00 to $1,000.00.... $1,000.01 to $2,000.00.... $2,000.01 to $3,000.00.... $3,000.01 to $4,000.00.... $4,000.01 to $5,000.00.... $5,000.01 to $6,000.00.... More than $6,000.00....... Total............... </TABLE> (1) Inactive revolving accounts are purged after five years (two if never used), and inactive installment accounts are purged after three years (one if never used). Purging began in 1994. (2) The figures for Number of Accounts and Receivables Outstanding are compiled from data as of the last cycle billing date of each Federated Subsidiary preceding the Cut-Off Date. COMPOSITION OF ACCOUNTS BY PAYMENT STATUS <TABLE> <CAPTION> PERCENTAGE PERCENTAGE OF TOTAL OF TOTAL NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING <S> <C> <C> <C> <C> Current and Retail Age 1(3).................. Retail Age 2 (30-59 days past due)...... Retail Age 3 (60-89 days past due)...... Retail Age 4 (90-119 days past due)..... Retail Age 5 (120-149 days past due).... Retail Age 6 (150-179 days past due).... Retail Age 7 and higher (180 or more days past due)................. Total............... </TABLE> (1) Inactive revolving accounts are purged after five years (two if never used), and inactive installment accounts are purged after three years (one if never used). Purging began in 1994. (2) The figures for Number of Accounts and Receivables Outstanding are compiled from data as of each cycle billing date during the month of March 1996 and exclude accounts with zero or credit balances. (3) Includes both current accounts and accounts that are less than 30 days past due. Accounts that were 1-29 days past due constituted ____% of the Total Number of Accounts and the receivables therein constituted ____% of the Total Receivables Outstanding. COMPOSITION OF ACCOUNTS BY AGE <TABLE> <CAPTION> PERCENTAGE PERCENTAGE OF TOTAL OF TOTAL NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING <S> <C> <C> <C> <C> Under 6 months............ 6 months to 1 year........ 1-2 years................. 2-3 years................. 3-4 years................. 4 years and older......... Total............... </TABLE> (1) Inactive revolving accounts are purged after five years (two if never used), and inactive installment accounts are purged after three years (one if never used). Purging began in 1994. (2) The figures for Number of Accounts and Receivables Outstanding are compiled from data as of the last cycle billing date of each Federated Subsidiary preceding the Cut-Off Date. COMPOSITION OF ACCOUNTS BY GEOGRAPHIC DISTRIBUTION <TABLE> <CAPTION> PERCENTAGE PERCENTAGE OF TOTAL CURRENT OF TOTAL NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES ACCOUNTS(1) ACCOUNTS OUTSTANDING(2) OUTSTANDING <S> <C> <C> <C> <C> California................ Florida................... New York.................. Washington................ Georgia................... Ohio...................... Massachusetts............. New Jersey................ Tennessee................. Pennsylvania.............. Indiana................... Kentucky.................. Alabama................... Arizona................... Idaho..................... South Carolina............ Oregon.................... Rhode Island.............. Connecticut............... New Mexico................ Texas..................... Subtotal.................. Other..................... Total.................. </TABLE> (1) Inactive revolving accounts are purged after five years (two if never used), and inactive installment accounts are purged after three years (one if never used). Purging began in 1994. BILLING AND PAYMENTS The accounts are grouped into billing cycles for purposes of administrative convenience for each Federated Subsidiary. Each billing cycle has a separate monthly billing date (which may vary slightly from month to month) at which time the activity in the related accounts during the month ending on such billing date is processed and billed to cardholders. New accounts are assigned to billing cycles in a manner which is intended, for purposes of administrative convenience, to equalize the number of accounts in the billing cycles. Monthly billing statements are sent to holders of the Federated Cards who have positive or negative balances. The billing statements present the total amount due and show the allocation between principal, current fees, current finance charges, and the minimum payment due. Subject to applicable law, late fees and returned check fees are also added to a cardholder's outstanding balance. No issuance, annual, over credit limit, or transaction fees are currently charged to obligors on the Accounts. FDS may change its billing practices, including the minimum monthly payment amounts, at any time. See "Description of the Offered Certificates--Collection and Other Servicing Procedures." A monthly finance charge is assessed on the Accounts. The charge is based on the average daily balance outstanding on an Account during a monthly billing period and is calculated by multiplying the average daily balance by the applicable finance charge rate. Current purchase transactions are included in the average daily balance where permitted by applicable law. Finance charges are assessed from date of purchase, although a grace period is available to avoid the finance charge if the account is paid in full. Payments by obligors generally are applied in the following order (pursuant to applicable law): (i) to finance charges, (ii) to other charges or fees, and (iii) to the unpaid principal balance of purchases allocated first to the longest outstanding receivable. The annual finance charge rate is 21.6% per annum, generally subject (where permitted) to a minimum monthly charge of $0.50, except where a lower rate is established by law and in those states in which a lower rate is chosen by FDS in consultation with the applicable Federated Subsidiary for competitive reasons. Under the terms of the account agreements governing the Accounts, FDS may change its finance charge rates at any time. There can be no assurance that finance charges, fees, and other charges will remain at current levels in the future. See "Risk Factors-- Possible Changes to the Terms of the Receivables" and "Description of the Offered Certificates--Collection and Other Servicing Procedures." FEDERATED, THE TRANSFEROR, AND FDS FEDERATED General. Federated is one of the leading operators of full-line department stores in the United States, with 411 department stores in 33 states as of February 1, 1997. As of February 1, 1997, Federated also operated more than 150 specialty stores under the names "Aeropostale" and "Charter Club," and a mail order catalog business under the name "Bloomingdale's By Mail." The following table sets forth certain information with respect to each of Federated's retail operating divisions as of February 1, 1997: <TABLE> <CAPTION> FISCAL GROSS 1996 SQUARE NUMBER OF SALES FEET(1) STORES (IN MILLIONS) (IN THOUSANDS) --------- ------------- -------------- <S> <C> <C> <C> Bloomingdale's........................ 21 $1,595.0(2) 5,578 The Bon Marche........................ 42 892.4 5,038 Burdines.............................. 48 1,333.4 7,942 Macy's East........................... 90 4,541.0 23,673 Macy's West/Bullock's................. 109 3,714.2 21,093 Rich's/Lazarus/Goldsmith's............ 76 2,105.5 14,780 Stern's............................... 25 880.7 4,915 Macy's Specialty...................... 153 166.8 561 --- ---------- ------- Total................................. 564 $15,229.0 83,580 === ========= ====== </TABLE> (1) Reflects total square footage of store locations, including office, storage, service and other support space that is not dedicated to direct merchandise sales, but excluding warehouses and distribution terminals not located at store sites. (2) Includes $136.7 million of sales of Federated's Bloomingdale's By Mail subsidiary. In general, each of Federated's retail operating divisions is a separate subsidiary of Federated. However, (i) the Macy's West division comprises three separate subsidiaries of Federated and (ii) the consolidated Rich's/Lazarus division comprises three separate subsidiaries of Federated. Further realignment of the operations, corporate structure, and/or assets of Federated's subsidiaries may be effected from time to time, and the names under which the stores or businesses included in or conducted through the Federated Stores and Bloomingdale's By Mail are operated may be changed from time to time. See "Risk Factors--Dependence on Certain Affiliates of the Transferor." Federated has advised the Transferor that Federated believes the department store business will continue to consolidate, and that it intends from time to time to consider the possible acquisition of department store assets and companies. In the event any such acquisitions are consummated, subject to compliance with the applicable provisions of the Pooling and Servicing Agreement, the Transferor may (but will not be obligated to) designate such accounts as Automatic Additional Accounts and cause the receivables therein to be transferred to the Trust. See "Description of the Offered Certificates--Automatic Addition of Accounts." THE TRANSFEROR The Transferor was incorporated in Delaware on September 23, 1992, and is an indirect wholly owned subsidiary of Federated. The Transferor was organized for the limited purpose of purchasing the Receivables in the Accounts and any Automatic Additional Accounts or Supplemental Accounts from the Originators, forming trusts such as the Trust, and transferring the Receivables to such trusts, causing such trusts to issue securities from time to time of the type comprising the Series 1997-1 Certificates and certificates of other Series. The principal executive offices of the Transferor are located at 9111 Duke Boulevard, Mason, Ohio 45040-8999. Its telephone number is (513) 573-2037. FDS FDS received its charter on September 8, 1993, and is an indirect wholly owned subsidiary of Federated. Pursuant to an Assumption Agreement dated September 15, 1993, FDS replaced Federated as Servicer under the Pooling and Servicing Agreement. In addition, in September 1993 FDS was added as a party to the Purchase Agreement and substantially all of the then-existing Accounts (other than the Broadway Accounts) were transferred from the other Federated Subsidiaries to FDS. Substantially all of the Broadway Accounts were transferred to FDS during fiscal 1996. FDS issues cards bearing the various tradenames of the Federated Stores and maintains separate credit card programs for each of them. Because the credit and collection policies of FDS with respect to its various programs are substantially similar, FDS is able to achieve significant economies of scale in credit servicing. At the present time, FDS is the owner of substantially all of the Accounts, although the other Originators may from time to time establish Accounts and sell the Receivables arising therein to the Transferor for transfer to the Trust pursuant to the Pooling and Servicing Agreement. The principal executive offices of FDS are located at 9111 Duke Boulevard, Mason, Ohio 45040-8999. The telephone number is (513) 573-2265. MATURITY ASSUMPTIONS The Class A Invested Amount is payable to the Class A Certificateholders, to the extent funds are available therefor in the Principal Funding Account, on the Class A Expected Final Payment Date, which is the [ ] Distribution Date (the "Class A Expected Final Payment Date"), or earlier in the event of a Pay Out Event which results in the commencement of the Early Amortization Period. The Class A Certificateholders will receive payments of principal on each Distribution Date following the Monthly Period in which a Pay Out Event occurs (each such Distribution Date being a "Special Payment Date") until the Class A Invested Amount has been paid in full or the Series 1997-1 Termination Date has occurred. The Class B Certificateholders will receive payments of principal on the Class B Expected Final Payment Date, which is the [ ] Distribution Date (the "Class B Expected Final Payment Date"), or earlier or later in certain circumstances, and each Distribution Date thereafter until the Class B Invested Amount is paid in full or the Series 1997-1 Termination Date has occurred. During the Accumulation Period, monthly collections of principal with respect to the Class A Certificates will be deposited in the Principal Funding Account until the amount deposited in the Principal Funding Account is equal to the Class A Invested Amount. The Class A Certificateholders will receive the amount on deposit in the Principal Funding Account on the Class A Expected Final Payment Date. During the Accumulation Period or any Early Amortization Period, as the case may be, the Class A Certificateholders will have deposited in the Principal Funding Account or will receive, as the case may be, on each Distribution Date, an amount equal to the lesser of (a) the product of the Fixed/Floating Allocation Percentage and the aggregate amount of Principal Collections collected during the related Monthly Period and (b) the aggregate amount of Net Principal Collections for such Monthly Period. During the Accumulation Period, the monthly amount deposited in the Principal Funding Account for payment on the Class A Expected Final Payment Date to the Class A Certificateholders will be equal to the lesser of (a) the sum of (i) the lesser of (x) the product of the Fixed/Floating Allocation Percentage and the aggregate amount of Principal Collections received during the related Monthly Period and (y) the Net Principal Collections and (ii) Shared Principal Collections allocable to the Class A Certificates, if any, and (b) the Controlled Deposit Amount, which is equal to the sum of the applicable Controlled Amortization Amount and any existing Accumulation Shortfall. Although it is anticipated that Principal Collections will be sufficient in each Monthly Period to fund the deposit of the Controlled Amortization Amount in the Principal Funding Account for payment to the Class A Certificateholders on the Class A Expected Final Payment Date, no assurance can be given in that regard. The Transferor cannot predict, and no assurance can be given, as to the cardholder monthly payment rates that will actually occur in any future period, as to whether any of the above assumptions will prove to have been correct, or as to whether the actual rate of payment of principal of the Class A Certificates or the Class B Certificates will be as anticipated. Should a Pay Out Event occur and the Early Amortization Period commence, the Class A Certificateholders will be entitled to receive on each Distribution Date payments of principal equal to the lesser of (i) the product of the Fixed/Floating Allocation Percentage and the aggregate amount of Principal Collections received during the related Monthly Period and (ii) the aggregate amount of Net Principal Collections for such Monthly Period, until the Class A Invested Amount is paid in full or until the Series 1997-1 Termination Date. Thereafter, on and after the Class B Principal Payment Commencement Date, the Class B Certificateholders will be entitled to receive on each Distribution Date payments of principal equal to the lesser of (i) the product of the applicable Fixed/Floating Allocation Percentage and Principal Collections received during the related Monthly Period and (ii) the aggregate amount of Net Principal Collections for such Monthly Period, until the Class B Invested Amount is paid in full or until the Series 1997-1 Termination Date. In addition, following the occurrence of a Pay Out Event during the Funding Period, the amounts remaining on deposit in the Pre-Funding Account will be payable as principal first to the Class A Certificateholders until the sum of the Class A Invested Amount and the Class A Pre-Funded Amount is paid in full and then to the Class B Certificateholders. A "Pay Out Event" would occur, either automatically or after specified notice, upon (a) the failure of the Transferor to make certain payments or transfers of funds for the benefit of the Certificateholders within the time periods stated in the Pooling and Servicing Agreement, (b) material breaches of certain representations, warranties or covenants of the Transferor, (c) certain insolvency events relating to the Transferor, FDS, or Federated, (d) the occurrence of a Servicer Default that would have a material adverse effect on the Certificateholders, (e) (x) the Transferor Interest being less than the Minimum Transferor Interest or (y) the total amount of Principal Receivables and the amount on deposit in the Excess Funding Account being less than the Minimum Aggregate Principal Receivables, in each case for 15 consecutive days, (f) the Trust becoming an "investment company" within the meaning of the Investment Company Act, or (g) a reduction in the average of the Portfolio Yields for any three consecutive Monthly Periods to a rate which is less than the Base Rate. See "Description of the Offered Certificates--Pay Out Events." In the absence of a Pay Out Event, the amount remaining in the Pre-Funding Account at the end of the Funding Period will be withdrawn and distributed on the next succeeding Distribution Date to the Class A Certificateholders and the Class B Certificateholders pro rata based on the Class A Invested Amount and the Class B Invested Amount. The following table sets forth the highest and lowest cardholder monthly payment rates for the Federated Portfolio during any month in the period shown and the average cardholder monthly payment rates for all months during the periods shown, in each case calculated as a percentage of total opening monthly account balances during the periods shown. Payment rates shown in the table are based on amounts which would be deemed payments of Principal Receivables and Finance Charge Receivables with respect to the Accounts. CARDHOLDER MONTHLY PAYMENT RATES FEDERATED PORTFOLIO <TABLE> <CAPTION> 26 WEEKS ENDED FISCAL YEAR ENDED --------------------- ------------------------------------- AUGUST 2, AUGUST 3, FEBRUARY FEBRUARY 3, JANUARY 1997 1996 1, 1997 1996 28, 1995 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> Lowest Month............... 15.37% 15.99% 17.38% Highest Month.............. 21.85% 18.04% 20.29% Monthly Average............ 16.75% 17.32% 18.72% </TABLE> The amount of collections of Receivables may vary from month to month due to seasonal variations, general economic conditions, payment habits of individual cardholders, and other factors. There can be no assurance that collections of Principal Receivables with respect to the Federated Portfolio, and thus the rate at which the Principal Funding Account could be funded during the Accumulation Period or the rate at which Certificateholders could expect to receive payments of principal on their Certificates during an Early Amortization Period, will be similar to the historical experience set forth above. If a Pay Out Event occurs, the average life and maturity of the Offered Certificates could be significantly reduced. See "Risk Factors--Reinvestment Risks; Payments and Maturity." POOL FACTOR AND RELATED INFORMATION The "Class A Pool Factor" and the "Class B Pool Factor" are each a seven-digit decimal, which the Servicer will compute monthly, expressing as of each Record Date the Class A Invested Amount as a proportion of the Class A Invested Amount as of the date of initial issuance of the Offered Certificates (the "Closing Date") and the Class B Invested Amount as a proportion of the Class B Invested Amount as of the Closing Date, respectively (in each case together with the Class A Percentage or the Class B Percentage, as applicable, of the Pre-Funded Amount). On the Closing Date, the Class A Pool Factor and the Class B Pool Factor will be 1.0000000 and will remain unchanged during the Revolving Period, except in certain limited circumstances. Thereafter, on and after the Class A Expected Final Payment Date or the beginning of the Early Amortization Period, the Class A Pool Factor will decline to reflect reductions in the Class A Invested Amount and on and after the Class B Principal Payment Commencement Date, the Class B Pool Factor will decline to reflect reductions in the Class B Invested Amount. A Certificateholder's pro rata interest in the Principal Receivables in the Trust for a given month can be determined by multiplying the denomination of the holder's Certificate by the applicable Pool Factor for that month. Pursuant to the Pooling and Servicing Agreement, monthly reports concerning, among other things, the Class A Invested Amount and the Class A Pool Factor and the Class B Invested Amount and the Class B Pool Factor will be made available to the Class A Certificateholders and the Class B Certificateholders, respectively. In addition, on or before January 31 of each year, information for tax reporting purposes will be made available to the Class A Certificateholders and the Class B Certificateholders, respectively. See "Description of the Offered Certificates--Book-Entry Registration" and "--Reports to Certificateholders." USE OF PROCEEDS The Trustee, on behalf of the Trust, will receive the Exchangeable Transferor Certificate from the Transferor and, in exchange therefor, will issue the Class A Certificates, the Class B Certificates, and the Class C Certificates, together with a new Exchangeable Transferor Certificate, to or upon the order of the Transferor. The Transferor will apply the entire net proceeds (i.e., the price to the public, as set forth on the cover page of this Prospectus, less underwriting discounts and commissions and offering expenses) received from the sale of the Offered Certificates to pay the purchase price of Receivables purchased from the Originators, to fund the Pre-Funding Account to the extent of the Pre-Funded Amount, and to make certain payments to Federated and its subsidiaries. Federated has informed the Transferor that Federated and its subsidiaries will use such proceeds for general corporate purposes. DESCRIPTION OF THE OFFERED CERTIFICATES The Offered Certificates will be issued pursuant to the Pooling and Servicing Agreement and the Series 1997-1 Supplement. Pursuant to the Pooling and Servicing Agreement, the Transferor and the Trustee may from time to time execute additional Supplements in order to issue additional Series. GENERAL The Offered Certificates will represent undivided interests in certain assets of the Trust, including the right to the investor allocation percentage of all cardholder payments on the Receivables in the Trust. Each Class A Certificate and Class B Certificate will represent the right to receive payments of interest at the Class A Certificate Rate or the Class B Certificate Rate, as the case may be, funded from collections of Finance Charge Receivables and payments of principal on and after the earlier of the Class A Expected Final Payment Date and the Distribution Date in the Monthly Period following the commencement of the Early Amortization Period, with respect to the Class A Certificates, and on and after the Class B Principal Payment Commencement Date, with respect to the Class B Certificates, in each case funded from collections of Principal Receivables allocated to the Class A Certificateholders' Interest or the Class B Certificateholders' Interest, as the case may be. The Transferor will own the Exchangeable Transferor Certificate and may from time to time own certificates of any Series or class, including without limitation the Class C Certificates. The Exchangeable Transferor Certificate will represent an undivided interest in the Trust, including the right to a percentage (the "Transferor Percentage") of all cardholder payments on the Receivables in the Trust equal to 100% minus the sum of the applicable investor allocation percentages for all Series of certificates then outstanding. The Exchangeable Transferor Certificate may be transferred in part, subject to certain limitations and conditions set forth in the Pooling and Servicing Agreement. See "--Certain Matters Regarding the Transferor and the Servicer." The Invested Amount on the Closing Date is subject to increase, up to the Full Invested Amount, during the Funding Period to the extent that amounts are withdrawn from the Pre-Funding Account and paid to the Transferor as principal is paid or deposited in the Series 1992-1 Principal Funding Account. During the Revolving Period, the amount of the Invested Amount in the Trust will otherwise remain constant except under certain limited circumstances. See "--Allocation Percentages," "--Reallocated Principal Collections," "--Application of Collections," "--Coverage of Interest Shortfalls," "--Investor Charge-Offs," and "--Defaulted Receivables; Rebates and Fraudulent Charges." The amount of Principal Receivables in the Trust, however, will vary each day as new Principal Receivables are created and others are paid. Following the conclusion of the Funding Period, the amount of the Transferor Interest (or the amount in the Excess Funding Account) will fluctuate each day to reflect the changes in the amount of the Principal Receivables in the Trust. During the Accumulation Period or any Early Amortization Period, and on and after the Class B Principal Payment Commencement Date, the Invested Amount in the Trust will decline as cardholder payments of Principal Receivables are collected and accumulated for distribution or distributed to the Certificateholders. As a result, unless additional Series are issued or the invested amount of the Variable Funding Certificates previously issued is increased, the Transferor Interest during any Accumulation Period or Early Amortization Period, and on and after the Class B Principal Payment Commencement Date, will generally increase each month to reflect the reductions in the Invested Amount of such Series and will also change to reflect the variations in the amount of the Principal Receivables in the Trust. The Transferor Interest may be reduced as the result of an Exchange. See "--Exchanges." Each class of Offered Certificates initially will be represented by certificates registered in the name of the nominee of DTC (together with any successor depository selected by the Transferor, the "Depository"), except as set forth below. Beneficial interests in each class of Offered Certificates will be available for purchase in minimum denominations of $1,000 and integral multiples thereof in book-entry form only. The Transferor has been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the holder of record of the Offered Certificates. No Offered Certificate Owner acquiring an interest in the Offered Certificates will be entitled to receive a certificate representing such Offered Certificate Owner's interest in such Certificates. Unless and until Definitive Certificates are issued under the limited circumstances described herein, all references herein to actions by Certificateholders of any class of Offered Certificates will refer to actions taken by the Depository upon instructions from its participating organizations ("Participants"), and all references herein to distributions, notices, reports, and statements to Certificateholders of any class of Offered Certificates will refer to distributions, notices, reports, and statements to the Depository or its nominee, as the registered holder of the Offered Certificates of such class, for distribution to Offered Certificate Owners of such class in accordance with the Depository's procedures. See "--Book-Entry Registration" and "--Definitive Certificates." BOOK-ENTRY REGISTRATION Holders of the Offered Certificates may hold their Certificates through DTC (in the United States) or Cedel or Euroclear (in Europe), which in turn hold through DTC, if they are participants of such systems, or indirectly through organizations that are participants in such systems. Cede, as nominee for DTC, will hold the global Certificates. Cedel and Euroclear will hold omnibus positions on behalf of the Cedel Participants and the Euroclear Participants, respectively, through customers' securities accounts in Cedel's and Euroclear's names on the books of their respective depositaries (collectively, the "Depositaries") which in turn will hold such positions in customers' securities accounts in the Depositaries' names on the books of DTC. For additional information regarding clearance and settlement procedures for the Offered Certificates, see Annex II hereto. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York UCC, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers (including the Underwriters), banks, trust companies, and clearing corporations and may include certain other organizations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers, and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (the "Indirect Participants"). Class A Certificate Owners and Class B Certificate Owners that are not Participants or Indirect Participants but desire to purchase, sell, or otherwise transfer ownership of, or other interest in, Certificates may do so only through Participants and Indirect Participants. In addition, Class A Certificate Owners and Class B Certificate Owners will receive all distributions of principal of and interest on the Class A Certificates and Class B Certificates, respectively, through the Participants who in turn will receive them from the Depository. Under a book-entry format, Class A Certificate Owners and Class B Certificate Owners may experience some delay in their receipt of payments, since such payments will be forwarded by the Trustee to the Depository or its nominee. The Depository will forward such payments to its Participants which thereafter will forward them to Indirect Participants, or Class A Certificate Owners or Class B Certificate Owners, as the case may be. It is anticipated that the only "Class A Certificateholder" and "Class B Certificateholder" will be Cede, as nominee of DTC. Class A Certificate Owners and Class B Certificate Owners will not be recognized by the Trustee as Certificateholders, as such term is used in the Pooling and Servicing Agreement, and Class A Certificate Owners and Class B Certificate Owners will be permitted to exercise the rights of Certificateholders only indirectly through the Participants, who in turn will exercise the rights of Certificateholders through the Depository. Under the rules, regulations, and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Certificates and is required to receive and transmit distributions of principal and interest on the Offered Certificates. Participants and Indirect Participants with which Class A Certificate Owners and Class B Certificate Owners have accounts with respect to the Class A Certificates and the Class B Certificates, respectively, similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Class A Certificate Owners and Class B Certificate Owners. Accordingly, although Class A Certificate Owners and Class B Certificate Owners will not possess Class A Certificates and Class B Certificates, respectively, Class A Certificate Owners and Class B Certificate Owners will receive payments and will be able to transfer their respective interests. Because DTC can act only on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a Class A Certificate Owner or a Class B Certificate Owner to pledge Offered Certificates to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such Offered Certificates, may be limited due to the lack of a physical certificate for such Offered Certificates. DTC has advised the Transferor that it will take any action permitted to be taken by a Class A Certificateholder or a Class B Certificateholder under the Pooling and Servicing Agreement only at the direction of one or more Participants to whose account with DTC the Offered Certificates are credited. Additionally, DTC has advised the Transferor that it will take such actions with respect to specified percentages of the Invested Amount only at the direction of and on behalf of Participants whose holdings include undivided interests that satisfy such specified percentages. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of Participants whose holdings include such undivided interests. Transfers between DTC Participants will occur in accordance with DTC rules. Transfers between Cedel Participants and Euroclear Participants will occur in the ordinary way in accordance with their applicable rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC in the United States, on the one hand, and directly or indirectly through Cedel Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Cedel Participants and Euroclear Participants may not deliver instructions directly to the Depositaries. Because of time-zone differences, credits or securities in Cedel or Euroclear as a result of a transaction with a DTC Participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and such credits or any transactions in such securities settled during such processing will be reported to the relevant Cedel Participant or Euroclear Participant on such business day. Cash received in Cedel or Euroclear as a result of sales of securities by or through a Cedel Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Cedel or Euroclear cash account only as of the business day following settlement in DTC. Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of Luxembourg as a professional depository. Cedel holds securities for its participating organizations ("Cedel Participants") and facilitates the clearance and settlement of securities transactions between Cedel Participants through electronic book-entry changes in accounts of Cedel Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Cedel in any of 28 currencies, including United States dollars. Cedel provides to its Cedel Participants, among other things, services for safekeeping, administration, clearance, and settlement of internationally traded securities, and securities lending and borrowing. Cedel interfaces with domestic markets in several countries. As a professional depository, Cedel is subject to regulations by the Luxembourg Monetary Institute. Cedel Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations and may include the Underwriters of the Offered Certificates. Indirect access to Cedel is also available to others, such as banks, brokers, dealers, and trust companies that clear through or maintain a custodial relationship with a Cedel Participant, either directly or indirectly. The Euroclear System (the "Euroclear System") was created in 1968 to hold securities for participants of the Euroclear System ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 27 currencies, including United States dollars. The Euroclear System includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. The Euroclear System is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for the Euroclear system on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers, and other professional financial intermediaries and may include the underwriters of the Offered Certificates. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions governing use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawal of securities and cash from the Euroclear System, and receipts of payments with respect to securities in the Euroclear System. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants and has no record of or relationship with persons holding through Euroclear Participants. Distributions with respect to Offered Certificates held through Cedel or Euroclear will be credited to the cash accounts of Cedel Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by its Depositary. Such distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Cedel or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a holder of an Offered Certificate under the Pooling and Servicing Agreement on behalf of a Cedel Participant or a Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Depositary's ability to effect such actions on its behalf through DTC. Although DTC, Cedel, and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Offered Certificates among Participants of DTC, Cedel, and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. DEFINITIVE CERTIFICATES The Offered Certificates of each Class will be issued in fully registered, certificated form to the Offered Certificate Owners of such Class or their nominees ("Definitive Certificates"), rather than to the Depository or its nominee, only if (i) the Transferor advises the Trustee in writing that the Depository is no longer willing or able to discharge properly its responsibilities as Depository with respect to the Certificates of such Class, and the Trustee or the Transferor is unable to locate a qualified successor, (ii) the Transferor, at its option, advises the Trustee in writing that it elects to terminate the book-entry system through the Depository, or (iii) after the occurrence of a Servicer Default, Offered Certificate Owners representing not less than 50% of such Class advise the Trustee and the Depository through Participants in writing that the continuation of a book-entry system through the Depository is no longer in the best interest of the Offered Certificate Owners of such Class. Upon the occurrence of any of the events described in the immediately preceding paragraph, the Depository is required to notify all Participants of the availability through the Depository of Definitive Certificates. Upon surrender by the Depository of the definitive certificate representing the Certificates of the affected Class and instructions for registration, the Trustee will issue the Certificates of such Class as Definitive Certificates, and thereafter the Trustee will recognize the holders of such Definitive Certificates as holders under the Pooling and Servicing Agreement ("Holders"). Distribution of principal and interest on the Offered Certificates will be made by the Trustee directly to Holders of Definitive Certificates in accordance with the procedures set forth herein and in the Pooling and Servicing Agreement. Interest payments and any principal payments on each Distribution Date will be made to Holders in whose names the Definitive Certificates were registered at the close of business on the related Record Date. Distributions will be made by check mailed to the address of such Holder as it appears on the register maintained by the Trustee. The final payment on any Offered Certificate, however, will be made only upon presentation and surrender of such Certificate at the office or agency specified in the notice of final distribution to Certificateholders. The Trustee will provide such notice to registered Holders mailed not later than the fifth day of the month of such final distributions. Definitive Certificates will be transferable and exchangeable at the offices of the Transfer Agent and Registrar, which initially will be the Trustee. No service charge will be imposed for any registration of transfer or exchange, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. The Transfer Agent and Registrar will not be required to register the transfer or exchange of Definitive Certificates for a period of fifteen days preceding the due date for any payment with respect to such Definitive Certificates. INTEREST PAYMENTS Interest will accrue on the outstanding principal balance of the Class A Certificates at the Class A Certificate Rate and on the outstanding principal balance of the Class B Certificates at the Class B Certificate Rate, in each case from the Closing Date. Interest will be distributed on [ ], and on each Distribution Date thereafter to Certificateholders of each Class in an amount equal to one-twelfth of the product of the applicable Certificate Rate and the applicable outstanding principal balance as of the preceding Record Date, except that interest for the first Distribution Date will include accrued interest at the applicable Certificate Rate from the Closing Date through [ ] (calculated as though there were only 30 days in [ ]). Interest will be calculated on the basis of a 360-day year of twelve 30-day months. Interest payments on the Class A Certificates on any Distribution Date will be funded from Available Series Finance Charge Collections allocated to the Certificateholders' Interest during the preceding Monthly Period. Subject to the prior payment of interest on the Class A Certificates (and, as to a portion thereof, to the prior payment of certain other amounts), interest payments on the Class B Certificates on any Distribution Date will be funded from Available Series Finance Charge Collections allocated to the Certificateholders' Interest during the preceding Monthly Period, and, on and after the Class B Principal Payment Commencement Date, from the Transferor Interest to the extent of the Transferor Subordination Amount. PRINCIPAL PAYMENTS During the Revolving Period (which begins on the Closing Date and ends on the day before either the Accumulation Period or the Early Amortization Period begins), no principal payments will be made to the Certificateholders (except to the extent described in "--Pre-Funding Account" should the Pre-Funding Amount be greater than zero on the first day of the __________ Monthly Period). On each business day during the Accumulation Period, principal will be deposited in the Principal Funding Account for distribution to Class A Certificateholders on the Class A Expected Final Payment Date. During any Early Amortization Period, principal will be paid monthly on each Distribution Date starting on the next Distribution Date following the Monthly Period in which the applicable Pay Out Event occurred, first to the Class A Certificateholders until the Class A Invested Amount is paid in full, then to the Class B Certificateholders monthly on each Distribution Date until the Class B Invested Amount is paid in full, and then to the Class C Certificateholders monthly on each Distribution Date until the Class C Invested Amount is paid in full. If a Pay Out Event occurs during the Accumulation Period, the amount in the Principal Funding Account will be paid to the Class A Certificateholders on the first Special Payment Date. If a Pay Out Event occurs during the Funding Period, the amounts remaining on deposit in the Pre-Funding Account will be payable as principal first to the Class A Certificateholders until the sum of the Class A Invested Amount and the Class A Pre-Funded Amount is paid in full and then to the Class B Certificateholders. See "--Pay Out Events" for a discussion of events which might lead to the commencement of an Early Amortization Period. See "--Application of Collections" for a discussion of the method by which collections of Principal Receivables are allocated during either an Accumulation Period or an Early Amortization Period. Net Principal Collections for any Monthly Period allocated to the Class A Invested Amount will first be used to cover, with respect to any Monthly Period during either the Accumulation Period or any Early Amortization Period, required deposits into the Principal Funding Account for the benefit of the Class A Certificateholders, or required payments of principal to the Class A Certificateholders, as the case may be. On and after the Class B Principal Payment Commencement Date, Net Principal Collections for any Monthly Period allocated to the Class B Invested Amount will first be used to cover required deposits into the Principal Account for the benefit of the Class B Certificateholders. On and after the Class C Principal Payment Commencement Date, Principal Collections for any Monthly Period allocated to the Class C Invested Amount will first be used to cover required deposits into the Principal Account for the benefit of the Class C Certificateholders. The Servicer will determine the amount of collections of Principal Receivables for any business day allocated to the Invested Amount for Series 1997-1 remaining after covering required deposits or payments of principal to the Certificateholders and any similar amount remaining for any other Series ("Shared Principal Collections"). The Servicer will allocate the Shared Principal Collections to cover any scheduled or permitted principal distributions to Certificateholders (including principal distributions which the Transferor may elect to make to the holders of the Variable Funding Certificates) and deposits to principal funding accounts, if any, for any Series that have not been covered out of the collections of Principal Receivables allocable to such Series and certain other amounts for such Series ("Principal Shortfalls"). Shared Principal Collections will not be used to cover investor charge-offs for any Series. If Principal Shortfalls exceed Shared Principal Collections on any business day, Shared Principal Collections will be allocated pro rata among the applicable Series based on the relative amounts of Principal Shortfalls. To the extent that Shared Principal Collections exceed Principal Shortfalls, the balance will, subject to certain limitations, be paid to the holder of the Exchangeable Transferor Certificate. POSTPONEMENT OF ACCUMULATION PERIOD Upon written notice to the Trustee, and subject to certain conditions, the Servicer may elect to postpone the commencement of the Accumulation Period, thereby extending the length of the Revolving Period. The Servicer may make such election only if the Accumulation Period Length (determined as described below) is less than eight months. On each Determination Date on and after the [ ] Determination Date but prior to the commencement of the Accumulation Period, the Servicer will determine the "Accumulation Period Length," which is the number of months expected to be required to fully fund the Principal Funding Account in an amount sufficient to pay the entire Class A Invested Amount no later than the Class A Expected Final Payment Date, based on the assumptions that (a) the payment rate with respect to Principal Collections remains constant at the lowest level of such payment rate during the twelve preceding Monthly Periods (or such lower payment rate as the Servicer may select), (b) the total amount of Principal Receivables in the Trust (and the principal amount on deposit in the Excess Funding Account, if any) remains constant at the level on such date of determination, (c) no Pay Out Event with respect to any Series will subsequently occur, and (d) no additional Series (other than any Series being issued on such date of determination) will be subsequently issued. If the Accumulation Period Length is less than eight months, the Servicer may, at its option, postpone the commencement of the Accumulation Period such that the number of months included in the Accumulation Period will equal or exceed the Accumulation Period Length. The effect of the foregoing calculation is to permit the reduction of the length of the Accumulation Period based on the certificateholders' interest of certain other Series, if any, which are scheduled to be in their revolving periods during the Accumulation Period and on increases in the principal payment rate, if any, occurring after the Closing Date. The length of the Accumulation Period will not be less than one month and any election to shorten the Accumulation Period will be subject to subsequent lengthening of the Accumulation Period on any subsequent Determination Date. If the commencement of the Accumulation Period is postponed, and if a Pay Out Event occurs after the date originally scheduled as the commencement of the Accumulation Period, it is probable that holders of Certificates would receive some of their principal later than if the Accumulation Period had not been postponed. SUBORDINATION OF THE CLASS B CERTIFICATES The Class B Certificates will be subordinated to the extent necessary to fund certain payments with respect to the Class A Certificates. To the extent the Class B Invested Amount is reduced, the percentage of Total Finance Charge Collections allocated to the Class B Certificateholders in subsequent Monthly Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class B Invested Amount is not reimbursed, the amount of principal distributable to the Class B Certificateholders will be reduced. The Class C Certificates will be subordinated to the extent necessary to fund certain payments with respect to the Class A Certificates and the Class B Certificates. To the extent the Class C Invested Amount is reduced, the percentage of Total Finance Charge Collections allocated to the Class C Certificateholders in subsequent Monthly Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class C Invested Amount is not reimbursed, the amount of principal distributable to the Class C Certificateholders will be reduced. If, on any Determination Date, the aggregate Investor Default Amount, if any, for each business day in the preceding Monthly Period exceeded the sum of (w) the aggregate amount of Available Series Finance Charge Collections applied with respect thereto as described in clause (iv) of "Payment of Fees, Interest, and Other Items," (x) the amount of Transferor Finance Charge Collections and Excess Finance Charge Collections allocated thereto as described in "--Reallocation of Cash Flows," (y) the amount of Reallocated Principal Collections allocated with respect thereto as described in "--Reallocated Principal Collections," and (z) on and after the Class B Principal Payment Commencement Date, the remaining amount of collections allocable to the holder of the Exchangeable Transferor Certificate to the extent of the Transferor Subordination Amount, the Class C Invested Amount will be reduced by the amount by which such aggregate Investor Default Amount exceeds the amount applied with respect thereto during the preceding Monthly Period. In the event that the Class C Invested Amount is reduced to zero prior to the Class B Principal Payment Commencement Date, the Class B Invested Amount will be reduced by the amount of the remaining shortfall, but not more than the aggregate Investor Default Amount for such Monthly Period. If the Class C Invested Amount is reduced to zero, on or after the Class B Principal Payment Commencement Date, a portion of the Transferor Subordination Amount equal to such insufficiency (but not in excess of the aggregate Investor Default Amount for such Monthly Period) will be deducted from the Transferor Interest and allocated to avoid a charge-off with respect to the Class B Certificates. If the Transferor Subordination Amount is reduced to zero, the Class B Invested Amount will be reduced by the amount by which the Transferor Subordination Amount would have been reduced below zero, but not more than the aggregate Investor Default Amount for such Monthly Period. Such reductions of the Class B Invested Amount will thereafter be reimbursed and the Class B Invested Amount increased on each Distribution Date by the amount, if any, of Total Finance Charge Collections, Excess Finance Charge Collections, and Transferor Finance Charge Collections for such Distribution Date allocated and available for that purpose. See "--Reallocation of Cash Flows," "--Reallocated Principal Collections," and "--Investor Charge-Offs." TRANSFER AND ASSIGNMENT OF RECEIVABLES The Transferor has transferred and assigned to the Trust all of its right, title, and interest in and to the Receivables in the Accounts and all Receivables existing on the Initial Closing Date and thereafter created in the Accounts and purchased by the Transferor. In connection with the transfer of the Receivables to the Trust, the Transferor has indicated in its computer files that the Receivables have been conveyed to the Trust. In addition, the Transferor has provided to the Trustee or its bailee computer files or microfiche lists containing a true and complete list showing each Account, identified by account number and by total outstanding balance on the Initial Cut-Off Date. The Transferor has not delivered to the Trustee any other records or agreements relating to the Accounts or the Receivables, except in connection with additions or removals of Accounts. Except as stated above, the records and agreements relating to the Accounts and the Receivables maintained by the Transferor or the Servicer are not segregated by the Transferor or the Servicer from other documents and agreements relating to other credit card accounts and receivables and are not stamped or marked to reflect the transfer of the Receivables to the Trust, but the computer records of the Transferor are required to be marked to evidence such transfer. The Transferor has filed a UCC financing statement with respect to the Receivables meeting the requirements of applicable state law. See "Risk Factors--Transfer of the Receivables; Insolvency Risk Considerations" and "Certain Legal Aspects of the Receivables." EXCHANGES The Pooling and Servicing Agreement provides that the Trustee may issue two types of certificates: (i) one or more Series of certificates, each of which may have multiple classes, of which one or more of such classes may be transferable, and (ii) the Exchangeable Transferor Certificate. The Exchangeable Transferor Certificate which evidences the Transferor Interest, is currently held by the Transferor and is transferable only as provided in the Pooling and Servicing Agreement. The Pooling and Servicing Agreement also provides that, pursuant to any one or more Supplements, the holder of the Exchangeable Transferor Certificate may tender the Exchangeable Transferor Certificate and the certificates evidencing any Series of certificates, to the Trustee in exchange for one or more new Series and a reissued Exchangeable Transferor Certificate. Pursuant to the Pooling and Servicing Agreement, the holder of the Exchangeable Transferor Certificate may define, with respect to any newly issued Series, certain terms including: (i) its name or designation; (ii) its initial invested amount (or method for calculating such amount); (iii) its certificate rate (or the method of allocating interest payments or other cash flows to such Series); (iv) the closing date; (v) the rating agency or agencies, if any, rating the Series; (vi) the interest payment date or dates and the date or dates from which interest shall accrue; (vii) the name of the clearing agency, if any; (viii) the method for allocating collections to certificateholders of such Series with respect to Principal Receivables, Finance Charge Receivables, and Receivables in Defaulted Accounts and the method by which the principal amount of such Series will amortize or accrete; (ix) the names of any accounts to be used by such Series and the terms governing the operation of any such accounts; (x) the percentage used to calculate monthly servicing fees; (xi) the Minimum Transferor Interest; (xii) the Enhancement provider, if applicable, and the terms of any Enhancement with respect to such Series; (xiii) the base rate applicable to such Series; (xiv) the terms on which the certificates of such Series may be repurchased or remarketed to other investors; (xv) the termination date of such Series; (xvi) any deposit into any account provided for such Series; (xvii) the number of classes of such Series and, if more than one class, the rights and priorities of each such class; (xviii) the fees, if any, to be included in funds available to certificateholders in such Series; (xix) the subordination, if any, of such Series with respect to any other Series; (xx) the rights, if any, of the holder of the Exchangeable Transferor Certificate that have been transferred to the holders of such Series; (xxi) the pool factor (consisting of a seven-digit decimal expressing the ratio of the invested amount to the initial invested amount for such Series); (xxii) the Minimum Aggregate Principal Receivables for such Series; (xxiii) whether such Series will be part of a group or subject to being paired with any other Series; (xxiv) whether such Series will be prefunded or paired with any other Series; and (xxv) any other relevant terms, including whether or not such Series will be pledged as collateral for an issuance of any other securities, including commercial paper (all such terms, the "Principal Terms" of such Series). None of the Transferor, the Servicer, the Trustee, or the Trust is required or intends to obtain the consent of any Certificateholder to issue any additional Series or in connection with the determination of the Principal Terms thereof. However, as a condition of an Exchange, the holder of the Exchangeable Transferor Certificate will deliver to the Trustee written confirmation that the Exchange will not result in either Rating Agency reducing or withdrawing its rating of any outstanding Series, including the Certificates. The Transferor may offer any Series to the public or other investors in transactions either registered under the Securities Act or exempt from registration thereunder, directly, through the Underwriters or one or more other underwriters or placement agents, in fixed-price offerings, in negotiated transactions, or otherwise. Any such Series may be issued in fully registered or book-entry form in minimum denominations determined by the Transferor. The Pooling and Servicing Agreement provides that the holder of the Exchangeable Transferor Certificate may perform Exchanges and define the Principal Terms of each Series, including the period during which amortization of the principal amount thereof is intended to occur, which period may have a different length and begin on a different date than such period for any other Series. Accordingly, one or more Series may be in their amortization periods while other Series are not. Thus, certain Series may not be amortizing while other Series are amortizing. Moreover, any Series may have the benefit of an Enhancement that is available only to such Series. Under the Pooling and Servicing Agreement, the Trustee will hold any such form of Enhancement only on behalf of the Series with respect to which it relates. Likewise, with respect to each such form of Enhancement, the holder of the Exchangeable Transferor Certificate may deliver a different form of Enhancement agreement. The Pooling and Servicing Agreement also provides that the holder of the Exchangeable Transferor Certificate may specify different coupon rates and monthly servicing fees with respect to each Series (or a particular class within such Series). Collections allocated to Finance Charge Receivables not used to pay interest on the certificates, the monthly servicing fee, the investor default amount, or investor charge-offs with respect to any Series will be allocated as provided in such Enhancement agreement, if applicable. The holder of the Exchangeable Transferor Certificate also has the option under the Pooling and Servicing Agreement to vary between Series the terms upon which a Series (or a particular class within such Series) may be repurchased by the Transferor or remarketed to other investors. Additionally, certain Series may be subordinated to other Series, and classes within a Series may have different priorities. The Series 1997-1 Supplement does not permit the subordination of the Certificates to any other Series that may be issued by the Trust (except to the limited extent described herein with respect to Shared Principal Collections and Excess Finance Charge Collections). There is no limit to the number of Exchanges that may be performed under the Pooling and Servicing Agreement. The Trust will terminate only as provided in the Pooling and Servicing Agreement. Under the Pooling and Servicing Agreement and pursuant to a Supplement, an Exchange may occur only upon the satisfaction of certain conditions provided in the Pooling and Servicing Agreement. Under the Pooling and Servicing Agreement, the holder of the Exchangeable Transferor Certificate may perform an Exchange by notifying the Trustee at least five business days in advance of the date upon which the Exchange is to occur. Under the Pooling and Servicing Agreement, the notice will state the designation of any Series to be issued on the date of the Exchange and, with respect to each such Series: (i) its initial principal amount (or method for calculating such amount), (ii) its certificate rate (or the method of allocating interest payments or other cash flows to such Series), and (iii) the provider of the Enhancement, if any, which is expected to provide credit support with respect to it. The Pooling and Servicing Agreement provides that on the date of the Exchange the Trustee will authenticate any such Series only upon delivery to the Trustee of the following: (i) a Supplement specifying the Principal Terms of such Series, (ii) an opinion of counsel to the effect that the certificates of such Series will be characterized as indebtedness or as partnership interests under existing law for federal income tax purposes and that the issuance of such Series will not adversely affect the federal income tax characterization of any outstanding Series, (iii) if required by such Supplement, the form of Enhancement and an appropriate Enhancement agreement with respect thereto executed by the Transferor and the issuer of the Enhancement, (iv) written confirmation from each Rating Agency that the Exchange will not result in such Rating Agency's reducing or withdrawing its rating on any then-outstanding Series rated by it, (v) the existing Exchangeable Transferor Certificate and, if applicable, the certificates representing the Series to be exchanged, and (vi) an officer's certificate of the Transferor stating that, after giving effect to such Exchange, the Transferor Interest would be at least equal to the Minimum Transferor Interest. Upon satisfaction of such conditions, the Trustee will cancel the existing Exchangeable Transferor Certificate and the certificates of the exchanged Series, if applicable, and authenticate the new Series and a new Exchangeable Transferor Certificate. PAIRED SERIES During the Funding Period, Series 1997-1 will be paired with Series 1992-1. For a description of the principal terms of Series 1992-1, see "Annex I--Other Series." Series 1997-1 will be prefunded from the proceeds of the sale of the Offered Certificates with an initial deposit to the Pre-Funding Account in an amount up to the excess of the outstanding principal balance of the Series 1997-1 Certificates over the amount on deposit in the principal funding account for the benefit of Series 1992-1 on the Closing Date. It is estimated that the excess of the outstanding principal balance of the Series 1997-1 Certificates over the amount on deposit in the principal funding account for the benefit of Series 1992-1 will be approximately $_____ million on the Closing Date. As principal is paid or deposited in the Series 1992-1 Principal Funding Account an equal amount of funds on deposit in the Pre-Funding Account will be released (which funds will be distributed to the Transferor) and the Invested Amount of Series 1997-1 will increase by a corresponding amount. The expected final payment date for Series 1992-1 is February 17, 1998. If a Pay Out Event occurs with respect to Series 1992-1 or Series 1997-1 during the Funding Period for Series 1997-1, the numerators used in the Fixed/Floating Allocation Percentage for each of Series 1997-1 and Series 1992-1 will be reset to be equal to the respective invested amounts of each such Series at the end of the last day prior to the occurrence of such Pay Out Event resulting in a possible reduction of the percentage of Principal Collections allocated to Series 1992-1 if such event allowed the payment of principal at such time to Series 1997-1 and required reliance by Series 1992-1 on clause (b) of the denominator of the Fixed/Floating Allocation Percentage for Series 1992-1. See "Risk Factors--Master Trust Considerations" and "Description of the Offered Certificates--Allocation Percentages." Series 1997-1 is subject to being paired with another Series. The Series with which Series 1997-1 may be paired either will be prefunded with an initial deposit to a prefunding account in an amount up to the initial principal balance of such Paired Series and primarily from the proceeds of the sale of such Paired Series or will have a variable principal amount. Any such prefunding account will be held for the benefit of such Paired Series and not for the benefit of Series 1997-1 Certificateholders. As principal is paid or deposited in the Principal Funding Account with respect to the Series 1997-1 Certificates, either (i) in the case of a prefunded Paired Series, an equal amount of funds on deposit in any prefunding account for such prefunded Paired Series will be released (which funds will be distributed to the Transferor) or (ii) in the case of a Paired Series having a variable principal amount, an interest in such variable Paired Series in an equal or lesser amount may be sold by the Trust (and the proceeds thereof will be distributed to the Transferor) and, in either case, the invested amount in the Trust of such Paired Series will increase by up to a corresponding amount. Upon payment in full of the Series 1997-1 Certificates, assuming that there have been no unreimbursed charge-offs with respect to any related Paired Series, the aggregate invested amount of such related Paired Series will have been increased by an amount up to an aggregate amount equal to the portion of the Series 1997-1 Invested Amount paid to the Series 1997-1 Certificateholders since the issuance of such Paired Series. The issuance of a Paired Series will be subject to the conditions described under "-- Exchanges." There can be no assurance, however, that the terms of any Paired Series might not have an impact on the timing or amount of payments received by a Series 1997-1 Certificateholder. If a Pay Out Event occurs with respect to Series 1997-1, if paired, or any related Paired Series during the Accumulation Period for Series 1997-1, either (i) the numerator used in the Fixed/Floating Allocation Percentage for Series 1997-1 and such related Paired Series will be reset to be equal to the respective invested amount of each such Series at the end of the last day prior to the occurrence of such Pay Out Event or (ii) the denominator of the Fixed/Floating Allocation Percentage for Series 1997-1 may be increased upon the occurrence of a Pay Out Event with respect to a Paired Series, in either case resulting in a possible reduction of the percentage of Principal Collections allocated to Series 1997-1 if such event allowed the payment of principal at such time to the Paired Series and required reliance by Series 1997-1 on clause (b) of the denominator of the Fixed/Floating Allocation Percentage for Series 1997-1. See "Risk Factors--Master Trust Considerations" and "Description of the Offered Certificates--Allocation Percentages." REPRESENTATIONS AND WARRANTIES Pursuant to the Pooling and Servicing Agreement, the Transferor represents and warrants that, among other things, subject to specified exceptions and limitations (i) the Transferor is duly organized, validly existing, and in good standing under the laws of the state of Delaware and has the corporate power and authority to execute, deliver, and perform its obligations under the Pooling and Servicing Agreement, any Supplement, and the Purchase Agreement, (ii) the execution and delivery of the Pooling and Servicing Agreement, any Supplement, and the Purchase Agreement, and the consummation of the transactions provided for therein, have been duly authorized by the Transferor by all necessary corporate action on its part, (iii) each of the Pooling and Servicing Agreement, any Supplement, and the Purchase Agreement constitutes a legal, valid, and binding obligation of the Transferor, and (iv) the transfer of Receivables by it to the Trust under the Pooling and Servicing Agreement constitutes either a valid transfer and assignment to the Trust of all right, title, and interest of the Transferor in and to the Receivables and the proceeds thereof (including amounts in any of the accounts established for the benefit of certificateholders) or the grant of a first priority security interest (except for Permitted Liens) in such Receivables and the proceeds thereof (including amounts in any of the accounts established for the benefit of certificateholders). In the event of a breach of any of the representations and warranties described in this paragraph with respect to any Series, either the Trustee or the holders of certificates evidencing undivided interests in the Trust aggregating more than 50% of the invested amount of such Series, by written notice to the Transferor (and to the Trustee and the Servicer if given by the certificateholders of such Series), may direct the Transferor to accept reassignment of an amount of Principal Receivables equal to the invested amount to be repurchased (as described below) within 60 days of such notice, or within such longer period specified in such notice. The Transferor will thereupon be obligated to accept reassignment of such Receivables on a Distribution Date occurring within such applicable period. Such reassignment will not be required to be made, however, if at any time during such applicable period, or such longer period, the representations and warranties shall then be true and correct in all material respects or such reassignment would cause either a Pay Out Event to occur or either Rating Agency to reduce or withdraw its then-current rating on the certificates of any class of any Series. The amount to be deposited by the Transferor for distribution to certificateholders in connection with such reassignment will be equal to the invested amount for all Series of certificates other than the Variable Funding Certificates required to be repurchased on the last day of the Monthly Period preceding the Distribution Date on which the reassignment is scheduled to be made, and, with respect to the Variable Funding Certificates, the invested amount as of the Distribution Date on which the reassignment is scheduled to be made, less the amount, if any, previously allocated for payment of principal to such certificateholders on such Distribution Date, plus an amount equal to all interest accrued but unpaid on such certificates at the applicable certificate rate through such last day of such Monthly Period, less the amount transferred to the Distribution Account from the Interest Funding Account in respect of interest on such certificates for the month ending on such last day of the Monthly Period. The payment of the reassignment deposit amount and the transfer of all other amounts deposited for the preceding month in the Distribution Account will be considered a payment in full of the investor interest for all Series of certificates required to be repurchased and will be distributed upon presentation and surrender of the certificates for each such Series. If the Trustee or certificateholders give a notice as provided above, the obligation of the Transferor to make any such deposit will constitute the sole remedy available to the Trustee and the certificateholders with respect to any breach of the Transferor's representations and warranties. Pursuant to the Pooling and Servicing Agreement, the Transferor also represents and warrants that, among other things, subject to specified exceptions and limitations, (i) the execution and delivery of the Pooling and Servicing Agreement, any Supplement, and the Purchase Agreement, and the performance of the transactions contemplated thereby, do not contravene the Transferor's charter or by-laws, violate any provision of law applicable to it or require any filing (except for filing under the UCC), registration, consent, or approval under any such law except for such filings, registrations, consents, or approvals as have already been obtained and are in full force and effect, (ii) the Transferor has filed all tax returns required to be filed and has paid or made adequate provision for the payment of all taxes, assessments, and other governmental charges due from the Transferor, (iii) there are no proceedings or investigations pending or, to the best knowledge of the Transferor, threatened against the Transferor, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality asserting the invalidity of the Pooling and Servicing Agreement, any Supplement, and the Purchase Agreement, seeking to prevent the consummation of any of the transactions contemplated thereby, seeking any determination or ruling that would materially and adversely affect the performance by the Transferor of its obligations thereunder, or seeking any determination or ruling that would materially and adversely affect the validity or enforceability thereof or of the tax attributes of the Trust, (iv) each Receivable is or will be an account receivable arising out of the Transferor's performance in accordance with the terms of the Charge Account Agreement giving rise to such Receivable, the Transferor has no knowledge of any fact which should have led it to expect at the time of the classification of any Receivable as an Eligible Receivable that such Eligible Receivable would not be paid in full when due, and each Receivable classified as an "Eligible Receivable" by the Transferor in any document or report delivered under the Pooling and Servicing Agreement satisfies the requirements of eligibility contained in the definition of Eligible Receivable set forth on the Pooling and Servicing Agreement, and (v) the Transferor is not an "investment company" within the meaning of the Investment Company Act. If any representation or warranty made by the Transferor in the Pooling and Servicing Agreement or the Supplement proves to have been incorrect in any material respect when made, and continues to be incorrect for 60 days after notice to the Transferor by the Trustee or to the Transferor and the Trustee by more than 50% of the certificateholders' interest and as a result the interest of the certificateholders are materially adversely affected, and continue to be materially adversely affected during such period, then the Trustee or 50% of the certificateholders' interest of any class may give notice to the Transferor (and to the Trustee in the latter instance) declaring that a Pay Out Event has occurred, thereby commencing the Early Amortization Period; provided, however, that a Pay Out Event will not be deemed to have occurred as aforesaid if the Transferor has accepted a reassignment of the affected Receivables during such period in accordance with the Pooling and Servicing Agreement. See "--Pay Out Events." The Trustee has not made, and it is not anticipated that the Trustee will make, any general examination of the Receivables or any records relating to the Receivables for the purpose of establishing the presence or absence of defects or compliance with the Transferor's representations and warranties or for any other purpose. The Servicer, however, is required to deliver to the Trustee on or before March 31 of each year an opinion of counsel with respect to the validity of the security interest of the Trust in and to the Receivables and certain other components of the Trust. CERTAIN COVENANTS Pursuant to the Pooling and Servicing Agreement, the Transferor covenants that, among other things, subject to specified exceptions and limitations, (i) it will take no action to cause any Receivable to be evidenced by any instruments or to be anything other than an account, general intangible, or chattel paper, (ii) except for the conveyances under the Pooling and Servicing Agreement, it will not sell any Receivable or grant a lien (other than a Permitted Lien) on any Receivable, (iii) it will comply with and perform its obligations under, and will cause each Originator to comply with and perform its obligations under, any Charge Account Agreement to which it is a party and its credit and collection policies and it will not change the terms of such agreements or policies except as provided in the Pooling and Servicing Agreement, (iv) in the event it is unable for any reason to transfer Receivables to the Trust, it will nevertheless continue to allocate and pay all collections from all Receivables to the Trust, (v) in the event it receives a collection on any Receivables, it will pay such collection to the Servicer as soon as practicable, (vi) it will notify the Trust promptly after becoming aware of any lien on any Receivable other than Permitted Liens, (vii) it will engage in no other business other than the business contemplated under the Pooling and Servicing Agreement and the Purchase Agreement, (viii) it will take all actions necessary to enforce its rights and claims under the Purchase Agreement, (ix) other than with respect to In-Store Payments, it will not commingle its assets with those of Federated or any affiliate of Federated, and (x) it will not acquire receivables from any person other than an Originator. ELIGIBLE ACCOUNTS; ELIGIBLE RECEIVABLES An "Eligible Account" means, as of the Closing Date (or, with respect to Automatic Additional Accounts and Supplemental Accounts, as of the date the Receivables arising in such Accounts are designated for inclusion in the Trust), each Account owned by an Originator (a) which is payable in United States dollars, (b) which has not been identified by such Originator in its computer files as an account as to which such Originator or the Servicer has any confirmed record of any fraud-related activity by the Obligor on such account, (c) which has not been sold or pledged to any other party and which does not have Receivables which have been sold or pledged to any other party, (d) which was created in accordance with the credit and collection policies of such Originator at the time of creation of such account or the Receivables of which each Rating Agency permits to be added automatically to the Trust, (e) the Receivables in which such Originator has not charged off in its customary and usual manner for charging off Receivables in such Accounts as of the Closing Date (or, with respect to Supplemental Accounts and Automatic Additional Accounts, as of the date the Receivables of such Accounts are designated for inclusion in the Trust unless such Account is subsequently reinstated), and (f) is not an Automatic Additional Account designated by the Transferor to be included as an Account after the occurrence of certain events or in excess of certain limitations specified below (unless the Rating Agencies shall have consented to the inclusion of such Automatic Additional Account as an Eligible Account). The limitations referred to in the immediately preceding sentence are designed, in general, to limit the number of Automatic Additional Accounts to be added as Eligible Accounts on any day without Rating Agency consent to a number that does not exceed the lesser of (i) 20% of the sum of (a) the number of Active Accounts as of the later of the Closing Date and the last day of the twelfth preceding Monthly Period, (b) the number of Automatic Additional Accounts that were thereafter added with Rating Agency consent, and (c) the number of Supplemental Accounts that were thereafter added, minus the number of Removed Accounts that were thereafter removed, and (ii) 15% of the sum of (a) the number of Active Accounts as of the later of the Closing Date and the last day of the third preceding Monthly Period, (b) the number of Automatic Additional Accounts that were thereafter added with Rating Agency consent, and (c) the number of Supplemental Accounts that were thereafter added, minus the number of Removed Accounts that were thereafter removed. The term "Active Account" means, as of any particular day, any Account in which there has been either purchase or merchandise return activity during the preceding 12 Monthly Periods. An "Eligible Receivable" means each Receivable that satisfies the following criteria: (a) it arises under an Eligible Account, (b) it constitutes an "account," a "general intangible," or "chattel paper" as defined in Article 9 of the UCC as then in effect in the Relevant UCC State, (c) it is the legal, valid, and binding obligation of a person who (i) is living, (ii) is not a minor under the laws of his/her state of residence, and (iii) is competent to enter into a contract and incur debt, (d) it and the underlying Charge Account Agreement do not contravene in any material respect any laws, rules, or regulations applicable thereto (including, without limitation, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, and privacy) that could reasonably be expected to have an adverse impact on the amount of collections thereunder, and the Originator of such Receivable is not in violation of any such laws, rules, or regulations in any respect material to such Charge Account Agreement, (e) all material consents, licenses, or authorizations of, or registrations with, any governmental authority required to be obtained or given in connection with the creation of such Receivable or the execution, delivery, creation, and performance of the underlying Charge Account Agreement have been duly obtained or given and are in full force and effect as of the date of the creation of such Receivables, (f) at the time of its transfer to the Trust, the Transferor or the Trust will have good and marketable title free and clear of all liens and security interests arising under or through the Transferor (other than Permitted Liens), (g) it is not, at the time of its transfer to the Trust, a Receivable in a Defaulted Account, and (h) it arises under a Charge Account Agreement that has been duly authorized and which, together with such Receivable, is in full force and effect and constitutes the legal, valid, and binding obligation of the Obligor of such Receivable enforceable against such Obligor in accordance with its terms and is not subject to any dispute, offset, counterclaim, or defense whatsoever (except the discharge in bankruptcy of such Obligor). AUTOMATIC ADDITION OF ACCOUNTS All Accounts created by the Originators that meet the definition of "Automatic Additional Accounts" will be included as Accounts from and after the date upon which such Automatic Additional Accounts are created and all Receivables in such Automatic Additional Accounts, whether such Receivables are then existing or thereafter created will be transferred automatically to the Trust upon purchase by the Transferor. An "Automatic Additional Account" is a consumer revolving credit card account (i) which is originated by an Originator during the normal operation of such Originator's credit card business and is not acquired by the Transferor or such Originator from another credit card issuer, (ii) which was in existence and owned by such Originator and the Receivable of which had been transferred to the Transferor pursuant to the Receivables Purchase Agreement on the date on which Receivables generated in such account are to be added to the Trust and is in existence at the close of business on the date that Receivables generated therein are designated for inclusion in the Trust, (iii) which is payable in United States dollars, and (iv) the Receivables in which have not been charged off prior to the date of their designation for inclusion in the Trust. Automatic Additional Accounts will also consist of any other consumer credit card accounts, the Receivables from which each Rating Agency permits to be added automatically to the Trust. The Transferor may also designate from time to time additional accounts purchased by the Originators or generated by persons that have become additional Originators in accordance with the terms of the Pooling and Servicing Agreement to be included as Automatic Additional Accounts if the Transferor has notified the Rating Agencies of such proposed designation and has received confirmation that such designation will not result in a downgrading of the then current rating of any outstanding Series. The Transferor, at its option, may terminate or suspend the inclusion of Automatic Additional Accounts at any time. If the Transferor has terminated or suspended the inclusion of Automatic Additional Accounts, the Transferor may, and in certain circumstances will be required to, add additional accounts ("Supplemental Accounts") the Receivables of which will be designated for transfer to the Trust. For all purposes of the Pooling and Servicing Agreement, all Receivables arising under such Automatic Additional Accounts will be treated as Receivables upon their creation. In connection with the sale of any such Receivables to the Transferor, the Originator will satisfy all applicable requirements of the Purchase Agreement. REMOVAL OF ACCOUNTS Subject to the conditions set forth in the next sentence, on each Determination Date on which the Transferor Interest exceeds 17% of aggregate Principal Receivables with respect to such Determination Date, the Transferor may, but will not be obligated to, (i) cause the Receivables in certain Accounts designated by the Transferor to no longer be transferred to the Trust and (ii) accept the transfer from the Trust of all Receivables and proceeds thereof from certain Accounts (the "Removed Accounts"), without notice to the Certificateholders, subject in each case to the maintenance of at least the amount of aggregate Principal Receivables required to be maintained pursuant to the Pooling and Servicing Agreement and any Supplement. There may be no more than one such removal with respect to any Monthly Period. The Transferor is permitted to designate and require reassignment to it of the Receivables from Removed Accounts only upon satisfaction of the following conditions: (i) the Trustee shall have executed and delivered to the Transferor a written reassignment and the Transferor shall have delivered a computer file or microfiche list containing a true and complete list of all Accounts the Receivables under which will continue to be transferred to the Trust after such removal, such Accounts to be identified by, among other things, account number and aggregate amount of Principal Receivables, (ii) the Transferor shall represent and warrant that no selection procedure used by the Transferor which is adverse to the interests of the Certificateholders was utilized in selecting the Removed Accounts, (iii) the removal of any Receivables of any Removed Accounts shall not, in the reasonable belief of the Transferor, cause a Pay Out Event to occur, (iv) the Transferor shall have delivered twenty days' prior written notice of the removal to each Rating Agency which has rated any outstanding Series and, prior to the date on which such Receivables are to be removed, shall have received confirmation from any Rating Agency of its intention not to reduce or withdraw the rating of any Series of certificates as a result of such removal, and (v) the Transferor shall have delivered to the Trustee an officer's certificate confirming the items set forth in clauses (i) through (iv) above. Notwithstanding the foregoing, the Transferor will be permitted to designate Removed Accounts in connection with the sale by Federated or any affiliate of Federated of all or substantially all of the capital stock or assets of any Originator if the conditions in clauses (i), (iii), and (iv) above shall have been met and the Transferor shall have delivered to the Trustee an officer's certificate confirming such items. Under these circumstances, subject to the terms and conditions of the Pooling and Servicing Agreement, the Transferor will have the option either to accept the transfer from the Trust of all Receivables and proceeds thereof in such Removed Accounts or to leave such Receivables and the proceeds thereof in the Trust. In addition, the Transferor will be permitted to deposit funds in the Excess Funding Account in connection with any such designation of Removed Accounts to the extent necessary to permit such designation. COLLECTION AND OTHER SERVICING PROCEDURES Pursuant to the Pooling and Servicing Agreement, the Servicer will be responsible for servicing, enforcing, and administering the Receivables and collecting payment due thereunder in accordance with its usual and customary servicing procedures and credit and collection policies. Servicing functions to be performed by the Servicer with respect to the Receivables include statement processing and mailing, collecting and recording payments, investigating payment delinquencies, and communicating with cardholders. Managerial functions to be performed by the Servicer on behalf of the Trust include maintaining books and records with respect to the foregoing and other matters pertinent to the Receivables, assisting the Trustee with any inspections of such books and records by the Trustee pursuant to the Pooling and Servicing Agreement, preparing and delivering the monthly and annual statements described in "--Reports to Certificateholders," and causing a firm of independent public accountants to prepare and deliver the annual reports described in "--Evidence as to Compliance." TRUST ACCOUNTS The Servicer maintains, in the name of the Trust for the benefit of certificateholders of all Series, a "Collection Account," which is a non-interest bearing segregated account established and maintained with the Servicer or with a "Qualified Institution." The Trustee maintains, for the benefit of the Certificateholders, an "Interest Funding Account," a "Principal Account," a "Principal Funding Account" and a "Pre-Funding Account," each of which is a segregated trust account with the Trustee. The Trustee also maintains, for the benefit of the Certificateholders, a "Distribution Account," which is a non-interest bearing segregated demand deposit account established with a Qualified Institution. A Qualified Institution is a depository institution, which may include the Trustee, which is acceptable to the Rating Agencies. Funds in the Principal Account, Principal Funding Account, and the Interest Funding Account will be invested, at the direction of the Servicer, in (i) obligations fully guaranteed by the United States of America, (ii) time deposits, promissory notes, or certificates of deposit of depository institutions or trust companies, the certificates of deposit of which are rated P-1 by Moody's and A-1+ by Standard & Poor's, (iii) commercial paper having, at the time of the Trust's investment, a rating of P-1 by Moody's and A-1+ by Standard & Poor's, (iv) bankers acceptances issued by any depository institution or trust company described in clause (ii) above, (v) money market funds rated P-1 by Moody's and AAA-m or AAA-mg by Standard & Poor's or otherwise approved in writing by each Rating Agency, (vi) certain open end diversified investment companies which the Rating Agency designates in writing will not result in a withdrawal or downgrading of its then current rating of any Series then rated by it, (vii) Eurodollar time deposits that have been rated P-1 by Moody's and A-1+ by Standard & Poor's, and (viii) any other investment that the Rating Agencies confirm in writing will not adversely affect their respective then current ratings of any outstanding Series of certificates (such investments, "Cash Equivalents"). Any earnings (net of losses and investment expenses) on funds in the Interest Funding Account or the Principal Account will be paid to the Servicer. Investment earnings relating to amounts and deposits in the Principal Funding Account will be treated as Available Series Finance Charge Collections. The Servicer has the revocable power to withdraw funds from the Collection Account, and to instruct the Trustee to make withdrawals and payments from the Interest Funding Account and the Principal Account, in each case for the purpose of making deposits and distributions required under the Pooling and Servicing Agreement, including the deposits and distributions described in "--Application of Collections." The paying agent appointed pursuant to the Pooling and Servicing Agreement (the "Paying Agent") has the revocable power to withdraw funds from the Distribution Account for the purpose of making distributions to Certificateholders. The Paying Agent initially will be the Trustee. EXCESS FUNDING ACCOUNT At any time during which no Series is in an accumulation or amortization period (including any early amortization period), or for a Series in amortization, the principal funding account, if any, is fully funded for an applicable period, and the Transferor Interest does not exceed the Minimum Transferor Interest, funds (to the extent available therefor as described herein) otherwise payable to the Transferor will be deposited in the Excess Funding Account on any business day until the Transferor Interest is at least equal to the Minimum Transferor Interest. Funds on deposit in the Excess Funding Account will be withdrawn and paid to the Transferor to the extent that on any day the Transferor Interest exceeds the Minimum Transferor Interest as a result of an increase in the aggregate amount of Principal Receivables in the Trust or allocated to one or more Series when they are in accumulation or amortization periods (including any early amortization period). Such deposits in and withdrawals from the Excess Funding Account may be made on a daily basis. In addition to the foregoing, the Transferor may, at its option on any business day, deposit funds in the Excess Funding Account to the extent necessary to maintain the Minimum Transferor Interest or the Minimum Aggregate Principal Receivables or to permit the designation of Removed Accounts as described in "--Removal of Accounts." Any funds on deposit in the Excess Funding Account at the beginning of the Accumulation Period will be deposited in the Principal Funding Account to the extent of Class A Monthly Principal, Class B Monthly Principal, or Class C Monthly Principal, as applicable, for any Distribution Date. In addition, no funds will be deposited in the Excess Funding Account during any accumulation period, amortization period, or early amortization period for any Series until the Principal Funding Account for such Series for such Distribution Date has been fully funded or the investor certificates of such Series have been paid in full. Funds on deposit in the Excess Funding Account will be invested by the Trustee at the direction of the Transferor in Cash Equivalents maturing on the next business day. On each Distribution Date, all net investment income earned on amounts in the Excess Funding Account since the preceding Distribution Date will be withdrawn from the Excess Funding Account and applied as described herein. PRE-FUNDING ACCOUNT The Servicer will establish and maintain the Pre-Funding Account with the trust department of The Chase Manhattan Bank in the name of the Trustee, on behalf of the Trust. Funds on deposit in the Pre-Funding Account will be withdrawn and paid to the Transferor in accordance with Series 1997-1 Supplement to the extent of any increases in the Invested Amount during the Funding Period as a result of principal payments to or deposits for the benefit of the Series 1992-1 Certificates. Following the occurrence of a Pay Out Event, any amounts remaining on deposit in the Pre-Funding Account will be payable as principal first to the Class A Certificateholders until the sum of the Class A Invested Amount and the Class A Pre-Funded Amount is paid in full, then to the Class B Certificateholders until the sum of the Class B Invested Amount and the Class B Pre-Funded Amount is paid in full. In the absence of a Pay Out Event, any amount in the Pre-Funding Account at the end of the Funding Period will be withdrawn and distributed on the next succeeding Distribution Date to the Class A Certificateholders and the Class B Certificateholders pro rata based on the Class A Invested Amount and the Class B Invested Amount. [If the Pre-Funded Amount is greater than zero on the first day of the __________ Monthly Period and no Pay Out Event shall have occurred, a prepayment premium (the "Class A Prepayment Premium") will be payable to the Class A Certificateholders in connection with the distribution of any Pre-Funded Amount to the Class A Certificateholders in an amount equal to the excess, if any, discounted as described below, of (i) the amount of interest that would accrue on an amount equal to the Class A Percentage of the remaining Pre-Funded Amount (the "Class A Prepayment Amount") at the interest rate borne by the Class A Certificates during the period commencing on and including the Distribution Date on which such Class A Prepayment Amount is required to be distributed to Class A Certificateholders to but excluding the __________ Distribution Date, over (ii) the amount of interest that would have accrued on such Class A Prepayment Amount over the same period at a per annum rate of interest equal to the yield to maturity on the Determination Date preceding such Distribution Date on the ___% United States Treasury Notes due __________. Such excess shall be discounted to present value to such Distribution Date at the yield described in clause (ii) above.] [If the Pre-Funded Amount is greater than zero on the first day of the __________ Monthly Period and no Pay On Event shall have occurred, a prepayment premium (the "Class B Prepayment Premium") will be payable to the Class B Certificateholders in connection with the distribution of any Pre-Funded Amount to the Class B Certificateholders, in an amount equal to the excess, if any, discounted as described below, of (i) the amount of interest that would accrue on an amount equal to the Class B Percentage of the remaining Pre-Funded Amount (the "Class B Prepayment Amount") at the interest rate borne by the Class B Certificates during the period commencing on and including the Distribution Date on which such Class B Prepayment Amount is required to be distributed to Class B Certificateholders to but excluding the __________ Distribution Date over (ii) the amount of interest that would have accrued on such Class B Prepayment Amount over the same period at a per annum rate of interest equal to the yield to maturity on the Determination Date preceding such Distribution Date on the ___% United States Treasury Notes due __________. Such excess shall be discounted to present value to such Distribution Date at the yield described in clause (ii) above.] [The Trust's obligation to pay the Class A Prepayment Premium and the Class B Prepayment Premium will be limited to the amount of Available Series Finance Charge Collections, Transferor Finance Charge Collections, and Excess Finance Charge Collections available for such purpose. See "--Application of Collections--Payment of Fees, Interest, and Other Items" and "--Reallocation of Cash Flows." No other assets of the Trust will be available for the purpose of making such payments.] All amounts on deposit in the Pre-Funding Account will be invested by the Trustee at the direction of the Servicer in Cash Equivalents. On each Distribution Date with respect to the Funding Period, all investment income earned on amounts in the Pre-Funding Account since the preceding Distribution Date will be withdrawn from the Pre-Funding Account and deposited into the Collection Account for application as Available Series Finance Charge Collections. ALLOCATION OF COLLECTIONS The Receivables in the Trust are divided into two components: Principal Receivables and Finance Charge Receivables. At any time, Finance Charge Receivables will be equal to the product of the Finance Charge Receivable Factor and the aggregate amount of Eligible Receivables as of the date of determination and Principal Receivables will be equal to the remainder of such Eligible Receivables. The Servicer will allocate collections on the Receivables on each business day between Finance Charge Collections and Principal Collections in the manner described in the definitions thereof. ALLOCATION PERCENTAGES Pursuant to the Pooling and Servicing Agreement, during each Monthly Period the Servicer will allocate among the Class A Certificateholders' Interest, the Class B Certificateholders' Interest, the Class C Certificateholders' Interest, the Transferor Interest, and interests of the holders of the other Series issued and outstanding from time to time pursuant to the Pooling and Servicing Agreement and applicable Supplements all collections on Finance Charge Receivables and all collections on Principal Receivables and the amount of all Receivables in Defaulted Accounts. Collections on Finance Charge Receivables prior to the date on which a Pay Out Event is deemed to have occurred, Collections of Principal Receivables prior to the Amortization Period Commencement Date, and the amount of Receivables in Defaulted Accounts at all times, will be allocated to the Class A Certificateholders' Interest, the Class B Certificateholders' Interest, and the Class C Certificateholders' Interest based on the percentage equivalent of the ratio that the amount of the Class A Adjusted Invested Amount, the Class B Invested Amount, or the Class C Invested Amount, respectively, as of the end of the preceding business day bears to the greater of (a) the total amount of Principal Receivables and amounts on deposit in the Excess Funding Account as of the end of the preceding business day and (b) the sum of the numerators used to calculate the applicable allocation percentages for all classes of all Series then outstanding (the "Class A Floating Allocation Percentage," the "Class B Floating Allocation Percentage," and the "Class C Floating Allocation Percentage," respectively; the sum of such percentages being the "Floating Allocation Percentage"). On any business day during the initial Monthly Period, each of the Class A Floating Allocation Percentage, the Class B Floating Allocation Percentage, and the Class C Floating Allocation Percentage will be equal to the percentage equivalent of the ratio which each of the initial Class A Invested Amount, the initial Class B Invested Amount, and the initial Class C Invested Amount, respectively, bears to the total amount of Principal Receivables as of the end of the preceding business day. During the Revolving Period, all Net Principal Collections allocable to the Certificates will be allocated and paid to the Transferor (except for Shared Principal Collections paid to the holders of certificates of other Series, if any). On any business day the "Fixed/Floating Allocation Percentage" shall mean: (i) with respect to Principal Collections on and after the Amortization Period Commencement Date, the percentage equivalent of the ratio which the Invested Amount at the end of the last day of the Revolving Period bears to the greater of (a) the sum of the aggregate amount of Principal Receivables and the amount on deposit in the Excess Funding Account as of the end of the preceding business day and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Receivables for all classes of all Series outstanding on such business day; provided, however, that, because the Certificates are subject to being paired with a future prefunded Series, if a Pay Out Event occurs with respect to the Certificates during the Accumulation Period, and if at such time the Certificates are paired with a prefunded Series, the numerator will be reset to be equal to the Invested Amount at the end of the last day prior to the occurrence of such Pay Out Event; or (ii) with respect to Finance Charge Collections on and after the occurrence of a Pay Out Event, the percentage equivalent of a fraction, the numerator of which is the Invested Amount at the end of the business day preceding the occurrence of the Pay Out Event and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the end of the preceding business day and (b) the sum of the numerators used to calculate the allocation percentages with respect to Finance Charge Collections with respect to all classes of all Series then outstanding on such business day. As used herein: (i) the term "Class A Invested Amount" for any day means an amount (not less than zero) equal to (a) the initial principal balance of the Class A Certificates less the Class A Percentage on the Closing Date of the initial deposit to the Pre-Funding Account, plus the Class A Percentage of any withdrawals from the Pre-Funding Account during the Funding Period, minus (b) the aggregate amount of principal payments made to Class A Certificateholders prior to such date, and minus (c) the excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all business days preceding such date over the aggregate amount of any reimbursements of Class A Investor Charge-Offs for all business days preceding such date; (ii) the term "Class A Adjusted Invested Amount" for any date means an amount (not less than zero) equal to the Class A Invested Amount minus the aggregate principal amount on deposit in the Principal Funding Account; (iii) the term "Class B Invested Amount" for any date means an amount (not less than zero) equal to (a) the initial principal balance of the Class B Certificates, less the Class B Percentage on the Closing Date of the initial deposit to the Pre-Funding Account, plus the Class B Percentage of any withdrawals from the Pre-Funding Account during the Funding Period, minus (b) the aggregate amount of principal payments made to Class B Certificateholders prior to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all prior business days, including the amount by which the Class B Invested Amount has been reduced to fund the Investor Default Amount on all prior business days as described under "--Investor Charge-Offs," minus (d) the aggregate amount of Reallocated Class B Principal Collections for which the Class C Invested Amount has not been reduced for all prior Distribution Dates, and plus (e) the aggregate amount of Available Series Finance Charge Collections, Transferor Finance Charge Collections, Excess Finance Charge Collections, and Transferor Subordination Amount applied on all prior business days for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d); (iv) the term "Class C Invested Amount" means an amount (not less than zero) equal to (a) the initial principal balance of the Class C Certificates, minus (b) the aggregate amount of principal payments made to Class C Certificateholders prior to such date, minus (c) the aggregate amount of Class C Investor Charge-Offs for all prior business days, equal to the amount by which the Class C Invested Amount has been reduced to fund the Investor Default Amount on all prior Distribution Dates as described under "--Investor Charge-Offs," minus (d) the aggregate amount of Reallocated Principal Collections for all prior Distribution Dates, and plus (e) the aggregate amount of Available Series Finance Charge Collections, Transferor Finance Charge Collections, and Excess Finance Charge Collections applied on all prior business days for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d); (v) the term "Invested Amount" means the sum of the Class A Adjusted Invested Amount, the Class B Invested Amount, and the Class C Invested Amount; and (vi) the term "Transferor Percentage" means (a) when used with respect to Principal Collections during the Revolving Period and Finance Charge Collections and the amount of Receivables in Defaulted Accounts at all times, 100% minus the sum of the Floating Allocation Percentage and the floating allocation percentages for all other Series and (b) when used with respect to Principal Collections during the Accumulation Period or any Early Amortization Period, 100% minus the sum of the Fixed/Floating Allocation Percentage and the allocation percentages used with respect to Principal Collections for all other Series. As a result of the Floating Allocation Percentage, Finance Charge Collections and the portion of Defaulted Receivables allocated to the Certificateholders will change each business day based on the relationship of the Class A Adjusted Invested Amount, the Class B Invested Amount, and the Class C Invested Amount to the total amount of Principal Receivables on the preceding business day. The numerator of the percentages of Principal Collections allocable to the Certificateholders, however, will remain fixed during the Amortization Period. Principal Collections allocable to the Class B Certificates and the Class C Certificates are subject to possible reallocation for the benefit of the Class A Certificateholders as described under "--Reallocated Principal Collections." REALLOCATION OF CASH FLOWS On each business day the Servicer will determine the Required Amount, if any. To the extent that any amounts are on deposit in the Principal Funding Account or the Excess Funding Account on any business day, the Servicer will determine the amount, if any, equal to the excess of (x) the product of (a) the Base Rate and (b) the product of (i) the aggregate amounts on deposit in the Excess Funding Account and the Principal Funding Account and (ii) the number of days elapsed since the previous business day divided by the actual number of days in such year over (y) the aggregate amount of all earnings since the previous business day available from the Cash Equivalents in which funds on deposit in the Excess Funding Account and the Principal Funding Account are invested (the "Negative Carry Amount"). The Servicer will apply an amount of Finance Charge Collections otherwise allocable to the Exchangeable Transferor Certificate equal to the least of (i) the Required Amount, (ii) the product of the Transferor Percentage, the Finance Charge Collections, and the Series Allocation Percentage ("Transferor Finance Charge Collections") on such business day, and (iii) the Negative Carry Amount for such business day in the manner specified for application of Finance Charge Collections. To the extent of any remaining Required Amount, the Servicer will apply all or a portion of the Excess Finance Charge Collections of other Series with respect to such business day allocable to the Certificates in an amount equal to the Required Amount. Excess Finance Charge Collections allocated to the Certificates for any business day will be equal to the product of (x) Excess Finance Charge Collections available from all other Series for such business day and (y) a fraction, the numerator of which is the Required Amount for such business day (as reduced by amount applied pursuant to the preceding paragraph) and the denominator of which is the aggregate amount of shortfalls in required amounts or other amounts to be paid from Finance Charge Collections for all Series for such business day. On and after the Class B Principal Payment Commencement Date, to the extent of any shortfall in the amount available to make required payments of interest accrued with respect to the outstanding aggregate principal amount of the Class B Certificates and to cover the Investor Default Amount or any Class B Investor Charge-Offs which remain unpaid after the application of Transferor Finance Charge Collections and Excess Finance Charge Collections, Principal Collections and any remaining Finance Charge Collections allocated to the holder of the Exchangeable Transferor Certificate in an amount not to exceed the least of (i) the Transferor Subordination Amount, (ii) the Transferor Interest on such day, and (iii) the amount of such shortfall will be treated as Finance Charge Collections allocable to the payment of such shortfall on the Class B Certificates. To the extent of the lesser of (i) any remaining Required Amount and (ii) the Negative Carry Amount minus the amount applied with respect thereto from Finance Charge Collections allocable to the Exchangeable Transferor Certificate, the Transferor may, at its option, contribute to the Trust such amount to be applied in the manner specified for application of Finance Charge Collections. REALLOCATED PRINCIPAL COLLECTIONS On each Distribution Date the Servicer will apply or cause the Trustee to apply an amount, not to exceed the Class C Invested Amount, equal to the product of (a)(i) during the Revolving Period, the Class C Floating Allocation Percentage or (ii) during an Amortization Period, the Class C Fixed/Floating Allocation Percentage, and (b) the amount of Principal Collections with respect to the related Monthly Period in the following priority (the collections applied in accordance with clause (a) below being "Reallocated Class C Principal Collections"): (a) an amount equal to the sum of (i) the Class A Required Amount with respect to the related Monthly Period and (ii) the Class B Required Amount with respect to the related Monthly Period will be applied first to the components of the Class A Required Amount and then to the components of the Class B Required Amount in the same priority as such components are applied from Available Series Finance Charge Collections as described in "--Application of Collections--Payment of Fees, Interest, and Other Items;" and (b) any remaining amount will, on each Distribution Date with respect to the Revolving Period, be applied as Shared Principal Collections, and on each Distribution Date with respect to an Amortization Period, be included in the funds available to make principal payments to the Class A Certificateholders until the Class A Invested Amount is paid in full and then to the Class B Certificateholders until the Class B Invested Amount is paid in full and then to the Class C Certificateholders until the Class C Invested Amount is paid in full. On each Distribution Date, the Servicer will apply or cause the Trustee to apply an amount, not to exceed the Class B Invested Amount, equal to the product of (a)(i) during the Revolving Period, the Class B Floating Allocation Percentage or (ii) during an Amortization Period, the Class B Fixed/Floating Allocation Percentage, and (b) the amount of Principal Collections with respect to the related Monthly Period in the following priority (the collections applied in accordance with clause (a) below being "Reallocated Class B Principal Collections" and the sum of Reallocated Class C Principal Collections and Reallocated Class B Principal Collections being "Reallocated Principal Collections"): (a) an amount equal to the excess, if any, of the Class A Required Amount with respect to the related Monthly Period over the amount of Reallocated Class C Principal Collections applied with respect thereto for the related Monthly Period will be applied first to the remaining components of the Class A Required Amount in the same priority as such components are applied from Available Series Finance Charge Collections as described in "--Application of Collections--Payment of Fees, Interest, and Other Items;" and (b) any remaining amount not applied in the foregoing manner will, on each Distribution Date with respect to the Revolving Period, be applied as Shared Principal Collections, and on each Distribution Date with respect to an Amortization Period, be included in the funds available to make principal payments to the Class A Certificateholders until the Class A Invested Amount is paid in full and then to the Class B Certificateholders until the Class B Invested Amount is paid in full. On each Transfer Date the Class C Invested Amount will be reduced by the amount of Reallocated Principal Collections for the related Monthly Period. In the event that such reduction would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero and the Class B Invested Amount will be reduced by the amount by which the Class C Invested Amount would have been reduced below zero. In the event that the reallocation of Principal Collections would cause the Class B Invested Amount to be a negative number on any business day, the amount of Class B Reallocated Principal Collections on such business day will be an amount not to exceed the amount which would cause the Class B Invested Amount to be reduced to zero. APPLICATION OF COLLECTIONS Allocations. Obligors make payments on the Receivables (i) to Lock-Box Accounts maintained by Lock-Box Banks pursuant to Lock-Box Agreements, (ii) to the Servicer, who deposits all such payments in Lock-Box Accounts no later than the second business day following receipt, or (iii) as In-Store Payments. All collections on Receivables of amounts due and owing to the Trustee represented by the Receivables deposited in the Lock-Box Accounts will, pending remittance to the Collection Account, be held for the benefit of the Trust and will be deposited into the Collection Account as promptly as possible after the date of processing of such collections. In-Store Payments will be deposited in the Collection Account as promptly as possible after the date of processing of such collections, but in no event later than the second business day following such date of processing. On the same day as any such deposit to the Collection Account is made, the Servicer makes the deposits and payments to the accounts and parties as indicated below; provided, however, that for as long as FDS or any affiliate of FDS remains the Servicer under the Pooling and Servicing Agreement, and (a)(i) the Servicer provides to the Trustee a letter of credit or other form of Enhancement covering the risk of collection of the Servicer acceptable to the Rating Agency and (ii) the Transferor shall not have received a notice from the Rating Agency that such letter of credit or other form of Enhancement would result in the lowering of such Rating Agency's then-existing rating of any Series of certificates then outstanding, (b) the Servicer has and maintains a short-term credit rating of at least P-1 by Moody's and of at least A-1 by Standard & Poor's, or (c) each Rating Agency confirms that such action will not result in a downgrading or withdrawal of the then current rating of any outstanding Series, then (x) the Servicer may make such deposits and payments on the business day immediately prior to the Distribution Date (the "Transfer Date") in an aggregate amount equal to the net amount of such deposits and payments which would have been made had the conditions of this proviso not applied and (y) certain payments and allocations described herein may be made on a monthly, rather than a daily, basis. If any of the criteria set forth in the proviso to the immediately preceding paragraph are satisfied, payments on the Receivables collected by the Servicer will not be segregated from the assets of the Servicer. Until such payments on the Receivables collected by the Servicer are deposited into the Collection Account, such funds may be used by the Servicer for its own benefit, and the proceeds of any short-term investment of such funds will accrue to the Servicer. During such times as the Servicer holds funds representing payments on the Receivables collected by the Servicer and is permitted to use such funds for its own benefit, the Certificateholders are subject to risk of loss, including risk resulting from the bankruptcy or insolvency of the Servicer. The Servicer will pay no fee to the Trust or any Certificateholder for any use by the Servicer of funds representing collections on the Receivables. The Servicer will withdraw the following amounts from the Collection Account for application on each business day as indicated: (a) an amount equal to the Transferor Percentage of the aggregate amount of Principal Collections will be paid to the holder of the Exchangeable Transferor Certificate to the extent such funds are not allocated to any Series pursuant to a Supplement; (b) an amount equal to the Transferor Percentage of the aggregate amount of Finance Charge Collections will be paid to the holder of the Exchangeable Transferor Certificate to the extent such funds are not allocated to any Series pursuant to a Supplement; (c) an amount equal to the Floating Allocation Percentage of the aggregate amount of Finance Charge Collections, Transferor Finance Charge Collections, investment earnings on amounts on deposit in the Pre-Funding Account and the Principal Funding Account to the extent on deposit in the Collection Account on such business day, and Excess Finance Charge Collections of other Series allocable to Series 1997-1, and, during the continuance of a Discount Trigger Event, certain Principal Collections allocable to Series 1997-1 will be allocated and paid as described below in "--Payment of Fees, Interest, and Other Items;" (d) during the Revolving Period, an amount equal to the Floating Allocation Percentage of Principal Collections (less the amount thereof which may be applied as Reallocated Class B Principal Collections or Reallocated Class C Principal Collections) will be applied as Shared Principal Collections; provided, however, that during the continuance of a Discount Trigger Event, certain Principal Collections are subject to reallocation as Finance Charge Collections; (e) during the Accumulation Period, an amount equal to the Fixed/Floating Allocation Percentage of Principal Collections (less the amount thereof which may be applied as Reallocated Principal Collections), any amount on deposit in the Excess Funding Account allocated to Certificateholders, any amounts to be paid in respect of Investor Default Amount, Class A Investor Charge-Offs, Class B Investor Charge-Offs, and Class C Investor Charge-Offs, and any amount of Shared Principal Collections on such business day will be deposited in the Principal Funding Account; provided, however, that during the continuance of a Discount Trigger Event, certain Principal Collections are subject to reallocation as Finance Charge Collections. On any business day on which the amount on deposit in the Principal Funding Account exceeds the sum of the Controlled Amortization Amount and any existing Accumulation Shortfall (such sum, the "Controlled Distribution Amount"), such excess will be treated as Shared Principal Collections and applied as such; (f) during any Early Amortization Period or on or after the Class B Principal Payment Commencement Date, an amount equal to the Fixed/Floating Allocation Percentage of such Principal Collections (less the amount thereof which is applied as Reallocated Principal Collections), any amount on deposit in the Excess Funding Account allocated to Certificateholders, any amounts to be paid in respect of the Investor Default Amount, Class A Investor Charge-Offs, Class B Investor Charge-Offs, and Class C Investor Charge-Offs, and any amount of Shared Principal Collections on such business day, up to the amount of the Invested Amount, will be deposited into the Principal Account; provided, however, that during the continuance of a Discount Trigger Event, certain Principal Collections are subject to reallocation as Finance Charge Collections; (g) Shared Principal Collections will be allocated to each outstanding Series pro rata based on the investor allocation percentage for Principal Receivables applicable to any Series, first to be applied to any shortfalls with respect to the controlled distribution amount for each such Series, and then to accelerate principal payments with respect to any Series which is in its amortization period but not subject to a controlled distribution amount, and then, at the option of the Transferor, to make payments of principal with respect to the Variable Funding Certificates. The Servicer will pay any remaining Shared Principal Collections on such business day to the holder of the Exchangeable Transferor Certificate; and (h) Excess Finance Charge Collections will be allocated as set forth below in clause (x) of "--Payment of Fees, Interest, and Other Items." Any Shared Principal Collections and other amounts not paid to the Transferor because the Transferor Interest on any date, after giving effect to the inclusion in the Trust of all Receivables on or prior to such date and the application of all prior payments to the Transferor, does not exceed the Minimum Transferor Interest, together with any adjustment payments, as described below, will be deposited into and held in the Excess Funding Account, and on the Amortization Period Commencement Date with respect to any Series, such amounts will be deposited in the principal account or principal funding account of such Series to the extent specified in the related Supplement until the principal funding account of such Series has been funded in full or the holders of certificates of such Series have been paid in full. Payment of Fees, Interest, and Other Items. On each business day during a Monthly Period, the Servicer will apply an amount equal to the sum of the Total Finance Charge Collections on deposit in the Collection Account and any investment earnings relating to amounts on deposit in the Principal Funding Account and the Pre-Funding Account deposited in the Collection Account (collectively, the "Available Series Finance Charge Collections") in the following priority: (i) an amount equal to the lesser of (A) the Available Series Finance Charge Collections and (B) the excess of (a) the sum of (1) the Class A Monthly Interest, (2) any Class A Monthly Interest with respect to any Interest Accrual Period beginning in a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, and (3) any additional interest at the Class A Certificate Rate plus 2% with respect to interest amounts that were due but not paid in a prior Monthly Period over (b) the amount which has already been deposited in the Interest Funding Account with respect thereto in the current Monthly Period, will be deposited in the Interest Funding Account for distribution on the next succeeding Distribution Date to the Class A Certificateholders; (ii) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clause (i) above and (B) the excess of (a) the sum of (1) the Class B Monthly Interest, (2) any Class B Monthly Interest with respect to any Interest Accrual Period beginning in a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, and (3) any additional interest at the Class B Certificate Rate plus 2% with respect to interest amounts that were due but not paid in a prior Monthly Period over (b) the amount which has already been deposited in the Interest Funding Account with respect thereto in the current Monthly Period, will be deposited in the Interest Funding Account for distribution on the next succeeding Distribution Date to the Class B Certificateholders; (iii) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) and (ii) above and (B) the portion of the Monthly Servicing Fee for the current month that has not been previously paid to the Servicer plus any prior Monthly Servicing Fee allocated to such Series that was due but not previously paid to the Servicer will be distributed to the Servicer; (iv) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (iii) above and (B) the sum of (1) the aggregate Investor Default Amount for such business day and (2) the unpaid Investor Default Amount for any prior business day during the then-current Monthly Period, will (v) during the Revolving Period, be treated as Shared Principal Collections, (w) on and prior to the Class B Principal Payment Commencement Date, during the Accumulation Period, be deposited in the Principal Funding Account to the extent included in Class A Monthly Principal or during any Early Amortization Period be deposited in the Principal Account for payment to the Class A Certificateholders, (x) during any Amortization Period on and after the Class B Principal Payment Commencement Date, be deposited in the Principal Account for payment to the Class B Certificateholders, and (y) during any Amortization Period on and after the Class C Principal Payment Commencement Date, be deposited in the Principal Account for payment to the Class C Certificateholders; (v) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (iv) above and (B) unreimbursed Class A Investor Charge-Offs, if any, will be treated as Shared Principal Collections during the Revolving Period, and will be deposited in the Principal Funding Account to the extent included in Class A Monthly Principal during the Accumulation Period or deposited in the Principal Account for payment to the Class A Certificateholders during any Early Amortization Period and, on and after the Class B Principal Payment Commencement Date, deposited in the Principal Account for payment to the Class B Certificateholders; (vi) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (v) above and (B) the sum of (1) the amount of interest which has accrued with respect to the outstanding aggregate principal amount of the Class B Certificates at the Class B Certificate Rate but has not been deposited in the Interest Funding Account or paid to the Class B Certificateholders either on such business day or on a prior business day, and (2) any additional interest at the Class B Certificate Rate plus 2% with respect to such interest amounts that were due but not paid to Class B Certificateholders in any previous Monthly Period, will be deposited in the Interest Funding Account for distribution on the next succeeding Distribution Date to the Class B Certificateholders; (vii) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (vi) above and (B) unreimbursed Class B Investor Charge-Offs and reductions of the Class B Invested Amount due to Reallocated Class B Principal Collections, if any, will be treated as Shared Principal Collections during the Revolving Period, and first will be deposited in the Principal Funding Account during the Accumulation Period or deposited in the Principal Account for payments to the Class A Certificateholders during any Early Amortization Period and then, on and after the Class B Principal Payment Commencement Date, deposited in the Principal Account for payment to the Class B Certificateholders; (viii) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (viii) above and (B) unreimbursed Class C Investor Charge-Offs and reductions of the Class C Invested Amount due to Reallocated Principal Collections, if any, will (w) during the Revolving Period, be treated as Shared Principal Collections, (x) during the Amortization Period but on or prior to the Class B Principal Payment Commencement Date, be deposited in the Principal Funding Account for payment to the Class A Certificateholders, (y) on and after the Class B Principal Payment Commencement Date, be deposited in the Principal Account for payment to the Class B Certificateholders, and (z) on and after the Class C Principal Payment Commencement Date, be deposited in the Principal Account for payment to the Class C Certificateholders; [(ix) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (ix) above and (B) the excess of (a) any unpaid Class A Prepayment Premium over (b) the amount which has already been deposited in the Interest Funding Account with respect thereto in the current Monthly Period, will be deposited in the Interest Funding Account for distribution on the next succeeding Distribution Date to the Class A Certificateholders; (x) an amount equal to the lesser of (A) any Available Series Finance Charge Collections remaining after application of such collections in clauses (i) through (x) above and (B) the excess of (a) any unpaid Class B Prepayment Premium over (b) the amount which has already been deposited in the Interest Funding Account with respect thereto in the current Monthly Period, will be deposited in the Interest Funding Account for distribution on the next succeeding Distribution Date to the Class B Certificateholders; and] (xi) any Available Series Finance Charge Collections remaining after making the above described distributions will be treated as Excess Finance Charge Collections which will be available to cover shortfalls, if any, in amounts payable from Finance Charge Collections to certificateholders of other Series and then to pay any unpaid commercially reasonable costs and expenses of a successor Servicer, if any. Excess Finance Charge Collections which are not so used will be paid to the Transferor; provided, however, that on any business day during any Early Amortization Period, the Trustee will deposit any such Excess Finance Charge Collections into the Interest Funding Account and will add such funds to the Available Series Finance Charge Collections on each subsequent business day in such Monthly Period until the last business day of the related Monthly Period, when the aggregate amount of such remaining Available Series Finance Charge Collections will be distributed as Excess Finance Charge Collections as set forth in this clause (x). "Class A Monthly Interest" on any Distribution Date will equal one-twelfth of the product of (i) the Class A Certificate Rate and (ii) the outstanding principal balance of the Class A Certificates as of the close of business on the last day of the preceding Monthly Period (after subtracting therefrom the aggregate amount of any Class A Monthly Principal distributed to holders of Class A Certificates during any Early Amortization Period), except that interest for the first Distribution Date will include accrued interest at the Class A Certificate Rate from the Closing Date through [ ] (calculated as though there were only 30 days in [ ]). "Class B Monthly Interest" on any Distribution Date will equal one-twelfth of the product of (i) the Class B Certificate Rate and (ii) the Class B Invested Amount as of the close of business on the last day of the preceding Monthly Period, except that interest for the first Distribution Date will include accrued interest at the Class B Certificate Rate from the Closing Date through [ ] (calculated as though there were only 30 days in [ ]). "Required Amount" means on any business day the amount, if any, by which the aggregate amount to be paid pursuant to clauses (i)-(x) above exceeds the portion of the Finance Charge Collections and Transferor Finance Charge Collections on any business day applied to the payment of the amounts described in such clauses. Payments of Principal. On each business day during the Revolving Period, the Trustee, acting in accordance with instructions from the Servicer, will withdraw all amounts on deposit in the Principal Account and treat such amounts as Shared Principal Collections as described in clause (g) of "--Allocations." On each business day during the Accumulation Period, principal will be deposited in the Principal Funding Account for distribution to the Class A Certificateholders on the Class A Expected Final Payment Date and, following the payment in full of the Class A Invested Amount, paid to the Class B Certificateholders on the Class B Expected Final Payment Date and, following the payment in full of the Class B Invested Amount, paid to the Class C Certificateholders on each Distribution Date thereafter until the Class C Invested Amount is paid in full. On the Transfer Date occurring in the month following the month in which any Early Amortization Period begins, and on each Transfer Date thereafter until the Series 1997-1 Termination Date or until the Class A Invested Amount is paid in full, the Trustee, acting in accordance with instructions from the Servicer, will withdraw all amounts on deposit in the Principal Account or the Principal Funding Account and, to the extent of Class A Monthly Principal, deposit such amounts in the Distribution Account for distribution to the Class A Certificateholders on the next succeeding Distribution Date. In the event that a Pay Out Event occurs prior to the end of the Funding Period, or amounts remain on deposit in the Pre-Funding Account at the end of the Funding Period, amounts on deposit in the Pre-Funding Account will be distributed to the Class A Certificateholders and the Class B Certificateholders in the manner and priorities described in "--Pre-Funding Account." The Class A Certificateholders will be entitled to receive principal payments to the extent of Class A Monthly Principal until the Class A Invested Amount is paid in full. Except for pro rata distributions of any amounts remaining in the Pre-Funding Account at the end of the Funding Period as described in "--Pre-Funding Account," the Class B Certificateholders will be entitled to receive principal payments only after the Class A Invested Amount has been paid in full. The Class C Certificateholders will be entitled to receive principal payments only after the Class A Invested Amount has been paid in full and the Class B Invested Amount has been paid in full. On the Transfer Date preceding the Class B Principal Payment Commencement Date (which is expected to be the Class B Expected Final Payment Date), and, if the Class B Invested Amount is not paid in full on such date, on each Transfer Date thereafter until the Series 1997-1 Termination Date or until the Class B Invested Amount is paid in full, the Trustee, acting in accordance with instructions from the Servicer, will withdraw amounts deposited into the Principal Account in respect of collections processed during the related Monthly Period and any amounts then on deposit in the Excess Funding Account and in each case allocable to such Class B Certificates and deposit such amounts in the Distribution Account for distribution to the Class B Certificateholders on the next succeeding Distribution Date. The Class B Certificateholders will be entitled to receive principal payments to the extent of Class B Monthly Principal until the Class B Invested Amount is paid in full. On the Transfer Date preceding the Class C Principal Payment Commencement Date, and on each Transfer Date thereafter until the Series 1997-1 Termination Date or until the Class C Invested Amount is paid in full, the Trustee, acting in accordance with instructions from the Servicer, will withdraw amounts deposited into the Principal Account in respect of collections processed during the related Monthly Period and any amounts then on deposit in the Excess Funding Account and in each case allocable to such Class C Certificates and deposit such amounts in the Distribution Account for distribution to the Class C Certificateholders on the next succeeding Distribution Date. The Class C Certificateholders will be entitled to receive principal payments to the extent of Class C Monthly Principal until the Class C Invested Amount is paid in full. At the end of each month, all interest and earnings (net of losses and investment expenses) on funds on deposit in the Principal Account and the Interest Funding Account shall be deposited by the Trustee in a separate deposit account with a Qualified Institution in the name of the Servicer, or a person designated in writing by the Servicer, which shall not constitute part of the Trust, or shall otherwise be turned over by the Trustee to the Servicer not less frequently than monthly. Any investment earnings with respect to amounts on deposit in the Excess Funding Account shall be deposited in the Collection Account and shall be treated as Finance Charge Collections. On each Distribution Date with respect to the Accumulation Period and any Special Payment Date, the Servicer shall withdraw from the Principal Funding Account and deposit in the Collection Account all interest and other investment income (net of losses and investment expenses) on funds then on deposit in the Principal Funding Account, and such funds shall not be considered to be principal amounts on deposit in the Principal Funding Account. Because funds are withdrawn from the Collection Account on each business day, amounts on deposit in the Collection Account are not invested. "Class A Monthly Principal" with respect to any Distribution Date relating to the Accumulation Period or any Early Amortization Period will equal the sum of (i) an amount equal to the aggregate Net Principal Collections received during the Monthly Period immediately preceding such Distribution Date, minus the aggregate amount of Reallocated Principal Collections for such Monthly Period, (ii) any amount on deposit in the Excess Funding Account allocated to the Certificates on such Distribution Date, and (iii) the amount allocated to the Class A Certificates with respect to such Distribution Date on account of the Investor Default Amount and any reimbursements of unreimbursed Class A Investor Charge-Offs, Class B Investor Charge-Offs, and Class C Investor Charge-Offs; provided, however, that for each Distribution Date with respect to the Accumulation Period (unless and until a Pay Out Event shall have occurred), Class A Monthly Principal may not exceed the Controlled Distribution Amount for such Distribution Date; provided further, that with respect to any Distribution Date, Class A Monthly Principal will not exceed the Class A Adjusted Invested Amount; provided, further, that with respect to the Series 1997-1 Termination Date, Class A Monthly Principal will be an amount equal to the Class A Invested Amount. "Class B Monthly Principal" with respect to any Distribution Date on or after the Class B Principal Payment Commencement Date will equal the sum of (i) an amount equal to the aggregate Net Principal Collections received during the Monthly Period immediately preceding such Distribution Date (less any payments to be made to Class A Certificateholders to the extent of any remaining Class A Invested Amount on such Distribution Date), minus the aggregate amount of Reallocated Principal Collections for such Monthly Period, (ii) any amount on deposit in the Excess Funding Account allocated to the Class B Certificates on such Distribution Date, and (iii) the amount allocated to the Class B Certificates with respect to such Distribution Date on account of the Investor Default Amount and any reimbursements of unreimbursed Class B Investor Charge-Offs and Class C Investor Charge-Offs; provided, however, that with respect to the Series 1997-1 Termination Date, Class B Monthly Principal will be an amount equal to the Class B Invested Amount. "Class C Monthly Principal" with respect to any Distribution Date on or after the Class C Principal Payment Commencement Date will equal the sum of (i) an amount equal to the aggregate Net Principal Collections received during the Monthly Period immediately preceding such Distribution Date (less any payments to be made to Class B Certificateholders to the extent of any remaining Class B Invested Amount on such Distribution Date), minus the aggregate amount of Reallocated Principal Collections for such Monthly Period, (ii) any amount on deposit in the Excess Funding Account allocated to the Class C Certificates on such Distribution Date, and (iii) the amount allocated to the Class C Certificates with respect to such Distribution Date on account of the Investor Default Amount and any reimbursements of unreimbursed Class C Investor Charge-Offs; provided, however, that with respect to the Series 1997-1 Termination Date, Class C Monthly Principal will be an amount equal to the Class C Invested Amount. COVERAGE OF INTEREST SHORTFALLS To the extent of any shortfall in the amount of Available Series Finance Charge Collections due to the accumulation of principal in the Principal Funding Account or the Excess Funding Account, a portion of the Finance Charge Collections allocable to the Exchangeable Transferor Certificate will be made available as described in "--Reallocation of Cash Flows" to cover the Negative Carry Amount. Thereafter, the Transferor may, at its option, contribute to the Trust an amount not in excess of the lesser of any remaining shortfall or remaining Negative Carry Amount for such purpose. Available Series Finance Charge Collections allocable to the Certificates in excess of the amounts necessary to make required payments with respect to the Certificates described above in "--Payment of Fees, Interest, and Other Items" ("Excess Finance Charge Collections") will be applied to cover any shortfalls with respect to amounts payable from Finance Charge Collections allocable to any other Series, pro rata based upon the amount of the shortfall, if any, with respect to such other Series. Any Excess Finance Charge Collections remaining after covering shortfalls with respect to all outstanding Series during a Monthly Period will be paid to the Servicer to cover certain costs and expenses and then to the holder of the Exchangeable Transferor Certificate. On and after the Class B Principal Payment Commencement Date, to the extent of any shortfall in the amount available to make required payments of interest accrued with respect to the outstanding aggregate principal amount of the Class B Certificates and to cover the Investor Default Amount or any Class B Investor Charge-Offs which remain unpaid after the application of Transferor Finance Charge Collections and Excess Finance Charge Collections, Principal Collections, and any remaining Finance Charge Collections allocated to the holder of the Exchangeable Transferor Certificate in an amount not to exceed the least of the Transferor Subordination Amount, the Transferor Interest on such day, and the amount of such shortfall, will be treated as Finance Charge Collections allocable to the payment of such shortfall on the Class B Certificates. DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES On each business day, the Servicer will calculate the Investor Default Amount for such business day. Receivables in any Account will be charged off as uncollectible in accordance with the Servicer's customary and usual policies and credit and collection policies, which, in general, currently provide that Receivables in any Account will be charged off when the Account becomes Retail Age 8 (210 days past due) or, in the case of certain major purchase plan accounts, when the Account becomes Retail Age 9 (240 days past due), unless the cardholder cures such default by making payments which qualify under the standards customarily applied by the Servicer. The Investor Default Amount will be allocated to the Certificateholders on each business day in an amount generally equal to the product of the Floating Allocation Percentage applicable on such business day and the amount of Principal Receivables in Defaulted Accounts for such business day. If on any business day the Servicer adjusts the amount of any Principal Receivable because of transactions occurring in respect of a rebate or refund to a cardholder, or because such Principal Receivable was created in respect of merchandise which was refused or returned by a cardholder, then the amount of the Transferor Interest in the Trust will be reduced, on a net basis, by the amount of the adjustment on such business day. In addition, the Transferor Interest in the Trust will be reduced, on a net basis, as a result of transactions in respect of any Principal Receivable which was discovered as having been created through a fraudulent or counterfeit charge. In the event the Transferor Interest would be reduced below the Minimum Transferor Interest as a result of any of the foregoing, the Transferor will be required to pay to the Trust the amount of such reduction (an "Adjustment Payment") out of its own funds. INVESTOR CHARGE-OFFS If on the second business day preceding each Distribution Date (the "Determination Date") the aggregate Investor Default Amount, if any, for each business day in the preceding Monthly Period exceeded the aggregate amount of Total Finance Charge Collections applied to the payment thereof and the amount of Transferor Finance Charge Collections, Excess Finance Charge Collections, and, on and after the Class B Principal Payment Commencement Date, collections allocated to the holder of the Exchangeable Transferor Certificate to the extent of the Transferor Subordination Amount applied to the payment thereof during the preceding Monthly Period, then a portion of the Class C Invested Amount equal to such insufficiency, but not more than the aggregate Investor Default Amount for such Monthly Period (a "Class C Investor Charge-Off"), will be deducted from the Class C Invested Amount to avoid a charge-off with respect to the Class A Certificates. The Class C Invested Amount thereafter will be increased (but not in excess of the unpaid principal balance of the Class C Certificates of such Series) on any business day by the amount of Total Finance Charge Collections allocated and available for that purpose as described under clause (ix) of "--Application of Collections--Payment of Fees, Interest, and Other Items." In the event that prior to the Class B Principal Payment Commencement Date any such reduction of the Class C Invested Amount would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the aggregate amount of such excess, but not more than the aggregate Investor Default Amount for such Monthly Period (a "Class B Investor Charge-Off"), which will have the effect of slowing or reducing the return of principal to the Class B Certificateholders. The Class B Invested Amount will thereafter be increased (but not in excess of the unpaid principal balance of the Class B Certificates) on any Monthly Period by the amount of Finance Charge Collections allocated and available for that purpose as described under clause (vii) of "--Application of Collections--Payment of Fees, Interest, and Other Items." In the event that, on or after the Class B Principal Payment Commencement Date, any such reduction of the Class C Invested Amount would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Transferor Subordination Amount will be reduced by the aggregate amount of such excess, but not by more than the aggregate Investor Default Amount for such Monthly Period. If the Transferor Subordination Amount is reduced to zero, the Class B Invested Amount will be reduced by the amount by which the Transferor Subordination Amount would have been reduced below zero, but not more than the aggregate Investor Default Amount for such Monthly Period. In the event that any such reduction of the Class B Invested Amount would cause the Class B Invested Amount to be a negative number, the Class B Invested Amount will be reduced to zero, and the Class A Invested Amount will be reduced by the amount by which the Class B Invested Amount would have been reduced below zero, but not more than the aggregate Investor Default Amount for such Monthly Period (a "Class A Investor Charge-Off"), which will have the effect of slowing or reducing the return of principal to the Class A Certificateholders. If the Class A Invested Amount has been reduced by the amount of any Class A Investor Charge-Offs, it will be increased on any business day (but not by an amount in excess of the aggregate Class A Investor Charge-Offs) by the amount of Available Series Finance Charge Collections allocated and available for such purpose as described under clause (v) of "--Application of Collections--Payment of Fees, Interest, and Other Items." FINAL PAYMENT OF PRINCIPAL; TERMINATION The Class A Certificates, the Class B Certificates, and the Class C Certificates will be subject to optional repurchase by the Transferor on any Distribution Date after the Invested Amount is reduced to an amount less than or equal to 20% of the highest Invested Amount outstanding at any time, if certain conditions set forth in the Pooling and Servicing Agreement are satisfied. The Certificates are also subject to optional repurchase by the Transferor on the second Distribution Date following the Class A Expected Final Payment Date. The repurchase price will be equal to (i) the Class A Invested Amount plus accrued and unpaid interest on the Class A Certificates, (ii) the Class B Invested Amount plus accrued and unpaid interest on the Class B Certificates, and (iii) the Class C Invested Amount. In each case interest will accrue through the day preceding the Distribution Date on which the repurchase occurs. The Certificates will be retired on the day following the Distribution Date on which the final payment of principal is scheduled to be made to the Certificateholders, whether as a result of optional reassignment to the Transferor or otherwise. Subject to prior termination as provided above, the Pooling and Servicing Agreement provides that the final distribution of principal and interest on the Offered Certificates will be made on the [ ] Distribution Date (the "Series 1997-1 Termination Date"). In the event that the Invested Amount is greater than zero on the Series 1996-1 Termination Date, the Trustee will sell or cause to be sold (and apply the proceeds first to the Class A Certificates until paid in full, then to the Class B Certificates, and finally to the Class C Certificates to the extent necessary to pay such remaining amounts to all Certificateholders pro rata within each class as final payment of the Certificates) interests in the Receivables or certain Receivables, as specified in the Pooling and Servicing Agreement and the Series 1997-1 Supplement, in an amount equal to up to 110% of the Invested Amount at the close of business on such date (but not more than the total amount of Receivables allocable to the Certificates). The net proceeds of such sale and any collections on the Receivables, up to an amount equal to the Invested Amount plus accrued interest due on the Certificates, will be paid on the Series 1997-1 Termination Date, first to the Class A Certificateholders until the Class A Invested Amount is paid in full, then to the Class B Certificateholders until the Class B Invested Amount is paid in full, and then to the Class C Certificateholders until the Class C Invested Amount is paid in full. Unless the Servicer and the holder of the Exchangeable Transferor Certificate instruct the Trustee otherwise, the Trust will terminate on the earlier of (a) the day after the Distribution Date following the date on which funds shall have been deposited in the Distribution Account for the payment to certificateholders in an aggregate amount sufficient to pay in full the aggregate investor interest of all Series outstanding plus interest thereon at the applicable certificate rates to the next Distribution Date and (b) a date which shall not be later than the expiration of 21 years from the death of the last survivor of the descendants of a specified person living on the date of the Pooling and Servicing Agreement. Upon the termination of the Trust and the surrender of the Exchangeable Transferor Certificate, the Trustee will convey to the holder of the Exchangeable Transferor Certificate all right, title, and interest of the Trust in and to the Receivables and other funds of the Trust (other than funds on deposit in the Distribution Account and other similar bank accounts of the Trust with respect to any Series). PAY OUT EVENTS As described above, the Revolving Period will continue until the commencement of the Accumulation Period, unless a Pay Out Event occurs prior to such date. A "Pay Out Event" refers to any of the following events: (i) failure on the part of the Transferor (a) to make any payment or deposit on the date required under the Pooling and Servicing Agreement (or within the applicable grace period which will not exceed five business days); (b) to perform in all material respects the Transferor's covenant not to sell, pledge, assign, or transfer to any person, or grant any unpermitted lien on, any Receivable; or (c) to observe or perform in any material respect any other covenants or agreements of the Transferor set forth in the Pooling and Servicing Agreement, the Purchase Agreement, or the Series 1997-1 Supplement, which failure has a material adverse effect on the Certificateholders and which continues unremedied for a period of 60 days after written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor by the Trustee, or to the Transferor and the Trustee by the holders of 50% of the Invested Amount and continues to materially and adversely affect the interests of the Certificateholders for such period; (ii) any representation or warranty made by the Transferor in the Pooling and Servicing Agreement or any information required to be given by the Transferor to the Trustee to identify the Accounts proves to have been incorrect in any material respect when made and which continues to be incorrect in any material respect for a period of 60 days after written notice to the Transferor from the Trustee, or to the Transferor and the Trustee by certificateholders representing more than 50% of the invested amount of any class of any Series outstanding, and as a result of which the interests of the Certificateholders are materially and adversely affected and continue to be materially and adversely affected for such period; provided, however, that a Pay Out Event pursuant to this subparagraph (ii) will not be deemed to occur thereunder if the Transferor has accepted reassignment of the related Receivable or all such Receivables, if applicable, during such period (or such longer period as the Trustee may specify) in accordance with the provisions thereof; (iii) certain events of insolvency or receivership relating to the Transferor, Federated, or FDS; (iv) any reduction of the average of the Portfolio Yields for any three consecutive Monthly Periods to a rate which is less than the Base Rate; (v) the Trust becomes an "investment company" within the meaning of the Investment Company Act; (vi) (a) the Transferor Interest shall be less than the Minimum Transferor Interest or (b) the total amount of Principal Receivables and the amount on deposit in the Excess Funding Account shall be less than the Minimum Aggregate Principal Receivables, in each case for 15 consecutive days; or (vii) any Servicer Default (as defined below) which would have a material adverse effect on the Certificateholders occurs. In the case of any event described in clause (i), (ii), or (vii) above, a Pay Out Event will be deemed to have occurred with respect to the Certificates only if, after any applicable grace period, either the Trustee or Certificateholders evidencing undivided interests aggregating more than 50% of the Invested Amount, by written notice to the Transferor and the Servicer (and to the Trustee if given by the Certificateholders) declare that a Pay Out Event has occurred with respect to the Certificates as of the date of such notice. In the case of any event described in clause (iii) or (v) above, a Pay Out Event with respect to all Series then outstanding, and in the case of any event described in clause (iv) or (vi), a Pay Out Event with respect only to the Certificates, will be deemed to have occurred without any notice or other action on the part of the Trustee or the Certificateholders or all certificateholders, as appropriate, immediately upon the occurrence of such event. On the date on which a Pay Out Event is deemed to have occurred, the Early Amortization Period will commence. In such event, distributions of principal to the Certificateholders will begin on the first Distribution Date following the month in which such Pay Out Event occurred. If, because of the occurrence of a Pay Out Event, the Early Amortization Period begins, Certificateholders will begin receiving distributions of principal earlier than they otherwise would have, which may shorten the average life of the Certificates. In addition to the consequences of a Pay Out Event discussed above, if, pursuant to certain provisions of federal law, the Transferor voluntarily enters liquidation or a receiver is appointed for the Transferor, on the day of such event the Transferor will immediately cease to transfer Principal Receivables to the Trust and promptly give notice to the Trustee of such event. Within 15 days, the Trustee will publish a notice of the liquidation or the appointment stating that the Trustee intends to sell, dispose of, or otherwise liquidate the Receivables in a commercially reasonable manner. Unless otherwise instructed within a specified period by certificateholders representing undivided interests aggregating more than 50% of the invested amount of each Series outstanding at such time (or, if any such Series has more than one class, of each class of such Series), the Trustee will sell, dispose of, or otherwise liquidate the portion of the Receivables allocable to the Series that did not vote to continue the Trust in accordance with the Pooling and Servicing Agreement in a commercially reasonable manner and on commercially reasonable terms. The proceeds from the sale, disposition, or liquidation of the Receivables will be treated as collections of the Receivables and applied as provided above in "--Application of Collections." If the only Pay Out Event to occur is either the bankruptcy or insolvency of the Transferor or the appointment of a bankruptcy trustee or receiver for the Transferor, the bankruptcy trustee or receiver may have the power to prevent the early sale, liquidation, or disposition of the Receivables and the commencement of the Early Amortization Period. In addition, a bankruptcy trustee or receiver may have the power to cause the early sale of the Receivables and the early retirement of the Certificates. SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Servicer's compensation for its servicing activities and reimbursement for its expenses will take the form of the payment to it of a monthly servicing fee in an amount equal to the sum of, with respect to all Series, one-twelfth of the product of the applicable servicing fee percentages with respect to each Series and the allocable portion of the Transferor Interest and the average amount of the Principal Receivables during each month. The monthly servicing fee will be allocated between the Transferor Interest, the Certificateholders' Interest and the investor interest for all other Series. The portion of the servicing fee allocable to the Certificateholders' Interest during each Monthly Period (the "Monthly Servicing Fee") will be equal to the product of 2.00% per annum and the sum of the Class A Adjusted Invested Amount, the Class B Invested Amount, and the Class C Invested Amount on the preceding Record Date or, in the case of the first Distribution Date, the initial principal amount of the Certificates. The Monthly Servicing Fee will be funded from collections of Finance Charge Receivables allocated to the Certificateholders' Interest, and will be paid each month from the amount so allocated and on deposit in the Collection Account. See "--Application of Collections--Payment of Fees, Interest, and Other Items" above. The remainder of the servicing fee will be allocable to the Transferor Interest and the investor interests of other Series. Neither the Trust nor the Certificateholders will have any obligation to pay such portion of the servicing fee. The Servicer will pay from its servicing compensation certain expenses incurred in connection with servicing the Receivables, including without limitation payment of the fees and disbursements of the Trustee and independent certified public accountants and other fees which are not expressly stated in the Pooling and Servicing Agreement to be payable by the Trust or the Certificateholders other than federal, state, and local income and franchise taxes, if any, of the Trust. CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER The Servicer may not resign from its obligations and duties under the Pooling and Servicing Agreement, except upon determination that performance of its duties is no longer permissible under applicable law. No such resignation will become effective until the Trustee or a successor to the Servicer has assumed the Servicer's responsibilities and obligations under the Pooling and Servicing Agreement. FDS, as Servicer, has delegated or will delegate some of its servicing duties to one or more of its affiliates or other persons; however, such delegation will not relieve it of its obligation to perform such duties in accordance with the Pooling and Servicing Agreement. In addition, any affiliate of FDS may be substituted in all respects for FDS as Servicer, provided that such affiliate expressly assumes the performance of every covenant and obligation of the Servicer under the Pooling and Servicing Agreement. The Pooling and Servicing Agreement provides that, subject to the limitations on the Servicer's liability described below, the Servicer will indemnify the Transferor and the Trust from and against any loss, liability, reasonable expense, damage, or injury suffered or sustained by reason of any acts or omissions or alleged acts or omissions of the Servicer with respect to the activities of the Trust or the Trustee for which the Servicer is responsible pursuant to the Pooling and Servicing Agreement; provided, however, that the Servicer will not indemnify (a) the Transferor or the Trust if such acts, omissions, or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by the Transferor, the Trustee (or any of its officers, directors, employees, or agents), or the Certificateholders, (b) the Trust, the Certificateholders, or the Offered Certificate Owners for losses, liabilities, expenses, damages, or injuries arising from actions taken by the Trustee at the request of Certificateholders, (c) the Trust, the Certificateholders, or the Offered Certificate Owners for any losses, liabilities, expenses, damages, or injuries incurred by any of them in their capacities as investors, including without limitation losses incurred as a result of defaulted Receivables or Receivables which are written off as uncollectible, or (d) the Transferor, the Trust, the Certificateholders, or the Offered Certificate Owners for any losses, liabilities, expenses, damages, or injuries suffered or sustained by the Trust, the Certificateholders, or the Offered Certificate Owners arising under any tax law, including without limitation any federal, state, local, or foreign income or franchise tax or any other tax imposed on or measured by income (or any interest or penalties with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust, the Certificateholders, or the Offered Certificate Owners in connection with the Pooling and Servicing Agreement to any taxing authority. The Pooling and Servicing Agreement also provides that the Servicer will indemnify the Trustee and its officers, directors, employees, or agents from and against any loss, liability, reasonable expense, damage, or injury suffered or sustained by reason of the acceptance of the Trust by the Trustee, the issuance by the Trust of certificates, or any of the other matters contemplated in the Pooling and Servicing Agreement; provided, however, that the Servicer will not indemnify the Trustee or its officers, directors, employees, or agents for any loss, liability, expense, damage, or injury caused by the fraud, negligence, or willful misconduct of any of them. In addition, the Pooling and Servicing Agreement provides that, subject to certain exceptions, the Transferor will indemnify the Trust and the Trustee from and against any reasonable loss, liability, expense, damage, or injury (other than to the extent that any of the foregoing relate to any tax law or any failure to comply therewith) suffered or sustained by reason of any acts or omissions or alleged acts or omissions arising out of or based upon the arrangement created by the Pooling and Servicing Agreement as though the Pooling and Servicing Agreement created a partnership under the Delaware Uniform Partnership Law in which the Transferor is a general partner. The Pooling and Servicing Agreement provides that, except for obligations specifically undertaken by the Transferor and the Servicer pursuant to the Pooling and Servicing Agreement, neither the Transferor nor the Servicer nor any of their respective directors, officers, employees, or agents will be under any liability to the Trust, the Trustee, its officers, directors, employees, or agents, the Certificateholders, or any other person for any action taken, or for refraining from taking any action pursuant to the Pooling and Servicing Agreement provided that neither the Transferor nor the Servicer nor any of their respective directors, officers, employees, or agents will be protected against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith, or gross negligence of the Transferor, the Servicer, or any such person in the performance of its duties thereunder or by reason of reckless disregard of obligations and duties thereunder. In addition, the Pooling and Servicing Agreement provides that the Servicer is not under any obligation to appear in, prosecute, or defend any legal action which is not incidental to its servicing responsibilities under the Pooling and Servicing Agreement and which in its opinion may expose it to any expense or liability. The Pooling and Servicing Agreement provides that, in addition to Exchanges, the Transferor may transfer its interest in all or a portion of the Exchangeable Transferor Certificate, provided that prior to any such transfer (a) the Trustee receives written notification from each Rating Agency that such transfer will not result in a lowering of its then-existing rating of the certificates of each outstanding Series then rated by it and (b) the Trustee receives a written opinion of counsel confirming that such transfer would not adversely affect the federal income tax treatment of the certificates of any outstanding Series or result in a taxable event to the certificateholders of any such Series. Any person into which, in accordance with the Pooling and Servicing Agreement, the Transferor or the Servicer may be merged or consolidated or any person resulting from any merger or consolidation to which the Transferor or the Servicer is a party, or any person succeeding to the business of the Transferor or the Servicer, upon execution of a Supplement and delivery of an opinion of counsel with respect to the compliance of the transaction with the applicable provisions of the Pooling and Servicing Agreement, will be the successor to the Transferor or the Servicer, as the case may be, under the Pooling and Servicing Agreement. SERVICER DEFAULT In the event of any Servicer Default (as defined below), either the Trustee or certificateholders representing undivided interests aggregating more than 50% of the aggregate investor interests for all outstanding Series, by written notice to the Servicer (and to the Trustee if given by the certificateholders), may terminate all of the rights and obligations of the Servicer as servicer under the Pooling and Servicing Agreement and in and to the Receivables and the proceeds thereof and the Trustee may appoint a new Servicer (a "Service Transfer"). The rights and interest of the Transferor under the Pooling and Servicing Agreement and in the Transferor Interest will not be affected by such termination. Upon such termination, the Trustee will as promptly as possible appoint a successor Servicer. If no such Servicer has been appointed and has accepted such appointment by the time the Servicer ceases to act as Servicer, all authority, power, and obligations of the Servicer under the Pooling and Servicing Agreement will pass to and be vested in the Trustee. If the Trustee is unable to obtain any bids from eligible servicers and the Servicer delivers an officer's certificate to the effect that it cannot in good faith cure the applicable Servicer Default, and if the Trustee is legally unable to act as a successor Servicer, then the Trustee will give the Transferor the right of first refusal to purchase the Receivables on terms equivalent to the best purchase offer as determined by the Trustee. A "Servicer Default" refers to any of the following events: (i) failure by the Servicer to make any payment, transfer, or deposit, or to give instructions to the Trustee to make certain payments, transfers, or deposits within five business days after the date the Servicer is required to do so under the Pooling and Servicing Agreement or any Supplement; (ii) failure on the part of the Servicer duly to observe or perform in any respect any other covenants or agreements of the Servicer which has a material adverse effect on the certificateholders of any Series then outstanding and which continues unremedied for a period of 60 days after written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by holders of certificates evidencing undivided interests aggregating not less than 50% of the invested amount of any Series materially adversely affected thereby and continues to have a material adverse effect on the certificateholders of any Series then outstanding for such period; or the delegation by the Servicer of its duties under the Pooling and Servicing Agreement, except as specifically permitted thereunder; (iii) any representation, warranty, or certification made by the Servicer in the Pooling and Servicing Agreement, or in any certificate delivered pursuant to the Pooling and Servicing Agreement, proves to have been incorrect when made which has a material adverse effect on the certificateholders of any Series then outstanding, and which continues to be incorrect in any material respect for a period of 60 days after written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and Trustee by the holders of certificates evidencing undivided interests aggregating not less than 50% of the invested amount of any Series materially adversely affected thereby and continues to have a material adverse effect on such certificateholders for such period; or (iv) the occurrence of certain events of bankruptcy, insolvency, or receivership of the Servicer. Notwithstanding the foregoing, a delay in or failure of performance referred to in clause (i) above for a period of five business days, or referred to under clause (ii) or (iii) for a period of 60 business days, will not constitute a Servicer Default if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or other similar occurrence. Upon the occurrence of any such event, the Servicer will not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of the Pooling and Servicing Agreement, and the Servicer will provide the Trustee, any provider of Enhancement, the Transferor, and the holders of certificates of all Series outstanding prompt notice of such failure or delay by it, together with a description of the cause of such failure or delay and its efforts to perform its obligations. In the event of a Servicer Default, if a bankruptcy trustee or receiver were appointed for the Servicer and no Servicer Default other than such bankruptcy or receivership or the insolvency of the Servicer exists, the bankruptcy trustee or receiver may have the power to prevent either the Trustee or the majority of the certificateholders from effecting a Service Transfer. REPORTS TO CERTIFICATEHOLDERS On each Distribution Date, the Paying Agent will forward to each Certificateholder of record a statement prepared by the Servicer setting forth with respect to such Series: (a) the total amount distributed, (b) the amount of the distribution allocable to principal on the Class A Certificates, the Class B Certificates, and the Class C Certificates, (c) the amount of such distribution allocable to interest on the Class A Certificates, the Class B Certificates, and the Class C Certificates, (d) the amount of collections of Principal Receivables processed during the related Monthly Period and allocated in respect of the Class A Certificates, the Class B Certificates, and the Class C Certificates, respectively, (e) the amount of collections of Finance Charge Receivables processed during the related Monthly Period and allocated in respect of the Class A Certificates, the Class B Certificates, and the Class C Certificates, respectively, (f) the aggregate amount of Principal Receivables, the Invested Amount, the Class A Invested Amount, the Class B Invested Amount, the Class C Invested Amount, the Floating Allocation Percentage, and during the Amortization Period, the Fixed/Floating Allocation Percentage with respect to the Principal Receivables in the Trust as of the close of business on the Record Date, (g) the aggregate outstanding balance of Accounts which are 30, 60, 90, 120, 150, and 180 days delinquent as of the end of the day on the Record Date, (h) the Aggregate Investor Default Amount for the related Monthly Period, (i) the aggregate amount of Class A Investor Charge-Offs, Class B Investor Charge-Offs, and Class C Investor Charge-Offs for the related Monthly Period, (j) the aggregate amount of the Investor Servicing Fee for the related Monthly Period, and (k) the Class A Pool Factor, the Class B Pool Factor, and the Class C Pool Factor as of the end of the last day of the related Monthly Period. On or before January 31 of each calendar year, beginning with 1997, the Paying Agent will furnish to each person who at any time during the preceding calendar year was a Certificateholder of record a statement prepared by the Servicer containing the information required to be contained in the regular monthly report to Certificateholders, as set forth in clauses (a), (b), and (c) above aggregated for such calendar year or the applicable portion thereof during which such person was a Certificateholder, together with such other customary information (consistent with the treatment of the Certificates as debt) as the Trustee or the Servicer deems necessary or desirable to enable the Certificateholders to prepare their United States tax returns. EVIDENCE AS TO COMPLIANCE The Pooling and Servicing Agreement provides that the Servicer will cause a firm of independent public accountants to furnish to the Trustee on an annual basis a report to the effect that such firm has compared the mathematical calculations set forth in the monthly statements described in the first paragraph under "--Reports to Certificateholders" for the Monthly Periods covered by such report with the Transferor's computer reports regarding the Receivables and that such reports are in agreement, except for such exceptions as such firm shall believe to be immaterial and such other exceptions as shall be set forth in such report. A copy of such report will be sent to each Certificateholder. The Pooling and Servicing Agreement provides that the Servicer will cause a firm of independent public accountants to furnish to the Trustee on an annual basis a report to the effect that such firm has made a study and evaluation in accordance with generally accepted auditing standards of the Servicer's internal accounting controls relative to the servicing of the Accounts and that, on the basis of such examination, such firm is of the opinion (assuming the accuracy of reports by the Servicer's third party agents) that the system of internal controls in effect at the end of the reporting period relating to servicing procedures performed by the Servicer, taken as a whole, provided reasonable assurance that the internal control system was sufficient for the prevention and detection of errors and irregularities and that such servicing was conducted in compliance with such provisions of the Pooling and Servicing Agreement with which such accountants can reasonably be expected to possess adequate knowledge of the subject matter, which are susceptible of positive assurance by such accountants, and for which their professional competence is relevant, except for such exceptions as such firm shall believe to be immaterial and such other exceptions as shall be set forth in such report. A copy of such report will be sent to each Certificateholder. The Pooling and Servicing Agreement also provides for delivery to the Trustee, on or before a certain date each year, of a certificate signed by an officer of the Servicer stating that the Servicer has fulfilled its obligations under the Pooling and Servicing Agreement throughout the preceding twelve months or, if there has been a default in the fulfillment of any such obligations, describing each such default. A copy of such certificate may be obtained by any Certificateholder upon the submission of a written request therefor addressed to the Trustee. AMENDMENTS The Pooling and Servicing Agreement and any Supplement may be amended by the Transferor, the Servicer, and the Trustee, without the consent of certificateholders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Pooling and Servicing Agreement and Supplements or of modifying in any manner the rights of such certificateholders; provided, however, that (i) the Servicer shall have provided an officer's certificate to the effect that such action will not adversely affect in any material respect the interests of such certificateholders, (ii) except in the case of any amendment for the sole purpose of curing any ambiguity or correcting or supplementing any inconsistent provision of the Pooling and Servicing Agreement or revising any schedule thereto (other than the list of Receivables), each Rating Agency initially contracted to rate the Class A Certificates, the Class B Certificates, and, if applicable, the Class C Certificates shall have been notified of such amendment and shall have provided notice to the Trustee or the Servicer that such action would not result in a reduction or withdrawal of its rating of the Class A Certificates, the Class B Certificates, or the Class C Certificates, and (iii) such action will not, in the opinion of counsel satisfactory to the Trustee, result in certain adverse tax consequences. In addition, the Pooling and Servicing Agreement and any Supplement may be amended from time to time by the Transferor, the Servicer, and the Trustee, without the consent of certificateholders, to add to or change any of the provisions of the Pooling and Servicing Agreement to provide that bearer certificates issued with respect to any other Series may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any interest on such bearer certificates, to permit such bearer certificates to be issued in exchange for registered certificates or bearer certificates of other authorized denominations or to permit the issuance of uncertificated certificates. Moreover, any Supplement and any amendments regarding the addition or removal of Receivables from the Trust will not be considered amendments requiring the consent of certificateholders under the provisions of the Pooling and Servicing Agreement or any Supplement. The Pooling and Servicing Agreement and the Supplement may be amended by the Transferor, the Servicer, and the Trustee with the consent of the holders of certificates evidencing undivided interests aggregating not less than 66 2/3% of the investor interests of each and every Series adversely affected (and with respect to Series 1997-1, the holders of not less than 66 2/3% of each class of Certificates), for the purpose of adding any provisions to, changing in any manner or eliminating any of the provisions of the Pooling and Servicing Agreement, or any Supplement or of modifying in any manner the rights of certificateholders of any then outstanding Series. No such amendment, however, may (a) reduce in any manner the amount of, or delay the timing of, distributions required to be made on any such Series, (b) change the definition of or the manner of calculating the interest of any certificateholder of such Series, or (c) reduce the aforesaid percentage of undivided interests the holders of which are required to consent to any such amendment, in each case without the consent of all certificateholders of all Series adversely affected. Promptly following the execution of any amendment to the Pooling and Servicing Agreement, the Trustee will furnish written notice of the substance of such amendment to each certificateholder. Any Supplement and any amendments regarding the addition or removal of Receivables from the Trust will not be considered an amendment requiring certificateholder consent under the provisions of the Pooling and Servicing Agreement and any Supplement. LIST OF CERTIFICATEHOLDERS Upon written request of certificateholders of record representing undivided interests in the Trust aggregating not less than 10% of the Invested Amount, the Trustee after having been adequately indemnified by such certificateholders for its costs and expenses, and having given the Servicer notice that such request has been made, will afford such certificateholders access during business hours to the current list of certificateholders of the Trust for purposes of communicating with other certificateholders with respect to their rights under the Pooling and Servicing Agreement. See "--Book-Entry Registration" and "--Definitive Certificates" above. THE TRUSTEE The Chase Manhattan Bank is the Trustee under the Pooling and Servicing Agreement. The Transferor, the Servicer, and their respective affiliates may from time to time enter into normal banking and trustee relationships with the Trustee and its affiliates. The Trustee, the Transferor, the Servicer, and any of their respective affiliates may hold Certificates in their own names. In addition, for purposes of meeting the legal requirements of certain local jurisdictions, the Trustee will have the power to appoint a co-trustee or separate trustees of all or any part of the Trust. In the event of such appointment, all rights, powers, duties, and obligations conferred or imposed upon the Trustee by the Pooling and Servicing Agreement will be conferred or imposed upon the Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee shall be incompetent or unqualified to perform certain acts, singly upon such separate trustee or co-trustee who will exercise and perform such rights, powers, duties, and obligations solely at the direction of the Trustee. The Trustee may resign at any time. The Transferor may also remove the Trustee if the Trustee ceases to be eligible to continue as such under the Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such circumstances, the Transferor will be obligated to appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee does not become effective until acceptance of the appointment by the successor Trustee. DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT PURCHASES OF RECEIVABLES The Receivables transferred to the Trust pursuant to the Pooling and Servicing Agreement are purchased by the Transferor pursuant to a Receivables Purchase Agreement (the "Purchase Agreement") among the Transferor, as purchaser of such Receivables, and the Originators, as sellers of such Receivables. Pursuant to the Purchase Agreement, the Transferor purchases from the Originators Receivables arising in the Accounts from time to time until the Purchase Termination Date (as defined below in "--Purchase Termination Date") applicable to such Originator. On each business day prior to the Purchase Termination Date applicable to such Originator, each Originator is required to deliver all of its Receivables to the Transferor. The purchase price of such Receivables is equal to the outstanding balance of such Receivables, as adjusted pursuant to the Purchase Agreement, and is payable by the Transferor in cash, by a promissory note, or by any combination thereof, at the Originator's option. Pursuant to the Pooling and Servicing Agreement, such Receivables are thereafter transferred immediately by the Transferor to the Trust. Pursuant to the Pooling and Servicing Agreement, the Transferor assigned its rights in, to, and under the Purchase Agreement with respect to such Receivables to the Trust. In September 1993, the Purchase Agreement was supplemented to add FDS as an Originator and substantially all of the then-existing Accounts were transferred from the other Originators (other than Broadway) to FDS. Substantially all of the Accounts (other than the Broadway Accounts) established subsequent to such transfer have been established by FDS. However, the other Originators remain parties to the Purchase Agreement and may from time to time establish Accounts and sell Receivables to the Transferor pursuant thereto. In February 1996, FDS began establishing and continues to establish the FDS/Broadway Accounts for qualified applicants who were or become customers of the department stores operated by Broadway following the conversion of such stores to other Federated nameplates. In May 1996, Broadway was added as a party to the Purchase Agreement and, concurrently therewith, the receivables then outstanding under the Broadway Accounts and the FDS/Broadway Accounts were transferred to the Transferor for inclusion in the Trust. Substantially all of the Broadway Accounts were transferred to FDS during fiscal 1996. See "Risk Factors--Effects of Certain Transactions." REPRESENTATIONS AND WARRANTIES Pursuant to the Purchase Agreement, each of the Originators represents and warrants to the Transferor that, among other things, as of the Initial Closing Date (or, in the case of certain Originators, the date upon which they first became Originators) and subject to specified exceptions and limitations, such Originator is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, such Originator is duly qualified to do business and in good standing (or is exempt from such requirement) in any state required in order to conduct its business and has obtained all necessary licenses and approvals required under applicable law, and such Originator has the requisite corporate power and authority to conduct its business and to perform its obligations under the Purchase Agreement. Pursuant to the Purchase Agreement, each of the Originators additionally represents and warrants to the Transferor that, among other things, as of the Initial Closing Date (or, in the case of certain Originators, the date upon which they first became Originators), and, as to matters involving Supplemental Accounts or Automatic Additional Accounts, as of the date that the Receivables therein are designated for inclusion in the Trust) and subject to specified exceptions and limitations, (i) the execution and delivery of the Purchase Agreement and the consummation of the transactions provided for in the Purchase Agreement have been duly authorized by such Originator by all necessary corporate action on its part, (ii) the execution, delivery, and performance of the Purchase Agreement and the performance of the transactions contemplated thereby do not contravene such Originator's charter or by-laws, violate any provision of law applicable to it, require any filing (except for filings under the UCC), registration, consent, or approval under any such law except for such filings, registrations, consents, or approvals as have already been obtained and are in full force and effect, (iii) such Originator has filed all tax returns required to be filed and has paid or made adequate provision for the payment of all taxes, assessments, and other governmental charges due from such Originator, (iv) there are no proceedings or investigations pending or, to the best knowledge of such Originator, threatened against such Originator before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality asserting the invalidity of the Purchase Agreement or seeking to prevent the consummation of any of the transactions contemplated by the Purchase Agreement, (v) each Receivable of such Originator is or will be an account receivable arising out of such Originator's performance in accordance with the terms of the Charge Account Agreement giving rise to such Receivable, (vi) such Originator has no knowledge of any fact which should have led it to expect at the time of the classification of such Receivable as an Eligible Receivable that such Eligible Receivable would not be paid in full when due, and each Receivable classified as an "Eligible Receivable" by such Originator in any document or report delivered under the Purchase Agreement satisfies the requirements of eligibility contained in the definition of Eligible Receivable set forth in the Purchase Agreement, (vii) the Purchase Agreement constitutes the legal, valid, and binding obligation of such Originator, enforceable against such Originator in accordance with its terms, (viii) such Originator is not insolvent, (ix) such Originator is the legal and beneficial owner of all right, title, and interest in and to each Receivable conveyed to the Transferor by such Originator pursuant to the Purchase Agreement, and each such Receivable has been or will be transferred to the Transferor free and clear of any lien other than Permitted Liens, (x) the Purchase Agreement constitutes a valid transfer, assignment, and conveyance to the Transferor of all of such Originator's right, title, and interest in and to the Receivables conveyed to the Transferor pursuant thereto, (xi) all material information with respect to the Accounts and the Receivables provided to the Transferor by such Originator was true and correct as of the Closing Date or as of the day Receivables arising under each such Account are created, and (xii) each of such Originator's Receivables has been conveyed to the Transferor free and clear of any lien of any person claiming through or under such Originator or any of its affiliates (other than Permitted Liens) and in compliance in all material respects with all requirements of law applicable to such Originator. Pursuant to the Purchase Agreement, each of the Originators additionally represents and warrants that, among other things, (i) each such Receivable of such Originator is an account receivable arising out of such Originator's performance in accordance with the terms of the Charge Account Agreement giving rise to such Receivable, (ii) such Originator has no knowledge of any fact which should have led it to expect at the time of the classification of such Receivable as an Eligible Receivable that such Eligible Receivable would not be paid in full when due, and each such Receivable classified as an "Eligible Receivable" by such Originator in any document or report under the Purchase Agreement satisfies the requirements of eligibility contained in the definition of Eligible Receivable set forth in the Purchase Agreement, (iii) each such Receivable of such Originator has been conveyed to the Transferor free and clear of any lien of any person claiming through or under such Originator or any of its affiliates (other than Permitted Liens), (iv) all consents, licenses, approvals or authorizations of or any declarations with any governmental authority required to be obtained by such Originator in connection with the transfer of such Receivable to the Transferor have been duly obtained and remain in full force and effect, and (v) all material information with respect to such Receivable provided to the Transferor by such Originator is true and correct as of the Initial Closing Date. If any of the representations or warranties of any Originator as to matters described in the three immediately preceding paragraphs are not true with respect to such Originator or any Receivable, as applicable, at the time such representation or warranty was made and as a result thereof (i) the Transferor is required to repurchase any Receivable from the Trust pursuant to the Pooling and Servicing Agreement or (ii) any Receivable is designated an "Ineligible Receivable" pursuant to the Pooling and Servicing Agreement, then such Originator will be obligated to pay to the Transferor immediately upon the Transferor's demand therefor an amount equal to the amount of all losses, damages, and liabilities of the Transferor that result from such breach, including but not limited to the cost of any of the Transferor's repurchase obligations pursuant to the Pooling and Servicing Agreement. In addition, upon any exercise by the Transferor of its right to designate Removed Accounts in connection with the sale by Federated or any affiliate of Federated of all or substantially all of the capital stock or assets of any Originator and to remove Receivables arising in such Removed Account from the Trust, the Originator of the removed Receivables is required to immediately repurchase each Receivables from the Transferor by tendering to the Transferor an amount in immediately available funds equal to the amount the Transferor remitted to the Trust in consideration of the transfer of the removed Receivables from the Trust to the Transferor. CERTAIN COVENANTS Pursuant to the Purchase Agreement, each Originator covenants that, among other things, subject to specified exceptions and limitations, (i) it will take no action to cause any Receivable to be anything other than an account, general intangible, or chattel paper, (ii) except for the conveyances under the Purchase Agreement, it will not sell any Receivable or grant a lien (other than a Permitted Lien) on any Receivable, (iii) it will comply with and perform its obligations under any Charge Account Agreement to which it is a party and its credit and collection policies and that it will not change the terms of such agreements or policies except as provided in the Purchase Agreement, (iv) in the event it receives a collection on any Receivable, it will pay such collection to the Servicer as soon as practicable, (v) it will not convey or transfer any Accounts, except for transfers to FDS and as otherwise provided in the Purchase Agreement, (vi) it will comply with all laws, rules, and regulations applicable to the Receivables, (vii) it will maintain in all material respects its corporate existence and corporate franchises, (viii) it will permit the Transferor or its agents to examine the records relating to the Receivables, (ix) it will maintain and implement any administrative or operating procedure reasonably necessary for the collection of Receivables, (x) if the Transferor purchases a Receivable that does not satisfy the eligibility requirements set forth in the Purchase Agreement, such Originator will give prompt notice thereof to the Transferor, and will furnish to the Transferor such information, documents, records, or reports as the Transferor may reasonably request, (xi) it will take all actions reasonably necessary to maintain its rights under all Charge Account Agreements to which it is a party, (xii) it will record each sale of a Receivable as a sale on its books and records, reflect each sale in its financial statements and tax returns as a sale, and recognize gain or loss on such sale, (xiii) it will maintain the Transferor's valid and properly perfected title to each Receivable and will execute and deliver such other documents or take all such further action to protect the Transferor's rights in the Receivables and enable the Transferor to exercise such rights, including without limitation, by filing UCC financing statements in each relevant jurisdiction, (xiv) it will cause any Receivable that constitutes chattel paper to bear a legend stating that such Receivable has been conveyed to the Trust, and (xv) it will not effect any change in the nature of its business that could reasonably be expected to have a material adverse effect on the value or collectibility of the Receivables. PURCHASE TERMINATION DATE If any of the Originators becomes insolvent, the Transferor's obligations under the Purchase Agreement to such Originator will automatically be terminated. In addition, if a Pay Out Event occurs as to all Series of certificates, the Transferor's obligations under the Purchase Agreement as to all of the Originators will automatically be terminated. The date of any such termination will be the "Purchase Termination Date" as to each Originator affected thereby. CERTAIN LEGAL ASPECTS OF THE RECEIVABLES TRANSFER OF RECEIVABLES The Purchase Agreement provides that the Originators transfer all of their respective right, title, and interest in and to the Receivables owned by each of them from time to time to the Transferor. However, a court could treat such transactions as an assignment of collateral as security for the benefit of the Transferor. Accordingly, each of the Originators has granted a security interest in the Receivables to the Transferor pursuant to the Purchase Agreement, and has taken certain actions required to perfect the Transferor's security interest in the Receivables. In addition, each of the Originators has warranted that if the transfer to the Transferor is deemed to be a grant of a security interest in the Receivables, the Transferor will have a perfected security interest therein, subject only to Permitted Liens. The Transferor has represented and warranted in the Pooling and Servicing Agreement that the transfer of Receivables by it to the Trust constitutes either a valid transfer and assignment to the Trust of all right, title, and interest of the Transferor in and to the Receivables, except for the interest of the Transferor as holder of the Exchangeable Transferor Certificate and any investor certificate of any Series then held by it, or the grant to the Trust of a security interest in the Receivables. The Transferor has taken certain actions required to perfect the Trust's security interest in the Receivables, and has warranted that if the transfer to the Trust is deemed to be a grant to the Trust of a security interest in the Receivables, the Trustee will have a perfected security interest therein, subject only to Permitted Liens. For a discussion of the Trust's rights arising from a breach of these warranties, see "Description of the Offered Certificates--Representations and Warranties." Each of the Originators and the Transferor has covenanted that it will take no action to cause any Receivable to be anything other than an "account," "general intangible," or "chattel paper" for purposes of the UCC. Both the transfer and assignment of accounts, general intangibles, and chattel paper and the transfer of accounts, general intangibles, and chattel paper as security for an obligation are treated under Article 9 of the UCC as creating a security interest therein and are subject to its provisions, and the filing of an appropriate financing statement will perfect a security interest therein. In order to protect the interests of the Trust in the Receivables, financing statements covering the Receivables have been and will be filed with the appropriate governmental authorities and the charge slips pursuant to which Receivables that constitute "chattel paper" for purposes of the UCC were generated will generally be marked with legends stating that such Receivables have been conveyed to the Trust. There are certain limited circumstances under the UCC in which a prior or subsequent transferee of Receivables coming into existence after the Initial Closing Date could have an interest in such Receivables with priority over the respective interests of the Transferor and the Trust therein. However, each of the Originators and the Transferor has represented and warranted that it transferred the Receivables free and clear of the lien of any third party. In addition, each of the Originators and the Transferor has covenanted that it will not sell, pledge, assign, transfer, or grant any lien on any Receivable (or any interest therein) other than to the Transferor and the Trust, respectively. A tax or other government lien on property of an Originator or the Transferor arising prior to the time a Receivable comes into existence may also have priority over the respective interests of the Transferor and the Trust in such Receivable. See "Risk Factors--Transfer of the Receivables; Insolvency Risk Considerations." CERTAIN MATTERS RELATING TO BANKRUPTCY OR INSOLVENCY The ability of the Trustee timely and fully to make the payments to which Certificateholders are entitled could potentially be affected by the bankruptcy or insolvency of one or more of the Originators or the Transferor. Under the United States Bankruptcy Code and similar state law applicable to the Originators other than FDS, and, in the case of FDS, under FIRREA (which became effective August 9, 1989 and sets forth certain powers that the FDIC could exercise if it were appointed as receiver for FDS), to the extent that the Originators or the Transferor have granted security interests in the Receivables to the Transferor or the Trust, respectively, and such security interests were validly perfected before any insolvency of the Originators or the Transferor and were not granted or taken in contemplation of insolvency or with the intent to hinder, delay, or defraud the Originators or the Transferor or their respective creditors, such security interests should not be subject to avoidance in the event of bankruptcy, insolvency, or receivership of the Originators of the Transferor, and payments to the Trust with respect to the Receivables should not be subject to recovery by a bankruptcy trustee, conservator, or receiver for the Originators or the Transferor. If, however, such a bankruptcy trustee, conservator, or receiver were to assert a contrary position (or, in the case of a conservator or receiver for FDS, were to require the Trustee to establish its right to those payments by submitting to and completing the administrative claims procedure established under FIRREA, or were to request a stay of proceedings with respect to FDS as provided under FIRREA), delays in payments on the Offered Certificates and possible reductions in the amount of those payments could occur. In addition, certain administrative expenses may also have priority over the Transferor's or the Trust's interest in such Receivables. In Octagon Gas System, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.), cert. denied, 114 S. Ct. 554 (1993), the court determined that the interest acquired by a purchaser of "accounts," which as defined under the UCC would likely include the Receivables, is treated as a security interest under the UCC. As described above, the treatment of the transfers of the Receivables to the Transferor or the Trust as grants of security interests could have consequences to the Offered Certificate Owners that would be less advantageous than the treatment of such transfers as outright sales. The circumstances under which the Octagon ruling would apply are not fully known and the extent to which the Octagon decision will be followed in other courts or outside of the Tenth Circuit is not certain. Although most of the Originators' and the Transferor's respective business activities are conducted outside the geographic area subject to the jurisdiction of the Tenth Circuit, a portion of such business activities are conducted within such geographic area. The Transferor has not engaged in any activities except purchasing accounts receivable from the Originators, forming trusts, transferring such accounts receivable to such trusts and engaging in activities incident to, or necessary or convenient to accomplish, the foregoing. The Transferor has no intention of filing a voluntary petition under the United States Bankruptcy Code or any similar applicable state law so long as the Transferor is solvent and does not reasonably foresee becoming insolvent. However, if one or more of the Originators were to become subject to bankruptcy, insolvency, or receivership or similar proceedings and a bankruptcy trustee, conservator, receiver, or other party in interest were to request a court to order that the Transferor should be substantively consolidated with such Originator or Originators, delays in payments on the Offered Certificates and, if such request were granted, possible reductions in the amount of those payments, could occur. The Pooling and Servicing Agreement provides that, upon the bankruptcy or appointment of a receiver for the Transferor, the Transferor will promptly give notice thereof to the Trustee, and a Pay Out Event with respect to all Series will occur. Under the Pooling and Servicing Agreement, no new Principal Receivables will be transferred to the Trust and, unless otherwise instructed within a specified period by the certificateholders representing undivided interests aggregating more than 50% of the aggregate invested amount of each Series (and, with respect to Series 1997-1, the holders of more than 50% of each of the Class A, Class B, and Class C Certificates), the Trustee will proceed to sell, dispose of, or otherwise liquidate the Receivables in a commercially reasonable manner and on commercially reasonable terms. The proceeds from the sale of the Receivables would then be treated by the Trustee as collections on the Receivables. If the only Pay Out Event to occur is either the insolvency of the Transferor or the appointment of a bankruptcy trustee or receiver for the Transferor, the receiver or bankruptcy trustee for the Transferor may have the power to continue to require the Transferor to transfer new Principal Receivables to the Trust and to prevent the early sale, liquidation, or disposition of the Receivables and the commencement of the Early Amortization Period. See "Description of the Offered Certificates--Pay Out Events." The occurrence of certain events of insolvency, conservatorship, or receivership with respect to the Servicer would result in a Servicer Default. If a conservator or receiver were appointed for the Servicer, and no Servicer Default other than such insolvency, conservatorship, or receivership of the Servicer exists, the conservator or receiver may have the power to prevent either the Trustee or the majority of the Certificateholders from effecting a transfer of servicing to a successor Servicer. CONSUMER AND DEBTOR PROTECTION LAWS The relationship of the cardholder and credit card issuer is extensively regulated by federal and state consumer protection laws. With respect to credit cards issued by the Originators, the most significant of these laws include the federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, and Fair Debt Collection Practices Act, as well as comparable statutes in the states in which cardholders reside. These statutes impose disclosure requirements when a credit card account is advertised, when it is opened, at the end of monthly billing cycles, upon account renewal for accounts on which annual fees are assessed, and at year end. In addition, these statutes limit cardholder liability for unauthorized use, prohibit certain discriminatory practices in extending credit, impose certain limitations on the type of account-related charges that may be assessed, and regulate collection practices. Federal legislation requires credit card issuers to disclose to consumers the interest rates, annual cardholder fees, grace periods, and balance calculation methods associated with their credit card accounts. Cardholders are entitled under current law to have payments and credits applied to the credit card account promptly, to receive prescribed notices, and to have billing errors resolved promptly. Congress and the states may from time to time enact new laws and amendments to existing laws to further regulate the extension and collection of consumer credit loans or to reduce the finance charges or other charges or fees that may be assessed in connection therewith. The Trust may be liable for certain violations of consumer protection laws that apply to the Receivables, either as assignee of the Transferor with respect to obligations arising before transfer of the Receivables to the Trust or as a party directly responsible for obligations arising after such transfer. In addition, a cardholder may be entitled to assert such violations by way of set-off against his obligation to pay the amount of Receivables owing. The Transferor covenants in the Pooling and Servicing Agreement to accept the transfer of all Receivables in an Account if any Receivable in such Account has not been created in compliance with the requirements of such laws. The Transferor has also agreed in the Pooling and Servicing Agreement to indemnify the Trust for, among other things, any liability arising from such violations. See "Description of the Offered Certificates--Representations and Warranties." Application of federal and state bankruptcy and debtor relief laws to the obligations represented by the Receivables could adversely affect the interests of the Certificateholders if such laws result in any Receivables being written off as uncollectible "Description of the Offered Certificates--Defaulted Receivables; Rebates and Fraudulent Charges." CERTAIN FEDERAL INCOME TAX CONSEQUENCES General. Set forth below is a discussion of the material anticipated federal income tax consequences to Offered Certificate Owners who are original owners of the Offered Certificates and hold the Offered Certificates as capital assets under the Code. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to Offered Certificate Owners in light of their particular circumstances, nor to certain types of Offered Certificate Owners subject to special treatment under the federal income tax laws (for example, banks and life insurance companies). This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and ruling authorities, all of which are subject to change, which change may be retroactive. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN THE OFFERED CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY, OR OTHER TAXING JURISDICTION. Characterization of the Certificates as Indebtedness. Pursuant to the Pooling and Servicing Agreement, the Transferor, the Trustee, the Offered Certificateholder, and each Offered Certificate Owner express their intent that, for tax purposes, the Offered Certificates will be indebtedness of the Transferor secured by the Receivables. The Transferor, the Offered Certificateholder, and each Offered Certificate Owner, by acquiring an interest in a Certificate, agree to treat the Offered Certificates as indebtedness of the Transferor for federal, state, and local tax purposes. Based upon the application of existing law to the facts of the transaction as set forth in the Pooling and Servicing Agreement and other relevant documents, Tax Counsel has advised the Transferor that, in the opinion of Tax Counsel, the Offered Certificates will be treated for federal income tax purposes as indebtedness of the Transferor. However, opinions of counsel are not binding on the IRS, and there can be no assurance that the IRS could not successfully challenge this conclusion. In general, the characterization of a transaction for federal income tax purposes is based upon economic substance, and the substance of the transaction in which the Offered Certificates are issued is consistent with the treatment of the Offered Certificates as debt of the Transferor for federal income tax purposes. Although there are certain judicial precedents holding that under the appropriate circumstances a taxpayer should be required to treat a transaction in accordance with the form chosen by the taxpayer, regardless of the transaction's substance, the operative provisions of the transaction and the Pooling and Servicing Agreement are not inconsistent with treating the Offered Certificates as debt and accordingly, these authorities would not be applied to require characterization of the transaction as a sale of the Receivables to the Trust or the Offered Certificate Owners. Based on the foregoing, Tax Counsel has concluded that the characterization of the Offered Certificates, for federal income tax purposes, would be governed by the substance of the transaction, which is the issuance of debt. Other Characterizations of Offered Certificates. If the Pooling and Servicing Agreement does not create a debt obligation for federal income tax purposes, the arrangement among the Transferor, the Offered Certificateholder, and the Offered Certificate Owners could be classified, for federal income tax purposes, alternatively as a partnership, a publicly traded partnership taxable as a corporation, or as an association taxable as a corporation. Because, in the opinion of Tax Counsel, the Offered Certificates will be characterized as debt for federal income tax purposes, no attempt will be made to comply with any reporting or tax payment requirements which might be applicable if the arrangement between the Transferor and the Offered Certificate Owners were treated as creating a partnership or a corporation. No IRS ruling on the federal income tax characterization of the Offered Certificates or the arrangement among the Transferor, the Offered Certificateholder, and Offered Certificate Owners will be sought. If the arrangement created by the Pooling and Servicing Agreement were characterized as a partnership among the Transferor, the Offered Certificateholder, and the Offered Certificate Owners, such a partnership would not be subject to federal income tax, but each item of income, gain, loss, deduction, and credit generated through the ownership of the Receivables by such a partnership would generally be passed through to the Transferor and the Offered Certificate Owners as partners in such a partnership according to their respective interests therein. The amount, timing, and character of income reportable by the Offered Certificate Owners as partners could differ materially from the income reportable by the Offered Certificate Owners if the Offered Certificates are characterized as debt. In addition, if the Pooling and Servicing Agreement were to create a partnership, the partnership might be required to withhold federal income tax at a rate of up to 39.6% on the income allocable to Foreign Investors. See "--Federal Income Tax Consequences to Foreign Investors." If the arrangement were treated as a publicly traded partnership taxable as an association or as an association taxable as a corporation, it would be subject to federal income tax at corporate tax rates on its taxable income generated by ownership of the Receivables. Such a tax could result in reduced distributions to Offered Certificate Owners. Distributions to the Transferor and, unless the Offered Certificates were treated as debt of such corporation, to the Offered Certificate Owners, would not be deductible in computing the taxable income of the corporation. In addition, if the Offered Certificates were not treated as debt of the corporation, all or a portion of any such distributions would, to the extent of the current and accumulated earnings and profits of such corporation, be treated as dividend income to the Offered Certificate Owners, and in the case of Offered Certificate Owners that are non-United States persons, would be subject to withholding tax. In addition, if the arrangement were treated as a publicly traded partnership, any income allocated to an Offered Certificate Owner that is a tax-exempt entity will constitute "unrelated business taxable income," at least where the publicly traded partnership is taxed as a partnership. TAXATION OF INTEREST AND DISCOUNT INCOME OF OFFERED CERTIFICATE OWNERS Assuming that the Offered Certificate Owners are owners of debt obligations for federal income tax purposes, interest generally will be taxable as ordinary income for federal income tax purposes when received by Offered Certificate Owners utilizing the cash method of accounting and when accrued by Offered Certificate Owners utilizing the accrual method of accounting. Interest received on the Offered Certificates may also constitute "investment income" for purposes of certain limitations of the Code concerning the deductibility of investment interest expense. While it is not anticipated that the Offered Certificates will be issued at a greater than de minimis discount, under current treasury regulations (the "Regulations"), it is possible that the Offered Certificates could nevertheless be deemed to have been issued with OID. This could be the case, for example, if interest payments were not deemed to be "qualified stated interest payments" because, for example, the initial interest period was longer than subsequent interest periods and a proper adjustment was not made to the value of the rate on which the initial interest payment was based. If the Regulations were to apply, in general, all of the taxable income to be recognized with respect to the Offered Certificates would be includible in income of Offered Certificate Owners as OID, but would not be includible again when the interest is actually received. If the Offered Certificates are in fact issued at a greater than de minimis discount or are treated as having been issued with OID under the Regulations, the following general rules will apply. The excess of the "stated redemption price at maturity" of the Offered Certificates (generally equal to their principal amount as of the date of original issuance plus all interest other than "qualified stated interest payments" payable prior to or at maturity) over their original issue price (in this case, the initial offering price at which a substantial amount of the Offered Certificates are sold to the public) will constitute OID. An Offered Certificate Owner must include OID in income over the term of the Offered Certificate under a constant yield method. In general, OID must be included in income in advance of the receipt of cash representing that income. In the case of debt instruments as to which the repayment of principal may be accelerated as a result of the prepayment of other obligations securing the debt instrument, the periodic accrual of OID is determined by taking into account both the prepayment assumptions used in pricing the debt instrument and the prepayment experience. If this provision applies to the Offered Certificates, the amount of OID which will accrue in any given "accrual period" may either increase or decrease depending upon the accrual prepayment rate. Offered Certificate Owners should be aware that the resale of a Certificate may be affected by the market discount rules of the Code. These rules generally provide that, subject to a de minimis exception, if a holder of an Offered Certificate acquires it at market discount (i.e., at a price below its stated redemption price at maturity or its "revised issue price" if it was issued with OID) and thereafter recognizes gain upon a disposition of the Offered Certificate, the lesser of such gain or the portion of the market discount that accrued while the Offered Certificate was held by such holder will be treated as ordinary interest income realized at the time of the disposition. Each Offered Certificate Owner should consult his own tax advisor regarding the impact of the original issue discount rules. SALES OF CERTIFICATES In general, an Offered Certificate Owner will recognize gain or loss upon the sale, exchange, redemption, or other taxable disposition of an Offered Certificate measured by the difference between (i) the amount of cash and the fair market value of any property received (other than amounts attributable to, and taxable as, accrued stated interest) and (ii) the owner's tax basis in the Offered Certificate (as increased by any OID or market discount previously included in income by the holder and decreased by any deductions previously allowed for amortizable bond premium and by any payments reflecting principal or OID received with respect to such Offered Certificate). Subject to the market discount rules discussed above and to the one-year holding requirement for long-term capital gain treatment, any such gain or loss generally will receive long-term capital gain treatment. The federal income tax rates applicable to capital gains for taxpayers other than individuals, estates, and trusts are currently the same as those applicable to ordinary income; however, the maximum ordinary income rate for individuals, estates, and trusts generally is 39.6%, whereas the maximum long-term capital gains rate for such taxpayers is 28%. Moreover, capital losses generally may be used only to offset capital gains. FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN INVESTORS In general, interest (including OID) paid on an Offered Certificate to a nonresident alien individual, foreign corporation or other non-United States person (other than a 10% shareholder of the Transferor) is not subject to federal income tax, provided that such interest is not effectively connected with a trade or business of the recipient in the United States and the Offered Certificateholder provides the required foreign person information certification. If the interests of the Offered Certificateholders were deemed to be partnership interests, such recharacterization could cause a foreign person to be treated as engaged in a trade or business in the United States. In such event the Offered Certificateholder would be required to file a federal income tax return and, in general, would be subject to federal income tax on its net income from the partnership. Furthermore, the partnership would be required, on a quarterly basis, to pay withholding tax equal to the sum, for each foreign partner, of such foreign partner's distributive share of "effectively connected" income of the partnership multiplied by the highest rate of tax applicable to that foreign partner. The tax withheld from each foreign partner would be credited against such foreign partner's U.S. income tax liability. Gain on any sale or other disposition of a partnership interest by a foreign partner would also be subject to U.S. income tax. If the Trust were taxable as a corporation, distributions to foreign persons, to the extent treated as dividends, would generally be subject to withholding at the rate of 30%, unless such rate were reduced by an applicable income tax treaty. BACKUP WITHHOLDING An Offered Certificate Owner may be subject to backup withholding at the rate of 31% with respect to interest paid on the Offered Certificates if the Offered Certificate Owner, upon issuance, fails to supply the Trustee or his broker with his taxpayer identification number, fails to report interest, dividends, or other "reportable payments" (as defined in the Code) properly, or under certain circumstances, fails to provide the Trustee or his broker with a certified statement, under penalty of perjury, that he is not subject to backup withholding. Information returns will be sent annually to the IRS and to each Offered Certificateholder setting forth the amount of interest paid on Offered Certificates and the amount of tax withheld thereon. STATE, LOCAL, AND FOREIGN TAXATION The discussion above does not address the tax treatment of the Trust, the Offered Certificates, or the Offered Certificate Owners under state and local tax laws or foreign tax laws. Issues as to the appropriate characterization of the arrangement created by the Pooling and Servicing Agreement may arise under the laws of various states and other jurisdictions. Such issues and the consequences of such characterization on the tax treatment of the Trust, the Offered Certificates, or the Offered Certificate Owners may be similar or dissimilar to those described above with respect to potential federal income tax consequences. According, prospective investors are urged to consult their own tax advisors regarding the state and local tax treatment of the Trust and the Offered Certificates, and the consequences of purchase, ownership, or disposition of the Offered Certificates under any state or local tax law or any foreign tax law, if applicable. EMPLOYEE BENEFIT PLAN CONSIDERATIONS Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit sharing, or other employee benefit plan that is subject to such provisions from engaging in certain transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to the plan. ERISA also imposes certain duties on persons who are fiduciaries of plans subject to ERISA and prohibits certain transactions between a plan and parties in interest with respect to such plans. Under ERISA, any person who exercises any authority or control with respect to the management or disposition of the assets of a plan is considered to be a fiduciary with respect to such plan (subject to certain exceptions not here relevant), and any person who provides services to a plan (as well as any corporation 50% or more of which is owned by such a service provider) is a "party in interest" under ERISA and a "disqualified person" under the Code with respect to the plan. A violation of these "prohibited transaction" rules may generate excise tax and other liabilities under ERISA and the Code for such persons. Plan fiduciaries should determine whether the acquisition and holding of the Class A Certificates and the operations of the Trust would result in direct or indirect prohibited transactions under ERISA and the Code. The operations of the Trust could result in prohibited transactions if Benefit Plans that purchase the Class A Certificates are deemed to own an interest in the underlying assets of the Trust. There may also be an improper delegation of the responsibility to manage Benefit Plan assets if Benefit Plans that purchase the Class A Certificates are deemed to own an interest in the underlying assets of the Trust. Pursuant to a final regulation (the "Final Regulation") issued by the DOL concerning the definition of what constitutes the "plan assets" of an employee benefit plan subject to Title I of ERISA or Section 4975 of the Code, or an individual retirement account ("IRA") (collectively referred to as "Benefit Plans"), the assets and properties of certain entities in which a Benefit Plan makes an equity investment could be deemed to be assets of the Benefit Plan in certain circumstances. Accordingly, if Benefit Plans purchase Class A Certificates, the Trust could be deemed to hold plan assets unless one of the exceptions under the Final Regulation is applicable to the Trust. The Final Regulation applies only to the purchase by a Benefit Plan of an "equity interest" in an entity. The Final Regulation defines "equity interest" as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and has no substantial equity features. The Final Regulation further provides that an undivided ownership interest in property or a beneficial interest in a trust is an equity interest. Assuming that interests in Class A Certificates are equity interests, the Final Regulation contains two exceptions under which the issuer of an equity interest to Benefit Plans would not be deemed to hold plan assets. First, the Final Regulation contains an exception that provides that if a Benefit Plan acquires a "publicly-offered security," the issuer of the security is not deemed to hold plan assets. A publicly-offered security is a security that is (i) freely transferable, (ii) part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another, and (iii) either is (A) part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of an offering of securities to the public pursuant to an effective registration under the Securities Act and the class of securities of which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the Commission) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. Second, the Final Regulation provides that if at all times less than 25% of the value of all classes of equity interests in an entity are held by benefit plan investors (which is defined as including plans subject to ERISA, government plans, and IRAs), the investing plan's assets will not be deemed to include any of the underlying assets of the entity. It is anticipated that interests in the Class A Certificates will meet the criteria of publicly-offered securities as set forth above. The Class A Underwriters expect, although no assurance can be given, that interests in the Class A Certificates of each Series will be held by at least 100 independent investors at the conclusion of the offering; there are no restrictions imposed on the transfer of interests in the Class A Certificates; and interests in the Class A Certificates will be sold as part of an offering pursuant to an effective registration statement under the Securities Act and then will be timely registered under the Exchange Act. If the Trust's assets are deemed under the Final Regulation to include assets of Benefit Plans that are Class A Certificateholders, transactions involving the Trust and "parties in interest" or "disqualified persons" with respect to such plans might be prohibited under Section 406 of ERISA and Section 4975 of the Code unless an exemption is applicable. In addition, the Servicer, the Transferor, and any Underwriter may be considered to be a party in interest, disqualified person, or fiduciary with respect to an investing Benefit Plan. Accordingly, an investment by a Benefit Plan in Class A Certificates may be a prohibited transaction under ERISA and the Code unless such investment is subject to a statutory or administrative exemption. Further, annual reporting obligations under ERISA with respect to the Trust and assets thereof, including a required accountant's report, would apply. Thus, for example, if a participant in any Benefit Plan is a cardholder under one of the Accounts, under DOL interpretations the purchase of interests in Class A Certificates by such plan could constitute a prohibited transaction. There are at least four class exemptions issued by the DOL that might apply, depending in part on who decided to acquire the Class A Certificates for the Benefit Plan: DOL Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers), PTE 91-38 (Class Exemption for Certain Transactions Involving Bank Collective Investment Funds), PTE 90-1 (Class Exemption for Certain Transactions Involving Insurance Company Pooled Separate Accounts), and PTE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company General Accounts). There can be no assurance that these exemptions, even if all of the conditions specified therein are satisfied, or any other exemption will apply to all transactions involving the Trust's assets. In light of the foregoing, fiduciaries of a Benefit Plan considering the purchase of interests in Class A Certificates should consult their own counsel as to whether the assets of the Trust which are represented by such interests would be considered plan assets, and whether, under the general fiduciary standards of investment prudence and diversification, an investment in Class A Certificates is appropriate for the Benefit Plan taking into account the overall investment policy of the Benefit Plan and the composition of the Benefit Plan's investment portfolio. In addition, fiduciaries should consider the consequences that would result if the Trust's assets were considered plan assets, the applicability of exemptive relief from the prohibited transaction rules, and whether all conditions for such exemptive relief would be satisfied. In particular, insurance companies considering the purchase of Class A Certificates should consult their own benefits or other appropriate counsel with respect to the United States Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust & Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock"), and the applicability of PTE 95-60. In John Hancock, the Supreme Court held that assets held in an insurance company general account may be deemed to be "plan assets" under certain circumstances; however, PTE 95-60 may exempt some or all of the transactions that could occur as the result of the acquisition and holding of the Class A Certificates by an insurance company general account from the penalties normally associated with prohibited transactions. Accordingly, investors should analyze whether John Hancock and PTE 95-60 or any other exemption may have an impact with respect to an investment in Class A Certificates. The Class B Certificates may not be acquired directly or indirectly by any employee benefit plan subject to ERISA, by any IRA or by certain other employee benefit accounts. The Pooling and Servicing Agreement and each Class B Certificate will provide that by accepting and holding a Class B Certificate, each Class B Certificateholder will be deemed to have represented and warranted that it is not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement (the "Underwriting Agreement") between the Transferor and the Underwriters named below (the "Underwriters"), the Transferor has agreed to sell to the Underwriters of the Class A Certificates (the "Class A Underwriters") and the Underwriter of the Class B Certificates (the "Class B Underwriter"), and each of the Underwriters has severally agreed to purchase, the principal amount of the Class A Certificates and the Class B Certificates, as applicable, set forth opposite its name: PRINCIPAL AMOUNT OF CLASS A UNDERWRITERS CLASS A CERTIFICATES - -------------------- -------------------- Credit Suisse First Boston Corporation............ $ [ ]........................ _____________ Total....................................... $ ============= PRINCIPAL AMOUNT OF CLASS B UNDERWRITERS CLASS B CERTIFICATES - -------------------- -------------------- Credit Suisse First Boston Corporation........... $ In the Underwriting Agreement, the Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the Certificates offered hereby if any of the Certificates are purchased. The Class A Underwriters propose initially to offer the Class A Certificates to the public at the price set forth on the cover page hereof and to certain dealers at such price less concessions not in excess of [ ]% of the principal amount of the Class A Certificates. The Class A Underwriters may allow, and such dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class A Certificates to certain brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Class A Underwriters. The Class B Underwriter proposes initially to offer the Class B Certificates to the public at the price set forth on the cover page hereof and to certain dealers at such price less concessions not in excess of [ ]% of the principal amount of the Class B Certificates. The Class B Underwriter may allow, and such dealers may reallow, concessions not in excess of [ ]% of the principal amount of the Class B Certificates to certain brokers and dealers. After the initial public offering, the public offering price and other selling terms may be changed by the Class B Underwriter. Underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Overallotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the securities to be higher than it would otherwise be in the absence of such transactions. The Transferor will indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or contribute to payments the Underwriters may be required to make in respect thereof. LEGAL MATTERS Certain legal matters relating to the issuance of the Offered Certificates will be passed upon for the Transferor by Jones, Day, Reavis & Pogue, New York, New York. Certain legal matters relating to the issuance of the Offered Certificates will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. GLOSSARY OF TERMS The following terms, which are used in this Prospectus, have the meanings indicated: "A&S" is defined at page 34 in "The Accounts." "Accounts" means all of the consumer revolving credit card accounts owned by the Originators on the Cut-Off Date, each Automatic Additional Account, and each Supplemental Account. "Accumulation Period" means the period scheduled to begin with the [ ] Monthly Period, but which may be postponed in the manner described in "Description of the Offered Certificates--Postponement of Accumulation Period," and ending on the earliest of (1) the day immediately preceding the first day of the Early Amortization Period and (2) the date of the termination of the Trust. "Accumulation Period Length" is defined at page 46 in "Description of the Offered Certificates--Postponement of Accumulation Period." "Accumulation Shortfall" initially means zero and with respect to any Distribution Date thereafter shall mean the excess, if any, of the Controlled Deposit Amount for such Distribution Date over the Net Principal Collections received during the related Monthly Period, together with the aggregate amount of Shared Principal Collections received during the related Monthly Period and allocable to the Class A Certificates, each to the extent available to be distributed to Class A Certificateholders on such Distribution Date. "Active Account" is defined at page 51 in "Description of the Offered Certificates--Eligible Accounts; Eligible Receivables." "Adjustment Payment" is defined at page 62 in "Description of the Offered Certificates--Defaulted Receivables; Rebates and Fraudulent Charges." "Amortization Period" means any Early Amortization Period or Accumulation Period. "Amortization Period Commencement Date" means the earlier of the date on which the Accumulation Period begins and the date on which a Pay Out Event occurs or is deemed to have occurred. "Annual Portfolio Turnover Rate" means with respect to any business day during a Monthly Period, the aggregate amount of credit sales arising under Accounts during each of the twelve Monthly Periods ending on the last day of the second preceding Monthly Period divided by the average of the Outstanding Balances of Receivables as of the last day of each such Monthly Period. "Automatic Additional Account" is defined at page 51 in "Description of the Offered Certificates--Automatic Addition of Accounts." "Available Series Finance Charge Collections" is defined at page 58 in "Description of the Offered Certificates--Application of Collections--Payment of Fees, Interest, and Other Items." "Base Rate" means the sum of the weighted average of the Class A Certificate Rate, the Class B Certificate Rate, and the Class C Certificate Rate plus [ ]%. "Benefit Plans" is defined at page 75 in "Employee Benefit Plan Considerations." "Billed Finance Charges" means with respect to any Monthly Period, the amount of finance charges, late fees, and other fees and charges billed to Obligors on the Receivables. "Broadway" means Broadway Stores, Inc. "Broadway Accounts" is defined at page 24 in "Risk Factors--Effects of Certain Transactions." "Broadway Receivables, Inc." means Broadway Receivables, Inc., a wholly owned subsidiary of Broadway. "Carryover Discount Amount" means for any Series for any business day the excess, if any, of the sum of the product of the Discount Allocation Percentage and the Discount Amount and the Carryover Discount Amount for such Series for the preceding business day over the amount of Principal Collections added to Total Finance Charge Collections for such Series on such preceding business day. "Cash Equivalents" is defined at page 52 in "Description of the Offered Certificates--Trust Accounts." "Cede" means Cede & Co. "Cedel" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Cedel Participant" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Certificateholders" means the record holders of the Certificates. "Certificateholders' Interest" means the interest in the assets of the Trust allocated to the Certificateholders. "Certificates" means, collectively, the Class A Certificates, the Class B Certificates, and the Class C Certificates. "Charge Account Agreement" means the agreement, which may consist of more than one document, pursuant to which a person is obligated to pay for purchased merchandise or services under a credit plan that permits such person to purchase merchandise and services on credit, together with any finance charges and other charges related thereto, as such agreement may be amended, modified, or supplemented from time to time; provided, however, that only agreements between such person and (i) an Originator or (ii) a creditor approved by each of the Rating Agencies will be considered a Charge Account Agreement. "Class A Adjusted Invested Amount" is defined at page 55 in "Description of the Offered Certificates--Allocation Percentages." "Class A Certificate Owners" means the owners of beneficial interests in the Class A Certificates. "Class A Certificate Rate" means [ ]% per annum. "Class A Certificateholders" means the record holders of the Class A Certificates. "Class A Certificateholders' Interest" means the interest in the assets of the Trust allocated to the Class A Certificateholders. "Class A Certificates" means the [ ]% Class A Asset Backed Certificates, Series 1997-1. "Class A Expected Final Payment Date" means the [ ] Distribution Date. "Class A Floating Allocation Percentage" means, with respect to any business day, the percentage equivalent of the ratio that the amount of the Class A Adjusted Invested Amount as of the end of the preceding business day bears to the greater of (i) the total amount of Principal Receivables and amounts on deposit in the Excess Funding Account as of the end of the preceding business day and (ii) the sum of the numerators used to calculate the allocation percentages for all classes of all Series then outstanding. "Class A Initial Invested Amount" means an amount equal to the initial principal balance of the Class A Certificates less the Class A Percentage on the Closing Date of the initial deposit to the Pre-Funding Account, plus the Class A Percentage of any withdrawals from the Pre-Funding Account during the Funding Period in connection with increases in the aggregate amount of Principal Receivables in the Trust. "Class A Invested Amount" is defined at page 54 in "Description of the Offered Certificates--Allocation Percentages." "Class A Investor Charge-Off" is defined at page 62 in "Description of the Offered Certificates--Investor Charge-Offs." "Class A Monthly Interest" is defined at page 59 in "Description of the Offered Certificates--Application of Collections--Class A Monthly Interest." "Class A Monthly Principal" is defined at page 60 in "Description of the Offered Certificates--Application of Collections--Class A Monthly Principal." "Class A Percentage" means a fraction the numerator of which is the Class A Invested Amount and the denominator of which is the sum of the Class A Invested Amount and the Class B Invested Amount. "Class A Prepayment Amount" is defined at page 53 in "Description of the Offered Certificate--Pre-Funding Account." "Class A Prepayment Premium" is defined at page 53 in "Description of the Offered Certificate--Pre-Funding Account." "Class A Required Amount" means, on any Determination Date, the amount, if any, by which the aggregate amount to be paid on each business day during the related Monthly Period pursuant to clauses (i) and (v), and the Class A Required Amount Percentage of the amounts described in clause (B) of clauses (iii) and (iv), in each case as described in "Description of the Offered Certificates--Application of Collections--Payment of Fees, Interest, and Other Items," exceeds the portion of the Available Series Finance Charge Collections, Transferor Finance Charge Collections, and Excess Finance Charge Collections on each business day during the related Monthly Period applied to the payment of the amounts described in such clauses. "Class A Required Amount Percentage" means, with respect to any Distribution Date, the percentage equivalent of a fraction the numerator of which is the weighted average Class A Invested Amount for each day in the preceding Monthly Period and the denominator of which is the weighted average Invested Amount for each day in the preceding Monthly Period. "Class A Underwriters" is defined at page 76 in "Underwriting." "Class B Certificate Owners" means the owners of beneficial interests in the Class B Certificates. "Class B Certificate Rate" means [ ]% per annum. "Class B Certificateholders" means the record holders of the Class B Certificates. "Class B Certificateholders' Interest" means the interest in the assets of the Trust allocated to the Class B Certificateholders. "Class B Certificates" means the [ ]% Class B Asset Backed Certificates, Series 1997-1. "Class B Expected Final Payment Date" means the [ ] Distribution Date. "Class B Fixed/Floating Allocation Percentage" means the percentage equivalent of the ratio which the Class B Invested Amount at the end of the last day of the Revolving Period bears to the greater of (a) the sum of the aggregate amount of Principal Receivables and the amount on deposit in the Excess Funding Account as of the end of the preceding business day and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Receivables for all classes of all Series outstanding on such business day; provided, however, that, because the Certificates are subject to being paired with a future prefunded Series, if a Pay Out Event occurs with respect to the Certificates during the Accumulation Period, and if at such time the Certificates are paired with a prefunded Series, the numerator will be reset to be equal to the Class B Invested Amount at the end of the last day prior to the occurrence of such Pay Out Event. "Class B Floating Allocation Percentage" means, with respect to any business day, the percentage equivalent of the ratio that the amount of the Class B Invested Amount as of the end of the preceding business day bears to the greater of (i) the total amount of Principal Receivables and amounts on deposit in the Excess Funding Account as of the end of the preceding business day and (ii) the sum of the numerators used to calculate the allocation percentages for all classes of all Series then outstanding. "Class B Initial Invested Amount" means an amount equal to the initial principal balance of the Class B Certificates less the Class B Percentage on the Closing Date of the initial deposit to the Pre-Funding Account, plus the Class B Percentage of any withdrawals from the Pre-Funding Account during the Funding Period in connection with increases in the aggregate amount of Principal Receivables in the Trust. "Class B Invested Amount" is defined at page 55 in "Description of the Offered Certificates--Allocation Percentages." "Class B Investor Charge-Off" is defined at page 62 in "Description of the Offered Certificates--Investor Charge-Offs." "Class B Monthly Interest" is defined at page 59 in "Description of the Offered Certificates--Application of Collections--Class B Monthly Interest." "Class B Monthly Principal" is defined at page 61 in "Description of the Offered Certificates--Application of Collections--Payments of Principal." "Class B Percentage" means a fraction the numerator of which is the Class B Invested Amount and the denominator of which is the sum of the Class A Invested Amount and the Class B Invested Amount. "Class B Prepayment Amount" is defined at page 53 in "Description of the Offered Certificates--Pre-Funding Account." "Class B Prepayment Premium" is defined at page 53 in "Description of the Offered Certificates--Pre-Funding Account." "Class B Principal Payment Commencement Date" means the earlier of (a) (i) during the Accumulation Period, the Class B Expected Final Payment Date or (ii) during the Early Amortization Period, the Distribution Date on which the Class A Invested Amount is paid in full or, if there are no Principal Collections remaining after payments have been made to the Class A Certificates on such Distribution Date, the next succeeding Distribution Date and (b) the Distribution Date following a mandatory sale or repurchase of the Receivables pursuant to the Pooling and Servicing Agreement. "Class B Required Amount" means, on any Determination Date, the amount, if any, by which the aggregate amount to be paid on each business day during the related Monthly Period pursuant to clauses (ii), (vi), and (vii), and the Class B Required Amount Percentage of the amounts described in clause (B) of clauses (iii) and (iv), in each case as described in "Description of the Offered Certificates--Application of Collections--Payment of Fees, Interest, and Other Items," exceeds the portion of the Finance Charge Collections, Transferor Finance Charge Collections, Excess Finance Charge Collections, and the Transferor Subordination Amount on each business day during the related Monthly Period applied to the payment of the amounts described in such clauses. "Class B Required Amount Percentage" means, with respect to any Distribution Date, the percentage equivalent of a fraction the numerator of which is the weighted average Class B Invested Amount for each day in the preceding Monthly Period and the denominator of which is the weighted average Invested Amount for each day in the preceding Monthly Period. "Class B Underwriter" is defined at page 76 in "Underwriting." "Class C Certificateholders" means the record holders of the Class C Certificates. "Class C Certificateholders' Interest" means the interest in the assets of the Trust allocated to the Class C Certificateholders. "Class C Certificates" means the Class C Certificates, Series 1997-1. "Class C Fixed/Floating Allocation Percentage" means the percentage equivalent of the ratio which the Class C Invested Amount at the end of the last day of the Revolving Period bears to the greater of (a) the sum of the aggregate amount of Principal Receivables and the amount on deposit in the Excess Funding Account as of the end of the preceding business day and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Receivables for all classes of all Series outstanding on such business day; provided, however, that, because the Certificates are subject to being paired with a future prefunded Series, if a Pay Out Event occurs with respect to the Certificates during the Accumulation Period, and if at such time the Certificates are paired with a prefunded Series, the numerator will be reset to be equal to the Class C Invested Amount at the end of the last day prior to the occurrence of such Pay Out Event. "Class C Floating Allocation Percentage" means, with respect to any business day, the percentage equivalent of the ratio that the amount of the Class C Invested Amount as of the end of the preceding business day bears to the greater of (i) the total amount of Principal Receivables and amounts on deposit in the Excess Funding Account as of the end of the preceding business day and (ii) the sum of the numerators used to calculate the allocation percentages for all classes of all Series then outstanding. "Class C Invested Amount" is defined at page 55 in "Description of the Offered Certificates--Allocation Percentages." "Class C Investor Charge-Off" is defined at page 62 in "Description of the Offered Certificates--Investor Charge-Offs." "Class C Monthly Principal" is defined at page 61 in "Description of the Offered Certificates--Application of Collections--Payments of Principal." "Class C Principal Payment Commencement Date" means the earlier of (a) the Distribution Date on which the Class B Invested Amount is paid in full or, if there are no Principal Collections remaining after payments have been made to the Class B Certificates on such Distribution Date, the next succeeding Distribution Date and (b) the Distribution Date following a mandatory sale or repurchase of the Receivables pursuant to the Pooling and Servicing Agreement. "clearing agency" is defined at page 43 in "Description of the Offered Certificates--Book-Entry Registration." "clearing corporation" is defined at page 43 in "Description of the Offered Certificates--Book-Entry Registration." "Closing Date" means the date of the initial issuance of the Offered Certificates. "Code" means the Internal Revenue Code of 1986, as amended. "Collection Account" means an account established by the Servicer for the purpose of depositing all collections of Receivables. "Commission" means the Securities and Exchange Commission. "Controlled Amortization Amount" means $[ ]; provided, however, that if the commencement of the Accumulation Period is postponed in the manner described in "Description of the Offered Certificates--Postponement of Accumulation Period," (i) the Controlled Amortization Amount may be greater than the amount stated above and will be determined by the Servicer in accordance with the Pooling and Servicing Agreement and (ii) the sum of the Controlled Amortization Amounts for all Distribution Dates with respect to such modified Accumulation Period shall not be less than the Class A Invested Amount. "Controlled Deposit Amount" means, for any Distribution Date with respect to the Accumulation Period, the sum of the Controlled Amortization Amount and any Accumulation Shortfall for the preceding Distribution Date. "Controlled Distribution Amount" is defined at page 57 in "Description of the Offered Certificates--Application of Collections." "Cooperative" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Cut-Off Date" means for Receivables in Accounts owned by each Originator, the date on which the last cycle of such Originator was billed in the [ ] fiscal month. "Date of Determination" means with respect to the Yield Factor or the Finance Charge Receivable Factor, respectively, the date on which such factor is determined, which will in no event be later than the tenth business day after the end of the preceding Monthly Period. "Default Amount" means, on any business day, the product of (i) the aggregate Outstanding Balances of Receivables in Defaulted Accounts on such business day minus the Ineligible Default Amount and (ii) one minus the Finance Charge Receivable Factor. "Defaulted Account" means each account with respect to which, in accordance with the Servicer's customary and usual servicing procedures, the Servicer has charged off the Receivables in such account as uncollectible. "Definitive Certificates" is defined at page 45 in "Description of the Offered Certificates--Definitive Certificates." "Delinquency Percentage" means with respect to any business day the percentage equivalent of an amount determined on the preceding Date of Determination (or on such business day with respect to each Date of Determination) equal to (x) the product of (i) 0.5 and (ii) the aggregate Outstanding Balance of all Receivables Retail Age 2 or greater (30 or more days past due) divided by (y) the aggregate Outstanding Balance of all Receivables on such Date of Determination. "Depositaries" is defined at page 43 in "Description of the Offered Certificates--Book-Entry Registration." "Depository" is defined at page 42 in "Description of the Offered Certificates--General." "Determination Date" is defined at page 62 in "Description of the Offered Certificates--Investor Charge-Offs." "Discount Allocation Percentage" means with respect to any Series and any business day the percentage equivalent of a fraction the numerator of which is the Series Discount Factor for such Series and the denominator of which is the Discount Factor on such business day. "Discount Amount" means for any business day the Discount Factor multiplied by the Outstanding Balance of Receivables transferred to the Trust on such business day. "Discount Factor" means for any business day an amount equal to the sum of each Series Discount Factor for all Series outstanding. "Discount Trigger Event" means for any business day the Discount Factor for the second preceding Monthly Period being in excess of zero and the Rating Agencies having consented to the discounting of purchases of Receivables prior to such business day and having not revoked such consent. "Distribution Account" is defined at page 52 in "Description of the Offered Certificates--Trust Accounts." "Distribution Date" means ______________, and the 15th day of each month thereafter or, if such day is not a business day, on the next succeeding business day. "DOL" means the U.S. Department of Labor. "DTC" means The Depository Trust Company. "Early Amortization Period" means the period beginning on the earlier of (a) the day on which a Pay Out Event occurs or is deemed to have occurred and (b) the Class A Expected Final Payment Date if the Class A Invested Amount has not been paid in full on such date, or the Class B Expected Final Payment Date if the Class B Invested Amount has not been paid in full on such date, and ending on the earlier of (i) the date of the termination of the Trust and (ii) the Series 1997-1 Termination Date. "Eligible Account" is defined at page 50 in "Description of the Offered Certificates--Eligible Accounts; Eligible Receivables." "Eligible Receivable" is defined at page 51 in "Description of the Offered Certificates--Eligible Accounts; Eligible Receivables." "Enhancement" means, with respect to any Series, any letter of credit, cash collateral account, guaranty, guaranteed rate agreement, maturity guaranty facility, tax protection agreement, interest rate swap, or other contract or agreement for the benefit of certificateholders or any class of certificateholders of such Series. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Euroclear" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Euroclear Operator" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Euroclear Participants" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Euroclear System" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Excess Finance Charge Collections" means any finance charge collections allocable to any Series in excess of the amounts necessary to make required payments therefrom with respect to such Series. "Excess Funding Account" means the account referred to as such at page 53 in "Description of the Offered Certificates--Excess Funding Account." "Exchange" means any tender by the Transferor to the Trustee of the Exchangeable Transferor Certificate, pursuant to any one or more Supplements or, if provided in the relevant Supplement, certificates representing any Series and the Exchangeable Transferor Certificate, in exchange for one or more new Series and a reissued Exchangeable Transferor Certificate. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchangeable Transferor Certificate" means the certificate which evidences the Transferor Interest. "FACS" is defined at page 29 in "Federated's Credit Card Business--Federated's Credit Card Business." "FDIC" means Federal Deposit Insurance Corporation. "FDS" means FDS National Bank, a national banking association. "FDS/Broadway Accounts" is defined at page 24 in "Risk Factors--Effects of Certain Transactions." "Federated" means Federated Department Stores, Inc. "Federated Cards" is defined at page 29 in "Federated's Credit Card Business--Federated's Credit Card Business." "Federated Portfolio" is defined at page 31 in "Federated's Credit Card Business--Revenue and Yield Experience." "Federated Stores" is defined at page 30 in "Federated's Credit Card Business--New Account Underwriting." "Federated Subsidiaries" means Bloomingdale's, Inc.; Bloomingdale's By Mail, Ltd.; Broadway; Burdines, Inc.; FDS; Lazarus, Inc.; Lazarus PA, Inc.; Macy's East, Inc.; Rich's Department Stores, Inc.; Stern's Department Stores, Inc.; and The Bon, Inc. "Final Regulation" is defined at page 75 in "Employee Benefit Plan Considerations." "Finance Charge Collections" means with respect to any Series for any business day (a) the product of (i) collections received with respect to the Receivables minus Recoveries and (ii) the Yield Factor plus (b) any investment earnings on amounts on deposit in the Excess Funding Account plus (c) Recoveries. "Finance Charge Receivable Factor" means with respect to any Date of Determination, the aggregate amount of finance charges, late fees, and other fees and charges outstanding on the last day of the second preceding Monthly Period divided by the aggregate Outstanding Balances of the Eligible Receivables on the last day of such second preceding Monthly Period (determined on the basis of a calculation performed by the Servicer). "Finance Charge Receivables" means for any business day the product of the Finance Charge Receivable Factor determined on the preceding Date of Determination (or on such business day with respect to each Date of Determination) and the aggregate amount of Eligible Receivables as of such business day (determined on the basis of a calculation performed by the Servicer). "Fixed/Floating Allocation Percentage" is defined at page 54 in "Description of the Offered Certificates--Allocation Percentages." "FIRREA" is defined at page 23 in "Risk Factors--Transfer of the Receivables; Insolvency Risk Considerations." "Floating Allocation Percentage" means the sum of the Class A Floating Allocation Percentage, the Class B Floating Allocation Percentage, and the Class C Floating Allocation Percentage. "Full Invested Amount" is defined at page 9 in "Prospectus Summary--Allocation of Trust Assets". "Funding Period' is defined at page 14 in "Prospectus Summary--Funding Period." "Holders" is defined at page 45 in "Description of the Offered Certificates--Definitive Certificates." "Indirect Participants" is defined at page 43 in "Description of the Offered Certificates--Book-Entry Registration." "Ineligible Default Amount" means, as of any business day, the aggregate Outstanding Balance of Receivables in Accounts which are identified on the Servicer's computer records as not being Eligible Accounts and which are reported in the Servicer's computer records on such business day as becoming Defaulted Accounts. "Ineligible Receivable" is defined at page 69 in "Description of the Receivables Purchase Agreement--Representations and Warranties." "Initial Closing Date" means December 15, 1992. "Initial Cut-Off Date" means for Receivables in Accounts owned by each Originator, the date on which the last cycle of such Originator was billed in the September 1992 fiscal month. "In-Store Payments" means any payment made by an Obligor with respect to a Receivable by delivery of cash, check, money order, or any other form of payment to a cashier or other employee of any Originator or any merchant which sells merchandise or services on credit pursuant to a Charge Account Agreement. "Interest Accrual Period" means, with respect to any Distribution Date, the period from and including the preceding Distribution Date (or, with respect to the initial Interest Accrual Period, from and including the Closing Date) to and excluding such Distribution Date, which shall be deemed to be a 30-day period. "Interest Funding Account" means an account established by the Trustee for the benefit of Certificateholders. "Invested Amount" means the sum of (a) the Class A Adjusted Invested Amount, (b) the Class B Invested Amount, and (c) the Class C Invested Amount; provided, however, that for purposes of calculating the "Pool Factor" for Series 1997-1 the amount specified in clause (a) above shall be the Class A Invested Amount. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time. "Investor Default Amount" means, with respect to each business day, an amount equal to the product of the aggregate Default Amount for all Defaulted Accounts on such business day and the Floating Allocation Percentage applicable for such business day. "IRA" is defined at page 75 in "Employee Benefit Plan Considerations." "IRS" means the Internal Revenue Service. "John Hancock" is defined at page 75 in "Employee Benefit Plan Considerations." "Lock-Box Account" means an account in the name of the Trustee with a Lock-Box Bank. "Lock-Box Agreement" means each agreement between the respective Originator, the Trustee, and the respective Lock-Box Bank, pursuant to which such Lock-Box Bank receives collections from time to time as provided therein. "Lock-Box Bank" means any of the banks that holds one or more Lock-Box Accounts for receiving collections, pursuant to a Lock-Box Agreement. "Macy's" means R.H. Macy & Co., Inc. "Macy's Credit Card Program" is defined at page 29 in "Federated's Credit Card Business--Federated's Credit Card Business." "Macy's Program Owner" is defined at page 34 in "The Accounts." "Merger" means the acquisition by Federated of Macy's on December 19, 1994, in a reverse acquisition merger, with Macy's, as the surviving corporation in the merger, changing its name to "Federated Department Stores, Inc." "Merger Date" means December 19, 1994. "Minimum Aggregate Principal Receivables" means, as of any date of determination, an amount equal to the sum of (a) the initial invested amounts for all outstanding Series on such date (except any Series created pursuant to a Variable Funding Supplement or a Paired Series), (b) with respect to any Series created pursuant to a Variable Funding Supplement, during the revolving period for such Series, the invested amount on such date of determination or, during the amortization period for such Series, the invested amount of such Series on the last day of the revolving period for such Series, and (c) with respect to any Paired Series, the invested amount of such Series as of such date (after taking into account any payments, deposits or adjustments made on such date). "Minimum Transferor Interest" means the product of (i) the sum of (a) the aggregate Principal Receivables and (b) the amounts on deposit in the Excess Funding Account and (ii) the highest Minimum Transferor Percentage for any Series. "Minimum Transferor Percentage" means during each fiscal year, for the Series 1997-1 Certificates (i) [10.5]% for the period from the January Monthly Period to and including the October Monthly Period; (ii) [11.5]% for the November Monthly Period; and (iii) [13.5]% for the December Monthly Period; provided, however, that such percentage may be adjusted from time to time upon written notice from the Transferor to the Trustee if each Rating Agency initially contracted to rate the Class A Certificates, the Class B Certificates, and, if applicable, the Class C Certificates shall have been notified of such amendment and shall have provided notice to the Trustee or the Servicer that such action would not result in a reduction or withdrawal of its rating of the Class A Certificates, the Class B Certificates, or the Class C Certificates, and such action will not, in the opinion of counsel satisfactory to the Trustee, result in certain adverse tax consequences. "Monthly Period" means the period from and including the first day of each fiscal month of the Transferor to and including the last day of such fiscal month, except that the first Monthly Period with respect to the Certificates will begin on and include the Closing Date and will end on and include ______________. "Monthly Servicing Fee" is defined at page 64 in "Description of the Offered Certificates--Servicing Compensation and Payment of Expenses." "Moody's" means Moody's Investors Service, Inc. "Negative Carry Amount" is defined at page 55 in "Description of the Offered Certificates--Reallocation of Cash Flows." "Net Finance Charge Portfolio Yield" means, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is the amount of Finance Charge Collections for such Monthly Period, calculated on a cash basis after subtracting the Investor Default Amount for such Monthly Period, and the denominator of which is the average daily Invested Amount during the preceding Monthly Period. "Net Principal Collections" means for any Series on any business day, (i) the product, during the Revolving Period, of the Floating Allocation Percentage for such Series and, during the Accumulation Period or any Early Amortization Period, the Fixed/Floating Allocation Percentage for such Series and the amount of Principal Collections on such business day minus (ii) on or after the occurrence and during the continuance of a Discount Trigger Event, the lesser of (a) the sum of (x) the product of the Discount Allocation Percentage and the Discount Amount for such business day and (y) the Carryover Discount Amount for such business day and (b) the amount determined pursuant to clause (i). "Obligor" means a person or persons obligated to make payments with respect to a Receivable arising under an Account pursuant to a Charge Account Agreement. "Offered Certificate Owners" means the holders of beneficial interests in the Offered Certificates. "Offered Certificates" means the Class A Certificates and the Class B Certificates. "OID" means original issue discount. "Originators" means the Federated Subsidiaries and FDS, with Macy's East, Inc. being an Originator solely in its capacity as the successor to Federated's former Abraham & Straus, Inc. and Jordan Marsh Stores Corporation subsidiaries, which were merged with and into Macy's East, Inc. in fiscal 1995. "Outstanding Balance" means, with respect to a Receivable on any day, the aggregate amount owed by the Obligor thereunder on such day. "Paired Series" means each Series which has been paired with a prefunded Series, and such prefunded Series. "Participants" is defined at page 42 in "Description of the Offered Certificates--General." "Pay Out Event" is defined at page 63 in "Description of the Offered Certificates--Pay Out Events." "Paying Agent" is defined at page 53 in "Description of the Offered Certificates--Trust Accounts." "Permitted Lien" means with respect to the Receivables: (i) liens in favor of the Transferor created pursuant to the Purchase Agreement assigned to the Trustee pursuant to the Pooling and Servicing Agreement; (ii) liens in favor of the Trustee pursuant to the Pooling and Servicing Agreement; and (iii) liens which secure the payment of taxes, assessments, and governmental charges or levies, if such taxes are either (a) not delinquent or (b) being contested in good faith by appropriate legal or administrative proceedings and as to which adequate reserves in accordance with generally accepted accounting principles shall have been established. "Pooling and Servicing Agreement" means the Amended and Restated Pooling and Servicing Agreement, dated as of December 15, 1992, among the Transferor, Federated, and the Trustee, as supplemented or amended in accordance with its terms. Unless the context requires otherwise, the term "Pooling and Servicing Agreement" refers to the Pooling and Servicing Agreement as supplemented by the Series 1997-1 Supplement. "Portfolio Yield" means, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is the amount equal to the sum of (i) the aggregate Total Finance Charge Collections for such Monthly Period, calculated on a cash basis plus (ii)(a) the interest and other investment income earned from amounts on deposit in the Principal Funding Account and the Pre-Funding Account which shall be available on the related Distribution Date and (b) Transferor Finance Charge Collections allocated to Certificateholders with respect to each Business Day in such Monthly Period minus the aggregate Investor Default Amount for such Monthly Period, and the denominator of which is the sum of (i) the average daily Invested Amount during such Monthly Period and (ii) the average daily amount on deposit the Principal Funding Account during such Monthly Period. "Pre-Funded Amount" is defined at page 14 in "Prospectus Summary--Funding Period." "Pre-Funding Account" is defined at page 14 in "Prospectus Summary--Funding Period." "Principal Account" is defined at page 52 in "Descriptions of the Offered Certificates--Trust Accounts." "Principal Collections" means with respect to any business day for any Series the product of (i) collections received with respect to the Receivables minus Recoveries and (ii) one minus the Finance Charge Receivable Factor. "Principal Funding Account" means a trust account established for the benefit of the Class A Certificateholders and in which, during the Accumulation Period, Principal Collections allocable to the Class A Certificateholders' Interest plus Shared Principal Collections, if any, from other Series allocable to the Class A Certificates, plus certain other amounts comprising but not exceeding Class A Monthly Principal, will be deposited. "Principal Receivables" means for any business day, the aggregate amount of Eligible Receivables as of such business day (determined on the basis of a calculation performed by the Servicer) minus the amount of Finance Charge Receivables on such business day. "Principal Shortfalls" is defined at page 46 in "Description of the Offered Certificates--Principal Payments." "Principal Terms" is defined at page 48 in "Description of the Offered Certificates--Exchanges." "PTE" is defined at page 75 in "Employee Benefit Plan Considerations." "Purchase Agreement" is defined at page 68 in "Description of the Receivables Purchase Agreement--Purchases of Receivables." "Purchase Termination Date" is defined at page 70 in "Description of the Receivables Purchase Agreement--Purchase Termination Date." "Qualified Institution" is defined at page 52 in "Description of the Offered Certificates--Trust Accounts." "Rating Agencies" means the two nationally recognized rating agencies that have been requested to rate the Class A Certificates and the Class B Certificates. "Reallocated Class B Principal Collections" is defined at page 56 in "Description of the Offered Certificates--Reallocated Principal Collections." "Reallocated Class C Principal Collections" is defined at page 56 in "Description of the Offered Certificates--Reallocated Principal Collections." "Reallocated Principal Collections" is defined at page 56 in "Description of the Offered Certificates--Reallocated Principal Collections." "Receivable" means, with respect to any Obligor, any account, chattel paper, or general intangible representing the indebtedness of such Obligor under a Charge Account Agreement arising from a sale of merchandise or services, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. Each Receivable includes, without limitation, (i) all rights of the Originator under the applicable Charge Account Agreement and (ii) all obligations of the Obligor thereof under the Charge Account Agreement pursuant to which such Receivable was created. "Record Date" means, with respect to any Distribution Date, the last business day of the preceding Monthly Period. "Recoveries" means any amounts received by the Servicer with respect to Receivables in accounts that previously became Defaulted Accounts. "Regulations" is defined at page 73 in "Certain Federal Income Tax Consequences--Taxation of Interest and Discount Income of Offered Certificate Owners." "Relevant UCC State" means each jurisdiction in which the filing of a UCC financing statement is necessary to evidence the security interest of the Trustee established under the Pooling and Servicing Agreement. "Removed Accounts" means accounts that have been designated by the Transferor, the Receivables of which pursuant to the terms of the Pooling and Servicing Agreement will no longer be transferred to the Trust. "Required Amount" is defined at page 60 in "Description of the Offered Certificates--Application of Collections--Payment of Fees, Interest, and Other Items." "Revolving Period" means the period beginning on the Closing Date and ending with the commencement of the Accumulation Period or an Early Amortization Period. "Securities Act" means the Securities Act of 1933, as amended. "Series" means any series of investor certificates issued by the Trust, including the Series 1997-1 Certificates. "Series Account" means the Principal Account, the Interest Funding Account, the Principal Funding Account, and any account or accounts established pursuant to the Series 1997-1 Supplement for the benefit of the Certificateholders. "Series Allocation Percentage" means, on any date of determination, the percentage equivalent of a fraction the numerator of which is the Invested Amount and the denominator of which is the sum of the invested amounts of all Series then outstanding. "Series Discount Factor" means for any Series and any business day the amount for such Series, if any, calculated as of the second preceding Monthly Period, by which either (x) the product of (i) the Base Rate plus one-half of one percent minus the Net Finance Charge Portfolio Yield divided by the Annual Portfolio Turnover Rate and (ii) the Floating Allocation Percentage exceeds (b) zero or, (y) solely at the option of the Transferor, the amount by which (a) the product of (i) the Base Rate plus one percent minus the Net Finance Charge Portfolio Yield divided by the Annual Portfolio Turnover Rate and (ii) the Floating Allocation Percentage exceeds (b) zero; provided, however, that the Series Discount Factor will never exceed 4%. "Series 1992-1 Principal Funding Account" is defined at page 14 in "Prospectus Summary--Paired Series." "Series 1997-1 Certificates" or "Series 1997-1" means, collectively, the Class A Certificates, the Class B Certificates, and the Class C Certificates. "Series 1997-1 Supplement" means the Supplement, dated as of the Closing Date, among the Transferor, the Servicer, and the Trustee relating to the Series 1997-1 Certificates. "Series 1997-1 Termination Date" means the earlier to occur of (i) the day after the Distribution Date on which the Series 1997-1 Certificates are paid in full and (ii) the [ ] Distribution Date. "Service Transfer" is defined at page 65 in "Description of the Offered Certificates--Servicer Default." "Servicer" means FDS in its capacity as Servicer of the Receivables pursuant to the Pooling and Servicing Agreement. "Servicer Default" is defined at page 65 in "Description of the Offered Certificates--Servicer Default." "Shared Principal Collections" means the amount of collections of Principal Receivables for any business day allocated by the Servicer to the Invested Amount for Series 1997-1 remaining after covering required deposits or payments of principal to the Certificateholders and any similar amount remaining for any other Series. "Special Payment Date" means a Distribution Date following the Monthly Period in which a Pay Out Event has occurred with respect to any Early Amortization Period and each Distribution Date following the Class A Expected Final Payment Date. "Standard & Poor's" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. "Supplement" means any Supplement to the Pooling and Servicing Agreement. "Supplemental Accounts" is defined at page 51 in "Description of the Offered Certificates--Automatic Addition of Accounts." "Tax Counsel" means Jones, Day, Reavis & Pogue, counsel to the Transferor. "Terms and Conditions" is defined at page 44 in "Description of the Offered Certificates--Book-Entry Registration." "Total Finance Charge Collections" means, with respect to a Series and any business day, the sum of (i)(a) on any day prior to the occurrence of a Pay Out Event, the product of the Floating Allocation Percentage for such Series and the amount of Finance Charge Collections deposited in the Collection Account for such business day or (b) on and after the occurrence of a Pay Out Event, the product of the Fixed/Floating Allocation Percentage for such Series and the amount of Finance Charge Collections for such business day, plus, on and after the occurrence of and during the continuance of a Discount Trigger Event, (ii) the lesser of (a) the sum of (x) the product of the Discount Allocation Percentage for such Series and the Discount Amount for such business day and (y) the Carryover Discount Amount for such Series for such business day and (b) the product of, during the Revolving Period, the Floating Allocation Percentage for such Series and, during the Accumulation Period or Early Amortization Period, the Fixed/Floating Allocation Percentage for such Series and the amount of Principal Collections deposited in the Collection Account for such business day. "Transfer Date" is defined at page 57 in "Description of the Offered Certificates--Application of Collections." "Transferor" means Prime Receivables Corporation, a Delaware corporation. "Transferor Finance Charge Collections" is defined at page 55 in "Description of the Offered Certificates--Reallocation of Cash Flows." "Transferor Interest" means, on any date of determination, the aggregate amount of Principal Receivables at the end of the day immediately prior to such date of determination plus all amounts on deposit in the Excess Funding Account (but not including investment earnings on such amounts), minus the aggregate invested amount of all Series at the end of such day. "Transferor Subordination Amount" means with respect to the Series 1997-1 Certificates, [ ], less the aggregate amount of collections allocated to the holder of the Exchangeable Transferor Certificate or any portion of the Transferor Interest previously applied to cover any deficiency in the amount otherwise available, on and after the Class B Principal Payment Commencement Date, to pay accrued and unpaid interest to the Class B Certificateholders and to cover any Investor Default Amounts and Class B Investor Charge-Offs. "Transferor Percentage" is defined at page 42 in "Description of the Offered Certificates--General" and at page 55 in "Description of the Offered Certificates--Allocation Percentages." "Trust" means the Prime Credit Card Master Trust. "Trustee" means The Chase Manhattan Bank (formerly Chemical Bank). "UCC" means the Uniform Commercial Code. "Underwriters" is defined at page 76 in "Underwriting." "Underwriting Agreement" is defined at page 76 in "Underwriting." "U.S. Person" is defined at page 95 in "Annex II: Global Clearance, Settlement and Tax Documentation Procedures." "Variable Funding Certificates" means a series of certificates, in one or more classes, issued pursuant to the Pooling and Servicing Agreement and a Variable Funding Supplement. "Yield Factor" means with respect to any business day the percentage equivalent of an amount determined on the preceding Date of Determination (or on such business day with respect to each Date of Determination) equal to (i)(x) the product of the Billed Finance Charges for the Monthly Period preceding such Date of Determination and one minus the Delinquency Percentage for the preceding Date of Determination (or on such business day with respect to each Date of Determination) plus (y) Recoveries for the Monthly Period preceding such Date of Determination divided by (ii) the aggregate amount of collections on Receivables for the Monthly Period preceding such Date of Determination. ANNEX I OTHER SERIES The table below sets forth the principal characteristics of the five Series heretofore issued by the Trust: Series 1992-1, Series 1992-2, Series 1992-3, Series 1995-1 and Series 1996-1. For more specific information with respect to any Series, any prospective investor should contact the Servicer at 9111 Duke Boulevard, Mason, Ohio 45040-8999, telephone number (513) 573-2265. The Servicer will provide, without charge, to any prospective purchaser of the Certificates, a copy of the disclosure documents for any previous publicly issued Series. SERIES 1992-1 1. CLASS A CERTIFICATES Initial Invested Amount............................ $450,000,000 Certificate Rate................................... 7.05% Current Invested Amount............................ $450,000,000 Controlled Amortization Amount..................... $150,000,000 Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1992-1 Class B and Class C Certificates Expected Final Payment Date........................ December 15, 1997 Scheduled Series Termination Date.................. February 15, 2001 Series Issuance Date............................... December 15, 1992 2. CLASS B CERTIFICATES Initial Invested Amount............................ $40,500,000 Certificate Rate................................... 7.55% Current Invested Amount............................ $40,500,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1992-1 Class C Certificates Expected Final Payment Date........................ January 15, 1998 Scheduled Series Termination Date.................. February 15, 2001 Series Issuance Date............................... December 15, 1992 3. CLASS C CERTIFICATES Initial Invested Amount............................ $55,000,000 Certificate Rate................................... 8.05% Current Invested Amount............................ $55,000,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Expected Final Payment Date........................ February 15, 1998 Scheduled Series Termination Date.................. February 15, 2001 Series Issuance Date............................... December 15, 1992 SERIES 1992-2 1. CLASS A CERTIFICATES Initial Invested Amount............................ $450,000,000 Certificate Rate................................... 7.45% Current Invested Amount............................ $450,000,000 Controlled Amortization Amount..................... $75,000,000 Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1992-2 Class B and Class C Certificates Expected Final Payment Date........................ December 15, 1999 Scheduled Series Termination Date.................. November 15, 2002 Series Issuance Date............................... December 15, 1992 2. CLASS B CERTIFICATES Initial Invested Amount............................ $40,500,000 Certificate Rate................................... 7.95% Current Invested Amount............................ $40,500,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1992-2 Class C Certificates Expected Final Payment Date........................ January 18, 2000 Scheduled Series Termination Date.................. November 15, 2002 Series Issuance Date............................... December 15, 1992 3. CLASS C CERTIFICATES Initial Invested Amount............................ $55,000,000 Certificate Rate................................... 8.45% Current Invested Amount............................ $55,000,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Expected Final Payment Date........................ February 15, 2000 Scheduled Series Termination Date.................. November 15, 2002 Series Issuance Date............................... December 15, 1992 SERIES 1992-3 VARIABLE FUNDING CERTIFICATES Invested Amount.................................... Variable Maximum Permitted Invested Amount.................. $455,000,000 Certificate Rate................................... Variable Commencement of Amortization Period................ January 1, 1998 (subject to extension) Annual Servicing Fee Percentage.................... 2.00% Scheduled Series Termination Date.................. January 15, 2001 (subject to extension) Series Issuance Date............................... January 5, 1993 SERIES 1995-1 1. CLASS A CERTIFICATES Initial Invested Amount............................ $546,000,000 Certificate Rate................................... 6.75% Current Invested Amount............................ $546,000,000 Controlled Amortization Amount..................... $68,250,000 Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1995-1 Class B and Class C Certificates Expected Final Payment Date........................ August 15, 2002 Scheduled Series Termination Date.................. November 15, 2005 Series Issuance Date............................... July 27, 1995 2. CLASS B CERTIFICATES Initial Invested Amount............................ $52,000,000 Certificate Rate................................... 6.90% Current Invested Amount............................ $52,000,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1995-1 Class C Certificates Expected Final Payment Date........................ September 16, 2002 Scheduled Series Termination Date.................. November 15, 2005 Series Issuance Date............................... July 27, 1995 3. CLASS C CERTIFICATES Initial Invested Amount............................ $52,000,000 Certificate Rate................................... 9.00% Current Invested Amount............................ $52,000,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Expected Final Payment Date........................ October 15, 2002 Scheduled Series Termination Date.................. November 15, 2005 Series Issuance Date............................... July 27, 1995 SERIES 1996-1 1. CLASS A CERTIFICATES Initial Invested Amount............................ $218,000,000 Certificate Rate................................... 6.70% Current Invested Amount............................ $218,000,000 Controlled Amortization Amount (subject to adjustment).......................... $24,222,222.22 Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1996-1 Class B and Class C Certificates Expected Final Payment Date........................ May 15, 2001 Scheduled Series Termination Date.................. July 15, 2004 Series Issuance Date............................... May 1, 1996 2. CLASS B CERTIFICATES Initial Invested Amount............................ $20,800,000 Certificate Rate................................... 6.85% Current Invested Amount............................ $20,800,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Credit Support..................................... Subordination of Series 1996-1 Class C Certificates Expected Final Payment Date........................ June 15, 2001 Scheduled Series Termination Date.................. July 15, 2004 Series Issuance Date............................... May 1, 1996 3. CLASS C CERTIFICATES Initial Invested Amount............................ $20,800,000 Certificate Rate................................... 9.00% Current Invested Amount............................ $20,800,000 Controlled Amortization Amount..................... N/A Annual Servicing Fee Percentage.................... 2.0% Expected Final Payment Date........................ July 15, 2001 Scheduled Series Termination Date.................. July 15, 2004 Series Issuance Date............................... May 1, 1996 ANNEX II GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Asset Backed Certificates, Series 1997-1 will be available only in book-entry form. Investors in the Offered Certificates may hold such Offered Certificates through any of DTC, Cedel, or Euroclear. The Offered Certificates will be tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Offered Certificates through Cedel and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Offered Certificates through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Cedel or Euroclear and DTC Participants holding Offered Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of Cedel and Euroclear (in such capacity) and as DTC Participants. Non-U.S. holders (as described below) of Offered Certificates will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Offered Certificates will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Offered Certificates will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Cedel and Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold such positions in accounts as DTC Participants. Investors electing to hold their Offered Certificates through DTC will follow the settlement practices applicable to conventional credit card certificate issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Offered Certificates through Cedel or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Offered Certificates will be credited to the securities custody accounts on the settlement date against payment in the same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. Trading between DTC Participants. Secondary market trading between DTC Participants will be settled using the procedures applicable to conventional credit card certificate issues in same-day funds. Trading between Cedel and/or Euroclear Participants. Secondary market trading between Cedel Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC seller and Cedel or Euroclear purchaser. When Offered Certificates are to be transferred from the account of a DTC Participant to the accounts of a Cedel Participant or a Euroclear Participant, the purchaser will send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at least one business day prior to settlement. Cedel or Euroclear, as the case may be, will instruct the respective Depositary to receive the Offered Certificates against payment. Payment will include interest accrued on the Offered Certificates from and including the last coupon payment date to and excluding the settlement date, on the basis of actual days elapsed and a 360-day year. Payment will then be made by the Depositary to the DTC Participant's account against delivery of the Offered Certificates. After settlement has been completed, the Offered Certificates will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Cedel Participant's or Euroclear Participant's account. The Offered Certificates credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Offered Certificates will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Cedel or Euroclear cash debit will be valued instead as of the actual settlement date. Cedel Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Cedel or Euroclear. Under this approach, they may take on credit exposure to Cedel or Euroclear until the Offered Certificates are credited to their accounts one day later. As an alternative, if Cedel or Euroclear has extended a line of credit to them, Cedel Participants or Euroclear Participants can elect not to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Cedel Participants or Euroclear Participants purchasing Offered Certificates would incur overdraft charges for one day, assuming they cleared the overdraft when the Offered Certificates were credited to their accounts. However, interest on the Offered Certificates would accrue from the value date. Therefore, in many cases the investment income on the Offered Certificates earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each Cedel Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Offered Certificates to the respective Depositary for the benefit of Cedel Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between Cedel or Euroclear seller and DTC purchaser. Due to time zone differences in their favor, Cedel Participants and Euroclear Participants may employ their customary procedures for transactions in which Offered Certificates are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Cedel or Euroclear will instruct the respective Depositary, as appropriate, to deliver the bonds to the DTC Participant's account against payment. Payment will include interest accrued on the Offered Certificates from and including the last coupon payment date to and excluding the settlement date on the basis of actual days elapsed and a 360-day year. The payment will then be reflected in the account of the Cedel Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Cedel Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Cedel Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Cedel Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Cedel or Euroclear and that purchase Offered Certificates from DTC Participants for delivery to Cedel Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing through Cedel or Euroclear for one day (until the purchase side of the day trade is reflected in their Cedel or Euroclear accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Offered Certificates in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Offered Certificates sufficient time to be reflected in their Cedel or Euroclear account in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase form the DTC Participant is at least one day prior to the value date for the sale to the Cedel Participant or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Offered Certificates holding securities through Cedel or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless (i) each clearing system, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Offered Certificates that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If the information shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of such change. Exemption for non-U.S. Persons with effectively connected income (Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or reduced rate for non-U.S. persons resident in treaty countries (Form 1001). Non-U.S. Persons that are Offered Certificate Owners residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8. Form 1001 may be filed by the Offered Certificate Owner or his agent. Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The Offered Certificate Owner or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is effective for one calendar year. The term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any political subdivision thereof, or (iii) an estate or trust the income of which is includible in gross income for United States tax purposes, regardless of its source. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Offered Certificates. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Offered Certificates. - --------------------------------------- ------------------------------ NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY $[ ] REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH PRIME CREDIT CARD THIS OFFER MADE BY THIS PROSPECTUS AND, MASTER TRUST IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PRIME RECEIVABLES CORPORATION OR THE $[ ] UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE [ ]% Class A Asset Backed HEREUNDER SHALL UNDER ANY CIRCUMSTANCE Certificates, CREATE AN IMPLICATION THAT THERE HAS Series 1997-1 BEEN NO CHANGE IN THE AFFAIRS OF PRIME RECEIVABLES CORPORATION OR THE RECEIVABLES OR THE ACCOUNTS SINCE THE DATE THEREOF. THIS PROSPECTUS DOES NOT $[ ] CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER [ ]% Class B Asset Backed OR SOLICITATION IS NOT AUTHORIZED OR IN Certificates, WHICH THE PERSON MAKING SUCH OFFER OR Series 1997-1 SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. TABLE OF CONTENTS PAGE Reports to Prime Receivables Corporation Certificateholders............. 4 Transferor Available Information............ 4 Prospectus Summary............... 5 Risk Factors..................... 23 The Trust........................ 29 Federated's Credit Card Business................. 29 The Accounts..................... 34 Federated, The FDS National Bank Transferor, and FDS............ 39 Servicer Maturity Assumptions............. 40 Pool Factor and Related Information.................... 41 Use of Proceeds.................. 42 Description of the Offered Certificates........... 42 Description of the Receivables Purchase PROSPECTUS Agreement...................... 68 Certain Legal Aspects of the Receivables............. 70 Certain Federal Income Tax Consequences............... 72 Employee Benefit Plan Underwriters of the Considerations................. 74 Class A Certificates Underwriting..................... 76 Credit Suisse First Boston Legal Matters.................... 76 [ ] Glossary of Terms................ 77 UNTIL [ ] ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY Underwriter of the BE REQUIRED TO DELIVER A PROSPECTUS. Class B Certificates THIS DELIVERY REQUIREMENT IS IN ADDITION Credit Suisse First Boston TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ----------------------------------------- ------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Estimates of various expenses expected to be incurred in connection with the issuance and distribution of the Offered Certificates, other than underwriting discounts and commissions, are set forth below. Registration Fee * Printing and Engraving * Trustee's Fees * Legal Fees and Expenses * Blue Sky Fees and Expenses * Accountants' Fees and Expenses * Rating Agency Fees * Miscellaneous Fees and Expenses * --- Total * === - ------------------ * To be provided by amendment. ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS The Transferor's Certificate of Incorporation and By-Laws provide for the indemnification of the directors, officers, employees, and agents of the Transferor to the full extent that may be permitted by Delaware law from time to time, and the By-Laws provide for various procedures relating thereto. Certain provisions of the Transferor's Certificate of Incorporation protect the Transferor's directors against personal liability for monetary damages resulting from breaches of their fiduciary duty of care, except as set forth below. Under Delaware law, absent these provisions, directors could be held liable for gross negligence in the performance of their duty of care, but not for simple negligence. The Transferor's Certificate of Incorporation absolves directors of liability for negligence in the performance of their duties, including gross negligence. However, the Transferor's directors remain liable for breaches of their duty of loyalty to the Transferor, as well as for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law and transactions from which a director derives improper personal benefit. The Transferor's Certificate of Incorporation also does not absolve directors of liability under section 174 of the Delaware General Corporation Law, which makes directors personally liable for unlawful dividends or unlawful stock repurchases or redemptions in certain circumstances and expressly sets forth a negligence standard with respect to such liability. Under Delaware law, directors, officers, employees, and other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation--a "derivative action") if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action and Delaware law requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to the corporation. The Transferor's Certificate of Incorporation provides, among other things, that each person who was or is made a party to, or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was a director, officer, employee, or agent of the Transferor (or was serving at the request of the Transferor as a director, officer, employee, or agent of another entity), will be indemnified and held harmless by the Transferor to the full extent authorized by Delaware law against all expense, liability, or loss (including attorneys' fees, judgments, fines, and amounts to be paid in settlement) actually and reasonably incurred by such person in connection therewith. The rights conferred thereby will be deemed to be contract rights and will include the right to be paid by the Transferor for the expenses incurred in defending the proceedings specified above in advance of their final disposition. The Transferor has entered into indemnification agreements with each of its directors and officers. These indemnification agreements provide for, among other things, (i) the indemnification by the Transferor of the indemnitees thereunder to the extent described above, (ii) the advancement of attorneys' fees and other expenses, and (iii) the establishment, upon approval by its Board of Directors, of trusts or other funding mechanisms to fund the Transferor's indemnification obligations thereunder. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES The Series 1992-1 and 1992-2 Class C Certificates described on Annex I to the Prospectus included in this Registration Statement (collectively, the "Series 1992 Class C Certificates") were initially issued to the Transferor on December 15, 1992. On January 18, 1995, the Transferor sold the Series 1992 Class C Certificates to a financial institution for an aggregate sale price of $77.0 million pursuant to an agreement providing for the allocation of payments received on account of the Series 1992 Class C Certificates as though such financial institution owned $77.0 million in principal amount thereof and the Transferor owned $33.0 million in principal amount thereof (with the Transferor's entitlement to such payments being subordinated to such financial institution's entitlement to such payments). The foregoing transactions were effected in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1 -- Form of Underwriting Agreement.* 3.1 -- Certificate of Incorporation of the Transferor.(1) 3.2 -- By-Laws of the Transferor.(1) 4.1 -- Amended and Restated Pooling and Servicing Agreement, dated as of December 15, 1992 (the "Pooling and Servicing Agreement"), among Federated, Prime Receivables Corporation and The Chase Manhattan Bank, as Trustee.(1) 4.2 -- Receivables Purchase Agreement, dated as of December 15, 1992 (the "Purchase Agreement"), among Abraham & Straus, Inc., Bloomingdale's, Inc., Burdines, Inc., Jordan Marsh Stores Corporation, Lazarus, Inc., Rich's Department Stores, Inc., Stern's Department Stores, Inc., The Bon, Inc., and Prime Receivables Corporation.(1) 4.3 -- First Amendment, dated as of December 1, 1993, to the Pooling and Servicing Agreement.(2) 4.4 -- Second Amendment, dated as of February 28, 1994, to the Pooling and Servicing Agreement.(2) 4.5 -- Third Amendment, dated as of May 31, 1994, to the Pooling and Servicing Agreement.(2) 4.6 -- Assumption Agreement under the Pooling and Servicing Agreement, dated as of September 15, 1993.(2) 4.7 -- Form of Series 1997-1 Supplement.* 4.8 -- First Amendment, dated as of June 23, 1993, to the Receivables Purchase Agreement.(2) 4.9 -- Second Amendment, dated as of December 1, 1993, to the Receivables Purchase Agreement.(2) 4.10 -- Third Amendment, dated as of February 28, 1994, to the Receivables Purchase Agreement.(2) 4.11 -- Fourth Amendment, dated as of May 31, 1994, to the Receivables Purchase Agreement.(2) 4.12 -- First Supplement, dated as of September 15, 1993, to the Receivables Purchase Agreement.(2) 4.13 -- Second Supplement, dated as of May 31, 1994, to the Receivables Purchase Agreement.(2) 4.14 -- Fourth Amendment, dated as of January 18, 1995, to the Pooling and Servicing Agreement.(3) 4.15 -- Fifth Amendment, dated as of April 30, 1995, to the Pooling and Servicing Agreement.(3) 4.16 -- Sixth Amendment, dated as of July 27, 1995, to the Pooling and Servicing Agreement.(3) 4.17 -- Fifth Amendment, dated as of April 30, 1995, to the Receivables Purchase Agreement.(3) 4.18 -- Seventh Amendment, dated as of May 14, 1996, to the Pooling and Servicing Agreement.(4) 4.19 -- Sixth Amendment, dated as of August 26, 1995, to the Receivables Purchase Agreement.(3) 4.20 -- Seventh Amendment, dated as of August 26, 1995, to the Receivables Purchase Agreement.(3) 4.21 -- Eighth Amendment, dated as of May 14, 1996, to the Receivables Purchase Agreement.(5) 4.22 -- Third Supplement, dated as of August 26, 1995, to the Receivables Purchase Agreement.(3) 4.23 -- Fourth Supplement, dated as of May 14, 1996, to the Receivables Purchase Agreement. 4.24 -- Eighth Amendment, dated as of March 3, 1997, to the Pooling and Servicing Agreement.(6) 4.25 -- Ninth Amendment, dated as of March 3, 1997, to the Receivables Purchase Agreement.(7) 4.26 -- Ninth Amendment, dated as of ______, 1997, to the Pooling and Servicing Agreement.* 5 -- Opinion of Jones, Day, Reavis & Pogue with respect to legality.* 8 -- Opinion of Jones, Day, Reavis & Pogue with respect to tax matters.* 23 -- Consent of Jones, Day, Reavis & Pogue (included in its opinions filed as Exhibits 5 and 8).* 24 -- Powers of Attorney. - ---------- * To be filed by amendment. (1) Incorporated by reference to the exhibit to the Transferor's Registration Statement on Form S-1 (Registration No. 33-52374) having the same numerical designation. (2) Incorporated by reference to the exhibit to the Transferor's Registration Statement on Form S-1 (Registration No. 33-92850) having the same numerical designation. (3) Incorporated by reference to the exhibit to the Transferor's Registration Statement on Form S-1 (Registration No. 333-1790-01) having the same numerical designation. (4) Incorporated by reference to exhibit 10.6.7 to Federated's Annual Report on Form 10-K for the fiscal year ended February 1, 1997. (5) Incorporated by reference to exhibit 10.13.8 to Federated's Annual Report on Form 10-K for the fiscal year ended February 1, 1997. (6) Incorporated by reference to exhibit 10.6.8 to Federated's Annual Report on Form 10-K for the fiscal year ended February 1, 1997. (7) Incorporated by reference to exhibit 10.13.9 to Federated's Annual Report on Form 10-K for the fiscal year ended February 1, 1997. (b) Financial Statements All financial statements, schedules, and historical financial information have been omitted as they are not applicable. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes as follows: (a) To provide to the Underwriter at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described under Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. (d) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cincinnati, State of Ohio, on August 25, 1997. PRIME RECEIVABLES CORPORATION (REGISTRANT) By: /s/ Susan P. Storer Susan P. Storer, President Pursuant to the Requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on August 25, 1997 in the capacities indicated. SIGNATURE TITLE --------- ----- * ------------------------- Karen M. Hoguet Chairman of the Board and Director (principal executive officer) /s/ Susan P. Storer ------------------------- Susan P. Storer President and Director (principal financial and accounting officer) * ------------------------- John R. Sims Director * ------------------------- Joan Dobrzynski Director * ------------------------- Francis B. Jacob II Director * The undersigned, by signing her name hereto, does sign and execute this Registration Statement pursuant to the Powers of Attorney executed by the above-named officers and directors. /s/ Susan P. Storer -------------------- Susan P. Storer Attorney-in-Fact </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-24 <SEQUENCE>2 <DESCRIPTION>EXHIBIT 24 - POWER OF ATTORNEY <TEXT> Exhibit 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below does hereby constitute and appoint John R. Sims, Susan P. Storer and Dennis J. Broderick as her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all acts and things for her and in her name, place and stead, in any and all capacities, that said attorney-in-fact and agent may deem necessary or advisable to enable Prime Receivables Corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with a Registration Statement on Form S-1 to be filed by Prime Receivables Corporation with respect to certain asset backed certificates representing undivided interests in Prime Credit Card Master Trust, including specifically, but not limited to, power and authority to sign any and all amendments, including post-effective amendments, to the Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Karen M. Hoguet Chairman of the Board Karen M. Hoguet and Director of Prime Receivables Corporation POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below does hereby constitute and appoint John R. Sims, Karen M. Hoguet and Dennis J. Broderick as her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all acts and things for her and in her name, place and stead, in any and all capacities, that said attorney-in-fact and agent may deem necessary or advisable to enable Prime Receivables Corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with a Registration Statement on Form S-1 to be filed by Prime Receivables Corporation with respect to certain asset backed certificates representing undivided interests in Prime Credit Card Master Trust, including specifically, but not limited to, power and authority to sign any and all amendments, including post-effective amendments, to the Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Susan P. Storer President and Director of Susan P. Storer Prime Receivables Corporation POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below does hereby constitute and appoint Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all acts and things for her and in her name, place and stead, in any and all capacities, that said attorney-in-fact and agent may deem necessary or advisable to enable Prime Receivables Corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with a Registration Statement on Form S-1 to be filed by Prime Receivables Corporation with respect to certain asset backed certificates representing undivided interests in Prime Credit Card Master Trust, including specifically, but not limited to, power and authority to sign any and all amendments, including post-effective amendments, to the Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ John R. Sims Director of Prime John R. Sims Receivables Corporation POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below does hereby constitute and appoint Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all acts and things for her and in her name, place and stead, in any and all capacities, that said attorney-in-fact and agent may deem necessary or advisable to enable Prime Receivables Corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with a Registration Statement on Form S-1 to be filed by Prime Receivables Corporation with respect to certain asset backed certificates representing undivided interests in Prime Credit Card Master Trust, including specifically, but not limited to, power and authority to sign any and all amendments, including post-effective amendments, to the Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Joan Dobrzynski Director of Prime Joan Dobrzynski Receivables Corporation POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below does hereby constitute and appoint Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all acts and things for her and in her name, place and stead, in any and all capacities, that said attorney-in-fact and agent may deem necessary or advisable to enable Prime Receivables Corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with a Registration Statement on Form S-1 to be filed by Prime Receivables Corporation with respect to certain asset backed certificates representing undivided interests in Prime Credit Card Master Trust, including specifically, but not limited to, power and authority to sign any and all amendments, including post-effective amendments, to the Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Francis B. Jacobs II Director of Prime Francis B. Jacobs II Receivables Corporation </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000893160_ventana_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000893160_ventana_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4bd93a7096ee075e213a4e10939c6047bf5e6ebd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000893160_ventana_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting." The Shares of Common Stock offered hereby are subject to a high degree of risk. See "Risk Factors." This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results and the timing of events could differ materially from those contemplated by such forward-looking statements. Factors that could cause such differences include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Ventana develops, manufactures and markets proprietary instrument/reagent systems that automate immunohistochemistry ("IHC") and in situ hybridization ("ISH") tests for the analysis of cells and tissues on microscope slides. These tests are important tools used in diagnosing and selecting appropriate treatment for cancer. With a worldwide installed base of 801 instruments as of December 31, 1996, the Company believes that it is the worldwide leader in the automated IHC testing market. The Company estimates that its installed base of instruments is approximately four times as large as the combined installed base of all of the Company's current competitors. Ventana has placed instruments with 35 of the 42 cancer centers identified as principal cancer research centers by the National Cancer Institute including the Mayo Clinic, the Dana Farber Cancer Institute, The Johns Hopkins University, the M.D. Anderson Cancer Center and the Fred Hutchinson Cancer Center. Each Ventana proprietary system placed typically provides a recurring revenue stream as customers consume reagents and supplies with each test conducted. Ventana's "patient priority" systems (the Ventana ES and gen II) perform multiple tests rapidly on a single patient biopsy thereby providing a matrix of diagnostic data to the pathologist. In February 1996, Ventana acquired BioTek Solutions, Inc. ("BioTek") for several strategic reasons, including its installed instrument base and complementary "batch processing" systems, which perform single tests on multiple patient biopsies. These complementary systems enable the Company to serve the full range of health care institutions that conduct IHC tests. Ventana increased its installed base by 287 instruments as a result of the acquisition, thereby increasing the corresponding aggregate recurring reagent revenue stream and positioning the Company as the worldwide leader in automated IHC testing. Ventana believes significant synergies and margin improvements can continue to be realized from the further integration of BioTek into Ventana's business model in which important, value-added activities are performed internally, in contrast to BioTek's reliance on third parties. Cancer is the second leading cause of death in the United States, accounting for approximately 25% of deaths. Currently, approximately 10 million people in the United States have a history of invasive cancer. It is estimated that 1.4 million new cases of invasive cancer will be diagnosed each year. Recent studies have indicated that the mortality rates of certain types of cancer have decreased which may be attributed to, among other factors, earlier detection and selection of appropriate therapies. The vast majority of IHC testing associated with cancer diagnosis and treatment in the United States is conducted in an aggregate of approximately 2,200 clinical institutions and reference and research laboratories which the Company estimates create the opportunity for the placement of as many as 2,500 automated IHC testing instruments. The Company believes that less than 25% of such institutions and laboratories currently conduct IHC testing on an automated basis. The international market for instrument placements is estimated by the Company to be approximately 1.2 times the size of the United States market, with Europe accounting for the majority of the international market potential. As compared to manual IHC testing, Ventana's automated systems provide improved reliability, reproducibility and consistency of test results. The systems' economic advantages include improved visualization quality and faster turnaround time, increased test throughput, a reduced dependence on skilled laboratory technicians and reduced cost per test. The Company believes it will play a critical, expanding role in cancer science as researchers will use Ventana systems to accelerate the identification and development of new tests and that the Company's installed base of instruments will speed the commercialization and clinical implementation of such new tests. The main element of the Company's strategy to strengthen its leadership position in automated IHC testing is to maximize instrument placements in order to create a barrier that competitors will need to overcome. To achieve this objective, the Company plans to introduce a lower cost instrument which targets potential patient priority customers (the Ventana NexES) and has commenced European sales of a lower cost instrument for potential batch processing customers (the TechMate 250). The Company believes that the introduction of the NexES will enable it to increase its emphasis on instrument placements through reagent programs ("RPs"). In an RP, the Company provides the customer with the use of an instrument with no capital investment with the objective of creating recurring reagent revenue. The Company believes that it can accelerate the rate of expansion of its installed base of instruments by using RPs because the required capital investment associated with a purchase, a significant sales hurdle for many potential customers, will be eliminated. THE OFFERING Common Stock offered by the Company............................ 1,850,000 shares Common Stock offered by the Selling Stockholders..................... 850,000 shares Total............................ 2,700,000 shares Common Stock to be outstanding after the Offering................. 12,828,238 shares(1) Use of proceeds.................... For general corporate purposes, which may include expansion of sales and marketing activities, research and development, clinical trials, capital expenditures, repayment of indebtedness and working capital. Nasdaq National Market symbol...... VMSI - --------------- (1) Includes 10,978,238 outstanding shares of Common Stock and the 1,850,000 Shares of Common Stock offered by the Company hereby. Excludes 784,613 shares of Common Stock issuable upon exercise of outstanding warrants and 715,235 shares of Common Stock issuable upon the exercise of options outstanding under the Company's stock option plans. SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, -------------------------------------------- 1993 1994 1995 1996 ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Sales: Instruments.................................. $ 1,162 $ 2,588 $ 4,644 $ 8,591 Reagents and other........................... 1,519 3,339 5,969 15,538 ------- ------- ------- -------- Total net sales........................... 2,681 5,927 10,613 24,129 Cost of goods sold............................. 1,722 2,531 4,282 10,632 ------- ------- ------- -------- Gross profit................................... 959 3,396 6,331 13,497 Operating expenses: Research and development..................... 2,100 1,926 2,239 2,749 Selling, general and administrative.......... 4,067 6,899 7,435 11,206 Nonrecurring expenses........................ -- -- -- 10,262 Amortization of intangibles.................. -- -- -- 424 ------- ------- ------- -------- Loss from operations........................... (5,208) (5,429) (3,343) (11,144) Other income (expense)......................... 229 59 74 (137) ------- ------- ------- -------- Net loss....................................... $(4,979) $(5,370) $(3,269) $(11,281) ======= ======= ======= ======== Net loss per share, as adjusted(1)............. $ (0.38) $ (1.16) ======= ======== Shares used in computing net loss per share, as adjusted(1).................................. 8,664 9,687 ======= ======== </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 --------------------------- ACTUAL AS ADJUSTED(2) -------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments................. $ 11,067 $ 38,514 Long-term debt.................................................... 12,500 12,500 Working capital................................................... 15,888 43,335 Total assets...................................................... 32,410 59,857 Accumulated deficit............................................... (33,410) (33,410) Total stockholders' equity........................................ 15,270 42,717 </TABLE> - --------------- (1) See Note 1 to the Consolidated Financial Statements for information concerning the computation of net loss per share, as adjusted. (2) Adjusted to give effect to the sale of the Shares of Common Stock offered by the Company hereby and the receipt of the net proceeds thereof (at an assumed public offering price of $16.00 per share). See "Use of Proceeds,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000894076_philip_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000894076_philip_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a6d24ff6355f865144df40e0bc1ec157bce693b8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000894076_philip_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and related notes appearing elsewhere in this Prospectus. In this Prospectus, the terms "Company" or "Philip" mean Philip Services Corp., its predecessors and its direct and indirect subsidiaries, unless the context otherwise indicates. Prospective investors should carefully consider the factors set forth herein under "Risk Factors" and are urged to read this Prospectus in its entirety. Unless otherwise specifically indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment options. All dollar references ($) in this Prospectus are to U.S. dollars unless otherwise specifically indicated. References to Cdn$ are to Canadian dollars. THE COMPANY The Company is one of North America's leading suppliers of resource recovery and industrial services. The Company has the largest integrated network of metals recovery and industrial services operations in North America, servicing over 50,000 industrial and commercial customers from over 300 locations. The Company applies proprietary technologies to reduce the cost and downtime associated with industrial cleaning and plant turnaround activities, and to recover value from industrial by-products and metal bearing residuals. The Company has achieved its leading position in the metals recovery and industrial services markets through internal growth and through the acquisition and integration of 40 companies since the beginning of 1996. As a result, the Company is viewed as a leading consolidator in the metals recovery and industrial services industries. The Company's primary base of operations is in the United States, with over 70% of the Company's worldwide revenue generated in U.S. dollars in the six months ended June 30, 1997. At November 4, 1997, the aggregate market value of the outstanding Common Shares was $1.836 billion. The Company's business is organized into two operating divisions -- the Metals Recovery Group and the Industrial Services Group. The Metals Recovery Group's three primary business operations are ferrous (steel), copper and aluminum processing and recycling. The ferrous metals operations include the collection and processing of ferrous scrap materials for shipment to steel mills and the provision of related mill services. Ferrous operations also include steel service centers that process and distribute structural steel products. Copper operations are comprised of cold process mechanical recovery facilities, scrap management, the management of material recycling centers for the telecommunications industry, and copper refining. The group's aluminum recycling operations process aluminum dross, a by-product of primary aluminum production, and produce aluminum deoxidizing products and alloys from aluminum scrap. Both the ferrous and non-ferrous operations of Philip provide significant brokerage capabilities for scrap materials and primary metals, including steel, copper, aluminum and tin. The Company services the steel, telecommunications, aluminum, wire and cable and automotive industries, as well as utilities. Major customers for the Company's ferrous processing operations include Armco, ASW, Copperweld, Dofasco, Republic Engineered Steels, Stelco and Timken. Major customers for the Company's non-ferrous processing operations include AK Steel, Bethlehem Steel, Chrysler Canada, Noranda and Southwire. The Industrial Services Group is the largest integrated provider of on-site industrial services, by-products recovery and environmental services in North America, with a network of over 250 facilities. The Industrial Services Group's operations are divided into four main activities: on-site industrial services, by-products recovery, environmental services and utilities management. On-site industrial services include industrial cleaning and maintenance, waste collection and transportation, container services and tank cleaning, turnaround and outage services, mechanical contracting and refractory services. By-products recovery includes distillation, engineered fuel blending, paint overspray recovery, organic and inorganic processing and polyurethane recycling. Environmental services include strategic resource management, decommissioning, remediation, environmental consulting and engineering, and analytical and emergency response services. Major clients include BASF, Boise Cascade, Chevron, Conoco, Dupont, Ford, General Electric, General Motors, Monsanto, PPG and Shell. According to industry sources, the North American market for resource recovery and industrial services is estimated to be a $50 billion market growing at over 10% annually. The market is driven by manufacturers' desire to increase efficiency and enhance competitiveness through increased outsourcing of non-core services, a reduction in the number of vendors from which outsourced services are purchased, and by maximizing resource recovery opportunities from waste and by-products streams. The market for industrial services and resource recovery is fragmented and primarily served by small, specialized regional service providers. Resource recovery and industrial services are prime candidates for outsourcing as neither are core activities and both benefit from the expertise and economies of scale an outside supplier can provide. The Company believes that it has developed a strategy to enhance its leadership position by capitalizing on these industry trends. Key elements of the Company's strategy include the following: - Increase sales to existing customers by cross-selling services; - Pursue strategic acquisitions that will broaden the Company's services to existing customers or in key geographic regions with significant industrial activity; - Continue to vertically integrate its collection, processing and distribution network; and - Continue to develop and apply innovative process and service technologies. COMPETITIVE STRENGTHS The Company believes the following competitive strengths enhance its leadership position in the resource recovery and industrial services sectors: Broadest Range of Integrated Services: Philip offers the broadest range of metals recovery, by-products recovery and industrial and environmental services in the industry. The Company believes it can better assist its clients achieve lower costs and improve operating efficiencies by providing single source solutions. Broad Geographic Network: The Company's broad geographic network, unlike its regional competitors, can support the requirements of its customers throughout North America. This network enables the Company to effectively package and cross-sell services to large North American accounts. Proprietary Technologies: The Company has developed a series of proprietary waste minimization, recovery and industrial cleaning and turnaround processes. These proprietary technologies enable the Company to recover a higher percentage of usable components and reduce both disposal costs and downtime associated with turnaround operations. Leading Consolidator: The industrial services sector is highly fragmented and is undergoing rapid consolidation in response to market demands for vendor reduction and broad geographic service capabilities. Philip is a leading consolidator in the industry as a result of its financial strength, focused strategy and multi-service capabilities. RECENT ACQUISITIONS Over the past five years, the Company has focused on increasing its revenue base, its range of services and its geographic network of facilities throughout North America through a series of strategic acquisitions. The Company intends to continue to selectively pursue acquisitions in the United States and Canada in the resource recovery and industrial services industries. The Company also intends to pursue international markets by expanding its ferrous operations in the United Kingdom and by supporting the European operations of its North American clients. The following are the principal acquisitions completed by the Company since June 30, 1997. Since revenues reported by the acquired businesses were in certain instances prepared on a different basis of presentation than those of the Company, such reported revenues are not necessarily indicative of the revenues that would have been recognized by the Company on a pro forma basis or that will be recognized by the Company in future periods. METALS RECOVERY Luria/Steiner-Liff/Southern Foundry. On October 10, 1997, the Company acquired the operating assets of Luria Brothers ("Luria") and on October 28, 1997 acquired the Steiner-Liff Metals group of companies ("Steiner-Liff") and the Southern Foundry Supply group of companies ("Southern Foundry"). These companies provide scrap processing and mill services to the U.S. steel industry. Luria is one of the largest ferrous scrap companies in the United States and operates ten processing facilities throughout the Midwestern and Eastern United States, most of which are located in close proximity to major steel mills or foundries. Luria has multi-year contracts with major steel mills to perform mill services including scrap management and on-site scrap preparation, inventory control, slag management and brokerage arrangements. Steiner-Liff consists of five companies, centered in Nashville, Tennessee, Knoxville, Tennessee, St. Louis, Missouri, and Birmingham, Alabama. Steiner-Liff is the oldest and largest scrap processor in the middle Tennessee market. The Southern Foundry group is headquartered in Chattanooga, Tennessee and consists of two companies operating from six locations. Luria, Steiner-Liff and Southern Foundry process or broker over 5.4 million gross tons of ferrous scrap, and over 165 million pounds of non-ferrous material a year and reported aggregate sales of $775 million, including brokerage revenue, for the fiscal year ended December 31, 1996. With these acquisitions, the Company believes that it is the largest ferrous processor in North America. The aggregate consideration paid for these businesses was $495.9 million, which included the assumption of $32.6 million in debt. Part of the purchase price was satisfied by the issuance of approximately 5.6 million Common Shares. Intermetco. In August 1997, Philip completed the acquisition of Intermetco Limited ("Intermetco"), a Canadian corporation, for a total consideration of Cdn$66 million, including the assumption of Cdn$8 million in debt. The acquisition price was paid with Cdn$4.7 million in cash and by the issuance of approximately 2.7 million Common Shares. Intermetco is a scrap and recycling processor which also manufactures and distributes pipe and tubular products. Intermetco reported sales of Cdn$194.9 million for the fiscal year ended December 31, 1996. The acquisition enhances Philip's ability to supply its steel industry clients with fully integrated services, from raw materials to by-products processing and distribution services. The Company believes that significant synergies will be realized through the increased tonnage processed at the Company's existing facilities, and through the integration of Intermetco's pipe and tubular products operations into Philip's southwestern and southeastern steel processing and distribution networks. Roth. In July 1997, Philip purchased Roth Bros. Smelting Corp. ("Roth"), a private company based in Syracuse, New York, for a total consideration of approximately $52 million, including the assumption of $6.7 million in debt. The acquisition price was paid with $37.5 million in cash and by the issuance of approximately 422,000 Common Shares. Roth is a manufacturer of secondary aluminum alloy products for the automotive and other industrial manufacturing industries which recorded sales of approximately $94 million for the fiscal year ended December 31, 1996. The Company believes the acquisition of Roth expands its aluminum alloy operations and will result in greater market penetration of the automotive manufacturers that are heavily concentrated in the Great Lakes region. INDUSTRIAL SERVICES Allwaste. In July 1997, Philip acquired Allwaste, Inc. ("Allwaste") for a total consideration of $502 million, including the assumption of $142 million in debt. The acquisition price was paid by the issuance of approximately 23 million Common Shares. Allwaste is an integrated provider of industrial and environmental services which reported revenues of $382.2 million for the fiscal year ended August 31, 1996. The Company believes the acquisition of Allwaste significantly broadens the Company's service offerings, expands its geographical presence in the United States and significantly increases its customer list. In addition, Allwaste is expected to provide the Company with opportunities to rationalize operations, to enhance revenues through the cross-selling of services and to improve asset utilization. Serv-Tech. In July 1997, Philip completed the acquisition of Serv-Tech Inc. ("Serv-Tech") for a total consideration of $58 million, including the assumption of $15 million in debt. The acquisition price was paid by the issuance of approximately 2.7 million Common Shares. Serv-Tech is an integrated provider of specialty services and products, including turnaround project management services, electrical and instrumentation management services, and specialty chemicals products. Serv-Tech reported revenues of $142.4 million for the fiscal year ended December 31, 1996. The Company believes the acquisition will strengthen its position in industrial maintenance and turnaround services. In addition, the acquisition will broaden the Company's customer base in the petrochemical and oil and gas utility industries. CREDIT FACILITY On August 11, 1997, the Company and Philip Environmental (Delaware) Inc. ("PEI"), a wholly owned subsidiary of the Company, entered into a Credit Agreement with a group of Canadian and United States financial institutions, providing for a revolving credit facility (the "Credit Facility") up to a maximum amount of $1.5 billion. The Credit Facility, which is secured by a pledge of all securities held by the Company and PEI in all of their material subsidiaries has a five-year term. Borrowings under the Credit Facility bear interest at varying rates, depending on the nature of the loan and the Company's compliance with certain financial ratios. See "Description of Certain Indebtedness -- Credit Facility." RECENT DEVELOPMENTS On November 5, 1997, the Company announced certain financial information for the nine months ended September 30, 1997. Revenues and income from operations for such period were $1,126 million and $98 million, respectively, compared to $382 million and $36 million, respectively, for the nine months ended September 30, 1996. See "Recent Developments." ------------------------------------ Philip is a corporation existing under the laws of the Province of Ontario. The Company's head office is located at 100 King Street West, P.O. Box 2440, LCD1, Hamilton, Ontario, Canada, L8N 4J6 and its telephone number is (905) 521-1600. THE OFFERINGS <TABLE> <S> <C> COMMON SHARES OFFERED: U.S. OFFERING............... 15,000,000 Shares INTERNATIONAL OFFERING...... 5,000,000 Shares ------------------- TOTAL.................... 20,000,000 Shares ------------------- </TABLE> COMMON SHARES TO BE OUTSTANDING AFTER THE OFFERINGS................ 128,019,291 shares(1) USE OF PROCEEDS............ Estimated net proceeds of the Offerings in the amount of approximately million will be used to repay indebtedness outstanding under the Company's Credit Facility. See "Use of Proceeds." NYSE, TSE AND ME STOCK EXCHANGE SYMBOL.......... "PHV" - --------------- (1) Based on 108,019,291 Common Shares outstanding as of November 4, 1997. Excludes options outstanding at November 4, 1997 to purchase up to 9,140,005 Common Shares, of which options to acquire 4,440,187 Common Shares were then exercisable, at prices ranging from Cdn$6.75 to Cdn$26.75. SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA The following table presents summary historical consolidated financial data of Philip for the periods indicated, including the accounts of all companies acquired prior to the end of the respective reporting periods. These companies, all of which were acquired in transactions accounted for as purchases, are included from their respective dates of acquisition. The selected historical consolidated financial data for Philip as of and for the three years ended December 31, 1996 is derived from the audited Consolidated Financial Statements of Philip and as of and for the six months ended June 30, 1996 and 1997 is derived from the unaudited interim consolidated financial statements of Philip, which in the opinion of management include all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial information for such periods. Interim results are not necessarily indicative of the results which may be expected for any other interim period or for a full year. For all periods indicated, the selected historical consolidated financial data reflects Philip's former municipal and commercial solid waste operations, which were sold in August 1996, as a discontinued operation. Philip prepares its Consolidated Financial Statements in accordance with Canadian GAAP. The summary historical consolidated financial data set forth below is presented in both Canadian GAAP and U.S. GAAP. Canadian GAAP conforms in all material respects with U.S. GAAP, except as described in Note 18 to the Consolidated Financial Statements of the Company included elsewhere in this Prospectus. The selected historical consolidated financial data should be read in conjunction with the accompanying Consolidated Financial Statements of the Company and the related Notes thereto included elsewhere in this Prospectus. Selected historical consolidated financial data of the Company presented in U.S. GAAP (in U.S. dollars) is disclosed in this Prospectus following the Consolidated Financial Statements of the Company. Philip did not pay any cash dividends during the periods set forth below. <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, FISCAL YEARS ENDED DECEMBER 31, ------------------------ -------------------------------------- 1997 1996 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> CANADIAN GAAP: STATEMENTS OF EARNINGS DATA: Revenue.............................................. $ 856,629 $ 323,397 $ 802,490 $ 648,311 $ 489,740 Operating expenses................................... 701,300 251,586 615,462 489,569 366,649 Selling, general and administrative.................. 63,461 33,445 78,053 66,563 51,216 Depreciation and amortization........................ 24,148 15,438 33,966 25,510 21,354 ---------- ---------- ---------- ---------- ---------- Income from operations............................... 67,720 22,928 75,009 66,669 50,521 Interest expense..................................... 19,212 15,023 24,598 28,187 21,750 Other income and expense-net......................... (5,522) (2,459) (4,782) (3,689) (2,122) ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations before tax....... 54,030 10,364 55,193 42,171 30,893 Income taxes......................................... 16,392 2,707 15,180 12,354 8,769 ---------- ---------- ---------- ---------- ---------- Earnings from continuing operations.................. 37,638 7,657 40,013 29,817 22,124 Discontinued operations (net of tax)................. -- 7,234 (1,005) 2,894 2,502 ---------- ---------- ---------- ---------- ---------- Net earnings......................................... $ 37,638 $ 14,891 $ 39,008 $ 32,711 $ 24,626 ========== ========== ========== ========== ========== Basic earnings per share: Continuing operations.............................. $ 0.53 $ 0.19 $ 0.79 $ 0.80 $ 0.61 Discontinued operations............................ -- 0.18 (0.02) 0.08 0.07 ---------- ---------- ---------- ---------- ---------- $ 0.53 $ 0.37 $ 0.77 $ 0.88 $ 0.68 ========== ========== ========== ========== ========== Fully diluted earnings per share: Continuing operations.............................. $ 0.52 $ 0.19 $ 0.72 $ 0.68 $ 0.55 Discontinued operations............................ -- 0.14 (0.01) 0.05 0.05 ---------- ---------- ---------- ---------- ---------- $ 0.52 $ 0.33 $ 0.71 $ 0.73 $ 0.60 ========== ========== ========== ========== ========== Weighted average number of common shares outstanding (000s)............................................. 70,970 40,586 50,632 37,342 36,209 ========== ========== ========== ========== ========== BALANCE SHEET DATA (END OF PERIOD): Working capital...................................... $ 526,982 $ 156,563 $ 347,501 $ 106,604 $ 88,269 Total assets......................................... 1,694,437 1,030,988 1,345,719 1,002,912 860,583 Total debt(1)........................................ 692,280 404,282 414,768 421,355 400,251 Shareholders' equity................................. 692,383 420,842 623,351 312,102 277,882 OTHER DATA: Amortization......................................... $ 7,055 $ 5,188 $ 11,720 $ 9,798 $ 7,869 Depreciation......................................... 17,093 10,250 22,246 15,712 13,485 Additions to property, plant & equipment............. 44,539 22,810 59,847 37,016 29,910 </TABLE> <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, FISCAL YEARS ENDED DECEMBER 31, -------------------------- -------------------------------------- 1997 1996 1996 1995 1994 ---------- ---------- ---------- -------- -------- (THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> U.S. GAAP: STATEMENTS OF EARNINGS DATA: Revenue....................................... $ 856,629 $ 323,397 $ 742,975 $648,311 $489,740 Operating expenses............................ 701,300 251,586 563,393 489,569 366,649 Selling, general and administrative........... 63,461 33,445 75,674 66,563 51,216 Depreciation and amortization................. 24,148 15,438 33,006 25,510 21,354 ---------- ---------- ---------- -------- -------- Income from operations........................ 67,720 22,928 70,902 66,669 50,521 Interest expense.............................. 19,212 13,639 22,157 25,557 19,339 Other income and expense-net.................. (5,522) (2,459) (4,708) (3,689) (2,122) ---------- ---------- ---------- -------- -------- Earnings from continuing operations before tax......................................... 54,030 11,748 53,453 44,801 33,304 Income taxes.................................. 16,392 2,707 13,755 12,354 8,769 ---------- ---------- ---------- -------- -------- Earnings from continuing operations........... 37,638 9,041 39,698 32,447 24,535 Discontinued operations (net of tax).......... -- 7,234 (1,005) 2,894 2,502 ---------- ---------- ---------- -------- -------- Net earnings.................................. $ 37,638 $ 16,275 $ 38,693 $ 35,341 $ 27,037 ========== ========== ========== ======== ======== Primary earnings per share: Continuing operations....................... $ 0.53 $ 0.22 $ 0.79 $ 0.87 $ 0.68 Discontinued operations..................... -- 0.18 (0.02) 0.08 0.07 ---------- ---------- ---------- -------- -------- $ 0.53 $ 0.40 $ 0.77 $ 0.95 $ 0.75 ========== ========== ========== ======== ======== Fully diluted earnings per share: Continuing operations....................... $ 0.52 $ 0.19 $ 0.69 $ 0.68 $ 0.55 Discontinued operations..................... -- 0.14 (0.01) 0.05 0.02 ---------- ---------- ---------- -------- -------- $ 0.52 $ 0.33 $ 0.68 $ 0.73 $ 0.57 ========== ========== ========== ======== ======== Weighted average number of common shares outstanding (000s).......................... 70,970 40,586 50,073 37,342 36,209 ========== ========== ========== ======== ======== BALANCE SHEET DATA (END OF PERIOD): Working capital............................... $ 526,982 $ 156,563 $ 347,501 $106,604 $ 88,269 Total assets.................................. 1,687,430 1,026,211 1,338,692 998,135 855,681 Total debt(1)................................. 692,280 418,645 414,768 437,100 419,082 Shareholders' equity.......................... 685,376 401,702 616,324 291,580 254,150 OTHER DATA: Amortization.................................. $ 7,055 $ 5,188 $ 11,016 $ 9,798 $ 7,869 Depreciation.................................. 17,093 10,250 21,990 15,712 13,485 Additions to property, plant and equipment.... 44,539 22,810 59,847 37,016 29,910 </TABLE> - --------------- (1) Total debt includes the current portion of long-term debt. The following table presents summary historical consolidated financial data of Philip on the same basis as set forth above, in U.S. Dollars and on the basis of U.S. GAAP. <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, FISCAL YEARS ENDED DECEMBER 31, ------------------------ ------------------------------------ 1997 1996 1996 1995 1994 ---------- -------- -------- -------- -------- (thousands of dollars, except share and per share amounts) <S> <C> <C> <C> <C> <C> U.S. GAAP STATEMENTS OF EARNINGS DATA: Revenue........................................... $ 623,358 $236,506 $545,344 $472,358 $358,784 Operating expenses................................ 510,282 183,991 413,013 356,699 268,606 Selling, general and administrative............... 46,254 24,460 56,063 48,496 37,522 Depreciation and amortization..................... 17,590 11,291 24,225 18,587 15,644 ---------- -------- -------- -------- -------- Income from operations............................ 49,232 16,764 52,043 48,576 37,012 Interest expense.................................. 13,979 9,973 16,263 18,621 14,167 Other income and expense - net.................... (4,051) (1,799) (3,456) (2,688) (1,553) ---------- -------- -------- -------- -------- Earnings from continuing operations before tax.... 39,304 8,590 39,236 32,643 24,398 Income taxes...................................... 11,923 1,979 10,098 9,001 6,424 ---------- -------- -------- -------- -------- Earnings from continuing operations............... 27,381 6,611 29,138 23,642 17,974 Discontinued operations (net of tax).............. -- 5,298 (716) 2,109 1,833 ---------- -------- -------- -------- -------- Net earnings...................................... $ 27,381 $ 11,909 $ 28,422 $ 25,751 $ 19,807 ========== ======== ======== ======== ======== Primary earnings per share: Continuing operations........................... $ 0.39 $ 0.17 $ 0.58 $ 0.63 $ 0.50 Discontinued operations......................... -- 0.12 (0.01) 0.06 0.05 ---------- -------- -------- -------- -------- $ 0.39 $ 0.29 $ 0.57 $ 0.69 $ 0.55 ========== ======== ======== ======== ======== Fully diluted earnings per share: Continuing operations........................... $ 0.38 $ 0.14 $ 0.51 $ 0.49 $ 0.40 Discontinued operations......................... -- 0.10 (0.01) 0.04 0.02 ---------- -------- -------- -------- -------- $ 0.38 $ 0.24 $ 0.50 $ 0.53 $ 0.42 ========== ======== ======== ======== ======== Weighted average number of common shares outstanding (000s).............................. 70,970 40,586 50,073 37,342 36,209 ========== ======== ======== ======== ======== BALANCE SHEET DATA (END OF PERIOD): Working capital................................... $ 382,062 $114,698 $253,675 $ 78,098 $ 63,050 Total assets...................................... 1,223,387 751,802 977,236 731,234 611,213 Total debt(1)..................................... 501,904 306,699 302,781 320,220 299,347 Shareholders' equity.............................. 496,898 294,287 449,907 213,611 181,541 OTHER DATA: Amortization...................................... $ 5,138 $ 3,795 $ 8,085 $ 7,139 $ 5,765 Depreciation...................................... 12,452 7,496 16,140 11,448 9,879 Additions to property, plant and equipment........ 25,900 11,177 30,004 23,347 17,223 </TABLE> - --------------- (1) Total debt includes the current portion of long-term debt. SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA The summary unaudited pro forma consolidated financial data set forth below should be read in conjunction with the Unaudited Pro Forma Consolidated Financial Information and related Notes included elsewhere in this Prospectus. The summary unaudited pro forma financial information is presented as if the acquisitions of Allwaste (completed on July 31, 1997), Intsel Southwest Limited Partnership (completed on September 27, 1996) ("Intsel") and Luntz Corporation (completed on December 23, 1996) ("Luntz") had occurred on January 1, 1996 (for Statements of Earnings purposes) and as if the acquisition of Allwaste had occurred on June 30, 1997 (for Balance Sheet purposes). The summary unaudited pro forma statement of earnings data and balance sheet data do not take into consideration other acquisitions completed by Philip in 1996 and 1997, which acquisitions are not sufficiently material, either individually or in the aggregate, to require pro forma disclosure under applicable disclosure rules. The summary unaudited pro forma financial information is presented in U.S. dollars and on the basis of U.S. GAAP, and excludes Philip's former municipal and commercial solid waste operations and Allwaste's former glass recycling operations since they are discontinued operations. This pro forma financial information does not purport to represent what Philip's results of operations or financial position would have been had the acquisitions of Allwaste, Intsel and Luntz occurred on the dates indicated or for any future period or at any future date. <TABLE> <CAPTION> PRO FORMA ------------------------------------------------------- SIX MONTHS ENDED FISCAL YEAR ENDED JUNE 30, 1997 DECEMBER 31, 1996 ---------------- ----------------- (thousands of dollars, except share and per share amounts) <S> <C> <C> U.S. GAAP STATEMENTS OF EARNINGS DATA: Revenue............................................... $817,843 $ 1,162,306 Operating expenses.................................... 656,721 907,720 Selling, general and administrative................... 66,536 113,251 Depreciation and amortization......................... 37,003 67,935 -------- ----------- Income from operations................................ 57,583 73,400 Interest expense...................................... 18,926 32,479 Other income and expense-net.......................... (5,870) (6,765) -------- ----------- Earnings from continuing operations before tax........ 44,527 47,686 Income taxes.......................................... 16,071 18,193 Minority interest..................................... 138 (101) -------- ----------- Earnings from continuing operations................... $ 28,318 $ 29,594 ======== =========== Primary earnings per share............................ $ 0.30 $ 0.39 -------- ----------- Fully diluted earnings per share...................... $ 0.29 $ 0.36 ======== =========== Weighted average number of common shares outstanding (000s).................................. 94,026 75,351 ======== =========== OTHER DATA: Amortization.......................................... $ 10,655 $ 15,990 Depreciation.......................................... 26,348 51,945 Additions to property, plant and equipment............ 50,254 66,677 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------------- PRO FORMA PRO FORMA AS ADJUSTED(1) ----------- -------------- (thousands of dollars) <S> <C> <C> BALANCE SHEET DATA (END OF PERIOD): Working capital................................................................. $ 364,424 $ 364,424 Total assets.................................................................... 1,886,500 1,886,500 Total debt(2)................................................................... 607,396 Shareholders' equity............................................................ 888,617 </TABLE> - --------------- (1) As adjusted for the Offerings and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000894172_hamilton_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000894172_hamilton_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..84f2c7f08319be6efe36b98c577635e05a5a12e5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000894172_hamilton_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION SET FORTH IN THIS PROSPECTUS (I) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, (II) GIVES EFFECT TO A 6.5-FOR-1 STOCK SPLIT EFFECTED PRIOR TO THE OFFERING (THE "STOCK SPLIT") AND (III) HAS BEEN ADJUSTED TO REFLECT A REORGANIZATION OF THE CAPITAL STRUCTURE OF THE COMPANY CONSISTING OF (A) THE CONVERSION OF ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES B PREFERRED STOCK INTO 277,316 SHARES OF COMMON STOCK (POST-STOCK SPLIT) AND ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES C PREFERRED STOCK INTO 188,852 SHARES OF COMMON STOCK (POST-STOCK SPLIT), AND (B) THE ISSUANCE OF AN AGGREGATE OF 1,396,761 SHARES OF COMMON STOCK (POST-STOCK SPLIT) FOR ALL OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF HAMILTON BANK, N.A. (COLLECTIVELY THE "REORGANIZATION"). THE REORGANIZATION WAS COMPLETED IN MARCH 1997. REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" INCLUDE HAMILTON BANCORP, INC. ("BANCORP") AND ITS 99.7%-OWNED SUBSIDIARY, HAMILTON BANK, N.A. THE COMPANY The Company, through its subsidiary, Hamilton Bank, N.A. (the "Bank"), is engaged in providing global trade finance, with particular emphasis on trade with and between South America, Central America, the Caribbean (collectively, the "Region") and the United States or otherwise involving the Region. Management believes that trade finance provides the Company with the opportunity for substantial and profitable growth, primarily with moderate credit risk, and that the Bank is the only domestic financial institution in the State of Florida focusing primarily on financing foreign trade. Through its relationships with approximately 500 correspondent banks and with importers and exporters in the United States and the Region, as well as its location in South Florida, which is becoming a focal point for trade in the Region, the Company has been able to take advantage of substantial growth in this trade. Much of this growth has been associated with the adoption of economic stabilization policies in the major countries of the Region. The Company operates in all major countries throughout the Region and has been particularly active in several smaller markets, such as Guatemala, Ecuador, Panama and Peru. Management believes that these smaller markets are not primary markets for larger, multinational financial institutions and, therefore, customers in such markets do not receive a similar level of service from such institutions as that provided by the Company. To enhance its position in certain markets, the Company has made minority investments in indigenous financial institutions in Guyana, Haiti and El Salvador. The Company has also strengthened its relationships with correspondent financial institutions in the Region by acting as placement agent, from time to time, for debt instruments or certificates of deposit issued by many of such institutions. As the Company has grown, it has begun to expand its activities in larger markets in the Region, such as Argentina and Brazil. The Company seeks to generate income by participating in multiple aspects of trade transactions that generate both fee and interest income. The Company earns fees primarily from opening and confirming letters of credit and discounting acceptances and earns interest on credit extended, primarily in the form of commercial loans, for pre- and post-export financing, such as refinancing of letters of credit, and to a lesser extent, from discounted acceptances. As the economy in the Region has grown and stabilized and the Company has begun to service larger customers, the balance of the Company's trade financing activities has shifted somewhat from letters of credit to the discounting of commercial trade paper and the granting of loans, resulting in less fee income but increased interest income. Increased competition has also resulted in decreased letter of credit fees. Virtually all of the Company's business is conducted in United States dollars. Management believes that the Company's primary focus on trade finance, its wide correspondent banking network in the Region, broad range of services offered, management experience, reputation and prompt decision-making and processing capabilities provide it with important competitive advantages in the trade finance business. The Company seeks to mitigate its credit risk through its knowledge and analysis of the markets it serves, by obtaining third-party guarantees of both local banks and importers on many transactions, by often obtaining security interests in goods being financed and by the short-term, self-liquidating nature of trade transactions. At December 31, 1996, 80.6% of the Company's loan portfolio consisted of short-term trade related loans with an average original maturity of approximately 180 days. Credit is generally extended under specific credit lines for each customer and country. These credit lines are reviewed at least annually. Lending activities are funded primarily through domestic consumer and commercial deposits gathered through a network of six branches in Florida as well as deposits received from correspondent banks, corporate customers and private banking customers within the Region. The Company is currently in the process of opening an additional branch in West Palm Beach, Florida. The Company's branches are strategically located in markets where it believes that there is both a concentration of retail deposits and foreign trade activity. The Company also participates in various community lending activities and under several United States and Florida laws and regulations, the Bank is considered a minority bank and is able to participate in certain minority programs involving both deposits and loans. The Company has experienced sustained growth in assets and earnings since its acquisition by current management and shareholders in 1988, and has also achieved a high level of profitability. For the three years ended December 31, 1996, average total loans increased from $270.8 million to $485.8 million, and net income increased from $5.7 million to $9.7 million. For the years ended December 31, 1995 and 1996, return on average assets was 1.50% and 1.41%, respectively, and return on average total equity was 24.73% and 24.29%, respectively. Along with its growth, the Company has maintained strong credit quality. Net loan chargeoffs as a percentage of average outstanding loans were 0.58% and 0.36% for 1995 and 1996. At December 31, 1996, non-performing assets represented 0.91% of total loans. The Company's goal is to continue to grow its earnings and maintain a high level of profitability while maintaining strong credit quality by continuing its focus on trade finance. The Company's strategy is (i) to continue to take advantage of the growing trade in the Region, (ii) to use the enhanced capital base resulting from this Offering to expand credit limits to existing customers, (iii) to take advantage of its enhanced capital base to expand the Bank's involvement with larger banks in certain of the larger markets in the Region, and (iv) to continue to expand its domestic branch system in order to attract additional consumer and commercial deposits. Bancorp is a bank holding company incorporated under the laws of Florida and established in Miami, Florida, in 1988 to acquire the Bank (then known as Alliance National Bank), a national bank. At December 31, 1996, the Company had total assets of approximately $755.6 million, total deposits of approximately $638.6 million and stockholders' equity of approximately $43.8 million. The principal executive offices of the Company are located at 3750 N.W. 87th Avenue, Miami, Florida 33178, and the Company's telephone number is (305) 717-5500. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................ 2,000,000 shares Common Stock outstanding after this Offering....... 9,067,949 shares(1)(2) Use of proceeds.................................... Contribution to the capital of the Bank to support future growth in its trade finance business. NASDAQ symbol...................................... "HABK" Risk Factors....................................... The Common Stock offered hereby involves a high degree of risk. Risks that should be considered by prospective purchasers include Regional economic conditions, potential political instability, credit risks and risks related to collateral, the concentration of cross-border lending activities, potential impact of changes in interest rates, the concentration of deposits, the ability of the Company to continue its growth strategy, dependence on management and key personnel, competition and supervision and regulation. See "Risk Factors." Dividend Policy.................................... The Company intends to retain all future earnings for the operation and expansion of its business and does not anticipate paying cash dividends on its Common Stock in the forseeable future. See "Dividend Policy." </TABLE> - ------------------------------ (1) Does not include an aggregate of 877,500 shares of Common Stock reserved for issuance upon exercise of stock options granted or to be granted under the Company's 1993 Stock Option Plan (the "1993 Plan"), pursuant to which options to purchase 585,000 shares of Common Stock are issued and outstanding at an exercise price of $9.23 per share, the fair market value on the date of grant as determined by the Company's Board of Directors. See "Management--Company Stock Option Plan." (2) Upon consummation of the Offering, approximately 28.1% of the issued and outstanding shares of Common Stock of the Company will be held by the Company's officers, directors and beneficial owners of more than 5% of the issued and outstanding shares of Common Stock (assuming no exercise of the over-allotment option). SUMMARY CONSOLIDATED FINANCIAL DATA (Dollars in thousands, except per share data) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 1996 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net interest income........................................ $9,712 $13,209 $17,201 $24,143 $28,375 Provision for credit losses................................ 1,477 2,550 2,875 2,450 3,040 --------- --------- --------- --------- --------- Net interest income after provision for credit losses...... 8,235 10,659 14,326 21,693 25,335 Trade finance fees and commissions......................... 5,535 6,572 7,422 8,173 7,590 Capital market fees, net................................... 1,036 1,634 1,410 318 112 Customer services fees..................................... 927 943 1,044 1,267 1,136 Net gain (loss) on sale of securities available for sale... 167 11 (168) 3 0 Other income............................................... 219 403 322 569 996 --------- --------- --------- --------- --------- Total non-interest income.................................. 7,884 9,563 10,030 10,330 9,834 --------- --------- --------- --------- --------- Operating expenses......................................... 10,795 13,014 14,946 18,849 19,604 --------- --------- --------- --------- --------- Income before provision for income taxes................... 5,324 7,208 9,410 13,174 15,565 Provision for income taxes................................. 1,950 2,761 3,721 5,171 5,855 --------- --------- --------- --------- --------- Net income................................................. $3,374 $4,447 $5,689 $8,003 $9,710 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- PER COMMON SHARE DATA: Net income per common share(1)............................. $0.62 $0.82 $1.05 $1.47 $1.79 Book value per common share(1)............................. $2.30 $3.10 $5.06 $6.41 $8.07 Average weighted shares.................................... 5,430,030 5,430,030 5,430,030 5,430,030 5,430,030 PRO FORMA PER COMMON SHARE DATA (2): Net income per common share................................ $1.33 Book value per common share................................ $6.01 Average weighted shares.................................... 7,292,949 </TABLE> <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 1996 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> AVERAGE BALANCE SHEET DATA: Total assets....................................................... $ 225,881 $ 276,285 $ 391,606 $ 534,726 $ 687,990 Total loans........................................................ 131,306 190,364 270,798 370,568 485,758 Total deposits..................................................... 166,389 222,397 317,176 444,332 574,388 Stockholders' equity............................................... 11,496 15,267 22,195 32,358 39,969 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ---------------------------------------- ACTUAL PRO FORMA(2) AS ADJUSTED(3) --------- ------------- -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Total assets............................................................. $ 755,570 $ 755,570 $782,570 Loans--net............................................................... 527,279 527,279 527,279 Total cash and cash equivalents.......................................... 33,106 33,106 60,106 Interest-earning deposits with other banks............................... 80,477 80,477 80,477 Securities available for sale............................................ 29,020 29,020 29,020 Due from customers on bankers' acceptances and on deferred payment letters of credit...................................................... 68,104 68,104 68,104 Deposits................................................................. 638,641 638,641 638,641 Bankers' acceptances and deferred payment letters of credit outstanding............................................................ 68,104 68,104 68,104 Total stockholders' equity............................................... 43,800 43,800 70,800 </TABLE> SELECTED FINANCIAL RATIOS: <TABLE> <CAPTION> AT AND FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 1996 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> PERFORMANCE RATIOS: Net interest spread............................................. 4.51% 4.76% 4.33% 4.20% 3.85% Net interest margin............................................. 5.40% 5.48% 5.06% 4.94% 4.52% Return on average equity........................................ 29.35% 29.13% 25.63% 24.73% 24.29% Return on average assets........................................ 1.49% 1.61% 1.45% 1.50% 1.41% Efficiency ratio(4)............................................. 61.35% 57.15% 54.89% 54.68% 51.31% ASSET QUALITY RATIOS: Allowance for credit losses as a percentage of total loans...... 1.05% 1.66% 1.31% 1.05% 1.07% Non-performing assets as a percentage of total loans............ 0.20% 1.33% 0.59% 1.07% 0.91% Allowance for credit losses as a percentage of non-performing assets........................................................ 520.87% 125.00% 221.13% 98.56% 117.97% Net loan charge-offs as a percentage of average outstanding loans......................................................... 0.66% 0.50% 0.74% 0.58% 0.36% CAPITAL RATIOS: Leverage capital ratio.......................................... 5.28% 5.21% 5.48% 5.68% 5.80% Tier 1 capital.................................................. 9.71% 9.35% 10.30% 9.98% 10.20% Total capital................................................... 10.96% 10.60% 11.47% 10.92% 11.50% Average equity to average assets................................ 5.09% 5.53% 5.67% 6.05% 5.81% </TABLE> - ------------------------ (1) Represents net income and net book value, respectively, per share of Common Stock and common stock equivalents. (2) The pro forma information reflects the completion of the Reorganization. (3) Adjusted to reflect the sale of 2,000,000 shares of Common Stock offered by the Company at an assumed public offering price of $15.00 per share. (4) Amount reflects operating expenses as a percentage of net interest income plus non-interest income.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000894751_boston_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000894751_boston_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e088a07c2ed02bb4c55b836efa8a8375e2d976ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000894751_boston_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements of the Company and Notes thereto included in this Prospectus. References in this Prospectus to the "Company" mean the Company, its predecessors, and its and their subsidiaries from time to time, unless the context otherwise requires. Boston Chicken(R) and Boston Market(R) are trademarks owned by the Company, and Einstein Bros.(TM) and Noah's New York Bagels(R) are trademarks owned by Einstein/Noah Bagel Corp. THE COMPANY The Company franchises and operates retail food service stores under the Boston Market brand name that specialize in fresh, convenient meals featuring home style entrees of chicken, turkey, ham, and meat loaf, as well as sandwiches and a variety of freshly prepared vegetables, salads, and other side dishes. As of April 20, 1997, the Boston Market system included 1,159 stores located in 38 states and the District of Columbia, 915 of which are operated by area developers partially financed by the Company with convertible secured revolving loans, 226 of which are Company stores, and 18 of which are operated by other franchisees. As of April 20, 1997, the Company had entered into area development agreements that provide for the development of 2,425 additional stores. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 6. See also "Risk Factors--Expansion/Dependence on Area Developers," "Recent Developments" and "The Company--Area Developers". The Boston Market concept combines the fresh, flavorful, and appealing meals associated with traditional home cooking with the convenience associated with fast food. Boston Market stores feature a clean, bright, and inviting environment to purchase a meal for take-out or in-store dining. Primary entrees include rotisserie roasted chicken and turkey breast, double-glazed baked ham, and double-sauced meat loaf. Side dishes designed to complement these entrees include mashed potatoes made from scratch, corn, stuffing, creamed spinach, butternut squash, garlic and dill potatoes, baked beans, macaroni and cheese, cranberry walnut relish, cinnamon apples, and a variety of chilled salads. Stores also offer a variety of freshly carved chicken, turkey, ham and meat loaf sandwiches under the Boston Carver(R) and Extreme Carver(TM) brand names; fresh-baked chicken pot pies; chicken and other soups; beverages; desserts; and other items. The Company owns approximately 17.3 million shares (representing approximately 52%) of the outstanding common stock of Einstein/Noah Bagel Corp. ("ENBC") as of July 17, 1997. ENBC franchises specialty retail stores that feature fresh-baked bagels, proprietary cream cheeses, specialty coffees and teas, and creative soups, salads and bagel sandwiches, and other related products, primarily under the Einstein Bros. Bagels and Noah's New York Bagels brand names. The common stock of ENBC is quoted on the Nasdaq National Market under the symbol "ENBX". On July 17, 1997, the last sale price of the common stock of ENBC as reported on the Nasdaq National Market was $12 5/8 per share. See "The Company--Einstein/Noah Bagel Corp." The Company was incorporated as a Massachusetts corporation in March 1988 and was reincorporated in the State of Delaware in September 1993. The Company's principal executive offices are located at 14103 Denver West Parkway, P.O. Box 4086, Golden, Colorado 80401-4086, and its telephone number is (303) 278-9500. RISK FACTORS AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS. SEE "RISK FACTORS." RECENT DEVELOPMENTS On May 28, 1997, the Board of Directors of the Company determined that, effective upon the sale by Saad J. Nadhir to other persons of a majority of his interest in the common stock of Progressive Food Concepts, Inc. ("PFCI") and Mr. Nadhir's resignation as an officer of PFCI, the number of directors of the Company would increase to ten and Mr. Nadhir would be appointed as a director and Co-Chairman of the Company, in each case without further action by the Board. On May 29, 1997, the Company announced that Scott Beck was assuming day- to-day management of the Company's Boston Market division, and that Larry Zwain, who had previously served as President and Chief Executive Officer of the Company's Boston Market division, would remain active in the Company's business through his position as Vice Chairman of the Company's Board of Directors. The Company also announced that it was not satisfied with current sales momentum in Boston Market stores or the level of discounts and promotions that currently characterize the system's marketing efforts, and that it intended to refocus the Company on its core home meal replacement business. Finally, the Company indicated that it was finalizing plans with its area developers to simplify the system's organizational structure to reduce duplication between the area developers and the Company's support center, to streamline certain administrative functions and to facilitate a higher level of store focus systemwide. On June 2, 1997, the Company reduced its support center workforce by approximately 115 people. The Company estimates that the workforce reductions will result in a one-time charge of up to $4.0 million in the second quarter of 1997. Such workforce reductions were primarily the result of the elimination of duplicative positions and the consolidation of various administrative functions. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 6. On June 25, 1997, the Company announced that it and its area developers had completed their review of store development plans and expect to open a total of 150 to 200 Boston Market stores in fiscal year 1997 and a total of 150 to 250 Boston Market stores in fiscal year 1998. The Company's original objective was to open approximately 300 stores in each such fiscal year. The Company has also announced that fewer than expected store openings will negatively impact earnings expectations for 1997 and 1998. The Company also announced that it is seeing sales weakness in Boston Market stores during the second quarter of fiscal 1997. The Company believes that such sales weakness is primarily attributable to transitioning its marketing strategy away from high levels of price-promoted offers and media spending and an emphasis on lunch products to reduced levels of price-promoted offers and media spending and an emphasis on dinner products. The Company believes that it may take several quarters for customer transactions to return to historical levels in light of fewer price- promoted offers and lower media spending. See "Risk Factors-- Expansion/Dependence on Area Developers," "The Company--Current Initiatives in the Boston Market System--Marketing Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." SEE ALSO "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 6. SUMMARY CONSOLIDATED FINANCIAL AND STORE DATA (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES) <TABLE> <CAPTION> FISCAL YEARS ENDED(1) QUARTERS ENDED(1) -------------------------------- -------------------- DEC. 25, DEC. 31, DEC. 29, APR. 21, APR. 20, 1994 1995 1996(2) 1996 1997 -------- ---------- ---------- -------- ---------- (UNAUDITED) <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenue......... $ 96,151 $ 159,479 $ 264,508 $ 47,347 $ 116,764 Income from opera- tions................ 24,611 67,238 91,329 28,547 46,021 Net income............ 16,173 33,559 66,958 15,649 21,448 Net income per common and equivalent share............... $ 0.38 $ 0.66 $ 1.01 $ 0.24 $ 0.32 Weighted average num- ber of common and equivalent shares outstanding......... 42,861 50,972 66,501 64,317 67,966 STORE DATA (UNAUDITED): Systemwide Boston Mar- ket store revenue (3).................. $383,691 $ 792,948 $1,166,591 $311,798 $ 415,238 Number of Boston Mar- ket stores: Beginning of period. 217 534 829 829 1,087 Opened.............. 323 310 273 70 72 Closed (4).......... (6) (15) (15) (5) 0 -------- ---------- ---------- -------- ---------- End of period....... 534 829 1,087 894 1,159 ======== ========== ========== ======== ========== Company stores...... 41 3 105 3 226 Franchised stores... 493 826 982 891 933 CONSOLIDATED BALANCE SHEET DATA: Working capital....... $ 32,049 $ 313,483 $ 58,829 $ (3,584) Notes receivable...... 202,500 456,034 800,519 852,834 Total assets.......... 426,982 1,073,877 1,543,616 1,635,917 Long-term debt........ 130,000 307,178 312,454 381,871 Stockholders' equity.. $259,815 $ 716,831 $ 935,840 $ 968,989 </TABLE> - -------- (1) The Company's fiscal year is the 52/53-week period ending on the last Sunday in December and normally consists of 13 four-week periods. The first quarter consists of four periods and each of the remaining quarters consists of three periods. The fiscal year ended December 31, 1995 includes 53 weeks of operations. (2) On June 17, 1996, the Company began consolidating ENBC's results of operations as a result of the Company's conversion of its loan to ENBC into a majority equity interest in ENBC's common stock. Giving pro forma effect to the Company's loan conversion as of the beginning of the Company's fiscal year, revenue, net income, and net income per common and equivalent share were $292,030,000, $59,522,000, and $0.90, respectively. (3) Includes gross revenue for all stores in the Boston Market system. (4) Such stores were closed due to operating or site-related issues, changes in the market or trade area, changes in store development strategy, or failure of the store to meet desired sales or profitability levels. Of such stores, the Company closed two stores located in Michigan and area developers closed the remaining stores located in 15 states. Such stores were open for an average of 2.5 years prior to their closing. Costs associated with such closings were expensed by the owners of such stores.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000896157_carecentri_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000896157_carecentri_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c727b50d3f31b481a3177859ad004c5d0e8a58b5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000896157_carecentri_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," appearing elsewhere in this Prospectus, and the financial statements and notes thereto. THE COMPANY The Company is a leading provider of integrated systems and services designed to enable home health care providers to more effectively operate their businesses and compete in a managed care environment. The Company is the result of the merger of Central Health Management Services, Inc. ("CHMS") and InfoMed Holdings, Inc. ("IMHI") (the "IMHI Acquisition") completed in October 1996. The Company offers two comprehensive and flexible software solutions which utilize a core platform of applications and incorporate specialized selected modules, based on customer-demand, and allow customers to generate and utilize comprehensive financial, operational and clinical information. The Company's Shared Resource Solution offers customers an outsourcing opportunity which incorporates the Company's proprietary NAHC IS system software. Under this arrangement, the Company operates a data center which stores customer data and allows them real-time, secure access through a wide area communications network. The Company's In-House Solution, STAT 2, offers similar functionality, but is licensed to customers for use on their own computer systems. In addition to these two systems solutions and related software support services, the Company's home health care consulting services, acquired in January 1996, assist providers in addressing the challenges of reducing costs, maintaining quality, streamlining operations and re-engineering organizational structures. The Company also provides comprehensive agency support services which include administrative, billing and collection, training, reimbursement and financial management services, among others. Historically, the home health care industry has been highly fragmented and characterized by small, local providers offering a limited range of services. With the advent of managed care and integrated delivery systems, home health care providers have had to expand their geographic scope and range of product and service offerings in order to obtain referrals. As a result of these developments, the home health care industry has entered into a period of rapid consolidation. This consolidation, along with measures to address ongoing cost pressures, has led home health care providers to increasingly require enhanced management expertise, specialized industry knowledge and standardized financial, operational and clinical information in order to compete. The Company believes that many existing home health care information systems are inadequate to address the changing needs of home health care providers. Generally, these systems were designed to generate patient billing information and cost reports for Medicare reimbursement, and, as a result, may be unable to provide the detailed information required for meaningful business analyses. As a result of its system and service offerings, the Company believes it is uniquely positioned to meet the ongoing demands of home health care providers. The Company's objective is to enhance its position as a leading provider of solutions to the home health care industry by: (i) leveraging its existing customer base; (ii) generating recurring revenue; (iii) capitalizing on changing industry dynamics; (iv) expanding through acquisitions and strategic alliances; and (v) broadening system and service lines. The Company markets its systems and services through a direct sales force which consists of two national sales managers and 14 sales representatives located throughout the United States. During 1996, the Company had over 500 customers nationwide, comprised of hospital-based companies, large and small free-standing home health care providers, alternate-site care organizations, integrated delivery systems and government-managed organizations, including Columbia/HCA Healthcare Corporation, Tenet Healthcare Corporation, Home Health First, Mercy Health Services and Advocate Health System. The Company's executive offices are located at 6600 Powers Ferry Road, Atlanta, Georgia 30339, and its telephone number is (770) 644-6500. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................ 2,000,000 shares Common Stock offered by the Selling Stockholder.... 800,000 shares Common Stock to be outstanding after the 8,020,367 shares(1) offering......................................... Use of proceeds.................................... For general corporate purposes and working capital, including potential acquisitions. See "Use of Proceeds." Nasdaq National Market symbol...................... SCHI </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (in thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------------------------ ---------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ---- ---- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues....................... $ 2,425 $ 5,208 $ 12,110 $ 13,222 $ 25,995 $5,166 $11,428 Costs of net revenues.............. 1,962 4,328 7,694 8,154 14,698 3,219 5,479 Selling, general and administrative................... 262 810 2,959 3,095 7,037 1,138 3,293 Research and development........... 125 276 2,165 2,929 5,677 1,114 1,539 Amortization and depreciation...... -- -- -- -- 785 104 425 Purchased in-process research and development...................... -- -- -- -- 12,574 -- -- Severance and other restructuring charges.......................... -- -- -- -- 1,215 -- -- Income (loss) from operations...... 76 (206) (708) (956) (15,991) (409) 692 Net income (loss) per share(2)..... $ (3.71) $ 0.09 Weighted average common and common equivalent shares(2)............. 4,288 7,364 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED(3) ------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................. $ 2,533 $26,076 Working capital (deficit)................................. (1,798) 21,745 Total assets.............................................. 18,533 42,076 Long-term obligations..................................... 406 406 Shareholders' equity...................................... 5,369 28,912 </TABLE> - ------------------------------ (1) Based on the number of shares outstanding at May 21, 1997. Excludes approximately 1,693,830 shares of Common Stock reserved for issuance under the Company's stock option plans and individual stock option grants, of which approximately 1,427,937 options were issued and outstanding at a weighted average exercise price of $5.20, and 561,679 shares reserved for issuance upon the exercise of outstanding warrants at a weighted average exercise price of $1.66. See "Capitalization," "Management -- Stock Plans," "Description of Capital Stock" and Note 12 of Notes to Consolidated Financial Statements of the Company. (2) The number of shares used to compute the net income or loss per share reflects the 2,994,856 shares issued in the reorganization of the Company on January 17, 1996. See Notes 1, 12 and 16 of the Notes to the Consolidated Financial Statements of the Company. (3) Adjusted to give effect to the sale of Common Stock offered hereby at an assumed public offering price of $13.00 per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization." ------------------------------ Except as otherwise noted, all information in this Prospectus (i) reflects a 1-for-2 reverse stock split which is subject to stockholder approval and will be effected upon effectiveness of this Registration Statement (the "Stock Split"), (ii) reflects the historical financial information for CHMS, the acquiror of IMHI for financial reporting purposes, and includes the results of operations for IMHI only from October 8, 1996, the date upon which the IMHI Acquisition was consummated, and (iii) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000897067_cymer-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000897067_cymer-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5eef097a60f87011878c0d66dac9558fde07b105
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000897067_cymer-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY The Company was incorporated in Nevada in 1996. The Company's predecessor, Cymer Laser Technologies, was incorporated in California in 1986 and was reincorporated in Nevada in 1996. The Company's principal offices are located at 16750 Via Del Campo Court, San Diego, California 92127, and it telephone number at that location is (619) 451-7300. Unless the context otherwise requires, the terms "Cymer" and the "Company" as used in this Prospectus refer to Cymer, Inc. and Cymer, Inc.'s wholly-owned subsidiary, Cymer Japan, Inc. SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenues................................. $ 9,131 $ 5,699 $ 8,921 $ 18,820 $ 64,995 Operating income (loss)........................ (1,117) (2,696) (1,788) 346 7,884 Net income (loss).............................. (1,268) (2,924) (2,045) 69 6,510 Primary earnings (loss) per share (1).......... $ 0.58 Weighted average common and common equivalent shares outstanding(1)...... 11,210 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 --------------------- <S> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents...................................... 55,405 Working capital................................................ 84,743 Total assets................................................... 129,467 Total debt..................................................... 2,217 Stockholders' equity .......................................... 98,820 </TABLE> - ------------------ (1) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the determination of shares used in computing earnings per share for 1996.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000898172_barnett_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000898172_barnett_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5986c92486f14884471a6ec6f26dcab97b27ebc8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000898172_barnett_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, references in this Prospectus to a particular year refer to the 12-month period ended on June 30 in that year. Unless otherwise indicated, all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000899647_riviera_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000899647_riviera_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9b3c631b228b498a1bacbf802753d1ef52df195d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000899647_riviera_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes appearing elsewhere in this Prospectus. In this Prospectus, the term "Company" refers to Riviera Holdings Corporation, a Nevada corporation, and its subsidiaries including Riviera Operating Corporation ("ROC"). This Prospectus contains forward-looking information that involves risks and uncertainties, and such information is subject to the assumptions set forth in connection therewith and the information contained or incorporated by reference herein. Investors should carefully consider the information set forth under the heading "Risk Factors." Unless otherwise indicated, the information in this Prospectus (i) gives effect to the Company's stock splits in November 1994 and November 1995 and (ii) does not give effect to the exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY Riviera Holdings Corporation owns and operates the Riviera Hotel & Casino (the "Riviera") located on the Strip in Las Vegas, Nevada. The Riviera caters to adults seeking traditional Las Vegas-style gaming and entertainment. The Riviera is situated on a 26-acre site across the Strip from Circus Circus and adjacent to the Las Vegas Hilton and the Las Vegas Convention Center. The property features approximately 2,100 hotel rooms (including 169 suites), 105,000 square feet of casino space, a 100,000 square-foot convention, meeting and banquet facility (one of the largest in Las Vegas), four full-service restaurants, a 430-seat buffet, four showrooms, a 200-seat entertainment lounge, 47 food and retail concessions and approximately 2,900 parking spaces. The casino contains approximately 1,300 slot machines, 50 gaming tables, a keno lounge and a 200-seat race and sports book. The Riviera also offers one of the most extensive entertainment programs in Las Vegas, including such popular shows as Splash(R), An Evening at La Cage(R), Crazy Girls(SM) and Bottoms Up(R) and featured comedians at the Riviera Comedy Club(SM). Opened in 1955, the Riviera was one of the original casino/hotels on the Las Vegas Strip catering to high stakes gamblers. Since opening, the Riviera has been expanded several times. The most recent expansion, which occurred during 1988 through 1990, resulted in significant cost overruns and ultimately contributed to the Company's predecessor filing for bankruptcy protection in 1991. In 1992 the current management team was assembled and successfully guided the Company through its emergence from bankruptcy in June 1993. As a result of the bankruptcy, all of the Common Stock and $100.0 million of First Mortgage Notes were distributed to the secured creditors of the predecessor company. The new management team implemented new marketing programs, which included targeting California and the southwestern United States, and initiated a number of strategic changes to reposition the Riviera, including a shift from "high-rollers" to mid-level gaming customers, particularly slot players, who seek a broader entertainment experience. Management reconfigured the casino space to improve the flow of customer traffic, installed new slot machines and bill acceptors, reduced the number of gaming tables and de-emphasized baccarat. Management also decreased the volatility of gaming revenues by reducing credit limits, outsourcing the Company's sports book and shifting to parimutuel horse wagering. Improved hotel marketing efforts have resulted in one of the highest room occupancy rates on the Strip. This repositioning of the Riviera, together with other cost saving measures, improved operating results with earnings before interest, taxes, depreciation and amortization ("EBITDA") increasing from $25.6 million in 1994 to $27.8 million in 1995 and $31.5 million in 1996, a 23.1% increase from 1994; and net earnings increasing from $4.8 million in 1994 to $6.3 million in 1995 and $8.4 million in 1996, a 76.2% increase from 1994. Furthermore, non-gaming revenues as a percentage of gross revenues increased from 50.8% in 1994 to 52.6% in 1995 and 54.6% in 1996. BUSINESS AND GROWTH STRATEGY Management is pursuing a business and growth strategy which includes the following: Develop New Casino/Hotels. The Company intends to pursue a growth strategy by developing or acquiring casino/hotel properties in Nevada and other jurisdictions. As part of this strategy, on March 4, 1997, the Company entered into a letter of intent with Eagle Gaming, L.P. ("Eagle") to form a joint venture, Riviera Black Hawk, LLC ("RBL"), to develop a casino (the "Black Hawk Project") at what management believes is the premier gaming site in the Black Hawk/Central City, Colorado gaming market. The 71,000 square foot site, zoned entirely for gaming, is the first gaming site encountered when traveling from Denver and is approximately an hour drive from, and 40 miles west of, Denver. Approximately three million people live within a 100-mile radius of Black Hawk/Central City and casinos in the market generated gaming revenues of approximately $291 million in 1995 and $309 million in 1996. Current estimates for the Black Hawk Project assume a budget of approximately $55 million, including the acquisition of land and the development of what management believes will be the largest casino in Colorado, comprising a 62,000 square foot casino building. The Black Hawk Project is expected to feature 1,000 slot machines, 14 table games, a 500-space covered parking garage and entertainment and food service amenities. The Company initially will own approximately 80% of RBL, subject to Eagle's option to increase its ownership interest in RBL up to 49.9% at any time prior to the date on which RBL is licensed by the Colorado gaming authorities. In addition, the Company will enter into a management agreement with RBL that will provide for management fees based upon gross revenues and EBITDA of the casino. It is anticipated that construction of the casino will begin in the third quarter of 1997 and will be completed by the middle of 1998. The Black Hawk Project is subject to a number of conditions. These conditions include obtaining commitments for approximately $33 million of mortgage and equipment financing on satisfactory terms, obtaining bonded fixed-price construction and completion contracts, obtaining regulatory approvals for the Black Hawk Project and completing a development and operating agreement with Eagle. There can be no assurance that these and other conditions to the Black Hawk Project can be satisfied on terms satisfactory to the Company. In addition to the Black Hawk Project in Colorado, the Company plans to review and selectively acquire or develop casino/hotel properties both in Nevada and other jurisdictions. Manage Distressed Casino/Hotel Properties. In order to capitalize on management's experience in repositioning and managing the Riviera through the bankruptcy process, the Company formed Riviera Gaming Management, Inc. ("RGM") for the primary purpose of obtaining casino management contracts with financially distressed casino/hotels in Nevada and other jurisdictions. Since August 1996, RGM has been managing the Four Queens Hotel/Casino ("Four Queens") located adjacent to the Golden Nugget on Fremont Street in downtown Las Vegas. Under the Four Queens management contract, RGM receives a guaranteed minimum management fee plus additional compensation, based on EBITDA improvement of the Four Queens, and warrants to purchase 20% (on a fully diluted basis) of the equity of the Four Queens' parent. The Company believes that there is increasing demand for the services of skilled gaming and hospitality professionals. The Company intends to pursue management contracts with other financially distressed gaming properties. Management is actively reviewing and evaluating other financially troubled gaming properties in Nevada and other jurisdictions with a view towards managing properties with underlying sound business potential and in which the Company can purchase an equity interest. Continue to Improve Performance of the Riviera. The Riviera will continue to emphasize marketing programs that appeal to slot and mid-level table game customers with a focus on creating repeat customers and increasing walk-in traffic. Key elements of this strategy include offering a value-oriented experience by providing a variety of hotel rooms, restaurants and entertainment, with some of Las Vegas' most popular shows, all at reasonable prices. The Company is continuing an extensive capital investment program at the Riviera, including completion of the upgrade of its slot machines in the second quarter of 1997 and the refurbishment of all its hotel rooms, which will be completed in the fall of 1997. In addition, the Company is focusing its marketing to take advantage of the Riviera's location by capitalizing on the increase in walk-in traffic from the addition of 1,000 rooms across the Strip at Circus Circus and the expansions of the Las Vegas Hilton and the Las Vegas Convention Center. Further Develop the Riviera. The Company has engaged architects and designers to prepare an overall expansion plan (the "Master Plan") for the existing 26-acre site. The Company expects that the first phase of the Master Plan ("Phase I") will include an approximately 40,000 square foot expansion of the convention, meeting and banquet facility as well as the redevelopment of approximately 20,000 square feet of vacant space fronting the Strip across from Circus Circus to attract additional walk-in customers. Future phases of the Master Plan may include the development of a 60,000 square foot domed entertainment and shopping complex directly over the casino that will exit down into the casino and the development of approximately nine acres of available land with the construction of a new hotel tower, a time-share tower (which may be developed with a third party) and/or additional parking space. The Company's principal executive offices are located at 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109, and its telephone number is (702) 734-5110. THE OFFERING Common Stock offered by: The Company....................... 1,750,000 shares The Selling Shareholders.......... 1,250,000 shares Common Stock to be outstanding after the Offering(1)..................... 6,672,503 shares Use of Proceeds to the Company...... To fund the investment in RBL for the development of the Black Hawk Project and, to the extent not used for such purpose, for working capital to fund, among other things, a portion of the multi-phase expansion of the Riviera's present property. AMEX Symbol......................... RIV - --------------- (1) Excludes (i) 1,050,000 shares of Common Stock reserved for issuance upon the exercise of stock options under the Company's 1993 Stock Option Plan and Non-Qualified Stock Option Plan for Non-Employee Directors of which options to purchase 774,000 shares have been granted as of the date hereof, (ii) 226,620 shares reserved for issuance under the Company's Employee Stock Purchase Plan and Compensation Plan for Directors serving on the Compensation Committee and (iii) 100,000 shares of Common Stock reserved for issuance upon the exercise of warrants to be issued to Ladenburg Thalmann & Co. Inc. ("Ladenburg") if Ladenburg arranges debt financing for RBL. See "Management" and "Underwriting." SUMMARY CONSOLIDATED FINANCIAL DATA The summary consolidated financial data set forth below has been derived from the audited consolidated financial statements of the Company for the respective periods presented and is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and notes thereto, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other financial and statistical data included elsewhere or incorporated in this Prospectus. <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ------------------------------------ 1994 1995 1996 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND ADR DATA) <S> <C> <C> <C> INCOME STATEMENT DATA: Net revenues.................................................... $ 153,921 $ 151,145 $ 164,409 Income from operations.......................................... 19,919 20,980 23,281 Interest expense, net........................................... 12,254 11,304 10,413 Net income...................................................... 4,790 6,344 8,440 Net income per share............................................ $ 1.00 $ 1.26 $ 1.63 Weighted average shares outstanding............................. 4,800,000 5,040,720 5,177,809 OTHER DATA: EBITDA(1)....................................................... $ 25,593 $ 27,791 $ 31,493 Cash flows from operating activities............................ 16,372 16,740 18,290 Cash flows used in investing activities......................... (10,439) (8,218) (13,017) Cash flows used in financing activities......................... (2,696) (2,983) (1,488) Average occupancy rate(2)....................................... 97.5% 97.0% 98.2% Average daily room rate(ADR).................................... $ 47.51 $ 54.69 $ 57.09 Number of slot machines(3)...................................... 1,203 1,226 1,312 Number of gaming tables(3)...................................... 56 56 55 </TABLE> <TABLE> <CAPTION> AT DECEMBER 31, 1996 --------------------------- ACTUAL AS ADJUSTED(4) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................................ $ 25,747 $ 48,383 Total assets............................................................. 167,665 190,301 Long-term debt........................................................... 109,088 109,088 Shareholders' equity..................................................... 35,251 57,887 </TABLE> - --------------- (1) "EBITDA" consists of earnings before interest, taxes, depreciation and amortization. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles ("GAAP")) as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. The Company believes that EBITDA gives an indication of the cash generating capacity of the Riviera and is useful as a comparison with other industry participants. (2) Based on available rooms. (3) Number of licensed slot machines and gaming tables at period end. (4) As adjusted to give effect to the sale by the Company of 1,750,000 shares of Common Stock offered hereby based on the last reported sales price of $14.125 on the AMEX on March 4, 1997 and the application of the net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000899866_alexion_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000899866_alexion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5cd8efd8908ce36ca6ecb04374c14ff99afa2f1c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000899866_alexion_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except where otherwise indicated, the information in this Prospectus (i) gives effect to a stock split at the rate of one share of Common Stock for every 2.5 shares of Common Stock effected January 5, 1996, (ii) gives effect to a stock split at the rate of one share of Common Stock for every four shares of Common Stock effected November 7, 1994 and (iii) gives effect to the conversion of all outstanding shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock") into 794,554 shares of Common Stock on March 4, 1996. THE COMPANY Alexion Pharmaceuticals, Inc. ("Alexion" or the "Company") is a biopharmaceutical company engaged in research and the development of proprietary immunoregulatory compounds for the treatment of autoimmune and cardiovascular diseases. The Company is developing C5 complement inhibitors ("C5 Inhibitors") and Apogens ("Apogens"), two classes of potential therapeutic compounds designed to selectively target specific disease-causing segments of the immune system. The Company believes that its C5 Inhibitors and Apogens, which are based upon distinct immunoregulatory technologies, may have the advantage of achieving a higher level of efficacy with the potential for reduced side effects when compared to existing therapeutic approaches. The Company will need to undertake and complete further tests in order to confirm its belief, and there can be no assurance as to the results of any such tests. As an outgrowth of its core immunoregulatory technologies, the Company is developing immunoprotected materials for transplantation and gene therapy. In collaboration with United States Surgical Corporation ("US Surgical"), Alexion is developing non-human UniGraft organ products which are designed for transplantation into humans. Further, in collaboration with Genetic Therapy Inc., a subsidiary of Novartis, ("GTI/Novartis"), Alexion is developing immunoprotected gene transfer systems which are designed to enable the injectable delivery of therapeutic genes to patients' cells. See "Business--Strategic Alliances, Collaborations and Licenses". The Human Immune System. The role of the human immune system is to defend the body from attack or invasion by infectious agents or pathogens. This is accomplished through a complex system of proteins and cells, primarily complement proteins, antibodies and various types of white blood cells, each with a specialized function. Under normal circumstances, complement proteins, together with antibodies and white blood cells, act beneficially to protect the body by removing pathogenic microorganisms, cells containing antigens (foreign proteins), and disease-causing immune complexes (combinations of antigens and antibodies). However, any number of stimuli, including antibodies, pathogenic microorganisms, injured tissue, normal tissue, proteases (inflammatory enzymes) and artificial surfaces can locally activate complement proteins in a cascade of enzymatic and biochemical reactions (the "complement cascade") to form inflammatory byproducts leading, for example, in the case of rheumatoid arthritis, to severe joint inflammation and, in the case of cardiovascular disorders such as myocardial infarction (death of heart tissue), to additional significant damage to the heart tissue. T-cells, a type of white blood cell, play a critical role in the normal immune response by recognizing cells containing antigens, initiating the immune response, attacking the antigen-containing tissue and directing the production of antibodies directed at the antigens, all of which lead to the elimination of the antigen-bearing foreign organism. When a T-cell mistakenly attacks host tissue, the T-cell may cause an inflammatory response resulting in tissue destruction and severe autoimmune disease leading, for example, in the case of multiple sclerosis, to severe and crippling destruction of nerve fibers in the brain. C5 Inhibitors. Alexion is developing specific and potent biopharmaceutical C5 Inhibitors which are designed to intervene in the complement cascade at what the Company believes to be the optimal point so that the disease-causing actions of complement proteins generally are inhibited while the normal disease-preventing functions of complement proteins generally remain intact. In laboratory and animal models of human disease, Alexion has shown that C5 Inhibitors are effective in substantially preventing inflammation during cardiopulmonary bypass ("CPB"), limiting myocardial infarction during coronary ischemia and reperfusion, reducing the incidence and severity of inflammation and joint damage in rheumatoid arthritis, enhancing survival in lupus and preserving kidney function in nephritis (kidney inflammation). The Company is developing two C5 Inhibitors, a short acting humanized (compatible for human use) single chain antibody (5G1.1-SC) designed for acute therapeutic settings such as in CPB procedures and in treating myocardial infarctions, and a long acting humanized monoclonal antibody (5G1.1) designed for treating chronic disorders such as nephritis and rheumatoid arthritis. An Investigational New Drug application ("IND") was filed with the United States Food and Drug Administration ("FDA") during March 1996 for 5G1.1-SC, and after receiving FDA authorization, a Phase I clinical trial in healthy male volunteers began in June 1996. Results of the Phase I trial indicated that a single dose administration of 5G1.1-SC was safe and well-tolerated in the study population. In September 1996, the Company received FDA authorization for its second clinical trial and in October 1996 commenced a Phase I/II study of 5G1.1-SC in patients undergoing CPB. The Company's long acting monoclonal antibody is in process development. Apogens. The Company's Apogen compounds are based upon discoveries at the National Institutes of Health ("NIH") which are exclusively licensed to Alexion and upon further discoveries by Alexion. These discoveries involve a mechanism by which substantially all disease-causing T-cells are selectively eliminated in vivo in animal models of disease. The highly specific recombinant Apogens under development by the Company are designed to selectively eliminate disease-causing T-cells in patients with certain autoimmune diseases including multiple sclerosis and diabetes mellitus. The Company has demonstrated that its lead proprietary Apogen, MP4, is effective at preventing neurologic disease and in ameliorating established disease in animal models of multiple sclerosis. MP4 is currently in process development and the Company anticipates it will file an IND for the multiple sclerosis indication in 1997. UniGraft Program. The Company's UniGraft program, in collaboration with US Surgical, is focused on developing non-human organ products designed for transplantation into humans without clinical rejection. Alexion has tested genetically engineered pig hearts, livers and lungs in primates and has demonstrated transplant organ function substantially longer than for transplanted non-genetically engineered porcine organs. See "Business--Strategic Alliances, Collaborations and Licenses." Gene Transfer Systems. Alexion is developing, in collaboration with GTI/Novartis, immunoprotected retroviral vector particles and producer cells which are designed to resist rejection and therefore may be able to be used for direct injectable delivery of therapeutic genes to patients' cells. See "Business--Strategic Alliances, Collaborations and Licenses."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000900091_hybrid_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000900091_hybrid_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a0b51d5d806d889205c930601cabd695a983047f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000900091_hybrid_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THE OUTCOME OF THE EVENTS DESCRIBED IN SUCH FORWARD-LOOKING STATEMENTS IS SUBJECT TO RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN SECTIONS ENTITLED "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Hybrid Networks, Inc. ("Hybrid" or the "Company") is a broadband access equipment company that designs, develops, manufactures and markets cable and wireless systems that provide high speed access to the Internet and corporate intranets for both businesses and consumers. The Company's products remove the bottleneck over the "last mile" connection to the end-user which causes slow response time for those accessing bandwidth-intensive information over the Internet or corporate intranets. The Company is currently generating, and expects to continue to generate in the near term, substantially all of its net sales from its Series 2000 product line and related support and networking services. Hybrid's Series 2000 product line consists of secure headend routers, cable or wireless modems and management software for use with either cable TV or wireless transmission facilities. The Series 2000 system also features a router to provide corporate telecommuters and others in remote locations secure access to their files on corporate intranets. The Series 2000 is capable of supporting a combination of speeds, media and protocols in a single cable or wireless system, providing system operators with flexible, scalable and upgradeable solutions that interoperate with a range of third party networking products allowing system operators to offer cost-effective broadband access to their subscribers. The Internet has become an increasingly important source of information for businesses and consumers. The Internet's importance results from a variety of factors, including increased email usage, the emergence of the World Wide Web and the proliferation of multimedia content, such as graphics, images, video and audio, which can be accessed online. In particular, businesses are demanding high speed access to the Internet and their corporate intranets for their employees, including telecommuters. In 1997, an American Management Association International and Tierney & Partners survey indicated that 27% of businesses surveyed reported moderate to heavy Internet usage. This number is expected to increase to 64% by 1999. In addition, the 1997 American Internet Users Survey, conducted by FIND/SVP, estimated that the number of telecommuters in the United States has grown to 11 million. According to a November 1996 Jupiter Communications report, the consumer market is also growing rapidly. Jupiter Communications projects the number of houses in the United States with Internet access will grow from 14.7 million in 1996 to 36.0 million by 2000 (a compound annual growth rate of 34.8%). Demand for bandwidth-intensive content, combined with the inherent technical difficulties of delivering large amounts of data over existing copper wire telephone infrastructure, has resulted in slow response times and increasing frustration for many Internet and corporate intranet users. While cable system operators and broadband wireless system operators seek alternatives to provide high speed, cost-effective broadband access, currently these operators do not possess the enabling technology over the last mile to provide such access to their end-users. In addition, Internet service providers ("ISPs"), which have traditionally provided Internet access, will face increasing pressure to provide improved broadband access to their subscribers. Hybrid's objective is to be a leader in providing cost-effective, high speed Internet and intranet access solutions to cable system operators, broadband wireless system operators, ISPs and other businesses. Hybrid markets and sells its products through its direct sales force and a network of original equipment manufacturers ("OEMs"), value added resellers ("VARs") and distributors. The Series 2000 product line allows cable and wireless operators to conserve scarce bandwidth and to utilize a variety of data return paths, including the public switched telephone network. The Series 2000 product line enables cable system operators to offer Internet access via either one-way or two-way cable systems, thus minimizing the operators' capital investment and time-to-market pressures. The Series 2000 also facilitates the entrance of broadband wireless system operators into the high speed Internet access market. The Series 2000 has been designed to utilize an array of wireless frequencies, ranging from UHF to MMDS frequencies, and to minimize commonly experienced interference problems. Hybrid was incorporated in Delaware in June 1990. The Company's principal executive offices are located at 10161 Bubb Road, Cupertino, California 95014-4167. The Company's telephone number is (408) 725-3250. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............. 2,700,000 shares Common Stock to be outstanding after this offering...................................... 9,973,311 shares(1) Use of proceeds................................. For the repayment of approximately $6.9 million of debt, working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......... HYBR </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------- ----------------------- 1994 1995 1996 1997 --------- --------- --------- 1996 ---------- ----------- (UNAUDITED) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales.............................................. $ 668 $ 630 $ 2,962 $ 1,253 $ 9,152 Loss from operations................................... (2,826) (5,131) (8,744) (6,256) (9,886) Net loss............................................... (2,897) (5,269) (8,515) (6,132) (10,082) Pro forma net loss per share(2)........................ $ (1.24) $ (1.33) Pro forma number of shares used in per share calculation(2)....................................... 6,873 7,607 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------- ACTUAL AS ADJUSTED(4) ----------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.................................... $ 5,314 $ 30,225 Working capital...................................................................... 3,565 35,108 Total assets......................................................................... 16,190 41,101 Long-term debt(3).................................................................... 6,223 6,223 Total stockholders' equity (deficit)................................................. (3) 31,540 </TABLE> - ------------------------------ (1) Based on shares outstanding as of September 30, 1997. Does not include (i) 1,974,242 shares of Common Stock issuable upon exercise of stock options outstanding as of September 30, 1997, at a weighted average exercise price of $2.72 per share, (ii) 2,046,213 shares of Common Stock available for future grant or issuance as of September 30, 1997 under the Company's 1993 Equity Incentive Plan, 1996 Equity Incentive Plan, Executive Officer Incentive Plan, 1997 Equity Incentive Plan, 1997 Directors Stock Option Plan and 1997 Employee Stock Purchase Plan, (iii) 1,160,558 shares of Common Stock issuable upon the exercise of warrants outstanding as of September 30, 1997 at a weighted average exercise price of $6.38 per share, (iv) 513,423 shares of Common Stock issuable as of September 30, 1997 upon the conversion of a debenture with an outstanding aggregate principal amount of $5.5 million (the "$5.5 Million Debenture"), (v) a warrant to purchase 2,659 shares of Common Stock at an exercise price of $10.91 per share issued in October 1997 in connection with obtaining a credit facility for $4.0 million (the "Credit Facility") or (vi) a warrant to purchase 458,295 shares of Common Stock at an exercise price of $10.91 per share issued in November 1997 in connection with a technology support and development arrangement. See "Capitalization," "Business-- Research and Development," "Management--Director Compensation," "Management--Employee Benefit Plans," "Description of Capital Stock" and Notes 5, 6 and 10 of Notes to Financial Statements. (2) See Note 2 of Notes to Financial Statements for an explanation of the determination of the pro forma number of shares used to compute pro forma net loss per share. (3) Includes the $5.5 Million Debenture, which is convertible into an aggregate of 513,423 shares of Common Stock at the option of the holder at any time and which automatically converts if (i) the gross proceeds to the Company from this offering are at least $15.0 million, (ii) the public offering price per share is at least $166.5 million divided by the number of fully diluted shares of capital stock of the Company (as determined pursuant to the terms of the $5.5 Million Debenture) prior to this offering (the "Minimum Price") and (iii) the closing price of the Common Stock after this offering is equal to or greater than the Minimum Price for any 90 consecutive calendar day period after this offering. See Note 6 of Notes to Financial Statements. (4) Adjusted to reflect (i) the sale and issuance of the 2,700,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13.00 per share and after deducting the estimated underwriting discount and offering expenses and the application of the estimated proceeds therefrom and (ii) the conversion of all outstanding shares of Preferred Stock into Common Stock upon the closing of this offering. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000901038_coleman_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000901038_coleman_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..900951a9d33f19369fd7b63c087fa450b2db653d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000901038_coleman_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and notes thereto contained elsewhere in this Prospectus. Unless the context otherwise requires, all references in this Prospectus to (i) the 'Issuer' mean CLN Holdings Inc. (formerly known as Coleman Escrow Corp.), (ii) the 'Company' or 'Coleman' mean The Coleman Company, Inc. and its subsidiaries, (iii) 'Coleman Holdings' mean Coleman Holdings Inc., formerly a wholly owned subsidiary of the Issuer that was merged with and into the Issuer on July 15, 1997, and (iv) 'Coleman Worldwide' mean Coleman Worldwide Corporation. All share information and percentages with respect to Coleman Common Stock are based on the number of shares outstanding as of August 4, 1997. THE ISSUER The Issuer is a holding company whose only significant asset is all of the common stock, par value $1.00 per share, of Coleman Worldwide. Coleman Worldwide was formed in March 1993 in connection with the offering of $575 million aggregate principal amount at maturity of LYONs. Coleman Worldwide also holds 44,067,520 shares of the Coleman Common Stock, which represent approximately 82.6% of the outstanding Coleman Common Stock. As such, the Issuer's principal business operations are conducted by Coleman and its subsidiaries, and the Issuer has no operations of its own. The Issuer is a direct wholly owned subsidiary of Coleman (Parent) Holdings Inc. and an indirect wholly owned subsidiary of MacAndrews & Forbes Holdings Inc. ('MacAndrews Holdings'), a corporation wholly owned through Mafco Holdings Inc. ('Mafco' and, together with MacAndrews Holdings, 'MacAndrews & Forbes') by Ronald O. Perelman. See 'Relationship with MacAndrews & Forbes and Related Transactions' and 'Ownership of Common Stock.' Following the LYONs Retirement, the Issuer expects to be merged with and into Coleman Worldwide in the Coleman Worldwide Merger, with Coleman Worldwide being the surviving corporation and changing its name to 'CLN Holdings Inc.' THE COMPANY Coleman believes that it is a leading manufacturer and marketer of consumer products for outdoor recreation and home hardware use on a global basis. The Company's products have been sold domestically and internationally under the Coleman brand name since the 1920s. The Company believes its strong market position is attributable primarily to its well-recognized trademarks, particularly the Coleman brand name, broad product line, product quality and innovation, and marketing, distribution and manufacturing expertise. The Company has two primary classes of products, outdoor recreation and hardware. The Company's principal outdoor recreation products include a comprehensive line of lanterns and stoves, fuel-related products such as disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags, backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture, portable electric lights, spas, camping accessories and other products. The Company's principal hardware products include portable generators, portable and stationary air compressors, and safety and security products such as smoke alarms, carbon monoxide detectors and thermostats. The Company's products, which are mostly used for outdoor recreation, home improvement projects, and emergency preparedness, are distributed predominantly through mass merchandisers, home centers and other retail outlets. The Company has made several acquisitions in recent years designed to expand its product lines. In 1996, the Company acquired the French company Application des Gaz ('Camping Gaz'), which the Company believes is a leader in the European camping equipment market and also acquired the assets of Seatt Corporation ('Seatt'), a leading designer, manufacturer and distributor of smoke alarms, thermostats and carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of Fort Smith, Inc. ('Sierra'), a manufacturer of portable outdoor and recreational folding furniture and accessories and substantially all of the assets of Active Technologies, Inc. ('ATI'), a manufacturer of technologically advanced lightweight generators and battery charging equipment. In 1994, the Company acquired substantially all of the assets of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc. (together, 'Eastpak'), a leading designer, manufacturer and distributor of branded daypacks, sports bags and related products and substantially all of the assets of Sanborn Manufacturing Company ('Sanborn'), a manufacturer of a broad line of portable and stationary air compressors. The Company also restructured certain operations. In 1994, the Company restructured its German manufacturing operations (the 'German Restructuring'), including selling its plastic cooler business located in Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in 1994. BUSINESS STRATEGY AND RESTRUCTURING The Company's business strategy is to build upon its reputation as a leading manufacturer and marketer of high quality brand name consumer products for outdoor recreation and home hardware use by (i) focusing on quality and service, (ii) continuing to introduce new products, (iii) developing the Company's existing brands, (iv) expanding the Company's international presence, (v) continuing to develop its human resources, including developing and building its team of experienced managers and increasing management's focus on profitability and cash flows and (vi) further improving the quality and efficiency of its business processes to reduce administrative costs and improve profitability and competitiveness. As part of its strategy to improve profitability, the Company has developed a restructuring program including plans to (i) close its executive offices in Golden, Colorado, with most of its administrative functions relocating to its Wichita, Kansas facility, (ii) reduce its work force by approximately 10% or 700 employees, (iii) close or relocate several of its factories, (iv) close its Geneva, Switzerland international headquarters, (v) rationalize its product lines, including a significant reduction in SKUs, and (vi) exit its pressure washer business. In addition, the Company continues to evaluate the various components of its business operations and may, as a result of those ongoing evaluations, decide to sell certain businesses or assets if suitable opportunities arise. Several of the initiatives involved in the Company's restructuring plan, including closing and relocating certain administrative and manufacturing facilities, were substantially completed as of June 30, 1997. The remaining initiatives are expected to be substantially completed within one year. The Company recorded restructuring and other charges of approximately $22.6 million and related tax benefits of approximately $8.6 million during the six months ended June 30, 1997. There can be no assurance that restructuring and other charges will not be recorded in subsequent periods. See 'Management's Discussion of Financial Condition and Results of Operations--Liquidity and Capital Resources.' BACKGROUND Coleman was formed in December 1991 to succeed to the assets and liabilities of the outdoor products business of New Coleman Holdings Inc. ('Holdings'), an indirect parent of the Issuer. Holdings (then named The Coleman Company, Inc.) was acquired in 1989 by MacAndrews & Forbes (the 'Acquisition'). In March 1992, the Company completed an initial public offering of the Coleman Common Stock (the 'IPO'). Coleman Worldwide's ownership interest in the Company was approximately 82.6% at August 4, 1997. In 1993, Coleman Worldwide issued $575.0 million principal amount at maturity of LYONs in an underwritten public offering. The net proceeds from the issuance of the LYONs of approximately $133.1 million were distributed by Coleman Worldwide to its then direct and indirect parent companies, of which $110.0 million was used to repay indebtedness incurred in connection with the Acquisition. See 'Description of Other Indebtedness--Coleman Worldwide--The LYONs.' In connection with the offering of the LYONs, the ownership interest of MacAndrews & Forbes in the Company was transferred to Coleman Worldwide. Each LYON ($1,000 principal amount at maturity) is exchangeable at the option of the holder at any time for 15.706 shares of Coleman Common Stock, subject to Coleman Worldwide's right to elect to pay cash equal to the then market value of such shares in lieu, in whole or in part, of delivering such shares of Coleman Common Stock. The LYONs are currently secured by a pledge of 7,834,208 shares (representing approximately 14.7% of shares outstanding) of Coleman Common Stock. As a result of the LYONs Exchange Offer, 8,560,602 shares of Coleman Common Stock were released from the pledge to secure the LYONs and were then pledged to secure the Notes. Also in 1993, Coleman Holdings, the then parent of Coleman Worldwide, issued approximately $281.3 million principal amount at maturity of Coleman Holdings Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The net proceeds from the issuance of the Coleman Holdings Notes of approximately $162.3 million were distributed to MacAndrews & Forbes and were not available to Coleman Holdings or its subsidiaries. A portion of such proceeds were used by MacAndrews & Forbes to repay indebtedness, and the balance of such proceeds were used for general corporate purposes. In connection with the offering of the Coleman Holdings Notes, all of the outstanding capital stock of Coleman Worldwide was transferred by Holdings to Coleman Holdings. Prior to the Coleman Holdings Merger, the Coleman Holdings Notes were secured by a pledge of all the common stock of Coleman Worldwide and guaranteed on a non-recourse basis by Coleman Worldwide (the 'Old Coleman Worldwide Non-Recourse Guaranty'). The Old Coleman Worldwide Non-Recourse Guaranty was secured by a pledge of 26,000,000 shares of Coleman Common Stock. Following consummation of the Coleman Holdings Notes Redemption on July 15, 1997, (i) all of the shares of Coleman Worldwide common stock pledged to secure the Coleman Holdings Notes were released from such pledge and were then pledged to secure the Notes and (ii) the 26,000,000 shares of Coleman Common Stock pledged to secure the Coleman Holdings Notes were released from such pledge and were then pledged to secure the Old Coleman Worldwide Non-Recourse Guaranty of the Notes. The Issuer was incorporated in Delaware in May 1997. The Issuer's principal executive offices are located at 5900 North Andrews Avenue, Suite 700A, Fort Lauderdale, Florida 33309 and its telephone number is (954) 772-0550. OWNERSHIP OF THE ISSUER AND THE COMPANY The following chart illustrates a simplified ownership structure of the Issuer and the Company: <TABLE> <S> <C> <C> -------------------------------------- Ronald O. Perelman -------------------------------------- | 100% | -------------------------------------- Mafco Holdings Inc. ('Mafco') -------------------------------------- | 100% | -------------------------------------- MacAndrews & Forbes Holdings Inc. ('MacAndrews Holdings') -------------------------------------- | 100% | -------------------------------------- New Coleman Holdings Inc. ('Holdings') -------------------------------------- | 100% | -------------------------------------- Coleman (Parent) Holdings Inc. -------------------------------------- | 100% | -------------------------------------- CLN HOLDINGS INC. (THE 'ISSUER') -------------------------------------- | 100% | - ---------------------------- -------------------------------------- Public Holders of Coleman Worldwide Corporation Coleman Common Stock ('Coleman Worldwide') - ---------------------------- -------------------------------------- | | 17.4% 82.6% | | | -------------------------------------- | The Coleman Company, Inc. |------------ ('Coleman' or the 'Company') -------------------------------------- </TABLE> THE TRANSACTIONS The Old Notes are, and the New Notes will be, secured by a pledge of all of the shares of common stock of Coleman Worldwide and guaranteed pursuant to the Coleman Worldwide Non-Recourse Guaranty, which Coleman Worldwide Non-Recourse Guaranty is currently secured by a pledge of 36,233,312 shares of Coleman Common Stock. Concurrently with the closing of the Offering, the Issuer deposited the Escrowed Funds, consisting of the net proceeds of the Offering of approximately $455.3 million, with the Escrow Agent, of which approximately $449.5 million has been released to the Issuer and used to finance the LYONs Exchange Offer (other than redemption fees and expenses) and the Coleman Holdings Notes Redemption. The Escrow Agent will release the remaining Escrowed Funds (approximately $9.2 million at September 5, 1997) to the Issuer from time to time upon the satisfaction of certain conditions, including presentation of an Officer's Certificate certifying that, among other things (a) (i) the conditions to the optional redemption by Coleman Worldwide contained in the indenture governing the LYONs (the 'LYONs Indenture') to be complied with on May 27, 1998 (other than payment) have been satisfied or waived, (ii) the conditions to any exchange of LYONs from time to time by the holders thereof and the election by Coleman Worldwide to deliver cash in lieu of shares of Coleman Common Stock that are contained in the LYONs Indenture (other than payment) have been satisfied or waived or (iii) the conditions to certain other payments that may be required to be made by Coleman Worldwide pursuant to the terms of the LYONs Indenture have been satisfied or waived and (b) following the release, such Escrowed Funds, subject to certain limited exceptions, will be contributed to Coleman Worldwide and used to fund the completion of the LYONs Retirement or such other payments, as the case may be. See 'Description of the Notes--Escrow of Proceeds.' Notwithstanding the foregoing, there will be no release of Escrowed Funds to the Issuer after the occurrence of certain events of bankruptcy, insolvency or reorganization of Coleman Worldwide or Coleman (the 'Triggering Events'). If a Triggering Event occurs, the Issuer will be required to use any remaining Escrowed Funds to redeem the Notes, on a pro rata basis, at a redemption price equal to the Accreted Value plus accrued interest (if any) on the Mandatory Redemption Date (as defined herein). See 'Description of the Notes-- Mandatory Redemption.' The Issuer has contributed an aggregate of approximately $450.5 million to Coleman Holdings and Coleman Worldwide to finance the Coleman Holdings Notes Redemption and the LYONs Exchange Offer (including redemption fees and expenses), of which $449.5 million consisted of Escrowed Funds, and will make additional contributions of the Escrowed Funds from time to time to Coleman Worldwide to finance the completion of the LYONs Retirement (collectively, the 'Capital Contributions'). On July 15, 1997, Coleman Holdings redeemed the Coleman Holdings Notes and satisfied and discharged all of its obligations under the indenture governing the Coleman Holdings Notes (the 'Coleman Holdings Notes Indenture'). As a result of the Coleman Holdings Merger, the Issuer directly owns all the shares of capital stock of Coleman Worldwide. In connection with the Coleman Holdings Merger, the pledge of the Coleman Holdings capital stock to secure the Notes was terminated. The LYONs Retirement is expected to be completed on or prior to May 27, 1998. In connection with the LYONs Retirement, on May 23, 1997, Coleman Worldwide commenced an offer to pay cash in the amount of $343.61 per $1,000 principal amount at maturity upon exchange of any and all outstanding LYONs. Holders of $545,053,000 aggregate principal amount at maturity of LYONs accepted Coleman Worldwide's offer to exchange such LYONs for cash. As a result, $16,500,000 aggregate principal amount at maturity of LYONs remained outstanding as of June 30, 1997, which LYONs are convertible into 259,149 shares of Coleman Common Stock (representing approximately 0.5% of shares outstanding). The Issuer intends to cause Coleman Worldwide to redeem any outstanding LYONs at a redemption price of $343.61 per $1,000 principal amount at maturity on May 27, 1998, which is the first time that Coleman Worldwide has the right to do so under the LYONs Indenture. There can be no assurance that the LYONs Retirement will be consummated on or before May 27, 1998. In addition, there can be no assurance that the Escrowed Funds will be sufficient to consummate the LYONs Retirement. See 'Risk Factors--Subordination to Subsidiary Liabilities.' Following the completion of the LYONs Retirement, the Issuer expects to be merged with and into Coleman Worldwide in the Coleman Worldwide Merger, with Coleman Worldwide, as the surviving corporation, assuming all of the Issuer's obligations under the Indenture and the Notes and changing its name to 'CLN Holdings Inc.' The Coleman Worldwide Non-Recourse Guaranty and the pledge of the Coleman Worldwide capital stock will terminate upon the Coleman Worldwide Merger. Following the completion of the LYONs Retirement, all obligations of Coleman Worldwide under the LYONs Indenture, will be satisfied and discharged. In addition to the 36,233,312 shares of Coleman Common Stock currently pledged, simultaneously with the release of additional Escrowed Funds from time to time in connection with the LYONs Retirement, the Coleman Worldwide Non-Recourse Guaranty will be secured by the shares of Coleman Common Stock for which such exchanged LYONs are exchangeable that are released from the pledge to secure any exchanged LYONs. Upon completion of the LYONs Retirement and the Coleman Worldwide Merger, the Notes will be secured by a pledge of 44,067,520 shares of Coleman Common Stock (consisting of the 36,233,312 shares currently pledged to secure the Old Notes and the 7,834,208 shares of Coleman Common Stock currently pledged to secure the LYONs), less any Delivered Shares. THE EXCHANGE OFFER <TABLE> <S> <C> Securities Offered.................... Up to $600,475,000 aggregate principal amount at maturity of Senior Secured First Priority Discount Exchange Notes due 2001 and $131,560,000 aggregate principal amount at maturity of Senior Secured Second Priority Discount Exchange Notes due 2001, in each case, which have been registered under the Securities Act. The terms of the New First Priority Notes and the New Second Priority Notes are identical in all material respects to the Old First Priority Notes and the Old Second Priority Notes, respectively, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by November 17, 1997, interest will accrue on the Old Notes (in addition to the accretion of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on May 15 and November 15, commencing May 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the November 15 or May 15 immediately preceding such interest payment date. The Exchange Offer.................... The New First Priority Notes and the New Second Priority Notes are being offered in exchange for a like principal amount at maturity of Old First Priority Notes and Old Second Priority Notes, respectively. The issuance of the New Notes is intended to satisfy obligations of the Issuer contained in the Registration Agreement. For procedures for tendering, see 'The Exchange Offer--Procedures for Tendering Old Notes.' Tenders; Expiration Date; Withdrawal.......................... The Exchange Offer will expire at 5:00 p.m., New York City time, on November 6, 1997, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See 'The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes' and 'The Exchange Offer-- Withdrawal.' Certain Conditions to Exchange Offer............................... The Issuer shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer if at any time before the acceptance of the Old Notes for exchange or the exchange of the New Notes for such Old Notes certain events have occurred, which in the reasonable judgment of the Issuer, make it inadvisable to proceed </TABLE> <TABLE> <S> <C> with the Exchange Offer and/or with such acceptance for exchange or with such exchange. Such events include (i) any threatened, instituted or pending action seeking to restrain or prohibit the Exchange Offer, (ii) a general suspension of trading in securities on any national securities exchange or in the over-the-counter market, (iii) a general banking moratorium, (iv) the commencement of a war or armed hostilities involving the United States and (v) a material adverse change or development involving a prospective material adverse change in the Issuer's business, properties, assets, liabilities, financial condition, operations, results of operations or prospects that may affect the value of the Old Notes or the New Notes. In addition, the Issuer will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, at any such time any stop order shall be threatened or in effect with respect to the Registration Statement of which the Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939. See 'The Exchange Offer-- Certain Conditions to the Exchange Offer.' Federal Income Tax Consequences........................ The exchange pursuant to the Exchange Offer should not result in gain or loss to the holders or the Issuer for federal income tax purposes. See 'Certain U.S. Federal Income Tax Considerations.' Use of Proceeds....................... There will be no proceeds to the Issuer from the exchange pursuant to the Exchange Offer. See 'Use of Proceeds.' Exchange Agent........................ First Trust National Association is serving as exchange agent (the 'Exchange Agent') in connection with the Exchange Offer. </TABLE> CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Old Notes and the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Issuer does not currently anticipate that it will register Old Notes under the Securities Act. See 'Description of the Notes--Registration Rights.' Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Issuer believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an 'affiliate' of the Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. However, the Issuer does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any holder is an affiliate of the Issuer, is engaged or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See 'Plan of Distribution.' In addition, to comply with the state securities laws, the New Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the New Notes to 'qualified institutional buyers' (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under the state securities laws. The Issuer currently does not intend to register or qualify the sale of the New Notes in any state where an exemption from registration or qualification is required and not available. See 'The Exchange Offer--Consequences of Exchanging Old Notes' and 'Description of the Notes--Registration Rights.' SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New First Priority Notes and the New Second Priority Notes are identical in all material respects to the Old First Priority Notes and the Old Second Priority Notes, respectively, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by November 17, 1997, interest will accrue on the Old Notes (in addition to the accretion of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on May 15 and November 15, commencing May 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the November 15 or May 15 immediately preceding such interest payment date. <TABLE> <S> <C> Securities Offered.................... Up to $600,475,000 principal amount at maturity of Senior Secured First Priority Discount Exchange Notes due 2001 (the 'New First Priority Notes') and up to $131,560,000 principal amount at maturity of Senior Secured Second Priority Discount Exchange Notes due 2001 (the 'New Second Priority Notes'). Maturity Date......................... May 15, 2001. Yield to Maturity..................... 11 1/8% and 12 7/8% per annum with respect to the New First Priority Notes and the New Second Priority Notes, respectively (computed on a semiannual bond equivalent basis), calculated from May 20, 1997. Original Issue Discount............... The Old First Priority Notes were issued at an issue price of $649.49 per $1,000 aggregate principal amount at maturity, and the Old Second Priority Notes were issued at an issue price of $608.12 per $1,000 aggregate principal amount at maturity. Because the New Notes will be treated as a continuation of the Old Notes, which were issued at an original issue discount ('Original Issue Discount') for federal income tax purposes, the New Notes will have Original Issue Discount. Prospective holders of the New Notes should be aware that although there will be no periodic payments of interest on the New Notes, accrued Original Issue Discount will be includable, periodically, in a holder's gross income for United States federal income tax purposes prior to redemption or other disposition of such holder's New Notes, whether or not such New Notes are ultimately </TABLE> <TABLE> <S> <C> redeemed, sold (to the Issuer or otherwise) or paid at maturity. See 'Certain U.S. Federal Tax Considerations.' Optional Redemption................... The Notes may be redeemed at the option of the Issuer in whole or from time to time in part at any time on and after May 15, 2000 at the redemption prices set forth herein on the date of redemption. Notwithstanding the foregoing, the Issuer will have the option to redeem the Notes at any time in whole at a redemption price equal to the Accreted Value on the date of redemption plus the Applicable Premium. See 'Description of the Notes--Optional Redemption.' Change of Control..................... Upon a Change of Control, each holder of the Notes will have the right to require the Issuer to repurchase all or a portion of such holder's Notes at a price equal to the Put Amount on the date of repurchase. Escrow of Proceeds of Offering........ Concurrently with the closing of the Offering, the net proceeds of the Offering were deposited with the Escrow Agent and held in escrow. Approximately $449.5 million of such Escrowed Funds have been released to the Issuer and used to finance the LYONs Exchange Offer (other than redemption fees and expenses) and the Coleman Holdings Notes Redemption. The remaining Escrowed Funds are temporarily invested in Treasury Securities and other Permitted Investments. The Escrow Agent will release the remaining Escrowed Funds to the Issuer from time to time as necessary to finance the completion of the LYONs Retirement, subject to satisfaction of certain conditions and subject to certain limited exceptions. Notwithstanding the foregoing, there will be no release of Escrowed Funds to the Issuer upon the occurrence of a Triggering Event. See 'Description of the Notes--Escrow of Proceeds.' Mandatory Redemption.................. The Notes are subject to mandatory redemption upon the occurrence of a Triggering Event at a time when any Escrowed Funds are remaining. If a Triggering Event occurs, the Issuer will be required to use any such remaining Escrowed Funds to redeem the Notes, on a pro rata basis, at a redemption price equal to the Accreted Value plus accrued interest (if any) on the Mandatory Redemption Date. See 'Description of the Notes--Mandatory Redemption.' Collateral............................ Prior to the Coleman Worldwide Merger, the Old Notes are, and the New Notes will be, secured by a pledge of all of the shares of capital stock of Coleman Worldwide and guaranteed pursuant to the Coleman Worldwide Non-Recourse Guaranty, which Coleman Worldwide Non-Recourse Guaranty is currently secured by a pledge of the 36,233,312 shares of Coleman Common Stock owned by Coleman Worldwide. In addition to such shares, simultaneously with the release of Escrowed Funds from time to time in connection with the LYONs Retirement, the Coleman Worldwide Non-Recourse Guaranty will be secured by the shares of Coleman Common Stock for which such exchanged LYONs are exchangeable that are released from the pledge to secure any exchanged LYONs. Upon completion of the LYONs Retirement, the Notes will be secured by a pledge of 44,067,520 shares of Coleman Common Stock (consisting of the 36,233,312 shares currently pledged to secure the Old Notes and the 7,834,208 shares of Coleman Common Stock currently pledged to secure the LYONs), less any Delivered Shares. The First Priority Notes will rank senior in right of payment </TABLE> <TABLE> <S> <C> to the Second Priority Notes with respect to any collateral securing the Notes and the Coleman Worldwide Non-Recourse Guaranty. See 'Risk Factors--Control by Holders of First Priority Notes.' No additional shares of Coleman Common Stock will be pledged by the Issuer as security for the Notes irrespective of the value of Coleman Common Stock at any time. See 'Risk Factors--Security for the Notes; Potential for Diminution' and 'Description of the Notes-- Security.' The Issuer may withdraw the collateral consisting of shares of Coleman Common Stock, in whole or in part, by substituting therefor with the Trustee cash or U.S. Government Obligations (as defined herein) that will be sufficient for the payment at maturity of principal and interest (if any) on the Notes, or the pro rata portion thereof, respectively. In addition, the pro rata portion of collateral consisting of Coleman Common Stock may be released following a redemption, in part, of the Notes or a repurchase, in part, of the Notes after a Change of Control or the delivery of less than all the Notes for cancellation. See 'Description of the Notes--Security.' Ranking and Holding Company Structure........................... The Old Notes are, and the New Notes will be, senior secured obligations of the Issuer and will rank pari passu in right of payment with all future senior indebtedness of the Issuer, if any, and senior to all future subordinated indebtedness of the Issuer, if any. The only outstanding indebtedness of the Issuer is the Notes, and all the Issuer's consolidated liabilities (other than the Notes and certain liabilities incurred in connection with the Offering) are liabilities of its subsidiaries. The Issuer is a holding company and therefore the Old Notes are, and the New Notes will be, effectively subordinated to all existing and future indebtedness and other liabilities of the Issuer's subsidiaries, including trade payables. As of June 30, 1997, after giving pro forma effect to the Coleman Holdings Notes Redemption, the Coleman Holdings Merger and the completion of the LYONs Retirement, the outstanding indebtedness and other liabilities of such subsidiaries would have been approximately $923.5 million. Prior to the LYONs Retirement, the Notes will also be effectively subordinated to the LYONs. See 'Risk Factors-- Holding Company Structure,' '--Indebtedness and Ability to Repay the Notes,' '--Subordination to Subsidiary Liabilities' and 'Description of the Notes.' Certain Covenants..................... The indenture governing the Notes (the 'Indenture') requires the LYONs Retirement to be consummated no later than June 10, 1998, provided that no Triggering Event shall have occurred. The Indenture also requires the Issuer, prior to the Coleman Worldwide Merger, to hold, directly or indirectly, all of the capital stock of Coleman Worldwide. The Issuer is also required to hold, directly or indirectly, a majority of the voting power of the voting stock of Coleman at all times, unless and until the Issuer exercises its right to substitute U.S. Government Obligations for all of the pledged collateral. The Indenture also contains certain covenants that, among other things, generally prohibit the incurrence of additional debt by the Issuer and the issuance of additional debt or preferred stock by Coleman Worldwide, and limit (i) the incurrence of additional debt and the issuance of preferred stock by Coleman, (ii) the payment of </TABLE> <TABLE> <S> <C> dividends on the capital stock of the Issuer and its subsidiaries and the redemption or repurchase of the capital stock of the Issuer, (iii) the sale of assets and subsidiary stock, (iv) transactions with affiliates, (v) the creation of liens on the assets of the Issuer and Coleman Worldwide and (vi) consolidations, mergers and transfers of all or substantially all of the Issuer's assets. The foregoing limitations and prohibitions, however, are subject to a number of qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds....................... The Issuer will not receive any proceeds from the Exchange Offer. Of the approximately $455.3 million of net proceeds from the Offering, the Issuer used approximately $187.3 million to finance a portion of the $188.3 million capital contribution made to Coleman Worldwide to fund the LYONs Exchange Offer (including redemption fees and expenses) and approximately $262.2 million to make a capital contribution to Coleman Holdings to fund the Coleman Holdings Notes Redemption. The Issuer will use the remainder of the net proceeds of the Offering to make capital contributions to Coleman Worldwide to fund the completion of the LYONs Retirement. Pending such use, the remainder of the Escrowed Funds are being held in escrow and invested in Treasury Securities and other Permitted Investments. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000901138_big-5_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000901138_big-5_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae3f5cd6545ba3a0b01aef69f7cb65f9c0f8ff5e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000901138_big-5_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus and is qualified in its entirety by the more detailed information and financial statements contained elsewhere in this Prospectus. Prospective investors are urged to read this Prospectus in its entirety. See "Risk Factors" for a discussion of certain factors to be considered in evaluating an investment in the securities offered hereby. THE COMPANY Big 5 Holdings, Inc., a Delaware corporation ("Big 5 Holdings"), and its parent, Big 5 Corporation, a Delaware corporation ("Parent"), were formed in 1992 for the purpose of acquiring United Merchandising Corp., a California corporation (the "Company" or "Big 5"). The acquisition took place on September 25, 1992, when Big 5 Holdings purchased all of the Company's outstanding capital stock from Thrifty Corporation, a California corporation ("Thrifty"). On August 10, 1993, Big 5 Holdings was merged into the Company, which was the surviving entity following the merger. The Company was founded in 1955 and currently operates a chain of retail stores under the trade name "Big 5 Sporting Goods." Big 5 is one of the leading sporting goods chains in the United States based on revenues, operating 196 stores as of December 29, 1996 located in eight western states, including California, Washington, Arizona, New Mexico, Nevada, Oregon, Texas and Idaho. According to industry sources, Big 5's fiscal 1996 revenues were the fourth highest among full-line sporting goods retailers in the United States, totalling $404.3 million for an increase of 9.2% versus comparable 1995 revenues. Big 5's marketing strategy is directed at the general sporting goods consumer, with product offerings including a wide selection of sporting goods in a broad range of prices. The principal executive offices of the Company are located at 2525 East El Segundo Boulevard, El Segundo, California 90245. The telephone number for the principal executive offices is (310) 536-0611. THE ACQUISITION Prior to September 25, 1992, the Company was a wholly owned subsidiary of Thrifty, which was in turn a wholly owned subsidiary of Pacific Enterprises, a California corporation ("PE"). On September 25, 1992, all of the Company's outstanding capital stock was acquired by Big 5 Holdings (the "Acquisition") for a purchase price of $135,000,000 pursuant to a Purchase and Sale Agreement dated as of May 22, 1992 among Big 5 Holdings, PE and Thrifty (as amended to the date of closing, the "Purchase Agreement"). Big 5 Holdings and Parent were each formed in 1992 by Green Equity Investors, L.P., a Delaware limited partnership ("GEI"), for the sole purpose of consummating the Acquisition. In connection with the consummation of the Acquisition, among other things, the Company issued the Securities in the aggregate principal amount of $55,000,000. The Securities were purchased by a total of 28 institutional and private investors in amounts ranging from $25,000 to $9,000,000 through a private placement in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder. The Securities are unsecured and subordinate in priority and right of payment to Senior Indebtedness of the Company (as defined in the Indenture and summarized under "Descriptions of Securities to be Registered -- Certain Definitions"), including the Revolving Credit Facility. As of December 29, 1996, $36,450,000 in principal amount of the Securities remained outstanding.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000906420_bank_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000906420_bank_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e0e156187ca1389a9ff4c84d86f523a7cf81b634
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000906420_bank_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION, DEFINITIONS AND FINANCIAL STATEMENTS APPEARING ELSEWHERE HEREIN. INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE PROSPECTUS. THE FISCAL YEAR FOR BANK UNITED CORP. AND ITS SUBSIDIARY, BANK UNITED, A FEDERALLY CHARTERED SAVINGS BANK (THE "BANK"), ENDS SEPTEMBER 30, AND, UNLESS OTHERWISE INDICATED, REFERENCES TO PARTICULAR YEARS ARE TO FISCAL YEARS ENDING SEPTEMBER 30 OF THE YEAR INDICATED. AS USED HEREIN, THE TERM "COMPANY" REFERS TO BANK UNITED CORP. AND ITS PREDECESSORS, AND ITS CONSOLIDATED SUBSIDIARIES, UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES. THE COMPANY The Company is a broad-based financial services provider to consumers and businesses in Texas and other selected regional markets throughout the United States. The Company operates a 70-branch community banking network serving approximately 216,000 households and businesses, ten regional commercial banking offices, six wholesale mortgage origination offices, a mortgage servicing business, and a financial markets business. At June 30, 1997, the Company had assets of $11.4 billion, deposits of $5.2 billion and stockholders' equity of $582.7 million and was the largest publicly traded depository institution headquartered in Texas, in terms of both assets and deposits. The Company was incorporated in Delaware on December 19, 1988 as USAT Holdings Inc. and became the holding company for the Bank upon the Bank's formation on December 30, 1988. The Bank is a federally chartered savings bank, the deposits of which are insured by the Savings Association Insurance Fund (the "SAIF") which is administered by the FDIC. In December 1996, the Company formed a new, wholly owned, Delaware subsidiary, BNKU Holdings, Inc. ("Holdings"). After acquiring all the common stock of Holdings, the Company contributed all the common stock of the Bank to Holdings, and Holdings assumed the obligations of the Company's $115 million 8.05% senior notes due May 15, 1998 (the "Senior Notes"). As a result of these transactions, Holdings is the sole direct subsidiary of the Company and the Bank is the sole direct subsidiary of Holdings. In conjunction with the formation of Holdings, the Company's headquarters were relocated from Uniondale, New York to Houston, Texas. The Company's address is 3200 Southwest Freeway, Houston, TX 77027, and its phone number is (713) 543-6500. BUSINESS STRATEGY After initially obtaining assets and deposits through the acquisition of failed thrifts and from the Resolution Trust Corporation (the "RTC"), the Company's operating strategy historically emphasized traditional single family mortgage lending and deposit gathering activities, with a focus on minimizing interest rate and credit risk while maximizing the net value of the Company's assets and liabilities. Over the past few years, however, the Company's management has pursued a strategy designed to reduce its reliance on its single family mortgage lending by developing higher margin consumer and commercial lending lines of business. During this time, the Company has engaged in more aggressive marketing campaigns and increased its portfolio of multi-family, residential construction, consumer, and commercial loans and the level of lower cost transaction and commercial deposit accounts. While the pursuit of this strategy entails risks different to those present in traditional single family mortgage lending, the Company believes it has taken appropriate measures to manage these risks adequately. To manage potential credit risk, the Company has developed comprehensive credit approval and underwriting policies and procedures for these lines of business. To offset operational and competitive risk, the Company has hired experienced commercial bank professionals, trained other personnel to manage and staff these businesses, and closely monitors the conduct and performance of the business. In addition to its efforts to increase originations of commercial and consumer loans, the Company has been increasing the retention of higher yielding single family and multi-family mortgage loans that, in the past, may have been sold or securitized. The Company intends to continue to pursue additional expansion opportunities, including acquisitions, while maintaining adequate capitalization. See "Risk Factors -- Evolution of Business" and "Business -- Community Banking Group" and "Business -- Commercial Banking Group". OPERATIONAL OVERVIEW -- COMMUNITY BANKING GROUP. The Community Banking Group's principal activities include deposit gathering, consumer lending, small business banking, investment product sales and retail mortgage originations. The Community Banking Group, which has marketed itself under the name "Bank United" since 1993, operates a 70-branch community banking network, a 24-hour telephone banking center, and a 69-unit ATM network, which together serve as the platform for the Company's consumer and small business banking activities. The community banking branch network includes 36 branches in the greater Houston area, 29 branches in the Dallas/Ft. Worth Metroplex and two branches each in Austin and San Antonio as well as a branch and credit card processing center in Phoenix, Arizona. Through its branch network, the Company maintains approximately 480,000 accounts with approximately 216,000 households and businesses. See "Business -- Community Banking Group". -- COMMERCIAL BANKING GROUP. The Commercial Banking Group provides credit and a variety of cash management and other services to real estate and related businesses. Business is solicited in Texas and in targeted regional markets throughout the United States. The Commercial Banking Group is expanding its products and industry specialties to include healthcare lending and other commercial and industrial loan products. See "Business -- Commercial Banking Group". -- FINANCIAL MARKETS GROUP. The Financial Markets Group manages the Company's asset portfolio activities, including loan acquisition and management, wholesale mortgage originations, and the securitization of loans. Additionally, under the supervision of the Asset and Liability Committee (the "ALCO"), the Financial Markets Group is responsible for the Company's investment portfolio, for interest rate risk hedging strategies, and for securing funding sources other than consumer and commercial deposits. See "Business -- Financial Markets Group". -- MORTGAGE BANKING GROUP. The Mortgage Banking Group principally engaged in three activities prior to February 1, 1997: retail mortgage originations, wholesale mortgage originations and mortgage servicing. In June 1996, the Company recorded a restructuring charge of $10.7 million before tax, to recognize the costs of closing or consolidating mortgage production offices and several regional operation centers and recorded $1.8 million of other expenses related to its mortgage origination business. Effective February 1, 1997, the Company sold certain of its retail and wholesale mortgage origination offices. In connection with this sale, the remaining offices were restructured or closed. The net gain on the sale of these offices, reduced by additional restructuring costs, was $4.0 million before tax and was recorded in the quarter ended March 31, 1997. The Company's sale of these offices was consistent with its commitment to advance its strategic focus on traditional community and commercial banking products and services. The Company intends to continue its mortgage servicing business as a separate group (see below), its retail mortgage origination capability in Texas through its community banking branches, and its wholesale mortgage origination capability through its Financial Markets Group. See "Business -- Mortgage Banking Group". -- MORTGAGE SERVICING GROUP. The Mortgage Servicing Group services first mortgage loans for single family residences for both the Company's portfolio and for investors. The Company's servicing portfolio at June 30, 1997 was $17.3 billion and approximately 225,000 loans. Additional servicing rights recently acquired by the Company associated with $7.1 billion in single family loans had not been transferred to the Company as of June 30, 1997. The total servicing portfolio at June 30, 1997, adjusted for the acquired servicing rights, was $24.4 billion. Included in the servicing portfolio at June 30, 1997 is $3.6 billion of servicing related to loans held in the Company's portfolio. See "Business -- Mortgage Servicing Group". BACKGROUND OF THE OFFERING The Company was organized, and through June 17, 1996, operated as a subsidiary of Hyperion Holdings Inc., a Delaware corporation ("Hyperion Holdings"). During that period, all of the outstanding shares of Hyperion Holdings were owned by Hyperion Partners. The general partner of Hyperion Partners is indirectly controlled by three individuals, including Lewis S. Ranieri, who from the Company's organization in 1988, has served as Chairman of the Board of the Company and, until July 15, 1996, also as President and Chief Executive Officer ("CEO") of the Company and Chairman of the Board of the Bank. DIVIDEND, DISTRIBUTION AND RESTRUCTURING In May 1996, the Company paid a dividend of $100 million to Hyperion Holdings and other holders of its common stock and made a related contractually required payment in lieu of dividends to the FDIC, as manager of the Federal Savings and Loan Insurance Corporation ("FSLIC") Resolution Fund (the "FDIC-FRF"), in the amount of $5.9 million. The dividends received by Hyperion Holdings were paid by Hyperion Holdings as a dividend to Hyperion Partners which distributed such amount to its limited and general partners in accordance with its limited partnership agreement. During the quarter ended June 30, 1996, the Company also recorded a $101.7 million tax benefit related to its net operating loss carryforwards ("NOLs"). During June 1996, the following actions were taken in the order indicated (collectively, the "Restructuring"): (1) Hyperion Holdings exchanged shares of a newly created class of its nonvoting common stock for certain shares of its voting common stock held by Hyperion Partners; (2) Hyperion Partners then distributed the Hyperion Holdings common stock owned by it to its limited and general partners in accordance with its limited partnership agreement (the "Distribution"); and (3) following the Distribution, Hyperion Holdings was merged with and into the Company (the "Merger"), with the result that holders of Hyperion Holdings voting and non-voting common stock received shares of Class A Common Stock and Class B Common Stock, and the holders of the Company's Class C common stock, par value $0.01 per share ("Class C Common Stock") received shares of Class B Common Stock. As part of the Restructuring, the common stock of the Company was converted 1,800 to one. Subsequent to the Restructuring, there were no shares of Class C Common Stock outstanding. The Restructuring was undertaken to simplify the ownership structure of the Company in order to facilitate financial and tax reporting, marketing of the Class A Common Stock and management of the Company's operations. In addition, the FDIC-FRF surrendered to the Bank a portion of the warrant (the "Warrant") it held to purchase 158,823 shares of common stock of the Bank ("Bank Common Stock") for a cash payment of $6.1 million and exercised the remainder of the Warrant. Immediately thereafter, the FDIC-FRF exchanged the shares of Bank Common Stock issued upon exercise of the balance of the Warrant for 1,503,560 shares of Common Stock. See "Business -- The Assistance Agreement" and "Selling Stockholders". In August 1996, the Company completed the offering of 12,075,000 shares of Class A Common Stock (the "August Offering"). Of the 12,075,000 shares sold, 910,694 were sold by the Company, with the balance sold by certain selling stockholders, including the FDIC-FRF which sold all of the shares received upon exercise of the Warrant. Since the August Offering, the Class A Common Stock has been listed on the NASDAQ under the symbol "BNKU". On November 25, 1997, the last reported sale price of the Class A Common Stock on the NASDAQ was $41 per share. On February 10, 1997, restrictions on the sale of 7,189,763 shares expired and certain stockholders sold 4,276,713 shares in a secondary public offering on that date. On August 14, 1997, restrictions on 3,018,847 shares lapsed and certain Stockholders sold 1,218,511 shares in a secondary public offering on that date. This Prospectus covers an additional 140,171 shares which could be sold by the Selling Stockholder at any time following August 14, 1997. See "Selling Stockholders" and "Plan of Distribution". LONG-TERM DEBT In May 1997, the Company issued $220 million of fixed-rate Subordinated Notes due May 2007, with a stated rate of 8.875% and an effective rate of 8.896% ("Subordinated Notes"). Net proceeds from the issuance of the Subordinated Notes were used to repurchase and retire $114.5 million of the Company's Senior Notes, pay the related costs and expenses, and provide additional capital to the Bank. The costs associated with retiring the Senior Notes are reflected as an extraordinary loss of $3.6 million, or $2.3 million after tax, in the quarter ended June 30, 1997. In connection with the repurchase of the Senior Notes, the Company obtained consents from the holders of the Senior Notes, which substantially eliminated all restrictive covenants of the related indenture, including limitations on dividends. The Subordinated Notes are subordinate to all liabilities of the Company's subsidiaries, including preferred stock and deposit liabilities. MANAGEMENT Day-to-day operations of the Bank are directed by Barry C. Burkholder, President and CEO of the Bank, who brings over 20 years of commercial banking experience to the Bank, with specific experience in consumer banking, mortgage banking and related areas. In connection with the Restructuring and the August Offering, on July 15, 1996 Mr. Burkholder became Chairman of the Board of the Bank as well as President and CEO of the Company. The executive management group of the Bank consists of seven individuals who have more than 20 years of related industry experience, the majority of which comes from commercial banking. See "Management". Lewis S. Ranieri, who has over 20 years of investment experience with particular expertise in the field of mortgage-backed securities ("MBS"), serves as Chairman of the Board of the Company and as a director of the Bank and provides strategic and managerial advice to the Company. See "Risk Factors -- Dependence on Key Personnel" and "Management -- Certain Relationships and Related Transactions". FUTURE TAX BENEFITS In connection with the acquisition from the FSLIC of certain of the assets and the assumption of all the deposits and certain other liabilities of United Savings Association of Texas ("Old USAT"), an insolvent thrift (the "Acquisition"), and the related Assistance Agreement (as defined herein), the Company succeeded to and recorded substantial NOLs which have resulted in certain tax benefits. As of June 30, 1997, the Company had NOLs of $724 million available to reduce taxable income in future years. Pursuant to the Tax Benefits Agreement (as defined herein), the Bank is required to pay to the FDIC-FRF a specified portion of net tax benefits obtained through the taxable year ending nearest to September 30, 2003. See "Regulation -- Taxation -- FSLIC Assistance". All previous offerings and the Offering have been structured with the intent to preserve the beneficial tax attributes of the Company as described above. See "Regulation -- Taxation". Accordingly, transfers and other dispositions of Common Stock by certain holders of the Common Stock were limited by provisions of the Company's Restated Certificate of Incorporation (the "Certificate") and the Company's By-Laws (the "By-Laws") for up to three years following the August Offering, except in certain circumstances, including the approval of the Board of Directors of the Company. See "Description of Capital Stock -- Common Stock". The limitations on transfers and other dispositions of Common Stock allowed the Company to record a $101.7 million tax benefit in fiscal 1996. See "Risk Factors -- Limitations on Use of Tax Losses; Restrictions on Transfers of Stock", "Capitalization" and Note 14 to the Consolidated Financial Statements. CLAIMS RELATED TO FORBEARANCE AGREEMENT In connection with the original acquisition of the Bank by the Company, the Federal Home Loan Bank Board (the "FHLBB") approved a forbearance letter, issued on February 15, 1989 (the "Forbearance Agreement"). Under the terms of the Forbearance Agreement, the FSLIC agreed to waive or forbear from the enforcement of certain regulatory provisions with respect to regulatory capital requirements, liquidity requirements, accounting requirements and other matters. After the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the OTS took the position that the capital standards set forth in FIRREA apply to all savings institutions, including those institutions, such as the Bank, that had been operating under previously granted capital and accounting forbearances, and that FIRREA eliminated these forbearances. The position of the OTS has adversely affected the Bank by curtailing the growth and reducing the leverage contemplated by the terms of the Forbearance Agreement. In 1995, the Bank, the Company, and Hyperion Partners (collectively, "Plaintiffs") filed suit against the United States in the Court of Federal Claims for alleged failures of the United States to abide by the terms of the Forbearance Agreement. RECENT DEVELOPMENTS On October 7, 1997, the Company signed an agreement to purchase 18 branches in Texas from Guardian Savings and Loan Association. The branches, six located in Houston and 12 in the Dallas/Ft. Worth Metroplex, have combined deposits of $1.44 billion. In September 1997, the Company also agreed to purchase three branches in the Dallas area, with $66 million in deposits, from California Federal Savings Bank, FSB. Final closing of these transactions is subject to regulatory approval. SUMMARY CONSOLIDATED FINANCIAL DATA The following table presents summary selected historical financial data of the Company. The information set forth below should be read in conjunction with the consolidated financial statements of the Company and the Notes thereto set forth elsewhere herein (the "Consolidated Financial Statements") and "Management's Discussion and Analysis of Financial Condition and Results of Operations". The statement of operations data set forth below for each of the three years ended September 30, 1996, 1995 and 1994 and the statement of financial condition data at September 30, 1996 and 1995 are derived from, and are qualified by reference to, the audited Consolidated Financial Statements. The statement of operations data set forth below for the years ended September 30, 1993 and 1992 and the statement of financial condition data at September 30, 1994, 1993 and 1992 are derived from the Company's audited consolidated financial statements. Information at or for the nine months ended June 30, 1997 and 1996 is not audited, but, in the opinion of management, includes all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of operations and financial condition for those periods. Results of operations for the nine months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. <TABLE> <CAPTION> AT OR FOR THE NINE MONTHS ENDED JUNE 30, AT OR FOR THE YEAR ENDED SEPTEMBER 30, ------------------------- ------------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ----------- ------------ ------------ ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF FINANCIAL CONDITION DATA Total assets ..................... $11,439,050 $ 11,023,270 $ 10,712,377 $11,983,534 $ 8,910,161 $ 8,440,556 $ 6,255,283 Loans ............................ 8,271,904 7,597,406 7,519,488 8,260,240 5,046,174 4,862,379 4,101,716 Mortgage-backed securities ....... 1,601,857 1,732,771 1,657,908 2,398,263 2,828,903 2,175,925 833,425 Deposits ......................... 5,249,888 5,053,605 5,147,945 5,182,220 4,764,204 4,839,388 4,910,760 Federal Home Loan Bank advances(1) 3,630,060 3,883,758 3,490,386 4,383,895 2,620,329 2,185,445 632,345 Securities sold under agreements to repurchase and federal funds purchased ........ 1,181,382 885,506 832,286 1,172,533 553,000 310,000 -- Long-term debt(1) ................ 220,194 115,000 115,000 115,000 115,000 115,000 106,090 Minority interest -- Bank Preferred Stock(2) ............. 185,500 185,500 185,500 185,500 85,500 85,500 -- Total stockholders' equity(3) .... 582,676 529,432 531,043 496,103 451,362 389,203 232,373 Book value per common share(4) ... 18.44 18.14 16.81 17.19 15.64 13.48 8.19 STATEMENT OF OPERATIONS DATA Interest income .................. $ 599,934 $ 620,419 $ 812,312 $ 746,759 $ 494,706 $ 482,490 $ 502,854 Interest expense ................. 401,025 448,026 584,778 552,760 320,924 300,831 348,291 ----------- ------------ ------------ ----------- ----------- ----------- ----------- Net interest income .......... 198,909 172,393 227,534 193,999 173,782 181,659 154,563 Provision for credit losses ...... 14,644 10,155 16,469 24,293 6,997 4,083 21,133 ----------- ------------ ------------ ----------- ----------- ----------- ----------- Net interest income after provision for credit losses ..................... 184,265 162,238 211,065 169,706 166,785 177,576 133,430 Non-interest income .............. 86,892 78,082 110,036 114,981 118,889 146,691 103,790 Non-interest expense ............. 153,000 167,993 253,265 194,576 199,593 201,964 180,415 ----------- ------------ ------------ ----------- ----------- ----------- ----------- Income before income taxes, minority interest and extraordinary loss ......... 118,157 72,327 67,836 90,111 86,081 122,303 56,805 Income tax expense (benefit) ..... 45,499 (73,644) (75,765) 37,415 (31,899) (26,153) 200 Minority interest(2)(5) .......... 13,689 20,102 24,666 10,977 9,010 6,537 -- Extraordinary loss(6) ............ 2,323 -- -- -- -- 14,549 -- ----------- ------------ ------------ ----------- ----------- ----------- ----------- Net income ................... $ 56,646 $ 125,869 $ 118,935 $ 41,719 $ 108,970 $ 127,370 $ 56,605 =========== ============ ============ =========== =========== =========== =========== Net income applicable to common shares ........... $ 56,646 $ 119,111 $ 113,327 $ 38,824 $ 102,519 $ 118,640 $ 52,406 Earnings per common share(4) ..... 1.79 4.13 3.87 1.35 3.55 4.11 1.85 Dividends per common share ....... 0.42 3.46 3.46 -- -- -- -- Average number of common shares outstanding(4) .......... 31,596 28,863 29,260 28,863 28,863 28,863 28,366 </TABLE> <TABLE> <CAPTION> AT OR FOR THE NINE MONTHS ENDED JUNE 30, AT OR FOR THE YEAR ENDED SEPTEMBER 30, ------------------------- ------------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) <S> <C> <C> <C> <C> <C> <C> <C> CERTAIN RATIOS AND OTHER DATA(7) Return on average assets(8) ... 0.86% 1.72% 1.28% 0.50% 1.42% 1.83% 0.89% Return on average common equity 13.56 33.06 23.06 8.80 26.32 44.87 28.18 Stockholders' equity to assets 5.09 4.80 4.96 4.14 5.07 4.61 3.71 Tangible stockholders' equity to tangible assets .......... 4.97 4.65 4.81 3.93 4.68 4.14 2.58 Net yield on interest-earning assets(9) ................... 2.58 2.09 2.10 1.92 2.20 2.61 2.60 Non-interest expense to average total assets ........ 1.87 1.97 2.26 1.86 2.41 2.76 2.85 Efficiency ratio(10) .......... 54.02 66.88 74.97 59.50 66.38 65.11 63.98 Allowance for credit losses to net nonaccrual loans(11) . 71.59 45.21 44.24 48.74 30.73 71.71 74.04 Allowance for credit losses to total loans .............. 0.46 0.49 0.52 0.44 0.46 0.61 0.68 Net loan charge-offs to average loans(11) ........... 0.26 0.17 0.17 0.16 0.30 0.05 0.07 Nonperforming assets to total assets ................ 0.67 1.03 1.12 0.84 1.09 0.72 0.89 Regulatory capital ratios of the Bank(12) Tangible capital .......... 7.59 6.15 6.57 6.20 6.01 6.17 4.24 Core capital .............. 7.65 6.23 6.64 6.29 6.17 6.43 5.04 Total risk-based capital .. 14.05 12.53 13.09 13.45 14.02 14.87 12.19 Number of community banking branches .................... 70 70 70 65 62 62 65 Number of commercial banking origination offices ......... 10 9 9 9 5 3 2 Number of mortgage origination offices (13) ................ 6 91 85 122 145 109 93 Single family servicing portfolio ................... $17,235,304 $12,037,262 $13,246,848 $12,532,472 $ 8,920,760 $ 8,073,226 $ 7,187,000 Single family originations(14) 1,603,305 2,846,514 3,762,198 3,447,250 5,484,111 6,737,762 6,118,363 Loans purchased for held to maturity portfolio .......... 842,270 102,230 148,510 2,658,093 1,406,275 1,212,103 916,613 CERTAIN RATIOS AND OTHER DATA -- EXCLUDING NON-RECURRING AND CERTAIN OTHER ITEMS(15) Net income .................... $ 56,507 $ 42,597 $ 56,392 $ 41,719 $ 50,804 $ 97,736 $ 56,605 Net income applicable to common shares ............... 56,507 39,876 53,295 38,824 47,585 91,461 52,406 Earnings per common share ..... 1.78 1.38 1.82 1.35 1.65 3.17 1.85 Operating earnings(16) ........ 110,890 86,836 114,659 91,295 75,514 77,105 50,024 Return on average assets(8) ... 0.86% 0.67% 0.67% 0.50% 0.72% 1.42% 0.89% Return on average common equity 13.54 11.38 11.47 8.80 12.27 34.43 28.18 Efficiency ratio(10) .......... 54.02 58.87 58.85 59.50 66.38 65.11 63.98 </TABLE> - ------------ (1) Long-term debt is comprised of Senior Notes, Subordinated Notes, and other long-term debt. Long-term debt excludes Federal Home Loan Bank ("FHLB") advances with maturities greater than one year. FHLB advances with maturities greater than one year were $2,564,801 and $1,109,945 as of June 30, 1997 and 1996, respectively, and were $926,291, $1,992,010, $782,129, $708,945, and $55,445 at September 30, 1996, 1995, 1994, 1993, and 1992, respectively. See Notes 9 and 11 to the Consolidated Financial Statements. (2) During fiscal 1993, the Bank issued its 10.12% Noncumulative Preferred Stock, Series A, and, during fiscal 1995, the Bank issued its 9.60% Noncumulative Preferred Stock, Series B (the Preferred Stock, Series A and Series B, is collectively referred to as the "Bank Preferred Stock"). None of the shares of Bank Preferred Stock are owned by the Company. All of the outstanding shares of common stock of the Bank are owned by Holdings, a wholly owned subsidiary of the Company. (3) In August 1996, the Company filed a registration statement with the Commission and 12,075,000 shares of the Company's Class A Common Stock were sold to the public. The Company sold 910,694 shares and certain stockholders sold 11,164,306 shares. See "Management's Discussion and Analysis -- Capital Resources and Liquidity -- Capital" and Note 16 to the Consolidated Financial Statements. (NOTES CONTINUED ON FOLLOWING PAGE) (4) Earnings per common share ("EPS") is net income (adjusted for earnings on the common stock equivalents attributable to the Bank's Warrant for periods prior to August 1996. See Note 5 herein) divided by the weighted-average number of common shares outstanding. Per share results have been restated to reflect an 1,800 to one common stock conversion in June 1996. See Notes 1 and 16 to the Consolidated Financial Statements. (5) In connection with its Acquisition, the Bank issued to the FDIC-FRF the Warrant to acquire 158,823 shares of common stock of the Bank at an exercise price of $0.01 per share. Payments in lieu of dividends related to the Warrant. In August 1996, the FDIC-FRF surrendered a portion of the Warrant for a cash payment of $6.1 million, exercised the remainder of the Warrant and immediately exchanged the shares of common stock of the Bank it received for 1,503,560 shares of Common Stock of the Company. The FDIC-FRF sold all of these shares in the August Offering. See "Business -- The Assistance Agreement -- Warrant Agreement". (6) Fiscal 1997 extraordinary loss is costs and charges associated with the repurchase and retirement of the Senior Notes. See Note 11 to the Consolidated Financial Statements. Fiscal 1993 extraordinary loss is costs and charges associated with the repayment of the note payable to related party and the 15.75% Notes (as defined, see "Management's Discussion and Analysis -- Capital Resources and Liquidity -- Notes Payable"). (7) Ratio, yield, and rate information are based on weighted average daily balances for fiscal 1993 and subsequent periods and average monthly balances for fiscal 1992, with the exception of return on average common equity, which is based on average monthly balances for all periods presented. Interim rates are annualized. (8) Return on average assets is net income without deduction of minority interest, divided by average total assets. (9) Net yield on interest-earning assets is net interest income as a percentage of average interest-earning assets. (10) Efficiency ratio is non-interest expenses (excluding goodwill amortization), divided by net interest income plus non-interest income, excluding net gains (losses) on securities, MBS, other loans, and the sale of mortgage offices. (11) During April 1997, $31.3 million of nonperforming loans were sold with related charge-offs of $5.0 million. Primarily as a result of this transaction, the allowance for credit losses to net nonaccrual loans increased to 71.59% at June 30, 1997 from 45.21% at June 30, 1996. Excluding the charge-offs related to this sale of nonperforming assets, net loan charge-offs to average loans would have been 0.18% for the nine months ended June 30, 1997. (12) Regulatory capital ratios presented are those of the Bank. No regulatory capital ratios are presented for the Company because there are no such applicable requirements for savings and loan holding companies such as the Company. For a discussion of the regulatory capital requirements applicable to the Bank, see "Regulation -- Safety and Soundness Regulations -- Capital Requirements". (13) During fiscal 1997, the Company sold certain of its mortgage origination offices. In connection with this sale, the remaining offices were restructured or closed. The mortgage origination branches shown at June 30, 1997 are the wholesale mortgage origination offices, which are currently part of the Financial Markets Group. (14) Includes $106.3 million, $100.0 million, $129.0 million, $135.3 million, $100.3 million, $116.5 million, and $127.0 million of brokered and purchased loans for the nine months ended June 30, 1997 and 1996, and fiscal 1996, 1995, 1994, 1993, and 1992, respectively. (15) Non-recurring items, deemed not to be part of the routine core business operations of the Company, are composed of the following for the nine months ended June 30, 1997 and fiscal 1996, 1994, and 1993: -- 1997 (increased EPS $0.01) -- (1) the gain on the sale of mortgage offices of $3,998 ($2,462 net of tax) and (2) the extraordinary loss on extinguishment of debt of $3,574 ($2,323 net of tax). -- 1996 (increased EPS $2.05) -- (1) a one-time SAIF assessment charge of $33,657 ($20,729 net of tax), (2) compensation expense of $7,820 ($4,816 net of tax), (3) charges totalling $12,537 ($7,729 net of tax) related to the restructuring of and items associated with the mortgage origination business, (4) a contractual payment to previous minority interests of $5,883, and (5) a tax benefit of $101,700. -- 1994 (increased EPS $1.90) -- tax benefit of $58,166 -- 1993 (increased EPS $0.94) -- (1) tax benefit of $44,183 and (2) extraordinary loss on extinguishment of debt of $14,549. (16) Operating earnings consists of net income, including net gains (losses) on the sales of single family servicing rights and single family warehouse loans, before taxes, minority interest, and extraordinary losses and excludes net gains (losses) on securities, MBS, other loans, and applicable non-recurring items. See note 15 herein and "Business -- General." THE OFFERING Class A Common Stock offered by the Selling Stockholder................. 140,171 shares Common Stock to be outstanding immediately after the Offering...................... 31,595,596 shares of Common Stock(1) Risk Factors.............................. General Business Risks; Evolution of Business; Interest Rate Risk; Competition; Funding and Liquidity; Concentration of Loan Portfolio; Active Purchaser of Loan Portfolios; Limitations on Use of Tax Losses; Restrictions on Transfers of Stock; Holding Company Structure; Ability to Pay Dividends; Regulation; Limitations on Stock Ownership; Anti-takeover Provisions; Dependence on Key Personnel; Conversion of Class B Common Stock; Dilution of Voting Power; Potential Effect of Shares Eligible for Future Sale; Liability under Representations and Warranties and Other Credit Risks; Litigation. Use of Proceeds........................... The Company will receive none of the proceeds of the sales of shares by the Selling Stockholder. See "Use of Proceeds". NASDAQ Symbol............................. BNKU - ------------ (1) Excludes shares issuable upon exercise of options to be issued to employees of the Company and shares to be issued, or issuable upon exercise of options to be issued, to non-employee directors of the Company. See "Management -- Executive Management Compensation Program" and "Management -- Compensation of Directors".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000906829_computer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000906829_computer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..eb027ceb15f84be18fe59e216fc8227383070390
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000906829_computer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and related Notes appearing elsewhere in this Prospectus. The following summary and certain portions of this Prospectus include forward-looking statements which involve risks and uncertainties. The Company's actual results may differ materially from the results predicted by such forward-looking statements due to various factors, including but not limited to those discussed in "Risk Factors." Except as otherwise specified, all information in this Prospectus reflects (i) the reincorporation of the Company in Delaware which will be effected prior to or upon completion of this offering, (ii) the automatic conversion of each outstanding share of Preferred Stock into Common Stock upon completion of this offering, (iii) a reverse stock split of 1-for-1.928 shares of the Preferred Stock and Common Stock of the Company which will be effected prior to or upon completion of this offering and (iv) no exercise of the Underwriters' over-allotment option. Computer Motion, Inc. (the "Company") develops and markets proprietary robotic and computerized surgical systems that enhance a surgeon's performance and centralize and simplify a surgeon's control of the operating room ("OR"). The Company believes that its products and technologies under development have the potential to revolutionize surgery and the OR by providing a surgeon with the precision and dexterity necessary to perform complex, minimally invasive surgical procedures including fully endoscopic multivessel coronary artery bypass grafts ("E-CABG") and by enabling a surgeon to control critical devices in the OR through simple verbal commands. The Company believes that its products and technologies under development will broaden the scope and increase the effectiveness of minimally invasive surgery, improve patient outcomes, and create a safer, more efficient and cost effective OR. The Company's current commercial product, AESOP, is an FDA-cleared, robotic endoscope positioning system. Traditionally, the vast majority of all surgeries have been open, requiring large incisions measuring up to 18 inches to access the operative site. Although this approach can be highly effective, it often results in significant trauma, pain and complications, as well as significant costs related to lengthy convalescent periods for the patient. In an effort to mitigate these shortcomings, minimally invasive surgical techniques and related technologies have been developed. According to Medical Data International ("MDI"), in the United Sates in 1995, over 13 million procedures which traditionally would have been performed in an open manner were performed using minimally invasive techniques. Minimally invasive surgery is intended to be as effective as traditional open surgery while offering patients substantially reduced pain and collateral trauma, shortened convalescent periods and decreased overall patient care costs. While these benefits are significant, the minimally invasive approach presents numerous challenges to surgeons, including the intricate reconstruction of patient tissue by suturing, delicate manipulation of small anatomical features and constrained access to, and limited visualization of, the operative site. The Company's robotic surgical system under development, ZEUS, is designed to fundamentally improve a surgeon's ability to perform complex surgical procedures and enable new, minimally invasive microsurgical procedures that are currently impossible or very difficult to perform. ZEUS is comprised of three surgeon-controlled robotic arms, one of which positions the endoscope and two of which manipulate the Company's proprietary single-use and reusable surgical instruments. The Company believes that ZEUS will improve a surgeon's dexterity and precision and enhance visualization of, and access to, confined operative sites. The Company also believes that new minimally invasive surgical procedures performed with ZEUS will, like currently available minimally invasive surgical procedures, result in reduced patient pain and trauma, fewer complications, lessened cosmetic concerns and shortened convalescent periods and will increase the number of patients qualified for certain surgical procedures. In addition, the Company believes that an increase in minimally invasive options will result in lower overall healthcare costs to providers, payors and patients. The Company has commenced limited experimental animal testing with ZEUS at The Cleveland Clinic, Pennsylvania State University's Hershey Medical Center and Sarasota Memorial Hospital. The Company intends to commence testing with ZEUS in the near future at Columbia/HCA Healthcare Corporation's Medical City of Dallas Hospital. The Company intends to seek premarket approval ("PMA") by the FDA to market ZEUS in the United States. The Company also develops technologies to centralize and simplify control of the OR. The modernization of the OR has resulted in the introduction of numerous medical devices with widely varied methods of control INTEGRATED OR NETWORK -- The HERMES OR Control Center under development is designed to form an integrated network of operating room devices, allowing surgeons to have direct control over these devices using verbal commands. In addition, HERMES can be controlled by a touch-screen hand control. [PHOTO] INTERACTIVE INTERFACES -- HERMES is designed to bring a new dimension of efficiency and safety to the operating room by providing both audible and visual feedback to the surgical team regarding the status of medical devices. HERMES OR CONTROL CENTER [PHOTO] [PHOTO] - -------------------------------------------------------------------------------- The Company's ZEUS and HERMES products are under development and have not been approved by the FDA for sale in the United States. These products have not been operated in clinical practice to date. Approval by the FDA could take several years and there can be no assurance that such approval will ever be obtained. In addition, these products have not been approved by international regulatory agencies for sale in international markets. The final design of the Company's products may differ from the artist's rendering above. See "Risk Factors -- Government Regulation and Lack of Regulatory Approval" and "-- Lack of Clinical Testing Experience; Safety and Efficacy Not Yet Established." - -------------------------------------------------------------------------------- and feedback. These devices aid a surgeon but also increase the complexity and costs of the OR. In many instances, these devices are manually controlled and monitored by someone other than a surgeon in response to a surgeon's spoken commands and requests for status. The Company's voice controlled technology platform under development, HERMES, is designed to enable a surgeon to directly control multiple OR devices, including various laparoscopic, arthroscopic and video devices, as well as the Company's robotic devices, through simple verbal commands. HERMES is also designed to provide standardized visual and digitized voice feedback to a surgical team. The Company believes that the enhanced control and feedback provided by HERMES has the potential to improve safety, increase efficiency, shorten procedure times and reduce costs. The Company has developed a prototype of HERMES and expects to commence functionality testing under Institutional Review Board approval during the second half of 1997. The Company's current commercial product, AESOP, approximates the form and function of a human arm and allows control of the endoscope through simple verbal commands. This eliminates the need for a member of a surgical staff to manually control the endoscope and provides a surgeon with direct control of the endoscope and results in a more stable and sustainable endoscopic image. As of July 1, 1997, the Company had sold 240 AESOP units worldwide, which the Company believes have been used to perform over 18,000 procedures. In addition to directly marketing its products, the Company intends to commercialize its robotic and computerized surgical systems by forming strategic alliances with prominent corporate and clinical partners. For instance, the Company and Medtronic, Inc. ("Medtronic"), a leading manufacturer of medical devices, entered into an agreement pursuant to which ZEUS, for cardiothoracic applications, will be co-marketed in North America by the Company and Medtronic and distributed exclusively in Europe, the Middle East and Africa by Medtronic. The Company has also entered into an agreement with Stryker Corporation ("Stryker"), a leading manufacturer of endoscopic equipment, pursuant to which Stryker will purchase HERMES on an OEM basis and will market HERMES as an integrated component of several of its laparoscopic and arthoroscopic products. The Company intends to enter into similar development and OEM relationships with other leading manufacturers of OR devices in order to establish the Company's HERMES technology as the standard method of controlling devices and equipment in the OR. The Company utilizes a number of third-party representatives to distribute AESOP internationally, including Johnson & Johnson which distributes AESOP in Australia, New Zealand, Singapore, Malaysia, Indonesia and Brunei. To date, the Company has not generated a material amount of revenue from any of these strategic alliances. The Company has also entered into agreements with a number of leading medical institutions and formed a Clinical Advisory Board in order to validate and guide the development process of the Company's robotic and computerized surgical systems. The Company was founded in 1989 and incorporated in California on April 11, 1990. The Company intends to reincorporate in Delaware prior to or effective upon completion of this offering. The Company's principal offices are located at 130-B Cremona Drive, Goleta, CA 93117 and its telephone number is (805) 968-9600. AESOP is a registered trademark and Computer Motion is a trademark of the Company. This Prospectus also includes trademarks of companies other than the Company. [PHOTO] ROBOTIC SURGICAL INSTRUMENTS -- ZEUS is comprised of three robotic arms, reusable and single-use instruments, a dedicated computer controller and an ergonomic surgeon console. One robotic arm is used to position the endoscope, while the other two are used to position and manipulate surgical instruments. SURGEON CONSOLE -- The surgeon precisely controls the movements of the robotic instruments by manipulating corresponding handles housed in the mobile console. The endoscope and other key features of ZEUS can be controlled using voice commands. MINIMALLY INVASIVE (MI) MICROSURGERY The ZEUS robotic surgical system under development is designed to enable new microsurgery procedures such as E-CABG (Endoscopic Coronary Artery Bypass Graft) on a beating or stopped heart, providing patients with the potential benefits of significantly reduced pain and trauma, shortened convalescent periods and lowered cosmetic concerns. ENABLING MI MICROSURGERY [PHOTO] ROBOTIC SURGICAL INSTRUMENTS [PHOTO] SURGEON CONSOLE [PHOTO] THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................... 2,500,000 shares Common Stock to be outstanding after the offering..... 7,114,354 shares(1) Use of proceeds....................................... For repayment of debt, research and development, sales and marketing and working capital. Proposed Nasdaq National Market symbol................ RBOT </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FISCAL NINE- THREE MONTHS YEAR MONTHS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31, DECEMBER 31, ----------------------------- ----------------- 1993 1993(2) 1994 1995 1996 1996 1997 --------- ------------ ------- ------- ------- ------ ------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue.................................... $ 393 $ 66 $ 607 $ 2,271 $ 4,057 $ 676 $ 1,373 Cost of revenue............................ 259 88 500 1,973 2,627 444 651 ----- ----- ------- ------- ------- ------ ------- Gross profit (loss)........................ 134 (22) 107 298 1,430 232 722 Operating expenses: Research and development................. 132 495 630 739 1,359 336 558 Selling, general and administrative...... 134 367 2,784 3,158 4,144 745 1,338 ----- ----- ------- ------- ------- ------ ------- Total operating expenses............... 266 862 3,414 3,897 5,503 1,081 1,896 ----- ----- ------- ------- ------- ------ ------- Loss from operations....................... (132) (884) (3,307) (3,599) (4,073) (849) (1,174) Interest and other income (expense), net... 1 10 63 9 (486) (41) (356) ----- ----- ------- ------- ------- ------ ------- Net loss................................... $(131) $ (874) $(3,244) $(3,590) $(4,559) $ (890) $(1,530) ===== ===== ======= ======= ======= ====== ======= Pro forma net loss per share............... $ (0.88) $(0.18) $ (0.28) ======= ====== ======= Pro forma shares used in per share computations(3).......................... 5,151 5,041 5,459 ======= ====== ======= </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ---------------------------- ACTUAL AS ADJUSTED(4) ------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................................................ $ 3,986 $ 32,686 Working capital...................................................................... 1,101 32,968 Total assets......................................................................... 7,052 35,752 Redeemable preferred stock........................................................... 6,002 -- Long-term debt, net of current portion............................................... 3,350 100 Total stockholders' equity (deficit)................................................. (7,054) 34,065 </TABLE> - --------------- (1) Excludes 1,553,981 shares of Common Stock issuable upon exercise of outstanding stock options and 1,609,250 shares of Common Stock issuable upon exercise of outstanding warrants as of June 1, 1997. Includes 2,414,646 shares of Common Stock issuable upon the automatic conversion of each outstanding share of Preferred Stock into Common Stock that will occur upon the completion of this offering. See "Capitalization," "Management -- Stock Plans," "Certain Transactions," and Notes 6, 14 and 15 of Notes to Financial Statements. (2) In 1993, the Company changed its fiscal year end from March 31 to December 31. (3) See Note 2 of Notes to Financial Statements for a description of the computation of pro forma net loss per share and net loss per share. (4) Adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $14.00 per share after deducting the underwriting discount and the estimated costs of this offering, the automatic conversion of all outstanding shares of the Company's Preferred Stock into Common Stock that will occur upon completion of this offering, the conversion of the Secured Convertible Debenture issued to Medtronic (the "Medtronic Debenture") which occurred in May 1997 and the repayment of bridge debt, as if such sale, conversions and repayments had occurred at March 31, 1997. The number of shares issued to Medtronic is subject to further adjustment under certain circumstances. See "Capitalization" and "Selected Financial Data" and "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000907038_jenner_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000907038_jenner_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..63335310739d921ad31523b8ce15da0d6a8d7966
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000907038_jenner_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains forward-looking statements. Such forward-looking statements include, but are not limited to, the Company's expectations regarding its future financial condition and operating results, product development, business and growth strategy, market conditions and competitive environment. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes the Underwriter's over-allotment option is not exercised, (ii) reflects a 1-for-1.7328 reverse stock split of the Company's Common Stock to be effected prior to the closing of the Offering, (iii) assumes the Warrants and the warrants to purchase 250,000 shares of Common Stock and/or 250,000 Warrants issued to the Representative in connection with this Offering (the "Representative's Warrants") are not exercised, (iv) assumes the reincorporation of the Company in Delaware prior to the closing of the Offering, and (v) assumes the conversion of all outstanding shares of the Company's Series A Preferred Stock and Series B Preferred Stock into 1,510,015 shares of the Company's Common Stock upon the closing of the Offering. THE COMPANY Jenner Technologies, Inc. ("Jenner" or the "Company"), a development stage company, is engaged in the development of immunotherapies to treat patients with cancer and certain side effects related to chemotherapy. The Company has four product candidates under development, two of which are in clinical trials. Three of the Company's product candidates are designed to delay or prevent the recurrence of cancer by stimulating the body's own immune system to attack microscopic disease remaining after a patient has undergone traditional therapy. The Company's product candidates consist of macrophage activators (ACT and JT3002) and therapeutic vaccines (OncoVax-P and OncoVax-CL). The Company acquired the technology related to ACT and JT3002 through an exclusive worldwide license with Novartis AG (the company resulting from the merger of Ciba-Geigy Limited and Sandoz, Ltd.) ("Novartis"). In addition, the Company acquired the rights to produce the antigen related to OncoVax-P through a non-exclusive license with Research Corporation Technologies, Inc. and the antigen related to OncoVax-CL through an exclusive worldwide license with Eli Lilly & Company. ACT is in a nationwide Phase III clinical trial as a therapy for patients with osteogenic sarcoma (bone cancer). The study calls for a total of 645 patients to be treated under the protocol and, as of December 31, 1996, approximately 540 patients had entered the study. ACT utilizes a small molecule that has the capacity to activate macrophages, which are scavenger cells that are part of the immune system. Once activated, macrophages acquire the ability to seek out and destroy tumor cells. ACT utilizes a proprietary liposomal formulation to deliver its active ingredients (liposomes are spheres of subcellular size composed primarily of fat molecules). JT3002 is in preclinical evaluation as a therapy for mucositis (damage to the gastrointestinal mucosa or lining of the gut), a side effect commonly associated with chemotherapy. The Company intends to file an Investigational New Drug application ("IND") with the United States Food and Drug Administration ("FDA") in late 1997 or early 1998 to commence Phase I clinical trials of JT3002, subject to the results of the preclinical evaluation. OncoVax-P is in limited Phase I/II clinical trials in patients with prostate cancer. The Company intends to commence a limited Phase I/II clinical trial for OncoVax-CL in patients with colorectal cancer in the first quarter of 1997. The Company's Phase I/II clinical trials are conducted in a small number of patients (5-6) to gain preliminary information regarding safety of the vaccine and ability to generate an immune response. OncoVax-P and OncoVax-CL each include a genetically engineered version of a tumor associated antigen which represents the "identity tag" of the cancer cell combined with an adjuvant which enhances the body's immune response. The antigen and adjuvant are packaged in liposomes which are taken up by antigen - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- presenting cells. The Company believes this approach will induce a more robust relevant immune response than if the liposomal delivery system is not used. Based on preclinical data, the Company believes that OncoVax-CL may have the potential for application in cancer indications other than colorectal cancer, such as lung, pancreatic and ovarian cancer. In an effort to leverage the Company's resources and better manage the risks and costs inherent in scientific research and new product development, Jenner has followed a business strategy of (i) in-licensing promising proprietary technologies for which substantial preclinical and/or clinical studies have been undertaken, (ii) focusing on human clinical trials to gain relevant information rather than developing animal models, and (iii) engaging qualified subcontractors to perform research and development functions. Through this business strategy, the Company has expended only approximately $4.0 million in cash through December 31, 1996 to develop its current product candidates and believes it has extended its research efforts to a larger number of applications than would otherwise be the case given its limited resources. The Company believes that its business strategy and management capabilities may enable it to shorten the time frame for commercializing its products. As the Company's product candidates advance through the regulatory process, the Company generally intends to establish strategic alliances with pharmaceutical companies and other corporate partners with large distribution systems to market and sell the Company's products worldwide. In some cases, however, where the customers for a product are easily identified and concentrated, the Company intends to market and distribute the product through a direct sales force. Jenner was incorporated as a California corporation in December 1992 and expects to reincorporate in Delaware prior to consummation of this Offering. The Company's principal offices are located at 2010 Crow Canyon Place, Suite 100, San Ramon, California 94583, and its telephone number is (510) 824-3150. - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- THE OFFERING Securities Offered....... 2,500,000 Shares of Common Stock and 2,500,000 Warrants. The Shares and the Warrants will be separately transferable immediately following the completion of this Offering. Exercise Price of Warrants............... Each Warrant entitles the registered holder thereof to purchase, at any time over a four (4) year period commencing one (1) year after the date of this Prospectus, one share of Common Stock at a price of $ per share [140% of the initial public offering price per Share]. The Warrant exercise price is subject to adjustment under certain circumstances. See "Description of Securities." Redemption of Warrants... Commencing eighteen (18) months after the date of this Prospectus, the Warrants are subject to redemption by the Company at $0.10 per Warrant on thirty (30) days' prior written notice to the warrant holders if the average closing sales price of the Common Stock equals or exceeds $ per share [160% of the initial public offering price per Share of Common Stock] for any twenty (20) trading days within a period of thirty (30) consecutive trading days ending on the fifth trading day prior to the date of the notice of redemption. See "Description of Securities." Common Stock Outstanding Prior to the Offering(1). 4,621,886 Shares Common Stock Outstanding After the Offering(1)... 7,121,886 Shares Use of Proceeds........... For research and development, clinical trials, purchase of equipment, working capital and general corporate purposes. See "Use of Proceeds." Risk Factors and Dilution. An investment in the securities offered hereby involves a high degree of risk and immediate and substantial dilution to the purchasers in this Offering. See "Risk Factors" and "Dilution." Proposed AMEX Symbols(2): Common Stock ........... JNR Warrants ............... JNRW - ---------- (1) Excludes 378,114 shares of Common Stock issuable upon exercise of outstanding non-plan stock options and outstanding stock options granted under the Company's 1993 Incentive Stock Plan as of January 31, 1997 at a weighted average exercise price of $0.90 per share, and 350,000 shares of Common Stock reserved for issuance under the Company's 1997 Stock Plan. See "Management -- Employee Benefit Plans." (2) Application has been made for listing of the Common Stock and the Warrants on AMEX. Jenner(tm) and ACT (tm) are trademarks of the Company. The Company has filed an application to register JennerTech(tm) as a trademark of the Company. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- SUMMARY FINANCIAL INFORMATION <TABLE> <CAPTION> PERIOD FROM PERIOD FROM INCEPTION INCEPTION (DECEMBER 8, (DECEMBER 8, 1992) TO YEAR ENDED DECEMBER 31, 1992) TO DECEMBER 31, ---------------------------------- DECEMBER 31, 1993 1994 1995 1996 1996 ---- ---- ---- ---- ---- STATEMENT OF OPERATIONS DATA: <S> <C> <C> <C> <C> <C> Revenues $ -- $ -- $ -- $ -- $ -- Research and development expenses 338,626 499,366 698,303 2,206,900 3,743,195 General and administrative expenses 137,325 228,114 195,663 339,948 901,050 --------- --------- --------- ----------- ----------- Loss from operations (475,951) (727,480) (893,966) (2,546,848) (4,644,245) Interest income (expense) 9,037 22,369 17,100 (140,987) (92,481) --------- --------- --------- ----------- ----------- Net loss $(466,914) $(705,111) $(876,866) $(2,687,835) $(4,736,726) ========= ========= ========= =========== =========== Pro forma net loss per share(1) $ (0.56) =========== Shares used to compute pro forma net loss per share(1) 4,785,863 =========== </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------- AS ACTUAL ADJUSTED(2) ------ ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital $ 1,317,447 $ 17,697,447 Total assets 1,563,392 17,943,392 Note payable to principal stockholder 3,000,000 3,000,000 Deficit accumulated during the development stage (4,736,726) (4,736,726) Total stockholders' equity (deficit) (1,852,170) 14,527,830 </TABLE> - ---------- (1) See Note 1 of Notes to Financial Statements for an explanation of the determination of the number of shares used to compute pro forma net loss per share. (2) Adjusted to give effect to the receipt of the estimated net proceeds of the Offering based upon an assumed initial public offering price of $7.50 per Share and $.10 per Warrant. See "Use of Proceeds" and "Capitalization." - -------------------------------------------------------------------------------- 6
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000908246_dtvn_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000908246_dtvn_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..42728e9ab358b5ae2bdbcac993e07991bce45906
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000908246_dtvn_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain significant matters discussed elsewhere in this document. This Summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus including information under "Risk Factors." Prospective investors are urged to read the entire Prospectus. Certain terms used in this Summary and elsewhere in this Prospectus are used as defined in the Summary or elsewhere in this Prospectus. See the "Glossary of Certain Industry Terms" appearing at the end of this Prospectus for the definitions of certain terms used herein. Unless otherwise indicated, all information contained in this Prospectus assumes that the Underwriters' over-allotment option as described in "Underwriting" is not exercised. The "Company" means Zydeco Energy, Inc. and its wholly-owned subsidiaries, Zydeco Exploration, Inc. and Wavefield Image, Inc., and, unless the context otherwise requires, such subsidiaries are also included in the description of the Company. The Shares offered hereby involve a high degree of risk and investors should carefully consider information set forth in "Risk Factors." THE COMPANY Zydeco Energy, Inc. ("Zydeco" or the "Company") is an independent energy company engaged in the exploration for oil and gas utilizing advanced 3D seismic and computer aided exploration ("CAEX") techniques. The Company believes it is one of the few independent exploration companies with comprehensive in-house technology and expertise enabling it to use the most recent advances in such 3D seismic and CAEX technology. Zydeco's geophysicists design the seismic data acquisition survey, manage the acquisition of seismic data and process and interpret the resulting data. The Company believes that its technology and expertise enable it to acquire and analyze seismic data efficiently over large geographical areas. The Company attempts to concentrate its efforts in areas previously unexplored with advanced 3D seismic technology. Based upon analysis of processed data, Zydeco personnel identify and rank potential oil and gas prospects for leasehold acquisition. The Company intends to enter into agreements with experienced industry partners for the development of such prospects and retain significant non-operating production interests in those prospects. Zydeco's present exploration efforts are focused in the Louisiana Transition Zone, the region of land and shallow water extending several miles both onshore and offshore from the coastline of Louisiana. The Louisiana Transition Zone is part of a geologically complex trend in which large oil and natural gas reserves have been discovered and produced. However, the Company believes that the Louisiana Transition Zone has historically been underexplored with 3D seismic techniques relative to nearby and geologically related deeper waters and lands inland from the coastline, primarily due to characteristics that make seismic data acquisition difficult and expensive. The Company believes that the comparatively low levels of 3D seismic exploration in the Louisiana Transition Zone provide significant opportunities for prospect identification in a region with prolific historical oil and gas production. The Company's three senior executives have an average of 29 years experience in the oil and gas exploration business. In addition, the Company has assembled an experienced exploration team of geophysicists and geologists with substantial industry experience in exploration and advanced seismic technology and analysis. This team has successfully assembled an integrated hardware and software seismic processing system which allows the Company to capitalize on the most recent developments in 3D seismic and CAEX technology. These recent developments include a processing technique initially licensed and recently acquired by the Company ("Wavefield Imaging Technology") which substantially reduces the cost of seismic data acquisition for certain surveys while improving the resolution of the subsurface image. The Company recently acquired Wavefield Image, Inc. ("Wavefield"), the owner and licensor of the Wavefield Imaging Technology. On July 3, 1997, the Company received notice that a patent application in respect of the Wavefield Imaging Technology has been allowed for patent issuance by the United States Patent and Trademark Office. The Company expects that the patent will be issued in a few months. The Company's primary objective is to discover and develop oil and gas reserves and increase cash flow through exploration, prospect identification and participation in projects to develop such prospects. Key elements of the Company's strategy include: (i) focusing its efforts in geologic areas that it believes are seismically underexplored and have the potential for substantial oil and gas reserves; (ii) continuing to develop and apply its advanced in- house 3D seismic technology and expertise; and (iii) pursuing joint ventures with industry partners to drill and develop producing properties from such prospects. To date, the Company has not generated net income primarily because of the significance and timing of its exploration expenditures and the substantial investments in advanced supercomputing processors and software required to keep pace with the most recent advances in CAEX technologies. In August 1996, the Company commenced an extensive 3D seismic exploration program in a part of the Louisiana Transition Zone in western Cameron Parish, Louisiana (the "West Cameron Seismic Project") utilizing the Wavefield Imaging Technology. As of June 30, 1997, the Company had acquired seismic permits and exclusive seismic options on approximately 151,000 contiguous acres onshore and in state and federal waters, including 51,000 acres with respect to which the Company has an exclusive seismic permit and 36,000 acres with respect to which the Company has lease options. On July 6, 1997, the Company completed seismic data acquisition for the West Cameron Seismic Project. The Company presently expects to commence lease acquisition for identified prospects in late 1997. While the Company believes the preliminary analysis of the data acquired from the West Cameron Seismic Project is promising for prospect identification, no assurances can be made as to the results of further processing and analysis of such data or as to the existence of recoverable hydrocarbons on the West Cameron Seismic Project acreage. No assurances can be made as to the existence of recoverable hydrocarbons on the West Cameron Seismic Project acreage or in any other areas in which the Company explores. The Company is financing the West Cameron Seismic Project in part through an exploration agreement (the "Cheniere Exploration Agreement") with Cheniere Energy Operating Co., Inc. ("Cheniere"). Pursuant to the Cheniere Exploration Agreement, Cheniere agreed to pay for all of the costs of permits, options and seismic data acquisition and processing for the West Cameron Seismic Project up to a maximum of $13.5 million, plus 50% of such costs in excess of $13.5 million, in exchange for an interest of up to 50% in the West Cameron Seismic Project. The Company estimates that the cost of seismic data acquisition and processing and obtaining seismic permits for the West Cameron Seismic Project through December 31, 1997 will aggregate approximately $18.5 million. As of August 19, 1997, Cheniere had paid $13.5 million and the Company had paid $3.0 million of such costs. Based on the Company's 1997 cost estimate, Cheniere would be required to pay an additional $2.5 million (including reimbursement of $500,000 in costs paid by the Company) in order to maintain a 50% interest in the West Cameron Seismic Project. Under the terms of the Cheniere Exploration Agreement, Cheniere may elect to cease payment of costs at any time, in which case its interest in the West Cameron Seismic Project would be proportionately reduced. If Cheniere elects to cease payment, the Company will be obligated to pay the entire remaining expected costs and Cheniere's interest in the West Cameron Seismic Project will be reduced. In addition to its interests in the West Cameron Seismic Project, the Company has identified a number of other potential prospects in the Louisiana Transition Zone, most of which were identified prior to conducting any 3D seismic surveys. As of June 30, 1997, the Company held oil and gas leases covering approximately 21,480 gross acres (11,326 net acres) in Louisiana State and Federal waters. Approximately two-thirds of these potential prospects are owned equally by Fortune Petroleum Corp. ("Fortune") pursuant to an agreement (the "Fortune Exploration Agreement") between the Company and Fortune. Although the Company plans to pursue further evaluation of certain of these potential prospects, including the possible sale of some of these prospects, there can be no assurance that any of the potential prospects will be drilled or will contain any commercially recoverable amounts of oil and gas. The Company's principal offices are located at Two Allen Center, 1200 Smith Street, Suite 1710, Houston Texas 77002. Its telephone number is (713) 659- 2222. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company......................... 3,200,000 shares Common Stock Outstanding after the Offering(1)................. 9,907,098 shares Use of Proceeds.................. To finance leasehold acquisition costs, seismic data acquisition costs, and processing and analysis costs principally in respect of the Company's West Cameron Seismic Project, drilling participation costs, and, to a lesser extent, for general corporate purposes, including working capital. Nasdaq Market Symbol(2).......... "ZNRG" </TABLE> - -------- (1) Does not include (i) 6,029,799 shares issuable upon exercise of outstanding options, unit options and warrants (assuming adjustment to outstanding unit options based upon an assumed public offering price of $5.00 per share) and (ii) 320,000 shares issuable upon exercise of the Underwriter Warrants. See "Capitalization." (2) The Common Stock has been approved for listing on the Nasdaq National Market upon notice of official issuance, subject to certain continued listing requirements described under "Risk Factors - Nasdaq Stock Market Listing." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (1) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SALES PRICE DATA) <TABLE> <CAPTION> PERIOD FROM INCEPTION (MARCH 17, SIX MONTHS YEAR ENDED 1994) ENDED JUNE 30, DECEMBER 31, THROUGH -------------------- -------------------- DECEMBER 31, 1997 1996 1996 1995 1994 --------- --------- --------- --------- ------------ <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Operating revenues...... $ 631 $ 605 $ 1,470 $ 587 $ -- Operating expenses...... 2,994 1,341 3,577 1,737 110 --------- --------- --------- --------- --------- Operating loss.......... (2,363) (736) (2,107) (1,150) (110) Other income (expense).. 96 143 249 (24) (23) --------- --------- --------- --------- --------- Net loss................ $ (2,267) $ (593) $ (1,858) $ (1,174) $ (133) ========= ========= ========= ========= ========= Net loss per share of Common Stock and Common Stock equivalent ...... $ (0.34) $ (0.10) $ (0.30) $ (0.30) $ (0.03) ========= ========= ========= ========= ========= Weighted average shares of Common Stock and Common Stock equivalents outstanding............ 6,599,543 5,804,929 6,168,798 3,906,706 4,468,777 ========= ========= ========= ========= ========= </TABLE> <TABLE> <CAPTION> AT JUNE 30, 1997 -------------------- ACTUAL AS ADJUSTED(2) ------ ------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and marketable securities.......... $2,759 $17,154 Working capital........................................... 2,243 16,638 Total assets.............................................. 7,383 21,778 Stockholders' equity...................................... 4,091 18,486 </TABLE> <TABLE> <CAPTION> PERIOD FROM INCEPTION (MARCH 17, SIX MONTHS YEAR ENDED 1994) ENDED JUNE 30, DECEMBER 31, THROUGH --------------- -------------- DECEMBER 31, 1997 1996 1996 1995 1994 ------- ------- ------- ------ ------------ <S> <C> <C> <C> <C> <C> OPERATING DATA: Production: Oil (Bbls)........................ 6,209 8,004 20,186 1,118 -- Natural gas (Mcf)................. 198,936 148,020 372,678 84,546 -- Average sales prices: Oil ( per Bbl).................... $ 21.54 $ 21.50 $ 22.39 $18.37 $ -- Natural gas ( per Mcf)............ $ 2.50 $ 2.60 $ 2.60 $ 1.76 $ -- </TABLE> - -------- (1) On December 20, 1995, TN Acquisition Corp. ("TN Acquisition"), a wholly- owned subsidiary of the Company, merged with and into Zydeco Exploration, Inc. ("Zydeco Exploration") in a reverse triangular merger (the "Merger"). As a result, Zydeco Exploration became a wholly-owned subsidiary of the Company and the Company, formerly known as "TN Energy Services Acquisition Corp.," changed its name to "Zydeco Energy, Inc." Under accounting rules applicable to the Merger, the historical financial statements of Zydeco Exploration became the historical financial statements of the Company. For the years ended December 31, 1996 and 1995 and the period from inception (March 17, 1994) through December 31, 1994, the historical financial data has been derived from financial statements audited by independent public accountants as indicated in their report included in this Prospectus. The financial data set forth above should be read in conjunction with the consolidated financial statements of the Company together with the related notes thereto included elsewhere herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) Adjusted to reflect the sale of 3,200,000 Shares offered hereby at an assumed public offering price of $5.00 per share after deducting underwriting discounts and commissions and estimated offering expenses and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization." SUMMARY OIL AND GAS RESERVE INFORMATION The following table sets forth summary information with respect to the Company's estimated proved oil and gas reserves as of December 31, 1996. The reserve and present value data as of December 31, 1996 have been prepared by Ryder Scott Company Petroleum Engineers, independent petroleum engineering consultants. For additional information relating to the Company's proved reserves, see "Business and Properties--Oil and Gas Reserves."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000909211_insync_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000909211_insync_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7cf3752789057d72efbc20597ffbdd6efbfbf4b4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000909211_insync_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and consolidated financial statements and notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties, including statements regarding strategies, intentions or expectations. The Company's actual results may differ materially from the results discussed in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Risk Factors." THE COMPANY Insync is a leading provider of outsourcing services to semiconductor equipment manufacturers for the design and manufacture of gas delivery systems and subassemblies. Gas delivery is a critical component of deposition, etch and other semiconductor process equipment. The Company believes its outsourcing services reduce its customers' total costs by shortening product delivery cycle times, reducing inventory and materials procurement costs, eliminating redundant work, enhancing information exchange and coordinating increasingly complex manufacturing and design processes. The Company's principal customers are Applied Materials, Inc., Lam Research Corporation, Watkins-Johnson Company and most recently, Novellus Systems, Inc., four major North American semiconductor equipment manufacturers. The Company offers a full range of gas delivery solutions, including subassemblies for integration into its customers' internally manufactured gas delivery systems and complete systems for incorporation into its customers' products at final assembly. Insync has recently introduced the Integrated Gas System (the "IGS"), a modular platform for gas delivery that is designed to simplify the specification, configuration, manufacturing and serviceability for gas delivery systems. The manufacture of semiconductors has required increasingly complex and sophisticated process technologies. More than 40% of all semiconductor manufacturing equipment, which in turn performs more than 70% of the manufacturing process steps, requires the introduction, management and evacuation of process gases. These steps include the deposition of insulating or conducting materials onto a wafer ("deposition") and the etching of the wafer to selectively remove deposited material ("etch"). Deposition and etch processes require highly controlled process environments and chemistry and, as a result, the equipment used for deposition and etch is complex and incorporates sophisticated systems to control various process gases and the conditions in which they are used. Device manufacturers continuously demand innovations in the core process technologies underlying deposition and etch. In order to meet such demands, equipment manufacturers have been required to repeatedly improve their process equipment in many respects, including the inclusion of increasingly complex and sophisticated gas delivery systems. Insync has expertise in gas delivery requirements and specialized production capabilities focused on the design and manufacture of complex, customized gas delivery systems and subassemblies within the time constraints demanded by equipment manufacturers. The Company has invested significant resources in developing additional manufacturing capabilities and capacity in order to offer its customers advanced production capabilities that, in many cases, exceed the customer's own internal capabilities. The Company believes its customers benefit by outsourcing resource-intensive design and manufacturing activities for gas delivery systems and subassemblies, and from the expertise and efficiencies that the Company derives from providing outsourced gas delivery solutions to multiple leading equipment manufacturers. The Company's objective is to be the primary provider of outsourcing design and manufacturing services for gas delivery to leading semiconductor equipment manufacturers. The Company's strategy is to extend its leadership in gas delivery, expand its gas delivery systems business, strengthen its relationships with customers and suppliers, leverage its manufacturing capabilities and promote modular approaches to gas delivery systems. In January 1996, Insync acquired substantially all of the non-cash assets and liabilities of Pullbrite, Inc. ("Pullbrite"), another independent provider of gas delivery systems to semiconductor equipment manufacturers. Insync was founded in 1989. Insync's address is 1463 Centre Pointe Drive, Milpitas, California 95035 and its telephone number is (408) 946-3100. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.. shares Common Stock offered by the Selling Shareholders........................ shares Common Stock outstanding after the Offering ........................... shares (1) Use of proceeds...................... Repayment of debt and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............................. INSY </TABLE> SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- --------- -------- -------- -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............... $ 2,771 $ 7,199 $ 20,617 $49,969 $86,099 $59,448 $34,679 Income (loss) from operations............. 178 (72) 1,477 5,518 (8,260)(2) 9,411 2,174 Interest expense and other, net............. 75 114 230 434 2,562 1,358 1,675 Net income (loss)....... 101 (188) 734 2,996 (6,508) 4,818 310 Pro forma net income (loss) per share(3).... $ (0.87) $ 0.03 Pro forma shares used in per share computations(3)........ 7,617 8,214 <CAPTION> QUARTER ENDED ---------------------------------------------------------------- MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, 1996 1996 1996 1996 1997 1997 -------- -------- --------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> Net sales............... $33,125 $26,323 $ 16,015 $10,636 $15,102 $19,577 Income (loss) from operations............. 5,768 3,643 (18,117)(2) 446 344 1,830 Interest expense and other, net............. 713 645 608 596 913 762 Net income (loss)....... $ 3,019 $ 1,799 $(11,239) $ (87) $ (336) $ 646 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------- AS ACTUAL ADJUSTED (4) ------- ------------ <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $ 7,951 $ Total assets.............................................. 39,241 Long-term obligations..................................... 17,108 Redeemable Preferred Stock and put warrants............... 23,845 Shareholders' equity (deficiency)......................... (17,030) </TABLE> - -------- (1) Excludes as of June 30, 1997 (i) 1,257,901 shares of Common Stock issuable upon the exercise of outstanding options at a weighted average exercise price of $3.90 per share and (ii) 317,996 shares of Common Stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $3.81 per share. See "Management--Stock Plans" and Notes 8 and 12 of Notes to Financial Statements of Insync. (2) Includes charges of $16.6 million and $858,000 for the write down of intangible assets and restructuring charges, respectively. See Notes 2 and 3 of Notes to Financial Statements of Insync. (3) See Note 1 of Notes to Financial Statements of Insync for an explanation of the number of shares used in computing pro forma net income (loss) per share. (4) Adjusted to reflect (i) conversion of each of the outstanding shares of redeemable Series A Preferred Stock upon the closing of the Offering and (ii) the sale of the shares of Common Stock offered by the Company at an assumed initial public offering price of $ per share (after deduction of the underwriting discounts and commissions and estimated offering expenses) and the application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization." Unless the context otherwise specifies, the information in this Prospectus assumes (i) no exercise of the Underwriters' over-allotment option, (ii) the conversion of all outstanding shares of redeemable Series A Preferred Stock of the Company (the "Redeemable Preferred Stock") into an aggregate of 2,352,940 shares of Common Stock upon the closing of the Offering, and (iii) the completion of a 2-for-3 reverse stock split of the Company's outstanding Common Stock to be effected prior to the effectiveness of the Offering. See "Certain Transactions" and "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000909413_exterran_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000909413_exterran_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1ce663ec207e0a1dd995bc7bb64ef821f62dd277
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000909413_exterran_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, (i) references to the Company include Hanover Compressor Company and its subsidiaries and (ii) all references to the number of shares of common stock, par value $.001 per share, of the Company ("Common Stock") and per share amounts assume that the Underwriters' over-allotment option is not exercised and reflect a 158 for 1 stock split of the Common Stock effected on June 24, 1997 prior to the offering of Common Stock made hereby (the "Offering"). See "Description of Capital Stock". THE COMPANY Hanover Compressor Company ("Hanover" or the "Company") is a leading provider of a broad array of natural gas compression rental, operations and maintenance services in the United States and select international markets. As of March 31, 1997, the Company had a fleet of 1,653 compression rental units with an aggregate capacity of 604,639 horsepower. Hanover's compression services are complemented by its compressor and oil and gas production equipment fabrication operations, which broaden its customer relationships both domestically and internationally. Through internal growth and a series of strategic acquisitions, the Company believes it is the largest operator of rental compression horsepower capacity in the United States, controlling an estimated 20% of the domestic rental market with 1,601 rental units having an aggregate capacity of approximately 535,000 horsepower at March 31, 1997. Internationally, the Company estimates it is one of the largest providers of compression services in the rapidly growing South American market, primarily in Argentina and Venezuela, operating 52 units with approximately 70,000 horsepower at March 31, 1997. In order to continue its international expansion, Hanover recently entered into a series of agreements with Wartsila Diesel International Ltd., OY ("Wartsila"), a leading global manufacturer of large horsepower engines, providing for, among other things, the fabrication and the right to exclusively market in select regions worldwide, Wartsila powered gas compression packages ranging from 1,400 to 7,850 horsepower. The Company's products and services are essential to the production, transportation, processing and storage of natural gas and are provided primarily to energy producers and processors. The Company's decentralized operating structure, technically experienced personnel and high quality compressor fleet, allow Hanover to successfully provide superior, reliable and timely customer service. As a result, Hanover has experienced substantial growth over the past five years and has developed and maintained a number of long-term customer relationships. This success has enabled Hanover to maintain an average horsepower utilization rate of approximately 95% over the last five years in comparison to an industry average estimated by the Company to be approximately 83%. INDUSTRY CONDITIONS Hanover currently competes primarily in the transportable natural gas compression market for units of up to 4,450 horsepower. This market, which includes rental and owner operated units, accounts for approximately 12 million horsepower in the United States and is believed to have grown between 6-10% per annum over the last five years. The Company estimates that the growth in the domestic gas compression market will continue due to the increased consumption of natural gas, the continued aging of the natural gas reserve base and the attendant decline of wellhead pressures and the discovery of new reserves. The rental portion of the domestic gas compression market is currently estimated to comprise only 25% of the aggregate U.S. horsepower, having grown at an estimated rate of 13% per annum since 1992. Growth of rental compression capacity in the U.S. market is primarily driven by the Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. SUBJECT TO COMPLETION, DATED JUNE 26, 1997 6,613,494 SHARES HANOVER COMPRESSOR COMPANY COMMON STOCK [HANOVER LOGO] (PAR VALUE $.001 PER SHARE) --------------------- Of the 6,613,494 shares of Common Stock offered hereby, 4,166,667 shares are being sold by the Company and 2,446,827 shares are being sold by the Selling Stockholders. See "Principal and Selling Stockholders". The Company will not receive any proceeds from the sale of shares being sold by the Selling Stockholders. Prior to this offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public offering price will be between $17.00 and $19.00. For factors to be considered in determining the initial public offering price, see "Underwriting". SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK. The Common Stock has been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol "HC". --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- <TABLE> <CAPTION> INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS -------------- ------------ ----------- ------------------- <S> <C> <C> <C> <C> Per Share............... $ $ $ $ Total(3)................ $ $ $ $ </TABLE> - --------------- (1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting estimated expenses of $1,000,000 payable by the Company. The Company has agreed to pay the expenses of the Selling Stockholders, other than underwriting discounts and commissions. (3) The Company has granted the Underwriters an option for 30 days to purchase up to an additional 992,024 shares of Common Stock at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such option is exercised in full, the total initial public offering price, underwriting discount, proceeds to Company and proceeds to Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriting". --------------------- The shares offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York on or about , 1997, against payment therefor in immediately available funds. GOLDMAN, SACHS & CO. CREDIT SUISSE FIRST BOSTON SALOMON BROTHERS INC --------------------- The date of this Prospectus is , 1997 increasing trend toward outsourcing by energy producers and processors. Outsourcing provides the customer greater financial and operating flexibility by minimizing the customer's investment in equipment and enabling the customer to more efficiently resize compression units to meet the changing needs of the well, pipeline or processing plant. In addition, outsourcing typically provides the customer with more timely and technically proficient service and necessary maintenance which often reduces operating costs. Internationally, the Company estimates similar growth opportunities for compressor rental and sales due to (i) increased worldwide energy consumption, (ii) implementation of international environmental and conservation laws preventing the flaring of natural gas, and (iii) increased outsourcing by energy producers and processors. GROWTH STRATEGY Since 1992, Hanover has aggressively expanded its operations. Revenues have increased from $33.1 million in 1992 to $136.0 million in 1996, while earnings before interest, taxes, depreciation and amortization ("EBITDA") have increased from $7.3 million in 1992 to $44.5 million in 1996. During the same period, net income has grown from $1.0 million to $10.4 million. Key elements of the Company's growth strategy include: DELIVERING A COMPREHENSIVE RANGE OF SERVICES AND PRODUCTS Hanover's core business provides a broad array of compression services designed to meet specific customer operating, technical and financial requirements. The Company offers its customers a full range of compressor rental, maintenance and contract compression services, together with the engineering, installation and field support necessary for cost-effective operation. As of March 31, 1997, Hanover owned and operated a diversified fleet of 1,653 gas compression rental units ranging in size from 25 to 2,650 horsepower. In this regard, management has pursued strategies that have significantly increased the average horsepower of Hanover's fleet over the past five years, and expects to continue to increase the average horsepower of its fleet. Larger horsepower applications generally require greater technical expertise and capital resources than smaller horsepower applications, which, the Company believes, enhance its competitive advantage. Hanover's compressor and oil and gas production equipment fabrication divisions design, engineer and assemble a fleet of larger natural gas compression units, and oil and gas production equipment, respectively, for timely delivery into the rental or sales markets. The Company's participation in the fabrication of compression units and oil and gas production equipment has broadened its customer relationships both domestically and internationally, enhancing its opportunities to increase its compression services business. PROMOTING INTERNAL GROWTH THROUGH A DECENTRALIZED STRUCTURE Hanover utilizes a decentralized management and operational structure to provide superior customer service in a relationship driven, service intensive industry. The Company's regionally based network, including maintenance and refurbishment facilities, enables it to maintain superior maintenance levels and response times, critical performance criteria which contribute to one of the highest fleet utilization rates in the industry. Local presence, experience and an in-depth knowledge of customers' operating needs and growth plans provide the Company with significant competitive advantages and internally-driven market share growth. In order to maintain this regional strength and to create incentives to attract and motivate an entrepreneurial, highly experienced management team and sales force, Hanover has implemented an equity ownership program pursuant to which approximately 100 members of the management and sales force have purchased over time approximately 14.7% of the Company's Common Stock (on a fully diluted basis before the Offering). See "Stock Option and Purchase Plans". The inside front cover contains a picture of a 2,225 horsepower compression unit being fabricated for offshore application. The inside back cover contains a map of its offices and facilities and a picture of a typical natural gas gathering application utilizing 3,000 horsepower compression units. 2,225 HORSEPOWER COMPRESSION UNIT BEING FABRICATED FOR OFFSHORE APPLICATION CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". PARTICIPATING IN INDUSTRY CONSOLIDATION The compression services industry has undergone significant change and consolidation over the past five years as energy producers and processors increasingly seek out suppliers possessing the requisite resources to meet their needs. Since mid-1993, the Company estimates that over 33% of the domestic compression rental fleet capacity has changed ownership. Hanover has been an active participant in this trend, having completed 10 major acquisitions for an aggregate consideration of approximately $109 million, adding 215,555 total horsepower and 623 compressor units to the Company's fleet through March 31, 1997. Hanover's strategy has been to utilize its decentralized structure and equity incentives to retain local management teams in order to capitalize on existing experience and customer relationships. Efficient integration of these acquisitions has permitted Hanover to accelerate the growth of the acquired businesses and expand the range of services offered. The Company plans to continue to pursue the acquisition of other companies, assets and product lines that either complement or expand its existing business. CAPITALIZING ON SELECT INTERNATIONAL OPPORTUNITIES The expanding international demand for energy is creating a growing market for natural gas compression services. While Hanover's primary market has historically been the natural gas producing basins in the United States, it has entered select international markets that management believes offer attractive long-term growth opportunities. The Company, through acquisitions and internal growth, believes it is one of the largest providers of compression services in the rapidly growing South American market, primarily in Argentina and Venezuela, operating in the aggregate over 70,000 horsepower at March 31, 1997. The Company's internationally generated rental and maintenance revenues have increased from $3.1 million in 1995 to $11.2 million in 1996 and, based on existing and recently awarded contracts, are expected to increase substantially in 1997 and 1998. Hanover estimates that only a small portion of the total gas compression market in South America is served by rental units but believes that large gas producers in the region will increasingly outsource their compression needs. In order to expand its presence in the South American market, the Company successfully utilizes local partners as well as its relationships with international energy companies such as Enron Capital and Trade Resources Corp. ("ECT"), the beneficial owner of approximately 12% of the Company's Common Stock. Furthermore, the Company also actively markets its compression fabrication services and production equipment worldwide, currently selling its compressors into China and Egypt and its production equipment into Canada, China, Mexico, the Middle East, South America and Russia. In order to access additional international growth opportunities and to broaden its product offerings, the Company has executed a series of agreements with Wartsila, providing for, among other things, the fabrication of Wartsila powered gas compression packages in Europe and the rental and sale of such units worldwide. Management believes that its alliance with Wartsila, pursuant to which Hanover will become the exclusive distributor in the Americas (excluding Canada) of engines ranging from 1,400 to 7,850 horsepower, will permit the Company to expand its product offerings and services. EXPANDING ITS CUSTOMER BASE THROUGH THE ACQUISITION AND LEASEBACK OF COMPRESSORS The Company estimates that United States energy producers, transporters and processors directly own and operate approximately nine million horsepower of transportable compression units of the type fabricated and leased by Hanover. This amount represents approximately 75% of the total U.S. transportable compression market. Recently, many major oil and gas companies have been divesting domestic energy reserves to independent energy producers who more frequently outsource their compressor needs in order to reduce operating costs. The Company offers these and other energy industry participants the opportunity to outsource their operations and reallocate capital to core activities through its acquisition and leaseback program, whereby the Company purchases in-place compression equipment at market value and leases the equipment back to the former owner under long-term operating and maintenance contracts. Through March 31, 1997, the Company has consummated 30 acquisition and leaseback transactions, pursuant to which it has leased compression units totalling 53,193 horsepower. Hanover believes that this strategy, together with its success in subsequently expanding upon these relationships, will promote opportunities to provide such services to other energy industry participants. COMPRESSOR RENTAL FEET The size and horsepower of the Company's compressor rental fleet on March 31, 1997 is summarized in the following table. <TABLE> <CAPTION> RANGE OF HORSEPOWER NUMBER OF AGGREGATE PER UNIT UNITS HORSEPOWER ---------- --------- ---------- <S> <C> <C> 0-99 581 35,429 100-199 339 47,272 200-499 321 96,377 500-799 124 76,283 800-1199 153 150,186 1200-2699 135 199,092 ----- ------- TOTAL 1,653 604,639 </TABLE> THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 4,166,667 shares Common Stock offered by the Selling Stockholders............ 2,446,827 shares Total............................................. 6,613,494 shares Common Stock to be outstanding after the Offering........... 27,079,013 shares(1)(2) Use of Proceeds............................................. To repay certain indebtedness. Proposed New York Stock Exchange Symbol..................... "HC" Dividend Policy............................................. The Company does not intend to pay dividends on the Common Stock. </TABLE> - --------------- (1) Excludes (i) 2,400,174 shares of Common Stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $5.11 per share, all of which will be exercisable upon consummation of the Offering, (ii) 568,950 shares of Common Stock issuable upon exercise of outstanding warrants at an exercise price of $.01 per share, 65% of which will be exercisable upon consummation of the Offering and (iii) 908,212 shares of Common Stock issuable upon exercise of stock options which certain employees have been offered the opportunity to be granted pursuant to the Company's 1997 Stock Option Plan in connection with and conditioned upon consummation of the Offering. See "Capitalization" and "Stock Option and Purchase Plans". (2) Excludes 264,780 shares of restricted Common Stock which certain employees have been offered the opportunity to purchase pursuant to the Company's 1997 Stock Purchase Plan in connection with and conditioned upon consummation of the Offering. See "Stock Option and Purchase Plans". SUMMARY HISTORICAL FINANCIAL AND OPERATING INFORMATION (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA) The following table presents certain historical financial data for the Company for each of the five years in the period ended December 31, 1996 and for the three months ended March 31, 1996 and 1997. The historical financial data for each of the five years in the period ended December 31, 1996 have been derived from the audited consolidated financial statements of the Company. The historical financial data for the three months ended March 31, 1996 and 1997 are unaudited. Interim results, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial information for such periods; however, such results are not necessarily indicative of the results which may be expected for any other interim period or for a full year. The following information should be read together with "Selected Historical Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and those relating to Astra Resources Compression, Inc. ("Astra"), which was acquired in December 1995, included elsewhere in this Prospectus. <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1992 1993 1994 1995(1) 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues................................. $ 33,104 $ 43,346 $ 56,080 $ 95,964 $136,011 $ 25,469 $ 40,924 Operating expenses....................... 19,542 24,541 30,539 56,256 75,031 12,440 21,804 Selling, general and administrative...... 6,227 7,413 8,427 12,542 16,439 3,794 4,694 Depreciation and amortization............ 3,923 5,758 8,109 13,494 20,722(2) 4,515 6,245 Interest expense......................... 1,659 1,366 2,027 4,560 6,594 1,218 2,571 -------- -------- -------- -------- -------- -------- -------- Income from continuing operations before income taxes........................... 1,753 4,268 6,978 9,112 17,225 3,502 5,610 Provision for income taxes............... 650 1,597 2,590 3,498 6,844 1,310 2,216 -------- -------- -------- -------- -------- -------- -------- Income from continuing operations........ 1,103 2,671 4,388 5,614 10,381 2,192 3,394 Discontinued operations.................. (115) -------- -------- -------- -------- -------- -------- -------- Net income............................... $ 988 $ 2,671 $ 4,388 $ 5,614 $ 10,381 $ 2,192 $ 3,394 ======== ======== ======== ======== ======== ======== ======== Net income available to common stockholders(3) Net income............................. $ 988 $ 2,671 $ 4,388 $ 5,614 $ 10,381 $ 2,192 $ 3,394 Dividends on Series A and Series B preferred stock...................... (832) (1,773) (513) Series A preferred stock exchange...... (3,794) Series B preferred stock conversion.... (1,400) -------- -------- -------- -------- -------- -------- -------- Net income available to common stockholders......................... 988 2,671 4,388 4,782 3,414 1,679 3,394 Weighted average common and common equivalent shares...................... 8,331 11,495 14,121 15,794 22,279 22,314 24,491 -------- -------- -------- -------- -------- -------- -------- Earnings per common share................ $ .12 $ .23 $ .31 $ .30 $ .15(3) $ .08 $ .14 ======== ======== ======== ======== ======== ======== ======== Supplemental earnings per common share(4)............................... $ .23 $ .14 ======== ======== OTHER DATA: EBITDA from continuing operations(5)..... $ 7,335 $ 11,392 $ 17,114 $ 27,166 $ 44,541 $ 9,235 $ 14,426 Aggregate capital expenditures........... $ 9,954 $ 19,469 $ 34,301 $123,200 $ 90,312 $ 20,232 $ 33,985 Total number of rental units............. 521 591 759 1,215 1,560 1,294 1,653 Aggregate horsepower..................... 116,898 144,567 228,627 418,480 569,557 458,290 604,639 Average horsepower per unit.............. 224 245 301 344 365 354 366 Horsepower utilization(6)................ 95.0% 94.1% 95.7% 94.2% 95.3% 95.0% 95.1% </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 AS OF -------------------------- DECEMBER 31, 1996 ACTUAL AS ADJUSTED(7) ----------------- -------- -------------- (UNAUDITED) <S> <C> <C> <C> BALANCE SHEET DATA: Working capital..................................... $ 41,513 $ 36,036 $ 36,036 Total assets........................................ 341,387 375,290 375,290 Long-term debt...................................... 122,756 139,482 70,732 Stockholders' equity................................ 176,895 180,377 249,127 </TABLE> - --------------- (1) The summary historical financial data include the results of operations of the Company and its wholly-owned subsidiaries. During 1995, the Company acquired Astra, a significant subsidiary. See Note 2 of the Notes to the Company's Consolidated Financial Statements for further information. (2) In order to more accurately reflect the estimated useful lives of natural gas compressor units in the rental fleet, effective January 1, 1996 the Company changed the lives over which these units are depreciated from 12 to 15 years. The effect of this change was a decrease in depreciation expense of $2.6 million and an increase in net income of $1.5 million ($.07 per common share) for the year ended December 31, 1996. (3) Earnings per share in 1996 was $.47 per share before the effects of charging retained earnings for $1.8 million relating to dividends on redeemable preferred stock and one time charges to retained earnings for (i) $3.8 million related to the exchange of all Series A preferred stock for subordinated notes and (ii) $1.4 million related to the conversion of all Series B preferred stock to Common Stock. See Note 7 of the Notes to Consolidated Financial Statements. (4) Supplemental earnings per common share is based on (i) the number of common and dilutive common equivalent shares outstanding plus the number of common shares assumed to be sold in the Offering necessary to raise sufficient net proceeds to pay the Offering expenses and to repay certain indebtedness of the Company as described in "Use of Proceeds" and (ii) net income increased by the effect of a decrease in interest expense ($4.5 million and $1.2 million for the year ended December 31, 1996 and the quarter ended March 31, 1997, respectively), less applicable income tax ($1.8 million and $0.5 million for the year ended December 31, 1996 and the quarter ended March 31, 1997, respectively), related to the indebtedness to be repaid. (5) EBITDA consists of the sum of consolidated net income, interest expense, income tax, and depreciation and amortization. The Company believes that EBITDA is a meaningful measure of its operating performance and is also used to measure the Company's ability to meet debt service requirements. EBITDA should not be considered as an alternative performance measure prescribed by generally accepted accounting principles. (6) Reflects average horsepower utilization over each twelve month period calculated on a monthly basis based upon horsepower available. (7) Reflects the sale of shares of Common Stock being offered by the Company at an assumed initial offering price of $18.00 per share (net of approximately $1.0 million of estimated offering expenses and $5.3 million of underwriting discounts and commissions) and the application of the estimated net proceeds therefrom to repay certain indebtedness. See "Use of Proceeds" and "Capitalization".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000910110_penn_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000910110_penn_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8dfc5778adc4d2d5a4f58da0c7e2ec8a75260e86
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000910110_penn_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Except where otherwise indicated, the "Company" refers to Penn-America Group, Inc. ("PAGI") and its wholly-owned subsidiary, Penn-America Insurance Company ("Penn-America"), as well as Penn-America's wholly-owned subsidiary, Penn-Star Insurance Company ("Penn-Star"). Penn-Star received its Certificate of Authority from the Insurance Department of Pennsylvania on February 21, 1997 and commenced operations on April 1, 1997. Terms defined in the "Glossary of Selected Insurance Terms" are printed in boldface type the first time they appear in the text of this Prospectus. All financial information contained in this Prospectus is presented in accordance with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), unless specified as being in accordance with STATUTORY ACCOUNTING PRACTICES ("SAP"). Except where otherwise indicated, all information contained in this Prospectus assumes no exercise of the Underwriters' over-allotment option. All per share information in this Prospectus has been adjusted to reflect a three-for-two split of the Company's Common Stock effected on March 7, 1997. THE COMPANY Penn-America Group, Inc. is a specialty property and casualty insurance holding company which, through its subsidiaries, markets and underwrites commercial property, general liability and multi-peril insurance for small businesses located primarily in small towns and suburban and rural areas, and NONSTANDARD personal automobile insurance. The Company provides commercial property and casualty insurance on both an EXCESS AND SURPLUS LINES basis and an admitted basis, and personal automobile insurance on an admitted basis. The Company markets its products through 52 high quality GENERAL AGENTS, who in turn produce business through over 25,000 RETAIL INSURANCE BROKERS located throughout the United States. The Company focuses on serving the insurance needs of small or nonstandard markets which are generally characterized by small average policy premiums and serviced by retail insurance brokers with limited access to larger, standard lines insurers. The Company believes that these markets are generally underserved by larger, standard lines insurers who often limit their UNDERWRITING to policies above a certain minimum premium size or to certain risk classes and who operate in large-scale markets in which they can achieve economies of scale. The Company believes that its distribution network enables it to effectively access these numerous small markets at a relatively low fixed cost through the marketing, underwriting and administrative support of its general agents, as well as the localized market knowledge and expertise of its general agents and their retail insurance brokers. The success of the Company's strategy is demonstrated by its strong and consistent growth and profitability. From 1992 to 1996, GROSS WRITTEN PREMIUMS grew at a 30.8% compound annual rate from $27.5 million to $80.5 million, and net operating earnings (excluding realized investment gains) grew at a 41.3% compound annual rate from $1.6 million to $6.4 million. The Company has operated at a SAP COMBINED RATIO under 100.0% in every year since 1992. The Company's average SAP combined ratio from 1992 to 1996 was 95.9%, and the Company's average return on average stockholders' equity during the same period was 15.0%. The Company's distribution strategy is to maintain strong relationships with fewer and higher quality general agents than its competitors. The Company carefully selects a limited number of agents in each state based on their experience and reputation and strives to preserve each agent's franchise value within its marketing territory. The Company seeks to grow with these general agents and develop strong, longstanding relationships by providing a high level of service and support. From 1992 to 1996, the Company achieved 192.3% cumulative growth in gross written premiums with a 36.8% increase in the number of general agents from 38 to 52. The Company maintains low fixed costs by underwriting the substantial majority of its policies on a BINDING AUTHORITY basis. The Company closely monitors the quality of business it underwrites by maintaining close relationships with a small number of general agents. The Company provides its general agents with a comprehensive, regularly updated underwriting manual which clearly outlines the Company's pricing and underwriting guidelines. The Company does not write high risk policies (e.g., medical malpractice, environmental and aviation liability). The Company generally reviews new and renewal commercial policies on a continuous basis and nonstandard personal automobile policies on a quarterly basis to ensure that its underwriting guidelines are being followed. In addition to standard commissions, the Company provides strong incentives to its general agents to produce profitable business through a contingent commission structure which is substantially tied to underwriting profitability and through the issuance of shares of Common Stock in lieu of cash for a portion of the contingent commissions. Historically, the Company has underwritten the majority of its commercial lines business on an excess and surplus lines basis. In recent years, the Company has underwritten a greater proportion of its commercial lines business on an admitted basis as it has identified profitable admitted markets which remain underserved by larger standard insurers. Currently, the Company underwrites all of its nonstandard personal automobile business on an admitted basis. The Company expects to continue to expand its commercial lines business by offering additional products and packages which enhance its current property and liability coverages, by identifying profitable programs and books of business and by selectively adding high quality general agents. Examples of such additional products and programs include a commercial automobile product and specialty programs, which may include miscellaneous professional liability coverage. The Company currently writes nonstandard personal automobile policies in five states. The Company has filed applications to write personal automobile policies in two additional states and is considering expanding into several other states. The Company's commercial insureds consist primarily of small, "main street" businesses, including restaurants, taverns, retailers and artisan contractors, located principally in small towns and suburban and rural areas. In addition, the Company has developed customized products and coverages for other small commercial insureds such as day care facilities, fitness centers and special events. The Company believes it has benefited from a general migration of small businesses out of urban centers and into suburban and rural areas. Industry consolidation, corporate downsizing and the increased use of communications technology and personal computers, among other factors, have contributed to the high growth in the number of small businesses in these areas. The Company's nonstandard automobile insurance products are designed for insureds who do not qualify for preferred or standard automobile insurance because of their payment history, driving record, age, vehicle type or other underwriting criteria or market conditions. Underwriting standards in the preferred and standard markets have become more restrictive, thereby requiring more insureds to seek nonstandard coverage and contributing to an increase in the size of the nonstandard automobile market. Penn-America was formed in 1975 by Irvin Saltzman, who began working in the insurance industry in 1947 when he founded a general agency. Jon S. Saltzman, Irvin Saltzman's son, is President and Chief Executive Officer of the Company and has been employed by the Company since 1986. The Company completed an initial public offering ("IPO") on October 28, 1993, at a price to the public of $6.00 per share. Currently, the Saltzman family, substantially through their ownership of Penn Independent, owns approximately 61.6% of the Company's Common Stock. After the Offering, the Saltzman family will own approximately 34.3% of the outstanding Common Stock of the Company (approximately 32.4% if the Underwriters' over-allotment option is exercised). The following table sets forth the Company's gross written premiums by specific product lines during the periods indicated: <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 1996 1995 1994 ----------------- ------------------ ------------------ GROSS PERCENT GROSS PERCENT GROSS PERCENT WRITTEN OF WRITTEN OF WRITTEN OF PREMIUMS TOTAL PREMIUMS TOTAL PREMIUMS TOTAL (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> Commercial multi-peril.................. $31,551 39.2% $26,653 39.8% $20,556 38.1% Commercial general liability............ 21,526 26.8 21,643 32.3 18,033 33.4 Commercial property..................... 5,555 6.9 5,288 7.9 4,449 8.3 Commercial automobile................... 98 0.1 38 0.1 -- -- ------- ----- ------- ----- ------- ----- Total commercial lines........... 58,730 73.0 53,622 80.1 43,038 79.8 ------- ----- ------- ----- ------- ----- Personal automobile liability........... 17,496 21.7 11,179 16.7 6,347 11.8 Personal automobile physical damage..... 4,270 5.3 2,152 3.2 4,541 8.4 ------- ----- ------- ----- ------- ----- Total personal automobile lines......................... 21,766 27.0 13,331 19.9 10,888 20.2 ------- ----- ------- ----- ------- ----- Total gross written premiums..... $80,496 100.0% $66,953 100.0% $53,926 100.0% ======= ===== ======= ===== ======= ===== </TABLE> The following table sets forth the SAP UNDERWRITING RATIOS for Penn-America and for the property and casualty insurance industry as a whole during the periods indicated: <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 1993 1992 <S> <C> <C> <C> <C> <C> PENN-AMERICA SAP UNDERWRITING RATIOS: Loss ratio............................................ 62.7% 62.6% 62.2% 63.2% 63.9% Expense ratio......................................... 31.6 30.4 32.3 34.8 35.6 ----- ----- ----- ----- ----- Combined ratio........................................ 94.3% 93.0% 94.5% 98.0% 99.5% ===== ===== ===== ===== ===== INSURANCE INDUSTRY SAP UNDERWRITING RATIOS:(1) Loss ratio............................................ 78.6% 78.9% 81.0% 79.5% 88.1% Expense ratio......................................... 26.2 26.1 26.0 26.1 26.3 Dividend ratio........................................ 1.1 1.4 1.3 1.2 1.2 ----- ----- ----- ----- ----- Combined ratio........................................ 105.9% 106.4% 108.3% 106.8% 115.6% ===== ===== ===== ===== ===== </TABLE> - ------------------------------ (1) Source: For 1996, BestWeek P/C Supplement, March 24, 1997 edition; for 1992 through 1995, Best's Aggregates & Averages--Property--Casualty. Approximately 89.5% of the Company's investment portfolio as of June 30, 1997 consisted of investment-grade fixed income securities and short-term investments. Approximately 99.0% of the Company's fixed income securities as of June 30, 1997 were rated "A-" or better by Standard & Poor's Corporation ("Standard & Poor's") or the equivalent rating by Moody's Investment Service ("Moody's"). As of June 30, 1997, the Company's fixed maturity investments had an average duration of 2.9 years. Publicly traded equity securities, the majority of which consisted of preferred stocks, represented 10.4% of the Company's investment portfolio as of June 30, 1997. Since 1993 Penn-America has maintained an "A (Excellent)" rating from A.M. Best Company, Inc. ("A.M. Best"), which rating was reaffirmed by A.M. Best on May 27, 1997. A.M. Best's ratings are based upon factors of concern to policyholders, including financial condition and solvency, and are not directed to the protection of investors. The Company employs approximately 97 people, all of whom are located at the Company's headquarters at 420 South York Road, Hatboro, Pennsylvania 19040 (telephone: (215) 443-3600). THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..... 2,500,000 shares Common Stock offered by the Selling Stockholder........................... 1,000,000 shares Common Stock to be outstanding after the Offering.............................. 9,301,384 shares(1)(2) Use of proceeds......................... The net proceeds to the Company from the Offering, after deducting underwriting discounts and commissions and estimated offering expenses, are estimated to be approximately $36.2 million. The Company expects to use the net proceeds from the Offering (i) to repay $9.0 million of bank debt, (ii) to increase the POLICYHOLDERS' SURPLUS of Penn-America and Penn-Star in order to support future growth and (iii) for general corporate purposes. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholder. Dividend policy......................... The Company intends to continue to pay quarterly cash dividends of $0.04 per share of Common Stock ($0.16 annually), subject to declaration by the Board of Directors and certain regulatory and other constraints. Nasdaq National Market symbol........... PAGI </TABLE> - ------------------------------ (1) Based on 6,801,384 shares outstanding on June 30, 1997. Excludes: (i) 334,500 shares issuable upon the exercise of outstanding options under the Company's 1993 Stock Incentive Plan, of which options for 226,500 shares were exercisable; (ii) 93,000 shares available for issuance upon grant and exercise of options under the Company's 1993 Stock Incentive Plan; (iii) 60,236 shares available for issuance under the Executive Incentive Compensation Plan; and (iv) 30,851 shares available for issuance under the Agent's Profit Sharing and Performance Awards Plan. See "Management--Company Stock Incentive Plan", "Management--Executive Incentive Compensation Plan" and Note 12 of Notes to Consolidated Financial Statements. (2) Excludes up to 525,000 shares which may be sold by the Company upon exercise of the Underwriters' over-allotment option. See "Underwriting." SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA The summary consolidated financial data as of June 30, 1997 and 1996 and for each of the six-month periods ended June 30, 1997 and 1996 have been derived from unaudited consolidated financial statements and include all adjustments (consisting only of normal recurring accruals) that the Company considers necessary for a fair presentation of such financial information for those periods. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The summary consolidated financial data as of December 31, 1996, 1995, 1994, 1993 and 1992 and for each of the years in the five-year period ended December 31, 1996 have been derived from the audited consolidated financial statements of the Company. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and related notes included elsewhere herein. <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ----------------- -------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues: Premiums earned............. $43,933 $32,108 $ 69,081 $ 57,228 $ 39,985 $25,961 $21,708 Net investment income....... 3,925 3,248 6,705 5,067 3,635 2,886 2,533 Net realized investment gains (losses)........... 109 102 906 1,279 (713) 753 1,012 ------- ------- ------- ------- ------- ------- ------- Total revenues........... 47,967 35,458 76,692 63,574 42,907 29,600 25,253 Losses and expenses: Losses and LAE.............. 27,607 20,105 43,292 35,835 24,855 16,411 13,865 Amortization of DAC......... 11,971 8,211 17,785 14,237 9,381 6,146 4,845 Other underwriting expenses................. 2,615 2,250 4,349 4,356 3,600 3,363 3,241 Interest expense............ 385 438 884 239 81 57 60 ------- ------- ------- ------- ------- ------- ------- Total losses and expenses............... 42,578 31,004 66,310 54,667 37,917 25,977 22,011 Earnings before income tax.... 5,389 4,454 10,382 8,907 4,990 3,623 3,242 Income tax.................... 1,620 1,453 3,389 2,881 1,579 1,115 970 ------- ------- ------- ------- ------- ------- ------- Net earnings............. $ 3,769 $ 3,001 $ 6,993 $ 6,026 $ 3,411 $ 2,508 $ 2,272 ======= ======= ======= ======= ======= ======= ======= PER SHARE DATA:(1) Net earnings(2)............... $ 0.56 $ 0.45 $ 1.05 $ 0.91 $ 0.51 $ 0.50 $ 0.49 Net operating earnings(3)..... 0.55 0.44 0.96 0.78 0.59 -- -- Cash dividends(4)............. 0.08 0.05 0.11 0.06 -- 1.13 0.07 Weighted average shares....... 6,719 6,656 6,663 6,645 6,645 4,997 4,652 OTHER OPERATING DATA: Gross written premiums........ $51,502 $37,201 $ 80,496 $ 66,953 $ 53,926 $35,521 $27,539 Net written premiums.......... 47,598 33,843 73,469 61,286 48,343 28,494 22,616 Net operating earnings(3)..... 3,697 2,934 6,395 5,182 3,882 2,011 1,604 Return on average stockholders' equity(5)..... 16.9% 16.2% 17.8% 18.7% 12.2% 11.4% 14.7% GAAP data: Loss ratio.................. 62.8% 62.6% 62.7% 62.6% 62.2% 63.2% 63.9% Expense ratio............... 33.2 32.6 32.0 32.5 32.4 36.6 37.2 ------- ------- ------- ------- ------- ------- ------- Combined ratio.............. 96.0% 95.2% 94.7% 95.1% 94.6% 99.8% 101.1% ======= ======= ======= ======= ======= ======= ======= STATUTORY DATA: Policyholders' surplus........ $43,887 $40,557 $ 41,665 $ 39,118 $ 25,677 $25,337 $14,045 Loss ratio.................... 62.8% 62.6% 62.7% 62.6% 62.2% 63.2% 63.9% Expense ratio................. 32.2 31.5 31.6 30.4 32.3 34.8 35.6 ------- ------- ------- ------- ------- ------- ------- Combined ratio................ 95.0% 94.1% 94.3% 93.0% 94.5% 98.0% 99.5% ======= ======= ======= ======= ======= ======= ======= Property and casualty industry combined ratio(6)........... -- -- 105.9% 106.4% 108.3% 106.8% 115.6% </TABLE> <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ------------------- -------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA (AT END OF PERIOD): Cash and investments........ $126,629 $103,016 $115,550 $100,428 $ 72,896 $61,764 $47,360 Total assets................ 173,415 143,499 158,605 137,763 100,112 78,507 61,098 Notes payable............... 9,000 10,050 9,000 10,150 1,350 350 -- Total stockholders' equity.................... 46,738 37,934 42,337 36,250 28,366 27,380 16,543 Total stockholders' equity per share(1).............. $ 6.87 $ 5.69 $ 6.34 $ 5.46 $ 4.27 $ 4.12 $ 3.94 </TABLE> - ------------------------------ (1) Adjusted to reflect a three-for-two split of the Company's Common Stock effected on March 7, 1997. (2) Net earnings per share for 1993 and 1992 are pro forma to reflect the economic impact of the dollar amount of a dividend in excess of 1993 and 1992 net earnings, assuming the dividend had been paid at January 1, 1992 with funds obtained from the sale of shares. Pro forma net earnings per share for 1993 are based upon 4,997,156 shares, which include 4,581,822 weighted average shares outstanding and 415,334 shares assumed to be outstanding since January 1, 1992 at $6.00 per share. (3) Excludes realized investment gains (losses), assuming a 34% marginal tax rate. (4) Cash dividends for 1993 reflect an extraordinary dividend of $5,000,000 paid to Penn Independent prior to the Company's IPO in October 1993. (5) For each six-month period, the return on average stockholders' equity is calculated on an annualized basis. The annualized return on average stockholders' equity for the six months ended June 30, 1997 is not necessarily indicative of the results that may be expected for any other interim period or for the full year. (6) Source: For 1996, BestWeek P/C Supplement, March 24, 1997 edition; for 1992 through 1995, Best's Aggregates & Averages--Property--Casualty.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000911684_focal-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000911684_focal-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e7bdaf10de5c001d6a4d62b27e8901eb8804336f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000911684_focal-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND GIVES EFFECT TO (I) THE EXERCISE OF CERTAIN OUTSTANDING WARRANTS TO PURCHASE 19,496 SHARES OF COMMON STOCK UPON THE COMPLETION OF THIS OFFERING, (II) THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK OF THE COMPANY INTO COMMON STOCK, WHICH WILL OCCUR AUTOMATICALLY UPON THE COMPLETION OF THIS OFFERING AND (III) A 1 FOR 3.25 REVERSE STOCK SPLIT OF ALL ISSUED AND OUTSTANDING COMMON STOCK THAT WILL BE EFFECTED PRIOR TO THE COMPLETION OF THIS OFFERING. SEE "CAPITALIZATION," "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING." THE COMPANY Focal, Inc. ("Focal" or the "Company") develops, manufactures and commercializes synthetic, absorbable, liquid surgical sealants based on the Company's proprietary polymer technology. The Company's family of FOCALSEAL surgical sealant products is currently being developed for use inside the body with or without sutures and staples to seal leaks resulting from lung, neuro, cardiovascular and gastrointestinal surgery. FOCALSEAL-L, the Company's first surgical sealant product, will initially be used to seal air leaks following lung surgery. The Company has entered into an exclusive marketing and distribution agreement for its surgical sealant products outside North America with Ethicon, Inc., a division of Johnson & Johnson ("Ethicon"), a worldwide leader in surgical wound closure products. The Company anticipates commercial launch of FOCALSEAL-L for lung surgery indications in Europe through Ethicon in the first half of 1998. There are more than 4 million open and minimally invasive lung, neuro, cardiovascular and gastrointestinal surgical procedures performed annually worldwide in which air or fluid leaks may arise in an unpredictable and unexpected manner, and in which the Company's products, if approved, may be effective in reducing post-surgical leaks. The reported incidence of air and fluid leaks in these procedures is approximately 79% (intraoperative) and 15% (persistent postoperative) in lung surgeries, 15% in cranial surgeries, 13% in spinal surgeries, 5% in large bowel surgeries and 25% in esophageal surgeries. In many of these surgical procedures, as well as in cardiovascular surgeries, air and fluid leaks can occur unpredictably and it can be difficult at the conclusion of surgery for the surgeon to determine whether a particular surgical site will leak. Accordingly, the Company believes that its FOCALSEAL surgical sealants may be used prophylactically in many of these procedures. The Company has conducted clinical trials of FocalSeal-L for lung surgery and intends to develop products and conduct clinical trials for neuro, cardiovascular and gastrointestinal surgery indications. Patients with persistent air or fluid leaks may require prolonged hospitalization, have more complications and higher levels of post-operative pain, and a higher risk of mortality. Sutures and staples, the principal products comprising the over $2.0 billion worldwide wound closure market, do not have inherent sealing capabilities, and therefore cannot consistently eliminate air and fluid leakage at the wound site. Focal's liquid surgical sealants adhere rapidly to underlying tissue, expand and contract with tissue, withstand air and fluid pressure, and are designed to provide an effective seal to reduce the incidence of air and fluid leaks following surgery. FOCALSEAL surgical sealants, which are biocompatible, remain intact through the critical wound healing period and are then absorbed and eliminated by the body. The Company believes the use of its FOCALSEAL liquid surgical sealants could potentially shorten patient recovery times and hospital stays and reduce post-surgical complications. Focal is currently developing two principal surgical sealant formulations, FOCALSEAL-L and FOCALSEAL-S, for a broad range of applications inside the body. The Company has completed a 60-patient, multicenter, randomized, controlled clinical trial in Europe involving use of FOCALSEAL-L in sealing air leaks following lung surgery. In the trial, following surgery with standard sutures and staples and prior to randomization, it was determined that 79% of all patients had intraoperative air leaks. FOCALSEAL-L was shown to be 100% effective in sealing intraoperative air leaks in the 30 patients who were randomized into the treated group. In the other patients, who were randomized into the untreated group and received sutures and staples alone, only 27% were free of intraoperative air leaks. In September 1997, the Company initiated a pivotal, 180-patient, multicenter clinical trial in the United States under a conditional investigational device exemption ("IDE") to evaluate FOCALSEAL-L in sealing intraoperative and postoperative air leaks following lung surgery. The Company expects to submit a Premarket Approval ("PMA") application to the FDA for lung surgery indications by the end of 1998. FOCALSEAL-S, the Company's second surgical sealant formulation, is absorbed by the body more quickly than FOCALSEAL-L and is designed for applications in which shorter sealing duration is desired. FOCALSEAL-S will initially be used to seal fluid leaks following neurosurgery. The Company expects to commence a clinical trial in Europe for this indication in mid-1998. The Company believes, based upon preclinical evaluation of its polymers, that its FOCALSEAL-L and FOCALSEAL-S formulations, which are designed to have absorption times that parallel long-term and short-term synthetic, absorbable polymer sutures, respectively, will also be widely applicable to cardiovascular surgery, gastrointestinal surgery and other surgical applications. Focal is also developing other applications for the liquid formulations of its polymer technology, including local drug delivery systems and tissue coatings. In local drug delivery applications, the Company believes that its polymers can deliver high concentrations of drugs at local disease sites, thereby potentially enhancing efficacy and reducing toxicity associated with systemic delivery of drugs. The Company is initially pursuing local delivery of drugs with the objective of reducing the incidence of restenosis following coronary angioplasty procedures. The Company has entered into a collaboration with Novartis Pharmaceuticals, Inc. ("Novartis") and Chiron Corporation ("Chiron") under which these companies are funding development of a polymer-based local drug delivery system for anti-restenosis agents being developed by them. In connection with the collaboration, Novartis and Chiron received worldwide marketing and distribution rights for this indication. In addition, the Company is developing tissue coatings to prevent the formation of post-surgical adhesions, excessive scar tissue which attaches to surrounding tissue and can cause serious complications, particularly in abdominal and gynecological surgeries. The Company intends to enter into other collaborations with pharmaceutical companies for additional drug delivery and tissue coating indications. Focal's family of surgical sealants and its other products under development are based on the Company's proprietary synthetic, absorbable, liquid formulation polymer technology. The Company's polymers are comprised of polyethylene glycol ("PEG"), other synthetic components and water. PEG and other synthetic components comprise approximately 10-20% of the Company's liquid formulations and are widely used in other medical products approved for use inside the body, such as IV-administered pharmaceuticals, synthetic absorbable sutures, bone and dental cements, pain medications and eye drops. Water comprises the other 80-90% of Focal's formulations. The Company combines PEG and other synthetic compounds in various proprietary polymer formulations in order to control characteristics such as viscosity, setting time, strength, absorption, flexibility and elasticity. This enables the Company to tailor formulations for particular applications. A key distinguishing characteristic of the Company's polymer formulations is that they are applied as liquids and then photopolymerized by light into solid gels inside the body, a process known as photopolymerization. The solid gel formed after the light has been applied, is highly flexible, elastic and transparent and strongly adheres to moist or dry tissue. The Company believes it has built a strong patent portfolio related to its photopolymerizable polymer technology. The Company has received, licensed or believes it has the option or right to license 17 issued United States patents and six foreign patents corresponding to certain of the issued United States patents, has 12 additional United States patent applications that have been allowed and has 21 patent applications pending in the United States, as well as foreign counterparts of certain of these applications. The Company's objective is to become a leader in the market for surgical sealants and in other markets where the Company's novel polymer technology could address large unmet clinical needs. The Company intends to achieve its goals by (i) marketing its FOCALSEAL surgical sealant products through Ethicon internationally and by building a direct sales force in North America; (ii) leveraging its proprietary polymer technology to develop new products; (iii) commercializing FOCALSEAL surgical sealants to parallel the existing products in the market for synthetic absorbable sutures; (iv) funding new research and development initiatives through corporate collaborations; and (v) retaining proprietary, and outsourcing non-proprietary, manufacturing processes. Focal was incorporated in Delaware in June 1991. The Company's principal executive offices are located at 4 Maguire Road, Lexington, Massachusetts 02173. Its telephone number is (781) 280-7800. THE OFFERING <TABLE> <S> <C> Common Stock offered......................... 2,500,000 shares Common Stock to be outstanding after the offering................................... 12,865,337 shares (1) Use of proceeds.............................. For research and development, clinical trials, expansion of manufacturing capabilities and sales and marketing activities, capital expenditures, working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... FOCL </TABLE> SUMMARY FINANCIAL DATA (In thousands, except per share data) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------------------ ------------------ 1992 1993 1994 1995 1996 1996 1997 -------- -------- --------- --------- -------- -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Collaborative research revenue............... $ -- $ -- $ 50 $ 968 $ 3,098 $ 2,349 $12,831 Operating expenses: Research and development................... 1,793 7,405 11,890 9,665 11,680 8,735 10,929 General and administrative................. 466 1,925 2,034 2,098 2,175 1,518 2,106 -------- -------- --------- --------- -------- -------- ------- Total operating expenses..................... 2,259 9,330 13,924 11,763 13,855 10,253 13,035 -------- -------- --------- --------- -------- -------- ------- Loss from operations......................... (2,259) (9,330) (13,874) (10,795) (10,757) (7,904) (204) Interest income.............................. 6 357 668 443 691 515 731 Interest expense............................. 13 44 79 107 92 71 81 -------- -------- --------- --------- -------- -------- ------- Net income (loss)............................ $ (2,266) $ (9,017) $ (13,285) $ (10,459) $(10,158) $ (7,460) $ 446 -------- -------- --------- --------- -------- -------- ------- -------- -------- --------- --------- -------- -------- ------- Pro forma net income (loss) per share (2).... $ (1.23) $ (.93) $ .04 -------- -------- ------- -------- -------- ------- Shares used in computing pro forma net income (loss) per share (2)............ 8,271 8,001 10,551 -------- -------- ------- -------- -------- ------- </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 -------------------------- PRO FORMA ACTUAL AS ADJUSTED (3) --------- --------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and marketable securities...................................... $ 13,215 $ 40,538 Working capital....................................................................... 9,254 36,577 Total assets.......................................................................... 16,491 43,814 Capital lease obligations, long-term portion.......................................... 1,207 1,207 Total stockholders' equity............................................................ 10,788 38,111 </TABLE> - ------------------------ (1) Excludes (i) 297,921 shares of Common Stock issuable upon the exercise of stock options outstanding under the Company's 1992 Incentive Stock Plan at September 30, 1997, and (ii) 179,586 shares issuable upon the exercise of warrants that will remain outstanding following the completion of this offering. See "Management--Incentive Stock Plans," "Certain Transactions," "Description of Capital Stock" and Note 5 of Notes to Financial Statements. (2) See Note 1 of Notes to Financial Statements for information concerning calculation of pro forma net income (loss) per share. (3) Pro forma as adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered hereby at an assumed initial public offering price of $12.00 per share and the receipt of the estimated net proceeds therefrom and the automatic conversion of all outstanding shares of Preferred Stock into 8,117,803 shares of Common Stock and the exercise of warrants to purchase 19,496 shares of Common Stock upon the completion of this offering. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000911953_renex-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000911953_renex-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7a7fe5533bc57280ea8a7095f211f9553b7d06d8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000911953_renex-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus, including information under "Risk Factors." Throughout this Prospectus, except where the context otherwise requires, reference to the "Company" or "Renex" means the Company and its subsidiaries. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." THE COMPANY Renex Corp., operating through its wholly-owned subsidiaries, is a high quality provider of dialysis and ancillary services to patients suffering from chronic kidney failure, generally referred to as end stage renal disease ("ESRD"). The Company has grown primarily through the development of new facilities ("de novo" development) and more recently through acquisitions, and seeks to distinguish itself on the basis of quality patient care and responsiveness to the professional needs of its referring nephrologists. The Company currently provides dialysis services to approximately 800 patients in seven states, through twelve outpatient dialysis facilities and two staff assisted home dialysis programs. Additionally, the Company provides inpatient dialysis services at five hospitals. The Company intends to accelerate the penetration of its existing markets through a combination of acquisitions and de novo development and to enter new markets, primarily through acquisitions, in which the Company believes it can establish significant market share over time. ESRD is the state of advanced chronic kidney disease characterized by the irreversible loss of kidney function. A normal human kidney removes waste products and excess water from the blood, preventing water overload, toxin buildup and eventual poisoning of the body. Chronic kidney disease can be caused by a number of conditions, including inherited diseases, diabetes, hypertension and other illnesses. Patients suffering from ESRD require routine dialysis treatments or kidney transplantation to sustain life. According to the Health Care Financing Administration ("HCFA"), the number of patients requiring chronic kidney dialysis services in the United States has increased from 66,000 patients in 1982 to over 200,000 patients in 1995. According to the National Institutes of Health, the number of ESRD patients is projected to reach 300,000 by the year 2000. According to HCFA, total spending for ESRD in the United States in 1995 was an estimated $13.1 billion. Of this amount, the Company estimates $6.0 billion was spent for dialysis treatment and ancillary services. Patients with ESRD generally receive dialysis treatments through a dialysis facility, which may be a free-standing or a hospital-based outpatient facility. The primary function of dialysis facilities is to provide ESRD patients with life sustaining kidney dialysis, including both hemodialysis and peritoneal dialysis. HCFA estimates that as of December 31, 1995, approximately 84% of ESRD patients in the United States were receiving hemodialysis treatments (83% in outpatient facilities and 1% in the home) and that approximately 16% of all ESRD patients were receiving peritoneal dialysis in the home, under the supervision of an outpatient facility. ESRD patients are generally under the care of a nephrologist, who serves as the primary gatekeeper of ESRD patients and, in consultation with the patient, plays a significant role in determining which dialysis facility and hospital will be used for such patient. The nephrologist is typically supported by a team of dialysis professionals, including patient care personnel, dieticians and social workers. Most dialysis facilities offer a range of services to ESRD patients, including: dialysis treatments; provision of supplies and equipment; patient, family and community training and education; insurance counseling; billing services; dietary counseling; and social services support. As of August 31, 1997, the Company operated twelve outpatient dialysis facilities, with a total of 187 certified dialysis stations. The Company has four additional facilities under development located in North Andover, Massachusetts; Union, Missouri; Maplewood, Missouri; and Bloomfield, New Jersey. The North Andover facility is near completion and is scheduled to open in October 1997. The Union facility's building is under construction, and the Maplewood and Bloomfield facilities are in the pre-construction phase. The Maplewood facility is expected to open in December 1997, and the Union Top Photo: Renex outpatient dialysis facility located in Tampa, Florida. Middle Photo: Dialysis station area at one of Renex' twelve outpatient dialysis facilities. Bottom Photo: Renex patient care professionals administering life sustaining hemodialysis to an end stage renal disease patient. and Bloomfield facilities are expected to open in the first quarter of 1998. The Company's dialysis facilities are designed specifically for outpatient hemodialysis and for the training of peritoneal dialysis and home hemodialysis patients. Each facility has between eight and 21 dialysis stations and many facilities are designed to accommodate additional stations as patient census increases. All of the Company's facilities contain state-of-the-art equipment and modern accommodations and are typically located near public transportation. The facilities are designed to provide a pleasant and comfortable environment for each patient and include such amenities as color television sets for each patient station, VCRs for patient education and entertainment, and portable telephones. In addition to the Company's outpatient dialysis facilities, the Company provides staff-assisted home hemodialysis services in St. Louis, Missouri and Tampa, Florida, and provides inpatient dialysis services to five hospitals pursuant to contracts negotiated with the hospitals for per-treatment rates paid directly by the hospitals. The Company also provides a full range of ancillary services to ESRD patients. The Company's goal is to continue expanding its geographic coverage and market penetration while maintaining high quality patient care and physician satisfaction with its services. The Company's growth strategy is focused on establishing local clusters of dialysis facilities in order to create strong regional networks. Renex has targeted seven markets, in which it has operations, for the development of regional networks. The Company intends to continue to grow these regional networks through a combination of strategic acquisitions and de novo development. Additionally, Renex seeks to enter new markets in which it believes that it can establish significant market share over time. The Company also intends to continue to establish alliances with hospitals and managed care organizations, and to capitalize on its relationships with nephrologists by emphasizing high quality patient care and sensitivity to physicians' professional concerns. Renex Corp. was incorporated in Florida on July 7, 1993. The Company's executive offices are located at 2100 Ponce de Leon Boulevard, Suite 950, Coral Gables, Florida 33134, and its telephone number is (305) 448-2044. THE OFFERING Common Stock offered......................... 3,000,000 shares Common Stock to be outstanding after the Offering..................................... 6,974,247 shares(1) Use of proceeds.............................. For repayment of indebtedness, including redemption of a warrant issued in connection with a portion of such indebtedness; capital expenditures associated with facilities under development; acquisitions; de novo facility development; and working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... RENX - --------------- (1) Excludes: (i) 355,064 shares issuable upon exercise of options granted pursuant to the Company's stock option plans, at a weighted average exercise price of $6.96 per share; (ii) an aggregate of 478,270 shares reserved for issuance for future grants of options under the Company's stock option plans; (iii) 49,169 shares issuable upon exercise of options granted to two of the Company's directors and three other individuals, at a weighted average exercise price of $6.51 per share; (iv) 441,621 shares reserved for issuance upon exercise of outstanding warrants at a weighted average exercise price of $6.88 per share; and (v) 300,000 shares issuable upon exercise of warrants issued to the Representatives at an exercise price of 107% of the initial public offering price per share (the "Representatives' Warrants"). See "Management," "Certain Transactions," "Description of Securities" and "Underwriting." --------------------- Except as otherwise noted, all information in this Prospectus, including financial information, share and per share data assumes: (i) an initial public offering price of $8.00 per share; (ii) no exercise of the Underwriters' over-allotment option; and (iii) a 1-for-3 reverse stock split of the Common Stock effected as of April 21, 1997. See "Description of Securities" and "Underwriting." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT SHARE AND OPERATING DATA) <TABLE> <CAPTION> PERIOD FROM INCEPTION (JULY 7, 1993) SIX MONTHS ENDED TO YEARS ENDED DECEMBER 31, JUNE 30, DECEMBER 31, ------------------------------------ ----------------------- 1993 1994 1995 1996 1996 1997 ----------------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net revenues...................... $ -- $2,746 $ 8,794 $18,569 $8,320 $12,432 Operating expenses................ 357 3,649 9,495 20,241 8,655 12,263 Operating income (loss)........... (357) (903) (701) (1,672) (335) 169 Net interest income (expense)..... 35 61 (360) (915) (419) (537) Net (loss)........................ (322) (842) (1,187) (2,449) (862) (503) Net (loss) per share(1)........... $(.13) $ (.31) $ (.40) $ (.66) $ (.25) $ (.12) Weighted average number of shares outstanding..................... 2,395,835 2,759,884 2,963,193 3,693,617 3,503,664 4,067,747 PRO FORMA DATA: Pro forma net (loss)(2)........... $(1,308) $ 138 Pro forma net (loss) per common share(2)........................ $ (.27) $ .03 Shares used in computation of pro forma net (loss) per common share(3)........................ 4,861,062 5,235,192 OPERATING DATA: Patients (at period end)(4)....... 142 319 691 530 791 Treatments(5)..................... 10,260 33,702 77,919 34,877 52,964 Number of facilities (at period end)(6)......................... 4 7 12 10 12 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------ PRO FORMA ACTUAL AS ADJUSTED(7) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $ 3,271 $14,930 Total assets.............................................. 17,095 28,893 Total debt................................................ 9,399 1,007 Total shareholders' equity................................ 3,826 24,288 </TABLE> - --------------- (1) See Note 1 of Notes to Consolidated Financial Statements for information concerning the computation of net (loss) per share. (2) The pro forma net loss per share as of December 31, 1996 and the six months ended June 30, 1997 have been computed as if the Company's receipt and application of approximately $8.6 million of the net proceeds from the sale of the 3,000,000 shares offered hereby were used to repay certain indebtedness as of the beginning of the fiscal year end period. The pro forma results of operations include reductions of interest that would not be incurred of $915,000 for the year ended December 31, 1996 and $533,000 for the six months ended June 30, 1997. It excludes: (a) a charge of approximately $1,585,000 resulting from the write-off of deferred financing costs and prepayment penalties; and (b) a charge of $422,000 to redeem the warrants issued in connection with such indebtedness. The redemption price was equal to the difference between the assumed initial offering price of $8.00 per share and the exercise price of the warrants of $6.00 per share. See "Use of Proceeds." (3) Includes the weighted average number of shares of Common Stock outstanding at such date and 1,167,445 of the 3,000,000 shares offered hereby, the proceeds of which will be used for repayment of indebtedness. (4) Number of ESRD patients under care, including patients receiving dialysis treatments in the Company's outpatient facilities and in the patients' homes. Data for the year ended December 31, 1995 excludes patients of three facilities acquired on December 29, 1995. See "Business -- Operations." (5) Treatments include all dialysis treatments provided in outpatient facilities, patients' homes and hospitals. Peritoneal dialysis treatments are stated in hemodialysis equivalents. See "Business -- Operations." (6) Data for the year ended December 31, 1995 excludes three facilities acquired on December 29, 1995. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview" and "Business -- Operations." (7) Pro forma as adjusted to give effect to the receipt and application of the estimated net proceeds from the sale of the 3,000,000 shares offered hereby. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000912183_cubist_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000912183_cubist_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..732c2fb214df9a45b0be0bdea23602e9ae45b969
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000912183_cubist_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "RISK FACTORS." THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS." THE COMPANY Cubist Pharmaceuticals, Inc. ("Cubist" or the "Company") is a biopharmaceutical company engaged in the research, development and commercialization of novel antiinfective drugs to treat infectious diseases caused by bacteria and fungi, primarily those resistant to existing antiinfective drugs. Cubist's strategy for combating antiinfective drug resistance is to identify novel intracellular targets essential for cell function in bacteria and fungi, such as proteins, RNA or DNA, which if inhibited by a drug would kill or attenuate the growth of the pathogen. Cubist selects these targets based on a thorough understanding of their function, thereby providing a foundation for assay development and identification of leads for drug discovery. Cubist believes that its rational, target-based, drug discovery strategy represents a distinct departure from and offers significant advantages over traditional drug discovery strategies to counter drug resistance. These traditional strategies have generally involved (i) whole-cell screening methodologies which provide only limited knowledge of target function, (ii) chemical modifications of existing antiinfective drugs, such as penicillin, or (iii) the combination of existing antiinfective drugs with another agent (an "antibiotic potentiator") to block drug resistance. For decades, antiinfective drug discovery research has utilized only a fixed number of targets and chemical structures, thereby limiting the ability of these approaches to identify new classes of drugs effective against drug-resistant bacteria and fungi. Cubist believes that the identification of new drug classes inhibiting new targets will provide a compelling solution to drug resistance. The Company has identified over 100 proprietary targets and related assays for the discovery of new drugs. The Company expects that drugs inhibiting these new targets will be immediately effective against drug-resistant bacteria and fungi since these pathogens have not had an opportunity to evolve resistance specific to these new drugs. Cubist's initial focus is on the identification and development of antiinfective drugs to inhibit selected targets essential for the life of the organism. Cubist's programs are based on targets that play a role in either the transport and binding of proteins, DNA replication, the biosynthesis of co-factors, cell envelope proteins or protein translation. The Company's strategy has been to rapidly advance assays to automated high-throughput screening for lead identification and characterization. To broaden its target pipeline and accelerate lead discovery using genomic targets, the Company has entered into a research collaboration with Novalon Pharmaceutical Corporation ("Novalon"), a drug discovery company focused on the development and application of novel screening technologies. The companies are working together to improve and apply this technology to reduce the time required to establish assays, enable the screening of a diverse range of targets for which there is limited biochemical information available for antiinfective drug discovery, and identify novel classes of small molecule inhibitors of specific targets. The Company also has several chemistry programs optimizing small molecule leads which have been identified through high-throughput screening. Compounds that meet specified criteria are tested for their inhibitory affects against a panel of microorganisms including multidrug resistant strains. Infectious disease mouse models have been established to evaluate the ability of these novel compounds to protect an animal from infection. A key element of the Company's strategy is to enhance certain of its drug discovery and development programs and to fund its capital requirements, in part, by entering into collaborative agreements with major pharmaceutical and biotechnology companies. The Company is a party to collaborative agreements based on certain targets within the Synthetase Program with Bristol-Myers Squibb Company and Merck & Co., Inc. BRISTOL-MYERS SQUIBB. Cubist is collaborating with Bristol-Myers Squibb Company ("Bristol-Myers Squibb") to discover antibacterial, antimycobacterial and antifungal drug candidates from leads detected in the screening of Bristol-Myers Squibb's compound library against six of Cubist's aminoacyl-tRNA synthetase targets. MERCK. Cubist is collaborating with Merck & Co., Inc. ("Merck") to discover antibacterial drug candidates from leads detected in the screening of Merck's compound library against three of Cubist's aminoacyl-tRNA synthetase targets. Cubist has also entered into collaborations with Genzyme Corporation, Pharmacopeia Inc., Terrapin Technologies, Inc. and ArQule, Inc. to access their small molecule synthetic compound libraries and to discover new chemical classes of antiinfective drugs. Apart from these collaborations, Cubist has retained rights to internally develop and commercialize certain proprietary products which will enable the Company either to commercialize certain drug candidates independently, or to enter into future drug development and commercialization alliances with third parties at a later stage in the development process. The Company was incorporated under the laws of the State of Delaware on May 1, 1992. The Company's principal executive offices are located at 24 Emily Street, Cambridge, Massachusetts 02139, and its telephone number is (617) 576-1999. CUBIST(TM), CUBIST PHARMACEUTICALS(TM) AND THE CUBIST LOGO ARE TRADEMARKS OF THE COMPANY. ALL OTHER TRADEMARKS AND TRADE NAMES REFERENCED IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS. THE OFFERING <TABLE> <S> <C> Common Stock Offered.................................... 1,265,307 shares Common Stock Outstanding after this Offering............ 10,551,391 shares(1) Use of Proceeds......................................... The Company will not receive any proceeds from the sale of the shares of Common Stock offered hereby by the Selling Stockholders. Nasdaq National Market Symbol........................... CBST Risk Factors............................................ The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ------------------------------------------ -------------------- 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Sponsored research revenues.............................. $ -- $ -- $ 1,271 $ 4,985 $ 2,047 $ 1,678 Total operating expenses................................. 1,716 4,758 6,673 8,861 4,056 5,883 Net interest income (expense)............................ 28 (55) 6 77 (64) 414 Net loss................................................. $ (1,688) $ (4,813) $ (5,396) $ (3,799) $ (2,073) $ (3,791) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net loss per share....................................... $ (1.99) $ (4.82) $ (3.99) $ (1.39) $ (1.51) $ (0.40) Weighted average shares used in computing net loss per share.................................................. 848 999 1,352 2,737 1,377 9,554 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------------------- ACTUAL AS ADJUSTED(2) ------------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and investments............................................. $ 14,727 $ 20,677 Working capital.................................................................... 10,529 16,479 Total assets....................................................................... 19,775 25,725 Long-term debt and capital lease obligations, less current portion................. 1,378 1,378 Accumulated deficit................................................................ (19,522) (19,522) Total stockholders' equity......................................................... 16,533 22,483 </TABLE> - ------------------------ (1) Excludes (i) an aggregate of 709,031 shares of Common Stock issuable pursuant to stock options outstanding as of June 30, 1997 under the Company's Amended and Restated 1993 Stock Option Plan, as amended (the "Plan"), at a weighted average exercise price per share of $4.00, (ii) 278,021 shares of Common Stock reserved for issuance pursuant to stock options that may be granted from time to time under the Plan, and (iii) 86,619 shares of Common Stock issuable pursuant to warrants outstanding as of June 30, 1997, at a weighted average exercise price per share of $4.04. (2) As adjusted to reflect the sale of 979,594 shares of Common Stock on July 18, 1997 at a price of $6.125 per share, and the receipt by the Company of the net proceeds therefrom after deducting the estimated offering expenses payable by the Company. See "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000912643_kontron_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000912643_kontron_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..95e131186e5ac462c0ee7ea5bca928c9206ef532
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000912643_kontron_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus, including financial information and share and per share data, (i) assumes no exercise of the Underwriters' over-allotment option and (ii) gives effect to the automatic conversion of all outstanding Preferred Stock into Common Stock upon the consummation of this offering. See "Capitalization," "Description of Capital Stock" and "Underwriting." THE COMPANY FieldWorks, Incorporated ("FieldWorks" or the "Company") designs, manufactures, markets and supports portable rugged computing platforms and computer system solutions for use in demanding field environments. In addition to providing the full range of computer features, performance and functionality typically found in high-end desktop computers, the Company's portable computing platforms have been designed to meet rigorous military standards for ruggedness and to function despite exposure to extreme temperature, mechanical shock, vibration and moisture. The Company's computing platforms are expandable through multiple expansion slots to provide a flexible electronic "toolbox" that can integrate all of a user's application-specific, multi-media and communications needs into one portable, rugged device. The Company's products have been designed with a modular system configuration that allows a user to easily upgrade the central processing unit ("CPU") or any of the other technological components without purchasing a new computer. Further, the Company has the ability to customize its computing platforms to meet the unique needs of its customers. The worldwide market for portable personal computers is expanding rapidly, and Frost & Sullivan has predicted that it may reach nearly $80 billion in annual sales by 2001. Within this market, the market for mobile computing and field force automation products is predicted to be one of the fastest growing sectors over the next decade, with annual growth predicted at as much as 35% or more. According to International Data Corp. ("IDC") estimates, the rugged portable computer market is currently over $500 million and is expected to grow by more than 50% over the next three years. Organizations are increasingly seeking to computerize field personnel, and industries such as telecommunications, utilities, farming, law enforcement, the military and transportation have recognized the need for computerization and automation in the field. However, the effectiveness of these efforts has often been limited by the nature of the products that have been available. Consumer portable personal computers frequently become inoperable under field conditions, are typically available only with a standard set of features that cannot be expanded or customized to meet the specialized needs of field users, and are not designed to be upgraded. Similarly, custom-designed portable personal computers are expensive, generally limited in their applications and often unable to withstand conditions typically present in the field, while mobile single-purpose diagnostic and data collection instruments generally have little independent computing capability. The Company's products have been designed to accomodate the demands of a wide variety of users who are looking for mobile computing platforms that are rugged and expandable, easily upgraded as technology changes and that can be customized to meet the specialized needs of field force users. The Company targets those markets that require portable computing platforms that can perform multiple functions, including diagnostics, data acquisition and electronic testing and monitoring, and simultaneously provide communications and computer capability even under adverse conditions in the field. FieldWorks rugged computing platforms are in use in a variety of market applications, including: electronic toolboxes for telecommunications test crews to simplify and expedite installation, repair and troubleshooting tasks; data collection and transmission for in-flight commercial airplane testing; collection and analysis of Global Positioning System ("GPS") geographical information and agricultural data to aid in the selection of crops, chemicals and farming methods; diagnostic system analysis and wireless communication for use with trucking fleets; and video surveillance and monitoring for law enforcement purposes. The Company believes that its rugged computing technology has enabled its customers to create new applications that improve the productivity of their field personnel and believes further that additional markets and customers will develop as more businesses recognize the benefits of providing field personnel with effective, sophisticated computing power. The Company's objective is to be the leading designer, manufacturer and marketer of rugged computing platforms and computer system solutions. The Company's strategy is to: (i) penetrate key vertical markets, (ii) expand strategic OEM relationships, (iii) establish relationships with large-volume, repeat customers, (iv) develop new products and enhance existing products and (v) establish product recognition. The Company shipped its first commercial product, the 7000 Series Field WorkStation rugged laptop computing platform, which is now offered in a range of models, in June 1994. In June 1996, the Company commercially introduced its 5000 Series Field WorkStation rugged notebook computing platform to meet the needs of customers who require a smaller, more lightweight toolbox but do not require the full expansion capability of the 7000 Series. The Company is currently developing additional series of computing platforms designed to address broader customer preferences for products with varying degrees of expandability, size and price, all of which provide the ruggedness, processing power and ease of upgrade that characterize the Company's current products. The Company assembles its products to its customers' specifications as orders are received, which enables the Company to provide each customer with a computing platform that satisfies its specific requirements. The Company was incorporated under the laws of the State of Minnesota in October 1992. The Company's executive offices are located at 9961 Valley View Road, Eden Prairie, Minnesota 55344, and its telephone number is (612) 947- 0856.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000914339_medicode_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000914339_medicode_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2eece7356c8abb5efbc6741848d447fd8fa0a970
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000914339_medicode_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Medicode is a leading provider of health care information products which reduce administrative costs associated with the reimbursement process, control clinical costs and increase the efficiency of the health care delivery process. The Company's products are used by payors, providers and self-insured employers to (i) accurately code and measure utilization of health care services, (ii) screen and edit claims for accuracy, consistency and compliance, (iii) efficiently evaluate, negotiate and implement provider payment arrangements, and (iv) track and analyze all aspects of care for a particular medical condition from initial diagnosis to treatment. The foundation for Medicode's solutions is its proprietary database of over 500 million geographically dispersed ambulatory patient care records, which is leveraged through the Company's clinical and technical expertise in data collection, mapping and analysis. Health care payors have attempted to achieve cost savings by shifting to providers an increasing portion of the financial risk associated with care delivery, generally under capitated payment arrangements. These initiatives have increased the necessity for reliable clinical and financial data in the health care delivery and payment system. The pursuit of administrative savings has led to the implementation of systems and knowledge bases designed to streamline administrative processes and financial transactions. Clinical cost containment efforts have focused on assessing the appropriateness of care and the reasonableness of provider charges, requiring standardized pricing guidelines and comparative databases and decision support tools. More recent care reengineering efforts require systems to capture and compare the outcomes of various treatment paths and standardize best treatment practices. Medicode's products are designed to provide solutions for administrative cost reduction, clinical cost containment and care reengineering. The Company's syndicated data products include proprietary coding source books and reference materials used by medical providers and payors to code medical procedures performed and other various non-proprietary titles which the Company resells. Approximately 80,000 customers have purchased one or more of the Company's syndicated data products in the last three years. The Company's benchmarking database products include databases of usual, customary and reasonable charges for specific procedures in particular geographic areas and state-mandated workers' compensation fee schedules which are currently licensed to over 1,300 customers. The Company's clinical editing software includes products for enhancing data accuracy, consistency and compliance and decision support tools which are currently licensed to over 170 customers. The Company's product development strategy leverages its proprietary patient encounter database which the Company regularly updates through the addition of data contributed by customers. The Company's products under development include: Allowed Medical, which will enable customers to evaluate payor-allowed charges by geographic region to determine more accurately the amount which will actually be paid for specific procedures; CareTrends, which will track a patient's entire course of treatment for a particular condition enabling customers to assess utilization and referral patterns and enhance clinical practice guidelines based on demonstrated outcomes; and the PowerTrak System, which will apply managed care analysis guidelines and decision support to enable comprehensive medical management of workers' compensation and automobile insurance claims. The Company's growth strategy is to: (i) leverage its approximately 80,000 current customers by cross-selling additional higher value, higher margin products; (ii) target additional underpenetrated customer segments such as providers assuming financial risk, self-insured employers and workers' compensation and automobile insurers; (iii) target larger customers with significant operating budgets and more complex information system needs; (iv) continue to emphasize repeat and recurring revenue from customers who have previously purchased similar products from the Company; and (v) pursue the acquisition of complementary businesses, products or technologies. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company. 1,250,000 shares Common Stock Offered by the Selling Stockholders....................... 750,000 shares Common Stock Outstanding after the Offering........................... 7,936,535 shares(1) Use of Proceeds..................... For working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market Sym- bol................................ MECD </TABLE> SUMMARY FINANCIAL INFORMATION (in thousands, except per share data) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------ ------------------ 1994 1995 1996 1996 1997 ------- ------- ------- -------- -------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DA- TA: Revenue.......................... $21,035 $25,699 $32,618 $18,773 $22,791 Cost of revenue.................. 7,173 9,164 11,053 5,357 6,811 Selling, general and administra- tive............................ 10,774 11,947 13,735 9,428 10,634 Research and development......... 3,141 4,335 5,214 4,148 4,229 Operating income (loss).......... (53) 253 2,616 (160) 1,117 Net income (loss)................ (112) 48 1,629 (128) 750 Pro forma net income per share(2)........................ $ 0.21 $ 0.09 Shares used in computing pro forma net income per share(2)... 7,873 7,909 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 -------------------------------------- ACTUAL PRO FORMA (3) AS ADJUSTED(3)(4) ------ ------------- ----------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............... $5,345 $7,030 $21,578 Working capital......................... 1,490 3,175 17,723 Total assets............................ 12,702 14,387 28,935 Long-term liabilities, less current por- tion................................... -- -- -- Stockholders' equity.................... 2,945 4,630 19,178 </TABLE> - -------- (1) Based upon shares outstanding as of September 30, 1997. Includes 1,060,386 shares issuable upon the exercise of outstanding warrants upon the completion of this offering and 227,892 shares to be sold by certain Selling Stockholders after the exercise of outstanding options immediately prior to the completion of this offering. Excludes (i) 1,476,738 shares issuable upon exercise of options outstanding at a weighted average exercise price of $1.58 per share, (ii) 200,000 shares reserved for future issuance under the Company's Employee Stock Purchase Plan (the "Purchase Plan") and (iii) 750,000 shares reserved for future issuance under the Company's stock option plans. See "Capitalization," "Management -- Stock Plans" and "Description of Capital Stock." (2) See Note 1 of Notes to Consolidated Financial Statements for information concerning the computation of pro forma net income (loss) per share. (3) Pro forma and as adjusted stockholders' equity assumes the conversion of all outstanding shares of Preferred Stock into Common Stock and the exercise of outstanding warrants to purchase 1,060,386 shares of Common Stock upon the completion of this offering with expected proceeds of $1,685,000. (4) As adjusted to reflect the sale of (i) 1,250,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $13.00 per share and the receipt of the net proceeds therefrom, and (ii) the exercise of options to purchase 227,892 shares by certain Selling Stockholders immediately prior to the completion of this offering and the receipt of the proceeds therefrom. See "Use of Proceeds" and "Capitalization." Except as otherwise indicated, all information in this Prospectus assumes (i) the reincorporation of the Company from Utah to Delaware which was effected in November 1997, (ii) the exchange, in connection with the reincorporation, of each outstanding share of Common Stock of the Utah corporation for 1.466 shares of Common Stock of the Delaware corporation, (iii) the conversion of each outstanding share of Preferred Stock into 1.466 shares of Common Stock upon the completion of this offering, (iii) the filing of the Company's Restated Certificate of Incorporation authorizing a class of undesignated Preferred Stock, to be effective upon the completion of this offering, (iv) the exercise of outstanding warrants to purchase 1,060,386 shares of Common Stock upon the completion of this offering, and (v) no exercise of the Underwriters' over- allotment option. See "Description of Capital Stock" and "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000914384_dan-river_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000914384_dan-river_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..92c951caebed38c469ab2a930ff1ac64e8465e5f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000914384_dan-river_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, references in this Prospectus to "Dan River" or the "Company" include Dan River Inc. and its predecessors and subsidiaries. In addition, unless otherwise indicated, all information in this Prospectus gives retroactive effect to the completion of the Recapitalization (as hereinafter defined), as well as to certain other changes with respect to the Company's charter and bylaws that will be completed prior to completion of the Offering. See "Certain Transactions." References to a fiscal year refer to the fiscal year of the Company, which is the 52- or 53-week period ending on the Saturday nearest to December 31. All fiscal years presented consisted of 52 weeks other than fiscal 1992, which ended on January 2, 1993 and consisted of 53 weeks. Unless otherwise indicated, the information in this Prospectus does not give effect to the exercise of the Underwriters' over-allotment option. See "Underwriters." THE COMPANY Founded in 1882, Dan River Inc. (the "Company" or "Dan River") is a leading manufacturer and marketer of textile products for the home fashions and apparel fabrics markets. The Company designs, manufactures and markets a coordinated line of value-added home fashions products consisting of packaged bedroom furnishings such as comforters, sheets, pillowcases, shams, bed skirts, decorative pillows and draperies. Dan River also manufactures and markets a broad range of high quality woven cotton and cotton-blend fabrics and believes that it is the leading supplier of men's dress shirting fabrics in North America (based on net sales). On a pro forma basis, after giving effect to the Cherokee Acquisition (described below), the Company's home fashions products and apparel fabrics accounted for 50.6% and 49.4%, respectively, of the Company's net sales of $480.6 million in fiscal 1996. Home Fashions Products. Dan River's home fashions products are marketed to key retailers under the "Dan River" brand name, as well as under licenses from, among others, "Colours by Alexander Julian," "D. Porthault," "John Wilman," "Liberty" and "Nautica." The Company's top five retail home fashions customers in fiscal 1996 were Wal-Mart Stores, Inc., Kmart Corporation, Federated Department Stores, Inc., J.C. Penney Company, Inc. and The May Department Stores Company. The Company focuses on value-added, higher thread count and yarn-dyed products and accessory items, as opposed to solid-colored commodity products. Management believes these products yield higher margins and differentiate the Company's product line from those of its competitors. Additionally, the Company is a leader in offering complete bed ensembles which it markets under the "Bed-in-a-Bag" name and which package a comforter together with matching sheets, pillowcases, shams and a dust ruffle. These packaged sets provide attractive profit margins for both the Company and its retail customers, while offering consumers value and convenience. The Company works directly with its customers from the earliest stage of the design process to develop styles that satisfy their specific needs. The Company's technologically advanced manufacturing operations also provide the flexibility to produce a wide variety of styles and to respond quickly to changes in market conditions. As a result of its innovative merchandising and styling techniques, its superior customer service, its license of certain well- known brand names and its flexible manufacturing operations, Dan River has increased its net sales of home fashions products 34.8% from $180.4 million in fiscal 1992 to $243.2 million in fiscal 1996. Apparel Fabrics. The Company's apparel fabrics are marketed to a diverse customer base including manufacturers of men's, women's and children's clothing, uniforms and home furnishings, and retailers of sewing and craft fabrics. The Company's apparel fabrics are used in garments marketed under such well-known brand names as Arrow, Brooks Brothers, Hathaway, Levi Strauss, Liz Claiborne, L.L. Bean, Manhattan, Osh Kosh B'Gosh and Van Heusen, as well as numerous private labels marketed through retailers such as J.C. Penney Company, Inc. and Sears, Roebuck & Co. The Company believes that it is the leading manufacturer of men's dress shirting fabrics in North America (based on net sales). Management believes that the Company enjoys a reputation as a leader in developing innovative fabric styles and designs and that its customers look to the Company's design and styling professionals to anticipate fashion trends and develop new products. On February 3, 1997, the Company acquired substantially all of the assets and certain of the liabilities of The New Cherokee Corporation ("Cherokee"), a major competitor of the Company (the "Cherokee Acquisition"). The Cherokee Acquisition almost doubled the size of the Company's apparel fabrics business, added complementary product lines and introduced new distribution channels. Since completing the Cherokee Acquisition, the Company has achieved significant cost savings by eliminating redundant manufacturing capacity and overhead and increasing the production volume at the former Cherokee facilities. On a pro forma basis, after giving effect to the Cherokee Acquisition, the Company had net sales of apparel fabrics of $237.4 million in 1996. BUSINESS STRATEGY The Company's principal business objective is to continue to expand the sales of its home fashions products and apparel fabrics, while improving the overall profitability of its operations. The primary components of the Company's business strategy include the following: . Capitalize on Profit Opportunities in Home Fashions Market. The Company focuses on the sale of higher thread count percale products (180 threads per square inch and above), printed products and accessory items (products other than individually packaged sheets and pillowcases) which enhance the Company's competitiveness, sales growth and profitability. The Company's customer-specific marketing strategy is designed to (i) create specialized products that provide differentiation from competitors and enable both the Company and its customers to increase sales and margins, and (ii) attract value conscious consumers by offering high quality products at reasonable prices. Accordingly, the Company works directly with retailers to develop value-added, fashion-oriented products (as opposed to solid color commodity products) that are periodically updated to respond to changing consumer preferences, thereby improving retailers' inventory turn rates and associated profitability. . Expand Distribution of Home Fashions Products Through Strategic Relationships with Major Retailers. The Company aggressively markets its home fashions products to, and has developed significant business relationships with, key retailers in all retail trade classes, including department stores, mass merchandisers, discount stores, national chain stores, specialty stores and warehouse clubs. Establishing and expanding these key distribution channels has strengthened consumer recognition of the "Dan River" brand name and increased sales. The Company has established strategic relationships with large, high volume retailers such as Wal-Mart Stores, Inc., Kmart Corporation, Federated Department Stores, Inc., J.C. Penney Company, Inc. and The May Department Stores Company, by providing high quality products together with superior customer service. . Enhance Strong Apparel Fabrics Market Position. Dan River seeks to enhance its position as a leading producer of apparel fabrics by focusing on customer relationships, anticipating fashion trends, developing new innovative products and reducing manufacturing lead times. Management believes that (i) the significant reduction in manufacturing costs achieved through its aggressive facility modernization program, (ii) the increase in the size of its apparel fabrics operations and attendant reduction in fixed costs on a per unit basis as a result of the Cherokee Acquisition and (iii) its diverse customer base will make Dan River's apparel fabrics business less sensitive to the cyclicality experienced by the textile industry in general and will further increase the Company's profitability. Management also believes that demand for apparel fabrics manufactured in North America and the Caribbean will continue to increase as a result of the North American Free Trade Agreement ("NAFTA"), the Caribbean Basin Recovery Act and the increasing importance of geographic proximity in enabling shortened delivery times. . Reduce Production Costs and Improve Productivity. The Company is a low cost producer. During the past five fiscal years, the Company has invested approximately $150 million in an extensive facility modernization program focused on installing the most advanced manufacturing technologies making the Company more competitive and cost- efficient. As a result of this program, as well as other improvements made by the current management team since the Company was acquired in 1989, the Company has significantly increased productivity, reduced costs and improved product quality. The Company intends to continue to modernize its operations and improve its low cost position. . Attain Textile Industry Leadership in Information Technology. The Company has invested significantly in information technology to provide improved and differentiated services. The Company has implemented an advanced supply chain management system which reduces manufacturing lead-time and enhances the Company's ability to respond to customer requirements. The Company's electronic data interchange ("EDI") systems, quick response customer delivery programs and point-of-sale decision support systems enable customers to maintain lower inventory levels and react faster to changes in product demand, thereby improving their operating results. In addition, the Company employs continuous inventory replenishment and dedicated manufacturing programs with certain customers to enhance service. Planned investments in information technology include the implementation of a new enterprise resource planning ("ERP") system along with additional continuous inventory replenishment programs. . Enhance Financial Flexibility. The Company seeks to maintain a capital structure that will position it for growth through expansion of existing operations and potential acquisitions as well as provide stability during cyclical downturns. The textile industry generally, and in particular marketers of home fashions products, have undergone significant consolidation in recent years and the Company anticipates that this trend will continue. The Company believes that, following completion of the Offering, its strong balance sheet will enable it to capitalize on attractive acquisition opportunities. Dan River is a Georgia corporation and its principal executive offices are located at 2291 Memorial Drive, Danville, Virginia 24541. Its telephone number is (804) 799-7000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000915290_concord_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000915290_concord_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3480ac9b9a7b9ab4d757765506cf4461a83ed71e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000915290_concord_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information including "Risk Factors" and financial statements and notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Concord develops, markets and supports a family of turnkey, automated, scaleable, software-based performance analysis and reporting solutions for the management of computer networks. By providing a global view of network performance, the Company's products enable the effective and efficient management of large and medium-size multi-vendor networks, both by end users and network service providers, including telecommunications carriers, Internet service providers (ISPs), systems integrators and outsourcers. The Company's Network Health product family retrieves and compiles vital network statistics, performs extensive analyses of those statistics and provides intuitive, informative, user-friendly graphical reports. The Company's software-only solutions provide information technology (IT) executives, managers and technicians with the information necessary to assess and correct costly network inefficiencies, make cost-effective network purchasing decisions and predict network failures. The Company's Network Health product family is a line of performance analysis and reporting solutions that automate the collection of critical network information from the Simple Network Management Protocol (SNMP) management information bases (MIBs) commonly installed in IT equipment. The Company uses a proprietary MIB translation module that enables the gathering of data from diverse network elements and technologies for analysis by Network Health's patented performance analysis and reporting software. Immediately after installation, the Company's products automatically generate reports that assess network characteristics, including baseline performance, bandwidth utilization, network volume, traffic and trends. Concord currently markets versions of Network Health which are designed to analyze and report on: local and wide area network (LAN and WAN) segments; specific applications for various network elements, such as routers, switches and servers; and traffic pattern analysis of the various nodes and applications used within the network. The Company's Network Health product family provides organizations with the following benefits: (i) capacity planning--providing information to support business decisions relating to network utilization and future capacity requirements; (ii) reduction in data communications expenses--identifying excess capacity on each WAN, leased line or frame relay circuit; (iii) effective allocation of resources--allowing management to effectively deploy networking resources and personnel; and (iv) service level monitoring--assisting managers in making network resource allocation decisions within an organization and assisting both network service providers and end users in monitoring the availability of negotiated service level agreements. The Company's initial target market has been organizations with large and medium-size networks comprised of 150 or more network elements. The Company markets to these potential customers through its own sales force, sales agents, network service providers, including telecommunications carriers, value added resellers and OEMs. Frequently, customers initially purchase Network Health products that analyze and report on a subset of their network elements. Benefits derived from the initial licensing agreement by customers often lead to expanded agreements that cover a larger proportion of the customers' networks. The Company believes that within the performance analysis and reporting market there are currently over 200 million potentially manageable elements. The Company believes that to date less than 0.5% of these elements are being managed utilizing software-based analysis and reporting. As of August 31, 1997, the Company had over 400 customers operating in and serving a variety of industries. Representative customers include America Online, Inc., Ameritech Corporation, AT&T Corporation, The Bear Stearns Companies, Inc., British Telecommunications plc, Burlington Northern Santa Fe Corporation, Department of Commerce, Dow Jones & Company, Inc., Ernst & Young, LLP, MCI Telecommunications Corp., Morgan Stanley Group Inc., Motorola Inc., New York Stock Exchange, Inc., Pfizer Inc., The Prudential Service Company, The Procter & Gamble Company, Sprint Corporation, Viacom International Inc., Visa International and U S WEST, Inc. - -------------------------------------------------------------------------------- The Company was incorporated in Massachusetts in 1980 under the name Concord Data Systems, Inc. and, in 1986, its legal name was changed to Concord Communications, Inc. As used in this Prospectus, references to the "Company" and "Concord" refer to Concord Communications, Inc. The Company's principal executive offices are located at 33 Boston Post Road West, Marlboro, Massachusetts 01752. The Company's telephone number is (508) 460-4646. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................... 2,300,000 shares Common Stock offered by the Selling Stockholders...... 600,000 shares Common Stock to be outstanding after the offering..... 11,505,816 shares (1) Use of Proceeds....................................... For general corporate purposes, including working capital. See "Use of Proceeds." Nasdaq National Market symbol......................... CCRD </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS FISCAL YEAR ENDED ENDED ----------------------------------------------------- JUNE 30, JAN. 2, JAN. 1, DEC. 31, DEC. 30, DEC. 28, ------------------- 1993 1994 1994 1995 1996 1996 1997 ------- ------- -------- -------- -------- --------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues.......................... $ 2,048 $ 3,493 $ 4,065 $ 4,355 $ 9,007 $ 3,469 $ 7,701 Gross profit............................ 603 1,527 2,124 3,191 7,050 2,538 6,422 Loss from continuing operations......... (3,139) (3,004) (4,394) (3,784) (5,055) (2,795) (966) Income (loss) from discontinued operations............................ 2,195 (68) 117 -- -- -- -- Net loss................................ $ (944) $(3,072) $(4,277) $(3,784) (5,055) (2,795) (966) Pro forma net loss per common and common equivalent share (unaudited) (2)...... $ (0.52) $ (0.29) $ (0.10) Pro forma weighted average number of common and common equivalent shares outstanding (unaudited) (2)........... 9,799 9,798 9,804 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------------------------------------------ PRO FORMA ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4) -------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.................................. $ 1,873 $ 1,873 $28,930 Working capital (deficit).................................. (2,467) (2,467) 24,590 Total assets............................................... 5,586 5,586 32,417 Long-term debt, net of current portion..................... 860 860 860 Redeemable convertible preferred stock..................... 14,919 -- -- Total stockholders' equity (deficit)....................... (16,328) (1,409) 25,648 </TABLE> - --------------- (1) Based on shares outstanding as of August 31, 1997. Excludes: (i) 2,017,314 shares of Common Stock issuable upon the exercise of options outstanding as of such date at a weighted average exercise price of $1.10 per share; and (ii) 1,221,250 additional shares reserved for future grants of issuances under the Company's stock option and stock purchase plans. See "Capitalization," "Management--Equity Plans," "--Director Compensation" and Note 6 of Notes to Financial Statements. (2) Computed on the basis described in Note 1 of Notes to Financial Statements. (3) Adjusted to reflect, upon the closing of this offering, the conversion of all outstanding shares of the Company's Preferred Stock into 8,108,258 shares of Common Stock. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (4) Adjusted to reflect the sale of the shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $13.00, after deducting the estimated underwriting discount and offering expenses. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000915320_leukosite_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000915320_leukosite_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3a0d676d93ca6b05a3a1329038cf8bb592b179c4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000915320_leukosite_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." THE COMPANY LeukoSite, Inc. ("LeukoSite" or the "Company") is a leader in the discovery and development of therapeutics based upon the biology of leukocytes (white blood cells), with potential applications in cancer and inflammatory, autoimmune and viral diseases. The Company's technologies and expertise in leukocyte biology facilitate the discovery and development of novel and proprietary drugs that destroy or block the disease-causing actions of leukocytes. The Company has one product candidate that has completed Phase II clinical trials, two product candidates that are expected to begin human clinical trials by early 1998, and seven small molecule drug discovery programs. In a properly functioning immune system, leukocytes rid the body of infectious organisms and repair damage to tissues and organs. However, leukocytes can also cause or exacerbate disease processes when their growth is uncontrolled, resulting in malignant diseases such as lymphomas and leukemias, or when they are abnormally recruited into tissues, resulting in autoimmune or inflammatory diseases. In addition, disease can also result when viruses such as HIV attach to, invade and destroy leukocytes. LeukoSite focuses on distinct cell surface molecules found on leukocytes and their roles in disease. The Company is developing monoclonal antibodies and small molecule drugs that selectively deplete leukocytes or block specific leukocyte recruitment pathways controlled by chemokines and their receptors as well as by integrins and adhesion molecules. LeukoSite believes that these drugs will have a high degree of specificity and reduced side effects compared to existing anti-cancer, anti-inflammatory, immunosuppressive and anti-viral therapies. The Company expects to initiate late stage clinical trials of its lead product candidate, LDP-03, in 1998. LDP-03 is a humanized monoclonal antibody to the leukocyte antigen CAMPATH, which was licensed by the Company after reviewing data from Phase I and II clinical trials showing activity in the treatment of chronic lymphocytic leukemia. The Company has entered into a joint venture with Ilex Oncology, Inc. ("Ilex") for the clinical development and commercialization of LDP-03. Under the terms of the agreement with Ilex, LeukoSite and Ilex will generally share equally in any profits from the sales of LDP-03 and in all future research, development, clinical and commercialization costs. The Company's second product candidate, LDP-01, is a humanized anti-integrin monoclonal antibody that inhibits early leukocyte recruitment and inflammation resulting from reperfusion injury. The Company intends to initiate two Phase I/IIa clinical studies of LDP-01 in the United Kingdom in early 1998, one for kidney transplantation and a second for thrombotic stroke. The Company's third product candidate, LDP-02, is a humanized monoclonal antibody to the a4b7 integrin and is being developed for the treatment of inflammatory bowel disease, such as Crohn's disease and ulcerative colitis. The Company intends to initiate a Phase I/IIa study of LDP-02 in the United Kingdom in early 1998. To date, the Company has also generated six chemokine-receptor drug discovery targets that are the subject of collaborations with pharmaceutical companies for small molecule drug discovery and development. The Company has collaboration agreements with Warner-Lambert Company ("Warner-Lambert"), Roche Bioscience and Kyowa Hakko Kogyo Co. Ltd. As of June 30, 1997, the Company had received $8.4 million under these collaborations for research funding and license fees and will be entitled to receive $13.0 million of additional funding that is not subject to the achievement of milestones. In addition, in the event that a product is successfully developed and commercialized under each of the collaborations, LeukoSite will be entitled to receive up to $44.3 million in development and commercialization milestone payments, as well as royalties associated with product sales. As of June 30, 1997, Warner-Lambert had invested $9.0 million and Roche Finance Ltd had invested $3.0 million in equity of the Company. The Company's executive offices are located at 215 First Street, Cambridge, Massachusetts 02142, and its telephone number is (617) 621-9350. [Appearing in a two-page foldout is the following.] [Next to a graphic which illustrates LDP-03 activity appears the following caption:] LDP-O3 LDP-03 is being developed to use the immune system to destroy cancerous leukocytes while leaving intact stem cells. [Next to a graphic which illustrates LDP-01 activity appear the following captions:] LDP-O1 (Stroke) LDP-01 is being developed to prevent activated leukocytes from causing continuing damage following ischemic stroke. LDP-O1 (Kidney) LDP-01 is being developed to prevent continuing ischemic damage by activated leukocytes following kidney transplantation using cadaver organs. [Next to a graphic which illustrates LDP-02 activity appears the following caption:] LDP-O2 LDP-02 is being developed to arrest the overactivity of a subset of leukocytes responsible for inflammatory bowel diseases. [Next to a graphic which illustrates the blocking of eosinophil recruitment appears the following caption:] Asthma LeukoSite is working with Roche Bioscience to prevent the harmful accumulation of eosinophils in the lung. [Next to a graphic which illustrates the human body and various organs appears the following caption:] CCR3 Antagonist Asthma Allergic hypersensitivity MCP-1 Antagonist Atherosclerosis Rheumatoid arthritis IL-8 Antagonist Myocardial infarction CCR1 Antagonist Rheumatoid Arthritis Multiple Sclerosis Psoriasis CXCR3 Antagonist Rheumatoid Arthritis Multiple Sclerosis Psoriasis CCR5 Antagonist HIV-1 infection and inflammatory diseases [Beta]7 Integrin Receptor Antagonist Inflammatory Bowel Disease [Next to a graphic which illustrates the bone marrow and the production of leukocytes and radiates mature leukocytes to the other graphics appear the following captions:] LeukoSite is pioneering novel treatments to block or destroy leukocytes while sparing normal functions of the immune system. LeukoSite is working with pharmaceutical partners to selectively interrupt the disease causing actions of certain leukocytes. The Company's products are currently in research and preclinical and clinical development. None of the Company's products has been submitted for regulatory approval. There can be no assurance that any products will be successfully developed, receive necessary regulatory approvals or, if such approvals are received, that any product candidate will be marketed successfully. [Appearing on the facing page of the fold out with the stabilization legend is the Company's logo.] ------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON STOCK, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." ------------------ LEUKOSITE and the Company's logo are trademarks of the Company. This Prospectus also includes trademarks of companies other than LeukoSite. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................... 2,500,000 shares Common Stock to be outstanding after the offering..... 9,049,882 shares(1) Use of proceeds....................................... To fund research and development programs and for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol......................... LKST </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FOR THE PERIOD FOR THE PERIOD FROM INCEPTION FROM INCEPTION (MAY 1, 1992) SIX MONTHS (MAY 1, 1992) THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30, THROUGH DECEMBER 31, ------------------------------------- --------------------- JUNE 30, 1992 1993 1994 1995 1996 1996 1997 1997 -------------- ------- ------- ------- ------- ----------- ------- -------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues.................... $-- $ -- $ -- $ 450 $ 3,674 $ 524 $ 2,275 $ 6,399 Operating expenses.......... 129 2,044 5,782 7,917 9,873 4,420 6,186 31,931 Interest income (expense), net....................... -- (19) 148 (10) 177 63 212 508 ----- ------- ------- ------- ------- ------- ------- -------- Net loss (2)................ $ (129) $(2,063) $(5,634) $(7,477) $(6,022) $(3,833) $(3,699) $(25,024) ===== ======= ======= ======= ======= ======= ======= ======== Pro forma net loss per common share (2).......... $ (1.03) $ (.57) ======= ======= Shares used in computing pro forma net loss per common share (2)................. 5,857 6,540 ======= ======= </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 -------------------------------------------- PRO FORMA ACTUAL PRO FORMA(3) AS ADJUSTED(4) -------- ------------ -------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and marketable securities...................... $ 11,649 $ 11,649 $ 26,162 Working capital....................................................... 6,771 6,771 21,808 Total assets.......................................................... 14,784 14,784 28,773 Long-term obligations, net of current portion......................... 1,123 1,123 1,123 Redeemable convertible preferred stock................................ 25,221 -- -- Deficit accumulated during development stage.......................... (25,512) (25,512) (25,512) Stockholders' equity (deficit)........................................ (16,759) 8,462 22,975 </TABLE> - ------------------------------ (1) Based on the number of shares outstanding as of July 31, 1997. Excludes (i) an aggregate of 947,272 shares of Common Stock issuable upon exercise of stock options outstanding as of July 31, 1997 at a weighted average exercise price of $3.89 per share and (ii) an aggregate of 84,145 shares of Common Stock issuable upon exercise of warrants outstanding as of July 31, 1997, at a weighted average exercise price per share of $4.10. See "Capitalization," "Management -- Amended and Restated 1993 Stock Option Plan" and Note 10 of Notes to Consolidated Financial Statements. (2) Computed as described in Note 2(b) of Notes to Consolidated Financial Statements. (3) Presented on a pro forma basis to give effect to the automatic conversion upon the closing of this offering of all outstanding shares of the Company's Preferred Stock into an aggregate of 5,435,026 shares of Common Stock (assuming an initial public offering price of $6.50 per share). (4) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $6.50 per share and the receipt of the estimated proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000915868_production_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000915868_production_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3e6c0184d131cd0f0da9eb0b5256f553956fe14c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000915868_production_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. PGI, Inc. ("PGI" or the "Company") is a leading worldwide provider of event services on an outsourced basis for corporations, associations and other organizations as well as on a proprietary basis for exhibitions owned and managed by the Company. In fiscal 1996, PGI planned and executed over 1,800 events attended by more than 900,000 people in approximately 50 cities in 12 countries. In order to provide its clients with a single source solution to their event planning needs, PGI offers a wide range of services that encompass the event planning process, including general management, concept creation, content creation and execution. In addition, the Company owns and manages proprietary exhibitions that utilize these services. The Company has developed internally and through acquisitions a vertically-integrated infrastructure capable of providing event services on a multinational basis. The Company believes that its vertically-integrated organization, creative talent, network of 24 offices in the United States and abroad, technological leadership and willingness to commit capital to acquire or develop proprietary exhibitions are competitive advantages in a fragmented industry where most vendors provide a limited set of services on a local basis. PGI's revenues have increased at a compound annual rate of 76.2% from fiscal 1994 to fiscal 1996. The events industry consists of companies that provide business communications and event management services and organizations that own or manage exhibitions. Corporations, associations and other organizations hold or sponsor events on a frequent, often recurring, basis throughout the year in order to communicate with customers, employees, members and other constituencies and either produce these events internally or outsource their production to third parties. Examples of business communications and event management services are the design, production and execution of conventions, sales meetings, conferences, executive presentations, shareholder and investor meetings, training sessions and product launches. Examples of exhibitions are trade shows, consumer shows and special events that provide a forum for face- to-face interaction and communication, typically between buyers and sellers. A recent study by Deloitte and Touche LLP estimated that the events industry generated approximately $80 billion in direct spending during 1994 in the U.S. alone, exclusive of travel and internal spending by corporations and associations. The Company believes that the market for event services is undergoing a shift toward outsourced management as organizations focus on their core competencies and seek to improve the professionalism, creativity and cost-efficiency of their events. Most vendors of outsourced event services cannot provide the wide range of services, international coverage, creative talent, purchasing power and technological capabilities required by large corporations and associations. The Company believes that there is an increasing trend on the part of associations, historically the largest owners and operators of exhibitions, to outsource the operational management and often the ownership of exhibitions as they focus on their core missions and seek to improve efficiencies. As a vertically-integrated service provider, PGI is able to offer a comprehensive solution to these organizations with the assurance of high- quality service and the opportunity to form a long-term relationship. PGI provides its clients a wide range of services such as video and media design and production, including creation and production of CD-ROMs and Internet broadcasts, graphic design and production, speech writing, staging and lighting design and the design of brochures and promotional materials. The Company offers execution and fulfillment management capabilities, including on-site quality and logistics control, hotel and venue coordination, transportation management, entertainment and talent booking, permit and approval management, food and beverage management and telemarketing services for the sale of exhibition space. PGI concentrates its selling efforts on large corporations, associations and other organizations with recurring needs to plan and execute a wide range of events in diverse locations. The Company centralizes many of its administrative and purchasing functions at its headquarters, while creative, production and sales personnel service clients from PGI's field offices. PGI believes that it differentiates itself through the creative talent, energy and commitment of its professionals. The Company's full-time staff of over 350 professionals is complemented by a pool of over 750 professionals hired on a project-by-project basis who have distinguished themselves through prior experience with PGI. For individual events, the Company brings together professionals from a wide range of creative disciplines, including writers and editors, video producers, digital media designers, graphic designers and logistics experts. PGI seeks to attract and retain the best operational personnel through attractive compensation, benefits and training programs and long-term career opportunities that smaller competitors cannot duplicate. To execute PGI's expansion plans, the Company has recruited a number of senior executives with broad and diverse experience managing rapidly growing international businesses. Through fiscal 1996, PGI devoted substantial capital and management attention to completing acquisitions that broadened its service offerings and geographic presence. In fiscal 1995 and 1996, the Company incurred significant costs to close certain unprofitable and redundant locations. Beginning in late fiscal 1996, PGI began to increase its focus on achieving marketing synergies among its acquired operations. The Company believes that substantial opportunities exist to develop new client relationships and to expand relationships with existing clients by cross-selling the full range of the Company's services, building out its international office network and expanding the Company's multimedia services. A major focus of the Company's growth strategy over the next several years will be the ownership of proprietary exhibitions and special events, both through acquisition and internal development. Exhibitions offer a number of attractive economic characteristics including (i) relatively high gross margins, (ii) attractive cash flow characteristics arising because revenues are prepaid while expenses are generally paid following an exhibition, (iii) stable revenue streams from successful shows that often sell out in advance and (iv) the ability to benefit from utilizing initial marketing costs for a series of exhibitions. PGI acquired its first proprietary exhibition in the first quarter of fiscal 1996 and currently owns 18 trade shows, consumer shows and special events. The Company's ownership of proprietary exhibitions and special events gives it complete decision-making authority over all aspects of an event. Owning and operating these events will permit the Company to capitalize on its vertically-integrated infrastructure, increase recurring revenues, reduce subcontracted costs and more efficiently allocate resources. Ownership of exhibitions allows the Company to replicate successful exhibitions in new locations, to spin off portions of exhibitions into stand-alone exhibitions and to develop new exhibitions in geographic and product markets that are underserved. The Company's headquarters are located at 2200 Wilson Boulevard, Arlington, VA 22201-3324 and its telephone number is (703) 528-8484. RECENT DEVELOPMENTS On January 31, 1997, the Company entered into an agreement (the "ASM Acquisition") to purchase all of the outstanding stock of American Show Management, Inc. ("ASM"). ASM owns and manages regional high-technology exhibitions and is a provider of event management services throughout the U.S. In calendar 1996, ASM produced Information Technology Expositions and Conferences (ITEC) in 22 markets, attracting approximately 2,300 exhibitors and 100,000 attendees. ASM had revenues of approximately $7.4 million for the eleven months ended November 30, 1996. The aggregate purchase price for the ASM Acquisition is $20.0 million in cash, 10,000 shares of Common Stock payable at closing and additional cash purchase price payable contingent upon achieving certain gross margin targets and exceeding operating income targets during calendar years 1997 and 1998. The consummation of the ASM Acquisition is contingent upon the completion of this offering, and the Company plans to use a portion of the proceeds of the offering to complete the ASM Acquisition. See "Company Overview," "Risk Factors--Management of Growth, Growth Through Acquisitions; Contingent Payments," "Use of Proceeds" and "Business--Structure and Integration of Acquisitions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000916079_universal_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000916079_universal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7db482a9db37fbb56f7289ba8ca31faad7ee077f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000916079_universal_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary............................. 4 Risk Factors................................... 14 The Transactions............................... 18 Use of Proceeds................................ 20 The Exchange Offer............................. 20 Capitalization................................. 27 Pro Forma Financial Information................ 28 Selected Consolidated Financial and Operating Data......................................... 35 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 37 Business....................................... 44 Management..................................... 54 Certain Transactions........................... 57 Principal Stockholders......................... 58 Description of Notes........................... 60 Description of Indebtedness and Other Commitments.................................. 83 Certain United States Federal Income Tax Consequences................................. 85 Plan of Distribution........................... 87 Legal Matters.................................. 88 Experts........................................ 88 Index to Financial Statements.................. F-1 </TABLE> [LOGO] UNIVERSAL OUTDOOR, INC. OFFER TO EXCHANGE ITS 9 3/4% SERIES B SENIOR SUBORDINATED EXCHANGE NOTES DUE 2006 FOR ANY AND ALL OF ITS OUTSTANDING 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 --------------------- PROSPECTUS --------------------- March 19, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- <PAGE> PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the various expenses in connection with the offering described in this Registration Statement. All amounts shown are estimates, except the SEC registration fee. <TABLE> <S> <C> Securities and Exchange Commission Registration Fee.............. $ 30,304 Printing and Engraving Expenses.................................. 50,000 Legal Fees and Expenses.......................................... 75,000 Accounting Fees and Expenses..................................... 50,000 Blue Sky Fees and Expenses....................................... 5,000 Exchange Agent Fees and Expenses................................. 15,000 Miscellaneous.................................................... 25,000 --------- $ 250,304 --------- --------- </TABLE> ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Certain provisions of the Illinois Business Corporation Act of 1983, as amended, provide that Universal Outdoor, Inc. ("the Registrant") may, and in some circumstances must, indemnify the directors and officers of the Registrant and of each subsidiary company against liabilities and expenses incurred by such person by reason of the fact that such person was serving in such capacity, subject to certain limitations and conditions set forth in the statute. The By-laws of the Registrant generally provide that the Registrant shall indemnify its officers and directors if such person acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Registrant, and, with respect to any criminal action or proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful. Indemnification shall be provided only upon a determination that such indemnification is proper in the circumstances because the person has met the applicable standard of conduct. Such determination shall be made by the Registrant as authorized by Section 8.75(d) of the Illinois Business Corporation Act of 1983, as amended, or any successor provisions. Expenses may be advanced to the indemnified party upon receipt of an undertaking by, or on behalf of, such person to repay such amounts if it is ultimately determined that he or she is not entitled to be indemnified by the Registrant. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. On December 16, 1996, the Registrant issued and sold to Bear, Stearns & Co., Inc. and BT Securities Corporation (the "Series B Initial Purchasers") $100 million principal amount of 9 3/4% Series B Senior Subordinated Notes due 2006 (sold with a 3% discount to the Series B Initial Purchasers). This sale to the Series B Initial Purchasers was exempt from registration as an exempt private placement under Section 4(2) of the Securities Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ -------------------------------------------------------------------------- <C> <S> 2.1 Plan and Agreement of Merger, dated November 18, 1993, between the Company and Universal Outdoor II, Inc. (filed as Exhibit 2 to the Company's Registration Statement on Form S-1 (Commission File No. 33-72710) and incorporated herein by reference) 2.2* Agreement and Plan of Merger between the Company, Universal Acquisition Corp. and Outdoor Advertising Holdings, Inc. dated August 27, 1996 </TABLE> II-1 <PAGE> <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ -------------------------------------------------------------------------- <C> <S> 2.3* Option and Asset Purchase Agreement between the Company and the Memphis/Tunica Sellers dated September 12, 1996 2.4** Asset Purchase Agreement by and among Mountain Media, Inc., d/b/a Iowa Outdoor Displays, Robert H. Lambert and the Company dated September 12, 1996 2.5* Asset Purchase Agreement between the Company and The Chase Company dated September 11, 1996 2.6** Stock Purchase Agreement, dated as of November 22, 1996, among Revere, the Company and the Stockholders of Revere 2.7** Asset Purchase Agreement, dated as of December 10, 1996, by and among Matthew, Matthew Acquisition Corp. and the Company 3.1 Third Amended and Restated Articles of Incorporation (filed as Exhibit 3.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Commission File No. 333-12427) and incorporated herein by reference) 3.2 Second Amended and Restated Bylaws (filed as Exhibit 3.2 to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Commission File No. 333-12427) and incorporated herein by reference) 4.1** Indenture, dated as of December 16, 1996, between the Company and United States Trust Company of New York, as Trustee 4.2** Purchase Agreement, dated as of December 11, 1996, among the Company and the Initial Purchasers relating to the Old Notes 4.3** Form of New Notes 4.4** Registration Rights Agreement, dated as of December 16, 1996, by and among the Company and the Initial Purchasers 5.1** Opinion of Winston & Strawn 10.1** Consolidated Credit Agreement dated October 31, 1996, among the Company, certain financial institutions, Bankers Trust Company, as Agent and LaSalle National Bank, as Co-Agent 10.2 Agreement Regarding Tax Liabilities and Payments dated as of November 18, 1993 by and between Parent and the Company (filed as Exhibit 10(f) to the Company's Form S-1 Registration Statement (File No. 33-72710) and incorporated herein by reference) 10.3** Indenture, dated as of October 16, 1996 between the Company and United States Trust Company of New York as Trustee 12.1** Computation of Ratios 21.1** Subsidiaries of the Company 23.1 Consent of Price Waterhouse LLP 23.2 Consent of Ernst & Young LLP 23.3 Consent of Ernst & Young LLP 23.4 Consent of Arthur Andersen LLP 23.5 Consent of Winston & Strawn (contained in Exhibit 5.1) 24.1 Power of Attorney (included on Signature Page) 25.1** Statement of eligibility of Trustee on Form T-1 99.1** Form of Letter of Transmittal 99.2** Form of Notice of Guaranteed Delivery </TABLE> II-2 <PAGE> <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ -------------------------------------------------------------------------- <C> <S> 99.3** Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4** Form of Letter from Registered Holders to Clients </TABLE> - ------------------------ * Filed with Amendment No. 2 to Parent's Registration Statement on Form S-1, dated October 9, 1996 (Commission File No. 333-12457) and incorporated herein by reference ** Previously Filed. ITEM 17. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that: Insofar as indemnification of liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 <PAGE> SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on the 19th day of March, 1997. UNIVERSAL OUTDOOR, INC. By: /s/ PAUL G. SIMON * ----------------------------------------- Daniel L. Simon PRESIDENT AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY The undersigned directors and officers of Universal Outdoor, Inc. do hereby constitute and appoint Brian T. Clingen and Paul G. Simon, and each of them, with full power of substitution, our true and lawful attorneys-in-fact and agents to do any and all acts and things in our name and behalf in our capacities as directors and officers, and to execute any and all instruments for us and in our names in the capacities indicated below which such person may deem necessary or advisable to enable Universal Outdoor, Inc. to comply with the Securities Act of 1933 (the "Act"), as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but not limited to, power and authority to sign for us, or any of us, in the capacities indicated below and any and all amendments (including pre-effective and post-effective amendments or any other registration statement filed pursuant to the provisions of Rule 462(b) under the Act) hereto; and we do hereby ratify and confirm all that such person or persons shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Act, this Registration Statement has been signed by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- President and Chief /s/ PAUL G. SIMON * Executive Officer - ------------------------------ (Principal Executive March 19, 1997 Daniel L. Simon Officer) and Director Vice President and Chief /s/ PAUL G. SIMON * Financial Officer - ------------------------------ (Principal Financial and March 19, 1997 Brian T. Clingen Accounting Officer) and Director /s/ PAUL G. SIMON * - ------------------------------ Director March 19, 1997 Michael J. Roche /s/ PAUL G. SIMON * - ------------------------------ Director March 19, 1997 Michael B. Goldberg /s/ PAUL G. SIMON * - ------------------------------ Director March 19, 1997 Frank K. Bynum, Jr. * Paul G. Simon executed for such person pursuant to a Power of Attorney appointing him attorney-in-fact for such person filed with the Commission pursuant to Amendment No. 1 to this Registration Statement. II-4 <PAGE> EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ -------------------------------------------------------------------------- <C> <S> 2.1 Plan and Agreement of Merger, dated November 18, 1993, between the Company and Universal Outdoor II, Inc. (filed as Exhibit 2 to the Company's Registration Statement on Form S-1 (Commission File No. 33-72710) and incorporated herein by reference) 2.2* Agreement and Plan of Merger between the Company, Universal Acquisition Corp. and Outdoor Advertising Holdings, Inc. dated August 27, 1996 2.3* Option and Asset Purchase Agreement between the Company and the Memphis/Tunica Sellers dated September 12, 1996 2.4** Asset Purchase Agreement by and among Mountain Media, Inc., d/b/a Iowa Outdoor Displays, Robert H. Lambert and the Company dated September 12, 1996 2.5* Asset Purchase Agreement between the Company and The Chase Company dated September 11, 1996 2.6** Stock Purchase Agreement, dated as of November 22, 1996, among Revere, the Company and the Stockholders of Revere 2.7** Asset Purchase Agreement, dated as of December 10, 1996, by and among Matthew, Matthew Acquisition Corp. and the Company 3.1 Third Amended and Restated Articles of Incorporation (filed as Exhibit 3.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Commission File No. 333-12427) and incorporated herein by reference) 3.2 Second Amended and Restated Bylaws (filed as Exhibit 3.2 to Amendment No. 2 to the Company's Registration Statement on Form S-1 (Commission File No. 333-12427) and incorporated herein by reference) 4.1** Indenture, dated as of December 16, 1996, between the Company and United States Trust Company of New York, as Trustee 4.2** Purchase Agreement, dated as of December 11, 1996, among the Company and the Initial Purchasers relating to the Old Notes 4.3** Form of New Notes 4.4** Registration Rights Agreement, dated as of December 16, 1996, by and among the Company and the Initial Purchasers 5.1** Opinion of Winston & Strawn 10.1** Consolidated Credit Agreement dated October 31, 1996, among the Company, certain financial institutions, Bankers Trust Company, as Agent and LaSalle National Bank, as Co-Agent 10.2 Agreement Regarding Tax Liabilities and Payments dated as of November 18, 1993 by and between Parent and the Company (filed as Exhibit 10(f) to the Company's Form S-1 Registration Statement (File No. 33-72710) and incorporated herein by reference) 10.3** Indenture, dated as of October 16, 1996 between the Company and United States Trust Company of New York as Trustee 12.1** Computation of Ratios 21.1** Subsidiaries of the Company 23.1 Consent of Price Waterhouse LLP 23.2 Consent of Ernst & Young LLP 23.3 Consent of Ernst & Young LLP 23.4 Consent of Arthur Andersen LLP 23.5 Consent of Winston & Strawn (contained in Exhibit 5.1) 24.1 Power of Attorney (included on Signature Page) </TABLE> <PAGE> <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ -------------------------------------------------------------------------- <C> <S> 25.1** Form of Statement of eligibility of Trustee on Form T-1 99.1** Form of Letter of Transmittal 99.2** Form of Notice of Guaranteed Delivery 99.3** Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4** Form of Letter from Registered Holders to Clients </TABLE> - ------------------------ * Filed with Parent's Registration Statement on Form S-1, dated October 9, 1996 (Commission File No. 333-12457) and incorporated herein by reference ** Previously Filed. </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.1 <SEQUENCE>2 <DESCRIPTION>CONSENT OF PRICE WATERHOUSE <TEXT> <PAGE> EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated February 28, 1997 relating to the consolidated financial statements of Universal Outdoor, Inc. for each of the three years in the period ended December 31, 1996 and our report dated June 14, 1996 relating to the statement of revenue and expenses of Ad-Sign for the year ended December 31, 1995, which appear in such Prospectus. We also consent to the references to us under the headings "Experts" and "Selected Consolidated Financial and Operating Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Consolidated Financial and Operating Data." Price Waterhouse LLP Chicago, Illinois March 18, 1997 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.2 <SEQUENCE>3 <DESCRIPTION>CONSENT OF ERNST & YOUNG LLP <TEXT> <PAGE> EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated July 21, 1995 with respect to the consolidated financial statements of NOA Holding Company included in this Registration Statement of Universal Outdoor, Inc. for the exchange of $100,000,000 of 9 3/4% Series B Senior Subordinated Notes due 2006 for $100,000,000 of 9 3/4% Series B Senior Subordinated Exchange Notes due 2006, of our report dated July 21, 1995. Ernst & Young LLP Minneapolis, Minnesota March 18, 1997 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.3 <SEQUENCE>4 <DESCRIPTION>CONSENT OF ERNST & YOUNG LLP <TEXT> <PAGE> EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 1, 1996, except for Note 16 as to which the date is August 27, 1996, with respect to the financial statements of POA Acquisition Corporation included in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-21717) and the related Prospectus of Universal Outdoor, Inc. for the registration of $100,000,000 of 9 3/4% Series B Senior Subordinated Exchange Notes due 2006. Ernst & Young LLP March 18, 1997 Orlando, Florida </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.4 <SEQUENCE>5 <DESCRIPTION>CONSENT OF ARTHUR ANDERSEN <TEXT> <PAGE> EXHIBIT 23.4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this registation statement. Arthur Andersen LLP Baltimore, Maryland, March 17, 1997 </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000916502_total_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000916502_total_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c329c90d4da83cdf0ff1f329e4eac31f7b725eed
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000916502_total_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATED TO THE PURCHASE OF COMMON STOCK OF THE COMPANY. SEE "RISK FACTORS." THE COMPANY Total Control designs, develops and markets products and technology for the control segment of the industrial automation market. The Company's broad range of products are used to define, monitor and maintain the operation, sequencing and safety of industrial equipment and machinery on the factory floor. These products range from closed architecture programmable logic controller ("PLC") operator interfaces to open architecture control software and systems, and are sold primarily through an international network of independent distributors with over 200 sales locations. End-users of the Company's products, none of which individually account for a material portion of its overall sales, include Abbott Laboratories, The Boeing Company, The Coca-Cola Company, The Dow Chemical Company, Eastman Kodak Company, Ford Motor Company, General Motors Corporation, Nabisco, Inc. and USX Corporation. The market for control segment products has been dominated by large manufacturers selling proprietary products. These proprietary products have many inherent limitations including fixed, vendor-defined functionality, closed architectures and limited networking capabilities, all of which result in a high cost of ownership. The Company believes that a migration is occurring gradually in this marketplace towards open systems-based products. Open systems allow manufacturers to benefit from standard networking protocols, intuitive graphical user interfaces, enhanced application software functionality and the continued cost reductions and performance increases associated with standards-based products. Furthermore, the availability of a standardized, easy-to-support operating system, such as Windows NT, allows industrial automation products to be based upon an open architecture platform with widespread market acceptance. To serve the diverse needs of this marketplace, the Company offers a broad range of control segment products. The Company's principal product line, QuickPanel and similar products, has gained a leadership position in the operator interface market and accounted for over 62% of the Company's net sales in the nine months ending December 31, 1996. The Company believes that this product line delivers price/performance leadership and has allowed the Company to gain greater visibility and an enhanced reputation both with its independent distributors and with end-users. The Company is beginning to invest substantial resources in developing future generations of the QuickPanel product line aimed at giving it the functionality of an open standards, interoperable network computer. The Company believes that industrial automation products for the control segment are best marketed and sold through independent distributors. The Company seeks to establish and maintain relationships with the leading industrial automation distributors in each of the geographic areas in which it competes. The Company's strategy for growth includes expanding its network of distributors as well as continuing to develop products that, from price, performance and support perspectives, satisfy the selling requirements of its distributors. The industrial automation marketplace continues to be highly competitive and fragmented and the Company believes that opportunities exist to acquire companies, assets and product lines which will allow it to expand its product portfolio and to leverage its operating infrastructure and distributor network. In September 1996, the Company acquired a controlling interest in Taylor Industrial Software Inc. ("Taylor"), a developer of PC-control software, client/server program management software, graphical operator interface software and PLC configuration and support software (the "Taylor Transaction"). In January 1996, the Company acquired Cincinnati Dynacomp, Inc. ("Cincinnati"), a manufacturer of lower-end operator interface products (the "Cincinnati Transaction"). The Company believes that its broad product line, its international network of independent distributors and its substantial base of end-users position it to become a leading worldwide provider of products in the control segment of the industrial automation market. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company.................................................. 1,650,000 shares The Selling Shareholders..................................... 350,000 shares Common Stock to be outstanding after the offering.............. 7,653,576 shares(1) Use of proceeds................................................ For repayment of certain indebtedness, including indebtedness owed to certain officers, directors and existing shareholders of the Company. Nasdaq National Market symbol.................................. TCPS </TABLE> - ------------------ (1) Excludes 965,974 shares of Common Stock reserved for issuance under the Company's stock option plans, of which 295,974 shares were subject to outstanding options as of January 31, 1997 at a weighted average exercise price of $2.85 per share and 297,850 shares will be subject to options to be granted immediately after the effectiveness of this offering at an exercise price equal to the initial public offering price per share in this offering, and 250,000 shares of Common Stock reserved for issuance under the Company's discount stock purchase plan. See "Management -- Stock Compensation Plans." SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> NINE MONTHS YEAR ENDED MARCH 31, ENDED DECEMBER 31, ---------------------------------------------- ----------------------------------- PRO FORMA PRO FORMA AS ADJUSTED AS ADJUSTED 1994 1995 1996 1996(1) 1995 1996 1996(1) --------- --------- --------- ------------- --------- --------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales................................. $ 11,723 $ 17,063 $ 25,743 $ 39,553 $ 17,645 $ 28,814 $ 31,851 Cost of goods sold........................ 6,304 9,689 15,370 21,718 10,588 15,199 15,510 --------- --------- --------- ------------- --------- --------- ------------- Gross profit.............................. 5,419 7,374 10,373 17,835 7,057 13,615 16,341 Operating expenses: Sales and marketing..................... 2,904 3,486 4,989 8,093 3,398 6,184 7,416 Research and development................ 1,188 1,517 1,952 4,245 1,367 2,591 3,275 General and administrative.............. 1,167 1,238 1,601 4,440 997 2,912 4,303 Change in estimated useful life of software development costs............ 466 -- -- -- -- -- -- Charge for purchased research and development........................... -- -- -- -- -- 4,893 -- --------- --------- --------- ------------- --------- --------- ------------- Income (loss) from operations............. (306) 1,133 1,831 1,057 1,295 (2,965) 1,347 Interest (expense) and other income, net..................................... (96) (164) (169) (72) (59) (387) 48 --------- --------- --------- ------------- --------- --------- ------------- Income (loss) before income taxes and minority interest....................... (402) 969 1,662 985 1,236 (3,352) 1,395 Provision for (benefit from) income taxes................................... (155) 247 665 548 494 599 696 --------- --------- --------- ------------- --------- --------- ------------- Income (loss) before minority interest.... (247) 722 997 437 742 (3,951) 699 Minority interest in loss of subsidiary... -- -- -- 245 -- 1,852 190 --------- --------- --------- ------------- --------- --------- ------------- Net income (loss)......................... (247) 722 997 682 742 (2,099) 889 Accretion to redemption value of common stock................................... (76) (208) (1,606) -- (1,446) (9,061) -- --------- --------- --------- ------------- --------- --------- ------------- Net income (loss) available to common shareholders............................ $ (323) $ 514 $ (609) $ 682 $ (704) $ (11,160) $ 889 --------- --------- --------- ------------- --------- --------- ------------- --------- --------- --------- ------------- --------- --------- ------------- Net income (loss) per share available to shareholders(2)......................... $ (0.07) $ 0.09 $ (0.11) $ (0.12) $ (1.97) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Weighted average number of common and common equivalent shares outstanding(2).......................... 4,343 5,972 5,633 5,633 5,679 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Pro forma net income (loss)(3)............ $ 1,006 $ (2,093) --------- --------- --------- --------- Pro forma net income (loss) per share(4)................................ $ 0.16 $ (0.35) --------- --------- --------- --------- Pro forma weighted average number of common and common equivalent shares outstanding(4).......................... 6,107 6,041 --------- --------- --------- --------- Pro forma as adjusted net income per share(5)................................ $ 0.09 $ 0.11 ------------- ------------- ------------- ------------- Pro forma as adjusted weighted average number of common and common equivalent shares outstanding(5)................... 7,819 7,797 ------------- ------------- ------------- ------------- </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------------------------------- PRO FORMA AS ACTUAL PRO FORMA(6) ADJUSTED(6)(7) --------------- --------------- --------------- (IN THOUSANDS) <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents...................................... $ 703 $ 703 $ 703 Working capital................................................ 5,870 4,260 10,249 Total assets................................................... 31,480 31,480 31,215 Long-term debt, net of current maturities...................... 9,414 7,414 292 Redeemable common stock........................................ 17,272 -- -- Shareholders' equity (deficit)................................. (9,249) 8,413 21,524 </TABLE> - ------------------ (1) Gives effect to the following transactions as if they had occurred at the beginning of fiscal 1996, as further described in the introduction and Notes to the Unaudited Pro Forma As Adjusted Condensed Consolidated Financial Statements included elsewhere in this Prospectus: (i) the Cincinnati Transaction and Taylor Transaction and the related purchase accounting effects; and (ii) the sale by the Company of 1,650,000 shares of Common Stock offered by it hereby, and the application of the estimated net proceeds thereof to repay certain indebtedness as described under "Use of Proceeds," and the elimination of the accretion to redemption value of common stock resulting from the Put Elimination. See "Pro Forma Combined"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000916709_united_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000916709_united_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..545a668ba467b86acaa13e8eca1cd267094effc2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000916709_united_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN A COMPLETE STATEMENT OF SUCH INFORMATION OR OF ALL MATERIAL FEATURES OF THE PROPOSED OFFERING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN CONJUNCTION WITH, THE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED HEREIN. THE COMPANY United Community Bancshares, Inc. ("United" or the "Company"), a bank holding company with $442 million in assets as of September 30, 1996, operates Signal Bank, Inc. ("Signal Bank") and The Goodhue County National Bank ("Goodhue Bank") (collectively, Signal Bank and Goodhue Bank are referred to as the "Banks"). Signal Bank is a state-chartered bank with offices in Eagan, Savage and West St. Paul, Minnesota. Goodhue Bank is a national bank with offices in Red Wing, Lanesboro and Rushford, Minnesota. In addition to the Banks, United also operates Consumers Credit Corporation ("CCC"), a consumer finance company with offices in Hastings, Northfield, Red Wing and West St. Paul, Minnesota. COMMUNITY BANKING PHILOSOPHY. United's operating strategy for the Banks has emphasized relationship banking for owner-operated small-to-medium-sized businesses, nonprofit organizations, professionals and consumers in market areas surrounding the Banks' offices. Management of each Bank believes that a significant number of its commercial customers prefer to bank with locally managed institutions which provide a full-service banking relationship covering the customer's commercial banking business and the personal needs of its management and employees. United provides its Banks with the advantages of affiliation with a multi-bank holding company, including services such as data processing services, credit policy formulation, accounting services, investment portfolio management and specialized staff support while generally granting substantial autonomy to management of the Banks with respect to the day-to-day operations and customer service decisions. The Company believes this autonomy allows the Banks to better serve customers in their respective communities and thereby enhances the Banks' business opportunities and operations. The Company also maintains local bank charters and boards of directors, as well as encourages all of its personnel to become active in community groups and projects. ACQUISITION OF PARK BANK. United has entered into a Merger Agreement, dated October 7, 1996 (the "Merger Agreement") with Park Financial Corporation ("PFC"), a privately-held bank holding company which owns Park National Bank ("Park Bank"), a national bank with assets of approximately $203 million as of September 30, 1996 (the "Park Acquisition"). Park Bank operates its principal office in St. Louis Park, Minnesota and a branch in New Hope, Minnesota. Park Bank provides a wide range of commercial and consumer services primarily to owner-operated small-to-medium-sized businesses, professionals and consumers principally in the western and northwestern portions of the seven-county Minneapolis-St. Paul metropolitan area. The cash purchase price of approximately $46 million will be obtained from the proceeds of this Offering, together with the proceeds from the concurrent sale of United's common stock in the approximate minimum amount of $5 million (net of estimated offering expenses), a loan from Firstar Bank Milwaukee, N.A. in the approximate amount of $24 million and cash on hand of approximately $7 million. The actual purchase price (estimated as of September 30, 1996 to be approximately $46 million) is based on the November 30, 1996 book value of PFC plus a premium plus a fixed daily accrual representing earnings from November 30, 1996 through the closing date of the Park Acquisition. As of the date of this Prospectus, all conditions precedent to the consummation of the Park Acquisition have been satisfied or waived, with the only remaining condition being the consummation of the sale of the Preferred Securities offered hereby. The Park Acquisition will be accounted for under the purchase method of accounting and will close concurrently with this Offering. See "Acquisition of Park." GROWTH STRATEGIES. United's strategy is to continue to grow by acquiring other financial institutions and financial service providers, expanding existing bank and consumer finance businesses internally, and pursuing other financial service opportunities. United's acquisition strategy is to identify banks with at least $50 million in assets in Minnesota and Wisconsin communities within a 100 mile radius of the Minneapolis- St. Paul metropolitan area. The Company does not have any pending arrangements, agreements or understandings regarding acquisitions other than the Park Acquisition. In assessing acquisitions, United focuses on credit quality, past performance of the bank, management strengths and weaknesses, location, community demographics, relative health of the local economy, organizational structure of the bank and consideration for and terms of the acquisition. Management believes there are a number of community banks which meet United's criteria and whose owners would be interested in selling their banks to a community-based organization like United. United will continue to expand its current business operations by identifying products or services which have been successful in one or more of its offices and expanding these products or services to other offices. For example, Signal Bank is a "preferred lender" with the Small Business Administration ("SBA"), and its expertise in making SBA loans will be utilized by other United subsidiary banks. Similarly, Goodhue Bank's lease financing experience will allow the United subsidiary banks to participate in more equipment financing transactions. In addition, United's strategy is to grow CCC's loan portfolio by building CCC's indirect and direct consumer finance business and by the acquisition or start-up of new offices. The Company is a Minnesota corporation and its principal executive offices are located at 2600 Eagan Woods Drive, Suite 155, Eagan, Minnesota 55121, and its telephone number is (612) 552-2828. United was formed on January 1, 1994 through the merger of Goodhue County Financial Corporation ("Goodhue"), the former holding company for Goodhue Bank, into Signal Bancshares, Inc. ("Signal"), the former holding company for Signal Bank. Upon consummation of the merger, the name of the Company was changed to United Community Bancshares, Inc. References to United or the Company means United and its subsidiaries unless the context otherwise requires. UNITED CAPITAL In connection with the Park Acquisition discussed herein, the Company must raise equity which will be considered "Tier 1" capital in order to have sufficient regulatory capital to consummate the Park Acquisition. "Tier 1" capital is generally defined as (i) the sum of common shareholders' equity, qualifying perpetual preferred stock (subject to certain limitations) and minority interests in the equity accounts of consolidated subsidiaries, less (ii) goodwill and other intangibles. On October 21, 1996, the Federal Reserve Board approved the use of certain cumulative preferred instruments in Tier 1 capital as minority interest in the equity accounts of consolidated subsidiaries. Typically, these preferred instruments are sold by a trust wholly- owned by a corporation, and the proceeds from the sale of preferred instruments are used by the trust to purchase the corporation's subordinated debt. The corporation's interest payments on the subordinated debentures are used by the trust to make the dividend payments on the preferred instruments. A significant benefit of this structure is the corporation's ability to deduct for federal income tax purposes the interest paid to the trust on the subordinated debentures. To take advantage of this new Federal Reserve Board approval, and to be able to deduct the interest on the subordinated debentures, the Company created United Capital Trust I ("United Capital"). United Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement executed by the Company, as Depositor, Wilmington Trust Company, as Property Trustee and as Delaware Trustee, and the Administrative Trustees named therein ("Trust Agreement"), and (ii) the filing of a certificate of trust with the Delaware Secretary of State on December 6 , 1996. United Capital's business and affairs are conducted by its Property Trustee, Delaware Trustee, and three individual Administrative Trustees who are officers of the Company. United Capital exists for the exclusive purposes of (i) issuing and selling the Preferred Securities and Common Securities, (ii) using the proceeds from the sale of Preferred Securities and Common Securities to acquire Junior Subordinated Debentures issued by the Company and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Preferred Securities). Accordingly, the Junior Subordinated Debentures will be the sole assets of United Capital, and payments under the Junior Subordinated Debentures will be the sole revenue of United Capital. All of the Common Securities will be owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of the Company as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Preferred Securities. See "Description of Preferred Securities -- Subordination of Common Securities." The Company will acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of United Capital. United Capital has a term of 54 years, but may terminate earlier as provided in the Trust Agreement. The principal executive office of United Capital is located at 2600 Eagan Woods Drive, Suite 155, Eagan, Minnesota 55121, and its telephone number is (612) 552-2828. THE OFFERING <TABLE> <S> <C> Preferred Securities issuer....... United Capital. Securities offered................ 440,000 Preferred Securities. The Preferred Securities represent undivided beneficial interests in United Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. Distributions..................... The distributions payable on each Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Preferred Security, will be cumulative, will accrue from the date of issuance of the Preferred Securities, and will be payable quarterly in arrears, on the last day of March, June, September and December in each year, commencing March 31, 1997. See "Description of Preferred Securities -- Distributions." Option to extend interest payment period........................... The Company has the right, at any time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters; provided, that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a consequence of the Company's extension of the interest payment period, quarterly Distributions on the Preferred Securities would be deferred (though such Distributions would continue to accrue with interest thereon compounded quarterly, since interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law) during any such Extension Period. During an Extension Period, the Company will be prohibited, subject to certain exceptions described herein, from declaring or paying any cash distributions with respect to its capital stock or debt securities that rank pari passu with or junior to the Junior Subordinated Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the foregoing requirements. See "Description of Junior Subordinated Debentures -- Option to Extend Interest Payment Period." Should an Extension Period occur, Preferred Security holders will continue to recognize interest income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences -- Potential Extension of Interest Payment Period and Original Issue Discount." </TABLE> <TABLE> <S> <C> Redemption........................ Subject to Federal Reserve approval, if then required under applicable capital guidelines or policies of the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to maturity at the option of the Company (1) on or after January 15, 2002, in whole at any time or in part from time to time, or (2) at any time, in whole (but not in part), upon the occurrence and during the continuance of a Tax Event or an Investment Company Event, in each case at the redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. The Preferred Securities are subject to mandatory redemption, upon repayment of the Junior Subordinated Debentures at maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate liquidation preference of the Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. See "Description of Junior Subordinated Debentures -- Redemption." Distribution of Junior Subordinated Debentures.......... The Company has the right at any time to terminate the Preferred Securities and cause the Junior Subordinated Debentures to be distributed to holders of Preferred Securities in liquidation of United Capital, subject to the Company having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of Preferred Securities -- Redemption." Guaranty.......................... Under the terms of its Guaranty, the Company has guaranteed the payment of Distributions and payments on liquidation or redemption of the Preferred Securities, but only in each case to the extent of funds held by United Capital, as described herein. The Company has, through the Guaranty, Trust Agreement, Junior Subordinated Debentures, Indenture, and Expense Agreement, taken together, fully, irrevocably and unconditionally guaranteed all of United Capital's obligations under the Preferred Securities. The obligations of the Company under the Guaranty and the Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness. See "Description of Guaranty." Ranking........................... The Preferred Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities except as described under "Description of Preferred Securities -- Subordination of Common Securities." The Junior Subordinated Debentures will be unsecured and subordinate and junior in right of payment to all Senior Indebtedness to the extent and in the manner set forth in the Indenture. See "Description of Junior Subordinated Debentures." The Guaranty will constitute an unsecured obligation of the Company and will rank subordinate </TABLE> <TABLE> <S> <C> and junior in right of payment to all Senior Indebtedness to the extent and in the manner set forth in the Guaranty Agreement. See "Description of Guaranty." Voting rights..................... Generally, the holders of the Preferred Securities will not have any voting rights. See "Description of Preferred Securities -- Voting Rights; Amendment of Trust Agreement." Listing........................... United does not intend to list the Preferred Securities on any securities exchange or include it for quotation on the Nasdaq National Market or any other quotation system. See "Risk Factors -- Limited Public Market" and "Underwriting." Use of proceeds................... The proceeds from the sale of the Preferred Securities offered hereby will be used by United Capital to purchase the Junior Subordinated Debentures issued by the Company. The net proceeds to the Company from the sale of the Junior Subordinated Debentures will be used to provide a portion of the financing for the Park Acquisition and to increase the Company's qualifying "Tier 1" capital in order for the Company to have sufficient capital to consummate the Park Acquisition. See "Use of Proceeds." Risk factors...................... Prospective investors should consider certain risk factors in connection with the purchase of the Preferred Securities offered hereby. See "Risk Factors." Underwriting...................... Piper Jaffray Inc. (the "Underwriter"), has agreed, subject to the terms and conditions of a Purchase Agreement to be entered into by the Underwriter, United and United Capital, to purchase from United Capital 440,000 Preferred Securities. The Underwriter is committed to purchase and pay for all such Preferred Securities if any are purchased. See "Underwriting." </TABLE> SUMMARY FINANCIAL DATA The summary financial information presented below reflects certain financial information of United on an historical basis as of and for the periods indicated and on an unaudited pro forma basis (i) as of and for the year ended December 31, 1993 taking into account the merger of Goodhue and Signal, which was accounted for using the purchase method of accounting effective January 1, 1994, as if such transaction had occurred on January 1, 1993, (ii) as of and for the nine months ended September 30, 1996 giving effect to the Park Acquisition (including related equity and debt financing transactions), which will be consummated concurrently with the closing of this Offering and will be accounted for using the purchase method of accounting, as if such transaction had occurred on January 1, 1996, and (iii) as of and for the nine months ended September 30, 1995 and the year ended December 31, 1995 giving effect to the Park Acquisition (including related equity and debt financing transactions), which will be consummated concurrently with the closing of this Offering and will be accounted for using the purchase method of accounting, as if such transaction had occurred on January 1, 1995. This data should be read in conjunction with each of United's and PFC's Consolidated Financial Statements and related notes included herein and in conjunction with the unaudited Pro Forma Combined Financial Statements and related notes included herein. See "Index to Financial Information," "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> <CAPTION> AS OF AND FOR THE AS OF AND FOR THE NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, -------------------- --------------------------------- 1996 1995 1995 1994 1993(1) --------- --------- --------- --------- ----------- (PRO FORMA) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> UNITED OPERATING DATA Interest income.......................................... $ 25,001 $ 22,919 $ 31,206 $ 25,516 $ 23,930 Interest expense......................................... 10,445 9,397 12,848 9,159 9,035 --------- --------- --------- --------- ----------- Net interest income...................................... 14,556 13,522 18,358 16,357 14,895 Provision for loan and lease losses...................... 146 41 61 234 605 --------- --------- --------- --------- ----------- Net interest income after provision for loan and lease losses.................................................. 14,410 13,481 18,297 16,123 14,290 Noninterest income....................................... 3,448 2,886 3,919 3,837 3,947 Noninterest expense...................................... 12,775 12,147 16,531 16,131 14,995 --------- --------- --------- --------- ----------- Income before income taxes and cumulative effect of change in accounting principle.......................... 5,083 4,220 5,685 3,829 3,242 Income tax expense....................................... 1,678 1,249 2,056 1,396 1,138 --------- --------- --------- --------- ----------- Income before cumulative effect of change in accounting principle............................................... 3,405 2,971 3,629 2,433 2,104 Cumulative effect of change in accounting principle (2)..................................................... -- -- -- -- 181 --------- --------- --------- --------- ----------- Net income............................................... $ 3,405 $ 2,971 $ 3,629 $ 2,433 $ 2,285 --------- --------- --------- --------- ----------- --------- --------- --------- --------- ----------- Income per common share before cumulative effect of change in accounting principle.......................... $ 6.20 $ 5.82 $ 6.97 $ 4.82 $ 4.17 Cumulative effect of change in accounting principle...... -- -- -- -- .36 --------- --------- --------- --------- ----------- Net income per common share.............................. $ 6.20 $ 5.82 $ 6.97 $ 4.82 $ 4.53 --------- --------- --------- --------- ----------- --------- --------- --------- --------- ----------- Weighted average common shares outstanding............... 549,079 510,770 520,306 504,686 505,084 --------- --------- --------- --------- ----------- --------- --------- --------- --------- ----------- BALANCE SHEET DATA Total assets............................................. $ 441,850 $ 411,431 $ 421,841 $ 383,984 $ 347,687 Net loans and leases..................................... 277,345 257,376 263,006 244,125 217,317 Investment securities.................................... 103,453 98,896 101,837 83,434 82,610 Deposits................................................. 351,825 325,027 340,723 312,947 291,590 Securities sold under repurchase agreements.............. 27,556 27,966 23,173 27,747 15,321 Notes payable and other borrowings....................... 16,709 16,813 15,762 12,412 10,549 Total stockholders' equity............................... 39,880 35,751 36,969 27,525 26,745 KEY RATIOS Return on average assets (3)(4).......................... 1.06% 1.01% 0.91% 0.68% 0.61% Return on average equity (3)(4).......................... 12.33 13.57 11.65 9.22 8.22 Average stockholders' equity to average assets........... 8.59 7.45 7.79 7.34 7.48 Net interest margin (3).................................. 5.03 5.10 5.13 5.12 5.01 Operating efficiency ratio............................... 70.96 74.03 74.21 79.88 79.58 Nonperforming loans/total loans and leases............... .43 .41 0.28 0.27 0.64 Allowance for loan and lease losses/total loans and leases.................................................. 1.02 1.12 1.09 1.16 1.24 Allowance for loan and lease losses/nonperforming loans and leases.............................................. 239.80 269.94 385.51 423.74 192.99 Common stock dividend payout ratio (5)................... 0.00 0.00 0.00 0.00 10.37 Ratio of earnings to fixed charges: (6) Including interest on deposits......................... 1.48x 1.45x 1.44x 1.42x 1.36x Excluding interest on deposits......................... 3.83x 3.31x 3.28x 3.27x 3.94x </TABLE> <TABLE> <CAPTION> AS OF AND FOR AS OF AND FOR THE THE NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, -------------------- ---------------- 1996 1995 1995 --------- --------- ---------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> PRO FORMA OPERATING DATA Interest income........................................................ $ 36,615 $ 33,685 $ 45,818 Interest expense....................................................... 16,229 14,788 20,207 --------- --------- -------- Net interest income.................................................... 20,386 18,897 25,611 Provision for loan and lease losses.................................... 475 581 781 --------- --------- -------- Net interest income after provision for loan and lease losses.......... 19,911 18,316 24,830 Noninterest income..................................................... 4,686 4,146 5,578 Noninterest expense.................................................... 18,433 17,905 24,255 --------- --------- -------- Income before income taxes and minority interest in preferred securities dividends of subsidiary.................................... 6,164 4,557 6,153 Income tax expense..................................................... 2,481 1,752 2,747 Minority interest in preferred securities dividends of subsidiary...... (617) (617) (823) --------- --------- -------- Net income............................................................. $ 3,066 $ 2,188 $ 2,583 --------- --------- -------- --------- --------- -------- Net income per common share............................................ $ 5.14 $ 3.92 $ 4.55 --------- --------- -------- --------- --------- -------- Weighted average common shares outstanding............................. 596,239 557,930 567,466 --------- --------- -------- --------- --------- -------- BALANCE SHEET DATA Total assets........................................................... $ 665,425 $ 621,228 $ 639,153 Net loans and leases................................................... 391,877 368,172 372,868 Investment securities.................................................. 171,722 157,852 162,882 Deposits............................................................... 516,791 481,361 506,477 Securities sold under repurchase agreements............................ 45,067 40,440 33,839 Notes payable and other borrowings..................................... 40,709 40,813 39,762 Total stockholders' equity............................................. 44,849 40,720 41,938 KEY RATIOS Return on average assets (3)........................................... 0.64% 0.50% 0.43% Return on average equity (3)........................................... 9.55 7.96 6.94 Average stockholders' equity to average assets......................... 6.65 6.26 6.17 Net interest margin (3)................................................ 4.87 4.91 4.86 Operating efficiency ratio............................................. 73.52 77.70 77.77 Nonperforming loans/total loans and leases............................. .66 1.22 0.53 Allowance for loan and lease losses/total loans and leases............. 1.25 1.37 1.40 Allowance for loan and lease losses/nonperforming loans and leases..... 189.12 112.22 264.26 Common stock dividend payout ratio (5)................................. 0.00 0.00 0.00 Ratio of earnings to fixed charges: (6) Including interest on deposits....................................... 1.38x 1.30x 1.30x Excluding interest on deposits....................................... 2.67x 2.28x 2.26x </TABLE> - ------------------------------ (1) Combines the results of operations and financial condition of Signal and Goodhue. (2) Cumulative effect of change in accounting principle in 1993 represents the adoption of Statement of Financial Accounting Standard ("SFAS") No. 109 Accounting for Income Taxes. (3) Annualized for the nine months ended September 30, 1996 and 1995. (4) Computed using income before cumulative effect of change in accounting principle. (5) Dividends per common share divided by net income per common share. (6) For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of earnings before income taxes and fixed charges. Fixed charges consist of one-third rent expense and interest expense.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000917062_visigenic_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000917062_visigenic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..06a4da3fca65fbe78d5e3b60a0805ac16985e020
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000917062_visigenic_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. See "Risk Factors" for a discussion of certain factors to be considered by prospective investors. THE COMPANY Visigenic Software, Inc. ("Visigenic" or the "Company") is a leading independent provider of software tools for database access and distributed object technologies for the Internet, Intranet and enterprise computing environments. The Company's standards-based products facilitate the development, deployment and management of distributed business applications by providing database-independent access to leading databases and the communication framework for distributed object applications. In today's increasingly complex computing environment, enterprises require flexible access to data and applications, regardless of whether the data and applications are located at the central office, a remote office or across the Internet. Enterprise computing environments are increasingly using multiple database management systems ("DBMSs"), operating systems, networks and hardware platforms and relying on object-oriented technologies to develop and deploy distributed business applications for these heterogeneous environments. The rapid growth of the Internet and Intranets, both of which are heterogeneous distributed computing environments, is accelerating the need for tools to develop, deploy and manage distributed business applications. Visigenic provides key software components that enable developers and information technology ("IT") professionals to develop, deploy and manage distributed business applications. The Company believes business applications increasingly will be comprised of objects, Java applets and databases that are distributed on networks. The Company's products enable the enterprise to adapt its application architecture to meet changing business and computing requirements by simplifying the development and deployment of distributed database and object-oriented applications. Visigenic's products support existing and emerging industry standards, making the Company's solutions open, flexible and interoperable across multiple operating environments. The Company believes that its products are especially well suited for large, distributed computing environments such as the Internet and Intranets. The Company's strategy is to become the premier provider of software tools which enable developers and IT professionals to develop, deploy and manage distributed business applications. Visigenic supports and contributes to the enhancement of open industry standards through active participation in several standards setting organizations. The Company intends to continue to develop strategic relationships with leading technology companies to promote the widespread acceptance and distribution of Visigenic products. Visigenic has established strategic relationships with Cisco, Hitachi, Microsoft, Netscape, Oracle and Platinum technology. Additionally, the Company intends to leverage its products and expertise to continue to exploit the opportunities of the Internet and Intranets. The Company markets and sells its software through its direct sales and telesales forces, independent software vendors ("ISVs"), value added resellers ("VARs"), international distributors and on-line Internet sales in North America, Europe and Asia. The Company's customers include Borland, Cisco, Compuware, Healtheon, Hewlett-Packard, Hitachi, Microsoft, Netscape, Oracle, Platinum technology and Software AG. The Company was incorporated in February 1993. The Company's principal executive offices are located at 951 Mariner's Island Boulevard, Suite 120, San Mateo, California, 94404. Its telephone number is (415) 286-1900. Its email address is info@visigenic.com and its Web site is located at www.visigenic.com. Information contained on the Company's Web site shall not be deemed to be a part of this Prospectus. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.................... 1,180,000 shares Common Stock offered by the Selling Stockholders....... 820,000 shares Common Stock to be outstanding after the offering...... 13,895,390 shares (1) Use of proceeds........................................ General corporate purposes, including working capital Nasdaq National Market symbol.......................... VSGN </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED MARCH 31, NINE MONTHS ENDED DECEMBER 31, --------------------------------------- ------------------------------------- 1996 1996 --------------------- -------------------------- PRO FORMA PRO FORMA 1994 1995 ACTUAL COMBINED (2) 1995 ACTUAL COMBINED (2) ------- ------- ------- ------------ --------- ---------- -------------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenue................. $ -- $ 1,115 $ 5,575 $ 6,577 $ 3,305 $ 11,534 $ 11,666 Gross profit............ -- 820 4,564 5,303 2,567 9,705 9,761 Loss from operations.... (2,496) (4,723) (4,464) (6,422) (3,743) (18,461) (18,697) Net loss................ $(2,454) $(4,629) $(4,379) $(6,337) $ (3,666) $ (18,271) $ (18,507) Pro forma net loss per share (3).............. -- -- $ (0.40) $ (0.57) $ (0.33) $ (1.51) $ (1.52) Pro forma weighted average common and common equivalent shares (3)............. -- -- 11,064 11,064 11,008 12,141 12,141 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 --------------------------- ACTUAL AS ADJUSTED (4) ------- --------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents........................... $ 9,064 $24,093 Working capital..................................... 11,286 26,315 Total assets........................................ 19,921 34,950 Stockholders' equity................................ 15,296 30,325 </TABLE> - -------------- (1) Excludes 3,351,736 shares of Common Stock reserved for issuance under the Company's stock plans, of which 2,321,735 shares of Common Stock are issuable upon exercise of options outstanding as of December 31, 1996 at a weighted average exercise price of $5.69 per share. See "Capitalization," "Management--Stock Plans" and Note 6 of Notes to Consolidated Financial Statements of Visigenic. (2) The Pro Forma Combined Statement of Operations data gives effect to the May 1996 acquisition of PostModern Computing Technologies Inc. as if it had occurred on April 1, 1995. The acquisition was accounted for as a purchase and resulted in the write-off of approximately $12.0 million of in process product development in the quarter ended June 30, 1996. The Pro Forma Combined Statement of Operations data for the year ended March 31, 1996 does not give effect to this write-off. See Note 9 of Notes to Consolidated Financial Statements of Visigenic and Pro Forma Condensed Combined Financial Statements. (3) See Note 2 of Notes to Consolidated Financial Statements of Visigenic for an explanation of the method used to determine the number of shares used to compute per share amounts. (4) Adjusted to reflect the sale of 1,180,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $14.00 and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization." ---------------- Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' overallotment option. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000917193_kaynar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000917193_kaynar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f7d16b941113cfb8e578b3dae115ba43dee3bc05
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000917193_kaynar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, AND NOTES THERETO, APPEARING ELSEWHERE IN THE PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THE PROSPECTUS (I) ASSUMES THAT IMMEDIATELY PRIOR TO THE OFFERING, KAYNAR TECHNOLOGIES INC. (THE "OPERATING COMPANY") WILL BE MERGED WITH AND INTO ITS PARENT, KAYNAR HOLDINGS INC. (SOMETIMES REFERRED TO HEREIN AS "HOLDINGS"), WHICH, AS THE CORPORATION SURVIVING THE MERGER, WILL BE RENAMED KAYNAR TECHNOLOGIES INC. (SEE "THE REORGANIZATION" FOR MORE INFORMATION REGARDING THE MERGER), (II) REFLECTS THE CONVERSION OF ALL OUTSTANDING SHARES OF HOLDINGS' CAPITAL STOCK INTO ADDITIONAL SHARES OF COMMON STOCK OR SHARES OF SERIES C PREFERRED STOCK AS DESCRIBED IN "THE REORGANIZATION" AND (III) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. UNLESS OTHERWISE INDICATED, THE TERM "COMPANY" AS USED HEREIN SHALL MEAN HOLDINGS, AS THE CORPORATION SURVIVING THE MERGER, TOGETHER WITH EACH OF HOLDINGS' CONSOLIDATED SUBSIDIARIES. THE COMPANY The Company is a leading manufacturer of specialty fasteners, fastening systems and related components primarily used by original equipment manufacturers ("OEMs") and their subcontractors in the production of commercial aircraft and defense products. In addition, the Company also manufactures other specialty fasteners and related products for sale in the automotive, electronic and other industrial markets, and their associated after-markets. The Company designs and manufactures a substantial majority of its fasteners to its customers' specifications and in a wide range of specialty metals, alloys and composites. The Company supplies products to virtually all major airframe and aircraft engine OEMs, including Boeing Co. ("Boeing"), General Electric Company ("GE"), the Pratt & Whitney Aircraft business of United Technologies Corporation ("Pratt & Whitney"), Airbus Industries ("Airbus"), Lockheed Martin Corporation ("Lockheed Martin"), McDonnell Douglas Corporation ("McDonnell Douglas") and Rolls Royce PLC ("Rolls Royce"), as well as to a global network of distributors. Direct sales to Boeing, GE and Pratt & Whitney, the Company's three largest OEM customers, accounted for approximately 18%, 12%, and 8% of the Company's 1996 net sales, respectively. Since the beginning of the commercial aircraft industry's recovery in 1994, the Company has experienced significant increases in sales and profitability. During this period, the Company's net sales have increased nearly 80%, from $55.1 million in 1994 to $99.0 million in 1996, and its operating income has increased approximately 160%, from $5.0 million in 1994 to $12.8 million in 1996. The Company's backlog of orders deliverable within 12 months has also increased during this period, from approximately $21 million as of January 3, 1994 to approximately $60 million as of December 31, 1996. The Company offers a broad line of fasteners, fastening systems and related components. The Company's Kaynar and Microdot business units manufacture precision, self-locking, internally threaded nuts and inserts and precision, threaded studs. Kaynar and Microdot fasteners are engineered for a variety of harsh, demanding environments and often require high tensile strength, toughness, durability, corrosion resistance and resistance to metal fatigue and creep. Kaynar's fasteners, which include wrenchable nuts, anchor nuts, gang channels, shank nuts, barrel nuts, clinch nuts and stake nuts, are used in airframe construction to fasten together various aircraft components, including the fuselage, wings and horizontal and vertical stabilizers. These fasteners also serve a similar function in the construction of aircraft jet and turboprop engines and related components. Recoil, acquired by the Company in August 1996, manufactures helically-wound wire thread inserts and thread repair kits, which are similar in design to certain Microdot products, but are sold to the automotive, electronic and other industrial markets, and their associated after-markets. The Company's K-Fast business unit produces and markets tools that are leased or sold to OEMs and are designed to allow operators to install the Company's and other manufacturers' fasteners rapidly and in restricted and hard-to-reach areas, while still maintaining precision torque control. The Company's goal is to sustain long-term, profitable growth by (i) enhancing its position as a leading supplier of specialty fasteners to the commercial aircraft and defense industries, (ii) expanding the array of fastener products and services it offers to current customers, (iii) continuing to focus on higher value-added specialty products, (iv) leveraging its core capabilities in engineering, materials technology, manufacturing and business processes to develop additional business with both new and existing customers, (v) increasing its international marketing and penetration of foreign markets and (vi) pursuing selected opportunities for acquisitions and strategic alliances. The Company believes that it possesses a number of competitive strengths. First, the Company has established itself as a market leader in the engineering and manufacture of precision, self-locking internally threaded nuts and inserts and precision, threaded studs used in the commercial aircraft and defense industries. Products made by the Company have been "designed into" nearly all major airframes and aircraft engines manufactured in the U.S. and Europe. Second, cross-functional design and engineering teams and manufacturing expertise allow the Company to respond rapidly to customer requirements. Third, while many OEMs have significantly reduced the number of qualified suppliers of a particular part to a core group of only two or three, the Company continues to be a qualified supplier to virtually all major airframe and aircraft engine OEMs. Fourth, the Company is a "source delegation supplier" to many of its customers, including Boeing, GE and Pratt & Whitney. A source delegation supplier's products are designed, shipped and installed without the OEM undertaking further testing that it might otherwise perform before installation. Fifth, the Company has benefited from ongoing programs designed to improve operating efficiency and customer service, while maintaining or improving quality control. INDUSTRY OVERVIEW AND TRENDS. The Company's primary market for fasteners, the commercial aircraft industry, is experiencing a strong increase in demand from airlines ordering new and replacement aircraft. During the early 1990's, most airlines significantly decreased their aircraft purchase orders due to reduced profitability and excess capacity. Since that time, however, a rebounding world economy and increased passenger air traffic have returned many airlines to profitability, resulting in renewed demand for new and replacement aircraft. In 1996, for example, Boeing and Airbus, the two largest commercial aircraft manufacturers, reported increases in announced aircraft orders of 107% and 208% over 1995, respectively. Increased demand for new and replacement aircraft has led to an increase in the demand for fasteners and fastening systems, such as those manufactured by the Company. While there can be no assurance that demand for new and replacement aircraft will not be adversely affected by business cycle fluctuations or declines in airline profitability, the Company believes that long-term industry trends are favorable. For example, in its 1997 Current Market Outlook report, Boeing projects that during the period from 1996 to 2006, world air travel will grow by nearly 75%. Boeing also projects that during this period domestic and international airlines will lease or purchase over 7,000 new aircraft, thereby increasing the worldwide commercial fleet from approximately 11,500 aircraft at the end of 1996 to approximately 17,000 aircraft (net of retirements) at the end of 2006. In addition, as airlines seek to serve a growing number of air travelers with existing restrictions on arrival and departure slots, airport gates and ramp capacity, commercial aircraft OEMs are experiencing increased orders for heavier, widebodied aircraft of intermediate size. Widebodied aircraft generally require a greater number of fasteners than smaller aircraft. RECENT ACQUISITIONS. The Company acquired one business and one additional product line in 1996. In August 1996, the Company purchased the businesses of Recoil Pty Ltd, an Australian corporation (the acquired businesses are collectively referred to herein as "Recoil"). For a description of the Recoil business unit see "Business--Products and Services--Industrial Products and Services." In the period from the Company's purchase of Recoil to December 31, 1996, and for the twelve months ended on that date, Recoil's net sales were $3.9 million and $9.9 million, respectively. In February 1996, the Company purchased the KELOX product line from the Fastening Systems division of Emhart Fastening Teknologies. The KELOX product line complements various Microdot inserts. COMPANY ORGANIZATION. The Company was formed in 1993 for the purpose of acquiring substantially all of the assets of the Aerospace Fastening Systems Group ("AFSG") of Microdot Inc., a Delaware corporation that commenced a voluntary bankruptcy proceeding on June 10, 1993 ("Old Microdot"). The acquisition was structured as a management buyout financed substantially by the General Electric Capital Corporation ("GECC" or the "Selling Stockholder"). See "The Company" for additional information regarding the AFSG acquisition. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company...... 1,800,000 shares Common Stock offered by the Selling Stockholder............................ 200,000 shares Total Common Stock offered........... 2,000,000 shares Common Stock and Common Stock equivalents to be outstanding after the Offering(1)............................ 8,600,000 shares Use of proceeds.......................... Proceeds to the Company will be used to repay certain indebtedness and for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol............ KTIC </TABLE> - ------------------------ (1) Includes 5,206,000 shares of Series C Convertible Preferred Stock (the "Series C Preferred Stock") owned by the Selling Stockholder. The Series C Preferred Stock is convertible into shares of Common Stock at a one-to-one conversion rate, subject to adjustment in certain circumstances. See "Description of Capital Stock--Series C Preferred Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000917770_fibercore_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000917770_fibercore_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bb857ee87115f0a47e0d327b0da035d2851365fc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000917770_fibercore_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information included in this Prospectus does not give effect to the exercise or conversion of Convertible Securities. Certain statements set forth under this caption constitute "forward-looking statements" within the meaning of the Reform Act. See "Special Note Regarding Forward-Looking Statements" on page 2 for additional factors relating to such statements. THE COMPANY The Company manufactures and markets single-mode and multi-mode optical fiber and optical fiber preforms for the telecommunications, data communications, and cable television industries and, through its Automated Light Technologies, Inc. ("ALT") subsidiary, develops and markets products capable of identifying and monitoring faults in fiber optic cables and splice points. The current organization of the Company resulted from the merger on July 18, 1995 (the "Venturecap Merger") of FiberCore Incorporated ("FiberCore"), a Nevada corporation organized in November 1993, into Venturecap, Inc. ("Venturecap"), an inactive Nevada corporation organized in May 1987. Venturecap issued 3.671307 shares in exchange for each outstanding share of FiberCore, and as a result, Venturecap issued a total of 24,617,133 shares for all of the outstanding shares of FiberCore. Unless otherwise noted, all share amounts in this prospectus give effect to the Venturecap Merger. Following the Venturecap Merger, Venturecap changed its name to FiberCore, Inc. The Company's strategy in the fiber optic manufacturing and marketing business is to become a low cost supplier of fiber optic preforms and optical fiber to independent manufacturers of fiber optic cable. The Company, through its FiberCore Jena subsidiary, maintains a manufacturing facility in Jena, Germany (the "Jena Facility"), which was established in 1986 and acquired by the Company in July 1994. The Company's initial marketing efforts are focused in Europe and on establishing strategic distribution alliances in developing countries where demand for fiber optic cable is believed by the Company to be growing more rapidly than in North America. Management believes that customers producing fiber from preforms themselves will enjoy the benefit of the Company's low-cost production methodology and avoid import duties on the value added in the fiber optic cable manufacturing process. In pursuit of its strategy, the Company has undertaken to form strategic alliances on a world-wide basis. These strategic alliances will range from joint-ventures, particularly in those countries requiring local control, to direct investments by the Company. The Company expects that product demand will be generated from these strategic alliances, as well as from independent manufacturers of fiber optic cable. Independent market forecasters, such as Kessler Marketing Intelligence of Newport, Rhode Island, have projected strong growth in the fiber optic market. The Company intends to capitalize on the projected growth by constructing a number of facilities to produce optical fiber preforms and optical fiber. Such new facilities and/or expansion of existing facilities are planned for the United States, Europe, the Middle East and elsewhere in Asia. The Company intends to use a well-balanced, phased-in approach for establishment of these facilities. The Company has already begun upgrading its Jena Facility and has begun planning the construction of a facility in the United States. The Company's long-term strategy also consists of constructing both Company owned and joint-venture owned facilities in the Middle East and elsewhere in Asia. Under this strategy, the Company plans to have at least two Company owned and at least two joint-venture owned facilities. The Company will attempt to continually improve the manufacturing processes at its facilities by implementing its patented technology and by developing new techniques that lower production costs, thereby enhancing the Company's already low cost producer strategy. On April 13, 1995, the Company and MESC entered into an agreement, which was amended on September 15, 1995 (the "MESC Share Purchase Agreement"), whereby MESC agreed to purchase 734,262 shares of Common Stock in two blocks of 367,131 shares at a purchase price of approximately $1.36 per share. MESC also received Warrants, which expires on April 13, 1997, to purchase 550,696 shares of Common Stock at an exercise price of $1.63 per share. MESC will receive 312,061 shares of Common Stock, will become entitled to exercise the Warrants and receive an additional 238,635 shares of Common Stock for no additional consideration upon delivery of a supply agreement between the Company and the JV Company (as defined below). Since October 1995, the Company has issued 734,262 shares of Common Stock in exchange for $1,000,000. Subsequently on January 31, 1996 and in connection with the MESC Share Purchase Agreement, the Company, through its subsidiary FiberCore Mid East Ltd., entered into agreements with a subsidiary of John Royle & Sons ("Royle"), a United States manufacturer of cable manufacturing systems and equipment, and the owners of Middle East Fiber Optic Manufacturing Company Limited ("MEOFC"), a Saudi Arabian company and an affiliate of MESC, for the establishment of a joint venture company (the "JV Company" or "MEFC") to engage in the manufacture and sale of optical fiber and optical fiber cable both inside and outside of Saudi Arabia. The Company and Royle have each contributed $500,000 to the JV Company and each holds a 15% interest in the JV Company. MEOFC contributed $2,330,000 and holds a 70% interest. The JV Company intends to borrow approximately $10,000,000 from the Saudi Industries Development Fund for investment in equipment and working capital and intends to purchase optical fiber preform and fiber from the Company. See "Business -- Joint Marketing Arrangements" and "Description of Securities". On April 17, 1995, the Company issued the AMP Note, a ten year $5,000,000 convertible note bearing interest at LIBOR plus one percent. In July 1996, the Company and AMP entered into a five year supply agreement (renewable for an additional five year term at AMP's option), whereby the Company will supply AMP with a minimum of 50% of AMP's future glass optical fiber needs. On November 27, 1996, the Company obtained an additional $3,000,000 loan from AMP and AMP converted $3,000,000 of principal plus accrued interest on the AMP Note into 3,058,833 shares of Common Stock. As part of the new $3,000,000 loan from AMP, Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting Agreement pursuant to which they agreed to vote together to elect a slate of directors to the Board of Directors of the Company. Such slate of directors initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan. The Voting Agreement also requires a classified and three year staggered Board of Directors. See "Business --Recent Developments," "Certain Transactions -- Dealings With AMP," and "Risk Factors -- Control of the Company." On September 18, 1995, the Company acquired ALT for the net issuance of 5,139,830 shares of Common Stock. ALT manufactures a patented Fiber Optic Cable Monitoring System ("FOCMS"), which continuously monitors fiber optic cables for faults. ALT also manufactures patented long-range Fault Locator Devices, Cable Protection Devices, which are applied at cable splice joints prior to fiber optic cable entering a building, and Electro-Optical Talksets, which are used by field personnel to communicate over optical fiber, twisted pair-cable (regular telephone cable) and metal sheaths encasing optical fiber and copper cables (together with FOCMS, the "ALT Products"). Target customers for the ALT Products include telephone companies worldwide. See "Business -- ALT Products" and "Certain Transactions -- The ALT Acquisition." On November 1, 1995, the Company entered into an International Distributor Agreement with Techman, a company owned by Dr. M. Mahmud Awan, a director of the Company. The International Distributor Agreement provides for commissions to be paid in the form of up to 1,000,000 shares of Common Stock based on sales generated by Techman for the Company of up to $200,000,000. Subsequently on January 11, 1996, Techman agreed to purchase 734,260 shares of Common Stock at $1.36 per share and received Warrants exercisable at $1.63 per share to purchase an additional 550,696 shares of Common Stock pursuant to a written agreement (the "Techman Share Purchase Agreement"). Additionally, under the Techman Share Purchase Agreement, the Company agreed to issue Techman 312,061 shares of Common Stock upon (i) formation of Fiber Optic Industries (Private) Ltd. ("FOI"), a joint-venture company in which the Company will hold a 30% ownership interest, to produce optical fiber and cable; and (ii) the completion of a supply agreement between FOI and the Company. Between February and September 1996, pursuant to the Techman Share Purchase Agreement and at the request of Techman, the Company issued 575,477 shares to Dr. Awan. Subsequent to September 1996, an additional 470,844 shares of Common Stock (representing the balance of shares to be issued under the Techman Share Purchase Agreement) were issued to Dr. Awan in exchange for a payment of $450,000 and the delivery by Techman of a twenty year supply agreement between the Company and FOI which the Company estimates could generate revenues of up to approximately $93,000,000 over five years, although there can be no assurance. The $450,000 payment was invested by the Company in FOI as an additional capital contribution (along with ratable additional capital contributions by FOI's other shareholders). The Company maintains a 30% ownership interest in FOI. See "Business -- Recent Developments" and "Certain Transactions -- Dealings With Techman." Unless otherwise specified, the term "Company", with respect to events prior to July 18, 1995, refers to FiberCore Incorporated and with respect to events subsequent to July 18, 1995, refers to FiberCore, Inc. and its subsidiaries (including ALT, subsequent to September 18, 1995). The Company incurred net losses of $1,625,368 during the 1994 calendar year on revenues of $230,888 and net losses of $4,009,163 during the 1995 calendar year on revenues of $3,093,499. For the nine months ended September 30, 1996, the Company incurred net losses of $1,652,670 on revenues of $6,244,566. The executive offices of the Company are located at 174 Charlton Road, Sturbridge, Massachusetts 01566 and its telephone number is (508) 347-7744. THE OFFERING Securities Offered:.................... Up to 42,443,075 shares of Common Stock which may be offered and sold, from time to time, by the Selling Securityholders. As of the date of this prospectus, the Selling Securityholders own or, upon the satisfaction of certain conditions, have the right to receive, 35,033,946 of such shares, while 7,409,129 shares are issuable to the Selling Securityholders upon the conversion or exercise of the Convertible Securities. See "Description of Securities." Shares of Common Stock outstanding prior to the Offering: ........................... 35,233,250 shares (1) and (2) Shares of Common Stock out- standing after the Offering ............................ 43,193,075 shares((3)) assuming all Warrants and Options are exercised and $2,209,131 in principal and accrued interest on the Notes are converted. Use of Proceeds: ...................... The Company will receive all of the proceeds from the exercise, of which there can be no assurance, of the Warrants and the Options, or approximately $6,281,754. Such proceeds will be used by the Company for the purchase of equipment, research and development and working capital. In the event any portion of the Notes are converted, the Company's indebtedness will be reduced accordingly. None of the proceeds from the sale of shares of Common Stock offered hereby by the Selling Securityholders will go to the Company. See "Use of Proceeds." Risk Factors: ......................... The securities offered hereby involve a high degree of risk. See "Risk Factors." Current OTC Bulletin Board Symbol: ............................. FBCE Proposed NASDAQ Small Cap Symbol: ..... FBCE - ---------- (1) Includes 750,000 shares of Common Stock of Venturecap that were outstanding prior to the Venturecap Merger and are not being registered hereunder. (2) Excludes all Underlying Shares issuable upon the exercise or conversion of the Convertible Securities. Also excludes an aggregate of 550,696 shares of Common Stock held by, for the benefit of or otherwise issuable to MESC, which are subject to the delivery of a supply agreement between the Company and the JV Company. (3) Includes an aggregate of 550,696 shares of Common Stock held by, for the benefit of or otherwise issuable to MESC, which are subject to the delivery of a supply agreement between the Company and the JV Company. FIBERCORE, INC. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) The following summary financial information and operating data of the Company is qualified in its entirety by the more detailed information and the Company's Consolidated Financial Statements and notes thereto appearing elsewhere in this prospectus. <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------------ Historical Pro Forma ------------------------------------------------------------------ 1995(1)(4) 1995(2) 1994(3)(5) 1993(3)(5) 1992(6) 1991(6) ---------- ------- ---------- ---------- ------- ------- <S> <C> <C> <C> <C> <C> <C> Operating Data: Net Sales .................... $ 3,255 $ 3,094 231 $ -- $ -- $ -- Costs and Expenses: Cost of sales ............... 5,077 4,509 1,064 -- -- -- Research and Development .... 188 75 90 -- -- -- Selling, general, and administrative ............. 2,247 2,099 699 1 -- -- Interest expense, net of interest income ............ 382 369 8 -- -- -- Other expense (income), net . (14) 51 (5) -- -- -- Income (loss) before provision for income taxes.. (4,625) (4,009) (1,625) (1) -- -- Provision for income taxes .. -- -- -- -- -- -- Net income (loss)(7) ........ $ (4,625) $ (4,009) $ (1,625) $ (1) $ -- -- Primary earnings (loss) per share(7) ................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ -- Fully diluted earnings (loss) per share................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ -- Weighted average shares outstanding(7) ............. 30,245,879 26,584,630 22,873,322 21,309,323 955,450 955,450 Weighted average shares outstanding (fully diluted). 30,980,539 27,319,291 22,873,322 21,309,323 955,450 955,450 Balance Sheet Data: Working capital (deficit) ... (293) (277) (519) 403 5 5 Total assets ................ 14,183 14,783 4,270 645 5 5 Total liabilities ........... 8,431 8,415 1,687 4 -- -- Accumulated deficit ......... (6,254) (5,638) (1,628) (3) (2) (2) Stockholders' equity ........ 5,752 6,368 2,583 641 5 5 </TABLE> Nine Months Ended September 30, ----------------------------------------- Pro Forma Historical ----------- ------------------------- 1995(1)(4) 1996 1995(2)(5) ---------- ---- ---------- Operating Data: Net Sales .................... $ 1,790 $ 6,245 $ 1,628 Costs and Expenses: Cost of sales ............... 3,048 6,108 2,509 Research and Development .... 152 281 34 Selling, general, and administrative ............. 1,206 2,766 1,050 Interest expense, net of interest income ............ 196 279 234 Other expense (income), net . (48) (690) (48) Income (loss) before provision for income taxes.. (2,764) (2,499) (2,151) Provision for income taxes .. -- -- -- Net income (loss)(7) ........ $ (2,764) $ (2,499) $ (2,151) Primary earnings (loss) per share(7) ................... $ (0.09) $ (.08) $ (0.09) Fully diluted earnings (loss) per share................... $ (0.09) $ (.08) $ (0.09) Weighted average shares outstanding(7) ............. 30,157,895 30,815,900 25,262,819 Weighted average shares outstanding (fully diluted). 30,365,796 32,899,366 25,470,719 Balance Sheet Data: Working capital (deficit) ... 734 223 734 Total assets ................ 16,454 14,018 17,064 Total liabilities ........... 12,254 8,073 12,251 Accumulated deficit ......... (4,392) (8,136) (3,779) Stockholders' equity ........ 4,200 5,945 4,813 - ---------- (1) Includes the results of ALT as if acquired at the beginning of the period and as if the conversion of ALT debt and warrants into approximately 4,500,000 shares of ALT common stock occurred immediately prior thereto. (2) Includes the results of ALT from September 18, 1995 (the date of acquisition) through December 31, 1995. (3) Does not include the results of ALT. (4) The pro forma results reflect higher amortization costs than the historical financials due to the allocation of the purchase price of the ALT acquisition to ALT's assets. The pro forma financials also reflect lower interest costs than the historical financials due to the conversion of ALT debt at an earlier date than the actual conversion. (5) Restated to reflect the Venturecap Merger as of the beginning of the period. (6) The years 1991 and 1992 reflect the financial position of Venturecap, Inc., a development stage company, prior to the merger with FiberCore, Incorporated in 1995. Venturecap had no significant activities in these years. FiberCore, Incorporated was formed in November 1993. (7) Supplementary Earnings Per Share Data: If the convertible debt had been converted at the beginning of the periods below, the earnings per share and the basis for this computation would have been as follows: Nine Months Ended Year Ended September 30, 1996 December 31, 1995 ------------------ ----------------- Net loss for the period ............ $ (2,242) $ (3,761) Weighted average shares outstanding. 35,214,743 29,644,053 Primary loss per share.............. $ (0.06) $ (0.13)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000918765_reptron_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000918765_reptron_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cf3d7e2d3ebe456d2b7f338bfe32fccc56c61ce4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000918765_reptron_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including the Consolidated Financial Statements and Notes thereto, included elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus assumes that the Underwriters' over- allotment options will not be exercised. THE COMPANY Reptron Electronics, Inc. (the "Company") is a leading integrated electronics company providing both value-added distribution of electronic components and targeted contract manufacturing services through its two divisions, Reptron Distribution and K-Byte Manufacturing. The two divisions are complementary, enabling the Company to provide customers with a wide range of products and value-added services, as well as a single source for their product, material, assembly and test requirements. Approximately 44% of the Company's 1996 net sales were generated by customers utilizing the services of both divisions. The Company believes that its integrated approach to manufacturing and distribution distinguishes it in the electronics industry, provides a high level of value to its customers and enables it to obtain sole source relationships with an increasing number of its customers. As a result of the successful implementation of the Company's business strategy, it has increased net sales from approximately $83.4 million in 1992 to $268.9 million in 1996 and net earnings from $1.2 million in 1992 to $7.7 million in 1996. Reptron Distribution sells over 60 vendor lines of semiconductors, passive products and electromechanical components, including more than 35,000 different items. Reptron Distribution sells to over 9,000 customers representing diverse industries, including robotics, telecommunications, computers and computer peripherals, consumer electronics, healthcare, industrial controls and contract manufacturing. Services provided to these customers (some of which are provided through K-Byte Manufacturing) include component sales, inventory replenishment programs, in-plant stores, component programming, electronic data interchange ("EDI"), concurrent engineering and surface mount technology ("SMT") and pin-through-hole ("PTH") manufacturing. As a result of two acquisitions completed in 1995, Reptron Distribution expanded its geographic presence and currently has 20 sales offices located throughout the U.S., enabling the Company to market to approximately 83% of the total available U.S. electronic components market (based upon 1996 industry sales). Reptron Distribution's net sales have increased from $48.9 million in 1992 to $168.3 million in 1996. K-Byte Manufacturing focuses on establishing primary or sole source relationships with OEMs in a wide variety of industries that require complex circuit board assembly with low-to-medium volume production runs. K-Byte Manufacturing leverages its relationship with Reptron Distribution by utilizing Reptron Distribution's 85-person field sales force, large customer base, greater access to electronic components and advantages in component pricing. The Company believes that K-Byte Manufacturing provides Reptron Distribution a significant competitive advantage by broadening the selection of products and value-added services that can be offered to Reptron Distribution customers. K-Byte Manufacturing, which operates two facilities in Michigan and one in Florida, has increased net sales from $34.5 million in 1992 to $100.7 million in 1996. The Company believes its growth has been fueled by several key trends: - Manufacturers of electronic components are reducing the number of distributors that are authorized to sell their products and selecting distributors that are able to serve a large part of the total available U.S. market; - Electronic components are increasingly being sold through value-added services, such as in-plant stores, automated inventory replenishment systems and the outsourcing of product assembly; and - OEMs are increasingly outsourcing the manufacture, assembly and testing of printed circuit boards to contract manufacturing specialists. According to the National Electronic Distributors Association ("NEDA"), the total North American electronics distribution market grew from $10.2 billion in revenue in 1992 to $21.0 billion in 1996, a compound annual growth rate of 19.8%. NEDA projects the market to grow to $23.6 billion in 1997. As a result of the outsourcing of manufacturing services, the contract manufacturing industry in the U.S. grew from $6.3 billion in 1992 to $14.5 billion in 1996, a compound annual growth rate of 23.2%, according to the Institute for Interconnecting and Packaging Electronic Circuits ("IPC"). Based on IPC estimates, the U.S. contract manufacturing industry has expanded and will expand at a 21% compound annual growth rate from 1995 through 2000. The Company's principal business objective is to expand its presence as a leading integrated electronics distributor and contract manufacturer. In order to implement its objective, the Company has formulated a strategy based upon the following key elements: (i) capitalize on the advantages of integration; (ii) increase sales from value-added services; (iii) target contract manufacturing customers in specific market segments; (iv) leverage investments made in its manufacturing facilities; and (v) expand into new geographic areas and increase penetration in existing markets. The Company was organized under the laws of Michigan in 1973 and reincorporated under the laws of Florida in 1993. The Company's principal executive offices are located at 14401 McCormick Drive, Tampa, Florida 33626, and its telephone number is (813) 854-2351. THE OFFERING Common Stock Offered by the Company......... 1,500,000 shares Common Stock Offered by the Selling Shareholder................................. 500,000 shares Common Stock to be Outstanding after the Offering(1)................................. 7,571,019 shares Use of Proceeds by the Company.............. To repay borrowings outstanding under the Company's Revolving Credit Facility (as defined herein). See "Use of Proceeds." Nasdaq National Market Symbol............... REPT - --------------- (1) Excludes, as of April 8, 1997, (i) 259,550 shares of Common Stock issuable upon the exercise of options outstanding, which had a weighted average exercise price of $9.74 per share and of which 117,788 shares were exercisable at a weighted average exercise price of $5.45 per share and (ii) 200,200 shares of Common Stock reserved for future issuance under the Company's Incentive Stock Option Plan. See "Description of Capital Stock." SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, --------------------------------------------------- 1992 1993 1994 1995 1996 ------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS DATA: Net Sales: Reptron Distribution.................... $48,872 $ 71,346 $ 96,003 $140,146 $168,279 K-Byte Manufacturing.................... 34,541 55,661 68,002 83,198 100,658 ------- -------- -------- -------- -------- Total net sales.................... 83,413 127,007 164,005 223,344 268,937 ======= ======== ======== ======== ======== Gross Profit: Reptron Distribution.................... 9,968 15,245 18,780 27,500 34,364 K-Byte Manufacturing.................... 4,613 9,023 11,431 12,663 17,485 ------- -------- -------- -------- -------- Total gross profit................. 14,581 24,268 30,211 40,163 51,849 Selling, general and administrative expenses................................ 11,217 16,455 19,051 26,586 35,023 ------- -------- -------- -------- -------- Operating income........................... 3,364 7,813 11,160 13,577 16,826 Interest expense........................... 1,363 1,811 1,474 2,767 4,025 ------- -------- -------- -------- -------- Earnings before income taxes............... 2,001 6,002 9,686 10,810 12,801 Income tax provision....................... 807 2,400 3,823 4,324 5,148 ------- -------- -------- -------- -------- Net earnings............................... $ 1,194 $ 3,602 $ 5,863 $ 6,486 $ 7,653 ======= ======== ======== ======== ======== Net earnings per share(1).................. $ .27 $ .81 $ 1.03 $ 1.05 $ 1.24 ======= ======== ======== ======== ======== Weighted average Common Stock and Common Stock equivalent shares outstanding..... 4,442 4,442 5,714 6,170 6,179 ======= ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------- ACTUAL AS ADJUSTED(2) -------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $ 77,231 $ 77,231 Total assets.............................................. 138,632 138,632 Revolving Credit Facility................................. 48,550 22,609 Long-term obligations(3).................................. 18,795 18,795 Shareholders' equity...................................... 48,690 74,631 </TABLE> - --------------- (1) Assuming that the Offering and the application of the estimated net proceeds therefrom to the Company had been consummated on January 1, 1996, pro forma net earnings per share for 1996 would have been $1.15 per share. (2) Adjusted to give effect to the Offering at an assumed public offering price of $18.625 per share (the last reported sales price of the Common Stock on the Nasdaq National Market on April 8, 1997) and the application of the estimated net proceeds therefrom to the Company. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000919871_union_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000919871_union_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0f7c65de97e5cbd56bb679b1da90f10121e6bff8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000919871_union_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and subject to, the more detailed information and financial statements and notes thereto included in this Prospectus. Each investor is encouraged to read this Prospectus in its entirety. Investors should carefully consider the information set forth under the caption "Risk Factors." The Company Union National is a one-bank holding company headquartered in Westminster, Maryland. Through its sole, wholly-owned subsidiary, Union National Bank ("UNB"), Union National is primarily engaged in commercial and retail banking services and in related businesses. UNB was founded in Westminster in 1816 under the name Bank of Westminster, and was briefly known during the period of 1821 to 1830 as a branch of the Farmers & Mechanics Bank of Frederick. In 1865, UNB became known as "The Union National Bank of Westminster." UNB is currently in its 180th year of operation. UNB converted to a bank holding company structure on January 19, 1994, when it formed Union National, a Maryland corporation, to serve as the holding company. The principal executive office of Union National is located at 117 East Main Street, Westminster, Maryland 21157, and its telephone number is (410) 848-7200. Dividend Reinvestment and Stock Purchase Plan Purpose The purpose of the Dividend Reinvestment and Stock Purchase Plan (the "Plan") of Union National Bancorp, Inc. ("Union National") is designed to provide the holders of Union National's Common Stock with a convenient and economical way to voluntarily purchase additional shares of Common Stock. Under to the Plan, cash dividends on all shares which are registered in a participant's name or which are held in a participant's Plan account are automatically reinvested in additional shares of Common Stock. Participants will pay no brokerage commission or service charges in acquiring additional shares of Common Stock under the Plan, and will receive a 3% discount for shares purchased through the Plan. Administration The Plan will be administered by American Stock Transfer and Trust Company (the "Plan Administrator"), which is also the stock transfer agent for Union National's Common Stock. The Plan Administrator, among other things, keep the records and send detailed statements of account to participants. Eligibility Generally, all record and beneficial owners are eligible to participate in the Plan. An eligible shareholder may join the Plan by completing and signing an authorization form appointing the Plan Administrator as his or her agent to reinvest dividends paid on some or all of his or her shares in the Common Stock of Union National. Purchases The number of shares to be purchased under the Plan will depend on the amount of dividends and voluntary cash investments to be reinvested and the applicable purchase price of the Common Stock. Common Stock will be purchased by the Plan Administrator not later than five business days after the Investment Date, as that term is defined in the Plan, at the fair market value of the Common Stock less a 3% discount on such purchases. The fair market value is determined by averaging the "daily average trades" for the ten (10) trading days preceding the relevant Investment Date, as reported by one or more brokerage firms selected by Union National. Shareholders who do not wish to participate in the Plan will receive cash dividends, as and if declared, by check or advice of credit to their account. Voluntary Cash Purchases Voluntary cash payments may be made by participants to purchase additional shares in amounts of not less than $100 no more than $10,000 per calendar quarter. Reports Each participant will receive a statement of account after each dividend payment date describing cash dividends and voluntary cash investments received, the number of shares purchased, the price per share and the total number of shares accumulated under the Plan. Withdrawal of Participation A participant may withdraw his or her participation under the Plan by sending written notice to the Plan Administrator. The Plan Administrator will issue a certificate for whole shares credited to the participant's account and a check representing the value of any fractional shares based on the then current market value per share of Union National's Common Stock. Withdrawal of Shares A participant can withdraw some or all of the shares of Common Stock credited to his or her account by completing a withdrawal notification specifying the number of shares to be withdrawn. Participants may also request that the Plan Administrator sell the shares being withdrawn from his or her account under the Plan. In such case, participants are responsible for fees, brokerage commission, and services charges incurred in connection with such sales. <TABLE> <CAPTION> The Offering <S> <C> <C> <C> <C> <C> <C> Common Stock to be Issued............................ Up to 150,000 shares Common Stock Outstanding............................. 834,000 shares Proposed Use of Proceeds............................. The proceeds from the sale of shares to the Plan will be used for working capital and general corporate purposes. See "Use of Proceeds." No Market for the Shares............................. The Common Stock is not listed on any stock exchange or quoted on an automated national quotation system, and no application is being made at this time to so list or quote the Common Stock. The bid and asked prices of the Common Stock are reported on the pink sheets and on various bulletin boards under the symbol "UNNL". </TABLE> Risk Factors Prospective investors in the Common Stock should carefully consider the factors set forth under the caption "Risk Factors" beginning on page 6. Summary Consolidated Financial Data <TABLE> <CAPTION> (In Thousands of Dollars Except Per Share Data) Six Months Ended June 30, Year Ended December 31, ------------------------- ----------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> RESULTS FROM OPERATIONS Interest Income $8,877 $8,665 $17,361 $17,091 $15,109 $14,789 $ 14,804 Interest Expense 4,046 4,042 8,099 8,092 6,289 6,170 6,967 ------ ------ ------- ------- ------- ------- --------- Net Interest Income 4,831 4,623 9,262 8,999 8,820 8,619 7,837 Provision for Credit Losses 116 191 329 212 342 425 470 ------ ------ ------- ------- ------- ------- --------- Net Interest Income after Provision for Credit Losses 4,715 4,432 8,933 8,787 8,478 8,194 7,367 Non-Interest Income 636 497 1,086 978 1,315 1,029 874 Non-Interest Expense 3,601 3,411 7,200 7,058 6,800 6,179 5,595 ------ ------ ------- ------- ------- ------- --------- Income Before Income Taxes 1,750 1,518 2,819 2,707 2,993 3,044 2,646 Applicable Income Taxes 575 527 955 912 990 1,009 867 ------ ------ ------- ------- ------- ------- --------- Net Income before effect of accounting change 1,175 991 1,864 1,795 2,003 2,034 1,780 Effect of accounting change 0 0 0 0 0 0 248 ------ ------ ------- ------- ------- ------- --------- Net Income $1,175 $ 991 $ 1,864 $ 1,795 $ 2,003 $ 2,034 $ 2,028 ====== ====== ======= ======= ======= ======= ========= FINANCIAL CONDITION Total assets $235,565 $219,801 $225,036 $218,816 $207,226 $192,290 $175,511 Investment securities (including available for sale) 63,445 53,264 55,940 52,421 54,938 48,724 38,659 Loans, net of unearned income 148,093 147,349 147,351 146,822 139,730 128,498 127,652 Allowance for loan losses 1,848 1,796 1,772 1,769 1,671 1,503 1,365 Deposits 205,596 197,390 199,291 193,462 182,533 172,816 160,367 Shareholders' equity 19,064 17,045 18,053 16,540 13,948 14,061 12,125 PER SHARE DATA Net income $ 1.41 $ 1.29 $ 2.23 $ 2.15 $ 2.40 $ 2.44 $ 2.43 Dividends 0.31 0.29 0.57 0.52 0.50 0.46 0.38 Shareholders' equity 22.85 20.44 21.65 19.83 16.72 16.86 14.54 PERFORMANCE RATIOS Return on average assets 1.09% 0.85% 0.84% 0.84% 1.00% 1.10% 1.06% Return on average equity 12.55 10.83 10.80 11.55 14.34 15.63 15.77 Net interest margin on average earning assets 4.51 4.48 4.53 4.56 4.83 5.12 5.13 Efficiency (non-interest expense / (net interest income + non-interest income)) 65.87 66.62 69.58 70.75 67.09 64.04 64.22 LIQUIDITY AND CAPITAL RATIOS Shareholders' equity (% assets) 8.09% 7.75% 8.02% 7.56% 6.73% 7.31% 6.91% Risk-based: Tier 1 Capital 11.91 10.98 11.72 10.86 10.42 10.62 9.83 Total Capital 13.07 12.12 12.87 12.01 11.77 10.94 10.75 Dividends (% net income) 22.01 23.56 25.51 24.16 20.82 18.86 17.80 Loans to deposits 72.03 74.65 73.94 75.89 76.55 74.36 79.60 ASSET QUALITY RATIOS Allowance for credit losses to total loans 1.25% 1.22% 1.20% 1.20% 1.20% 1.17% 1.07% Allowance for credit losses to non-performing loans 262.50 217.96 136.34 322.24 717.14 167.23 201.99 Net loan charge-offs to average total loans 0.07 0.03 0.22 0.08 0.13 0.22 0.16 </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000920343_world_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000920343_world_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f72924e3a4a53265bbe5ec0cb543df7bac0146e3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000920343_world_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Capitalized Terms at page 97 for the location herein of certain capitalized terms. OVERVIEW................... Certain motor vehicle dealers ("Dealers") in the World Omni Financial Corp. ("World Omni") network of dealers have assigned, and will assign, closed-end retail automobile and light duty truck leases to World Omni LT, an Alabama trust (the "Origination Trust"). The Origination Trust was created in 1993 to avoid the administrative difficulty and expense associated with retitling leased vehicles in the securitization of automobile and light duty truck leases. The Origination Trust has issued to Auto Lease Finance L.P. ("ALFI L.P.") an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated assets of the Origination Trust. ALFI L.P. will instruct the trustee of the Origination Trust to allocate a separate portfolio of leases and leased vehicles within the Origination Trust and create a special unit of beneficial interest (the "SUBI") which will represent the entire beneficial interest in such portfolio. Upon its creation, such portfolio will no longer be a part of the Origination Trust Assets represented by the UTI. ALFI L.P. will sell its interest in the SUBI to World Omni Lease Securitization L.P. (the "Transferor") and the Transferor will in turn contribute a 99.8% interest in the SUBI to the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"). In return, the Trust will issue certain securities, including the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes being offered hereby. The undivided equity interest in the Trust will be permanently retained by the Transferor. ALFI L.P. has caused and from time to time in the future may cause additional special units of beneficial interest similar to the SUBI ("Other SUBIs") to be created out of the UTI and sold to the Transferor or one or more other entities. The Trust and the Noteholders will have no interest in the UTI, any Other SUBI or any assets of the Origination Trust evidenced by the UTI or any Other SUBI. THE TRUST.................. The Trust will be created pursuant to a securitization trust agreement dated as of October 1, 1997 (the "Agreement"), among the Transferor, PNC Bank, Delaware ("PNC Bank"), as owner trustee (in such capacity, the "Owner Trustee") and U.S. Bank National Association ("U.S. Bank"), as indenture trustee (in such capacity, the "Indenture Trustee"). The property of the Trust will consist primarily of an undivided 99.8% interest (the "SUBI Interest") in the SUBI, which will evidence a beneficial interest in certain specified assets of the Origination Trust (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy), and monies on deposit in the Reserve Fund and in certain other accounts established as described herein. The Origination Trust was formed by ALFI L.P., as grantor and initial beneficiary, and VT Inc., as trustee (the "Origination Trustee"). The sole general partner of ALFI L.P. is Auto Lease Finance, Inc., a Delaware corporation ("ALFI") which is a wholly owned, special purpose subsidiary of World Omni. ALFI may not transfer its general WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST WORLD OMNI LEASE SECURITIZATION L.P. AUTO LEASE FINANCE L.P. WORLD OMNI LT CROSS REFERENCE SHEET FURNISHED PURSUANT TO RULE 501(B) OF REGULATION S-K <TABLE> <CAPTION> ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS ---------------------------- --------------------------------- <C> <S> <C> 1. Forepart of Registration Statement and Outside Cover Page of Prospectus.................................................. Forepart of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges............................................... Summary; Risk Factors 4. Use of Proceeds............................................. Use of Proceeds 5. Determination of Offering Price............................. * 6. Dilution.................................................... * 7. Selling Security Holders.................................... * 8. Plan of Distribution........................................ Underwriting 9. Description of Securities to be Registered.................. Summary; The Trust and the SUBI; The Contracts; Maturity, Prepayment and Yield Considerations; Description of the Notes; Security for the Notes 10. Interests of Named Experts and Counsel...................... * 11. Information With Respect to the Registrant.................. The Trust and the SUBI; The Origination Trust; The Transferor 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................................. * </TABLE> - --------------- * Answer negative or item inapplicable. (Cover continued from previous page) The SUBI initially will evidence a beneficial interest in specified Origination Trust Assets, including certain lease contracts, the automobiles and light duty trucks relating to such lease contracts, certain monies due under or payable in respect of such lease contracts and leased vehicles on or after October 1, 1997, payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other Origination Trust Assets, as more fully described under "The Trust and the SUBI -- The SUBI" (collectively, the "SUBI Assets"). From time to time until principal is first distributed to the Noteholders, as described below, principal collections on or in respect of the SUBI Assets will be reinvested in additional lease contracts assigned to the Origination Trust by dealers in the World Omni network of dealers, together with the automobiles and light duty trucks relating thereto, which at the time of reinvestment will become SUBI Assets. The SUBI will not evidence a direct interest in the SUBI Assets, nor will it represent a beneficial interest in all of the Origination Trust Assets. Payments made on or in respect of the Origination Trust Assets not represented by the SUBI will not be available to make payments on the Notes. For further information regarding the Trust, the SUBI and the Origination Trust, see "The Trust and the SUBI" and "The Origination Trust". The Notes will consist of four classes of senior notes (respectively, the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", and collectively, the "Notes") and one class of subordinated Notes (the "Class B Notes"). The Class A Notes will be the only Notes offered hereby. The initial principal amount of the Class B Notes will be approximately $62,950,545, and the Class B Notes will be subordinated to the Class A Notes to the extent described herein. The Transferor will own the undivided equity interest in the Trust (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described herein. For further information regarding the Notes, see "Description of the Notes". In general, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made on the Class A-4 Notes until the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been paid in full. Interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes will accrue at the respective fixed per annum interest rates specified herein and will be distributed to holders of the Class A Notes on the twenty-fifth day of each month (or, if such day is not a Business Day, on the next succeeding Business Day), beginning November 25, 1997 (each, a "Distribution Date"). Principal will be distributed to holders of the Notes to the extent described herein on each Distribution Date beginning in December 1998, or, in certain limited circumstances, earlier, as more fully described herein. The final maturity date for each Class of Class A Notes will be the November 2003 Distribution Date. There currently is no secondary market for the Class A Notes and there is no assurance that one will develop. The Underwriters expect, but will not be obligated, to make a market in each Class of Class A Notes. There is no assurance that any such market will develop, or if one does develop, that it will continue. As more fully described under "Ratings of the Class A Notes", it is a condition of issuance that each of Moody's Investors Service, Inc., Standard & Poor's and Fitch Investors Service, L.P. rates each Class of Class A Notes in its highest rating category. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF ANY CLASS OF NOTES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". partnership interest in ALFI L.P. so long as any financings involving interests in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of ALFI L.P. is World Omni. VT Inc. is an Alabama corporation and a wholly owned, special purpose subsidiary of U.S. Bank that was organized solely for the purpose of acting as Origination Trustee. VT Inc. is not affiliated with World Omni or any affiliate thereof. For further information regarding the Origination Trustee, see "The Origination Trust -- The Origination Trustee". The Origination Trust Assets consist of retail closed-end lease contracts assigned to the Origination Trust by Dealers, the automobiles and light duty trucks relating thereto and all proceeds thereof and payments made under certain insurance policies relating to such contracts, the related lessees or such leased vehicles, including the Residual Value Insurance Policy. The SUBI initially will evidence a beneficial interest in a specified portion of the Origination Trust Assets, including certain lease contracts (the "Initial Contracts") originated by Dealers located throughout the United States, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles"), certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after October 1, 1997 (the "Initial Cutoff Date"), payments made under certain insurance policies (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) relating to the Initial Contracts, the related lessees and the Initial Leased Vehicles and certain related assets and rights (collectively, the "SUBI Assets"). For further information regarding the SUBI Assets, see "The Trust and the SUBI -- The SUBI". Prior to the time when principal is first distributed to Noteholders as described herein, payments made on or in respect of the SUBI Assets allocable to principal will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") originated and assigned to the Origination Trust by Dealers located throughout the United States and the automobiles and light duty trucks relating thereto (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles, together with certain related Origination Trust Assets, will become SUBI Assets. For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles" and "The Trust and the SUBI -- The SUBI". The Dealers comprising the sources for Contracts and Leased Vehicles are members of World Omni's network of dealers. These Dealers offer automobiles and light duty trucks for lease pursuant to World Omni-approved terms and documentation. For further information regarding World Omni's lease business, see "World Omni". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Origination Trust Assets other than the INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 23, 1997 $1,109,128,644 (Approximate) WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST $260,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-1 $220,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-2 $390,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-3 $239,128,644 (Approximate) % Automobile Lease Asset Backed Notes, Class A-4 WORLD OMNI LEASE SECURITIZATION L.P. (Transferor) WORLD OMNI FINANCIAL CORP. (Servicer) The Automobile Lease Asset Backed Notes (the "Class A Notes") will be issued by the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"), a Delaware business trust created pursuant to a Securitization Trust Agreement between World Omni Lease Securitization L.P. (the "Transferor"), PNC Bank, Delaware, as owner trustee (the "Owner Trustee") and U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"). The Class A Notes will be issued pursuant to an Indenture between the Trust and the Indenture Trustee. The Class A Notes will be secured by the property of the Trust, which will consist of an undivided 99.8% interest in a Special Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence a beneficial interest in certain specified assets of World Omni LT, an Alabama trust (the "Origination Trust"), monies on deposit in certain accounts and other assets, as described more fully under "The Trust and the SUBI". The assets of the Origination Trust (the "Origination Trust Assets") will consist of retail closed-end lease contracts assigned to the Origination Trust by dealers in the World Omni Financial Corp. ("World Omni") network of dealers, the automobiles and light duty trucks relating thereto and payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other assets, as more fully described under "The Origination Trust -- Property of the Origination Trust". World Omni will service the lease contracts included in the Origination Trust Assets. (Cover continued on next page) ------------------ FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A NOTES, SEE "RISK FACTORS" ON PAGE 17 HEREIN. ------------------ THE CLASS A NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF WORLD OMNI LEASE SECURITIZATION L.P., AUTO LEASE FINANCE L.P., WORLD OMNI LT, WORLD OMNI FINANCIAL CORP. OR ANY OF THEIR RESPECTIVE AFFILIATES. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> UNDERWRITING DISCOUNTS AND PROCEEDS TO THE PRICE TO PUBLIC(1) COMMISSIONS(2) TRANSFEROR(1)(3) ------------------ -------------- ---------------- <S> <C> <C> <C> Per Class A-1 Note................................... % % % Per Class A-2 Note................................... % % % Per Class A-3 Note................................... % % % Per Class A-4 Note................................... % % % Total................................................ $ $ $ </TABLE> (1) Plus accrued interest, if any, calculated at the related Note Rate from and including the date of initial issuance. (2) The Transferor and World Omni have agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933. See "Underwriting". (3) Before deducting expenses payable by the Transferor estimated to be $1,050,000. ------------------ The Class A Notes are offered by the Underwriters, subject to prior sale, when, as and if issued to and accepted by the Underwriters, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Class A Notes in book-entry form will be made through the facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System, on or about , 1997, against payment in immediately available funds. CREDIT SUISSE FIRST BOSTON BANCAMERICA ROBERTSON STEPHENS MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY SECURITIES, INC. The date of this Prospectus is , 1997. AVAILABLE INFORMATION The Transferor, as originator of the Trust, has filed with the Securities and Exchange Commission (the "Commission") on behalf of the Trust a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement"), of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Class A Notes being offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which is available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048. Copies of such information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission at http://www.sec.gov. The Servicer, on behalf of the Trust, will also file or cause to be filed with the Commission such periodic reports as are required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. SUBI Assets. Payments made on or in respect of Origination Trust Assets other than the SUBI Assets will not be available to make payments on the Notes. The 0.2% interest in the SUBI not transferred to the Trust will be permanently retained by the Transferor (the "Retained SUBI Interest"). Accordingly, the Transferor will be entitled to receive 0.2% of all payments made on or in respect of the SUBI Assets and will share in 0.2% of all losses and liabilities incurred by the SUBI Assets. Any payments made in respect of the Retained SUBI Interest will not be available to make payments on the Notes. For further information regarding the SUBI, see "Summary -- Security for the Notes -- The SUBI", "The Trust and the SUBI -- The SUBI" and "The Origination Trust". THE TRANSFEROR............. The Transferor is a Delaware limited partnership, the sole general partner of which is World Omni Lease Securitization, Inc., a Delaware corporation ("WOLSI"), which is a wholly owned, special purpose subsidiary of World Omni. WOLSI may not transfer its general partnership interest in the Transferor so long as any financings involving interests formerly or partially held by it in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of the Transferor is World Omni. WORLD OMNI................. World Omni is a Florida corporation that is a wholly owned subsidiary of JM Family Enterprises, Inc., a Delaware corporation ("JMFE"). JMFE also wholly owns Southeast Toyota Distributors, Inc. ("SET"), which is the exclusive distributor of Toyota automobiles and light duty trucks in Florida, Alabama, Georgia, North Carolina and South Carolina (the "Five State Area"). As more fully described under "World Omni", World Omni provides consumer lease and installment contract financing to retail customers of, and floorplan and other dealer financing to, Dealers that are located throughout the United States. World Omni wholly owns both ALFI and WOLSI. Pursuant to an amended and restated servicing agreement dated as of July 1, 1994, as amended, to be supplemented by a servicing supplement dated as of October 1, 1997 (collectively, the "Servicing Agreement"), each between World Omni and the Origination Trustee, World Omni will act as the initial servicer of the Origination Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). The Owner Trustee and the Indenture Trustee will be third party beneficiaries of the Servicing Agreement, as described under "Additional Document Provisions -- The Servicing Agreement -- Indenture Trustee and Owner Trustee as Third-Party Beneficiaries". SECURITIES OFFERED......... The Automobile Lease Asset Backed Notes (the "Notes") will consist of four classes of senior Notes (the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", respectively, and collectively, the "Class A Notes") and one class of subordinated notes (the "Class B Notes"). Generally, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made [OVERVIEW OF TRANSACTION CHART] on the Class A-4 Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been paid in full, in each case as more fully described under "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Amortization Period". The Class B Notes will be subordinated to the Class A Notes so that (i) interest payments generally will not be made in respect of the Class B Notes until interest in respect of the Class A Notes has been paid, (ii) principal payments generally will not be made in respect of the Class B Notes until the Class A-1, Class A-2 and Class A-3 Notes have been paid in full and (iii) if other sources available to make payments of principal and interest on the Class A-4 Notes are insufficient, amounts that otherwise would be paid in respect of the Class B Notes generally will be available for that purpose, as more fully described under "Description of the Notes -- Distributions on the Notes". The undivided equity interest in the Trust will be permanently retained by the Transferor (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". Only the Class A Notes are being offered hereby. The Class A Notes will be issued in book-entry form in minimum denominations of $1,000 and integral multiples thereof, as set forth under "Description of the Notes -- Book-Entry Registration" and "-- Definitive Notes". The Class B Notes will be sold in one or more private placements. Each Note will represent the right to receive monthly payments of interest at the related Note Rate and, to the extent described herein, monthly payments of principal during the Amortization Period. These payments will be funded from a portion of the payments received by the Trust on or in respect of the SUBI Interest (i.e., from a portion of 99.8% of the payments received on or in respect of the Contracts and the Leased Vehicles) and, in certain circumstances, from Excess Collections, the Servicing Fee (so long as World Omni is the Servicer), Transferor Amounts that otherwise would be distributable in respect of the Transferor Interest, Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy and monies on deposit in the Reserve Fund. On the date of initial issuance of the Notes (the "Closing Date"), the Trust will issue approximately $260,000,000 aggregate principal amount of Class A-1 Notes (the "Initial Class A-1 Note Balance"), approximately $220,000,000 aggregate principal amount of Class A-2 Notes (the "Initial Class A-2 Note Balance"), approximately $390,000,000 aggregate principal amount of Class A-3 Notes (the "Initial Class A-3 Note Balance"), approximately $239,128,644 aggregate principal amount of Class A-4 Notes (the "Initial Class A-4 Note Balance" and, together with the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance and the Initial Class A-3 Note Balance, the "Initial Class A Note Balance") and approximately $62,950,545 aggregate principal amount of Class B Notes (the "Initial Class B Note Balance" and, together with the Initial Class A Note Balance, the "Initial Note Balance"). The aggregate principal amounts of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes and the Class B Notes will, except in certain circumstances described under "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles", remain fixed at their respective Initial Class Note Balances during the Revolving Period and, to the extent described herein, will decline thereafter during the Amortization Period as principal is paid on the Notes. The "Class Note Balance" of any Class of Notes on any day will equal the Initial Class Note Balance, reduced by the sum of all distributions made in respect of principal (including any reimbursements of Loss Amounts allocable to such Class and Note Principal Loss Amounts in respect of such Class) on or prior to such day on the related Class of Notes and those Note Principal Loss Amounts in respect of such Class, if any, which have not been reimbursed as described herein. The "Class A Note Balance" will mean the sum of the Class A-1, Class A-2, Class A-3 and Class A-4 Note Balances. The "Note Balance" with respect to the Notes will mean the sum of the Class A Note Balance and the Class B Note Balance. The amount of the Transferor Interest will initially equal approximately $26,978,805 (which amount will equal 2.25% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date) and on any day will equal the difference between 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Notes -- The SUBI" and "Summary -- The Contracts", and the Note Balance. As more fully described under "Description of the Notes -- General", the Aggregate Net Investment Value can change daily. REGISTRATION OF THE NOTES.................... Each Class of Class A Notes initially will be represented by one or more notes registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). A person acquiring an interest in the Class A Notes (each, a "Note Owner") will hold his or her interest through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. No Note Owner will be able to receive a definitive Note representing such person's interest, except in the limited circumstances described under "Description of the Notes -- Definitive Notes". Unless and until definitive Notes are issued, Note Owners will not be recognized as holders of record of Class A Notes and will be permitted to exercise the rights of such holders only indirectly through DTC. For further information regarding book-entry registration of the Class A Notes, see "Description of the Notes -- General" and "-- Book-Entry Registration". INTEREST................... On the twenty-fifth day of each month or, if such day is not a Business Day, on the next succeeding Business Day, beginning November 25, 1997 (each, a "Distribution Date"), distributions in respect of the Class A Notes will be made to the holders of record of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes (respectively, the "Class A-1 Noteholders", the "Class A-2 Noteholders", the "Class A-3 Noteholders" and the "Class A-4 Noteholders", and collectively, the "Class A Noteholders") as of the day immediately preceding such Distribution Date or, if Definitive Notes are issued, the last day of the immediately preceding calendar month (each such date, a "Record Date"). On each Distribution Date, the Indenture Trustee will distribute interest for the related Interest Period to the Class A Noteholders, based on the related Class Note Balance as of the immediately preceding Distribution Date (after giving effect to reductions in such Class Note Balance as of such immediately preceding Distribution Date) or, in the case of the first Distribution Date, on the Initial Class Note Balance, in the case of (i) the Class A-1 Notes, at an annual percentage rate equal to % (the "Class A-1 Note Rate"), (ii) the Class A-2 Notes, at an annual percentage rate equal to % (the "Class A-2 Note Rate"), (iii) the Class A-3 Notes, at an annual percentage rate equal to % (the "Class A-3 Note Rate") and (iv) the Class A-4 Notes, at an annual percentage rate equal to % (the "Class A-4 Note Rate"). All such payments will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The final maturity date for each Class of Class A Notes (the "Stated Maturity Date") will be the November 2003 Distribution Date. A "Business Day" will be a day other than a Saturday or Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, Wilmington, Delaware, Deerfield Beach, Florida, or Mobile, Alabama, are authorized or obligated by law, executive order or government decree to be closed. As described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", distributions in respect of interest on the Class B Notes will be subordinated to distributions in respect of interest on the Class A Notes under certain circumstances. THE REVOLVING PERIOD; SUBSEQUENT CONTRACTS AND SUBSEQUENT LEASED VEHICLES................. No principal will be payable on the Notes until the December 1998 Distribution Date or, upon the occurrence of an Early Amortization Event, until the Distribution Date in the month immediately succeeding the month in which such Early Amortization Event occurs. From and including the Closing Date and ending on the day immediately preceding the commencement of the Amortization Period (i.e., the earlier of November 1, 1998 or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and reimbursements of Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Class A-1, Class A-2, Class A-3, Class A-4 and Class B Note Balances at constant levels during the Revolving Period, except to the extent there are unreimbursed Note Principal Loss Amounts in respect of any such Class, in which case the Note Balance of the related Class of Notes will decrease until such time, if any, as such Note Principal Loss Amounts are reimbursed as described under "Description of the Notes -- Distributions on the Notes -- Distribu- tions of Interest". The events that might lead to the termination of the Revolving Period prior to its scheduled termination date are described under "Description of the Notes -- Early Amortization Events". Prior to the twenty-fifth calendar day (i) in each month (beginning November 1997) during the Revolving Period and (ii) if no Early Amortization Event has occurred, in the month in which the Amortization Date occurs, on one or more days selected by the Servicer (each, a "Transfer Date"), the Servicer will direct the Origination Trustee to reinvest Principal Collections and certain Loss Amounts that otherwise would be reimbursed to the Noteholders in certain lease contracts and the related leased vehicles of the Origination Trust that are not evidenced by the SUBI or any Other SUBI. Upon such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the twenty-fifth calendar day of any month (beginning November 1997) during the Revolving Period the amount of Principal Collections and such otherwise reimbursable Loss Amounts as of the last day of the immediately preceding month that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles exceeds $1,000,000, an Early Amortization Event will occur, the Revolving Period will terminate as of such day and all unreinvested Principal Collections and all such Loss Amounts will be distributed as principal to Noteholders on the immediately succeeding Distribution Date. For further details concerning the application of Principal Collections and Loss Amounts, see "Summary -- Amortization Period; Principal Payments", "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts", "The Trust and the SUBI -- The SUBI" and "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Revolving Period". The Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Origination Trust's portfolio of lease contracts and related vehicles that are not allocated to (or reserved for allocation to) any Other SUBI, based on the same criteria as are applicable to the Initial Contracts and the other criteria described under "The Contracts -- Representations, Warranties and Covenants". If allocations are being made in respect of any one or more previous Other SUBI(s) at the same time out of the Origination Trust's general pool of unreserved lease contracts, reinvestment will be made first in respect of such previous Other SUBI(s). For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract (including any payment in respect of the related Leased Vehicle, but other than any payment as to which a Loss Amount has been realized and allocated during any prior Collection Period), discounted to the extent required below. A "Collection Period" will be each calendar month. For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than approximately 8.0% (each, a "Discounted Contract") will be discounted to present value at a rate of approximately 8.0%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Noteholders. "Collections" with respect to any Collection Period will include all net collections received on or in respect of the Contracts and Leased Vehicles during such Collection Period other than Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy, such as Monthly Payments (including amounts in the SUBI Collection Account that previously constituted Payments Ahead but which represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds, Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds and any Undistributed Transferor Excess Collections in respect of the immediately preceding Collection Period, less an amount equal to the sum of (i) Payments Ahead with respect to one or more future Collection Periods, (ii) amounts paid to the Servicer in respect of outstanding Advances, Matured Leased Vehicle Expenses, Repossessed Vehicle Expenses, other Liquidation Expenses and Insurance Expenses, (iii) late payment charges, payments of insurance premiums, excise taxes or similar items and (iv) Additional Loss Amounts in respect of such Collection Period. In addition, if such Collection Period occurs during the Revolving Period, amounts otherwise payable to the Noteholders on the related Distribution Date as reimbursement of Loss Amounts allocable to the Notes (as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest") will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. "Interest Collections" with respect to any Collection Period generally will equal the amount by which Collections exceed Principal Collections. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses. "Net Matured Leased Vehicle Proceeds" will be Matured Leased Vehicle Proceeds received during a Collection Period net of Matured Leased Vehicle Expenses incurred during such Collection Period. AMORTIZATION PERIOD; PRINCIPAL PAYMENTS....... The "Amortization Period" will commence on the earlier of November 1, 1998 (the "Amortization Date") or the day on which an Early Amortization Event occurs, and will end when each Class of Notes has been paid in full and all Note Principal Loss Amounts and Class B Note Principal Carryover Shortfalls, if any, have been repaid in full, together with accrued interest thereon, or when the Trust otherwise terminates. During the Amortization Period, Principal Collections and certain reimbursed Loss Amounts will no longer be reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. Instead, on each Distribution Date beginning with the Distribution Date in the month following the month in which the Amortization Period commences and ending on the Distribution Date on which the Class A-3 Notes have been paid in full, all Principal Collections for the related Collection Period that are allocable to the Notes will be distributed as principal payments first to the Class A-1 Noteholders until the Class A-1 Notes have been paid in full, second, to the Class A-2 Noteholders until the Class A-2 Notes have been paid in full, third, to the Class A-3 Noteholders until the Class A-3 Notes have been paid in full and thereafter the Class A Percentage and the Class B Percentage of any remaining such Principal Collections will be distributed as principal payments to the Class A-4 Noteholders and to the holders of record of the Class B Notes (the "Class B Noteholders" and, together with the Class A Noteholders, the "Noteholders"), respectively. On each Distribution Date after the Class A-3 Notes have been paid in full, the Class A Percentage and the Class B Percentage of Principal Collections for the related Collection Period allocable to the Notes will be distributed to the Class A-4 Noteholders and the Class B Noteholders, respectively, until the related Class of Notes has been paid in full. Certain Loss Amounts incurred during the Amortization Period will be reimbursed to the Noteholders as described below. The "Class A Percentage" will mean the Class A Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time, and the "Class B Percentage" will mean the Class B Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time. The Class A Percentage and the Class B Percentage will not change after they are set. In no event will the principal distributed in respect of any Class of Notes exceed its Note Balance. In addition, under certain circumstances, (i) Class A Noteholders will be entitled to receive reimbursement of an allocable percentage of Loss Amounts as a distribution of principal from sources other than Principal Collections and (ii) principal allocable to the Class B Notes may instead be distributed in respect of Loss Amounts allocable to the Class A-4 Notes, Class A-4 Note Principal Loss Amounts and accrued and unpaid interest thereon, as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal" and "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts". See "Description of the Notes -- Early Amortization Events" for a description of the events that might lead to the commencement of the Amortization Period prior to the Amortization Date. During the Amortization Period, the amount of Principal Collections allocable to the Notes in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period allocable to the SUBI Interest multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Note Balance and the denominator of which is 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- The Contracts", as of the last day of the last Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. See "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage" for a description of calculation of the Investor Percentage relating to Interest Collections and Loss Amounts. Allocations based upon the Principal Allocation for Principal Collections during the Amortization Period may result in distributions of principal with respect to a Collection Period during the Amortization Period to Noteholders in amounts that are greater relative to the declining balance of the Note Balance than would be the case if no fixed Investor Percentage were used to determine the percentage of Principal Collections distributed in respect of the Notes. Additionally, to the extent that on any Distribution Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period allocable to the SUBI Interest remains after required distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Reserve Fund Cash Requirement. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of 0.25%, (ii) 99.8% and (iii) the Aggregate Net Investment Value as of the last day of such Collection Period (the "Accelerated Principal Distribution Amount"), will be distributed as an additional payment of principal to the Noteholders in the same manner and priority as principal is distributed in respect of the Notes as described in the preceding paragraphs. See "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" and "Description of the Notes -- The Accounts -- The SUBI Collection Account -- Withdrawals from the SUBI Collection Account" for further information regarding the foregoing matters. OPTIONAL REDEMPTION........ The Notes will be subject to redemption if the Transferor exercises its option to purchase all of the assets of the Trust, which option may be exercised on any Distribution Date if, either before or after giving effect to any payment of principal required to be made on such Distribution Date, the Note Balance has been reduced to an amount less than or equal to 10% of the Initial Note Balance, at a purchase price determined as described under "Description of the Notes -- Termination of the Trust; Redemption of the Notes". SECURITY FOR THE NOTES..... The security for the Notes will consist primarily of the following: A. THE SUBI................ The SUBI will evidence a beneficial interest in the SUBI Assets. The Origination Trust was created pursuant to a trust agreement (the "Origination Trust Agreement"), among ALFI L.P., as grantor and initial beneficiary, the Origination Trustee and U.S. Bank, as trust agent (in such capacity, the "Trust Agent"). The SUBI Interest will be evidenced by a Certificate (the "SUBI Certificate") evidencing a 99.8% beneficial interest in the SUBI Assets that will be issued by the Origination Trust pursuant to a supplement to the Origination Trust Agreement dated as of October 1, 1997 (the "SUBI Supplement" and, together with the Origination Trust Agreement, the "SUBI Trust Agreement"). The Indenture Trustee and the Owner Trustee will be third party beneficiaries of the SUBI Trust Agreement. The Transferor will permanently hold the Retained SUBI Interest, representing the 0.2% beneficial interest in the SUBI Assets not evidenced by the SUBI Certificate. The Origination Trust Assets evidenced by the SUBI will primarily include the Contracts and the Leased Vehicles. The SUBI will not evidence an interest in any Origination Trust Assets other than the SUBI Assets, and payments made on or in respect of all other Origination Trust Assets will not be available to make payments on the Notes. For more information regarding the SUBI, see "The Trust and the SUBI" and "The Origination Trust". B. THE RESIDUAL VALUE INSURANCE POLICY........ Automobile and light duty truck leasing companies such as World Omni sometimes obtain residual value insurance to minimize losses in respect of the residual values of leased vehicles. Although many forms of such insurance are available, in general, claims are made if the proceeds of the sale of a leased vehicle are less than its residual value established at the time of origination of the related closed-end lease contract. On the Closing Date, American International Specialty Lines Insurance Company ("AISLIC" or the "RV Insurer") an indirect subsidiary of American International Group, Inc. ("AIG"), will issue an insurance policy (the "Residual Value Insurance Policy") to the Transferor (with the Origination Trustee, the Owner Trustee, the Indenture Trustee and ALFI L.P. also named as insureds), which will provide coverage for the Insured Residual Value Loss Amount for any Collection Period. The aggregate maximum amount payable under the Residual Value Insurance Policy with respect to any Leased Vehicle will be the lesser of $60,000 and its insured residual value, calculated as described under "Security for the Notes -- The Residual Value Insurance Policy". Additionally, the aggregate maximum amount payable under the Residual Value Insurance Policy will not exceed the aggregate insured residual values of all Leased Vehicles. Prior to each Distribution Date, the Servicer will make a claim for any Insured Residual Value Loss Amount under the Residual Value Insurance Policy. The proceeds of any such claim will be used to make the payments described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". For a fuller description of these mechanics, see "Security for the Notes -- The Residual Value Insurance Policy". The "Insured Residual Value Loss Amount" for any Collection Period will be the lesser of (i) the Investor Percentage of the Residual Value Loss Amount allocable to the SUBI Interest, and (ii) any shortfall in the amount required to make all payments (other than deposits into the Reserve Fund) required to be made on the related Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", after application of the Investor Percentage of Interest Collections allocable to the SUBI Interest and Transferor Amounts otherwise payable in respect of the Transferor Interest, as described below under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". C. THE RESERVE FUND........ The Trust will have the benefit of the Reserve Fund maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor (as holder of the Transferor Interest). The Reserve Fund is designed to provide additional funds for the benefit of the Noteholders in the event that on any Distribution Date Interest Collections allocable to the Notes for the related Collection Period, plus Transferor Amounts otherwise distributable in respect of the Transferor Interest, plus any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy for the related Collection Period, are insufficient to pay, among other things, the sum of (i) accrued interest and any overdue interest (with interest thereon) at the applicable Note Rate on the Notes on such Distribution Date, (ii) any Loss Amount for such Collection Period allocable to the Notes, calculated as described under "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage", and (iii) any unreimbursed Note Principal Loss Amounts, together with interest thereon at the applicable Note Rate. Monies on deposit in the Reserve Fund also will be available to Noteholders should Collections ultimately be insufficient to pay in full any Class of Notes. For further information regarding the Reserve Fund, see "Security for the Notes -- The Reserve Fund". The Reserve Fund will be created with an initial deposit by the Transferor of approximately $11,990,580 (the "Initial Deposit") (which amount will equal 1.0% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). On each Distribution Date, the funds in the Reserve Fund will be supplemented by (i) certain Interest Collections, as more fully described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", (ii) income realized on the investment of amounts on deposit in the Reserve Fund and (iii) in certain circumstances, the deposit of monies in respect of the related Collection Period remaining in the Distribution Account after making all payments required to be made therefrom on such Distribution Date prior to such deposit, including monies that would otherwise be distributed or applied in respect of the Transferor Interest, until the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement then in effect, calculated as described under "Security for the Notes -- The Reserve Fund -- The Reserve Fund Cash Requirement". The Transferor may be required under certain circumstances to deposit funds into the Reserve Fund in an amount equal to certain Reserve Fund supplemental requirements. For a description of the circumstances under which the Transferor will be required to make such deposits, see "Security for the Notes -- The Reserve Fund". For further information regarding deposits into the Reserve Fund, see "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". After giving effect to all payments from the Reserve Fund on a Distribution Date, monies on deposit therein that are in excess of the Reserve Fund Cash Requirement generally will be paid to the Transferor, free and clear of any lien of the Trust. D. SUBORDINATION OF THE TRANSFEROR INTEREST..... The Transferor Interest will initially equal approximately $26,978,805, and will represent the entire equity interest in the Trust. However, to provide additional credit enhancement for the Notes, on each Distribution Date, no payments will be made to the Transferor in respect of the Transferor Interest until all payments required to be made on such Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" have been made and the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement. For a description of certain payments made to the Transferor, see "Description of the Notes -- Certain Payments to the Transferor". THE CONTRACTS.............. The Contracts will consist of a pool of retail closed-end lease contracts originated by Dealers located throughout the United States, each of which will have an original term of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price), plus an implicit rate in each Lease calculated as an annual percentage rate (the "Lease Rate") on a constant yield basis. The Contracts will provide for equal monthly payments (the "Monthly Payments") such that at the end of the related Contract term such capitalized cost will have been amortized to an amount equal to the residual value of the related Leased Vehicle established at the time of origination of such Contract (the "Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of 49,166 lease contracts. As of the Initial Cutoff Date, the Lease Rate of the Initial Contracts ranged from 3.08% to 12.94%, with a weighted average Lease Rate of approximately 8.80%. The aggregate of the original principal balances of the Initial Contracts as of their respective dates of origination was approximately $1,266,000,709. As of the Initial Cutoff Date, the aggregate Outstanding Principal Balance of the Initial Contracts was approximately $1,205,609,324, the aggregate Residual Value of the Initial Leased Vehicles was approximately $833,211,953 and the Initial Contracts had a weighted average original term of approximately 40.96 months and a weighted average remaining term to scheduled maturity of approximately 34.47 months. See "The Contracts" for further information regarding the Initial Contracts. The Initial Contracts were, and the Subsequent Contracts will be, identified by the Servicer from the Origination Trust's portfolio of lease contracts originated by Dealers located throughout the United States that are not evidenced by (or reserved for allocation to) any Other SUBI, based upon the criteria specified in the SUBI Trust Agreement and described under "The Contracts -- Characteristics of the Contracts" and "-- Representations, Warranties and Covenants". The "Aggregate Net Investment Value" as of any day will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than two full Collection Periods (the "Matured Leased Vehicle Inventory") and (iii) during the Revolving Period, the amount of Principal Collections and Loss Amounts that otherwise would be reimbursed to the Noteholders, if any, that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The "Discounted Principal Balance" of (i) a Discounted Contract will equal the present value of all remaining Monthly Payments on such Contract and the Residual Value of the related Leased Vehicle, calculated using a discount rate of approximately 8%, and (ii) all Contracts other than Discounted Contracts will equal their Outstanding Principal Balance. As of the Initial Cutoff Date, the aggregate Discounted Principal Balance of the Initial Contracts and the Aggregate Net Investment Value was approximately $1,201,460,915. THE LEASED VEHICLES........ The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will be either new vehicles, dealer demonstrator vehicles or manufacturers' program vehicles, as described under "The Contracts -- General". Manufacturers' program vehicles are vehicles which have been sold directly by manufacturers to rental car companies and returned to the manufacturer for resale. The certificates of title to the Initial Leased Vehicles have been, and the certificates of title to the Subsequent Leased Vehicles will be, registered at all times in the name of the Origination Trustee (in its capacity as trustee of the Origination Trust). Such certificates of title will not reflect the indirect interest of the Owner Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI or any security interest of the Indenture Trustee. Therefore, the Indenture Trustee will not have a perfected lien in the Leased Vehicles, although it will be deemed to have a perfected security interest in the SUBI Certificate and certain other assets. For further information regarding the titling of the Leased Vehicles and the interest of the Indenture Trustee therein, see "The Origination Trust -- Contract Origination; Titling of Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles -- Back-up Security Interests". THE ACCOUNTS............... The Indenture Trustee will maintain the SUBI Collection Account for the benefit of the Noteholders. Within two Business Days of receipt, payments made on or in respect of the Contracts or the Leased Vehicles generally will be deposited by the Servicer into the SUBI Collection Account. Such payments will include, but will not be limited to, Monthly Payments made by lessees, Monthly Payments determined by the Servicer to be due in one or more future Collection Periods (each, a "Payment Ahead"), Prepayments, proceeds from the sale or other disposition of Leased Vehicles relating to Matured Contracts (including payments for excess mileage and excess wear and use, but excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) ("Matured Leased Vehi- cle Proceeds"), proceeds received in connection with the sale or other disposition of Leased Vehicles that have been repossessed ("Repossessed Vehicle Proceeds") and other amounts received in connection with the realization of the amounts due under any Contract (excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), either from amounts on deposit in the SUBI Collection Account or as a deduction from Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds or other Liquidation Proceeds, as appropriate, deposited into the SUBI Collection Account. For further details regarding these deposits and reimbursements, see "Description of the Notes -- The Accounts -- The SUBI Collection Account". On the Business Day immediately preceding each Distribution Date (each, a "Deposit Date"), the following amounts will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) Reallocation Payments by World Omni (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred. Thereafter, 99.8% of Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, 99.8% of Principal Collections) on deposit in the SUBI Collection Account in respect of the related Collection Period will be allocable to the SUBI Interest and deposited into the Distribution Account maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor. Any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy will be deposited into the SUBI Collection Account (if it relates to the Revolving Period) or the Distribution Account (if it relates to the Amortization Period) within one Business Day of receipt by the Servicer. Any Required Amount will be withdrawn from the Reserve Fund and deposited into the Distribution Account on each Distribution Date. All payments to Noteholders will be made from the Distribution Account. The remaining 0.2% of Collections will be distributed on such Distribution Date to the Transferor in respect of the Retained SUBI Interest, which amounts in no event will be available to make payments on the Notes. Any funds remaining in the Distribution Account on a Distribution Date in respect of the related Collection Period following the payment of amounts required to be paid therefrom generally will be paid to the Transferor. For further information regarding these deposits and payments, see "Description of the Notes -- The Accounts -- The Distribution Account" and "-- The SUBI Collection Account". ADVANCES................... On each Deposit Date the Servicer will be obligated to make, by deposit into the SUBI Collection Account, an advance equal to the aggregate Monthly Payments due but not received during the related Collection Period with respect to Contracts that are 31 days or more past due as of the end of such Collection Period, and the Servicer may (but shall not be required to) make such an advance with respect to Contracts that are one or more days, but less than 31 days, past due as of the end of such Collection Period (each, an "Advance"). The Servicer will not be required to make any Advance to the extent that it determines that such Advance may not be ultimately recoverable by the Servicer from Net Liquidation Proceeds or otherwise. For further information regarding Advances, see "Additional Document Provisions -- The Servicing Agreement -- Advances". SERVICING COMPENSATION..... The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets allocable to the SUBI Interest (the "Servicing Fee"), payable on each Distribution Date, equal to one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Distribution Date, one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees and other administrative fees or similar charges under the Contracts. For further information regarding Servicer compensation, see "Additional Document Provisions -- The Servicing Agreement -- Servicing Compensation". TAX STATUS................. Cadwalader, Wickersham & Taft, special federal income tax counsel to the Transferor, is of the opinion that the Class A Notes will be characterized as indebtedness for federal income tax purposes, as described under "Material Income Tax Considerations -- Federal Taxation". Each Class A Noteholder, by its acceptance of a Class A Note, and each Note Owner, by its acquisition of an interest in the Class A Notes, will agree to treat the Class A Notes as indebtedness for federal, state and local income tax purposes. Prospective investors are advised to consult their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of the Class A Notes, and the tax consequences arising under the laws of any state or other taxing jurisdiction. For further information regarding material federal income tax considerations with respect to the Class A Notes, see "Material Income Tax Considerations -- Federal Taxation". ERISA CONSIDERATIONS....... As more fully described under "ERISA Considerations", an employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the provisions of Section 4975 of the Internal Revenue Code of 1986, as amended, contemplating the purchase of Class A Notes should consult its counsel before making a purchase, and the fiduciary of such plan and such legal advisors should consider the matters discussed herein. RATINGS.................... It is a condition of issuance of the Class A Notes that each of Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's ("Standard & Poor's") and Fitch Investors Service, L.P. ("Fitch" and, together with Moody's and Standard & Poor's, the "Rating Agencies") rates each Class of Class A Notes in its highest rating category. The ratings of the Class A Notes should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold the related Class A Notes, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The ratings of the Class A Notes address the likelihood of the payment of principal of and interest on the Class A Notes pursuant to their terms. For further information concerning the ratings assigned to the Class A Notes, including the limitations of such ratings, see "Ratings of the Class A Notes".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000921960_photoelect_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000921960_photoelect_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2d57bcfb5169c0f5d34ccb380b7d721ae7a3498a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000921960_photoelect_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise specified, the information contained in this Prospectus has been adjusted to give effect to a one-for-two reverse stock split of the Common Stock and the Preferred Stock to be effective prior to the closing of this offering and the conversion of each outstanding share of Preferred Stock into Common Stock upon such closing. Unless otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. As used herein, unless the context requires otherwise, the term "Company" includes Photoelectron Corporation and its subsidiary, Photoelectron (Europe) Ltd. The Common Stock offered hereby involves a high degree of risk. Prospective investors should carefully consider the risks set forth under the heading "Risk Factors." THE COMPANY The Company is engaged in the design, development and commercialization of the Photon Radiosurgery System ("PRS"), a proprietary, therapeutic device for the treatment of cancerous tumors through the application of x-ray radiation directly to the tumor site. The PRS delivers in a single treatment a high dose of radiation through a thin, minimally invasive, needle-like probe, which emits from its tip precisely controlled low energy x-rays that irradiate the tumor from the inside out. The limited penetration of low energy x-rays in tissue substantially confines the radiation to the tumor site. The Company believes that the PRS offers a number of advantages over conventional radiation therapies by allowing higher radiation doses with shorter patient treatment times. Substantial confinement of the radiation to the tumor boundaries significantly reduces the risk of radiation exposure to the surrounding healthy tissue and important organs or critical structures. Cancerous tumors are expected to account for 90% of the approximately 1.3 million new U.S. cancer cases anticipated in 1996. Such tumors are most often treated through invasive surgery, the destruction of cancerous cells by exposure to radiation, or a combination of the two. The most common form of treatment of cancerous tumors is by invasive surgery. The Company believes that the PRS provides an attractive, minimally invasive alternative to surgery, resulting in significantly less patient trauma, shorter hospital stays and lower treatment costs than surgery. The PRS can be applied after performing a biopsy and, when desirable, use of the PRS can be coupled with surgical procedures. Next to surgery, radiation therapy is the most common modality of treating cancer. Approximately 50% of all cancer patients in the U.S. receive radiation therapy at some point during the course of their disease. Radiation can be administered to a tumor by external beams or interstitially by inserting a radiative source into the patient. With external beams, radiation must pass through, and may potentially damage, healthy tissue before reaching the tumor, whereas the PRS delivers radiation directly to the tumor site. An established form of treatment, called brachytherapy, delivers radiation directly to a tumor site by the insertion of radioactive isotopes. In comparison to this form of treatment, the Company believes that the PRS offers a greater ability to control and localize low energy radiation doses, and avoids the costs and risks associated with the storage, handling and disposal of radioactive materials. The Company believes that the PRS also offers significant advantages over other forms of therapy, such as the destruction of cancerous cells by heating, cooling or the use of laser light. To date, the Company has focused its clinical efforts primarily on the treatment of metastatic brain tumors. However, the PRS is being developed for a variety of applications, including the treatment of primary brain tumors as well as breast, prostate, bladder, skin and other cancers. The method of treatment will depend on the application. The Company expects that the three basic PRS treatment methods will be: (i) the "interstitial" irradiation of localized tumors from the inside out; (ii) the "intracavitary" irradiation of body cavities; and (iii) the "intraoperative" irradiation of tumors during surgery or of the beds of surgically removed tumors in order to destroy remaining cancerous cells. Because of the particularly sensitive nature of the brain and its surrounding organs and critical structures, such as the optic nerves, damage from external radiation and surgical procedures can severely harm the patient. Accordingly, aggressive treatment of brain cancers has historically been limited. The PRS, however, has been used to treat metastatic brain tumors in 57 patients in its clinical trials. Although the studies are not yet complete, in the Company's opinion, based primarily on two autopsies, the PRS has destroyed all cancerous tissue which has been targeted with an adequate dose of radiation. Based on these results, the Company believes that the PRS can be applied to treat primary brain tumors and other cancerous tumors throughout the body, with reduced risk of damage to surrounding tissue. Phase II clinical trials for the treatment of metastatic brain tumors are currently ongoing with respect to this application. On December 11, 1996, the Company submitted an application under Section 510(k) of the Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act") to the U.S. Food and Drug Administration ("FDA") seeking clearance to commercialize the current model of the PRS for treatment of metastatic brain tumors. Locally approved clinical trials for the treatment of brain tumors are also being performed at sites in Europe and Japan. The Company currently anticipates that the first clinical trials to determine the safety of the PRS for treatment of breast cancer will begin in early 1997. A protocol for human clinical trials of the PRS to treat prostate tumors has been approved by the ethics committee of a London hospital and animal trials relating to the use of the PRS in treating bladder tumors are currently underway in the U.S. The Company will consider the use of the PRS for other potential applications on an ongoing basis. The Company's strategy is to (i) utilize its core technology for the treatment of metastatic brain tumors and additional applications, (ii) build relationships with medical professionals and institutions, (iii) obtain regulatory clearance for the PRS in the U.S. and internationally, initially for treatment of metastatic brain tumors and subsequently for other forms of cancer, (iv) pursue commercial acceptance of the PRS in the U.S. and internationally by relying on internal resources and collaborative relationships to create sales and distribution capabilities, and (v) protect its intellectual property rights. The Company and Toshiba Medical Systems Company, Ltd. ("Toshiba") have entered into agreements relating to performance of clinical trials, and to future product distribution arrangements in Japan. The Company holds nine U.S. patents and four U.S. patent applications relating to the PRS or its constituent or ancillary components. The Company has also obtained or filed patent applications in other selected foreign countries. The Company was formed in 1989 as a joint venture between Thermo Electron Corporation ("Thermo Electron") and an investment entity organized by Peter M. Nomikos, the Company's President and Chief Executive Officer. Mr. Nomikos co- founded Thermo Electron with George N. Hatsopoulos, Ph.D., a director of the Company. The Company was incorporated in Massachusetts in 1989. The Company's principal executive offices are located at 5 Forbes Road, Lexington, Massachusetts 02173, and its telephone number is (617) 861-2069. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 2,000,000 shares (1) Common Stock to be outstanding after the offering.. 6,484,666 shares (2) Use of proceeds.................................... To fund research and development and clinical trials, for manufacturing and marketing purposes and for working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq Stock Market's National Market Symbol....... PECX </TABLE> - -------- (1) Assumes that the Underwriters' over-allotment option is not exercised. (2) Based upon the number of shares outstanding at December 3, 1996. Excludes 1,417,334 shares of Common Stock issuable upon exercise of warrants outstanding at December 3, 1996 with an exercise price of $3.00 per share and 881,249 shares of Common Stock issuable upon conversion of the Company's 8% convertible debt outstanding at September 28, 1996 with a weighted average conversion price of $2.28. Also excludes 812,975 shares of Common Stock issuable upon exercise of options outstanding at December 3, 1996 with a weighted average exercise price of $4.70 per share. See Notes 6, 7, 8 and 9 of Notes to Consolidated Financial Statements, "Description of Capital Stock," "Management--Officers and Directors," and "--Executive Compensation" and "Certain Transactions." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FISCAL YEAR ENDED NINE MONTHS ENDED (1) ------------------------------------------------------------ --------------------------- DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28, 1991 1993 1994 1994 1995 1995 1996 ------------ ---------- ---------- ------------ ------------ ------------- ------------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Research and development expenses............... $ 784 $ 1,227 $ 1,727 $ 2,086 $ 3,226 $ 1,721 $ 2,263 General and administrative expenses............... 116 192 251 505 866 543 1,168 Net loss................ $ (974) $ (1,586) $ (2,267) $ (2,672) $ (4,117) $ (2,331) $ (3,319) Net loss per share...... $ (0.90) $ (1.25) $ (1.55) $ (1.60) $ (2.85) $ (1.61) $ (1.73) Pro forma net loss per share (2).............. $ -- $ -- $ -- $ -- $ (1.02) $ -- $ (0.74) Weighted average common and common equivalent shares outstanding..... 1,087 1,266 1,466 1,669 1,447 1,446 1,919 Pro forma weighted average common and common equivalent shares outstanding (2).................... -- -- -- -- 4,032 -- 4,503 </TABLE> <TABLE> <CAPTION> SEPTEMBER 28, 1996 (1) ----------------------------- PRO FORMA (3) AS ADJUSTED (4) ------------- --------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............ $ 4,005 $ 25,470 Total assets............ 6,037 27,502 Total long-term debt, including current portion................ 2,013 2,013 Deficit accumulated during development stage.................. (15,744) (15,744) Total shareholders' equity................. 3,803 25,268 </TABLE> - -------- (1) Derived from unaudited financial statements. (2) Includes 2,583,295 shares of Common Stock to be issued upon the conversion of all of the outstanding preferred stock. The remaining 309,017 shares of Common Stock to be issued upon the conversion of all outstanding preferred stock is included in historical loss per share for all periods pursuant to certain Securities and Exchange Commission requirements. (3) Gives effect to the conversion of all of the outstanding Preferred Stock into 2,892,312 shares of Common Stock, which will automatically occur on the closing of this offering. The Company's Preferred Stock consists of three separate series; 1,282,005 shares of Series A Convertible Preferred Stock, 500,000 shares of Series B Convertible Preferred Stock, and 1,110,307 shares of Series C Convertible Preferred Stock were outstanding as of September 28, 1996. Each share of Preferred Stock is convertible into one share of Common Stock. See Notes 6, 7, 8 and 9 of Notes to Consolidated Financial Statements, "Description of Capital Stock," "Management--Officers and Directors," "--Executive Compensation" and "Certain Transactions." (4) Adjusted to give effect to the sale of the 2,000,000 shares of Common Stock offered hereby, at an assumed initial public offering price of $12.00 per share after deducting the estimated underwriting discounts and commissions and offering expenses payable by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000922341_seabulk_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000922341_seabulk_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..968f7ad6461de5d4ce537bab30fd32482d501608
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000922341_seabulk_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. The Pro Forma Condensed Consolidated Financial Statements and other pro forma operating data included in this Prospectus give effect to the IPO, the repayment of certain indebtedness with proceeds of the IPO, and the acquisition of the OMI Chemical Carriers, the Seal Fleet Vessels, and vessels from GBMS (as each such term is defined herein) and one additional vessel but do not give effect to the Current Acquisitions (as defined herein) or the Offering. Unless the context otherwise requires, all references in the Prospectus to the "Company" or "Hvide" include Hvide Marine Incorporated, its predecessors, and its consolidated subsidiaries. See "Glossary" for definitions of certain terms used herein. THE COMPANY Hvide (pronounced "vee-dah") provides marine support and transportation services primarily in the U.S. domestic trade and principally to the energy and chemical industries. The Company is the third largest operator of supply and crew boats in the U.S. Gulf of Mexico. In addition, the Company is the sole provider of commercial tug services in Port Everglades and Port Canaveral, Florida, and a leading provider of such services in Mobile, Alabama. The Company also transports petroleum products and specialty chemicals in the U.S. domestic trade, a market insulated from international competition under the Jones Act. The total capacity of the Company's five chemical carriers represents approximately 44% of the capacity of the domestic specialty chemical carrier fleet. In addition, the Company has options to acquire up to a 75% interest in five double-hull petroleum product carriers currently under construction for delivery during 1998. The Company has grown rapidly through a series of acquisitions, increasing its marine support fleet from 20 vessels in 1993 to 74 vessels currently and its marine transportation fleet from three vessels in 1993 to 29 vessels currently. Primarily as a result of these acquisitions, the Company's revenue increased 196% from $41.5 million in 1993 to $123.0 million in 1995, on a pro forma basis. Over the same period, the Company's EBITDA increased 181% from $11.3 million to $31.7 million and its income from operations increased 186% from $6.6 million to $18.9 million, in each case on a pro forma basis. For the nine months ended September 30, 1996, the Company reported revenue, EBITDA, and operating income of $101.0 million, $27.1 million, and $16.0 million, respectively, in each case on a pro forma basis. For other measures of the Company's operating results as determined under generally accepted accounting principles and its pro forma operating results, see "Selected Historical and Pro Forma Consolidated Financial Data" and the Company's consolidated financial statements. The Company has recently acquired or entered into agreements to acquire an aggregate of seven supply boats, five crew boats, one offshore anchor handling tug, and two harbor tugs (the "Current Acquisitions"). The Current Acquisitions, which upon completion will increase the Company's marine support fleet from 74 to 89 vessels, will be funded in part with proceeds of the Offering. The $51.2 million aggregate cost of the Current Acquisitions includes the estimated cost of upgrading, refurbishing, and lengthening two of the supply boats to 225-foot, 4,300-hp dynamically positioned vessels for use in deepwater service. See "Use of Proceeds" and "Business -- Current Acquisitions." The Company's strategy is to realize the benefits presented by the integration of its recent and pending acquisitions with its existing operations and to continue to grow through selected acquisitions that further consolidate the marine support and transportation services markets in which the Company operates. The Company believes it has numerous opportunities to make further accretive acquisitions in its core businesses. Critical elements of the Company's strategy include continuing to (i) utilize its demonstrated expertise in acquiring vessels, thereby further consolidating its niche markets, (ii) emphasize U.S. domestic operations, (iii) develop and apply marine technology to meet its customers' needs in an innovative and cost-effective manner, (iv) maintain and pursue long-term customer relationships that limit the risk associated with the investments required for new vessels and mitigate the effects of industry cyclicality, and (v) enhance its record of quality service and safety. MARINE SUPPORT SERVICES Offshore Energy Support. The Company's fleet of 75 offshore energy support vessels, giving effect to the Current Acquisitions, consists of 31 supply boats, 42 crew boats, and two utility boats that transport supplies and personnel and provide towing and other support services to offshore oil and natural gas exploration and production operations, primarily in the U.S. Gulf of Mexico. The offshore energy support industry in the U.S. Gulf of Mexico has experienced substantial consolidation and vessel attrition during the past decade. The Company believes that industry fundamentals have improved, and expects continued strong demand and further consolidation to result in increasing day rates and utilization. The Current Acquisitions strengthen the Company's position as the third largest operator of supply and crew boats in the U.S. Gulf of Mexico. This strengthened position will, at the same time, make the Company's operations more susceptible to fluctuations in oil and gas prices, which affect the level of offshore exploration and development activity and thus the demand for the services provided by the Company's offshore energy support vessels. In the past, the Company has sought to mitigate the adverse effect of reduced demand through cost reduction and relocation of support vessels to other markets. See "Risk Factors -- Cyclical Industry Conditions" and "Business -- The Industry -- Marine Support Services." Offshore and Harbor Towing. The Company's 14 tugs, giving effect to the Current Acquisitions, provide offshore towing services and harbor assistance to tankers, barges, containerships, other cargo vessels, and cruise ships calling at Port Everglades and Port Canaveral, Florida, and Mobile, Alabama. In Port Everglades and Port Canaveral, the Company is the sole franchisee providing commercial tug services. The Company directed the design and construction of its technologically advanced 5,100-hp tractor tug, the Broward, which is capable of providing escort services to tankers and other large vessels and specialized deepwater services to the offshore energy industry. In addition to these 14 tugs, the Company recently entered into one-year charters of two newly built 4,000-hp tugs with omni-directional propulsion systems, which are currently being used by the Company to provide harbor services. The Company intends to remove from service one tug currently engaged in harbor services in the second quarter of 1997. MARINE TRANSPORTATION SERVICES Chemical Transportation. The total capacity of the Company's five chemical carriers represents approximately 44% of the capacity of the domestic specialty chemical carrier fleet, and four of the vessels are among the last independently owned chemical carriers scheduled to be retired under the Oil Pollution Act of 1990 ("OPA 90"). Two of the carriers currently transport industrial chemicals in bulk parcel lots, and the other three carriers currently transport petroleum products and petrochemicals, primarily for major oil and chemical companies. The Company believes that domestic energy and chemical transportation freight rates will increase within the next three to five years and continue thereafter, as the supply of vessels eligible to carry petroleum products diminishes as a result of mandatory retirement imposed by OPA 90. Petroleum Product Transportation. The Company's petroleum product transportation fleet is currently comprised of the Seabulk Challenger, a 39,300 dwt product carrier, and a fleet of ten towboats and 13 fuel barges. The Seabulk Challenger has since 1975 operated under successive charters to Shell Oil Company ("Shell") (extending to January 2000) carrying refined petroleum products from Shell's refineries in Texas and Louisiana to various U.S. Gulf of Mexico and Atlantic coast ports. The towboat and barge fleet is engaged in the transportation of residual and diesel fuels along the Atlantic intracoastal waterway and in the St. Johns River in Florida, primarily for a major Florida utility. The Company also owns a minority interest in five 45,300 dwt double-hull petroleum product carriers currently under construction for delivery during 1998. The product carriers are intended to serve the domestic market currently served by single-hull tankers whose retirement is mandated by OPA 90. The Company, whose ownership is currently 2.4%, has options to purchase up to an additional 72.6% ownership interest in the vessels for a total estimated cost of up to $32.0 million (assuming exercise of the options before January 1, 1998). The Company is supervising the construction of the vessels and will provide operational management following delivery. OPA 90. OPA 90 requires, among other things, that existing single-hull vessels be retired from domestic transportation of petroleum products between 1995 and 2015, depending upon vessel size and age, unless retrofitted with double hulls. The Company's chemical carriers and its petroleum product carrier will be required to cease transporting petroleum products at various dates from 2000 to 2015, and its fuel barges will cease transporting fuel in 2015. See "Risk Factors -- Mandated Removal of Vessels from Jones Act Trade." The Company currently has no specific plans concerning the retrofitting or replacement of such vessels. THE OFFERING <TABLE> <S> <C> Class A Common Stock Offered: By the Company....................... 3,860,584 shares By the Selling Stockholders.......... 139,416 shares ------------------ Total........................ 4,000,000 shares ------------------ ------------------ Common Stock to be Outstanding After the Offering: Class A Common Stock.............. 11,508,375 shares(1) Class B Common Stock.............. 3,419,577 shares ------------------ Total........................ 14,927,952 shares ------------------ ------------------ </TABLE> Voting Rights................ The Company's outstanding capital stock consists of Class A Common Stock and Class B Common Stock (together, the "Common Stock"). Each holder of Class A Common Stock is entitled to one vote per share and each holder of Class B Common Stock is entitled to ten votes per share on all matters submitted to a vote of stockholders. Except as required by law and the Company's Articles of Incorporation, holders of the Class A Common Stock and the Class B Common Stock vote together as a single class. See "Description of Capital Stock." After the Offering, the holders of the Class A Common Stock and the Class B Common Stock will have 25.2% and 74.8% of the voting power of the Common Stock, respectively (26.3% and 73.7%, respectively, if the Underwriters' over-allotment option is exercised in full). Upon completion of the Offering, J. Erik Hvide, the Company's Chairman, together with certain trusts of which he is the trustee (the "Hvide Trusts"), and a group of investors (the "Investor Group") that in September 1994 purchased shares of Common Stock, Common Stock Contingent Share Issuances, and the Company's Junior Notes and Senior Notes (each as defined herein), will own shares that will represent 11.9% and 12.5%, respectively, of the outstanding shares of Common Stock (11.3% and 12.0%, respectively, if the Underwriter's over-allotment option is exercised in full) and 38.7% and 36.6%, respectively, of the voting power of all Common Stock (37.9% and 36.3%, respectively, if the Underwriters' over-allotment option is exercised in full). In addition, the Hvide Family (as defined herein) and the Investor Group have entered into an agreement giving them the right to nominate eight and three persons, respectively, to the Company's 11-member Board of Directors. The Company's Articles of Incorporation require that certain significant transactions be approved by 95% of the holders of the Class B Common Stock, which is held entirely by members of the Hvide Family and the Investor Group. See "Description of Capital Stock -- Certain Provisions of Articles of Incorporation and By-Laws" and "-- Shareholders Agreement" and "Risk Factors -- Control by Current Stockholders." Use of Proceeds to the Company...................... To fund the balance of the cost of the Current Acquisitions, to repay a portion of the Company's indebtedness, and for general corporate purposes. Nasdaq National Market Symbol....................... HMAR - ------------------------------------ (1) Excludes 806,000 shares of Class A Common Stock reserved for issuance upon exercise of currently outstanding options and 500,000 shares reserved for issuance under the Company's Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans." SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA The summary consolidated financial data presented below should be read in conjunction with the consolidated financial statements and notes thereto of the Company, the financial statements and notes thereto of the OMI Chemical Carriers, the Seal Fleet Vessels, and GBMS, "Selected Historical and Pro Forma Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Pro Forma Condensed Consolidated Financial Statements" included elsewhere in this Prospectus. The summary unaudited pro forma statement of operations data for the year ended December 31, 1995 and the nine months ended September 30, 1996 give effect to the acquisitions of the three OMI Chemical Carriers and the eight Seal Fleet Vessels in August 1996, the acquisition of eight crew boats from GBMS in January 1996, the acquisition of one vessel in February 1996, the August 1996 initial public offering of the Company's Class A Common Stock (the "IPO"), and the repayment of certain indebtedness, as if all such transactions had occurred on January 1, 1995 and January 1, 1996, respectively. Such pro forma data are presented for illustrative purposes only and do not purport to represent what the Company's results actually would have been if such events had occurred at the dates indicated, nor do such data purport to project the results of operations for any future period or as of any future date. The summary unaudited pro forma statements of operations data for the year ended December 31, 1995 and the nine months ended September 30, 1996 do not give effect to the Current Acquisitions or the Offering. The summary balance sheet data at September 30, 1996 have been adjusted to give effect to the Offering and the application of the estimated net proceeds therefrom. The results for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------- ----------------------------- PRO FORMA PRO FORMA 1993 1994 1995 1995 1995 1996 1996 (IN THOUSANDS, EXCEPT PER SHARE, VESSEL, AND OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue.......................................... $41,527 $ 49,792 $70,562 $122,985 $51,194 $72,130 $101,046 Income from operations........................... 6,584 5,838 11,072 18,925 7,854 12,877 16,010 Interest expense, net............................ 3,412 5,302 11,460 12,312 8,491 8,751 9,034 Income (loss) before provision for (benefit from) income taxes, extraordinary item and cumulative effect of a change in accounting principle..... 3,691 547 (362) 6,803 (581) 4,325 7,175 Income (loss) before extraordinary item and cumulative effect of a change in accounting principle...................................... 1,818 358 (360) 4,354 (581) 2,709 4,520 Loss on extinguishment of debt, net(1)........... -- -- -- -- -- 8,016 -- Cumulative effect of a change in accounting principle...................................... 1,491 -- -- -- -- -- -- ------- -------- ------- -------- ------- ------- -------- Net income (loss)................................ 3,309 358 (360) 4,354 (581) (5,307) 4,520 ======= ======== ======= ======== ======= ======= ======== EARNINGS (LOSS) PER COMMON SHARE: Income (loss) before extraordinary item and cumulative effect of a change in accounting principle(2)................................... $ 0.26 $ 0.03 $ (0.14) $ 0.40 $ (0.23) $ 0.68 $ 0.41 Net income (loss)(2)............................. 0.50 0.03 (0.14) 0.40 (0.23) (1.32) 0.41 ======= ======== ======= ======== ======= ======= ======== Weighted average number of common shares and common share equivalents outstanding(3)........ 6,268 5,302 2,535 10,905 2,535 4,018 11,064 ======= ======== ======= ======== ======= ======= ======== EARNINGS (LOSS) PER COMMON SHARE ASSUMING FULL DILUTION: Income before extraordinary item and cumulative effect of a change in accounting principle(2)................................... $ 0.26 $ 0.06 $ 0.12 $ 0.00 $ 0.64 Net income (loss)(2)............................. 0.50 0.06 0.12 0.00 (0.95) ======= ======== ======= ======= ======= Weighted average number of common shares and common share equivalents outstanding(3)........ 6,268 5,616 3,779 3,779 5,049 ======= ======== ======= ======= ======= OTHER FINANCIAL DATA: EBITDA(4)........................................ $11,319 $ 10,338 $17,380 $ 31,655 $12,545 $18,992 $ 27,135 ======= ======== ======= ======== ======= ======= ======== NET CASH PROVIDED BY (USED IN): Operating activities............................. $ 6,956 $ 2,858 $ 3,948 $ 71 $ 6,126 Investing activities............................. (2,247) (39,815) (8,066) (5,312) (61,738) Financing activities............................. (6,158) 41,249 805 1,715 58,160 </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, --------------------------- ----------------- 1993 1994 1995 1995 1996 <S> <C> <C> <C> <C> <C> VESSEL DATA (AT END OF PERIOD): Marine Support Services Supply boats............................................ 10 14 14 14 24 Crew boats(5)........................................... -- 21 28 28 39 Tugs.................................................... 10 10 11 11 11 Marine Transportation Services Chemical carriers....................................... 2 2 2 2 5 Product carriers........................................ 1 1 1 1 1 Towboats and barges..................................... -- 18 23 23 23 ------- ------- ------- ------- ------- Total............................................... 23 66 79 79 103 ======= ======= ======= ======= ======= OPERATING DATA: Supply boats: Average vessel day rates(6)............................... $ 2,696 $ 3,195 $ 3,023 $ 2,947 $ 4,276 Average vessel utilization(7)............................. 98% 84% 81% 77% 95% Crew boats: Average vessel day rates(6)............................... -- $ 1,421 $ 1,434 $ 1,426 $ 1,490 Average vessel utilization(7)............................. -- 88% 85% 84% 93% Tugs: Total offshore and ship docking tug revenue (in thousands).............................................. $10,585 $11,140 $12,582 $ 9,204 $10,234 Total ship docking tug jobs............................... 8,178 8,740 9,233 6,847 7,150 Chemical and product carriers: Time charter equivalents(8)............................... $24,765 $24,898 $26,034 $25,389 $26,227 </TABLE> <TABLE> <CAPTION> AT SEPTEMBER 30, 1996 ---------------------- ACTUAL AS ADJUSTED (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................... $ (105) $ 23,122 Total assets................................................ 254,616 321,261 Total debt.................................................. 134,317 113,006 Stockholders' and minority partners' equity................. 98,927 188,174 </TABLE> - ------------------------------------ (1) Reflects the loss on the extinguishment of debt from a portion of the proceeds of the IPO net of applicable income taxes of $1,405,000. (2) For the purpose of calculating earnings per share for the years 1993 and 1994, historical income available to common stockholders has been reduced for dividends on Class A Preferred Stock of $203,000 and $222,000, respectively. The Class A Preferred Stock was redeemed on September 30, 1994. See "Certain Transactions." (3) For the years 1993 and 1994, the weighted average number of common shares and common share equivalents assumes the conversion of the Class B Preferred Stock into shares of Common Stock. The Class B Preferred Stock was redeemed on September 30, 1994. For the years ended 1994 and 1995 and the nine months ended September 30, 1995 and 1996, shares outstanding assuming full dilution reflects the assumed conversion of a portion of the Junior Notes (as defined herein) into shares of Common Stock. The Junior Notes were issued in September 1994 and converted into shares of Common Stock in September 1996. Pro forma shares reflect the weighted average number of common shares giving effect to the issuance of 7,159,000 shares of Class A Common Stock in the IPO, 100,358 shares of Class A Common Stock in payment of services, 25,667 shares of Class A Common Stock in exchange for certain outstanding indebtedness, and 1,244,002 shares of Class A and Class B Common Stock in exchange for the principal amount of the Junior Notes remaining after the application of the proceeds of the IPO, and exclude 806,000 shares of Class A Common Stock reserved for issuance upon exercise of currently outstanding options and 500,000 shares reserved for issuance under the Company's Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000922471_budget_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000922471_budget_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..40d031b81828bdabbbb02cfa3d15bd496c5afa49
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000922471_budget_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus assumes that the Underwriters' over-allotment options are not exercised. As used in this Prospectus, unless the context otherwise requires, (i) "TEAM" refers to Budget Group, Inc. and its subsidiaries prior to its acquisition of Budget Rent a Car Corporation on April 29, 1997 (the "Budget Acquisition"); (ii) "BRACC" refers to Budget Rent a Car Corporation and its subsidiaries; (iii) the "Company" or "Budget Group" refers to TEAM (including BRACC) after giving effect to the Budget Acquisition; (iv) the "Budget System" or "Budget" refers to the business of renting cars and trucks and retailing late model vehicles conducted by the Company and its franchisees under the Budget name and (v) "Selling Stockholders" refers to Ford FSG, Inc., an affiliate of Ford Motor Company ("Ford"), Atlantic Equity Corporation, a wholly owned subsidiary of NationsBank Corporation ("NationsBank"), and Budget Rent-A-Car of Southern California ("SoCal"), a licensee of the Company and, through its wholly owned subsidiary, an operator of Budget locations in Southern California. In connection with the Budget Acquisition, Team Rental Group, Inc. changed its name to Budget Group, Inc. "Common Stock", as used herein, refers collectively and without distinction to the Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), and the Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), of the Company. THE COMPANY The Company and its franchisees operate the third largest worldwide general use car and truck rental system, with approximately 3,200 locations and a peak fleet size during 1996 of 266,000 cars and 18,000 trucks. The Budget System includes locations in both the airport and local (downtown and suburban) markets in all major metropolitan areas in the United States, in many other small and mid-size U.S. markets and in more than 110 countries worldwide. Pro forma for the Budget Acquisition, the Budget System included approximately 455 company-owned locations in the United States at December 31, 1996, accounting for approximately 76% of 1996 U.S. system-wide revenues. In addition, Budget franchisees operated approximately 500 royalty-paying franchise locations in the United States at December 31, 1996. Budget is one of only three vehicle rental systems that offer rental vehicles throughout the world under a single brand name, with locations in Europe, Canada, Latin America, the Middle East, Asia/Pacific and Africa. The Budget System currently maintains more local market rental locations throughout the world than its major competitors. The Budget System is also unique among major car rental systems in that it rents trucks in most major markets worldwide. The Budget System's consumer truck rental fleet is the fourth largest in the United States. The Budget System had vehicle rental revenues of $2.5 billion for 1996. The Company is also one of the largest independent retailers of late model vehicles in the United States, with 23 retail car sales facilities and pro forma revenues of $246.9 million for 1996. The Company operates its retail car sales facilities under the name "Budget Car Sales". On April 29, 1997, the Company acquired all the capital stock of BRACC pursuant to a series of stock purchase agreements among TEAM, Ford, BRACC and the common stockholder of BRACC (the "Stock Purchase Agreements"). The consideration paid by the Company pursuant to the Stock Purchase Agreements consisted of approximately $275.0 million in cash and the issuance to Ford of 4,500 shares of Series A Convertible Preferred Stock of the Company (representing all the outstanding shares of such series). See "The Budget Acquisition". Each share of Series A Convertible Preferred Stock is non-voting, does not carry a dividend and is convertible into 1,000 shares of Class A Common Stock. In connection with the Offering, 4,400 shares of Series A Convertible Preferred Stock issued to Ford will convert into 4,400,000 shares of Class A Common Stock, which are being offered hereby. STRATEGY Management's long-term strategy is to create an automotive services company which leverages the asset base and expertise of the Company. The Company's assets include a trade name that is recognized around the world; locations for the rental, sale and maintenance of vehicles; a workforce that is proficient in acquiring, financing, monitoring, maintaining and selling cars and trucks; and advanced information systems to support these operations. Increasing the utilization of these assets by acquiring automobile-related businesses would reduce the Company's unit costs and increase profitability. In the near term, management has developed a business strategy designed to increase the revenues and improve the profitability of the Company. Key elements of this strategy are as follows: Enhance the Budget Brand. The Budget System's company-owned locations account for approximately 76% of U.S. revenues, which management believes is a higher percentage than many of its principal competitors. Management believes this high level of corporate ownership is a competitive advantage in the marketplace. It facilitates more consistent delivery of high quality services and improved operations and communications, thereby strengthening the Budget brand name among customers. In addition, the Company's structure facilitates national advertising and marketing programs designed to increase the public's awareness of the Budget brand. Management believes that there will be continuing opportunities to further consolidate the Budget System by acquiring additional franchise operations, and that such consolidation will further strengthen the Budget brand. Improve the Performance of Car Rental Operations. Historically, TEAM enhanced the profitability of its acquired franchise territories by reducing operating costs and increasing rental revenue. Similarly, in 1996, BRACC began initiatives to improve the performance of its company-owned operations. Management believes that the Budget Acquisition will enable the Company to combine key elements of the TEAM and BRACC strategies to achieve even greater operating efficiencies. The Company expects to undertake significant initiatives to (i) enhance the performance of its U.S. car rental operations, (ii) capitalize on the increased level of company-owned locations, (iii) increase its marketing to corporate accounts, (iv) place increased emphasis on the leisure and local rental markets (including its entry into the insurance replacement market), and (v) expand and improve Budget's international operations. Continue to Expand Retail Car Sales Operations. The increased cost of new cars and the improved reliability of low-mileage, late model cars have contributed to greater market demand for late model cars in recent years. The Company, with 23 retail car sales facilities and pro forma car sales revenues of $246.9 million for 1996, is one of the largest independent retailers of late model vehicles in the United States. The Company is establishing a nationally recognized retail car sales operation which will provide low-mileage, late model vehicles to consumers in a new car sales environment under the Budget Car Sales brand. Expand Truck Rental Operations. With the fourth largest consumer truck rental fleet in the United States, Budget is unique among major car rental systems in that it rents trucks to consumers and commercial users in most major markets worldwide. The Company expects to add truck rental locations in various markets, particularly in conjunction with the addition of new local market car rental locations. Management believes that adding truck rental locations will leverage certain fixed costs and increase consumer awareness of the Budget brand, while favorable pricing trends in the truck rental market are expected to provide attractive returns on invested capital. --------------------- Sanford Miller (Chairman of the Board and Chief Executive Officer), John P. Kennedy (Vice Chairman of the Board) and Jeffrey D. Congdon (Vice Chairman of the Board and Chief Financial Officer) (collectively, the "Principal Executive Officers") together have over 75 years of experience in the vehicle rental business and had acquired and operated 54 Budget franchises prior to the Budget Acquisition. In addition, Messrs. Miller and Congdon together have over 25 years of experience operating retail car sales facilities. The principal executive offices of the Company are located at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114 (telephone number: (904) 238-7035). RECENT DEVELOPMENTS On July 31, 1997, the Company acquired the fleet and certain other assets of Premier Rental Car, Inc. ("Premier"). The purchase price consisted of $2.0 million in cash and the refinancing of approximately $85.2 million of outstanding Premier fleet indebtedness (the "Premier Acquisition"). Premier, based in Cleveland, Ohio, provides rental cars for the insurance replacement market and owns and operates 9,000 vehicles from 101 locations in 13 major U.S. markets. In 1996, Premier had revenues of approximately $61.0 million. Premier will continue to operate under its own trade name, and the Company does not expect this acquisition to have a material effect on its earnings in 1997. In July 1997, the Company acquired the Budget franchise located in Chattanooga, Tennessee for $3.2 million. On August 19, 1997, Budget Truck Rental announced that it had entered into a four-year preferred alliance agreement with HFS Incorporated, making Budget the exclusive provider of truck rental services promoted to customers of Coldwell Banker, ERA and Century 21 real estate brands, as well as relocation customers of HFS Mobility Services, Inc. In September 1997, the Company entered into a letter of intent to purchase the St. Louis, Missouri Budget franchisee for approximately $9.0 million, consisting of $1.0 million in cash and $8.0 million in Class A Common Stock. This franchise has six locations and a peak fleet of approximately 1,100 vehicles, and had revenues of approximately $16.0 million for 1996. THE OFFERING <TABLE> <S> <C> <C> Class A Common Stock offered(a).................... 4,717,500 shares Shares to be outstanding after the Offering: Class A Common Stock(a).......................... 22,645,583 shares Class B Common Stock............................. 1,936,600 shares ----------- Total(b)................................. 24,582,183 shares =========== Use of proceeds.................................... The Company will receive proceeds from the Offering only upon exercise of the over-allotment options. See "Use of Proceeds". NYSE symbol........................................ BD </TABLE> - --------------- (A) In the event the over-allotment options are exercised in full, the total number of shares of Class A Common Stock to be offered and the total number of shares of Class A Common Stock to be outstanding after the Offering would be 5,317,500 and 23,245,583, respectively. (b) Does not include (i) 3,986,049 shares of Class A Common Stock issuable upon conversion of the Company's outstanding 7.0% Convertible Subordinated Notes, Series A, due 2007 (the "Series A Convertible Notes"); (ii) 1,609,442 shares of Class A Common Stock issuable upon conversion of the Company's outstanding 6.85% Convertible Subordinated Notes, Series B, due 2007 (the "Series B Convertible Notes" and together with the Series A Convertible Notes, the "Convertible Notes"); (iii) 100,000 shares of Class A Common Stock issuable upon conversion of the Series A Convertible Preferred Stock issued to Ford in the Budget Acquisition that will remain outstanding if the Underwriters' over-allotment option from Ford is not exercised; (iv) 1,768,150 shares of Class A Common Stock and 164,000 shares of Class B Common Stock issuable pursuant to outstanding options; (v) 50,000 shares of Class A Common Stock reserved for issuance upon exercise of a warrant (the "NationsBank Warrant") that will remain outstanding if the Underwriters' over-allotment option from Atlantic Equity Corporation is not exercised; and (vi) 36,667 shares of Class A Common Stock held as treasury shares. See "Management -- Benefit Plans" and "Description of Capital Stock -- Warrants". SUMMARY PRO FORMA FINANCIAL DATA The following tables set forth summary unaudited pro forma financial data of the Company, which data were derived from the Pro Forma Consolidated Statements of Operations for the year ended December 31, 1996 and the six months ended June 30, 1997 included elsewhere in this Prospectus. The pro forma statements of operations data and other data give effect to the 1996 TEAM Transactions and the Budget Acquisition Transactions (each as defined under "Pro Forma Consolidated Statements of Operations") as if they each had occurred on January 1, 1996. The information below should be read in conjunction with the Pro Forma Consolidated Statements of Operations and the notes thereto included elsewhere in this Prospectus. The summary unaudited pro forma financial data set forth below are presented for information purposes only and do not purport to represent what the Company's results of operations would have been had the Transactions actually occurred on the date indicated or to predict the Company's results of operations in the future. <TABLE> <CAPTION> SIX MONTHS YEAR ENDED ENDED DECEMBER 31, 1996 JUNE 30, 1997 ----------------- ------------- (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating revenue: Vehicle rental revenue.................................... $1,197,888 $ 606,504 Royalty fees.............................................. 52,711 28,612 Retail car sales revenue.................................. 246,936 130,738 Other..................................................... 14,693 3,482 ---------- ---------- Total operating revenues........................... $1,512,228 $ 769,336 ---------- ---------- Operating costs and expenses: Direct vehicle and operating.............................. 152,039 79,075 Depreciation -- vehicle................................... 327,436 174,236 Depreciation -- non-vehicle............................... 29,577 13,953 Cost of car sales......................................... 212,330 111,759 Sales, general and administrative......................... 613,769 336,678 Amortization.............................................. 12,517 6,471 ---------- ---------- Total operating costs and expenses................. $1,347,668 $ 722,172 ---------- ---------- Operating income............................................ $ 164,560 $ 47,164 ---------- ---------- Other (income) expense: Vehicle interest expense.................................. 106,921 56,895 Non-vehicle interest expense.............................. 26,929 11,799 Interest income -- restricted cash........................ (1,818) (1,848) ---------- ---------- Total other (income) expense....................... $ 132,032 $ 66,846 ---------- ---------- Income (loss) before income taxes........................... 32,528 (19,682) Provision for income taxes................................ 11,624 (8,946) ---------- ---------- Net income (loss).................................. $ 20,904 $ (10,736) ========== ========== Weighted average common and common equivalent shares outstanding: Primary................................................... 24,579 24,982 Fully diluted............................................. 28,618 25,286 Earnings per common and common equivalent share: Primary................................................... $ 0.85 $ (0.43) Fully diluted............................................. $ 0.85 $ (0.43) ========== ========== OTHER DATA: EBITDA(a)................................................... $ 535,908 $ 243,672 Adjusted EBITDA(a).......................................... 101,551 12,541 Ratio of Adjusted EBITDA to non-vehicle interest expense.... 3.8x 1.1x </TABLE> - --------------- (a) EBITDA consists of income before income taxes plus (i) vehicle interest expense, (ii) non-vehicle interest expense, (iii) vehicle depreciation expense and (iv) non-vehicle depreciation and amortization expenses. Adjusted EBITDA consists of income before income taxes plus (i) non-vehicle interest expense and (ii) non-vehicle depreciation and amortization expenses. EBITDA and Adjusted EBITDA are not presented as, and should not be considered, alternative measures of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but are presented because they are widely accepted financial indicators of a company's ability to incur and service debt. SUMMARY OPERATING DATA FOR THE BUDGET SYSTEM The following tables set forth summary operating data of the Budget System for the year ended December 31, 1996 and as of December 31, 1996. References to revenues of the Budget System include revenues received by BRACC and its franchisees for the rental of cars and trucks. The respective revenue contributions of locations owned by TEAM or BRACC (referred to as "company-owned" locations) have been determined by reference to the size of the vehicle fleet operated from those locations, in that fleet size generally corresponds to revenue contribution for any particular period. Company-owned and franchised Budget locations operate within the integrated Budget System and management believes that system-wide data are useful in analyzing the operations and market position of the overall Budget System, as well as the relative contributions of company-owned and franchised locations. Operations and operating data for franchisees set forth or reflected in system-wide data are based on reports provided to BRACC by franchisees in accordance with their franchise agreements and are not based on audited historical financial statements of those franchisees. <TABLE> <CAPTION> YEAR ENDED PERCENT OF DECEMBER 31, 1996 BUDGET SYSTEM ----------------- ---------------- (IN THOUSANDS) <S> <C> <C> SYSTEM-WIDE DATA: Vehicle rental revenues: United States: BRACC-owned........................................ $ 871,841 61.0% TEAM-owned......................................... 234,124(a) 16.4 Other franchisees.................................. 323,818 22.6 ---------- ------- Total United States............................. $1,429,783 100.0% ---------- ======= International: BRACC-owned........................................ 91,923 8.5% Franchisees........................................ 984,368 91.5 ---------- ------- Total International............................. $1,076,291 100.0% ---------- ======= Total Budget System........................... $2,506,074 ========== Car sales revenues: BRACC................................................ $ 91,503 TEAM................................................. 155,433(b) ---------- Total Budget Group.............................. $ 246,936 ========== </TABLE> <TABLE> <CAPTION> AS OF PERCENT OF DECEMBER 31, 1996 BUDGET SYSTEM ----------------- ---------------- <S> <C> <C> RENTAL LOCATIONS IN OPERATION: United States: BRACC-owned.......................................... 304 31.8% TEAM-owned........................................... 152 15.9 Other franchisees.................................... 500 52.3 -------- ------- Total United States ............................ 956 100.0% ======== ======= International: BRACC-owned.......................................... 70 3.1% Franchisees.......................................... 2,182 96.9 -------- ------- Total International............................. 2,252 100.0% ======== ======= </TABLE> - --------------- (a) Pro forma to give effect to the acquisition of VPSI, Inc. ("Van Pool") and the Phoenix Acquisition (as hereinafter defined) as if such acquisitions had been consummated on January 1, 1996. (b) Pro forma to give effect to the ValCar Acquisition (as hereinafter defined) as if such acquisition had been consummated on January 1, 1996. SUMMARY HISTORICAL FINANCIAL DATA OF THE COMPANY The following tables set forth summary historical consolidated financial data of the Company, which have been derived from the Consolidated Financial Statements of the Company, except for the Rental Data and Retail Car Sales Data. Information for the six months ended June 30, 1997 includes the operations of BRACC from April 29, 1997. The information below should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company". <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ---------------------------------- -------------------------- 1994 1995 1996 1996 1997 -------- -------- ---------- ---------- ------------ (IN THOUSANDS EXCEPT PER SHARE AND RENTAL AND RETAIL CAR SALES DATA) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating revenue: Vehicle rental revenue(a)........... $ 38,642 $107,067 $ 223,250 $103,842 $ 294,559 Retail car sales revenue.............. -- 42,662 134,120 55,686 101,592 Royalties and other revenue.............. -- -- -- -- 12,618 -------- -------- ---------- -------- ---------- Total operating revenue......... $ 38,642 $149,729 $ 357,370 $159,528 $ 408,769 Depreciation -- vehicle... 7,382 27,476 60,735 28,023(b) 85,217 Operating income.......... 4,196 14,180 35,267 18,096 37,260 Vehicle interest expense................ 3,909 13,874 25,336 11,963 27,794 Non-vehicle interest expense (income), net.................... (139) (716) 838 262 3,478 Income before income taxes.................. $ 426 $ 1,022 $ 7,818 $ 5,871(b) $ 5,988 Net income................ $ 250 $ 337 $ 4,497 $ 3,523 $ 3,501 Weighted average common and common equivalent shares outstanding (000s): Primary................ 3,704 6,369 9,488 7,413 16,313 Fully diluted.......... 3,704 6,369 9,488 7,497 16,391 Earnings per common and common equivalent share: Primary................ $ 0.07 $ 0.05 $ 0.47 $ 0.48 $ 0.21 Fully diluted.......... 0.07 0.05 0.47 0.47 0.21 OPERATING DATA: EBITDA(c)................. $ 12,923 $ 45,204 $ 101,215 $ 49,112 $ 132,626 Adjusted EBITDA(c)........ 1,632 3,854 15,144 9,126 19,615 Net cash provided by operating activities... 3,660 16,148 54,379 26,618 98,017 Net cash used in investing activities............. (122,291) (46,298) (62,806) (100,028) (565,626) Net cash provided by financing activities... 119,006 29,629 58,560 84,023 685,827 </TABLE> <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ---------------------------------- -------------------------- 1994 1995 1996 1996 1997 -------- -------- ---------- ---------- ------------ <S> <C> <C> <C> <C> <C> RENTAL DATA (U.S. UNLESS NOTED):(d) Locations in operation at period end............. 63 133 152 159 476 Number of usable vehicles at period end(e)....... 5,044 11,143 14,761 17,094 98,100 Rental transactions(f).... 276,000 689,000 1,166,000 551,000 1,610,000 Daily dollar average(g)... $ 37.32 $ 40.75 $ 41.19 $ 42.06 $ 42.31 Vehicle utilization(h).... 80.6% 80.0% 80.9% 80.8% 79.7% Average monthly revenue per unit(i)............ $ 909 $ 992 $ 1,017 $ 1,019 $ 1,018 RETAIL CAR SALES DATA: Locations in operation at period end............. -- 7 11 9 23 Average monthly vehicles sold................... -- 351 752 510 1,012 Average monthly sales revenue (000s)......... $ -- $ 5,177 $ 12,757 $ 9,281 $ 16,932 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 -------------- (IN THOUSANDS) <S> <C> BALANCE SHEET DATA: Revenue earning vehicles, net............................. $2,340,807 Vehicle inventory (car sales)............................. 29,618 Total assets.............................................. 3,599,975 Fleet financing facilities................................ 2,430,703 Other notes payable....................................... 325,381 Total debt................................................ 2,756,580 Stockholders' equity...................................... 376,626 </TABLE> - --------------- (a) Includes revenue from vehicle rentals and related products (such as supplemental liability insurance and loss damage waivers). (b) Includes $1.9 million of automobile incentives received in 1995 that reduced vehicle depreciation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company -- Results of Operations". (c) EBITDA consists of income before income taxes plus (i) vehicle interest expense, (ii) non-vehicle interest expense, (iii) vehicle depreciation expense and (iv) non-vehicle depreciation and amortization expenses. Adjusted EBITDA consists of income before income taxes plus (i) non-vehicle interest expense and (ii) non-vehicle depreciation and amortization expenses. EBITDA and Adjusted EBITDA are not presented as, and should not be considered, alternative measures of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but are presented because they are widely accepted financial indicators of a company's ability to incur and service debt. (d) Does not include data from Van Pool, the Company's van pooling operation. (e) Represents vehicles available for rent. (f) Rounded to the nearest thousand. (g) Represents rental revenue divided by the number of days that vehicles were actually rented. (h) Represents the number of days vehicles were actually rented divided by the number of days vehicles were available for rent. (i) Represents average monthly revenue divided by average monthly fleet. SUMMARY HISTORICAL FINANCIAL DATA OF BRACC The following tables set forth summary historical consolidated financial data for BRACC, which have been derived from the Consolidated Financial Statements of BRACC. The financial data for all periods presented have been reclassified to conform to the financial statement presentation of the Company. The information below should be read in conjunction with the Consolidated Financial Statements of BRACC and the notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations of BRACC". <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------ ----------------------- 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT RENTAL AND RETAIL CAR SALES DATA) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating revenue: Vehicle rental revenue(a).............. $1,011,203 $1,034,873 $ 963,764 $ 221,778 $ 228,135 Retail car sales revenue................. 77,999 83,795 91,503 22,734 20,913 Other revenue............. 66,564 74,802 77,554 17,259 17,363 ---------- ---------- ---------- ---------- ---------- Total operating revenue............ $1,155,766 $1,193,470 $1,132,821 $ 261,771 $ 266,411 Vehicle depreciation expense................... 257,356 323,619 263,846 54,583 65,439 Operating income............. 110,075 18,583 124,651 23,543 5,332 Vehicle interest expense..... 86,127 124,758 92,738 22,949 22,589 Non-vehicle interest expense................... 18,823 25,151 31,444 7,265 7,043 Income (loss) before income taxes..................... $ 5,125 $ (131,326) $ 469 $ (6,671) $ (24,300) Net income (loss)............ $ 1,125 $ (132,640) $ (2,531) $ (7,271) $ (19,440) OPERATING DATA: EBITDA(b).................... $ 405,715 $ 378,728 $ 432,111 $ 88,813 $ 81,364 Adjusted EBITDA(b)........... 62,232 (69,649) 75,527 11,281 (6,664) Net cash provided by operating activities...... 280,793 173,944 256,290 72,826 95,811 Net cash used in investing activities................ (411,810) (180,938) (205,054) (147,880) (259,409) Net cash provided by (used in) financing activities................ 173,789 35,661 (87,561) 44,288 156,928 RENTAL DATA (U.S. UNLESS NOTED): Locations in operation at period end (worldwide).... 447 390 374 388 374 Number of usable vehicles at period end(c)............. 75,467 68,148 67,137 69,060 76,284 Rental transactions(d)....... 6,030,000 5,909,000 5,346,000 1,212,000 1,261,000 Daily dollar average(e)...... $ 38.43 $ 39.58 $ 41.26 $ 41.57 $ 40.33 Vehicle utilization(f)....... 77.4% 75.1% 76.7% 76.2% 79.5% Average monthly revenue per unit(g)................... $ 904 $ 904 $ 966 $ 960 $ 962 RETAIL CAR SALES DATA: Locations in operation at period end................ 8 9 11 9 11 Average monthly vehicles sold...................... 462 449 491 497 480 Average monthly sales revenue (000s).................... $ 6,500 $ 6,983 $ 7,625 $ 7,578 $ 6,971 </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 -------------- (IN THOUSANDS) <S> <C> BALANCE SHEET DATA: Revenue earning vehicles, net............................. $ 1,494,755 Vehicle inventory......................................... 14,828 Total assets.............................................. 2,484,152 Fleet financing facilities................................ 1,513,259 Other notes payable....................................... 474,055 Total debt................................................ 1,987,314 Mandatory redeemable preferred stock...................... 5,272 Stockholders' equity...................................... 121,288 </TABLE> - --------------- (a) Includes revenue from vehicle rentals and related products (such as insurance and loss damage waivers). (b) EBITDA consists of income before income taxes plus (i) vehicle interest expense, (ii) non-vehicle interest expense, (iii) vehicle depreciation expense and (iv) non-vehicle depreciation and amortization expenses. Adjusted EBITDA consists of income before income taxes plus (i) non-vehicle interest expense and (ii) non-vehicle depreciation and amortization expenses. EBITDA and Adjusted EBITDA are not presented as, and should not be considered, alternative measures of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but are presented because they are widely accepted financial indicators of a company's ability to incur and service debt. (c) Represents vehicles available for rent. (d) Rounded to the nearest thousand. (e) Represents rental revenue divided by the number of days that vehicles were actually rented. (f) Represents the number of days vehicles were actually rented divided by the number of days vehicles were available for rent. (g) Represents average monthly revenue divided by average monthly fleet. FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations and business of the Company, including statements under the captions "Pro Forma Consolidated Financial Statements", "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company" and "Business". These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any of such matters will be realized. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (a) the Company's ability to service its debt or to obtain financing for its fleet vehicles; (b) management and integration of the operations of TEAM and BRACC following the Budget Acquisition and the success of initiatives undertaken by the Company to increase its revenues and improve its profitability; (c) competitive pressure in the vehicle rental and retail car sales industries; and (d) general economic conditions. For further information on other factors which could affect the financial results of the Company and such forward-looking statements, see "Risk Factors".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000923660_diversifie_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000923660_diversifie_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b4a88d346663799bee81a0dbce2893d962de8d6d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000923660_diversifie_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF THE PROSPECTUS The following is a summary of the Prospectus. The Prospectus contains more detailed information under the captions referred to below, and this summary is qualified in its entirety by the information appearing elsewhere in this Prospectus. See also the Glossary. THE OFFERING Securities Offered......150,000 Units at Net Asset Value per Unit as of the end of each month during the Continuous Offering. Net Asset Value is defined in the Glossary at page 137. Minimum Subscription....The minimum subscription is $5,000, except for subscriptions by employee-benefit plans (and subject to higher minimums imposed by certain states) which may be made for a minimum of $2,000. The minimum investment for subscribers who are already limited partners will be $1,000 (except in Maine, where the minimum additional subscription will be $5,000). During the Continuous Offering, the minimum subscription will purchase Units and fractional Units (rounded to four decimal places) as of the end of the last day of the month ending at least 5 days after a subscription is accepted. See "Plan of Distribution". The General Partner and its affiliates are free to purchase Units for investment purposes, provided that in no event will total contributions by these entities equal or exceed 10% of the total contributions to the Partnership at any time. Plan of Distribution....The Units will be offered through SB and possibly other selling agents on a best efforts basis (so that neither SB nor any other underwriter has agreed to purchase any Units). Units will be offered until the earlier of the sale of all 150,000 Units and two years after the date of this Prospectus (the "Continuous Offering"). The General Partner may determine to increase the number of Units offered, or not to offer Units in a particular month. For any subscriber wishing to subscribe for Units as of the first day of a month, a completed Subscription Agreement (Exhibit B to the Prospectus) must be received by the General Partner at least 6 days previously. Subscription funds must be delivered to the escrow agent and will be held until the first business day of the month in which the subscription is to take effect, at which time the subscription funds will be transferred to the Partnership's trading account. The General Partner has sole discretion to offer additional Units but has no present intention to do so. The General Partner may reject any subscription for any reason. A subscription may be revoked during the Continuous Offering within five business days of the investor's subscription or if the General Partner determines not to offer Units as of the end of a month. See "Plan of Distribution" and "Subscription Procedure". Use of Proceeds.........The proceeds of the offering will be deposited in the Partnership's trading accounts at SB and will be used to trade in commodity interests including futures contracts, options and forward contracts. Such proceeds will be maintained in cash. A subscription will be either accepted or rejected within four business days from the receipt of the subscription by the General Partner. See "Use of Proceeds". Purchase of Units by Retirement Plans...Participants in employee-benefit plans may be capable of purchasing Units with a portion of their retirement assets. See "ERISA Considerations". SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II CROSS REFERENCE SHEET <TABLE> <CAPTION> ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS ------------------------------------------- --------------------------------------------- <C> <S> <C> 1. Forepart of the Registration Statement and Outside Front Cover of Prospectus........ Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus............................ Inside Cover Page; Table of Contents 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges....... Summary of the Prospectus; Risk Factors 4. Use of Proceeds............................ Use of Proceeds 5. Determination of Offering Price............ Cover Page; Plan of Distribution 6. Dilution................................... * 7. Selling Security Holders................... * 8. Plan of Distribution....................... Plan of Distribution 9. Description of Securities to be Registered............................... Cover Page; Redemptions; The Limited Partnership Agreement 10. Interests of Named Experts and Counsel..... Legal Matters 11. Information With Respect to the Registrant............................... Summary of the Prospectus; Risk Factors; Commodity Futures Markets; Trading Policies; Financial Statements; The General Partner; The Advisors; Conflicts of Interest; Fees and Expenses to the Partnership; The Limited Partnership Agreement 12. Disclosure of Commission Position on Indemnification for Securities Act Liability................................ * </TABLE> - --------------- * Not applicable. The Partnership is soliciting subscriptions for 150,000 units of limited partnership interest ("Units") with a minimum subscription per investor of $5,000 (except that the minimum investment is $2,000 for employee benefit plans, subject to higher minimums in certain states). As of March 31, 1997, 80,172 Units have been sold. The Partnership will continue to offer Units until the earlier of two years from the date hereof and the date on which all of the Units are sold (the "Continuous Offering"). During the Continuous Offering, Units and fractional Units (rounded to four decimal places) will be sold at their Net Asset Value per Unit as of the last business day of the month ending at least 5 days after a subscription is accepted. Net Asset Value is defined in the Glossary at page 137. A subscription may be revoked by a subscriber if the General Partner determines not to offer Units as of the end of a month. See "Plan of Distribution" and "Subscription Procedure". The Units are being offered through SB on a best efforts basis without any firm underwriting commitment (so that neither SB nor any other underwriter has agreed to purchase any Units). The Partnership will dissolve no later than December 31, 2014. See "Summary of the Prospectus -- The Partnership -- Dissolution of the Partnership". - --------------- NOTES: (1) The Units are being offered on a best efforts basis through SB and such other members of the National Association of Securities Dealers, Inc. or foreign brokers as may participate in the offering. No underwriting commissions will be paid in connection with this offering. SB may pay underwriting commissions of up to $50 per Unit sold out of its own funds. SB will pay a portion of the brokerage fees it receives to its registered representatives ("Financial Consultants") who sell Units in the offering and who are registered with the Commodity Futures Trading Commission ("CFTC") as associated persons of a futures commission merchant for continuing services to be provided by such persons to purchasers of Units. Those services will include (i) answering questions regarding daily net asset value and computations thereof, monthly statements, annual reports and tax information provided by the Partnership, (ii) providing assistance to investors including when and whether to redeem the Units or purchase additional Units and (iii) general servicing of accounts. A Financial Consultant may be credited with up to approximately 85% of the amount of brokerage fees attributable to Units sold by him. The brokerage fees will be paid for the life of the Partnership, although the rate at which such fees are charged may change. See "Plan of Distribution" and "The Commodity Broker/Dealer -- Brokerage Fees". No portion of SB's brokerage fees will be paid to any Financial Consultant who is not registered with the CFTC as an associated person of a futures commission merchant. (2) The Partnership began its initial offering of Units on August 21, 1995 and began trading on January 17, 1996 with an initial capitalization of $8,615,000. As of March 31, 1997, the Partnership's Net Assets were $81,596,199 and the Net Asset Value per Unit initially sold for $1,000 was $1,162.50. During the Continuous Offering, subscription amounts will be held in escrow at European American Bank, New York, New York, until the first business day of the month in which the subscription is to take effect, at which time the subscription funds will be transferred to the Partnership's trading account. The funds held in escrow will be invested as the General Partner shall from time to time direct by written instrument delivered to the escrow agent in an interest bearing bank money market account. See "Plan of Distribution". (3) The initial offering and organizational expenses of the Partnership were capped at $525,000, which amount was paid by SB. This amount was recouped from interest earned on the Partnership's assets. The Limited Partnership Agreement requires the Partnership to bear all of its offering expenses of the Continuous Offering. These expenses were $291,000 for 1996 and are estimated at $370,000 for 1997. See "Fees and Expenses to the Partnership" and "Redemptions". (4) The minimum additional subscription during the Continuous Offering for investors who are already limited partners will be $1,000 (except in Maine, where the minimum additional subscription will be $5,000). In the case of sales to employee-benefit plans including qualified corporate pension and profit-sharing plans, "simplified employee pension plans," so-called, "Keogh" (H.R. 10) plans and Individual Retirement Accounts, and subject to higher minimum investment standards imposed by certain states as listed in Exhibit C hereto, the minimum purchase is $2,000. See "ERISA Considerations." ------------------------ THE PARTNERSHIP The Partnership.........Smith Barney Diversified Futures Fund L.P. II is a limited partnership organized on May 10, 1994 under the laws of the State of New York with the name Consulting Group Managed Futures Fund L.P. The Partnership changed its name as of July 31, 1995. The initial offering period of the Units began August 21, 1995, and the Partnership commenced trading operations on January 17, 1996. See "The Limited Partnership Agreement". Risk Factors............An investment in the Partnership is speculative and involves substantial risks. The risks of an investment in the Partnership include, but are not limited to: -- the speculative, volatile and highly leveraged nature of trading in commodity futures, forward and option contracts; -- the fees and expenses which the Partnership incurs regardless of the Partnership's trading performance, including a brokerage charge of 6% per year and a management fee that will range from 2% to 4%; -- substantial incentive fees may be paid during a year even though the Partnership incurs a net loss for the full year; -- that the Partnership is subject to certain conflicts of interest (including those arising from the relationship between the General Partner and the commodity broker/dealer); -- the control of other accounts by the Advisors; -- existence of other commodity pools sponsored and established by the General Partner and SB and the Advisors and their affiliates; -- no public market for Units exists; -- investors have limited voting rights with respect to the Partnership's affairs; -- profits earned in any year will result in an increase in a limited partner's tax liability. Dissolution of the Partnership...........The Partnership will dissolve and its affairs be wound up as soon as practicable upon the first to occur of the following: (i) December 31, 2014; (ii) the vote to dissolve the Partnership by limited partners owning more than 50% of the Units; (iii) assignment by the General Partner of all of its interest in the Partnership or withdrawal, removal, bankruptcy or any other event that causes the General Partner to cease to be a general partner under the New York Revised Limited Partnership Act unless the Partnership is continued as described in the Limited Partnership Agreement; (iv) Net Asset Value per Unit falls to less than $400 as of the end of any trading day; or (v) the occurrence of any event which shall make it unlawful for the existence of the Partnership to be continued. See "Risk Factors -- Dissolution of the Partnership, Cessation of Trading" and "The Limited Partnership Agreement -- Management of Partnership Affairs". Offices.................The offices of the Partnership and the General Partner are located at c/o Smith Barney Futures Management Inc., 390 Greenwich Street, New York, New York 10013, (212) 723-5424. Trading Policies........The Partnership's objective is to achieve capital appreciation by engaging in speculative trading of a diversified portfolio of commodity interests which may include futures contracts, options, forward contracts and physicals. There can An annual report containing financial statements and the report of the Partnership's independent accountants will be distributed to limited partners not more than 90 days after the close of the Partnership's fiscal year. ------------------------ The Partnership is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the Securities and Exchange Commission. Such reports and other information can be inspected and copied at public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and its Northeast regional office at 7 World Trade Center, Suite 1300, New York, NY 10018 and its Midwest regional office at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. The Commission also maintains a Web site (http://www.sec.gov) that contains such reports and other information regarding the Partnership. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. ------------------------ A COPY OF THE NASAA GUIDELINES FOR THE REGISTRATION OF COMMODITY POOL PROGRAMS, AS AMENDED AND ADOPTED AS OF AUGUST 30, 1990, WILL BE PROVIDED TO ANY PERSON, WITHOUT CHARGE, UPON REQUEST. SAID REQUEST MAY BE MADE IN WRITING TO THE PARTNERSHIP, C/O SMITH BARNEY FUTURES MANAGEMENT INC., 390 GREENWICH STREET, NEW YORK, NEW YORK 10013 OR BY CALLING (212) 723-5424. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY ANY PERSON WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE. UNTIL 31, 1997 (90 DAYS AFTER THE DATE HEREOF), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ------------------------ be no assurance that the Partnership's investment objective will be met. The Partnership's trading policies, in summary, are to invest Partnership funds only in commodity contracts traded in sufficient volume to permit the ease of taking and liquidating positions; that no additional positions in a commodity will be initiated by an Advisor if such positions would result in aggregate positions for all commodities requiring as margin more than 66 2/3% of the Partnership's assets allocated to that Advisor; that the Partnership will not employ the trading technique commonly known as "pyramiding"; that the Partnership will not utilize borrowings except short-term borrowings if the Partnership takes delivery of any cash commodities; that the Partnership may, from time to time, engage in spreads or straddles; and that the Partnership will not permit the churning of its trading accounts. This discussion is a summary only and is qualified in its entirety by reference to the discussion under "Trading Policies". See "Commodity Markets" and "Trading Policies". The terms "pyramiding", "spreads" and "straddles" are defined in the Glossary. Management..............The General Partner of the Partnership is Smith Barney Futures Management Inc., a corporation organized under the laws of the State of Delaware and an affiliate of Smith Barney Inc. ("SB"). SB acts as commodity broker/dealer for the Partnership. The General Partner administers the business and affairs of the Partnership. The Advisors make trading decisions for the Partnership. Each of Chesapeake, JWH and Millburn was initially allocated one-third of the Partnership's assets to manage. As of May 1, 1997 the General Partner intends to add ARA and Willowbridge. With the addition of ARA and Willowbridge, the allocations of the Partnership's assets will be approximately as follows: Chesapeake -- 25%; JWH -- 36%; Millburn -- 25%; ARA -- 7%; and Willowbridge 7%. The General Partner currently intends to increase the allocations to ARA and Willowbridge as subscriptions are received by the Partnership. Nonetheless, the General Partner, consistent with its fiduciary duties to the limited partners, may modify these allocations at any time in its sole discretion. Future allocations to the Advisors or additional advisors will be made at the discretion of the General Partner. In allocating assets to the Advisors, the General Partner has considered each Advisor's past performance, trading style, volatility of markets traded and fee requirements. All of the Partnership's assets in its trading accounts at SB will be available for trading, subject to the trading policies of the Partnership. -- Chesapeake currently trades pursuant to its "Diversified Trading Program" and its "Financials and Metals Program" for the Partnership. The Diversified Trading Program emphasizes a maximum range of diversification with a global portfolio of futures, forward and cash markets which include, but are not limited to, agricultural products, precious and industrial metals, currencies, financial instruments, and stock, financial and economic indices. The Financials and Metals Program offers the opportunity to achieve a diversified portfolio of investment in futures and forward interest contracts worldwide, but specializes in the larger and more liquid markets now available for trading. -- JWH currently utilizes its Global Diversified Portfolio and its Original Investment Program in its management of the assets allocated to it by the Partnership. The Global Diversified Portfolio utilizes an intermediate-term trading system, which attempts to identify and profit from market trends and to remain neutral (i.e., no position taken) during non-trending market periods. The Original Investment Program employs a very long-term, trend- RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED BY THIS POOL AT PAGES 17 AND 18 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 20 AND 21. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 10-16. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. ------------------------ following reversal approach in which a position, either long or short, is held in every market traded by the program at all times. -- Millburn currently trades the World Resource Portfolio version of its Diversified Program for the Partnership. In the World Resource Portfolio, Millburn trades a broadly diversified portfolio of approximately fifty markets in the following six sectors: currencies, precious and industrial metals, debt instruments, stock indices, agricultural commodities and energy. -- ARA will trade pursuant to its Gamma Program, a fully automated technical trend-following system, which currently trades in 18 markets. -- Willowbridge will utilize its Argo Trading System for assets allocated it by the Partnership. The Argo Trading System is a computerized version of an experienced chartist trader, using the concepts of pattern recognition, support/resistance levels and counter-trend liquidations in making trading decisions. Its focus is primarily on major long-term price moves. It is intended that Argo's positions will generally be held from 20 to 30 trading days. The Argo Trading System trades a diversified portfolio of commodity interests in the agricultural commodities, energy, precious and industrial metals, financial instruments and foreign currency markets. The Advisors may override computer-generated trading signals or may adjust their trading programs in the future. The Advisors are not affiliated with one another and none is affiliated with the General Partner or SB. Each Advisor makes its trading decisions independently. The Advisors are not responsible for the organization or operation of the Partnership. See "Conflicts of Interest", "Fiduciary Responsibility" and "The Commodity Broker/Dealer". The limited partners do not participate in the management or control of the Partnership. Under the Limited Partnership Agreement, responsibility for managing the Partnership is vested solely in the General Partner. The General Partner is a fiduciary to the limited partners. As such, the General Partner must exercise good faith and fairness in all dealings affecting the Partnership. In the event that a limited partner believes the General Partner has violated its fiduciary responsibility to the limited partners, he may seek legal relief for himself or on behalf of the Partnership, if the General Partner has refused to bring the action, or if an effort to cause the General Partner to bring the action is not likely to succeed, or may have a right to bring a class action on behalf of all of the limited partners, under applicable laws, including partnership, commodities or securities laws, to recover damages from or require an accounting by the General Partner. Limited partners may also be afforded certain rights for reparations under the Commodity Exchange Act ("CEA") for violations of the CEA by the General Partner. The General Partner may be removed and successor general partners may be admitted upon the vote of a majority of the outstanding Units. See "The Limited Partnership Agreement" and "Fiduciary Responsibility". Any limited partner, upon written request addressed to the General Partner, may obtain from the General Partner a list of the names and addresses of record of all limited partners and the number of Units held by each limited partner. Upon receipt of a written request delivered in person or by certified mail, signed by limited partners owning at least 10% of the outstanding Units, that a meeting of the Partnership be called to consider any matter upon which limited partners may vote pursuant to the Limited Partnership Agreement, the General Partner, by written notice to each limited partner of record mailed within 15 days after such receipt, must call a meeting of the Partnership. Such meeting must be held at least 30 but not more TABLE OF CONTENTS <TABLE> <CAPTION> Page ------ <S> <C> Risk Disclosure Statement................. iv Summary of the Prospectus................. 1 The Offering............................ 1 The Partnership......................... 2 Selected Financial Data................. 9 Risk Factors.............................. 10 Fees and Expenses to the Partnership...... 17 Potential Benefits to Investors........... 21 Conflicts of Interest..................... 22 Trading Policies.......................... 25 The General Partner....................... 26 Background.............................. 26 Principals.............................. 26 The Partnership -- Management's Discussion and Analysis of Financial Conditions and Results of Operation... 28 Performance of the Partnership.......... 30 Other Pools Operated by the General Partner............................... 30 The Advisors.............................. 36 Chesapeake Capital Corporation ......... 37 John W. Henry & Co., Inc................ 48 Millburn Ridgefield Corporation......... 70 ARA Portfolio Management Company, L.L.C................................. 79 Willowbridge Associates, Inc............ 85 Fiduciary Responsibility.................. 98 The Commodity Broker/Dealer............... 99 Income Tax Aspects........................ 102 Summary of Federal Income Tax Consequences for United States Taxpayers Who Are Individuals......... 102 Tax Consequences for Exempt Organizations......................... 108 State, Local and Other Taxes............ 108 Summary of the United States Federal Income Tax Consequences for Non-U.S. Taxpayers............................. 109 <CAPTION> Page ------ <S> <C> Basis of Summary of Income Tax Aspects............................... 109 Use of Proceeds........................... 109 Plan of Distribution...................... 110 Investment Requirements................... 111 Subscription Procedure.................... 112 The Limited Partnership Agreement......... 112 Liability of Limited Partners........... 112 Management of Partnership Affairs....... 113 Sharing of Profits and Losses........... 113 Additional Partners..................... 114 Restrictions on Transfer or Assignment............................ 114 Dissolution of the Partnership.......... 114 Removal or Admission of General Partner............................... 114 Amendments; Meetings.................... 114 Reports to Limited Partners............. 115 Power of Attorney....................... 115 Indemnification......................... 115 Redemptions............................... 116 Erisa Considerations...................... 116 Legal Matters............................. 119 Experts................................... 119 Additional Information.................... 119 Commodity Markets......................... 120 Commodity Futures....................... 120 Forward Contracts....................... 120 Uses of Commodity Markets............... 120 Options................................. 121 Regulation.............................. 121 Margins................................. 123 Financial Statements...................... 125 Glossary.................................. 137 Limited Partnership Agreement -- Exhibit A....................................... A-1 Subscription Agreement -- Exhibit B....... B-1 Suitability Requirements -- Exhibit C..... C-1 </TABLE> than 60 days after the mailing of such notice and the notice must specify the date, a reasonable time and place, and the purpose of such meeting. See "Risk Factors" and "Fees and Expenses to the Partnership." Fiscal Year.............The fiscal year of the Partnership will commence on January 1 and end on December 31 each year ("fiscal year"). Fees and Expenses to the Partnership....The Partnership will pay substantial fees to the Advisors and SB. The Partnership will pay each Advisor a monthly management fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except that JWH will receive a monthly management fee equal to 1/3 of 1% (4% per year) of month-end Net Assets) allocated to the respective Advisor. (Management fees are subject to an overall limitation in the Limited Partnership Agreement and the Revised Commodity Pool Guidelines of the North American Securities Administrators Association, Inc. (the "NASAA Guidelines"), as described under "Fees and Expenses to the Partnership -- Caps on Fees".) The Partnership will also pay each Advisor an incentive fee payable quarterly equal to 20% of the New Trading Profits earned by each Advisor for the Partnership (except JWH, which will receive an incentive fee of 15% of New Trading Profits), including unrealized appreciation on open positions, as of the end of each period. (Incentive fees are subject to the limits imposed by the NASAA Guidelines and the Limited Partnership Agreement, as described under "Fees and Expenses to the Partnership -- Caps on Fees".) New Trading Profits does not include interest earned or accrued during the period. Since the Advisors' incentive fees are paid quarterly, substantial incentive fees may be paid during a year even though the Partnership may incur a net loss for the full year. The Customer Agreement provides that the Partnership will pay SB a monthly brokerage fee equal to 1/2 of 1% of month-end Net Assets (6% per year) in lieu of brokerage commissions on a per trade basis. (The brokerage fee -- together with National Futures Association ("NFA"), exchange, floor brokerage, give-up, user and clearing fees -- is subject to the limitation imposed by the NASAA Guidelines, as described under "Fees and Expenses to the Partnership -- Caps on Fees".) See "Fees and Expenses to the Partnership -- The Commodity Broker/Dealer". SB will pay a portion of such brokerage fees to its Financial Consultants who have sold Units in this offering and who are registered as associated persons with the CFTC. Such Financial Consultants would be credited with a maximum of 5% of Net Assets per year in return for continuing services to be provided by them to Unit holders as described under "The Commodity Broker/Dealer -- Brokerage Fees". Brokerage fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. Based upon the Partnership's and Advisors' trading activities during 1996, the fee that the Partnership pays is estimated to equal $61.00 per round-turn transaction (as defined in the Glossary), of which $54.00 is brokerage commissions and $7.00 is other trading-related fees. The General Partner will review, at least annually, the brokerage rates charged to other comparable commodity pools to the extent practicable, to determine that the brokerage rates being paid by the Partnership are competitive with such other rates. The General Partner will renegotiate the Customer Agreement if its fiduciary duties so require. Brokerage fees will not exceed the limit imposed in the NASAA Guidelines. The General Partner, consistent with the restrictions imposed by the Limited Partnership Agreement attached hereto as Exhibit A, as well as the NASAA Guidelines discussed below, may negotiate for increased brokerage fees in appropriate circumstances. The Partnership shall seek the best prices and services available in its commodity futures brokerage transactions. The NASAA Guidelines provide that a brokerage commission is presumptively reasonable if it is 80% of the published retail rate plus pit brokerage fees or if it (including pit brokerage fees) is 14% annually of the average Net Assets of the Partnership (excluding Partnership assets not directly related to trading activity). See "The Commodity Broker/Dealer -- Brokerage Fees". The brokerage fee payable to SB for a year would equal a maximum of $9,000,000 per year assuming that the Partnership sold 150,000 Units at $1,000 each and Net Assets remained at the same level for the year. On these assumptions, Financial Consultants could be credited with a maximum of $7,500,000. The Partnership will pay, or reimburse SB if previously paid, for National Futures Association ("NFA"), exchange, clearing, user, give-up and floor brokerage fees, all of which are estimated to be up to .8% of Net Assets per year. The Partnership will effect all transactions in spot and forward foreign currencies with SB at prices quoted by SB which do not include a mark-up. The General Partner bears such general and administrative expenses of the Partnership as may be incurred, but (except as noted below) the Partnership pays all of its legal, accounting, filing, reporting and data processing expenses, incentive fees, management fees, brokerage fees, expenses of the Continuous Offering and extraordinary expenses (only periodic filing and reporting fees are subject to an overall limitation in the Limited Partnership Agreement as described under "Fees and Expenses of the Partnership -- Cap on Fees"). The actual offering and operating expenses for 1996 were $411,000 (of which $291,000 were offering expenses and $120,000 were operating expenses). In 1997, these expenses are estimated at $520,000 (assuming 85,000 Units are sold) to $545,000 (assuming 150,000 Units are sold) of which the offering expenses are expected to be $370,000 and the operating expenses are anticipated to range from $150,000 to $175,000, respectively. The aggregate annual expenses of every character paid or incurred by the Partnership, including management fees, advisory fees and all other fees, except for incentive fees, commodity brokerage fees, the actual cost of legal and audit services and extraordinary expenses, when added to the customary and routine administrative expenses of the Partnership, shall in no event exceed, on an annual basis, 1/2 of 1% of Net Assets per month (6% per year). For the purpose of this limitation, customary and routine administrative expenses shall include all expenses of the Partnership other than commodity brokerage fees, incentive fees, the actual cost of legal and audit services and extraordinary expenses. SB pays monthly interest to the Partnership on 80% of the average daily equity maintained in cash in the Partnership's account. Such segregated bank accounts do not ordinarily earn interest. See "Fees and Expenses to the Partnership", "Plan of Distribution" and "Redemptions". The table below summarizes the fees and expenses to the Partnership: <TABLE> <CAPTION> ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION ------------------- ---------------------------- ---------------------------- <S> <C> <C> Advisors........... Monthly management fee 1/6 of 1% (2% per year) or (Subject to cap) 1/3 of 1% (4% per year) of month-end Net Assets. Quarterly incentive fee 20% or 15% of New Trading (Subject to cap) Profits earned by each Advisor for the Partnership in each calendar quarter. Commodity Brokerage fee 1/2 of 1% of month-end Net Broker............. (Subject to cap) Assets per month (6% per (SB) year)(1) (a portion of which will be paid to SB Financial Consultants who have sold Units in this offering), and reimbursement of other ac- tual transaction fees paid in connection with trading estimated at .8% of Net Assets. Others............. Periodic legal, accounting, Actual expenses incurred filing and reporting fees, estimated at between .36% expenses of the Continuous and .61% of Net Assets per Offering as well as year (exclusive of extraordinary expenses extraordinary expenses). </TABLE> ---------------------------------------- (1) Brokerage fees will be paid for the life of the Partnership, but the rate at which such fees will be paid may change, provided that such fees (i) remain competitive with the brokerage rates paid by public commodity pools which are comparable to the Partnership, (ii) will not be increased for the first five years of trading if any Advisor is affiliated with the General Partner and (iii) will not exceed the limitations imposed by the NASAA Guidelines, which provide that brokerage fees (together with NFA, exchange, floor brokerage, give-up, user and clearing fees) will be considered presumptively reasonable if they do not exceed 14% annually of the Partnership's Net Assets (excluding Partnership assets not directly related to trading activity). SB may receive a benefit with respect to Partnership assets maintained in cash as described below under the heading "Fees and Expenses to the Partnership -- Commodity Broker/Dealer." Interest Income.........All of the Partnership's assets will be deposited in cash in brokerage accounts at SB. SB deposits the Partnership's cash in segregated bank accounts as required by CFTC regulations. Such accounts do not earn interest. However, SB will pay monthly interest to the Partnership on 80% of the average daily equity maintained in cash in the Partnership's account at SB during each month at a 30-day Treasury bill rate determined weekly by SB based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days (or on the maturity date closest thereto) from the date on which such weekly rate is determined. All assets in the Partnership's accounts may be used to meet margin requirements. SB intends to require the Partnership to meet its standard customer margin requirements which may be greater than exchange minimum levels. SB may benefit from the use of the Partnership's cash to the extent that such use reduces SB's interest expense in an amount greater than the amount of interest payments received by the Partnership. See "Commodity Markets -- Margins" and "The Commodity Broker/Dealer -- Customer Agreement". Break-even Analysis.....The General Partner estimates that during each fiscal year, the Partnership would be required to make trading profits equal to 6.39%, assuming a Partnership size of $85,000,000, (approximately the Net Asset Value as of March 31, 1997) and 6.14%, assuming a Partnership size of $150,000,000, ($63.91 and $61.41, respectively, based upon a $1,000 investment) of the Net Asset Value per Unit in order for the value of a Unit at year end to equal the initial value of that Unit at the beginning of the year. See "Fees and Expenses to the Partnership." Redemptions.............On 10 days' notice to the General Partner, a limited partner may require the Partnership to redeem his Units at their Net Asset Value as of the last day of a (This page has been left blank intentionally.) month. Because Net Asset Value fluctuates daily, Limited Partners will not know the redemption value of their Units at the time their notice of redemption is submitted. The General Partner reserves the right to permit the redemption of Units more frequently than monthly (but no more frequently than daily), provided that such action is in the best interest of the Partnership taking into account potential tax consequences to Limited Partners. See "Redemptions". No fee is charged for redemptions. The Partnership's assets are generally valued at fair market value, or in the absence of a fair market value, as determined in good faith by the General Partner. Options are generally valued at the last sale price or, in the absence of a last sale price, the last bid price. The value of a futures contract equals the unrealized gain or loss on the contract that is determined by marking it to the current settlement price for a like contract acquired on the day on which the futures contract is being valued. A settlement price may not be used if the market makes a limit move with respect to a particular commodity. Forward contracts and futures contracts, when no market quote is available, will be valued at their fair market value as determined by the General Partner. Distributions...........Distributions of profits, if any, will be made in the sole discretion of the General Partner and at such times as the General Partner may decide. In view of the fact that a limited partner may redeem his Units and no charge is assessed upon redemption, the General Partner has no current intention of making any distributions. In any event, the General Partner does not intend to make any distribution which would reduce the Net Asset Value of a Unit below $1,000, or if the size of a distribution would not warrant the administrative expense which would be involved, or if, in the opinion of the General Partner, a distribution would otherwise not be in the best interests of the Partnership or the limited partners. The determination of what is in the best interests of the Partnership or limited partners will be made on a case by case basis by the General Partner in its sole discretion and consistent with its fiduciary obligations to the Partnership and the limited partners. To the extent that profits are retained by the Partnership, the Net Assets of the Partnership will be greater, thereby increasing the amount of the brokerage fee which will be earned by SB. See "Conflicts of Interest". A limited partner's tax liability for profits of the Partnership may exceed the amount of any distributions received from the Partnership. See "Risk Factors -- Tax Consequences" and "Income Tax Aspects". Income Tax Aspects......The trading activities of the Partnership, in general, generate capital gain and loss and ordinary income. Counsel to the Partnership has opined that the Partnership will be treated as a partnership for federal income tax purposes. Accordingly, the Partnership pays no federal income tax; rather, limited partners are allocated their proportionate share of the taxable income or losses realized by the Partnership during the period of the Partnership's taxable year that Units were owned by them. Unrealized gains on "Section 1256 contracts" as defined in the Internal Revenue Code of 1986 (the "Code") held by the Partnership at the end of its taxable year must be included in income under the "mark-to-market" rule and will be allocated to partners in proportion to their respective capital accounts. The mark-to-market rule does not apply to the Partnership's positions in futures contracts on most foreign exchanges and in foreign currency forward contracts not in the interbank market, unless the Partnership elects such treatment under Code Section 988. The Partnership has made the election necessary to gain such treatment in 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000923687_security_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000923687_security_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bab60048c85fc8cbc4b6ecd7f4fbb4df3f119751
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000923687_security_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus assumes (i) an estimated initial public offering price of $ per Class B Share (the midpoint of the range of estimated initial public offering prices set forth on the cover page of this Prospectus), (ii) no exercise of the Underwriters' over-allotment option and (iii) approval by the shareholders of ATLANTIC, PTR and SCI (each as defined below) of the proposed merger transactions described below (see "Business--The Proposed Mergers"). SECURITY CAPITAL GROUP INCORPORATED Security Capital is a real estate research, investment and management company. Management has assembled a superior team of operating and investment professionals to implement the firm's strategy. Prior to the Offering, Security Capital was owned primarily by directors, officers, employees and 65 major domestic and foreign institutional investors. Security Capital's strategy is to create the optimal organization to lead and profit from global real estate securitization. Security Capital will implement this strategy by: . Providing leadership in real estate research conducted on a global basis. Security Capital's proprietary research, which is available to Security Capital's affiliates, provides a strong foundation for its capital deployment strategy. . Continuing to invest its capital in fully integrated, value-added operating companies that have strong prospects for sustained growth. Security Capital plans to utilize the results of its research to identify opportunities in which it can invest its capital in the start-up of highly focused, private operating companies with the objective of becoming publicly traded and having the prospect of dominating their respective niches. The Company currently is considering several new business initiatives. See "Business--Future Strategy." In addition, Security Capital will continue to make investments in public companies in which it can provide strategic and operating guidance and capital and thereby enable the companies to pursue an attractive growth strategy. See "Business--Operating Strategy--Security Capital Strategic Group." .Creating a global real estate securities management business. Since its commencement of operations in 1991, Security Capital has continually committed research and development capital to generate new start-up, fully integrated real estate operating companies and new business services. Based on such research and development activities, Security Capital has established a range of real estate research, service and management businesses and made a series of investments in Security Capital Pacific Trust ("PTR"), Security Capital Industrial Trust ("SCI"), Security Capital Atlantic Incorporated ("ATLANTIC"), Security Capital U.S. Realty ("Security Capital USREALTY") and Homestead Village Incorporated ("Homestead"), each of which is now publicly traded. Through May 31, 1997, Security Capital has invested an aggregate of approximately $2.0 billion in the common shares of PTR, SCI, ATLANTIC, Security Capital USREALTY and Homestead and warrants of Homestead. Those securities had an aggregate market value of approximately $2.9 billion (based on the closing price of those securities on the principal exchange on which such securities are listed on May 31, 1997). As of June 6, 1997, Security Capital owned approximately 35% of PTR, 51% of ATLANTIC, 64% of Homestead, 44% of SCI and 32% of Security Capital USREALTY (based in each case on common shares outstanding) and, pursuant to a series of investor agreements, advisory agreements, board representation or other control rights, has significant influence over the operations of each of these entities. As of May 31, 1997, these five publicly traded real estate companies had a collective equity market capitalization (assuming full conversion or exercise of convertible securities, options and warrants) of approximately $8.2 billion. Security Capital USREALTY has made strategic investments in three publicly traded companies, CarrAmerica Realty Corporation ("CarrAmerica"), Storage USA, Inc. ("Storage USA") and Regency Realty Corporation ("REGENCY"), and one private company, Pacific Retail Trust ("PACIFIC RETAIL"), which had a collective equity market capitalization of approximately $4.1 billion as of May 31, 1997 (assuming contractual equity commitments by investors have been funded, and full conversion or exercise of convertible securities, options and warrants). For further information on the Company's relationship to these publicly traded companies, see "Business-- Operating Strategy," "--Operating Companies Market Price Information and Financial Performance" and "Relationships with Operating Companies." Security Capital has several new business initiatives which recently became operational, including Strategic Hotel Capital Incorporated, Security Capital Preferred Growth and Security Capital Employee REIT Fund, in which Security Capital has initially committed to invest $200 million, $50 million and $100 million, respectively, and several other new business initiatives which are in varying stages of research and development. Security Capital USREALTY also has several new business initiatives expected to be operational by the end of 1997. See "Business--Future Strategy." Security Capital believes that an important component of its future growth will come from new business initiatives and the implementation of new business strategies, although there can be no assurance that current new business initiatives will be continued or prove successful. SECURITY CAPITAL OWNERSHIP AND MARKET CAPITALIZATION OF INVESTEES <TABLE> <CAPTION> DIRECT/INDIRECT EQUITY MARKET INVESTEE OWNERSHIP (1)(2) CAPITALIZATION (1) -------- ---------------- ------------------ (in millions) <S> <C> <C> Security Capital Pacific Trust 32% $1,879 Security Capital Atlantic Incorporated 51% 918 Homestead Village Incorporated (3) 30% 971 Security Capital Industrial Trust 38% 2,280 ------ Total $8,164 ====== Security Capital USREALTY (4) 32% $2,116 CarrAmerica Realty Corporation (5) 38% 1,838 Storage USA, Inc. (5) 35% 1,110 Regency Realty Corporation (5) 39% 585 Pacific Retail Trust (5) 69% 614 ------ Total $4,147 ====== </TABLE> - ------- (1) Ownership and market capitalization are as of May 31, 1997, and assume contractual equity commitments by investors have been funded, convertible instruments have been converted into common shares, and options and warrants for common shares have been exercised. The resulting number of common shares is multiplied by the closing price of the common shares on such date for those companies listed on an exchange or, in the case of PACIFIC RETAIL, the last private equity offering price. See "--Operating Companies Market Price Information and Financial Performance." (2) As of June 6, 1997, Security Capital's percentage ownerships in its investees, based on common shares outstanding on such date, were 35% of PTR, 51% of ATLANTIC, 64% of Homestead, 44% of SCI and 32% of Security Capital USREALTY. Equity market capitalization, as of May 31, 1997, based on common shares outstanding was $1,708 million for PTR, $918 million for ATLANTIC, $383 million for Homestead, $1,967 million for SCI, and $2,116 million for Security Capital USREALTY. (3) Ownership of Homestead assumes that all convertible mortgages have been funded and converted into shares of Homestead common stock and that all warrants to purchase shares of Homestead common stock have been exercised. Ownership of Homestead does not include any ownership Security Capital may obtain in Homestead upon conversion of convertible mortgages owned by PTR and ATLANTIC through funding commitment agreements. See "Relationships with Operating Companies--Homestead--Homestead Transaction." (4) This company is an investee of Security Capital USREALTY through its subsidiary and is not directly advised by Security Capital. The ownership percentage reflected is that of Security Capital USREALTY. (5) As of May 31, 1997, Security Capital USREALTY's percentage ownerships in its investees, based on common shares outstanding on such date, were 43% of CarrAmerica, 37% of Storage USA, 42% of REGENCY and 73% of PACIFIC RETAIL. Security Capital's and its affiliates' principal business activities are carried out in offices located in Atlanta, Brussels, Chicago, Denver, El Paso, London, Luxembourg, New York and Santa Fe. THE PROPOSED MERGER TRANSACTIONS Security Capital, through its affiliates, currently provides real estate investment trust ("REIT") management and property management services to each of ATLANTIC, PTR and SCI. In December 1996, management of Security Capital proposed to its Board that Security Capital exchange its REIT management companies and property management companies for common shares of ATLANTIC, PTR and SCI, respectively. In January 1997, based upon the direction of the Board, Security Capital proposed to the Board of Directors of ATLANTIC, and the Board of Trustees of each of PTR and SCI, that each of ATLANTIC, PTR and SCI become internally managed. On March 24, 1997, Security Capital and each of ATLANTIC, PTR and SCI entered into Merger and Issuance Agreements (collectively, the "Merger Agreements"), pursuant to which Security Capital will cause its affiliates providing REIT management and property management services to each of ATLANTIC, PTR and SCI to be merged into newly formed subsidiaries of such respective entities (the "Mergers") with the result that all personnel employed in the REIT management and property management businesses would become officers and employees of ATLANTIC, PTR and SCI, respectively. In exchange for the transfer of those businesses, Security Capital will receive $ of ATLANTIC's shares of common stock, $ of PTR's common shares of beneficial interest and $ of SCI's common shares of beneficial interest. Each Merger is subject to approval of the shareholders of each of ATLANTIC, PTR and SCI, respectively, and to various customary closing conditions. In order to allow the common shareholders of ATLANTIC, PTR and SCI, respectively, to maintain their relative percentage ownership interests in each of their companies, concurrently with proxy solicitations seeking approval of the Mergers, each of ATLANTIC, PTR and SCI will conduct a rights offering entitling its common shareholders (other than Security Capital) to purchase additional common shares. The rights offering price for each company is expected to be at a discount to the price at which common shares will be issued to Security Capital pursuant to the respective Merger Agreements. In addition, as part of the transactions contemplated by the Merger Agreements, and to permit the shareholders of ATLANTIC, PTR and SCI to benefit from the Mergers on the same terms as Security Capital equity holders, Security Capital will issue warrants to purchase an aggregate of $250 million of Class B Shares ("Warrants") to the common equity holders (and holders of certain securities convertible into common shares) of each of ATLANTIC, PTR and SCI (other than Security Capital) after the closing of the Mergers (the "Warrant Issuance"). The number of Class B Shares subject to the Warrants will be based on the market price of the Class B Shares on a date within approximately 60 days following the closing of the Mergers. The exercise price of the Warrants will be based on the market price of the Class B Shares on a date to be established following completion of the Offering, and the Warrants will have a term of one year.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000924940_diamond_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000924940_diamond_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8638f4a0357fca8e94aa74e0fab645fa0b3f996d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000924940_diamond_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) assumes an Exercise Price of $5.50, and (iii) gives effect to a 1.65-for-1 split of the Common Stock effected on February 18, 1997. Unless the context otherwise requires, all references to "Common Stock" refer collectively to the Class A common stock and the Class B common stock. See "CERTAIN TRANSACTIONS" and "DESCRIPTION OF CAPITAL STOCK-- Common Stock." All references to fiscal years of the Company in this Prospectus refer to the fiscal years ended on March 31 in those years. All references to the term "Partner" refer to the internal designation by Diamond of certain of its employees and does not refer to a partner of a general or limited partnership. Unless the context otherwise indicates, Diamond Technology Partners Incorporated and its wholly-owned subsidiary are referred to collectively herein as "Diamond" or the "Company." THE COMPANY Diamond is a management consulting firm that devises business strategies enabled by information technology ("IT") and manages the implementation of those strategies. Diamond was founded upon, and continues to stress, a business culture in which strategic consulting and IT expertise are optimally integrated to provide superior client solutions. The Company believes that the distinguishing qualities of its consulting process are its ability to synthesize strategy with technology, deliver solutions with measurable results, deliver services through small multidisciplinary project teams and maintain objectivity in solution recommendations. The Company leads its clients through a process which broadens their understanding of the ways that IT can be incorporated into their businesses to gain competitive advantage in their markets. Diamond's professionals, working closely with client personnel, perform thorough analyses of the client's current business with a focus on alternative IT-driven business strategies. When an appropriate strategy has been developed, Diamond's professionals provide important management oversight of the strategy implementation process, which generally includes design, deployment and integration of IT solutions together with modification of business processes and organizational structure. Diamond manages the deployment phase by utilizing the client's internal resources or third-party resources selected by Diamond for their particular expertise. Throughout the entire process, Diamond transfers relevant knowledge to the client organization. Diamond has grown rapidly since its inception in January 1994, generating $33.8 million in net revenues over the 12 month period ended December 31, 1996 and expanding from 18 employees at inception to 177 as of December 31, 1996. Diamond serves clients in a variety of industries, ranging in size from Fortune 500 companies to smaller private companies. The number of clients served by the Company in each fiscal quarter has increased from nine clients served during the fiscal quarter ended June 30, 1994 to 29 clients served during the fiscal quarter ended December 31, 1996. These clients are primarily in the telecommunications, insurance, financial services and consumer products and services industries. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Recent Developments." Pursuant to the terms of the Amended and Restated Voting and Stock Restriction Agreement dated as of April 1, 1996 (the "Voting and Stock Restriction Agreement") among Safeguard, Technology Leaders L.P. ("TL") and Technology Leaders Offshore C.V. ("TL Offshore" and together with TL, "Technology Leaders") and CIP Capital L.P. ("CIP" and together with Safeguard and Technology Leaders, the "1994 Purchasers"), CompuCom Systems, Inc., Cambridge Technology Partners (Massachusetts), Inc. and each employee- stockholder of the Company, each employee-stockholder of the Company has granted a proxy to the Chief Executive Officer of the Company (currently Melvyn E. Bergstein) conveying the right to vote their shares of Common Stock. Accordingly, after the completion of the Offering, the Company's Chief Executive Officer will control approximately 80.0% of the voting rights of the outstanding Common Stock. The Company was initially incorporated in Illinois in 1994 and was reincorporated in Delaware in 1996. The Company's principal executive offices are located at 875 North Michigan Avenue, Suite 3000, Chicago, Illinois 60611, and its telephone number is (312) 255-5000. The Company also has a homepage on the World Wide Web and its e-mail address is dtpgeneral@diamtech.com. Information contained in the Company's web site shall not be deemed to be part of this Prospectus. THE OFFERING Terms of Offering........... Holders of record at the close of business on , 1997 of the outstanding Safeguard Common Shares will receive one Company Right for every ten Safeguard Common Shares. The Direct Purchasers will be granted the Direct Rights. Each Right will entitle the holder to purchase one share of Class A common stock at a purchase price anticipated to be between $5.00 and $6.00 per share. Persons may not exercise Rights for fewer than 50 shares of Class A common stock. Holders of Rights will have the opportunity to acquire an aggregate of approximately shares of Class A common stock upon exercise of the Rights. Exercise Price.............. Anticipated to be between $5.00 and $6.00 per share of Class A common stock. Expiration Date for , 1997 at 5:00 p.m., Eastern Standard Time. Rights..................... Rights...................... Rights will be evidenced by transferable certificates that will be exercisable by the holder until the Expiration Date, at which time unexercised rights will be null and void. See "THE OFFERING." Exercise by Safeguard CEO... The chairman and chief executive officer of Safeguard and/or his assignees are expected to exercise all Company Rights distributed to them and acquire approximately 291,000 shares of Class A common stock. Sale to Other Persons....... The Direct Rights will be granted by the Company to the Direct Purchasers. The first 300,000 Unsubscribed Shares and the shares of Class A common stock subject to the Undistributed Rights will be sold by the Company to the Other Purchasers. Standby Underwriting........ The Excess Unsubscribed Shares will be sold to the Underwriters and offered to the public by the Underwriters. See "THE OFFERING--Sales of Unsubscribed Shares; Standby Commitment" and "UNDERWRITING." Class A common stock Offered: by the Company............ 1,755,000 shares by the Selling Stockholders............. 1,600,000 shares Common Stock to be Outstanding After the Rights Offering............ 11,316,301 shares (representing 6,349,179 shares of Class A common stock and 4,967,122 shares of Class B common stock) (1) Voting Rights and Conversion................. Shares of Class A common stock are entitled to one vote per share and shares of Class B common stock are entitled to five votes per share. Shares of Class B common stock are convertible on a one-for-one basis into shares of Class A common stock automatically upon certain transfers of the shares of Common Stock and termination of employment with the Company. See "DESCRIPTION OF CAPITAL STOCK." Use of Proceeds............. $2.0 million for the repayment of debt to Safeguard and the remainder for working capital, general corporate purposes and capital expenditures. A portion of the net proceeds may be used for acquisitions, although the Company is not currently engaged in any acquisition negotiations. See "USE OF PROCEEDS." Nasdaq National Market Symbols: Rights.................... DTPIR Class A common stock...... DTPIV (when-issued) DTPI (thereafter) - -------- (1) Excludes as of February 10, 1997 (i) 3,074,536 shares of Common Stock issuable upon the exercise of options (of which options to purchase 79,448 shares were exercisable at February 10, 1997) at a weighted average exercise price of $2.50 per share and (ii) 526,597 shares of Common Stock issuable upon the exercise of warrants (all of which were exercisable as of February 10, 1997) at an exercise price of $5.50 per share. See "MANAGEMENT--Stock Options" and "CERTAIN TRANSACTIONS." SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF CLIENTS) <TABLE> <CAPTION> INCEPTION NINE MONTHS ENDED TO YEAR ENDED MARCH 31, DECEMBER 31, MARCH 31, ---------------------- ------------------- 1994 1995 1996 1995 1996(1) --------- ---------- ---------- -------- ---------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues............... $ 261 $ 12,843 $ 26,339 $ 18,756 $ 26,245 Income (loss) from operations................ (889) (462) 1,374 945 (569) Net income (loss).......... (886) (377) 1,236 855 (380) Pro forma net income (loss) per share of Common Stock..................... $ (.35) $ (.05) $ 0.13 $ 0.09 $ (0.04) Shares used in computing pro forma net income (loss) per share of Common Stock..................... 2,511 8,272 9,824 9,762 10,439 </TABLE> <TABLE> <CAPTION> QUARTER ENDED ---------------------------------------------------------------- JUN. 30, SEPT. 30, DEC. 31, MAR 31, JUN. 30, SEPT. 30, DEC. 31, 1995 1995 1995 1996 1996(1) 1996(1) 1996(1) -------- --------- -------- ------- -------- --------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues............ $5,863 $5,975 $6,918 $7,583 $ 7,753 $8,336 $10,156 Income (loss) from operations............. $ 363 $ 149 $ 433 $ 429 $(1,215) $ (589) $ 1,235 Net income (loss)....... $ 312 $ 159 $ 383 $ 382 $ (714) $ (385) $ 719 OTHER OPERATING DATA: Number of clients served................. 13 10 13 17 21 25 29 Number of clients generating revenues greater than $250,000.. 8 9 8 7 11 11 16 Average revenue per client................. $ 451 $ 598 $ 532 $ 446 $ 369 $ 333 $ 350 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 --------------------------- ACTUAL(1) AS ADJUSTED(2)(3) --------- ----------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents........................... $ 7,132 $13,318 Working capital..................................... 6,312 14,498 Total assets........................................ 13,928 20,114 Long-term debt, including current portion........... 2,177 177 Total stockholders' equity.......................... 8,751 16,937 </TABLE> - -------- (1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Recent Developments." (2) Adjusted to give effect to the sale by the Company of 1,755 shares of Common Stock and the receipt and application of approximately $8,186 in net proceeds from this Offering, after deducting the maximum Total Underwriting Discount with respect to such shares of approximately $642 and estimated offering expenses of $825 (including $125 representing the maximum applicable non-accountable expense allowance to the Underwriters). (3) The "As Adjusted" long-term debt amount reflects the repayment of a $2,000 loan from Safeguard using net proceeds from this Offering. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity and Capital Resources" and "USE OF PROCEEDS."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000925732_cell_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000925732_cell_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..00bb58e5045dcc31d86f846c255c94dc0f8b290b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000925732_cell_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements, including the Notes thereto, contained elsewhere in this Prospectus. Investors should carefully consider the information set forth under the heading "Risk Factors." In this Prospectus, the term "Company" or "CPI" refers to Cell Pathways, Inc. Unless otherwise indicated, the information in this Prospectus (i) assumes the conversion of all of the outstanding shares of the Company's convertible preferred stock (the "Convertible Preferred Stock") into Common Stock upon consummation of this offering; (ii) assumes no exercise of the Underwriters' over-allotment option; (iii) excludes the issuance of up to 82,612 shares of Common Stock upon redemption of the Company's 61,250 outstanding shares of Redeemable Preferred Stock; and (iv) reflects a 1-for-1.8157 reverse split of the Company's outstanding Common Stock. THE COMPANY CPI is a pharmaceutical company focused on the development and commercialization of products to prevent and treat cancer. The Company is currently planning clinical trials of its lead compound FGN-1 in six indications and is conducting an ongoing pivotal Phase III trial for Adenomatous Polyposis Coli ("APC"), a disease characterized by numerous precancerous polyps of the colon. The Company plans to initiate Phase II/III trials of FGN-1 for sporadic adenomatous colonic polyps, prostate cancer, lung cancer and breast cancer in the fourth quarter of 1997, and to commence clinical trials of FGN-1 for Barrett's Esophagus and cervical dysplasia in 1998. The Company's technology is based upon its discovery of a novel mechanism which the Company believes, based on its research, can be targeted to induce selective apoptosis, or programmed cell death, in precancerous and cancerous cells without affecting normal cells. Utilizing this proprietary knowledge, the Company has created over 400 new chemical compounds, over 200 of which display significantly greater apoptotic potency than FGN-1. CPI's objectives are to be a leader in cancer chemoprevention and to build an integrated pharmaceutical company focused on the oncology market. To meet these objectives, the Company intends to: (i) pursue accelerated clinical development of FGN-1; (ii) leverage the Company's technology to develop additional agents for cancer therapy and chemoprevention; (iii) commercialize products directly to focused physician groups; and (iv) develop strategic collaborations for selected indications and markets. The Company's clinical trial strategy for its targeted indications is to identify subsets of larger patient populations in which clinical endpoints occur in high frequency and in a relatively short time frame. The Company plans to utilize data obtained in its completed clinical trials in its initial indications to provide a basis for commencing more advanced clinical trials in other indications. The Company believes that this strategy may allow the Company to reduce the size and duration of clinical trials, thereby generating statistically significant clinical results more quickly and cost-effectively. Adenomatous Polyposis Coli. Consistent with its clinical trial strategy, the Company has chosen APC as its initial indication and has obtained Orphan Drug status for FGN-1 in the treatment of APC. In a Phase I/II study completed in January 1997, 18 APC patients were treated with FGN-1 for six months. At the end of the study, all patients elected to continue in an open label extension of the study, and several patients have exceeded 24 months on the drug. In this study and its extension, nearly all patients have been observed to experience a dose-related reduction in the number and size of exophytic (i.e., raised over the surface) precancerous rectal polyps that were six millimeters or less in diameter at the beginning of the study. In the extended study, no progressive increase in polyp size or volume was observed in 13 of the 14 patients who have remained in the study and have been maintained on the optimal dose. There have been no withdrawals from the study or its extension attributable to serious adverse events. After reviewing the results of the Phase I/II trial with the FDA, CPI initiated a pivotal Phase III study in the second quarter of 1997, which will include 150 patients at approximately 12 centers worldwide. The Company is initiating a concurrent Phase III study in patients with high rates of polyp formation who otherwise would be excluded from the first Phase III study. There can be no assurance that the results of the Phase I/II study will be indicative of results in the Phase III studies or that the Phase III studies will show that FGN-1 is sufficiently safe and effective for marketing approval by the FDA or other regulatory authorities. Sporadic Adenomatous Colonic Polyps. Sporadic adenomatous colonic polyps occur in more than 30% of people in the U.S. over the age of 50 and are histologically and genetically indistinguishable from the polyps of APC. In September 1997, CPI completed a Phase IB study in 18 patients with a history of sporadic adenomatous colonic polyps and/or cervical dysplasia. CPI plans to initiate a multi-center, pivotal Phase II/III trial in the fourth quarter of 1997 to evaluate the safety and efficacy of different doses of FGN-1 in the treatment of existing sporadic adenomatous colonic polyps. Other Precancer Indications. The Company plans to commence clinical trials of FGN-1 for other precancerous indications, including Barrett's Esophagus and cervical dysplasia. Barrett's Esophagus is a precancerous condition of the lower esophagus. An estimated 2,000,000 people in the U.S. have Barrett's Esophagus, but only one half have symptoms that could lead to diagnosis. Cervical dysplasia, a precancerous lesion of the cervix, is diagnosed in approximately 5% of the fifty million Pap smears performed each year in the U.S. A small portion of these cases progress to cervical cancer. CPI plans to initiate Phase II studies in 1998 to evaluate the safety and efficacy of different doses of FGN-1 for the treatment of Barrett's Esophagus and cervical dysplasia. Cancer Indications. In addition, CPI plans to test FGN-1 for certain cancers, including prostate, lung and breast cancer. It is estimated that in 1997 there will be approximately 209,000 new cases of prostate cancer and approximately 185,000 new cases of breast cancer in the U.S. The Company plans to initiate Phase II/III clinical studies in the fourth quarter of 1997 to evaluate the safety and efficacy of different doses of FGN-1 in preventing the recurrence of prostate and breast cancer. It is estimated that in 1997 there will be approximately 177,000 new cases of lung cancer in the U.S. In the fourth quarter of 1997, the Company plans to conduct a pilot study of the safety and efficacy of FGN-1 in patients with advanced lung cancer. The Company has to date retained all rights to FGN-1 and its other compounds, and plans to establish its own sales force to promote FGN-1 for indications treated by relatively small, well-defined groups of clinical specialists. To reach larger physician groups, such as gynecologists, the Company may enter into marketing agreements with pharmaceutical or biotechnology companies. The Company also plans to seek partners for international development and commercialization of its products in all indications. The business of the Company began operating in partnership form in 1990. The Company was incorporated in Delaware in November 1992, and served as the general partner of the partnership until September 1993 when it acquired the partnership's assets. The Company's executive offices are located at 702 Electronic Drive, Horsham, PA 19044 and its telephone number is (215) 706-3800. THE OFFERING <TABLE> <S> <C> Common Stock offered............................ 2,500,000 Shares Common Stock outstanding after the offering..... 10,160,184 shares(1) Use of proceeds................................. For research and development activities, including clinical development of FGN-1; working capital; and general corporate purposes, including capital expenditures. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000925988_ing_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000925988_ing_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..20ee2b850fe7a6b0884a26350606a3a107f05ff0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000925988_ing_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY Description of the Guaranteed Account The AICA Guaranteed Account is a guaranteed interest option available as a funding option under certain variable annuity contracts issued by the Company. Amounts invested in the Guaranteed Account are credited with interest rates guaranteed by the Company for stated periods of time. Amounts must remain in the Guaranteed Account for the full Guaranteed Term to receive the quoted interest rates. Withdrawals or transfers from a Guaranteed Term before the end of the Guaranteed Term may be subject to a Market Value Adjustment. During a Deposit Period, Certificate Holders may direct some or all of their Purchase Payment(s) to the Guaranteed Account. There is no minimum amount of payment if the investment comes from a Purchase Payment. Transfers of accumulated amounts from other funding options to the Guaranteed Account are also allowed. If a transfer is made to the Guaranteed Account from other Contract funding options, the transferred value may not be less than $500 (see "Contributions to the Guaranteed Account"). Guaranteed Rates and Guaranteed Terms Interest is credited daily at a rate that will provide the guaranteed annual effective yield over the period of one year. The Company will declare the Guaranteed Rate(s) for all available Guaranteed Terms at the start of the Deposit Period for those Guaranteed Terms. These Guaranteed Rate(s) are guaranteed for that Deposit Period and for the length of the Guaranteed Term. Guaranteed Rates will never be less than the annual effective rate stated in the Contract (see "Guaranteed Rates"). Transfers and Withdrawals Full or partial surrenders and transfers to other funding options under the Contract are permitted from the Guaranteed Account; however, amounts invested for a Guaranteed Term during a Deposit Period may not be transferred during that Deposit Period or for 90 days after the close of that Deposit Period. This restriction may not apply in all circumstances (see "Transfers and Withdrawals"). Market Value Adjustment Amounts withdrawn or transferred from the Guaranteed Account prior to the Maturity Date may be subject to a Market Value Adjustment. The Market Value Adjustment reflects the change in the value of the investment at the time of withdrawal due to changes in interest rates since the date of deposit, and may be positive or negative. This provision does not apply to (1) amounts transferred on the Maturity Date; (2) amounts transferred under the Maturity Value Transfer Provision; (3) amounts transferred from the one-year Guaranteed Term in connection with the Dollar Cost Averaging Program described in the Contract Prospectus; and (4) amounts distributed under one of the Additional Withdrawal Options described in the Contract Prospectus. If amounts are withdrawn from the Guaranteed Account due to annuitization under one of the lifetime Annuity options described in the Contract Prospectus, only the positive Aggregate Market Value Adjustment, if any, is applied. When a guaranteed death benefit is payable under the terms of the Contract, only a positive Aggregate Market Value Adjustment amount, if any, is applied to amounts withdrawn from the Guaranteed Account if withdrawn within the first six months after the date of death (see "Market Value Adjustment"). Maturity of a Guaranteed Term On or before the Maturity Date, a Certificate Holder may instruct the Company, on the Maturity Date, to (a) reinvest the Matured Term Value in the Guaranteed Account for a new Guaranteed Rate and Term available under the then current Deposit Period; (b) transfer the Matured Term Value to one or more of the variable funding options available under the Contract; or (c) withdraw the Matured Term Value. In none of these circumstances would a Market Value Adjustment be applicable to the Matured Term Value; however, a deferred sales charge may be assessed on amounts withdrawn from the Contract (see "Contract Charges" and the Contract Prospectus). If the Company does not receive direction from the Certificate Holder by the Maturity Date, the Matured Term Value will be reinvested in the Guaranteed Account for a new Guaranteed Rate and Term under the then current Deposit Period. The new Guaranteed Term will have the same length to maturity as the Guaranteed Term that is maturing. If such a Guaranteed Term is not available, the transfer will be to the next shortest available Guaranteed Term (see "Maturity of a Guaranteed Term"). Maturity Value Transfer Provision The Maturity Value Transfer Provision is available at maturity when the Company automatically reinvests the total Guaranteed Term value into the open Deposit Period. This provision allows Certificate Holders to transfer to other funding options or withdraw, without a Market Value Adjustment, all or a portion of the Matured Term Value that was transferred to a new Guaranteed Term by default. A deferred sales charge may still be applied to any amounts withdrawn from the Contract (see "Maturity Value Transfer Provision"). Contract Charges Certain charges such as the mortality and expense risk charge and administrative charge are assessed under the Contract to compensate the Company for costs associated with administering the Contract. These charges are not deducted from the Guaranteed Account. Other charges, such as deferred sales charges, maintenance fees, premium taxes and transfer fees, as well as any federal income taxes and tax penalties, may be deducted from amounts held in or transferred from the Guaranteed Account. For a description of all fees and charges deducted under the Contract, see "Contract Charges" and the Contract Prospectus. Investments The interest rate(s) credited during any Guaranteed Term does not necessarily relate to investment performance. As in the case of all of the Company's general account assets, deposits received under the Guaranteed Account will generally be invested in federal, state and municipal obligations, corporate bonds, other fixed income investments, and cash or cash equivalents. All of the general assets of the Company are available to meet the guarantees under the general account (see "Investments"). Guaranteed Account Notifications At least 18 calendar days prior to the Maturity Date, the Company will notify you of a Guaranteed Term's maturity. The notice will also include information relating to the current Deposit Period's Guaranteed Rates and the available Guaranteed Terms. At any time, you may obtain information concerning available Deposit Periods, Guaranteed Rates, and Guaranteed Terms through the use of a toll-free telephone number (1-800-531-4547) (see "Description of the AICA Guaranteed Account--General" and "Maturity of a Guaranteed Term").
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000927456_caredata_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000927456_caredata_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8335fdf7bc18ade0627fac06d3b5245431b16fdd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000927456_caredata_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Medirisk is a leading provider of proprietary databases and related decision-support software and analytical services to the health care industry in the United States. The Company's products and services enable payers and providers to make objective comparisons of the financial costs and clinical outcomes of physician-mediated services to customer-specific and industry benchmarks and to access information concerning specific physicians. Such capabilities assist payers and providers in pricing managed care contracts, evaluating physician fee schedules and utilization of physician-mediated services, comparing provider outcomes and performance, and recruiting physicians. Medirisk actively sells its products to over 750 major customers, including leading health plans, insurers, hospitals and larger physician groups, as well as to more than 700 smaller customers, including single-specialty physician groups. The Company believes it is the U.S. leading provider of clinical and financial databases comprised of physician-oriented content. Medirisk's health care information products and services consist of financial products, clinical performance products and physician database products. Financial Products. Medirisk's financial products provide customers with comprehensive proprietary information regarding physician fees and health care utilization patterns in the United States. The Company's financial products enable payers and providers to analyze health care cost and utilization data and compare, by procedure and geographic location, pricing and utilization trends. Clinical Performance Products. Medirisk's clinical performance products allow customers to measure outcomes across a full range of care within a variety of medical specialties. The Company's clinical performance products enable both payers and providers to measure clinical outcomes and apply that information to attract and retain managed care arrangements and to improve quality of clinical care. Physician Database Products. Medirisk offers a database comprised of detailed information concerning U.S. physicians who are candidates for new practice affiliations. The Company licenses its physician database products to assist customers in cost-effective in-house physician recruiting. Medirisk built its core databases by collecting, standardizing and normalizing more than three billion health care transaction records. Medirisk's databases include records submitted by the Company's customers under its ongoing data collection plan and the results of regular proprietary surveys of managed care plans and other payers. The Company believes that the long-standing relationships under which it collects these data and the data interpretation methodologies used by the Company represent significant competitive advantages. Medirisk's objective is to enhance its position as a leading provider of proprietary databases and related decision-support software and analytical services to payers, providers and other health care industry participants. To attain this objective, Medirisk seeks to: (i) leverage the Company's existing customer base to cross sell additional products; (ii) emphasize recurring revenue; (iii) develop new products; and (iv) acquire and integrate complementary products and businesses. To capitalize on the fragmentation of the industry and to support its acquisition strategy, Medirisk has corporate resources dedicated to identifying, analyzing and pursuing appropriate acquisition candidates. The Company is currently tracking a database of more than 300 companies, of which more than 100 currently meet Medirisk's primary acquisition criteria for product type, revenue and customer base.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000927963_tvx-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000927963_tvx-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e89bc40634c15afb2c05ebe9bd40a356520b495b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000927963_tvx-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Except where otherwise indicated, the information contained in this Prospectus (i) assumes that the Over-allotment Option is not exercised, (ii) reflects the effects of the consummation of the acquisition of all of the shares of Active Imaging plc by the Company on a pro forma basis as set forth herein, (iii) reflects the conversion of all outstanding Series B Non-Voting Convertible Preferred Stock of TVX into Common Stock and the redemption of stock issues as outlined in "Use of Proceeds" and (iv) reflects a 0.9116 for 1 stock split of the Company's Common Stock in January 1997. Unless the context otherwise requires, references in this Prospectus to the "Company" mean TVX, Inc. ("TVX") after giving effect to the acquisition of Active Imaging plc ("Active Imaging"). See "The Acquisition." Prospective investors should carefully consider the information set forth under the heading "Risk Factors." THE COMPANY The Company develops and distributes digital image management systems for the security and surveillance industry, the transportation management industry and Internet video applications. It also is a value-added reseller, with systems engineering capabilities, of imaging hardware and software. The Company's systems enable video and still images to be captured, digitized and compressed for storage or immediate transmission over wired or wireless networks for evaluation by end users. The Company's systems, many of which are covered by patents or patents pending, generally consist of proprietary software and integrated hardware platforms that are sold globally through multiple distribution channels. The Company believes it differentiates itself by utilizing its technology to offer high quality integrated solutions that allow for interactive communication and automated processing of information. The Company believes that there is significant demand in existing and developing markets for systems utilizing its technology. The Company's principal stockholders are CommNet Cellular Inc. ("CommNet"), one of the largest providers of wireless telephone services for rural areas in the United States, and ADT Limited ("ADT"), the largest provider of security alarm systems and monitoring services in the United States and United Kingdom. ADT's ownership in TVX is held through Automated Security (Holdings) plc ("ASH"), which it acquired in September 1996. Both CommNet and ADT are publicly traded companies listed on Nasdaq under the symbol CELS and the New York Stock Exchange under the symbol ADT, respectively. TVX was founded in early 1992 by several individuals and ASH to capitalize on security industry applications of TVX's visual surveillance technology. CommNet recognized the synergy between TVX's technology and CommNet's wireless technology and began investing in TVX in the fall of 1992. As a leading provider of security systems, ADT is actively evaluating the market applications of several of the Company's systems. Concurrently with the Offering, TVX is acquiring Active Imaging, a publicly- traded United Kingdom-based company. Active Imaging develops and markets proprietary and jointly owned imaging products. It also operates as a value- added reseller, systems integrator and supplier of third party imaging products, with customers including SmithKline Beecham, Philips Medical Systems, Unilever and the Defence Research Authority. See "The Acquisition." MARKET OPPORTUNITIES Advances in computer software and microprocessor technology have enabled the development of digital image management systems which the Company believes have applications in numerous industries. Initially, the Company has targeted the security and surveillance industry, transportation management industry and Internet video market, where the Company believes there is significant demand for its systems and technologies. SECURITY AND SURVEILLANCE. Within the security and surveillance industry, the Company has focused on the market segments of alarm verification, automated transaction recording and mobile applications. Alarm Verification. In 1995, the economic loss from residential and commercial burglaries in the United States was $4.3 billion. Businesses and homeowners are increasingly concerned with protecting their property, employees and families, leading to a growing number of alarm system installations. Between 1989 and 1995, the installed base of security alarm systems in the United States increased from approximately 11 million to approximately 17 million, representing a compound annual growth rate of 7.5%. While the installed base of security alarms continues to grow, the incidence of false alarms presents a serious challenge for the future growth of the industry. According to United States and United Kingdom police department studies, approximately 95% of the alarms that are triggered are false alarms, causing inefficient utilization of scarce law enforcement resources. In response to this expanding problem, municipalities are increasingly establishing strict alarm response policies, including downgrading the priority response time for alarms, imposing fines of up to hundreds of dollars for each false alarm, and refusing to respond to an alarm after a certain number of false alarms, threatening to erode the value of the existing installed base of alarm systems. In response to increasing demand for visual verification of alarms, the Company completed beta testing and began shipping its Apollo system in the United States in September 1996. The Apollo system is a relatively low cost, fully interactive verification and observation system that can be integrated with most major alarm systems on the market today. Upon activation of the alarm, the Apollo system automatically sends digital images from the alarm site to a central monitoring station for immediate evaluation, electronic enhancement, or transmission to others, such as law enforcement agencies. The Apollo system is fully interactive, so as to enable the central monitoring system to activate any camera on the system to capture and transmit additional images. Although the Apollo system has only recently been introduced in the market, the Company believes that, based upon initial demand and recent efforts to heighten customer awareness, sales of the Apollo system should increase significantly. Automated Transaction Recording. As of September 30, 1996, there were over 300,000 automated teller machines ("ATMs") within the United States and Europe, operated primarily by banks and retailers. The number of ATMs has increased at a compound annual growth rate of 10% over the three year period from 1992 to 1995. ATM and electronic point-of-sale ("POS") system usage has also increased significantly over the past three years, both in terms of the dollar amount of transactions and per capita use, as banks and retailers have focused on reducing overhead, decreasing transaction costs and improving customer service. Industry estimates indicate that, as of the end of 1995, approximately 10.2 million retailers world-wide used some form of electronic POS system for registering customer transactions. With greater deployment of and easier access to ATMs throughout the U.S. and Europe, ATM providers are increasingly concerned with fraud detection, dispute resolution and security surveillance. Most ATM systems record ATM users with video cameras, which are very expensive to maintain, do not provide complete transaction information, cannot be accessed remotely, and require a time- consuming process to locate and retrieve information. The Company has developed a more efficient and less expensive product, the DTR ViewPoint system, to replace videotape with digitally compressed images of the ATM user and his or her transaction information, which can be easily retrieved and evaluated. These images can be stored electronically, transmitted via modem and, if desired, immediately viewed and downloaded from a remote site. The DTR ViewPoint system has been sold to Bancorp Hawaii, Inc., for secondary testing, and to EDS Systems Corp., Compass Bank, Keycorp, Peninsula Bank and Kerns School Federal Credit Union for beta testing and evaluation. In addition, the Company is currently negotiating with Wells Fargo Armored Services ("Wells Fargo"), the largest ATM servicing group in the United States, for Wells Fargo to market, install and service the DTR ViewPoint system throughout the U.S. in conjunction with its cash and ATM distribution functions. The Company believes there are numerous additional applications for the DTR ViewPoint system including car rentals, check cashing, returning purchased goods and inventory management. Mobile Applications. Many of the 5,000 metropolitan area transit authorities in the United States are increasingly concerned about improving security and reducing vandalism and accident-related liability claims on their mass transit systems. Numerous mass transit systems have reported significant problems with assaults and even homicides, as well as with obtaining accurate information regarding on-board incidents and traffic accidents. In response to these concerns, the Company introduced the MobileView system, which it believes to be the most effective product available today for surveillance and security on mass transit systems. The MobileView system captures digital images that are stored on a ruggedized, removable hard drive or transmitted over a wireless network to a central receiving station for remote monitoring. The wireless transmission of images can be initiated automatically by sensors in the case of vehicle impact, by the driver in panic situations, or by the central station operator for further observation and additional information in a crisis situation. Since the images stored and/or transmitted are digital, the images can be enhanced, printed, and/or faxed quickly and efficiently. With no VCR to service or tapes to maintain or replace, the MobileView system provides a cost- effective, long-term operational solution with greater durability for mass transit and commercial applications. The Los Angeles County Metro Transit Authority ("LACMTA") has tested the system and recently ordered 250 units for delivery beginning in June 1997 to be installed on a portion of its fleet of 2,400 buses. In addition, the MobileView system is being tested or considered by transit authorities in various metropolitan areas, including San Francisco, Oakland, Dallas, Seattle, Denver and Broward County, Florida. The Company also believes that the MobileView system provides manufacturers and shipping companies with a highly effective method for detecting fraud, theft and other problems related to the shipping of goods. TRANSPORTATION MANAGEMENT. Traffic jams, and their associated social and environmental costs, are problems for most developed countries. The Company believes that both federal governments and local jurisdictions desire cost- effective mechanisms to monitor, analyze and ultimately control and improve road traffic. For example, Congress passed the Intermodal Surface Transportation Efficiency Act of 1991, authorizing expenditures by the U.S. government on the application of interactive technology to roads. The Company developed the InVision camera system to assist municipalities in managing vehicular traffic by collecting digital images and data, then relaying that information to a central traffic control station for analysis. The InVision system has two distinct applications, freeway management and intersection traffic management. As a freeway management application, the InVision system assists municipalities in managing vehicular traffic by collecting digital images and data regarding vehicle speed and type, traffic density and general road conditions. The Texas Department of Transportation is currently testing the system as a freeway management system in Houston. As an intersection traffic management tool, the InVision system is being tested to cost-effectively replace and improve upon the underground sensors (often referred to as an induction loop system), currently used by many jurisdictions in the United States and United Kingdom. The city of New Orleans and a Dallas suburb have substantially completed their testing of the InVision system as an intersection traffic management system and have indicated their intention to install such systems upon receipt of funding. INTERNET VIDEO APPLICATIONS. As of January 1996, there were approximately 30 million users in over 170 countries connected to the Internet, a global network of computer networks which allows computers to communicate using Internet protocols. Based upon its belief that there will be a convergence of broadcast media into the Internet in order to provide real time access to information and events, the Company has developed the MvNet camera which can be directly linked to the Internet to provide constant and immediate video images to a personal computer. The MvVision camera series, which currently includes the MvNet camera and the Mv2000, is an intelligent camera system permitting a user to program it for specific applications. For example, it might store all image data, but only transmit images that meet specifically pre-defined criteria such as the appearance of an object within the field of vision. The Company's MvNet camera is a "plug- and-play" camera system which combines a video camera, computer, network and communication device and Web server which, when accessed via the Internet or intranet (a type of internal computer communications network), provides data and live images at the request of remote authorized viewers using industry standard Internet viewing software packages such as Netscape Navigator(R). The Company currently has an installed base of approximately 200 MvNet systems used by companies such as Apple Computer, American Airlines, Los Alamos National Laboratories and Cyberia Internet Cafes for applications including Webcasts of music concerts, monitoring cargo plane hangars, monitoring nuclear materials and video communications between cafe locations. Another product in the MvVision camera series, the Mv2000 is designed for security, surveillance and monitoring. Other potential applications could include industrial inspection applications, including identifying defects during the production process. INTEGRATED SOLUTIONS. The Company operates as a United Kingdom-based value- added reseller of customized imaging hardware and software with systems engineering capabilities for scientific and medical and industrial applications. The application specific systems that the Company develops for various customers include use of both the Company's own and jointly owned proprietary products and those from some of the world's leading imaging hardware and software companies. Customers include SmithKline Beecham, Philips Medical Systems, Unilever and the Defence Research Authority. The Company's system engineering projects, which are generally created pursuant to agreements which permit the Company to retain title to the customized solution developed for such customers, provide it with potential applications for productization and identification of new applications for its technology. COMPANY STRATEGY The Company's primary objective is to be a leading provider of digital image management solutions to markets in which immediate image capture and transmission, storage and/or retrieval are critical. The Company has historically focused its resources on the research and development of its systems and is now emphasizing sales and marketing efforts to significantly and profitably expand the markets for its systems. The principal elements of the Company's strategy are described in more detail below. INCREASE SALES AND MARKETING EFFORTS. The Company intends to expand its sales and marketing efforts to increase sales in existing markets and to create new applications of its existing technologies. The Company believes that the increased product offerings and greater distribution strength which should result from combining TVX and Active Imaging will permit the Company to become a more competitive global provider of digital image management solutions. The Company intends to expand its direct sales and marketing force by fifty percent during the next twelve months and to initiate, with its distributor network, joint direct marketing and telemarketing efforts, extensive product training and advertising, and participation in global trade shows and product seminars. The Company also intends to seek additional applications for its technologies which it may either develop internally or license to other companies for development in order to achieve greater market recognition and penetration. MAINTAIN TECHNOLOGY LEADERSHIP. The Company believes it provides superior systems to address specific market needs by incorporating advanced and innovative technology consisting of integrated hardware and proprietary software to provide complete solutions for the customer. The Company has invested and intends to continue to invest significant resources in system enhancement, particularly in the areas of software, application specific integrated circuit ("ASIC") development and platform packaging and integration. The Company believes its commitment to research and development is important to maintain and enhance its technological leadership position and expects to focus its efforts upon reducing the cost of its systems and improving their features and functionality. The Company also intends to opportunistically develop strategic relationships through licensing agreements, joint ventures, acquisitions and other partnering agreements in an effort to maintain its technology leadership in each of its market segments. For example, the Company's MvNet camera is currently being used by Apple Computer and evaluated by Microsoft and Netscape. There can be no assurance, however, that any of these entities will decide to incorporate the Company's technology standards into their systems, or that if incorporated, the Company will generate any sales from such relationships. While the Company has no current plans or intentions to acquire additional businesses, technologies or product lines, the Company will continue to evaluate acquisitions of complementary businesses and technologies in order to expand its technology leadership. STRENGTHEN DISTRIBUTION CAPABILITY. The Company's distribution network consists of its direct sales force, various international, national and regional distributors and dealers and strategic marketing partners. In order to increase sales to current markets and penetrate new markets, the Company intends to strengthen its distribution capabilities by expanding its existing sales channels and seeking new strategic marketing partners who have expertise and presence in selected markets. The Company is currently exploring several such relationships, including discussions with Wells Fargo for the distribution of the Company's DTR ViewPoint system to ATM providers. The Company believes that the use of strategic marketing partners can provide a more efficient and cost-effective route to the marketplace for application specific products. In many cases, these strategic relationships can provide immediate world-wide access and distribution, decreasing the need for costly infrastructure development and permitting the Company to focus on core technology development. EMPHASIZE CUSTOMER SERVICE AND SUPPORT. Since its inception, the Company has emphasized the importance of customer service and support. The Company believes that its customer support organization, including support provided by distributors and dealers, is a critical factor in facilitating additional sales to existing customers as well as sales to new customers. Because the Company's systems are technically sophisticated, the Company's internal sales staff is supported by highly qualified and extensively trained systems specialists. The Company also offers extensive training, maintenance and software support programs to its customers through its support organization at five locations in the United States and United Kingdom. The Company also intends to remain at the forefront in the areas of quality and customer service through its continued investments in management information technology. The Company intends to enhance and expand its customer service and support capability in order to address the needs of its existing and new markets. ENHANCE OPERATING EFFICIENCIES. The Company intends to utilize a portion of the proceeds from the Offering to acquire or construct its own manufacturing facility which it believes will allow it to react more quickly to changes in product specifications, to accommodate growth, and to improve cost control, inventory supply and cash flow, thus improving its gross profit margin. Additionally, by integrating substantially all of the operations and product lines of TVX and Active Imaging, and by making additional investments in management information technology, the Company believes that it will be able to operate the combined companies on a more efficient and cost-effective basis. THE ACQUISITION Concurrently with the Offering, TVX is acquiring Active Imaging pursuant to offers (the "Offers") being made to Active Imaging's shareholders. The Offers are conditional upon, among other things, acceptances of the Offers being received in respect of at least 90% of the outstanding shares of common stock of Active Imaging (the "Acquisition") and the Offers being declared unconditional in all respects, except for the closing of the Offering. TVX is offering an aggregate of up to $10.0 million in cash to the holders of Active Imaging common and preferred shares. The amount offered to the holders of Active Imaging preferred stock is equal to the redemption amount of each share together with accrued and unpaid dividends. Based on an exchange rate of $1.611 for (Pounds)1.00 (the "Reference Exchange Rate"), this represents aggregate cash consideration of approximately $2.1 million. TVX is offering the holders of Active Imaging common stock the alternatives of cash or shares of TVX Common Stock, in each case having a value of approximately $1.68 per share (the "Offer Price"). If the initial public offering price of the Offering exceeds $15.00 per share, then the Offer Price will be proportionately increased. The maximum cash available for the holders of Active Imaging common stock will be approximately $7.9 million ($10.0 million less the cash consideration of $2.1 million to be paid to the holders of the Active Imaging preferred stock). See "Use of Proceeds." To the extent that aggregate elections by holders of Active Imaging common stock to receive cash exceed the maximum cash available for such holders, such elections will be reduced pro rata and the balance will be satisfied in shares of TVX Common Stock. Assuming an initial public offering price of between $14.00 and $16.00 per share, the value of the total consideration for the Acquisition will range from approximately $32.9 million to $34.8 million. The following table summarizes various possible results of the Offers to the holders of Active Imaging common stock: <TABLE> <CAPTION> IPO PRICE OFFER PRICE CASH ACCEPTED (1) TVX SHARES ISSUED (1)(2) --------- ----------- ----------------- ------------------------ <S> <C> <C> <C> <C> $14.00 $1.68 $7,900,000 1,634,094 14.00 1.68 -- 2,198,380 15.00 1.68 7,900,000 1,525,398 15.00 1.68 -- 2,052,065 16.00 1.79 7,900,000 1,656,350 16.00 1.79 -- 2,046,578 </TABLE> - -------- (1) Assumes the Offers are accepted by the holders of all of the 18,289,348 shares of Active Imaging common stock currently outstanding and an exchange rate equal to the Reference Exchange Rate. (2) Does not include 319,147 shares of the Company's Common Stock issuable upon exercise of Active Imaging options and warrants currently outstanding or conditionally issuable. TVX has received irrevocable undertakings to accept the Offers from the holders of all of the outstanding Active Imaging preferred stock and from the holders of approximately 77.5% of the outstanding Active Imaging common stock. Upon the closing of the Acquisition and the Offering, one director of Active Imaging will become an officer of the Company and one director of Active Imaging will become a director of the Company. See "Management." The Company believes the Acquisition will permit the combined entities to improve their existing systems and to develop new technologies more efficiently since both TVX and Active Imaging are in the business of developing and distributing digital image management systems and thus will be able to share their existing technologies, sales and marketing efforts and research and development capabilities. Moreover, even though TVX and Active Imaging are in the same business, Active Imaging has pursued the market for video applications while TVX has pursued the market for still image applications and thus their technologies are complementary. In addition, the Company believes the combined entity will be able to be operated on a more efficient and cost-effective basis. THE OFFERING <TABLE> <C> <S> Common Stock offered ...................... 2,666,667 shares (1) Common Stock outstanding after the 7,362,372 shares (1)(2) Offering.................................. Use of Proceeds............................ Payment of the anticipated cash portion of the Acquisition; retirement of existing debt; general corporate purposes, including research and development and marketing expenses; building or obtaining manufacturing capability; transaction fees and expenses; integration of the Company's operations following the Acquisition; and redemption of the stock issues. See "Use of Proceeds." Proposed Nasdaq National Market symbol..... TVAI </TABLE> - -------- (1) Excludes shares issuable upon exercise of the Over-allotment Option. (2) After giving effect to (i) the acquisition of all the outstanding shares of capital stock of Active Imaging, (ii) the receipt by the Company of the net proceeds from the sale of 2,666,667 shares of Common Stock offered hereby at an assumed initial offering price of $15.00 per share, (iii) the application of a portion of the estimated net proceeds therefrom for the repayment of all of the Company's long-term notes payable and redemption of stock issues as outlined in "Use of Proceeds", and (iv) the conversion of all outstanding TVX Series B Non-Voting Convertible Preferred Stock into Common Stock (collectively, the "Transactions"). See "Pro Forma Capitalization." Excludes (i) 938,036 shares of Common Stock reserved for issuance pursuant to the exercise of outstanding stock options under the Company's stock option plans at a weighted average price of approximately $1.09 per share, (ii) 259,614 shares of Common Stock reserved for future issuance pursuant to such stock option plans, (iii) 911,600 shares of Common Stock reserved for issuance upon exercise of outstanding warrants at a price of approximately $0.73 per share, and (iv) 319,147 shares of Common Stock reserved for issuance upon exercise of Active Imaging options and warrants currently outstanding or conditionally issuable. SUMMARY FINANCIAL INFORMATION The following tables summarize certain selected consolidated financial data of TVX, Active Imaging and TVX Limited for the periods indicated. The summary historical information has been derived from and should be read in conjunction with the historical consolidated financial statements of TVX, Active Imaging and TVX Limited, including the related notes thereto, which are included elsewhere herein. TVX, INC. <TABLE> <CAPTION> JANUARY 13, 1992 YEAR ENDED SEPTEMBER 30, (INCEPTION) THROUGH ------------------------------------------------ PRO SEPTEMBER 30, 1992 1993 1994 1995 1996 FORMA (1) ------------------- ---------- ---------- ----------- ----------- ------------ <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............... $ 321,282 $1,041,142 $1,812,293 $ 1,071,019 $ 1,033,920 $ 8,551,120 Cost of sales........... 230,200 686,655 1,203,019 754,915 786,660 6,454,719 --------- ---------- ---------- ----------- ----------- ------------ Gross profit........... 91,082 354,487 609,274 316,104 247,260 2,096,401 General, administrative and other expenses..... 294,216 885,884 1,186,798 2,445,917 2,276,573 10,866,985 Research and development expenses............... 1,800 39,800 90,100 652,000 541,950 3,102,031 --------- ---------- ---------- ----------- ----------- ------------ Loss from operations... (204,934) (571,197) (667,624) (2,781,813) (2,571,263) (11,872,615) Other credits (charges).............. 5,366 7,815 (58,773) (253,206) (430,485) (669,571) --------- ---------- ---------- ----------- ----------- ------------ Net loss............... (199,568) (563,382) (726,397) (3,035,019) (3,001,748) (12,542,186) Accrued preferred stock dividends.............. -- (5,918) (129,904) (192,000) (248,000) (248,000) --------- ---------- ---------- ----------- ----------- ------------ Net loss applicable to common stockholders... $(199,568) $ (569,300) $ (856,301) $(3,227,019) $(3,249,748) $(12,790,186) ========= ========== ========== =========== =========== ============ Net loss per common share.................. $ (0.12) $ (0.19) $ (0.27) $ (0.99) $ (0.93) $ (2.31) ========= ========== ========== =========== =========== ============ Common shares used in computing net loss per share.................. 1,613,379 3,033,582 3,130,986 3,268,049 3,476,865 5,528,930 ========= ========== ========== =========== =========== ============ </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1996 ----------------------------- ACTUAL AS ADJUSTED(1)(2) ---------- ----------------- <S> <C> <C> BALANCE SHEET DATA: Working capital...................... $ 655,816 $28,450,594 Total assets......................... 3,734,810 57,290,451 Long term notes payable and other.... 6,369,000 133,052 Redeemable preferred stock........... 1,435,822 -- Redeemable common stock.............. 350,000 -- Stockholders' equity (deficiency).... (5,583,274) 53,168,222 </TABLE> - -------- (1) See "Unaudited Pro Forma Combined Financial Statements" and related notes thereto. (2) Adjusted to reflect the Transactions. ACTIVE IMAGING PLC <TABLE> <CAPTION> YEAR ENDED DECEMBER 31 ------------------------------------------------------------------------ 1992 1993 1994(1) 1995(1) 1996(1) 1996(2) ------------ ------------ ------------ ------------ ------------ ------- (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 $'000 <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............... 2,336 3,103 4,448 5,063 4,207 6,585 Cost of sales........... (1,447) (1,875) (2,840) (3,292) (3,036) (4,752) ------ ------ ------ ------ ------ ------ Gross profit........... 889 1,228 1,608 1,771 1,171 1,833 General, administrative and other expenses..... (853) (1,069) (1,628) (1,883) (3,359) (5,258) Research and development expenses (net of grants)................ -- (40) (52) (389) (1,440) (2,254) ------ ------ ------ ------ ------ ------ Operating (loss)/profit (36) 119 (72) (501) (3,628) (5,679) Interest receivable/(payable) and similar income/charges......... (7) (10) (17) (51) 22 34 ------ ------ ------ ------ ------ ------ (Loss)/profit on ordinary activities before taxation........ (43) 109 (89) (552) (3,606) (5,645) Tax (payable)/repayable on loss on ordinary activities............. (1) (32) -- 38 -- -- ------ ------ ------ ------ ------ ------ (Loss)/profit for the year................... (44) 77 (89) (514) (3,606) (5,645) Dividends and appropriations: Preference share appropriations....... -- -- -- (37) (44) (69) ------ ------ ------ ------ ------ ------ (Loss)/profit for the year after appropriations......... (44) 77 (89) (551) (3,650) (5,714) ====== ====== ====== ====== ====== ====== Loss per ordinary common stock.................. 12.89p 79.78p 24.56p 38.44c ====== ====== ====== ====== ====== ====== Adjusted loss per ordinary common stock.. 1.29p 7.98p 24.56p 38.44c ====== ====== ====== ====== ====== ====== <CAPTION> 1996(1) 1996(2) ------------ ------- (Pounds)'000 $'000 <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital............................................................. 1,464 2,292 Total assets................................................................ 5,648 8,841 Shareholders' funds......................................................... 3,305 5,173 </TABLE> - -------- (1) The results summarized above were prepared under accounting principles generally accepted in the United Kingdom. If the above results would have been prepared under accounting principles generally accepted in the United States, the net loss presented for the years ended December 31, 1994, 1995 and 1996 would have been (Pounds)201,000, (Pounds)785,000 and (Pounds)3,859,000, respectively. The shareholders' funds at December 31, 1996 would have been (Pounds)2,406,000 under United States generally accepted accounting principles. See Notes to the Active Imaging Financial Statements. (2) The 1996 results and balance sheet data have been converted into US dollars for convenience purpose only using the Noon Buying Rate at September 30, 1996. TVX LIMITED <TABLE> <CAPTION> PERIOD PERIOD YEAR ENDED DECEMBER 1, 1995 THROUGH DECEMBER 1, 1995 THROUGH NOVEMBER 30, 1995(1) SEPTEMBER 17, 1996(1) SEPTEMBER 17, 1996(1)(2) -------------------- ------------------------ ------------------------ <S> <C> <C> <C> (Pounds)'S (Pounds)'S $'S STATEMENT OF OPERATIONS DATA: Net Sales............... 997,599 659,701 1,032,630 Cost of sales........... (962,118) (642,840) (1,006,237) ---------- ---------- ---------- Gross profit........... 35,481 16,861 26,393 Administrative ex- penses................. (887,427) (573,742) (898,078) Other................... (559,140) -- -- ---------- ---------- ---------- Loss on ordinary activi- ties before taxation............... (1,411,086) (556,881) (871,685) Taxation credit......... 275,920 -- -- ---------- ---------- ---------- Loss on ordinary activi- ties................... (1,135,166) (556,881) (871,685) ========== ========== ========== </TABLE> <TABLE> <CAPTION> NOVEMBER 30, 1995(1) SEPTEMBER 17, 1996(1) SEPTEMBER 17, 1996(1)(2) -------------------- --------------------- ------------------------ <S> <C> <C> <C> (Pounds)'S (Pounds)'S $'S BALANCE SHEET DATA: Working capital......... (2,199,214) 372,748 583,462 Total assets............ 1,227,020 497,590 778,878 Shareholders' funds..... (2,159,793) 418,326 654,806 </TABLE> - -------- (1) No significant differences exist between generally accepted accounting principles from these in the United States versus those in the United Kingdom as such accounting principles relate to TVX Limited. See Notes to the TVX Limited financial statements. (2) The 1996 results and balance sheet data have been converted into U.S. Dollars for convenience purposes only using the Noon Buying Rate at September 30, 1996. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Prospectus, including the matters set forth under the caption "Risk Factors," which could cause actual results to differ materially from those indicated in such forward-looking statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000928358_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000928358_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8b23a28c4cae8a808c1990c98fbe5ee7561c9025
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000928358_first_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and the notes thereto contained elsewhere in this Prospectus. On January 3, 1997, First Nationwide Escrow Corp. merged with and into First Nationwide Holdings Inc. (the "FN Escrow Merger") and First Nationwide Bank, A Federal Savings Bank merged with and into California Federal Bank, A Federal Savings Bank (the "Cal Fed Acquisition"). Unless the context otherwise indicates, (i) the "Issuer" refers to First Nationwide Escrow Corp., as the obligor on the Old Notes prior to the consummation of the FN Escrow Merger and to First Nationwide Holdings Inc. as the obligor on the Notes after the consummation of the FN Escrow Merger, (ii) "First Nationwide" refers to First Nationwide Bank, A Federal Savings Bank prior to the consummation of the Cal Fed Acquisition, (iii) "Cal Fed" and "California Federal" refer to Cal Fed Bancorp Inc. and California Federal Bank, A Federal Savings Bank, respectively, prior to the consummation of the Cal Fed Acquisition and (iv) the "Bank" refers to California Federal Bank, A Federal Savings Bank, the surviving entity after consummation of the Cal Fed Acquisition. An index of defined terms used in this Propsectus begins on page 252. THE ISSUER The Issuer is a holding company whose only significant asset is all of the common stock, par value $.01 per share, of the Bank. As such, the Issuer's principal business operations are conducted by the Bank and its subsidiaries. THE BANK After giving effect to the Cal Fed Acquisition, the Capital Corporation Offering and the Capital Contribution, at September 30, 1996, the Bank would have had approximately $31.0 billion in assets, approximately $17.6 billion in deposits, would have operated approximately 227 branches and would have ranked at such date as the fourth largest thrift in the United States in terms of assets, based on published sources. The Bank's principal business consists of operating retail deposit branches and originating and/or purchasing residential real estate loans and, to a lesser extent, certain consumer loans, and is conducted primarily in California, Florida, Nevada and Texas. The Bank also actively manages its portfolio of commercial real estate loans acquired through acquisitions and is active in mortgage banking and loan servicing. These operating activities are financed principally with customer deposits, secured short-term and long-term borrowings, collections on loans, asset sales and retained earnings. As of September 30, 1996, First Nationwide had approximately $16.8 billion in assets and approximately $8.8 billion in deposits and operated 116 branches. The Bank is chartered as a federal stock savings bank under the Home Owners' Loan Act ("HOLA") and regulated by the Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance Corporation ("FDIC"), which, through the Savings Association Insurance Fund ("SAIF"), insures the deposit accounts of the Bank, up to applicable limits. The Bank is also a member of the Federal Home Loan Bank System ("FHLBS"). The Cal Fed Acquisition On July 27, 1996, Holdings entered into an Agreement and Plan of Merger, dated as of July 27, 1996, among Holdings, Cal Fed and California Federal (the "Merger Agreement"), pursuant to which on January 3, 1997 Holdings acquired Cal Fed and California Federal and First Nationwide merged with and into California Federal. The aggregate consideration paid under the Merger Agreement consisted of approximately $1.2 billion in cash and the issuance of the Secondary Litigation Interests (as defined herein) by California Federal. California Federal, headquartered in Los Angeles, was a federal stock savings bank chartered under the HOLA, which operated 118 branches in California and Nevada. Cal Fed was a Delaware chartered unitary savings and loan holding company whose only significant asset was all of the common stock of California Federal. Cal Fed was a publicly owned corporation whose common shares were traded on the New York Stock Exchange under the symbol "CAL." Management believes that the Cal Fed Acquisition furthers its strategy of building franchise value by expanding First Nationwide's retail branch network in California. See "--Business Strategy." California Federal offered a broad range of consumer financial services including demand and term deposits, mortgage, consumer and small business loans, and insurance and investment products. At September 30, 1996, California Federal had approximately $14.1 billion in assets and $8.8 billion in deposits. Management believes that the Cal Fed Acquisition substantially completes the strategy initiated in 1994 to expand and focus First Nationwide's retail franchise in California. See "--Business Strategy." The Cal Fed Acquisition significantly enhances First Nationwide's presence in Southern California, which management believes is an attractive area for expansion and complements First Nationwide's existing branches in Northern California. At September 30, 1996, First Nationwide had approximately $4.9 billion in retail deposits at 72 branches in Northern California and approximately $.8 billion in retail deposits at 17 branches in Southern California. After giving effect to the Cal Fed Acquisition, at September 30, 1996, the Bank would have had approximately $6.1 billion in retail deposits at 89 branches in Northern California and $7.5 billion in retail deposits at 105 branches in Southern California. In addition to significantly enhancing First Nationwide's statewide branch network, the Cal Fed Acquisition will contribute significant earnings. See "--Summary Pro Forma Financial Data." The economies of scale resulting from the Cal Fed Acquisition will enable the Bank to continue to improve the efficiency of its operations. The Cal Fed Acquisition also adds approximately $3.5 billion to the loan servicing portfolio, which will enable First Nationwide Mortgage Company ("FNMC"), the mortgage banking subsidiary of the Bank, to realize continued operating efficiencies. The Cal Fed Acquisition adheres to First Nationwide's strategy of protecting the credit quality of its assets. In 1994, California Federal completed a significant restructuring, which included the sale of approximately $1.3 billion of non-performing and high-risk performing assets. At December 31, 1995, the California Federal loan portfolio consisted of predominantly 1-4 unit residential mortgage loans (76.8% of total loans) and 5+ unit residential mortgage loans (14.2% of total loans). The Cal Fed Acquisition will be accounted for under the purchase method of accounting and therefore the California Federal loan portfolio will be acquired at its current fair market value. On a pro forma basis after giving effect to the Cal Fed Acquisition at September 30, 1996, 70.5% of the Bank's loans would have consisted of residential mortgages, compared to 59.8% on an historical basis, and 28.9% of the Bank's loans would have consisted of commercial real estate loans, compared to 39.6% on an historical basis. See "Business--Holdings--Lending Activities." Holdings financed the Cal Fed Acquisition with (i) the net proceeds of approximately $555 million from the issuance of $575 million aggregate principal amount of the Old Notes, (ii) an investment by a newly formed Delaware corporation, all the common stock of which is owned by Gerald J. Ford, the Chairman of the Board, Chief Executive Officer and a director of the Bank ("Special Purpose Corp."), of $150 million in cash in Holdings in exchange for $150 million aggregate liquidation value of Holdings' Cumulative Perpetual Preferred Stock (the "Holdings Preferred Stock") and (iii) existing cash. The net proceeds from the Old Notes and the Holdings Preferred Stock, approximately $700 million, were contributed to First Nationwide prior to the Cal Fed Acquisition (the "Capital Contribution"). See "Strategic Acquisitions and Dispositions--The Cal Fed Acquisition." Management expects the Bank to maintain its "well capitalized" status. Further, it is expected that the issuance of the Capital Corporation Preferred Stock in the Capital Corporation Offering, by increasing core capital, will enable the Bank to retain a higher base of interest-earning assets, resulting in incrementally higher related earnings. See "Strategic Acquisitions and Dispositions--Dispositions--California Federal Preferred Capital Corporation." Business Strategy With the Cal Fed Acquisition, the Bank has substantially completed its business strategy initiated in 1994 by investing in its California retail franchise and divesting most of its non-California branches. In addition, the Bank has significantly expanded its mortgage servicing operations to gain increased economies of scale. The key elements of the Bank's business strategy following the Cal Fed Acquisition include: o Evaluating selective opportunities to further enhance the Bank's retail branch network in California. o Evaluating selective opportunities to increase the size and the profitability of the Bank's mortgage banking operations. o Protecting the credit quality of the assets of the Bank through, among other things, continuing to originate single-family loans and consumer loans in accordance with stringent underwriting standards and actively managing the Bank's existing portfolio of commercial real estate loans. o Increasing the Bank's operating efficiency by, among other things, expanding its customer base, increasing transaction account volumes and reducing costs through consolidation of certain administrative and managerial functions. o Identifying new opportunities to serve the needs of the communities in which the Bank is located. Since the FN Acquisition (as defined herein) in 1994, First Nationwide has consummated the following transactions to effect its business strategy. See "Strategic Acquisitions and Dispositions." o On June 1, 1996, First Nationwide acquired Home Federal Financial Corporation ("HFFC") and its wholly owned federally chartered savings association subsidiary, Home Federal Savings and Loan Association of San Francisco ("Home Federal"), which had approximately $717 million in assets and $632 million in deposits and operated 15 branches in Northern California (the "Home Federal Acquisition"). o On February 1, 1996, First Nationwide acquired SFFed Corp. ("SFFed") and its wholly owned subsidiary, San Francisco Federal Savings and Loan Association ("San Francisco Federal"), which had approximately $4.0 billion in assets and approximately $2.7 billion in deposits and operated 35 branches in the Northern California area (the "SFFed Acquisition"). In connection with the SFFed Acquisition, Holdings issued $140.0 million aggregate principal amount of 9 1/8% Senior Subordinated Notes Due 2003 (the "Holdings 9 1/8% Senior Subordinated Notes") and contributed the net proceeds therefrom to First Nationwide as additional paid-in capital, which augmented First Nationwide's regulatory capital to maintain its "well capitalized" status after the SFFed Acquisition. o In April 1995, First Nationwide acquired approximately $13 million in deposits located in Tiburon, California from East-West Federal Bank, a federal savings bank (the "Tiburon Purchase"). In August 1995, First Nationwide acquired three retail branches located in Orange County, California with deposit accounts totalling approximately $356 million from ITT Federal Bank, fsb (the "ITT Purchase"). On December 8, 1995, First Nationwide consummated the purchase of four retail branches located in Sonoma County, California with associated deposit accounts of approximately $144 million from Citizens Federal Bank, a Federal Savings Bank (the "Sonoma Purchase" and, collectively with the Tiburon Purchase and the ITT Purchase, the "Branch Purchases"). o From January through June of 1996, First Nationwide consummated the sale of its retail branches in Ohio (the "Ohio Branch Sale"), New York and New Jersey (the "Northeast Branch Sales") and Michigan (the "Michigan Branch Sale" and, collectively with the Ohio Branch Sale and the Northeast Branch Sales, the "Branch Sales") at prices which represented an average premium of 7.96% of the approximately $4.6 billion of deposits sold and resulted in gains of approximately $363.0 million on a pre-tax basis through September 30, 1996. o On February 28, 1995, First Nationwide (through FNMC), acquired a 1-4 unit residential mortgage loan servicing portfolio of approximately $11.4 billion and other assets and liabilities (the "Maryland Acquisition"). o On October 2, 1995, FNMC purchased from Lomas Mortgage USA, Inc. ("LMUSA") a loan servicing portfolio of approximately $11.1 billion, a portfolio of $2.9 billion of mortgage servicing rights ("MSRs"), which are rights to service mortgages held by others, which MSRs are owned by third parties who have contracted with FNMC to monitor the performance, and consolidate the reporting, of various other servicers (a "master servicing portfolio") and other assets (the "LMUSA 1995 Purchase"). On January 31, 1996, FNMC purchased LMUSA's remaining loan servicing portfolio which, as of December 31, 1995, totalled $14.1 billion, a master servicing portfolio of $2.7 billion and other assets (the "LMUSA 1996 Purchase" and, together with the LMUSA 1995 Purchase, the "LMUSA Purchases"). These transactions have significantly increased First Nationwide's presence on the West Coast, providing additional economies of scale and diversity of operations within its target California markets. Management believes that consummation of the Cal Fed Acquisition further strengthens First Nationwide's presence on the West Coast. As a result of these transactions, including the Cal Fed Acquisition, approximately 86% of the Bank's total retail deposits are located in California. The Bank's retail deposits in California will have increased from $2.3 billion at the time of the FN Acquisition in October 1994 to $13.6 billion at September 30, 1996 after giving effect to the Cal Fed Acquisition. The Bank's retail deposits outside California will have decreased from $6.9 billion at the time of the FN Acquisition to $2.2 billion at September 30, 1996 after giving effect to the Cal Fed Acquisition. The SFFed Acquisition, the Branch Sales and the Home Federal Acquisition have enabled First Nationwide to enhance, and management expects that the Cal Fed Acquisition will enable the Bank to further enhance, the value of its franchise and improve its operating efficiency through the consolidation or elimination of duplicative back office operations and administrative and management functions. The efficiency of a financial institution is often measured by its efficiency ratio, which represents the ratio of noninterest expense to net interest income and noninterest income. First Nationwide has improved its efficiency ratio from approximately 62.2% on an annualized basis during the fourth quarter of 1994 to approximately 53.8% on an annualized basis, excluding non-recurring gains and charges and certain incentive plan accruals, during the third quarter of 1996. The Maryland Acquisition and the LMUSA Purchases have enabled First Nationwide to increase its noninterest income through fees generated from its mortgage servicing operations. First Nationwide's excess servicing capacity and existing servicing expertise enabled it to accommodate the loan servicing portfolios acquired in these transactions without the need for significant additional investment. Since the FN Acquisition, the Bank's mortgage servicing portfolio will have increased from $6.7 billion to $46.2 billion at September 30, 1996 after giving effect to the Cal Fed Acquisition. The Bank applies stringent underwriting standards in originating single-family residential loans and consumer loans, as well as in evaluating acquisition opportunities. The Bank has a specialized credit risk management group that is charged with the development of credit policies and performing credit risk analyses for all asset portfolios. From October 1994 to November 1996, First Nationwide also used the Put Agreement (as defined herein) to mitigate credit losses on certain acquired assets, thereby improving the overall credit quality of its loan portfolio. Background First Nationwide was organized as "First Gibraltar Bank, FSB" ("First Gibraltar"), in December 1988 to acquire substantially all of the assets and certain liabilities of five insolvent Texas thrifts (the "Texas Closed Banks") in a federally assisted transaction pursuant to an Assistance Agreement, as amended (the "Assistance Agreement"), by and among First Nationwide, FSLIC Resolution Fund (the "FSLIC/RF") (as successor to the Federal Savings and Loan Insurance Corporation (the "FSLIC")), First Gibraltar Holdings Inc. ("First Gibraltar Holdings") and MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"). On December 31, 1992, First Gibraltar sold a substantial portion of its business operations in Oklahoma, consisting of approximately $3 million of loans and 27 branches with $809 million in deposits (the "First Gibraltar Oklahoma Sale"). On February 1, 1993, First Gibraltar sold to Bank of America Texas, N.A. and Bank of America Corporation (collectively, "BankAmerica") $829 million in loans and 130 branches with approximately $6.9 billion in deposits (the "First Gibraltar Texas Sale"), and First Nationwide changed its name to "First Madison Bank, FSB" ("First Madison"). Following the First Gibraltar Texas Sale, and through September 1994, First Madison's principal business was the funding of the assets acquired from the Texas Closed Banks (the "Covered Assets") and the performance of its obligations under the Assistance Agreement. On April 14, 1994, First Nationwide entered into the Asset Purchase Agreement (the "Asset Purchase Agreement") with First Nationwide Bank, A Federal Savings Bank ("Old FNB"), an indirect subsidiary of Ford Motor Company ("Ford Motor"). On October 3, 1994, effective immediately after the close of business on September 30, 1994, First Nationwide acquired substantially all of the assets (other than certain non-performing and other excluded assets) and certain of the liabilities (the "FNB Acquired Business") of Old FNB (the "FN Acquisition") for $726.5 million. Effective on October 1, 1994, First Nationwide changed its name from "First Madison Bank, FSB" to "First Nationwide Bank, A Federal Savings Bank." In connection with the FN Acquisition, First Nationwide entered into a Non-Performing Asset Sale Agreement (the "Put Agreement") with Granite Management and Disposition, Inc. ("Granite"), a subsidiary of Ford Motor, pursuant to which First Nationwide had the right through November 30, 1996 to require Granite to purchase up to $500 million of principally non-performing assets acquired from Old FNB. In the event that, as of November 30, 1996, First Nationwide had not required Granite to purchase $500 million of non-performing assets, it had the right to require Granite to purchase any qualifying assets of First Nationwide, other than assets which previously were eligible to be put to Granite and which First Nationwide did not require Granite to purchase, up to such $500 million maximum. At September 30, 1996, the remaining available balance under the Put Agreement was approximately $70.5 million, which First Nationwide fully utilized on December 5, 1996. Of the approximately $228 million in non-performing assets at September 30, 1996, approximately $17.3 million were eligible to be sold to Granite under the Put Agreement. See "Business--Holdings--Other Activities--The Put Agreement." First Nationwide financed the FN Acquisition with: (i) a capital contribution by Holdings funded with the net proceeds of (a) the issuance of Holdings' 12-1/4% Senior Notes Due 2001 (the "Holdings Senior Notes") and (b) the issuance of Holdings' class C common stock to First Nationwide (Parent) Holdings Inc. ("Parent Holdings"), an indirect subsidiary of MacAndrews Holdings (all of which class C common stock was redeemed on June 3, 1996), (ii) the net proceeds from the issuance of the 11 1/2% Bank Preferred Stock and (iii) existing cash and proceeds from securities sold under agreements to repurchase. See "Certain Transactions." California Federal Preferred Capital Corporation In November 1996, First Nationwide established Capital Corporation for the purpose of acquiring, holding and managing real estate mortgage assets. All of Capital Corporation's common stock is owned by the Bank. It is expected that substantially all of Capital Corporation's mortgage assets will be acquired from the Bank and affiliates of the Bank. Capital Corporation has entered into a subservicing agreement with FNMC pursuant to which FNMC will service Capital Corporation's mortgage assets. On January 31, 1997, Capital Corporation consummated the offering of 20,000,000 shares of its Capital Corporation Preferred Stock (the "Capital Corporation Offering") and received proceeds therefrom of approximately $484.3 million (net of underwriting discounts). Ownership The Issuer is 80% indirectly owned by MacAndrews Holdings, a corporation wholly owned through Mafco Holdings Inc. ("Mafco Holdings" and, together with MacAndrews Holdings, "MacAndrews & Forbes"), by Ronald O. Perelman, and is 20% indirectly owned by Hunter's Glen/Ford, Ltd. ("Hunter's Glen"), a limited partnership controlled by Gerald J. Ford, Chairman of the Board, Chief Executive Officer and a director of the Bank. See "Ownership of the Common Stock" and "Certain Transactions--Transactions with Mr. Ford." The Issuer's principal executive offices are located at 35 East 62nd Street, New York, New York 10021 and its telephone number is (212) 572-8600. The Issuer was incorporated in 1994 under the laws of the State of Delaware. The following chart sets forth in simplified form the ownership of the common equity of the Issuer and the Bank. Ronald O. Perelman 100% Mafco Holdings Inc. ("Mafco Holdings") 100% MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings") 100% Trans Network Insurance Services Inc. ("TNIS") (formerly "First Gibraltar (Parent) Holdings Inc.") 100% First Gibraltar Guarantor Corp. 100% First Gibraltar Holdings Inc. ("First Gibraltar Holdings") 100% First Nationwide (Parent) Holdings Inc. ("Parent Holdings") 80%* Hunter's Glen/ Ford, Ltd. ("Hunter's Glen") 20%* FIRST NATIONWIDE HOLDINGS INC. ("HOLDINGS" OR THE "ISSUER") 100% California Federal Bank, A Federal Savings Bank (the "Bank"), as successor by merger to First Nationwide Bank, A Federal Savings Bank 100% California Federal Preferred Capital Corporation (the "Capital Corporation") - ------------ * Hunter's Glen, a limited partnership controlled by Gerald J. Ford, Chairman of the Board, Chief Executive Officer and a director of the Bank, owns 100% of the class B common stock of Holdings, representing 20% of its voting common stock (representing approximately 15% of the voting power of its common stock), and Parent Holdings beneficially owns 100% of the class A common stock of Holdings, representing 80% of its voting common stock (representing approximately 85% of the voting power of its common stock). See "Ownership of the Common Stock." THE EXCHANGE OFFER SECURITIES OFFERED ............ Up to $575,000,000 principal amount of 10 5/8% Senior Subordinated Exchange Notes Due 2003, which have been registered under the Securities Act. The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by July 2, 1997, the rate per annum at which the Old Notes bear interest will be 11 1/8% per annum from and including July 2, 1997 until but excluding the date of consummation of the Exchange Offer. THE EXCHANGE OFFER ............ The New Notes are being offered in exchange for a like principal amount of Old Notes. The issuance of the New Notes is intended to satisfy obligations of the Issuer contained in the Registration Agreement. For procedures for tendering, see "The Exchange Offer." TENDERS, EXPIRATION DATE; WITHDRAWAL ................... The Exchange Offer will expire at 5:00 p.m., New York City time, on March 31, 1997, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES.................. The exchange pursuant to the Exchange Offer should not result in gain or loss to the holders or the Issuer for federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations." USE OF PROCEEDS ............... There will be no proceeds to the Issuer from the exchange pursuant to the Exchange Offer. EXCHANGE AGENT ................ The Bank of New York is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Old Notes and the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Issuer does not currently anticipate that it will register Old Notes under the Securities Act. See "Description of the Notes--Registration Rights." Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Issuer believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. However, the Issuer does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the state securities laws, the New Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the New Notes to "qualified institutional buyers" (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under the state securities laws. The Issuer currently does not intend to register or qualify the sale of the New Notes in any state where an exemption from registration or qualification is required and not available. See "The Exchange Offer--Consequences of Exchanging Old Notes" and "Description of the Notes--Registration Rights." SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by July 2, 1997, the rate per annum at which the Old Notes bear interest will be 11 1/8% per annum from and including July 2, 1997 until but excluding the date of consummation of the Exchange Offer. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from September 19, 1996. Accordingly, if the relevant record date for interest payment occurs after the consummation of the Exchange Offer registered holders of New Notes on such record date will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from September 19, 1996. If, however, the relevant record date for interest payment occurs prior to the consummation of the Exchange Offer registered holders of Old Notes on such record date will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from September 19, 1996. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer, except as set forth in the immediately preceding sentence. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. SECURITIES OFFERED ............ Up to $575,000,000 aggregate principal amount of 10 5/8% Senior Subordinated Exchange Notes Due 2003, which have been registered under the Securities Act. MATURITY DATE ................. October 1, 2003. INTEREST PAYMENT DATES ........ April 1 and October 1 of each year, commencing April 1, 1997. OPTIONAL REDEMPTION ........... Except as described below, the Notes may not be redeemed prior to January 1, 2001. On and after such date, the Notes will be redeemable at the option of the Issuer, in whole or in part, during the 12-month period beginning January 1, 2001, at the redemption prices set forth herein plus accrued and unpaid interest to the date of redemption. See "Description of the Notes--Optional Redemption." CHANGE OF CONTROL ............. Upon a Change of Control Call Event occurring on or prior to December 31, 2000, the Issuer will have the option to redeem the Notes, in whole but not in part, at an aggregate redemption price equal to the sum of: (i) the then outstanding principal amount of the Notes plus, (ii) accrued and unpaid interest to the date of redemption plus, (iii) the Applicable Premium. Upon a Change of Control Put Event, each holder of the Notes will have the right to require the Issuer to repurchase all or a portion of such holder's Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. The Issuer's ability to purchase the Notes may be limited by the amount of available cash, covenants contained in the indenture governing the Holdings Senior Notes (the "Holdings Senior Notes Indenture") and the indenture governing the Holdings 9 1/8% Senior Subordinated Notes (the "Holdings 9 1/8% Senior Subordinated Notes Indenture") and other factors. See "Risk Factors--Holding Company Structure; Restrictions on Ability of Subsidiaries to Pay Dividends," "Risk Factors--Indebtedness and Ability to Pay Principal of the Notes," "Description of Other Indebtedness and Preferred Stock" and "Description of the Notes." RANKING AND HOLDING COMPANY STRUCTURE ............ The Old Notes are, and the New Notes will be, unsecured senior subordinated obligations of the Issuer and will rank subordinate in right of payment to all existing and future Senior Indebtedness of the Issuer, including the Holdings Senior Notes. The Notes will rank pari passu in right of payment with all existing and future Parity Obligations of the Issuer, including the Holdings 9 1/8% Senior Subordinated Notes, and senior to all future subordinated debt of Holdings, if any is issued. At September 30, 1996, after giving effect to the Cal Fed Acquisition, the Capital Corporation Offering, the Capital Contribution and the Offering, Holdings would have had outstanding $200 million of Senior Indebtedness, consisting of the Holdings Senior Notes, and $140 million of Parity Obligations, consisting of the Holdings 9 1/8% Senior Subordinated Notes. As of the date hereof, Holdings has no subordinated debt outstanding and has no current plans to issue any significant amount of debt which is subordinated in right of payment to the Notes. The Issuer is a holding company and therefore the Old Notes are, and the New Notes will be, effectively subordinated to (i) all existing and future liabilities, including deposits, indebtedness and trade payables, of the Issuer's subsidiaries, including the Bank and Capital Corporation, and (ii) all preferred stock issued by the Issuer's subsidiaries, including the Subsidiary Preferred Stock. At September 30, 1996, after giving effect to the Cal Fed Acquisition, the Capital Corporation Offering and the Capital Contribution, the outstanding interest-bearing liabilities, including deposits, of such subsidiaries would have been approximately $27.5 billion, the other liabilities of such subsidiaries, including trade payables and accrued expenses, would have been approximately $652 million, and there would have been approximately $973 million aggregate liquidation value of the Subsidiary Preferred Stock outstanding. See "Risk Factors--Subordination to Senior Indebtedness and to Subsidiary Liabilities and Subsidiary Preferred Stock" and "Description of the Notes." CERTAIN COVENANTS ............. The Indenture contains certain covenants that, among other things, will limit: (i) the issuance of additional debt by the Issuer and certain subsidiaries, (ii) the payment of dividends on the capital stock of the Issuer and its subsidiaries, and the redemption or repurchase of the capital stock of the Issuer and its subsidiaries, including a requirement that no such payments, redemptions or repurchases may be made if at the time the Consolidated Common Shareholders' Equity (as defined herein) of the Bank is less than the Minimum Common Equity Amount (as defined herein), (iii) the making of certain investments, (iv) transactions with affiliates, (v) the creation of liens on the assets of the Issuer, (vi) the incurrence of additional subordinated debt that is senior in right of payment to the Notes, (vii) the termination or amendment of the Tax Sharing Agreement (as defined herein), (viii) the ability of the Issuer or any subsidiary to restrict dividends or distributions from subsidiaries, (ix) consolidations, mergers and transfers of all or substantially all of the Issuer's assets and (x) other business activities of the Issuer. All these limitations and prohibitions, however, are subject to a number of important qualifications. See "Description of the Notes--Certain Covenants." USE OF PROCEEDS ............... The Issuer will not receive any proceeds from the Exchange Offer. The net proceeds of the Offering, which were approximately $555 million, were used together with an investment by Special Purpose Corp. in exchange for the Holdings Preferred Stock and existing cash, to finance the Cal Fed Acquisition. See "Use of Proceeds." EXCHANGE OFFER; REGISTRATION RIGHTS ........................ Holders of New Notes are not entitled to any registration rights with respect to the New Notes. Pursuant to the Registration Agreement, the Issuer agreed to file, at its cost, a registration statement with respect to the Exchange Offer. The Registration Statement of which this Prospectus is a part constitutes the registration statement for the Exchange Offer. See "Description of the Notes--Registration Rights."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000929425_rfp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000929425_rfp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d50cb1bf7ca091107bc21a81bb208724017455ba
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000929425_rfp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PERSON RECEIVING THE SHARES IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000931075_freedom_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000931075_freedom_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ccb6f7959af3bcd458859ee67274c768bbab853b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000931075_freedom_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context requires otherwise, 'Freedom' refers to Freedom Chemical Company and 'Company' refers to Freedom and its subsidiaries. THE COMPANY GENERAL Freedom Chemical Company is a leading global manufacturer and marketer of a broad range of specialty and fine chemical products which are sold into several market segments for use in food and beverage products, household and industrial products, cosmetics and personal care products, pharmaceuticals, pet foods, textile and paper products and many other diverse applications. The Company focuses on niche products where it has strong market positions or a manufacturing advantage. The Company believes that this focus, combined with improved operating efficiencies resulting from recently completed restructuring and other measures, have enhanced the Company's potential for future growth and profitability. The Company's net sales and net income were $296.9 million and $(17.0) million, respectively, for the year ended December 31, 1995, and $229.1 million and $0.3 million, respectively, for the nine months ended September 30, 1996. In addition, the Company's net cash provided by (used in) operating activities, investing activities and financing activities for the year ended December 31, 1995 were $(3.1) million, $(32.0) million and $33.7 million, respectively, and $(0.9) million, $(7.1) million and $8.2 million, respectively, for the nine months ended September 30, 1996. Approximately 41.6% of the Company's 1995 net sales consisted of sales made outside the United States. The Company's products are manufactured at four facilities located in the United States, four facilities located in Europe and two facilities located in India. The Company estimates that approximately 38.6% of its 1995 domestic net sales were derived from product lines for which it believes it is either the largest or second largest U.S. producer. Typically, the Company's products are important to the performance of its customers' products, but represent a relatively small percentage of their total product costs. For example, although food preservatives are essential to the quality of carbonated diet soft drinks (such as Diet Coke(Registered)), the Company's preservatives, potassium benzoate and sodium benzoate, generally represent less than $.01 of the total cost of one 24-can case. The Company has five core product lines: o Food and Personal Care Ingredients. The Company manufactures and markets food, drug and cosmetic colors, food preservatives and flavors and fragrances to a broad array of customers, including food and beverage, pet food, cosmetic, pharmaceutical and household product manufacturers. The Company believes it is the largest U.S. manufacturer of two of the world's most widely used food preservatives and is the second largest U.S. producer of food dyes. Food and Personal Care Ingredients accounted for approximately $61.3 million, or 20.6%, of the Company's 1995 net sales. o Pharmaceutical Intermediates and Natural Additives. The Company manufactures and markets a number of pharmaceutical intermediates and active ingredients for use in prescription and over-the-counter pharmaceuticals, as well as natural additives, including thickeners (which mimic the feel of fat), gelling agents, bioproteins and amino acids, for use in foods, pet foods, shampoos and cosmetics. The Company believes that it is the largest producer of cysteine in the world. Pharmaceutical Intermediates and Natural Additives accounted for approximately $35.0 million, or 11.8%, of the Company's 1995 net sales. o Specialty Organic Chemicals and Intermediates. The Company manufactures and markets a number of specialty and fine organic chemicals and chemical intermediates, including benzaldehyde, benzoic acid, benzyl alcohol and phenol, that are used to manufacture flavors and fragrances, adhesives, plasticizers, alkyd and polyester resins, rubber chemicals and agricultural intermediates. The Company is the sole U.S. producer of benzaldehyde and believes that it is the largest U.S. producer of benzoic acid. Specialty Organic Chemicals and Intermediates accounted for approximately $56.0 million, or 18.9%, of the Company's 1995 net sales. o Organic Pigments and Dyes. The Company manufactures and markets carbonless copy and technical dyes for use in industrial and consumer products, and pigments for use in paints, coatings, inks and plastics. The Company is a leading manufacturer of blue carbonless copy dyes used in business forms, such as credit card receipts, and of blue technical dyes used in a wide range of household products, such as window cleaners. Organic Pigments and Dyes accounted for approximately $68.7 million, or 23.1%, of the Company's 1995 net sales. o Textile and Paper Chemicals. The Company manufactures and markets a wide range of specialty and fine chemicals that are used in the textile and paper industries. The Company is one of the two leading U.S. producers of glyoxal and glyoxal resins which impart wrinkle resistance and shrinkage control to cotton and cotton blend fabrics and are also used to enhance the absorbency of paper. The Company also markets a complete line of textile processing products. Textile and Paper Chemicals accounted for approximately $75.9 million, or 25.6%, of the Company's 1995 net sales. The Company was formed in April 1992 by Joseph Littlejohn & Levy, a private investment firm ('JLL'), and certain of the Company's present and past executive officers. Freedom commenced operations in order to acquire the textile chemical business (the 'Freedom Textile Acquisition') of American Cyanamid Company ('American Cyanamid'), a leading producer of glyoxal, which it renamed Freedom Textile Chemicals Co. ('Freedom Textile'). Thereafter, as part of its strategy to acquire specialty chemical companies with strong market positions, complementary product lines and opportunities for operational improvement, the Company acquired Hilton Davis Chemical Co. ('Hilton Davis'), a leading supplier of food, drug and cosmetic colors, dyes and specialty and fine chemicals, in September 1993 (the 'Hilton Davis Acquisition'), and Kalama Chemical Inc. ('Kalama'), a leading supplier of food and beverage preservatives and certain flavors and fragrances, in May 1994 (the 'Kalama Acquisition'). In December 1994, the Company acquired substantially all the assets of Reilly-Whiteman Inc. ('Reilly-Whiteman'), a producer of textile and other industrial chemicals (the 'Reilly-Whiteman Acquisition'), and in January 1995, Freedom, through its wholly owned subsidiary Freedom Chemical Diamalt, acquired certain assets of Diamalt GmbH ('Diamalt'), a producer of pharmaceutical intermediates, natural additives and food and pet food ingredients (the 'Diamalt Acquisition'). BUSINESS STRATEGY The Company's objective is to continue to enhance its revenue growth and profitability by leveraging its strong market positions in its core product lines and by continuing to improve operating efficiencies. The Company plans to achieve its objective through the following key strategies: o Increase Capacity of Key Product Lines. The Company intends to increase sales by investing in capacity expansions for key product lines currently operating at or near full capacity and has budgeted approximately $8 million to $10 million for each of the next two years for capacity expansions and process improvements. In 1995, the Company completed the construction and start-up of a plant in Madras, India to produce amino acids and cysteine and its derivatives. In addition, it expanded benzaldehyde production capacity at its plant in Kalama, Washington by 50% and implemented cassia production capacity at its plant in Vadodara, India. The Company's current major capacity expansion projects include (i) further plant expansion at Kalama, Washington, which will expand the Company's production capacity for benzoic acid, phenol, benzaldehyde and flavor and fragrance chemicals, (ii) expansion of cysteine production capacity at its plant in Raubling, Germany and (iii) expansion of cassia production capacity at its plant in Vadodara, India. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources.' o Introduce New or Technologically Improved Products. The Company's research and development efforts focus on the development of new and technologically advanced products to respond to customer demands, changes in the marketplace, technology and environmental regulations. For example, the Company is currently working with its customers and capitalizing on existing technology to develop new value-added products such as 'wash-away' textile dyes and specialty pigments, environmentally friendly water-based paint pigments, textile chemicals with reduced formaldehyde content and new coatings that meet stricter environmental regulations for volatile organic compounds. The Company also has an active pharmaceutical intermediates program and recently began production and sale of thymidine, an AZT intermediate utilized in producing drugs for AIDS therapy. o Continue to Improve Operating Efficiencies. The initiatives taken by the Company in connection with the restructuring and other measures have already yielded significant cost savings and the Company intends to implement additional cost-saving and productivity-enhancing programs in the future. Currently, the Company is undertaking the following programs: raw material sourcing from multiple vendors, yield improvement programs, the discontinuation of unprofitable or low margin product lines, the reduction of utility costs and the implementation of additional employee profit incentive programs. The Company is analyzing additional opportunities to increase operating efficiencies and profitability, including the possibility of further consolidation of its manufacturing facilities, which are likely to result in additional restructuring and other charges. See '--Restructuring and Other Charges.' o Broaden Product Offerings to Primary Markets. The Company seeks to broaden its product lines through internal development and believes that offering a complete product portfolio to a given customer will enable it to utilize more effectively its direct sales force, become a more complete supplier to the industries it serves and increase its unit sales per customer. Natural chemicals, including thickeners, enzymes and sizing agents, are widely used in the European textile industry and the Company intends to offer these products in the United States as additional manufacturing capacity to produce these products becomes available. In addition, the Company plans to capitalize on its position in food and pet food ingredients by broadening its food colors, preservatives and flavor product lines with natural additives such as amino acids, polysaccharides, alginates and bioproteins, as well as with other products used by the food and pet food industries. o Expand Customer Base. The Company intends to expand and strengthen its customer base by (i) focusing on relationships with key accounts, (ii) creating incentives for its sales force to concentrate on fast-growing, high margin areas within existing product segments, (iii) pursuing growth opportunities in new markets outside the United States, including Mexico, Central and South America and Asia, as such markets continue to develop economically and the consumption of food, beverage, household and other products containing the Company's products increases and (iv) cross-marketing its products to existing customers who do not currently purchase such products through, among other initiatives, an international sales force that will market products from all of the Company's product groups. o Enhance Growth through Selective Acquisitions. Freedom will continue to selectively seek acquisitions with complementary product lines that offer the opportunity to significantly improve profitability through integration with the Company's existing businesses, although no specific acquisition is currently contemplated. The Company considers the following characteristics in its acquisitions: (i) strong market positions, (ii) unique product offerings, (iii) low cost manufacturing capacity and (iv) technological or cost advantages. RESTRUCTURING AND OTHER CHARGES In 1995, the Company recorded $14.4 million of restructuring and other charges. The restructuring and other charges included (i) the consolidation of certain of the Company's manufacturing facilities, (ii) the sale of the Company's non-strategic transparent iron oxide coatings business, (iii) the write-off of discontinued inventory and capitalized expenses and (iv) the recognition of certain estimated environmental remediation costs. As a part of these actions, the Company closed in April 1996 its Conshohocken, Pennsylvania plant which manufactured products in the Organic Pigments and Dyes group and in May 1996 its Newark, New Jersey plant which manufactured products in the Textile and Paper Chemicals groups and relocated certain of those production capabilities and technology to its other facilities. In addition, the Company reduced personnel by approximately 135 employees in both administrative and manufacturing positions. In the fourth quarter of 1996, the Company recorded a charge of $6.0 million as a result of inventory obsolescence from plant closures of $0.9 million, inventory disposal costs of $0.6 million, severance for displaced workers associated with plant closings and administrative personnel reductions of $1.5 million and other charges of $0.7 million. Additionally, during 1994, the Company idled its salicylic acid product line. However, the Company continued to be a reseller of this product and continued to pursue a long term position in this market. Since projected future cash flows from this product line were sufficient to realize the Company's investment from the time the assets were idled until the fourth quarter of 1996, management did not believe that there was an impairment in the idle assets. In the fourth quarter of 1996, the Company decided not to allocate its capital resources to re-enter the salicylic acid business. Accordingly, the Company recorded a charge of $2.3 million. The write-off will be included in restructuring and other charges on the Company's statement of operations for 1996. Management estimates the costs to dismantle the line are approximately equal to the salvage value of the line. During the fourth quarter of 1996, the Company decided to shutdown its Cowpens, South Carolina facility. During 1996, the Company incurred a loss from operations of approximately $2.6 million from the Cowpens operations, including a direct write-off of $1.5 million for inventory and related items in the fourth quarter. The write-off was composed of $0.9 million of obsolete inventory from unusable/unsaleable product as a result of product separation. The obsolete inventory was identified during the October 31, 1996 planned physical inventory. The write-off also included $0.6 million of disposal costs related to hazardous products which required environmentally sound disposal procedures. Management is currently negotiating with prospective buyers to sell the facility for its net book value of approximately $2.7 million plus assumption of environmental liabilities of $1.9 million. It is anticipated that the sale will be completed during 1997. Of the aforementioned $0.7 million of other charges, $0.5 million relates to a municipality surcharge for water treatment and waste disposal at the Company's Charlotte facility. The surcharge resulted from low plant efficiency (due to the approach of a scheduled turn around and catalyst change-out in January 1997) and high operating levels which caused waste to be produced at above normal levels. Of the $6.0 million charge recorded in the fourth quarter of 1996, $3.2 million is attributable to noncash items, primarily the idle equipment write-off of $2.3 million and obsolete inventory of $0.9 million. Charges that will require an outlay of cash total approximately $2.8 million. Of this amount $0.3 million was paid in the month of December. The remaining cash items totaling approximately $2.5 million will be paid primarily over the first six months of 1997. Management believes this outlay of cash will be funded with cash flow from operations and borrowings under the Amended and Restated Credit Agreement (as defined herein) and will not materially adversely affect the Company's operating cash flows or financial position. The Company will continue to analyze additional opportunities to increase operating efficiencies and profitability, which may result in additional restructuring and other charges in the future. Additional matters have not currently been identified. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and Note 17 to the Company's Consolidated Financial Statements included herein. THE TRANSACTIONS The Company has undertaken the following transactions to provide it with greater flexibility in the next several years with respect to its capital expenditure and working capital requirements. Concurrently with the consummation of the offering of Old Notes, Freedom amended and restated its existing credit agreement (the 'Freedom Credit Agreement' and, as amended and restated, the 'Amended and Restated Credit Agreement'). The Amended and Restated Credit Agreement provides for a revolving loan facility of up to $85 million and includes Freedom and Freedom Chemical Diamalt as borrowers. The obligations of Freedom under the Amended and Restated Credit Agreement are guaranteed by all of Freedom's domestic subsidiaries and Freedom Chemical Diamalt and are secured by a first priority lien on substantially all of the properties and assets of Freedom and its domestic subsidiaries and certain properties and assets of Freedom Chemical Diamalt. The obligations of Freedom Chemical Diamalt under the Amended and Restated Credit Agreement are guaranteed by Freedom. See 'Description of Amended and Restated Credit Agreement.' The Company initially borrowed $21.5 million under the Amended and Restated Credit Agreement. As a condition to such initial borrowing, all of the Company's outstanding indebtedness under the Freedom Credit Agreement and under Freedom Chemical Diamalt's existing credit agreement (the 'Diamalt Credit Agreement' and, together with the Freedom Credit Agreement, the 'Existing Credit Agreements') was repaid in full and the Diamalt Credit Agreement was terminated. Joseph Littlejohn & Levy Fund, L.P. ('JLL Fund I') and Joseph Littlejohn & Levy Fund II, L.P. ('JLL Fund II' and, together with JLL Fund I, the 'JLL Funds'), Freedom's two largest stockholders, invested an aggregate of approximately $9.94 million in Series A Common Stock (the 'Common Stock') of Freedom (the 'JLL Cash Equity Investment' and, together with a $60,000 cash equity investment made by an executive officer of Freedom, the 'Cash Equity Investments') concurrently with the consummation of the offering of Old Notes. In addition certain other stockholders of Freedom (principally current and former management), using the proceeds of Company loans, invested an aggregate of approximately $1.9 million in Common Stock (the 'Additional Equity Investments' and, together with the Cash Equity Investments, the 'Equity Investments') following consummation of the offering of Old Notes. See 'Certain Transactions.' As of the date of this Prospectus, the JLL Funds beneficially own, on a fully diluted basis, approximately 76.1% of Freedom's issued and outstanding Common Stock, 93.5% of Freedom's issued and outstanding Series B Redeemable Preferred Stock (the 'Series B Preferred Stock') and 90.5% of Freedom's issued and outstanding Series C Redeemable Preferred Stock (the 'Series C Preferred Stock' and, together with the Series B Preferred Stock, the 'Preferred Stock'). In addition, concurrently with the consummation of the offering of Old Notes, the Series B Preferred Stock and the Series C Preferred Stock of Freedom were amended (the 'Preferred Stock Amendment') to extend the mandatory redemption dates of such Preferred Stock to April 30, 2007 and May 31, 2007, respectively. No consideration was paid to Freedom's Preferred Stockholders in connection with the Preferred Stock Amendment. The offering of Old Notes, the Equity Investments, the initial borrowing under the Amended and Restated Credit Agreement and, in each case, the application of the proceeds therefrom are collectively referred to herein as the 'Transactions.' See 'Use of Proceeds' which sets forth the impact of the Transactions on the Company's financial position. ------------------ The Company's principal executive offices are located at 1735 Market Street, Philadelphia, Pennsylvania, 19103, and its telephone number is (215) 979-3100. THE EXCHANGE OFFER <TABLE> <S> <C> Securities Offered........................... Up to $125,000,000 principal amount of 10 5/8% Senior Subordinated Notes due 2006, which have been registered under the Securities Act. The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain interest provisions relating to the Old Notes described below under '--Summary Description of the New Notes.' The Exchange Offer........................... The New Notes are being offered in exchange for a like principal amount of Old Notes. The issuance of the New Notes is intended to satisfy obligations of Freedom contained in the Registration Rights Agreement, dated October 17, 1996, among Freedom, the Guarantors and the Initial Purchasers (the 'Registration Rights Agreement'). Expiration Date; Withdrawal Rights........... The Exchange Offer will expire at 5:00 p.m., New York City time, on March 17, 1997, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering Holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See 'The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes' and '-- Withdrawal Rights.' Procedures for Tendering Old Notes........... Each Holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with either certificates for such Old Notes or a Book-Entry Confirmation (as defined herein) of such Old Notes into the Book-Entry Transfer Facility (as defined herein), if such procedure is available, and any other required documentation to the exchange agent (the 'Exchange Agent') at the address set forth herein. By executing the Letter of Transmittal, each Holder will represent to the Company, among other things, that (i) the New Notes acquired pursuant to the Exchange Offer by the Holder and any other person are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the Holder nor such other person is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) neither the Holder nor such other person is an 'affiliate,' as defined under Rule 405 of the Securities Act, of the Company. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker or dealer will not be deemed to </TABLE> <TABLE> <S> <C> admit that it is an 'underwriter' within the meaning of the Securities Act. See 'The Exchange Offer--Procedures for Tendering Old Notes' and 'Plan of Distribution.' Special Procedures for Beneficial Owners.......................... Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. See 'The Exchange Offer--Procedures for Tendering Old Notes.' Guaranteed Delivery Procedures............... Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who can not deliver their Old Notes or any other documents required by the Letter of Transmittal to the Exchange Agent must tender their Old Notes according to the guaranteed delivery procedures set forth in 'The Exchange Offer--Guaranteed Delivery Procedures.' Federal Income Tax Consequences.............. The exchange pursuant to the Exchange Offer should not result in gain or loss to the Holders or the Company for federal income tax purposes. See 'Certain Federal Income Tax Consequences.' Use of Proceeds.............................. There will be no proceeds to the Company from the Exchange Offer. Exchange Agent............................... The Bank of New York is serving as Exchange Agent in connection with the Exchange Offer. See 'The Exchange Offer--Exchange Agent.' </TABLE> CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Freedom does not currently anticipate that it will register Old Notes under the Securities Act. See 'Description of the Notes--Registration Rights.' Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, Freedom believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by Holders thereof (other than any Holder which is an 'affiliate' of Freedom within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. Each broker-dealer that receives New Notes for its own account in exchange of Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a Prospectus in connection with any resale of such New Notes. See 'Plan of Distribution.' In addition, to comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or register thereunder the New Notes prior to offering or selling such New Notes. Freedom has agreed, pursuant to the Registration Rights Agreement, subject to certain limitations specified therein, to register or qualify the New Notes for offer or sale under the securities laws of such jurisdictions as any Holder reasonably requests in writing. Unless a Holder so requests, Freedom does not intend to register or qualify the sale of the New Notes in any such jurisdictions. See 'The Exchange Offer--Consequences of Exchanging Old Notes.' SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain provisions providing for an increase in the interest rates on the Old Notes under certain circumstances relating to timing of the Exchange Offer, which rights will terminate upon consummation of the Exchange Offer. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from October 17, 1996. Accordingly, registered Holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from October 17, 1996. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer, which rights will terminate upon consummation of the Exchange Offer. <TABLE> <S> <C> Notes Offered................................ Up to $125,000,000 principal amount of the Company's 10 5/8% Senior Subordinated Notes due 2006, which have been registered under the Securities Act. Maturity Date................................ October 15, 2006. Interest Payment Dates....................... April 15 and October 15 of each year, commencing April 15, 1997. Optional Redemption.......................... The Notes are redeemable at the option of Freedom, in whole or in part, at any time on or after October 15, 2001 at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, on or prior to October 15, 1999, Freedom, at its option, may redeem in the aggregate up to 35% of the original principal amount of the Notes at a redemption price equal to 109.625% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds of one or more Public Equity Offerings; provided, however, that at least $81.25 million aggregate principal amount of Notes remain outstanding immediately after giving effect to such redemption. Ranking...................................... The Notes are unsecured senior subordinated obligations of Freedom and are subordinated in right of payment to all existing and future Senior Debt of Freedom, including indebtedness under the Amended and Restated Credit Agreement, and rank pari passu in right of payment with all other existing and future senior subordinated indebtedness of Freedom. As of September 30, 1996, after giving pro forma effect to the Transactions, the Company would have had approximately $21.5 million of Senior </TABLE> <TABLE> <S> <C> Debt outstanding and approximately $149.2 million of indebtedness outstanding. Guarantees................................... The Notes are fully and unconditionally guaranteed, on a joint and several basis, as to the payment of principal, premium, if any, and interest by all of Freedom's domestic subsidiaries and Freedom Chemical Diamalt (collectively, the 'Guarantors'). The Guarantees are subordinated in right of payment to all existing and future Senior Debt of the respective Guarantors, including such Guarantors' guarantees of Freedom's obligations under the Amended and Restated Credit Agreement. Freedom will cause any future domestic Restricted Subsidiary of Freedom to guarantee, on a senior subordinated basis, the due and punctual payment of all amounts due under the Notes. See 'Description of the Notes--Certain Covenants.' Change of Control............................ Upon the occurrence of a Change of Control (as defined herein), (i) Freedom will have the option to redeem the Notes, in whole or in part, at a redemption price equal to the principal amount thereof, together with accrued and unpaid interest to the date of redemption, plus the Applicable Premium (as defined herein), and (ii) subject to certain conditions, each holder of Notes will have the right to require Freedom to purchase such holder's Notes at a purchase price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Asset Sales.................................. In the event of certain asset sales, Freedom will be required to offer to purchase the Notes at a purchase price equal to 100% of their principal amount together with accrued and unpaid interest, if any, to the date of purchase with the net proceeds of such assets sales. Covenants.................................... The indenture pursuant to which the Old Notes were, and the New Notes will be, issued (the 'Indenture') contains certain covenants that, among other things, limit the ability of Freedom and any Restricted Subsidiary (as defined herein) to (i) incur additional indebtedness, (ii) issue preferred stock in Restricted Subsidiaries, (iii) pay dividends or make other distributions, (iv) repurchase equity interests or subordinated indebtedness, (v) create certain liens, (vi) enter into certain transactions with affiliates, (vii) consummate certain asset sales, (viii) sell equity interests in any Restricted Subsidiaries which guarantee the Notes, and (ix) merge or consolidate with any person. See 'Description of the Notes--Certain Covenants.' Exchange Offer; Registrations Rights......... Holders of New Notes (other than as set forth below) are not enti- tled to any registration rights with respect to the New Notes. Pursuant to the Registration Rights Agreement, Freedom agreed, for the benefit of the Holders of Old Notes, to file an Exchange Offer Registration Statement (as defined). The Registration Statement of which this Prospectus is a part constitutes the Exchange Offer Registration Statement. Under certain circumstances, certain Holders of Notes (including Holders who may not participate in the Exchange Offer or who may not freely resell New Notes received in the Exchange Offer) may require Freedom to file, and </TABLE> <TABLE> <S> <C> cause to become effective, a shelf registration statement under the Securities Act, which would cover resales of Notes by such Holders. See 'Description of the Notes--Exchange Offer; Registra- tion Rights.' Use of Proceeds.............................. The Company will not receive any proceeds from the Exchange Offer. The proceeds from the offering of the Old Notes, together with the initial borrowings under the Amended and Restated Credit Agreement and the proceeds from the Cash Equity Investment, which were approximately $156.5 million in the aggregate, were used to repay in full indebtedness outstanding under the Existing Credit Agreements and to pay fees and expenses related to the Transactions. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000931336_dean_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000931336_dean_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70b27d130e05f49f70ae622d3dfbbb8238c8db61
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000931336_dean_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY AS USED IN THIS PROSPECTUS, EXCEPT AS OTHERWISE STATED OR UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS "SUIZA FOODS" AND THE "COMPANY" REFER TO SUIZA FOODS CORPORATION AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS AND THE HISTORICAL OPERATIONS AND ACTIVITIES OF CERTAIN ENTITIES (THE "COMBINED ENTITIES") THAT BECAME SUBSIDIARIES OF THE COMPANY IN MARCH 1995 PURSUANT TO A CORPORATE COMBINATION ACCOUNTED FOR AS A POOLING OF INTERESTS (THE "COMBINATION"). SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--HISTORIC RELATIONSHIPS AND RELATED TRANSACTIONS--THE COMBINATION". THE COMPANY'S OPERATING SUBSIDIARIES ARE REFERRED TO INDIVIDUALLY HEREIN AS "SUIZA-PUERTO RICO", "VELDA FARMS", "SWISS DAIRY", "MODEL DAIRY" AND "REDDY ICE". UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS WILL NOT EXERCISE THEIR OVER-ALLOTMENT OPTION. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE HEREIN. THE COMPANY Suiza Foods is a leading manufacturer and distributor of fresh milk products, refrigerated ready-to-serve fruit drinks and coffee in Puerto Rico, fresh milk and related dairy products in Florida, California and Nevada and packaged ice in Florida and the southwestern United States. The Company has grown primarily through a successful acquisition strategy, having consummated 37 acquisitions since its inception in May 1988, including 11 acquisitions since its initial public offering in April 1996 (the "IPO"). As a result of its acquisition strategy, the Company's net sales grew from $51.7 million in 1993 to $430.5 million in 1995, during which time its operating income increased from $8.7 million to $30.6 million. Pro forma net sales and operating income for the nine months ended September 30, 1996 were $496.3 million and $34.5 million, respectively. Management believes that the dairy, ice and related distribution oriented food industries provide attractive acquisition opportunities. The Company's strategy is to continue to expand its dairy, ice and related food businesses primarily through acquisitions of strong regional operators in new markets and consolidating or add-on acquisitions in its existing markets. Through acquisitions in the Company's existing markets, management believes that the Company can continue to realize substantial operating efficiencies and economies of scale. The Company also seeks to expand its existing operations by adding new customers, extending its product lines and securing distribution rights for additional branded products. The Company conducts its operations through strong regional operating companies, which have long-standing reputations for customer service and product quality. Currently, the Company's operations are organized under two major business lines, dairy and ice. DAIRY - Suiza-Puerto Rico manufactures and distributes approximately 66% of the fresh milk sold in Puerto Rico and manufactures and markets a line of refrigerated ready-to-serve fruit drinks under its Suiza Fruit-TM- name, a leading brand in Puerto Rico. The Company distributes its dairy products to grocery stores, retail outlets and schools, and also distributes third party brand name ice cream and other refrigerated and frozen foods, principally to grocery stores. The Company also processes and distributes coffee in Puerto Rico and exports specialty super premium coffees to the mainland United States and international markets through Garrido & Compania, Inc. ("Garrido"). Garrido is the second largest coffee processor in Puerto Rico and operates the largest office and hotel coffee service on the island. - Velda Farms manufactures and distributes fresh milk, ice cream and related products throughout peninsular Florida under its own brand names and under brands licensed from third parties. Velda Farms serves approximately 9,500 customers and distributes its products and third party branded products to food service accounts, convenience stores, club stores and schools. - Swiss Dairy manufactures and distributes fresh milk and related products in southern California and southern Nevada. Swiss Dairy offers a limited product line in order to cost effectively service its high volume retail customers. - Model Dairy manufactures and distributes fresh milk, ice cream and related products in northern Nevada and certain areas of northern California. Model Dairy is the largest dairy processor in northern Nevada and distributes its full line of products to grocery stores, retail outlets, schools and food service accounts. ICE - Reddy Ice manufactures and distributes ice products for retail, commercial and industrial uses. The Company currently manufactures ice at 21 facilities and serves approximately 21,000 retail locations in Texas, Florida, Arizona, New Mexico, Nevada, Oklahoma and Utah. Management believes that the Company is one of the largest manufacturers and distributors of packaged ice in the United States and that it has significant market share in each of its markets. RECENT DEVELOPMENTS In April 1996, the Company completed its IPO with net proceeds to the Company of approximately $48.6 million. These proceeds were applied to repay a portion of the Company's senior and subordinated indebtedness. Since its IPO, the Company has completed a number of acquisitions within its two major business lines, including the following: - In July 1996, the Company acquired Garrido, a leading Puerto Rico processor and distributor of coffee, for approximately $35.0 million plus future performance based payments of up to $5.5 million. Garrido's sales for its fiscal year ended June 30, 1996 were approximately $26.2 million. - In September 1996, the Company acquired Swiss Dairy, a manufacturer and distributor of fresh milk and related products in southern California and southern Nevada, for approximately $54.0 million. Swiss Dairy had sales of approximately $108.2 million for the twelve months ended September 7, 1996. - In December 1996, the Company acquired Model Dairy, a manufacturer and distributor of fresh milk and related products in northern Nevada and northern California, for approximately $26.0 million. Model Dairy's sales for its fiscal year ended October 31, 1996 were approximately $56.9 million. - The Company has also completed seven acquisitions of small ice businesses since its IPO for total consideration of $4.6 million. These businesses have been consolidated into the Company's existing ice operations. Since its IPO, the Company has also completed the following financing transactions: - In August 1996, the Company completed a private placement of 625,000 shares of Common Stock to T. Rowe Price Small Cap Value Fund with net proceeds to the Company of approximately $9.7 million (the "Private Placement"). The proceeds were applied to repay a portion of the Company's senior indebtedness. - In connection with its acquisition of Swiss Dairy in September 1996, the Company amended its Senior Credit Facility (as defined herein) to provide for a new $90.0 million acquisition facility. The Company financed its acquisitions of Swiss Dairy and Model Dairy with borrowings under this acquisition facility. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........................... 4,000,000 shares Common Stock offered by the Selling Stockholders.............. 700,000 shares Common Stock to be outstanding after the Offering (1)......... 14,741,729 shares Use of Proceeds............................................... To repay certain outstanding indebtedness. See "Use of Proceeds". Nasdaq National Market symbol................................. SWZA </TABLE> - -------------------------- (1) Total shares outstanding is as of December 31, 1996 and excludes 1,466,738 shares of Common Stock subject to options outstanding as of that date, which are exercisable at a weighted average exercise price of $8.11 per share. See "Management--Executive Compensation--Option and Restricted Stock Plan" and "Certain Relationships and Related Transactions--Historic Relationships and Related Transactions--The Combination-- Stock Options". * * * The Company was formed to become a holding company for Suiza-Puerto Rico, Velda Farms and Reddy Ice pursuant to the Combination. See "Certain Relationships and Related Transactions--Historic Relationships and Related Transactions--The Combination". The Company is a Delaware corporation with its principal offices located at 3811 Turtle Creek Boulevard, Suite 1300, Dallas, Texas 75219 (telephone number 214-528-0939). SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE DATA) The following summary consolidated financial data for the three years ended December 31, 1995 have been derived from the audited consolidated financial statements of the Company. The summary consolidated financial data for the nine-month periods ended September 30, 1995 and 1996 were derived from the unaudited financial statements of the Company and include, in management's opinion, all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the results for such periods. The summary financial data do not purport to indicate results of operations as of any future date or for any future period. Effective with the Combination, the Company became the holding company for the operations of Suiza-Puerto Rico, Velda Farms and Reddy Ice. The Combination was accounted for using the pooling of interests method of accounting. Results of operations of Suiza-Puerto Rico and Velda Farms are included from the dates such operations were acquired in purchase business combinations (December 16, 1993 and April 10, 1994, respectively). The pro forma operating data give effect to the Garrido, Swiss Dairy and Model Dairy acquisitions as if such transactions had been consummated on January 1, 1995. The pro forma balance sheet data give effect to the Model Dairy acquisition as if such transaction had occurred on September 30, 1996. There is no pro forma balance sheet impact from the Garrido and Swiss Dairy acquisitions since they were consummated prior to September 30, 1996 and are reflected in the historical balance sheet. See "Unaudited Pro Forma Financial Data". <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, --------------------------------- -------------------------------------------- PRO FORMA 1993 1994 1995 1995 1996 1996 --------- --------- --------- --------- --------- ----------- PRO FORMA 1995 ----------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING DATA: Net sales................................. $ 51,675 $ 341,108 $ 430,466 $ 634,186 $ 325,454 $ 364,611 $ 496,333 Gross profit.............................. 31,263 100,640 117,833 152,281 90,692 97,480 120,459 Operating income.......................... 8,702 25,760 30,564 42,882 24,234 26,404 34,463 Interest expense, net..................... 7,697 19,279 19,921 27,864 15,285 12,844 17,600 Income (loss) before extraordinary loss... 1,420 4,245 (1,576) 2,008 (2,846) 23,873 26,424 Net income (loss) (1)..................... 1,420 4,048 (10,038) 2,008 (11,308) 21,658 26,424 Weighted average shares outstanding............................. 2,487,174 6,156,387 6,109,398 6,782,907 6,041,000 9,360,539 9,360,539 Earnings (loss) per share: Income (loss) before extraordinary loss... $ .57 $ .69 $ (.26) $ .30 $ (.47) $ 2.55 $ 2.82 Extraordinary loss........................ -- (.03) (1.38) -- (1.40) (.24) -- --------- --------- --------- ----------- --------- --------- ----------- Net income (loss) (1)..................... $ .57 $ .66 $ (1.64) $ .30 $ (1.87) $ 2.31 $ 2.82 --------- --------- --------- ----------- --------- --------- ----------- --------- --------- --------- ----------- --------- --------- ----------- </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1996 --------------------------------------- PRO FORMA ACTUAL PRO FORMA AS ADJUSTED (2) --------- ----------- --------------- (UNAUDITED) <S> <C> <C> <C> BALANCE SHEET DATA: Working capital.......................................................... $ 22,281 $ 26,654 $ 28,673 Total assets............................................................. 349,670 381,114 380,121 Total debt............................................................... 215,953 242,801 163,365 Total stockholders' equity............................................... 89,476 89,476 169,938 </TABLE> - ------------------------------ (1) Net income (loss) and related per share amounts include the following nonrecurring and extraordinary charges and benefits: <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, NINE MONTHS ENDED ------------------------------- SEPTEMBER 30, 1993 1994 1995(D) -------------------------- --------- --------- --------- 1995 1996(D) ----------- ------------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> Merger, financing and other costs (a)..................... $ -- $ (1,602) $ (9,554) $ (9,544) $ (354) --------- --------- --------- ----------- ------------- Tax benefits (b).......................................... -- -- -- -- 13,950 Extraordinary loss from early extinguishment of debt (c)..................................................... -- (197) (8,462) (8,462) (2,215) --------- --------- --------- ----------- ------------- $ -- $ (1,799) $ (18,016) $ (18,016) $ 11,381 --------- --------- --------- ----------- ------------- --------- --------- --------- ----------- ------------- </TABLE> (a) Consists of costs incurred in connection with the Combination, an uncompleted public offering of Common Stock, an uncompleted debt offering, uncompleted acquisitions and debt refinancing costs, net of associated income taxes of $58 in 1994, $684 in 1995 and $217 in the nine months ended September 30, 1996. (b) Includes sale of Puerto Rico tax credits of $3,400 (net of related expenses), reflected in other income, and the recognition of $11,750 in deferred income tax benefits, recorded as a credit to tax expense, both effects related to tax credits generated by Suiza-Puerto Rico, partially offset by additional income tax expense of $1,200 related to the sale of the tax credits. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Tax Benefits". (c) Net of associated income taxes of $700 in 1995 and $900 in the nine months ended September 30, 1996. (d) The nonrecurring and extraordinary charges and benefits are reflected in pro forma net income and per share amounts for the corresponding periods, except for extraordinary losses of $8,462 in 1995 and $2,215 in the nine months ended September 30, 1996 that are excluded from income from continuing operations on a pro forma basis. (2) As adjusted to reflect the sale of the 4,000,000 shares of Common Stock offered hereby by the Company at an assumed public offering price of $22.25 and the application of the net proceeds therefrom, including the recognition of an extraordinary loss of $3,294 related to the write-off of unamortized deferred loan costs of $993 and the expensing of prepayment penalties of $4,320, net of the tax benefit of $2,019. See "Use of Proceeds".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000932202_general_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000932202_general_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..483a1e91827b7813e4e06ad37a0b01ebe6a782e0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000932202_general_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and related notes thereto appearing elsewhere in this Prospectus. Industry data used throughout this Prospectus was obtained from industry publications and internal Company estimates that the Company believes to be reliable, but has not been independently verified. Unless the context otherwise requires, all references to "GMI" herein refer to General Medical Inc., the issuer of the Common Stock offered hereby; all references to "Holdings" herein refer to GM Holdings, Inc., a wholly-owned subsidiary of GMI with no business operations of its own; all references to "General Medical" herein refer to General Medical Corporation, a wholly-owned subsidiary of Holdings and the Company's principal operating subsidiary, and all references to the "Company" herein refer collectively to GMI and its subsidiaries. See "The Company." Except where otherwise indicated, the information in this Prospectus, including all share and per share amounts, (i) gives effect to an increase in authorized shares and a 1.36-to-one stock split of both the Common Stock and the Company's Class A Common Stock (the "Stock Split") each to be effected prior to the Offerings, and (ii) assumes the U.S. Underwriters' over-allotment option is not exercised. THE COMPANY The Company is a leading national distributor of medical and surgical supplies, servicing the full continuum of healthcare providers, from hospitals to physicians to extended care providers, and is the third largest distributor of such products in the United States. The Company had 1995 revenues of approximately $1.5 billion, of which 58% were derived from the acute care market (hospitals and ambulatory surgical centers), 31% from the physician care market (physicians and clinics) and 11% from the extended care market (nursing homes, home healthcare organizations and rehabilitation facilities). The Company is placing an increasing emphasis on sales to these markets through integrated healthcare networks ("IHNs") which operate healthcare facilities across the market continuum. The Company distributes a broad array of products, comprising approximately 130,000 stock-keeping units ("SKUs") which are supplied by over 4,000 medical and surgical product manufacturers. Additionally, the Company offers a variety of value-added services to its customers, particularly in the area of cost containment and inventory management. The Company's more than 700 person sales force is divided into four groups, targeting acute care providers, physician care providers, extended care providers and IHNs. According to an industry source, sales of medical/surgical supplies in the United States exceeded $28 billion in 1995, and are estimated to be growing at an annual rate of seven to eight percent. The Company believes that there are several major trends currently characterizing the industry, including: (i) the continuing consolidation of healthcare providers within and across markets, (ii) the rising importance of multi-market and national distribution capabilities, (iii) an increasing emphasis on value-added services that lower healthcare providers' administrative and other costs associated with medical/surgical supply management, (iv) a shift in the delivery of healthcare from acute care settings to alternate sites, such as physician offices and extended care facilities, and (v) the growing importance of an efficient distribution model as customers become more cost-conscious. The Company believes that its multi-market focus and national presence provide it with competitive advantages and position it to benefit from trends impacting the industry. First, as healthcare providers form IHNs, the Company has the opportunity to sell products and services to new and existing customers across different markets. The Company's current IHN customers include Cigna Health Corp. ("Cigna"), Geisinger Health Systems ("Geisinger") and Maricopa Health Systems ("Maricopa"), all of which operate in multiple healthcare markets. The Company also has the potential to grow as customers continue to consolidate within individual markets. For example, the Company has distribution relationships with MedPartners, Inc. ("MedPartners"), a physician care provider, which recently acquired Caremark International, Inc. ("Caremark"), another physician care provider, and Tenet Healthcare Corporation ("Tenet"), an acute care provider, which has announced its intention to acquire OrNda Healthcare Corp. ("OrNda"), another operator of acute care facilities. None of the above-mentioned customers accounted for more than 1% of the Company's 1995 revenues, except that hospitals owned by Tenet accounted for approximately 2% of such revenues. Second, the Company believes that its ability to provide access to multiple markets on a national basis is attractive to both healthcare providers and manufacturers. In particular, the Company believes manufacturers increasingly must rely on distributors such as the Company in order to gain access to the physician care and extended care markets, which manufacturers may not be able to access directly on an economical basis due to small order quantities and the large number of healthcare providers in such markets. For example, Allegiance Corporation ("Allegiance"), a manufacturer and distributor which competes with the Company in distribution in the acute care market, recently signed an agreement with the Company whereby the Company has become a preferred distributor of Allegiance products to the physician care and extended care markets. Third, hospitals and other large customers are increasingly looking to distributors to assist them in lowering their administrative burdens and total supply costs. For example, hospitals are increasingly requiring distributors to deliver product in small units of measure and on a just-in-time basis to multiple sites within a facility. The Company believes it is well- qualified to provide services which address these needs, due to its existing expertise in serving the physician care and extended care markets, which are typically serviced under such a distribution model. Fourth, the Company believes that its position as a national distributor to all markets lowers its distribution costs by enhancing purchasing power and spreading overhead costs over a larger sales base. The Company's business objective is to be the leading national distributor of medical and surgical supplies servicing the full continuum of healthcare providers. To pursue this objective and to continue to improve its profitability, the Company has implemented the following strategies: (i) drive sales growth in each of the Company's markets with an increased emphasis on the alternate-site markets, (ii) reduce customers' total medical/surgical supply costs through the provision of value-added services, (iii) provide manufacturers with access to multiple markets, (iv) realign its distribution network to provide high quality customer service and reduce costs and (v) acquire local and regional medical/surgical supply distributors that could complement the Company's existing distribution network as well as enhance the Company's market presence. THE OFFERINGS <TABLE> <S> <C> Common Stock offered in the Offerings: U.S. Offering.............................. 7,200,000 shares(1) International Offering..................... 1,800,000 shares ---------------- Total........................................... 9,000,000 shares(1) Capital Stock to be outstanding after the Of- ferings: Common Stock............................... 20,994,050 shares(2)(3) Class A Common Stock....................... 1,651,355 shares(2) -------------------- Total........................................... 22,645,405 shares(1)(3)(4) </TABLE> Use of proceeds...................... The estimated net proceeds from the Offerings, together with amounts borrowed under the New Credit Facilities, comprised of a New Revolving Credit Facility and an Interim Receivables Facility (each as defined), to be entered into by General Medical prior to or as of the closing of the Offerings, will be used to repay certain outstanding indebtedness of Holdings, GMI's wholly-owned subsidiary, to consummate the Debenture Tender Offer and the Consent Solicitation (each as defined) by General Medical, to repay outstanding indebtedness under the Existing Credit Facility (as defined) and to pay related fees and expenses. For a description of certain transactions being undertaken in connection with the Offerings, and upon which the closing of the Offerings will be conditioned, see "Use of Proceeds," "Capitalization" and "Description of Certain Indebtedness." Nasdaq National Market symbol........ "GENM" - ------- (1) Does not include 1,350,000 shares of Common Stock that are subject to an over-allotment option granted by the Company to the U.S. Underwriters. See "Underwriting." (2) Other than voting rights, the Common Stock and Class A Common Stock have identical attributes. On all matters submitted to a vote of stockholders, holders of Common Stock are entitled to one vote per share. Except with respect to certain matters submitted for a class vote, holders of Class A Common Stock are not entitled to voting rights. The Class A Common Stock is convertible into Common Stock on a one-for-one basis. See "Description of Capital Stock." (3) Includes 129,850 shares of Common Stock to be issued prior to the Offerings pursuant to the Securities Purchase Agreement (as defined). See "Certain Transactions--Other Agreements." (4) Excludes 1,317,336 shares of Common Stock reserved for issuance upon the exercise of outstanding stock options granted pursuant to the Company's stock incentive plans. See "Management--Compensation of Directors and Executive Officers." SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION The following summary consolidated historical and pro forma financial information for each of the two years ended December 31, 1991 and 1992, and for the eight month period ended August 31, 1993, the four month period ended December 31, 1993, each of the two years ended December 31, 1994 and 1995 and the nine month period ended September 30, 1996, has been derived from the audited consolidated financial statements of the Company and its predecessor. The summary interim consolidated financial information as of and for the nine month period ended September 30, 1995 has been derived from unaudited consolidated financial statements of the Company. Results for the interim periods are not necessarily indicative of the results for the full fiscal year. The unaudited selected consolidated pro forma financial information reflects the effect of adjustments to the historical consolidated financial statements of the Company necessary to give effect to the transactions as described in the notes below, and is based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. The pro forma financial information is presented for comparative and informational purposes only and is not necessarily indicative of future results or of the results that would have been obtained had the transactions assumed therein been completed on the dates indicated. The information presented below should be read in conjunction with "Selected Consolidated Historical and Pro Forma Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and related notes, all included elsewhere in this Prospectus. <TABLE> <CAPTION> PREDECESSOR(1) COMPANY ------------------------------ ----------------------------------------------------------- EIGHT MONTHS FOUR YEAR ENDED ENDED MONTHS ENDED YEAR ENDED NINE MONTHS ENDED DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, ------------------ ---------- ------------ ---------------------- ---------------------- 1991 1992 1993 1993 1994(2) 1995(3) 1995 1996 -------- -------- ---------- ------------ ---------- ---------- ---------- ---------- (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................ $729,624 $853,967 $611,641 $ 300,921 $1,113,840 $1,492,143 $1,099,442 $1,271,428 Cost of sales........... 598,543 703,968 503,744 249,219 912,182 1,214,714 895,775 1,036,701 -------- -------- -------- --------- ---------- ---------- ---------- ---------- Gross profit............ 131,081 149,999 107,897 51,702 201,658 277,429 203,667 234,727 Selling, general and administrative expenses............... 111,829 123,931 88,210 43,969 161,662 236,429 174,290 189,704 Consolidation costs(4).. -- -- -- -- -- 10,216 9,561 2,031 Loss (gain) on sale of manufacturing assets(5).............. -- -- -- -- (2,788) 709 -- -- Amortization of intangibles............ -- -- -- 3,833 11,524 9,392 7,235 5,673 -------- -------- -------- --------- ---------- ---------- ---------- ---------- Income from continuing operations before interest expense and income taxes (benefit). 19,252 26,068 19,687 3,900 31,260 20,683 12,581 37,319 Interest expense........ 12,282 10,221 3,828 8,534 32,006 45,183 33,262 35,836 Income taxes (benefit).. 3,175 6,181 6,565 (727) 2,719 (6,028) (5,260) 2,540 -------- -------- -------- --------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations.. $ 3,795 $ 9,666 $ 9,294 $ (3,907) $ (3,465) $ (18,472) $ (15,421) $ (1,057) ======== ======== ======== ========= ========== ========== ========== ========== Net income (loss)(6)(7). $ (2,962) $ 43,179 $ 10,435 $ (3,907) $ (3,465) $ (18,472) $ (15,421) $ (1,057) ======== ======== ======== ========= ========== ========== ========== ========== PRO FORMA OPERATING DATA: Pro forma net income (loss) (8)............. $ (6,711) $ 8,269 Pro forma net income (loss) per share....... $ (0.29) $ 0.36 Pro forma weighted average number of shares outstanding..... 22,923 22,799 OTHER OPERATING DATA: Gross margin............ 18.0% 17.6% 17.6% 17.2% 18.1% 18.6% 18.5% 18.5% Cash flows provided by (used in): Operating activities.... $ 10,965 $ 13,892 $ 5,805 $ 10,500 $ (12,604) $ (33,194) $ (24,580) $ 28,224 Investing activities.... (1,664) 36,093 (1,592) (221,618) (95,968) (31,566) (29,266) (5,164) Financing activities.... (8,037) (37,262) (7,630) 218,721 106,741 62,625 50,342 (21,454) Adjusted EBITDA(9)...... 22,121 28,938 21,639 8,891 43,815 44,636 32,541 48,686 Adjusted EBITDA margin(10)............. 3.0% 3.4% 3.5% 3.0% 3.9% 3.0% 3.0% 3.8% </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ---------------------- ACTUAL PRO FORMA(11) -------- ------------- (DOLLARS IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA (AT PERIOD END): Working capital.......................................... $175,162 $186,053 Total assets............................................. 685,199 680,111 Long-term debt, less current maturities.................. 419,850 301,857 Stockholders' equity..................................... 58,399 182,196 </TABLE> - ------- (footnotes appear on following page) (1) General Medical, the Company's principal operating subsidiary, was acquired on August 31, 1993 in a business combination accounted for as a purchase. The consolidated financial information with respect to the Predecessor (as defined) reflects historical results and, accordingly, does not reflect the effects of purchase accounting adjustments or interest associated with debt incurred to finance the acquisition. (2) The operations of Titus (as defined) and Foster (as defined) are included in the consolidated operating results of the Company since the dates of the acquisitions on July 28, 1994 and August 31, 1994, respectively. (3) The acquisition of Randolph was consummated on January 5, 1995. The operations of Randolph are included in the consolidated operating results of the Company as of the beginning of 1995. (4) Reflects costs associated with the consolidation of General Medical's distribution facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Distribution" and Note 3 of Notes to the Company's Consolidated Financial Statements. (5) Represents a gain in 1994 and a loss in 1995 from the sale of certain manufacturing assets of a wholly-owned subsidiary of General Medical. (6) Reflects a $6.8 million loss in 1991 from discontinuance of the operations of a 94%-owned subsidiary of the Predecessor. Gains from discontinued operations in 1992 and 1993 of $34.0 million and $1.1 million, respectively, resulted from the sale of a wholly-owned subsidiary of the Predecessor net of applicable tax. (7) Net income for 1992 reflects the cumulative effect of a change in accounting principle for the adoption of SFAS No. 109, "Accounting for Income Taxes" of $0.5 million. (8) Gives effect to (i) the Offerings at an assumed initial public offering price of $17.00 per share, (ii) estimated initial borrowings under the New Credit Facilities, and (iii) the application of the proceeds therefrom to repay certain outstanding indebtedness and to pay fees and expenses as described in "Use of Proceeds," each determined as of the beginning of the respective periods. Also gives effect to the acquisition of 51% in principal amount of the 12 1/8% Debentures pursuant to the Debenture Tender Offer. The Company is seeking to acquire 100% in principal amount of the 12 1/8% Debentures in the Debenture Tender Offer. The following compares the effect on pro forma operating data if 51% and 100%, respectively, in principal amount of the 12 1/8% Debentures are acquired (amounts in thousands, except per share amounts): <TABLE> <CAPTION> NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1995 1996 ---------------- ------------- 51% 100% 51% 100% ------- ------- ------ ------ <S> <C> <C> <C> <C> Pro forma net income (loss)................ $(6,711) $(6,288) $8,269 $8,807 Pro forma net income (loss) per share...... $(0.29) $(0.27) $0.36 $0.39 Pro forma weighted average number of shares outstanding............................... 22,923 22,923 22,799 22,799 </TABLE> See "Use of Proceeds," "Capitalization" and "Selected Consolidated Historical and Pro Forma Financial Information." (9) Adjusted EBITDA represents the sum of income (loss) from continuing operations before income taxes (benefit), interest expense, depreciation, amortization and nonrecurring consolidation charges less the gain (in 1994) from the sale of certain manufacturing assets. Management uses adjusted EBITDA as a performance indicator and believes that it provides additional information related to the Company's ability to generate cash for capital expenditures, debt service and other obligations. Also, increases and decreases in adjusted EBITDA and adjusted EBITDA margin (as defined) are indicators of the change in cash generated from internal growth as well as from the impact of the Company's recent acquisitions. EBITDA excludes, however, items that are significant components in understanding and assessing the Company's financial performance and, as presented, may not be comparable to similarly titled measures as calculated by other companies. Furthermore, adjusted EBITDA is not determined in accordance with generally accepted accounting principles and should not, therefore, be viewed by investors as an alternative to operating income as an indicator of performance. Similarly, adjusted EBITDA should not be viewed as an alternative to cash flows from operating, investing and financing activities as presented in the consolidated statements of cash flows. For balanced disclosure of operating results and cash flow activities, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." (10) This margin is calculated as adjusted EBITDA as a percentage of revenues. (11) Gives effect to (i) the Offerings at an assumed initial public offering price of $17.00 per share, (ii) estimated initial borrowings under the New Credit Facilities, and (iii) the application of the proceeds therefrom to repay certain outstanding indebtedness and to pay fees and expenses as described in "Use of Proceeds." Also gives effect to the acquisition of 51% in principal amount of the 12 1/8% Debentures pursuant to the Debenture Tender Offer. The Company is seeking to acquire 100% in principal amount of the 12 1/8% Debentures in the Debenture Tender Offer. The following compares the effect on pro forma balance sheet data if 51% and 100%, respectively, in principal amount of the 12 1/8% Debentures are acquired (amounts in thousands): <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, 1996 ----------------- 51% 100% -------- -------- <S> <C> <C> Pro forma working capital................................ $186,053 $188,901 Pro forma total assets................................... 680,111 678,766 Pro forma long-term debt, less current maturities........ 301,857 306,918 Pro forma stockholders' equity........................... 182,196 178,638 </TABLE> In connection with the repayment of long-term debt and the write-off of related deferred financing costs, the Company will incur an extraordinary after-tax charge of approximately $16.9 million, or $0.73 per share, assuming 51% in principal amount of the 12 1/8% Debentures are acquired pursuant to the Debenture Tender Offer. If 100% in principal amount of the 12 1/8% Debentures are acquired, such charge would be $20.4 million, or $0.89 per share. Additionally, the Company will incur a one-time charge of $1.8 million, or $0.08 per share, representing the after-tax effect of the $3.0 million payment made to terminate certain financial advisory services provided to the Company by Kelso (the "Termination Fee"). See "Certain Transactions--Relationship with Insiders." These charges are reflected in stockholders' equity, and will be recorded upon completion of the Offerings. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000932290_centerspan_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000932290_centerspan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..254f9f22282caa8b1626a5f48aa17bcde22f8f86
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000932290_centerspan_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY ThrustMaster designs, develops, manufactures and markets a diversified line of innovative and technologically advanced game controllers for the home personal computer ("PC") market. The Company has established ThrustMaster as a brand name recognized for quality, value, durability and ease of use. ThrustMaster products enhance the enjoyment of the PC entertainment experience and appeal to a wide variety of users, from occasional game players to avid enthusiasts. The Company's products include racing wheels, joysticks, gamepads and flight simulation controllers. ThrustMaster products are available in over 5,000 retail outlets in North America and Europe, including Babbage's, Etc.; Best Buy Co., Inc.; Circuit City Stores, Inc.; CompUSA; Computer City Supercenter; The Electronic Boutique, Inc. and Sam's Club. From 1992 to 1996, the Company's annual revenue increased from $2.1 million to $30.8 million and annual net income increased from $0.4 million to $2.3 million. For the nine months ended September 30, 1997 compared to the nine months ended September 30, 1996, revenues increased 52% to $23.9 million and net income increased 74% to $1.5 million. Over the last several years, significant technological advances in the home PC, such as improvements in processor speeds and graphical capabilities, have enabled software developers to create increasingly sophisticated entertainment programs with real-time interaction that offer greater realism and excitement. As a result, the PC has become a viable home entertainment platform. According to IDC/LINK, an industry research firm, the installed base of home PCs in the United States will reach 50 million units by the end of 1997, and will increase to 70 million units by 2001. Shipments of new PCs are projected to increase from 10.4 million units in 1996 to 18.7 million units in 2001. Unit shipments of software titles are projected to grow from 48 million in 1996 to over 126 million in 2001, representing a compound annual rate of approximately 21%. The Company believes that sales of game controllers are directly correlated with sales of both PCs and entertainment software titles. Working with leading software publishers, such as Electronic Arts, Inc., Activision, Inc., Sierra On-Line, Inc., GT Interactive Software Corp. and Virgin Interactive Entertainment, Inc., the Company often bundles its game controllers with popular software titles. These bundling arrangements enable the Company to deliver increased value to consumers, and to differentiate its products from competing products. The Company offers a variety of bundled game controller packages which allow for differentiation among retailers that carry the Company's products. The Company also utilizes recognized brand names, such as NASCAR-Registered Trademark-, TOP GUN-TM- and NASA, to enhance consumer appeal. The Company's objective is to be a leading provider of controllers to the interactive electronic entertainment industry. In order to achieve this objective, the Company's business strategy is to: (i) market high quality controllers that provide value and durability; (ii) leverage popular game titles and brands to increase product demand; (iii) foster strategic relationships with hardware manufacturers; (iv) develop and introduce innovative products; and (v) pursue strategic acquisitions of complementary products or businesses. The Company was incorporated in Oregon in 1990. The Company's principal executive offices are located at 7175 NW vergreen Parkway, Suite 400, Hillsboro, Oregon 97124-5839, and its telephone number is (503) 615-3200. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............. 1,200,000 shares Common Stock offered by the Selling Shareholder................................... 300,000 shares Total Common Stock offered...................... 1,500,000 shares Common Stock to be outstanding after this offering...................................... 5,493,588 shares(1) Use of proceeds................................. For the repayment of indebtedness and for working capital and general corporate purposes, which may include acquisitions or joint ventures. Nasdaq National Market Symbol................... TMSR </TABLE> - ------------------------ (1) Based on shares outstanding as of November 1, 1997. Excludes (i) 900,868 shares issuable upon exercise of outstanding stock options under the Company's 1994 Stock Option Plan, 1990 Stock Option Plan and Director's Nonqualified Stock Option Plan, with a weighted average exercise price of $4.56 per share, (ii) 193,342 shares reserved for future grants under such stock options plans, and (iii) 117,150 shares issuable upon the exercise of outstanding warrants issued in connection with the Company's initial public offering, with an exercise price of $7.57 per share. See "Management-- Incentive Compensation and Benefit Plans" and "Description of Capital Stock--Warrants." EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) GIVES EFFECT TO A 3% STOCK DIVIDEND ON THE COMMON STOCK DECLARED ON JANUARY 21, 1997, AS IF SUCH DIVIDEND HAD BEEN DECLARED AND MADE PRIOR TO THE PERIODS COVERED HEREBY. SEE "UNDERWRITING." UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "THRUSTMASTER" ARE TO THRUSTMASTER, INC., AND ITS SUBSIDIARY. THE THRUSTMASTER LOGO AND THRUSTMASTER ARE AMONG THE COMPANY'S TRADEMARKS. THIS PROSPECTUS INCLUDES OTHER TRADEMARKS AND TRADE NAMES OF THE COMPANY AND OF OTHER COMPANIES. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues............................... $ 2,655 $ 8,214 $ 13,582 $ 19,415 $ 30,821 $ 15,745 $ 23,930 Cost of goods sold..................... 1,438 4,290 8,007 11,815 19,592 9,727 14,814 --------- --------- --------- --------- --------- --------- --------- Gross profit......................... 1,217 3,924 5,575 7,600 11,229 6,018 9,116 Operating expenses..................... 687 2,581 3,804 5,956 8,066 5,032 7,156 --------- --------- --------- --------- --------- --------- --------- Income from operations................. 530 1,343 1,771 1,644 3,163 986 1,960 Interest income........................ -- -- -- 404 466 324 284 --------- --------- --------- --------- --------- --------- --------- Income before income taxes............. 530 1,343 1,771 2,048 3,629 1,310 2,244 Provision for income taxes(1).......... 169 456 633 687 1,370 472 790 --------- --------- --------- --------- --------- --------- --------- Net income(1).......................... $ 361 $ 887 $ 1,138 $ 1,361 $ 2,259 $ 838 $ 1,454 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net income per share................... $ 0.25 $ 0.33 $ 0.38 $ 0.32 $ 0.49 $ 0.18 $ 0.30 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Weighted average shares outstanding.... 1,431 2,686 2,957 4,293 4,647 4,582 4,807 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------- ACTUAL AS ADJUSTED(2) --------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Working capital........................................................................ $ 15,642 $ 32,132 Total assets........................................................................... 22,844 39,334 Total liabilities...................................................................... 5,319 5,319 Total shareholders' equity............................................................. 17,525 34,015 </TABLE> - ------------------------ (1) The provision for income taxes, net income and net income per share includes a pro forma income tax adjustment to reflect the Company as a C corporation, rather than an S corporation, for federal and state income tax purposes for the years ended December 31, 1992, 1993, 1994 and 1995. See Notes 2 and 12 to Consolidated Financial Statements. (2) As adjusted to reflect the sale by the Company of 1,200,000 shares of Common Stock in connection with this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000932455_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000932455_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..05889e81e8e9f2b2b205b6b06fa8a89e42de5a2b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000932455_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes (i) that all numbers of shares of Common Stock and per share amounts have been adjusted to reflect a 73 for 1 stock split to be effected immediately prior to the Offering and (ii) no exercise of the Underwriters' over-allotment option. References herein to the Company or American Tower include American Tower Corporation and its subsidiaries, unless the context indicates otherwise. Prospective investors should carefully consider the information set forth in "Risk Factors" before purchasing any shares of Common Stock offered hereby. THE COMPANY American Tower Corporation is a leading independent owner and operator of wireless communications towers with nearly 600 towers on 550 sites in 30 states. The Company rents tower space and provides related services to wireless communications service providers, as well as operators of private networks and government agencies, for a diverse range of applications including paging, cellular, personal communications services ("PCS"), fixed microwave, specialized mobile radio ("SMR") and enhanced specialized mobile radio ("ESMR"). American Tower owns and operates towers in 45 of the top 100 metropolitan statistical areas ("MSAs") in the United States and has clusters of towers in cities such as Houston, Dallas, Baltimore, San Antonio, Atlanta, Jacksonville, Kansas City, Albuquerque and Nashville. The Company's customers include Bell South Mobility, GTE Mobilnet, Houston Cellular, Nextel, PageMart, Pagenet, Pittencrief Communications, SBC Communications, Shell Offshore, CSX Transportation, and various federal and local government agencies. Communications site operators have benefited in recent years from increasing demand for wireless communications services which has prompted the issuance of new wireless network licenses and construction of new wireless networks. The Company believes that the increase in demand for wireless communications is attributable to (i) the increasing mobility of the U.S. population and growing awareness of the benefits of mobile communications; (ii) technological advances in communications equipment and increasing affordability of wireless services; (iii) changes in telecommunications regulations; and (iv) business and consumer preferences for higher quality voice and data transmission. Consequently, more towers will be required to accommodate the anticipated increase in the demand for higher frequency technologies (such as PCS) which have a reduced cell range and thus require a more dense network, or "footprint," of towers. The Personal Communications Industry Association ("PCIA") estimates that there are currently 22,000 antenna sites in the U.S. for cellular and PCS alone and that this number will grow to 100,000 sites by the year 2000 as cellular systems expand coverage and PCS systems are deployed. Further, industry analysts estimate that between 1996 and 2000 total spending on infrastructure for PCS networks in the United States, including cell sites and mobile switching centers, will exceed $24 billion. American Tower believes that it is well positioned to capitalize on the continued growth in wireless communications. The Company's strategy for growth is to focus its internal sales and marketing activities on maximizing the capacity utilization of its towers. In addition, the Company has experience in the construction and acquisition of towers which it believes will allow the Company to increase its penetration of existing markets and expansion into new markets. The Company is currently in the process of constructing 40 towers, plans to construct as many as 35 additional towers in 1997 and has acquired or agreed to acquire 33 towers on 19 sites since the beginning of the year. In addition to providing multiple sites in existing and emerging markets, the Company is seeking to develop a nationally-recognized or branded solution to its customers' rental tower needs by focusing on quality customer service. Among the enhanced services offered by the Company are (i) remote monitoring capabilities which ensure compliance with Federal Communications Commission ("FCC") regulations and quickly identify breaches of customer network integrity; (ii) regulatory compliance expertise which can accelerate a customer's speed to market by decreasing the time and costs associated with Federal Aviation Administration ("FAA"), FCC and local zoning or permitting compliance; and (iii) standardized and master licensing agreements and predictable pricing terms which simplify the contracting process. The Company believes that wireless service providers prefer to deal with a consolidated tower provider, as opposed to individual tower owners, and that providers which are expanding within existing markets or new markets are motivated to lease space from tower operators that offer a consistent level of value added service. The Company believes that the development of such customer-oriented services has contributed to its yearly customer "churn" rates of less than 1%, increased capacity utilization on existing towers and differentiation of American Tower's services from those of its competitors. GROWTH STRATEGY In light of the increasing demand for wireless communications services and the ongoing development of new wireless technologies and networks, American Tower believes that there are significant opportunities to expand its business. The Company's growth strategy includes: Internal Growth through Sales and Marketing Activities. A key component of American Tower's growth strategy is to maximize the utilization of its tower sites. The Company targets wireless providers that are expanding their existing network infrastructure as well as those deploying new technologies. The Company also focuses on acquiring towers sites with underutilized capacity which it believes can be filled through the implementation of the Company's sales and marketing techniques. Because the costs of operating a tower site are largely fixed, increasing tower utilization results in improved site operating margins. When a specific tower reaches full antennae attachment capacity, American Tower is often able to construct an additional tower at the same location, enabling it to further leverage its investment in land leases, tower monitoring costs and certain initial capital expenditures, such as utilities and telephone service. Growth by Construction. American Tower intends to continue constructing towers to "fill in" its tower network in existing markets and to enter new markets. By locating new towers in areas identified by its customers as optimal for their network expansion requirements, the Company attempts to secure commitments for licensing space prior to commencing construction. Further, master planned communities and other neighborhoods with zoning or regulatory bodies which have previously opposed tower construction are increasingly seeking a single tower rental company which can offer an integrated and efficient tower construction plan to meet their growing wireless needs. The Company is seeking opportunities to build towers in such communities and is currently constructing five tower sites in The Woodlands, a master planned community north of Houston. The Company believes that its experience in site analysis and tower construction provides it with a competitive advantage in procuring such exclusive construction agreements. Growth by Acquisition. American Tower intends to continue to make strategic acquisitions in the fragmented tower rental industry. The Company will target acquisitions in markets where the Company already owns clusters of towers as well as new markets. The Company seeks to increase revenues and operating margins at acquired tower sites through expanded sales and marketing efforts, improved service and elimination of redundant overhead. The Company evaluates acquisitions using numerous criteria, including customer requirements, tower location, tower height, competition and existing capacity utilization. Acquisition candidates include local tower owners, private communication networks (such as those previously used by railroad or energy companies), independent tower rental competitors and the tower networks of wireless communications companies. In order to capitalize on industry consolidation, the Company has begun to hire additional personnel to support expanded acquisition activities. COMPANY BACKGROUND American Tower was organized in October 1994 by an investor group led by Summit Capital Inc. of Houston and Chase Capital to acquire Bowen-Smith Corp. ("Bowen-Smith"). Bowen-Smith had been in the tower rental business since 1966, initially serving the communications tower requirements of two-way radio and microwave transmission users. At the time of the acquisition (the "Bowen-Smith Acquisition"), Bowen-Smith owned 184 towers on 175 sites located primarily in Texas, Louisiana and Oklahoma. Within the first year after the Bowen-Smith Acquisition, the Company acquired or constructed more than 75 communications towers. In December 1995, the Company acquired 103 towers from CSX Realty Development Corporation ("CSX"), and in October 1996, the Company acquired 154 towers from Prime Communication Sites Holding, LLC ("Prime"). THE OFFERING Common Stock offered by the Company............................. shares Common Stock offered by the Selling Stockholder......................... shares Common Stock to be outstanding after the Offering........................ shares(1) Use of proceeds..................... The Company intends to use the net proceeds of the Offering to (i) repay $4.9 million of subordinated debt; (ii) redeem the Company's Series A Redeemable Preferred Stock (the "Series A Preferred Stock") for $4.5 million; and (iii) repay a portion of the outstanding indebtedness under the Company's bank credit facility (the "Credit Facility"). The Company will not receive any proceeds from the sale of shares by the Selling Stockholder. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............................. "ATWR" - --------------- (1) Includes warrants to purchase 2,681,071 shares of Common Stock at a nominal price per share which the Company expects to be exercised prior to the consummation of the Offering and shares of Common Stock having a value of $1.0 million (based upon the initial public offering price) to be issued upon the closing of the Offering in connection with a recently completed acquisition. Excludes 456,250 shares of Common Stock issuable upon exercise of options outstanding under the Company's stock option plan. See "Management -- Stock Option Plan." SUMMARY FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED OCTOBER 15, DECEMBER 31, 1996 1994 THROUGH YEAR ENDED --------------------------- DECEMBER 31, DECEMBER 31, PRO FORMA 1994(1) 1995 ACTUAL AS ADJUSTED(2) ------------ ------------ ---------- -------------- <S> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Total revenues...................................... $ 1,948 $ 8,277 $ 12,366 $15,756 Operating expenses: Direct tower costs................................ 402 1,868 2,849 3,647 Selling, general and administrative............... 380 1,601 2,049 2,151 Depreciation and amortization..................... 403 1,908 2,709 3,891 ---------- ---------- ---------- ------- Total operating expenses................... 1,185 5,377 7,607 9,689 ---------- ---------- ---------- ------- Operating income.................................... 763 2,900 4,759 6,067 Interest expense, net............................... 576 3,068 3,808 3,347 Other expense....................................... 66 414 150 150 ---------- ---------- ---------- ------- Income (loss) before income taxes and extraordinary item.............................................. 121 (582) 801 2,570 Income tax (expense) benefit........................ (50) 217 (303) (977) ---------- ---------- ---------- ------- Income (loss) before extraordinary item............. 71 (365) 498 $ 1,593 ======= Extraordinary loss, net(3)........................ -- (207) (451) ---------- ---------- ---------- Net income (loss)................................. $ 71 $ (572) $ 47 ========== ========== ========== Earnings (loss) per common share: Income (loss) before extraordinary item........... $ $ $ $ ======= Extraordinary loss, net........................... ---------- ---------- ---------- Net income (loss) per common share................ $ $ $ ========== ========== ========== Weighted average common shares and common stock equivalents outstanding........................... OTHER OPERATING DATA: EBITDA(4)........................................... $ 1,166 $ 4,808 $ 7,468 $ 9,958 EBITDA margin(4).................................... 59.9% 58.1% 60.4% 63.2% Tower sites: Beginning of period............................... 175 175 361 361 Tower sites acquired during the period............ -- 183 158 177 Tower sites constructed during the period......... -- 3 27 27 Tower sites disposed of during the period......... -- -- (45) (45) End of period..................................... 175 361 501 520 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------------------------- PRO FORMA ACTUAL PRO FORMA(5) AS ADJUSTED(5) ------ ------------ -------------- <S> <C> <C> <C> <C> BALANCE SHEET DATA: Land, rental towers and related fee-based assets, net........... $66,857 $85,673 $85,673 Total assets.................................................... 75,527 95,417 95,417 Long-term debt, less current portion............................ 49,771 68,661 38,161 Redeemable preferred stock...................................... 4,000 4,000 -- Total stockholders' equity...................................... 11,598 12,598 47,272 </TABLE> - --------------- (1) The Company was organized in connection with the Bowen-Smith Acquisition in October 1994, at which time the book values of the assets and liabilities acquired were adjusted to their estimated fair values on the basis of purchase accounting. In addition, upon the closing of the Bowen-Smith Acquisition the Company entered into new debt and equity financing arrangements, adjusted the depreciation period for towers and related fee-based assets, outsourced its tower maintenance services and implemented other significant changes in the Company's operations. Each of these factors affects the comparability of periods prior to the Bowen-Smith Acquisition with periods since October 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." (2) Gives effect to (i) the acquisition of 154 communications towers from Prime in October 1996 (the "Prime Acquisition"); (ii) other acquisitions completed since January 1, 1996; (iii) pending acquisitions of five tower sites; and (iv) the application of the net proceeds from the Offering, as if each had occurred at January 1, 1996. The pro forma data does not reflect towers under construction. See "Use of Proceeds" and "Unaudited Pro Forma Condensed Consolidated Financial Information." (3) Reflects extraordinary charges resulting from prepayment of indebtedness in both 1995 and 1996, net of related income tax benefits. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations." (4) Earnings before interest, taxes, depreciation and amortization ("EBITDA"). Based on its experience in the tower industry, the Company believes that EBITDA is an important tool for measuring the performance of tower companies (including potential acquisition targets) in several respects, including liquidity, operating performance and leverage. In addition, lenders use EBITDA in evaluating tower companies, and substantially all of the Company's financing agreements contain covenants in which EBITDA is used as a measure of financial performance. However, EBITDA should not be considered an alternative to operating or net income as an indicator of the Company's performance or to cash flow from operations as a measure of liquidity. EBITDA Margin represents EBITDA as a percentage of total revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview" and "-- Liquidity and Capital Resources." (5) Gives effect to (i) the acquisitions completed since December 31, 1996 and (ii) pending acquisitions of five tower sites, as if each had occurred at December 31, 1996. The Pro Forma As Adjusted column also gives effect to the application of the estimated net proceeds from the Offering, as if the Offering had occurred at December 31, 1996. The pro forma data does not reflect towers under construction. See "Use of Proceeds" and "Unaudited Pro Forma Condensed Consolidated Financial Information."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000933405_atc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000933405_atc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..da68b2275e35f921af9f9975667ab77ee0674fbe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000933405_atc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE HEREIN. THROUGHOUT THIS PROSPECTUS, EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY" REFERS COLLECTIVELY TO AFTERMARKET TECHNOLOGY CORP. ("ATC") AND ITS SUBSIDIARIES, INCLUDING THE PREDECESSOR COMPANIES (AS DEFINED HEREIN) FOR PERIODS PRIOR TO THE INITIAL ACQUISITIONS (AS DEFINED HEREIN). UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY The Company is a leading remanufacturer and distributor of drive train products used in the repair of vehicles in the automotive aftermarket. The Company's principal products include remanufactured transmissions, torque converters and engines, as well as remanufactured and new parts for the repair of automotive drive train assemblies. The Company's two primary customer groups are: original equipment manufacturers ("OEMs"), principally Chrysler, which purchase remanufactured transmissions and other remanufactured drive train components for use as replacement parts by their dealers primarily during the warranty period following the sale of a vehicle; and independent transmission rebuilders, general repair shops, distributors and retail automotive parts stores (the "Independent Aftermarket"), which purchase remanufactured torque converters and engines and other remanufactured and new parts for repairs during the period following the expiration of the vehicle warranty. The automotive aftermarket in the United States and Canada, which consists of sales of parts and services for vehicles after their original purchase, has been noncyclical and has generally experienced steady growth over the past ten years, unlike the market for new vehicle sales. According to the Automotive Parts & Accessories Association, between 1985 and 1995 (the most recent period for which data is available), estimated industry-wide revenue for the automobile aftermarket increased from approximately $127 billion to $188 billion. This consistent growth is due principally to the increase in the number of vehicles in operation, the increase in the average age of vehicles, and the increase in the average number of miles driven annually per vehicle. The Company competes specifically in the aftermarket segment for automotive transmissions, engines and other drive train related products, which represents more than $7 billion of the entire automotive aftermarket. The Company believes that within this segment the market for remanufactured drive train products has grown faster than the overall automotive aftermarket. The Company was organized in 1994 by Aurora Capital Partners L.P. ("ACP") to combine the businesses of four existing companies serving the drive train remanufacturing market. Since that time the Company has grown both internally and through eight additional acquisitions. The Company and its predecessor companies have achieved compound annual growth in revenue of approximately 37% from 1992 through June 30, 1997 (including both internal growth and growth through acquisitions). The Company believes the key elements of its success are the quality and breadth of its product offerings and the Company's emphasis on strong customer relationships, promoted by strong technical support, rapid delivery time, innovative product development and competitive pricing. In addition, the Company has benefited from the increasing use of remanufactured products as the industry recognizes that remanufacturing provides a consistently high quality, lower cost alternative to rebuilding the assembly or replacing it with a new assembly manufactured by an OEM. The Company's strategy is to achieve growth both internally and through strategic acquisitions. The Company intends to expand its business by: (i) increasing penetration of its current customer base; (ii) gaining new OEM and Independent Aftermarket customers; and (iii) introducing new products to both existing and new customers. Strategic acquisitions have been an important element in the Company's historical growth, and the Company plans to continue to support the growth strategies listed above through strategic acquisitions in the future. The Company's management is experienced in identifying acquisition opportunities and completing and integrating acquisitions within the automotive aftermarket. In addition, the Company believes that its core competency of remanufacturing, which has been applied to the drive train products segment of the automotive aftermarket, has the potential to be utilized in other aftermarket segments. Therefore, the Company is conducting selective market studies to explore possible additional markets for its remanufacturing capabilities. ATC was incorporated under the laws of Delaware in July 1994 at the direction of ACP to acquire Aaron's Automotive Products, Inc. ("Aaron's"), H.T.P., Inc. ("HTP"), Mamco Converters, Inc. ("Mamco") and RPM Merit, Inc. ("RPM") (collectively, the "Initial Acquisitions"). Aaron's, HTP, Mamco and RPM as they existed prior to the Initial Acquisitions are hereinafter collectively referred to as the "Predecessor Companies." Subsequent to the Initial Acquisitions, the Company acquired Component Remanufacturing Specialists, Inc. ("CRS") and Mascot Truck Parts Inc. ("Mascot") in June 1995, and King-O-Matic Industries Limited ("King-O-Matic") in September 1995 (collectively, the "1995 Acquisitions"), Tranzparts, Inc. ("Tranzparts") in April 1996 and Diverco, Inc. ("Diverco") in October 1996 (the "1996 Acquisitions") and Replacement & Exchange Parts Co., Inc. ("REPCO") in January 1997, ATS Remanufacturing ("ATS") in July 1997 and Trans Mart, Inc. ("Trans Mart") in August 1997 (the "1997 Acquisitions" and, together with the Initial Acquisitions, the 1995 Acquisitions and the 1996 Acquisitions, the "Acquisitions"). ATC conducts all of its operations through its wholly-owned subsidiaries and each of their respective subsidiaries. Prior to this Offering, approximately 69% of the voting power (through direct ownership of shares and certain voting arrangements) and 50% of the common equity in the Company are held by Aurora Equity Partners L.P. and Aurora Overseas Equity Partners I, L.P. (collectively, the "Aurora Partnerships"). The general partner of each of the Aurora Partnerships is indirectly controlled by Messrs. Richard R. Crowell, Gerald L. Parsky and Richard K. Roeder, each of whom is a director of the Company. Upon consummation of this Offering, the Company will continue to be controlled by the Aurora Partnerships, which will hold approximately 56% of the voting power (through direct ownership and certain voting arrangements) and 41% of the common equity in the Company. See "Risk Factors -- Control of the Company; Anti-Takeover Matters," "Principal and Selling Stockholders" and "Certain Transactions." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........ 2,200,000 shares Common Stock offered by the Selling Stockholders............................. 1,000,000 shares Total shares offered in this Offering...... 3,200,000 shares Common Stock to be outstanding after this Offering................................. 19,445,578 shares (1) Use of proceeds............................ For the retirement of outstanding indebtedness under the Company's revolving credit facility. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000934005_chief_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000934005_chief_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e3ebd1d955e82cd240d7cbbdfc2b054b1d2ff5cf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000934005_chief_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. As used herein and except as the context otherwise may require, the "Company" or "Chief" means Chief Auto Parts Inc. and references to a certain fiscal year of the Company mean the fiscal year ended on the last Sunday of that calendar year (e.g., fiscal 1996 means the fiscal year ended December 29, 1996). This Prospectus contains, in addition to historical information, forward-looking statements that include risks and other uncertainties. The Company's actual results may differ materially from those anticipated in these forward-looking statements. Factors that might cause such a difference include those discussed under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as general economic and business conditions, competition and other factors discussed elsewhere in this Prospectus. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may reflect events or circumstances after the date hereof or the occurrence of anticipated or unanticipated events. THE COMPANY Chief is one of the nation's largest auto parts and accessories retail chains, both in number of stores and annual revenue, with 547 retail stores as of March 30, 1997 located in six states, primarily concentrated in Southern California and Texas. The Company's research indicates that it is a market leader based on number of stores in its six primary markets -- Los Angeles, Dallas/Fort Worth, Sacramento, San Diego, Las Vegas and Fresno -- with more than twice as many stores as its nearest competitor in the Los Angeles market. The Company is a consumer-oriented, specialty aftermarket retailer, primarily serving do-it-yourself ("DIY") customers and, to a lesser extent, commercial customers. Chief's product mix of approximately 16,000 stock keeping units ("SKUs") in its typical retail store features nationally known brand names, as well as private label automotive parts, including new and remanufactured hard parts, accessories and maintenance items. The Company's Chief Executive Officer, David H. Eisenberg, joined the Company in 1992 and subsequently recruited many of the Company's current senior executives. Since fiscal 1993, net sales and EBITDA (as defined in note (f) to the Summary Financial and Other Data table) have increased an average of 5.4% and 18.6% per year, respectively, to $438.2 million and $33.3 million, respectively, in fiscal 1996, although net income decreased by approximately 88.4% from fiscal 1995 to fiscal 1996. Chief's management team has instituted a number of initiatives designed to promote the Company's image as a premier retailer for the DIY customer including a focus on competitive pricing and superior customer service; investment in store expansions, relocations and remodelings; and enhancement of information systems to improve customer service, productivity and inventory management. In June 1994, TCW Special Credits Fund V -- The Principal Fund, a private equity investment fund ("The Principal Fund"), and certain of its affiliates acquired Chief through the merger of a shell corporation with the Company. Pursuant to a subadvisory agreement, Oaktree Capital Management LLC ("Oaktree") manages The Principal Fund. The acquisition significantly deleveraged the Company, providing it with access to growth capital and allowing management to focus on operational improvements and growth. The support and flexibility afforded by this change in Chief's capital structure enabled management to reposition the Company from a chain of smaller automotive parts convenience stores to a full-line auto parts and accessories chain. Since June 1994, the Company has invested approximately $45.1 million in total capital expenditures in connection with its program to reposition Chief in the automotive aftermarket marketplace and has doubled the average number of SKUs in its stores. During this period, the Company remodeled 292 of its stores, opened 99 new stores, relocated 19 stores to larger, more favorable locations averaging 5,390 square feet (an increase from approximately 2,740 square feet for such stores prior to relocation), closed 45 small or underperforming stores and introduced Chief's commercial sales program into 32 existing stores (as of April 30, 1997, 16 of which were opened in the last 60 days). The Company has substantially completed its program of repositioning Chief as a full-line auto parts and accessories chain. <PAGE> 5 Chief's redesigned store layouts and enhanced product offerings enable the Company to merchandise store product lines to target more effectively the needs of the DIY customer, resulting in increased sales of "hard parts" (such as alternators and starters) which carry higher margins and higher average transaction prices than many of the Company's other products, such as motor oil. These improvements also have contributed to an increase in gross profit margins and EBITDA margins (as defined in note (g) to the Summary Financial and Other Data table) from 37.9% and 6.3%, respectively, in fiscal 1994 to 42.5% and 7.6%, respectively, in fiscal 1996. Management believes that the automotive aftermarket parts industry is growing as a result of: (i) increases in the size and age of the country's automotive fleet; (ii) increases in the number of miles driven annually per vehicle; (iii) the higher cost of new cars as compared to historical costs; (iv) the higher cost of replacement parts as a result of technological changes in recent models of vehicles; and (v) the increasing labor costs associated with parts, installation and maintenance. Management further believes that the retail auto parts industry displays certain recession-resistant characteristics resulting from a shift from professional repairs to DIY repairs during economic downturns and sales increases in automobile enhancement products during better economic conditions. OPERATING STRENGTHS AND BUSINESS STRATEGIES Chief attributes its present success and significant opportunities for continued growth to the following operating strengths and business strategies: - Leading position in favorable markets. The Company's research indicates that it is a market leader based on number of stores in its six primary markets -- Los Angeles, Dallas/Fort Worth, Sacramento, San Diego, Las Vegas and Fresno -- with more than twice as many stores as its nearest competitor in the Los Angeles market. California and Texas are the two largest states in the country in terms of vehicle registration and population, and both have climates suited for year-round outdoor auto repair activities. The Company has achieved a high level of name recognition with its customers in these markets as a result of consistently providing high quality products and customer service. - Investments in store relocation, expansion and remodeling. Chief has focused on relocating and expanding existing stores to larger locations with more customer-friendly layouts and identifying desirable locations for opening new stores, primarily in existing markets. The Company also significantly redesigned its store layout and remodeled 292 of its stores from June 1994 through March 1997. Seventy-four percent of the Company's existing store base is either new or has been remodeled since June 1994. Chief plans to open 40 new stores, to relocate or expand at least 25 stores and to complete 80 remodels in 1997 at an aggregate estimated cost of $11.1 million. The Company plans to remodel 15 stores each year for the four year period beginning January 1, 1998 at an estimated total cost of $10.7 million. The Company expects to finance such activity with a combination of funds generated from operations and borrowings under the New Credit Facility. - Enhancement of management information systems. Management has adopted a strategy of enhancing Chief's customer service, productivity, inventory and merchandising management through the implementation of new and improved technology-based systems, including (i) the integration of its point-of-sale system and electronic parts catalog, (ii) the introduction and continued roll-out of perpetual inventory systems in its stores and (iii) the installation of portable, hand-held radio frequency computer devices to automate price management, receiving, shipping and ordering functions in each store and distribution center and to facilitate the management of the perpetual inventory system. Management believes these systems should contribute to improved profitability. - Commercial sales program. The Company recently initiated its commercial sales program, marketed towards the commercial segment of the automotive aftermarket industry, which the Company believes constitutes approximately $40-$45 billion of the total estimated $75 billion annual sales for the automotive aftermarket industry. In stores with commercial sales capabilities, Chief offers commercial customers over 20,000 SKUs delivered within 30 minutes from time of order. As of April 30, 1997, the Company has introduced commercial sales capabilities into 32 of its existing stores, 16 of which were opened within the last 60 days at an estimated cost of $500,000. Chief believes that a successful 2 <PAGE> 6 commercial sales program will complement the Company's existing retail business. The Company will evaluate the performance of its existing commercial sales program before planning any expansion of the program into additional stores. - Emphasis of competitive advantages over smaller retailers. The Company will continue to consolidate its position in key markets by enhancing its competitive advantages over smaller competitors including: (i) economies of scale in advertising, distribution and warehousing; (ii) an ability to stock and warehouse a larger number of SKUs, including private label brands; (iii) lower product costs as a result of purchasing directly from manufacturers rather than through distributors; (iv) an ability to attract talented employees and offer attractive career paths; (v) superior customer service due to better information systems and continuous employee training; and (vi) a greater number of locations and extended store hours. - Strong management team with significant equity ownership. Chief's management team has repositioned the Company from a chain of smaller automotive parts convenience stores to a full-line auto parts and accessories chain. Four of the Company's top executives, including the Chief Executive Officer, David H. Eisenberg, joined the Company following their management of Peoples Drug Stores Incorporated, a drugstore chain with approximately 500 locations. The Company's six senior executives average more than 24 years of experience in the retail industry and possess a diverse skill base which incorporates marketing, merchandising, distribution, management information systems integration and customer and vendor relationships. Senior management owns 9.2% of Chief's common stock on a fully diluted basis. The Company is a Delaware corporation. Its principal offices are located at One Lincoln Centre, Suite 200, 5400 LBJ Freeway, Dallas, Texas 75240-6223 and its telephone number is (972) 341-2000. THE OFFERING Securities Offered......... $130,000,000 aggregate principal amount of % Senior Notes due 2005 of the Company. Maturity Date.............. , 2005. Interest Payment Dates..... and of each year, commencing , 1997. Optional Redemption........ The Notes may be redeemed at the option of the Company, in whole or in part, at any time on or after , 2001 at the redemption prices set forth herein, plus accrued interest, if any, to the date of redemption. Up to an aggregate of 36% of the principal amount of the Notes may be redeemed from time to time prior to , 2000 at the option of the Company at the redemption prices set forth herein plus accrued interest, if any, to the date of redemption, with the net cash proceeds of one or more Public Equity Offerings provided that at least 64% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of the Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, each holder of Notes may require the Company to make an offer to repurchase such holder's outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued interest, if any, to the date of repurchase. The New Credit Facility will prohibit the purchase of Notes by the Company in the event of a Change of Control unless and until any indebtedness under the New Credit Facility is paid in full. The Company's failure to purchase the Notes would result in a default under the Indenture. The remedy available to holders of the Notes in the event of a default under the Indenture is the acceleration of indebtedness under the Indenture. If the Company should fail to pay amounts due upon acceleration of the Notes, the holders of the Notes would be entitled to seek legal or equitable remedies against the Company. A default or 3 <PAGE> 7 acceleration of Indebtedness under the Indenture would result in a default under and could result in an acceleration of amounts due under the New Credit Facility. The restrictions which the New Credit Facility places on the Company's ability to repurchase the Notes do not affect the ability of the holders of the Notes to cause the acceleration of the Notes if the Company defaults in its obligations under the Indenture or their ability to seek legal or equitable remedies against the Company if the Company is unable to pay such accelerated amounts. A Change of Control has the same definition in the Indenture and the New Credit Facility, and therefore, a Change of Control which would trigger a default under the New Credit Facility would trigger the Company's repurchase obligations under the Indenture. The failure of the Company to pay any other Indebtedness which exceeds $10.0 million will also cause a default under the Indenture. The Change of Control provisions of the Indenture may be amended with the consent of the holders of a majority in principal amount of the Notes then outstanding. The Company may not be able to fund the repurchase of all the Notes in the event of a Change of Control. See "Risk Factors -- Change of Control," "Description of the Notes -- Change of Control," "-- Certain Covenants" and "-- Defaults." Ranking.................... The Notes will be unsecured senior obligations of the Company and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of the Company, if any, and will rank senior in right of payment to any subordinated indebtedness of the Company. As of March 30, 1997, after giving pro forma effect to the Recapitalization as if it had occurred on such date, the aggregate amount of the Company's outstanding secured indebtedness, to which the Notes would be effectively subordinated, would have been approximately $9.2 million and the Company would have had $74.7 million of outstanding indebtedness ranking pari passu with the Notes (consisting of trade accounts payable). In connection with the Recapitalization, the Company will enter into the New Credit Facility, which will mature on May , 2002. See "Description of the Notes -- Ranking." Restrictive Covenants...... The indenture under which the Notes will be issued (the "Indenture") will contain certain covenants that, among other things, will limit the ability of the Company and/or its Restricted Subsidiaries (as defined) to (i) incur additional indebtedness, (ii) pay dividends or make certain other restricted payments, (iii) make investments, (iv) enter into transactions with affiliates, (v) make certain asset dispositions and (vi) merge or consolidate with, or transfer substantially all of its assets to, another person. The Indenture also will limit the ability of the Company's Restricted Subsidiaries to issue Capital Stock (as defined) and to create restrictions on the ability of such Restricted Subsidiaries to pay dividends or make any other distributions. In addition, the Company will be obligated to offer to repurchase Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase, with the net cash proceeds of certain sales or other dispositions of assets only to the extent that an excess of cash is available after application of such net cash proceeds pursuant to the terms of the Indenture. However, all of these limitations and prohibitions are subject to a number of important qualifications. A default under certain of the Company's other financial obligations could result in a default under the Indenture. See "Description of the Notes -- Certain Covenants" and "-- Defaults." 4 <PAGE> 8 Limitation on Liability.... No director, officer, employee, incorporator, controlling person or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission (as defined) that such waiver is against public policy. THE RECAPITALIZATION In connection with the Offering, the Company and its stockholders will effect a series of transactions that will result in a recapitalization of the Company (such transactions are collectively referred to herein as the "Recapitalization"). The elements of the Recapitalization consist of (i) the completion of the Offering (estimated to result in approximately $125.4 million of net proceeds), (ii) the exercise of outstanding options to purchase 4,839.97 shares of common stock of the Company, par value $0.01 per share (the "Common Stock"), by management for aggregate proceeds of $6.9 million, (iii) the repayment by members of management of approximately $910,000, a portion of the amounts owed to the Company under certain promissory notes, (iv) the establishment of the New Credit Facility, which will provide for $100.0 million of revolving credit facilities, and (v) the application of the aggregate net proceeds from the foregoing as described under "Use of Proceeds." Consummation of each of the foregoing transactions is subject to the simultaneous consummation or effectiveness, as applicable, of each of the other elements of the Recapitalization. See "The Recapitalization," "Use of Proceeds," "Benefits to Related Parties," "Certain Transactions" and "Description of New Credit Facility." USE OF PROCEEDS The net proceeds from the sale of the Notes are estimated to be approximately $125.4 million (after deduction of discounts to the Underwriters and other expenses). The Company intends to use the aggregate net proceeds from the Recapitalization (i) to repay all outstanding indebtedness (approximately $65.0 million) under its existing credit facility (the "Existing Credit Facility"), (ii) to pay certain employees of the Company an aggregate of $4.0 million for previously accrued employee incentive compensation and (iii) to distribute approximately $75.0 million to the stockholders of the Company (consisting of approximately $64.2 million to The Principal Fund and its affiliates and $10.8 million to management stockholders, of which approximately $7.8 million will be used by certain management stockholders to exercise options and repay certain loans pursuant to the Recapitalization). See "The Recapitalization," "Use of Proceeds" and "Benefits to Related Parties." BENEFITS TO RELATED PARTIES The Principal Fund, its affiliates and certain management stockholders will receive an aggregate of $75.0 million in the Recapitalization. Approximately $6.9 million of such $75.0 million will be used by management stockholders to exercise their outstanding options to purchase 4,839.97 shares of the Common Stock of the Company. Approximately $910,000 of such $75.0 million will be used by management stockholders to repay a portion of amounts owed the Company under certain promissory notes. Approximately $64.2 million and approximately $3.0 million will be distributed to The Principal Fund and to management stockholders, respectively, as a partial return of such stockholders' investment in Chief. These payments are the first dividend or return of investment that the stockholders have received since the time of The Principal Fund's investment in the Company in June 1994. The Principal Fund's investment significantly deleveraged the Company at a time when management needed a flexible capital structure in order to implement its plan to reposition Chief as a full-line auto parts and accessories chain. Because the Company has substantially completed its program of repositioning Chief, the Company has decided to provide its stockholders with a partial return of their initial investment in Chief.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000936094_linc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000936094_linc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6b525bcc6a674b4d9a8adb0f7bbb7f45c565229f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000936094_linc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including "Risk Factors," appearing elsewhere in this Prospectus and the financial statements and notes hereto. In addition to such other information, the following summary should be considered carefully by prospective investors in evaluating the Company and its business before purchasing shares of the Common Stock offered hereby. Except for historical information contained herein, this Prospectus contains forward- looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The cautionary statements made in this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. The Company's actual results could differ materially from those discussed herein. Unless otherwise indicated, the information set forth in this Prospectus does not give effect to the exercise of the Underwriters' over-allotment option. As used in this Prospectus, unless the context otherwise requires, the term "Company" refers to LINC Capital, Inc. and all of its subsidiaries and its and their respective predecessors and subsidiaries. THE COMPANY GENERAL LINC Capital, Inc. (the "Company") is a finance company specializing in the origination, acquisition, securitization and servicing of equipment leases and in the rental and distribution of analytical instruments. The Company's principal businesses are (i) the direct origination of leases of a broad range of equipment to emerging growth companies primarily serving the healthcare and information technology industries ("Select Growth Leasing" activities) and (ii) the rental and distribution of analytical instruments to companies serving the environmental, chemical, pharmaceutical and biotechnology industries ("Instrument Rental & Distribution" activities). The Company believes that its position as a leading provider of equipment leasing, rental and other services to its specialized markets provides significant opportunities for internal growth, as well as growth through the acquisition and financing of lease portfolios originated by other lessors and the acquisition of leasing companies which can capitalize on the existing capabilities and significant management experience of the Company ("Portfolio Finance & Lessor Acquisition" activities). The Company believes that its extensive experience in these markets and its flexibility in structuring transactions to meet the needs of both its leasing and rental customers provide it with a competitive advantage over other sources of such services. BACKGROUND The Company's management team has extensive experience in the development of specialty finance companies, with each of its three senior officers having over 25 years experience in the equipment leasing or rental industry. Since its founding in 1975 by Mr. Martin E. Zimmerman, the Company's Chairman and Chief Executive Officer, the Company and companies previously managed by Mr. Zimmerman and Mr. Allen P. Palles, the Company's Executive Vice President and Chief Financial Officer, have originated over $1.5 billion in equipment leases, have acquired and serviced over $600 million in lease portfolios originated by other lessors and have financed over $650 million of assets through securitizations and other structured financings. Under the management of Messrs. Zimmerman and Palles, the Company believes, based on management's extensive knowledge of and experience in the equipment leasing industry, that it became the largest independent lessor of healthcare equipment in the United States with over $500 million in assets owned or managed in 1993 and, based on statements made to the Company by individuals familiar with the securitization industry as well as its own research, that it was the first company in the U.S. to securitize healthcare equipment leases and related residual values. The Company sold its healthcare equipment leasing and portfolio acquisition and servicing business in 1994 to a subsidiary of Anthem Insurance Companies, Inc. (the "1994 Sale") which Messrs. Zimmerman and Palles managed until late 1996 after its sale (the "1996 Sale") to Newcourt Credit Group (USA), Inc. ("Newcourt"). After the 1996 Sale, Messrs. Zimmerman and Palles returned to the Company on a full-time basis to pursue opportunities in its Select Growth Leasing and Instrument Rental & Distribution activities. The Company has also engaged in a number of other successful activities serving the healthcare industry, including a business providing receivables-based lending to healthcare providers which was sold to The FINOVA Group in 1996. Pursuant to a non-competition agreement associated with the 1994 Sale which expired in September 1997 (the "Non-Compete Agreement"), the Company was effectively restricted from participating in Portfolio Finance & Lessor Acquisition activities and from originating leases other than to emerging growth companies. The Company will pursue such opportunities once again now that the Non-Compete Agreement has expired. The Company will also continue to expand its Select Growth Leasing activities which were initiated in response to fundamental changes in the healthcare and information technology industries, which management believes enhanced the growth dynamics for lessors serving these industries. The Company will also continue to pursue expansion of its Instrument Rental & Distribution activities, which have marketing, financing and administrative synergies with its Select Growth Leasing activities. The Company's Instrument Rental & Distribution activities were developed through the acquisition in 1991 of a business founded by Mr. Robert E. Laing, the Company's President and Chief Operating Officer, and the acquisition in 1992 of the analytical instruments business of AT&T Capital Corporation ("AT&T Capital"). Prior to founding this business, Mr. Laing spent 17 years with U.S. Leasing International Inc. ("U.S. Leasing"), then one of the largest equipment lessors in the U.S., and was its senior executive responsible for its extensive rental activities. BUSINESS ACTIVITIES Select Growth Leasing. The Company's Select Growth Leasing activities consist primarily of the direct origination of non-cancelable, full-payout leases to middle and late stage emerging growth companies in the healthcare and information technology industries. Such companies include physician practice management organizations, rehabilitation service companies, extended care providers, healthcare claims administrators and information service providers and Internet and telecommunications service companies. The Company has provided leasing to over 75 companies, including Cardiac Pathways Corporation, Mariner Health Group, Inc., Transitional Health Services, Earthlink Network, Inc., Bridge Data Corporation and Intermedia Communications, Inc. A majority of the Company's Select Growth Leasing clients are supported by institutional private equity investors which provide capital and management resources to such customers. Such private equity investors include Welsh Carson Anderson & Stowe, Weiss, Peck & Greer, Essex Venture Partners and Oak Investment Partners. Leases to individual customers typically include multiple items with an aggregate total cost ranging from $250,000 to $2.0 million and cover a broad variety of equipment, each with original purchase prices which are generally less than $100,000 per item. These leases generally cover essential operating equipment, including data processing equipment, production equipment, analytical instruments and medical equipment. Leases are originated by representatives located in Chicago, San Francisco, Boston and Los Angeles and are often the result of a network of independent lease brokers and referrals from institutional private equity investors. For the first six months of 1997 compared with the same period in 1996, new lease originations increased from $12.5 million to $23.9 million and backlog of unfunded leases increased from $6.4 million to $19.9 million. The Company's Select Growth Leasing activities are expected to continue to grow due to the Company's ability to provide such services to more established companies, which prior to September 1997 was restricted by the Non-Compete Agreement. The Company believes that regulatory reform, consolidations, outsourcing and other fundamental changes in the healthcare industry, expansion of the information technology industry and development of new technologies have promoted the formation and growth of new companies of the type served by its Select Growth Leasing activities. Such companies typically have limited access to financing from commercial banks, diversified finance companies and traditional leasing companies. The Company's experience in serving the healthcare and the information technology industries enables it to serve the specific needs of its customer base more effectively than its competitors by providing a variety of financing alternatives, such as flexible lease structures, asset-based financing, sale-leaseback transactions and secured credit lines, while maintaining a high degree of credit quality. In a significant number of its Select Growth Leasing transactions, the Company receives warrants or other equity participation rights which provide additional opportunities for profitability upon the sale of such rights. As of June 30, 1997, the Company held equity participation rights in 39 companies, 13 of which were publicly traded. Since the initiation of the Company's Select Growth Leasing activities in 1993, credit losses have been less than 2.0% of lease receivables originated. Management believes that the low level of credit losses achieved by the Company are a result of its: (i) due diligence and credit scoring procedures specifically designed to analyze lease transactions with emerging growth companies in the healthcare and information technology industries; (ii) extensive monitoring and review of such transactions by senior executives of the Company; (iii) proactive approach to addressing delinquencies; (iv) transaction structuring experience; (v) advanced hardware and software systems; and (vi) extensive experience in servicing lease portfolios. As of June 30, 1997, the Company had loss reserves of 4.9% of its net investment in lease receivables, which was well in excess of its historical experience of credit losses. In addition, the Company's extensive experience in remarketing equipment and conservative policies toward estimating residual values has resulted in the Company recognizing substantial gains on the remarketing of leased equipment. Since 1981, the Company and companies previously managed by Messrs. Zimmerman and Palles have remarketed equipment with an original cost of over $1.0 billion in equipment following lease expirations and realized over $280 million in residual proceeds, more than 150% of the original estimates. Instrument Rental & Distribution. The Company's Instrument Rental & Distribution activities consist primarily of the rental and distribution of analytical instruments, such as gas and liquid chromatographs, mass spectrometers and atomic absorption systems. Such instruments typically cost between $15,000 and $60,000 and are used by companies serving the environmental, chemical, pharmaceutical and biotechnology industries to measure the chemical composition of a variety of substances. The Company is a distributor for most of the significant manufacturers of this type of equipment, including Hewlett-Packard Company ("Hewlett-Packard"), the largest manufacturer in this industry, The Perkin-Elmer Corporation and Varian Associates Inc. The Company believes, based on its own research, that it is the largest independent source of analytical instruments in the U.S. and believes, based on oral confirmation from Hewlett-Packard, that it is the only independent company authorized to rent Hewlett-Packard analytical instruments. Such instruments have relatively long economic lives and have not been subject to rapid obsolescence. Certain segments of the market for analytical instruments have undergone a fundamental change over the past several years in that vendors have increasingly relied upon independent companies, such as the Company, to take responsibility for the distribution and rental of such equipment. This is consistent with a trend toward outsourcing among providers of a variety of products and services and is largely the result of customer demand for analytical instruments which are specifically tailored with certain enhancements to meet their needs and continued customer support. These vendors have increasingly focused on the manufacture of such equipment and allowed independent companies to focus on other functions such as rental, inventory management and distribution. The Company believes that its expertise in all of these areas has allowed it to become the leading independent distribution and rental company in the analytical instrument market. The Company provides analytical instruments which are customized, calibrated and ready for use and typically delivers equipment from its centralized warehouse within 24 hours of receipt of an order. The Company services over 2,300 analytical instrument customers through its sales force of product specialists and orders directed by its vendors. The Company's product specialists have immediate access via laptop computers to a proprietary sales management system which provides up-to-the-minute tracking of each item of inventory. The Company is expanding its customer base by increasing its focus on the chemical, pharmaceutical and biotechnology industries and will seek opportunities to capitalize on its distribution and rental expertise and its knowledge of the healthcare market by developing similar relationships with vendors of medical equipment and acquiring other established rental and distribution companies. Portfolio Finance & Lessor Acquisition. Since 1988, the Company and companies previously managed by Messrs. Zimmerman and Palles have acquired approximately $325 million in lease portfolios and companies which had lease receivables of approximately $300 million. The Company will reinitiate its Portfolio Finance & Lessor Acquisition activities now that the Non-Compete Agreement has expired. The Company believes there are substantial opportunities for such activities due to the fragmented nature of the leasing industry, the inability of a significant number of small equipment leasing companies to efficiently finance their portfolios and obtain more favorable financing rates through the asset-backed securities markets and the cost of implementing new technologies to remain competitive. The leasing companies which the Company expects to finance or acquire are characterized by: (i) strong customer or vendor relationships; (ii) lease transactions which range in size from $5,000 to $250,000; (iii) needs for committed financing and servicing relationships; and (iv) a focus on customers which are not effectively served by more traditional funding sources. The Company also expects to pursue selective acquisitions of companies meeting these criteria which can be integrated into the Company's organizational structure and which can recognize synergies from the Company's operating systems and geographic presence. Based on data available from the Equipment Leasing Association (the "ELA"), the Company believes that there are over 150 independent leasing companies in the U.S. with less than $50 million in annual lease originations. The Company believes that many of these companies are likely candidates for the Company's Portfolio Finance & Lessor Acquisition activities. FINANCING The Company currently funds its activities through warehouse, revolving credit and term loan facilities provided by a group of banks under its senior credit facility (the "Senior Credit Facility"), as well as recourse and non- recourse loans provided by various financial institutions. Upon achieving a sufficient portfolio size of lease receivables, the Company expects to sell or finance a portion of such receivables in the public and private markets, largely through securitizations or other structured financings. Since 1987, the Company and companies previously managed by Messrs. Zimmerman and Palles have completed 20 securitizations and other structured financings generating over $650 million in proceeds. The Company's financing objective is to maximize the spread between the yield received on its leases and its cost of funds by obtaining favorable terms on its various financing transactions. The Senior Credit Facility will be amended upon consummation of the Offering to increase the amount available under the facility to $100 million and to reduce the applicable interest rates thereunder. In addition, to provide for the securitization and sale of leases, shortly after consummation of the Offering, the Company expects to enter into a Securitization Warehousing and Term Funding Conduit Facility in an initial amount of $60 million and which may be increased to $100 million at the Company's option based on certain conditions (the "Securitization Facility"). As a result of the Company's established track record in the specialty finance industry, the Company believes that the terms of its Senior Credit Facility and Securitization Facility are superior to the terms of similar facilities obtained by other companies in its industry of similar size and credit characteristics. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.. 2,000,000 shares Common Stock to be outstanding after 4,833,696 shares (1) the Offering........................ Use of Proceeds...................... To repay indebtedness under the Company's Senior Credit Facility. See "Use of Proceeds." Proposed Nasdaq National Market "LNCC" symbol.............................. </TABLE> - -------- (1) Does not include 166,304 shares of Common Stock issuable upon the exercise of stock options outstanding under the Company's 1994 Stock Option Plan (with an average exercise price of $2.15), 160,742 shares of Common Stock issuable upon the exercise of stock options to be granted in connection with the Offering under the Company's 1997 Stock Incentive Plan (exercisable at the initial public offering price) and 58,332 shares of Common Stock issuable upon the exercise of stock options to be granted in connection with the Offering under the Company's Non-Employee Director Option Plan (exercisable at the initial public offering price). See "Management--Stock Option Plans." SUMMARY FINANCIAL AND OPERATING DATA The following table sets forth summary financial and operating data for the Company as of the dates and for the periods indicated. The summary financial data as of and for the years ended December 31, 1994, 1995 and 1996 and as of and for the six months ended June 30, 1997 are derived from financial statements audited by KPMG Peat Marwick LLP. The summary pro forma statement of operations data and the as adjusted balance sheet data give effect to (i) the borrowing of approximately $4.9 million under the Senior Credit Facility to redeem the preferred stock of a subsidiary of the Company (the "Subsidiary Preferred Stock") and approximately $0.8 million borrowed to purchase certain executives' minority interests in a subsidiary of the Company; (ii) the repayment by an affiliated company of a loan of approximately $3.4 million from the Company; (iii) the Offering; (iv) the application of the estimated net proceeds from the Offering to repay the Company's indebtedness under the Senior Credit Facility; (v) the distribution to certain stockholders of the stock of a subsidiary of the Company which owns the Company's net assets from discontinued operations to certain stockholders of the Company and the redemption of 482,792 shares of Common Stock in connection therewith; and (vi) anticipated changes in the compensation of senior management. See "Use of Proceeds," "Management-- Employment and Non-Competition Agreements" and "Certain Transactions." The summary pro forma and as adjusted data are not necessarily indicative of results which would have been obtained had these events actually occurred or of the Company's future results. This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and notes thereto included elsewhere herein. <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ---------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues: Sales of equipment..... $ 8,060 $10,596 $15,836 $13,852 $22,595 $ 9,962 $ 10,252 Cost of equipment sold. 6,828 8,992 13,312 11,477 18,242 7,988 8,222 ------- ------- ------- ------- ------- ------- -------- Gross profit from sales of equipment.......... 1,232 1,604 2,524 2,375 4,353 1,974 2,030 Rental and operating lease revenue......... 8,071 7,464 8,531 9,102 7,167 3,803 3,164 Direct finance lease income................ -- -- 339 1,467 3,055 1,289 2,598 Fee income............. -- -- 580 2,378 1,869 1,130 648 Gain on remarketing of leased equipment...... -- -- 5 44 450 13 277 Gain on equity participation rights.. -- -- -- -- 263 -- 97 Interest and other income................ -- -- 352 778 657 350 779 Total net revenues..... 9,303 9,068 12,331 16,144 17,814 8,559 9,593 ------- ------- ------- ------- ------- ------- -------- Expenses: Selling, general and administrative........ 4,480 5,257 6,842 7,524 8,008 3,717 3,963 Interest............... 782 995 1,138 1,962 2,771 1,304 1,844 Depreciation of equipment............. 2,627 2,822 3,512 4,054 3,647 1,892 1,858 Provision for credit losses................ 166 35 247 1,060 749 338 479 ------- ------- ------- ------- ------- ------- -------- Total expenses......... 8,055 9,109 11,739 14,600 15,175 7,251 8,144 ------- ------- ------- ------- ------- ------- -------- Net income from continuing operations before provision for income taxes and minority interest...... 1,248 (41) 592 1,544 2,639 1,308 1,449 Income tax expense...... 494 4 257 747 1,084 532 534 ------- ------- ------- ------- ------- ------- -------- Net income from continuing operations before minority interest............... 754 (45) 335 797 1,555 776 915 Minority interest....... 138 3 80 34 120 39 13 ------- ------- ------- ------- ------- ------- -------- Net income (loss) from continuing operations . $ 616 $ (48) $ 255 $ 763 $ 1,435 $ 737 $ 902 ======= ======= ======= ======= ======= ======= ======== Pro forma information: Net income from continuing operations before provision for income taxes...................................... $ 4,160 $ 2,068 $ 2,422 Net income from continuing operations (1).............. 2,469 1,231 1,508 Net income from continuing operations per common share. $ 0.49 $ 0.25 $ 0.30 Shares used in computing net income per common share... 5,070 5,018 4,976 </TABLE> <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, --------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING DATA: Leasing: Lease originations..... $ -- $ 9,548 $21,642 $20,479 $24,073 $12,454 $23,851 Backlog of unfunded leases (2)............ -- 5,153 8,351 8,609 5,864 6,447 19,860 Net investment in direct finance leases (2)................... -- -- 8,296 17,144 31,763 23,700 43,395 Net charge-off percentage (3)........ -- -- 0.1% 0.6% 1.3% -- 0.1% Rental and Distribution: Net margin on sales of equipment............. 15.3% 15.1% 15.9% 17.1% 19.3% 19.8% 19.8% Equipment held for rental and operating leases, net (2)....... $12,611 $13,840 $15,780 $18,500 $15,048 $15,579 $16,087 <CAPTION> AS OF JUNE 30, 1997 ------------------- ACTUAL AS ADJUSTED ------- ----------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Assets: Net investment in direct finance leases........................ $43,395 $43,395 Equipment held for rental and operating leases, net............ 16,087 16,087 Net assets of discontinued operations.......................... 6,204 -- Accounts and notes receivable.................................. 9,703 9,703 Deferred income taxes.......................................... 1,068 1,068 Goodwill....................................................... 1,188 1,910 Other assets................................................... 4,020 4,020 Cash and cash equivalents...................................... -- -- ------- ------- Total assets.................................................. $81,665 $76,183 ======= ======= Liabilities and Stockholders' Equity: Senior credit facility and other senior notes payable.......... $46,763 $21,723 Recourse debt.................................................. 2,386 2,386 Non-recourse debt.............................................. 6,913 6,913 Accounts payable............................................... 3,805 3,761 Accrued expenses and customer deposits......................... 1,689 1,689 Subordinated debentures........................................ 5,251 5,251 ------- ------- Total liabilities............................................. 66,807 41,723 Stockholders' equity........................................... 14,858 34,460 ------- ------- Total liabilities and stockholders' equity.................... $81,665 $76,183 ======= ======= </TABLE> - -------- (1) The following table sets forth the calculation of pro forma net income: <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------- 1996 1996 1997 ------------ ------ -------- <S> <C> <C> <C> Net income from continuing operations before provision for income taxes................... $ 2,639 $1,308 $ 1,449 Pro forma adjustments: Interest reduction (a)....................... 1,927 963 988 Increase in compensation (b)................. (377) (188) -- Goodwill amortization (c).................... (29) (15) (15) ------- ------ ------- Pro forma net income from continuing operations before provision for income taxes. 4,160 2,068 2,422 Pro forma tax provision....................... (1,691) (837) (914) ------- ------ ------- Pro forma net income from continuing $ 2,469 $1,231 $ 1,508 operations.................................. ======= ====== ======= </TABLE> -------- (a) The reduction in interest expense is attributable to the repayment of approximately $25.0 million under the Senior Credit Facility resulting from the application of the net proceeds of the Offering ($27.3 million) and of repayment of the loan due from an affiliate ($3.4 million), net of borrowing incurred to redeem the Subsidiary Preferred Stock ($4.9 million) and to purchase certain executives' minority interests in a subsidiary of the Company ($0.8 million). See "Use of Proceeds" and "Certain Transactions." The interest expense reduction is calculated as the net reduction in borrowing multiplied by the Company's weighted average interest rate under the Senior Credit Facility for the applicable period. (b) Changes in compensation are attributable to the employment of Messrs. Zimmerman and Palles for the entire year of 1996 and the six months ended June 30, 1996 at the compensation levels provided for in the agreements to be entered into between those executives and the Company in connection with Offering. See "Management--Employment and Non- Competition Agreements." (c) The goodwill amortization is attributable to goodwill created as a result of the Company's purchase of certain executives' minority interests in a subsidiary of the Company. See "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000941167_jts-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000941167_jts-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0b637fbd6d596fc594b6403947639a16fa7cf10e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000941167_jts-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety and should be read in conjunction with the more detailed information and financial statements and the notes thereto appearing elsewhere in this Prospectus. This Prospectus Summary and other parts of this Prospectus include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Prospectus Summary and other parts of this Prospectus, including without limitation, statements regarding the Company's financial position, business strategy, budgets and the plans and objectives of management for future operations, including plans and objectives relating to the Company's products, are forward-looking statements. Although the Company believes that assumptions underlying such forward-looking statements are reasonable, it can give no assurance that such assumptions will prove to have been correct. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Important cautionary factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, those disclosed under "Risk Factors", "Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Prospectus, including without limitation, in conjunction with the forward-looking statements included in this Prospectus. All written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. Prospective investors should consider carefully the information discussed under "Risk Factors", "Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus. THE COMPANY For purposes of this Prospectus, Atari Corporation ("Atari") refers to the pre-merger Atari and its multimedia entertainment operations. JTS Corporation ("JTS" or the "Company") refers to the pre- and post-merger JTS and its hard disk drive operations. JTS designs, manufactures and markets hard disk drives for use in notebook computers and desktop personal computers. JTS currently has two product families in production, the 3-inch form factor "Nordic" family for notebook computers and the 3.5-inch form factor "Palladium" family for desktop personal computers. Shipments of Nordic drives to Compaq Computer Corporation ("Compaq") began in the second quarter of fiscal 1997, and JTS began volume production of Nordic drives in the fourth quarter of fiscal 1997. JTS began volume production of Palladium disk drives in October 1995. The Company markets its products to original equipment manufacturers ("OEMs"), computer companies and second-tier systems integrators for incorporation into their computer systems and subsystems. The Company sells its products through a direct sales force operating throughout the United States, Europe and Asia, as well as through distributors in the United States, Europe, Latin America, Canada and Asia. JTS was incorporated in February 1994 and remained in the development stage until October 1995. In July 1996, the Company completed its merger (the "Merger") with Atari. Since 1992, Atari has significantly downsized its operations and after completion of the Merger JTS' hard disk drive operations have represented the significant portion of the Company's business. To obtain a low-cost manufacturing source of hard disk drives, JTS acquired 90% of the outstanding stock of the hard disk drive division of JTS Technology Ltd. (formerly Moduler Electronics (India) Pvt. Ltd.) ("JTS Technology"), located in Madras, India, in April 1996. Subsequent to the Merger, the Company changed its fiscal year from a 52/53 week fiscal year ending on the Saturday closest to December 31 to a 52/53 week fiscal year ending on the Sunday closest to January 31. COMPANY STRATEGY In recent years, the computer industry has witnessed the emergence of several trends that JTS believes will continue to drive demand for innovative disk drive products. First, new data- and image-intensive applications are generating increased demand for greater storage capacities and performance at a lower cost. Second, the demand for mobile computing devices, such as notebook computers, has kept pace with the significant growth in sales of personal computers, with portables representing approximately 15% of all personal computers sold in 1995. As the gap in technology and pricing between desktop and portable computers continues to narrow, consumers are demanding storage capacities in notebook computers compara- ble to those offered by desktops. Lastly, the notebook computer industry is generally migrating towards lower profile computing devices. The pressure to reduce the profiles, increase the capacities and lower the costs of personal computers has presented manufacturers with a substantial ongoing technical challenge. JTS has undertaken several key initiatives to meet the challenges currently facing hard disk drive manufacturers and to position the Company to become a leading international supplier of hard disk drives to the notebook and desktop computer markets. These key initiatives include the following: ESTABLISH 3-INCH FORM FACTOR TECHNOLOGY AS AN INDUSTRY STANDARD FOR NOTEBOOK COMPUTERS. To address demand in the portable storage market for lower profiles, greater storage capacities and lower costs, JTS has developed its Nordic family of 3-inch form factor disk drives. The disks used in the 3-inch format have 82% greater recording area than disks used in 2.5-inch drives, the current industry standard for notebook computers, offering nearly double the storage capacity at the same areal densities. Nordic drives also offer cost advantages per megabit of storage space over competing drives. The design of the Nordic drives makes them the lowest profile disk drives currently in the market. FORM STRATEGIC ALLIANCES WITH COMPAQ AND OTHER KEY PARTICIPANTS IN THE COMPUTER INDUSTRY. As part of the Company's effort to gain rapid market acceptance of the 3-inch form factor Nordic drives, JTS has entered into agreements with Compaq, as a leading end-user of the 3-inch disk drives, and Western Digital Corporation ("Western Digital"), as an alternate source for disk drives incorporating Nordic technology. The Company is currently designing into its disk drives magneto-resistant ("MR") head component technology, which allows data to be recorded at much higher track densities than metal in-gap ("MIG") or inductive thin-film head technology. JTS intends to continue to take advantage of its management's considerable experience in the computer industry to obtain access to other key computer industry participants. DEVELOP INNOVATIVE DISK DRIVE TECHNOLOGY FOR NOTEBOOK AND DESKTOP PERSONAL COMPUTERS. JTS expects to continue to develop and design into each of its product families innovative and advanced hard disk drive technology which the Company believes will enhance the performance characteristics and storage capacities of its products. The Company intends to continue to work closely with its customers and suppliers to design drives that satisfy the customers' end-product requirements using efficient and low-cost manufacturing methods. JTS is committed to the timely development of new products and the continuing evaluation of new technologies. In this regard, JTS is presently designing into each of its hard disk drive product families various high performance features, such as MR heads, new application specific integrated circuit ("ASIC")/channel technology and advanced head lifters. ACHIEVE LOW PRODUCT COST STRUCTURE. By locating manufacturing facilities in Madras, India, JTS intends to capitalize upon a low-cost and highly-skilled labor force. JTS believes that labor costs in India are significantly lower than labor costs in other countries where hard disk drives are commonly manufactured, such as Singapore, Malaysia and Thailand. To leverage its low-cost labor force, JTS manufactures certain labor-intensive components in-house rather than purchasing such components from outside suppliers. The Company also utilizes many common components in its 3-inch and 3.5-inch form factor disk drives, thereby reducing inventory requirements, creating significant assembling efficiencies and obtaining cost advantages from volume purchases of materials.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000941604_outerwall_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000941604_outerwall_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2bdd55675acea4f7d986eaf5d08ea4d4ed91116e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000941604_outerwall_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES (I) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING AND (III) THE CASH EXERCISE OF WARRANTS TO PURCHASE 2,693,420 SHARES OF COMMON STOCK, WHICH WARRANTS EXPIRE UPON THE CLOSING OF THIS OFFERING OR WITHIN 90 DAYS THEREAFTER (SUCH WARRANTS MAY BE EXERCISED ON A CASHLESS BASIS IN WHICH EVENT THE COMPANY WOULD NOT RECEIVE CASH PROCEEDS FROM THEIR EXERCISE). SEE "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING." THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Coinstar, Inc. develops, owns and operates a network of automated, self-service coin counting and processing machines that provide consumers with a convenient means to convert loose coins into cash. The Coinstar units, located in supermarkets in 20 states across the country, accept and count accumulated loose coins deposited by consumers and issue vouchers listing the total number, denominations and dollar value of coins processed less a processing fee charged by the Company, currently 7.5% (prior to 1996 the Company charged a 10% processing fee on pennies and a 5% processing fee on all other coins.) The vouchers are redeemable by customers at store cashiers for either credit towards retail purchases or cash, regardless of whether a purchase is made. The Company believes its service addresses a significant consumer need for a convenient and reliable coin processing method. The Coinstar service provides consumers with a means of redeeming accumulated loose coins and an alternative to manually presorting, counting and wrapping coins typically required for cash redemption at a bank. Since inception, the Coinstar network has processed over 7 million customer transactions consisting of over 5 billion coins worth over $190 million. The Company began commercial deployment of the network in 1994 and, in 1996, significantly accelerated its plans for installation of the Coinstar units in various geographic regions. As of March 31, 1997, the Company had an installed base of 1,929 units located in supermarkets in 27 regional markets across the United States. The New York Times has reported that an estimated 288 billion cash transactions have occurred on an annual basis. Assuming that the change generated by each such cash transaction averaged fifty cents, the annual coin flow resulting from such transactions would have been approximately $144 billion. To support the flow of coins in the economy, the United States Mint (the "U.S. Mint") has produced $15 billion in new coins over the past 25 years. According to the U.S. Mint, the circulating stock of coins used in cash transactions is approximately $8 billion. The prevalence of coins used in cash transactions and the lack of a convenient alternative for converting coins into cash has resulted in the accumulation of coins. Based on such U.S. Mint data, only $8 billion of the $15 billion in coins produced over the last 25 years (the useful life of a coin) are regarded as circulating, and the Company believes there is an estimated $7 billion of non-circulating coins. The Company believes a significant market opportunity exists for providing a convenient method of redeeming non-circulating coins and recycling the recurring coin flow in the United States economy. The actual size of the market potentially available to the Company, however, is limited by the number of geographic locations in which it is economically feasible for the Company to locate units. In addition, many consumers regularly use their loose change in commercial transactions rather than accumulating it, or may elect other alternatives for recycling their accumulated coins. In 1996 the Company processed approximately $115 million of coins. See "Risk Factors." The Company believes a key competitive advantage is its significant expertise accumulated over the past five years in designing and manufacturing the Coinstar units, in developing and supporting a wide-area communications network capable of receiving and transmitting data to all Coinstar units, and in building a dedicated field service organization with the ability to rapidly deploy and service the Coinstar units. The Coinstar unit is a modularly designed, free-standing machine controlled by an internal computer connected to the Company's wide-area communications network. The network is critical to providing high availability of the Coinstar units, maintaining a high level of customer service and managing direct operating costs. The reliability of the Coinstar unit and the utilization of the communications network, in conjunction with the support of the Company's regional field service organization, have resulted in median availability of units in operation of over 98%. In addition, the network is used to distribute store-specific promotional programs such as electronic offers, coupons and advertising. The focus of the Company's growth has been to increase its installed base in supermarkets in some of the largest designated market areas ("DMAs") in the country. The Company believes that installation of the Coinstar units in supermarket chains provides meaningful benefits to its retail distribution partners, such as offering a new customer service, increasing store traffic, promoting sales and generating media coverage. The Company has targeted supermarkets as its initial primary distribution channel for deployment of its units because of the prevalence of large regional chains, geographic concentration of stores and recurring consumer traffic, all of which create economies of scale for the marketing, deployment and operation of the Coinstar units. The Company estimates that there are 30,000 supermarkets in the United States, 25,000 of which are located in the 100 largest DMAs targeted by the Company. The Company's primary objective is to extend its position as the leading provider of automated, self-service coin processing services and to develop new value-added services that can be delivered through its network. Principal elements of the Company's growth strategy include: (i) increasing penetration of its installed base in supermarkets in the largest DMAs nationwide; (ii) developing and implementing new marketing programs and initiatives to promote consumer awareness and usage of its service; and (iii) entering new distribution channels for the installation of the Coinstar unit, such as banks, convenience stores and mass merchants, and, potentially, international distribution channels. The Company will continue to evaluate new consumer service offerings that could be developed to capitalize on its ownership and operation of a networked service and delivery platform in high traffic retail locations. The modular construction of the Coinstar unit facilitates the potential addition of peripherals to provide additional services such as targeted electronic promotions, event ticketing and smart card applications.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000942177_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000942177_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1040e874281c5d2ab38fa8c481822baa0af92ce4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000942177_first_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. SEE THE INDEX OF PRINCIPAL TERMS, BEGINNING ON PAGE 55, FOR THE LOCATION HEREIN OF THE DEFINITIONS OF CAPITALIZED TERMS. <TABLE> <S> <C> Issuer....................... First Security Auto Grantor Trust 1997-A (the "Trust") Seller and Servicer.......... First Security Bank, N.A. (the "Seller" and the "Servicer" in its capacity as such; and otherwise sometimes referred to herein as the "Bank"). Securities Offered........... % Asset Backed Certificates, Class A (the "Class A Certificates"). % Asset Backed Certificates, Class B (the "Class B Certificates" together with the Class A Certificates, the "Certificates"). The Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. See "The Certificates--General." Trust Assets................. The property of the Trust (the "Trust Property") will include (i) a pool of fixed rate retail motor vehicle installment sale contracts and installment loans originated by the Seller that provide for the allocation of payments between principal and interest according to the simple interest method (collectively, the "Receivables"), (ii) all monies received under the Receivables after the close of business of the Servicer on February 25, 1997 (the "Cutoff Date"), (iii) security interests in the new and used automobiles and light trucks financed thereby (collectively, the "Financed Vehicles"), (iv) certain rights of the Trust under the Yield Supplement Agreement as described below, (v) the Seller's rights (if any) to receive proceeds from claims under certain insurance policies relating to the Financed Vehicles or the obligors under the Receivables (each, an "Obligor"), (vi) certain of the Seller's rights relating to the Receivables under agreements between the Seller and the motor vehicle dealers ("Dealers") that sold the Financed Vehicles and any assignments and other documents related thereto (collectively, the "Dealer Agreements") and under the documents and instruments contained in the Receivable Files, (vii) all rights of the Trust under the Pooling and Servicing Agreement with respect to the Trust (the "Agreement") between the Bank, as Seller and Servicer, and the Trustee, (viii) certain amounts from time to time on deposit in the Certificate Account, the Class A Distribution Account and the Class B Distribution Account and (ix) all proceeds of the foregoing within the meaning of the UCC. The Reserve Account and the Yield Supplement Account, and any amounts therein, will not be property of the Trust, but will be pledged to and held by the Collateral Agent, as secured party for the benefit of the Certificateholders. Certificates................. The Class A Certificates will be issued in an initial principal amount equal to $286,568,473.85 (the "Original Class A Certificate Balance"), and the Class B Certificates will be issued in an initial principal amount equal to $13,503,000.00 (the "Original Class B Certificate Balance" and, together with the Original Class A Certificate Balance, the "Original Certificate Balance"). The Original Class A Certificate Balance will equal approximately 95.50% of the aggregate outstanding principal balance of the Receivables determined in accordance with the Agreement (the "Pool Balance") as of the </TABLE> <TABLE> <S> <C> Cutoff Date (the "Original Pool Balance"). The Original Class B Certificate Balance will equal approximately 4.50% of the Original Pool Balance. Registration of Certificates............... The Class A Certificates and the Class B Certificates will each be represented initially by global certificates registered in the name of the Certificateholders, initially Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC"). No person acquiring a beneficial ownership interest in the Certificates (a "Certificate Owner") will be entitled to receive a Definitive Certificate representing such person's interest in the Trust except in certain limited circumstances. Under the terms of the Agreement, Certificate Owners will not be recognized as Certificateholders and will be permitted to exercise the rights of the Certificateholders only indirectly through DTC. See "Risk Factors--The Certificates" and "The Certificates." Class A Pass-Through Rate.... % per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months (the "Class A Pass-Through Rate"). Class B Pass Through Rate.... % per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months (the "Class B Pass-Through Rate" and, together with the Class A Pass-Through Rate, the "Pass-Through Rates"). Distribution Date............ The 15th day of each month (or, if such day is not a business day, the next succeeding business day) (each, a "Distribution Date"), beginning April 15, 1997. Interest..................... On each Distribution Date, interest at the Class A Pass-Through Rate on the Class A Certificate Balance and interest at the Class B Pass-Through Rate on the Class B Certificate Balance, in each case as of the immediately preceding Distribution Date (after giving effect to any payments of principal made on such Distribution Date) will be distributed to the registered holders of the Class A Certificates ("Class A Certificateholders") and the registered holders of the Class B Certificates ("Class B Certificateholders" and, together with the Class A Certificateholders, the "Certificateholders"), initially, Cede as nominee of DTC, as of the day immediately preceding such Distribution Date (or, if Definitive Certificates are issued, the last day of the related Collection Period) (the "Record Date") to the extent that sufficient funds are on deposit for such Distribution Date in the Certificate Account or available in the Reserve Account to make such distribution. A "Collection Period" means a period during the term of the Agreement from and including the 26th day of a calendar month to and including the 25th day of the succeeding calendar month (or, in the case of the initial Collection Period, the period from but not including the Cutoff Date to and including March 25, 1997). See "The Certificates--Distributions on Certificates" and "--Reserve Account." The rights of Class B Certificateholders to receive payments of interest will be subordinated to the rights of the Class A Certificateholders to receive payments of interest to the extent described herein. See "Risk Factors-- Limited Assets; Subordination." Principal.................... On each Distribution Date, as described more fully herein, all payments of principal on the Receivables received by the Servicer during the related Collection Period, plus all Liquidation Proceeds, to the extent allocable to principal will be distributed by the Trustee PRO RATA to the Class A Certificateholders and to the Class B Certificate holders of record on the related Record Date to the extent that sufficient funds are on deposit in the </TABLE> <TABLE> <S> <C> Certificate Account or available in the Reserve Account to make such distribution. See "The Certificates--Distributions on Certificates" and "--Reserve Account." The rights of the Class B Certificateholders to receive payments of principal will be subordinated to the rights of the Class A Certificateholders to receive payments of interest and principal to the extent described herein. Servicing Fees............... On each Distribution Date, the Servicer will receive a fee for servicing the Receivables, equal to the product of (i) one-twelfth of the Basic Servicing Fee Rate (as defined below), multiplied by (ii) the Pool Balance as of the first day of the related Collection Period (the "Basic Servicing Fee"). In addition, the Servicer will be entitled to retain any late fees, prepayment charges (other than Deferral Fees) and other fees and charges collected during such Collection Period on the Receivables it services, plus any interest earned during the Collection Period on the amounts deposited by it in the Accounts (as such terms are defined below) (the "Supplemental Servicing Fee"). The "Basic Servicing Fee Rate" will equal 1.0% per annum. See "The Certificates--Servicing Compensation." Subordination of Class B Certificates............... Distributions of interest and principal on the Class B Certificates will be subordinated in priority of payment to distributions of interest and principal due on the Class A Certificates in the event of defaults on the Receivables to the extent described herein. The Class B Certificateholders will not receive any distributions of interest with respect to a Collection Period until the full amount of interest on the Class A Certificates relating to such Collection Period has been deposited in the Class A Distribution Account. The Class B Certificateholders will not receive any distributions of principal with respect to such Collection Period until the full amount of interest on and principal of the Class A Certificates relating to such Collection Period has been deposited in the Class A Distribution Account. See "Risk Factors--Limited Assets; Subordination." Advances..................... On each Deposit Date, the Servicer shall, subject to the following, make a payment (an "Advance") with respect to each Receivable serviced by it (other than a Defaulted Receivable) equal to the excess, if any, of (x) the product of the principal balance of such Receivable as of the first day of the related Collection Period and one-twelfth of its Contract Rate (calculated on the basis of a 360-day year comprised of twelve 30-day months), over (y) the interest actually received by the Servicer with respect to such Receivable from the Obligor or from payments of the Purchase Amount, Liquidation Proceeds or Recoveries (in each case for the related Collection Period and to the extent allocable to interest) during or with respect to such Collection Period. The Servicer may elect not to make an Advance of interest due and unpaid with respect to a Receivable to the extent that the Servicer, in its sole discretion, determines that such Advance is not recoverable from subsequent payments on such Receivable or from funds in the Reserve Account. See "The Certificates--Advances." Yield Supplement Agreement... The Seller will enter into a yield supplement agreement with the Trust (the "Yield Supplement Agreement") which will provide funds to supplement the interest collections on Receivables that have Contract Rates that are below the Class A Pass-Through Rate or the Class B Pass-Through Rate, plus the </TABLE> <TABLE> <S> <C> Basic Servicing Fee Rate, as described below. The Yield Supplement Agreement will, with respect to each Receivable, provide for payment by the Seller on or prior to the business day preceding each Distribution Date (such date, the "Deposit Date") of an amount (if positive) calculated by the Servicer equal to one-twelfth of the difference between (i) the sum of interest on the Class A Percentage of such Receivable's principal balance as of the first day of the related Collection Period at a rate equal to the sum of the Class A Pass-Through Rate and the Basic Servicing Fee Rate and interest on the Class B Percentage of such Receivable's principal balance as of the first day of the related Collection Period at a rate equal to the sum of the Class B Pass-Through Rate and the Basic Servicing Fee Rate and (ii) interest at the Contract Rate on such Receivable's principal balance as of the first day of the related Collection Period (in the aggregate for all Receivables with respect to any Deposit Date, the "Yield Supplement Amount"). The Seller's obligations under the Yield Supplement Agreement will be secured by funds on deposit in an account to be maintained by the Seller in the name of the Collateral Agent (the "Yield Supplement Account"). The amount on deposit in the Yield Supplement Account and available on any Distribution Date will be equal to at least the sum of all projected Yield Supplement Amounts for all future Distribution Dates, assuming that future scheduled payments on the Receivables are made on their scheduled due dates; provided that if on any date the Seller shall fail to pay the amount payable under the Yield Supplement Agreement in accordance with the terms thereof, then, in such event, the Specified Yield Supplement Balance shall not thereafter be reduced (the "Specified Yield Supplement Balance"). The amount required to be deposited by the Seller into the Yield Supplement Account on or prior to the Closing Date will be $ (the "Yield Supplement Initial Deposit"). Reserve Account.............. A reserve account (the "Reserve Account") will be established and maintained by the Seller, in the name of, and under the control of, the Collateral Agent with an initial deposit of cash or certain investments having an aggregate value of at least $7,501,786.85 (the "Reserve Account Initial Deposit"). In addition, on each Distribution Date, any amounts on deposit in the Certificate Account with respect to the related Collection Period after payments to the Certificateholders and the Servicer have been made will be deposited into the Reserve Account until the amount of the Reserve Account is equal to the Specified Reserve Account Balance. The Reserve Account provides credit enhancement and liquidity to the Certificateholders that will be available in the event that, as a result of defaults or delinquencies, Collections on the Receivables are insufficient to make the distributions on the Certificates. On or prior to each Deposit Date, the Collateral Agent will withdraw funds from the Reserve Account, to the extent of the funds therein (net of investment earnings), (i) to the extent required to reimburse the Servicer for Advances previously made and not reimbursed ("Outstanding Advances") to the extent provided in the Agreement and (ii) to the extent (x) the sum of the amounts required to be distributed to Certificateholders and the Servicer on the related Distribution Date exceeds (y) the amount on deposit in the Certificate Account as of the last day of the related Collection Period (net of investment income). If the amount in the Reserve Account is reduced to zero, Certificateholders will bear directly the credit and other risks associated with </TABLE> <TABLE> <S> <C> ownership of the Receivables, including the risk that the Trust may not have a perfected security interest in the Financed Vehicles. See "Risk Factors," "The Certificates--Reserve Account," "Certain Legal Aspects of the Receivables." Specified Reserve Account Balance.................... On any Distribution Date, the Specified Reserve Account Balance will equal 4.50% (9.00% under certain circumstances described herein) of the Pool Balance as of the last day of the related Collection Period, but in any event not less than the lesser of (i) $6,001,429.48 and (ii) the sum of the Pool Balance and an amount sufficient to pay interest on (a) the Class A Percentage of such Pool Balance at a rate equal to the sum of the Class A Pass-Through Rate and the Basic Servicing Fee Rate through the Final Scheduled Distribution Date and (b) the Class B Percentage of such Pool Balance at a rate equal to the sum of the Class B Pass-Through Rate and the Basic Servicing Fee Rate through the Final Scheduled Distribution Date. The Specified Reserve Account Balance may be reduced to a lesser amount as determined by the Seller, provided that such reduction does not adversely affect the ratings of the Certificates by the Rating Agencies. Amounts in the Reserve Account on any Distribution Date (after giving effect to all distributions made on that date) in excess of the Specified Reserve Account Balance for such Distribution Date will be paid to the Seller. Optional Purchase............ If the Pool Balance as of the last day of a Collection Period has declined to 10% or less of the Original Pool Balance, the Servicer may purchase all remaining Trust Property on any Distribution Date occurring in a subsequent Collection Period at a purchase price equal to the aggregate of the Purchase Amounts of the remaining Receivables (other than Defaulted Receivables). See "The Certificates--Termination." Trustee...................... Bankers Trust Company (the "Trustee"). Collateral Agent............. Bankers Trust Company (the "Collateral Agent"). Tax Status................... In the opinion of Kirkland & Ellis, special tax counsel to the Seller, the Trust will be classified for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Certificate Owners must report their respective allocable shares of income earned on Trust assets and, subject to certain limitations applicable to individuals, estates and trusts, may deduct their respective allocable shares of reasonable servicing and other fees. See "Federal Income Tax Consequences." Prepayment Considerations.... The weighted average life of the Certificates may be reduced by full or partial prepayments on the Receivables. The Receivables are prepayable at any time. Prepayments may also result from liquidations due to default, the receipt of monthly installments earlier than the scheduled due dates for such installments, the receipt of proceeds from credit life, disability, theft or physical damage insurance, repurchases by the Seller as result of certain uncured breaches of the warranties made by it in the Agreement with respect to the Receivables, purchases by the Servicer as a result of certain uncured breaches of the covenants made by it in the Agreement with respect to the Receivables, or the Servicer exercising its optional purchase right. The rate of prepayments on the Receivables may be influenced by a variety of economic, social, and other factors, including Obligor refinancings resulting from </TABLE> <TABLE> <S> <C> decreases in interest rates and the fact that the Obligor may not sell or transfer the Financed Vehicle securing a Receivable without the consent of the Seller. No prediction can be made as to the actual prepayment rates which will be experienced on the Receivables. If prepayments were to occur after a decline in interest rates, investors seeking to reinvest their distributed funds might be required to invest at a return lower than the applicable Pass-Through Rate. Certificate Owners will bear all reinvestment risk resulting from prepayment of the Receivables. See "Risk Factors--Prepayment Considerations" and "The Receivables--Maturity and Prepayment Assumptions." Rating....................... It is a condition to the issuance of the Certificates that the Class A Certificates be rated in the "AAA" category or its equivalent, and the Class B Certificates be rated at least in the "A" category or its equivalent, in each case by at least one nationally recognized rating agency (a "Rating Agency"). A security rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn at any time by the assigning Rating Agency. The ratings on the Certificates do not address the timing of distributions of principal on the Certificates prior to the Final Scheduled Distribution Date. ERISA Considerations......... The Class A Certificates may be purchased by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended, upon satisfaction of certain conditions described herein. Because the Class B Certificates are subordinated to the Class A Certificates, employee benefit plans subject to ERISA will not be eligible to purchase Class B Certificates. Any benefit plan fiduciary considering a purchase of Certificates should, among other things, consult with experienced legal counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000942416_coulter_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000942416_coulter_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..644348728973c28098dd9286638e9e994b13d9dc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000942416_coulter_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." THE COMPANY Coulter Pharmaceutical is engaged in the development of novel drugs and therapies for the treatment of people with cancer. The Company currently is developing a family of cancer therapeutics based upon two platform technologies (i.e., the technologies upon which it intends to base product development): conjugated antibodies and tumor-activated peptide ("TAP") pro-drugs. The Company's most advanced product candidate, Bexxar (formerly known as the "B-1 Therapy"), consists of a monoclonal antibody conjugated with a radioisotope. The Company intends to seek expedited initial approval of Bexxar for the treatment of low-grade and transformed low-grade non-Hodgkin's lymphoma ("NHL") in patients refractory to chemotherapy, while simultaneously pursuing clinical trials to expand the potential use of Bexxar to other indications. In a Phase I/II clinical trial of Bexxar, 42 patients with low-grade or transformed low-grade NHL who had relapsed from previous chemotherapy regimens achieved an 83% overall response rate, with a 48% complete response rate and a 35% partial response rate. Of those patients who experienced a complete response, the average duration of response was 20.2 months as of July 1997. Currently, the Company is conducting a pivotal Phase II/III clinical trial for its initial indication, low-grade and transformed low-grade NHL in patients refractory to chemotherapy, which includes 60 patients and a post-treatment follow-up period of approximately six months. The Company intends to file for U.S. Food and Drug Administration ("FDA") marketing approval of Bexxar for this indication in the second half of 1998. The Company believes that Bexxar, if successfully developed, could become the first radioimmunotherapy approved in the United States for the treatment of people with cancer. The Company intends to pursue additional trials to expand the potential use of Bexxar to other indications. The Company currently is conducting a single-center Phase II trial in newly diagnosed low-grade NHL patients. An interim analysis of data from the first 17 patients showed a 100% overall response rate, with 41% (seven patients) having achieved complete responses and 59% (ten patients) having achieved partial responses. Of the ten partial responses, three were awaiting confirming tests necessary for classification as complete responses, six had ongoing tumor shrinkage and one had relapsed. The Company believes that its Phase II trial of Bexxar for patients newly diagnosed with NHL is the first clinical trial of a radioimmunotherapy as a stand-alone, first-line treatment for people with cancer. Cancer is a family of more than one hundred diseases that can be categorized into two broad groups: hematologic ("blood-borne") malignancies and solid tumor cancers. Bexxar addresses NHL, a blood-borne cancer of the immune system affecting B-cells that is categorized as low-, intermediate- or high-grade disease. In the United States, the Company estimates that approximately 140,000 patients have low-grade or transformed low-grade NHL. While patients with low-grade and transformed low-grade NHL often can achieve one or more remissions with chemotherapy, eventually these patients relapse and ultimately die from the disease or from complications of treatment. Bexxar is designed to optimize therapeutic benefit for each patient without the debilitating side effects typically associated with conventional cancer treatments. Bexxar consists of a radioisotope, 131)Iodine ("(131)I"), combined with a monoclonal antibody (the "B-1 Antibody") which recognizes and binds to the CD20 antigen, an antigen commonly expressed on the surface of B-cells primarily during that stage of their life cycle when NHL arises. Bexxar is administered to patients pursuant to a proprietary therapeutic protocol consisting of a single, two-dose regimen that the Company believes can be administered primarily on an outpatient basis pursuant to Nuclear Regulatory Commission ("NRC") regulations. The objective of the Company's second technology platform, the TAP pro-drug program, is to broaden significantly the therapeutic windows of conventional chemotherapies. The Company is developing TAP pro-drug versions of cytotoxic drugs designed to be activated preferentially in the proximity of metastatic cancer cells, yet stable in circulation and normal tissues. Accordingly, relatively larger quantities of cytotoxic agents are expected to reach and enter malignant cells as opposed to normal cells, which could permit a significant increase in maximum tolerated dosages, potentially overcoming drug resistance in cancer cells. The Company currently is developing a pro-drug version of doxorubicin, "Super-Leu-Dox," to treat certain solid tumor cancers and plans to commence clinical trials during the first half of 1998. In vitro studies have shown that Super-Leu-Dox is 40 times more likely to be absorbed and chemically activated by tumor cells than by normal cells. An earlier leucine-doxorubicin conjugate was tested as a stand-alone therapy for the treatment of solid tumors in two separate dose escalation trials in Europe in a total of 59 patients. Patients in these trials safely tolerated doses well in excess of those associated with unmodified doxorubicin. The Company intends to market and sell its products in the United States through a direct sales force and, where appropriate, in collaboration with marketing partners. The Company believes that an established sales and marketing capability will enable it to compete effectively for opportunities to license or distribute later-stage product candidates and approved products. Internationally, the Company intends to distribute its products through marketing partners. The Company was incorporated under the laws of Delaware in February 1995. The Company's executive offices are located at 550 California Avenue, Suite 200, Palo Alto, California 94306, and its telephone number is (650) 842-7300. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,400,000 shares Common Stock to be outstanding after the offering................................... 12,752,745 shares (1) Use of proceeds.............................. For funding of manufacturing scale-up, clinical trials and prelaunch marketing of Bexxar; for facilities expansion; and for other research and development, working capital and general corporate purposes. Nasdaq National Market symbol................ CLTR </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------------ ----------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Research and development expenses................. $ 1,574 $ 1,838 $ 2,798 $ 2,739 $ 13,681 $ 4,940 $ 6,583 Net loss................... $(1,701) $(2,016) $(3,086) $(3,229) $(15,338) $(5,311) $(8,800) Net loss per share......... $ (2.03) $ (0.69) $ (1.01) Shares used in computing net loss per share(2).... 7,557 7,736 8,725 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 -------------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments............ $41,038 $ 77,698 Working capital.............................................. 37,199 73,859 Total assets................................................. 43,487 80,147 Deficit accumulated during the development stage............. (27,131) (27,131) Total stockholders' equity................................... 36,883 73,543 </TABLE> - --------------- (1) Based on the number of shares outstanding at August 31, 1997. Excludes 1,539,337 shares of Common Stock which were subject to outstanding options at such date at a weighted average exercise price of $5.78 per share and 24,666 shares of Common Stock issuable upon exercise of a warrant at an exercise price of $9.75 per share. See "Capitalization" and "Management -- Stock Option Plans." (2) See Note 1 of Notes to December 31, 1996 and June 30, 1997 Consolidated Financial Statements for an explanation of the determination of shares used in computing net loss per share. (3) As adjusted to reflect the sale of 2,400,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $16.38 per share and the receipt of the estimated proceeds therefrom. See "Use of Proceeds" and "Capitalization." ------------------------------ Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000943357_mc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000943357_mc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2a48309d19955dc4428946fc3aeb320de5da1a49
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000943357_mc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context indicates otherwise in this Prospectus (i) all references to "Midcom" or the "Company" refer to MIDCOM Communications Inc. and its subsidiaries and (ii) all references to Consolidated Financial Statements refer to the financial statements of Midcom. This Prospectus contains certain forward-looking statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company or industry trends to differ materially from those expressed or implied by such forward-looking statements. Such factors include, among others, those discussed in "Risk Factors" and elsewhere in this Prospectus. THE COMPANY MIDCOM Communications Inc. provides long distance voice and data telecommunications services. As primarily a nonfacilities-based reseller, Midcom principally utilizes the network switching and transport facilities of Tier I long distance carriers, such as Sprint Corporation ("Sprint"), WorldCom, Inc. ("WorldCom") and AT&T Corp. ("AT&T"), to provide a broad array of integrated long distance telecommunications services on a seamless and highly reliable basis. Midcom's service offerings include basic "1 plus" and "800" long distance service, frame relay data transmission service, wireless service, dedicated private lines between customer locations and enhanced telecommunications services such as facsimile broadcast services and conference calling. Midcom focuses on serving small to medium-sized businesses. The Company estimates that during the fourth quarter of 1996 it invoiced approximately 100,000 customer locations per month, a significant majority of which were located in the major metropolitan areas of California, Florida, Illinois, New York, Ohio and Washington. The Company believes that the larger long distance carriers, such as AT&T, Sprint, WorldCom and MCI Communications Corporation ("MCI"), tend to focus their sales and customer support efforts on residential and large commercial customers and do not routinely provide significant pricing discounts for small to medium-sized businesses. By purchasing large usage volumes from the facilities-based carriers at wholesale prices, Midcom seeks to offer its customers more favorable pricing than they could obtain from such carriers directly. In addition, the Company believes that businesses in this market segment do not typically have in-house telecommunications expertise and therefore require more assistance with the assessment and management of their telecommunications requirements. As a result, the Company believes that it is able to differentiate its service offerings from the larger carriers in this market segment on the basis of price, breadth of service offerings, customer service and support and the ability to provide customized solutions to the telecommunications requirements of its customers. See "Business -- Marketing and Sales," "Business -- Competition" and "Business -- Customer Concentrations." Midcom believes that the Telecommunications Act of 1996 (the "Telecommunications Act") will substantially expand its market opportunities. The Telecommunications Act removes substantial legal barriers to competitive entry into the local telecommunications market and directs incumbent local exchange carriers to allow competing telecommunications service providers such as the Company to interconnect their facilities with the local exchange networks, to lease network components on an unbundled basis and to resell local telecommunications services. According to Federal Communications Commission ("FCC") and other industry estimates, in 1995 long distance providers reported revenue of $72.4 billion while local telecommunications providers reported revenue of $102.9 billion. See "Business -- Industry Background," "Business -- Regulation" and "Business -- Competition." Subsequent to its initial public offering in July 1995, Midcom completed numerous acquisitions of businesses and customer bases. Although these acquisitions contributed to substantial growth, they placed significant demands on management resources and disrupted Midcom's normal business operations. In particular, the Company was not able to consolidate and integrate the sales and marketing, customer support, billing and other functions of certain acquired operations as quickly as anticipated. This increased the Company's overall cost structure and resulted in lower profitability and cash flows. See "Business -- Acquisitions." Also, during 1995, the Company was in the process of implementing a new management information system, including the installation of a new billing system. Problems encountered in this implementation process contributed to the Company's operational difficulties. In addition, certain reports generated by the new management information system that were used to estimate unbilled revenue for the third quarter of 1995 failed to fully reflect all discounts that were properly included in the bills subsequently sent to the Company's customers. See "Business -- Information Systems." Primarily as a result of this failure, reported revenue was overstated for the PROSPECTUS 1,675,200 SHARES MIDCOM COMMUNICATIONS INC. COMMON STOCK ------------------------ THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ This Prospectus relates to the public offer and sale of up to 1,675,200 shares (the "Securities") of common stock, par value $.0001 per share (the "Common Stock"), of MIDCOM Communications Inc. ("Midcom" or the "Company") which were privately offered by the Company in a series of unrelated transactions and which may be offered from time to time for the account of the holders thereof named herein (the "Selling Securityholders"). See "Selling Securityholders" and "Plan of Distribution." Information concerning the Selling Securityholders may change from time to time, which changes will be set forth in an accompanying Prospectus Supplement. The Common Stock is traded on the Nasdaq National Market ("Nasdaq") under the symbol "MCCI." The closing sale price of the Common Stock reported on Nasdaq on April 4, 1997 was $6 3/8 per share. The Company has been advised by the Selling Securityholders that the Selling Securityholders, acting as principals for their own account, directly or through agents, dealers or underwriters to be designated from time to time, may sell the Securities from time to time on terms to be determined at the time of sale through customary brokerage channels, negotiated transactions or a combination of these methods at fixed prices that may be changed, at market prices then prevailing or at negotiated prices then obtainable. To the extent required, the number of Securities to be sold, the names of the Selling Securityholders, the purchase price, the public offering price, the name of any agent, dealer or underwriter, the amount of any offering expenses, any applicable commissions or discounts and any other material information with respect to a particular offer will be set forth in an accompanying Prospectus Supplement or, if appropriate, a post-effective amendment to the Registration Statement of which this Prospectus is a part. Each of the Selling Securityholders reserves the right to accept and, together with its agents from time to time, to reject in whole or in part any proposed purchase of the Securities to be made directly or through agents. The aggregate proceeds to the Selling Securityholders from the sale of the Securities offered by the Selling Securityholders hereby will be the purchase price of such Securities less any discounts or commissions. The Company will receive no portion of the proceeds from the sale of the Securities offered hereby and will bear certain expenses incident to their registration. See "Plan of Distribution." No person has been authorized to give any information or to make any representation other than those contained in this Prospectus, and if given or made, such information or representation must not be relied upon as having been authorized by the Company. This Prospectus shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of, any of the Securities to any person in any jurisdiction in which such an offer, solicitation or sale would be unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create any implication that the information contained herein is correct as of any time subsequent to the date hereof. ------------------------ THE DATE OF THIS PROSPECTUS IS APRIL 7, 1997. third quarter of 1995 and the Company's Quarterly Report on Form 10-Q for that period had to be amended to restate reported results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Restatement of Results for the Third Quarter of 1995." In addition, the Company's profitability was reduced as a result of the Company's supply contract with AT&T which provided for higher rates than those provided by competitive suppliers, although in October 1996 the Company and AT&T entered into a new carrier supply contract which provides for more favorable rates. See "Business -- Suppliers." These factors contributed to defaults under the Company's then-existing revolving credit facility and caused the Company's auditors to include going concern disclosure in their report with respect to the Company's 1995 Consolidated Financial Statements. Similar going concern disclosure is included in their report with respect to the Company's 1996 Consolidated Financial Statements included in this Prospectus. In connection with the audit of Midcom's 1995 Consolidated Financial Statements, Midcom's independent auditors also identified certain material weaknesses in the Company's internal financial controls. As a result of operational and other changes implemented by the Company, on March 13, 1997 the Company's independent auditors reported to the Company's Audit Committee that these material weaknesses have been corrected. However, there can be no assurance that the Company will not encounter other internal control weaknesses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Past Material Weaknesses" and "Description of Certain Indebtedness." In response to these developments, during the second and third quarters of 1996 Midcom recruited an executive management team with extensive experience and expertise in the telecommunications industry. In May 1996, the Company hired William H. Oberlin as its President and Chief Executive Officer, appointed Mr. Oberlin, Marvin C. Moses and John M. Zrno to its Board of Directors and engaged Mr. Moses and Mr. Zrno as consultants. In December 1996, Mr. Zrno became Chairman of the Company's Board of Directors. These individuals formerly held senior management positions at ALC Communications Corporation ("ALC"), a leading provider of long distance and other services to small and medium-sized businesses. During their tenure at ALC, ALC completed a successful turn-around and experienced profitable growth. From the fiscal year ended December 31, 1991 through the 12 months ended June 30, 1995 (prior to ALC's merger into Frontier Corporation), ALC's revenue increased from $346.9 million to $677.1 million and net income increased from $5.3 million to $75.0 million. In addition, in July 1996 the Company appointed Daniel M. Dennis to the Company's Board of Directors. Mr. Dennis has served in a number of management positions with MCI for over 23 years. See "Management." Midcom's executive management team has developed a restructuring, network and marketing strategy which is designed to address the operational challenges experienced by the Company and increase internally generated sales and profitability. Principal components of the Company's strategy include the following: Continue to Build Management Team and Restructure Operations. Midcom will continue to seek opportunities to augment management with individuals who have telecommunications industry experience and expertise. Since May 1996, the Company has appointed more than 10 individuals to key operational management positions. These individuals have extensive experience in the operation of a telecommunications company, including (i) network design, implementation and operation, (ii) marketing and sales, (iii) management information systems and (iv) bill processing and collection. The Company's management team has focused on, and has substantially completed, the consolidation and integration of the Company's multiple information and billing systems and other redundant functions of its acquired long distance operations and the renegotiation of the Company's existing carrier supply agreements to obtain more favorable terms. The management team will continue to focus on integrating the Company's data transmission and enhanced telecommunications services, enlarging and enhancing the Company's information system and improving its financial reporting and internal controls. Midcom believes that the experience and depth of its management team has improved its ability to address its operational challenges and to pursue its transition from primarily a nonfacilities-based reseller of long distance and other telecommunications services to a switch-based provider of integrated telecommunications services. Deploy Switching Facilities. The Company has acquired six state-of-the-art high capacity switches, with local and long distance functionality. The Company plans to install these switches in areas of the country where it believes that its volume of long distance traffic and the regulatory environment and market conditions will permit it to provide local service at acceptable margins. Moreover, the Company believes that, in the cities where it intends to deploy switches, there will be significant local circuit capacity at attractive rates available from incumbent local exchange carriers, competitive local exchange carriers and 38GHz wireless providers. Using its own switches will enable the Company to (i) direct customer call traffic over multiple networks which is expected to minimize costs and improve gross margin, (ii) switch local traffic, thereby increasing the economic viability of entering the market for local telecommunications services, (iii) shield proprietary information regarding its customers from the underlying carriers, thereby increasing customer control, (iv) facilitate access to call data records and (v) implement differentiating features and billing enhancements without involving the underlying carrier. See "Business -- Switching Facilities." Reorganize and Expand Sales Efforts. To take full advantage of its planned switching network and expanded product offerings, Midcom has reorganized its direct sales force into (i) a national and key accounts group consisting of highly experienced sales personnel focused on larger customers with sophisticated telecommunications requirements and (ii) a general accounts group focused on smaller customers. Both groups will be located in major metropolitan areas where the Company has customer concentrations sufficient to support a sales and marketing presence and where the Company believes it has significant market opportunities and can compete effectively on the basis of price. The Company intends to implement training programs and financial incentives designed to increase the cross-selling efforts of its direct sales force and further integrate the Company's broad array of service offerings. In addition, the Company intends to increase the number of sales representatives from approximately 35 at the end of July 1996 to over 250 by the end of 1997. The Company plans to continue to supplement its direct sales force with its network of resellers and distributors. In addition to its existing non-territorial distributor network, the Company is in the process of developing a new tier of distributors who will be offered long-term financial incentives and who will be required, within selected territories, to market and sell the Company's service offerings exclusively. The Company believes that the long-term financial incentives and exclusive marketing arrangements offered to this new tier of distributors will result in improved performance and increased loyalty to the Company and its service offerings. See "Business -- Marketing and Sales." Expand and Enhance Customer Support Efforts. Midcom intends to support its expanded sales efforts and reduce customer attrition by continuing to build an enhanced customer service and support operation. The Company has increased its customer service and support staff from approximately 45 at the end of July 1996 to approximately 60 at the end of 1996 and intends to further increase this staff through 1997 to the extent necessary to support growth in sales. This expanded operation is intended to include (i) a staff of trained customer service representatives available twenty-four hours a day at a number of integrated customer service centers, (ii) trained account representatives assigned and dedicated to individual customers with sophisticated telecommunications requirements and (iii) teams of technical specialists available to develop customized solutions for a customer's unique telecommunication needs. See "Business -- Customer Service." Resell Local Services and Provide a Single-Source Solution. Regulatory changes resulting from the Telecommunications Act significantly expand the number and types of services Midcom is permitted to offer. As a result, Midcom intends to offer its customers local dial tone and a variety of other local telecommunications services primarily in locations where it has a significant sales and marketing presence or where it plans to deploy switching facilities. The Company believes that its large and geographically concentrated customer base of small to medium-sized businesses represents a significant potential market for these additional services. These additional services will afford the Company the opportunity to provide its customers with a single-source solution for local, long distance, wireless and enhanced telecommunications services. The Company believes that bundling these services will provide substantial advantages to its customers, including lower overall costs and a higher level of service due to a single source for ordering, installation, customer service and account management. In addition, Midcom believes that offering a single source for telecommunications services will permit the Company to (i) leverage its significant customer base and increase sales by increasing its share of the telecommunications expenditures of its customers and (ii) improve customer control and retention by strengthening its relationships with its customers. See "Business -- Industry Background," "Business -- Regulation" and "Business -- Competition." The Company's ability to implement the foregoing strategy and achieve the intended positive results is subject to a number of risks and uncertainties, and there can be no assurance that the strategy will be successfully implemented or that the intended positive results will be achieved. See "Risk Factors." Midcom was incorporated in the State of Washington in 1989. Its executive offices are located at 1111 Third Avenue, Seattle, Washington 98101, and its telephone number is (206) 628-8000. RISK FACTORS Prospective investors are strongly cautioned that an investment in the Securities offered hereby involves a very high degree of risk. The Company's ability to halt the deterioration of its results of operations and financial condition and successfully implement its operating strategy is subject to an unusual number of material risks and uncertainties. Prospective investors should not dismiss, as "boilerplate" or "customary" disclosure, the risk factors contained herein. The contingencies and other risks discussed under the heading "Risk Factors" could affect the Company in ways not presently anticipated by its management and thereby impair its ability to continue as a going concern and materially affect the value of its debt and equity securities, including the Securities offered hereby. A careful review and understanding of each of the risk factors contained herein, as well as the other information contained in this Prospectus, is essential for an investor seeking to make an informed investment decision with respect to the Securities. THE PRIVATE PLACEMENT In August and September of 1996, the Company completed a private placement (the "Private Placement") of $97,743,000 in aggregate principal amount of 8 1/4% Convertible Subordinated Notes due 2003 (the "Notes") pursuant to a Purchase Agreement, dated as of August 15, 1996 (the "Purchase Agreement"), among the Company, PaineWebber Incorporated ("PaineWebber") and Wheat, First Securities, Inc. ("Wheat, First," and together with PaineWebber the "Initial Purchasers"). The Notes were sold to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), certain "accredited investors" pursuant to Regulation D under the Securities Act, and certain non-U.S. persons pursuant to Regulation S under the Securities Act. The net proceeds to Midcom from the Private Placement were approximately $94.2 million, after deducting the discount to the Initial Purchasers and expenses. The Company used the net proceeds as follows: (i) $34.0 million to repay in full all obligations under the Company's secured revolving credit facility with Transamerica Business Credit Corporation and certain other lenders (the "Transamerica Credit Facility"), (ii) $5.0 million to pay the first installment of an $8.8 million payment in connection with the satisfaction of past shortfalls and reduction of the minimum commitment under the Company's carrier supply contract with AT&T and (iii) $10.0 million to bring current a number of payment obligations existing prior to the completion of the Private Placement. The balance of the net proceeds has been and will be used for working capital, capital expenditures and general corporate purposes. Pursuant to a Registration Rights Agreement, dated as of August 22, 1996 (the "Registration Rights Agreement"), among the Company and the Initial Purchasers, the Company has agreed to register under the Securities Act the public offer and sale of the Notes and the shares of Common Stock issuable upon conversion of the Notes (the "Conversion Shares"). Pursuant to the Registration Rights Agreement, the Company filed a shelf registration statement (together with all exhibits, schedules, supplements and amendments thereto, the "Shelf Registration Statement") with the Securities and Exchange Commission (the "Commission") on October 18, 1996 (file no. 333-14427) to register the public offer and sale of the Notes and the Conversion Shares. The Shelf Registration Statement was declared effective by the Commission in April 1997. The Company is required under the Registration Rights Agreement to maintain the effectiveness of the Shelf Registration Statement for a period of three years from the completion of the Private Placement or, if shorter, when (i) all the Notes and Conversion Shares have been sold pursuant to the Shelf Registration Statement or (ii) the date on which there ceases to be outstanding any Notes or Conversion Shares. See "Description of Notes -- Registration Rights; Liquidated Damages." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA The summary consolidated financial and operating data presented below is qualified in its entirety by, and should be read in conjunction with, the Company's Consolidated Financial Statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenue............................................................... $111,699 $203,554 $148,777 Gross profit.......................................................... 32,655 64,008 40,827 Depreciation and amortization......................................... 4,134 13,790 32,687 Settlement of contract dispute........................................ -- -- 8,800 Restructuring charge(1)............................................... -- -- 2,220 Loss on impairment of assets(2)....................................... -- 11,830 20,765 Operating income (loss)............................................... 824 (23,673) (88,670) Net loss(3)........................................................... (3,029) (33,418) (97,319) Net loss per share(4)................................................. $ (0.31) $ (2.76) $ (6.27) Shares used in calculating per share data(4).......................... 9,930 12,101 15,529 SUPPLEMENTAL OPERATING DATA: EBITDA(5)............................................................. $ 4,958 $ 1,947 $(35,218) </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------ <S> <C> BALANCE SHEET DATA: Cash and cash equivalents.................................................... $ 30,962 Total assets................................................................. 79,923 Short-term obligations, including current portion of long-term obligations... 12,994 Long-term obligations, less current portion.................................. 102,953 Shareholders' deficit........................................................ $(69,284) </TABLE> - --------------- (1) Consists primarily of severance and lease cancellation charges relating to restructuring of operations in March and April 1996. (2) Consists of the following: (i) a write-down of the Company's interest in its joint venture in Russia of $6.8 million in 1995 and $2.0 million in September 1996, (ii) a $2.5 million write-off in 1995 of the Company's existing limited capacity switching equipment as a result of its decision to deploy new, state-of-the-art high capacity switches, (iii) a $2.5 million partial write-down in 1995 of the Company's capitalized software development costs for its management information system, (iv) a $17.8 million write-down of intangible assets in June 1996 and (v) a $1.0 million write-down of microwave equipment in June 1996. (3) Includes $3.0 million of original issue discount and $1.1 million of deferred financing costs written off in the third and fourth quarters of 1995, respectively. (4) Net loss per share is based on the number of shares as described in Note 1 of the Notes to Consolidated Financial Statements. (5) As used herein, "EBITDA" is defined as operating income plus depreciation, amortization and loss on impairment of assets. EBITDA is commonly used to measure performance of telecommunications companies because of (i) the importance of maintaining cash flows in excess of debt-service obligations due to the capital and acquisition-intensive nature of the telecommunications industry and (ii) the non-cash effect on earnings of generally high levels of both amortization and depreciation expenses associated with capital equipment and acquisitions common in this industry. EBITDA does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000944541_vrb_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000944541_vrb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c9249118c4b2b9e5a1eac930537d4e09f8a97678
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000944541_vrb_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of information set forth in more detail elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. The number of shares and options outstanding and per share amounts reflect VRB's two-for-one stock split paid on September 17, 1997. References to "VRB" in this Prospectus mean VRB Bancorp and Valley of the Rogue Bank, its subsidiary, and references to the "Offering" mean the offering of 1,000,000 shares of Common Stock pursuant to this Prospectus. THE COMPANY OVERVIEW VRB is the largest community bank in southern Oregon, currently operating nine full-service branches in the Rogue Valley. As of June 30, 1997, VRB had assets of $180 million and deposits of $156 million. VRB has entered into an agreement to acquire Colonial Banking Company ("Colonial"), which will add four branches and $101 million in deposits, increasing VRB's market share to over 15% of commercial bank deposits in the Rogue Valley. See "Colonial Banking Company Acquisition." VRB has delivered 29 consecutive years of profitability. During the most recent five years, it has increased earnings by an average of 18% per year and increased its return on average assets from 1.61% in 1992 to 1.99% in 1996. During the same period, VRB has achieved a return on average equity greater than 16% while sustaining high asset quality. VRB has consistently performed in the top quartile when comparing its return on average equity to its national peer group comprising over 900 banks with assets of between $100 and $300 million and multiple branches located in metropolitan areas. The consolidation of the banking industry in Oregon has had a positive effect on VRB. Major regional banks have chosen to focus on larger metropolitan markets and to de-emphasize personal service to achieve efficiencies. VRB continues to introduce new products while maintaining the personal service and local decision-making believed to be important to its customers. Its high level of demand deposit accounts (30% of total deposits at June 30, 1997) has significantly contributed to its consistently low cost of funds and high net interest margin. VRB's growing base of core deposits confirms its belief that its product delivery approach is attractive to a significant number of customers in its market. VRB offers a broad range of commercial banking services, primarily to small and medium-sized businesses, professionals, farmers and retail customers, including commercial, real estate and agricultural loans, accounts receivable and inventory financing, consumer installment loans, acceptance of deposits, and personal savings and checking accounts. A majority of VRB's loans are commercial loans collateralized with real estate. BUSINESS STRATEGY VRB seeks significant growth in its earning assets while maintaining a high return on equity. VRB believes that this objective can be achieved by continuing to emphasize personalized, quality banking products and services to its customers. VRB intends to increase its market penetration in its existing markets and to expand into new markets through acquisitions. VRB's strategy consists of the following: - Provide a full range of banking products and personalized service. VRB believes offering products with a high level of personal service attracts and retains customers. VRB focuses on customer care by providing friendly, interactive service dedicated to meeting the needs of each individual customer. Although many of its customers desire personal banking services, VRB also has made a commitment to provide new technology-based services to attract a broader customer base. These products and services include 24-hour telephone account access, a recently developed debit card program and an expanded ATM network. - Increase market share in existing markets. VRB believes there is significant potential to increase its business with current customers and attract new customers in its existing market. Early in 1995, VRB embarked on a sales training program and in 1996 appointed a Corporate Sales Officer with responsibility for improving the business development skills of employees. VRB believes it can gain more customers within the Rogue Valley by continuing to distinguish itself from larger banks, all of which are headquartered in other states, have reduced personal service and have transferred lending decisions away from local branches. As of June 30, 1997, VRB's market share of commercial bank deposits in the Rogue Valley was 9.3%, up from 7.7% on December 31, 1995. VRB believes this increase of over 20% in an eighteen month period is a direct result of its increased marketing efforts and validates VRB's belief that personalized service is important to a significant segment of its market. The addition of Colonial's deposits is expected to increase VRB's total market share to over 15% of commercial bank deposits in the Rogue Valley. - Explore opportunistic acquisitions. After the integration of Colonial, VRB intends to explore acquisitions of other community banks in the Pacific Northwest. Although VRB is not currently engaged in any acquisition discussions, it believes that it will be able to supplement internal growth with complementary acquisitions. VRB Bancorp was organized in 1983 under Oregon law to become the holding company for Valley of the Rogue Bank, an Oregon state-chartered bank that commenced operations in 1968. VRB maintains its principal offices at 110 Pine St., Rogue River, Oregon 97537, and its telephone number is 541-582-4561. THE OFFERING <TABLE> <S> <C> Common Stock offered by VRB.................. 1,000,000 shares Common Stock to be outstanding after the Offering................................... 8,188,090 shares(1) Use of proceeds.............................. To fund a significant portion of the purchase price in connection with the acquisition of Colonial. See "Use of Proceeds" and "Colonial Banking Company Acquisition." Proposed Nasdaq National Market symbol....... VRBA </TABLE> - --------------- (1) Includes 21,960 shares issued upon exercise of stock options subsequent to June 30, 1997. Does not include an aggregate of 463,560 shares of Common Stock reserved for issuance under VRB's stock option plans, 162,500 of which are subject to outstanding options as of the date hereof. VRB's Board of Directors has approved effective with the Offering, grants of options to certain executive officers covering an additional 100,000 shares. See "Management -- Stock Option Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000944696_capital_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000944696_capital_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..df9fe3e70351e14563272f6fad6d70270679ba34
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000944696_capital_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus gives effect to the 11 for 10 stock split of each outstanding share of Common Stock on June 30, 1989 and the 11 for 10 stock split on June 30, 1990. Unless the context indicates or requires otherwise, reference in this prospectus to the "Company" is to ND Holdings, Inc., a North Dakota corporation and its subsidiaries. Common Stock means the Company's Common Stock (no par value). Fiscal year references refer to the respective fiscal years ended December 31. The Company The principal business of the Company, incorporated as a North Dakota corporation on September 22, 1987, is acting as a holding company for mutual fund management, brokerage and transfer agency firms. Through its subsidiaries, investment advisory, asset management, underwriting and transfer agent services are provided to mutual funds sponsored by the Company. Currently through its wholly-owned subsidiary, ND Money Management, Inc., the Company acts as advisor to five mutual funds, all of which were organized and initiated by the Company: ND Tax-Free Fund, Inc., ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax- Free Fund, Inc. and Integrity Fund of Funds, Inc. (the "Funds"). As a result of the acquisition of The Ranson Company, Inc., completed on January 5, 1996, the Company is also the manager of three additional funds, called the "Ranson Managed Portfolios". Ranson Capital Corporation, a NASD member broker/dealer and the investment advisor and manager for the three "Ranson Managed Portfolios": the Kansas Municipal Fund, Kansas Insured Intermediate Fund and the Nebraska Municipal Fund, is a subsidiary of The Ranson Company (and now the Company). The Company's broker/dealer subsidiary, ND Capital, Inc., functions as underwriter to the Funds and services customers of the Funds. The Company's Transfer Agency subsidiary, ND Resources, Inc., acts as transfer agent and performs clerical functions for the Funds. Revenue is received for the management of the Funds along with commissions for sale of fund shares as well as transfer fees and clerical services. The five original Funds have grown to over $144,000,000 in combined assets as of October 1996. Ranson Capital Corporation, as a wholly-owned subsidiary of the Company, continues to act as the investment adviser and manager for the Ranson Managed Portfolios. The Ranson Managed Portfolios provided an additional managed asset base of approximately $184,000,000. As a result, total assets managed by the Company now total approximately $324,000,000 . The Ranson Company, Inc. Purchase On January 5, 1996, the Company completed the acquisition of The Ranson Company, Inc. The aggregate purchase price of The Ranson Company, Inc. was $6,196,402. $5,083,273 (80% of the total) of this amount was paid directly to The Ranson Company, Inc. shareholders on January 5, 1996. $1,113,129 was placed in escrow until final payment on July 3, 1996. See "The Ranson Company, Inc. Acquisition", "The Company's Subsidiaries and Operations", "Certain Transactions", and "The Ranson Acquisition." The source of funds for the acquisition was a combination of cash and cash equivalents, sale of marketable securities held by the Company and $1,500,000 borrowed from a local bank on a short term note. The Offering Common Stock offered by the Company hereby..........................2,546,419 shares Common Stock offered by the Selling Shareholders hereby.............453,581 shares Common Stock to be outstanding after the offering......................10,659,361 shares (1) Use of proceeds...........................For general corporate purposes the priority use of which is developing and increasing mutual fund assets under its management by acquisition of management contracts through purchase of contract rights, and acquisition of other fund managers. Proposed NASDAQ Market Symbol.............INTG (1) Excludes 1,050,000 shares of Common Stock issuable upon exercise of warrants outstanding at September 30, 1996. SUMMARY OF CONSOLIDATED FINANCIAL DATA The following tables set forth certain consolidated financial data with respect to the Company that has been derived from the consolidated financial statements of the Company for the five fiscal years in the period ended December 31, 1995. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." This summary of consolidated financial data should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. <TABLE> <CAPTION> Years Ended December 31, ------------------------------------------------------0-------- 1991 1992 1993 1994 1995 --------- --------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> Income Statement Data:(1) Total revenues and other income $ 268,881 $ 550,541 $ 910,628 $ 1,325,373 $ 1,719,843 Total expenses and losses recognized 584,032 980,171 1,249,283 1,802,749 2,265,948 Loss before income tax benefit and cumulative effect adjustment (315,151) (429,630) (338,655) (477,376) (535,461) Deferred income tax benefit - - 135,000 205,500 162,400 Loss before effect of a change in accounting principle (315,151) (429,630) (203,655) (271,876) (373,061) Cumulative effect on prior years of accounting change - - 539,500 - - Net Income (315,151) (429,630) 335,845 (271,876) (373,061) Earnings per share(2) $(.09) $(.11) $ .07 $(.04) $(.05) Operating Data: Average assets under administration (in millions) (3) $ 32 $ 63 $ 93 $ 110 $ 120 Number of funds at period end 2 2 3 5 5 </TABLE> <TABLE> <CAPTION> December 31, --------------------------------------- 1993 1994 1995 ----------- ----------- ----------- <S> <C> <C> <C> Balance Sheet Data: Cash and short-term investments $ 2,225,591 $ 5,480,740 $ 5,379,645 Total assets 5,535,500 9,231,998 9,470,586 Total liabilities 300,648 333,370 360,160 Total stockholders' equity 5,234,852 8,898,628 9,110,426(4) Book value per share .90 1.11 1.11 <FN> (1) Represents historical consolidated income statement data and does not give effect to this offering. (2) Earnings per share have been computed based upon weighted average shares of Common Stock outstanding and Common Stock equivalent for the periods presented, adjusted for the stock splits referred to in the Notes to the Consolidated Financial Statements. (3) Average assets under administration were estimated using mid year assets (July 1st of each period). (4) Includes redeemable stock (Common Stock subject to rescission exchange offer) totaling 4,859,207 shares recorded at $9,600,000. </TABLE> This Prospectus contains certain forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth under "Risk Factors and elsewhere in this Prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000944853_jenna_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000944853_jenna_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c9fbf10629c0342ecb56f7f65aa88f769b48efc9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000944853_jenna_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Company's consolidated financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus (i) reflects a 0.9047619-for-one stock dividend effected in July 1996 (the "Stock Dividend"); (ii) assumes no exercise of (a) the Underwriter's over-allotment option, (b) the Warrants, (c) the Selling Warrantholder Warrants, (d) the Underwriter's Option, (e) options granted or available for grant under the 1996 Incentive Stock Option Plan of Jenna Lane, Inc. adopted in August 1996 (the "Option Plan") and (iii) gives effect to the conversion, on the closing of the Offering, of (x) the Bridge Warrants into the Selling Warrantholder Warrants and (y) all outstanding shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock") into 952,381 shares of Common Stock. THE COMPANY The Company was formed in February 1995 and designs, manufactures and markets high quality, cut and sewn, popularly priced junior, "missy", and large size fashion and basic sportswear for women. The Company was founded by individuals with extensive experience in apparel manufacturing, operations, sales, and merchandising. Since its inception, the Company has dedicated its time and resources primarily to the development of two sets of product lines, basic sportswear and fashion sportswear. Sales of basic sportswear comprised approximately 50-60% of the Company's revenues in the fiscal year ended March 31, 1996 and the nine months ended December 31, 1996. In the production of basic sportswear, the Company operates primarily as a domestic manufacturer which substantially controls or owns all aspects of its production capability, known within the industry as "vertical integration." The Company believes that this vertical integration positions the Company among the few apparel manufacturers in its market with the ability to control and manage the entire manufacturing process from the conversion of yarn into fabric to the completion of finished apparel. The Company believes it is able to realize significant cost savings through its retention of responsibility for the manufacturing of its own fabric (although not actually manufacturing itself). As a result, the Company believes it can sell high quality merchandise to price sensitive discounters and mass merchants at prices competitive to those of imported goods. Management believes that vertical integration as a domestic manufacturer of basic sportswear allows the Company to deliver good quality competitively priced merchandise to customers significantly faster than the delivery time on goods shipped from overseas. Because of the Company's ability to produce goods more quickly than those of its competitors who import products, the Company's retail customers can conserve capital by purchasing less initial inventory, reduce markdowns by holding smaller quantities of non-moving merchandise, and increase sales by rapidly restocking fast-selling items. Management believes that the Company's ability to deliver high quality, competitively priced merchandise in a short time frame has allowed it to obtain as customers many of the nation's leading discount retail outlets, although no assurance can be given that these relationships will continue or be expanded. The second key merchandise product line which the Company has pursued, which comprised approximately 40-50% of the Company's revenues in the fiscal year ended March 31, 1996 and the nine months ended December 31, 1996, is fashion sportswear. In producing its fashion sportswear, the Company follows more traditional manufacturing processes utilized in the apparel industry, namely the purchasing of fabric from outside vendors. The fashion sportswear product line generates a higher gross profit margin than basic sportswear due to the differentiation of product and reduced competition. In its fashion sportswear production, the Company loses its competitive advantage of converting its own fabrics, however, management believes that its long standing relationships with buyers and management of its retail customers and its overall merchandising and design skills allow the Company to successfully compete in the fashion sportswear business, although no assurance of such success can be given. The Company's sales efforts are organized based on the merchandise category and/or customer, and are divided into "Missy"/Large Size, Young Large Size, Imports, Mail Order and Mass Merchants. There can be no assurance that these sales efforts will be successful or that the Company will not determine to add additional categories or eliminate some or all of the divisions denoted above. Indeed, since the Company's formation, it has added one such category and eliminated another. Although management is pleased with its success to date in selling domestically produced basic sportswear and fashion sportswear, and believes the Company will continue to benefit from substantial focus on those areas, a longer-term opportunity for expansion will be the growth and development of sales of imported fashion sportswear. Part of management's long-term plan is to continue to expand its importing activities, which represented approximately 15% of the Company's revenues for the nine months ended December 31, 1996. There can be no assurance that this plan will be successfully implemented or, if implemented, result in profits to the Company. See "Use of Proceeds"; Risk Factors -- Foreign Operations and Sourcing; Import Restrictions" and "Business -- Sales Groups -- Imports." The Company attempts to maximize its competitive advantage through its market focus, product design, and merchandise. The Company targets the major national, regional and specialty chains whose volume demands attract them to manufacturers who can produce quality merchandise in high volumes at low cost within specified delivery schedules. See "Business." The Company was incorporated under the laws of the State of Delaware in February 1995. The Company's principal executive offices are located at 1407 Broadway, Suite 1801, New York, New York 10017, and its telephone number is (212) 704-0002. This Prospectus may be deemed to contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company desires to avail itself of certain "safe harbor" provisions of the Reform Act and is therefore including this special note to enable the Company to do so. Forward-looking statements in this Prospectus or hereafter included in other publicly available documents filed with the Commission, reports to the Company's stockholders and other publicly available statements issued or released by the Company involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, risks set forth herein, each of which could adversely affect the Company's business and the accuracy of the forward-looking statements contained herein. THE OFFERING Securities Offered..................... 600,000 Units, each consisting of two shares of Common Stock and one Warrant. The Common Stock and Warrants will be immediately separately transferable. No separate securities will be issued for the Units. Each Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $7.00, subject to adjustment, at any time until the third anniversary of the date of this Prospectus. The Warrants are subject to redemption in certain circumstances. See "Description of Securities." Securities Offered Concurrently by Selling Securityholders................ 1,000,000 Warrants and 1,000,000 shares of Common Stock issuable upon exercise of such Warrants, as well as the 90,000 Selling Common Stockholder Shares which, together with 45,000 Warrants to be issued by the Company, will be sold as part of the Underwriter's over-allotment option, if the option is exercised. The Company will not receive any of the proceeds of the sale of such Selling Securityholder Securities. See "Concurrent Offerings." Common Stock Outstanding Before Offering............................... 3,000,000 shares (1) Common Stock Outstanding After Offering............................... 4,200,000 shares (2) Use of Proceeds........................ To repay $500,000 principal amount of 10% installment promissory notes (the "Bridge Notes") issued in the Bridge Financing, plus accrued interest thereon of approximately $8,500; to repay $500,000 principal amount of 10% installment promissory notes (the "November Notes") issued in the November Offering (as hereinafter defined), plus accrued interest thereon of approximately $4,300; to purchase a new CAD/CAM system for design and manufacturing; to expand the Company's existing computer system; to make a loan to a supplier of the Company to assist in opening a cutting room; for reservation of funds relating to letters of credit in the import division and for working capital. See "Use of Proceeds." Listing; Proposed Trading Symbols...... The Company has made an application to list the Common Stock and the Warrants on the Nasdaq National Market System ("Nasdaq"), with the proposed symbols for the Common Stock and Warrants, respectively, being JLNY and JLNYW. The Units will not be listed for trading on Nasdaq and no separate trading market will exist for the Units.(3) Risk Factors........................... The Offering involves a high degree of risk and immediate dilution. See "Risk Factors" and "Dilution." - --------------- (1) Includes (i) 952,381 shares of Common Stock issuable upon conversion of the Series A Preferred Stock on the closing of the Offering (the "Preferred Conversion Shares") and (ii) 571,429 shares of Common Stock (the "Performance Shares") held by certain officers and directors of the Company, which are subject to repurchase by the Company at the par value thereof if the Company does not attain certain earnings levels. Does not include (x) 1,000,000 shares of Common Stock issuable upon exercise of the Bridge Warrants, (y) 100,000 shares of Common Stock issuable upon exercise of outstanding options under the Option Plan at an exercise price of $3.00 per share and 194,159 shares of Common Stock issuable upon exercise of outstanding options under the Option Plan at an exercise price of $5.00 per share and (z) 305,841 additional shares of Common Stock reserved for issuance upon exercise of options not yet granted under the Option Plan. See "Capitalization" and "Management." (2) Includes the 571,429 Performance Shares. Does not include (i) 180,000 shares of Common Stock issuable upon exercise of the Underwriter's over-allotment option and the Warrants issuable upon exercise of such option; (ii) 180,000 shares of Common Stock issuable upon exercise of the Underwriter's Option and the Warrants underlying such option; (iii) 600,000 shares of Common Stock issuable upon exercise of the Warrants offered hereby; (iv) 1,000,000 shares of Common Stock issuable upon exercise of the Selling Warrantholder Warrants; (v) 100,000 shares of Common Stock issuable upon exercise of outstanding options under the Option Plan at an exercise price of $3.00 per share and 194,159 shares of Common Stock issuable upon exercise of outstanding options under the Option Plan at an exercise price of $5.00 per share and (vi) 305,841 additional shares of Common Stock reserved for issuance upon exercise of options not yet granted under the Option Plan. See "Capitalization," "Management" and "Underwriting." (3) No assurance can be given that an active trading market will develop, or, if one develops, be maintained for any of the Company's securities. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000945276_play-by_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000945276_play-by_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c51f2ec48126e1db952be40866e5539e9c031aaf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000945276_play-by_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY BY, THE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO "PLAY-BY-PLAY" OR THE "COMPANY" INCLUDE PLAY-BY-PLAY TOYS & NOVELTIES, INC., ITS PREDECESSORS AND THEIR SUBSIDIARIES. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE BUSINESS OF THE COMPANY AND THE INDUSTRY IN WHICH IT OPERATES. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH MAY CAUSE ACTUAL RESULTS TO DIFFER SIGNIFICANTLY FROM SUCH FORWARD-LOOKING STATEMENTS. SEE "DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS." THE COMPANY The Company designs, develops, markets and distributes stuffed toys, novelty items and its Play-Faces (registered trademark) line of sculpted toy pillows based on licensed characters and trademarks. The Company also designs, develops, markets and distributes electronic toys and non-licensed stuffed toys and markets and distributes a broad line of non-licensed novelty items. The Company markets and distributes its products in both amusement and retail markets and believes that it is the leading supplier of stuffed toys and novelty items to the domestic amusement industry. Over the last three fiscal years, the Company's net sales have grown from $32.6 million for fiscal 1994 to $137.4 million for fiscal 1997, representing a 62.4% average annual increase, and net income has increased from $1.1 million for fiscal 1994 to $6.2 million for fiscal 1997, representing a 82% average annual increase. The Company's growth in net sales and net income is primarily attributable to its introduction of new products and its two strategic acquisitions. The Company develops its licensed stuffed toys based principally on popular, classic characters such as Looney Tunes, Animaniacs, Batman, Superman, characters featured in Space Jam (the motion picture), The Flintstones (trademark) and Popeye (trademark) and on popular, classic trademark licenses such as Coca-Cola (registered trademark) brand stuffed toys, including the Coca-Cola (registered trademark) Polar Bear, and Harley-Davidson Motor Company's Harley Hog (trademark). The Company develops a licensed stuffed toy by identifying a character or trademark license, obtaining the necessary license, designing the product and developing a prototype, and manufacturing the products through third party manufacturers. The Company believes that products based on popular, classic characters and trademarks will have a longer and more stable product life cycle than products based on newer, less established characters and trademarks. The Company believes its position as a leading supplier to the domestic amusement industry allows it to more effectively acquire licenses for products sold to the amusement market. The Company's non-licensed products include traditional stuffed toys in various sizes, interactive dolls and novelty items such as low-priced plastic toys and games used primarily as redemption prizes by its amusement customers. For fiscal 1997, net sales of licensed products and non-licensed products accounted for 59.7% and 38.0%, respectively, of the Company's net sales. The Company commenced its retail product line in fiscal 1995 with its originally developed Play-Faces (registered trademark) line of sculpted toy pillows shaped in the facial likenesses of licensed animated characters. The Play-Faces (registered trademark) line is based upon popular, classic characters, including The Walt Disney Company's animated characters, Looney Tunes, Animaniacs, Batman, Superman, Space Jam characters, Sesame Street Characters, Garfield (trademark) and new characters developed and introduced by leading entertainment companies, such as the ones presented in The Walt Disney Company's animated films Toy Story, The Hunchback of Notre Dame, and 101 Dalmatians. During fiscal 1997 the Company further developed the Play-Faces (registered trademark) line by adding full bodied Play-Faces (registered trademark) which are being sold in the domestic sections of mass retailers. The Company believes its Play-Faces (registered trademark) line is a distinct product category which enhances its ability to acquire additional character and trademark licenses. Play-Faces (registered trademark) products accounted for 12.0% of the Company's net sales for fiscal 1997. During fiscal 1997, the Company entered the large doll market with a pair of electronic interactive dolls, the "Talkin' Tots" (trademark), which talk and sing together utilizing infrared technology. The Company began selling "Talkin' Tots" (trademark) during the fourth quarter of fiscal 1997 and began television advertisements during the first quarter of fiscal 1998. The Company also developed a retail line of Looney Tunes products during fiscal 1997, including standing, sitting and bean bag stuffed toys and another television promoted electronic stuffed toy, the "Tornado Taz." The "Tornado Taz" is a Tazmanian Devil (trademark) that spins, shakes, grunts and laughs. The Looney Tunes products include such characters as Tweety, (trademark) Sylvester, (trademark) Tazmanian Devil, (trademark) Bugs Bunny, (trademark) Speedy Gonzales, (trademark) Yosemite Sam (trademark) and Daffy Duck (trademark). The Company has a diversified base of customers within the amusement and retail distribution channels. Amusement customers, which accounted for 69.8% of net sales for fiscal 1997, include theme parks such as Six Flags, Busch Gardens and SeaWorld, family entertainment centers such as Dave & Buster's, Inc., Tilt and Namco, and carnivals and state fairs. In addition to theme parks, family entertainment centers and carnivals, the Company's amusement distribution channels include Fun Services (registered trademark) (sales through franchisees), fundraising and premium (products designed for specific companies) customers. Retail customers, which accounted for 27.9% of net sales for the same period, principally consist of mass merchandisers such as Wal-Mart, Kmart and Target, and specialty retailers such as Toys "R" Us and Kay Bee Toy. No one customer accounted for more than 10% of net sales for fiscal 1997. The Company recently completed two strategic acquisitions that have contributed to its growth. In June 1996, the Company acquired substantially all of the operating assets, business operations and facilities of Ace Novelty Co. Inc. ("Ace") for $44.7 million. In November 1996, the Company, through its wholly-owned subsidiary Play-By-Play Toys & Novelties Europa S.A. ("Play-By-Play Europe"), acquired The TLC Gift Company, Ltd. ("TLC") based in Doncaster, England for 40,000 shares of Common Stock. The Ace acquisition provided the Company with several strategic advantages, including significant distribution channels in the central and western United States, significant distribution channels in the outdoor amusement markets, key United States and international classic character licenses for retail and amusement, an in-house design and development team and additional key personnel. The Company believes that the Ace acquisition contributed to the Company's profitability in fiscal 1997. Similarly, the TLC acquisition resulted in additional distribution channels in the U.K., where TLC is headquartered, and other areas of Europe. The Company believes that the TLC acquisition has begun contributing to the Company's net earnings and is partially responsible for the significant growth the Company has experienced internationally. RECENT DEVELOPMENT In September 1997, the Company obtained the worldwide license for Baby Looney Tunes products. This license allows the Company to develop and market pre-school and infant toys, including molded and stuffed toys, incorporating the Looney Tunes characters beginning in calendar 1998. COMPANY STRENGTHS The Company believes its principal strengths include its: o emphasis on licenses for popular, classic characters and trademarks and new characters introduced by leading entertainment companies; o demonstrated ability to develop new and innovative toys such as "Talkin' Tots" (trademark) and "Tornado Taz" (trademark), new licensed products such as the Coca-Cola (registered trademark) brand stuffed toys and new product categories such as the Play-Faces (registered trademark) line; o position as the leading supplier of stuffed toys and novelty items to the amusement industry; o balance between amusement and retail markets, which reduces seasonality and increases stability of revenues; o experienced management team with toy and licensing expertise; o in-house design and development team which provides the Company the ability to bring more products to market quicker, thereby taking early advantage of product trends; o Hong Kong office which results in direct sourcing in the Far East and the ability to better manage product quality, production and timely availability of products; o diverse customer base including over 4,000 customers, with no customer accounting for greater than 10% of net sales; o multiple distribution channels which enhance the Company's ability to sell slower moving items while minimizing the impact on gross profit margins; and o distribution facilities located throughout North America and Europe allowing the Company to better serve its customers which typically have multiple locations and minimal inventory space. BUSINESS STRATEGY The Company's growth strategy includes the following key elements: LICENSED PRODUCT LINE EXPANSION. The Company believes that by developing licensed products based principally on popular, classic characters and trademarks, it has established a core licensed product portfolio that is characterized by a longer life cycle than is typical in the toy industry. The Company intends to continue to develop its licensed product line by targeting licensing opportunities where it can take advantage of licensor advertising, publicity and media exposure. The Company believes that its broad licensed product line prevents it from becoming overly dependent on a single product or customer. DEVELOPMENT OF INNOVATIVE TOYS AND NEW PRODUCT CATEGORIES. The Company believes that its Play-Faces (registered trademark) and other license-based product lines represent distinct product categories which enhance its market identification and ability to acquire additional character and trademark licenses. The Company intends to develop new product categories targeted to both its amusement and retail customers. The Company strives to develop unique products with broad end-consumer appeal at competitive prices by identifying previously undeveloped or under-developed products or product categories and matching them with popular, classic licensed characters and/or trademarks. The Company believes it has successfully implemented this approach with its Looney Tunes product lines, "Talkin' Tots (trademark)," "Tornado Taz," Play-Faces (registered trademark) product lines, Harley-Davidson Motor Company's Harley Hog (trademark) and Coca-Cola (registered trademark) Polar Bear. INTERNATIONAL EXPANSION. The Company plans to increase its international sales, primarily in Europe and Latin America, in both the amusement and retail channels through the Company's European distribution facilities and independent distributors. The Company believes that markets outside the United States present significant opportunities and are generally less competitive than the United States market. The Company commenced toy distribution and sales operations in Europe and Latin America in fiscal 1994. Since fiscal 1994, international net sales have increased at an average annual rate in excess of 100%, and the Company believes there are additional significant opportunities for growth in international markets. Additionally, with the newly obtained worldwide manufacturing and distribution rights for Baby Looney Tunes, the Company will begin selling in new markets for the Company, including the Asia Pacific countries. RETAIL MARKET PENETRATION. The Company intends to broaden its retail distribution both domestically and internationally. Through its licensing and new product development strategies, the Company plans to further penetrate the retail market by continuing to develop and introduce new products (such as "Talkin' Tots" (trademark) and "Tornado Taz") and product categories (such as Play-Faces (registered trademark)). Since fiscal 1994, retail sales have grown at an average annual rate of 127.3% domestically and at an average annual rate of 110% internationally. Based on the Company's small market share of the retail industry and its proven ability to develop product niches and obtain key licenses, retail products continue to be a growth opportunity for the Company. AMUSEMENT MARKET PENETRATION. With the Ace acquisition, the Company believes that it has become the leading supplier of stuffed toys and novelty items to the domestic amusement market. The Company believes that this market is less susceptible to changing consumer preferences than the retail market. The Company believes that its broad and continually updated line of licensed and non-licensed stuffed toys and novelty items, its purchasing power and its reputation as a leading amusement supplier provide the Company with a competitive advantage over many other suppliers to this market. While the Company believes there is greater opportunity to grow its retail and international businesses than its domestic amusement business, the latter provides the Company with a consistent base of cash flow. ACQUISITION STRATEGY. The acquisition strategy of the Company is to find businesses with unique product lines (either licensed or non-licensed) which can be sold through the Company's existing distribution channels or businesses which have complementary distribution channels for the Company's existing product lines. The Company believes that this strategy should result in greater sales while reducing the combined companies' general and administrative costs. The Company believes that the Ace and TLC acquisitions accomplished both of these acquisition objectives. THE OFFERING <TABLE> <CAPTION> <S> <C> Common Stock Offered by the Company....................................... 2,000,000 shares(1) Common Stock to be Outstanding after the Offering......................... 6,920,100 shares(1)(2) ========= Use of Proceeds........................................................... The net proceeds of the Offering will be used for repayment of indebtedness of approximately $19 million outstanding under various debt facilities and for general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol............................................. "PBYP" </TABLE> - ------------ (1) Excludes 300,000 shares to be sold by the Company in the event of the exercise of the Underwriters' over-allotment option. (2) Excludes (i)1,446,500 shares of Common Stock reserved for future issuance under outstanding options, (ii) 117,000 shares of Common Stock subject to outstanding warrants and (iii) a maximum of 882,353 shares of Common Stock issuable upon partial or total conversion, if any, of the Company's outstanding convertible debentures. See "Management -- 1994 Incentive Plan" and Notes 9 and 13 of Notes to Consolidated Financial Statements. RISK FACTORS An investment in the Common Stock involves certain risks that a potential investor should carefully evaluate prior to making such an investment. See "Risk Factors." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table sets forth certain summary financial data of the Company. The information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. YEAR ENDED JULY 31, -------------------------------- 1997 1996 1995 ---------- --------- --------- CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net sales....................... $ 137,386 $ 74,197 $ 47,730 Gross profit.................... 47,588 24,148 16,714 Income from operations.......... 13,146 6,676 4,036 Net income...................... 6,216 3,668 1,639 Net income per share: Primary.................... 1.25 .76 .63 Fully Diluted.............. 1.21 .76 .63 JULY 31, 1997 --------------------------- ACTUAL AS ADJUSTED(1) -------- --------------- CONSOLIDATED BALANCE SHEET DATA: Working capital................. $ 35,372 $ 65,111 Total assets.................... 125,906 136,381 Total long-term debt and capital leases......................... 23,238 23,238 Total liabilities............... 82,237 63,250 Shareholders' equity............ 43,669 73,408 - ------------ (1) As adjusted to give effect to the Offering and the application of the estimated $29.7 million net proceeds to the Company therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000945441_integrated_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000945441_integrated_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..54b329cb102c4d9b4007cbab3d949f93dc79b396
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000945441_integrated_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000946293_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000946293_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..66fa87fe72a13d9aa4a5404279ee0a3f5b6f88d2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000946293_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Unless otherwise indicated, all information in this Prospectus has been adjusted to reflect (i) a stock split of the Common Stock on the basis of 500 shares of Common Stock for each share of Common Stock effected in October 1995 (the "October 1995 Stock Split"), (ii) a stock split of the Common Stock on the basis of 10 shares of Common Stock for each share of Common Stock effected in July 1996 (the "July 1996 Stock Split") and (iii) a reverse stock split of the Common Stock on the basis of 3 shares of Common Stock for every 4 shares of Common Stock effected in October 1996 (the "Reverse Stock Split," and together with the October 1995 Stock Split and the July 1996 Stock Split, the "Stock Splits"). Certain of the information contained in this summary and elsewhere in this Prospectus, including information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and related strategy and financing, are forward looking statements. The Company The Company was incorporated on April 28, 1995 and is principally engaged in the direct sale of fine 14K, 18K and 24K gold jewelry, precious stone jewelry and fine collectibles from some of the world=s most prestigious manufacturers. The fine collectible products are from manufacturers such as Waterford (crystal), Lalique (crystal), Lenox (crystal, china and silver), Mark Hopkins (bronze sculptures), Sorrento (Italian, hand-made music boxes), Mont Blanc (writing instruments), Lladro (Spanish porcelain), Coach Leather (handbags, briefcases, luggage, accessories), Chilmark (bronze sculptures), Marlene=s Collection (Canadian collectible dolls), Swarovski (crystal), Reed & Barton (silver & flatware), Kirk Stief (silver), Gorham (silver and flatware), Hummel (figurines), Precious Moments (figurines), Barbie (porcelain dolls and collectibles), Coca-Cola (collectibles), Bill Blass (luggage and accessories), Enesco Corporation (figurines and bric-a-brack), Armani (sculpture), Bosca (leather goods), Legends (bronze sculptures), Miller Rogaska (crystal), The Doll Maker (collectible dolls), Paul Miller (commemorative prints), Business Telecommunications, Inc. (telecommunications services), and Callaway, Taylor Made, King Cobra, Top Flite, Titleist and Odyssey Golf (golf clubs and accessories). Some of these products are premium incentive products that are not sold to the general public, but are available only to sales representatives of the Company as an incentive award. The Company utilizes a network marketing distribution system which is essentially a non-storefront means of selling products through a network of Independent Retail Sales Representatives ("IRSRs"). IRSRs are independent contractors who purchase products from the Company and either resell them to the public or keep them for personal use. In addition, IRSRs may supervise or manage one or more additional IRSRs. The Company currently has over 75,000 IRSRs throughout the United States and its territories and the provinces of Alberta, British Columbia and Ontario, Canada. The Company=s wholly owned subsidiary, International Heritage of Canada, Inc., a Canadian corporation ("IHI Canada") engages in similar direct retail sales of jewelry and fine collectibles in the Canadian provinces of Alberta, British Columbia and Ontario. The Company has had a history of losses since inception but has achieved profitability with a net income of $1,312,251 during the year ended December 31, 1996 with an accumulated deficit of $617,572. From the date of incorporation through December 31, 1996, the Company had accumulated losses of $617,572. For the year ended December 31, 1995, the Company had total revenues of $4,852,242; whereas for the year ended December 31, 1996 the Company had total revenues of $47,705,202. Net income for the year ended December 31, 1996 was $1,312,251 compared to a net loss at December 31, 1995 of $1,929,823. Although the Company realized a profit for the year ending December 31, 1996, there can be no assurance that the Company will be profitable in the future. The Company's principal executive offices are located at 2626 Glenwood Avenue, Suite 200, Raleigh, North Carolina 27608, its main telephone number is (919) 571-4646, its telephone number for Representative Services is (919) 571-2528, and its fax number is (919) 571-4620. The Company's Canadian leasing and operating real and personal property of any and all kinds. To Deal in All Classes of Property To acquire by purchase, exchange, lease, or otherwise, and to own, hold, use, develop, operate, sell, assign, lease, transfer, convey, exchange, mortgage, create security interests in, pledge, or otherwise dispose of, deal in and with, real and personal property of every class or description and rights and privileges therein wheresoever situate. To Mortgage Assets To borrow money and contract debts; to make, issue, and dispose of bonds, debentures, notes, and other obligations, secured or unsecured; and to make any lawful contract of guaranty, suretyship, or of any kind whatsoever in connection with, or in aid of , any corporation or other organizations any of whose securities this Corporation has an interest; to secure contracts, obilgations, and liabilites or any thereof, in whole or in part, by mortgage, deed of trust, creation of security intersts in, pledge, or other lien, upon any or all the propoerty of this Corporation wheresoever situated, acquired, or to be acquired. To Deal in its Own Share To purchase, hold, cancel reissue, sell, exchange, transfer, or otherwise deal any of its outstanding shares from time to time to such an extent and in such manner and upon such terms as the Board of Directors of the Corporation shall determine; provided that this Corporation shall not use its funds or property for the purchase of its own shares when such use would cause any impairment of its capital, except to the extent permitted by law; and provided further that shares of the Corporation belonging to it shall not be voted upon directly or indirectly. To Invest Corporate Funds To invest and deal with the funds of this Corporation in any manner, and to acquire by purchase or otherwise the stocks, bonds, notes, debentures and other securities and obligations of any government, state, municipality, corporation, association or partnership, domestic or foreign and, while owner of any such securities or obligations, to exercise all the rights, powers, and privileges of ownership, including among other things the right to vote thereon for any and all purposes. ~ To Invest in the Shares of Other CorDorations Subject to the restrictions or limitations imposed by law, to purchase or otherwise acquire, hold, sell, assign, transfer, create security interests in, pledge, exchange, or otherwise dispose of the shares, bonds, obligations, or other securities and evidences of indebtedness of other corporations, domestic and foreign, and the goodwill, rights, assets and property of any and every kind or any part thereof, of any person, firm, or corporation, domestic or foreign, and if desirable to issue in exchange therefor the shares, bonds, or other obligations of this Corporation, and while the owner of such shares to exercise all rights, powers, and privileges of ownership, including the power to vote thereon; and in furtherance of the corporate purposes, in the course of the transaction of the Section 8. Voting Group. All shares of one or more classes or series that under the articles of incorporation or the North Carolina Business Corporation Act are entitled to vote and be counted together collectively on a matter at a meeting of shareholders constitute a voting group. All shares entitled by the articles of incorporation or the North Carolina Business Corporation Act to vote generally on a matter are for that purpose a single voting group. Classes or series of shares shall not be entitled to vote separately by voting group unless expressly authorized by the articles of incorporation or specifically required by law. Section 9. Quorum. Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of those shares exists, in person or by proxy. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn; and, subject to the provisions of Section 5 of this Article II, at any adjourned meeting any business may be transacted that might have been transacted at the original meeting if a quorum exists with respect to the matter proposed. Section 10. Proxies. Shares may be voted either in person or by one (1) or more proxies authorized by a written appointment of proxy signed by the shareholder or by his duly authorized attorney in fact. An appointment of proxy is valid for eleven (11) months from the date of its execution, unless a different period is expressly provided in the appointment form. Section 11. Voting of Shares. Subject to the provisions of the articles of incorporation, each outstanding share shall be entitled to one vote on each matter voted on at a meeting of shareholders. Except in the election of directors as governed by the provisions of Section 3 of Article III, if a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater vote is required by law or the articles of incorporation or these bylaws. The execution of this Agreement after June 1, 1995, in no way limits or impacts the enforceability of this Agreement, and Employer hereby ratifies the terms of this Agreement for the time period of June 1, 1995, to the date of execution of this Agreement, and thereafter until termination of this Agreement pursuant to the provisions herein. SECTION FOUR: COMPENSATION OF EMPLOYEE Employer shall pay Employee, and Employee shall accept from Employer, in full payment of Employee's services as the Chief Executive Officer of Employer, a compensation equal teethe greater of three percent (3%) of the net revenues of Employer, as defined by general accounting principals, or FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($425,000.00) per year, payable at least twice each month.' 2. Employer shall reimburse Employee, pursuant to company policy, for all out-ofpocket expenses that Employee shall incur in connection with his services for Employer contemplated by this Agreement on presentation by Employee of appropriate vouchers or receipts for such expenses to Employer. 3. In addition to the compensation referenced hereinabove, and in partial (FOOTNOTE) (1)As of October 31, 1995, Employee has received compensation in the amount of $ 7 7,905 . 7 1 from Employer for services rendered between June 1, 1995, and October 31, 1995. Employer acknowledges that the compensation received by the Employee during this time period is not payment in full pursuant to the compensation agreement referenced above. Instead, the compensation received represents three percent (3 %) of the net revenues of Employer as defined by general accounting principals between June 1, 1995, and October 31, 1995, which is less than the $425,000.00 annualized minimum. Therefore, the Employer acknowledges that additional compensation is owed to the Employee for services rendered as the Chief Executive Officer for the period of June 1, 1995, through October 31, 1995, in the amount of ~ 99.177.62 . Pursuant to the terms of this Agreement, the Employer agrees to execute a promissory note for the balance owed as compensation, which promissory note shall be payable upon demand and shall bear interest at the rate of eight percent (8%) per annum. Furthermore, the Employer agrees to withhold from said additional compensation the necessary taxes due and owing the federal and state governments with respect to said compensation and withhold from its own gross revenues the necessary matching contribution due and owing the federal and state governments with respect to said compensation. consideration for the guarantees previously executed by the Employee for the benefit of Employer, Employee shall be entitled to a stock bonus of one percent (1 %) of the issued and outstanding common stock of Employer as of December 31, 1995, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of 55,000,000.00; and a bonus of two percent (2%) of the issued and outstanding common stock of Employer as of December 31, 1996, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $25,000,000.00; and a bonus of three percent (3 %) of the issued and outstanding common stock of Employer as of December 1, 1997, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $75,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1998, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $125,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1999, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $200,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 2000, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $275,000,000.00. 4. In addition to the compensation set forth hereinabove, Employee shall receive a semi-annual bonus, which shall be payable no later than July 15th and January 15th (the first such installment being due no later than January 15, 1996, for the initial seven-month term of this agreement), equal to three percent (3%) of the operating profits of Employer before taxes, debt service, and depreciation at that time and determined by the six-month financial statement of Employer as of June 30th and December 30th. For the purpose of this paragraph, debt service shall include any loan to the Employer for the purpose of conducting business which is payable over a period of one (1) year or more. SECTION FIVE: OTHER EMPLOYMENT Employee shall devote a sufficient amount of his time, attention, knowledge, and skills solely to the business and interests of Employer, Employer shall be entitled to all of the benefits, profits, or other issues arising from or incident to all work, services, and advice of Employee and Employee shall not. during the term of this Agreement, be interested directly or indirectly, in any manner, as partner, officer, director, shareholder, advisor, employee, or in any other capacity in any other business similar to Employer's business or any allied trade; provided, however, that nothing contained in this section shall be deemed to prevent or to limit the right of the Employee to invest any of his money in the capital stock or other securities of any corporation whose stock or securities are publicly owned or are regularly traded on any public exchange, nor shall anything contained in this section be deemed to prevent Employee from investing or limiting Employee's right to invest his money in real estate. Furthermore, Employer acknowledges that the Employee currently has a substantial business relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, which relationship the Employee shall not have to terminate during the term of this Agreement. The Employer acknowledges that nothing contained in this section shall prevent or limit the right of the Employee to continue his relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, during the term of this Agreement, nor shall anything contained in this section prevent or limit the right of the Employee to devote a limited amount of his time, attention, knowledge, and skills to Mayflower Holdings, Inc.'s and Mayflower Capital, LLC's business or allied trade, so long as such relationship does not interfere with Employee's performance under this Agreement. SECTION SIX: EMPLOYEE'S SERVICES AS DIRECTOR Employee hereby consents to serve as a director of Employer or any parent, subsidiary, or corporation affiliated with Employer, if duly elected and qualified, on condition that Employee receive the same compensation paid to other directors of any such company for their services as directors. SECTION SEVEN: VACATION Employee shall be entitled to twenty (20) days of paid vacation each year during the term of this Agreement, the time for such vacation to be determined by mutual agreement between Employer and Employee. SECTION EIGHT: HEALTH AND DEATH BENEFITS 1. Employer agrees to provide health benefits to the Employee and his immediate family, which shall include the Employee's spouse and all children of Employee. In the event Employee selects a health plan other than that provided to all employees of Employer, Employer shall pay on behalf of Employee the amount that Employee and his immediate family would be charged under the health care plan provided to all employees of Employer. Any difference in health care benefit coverage shall be the responsibility of Employee. 2. Employer agrees to purchase upon the execution of this Agreement a key man insurance policy in the amount of $2,500,000.00, which will provide a death benefit of $1,500,000.00 to Employer and a death benefit of $1,000,000.00 to Employee's designated beneficiary or his heirs. SECTION NINE: TERMINATION FOR DISABILITY In spite of anything in this Agreement to the contrary, Employer is hereby given the option to terminate this Agreement in the event that Employee shall, during the term of this Agreement, become permanently disabled as the term "permanently disabled" is fixed and defined in this section. Such option shall be exercised by Employer giving notice to Employee by registered mail addressed to him in care of the Employer at 2626 Glenwood Avenue, Suite 200, City of Raleigh, State of North Carolina, or at such other address as Employee shall designate in writing of Employer's intention to terminate this Agreement on the last day of the month during which such notice is mailed. On the giving of such notice, this Agreement shall cease on the last day of the month for which the notice is so mailed, with the same force and effect as if such last day of the month were the date originally set forth in this Agreement as the termination date of this Agreement; provided, however, that Employee shall receive from Employer compensation pursuant to the terms of this Agreement for a period of one (1) year following the effective date of such termination. For the purposes of this Agreement, Employee shall be deemed to have become permanently disabled if, during any year of the term of this Agreement, because of ill health, physical or mental disability, or for other causes beyond Employee's control, he shall have been continuously unable or shall have failed to perform his duties under this Agreement for ninety (90) consecutive days, or if, during any year of the term of this Agreement, Employee shall have been unable or shall have failed to perform his duties for a total period of one hundred and twenty (120) days, irrespective of whether or not such days are consecutive. For the purposes of this Agreement, the term "any year of the term of this Agreement" is defined to mean any twelve (12) calendar months commencing on June 1, 1995, and terminating on May 31, 1998, during the term of this Agreement. SECTION TEN INDEMNIFICATION In return for the services provided to Employer by Employee and many risks accepted by the Employee on behalf of the Employer in the start-up of Employer, Employer shall indemnify Employee to the fullest extent permitted by law against (1) reasonable expenses, including attorneys' fees, actually and necessarily incurred by Employee in connection with any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, seeking to hold Employee liable by reason of the fact that Employee is or was acting in any capacity for Employer, and (2) payments made by Employee on behalf of Employer in satisfaction of any judgment, money decree, fine, penalty, or reasonable settlement for which Employee may have become liable in any such action, suit, or proceeding. In the event that there is any threatened or pending action, suit, or proceeding initiated against the Employee pursuant to which t'ne Employee may become liable, the Employee shall have the right to demand and obtain from the Employer an advance of TWELVE THOUSAND AND NO/100 DOLLARS ($12,000.00) to insure payment of any judgment, money decree, fine, or penalty, which amount shall be deposited in the trust account of Employee's chosen counsel, but which shall not relieve Employer from satisfying Employee's attorneys' fees and expenses on a monthly basis while t'ne action, suit, or proceeding is pending. SECTION ELEVEN: TERMINATION OF AGREEMENT 1. This Agreement may be terminated by either party on thirty (30) days written notice to the other; however, Employer can terminate this agreement "for cause" only, which cause must be set forth specifically within the written notice of termination provided to Employee. Within the Agreement, "for cause" termination will be limited to these situations when a majority of the Board of Directors has determined that the Employee has been grossly negligent with respect to his duties as Chief Executive Officer or determine that Employee is in material breach of this Agreement. If Employer shall so terminate this Agreement, Employee shall be entitled to compensation for one (1) year pursuant to the terms of this Agreement from the date of termination. If Employer terminates this Agreement, Employer will not be relieved of any obligation under this Agreement during the one (1) year period of full compensation If Employee shall so terminate this Agreement, he shall be entitled to compensation for a period of six (6) months pursuant to the terms of this Agreement from the date of termination. Furthermore, regardless of how or when this Agreement is terminated, Employer shall at no time be relieved of its obligation to indemnify Employee pursuant to the terms of this Agreement. 2. Even though the initial term of employment shall terminate on May 31, 1998, this Agreement shall automatically renew for successive three-year periods unless written notice of the termination of this Agreement is provided by one party to the other at least ninety (90) days prior to the end of the initial term of this Agreement or at the end of each successive term of this Agreement. Furthermore, the Employer agrees not to terminate this Agreement at the end of the initial term or any successive term unless good cause exists to terminate this Agreement, and Employer agrees to negotiate in good faith with the Employee at the end of the initial term of this Agreement and at the end of each successive term of this Agreement so that Employee will be provided an employment and compensation package consistent with the value that Employee provides to Employer. SECTION TWELVE: AGREEMENTS OUTSIDE OF CONTRACT This Agreement contains the complete understanding and agreement concerning the employment arrangement between the Parties and shall, as of the effective date hereof, supersede all other agreements, representations, promises or understandings, written or oral, between the Parties with respect to the subject matter of this Agreement. SECTION THIRTEEN: MODIFICATION OF AGREEMENT Any modification of this Agreement or additional obligation assumed by either party in connection with the Agreement shall be binding only if evidenced in writing signed by the Parties or any authorized representative of the Parties. SECTION FOURTEEN: ARBITRATION If there is a dispute over payment of fees or expenses under this Agreement, the dispute will be resolved by binding arbitration before the American Arbitration Association, and Employee and Employer agree to be bound by the final decision of that arbitration. Any prevailing party in arbitration shall have the right to recover all costs and fees, to include attorneys' fees incident to the arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute, or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when the institution of legal or equitable proceedings based on such dispute, claim, or controversy would be barred by the applicable statute of limitations. SECTION FIFTEEN: EFFECT OF PARTIAL INVALIDITY The invalidity of any portion of this Agreement will not and shall not be deemed to affect the validity of any other provision. In the event that any provision of this Agreement is held to be invalid, the Parties agree that the remaining provisions shall be deemed to be in full force and effect as if they had been executed by both Parties subsequent to the expungement of the invalid provision. SECTION SIXTEEN: CHOICE OF LAW It is the intention of the Parties to this Agreement that the performance under this Agreement, and all suits and special proceedings under this Agreement be construed in accordance with and under and pursuant to the laws of the State of North Carolina in that, in any action, special proceeding or any other proceeding that may be brought arising out of, in connection, or by reason of this Agreement, the laws of the State of North Carolina shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted. SECTION SEVENTEEN: NO WAIVER The failure of either party to this Agreement to insist upon the performance of any of the terms and conditions of this Agreement, or the waiver of any breach of any of the terms and conditions of this Agreement, shall not be construed as thereafter waiving any such terms and conditions, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. SECTION EIGHTEEN: ATTORNEYS' FEES In the event that any action is filed in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party, in addition to all sums that either party may be called on to pay, a reasonable sum for the successful party's attorneys' fees. SECTION NINETEEN: PARAGRAPH HEADINGS The titles to the paragraphs of this Agreement are solely for the convenience for the Parties and shall not be used to explain, modify, simplify, or aid in the interpretation of the provisions of this Agreement. SECTION TWENTY: PROMISSORY NOTE Pursuant to the terms of this Agreement, and simultaneous with the execution of this Agreement, Employer shall execute a Promissory Note for the benefit of Employee for unpaid compensation between the period of June 1, 1995, and October 31, 1995. IN WITNESS WHEREOF, each party to this Agreement has caused it to be executed under seal and on the date indicated below. EMPLOYEE /s/ Stanley H. Van Etten DATE SIGNED: 12/11/95 EMPLOYER _(SEAL) /s/ Claude Savage Claude Savage, Director of Employer DATE SIGNED: 12/11/95 /s/ Larry Smith Larry Smith, Director of Employer DATE SIGNED: _ (CORPORATE SEAL) 12/18/95 CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this AS day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and John D. Brothers (the "Employee"), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW. THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Compliance and Shareholder Relations for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related tO the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commission paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to. influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains - the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: INTERNATIONAL HERITAGE, INC. By: EMPLOYEE /s/ Stanley Van Etten President and CEO /s/ John Brothers CONFIDENTIALITY AND NON-COMPETITIONAGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and Mary Breen (the Employees), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not t disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term. at which time the Company shall have a, I , and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an of ricer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the, Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to, influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree.that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by bot'n parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement c. the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: /s/ John Brothers CORPORATE SEAL INTERNATIONAL HERITAGE, INC. /s/ Stanley H. Van Etten Stanley H. Van Etten President and CEO EMPLOYEE /s/ Mary Breen CONFIDENTIALITY AND NONCOMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company), and Dwight Hallman (the "Employee"), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Operations for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to, influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and S of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains - the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: John Brothers Secretary CORPORATE SEAL INTERNATIONAL HERITAGE, INC. Stanley H. Van Etten President and CEO EMPLOYEE /s/ Dwight Hallman CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1st day of March, 1996, by and between International Inc., a North Carolina corporation, (the "Company"), and Clark Jones (the "Employees), an individual residing in Wake County, North Carolina. WITNESSETH: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15~ day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Controller for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or trailing by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section S(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The coverlets of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, Ames and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Saw. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By John Brothers /Secretary INTERNATIONAL HERITAGE INC. /s/ Stanley H. Van Ellen President and CEO EMPLOYEE /s/ Clark Jones (SEAL) CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 5 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the Company), and Dawn McIntyre (the "Employees), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto,, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 19!~6, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Marketing and Fulfillment for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales ~epresentative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to t'ne Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captious. captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By./s/ John Brothers /Secretary Red 00349R 307 RA63982.1 3122196 9-58am INTERNATIONAL HERITAGE, INC. By /s/ Stanley H. Van Etten Stanley H. Van Etten President and CEO EMPLOYEE SEAL) Dawn McIntyre CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this Ad day of April, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and Stephanie Harris (the "Employee"), an individual residing in Wake County, North Carolina. WITNESSETH: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received a raise from the Company effective April 19, 1996, and upon successful completion of a month-long intensive training with 20/21 shall receive a subsequent raise; and NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as the execution of this Agreement, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (IS) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of date of execution. 3. Duties. The Employee shall serve as the Data Systems Manager for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. G. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees. (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section S(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed so be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: Secretary CORPORATE SEAL ID#: ra65464.1 INTERNATIONAL HERITAGE, INC. By: /s/ Stanley H. Van Etten - Stanley H. Van Etten President and CEO EMPLOYEE <g (SEAL) Stephanie Harris STATE OF NORTH CAROLINA COUNTY OF WAKE EMPLOYMENT AGREEMENT This Employment Agreement (hereinafter "Agreement") made and effective as of June 1,1995, by and between International Heritage, Inc. and International Heritage of Canada, Inc. (hereinafter collectively referred to as "Employer"), both of which are corporations with International Heritage, Inc. being duly organized and existing under the laws of the State of North Carolina, with a place of business at 2626 Glenwood Avenue, Suite 200, City of Raleigh, County of Wake, and State of North Carolina, and with International Heritage of Canada, Inc. being duly organized and existing under the laws of Canada, with a place of business at 885 West Georgia Street, Suite LOO, City of Vancouver, Province of British Columbia, and Stanley H. Van Etten (hereinafter "Employee) with a residence at 11816 Mt. Batten Way, City of Raleigh, County of Wake, and State of North Carolina. (Throughout the Agreement, Employer and Employee will collectively be referred to as the "Parties.") RECITALS WHEREAS, Employer is engaged in the business of multi-level network marketing, and desires to employ the services of Employee as Chief Executive Officer of its current operations and to assist in the opening and operation of additional regional offices; and WHEREAS, Employee is willing to be employed by Employer, and Employer is willing to employ Employee, on the terms, covenants, and conditions set forth in this Agreement. NOW, THEREFORE, for the reasons set forth above, and in consideration of the mutual promises and agreements set forth in this Agreement, Employer and Employee agree as follows: SECTION ONE: EMPLOYMENT 1. Employer hereby employs, engages, and hires Employee as Chief Executive Officer of Employer to assist Employer in becoming a successful multi-level network marketing company and provide financial and management services to the Employer, and Employee hereby accepts and agrees to such employment, engagement, and hiring, subject to the supervision of and pursuant to the orders, advice, and direction of the Board of Directors of the Employer. Employee shall perform such other duties as are customarily performed by one holding such position in other, same, or similar businesses or enterprises as that engaged in by Employer, and shall additionally render such specific. other and unrelated services and duties as may be assigned to the Employee from time to time by the Board of Directors of the Employer. SECTION TWO: BEST EFFORTS OF EMPLOYEE Employee agrees that he will at all times faithfully, industriously, and to the best of his ability, experience, and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terns of this Agreement, to the reasonable satisfaction of Employer. Such duties shall be rendered at 2626 Glenwood Avenue, City of Raleigh, State of North Carolina, and at 995 West Georgia Street, Suite 137O, City of Vancouver, Province of British Columbia, and such other place or places as Employer shall in good faith require on a temporary basis or as the interests, needs, business, or opportunities of Employer shall require. SECTION THREE: TERM OF EMPLOYMENT The term of this Agreement shall be for three (3) years commencing June 1, 1995, and terminating May 31, 1998, subject, however, to prior termination as provided in this Agreement. The execution of this Agreement after June 1, 1995, in no way limits or impacts the enforceability of this Agreement, and Employer hereby ratifies the terms of this Agreement for the time period of June 1, 1995, to the date of execution of this Agreement, and thereafter until termination of this Agreement pursuant to the provisions herein. SECTION FOUR: COMPENSATION OF EMPLOYEE Employer shall pay Employee, and Employee shall accept from Employer, in full payment of Employee's services as the Chief Executive Officer of Employer, a compensation equal teethe greater of three percent (3%) of the net revenues of Employer, as defined by general accounting principals, or FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($425,000.00) per year, payable at least twice each month.' 2. Employer shall reimburse Employee, pursuant to company policy, for all out-ofpocket expenses that Employee shall incur in connection with his services for Employer contemplated by this Agreement on presentation by Employee of appropriate vouchers or receipts for such expenses to Employer. 3. In addition to the compensation referenced hereinabove, and in partial (1)As of October 31, 1995, Employee has received compensation in the amount of $ 7 7,905 . 7 1 from Employer for services rendered between June 1, 1995, and October 31, 1995. Employer acknowledges that the compensation received by the Employee during this time period is not payment in full pursuant to the compensation agreement referenced above. Instead, the compensation received represents three percent (3 %) of the net revenues of Employer as defined by general accounting principals between June 1, 1995, and October 31, 1995, which is less than the $425,000.00 annualized minimum. Therefore, the Employer acknowledges that additional compensation is owed to the Employee for services rendered as the Chief Executive Officer for the period of June 1, 1995, through October 31, 1995, in the amount of ~ 99.177.62 . Pursuant to the terms of this Agreement, the Employer agrees to execute a promissory note for the balance owed as compensation, which promissory note shall be payable upon demand and shall bear interest at the rate of eight percent (8%) per annum. Furthermore, the Employer agrees to withhold from said additional compensation the necessary taxes due and owing the federal and state governments with respect to said compensation and withhold from its own gross revenues the necessary matching contribution due and owing the federal and state governments with respect to said compensation. consideration for the guarantees previously executed by the Employee for the benefit of Employer, Employee shall be entitled to a stock bonus of one percent (1 %) of the issued and outstanding common stock of Employer as of December 31, 1995, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of 55,000,000.00; and a bonus of two percent (2%) of the issued and outstanding common stock of Employer as of December 31, 1996, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $25,000,000.00; and a bonus of three percent (3 %) of the issued and outstanding common stock of Employer as of December 1, 1997, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $75,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1998, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $125,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1999, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $200,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 2000, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $275,000,000.00. 4. In addition to the compensation set forth hereinabove, Employee shall receive a semi-annual bonus, which shall be payable no later than July 15th and January 15th (the first such installment being due no later than January 15, 1996, for the initial seven-month term of this agreement), equal to three percent (3%) of the operating profits of Employer before taxes, debt service, and depreciation at that time and determined by the six-month financial statement of Employer as of June 30th and December 30th. For the purpose of this paragraph, debt service shall include any loan to the Employer for the purpose of conducting business which is payable over a period of one (1) year or more. SECTION FIVE: OTHER EMPLOYMENT Employee shall devote a sufficient amount of his time, attention, knowledge, and skills solely to the business and interests of Employer, Employer shall be entitled to all of the benefits, profits, or other issues arising from or incident to all work, services, and advice of Employee and Employee shall not. during the term of this Agreement, be interested directly or indirectly, in any manner, as partner, officer, director, shareholder, advisor, employee, or in any other capacity in any other business similar to Employer's business or any allied trade; provided, however, that nothing contained in this section shall be deemed to prevent or to limit the right of the Employee to invest any of his money in the capital stock or other securities of any corporation whose stock or securities are publicly owned or are regularly traded on any public exchange, nor shall anything contained in this section be deemed to prevent Employee from investing or limiting Employee's right to invest his money in real estate. Furthermore, Employer acknowledges that the Employee currently has a substantial business relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, which relationship the Employee shall not have to terminate during the term of this Agreement. The Employer acknowledges that nothing contained in this section shall prevent or limit the right of the Employee to continue his relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, during the term of this Agreement, nor shall anything contained in this section prevent or limit the right of the Employee to devote a limited amount of his time, attention, knowledge, and skills to Mayflower Holdings, Inc.'s and Mayflower Capital, LLC's business or allied trade, so long as such relationship does not interfere with Employee's performance under this Agreement. SECTION SIX: EMPLOYEE'S SERVICES AS DIRECTOR Employee hereby consents to serve as a director of Employer or any parent, subsidiary, or corporation affiliated with Employer, if duly elected and qualified, on condition that Employee receive the same compensation paid to other directors of any such company for their services as directors. SECTION SEVEN: VACATION Employee shall be entitled to twenty (20) days of paid vacation each year during the term of this Agreement, the time for such vacation to be determined by mutual agreement between Employer and Employee. SECTION EIGHT: HEALTH AND DEATH BENEFITS 1. Employer agrees to provide health benefits to the Employee and his immediate family, which shall include the Employee's spouse and all children of Employee. In the event Employee selects a health plan other than that provided to all employees of Employer, Employer shall pay on behalf of Employee the amount that Employee and his immediate family would be charged under the health care plan provided to all employees of Employer. Any difference in health care benefit coverage shall be the responsibility of Employee. 2. Employer agrees to purchase upon the execution of this Agreement a key man insurance policy in the amount of $2,500,000.00, which will provide a death benefit of $1,500,000.00 to Employer and a death benefit of $1,000,000.00 to Employee's designated beneficiary or his heirs. SECTION NINE: TERMINATION FOR DISABILITY In spite of anything in this Agreement to the contrary, Employer is hereby given the option to terminate this Agreement in the event that Employee shall, during the term of this Agreement, become permanently disabled as the term "permanently disabled" is fixed and defined in this section. Such option shall be exercised by Employer giving notice to Employee by registered mail addressed to him in care of the Employer at 2626 Glenwood Avenue, Suite 200, City of Raleigh, State of North Carolina, or at such other address as Employee shall designate in writing of Employer's intention to terminate this Agreement on the last day of the month during which such notice is mailed. On the giving of such notice, this Agreement shall cease on the last day of the month for which the notice is so mailed, with the same force and effect as if such last day of the month were the date originally set forth in this Agreement as the termination date of this Agreement; provided, however, that Employee shall receive from Employer compensation pursuant to the terms of this Agreement for a period of one (1) year following the effective date of such termination. For the purposes of this Agreement, Employee shall be deemed to have become permanently disabled if, during any year of the term of this Agreement, because of ill health, physical or mental disability, or for other causes beyond Employee's control, he shall have been continuously unable or shall have failed to perform his duties under this Agreement for ninety (90) consecutive days, or if, during any year of the term of this Agreement, Employee shall have been unable or shall have failed to perform his duties for a total period of one hundred and twenty (120) days, irrespective of whether or not such days are consecutive. For the purposes of this Agreement, the term "any year of the term of this Agreement" is defined to mean any twelve (12) calendar months commencing on June 1, 1995, and terminating on May 31, 1998, during the term of this Agreement. SECTION TEN INDEMNIFICATION In return for the services provided to Employer by Employee and many risks accepted by the Employee on behalf of the Employer in the start-up of Employer, Employer shall indemnify Employee to the fullest extent permitted by law against (1) reasonable expenses, including attorneys' fees, actually and necessarily incurred by Employee in connection with any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, seeking to hold Employee liable by reason of the fact that Employee is or was acting in any capacity for Employer, and (2) payments made by Employee on behalf of Employer in satisfaction of any judgment, money decree, fine, penalty, or reasonable settlement for which Employee may have become liable in any such action, suit, or proceeding. In the event that there is any threatened or pending action, suit, or proceeding initiated against the Employee pursuant to which t'ne Employee may become liable, the Employee shall have the right to demand and obtain from the Employer an advance of TWELVE THOUSAND AND NO/100 DOLLARS ($12,000.00) to insure payment of any judgment, money decree, fine, or penalty, which amount shall be deposited in the trust account of Employee's chosen counsel, but which shall not relieve Employer from satisfying Employee's attorneys' fees and expenses on a monthly basis while t'ne action, suit, or proceeding is pending. SECTION ELEVEN: TERMINATION OF AGREEMENT 1. This Agreement may be terminated by either party on thirty (30) days written notice to the other; however, Employer can terminate this agreement "for cause" only, which cause must be set forth specifically within the written notice of termination provided to Employee. Within the Agreement, "for cause" termination will be limited to these situations when a majority of the Board of Directors has determined that the Employee has been grossly negligent with respect to his duties as Chief Executive Officer or determine that Employee is in material breach of this Agreement. If Employer shall so terminate this Agreement, Employee shall be entitled to compensation for one (1) year pursuant to the terms of this Agreement from the date of termination. If Employer terminates this Agreement, Employer will not be relieved of any obligation under this Agreement during the one (1) year period of full compensation If Employee shall so terminate this Agreement, he shall be entitled to compensation for a period of six (6) months pursuant to the terms of this Agreement from the date of termination. Furthermore, regardless of how or when this Agreement is terminated, Employer shall at no time be relieved of its obligation to indemnify Employee pursuant to the terms of this Agreement. 2. Even though the initial term of employment shall terminate on May 31, 1998, this Agreement shall automatically renew for successive three-year periods unless written notice of the termination of this Agreement is provided by one party to the other at least ninety (90) days prior to the end of the initial term of this Agreement or at the end of each successive term of this Agreement. Furthermore, the Employer agrees not to terminate this Agreement at the end of the initial term or any successive term unless good cause exists to terminate this Agreement, and Employer agrees to negotiate in good faith with the Employee at the end of the initial term of this Agreement and at the end of each successive term of this Agreement so that Employee will be provided an employment and compensation package consistent with the value that Employee provides to Employer. SECTION TWELVE: AGREEMENTS OUTSIDE OF CONTRACT This Agreement contains the complete understanding and agreement concerning the employment arrangement between the Parties and shall, as of the effective date hereof, supersede all other agreements, representations, promises or understandings, written or oral, between the Parties with respect to the subject matter of this Agreement. SECTION THIRTEEN: MODIFICATION OF AGREEMENT Any modification of this Agreement or additional obligation assumed by either party in connection with the Agreement shall be binding only if evidenced in writing signed by the Parties or any authorized representative of the Parties. SECTION FOURTEEN: ARBITRATION If there is a dispute over payment of fees or expenses under this Agreement, the dispute will be resolved by binding arbitration before the American Arbitration Association, and Employee and Employer agree to be bound by the final decision of that arbitration. Any prevailing party in arbitration shall have the right to recover all costs and fees, to include attorneys' fees incident to the arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute, or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when the institution of legal or equitable proceedings based on such dispute, claim, or controversy would be barred by the applicable statute of limitations. SECTION FIFTEEN: EFFECT OF PARTIAL INVALIDITY The invalidity of any portion of this Agreement will not and shall not be deemed to affect the validity of any other provision. In the event that any provision of this Agreement is held to be invalid, the Parties agree that the remaining provisions shall be deemed to be in full force and effect as if they had been executed by both Parties subsequent to the expungement of the invalid provision. SECTION SIXTEEN: CHOICE OF LAW It is the intention of the Parties to this Agreement that the performance under this Agreement, and all suits and special proceedings under this Agreement be construed in accordance with and under and pursuant to the laws of the State of North Carolina in that, in any action, special proceeding or any other proceeding that may be brought arising out of, in connection, or by reason of this Agreement, the laws of the State of North Carolina shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted. SECTION SEVENTEEN: NO WAIVER The failure of either party to this Agreement to insist upon the performance of any of the terms and conditions of this Agreement, or the waiver of any breach of any of the terms and conditions of this Agreement, shall not be construed as thereafter waiving any such terms and conditions, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. SECTION EIGHTEEN: ATTORNEYS' FEES In the event that any action is filed in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party, in addition to all sums that either party may be called on to pay, a reasonable sum for the successful party's attorneys' fees. SECTION NINETEEN: PARAGRAPH HEADINGS The titles to the paragraphs of this Agreement are solely for the convenience for the Parties and shall not be used to explain, modify, simplify, or aid in the interpretation of the provisions of this Agreement. SECTION TWENTY: PROMISSORY NOTE Pursuant to the terms of this Agreement, and simultaneous with the execution of this Agreement, Employer shall execute a Promissory Note for the benefit of Employee for unpaid compensation between the period of June 1, 1995, and October 31, 1995. IN WITNESS WHEREOF, each party to this Agreement has caused it to be executed under seal and on the date indicated below. EMPLOYEE /s/ Stanley H. Van Etten DATE SIGNED: 12/11/95 EMPLOYER _(SEAL) /s/ Claude Savage Claude Savage, Director of Employer DATE SIGNED: 12/11/95 /s/ Larry Smith Larry Smith, Director of Employer DATE SIGNED: _ (CORPORATE SEAL) 12/18/95 CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this AS day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and John D. Brothers (the "Employee"), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW. THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Compliance and Shareholder Relations for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related tO the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commission paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to. influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains - the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: INTERNATIONAL HERITAGE, INC. By: EMPLOYEE /s/ Stanley Van Etten President and CEO /s/ John Brothers CONFIDENTIALITY AND NON-COMPETITIONAGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and Mary Breen (the Employees), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not t disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term. at which time the Company shall have a, I , and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an of ricer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the, Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to, influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree.that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by bot'n parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement c. the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: /s/ John Brothers CORPORATE SEAL INTERNATIONAL HERITAGE, INC. /s/ Stanley H. Van Etten Stanley H. Van Etten President and CEO EMPLOYEE /s/ Mary Breen CONFIDENTIALITY AND NONCOMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company), and Dwight Hallman (the "Employee"), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Operations for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to, influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and S of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains - the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: John Brothers Secretary CORPORATE SEAL INTERNATIONAL HERITAGE, INC. Stanley H. Van Etten President and CEO EMPLOYEE /s/ Dwight Hallman CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 1st day of March, 1996, by and between International Inc., a North Carolina corporation, (the "Company"), and Clark Jones (the "Employees), an individual residing in Wake County, North Carolina. WITNESSETH: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 1996, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15~ day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Controller for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or trailing by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section S(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The coverlets of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, Ames and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Saw. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By John Brothers /Secretary INTERNATIONAL HERITAGE INC. /s/ Stanley H. Van Ellen President and CEO EMPLOYEE /s/ Clark Jones (SEAL) CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made and entered into this 5 day of March, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the Company), and Dawn McIntyre (the "Employees), an individual residing in Wake County, North Carolina. W I T N E S S E T H: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received from the Board of Directors of the Company a new compensation package including a raise effective January 1, 1996, said raise being retroactively paid upon the signing of this Agreement; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto,, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as of January 1, 19!~6, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (15) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of January 1, 1996. 3. Duties. The Employee shall serve as the Director of Marketing and Fulfillment for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales ~epresentative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. 5. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees: (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5%) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section 5(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification. The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to t'ne Company; (iii) gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates. 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained, shall be of any force or effect. 13. Captious. captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By./s/ John Brothers /Secretary Red 00349R 307 RA63982.1 3122196 9-58am INTERNATIONAL HERITAGE, INC. By /s/ Stanley H. Van Etten Stanley H. Van Etten President and CEO EMPLOYEE SEAL) Dawn McIntyre CONFIDENTIALITY AND NON-COMPETITION AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made and entered into this Ad day of April, 1996, by and between International Heritage, Inc., a North Carolina corporation, (the "Company"), and Stephanie Harris (the "Employee"), an individual residing in Wake County, North Carolina. WITNESSETH: WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company; and WHEREAS, Employee will be employed in a position of trust and confidence to aid the Company in its business; and WHEREAS, incident to and as a necessary part of Employee's employment by the Company, Employee will have access to the Company's confidential and proprietary information, and, therefore, the Company desires to receive from Employee a covenant not to disclose any information related to the Company's business; and WHEREAS, as a condition of and for and in consideration of the Company's employment of Employee, the Company requires that Employee enter into this Agreement; and WHEREAS, the Employee has received a raise from the Company effective April 19, 1996, and upon successful completion of a month-long intensive training with 20/21 shall receive a subsequent raise; and NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, including the employment of Employee by the Company, and the compensation received by Employee from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Employment. Employee is employed, effective as the execution of this Agreement, as an employee at-will of the Company, subject to the Company's policies, practices and procedures, which policies, practices and procedures may be amended by the Company from time to time, with or without notice. Further, the parties hereto acknowledge and agree that Employee's employment and this Agreement can be terminated, subject to the provisions herein, by either party, with or without cause. If Employee is being terminated without cause, the Company shall give the Employee sixty (60) days' written notice and shall pay Employee through the expiration of the sixty (60) day notice term, at which point the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the sixty (60) day notice term. If Employee is being terminated with cause, the Company shall give the Employee fifteen (15) days' written notice and shall pay Employee through the expiration of the fifteen (IS) day notice term, at which time the Company shall have no further obligation to Employee. The Company may elect, in its sole discretion, not to have Employee perform his or her duties during the fifteen (15) day notice term. If Employee elects to terminate his or her employment he or she must give thirty (30) days' written notice to the Company and Employee must faithfully fulfill all of his or her duties through the expiration of the thirty (30) day notice term in order to be entitled to compensation through the expiration of said term. The parties acknowledge and agree that nothing contained herein is or should be construed as a promise of future or continued employment, creating in the Employee any right to employment or to any cause of action on account of termination of employment. 2. Effective Date. This Agreement is effective as of date of execution. 3. Duties. The Employee shall serve as the Data Systems Manager for the Company. Employee shall faithfully perform all reasonable duties as they are prescribed, from time to time, by the President and CEO, or other designated parties within the Company, or the Board of Directors, or as may be ordinary or incident to the position in which Employee is employed. Employee will devote his or her full time, attention and energy to the duties and responsibilities incident to his or her position and will not engage in any other business activities while an Employee of the Company without prior express written consent of the Company's President or a majority of the Board of Directors. 4. Confidentiality. Employee agrees to treat all matters and information related to the Company's business, including, without limitation, trade secrets, products, systems, programs, procedures, manuals, guides, confidential reports and communications, personnel information, client and customer lists, Independent Retail Sales Representative's names and any associated information, identities, sales information of any nature or description, commissions paid, any other data incident to the Company's business, as confidential information entrusted to him or her solely for use in his or her capacity as an employee of the Company, and not to use, divulge, disclose or communicate such information in any way to any person or entity (other than to an officer, employee or authorized agent of the Company for use in the business of the Company) during or after his or her employment with the Company. The Employee agrees that, in the event of termination of his or her employment for any reason, he or she will not under any circumstances retain any information, written or otherwise, concerning the business operations of the Company. This covenant shall survive termination of this Agreement and termination of Employee's employment. G. Covenant Not To Compete. It is recognized and understood by all parties hereto that the Employee, through his or her employment with the Company, will acquire a considerable amount of knowledge and goodwill with respect to the business of the Company, which knowledge and goodwill are extremely valuable to the Company and which would be extremely detrimental to the Company if used by the Employee to compete with the Company. It is, therefore, understood and agreed by the parties hereto that, because of the nature of the business of the Company, it is necessary to afford fair protection to the Company from such unfair competition by the Employee. Consequently, the Employee covenants and agrees as follows: (A) Except as otherwise approved in writing by the Company, the Employee agrees. (i) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not, directly or indirectly, with or through any family member or former director, officer, employee of the Company, or acting alone or as a member of a partnership, or as an officer, holder of or investor in five percent (5 %) or more of any security of any class, director, employee, consultant, member or representative of any corporation or other business entity: (1) engage in, perform or provide services to any network marketing or distribution company within a radius of twenty-five (25) miles of any site upon which the Company has provided services, to include product sales and opportunity meetings or training by an Independent Retail Sales Representative of the Company, which are the same or substantially similar to the services performed or provided by Employee for the Company, or engage in the same or substantially similar business as that engaged in by the Company anywhere in the United States, all United States territories and the provinces of Alberta, Ontario and British Columbia, Canada; (2) request, solicit, approach, or otherwise interfere with or seek to interfere with the relationship between the Company and (a) any Independent Retail Sales Representative of the Company during the one (1) year prior to termination of the Employee's employment with the Company; or (b) any suppliers or vendors of the Company during the one (1) year prior to termination of the Employee's employment with the Company. (ii) that during the Employee's employment with the Company, and for a period of one (1) year from the date of termination of the Employee's employment with the Company, whether by Employee or Company, he or she will not directly or indirectly hire, contract with, induce or attempt to influence any individual who, at any time during the 180 days prior to the termination of the Employee's employment with the Company, was an employee, agent, or Independent Retail Sales Representative of the Company or any other company owned or operated by the Company, to terminate his or her employment or association with the Company. (B) The parties hereto agree that, in the event that either the length of time or the geographic area set forth in Section S(A) of this Agreement is found to be unreasonable by a court, the court may reduce such restrictions to those which it deems reasonable under the circumstances. (C) The Company's employment of the Employee shall constitute sufficient and valuable consideration for Employee's obligations under this Agreement. (D) The covenants of Sections 4 and 5 of this Agreement shall survive any termination of this Agreement and termination of Employee's employment with the Corporation. 6. Remedy. Employee understands and agrees that the Company will suffer irreparable harm in the event that the Employee breaches any of his or her obligations under this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, the Employee agrees that, in the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to an injunction in order to prevent or to restrain any such breach by the Employee, or by the Employee's partners, agents, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him or her. The Company shall not be required to post any bond to obtain any such injunction. 7. Indemnification The Company shall indemnify Employee who was or is a party or is threatened to be made a party to any pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by the Company), by reason of the fact that he or she is an Employee of the Company, or is or was serving at the request of the Company, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such suit, action or proceeding if he or she acted in good faith and in a manner he or she reasonably believed so be in or not opposed to the best interests of the Company. Provided, however, that there shall be no indemnification for: (i) misconduct in the performance of the Employee's duties to the Company; (ii) negligence in the performance of the Employee's duties to the Company; (iii gross negligence or willful misconduct in the performance of Employee's duties to third parties; (iv) felony behavior, or (v) violations of criminal or civil statutes. 8. Severability. The invalidity or unenforceability of any provision hereto shall in no way affect the validity or enforceability of any other provision. 9. Modification and Waiver. This Agreement may be changed or modified only if consented to in writing by both parties. No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against whom such waiver is sought to be enforced; moreover, no valid waiver of any other provision of this agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time, nor will it be deemed a valid waiver of such provision at any other time. 10. Governing Law. This Agreement shall be governed by and according to the laws of the State of North Carolina. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors, assigns and affiliates 12. Entire Agreement. This Agreement contains the entire agreement and understandings by and between the Employee and the Company with respect to the matters herein described and no representations, promises, agreement or understandings, written or oral, not herein contained shall be of any force or effect. 13. Captions. The captions in this Agreement are for convenience only and in no way define, bind or describe the scope or intent of this Agreement. 14. Arbitration. Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Raleigh, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association, and judgment thereof may be entered in any court having jurisdiction thereof. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable state of limitations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their respective seals as of the day and year first above written. ATTEST: By: Secretary CORPORATE SEAL ID#: ra65464.1 INTERNATIONAL HERITAGE, INC. By: /s/ Stanley H. Van Etten - Stanley H. Van Etten President and CEO EMPLOYEE <g (SEAL) Stephanie Harris The execution of this Agreement after June 1, 1995, in no way limits or impacts the enforceability of this Agreement, and Employer hereby ratifies the terms of this Agreement for the time period of June 1, 1995, to the date of execution of this Agreement, and thereafter until termination of this Agreement pursuant to the provisions herein. SECTION FOUR: COMPENSATION OF EMPLOYEE Employer shall pay Employee, and Employee shall accept from Employer, in full payment of Employee's services as the Chief Executive Officer of Employer, a compensation equal teethe greater of three percent (3%) of the net revenues of Employer, as defined by general accounting principals, or FOUR HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($425,000.00) per year, payable at least twice each month.' 2. Employer shall reimburse Employee, pursuant to company policy, for all out-ofpocket expenses that Employee shall incur in connection with his services for Employer contemplated by this Agreement on presentation by Employee of appropriate vouchers or receipts for such expenses to Employer. 3. In addition to the compensation referenced hereinabove, and in partial (1)As of October 31, 1995, Employee has received compensation in the amount of $ 7 7,905 . 7 1 from Employer for services rendered between June 1, 1995, and October 31, 1995. Employer acknowledges that the compensation received by the Employee during this time period is not payment in full pursuant to the compensation agreement referenced above. Instead, the compensation received represents three percent (3 %) of the net revenues of Employer as defined by general accounting principals between June 1, 1995, and October 31, 1995, which is less than the $425,000.00 annualized minimum. Therefore, the Employer acknowledges that additional compensation is owed to the Employee for services rendered as the Chief Executive Officer for the period of June 1, 1995, through October 31, 1995, in the amount of ~ 99.177.62 . Pursuant to the terms of this Agreement, the Employer agrees to execute a promissory note for the balance owed as compensation, which promissory note shall be payable upon demand and shall bear interest at the rate of eight percent (8%) per annum. Furthermore, the Employer agrees to withhold from said additional compensation the necessary taxes due and owing the federal and state governments with respect to said compensation and withhold from its own gross revenues the necessary matching contribution due and owing the federal and state governments with respect to said compensation. <END FOOTNOTE> corporate offices are located at 885 West Georgia Street, Suite 1370, Vancouver, B.C., Canada V6C 3E8, its telephone number is (604) 602- 1275, and its fax number is (604) 602-1285. The Company=s Internet home page on the World Wide Web is www.aable.com/ihi/. The International Data Communication Center is 1-888-444-6242 (toll free). Related Party Transactions * Mayflower Holdings, Inc. ("Mayflower"), a principal shareholder of the Company, of which Stanley H. Van Etten, President and Chief Executive Officer of the Company and president and principal shareholder of Mayflower, provided substantial professional services, employees, operating capital, corporate office space (through November 30, 1995), loans, general administrative supplies and support to the Company during the period March through December 1995. As a result, the Company owed Mayflower $389,068 for services rendered and expense reimbursements, including $131,812 in notes payable with interest accrued at a rate of 8% per annum. These amounts were paid in full as of February 1996. The interest paid on the note was $6,544. * In 1996, the Company incurred costs for services provided by Mayflower totaling approximately $60,667. As of December 31, 1996, the amount due from Mayflower was $2,163. The Company sublet office space to Mayflower during 1996 on a monthto-month basis at a rate of $500 per month. Rental income was $6,000 in 1996. * In February 1996, the Company issued to Mayflower 187,500 shares of common stock valued at $250,000 in exchange for consulting fees. The shares were canceled and fair market value options were granted in replacement thereof for 375,000 shares at an exercise price of $1.33 per share. The options expire October 31, 1999, and are outstanding as of December 31, 1996. These options are not subject to the International Heritage, Inc. 1996 Stock Option Plan ("Stock Option Plan"). * In September 1995, the Company entered into an agreement with the Company's President and Chief Executive Officer, Stanley H. Van Etten, and his father, Stanley L. Van Etten to create a sales training handbook for the Company's IRSRs. The agreement called for a lump sum payment of $10,000 to Stanley L. Van Etten for the rewrite of an earlier created sales book to create a version specifically for the Company=s IRSRs, which was paid on October 2, 1995, as well as a $4 per book royalty for all books sold to the Company. The Company currently includes one copy of the book in each Retail Business Career Kit ("Kit") and sells copies of the book for $14.95 individually or in packets of 10 for $100. $132,000 was paid to these individuals in 1996 and $30,600 was paid in 1995. No amounts were due at December 31, 1996. * Mayflower loaned the Company $200,000 in August 1996. The note required repayment at a rate of $50,000 on the 15th of each month for the months October 1996 through January 1997 with the final payment including interest accrued at a rate of 12% per annum. This loan was secured by the assets of the Company. During 1996, the Company offset $58,172 in receivables from Mayflower against the note principal. The loan was repaid and the security interest released in November 1996. * Under a 1995 employment contract and based on the Company's achievement of certain revenue goals, the President of the Company is entitled to receive stock incentives in the amount of 1% of issued and oustanding shares as of December 31, 1995, 2% as of December 31, 1996, and 3% as of each year ended December 31, 1997 through 2000. These stock incentives were granted to the President as additional compensation and were at no cost to the President. In 1995, the Company did not meet the revenue goals noted in the President=s contract, but in March 1995, the Board granted the stock incentives to the President based on accrued sales and deferred revenue combined. Effective October 31, 1996, the President gave back the incentive stock and the Company granted additional stock options of 151,300 shares of Common Stock at an exercise price of $1.33 per share. business and affairs of this Corporation, to acquire real and personal property, rights and interests of every nature, and to execute and issue bonds, debentures, and other negotiable or transferable instruments, and to mortgage and create a security interest in, or pledge, any or all of the property of the Corporation; to secure such bonds, debentures, or other instruments, upon such terms and conditions as may be set forth in the instrument or instruments, mortgaging, creating a security interest in, or pledging the same, or in any deed, contract or other instrument relating thereto. To Acquire Other Businesses To acquire, by purchase, exchange, or otherwise, all or any part of, or any interest in, the property, assets, business, and goodwill of any one or more persons, firms, associations, or corporations heretofore or hereinafter engaged in any business for which a corporation may now or hereafter be organized under the laws of this or any other state or country; to pay for the same in cash, property, its own or other securities; to hold, operate, reorganize, liquidate, sell, or in any manner dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations, or contracts of such persons, firms, associations, or corporations, and to conduct the whole or part of any business thus acquired. To Assist Other Corporations To aid in any manner any corporation, association, or trust estate, domestic or foreign, or any firm or individual, any shares of stock in which or any bonds, debentures, notes, securities, evidences of indebtedness, contracts, or obligations of which are hold by or for this Corporation, directly or indirectly, or in which, or in the welfare of which, this Corporation shall have any interest and to do any acts designed to protect, preserve, improve, or enhance the value of any property at any time held or controlled by it or in which it may be at any time interested, directly or indirectly or through other corporations or otherwise; and to organize or promote or facilitate the organization of any corporation, association, partnership, syndicate, or entity, domestic or foreign. To Oroganize Other Corporations To organize or cause to be organized under the laws of any state of the United States, or of the District of Columbia, or of any territory, dependency, or possession of the United States, or of any foreign country, a corporation or corporations for the purpose of transacting, promoting, or carrying on any or all of the objects or purposes for which this Corporation is organized, and to dissolve, wind up, liquidate, merge, or consolidate any such corporation or corporations or to cause the same to be dissolved, wound up, liquidated, merged or consolidated. Absent special circumstances, shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by another corporation in which the corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided that this provision does not limit the power of the corporation to vote its own shares held by it in a fiduciary capacity. Section 12. Informal Action by Shareholders. Any action that is required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one (1) or more written consents, describing the action so taken, shall be signed by all of the shareholders who would be entitled to vote upon such action at a meeting, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. If the corporation is required by law to give notice to nonvoting shareholders of action to be taken by unanimous written consent of the voting shareholders, then the corporation shall give the nonvoting shareholders, if any, written notice of the proposed action at least ten (10) days before the action is taken. ARTICLE III. BOARD OF DIRECTORS Section 1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board of Directors. Section 2. Number and Qualifications. The number of directors constituting the Board of Directors shall be not less than one (1) nor more than seven (7) as may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or by the Board of Directors. Directors need not be residents of the State of North Carolina or shareholders of the corporation. Section 3. Election. Except as otherwise provided in this Article III, the directors shall be elected at the annual meeting of shareholders. Those persons who receive the highest number of votes at a meeting at which a quorum is present shall be deemed to have been elected. Section 4. Staggered Terms for Directors. The total number of Directors shall be divided into two (2) groups, one group consisting of three (3) directors who shall serve a one (1) year term and two (2) of whom shall be outside directors, the second group shall consist of up to four (4) directors who shall serve a two (2) year term. Terms shall expire at the first annual shareholders' meeting after their election and at the second annual shareholders' meeting after their election, for the first and second groups, respectively. At each annual shareholders' meeting held thereafter, directors shall be chosen for a term of one (1) or two (2) years as the case may be, to succeed those whose terms expire. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which the vacant director would have been elected. A decrease in the number of directors does not shorten an incumbent director's term. Despite the expiration of a director's term, such director shall continue to ser ve until a successor shall be elected and qualifies or until there is a decrease in the number of directors. consideration for the guarantees previously executed by the Employee for the benefit of Employer, Employee shall be entitled to a stock bonus of one percent (1 %) of the issued and outstanding common stock of Employer as of December 31, 1995, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of 55,000,000.00; and a bonus of two percent (2%) of the issued and outstanding common stock of Employer as of December 31, 1996, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $25,000,000.00; and a bonus of three percent (3 %) of the issued and outstanding common stock of Employer as of December 1, 1997, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $75,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1998, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $125,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 1999, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $200,000,000.00; and a bonus of three percent (3%) of the issued and outstanding common stock of Employer as of December 31, 2000, provided that Employer is open and doing business and provided that Employer has achieved gross revenue in excess of $275,000,000.00. 4. In addition to the compensation set forth hereinabove, Employee shall receive a semi-annual bonus, which shall be payable no later than July 15th and January 15th (the first such installment being due no later than January 15, 1996, for the initial seven-month term of this agreement), equal to three percent (3%) of the operating profits of Employer before taxes, Effective October 31, 1996, the President agreed to and has been granted stock options for 2,295,000 shares, exercisable at $1.33 per share in exchange for the 1996, 1997, 1998, 1999 and 2000 incentive stock referred to above. As a result of having been granted these options, the President is no longer entitled to receive the stock incentives referred to above and the options are not contingent on the Company's achievement of the specified revenue goals. These options are outstanding at December 31, 1996, expire on October 31, 2001, and are not subject to the Stock Option Plan. All other provisions of the President=s employment agreement remain unchanged. * One of the Company's jewelry suppliers, Jewels by Evonne, is principally owned by a shareholder of the Company, Evonne Eckenroth. The Company sold $1,160,593 (Representative Cost) worth of products supplied by Jewels by Evonne during 1996, the majority of which were sold during the Company's Winter Product Promotion. Regulation of the Company's Business No state or federal regulatory body has formally questioned any of the Company's sales practices for its products or services. Further, the Company has not received any formal "inquiries" for investigation from any state or federal regulatory body. However, the Company was required in connection with the sale of certain of its securities to make a rescission offer to shareholders in the State of Washington. From August 1995 through December 1995, the Company privately offered and sold shares of its common stock within the State of Washington. A total of 40 Washington residents purchased shares through the offering, which resulted in proceeds to the Company of $100,650. The offering was not registered with the Securities Division of the Department of Financial Institutions of Washington ("Securities Division"), and the Company did not file a notification of claim of exemption for the offering with the Securities Division. The Company notified the Securities Division upon discovering that the offering may not qualify for an exemption from the registration requirements under the Securities Act of Washington. The Company then filed an application with the Securities Division to register a rescission offer. The Company subsequently withdrew the application and, on March 8, 1996, refunded Washington shareholders their initial investment plus interest totaling $104,538.49. The Company, without admitting or denying any wrongdoing, entered into a Consent Agreement with the Securities Division on September 5, 1996. The Offering Common Stock Offered.................3,000,000 shares. See "Description of Capital Stock." Common Stock Outstanding Prior to the Offering. . . . .7,273,246 shares Common Stock to be Outstanding After the Offering. . .10,273,246 shares Proposed Nasdaq National Market Symbol................NIHI Use of Proceeds The Company intends to apply the net proceeds of this Offering approximately as follows: (i) $2,000,000 for corporate expansion; (ii) $3,000,000 to develop a fulfillment center; (iii) $2,000,000 for general marketing efforts; (iv) $2,000,000 for information system upgrades; (v) $1,000,000 for expanded sales training; and (vi) $2,671,595 for working capital and general corporate purposes. See "Use of Proceeds." To Vote Shares in Other Corporations Shares in other corporations held by this Corporation shall be voted by such Officer or Officers of this Corporation as the Board of Directors, by a majority vote, shall designate for that purpose, or by a proxy thereunto duly authorized by like vote of such Board, except as otherwise ordered by vote of the holders of a majority of the shares outstanding and entitled to vote. To Act as a Holding Company To purchase, own and hold the stock of other corporations, and to do every act and thing covered generally by the denomination "holding corporation," and especially to direct the operations of other corporations through the ownership of stock therein; to purchase, subscribe for, acquire, own, hold, sell, exchange, assign, transfer, create security interests in, pledge, or otherwise dispose of shares or voting trust certificates for shares of the capital stock, or any bonds, notes, securities, or evidences of indebtedness created by any other corporation or corporations organized under the laws of this state or any other state or district or country, nation, or government, and also bonds or evidences of indebtedness of the United States or of any state, district, territory, dependency or country or subdivision or municipality thereof; to issue in exchange thereof shares of the capital stock, bonds, notes or other obligations of the Corporation and while the owner thereof, to exercise all the rights, powers, and privileges of ownership including the right to vote on any shares of stock or voting trust certificates so owned; to promote, lend money to, and guarantee the dividends, stocks, bonds, notes, evidences of indebtedness, contracts or other obligations, of and otherwise aid in any manner which shall be lawful, any corporation or association of which any bonds, stocks, voting trust certificates, or other securities or evidences of indebtedness shall be held by or for this Corporation, or in which, or in the welfare of which, this Corporation shall have any interest, and to do any acts and things permitted by law and designated to protect, preserve, improve, or enhance the value of any such bonds, stocks, or other securities or evidences of indebtedness of the property of this Corporation. To Act Outside the State To carry on its operations and conduct business in any state, district, territory, dependency, or possession of the United States, and in any foreign country. To Engage in Any Lawful Act To engage in any lawful act or activity for which corporation may be organized under the North Carolina Business Corporation Act. Construction of Power Clauses The foregoing clauses shall be construed as and shall be powers as well as purposes, and the matters expressed in each clause shall, unless otherwise herein expressly provided, be in no wise limited by reference to or reference from the terms of any other clause but shall be regarded as independent bowers and purposes and the enumeration of specific powers and purposes shall not e construed to limit or restrict in any manner the meaning of general terms or other general powers of this Corporation, nor shall the expression of one thing be deemed exclude another not expressed, although it be of like nature. This Section 5. Removal. Any director may be removed at any time with or without cause by a vote of the shareholders if the number of votes cast to remove such director exceeds the number of votes cast not to remove him. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. A director may not be removed by the shareholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is removal of the director. If any directors are so removed, new directors may be elected at the same meeting. Section 6. Vacancies. Any vacancy occurring in the Board of Directors, including without limitation a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, may be filled by the shareholders or by the Board of Directors, whichever group shall act first. If the directors remaining in office do not constitute a quorum, the directors may fill the vacancy by the affirmative vote of a majority of the remaining directors. If the vacant office was held by a director elected by a voting group, only the remaining director or directors elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy. Section 7. Chairman of Board. There may be a Chairman of the Board of Directors elected by the directors from their number at any meeting of the Board. The Chairman shall preside at all meetings of the Board of Directors and perform such other duties as may be directed by the Board. Section 8. Compensation. The Board of Directors may provide for the compensation of directors for their services as such and for the payment or reimbursement of any or all expenses incurred by them in connection with such services. ARTICLE IV. MEETINGS OF DIRECTORS Section 1. Regular Meetings. A regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting of shareholders. In addition, the Board of Directors may provide, by resolution, the time and place, either within or without the State of North Carolina. for the holding of additional regular meetings. Section 2. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, if any, by the President or by a majority of the duly elected directors. Such a meeting may be held either within or without the State of North Carolina, as fixed by the person or persons calling the meeting. Section 3. Notice of Meetings. Regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors shall, at least two (2) days before the meeting, give or cause to be given notice thereof by any debt service, and depreciation at that time and determined by the six-month financial statement of Employer as of June 30th and December 30th. For the purpose of this paragraph, debt service shall include any loan to the Employer for the purpose of conducting business which is payable over a period of one (1) year or more. SECTION FIVE: OTHER EMPLOYMENT Employee shall devote a sufficient amount of his time, attention, knowledge, and skills solely to the business and interests of Employer, Employer shall be entitled to all of the benefits, profits, or other issues arising from or incident to all work, services, and advice of Employee and Employee shall not. during the term of this Agreement, be interested directly or indirectly, in any manner, as partner, officer, director, shareholder, advisor, employee, or in any other capacity in any other business similar to Employer's business or any allied trade; provided, however, that nothing contained in this section shall be deemed to prevent or to limit the right of the Employee to invest any of his money in the capital stock or other securities of any corporation whose stock or securities are publicly owned or are regularly traded on any public exchange, nor shall anything contained in this section be deemed to prevent Employee from investing or limiting Employee's right to invest his money in real estate. Furthermore, Employer acknowledges that the Employee currently has a substantial business relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, which relationship the Employee shall not have to terminate during the term of this Agreement. The Employer acknowledges that nothing contained in this section shall prevent or limit the right of the Employee to continue his relationship with Mayflower Holdings, Inc. and Mayflower Capital, LLC, during the term of this Agreement, nor shall anything contained in this section prevent or limit the right of the Risk Factors The Shares offered hereby involve a high degree of risk including, without limitation, network marketing industry compliance, ability to manage growth, history of losses and uncertainty of future profits, refund policy and money back guaranty, dependence on IRSRs, dependence on third party manufacturers, possible need for additional financing, immediate and substantial dilution, no dividends, experience of management, competition, rescission offer, prior transactions with affiliates, independent board members, suppliers, dependence on consumer spending, limited prior underwritings, no prior market, control by current shareholders and the effect of outstanding options and shares eligible for future sale. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000948072_birner_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000948072_birner_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2bd89a72afaf84a079574bf772d02600274abd8d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000948072_birner_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed in- formation and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes (i) no exercise of the Underwriters' over-allotment option, (ii) the filing and effectiveness of certain amendments to the Company's Amended and Re- stated Articles of Incorporation, and (iii) the conversion of certain convert- ible debentures into 1,633,142 shares of Common Stock, effective upon the con- summation of the Offering (the "Conversion of Debentures"). THE COMPANY The Company acquires, develops, and manages geographically dense dental prac- tice networks in select markets, currently including Colorado and New Mexico. With its 30 Offices in Colorado, the Company believes, based on industry knowl- edge and contacts, that it is the largest provider of dental management serv- ices in Colorado. The Company and its dental practice management model, which was developed by the Company's President, Mark Birner, D.D.S., provide a solu- tion to the needs of dentists, patients, and third-party payors by allowing the Company's affiliated dentists to provide high-quality, efficient dental care in patient-friendly, family practice settings. Dentists practicing at the Offices provide comprehensive general dentistry services, and the Company increasingly offers specialty dental services through affiliated specialists. The Company manages 34 Offices, of which 28 were acquired and six were de novo develop- ments. The success of the Company's dental practice network in Colorado has led to its expansion into New Mexico and its evaluation of additional markets. The dental services industry is undergoing rapid change throughout the United States. The industry is highly fragmented, with approximately 153,300 active dentists in the United States in 1995, of which nearly 88% practiced either alone or with one other dentist. Dental services generally have not been cov- ered by third-party payment arrangements and consequently have been paid for by individuals on an out-of-pocket basis. More recently, factors such as increased consumer demand for dental services and the desire of employers to provide en- hanced benefits for their employees have resulted in an increase in third-party payment arrangements for dental services. These third-party payment arrange- ments include indemnity insurance, preferred provider plans and capitated man- aged dental care plans. Current market trends, including the rise of third- party payment arrangements, have contributed to the increased consolidation of practices in the dental services industry and to the formation of dental prac- tice management companies. The Company's focus is to manage its dental practice networks to provide op- timum settings for dentists to develop long-term relationships with patients by providing them with high-quality dental care. The Company affiliates with high- quality dentists, and builds its Offices around designated managing dentists who are given the benefits of owning their own practices without the capital commitment and administrative burdens. In addition, managing dentists are pro- vided economic incentives to improve the operating performance of their Of- fices. The Company assumes responsibility for non-dental functions within its networks, allowing its affiliated dentists to concentrate on providing dental care to patients. While the Company's primary emphasis is on fee-for-service business, it has significant experience with capitated managed dental care con- tracts, which are used to optimize revenue mix and facility utilization. The Company's strategy is to become the leading dental practice management company in the markets it serves. The key elements of the Company's strategy include (i) developing and operating geographically dense dental practice net- works, (ii) capitalizing on its flexible growth strategy, (iii) enhancing oper- ating performance of the Offices, (iv) capturing specialty service revenue, and (v) developing brand identity. The Company's expansion program is flexible, allowing the Company to enter new markets and develop its dental practice networks through a variety of means. The Company has demonstrated its ability to make acquisitions of large group practices, to acquire solo and small group practices, and to develop de novo Offices. The Company believes its experience in identifying, acquiring and integrating solo and small group practices will become increasingly important, as the majority of dentists practice either alone or with one other dentist. The Company believes that its experience with multiple expansion methods allows it to capitalize on the opportunities presented by a market and provides a significant competitive advantage. The Company's expansion program involves certain risks. See "Risk Factors--Risks Associated with Acquisition Strategy" and "--Risks Associated with De Novo Office Development." The Company began operations in October 1995 with the intention of becoming the leading dental practice management company in Colorado. Birner has experi- enced significant growth and margin improvement, and the Company's net income has increased from losses of ($160,000) and ($335,000) for the years ended De- cember 31, 1995 and 1996, respectively, to net income of $236,000 for the nine months ended September 30, 1997. Dental office revenue, net from the Company's Colorado operations increased from $4.6 million during the nine months ended September 30, 1996 to $11.4 million during the nine months ended September 30, 1997, and contribution from dental offices (net revenue less direct expenses incurred in connection with the operation of the Offices) increased from $651,000 to $2.0 million during these respective periods. A substantial portion of these increases results from practice acquisitions made by the Company dur- ing these periods. With respect to the seven practices acquired in Colorado in May 1996 (the "Family Dental Acquisition"), during the six months prior to the Family Dental Acquisition, dental office revenue, net for the seven practices was $2.3 million, contribution from dental offices was ($185,000) and contribu- tion margin (contribution from dental offices as a percentage of dental office revenue, net) was (8.0)%. During the six months immediately following the Fam- ily Dental Acquisition and the implementation of the Company's dental practice management model, dental office revenue, net for these seven practices in- creased to $2.6 million, contribution from dental offices increased to $367,000 and contribution margin increased to 14.1%. The five de novo Offices opened by the Company between January 8, 1996 and July 15, 1996 generated dental office revenue, net of $1.3 million during the six months ended June 30, 1997, had contribution from dental offices of $227,000 during this period, and had a con- tribution margin of 17.5% during this period. THE OFFERING <TABLE> <S> <C> Common Stock offered: By the Company........................ 1,533,816 shares By the Selling Shareholders........... 266,184 shares Common Stock to be outstanding after the Offering.......................... 6,362,993 shares (1) Use of Proceeds........................ For the repayment of certain indebted- ness, for potential acquisitions and development of new Offices, and for working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol................................ BDMS </TABLE> - -------- (1) Includes (i) 1,633,142 shares of Common Stock to be issued simultaneously with the consummation of the Offering in connection with the Conversion of Debentures and (ii) 34,387 shares of Common Stock issued on August 15, 1997 upon the exercise of certain warrants. Excludes (i) 306,721 shares of Com- mon Stock reserved for issuance upon exercise of options outstanding as of October 31, 1997 under the Birner Dental Management Services, Inc. 1995 Em- ployee Stock Option Plan (the "Employee Plan") at a weighted average exer- cise price of $5.65 per share, (ii) 149,303 shares of Common Stock reserved for issuance upon exercise of options outstanding as of October 31, 1997 under the Birner Dental Management Services, Inc. 1995 Stock Option Plan for Managed Dental Centers (the "Dental Center Plan") at a weighted average exercise price of $5.12 per share, and (iii) 381,040 shares of Common Stock reserved for issuance upon exercise of warrants outstanding as of October 31, 1997 at a weighted average exercise price of $3.81 per share. See "Man- agement" and "Shares Eligible for Future Sale." As used in this Prospectus, "P.C." means any professional corporation operating a dental practice with which the Company has entered into a management agree- ment, "Office" means any dental practice managed by the Company, and "de novo Office" means an Office that has been developed by the Company internally, as compared to a previously existing dental practice that has been acquired. The "Additional 1996 Acquisitions" means three separate acquisitions of solo prac- tices in July and August 1996 which were consolidated into existing Offices, the acquisition of an interest in and the right to manage one solo practice in August 1996, and one additional acquisition of a solo practice in September 1996. The "Early 1997 Acquisitions" means the three practices acquired through separate acquisitions of solo practices in February 1997, April 1997, and May 1997, and the acquisition of an interest in and the right to manage one solo practice in April 1997. The "Late 1997 Acquisitions" means the two practices acquired through separate acquisitions of solo practices in August 1997. The "Gentle Dental Acquisition" means the acquisition of a group of nine practices in September 1997. All references herein to industry, financial and statistical information are based on trade articles and industry reports that the Company believes to be reliable and representative of the dental services industry at the date of this Prospectus. SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, INCEPTION ---------------------------- -------------------------------------- TO DECEMBER 31, 1996 PRO FORMA 1997 PRO FORMA 1995 (1) 1996 AS ADJUSTED (2)(3) 1996 1997 AS ADJUSTED (3)(4) --------------- -------- ------------------ -------- -------- ------------------ <S> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Dental office revenue, net.................... $ 448 $ 7,189 $ 15,833 $ 4,555 $ 10,492 $ 14,961 Less -- amounts retained by dental offices...... 148 1,882 4,453 1,140 2,647 4,157 -------- -------- -------- -------- -------- -------- Net revenue............. 300 5,307 11,380 3,415 7,845 10,804 Management service fee revenue................ -- 66 66 -- 739 739 -------- -------- -------- -------- -------- -------- Total net revenue....... 300 5,373 11,446 3,415 8,584 11,543 Direct expenses......... 306 4,602 10,099 2,764 6,592 8,947 -------- -------- -------- -------- -------- -------- Contribution from dental offices................ (6) 771 1,347 651 1,992 2,596 Corporate expenses-- General and administra- tive.................. 149 722 1,056 611 875 1,227 Acquisition costs...... -- -- -- -- 252 252 Depreciation and amor- tization.............. 4 58 58 35 71 71 -------- -------- -------- -------- -------- -------- Operating (loss) income................. (159) (9) 233 5 794 1,046 Interest (expense) income, net............ (1) (326) (63) (162) (553) (22) -------- -------- -------- -------- -------- -------- (Loss) income before income taxes........... (160) (335) 170 (157) 241 1,024 Income taxes............ -- -- 64 -- 5 384 -------- -------- -------- -------- -------- -------- Net (loss) income....... $ (160) $ (335) $ 106 $ (157) $ 236 $ 640 ======== ======== ======== ======== ======== ======== Net (loss) income per common share........... $ (.06) $ (.10) $ .02 $ (.05) $ .06 $ .09 ======== ======== ======== ======== ======== ======== Weighted average common shares outstanding..... 2,786 3,426 5,959 3,425 3,634 6,801 <CAPTION> SEPTEMBER 30, 1997 ---------------------------- PRO FORMA ACTUAL AS ADJUSTED(5) -------- ------------------ <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............ $ 1,323 $ 10,662 Working capital......... 230 10,249 Total assets............ 15,123 23,687 Long-term debt, less current maturities..... 10,361 335 Total shareholders' equity................. 1,590 21,326 <CAPTION> YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, INCEPTION ---------------------------- -------------------------------------- TO DECEMBER 31, 1996 PRO FORMA 1997 PRO FORMA 1995 (1) 1996 AS ADJUSTED (2)(3) 1996 1997 AS ADJUSTED --------------- -------- ------------------ -------- -------- ------------------ <S> <C> <C> <C> <C> <C> <C> SELECTED OPERATING DATA: Number of dental offices (6).................... 4 18 34 18 34 34 Number of dentists (6)(7)................. 6 24 49 24 53 53 Total net revenue per office................. $ 74,990 $298,513 $336,661 $189,724 $252,455 $339,509(3)(4) </TABLE> - -------- (1) The Company was formed on May 17, 1995, and had no substantial operations until October 1, 1995. (2) Gives effect to (i) the Family Dental Acquisition, (ii) the Additional 1996 Acquisitions, (iii) the Early 1997 Acquisitions, (iv) the Late 1997 Acqui- sitions, and (v) the Gentle Dental Acquisition, all as if they had been completed on January 1, 1996. See "Pro Forma Consolidated Financial Infor- mation," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business -- Expansion Program -- Recent Acqui- sitions." (3) Gives effect to the Conversion of Debentures and to the completion of the Offering at the assumed initial public offering price of $10.00 per share and the receipt and application of the estimated net proceeds therefrom as if such transactions had been completed as of the beginning of the respec- tive periods presented, or for the Conversion of Debentures, from the date of issuance. See "Use of Proceeds," "Capitalization," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) Gives effect to (i) the Early 1997 Acquisitions, (ii) the Late 1997 Acqui- sitions, and (iii) the Gentle Dental Acquisition, as if they had been com- pleted on January 1, 1997. See "Pro Forma Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business -- Expansion Program -- Recent Acquisitions." (5) Gives effect to (i) the Conversion of Debentures, and (ii) the completion of the Offering at the assumed initial public offering price of $10.00 per share and the receipt and application of the estimated net proceeds there- from, all as if such transactions had been completed on September 30, 1997. See "Use of Proceeds," "Capitalization," "Pro Forma Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business -- Expansion Program -- Recent Acquisitions." (6) Data is as of the end of the respective periods presented. (7) Includes general dentists employed by the P.C.s, but excludes specialists who are independent contractors. ---------------- The address of the Company's executive offices is 3801 East Florida Avenue, Suite 208, Denver, CO 80210 and its telephone number is (303) 691-0680.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000948421_iridium_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000948421_iridium_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d87446b85fcac46efd2144692b11280968f88385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000948421_iridium_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by reference to the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. See the Glossary included as Annex A hereto for the definitions of certain terms used in this Prospectus. On February 26, 1997, the Company effected a 100 for 1 stock split (the "Stock Split") of the Company's Class A Common Stock. On May 9, 1997, Iridium effected a 75 for 1 subdivision of its Class 1 Membership Interests whereby each existing Class 1 Interest was subdivided into 75 Class 1 Interests (the "Class 1 Interest Subdivision"). Unless otherwise indicated all information contained in this Prospectus reflects the Stock Split and the Class 1 Interest Subdivision and assumes that the over-allotment options granted to the Underwriters are not exercised. In this Prospectus, reference to "dollars" and "$" are United States dollars. THE COMPANY AND IRIDIUM Iridium LLC ("Iridium") is developing and commercializing a global mobile wireless communications system that will enable subscribers to send and receive telephone calls virtually anywhere in the world -- all with one phone, one phone number and one customer bill. The IRIDIUM communications system (the "IRIDIUM System") will combine the convenience of terrestrial wireless systems with the global reach of Iridium's satellite system. The IRIDIUM System encompasses four components: the "space segment," which will include the low earth orbit satellite constellation and the related control facilities; the ground stations or "gateways," which will link the satellites to terrestrial communications systems; the IRIDIUM subscriber equipment, which will provide mobile access to the satellite system and terrestrial wireless systems; and the terrestrial wireless interprotocol roaming infrastructure, which will facilitate roaming among the IRIDIUM satellite system and multiple terrestrial wireless systems that use different wireless protocols. Launch of the first five IRIDIUM satellites occurred on May 5, 1997, and Iridium expects to commence commercial operations in September 1998. The satellite constellation is being designed, assembled and delivered in orbit by Motorola, Inc. ("Motorola"), a leading international provider of wireless communications systems, phones and pagers, semiconductors and other electronic equipment. Motorola is also the principal investor in Iridium, having provided direct investments and guarantees totaling over $1.26 billion, and a conditional commitment to guarantee up to an additional $350 million of borrowings. Iridium's other strategic investors include leading wireless communications service providers from around the world, as well as experienced satellite manufacturers and experienced launch providers. Iridium World Communications Ltd., a Bermuda company (the "Company"), is the issuer of the Class A Common Stock offered hereby. Upon consummation of the Offerings and application of the net proceeds therefrom to purchase Class 1 Membership Interests in Iridium ("Class 1 Interests"), the Company will be admitted as a member of Iridium and is expected to own approximately 7.2% of the outstanding Class 1 Interests (approximately 8.2%, if the Underwriters' over-allotment options are exercised in full). See "Dilution." The shares of Class A Common Stock are equity securities of the Company and do not represent interests in Iridium. IRIDIUM SERVICES AND MARKET Global mobile satellite service ("MSS") systems such as the IRIDIUM System are designed to address two broad trends in the communications market: (i) the worldwide growth in the demand for portable wireless communications -- according to industry sources, the worldwide wireless communications market had approximately 135 million subscribers at year-end 1996 and is estimated to grow to over 400 million subscribers by year-end 2000; and (ii) the growing demand for communications services to and from areas where landline or terrestrial wireless service is not available or accessible. The IRIDIUM System architecture and IRIDIUM voice, data, facsimile and paging services ("IRIDIUM Services") are primarily designed to serve customers who place the greatest value on global mobile communications services. Iridium believes there is a significant market comprised of individuals and businesses who need global communications capability and are willing to pay for the convenience of a hand-held wireless phone or belt-worn pager. The availability of terrestrial wireless communications service is often constrained by the limited --------------------- CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF CLASS A COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." --------------------- FORWARD LOOKING INFORMATION Iridium is a development stage enterprise. Accordingly, all statements in this Prospectus that are not clearly historical in nature are forward looking. Examples of such forward looking statements include the statements concerning Iridium's operations, prospects, markets, size of addressable markets for mobile satellite services, technical capabilities, funding needs, financing sources, pricing, launch schedule, commercial operations schedule, the estimate of the last year in which Iridium will have negative cash flow and a net increase in year-end borrowings, and future regulatory approvals, as well as information concerning expected characteristics of competing systems and expected actions of third parties such as equipment suppliers, gateway operators, service providers and roaming partners. These forward looking statements are inherently predictive and speculative and no assurance can be given that any of such statements will prove to be correct. Actual results and developments may be materially different from those expressed or implied by such statements. See "Risk Factors" for a discussion of various factors which, among others, could result in any of such forward looking statements proving to be inaccurate. geographic coverage of terrestrial systems, the incompatibility of differing wireless protocols or the absence of roaming agreements among wireless operators. The combination of IRIDIUM Cellular Roaming Service ("ICRS"), IRIDIUM Satellite Services and IRIDIUM paging will extend wireless access globally and allow customers of Iridium to be reached by phone or pager, and to place phone calls from or to, virtually anywhere in the world with one phone and one phone number. ICRS is expected to enable customers to roam on an international basis among terrestrial wireless networks, including those using different protocols, that have roaming agreements with Iridium. IRIDIUM Satellite Services will extend voice services to the regions of the world not served by terrestrial systems. Iridium intends to offer global paging both in combination with IRIDIUM voice services and as a stand-alone service. Iridium believes that the signaling capabilities of the IRIDIUM System will enable Iridium to track the location of a voice customer effectively and with minimal customer cooperation, thereby allowing Iridium to direct pages and calls as customers travel globally. Iridium also expects to offer, commencing in 1999, a broad range of in-flight passenger communications services with participating airlines, including global incoming and outgoing voice, data and facsimile services. In addition, Iridium expects to market IRIDIUM Services to governmental, industrial and rural users of wireless communications systems. Iridium believes it will be the only wireless communications system in operation prior to 2000 that will be able to offer this array of global communications services. See "Risk Factors -- Consequences of Satellite Service Limitations on Customer Acceptance" and "-- Consequences of IRIDIUM Phone and Pager Characteristics on Customer Acceptance." To estimate potential demand for its services, Iridium has engaged in extensive market analysis, including primary market research which involved screening over 200,000 persons and interviewing more than 23,300 individuals from 42 countries and 3,000 corporations with remote operations. Based on this market analysis, Iridium has identified five target markets for IRIDIUM Services: traveling professionals; corporate/industrial; government; rural; and aeronautical. Iridium expects the traveling professional and corporate/industrial markets will provide most of the demand for IRIDIUM Services. Iridium believes that individuals in these markets are more likely to need and have the ability to afford hand-held, global mobile communications capability than, for example, individuals who live in remote areas outside existing distribution channels for wireless communications services. Iridium estimates that the addressable traveling professional market, which it defines as all employed adults living in urban areas who own a wireless phone and travel at least four times per year beyond the coverage of their current wireless phone, will include approximately 42 million individuals by 2002. The global corporate/industrial addressable market, which consists of companies with more than 1,000 employees in industries with operations that are likely to need mobile satellite services, is estimated by Iridium to include over 8,800 companies by 2002. Iridium believes that its unique service package is well tailored to meet the demands of, and will give Iridium an advantage over competing MSS systems in, these target markets. For a more detailed description of Iridium's target markets see "Business -- The IRIDIUM Market," and for a discussion of the forward looking nature of Iridium's estimates, and various of the factors which could cause actual addressable markets to differ materially from these estimates, see "Risk Factors -- Risk of Error in Forward Looking Statements." THE IRIDIUM SYSTEM The satellite constellation of the IRIDIUM System, which will consist of 66 operational satellites arranged in six polar orbital planes, is being assembled and delivered in orbit by Motorola pursuant to a fixed price contract, subject to certain adjustments. Motorola also will operate and maintain the satellite constellation for five years (extendible to seven years at Iridium's option) under a fixed price contract, subject to certain adjustments. Iridium believes the IRIDIUM System will have greater signal strength than other proposed MSS systems, thereby allowing it to better serve hand-held phones and providing a higher degree of in-building penetration for paging services. The IRIDIUM System utilizes adaptations of proven technologies, including GSM cellular call processing technology, intersatellite links, FDMA/TDMA radio transmission technology, a 2,400 bps vocoder and business support software. The IRIDIUM satellites will feature cross-link antennas allowing telephone calls and signaling information to be passed globally from satellite to satellite. These intersatellite links, which enable the satellites to function as switches in the sky, will allow the IRIDIUM System to (i) select the optimal space-to-ground path of each call, thereby enhancing system reliability and capacity while reducing the costs associated with the use of terrestrial phone systems, (ii) communicate with subscribers in all regions of the world (including mid-ocean and remote areas) regardless of their proximity to a gateway, (iii) provide full global coverage with a relatively small number of gateways, thereby lowering total ground segment build-out and operating costs and (iv) provide enhanced ability to track the location of a voice customer, allowing Iridium to direct calls and pages as customers travel globally. In addition, the communications, station keeping and control systems of the IRIDIUM satellites can be upgraded, maintained and reconfigured in orbit through the remote loading of software. Iridium believes that its primary technological challenge in implementing the IRIDIUM System is the integration of these proven technologies into a single system. Iridium expects to provide virtually global service initially through 11 gateways, although it will be able to provide full global service with fewer gateways. Each of these 11 gateways will be owned, operated and financed by one or more investors in Iridium or their affiliates. IRIDIUM subscriber equipment will support voice, data and paging services. Iridium expects that portable, hand-held IRIDIUM phones will be manufactured by at least two experienced suppliers, Motorola and Kyocera Corporation ("Kyocera"), both of which have hand-held IRIDIUM phones under development. The phones are expected to be available in satellite-only and "multi-mode" models. The multi-mode phone being developed by Motorola uses changeable terrestrial radio cassettes ("TRCs") which can be inserted into the phone. TRCs will be developed for most major terrestrial wireless protocols so that with a single multi-mode phone and the appropriate TRCs, a subscriber will be able to access the IRIDIUM System and most terrestrial wireless systems. Kyocera's multi-mode phone is expected to be configured as a satellite phone casing into which terrestrial wireless phones using different protocols can be inserted. The IRIDIUM belt-worn pager, to be manufactured by Motorola, will have the capability to receive alphanumeric messages virtually anywhere in the world. ICRS will support roaming among the two principal types of terrestrial wireless protocols -- IS-41 (AMPS, NAMPS and CDMA) and GSM (GSM900, DCS1900 and DCS1800). Roaming between these protocols requires cross protocol translation which will be accomplished for ICRS through the IRIDIUM Interoperability Unit ("IIU"), being developed under the direction of Motorola. The IIU will permit system management information, including customer authentication and location, to be relayed between systems that use different technologies. PRICING STRATEGY, DISTRIBUTION AND MARKETING Iridium intends to implement a pricing strategy for its voice services similar to the prevailing pricing structure for terrestrial wireless calls. Prices for terrestrial wireless calls generally reflect two components -- a charge based on the landline "dial-up" rate for a comparable call (primarily the long distance charges) and a mobility premium for the convenience of wireless service (including any roaming charges). Pricing for both IRIDIUM Satellite Services and ICRS is expected to be based on this structure. For international IRIDIUM Satellite Services calls, which Iridium expects will constitute the majority of calls over the IRIDIUM satellite system, the "dial-up" rate component will be designed to approximate the rates for comparable landline point-to-point international long distance calls. Iridium has analyzed and will continue to analyze published international direct dial rates around the world as well as published international calling card rates of many of the largest international telecommunications carriers in establishing the "dial-up" rate component. Iridium intends to set the global mobility premium with reference to the premium charged by other wireless services, including cross-protocol international terrestrial wireless roaming services and competing MSS systems. Iridium will set the wholesale prices for its services to allow for a suggested retail price that will approximate the "dial-up" plus mobility premium price. Iridium's wholesale price will be designed to compensate Iridium, as the network provider, and the originating and terminating gateways, as well as to cover the PSTN tail charges. The home gateway will mark up the wholesale price and the service provider will establish the final retail price. Iridium expects that for international wireless calls, Iridium's suggested retail prices will be competitive with other global MSS systems. In addition, from a regulatory approval perspective in markets where the monopoly telecommunications provider and the licensing authority are the same entity, a pricing strategy that takes into account the "dial-up" alternatives allows Iridium to respond to concerns that Iridium will capture the local monopoly provider's long-distance revenues by undercutting terrestrial "dial-up" rates. For ICRS pricing, the "dial up" rate component is primarily the long distance charge, if any, which will be passed through to the customer. The mobility premium will be set to compensate the parties involved, primarily the serving network for its airtime charges, the visited gateway for customer authentication and Iridium for protocol translation services. The retail price will include the markup of the home gateway and service provider. Iridium believes that its ICRS suggested retail prices will be comparable to prices charged by other cross-protocol roaming services. In addition to airtime charges, IRIDIUM subscribers will pay a monthly subscription fee in the same manner that terrestrial wireless customers pay monthly charges. Iridium will permit service providers that are wireless network operators to offer IRIDIUM Services as additional features to their existing wireless services, permitting their customers to remain customers of the wireless network and to roam onto the IRIDIUM System. These customers will pay a feature charge to Iridium for the roaming privilege that will be significantly below the IRIDIUM monthly subscription fee, but they will pay an additional roaming premium for calls made over the IRIDIUM System. Initially, Iridium paging subscribers will pay a fixed monthly subscription fee for unlimited paging. Iridium expects to implement per page pricing after commencement of commercial operations, with the cost per page based, in part, on the size of the geographic area covered by the page. The monthly paging subscription fees will be reduced for persons who are also subscribers to IRIDIUM voice services. Iridium's distribution strategy reflects its role as a wholesaler of IRIDIUM Services and is primarily designed to leverage off established retail distribution channels by using existing distributors of wireless services as IRIDIUM service providers and marketing IRIDIUM Services to their customers. Iridium will implement the distribution of IRIDIUM Services through its gateway operators, all of which have agreed to become or to engage IRIDIUM service providers within their exclusive gateway territories. IRIDIUM service providers will generally have primary responsibility for marketing IRIDIUM Services within their territories in accordance with marketing policies and programs established by Iridium. They will also be responsible for customer service, billing and collection. Iridium anticipates its gateway operators will generally seek to utilize more than one method of distribution in their markets. Iridium expects that its service providers also will include affinity partners (e.g., airlines, hotels and car rental companies). Iridium's marketing strategy is to position IRIDIUM as the premier brand in global wireless communications services. Iridium believes that its principal target markets -- traveling professional and corporate/industrial -- can be accessed through established marketing channels, which will permit more effective marketing compared to MSS systems targeting individuals in remote areas where marketing opportunities and distribution channels are limited. Iridium is coordinating with its gateway partners to determine the optimum allocation of marketing expenditures based on the market analysis that Iridium has conducted. Iridium plans to engage in direct marketing to certain markets, such as the utility, oil and gas, mining and maritime industries. Iridium believes that a coordinated and comprehensive global marketing strategy, supported by its market research, will promote a consistent message and permit Iridium to establish a global brand identity. IRIDIUM'S INVESTOR GROUP The IRIDIUM investor team includes enterprises from around the world with skills and experience in developing, manufacturing, licensing and distributing satellite and telecommunications products and services. Iridium's strategic investors have collectively invested, or committed to invest, approximately $3.34 billion in Iridium, including equity, debt, guarantees, conditional commitments to provide guarantees and a reserve capital call. These investments represent more than 77% of Iridium's projected total funding needs through the end of September 1998, the month Iridium expects to commence commercial operations, and approximately 67% of Iridium's projected total funding needs through December 31, 1999, the last year in which Iridium projects negative cash flow and a net increase in year-end borrowings. By partnering with strategic investors, Iridium benefits from the development, manufacturing and launch expertise of leading worldwide satellite development and launch organizations and from the wireless telecommunications distribution and regulatory expertise of leading telecommunications companies. The Iridium investor team includes leading telecommunications companies in North America (Motorola, Sprint and BCE Mobile Communications Inc.), Europe (STET and o.tel.o communications GmbH) and Asia (DDI in Japan, UCOM in Thailand and Korea Mobile Telecommunications). Iridium expects that these investors will use their wireless communications sales and services organizations to market IRIDIUM Services and equipment in their territories, which include their existing base of approximately 14 million wireless subscribers. In addition, because of the prominence of many of these investors, Iridium believes that their efforts to obtain necessary regulatory approvals have been, and will continue to be, of great importance. The investor team also includes organizations with significant satellite communications development, manufacturing and launch expertise including Raytheon, Lockheed Martin, Nuova Telespazio, Khrunichev and China Aerospace. Iridium expects subscriber equipment for use with the IRIDIUM System will be manufactured and sold by Motorola and Kyocera, two of the world's leading manufacturers of wireless phones. On May 30, 1997, South Pacific Iridium Holdings Limited ("SPI"), an indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation, purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant to the terms of its purchase agreement with Iridium, SPI exercised its right to defer payment of 60% of the total purchase price payable and is required to pay 10% of the total purchase price on or before November 15, 1997 and the remaining 50% on or before May 15, 1998. The total purchase price of such Class 1 Interests will increase to approximately $110 million in the event SPI elects in full its right to defer payment. All information in this Prospectus with respect to Class 1 Interests gives effect to the issuance of 7,500,000 Class 1 Interests to SPI. In connection with its investment in Iridium, SPI was allocated the South Pacific gateway service territory. PROGRESS TO DATE Iridium, Motorola and the various gateway owners have made substantial progress in the development and implementation of the IRIDIUM System and related activities and expect to commence global commercial service on schedule in September 1998. Satellite hardware development is substantially complete. By early May 1997, eight satellites had been produced, seven additional satellites had been assembled and were in testing and additional satellites were being produced at a rate of approximately five per month. The first five IRIDIUM satellites were launched on May 5, 1997. The initial satellite launch had been scheduled to occur in January 1997, but was postponed until May 1997 following the failure of a Delta II launch vehicle, the same type of launch vehicle McDonnell Douglas is using for Iridium satellite launches. Motorola has informed Iridium that it is in the process of reworking the original launch schedule with its launch service providers and currently believes that the new planned launch schedule should permit Iridium to meet its planned September 1998 commencement of commercial operations for the IRIDIUM System and that there will be no price adjustment under the Space System Contract, the Operations and Maintenance Contract or the Terrestrial Network Development Contract as a result of the initial launch delay. See "Risk Factors -- Potential for Delay and Cost Overruns -- Deployment of Satellites" and "-- Satellite Launch Risks -- Number of Launches; Compressed Launch Schedule." Motorola has completed construction of most of the terrestrial facilities necessary to command the in-space movements of the IRIDIUM System's satellites, including the Master Control Facility and the associated tracking, telemetry and command ("TT&C") facilities. The construction of the Iridium North America (Tempe, Arizona) and Nippon Iridium Corporation (Nagano, Japan) gateway facilities is substantially complete and the telecommunications equipment is being installed at both locations. Equipment procurement has commenced for seven other gateways pursuant to gateway equipment purchase agreements with Motorola. Motorola has produced a functional, unminiaturized prototype of the IRIDIUM phone, and Motorola has produced a functional prototype of the IRIDIUM belt-worn pager. Iridium has also made substantial progress in the development of its IRIDIUM business support systems, which will be used for the provision of its billing and customer support functions. See "Risk Factors" for a description of the risks that could impair the ability of Iridium to commence commercial operations on schedule in September 1998. Iridium has made significant progress to date in securing the worldwide regulatory approvals necessary to build and operate the IRIDIUM System. At the 1992 World Administrative Radiocommunications Conference ("WARC-92"), the International Telecommunications Union (the "ITU") allocated 16.5 MHz of spectrum in the 1610-1626.5 MHz band to MSS systems. The U.S. Federal Communications Commission (the "FCC") conditionally assigned the IRIDIUM System exclusive use of 5.15 MHz of the 16.5 MHz for use in the United States. The space segment of the IRIDIUM System has been licensed in the United States. Iridium believes that coordination through the ITU has been completed successfully between the IRIDIUM System and all existing or planned systems that have been identified under the ITU's coordination process. No other action is required from any other country to license the space segment. Three final and four experimental licenses to build and operate gateways have been received, including a final license with respect to the Iridium North America gateway in Tempe, Arizona. Each country in which Iridium intends to operate must authorize use of IRIDIUM subscriber equipment, including allocation of subscriber link frequencies. The FCC has issued a license covering IRIDIUM Satellite Services in the United States and six additional countries have granted conditional licenses for IRIDIUM Satellite Services in their respective countries. Iridium's gateway owners are dedicating substantial effort to obtaining licensing for IRIDIUM Satellite Services in the countries in their service territories with particular focus on obtaining licenses by the commencement of commercial operations in those countries which are expected to account for most of the demand for and usage of IRIDIUM Services. See "Risk Factors -- Risks Associated with Licensing and Spectrum Allocation -- Significant Regulatory Approvals Required for Operation of the IRIDIUM System," "-- Significant Remaining Regulatory Approvals" and "Regulation of Iridium" for a discussion of the conditions to these licenses and the additional regulatory approvals outside the United States that remain to be obtained. THE COMPANY The Company is organized to act as a member of Iridium and to have no other business. The Company will use the net proceeds from the Offerings to acquire Class 1 Interests. Upon consummation of the Offerings and application of the proceeds therefrom to purchase Class 1 Interests, the Company is expected to own approximately 7.2% of the outstanding Class 1 Interests (approximately 8.2% if the Underwriters' over-allotment options are exercised in full). See "Dilution" and "Governance of the Company and Relationship with Iridium." BUSINESS STRATEGY Iridium's strategy is to launch and operate the premier global mobile wireless network. The key components of this strategy are set forth below: Provide a unique service package to traveling professionals enabling them to be reached and make calls virtually anywhere in the world. IRIDIUM Satellite Services will complement terrestrial wireless services and provide the traveling professional with communications capability in areas where terrestrial wireless service is unavailable, inconvenient, of poor quality or unreliable. Iridium intends to offer ICRS and global paging as complements to IRIDIUM Satellite Services and as stand-alone services. Iridium believes that it will be the only wireless communications system in operation prior to 2000 that will be able to offer virtually global mobile voice and paging services, including: - Global coverage. An IRIDIUM subscriber will generally have worldwide wireless coverage wherever IRIDIUM Services are authorized, including mid-ocean and remote areas. The availability of the IRIDIUM Satellite Service will not be limited by the customer's proximity to a gateway. Iridium believes this feature will make its Satellite Services particularly well suited for aeronautical and shipping communications and for service in land areas where LEO MSS systems using "bent pipe" technology are not expected to have the more extensive gateway infrastructure needed by such systems to provide global coverage. - Convenient roaming onto terrestrial wireless networks. Iridium will offer subscribers a combination of IRIDIUM Satellite Services and ICRS. With the addition of ICRS, customers will be able to overcome (i) the incompatibility of differing wireless protocols and (ii) the service limitations of satellite-only voice services in buildings and urban canyons. Iridium expects to be able to deliver all of its voice services with one phone, one phone number and one customer bill. - Global paging with belt-worn pagers. The IRIDIUM belt-worn pager will have the capability of receiving alphanumeric messages of up to 63 characters and numeric messages of up to 20 digits virtually anywhere in the world. With Iridium's global paging, users of IRIDIUM Satellite Services or ICRS will generally be able to update their location on the IRIDIUM System by briefly turning on their phone, thereby allowing the IRIDIUM System to send a targeted page. Iridium believes that it will be the first company, and the only company prior to 2000, which will offer global paging to a belt-worn pager. - Greater signal strength. The IRIDIUM System is designed to provide greater signal strength than proposed competing MSS systems. Iridium believes this greater signal strength will allow it to better serve hand-held phones, and provide a higher degree of in-building signal penetration for pagers, than competing MSS systems. Be the first to market with a global wireless communications system. Iridium plans to capitalize on the substantial design, development, fabrication and testing efforts and financial investment to date of its strategic investors to bring IRIDIUM Services to market at the earliest practicable date, which is currently expected to be September 1998. Iridium believes that it will be the only wireless communications system in operation prior to 2000 that will be able to offer global mobile voice and paging services in each country in which IRIDIUM Services are authorized. Adapt proven technologies through an industrial team led by Motorola. The IRIDIUM System adapts proven technology, including GSM cellular call processing technology, intersatellite links, FDMA/TDMA radio transmission technology, a 2,400 bps vocoder and business support software. Iridium believes that the primary technological challenge is the integration of these proven technologies into a single system. Motorola, the principal investor in Iridium, is a leading international provider of wireless communications systems, cellular phones, pagers, semiconductors and other electronic equipment. The industrial team assembled by Motorola to build and deliver in orbit the IRIDIUM System consists of major companies experienced in aerospace and telecommunications, including Nuova Telespazio, Lockheed Martin, Raytheon, McDonnell Douglas, Khrunichev and China Aerospace. Capitalize on the strengths of its strategic investors. A number of Iridium's strategic investors provide telecommunications services in various parts of the world and have significant operating, regulatory and marketing experience in their service territories. Iridium expects that its investors with existing wireless communications sales and service organizations will use these organizations to market and distribute IRIDIUM Services and equipment to potential subscribers. Because of the prominence of many of these investors, Iridium believes that their efforts to obtain the necessary regulatory approvals have been, and will continue to be, of great importance. Utilize existing wireless distribution channels. Iridium's strategy is to target primarily traveling professionals, who are generally wireless phone users. Iridium's strategy is to provide customers with an enhancement to their existing terrestrial wireless service through existing marketing and distribution channels rather than to focus on individuals who have no or limited landline or wireless communications experience and live in areas where no marketing and distribution channels currently exist. SOURCES AND USES OF FUNDS BY IRIDIUM The following table describes the estimated sources and uses of funds by Iridium from its inception through the end of September 1998 (the month Iridium expects to commence commercial operations). Significant additional funds will be needed to cover Iridium's cash needs prior to its generation of positive cash flow from operations. The projection of total sources and total uses of funds is forward looking and could vary, perhaps substantially, from actual results, due to events outside Iridium's control, including unexpected costs and unforeseen delays. See "Risk Factors -- Risk of Error in Forward Looking Statements." PRE-OPERATIONAL PERIOD(1) (IN MILLIONS) <TABLE> <CAPTION> SOURCES OF FUNDS - ------------------------------------ <S> <C> Class 1 Interests(2)................ $1,728 Series A Class 2 Interests(3)....... 31 14 1/2% Senior Subordinated Notes due 2006(4)....................... 238 Guaranteed Bank Facility(5)......... 750 ------ Total.......................... 2,747 Estimated Net Proceeds to Iridium from the Offerings(6)............. 186 ------ Total after Offerings.......... 2,933 Reserve Capital Call(7)............. 243 Conditional Motorola Guarantee Commitment(8)..................... 350 Additional funding requirements(9)................... 835 ------ Total Pre-operational Sources...................... $4,361 ====== </TABLE> <TABLE> <CAPTION> USES OF FUNDS - ------------------------------------ <S> <C> Space System Contract(10)........... $3,450 Terrestrial Network Development Contract(11)...................... 179 Business support systems and other expenditures(12).................. 184 Net interest and financing costs(13)......................... 220 Net expenses and working capital(13)(14)................... 328 ------ Total Pre-operational net uses......................... $4,361 ====== </TABLE> - --------------- (1) Assumes that the IRIDIUM System will commence commercial operations in September 1998. Iridium anticipates total cash needs of $5.0 billion (net of assumed revenues following commencement of commercial operations) through year-end 1999, the last year in which Iridium projects negative cash flow and a net increase in year-end borrowings. Many factors, including Iridium's ability to generate significant revenues, could affect this estimate. See "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) Includes the investment of $100 million by South Pacific Iridium Holdings Limited ("SPI"), an indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation. On May 30, 1997, SPI purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant to the terms of its purchase agreement with Iridium, SPI exercised its right to defer payment of 60% of the total purchase price and is required to pay 10% of the total purchase price on or before November 15, 1997 and the remaining 50% on or before May 15, 1998. The aggregate purchase price of such Class 1 Interests will increase to approximately $110 million in the event SPI elects in full its right to defer payment. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) The Series A Class 2 Interests pay a 14 1/2% dividend which, at the option of Iridium, may be paid in-kind until 2001 and paid in cash thereafter. If all dividends permitted to be paid in-kind are paid in-kind, at the time when the Series A Class 2 Interests convert to a cash dividend, there will be 62,668 Series A Class 2 Interests outstanding convertible into 1,159,985 Class 1 Interests, subject to anti-dilution adjustments. (4) These Notes were issued with warrants to purchase 4,997,292 Class 1 Interests at a price of $.01 per Interest. (5) As of March 31, 1997, Iridium had drawn $665 million under a $750 million borrowing facility with a syndicate of banks (the "Guaranteed Bank Facility"). Borrowings under the Guaranteed Bank Facility are guaranteed by Motorola. The Guaranteed Bank Facility matures in August 1998. Iridium expects that it will be able to extend this facility through December 31, 2000. Motorola has conditionally committed to extend its guarantee to that date if the Guaranteed Bank Facility is so extended. In connection with its guarantee of the Guaranteed Bank Facility Motorola received a security interest in substantially all of Iridium's assets. Motorola's compensation for the $750 million guarantee is in the form of warrants to acquire additional Class 1 Interests at $.00013 per Class 1 Interest. The maximum number of warrants to be issued as compensation for the $750 million guarantee prior to the commencement of commercial operations would be warrants to purchase 11,250,000 Class 1 Interests (subject to anti-dilution adjustments). If the Guaranteed Bank Facility is extended beyond the commencement of commercial operations, the yearly warrant compensation proposed by Motorola would be warrants to purchase 900,000 Class 1 Interests at $.00013 per Class 1 Interest for each $100 million of guarantee commitments, beginning at the commencement of commercial operations (subject to anti-dilution adjustments). The Class 1 Interests acquired upon exercise of such warrants must be held for five years from the date of issuance of such Interests. See "Dilution." (6) Reflects the application of the estimated net proceeds of the Offerings to the purchase from Iridium of 10,000,000 Class 1 Interests at a price per Class 1 Interest equal to the net price per share of Class A Common Stock payable to the Company in the Offerings. Expenses of the Offerings, estimated to be $2,000,000, will be borne entirely by Iridium. See "Use of Proceeds." (7) Seventeen of Iridium's investors have made varying reserve capital call commitments to purchase an aggregate of 18,206,550 Class 1 Interests at $13.33 per Class 1 Interest for an aggregate purchase price of approximately $243 million (the "Reserve Capital Call"). Iridium is required to exercise the Reserve Capital Call under certain conditions, including in the event of a prospective funding shortfall. See "Description of Iridium LLC Limited Liability Company Agreement -- Capital Contributions; Reserve Capital Call." (8) Motorola has made a conditional commitment to guarantee up to an additional $350 million of borrowings under the Guaranteed Bank Facility, for which Motorola would be compensated with additional warrants to purchase Class 1 Interests at $.00013 per Class 1 Interest. The maximum number of warrants to be issued as compensation for the additional $350 million guarantee, if implemented, would be warrants to purchase 3,750,000 Class 1 Interests (subject to anti-dilution adjustments) prior to commencement of commercial operations. See "Dilution." If such additional borrowing under the Guaranteed Bank Facility is extended beyond its August 1998 maturity date, Motorola has proposed additional warrant compensation beginning at commencement of commercial operations as described in note (5) above. (9) Iridium currently expects to satisfy its additional funding requirements through the incurrence of debt. Iridium is seeking to obtain a senior bank facility in an amount of up to approximately $1.7 billion. In addition to or in lieu of such bank facility, additional financing may need to be obtained through the issuance of equity or debt securities in the public or private markets. Iridium expects that in connection with any issuance of debt securities in the public or private market, equity compensation in the form of warrants to purchase shares of Class A Common Stock likely will be required. Iridium also expects that other methods of debt financings are likely to require guarantees or other forms of credit support and that compensation, including equity (which may be in the form of warrants) likely will be required for such guarantees. There are currently no agreements with Motorola or Iridium's other investors or vendors to provide such credit support. It is possible that some portion of Iridium's additional funding requirements may be met through the issuance of additional equity. Although Iridium believes that it will be able to meet its additional funding requirements, there can be no assurance that such financing will be available on favorable terms, on a timely basis, or at all. Among other things, the availability of any financing is subject to market conditions at the time of any proposed financing. See "Risk Factors -- Significant Additional Funding Needs" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (10) As of March 31, 1997, Iridium had incurred $2,284 million of this amount. See "Risk Factors -- Potential for Delay and Cost Overruns," "-- Risks Associated with Principal Supply Contracts" and "-- Satellite Launch Risks -- Impact of Excusable Delays." (11) As of March 31, 1997, Iridium had incurred $64 million of this amount. See "Risk Factors -- Risks Associated with Principal Supply Contracts." (12) As of March 31, 1997, Iridium had incurred $28 million of this amount. See "Risk Factors -- Risks Associated with Principal Supply Contracts." (13) Based on assumed interest rates and borrowing levels. Actual interest and financing costs will depend upon applicable interest rates and the amount and timing of actual borrowings. (14) Comprised of operating expenses of $587 million and net of interest income of $13 million and working capital of $246 million. THE OFFERINGS Class A Common Stock offered by the Company: U.S. Offering..................... 8,000,000 shares International Offering............ 2,000,000 shares Total.......................... 10,000,000 shares Class A Common Stock of the Company to be outstanding immediately after the Offerings..................... 10,000,000 shares(1) Iridium Class 1 Interests to be outstanding immediately after the Offerings......................... 139,219,150 Interests(1)(2) Iridium Class 1 Interests to be owned by the Company immediately following the Offerings........... 10,000,000 Interests(1) Use of Proceeds..................... The estimated net proceeds of the Offerings, including the net proceeds from any exercise of the Underwriters' over-allotment options, will be used by the Company to purchase Class 1 Interests in Iridium pursuant to the terms of the 1997 Subscription Agreement described under "Governance of the Company and Relationship with Iridium -- 1997 Subscription Agreement." Iridium will use the proceeds from such sale of the Class 1 Interests primarily to make milestone payments under the Space System Contract and the Terrestrial Network Development Contract and to a lesser extent for other general corporate purposes related to the commercialization of the IRIDIUM System. See "Use of Proceeds." Voting Rights....................... All voting rights with respect to the affairs of the Company, except as otherwise required by law, are vested in the holders of the Class A Common Stock. See "Governance of the Company and Relationship with Iridium" and "Description of Capital Stock." Nasdaq NMS Symbol................... IRIDF - --------------- (1) Assumes the Underwriters' over-allotment options are not exercised. If the over-allotment options are exercised in full, there will be 11,500,000 shares of Class A Common Stock, and 140,719,150 Class 1 Interests, outstanding immediately following the Offerings of which the Company will own 11,500,000 Interests. Does not reflect the issuance of shares of the Company's non-voting Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), to be issued in connection with the Company's Global Ownership Program or the application of the proceeds therefrom to acquire Class 1 Interests. Upon satisfaction of certain conditions, the shares of Class B Common Stock may be exchanged for shares of Class A Common Stock. There are no shares of Class B Common Stock outstanding. See "Governance of the Company and Relationship with Iridium -- Global Ownership Program" and "Description of Capital Stock." (2) This amount does not give effect to the issuance of any Class 1 Interests pursuant to options, warrants or convertible interests or pursuant to the Reserve Capital Call. See "Dilution."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000949112_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000949112_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d1c0379acabaa7ef13f63e8ab33525d46ababfd0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000949112_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and related notes thereto appearing elsewhere in this Prospectus. Information contained in this Prospectus includes "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995) which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "plans" or "anticipates" or variations thereon or comparable terminology or by a discussion of strategy. Because such statements include risks and uncertainties, actual results could differ materially from those expressed or implied by such forward-looking statements. This Prospectus also contains important cautionary statements identifying factors which may affect such future results. See "Risk Factors" for a discussion of certain of these factors and risks associated with an investment in the Common Stock. Except as noted otherwise, all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. Unless the context otherwise requires, the term the "Company" refers to American Coin Merchandising, Inc., a Delaware corporation, or prior to August 31, 1995, American Coin Merchandising, Inc. and affiliates. THE COMPANY The Company is a leading owner, operator and franchisor of coin-operated skill-crane machines ("Shoppes") that dispense stuffed animals, plush toys, watches, jewelry and other items through a national network of more than 9,000 machines operated by the Company and its franchisees. For up to 50c a play, customers maneuver the skill-crane into position and attempt to retrieve the desired item in the machine's enclosed display area before play is ended. The Shoppes are located in supermarkets, mass merchandisers, bowling centers, bingo halls, bars, restaurants, warehouse clubs and similar locations ("Retail Accounts") to take advantage of the regular customer traffic at these locations. Shoppes are currently located in Wal-Mart, Kmart, Safeway, Denny's, Kroger, and many other well-known Retail Accounts. The Company utilizes displays of quality merchandise, new product introductions, including Company-designed products, licensed products and seasonal items, and other merchandising techniques to attract new and repeat customers. The Company is beginning to expand into complementary vending businesses, including kiddie rides and bulk vending (candy, gum, novelty items, etc.). The number of Company owned and operated Shoppes has risen from 743 to 3,967 from 1993 to 1996, representing a compound annual growth rate of 74.8%. In 1996, the Company had record revenue and operating earnings of $38.3 million and $4.3 million. The Company's growth continued during the six month period ended June 30, 1997, when the Company had six month revenue and operating earnings of $26.1 million and $3.1 million, an increase of 59.3% and 104.2% over the comparable 1996 period. This growth resulted primarily from an increase in the installed base of Company owned and operated Shoppes from 2,904 as of June 30, 1996 to 4,792 as of June 30, 1997, or an increase of 65%. In 1996, Shoppes owned by the Company and its franchisees vended more than 7.25 million toys. The Company plans to increase the number of Shoppes it owns and operates by an average of at least 1,400 for 1997 and 1998 through a combination of acquisitions and new Shoppe placements. The Company believes that the Shoppes' potential economic return, visual appeal, product quality and the Company's high operational standards are important factors in gaining acceptance of the Company's Shoppes by Retail Accounts. The Company operates three types of Shoppes: (i) the Toy Shoppe which primarily dispenses stuffed animals and plush toys, (ii) the Treasure Shoppe which dispenses items such as jewelry and watches, and (iii) the Fun Shoppe which dispenses small toys and candy. Over 60% of the Company's Shoppe placements have been Toy Shoppes, which the Company purchases for an average price of $3,600. In 1996, a Toy Shoppe averaged $12,000 in revenue and over $4,200 in cash profit contribution (revenue minus cost of vended products, location commissions and direct service cost). The skill-crane industry has been in existence for over 75 years and is highly fragmented. Based on analysis of certain industry publications, the Company believes that there are approximately 50,000 units of prize-dispensing equipment in operation nationwide, of which skill-cranes are the most prevalent type, with the average skill-crane business operating 16 machines. With over 5,000 Company owned and operated Shoppes as of August 31, 1997, management believes the Company is the largest, and only national, owner and operator of skill-crane machines. The Company believes that supermarkets, mass merchandisers, bowling centers, bingo halls, bars, restaurants, warehouse clubs and similar locations, representing over 100,000 potential crane locations, are becoming increasingly aware of the economic benefits of amusement and vending machines, such as the Company's Shoppes, which can provide retailers greater revenue and profits per square foot than alternative uses of available floor space, with minimal expense. BUSINESS STRATEGY The Company's business strategy is to differentiate itself from traditional skill-crane operators by (i) offering products of higher quality than the carnival-type products that have been associated with skill-crane and other prize-dispensing equipment; (ii) utilizing appealing merchandise displays, frequent new product introductions, including Company-designed products, licensed products and seasonal items, and other merchandising techniques designed to attract customers; (iii) controlling product cost by purchasing products in large quantities directly from manufacturers; (iv) closely monitoring Shoppe revenue per product dispensed (the "Vend Ratio") to maintain customer satisfaction and optimize Shoppe revenue and profitability; (v) concentrating the placement of its Shoppes in Retail Accounts; (vi) providing major Retail Accounts with the timely installation and operation of an integrated system of Shoppes that can exceed 1,000 machines on a national basis; and (vii) providing comprehensive training for the Company's field office personnel and franchisees to assure the achievement of the Company's business objectives. The Company intends to focus on owning and operating Shoppes and does not currently intend to grant any additional franchises. GROWTH STRATEGY - Further penetration of existing geographic markets. As of August 31, 1997, the Company owned and operated over 5,000 Shoppes from a national network of 30 offices with operations in 40 states, which management believes makes the Company the largest, and only national, owner and operator of skill-crane machines. The Company believes this network is well positioned to serve the skill-crane operations of supermarkets, mass merchandisers, bowling centers, bingo halls, bars, restaurants, warehouse clubs and similar locations, which the Company estimates represent over 100,000 potential crane locations. - Increase penetration of existing Retail Accounts. The Company and its franchisees are designated skill-crane operators for many regional and national Retail Accounts including Wal-Mart, Safeway, Kroger and franchised Denny's. The Company believes opportunities exist to increase penetration within its existing Retail Accounts. For example, while the Company already owned and operated 1,465 Shoppes in Wal-Mart as of August 31, 1997, over 250 stores have yet to be installed under the Wal-Mart contract. - Target marketing efforts towards new large Retail Accounts. The Company believes the attractive economic returns its Shoppes offer and its demonstrated success with installing and operating a significant number of Shoppes in Retail Accounts such as Wal-Mart and Safeway will allow it to successfully target new national and regional Retail Accounts. In only twelve months (ended June 30, 1997), the Company installed over 1,200 Shoppes in Wal-Mart stores. - Capitalize on relationships with existing Retail Accounts. The Company believes it can capitalize on its existing relationships with Retail Accounts to expand the number and type of amusement and vending machines its employees service at each location. Already the Company has introduced multiple Shoppes at individual locations and is beginning to introduce kiddie rides and bulk vending into its system. - Acquire franchisees and other complementary vending businesses. The Company has undertaken six (6) acquisitions since January 1, 1996 (see "Recent Acquisitions") acquiring over 600 Shoppes, significant franchised territories and a bulk vending and kiddie ride business. The Company plans to pursue acquisition opportunities in order to increase the number of Company owned machines and to acquire franchised territories and other complementary businesses. RECENT ACQUISITIONS As part of the Company's growth strategy, since January 1996 it has undertaken the following six (6) acquisitions: - Hoosier Coin Company. The Company's former franchisee for Indiana, including 156 Shoppes, was purchased in January 1996 for consideration of approximately $0.5 million. - Northern Coin Company. The Company's former licensee for portions of Colorado, including 40 Shoppes, was purchased in May 1996 for consideration of approximately $0.5 million. - Sugarloaf of Utah. The Company's former franchisee for Utah, including 213 Shoppes, was purchased in July 1996 for consideration of approximately $0.9 million. - Sugarloaf West. The Company's former franchisee for portions of Colorado, including 37 Shoppes, was purchased in August 1996 for consideration of approximately $0.2 million. - Sugarloaf, Inc. The Company's former franchisee for the states of Louisiana and Oklahoma and portions of Missouri, Illinois and Texas, including 202 Shoppes, was purchased in July 1997 for consideration of approximately $1.7 million. - Quality Amusements Corp. and Quality Entertainment Corp. On September 12, 1997, the Company executed an agreement to purchase the assets of these operators of bulk vending machines and kiddie rides for consideration of approximately $1.8 million, which is scheduled to close November 1, 1997. The Company was incorporated in Colorado in July 1988 and was reincorporated in Delaware in July 1995. The Company's principal executive offices are located at 5660 Central Avenue, Boulder, Colorado 80301 and its telephone number is (303) 444-2559. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company.................. 1,000,000 shares Common Stock Offered by the Selling Stockholders..... 1,000,000 shares(1) Common Stock Outstanding after the Offering.......... 6,449,904 shares(2) Use of Proceeds...................................... To repay bank debt, purchase additional Shoppes, fund acquisitions and for working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol........................ "AMCN" </TABLE> - --------------- (1) Excludes 300,000 shares of Common Stock which is subject to the Underwriters' over-allotment option. See "Underwriting." (2) Excludes (i) 329,500 shares of Common Stock issuable upon exercise of stock options at a weighted average exercise price of $7.76 per share outstanding as of August 31, 1997, and (ii) 125,000 shares of Common Stock issuable upon exercise of certain warrants which have an exercise price of $8.40 per share. See "Management -- Stock Option Plan" and " -- Non-Employee Directors' Stock Option Plan." SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> SIX MONTHS TWELVE ENDED MONTHS YEAR ENDED DECEMBER 31, JUNE 30, ENDED ---------------------------------------------- ----------------- JUNE 30, 1992 1993 1994 1995 1996 1996 1997 1997 ------ ------- ------- ------- ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS DATA: Revenue........................................ $7,784 $10,508 $17,614 $25,714 $38,267 $16,417 $26,147 $47,997 Gross profit................................... 2,557 3,403 5,008 7,959 11,325 4,707 7,796 14,414 General and administrative expense............. 2,098 2,854 3,607 4,565 7,053 3,203 4,725 8,575 Operating earnings............................. 459 549 1,401 3,394 4,272 1,504 3,071 5,839 Net earnings................................... 516 321 1,082 2,575 2,586 876 1,765 3,475 Pro forma net earnings(1)...................... 320 199 671 2,549 Net earnings per share(2)...................... $ 0.48 $ 0.16 $ 0.33 $ 0.64 Weighted average common shares(2).............. 5,417 5,449 5,381 5,447 COMPANY OPERATING DATA: Revenue growth................................. -- 35.0% 67.6% 46.0% 48.8% 37.9% 59.3% Operating earnings growth...................... -- 19.6 155.2 142.3 25.9 0.7 104.2 Gross margin................................... 32.9% 32.4 28.4 31.0 29.6 28.7 29.8 Operating earnings margin...................... 5.9 5.2 8.0 13.2 11.2 9.2 11.7 Pro forma net earnings margin(3)............... 4.1 1.9 3.8 9.9 6.8 5.3 6.8 NUMBER OF SHOPPES(4): Company operations............................. 284 743 1,019 2,057 3,967 2,904 4,792 Franchise operations........................... 1,788 2,148 3,008 3,455 3,981 3,522 4,195 ------ ------- ------- ------- ------- ------- ------- Total.................................. 2,072 2,891 4,027 5,512 7,948 6,426 8,987 ====== ======= ======= ======= ======= ======= ======= </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------- ACTUAL AS ADJUSTED(5) ------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $ 1,958 $10,881 Total assets................................................ 24,695 33,618 Total short-term debt and current portion of long-term debt...................................................... 1,101 1,101 Total long-term debt, excluding current portion............. 6,760 725 Total stockholders' equity.................................. 13,467 28,425 </TABLE> - --------------- (1) During the years 1992 through August 1995, the Company and each of the Chicago Toy Company, the Georgia Toy Company, Inland Merchandising, Inc., Lehigh Valley Toy Company, Performance Merchandising, Inc., Southwest Coin Company, Sugarloaf, Ltd. and Sugarloaf Marketing Inc., (the "Affiliated Entities") were organized as either S corporations or a partnership and the taxable income of the Company and the Affiliated Entities was attributable directly to their respective stockholders or partners during such periods. Accordingly, net income has been adjusted to reflect federal and state income taxes as if such taxes had been incurred for such period at an estimated effective rate of 38%. See Note 1 of Notes to the Financial Statements included herein. (2) Net earnings per share and weighted average common shares are not presented for 1992 through 1995 because the Company and each of the Affiliated Entities were organized as S corporations or a partnership. On a pro forma basis, net earnings per share and weighted average common shares would have been $0.55 and 4,669,000 respectively, for 1995. See Note 14 of Notes to the Financial Statements included herein. (3) Net earnings margin for 1992 through 1995 is based on pro forma net earnings. (4) Shoppes previously owned and operated by the Affiliated Entities, other than Sugarloaf Marketing, are included in Company operations. Shoppes previously owned and operated by Sugarloaf Marketing are included in franchise operations on a historical basis. The number of Shoppes is as of the end of the indicated period. (5) Adjusted to give effect to the sale of the 1,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $16.125 per share and after deduction of underwriting discounts and commissions and estimated offering expenses and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000949173_aviron_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000949173_aviron_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cb422076c12743517b5ea679617605c2c47e0792
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000949173_aviron_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," appearing elsewhere in this Prospectus. THE COMPANY Aviron is a biopharmaceutical company whose focus is the prevention of disease through innovative vaccine technology. The Company's goal is to become a leader in the discovery, development, manufacture and marketing of live virus vaccines which are sufficiently cost effective to justify their use in immunization programs targeting the general population. Live virus vaccines, such as those for smallpox, polio, measles, mumps and rubella, have had a long record of success in preventing, and in some cases eliminating, disease. The Company's lead product candidate, a live cold adapted intranasal influenza vaccine, was recently shown to provide a high protection rate against influenza, with minimal adverse effects, in a pivotal Phase III clinical trial in children. Aviron is developing this vaccine for administration to children, healthy adults and the elderly and high risk individuals. The Company recently filed an Investigational New Drug Application ("IND") for a live intranasal vaccine for Parainfluenza Virus Type 3 ("PIV-3") and the Company plans to initiate Phase II clinical trials for this vaccine candidate by the end of 1997. The Company is also developing a subunit vaccine for Epstein-Barr Virus ("EBV"), in collaboration with SmithKline Beecham Biologicals, S.A. ("SmithKline Beecham"), which is expected to enter Phase I/II clinical trials in Europe by the end of 1997. In addition, Aviron is using its proprietary "Rational Vaccine Design" technology to discover new live virus vaccines. Rational Vaccine Design involves the deletion or modification of virulence proteins, the alteration of the virus' genetic control signals to slow down its replication, or the addition of antigenic information to enhance the virus' stimulation of the immune system. The Company is applying this technology to develop vaccine candidates for the prevention of influenza in elderly persons and diseases caused by Cytomegalovirus ("CMV"), Herpes Simplex Virus Type 2 ("HSV-2") and Respiratory Syncytial Virus ("RSV"). Influenza. Influenza affects 35 to 50 million Americans each year resulting in approximately 20,000 deaths annually, primarily in the elderly, despite the availability of an injectable inactivated vaccine that has been reported to be 60% to 90% effective. The United States Food and Drug Administration (the "FDA") estimates that approximately 75 million doses of the injectable influenza vaccine were manufactured for use in the United States in 1996. Experts suggest that, although over half of Americans at high risk for complications from influenza receive the annual influenza vaccine, relatively few of the 70 million children under the age of 18 are vaccinated. In July 1997, the National Institute of Allergy and Infectious Diseases ("NIAID") of the National Institutes of Health ("NIH") and the Company announced the results of an initial analysis of the first stage of a pivotal Phase III clinical trial of Aviron's live cold adapted intranasal influenza vaccine involving 1,602 children. In this trial, the vaccine demonstrated a 93% protection rate against culture-confirmed influenza in those children receiving two doses of the vaccine, the primary endpoint of the study. Only 1% of the children who received two doses experienced culture-confirmed influenza, compared to 18% of those receiving placebo. These results were statistically significant. To date, the data have not yet been peer-reviewed, however, the clinical investigators intend to submit findings of this trial in 1997 for publication in a peer-reviewed medical journal. The Company plans to conduct the second stage of this Phase III clinical trial during the 1997/98 influenza season to collect immunogenicity data, as well as additional safety and efficacy data. In 1996, the Company completed a Phase II challenge study of this vaccine in 92 adults which demonstrated an 85% protection rate, compared to placebo, against culture-confirmed influenza. These results were also statistically significant. Previously, Aviron conducted Phase I/II clinical trials of this vaccine in approximately 600 children and healthy adults. Prior to Aviron's in-licensing of the cold adapted vaccine, formulations of this vaccine had been tested in over 7,000 patients. The cold adapted influenza vaccine elicits an immune response similar to that of the natural infection by stimulating mucosal immunity in the nose, cellular components of the immune system and circulating antibodies. Aviron intends to develop the live cold adapted influenza vaccine for widespread annual use in children and adults, and for co-administration with the inactivated injectable vaccine for improved protection in the elderly. In addition, Aviron is developing a genetically engineered influenza vaccine that is intended to be a better immune stimulus in the elderly than either the cold adapted vaccine or the inactivated vaccine alone, and, therefore, more suitable for use as a single-dose vaccine in this population. Parainfluenza Virus Type 3. PIV-3 is a common respiratory virus of childhood which causes croup, cough, fever and pneumonia. Over 80% of children have been infected by age four, many having experienced several cases of PIV-3 infection. The Company has in-licensed the rights to a bovine PIV-3 ("bPIV-3") vaccine from the NIH which has been tested in over 100 infants, children and adults for prevention of PIV-3 illness. Aviron has submitted an IND for a Phase II clinical trial which the Company expects to begin by the end of 1997. Epstein-Barr Virus. EBV infects most people at some point in their lifetime. At least half of the approximately 10% of students who first become infected with the virus in high school and college develop infectious mononucleosis. EBV also has been shown to be a contributing factor in the development of certain types of cancer and lymphoma. The Company has delivered clinical trial materials to SmithKline Beecham to begin a Phase I/II clinical trial of the subunit vaccine, expected to be initiated by SmithKline Beecham in Europe by the end of 1997. Cytomegalovirus. Most people also become infected with CMV at some time in their lives, but the resulting disease is typically serious only for those with impaired immune systems or for babies of women infected in the first trimester of pregnancy. The Company has selected several Rational Vaccine Design candidates for clinical testing for the prevention of CMV disease. Herpes Simplex Virus Type 2. Genital herpes is an incurable disease characterized by recurrent, often painful genital sores, with over 700,000 new cases estimated in the United States each year. The Company currently is developing and evaluating several Rational Vaccine Design candidates in preclinical models to create a prophylactic vaccine. Respiratory Syncytial Virus. RSV is the major cause of lower respiratory tract illness in the very young, responsible for over 90,000 hospitalizations and more than 4,000 deaths per year in the United States. Aviron is using its Rational Vaccine Design technology to develop intranasal vaccine candidates to prevent RSV disease. Aviron has entered into, and intends to enter into additional, selected collaborative agreements to gain access to complementary technologies, capabilities and financial support for its programs. In addition to acquiring rights from third parties to augment its Rational Vaccine Design technology and the cold adapted influenza vaccine technology, the Company has entered into a collaborative agreement with SmithKline Beecham covering worldwide rights to its EBV vaccine, and a collaboration with Sang-A Pharm. Co., Ltd. ("Sang-A") involving certain marketing and manufacturing rights to the Company's products in Korea. In addition, the Company entered into a contract manufacturing agreement with Evans Medical Limited, a subsidiary of Medeva plc ("Evans"), for the commercial manufacture of its cold adapted influenza vaccine. The Company was incorporated in California in April 1992 as Vector Pharmaceuticals, Inc., changed its name to Aviron in February 1993, and reincorporated in Delaware in November 1996. The Company's executive offices are located at 297 North Bernardo Avenue, Mountain View, California 94043, and its telephone number is (415) 919-6500.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0000949874_young_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0000949874_young_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5c2d02af936185e3d51fd6142b4a1a381b648e5e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0000949874_young_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Young Innovations, Inc. was incorporated in July 1995 to serve as the parent corporation for Young Dental Manufacturing Company ("Young Dental"), founded at the turn of the century, and Lorvic Holdings, Inc. ("Lorvic") and its operating subsidiary, The Lorvic Corporation, founded in 1953; Lorvic was acquired by Young Dental in May 1995. Denticator International, Inc. ("Denticator") was acquired by the Company in July 1996. Young Dental International, Inc. ("YDI") was organized as an indirect, wholly-owned subsidiary in February 1996 to serve as a foreign sales corporation. Unless otherwise indicated, all references in this Prospectus to the "Company" include Young Dental, YDI, Lorvic and Denticator and all information is adjusted to reflect the 1.2 for one stock split of the Common Stock effected in the form of a stock dividend on October 15, 1997 and assumes no exercise of the Underwriters' over-allotment option. The following summary is qualified in its entirety by the detailed information and the Consolidated Financial Statements of the Company, Lorvic and Denticator, including the Notes thereto, included elsewhere in this Prospectus. With respect to information stated on a pro forma basis for 1996, such information includes the results of operations of Denticator as if the acquisition occurred on January 1, 1996. THE COMPANY The Company is a leading designer, manufacturer and marketer of single-use supplies, autoclavable instruments and other products used by dental professionals, primarily in preventive dentistry and infection control. The Company has grown and built a leading market share in certain segments of the preventive dentistry market which it believes is due to its (i) longstanding reputation for high quality, innovative and reliable products; (ii) widespread name recognition and ability to leverage the Young and Denticator brands; and (iii) consummation of the Lorvic and Denticator acquisitions. The Company's disposable and metal prophy angles, cups and brushes (collectively, "Prophy Products"), which are integral components used in the cleaning and polishing of teeth by dental professionals, represented 77.7% of the Company's pro forma net sales in 1996. The Company's branded Prophy Products currently have an estimated domestic market share of 53%, up from 22% in 1990. Additionally, the Company has developed and acquired aspiration and infection control products, as well as complementary preventive products such as pastes, fluorides and fluoride applicators. The Company markets its full line of products to dental professionals worldwide through a network of medical and dental product distributors. The Company actively supports its distributor relationships through Company sales personnel in the United States, independent sales representatives in Canada and exclusive sales representatives in 13 countries outside of North America. The Company also uses non-exclusive distributors to service markets in 40 other countries. All major distributors of dental products in North America sell the Company's products, including Patterson Dental Company ("Patterson"), Henry Schein, Inc. ("Schein"), Sullivan Dental Products, Inc. ("Sullivan") and H. Meer Dental Supply Company, Inc. ("Meer"). The Company's product development, manufacturing and marketing capabilities and its relationships with distributors allow the Company to provide a broad range of high quality, innovative and reliable products to dental professionals. Additionally, these capabilities and relationships enable the Company to quickly and efficiently offer new products or product extensions to its existing customer base and new markets. The Company's objective is to profitably establish the number one or two market share position for professional dental products in each of the market segments in which it competes. The Company strives to achieve its objective by enhancing and leveraging its name recognition and reputation; augmenting its proprietary manufacturing capabilities with additional automation, capacity and technology in order to maintain its low cost structure; and expanding its established lines of single-use products which generate a significant stream of recurring revenues and cash flows. The Company believes that its gross and operating profit margins of 55.6% and 27.3% of 1996 pro forma net sales, respectively, are the result of the successful implementation of these strategies. The Company plans to capitalize on its established market position by (i) pursuing strategic acquisitions of complementary businesses, product lines and key technologies; (ii) actively developing new dental products and product lines; and (iii) pursuing targeted international expansion. LINE DRAWING OF DISPOSABLE PROPHY ANGLE ATTACHING TO LOW SPEED HANDPIECE THE DISPOSABLE PROPHY ANGLE IS ATTACHED TO A LOW SPEED HANDPIECE. PHOTO OF DISPOSABLE PROPHY ANGLE IN USE ON TEETH THE PROPHY CUP IS FILLED WITH A PROPHY PASTE AND USED TO POLISH TEETH. LINE DRAWING OF RIGHT ANGLE STYLE DISPOSABLE PROPHY ANGLE LINE DRAWING OF CONTRA ANGLE STYLE DISPOSABLE PROPHY ANGLE DISPOSABLE PROPHY ANGLES ARE AVAILABLE IN RIGHT OR CONTRA ANGLE STYLES. The Company's established position in the professional dental products industry has enabled it to acquire successfully Lorvic in May 1995 and Denticator in July 1996. The Lorvic acquisition added complementary lines of aspiration and infection control products, as well as complementary preventive products such as pastes, fluorides and fluoride applicators. The Denticator acquisition built on the Company's market position by adding Prophy Product lines aimed at the popular price segment of the market, which the Company traditionally had not targeted. Preventive dentistry, including regular professional cleaning and polishing of teeth ("prophy" or "prophylaxis"), is effective in reducing the incidence of cavities, gingivitis and periodontal disease and, due to its cost effectiveness, is increasingly emphasized by private dental insurers, managed care providers and consumers. Based on data compiled by the Health Care Financing Administration ("HCFA"), total spending on dental products and services increased from $31.6 billion to $45.8 billion from 1990 to 1995, or 7.7% per annum, and is estimated to increase by 5.6% per annum from 1995 to 2005. The Company believes that the cost effectiveness of preventive dentistry, the increasing proportion of dental services paid for by third parties and the continued emphasis on infection control by dental professionals have led to and will continue to result in an increase in the sales of preventive dental and infection control products, particularly the Company's single-use products. In 1996, single-use products represented 92.9% of the Company's pro forma net sales. The Company believes that the dental industry is presently undergoing consolidation at three different levels. Dental service providers are combining as dental practice management companies acquire specialty and general dental practices. Professional dental product distributors are also undergoing consolidation as evidenced by Schein recently announcing its agreement to acquire Sullivan. The professional dental product manufacturing industry is highly fragmented with over 400 companies, many of which are small in size. The Company believes that many small manufacturers will be at an increasing disadvantage in the marketplace due to limited manufacturing and distribution resources, increasing regulatory requirements and pricing pressures resulting from the consolidation of distributors and dental service providers. As a result, the Company anticipates increasing consolidation among manufacturers and believes it is well positioned to make additional acquisitions due to its acquisition experience and approach, name recognition, manufacturing capabilities and established distribution network. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................. 2,000,000 shares Common Stock to be outstanding after the Offering... 6,410,296 shares(1) Use of Proceeds..................................... To repay indebtedness, for working capital needs and general corporate purposes, including potential acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............. YDNT </TABLE> - --------------- (1) Does not include 350,000 shares reserved for issuance under the Company's 1997 Stock Option Plan, of which options to purchase 230,800 shares of Common Stock will be issued immediately after the completion of the Offering at an exercise price equal to the initial public offering price. Also does not include an amount of shares not to exceed an aggregate value of $800,000 based upon the market value of the Common Stock on July 22, 1998, that may be issued to the President and Chief Executive Officer of Denticator in July 1998 in connection with the Denticator acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management -- Stock Option Plan and -- Employment Agreements." PHOTO OF LORVIC PRODUCT LINE SHOWING OVER THIRTY PRODUCTS LORVIC PRODUCTS INCLUDE A FULL LINE OF POLISHING PASTES, INFECTION CONTROL PRODUCTS AND ASPIRATORS. PHOTO OF DENTICATOR PRODUCT LINE SHOWING OVER THIRTY PRODUCTS DENTICATOR PRODUCTS INCLUDE DISPOSABLE PREVENTIVE PRODUCTS INCLUDING PROPHY AND HOME CARE PRODUCTS. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, ------------------------------------------------------------- ------------------------------- PRO FORMA PRO FORMA AS ADJUSTED AS ADJUSTED 1992 1993 1994 1995 1996(1) 1996(2) 1996 1997 1997(2) ------- ------- ------- ------- ------- ----------- ------- ------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales................ $ 9,932 $11,604 $12,036 $17,496 $21,580 $24,568 $15,087 $18,214 $18,214 Cost of goods sold....... 5,126 5,609 5,457 7,379 9,470 10,896 6,430 7,343 7,343 ------- ------- ------- ------- ------- ------- ------- ------- ------- Gross profit............. 4,806 5,995 6,579 10,117 12,110 13,672 8,657 10,871 10,871 Selling, general and administrative expenses............... 2,640 2,825 3,063 4,494 5,790 6,976 3,989 5,490 5,490 ------- ------- ------- ------- ------- ------- ------- ------- ------- Income from operations... 2,166 3,170 3,516 5,623 6,320 6,696 4,668 5,381 5,381 Interest expense......... 75 268 189 741 974 -- 700 895 -- Other expense (income), net.................... (257) 29 (124) (320) 123 119 258 (17) (17) ------- ------- ------- ------- ------- ------- ------- ------- ------- Income before provision for income taxes....... 2,348 2,873 3,451 5,202 5,223 6,577 3,710 4,503 5,398 Provision for income taxes.................. -- 700 1,270 2,044 1,955 2,459 1,367 1,716 2,056 ------- ------- ------- ------- ------- ------- ------- ------- ------- Net income............... $ 2,348 $ 2,173 $ 2,181 $ 3,158 $3,268 $ 4,118 $ 2,343 $ 2,787 $ 3,342 ======= ======= ======= ======= ======= ======= ======= ======= ======= Earnings per share(3).... $ 0.49 $ 0.71 $ 0.74 $ 0.66 $ 0.53 $ 0.63 $ 0.54 ======= ======= ======= ======= ======= ======= ======= Weighted average common shares outstanding..... 4,450 4,450 4,450 4,450 4,444 6,274 4,450 4,410 6,240 Pro forma net income(4).............. $ 1,479 $ 1,805 ======= ======= Pro forma earnings per share(4)............... $ 0.33 $ 0.41 ======= ======= </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 --------------------- AS ACTUAL ADJUSTED(5) ------- ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................. $(5,905) $ 9,470 Total assets.............................................. 32,566 38,856 Total debt (including current maturities)................. 13,741 21 Stockholders' equity...................................... 13,098 34,744 </TABLE> - --------------- (1) On July 22, 1996, the Company acquired Denticator. The income statement data for the year ended December 31, 1996, include results of operations for Denticator from July 22, 1996, through December 31, 1996. The balance sheet data as of December 31, 1996, include Denticator as of that date. (2) Pro forma as adjusted to give effect to (i) the acquisition of Denticator, including the incurrence of additional indebtedness related thereto as if the acquisition was completed on January 1, 1996; and (ii) the application of $18.3 million of the net proceeds of the Offering to repay all indebtedness of the Company which would have been outstanding as of January 1, 1996. Pro forma earnings per share assumes 4,444,003 and 4,409,914 weighted average shares outstanding for 1996 and the nine months ended September 30, 1997, respectively, plus 1,830,000 shares, representing those shares of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share (net of underwriting discount and Offering expenses), sufficient to repay $18.3 million of indebtedness which would have been outstanding as of January 1, 1996. The pro forma information is not necessarily indicative of the results that actually would have been achieved if the Denticator acquisition had been consummated on January 1, 1996, or that may be achieved in the future. See "Use of Proceeds" and "Young Innovations, Inc. and Denticator International, Inc. Unaudited Pro Forma Financial Information." (See footnotes on following page) (Footnotes from preceding page) - --------------- (3) The Company plans to retire substantially all of its outstanding indebtedness using a portion of the net proceeds from the Offering. Assuming the Company's revolving line of credit and long-term borrowings were retired as of January 1, 1996, supplementary earnings per share would be $0.50 and $0.57 for the nine months ended September 30, 1996, and 1997, respectively, reflecting the elimination of interest expense, net of income taxes, of $441,000 for 1996 and $555,000 for 1997. Supplementary earnings per share assumes 4,450,210 and 4,409,914 weighted average shares outstanding for the nine months ended September 30, 1996 and 1997, respectively, plus 1,170,000 and 1,460,000 shares, representing those shares of Common Stock sold at an assumed initial public offering price of $11.00 per share (net of underwriting discount and Offering expenses) and the application of the net proceeds therefrom sufficient to retire $11.5 million and $14.4 million of average outstanding borrowings for the nine months ended September 30, 1996 and 1997, respectively. (4) Until February 28, 1993, Young Dental had elected to be treated as an S Corporation for income tax purposes. Effective March 1, 1993, Young Dental terminated its S Corporation status and became a taxable entity. Assuming Young Dental was a C Corporation, the estimated additional pro forma provision for income taxes would have been $869,000 for 1992 and $368,000 for 1993, assuming an income tax rate of 37.0%. (5) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock offered by the Company hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001000368_firstplus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001000368_firstplus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c2fa81326fe3241dbc84303f9cdf3247096f8850
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001000368_firstplus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FACTORS SET FORTH UNDER "RISK FACTORS" BELOW SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE "COMPANY" REFER TO RAC FINANCIAL GROUP, INC. AND ITS SUBSIDIARIES. EXCEPT AS OTHERWISE NOTED HEREIN, ALL INFORMATION IN THIS PROSPECTUS RELATING TO THE COMPANY'S CAPITAL STOCK HAS BEEN ADJUSTED TO REFLECT COMMON STOCK SPLITS OF 67-FOR-ONE AND TWO-FOR-ONE IN JULY 1995 AND NOVEMBER 1996, RESPECTIVELY. UNLESS THE CONTEXT INDICATES OTHERWISE, (I) ALL REFERENCES TO THE COMPANY'S ORIGINATION OF STRATEGIC LOANS INCLUDES BULK PURCHASES OF LOANS ("BULK LOANS"), (II) ALL REFERENCES HEREIN TO "COMMON STOCK" INCLUDE THE COMPANY'S NON-VOTING COMMON STOCK (AS HEREINAFTER DEFINED), AND (III) THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS WILL NOT BE EXERCISED. THE COMPANY RAC Financial Group, Inc. is a specialized consumer finance company that operates under the trade name FIRSTPLUS. The Company originates, purchases, services and sells consumer finance receivables, substantially all of which are debt consolidation or home improvement loans secured primarily by second liens on real property. The Company offers uninsured home improvement and uninsured debt consolidation loans ("Conventional Loans") and to a lesser extent partially insured Title I home improvement loans ("Title I Loans"). The Company sells substantially all of its Conventional Loans and Title I Loans that meet its securitization parameters (collectively, the Company's "strategic loans") primarily through its securitization program and retains rights to service these loans. The Company originated and purchased an aggregate of $227.9 million and $1.1 billion of strategic loans in the fiscal years ended September 30, 1995 and 1996, respectively. For fiscal 1995 and 1996, the Company had total revenues of $33.9 million and $198.1 million, respectively, Gain on Sale (as hereinafter defined) of loans, net (but before provision for possible credit losses), of $29.1 million (of which $4.1 million was related to non-strategic loans) and $158.6 million (of which $8.4 million was related to non-strategic loans), respectively, and net income of $5.8 million and $34.2 million, or $0.28 and $1.31 per share on a fully diluted basis, respectively. The Company relies principally on the creditworthiness of the borrower for repayment of Conventional Loans. The Company's borrowers typically have limited access to consumer financing for a variety of reasons, primarily insufficient home equity values. The Company uses its own credit evaluation criteria to classify its applicants as "A+" through "D" credits. The Company currently makes loans only to borrowers it classifies as "C+" or better for Conventional Loans and "C" or better for Title I Loans. The Company's credit evaluation criteria include, as a significant component, the credit evaluation scoring methodology developed by Fair, Isaac and Company ("FICO"), a consulting firm specializing in creating default-predictive models through scoring mechanisms. For fiscal 1995 and 1996, 76.7% and 83.2%, respectively, of the Company's Conventional Loan originations were classified by the Company as "B" borrowers or better. The Company's principal origination channel is its network of regional independent correspondent lenders. Correspondent lenders tend to be commercial banks, thrifts or finance companies that do not have the infrastructure to hold and service portfolios of Conventional and Title I Loans. The Company's correspondent lenders originate Conventional and Title I Loans using the Company's underwriting criteria and sell these loans to the Company. During fiscal 1995 and 1996, the Company originated loans through correspondent lenders ("Correspondent Loans") of $81.9 million and $1.0 billion, respectively, representing 68.5% and 93.9%, respectively, of the Company's originations of strategic loans during such years (excluding Bulk Loans). In early 1996, the Company expanded its efforts to originate loans directly to qualified homeowners ("Direct Loans"). The Company originates Direct Loans through television, radio and direct mail advertising campaigns and referrals from independent home improvement contractors. The Company is pursuing a strategy to increase its Direct Loan originations because the Company believes that Direct Loans should prove to be more profitable and allow the Company to have better control over the quality and size of the Company's production. The Company originated $906,000 and $45.1 million in Direct Loans in fiscal 1995 and 1996, respectively, representing 0.4% and 4.0%, respectively, of the Company's originations of strategic loans during such periods (excluding Bulk Loans). The Conventional Loans originated by the Company in fiscal 1995 and 1996 had an average principal amount of approximately $17,426 and $27,671, respectively, and had a weighted average interest rate of 15.1% and 14.5% per annum, respectively. Conventional Loans originated by the Company in fiscal 1995 and 1996 had a weighted average stated maturity of 14.6 years and 18.7 years, respectively, and an average FICO score of 629 and 662, respectively. See "Business--Underwriting." Title I Loans are insured, subject to certain exceptions, for 90% of the principal balance and certain interest costs under the Title I credit insurance program (the "Title I Program") administered by the Federal Housing Administration (the "FHA"). The Title I Loans originated by the Company in fiscal 1995 and 1996 had an average principal amount of approximately $15,160 and $17,414, respectively, and a weighted average interest rate of 14.5% and 13.9% per annum, respectively. The Company sells substantially all of the Conventional Loans and Title I Loans it originates and purchases through its securitization program and generally retains rights to service such loans. The Company sold approximately $234.8 million and $723.1 million of strategic loans through securitization transactions during fiscal 1995 and 1996, respectively. The Company earns servicing fees on a monthly basis ranging from 0.75% to 1.00% on the loans it services in the various securitization pools. At September 30, 1996, the principal amount of strategic loans serviced by the Company (the "Serviced Loan Portfolio") was $1.3 billion. The Serviced Loan Portfolio includes strategic loans held for sale and strategic loans that have been securitized and are serviced by the Company (including $68.0 million of loans subserviced by a third party). The Company is a Nevada corporation that was formed in October 1994 to combine the operations of SFA: State Financial Acceptance Corporation ("SFAC"), a home improvement lender formed in January 1990, and FIRSTPLUS Financial, Inc. ("FIRSTPLUS Financial"), formerly Remodelers National Funding Corporation, an approved Title I home improvement lender formed in April 1986 (the "Combination"). The Company's principal offices are located at 1250 West Mockingbird Lane, Dallas, Texas 75247, and its telephone number is (214) 630-6006. BUSINESS STRATEGY The Company's goal is to become a leading consumer finance company by implementing the following strategies: RISK MANAGEMENT. The Company intends to maintain loan underwriting quality by continuing to refine and employ its proprietary scoring technology. The Company expects to add personnel to its loan processing staff and to utilize advancements in computer technology to provide prompt turnaround, efficient underwriting procedures and accurate credit verification. The Company will continue to refine its credit information in order to improve its underwriting and its risk-based pricing models. In addition, by focusing primarily on the creditworthiness of borrowers rather than the collateral, the Company believes that it will be able to differentiate itself from other participants in the market. PRODUCT ORIGINATION. The elements of this strategy include: BUILDING A NATIONAL FRANCHISE. The Company intends to develop consumer recognition of the FIRSTPLUS brand name through increased national television and local radio advertising, the use of celebrity spokespersons, such as star quarterback Dan Marino, and through direct mailings and telemarketing. EXPANDING DIRECT LOAN ORIGINATION CHANNEL. The Company believes that Direct Loans will become a larger percentage of its originations. In pursuit of that strategy, in November 1995 the Company acquired First Security Mortgage Corp., which the Company operates as its FIRSTPLUS East division ("FIRSTPLUS East"), in May 1996 the Company acquired Mortgage Plus Incorporated, renamed FIRSTPLUS Financial West, Inc. ("FIRSTPLUS West"), and in October 1996 the Company acquired National Loans, Inc. ("National"), a personal consumer loan company, each of which has certain direct-to-consumer lending capabilities. DEVELOPING THE PERSONAL CONSUMER FINANCE BUSINESS. Through the acquisition of personal consumer loan companies, such as National, the Company will seek to acquire retail branch locations from which it can originate personal consumer loans and strategic loans and develop brand name recognition. MITIGATING NEGATIVE CASH FLOW. The Company expects to increase its interest income and, therefore, reduce the amount of cash used in its operating activities by maintaining a significant quantity of loans on its balance sheet as "loans held for sale, net" and by acquiring and/or developing companies in related businesses that generate positive cash flow. INCREASING THE CORRESPONDENT LENDER NETWORK. The Company intends to further develop its Correspondent Loan business by increasing its network of regional independent correspondent lenders. HIRING EXPERIENCED MANAGEMENT. In order to effectively manage its growth, the Company intends to continue to pursue the hiring of experienced personnel to expand its marketing, underwriting and servicing capabilities. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company.......................... 4,200,000 shares The Selling Stockholders............. 1,800,000 shares Common Stock to be outstanding after the Offering......................... 33,770,688 shares (1) Use of Proceeds........................ To reduce outstanding indebtedness, to fund loan originations and for general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol.......... "RACF" </TABLE> - ------------------------ (1) Excludes an aggregate of 7,013,471 shares of Common Stock issuable upon exercise of presently outstanding options and warrants and upon conversion of the Company's 7.25% Convertible Subordinated Notes due 2003 (the "Convertible Notes"). See "--Recent Developments--Recent Financial Results,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001000512_household_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001000512_household_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..64ca77005eaed33bdda5d5097a08d8088683b4a4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001000512_household_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary of certain pertinent information is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Reference is made to the Index of Defined Terms for the location of the definitions of certain capitalized terms. ISSUER........................... The Household Consumer Loan Trust 1997-2 (the "Issuer"), a Delaware business trust to be formed by the Seller and the Owner Trustee pursuant to the Trust Agreement (the "Trust Agreement"). SECURITIES ISSUED BY THE ISSUER........................... The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class B Notes and the Certificates. The Notes will be issued pursuant to the Indenture and will be secured by the Trust Assets (as defined below). Pursuant to the terms of the Indenture, the Class B Notes will be subordinate to the Class A Notes, the Class A-3 Notes will be subordinate to the Class A-2 and Class A-1 Notes and the Class A-2 Notes will be subordinate to the Class A-1 Notes. The Certificates will be issued by the Issuer pursuant to the Trust Agreement. The Certificates will be subordinate to the Notes pursuant to the terms of the Indenture. The Notes represent obligations solely of the Issuer and do not represent interests in or obligations of the Seller, the Servicer, the Deposit Trustee, the Owner Trustee, the Indenture Trustee or any affiliate thereof, except to the extent described herein. None of the Notes, the Series 1997-2 Participation or the Credit Lines are insured or guaranteed by any governmental agency or instrumentality. Only the Class A Notes are offered hereby. A. THE CLASS A-1 NOTES......... $912,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-1 Notes"). THE CLASS A-2 NOTES......... $48,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-2 Notes"). THE CLASS A-3 NOTES......... $90,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-3 Notes"). Collectively, the Class A-1 Notes, Class A-2 Notes and the Class A-3 Notes are referred to herein as the "Class A Notes". The Class A Notes will be issued pursuant to the Indenture (the "Indenture") between the Issuer and The Bank of New York, as indenture trustee (the "Indenture Trustee"). B. THE CLASS B NOTES........... $57,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class B Notes"). The Class B Notes will be issued pursuant to the Indenture and are not offered hereby. C. THE CERTIFICATES............ $42,000,000 Consumer Loan Asset Backed Certificates, Series 1997-2 (the "Certificates"). The Certificates will be issued pursuant to the Trust Agreement and are not offered hereby. The Certificates will represent fractional undivided beneficial interests in the Issuer. TRUST ASSETS..................... The "Trust Assets" include (i) a participation interest (the "Series 1997-2 Participation") in (x) the Receivables arising under the Credit Lines and the proceeds thereof, and (y) the preferred stock of the Seller held by the Deposit Trustee (the "Preferred Stock") and (ii) monies on deposit in certain accounts of the Issuer for the benefit of Securityholders. In addition to the Trust Assets, as described herein, payments to Noteholders will be supported by the Overcollateralization Amount, the subordination of certain classes of Notes to other classes of Notes and by the subordination of the Certificates to the Notes. See "Description of the Deposit Trust" herein for a description of the Preferred Stock of the Seller held by the Deposit Trust. SELLER........................... Household Consumer Loan Corporation is a corporation organized under the laws of the State of Nevada and is a wholly-owned special purpose subsidiary of Household Finance Corporation ("HFC"). The Seller purchases Receivables from the Subservicers (as defined below). The Seller then sells the Receivables and all rights with respect thereto to the Deposit Trust. See "Description of the Deposit Trust -- Assignment of Receivables" herein. DEPOSIT TRUST.................... Household Consumer Loan Deposit Trust I (the "Deposit Trust") is a common law trust. Texas Commerce Bank National Association acts as trustee for the Deposit Trust. The Deposit Trust previously issued participation interests in the pool of Receivables in connection with the issuance of other series of asset-backed securities. It is expected that the Deposit Trust will issue additional participation interests from time to time (each participation interest, a "Series Participation Interest"). Each Series Participation Interest will be issued in connection with the issuance of a series of securities (each, a "Series"). See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. A participation interest was also issued to the Seller (the "Seller's Interest") which at any point in time represents the entire undivided beneficial interest in the Deposit Trust not represented by the outstanding Series Participation Interests. The Series 1997-2 Participation will be the only Series Participation Interest held by the Issuer. SERVICER......................... HFC, a subsidiary of Household International, Inc., is the servicer of the Credit Lines pursuant to the Pooling and Servicing Agreement dated as of September 1, 1995 (the "Pooling and Servicing Agreement") among the Seller, the Deposit Trustee and the Servicer. Each Credit Line is subserviced by the appropriate Subservicer (as defined below) on behalf of HFC as Servicer. SUBSERVICERS..................... Household Realty Corporation, Household Finance Corporation of California, Household Finance Corporation II, Household Finance Corporation III, Household Finance Industrial Loan Company, Household Finance Realty Corporation of New York, Household Financial Center Inc., Household Finance Corporation of Alabama, Household Finance Corporation of Nevada, Household Finance Realty Corporation of Nevada, Household Industrial Loan Company of Kentucky, Household Finance Industrial Loan Company of Iowa, Household Finance Consumer Discount Company, Household Industrial Finance Company and Mortgage One Corporation (collectively, the "Subservicers" and each individually, a "Subservicer"), are wholly-owned subsidiaries of HFC, licensed to make and service consumer loans in the states in which the Credit Lines were originated. The Subservicers originated the Credit Lines or purchased them from third parties. ADMINISTRATOR.................... HFC is the Administrator pursuant to an Administration Agreement to be dated as of November 1, 1997 (the "Administration Agreement") among HFC, the Seller, the Issuer and the Owner Trustee. Pursuant to the Administration Agreement, HFC will perform certain duties of the Issuer, the Owner Trustee and the Seller under the Indenture and the Trust Agreement. See "Description of the Securities -- Administration Agreement" herein. THE CREDIT LINES................. The Credit Lines which generate the Receivables held by the Deposit Trust consist of a portion of the total pool of revolving consumer credit lines originated or purchased by the Subservicers (and any other consumer lending affiliates of HFC that become Subservicers) from time to time (the "Portfolio"). The Credit Lines are designated to the Deposit Trust and are required to satisfy the criteria set forth in the Pooling and Servicing Agreement for Eligible Credit Lines (as defined herein). The Receivables arising under each Credit Line, whether existing on the applicable Cut-Off Date (as defined herein) for such Receivables or thereafter generated have been or will be sold by the Subservicers to the Seller, which has sold or will sell such Receivables to the Deposit Trust. The Credit Lines are not being sold or transferred to the Seller or to the Deposit Trust and will continue to be held and administered by the Subservicers. See "Risk Factors -- Change in Loan Terms and Finance Charges", "Description of the Deposit Trust -- Assignment of Receivables", "Description of the Receivables Purchase Agreement -- Sale of Receivables" herein. The Seller entered into a receivables purchase agreement dated as of September 1, 1995 (the "Initial Cut-Off Date"), with certain of the Subservicers and as of August 1, 1997 entered into an amendment to such agreement pursuant to which an additional wholly-owned subsidiary of HFC may sell Receivables to the Seller (as amended, the "Receivables Purchase Agreement"). The Seller may enter into further amendments or other similar agreements with affiliates of HFC from time to time. On September 28, 1995 (the "Initial Issuance Date"), pursuant to the Receivables Purchase Agreement, Subservicers sold to the Seller all of their respective rights, title and interest in the Receivables existing under the Credit Lines designated to the Deposit Trust as of the Initial Cut-Off Date (the "Initial Credit Lines", and such Receivables outstanding under the Initial Credit Lines as of the Initial Cut-Off Date, the "Initial Receivables"). Each Subservicer has sold and will continue to sell to the Seller all of its right, title and interest in new Principal Receivables and Finance Charge and Administrative Receivables arising under the Initial Credit Lines from time to time. Pursuant to the Pooling and Servicing Agreement, all Receivables which arise under the Credit Lines will be purchased by the Seller from the Subservicers and will be sold to the Deposit Trust. Subject to certain limitations and conditions, the Seller expects to continue to add Receivables to the Deposit Trust from time to time. To do so, the Seller may designate additional Credit Lines, the Receivables of which will be purchased from a Subservicer and assigned by the Seller to the Deposit Trust. Such additional Credit Lines may include New Credit Lines and Additional Credit Lines (each, as defined herein). Since the Initial Cut-Off Date, the Seller has conveyed to the Deposit Trust the Receivables arising in certain Additional Credit Lines in accordance with the provisions of the Pooling and Servicing Agreement. All Receivables arising under Credit Lines designated to the Deposit Trust, whether existing at the time such Credit Lines are designated, or subsequently generated, will be conveyed to the Deposit Trust. The Seller will also have the right, in certain circumstances, to remove certain Credit Lines and the Receivables arising thereunder from the Deposit Trust, in which case, no further interest in Receivables arising under such Credit Lines will be transferred to the Deposit Trust (the "Removed Credit Lines"). See "Description of the Deposit Trust -- Additions of Credit Lines" and "-- Removal of Deposit Trust Assets". THE RECEIVABLES.................. The Receivables include (a) all periodic finance charges, and other amounts as described in the Series 1997-2 Supplement (as defined herein) (as increased by any Principal Discount) (the "Finance Charge Receivables"), (b) all administrative fees and late charges and all other fees or charges billed to obligors on the Credit Lines (the "Administrative Receivables" and together with the Finance Charge Receivables, the "Finance Charge and Administrative Receivables") and (c) all amounts owed by obligors under the Credit Line Agreements (as defined herein) and other amounts in respect of principal as described in the Series 1997-2 Supplement (as decreased by any Principal Discount) (the "Principal Receivables"). Recoveries (as defined below) attributed to Defaulted Credit Lines (as defined below) will be treated as collections of Finance Charge Receivables. Finance Charge and Administrative Receivables and Principal Receivables will be allocated to the Series 1997-2 Participation in accordance with the applicable Allocation Percentage (as defined herein) for the related Collection Period. Finance charges are assessed on Principal Receivables and on certain of the Finance Charge Receivables at rates determined by the Subservicers with respect to the respective Credit Lines generated by each such party. As of the close of business on September 30, 1997 (the "Series 1997-2 Cut-Off Date"), the interest rates on the Receivables ranged from 0.00% to 36.00% with a weighted average interest rate (by principal balance) of 19.46%. As of the Series 1997-2 Cut-Off Date, the average principal balance of the Credit Lines designated to the Deposit Trust was $6,131.23. Pursuant to the option to discount receivables contained in the Pooling and Servicing Agreement (see "Description of the Deposit Trust -- Discount Option"), the Seller has the option to designate or redesignate a fixed percentage of each Principal Receivable assigned to the Deposit Trust as a finance charge receivable (the "Principal Discount"). As of the date of this Prospectus, the Seller has not elected to exercise such option with respect to the Receivables; however, it may do so at any time in the future. In the event of such election, such percentage designated by the Seller is the "Discount Percentage." The Discount Percentage may be designated by the Seller at any time, and once designated, may be increased, decreased or withdrawn by the Seller. The Principal Discount may apply to Principal Receivables assigned to the Deposit Trust prior to, on or after the date the Seller makes such designation or redesignation. When the Discount Option has been elected, the Discount Percentage of Principal Receivables will instead be treated as Finance Charge and Administrative Receivables, and the Discount Percentage of all collections of Receivables that would otherwise be Principal Receivables will be applied as collections of Finance Charge and Administrative Receivables. The applicable Allocation Percentage of such discounted amount treated as Finance Charge and Administrative Receivables will be available to make distributions of the Participation Pass-Through Rate and Defaulted Amounts allocated to the Series 1997-2 Participation. See "Risk Factors -- Discounted Principal Receivables" herein. If such election is made, as described in this Prospectus, all references herein to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust to refer to such Receivables, or collections with respect thereto, as defined above, after application of the Principal Discount. In such event, references in this Prospectus to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust prior to such election to refer to such Receivables, or collections with respect thereto, without application of a Discount Percentage. All historical and current data herein regarding credit lines and receivables is presented without adjustment for a Principal Discount. The amount of Receivables will fluctuate from day to day as new Receivables are generated and sold by the Subservicers to the Seller and then by the Seller to the Deposit Trust, and as existing Receivables are collected, charged-off as uncollectible or otherwise adjusted. The amount represented by the Series 1997-2 Participation will not increase as a result of additional Principal Receivables being generated under any designated Credit Line ("Additional Balances"). Additional Balances and Receivables attributable to Aggregate Additional Credit Lines exceeding the amount of reinvested collections for the Series 1997-2 Participation and all other Series Participation Interests will be reflected in the principal balance of the Seller's Interest. However, the principal balance of the Series 1997-2 Participation will be adjusted to reflect payments made on the Series 1997-2 Participation. The aggregate amount of Receivables in the Deposit Trust on the Series 1997-2 Cut-Off Date was $4,278,341,258.64 of which $4,127,807,129.41 were Principal Receivables and $150,534,129.23 were Finance Charge and Administrative Receivables. With respect to any date, the "Pool Balance" will be equal to the aggregate of the Principal Balances of all Credit Lines as of such date. The "Principal Balance" of a Credit Line on any day is equal to its principal balance on the date the Credit Line is designated to the Deposit Trust (each such date, a "Cut-Off Date"), plus (i) any Additional Balance in respect of such Credit Line, minus (ii) all Principal Collections credited against the Principal Balance prior to such day, minus (iii) all related Defaulted Amounts, and plus or minus (iv) any correcting adjustments. Notwithstanding the above, the Principal Balance of Receivables for a Defaulted Credit Line shall be zero. With respect to any Distribution Date, a "Defaulted Credit Line" is a defaulted Credit Line as to which the Servicer has charged off all of the related Principal Balance during the related Collection Period. A "Defaulted Amount" is the amount equal to the Principal Balance of a Defaulted Credit Line that the Servicer has charged off on its servicing records in such Collection Period. SERIES 1997-2 PARTICIPATION...... Pursuant to the Series 1997-2 Supplement, the Seller will convey the Series 1997-2 Participation to the Issuer. The Series 1997-2 Participation shall initially be $1,200,000,000 (the "Initial Series 1997-2 Participation Invested Amount"). Thereafter, the "Series 1997-2 Participation Invested Amount" with respect to any date will be an amount equal to the Initial Series 1997-2 Participation Invested Amount minus the sum of the Series 1997-2 Participation Principal Distribution Amount (as defined herein) paid for all Distribution Dates and the Defaulted Amounts allocated to the Series 1997-2 Participation during the related and all prior Collection Periods that have not been included in the Series 1997-2 Participation Principal Distribution Amount on the current or any prior Distribution Date. The Series 1997-2 Participation will be entitled to receive a percentage of the Interest Collections (which shall include Recoveries), Principal Collections or Net Principal Collections (as defined below) and Defaulted Amounts received or incurred during each Collection Period. With respect to any Collection Period prior to the occurrence of an Amortization Event, Interest Collections and Defaulted Amounts allocated to the Series 1997-2 Participation will be based upon the Floating Allocation Percentage. With respect to any Collection Period during an Early Amortization Period, Interest Collections will be allocated to the Series 1997-2 Participation based upon the Fixed Allocation Percentage. However, Defaulted Amounts allocated to the Series 1997-2 Participation with respect to any Collection Period after an Amortization Event shall continue to be made based upon the Floating Allocation Percentage. Interest Collections with respect to any Collection Period will be distributable to the Issuer as holder of the Series 1997-2 Participation as described under "Remittance on the Series 1997-2 Participation." Allocated Interest Collections not so distributed will be distributable to the Seller. With respect to any Collection Period prior to the Accelerated Amortization Date or the commencement of an Early Amortization Period, Principal Collections will be allocated to the Series 1997-2 Participation based upon the greater of: (i) the Floating Allocation Percentage of Net Principal Collections (as defined below) or (ii) the Minimum Principal Amount. With respect to any Collection Period after the Accelerated Amortization Date or during the Early Amortization Period, the Series 1997-2 Participation will be entitled to Principal Collections based upon the Fixed Allocation Percentage. For any Distribution Date, the Fixed Allocation Percentage applicable to Principal Collections may be different than the Fixed Allocation Percentage applicable to Interest Collections if an Amortization Event occurs after the Accelerated Amortization Date. "Net Principal Collections" will equal the excess, if any, of Principal Collections for the related Collection Period, minus Additional Balances sold to the Deposit Trust during any Collection Period. If there is no excess, Net Principal Collections will equal zero. The Floating Allocation Percentage and the Fixed Allocation Percentage are defined herein under "Description of the Deposit Trust -- Allocations and Collections". The Minimum Principal Amount is defined herein under "Description of the Deposit Trust -- Distributions on the Series 1997-2 Participation". COLLECTIONS...................... All collections on the Receivables will be allocated by the Servicer as payments on Credit Lines in accordance with the terms of the Credit Line Agreements. See "Description of the Deposit Trust -- Allocations and Collections" herein. As to any Payment Date, "Interest Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Finance Charge and Administrative Receivables, including Recoveries and (ii) the interest portion of the Transfer Price (as defined herein) received in the event the Series 1997-2 Participation is reassigned to the Seller, reduced, if HFC is no longer the Servicer, by the Servicing Fee for such Collection Period. As to any Payment Date, "Principal Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Principal Receivables (other than the principal portion of any Recoveries), and (ii) the principal portion of the price received for any repurchased Receivable and the Transfer Price. As to any Payment Date, the "Collection Period" is the calendar month preceding the month of such Payment Date. On the Business Day prior to each Payment Date, the Servicer will deposit the remittances to be made on the Series 1997-2 Participation for such Payment Date into an account (the "Collection Account") established and maintained by the Deposit Trustee under the Pooling and Servicing Agreement. ACCELERATED AMORTIZATION DATE.... The "Accelerated Amortization Date" is October 31, 2002. EARLY AMORTIZATION PERIOD........ An Early Amortization Period will begin with the first day of the Collection Period in which an Amortization Event has occurred and will continue until the unpaid principal balance of the Series 1997-2 Participation is zero. "Amortization Events" will include, but are not limited to: (a) failure of the Seller to observe certain covenants; (b) certain breaches of representations and warranties; (c) the occurrence of certain events of bankruptcy, insolvency or receivership related to the Seller or the Servicer; (d) the Deposit Trust or the Issuer becomes an investment company under the Investment Company Act of 1940; (e) a Servicer Default occurs under the Pooling and Servicing Agreement; (f) the percentage (averaged over any three consecutive months) obtained by dividing i) the Overcollateralization Amount by ii) the outstanding unpaid principal balance of the Series 1997-2 Participation, is reduced below 4.25%; and (g) the portion of the Seller's Trust Amount owned by Household Consumer Loan Corporation is reduced below 1.01% of the aggregate invested amounts or certificate principal balances, as specified in each Series Supplement to the Pooling and Servicing Agreement for all outstanding Series Participation Interests. See "Description of the Securities -- Early Amortization Period." REMITTANCE ON THE SERIES 1997-2 PARTICIPATION.................. On each Distribution Date the Deposit Trust will make the following remittances to the Indenture Trustee in respect of collections during the preceding Collection Period: INTEREST.................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer from the applicable Allocation Percentage of Interest Collections for the preceding Collection Period equal to the amount accrued at the Participation Pass-Through Rate on the unpaid principal balance of the Series 1997-2 Participation. The "Participation Pass-Through Rate" for each Distribution Date is a per annum rate equal to Prime Rate (as defined herein), less 1.50%, subject to a minimum rate equal to a per annum rate which will result in an amount sufficient to pay the full amount of interest due on the Notes and to make a full distribution on the Certificates at the Certificate Rate, plus one-twelfth of the Series 1997-2 Participation Invested Amount, multiplied for each Distribution Date occurring prior to December 1998, by 1.50%, and for each Distribution Date occurring in December 1998 or thereafter, by 0.25% (the "Series 1997-2 Participation Interest Distribution Amount"). PRINCIPAL................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer equal to the sum of the applicable Allocation Percentage of Principal Collections, or during any Collection Period prior to the Accelerated Amortization Date or commencement of an Early Amortization Period, equal to the sum of (a) the greater of: (i) the Floating Allocation Percentage of Net Principal Collections or (ii) the Minimum Principal Amount, as defined herein, and (b) to the extent of the applicable Allocation Percentage of Interest Collections remaining after providing for the distribution of the Participation Pass-Through Rate on the Series 1997-2 Participation, Defaulted Amounts and the amount of any Defaulted Amounts previously allocated to the Series 1997-2 Participation that have not been included in the Series 1997-2 Principal Distribution Amount on any prior Distribution Date (the "Series 1997-2 Participation Principal Distribution Amount"). SECURITIES INTEREST.............. Interest on each class of Notes will be payable monthly on the fifteenth day of each month or, if such day is not a Business Day (as defined herein), on the next succeeding Business Day (each, a "Payment Date"), commencing in December 1997, in an amount equal to interest accrued during the related Interest Period (as defined below) at the applicable Note Rate on the Security Balance for the related class of Notes. The applicable "Note Rate" for an Interest Period will be the per annum rate equal to the sum of (a) the London interbank offered rate for one-month United States dollar deposits ("LIBOR"), determined as specified herein, as of the second LIBOR Business Day (as defined herein) prior to the first day of such Interest Period (or as of two LIBOR Business Days prior to the Closing Date, in the case of the first Interest Period) and (b) 0. % per annum with respect to the Class A-1 Notes, 0. % per annum with respect to the Class A-2 Notes, 0. % per annum with respect to the Class A-3 Notes and a rate specified in the Indenture not to exceed % per annum in respect of the Class B Notes. The Note Rate for each class is subject to a maximum rate as described under "Description of the Securities -- Distributions on the Securities" herein. Interest on the Notes in respect of any Payment Date will accrue from (and including) the preceding Payment Date (or in the case of the first Payment Date, from the date of the initial issuance of the Notes (the "Closing Date")) through (and including) the day preceding such Payment Date (each such period, an "Interest Period") on the basis of a 360-day year and the actual number of days in such Interest Period. See "Description of the Securities -- Distributions on the Securities". Interest for any Payment Date due but not paid on such Payment Date shall bear interest, to the extent permitted by applicable law, at the related Note Rate until paid. Failure to pay interest in full on any Payment Date after expiration of the applicable grace period is an Event of Default under the Indenture. Distributions on Certificates will be payable monthly on each Payment Date, commencing in December 1997, at the Certificate Rate on the Security Balance of the Certificates for the related Interest Period. The "Certificate Rate" will generally equal the sum of (a) LIBOR (calculated in the manner described above for the Class A and Class B Notes for such Interest Period) and (b) the rate specified in the Trust Agreement not to exceed % per annum, subject to certain limitations as described herein under "Description of the Securities -- Distributions on the Securities." The Certificate Rate will accrue on any amounts distributable in payment of the Certificate Rate, but not paid on any monthly Payment Date. SECURITIES PRINCIPAL............. On each Payment Date, to the extent funds are available therefor, other than the Payment Date in November 2007 (the "Final Payment Date"), principal payments will be due and payable on the Notes and distributions will be due on the Certificates in respective amounts described below under "Allocation of Remittances on the Series 1997-2 Participation". On the Final Payment Date, principal will be due and payable on the Notes in an amount equal to the Security Balance thereof on such Payment Date. In addition, on any Payment Date, to the extent of funds available therefor, Noteholders will also be entitled to receive principal payments in respect of the Accelerated Principal Payment Amount as described in this Prospectus Summary under "Allocation of Remittances on the Series 1997-2 Participation". In no event will principal payments on the Notes on any Payment Date exceed the Security Balance thereof on such date. ALLOCATION OF REMITTANCES ON THE SERIES 1997-2 PARTICIPATION...... The majority of the defined terms used in this Allocation of Remittances on the Series 1997-2 Participation are defined beginning on page 64 under "Description of the Securities -- Distributions on the Securities -- Allocations of Remittances on the Series 1997-2 Participation". Except as provided below, on each Payment Date other than a Payment Date occurring after an Event of Default, remittances on the Series 1997-2 Participation will be allocated in the following order of priority: (i) sequentially, as payment for the amount of interest due on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class B Notes; (ii) except as otherwise specified below, to the Certificates on behalf of the Issuer, as payment of the amount distributable in respect of the Certificate Rate on the Security Balance of the Certificates and previously unpaid; (iii) sequentially, up to the Optimum Monthly Principal: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes; (iv) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Targeted Balance, to the extent the Adjusted Security Balance of the Certificates is not reduced below $14,000,000; (v) to the Seller, in reduction of the Overcollateralization Amount, up to the remaining Optimum Monthly Principal provided the Overcollateralization Amount is not less than $17,000,000; (vi) as principal on the Notes, sequentially, up to the Accelerated Principal Payment Amount for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes, (e) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (f) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (g) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (h) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (vii) as principal on the Notes, sequentially, up to the remaining Optimum Monthly Principal for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (viii) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Minimum Balance, or if the Series 1997-2 Participation Invested Amount is zero, then to the Certificates until the Security Balance of the Certificates equals zero; (ix) to the Seller in reduction of the Overcollateralization Amount to an amount not less than zero, the remaining Optimum Monthly Principal; and (x) any remaining amounts to the Seller. In the event (a) immediately prior to a Distribution Date the Series 1997-2 Participation Invested Amount is less than the aggregate Security Balance of the Class A and Class B Notes immediately prior to the related Payment Date, or (b) the remittances on the Series 1997-2 Participation for a Payment Date is less than the aggregate amount to be paid pursuant to clauses (i) and (ii) above, the amount to be paid pursuant to clause (ii) above will be paid only after payments are made on the Notes pursuant to clause (iii). OVERCOLLATERALIZATION AMOUNT..... As of the Closing Date, the Overcollateralization Amount is equal to $51,000,000 (the "Initial Overcollateralization Amount") or 4.25% (the "Initial Overcollateralization Percentage") of the Initial Series 1997-2 Participation Invested Amount. For each Payment Date, the "Overcollateralization Amount" equals the amount by which the Series 1997-2 Participation Invested Amount exceeds the aggregate Security Balance of the Series 1997-2 Securities, in each case after giving effect to distributions on such Payment Date. For each Payment Date, the "Accelerated Principal Payment Amount" is equal to the lesser of (i) the amount by which the remittance on the Series 1997-2 Participation exceeds the sum of (a) the amount to be distributed on the Notes with respect to interest and the Certificates with respect to the Certificate Rate on such Payment Date and (b) the Optimum Monthly Principal for such Payment Date and (ii) one-twelfth of the Series 1997-2 Participation Invested Amount, multiplied for each Payment Date occurring prior to December 1998, by 1.50%, and for each Payment Date occurring in December 1998 or thereafter, by 0.25%. The distribution of Accelerated Principal Payment Amounts, if any, to Noteholders will increase the Overcollateralization Amount. The Overcollateralization Amount will be available to absorb any Defaulted Amounts that are allocated to Noteholders and not covered by distributions on the Series 1997-2 Securities. See "Description of the Securities -- Distributions on the Securities -- Overcollateralization Amount" herein. ISSUANCE OF ADDITIONAL SERIES.... Five Series were previously issued through the sale of Series Participation Interests in the Receivables of the Deposit Trust. See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. Additional Series are expected to be issued from time to time through the sale of additional Series Participation Interests to new issuers. It is anticipated that the securities of other Series will have expected final payment dates, rapid amortization dates, amortization periods, non-amortization periods, accelerated amortization periods and periods during which the principal amount of such securities is accumulated in a principal funding account or paid to holders of such securities which differ from those for the Series 1997-2 Securities. Accordingly, each Series may have entirely different methods for calculating the amount and timing of principal and interest distributions to securityholders and Series Enhancements (as defined below) and may utilize other methods for determining the portion of collections allocable to such securityholders and Series Enhancements. See "Deposit Trust Risk Factors." "Series Enhancement" means any letter of credit, surety bond, subordinated interest in the trust assets, collateral invested amount, collateral account, spread account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement or other similar arrangement for the benefit of holders of interests in a Series. DENOMINATIONS.................... The Notes will be issued in the aggregate principal amounts set forth on the cover page hereof, in fully registered denominations of $100,000 and integral multiples of $1,000 in excess thereof. REGISTRATION OF NOTES............ The Notes will initially be issued in book-entry form. Persons acquiring beneficial ownership interests in the Notes ("Note Owners") may elect to hold their Notes through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or The Chase Manhattan Bank, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. So long as the Notes are in book-entry form, such Notes will be evidenced by one or more Notes registered in the name of CEDE & Co., the nominee of DTC. The interests of the Note Owners will be represented by book-entries on the records of DTC and participating members thereof. Notes will be available in definitive form only under the limited circumstances described herein. All references in this Prospectus to "Holders" or "Noteholders" shall be deemed, unless the context clearly requires otherwise, to refer to CEDE & Co., as nominee of DTC. See "Risk Factors" and "Description of the Securities -- Registration of Notes" herein. RECORD DATE...................... The last day preceding a Payment Date, or if the Notes are no longer book-entry securities, the last day of a month preceding a Payment Date. SERVICING........................ The Servicer will be responsible for servicing and managing the Credit Lines and making collections on the Receivables. Each Credit Line will be subserviced by the appropriate Subservicer on behalf of HFC, as Servicer. The Servicer will cause Interest Collections and Principal Collections to be deposited into the Collection Account, except as described herein. On the fifth Business Day prior to any Payment Date (the "Determination Date"), the Servicer will calculate, and instruct the Deposit Trust, the Issuer and the Indenture Trustee regarding the amounts to be paid to the Noteholders with respect to the related Collection Period. See "Description of the Securities -- Distributions on the Securities." As long as HFC is the Servicer it will receive, or be entitled to retain on behalf of itself and the Subservicers, a portion of the Interest Collections remaining after distribution of the Series 1997-2 Participation Interest Distribution Amount and the Series 1997-2 Participation Principal Distribution Amount a monthly servicing fee (the "Servicing Fee") attributable to the Series 1997-2 Participation in the amount of 2.00% per annum of the Series 1997-2 Participation Invested Amount as of the end of the related Collection Period. See "Description of the Deposit Trust -- Servicing Compensation and Payment of Expenses." In certain limited circumstances, the Servicer may resign or be removed under the Pooling and Servicing Agreement, in which event either the Deposit Trustee or, so long as it meets certain eligibility standards as set forth in the Pooling and Servicing Agreement, a third-party servicer will be appointed as a successor Servicer. In such event, the Servicing Fee will be paid to the successor Servicer from Interest Collections prior to any distributions on the Series 1997-2 Participation. See "Description of the Deposit Trust -- Certain Matters Regarding the Servicer and the Seller." If the Servicer fails to comply with certain representations, warranties or covenants with respect to any Credit Line and such noncompliance is not cured within a specified period and has a material adverse effect on the Noteholders, or if certain events of insolvency occur with respect to the Servicer, the Deposit Trustee may appoint a successor Servicer. See "Description of the Deposit Trust -- Assignment of Receivables." FINAL PAYMENT OF PRINCIPAL; TERMINATION...................... The Notes will mature on the earlier of the date the Notes are paid in full or on the Payment Date occurring in November 2007. In addition, the Issuer of the Notes will pay the Notes in full upon the exercise by the Seller of its option to purchase the Series 1997-2 Participation after the aggregate Security Balance of the Series 1997-2 Securities is reduced to an amount less than or equal to $114,900,000 (10% of the initial aggregate Security Balance of the Series 1997-2 Securities). See "Description of the Securities -- Maturity."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001000577_simon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001000577_simon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..42db1afb1070021ca7c12dc95ea8b0bf148e1b02
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001000577_simon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated in this Prospectus, (i) all information assumes that the Underwriters' over- allotment option is not exercised; (ii) all references to the "Company" or "Simon Transportation" refer to Simon Transportation Services Inc. and Dick Simon Trucking, Inc., a Utah corporation and wholly owned subsidiary of Simon Transportation Services Inc; and (iii) all financial information includes the historical operations of Dick Simon Trucking, Inc. and R. D. Simon Trucking, a sole proprietorship formerly owned by Richard D. Simon. See "Holding Company Formation" and Note 1 to Consolidated Financial Statements. THE COMPANY Simon Transportation has become one of the country's fastest-growing truckload carriers by providing nationwide, predominantly temperature- controlled transportation services for major shippers in the food industry. Many large shippers rely upon a limited number of transportation partners, or core carriers, to provide just-in-time deliveries, dedicated fleet service, and "continuous movement" of equipment. By offering these and other premium services at a cost generally lower than private fleets, Simon Transportation has become a core carrier for service-sensitive national accounts such as Nestle, Kraft, M&M Mars, ConAgra, Albertson's, Pillsbury, Campbell's Soup, and Coca-Cola Foods. Management believes that serving food industry shippers is desirable because their products are generally less affected by economic cycles, and many of these shippers require time-sensitive and specialized service that justifies a higher rate per mile. As a result of this strategy, Simon Transportation has increased its revenue to $101.1 million in fiscal 1996 from $40.8 million in fiscal 1992, a 25.5% compounded annual growth rate. During the same period, operating earnings more than doubled to $9.2 million from $4.5 million. Simon Transportation substantially expanded and upgraded its tractor and trailer fleets during the fiscal year ended September 30, 1996. After applying the net proceeds of its November 1995 initial public offering to reduce debt and purchase revenue equipment, the Company took delivery of approximately 665 new tractors and traded approximately 348 older models. This expanded Simon Transportation's fleet by 317 tractors and reduced the fleet's average age to approximately 13 months at September 30, 1996. Following the fleet upgrade, all of the Company's tractors are equipped with electronic engines and Qualcomm satellite-based tracking and communication units, and most are covered with three-year, 500,000 mile engine warranties. Simon Transportation also took delivery of 806 new 53-foot, temperature-controlled trailers during fiscal 1996, in response to customer demand for greater freight capacity. The Company has scheduled deliveries that would increase its fleet by approximately 360 tractors and 500 53-foot trailers during fiscal 1997 and has options on an additional 100 tractors. Simon Transportation's fleet expansion and upgrade, along with strong customer demand, contributed to 34.4% revenue growth in fiscal 1996, to $101.1 million from $75.2 million in fiscal 1995. In addition to increasing its weighted average tractor fleet by 29.4%, the Company improved its revenue per tractor per week by approximately 4.5%. The newer tractors also improved fuel efficiency and lowered maintenance and repair costs. These factors contributed toward improving Simon Transportation's pretax margin to 6.3% in fiscal 1996 from 3.4% in fiscal 1995. The truckload industry, including the temperature-controlled segment, is consolidating in response to several identifiable trends. Many major shippers are reducing the number of carriers they use in favor of service-based, ongoing relationships with a limited group of core carriers. These partnerships and the increasing use of equipment and drivers dedicated to a single shipper's needs ("dedicated fleets") are designed to ensure higher quality, more consistent service for shippers and greater equipment utilization and more predictable revenue for core carriers. Other shippers that own tractor-trailer fleets are outsourcing their transportation requirements to truckload carriers to lower operating expenses and conserve capital for core corporate purposes. This outsourcing has resulted in some shippers eliminating their own trucks in favor of truckload carriers, which, according to a study commissioned by the American Trucking Associations Foundation, can provide similar service at approximately 25% less cost. Deregulation and economies of scale also promote consolidation. Many truckload carriers have grown rapidly since deregulation in 1980 and have achieved the size to negotiate lifetime equipment warranties and obtain equipment, fuel, insurance, financing, and other items for significantly less than smaller or more leveraged competitors. All of these trends favor large carriers with modern fleets, excellent service, in-transit communication and load tracking, good drivers, a strong safety record, adequate insurance, and a strong capital base. Management plans to continue the Company's growth and believes that the Company's net proceeds of the Offering will strengthen its ability to capitalize on these industry trends. Simon Transportation Services Inc. was incorporated under the laws of Nevada in August 1995 to own 100% of Dick Simon Trucking, Inc., which was incorporated in Utah in 1972. The Company's headquarters is located at 4646 South 500 West, Salt Lake City, Utah 84123, and its telephone number is (801) 268-9100. THE OFFERING <TABLE> <S> <C> Class A Common Stock offered by the Company........................... 1,425,000 shares Class A Common Stock offered by the Selling Stockholders.............. 575,000 shares(1) Common Stock to be outstanding after the Offering: Class A Common Stock............. 4,787,257 shares(2) Class B Common Stock............. 1,382,661 shares(1) Total.............................. 6,169,918 shares(2) Use of Proceeds.................... Purchase new revenue equipment and provide working capital. See "Use of Proceeds." Nasdaq National Market symbol...... SIMN </TABLE> - -------- (1) Richard D. Simon is selling 10,500 shares of Class A Common Stock and 489,500 shares of Class B Common Stock, which will immediately convert to Class A Common Stock upon sale. The Class A Common Stock is entitled to one vote per share. The Class B Common Stock is entitled to two votes per share and automatically converts into Class A Common Stock if beneficially owned by persons other than Richard D. Simon and certain members of his immediate family. The Class A and Class B Common Stock vote together as a single class except as required by law and are substantially identical, except with respect to voting rights. See "Description of Capital Stock." (2) Excludes approximately 398,000 shares of Class A Common Stock reserved for issuance under the Company's Incentive Stock Plan, options to purchase approximately 363,700 of which are currently outstanding. Also excludes 24,000 shares of Class A Common Stock reserved for issuance under the Company's Outside Director Stock Plan, options to purchase 4,000 of which are currently outstanding. See "Management--Incentive Stock Plan" and "Management--Directors' Compensation." RISK FACTORS There are a number of factors that should be considered by potential investors before purchasing shares of the Company's Class A Common Stock. See "Risk Factors." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED SEPTEMBER 30, DECEMBER 31, -------------------------------------------- ---------------- 1992 1993 1994 1995 1996 1995 1996 ------- ------- ------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS DATA: Operating revenue...... $40,823 $57,694 $71,691 $75,218 $101,090 $20,588 $34,166 Operating earnings..... 4,520 4,943 6,282 6,076 9,161 1,661 2,433 Interest expense and other, net............ 1,276 2,559 3,136 3,527 2,758 (806) (446) Provision for income taxes(1).............. -- -- -- -- 5,454 3,257 751 Net earnings(2)........ 3,244 2,384 3,146 2,549 949 (2,402) 1,236 PRO FORMA STATEMENT OF EARNINGS DATA:(2) Earnings before provision for income taxes................. 3,244 2,384 3,146 2,549 6,403 855 1,987 Provision for income taxes................. 1,285 944 1,246 1,010 2,536 339 751 Net earnings........... 1,959 1,440 1,900 1,539 3,867 516 1,236 Net earnings per common share................. $ 0.85 $ 0.63 $ 0.83 $ 0.67 $ 0.88 $ 0.15 $ 0.26 Weighted average common shares outstanding.... 2,300 2,300 2,300 2,300 4,418 3,451 4,743 OPERATING DATA: Operating ratio(3)..... 88.9% 91.4% 91.2% 91.9% 90.9% 91.9% 92.9% Pretax margin.......... 7.9% 4.1% 4.4% 3.4% 6.3% 4.2% 5.8% Average revenue per loaded mile........... $ 1.23 $ 1.23 $ 1.23 $ 1.26 $ 1.24 $ 1.25 $ 1.27 Average revenue per mile operated......... $ 1.07 $ 1.07 $ 1.10 $ 1.11 $ 1.10 $ 1.10 $ 1.12 Average revenue per tractor per week...... $ 2,582 $ 2,471 $ 2,489 $ 2,417 $ 2,526 $ 2,513 $ 2,665 Empty miles percentage............ 13.2% 12.6% 10.7% 11.3% 11.7% 11.8% 12.0% Average length of haul in miles.............. 596 677 725 949 984 1,004 979 Weighted average tractors.............. 304 449 554 598 774 632 990 Tractors at end of period................ 389 523 570 623 940 647 1,011 Trailers at end of period................ 589 745 873 877 1,430 915 1,550 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ---------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Net property and equipment............................ $55,836 $55,836 Total assets.......................................... 78,528 102,062 Long-term debt and capitalized leases, including current portion...................................... 38,013 38,013 Stockholders' equity.................................. 30,359 53,893 </TABLE> - -------- (1) The provisions for income tax for fiscal 1996 and the three months ended December 31, 1995, include a one-time, non-cash charge of approximately $3.0 million in recognition of deferred income taxes that resulted from the Company's conversion to a C Corporation on November 17, 1995, the date of its initial public offering. (2) The Company was treated as an S Corporation for federal and state income tax purposes from October 1, 1990, to November 16, 1995. As a result, the Company's taxable earnings for such period were taxed for federal and state income tax purposes directly to the Company's then-existing stockholders. The pro forma statement of earnings data give effect to an adjustment for a provision for federal and state income taxes as if the Company had been treated as a C Corporation during all periods reported. The pro forma statement of earnings data do not give effect to the one-time, non-cash charge of approximately $3.0 million in recognition of deferred income taxes that resulted from the Company's conversion to a C Corporation on November 17, 1995, the date of its initial public offering. See Note 3 to Consolidated Financial Statements. (3) Operating expenses as a percentage of revenue. The Company's operating ratio is affected by the method of equipment financing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001001426_pericom_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001001426_pericom_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f0caa1cf45b52dba6306cb833c0b02afeeb0aac
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001001426_pericom_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the detailed information and the Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) has been adjusted to reflect a 1-for-2 reverse stock split effected in October 1997, and (iii) has been adjusted to reflect the conversion of all outstanding shares of Preferred Stock into Common Stock upon the closing of the offering. THE COMPANY Pericom Semiconductor Corporation (the "Company" or "Pericom") designs, develops and markets high-performance interface integrated circuits ("ICs") used in many of today's advanced electronic systems. Interface ICs, such as interface logic, switches and clock management products, transfer, route and time electrical signals among a system's microprocessor, memory and various peripherals and between interconnected systems. High-performance interface ICs, which enable high signal quality, are essential for the full utilization of the available speed and bandwidth of advanced microprocessors, memory ICs, LANs and WANs. Pericom focuses on high-growth and high-performance segments of the notebook computing, networking and multimedia markets, in which advanced system designs require interface ICs with high-speed performance, reduced power consumption, low-voltage operation, small size and higher levels of integration. Pericom has combined its extensive design technology and applications knowledge with its responsiveness to the specific needs of electronic systems developers to become a competitive supplier of interface ICs. The Company has evolved from one product line in fiscal 1992 to four currently -- SiliconInterface, SiliconSwitch, SiliconClock and SiliconConnect -- with a goal of providing an increasing breadth of interface IC solutions to its customers. Pericom currently offers approximately 300 standard products, of which 81 were introduced during the twelve months ended September 30, 1997, and is planning to introduce 34 new products during the fourth quarter of calendar 1997. Pericom has developed and is continuously refining a modular design methodology which enables it to rapidly introduce proprietary and high- performance products. Central to this methodology is Pericom's library of advanced digital and analog macrocells and core functions, many of which are not available in commercial ASIC libraries. A number of these macrocells and core functions, including mixed-voltage input/output cells, a digital PLL, an analog PLL and a charge pump, are designed with patented technology. This advanced library allows Pericom to effectively address the market requirements for interface ICs with short propagation delay, low noise and jitter, minimal skew and reduced EMI emissions. The modular design methodology also allows the Company to utilize a combination of digital macrocells, analog macrocells and sea-of-gates arrays to rapidly design interface ICs optimized for power, density, performance and manufacturing. Another key attribute of the design methodology is the utilization of common mask sets from which multiple designs can be developed, resulting in rapid product introductions, lower development costs and fast response to volume requirements at competitive pricing. The Company has adopted a fabless manufacturing strategy to gain access to a broad range of advanced process technologies without incurring substantial capital investments. The Company has a long-standing relationship with Chartered, recently began using TSMC as an important supplier and is currently qualifying LG. The Company also utilizes AMS and NJRC for BiCMOS and high- voltage CMOS processes. See "Risk Factors--Dependence on Independent Wafer Foundries." Pericom pursues a three-tier customer strategy, consisting of (i) penetrating target accounts by working with customer system design engineers to have Pericom ICs incorporated into their product designs, (ii) solidifying customer relationships through on-time delivery of high-quality, state-of-the-art, competitively-priced ICs and (iii) expanding sales to existing customers by providing increasingly extensive solutions to customer needs. The Company markets and distributes its products through a worldwide network of independent sales representatives and distributors. The Company's customers and OEM end users include 3Com Corporation, Apple Computer, Inc., Ascend Communications, Inc., Avid Technology, Inc., Cabletron Systems, Inc., Canon Inc., Cisco Systems, Inc., Compaq Computer Corporation, Digital Equipment Corporation, Hewlett-Packard Company, Hitachi Ltd., International Business Machines Corporation, Intel Corporation, Inventec, Inc., Smart Modular Technologies Inc., Solectron Technology Corporation and Toshiba Corporation. THE OFFERING <TABLE> <S> <C> Common Stock offered: By the Company.................................. 2,000,000 shares By the Selling Shareholders..................... 500,000 shares Total..................................... 2,500,000 shares Common Stock to be outstanding after the offering(1)...................................... 9,023,790 shares Use of proceeds................................... General corporate purposes, including working capital, purchase of capital equipment and potential acquisitions. Proposed Nasdaq National Market symbol............ PSEM </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, -------------------------------------- -------------- 1993 1994 1995 1996 1997 1996 1997 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Net revenues............. $6,284 $18,886 $22,732 $41,174 $33,166 $6,601 $11,398 Gross profit............. 2,983 7,878 9,859 18,377 12,180 2,605 4,559 Income from operations... 367 2,432 2,879 7,492 2,004 171 1,434 Net income............... 333 2,544 2,041 4,710 1,578 185 1,023 Net income per common and equivalent share........ $ 0.05 $ 0.33 $ 0.26 $ 0.57 $ 0.20 $ 0.02 $ 0.12 Shares used in computing per share data(2) ...... 6,638 7,696 7,975 8,269 8,092 8,224 8,210 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 ----------------------- ACTUAL AS ADJUSTED (3) ------- --------------- <S> <C> <C> BALANCE SHEET DATA: Cash and equivalents.................................... $ 9,544 $27,544 Working capital......................................... 13,535 31,535 Total assets............................................ 24,086 42,086 Shareholders' equity.................................... 17,876 35,876 </TABLE> - -------- (1) Excludes 1,486,057 shares reserved for issuance pursuant to the exercise of stock options outstanding as of September 30, 1997 having a weighted average exercise price of $2.56 per share. See "Management -- Stock Plans"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001002125_advanced_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001002125_advanced_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d0064876f5d9b41328e55f31967aca77306d717
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001002125_advanced_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. The Company was formed on May 19, 1995 and acquired ownership, primarily by merger (the "Combination"), of affiliated companies that were previously under common ownership and management (the "Predecessors"). Unless the context otherwise requires, the "Company" refers to Advanced Lighting Technologies, Inc., its subsidiaries and the Predecessors. Unless the context otherwise requires, the information in this Prospectus gives effect to this offering of Common Stock (the "Offering") and, except as otherwise indicated, the information contained in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Industry data in this Prospectus with respect to the lighting market is reported on a calendar year basis and includes the industrial, commercial and residential sectors, but not the automotive sector. Such industry data is derived from selected reports published by the National Electrical Manufacturers Association ("NEMA"). THE COMPANY Advanced Lighting Technologies, Inc. is an innovation-driven designer, manufacturer and marketer of metal halide lighting products. Metal halide lighting combines superior energy efficient illumination with long lamp life, excellent color rendition and compact lamp size. The Company believes that it is the only designer and manufacturer in the world focused primarily on metal halide lighting. As a result of this unique focus, the Company has developed substantial expertise in all aspects of metal halide lighting. The Company believes that this focus enhances its responsiveness to customer demand and has contributed to its technologically advanced product development and manufacturing capabilities. The metal halide market is the fastest growing segment of the domestic lighting market, having grown at a compound annual rate of approximately 15% since 1993. The Company's strong market position, new product development capabilities and participation in international markets have enabled the Company to increase its revenues at rates in excess of the growth of the domestic metal halide market. The Company's sales increased at a compound annual growth rate of 32.9% to $54.6 million in fiscal 1996 from $30.9 million in fiscal 1994, as the Company has become a vertically integrated provider of metal halide products. The Company has experienced growth in net sales in each of the past 15 consecutive quarters and the Company's sales increased 63.0% to $60.8 million in the nine months ended March 31, 1997 from $37.3 million in the nine months ended March 31, 1996. The Company has integrated vertically to design, manufacture and market: (i) materials necessary for the manufacture of metal halide lamps (light bulbs); (ii) system components necessary to assemble metal halide lighting systems; and (iii) complete metal halide lighting systems for use or installation by an end user. This integration is illustrated by the following list of principal products: <TABLE> <S> <C> <C> - ----------------------------- ----------------------------- ------------------------- MATERIALS SYSTEM COMPONENTS SYSTEMS - ----------------------------- ----------------------------- ------------------------- Metal Halide Salts Lamps (Light Bulbs): Portable Lighting Electrodes Specialty Fixtures(1) Amalgams Commodity Fiber Optic Lighting(1) Getters Power Supplies: Projection TV Optical Magnetic Systems(2) Electronic System Controls and Switches Fiber Optic Cable </TABLE> - --------------- (1) Recent commercial introduction (2) Currently in development [INSIDE FRONT COVER] [FOUR PRODUCT PICTURES WITH DESCRIPTIVE CAPTION: "MATERIALS," "SYSTEM COMPONENTS," "EQUIPMENT" AND "SYSTEMS"] The Company also designs, manufactures and markets turnkey lamp production equipment groups that are typically sold to international manufacturers. Such equipment is sold to existing lamp manufacturers or to joint ventures formed by the Company in developing markets. The Company generates revenue from the initial sale of its production equipment and recurring sales of the materials used in lamp production. The Company has also begun to manufacture and sell photometric measuring equipment and to market internationally its power supply production equipment. The Company produces over 300 ultra-pure metal halide salts and believes that it produces 100% of the metal halide salts used in the manufacture of metal halide lamps in the United States and over 80% of salts used worldwide. Metal halide salts are the primary ingredient within the arc tube of metal halide lamps and determine the lighting characteristics of the lamp. The Company currently markets over 240 specialty and 40 commodity-type metal halide lamps, giving it the most diverse product line of any metal halide lamp manufacturer. In addition, the Company offers more than 400 power supply products for metal halide and other discharge lamp systems. METAL HALIDE Invented approximately 35 years ago, metal halide is the newest of all major lighting technologies and can produce the closest simulation to sunlight of any available lighting technology. Metal halide lighting is currently used primarily in commercial and industrial applications such as factories and warehouses, outdoor site and landscape lighting, sports facilities and large retail spaces such as superstores. In addition, due to metal halide's superior lighting characteristics, the Company believes many opportunities exist to "metal halidize" applications currently dominated by older incandescent and fluorescent lighting technologies. For example, a 100 watt metal halide lamp, which is approximately the same size as a household incandescent lamp, produces as much light as five 100 watt incandescent lamps and as much as three 34 watt, four foot long fluorescent lamps. While domestic sales of incandescent and fluorescent lamps grew at a compound annual rate of approximately 5% over the last three years, domestic metal halide lamp sales have grown at a compound annual rate of approximately 15% over the same period, making metal halide the fastest growing segment of the approximately $2.7 billion domestic lamp market. In 1996, metal halide accounted for approximately 7% of domestic lamp sales. The Company believes that the majority of the growth of metal halide has occurred in commercial and industrial applications. Recently, metal halide systems have been introduced in fiber optic, projection television and automotive headlamp applications. The Company believes that additional opportunities for metal halide lighting exist in other applications where energy efficiency and light quality are important. As a result of the Company's dominant position in metal halide materials and lamp production equipment, the Company expects to benefit from continued growth in metal halide markets. In addition, the Company expects to be a leader in metal halide's continued market expansion by providing innovative metal halide system components and integrated systems. STRATEGY The Company's operating strategies include: (i) remaining focused on the metal halide market; (ii) continuing to pursue vertical integration to expand the Company's ability to introduce new products and applications; and (iii) strengthening the Company's relationships with original equipment manufacturers ("OEMs") and lighting agents to increase the number of applications and the penetration of the Company's products in new metal halide installations. The Company's growth strategy contains four key elements: - Introduce New Products, Systems and Applications. The Company intends to develop new products, system components and systems which will permit metal halide to penetrate lighting applications that are currently dominated by older lighting technologies. To further the Company's integrated systems strategy, the Company acquired two manufacturers of power supplies, emphasizing metal halide lighting systems. The Company can now package lamps together with power supplies and other system components, ensuring compatibility and quality, increasing the marketability of these system components to OEM customers and accelerating introduction of new systems. - Increase Sales of Existing Products. By expanding existing relationships and developing new relationships with lighting agents and OEMs, the Company expects to increase sales of existing specialty lamps and power supplies. The Company also expects its sales of replacement bulbs to increase as the installed base of the Company's specialty lamps increases and such lamps need to be replaced. - Participate in Growing International Markets. Because the Company expects that international growth of metal halide lighting products and systems will exceed domestic growth, the Company intends to directly market its products in developed countries and to pursue joint venture arrangements in developing countries to accelerate metal halide's penetration of international markets. - Penetrate the Residential Lighting Market. Over the longer term, the Company intends to penetrate the residential lighting market with metal halide table and floor lamps as well as products designed for residential recessed and track lighting applications. The Company has recently introduced a limited range of metal halide residential lighting fixtures and also has developed a "gear pack" which permits existing incandescent table or floor lamp designs to be adapted to the Company's MICROSUN(TM) technology. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company: U.S. Offering............................... 2,400,000 International Offering...................... 600,000 --------- Total.................................... 3,000,000 ========= Common Stock to be outstanding after the Offering (1)................................ 16,430,731 shares Use of proceeds............................... To repay the Company's term loan facility and amounts outstanding under its domestic revolving credit facilities, including borrowings incurred to fund the purchase of the power supply business of W. J. Parry & Co. (Nottingham) Ltd., to fund capital expenditures and to fund the Company's anticipated cash contribution to the proposed fiber optic lighting systems joint venture with Rohm and Haas Company. The remaining proceeds will be used for general corporate purposes, including investments in joint ventures, acquisitions and working capital. See "Use of Proceeds." Nasdaq National Market Symbol................. ADLT </TABLE> - --------------- (1) Does not include 954,002 shares of Common Stock reserved for issuance under the Company's 1995 Incentive Award Plan (the "Incentive Award Plan"), of which options to purchase 924,752 shares of Common Stock had been granted and were outstanding as of May 28, 1997. See "Management -- Incentive Award Plan." Does not include 100,000 shares of Common Stock reserved for issuance under the Company's Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"). SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED MARCH 31, FISCAL YEAR ENDED JUNE 30, ------------------- --------------------------------- 1997 1996 1996 1995 1994 ------- ------- ------- ------- ------- (UNAUDITED) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales................................................ $60,776 $37,295 $54,636 $40,767 $30,938 Costs and expenses: Cost of sales (1)...................................... 32,463 19,957 29,164 21,899 17,253 Selling, general and administrative(1)................. 15,953 10,259 14,907 11,833 8,400 Research and development............................... 4,268 1,714 3,000 1,673 1,006 Amortization of intangible assets(1)................... 199 63 90 55 55 Settlement of claim.................................... 771(2) -- -- -- -- Noncash settlement of claim............................ -- 2,732 (3) 2,732 (3) -- -- Reorganizing and restructuring......................... -- -- -- (121)(4) 852(4) ------- ------- ------- ------- ------- Income from operations................................... 7,122 2,570 4,743 5,428 3,372 Interest expense, net.................................... 139 1,087 1,316 2,074 2,095 ------- ------- ------- ------- ------- Income before income taxes and extraordinary items....... 6,983 1,483 3,427 3,354 1,277 Income taxes (5)......................................... 2,481 525 910 212 71 ------- ------- ------- ------- ------- Income before extraordinary items........................ 4,502 958 2,517 3,142 1,206 Extraordinary gain (charge).............................. -- (135)(6) (135)(6) (253)(7) -- ------- ------- ------- ------- ------- Net income............................................... $ 4,502 $ 823 $ 2,382 $ 2,889 $ 1,206 ======= ======= ======= ======= ======= Income (loss) per share(8): Before extraordinary items............................. $ .33 $ (.04) $ .12 $ .10 $ .13 Extraordinary items.................................... -- (.02) (.01) (.03) -- ------- ------- ------- ------- ------- Net income (loss)...................................... $ .33 $ (.06) $ .11 $ .07 $ .13 ======= ======= ======= ======= ======= Shares used for computing per share amounts (8).......... 13,503 8,999 9,479 7,818 7,818 ======= ======= ======= ======= ======= </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 --------------------------- ACTUAL AS ADJUSTED(9) -------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments...................................... $ 16,437 $ 32,424(10) Working capital........................................................................ 43,393 59,380 Total assets........................................................................... 112,320 150,207(10) Total long-term debt................................................................... 22,952 3,257 Total shareholders' equity............................................................. 63,158 134,445 </TABLE> - --------------- (1) Beginning with the nine month period ended March 31, 1997, the components of selling, general and administrative expenses were disaggregated to report separately marketing and selling expenses and general and administrative expenses. See "Condensed Consolidated Statements of Operations (Unaudited)." Also, beginning with the nine month period ended March 31, 1997, amortization of intangible assets was reported as a separate component of costs and expenses. Amortization of intangible assets for all periods presented above has been reclassified to conform with this presentation. Previously, amortization of intangible assets for fiscal 1996 was included in cost of sales, and for fiscal 1995 and earlier years was included in interest expense. (2) On March 1, 1996, a former shareholder of the holding company ("VLI") for the Company's largest Predecessor, Venture Lighting International, Inc. ("Venture"), asserted a claim against certain officers and directors of the Company, and subsequently against the Company, seeking $3,600 in damages relating to the redemption of his VLI shares prior to the Combination. On August 23, 1996, another former VLI shareholder filed a similar claim against the Company and such officers and directors seeking damages of $1,600. On November 29, 1996, the Company and such officers and directors entered into a settlement of both claims for an aggregate amount of $475. The pretax charge of $771 in the second quarter of fiscal 1997 represents the $475 settlement plus legal and other directly-related costs, net of anticipated insurance recoveries. (3) On October 27, 1995, several former VLI shareholders, whose shares were redeemed in August 1995 (prior to the Combination), asserted a claim against certain officers of the Company. On November 15, 1995, such officers entered into a settlement agreement. Since the settlement resulted in a transfer of personal shares held by such officers, there was no dilution of the ownership interests of other shareholders of the Company. The settlement was recorded as a noncash expense and an increase in paid-in capital in December 1995. (4) In fiscal 1994, the Company recorded a provision of $852 for the costs, principally inventory and equipment write-downs, in connection with exiting a product line unrelated to lighting. In fiscal 1995, the disposition plan was revised, resulting in a reduction of the original estimate by $121. (5) At June 30, 1996, the Company had net operating loss tax carryforwards of approximately $8,200, which expire in fiscal years 2006 through 2011. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (6) In fiscal 1996, the Company incurred an extraordinary loss on the early extinguishment of debt of $135. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (7) In fiscal 1995, the Company incurred an extraordinary loss on the early extinguishment of debt of $253. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (8) Net income per share is based upon the income attributable to common shareholders. Such income has been decreased by preferred stock dividends and increases in the value of warrants aggregating $1,350 ($.15 per share) in the nine months ended March 31, 1996, $1,350 ($.14 per share) in fiscal 1996, $2,360 ($.30 per share) in fiscal 1995 and $170 ($.02 per share) in fiscal 1994. See Note K to "Notes to Consolidated Financial Statements." (9) As adjusted to give effect to the sale of 3,000,000 shares of Common Stock offered by the Company hereby at the assumed public offering price of $25 1/4 (the last reported sale price for the Common Stock on June 30, 1997), after deducting underwriting discounts and commissions and estimated offering expenses, and the application of the net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001002132_alphanet_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001002132_alphanet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3481fad7ddb423376e8403c4b83fe2d552fcb5d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001002132_alphanet_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus, including information under "Risk Factors." Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. THE COMPANY AlphaNet Solutions, Inc. (the "Company") is a single-source provider of information technology ("IT") products, services and support to Fortune 1000 and other large and mid-sized companies located primarily in the New York-to- Philadelphia corridor. The Company is authorized by many industry-leading manufacturers of IT products, including Cisco Systems, Compaq, Hewlett-Packard, IBM, Lucent Technologies, Microsoft, NEC and Novell, to resell their products and provide related technical services. Such products include workstations, servers, microcomputers, networking and communications equipment, and applications software. Through its established vendor alliances with MicroAge Computer Centers, Inc. ("MicroAge") and Ingram Micro, Inc. ("Ingram"), major aggregators of computer hardware and software, the Company provides its customers with competitive pricing and value-added services such as electronic product ordering, product configuration, testing, warehousing and delivery. Additionally, since 1990, the Company has been developing related IT services and currently offers network consulting, workstation support, education, communications installation and IT staffing services. The need to access and distribute data on a real-time basis throughout an organization and between organizations has led to the rapid growth in network computing infrastructures which connect numerous and geographically dispersed end users via local and wide area networks. As a result of the rapid changes in the IT products market and the risks associated with large capital expenditures, organizations increasingly rely on companies which offer and have knowledge of a wide variety of networking products and the ability to perform related technical services in a cost-effective manner. These factors have resulted in substantial growth in the IT services market. Industry sources estimate that the U.S. market for all IT professional services was $49 billion in 1995 and may reach $97 billion by 2000. The Company's primary business objective is to become a leading single-source provider of high-quality IT products, services and support in its target markets. To this end, the Company intends: (i) to leverage its complementary businesses by continuing to combine the expertise of its technical personnel with its strong product procurement and marketing capabilities; (ii) to broaden its IT service offerings in order to provide additional sales opportunities with new and existing clients; (iii) to expand and develop its strategic relationships to create new sales opportunities by offering products and services complementary to those of its strategic partners; and (iv) to pursue strategic acquisitions to expand the Company's service offerings, to add to or enhance technical or sales personnel, or to provide desirable customer relationships. In July 1996, the Company consummated its acquisition of certain assets and the business of Lior, Inc., a New Jersey-based MicroAge affiliate ("Lior"), which resulted in a substantial increase in product sales and opportunities to provide services and support to Lior customers which previously purchased primarily computer products from Lior. The Company believes that additional acquisition opportunities may be available to it upon completion of this offering. The Company's major customers include Nabisco, BASF Corporation, KPMG Peat Marwick, Summit Bank, Mercedes-Benz of North America, Matsushita, PSE&G, Polo- Ralph Lauren, Lucent Technologies, AT&T, Fuji Film, Innovex, CS First Boston, Johnson & Johnson, and Schindler Elevator. The Company believes that it competes with its competitors by providing a single-source solution for its customers' IT products and services needs and by providing a wide range of high-quality services to the management information systems ("MIS") departments and end users of its corporate clients. The Company also believes that it distinguishes itself from its competition on the basis of technical expertise, competitive pricing, vendor alliances, relationships with MicroAge and Ingram, direct sales strategy and customer service orientation. The Company, a New Jersey corporation, was incorporated in 1984 under the name AlphaTronics Associates, Inc. The address of the Company's principal executive offices is 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927, and its telephone number is (201) 267-0088. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 1,150,000 shares Common Stock offered by the Selling Shareholders... 850,000 shares Common Stock to be outstanding after the Offering.. 6,253,990 shares(1) Use of Proceeds.................................... Repayment of bank debt; expansion of services component of the Company's business; enhancement of the Company's MIS infrastructure; and working capital and other general corporate purposes, including possible acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol...................... ALPH </TABLE> - -------- (1) Excludes 746,010 shares of Common Stock reserved for issuance under the Company's 1995 Stock Plan, under which options to purchase 523,360 shares of Common Stock have been granted, 49,920 of which are currently exercisable. Also excludes 100,000 shares of Common Stock reserved for issuance under the Company's 1995 Non-Employee Director Stock Option Plan, under which options to purchase 60,000 shares of Common Stock have been granted, 12,000 of which are currently exercisable. See "Management--1995 Stock Plan" and "-- 1995 Non-Employee Director Stock Option Plan." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------- -------------------- 1992 1993 1994 1995 1996(1) 1996 1997(1) ------- ------- ------- ------- -------- --------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Net sales.............. $35,432 $47,041 $70,468 $74,016 $119,605 $ 19,296 $ 46,501 Gross profit(2)........ 5,767 6,970 10,896 12,568 18,472 3,404 6,980 Operating income....... 548 652 3,183 4,175 5,725 979 2,026 Income before pro forma income taxes(3)....... 471 560 3,076 4,089 5,854 961 1,968 Pro forma net income(3)............. 276 330 1,829 2,439 3,463 572 1,161 Pro forma net income per share(3).......... $ 0.61 $ 0.72 $ 0.14 $ 0.22 Weighted average common shares and common shares equivalent outstanding(4)........ 3,988 4,829 4,043 5,293 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ---------------------- ACTUAL AS ADJUSTED(5) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital......................................... $14,592 $34,192 Total assets............................................ 46,142 61,067 Notes payable to bank................................... 4,675 -- Shareholders' equity.................................... 20,082 39,682 </TABLE> - -------- (1) On July 24, 1996, the Company acquired certain assets of Lior, in a business combination accounted for under the purchase method, for $1.1 million, including acquisition costs, financed with a portion of the proceeds from the Company's initial public offering. The operations related to the acquired assets of Lior are included in the accompanying consolidated financial statements subsequent to July 24, 1996. See Note 2 of Notes to Consolidated Financial Statements. (2) Commencing with the 1996 fourth quarter and year-end results, certain indirect costs which previously were classified as costs of services have been reclassified to general and administrative expenses to conform with current industry practices. Such expenses amounted to $1.1 million, $1.4 million, $1.7 million, $2.2 million and $3.1 million for the years ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and $701,000 for the three months ended March 31, 1996. Throughout this Prospectus, all prior period financial information has been reclassified to conform with such presentation. (3) Prior to the consummation of the Company's initial public offering of its Common Stock in March 1996, the Company had elected S Corporation treatment for federal income tax purposes from 1986 and for New Jersey state income tax purposes from 1994. The historical financial statements for the years 1992 through 1995, therefore, do not include a provision for federal and state income taxes for such periods, except for certain state income taxes imposed at the corporate level. Accordingly, for such periods and for the period January 1 through March 19, 1996 (the date on which the Company terminated its S Corporation status), pro forma net income has been computed as if the Company had been fully subject to federal and state income taxes based on the tax laws in effect during the respective periods. See Notes 1 and 10 of Notes to Consolidated Financial Statements. (4) The weighted average common shares and common shares equivalent outstanding have been adjusted for (i) the number of shares that were required to fund the S Corporation distribution, less the outstanding loan to a principal shareholder, following the Company's initial public offering and (ii) certain stock options granted by the Company. See Notes 1 and 7 of Notes to Consolidated Financial Statements. (5) Adjusted to reflect the sale of 1,150,000 shares of Common Stock offered by the Company hereby at an assumed offering price of $18 5/8 per share and the anticipated application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001002618_pdc-1996_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001002618_pdc-1996_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8362435fa4c8557732618845b7493e83a600d3a3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001002618_pdc-1996_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY........................................................... 1 RISK FACTORS.......................................................11 Special Risks of the Partnership..............................11 Risks Pertaining to the Natural Gas Investment................17 Tax Status and Tax Risks......................................18 TERMS OF THE OFFERING..............................................21 General.......................................................21 Activation of Partnerships....................................25 Types of Units................................................26 Conversion of Units by Additional General Partners............27 Unit Repurchase Program.......................................28 Investor Suitability..........................................30 ASSESSMENTS AND FINANCING..........................................33 SOURCE OF FUNDS AND USE OF PROCEEDS................................34 Source of Funds...............................................34 Use of Proceeds...............................................34 Subsequent Source of Funds....................................35 PARTICIPATION IN COSTS AND REVENUES................................36 Revenues......................................................36 Costs.........................................................37 Allocations Among Investor Partners; Deficit Capital Account Balances.....................................................42 Cash Distributions Policy.....................................42 Termination...................................................43 Amendment of Partnership Allocation Provisions................43 COMPENSATION TO THE MANAGING GENERAL PARTNER AND AFFILIATES........44 PROPOSED ACTIVITIES................................................47 Introduction..................................................47 Drilling Policy...............................................49 Acquisition of Undeveloped Prospects..........................50 Title to Properties...........................................52 PDC Prospects.................................................52 Drilling and Completion Phase.................................56 Production Phase of Completion................................61 Interests of Parties..........................................62 Insurance.....................................................62 The Managing General Partner's Policy Regarding Roll-Up Transactions.................................................65 COMPLETION, MARKETS AND REGULATIONS................................66 Completion and Markets........................................66 Regulation....................................................68 Page Natural Gas Pricing...........................................69 Proposed Regulations..........................................69 MANAGEMENT.........................................................70 General Management............................................70 Experience and Capabilities as Driller/Operator...............70 Petroleum Development Corporation.............................70 Certain Shareholders of Petroleum Development Corporation.....72 Renumeration..................................................74 Legal Proceeding..............................................74 CONFLICTS OF INTEREST..............................................74 Certain Transactions..........................................79 FIDUCIARY RESPONSIBILITY OF THE MANAGING GENERAL PARTNER...........82 PRIOR ACTIVITIES...................................................83 Prior Partnerships............................................83 Previous Drilling Activities..................................86 Payout and Net Cash Tables....................................88 Tax Deductions and Tax Credits of Partnerships in Previous Partnerships.................................................96 PARTNERSHIP PROVED RESERVES AND FUTURE NET REVENUES...............101 TAX CONSIDERATIONS................................................104 Summary of Conclusions.......................................104 General Tax Effects of Partnership Structure.................108 Intangible Drilling and Development Costs Deductions.........109 A. Classification of Costs.............................110 B. Timing of Deductions................................110 C. Recapture of IDC....................................111 DEPLETION DEDUCTIONS..............................................111 Depreciation Deductions......................................112 Interest Deductions..........................................112 Transaction Fees.............................................113 Basis and At Risk Limitations................................114 Passive Loss Limitations.....................................114 A. Introduction........................................114 B. General Partner Interests...........................115 C. Limited Partner Interests...........................116 Conversion of Interests......................................116 Alternative Minimum Tax......................................116 Gain or Loss on Sale of Property or Units....................117 Partnership Distributions....................................118 Partnership Allocations......................................118 Profit Motive................................................118 Administrative Matters.......................................119 Accounting Methods and Periods...............................121 ii<PAGE> Page Social Security Benefits; Self-employment tax...............121 State and Local Taxes.......................................121 Individual Tax Advice Should Be Sought......................121 SUMMARY OF PARTNERSHIP AGREEMENT..................................121 Responsibility of Managing General Partner..................121 Liabilities of General Partners, Including Additional General Partners...........................................122 Liability of Limited Partners...............................122 Allocations and Distributions...............................122 Voting Rights...............................................123 Retirement and Removal of the Managing General Partner......124 Term and Dissolution........................................124 Indemnification.............................................126 Reports to Partners.........................................126 Power of Attorney...........................................126 Other Provisions............................................126 TRANSFERABILITY OF UNITS..........................................127 PLAN OF DISTRIBUTION..............................................128 SALES LITERATURE..................................................130 LEGAL OPINIONS....................................................130 EXPERTS...........................................................130 ADDITIONAL INFORMATION............................................130 GLOSSARY OF TERMS.................................................131 APPENDICES: A. Form of Limited Partnership Agreement.........................A-1 B. Subscription Agreements.......................................B-1 C. Special Subscription Instructions.............................C-1 D. Opinion of Counsel -- Tax Considerations......................D-1 TABLE OF CONTENTS Page ARTICLE I: The Partnership . . . . . . . . . . . . . . . . 1 1.01 Organization. . . . . . . . . . . . . . . . . . . 1 1.02 Partnership Name. . . . . . . . . . . . . . . . . 1 1.03 Character of Business . . . . . . . . . . . . . . 1 1.04 Principal Place of Business . . . . . . . . . . . 1 1.05 Term of Partnership . . . . . . . . . . . . . . . 2 1.06 Filings . . . . . . . . . . . . . . . . . . . . . 2 1.07 Independent Activities . . . . . . . . . . . . . 2 1.08 Definitions . . . . . . . . . . . . . . . . . . . 3 ARTICLE II: Capitalization. . . . . . . . . . . . . . . . . . 12 2.01 Capital Contributions of the Managing General Partner and Initial Limited Partner . . . . . . . 12 2.02 Capital Contributions of the Investor Partners. . . . . . . . . . . . . . . . . . . . . 12 2.03 Additional Contributions. . . . . . . . . . . . . 13 ARTICLE III: Capital Accounts and Allocations. . . . . . . . . 14 3.01 Capital Accounts. . . . . . . . . . . . . . . . . 14 3.02 Allocation of Profits and Losses. . . . . . . . . 16 3.03 Depletion . . . . . . . . . . . . . . . . . . . . 22 3.04 Apportionment Among Partners. . . . . . . . . . . 22 ARTICLE IV: Distributions . . . . . . . . . . . . . . . . . . 23 4.01 Time of Distribution. . . . . . . . . . . . . . . 23 4.02 Distributions . . . . . . . . . . . . . . . . . . 23 4.03 Capital Account Deficits. . . . . . . . . . . . . 23 4.04 Liability Upon Receipt of Distributions . . . . . 24 ARTICLE V: Activities. . . . . . . . . . . . . . . . . . . . 24 5.01 Management. . . . . . . . . . . . . . . . . . . . 24 5.02 Conduct of Operations . . . . . . . . . . . . . . 24 5.03 Acquisition and Sale of Leases. . . . . . . . . . 26 5.04 Title to Leases . . . . . . . . . . . . . . . . . 27 5.05 Farmouts. . . . . . . . . . . . . . . . . . . . . 27 5.06 Release, Abandonment, and Sale or Exchange of Properties . . . . . . . . . . . . . . . . . . 28 5.07 Certain Transactions. . . . . . . . . . . . . . . 28 ARTICLE VI: Managing General Partner. . . . . . . . . . . . . 33 6.01 Managing General Partner. . . . . . . . . . . . . 33 6.02 Authority of Managing General Partner . . . . . . . . . . . . . . . . . . . . . 34 6.03 Certain Restrictions on Managing General Partner's Power and Authority . . . . . . . . . . 35 6.04 Indemnification of Managing General Partner . . . . . . . . . . . . . . . . . . . . . 37 6.05 Withdrawal. . . . . . . . . . . . . . . . . . . . 38 i<PAGE> 6.06 Management Fee. . . . . . . . . . . . . . . . . . 39 6.07 Tax Matters and Financial Reporting Partner . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE VII: Investor Partners . . . . . . . . . . . . . . . . 39 7.01 Management. . . . . . . . . . . . . . . . . . . . 39 7.02 Indemnification of Additional General Partners. . . . . . . . . . . . . . . . . 40 7.03 Assignment of Units . . . . . . . . . . . . . . . 40 7.04 Prohibited Transfers . . . . . . . . . . . . . . 42 7.05 Withdrawal by Investor Partners . . . . . . . . . 42 7.06 Removal of Managing General Partner . . . . . . . 42 7.07 Calling of Meetings . . . . . . . . . . . . . . . 43 7.08 Additional Voting Rights. . . . . . . . . . . . . 43 7.09 Voting by Proxy . . . . . . . . . . . . . . . . . 44 7.10 Conversion of Additional General Partner Interests into Limited Partner Interests . . . . . . . . . . . . . . . . . . . . 44 7.11 Unit Repurchase Program . . . . . . . . . . . . . 45 7.12 Liability of Partners . . . . . . . . . . . . . . 46 ARTICLE VIII: Books and Records. . . . . . . . . . . . . . . . .46 8.01 Books and Records . . . . . . . . . . . . . . . . 46 8.02 Reports . . . . . . . . . . . . . . . . . . . . . 47 8.03 Bank Accounts . . . . . . . . . . . . . . . . . . 49 8.04 Federal Income Tax Elections. . . . . . . . . . . 49 ARTICLE IX: Dissolution; Winding-up . . . . . . . . . . . . . 49 9.01 Dissolution . . . . . . . . . . . . . . . . . . . 49 9.02 Liquidation . . . . . . . . . . . . . . . . . . . 50 9.03 Winding-up . . . . . . . . . . . . . . . . . . . 51 ARTICLE X: Power of Attorney . . . . . . . . . . . . . . . . 52 10.01 Managing General Partner as Attorney-in-Fact. . . 52 10.02 Nature as Special Power . . . . . . . . . . . . . 53 ARTICLE XI: Miscellaneous Provisions. . . . . . . . . . . . . 53 11.01 Liability of Parties. . . . . . . . . . . . . . . 53 11.02 Notices . . . . . . . . . . . . . . . . . . . . . 53 11.03 Paragraph Headings. . . . . . . . . . . . . . . . 53 11.04 Severability. . . . . . . . . . . . . . . . . . . 54 11.05 Sole Agreement. . . . . . . . . . . . . . . . . . 54 11.06 Applicable Law. . . . . . . . . . . . . . . . . . 54 11.07 Execution in Counterparts . . . . . . . . . . . . 54 11.08 Waiver of Action for Partition. . . . . . . . . . 54 11.09 Amendments. . . . . . . . . . . . . . . . . . . . 54 11.10 Consent to Allocations and Distributions. . . . . 55 11.11 Ratification. . . . . . . . . . . . . . . . . . . 55 11.12 Substitution of Signature Pages . . . . . . . . . 55 11.13 Incorporation by Reference. . . . . . . . . . . . 55 Signature Page . . . . . . . . . . . . . . . . . .56 ii<PAGE> FORM OF LIMITED PARTNERSHIP AGREEMENT OF PDC 1996-____ LIMITED PARTNERSHIP, [PDC 1997-____LIMITED PARTNERSHIP,] A WEST VIRGINIA LIMITED PARTNERSHIP This LIMITED PARTNERSHIP AGREEMENT (the "Agreement") is made as of this ___ day of ___________, 1996 [1997] by and among Petroleum Development Corporation, a Nevada corporation, as managing general partner (the "Managing General Partner"), Steven R. Williams, a resident of West Virginia, as the Initial Limited Partner, and the Persons whose names are set forth on Exhibit A attached hereto, as additional general partners (the "Additional General Partners") or as limited partners (the "Limited Partners" and, collectively with Additional General Partners, the "Investor Partners"), pursuant to the provisions of the West Virginia Uniform Limited Partnership Act (the "Act"), on the following terms and conditions: ARTICLE I The Partnership 1.01 Organization. Subject to the provisions of this Agreement, the parties hereto do hereby form a limited partnership (the "Partnership") pursuant to the provisions of the Act. The Partners hereby agree to continue the Partnership as a limited partnership pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. 1.02 Partnership Name. The name of the Partnership shall be PDC 1996- ___ Limited Partnership, [PDC 1997-_ Limited Partnership,] a West Virginia limited partnership, and all business of the Partnership shall be conducted in such name. The Managing General Partner may change the name of the Partnership upon ten days notice to the Investor Partners. The Partnership shall hold all of its property in the name of the Partnership and not in the name of any Partner. 1.03 Character of Business. The principal business of the Partnership shall be to acquire Leases, drill sites, and other interests in oil and/or gas properties and to drill for oil, gas, hydrocarbons, and other minerals located in, on, or under such properties, to produce and sell oil, gas, hydrocarbons, and other minerals from such properties, and to invest and generally engage in any and all phases of the oil and gas business. Such business purpose shall include without limitation the purchase, sale, acquisition, disposition, exploration, development, operation, and production of oil and gas properties of any character. The Partnership shall not acquire property in exchange for Units. Without limiting the foregoing, Partnership activities may be undertaken as principal, agent, general partner, syndicate member, joint venturer, participant, or otherwise. 1.04 Principal Place of Business. The principal place of business of the Partnership shall be at 103 East Main Street, Bridgeport, West Virginia, 26330. The Managing General Partner may change the principal place of business of the Partnership to any other place within the State of West Virginia upon ten days notice to the Investor Partners. 1<PAGE> 1.05 Term of Partnership. The Partnership shall commence on the date the Partnership is organized, as set forth in Section 1.01, and shall continue until terminated as provided in Article IX hereof. Notwithstanding the foregoing, if Investor Partners agreeing to purchase $1,000,000 ($2,000,000 with respect to PDC 1997-D Limited Partnership) in Units have not subscribed and paid for their Units by the Offering Termination Date, then this Agreement shall be void in all respects, and all investments of the Investor Partners shall be promptly returned together with any interest earned thereon and without any deduction therefrom. The Managing General Partner and its Affiliates may purchase up to 10% (and no more) of the Units subscribed for by Investor Partners in the Partnership; however, not more than $50,000 of the Units purchased by the Managing General Partner and/or its Affiliates will be applied to satisfying the $1,000,000 minimum ($2,000,000 with respect to PDC 1997-D) . The Units so purchased by the Managing General Partner and/or its Affiliates will be counted toward satisfying the minimum subscription amount. 1.06 Filings. (a) A Certificate of Limited Partnership (the "Certificate") has been filed in the office of the Secretary of State of West Virginia in accordance with the provisions of the Act. The Managing General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership under the laws of West Virginia. The Managing General Partner shall cause amendments to the Certificate to be filed whenever required by the Act. (b) The Managing General Partner shall execute and cause to be filed original or amended Certificates and shall take any and all other actions as may be reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership or similar type of entity under the laws of any other states or jurisdictions in which the Partnership engages in business. (c) The agent for service of process on the Partnership shall be Steven R. Williams or any successor as appointed by the Managing General Partner. (d) Upon the dissolution of the Partnership, the Managing General Partner (or any successor managing general partner) shall promptly execute and cause to be filed certificates of dissolution in accordance with the Act and the laws of any other states or jurisdictions in which the Partnership has filed certificates. 1.07 Independent Activities. Each General Partner and each Limited Partner may, notwithstanding this Agreement, engage in whatever activities they choose, whether the same are competitive with the Partnership or otherwise, without having or incurring any obligation to offer any interest in such activities to the Partnership or any Partner. However, except as otherwise provided herein, the Managing General Partner and any of its Affiliates may pursue business opportunities that are consistent with the Partnership's investment objectives for their own account only after they have determined that such opportunity either cannot be pursued 2<PAGE> by the Partnership because of insufficient funds or because it is not appropriate for the Partnership under the existing circumstances. Neither this Agreement nor any activity undertaken pursuant hereto shall prevent the Managing General Partner from engaging in such activities, or require the Managing General Partner to permit the Partnership or any Partner to participate in any such activities, and as a material part of the consideration for the execution of this Agreement by the Managing General Partner and the admission of each Investor Partner, each Investor Partner hereby waives, relinquishes, and renounces any such right or claim of participation. Notwithstanding the foregoing, the Managing General Partner still has an overriding fiduciary obligation to the Investor Partners. 1.08 Definitions. Capitalized words and phrases used in this Agreement shall have the following meanings: (a) "Act" shall mean the Uniform Limited Partnership Act of the State of West Virginia, as set forth in Sections 47-9-1 through 47-9-63 thereof, as amended from time to time (or any corresponding provisions of succeeding law). (b) "Additional General Partner" shall mean an Investor Partner who purchases Units as an additional general partner, and such partner's transferees and assigns. "Additional General Partners" shall mean all such Investor Partners. "Additional General Partner" shall not include, after a conversion, such Investor Partner who converts his interest into a Limited Partnership interest pursuant to Section 7.10 herein. (c) "Administrative Costs" shall mean all customary and routine expenses incurred by the Managing General Partner for the conduct of program administration, including legal, finance, accounting, secretarial, travel, office rent, telephone, data processing and other items of a similar nature. (d) "Affiliate" shall mean an affiliate of a specified person means (a) any person directly or indirectly owning, controlling, or holding with power to vote 10 percent or more of the outstanding voting securities of such specified person; (b) any person 10 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such specified person; (c) any person directly or indirectly controlling, controlled by, or under common control with such specified person; (d) any officer, director, trustee or partner of such specified person, and (e) if such specified person is an officer, director, trustee or partner, any person for which such person acts in any such capacity. (e) "Agreement" or "Partnership Agreement" shall mean this Limited Partnership Agreement, as amended from time to time. (f) "Capital Account" shall mean, with respect to any Partner, the capital account maintained for such Partner pursuant to Section 3.01 hereof. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) The registrant will not identify to any third party any prospects which will go into or are likely to be placed into the program, or are representative of prospects which may be placed in the program, whether such third party is a selling dealer or other party involved with making or directing investment decisions regarding the purchase of program interests, except to the extent such prospects have been identified in the prospectus or an amendment thereto. (5) To the extent a review of prospects or lease inventory is permitted to third parties, it will be: (a) only incidental to an underwriter's due diligence examination; (b) no reference to any specific property (unless such property is described in the prospectus or an amendment) will appear in any analysis or report on the program prepared by such third party; and (c) any third party, prior to receiving permission to examine properties will agree to the above conditions, and registrant will file a copy of such agreement(s) as an exhibit to the registration statement. (6) No prospective investors or their representatives will be permitted to examine any prospects or inventory or data related thereto which is not described in the prospectus or an amendment thereto. (7) An annual report on Form 10-K will be filed at the conclusion of the fiscal year following the year in which the registration statement is declared effective. (8) A Form 8-K or final SR to reflect the expenditure of the proceeds of the offering will be filed. (9) Any revised prospectuses required by the provisions of Section 10(a)(3) of the Securities Act of 1933, as amended, will be filed as post- effective amendments to the registration statement. - 3 - <PAGE> (10) For the purpose of determining any liability under said Act (without thereby affecting the original effective date of this registration statement for the purpose of Section 10(a)(3) of said Act) each such post-effective amendment may be deemed to be a new registration statement relating to the securities offered thereby, and the offering of such securities at that time may be deemed to be the initial bona fide offering thereof and that such post-effective amendment will comply with the applicable forms and rules and regulations of the Commission in effect at the time such post-effective amendment is filed. (11) The prospectus will be supplemented at the close of any partnership to state the number of participants in that partnership, the amount of participation sold therein, the cumulative amount sold under all partnerships formed under the subject registration statement, the amount of interests to be offered in the next partnership and in succeeding partnerships to be formed under this registration statement. (12) The Registrant undertakes to send to each Investor Partner at least on an annual basis a detailed statement of any transactions with the Managing General Partner or its Affiliates, and of fees, commissions, compensation, and other benefits paid, or accrued to the Managing General Partner or its Affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed. (13) The Registrant undertakes to send to the Investor Partners, within 45 days after the close of each quarterly fiscal period, the information specified by the Form 10-Q, if such report is required to be filed with the Commission. (14) The Registrant undertakes to provide to the Investor Partners the financial statements required by Form 10-K for the first full fiscal year of operations of the Partnership. (15) The undersigned Registrant hereby undertakes to provide to the Underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the Underwriter to permit prompt deliver to each purchaser. The registrant undertakes to file a sticker supplement pursuant to Rule 424(c) under the Act during the distribution period describing each property not identified in the prospectus at such time as there arises a reasonable probability that such property will be acquired and to consolidate all such stickers into a post-effective amendment filed at least once every three months, with the information contained in such amendment provided simultaneously to the existing Limited Partners. Each sticker supplement should disclose all compensation and fees received by the General Partner(s) and its affiliates in connection with any such acquisition. The post-effective amendment shall include audited financial statements meeting the requirements of Rule 3-05 of Regulation S-X only for properties acquired during the distribution period. CONFORMED COPY SIGNATURES Pursuant to the requirements of Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bridgeport, State of West Virginia, on June 4, 1997. PDC 1996-1997 Drilling Program (Registrant) By: Petroleum Development Corporation, a Nevada corporation, Managing General Partner By /s/ Steven R. Williams Steven R. Williams Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Signature Title Date /s/ James N. Ryan Chairman of the Board June 4, 1997 James N. Ryan (Principal Executive Officer) /s/ Steven R. Williams President and Director June 4, 1997 Steven R. Williams /s/ Dale G. Rettinger Executive Vice President, June 4, 1997 Dale G. Rettinger Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) /s/ Roger J. Morgan Secretary and Director June 4, 1997 Roger J. Morgan (g) "Capital Contribution" shall mean, the total investment, including the original investment, assessments, and amounts reinvested, by such Investor Partner to the capital of the Partnership pursuant to Section 2.02 herein, and, with respect to the Managing General Partner and the Initial Limited Partner, the total investment, including the original investment, assessments, and amounts reinvested, to the capital of the Partnership pursuant to Section 2.01 herein. (h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). (i) "Cost," when used with respect to the sale of property to the Partnership, shall mean (a) the sum of the prices paid by the seller to an unaffiliated person for such property, including bonuses; (b) title insurance or examination costs, brokers' commissions, filing fees, recording costs, transfer taxes, if any, and like charges in connection with the acquisition of such property; (c) a pro rata portion of the seller's actual necessary and reasonable expenses for seismic and geophysical services; and (d) rentals and ad valorem taxes paid by the seller with respect to such property to the date of its transfer to the buyer, interest and points actually incurred on funds used to acquire or maintain such property, and such portion of the seller's reasonable, necessary and actual expenses for geological, engineering, drafting, accounting, legal and other like services allocated to the property cost in conformity with generally accepted accounting principles and industry standards, except for expenses in connection with the past drilling of wells which are not producers of sufficient quantities of oil or gas to make commercially reasonable their continued operations, and provided that the expenses enumerated in this subsection (d) hereof shall have been incurred not more than 36 months prior to the purchase by the Partnership; provided that such period may be extended, at the discretion of the state securities administrator, upon proper justification, When used with respect to services, "cost" means the reasonable, necessary and actual expense incurred by the seller on behalf of the Partnership in providing such services, determined in accordance with generally accepted accounting principles. As used elsewhere, "cost" means the price paid by the seller in an arm's-length transaction. (j) "Depreciation" shall mean, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing General Partner. (k) "Development Well" shall mean a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. 4<PAGE> (l) "Direct Costs" shall mean all actual and necessary costs directly incurred for the benefit of the Partnership and generally attributable to the goods and services provided to the Partnership by parties other than the Managing General Partner or its Affiliates. Direct costs shall not include any cost otherwise classified as organization and offering expenses, administrative costs, operating costs or property costs. Direct costs may include the cost of services provided by the Managing General Partner or its Affiliates if such services are provided pursuant to written contracts and in compliance with Section 5.07(e) of the Partnership Agreement. (m) "Drilling and Completion Costs" shall mean all costs, excluding Operating Costs, of drilling, completing, testing, equipping and bringing a well into production or plugging and abandoning it, including all labor and other construction and installation costs incident thereto, location and surface damages, cementing, drilling mud and chemicals, drillstem tests and core analysis, engineering and well site geological expenses, electric logs, costs of plugging back, deepening, rework operations, repairing or performing remedial work of any type, costs of plugging and abandoning any well participated in by the Partnership, and reimbursements and compensation to well operators, including charges paid to the Managing General Partner as unit operator during the drilling and completion phase of a well, plus the cost of the gathering system and of acquiring leasehold interests. (n) "Dry Hole" shall mean any well abandoned without having produced oil or gas in commercial quantities. (o) "Exploratory Well" shall mean a well drilled to find commercially productive hydrocarbons in an unproved area, to find a new commercially productive horizon in a field previously found to be productive of hydrocarbons at another horizon, or to significantly extend a known prospect. (p) "Farmout" shall mean an agreement whereby the owner of the leasehold or working interest agrees to assign his interest in certain specific acreage to the assignees, retaining some interest such as an overriding royalty interest, an oil and gas payment, offset acreage or other type of interest, subject to the drilling of one or more specific wells or other performance as a condition of the assignment. (q) "General Partners" shall mean the Additional General Partners and the Managing General Partner. (r) "Gross Asset Value" shall mean, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (1) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the contributing Partner and the Partnership; 5<PAGE> (2) The Gross Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the Managing General Partner, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership Property as consideration for an interest in the Partnership; and (c) the liquidation of the Partnership within the meaning of Treas. Reg. Section 1.704-1(b) (2)(ii)(g); provided, however, that the adjustments pursuant to clauses (a) and (b) above shall be made only if the Managing General Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (3) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution; and (4) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treas. Reg. Section 1.704-1(b)(2) (iv)(m) and Section 3.02(g) hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this Section (4) to the extent the Managing General Partner determines that an adjustment pursuant to Section (2) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section (4). If the Gross Asset Value of an asset has been determined or adjusted pursuant to Section (i), Section (ii), or (iv) hereof, such Gross Asset value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (s) "IDC" shall mean intangible drilling and development costs. (t) "Independent Expert" shall mean a person with no material relationship with the Managing General Partner or its Affiliates who is qualified and who is in the business of rendering opinions regarding the value of oil and gas properties based upon the evaluation of all pertinent economic, financial, geologic and engineering information available to the Managing General Partner or its Affiliates. (u) "Initial Limited Partner" shall mean Steven R. Williams or any successor to his interest. (v) "Investor Partner" shall mean any Person other than the Managing General Partner (i) whose name is set forth on Exhibit A, attached hereto, as an Additional General Partner or as a Limited Partner, or who has been admitted as an additional or Substituted Investor Partner pursuant to the terms of this Agreement, and (ii) who is the owner of a Unit. "Investor Partners" means all such Persons. All references in this Agreement to a majority in interest or a specified percentage of the Investor Partners shall mean Investor Partners holding more than 50% or such specified percentage, respectively, of the outstanding Units then held. (w) "Lease" shall mean full or partial interests in: (i) undeveloped oil and gas leases; (ii) oil and gas mineral rights; (iii) licenses; (iv) concessions; (v) contracts; (vi) fee rights; or (vii) other rights authorizing the owner thereof to drill for, reduce to possession and produce oil and gas. (x) "Limited Partner" shall mean an Investor Partner who purchases Units as a Limited Partner, such partner's transferees or assignees, and an Additional General Partner who converts his interest to a limited partnership interest pursuant to the provisions of the Agreement. "Limited Partners" shall mean all such Investor Partners. (y) "Management Fee" shall mean that fee to which the Managing General Partner is entitled pursuant to Section 6.06 hereof. (z) "Managing General Partner" shall mean Petroleum Development Corporation or its successors, in their capacity as the Managing General Partner. (aa) "Mcf" shall mean one thousand cubic feet of natural gas. (bb) "Net Subscriptions" shall mean an amount equal to the total Subscriptions of the Investor Partners less the amount of Organization and Offering Costs of the Partnership. (cc) "Nonrecourse Deductions" shall have the meaning set forth in Treas. Reg. Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a Partnership fiscal year shall equal the net increase in the amount of Partnership Minimum Gain during that fiscal year reduced (but not below zero) by the aggregate distributions during that fiscal year of proceeds of a Nonrecourse Liability that are allocable to an increase in Partnership Minimum Gain, determined according to the provisions of Treas. Reg. Section 1.704-2(c). (dd) "Nonrecourse Liability" shall have the meaning set forth in Treas. Reg. Sections 1.704-2(b)(3) and 1.752-1(a)(2). (ee) "Offering Termination Date" shall mean December 31, 1996 with respect to Partnerships designated "PDC 1996-_ Limited Partnership (December 31, 1997 with respect to Partnerships designated "PDC 1997-_ Limited Partnership") or such earlier date as the Managing General Partner, in its sole and absolute discretion, shall elect. 7<PAGE> (ff) "Oil and Gas Interest" shall mean any oil or gas royalty or lease, or fractional interest therein, or certificate of interest or participation or investment contract relative to such royalties, leases or fractional interests, or any other interest or right which permits the exploration of, drilling for, or production of oil and gas or other related hydrocarbons or the receipt of such production or the proceeds thereof. (gg) "Operating Costs" shall mean expenditures made and costs incurred in producing and marketing oil or gas from completed wells, including, in addition to labor, fuel, repairs, hauling, materials, supplies, utility charges and other costs incident to or therefrom, ad valorem and severance taxes, insurance and casualty loss expense, and compensation to well operators or others for services rendered in conducting such operations. (hh) "Organization and Offering Costs" shall mean all costs of organizing and selling the offering including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositaries, engineers and other experts, expenses of qualification of the sale of the securities under Federal and State law, including taxes and fees, accountants' and attorneys' fees and other frontend fees. (ii) "Overriding Royalty Interest" shall mean an interest in the oil and gas produced pursuant to a specified oil and gas lease or leases, or the proceeds from the sale thereof, carved out of the working interest, to be received free and clear of all costs of development, operation, or maintenance. (jj) "Partner Minimum Gain" shall mean an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treas. Reg. Section 1.704-2(i). (kk) "Partner Nonrecourse Debt" shall have the meaning set forth in Treas. Reg. Section 1.704-2(b)(4). (ll) "Partner Nonrecourse Deductions" shall have the meaning set forth in Treas. Reg. Section 1.704-2(i)(2). The amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership fiscal year shall equal the net increase in the amount of Partner Minimum Gain attributable to such Partner Nonrecourse Debt during that fiscal year reduced (but not below zero) by proceeds of the liability distributed during that fiscal year to the Partner bearing the economic risk of loss for such liability that are both attributable to the liability and allocable to an increase in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Treas. Reg. Section 1.704-2(i)(3). 8<PAGE> (mm) "Partners" shall mean the Managing General Partner, the Initial Limited Partner, and the Investor Partners. "Partner" shall mean any one of the Partners. All references in this Agreement to a majority in interest or a specified percentage of the Partners shall mean Partners holding more than 50% or such specified percentage, respectively, of the outstanding Units then held. (nn) "Partnership" shall mean the partnership pursuant to this Agreement and the partnership continuing the business of this Partnership in the event of dissolution as herein provided. (oo) "Partnership Minimum Gain" shall have the meaning set forth in Treas. Reg. Sections 1.704-2(b)(2) and 1.704-2(d)(1). (pp) "Permitted Transfer" shall mean any transfer of Units satisfying the provisions of Section 7.03 herein. (qq) "Person" shall mean any individual, partnership, corporation, trust, or other entity. (rr) "Profits" and "Losses" shall mean, for each fiscal year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (1) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section 1.08(rr) shall be added to such taxable income or loss; (2) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a) (2)(B) expenditures pursuant to Treas. Reg. Section 1.704- 1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this Section 1.08(rr) shall be subtracted from such taxable income or loss; (3) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to Section 1.08(r)(2) or Section 1.08(r)(3) hereof, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses. (4) Gain or loss resulting from any disposition of Partnership Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001002628_aht-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001002628_aht-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..aae05f3d0da519230239dbcbe337f2cb1d7e8514
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001002628_aht-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Unless the context otherwise requires, all references in this Prospectus to the Company refer collectively to Advanced Health Corporation, its predecessor and its subsidiaries. THE COMPANY Advanced Health Corporation provides a full range of integrated management services and clinical information systems to physician group practices, single legal entities comprised of multiple physicians, and to physician networks, aggregations of individual physicians and physician groups formed for the purpose of entering into contracts with third-party payors. The management services provided by the Company include physician practice and network development, marketing, payor contracting, financial and administrative management, clinical information management, human resource management and practice and network governance. The Company developed its clinical information systems to provide physicians, at the point of care and on a real-time basis, with patient-specific clinical and payor information and the ability to generate patient medical orders and facilitate the implementation of disease management programs. Through the management of multi-specialty and single-specialty physician group practices and networks, the Company focuses its management efforts on high-cost, high-volume areas of medical care, including disease specialties such as cardiology, oncology and orthopedics. The Company currently manages eight multi-specialty physician group practices and four single-specialty physician group practices comprised of more than 225 providers in the greater New York and Philadelphia metropolitan areas and 13 physician networks with approximately 1,550 physicians in the greater New York, Philadelphia and Atlanta metropolitan and surrounding areas, and provides physician group consulting services to more than 50 physicians. In response to the impact of the development of managed care programs on the delivery of health care services, physician practice management companies have emerged in recent years to manage the financial and administrative requirements of physician organizations. More importantly, the Company believes there exists an even greater need among physicians for clinical management services and information systems. The Company believes that assisting physicians in managing the clinical aspects of their practices represents the greatest opportunity to enhance the quality and reduce the cost of health care. The Company believes that it is well positioned to attract, organize and manage physician group practices and networks by offering a full range of integrated management services and clinical information systems. The Company believes that its clinical information systems will allow physicians, at the point of care and on a real-time basis, (i) to access patient-specific clinical and payor information, (ii) to generate patient instructions, prescriptions and orders for tests, specialty referrals and specialty procedures and (iii) to access databases containing managed care and disease management protocols, diagnostic/treatment preferences and guidelines affecting medical orders. By combining its group practice and network management services with its clinical information systems, the Company believes it can provide physicians with integrated solutions for managing the increased financial opportunities and risks associated with managed care contracts while allowing physicians to improve the quality of care. The Company's strategy includes (i) establishing long-term contractual alliances with physician organizations, (ii) managing high-cost, high-volume areas of medical care, including disease specialties such as cardiology, oncology and orthopedics, (iii) providing physicians with clinical information at the point of care, (iv) focusing on selected geographic markets that offer concentrations of physicians seeking the Company's services and (v) developing relationships with key industry participants. The Company has entered into information technology agreements with Merck Medco Managed Care, Inc., PCS Health Systems, Inc., the managed care unit of Eli Lilly & Company, Physicians' Online, Inc. ("Physicians' Online") and Rush Presbyterian - St. Luke's Medical Center. <TABLE> <CAPTION> THE OFFERING <S> <C> Common Stock offered: By the Company ............ 2,000,000 shares By the Selling Stockholders 500,000 shares Common Stock to be outstanding after the offering ............... 9,521,848 shares(1) Use of proceeds ............. For working capital and general corporate pur- poses, which may include acquisitions. See "Use of Proceeds." Nasdaq National Market symbol ....... ADVH </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, ------------------------------------------ ------------------------- 1994 1995 1996 1996 1997 ----------- ------------- ------------ ----------- ----------- <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues .................................... $ 379 $ 1,054 $ 19,136 $ 7,617 $23,028 Cost of revenues ........................... 12 340 9,707 5,580 17,309 -------- -------- -------- -------- ------- Gross profit .............................. 367 714 9,429 2,037 5,719 Operating expenses ........................ 2,901 6,412 11,886 3,840 4,185 -------- -------- -------- -------- ------- Operating income (loss) ..................... (2,534) (5,698) (2,457) (1,803) 1,534 Other income (expense) ..................... (15) (9) 15 (53) 343 -------- -------- -------- -------- ------- Net income (loss) before income taxes ...... (2,549) (5,707) (2,442) (1,856) 1,877 Benefit (provision) for income taxes ...... - - 977 - (66) -------- -------- -------- -------- ------- Net income (loss) ........................... $ (2,549) $ (5,707) $ (1,465) $ (1,856) $ 1,811 ======== ======== ======== ======== ======= Net income (loss) per share ............... $ (1.29) $ (1.68) $ (0.29) $ (0.41) $ 0.22 ======== ======== ======== ======== ======= Weighted average number of common shares and common share equivalents outstanding(2) ........................... 1,978 3,389 5,130 4,489 8,190 </TABLE> JUNE 30, 1997 --------------------------- ACTUAL AS ADJUSTED(3) --------- --------------- BALANCE SHEET DATA: Cash and cash equivalents(4) ...... $ 4,840 $45,546 Investments in marketable securities 7,336 7,336 Working capital .................. 21,645 62,351 Total assets ..................... 36,999 77,705 Total debt ........................ 53 53 Total stockholders' equity(5)....... 33,965 74,671 - ---------- (1) Excludes 2,397,187 shares issuable upon the exercise of outstanding stock options at a weighted average exercise price of $12.42 per share and 481,489 shares issuable upon the exercise of outstanding warrants to purchase Common Stock at a weighted average exercise price of $8.50 per share. Also excludes 313,203 shares and 113,995 shares issuable upon the exercise of options and warrants, respectively, which, in each case, are contingent upon the Company achieving certain capitalization levels related to regulatory requirements or upon the Company achieving certain performance targets. Also excludes 548,224 shares issuable in the Roll Up Transaction (as defined herein). Also excludes options to purchase 12,012 shares of Common Stock at an exercise price of $1.00 per share issued in connection with the acquisition in September 1997 of certain assets of a clinical information software company and an aggregate of up to 114,613 shares of Common Stock that may be issued as contingent consideration in connection with such acquisition. See "Business - Contractual Relationships with Affiliated Physicians," "Management - Stock Plans" and Notes 3, 9 and 10 of Notes to Consolidated Financial Statements. (2) See Note 2 of Notes to Consolidated Financial Statements. (3) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock offered by the Company hereby, assuming a public offering price of $22.125 per share, after deducting underwriting discounts and commissions and estimated offering expenses. (4) Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less when purchased. (5) Excludes 254,047 shares issued upon the exercise of options since June 30, 1997
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001003842_wfs_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001003842_wfs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a62ead75d3364da20bf213caa22daa0086b4a8b5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001003842_wfs_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of certain capitalized terms. Trust...................... WFS Financial 1997-A Owner Trust (the "Trust"). Seller..................... WFS Financial Auto Loans, Inc. (the "Seller"), a wholly owned, limited-purpose operating subsidiary of WFS Financial Inc. The principal executive offices of the Seller are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 753-3000. Prior to May 29, 1996, the Seller was known as Western Financial Auto Loans, Inc. See "The Seller." WFS........................ WFS Financial Inc ("WFS" or, in its capacity as Master Servicer, the "Master Servicer"), a majority owned, operating subsidiary of Western Financial Bank, F.S.B. (the "Bank"), a federally chartered savings association. The principal offices of WFS are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 753-3000. See "WFS." WII........................ WFS Investments, Inc. ("WII"), a California corporation and a wholly owned operating subsidiary of WFS. The principal office of WII is 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WII." Securities Offered......... The securities offered are as follows: A. General................. The WFS Financial 1997-A Owner Trust Auto Receivable Backed Notes (the "Notes") will represent obligations of the Trust secured by the assets of the Trust (other than the Certificate Distribution Account and the Certificate Policy). The WFS Financial 1997-A Owner Trust Auto Receivable Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") will represent fractional undivided interests in the Trust. The Trust will issue four Classes of Notes pursuant to an indenture to be dated as of March 1, 1997 (the "Indenture"), between the Trust and Bankers Trust Company, as trustee (the "Indenture Trustee"), as follows: (i) $105,000,000 aggregate principal amount of 5.63% Auto Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii) $115,000,000 aggregate principal amount of 6.15% Auto Receivable Backed Notes, Class A-2 (the "Class A-2 Notes"), (iii) $180,000,000 aggregate principal amount of 6.50% Auto Receivable Backed Notes, Class A-3 (the "Class A-3 Notes") and (iv) $55,000,000 aggregate principal amount of 6.75% Auto Receivable Backed Notes, Class A-4 (the "Class A-4 Notes"). Payments of principal and interest on the Notes will be made in accordance with the priorities set forth under "Certain Information Regarding the Securities -- Distributions on the Securities." The Trust will issue $45,000,000 aggregate principal amount of 6.85% Auto Receivable Backed Certificates (the "Certificates") pursuant to a trust agreement (the "Trust Agreement") to be dated as of the date of initial issuance of the Securities (the "Closing Date"), among the Seller, Financial Security Assurance Inc. ("Financial Security"), WII and Chase Manhattan Bank Delaware, as trustee (the "Owner Trustee" and, together with the Indenture Trustee, the "Trustees"). Payments in respect of the Certificates will be subordinated to payments on the Notes to the extent described herein. Each Class of Notes and the Certificates will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Definitive Securities will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities -- Book-Entry Registration" and "-- Definitive Securities." B. Property of the Trust... Each Note will represent an obligation of, and each Certificate will represent a fractional undivided interest in, the Trust. The property of the Trust will primarily include (i) a pool of retail installment sales contracts and installment loans (the "Contracts") secured by the new and used automobiles and light-duty trucks financed thereby (the "Financed Vehicles"); (ii) certain monies due under the Contracts on and after March 1, 1997 (the "Cut-Off Date"); (iii) security interests in the Financed Vehicles; (iv) a financial guaranty insurance policy (the "Note Policy") to be issued by Financial Security for the exclusive benefit of Noteholders, which will unconditionally and irrevocably guarantee payment of the Scheduled Payments on each Distribution Date; (v) a financial guaranty insurance policy (the "Certificate Policy" and, together with the Note Policy, the "Policies") to be issued by Financial Security for the exclusive benefit of Certificateholders, which will unconditionally and irrevocably guarantee payment of the Guaranteed Distributions on each Distribution Date; (vi) amounts on deposit in the Collection Account, the Note Distribution Account, the Certificate Distribution Account, the Spread Account and the Holding Account, including all Eligible Investments therein and all income from the investment of funds therein and all proceeds therefrom; (vii) proceeds from claims under certain insurance policies in respect of individual Financed Vehicles or obligors under the Contracts (the "Obligors"); and (viii) certain rights under the sale and servicing agreement to be dated as of March 1, 1997 (the "Sale and Servicing Agreement"), among the Trust, the Seller and the Master Servicer. Pursuant to the Indenture, the property of the Trust (other than the Certificate Distribution Account and the Certificate Policy) will be held by the Master Servicer for the benefit of the Indenture Trustee and Financial Security on behalf of the holders of the Notes. C. Distribution Dates...... Distributions of interest and principal on the Securities will be made on March 20, June 20, September 20 and December 20 of each year (or, if any such day is not a Business Day, on the next succeeding Business Day) (each, a "Distribution Date"), commencing June 20, 1997. Payments on the Securities on each Distribution Date will be paid to the holders of record of the related Securities on the Business Day immediately preceding such Distribution Date or, in the event that Definitive Securities are issued, as of the 15th day of the month immediately preceding the month in which such Distribution Date occurs (each, a "Record Date"). A "Business Day" will be any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Wilmington, Delaware, or Los Angeles, California are authorized or obligated by law, executive order or government decree to be closed. To the extent not previously paid prior to such dates, the outstanding principal amount of (i) the Class A-1 Notes will be payable on March 20, 1998 (the "Class A-1 Final Distribution Date"), (ii) the Class A-2 Notes will be payable on December 20, 1999 (the "Class A-2 Final Distribution Date"), (iii) the Class A-3 Notes will be payable on September 20, 2001 (the "Class A-3 Final Distribution Date") and (iv) the Class A-4 Notes will be payable on June 20, 2004 (the "Class A-4 Final Distribution Date" and, together with the Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date and the Class A-3 Final Distribution Date, the "Note Final Distribution Dates"). To the extent not previously paid in full prior to such date, the unpaid principal balance of the Certificates will be payable on June 20, 2004 (the "Certificate Final Distribution Date" and, together with the Note Final Distribution Dates, the "Final Distribution Dates"). Terms of the Notes......... The principal terms of the Notes will be as described below: A. Interest Rates.......... Interest will be borne on (i) the Class A-1 Notes at the rate of 5.63% per annum (the "Class A-1 Rate"), (ii) the Class A-2 Notes at the rate of 6.15 % per annum (the "Class A-2 Rate"), (iii) the Class A-3 Notes at the rate of 6.50% per annum (the "Class A-3 Rate") and (iv) the Class A-4 Notes at the rate of 6.75% per annum (the "Class A-4 Rate" and, together with the Class A-1 Rate, the Class A-2 Rate and the Class A-3 Rate, the "Interest Rates"). B. Interest................ Interest on the outstanding principal amount of each Class of Notes will accrue at the related Interest Rate from and including the most recent Distribution Date on which interest has been paid (or from and including the Cut-Off Date with respect to the first Distribution Date) to but excluding the current Distribution Date (each, an "Interest Period"). Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days elapsed in an Interest Period and a 360-day year. Interest on the Class A-2, Class A-3 and Class A-4 Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Notes for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the related Interest Rate. See "The Notes -- Payments of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." C. Principal............... Principal of the Notes will be payable on each Distribution Date in an amount generally equal to the Note Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." The Note Principal Distributable Amount will include an amount equal to the Accelerated Principal Distributable Amount for such Distribution Date. On each Distribution Date, the Note Principal Distributable Amount will be applied in the following priority: first to reduce the principal amount of the Class A-1 Notes; second, after the principal amount of the Class A-1 Notes has been reduced to zero, to reduce the principal amount of the Class A-2 Notes; third, after the principal amount of the Class A-2 Notes has been reduced to zero, to reduce the principal amount of the Class A-3 Notes; and fourth, after the principal amount of the Class A-3 Notes has been reduced to zero, to reduce the principal amount of the Class A-4 Notes. Notwithstanding the foregoing, if the principal amount of a Class of Notes has not been paid in full prior to its Note Final Distribution Date, the Note Principal Distributable Amount for such Note Final Distribution Date will include an amount sufficient to reduce the unpaid principal amount of such Class of Notes to zero on such Note Final Distribution Date. See "The Notes -- Payments of Principal" and "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." D. Optional Redemption..... In the event of an Optional Purchase, each Class of outstanding Notes will be redeemed in whole, but not in part, at a redemption price equal to the unpaid principal amount of such Class of Notes plus accrued interest thereon at the related Interest Rate. See "The Notes -- Optional Redemption." E. Mandatory Redemption.... Under certain conditions, the Notes may be accelerated upon the occurrence of an Event of Default under the Indenture. So long as no Insurer Default shall have occurred and be continuing, under certain circumstances Financial Security will have the right (in addition to its obligation to make Scheduled Payments on the Notes in accordance with the terms of the Note Policy) but not the obligation, to elect to accelerate the principal of the Notes and to cause the Master Servicer or the Trustee to sell or otherwise liquidate the property of the Trust and to deliver the proceeds to the Indenture Trustee for distribution in accordance with the terms of the Indenture. See "The Notes -- Events of Default." Terms of the Certificates............... The principal terms of the Certificates will be as described below: A. Interest................ On each Distribution Date, the Owner Trustee or any paying agent as the Owner Trustee may designate from time to time (the "Paying Agent") will distribute pro rata to Certificateholders of record as of the related Record Date accrued interest at the rate of 6.85% per annum (the "Pass-Through Rate") on the Certificate Balance, as defined below, as of the immediately preceding Distribution Date (after giving effect to distributions of principal to be made on such immediately preceding Distribution Date) or, in the case of the first Distribution Date, the Original Certificate Balance. Interest in respect of a Distribution Date will accrue from and including the Cut-Off Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid, to but excluding the current Distribution Date. Interest on the Certificates for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the Pass-Through Rate. See "The Certificates -- Distributions of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." The "Certificate Balance" will equal $500,000,000 (the "Original Certificate Balance") on the Closing Date and on any date thereafter will equal the Original Certificate Balance reduced by all distributions of principal previously made in respect of the Certificates. Distributions on the Certificates will be subordinated to payments of interest and principal on the Notes as described under "The Certificates" and "Certain Information Regarding the Securities -- Distributions on the Securities." B. Principal............... No principal will be paid on the Certificates until the Distribution Date on which the principal amount of the Class A-1, Class A-2 and Class A-3 Notes has been reduced to zero. On such Distribution Date and each Distribution Date thereafter, principal of the Certificates will be payable in an amount equal to the Certificate Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." On each Distribution Date on or after the Distribution Date on which the Class A-4 Notes have been paid in full, any Accelerated Principal Distributable Amount will be included in the Certificate Principal Distributable Amount. If not paid in full prior to the Certificate Final Distribution Date, the remaining Certificate Balance, if any, will be payable on that date. See "The Certificates -- Distributions of Principal." C. Optional Prepayment..... In the event of an Optional Purchase, the Certificates will be repaid in whole, but not in part, at a repayment price equal to the Certificate Balance plus accrued interest thereon at the Pass-Through Rate. See "The Certificates -- Optional Prepayment." Security for the Securities................. The principal security for the Securities will be as described below: A. The Contracts........... The Contracts will consist of retail installment sales contracts and installment loans, secured by liens on the Financed Vehicles, purchased from WFS by the Seller and from the Seller by the Trust, including the right to receive the payments thereunder on and after the Cut-Off Date. The Seller will be required to repurchase Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Securityholders, the Indenture Trustee, the Owner Trustee or Financial Security. The Contracts were purchased from new and used car dealers or originated directly from consumers by WFS. The Contracts were originated in California and 31 other states by new and used car dealers not affiliated with WFS, except for a limited number of Contracts originated directly from consumers by WFS. The Contracts will be selected by WFS from its portfolio of retail installment sales contracts and installment loans based upon the criteria to be specified in the Sale and Servicing Agreement. As of the Cut-Off Date, the Aggregate Scheduled Balance will be $500,000,000 (the "Cut-Off Date Aggregate Scheduled Balance") and the Contracts will have an expected weighted average annual percentage rate of approximately 15.43% and an expected weighted average remaining maturity of approximately 57 months. See "The Contracts Pool." Approximately 42.3% of the aggregate principal amount of the Contracts will be Rule of 78's Contracts and approximately 57.7% will be Simple Interest Contracts, based upon the anticipated Scheduled Balances of the Contracts as of the Cut-Off Date. All net collections received by the Master Servicer on or in respect of the Contracts, any Advances made by the Master Servicer and all amounts paid under the Policies will be deposited in or credited to the Collection Account or, in certain limited instances, the Holding Account. On each Distribution Date, the Indenture Trustee will distribute the amounts on deposit in the Collection Account with respect to such Distribution Date to the Note Distribution Account and, to the extent applicable, the Certificate Distribution Account. All payments to Noteholders will be made from the Note Distribution Account and to Certificateholders from the Certificate Distribution Account. See "Certain Information Regarding the Securities -- The Accounts and Eligible Investments" and "-- Distributions on the Securities." B. The Spread Account...... The Securityholders will be afforded certain limited protection, to the extent described herein, against losses in respect of the Contracts by the establishment of a segregated trust account in the name of the Indenture Trustee for the benefit of the Securityholders (the "Spread Account"). The Spread Account will be part of the Trust. The Spread Account will be created with an initial deposit by the Seller of $15,000,000 (the "Spread Account Initial Deposit"). The funds in the Spread Account will thereafter be supplemented on each Distribution Date by the deposit of any Excess Amounts (as defined below), until the cash on deposit in the Spread Account is at least equal to the Minimum Funded Amount and the sum of the Funded Amount and the Overcollateralization Amount is at least equal to the Specified Spread Account Balance. "Excess Amounts" in respect of a Distribution Date will be calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments" and will equal the funds on deposit in the Collection Account in respect of such Distribution Date, after giving effect to all distributions required to be made on such Distribution Date. The Specified Spread Account Balance, the Minimum Funded Amount and the Overcollateralization Amount will be calculated as described under "Certain Information Regarding the Securities -- Payment Priorities of the Notes and the Certificates; The Spread Account -- Calculation of Specified Spread Account Balance." On each Distribution Date, funds will be withdrawn from the Spread Account for distribution to Securityholders to cover any shortfalls in interest and principal required to be paid on the Securities (before giving effect to any claim under the Policies). If on the last day of any month (each, a "Calculation Day") or on any Distribution Date the Spread Account is fully funded, any excess cash on deposit therein will be released therefrom and upon such distribution Securityholders will have no further rights in, or claims to, such amounts. See "Certain Information Regarding the Securities -- Withdrawals from the Spread Account." C. The Policies............ On the Closing Date, Financial Security will issue the Note Policy to the Indenture Trustee and the Certificate Policy to the Owner Trustee pursuant to the insurance, indemnity and pledge agreement to be dated as of March 1, 1997 (the "Insurance Agreement"), among Financial Security, the Trust, the Seller, Bankers Trust Company as Collateral Agent for Financial Security, WII and WFS. Pursuant to the Note Policy, Financial Security will unconditionally and irrevocably guarantee to the Noteholders payment of the Scheduled Payments for each Distribution Date. Pursuant to the Certificate Policy, Financial Security will unconditionally and irrevocably guarantee to the Certificateholders payment of the Guaranteed Distributions for each Distribution Date. See "The Policies" and "Financial Security Assurance Inc." Optional Purchase.......... The Seller may, but will not be obligated to, purchase all of the Contracts in the Trust, and thereby cause early retirement of all outstanding Securities, on any Distribution Date as of which (i) the Aggregate Scheduled Balance is 10% or less of the Cut-Off Date Aggregate Scheduled Balance and (ii) the aggregate outstanding principal amount of the Securities is 5% or less of the initial aggregate amount of the Securities (an "Optional Purchase"). See "Certain Information Regarding the Securities -- Termination." The Master Servicer........ WFS, as Master Servicer, will be obligated pursuant to the Sale and Servicing Agreement, subject to the limitations set forth therein, to service the Contracts and to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by WFS are incorrect or if WFS, as Master Servicer, breaches certain of its servicing obligations under the Sale and Servicing Agreement, in either case in a manner that materially and adversely affects such Contracts. See "The Master Servicer." Ratings.................... It is a condition of issuance that the Class A-1 Notes be rated A-1+ by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the "Rating Agencies"), and the Class A-2, Class A-3 and Class A-4 Notes and the Certificates each be rated AAA by S&P and Aaa by Moody's. See "Ratings of the Securities." Tax Status................. In the opinion of special tax counsel to the Seller, for both federal and California income tax purposes, the Notes will be characterized as debt, and the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. Each Noteholder, by the acceptance of a Note, will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate, will agree to treat the Trust as a partnership in which the Certificateholders are partners for federal income tax purposes. See "Certain Federal Income Tax Consequences" and "Certain California Income Tax Consequences." ERISA Considerations....... Subject to the considerations discussed under "ERISA Considerations," the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Since the Certificates will be subordinated to the Notes to the extent described herein, employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations." Legal Investment........... The Class A-1 Notes have been structured to be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisors regarding the eligibility of the Class A-1 Notes under Rule 2a-7, the fund's investment policies and objectives and an investment in the Class A-1 Notes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001004939_vanstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001004939_vanstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6040a68af04ce463738740e6a2fbe104d5ce85d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001004939_vanstar_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." SEE "SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995." THE COMPANY The Company is a leading provider of services and products designed to build and manage personal computer ("PC") network infrastructures, primarily for Fortune 1000 companies and other large enterprises. The Company provides customized, integrated solutions for its customers' distributed computing networks by combining a comprehensive offering of value-added services with its expertise in sourcing and distributing PCs, network products, computer peripherals and software from a variety of vendors. These integrated solutions are designed to support the customer's client/server environments throughout its life cycle. The Company refers to these solutions as "Life Cycle Management." Life Cycle Management integrates the offerings of design and consulting, acquisition and deployment, operation and support, and enhancement and migration. Large organizations are becoming increasingly dependent on information technology to compete effectively in today's global markets. The decision-making process that organizations face when planning, selecting and implementing information technology solutions is growing more complex, and, as a result, many organizations are outsourcing the management and support of their PC network infrastructure needs. The Company believes that its customers require increasingly sophisticated PC network systems and support infrastructures. The Company seeks to satisfy these requirements while seeking to minimize its customers' internal staff requirements and systems development risk. The Company enhances the delivery of its services and products with proprietary automated systems, such as the Vanstar Navigator, and proprietary process methodologies, such as Horizon, to analyze, design and manage its customers' PC network infrastructures better. The Company's goal, through the use of these systems and methodologies, is to reduce the labor component of PC life cycle management and thereby increase efficiency, reduce costs and make network systems more reliable and easier to use. The Company's service and product offerings are developed, delivered and managed by a technical force of over 3,900 employees nationwide, including a rapidly expanding systems engineering force, which grew from approximately 200 professionals in March 1994 to approximately 1,400 in December 1996. The Company believes that certain segments of its industry have begun to consolidate. In order to maintain its position as a leading provider of PC network infrastructure solutions to large businesses, the Company believes that expansion through acquisitions, as well as internal growth, will be necessary. Effective May 24, 1996, the Company consummated the acquisition of certain of the assets and business operations of Dataflex Corporation ("Dataflex"), previously known as the Dataflex Western Region and Dataflex Southwest Region (the "Dataflex Regions"). These Dataflex Regions offer PC product distribution, service and support in the states of Arizona, California, Colorado, Nevada, New Mexico and Utah and reported revenues of approximately $145 million for the fiscal year ended March 31, 1996. Effective December 16, 1996, the Company consummated the acquisition of CDS which provides outsourcing of integrated information technology services, related technical support services and procurement of computer hardware and software. CDS reported total revenues of approximately $74.3 million for its fiscal year ended March 31, 1996. In addition, the Company has recently consummated certain other acquisitions in the areas of education services and acquisition and deployment services. The Company expects, for the foreseeable future, to continue to evaluate other potential acquisition opportunities, and to make additional acquisitions as economic and market conditions, and the availability of attractive candidates, permit. See "Selling Stockholders" and "Recent Developments." In fiscal 1996 and the first six months of fiscal 1997, the Company's operating performance improved over prior periods due to higher professional services, and life cycle services and product revenue, higher product gross margins, decreased fixed costs as a percentage of revenue, as well as cost reduction efforts and operational improvements. In order to achieve its objective of continuing to be a leading provider of PC network infrastructure solutions to large businesses throughout the world, the Company intends to leverage its broad customer base, to develop and enhance its value-added service offerings and to expand its worldwide service capabilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The principal executive offices of the Company are located at 5964 West Las Positas Boulevard, Pleasanton, California 94588, and its telephone number is (510) 734-4000. THE OFFERING <TABLE> <S> <C> Shares Offered.................... 1,132,491 shares of Company Common Stock(1) Selling Stockholders.............. The Shares offered hereby were originally issued by the Company to the Selling Stockholders in unrelated, private transactions exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder. These stockholders or their transferees, pledgees, donees or successors, may from time to time offer and sell the Shares pursuant to this Prospectus. See "Selling Stockholders." Percentage of Outstanding Common Stock Offered by the Selling Stockholders..................... 2.7%(2) Use of Proceeds................... The Selling Stockholders will receive all of the proceeds from the sale of the Shares. The Company will not receive any proceeds from the sale of the Shares. NYSE Symbol....................... VST Risk Factors...................... An investment in the Shares involves a high degree of risk. See "Risk Factors" for a discussion of certain factors that should be considered in evaluating an investment in the Shares. </TABLE> - ------------------------ (1) Assumes that all of the shares of Company Common Stock held in escrow for the benefit of the various Selling Stockholders pursuant to the terms of certain Escrow Agreements are released to the Selling Stockholders. See "Selling Stockholders." (2) Percentage indicated is based upon 42,301,215 shares of Company Common Stock outstanding on December 31, 1996 but does not include shares of Company Common Stock issued or issuable by the Company thereafter. SUMMARY CONSOLIDATED FINANCIAL DATA The summary consolidated financial data presented below (other than the unaudited information as of and for the six months ended October 31, 1995 and 1996) have been derived from the consolidated audited financial statements of the Company for the periods indicated. The summary unaudited consolidated financial information as of and for the six months ended October 31, 1995 and 1996, in the opinion of management, reflects all adjustments, consisting only of a normal recurring nature, necessary for a fair presentation of the consolidated financial position and consolidated results of operations for interim periods. The consolidated operating results for the six months ended October 31, 1996 are not necessarily indicative of the results which may be expected for the full fiscal year ending April 30, 1997. All of the following information should be read in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements (including the Notes thereto) appearing elsewhere in this Prospectus. <TABLE> <CAPTION> SEVEN FISCAL YEAR ENDED MONTHS FISCAL YEAR ENDED SIX MONTHS ENDED SEPTEMBER 30, ENDED APRIL 30, OCTOBER 31, -------------------- APRIL 30, ---------------------- -------------------- 1992 1993 1994 1995 1996 1995 1996 -------- ---------- --------- ---------- ---------- -------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Revenue......................................... $787,798 $1,099,813 $586,514 $1,385,392 $1,804,813 $872,297 $1,102,823 Cost of revenue................................. 696,518 921,789 489,512 1,174,854 1,559,886 751,050 943,420 Gross margin.................................... 91,280 178,024 97,002 210,538 244,927 121,247 159,403 Selling, general and administrative expenses.... 158,644 181,320 97,436 182,411 201,880 93,134 116,237 Operating income (loss)......................... (76,272) (3,296) (434) 28,127 43,047 28,113 43,166 Interest expense, net........................... 20,242 22,196 11,181 25,978 30,265 (14,994) (9,088) Income (loss) before income taxes and distributions on convertible preferred securities of trust........................... (54,228) (18,751) (6,969) 1,268 8,053 34,078 13,119 Distributions on convertible preferred securities of trust, net of tax............... -- -- -- -- -- -- (629) Income from discontinued operations............. 2,261 14,505 51,474 -- 9,194 -- -- Net income (loss)............................... (51,967) (4,246) 44,505 1,268 17,247 8,265 20,840 Earnings per share (1): Continuing operations......................... 0.04 0.23 0.25 0.49 Discontinued operations....................... -- 0.27 -- -- Total earnings per share.................... 0.04 0.50 0.25 0.49 </TABLE> <TABLE> <CAPTION> OCTOBER 31, 1996 --------------- (IN THOUSANDS) <S> <C> Balance Sheet Data: Working capital................................................................................ $ 231,358 Total assets................................................................................... 843,258 Current maturities of long-term debt........................................................... 2,365 Long-term debt, less current maturities........................................................ 3,337 Company-obligated mandatorily redeemable convertible preferred securities of subsidiary trust holding solely convertible subordinated debt securities of the Company (2)................... 194,561 Total stockholders' equity..................................................................... 155,349 </TABLE> - ------------------------ (1) Earnings per share for the six months ended October 31, 1995 and the fiscal years ended April 30, 1995 and 1996 give effect to the conversion of all outstanding shares of Preferred Stock and Class B Common Stock into Company Common Stock and the exchange of all outstanding warrants for shares of Company Common Stock in connection with the Company's initial public offering occurring March 11, 1996 as if the conversion had occurred at the later of the beginning of the period or the issuance date. (2) The sole asset of Vanstar Financing Trust is $207,474,200 aggregate principal amount of the Company's 6 3/4% Convertible Subordinated Debentures due 2016.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005015_audio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005015_audio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6883e7d9f8b37418eb8e944556c03e983d2e0aff
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005015_audio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) included elsewhere in this Prospectus. As used in this Prospectus, the terms "fiscal 1992," "fiscal 1993," "fiscal 1994," "fiscal 1995" and "fiscal 1996" refer to the Company's fiscal years ended September 30, 1992, 1993, 1994, 1995 and 1996, respectively. Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Unless the context otherwise requires, as used in this Prospectus, the terms "Company" and "Caribiner" mean Caribiner International, Inc., together with its direct and indirect wholly-owned subsidiaries. THE COMPANY Caribiner is a leading international producer of meetings, events and training programs and a provider of related business communications services that enable businesses to inform, sell to and train their sales forces, dealers, franchisees, partners, stockholders and employees. The Company believes its principal strengths are the depth of its creative, production and technical talent, its ability to consistently meet its clients' objectives and expectations and its ability to manage effectively and reliably a number of complex large-scale projects contemporaneously. Caribiner's clients are typically large companies that have a business need to communicate with sizable internal and external constituencies on a regular basis and include some of the world's largest companies in diverse industries. Major clients include the Ford Motor Co. (automotive), International Business Machines Corporation ("IBM") (information technology), Parke-Davis (pharmaceuticals), Holiday Inn Worldwide (lodging), Shell Oil Company (petroleum) and McDonald's Corporation (fast food). The Company has offices throughout the United States, as well as in London, Dubai and Hong Kong. The Company's strategy is to enhance its leading market position with continued growth, generated both internally and through additional domestic and international acquisitions. Caribiner's revenue has grown from $21.8 million in fiscal 1992 to $81.1 million in fiscal 1995 and $148.3 million in fiscal 1996. On a pro forma basis reflecting certain acquisitions, Caribiner's revenue was $227.1 million in fiscal 1996. (See "Unaudited Pro Forma Consolidated Financial Information.") Business activities and events that generate a need for business communications services include sales meetings, product launches, training and education of employees and dealers, development of strategic and organizational communications, conferences, stockholder meetings and other executive management presentations that are used to convey important information about the business and/or its products. Although no firm data exists with respect to the size of the business communications services industry and the number and size of competitors within the industry, management believes, based on its experience in the industry, that the business communications services industry in the United States and abroad is highly fragmented, that no one participant or small number of participants is dominant in the industry and that its competitors consist primarily of small, regional firms that do not have the resources to provide the full range of services offered by the Company. The Company offers a wide range of business communications services, including conceptualizing, planning and producing corporate meetings and events and providing audio visual equipment rentals, sales and related staging services for such meetings and events, developing training and educational materials relating to new job skills, products, systems and organizational processes, handling internal corporate communications and creating interactive trade show exhibits. The Company believes it has benefited from a trend among major corporations toward increased corporate outsourcing of meetings, events, training and communications. These services are delivered in all forms of media, including film, interactive technologies (including CD-ROM), videotape, slides, computer graphics and animation, print and multimedia. Examples of such engagements include: . The production of the automobile introduction shows for the complete line of 1997 Ford Motor Co. vehicles, which were attended by approximately 8,000 dealers and their guests and Ford employees in San Francisco over a two-week period in August, 1996. Beginning eight months prior to the introductions, the Company's personnel worked closely with Ford's management and product teams to develop the messages and themes which the automobile maker wanted to communicate to its dealers. Caribiner designed and constructed all sets and stage layouts, drafted corporate speeches made by Ford's management, choreographed the unveiling of the new 1997 vehicles to the dealers, produced several audio/visual presentations and arranged for live entertainment. . The introduction to approximately 1,400 sales people from two leading pharmaceutical companies of a new jointly-promoted product in February, 1996 in Orlando, Florida. Within the span of two months, the Company produced the entire event, which was designed to educate each of the companies' sales forces regarding a new antihistamine product. The Company custom-built and designed several meeting areas within a single large convention center, designed an interactive computer video game to test the sales persons' knowledge of the product, produced sketches to demonstrate the product's advantages over competing products, produced several videos, arranged for live entertainment and drafted speeches made by the companies' senior managers. . The development and delivery in October, 1995 of three interactive multimedia CD-ROM-based courses for a retailer focusing on product identification, customer service and technical equipment and procedures specific to a cashier's job. The courses utilized digital audio, still images, text and/or video and assessment questions. . The design of a 3,200 square foot exhibit for Philip Morris Companies, Inc. for use at the October, 1995 National Association of Convenience Stores trade show, which was attended by approximately 14,000 people, as well as the production of two videos and the design and supervision of all on-site activities, including two interactive exhibits. . The provision by Total Audio Visual Services ("TAVS") (a business acquired by the Company in September, 1996) of over 5,000 pieces of audio visual equipment (ranging from data projectors, video walls and concert sound systems to overhead projectors and flip charts) to Computer Associates International, Inc. in connection with its CA World '96 annual users' conference in New Orleans in August, 1996, which was attended by approximately 10,000 people. The Company also provided staging and convention and trade show support services with approximately 150 technicians and other personnel on site. COMPETITIVE POSITION Market leader. The Company offers a full range of business communications services and a depth and breadth of creative, production, technical and organizational expertise that management believes, based on its experience in the industry, most of its competitors generally lack. Caribiner has established a track record of success in executing projects of various types and sizes, including multi-million dollar events, in a number of industries. Caribiner's projects are frequently high profile events where senior executives of a client, often the CEO, are presenting new information to the audience. As a result, Caribiner believes that confidence in a business communications services provider and its ability to execute effectively are of critical importance to clients. In addition, the Company believes that it has an advantage over smaller competitors in that its resources permit it to seek out and manage a number of large-scale projects contemporaneously. From fiscal 1993 to fiscal 1996, the number of clients to whom the Company provided services during the year grew from 65 to over 300. Strong client relationships. The Company's capabilities have resulted in its developing long-standing relationships and significant levels of revenue with numerous major clients. In fiscal 1996, Caribiner had revenue in excess of $1 million from each of 24 clients, many of which Caribiner has had relationships with for several years, compared with nine such clients in fiscal 1993. These 24 clients contributed revenue of $109.8 million in fiscal 1996. Such large accounts are often developed as a result of the Company's efforts to penetrate a number of different divisions and departments within a client. For example, for its largest client, Ford Motor Co., in fiscal 1996 Caribiner executed 160 projects of various sizes for numerous individual buyers of services in 21 Ford business units, including Ford Corporate, Ford Division, Lincoln-Mercury Division, Ford Fleet and Lease, Ford Export and Ford Credit. Expanding national and international presence. As part of the Company's strategy to expand its client base, increase its range of services and broaden its geographic coverage, over the last three years Caribiner has opened new offices in Boston, San Francisco, White Plains (NY) and Hong Kong, and acquired offices throughout the United States and in London and Dubai internationally. This expansion has provided strategic and operational benefits, which include enabling the Company to service clients more effectively by being in closer proximity to them, enabling the Company to serve the international needs of its clients, expanding and diversifying the Company's client base, securing the services of the acquired business' key executives and sales personnel, reducing costs by centralizing finance, administration and information technology functions and realizing purchasing advantages associated with increased economies of scale. The Company has also expanded the business communications services which it offers to clients to include the provision of audio visual equipment rentals, sales and related staging services through its recent acquisitions of TAVS and Video Supply Company, Inc. d/b/a Projexions Video Supply ("Projexions"). GROWTH STRATEGY The Company's strategy is to enhance its leading market position with continued growth, generated both internally and through domestic and international acquisitions. To achieve this goal, Caribiner plans to (i) increase penetration of existing accounts, (ii) develop new large accounts, (iii) continue to diversify the range of services offered and (iv) continue expansion domestically and internationally through acquisitions and the opening of new offices. Increase penetration of existing accounts. The Company believes that it has demonstrated the ability to increase its penetration of existing accounts and to solve a wide range of business communications needs for its clients. The Company has identified and utilized a number of ways to establish and build a client relationship with a large account including: . securing a "blanket purchase order" or other agreement which enables decision makers within a client to award business to Caribiner without going through a bidding or selection process; . establishing a local presence to be in close proximity to a client and to ensure rapid response to clients; and . establishing an outsourcing relationship with a client for specific communications needs. As a result, the Company has entered into agreements with several key accounts for a variety of business communications services. The terms of these agreements provide either specific event and service commitments or blanket purchase order arrangements, though these agreements are generally terminable by the client on short notice and do not provide for minimum levels of revenue. The Company currently has seven such agreements in place with clients, as compared to two such agreements at the end of fiscal 1994. Develop new large accounts. The Company intends to develop new large accounts by continuing to target clients that have significant or potentially significant business communications needs. The Company utilizes a number of techniques to develop new large accounts, including responding to requests for proposals, becoming a part of a company's regular "bid" list, pursuing client referrals, identifying prospects through research of a potential client's business communications needs (e.g., the status of product launches) and actively marketing to potential new clients. Sales and marketing personnel in each of Caribiner's offices identify potential client relationship opportunities and promote Caribiner's expertise and range of services. Continue to diversify the range of services offered. Caribiner believes there are significant opportunities to increase its penetration of accounts by promoting its capabilities in areas such as employee training and education and corporate communications, which can be utilized by clients either in conjunction with meetings and events or separately from them. Revenue for the Company's "non-meetings" business has increased from a relatively insignificant amount in fiscal 1993 to $18.0 million in fiscal 1995 and $33.5 million in fiscal 1996. Caribiner believes that continued efforts to promote its non- meetings business will result in increased usage of the Company's wide range of business communications services, strengthen ongoing client relationships and further expand its revenue base. Caribiner also believes there are attractive opportunities to continue expanding its position as a provider of audio visual equipment rentals and related staging services through internal growth and acquisitions. The Company believes that these services complement its other "meetings-related" activities. Continue expansion domestically and internationally. Caribiner intends to continue to expand domestically and internationally by making acquisitions in the business communications services industry and opening new offices to service existing or potential new clients. In making acquisitions, the Company will continue to focus on companies that have an existing or potential client base that lends itself to increased penetration subsequent to acquisition and that are in attractive markets. The Company believes that numerous acquisition candidates are available as a result of the fragmented nature of the industry. Since October, 1993, the Company opened four offices, made twelve acquisitions and acquired a contractual client relationship with a major corporation from another business communications services provider. Caribiner believes that its future worldwide opportunities are significant as a result of the global marketing approach undertaken by its clients as well as the size of the international business communications market. RECENT ACQUISITIONS Since January, 1996, the Company has completed seven acquisitions. These acquisitions have broadened the business communications services offered by the Company, provided the Company with a significant international presence and enabled the Company to obtain relationships with large new clients. The TAVS Acquisition. In September, 1996, the Company acquired TAVS, a leading provider of audio visual equipment rentals, sales and related staging services, including hotel audio visual outsourcing services, in the United States. The acquisition of TAVS enables the Company to offer its own audio visual equipment and staging services for use at meetings and events serviced by the Company and reduce the Company's reliance on third party vendors. The Company also believes that since many TAVS clients are hotel properties whose business customers tend to book hotel facilities well in advance of meetings and events, and often prior to contacting a business communications services provider, it will have opportunities to benefit from cross-referral of customers. TAVS reported revenue of $45.9 million for the year ended December 31, 1995. The Blumberg Acquisition. In January, 1997, the Company acquired Blumberg Communications Inc. ("Blumberg"), a provider of audio visual equipment rentals, sales and related staging services, including hotel audio visual outsourcing services, in the upper mid-west and southern U.S. The Company is integrating Blumberg's operations with its existing operations, thereby expanding its presence in the geographic regions which Blumberg serves. Blumberg reported revenue of $42.3 million for the year ended May 31, 1996. The Spectrum Acquisition. In June, 1996, the Company acquired SCH International Limited ("Spectrum"), a leading London-based producer of meetings and events and provider of other business communications services, with a significant presence in the United Kingdom and Europe. Spectrum owns Spectrum Communications Limited and Mark Wallace Associates Limited ("MWA") in London and a joint venture interest in Spectrum Communications LLC in Dubai. The acquisition of Spectrum allowed the Company to establish an international presence and will enable it to serve the global needs of its domestic clients. Spectrum reported revenue of $20.5 million for the nine months ended March 31, 1996. The Projexions Acquisition. In January, 1997, the Company acquired Projexions, a provider of audio visual equipment rentals and related staging services, including hotel audio visual outsourcing services, in the southeastern U.S. The Company is integrating Projexions into its TAVS division, thereby strengthening the Company's position as a leading provider of hotel audio visual outsourcing services in that region. Projexions reported revenue of $17.7 million for the year ended December 31, 1995. The Koors Perry Acquisition. In January, 1996, the Company acquired Koors Perry & Associates, Inc. ("Koors Perry"), a regional business communications services provider based in Atlanta, Georgia. The Company integrated Koors Perry with its Atlanta office and has used it as a base from which to expand its presence in the southeastern U.S. Koors Perry reported revenue of $8.9 million for the nine months ended September 30, 1995. The Lighthouse Acquisition. In June, 1996, the Company acquired Lighthouse, Ltd. ("Lighthouse"), a leading midwestern business communications services provider. The Company integrated its Chicago office with the Lighthouse headquarters in Rolling Meadows, Illinois and such acquisition has enabled it to further expand its presence in the midwestern U.S. Lighthouse reported revenue of $10.4 million for the year ended December 31, 1995. The Rome Acquisition. In December, 1996, the Company acquired Rome Network, Inc. ("Rome"), a regional producer of meetings and events headquartered in San Francisco. The Company is integrating Rome into its San Francisco office, thereby expanding and strengthening its presence in the business communications services industry in the Northern California market. Rome reported revenue of $2.4 million for the year ended February 29, 1996. BACKGROUND The Company was founded in 1989 by its Chairman of the Board and Chief Executive Officer, Raymond S. Ingleby, under the name Ingleby Enterprises Inc. and adopted its present name in December, 1995. The Company became a leader in the business communications market in June, 1992 when it acquired Caribiner, Inc., which was founded in 1970. In March, 1996, the Company consummated an initial public offering (the "Initial Public Offering") of its Common Stock, which included the sale by the Company of 2,878,014 shares of Common Stock. In connection with the Initial Public Offering, certain stockholders of the Company sold an additional 646,963 shares of Common Stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005270_engineerin_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005270_engineerin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..308bab81ede173115dc586d5d283f37cb35696f5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005270_engineerin_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements included elsewhere in this Prospectus. Except as set forth in the consolidated financial statements or otherwise noted, the information contained in this Prospectus assumes that there will be no exercise of the Underwriters' over-allotment option. THE COMPANY EAI specializes in developing 3D visualization technology and products that address the productivity, communication, education and entertainment needs of its clients. The Company utilizes its core technical competencies in high speed, real time graphics, CAD/CAE/CAM interfaces, distributed databases and Internet/intranet communications to provide solutions through three interrelated product lines: 3D visualization software, interactive software and custom animation. Utilizing its broad base of technology, in conjunction with its extensive library of computer-generated animation assets, EAI offers products that allow customers to reduce time to market, decrease product development costs and obtain realistic, high quality 3D animations at reasonable prices within a short time frame. The Company offers three product lines that benefit from and build upon each other: 3D visualization software products EAI develops, produces and sells a suite of 3D visualization software products, referred to as VisProducts, that enables users to perform sophisticated product visualization, digital prototyping and engineering design and analysis tasks. EAI's multi-platform products interface seamlessly with most popular CAD/CAE/CAM environments, operate on all major workstation platforms and allow access to visualizations with personal computers, thereby allowing customers to use VisProducts with their existing hardware and software. When deployed on an enterprise-wide basis, the Company's VisProducts enable the creation of a collaborative visual environment that allows functional groups throughout the organization, including engineering, manufacturing, marketing, sales and support, to more easily visualize products, see the effects of changes during the development process and communicate in real time. This collaborative approach can help reduce the total time required for products to move from initial concept through final manufacturing by identifying problems early in the design cycle. Interactive software products EAI develops and produces 3D interactive software products for distribution and marketing partners in both academic and consumer markets. From its success in creating products for the medical education market, EAI has expanded its line of interactive software products to include products for the broader educational and consumer markets. EAI has contracts with BMG Interactive, Elsevier Science N.L., Hoechst Marion Roussel North America, Houghton Mifflin Company, International Business Machines Corporation, Smithsonian Institution Inc., The Times Mirror Company, William C. Brown Publishers and Williams & Wilkins, Inc. Custom animation products The Company develops, produces and sells custom 3D computer-generated animated movies on videotape, videodisc and CD-ROM to the biomedical, corporate communications, litigation and entertainment markets. The Company's custom animation products are used to market products and to educate students, medical professionals and trial juries about complex issues. In addition, the Company has recently created custom animations and special effects for use in entertainment projects for producers such as The Discovery Channel and the National Geographic Society. In 1996, EAI produced more than 4,000 minutes of 3D animation in over 150 projects for customers. The Company was incorporated in 1988 in Iowa and, in December 1995, reincorporated in Delaware. The Company maintains its executive offices at 2321 North Loop Drive, Ames, Iowa 50010. The Company's telephone number is (515) 296-9908; its Internet e-mail address is EAII@eai.com; and its World Wide Web address is www.eai.com. THE OFFERING The offering of 1,429,000 shares of Common Stock being offered is referred to in this Prospectus as the "Offering." <TABLE> <S> <C> COMMON STOCK OFFERED(1): By the Company............ 870,000 shares By the Selling Stockholders............. 559,000 shares Total Offering............ 1,429,000 shares COMMON STOCK OUTSTANDING AFTER THE OFFERING(1)(2)... 5,572,260 shares USE OF PROCEEDS TO THE For expansion of international sales and marketing COMPANY.................... and for general corporate purposes, including product development and capital expenditures, including computer and equipment purchases. See "Use of Proceeds." RISK FACTORS................ For a discussion of certain considerations relevant to an investment in the Common Stock, see "Risk Factors." NASDAQ NATIONAL MARKET SYMBOL..................... "EAII" </TABLE> - ------- (1) Assumes the Underwriters' over-allotment option for up to 214,350 shares of Common Stock is not exercised. See "Underwriting." (2) Excludes 1,190,000 shares of Common Stock reserved for issuance under the Company's 1994 Stock Option Plan (the "1994 Option Plan") (including 890,100 shares issuable upon the exercise of outstanding options that have been granted under the 1994 Option Plan, of which options to purchase 154,825 shares of Common Stock are currently exercisable), 60,000 shares of Common Stock reserved for issuance under the Company's Non-Employee Directors Option Plan ("Director Option Plan") (including 5,000 shares issuable upon the exercise of outstanding options that have been granted under the Director Option Plan, all of which are currently exercisable) and 513,996 shares of Common Stock reserved for issuance under other outstanding options (all of which are currently exercisable). See "Management--Employee Benefit Plans" and Note 7 of Notes to Consolidated Financial Statements. SUMMARY FINANCIAL DATA <TABLE> <CAPTION> ------------------------------------------------ THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1996 1996 1997 ---- ------ ------ ------- ------- ------ ------ <S> <C> <C> <C> <C> <C> <C> <C> Dollars in thousands, except per share data STATEMENT OF OPERATIONS DATA Net revenues $993 $2,687 $5,456 $10,415 $20,413 $3,101 $7,676 Income from operations 26 204 274 865 2,059 229 1,040 Net income 5 107 114 431 1,851 176 785 Earnings per share -- $ .04 $ .03 $ .12 $ .36 $ .04 $ .14 </TABLE> <TABLE> <CAPTION> ------------------- AT MARCH 31, 1997 AS ACTUAL ADJUSTED(1) ------- ----------- <S> <C> <C> Dollars in thousands BALANCE SHEET DATA Cash and short-term investments $17,670 $42,622 Working capital 26,515 51,467 Total assets 38,654 63,606 Long-term debt and obligations under capital leases, less current maturities 788 788 Stockholders' equity 33,890 58,842 </TABLE> - ------- (1) Adjusted to reflect the sale of 870,000 shares of Common Stock by the Company at an estimated offering price of $31.00 per share as if such sale had occurred on March 31, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005407_chirex-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005407_chirex-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..11c124aceb63e1eb25d3d8bb4753ad653a2d7a8b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005407_chirex-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information appearing elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information and financial statements contained elsewhere in this Prospectus. Certain technical terms used in this Prospectus are defined in the Glossary beginning on Page G-1. THE COMPANY ChiRex Inc. is a contract manufacturing organization ("CMO") serving the outsourcing needs of the pharmaceutical industry through its extensive pharmaceutical fine chemical manufacturing and process development capabilities and proprietary technologies. The Company supports and supplements the in-house development and manufacturing capabilities of its pharmaceutical and biotechnology customers with a broad range of fully-integrated services, accelerating the time from drug discovery to commercialization. The Company currently manufactures 54 products, of which 29 are core products. The Company's customers include Cell Therapeutics, Inc., ACS Dobfar SpA, Glaxo Wellcome PLC, Pfizer Inc., Pharmacia & Upjohn Inc., Procter & Gamble Company, Rohm and Haas Company, Sanofi S.A. and SmithKline Beecham PLC. The Company was created simultaneously with its initial public offering in March 1996 (the "IPO") through the combination of a U.S.-based chiral chemistry business, SepraChem Inc., and a U.K.-based pharmaceutical fine chemical manufacturing business, Sterling Organics Limited. Since the IPO, the Company has integrated these operations and further developed its advanced manufacturing facilities, commercial development process and technology base. During this time, the Company has entered into an exclusive agreement for the supply of clinical and commercial requirements for Cell Therapeutics' new cytoprotective drug, lisofylline, established a new supply relationship with Pfizer and scaled-up production of three pharmaceutical intermediates using the Company's proprietary ChiRex Technologies for three customers. In addition, the Company recently entered into an exclusive license agreement with Harvard University for kinetic resolution technology applicable to the manufacture of single-isomer forms of certain chiral intermediates, which the Company believes has significant commercial potential. Since the IPO, management has reviewed the Company's product portfolio and identified 29 of the 54 products it manufactured in 1996 as "core products" which the Company believes offer superior long-term growth potential, higher margins or strategic customer relationship benefits. The Company intends to focus on developing additional revenues from existing core products and adding new core products to the Company's portfolio while phasing out non-core products to release capacity and improve profitability. In particular, the Company is actively negotiating the disposition of its acetaminophen business, pursuant to which the Company sells commercial scale quantities of acetaminophen, an analgesic, to two major customers. During 1996, core product revenue increased by 35% through the addition of seven new products and increased revenue from existing core products. CMOs have evolved from providing limited third-party manufacturing services to offering a full range of drug development and manufacturing capabilities. CMOs currently offer research and development and hazard evaluation capabilities, scale-up facilities, state-of-the-art analytical departments, documentation expertise, large, multi-purpose, FDA-inspected cGMP facilities and efficient waste treatment facilities. Due to the interactive nature of their services, a CMO's success depends on the strength of its relationships with customers. Critical success factors for CMOs in developing outsourcing relationships with major life science companies include: (i) an established reputation and proven track record, (ii) flexible cGMP manufacturing capacity, (iii) technical competence and a broad technology base, (iv) financial stability and (v) secure management of trade secrets and intellectual property rights. According to A.D. Little, in 1996 the global market for the manufacture of pharmaceutical fine chemical intermediates and bulk actives and custom synthesis was approximately $12.0 billion. In recent years, outsourcing of drug development and manufacturing activities by pharmaceutical and biotechnology companies has increased in response to pharmaceutical cost containment pressures, increased pressure to bring new and innovative drugs to market faster and more complex manufacturing processes. The Company's goal is to be a preferred partner to major life sciences companies in the development of manufacturing processes and to supply on a commercial scale pharmaceutical intermediates and active ingredients for leading proprietary and generic drugs. The Company's strategy for achieving this objective is to: (i) leverage its research and development expertise, (ii) expand its existing cGMP manufacturing capacity or acquire new capacity, (iii) provide clinical scale manufacturing capacity to its customers, (iv) apply proprietary technologies to the development and manufacture of a range of chiral intermediates and (v) identify opportunities to develop and market complex, generic drugs where its technologies provide process and cost advantages. RECENT DEVELOPMENTS The Company is actively negotiating the disposition of its acetaminophen business. Although acetaminophen (paracetamol), an OTC analgesic, is the largest volume product manufactured by the Company, representing approximately 31% of the Company's 1996 pro forma revenues, it is not highly profitable at the gross margin level. In connection with the disposition of the business, the Company intends to implement measures designed to significantly offset the effect on net income. The Company has agreed in principle with Dabur India Ltd. to dissolve their joint venture, InNova Pharmaceuticals SRL. The Company originally sought to utilize InNova as a secure supply source of starting material for semi-synthetic paclitaxel, a compound used in the treatment of breast and ovarian cancer. Recently, however, new suppliers this raw material have emerged, mitigating InNova's competitive advantage. Moreover, the Company is committed to focusing on its core business of developing, manufacturing and supplying pharmaceutical fine chemicals, whereas Dabur wanted to change the mission of InNova from one of a single product joint venture to one of a multi-product generic oncology drug business. The Company believes that its low cost proprietary process technology for producing semi-synthetic paclitaxel will allow it to sell either exclusively to a major generic drug marketing company or non-exclusively to several market participants. The Company is currently pursuing these options with several major companies. THE OFFERING <TABLE> <S> <C> Common Stock being offered................... 3,489,301 shares(1) Common Stock outstanding after the offering................................... 10,943,678 shares(1)(2) Use of Proceeds.............................. All of the proceeds from the sale of the 3,489,301 shares of Common Stock offered hereby will be received by Sepracor. If the Underwriters' over-allotment option is exercised, the proceeds therefrom will be used by the Company for working capital and general corporate purposes. Nasdaq National Market symbol................ CHRX </TABLE> - --------------- (1) Excludes up to 523,395 shares of Common Stock that may be sold by the Company pursuant to the Underwriters' over-allotment option. See "Underwriting." (2) Based on the number of shares of Common Stock outstanding as of March 17, 1997. Does not include as of such date 840,798 shares of Common Stock issuable upon exercise of options with a weighted average exercise price of $6.95 per share. See "Management -- Executive Compensation" and Note 3 of Notes to Consolidated Financial Statements of the Company. SUMMARY FINANCIAL INFORMATION (In thousands, except per share amounts) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1996 --------------------------- ACTUAL PRO FORMA(1) -------- ------------ <S> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues........................................................... $ 74,615 $ 89,827 Costs of goods sold.............................................. 56,508 69,184 -------- -------- Gross profit....................................................... 18,107 20,643 Research and development......................................... 3,517 4,075 Selling, general and administrative.............................. 7,952 9,252 Goodwill amortization............................................ 924 1,149 Write-off of in-process research and development related to the Contribution(2)............................................... 5,790 5,790 Stock compensation charge related to the Merger(2)............... 5,611 5,611 -------- -------- Operating loss..................................................... (5,687) (5,234) Interest expense................................................. 755 1,005 -------- -------- Loss before income taxes........................................... (6,442) (6,239) Provision for income taxes....................................... 1,867 2,008 -------- -------- Net loss........................................................... $ (8,309) $ (8,247) ======== ======== Net loss per common share.......................................... $ (0.88) $ (0.76) Weighted average number of common shares outstanding............... 9,485 10,895 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------- <S> <C> <C> BALANCE SHEET AND OTHER DATA: Cash............................................................. $ 291 Total assets..................................................... 130,806 Long-term debt................................................... 3,933 Stockholders' equity............................................. 90,068 EBITDA (for the period)(3)....................................... 15,457 </TABLE> - ------------------------ (1) Gives pro forma effect to the Contribution (as defined herein) as if it had occurred on January 1, 1996. See "The Company," "Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "The Formation Transactions." (2) See "The Company" and "The Formation Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005700_data_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005700_data_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..00150b5a6ce778e48671e526d173c7f83b78e2f0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005700_data_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information contained in this Prospectus, including "Risk Factors" and the Financial Statements and Notes thereto. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over- allotment option. THE COMPANY Data Processing Resources Corporation ("DPRC" or the "Company") provides information technology ("IT") staffing services to a diverse group of corporate clients. By drawing from its carefully screened database of approximately 40,000 highly qualified technical consultants, the Company offers staffing solutions to meet its clients' enterprise-wide systems applications development needs. The Company's technical consultants have expertise on multiple hardware platforms utilizing a wide variety of software applications and provide services covering all aspects of the systems applications development lifecycle, including planning, design, building and programming, implementation, maintenance and ongoing management. The Company also provides other value-added services in rapidly growing areas such as client/server architecture, wide area and local area networks ("WANs" and "LANs"), help desk support, intranet and internetworking. For the 11 months ended November 30, 1996, the Company placed approximately 1,300 technical consultants on projects for approximately 230 clients, including Mitsubishi Motor Sales of America, Nissan Motor Corporation USA, The Walt Disney Company and U.S. West. Since December 1995, the Company has expanded beyond its three California offices and currently has ten offices in eight states. Of the seven new offices, three were internally developed and four were acquired by the Company in three recent acquisitions. IT staffing services is one of the fastest growing segments of the supplemental staffing industry. According to the July 30, 1996 Staffing Industry Report, revenues from technical/computer temporary staffing are estimated to have grown from $5.7 billion in 1993 to an estimated $9.2 billion in 1995. An important factor in this growth has been a fundamental shift by businesses from closed, proprietary systems to open systems incorporating a range of different IT systems. This trend has accelerated the pace of technological change in information systems and increased the need for specialized IT professionals to assist in the integration of a variety of hardware platforms and software applications. Another factor contributing to the growth has been the increasing demand to integrate data, voice and video in new information systems. In addition, the trend by businesses to reduce corporate workforces through outsourcing has increased the demand for outside IT services. The IT staffing services industry is highly fragmented and competitive with a large number of small businesses, many of which operate in a single geographic market. This fragmentation, combined with changing client demands and increased competitive pressures, has resulted in a trend towards industry consolidation. The Company serves as an extension of its clients' IT operations by providing technical consultants to meet their IT staffing needs. The Company's business strategy encompasses a number of key elements which management believes are necessary to ensure high quality standards and to achieve consistently strong financial performance. The primary element of this strategy is to recruit and retain qualified technical consultants with a wide range of skills. Second, the Company emphasizes and maintains a relationship-oriented consultative approach designed to create long-term partnerships with its clients. Third, the Company focuses on enhancing margins by improving operating efficiencies and offering a product mix which emphasizes higher value-added services. Finally, the Company seeks to meet its clients' supplemental IT staffing needs by offering responsive, timely and comprehensive technical staffing solutions for all aspects of the systems applications development lifecycle. The Company's goal is to emerge as a leading staffing company providing comprehensive IT solutions. To achieve this goal, the Company has adopted a growth strategy to broaden the geographic scope of its operations, recruit and retain qualified technical consultants, diversify its client base, expand the services it offers and strengthen its strategic relationships with other professional service organizations. The Company is expanding its geographic scope through both internal development and acquisitions and is developing a network of branch offices clustered around regional hub offices. The Company has selected Newport Beach, Dallas, Denver and Seattle to serve as its regional hubs for the California, Texas, Rocky Mountain and Pacific Northwest regions, respectively. A future office in Chicago or Minneapolis is planned to serve as a regional hub for the North Central region. Although the Company's growth strategy has previously focused on the Western United States, the Company is beginning to consider acquisition opportunities nationwide. The Company also recognizes the need to recruit and retain new qualified technical consultants. As a result, the Company has recently improved the benefits it offers to its technical consultants and has begun to utilize salaried technical consultants, who remain on the Company's payroll even when not on assignment. In addition, the Company intends to continue to add new clients through expanded marketing programs, including a greater focus on middle market companies, and has begun to offer a number of new value-added services, including Year 2000 and internetworking services. Finally, the Company is developing strategic relationships with a number of professional service providers such as national accounting firms, consulting firms, facilities management companies and other outsourcing providers. The Company was incorporated in 1984 as a California corporation, and its principal executive offices are located at 4400 MacArthur Boulevard, Suite 600, Newport Beach, California 92660. The Company's telephone number is (714) 553- 1102. RECENT ACQUISITIONS Since the completion of the Company's initial public offering in March 1996 (the "IPO"), the Company has acquired the following three IT staffing services businesses (collectively, the "Acquisitions"): . In January 1997, the Company acquired LEARDATA Info-Services, Inc. ("Leardata"), a Dallas-based IT staffing company with approximately 130 technical consultants, for $21.4 million in cash and stock (the "Leardata Acquisition"). Leardata generated revenues in approximately 30 states during the nine months ended September 30, 1996. Leardata had revenues of approximately $4.3 million for the three months ended September 30, 1996. . In November 1996, the Company acquired Professional Software Consultants, Inc. ("PSCI"), a Phoenix-based IT staffing company with approximately 130 technical consultants, for $4.9 million in cash and an earnout payment to be made based on PSCI's financial performance for the two months ending December 31, 1996 (the "PSCI Acquisition"). PSCI had revenues of approximately $2.7 million for the three months ended September 30, 1996. . In July 1996, the Company acquired the Applications, Design and Development division ("AD&D") of ADD Consulting, Inc. for $11.7 million in cash and stock (the "AD&D Acquisition"), adding branches in Omaha and Kansas City, as well as approximately 170 technical consultants. AD&D had revenues of approximately $13.9 million for the 12 months ended July 31, 1996. Through the Acquisitions, the Company has significantly expanded its geographic scope and positioned itself as a leading provider of IT staffing services. The Acquisitions also have diversified and broadened the Company's customer base. The Company continually reviews potential acquisitions and is currently in various stages of investigating and negotiating with several acquisition candidates, but has not entered into a definitive purchase agreement with any acquisition candidate. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............... 2,000,000 shares Common Stock offered by the Selling Shareholder... 200,000 shares Common Stock to be outstanding after the Offering. 9,802,547 shares (1) Use of proceeds................................... To repay outstanding indebtedness, for future acquisitions, the opening of new offices, working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol..................... DPRC </TABLE> - -------- (1) Excludes 1,227,800 shares of Common Stock reserved for issuance under the Company's 1994 Stock Option Plan, of which options to purchase 811,720 shares were outstanding as of November 30, 1996, and 250,000 shares of Common Stock reserved for issuance under the Company's Employee Stock Purchase Plan. See "Management -- 1994 Stock Option Plan" and " -- Employee Stock Purchase Plan." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> Three Months Ended October Fiscal Year Ended July 31, 31, ------------------------------------------- ----------------- 1992 1993 1994 1995 1996 1995 (1) 1996 ------- ------- ------- ------- ------- -------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues................ $20,621 $23,163 $34,165 $49,558 $58,145 $13,954 $20,134 Cost of professional services................ 17,927 19,397 28,047 40,082 45,918 11,035 15,434 ------- ------- ------- ------- ------- ------- ------- Gross margin............ 2,694 3,766 6,118 9,476 12,227 2,919 4,700 Selling, general and administrative expenses (2).................... 2,530 3,648 5,581 5,769 6,719 1,491 2,853 ------- ------- ------- ------- ------- ------- ------- Operating income........ 164 118 537 3,707 5,508 1,428 1,847 Interest (expense) income, net............. (128) (113) (401) (764) (162) (159) 202 ------- ------- ------- ------- ------- ------- ------- Income before provision for income taxes....... 36 5 136 2,943 5,346 1,269 2,049 Provision for income taxes................... 11 4 56 1,205 2,096 516 801 ------- ------- ------- ------- ------- ------- ------- Net income.............. $ 25 $ 1 $ 80 $ 1,738 $ 3,250 $ 753 $ 1,248 ======= ======= ======= ======= ======= ======= ======= Net income per share.... $ 0.54 $ 0.15 $ 0.16 ======= ======= ======= Weighted average common and common equivalent shares (3)............. 6,039 4,926 7,864 </TABLE> <TABLE> <S> <C> <C> <C> PRO FORMA STATEMENT OF INCOME DATA (4): Revenues................................................ $93,467 $27,125 Gross margin............................................ 22,352 6,656 Operating income........................................ 8,265 2,496 Net income (5).......................................... 3,798 1,413 Net income per share (5)................................ $ 0.59 $ 0.17 ======= ======= Weighted average common and common equivalent shares (3) (5).................................................... 6,488 8,174 </TABLE> <TABLE> <CAPTION> October 31, 1996 ---------------------------------- Pro Forma As Actual Pro Forma (6) Adjusted (7) ------- ------------- ------------ <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.................... $22,945 $12,609 $37,448 Working capital.............................. 28,105 20,896 45,735 Total assets................................. 44,895 60,128 84,967 Total debt (8)............................... -- 9,500 -- Shareholders' equity......................... 40,155 44,198 78,537 </TABLE> - -------- (1) The AD&D Acquisition was completed on July 1, 1996. Consequently, the Statement of Income Data for the three months ended October 31, 1996 (which includes the acquired operations for the entire period) are not directly comparable to the Statement of Income Data for the three months ended October 31, 1995. See "Pro Forma Combined Condensed Financial Information." (2) Selling, general and administrative expenses for fiscal 1992, 1993 and 1994 include management fees of $765,000, $820,000 and $586,000, respectively, which were paid to a management company controlled by one of the founders of the Company. This management fee was terminated in February 1994 upon the redemption of such founder's ownership interest in the Company. Selling, general and administrative expenses for fiscal 1992, 1993, 1994 and 1995 also include compensation paid to Ms. Weaver of $815,000, $975,000, $1.7 million and $921,000, respectively. Effective March 1995, Ms. Weaver's annual compensation was significantly reduced. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management -- Compensation." (3) Weighted average common and common equivalent shares gives effect to the assumed exercise of all outstanding stock options using the treasury method. See Note 2 of Notes to Financial Statements of the Company included elsewhere in this Prospectus. (4) The Pro Forma Statement of Income Data for fiscal 1996 gives effect to the AD&D Acquisition, the PSCI Acquisition and the Leardata Acquisition as if such transactions had occurred on August 1, 1995. The Pro Forma Statement of Income Data for the three months ended October 31, 1996 gives pro forma effect to the PSCI Acquisition and the Leardata Acquisition as if such transactions had occurred on August 1, 1995. The Pro Forma Statement of Income Data does not assume the repayment of the debt. See note 8 below. See "Pro Forma Combined Condensed Financial Information." (5) Assuming the issuance of 519,000 shares of Common Stock by the Company which would be necessary to generate gross proceeds sufficient to repay the pro forma outstanding debt of $9.5 million and the elimination of all interest expense, net of tax, associated therewith, supplemental net income and supplemental net income per share for the fiscal year ended July 31, 1996 and the three months ended October 31, 1996 would be $4.2 million and $0.60 and $1.5 million and $0.17, respectively. (6) The Pro Forma Balance Sheet Data as of October 31, 1996 gives effect to the PSCI Acquisition and the Leardata Acquisition as if such transactions had occurred on October 31, 1996. See "Pro Forma Combined Condensed Financial Information." (7) The Pro Forma As Adjusted Balance Sheet Data as of October 31, 1996 further adjusts the Pro Forma Balance Sheet Data to give effect to the sale by the Company of 2,000,000 shares of Common Stock offered hereby at an estimated offering price of $18.31 per share of Common Stock and the application of the estimated net proceeds therefrom. See "Use of Proceeds,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005969_ge_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005969_ge_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4979abad29300ef8f1370eca2f66f924a45fa681
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005969_ge_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "RISK FACTORS." THE COMPANY InVision Technologies, Inc. ("InVision" or the "Company") is the worldwide leader in explosive detection technology. The Company develops, manufactures, markets and supports an explosive detection system ("EDS") for civil aviation security based on advanced computed tomography ("CT" or "CAT Scan") technology. To date, the Company's CTX 5000 is the only EDS to be certified by the Federal Aviation Administration ("FAA") for use in the inspection of checked luggage on commercial flights. Historically, the FAA has been the leader in establishing standards for aviation security worldwide, and the Company believes that airports around the world will migrate over time towards security policies consistent with those of the FAA. As a result, the Company believes that the CTX 5000 is well positioned to become the industry standard. In December 1996, the Company received an order from the FAA for 54 CTX 5000 systems to be installed at the busiest U.S. airports. For the fiscal year ended December 31, 1996 and the quarter ended March 31, 1997, the Company had revenues of $15.8 million and $9.4 million, respectively, and at March 31, 1997 had orders in backlog in the amount of $68.6 million. As of March 31, 1997, 37 CTX 5000 systems had been shipped to 13 airports in eight countries around the world. The Company believes that the CTX 5000 is the only EDS capable of reliably detecting all types of explosives designated by the FAA to be a threat to commercial aviation, and that the CTX 5000 is superior to competing systems by virtue of its advanced detection technology. The CTX 5000 is capable of capturing and processing substantially more data than other explosive detection systems, and of rendering three-dimensional images of suspicious objects. By combining the superior capability of CT technology and advanced software for image processing with simple user interfaces, the Company's CTX 5000 is capable of providing high detection and low false alarm rates, as well as advanced threat resolution capability and increased operator efficiency. There are over 600 airports worldwide providing scheduled service for an aggregate of approximately 2.5 billion passengers per year. Of these airports, over 400 are located in the United States, and a substantial portion of the remainder are located in Europe and the Asia/Pacific region. It is estimated that it would cost approximately $2.2 billion to equip the 76 largest airports in the United States with certified explosive detection systems. In recent years, increased incidents of bombings and airline terrorism have contributed to an enhanced perception of the threat of terrorism among the general public. According to a report of the President's Commission on Aviation Security and Terrorism dated May 15, 1990, there were 41 bombings against civilian aviation targets worldwide between 1975 and 1989. According to Time Magazine, there were 10,222 bombings in the United States between 1983 and 1993. According to a CBS poll conducted in July 1996, airline passengers have expressed a willingness to pay more for airline travel and endure delays if such actions will decrease the threat of successful airline bombings. Following the December 1988 bombing of Pan American Flight 103, the United States enacted the Aviation Security Improvement Act of 1990, in response to which the FAA sponsored the development of advanced explosive detection technology, established protocols for the certification of such technology, and began to set forth the guidelines for its worldwide implementation. To date, the FAA has spent approximately $150 million on development related to high detection technology and, subsequent to a report of the White House Commission on Aviation Safety and Security, Congress has recently appropriated $144 million for the purchase of EDS to be deployed at major airports in the United States. The Company's objective is to become the leading provider of explosive detection systems worldwide and to extend its technology expertise to address broader applications for detection. Specific elements of the Company's growth strategy are to enhance its technological leadership, expand its sales and marketing organization, leverage its detection technology expertise to enter new markets for detection, and selectively pursue strategic relationships and acquisitions. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company... 1,875,000 shares Common Stock Offered by the Selling Stockholders........................ 1,250,000 shares Common Stock to be Outstanding after the Offering........................ 11,092,000 shares(1) Use of Proceeds....................... To purchase capital equipment and undertake facility improvements, to fund research and development, for working capital and other general corporate purposes, and to pursue possible acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol......... INVN </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ---------------------------------------------------- ------------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues........................... $ -- $ -- $ -- $ 9,066 $ 15,841 $ 3,922 $ 9,377 Gross profits...................... -- -- -- 2,289 6,105 1,469 4,669 Income (loss) from operations...... (2,044) (3,025) (3,324) (2,988)(2) (2,233)(2) (185) 760(2) Net income (loss).................. (2,196) (3,307) (3,727) (3,292) (3,572)(3) (1,215)(3) 642 Net income (loss) per share(4)..... $ (0.50) $ (0.44) $ (0.17) $ 0.06 Shares used in per share calculations(4).................. 6,642 8,142 7,081 10,272 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ----------------------- ACTUAL AS ADJUSTED(5) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash................................................................................... $ 2,251 $27,869 Working capital........................................................................ 7,283 32,901 Total assets........................................................................... 19,509 45,127 Long-term liabilities.................................................................. 110 110 Total stockholders' equity............................................................. 9,845 35,463 </TABLE> - ------------------------ (1) Based on the number of shares outstanding on March 31, 1997. Excludes, as of such date, (i) approximately 1,086,000 shares of Common Stock issuable upon exercise of options outstanding, of which options to purchase approximately 729,000 shares were exercisable at a weighted average exercise price of $0.80 per share, (ii) 180,000 shares of Common Stock issuable upon exercise of warrants outstanding at an exercise price of $6.60 per share, (iii) approximately 835,000 shares reserved for future grants under the Company's Equity Incentive Plan, and (iv) 300,000 shares reserved for issuance pursuant to the Company's 1996 Employee Stock Purchase Plan. Common Stock outstanding after the Offering includes 11,806 shares to be issued upon the exercise of options by the Selling Stockholders, all of which shares are being sold in this Offering. See "Management--Equity Incentive Plans," "Principal and Selling Stockholders," "Description of Capital Stock" and Note 8 of Notes to Consolidated Financial Statements. (2) The Company recorded non-cash charges related to grants of stock options having exercise prices below the fair market value on the date of grant to employees and directors in the amounts of $369,000, $489,000 and $90,000, respectively, in 1995, 1996 and the three months ended March 31, 1997. See Note 8 of Notes to Consolidated Financial Statements. (3) The Company recorded a non-cash charge resulting from amortization of a bridge loan warrant discount in the amount of $1.3 million in 1996, including $949,000 in the three months ended March 31, 1996. See Note 6 of Notes to Consolidated Financial Statements. (4) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used to compute per share amounts. (5) As adjusted to give effect to (i) the exercise of options to purchase 11,806 shares of Common Stock to be sold in this Offering by the Selling Stockholders at a weighted average exercise price of $0.55 per share, (ii) the sale of the 1,875,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $14.875 per share, and (iii) the application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005970_dawson_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005970_dawson_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..89b8e195e0a4452a7050007f5bfeeffa16a527e2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005970_dawson_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and the consolidated financial statements of the Company and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option in connection with the Equity Offering will not be exercised. Unless the context otherwise requires, references in this Prospectus to the "Company" or "Dawson" mean Dawson Production Services, Inc., its predecessors, and its and their subsidiaries. Unless the context otherwise requires, pro forma information contained herein gives effect to the Taylor Acquisition (as defined herein) in July 1996, the Pride Acquisition and the Offerings. THE COMPANY Dawson Production Services, Inc. is a leading provider of a broad range of workover, liquid and production services used in the production of oil and gas. The Company's services are utilized by major oil and gas companies as well as independent producers to optimize performance of oil and gas wells. The Company recently entered into an agreement to acquire the U.S. land-based well servicing operations of Pride Petroleum Services, Inc. in a transaction that will position Dawson as the second largest provider of workover rigs in the United States. The Company commenced operations in 1951. In 1982, the current management team joined the Company and initiated a strategy to expand and diversify the Company's workover rig services. Since 1982, the Company has grown from four workover rigs in a single yard to 91 workover rigs in 10 yards through a series of strategic acquisitions of businesses and assets. Upon the closing of the Pride Acquisition, the Company will own and operate 498 workover rigs. In addition, in November 1994 the Company broadened the array of services it provides by acquiring the liquid services and production services businesses of Well Solutions, Inc. and expanded such businesses in July 1996 with the acquisition of Taylor Companies, Inc. The Company believes that it generally has been successful in acquiring businesses and assets and subsequently reducing overhead, enhancing internal controls, improving marketing and related operations through management incentives and improving the utilization of its assets by redeploying equipment. BUSINESS STRATEGY The Company's strategy emphasizes diversification and expansion through acquisitions and internal growth. In recent years, there has been significant industry consolidation activity in the Company's principal businesses. The Company has been an active participant in this industry consolidation and plans to continue to pursue strategic acquisitions of businesses and assets which enhance or expand its market presence or complement its existing businesses. Upon the closing of the Pride Acquisition, the Company intends to expand the range of services offered at its locations and increase its presence, through redeployment of underutilized assets, within the geographic regions in which the Company will then operate. The Company believes that its ability to offer a wide range of services over a large operating base will provide it with a competitive advantage by allowing its customers to consolidate their procurement of workover, liquid and production services by utilizing fewer vendors. The Company believes that this consolidation may allow customers to lower their costs by streamlining production decisions and increasing operational efficiencies. The Company also believes that its strategy will allow it to take advantage of cross-marketing opportunities for its services and to appeal to a broader customer base by enhancing its position as a one-stop source for workover, liquid and production services. PRIDE ACQUISITION Consistent with its business strategy, on December 23, 1996 the Company entered into a purchase agreement to acquire substantially all of Pride's U.S. land-based well servicing operations for approximately $135.9 million in cash. The Pride Acquisition will significantly increase the size and geographic scope of the Company's workover rig services business. Pride's U.S. land-based fleet consists of 407 workover rigs and related operations in 28 locations in the Texas and Louisiana Gulf Coasts, the Permian Basin areas of West PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and the consolidated financial statements of the Company and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option in connection with the Equity Offering will not be exercised. Unless the context otherwise requires, references in this Prospectus to the "Company" or "Dawson" mean Dawson Production Services, Inc., its predecessors, and its and their subsidiaries. Unless the context otherwise requires, pro forma information contained herein gives effect to the Taylor Acquisition (as defined herein) in July 1996, the Pride Acquisition and the Offerings. THE COMPANY Dawson Production Services, Inc. is a leading provider of a broad range of workover, liquid and production services used in the production of oil and gas. The Company's services are utilized by major oil and gas companies as well as independent producers to optimize performance of oil and gas wells. The Company recently entered into an agreement to acquire the U.S. land-based well servicing operations of Pride Petroleum Services, Inc. in a transaction that will position Dawson as the second largest provider of workover rigs in the United States. The Company commenced operations in 1951. In 1982, the current management team joined the Company and initiated a strategy to expand and diversify the Company's workover rig services. Since 1982, the Company has grown from four workover rigs in a single yard to 91 workover rigs in 10 yards through a series of strategic acquisitions of businesses and assets. Upon the closing of the Pride Acquisition, the Company will own and operate 498 workover rigs. In addition, in November 1994 the Company broadened the array of services it provides by acquiring the liquid services and production services businesses of Well Solutions, Inc. and expanded such businesses in July 1996 with the acquisition of Taylor Companies, Inc. The Company believes that it generally has been successful in acquiring businesses and assets and subsequently reducing overhead, enhancing internal controls, improving marketing and related operations through management incentives and improving the utilization of its assets by redeploying equipment. BUSINESS STRATEGY The Company's strategy emphasizes diversification and expansion through acquisitions and internal growth. In recent years, there has been significant industry consolidation activity in the Company's principal businesses. The Company has been an active participant in this industry consolidation and plans to continue to pursue strategic acquisitions of businesses and assets which enhance or expand its market presence or complement its existing businesses. Upon the closing of the Pride Acquisition, the Company intends to expand the range of services offered at its locations and increase its presence, through redeployment of underutilized assets, within the geographic regions in which the Company will then operate. The Company believes that its ability to offer a wide range of services over a large operating base will provide it with a competitive advantage by allowing its customers to consolidate their procurement of workover, liquid and production services by utilizing fewer vendors. The Company believes that this consolidation may allow customers to lower their costs by streamlining production decisions and increasing operational efficiencies. The Company also believes that its strategy will allow it to take advantage of cross-marketing opportunities for its services and to appeal to a broader customer base by enhancing its position as a one-stop source for workover, liquid and production services. PRIDE ACQUISITION Consistent with its business strategy, on December 23, 1996 the Company entered into a purchase agreement to acquire substantially all of Pride's U.S. land-based well servicing operations for approximately $135.9 million in cash. The Pride Acquisition will significantly increase the size and geographic scope of the Company's workover rig services business. Pride's U.S. land-based fleet consists of 407 workover rigs and related operations in 28 locations in the Texas and Louisiana Gulf Coasts, the Permian Basin areas of West Texas and New Mexico, and California. Upon completion of the Pride Acquisition, the Company will be the largest provider of workover rigs in Texas and the second largest provider in the United States. The Company will seek to generate improved profit margins for the acquired assets through increased operating efficiencies and cost savings resulting from overhead reductions and the consolidation of certain overlapping yard locations. In addition, the Company will seek to expand its liquid and production services businesses into new markets through certain of the acquired yard locations and to redeploy certain of the acquired workover rigs to areas with greater rig demand. See "Pride Acquisition." For the year ended March 31, 1996, the Company's pro forma revenue and EBITDA (as defined herein) were approximately $182.2 million and $26.5 million, respectively, compared to historical revenue and EBITDA of approximately $52.4 million and $9.1 million, respectively. For the six months ended September 30, 1996, the Company's pro forma revenue and EBITDA were approximately $100.2 million and $14.8 million, respectively, compared to historical revenue and EBITDA of approximately $33.8 million and $6.5 million, respectively. MOBLEY ACQUISITION On January 20, 1997, Dawson acquired the liquid services assets of Mobley Environmental Services, Inc. for approximately $5.0 million in cash and a $0.5 million five year subordinated note (the "Mobley Acquisition"). These assets generated revenues of approximately $4.4 million and $3.2 million for the 12 months ended December 31, 1995 and the nine months ended September 30, 1996, respectively. OPERATIONS Workover Rig Services. The Company provides workover rig services to oil and gas exploration and production companies through the use of mobile well servicing workover rigs together with crews of three to four workers. As of January 15, 1997, the Company operated 89 land workover rigs, two barge-mounted workover rigs and ancillary equipment from 10 yards in Texas and Louisiana. Upon the closing of the Pride Acquisition, the Company will expand its workover rig fleet to 498 rigs located in Texas, Louisiana, California and New Mexico. Workover rig services are used throughout the life of a well and are categorized by the type of job performed: completion, maintenance, workover and plugging and abandonment. Completion services prepare newly drilled wells for production. Newly drilled wells are frequently completed by well servicing rigs to minimize the use of higher cost drilling rigs. Maintenance services are required on producing oil and gas wells to ensure efficient and continuous operation. In addition to periodic maintenance, producing oil and gas wells occasionally require major repairs or modifications called "workovers." Workover rigs are also used in the plugging and abandonment of oil and gas wells no longer capable of producing in economic quantities. For the six months ended September 30, 1996, workover rig services contributed approximately 46% of the Company's revenues (75% on a pro forma basis). Liquid Services. The Company uses its vacuum trucks, frac tanks and salt water injection wells to provide an integrated mix of liquid services to well site customers. The Company owns and operates 175 vacuum trucks and will acquire an additional 10 vacuum trucks in connection with the Pride Acquisition. Vacuum trucks are used to extract fluids from pits, tanks and other storage facilities and to transport water for frac tanks, produced salt water to injection wells and brine and other drilling fluids to and from well locations. Vacuum truck services are generally provided to oilfield operators within a 30-mile radius of the Company's nearest yard. The Company owns 696 frac tanks, which are used during all phases of the life of a producing well to store various fluids at the well site. The Company also owns or leases 22 salt water injection wells. In Texas and Arkansas, salt water produced from oil and gas wells is generally required by law to be disposed of in salt water injection wells. For the six months ended September 30, 1996, liquid services contributed approximately 38% of the Company's revenues (20% on a pro forma basis). Texas and New Mexico, and California. Upon completion of the Pride Acquisition, the Company will be the largest provider of workover rigs in Texas and the second largest provider in the United States. The Company will seek to generate improved profit margins for the acquired assets through increased operating efficiencies and cost savings resulting from overhead reductions and the consolidation of certain overlapping yard locations. In addition, the Company will seek to expand its liquid and production services businesses into new markets through certain of the acquired yard locations and to redeploy certain of the acquired workover rigs to areas with greater rig demand. See "Pride Acquisition." For the year ended March 31, 1996, the Company's pro forma revenue and EBITDA (as defined herein) were approximately $182.2 million and $26.5 million, respectively, compared to historical revenue and EBITDA of approximately $52.4 million and $9.1 million, respectively. For the six months ended September 30, 1996, the Company's pro forma revenue and EBITDA were approximately $100.2 million and $14.8 million, respectively, compared to historical revenue and EBITDA of approximately $33.8 million and $6.5 million, respectively. MOBLEY ACQUISITION On January 20, 1997, Dawson acquired the liquid services assets of Mobley Environmental Services, Inc. for approximately $5.0 million in cash and a $0.5 million five year subordinated note (the "Mobley Acquisition"). These assets generated revenues of approximately $4.4 million and $3.2 million for the 12 months ended December 31, 1995 and the nine months ended September 30, 1996, respectively. OPERATIONS Workover Rig Services. The Company provides workover rig services to oil and gas exploration and production companies through the use of mobile well servicing workover rigs together with crews of three to four workers. As of January 15, 1997, the Company operated 89 land workover rigs, two barge-mounted workover rigs and ancillary equipment from 10 yards in Texas and Louisiana. Upon the closing of the Pride Acquisition, the Company will expand its workover rig fleet to 498 rigs located in Texas, Louisiana, California and New Mexico. Workover rig services are used throughout the life of a well and are categorized by the type of job performed: completion, maintenance, workover and plugging and abandonment. Completion services prepare newly drilled wells for production. Newly drilled wells are frequently completed by well servicing rigs to minimize the use of higher cost drilling rigs. Maintenance services are required on producing oil and gas wells to ensure efficient and continuous operation. In addition to periodic maintenance, producing oil and gas wells occasionally require major repairs or modifications called "workovers." Workover rigs are also used in the plugging and abandonment of oil and gas wells no longer capable of producing in economic quantities. For the six months ended September 30, 1996, workover rig services contributed approximately 46% of the Company's revenues (75% on a pro forma basis). Liquid Services. The Company uses its vacuum trucks, frac tanks and salt water injection wells to provide an integrated mix of liquid services to well site customers. The Company owns and operates 175 vacuum trucks and will acquire an additional 10 vacuum trucks in connection with the Pride Acquisition. Vacuum trucks are used to extract fluids from pits, tanks and other storage facilities and to transport water for frac tanks, produced salt water to injection wells and brine and other drilling fluids to and from well locations. Vacuum truck services are generally provided to oilfield operators within a 30-mile radius of the Company's nearest yard. The Company owns 696 frac tanks, which are used during all phases of the life of a producing well to store various fluids at the well site. The Company also owns or leases 22 salt water injection wells. In Texas and Arkansas, salt water produced from oil and gas wells is generally required by law to be disposed of in salt water injection wells. For the six months ended September 30, 1996, liquid services contributed approximately 38% of the Company's revenues (20% on a pro forma basis). Production Services. The Company's production services consist of production testing services, slickline wireline services, fishing and rental tool services and pipe testing. The Company owns 21 gas production testing units which are used to perform deliverability tests required upon the initial completion of a well and periodically during the productive life of a gas well. In addition, the Company offers slickline wireline services which are used to simplify completion operations and in connection with regular maintenance on producing wells. The Company also provides a complete line of cased hole fishing and rental tools to oilfield operators and service companies, and operates nine pipe testing units along the Texas Gulf Coast. This testing equipment is used during completion and recompletion operations for leak detection in the internal pipe systems of oil and gas wells. For the six months ended September 30, 1996, production services contributed approximately 16% of the Company's revenues (5% on a pro forma basis). THE DEBT OFFERING Securities Offered......... $130,000,000 principal amount of % Senior Notes due 2007. Maturity Date.............. February 1, 2007. Interest Rate and Payment Dates.................... The Notes will bear interest at a rate of % per annum. Interest on the Notes will accrue from the date of issuance thereof and will be payable semi-annually on February 1 and August 1 of each year, commencing August 1, 1997. Optional Redemption........ The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2002, at the redemption prices set forth herein, together with accrued and unpaid interest to the date of redemption. In the event the Company consummates a Public Equity Offering (as defined herein) on or prior to February 1, 2000, the Company may at its option use all or a portion of the proceeds from such offering to redeem up to $45.5 million principal amount of the Notes at a redemption price equal to % of the aggregate principal thereof, together with accrued and unpaid interest to the date of redemption, provided that at least $84.5 million in aggregate principal amount of Notes remain outstanding immediately after such redemption. See "Description of Notes -- Optional Redemption." Repurchase Obligation Upon Change of Control... Upon the occurrence of a Change of Control, each holder of Notes will have the right to require the Company to purchase all or a portion of such holder's Notes at a price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of purchase. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control." Guarantees................. The Notes will be unconditionally guaranteed on a senior unsecured basis by each of the Company's principal operating subsidiaries, and such Subsidiary Guarantees will rank pari passu in right of payment with all senior Indebtedness of the Subsidiary Guarantors. The Subsidiary Guarantees may be released under certain circumstances. See "Description of Notes -- Subsidiary Guarantees." Production Services. The Company's production services consist of production testing services, slickline wireline services, fishing and rental tool services and pipe testing. The Company owns 21 gas production testing units which are used to perform deliverability tests required upon the initial completion of a well and periodically during the productive life of a gas well. In addition, the Company offers slickline wireline services which are used to simplify completion operations and in connection with regular maintenance on producing wells. The Company also provides a complete line of cased hole fishing and rental tools to oilfield operators and service companies, and operates nine pipe testing units along the Texas Gulf Coast. This testing equipment is used during completion and recompletion operations for leak detection in the internal pipe systems of oil and gas wells. For the six months ended September 30, 1996, production services contributed approximately 16% of the Company's revenues (5% on a pro forma basis). THE EQUITY OFFERING Common Stock Offered by the Company........... 3,500,000 Shares Common Stock Offered by the Selling Shareholders............. 1,206,807 Shares Common Stock Outstanding: Before the Equity Offering(1).............. 6,399,725 Shares After the Equity Offering(1)................ 9,899,725 Shares Use of Proceeds............ The net proceeds to the Company from the sale of shares of Common Stock are estimated to be approximately $43.3 million. The Company will use the net proceeds from the sale of the shares of Common Stock, together with the estimated net proceeds to the Company from the Debt Offering of approximately $125.4 million, to fund the approximately $135.9 million purchase price of the Pride Acquisition, to prepay certain existing indebtedness (including accrued interest) of the Company, and for fees and expenses of the Pride Acquisition, working capital and general corporate purposes. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Shareholders. See "Use of Proceeds." Nasdaq National Market Symbol................... DPSI Debt Offering.............. Concurrently with the Equity Offering, the Company is offering $130.0 million of % Senior Notes due 2007 to the public. The closing of the Equity Offering and the Debt Offering are each conditioned upon the simultaneous closing of the other and upon the simultaneous closing of the Pride Acquisition. - --------------- (1) Does not include 548,650 shares issuable upon exercise of outstanding options as of January 15, 1997, of which 163,479 were exercisable at that date. Ranking.................... The Notes will be senior unsecured obligations of the Company, ranking pari passu in right of payment with all senior Indebtedness of the Company and senior to all Subordinated Indebtedness of the Company. The Notes and the Subsidiary Guarantees will be effectively subordinated to secured Indebtedness of the Company and the Subsidiary Guarantors, including any Indebtedness under the Credit Facility which is secured by liens on certain assets of the Company. At September 30, 1996, on a pro forma basis, the Notes and the Subsidiary Guarantees would not have been subordinated to any secured Indebtedness (excluding letters of credit) of the Company or the Subsidiary Guarantors. Subject to certain limitations, the Company may incur additional indebtedness in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Notes -- General." Certain Covenants.......... The Indenture relating to the Notes will contain certain covenants, including covenants that limit: (i) indebtedness; (ii) restricted payments; (iii) issuances and sales of capital stock of restricted subsidiaries; (iv) sale/leaseback transactions; (v) transactions with affiliates; (vi) liens; (vii) asset sales; (viii) dividends and other payment restrictions affecting restricted subsidiaries; (ix) conduct of business; and (x) mergers, consolidations or sales of assets. See "Description of Notes -- Certain Covenants." Use of Proceeds............ The net proceeds to the Company from the sale of the Notes are estimated to be approximately $125.4 million. The Company will use the net proceeds from the sale of the Notes, together with the estimated net proceeds to the Company from the Equity Offering of approximately $43.3 million, to fund the approximately $135.9 million purchase price of the Pride Acquisition, to prepay certain existing indebtedness (including accrued interest) of the Company, and for fees and expenses of the Pride Acquisition, working capital and general corporate purposes. See "Use of Proceeds." Equity Offering............ Concurrently with the Debt Offering, the Company and the Selling Shareholders are offering 4,706,807 shares (5,412,828 shares if the underwriters' over-allotment option is exercised in full) of Common Stock for sale to the public, of which 3,500,000 shares will be sold by the Company. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Shareholders in the Equity Offering. The closing of the Debt Offering and the Equity Offering are each conditioned upon the simultaneous closing of the other and upon the simultaneous closing of the Pride Acquisition. SUMMARY OF CONSOLIDATED FINANCIAL DATA The following table presents for the periods indicated certain historical consolidated and certain pro forma combined financial data for the Company. The following information should be read together with "Pro Forma Condensed Consolidated Financial Statements," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements, including the notes thereto, included elsewhere in this Prospectus. The results for the six months ended September 30, 1996 are not necessarily indicative of results for the full year. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations and financial position that would have been achieved had the transactions reflected therein been consummated on the dates indicated. <TABLE> <CAPTION> AT OR FOR SIX MONTHS AT OR FOR YEARS ENDED MARCH 31, ENDED SEPTEMBER 30, ---------------------------------------------------------- ---------------------------- 1996 1996 PRO PRO 1992 1993 1994 1995 1996 FORMA(1) 1995 1996 FORMA(1) ------- ------- ------- ------- ------- -------- ------- ------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues............................. $15,784 $20,822 $27,942 $36,005 $52,391 $182,219 $25,888 $33,811 $100,229 Costs and expenses: Operating.......................... 11,440 14,772 19,937 24,241 34,320 131,052 16,875 21,893 71,994 General and administrative......... 2,443 3,040 3,854 5,574 8,937 24,676 4,238 5,469 13,480 Depreciation and amortization...... 1,062 1,374 1,707 2,608 4,396 19,204 2,016 2,876 9,692 ------- ------- ------- ------- ------- -------- ------- ------- -------- Operating income..................... 839 1,636 2,444 3,582 4,738 7,287 2,759 3,573 5,063 Interest expense..................... 352 301 282 789 1,848 12,610 953 296 6,305 Other (income) expense............... (8) 84 (61) (41) (129) (1,490) (27) (252) (201) Minority interest.................... -- 358 902 1,092 937 937 787 -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Income (loss) before income taxes and extraordinary item................. 495 893 1,321 1,742 2,082 (3,833) 1,046 3,529 (1,041) Provision for income taxes........... 236 320 525 681 709 (1,860) 398 1,354 (406) ------- ------- ------- ------- ------- -------- ------- ------- -------- Income (loss) before extraordinary item............................... 259 573 796 1,061 1,373 (2,910) 648 2,175 (635) Extraordinary item(2)................ 38 -- (92) -- (514) (514) -- -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Net income (loss).................... 297 573 704 1,061 859 (3,424) 648 2,175 (635) Preferred stock dividends............ 101 101 101 101 88 88 50 -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Net income (loss) applicable to common stock....................... $ 196 $ 472 $ 603 $ 960 $ 771 $ (3,512) $ 598 $ 2,175 $ (635) ======= ======= ======= ======= ======= ======== ======= ======= ======== Primary earnings (loss) per share.... $ .11 $ .23 $ .29 $ .45 $ .27 $ (.55) $ .25 $ .33 $ (.06) Fully diluted earnings (loss) per share.............................. $ .11 $ .23 $ .29 $ .42 $ .27 $ (.55) $ .23 $ .33 $ (.06) Average number of shares outstanding -- primary............................ 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 6,382,896 2,384,359 6,510,428 9,890,984 Average number of shares outstanding -- fully diluted....... 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 6,382,896 3,095,826 6,527,796 9,890,984 BALANCE SHEET DATA: Cash and cash equivalents............ $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364 $ 28,393 Net property and equipment........... 6,261 8,625 8,978 25,321 29,115 39,209 145,859 Total assets......................... 11,685 15,828 16,714 40,525 56,368 74,092 235,071 Long-term debt and other obligations, net of current portion............. 1,938 1,722 1,623 15,989 3,695 4,609 132,750 Total shareholders' equity........... 5,487 6,009 6,720 10,098 45,694 47,933 91,226 OTHER FINANCIAL DATA: Ratio of earnings to fixed charges(3)......................... 2.3x 3.6x 5.0x 3.1x 2.1x 0.6x 2.1x 10.9x 0.8x EBITDA(4)............................ $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 26,491 $ 4,775 $ 6,449 $ 14,755 Ratio of EBITDA to interest expense............................ 5.4x 10.0x 14.7x 7.9x 4.9x 2.1x 5.0x 21.8x 2.3x </TABLE> - --------------- (1) Adjusted, in the case of the income statement data, to reflect the consummation of the Pride Acquisition, the Taylor Acquisition and the Offerings, as if each had occurred on April 1, 1995, and in the case of balance sheet data at September 30, 1996, to reflect the consummation of the Pride Acquisition and the Offerings as if they had been completed at such date. See "The Company." Does not give effect to certain estimated consolidation cost savings and operational efficiencies that the Company anticipates can be achieved in connection with the Pride Acquisition, primarily resulting from the consolidation of certain facilities and the reduction of personnel. Assuming that such consolidation cost savings had occurred at the beginning of the year ended March 31, 1996 and the beginning of the six month period ended September 30, 1996, results of operations (after taking into consideration the tax effect of such consolidation cost savings) would have been a net loss of $0.5 million and net income of $0.9 million, respectively, and EBITDA would have been $31.3 million and $17.2 million, respectively. There can be no assurance with respect to the amount or timing of any such consolidation cost savings by the Company or that any such consolidation cost savings will not be offset in part by additional operating expenses resulting from the Pride Acquisition. (2) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of change in accounting principle. (3) For purposes of computing the ratio of earnings to fixed charges, earnings are computed as income before income taxes, extraordinary item and cumulative effect of a change in accounting principle, plus fixed charges. Fixed charges consist of interest, whether expensed or capitalized, amortization of debt issuance costs and an estimated portion of rentals representing interest costs. On a pro forma basis, earnings were inadequate to cover fixed charges for the periods ended March 31, 1996 and September 30, 1996 by $4.8 million and $1.0 million, respectively. (4) EBITDA is defined as earnings before interest expense, taxes, depreciation and amortization, minority interest and other (income) expense and is presented because it is a widely accepted financial indication of a company's ability to incur and service debt. EBITDA should not be considered as an alternative to earnings as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. SUMMARY OF CONSOLIDATED FINANCIAL DATA The following table presents for the periods indicated certain historical consolidated and certain pro forma combined financial data for the Company. The following information should be read together with "Pro Forma Condensed Consolidated Financial Statements," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements, including the notes thereto, included elsewhere in this Prospectus. The results for the six months ended September 30, 1996 are not necessarily indicative of results for the full year. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations and financial position that would have been achieved had the transactions reflected therein been consummated on the dates indicated. <TABLE> <CAPTION> AT OR FOR SIX MONTHS AT OR FOR YEARS ENDED MARCH 31, ENDED SEPTEMBER 30, ---------------------------------------------------------- ---------------------------- 1996 1996 PRO PRO 1992 1993 1994 1995 1996 FORMA(1) 1995 1996 FORMA(1) ------- ------- ------- ------- ------- -------- ------- ------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues............................. $15,784 $20,822 $27,942 $36,005 $52,391 $182,219 $25,888 $33,811 $100,229 Costs and expenses: Operating.......................... 11,440 14,772 19,937 24,241 34,320 131,052 16,875 21,893 71,994 General and administrative......... 2,443 3,040 3,854 5,574 8,937 24,676 4,238 5,469 13,480 Depreciation and amortization...... 1,062 1,374 1,707 2,608 4,396 19,204 2,016 2,876 9,692 ------- ------- ------- ------- ------- -------- ------- ------- -------- Operating income..................... 839 1,636 2,444 3,582 4,738 7,287 2,759 3,573 5,063 Interest expense..................... 352 301 282 789 1,848 12,610 953 296 6,305 Other (income) expense............... (8) 84 (61) (41) (129) (1,490) (27) (252) (201) Minority interest.................... -- 358 902 1,092 937 937 787 -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Income (loss) before income taxes and extraordinary item................. 495 893 1,321 1,742 2,082 (3,833) 1,046 3,529 (1,041) Provision for income taxes........... 236 320 525 681 709 (1,860) 398 1,354 (406) ------- ------- ------- ------- ------- -------- ------- ------- -------- Income (loss) before extraordinary item............................... 259 573 796 1,061 1,373 (2,910) 648 2,175 (635) Extraordinary item(2)................ 38 -- (92) -- (514) (514) -- -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Net income (loss).................... 297 573 704 1,061 859 (3,424) 648 2,175 (635) Preferred stock dividends............ 101 101 101 101 88 88 50 -- -- ------- ------- ------- ------- ------- -------- ------- ------- -------- Net income (loss) applicable to common stock....................... $ 196 $ 472 $ 603 $ 960 $ 771 $ (3,512) $ 598 $ 2,175 $ (635) ======= ======= ======= ======= ======= ======== ======= ======= ======== Primary earnings (loss) per share.... $ .11 $ .23 $ .29 $ .45 $ .27 $ (.55) $ .25 $ .33 $ (.06) Fully diluted earnings (loss) per share.............................. $ .11 $ .23 $ .29 $ .42 $ .27 $ (.55) $ .23 $ .33 $ (.06) Average number of shares outstanding -- primary............................ 1,768,613 2,020,664 2,052,168 2,155,380 2,931,234 6,382,896 2,384,359 6,510,428 9,890,984 Average number of shares outstanding -- fully diluted....... 1,768,613 2,020,664 2,450,791 2,648,740 3,207,622 6,382,896 3,095,826 6,527,796 9,890,984 BALANCE SHEET DATA: Cash and cash equivalents............ $ 400 $ 1,139 $ 2,172 $ 2,797 $13,863 $ 9,364 $ 28,393 Net property and equipment........... 6,261 8,625 8,978 25,321 29,115 39,209 145,859 Total assets......................... 11,685 15,828 16,714 40,525 56,368 74,092 235,071 Long-term debt and other obligations, net of current portion............. 1,938 1,722 1,623 15,989 3,695 4,609 132,750 Total shareholders' equity........... 5,487 6,009 6,720 10,098 45,694 47,933 91,226 OTHER FINANCIAL DATA: Ratio of earnings to fixed charges(3)......................... 2.3x 3.6x 5.0x 3.1x 2.1x 0.6x 2.1x 10.9x 0.8x EBITDA(4)............................ $ 1,901 $ 3,010 $ 4,151 $ 6,190 $ 9,134 $ 26,491 $ 4,775 $ 6,449 $ 14,755 Ratio of EBITDA to interest expense............................ 5.4x 10.0x 14.7x 7.9x 4.9x 2.1x 5.0x 21.8x 2.3x </TABLE> - --------------- (1) Adjusted, in the case of the income statement data, to reflect the consummation of the Pride Acquisition, the Taylor Acquisition and the Offerings, as if each had occurred on April 1, 1995, and in the case of balance sheet data at September 30, 1996, to reflect the consummation of the Pride Acquisition and the Offerings as if they had been completed at such date. See "The Company." Does not give effect to certain estimated consolidation cost savings and operational efficiencies that the Company anticipates can be achieved in connection with the Pride Acquisition, primarily resulting from the consolidation of certain facilities and the reduction of personnel. Assuming that such consolidation cost savings had occurred at the beginning of the year ended March 31, 1996 and the beginning of the six month period ended September 30, 1996, results of operations (after taking into consideration the tax effect of such consolidation cost savings) would have been a net loss of $0.5 million and net income of $0.9 million, respectively, and EBITDA would have been $31.3 million and $17.2 million, respectively. There can be no assurance with respect to the amount or timing of any such consolidation cost savings by the Company or that any such consolidation cost savings will not be offset in part by additional operating expenses resulting from the Pride Acquisition. (2) Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect of change in accounting principle. (3) For purposes of computing the ratio of earnings to fixed charges, earnings are computed as income before income taxes, extraordinary item and cumulative effect of a change in accounting principle, plus fixed charges. Fixed charges consist of interest, whether expensed or capitalized, amortization of debt issuance costs and an estimated portion of rentals representing interest costs. On a pro forma basis, earnings were inadequate to cover fixed charges for the periods ended March 31, 1996 and September 30, 1996 by $4.8 million and $1.0 million, respectively. (4) EBITDA is defined as earnings before interest expense, taxes, depreciation and amortization, minority interest and other (income) expense and is presented because it is a widely accepted financial indication of a company's ability to incur and service debt. EBITDA should not be considered as an alternative to earnings as an indicator of the Company's operating performance or to cash flows as a measure of liquidity.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001005972_party_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001005972_party_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..233cc6cf1f282aa3dff20f0703e047a43450a94c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001005972_party_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and notes appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY Party City Corporation ("Party City" or the "Company") is a rapidly growing specialty retailer of party supplies through its network of discount Super Stores. The Company believes that its store system -- composed of 44 Company-owned and 159 franchise locations in 29 states coast-to-coast, Puerto Rico, Canada and Spain as of February 28, 1997 -- makes Party City one of the largest party supplies superstore chains in the world. The first franchise store was authorized in 1989 and the first Company-owned store was opened in January 1994. For the year ended December 31, 1996, system-wide sales totaled $269.7 million, an increase of 47.5% over the year ended December 31, 1995. During the year ended December 31, 1996, the Company significantly accelerated its Company-owned Super Store expansion program and opened 20 Company-owned Super Stores. Primarily as a result of this expansion, the Company's total revenue increased from approximately $23.1 million in 1995 to approximately $48.5 million in 1996, an increase of 110%. During this same period, income from operations increased 164% from approximately $2.1 million in 1995 to approximately $5.6 million in 1996. The Company believes it has transformed the party supplies business by introducing increased product and marketing focus and greater mass merchandising sophistication to a business traditionally served by single owner-operated party supplies stores, specialty party supplies retailers (including superstores), and designated departments in drug stores, general mass merchandisers, supermarkets and department stores of local, regional and national chains. Party City seeks to offer customers a "one-stop" party store that provides a wide selection of merchandise at everyday low prices. A key element of delivering customer satisfaction is stocking inventory of sufficient depth and breadth to satisfy customer needs for parties and events of virtually all sizes and types. Party City Super Stores offer a broad selection of merchandise (branded as well as private label) for a wide variety of celebratory occasions, including birthday parties, weddings, and baby showers, as well as seasonal events including Halloween, Christmas, New Year's Eve, graduation, Easter, Valentine's Day, Thanksgiving, St. Patrick's Day, the Super Bowl and the Fourth of July. Company research indicates that its typical customer is a female between the ages of 24 and 55 and, during 1996, purchased items totalling $17.00 per visit. Party City generally offers products priced from under $1.00 to $100. The Company's objective is to continue to expand its position as a leading category-dominant national chain of party supplies Super Stores. Key elements of the Company's business strategy are as follows: Pursue Super Store Expansion. The Company's expansion strategy is to rapidly increase its Company-owned store base, while continuing to add franchise stores. The Company believes that opportunities for substantial expansion exist by opening additional Super Stores in both new and existing markets nationwide. In addition, the Company recently purchased six franchise stores and anticipates selectively acquiring additional franchise stores in the future where they will be accretive to the Company's net income per share. See "Recent Events." The Company anticipates opening approximately 45 to 50 Company-owned Super Stores and 20 franchise stores in 1997 and approximately 70 to 75 Company-owned Super Stores and 12 franchise stores in 1998. Offer the Broadest Selection of Merchandise in an Exciting Shopping Environment. With approximately 20,000 stock keeping units ("SKUs"), the Party City stores provide party-planners and party-goers with convenient one-stop shopping for party supplies. Within each product category, the Company offers a wide variety of patterns, colors and styles. Establish Convenient Store Locations. The Company seeks to maximize customer traffic and quickly build the visibility of new stores by situating its stores in highly traveled areas. The Company carefully considers site selection and analyzes population density, demographics, traffic counts, complementary retailers, storefront visibility and presence, competition, lease rates and the availability of parking before deciding on a specific location. Maintain Everyday Low Pricing. The Company reinforces customers' expectations of savings by offering everyday low pricing. In addition, the Company maintains a lowest price guaranty policy which states that Party City will meet and discount the advertised price of a competitor. Provide Excellent Customer Service. The Company views the quality of its customers' shopping experience as critical to its continued success. To this end, well-trained sales associates provide customers with personalized shopping assistance. Utilize Sophisticated Merchandising Systems. The Company's customized management information system ("MIS") enables Party City to quickly analyze the performance of Company-owned and franchise stores and thus react more rapidly to changing customer preferences. The MIS system further assists management in evaluating the sales performance of individual stores and in analyzing and deciding upon the proper mix of merchandise. The Company continually evaluates and updates its systems. Capitalize on Direct Marketing and Advertising. The Company solicits zip code information from customers at the time of their purchases. This information allows the Company to effect 10 to 12 direct mailings per year to residents in those targeted areas. Direct mail advertising has enabled the Company and its franchisees to successfully open stores in any area of the country without the need to cluster stores. Investment in Infrastructure to Support Growth. As the Company has increased its base of Company-owned Super Stores, it has made additions to its management team. During 1996, the Company added a chief operating officer as well as key people in the Company's MIS, real estate, merchandising, administrative support and construction departments. The Party City Super Store concept was developed in 1986 by the Company's Chairman of the Board and President, Steven Mandell. The Company was founded as a New Jersey corporation in 1990 and was re-incorporated in Delaware in January 1996. The Company's corporate headquarters are located at 400 Commons Way, Rockaway, New Jersey 07866, and its telephone number is (201) 983-0888. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..................... 1,200,000 shares Common Stock offered by the Selling Stockholders........ 1,040,000 shares Common Stock to be outstanding after the Offering (1)... 8,174,500 shares Use of proceeds......................................... To open new Company-owned Super Stores, to acquire existing franchisee-owned stores and to provide for working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol........................... PCTY </TABLE> - - --------------- (1) Does not include 505,750 shares of Common Stock reserved for issuance upon the exercise of stock options outstanding as of April 8, 1997. RECENT EVENTS On February 28, 1997, the Company acquired six franchise stores. Four of the stores acquired were owned by Steven Mandell, the Company's Chairman and President, and the remaining two stores were owned by Perry Kaplan, a former executive officer and a Director of the Company. Total sales of the six franchise stores in 1996 were approximately $12.8 million, or an average of $2,142,000 per store. The aggregate purchase price for the six stores was approximately $5.9 million, subject to post closing adjustments for inventory and payable levels. The Company believes the acquired stores will be accretive to net income per share. The Company's expansion strategy, in addition to continuing to open additional Company-owned Super Stores in both new and existing markets while continuing to add franchise stores, includes the selective acquisition of franchise stores. See "Business -- Expansion Plans" and "Certain Transactions." The Company is in the process of improving store appearance by updating signage and window displays in its Company-owned stores. These changes will include the addition of new store front window signs, larger and more informative aisle markers, department identification signage and the removal of store front window blinds, to provide a brighter and more attractive display of merchandise. The Company believes these improvements will be completed in all of the Company-owned stores by the end of the second quarter of 1997. On March 3, 1997, the Company signed a commitment letter to replace the Company's existing $5,000,000 credit facility with a $20,000,000 revolving line of credit maturing June 30, 2000. The new credit facility provides a lower rate of interest on advances and more favorable financial covenants. The terms of the commitment letter are subject to the negotiation and execution of definitive loan documents. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." SUMMARY FINANCIAL AND STORE DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1992 1993 1994 1995 1996 ---------- ---------- ---------- ----------- ----------- <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Total revenue.............................. $1,060,890 $2,408,828 $8,852,796 $23,120,342 $48,528,385 Income before interest and income taxes.... 15,002 258,109 946,402 2,140,304 5,648,920 Net income................................. $ 7,738 $ 234,737 $ 542,523 $ 1,299,965 $ 3,755,525 ========== ========== ========== ========== =========== Net income per share....................... $ 0.24 $ 0.56 ========== =========== Pro Forma(1): Net income............................... $ 5,701 $ 132,218 $ 598,434 ========== ========== ========== Net income per share..................... -- $ 0.03 $ 0.12 ========== ========== ========== Weighted average shares outstanding(2)..... 3,323,904 4,098,333 5,008,333 5,322,333 6,664,202 </TABLE> <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1992 1993 1994 1995 1996 ----- ----- ------ ---------- ---------- <S> <C> <C> <C> <C> <C> STORE DATA: Company-owned: Number of stores opened during period........ 7 9 20 Number of stores closed during period........ 0 0 0 Number of stores open at end of period....... 7 16 36 Franchise: Number of stores opened during period........ 16 26 42 35 32 Number of stores closed during period........ 0 0 1 2 0 Number of stores open at end of period....... 32 58 99 132 164 ----- ----- ------ ---------- ---------- Total stores open at end of period............. 32 58 106 148 200 Increase in Company-owned same store sales(3)..................................... 26.6% 17.9% Increase in franchise same store sales(3)...... 17.1% 8.1% 19.1% 10.3% 13.5% System-wide store sales ($ millions)........... $28.1 $56.9 $113.0 $182.8 $269.7 Average sales per Company-owned store(4)....... $1,510,000 $1,662,000 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------------ ACTUAL AS ADJUSTED(5) ----------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital.......................................................... $17,418,467 $ 31,618,467 Total assets............................................................. 34,603,107 48,803,107 Long-term obligations.................................................... 1,665,624 1,665,624 Total stockholders' equity............................................... 23,561,141 37,761,141 </TABLE> - - --------------- (1) Until April 27, 1994, the Company elected to be taxed as an S Corporation under the Internal Revenue Code. As a result, the pro forma income statement data for each of the three years in the period ended December 31, 1994 reflect adjustments to the historical income statement data assuming the Company had not elected S Corporation status. (2) In April 1994, the stockholders of the Company approved a 26,667-for-1 Common Stock split. All share information has been restated to give retroactive effect to the stock split. (3) Increases in Company-owned and franchise same store sales have been calculated for stores that were open for at least 13 months as of the end of such applicable period. (4) For stores open at least one full calendar year. Includes seven stores and 16 stores in 1995 and 1996, respectively. (5) As adjusted to give effect to the sale by the Company of 1,200,000 shares of Common Stock offered hereby at an offering price of $13.00 per share less the underwriting discount and estimated offering expenses payable by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001007020_integrated_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001007020_integrated_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c67e60ba76eadc97004f1f4d8ccd5e59fcebab23
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001007020_integrated_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Unless the context otherwise indicates, Integrated Systems Consulting Group, Inc. and its subsidiaries are referred to collectively herein as "ISCG" or the "Company." The Company ISCG provides consulting services that address its clients' information processing needs through technologically advanced solutions, including client-server architecture, graphical user interface ("GUI")-based applications, local and distributed relational databases and cross-platform applications integration. The Company delivers consulting services in two broad areas: software applications development ("applications development") and systems and network management ("network management"). In the applications development area, the Company provides expertise to its clients in the full software development life cycle or one or more discrete phases within such process. The Company's applications development activities accounted for approximately 78.4% and 79.3% of its revenues in 1995 and 1996, respectively. In the network management area, the Company provides expertise to its clients in the design, implementation, management and support of multi-vendor local and wide area networks, desktop computer systems and servers. The Company's network management activities accounted for approximately 21.6% and 20.7% of its revenues in 1995 and 1996, respectively. Historically, the Company has provided consulting services to businesses in a variety of industries, particularly the pharmaceutical, biotechnology, chemical and software industries. In recent years, however, the Company has principally focused its marketing efforts on the pharmaceutical industry in order to exploit more effectively its extensive experience in the development, implementation, integration and management of information systems used in connection with the drug development process. By virtue of this experience, the Company's technical employees have developed a strong understanding of the drug development process and broad expertise in the information systems and software applications required to support this complicated and data intensive process. In addition, the Company's technical employees have developed a broad range of technical skills and capabilities with respect to commercially available packaged software products that address drug development information processing requirements. Pharmaceutical company engagements accounted for an aggregate of approximately $8.3 million, $13.5 million and $18.0 million or 61.5%, 64.3% and 58.8% of the Company's revenues in 1994, 1995 and 1996, respectively. See "Risk Factors--Dependence on Pharmaceutical Industry," "Risk Factors--Concentration and Mix of Revenues," "Business--General" and "Business--Competition." The Company has experienced substantial growth in revenues, income from operations and net income since it began operations in 1988. The Company believes this growth has resulted from, and its future success will depend in large part upon, its ability to attract, retain and motivate highly skilled technical employees. In this regard, the Company seeks to create an attractive and rewarding corporate culture by enfranchising employees through stock ownership, by promoting from within and by providing intensive training, challenging assignments and involvement in many facets of the Company's business processes in an environment of mutual trust and support. The Company believes that these policies have resulted in a turnover rate of its technical employees which is considerably lower than the industry average. The Company's clients include some of the largest pharmaceutical companies in the world and other Fortune 500 corporations, including, among others, Air Products and Chemicals, Inc., American Cyanamid Company, Bristol-Myers Squibb Co., Eli Lilly & Company, G. D. Searle & Company, Merck & Company, Inc., Pfizer Inc., Procter & Gamble, Rhone-Poulenc Rorer Pharmaceuticals, SmithKline Beecham Pharmaceuticals, Inc., Warner-Lambert Company and Zeneca Group. In 1995 and 1996, the Company derived approximately 88.1% and 85.6% of its revenues, respectively, from clients to which it had provided services in the previous year. See "Risk Factors--Dependence on Pharmaceutical Industry," "Risk Factors--Concentration and Mix of Revenues" and "Business--Concentration and Mix of Revenues." The Company was incorporated in the Commonwealth of Pennsylvania in 1988. The Company completed its initial public offering of common stock in May 1996 pursuant to a rights offering to the stockholders of Safeguard Scientifics, Inc. ("Safeguard"). The Company's principal executive offices are located at 575 East Swedesford Road, Suite 200, Wayne, Pennsylvania 19087, and its telephone number is (610) 989-7000. The Company's World Wide Web homepage address is http://www.iscg.com and its e-mail address is info@iscg.com.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001007184_einstein_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001007184_einstein_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c5042a967e532e48763a206272f1a356a7ae34ca
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001007184_einstein_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements of the Company and Notes thereto included herein. References in this Prospectus to the "Company" mean the Company, its predecessors, and its and their subsidiaries from time to time, unless the context otherwise requires. Einstein Bros.(TM) and Noah's New York Bagels(R) are trademarks owned by Einstein/Noah Bagel Corp. THE COMPANY The Company franchises specialty retail stores that feature fresh-baked bagels, proprietary cream cheeses, specialty coffees and teas, and creative soups, salads and bagel sandwiches, primarily under the Einstein Bros. Bagels and Noah's New York Bagels brand names. As of April 21, 1997, there were 420 stores in operation systemwide, all of which were operated by area developers financed in part by the Company. Such financing generally permits the Company in certain circumstances to convert its loan into a majority equity interest in the area developer at a premium over the price per unit paid by the investors in the area developer for their equity investments. As of April 21, 1997, the Company had entered into area development agreements that provide for the development of 1,047 additional stores, the majority of which are scheduled to open over the next three years. The Company estimates that there will be between 615 and 665 stores in operation systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 5. The Company has two principal brands. The Einstein Bros. Bagels brand was developed by the Company after it was formed in March 1995. The Noah's New York Bagels brand, which was acquired when the Company acquired Noah's New York Bagels, Inc. ("Noah's") in February 1996, was originally introduced in 1989 in Berkeley, California. As of April 21, 1997, there were 283 Einstein Bros. Bagels stores in 28 states and the District of Columbia, and 102 Noah's New York Bagels stores in California, Washington and Oregon. The key component of the Company's product strategy is its offering of fresh-baked bagels, produced utilizing proprietary processes that allow for maximum inclusion of high quality ingredients, such as whole blueberries, raisins and nuts. Bagels are offered in a wide variety of both traditional and creative flavors and are baked fresh throughout the day in each Einstein Bros. Bagels and Noah's New York Bagels store using steamed-baking processes. The Company was incorporated in Delaware in February 1995 under the name Progressive Bagel Concepts, Inc. The Company's name was subsequently changed to Einstein/Noah Bagel Corp. in June 1996. The Company's principal executive offices are located at 14123 Denver West Parkway, Golden, Colorado, and its telephone number is (303) 215-9300. RISK FACTORS AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES CERTAIN RISKS. SEE "RISK FACTORS." SUMMARY CONSOLIDATED FINANCIAL AND STORE DATA (IN THOUSANDS, EXCEPT SHARE DATA AND NUMBER OF STORES) <TABLE> <CAPTION> PERIOD FROM MARCH 24, 1995 QUARTERS ENDED(1) (INCEPTION) THROUGH FISCAL YEAR ENDED ------------------------------- DECEMBER 31, 1995 DECEMBER 29, 1996(1) APRIL 21, 1996 APRIL 20, 1997 ------------------- -------------------- -------------- -------------- (UNAUDITED) <S> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenue................... $ 26,423 $ 61,707 $22,379 $16,728 Income (loss) from operations... (43,152)(2) 10,039 (1,270) 7,232 Net income (loss)............... (43,716) 5,707 (3,317) 5,178 Net income (loss) per common and equivalent share....... $ (4.54) $ 0.25 $ (0.35) $ 0.15 Weighted average number of common and equivalent shares outstanding during the period................. 9,659 22,344 9,679 34,962 ======== ======== ======= ======= Ratio of earnings to fixed charges(3).................... -- 1.76 -- 22.45 ======== ======== ======= ======= STORE DATA (UNAUDITED): Systemwide revenue(4)........... $ 26,986 $145,631 $29,764 $84,469 ======== ======== ======= ======= Number of stores: Beginning of period........... -- 60 60 315 Opened or acquired............ 60 266 85 105 Closed(5)..................... -- (11) (7) -- -------- -------- ------- ------- End of period................. 60 315 138 420 ======== ======== ======= ======= Company stores................ 47 14 61 0 Area developer stores......... 13 301 77 420 </TABLE> <TABLE> <CAPTION> APRIL 20, 1997 -------------------------------- DECEMBER 29, 1996 ACTUAL AS ADJUSTED(6) ----------------- -------- -------------- (UNAUDITED) <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital....................... $ 46,421 $ (1,322) $115,878 Notes receivable...................... 146,087 216,999 216,999 Total assets.......................... 332,418 357,352 474,552 Long-term debt........................ -- 7,800 125,000 Stockholders' equity.................. $315,517 $329,849 $329,849 </TABLE> - --------------- (1) The Company's fiscal year is the 52/53-week period ending on the last Sunday in December and normally consists of 13 four-week periods. The first quarter consists of four four-week periods and each of the remaining quarters consists of three four-week periods. (2) Includes a $26,575,000 write-off of intangible assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001007209_netspeak_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001007209_netspeak_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e12e8357a326063b5c1e65902cf8ecc8254d5339
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001007209_netspeak_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE OVER-ALLOTMENT OPTION; (II) ASSUMES NO EXERCISE OF THE WARRANTS TO BE ISSUED BY THE COMPANY TO THE REPRESENTATIVES, TO PURCHASE UP TO 200,000 SHARES OF COMMON STOCK (THE "ADVISORS' WARRANTS"); (III) ASSUMES THE EXERCISE UPON CONSUMMATION OF THIS OFFERING OF A WARRANT TO PURCHASE 452,855 SHARES OF COMMON STOCK (THE "MOTOROLA WARRANT") HELD BY MOTOROLA, INC. ("MOTOROLA"); (IV) DOES NOT GIVE EFFECT TO 207,679 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF ANOTHER OUTSTANDING WARRANT; AND (V) DOES NOT GIVE EFFECT TO 2,382,500 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF OUTSTANDING STOCK OPTIONS GRANTED UNDER THE COMPANY'S 1995 STOCK OPTION PLAN (THE "1995 PLAN"). THE COMPANY NetSpeak develops, markets, licenses, and supports a suite of intelligent software modules which enable real-time, concurrent interactive voice, video and data transmission over packetized data networks such as the Internet and local-area and wide-area networks ("LANs" and "WANs", respectively). The Company believes that its technology is strategically positioned to capitalize on the rudimentary shift in corporate telecommunications philosophy as businesses seek to expand the functionality of their communication systems as well as optimize their use of packetized data networks. Netspeak is currently marketing a user-friendly core communications technology which enables, in a cost-effective manner, corporations and other users to enhance the role of their packetized data networks to support concurrent voice, video and data transmission. NetSpeak believes that as potential users become increasingly educated as to the benefits of integrating the two networks, significant revenue opportunities for the Company will be generated. The Company's software uses patent-pending intelligent virtual circuit switching technology to provide gateways between packetized data networks and traditional voice transmission networks. The technology also allows users to integrate into packetized data networks a variety of features and functions commonly found in traditional voice transmission networks, including automatic call distribution ("ACD"), multi-point conferencing, interactive voice response services, messaging services, and least cost routing, as well as to expand functionality by offering additional features such as concurrent voice and data transmission and video conferencing. The Company's patent-pending virtual circuit switching technology provides intelligent call routing which enables users to transparently communicate with each other on a point-to-point basis. The Company believes that its products and systems are designed to allow customers to integrate NetSpeak's technology into their existing network infrastructures without the need for significant upgrading, and can ultimately provide a complete software-based solution for the delivery of concurrent real-time interactive voice, video and data communications over packetized data networks. In order to facilitate and accelerate the acceptance of NetSpeak's technology as well as enhance the marketing and distribution of its products and systems, the Company has established a number of strategic alliances with various telecommunications and computer industry leaders. Under certain of these agreements, either the Company's technology is integrated into products which are marketed by its strategic partners or the Company's products and systems are marketed and distributed by its strategic partners through various distribution channels. The Company believes that these strategic alliances also offer access to its partners' leading edge technologies, as well as insights into market trends and product development. In August 1996, the Company established a strategic alliance with Motorola pursuant to which Motorola made a minority investment in the Company and the Company granted Motorola a right of first negotiation on licenses of the Company's technology as it applies to the cellular, cable and wireless communications industries. Motorola, through its affiliates, is also conducting a test trial of a system that uses the Company's products and systems and those of Motorola. Beginning in June 1996, the Company entered into a strategic alliance with Creative Technology, Ltd. ("Creative"), a world leader in the manufacture and distribution of audio cards and multimedia computer peripherals. Pursuant to such alliance, Creative made a minority investment in the Company. NetSpeak granted Creative a world-wide license to market, distribute and bundle NetSpeak's WebPhone client (or end-user) software under the Creative brand name in the retail distribution channel and the Company and Creative are jointly developing various other Internet-related software applications which use both the Company's and Creative's proprietary technologies, in such areas as multimedia applications for Internet Protocol ("IP") based networks. In May 1997, the Company entered into a Technology Development and License Agreement with ACT Networks, Inc. ("ACT"), an industry-leading provider of WAN access products which utilize frame relay systems to integrate voice, data and facsimile communications. Under the agreement, the Company will adapt certain of its software modules to execute on ACT's hardware products. In addition, the Company granted ACT a license to distribute a variety of the Company's products to ACT customers and ACT will integrate their respective technologies into a bundled solution to be distributed and marketed by both the Company and ACT. The Company has entered into a related agreement pursuant to which ACT has indicated that it has an interest in purchasing $2,000,000 of Common Stock in this Offering. At an assumed offering price of $8.50 per share this would equate to 235,294 shares or approximately 12% of the shares of Common Stock offered hereby. In August 1996, the Company established a strategic alliance with the Switching Systems Division of Rockwell International Corporation ("Rockwell"), an industry leader in medium to high end ACD systems. As part of this alliance, the Company's gateway products and ACD systems are being integrated into Rockwell's ACD systems. Beginning in November 1996, the Company entered into a strategic alliance with Infonet Services Corporation ("Infonet"), one of the largest commercial data network carriers in the world. Pursuant to such alliance, the Company will integrate its technology with Infonet's existing global data network, to enhance concurrent voice and data transmission over the network. In April 1997, the Company entered into a non-binding memorandum of understanding with Fujitsu Business Communication Systems ("Fujitsu"). In May 1997, the Company completed negotiation of, but has not executed, an original equipment manufacturer ("OEM") agreement, pursuant to which Fujitsu will integrate, distribute and resell the Company's products to Fujitsu customers and undertake joint development efforts with the Company. In March 1997, the Company entered into a non-binding memorandum of understanding with Telstra R&D Management Pty, Ltd. ("TRDM"), a subsidiary of Telstra Corporation Ltd. ("TCL"), the Australian telecommunications carrier. In May 1997, the Company completed negotiation of, but has not yet executed, a development and marketing agreement pursuant to which the Company and TRDM intend to integrate their respective existing technologies into a product which facilitates increased call completion rates for telecommunications carriers. The jointly developed product is intended to be marketed by both the Company and TRDM to other telecommunications carriers, including TCL. MCI Communications Corp. ("MCI"), one of the nation's largest long-distance carriers, has initially licensed and used limited quantities of the Company's products in MCI's new VAULT technology, designed to bridge traditional telephone networks with packetized data networks such as the Internet. MCI has subsequently selected the Company as one of its suppliers for components of its VAULT technology products and services, and is currently negotiating a volume software license agreement with the Company. The Company intends to establish additional strategic alliances. In addition to marketing its technology, products and systems with its strategic partners, NetSpeak has begun to market its products directly to end-users, including telephone companies, cable companies, and other common carriers, large business enterprises, ACD manufacturers and OEMs, governmental and educational entities, as well as to distributors, such as systems integrators ("SIs") and value added resellers ("VARs"). To date, such marketing efforts primarily have been limited to direct contacts with a number of these customers. In addition, NetSpeak is marketing its WebPhone client software products over the Internet, by advertising in computer periodicals and through distribution agreements with over 700 Internet service providers ("ISPs") worldwide. The Company is currently developing an in-house marketing and sales infrastructure. The Company's strategy is to become an industry leader in providing business solutions for concurrent real-time interactive voice, video and data transmission over packetized data networks. The Company intends to achieve its goal by (i) establishing strategic alliances to facilitate technological acceptance and enhance the marketing and distribution of its products and systems; (ii) expanding its internal marketing and sales efforts; and (iii) continuing research and development to enhance existing product applications, as well as develop new applications. NetSpeak was incorporated in the State of Florida on December 8, 1995 under the name "Comnet Corporation." The Company began using the mark "NetSpeak" on December 14, 1995 and formally assumed its present name on December 18, 1995, when it acquired Internet Telephone Company ("ITC"), which had begun development of the Company's technology in May 1995. Unless the context otherwise requires, references herein to "NetSpeak" or the "Company" are to NetSpeak and ITC, its subsidiary and Predecessor. The Company's executive offices are located at 902 Clint Moore Road, Suite 104, Boca Raton, Florida 33487, and Company's telephone number is (561) 997-4001. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company ......... 2,000,000 shares. Common Stock outstanding before the Offering ........................ 7,698,532 shares. Common Stock to be outstanding after the Offering(1) ..................... 10,151,387 shares. Use of Proceeds .............................. Expansion of sales and marketing efforts, additional research and development expenditures, capital expenditures and working capital and other general corporate purposes. See "Use of Proceeds." Risk Factors ................................. The securities offered hereby involve a high degree of risk and immediate and substantial dilution. See "Risk Factors" and "Dilution." Proposed Nasdaq National Market symbol ...... "NSPK." <FN> - ---------------- (1) Gives effect to exercise of the Motorola Warrant. Does not give effect to the exercise of (i) the Over-Allotment Option; (ii) the Advisors' Warrants to purchase 200,000 shares of Common Stock, exercisable at 120% of the public offering price per share; (iii) an outstanding warrant to purchase 207,679 shares of Common Stock exercisable at a price of $5.05 per share; and (iv) stock options granted under the 1995 Plan to purchase 2,263,500 shares of Common Stock at exercise prices ranging from $1.00 to $7.00 per share and 119,000 shares of Common Stock at an exercise price equal to the price per share in this Offering. </FN> </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> PREDECESSOR(1) SUCCESSOR(1) ------------------ ------------------------------------------------------------------ THREE MONTHS MAY 15, 1995 DECEMBER 8, 1995 YEAR ENDED ENDED MARCH 31, TO DECEMBER 18, TO DECEMBER 31, DECEMBER 31, ----------------------------- 1995 1995 1996 1996 1997 ------------------ ------------------- -------------- ------------- ------------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues ..................... $ - $ - $ 867,117 $ 90,681 $ 903,766 Total operating expenses ......... 180,682 642,483 3,861,917 508,471 1,902,208 Loss from operations ............ (180,682) (642,483) (2,994,800) (417,790) (998,442) Net loss ........................ (180,682) (642,483) (2,865,704) (400,367) (984,935) Net loss per share ............... $ (.35) $ (0.05) $ (0.12) Shares used in computing net loss per share(2) .................. 8,176,833 8,176,833 8,176,833 </TABLE> <TABLE> <CAPTION> SUCCESSOR(1) MARCH 31, 1997 ---------------------------------------------- PRO FORMA ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4) ----------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents ............................................. $4,869,565 $7,360,268 $22,469,168 Working capital ...................................................... 2,711,290 5,201,993 20,560,893 Total assets ......................................................... 7,411,244 9,901,947 24,711,947 Shareholders' equity ................................................... 4,693,968 7,184,671 22,244,671 <FN> - ---------------- (1) NetSpeak acquired ITC by issuing 2,500,000 shares of common stock, valued at $500,000, in exchange for all of the outstanding shares of ITC. The acquisition was accounted for as a purchase, and the purchase price was allocated to the assets acquired, including purchased research and development in process, and liabilities assumed based upon their fair value on the date of acquisition. The financial information identified herein as for the Predecessor is for ITC for the period May 15, 1995 (inception) to December 18, 1995, the date of its acquisition by NetSpeak. The financial information identified herein as for the Successor is for NetSpeak (including ITC on a consolidated basis from the date of acquisition) as of March 31, 1997 and for the period from December 8, 1995 (inception) to December 31, 1995, for the year ended December 31, 1996 and the three months ended March 31, 1996 and 1997. (2) See Note 1 of "Notes to Consolidated Financial Statements" for an explanation of the determination of the number of shares and share equivalents used in computing the per share amounts. Does not give effect to the exercise of (i) the Over-Allotment Option; (ii) the Advisors' Warrants to purchase 200,000 shares of Common Stock, exercisable at 120% of the public offering price per share; and (iii) stock options to purchase 1,710,000 shares of Common Stock granted under the 1995 Plan prior to February 1, 1996, which are not included because such options were issued prior to the 12 months immediately preceding the Offering and the effect on net loss per share would be anti-dilutive. (3) Gives the effect to exercise of the Motorola Warrant and the receipt of $2,490,703 or $5.50 per share therefrom. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) As adjusted to give effect to the sale by the Company of 2,000,000 shares of Common Stock at an assumed offering price of $8.50 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001009532_broadwing_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001009532_broadwing_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a0a81adcefa44674d845896dfab078cc0f12e896
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001009532_broadwing_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Certain of the information contained in this Prospectus, including information regarding the Company's network expansion and switched long distance services and related strategy and financing, are forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the matters described in the forward-looking statements and other matters that should be carefully considered by prospective investors, see "Risk Factors." Certain terms used herein are defined in the Glossary at page A-1. The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Consolidated Financial Statements (including the Notes thereto), appearing elsewhere in this Prospectus. As used herein, unless the context otherwise requires, the term "Company" refers to IXC Communications, Inc. ("IXC Communications") and its subsidiaries, including predecessor corporations. Industry data was obtained from a report issued in March 1996 from the FCC and from reports dated April 1995 and January 1996 from International Data Corporation (an industry research organization), which the Company has not independently verified. Unless otherwise indicated, all information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised and has been adjusted to reflect stock splits prior to the Company's initial public offering. THE COMPANY The Company provides two principal services to long distance companies: (i) transmission of voice and data over dedicated circuits ("private lines"); and (ii) switched long distance services. The Company is one of only five carriers that currently own a digital telecommunications network extending from coast-to-coast (the other carriers are AT&T, MCI, Sprint and WorldCom). As of February 28, 1997, the Company's network included approximately 10,000 digital route miles, containing over 96,000 fiber miles. Its facilities also include five long distance switches located in Los Angeles, Dallas, Chicago, Philadelphia and Atlanta and ten Frame Relay-ATM switches located in major cities. The Company is currently engaged in a major expansion of its network, as set forth in the map on the inside front cover page of this Prospectus. The Company had revenues of $203.8 million in 1996, with approximately $99.8 million generated by its private line business and approximately $104.0 million generated by its switched services business. The Company has private line circuit contracts with over 200 long distance carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, Frontier and LCI. The Company also provides private line transmission service to customers after contract expiration on a month-to-month basis. Pursuant to the Company's private line contracts, customers are required to make fixed monthly payments, generally in advance. Many of such contracts contain substantial "take or pay" commitments. The Company has historically enjoyed a high customer retention rate in its private line business. The Company recently expanded into the business of selling switched long distance services to long distance resellers in order to complement its private line business and to capitalize on its ability to provide switched services over its own network. Switched long distance services are telecommunications services that are processed through the Company's digital switches and carried over long distance circuits and other transmission facilities owned or leased by the Company. The Company sells switched long distance services on a per-call basis, charging by minutes of use ("MOUs"), with payment due monthly after services are rendered. The Company's customers for switched services are principally long distance resellers (both switchless resellers and switched resellers that lack a switch in a geographic region) that use the Company's network to provide long distance service to end-user customers. The Company's switched network became fully operational in February 1996. The Company has switched long distance services contracts with over 70 long distance resellers. Excel, the Company's largest customer of switched long distance services, is contractually obligated to continue to utilize a minimum of 70 million minutes of traffic per month until reaching total usage of 4.2 billion minutes (subject to Excel's right to reduce or terminate its commitment under certain circumstances), of which approximately 3.3 billion minutes remained as of February 28, 1997. The Company's switched long distance business has grown rapidly, with Excel accounting for most of the growth. The Company's switched long distance revenues amounted to approximately $104.0 million in 1996, with $3.6 million in the first quarter, $19.0 million in the second quarter, $35.3 million in the third quarter and $46.1 million in the fourth quarter. The Company plans to continue to expand the capabilities of the switched network in 1997 to meet customer demand by adding additional equipment, including three long distance switches anticipated to be located in Fresno, California, Joplin, Missouri and New York. The Company believes that it is well-positioned to continue to attract long distance resellers as customers for its switched long distance services because: (i) it is not currently a significant competitor for sales to end users; and (ii) it provides more focused service to its reseller customers, since servicing such customers is its primary business, unlike its major competitors whose main business is selling retail long distance service to end users in competition with their reseller customers. The Company's primary business objectives over the near term are: (i) to continue to increase revenue from its switched long distance services business; (ii) to complete substantial portions of the network expansion in 1997; and (iii) to utilize its expanded network to increase its revenues and profitability. INDUSTRY OVERVIEW The domestic long distance market generated revenues of approximately $75.9 billion in 1995. In 1995, the first-tier long distance providers (AT&T, MCI and Sprint) accounted for approximately 85.6% of such revenue, the second-tier companies (WorldCom, Frontier, Cable & Wireless, LCI and others) accounted for approximately 8.9%, and the third-tier companies (approximately 400 companies) accounted for the remaining 5.5% of the long distance market. According to data included in an FCC report issued in March 1996, while total long distance revenues grew at a compound annual rate of over 8% during the period from 1989 through 1995, the revenues of all carriers other than the first-tier carriers grew in the aggregate at an annual compound rate of over 22% during the same period. The report also stated that the second-tier and third-tier carriers increased their market share sixfold over a ten-year period, increasing from less than 3% in 1984 to more than 17% in 1994. In addition, industry sources estimate that combined revenues of second-tier and third-tier carriers grew by 17.9% in 1995. The Company provides private line services to companies in all three tiers and switched long distance services to companies in the second and third tiers. NETWORK EXPANSION Because of geographic limitations and capacity constraints, the Company currently supplements its own facilities with a significant amount of fiber capacity obtained from other carriers. The Company is currently engaged in a major expansion of its network to increase the Company's geographic scope and network capacity. Prior to beginning construction of the network expansion in late 1995, the Company owned a coast-to-coast network containing over 1,700 route miles of fiber optic cable and over 5,000 route miles of digital microwave. The network expansion includes routes planned: (i) from New York to Los Angeles via Cleveland, Chicago, St. Louis, Dallas and Phoenix; (ii) from Los Angeles to San Francisco; (iii) from New York to Houston via Atlanta; and (iv) from Houston to Dallas. These routes would add over 7,180 route miles to the Company's network. As of February 28, 1997, over 3,300 route miles of the network expansion were complete. The network expansion is expected to deliver significant strategic and financial benefits to the Company through: (i) producing substantial savings by allowing the Company to move a portion of its excess private line traffic from leased circuits on the networks of other carriers to its own expanded network; (ii) providing high-capacity new routes and substantially increasing the capacity of certain existing routes, allowing the Company to increase revenues by leasing additional circuits to its customers, including high-capacity circuits such as OC-48's, OC-12's and OC-3's; (iii) allowing the Company to improve profitability in its switched long distance services business by reducing its underlying transmission costs; and (iv) creating sufficient capacity to support increased demand which may result from Internet and multimedia applications, Frame Relay and ATM. The Company plans to meet the costs of the routes from New York to Los Angeles via St. Louis and from New York to Houston via Atlanta with cash on hand, the proceeds of this offering (the "Offering"), the proceeds from a placement of convertible preferred stock (described below), the proceeds from sales of fiber to LCI and MCI, additional cost-saving arrangements, cash flow from its operations and vendor financing it may seek. The Company is reducing the per-route-mile cost of these routes through the fiber sale to LCI and through a similar sale to MCI, fiber exchange arrangements with WorldCom and Vyvx (a video transmission subsidiary of The Williams Companies) and joint construction and other cost-saving arrangements with other carriers. In 1996 the Company began equipping its network with the data switches and other equipment necessary to enter into the Frame Relay and ATM transmission business. This equipment, in connection with the network expansion and additional equipment and software to be installed in 1997, should allow the Company to enter into the business of Frame Relay and ATM transmission for Internet and Intranet providers and other large users of data capacity. The Company began beta-testing such facilities in late 1996 and will begin offering such services in the first half of 1997. Although such services will not be a significant source of revenues in 1997, the Company expects that the market for such high-capacity data uses will grow substantially in the future along with the expected growth of Internet and Intranet use. To position itself to benefit from such growth, the Company seeks to establish itself as a high quality provider of choice of these services. RECENT EVENTS During the last six months, the Company continued to sign contracts with new and existing customers for switched long distance services and private line services. During this period, Excel's usage of the Company's network increased substantially above its 70 million minute per month minimum. In addition, the Company entered into a significant agreement with a major long distance carrier that will obtain private line services from the Company. Under this contract the Company will supply DS-3 circuits for aggregate revenues of over $24.0 million during 1997-1998. The Company also entered into an interconnection agreement with Bell Atlantic that will facilitate its entry into the data communications business. In February 1997, Morgan Stanley Capital Partners III, L.P. (together with certain affiliates thereof "MSCAP") and the Trustees of General Electric Pension Trust ("GEPT"), the Company's largest stockholder, agreed to purchase $100.0 million of 7% Series A Convertible Preferred Stock (the "Convertible Preferred Stock") of the Company (the "Preferred Stock Sale"). The Convertible Preferred Stock will be convertible into Common Stock at a price of $38.40 per share. The transaction is subject to customary closing conditions, and is expected to close in March 1997. Over 3,300 route miles of the network expansion had been completed through February 28, 1997. The Company has entered into several agreements with other carriers that will result in reductions or offsets to its per-route-mile cost of construction, including: (i) a contract with LCI pursuant to which LCI will purchase an indefeasible right to use fibers from Chicago to Los Angeles for approximately $97.9 million (the "LCI Fiber Sale"); (ii) a contract with MCI pursuant to which MCI will purchase an indefeasible right to use fibers from Los Angeles to New York for approximately $121.0 million (the "MCI Fiber Sale"). This contract replaces a $20.0 million lease contract with MCI for OC-48 capacity announced in January 1997; (iii) a contract with Vyvx to exchange the use of certain fibers on the Company's New York to Los Angeles route for the use of fibers on a 1,600-mile route to be constructed by Vyvx from Washington, D.C. to Houston; (iv) joint construction contracts with other carriers: LCI (Youngstown, Ohio -- Toledo), DTI (Anderson, Missouri -- Kansas City), and CCTS (Riverdale, Illinois -- Chicago). These arrangements allow the Company and the other carriers to share the costs of construction of these routes; (v) a contract with MFS, a recently acquired subsidiary of WorldCom, pursuant to which MFS will include fibers for the Company in a route MFS is constructing from Cleveland through upstate New York to New York City. This route, which replaces a previously planned Company route from Cleveland to Philadelphia, will substantially increase the scope of the Company's network by including cities in upstate New York, bring the network to Albany (which may facilitate a future extension to Boston), and provide additional fibers into New York City; and (vi) other contracts providing for the Company to sell another carrier the use of fibers in routes the Company is constructing: GST (Phoenix to the Arizona-New Mexico border) and WorldCom (Phoenix -- Las Vegas). In January 1997, the Company entered into agreements to purchase two long distance companies, LD Services, Inc. ("LDS"), a switchless reseller with 1996 revenues of approximately $30.0 million, and Telecom One, Inc. ("Telecom One"), a switchless reseller with 1996 revenues of approximately $8.0 million. The consideration for these acquisitions will be Common Stock of the Company. For a description of how many shares of Common Stock will be issued pursuant to these acquisitions, see "Business -- Acquisitions." The Company expects to complete these acquisitions in 1997 upon the satisfaction of certain conditions, including receipt of regulatory approvals. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................ 1,050,000 shares Common Stock offered by the Selling Shareholders... 450,000 shares Common Stock outstanding immediately after this offering......................................... 31,849,560 shares(1) Use of proceeds.................................... Capital expenditures, including the network expansion. See "Use of Proceeds." Nasdaq National Market symbol...................... IIXC </TABLE> - ------------------ (1) Computed using shares outstanding at March 1, 1997. Accordingly, the following shares are not included: (i) 1,212,450 shares of Common Stock reserved for issuance under the 1994 Stock Plan (as defined herein), of which options to purchase 1,151,526 shares were outstanding as of March 1, 1997 at a weighted average exercise price of $4.78 per share; (ii) 2,121,787 shares of Common Stock reserved for issuance under the 1996 Stock Plan (as defined herein), of which options to purchase 743,000 shares were outstanding as of March 1, 1997 at a weighted average exercise price of $25.02 per share; and (iii) 67,900 shares of Common Stock reserved for issuance under the Special Stock Plan (as defined herein), of which options to purchase 67,900 shares were outstanding as of March 1, 1997 at a weighted average exercise price of $3.01 per share. Also does not include shares to be issued in connection with LDS and Telecom One acquisitions or upon the conversion of the Convertible Preferred Stock. The Company estimates that the aggregate number of shares of Common Stock to be issued to the shareholders of LDS and Telecom One at the closings of these acquisitions will be between 1.1 million and 1.3 million. In addition, at the end of 1999, the Company will be required to pay the Telecom One shareholders additional shares of Common Stock, depending upon the future revenues of Telecom One and the balance sheet of Telecom One at the end of 1999, which the Company estimates is unlikely to exceed 200,000 shares. See "Risk Factors -- Shares Eligible for Future Sale," "Business -- Acquisitions" and "Description of Capital Stock -- Preferred Stock." SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth certain summary consolidated financial data of the Company. The historical financial data as of and for the years ended December 31, 1994, 1995 and 1996 have been derived from the audited Consolidated Financial Statements of the Company. The summary consolidated financial data set forth below is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements, the Notes thereto and other financial information included elsewhere in this Prospectus. <TABLE> <CAPTION> HISTORICAL -------------------------------- YEAR ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net operating revenues..................................... $ 80,663 $ 91,001 $203,761 Operating income (loss).................................... 14,085 1,429 (14,016) Interest expense........................................... 6,105 14,597 37,076 Income (loss) before extraordinary gain (loss)(1).......... 5,017 (3,218) (37,448) Net income (loss) per common and common equivalent share... $ .22 $ (.27) $ (1.39) Weighted average common and common equivalent shares used in computations of income (loss) per share.............. 24,993 25,108 28,209 BALANCE SHEET DATA: Cash and cash equivalents(2)............................... $ 6,048 $ 6,915 $ 61,340 Escrow under Senior Notes(2)............................... -- 198,266 51,412 Total assets............................................... 105,409 336,475 459,151 Total debt and capital lease obligations................... 69,124 298,794 302,281 Stockholders' equity....................................... $ 14,189 $ 6,858 $ 63,479 OTHER FINANCIAL AND OPERATIONS DATA: EBITDA(3).................................................. $ 26,206 $ 18,867 $ 13,225 Capital expenditures....................................... $ 7,087 $ 23,670 $136,391 Ratio of EBITDA to interest expense(4)..................... 4.29x 1.29x -- Minutes of use (in millions)............................... -- 12.8 1,105.2 Digital route miles(5)..................................... 6,700 6,758 7,325 Fiber miles(6)............................................. 20,747 22,159 33,445 </TABLE> - --------------- (1) The Company recognized an extraordinary gain (involving a related party) of $2.3 million in 1994 and an extraordinary loss of $1.7 million in 1995, in each case relating to the early extinguishment of debt. (2) The Company made significant capital expenditures in the first two months of 1997. As of February 28, 1997, all escrow funds have been expended and the Company's cash and cash equivalents total approximately $31.0 million. (3) EBITDA is defined as operating income (loss) plus depreciation and amortization. EBITDA for 1995 and 1996 includes the negative EBITDA of the Company's switched long distance services business. During 1995 and the first quarter of 1996 such negative EBITDA relates to start-up and operating expenses incurred before the Company began generating material revenues from its switched long distance business. The Company has included information concerning EBITDA because it believes that EBITDA is used by certain investors as one measure of an issuer's historical ability to service its debt. EBITDA is not a measurement determined in accordance with GAAP, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and is not necessarily comparable with similarly titled measures for other companies. (4) For 1996, EBITDA was insufficient to cover interest expense by $23.9 million. The Company made the interest payments on the Senior Notes in 1996 with funds from the Escrow under Senior Notes. (5) Includes 5,000 digital microwave miles. With the completion of portions of the network expansion in early 1997, as of February 28, 1997, the Company had approximately 10,000 digital route miles. (6) Fiber miles represent the number of fiber route miles of a fiber optic route multiplied by the number of fiber strands in the route. With the completion of portions of the network expansion in early 1997, as of February 28, 1997, the Company had approximately 96,000 fiber miles (excluding fibers as to which the Company has sold or exchanged long-term rights to use).
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001009900_monarch_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001009900_monarch_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..80d09b320c97eae220d49c688e523966a33de3c3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001009900_monarch_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto of Monarch Dental Corporation ("Monarch" or the "Company") appearing elsewhere in this Prospectus. Monarch is a dental group practice management company. It manages dental facilities (each, a "Dental Office" and collectively, the "Dental Offices") at which it provides office space, support personnel, information systems and management services to general dentists and specialists. Monarch owns all of the operating assets of the Dental Offices, including leasehold interests. Except where permitted by law, Monarch does not employ dentists to practice dentistry nor does it otherwise control the practice of dentistry. The Company has entered into Management Agreements (the "Management Agreements") with dental professional corporations (the "P.C.s") pursuant to which dentists employed by (or who contract with) the P.C.s practice dentistry at the Company's Dental Offices, other than those in Wisconsin where ownership of dental practices by the Company is permitted. Under this structure, all revenues derived from the practice of dentistry are the revenues of the P.C.s and the compensation, benefits and other payments to the dentists and hygienists employed by or contracting with the P.C.s are expenses of the P.C.s. The Company's net revenues under this structure consist of management fees under the Management Agreements and constitute the revenues of the P.C.s less these expenses. Prior to February 1996, the Company generally did not operate its business pursuant to this structure because its sole owner until that time was a licensed dentist and, as such, the practice of dentistry by the Company was permitted. THE COMPANY The Company manages dental group practices in selected markets, presently including Dallas-Fort Worth, Houston, Wisconsin and Arkansas. The Company seeks to build geographically dense networks of dental providers by expanding within its existing markets and entering new markets through acquisition. At May 31, 1997, the Company owned and managed 67 Dental Offices, of which 16 were internally developed and 51 were acquired by the Company. Dentists practicing at the Dental Offices provide general dentistry services and increasingly offer specialty dental services such as orthodontics, oral surgery, endodontics, periodontics and pediatric dentistry. At May 31, 1997, 123 full-time general dentists and 13 full-time specialists practiced at the Company's Dental Offices. The dental services industry is undergoing rapid change throughout the United States. The industry historically has been highly fragmented, with approximately 153,300 active dentists in the United States in 1995, of which nearly 88% practiced either alone or with one other dentist. Services generally have not been covered by third-party payment arrangements and consequently have been paid for by individuals on an out-of-pocket basis. More recently, factors such as increased consumer demand for dental services and the desire of employers to provide enhanced benefits for their employees have resulted in an increase in third-party payment arrangements to finance the purchase of dental services. These third-party payment arrangements include indemnity insurance, preferred provider plans and capitated managed dental care plans. In response to current market trends, general and specialty dental practices increasingly have formed larger group practices. In these practices a separate professional management team handles practice management functions such as staffing, billing, information systems, managed care contracting, leasing, purchasing and marketing, enabling dentists to focus on providing high-quality dental services. The Company seeks to capitalize on emerging trends in the dental services industry. The Company's objective is to be a leading dental practice management company in each of its markets. The Company's business strategy emphasizes (i) expanding operations within its existing markets, (ii) entering selected new markets by acquiring group practices which have a significant market presence or which the Company believes can achieve such a presence in the near term, and seeking to use these practices as a "pedestal" from which to expand, (iii) increasing patient volume principally through television, radio and print advertising, (iv) optimizing the revenue mix of its associated dental practices by focusing on fee-for-service general and specialty dentistry and supplementing this business with revenue from contracts with capitated managed dental care plans and (v) adapting and implementing the best practices identified in its affiliated groups throughout its provider networks. The Company has generated growth within existing markets principally by increasing the overall physical space, patient volume and fees at existing Dental Offices and by opening Dental Offices on a de novo basis (i.e., opening Dental Offices at new locations). The revenues of the Company in all markets other than Wisconsin consist of management fees derived from the Management Agreements which have been in effect since February 6, 1996. Revenue of the dental group practices practicing at the Company's Dallas-Fort Worth Dental Offices increased $3.6 million, or 38.3%, to $13.2 million in 1995, and increased $5.1 million, or 38.1%, to $18.3 million in 1996. Revenue of the dental group practices practicing at the Company's Dallas-Fort Worth Dental Offices constitutes revenue of the P.C. operating at these Dental Offices for all periods after February 6, 1996. Operating income at the Company's Dallas-Fort Worth Dental Offices increased $694,000, or 52.7%, to $2.0 million in 1995 and increased $805,000, or 40.0%, to $2.8 million in 1996. Operating income at the Dallas-Fort Worth Dental Offices consists of dental group practices revenue, net received by the P.C. operating at these Dental Offices less amounts retained by dental group practices (i.e., amounts retained by the P.C. for the salaries and benefits of the dentists and hygienists) and operating expenses of the Company, which include salaries and benefits of personnel other than dentists and hygienists, dental supplies, dental laboratory fees, occupancy costs, advertising expense, depreciation and amortization and general and administrative expenses but excluding interest expense and income tax expense. There can be no assurance that the Company's revenue and operating income in this market will continue to grow at these historic rates or that the Company's operations in other markets will grow at rates comparable to those experienced in Dallas-Fort Worth. Since January 1, 1996, the Company has entered three new markets through the acquisitions of MacGregor Dental Centers in Houston in February 1996, Midwest Dental Care in Wisconsin in August 1996 and Convenient Dental Care, Arkansas Dental Health Associates and United Dental Care Tom Harris D.D.S. & Associates in Arkansas in November 1996, January 1997 and April 1997, respectively. The collective pro forma revenue of these acquired companies was $37.9 million for the year ended December 31, 1996. In June 1997, the Company entered into a definitive agreement to acquire Dental Centers of Indiana, Inc., an Indiana-based dental practice, which operates 11 dental offices with 14 dentists and which had $3.6 million in revenue for the year ended December 31, 1996. The Company anticipates that the closing of the acquisition of Dental Centers of Indiana, Inc. will occur on or about the commencement of this offering. See "Business -- Expansion -- Pending Acquisition." THE OFFERING Common Stock offered by the Company..... 2,750,000 shares Common Stock to be outstanding after the offering................................ 9,458,723 shares(1) Use of proceeds......................... To repay a portion of existing indebtedness, to redeem all outstanding shares of redeemable preferred stock and for general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.................................. MDDS - ------------------------------ (1) Excludes (i) 1,031,042 shares of Common Stock reserved for issuance under the Company's 1996 Stock Option and Incentive Plan, as amended (the "1996 Stock Plan"), of which at May 31, 1997 435,750 shares were issuable upon the exercise of outstanding stock options at a weighted average exercise price of $10.41 per share (assuming an initial public offering price of $11.00 per share), (ii) 500,000 shares of Common Stock reserved for issuance under the Company's 1996 Equity Acquisition Option Plan (the "Acquisition Plan"), of which at May 31, 1997 up to 185,000 shares were reserved for issuance under options to be granted at an exercise price equal to the fair market value of the Common Stock at the time of grant if certain acquired dental practices achieve specified financial performance goals, (iii) 250,000 shares of Common Stock reserved for issuance under the Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") and (iv) approximately 163,600 shares of Common Stock issuable in connection with the closing of the acquisition of Dental Centers of Indiana, Inc. at an assumed initial public offering price of $11.00 per share. See "Business -- Expansion -- Pending Acquisition," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management -- Employee Stock and Other Benefit Plans -- 1996 Stock Option and Incentive Plan" and "-- 1997 Employee Stock Purchase Plan." ------------------------------ Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option and has been adjusted to reflect (i) a 1-for-2 reverse stock split of the Company's Common Stock and non-voting Class A Common Stock effected on June 19, 1997, (ii) the conversion of all outstanding shares of non-voting Class A Common Stock into an equal number of shares of Common Stock upon completion of this offering and (iii) the conversion of each outstanding share of Convertible Participating Preferred Stock and Series A Convertible Junior Preferred Stock into one-half of one share of Common Stock upon completion of this offering. Unless the context otherwise requires, all references to the "Company" mean Monarch Dental Corporation, its predecessors and all of its direct and indirect subsidiaries. All references to "dentists" providing services at the Dental Offices refer to dentists employed by (or who contract with) the P.C.s or by (or with) the Company in states in which such employment or contracting is permissible. All references herein to industry financial and statistical information are based on trade articles and industry reports that the Company believes to be reliable and representative of the dental services industry at the date of this Prospectus, although there can be no assurance to that effect. SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> YEAR ENDED THREE MONTHS THREE MONTHS DECEMBER 31, ENDED ENDED YEAR ENDED DECEMBER 31, 1996 MARCH 31, MARCH 31, 1997 -------------------------- PRO FORMA ---------------- PRO FORMA 1994 1995 1996 AS ADJUSTED(1)(2) 1996 1997 AS ADJUSTED(2)(3) ------ ------- ------- ----------------- ------ ------- ----------------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF INCOME DATA: Dental group practices revenue, net............... $9,559 $13,223 $35,980 $59,998 $6,316 $14,476 $16,620 Less: amounts retained by dental group practices..... 3,070 4,301 11,802 19,175 2,060 5,029 5,610 Net revenue.................. 6,489 8,922 24,178 40,823 4,256 9,447 11,010 Operating expenses........... 5,401 7,253 21,391 36,034 3,544 8,485 9,723 Operating income............. 1,088 1,669 2,787 4,789 712 962 1,287 Interest expense, net........ 81 87 1,687 1,135 259 579 283 Income before income taxes... 1,007 1,582 1,100 3,601 453 383 973 Income taxes(4).............. -- -- 425 1,394 174 150 379 Net income................... $1,007 $ 1,582 $ 675 $ 2,207 $ 279 $ 233 $ 594 Pro forma net income(4)...... $ 617 $ 970 $ 675 $ 2,207 $ 279 $ 233 $ 594 Net income per common share(5)................... $ 0.10 $ 0.23 $ 0.04 $ 0.03 $ 0.06 Weighted average common shares outstanding......... 6,896 9,646 6,896 6,896 9,646 OTHER OPERATING DATA: Number of Dental Offices (end of period)................. 10 12 53 76 28 57 78 Number of dentists (end of period)(6)................. 25 33 133 160 75 125 152 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------- PRO FORMA ACTUAL AS ADJUSTED(7) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............................... $ 446 $ 1,529 Working capital (deficit)............................... (3,878) (3,002) Total assets............................................ 36,353 44,666 Long-term debt, less current maturities................. 19,424 5,931 Redeemable equity securities............................ 9,751 -- Total stockholders' equity (deficit).................... (3,309) 27,719 </TABLE> - ------------------------------ The unaudited pro forma consolidated financial information presented does not purport to (i) represent what the consolidated results of operations or financial condition of the Company would actually have been if the transactions reflected therein had in fact occurred on the assumed dates or (ii) project the future consolidated results of operations or financial condition of the Company. (1) Gives effect to the acquisitions of MacGregor Dental Centers, Midwest Dental Care, Convenient Dental Associates, Arkansas Dental Health Associates, United Dental Care Tom Harris D.D.S. & Associates and Dental Centers of Indiana, Inc. as if they had been completed on January 1, 1996. See "The Company," "Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) Gives effect to the sale of 2,750,000 shares of Common Stock offered hereby as if it had been completed at January 1, 1996 at an assumed initial public offering price of $11.00 per share and the receipt and application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization." (3) Gives effect to the acquisitions of United Dental Care Tom Harris D.D.S. & Associates and Dental Centers of Indiana, Inc. as if they had been completed on January 1, 1997. See "The Company," "Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) The Company was an S corporation prior to February 6, 1996, and accordingly, the consolidated statements of income for all periods ending prior to such date did not include income tax expense. Pro forma net income includes an adjustment to reflect estimated income tax effects on net income for the years ended December 31, 1994 and 1995 at an assumed effective tax rate of 38.7%. (5) Computed on the basis described in Note 2 of Notes to Consolidated Financial Statements of the Company. Due to the effect on the Company's capital structure of transactions completed in February 1996, per share data for the periods ended prior to January 1, 1996 are not comparable to subsequent periods and, therefore, have not been presented. See "Certain Transactions." (6) Includes full-time general dentists and specialists employed by or contracted with the Company (in the case of Midwest Dental Care) or the applicable P.C. (in the case of each dental practice group other than Midwest Dental Care). (7) Gives effect to the acquisitions of United Dental Care Tom Harris D.D.S. & Associates and Dental Centers of Indiana, Inc. and to the completion of this offering at an assumed initial public offering price of $11.00 per share and the receipt and application of the estimated net proceeds therefrom as if such transactions had been completed on March 31, 1997. See "The Company,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001010286_fibertower_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001010286_fibertower_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b23f64eb0de430498f8b9481b718ddbafa24bc82
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001010286_fibertower_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Investors should carefully consider the risk factors related to the purchase of the Shares. See "Risk Factors." The Company provides point-to-point wireless broadband digital telecommunications services. Utilizing 38 GHz frequencies, the Company offers cost-effective, high-capacity, high-quality "last mile" local access to voice, data, video and Internet services. Licenses which the Company owns, manages or has a long-term right to use permit it to develop a large-scale national network in 173 U.S. markets covering an estimated aggregate population of approximately 158 million people, including 83 of the top 100 markets. Significant increases in microprocessor power and advances in multimedia and on-line applications such as the Internet, local and wide area networks and video teleconferencing have substantially increased demand for high-speed, high-capacity telecommunications services. Conventional copper wire networks of local telephone companies do not have sufficient capacity to service this demand, resulting in a "last mile bottleneck." Fiber-optic cable networks have been deployed in part to overcome these constraints. However, fiber reaches only a small percentage of the addressable market and it is expensive to extend to the end user. Deregulation in telecommunications and improved technology allow ART to extend the reach of telecommunications networks using broadband wireless technology. Utilizing unobtrusive equipment mounted on rooftops and other tall structures, ART is able to transmit voice, data and video signals from fiber- optic, copper, coaxial cable and satellite earth stations to the end user locations. Advantages of ART's "last mile" wireless solution include: . Broad Footprint. The broad scope of the Company's license footprint enables it to offer wireless broadband services targeting much of the United States' addressable business market. . High Data Transfer Rates. ART's current technology permits data transfer at over 350 times the rate of the current fastest integrated services digital network, permitting real-time, full motion video and 3-D graphics and other data-intensive interactive applications. . High-Quality Transmission. ART's networks are designed for performance comparable to fiber and superior to copper networks. . Significant Channel Capacity. Because 38 GHz channels can be efficiently reused within the licensed area, a single channel can serve a significant number of end users. . Rapidly Deployed and Easily Installed Equipment. ART's 38 GHz equipment can be deployed considerably faster than both wireline and many other wireless technologies. It is small and unobtrusive and can be easily installed and redeployed. . Cost-Effective Service. ART's wireless solution enjoys favorable economics compared to cabled networks. ART is marketing its services primarily to carriers, including competitive local exchange carriers ("CLECs"), local exchange carriers ("LECs"), competitive access providers ("CAPs"), Internet service providers ("ISPs"), mobile communications service providers and long distance companies ("IXCs"), to enable them to extend their networks on a cost-effective basis. ART is identifying and obtaining roof rights for high-density off-net customer locations in its markets and plans to market high-speed broadband access to these locations to carriers. The Company is building its wireless networks incrementally in response to customer demand in each of its target markets, thereby efficiently deploying its capital. The Company is a Delaware corporation organized in 1993 under the name of Advanced Radio Technologies Corporation. In October 1996, the Company acquired through a merger (the "Merger") Advanced Radio Telecom Corp., a corporation organized by the Company and others in 1995 to acquire 38 GHz licenses and to operate its business jointly with the Company. Upon the Merger, Advanced Radio Telecom Corp. became a wholly owned subsidiary of the Company and changed its name to ART Licensing Corp. ("ART Licensing"), and the Company changed its name to Advanced Radio Telecom Corp. The Company commenced commercial operations in the fourth quarter of 1996. The Company's executive offices are located at 500 108th Avenue NE, Suite 2600, Bellevue, Washington 98004 and its telephone number is (425) 688-8700. SUMMARY CONSOLIDATED FINANCIAL INFORMATION The summary financial data presented below as of December 31, 1996 and for the years ended December 31, 1995 and 1996 were derived from and should be read in conjunction with the audited consolidated financial statements of the Company and the related notes thereto included elsewhere in this Prospectus. The summary financial data presented below as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 were derived from and should be read in conjunction with the unaudited condensed consolidated financial statements of the Company and the related notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, 1995 1996 1996 1997 -------- -------- -------- ------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue (1)................ $ 5,793 $ 2,907,927 $ 61,520 $ 685,193 Depreciation and amortization.............. 15,684 1,017,959 278,375 2,361,275 Interest and other expenses, net....... 121,986 6,512,251 1,826,805 8,756,883 Net loss................... (3,234,843) (30,670,303) (15,671,864) (25,158,390) Net loss per share......... (0.54) (3.97) (2.38) (1.42) Weighted average number of shares of Common Stock outstanding............... 5,946,338 7,717,755 6,577,461 17,735,974 OTHER FINANCIAL DATA: EBITDA (2)................. $(2,007,568) $(14,348,920) $ (5,150,958) $(14,455,716) Capital expenditures....... 3,585,144 16,631,451 4,040,806 10,124,970 <CAPTION> AS OF DECEMBER 31, AS OF JUNE 30, 1996 1997 ------------------ ---------------- <S> <C> <C> BALANCE SHEET DATA: Working capital surplus (deficit)................. $(9,623,905) $ 49,098,454 Property and equipment, net 19,303,849 28,228,836 FCC licenses, net.......... 4,330,906 131,822,061 Total assets............... 36,648,701 263,948,181 Long-term debt (including current portion).......... 4,977,246 110,278,144 Total stockholders' equity. 19,949,920 111,752,301 </TABLE> - -------- (1) For the year ended December 31, 1996 and for the six months ended June 30, 1997, $2,660,811 and $356,970, respectively, of revenue were derived from non-recurring equipment sales and construction revenue. (2) EBITDA represents loss before interest and financing expense (net of interest income), income tax expense (benefit), depreciation and amortization expense, non-cash compensation expense and non-cash market development expense. EBITDA is not intended to represent cash flows from operating activities, as determined in accordance with generally accepted accounting principles. EBITDA should not be considered as an alternative to, or more meaningful than, operating income or loss, net income or loss or cash flow as an indicator of the Company's performance. EBITDA has been included because the Company uses it as one means of analyzing its ability to service its debt, because a similar measure is used in the indenture relating to the Company's 14% Senior Notes due 2007 (the "Senior Notes") with respect to computations under certain covenants and because the Company understands that it is used by certain investors as one measure of a company's historical ability to service its debt. Not all companies calculate EBITDA in the same fashion and therefore EBITDA as presented may not be comparable to other similarly titled measures of other companies.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001010471_wyndham_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001010471_wyndham_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0d540b6c432f5501d63cdb27a62565457c9f8c2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001010471_wyndham_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY On May 24, 1996, immediately prior to the consummation of the initial public offering of the Common Stock of Wyndham Hotel Corporation ("Wyndham" or the "Company"), the Company succeeded to the hotel management and related businesses of Wyndham Hotel Company Ltd. ("Old Wyndham"), ownership of 6 Wyndham brand hotels and leasehold interests relating to 12 additional Wyndham brand hotels. Concurrent with the Company's initial public offering and as part of its financing plan, the Company issued $100,000,000 aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2006 (the "Notes"). Unless the context otherwise requires, the term "Company" or "Wyndham" when used in this Prospectus refers to Wyndham Hotel Corporation and its combined subsidiaries, and for the periods prior to May 24, 1996, includes the operations of Old Wyndham and the Company's other predecessors. The following summary is qualified in its entirety by the more detailed information and combined financial statements, including the notes thereto, appearing elsewhere in this Prospectus. INTRODUCTION Wyndham Hotel Corporation is a national hotel company operating upscale hotels primarily under the Wyndham brand name. Wyndham hotels are located in 26 states, the District of Columbia, Ontario, Canada and on 5 Caribbean islands. Wyndham hotels compete with national hotel chains such as Marriott, Hyatt and Hilton. The Company offers three distinct full service hotel products under the Wyndham brand designed to serve its core upscale customers in urban, suburban and select resort markets. At January 15, 1997, the Company's hotel portfolio consisted of 80 hotels operated by the Company and 2 franchised hotels (the "Portfolio"). The Company's Portfolio consists of 76 upscale hotel properties (which includes four properties under renovation) and 6 extended-stay hotel properties, which the Company began managing in September 1996. This Prospectus relates to the proposed distribution by WEL of 646,669 Wyndham Shares held by WEL to 91 WEL Participants. The proposed distribution of the Wyndham Shares is part of a Plan of Distribution that would result in the dissolution and termination of WEL. The Plan of Distribution must be approved by the holders of a majority of the percentage interests held by all WEL Participants. THE PLAN OF DISTRIBUTION GENERAL WEL was established in 1990 by Old Wyndham as an equity participation program designed to enable WEL Participants to receive indirect equity interests in Old Wyndham, certain hotels managed by Old Wyndham and certain hotel-related assets (collectively, the "WEL Investments"). Each WEL Participant received his or her interest in WEL in connection with the performance of services. In connection with the Company's initial public offering, WEL received the Wyndham Shares in exchange for WEL's ownership interest in certain of the WEL Investments. Wyndham Hotel Management Corporation, as the General Partner of WEL, is proposing the distribution of the Wyndham Shares to WEL Participants as part of the Plan of Distribution. The Plan of Distribution must be approved by the holders of a majority of the percentage interests held by all WEL Participants. Following the Wyndham Share distribution, the business of WEL will be wound up and WEL will be terminated. Any assets remaining in WEL following the winding up will be distributed to WEL Participants. A copy of the Plan of Distribution is attached as Appendix B to this Prospectus. The Wyndham Shares will be distributed to WEL Participants as soon as practicable following the date (the "Plan Effective Date") of the General Partner's receipt of approval of the Plan of Distribution by WEL Participants. In accordance with the provisions of the WEL Agreement, the Wyndham Shares will be distributed to WEL Participants according to the balance in each WEL Participant's capital account as adjusted in accordance with the WEL Agreement. In accordance with 1996 amendments to the WEL Agreement, which established the "EVBS Value" of Wyndham Shares at the initial public - 2 - <PAGE> 15 offering price, or $16.00 per share, Wyndham Shares will be distributed based on a share price of $16.00. A WEL Participant should refer to the individual account statement included in the materials accompanying this Prospectus for the number of Wyndham Shares to be distributed to him or her. The Wyndham Shares also will be distributed subject to each participant's pro rata share of "WEL Indebtedness," as described below. For a discussion of the methodology used to determine the number of Wyndham Shares to be distributed to each WEL Participant, see "Plan of Distribution -- Distribution Methodology." As a result of the Wyndham Share distribution, each WEL Participant will receive directly (subject to payment of his or her share of WEL Indebtedness) the Wyndham Shares represented by his or her ownership interest in WEL. As part of the Plan of Distribution, WEL Participants will be permitted for a period of three business days (the "Resale Window") following the share distribution to sell his or her Wyndham Shares, subject to compliance with the Company's Insider Trading Policy and to repayment of any WEL Indebtedness or Participant Loan secured by the Wyndham Shares being sold. Each WEL Participant will be restricted under the Plan of Distribution from making any public sale of his or her Wyndham Shares for a period (the "Lock-Up Period") of three weeks following the Resale Window. The Resale Window and the Lock-Up Period are designed to facilitate the resale of the Wyndham Shares on the open market. WEL Participants who are considered "affiliates" of the Company will also be required to comply with certain other securities law restrictions in connection with any such sale. See "Plan of Distribution -- Resale Restrictions." No WEL Participant is entitled to appraisal or similar rights in connection with the Plan of Distribution. REPAYMENT OF WEL INDEBTEDNESS Since WEL's inception, WEL Investments have been purchased through loans made to WEL by Wyndham Finance Limited Partnership or its predecessors ("WFLP"). In connection with the Company's initial public offering, the Company purchased from WFLP the promissory notes evidencing such loans at their face value, plus accrued interest, as of December 31, 1995. As of November 30, 1996, the aggregate outstanding balance under such loans was $3,070,654. In addition, WEL has issued promissory notes in connection with purchasing the interests of former WEL Participants, the outstanding balance of which was $169,522 as of November 30, 1996 and has incurred obligations to other former WEL Participants, which total approximately $520,000. The total indebtedness owed by WEL from time to time is referred to herein as the "WEL Indebtedness." In order to facilitate the repayment of the WEL Indebtedness (without WEL's having to sell any Wyndham Shares to provide funds), the Plan of Distribution requires that the Wyndham Shares be distributed subject to each participant's pro rata allocation of WEL Indebtedness. Each WEL Participant will be permitted to borrow funds under a Participant Loan from Smith Barney Inc. ("Smith Barney") to repay the WEL Indebtedness. Alternatively, WEL Participants can elect to have a portion of their Wyndham Shares sold on the first day of the Resale Window to repay their WEL Indebtedness. If a WEL Participant elects not to take out a Participant Loan or to have a portion of his or her Wyndham Shares sold, such participant will be required to otherwise repay his or her share of WEL Indebtedness prior to receipt of any Wyndham Shares. IN ORDER FOR A WEL PARTICIPANT TO RECEIVE HIS OR HER WYNDHAM SHARES, SUCH PARTICIPANT MUST REPAY HIS OR HER SHARE OF WEL INDEBTEDNESS THROUGH A PARTICIPANT LOAN, BY HAVING A PORTION OF HIS OR HER WYNDHAM SHARES SOLD OR BY MAKING PAYMENT OF SUCH AMOUNT FROM OTHER SOURCES DIRECTLY TO THE GENERAL PARTNER WHO WILL THEN REMIT THE FUNDS TO THE HOLDERS OF WEL INDEBTEDNESS. See "Plan of Distribution -- Repayment of WEL Indebtedness." The Participant Loans will be margin loans payable on demand and will be secured by Wyndham Shares with a market value that initially must equal 2.0 times the outstanding balance of the Participant Loan. The Participant Loans will bear interest at a floating interest rate that will fluctuate based on short term interest rates. For purposes of illustration, the rate would be 8% per annum as of the date of this Prospectus. WEL Participants may obtain the actual rate by contacting Smith Barney. Each WEL Participant who takes out a Participant Loan will become personally obligated to repay to Smith Barney the proceeds of such loan and will be subject to the risks generally associated with margin borrowing. For a discussion of these risks, see "Risk Factors -- Risks Associated with Participant Loans." For a summary of certain terms and conditions of the Participant Loans, see "The Plan of Distribution -- Repayment of WEL Indebtedness -- Participant Loans." - 3 - <PAGE> 16 REASONS FOR PLAN OF DISTRIBUTION WEL was established to enable WEL Participants to receive indirect equity interests in WEL Investments. The primary purpose of WEL was to attract and retain key executive and managerial employees and to motivate such employees to achieve Old Wyndham's long range goals by granting them indirect equity interests in WEL Investments. In connection with the Company's initial public offering, the Company adopted the 1996 Wyndham Hotel Corporation Long-Term Incentive Plan (the "1996 Incentive Plan"), which is a standard long-term incentive compensation program for key employees of a publicly held company. The 1996 Incentive Plan has replaced WEL as the Company's primary ongoing incentive compensation program. The General Partner believes that the Plan of Distribution is in the best interests of WEL Participants. There are legal restrictions on the number of persons who can become WEL Participants without subjecting WEL to substantial regulatory compliance burdens. In addition, the Company has determined, for a number of reasons, that WEL will not receive interests in assets acquired by the Company in the future. Accordingly, the General Partner believes that WEL's effectiveness as an ongoing incentive compensation program has become limited. The General Partner also believes, however, that WEL has served its purpose effectively by assisting in motivating and retaining key Wyndham personnel that have contributed greatly to the Company's growth since WEL was established in 1990. The General Partner also decided to propose the Plan of Distribution because of the numerous expressions of interest, directly and through the WEL Steering Committee, by WEL Participants in receiving a distribution of the Wyndham Shares, and because the distribution is not expected to result in the recognition of taxable income or loss by WEL Participants until a participant elects to sell all or any portion of his or her Wyndham Shares. See "Plan of Distribution -- Federal Income Tax Considerations." For additional information concerning reasons for the Plan of Distribution, see "The Plan of Distribution -- Reasons for Plan of Distribution." REQUIRED VOTE As of the date of this Prospectus, based upon a price per share of $16.00, the Wyndham Shares represent approximately 98% of the overall economic value of WEL. The WEL Agreement, a copy of which is attached as Appendix A to this Prospectus, requires approval of the "transfer" of all or substantially all of WEL's assets by the General Partner and the holders of a majority of the percentage interests held by all WEL Participants. Because the term "transfer" is broadly defined under the WEL Agreement, the General Partner has determined to consider the Plan of Distribution to involve a "transfer" within the meaning of the WEL Agreement and, therefore, is seeking approval of the Plan of Distribution by WEL Participants. The Plan of Distribution also will constitute an event of dissolution under the WEL Agreement. Accordingly, by voting in favor of the Plan of Distribution, WEL Participants will be voting for (i) the distribution of the Wyndham Shares to WEL Participants and (ii) the resulting dissolution and termination of WEL. VOTING PROCEDURES This Prospectus, together with the accompanying materials, constitute the "Solicitation Materials" being distributed to WEL Participants to obtain their votes for or against the Plan of Distribution. (The power of attorney and participant consent form included in the Solicitation Materials are referred to collectively as the "Consent Form.") No special meeting of WEL Participants has been scheduled to discuss the Solicitation Materials or vote upon the Plan of Distribution. Only WEL Participants who are limited partners of WEL of record as of the date of this Prospectus will receive notice of, and will be entitled to vote with respect to, the Plan of Distribution. The Solicitation Period is the time period during which WEL Participants may vote for or against the Plan of Distribution. The Solicitation Period will commence upon delivery of the Solicitation Materials to WEL Participants - 4 - <PAGE> 17 (on or about January 29, 1997) and will continue until the later of (a) February 7, 1997 or (b) such later date as may be selected by the General Partner and as to which notice is given to WEL Participants. In its discretion, the General Partner may elect to extend the Solicitation Period. Any Consent Form received by the General Partner prior to 12:00 noon, Central time, on the last day of the Solicitation Period will be effective provided that such Consent Form has been properly completed and signed. If you fail to return a signed Consent Form by the end of the Solicitation Period, your WEL interest will be counted as voting AGAINST the Plan of Distribution. WEL Participants who return a signed Consent Form but fail to indicate their approval or disapproval of the Plan of Distribution will be deemed to have voted FOR the Plan. Consent Forms may be withdrawn at any time prior to the expiration of the Solicitation Period. CONDITIONS TO PLAN OF DISTRIBUTION The Plan of Distribution is subject to certain conditions. In accordance with the terms of the WEL Agreement, the Plan must receive the approval of WEL Participants holding a majority of the percentage interests in WEL. In addition, the Plan is conditioned upon the General Partner's not withdrawing its recommendation of the Plan prior to the distribution of the Wyndham Shares. The General Partner reserves its right to withdraw its recommendation in its own discretion at any time prior to such distribution. See "Plan of Distribution -- Conditions to Plan of Distribution." DISSOLUTION OF WEL In connection with the dissolution of WEL, the General Partner, as the liquidating trustee, will establish a cash reserve in an amount believed to be sufficient to discharge any remaining liabilities of WEL. Cash held by WEL in excess of the reserve will be used to retire WEL Indebtedness in conjunction with the Plan of Distribution. Following the distribution of the Wyndham Shares, the General Partner will apply the cash reserve from time to time in payment of, or provision for, WEL's remaining liabilities. WEL will be terminated upon the earlier of (i) the application of all such cash in payment of, or provision for, such liabilities, or (ii) 24 months following the Plan Effective Date (or such other period as may be deemed appropriate by the General Partner), at which time any cash remaining in WEL will be distributed to WEL Participants. Because the amount of the cash reserve is expected to be relatively small, however, the General Partner does not anticipate that there will be cash remaining for distribution in connection with the dissolution of WEL. If the assets of WEL are insufficient to pay all liabilities of WEL following the distribution of the Wyndham Shares and any cash, then each WEL Participant may be personally liable to creditors of WEL for such liabilities (including any unpaid or unmatured liabilities on the termination of WEL) to the extent of the aggregate of an amount equal to (i) the fair market value of the Wyndham Shares (net of WEL Indebtedness) received by the WEL Participant in connection with the Plan of Distribution and (ii) other distributions received by the WEL Participant from WEL in connection with its dissolution. With respect to the satisfaction of any such remaining liabilities, however, the General Partner has agreed to apply first the Wyndham Shares (net of WEL Indebtedness and taxes) distributed to the General Partner in the Plan of Distribution. Therefore, WEL Participants should not be exposed to any of the foregoing liabilities (if any) until the General Partner's Wyndham Shares (net of WEL Indebtedness and taxes) are exhausted. RELEASE BY WEL PARTICIPANTS As part of the Plan of Distribution, WEL Participants agree to release WEL, other WEL Participants, the General Partner and its officers and directors, and the Company and its officers and directors from all claims and demands of any kind or nature that WEL Participants may have arising from or related to their interest in WEL. This includes, but is not limited to, a release by WEL Participants of all claims concerning (i) the value of their ownership interests in WEL, (ii) the number of Wyndham Shares to which they are entitled in the Plan of Distribution and the methodology used to determine such number, and (iii) the fairness of the Plan of Distribution. This also includes, but is not limited to, a release of all claims concerning the General Partner's past management of the affairs of WEL, including the WEL Investments, and the valuation of the Other Assets. - 5 - <PAGE> 18 SALE OF OTHER WEL ASSETS Other than the Wyndham Shares, WEL's assets as of November 30, 1996 consisted of approximately $215,000 in cash. Prior to the proposed Plan of Distribution, WEL owned 5% limited partnership interests in nine partnerships that own hotels managed by Wyndham, and five partnerships and one corporation that own hotel-related assets (the "Other Assets"). Because of the relatively low aggregate economic value of WEL's interests in these entities, as well as the relative illiquidity of such interests, effective as of October 15, 1996, the General Partner transferred the Other Assets to affiliates of the Company in consideration for the assumption of $619,200 in indebtedness owed by WEL with respect to such assets. The valuation and transfer of the Other Interests was approved by a committee (the "WEL Steering Committee") composed of seven WEL Participants selected by the Company. See " -- Conflicts of Interest." CONFLICTS OF INTEREST The Plan of Distribution was proposed and structured by the General Partner in consultation with the WEL Steering Committee. Trammell S. Crow and James D. Carreker are the sole stockholders and are on the Board of Directors of the General Partner. The General Partner owns a 1% interest in WEL. Consequently, in the event the Plan of Distribution is approved, Messrs. Crow and Carreker will receive indirectly an aggregate of 6,466 Wyndham Shares, which may cause a conflict of interest in the General Partner's recommendation of the Plan of Distribution. In resolving any conflicts of interest, the General Partner must act in accordance with its fiduciary duties to the WEL Participants. The Other Assets were transferred to Mr. Carreker, Leslie V. Bentley, Anne L. Raymond and Stanley M. Koonce (collectively, the "Senior Executive Officers") and entities in which Mr. Trammell S. Crow and Mr. Harlan R. Crow, who also is on the Board of Directors of the General Partner, have an ownership interest. The valuation of the Other Assets was determined according to negotiations between the General Partner on behalf of WEL, and representatives of the Crow Family and the Senior Executive Officers. WEL was represented by Anne L. Raymond, who is an officer of the General Partner and Executive Vice President and Chief Financial Officer of the Company. Ms. Raymond holds no ownership interest in WEL, but received an ownership interest in the Other Assets. WEL also was represented by the WEL Steering Committee. During the course of the negotiations, the WEL Steering Committee proposed the transfer of the Other Assets in consideration for the assumption of $619,200 in debt owed by WEL. This proposal was accepted by representatives of the Senior Executive Officers and Messrs. Trammell S. Crow and Harlan R. Crow. Nevertheless, no independent third party was engaged to value the Other Assets. Furthermore, while Messrs. Trammell S. Crow and Carreker indirectly have ownership interests in WEL, Messrs. Crow and Carreker may not have the same interests in the Plan of Distribution as WEL Participants. There are no assurances that if the purchase of the Other Assets were the result of completely arm's-length negotiations the resulting purchase price would not be higher than the purchase price that was actually paid. TAX CONSEQUENCES OF PLAN OF DISTRIBUTION For a discussion of the federal income tax considerations in connection with the Plan of Distribution, see "Plan of Distribution -- Federal Income Tax Considerations." THE COMPANY Wyndham Hotel Corporation is a national hotel company operating upscale hotels primarily under the Wyndham brand name. Wyndham hotels are located in 26 states, the District of Columbia, Ontario, Canada and on 5 Caribbean islands. Wyndham hotels compete with national hotel chains such as Marriott, Hyatt and Hilton. The Company offers three distinct full service hotel products under the Wyndham brand designed to serve its core upscale customers in urban, suburban and select resort markets. At January 15, 1997, the Company's hotel portfolio consisted of 80 hotels operated by the Company and 2 franchised hotels (the "Portfolio"). The Company's Portfolio consists of 76 upscale hotel properties (which includes four properties under renovation) and 6 extended-stay hotel properties, which the Company began managing in September 1996. - 6 - <PAGE> 19 WYNDHAM BRAND Wyndham has focused on developing a brand name that is nationally recognized in the upscale hotel market, and on earning the loyalty of its core upscale customers: individual business travelers, business groups and other group customers, and leisure travelers. Because Wyndham has operating control over more than 98% of the hotels operated under the Wyndham brand name, it is able to consistently deliver quality products and services throughout its hotel system and generate the marketing programs necessary to maintain the quality associated with the Wyndham name. According to written guest surveys conducted by Wyndham at its hotels during 1995, 91% of Wyndham guests surveyed rated the overall quality of Wyndham hotel products and services good or excellent, and 94% of the guests surveyed indicated that they would return to that Wyndham hotel on their next trip to the same city. The Company believes that growing national recognition of the Wyndham brand, together with the quality and efficiency of Wyndham hotel operations, has facilitated the Company's historical growth and will enhance its ability to realize its future growth objectives. MULTIPLE UPSCALE HOTEL PRODUCTS Wyndham offers three distinct full service hotel products under a single brand name that are tailored to urban, suburban and select resort markets, the primary markets that serve its core upscale customers. o Wyndham Hotels. In urban markets, the Company operates or franchises 22 large upscale hotels under the Wyndham brand ("Wyndham Hotels"), which contain an average of approximately 400 hotel rooms, generally between 15,000 and 250,000 square feet of meeting space, and a full range of guest services and amenities. Wyndham Hotels are targeted principally at business groups and other group customers, as well as individual business travelers. o Wyndham Garden Hotels. In suburban markets, Wyndham operates 40 mid-size hotels under the name "Wyndham Garden"R ("Wyndham Garden Hotels"), which were created by the Company to cater to individual business travelers and small business groups. (The Company operates four additional hotels under brand names other than the Wyndham brand, which are scheduled to become Wyndham Garden Hotels following renovations that are currently underway. Two of these hotels are scheduled to be converted by the first quarter of 1997, and two are scheduled to be converted by the second quarter of 1997.) With guest services, hotel finishings and landscaping comparable to Wyndham Hotels, Wyndham Garden Hotels are designed to provide a guest experience similar to that enjoyed at Wyndham Hotels, but at a price that is competitive in suburban markets. The Company locates Wyndham Garden Hotels primarily near suburban business centers and airports and, where possible, seeks to cluster these hotels in a "hub-and-spoke" distribution pattern around one or more Wyndham Hotels in order to achieve operating and marketing efficiencies and enhance local name recognition. Wyndham Garden Hotels are full service upscale hotels containing between approximately 150 and 225 hotel rooms that offer a package of services and amenities focused on the needs of the business traveler, including generally between 1,500 and 5,000 square feet of meeting space, restaurants that serve three meals a day, exercise rooms, and laundry and room service. o Wyndham Resorts. Wyndham's Portfolio also includes seven resort hotels ("Wyndham Resorts") that are full service destination resorts targeted at upscale leisure and incentive travelers and are located both domestically and on five Caribbean islands. Through Wyndham Resorts, the Company is able to offer guest rewards and other cross-promotional benefits to its domestic customers, thus improving Wyndham's competitiveness and brand loyalty. EXTENDED-STAY HOTEL PRODUCT The Company manages six extended-stay hotel properties, which following planned renovations will be operated under the Homegate Studios & Suites brand name. These hotels are located in Texas and are targeted at - 7 - <PAGE> 20 business travelers, professionals on temporary work assignments, persons between domestic situations and persons relocating or purchasing a home, who often desire accommodations for an extended duration. These midprice hotels contain approximately 125 rooms and feature a fully equipped kitchen, upscale residential-quality finishes and accessories, and separation between cooking, living and sleeping areas. PORTFOLIO OF OWNED, LEASED AND MANAGED HOTELS Wyndham believes that the stability of its Portfolio of owned, leased and managed hotels provides a strong foundation for the implementation of its growth strategy. Wyndham's Portfolio consists of 10 owned hotels, 13 leased hotels, 57 managed hotels and 2 franchised hotels. Of the Company's 13 leased hotels, 12 are leased from an unaffiliated third party pursuant to one or more long-term leases with an initial term of approximately 16 years and renewals for 48 additional years that the Company may elect to exercise. The remaining leased hotel is leased from an unaffiliated third party pursuant to a lease with a remaining term of 22 years. The average remaining term at November 30, 1996 of the Company's 46 management contracts for Wyndham brand hotels was 14 years (including renewals that the Company may elect to exercise), with shorter terms for 2 of the Company's 3 non-branded upscale hotel management contracts. The management contracts relating to the Company's six extended-stay hotel properties have ten-year terms. See "Business -- Management Contracts." The Company believes that the stability of its management contracts is enhanced by the fact that 16 of the upscale hotel management contracts for hotels operated by the Company relate to hotels in which Mr. and Mrs. Trammell Crow, various descendants of Mr. and Mrs. Trammell Crow and various corporations, partnerships, trusts and other entities beneficially owned or controlled by such persons (collectively, the "Crow Family Members") have interests. Crow Family Members own approximately 47.3% of the outstanding Common Stock. Seventeen additional upscale hotel management contracts for hotels managed by the Company relate to hotels owned by entities (together with certain affiliates, "Bedrock") and an institutional investor organized by the Hampstead Group L.L.C. ("Hampstead"), which owns approximately 11.4% of the outstanding Common Stock. The Company's six extended-stay hotel management contracts relate to hotels owned by Homegate Hospitality, Inc., of which affiliates of Crow Family Members, Trammell Crow Residential Company ("Trammell Crow Residential") and Greystar Capital Partners, L.P. ("Greystar") were founders and remain principal stockholders. See "Risk Factors -- Dependence on Management Contracts and on Certain Hotel Owners" and "Principal Stockholders." OPERATING AND FINANCIAL PERFORMANCE The Company seeks to maximize revenues through its comprehensive marketing strategy and the delivery of high quality accommodations and hotel services that result in satisfied, loyal hotel guests. The Company believes that this strategy has resulted in strong operating performance. During 1995, the average occupancy rates, average daily room rates (total room revenues divided by the total number of rooms occupied) ("ADR") and revenue per available room (ADR multiplied by the average occupancy percentage) ("REVPAR") for upscale Portfolio hotels were 69%, $88.79 and $60.96, respectively, compared with an average during this period of 69%, $80.38 and $55.06, respectively, in the upscale segment of the lodging industry. See "Business -- The Company's Hotels." During the nine months ended September 30, 1996 (the "1996 First Nine Months"), average occupancy rates, ADR and REVPAR for upscale Portfolio hotels were 70%, $92.24 and $64.93, respectively, compared with an average during this period of 70%, $85.74 and $60.33, respectively, in the upscale segment of the lodging industry. The Company believes that its experience as a hotel owner makes it a better hotel manager by keeping it focused on controlling each element of operating expenses, which is essential to achieving attractive returns for both the Company's hotels and managed hotels. The gross operating profit margins for the 30 Wyndham brand hotels that have been operated by the Company since January 1, 1993 ("Comparable Hotels") for 1993, 1994 and 1995 were 32%, 34% and 36%, respectively, and for the nine months ended September 30, 1995 (the "1995 First Nine Months") and the 1996 First Nine Months were 36% and %, respectively. In comparison, the average for the upscale full service segment of the lodging industry was 30%, 31% and 33%, respectively, during 1993, 1994 and 1995. (Gross operating profit margin statistics for the lodging industry are not yet available for 1996.) Gross operating profit per available room for Comparable Hotels in 1993, 1994 and 1995 was $9,612, $11,417 and $12,547, respectively, compared to the average for the upscale full service segment of the lodging industry of $8,397, $9,364 and $10,470, respectively, during 1993, - 8 - <PAGE> 21 1994 and 1995. (Gross operating profit per room statistics for the lodging industry also are not yet available for 1996.) For a presentation of certain financial data for the Company's entire hotel Portfolio, see " -- Summary Combined Financial and Other Data" below. See "Business -- Operating Strategy." MARKETING STRATEGY Wyndham has a full complement of sales and marketing capabilities designed to maximize hotel revenues and brand awareness. The Company's direct sales program at the hotel level, implemented by a sales force of almost 500 representatives, is designed to "pull" local business into each hotel and in 1995 accounted for over 60% of room revenues at Wyndham brand hotels. The Company also has a national sales team that focuses on major corporate, group and association accounts and seeks to "push" business into Wyndham hotels on a nationwide basis. Over 35% of Wyndham's hotel room revenues in 1995 were booked through Wyndham's central reservations system, which features a single telephone number for all Wyndham brand hotels (800-WYNDHAM). See "Business -- Customers and Marketing." GROWTH STRATEGY The Company intends to continue focusing on both internal growth--enhancing the revenues, cash flow and profitability of its existing hotels, and external growth--increasing the number of hotels in its Portfolio. The Company believes that the primary factors contributing to internal growth include (i) revenue increases resulting from continuing improvements in the upscale segment of the lodging industry and continuing maturation of 41 hotels added since the beginning of 1995 (including 14 Wyndham Garden Hotels and four additional hotels under renovation that will be converted to the Wyndham Garden brand), and (ii) improved operating margins resulting from operating leverage and Wyndham's continued emphasis on controlling operating expenses. The Company's external growth strategy is to continue to increase the number of Wyndham brand hotels in the upscale full service segment of the lodging industry. In addition, the Company expects to increase the number of management contracts for extended-stay hotel properties in its Portfolio operated under the Homegate Studios and Suites brand name. The near-term focus of the Company's external growth strategy will be to increase the Wyndham Portfolio through additional management contracts, "like new" renovations of acquired properties, other acquisitions and joint ventures. The Company also will consider franchising and hotel construction, depending on market conditions. In addition, the Company expects to continue its evaluation of other new hotel products that may be offered under the Wyndham brand. In executing this growth strategy, the Company will continue to rely on its senior executive officers (James D. Carreker, Leslie V. Bentley, Anne L. Raymond and Stanley M. Koonce) (the "Senior Executive Officers"). See " -- Portfolio Additions." The Company's strategic business relationships with Crow Family Members and Bedrock, which collectively own approximately 58.7% of the Company's Common Stock, have played an important role in the Company's growth to date. The Company believes that these and other business relationships will facilitate future growth by providing potential management contract, acquisition, renovation and development opportunities. See "Business -- Growth Strategy." The Company believes that its ability to achieve both internal and external growth will help attract third party debt and equity capital to help fund the growth of the Company's Portfolio. The Company has substantial capital available for growth from a $100 million revolving credit facility (the "Revolving Credit Facility"). As of November 30, 1996, $35.7 million was available for borrowings under the Revolving Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." PORTFOLIO ADDITIONS Since the Company's initial public offering, the Company has added on a net basis four hotel management contracts to its base of 47 managed upscale hotel properties and acquired a third property that has been managed by the Company since it was built in 1988. This property, the 159 room Wyndham Garden Hotel -- Vinings, was acquired from an unaffiliated third party in May 1996. - 9 - <PAGE> 22 The Company has acquired three additional upscale hotels since its initial public offering. In July 1996, the Company acquired from an unaffiliated third party a 181 room hotel located in the Overland Park, Kansas metropolitan area. This hotel is currently being operated by the Company as a Best Western Hotel during renovations that are underway. The Company expects that this hotel will be converted to a Wyndham Garden Hotel in the first quarter of 1997. In August 1996, the Company acquired from an unaffiliated third party a 230 room hotel located in Dallas, Texas. This hotel is currently being operated by the Company as a Quality Inn Hotel during renovations that are underway. The Company expects that this hotel will be converted to a Wyndham Garden Hotel in the first quarter of 1997. In August 1996, the Company also acquired the Wyndham Bristol Hotel at Toronto Airport. This Wyndham Hotel, which was acquired from an unaffiliated third party, contains 287 rooms and is located in the Toronto, Canada Metropolitan area. In August 1996, a subsidiary of the Company entered into a master management assistance agreement (the "Homegate Agreement") with Homegate Hospitality, Inc. ("Homegate"), a newly formed public company, pursuant to which the Company is to provide to Homegate hotel management, purchasing, marketing and technical services for mid-price extended-stay hotel properties to be developed by Homegate. The hotel properties will be operated under the name Homegate Studios and Suites and are targeted principally at business travelers, professionals on temporary work assignments, persons between domestic situations and persons relocating or purchasing a home, who often desire accommodations for an extended period of time. The Homegate Agreement provides for the Company to manage up to 60 extended-stay properties pursuant to separate 10-year management contracts. Affiliates of Crow Family Members, Trammell Crow Residential and Greystar were founders and remain principal stockholders of Homegate. In addition, James D. Carreker and Harlan R. Crow serve on the board of directors of Homegate. Since its initial public offering, the Company has added six management contracts for extended-stay hotel properties. Following planned renovations, five of these properties will be converted to the Homegate Studios and Suites brand. See "Business." In January 1997, Hospitality Properties Trust, a publicly traded real estate investment trust, purchased the Doubletree Hotel in Salt Lake City from City Hotels, S.A., a Belgian real estate Company, for $44 million. Hospitality Properties Trust leased the property back to a subsidiary of the Company pursuant to a lease with an initial term ending December 31, 2012 plus renewals for 48 additional years that the Company may elect to exercise. The 381 room hotel will be operated as a Wyndham Hotel. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." All statistics set forth in this Prospectus relating to the lodging industry (other than Wyndham statistics) are from, or have been derived from, information published or provided by Smith Travel Research, an industry research organization. Smith Travel Research has not provided any form of consultation, advice or counsel regarding any aspect of the proposed Plan of Distribution, and Smith Travel Research is in no way associated with the proposed Plan of Distribution. - 10 - <PAGE> 23 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING, MARGIN AND RATIO DATA) The following table sets forth summary financial data for the Company. The table also sets forth summary pro forma financial data for the Company as if the Company's initial public equity offering and the issuance of the Notes and the other transactions described under "Pro Forma Consolidated Financial Data" had occurred at the beginning of 1995. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------------------- ------------------------------------ (UNAUDITED) PRO PRO FORMA FORMA 1993 1994 1995 1995 1995 1996 1996 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> Portfolio Hotel Revenues(1) $ 345,733 $ 394,949 $ 534,204 N/A $ 379,625 $ 489,639 N/A Statement of Income Data: Revenues: Hotel Revenues $ 43,921 $ 51,799 $ 54,673 $ 132,001 $ 41,685 $ 71,302 $ 105,461 Management Fees 10,731 13,302 16,921 14,274 11,909 16,546 15,426 Service Fees 2,127 2,904 4,120 3,391 2,823 2,961 2,616 Reimbursements 4,164 8,004 10,836 9,095 7,735 10,812 10,341 Other income 334 257 1,340 1,500 1,349 320 320 --------- ---------- ---------- ---------- ---------- ---------- ---------- Total Company Revenues 61,277 76,266 87,890 160,261 65,501 101,941 134,164 Operating costs and expenses 54,183 63,929 73,264 139,574 53,474 84,444 113,058 Operating income 7,094 12,337 14,626 20,687 12,027 17,497 21,106 Interest Expense, net (7,075) (7,526) (8,021) (13,278) (6,167) (6,944) (8,683) Income before income taxes and extraordinary item 1,654 6,265 7,949 8,193 6,901 11,172 13,013 Income taxes benefit(2) -- -- -- -- -- 10,388 -- Pro forma income taxes(2) -- -- -- (3,235) -- -- (5,140) Net income 1,654 6,265 7,949 4,958 6,901 20,429 7,873 Historical net income as adjusted for pro forma income tax 4,809 4,175 N/A Historical net income as adjusted per common share(3) .24 .21 1.02 Common shares outstanding(3) 20,018 20,018 20,018 Pro forma net income per share -- -- -- .25 -- -- .39 Pro forma common shares outstanding -- -- -- 20,018 -- -- 20,018 Portfolio Hotel Operating Data:(4) Number of hotels(5) 47 53 66 64 74 Number of rooms(5) 12,116 12,866 17,604 17,186 18,601 Occupancy percentage(6) 65% 68% 69% 71% 70% ADR(7) $ 80.60 $ 86.13 $ 88.79 $ 88.50 $ 92.24 REVPAR(8) $ 52.45 $ 58.84 $ 60.96 $ 62.65 $ 64.93 Gross operating profit margin(9) 26% 30% 29% 30% 32% Food and beverage margin(10) 25% 25% 26% 24% 24% Gross operating profit per available room(11) $ 8,254 $ 10,628 $ 10,978 $ 8,225 $ 9,417 Comparable Hotel Operating Data:(12) Number of hotels 30 30 30 30 30 Number of rooms 7,334 7,334 7,334 7,334 7,334 Occupancy percentage(6) 67% 70% 72% 74% 73% ADR(7) $ 76.39 $ 80.16 $ 84.38 $ 84.18 $ 91.96 REVPAR (8) $ 51.31 $ 56.09 $ 60.99 $ 61.94 $ 66.85 Gross operating profit margin(9) 32% 34% 36% 36% 37% Food and beverage margin(10) 29% 31% 31% 30% 28% </TABLE> - 11 - <PAGE> 24 <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- ------------------------------------ (UNAUDITED) PRO PRO FORMA FORMA 1993 1994 1995 1995 1995 1996 1996 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> Gross operating profit per available room(11) $ 9,612 $ 11,417 $ 12,547 $ 9,379 $ 10,306 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1995 1996 ACTUAL ACTUAL ------ ------ <S> <C> <C> Balance Sheet Data: Cash and cash equivalents $ 4,160 $ 20,147 Total assets 133,403 240,091 Long-term obligations including current portion 90,978 130,664 Total partners' capital and stockholders' equity 17,557 71,916 </TABLE> (1) Represents unaudited revenues of hotels owned, leased or managed by the Company, as distinguished from Total Company Revenues. (2) For the years 1993 through 1995 and the first five months of 1996, Wyndham made no provision for income taxes because the combined company was a combination of partnerships, S corporations and a nontaxable Bermuda corporation that are not subject to U.S. federal income taxes. Since the Company's formation in late May 1996, income taxes have been provided. The provision for income taxes to arrive at pro forma net income assumes a combined federal and state effective income tax rate of 39.5% computed as follows: <TABLE> <S> <C> Federal income tax rate 35.0% Weighted average state income tax rate (net of federal benefit) 4.5% ---- 39.5% </TABLE> The income tax benefit reflects the recognition of deferred income tax associated with the change in tax status of the Company that occurred in connection with the Company's initial public offering in May 1996. (3) Historical net income as adjusted per common share is based on historical net income as adjusted for pro forma income tax divided by the number of shares issued in the initial public offering of the Company as if the Company had been a corporation prior to its formation in May 1996. (4) Includes hotels owned, leased, managed or franchised during the periods presented, except data for gross operating profit margin, food and beverage margin and gross operating profit per available room excludes the Company's franchised property, for which the information is not available. The number of hotels listed in 1994 does not include 7 hotels for which the Company had signed management contracts that were closed for renovations or construction in that period. Occupancy, ADR, REVPAR, margin data and gross operating profit per available room exclude extended-stay hotels. Annual changes in occupancy percentage, ADR and REVPAR and fluctuations in gross operating profit margins for the Company's Portfolio of hotels have been affected by the addition of newly opened or renovated Wyndham brand hotels, which typically begin operations with lower occupancy rates, ADR, REVPAR and margins than mature hotels and improve over time as the hotels benefit from Wyndham's operating standards and become integrated into Wyndham's sales and marketing programs and central reservations system. There can be no assurance that the Company's hotels opened or renovated subsequent to January 1, 1993 will achieve occupancy rates, ADR, REVPAR or operating results comparable to the Comparable Hotels. (5) At end of period. - 12 - <PAGE> 25 (6) Occupancy percentage represents total rooms occupied divided by total available rooms. Total available rooms represents the number of rooms available for rent multiplied by the number of days in the reported period. (7) ADR represents total room revenues divided by the total number of rooms occupied. (8) REVPAR represents total room revenues divided by total available rooms. (9) Gross operating profit margin represents gross operating profit as a percentage of total revenues. "Gross operating profit" represents gross revenues less department expenses and undistributed operating expenses. Gross operating profit margins are included herein because management uses them as a measure of hotel operating performance and because management believes that these items are useful in making industry comparisons. (10) Food and beverage margin represents food and beverage operating profit as a percentage of food and beverage revenues. (11) Gross operating profit per available room represents gross operating profit divided by total available rooms for the period. Gross operating profit per available room for Portfolio Hotel Operating Data has been calculated by dividing the gross operating profit for the hotels operated by the Company during the entire period presented by the total available rooms for such hotels. (12) The Company has chosen a Comparable Hotel data set based on Wyndham brand hotel properties operated by the Company since January 1, 1993 because the Company believes that these 30 hotels have been operated by the Company for a sufficient period of time to provide meaningful period-to-period comparisons and that these hotels fully reflect the Company's operating capabilities. - 13 - <PAGE> 26
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001010655_hte-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001010655_hte-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f29a3972618c75b2df91d9c923c7c92fe5280a9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001010655_hte-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION DISCUSSED UNDER "RISK FACTORS." EXCEPT AS SET FORTH IN THE CONSOLIDATED FINANCIAL STATEMENTS AND UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THE PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER- ALLOTMENT OPTION, AND (II) GIVES EFFECT TO A RECAPITALIZATION AND RELATED 53-FOR-ONE SPLIT AS DESCRIBED IN "-THE RECAPITALIZATION." THE COMPANY CHANGED ITS FISCAL YEAR END FROM MARCH 31 TO DECEMBER 31 EFFECTIVE DECEMBER 31, 1996. THE COMPANY HTE develops, markets, implements and supports fully-integrated enterprise-wide software applications designed specifically for public sector organizations, including state, county and city governments, other municipal agencies and publicly owned utilities. For the past 15 years, the Company has focused its applications, business and marketing exclusively on the public sector and has established itself as a market leader. HTE's fully-integrated enterprise-wide software applications are designed to enable public sector organizations to improve delivery of services, reduce costs, enhance revenue collection, operate successfully within budgetary constraints, comply with government regulations and improve overall operating efficiencies. The Company's Total Enterprise Solution currently includes 35 applications addressing four functional areas: financial management, community services, public safety and utility management. The Company's products operate as integrated suites of applications or as stand-alone applications and function with a variety of computer and network hardware, operating systems, database software and desktop applications provided by other vendors. The public sector marketplace is composed of state, county and city governments, other municipal agencies and publicly owned utilities. Like many private sector businesses, public sector organizations are facing increasing pressure to improve delivery of goods and services while striving to reduce costs and generate additional revenue. In response, public sector organizations are employing information technology solutions in an effort to streamline and automate administrative intensive processes, improve timeliness and quality of services and generally enhance operating efficiencies. In 1996, state and local government agencies spent approximately $34.5 billion on information technology and related products according to G2 Research, Inc. This total included approximately $5.0 billion for software, $6.7 billion for external services and $7.4 billion for hardware. Approximately $15.4 billion was spent on internal services such as in-house MIS departments. In the 1970s and 1980s, local governments and utility companies began to use computerized operations management systems principally based on mainframe computers and later based on minicomputers. These legacy systems typically were developed on a custom basis using proprietary operating systems and database software. As a result, these systems are often difficult and expensive to maintain, update and change. In recent years, a number of software providers have offered "point solutions" that focus on a single function and are not interoperable with other software applications. Additionally, certain vendors offer generalized software applications that frequently are not specifically tailored to the nuances of the public market and do not enable information sharing across multiple departments. Many public sector organizations currently are faced with a pressing need to integrate mission-critical functions and databases by replacing stand-alone applications and customized software with solutions that manage the flow of information across the enterprise. HTE offers fully-integrated enterprise-wide software solutions designed to automate and integrate the operations of public sector organizations. The applications in the Company's Financial Management System are based on government fund accounting and provide integrated financial management functions including the general ledger, budgeting, purchasing and asset management. The Company's Community Services System provides a centralized land and location database solution which expedites access to property data, building licenses and permits, planning and zoning processes and tax and billing collections. Public Safety applications offer police, fire and rescue entities and other emergency personnel a complete public safety solution through an integrated suite of applications which provide immediate field access to vital information. The Company's Utility Systems facilitate electric, water and gas utility services by automating tasks such as customer location maintenance, meter reading maintenance, bill processing, delinquencies, penalties, refunds and write-offs. All of the Company's applications are designed to work together seamlessly and allow users to share functions and eliminate redundant data and repetitive tasks. In addition to offering a comprehensive suite of applications, the Company provides maintenance services and a complete range of professional services, including system planning and implementation, project management, training and education, and custom applications analysis, design and development. The Company markets and sells its products through a direct sales force. The Company's focus on the public sector has allowed it to develop significant expertise regarding public sector organizations and to design feature-rich solutions that address the specific needs of these organizations. As of December 31, 1996, the Company had over 1,000 customers in the U.S. and Canada, including installations in all 50 U.S. states. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company .......................................... 1,950,000 shares The Selling Shareholders .............................. 550,000 shares Common Stock to be outstanding after this offering ...... 7,313,651 shares(1) Use of Proceeds .......................................... Repayment of indebtedness, working capital and other general corporate purposes and potential acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol .................. HTEI </TABLE> - ---------------- (1) Excludes 620,100 shares of Common Stock subject to issuance pursuant to options outstanding as of March 31, 1997, including options for 567,100 shares granted under the Company's 1997 Executive Incentive Compensation Plan. THE RECAPITALIZATION Immediately prior to the effective date of this offering, the Company will complete a recapitalization (the "Recapitalization") pursuant to which each outstanding share of the Company's currently authorized Class A common stock, mandatorily redeemable Class C common stock and convertible mandatorily redeemable preferred stock ("Redeemable Preferred Stock") will automatically be converted into 53 shares of a newly authorized class of Common Stock. As part of the Recapitalization, the Company will pay in cash all accrued dividends on the Redeemable Preferred Stock. See Notes 6, 7 and 16 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ---------------------------------------------------- 1993 1994 1995 1996 -------------- -------------- ---------- ---------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues ..................... $ 11,315 $ 14,584 $19,706 $30,200 Income (loss) from operations ...... 17 (1,019) 955 637 Net income (loss) .................. (189) (1,045) 712 299 Pro forma net income per common and common equivalent share(1) ............... Pro forma weighted average number of common and common equivalent shares outstanding(1) ..................... <CAPTION> NINE MONTHS ENDED THREE MONTHS ENDED DECEMBER 31, MARCH 31, ------------------------ -------------------- 1995 1996 1996 1997 ------------- ---------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues ..................... $ 20,673 $28,688 $9,527 $11,947 Income (loss) from operations ...... (1,393) 1,606 2,030 1,601 Net income (loss) .................. (858) 834 1,157 899 Pro forma net income per common and common equivalent share(1) ............... $ 0.15 $ 0.16 Pro forma weighted average number of common and common equivalent shares outstanding(1) ..................... 5,481 5,481 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ----------------------------------------------------- PRO FORMA FOR ACTUAL RECAPITALIZATION(2) AS ADJUSTED(3) ------------- ---------------------- ---------------- (UNAUDITED) <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents .................................... $ 855 $ 366 $20,363 Working capital ............................................. 675 186 21,008 Total assets ................................................ 24,234 23,745 43,742 Notes payable to related parties, less current portion ...... 240 240 - Total stockholders' equity (deficit) ........................ (1,375) 4,202 25,264 </TABLE> - --------- (1) Pro forma net income per common and common equivalent share and the pro forma weighted average number of common and common equivalent shares outstanding reflects the Company's historical data as adjusted for the Recapitalization and the options and stock issued during the period commencing 12 months prior to the initial filing of the registration statement for this offering. For purposes of the pro forma net income (loss) per common and common equivalent share, the treasury stock method has been used assuming an initial offering price of $12.00 per share. (2) Gives retroactive effect to the Recapitalization and related payment of accrued dividends. See "-The Recapitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001010753_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001010753_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..45a10fbe54c43df8df3537f6d05c10269f7e507a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001010753_first_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. A LISTING OF THE PAGES ON WHICH SUCH TERMS ARE DEFINED IS FOUND IN THE "INDEX OF TERMS" BEGINNING ON PAGE 96. <TABLE> <S> <C> TYPE OF SECURITIES................ Class A 6.40% Asset Backed Certificates, Series 1997-1 (the "Class A Certificates") and Class B 6.55% Asset Backed Certificates, Series 1997-1 (the "Class B Certificates," and together with the Class A Certificates, the "Certificates"). OVERVIEW OF THE TRANSACTION....... The First Bank Corporate Card Master Trust (the "Trust") was formed for the purpose of holding the Receivables and issuing the Certificates and other similar securities. Each Certificate will represent the right to receive a portion of the collections on the Receivables. Such collections will be used to pay interest and principal due on such Certificate on the applicable payment date. The Class A Certificates will also have the benefits of certain excess collections and amounts available from the Overconcentration Account, and the subordination of the Class B Certificates and the Collateral Investor Interest. The Class B Certificates will also have the benefits of certain excess collections and amounts available from the Overconcentration Account not needed to cover shortfalls in respect of the Class A Certificates, and the subordination of the Collateral Investor Interest not used for the benefit of the Class A Certificates. The Class B Certificates therefore bear a greater risk of loss of principal and of shortfalls in payments of interest than the Class A Certificates. Accordingly, the Class A Certificates will receive a higher credit rating than the Class B Certificates. See "Summary--Certificate Rating." For a description of the subordination of the Class B Certificates, see "Summary--Subordination of the Class B Certificates and the Collateral Investor Interest" and "Risk Factors--Effect of Subordination." Both the Class A Certificates and the Class B Certificates are subject to repayment earlier than expected if certain events called Early Amortization Events occur. See "Description of the Certificates--Early Amortization Events." Both the Class A Certificates and the Class B Certificates are also subject to potential delayed repayment if the payment rate on the Receivables decreases. See "Risk Factors--Timing of Payments and Maturity" and "Maturity Considerations." In no event, however, will principal be paid on the Class B Certificates prior to the payment in full of the Class A Invested Amount. For a discussion of other risk factors applicable to the Certificates, see "Risk Factors." </TABLE> <TABLE> <S> <C> TRUST............................. The Trust will be governed by a pooling and servicing agreement (the "Agreement"), among First Bank of South Dakota (National Association) ("First Bank" or the "Bank"), as transferor, FBS Card Services, Inc., as servicer, and Citibank, N.A., as trustee (the "Trustee"). The Trust was created as a master trust under which one or more series (each, a "Series") may be issued pursuant to a series supplement to the Agreement (each, a "Series Supplement"). The Certificates will be issued pursuant to the Agreement, as supplemented by the Series Supplement relating to the Certificates (the "Series 1997-1 Supplement") (the term "Agreement," unless the context requires otherwise, refers to the Agreement as supplemented by the Series 1997-1 Supplement). An interest referred to as the "Collateral Investor Interest" and deemed to be a class of investor certificates will also be issued as part of Series 1997-1 and will be subordinated to the Certificates as described herein. The Collateral Investor Interest is not offered hereby. As used in this Prospectus, the term "Certificateholders" refers to holders of the Certificates, the term "Class A Certificateholders" refers to holders of the Class A Certificates, the term "Class B Certificateholders" refers to holders of the Class B Certificates, the term "Collateral Interest Holder" refers to the holder of the Collateral Investor Interest and the term "Series 1997-1" refers to the Series issued pursuant to the Agreement, as supplemented by the Series 1997-1 Supplement. The Collateral Interest Holder will not be an affiliate of First Bank. Series 1997-1 is the first Series to be issued by the Trust. Additional Series consisting of one or more classes of certificates (each, a "Class") may be issued from time to time by the Trust. THE TRANSFEROR.................... First Bank of South Dakota (National Association) (the "Transferor"), a national banking association organized under the laws of the United States and a wholly-owned subsidiary of First Bank System, Inc., a Delaware corporation. The principal offices of the Transferor are located at 141 North Main Avenue, Sioux Falls, South Dakota 57117, and its telephone number is (605) 339-8600. THE SERVICER...................... FBS Card Services, Inc. (the "Servicer"), a Minnesota corporation, and a wholly-owned subsidiary of First Bank System, Inc. THE TRUSTEE....................... Citibank, N.A., a national banking association. TRUST ASSETS...................... The assets of the Trust will include (i) receivables (the "Receivables") arising under certain VISA-Registered Trademark-* charge card accounts (the "Accounts"), including any Additional Accounts follow- ing their designation, originated under the Bank's Corporate Card or Purchasing Card programs and selected from the portfolio of VISA accounts in such programs owned by the </TABLE> - --------- * VISA-Registered Trademark- is a federally registered servicemark of VISA USA, Inc. <TABLE> <S> <C> Bank (the "Bank Portfolio"), (ii) all monies due in payment of the Receivables (including recoveries on charged-off Receivables and amounts, if any, paid by corporate clients as co-obligors under the Corporate Card program), (iii) all proceeds of the Receivables, (iv) the right to receive certain amounts of Net Interchange allocable to the Certificates (which right may not be afforded to other Series issued by the Trust), (v) all monies on deposit in certain bank accounts of the Trust (other than investment earnings on such amounts, except as otherwise specified herein) and (vi) any Enhancement with respect to any particular Series or Class as described herein. The Certificateholders will not be entitled to the benefits of any Enhancement issued with respect to any Series other than Series 1997-1, and the holders of certificates of other Series will not be entitled to the benefits of any Enhancement issued with respect to Series 1997-1. On February 27, 1997 (the "Closing Date"), the Transferor will convey to the Trustee for the benefit of the Trust all Receivables existing under certain Accounts that will be selected from the Bank Portfolio based on criteria provided in the Agreement as applied on November 30, 1996 (the "Cut-Off Date") and will convey to the Trustee all Receivables arising under the Accounts from time to time thereafter until the termination of the Trust. In addition, pursuant to the Agreement, the Transferor may or may be obligated to (subject to certain limitations and conditions) designate Additional Accounts for inclusion in the Trust. See "The Receivables" and "Description of the Certificates--Addition of Accounts." INTEREST AND PRINCIPAL............ Each of the Certificates offered hereby represents the right to receive certain payments from the assets of the Trust. The Trust's assets will be allocated among the Class A Certificateholders (the "Class A Investor Interest"), the Class B Certificateholders (the "Class B Investor Interest"), the Collateral Interest Holder (the "Collateral Investor Interest," and together with the Class A Investor Interest and the Class B Investor Interest, the "Investor Interest"), the holders of other undivided interests in the Trust issued pursuant to the Agreement and applicable Series Supplements, and the Transferor (the "Transferor Interest"), as described below. The Collateral Investor Interest constitutes Enhancement for the Certificates. Allocations will be made to the Collateral Investor Interest, and the Collateral Interest Holder will have voting and certain other rights, as if the Collateral Investor Interest were a subordinated Class of Certificates. The Transferor Interest will represent the right to the assets of the Trust not allocated to the Class A Investor Interest, the Class B Investor Interest, the Collateral Investor Interest or the holders of other undivided interests in the Trust. The principal balance of the Transferor Interest will fluctuate as the amount of Receivables in the Trust changes from time to time. </TABLE> <TABLE> <S> <C> Each Class A Certificate represents the right to receive from the assets of the Trust allocated to the Class A Certificates payments of (i) interest at the rate of 6.40% per annum (the "Class A Certificate Rate"), accruing from the Closing Date and (ii) principal on the February 2002 Distribution Date (the "Class A Expected Final Payment Date") or, under certain limited circumstances, during the Early Amortization Period, funded from a percentage of the payments received with respect to the Receivables and certain other funds (including, under the circumstances specified herein, funds, if any, on deposit in the Principal Funding Account), as described herein. Each Class B Certificate represents the right to receive from the assets of the Trust allocated to the Class B Certificates payments of (i) interest at the rate of 6.55% per annum (the "Class B Certificate Rate"), accruing from the Closing Date and (ii) principal on the February 2002 Distribution Date (the "Class B Expected Final Payment Date") or, under certain limited circumstances, during the Early Amortization Period, funded from a percentage of the payments received with respect to the Receivables and certain other funds, as described herein. No principal will be distributed on the Class B Certificates until the Class A Invested Amount has been paid in full. See "Description of the Certificates--Subordination of the Class B Certificates and the Collateral Investor Interest." The interest in the Trust represented by the Class A Certificates (the "Class A Invested Amount") initially will equal $394,800,000 (the "Class A Initial Invested Amount") and will decline as principal with respect to the Class A Certificates is paid to the Class A Certificateholders or as Investor Charge-Offs allocable to the Class A Certificates occur. The interest in the Trust represented by the Class B Certificates (the "Class B Invested Amount") initially will equal $6,300,000 (the "Class B Initial Invested Amount") and will decline as principal with respect to the Class B Certificates is paid to the Class B Certificateholders, as Principal Collections allocable to the Class B Certificates are reallocated for the benefit of the Class A Certificates, as Investor Charge-Offs allocable to the Class B Certificates occur or as certain Investor Default Amounts otherwise allocable to the Class A Certificates are allocated to the Class B Certificates when the Collateral Invested Amount is zero. The interest in the Trust represented by the Collateral Investor Interest (the "Collateral Invested Amount" and, together with the Class A Invested Amount and the Class B Invested Amount, the "Invested Amount") initially will equal $18,900,000 (the "Collateral Initial Invested Amount" and, together with the Class A Initial Invested Amount and the </TABLE> <TABLE> <S> <C> Class B Initial Invested Amount, the "Initial Invested Amount") and will decline as principal with respect to the Collateral Investor Interest is paid to the Collateral Interest Holder, as Principal Collections allocable to the Collateral Investor Interest are reallocated for the benefit of the Class A Certificates and the Class B Certificates, as Investor Charge-Offs allocable to the Collateral Investor Interest occur or as certain Investor Default Amounts otherwise allocable to the Class A Certificates and the Class B Certificates are allocated to the Collateral Investor Interest. During the Accumulation Period, for the sole purpose of allocating Yield Collections and the amount of Defaulted Receivables with respect to each Collection Period, an amount equal to the amount on deposit in the Principal Funding Account from time to time will be subtracted from the Class A Invested Amount (as so reduced, the "Class A Adjusted Invested Amount" and together with the Class B Invested Amount and the Collateral Invested Amount, the "Adjusted Invested Amount"). The Transferor Interest will initially be held by the Transferor. The final payment of principal and interest on the Certificates will be made no later than the February 2003 Distribution Date. Series 1997-1 will terminate on the earliest to occur of (a) the Distribution Date on which the Invested Amount is paid in full, (b) the February 2003 Distribution Date or (c) the Trust Termination Date (such earliest to occur, the "Series 1997-1 Termination Date"). After the Series 1997-1 Termination Date, the Trust will have no further obligation to pay principal or interest on the Certificates. The Class A Certificates, the Class B Certificates and the Collateral Investor Interest will each include the right to receive (but only to the extent needed to make required payments under the Agreement) varying percentages of Yield Collections and Principal Collections and will be allocated varying percentages of the amount of Defaulted Receivables during each calendar month (each, a "Collection Period"). Yield Collections and the amount of Defaulted Receivables at all times, and Principal Collections during the Revolving Period, will be allocated to the Class A Investor Interest, the Class B Investor Interest and the Collateral Investor Interest based on the Class A Floating Percentage, the Class B Floating Percentage and the Collateral Floating Percentage, respectively, applicable during the related Collection Period. Principal Collections during the Accumulation Period and the Early Amortization Period will be allocated to the Class A Investor Interest, the Class B Investor Interest and the Collateral Investor Interest based on the Class A Fixed Percentage, the Class B </TABLE> <TABLE> <S> <C> Fixed Percentage and the Collateral Fixed Percentage, respectively. See "Description of the Certificates--Allocation Percentages" and "--Early Amortization Events." RECEIVABLES....................... The Receivables arise in Accounts that have been selected from the Bank Portfolio based on criteria provided in the Agreement as applied on the Cut-Off Date and, with respect to certain Additional Accounts, if any, on subsequent dates. The Receivables consist of amounts charged by cardholders for goods and services and cash advances plus the related amounts billed to the Accounts in respect of cash advance fees, annual cardholder fees, late fees, and other fees and charges. In addition, certain amounts of Net Interchange attributed to cardholder charges for goods and services in the Accounts will be allocated to the Certificates and treated as Yield Collections. See "First Bank's Corporate Card and Purchasing Card Programs--Interchange." The aggregate amount of Receivables in the Accounts as of the end of the day on the Cut-Off Date was $555,691,966.42. During the term of the Trust, all new Receivables arising in the Accounts will be transferred automatically to the Trust by the Transferor. The total amount of Receivables in the Trust will fluctuate from day to day, because the amount of new Receivables arising in the Accounts and the amount of payments collected on existing Receivables usually differ each day. The Trustee is not required nor expected to make any initial or periodic general examination of the Receivables or any records relating to the Receivables for the presence or absence of defects, compliance with the Transferor's representations and warranties or for any other purpose. Pursuant to the Agreement, the Transferor will have the right (subject to certain limitations and conditions), and in some circumstances, will be obligated, to designate additional eligible VISA charge card accounts originated under the Bank's Corporate Card or Purchasing Card programs (the "Additional Accounts") and to convey to the Trust all of the Receivables in the Additional Accounts, whether such Receivables are then existing or thereafter created. In addition, the Transferor will have the right (subject to certain limitations and conditions) to designate certain Accounts and to accept the reconveyance of all the Receivables in such Accounts (the "Removed Accounts"). See "The Receivables" and "Description of the Certificates--Addition of Accounts" and "--Removal of Accounts." YIELD FACTOR; COLLECTIONS......... The Receivables originated under the Accounts are not subject to a monthly finance charge, and therefore, a portion of the collections on the Receivables received during the preceding Collection Period will be treated as "yield" to the Trust. The "Yield Collections" for any Collection Period will equal the </TABLE> <TABLE> <S> <C> sum of (i) the aggregate amount of collections on the Receivables during such Collection Period (other than recoveries on charged-off Receivables and Net Interchange, if any) multiplied by the Yield Factor, (ii) certain amounts of Net Interchange attributed to cardholder charges in the Accounts with respect to such Collection Period and (iii) any earnings (net of losses and investment expenses) on funds on deposit in the Excess Funding Account during such Collection Period. The remainder of the aggregate amount of collections on the Receivables during any Collection Period will be treated as "Principal Collections." The "Yield Factor" of the Trust is equal to 2.00%, and is a means of allocating collections on the Receivables to the payment of interest and principal on the Certificates which does not change the aggregate cash flow available to the Trust. "Net Interchange" consists of certain fees received by the Transferor from VISA as partial compensation for taking credit risk, absorbing fraud losses and funding receivables for a limited period prior to initial billing, net of VISA dues and rebates to corporate customers and travel agencies. See "First Bank's Corporate Card and Purchasing Card Programs--Interchange." EXCHANGES......................... The Agreement authorizes the Trustee to issue two types of certificates: (i) one or more Series of certificates that will be transferable and have the characteristics described below and (ii) a certificate that evidences the Transferor Interest (the "Exchangeable Transferor Certificate"), which initially will be held by the Transferor and which generally will be retained by the Transferor. Pursuant to any one or more Series Supple- ments to the Agreement, the holder of the Exchangeable Transferor Certificate may tender the Exchangeable Transferor Certificate or, if provided in the relevant Series Supplement, 100% of the certificates representing any Series issued by the Trust and the Exchangeable Transferor Certificate, to the Trustee in exchange for one or more new Series and a reissued Exchangeable Transferor Certificate (any such tender, an "Exchange"). Any such Series may be offered to the public or other investors under a prospectus or other disclosure document (a "Disclosure Document") in transactions either registered under the Securities Act of 1933, as amended (the "Securities Act"), or exempt from registration thereunder, directly or through one or more underwriters or placement agents, in fixed-price offerings or in negotiated transactions or otherwise. The Transferor's ability to make an Exchange is subject to certain conditions precedent, including the requirement that each Rating Agency that has rated any outstanding Series confirm that the Exchange will not result in the reduction or withdrawal of its rating on any outstanding Series. See "Description of the Certificates--Exchanges." </TABLE> <TABLE> <S> <C> DENOMINATIONS..................... Beneficial interests in the Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. REGISTRATION OF CERTIFICATES...... The Certificates initially will be represented by Certificates registered in the name of Cede, as the nominee of DTC. No Certificate Owner will be entitled to receive a Definitive Certificate, except under the limited circumstances described herein. Certificateholders may elect to hold their Certificates through DTC (in the United States) or Cedel or Euroclear (in Europe). Transfers will be made in accordance with the rules and operating procedures described herein. See "Description of the Certificates--Definitive Certificates." SERVICING FEE..................... The Servicer will receive a monthly fee as servicing compensation from the Trust equal to one-twelfth of the product of 2.0% per annum and the Adjusted Invested Amount as of the last day of the second preceding Collection Period (the "Monthly Investor Servicing Fee"). So long as FBS Card Services, Inc., Citibank, N.A. or any of their respective affiliates is acting as Servicer under the Agreement, a portion of the Monthly Investor Servicing Fee equal to one-twelfth of the product of 1.0% per annum and the Adjusted Invested Amount as of the last day of the second preceding Collection Period will be payable solely from Net Interchange. See "Description of the Certificates--Servicing Compensation and Payment of Expenses." INTEREST PAYMENTS................. Interest will accrue on the unpaid principal balance of the Class A Certificates at a per annum rate equal to the Class A Certificate Rate and will accrue on the unpaid principal balance of the Class B Certificates at a per annum rate equal to the Class B Certificate Rate. Except as otherwise provided herein, interest will be paid to Certificateholders semi-annually on February 15 and August 15 (or, if any such day is not a business day, on the next succeeding business day) and on the Class A Expected Final Payment Date with respect to the Class A Certificates and on the Class B Expected Final Payment Date with respect to the Class B Certificates (each, an "Interest Payment Date"). If an Early Amortization Period commences, then thereafter interest will be distributed to the Certificateholders monthly on each Special Payment Date. Interest for any Interest Payment Date or Special Payment Date due but not paid on such Interest Payment Date or Special Payment Date will be payable on the next succeeding Interest Payment Date or Special Payment Date, together with additional interest on such amount at the applicable Certificate Rate. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest payments on each Interest Payment Date or Special Payment Date will be funded from the portion of Yield </TABLE> <TABLE> <S> <C> Collections collected during the Collection Period or Collection Periods since the later of the Closing Date or the last date on which a payment of interest on the Certificates was made and certain other available amounts (a) with respect to the Class A Certificates, allocated to the Class A Investor Interest, and, if necessary, from Excess Spread, Shared Excess Yield Collections, amounts available from the Overconcentra- tion Account and Reallocated Principal Collections (to the extent available), (b) with respect to the Class B Certificates, allocated to the Class B Investor Interest and, if necessary, from Excess Spread, Shared Excess Yield Collections, amounts available from the Overconcentration Account and Reallocated Collateral Principal Collections (to the extent available) and (c) with respect to the Collateral Investor Interest, from Excess Spread, Shared Excess Yield Collections and amounts available from the Overconcentration Account. See "Description of the Certificates--Overconcentration Account," "--Reallocation of Cash Flows" and "--Application of Collections--Payment of Interest, Fees and Other Items." If payments of interest on the Certificates occur less frequently than monthly, amounts allocable to interest on the Certificates will be deposited in one or more trust accounts and will generally be invested in certain Eligible Investments pending distribution to Certificateholders. See "Description of the Certificates--Interest Payments." PRINCIPAL PAYMENTS................ Principal on the Class A Certificates is scheduled to be paid on the February 2002 Distribution Date (the "Class A Expected Final Payment Date"). Principal on the Class B Certificates is scheduled to be paid on the February 2002 Distribution Date (the "Class B Expected Final Payment Date"). No principal will be distributed on the Class B Certificates until the Class A Invested Amount has been paid in full. Distributions of princi- pal with respect to the Class A Certificates or the Class B Certificates may commence earlier than the Expected Final Payment Date for such Class, and the final distribution of principal with respect to the Class A Certificates or the Class B Certificates may be made later than the Expected Final Payment Date for such Class, if an Early Amortization Event occurs and the Early Amortization Period commences or under certain other circumstances described herein. See "Description of the Certificates--Principal Payments" and "Maturity Considerations." RECORD DATE....................... The last business day of the month immediately preceding an Interest Payment Date or Special Payment Date. REVOLVING PERIOD.................. No principal will be payable to the Class A Certificateholders until the Class A Expected Final Payment Date or, upon the occurrence of an Early Amortization Event as described herein, the first Special Payment Date with respect to the </TABLE> <TABLE> <S> <C> Early Amortization Period. No principal will be payable to the Class B Certificateholders until the Class A Invested Amount has been paid in full. For the period beginning on the Closing Date and ending with the earlier of the commencement of the Accumulation Period or the Early Amortization Period (the "Revolving Period"), Principal Collections otherwise allocable to the Certificateholders and the Collateral Interest Holder (other than Principal Collections allocated to the Class B Certificateholders and the Collateral Interest Holder that are used to pay any deficiency in the Class A Required Amount or the Class B Required Amount ("Reallocated Principal Collec- tions")) will, subject to certain limitations, be treated as Shared Principal Collections and applied to cover principal payments due to or for the benefit of certificateholders of other Series, if so specified in the Series Supplements for such other Series, or, subject to certain limitations, paid to the Transferor as holder of the Exchangeable Transferor Certificate or deposited into the Excess Funding Account or, in certain circumstances, be paid to the Collateral Interest Holder. See "Description of the Certificates--Early Amortization Events" for a discussion of the events which might lead to the termination of the Revolving Period prior to the com- mencement of the Accumulation Period. ACCUMULATION PERIOD............... Unless an Early Amortization Event has occurred, the Revolving Period with respect to the Certificates is scheduled to end and the principal accumulation period with respect to the Certificates (the "Accumulation Period") is scheduled to commence at the opening of business on the first day of the December 2001 Collection Period. Subject to the conditions set forth under "Description of the Certificates--Postponement of Accumulation Period," the day on which the Revolving Period ends and the Accumulation Period begins may be delayed to no later than the opening of business on the first day of the January 2002 Collection Period. Unless an Early Amortization Event has occurred, the Accumulation Period will commence at the opening of business on the day following the last day of the Revolving Period and end on the earliest of (a) the commencement of the Early Amortization Period, (b) the payment in full of the Invested Amount or (c) the Series 1997-1 Termination Date. During the Accumulation Period, prior to the payment of the Class A Invested Amount in full, amounts equal to the least of (a) the Available Investor Principal Collections with respect to the preceding Collection Period plus the amount of any Reallocated Principal Collections used to fund any Class A Investor Default Amount or Class B Investor Default Amount for such Collection Period, (b) the Controlled Deposit Amount for the related Transfer Date and (c) the Class A Adjusted Invested Amount with respect to such Transfer Date will be </TABLE> <TABLE> <S> <C> deposited monthly in a trust account established by the Trustee (the "Principal Funding Account") on each Transfer Date beginning with the Transfer Date in the month following the commencement of the Accumulation Period until the Principal Funding Account Balance is equal to the Class A Invested Amount. After the Class A Invested Amount has been paid in full, an amount equal to the lesser of (a) the Available Investor Principal Collections with respect to the preceding Collection Period plus the amount of any Reallocated Principal Collections used to fund any Class A Investor Default Amount or Class B Investor Default Amount for such Collection Period minus the portion of such amounts applied to Class A Monthly Principal on such Transfer Date and (b) the Class B Invested Amount with respect to such Transfer Date will be deposited monthly into the Collection Account on each Transfer Date for distribution to the Class B Certificate- holders until the Class B Invested Amount has been paid in full. If, for any Collection Period, the sum of the Available Investor Principal Collections and the amount of any Reallocated Principal Collections used to fund any Class A Investor Default Amount or Class B Investor Default Amount for such Collection Period exceeds the applicable Controlled Deposit Amount, the amount of such excess will be first paid to the Collateral Interest Holder to the extent that the Collateral Invested Amount exceeds the Required Collateral Invested Amount and then will be treated as Shared Principal Collections and allocated to the holders of other Series of certificates issued and outstanding, if any, or, subject to certain limitations, paid to the Transferor as holder of the Exchangeable Transferor Certificate or deposited into the Excess Funding Account. If, for any Collection Period, the sum of the Available Investor Principal Collections and the amount of any Reallocated Principal Collections used to fund any Class A Investor Default Amount or Class B Investor Default Amount for such Collection Period is less than the applicable Controlled Deposit Amount, the amount of such deficiency will be the applicable "Deficit Controlled Accumulation Amount" for the succeeding Collection Period. See "Description of the Certificates--Application of Collections." Unless an Early Amortization Event shall have occurred, prior to the payment of the Class A Invested Amount in full, all funds on deposit in the Principal Funding Account will be invested at the direction of the Servicer by the Trustee in certain Eligible Investments. Investment earnings (net of losses and investment expenses) on funds on deposit in the Principal Funding Account (the "Principal Funding Investment Proceeds") during the Accumulation Period will be applied as Class A Available Funds. If, for any Transfer Date, the Principal Funding Investment Proceeds are less than the Covered Amount, the amount of such shortfall (the "Principal </TABLE> <TABLE> <S> <C> Funding Investment Shortfall") will be funded from Class A Available Funds (including a withdrawal from the Reserve Account to the extent available), a withdrawal from the Overconcentration Account to the extent available or from Reallocated Principal Collections. The "Covered Amount" shall mean for any Transfer Date with respect to the Accumulation Period or the first Special Payment Date of the Early Amorti- zation Period, an amount equal to one-twelfth of the product of (i) the Class A Certificate Rate and (ii) the Principal Funding Account Balance, if any, as of the Record Date preceding such Transfer Date. Funds on deposit in the Principal Funding Account will be available to pay the Class A Certificateholders in respect of the Class A Invested Amount on the Class A Expected Final Payment Date. If the aggregate principal amount of deposits made to the Principal Funding Account is insufficient to pay the Class A Invested Amount in full on the Class A Expected Final Payment Date, the Early Amortization Period will com- mence as described below. Although it is anticipated that during the Accumulation Period prior to the payment of the Class A Invested Amount in full, funds will be deposited in the Principal Funding Account in an amount equal to the applicable Controlled Deposit Amount on each Transfer Date and that scheduled principal will be available for distribution to the Class A Certificateholders on the Class A Expected Final Payment Date, no assurance can be given in that regard. See "Maturity Considerations." EARLY AMORTIZATION PERIOD......... During the period beginning on the day on which an Early Amortization Event has occurred and ending on the earlier of (a) the date on which the Invested Amount has been paid in full and (b) the Series 1997-1 Termination Date (the "Early Amortization Period"), Principal Collections allocable to the Certificateholders will be applied to the payment of principal on the Certificates and will be distributed monthly on each Special Payment Date, beginning with the Special Payment Date following the occurrence of an Early Amortization Event, to the Class A Certificateholders and, following payment of the Class A Invested Amount in full, to the Class B Certificateholders and, following payment of the Class B Invested Amount in full, to the Collateral Interest Holder. The Early Amortization Period is intended to result in the fastest possible distribution of principal to Certificateholders following an Early Amortization Event in order to better ensure the repayment of principal to Certificateholders. See "Description of the Certificates--Early Amortization Events" for a discussion of the events which might lead to the commencement of the Early Amortization Period. PRINCIPAL COLLECTIONS; CERTAIN ALLOCATIONS..................... Principal Collections for any Collection Period will be allocated </TABLE> <TABLE> <S> <C> on the basis of varying percentages. Under the Agreement, such collections will generally be, (i) during the Revolving Period, treated as Shared Principal Collections or, in certain circumstances, paid to the Collateral Interest Holder as principal on the Collateral Investor Interest or distributed to the Transferor as holder of the Exchangeable Transferor Certificate or deposited into the Excess Funding Account; provided that (a) Principal Collections allocable to the Collateral Investor Interest may be used to cover shortfalls in Yield Collections used to pay or allocate interest and other amounts to the Class A Certificates and the Class B Certificates on any Transfer Date, and (b) Principal Collections allocable to the Class B Certificates may be used to cover remaining shortfalls in Yield Collections used to pay or allocate interest and other amounts to the Class A Certificates on any Transfer Date; (ii) during the Accumulation Period, deposited into the Principal Funding Account in an amount up to the Controlled Deposit Amount, with any excess (a) in certain circumstances, paid to the Collateral Interest Holder as principal on the Collateral Investor Interest or (b) treated as Shared Principal Collections or distributed to the Transferor as holder of the Exchangeable Transferor Certificate or deposited into the Excess Funding Account; (iii) on or after the Class A Expected Final Payment Date or during any Early Amortization Period, paid to Class A Certificateholders in respect of the Class A Invested Amount or (iv) after the Class A Invested Amount has been paid in full, on or after the Class B Expected Final Payment Date or during any Early Amortization Period, paid to Class B Certificateholders as principal on the Class B Certificates. See "Description of the Certificates--Allocation Percentages." SUBORDINATION OF THE CLASS B CERTIFICATES AND THE COLLATERAL INVESTOR INTEREST............... The Class B Certificates and the Collateral Investor Interest will be subordinated as described herein to the extent necessary to fund payments with respect to the Class A Certificates. In addition, the Collateral Investor Interest will be subordinated as described herein to the extent necessary to fund certain payments with respect to the Class B Certificates. If the Class B Invested Amount and the Collateral Invested Amount are each reduced to zero and amounts on deposit in the Overconcentration Account are exhausted, the Class A Certificateholders will bear directly the credit and other risks associated with their undivided interest in the Trust and thus will be more likely to suffer a loss. To the extent the Class A Invested Amount is reduced, the percentage of Yield Collections allocable to the Class A Certificateholders with respect to subsequent Collection Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class A Invested </TABLE> <TABLE> <S> <C> Amount is not reimbursed, the amount of principal distributable to the Class A Certificateholders will be reduced. If the Collateral Invested Amount is reduced to zero and amounts on deposit in the Overconcentration Account are exhausted, the Class B Certificateholders will bear directly the credit and other risks associated with their undivided interest in the Trust and thus will be more likely to suffer a loss. To the extent the Class B Invested Amount is reduced, the percentage of Yield Collections allocable to the Class B Certificateholders with respect to subsequent Collection Periods will be reduced. Moreover, to the extent the amount of such reduction in the Class B Invested Amount is not reimbursed, the amount of principal distributable to the Class B Certificateholders will be reduced. No principal will be paid to the Class B Certificateholders until the Class A Invested Amount is paid in full. See "Risk Factors--Effect of Subordination," "Description of the Certificates--Allocation Percentages," "--Subordination of the Class B Certificates and the Collateral Investor Interest" and "--Application of Collections." ADDITIONAL AMOUNTS AVAILABLE TO CERTIFICATEHOLDERS.............. With respect to any Transfer Date, Excess Spread and Shared Excess Yield Collections will be applied to fund the Class A Required Amount and the Class B Required Amount, if any. The "Class A Required Amount" means the amount, if any, by which the sum of (a) Class A Monthly Interest due on the related Distribution Date and any overdue Class A Monthly Interest and Class A Additional Interest thereon, (b) the Class A Servicing Fee for the related Collection Period and any overdue Class A Servicing Fee and (c) the Class A Investor Default Amount, if any, for the related Collection Period exceeds the Class A Available Funds for the related Collection Period. The "Class B Required Amount" means the amount, if any, equal to the sum of (a) the amount, if any, by which the sum of (i) Class B Monthly Interest due on the related Distribution Date and any overdue Class B Monthly Interest and Class B Additional Interest thereon and (ii) the Class B Servicing Fee for the related Collection Period and any overdue Class B Servicing Fee exceeds the Class B Available Funds for the related Collection Period and (b) the amount, if any, by which the Class B Investor Default Amount for the related Collection Period exceeds the amount of Excess Spread and Shared Excess Yield Collections allocable to Series 1997-1 available to cover the Class B Investor Default Amount for the related Collection Period. "Excess Spread" for any Transfer Date will equal the sum of (a) the excess of (i) Class A Available Funds for the related Collec- tion Period over (ii) the sum of the amounts referred to in clauses (a), (b) and (c) in the definition of "Class A Required Amount" above, (b) the excess of (i) Class B Available Funds for the related Collection Period over (ii) the sum of the </TABLE> <TABLE> <S> <C> amounts referred to in clauses (a) (i) and (a) (ii) in the definition of "Class B Required Amount" above and (c) Collateral Available Funds for the related Collection Period not used to pay the Collateral Servicing Fee and any overdue Collateral Servicing Fee, as described herein. "Shared Excess Yield Collections" for any Transfer Date will equal the aggregate amount of Yield Collections for the related Collection Period allocable to other Series in excess of amounts necessary to make required payments with respect to such Series, if any. If, on any Transfer Date, the sum of Excess Spread and Shared Excess Yield Collections is less than the Class A Required Amount, the amount, if any, available from the Overconcentration Account will be used to fund the remaining Class A Required Amount. If the amount available from the Overconcentration Account is insufficient to fund the remaining Class A Required Amount, Reallocated Principal Collections allocable first to the Collateral Investor Interest and then to the Class B Investor Interest with respect to the related Collection Period will be used to fund the remaining Class A Required Amount. If Reallocated Principal Collections with respect to such Collection Period are insufficient to fund the remaining Class A Required Amount for the related Transfer Date, then the Collateral Invested Amount (after giving effect to reductions for any Collateral Investor Charge-Offs and any Reallocated Collateral Principal Collections on such Transfer Date) will be reduced by the amount of such deficiency (but not by more than the Class A Investor Default Amount for such Transfer Date). In the event that such reduction would cause the Collateral Invested Amount to be a negative number, the Collateral Invested Amount will be reduced to zero, and the Class B Invested Amount (after giving effect to reductions for any Class B Investor Charge-Offs and any Reallocated Class B Principal Collections on such Transfer Date) will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero. In the event that such reduction would cause the Class B Invested Amount to be a negative number, the Class B Invested Amount will be reduced to zero and the Class A Invested Amount will be reduced by the amount by which the Class B Invested Amount would have been reduced below zero (such reduction, a "Class A Investor Charge-Off"). If the Collateral Invested Amount and the Class B Invested Amount are reduced to zero and amounts on deposit in the Overconcentration Account are exhausted, the Class A Certificateholders will bear directly the credit and other risks associated with their undivided interest in the Trust. See "Description of the Certificates--Reallocation of Cash Flows" and "--Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs." </TABLE> <TABLE> <S> <C> If, on any Transfer Date, the sum of Excess Spread and Shared Excess Yield Collections not required to pay the Class A Required Amount and to reimburse Class A Investor Charge-Offs is less than the Class B Required Amount, the amount, if any, available from the Overconcentration Account not required to fund the Class A Required Amount will be used to fund the remaining Class B Required Amount. If the amount available from the Overconcentration Account is insufficient to fund the remaining Class B Required Amount, Reallocated Principal Collections allocable to the Collateral Investor Interest for the related Collection Period not required to pay the Class A Required Amount will be used to fund the remaining Class B Required Amount. If such remaining Real- located Principal Collections allocable to the Collateral Investor Interest with respect to such Collection Period are insufficient to fund the remaining Class B Required Amount for the related Transfer Date, then the Collateral Invested Amount (after giving effect to reductions for any Collateral Investor Charge-Offs and any Reallocated Collateral Principal Collections and any adjustments made thereto for the benefit of the Class A Certificateholders on such Transfer Date) will be reduced by the amount of such deficiency (but not by more than the Class B Investor Default Amount for such Collection Period). In the event that such reduction would cause the Collateral Invested Amount to be a negative number, the Collateral Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Collateral Invested Amount would have been reduced below zero (such reduction, a "Class B Investor Charge-Off"). In the event of a reduction of the Class A Invested Amount, the Class B Invested Amount or the Collateral Invested Amount, the amounts available to fund payments of principal and interest with respect to the Class A Certificates and the Class B Certificates will be decreased. See "Description of the Certificates--Reallocation of Cash Flows" and "--Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs." REQUIRED COLLATERAL INVESTED AMOUNT.......................... The "Required Collateral Invested Amount" means (a) $18,900,000 on the initial Transfer Date and (b) on any Transfer Date thereafter, an amount equal to the sum of (i) 4.5% of the sum of (x) the Class A Adjusted Invested Amount and the Class B Invested Amount (after giving effect to any reductions thereof on such Transfer Date and the related Distribution Date) and (y) the Collateral Invested Amount on the prior Transfer Date after any adjustments made thereto on such Transfer Date and (ii) during the Accumulation Period, the excess, if any, of the Required Overconcentration Account Amount over the amount on deposit in the Overconcentration Account (after giving effect to any deposit to be made to, and </TABLE> <TABLE> <S> <C> any withdrawal to be made from, the Overconcentration Account on such Transfer Date); PROVIDED, HOWEVER, that if an Early Amortization Event occurs, then the Required Collateral Invested Amount shall equal the Required Collateral Invested Amount on the Transfer Date immediately preceding the occurrence of such Early Amortization Event. With respect to any Transfer Date, if the Collateral Invested Amount is less than the Required Collateral Invested Amount, certain amounts of Excess Spread and Shared Excess Yield Collections allocable to Series 1997-1 will be used to increase the Collateral Invested Amount to the extent of such shortfall. If on any Transfer Date, the Collateral Invested Amount exceeds the Required Collateral Invested Amount, distributions in respect of such excess may be applied in accordance with the loan agreement among the Transferor, the Trustee, the Servicer and the Collateral Interest Holder (the "Loan Agreement") and will not be available to the Certificateholders. See "Description of the Certificates-- Enhancement; Required Collateral Invested Amount." OVERCONCENTRATION ACCOUNT......... An account (the "Overconcentration Account") will be held in the name of the Trustee for the benefit of the Certificateholders and the Collateral Interest Holder. The Overconcentration Account will have an initial balance of zero. On any Transfer Date on which the aggregate amounts of Eligible Receivables due from companies with specified credit ratings and their employees and consolidated affiliates exceed speci- fied percentages of the total amount of Eligible Receivables as described herein, certain amounts of Excess Spread and Shared Excess Yield Collections are required to be deposited in the Overconcentration Account. To the extent that on any Transfer Date the sum of Excess Spread and Shared Excess Yield Collections is less than the Class A Required Amount, the Class B Required Amount and the Collateral Required Amount, amounts, if any, available from the Overconcentration Account will be applied to fund the remaining Class A Required Amount, Class B Required Amount and Collateral Required Amount, in that order of priority. If, on any Transfer Date, amounts on deposit in the Overconcentration Account (after giving effect to any deposits therein or withdrawals therefrom on such Transfer Date) exceed the Required Overconcentration Account Amount, such excess shall be paid to the Collateral Interest Holder in accordance with the Loan Agreement or treated as Shared Excess Yield Collections allocable to other Series, and will not be available to the Certificateholders. See "Description of the Certificates-- Overconcentration Account." SHARED EXCESS YIELD COLLECTIONS... Subject to certain limitations, Shared Excess Yield Collections, if any, with respect to any Series may be applied to cover any shortfalls with respect to amounts payable from Yield Collections allocable to any other Series, PRO RATA based upon the </TABLE> <TABLE> <S> <C> amount of the shortfall, if any, with respect to each Series. See "Description of the Certificates--Shared Excess Yield Collections." SHARED PRINCIPAL COLLECTIONS...... Principal Collections and certain other amounts otherwise allocable to other Series, to the extent such collections are not needed to make payments to or deposits for the benefit of the certificateholders of such other Series, will be applied to cover principal payments due to or for the benefit of the holders of the Certificates and the Collateral Investor Interest. See "Description of the Certificates--Shared Principal Collections." OPTIONAL REPURCHASE............... The Invested Amount will be subject to optional repurchase by the Transferor on any Distribution Date on or after the Distribution Date on which the Invested Amount is reduced to an amount less than or equal to 5% of the Initial Invested Amount, if certain conditions set forth in the Agreement are met. The repurchase price will be equal to the Invested Amount plus accrued and unpaid interest on the Certificates and the Collateral Investor Interest through the day preceding the Distribution Date on which the repurchase occurs. See "Description of the Certificates--Final Payment of Principal; Termination." TAX STATUS........................ In the opinion of counsel to First Bank, for federal income tax purposes, the Class A Certificates and the Class B Certificates will be characterized as debt and the Trust will not be characterized as an association or publicly traded partnership taxable as a corporation. Under the Agreement, the Transferor, the Servicer, the Class A Certificateholders and the Class B Certificateholders will agree to treat the Class A Certificates and the Class B Certificates as debt for federal, state and other tax purposes. See "Federal Income Tax Consequences" for additional information concerning the application of federal income tax laws. ERISA CONSIDERATIONS.............. Under a regulation issued by the Department of Labor (the "Plan Assets Regulation"), the Trust's assets would not be deemed "plan assets" of any employee benefit plan holding interests in the Class A Certificates if the Class A Certificates qualify as "publicly-offered securities" within the meaning of the Plan Assets Regulation. To qualify as publicly-offered securities, certain conditions must be met, including that interests in the Class A Certificates be held by at least 100 independent persons upon completion of the public offering being made hereby. The Underwriters expect, although no assurance can be given, that the Class A Certificates will be held by at least 100 such persons, and the Transferor anticipates that the other conditions of the Plan Assets Regulation will be met. No monitoring or other measures will be taken to ensure that any such conditions will be met with respect to the Class A Certificates. If the Trust's assets were deemed to be </TABLE> <TABLE> <S> <C> "plan assets" of such a plan, there is uncertainty whether existing exemptions from the "prohibited transaction" rules of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), would apply to all transactions involving the Trust's assets. Accordingly, benefit plan fiduciaries should consult with counsel before making a purchase of Class A Certificates. See "ERISA Considerations." The Underwriters do not expect that the Class B Certificates will be held by 100 or more independent investors and, therefore, do not expect that the Class B Certificates will qualify as publicly-offered securities under the Plan Assets Regulation. Accordingly, the Class B Certificates may not be acquired by employee benefit plan investors, including but not limited to insurance company general accounts. Each Certificate Owner of a Class B Certificate, by its acceptance thereof, will be deemed to have represented that it is not an employee benefit plan investor. See "ERISA Considerations." CERTIFICATE RATING................ It is a condition to the issuance of the Class A Certificates that they be rated in the highest rating category by at least one nationally recognized rating organization selected by the Transferor (each, a "Rating Agency"). The rating of the Class A Certificates is based primarily on the value of the Receivables as determined by the applicable Rating Agency and the terms of the Class B Certificates and the Collateral Investor Interest. See "Description of the Certificates--Subordination of the Class B Certificates and the Collateral Investor Interest" and "Risk Factors--Certificate Rating." It is a condition to the issuance of the Class B Certificates that they be rated in one of the three highest rating categories by at least one Rating Agency. The rating of the Class B Certificates is based primarily on the value of the Receivables as determined by the applicable Rating Agency and the terms of the Collateral Investor Interest. See "Description of the Certificates--Subordination of the Class B Certificates and the Collateral Investor Interest" and "Risk Factors--Certificate Rating."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011028_netsmart_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011028_netsmart_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..414976de20f937607e2b13a1690043269bda79fc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011028_netsmart_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following discussion summarizes certain information contained in this Prospectus. It does not purport to be complete and is qualified in its entirety by reference to more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. All share and per share information in this Prospectus has been restated to reflect a 2,000-for-one Common Stock recapitalization effective in August 1993, a .576-for-one reverse split effective in October 1993 and a three-for-four reverse split effective February 1996. Prospective investors are cautioned that the statements in this Prospectus that are not descriptions of historical facts may be forward looking statements that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those identified under "Risk Factors" and elsewhere in this Prospectus or in documents incorporated by reference in this Prospectus. In exercising Warrants, either during or after the Special Exercise Period, prospective investors should assume that no Warrants will be exercised other than those previously exercised and those being exercised by the investor. THE COMPANY Netsmart Technologies, Inc. (the "Company") develops, markets and supports computer software designed to provide a range of services in a network computing environment. A network computing environment is a computer system that provides multiple users with access to a common database and functions. A network system can be a local system, such as a local area network, known as a LAN, which operates within an office or facility, or a distributed system which provides simultaneous access to a common data base to many users at multiple locations. There are typically three parties in the Company's network system -- the sponsor, which is the party that maintains the data base, such as a managed care organization or financial institution, the users, who are the individuals who use the system, and may be the subscribers of a managed care organization or the bank card or credit card holders of a financial network, and the service providers, who are those who provide goods or services to the users, such as physicians, pharmacies, banks and merchants who provide goods, services or funds to bank card or credit card holders. The Company's principal services are its health information systems, which are marketed principally to specialized care facilities, many of which are operated by government entities and include entitlement programs, principally in the behavioral health field. Users typically purchase one of the health information systems, in the form of a perpetual license to use the system, as well as contract services, maintenance and third party hardware and software which the Company offers pursuant to arrangements with the hardware and software vendors. The contract services include project management, training, consulting and software development services, which are provided either on a time and materials basis or pursuant to a fixed-price contract. The software development services may require the Company to adapt one of its health information systems to meet the specific requirements of the customer. The Company has developed proprietary network technology utilizing smart cards which it is seeking to market as part of its health information systems. It is also seeking to market products utilizing its smart card technology in the financial field. A smart card is a plastic card about the size of a standard credit card which contains a single embedded microprocessor chip with both data storage and computing capabilities. The smart card software provides access to the information stored in the chip, the ability to update stored - 2 - 57046 <PAGE> information and includes security elements to restrict unauthorized access to or modification of certain information stored on the card utilizing a smart card reader system. The smart card reader system and the software provides the ability to include information on both the smart card and the organization's computer system. The Company also offers network applications which use telecommunications rather than smart cards to obtain access to and manage data. The Company's principal source of revenue is its health information systems and related services which are marketed by its subsidiary, Creative Socio-Medics Corp. ("CSM"). CSM was acquired in June 1994 by a wholly-owned subsidiary of SIS Capital Corp. ("SISC") from Creative Socio-Medics Corp. ("Old CSM"), which is a wholly-owned subsidiary of Advanced Computer Techniques, Inc. ("ACT"), a nonaffiliated party. SISC transferred such subsidiary to the Company in September 1995. For the six months ended June 30, 1997 and the year ended December 31, 1996, approximately 95% and 76% of revenue was derived from health information systems and services. Substantially all of the Company revenue through December 31, 1995 was derived from health information systems and services. The only significant revenue derived from the Company's smart card products, known as its CarteSmart System, represented revenue from one customer, IBN, Inc. ("IBN"), and the contract with IBN is substantially complete. The agreement with IBN relates to a CarteSmart license and the implementation by IBN of a system, which includes such software, for financial institutions in the former Soviet Union. The Company is a Delaware corporation, formed in September 1992 under the name Medical Services Corp., a holding company, whose operations were conducted by its wholly-owned subsidiary, Carte Medical Corp. In October 1993, the Company merged its subsidiary into itself and changed its name to Carte Medical Corporation. In June 1995, the Company's name was changed to CSMC Corporation, and, in February 1996, the Company's name was changed to Netsmart Technologies, Inc. References to the Company include both the Company, its former and present subsidiaries, including CSM from June 16, 1994, the date of the acquisition of the assets of Creative Socio-Medics Corp. ("Old CSM"), unless the context indicates otherwise. The Company's executive offices are located at 146 Nassau Avenue, Islip, New York 11751, telephone (516) 968-2000. As of August 31, 1997, approximately 45.9% of the Company's outstanding Common Stock was owned by SISC, which is a wholly-owned subsidiary of Consolidated Technology Group Ltd. ("Consolidated"), a public company. See "Certain Transactions" and "Principal Stockholders." Mr. Lewis S. Schiller, chairman of the board and a director of the Company, is also chairman of the board, chief executive officer and a director of Consolidated and SISC. Mr. Schiller is also chairman of the board of Trans Global Services, Inc. ("Trans Global"), a public-held subsidiary of Consolidated. Mr. Norman J. Hoskin, a director of the Company, is also a director of Consolidated and Trans Global. THE OFFERING Securities Offered by the Compan1,793,750 shares of Common Stock issuable upon exercise of outstanding Warrants, during the Special Exercise Period, which is the 90 day period commencing on the date of this Prospectus and ending at 5:30 P.M., New York City time, on , 1997, which period may be extended by the Company for up to 30 days in the aggregate. Upon the expiration of the Special Exercise Period, the Company will be offering 896,875 shares of Common Stock issuable upon exercise of the Warrants. See "Description of Securities -- Series A Redeemable Common Stock Purchase Warrants." Securities Offered by the Underwriter: 56,250 Units, each Unit consisting of two shares of Common Stock and one Warrant, which are issuable to the Underwriter pursuant to the Underwriter's Options issued in the Company's initial public offering. Pursuant to the Underwriter's Options, if the Underwriter's Options are exercised, the Warrants issuable upon exercise of the Underwriter's Options must be exercised immediately. 500,000 shares of Common Stock and 250,000 Warrants which were purchased or may be purchased by the Underwriter from four stockholders who acquired such shares and Warrants in connection with an interim financing prior to the Company's initial public offering. See "Selling Security Holders." Securities Offered by Affiliates74,200 shares of Common Stock issuable upon exercise of Series B Warrants held by Mr. James L. Conway, president and a director of the Company (43,100 shares), and Mr. Storm Morgan, a director of the Company (31,100 shares). See "Selling Security Holders." - 3 - 57046 <PAGE> The Series B Warrants which may be sold by Messrs. Conway and Morgan have an exercise price of $2.00 per share, expire on December 31, 1999 and are not redeemable. Prior to August 13, 1998, such Series B Warrants and the shares of Common Stock issuable upon exercise of such Series B Warrants may not be sold without the consent of the Underwriter. There is no public market for, and there is not expected to be any public market for, the Series B Warrants. The Series B Warrants provide that, in the event that they are sold or otherwise transferred pursuant to an effective registration statement, they expire 90 days from the date of transfer. As a result, any purchaser of Series B Warrants must, within a short period, either exercise the Series B Warrants or permit them to expire unexercised. Description of Warrants: Exercise of Warrants Subject to redemption by the Company, the Warrants are exercisable during the two-year period commencing August 13, 1997. Exercise during Special Exercise Period During the Special Exercise Period, the exercise price of the Warrants is $3.00, for which the exercising Warrant holder will receive two shares of Common Stock, resulting in an exercise price of $1.50 per share of Common Stock. Exercise Subsequent to Special Exercise Period Subsequent to the expiration of the Special Exercise Period, the exercise price of the Warrants will be $4.50 per share, subject to adjustment, for which the exercising Warrant holder will receive one share of Common Stock. Redemption of Warrants The Warrants are redeemable by the Company commencing August 13, 1997 with the consent of the Underwriter, at $.05 per Warrant, on not more than 60 nor less than 30 days written notice, provided that the closing bid price of the Common Stock is at least $9.00 per share, subject to adjustment, during 20 consecutive trading days ending within ten days of the date the Warrants are called for redemption. Exercise Procedure The Warrants may be exercised by surrender of the Warrant certificate evidencing the Warrants being exercised at the Company's transfer agent, American Stock Transfer & Trust Company, the Warrant Agent, with the exercise form on the reverse side of the Warrant certificate completed and exercised as indicated on the certificate, accompanied by full payment of the exercise price in cash or by certified or official bank check. Only those Warrants which have been properly completed and are received by the Warrant Agent accompanied by full payment of the exercise price in cash or certified or official bank check by 5:30 P.M., New York City time on the last day of the Special Exercise Period will be entitled to the reduced exercise price. Use of Proceeds: The net proceeds of this Offering will be used for working capital and other corporate purposes. Risk Factors: Purchase of the shares of Common Stock involves a high degree of risk and substantial dilution, and should be considered only by investors who can afford to sustain a loss of their entire investment. See "Risk Factors" and "Dilution." Nasdaq Symbols: Common Stock NTST Warrants NTSTW - 4 - 57046 <PAGE> Common Stock Outstanding: At the date of this Prospectus: 6,811,005 shares of Common Stock1 As Adjusted2: 8,604,755 shares of Common Stock 1 Does not include a maximum of 511,000 shares of Common Stock which may be issued pursuant to the Company's 1993 Long Term Incentive Plan, 2,773,125 shares of Common Stock issuable pursuant to the Company's Series B Common Stock Purchase Warrants ("Series B Warrants") or any shares of Common Stock issuable upon exercise of the Warrants, the Underwriter's Options or the Warrants issuable upon exercise of the Underwriter's Options. 2 Reflects the issuance of the 1,793,750 shares of Common Stock issuable upon exercise of outstanding Warrants during the Special Exercise Period, and does not reflect (a) the issuance of 112,500 shares of Common Stock and 56,250 Warrants upon exercise of the Underwriter's Options, (b) the issuance of 112,500 shares of Common Stock upon exercise of the Warrants issuable upon exercise of the Underwriter's Options during the Special Exercise Period or (c) the issuance of any shares of Common Stock upon exercise of Series B Warrants. SUMMARY FINANCIAL INFORMATION (In thousands, except per share amounts) Statement of Operations Data1: <TABLE> Six Months Ended June 30, Year Ended December 31, 1997 1996 1996 1995 1994 1993 ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> Revenue $3,313 $4,936 $8,541 $7,382 $2,924 $ 57 Net (loss) (1,240) (2,236) (6,579) (2,850) (1,751) (433) (Loss) per share of Common (.18) (.46) (1.28) (.59) (.36) (.09) Stock Weighted average number of shares outstanding 6,800 4,822 5,149 4,822 4,822 4,763 ============================ ======================= ========================================= </TABLE> Balance Sheet Data: <TABLE> June 30, 1997 As Adjusted2 Actual December 31,1996 <S> <C> <C> <C> Working capital (deficiency) $ 1,461 $ (1,079) $ 477 Total assets 10,113 7,573 8,251 Total liabilities 4,397 4,397 3,836 Accumulated deficit (13,075) (13,075) (11,726) Stockholders' equity3 5,715 3,175 4,415 Net tangible book value (deficiency) per share of Common Stock4 .08 (.27) (.04) - --------------------------------------- --------- ------- ------- </TABLE> 1 Statement of operations data includes the operations of CSM commencing July 1, 1994. 2 As adjusted to reflect, on a proforma basis, the exercise of the 896,875 Warrants during the Special Exercise Period and the receipt by the Company of the net proceeds from such exercise. There is no assurance that any of such Warrants will be exercised. See "Use of Proceeds" and "Capitalization." 3 Stockholders' equity includes $1,210 additional paid-in capital relating to Preferred Stock. 4 Excludes the amount allocated to the liquidation preferences of the Series D Preferred Stock. - 5 - 57046 <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011065_sibia_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011065_sibia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f1f29caf9e1c85f572b8b6db8cd16ff508a402b5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011065_sibia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto, contained elsewhere in this Prospectus. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as those discussed elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY SIBIA Neurosciences, Inc. ("SIBIA" or the "Company") is engaged in the discovery and development of novel small molecule therapeutics for the treatment of nervous system disorders. The Company's focus is on the development of therapeutics for the treatment of neurodegenerative, neuropsychiatric and neurological disorders, many of which affect large patient populations and represent critical unmet medical needs. SIBIA is a leader in the development of proprietary drug discovery platforms that combine key tools necessary for modern drug discovery, including genomics, high throughput screening, advanced combinatorial chemistry techniques and pharmacology. These platforms are based on two primary technologies in which the Company has established a leading scientific and proprietary position: human receptor/ion channel subtype technology and human protease technology. The Company's expertise with its drug discovery technologies and its proprietary molecular targets and drug candidates has enabled the Company to establish several corporate collaborations, which include Novartis AG ("Novartis"), Bristol-Myers Squibb Company ("Bristol-Myers Squibb") and Meiji Seika Kaisha, Ltd. ("Meiji"), and multiple technology licensing arrangements, which include The Salk Institute for Biological Studies ("The Salk Institute"), Aurora Biosciences Corporation ("Aurora") and Neurocrine Biosciences, Inc. ("Neurocrine"). SIBIA believes its proprietary drug discovery technology platform and drug candidates will lead to additional corporate collaborations and licensing opportunities with pharmaceutical, biotechnology and drug discovery service companies. The first compound to enter clinical trials from the Company's drug discovery program was SIB-1508Y, currently in development for Parkinson's disease. This compound was selected as a potential drug candidate on the basis of its nicotinic acetylcholine receptor ("nAChR") subtype selectivity and behavioral profile. In contrast to current therapies, which treat only motor dysfunction, SIB-1508Y is being developed for the treatment of motor, affective and cognitive dysfunctions of Parkinson's disease. In September 1997, SIBIA completed Phase I clinical trials of SIB-1508Y and expects to commence Phase II clinical trials in early 1998. The Company has a collaboration with Meiji for the development and commercialization of SIB-1508Y in Japan and certain other Asian countries and plans to establish additional corporate collaborations for advanced clinical trials and commercialization of SIB-1508Y in other areas of the world. In addition, the Company has selected another nAChR subtype-selective compound, SIB-1553A, as a development candidate for the treatment of Alzheimer's disease. SIBIA plans to identify a collaborative partner for SIB-1553A and initiate Phase I clinical trials in 1998. SIBIA believes that its drug discovery platforms based on human receptor/ion channel subtype and human protease technologies will enable the discovery and development of new classes of drugs for the treatment of nervous system disorders. The human nervous system is a complex network of interconnected neurons that are responsible for coordination of virtually all bodily functions. Receptors and ion channels and the neurotransmitters that modulate them are key components in the communication between neurons. Such communication is fundamental to many neurological functions, including cognition, memory, sensory perception and motor control. Calcium ions are among the most important primary and secondary messengers in the nervous system. Calcium ions enter neurons through ion channels, specifically nAChRs, excitatory amino acid receptors ("EAARs") and voltage-gated calcium channels ("VGCCs"). SIBIA is focusing its human receptor/ion channel subtype technology platform on subtypes of these receptor/ion channel classes as molecular targets. To date, SIBIA has developed a proprietary library of more than 50 complete genes cloned from human brain tissue which code for multiple, distinct subtypes within these three receptor/ion channel classes. The Company has also expressed over 30 subtypes of receptor/ion channels in stable cell lines, each of which represents a potential molecular and therapeutic target for nervous system disorders. SIBIA's human protease technology platform is focused on small molecule compounds able to control specific proteases involved in neurodegenerative disorders, including amyloid precursor protein ("APP") modulators for Alzheimer's disease and caspase inhibitors for apoptosis and neuroprotection. Proteases are enzymes which play an important role in the processing of proteins. In neurons, specific proteases control pathways critical to neuronal communication and survival. SIBIA, in collaboration with Bristol-Myers Squibb, has identified several series of small molecules which inhibit amyloid beta protein ("A(LOGO)") production in vitro and in vivo. The most advanced compounds from this collaboration are in pre-clinical development. Integral to the Company's drug discovery platforms is the combination of key tools necessary for modern drug discovery, including genomics, high throughput screening, advanced combinatorial chemistry techniques and pharmacology. SIBIA has developed functional cell-based assays incorporating its receptor/ion channel subtype and protease targets for use with its high throughput screening systems for the rapid characterization, profiling and optimization of selected compounds through an interactive process with chemistry and pharmacology in order to develop lead candidates for further development. The Company synthesizes targeted compound libraries internally using the Company's proprietary high throughput organic synthesis ("HTOS") combinatorial chemistry technology to optimize compounds identified through screening. By integrating its high throughput screening capabilities with its HTOS technologies, SIBIA can rapidly convert hits identified through screening to potential lead compounds. SIBIA's strategy is to (i) focus on drug discovery and early stage drug development; (ii) utilize its large portfolio of proprietary molecular targets to develop compounds that address a broad spectrum of nervous system disorders; (iii) establish corporate alliances with pharmaceutical and biotechnology companies for the discovery, development and commercialization of its drug candidates; and (iv) establish multiple technology licensing arrangements to enhance its nervous system drug discovery capabilities. The Company is applying its drug discovery technologies to discover and develop potential drug candidates independently and in collaboration with established pharmaceutical companies. The Company currently expects that late stage clinical development and commercialization of independently discovered compounds will be accomplished in conjunction with corporate partners. The Company believes, assuming successful pre-clinical studies, that compounds discovered with its technologies and in conjunction with its corporate partners will enter clinical trials within the next 12 to 18 months. Since 1992, the Company has received approximately $55 million in equity, license fees, research support and milestone payments from corporate partners. SIBIA directly holds, or has exclusive licenses to, 19 issued U.S. and seven foreign patents relating to molecular targets, technologies, compounds and assay methods integral to its drug discovery effort for various nervous system diseases and disorders. In addition, SIBIA has 57 pending U.S. applications relating to these enabling technologies, 15 of which have been allowed, and numerous pending foreign applications. The Company was incorporated in Delaware on April 15, 1981. The Company is located at 505 Coast Boulevard South, Suite 300, La Jolla, CA 92037-4641, and its telephone number is (619) 452-5892. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company.................. 2,250,000 shares Common Stock Offered by the Selling Stockholder...... 250,000 shares Common Stock Outstanding after this Offering......... 11,539,480 shares(1) Use of Proceeds...................................... For research and development activities, working capital and general corporate purposes, which may include capital expenditures and acquisitions. Nasdaq National Market Symbol........................ SIBI </TABLE> SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------ ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Total revenue....................... $ 3,196 $ 5,077 $4,852 $10,448 $ 8,481 $ 6,451 $ 9,052 Research and development expenses... 5,446 7,713 8,663 8,949 12,268 8,902 12,160 General and administrative expenses.......................... 2,114 2,202 1,917 2,178 3,561 2,702 3,715 Other income........................ 366 288 5,701(2) 3,680(3) 1,784 1,188 1,708 Net income (loss)................... $(3,998) $(4,550) $ (27) $ 2,926 $(5,564) $(3,965) $(5,115) ======= ======= ====== ======= ======= ======= ======= Net income (loss) per share (4)..... $ 0.42 $ (0.73) $ (0.56) $ (0.55) ======= ======= ======= ======= Shares used in computing net income (loss) per share (4).............. 6,928 7,596 7,116 9,224 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------ AS ACTUAL ADJUSTED(5) -------- ----------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and investment securities................................ $ 35,745 $ 51,961 Working capital (6)............................................................. 33,801 50,017 Total assets.................................................................... 38,541 54,757 Long-term capital lease obligations............................................. 527 527 Accumulated deficit............................................................. (26,808) (26,808) Total stockholders' equity...................................................... 34,735 50,951 </TABLE> - --------------- (1) Excludes, as of September 30, 1997, (i) 1,345,848 shares of Common Stock available for issuance pursuant to the Company's stock option plans, (ii) 842,014 shares of Common Stock issuable pursuant to outstanding options under the Company's stock option plans at a weighted average exercise price of approximately $4.17 per share, (iii) 373,062 shares of Common Stock issuable pursuant to outstanding options under the Company's Management Change of Control Plan (the "Change of Control Plan") at an exercise price of $0.85 per share, and (iv) 478,794 shares of Common Stock available for issuance pursuant to the Company's Employee Stock Purchase Plan. See "Management -- Change in Control Arrangements," "-- 1996 Equity Incentive Plan," "-- Employee Stock Purchase Plan" "-- 1996 Non-Employee Directors' Stock Option Plan" and Note 10 of Notes to Financial Statements. (2) Includes a gain of $5,296,000 on the sale of the Company's interest in the SISKA Diagnostics, Inc. joint venture. See Note 6 of Notes to Financial Statements. (3) Includes income (net of legal expenses) of $3,146,000 received by the Company under settlement agreements with two law firms for failure to properly file a foreign patent application. See Note 7 of Notes to Financial Statements. (4) See Note 1 of Notes to Financial Statements for information concerning the computation of net income (loss) per share. (5) Adjusted to reflect the net proceeds from the sale of the 2,250,000 shares of Common Stock offered by the Company hereby and the receipt by the Company of the estimated net proceeds therefrom, at an assumed public offering price of $7.88 per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011147_coach-usa_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011147_coach-usa_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5a8e959d9888b99b202d41b62595a669d704f577
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011147_coach-usa_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE PRO FORMA AND HISTORICAL FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH CONTAIN RISKS AND UNCERTAINTIES. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE INFORMATION SET FORTH UNDER THE CAPTIONS "RISK FACTORS," "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS IN THE PROSPECTUS GENERALLY. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING, WITHOUT LIMITATION, THE RISK FACTORS SET FORTH HEREIN AND THE MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011292_national_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011292_national_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b171dd557424301803f8fe440e88ceda3f8ee1de
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011292_national_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and historical and pro forma financial data appearing elsewhere in this Prospectus and should be read only in conjunction with the entire Prospectus. Except as the context otherwise requires, references to or descriptions of operations of the Partnership include the operations of the Operating Partnership and any other subsidiary operating partnership or corporation and the operations of the Partnership's predecessor, National Propane. For ease of reference, a glossary of certain terms used in this Prospectus is included as Appendix B to this Prospectus. Capitalized terms not otherwise defined herein have the meanings given in the glossary. Special Note: Certain statements set forth below under this caption constitute 'forward- looking statements' within the meaning of the Reform Act. See 'Special Note Regarding Forward-Looking Statements' on page 4 for additional factors relating to such statements. NATIONAL PROPANE PARTNERS, L.P. The Partnership, a Delaware limited partnership formed in March 1996 to acquire, own and operate the business and assets of National Propane, is engaged primarily in (i) the retail marketing of propane to residential, commercial and industrial, and agricultural customers and to dealers (located primarily in the Northeast) that resell propane to residential and commercial customers and (ii) the retail marketing of propane-related supplies and equipment, including home and commercial appliances. The Partnership believes it is the sixth largest retail marketer of propane in terms of volume in the United States, supplying approximately 250,000 active retail and wholesale customers in 25 states through its 166 service centers located in 24 states. The Partnership's operations are concentrated in the Midwest, Northeast, Southeast and Southwest regions of the United States. The retail propane sales volume of the Partnership was approximately 150 million gallons in 1995. In 1995, approximately 48.6% of the Partnership's retail sales volume was to residential customers, 34.2% was to commercial and industrial customers, 6.3% was to agricultural customers, and 10.9% was to dealers. Sales to residential customers in 1995 accounted for approximately 64% of the Partnership's gross profit on propane sales, reflecting the higher margin nature of this segment of the market. Approximately 90% of the tanks used by the Partnership's retail customers are owned by the Partnership. National Propane was incorporated in 1953 under the name Conservative Gas Corporation. In April 1993, there was a change of control of the parent of the Partnership (the 'Acquisition'). Since the Acquisition, the Partnership's new management team, headed by Ronald D. Paliughi, who became President and Chief Executive Officer of National Propane in April 1993, has implemented an operating plan designed to make the Partnership more efficient, profitable and competitive. Since the Acquisition, the Partnership's management has: (i) consolidated nine separately branded businesses into a single company with a new, national brand and logo; (ii) consolidated eight regional offices into one national headquarters; (iii) installed the Partnership's first system-wide data processing system; (iv) implemented system-wide pricing, marketing and purchasing strategies, thereby reducing the cost duplication and purchasing and pricing inefficiencies associated with the Partnership's formerly decentralized structure; and (v) centralized and standardized accounting, administrative and other corporate services. As a result of these initiatives, the Partnership has become more efficient and competitive, and believes it is now positioned to capitalize on opportunities for business growth, both internally and through acquisitions. Although management has focused primarily on implementing the new operating plan, the Partnership has acquired seven propane businesses since November 1993, resulting in an increase in volume sales of approximately 14.2 million gallons annually. Four of these acquired businesses operate in the Midwest, two operate in the Southwest and one operates in the Southeast. The Partnership believes that its competitive strengths include: (i) gross profit and operating margins that it believes to be among the highest of the major retail propane companies whose financial statements are publicly available; (ii) the concentration of its operations in colder regions (such as the upper Midwest and Northeast), high margin regions (such as the Northeast and Florida), and regions experiencing population growth (such as Florida and the Southwest); (iii) an experienced management team; (iv) a well-trained and motivated work force; and (v) an effective pricing management system. However, the propane industry is highly competitive and includes a number of large national firms that may have greater financial or other resources or lower operating costs than the Partnership. On July 2, 1996, the Partnership consummated its initial public offering of Common Units (the 'IPO'). In connection with the IPO, the Partnership acquired the propane business and assets of the Managing General Partner. BUSINESS STRATEGY The Partnership's business strategy is to (i) increase its efficiency, profitability and competitiveness by building on the efforts it has already undertaken to improve pricing management, marketing and purchasing and to further consolidate its operations and (ii) increase its market share through strategic acquisitions and internal growth. Key elements of this strategy include (i) continuing with the implementation of centralized price monitoring, (ii) strengthening its image as a reliable, full service, nationwide propane supplier, (iii) further improving its propane purchasing and storage, thereby making more efficient use of its system-wide storage capacity and (iv) further consolidating its operations, where appropriate. In addition, because the retail propane industry is mature and overall demand for propane is expected to involve little growth for the foreseeable future, acquisitions are expected to be an important element of the Partnership's business strategy. The Partnership intends to take two approaches to acquisitions: (i) primarily to build on its broad geographic base by acquiring smaller, independent competitors that operate within the Partnership's existing geographic areas and incorporating them into the Partnership's distribution network and (ii) to acquire propane businesses in areas in the United States outside of its current geographic base where it believes there is growth potential and where an attractive return on its investment can be achieved. The Partnership recently entered into a letter of intent to acquire a propane business for approximately $1.0 million; however, consummation of this transaction is subject to customary closing conditions and completion of definitive documentation, and no assurance can be given that this acquisition will be completed. Although the Partnership continues to evaluate a number of propane distribution companies, including regional and national firms, as part of its ongoing acquisition program, except as described in the preceding sentence, the Partnership does not have any present agreements or commitments with respect to any acquisition. There can be no assurance that the Partnership will identify attractive acquisition candidates in the future, will be able to acquire such candidates on acceptable terms, or will be able to finance such acquisitions. If the Partnership is able to make acquisitions, there can be no assurance that such acquisitions will not dilute earnings and distributions or that any additional debt incurred to finance such acquisitions will not adversely affect the ability of the Partnership to make distributions to Unitholders. In addition, to the extent that warm weather adversely affects the Partnership's operating and financial results, the Partnership's access to capital and its acquisition activities may be limited. The Managing General Partner has broad discretion in making acquisitions and it is expected that the Managing General Partner generally will not seek Unitholder approval of acquisitions. In order to facilitate the Partnership's acquisition strategy, concurrently with the closing of the IPO, the Operating Partnership entered into a $55 million bank credit facility (the 'Bank Credit Facility'), including a $40 million facility to be used for acquisitions and improvements (the 'Acquisition Facility'). See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Description of Indebtedness.' At December 31, 1996, $7.9 million was outstanding under the Bank Credit Facility. The Partnership also has the ability to fund acquisitions through the issuance of additional partnership interests. See 'The Partnership Agreement -- Issuance of Additional Securities.' In addition to pursuing expansion through acquisitions, the Partnership intends to pursue internal growth at its existing service centers and to expand its business by opening new service centers. The Partnership believes that it can attract new customers and expand its market base by providing superior service, introducing innovative marketing programs and focusing on population growth areas. GENERAL The Partnership is engaged primarily in the domestic retail marketing of propane and propane-related supplies and equipment, including home and commercial appliances. Propane, a by-product of natural gas processing and petroleum refining is a clean-burning energy source recognized for its transportability and ease of use relative to alternative forms of stand-alone energy. The Partnership's retail customers fall into four broad categories: residential customers, commercial and industrial customers, agricultural customers and dealers (located primarily in the Northeast) that resell propane to residential and commercial customers. Residential customers use propane primarily for space heating, water heating, cooking and clothes drying. Commercial and industrial customers use propane for commercial applications such as cooking and clothes drying and industrial uses such as fueling over-the-road vehicles, forklifts and stationary engines, firing furnaces, as a cutting gas and in other process applications. Agricultural customers use propane for tobacco curing, crop drying, poultry brooding and weed control. Propane competes primarily with natural gas, electricity and fuel oil as an energy source, principally on the basis of price, availability and portability. Propane serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Propane is generally more expensive than natural gas on an equivalent BTU basis in locations served by natural gas, although propane is sold in such areas as a standby fuel for use during peak demand periods and during interruptions in natural gas service. Propane is generally less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Although propane is similar to fuel oil in certain applications and market demand, propane and fuel oil compete to a lesser extent primarily because of the cost of converting from one to the other. The Partnership distributes propane through a nationwide distribution network integrating 166 service centers in 24 states. The Partnership's operations are located primarily in the Midwest, Northeast, Southeast and Southwest regions of the United States. No single customer accounted for 10% or more of the Partnership's revenues in 1995. Historically, approximately 66% of the Partnership's retail propane volume has been sold during the six-month period from October through March, as many customers use propane for heating. Consequently, sales, gross profits and cash flows from operations are concentrated in the Partnership's first and fourth fiscal quarters. In 1995, on a pro forma basis, the Partnership would have had net income of approximately $10.7 million, and on an historical basis, had a net loss of approximately $0.6 million. For information regarding pro forma adjustments to the Partnership's historical operating data, see 'Selected Historical and Pro Forma Consolidated Financial and Operating Data' and the pro forma consolidated financial statements and notes thereto included elsewhere in this Prospectus. The Partnership also sells, leases and services equipment related to its propane distribution business. In the residential market, the Partnership sells household appliances such as cooking ranges, water heaters, space heaters, central furnaces and clothes dryers, as well as less traditional products such as barbecue equipment and gas logs. In addition to its 166 service centers, the Partnership owns underground storage facilities in Hutchinson, Kansas and Loco Hills, New Mexico, leases above ground storage facilities in Crandon, Wisconsin and Orlando, Florida and owns or leases smaller storage facilities in other locations throughout the United States. As of December 31, 1996, the Partnership's total storage capacity was approximately 33.1 million gallons (including approximately one million gallons of storage capacity currently leased to third parties). As of December 31, 1996, the Partnership had a fleet of 7 transport truck tractors and approximately 400 bulk delivery trucks, 400 service and light trucks and 150 cylinder delivery vehicles. The principal executive office of the Partnership is located at Suite 1700, IES Tower, 200 1st Street, S.E., Cedar Rapids, Iowa 52401-1409 and its telephone number is (319) 365-1550. RISK FACTORS Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which the Partnership is subject are similar to those that would be faced by a corporation engaged in a similar business. Prospective purchasers of the Common Units should consider the following risk factors in evaluating an investment in the Common Units: RISKS INHERENT IN THE PARTNERSHIP'S BUSINESS Weather conditions, which can vary substantially from year to year, have a significant impact on the demand for propane for both heating and agricultural purposes. Many customers of the Partnership rely heavily on propane as a heating fuel. Accordingly, the volume of propane sold is at its highest during the six-month peak heating season of October through March and is directly affected by the severity of the winter weather. Historically, approximately 66% of the Partnership's retail propane volume has been sold during this peak heating season. Actual weather conditions, therefore, may significantly affect the Partnership's financial performance. Furthermore, despite the fact that overall weather conditions may be normal, variations in weather in one or more regions in which the Partnership operates can significantly affect the total volume of propane sold by the Partnership and, consequently, the Partnership's results of operations. Propane is a commodity, the market price of which is often subject to volatile changes in response to changes in supply or other market conditions. Because rapid increases in the wholesale cost of propane may not be immediately passed on to customers, such increases could reduce gross profits. In the fourth quarter of 1996, the price of propane was significantly higher than historical levels. Between November 1, 1996 and December 31, 1996, the price of propane in the spot market at Mont Belvieu, Texas, the largest storage facility in the United States, averaged $0.5953 per gallon, with a high of $0.7050 per gallon on December 16, 1996 and a low of $0.4875 per gallon on December 31, 1996. During the 1995-96 winter season, from November 1, 1995 to March 31, 1996, the price of propane at Mont Belvieu averaged $0.3672 per gallon, with a high of $0.5250 on February 15, 1996 and a low of $0.3037 on November 15, 1995. Between November 1, 1996 and December 31, 1996, the price of propane in the spot market at Conway, Kansas averaged $0.7494 per gallon, with a high of $1.0400 per gallon on December 16, 1996 and a low of $0.5100 per gallon on November 7, 1996. During the 1995-96 winter season, from November 1, 1995 to March 31, 1996, the price of propane at Conway averaged $0.3713 per gallon, with a high of $0.4363 on February 15, 1996 and a low $0.3237 on November 15, 1995. The Partnership has to date purchased a significant amount of its propane in the Conway, Kansas spot market. Although the increased wholesale price of propane has increased the Partnership's revenues for the fourth quarter of 1996, the Partnership was unable to fully pass on the increased product cost to its customers resulting in a lower per gallon profit margin. As a result, the Partnership expects that it will have slightly lower operating income for the fourth quarter of 1996 compared to the corresponding period of 1995. Except for occasional opportunistic buying and storage of propane during periods of low demand, the Partnership has not engaged in any significant hedging activities with respect to its propane supply requirements, although it may do so in the future. The domestic retail propane business is highly competitive, and some of the Partnership's competitors may be larger or have greater financial and other resources or lower operating costs than the Partnership. In addition, propane is sold in competition with other sources of energy, some of which are less costly for equivalent energy values. The domestic retail propane industry is mature, and the Partnership foresees only limited growth in total demand for the product. The Partnership expects the overall demand for propane to remain relatively constant over the next several years, with year-to-year industry volumes being affected primarily by weather patterns. Therefore, the growth of the Partnership's propane business depends in large part on its ability to acquire other retail distributors. There can be no assurance that the Partnership will identify attractive acquisition candidates in the future, will be able to acquire such candidates on acceptable terms or will be able to finance such acquisitions. If the Partnership is able to make acquisitions, there can be no assurance that such acquisitions will not dilute earnings and distributions or that any additional debt incurred to finance such acquisitions will not adversely affect the ability of the Partnership to make distributions to Unitholders. The Partnership's operations are subject to the operating hazards and risks normally associated with handling, storing and delivering combustible liquids such as propane. As a result, the Partnership has been, and will likely continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business. In addition, in connection with the IPO the Partnership assumed certain contingent liabilities of National Propane, including certain potential environmental remediation costs at properties owned by National Propane. Although the Partnership self insures and maintains such insurance policies as the Managing General Partner believes are reasonable and prudent, future claims or environmental liabilities not covered by insurance or indemnification, or a large number of claims incurred by the Partnership in the future that are within the Partnership's self insured retention, may have a material adverse effect on the business, results of operations or financial position of the Partnership, including the Partnership's ability to make the Minimum Quarterly Distribution. RISKS INHERENT IN AN INVESTMENT IN THE PARTNERSHIP Cash distributions to Unitholders are not guaranteed and may fluctuate based upon the Partnership's performance. Cash distributions are dependent primarily on cash flow and not on profitability, which is affected by non-cash items. Therefore, cash distributions may be made during periods when the Partnership records losses and may not be made during periods when the Partnership records profits. In addition, the Managing General Partner may establish reserves that reduce the amount of Available Cash. Due to the seasonal nature of the Partnership's business, the Managing General Partner anticipates that it may make additions to reserves during certain of the Partnership's fiscal quarters in order to fund operating expenses, interest payments and cash distributions to partners with respect to future fiscal quarters. As a result of these and other factors, there can be no assurance regarding the actual levels of cash distributions by the Partnership. The amount of Available Cash from Operating Surplus needed to distribute the Minimum Quarterly Distribution for four quarters on the Common Units (including the Common Units offered hereby) and Subordinated Units outstanding as of the date of this Prospectus and the related distribution on the General Partner Interests is approximately $24.6 million (approximately $14.1 million for the Common Units, $9.5 million for the Subordinated Units and $1.0 million for the General Partner Interests). The amount of pro forma Available Cash from Operating Surplus generated during 1995 was approximately $17.6 million. Such amount would have been sufficient to cover the Minimum Quarterly Distribution for the four quarters in such year on all of the outstanding Common Units (including the Common Units offered hereby) and the related distribution on the General Partner Interests, but would have been insufficient by approximately $7.0 million to cover the Minimum Quarterly Distribution on the Subordinated Units and the related distribution on the General Partner Interests. Approximately $5.5 million of the Partnership's annual cash receipts are interest payments from Triarc under the Partnership Loan, which bears interest at an annual rate of 13.5%. On a pro forma basis, such amount represents approximately 31% of the Partnership's Available Cash from Operating Surplus in 1995. Because Triarc is a holding company, its ability to meet its cash requirements (including required interest and principal payments on the Partnership Loan) is primarily dependent (in addition to its cash on hand) upon cash flows from its subsidiaries, including loans and cash dividends and reimbursement by subsidiaries to Triarc in connection with its providing certain management services and payments by subsidiaries under certain tax sharing agreements. Under the terms of various indentures and credit arrangements, Triarc's principal subsidiaries are currently unable to pay any dividends or make any loans or advances to Triarc. In addition, the Partnership Loan does not restrict Triarc's ability to sell, convey, transfer or encumber the stock or assets of any of its subsidiaries (other than certain limitations with respect to the Managing General Partner and Southeastern Public Service Company ('SEPSCO')) or its ability to dispose of its cash on hand or other assets. On October 29, 1996, Triarc announced that its Board of Directors approved a plan to undertake the Spinoff Transactions (as defined herein) and in connection therewith it is expected that the Managing General Partner may be merged with and into Triarc, see 'Certain Information Regarding Triarc.' Triarc's cash on hand and marketable securities as of November 30, 1996 was approximately $177.0 million. The Partnership believes that such amount of cash and marketable securities, plus payments or distributions from certain of Triarc's subsidiaries, will enable Triarc to have adequate cash resources to meet its short term cash requirements, including required interest payments on the Partnership Loan. See 'Cash Distribution Policy -- Partnership Loan' and 'Certain Information Regarding Triarc.' However, there can be no assurance that Triarc will continue to have cash on hand or that it will in the future receive sufficient payments or distributions from its subsidiaries in order to enable it to satisfy its obligations under the Partnership Loan. Triarc's failure to make interest or principal payments under the Partnership Loan would adversely affect the ability of the Partnership to make the Minimum Quarterly Distribution to all Unitholders. In addition, Triarc is permitted to prepay the Partnership Loan under certain circumstances. The prepayment by Triarc of all or a portion of the Partnership Loan and the failure by the Partnership to reinvest such funds in a manner that generates an equivalent amount of annual cash flow could have an adverse effect on the Partnership's ability to make distributions to Unitholders. The Partnership Loan is recourse to Triarc and is secured by a pledge by Triarc of all of the shares of capital stock of the Managing General Partner owned by Triarc (approximately 75.7% of the Managing General Partner's outstanding capital stock as of the date of this Prospectus). See 'Cash Distribution Policy -- Partnership Loan' and 'Certain Information Regarding Triarc.' The Partnership is significantly leveraged and has indebtedness that is substantial in relation to its partners' capital. On a pro forma basis as of September 30, 1996, the Partnership's total indebtedness as a percentage of its total capitalization would have been approximately 79.0%. The principal and interest payable on such indebtedness and compliance with the requirements of such indebtedness with respect to the maintenance of reserves will reduce the cash available to make distributions on the Units. As of December 31, 1996, the Partnership had $7.9 million outstanding under the Bank Credit Facility and additional borrowings could result in a significant increase in the Partnership's leverage. Furthermore, the Managing General Partner may cause the Partnership to incur additional indebtedness, including borrowings that have the purpose or effect of enabling the Managing General Partner to receive distributions or hastening the conversion of Subordinated Units into Common Units. The First Mortgage Notes and the Bank Credit Facility are secured by a lien on substantially all of the assets of the Operating Partnership. In the case of a continuing default by the Operating Partnership under such indebtedness, the lenders would have the right to foreclose on the Operating Partnership's assets, which would have a material adverse effect on the Partnership. In addition, the First Mortgage Notes and the Bank Credit Facility contain provisions relating to change of control. If such provisions are triggered, such outstanding indebtedness may become immediately due. In such event, there is no assurance that the Partnership would be able to pay the indebtedness, in which case the lenders would have the right to foreclose on the Operating Partnership's assets, which would have a material adverse effect on the Partnership. The Partnership's assumptions concerning future operations, including assumptions that normal weather conditions will prevail in the Partnership's operating areas, may not be realized. Although the Partnership believes its assumptions are reasonable, whether such assumptions are realized is not, in many cases, within the control of the Partnership. Significant variances between the Partnership's assumptions and actual conditions, particularly with respect to weather conditions, could have a significant impact on the business of the Partnership. The Managing General Partner manages and operates the Partnership, and holders of Common Units have no right to participate in such management and operation. Holders of Common Units have no right to elect the Managing General Partner on an annual or other continuing basis, and have only limited voting rights on matters affecting the Partnership's business. Prior to making any distribution on the Common Units, the Partnership will reimburse the Managing General Partner and its Affiliates (including Triarc) at cost for all expenses incurred on behalf of the Partnership. On a pro forma basis, approximately $56.8 million of expenses would have been reimbursed by the Partnership to the Managing General Partner in 1995. Affiliates of the Managing General Partner (including Triarc) may provide certain administrative services for the Managing General Partner on behalf of the Partnership and will be reimbursed for all expenses incurred in connection therewith. In addition, the Managing General Partner and its Affiliates may provide additional services to the Partnership, for which the Partnership will be charged reasonable fees as determined by the Managing General Partner. Subject to certain limitations, the Partnership may issue additional Units or other interests in the Partnership, the effect of which may be to dilute the interests of holders of Common Units in distributions by the Partnership and to make it more difficult for a person or group to remove the Managing General Partner as general partner or otherwise change the management of the Partnership. The Managing General Partner has the right to acquire all, but not less than all, of the outstanding Common Units at a price generally equal to the then current market price of the Common Units in the event that not more than 20% of the outstanding Common Units are held by persons other than the Managing General Partner and its Affiliates. Consequently, a Unitholder may have its Common Units purchased from him even though such holder does not desire to sell them, and the price paid may be less than the amount such Unitholder would desire to receive upon such sale. The Partnership Agreement contains certain provisions that may discourage a person or group from attempting to remove the Managing General Partner as general partner or otherwise change the management of the Partnership. The Partnership Agreement provides that if the Managing General Partner is removed other than for Cause (as defined in the Glossary) and the Units held by the General Partners and their Affiliates are not voted in favor of such removal, the Subordination Period will end, all arrearages on the Common Units will terminate and all outstanding Subordinated Units will convert into Common Units and the General Partners will have the right to convert the General Partner Interests into Common Units or to receive, in exchange for such interests, cash payment equal to the fair market value of such interests. The Managing General Partner's current ownership interest in the Partnership precludes any vote to remove the Managing General Partner without its consent. Further, the Partnership Agreement provides that if any person or group other than the Managing General Partner and its Affiliates acquires beneficial ownership of 20% or more of the outstanding Units of any class, such person or group will lose voting rights with respect to all of its Units. The effect of these provisions may be to diminish the price at which the Common Units will trade under certain circumstances. Under certain circumstances, holders of Common Units could lose their limited liability and could become liable for amounts improperly distributed to them by the Partnership. See 'The Partnership Agreement -- Limited Liability.' The holders of the Common Units have not been represented by counsel in connection with the preparation of the Partnership Agreement or the other agreements referred to herein. The propane industry consists of a small number of national retail marketers and a larger number of regional companies. From time to time, these national and regional retail marketers, including the Partnership, have in the past engaged and may in the future engage, in discussions concerning acquisitions, dispositions and combinations of operations. While the Partnership is not currently engaged in negotiations with any national or regional marketer concerning any such acquisition, disposition or combination, there can be no assurance that in the future the Partnership will not engage in any such negotiations or pursue opportunities to engage in any such transaction. In addition, although any merger, consolidation or combination involving the Partnership, and any sale, exchange or disposition of all or substantially all of its assets, would require the approval of a Unit Majority under the terms of the Partnership Agreement, the Partnership and the General Partners are not restricted under the Partnership Agreement from engaging in other transactions that may not require the prior consent or vote of the Unitholders and that could result in a change of control of the Partnership. If any of such transactions were deemed to be a change of control under the First Mortgage Notes or the Bank Credit Facility, the Partnership would be required to offer to redeem all of the outstanding First Mortgage Notes at a premium and to repay all indebtedness under the Bank Credit Facility. As a result, the occurrence of a change of control could have a material adverse effect on the Partnership and its ability to pay the Minimum Quarterly Distribution to the Unitholders. The Partnership believes that its success has been and will continue to be dependent to a significant extent upon the efforts and abilities of its senior management team. The failure by the Managing General Partner to retain members of its senior management team could adversely affect the Partnership's ability to build on the efforts undertaken by its current management to increase the efficiency and profitability of the Partnership. CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY The Managing General Partner and its Affiliates may have conflicts of interest with the Partnership and the holders of Common Units. The Partnership Agreement permits the Managing General Partner to consider, in resolving conflicts of interest, the interests of parties (including the General Partner and its Affiliates) other than the Unitholders, thereby limiting the Managing General Partner's fiduciary duties to the Partnership and the Unitholders. The discretion given in the Partnership Agreement to the Managing General Partner in resolving conflicts of interest may significantly limit the ability of a Unitholder to challenge what might otherwise be a breach of fiduciary duty under Delaware law. In addition, holders of Common Units are deemed to have consented to certain actions that might otherwise be deemed conflicts of interest or a breach of fiduciary duty. The validity and enforceability of these types of provisions under Delaware law are uncertain. The Partnership Agreement provides that any borrowings by the Partnership shall not constitute a breach of any duty owed by the Managing General Partner, including borrowings that have the purpose or effect of enabling the Managing General Partner to receive Incentive Distributions or hastening the conversion of the Subordinated Units into Common Units. The Partnership Agreement permits the Managing General Partner to merge with and into Triarc (the 'Triarc Merger') without the prior approval of any Unitholder. It is expected that the Triarc Merger may occur in connection with the Spinoff Transactions. The Partnership Note contains a covenant of Triarc that, in the event of a Triarc Merger, Triarc will concurrently therewith pledge as security for the Partnership Loan certain assets of the Managing General Partner. See 'Cash Distribution Policy -- Partnership Loan' and 'Certain Information Regarding Triarc.' The Partnership Agreement does not prohibit the Partnership from engaging in roll-up transactions. Although the Managing General Partner has no present intention of causing the Partnership to engage in any such transaction, it is possible it will do so in the future. There can be no assurance that a roll-up transaction would not have a material adverse effect on a Unitholder's investment in the Partnership. The Managing General Partner (unless merged with and into Triarc) and the Special General Partner (as defined in the Glossary) are prohibited from conducting any business or having any operations other than those incidental to serving as general partners of the Partnership and the Operating Partnership so long as they are general partners of the Partnership. The Partnership Agreement does not restrict the ability of Affiliates of the Managing General Partner (other than the Special General Partner) to engage in any activities, except for the retail sale of propane to end users in the continental United States. The Managing General Partner's Affiliates (other than the Special General Partner) may compete with the Partnership in other propane related activities, such as trading, transportation, storage and wholesale distribution of propane. Further, in the event of the Triarc Merger the ability of the Managing General Partner to engage in activities other than those incidental to serving as a general partner of the Operating Partnership and the Partnership and to compete in other propane related activities, such as trading, transportation, storage and wholesale distribution, will not be restricted. Furthermore, the Partnership Agreement provides that the Managing General Partner and its Affiliates have no obligation to present business opportunities to the Partnership. TAX RISKS The availability to a Common Unitholder of federal income tax benefits of an investment in the Partnership depends, in large part, on the classification of the Partnership as a partnership for federal income tax purposes. Based on certain representations by the General Partners, Andrews & Kurth L.L.P., special counsel to the General Partners and the Partnership ('Counsel'), is of the opinion that, under current law, the Partnership will be classified as a partnership for federal income tax purposes. No ruling has been requested from the Internal Revenue Service (the 'IRS') with respect to classification of the Partnership as a partnership for federal income tax purposes or any other matter affecting the Partnership. A Unitholder will be required to pay income taxes on his allocable share of the Partnership's income, whether or not he receives cash distributions from the Partnership. Investment in Units by certain tax-exempt entities, regulated investment companies and foreign persons raises issues unique to such persons. For example, virtually all of the taxable income derived by most organizations exempt from federal income tax (including individual retirement accounts and other retirement plans) from the ownership of a Unit will be unrelated business taxable income and thus will be taxable to such a Unitholder. In the case of taxpayers subject to the passive loss rules (generally individuals and closely held corporations), losses generated by the Partnership, if any, will only be available to offset future income generated by the Partnership and cannot be used to offset income from other activities, including passive activities or investments. Passive losses which are not deductible because they exceed the Unitholder's income generated by the Partnership may be deducted in full when the Unitholder disposes of his entire investment in the Partnership in a fully taxable transaction to an unrelated party. A Unitholder will be required to file state income tax returns and pay state income taxes in some or all of the various jurisdictions in which the Partnership does business or owns property. The Partnership has been registered with the IRS as a 'tax shelter.' No assurance can be given that the Partnership will not be audited by the IRS or that tax adjustments will not be made. Any adjustments in the Partnership's tax returns will lead to adjustments in the Unitholders' tax returns and may lead to audits of the Unitholders' tax returns and adjustments of items unrelated to the Partnership. See 'Risk Factors,' 'Cash Distribution Policy,' 'Conflicts of Interest and Fiduciary Responsibility,' 'Description of the Common Units,' 'The Partnership Agreement' and 'Tax Considerations' for a more detailed description of these and other risk factors and conflicts of interest that should be considered in evaluating an investment in the Common Units. THE IPO AND ADDITIONAL TRANSACTIONS On July 2, 1996, the Partnership consummated the IPO and received therefrom net proceeds aggregating approximately $115.7 million. On July 22, 1996, the over-allotment option granted by the Partnership to the underwriters in the IPO (the 'IPO Over-Allotment Option') was exercised with respect to 111,074 Common Units, and the Partnership received net proceeds therefrom aggregating approximately $2.2 million, which the Partnership used for general partnership purposes. Concurrently with the closing of the IPO, both the Managing General Partner and the Special General Partner contributed substantially all of their assets (which assets did not include an existing intercompany note from Triarc, approximately $59.3 million of the net proceeds from the issuance of the First Mortgage Notes and certain other assets of the Managing General Partner) to the Operating Partnership (the 'Conveyance') as a capital contribution and the Operating Partnership assumed substantially all of the liabilities of the Managing General Partner and the Special General Partner (other than certain income tax liabilities), including the First Mortgage Notes and all indebtedness of the Managing General Partner outstanding under the Former Credit Facility (as defined below). Immediately thereafter, the Managing General Partner and the Special General Partner conveyed their limited partner interests in the Operating Partnership to the Partnership. As a result of such contributions, each of the Managing General Partner and the Special General Partner have a 1.0% general partner interest in the Partnership and a 1.0101% general partner interest in the Operating Partnership. In addition, the Managing General Partner received in exchange for its contribution to the Partnership 4,533,638 Subordinated Units and the right to receive the Incentive Distributions. Also immediately prior to the closing of the IPO, the Managing General Partner issued $125 million aggregate principal amount of First Mortgage Notes to certain institutional investors in a private placement. Approximately $59.3 million of the net proceeds from the sale of the First Mortgage Notes (the entire net proceeds of which were approximately $118.4 million) were used by the Managing General Partner to pay a dividend to Triarc. The remainder of the net proceeds from the sale of the First Mortgage Notes (approximately $59.1 million) were contributed by the Managing General Partner to the Operating Partnership in connection with the Conveyance and were used by the Operating Partnership to repay (in the manner described below) a portion of the Managing General Partner's indebtedness outstanding under the Revolving Credit and Term Loan Agreement, dated as of October 7, 1994, as amended, among the Managing General Partner, the Bank of New York, as Administrative Agent, certain Co-Agents and the several lending institutions party thereto (the 'Former Credit Facility') and to repay other indebtedness of the Managing General Partner and certain of its subsidiaries outstanding under equipment notes, notes issued in connection with acquisitions ('Acquisition Notes') and capital leases (collectively, 'Other Former Indebtedness'). First, approximately $30.1 million of such net proceeds were used by the Operating Partnership to repay the indebtedness outstanding under the Former Credit Facility which was evidenced by the Refunding Notes (as defined in the Former Credit Facility), and then the remainder of such net proceeds (approximately $29.1 million) together with cash on hand was used to repay other indebtedness outstanding under the Former Credit Facility and Other Former Indebtedness. After the repayment of the Refunding Notes and such other indebtedness as described above, the net proceeds of the IPO (approximately $115.7 million) were contributed to the Operating Partnership which used such proceeds to repay all remaining indebtedness under the Former Credit Facility, to make the Partnership Loan and to pay certain accrued management fees and tax sharing payments due to Triarc from the Managing General Partner. Concurrently with the closing of the IPO, the Operating Partnership also entered into the Bank Credit Facility, which includes a $15 million revolving credit facility to be used for working capital and other general partnership purposes (the 'Working Capital Facility') and the $40 million Acquisition Facility. These facilities were undrawn at the time of the consummation of the IPO and the transactions referred to above (collectively, the 'Transactions'). For additional information regarding the terms of the First Mortgage Notes and the Bank Credit Facility, see 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Description of Indebtedness.' For additional information regarding the terms of the Partnership Loan, see 'Cash Distribution Policy -- Partnership Loan.' On November 7, 1996, the Partnership issued and sold the 400,000 Common Units offered hereby to Merrill Lynch, Pierce, Fenner & Smith Incorporated (the 'Selling Unitholder') pursuant to a Purchase Agreement, dated as of such date, between the Partnership, certain of its Affiliates and the Selling Unitholder (the 'Purchase Agreement'). Such transaction, which was exempt from the registration requirements of the Securities Act, is referred to herein as the 'Private Placement.' The estimated net proceeds to the Partnership from the Private Placement were approximately $7.4 million. Such net proceeds were used by the Partnership for general partnership purposes. See 'The Selling Unitholder.' DISTRIBUTIONS AND PAYMENTS TO THE MANAGING GENERAL PARTNER AND ITS AFFILIATES The following table summarizes the distributions and payments made and to be made by the Partnership to the Managing General Partner and its Affiliates in connection with the Transactions and the ongoing operations of the Partnership. Such distributions and payments were determined by and among affiliated entities and, consequently, were not the result of arm's length negotiations. See 'Conflicts of Interest and Fiduciary Responsibility.' <TABLE> <S> <C> FORMATION STAGE The consideration paid to the Managing General Partner, the Special General Partner, Triarc and their Affiliates for the transfer of the propane business and related liabilities of National Propane to the Partnership...................... 4,533,638 Subordinated Units, an aggregate 4% unsubordinated general partner interest in the Partnership and the Operating Partnership on a combined basis (and the right to receive Incentive Distributions), and the assumption by the Operating Partnership of substantially all of the liabilities of the Managing General Partner and the Special General Partner, (other than certain income tax liabilities), including the First Mortgage Notes and all indebtedness of the Managing General Partner outstanding under the Former Credit Facility. The net proceeds of the IPO (approximately $115.7 million) were contributed to the Operating Partnership and used by the Operating Partnership together with cash on hand to make the $40.7 million Partnership Loan to Triarc, to repay approximately $12.8 million in accrued management fees and tax sharing payments due to Triarc and to repay a portion of the indebtedness of the Managing General Partner assumed by the Operating Partnership in connection with the Transactions. In addition, the Managing General Partner made a dividend to Triarc a portion (approximately $51.4 million) of an existing intercompany note and made a dividend of approximately $59.3 million in cash from the net proceeds of the sale of the First Mortgage Notes to Triarc. The remainder of the net proceeds from the sale of the First Mortgage Notes were used to repay indebtedness of the Managing General Partner and its subsidiaries. Accordingly, substantially all of the net proceeds of the IPO were paid to, or otherwise benefited, the Managing General Partner, the Special General Partner, Triarc and their Affiliates. See 'The IPO and Additional Transactions.' OPERATIONAL STAGE Distributions of Available Cash to the General Partners........................ Available Cash will generally be distributed 96% to the Unitholders (including to the Managing General Partner as holder of the Subordinated Units) and 4% to the General Partners, except that if distributions of Available Cash from Operating Surplus exceed the Target Distribution Levels (as defined below), the General Partners will receive a percentage of such excess distributions that will increase to up to approximately 50% of the excess distributions above the highest Target Distribution Level. On November 14, 1996, in connection with the payment of the Minimum Quarterly Distribution to the holders of Common Units in the amount of $0.525 per Common Unit, the Partnership paid a distribution to the Managing General Partner of $0.525 per Subordinated Unit (approximately $2.4 million in the aggregate) and a corresponding distribution to the General Partners in the aggregate amount of approximately $235,800. See 'Cash Distribution Policy.' </TABLE> <TABLE> <S> <C> Payments to the Managing General Partner and its Affiliates...................... In general, the management and employees of National Propane who managed and operated the propane business and assets prior to the IPO that are now owned by the Partnership continue to manage and operate the Partnership's business as officers and employees of the Managing General Partner and its Affiliates. The Managing General Partner does not receive any management fee or other compensation in connection with its management of the Partnership, but is reimbursed at cost for all direct and indirect expenses incurred on behalf of the Partnership, including the costs of compensation and employee benefit plans described herein properly allocable to the Partnership, and all other expenses necessary or appropriate to the conduct of business of, and allocable to, the Partnership. On a pro forma basis, an aggregate of approximately $56.8 million of expenses would have been reimbursed by the Partnership to the Managing General Partner in 1995 (comprising approximately $33.0 million in salary, payroll tax and other compensation paid to employees of the Managing General Partner and approximately $23.8 million for all other operating expenses). Affiliates of the Managing General Partner (including Triarc) may provide certain administrative services for the Managing General Partner on behalf of the Partnership and will be reimbursed for all direct and indirect expenses incurred in connection therewith. In addition, the Managing General Partner and its Affiliates may provide additional services to the Partnership, for which the Partnership will be charged reasonable fees as determined by the Managing General Partner. See 'Certain Relationships and Related Transactions' for a description of other ongoing arrangements between the Managing General Partner and its Affiliates and the Partnership. Withdrawal or removal of the General Partners................................ If the General Partners withdraw in violation of the Partnership Agreement or are removed by the Unitholders for Cause (as defined in the Glossary), the successor general partner will have the option to purchase the General Partner Interests (and the right to receive Incentive Distributions) for a cash payment equal to the fair market value thereof; if the Managing General Partner withdraws or is removed without Cause it will have the option to require the successor general partner to purchase the General Partner Interests (and the right to receive Incentive Distributions) from the departing General Partners for such price. If the General Partner Interests (and the right to receive Incentive Distributions) are not so purchased by the successor general partner, the General Partners have the right to convert such partner interests into a number of Common Units equal in value to the fair market value thereof as determined by an independent investment banking firm or other independent experts or to receive cash in exchange for such interests. LIQUIDATION STAGE Liquidation............................... In the event of any liquidation of the Partnership, the partners, including the General Partners, will be entitled to receive liquidating distributions in accordance with their respective capital account balances. See 'Cash Distribution Policy -- Distributions of Cash Upon Liquidation.' </TABLE> CASH AVAILABLE FOR DISTRIBUTION Available Cash will generally be distributed 96% to the Unitholders (including the Managing General Partner as the holder of Subordinated Units) and 4% to the General Partners, pro rata, except that if distributions of Available Cash exceed Target Distribution Levels (as defined in the Glossary) above the Minimum Quarterly Distribution, the General Partners will receive an additional percentage of such excess distributions that will increase to up to 50% of the distributions above the highest Target Distribution Level. See 'Cash Distribution Policy -- Incentive Distributions -- Hypothetical Annualized Yield.' The amount of Available Cash from Operating Surplus needed to distribute the Minimum Quarterly Distribution for four quarters on the Common Units (including the Common Units offered hereby) and Subordinated Units outstanding at the date of this Prospectus and on the General Partner Interests is approximately $24.6 million (approximately $14.1 million for the Common Units, $9.5 million for the Subordinated Units and $1.0 million for the General Partner Interests). Pro forma Available Cash from Operating Surplus generated during 1994 and 1995 (approximately $22.7 million and $17.6 million, respectively) would have been sufficient to cover the Minimum Quarterly Distribution on the Common Units and the related distribution on the General Partner Interests, but would have been insufficient by approximately $1.9 million and $7.0 million to cover the Minimum Quarterly Distribution on the Subordinated Units and the related distribution on the General Partner Interests in 1994 and 1995, respectively. The decline in pro forma Available Cash from Operating Surplus generated during 1995 was primarily due to the fact that temperatures during the winter of 1994-95 across the markets served by the Partnership were substantially warmer than the prior year. Pro forma Available Cash from Operating Surplus generated during the twelve months ended September 30, 1996 (approximately $21.5 million) would have been sufficient to cover the Minimum Quarterly Distribution on the Common Units and the related distribution on the General Partner Interests, but would have been insufficient by approximately $3.1 million to cover the Minimum Quarterly Distribution on the Subordinated Units and the related distribution on the General Partner Interests. Pro forma Available Cash from Operating Surplus generated during the nine months ended September 30, 1996 would have been approximately $11.6 million; however, because of the highly seasonal nature of the Partnership's business, such amount is not necessarily indicative of the results that will be obtained over twelve months. The Partnership's revenues and cash flows have historically been highest in the first and fourth quarters, which are the heating season, and the lowest in the second and third quarters, which are the non-heating season. Although such $11.6 million generated during the nine months ended September 30, 1996 would have been deficient by approximately $6.8 million to cover Minimum Quarterly Distributions on the Common Units, the Subordinated Units and related distributions on the General Partners Interests during such nine months, the Partnership would have had sufficient cash on hand or available to it from its credit line for the payment of the Minimum Quarterly Distributions during the seasonally low cash flow second and third quarters of 1996. During the Partnership's normal business cycles it will establish reserves during heating season quarters for, among other things, payment of the Minimum Quarterly Distribution on the Common Units in subsequent quarters and future debt payments, decreasing the Amount of Available Cash from Operating Surplus that would have been distributed for such heating season quarters. For the calculation of Pro Forma Operating Surplus, see 'Cash Distribution Policy -- Cash Available for Distribution.' Based on the Partnership's actual results of operations for the eleven months ended November 30, 1996 and limited data about operations in December 1996, the Partnership believes that it will generate during 1996 Available Cash from Operating Surplus of approximately $18.7 million, although there can be no assurance it will generate such amount. The amounts of pro forma Available Cash from Operating Surplus for 1994 and 1995 and for the twelve months and nine months ended September 30, 1996 set forth above were derived in part from the pro forma financial statements of the Partnership in the manner set forth in the table entitled 'Pro Forma Operating Surplus' set forth in 'Cash Distribution Policy -- Cash Available for Distribution.' The pro forma adjustments are based upon currently available information and certain estimates and assumptions. The pro forma financial statements do not purport to present the results of operations of the Partnership had the Partnership actually commenced operations as of the date indicated. Furthermore, the pro forma financial statements are based on accrual accounting concepts while Available Cash and Operating Surplus are defined in the Partnership Agreement on a cash accounting basis. As a consequence, the amounts of pro forma Available Cash from Operating Surplus shown above should only be viewed as a general indication of the amounts of Available Cash from Operating Surplus that may in fact have been generated by the Partnership had it been formed in earlier periods. Available Cash is defined in the Glossary and generally means, with respect to any fiscal quarter of the Partnership, all cash on hand at the end of such quarter less the amount of cash reserves that is necessary or appropriate in the discretion of the Managing General Partner to (i) provide for the proper conduct of the Partnership's business, (ii) comply with applicable law or any Partnership debt instrument or other agreement, or (iii) provide funds for distributions to Unitholders and the General Partners in respect of any one or more of the next four quarters. Operating Surplus is defined in the Glossary and refers generally to (i) the cash balance of the Partnership on the date the Partnership commenced operations, plus $15.4 million, plus all cash receipts of the Partnership from its operations, less (ii) all Partnership operating expenses, debt service payments (including reserves therefor but not including payments required in connection with the sale of assets or any refinancing with the proceeds of new indebtedness or any equity offering), maintenance capital expenditures and reserves established for future Partnership operations. For a more complete definition of Available Cash and Operating Surplus, see the Glossary. In addition, certain provisions in the First Mortgage Notes and the Bank Credit Facility, under certain circumstances, restrict the Partnership's ability to make distributions to its partners. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Description of Indebtedness.' Approximately $5.5 million of the Partnership's annual cash receipts are derived from interest payments from Triarc under the Partnership Loan. On a pro forma basis, such amount represents approximately 31% of the Partnership's Available Cash from Operating Surplus in 1995. Consequently, the Partnership's ability to make the Minimum Quarterly Distribution to all Unitholders will depend in part on Triarc's ability to make interest payments under the Partnership Loan. For a description of the Partnership Loan and certain information regarding Triarc, see 'Cash Distribution Policy -- Partnership Loan' and 'Certain Information Regarding Triarc,' respectively. PARTNERSHIP STRUCTURE AND MANAGEMENT The Partnership's activities are conducted through the Operating Partnership and its corporate and partnership subsidiaries. The Managing General Partner serves as the managing general partner, and National Propane SGP, Inc. (the 'Special General Partner'), a wholly owned subsidiary of the Managing General Partner, serves as the non-managing general partner, of the Partnership and the Operating Partnership. The Managing General Partner and the Special General Partner are together referred to herein as the 'General Partners.' Each of the General Partners owns a 1.0% and 1.0101% general partner interest in each of the Partnership and the Operating Partnership, respectively. The Partnership owns a 97.9798% limited partner interest in the Operating Partnership. Each of the Managing General Partner and the Special General Partner owns a 2% General Partner Interest in the Partnership and the Operating Partnership on a combined basis. Provided that the Managing General Partner has not merged with and into Triarc, the Special General Partner may convert all or a portion of its General Partner Interest into a number of Units having rights to distributions of Available Cash from Operating Surplus equal to the distribution rights with respect to Available Cash from Operating Surplus of the General Partner Interest so converted. References herein to the General Partner Interests or to distributions to the General Partners of 4% of Available Cash are references to the amount of the General Partners' aggregate unsubordinated percentage interest in the Partnership and the Operating Partnership on a combined basis. In general, the management and employees of National Propane who managed and operated the propane business and assets prior to the IPO that are now owned by the Partnership continue to manage and operate the Partnership's business as officers and employees of the Managing General Partner and its Affiliates. The Partnership does not have any officers or employees of its own. The Managing General Partner does not receive any management fee or other compensation in connection with its management of the Partnership, but is reimbursed by the Partnership at cost for all direct and indirect expenses incurred on behalf of the Partnership, including the costs of compensation and employee benefit plans described herein properly allocable to the Partnership, and all other expenses necessary or appropriate to the conduct of the business of, and allocable to, the Partnership. The Partnership Agreement provides that the Managing General Partner will determine the expenses that are allocable to the Partnership in any reasonable manner determined by the Managing General Partner in its sole discretion. Affiliates of the General Partners' (including Triarc) may provide administrative services for the General Partners on behalf of the Partnership and will be reimbursed for all expenses incurred in connection therewith. In addition, the General Partners and their Affiliates (including Triarc) may provide additional services to the Partnership, for which the Partnership will be charged reasonable fees as determined by the Managing General Partner. UNIT OPTION PLAN Effective upon the closing of the IPO, the Managing General Partner adopted the National Propane Corporation 1996 Unit Option Plan (the 'Option Plan'), which permits the issuance of options to purchase Common Units and Subordinated Units and the grant of Unit appreciation rights ('UARs') covering up to an aggregate of 1,250,000 Common Units and Subordinated Units (subject to adjustment in certain circumstances) plus an additional number of Units equal to 1% of the number of Units outstanding as of each December 31 following the Option Plan's effective date which will be added to the total number of Units that may be issued thereafter. The number of Units available for issuance will also be increased by the number of Units received by the Managing General Partner as payment of the exercise price of options and by the number of Units purchased by the Managing General Partner from an amount equal to the cash proceeds received by the Managing General Partner on the exercise of options. As of December 31, 1996, no options or UARs had been granted under the Option Plan. See 'Management -- Unit Option Plan.' The following chart depicts the organization and ownership of the Partnership, the Operating Partnership and the Operating Partnership's corporate subsidiary. The percentages reflected in the following chart represent the approximate ownership interest in each of the Partnership and the Operating Partnership, individually, and not on an aggregate basis. Except in the following chart, the ownership percentages referred to in this Prospectus (including those given below in the box entitled 'Effective Aggregate Ownership of the Partnership and the Operating Partnership') reflect the aggregate ownership of the Partnership and the Operating Partnership on a combined basis. [GRAPHICAL REPRESENTATION of the ownership structure of the Partnership, the Operating Partnership, the General Partners and relevant Affiliates. Triarc owns the General Partner 75.7% directly and 24.3% through its wholly-owned subsidiary SEPSCO. Each of the General Partner and the Special General Partner, its wholly-owned subsidiary, own a 1.0% and 1.0101% unsubordinated general partner interest in the Partnership and the Operating Partnership, respectively. The General Partner owns 4,533,638 Subordinated Units representing a 41.4% general partner interest in the Partnership and the Public Unitholders own 6,190,476 Common Units representing a 56.6% limited partner interest in the Partnership. The Partnership owns a 97.9798% limited partner interest in the Operating Partnership. National Sales is a wholly-owned subsidiary of the Operating Partnership.]
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011584_fine-host_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011584_fine-host_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3554582de077ecd3533bebc3e4b774a2a4c8acf9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011584_fine-host_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OR REQUIRES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "FINE HOST" ARE TO FINE HOST CORPORATION AND ITS SUBSIDIARIES. THE COMPANY Fine Host Corporation is a leading contract food service management company, providing food and beverage concession, catering and other ancillary services at more than 750 facilities located in 38 states, primarily through multi-year contracts. Fine Host targets four distinct markets within the contract food service industry: the recreation and leisure market (arenas, stadiums, amphitheaters, civic centers and other recreational facilities); the convention center market; the education market (colleges, universities and elementary and secondary schools); and the business dining market (corporate cafeterias, office complexes and manufacturing plants). The Company is the exclusive provider of food and beverage services at substantially all of the facilities it serves. The Company estimates that the United States contract food service industry had annual revenues of approximately $96 billion in 1995, of which approximately $60 billion was in markets in which the Company presently competes. In this industry, the facility owner, rather than the food service provider, is primarily responsible for attracting patrons. As a result, the Company does not incur the expense of marketing to the broader public and is able to focus on operations, client satisfaction, account retention and new account development. Fine Host was founded as a start-up company in 1985 by experienced contract food service industry executives and has grown to a business with net sales of $127.9 million in fiscal 1996 and $49.5 million for the three months ended March 26, 1997. Throughout its history, the Company has focused its efforts exclusively on the contract food service industry, unlike most of its national competitors. The Company achieved early success in the industry by focusing on facilities generating $1 million to $4 million in annual food and beverage sales. The Company believes that these "middle-market" facilities generally provide greater profit margins and require less capital investment than larger facilities. Middle-market facilities serviced by the Company include the Albuquerque Convention Center in Albuquerque, New Mexico; the D. L. Lawrence Convention Center in Pittsburgh, Pennsylvania; the Pyramid Arena in Memphis, Tennessee; and Xavier University in New Orleans, Louisiana. This middle-market focus has been supplemented by several contracts at larger facilities such as Pro Player Stadium (home of the Miami Dolphins and the Florida Marlins and the site of two Super Bowls), the Orange County Convention Center in Orlando, Florida (one of the largest convention centers in the world) and Boise State University in Boise, Idaho. Servicing these larger facilities gives the Company high visibility in the industry and strengthens its credibility when bidding on new contracts or pursuing acquisitions. Fine Host has developed and implemented various operating strategies and systems, including labor and product cost management, quality control programs, facility-design and customized menu design capabilities and extensive on-site marketing support. The Company believes that these operating techniques have led to significant increases in sales at many of the facilities it serves. The Company's operating strategies and systems are implemented by localized management teams that are given the freedom and authority to make operational decisions. The Company emphasizes flexibility and responsiveness in consistently providing high quality and client satisfaction while tightly controlling labor and overhead costs at the local level. As the Company has grown, it has been able to achieve economies of scale and develop a strong corporate image and national reputation. The Company has increased its net sales and profits by renewing existing contracts, by successfully bidding on new targeted accounts and by making acquisitions. The Company believes that its strong operating performance and focus on client satisfaction have enabled it to retain and renew contracts. Fine Host has retained the food and beverage business at each of the 24 public convention centers at which it has been awarded a contract without the loss of any such contract, and has renewed each of the 13 convention center contracts that have come up for renewal. The Company believes its ability to obtain new contracts is enhanced by the experience of its management team, its geographic diversity and market penetration, its expansion into the education and corporate dining markets and its establishment of an international presence. From April 1993 through January 1997, the Company completed nine acquisitions of companies in the contract food service industry, which have accounted for a significant part of the Company's growth. Fine Host believes there are other opportunities to expand its business through acquisition, particularly in the education and corporate dining markets, as well as in markets where the Company does not primarily operate, such as hospitals, healthcare facilities and correctional facilities. The Company believes that it can integrate acquired companies successfully without a significant increase in general and administrative expenses. See "Risk Factors--Risk of Inability to Operate or Integrate Acquired Businesses; Expenses Associated with Acquisition Strategy" and "Business--Growth Opportunities." Fine Host's growth has accelerated since its initial public offering on June 25, 1996 (the "Initial Public Offering") with the successful completion of five strategic acquisitions. These acquisitions significantly increase the Company's presence in the education and business dining markets in the northeastern and mid-Atlantic regions of the United States. Four of these acquisitions, Ideal Management Services, Inc. ("Ideal"), Republic Management Corp. of Massachusetts ("Republic"), Service Dynamics Corp. ("Service Dynamics") and Serv-Rite Corporation ("Serv-Rite"), increase the Company's presence in the school nutrition (grades K-12) ("School Nutrition") market, a market estimated by the U.S. government to be approximately $10 billion in 1995. The Company believes that all of these companies have experienced management teams and strong operating results at their facilities, yet can benefit from the Company's size and operating infrastructure. On February 12, 1997, the Company completed a follow-on offering (the "Follow-On Offering") of 2,875,000 shares of Common Stock, consisting of 2,689,000 shares sold by the Company and 186,000 shares sold by certain selling stockholders, resulting in net proceeds to the Company of approximately $59.1 million. The Company was incorporated in Delaware in November 1985 and its principal executive offices are located at 3 Greenwich Office Park, Greenwich, Connecticut 06831. Its telephone number is (203) 629-4320. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling Stockholders... 941,350 shares Common Stock outstanding........................... 8,959,266 shares(1) Nasdaq National Market symbol...................... FINE </TABLE> - ------------------------ (1) Based on shares outstanding as of May 8, 1997. Does not include 501,444 shares of Common Stock issuable upon the exercise of outstanding stock options and 80,917 shares of Common Stock issuable upon conversion of outstanding convertible notes. An aggregate of 34,334 additional shares of Common Stock has been reserved for future grants under the Company's stock plans. See "Management--Compensation Pursuant to Plans" and "Description of Capital Stock--Convertible Notes." SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> THREE MONTHS ENDED FISCAL YEARS (1) ----------- ----------------------------------------------------- MARCH 27, 1992 1993 1994 1995 1996 1996 --------- --------- --------- --------- --------- ----------- <S> <C> <C> <C> <C> <C> <C> (IN THOUSANDS, EXCEPT PER SHARE AND CONTRACT DATA) STATEMENT OF INCOME DATA: Net sales............................................. $ 39,429 $ 61,212 $ 82,119 $ 95,462 $ 127,925 $ 24,160 Gross profit.......................................... 4,031 5,396 8,286 9,886 14,222 2,530 Income from operations................................ 949 2,747 4,880 6,260 8,834 1,194 Net income before accretion........................... $ 340 $ 1,084 $ 1,866 $ 2,196 $ 3,804 $ 259 Net income per share assuming full dilution (2)....... $ 0.17 $ 0.24 $ 0.49 $ 0.39 $ 0.50 $ (0.22) Average number of shares of Common Stock outstanding assuming full dilution.............................. 2,048 3,087 3,287 3,330 5,005 3,510 SELECTED OPERATING DATA: EBITDA (3)............................................ $ 2,154 $ 4,631 $ 7,563 $ 10,416 $ 14,078 $ 2,199 Net cash provided by operating activities............. 1,676 3,765 2,570 2,971 346 1,630 Net cash used in investing activities................. (2,295) (7,669) (9,046) (8,124) (25,875) (6,725) Net cash provided by financing activities............. 463 2,737 7,632 4,255 29,619 5,823 Total contracts (at end of period) (4)................ 28 42 81 95 341 156 <CAPTION> MARCH 26, 1997 ----------- <S> <C> STATEMENT OF INCOME DATA: Net sales............................................. $ 49,452 Gross profit.......................................... 5,242 Income from operations................................ 2,027 Net income before accretion........................... $ 848 Net income per share assuming full dilution (2)....... $ 0.11 Average number of shares of Common Stock outstanding assuming full dilution.............................. 7,951 SELECTED OPERATING DATA: EBITDA (3)............................................ $ 4,042 Net cash provided by operating activities............. 324 Net cash used in investing activities................. (15,716) Net cash provided by financing activities............. 24,432 Total contracts (at end of period) (4)................ 713 </TABLE> <TABLE> <CAPTION> MARCH 26, 1997 --------------- <S> <C> (IN THOUSANDS) BALANCE SHEET DATA: Total debt........................................................................................ $ 8,735 Stockholders' equity.............................................................................. 107,454 </TABLE> - ---------------------------------- (1) The Company's fiscal year ends on the last Wednesday of December. The 1992 fiscal year was a 53-week period. (2) Net income (loss) per share assuming full dilution is calculated based upon net income less accretion to the redemption value of warrants issued in fiscal 1993. Accretion to redemption value of warrants was $230 ($0.07 per share), $250 ($0.08 per share), $900 ($0.27 per share) and $1,300 ($0.26 per share) for fiscal 1993, 1994, 1995 and 1996, respectively, and $1,040 ($0.30 per share) and $0 for the three months ended March 27, 1996 and March 26, 1997, respectively. (3) Represents earnings before interest expense, income tax expense and depreciation and amortization ("EBITDA"). EBITDA is not a measurement in accordance with generally accepted accounting principles ("GAAP") and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by GAAP or as a measure of the Company's profitability or liquidity. The Company has included information concerning EBITDA herein because management believes EBITDA provides useful information regarding the cash flow of the Company and its ability to service debt. (4) Represents total contracts other than contracts for one-time or special events.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011630_promedco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011630_promedco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6b36ee930f29ba628a6d5a279a54fffe7e8008f3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011630_promedco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used herein, the terms "ProMedCo" and the "Company" refer to ProMedCo Management Company and its consolidated subsidiaries. Except as otherwise indicated, all information in this Prospectus assumes (i) the conversion of all outstanding shares of Series A Redeemable Convertible Preferred Stock and Class B Common Stock of the Company into Common Stock and the termination of the Company's contingent obligation to repurchase Redeemable Common Stock, and (ii) no exercise of the Underwriters' over-allotment option. THE COMPANY ProMedCo is a physician practice management company that consolidates its affiliated physician groups into primary-care-driven multi-specialty networks. The Company focuses on pre-managed-care secondary markets located principally outside of or adjacent to large metropolitan areas. The Company believes that primary care physicians increasingly will be the principal point of access to the healthcare delivery system and will control, directly or indirectly, a growing percentage of healthcare expenditures, and it therefore affiliates with physician groups having a primary care orientation. ProMedCo assists in expanding and integrating the affiliated groups into comprehensive multi-specialty networks to increase their market presence. The groups expand through affiliations with additional primary care physicians and specialists and selective additions of ancillary services. The groups are thus well positioned to become the physician component of locally developing managed care delivery systems. In addition to providing operating and expansion capital, the Company provides its affiliated groups with a broad range of strategic and management expertise and services. ProMedCo commenced operations in December 1994 and has since affiliated with seven physician groups aggregating 146 physicians and 46 physician extenders (primarily physician assistants and nurse practitioners) at 24 sites in Texas, Alabama, Kentucky, and Nevada. Currently, approximately 72% of the Company's affiliated physicians are primary care providers. Following the Offering, approximately 46% of ProMedCo's outstanding Common Stock will be owned by the Company's officers, directors, and affiliated physicians. When affiliating with a physician group, the Company typically purchases the group's non-real estate operating assets and enters into a long-term service agreement with the group in exchange for a combination of Common Stock, cash, other securities of the Company, and/or assumption of liabilities. Under the service agreement, the Company receives a fixed percentage (typically 15%) of the physician group's operating income (as defined) plus a percentage (typically a variable percentage ranging from 25% to 50%, depending upon the amount of revenue) of any surpluses in the group's revenues under risk-sharing arrangements pursuant to capitated managed care contracts. Although the group's physicians retain full control over the practice of medicine, ProMedCo manages all day-to-day operations other than the provision of medical services. Through a policy council, the physicians set broad management and operational policy jointly with Company representatives. The key elements of the Company's strategy are to (i) affiliate with primary-care-oriented multi-specialty groups; (ii) continue to penetrate pre-managed-care markets; (iii) expand its affiliated groups' market presence through addition of physicians and selected ancillary services; (iv) preserve the local autonomy of the Company's affiliated physician groups and maintain decentralized management; and (v) align the Company's economic interests with those of its physician partners. The Company was incorporated in Texas in 1993 and reincorporated in Delaware in January 1997. Its executive offices are located at 801 Cherry Street, Suite 1450, Fort Worth, Texas 76102, and its telephone number is (817) 335-5035. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........................... 4,000,000 shares Common Stock to be outstanding after the Offering............. 8,821,657 shares(1) Use of proceeds............................................... Acquisitions and working capital, including repayment of certain indebtedness Nasdaq National Market symbol................................. PMCO </TABLE> - --------------- (1) Based upon the number of shares outstanding as of December 31, 1996. Does not include (i) 2,033,333 shares to be issued on the first day of the calendar month following the closing of the Offering in connection with the acquisition of the assets of Abilene Diagnostic Clinic Practices ("Abilene"), (ii) 400,000 shares to be issued in connection with the merger with Western Medical Management Corp., Inc. (the "Reno Merger") which is expected to be consummated upon closing of the Offering, (iii) 4,030,525 shares reserved for issuance upon exercise of outstanding options and warrants with a weighted average exercise price of $3.10 per share, and (iv) 200,030 shares reserved for conversion of outstanding convertible subordinated notes issued in connection with acquisitions. See "Business -- Affiliation Structure" and "Management -- Stock Option Plans," and "-- Employee Stock Purchase Plan." SUMMARY FINANCIAL DATA <TABLE> <CAPTION> JULY 1, 1994 YEAR ENDED (INCEPTION) TO DECEMBER 31, PRO FORMA DECEMBER 31, -------------------------------- AS ADJUSTED 1994 1995 1996 1996(1)(2)(3) -------------- -------------- -------------- ------------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Physician groups revenue, net............ $ -- $1,918,029 $34,641,222 $64,385,782 Less: amounts retained by physician groups................................. -- 759,513 15,322,220 26,525,100 -------------- -------------- -------------- ------------- Management fee revenue................... -- 1,158,516 19,319,002 37,860,682 Net income (loss)........................ (169,890) (697,342) (549,305) 83,180 Net income (loss) per share.............. $ (0.03) $ (0.09) $ (0.07) $ 0.01 Weighted average number of common shares outstanding............................ 6,522,237 7,857,308 7,914,560 14,841,889(4) OTHER DATA (AT END OF PERIOD): Affiliated physicians.................... 32 146 Affiliated physician groups.............. 2 7 Number of service sites.................. 4 24 Number of states......................... 1 4 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ---------------------------------------------- PRO PRO FORMA ACTUAL FORMA(5) AS ADJUSTED(6) ----------- ----------- -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents........................... $ 1,633,534 $ 1,995,274 $34,302,674 Working capital..................................... 2,830,140 3,453,883 35,761,283 Total assets........................................ 28,470,335 42,759,774 74,502,747 Long-term debt, less current maturities............. 7,867,847 8,206,959 4,049,932 Redeemable equity securities........................ 3,949,417 -- -- Total stockholders' equity.......................... 11,177,764 26,673,389 62,573,389 </TABLE> - --------------- (1) Gives effect to the following transactions as if they had been completed on January 1, 1996: (i) the affiliations with Cullman Primary Care, P.C., Morgan-Haugh, P.S.C., HealthFirst Medical Group, P.A., King's Daughters Clinic, P.A., and Abilene (collectively, the "Acquisitions") and (ii) the Reno Merger. The acquisition of the assets of Abilene by the Company will be completed on the first day of the calendar month following the closing of the Offering (the "Abilene Acquisition"). See "Pro Forma Consolidated Financial Information." (2) Adjusted to give effect to the sale of 4,000,000 shares of Common Stock offered by the Company at an assumed public offering price of $10.00 per share and the application of the estimated net proceeds therefrom, assuming the Offering was completed January 1, 1996. See "Use of Proceeds." (3) Includes merger costs of $682,269, recorded in the historical financial statements of Reno, for expenses associated with the Reno Merger. (4) Gives effect to the conversion into Common Stock of all outstanding shares of Series A Redeemable Convertible Preferred Stock, and the termination of the Company's contingent obligation to repurchase Redeemable Common Stock. (5) Gives effect to the Abilene Acquisition and the Reno Merger as if they had been completed on December 31, 1996. (6) Adjusted to give effect to the sale of 4,000,000 shares of Common Stock offered by the Company at an assumed public offering price of $10.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011632_peritus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011632_peritus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a164e3a23a2b2bb2d324aa47e094d917d8bce511
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011632_peritus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted herein, all information in this Prospectus (i) reflects the filing in May 1997 of Articles of Amendment to the Company's Articles of Organization redesignating the Company's Class A Voting Common Stock as Common Stock (the "Common Stock"), (ii) gives effect upon the closing of this offering to the lapse of the Redeemable Common Stock Right and the conversion of the Company's Class B Non-Voting Common Stock (the "Class B Common Stock"), Series A Convertible Preferred Stock and Series B Convertible Preferred Stock (together, the "Convertible Preferred Stock") into an aggregate of 3,822,903 shares of Common Stock and (iii) assumes no exercise of the Underwriters' over- allotment option. See "Description of Capital Stock," "Underwriting" and Note 10 of Notes to the Company's Consolidated Financial Statements. THE COMPANY Peritus Software Services, Inc. ("Peritus" or the "Company") provides software products and services that enable organizations to improve the productivity, quality and effectiveness of their information technology ("IT") systems maintenance or "software evolution" functions. The Company's solutions, which employ software tools, methodologies and processes, are designed to automate the labor-intensive processes involved in conducting "mass change" and other software maintenance tasks. In 1996, the Company released its first software product, its AutoEnhancer/2000 software, which is aimed at the most pressing mass change challenge, the "year 2000 problem." The Company licenses this software directly to end users as well as through consultants, systems integrators (together, "value added integrators") and distributors. The Company also provides software maintenance outsourcing services to large organizations that seek to enhance the productivity of their IT systems and application software maintenance functions. Organizations worldwide are faced with the challenge of modifying, enhancing and adapting their IT systems and evolving their software to respond to a changing and more competitive business environment. This challenge has increased with the broadening complexity of IT and the continued evolution of mainframe systems, as well as the advent of distributed, client/server computing and the proliferation of third-party enterprise software applications. One of the most crucial software evolution challenges facing IT departments is the cost-effective implementation of mass changes to application systems and their associated databases. Examples of mass change problems include the year 2000 problem, which is the inability of certain computer systems to properly interpret dates for the year 2000 and beyond, the European Union's expected conversion to the euro currency, the anticipated expansion in the number of digits in Japan's telephone numbers and the extension of the number of digits or other characters in zip codes, product codes and account numbers. According to its January 1993 ADM Research Note, Gartner Group, Inc. estimated that, within the established worldwide IT infrastructure, up to 200 billion lines of COBOL software code have been written to support applications, many of which are mission-critical. In addition, between 60% to 80% of the average annual IT application development budget is spent on the maintenance of legacy applications. Although the maintenance function within IT departments has received little management attention historically, the impending year 2000 problem, with an estimated cost of between $300 and $600 billion to fix, represents the most significant IT maintenance challenge to date. The Company's AutoEnhancer/2000 software is designed to automate the critical correction phase of a year 2000 renovation. The Company has entered into agreements with a number of leading value added integrators and distributors, including Bull HN Information Systems Inc., a related party, CIBER, Inc., Computer Sciences Corp., IBM Global Services and Keane, Inc., which license the Company's software tool for use in serving their clients. The Company also licenses its AutoEnhancer/2000 software tool directly to end users, including Metropolitan Life Insurance Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which are employing the tool in-house as part of their year 2000 renovation efforts. During 1996 and the three months ended March 31, 1997, revenue from the licensing of the AutoEnhancer/2000 software represented 33.9% and 52.7% of the Company's total revenue, respectively, and the Company expects that such license revenue will continue to represent a significant percentage of its total revenue for the foreseeable future. In June 1997, the Company entered into a joint marketing agreement with VIASOFT, Inc., a provider of enterprise application management solutions, to form a joint marketing arrangement that would combine complementary product and services offerings in a "best practice" suite of year 2000 solutions. The Company's software maintenance outsourcing services are provided on a fixed-fee basis and employ the Company's proprietary software tools, methodologies and processes to generate productivity gains through the automation of the software evolution process. Under maintenance outsourcing engagements, the Company typically assumes responsibility for providing software maintenance services for the client. Productivity gains can be realized through contract pricing that guarantees reductions in IT costs and/or measurable improvements in the quality and throughput of maintenance tasks. The Company provides its outsourcing services pursuant to multi-year engagements to a number of large organizations, including Advanced Micro Devices, Inc., Bull HN Information Systems Inc., a related party, Computervision Corporation, MicroAge Computer Center, Inc., NYNEX and Stratus Computer, Inc. The Company also provides its productivity-enhancing maintenance techniques to clients that maintain their source code in-house through the Company's technology transfer services. The Company's objective is to establish leadership in providing solutions based on software tools and methodologies that significantly enhance the productivity of the software evolution process. The Company intends to accomplish this goal by developing additional product extensions from its core technology that are aimed at specific mass change challenges. In addition, the Company intends to leverage the relationships developed through its year 2000 products and services into long-term outsourcing engagements and future mass change sales opportunities. Peritus is a Massachusetts corporation organized in August 1991. The Company's principal executive offices are located at 304 Concord Road, Billerica, Massachusetts 01821-3485, and its telephone number is (508) 670-0800. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 2,800,000 shares Common Stock offered by the Selling Stockholders... 700,000 shares Common Stock to be outstanding after the offering.. 12,822,304 shares (1) Use of proceeds.................................... For (i) repayment of certain existing indebtedness, (ii) research and development, (iii) working capital and other general corporate purposes and (iv) possible acquisitions. Nasdaq National Market symbol...................... PTUS </TABLE> - -------- (1) Based on the number of shares of Common Stock outstanding on June 30, 1997. Excludes an aggregate of 3,012,957 shares of Common Stock reserved under the Company's 1992 Long-Term Incentive Plan, all of which shares were subject to outstanding options as of June 30, 1997 at a weighted average exercise price of $2.28 per share. Also excludes an aggregate of 2,350,000 shares of Common Stock reserved under the Company's 1997 Stock Incentive Plan, 1997 Director Stock Option Plan and 1997 Employee Stock Purchase Plan, 469,500 of which shares were subject to outstanding options as of June 30, 1997 at an exercise price of $10.00 per share. Also excludes 312,500 shares of Common Stock issuable upon the exercise of outstanding warrants as of June 30, 1997 at an exercise price of $1.60 per share. See "Management--Executive Compensation" and Notes 10 through 14 of Notes to the Company's Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------ --------------- 1992 1993 1994 1995 1996 1996 1997 ----- ------ ------ ------- ------- ------- ------ <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue: Outsourcing services... $ 746 $1,798 $7,130 $16,400 $10,190 $ 2,244 $2,519 License................ -- -- -- -- 6,526 -- 4,144 Other services......... 117 433 742 2,105 2,519 404 1,196 ----- ------ ------ ------- ------- ------- ------ Total revenue (1).... 863 2,231 7,872 18,505 19,235 2,648 7,859 Cost of revenue: Outsourcing services... 517 841 4,700 9,602 8,488 2,234 2,045 License................ -- -- -- -- 162 -- 127 Other services......... 103 306 319 2,421 2,931 506 1,289 ----- ------ ------ ------- ------- ------- ------ Total cost of revenue............. 620 1,147 5,019 12,023 11,581 2,740 3,461 ----- ------ ------ ------- ------- ------- ------ Gross profit (loss)...... 243 1,084 2,853 6,482 7,654 (92) 4,398 Total operating expenses................ 357 889 2,209 6,189 12,398 2,762 3,942 ----- ------ ------ ------- ------- ------- ------ Income (loss) from operations.............. (114) 195 644 293 (4,744) (2,854) 456 Net income (loss)........ $(112) $ 188 $ 305 $ 55 $(4,921) $(2,712) $ 406 Pro forma net income (loss) per share (2).... $ (0.46) $ 0.03 Weighted average shares used to compute pro forma net income (loss) per share (2)........... 10,695 12,711 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------ PRO FORMA ACTUAL AS ADJUSTED (3) ------- --------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.............................. $ 5,022 $36,919 Working capital........................................ 8,406 40,303 Total assets........................................... 15,712 47,609 Long-term debt, net of current portion................. 1,476 533 Redeemable stock....................................... 12,546 -- Stockholders' equity (deficit)......................... (3,160) 42,226 </TABLE> - -------- (1) Revenue (in thousands) from related parties in the years ended December 31, 1992, 1993, 1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997 was $745, $824, $4,317, $10,124, $6,443, $1,179 and $975, respectively. See the Company's Consolidated Financial Statements. (2) See Note 2 of Notes to the Company's Consolidated Financial Statements for an explanation of the determination of pro forma net income (loss) per share. (3) Gives effect to (i) the conversion of all outstanding shares of Class B Common Stock and Convertible Preferred Stock into Common Stock and the lapse of the Redeemable Common Stock Right upon the closing of this offering, and (ii) the sale by the Company of the 2,800,000 shares of Common Stock offered hereby, and the application of a portion of the estimated net proceeds therefrom to repay certain indebtedness, at an assumed initial public offering price of $13.00 per share, after deducting the estimated underwriting discount and offering expenses. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011657_titanium_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011657_titanium_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2ab8279931b12b086b29fd4b07da531afa445c5f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011657_titanium_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. References to the "Company" or "TIMET" in this Prospectus, except where otherwise indicated, (i) include the businesses acquired by the Company from IMI plc (the "IMI Titanium Business") pursuant to an acquisition completed on February 15, 1996 (the "IMI Titanium Acquisition"), and (ii) include the assets acquired by the Company from Axel Johnson Metals, Inc. ("AJM") pursuant to an acquisition completed on October 1, 1996 (the "AJM Acquisition"). See "--1996 Acquisitions," and "Business--Recent Acquisitions and Capital Transactions." References to the "Company" or "TIMET" in this Prospectus for periods prior to and including December 31, 1995, except when otherwise indicated, exclude the IMI Titanium Business, and such references for periods prior to October 1, 1995, except where otherwise indicated, exclude the businesses acquired in the AJM Acquisition. OVERVIEW Titanium Metals Corporation ("TIMET" or the "Company") is one of the world's leading integrated producers of titanium sponge and mill products, has the largest sales volume worldwide and is the largest supplier of titanium to the aerospace and industrial markets. The Company believes it is the low-cost producer of titanium sponge and melt products. Due to its economies of scale, manufacturing expertise and past investment in technology, TIMET believes that it is well-positioned to capitalize on the improved fundamentals in the titanium industry. TIMET's products include: titanium sponge, the basic form of titanium metal used in processed titanium products; titanium ingot and slab, the result of melting sponge and titanium scrap, either alone or with various other alloying elements; and forged and cast products produced from ingot or slab, including billet, bar, flat products (plate, sheet, and strip), tubular products (welded tubing and pipe), extrusions, wire and castings. Titanium is one of the newest specialty metals, having first been manufactured for commercial use in the 1950s. Titanium's unique combination of corrosion resistance, elevated-temperature performance and high strength-to-weight ratio makes it particularly desirable for use in commercial and military aerospace applications in which these qualities are essential design requirements. While aerospace applications have historically accounted for a substantial portion of the worldwide demand for titanium (more than half of the Company's sales in 1996), the number of end-use markets for titanium has expanded substantially. Today, numerous industrial uses for titanium exist, including chemical plants, industrial power plants, desalination plants and pollution control equipment. Customer demand for titanium is also increasing in new and emerging uses such as medical implants, golf club heads, other sporting equipment, offshore oil and gas production installations, geothermal facilities, and possible automotive and computer uses. The titanium industry is comprised of several manufacturers which, like the Company, produce a relatively complete range of titanium products. The Company believes that at least 90% of the world's titanium sponge is produced by six companies. However, there are a significant number of producers worldwide that manufacture a limited range of titanium mill products. RECENT INDUSTRY RECOVERY The titanium industry suffered a downturn in the early 1990's, and in each of 1991 to 1995 the Company reported a net loss. The cyclical nature of the aerospace industry has historically been the principal cause of the fluctuations in performance of titanium companies with cyclical peaks in mill products shipments in 1980 and 1989, and with cyclical lows in 1983 and 1991. Industry shipments remained relatively flat from 1991 to 1994. - 5 - <PAGE> 8 Since 1995, the titanium industry has improved due to a combination of factors including a resurgence in commercial aerospace demand, continuing and stable industrial demand and the emergence of new uses for titanium, including golf club heads. U.S. industry mill product shipments in 1995 increased 26% from 1994. In 1996, U.S. industry mill product shipments were an estimated 57 million pounds, up 31% from 1995 with U.S. shipments to the commercial aerospace market an estimated 25 million pounds, up 40% from the prior year. In addition, U. S. industry mill product shipments to the golf club market in 1996 were approximately 8 to 10 million pounds compared to virtually none in 1994. While worldwide industry shipments are not as readily tracked as U.S. shipments (in large part due to uncertainties of shipments by companies located in the former Soviet Union), the Company believes U.S. trends are a reasonable proxy for worldwide trends. Aerospace demand for titanium products, which includes both jet engines and air frames, can be broken down into commercial and military sectors. Since 1987, sales to the commercial aerospace sector have been more significant than to the military aerospace markets. The commercial aerospace sector is expected to continue its predominance as a result of the expected growth of worldwide airline traffic, new orders for aircraft, and replacement and repair of the commercial airline fleet. Due to improved fundamentals, the commercial airline industry reported operating profits of over $16 billion (estimated) in 1996, $6 billion in 1995 and $2 billion in 1994 compared to cumulative losses in excess of $5 billion in the 1990 to 1993 period. Most major carriers are investing in upgrading and expanding their fleets. The Company can give no assurance as to the extent or duration of any recovery in the commercial aerospace market or the extent to which such recovery will result in increased demand for titanium products. Since titanium's initial aerospace applications, the number of end-use markets for titanium has expanded substantially. Existing industrial uses for titanium include chemical plants, industrial power plants, desalination plants, and pollution control equipment. Titanium is also experiencing increased customer demand in new and emerging uses such as medical implants, golf club heads, other sporting equipment, offshore oil and gas production installations, geothermal facilities, and possible automotive and computer uses. Several of these applications represent potential growth opportunities that may reduce the industry's historical dependence on the aerospace market. The Company's order backlog was approximately $440 million at December 31, 1996 compared to a combined TIMET/IMI/AJM backlog of $226 million at December 31, 1995. Approximately 95% of the 1996 year end backlog is expected to be delivered during 1997. Although the Company believes that the backlog is a reliable indicator of future business activity, conditions in the aerospace industry could change and result in future cancellations or deferrals of existing aircraft orders and materially and adversely affect the Company's existing backlog, orders, and future financial condition and operating results. As of December 31, 1996, the estimated firm order backlog for Boeing, McDonnell Douglas and Airbus, as reported by The Airline Monitor, was 2,370 planes versus 1,869 planes on December 31, 1995, an increase of 27%. The newer wide body planes, such as the Boeing 777, and the Airbus A-330 and A-340, tend to use a higher percentage of titanium in their frames, engines and parts (as measured by total fly weight) than narrow body planes. "Fly weight" is the empty weight of a finished aircraft with engines but without fuel or passengers. The Boeing 777, for example, utilizes titanium for approximately 9% of total fly weight, compared to between 2% to 3% on the older 737, 747 and 767 models. The estimated firm order backlog for wide body planes at year end 1996 was 767 (32% of total backlog) compared to 682 at the end of 1995. Growth in firm order backlog for narrow body aircraft has also been strong, having increased 35% during 1996 to 1,603. The Company believes the prospects for the titanium industry are encouraging given the resurgence of the commercial aerospace industry and the emergence of the golf club market. Furthermore, while the titanium industry remains cyclical and continues to be affected by a number of economic and political factors, the Company believes that current conditions affecting the titanium industry are different in several important respects from those that existed during the last industry downturn that began in 1991. Following the breakup of the former Soviet Union in 1990, military aerospace spending was cut back significantly. In addition, demand for titanium within the former Soviet Union declined substantially, which resulted in a sharp increase in shipments by titanium suppliers within the former Soviet Union to the rest of the world. After the Persian Gulf War in 1990, commercial aerospace profitability suffered a sharp decrease and demand for commercial aircraft declined commensurately. This confluence of events caused a severe titanium product supply and demand imbalance which the Company believes is in the process of being corrected, although other economic and political factors or developments that the Company cannot predict could adversely affect the titanium industry in the future. - 6 - <PAGE> 9 BUSINESS CONSIDERATIONS In its effort to maintain and expand its leading market and competitive position, the Company intends to focus on the following strategic objectives: o Maximizing its participation in aerospace industry recovery. The Company's experience in the aerospace industry, its proprietary alloys developed for that market and its ability to devote additional production capacity to meet aerospace demand, position it to benefit from the recovery of this market. o Invest in Technology and innovative projects aimed at reducing costs and enhancing productivity, quality and production capacity. During the five years ended December 31, 1996, TIMET invested over $140 million in capital expenditures (excluding the 1996 acquisitions described below) aimed at enhanced productivity and quality and expansion of production capacity. In particular, TIMET has invested approximately $100 million in a new, cost-effective Vacuum Distillation Process ("VDP") facility at its principal manufacturing site in Henderson, Nevada. The VDP technology produces higher-purity titanium sponge using less power and at higher throughput rates than the traditional Kroll-leach technology. The IMI Titanium Acquisition, described below, affords an opportunity for two leading industry participants to exchange "best practices" technology and thereby to capitalize on the manufacturing and process technology strengths of each organization. In October 1996, TIMET acquired the 50% interest in Titanium Hearth Technologies ("THT") it did not already own. Utilizing its own proprietary technology, THT operates four electron beam cold hearth melting furnaces which provide the Company with the ability to use a larger percentage of titanium scrap than traditional melting techniques and to produce slab products directly without intermediate forging steps, thereby reducing manufacturing costs. Cold hearth melting produces high-quality titanium and is required by certain aerospace manufacturers for certain of their most demanding titanium applications. o Lower the cost of sourcing raw materials. TIMET is one of only two companies in North America which are vertically integrated in the production of sponge and mill products. TIMET is one of the world's largest producers and purchasers of titanium sponge. It is also a large producer and purchaser of titanium scrap, another key material in the manufacture of titanium mill products, which the Company consumes through its own operations. This position was enhanced by the purchase in October 1996 of the AJM scrap processing business. The ability both to produce sponge and to purchase sponge or scrap allows the Company considerable flexibility in optimizing its mix of raw material purchases. The Company's 30 million pounds of sponge capacity gives it valuable latitude in responding to increases in demand for titanium products by reducing the Company's dependence on purchasing sponge and scrap in the open market. o Invest in strategic alliances, new markets, applications and products and acquisitions. Through various strategic alliances, the Company has sought to gain access to unique process technologies and markets for titanium. The Company has explored and will continue to explore other strategic arrangements in the areas of product production and distribution. The Company also continues to work with existing and potential customers to identify and develop new or improved applications for titanium that take advantage of its unique qualities. Historically, the Company has developed many new and improved applications for titanium with or for its customers. The Company believes that substantially all of the proprietary titanium alloys of commercial significance that have been engineered over the last 25 years have been invented by TIMET or the IMI Titanium Business. o Maintain a Strong Balance Sheet. Because the Company operates in a cyclical industry, management is seeking to maintain a strong balance sheet. A portion of the Company's net proceeds from the initial sale of the Convertible Preferred Securities were used to repay indebtedness under the Company's U.S. credit facility, substantially all of which may be reborrowed by the Company, subject to the satisfaction of certain conditions. The Company will not receive any proceeds of the sale of any securities offered pursuant to this Prospectus. - 7 - <PAGE> 10 1996 ACQUISITIONS In February 1996, the Company completed the IMI Titanium Acquisition from IMI plc (which, together with its subsidiaries and affiliates is referred to herein as "IMI"). The IMI Titanium Business was acquired for approximately 9.6 million shares of Common Stock and $20 million of the Company's subordinated debt (since repaid) issued in exchange for a like amount of debt previously owed to IMI by one of its titanium subsidiaries. In addition, the Company's two principal stockholders, Tremont Corporation ("Tremont") and Union Titanium Sponge Corporation ("UTSC"), received an option to acquire from IMI an aggregate of approximately 2 million shares of Common Stock. See "Certain Relationships and Related Transactions--Shareholders' Agreements." The IMI Titanium Business is Western Europe's largest producer of titanium ingot and mill products for aerospace and industrial application. In addition, the IMI Titanium Business has two titanium castings operations located in the United States. In 1995, the IMI Titanium Business had sales of $147 million and a net loss of $33 million. The Company believes the IMI Titanium Acquisition allows the Company to enjoy a strong competitive advantage in several key areas and thus create additional value for its shareholders. The Company believes the acquisition will allow for: (i) combined manufacturing expertise, leading to lower costs and improved overall quality; (ii) the integration of two world leaders in titanium research and technology, advancing product and process development; (iii) augmented scale and geographic reach, leading to efficiencies in marketing, distribution and purchasing; and (iv) increased production flexibility through additional European manufacturing facilities, allowing the Company to better service global demand. The Company believes that, as a result of the IMI Titanium Acquisition and its enhanced competitive position, it is well positioned to participate in the improving fundamentals of the titanium industry. In October 1996, the Company acquired substantially all of the assets of AJM, including AJM's 50% partnership interest in THT and AJM's titanium scrap business and additional electron beam cold hearth melting operations (the "AJM Acquisition"). The purchase price for the AJM assets was $96 million in cash, which was funded by borrowings under the Company's U.S. credit facility (since repaid). During 1995, THT had sales of $47.1 million and net income of $7.9 million. The AJM Acquisition will enhance TIMET's capacity in titanium scrap utilization and its leadership in high technology electron beam cold hearth melting. See "Management's Discussion and Analysis of Financial Condition and Results of Operation--Liquidity and Capital Resources." During the summer of 1996, the Company completed strategic transactions with Compagnie Europeenne du Zirconium--CEZUS, S.A. ("CEZUS") in France (forming TIMET Savoie, S.A. ("TIMET Savoie")) and TISTO Titan und Sonderlegierungen GmbH ("TISTO") in Germany, which enhanced TIMET's manufacturing and distribution capabilities in Europe. In addition, in early 1997, the Company completed a strategic investment in Titanium Memory Systems, Inc. ("TMS"), a development stage manufacturer of titanium substrates for computer hard drives. See "Business--Recent Acquisitions and Capital Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." THE COMPANY The Company completed its initial public offering of Common Stock in June 1996 (the "Stock Offering"). As a result of the Stock Offering, the outstanding Common Stock is currently held 30.3% by Tremont, 10.0% by UTSC, a consortium of Japanese companies, and 6.4% by IMI. In addition, Tremont and UTSC hold options to acquire all of the outstanding Common Stock held by IMI, shares which are equal to the number of Offered Common. See "Principal Stockholders." The Company is incorporated in Delaware and its principal offices are located at 1999 Broadway, Suite 4300, Denver, Colorado 80202. Its telephone number is (303) 296-5600. - 8 - <PAGE> 11
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011744_cs_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011744_cs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1af816cffa4d79fff0124111ee7ab86db1ae078f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011744_cs_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY CS Wireless Systems, Inc. (the "Company" or "CS Wireless") is one of the largest wireless cable television companies in the United States in terms of line-of-sight ("LOS") households and subscribers. The Company's 11 markets encompass on a pro forma basis approximately 7.4 million television households, approximately 6.0 million of which are LOS households, as estimated by the Company. As of December 31, 1996 the Company provided service to approximately 65,553 subscribers. See "Operating and Planned Markets" below. The Company is a majority-owned subsidiary of CAI Wireless Systems, Inc. ("CAI"), the largest developer, owner and operator of wireless cable television systems in the United States in terms of LOS households and the first wireless cable operator to enter into a strategic arrangement with Regional Bell Operating Companies ("RBOCs") through its strategic business relationship with affiliates of Bell Atlantic Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX"). The Company is also affiliated with Heartland Wireless Communications, Inc. ("Heartland"), a leading developer, owner and operator of wireless cable systems in small to mid-size markets. See "--Company Formation." BUSINESS STRATEGY The Company's objective is to become a leading regional provider of subscription television services. The Company expects to achieve its goal through: (i) the deployment of digital wireless cable equipment in most of its markets; (ii) the acquisition and/or swapping of wireless cable assets or systems to increase the Company's regional concentration of markets; (iii) the aggressive pursuit of strategic partners; and (iv) the rapid penetration of its markets. (i) DEPLOY DIGITAL WIRELESS CABLE EQUIPMENT. The Company expects that digital wireless cable equipment will become commercially available in sufficient production in 1997. Relative to this occurring, the Company intends to begin the build out and conversion of some of its markets using digital technology in 1997. Digital technology, capable of delivering in excess of 100 channels, will allow CS Wireless to offer more programming choices than almost all of its hard-wire cable competitors in its markets. An upgrade to digital technology for a wireless cable system is expected to be less expensive and faster than that for hard-wire cable systems because new equipment need only be installed at the subscriber site and at the head-end instead of throughout the cable plant. The Company believes that cable subscribers are most sensitive to programming, price, service and reliability and that digital technology will enable the Company to offer its subscribers a service that is comparable or superior to hard-wire cable in each of these respects. The Company's value pricing strategy is to offer more programming than its hard-wire cable competitors at a price level comparable to that of its hard-wire cable competitors' expanded basic service. The availability of channels in excess of those used to provide a complete selection of local television stations and cable networks will be used to provide an expanded variety of premium and pay-per-view channels. In addition, high channel capacity may enable the Company to use its channels for other uses, such as interactive programming, as these services and technologies become available. CS Wireless will explore other delivery technologies that can enhance its video services to its subscribers. (ii) INCREASE REGIONAL CONCENTRATION. An important part of the Company's growth strategy is to expand its markets and subscriber base through the acquisition of wireless cable systems and channel rights in targeted markets primarily throughout the midwest and southwest regions of the United States. Through selected acquisitions, divestitures, asset swaps and joint ventures, the Company will seek to increase its regional concentration of wireless cable television systems in order to realize economies of scale and operating efficiencies and to increase its attractiveness to strategic partners. Consistent with this strategy, the Company continues to explore and pursue opportunities to acquire additional wireless cable television assets in markets that meet the Company's selection criteria, to divest itself of wireless cable television assets that are not consistent with the Company's regional market emphasis, and to continually evaluate its current markets to ensure that its portfolio of operating systems and channel interests reflect the Company's growth strategy. (iii) AGGRESSIVELY PURSUE STRATEGIC RELATIONSHIPS. The Company believes that its strategy of increasing regional concentration of wireless cable television systems and channel rights will enhance the Company's ability to attract potential joint venture opportunities with large strategic partners, including RBOCs, long distance telephone companies and other large telecommunications conglomerates. The Company also believes that such relationships will enable it to benefit from such partners' capital, infrastructure and brand identity, thereby increasing the Company's ability to penetrate its markets. (iv) RAPIDLY PENETRATE MARKETS. The Company's operating strategy focuses on rapidly penetrating its markets through value pricing, competitive programming offerings, commitment to digital and other technologies, responsive customer service, signal quality and reliability, and targeted marketing. This operating strategy is designed to attract and retain subscribers, enabling the Company to compete effectively with hard-wire cable providers. OPERATING AND PLANNED MARKETS The table below outlines as of December 31, 1996 (except as indicated in footnote (a) below) the characteristics of the Company's operational and pre-launch markets, as well as its market under development and markets held for sale or disposition. The Company expects that the pre-launch market and the market under development will be operational by the end of 1998. <TABLE> <CAPTION> ESTIMATED TOTAL ESTIMATED NUMBER OF APPROXIMATE SERVICE AREA LOS CHANNELS NUMBER OF MARKET HOUSEHOLDS(A) HOUSEHOLDS(A) AVAILABLE(B) SUBSCRIBERS - ---------------------------------------------------- ------------- ------------- ----------------- ------------- <S> <C> <C> <C> <C> OPERATIONAL MARKETS Cleveland, OH (c)................................... 1,178,000 884,000 37 23,945 Dayton, OH (d)(e)(f)................................ 610,000 413,000 38 7,012 San Antonio, TX (d)................................. 550,000 440,000 38 13,443 Fort Worth, TX (d).................................. 540,000 443,000 42 1,042 Grand Rapids, MI (d)................................ 458,000 344,000 23 757 Kansas City, MO and Suburbs(g)...................... 1,065,000 800,000 29(h) 6,023 PRE-LAUNCH MARKET Dallas, TX (d)...................................... 981,000 872,000 35 -- MARKET UNDER DEVELOPMENT Charlotte, NC (c)................................... 580,000 472,000 13(i) -- MARKETS HELD FOR SALE OR DISPOSITION (J) Stockton/Modesto, CA (c)............................ 350,000 300,000 32 -- Bakersfield, CA (c)................................. 162,000 151,000 42 8,553 Minneapolis, MN (d)................................. 959,000 882,000 32(k) 4,778 ------------- ------------- ------ Total............................................. 7,443,000 6,001,000 65,553 ------------- ------------- ------ ------------- ------------- ------ </TABLE> - ------------------------ (a) The Estimated Total Service Area Households for each market represents the Company's estimate of the number of households within the service area for the primary transmitter in each market based on census data. The Estimated LOS Households for each market represents the approximate number of Estimated Total Service Area Households within the service area of the primary transmitter that can receive an adequate unobstructed analog signal, as estimated by the Company, based on topographical and engineering analyses. The service area for a market varies based on a number of factors, including the transmitter height, transmitter power and the proximity of adjacent wireless cable systems. (b) The Number of Channels Available comprises analog wireless cable and local broadcast channels that can be received by subscribers. Wireless cable channels either are licensed to the Company or are leased to the Company from other license holders. The Number of Channels Available includes 8, 8, 5, 6, 13, 7, 5, 13, 0, 6 and 10 off-air channels, and 29, 24, 33, 32, 29, 16, 24, 22, 8, 27 and 32 wireless cable channels, in Cleveland, Ohio; Minneapolis, Minnesota; Dayton, Ohio; San Antonio, Texas; Fort Worth, Texas; Grand Rapids, Michigan; Kansas City, Missouri and Suburbs; Dallas, Texas; Charlotte, North Carolina; Stockton/Modesto, California; and Bakersfield, California, respectively. The Number of Channels Available also includes certain channels that are subject to FCC (as defined) approval of applications for new station authorizations, power increases, transmitter relocations, as well as third party interference agreements. The FCC's failure to grant one or more new station applications could decrease the number of channels. The FCC's failure to grant one or more power increase or transmitter relocation applications, or the failure to obtain certain third party interference agreements, could delay the initiation of service and/or reduce the coverage area of the affected system or systems. (c) Market contributed by CAI. (d) Market contributed by Heartland. (e) For purposes of Estimated Total Service Area Households and Estimated LOS Households, the Dayton, Ohio market includes Bloom Center/Napoleon, Indiana, a suburban market adjacent to Dayton. The Bloom Center/Napoleon market is not yet operational. (f) When the FCC issues a station authorization, the licensee is afforded a certain period of time to complete construction. If the licensee cannot complete construction within the specified time frame, the licensee must file a request with the FCC for additional time to complete construction. The Bloom Center/Napoleon, Indiana market has 20 channels, all of which are the subject of currently pending requests for additional time to complete construction. (g) The Company's Kansas City, Missouri and Suburbs market is comprised of Kansas City, Missouri, as well as the suburbs of Maysville (Cameron) and Sweet Springs, Missouri, and Effingham (Nortonville) and Wellsville, Kansas. Maysville and Sweet Springs were contributed to the Company by Heartland at the Contribution Closing. Effingham and Wellsville, Kansas were acquired by the Company in the USA Wireless Acquisition. Kansas City, Missouri is expected to be received by the Company from People's Choice TV Corp. ("PCTV") in exchange for the Company's Salt Lake City market (the "PCTV Swap"). The PCTV Swap is expected to close during the first quarter of 1997. See "Business--Pending Acquisitions and Divestitures." (h) The total of 29 channels available is based on 24 wireless cable channels and 5 off-air channels for the Kansas City system. See "Business--The Company's Markets" for a description of the number of channels in each of the Kansas City suburban markets as defined in (g) above. (i) The Company currently holds licenses or leases for six wireless cable channels and also has the right to develop seven additional channels, depending on interference considerations, in the Charlotte market as a result of its ownership of the Charlotte BTA. (FOOTNOTES CONTINUED ON FOLLOWING PAGE) (FOOTNOTES FOR PRECEDING PAGE) (j) Does not include the Salt Lake City market which is expected to be transferred to PCTV in the PCTV Swap. Does not include the Atlanta (suburbs) market acquired by the Company on July 17, 1996 pursuant to the Heartland Acquisition. See "Business--Pending Acquisitions and Divestitures." (k) Does not include four channels whose authorization is the subject of a petition for reconsideration and, in the alternative, a new station application and four channels that are leased but no channel capacity is available. AFFILIATION WITH CAI AND HEARTLAND CS Wireless believes that its affiliation with CAI and Heartland will permit it to achieve economies of scale in the purchase of equipment and programming, which the Company believes will facilitate meeting its objective of becoming a leading regional provider of subscription television services. Heartland provided certain miscellaneous administrative services to the Company, including the maintenance of the Company's financial information, for an interim period, which ended in July 1996. CAI has also agreed to permit two of its employees to assist the Company with programming and licensing functions. In addition, the affiliation provides access to management with significant experience in the wireless cable industry, including expertise in executing strategic relationships. See "Certain Relationships and Related Transactions." COMPANY FORMATION On February 23, 1996, CAI contributed to the Company (the "CAI Contributions") wireless cable television assets or stock of subsidiaries owning wireless cable television assets comprising four markets located in Bakersfield and Stockton/Modesto, California; Charlotte, North Carolina; and Cleveland, Ohio. CAI received from the Company shares of Common Stock initially constituting approximately 60% of the Company's common stock, $.001 par value per share (the "Common Stock"). Simultaneously, Heartland contributed or sold to the Company (the "Heartland Contributions" and, together with the CAI Contributions, the "Contributions") wireless cable television assets comprising eight markets located in Grand Rapids, Michigan; Minneapolis, Minnesota; Maysville and Sweet Springs, Missouri; Dayton, Ohio; Dallas, Fort Worth and San Antonio, Texas; and Salt Lake City, Utah. Heartland received from the Company shares of Common Stock initially constituting approximately 40% of the Common Stock, approximately $28.3 million in cash, a nine-month note for $25 million (the "Heartland Short-Term Note") and a 10-year note for $15 million (the "Heartland Long-Term Note," and together with the Heartland Short-Term Note, the "Heartland Notes"). The Heartland Short-Term Note was repaid on March 1, 1996 with a portion of the net proceeds from the Unit Offering. See "The Contributions." The equity interests of CAI and Heartland in the Company (i) have been diluted by the issuance of the Common Shares to the purchasers of the Units (as defined), the issuance of Common Stock in connection with the USA Acquisition (as defined) and the issuance of a total of 1,000,000 shares (the "BANX Shares") to MMDS Holdings II, Inc., an affiliate of Bell Atlantic, and NYNEX MMDS Holding Company, an affiliate of NYNEX (collectively, the "BANX Affiliates"), and (ii) are subject to further dilution for future issuances of Common Stock. As of October 15, 1996, CAI owned approximately 52% of the Common Stock, Heartland owned approximately 34% of the Common Stock, the BANX Affiliates owned approximately 10% of the Common Stock, and the holders of the Common Shares and certain other stockholders of the Company owned approximately 4% of the Common Stock. See "Stock Ownership" and "Business--Pending Acquisitions and Divestitures." THE UNIT OFFERING On February 23, 1996, the Company issued and sold 100,000 Units (the "Units"), with each Unit consisting of four Old Notes (each at $1,000 principal amount at maturity) and 1.1 shares (the "Common Shares") of Common Stock, of the Company (the "Unit Offering"). Units were sold pursuant to exemptions from or in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. See "The Exchange Offer." New Notes were offered to holders of Old Notes in the Original Exchange Offer that expired on December 9, 1996, and pursuant to which an aggregate principal amount of $386,442,000 of Old Notes were exchanged for a like principal amount of New Notes. INDUSTRY OVERVIEW The market for subscription television has annual sales in the United States of approximately $20 billion. According to a report issued by the Federal Communications Commission (the "FCC") in September 1995, of the approximately 96 million total television households nationwide, approximately 85 million are passed by hard-wire cable systems, and of those homes that are passed by cable, approximately 62 million are hard-wire cable subscribers. On average, hard-wire cable subscribers pay approximately $32.50 per month for programming services, according to Paul Kagan Associates Inc. ("Kagan"). The Company believes that wireless cable has several competitive advantages compared with hard-wire cable television providers, including: (i) LOW COST PROVIDER. Unlike traditional hard-wire cable systems, wireless cable does not require extensive coaxial cable networks, amplifiers and related equipment ("Cable Plant"), thereby reducing necessary capital and maintenance expenditures significantly. Therefore, a major percentage of wireless cable capital expenditures are demand driven and are not made until a new subscriber is added; (ii) HIGH RELIABILITY. Although wireless cable transmission requires a clear line of sight, wireless cable typically enjoys a lower rate of transmission disruption since the signal is transmitted over airwaves as opposed to through a Cable Plant; (iii) SUPERIOR PICTURE QUALITY. An equivalent or higher quality picture is provided as a result of the elimination of signal noise inherent in Cable Plant; and (iv) FASTER AND LESS EXPENSIVE TO UPGRADE TO DIGITAL TECHNOLOGY. An upgrade to digital technology for a wireless cable system is expected to be less expensive and faster because new equipment need only be installed at the subscriber site and at the head-end as opposed to through a Cable Plant. CS Wireless is a Delaware corporation. Its principal executive offices are located at 200 Chisholm Place, Suite 202, Plano, Texas 75075. The Company's telephone number is (972) 509-2634. THE EXCHANGE OFFER <TABLE> <S> <C> Securities Offered.............. Up to $13,558,000 aggregate principal amount at maturity of the Company's 11 3/8% Series B Senior Discount Notes due 2006 (the "New Notes"). The Exchange Offer.............. The New Notes are being offered in exchange for a like principal amount of Old Notes. For procedures for tendering the Old Notes, see "The Exchange Offer." Tenders; Expiration Date; Withdrawal.................... The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, or such later date and time to which it is extended (the "Expiration Date"). The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering holder thereof promptly after expiration or termination of the Exchange Offer. Federal Income Tax Consequences.................. The exchange pursuant to the Exchange Offer will not result in any income, gain or loss to the holders of the Notes or the Company for federal income tax purposes. See "Certain Federal Income Tax Considerations." Use of Proceeds................. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent.................. Fleet National Bank has agreed to act as Exchange Agent for the Exchange Offer. </TABLE> SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New Notes and the Old Notes are substantially identical except for certain transfer restrictions and registration rights relating to the Old Notes. <TABLE> <S> <C> Interest Rate and Payment Dates......................... The Notes will accrete in value from the date of issuance to March 1, 2001, at a rate of 11 3/8% per annum, compounded semi-annually. Cash interest on the Notes will neither accrue nor be payable prior to March 1, 2001. Commencing September 1, 2001, cash interest will be payable on the Notes semi-annually in arrears on each March 1 and September 1 at the rate of 11 3/8% per annum. Maturity........................ March 1, 2006. Optional Redemption............. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2001 at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to March 1, 1999, the Company may redeem up to 35% of the aggregate principal amount of the Notes originally issued with the net proceeds of one or more public offerings of its Common Stock or from the sale or issuance for cash of its Common Stock to a Strategic Equity Investor (as defined) at a redemption price equal to 111% of the Accreted Value (as defined) on the date of redemption; provided, however, that immediately after giving effect to any such redemption, not less than 65% of the aggregate principal amount of the Notes originally issued remains outstanding. See "Description of the Notes--Optional Redemption." </TABLE> <TABLE> <S> <C> Mandatory Redemption............ There will be no sinking fund requirements. Offers to Purchase.............. In the event of a Change of Control, each holder will have the option to require the Company to repurchase such holder's Notes at a price equal to 101% of the Accreted Value on the date of repurchase (if prior to March 1, 2001) or 101% of the principal amount thereof (if on or after March 1, 2001) plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of the Notes--Change of Control." In addition, the Company will be obligated to make an offer to repurchase the Notes for cash at a price equal to 100% of the Accreted Value on the date of repurchase (if prior to March 1, 2001) or 100% of the principal amount thereof (if on or after March 1, 2001), plus accrued and unpaid interest, if any, thereon to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of the Notes--Limitation on Asset Sales." Ranking......................... The Notes are general unsecured senior obligations of the Company ranking senior in right of payment to all existing and future subordinated Indebtedness of the Company, including the Indebtedness evidenced by the Heartland Long-Term Note, and pari passu in right of payment with all of senior Indebtedness of the Company. The Notes are effectively subordinated to all secured Indebtedness of the Company to the extent of the value of the assets securing such Indebtedness, and are effectively subordinated to all Indebtedness and other liabilities (including trade payables) of the subsidiaries of the Company. Certain Covenants............... The Indenture (as defined) imposes certain limitations on the ability of the Company and the Restricted Subsidiaries (as defined) to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments and investments, consummate certain asset sales, enter into certain transactions with affiliates, redesignate an Unrestricted Subsidiary (as defined) to be a Restricted Subsidiary, designate a Restricted Subsidiary as an Unrestricted Subsidiary, incur liens, enter into certain sale and leaseback transactions, engage in certain businesses, and merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets. The Indenture also imposes limitations on the Company's ability to restrict the ability of its Restricted Subsidiaries to pay dividends or make certain payments to the Company or any of its Restricted Subsidiaries and on the ability of the Company's Restricted Subsidiaries to issue preferred stock. See "Description of the Notes." Original Issue Discount......... Because the New Notes are treated as a continuation of the Old Notes for federal income tax purposes, the New Notes will be treated as having been issued with original issue discount for Federal income tax purposes. See "Certain Federal Income Tax Considerations." </TABLE> For additional information regarding the Notes, see "Description of the Notes." RISK FACTORS See "Risk Factors" beginning on page 13 for a discussion of certain risks that should be considered by holders who tender their Old Notes in the Exchange Offer.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001011836_southern_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001011836_southern_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..10d4505e58c20d365048b5d806ddbf0388196408
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001011836_southern_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus (i) excludes 1,942,200 shares of Common Stock reserved for issuance under the Company's 1995 Stock Option, Deferred Stock and Restricted Stock Plan (the "Stock Option Plan"), of which 974,700 will be outstanding on the effective date of this Offering, and 1,942,200 shares of Common Stock reserved for issuance upon exercise of outstanding options under the Company's 1995 Senior Management Stock Option Plan (the "Senior Management Plan"), and (ii) gives effect to a 4,150 for one stock split effected in April 1996 and a three for two stock split effected in January 1997. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Southern Pacific Funding Corporation ("SPFC" or the "Company") is a specialty finance company engaged in the business of originating, purchasing and selling high-yielding, sub-prime mortgage loans secured primarily by one-to-four family residences. The majority of the Company's loans are made to owners of single family residences who use the loan proceeds for purposes such as debt consolidation, financing of home improvements and educational expenditures. The Company focuses on lending to individuals who often have impaired or unsubstantiated credit histories and/or unverifiable income. As a result, the Company's customers are less likely to qualify for loans from conventional mortgage sources and generally pay higher interest rates as compared to interest rates charged by conventional mortgage sources. Approximately 83.2% and 98.8% of the Company's mortgage loans originated or purchased during the year ended December 31, 1995 and the nine months ended September 30, 1996, respectively, were secured by first mortgages, and the remainder were secured by second mortgages. The Company originates and purchases loans through its Wholesale Division, its Correspondent Program, its Retail/Telemarketing Division and its Institutional Division. The Company commenced operations in January 1993 as a division of Southern Pacific Thrift & Loan Association ("SPTL"), a wholly-owned subsidiary of Imperial Credit Industries, Inc. ("ICII" or "Selling Shareholder"), and has been an operating subsidiary of ICII since April 1995. The Company completed the initial public offering (the "IPO") of its Common Stock in June 1996 and ICII completed a secondary offering (the "Secondary Offering") of 1,000,000 shares of the Company's Common Stock in November, 1996. Upon completion of the Secondary Offering, ICII owned approximately 51.2% of the Company's outstanding Common Stock. In addition, concurrently with the Secondary Offering, the Company sold $75,000,000 principal amount of Convertible Subordinated Notes due 2006 (the "Notes Offering"). Upon successful completion of this Offering, ICII will beneficially own approximately 49.4% of the outstanding Common Stock of the Company. ICII is a diversified specialty finance company offering financial products in the following four sectors: sub-prime residential mortgage banking, commercial mortgage banking, business lending and consumer lending. The Company originates a majority of its loans through its Wholesale Division, which is currently comprised of approximately 68 account executives located in 14 regional branch centers who have established relationships with independent mortgage brokers. For the nine months ended September 30, 1996, the Wholesale Division originated loans in 45 states and the District of Columbia. Of the Wholesale Division's 14 regional branch centers, four are located in California, two in Oregon, and one in each of Washington, Florida, Colorado, Illinois, Ohio, Massachusetts, Texas and Virginia. The Company believes that its competitive strengths include providing prompt, responsive service and flexible underwriting to independent mortgage brokers. The Company's underwriters apply its underwriting guidelines on an individual basis but have the flexibility to deviate from them when an exception or upgrade is warranted by a particular loan applicant's situation, such as evidence of a strong mortgage repayment history relative to a weaker overall consumer-credit repayment history. In most cases, the Company conditionally approves loans within 24 hours from receipt of application and funds loans within 21 days after approval. The Wholesale Division originated $183.0 million, $267.4 million and $345.6 million of loans during the years ended December 31, 1994 and 1995 and the nine months ended September 30, 1996, respectively, representing 96.2%, 92.7% and 70.5% of total loan originations and purchases during the respective periods. The Company recently formed its Retail/Telemarketing Division to solicit loans directly from prospective borrowers. The Retail/Telemarketing Division originates loans through predictive dialing machines, which combine telephone dialing technology with an on-line computer to facilitate the loan origination process. The predictive dialing machine (i) automatically dials prospective borrowers, (ii) provides the telemarketer with an on-screen marketing presentation to market efficiently the Company's loan products, and (iii) provides an interactive loan underwriting program and loan quotation system to assess immediately the prospect's borrowing capability. The Company purchases loans through its Correspondent Program. Loans purchased through the Correspondent Program are complete loan packages that have been underwritten and funded by mortgage bankers or financial institutions. All loans purchased through the Correspondent Program are reunderwritten by the Company's underwriting staff to determine that the loan packages are complete and materially adhere to the Company's underwriting guidelines. During the years ended December 31, 1994 and 1995 and the nine months ended September 30, 1996, the Company purchased $7.3 million, $21.1 million and $130.6 million of mortgage loans, respectively, through its Correspondent Program. The Institutional Division, which began operations in 1996, also originates and purchases loans through relationships developed with small- to medium-sized commercial banks, savings banks and thrift institutions. During the nine months ended September 30, 1996, the Institutional Division originated and purchased $13.7 million of mortgage loans. In order to increase the Company's volume and diversify its sources of loan originations, the Company has entered into strategic alliances with and, in some circumstances, has acquired selected mortgage lenders. Pursuant to such strategic alliances, the Company provides financing arrangements and a commitment to purchase qualifying loans, and the participant in such a strategic alliance is entitled to participate in the potential profitability of Company sponsored securitizations. The Company is also seeking to acquire additional mortgage lenders whose operations are complementary to the Company's. The Company believes that such acquisitions will provide the Company with new strategic broker relationships, additional experienced management personnel and a greater share of the residential mortgage loan origination market. The Company may consider acquiring smaller lenders from whom the Company has purchased or financed mortgage loans or larger companies with operations and resources similar to the Company's. The Company sells a majority of its loan origination and purchase volume through public securitizations. Securitization sales provide the Company with greater flexibility and operating leverage than a portfolio lender by allowing the Company to generate fee and interest income and participate in the continuing profitability of the loans with a significantly smaller capital commitment than that required by traditional portfolio lenders. Generally, in each securitization transaction, the Company retains an interest in the loans sold through interest-only and residual certificates, which are amortized over an estimated average life. Cash flow received from these interest-only and residual certificates is subject to the prepayment and loss characteristics of the underlying loans. During the years ended December 31, 1994 and 1995 and the nine months ended September 30, 1996, the Company securitized $70.2 million, $164.9 million and $422.4 million of mortgage loans, respectively. The Company obtains the servicing rights on all loans it originates or purchases. In September 1995, the Company chose to outsource its loan servicing operations to Advanta Mortgage Corp. USA ("Advanta"), which the Company believes is one of the largest servicers of sub-prime mortgage loans. The Company believes that by outsourcing loan servicing to Advanta, it is able to benefit from Advanta's experience in servicing sub-prime mortgage loans, its comprehensive reporting capabilities, and the cost efficiencies related to having large amounts of loans serviced by Advanta for itself and others. Under the Company's servicing agreement with Advanta, the Company is able to reduce the overhead, administrative and other fixed costs associated with servicing loans while maintaining control of its servicing portfolio. Advanta currently services every mortgage loan originated or purchased by the Company. As of September 30, 1996, the Company's servicing portfolio (inclusive of securitized loans for which the Company has ongoing risk of loss but has no remaining servicing rights or obligations) was $651.3 million. The Company's goal is to increase loan origination and purchase volume nationwide while maintaining quality customer service and consistent underwriting practices. The Company intends to achieve this goal by employing the following strategies: (i) continuing expansion of its Wholesale Division, (ii) continuing expansion of existing strategic alliances and entering into new strategic alliances with or acquiring additional mortgage lenders, (iii) increasing the volume and size of loan packages acquired through its Correspondent Program, (iv) expanding its Retail/Telemarketing Division and (v) increasing its pull-through ratio, which is the ratio of loans ultimately funded to loans approved. The Company was incorporated in California in October 1994. The Company's headquarters are located at One Centerpointe Drive, Suite 500, Lake Oswego, Oregon 97035, and its telephone number is (503) 684-4700. RECENT DEVELOPMENTS In October 1996, the Company entered into a $150 million warehouse line of credit (the "Second Facility") which will expire on October 22, 1997, to increase its available funds for loan originations and purchases. In February 1997, the capacity under the Second Facility increased to $400 million. The Company's First Facility was extended to August 24, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." In November 1996, ICII sold 1,000,000 shares of the Company's Common Stock to the public in the Secondary Offering. The Company did not receive any proceeds from the Secondary Offering. Concurrently with the Secondary Offering, the Company sold $75 million principal amount of Convertible Subordinated Notes (the "Notes") due 2006 in the Notes Offering. The net proceeds received by the Company from the Notes Offering, after deducting underwriting discounts and offering expenses payable by the Company were approximately $72 million. The Company applied the net proceeds from the Notes Offering in the following manner: (i) to fund loan originations and purchases; (ii) to support strategic alliances entered into with selected mortgage lenders; (iii) to support securitization transactions; and (iv) for general corporate purposes. The Notes will mature on October 15, 2006, unless previously redeemed or converted. Interest on the Notes is payable on April 15 and October 15 of each year, commencing April 15, 1997. The Notes are convertible into Shares of Common Stock of the Company, at any time prior to maturity, unless previously redeemed or converted at a conversion price of $23.80 per share (equivalent to a conversion rate of approximately 42.02 shares per $1,000 principal amount of Notes), subject to adjustment. The Notes are subordinated in right of payment to all existing and future senior indebtedness (including trade payables) of the Company. RESULTS OF THE QUARTER AND YEAR ENDED DECEMBER 31, 1996 The Company reported net earnings for the three months ended December 31, 1996 of $10.0 million, or $0.43 earnings per share, an increase of 1,054% from $0.9 million, or $0.06 earnings per share, for the three months ended December 31, 1995. Net earnings for the year ended December 31, 1996 increased 277% to $27.6 million, or $1.37 earnings per share, compared to $7.3 million, or $0.47 earnings per share, for the year ended December 31, 1995. The increase in earnings was primarily attributable to the Company's continued expansion of its loan production sources and the sale of such loans. For the three months ended December 31, 1996, the Company originated and purchased $299.8 million of loans, an increase of 301% from $74.7 million of loans originated and purchased in the comparable period in the preceding year. During the three months ended December 31, 1996, the Company sold $235 million in loans through securitization transactions compared to $12.9 million sold through whole loans sales and $30.3 million sold through securitization transactions in the comparable period in the preceding year. As of December 31, 1996 the Company reported total delinquencies of 6.9% of the loan servicing portfolio of $908 million and net losses for the year ended December 31, 1996 as a percentage of the loan servicing portfolio were .04% or $369,613 for the year. OTHER DEVELOPMENTS Advanta Corp. Advanta Corp., the parent of the servicer of the Company's mortgage loan portfolio, recently announced that it was exploring strategic alternatives as a result of increased losses from credit card loans. Although Advanta Corp. stated that its mortgage business was performing well, there can be no assurance that a sale of Advanta Corp. or some of its businesses would not have an adverse effect on the Company. See "Risk Factors--Risks of Contracted Servicing." Acquisitions and Strategic Alliances. Pursuant to the Company's strategy to increase and diversify sources of loan production, the Company recently organized Hallmark America Inc. ("Hallmark America") and acquired National Capital Funding ("National Capital") and entered into strategic alliances with BOMAC Capital Mortgage, Inc. ("BOMAC") and American Funding Group Inc. ("American Funding"). The Company believes that these acquisitions and strategic alliances permit the Company to secure new and cost effective means of loan production. As such, the Company is currently in discussions with other potential acquisition candidates or strategic partners. Strategic Alliance with BOMAC. In November 1996, SPFC entered into a strategic alliance with BOMAC, a Dallas, Texas based non-conforming lender. Pursuant to the strategic alliance agreement, BOMAC has agreed to provide SPFC with all non-conforming loans originated by BOMAC. Such commitment terminates upon the earlier of delivery of loans in an aggregate amount of $600 million or three years after the first securitization in which BOMAC's loans are included in a SPFC sponsored securitization. SPFC has agreed to provide BOMAC with financing facilities for the origination of loans and for working capital purposes and interest-only and residual certificates resulting from the securitization of BOMAC's loans, less certain fees and expenses. Acquisition of Hallmark. In December 1996, SPFC organized Hallmark America as a wholly owned subsidiary and capitalized it with $625,000 in cash, for the purpose of investing in Hallmark Government Funding ("Hallmark Government"). Hallmark Government is a Bellevue, Washington based mortgage lender which provides mortgage brokers mortgage banking services and support in return for the right of first refusal to purchase loans originated by the mortgage broker. Hallmark America purchased preferred stock of Hallmark Government and various fixed assets and obtained an exclusive loan purchase commitment from Hallmark Government for $360,000. Hallmark America also acquired a five year option to purchase the remaining capital stock of Hallmark Government at fair market value. Acquisition of National Capital. In December 1996, SPFC acquired 95% of the common stock of National Capital for $5 million in cash. National Capital is an Atlanta, Georgia based diversified financial services company which offers non- conforming loans through its subsidiary MorCap. MorCap originates loans through a network of approximately 400 mortgage brokers throughout the southeastern United States. To incentivize increased loan production and profitability, management of National Capital has a buy-back option for a controlling interest in National Capital once certain volume and profitability conditions are met by MorCap. Strategic Alliance with American Funding. In December 1996, SPFC entered into a strategic alliance with American Funding, a Denver, Colorado based non- conforming lender. Pursuant to the strategic alliance agreement, American Funding has agreed to provide SPFC with all non-conforming loans originated by American Funding. Such commitment terminates upon the earlier of delivery of loans in an aggregate amount of $600 million or three years after the first securitization in which American Funding's loans are included in a SPFC sponsored securitization. SPFC has agreed to provide American Funding with financing facilities for the origination of loans and for working capital purposes and interest-only and residual certificates resulting from the securitization of American Funding's loans, less certain fees and expenses. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling Shareholder......................... 370,000 shares Common Stock outstanding before and after the Offering(1)............... 20,737,500 shares Use of Proceeds...................... The Company will not receive any proceeds from the Offering. New York Stock Exchange Symbol....... "SFC" </TABLE> - -------- (1) Does not include 1,942,200 shares reserved for issuance under the Stock Option Plan and 1,942,200 shares reserved for issuance pursuant to options granted under the Senior Management Plan. The following options to acquire shares have been granted to certain executive officers of the Company under the Senior Management Plan and to the non-employee directors, certain officers and other employees of the Company: <TABLE> <CAPTION> NUMBER OF OPTIONS EXERCISE ISSUED PRICE --------- -------- <S> <C> <C> Senior Management Plan 11/01/95.................................................. 1,942,200 $ 7.00 Stock Option Plan 06/13/96 Issuance......................................... 345,000 $11.33 06/24/96 Issuance......................................... 435,000 $11.42 </TABLE> See "Management--Stock Options."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012123_renaissanc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012123_renaissanc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8d3c3d5d8827563c81b4ca3c938c38d41d1dc8f6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012123_renaissanc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Investors should carefully consider the risk factors related to the purchase of Common Stock of the Company. See "Risk Factors." THE COMPANY The Registry, Inc. ("The Registry" or the "Company") provides information technology ("IT") consultants on a contract basis to organizations with complex IT operations. The Company's revenue is principally derived from supplemental IT staffing services and, to a lesser extent, from management consulting services provided through its specialized practices. As of December 28, 1996, the Company had approximately 2,840 IT consultants placed with its clients to assist them in implementing solutions for systems and applications development in such areas as distributed network design, database design and development and client/server migration. These consultants, billed primarily on an hourly basis, typically work on engagements lasting from six to twelve months under the direction of the client. In fiscal 1996, the Company provided IT consultants to approximately 800 clients in a diverse range of industries, including Abbott Laboratories, Digital Equipment Corp., Sprint Communications Company L.P. and Sun Microsystems, Inc. The Registry has grown from six offices and $19.4 million in revenue in fiscal 1991 to 37 offices and $266.9 million in revenue for the twelve months ended December 28, 1996. In recent years, the IT services industry has grown significantly. According to a 1996 report prepared by Dataquest, Inc. for the Company, the potential U.S. market size for supplemental IT staffing services of the type provided by The Registry's IT consultants was estimated at $9.5 billion in 1994 and is projected to grow to $16.1 billion in 1999. This growth is a result of numerous factors including: (i) an increased focus on core business operations by organizations; (ii) the need to access specialized IT skills to keep pace with rapidly changing technologies; (iii) the growing trend toward flexible staffing which provides a variable cost solution to a fixed cost problem; and (iv) the desire to reduce the cost of recruiting, training and terminating employees as IT requirements change. The Company believes that its ability to identify, attract and retain qualified IT consultants is critical to its success. Most of the Company's Resource Managers recruit in one of five technology sectors, thereby enabling the Company to more effectively match the needs of its clients with the skills of its IT consultants. The Company has also established a National Resource Delivery Team (NRDT) which provides access to consultants from across the nation when local resources for a particular skill set are scarce. To enhance retention, the Company actively remarkets its consultants and offers a comprehensive benefits package. Account Managers manage the Company's client relationships. The primary responsibility of each Account Manager is to develop and implement a specific account plan identifying the business requirements for IT staffing and services of each assigned client on an ongoing basis. Account Managers work closely with Resource Managers to identify new assignments at existing client sites as well as to locate potential new clients. Resource Managers are responsible for soliciting, recruiting and assessing technical consultants, developing and maintaining consultant relationships and maintaining and updating the Company's database of IT consultant resumes. The Registry's goal is to be a leading nationwide provider of IT professional services. The Company's strategy encompasses the following elements: (i) focus on resource management to effectively identify, qualify, place and retain quality IT consultants; (ii) focus on application development and software engineering; (iii) emphasize long-term client relationships; (iv) enhance growth through internal development, acquisitions and development of new services; and (v) continue to expand a national presence, leveraging the Company's resource management capabilities as well as its nationwide resource pool and customer base. As a result of its involvement in the IT planning process of many of its clients, the Company is often afforded an opportunity to anticipate clients' needs for additional IT consultants and services. Following this offering, G. Drew Conway, President, Chief Executive Officer and principal stockholder of The Registry, will own 50.1% of the Company's outstanding Common Stock. The Company was incorporated in Massachusetts on June 10, 1986. Unless the context otherwise requires, references herein to "The Registry" and the "Company" refer to The Registry, Inc., a Massachusetts corporation ("TRI"), and its wholly-owned subsidiaries. The Company's executive offices are located at 189 Wells Avenue, Newton, Massachusetts 02159. Its telephone number is (617) 527-6886. RECENT ACQUISITIONS In keeping with an important component of its growth strategy, the Company has acquired five IT consulting companies and an application development business since its initial public offering in June 1996. The Company believes that these acquisitions have expanded its national presence thereby broadening its nationwide resource pool and client base. Certain information relating to these acquisitions is summarized in the following table. <TABLE> <CAPTION> MOST RECENT ACQUISITION FISCAL YEAR ACQUIRED COMPANY DATE REVENUE (1) BRANCHES HEADQUARTERS - ------------------------- ----------- ------------- -------- ------------ <S> <C> <C> <C> <C> Morris Information 8/16/96 $ 3,700,000 2 Houston, TX Systems, Inc. Sun-Tek Consultants, Inc. 11/1/96 2,400,000 1 Orlando, FL Application Resources, 11/26/96 37,600,000 3 San Francisco, CA Inc. Shamrock Computer 11/27/96 33,700,000 5 Bloomington, MN Resources, Ltd. Sterling Information 11/27/96 6,100,000 1 Austin, TX Group, Inc. James Duncan & Associates 12/24/96 6,400,000 2 Royal Tunbridge Wells, England </TABLE> - -------- (1) Represents revenue for fiscal years ending December 31, 1995 for each of Morris Information Systems, Inc., Sun-Tek Consultants, Inc., Sterling Information Group, Inc. and James Duncan & Associates and June 29, 1996 for each of Application Resources, Inc. ("ARI") and Shamrock Computer Resources, Ltd. ("SCR"). The acquisitions of ARI and SCR have been accounted for as poolings-of-interests and, accordingly, the Company's financial statements have been restated to include the results of operations of these entities for all periods presented. The other acquisitions have been accounted for as purchases. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Recent Acquisitions" and the Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company.............................. 1,234,166 shares The Selling Stockholders................. 1,765,834 shares Common Stock to be outstanding after the offering.................................. 13,974,989 shares (1) Use of proceeds............................ For repayment of indebtedness, working capital, other general corporate purposes and acquisitions. See "Use of Proceeds." Nasdaq National Market symbol.............. REGI </TABLE> - -------- (1) Excludes 4,088,671 shares of Common Stock reserved for issuance under stock option and stock purchase plans, of which 1,403,405 shares were subject to outstanding options as of December 28, 1996 at a weighted average exercise price of $9.91 per share. See "Capitalization" and "Management -- Stock Awards." SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> YEAR ENDED SIX MONTHS ENDED -------------------------------------------------------- --------------------------- MAY 31, ---------------------------- JUNE 24, JUNE 29, DEC. 30, DEC. 28, 1992 (1) 1993 (1) 1994 (1) 1995 (1)(2)(3) 1996 (1)(3) 1995 (1)(3) 1996 (1)(3) -------- -------- -------- -------------- ----------- ----------- --------------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenue................. $27,541 $47,890 $82,376 $153,985 $216,878 $94,532 $144,520 Cost of revenue......... 21,035 36,770 63,100 114,641 158,742 69,394 104,442 ------- ------- ------- -------- -------- ------- -------- Gross profit............ 6,506 11,120 19,276 39,344 58,136 25,138 40,078 Selling, general and administrative expenses............... 5,357 9,659 16,933 33,544 46,144 19,980 34,763 (4) ------- ------- ------- -------- -------- ------- -------- Income from operations.. 1,149 1,461 2,343 5,800 11,992 5,158 5,315 Interest and other income (expense), net......... (160) (290) (452) (1,133) (2,233) (902) 1,619 (5) ------- ------- ------- -------- -------- ------- -------- Income before taxes..... 989 1,171 1,891 4,667 9,759 4,256 6,934 Pro forma provision for income taxes (6)....... 320 593 889 2,014 4,222 1,868 5,187 ------- ------- ------- -------- -------- ------- -------- Pro forma net income (6)............. $ 669 $ 578 $ 1,002 $ 2,653 $ 5,537 $ 2,388 $ 1,747 ======= ======= ======= ======== ======== ======= ======== Pro forma net income per share (6).............. $ 0.24 $ 0.50 $ 0.22 $ 0.13 ======== ======== ======= ======== Weighted average common and common equivalent shares (7)............. 10,968 11,083 10,867 13,599 SELECTED OPERATING DATA: Number of branch offices open at end of period.. 9 12 24 29 31 29 37 <CAPTION> DECEMBER 28, 1996 --------------------------- ACTUAL AS ADJUSTED (8) ----------- --------------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents..................................................... $ 7,090 $ 35,767 Working capital............................................................... 26,543 72,891 Total assets.................................................................. 90,608 119,285 Total debt.................................................................... 22,429 4,758 Total stockholders' equity.................................................... 48,563 94,911 </TABLE> (1) Upon consummation of the acquisitions of ARI and SCR, ARI and SCR's December 31 year ends were conformed to the Company's last Saturday in June year end for fiscal 1996. The Statement of Income Data above gives effect to the acquisitions by combining the results of operations of The Registry for the year ended June 29, 1996 and the six months ended December 30, 1995 and December 28, 1996 with the results of operations of ARI and SCR for the same periods. The Statement of Income Data also gives effect to the acquisitions by combining the results of operations of The Registry for the years ended May 31, 1992, May 31, 1993, May 31, 1994 and June 24, 1995 with the results of operations of ARI for the three months ended December 31, 1994 and the year ended December 31, 1995 and with the results of operations of SCR for the years ended December 31, 1992, December 31, 1993, December 31, 1994 and December 31, 1995, respectively, on a pooling-of- interests basis. ARI commenced operations as a separate entity on October 1, 1994. (2) The Company changed its fiscal year from May 31 to the last Saturday in June, effective with the fiscal year ended June 24, 1995. Accordingly, the June 1994 results are not included in the data presented above. See Note 2 to Consolidated Financial Statements. (3) Statement of Income Data for the years ended June 24, 1995 and June 29, 1996 are for 52 and 53 weeks, respectively. Statement of Income Data for the six months ended December 30, 1995 and December 28, 1996 are for 27 and 26 weeks, respectively. (4) In November 1996, the Company completed the acquisitions of ARI and SCR, each of which has been accounted for as a pooling-of-interests. Transaction and other related costs have been expensed as incurred and totalled $5.1 million in the six months ended December 28, 1996. (5) In August 1996, ARI received a settlement of $1.6 million from its insurance company for payment of defense costs and related expenses associated with certain litigation. This amount, net of related expenses, has been included in interest and other income (expense), net, in the Statement of Income Data above. (6) The Company effected the Reorganization described below on January 1, 1996. In addition, effective November 26, 1996, the S corporation status of SCR was terminated in connection with the acquisition of SCR by The Registry. The pro forma data have been computed as if America's Registry, Inc. ("America's Registry"), a wholly-owned subsidiary of the Company, and SCR, which were S corporations for federal and state income tax purposes since inception of their respective operations, were subject to federal and state corporate income taxes since inception based on the statutory tax rates and the tax laws then in effect. See Notes 2, 9 and 16 to Consolidated Financial Statements. (7) Weighted average common and common equivalent shares outstanding consist of the weighted average number of shares of Common Stock outstanding, after giving effect to the Reorganization described below, Common Stock which may be issuable upon exercise of outstanding stock options using the treasury stock method and Common Stock issuable upon conversion of shares of preferred stock. For the year ended June 24, 1995 and the six months ended December 30, 1995, weighted average common and common equivalent shares also include 397,588 shares related to the dilution attributable to options granted in the twelve months prior to the closing of the Company's initial public offering in June 1996 using the treasury stock method. (8) Adjusted to give effect to the sale of 1,234,166 shares of Common Stock by the Company offered hereby at an assumed offering price of $40.00 per share and the application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization." ---------------- Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Capitalization,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012270_collagenex_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012270_collagenex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dc7f52f451ec9c6f37da56885392c627ef8c675a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012270_collagenex_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and the notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include those discussed in "Risk Factors" and the other risks described in this Prospectus. THE COMPANY CollaGenex Pharmaceuticals is engaged in the development and commercialization of innovative, proprietary medical therapies for the treatment of periodontal disease and other dental pathologies. The Company believes that its initial drug, Periostat, will be the first orally administered, systemically delivered pharmaceutical to treat periodontitis. Unlike existing treatments, which focus on the bacterial infection associated with periodontitis, Periostat inhibits the chronic progressive tissue degradation characteristic of the disease. The Company completed three pivotal Phase III clinical trials on Periostat. Based on these clinical trials, the Company believes that Periostat is a safe, efficacious, cost-effective therapy for the long-term treatment of periodontitis. The Company submitted a new drug application for Periostat in August 1996. The NDA was accepted for filing by the United States Food and Drug Administration in October 1996. Periodontitis is a chronic disease characterized by the progressive loss of attachment between the periodontal ligament and the surrounding alveolar bone, ultimately resulting in tooth loss. According to industry data, in the United States alone, an estimated one-third of all adults, or 67 million people, suffer from some form of periodontitis. Approximately 13 million people seek professional treatment annually for periodontal disease, resulting in over 17 million periodontal procedures and annual expenditures of approximately $6 billion. Due to the costs associated with the disease, the Company believes that the treatment of periodontitis will be increasingly important to dental health managed care organizations and dental practitioners operating under capitated or fixed fee arrangements. Existing therapies and those treatments known to be under development for periodontitis are designed primarily to treat the bacterial infection associated with periodontitis on a short-term, periodic basis. These treatments include mechanical and surgical techniques, prophylactic approaches, such as mouthwashes, and locally-delivered pharmaceutical therapies. The Company believes, however, that periodic treatments designed solely to fight bacterial infection are inadequate and that such treatments would be considerably more effective if augmented by a long-term pharmaceutical therapy, such as Periostat, which inhibits connective tissue destruction. The Company's core technology involves inhibiting the activity of certain enzymes that destroy the connective tissues of the body. Connective tissues are components of the body that form the structural basis for skin, bone, cartilage and ligaments. In addition to periodontal disease, this core technology may be applicable to other diseases and conditions characterized by the progressive destruction of connective tissues of the body, such as cancer metastasis, wounds, osteoarthritis, osteoporosis, rheumatoid arthritis and diabetic nephropathy. The Company's core technology is licensed on an exclusive basis from the Research Foundation of the State University of New York at Stony Brook. The Company's primary objective is to become a leading provider of innovative medical therapies for the treatment of periodontal disease and other dental pathologies. The Company's strategy to achieve this objective is to: (i) develop market acceptance of Periostat among periodontists, general dentists, third-party payors and patients; (ii) establish a sales and marketing organization; (iii) build relationships with dental health managed care organizations; (iv) acquire complementary technologies and products; and (v) leverage the Company's core technology through strategic partnering arrangements for non-dental applications. The Company was incorporated in Delaware in January 1992 under the name Collagenex, Inc. The Company's name was changed to CollaGenex Pharmaceuticals, Inc. in April 1996. All references to the Company refer to CollaGenex Pharmaceuticals, Inc. and its wholly-owned subsidiary, CollaGenex International, Ltd. The Company's executive offices are located at 301 South State Street, Newtown, PA 18940, and its telephone number is (215) 579-7388. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.............. 1,000,000 shares Common Stock to be outstanding after the 8,543,579 shares(1) offering....................................... Use of Proceeds.................................. For marketing expenses associated with new product introduction; the establishment of sales and marketing capabilities; pharmaceutical development; and other general corporate purposes, including working capital Nasdaq National Market Symbol.................... CGPI </TABLE> - --------------- (1) Excludes 546,704 shares of Common Stock issuable upon the exercise of stock options outstanding as of February 28, 1997 at a weighted average exercise price of $5.27 per share, of which options to purchase 86,350 shares of Common Stock are exercisable. See "Management -- Directors' Compensation" and "-- Stock Option Plans." Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriter's over-allotment option. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM JANUARY 10, 1992 YEAR ENDED DECEMBER 31, (INCEPTION) TO ------------------------------------------- DECEMBER 31, 1992 1993 1994 1995 1996 ----------------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues................... $ -- $ -- $ -- $ -- $ 400 Loss from operations....... (1,464) (2,526) (2,721) (5,183) (6,563) Net loss................... (1,416) (2,483) (2,653) (5,269) (5,918) Net loss allocable to common stockholders..... (1,607) (2,834) (3,229) (6,028) (6,638) Pro forma: Net loss per share(1)...... $ (1.10) $ (0.90) Shares used in computing pro forma net loss per share(1)................ 4,808 6,580 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 --------------------------- ACTUAL AS ADJUSTED(2) -------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.............. $ 18,215 $ 32,115 Total assets................................................... 18,437 32,337 Deficit accumulated during the development stage............... (17,739) (17,739) Total stockholders' equity..................................... 17,592 31,492 </TABLE> - --------------- (1) See Note 2 of Notes to Financial Statements for information concerning computation of pro forma net loss per share. (2) Adjusted to reflect the sale of 1,000,000 shares of Common Stock offered hereby after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012393_keystone_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012393_keystone_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..79727e779aa852217790eed1e0a7543606e167a2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012393_keystone_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve risks and uncertainties, such as statements of the Company's strategies, plans, objectives, expectations and intentions. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The cautionary statements made in this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. Except as otherwise specifically set forth, all information, financial and otherwise, with respect to Keystone Automotive Industries, Inc. ("Keystone" or the "Company") (i) includes its wholly-owned subsidiary, North Star Plating Company ("North Star"), which was combined with the Company on March 28, 1997 in a transaction accounted for as a pooling of interests, and (ii) assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Keystone is the nation's leading distributor of aftermarket collision replacement parts produced by independent manufacturers for automobiles and light trucks. Keystone distributes products primarily to collision repair shops throughout most of the United States. In addition, the Company recycles and produces chrome plated and plastic bumpers and remanufactures alloy wheels. The Company's product lines consist of automotive body parts, bumpers, autoglass and remanufactured alloy wheels, as well as paint and other materials used in repairing a damaged vehicle. Keystone currently offers more than 19,000 stock keeping units to over 22,000 collision repair shop customers, out of an estimated 48,000 shops nationwide. Founded in Southern California in 1947, the Company operates a "hub and spoke" distribution system consisting of 11 regional hubs and 71 service centers located in 33 states in the West, Midwest, Northeast, Mid-Atlantic and South, as well as in Tijuana, Mexico. From these service centers, Keystone has approximately 360 professional and highly-trained salespersons who call on an average of over 5,000 collision repair shops per day. On March 28, 1997, a wholly-owned subsidiary of the Company merged into North Star in a transaction (the "North Star Merger") accounted for as a pooling of interests. At the time of the North Star Merger, North Star operated four regional hubs and 23 service centers located in the Midwest and Mid-Atlantic, and the Company believes that North Star was the second largest distributor of aftermarket collision replacement parts in the United States. North Star's operations are very similar to the Company's and strategically expand the Company's geographic market coverage, as only two of the North Star service centers operate in markets already served by Keystone. In addition, the North Star Merger adds depth and experience to the Company's management capabilities. For the fiscal year ended March 28, 1997, the Company generated record revenues, net income and net income per share of $194.3 million, $6.8 million and $0.72, respectively. These results represented increases of approximately 23.8%, 56.6% and 35.8%, respectively, over revenues of $157.0 million, net income of $4.3 million and net income per share of $0.53 in fiscal 1996. For fiscal 1995, 1996 and 1997, the Company generated increases in comparable service center sales of approximately 16%, 13% and 13%, respectively. Keystone's growth has been due primarily to a combination of (i) strategic acquisitions of independent distributors, both in new and existing geographic markets, (ii) expansion of existing product lines and introduction of new product lines and (iii) increased demand for aftermarket collision parts. The Aftermarket Body Parts Association ("ABPA"), the principal industry trade group, estimates that the wholesale market for aftermarket collision parts in the United States and Canada has grown since its inception in the early 1980s to between $800 million and $1.2 billion in annual expenditures in 1995, or approximately 10% of the collision parts market. Substantially all of the remainder of the collision parts market consists of parts produced by original equipment manufacturers ("OEMs"), which prior to 1980 were the sole source of all collision parts. Aftermarket collision parts generally sell for between 20% and 40% less than comparable OEM parts. According to Body Shop Business' 1996 Industry Survey, the percentage of collision repair facilities using aftermarket collision replacement parts increased from approximately 54% in 1993 to 69% in 1995. The aftermarket collision parts market has grown primarily due to the increasing availability of quality parts and cost containment efforts by the insurance industry. Industry sources estimate that approximately 87% of all automobile collision repair work in the United States is paid for in part by insurance. The aftermarket collision parts distribution industry is highly fragmented and is in the process of consolidation. Typically, the Company's competitors are independently owned distributors operating from one to three locations. As a result of the increasing number of aftermarket collision parts and makes and models of automobiles and light trucks, there is increasing pressure on distributors to maintain larger inventories. In addition, the trend towards larger, more efficient collision repair shops has increased the pressure on distributors to provide price concessions, just-in-time delivery and certain value-added services, such as training, that collision repair shops require in their increasingly complex and competitive industry. As a result of its competitive strengths, the Company believes that it is well-positioned to take advantage of the consolidation in its industry and to meet the increasing demands of its customers. Keystone believes that its growth in sales and earnings has been and will continue to be driven by its competitive strengths, which include the following: . Leading Market Position. As the nation's leading distributor of aftermarket collision parts, Keystone offers its customers one of the broadest available selections of aftermarket collision parts, just-in- time delivery, lower prices due to volume purchasing, worldwide product sourcing, priority access to new products and superior technical expertise. . Relationship with Insurance Companies. Since the founding of its business in 1947, Keystone has fostered its relationship with insurance companies, whose increasing efforts to contain the escalating cost of collision repairs have been a principal factor in the growth of the market for aftermarket collision parts. . Experienced Management. Keystone's executive officers have been employed by the Company for an average of 20 years, and the Company's service center managers have been employed for an average of over nine years. The experience and tenure of the Company's personnel and their long- standing relationships with collision repair shop operators have been instrumental in the growth of the Company. . Entrepreneurial Corporate Culture. The manager of each Keystone service center is responsible for its day-to-day operations and is eligible to earn a bonus of more than 100% of base salary based on the performance of the service center. . Superior Customer Service. The Company strives to provide responsive customer service and to foster close customer relations. In particular, the Company maintains large inventories of parts to meet diverse customer requirements, provides prompt delivery of customer orders, usually within 24 hours, by professional and highly-trained route salespersons and has a policy of complete customer satisfaction backed by a limited warranty of parts for as long as the repair shop's customer owns the repaired vehicle. . Management Information and Other Systems. The Company has developed its own computerized order taking, inventory control and management information systems in an effort to achieve additional operating efficiencies and a higher level of customer service. The Company intends to continue its growth through an integrated strategy of selectively acquiring other independent distributors, expanding its existing product lines and introducing new product lines. Since its initial public offering in June 1996, Keystone has acquired 30 service centers by means of the North Star Merger and six other acquisitions and has opened alloy wheel remanufacturing operations at four centers. In addition, the Company has entered into agreements which, if successfully completed, will result in an expansion into the Southwest through the acquisition of six service centers located in Arizona, Colorado, New Mexico, Nevada and Texas. The Company seeks to acquire well-established independent distributors with strong management and significant market share in order to expand into new geographic markets and to increase its penetration in existing markets. Keystone also continually expands its existing product lines as additional aftermarket collision parts become available. Since April 1991, the Company has introduced such additional products as paint and related supplies and equipment, radiators and condensers, head and tail light assemblies and autoglass. In addition, in fiscal 1996 the Company began remanufacturing alloy wheels. The Company's principal executive offices are located at 700 East Bonita Avenue, Pomona, California 91767, and its telephone number is (909) 624-8041. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company............... 1,500,000 shares Common Stock offered by the Selling Shareholders.. 2,300,000 shares(1) Common Stock to be outstanding after the Offering. 11,250,000 shares(2) Use of proceeds................................... The net proceeds will be used primarily to pay down the Company's bank line of credit. The balance of the proceeds and future borrowings under the line of credit will be used for working capital and general corporate purposes and acquisitions. The Company will not receive any proceeds from the sale of shares by the Selling Shareholders. See "Use of Proceeds." Nasdaq National Market symbol..................... KEYS </TABLE> - -------- (1) See "Principal and Selling Shareholders." (2) Excludes shares reserved for issuance under the Company's 1996 Employee Stock Incentive Plan (the "Stock Incentive Plan"), of which 587,000 shares were subject to outstanding options as of May 31, 1997, at a weighted average exercise price of $12.86 per share. See "Management--Stock Incentive Plan." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (In thousands, except share and per share amounts and operating data) <TABLE> <CAPTION> FISCAL YEAR ENDED ------------------------------------------------------- MARCH 26, MARCH 25, MARCH 31, MARCH 29, MARCH 28, 1993 1994 1995(1) 1996 1997 ----------- ----------- --------- --------- --------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> Consolidated Statement of Income Data Net sales............... $ 99,165 $ 110,918 $ 132,655 $ 157,021 $ 194,321 Gross profit............ 39,766 45,205 53,336 61,890 79,269 Operating income........ 2,424 3,592 5,178 8,662 12,521 Net income.............. 821 1,526 2,435 4,336 6,789 ========= ========= ========= ========= ========= Net income per common share.................. $ 0.10 $ 0.18 $ 0.29 $ 0.53 $ 0.72 ========= ========= ========= ========= ========= Weighted average common shares outstanding(2).. 8,313,000 8,313,000 8,255,000 8,250,000 9,408,000 ========= ========= ========= ========= ========= Operating Data (Unaudited) Number of service centers(3) Starting sites......... 38 49 49 53 64 Sites acquired........ 14 2 6 10 10 Sites opened.......... 2 -- -- 3 -- Sites consolidated.... 3 2 1 2 3 Sites closed.......... 2 -- 1 -- 1 Ending sites........... 49 49 53 64 70 Comparable service center sales increase(4) Keystone....................................... 19% 10% 13% North Star..................................... 7% 22% 13% Combined...................................... 16% 13% 13% </TABLE> <TABLE> <CAPTION> MARCH 28, 1997 ------------------- AS ACTUAL ADJUSTED(5) ------- ----------- <S> <C> <C> Consolidated Balance Sheet Data Working capital............................................. $26,847 $48,007 Total assets................................................ 78,800 87,331 Total current liabilities................................... 35,438 22,809 Long-term debt.............................................. 1,105 1,105 Shareholders' equity........................................ 41,854 63,014 </TABLE> - -------- (1) Fiscal 1995 contained 53 weeks. (2) Includes Common Stock equivalents attributable to stock options outstanding, which are not material. (3) Information with respect to service centers includes combined operating data of both Keystone and North Star. As a result of the North Star Merger, the Company acquired 23 service centers. Since March 28, 1997, the Company has acquired one additional service center. (4) Comparable service center sales have been computed using sales of service centers that were open throughout both fiscal years being compared. (5) Adjusted to reflect the sale of the shares of Common Stock offered by the Company hereunder and the application of the net proceeds at an assumed public offering price of $15.25 per share. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012480_sabratek_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012480_sabratek_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7d2730c86eb70d6667a6221d0b2ee93bec56a4d7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012480_sabratek_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus (i) assumes that the Underwriters' over-allotment option is not exercised, (ii) assumes the exercise of outstanding options and warrants to purchase 191,799 shares of Common Stock by the Selling Stockholders and receipt by the Company of $935,522 in proceeds in connection therewith and (iii) has been adjusted to give effect to a 1-for-3.173 reverse stock split which was effected by the Company in connection with its initial public offering of 2,875,000 shares of Common Stock in June, 1996. See "Underwriting" and "Selling Stockholders." This Prospectus contains certain forward-looking statements within the meaning of the Federal securities laws. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Sabratek Corporation (the "Company" or "Sabratek") develops, produces and markets technologically-advanced, user-friendly and cost-effective therapeutic and diagnostic medical systems designed specifically to meet the unique needs of the alternate-site health care market. The Company's multi-therapy infusion and other systems incorporate advanced communications technology which is designed to reduce provider operating costs while maintaining the integrity and quality of care. Sabratek's proprietary health care information system provides remote programming as well as real-time diagnostic and therapeutic data capture capabilities, allowing caregivers to monitor patient compliance more effectively and allowing providers to develop outcome analyses and optimal clinical protocols. The Company has designed its integrated hardware and software system to permit providers of infusion therapy to achieve cost-effective movement of patients along the continuum of alternate-site health care settings. The Company intends to expand its product line beyond infusion therapy to become a leading developer and marketer of a variety of interactive therapeutic and diagnostic medical systems for the delivery of high-quality, cost-effective health care in alternate sites. The Company believes that its current and future products and related software will facilitate the ability of alternate-site providers to create a "virtual" hospital room, thereby affording the delivery of a wide range of care previously provided primarily in an acute-care setting. Substantially all of the Company's revenues have historically been derived from the sale of its multi-therapy infusion pumps and related disposable supplies. Since August, 1996, the Company has commercially introduced several additional products which it believes will contribute to future revenues. Sabratek's strategy focuses primarily on the alternate-site health care market, which it believes will continue to experience significant growth as managed care payors continue to move patients to the lowest-cost care setting. Such growth may be attributed to increasing cost-containment pressures, along with advances in medical technology, that have transitioned the delivery of health care away from the traditional acute-care setting to more cost-effective sites. The alternate-site market includes, among other things, the provision of infusion services rendered in various settings, including the patient's residence, sub-acute care facilities, nursing homes, outpatient clinics, dialysis centers and hospice facilities. According to POV, Incorporated, an industry tracking and consulting firm, the infusion therapy segment of this market is expected to grow in revenue from $3.2 billion in 1992 to $7.9 billion in 1997, representing an average annual compounded growth rate of approximately 20%. The Company believes that for alternate-site health care providers, the management of costly resources such as nursing staff and infusion equipment inventories is critical to their operating viability. The Company's strategic response to the need to achieve cost-effective movement of patients along the continuum of alternate-site care has been to develop the SEAMLESS DELIVERY SYSTEM which integrates stationary and ambulatory multi-therapy infusion pumps, disposable supplies, a proprietary interactive software system and a proprietary infusion pump testing device. Sabratek's SEAMLESS DELIVERY SYSTEM maximizes the similarities in operating features and range of therapeutic applications of the Company's stationary and ambulatory infusion devices, thereby reducing the costly time requirements of training and infusion administration as well as minimizing equipment inventories. The Company's interactive software system augments the utilization of Sabratek's infusion pumps and allows providers to program therapies and monitor compliance on a real-time basis from a remote location. The Company's portable, automatic infusion pump testing device enables providers to perform on-site diagnostic tests on Sabratek's infusion pumps and thereby reduces costs by eliminating the traditional reliance on third-party testing services and in-house biomedical engineering capabilities. The Company believes that competing infusion therapy products do not meet the diverse needs of payors, alternate-site health care providers and their patients within the managed care environment to the same extent as the Company's SEAMLESS DELIVERY SYSTEM. In 1992, the Company commercially launched its multi-therapy stationary infusion device (the "3030 Stationary Pump"), and in 1995 introduced its multi-therapy ambulatory infusion device (the "6060 Ambulatory Pump"). In addition, the Company markets a comprehensive line of related disposable tubing sets. Both the 3030 Stationary Pump and the 6060 Ambulatory Pump have received 510(k) clearance from the Food and Drug Administration (the "FDA"). In 1996, the Company began marketing its proprietary medical software system ("MediVIEW") and its proprietary infusion pump testing device (the "PumpMaster"). The Company currently markets its products domestically to national, regional and local alternate-site and acute-care providers through a sales force composed of 17 direct sales professionals, six clinical support staff and two full-time sales consultants combined with a network of specialized alternate-site medical products distributors. The Company also markets its products internationally through distributors in Europe, Asia, Africa, South America and the Middle East. The Company's goal is to continue to develop and market interactive therapeutic and diagnostic medical systems designed to improve the delivery of high-quality, cost-effective health care at alternate sites. The Company intends to achieve its goal by continuing to: (i) develop advanced medical products and related software systems that maximize the cost-effective provision of alternate-site health care, (ii) develop an integrated system of therapeutic and diagnostic information-based medical products supported by the Company's proprietary health care information system platform, and (iii) create a proprietary outcomes database through the Company's products and software system platform. RECENT DEVELOPMENTS On February 25, 1997, Sabratek acquired substantially all the assets of Rocap, Inc. ("Rocap") for $100,000 in cash, 131,593 shares of Sabratek Common Stock (valued at approximately $2.9 million), plus the assumption of net liabilities of approximately $661,000 and the forgiveness of a bridge loan. In connection with the acquisition, the former President of Rocap entered into a three-year employment agreement with Sabratek. Rocap produces and markets prepackaged injectable prescription pharmaceuticals (intravenous or "I.V." Admixture products) and pre-filled I.V. tubing flush syringes for the alternate-site and acute-care markets. The Company believes the addition of the Rocap product line expands the scope of the Company's I.V. delivery systems, products, and services, thereby enhancing the Company's competitive position. SUB-ACUTE FACILITY LONG-TERM CARE FACILITY SKILLED NURSING FACILITY HOSPICE SEAMLESS DELIVERY SYSTEM(TM) FEATURES FACILITATE THERAPIES FOR HIGHER ACUITY PATIENTS: - - MULTIPLE THERAPY PROTOCOLS - - REMOTE INTERACTIVE PROGRAMMING AND MONITORING - - DATA CAPTURE AND OUTCOMES REPORTING - - CUSTOMIZABLE DELIVERY FORMATS - - USER-FRIENDLY DESIGN AND FEATURES - - ADVANCED SAFETY ALARMS AND FEATURES ANTIBIOTIC THERAPY PREGNANCY/OBSTETRICAL CHEMOTHERAPY PAIN MANAGEMENT THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 1,700,000 shares Common Stock offered by Selling Stockholders................ 478,493 shares Common Stock to be outstanding after the Offering(1)........ 10,266,028 shares Use of proceeds............................................. For expanding manufacturing capacity; for funding further product development efforts; and for expanding sales and marketing activities, with the remainder to be used for working capital and general corporate purposes. In addition, proceeds may be used for future joint ventures or acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol............................... SBTK </TABLE> - --------------- (1) Based on the number of shares outstanding on February 28, 1997. Excludes 1,467,123 shares of Common Stock issuable upon exercise of outstanding stock options under the Company's Stock Option Plan at a weighted average exercise price of $8.31 per share, 233,997 shares of Common Stock reserved for future option grants under such plan and 544,430 shares of Common Stock issuable upon exercise of warrants at a weighted average exercise price of $5.36 per share. Includes 191,799 shares of the above outstanding options and warrants issuable upon exercise by the Selling Stockholders. See "Management -- Stock Option Plan" and "Description of Capital Stock -- Warrants." INFUSION SUITE CLINIC PHYSICIAN'S HOME HEALTH PATIENT'S HOME OFFICE AGENCY HEALTH CARE PROVIDER AND PAYOR BENEFITS ACHIEVE LOWER COSTS - MINIMIZES ON-SITE CAREGIVER INTERVENTION - MAXIMIZES THERAPY COMPLIANCE - REDUCES TRAINING/TRAVEL TIME - ENABLES OPTIMAL CLINICAL PROTOCOL DEVELOPMENT - MINIMIZES PUMP INVENTORIES AND MAINTENANCE COSTS - OPTIMIZES ADMINISTRATIVE EFFICIENCIES ENTERAL NUTRITION PARENTERAL NUTRITION HUMAN GROWTH HORMONES HEMOPHILIA SUMMARY FINANCIAL INFORMATION <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1996 --------------------------------------------- PRO 1992 1993 1994 1995 1996 FORMA(1) ---- ---- ---- ---- ---- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales................................ $ 842 $ 1,229 $ 3,315 $ 4,040 $17,696 $19,632 Gross margin (loss)...................... (28) (405) 834 1,138 8,948 9,340 Selling, general and administrative expenses............................... 765 2,411 4,108 6,874 8,474 10,092 Operating income (loss).................. (793) (2,816) (3,274) (5,736) 474 (752) Stock appreciation rights(2)............. -- -- -- -- (1,628) (1,628) Net loss................................. (791) (2,821) (3,555) (6,036) (858) (2,122) Weighted average common shares outstanding(3)......................... 6,610 7,263 7,395 Net loss per share (1995 pro forma)(3)... $ (0.90) $ (0.12) $ (0.29) </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 ------------------------------------------ PRO FORMA ACTUAL PRO FORMA(4) AS ADJUSTED(5) ------ ------------ -------------- (IN THOUSANDS) <S> <C> <C> <C> BALANCE SHEET DATA: Working capital....................................... $ 24,587 $ 23,427 $ 63,623 Total assets.......................................... 32,951 37,235 77,431 Total debt and capital lease obligations.............. 327 818 818 Accumulated deficit................................... (14,310) (14,310) (14,310) Total stockholders' equity............................ 28,650 31,550 71,746 </TABLE> - --------------- (1) Gives effect to the acquisition of Rocap as if it occurred on January 1, 1996. See "Pro Forma Supplemental Consolidated Financial Statements." (2) For the period ended December 31, 1996, a non-recurring charge in the amount of approximately $1.6 million was recorded to recognize obligations under certain stock appreciation rights in connection with the Company's June 1996 initial public offering. (3) See Note (2) to the Financial Statements for an explanation of the calculation of weighted average shares outstanding. (4) Gives effect to the acquisition of Rocap as if it occurred on December 31, 1996. See "Pro Forma Supplemental Consolidated Financial Statements."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012483_central_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012483_central_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3f5d9644b1977e2e4a0fa07d4361e8c7256a4de3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012483_central_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. For purposes of this Prospectus, unless otherwise indicated or the context otherwise requires, (i) the "Company" refers to Central Financial Acceptance Corporation, its predecessors and its wholly-owned subsidiaries, collectively, (ii) "Central" refers to the parent company only and (iii) the information herein (a) assumes that the Company has been in existence and the Reorganization (as defined below) was consummated concurrently with the 1991 Acquisition (as defined below) and (b) assumes no exercise of the Underwriters' over-allotment option. THE COMPANY The Company is a specialized consumer finance company that primarily serves the financing needs of the rapidly growing low income Hispanic population, a market the Company believes is underserved. The Company (i) provides small, unsecured personal loans to the Company's customers; (ii) purchases and services consumer finance receivables generated by the Company's customers for purchases of high quality, brand name consumer products, appliances and furniture sold by Banner's Central Electric, Inc. ("Banner"), an affiliate of the Company, and by independent retailers; (iii) sells airline tickets and originates and services travel-related finance receivables; and (iv) provides insurance products and insurance premium financing to its customers. The Company has catered to the low income Hispanic population during its 40 years of operation by locating its facilities primarily in Hispanic communities, advertising in Spanish, and employing Spanish as the primary language at its locations. While the Company operates primarily in the greater Los Angeles area and faces substantial competition with respect to its lines of business, the Company's objective is to become the leading provider of consumer credit and other financial services to the low income Hispanic population in urban areas within California and elsewhere in the United States. The Company's customers are typically between the ages of 21 and 45, earn less than $25,000 per year, have little or no savings, and have limited or short-term employment histories. In addition, the Company's customers typically have no or limited prior credit histories and are generally unable to secure credit from traditional lending sources. The Company bases its credit decisions on its assessment of a customer's ability to repay the obligation. In making a credit decision, in addition to the size of the obligation, the Company generally considers a customer's income level, type and length of employment, stability of residence, personal references, and prior credit history with the Company. The Company also obtains a credit bureau report and rating, if available, and seeks to confirm other credit-related information. The Company, however, is more susceptible to the risk that its customers will not satisfy their repayment obligations than are less specialized consumer finance companies or consumer finance companies that have more stringent underwriting criteria. See "Risk Factors -- Credit Risk Associated with Customers; Lack of Collateral" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Trends -- Credit Quality" and "-- Delinquency Experience and Allowance for Credit Losses." Since 1950, Hispanics have been the fastest growing minority group in the United States, increasing from 4.0 million in 1950 to approximately 27.0 million in 1996, a compound annual growth rate of 4.3%. According to the 1996 U.S. Bureau of the Census Current Population Report (the "1996 Report"), this trend is expected to continue. The 1996 Report projects that the Hispanic population will total 36.0 million by 2005. California is home to the largest Hispanic population in the United States, and it is estimated that this population will grow from 9.4 million in 1995 to 13.0 million by 2005, at which time Hispanics will comprise approximately 34% of California's total population. Recognizing these demographic trends, management's strategy has been to identify new financial products and services that it believes could be introduced successfully to the low income Hispanic population in urban areas within California and to increase the number of locations through which it can distribute its products and services. From 1991, when the Company was acquired by its current management (the "1991 Acquisition"), until the Company's initial public offering in June 1996, the Company grew primarily as a result of the introduction of such financial products and services and increased pricing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Trends -- Analysis of Changes in Net Interest Income." The Company's most significant growth has occurred as a result of the introduction of unsecured small loans in the fourth quarter of 1992, a product which the Company believes offers significant continued growth potential. In 1995, the Company began offering company-financed sales of airline tickets and in 1996, the Company began selling automobile insurance and offering insurance premium financing and expanded its independent retail financing business. In 1997, the Company introduced a new financial product involving the issuance of a card, called an "Efectiva Card", which provides customers of the Company with the ability to access their established lines of credit with the Company by withdrawing cash from the Company's cash dispensing machines. As of the date hereof, the Company has installed a proprietary, non-networked, closed system of 20 such cash dispensing machines, of which 18 are in locations owned or leased by the Company or Banner and 2 of which are in locations owned or leased by unaffiliated parties. To continue its growth, in 1996 the Company began to expand its distribution network through acquisitions of businesses primarily serving the Hispanic community. The Company also intends to develop new financial products and services internally that the Company believes will complement or expand its current financial products and services, or seek to acquire existing businesses that offer such products and services. The Company also intends to expand its consumer finance business for independent retailers. Prior to May 1996, the Company offered its products and services through 12 locations, 11 of which were in the greater Los Angeles area. From May 1996 to year end 1996, the Company acquired the business of, and assumed the leasehold interests to, 80 travel locations. In July 1996, the Company acquired the business of, and assumed the leasehold interests in, 10 auto insurance locations in the greater Los Angeles area. Although such transactions were not material from a financial point of view, the Company believes that such businesses provide the Company with growth opportunities while adding additional locations through which it can offer its financial products and services. As a result of internal expansions, acquisitions and consolidation of certain of its operations, at June 30, 1997, the Company operated through 77 locations of which 54 are located in Southern California, 17 are located in Northern California, and 6 are located outside of California. At June 30, 1997, the Company's gross receivables portfolio was approximately $133.0 million, consisting of $54.8 million in the portfolio of loan contracts (the "Small Loan Portfolio"), $48.6 million in the portfolio of consumer product contracts from sales by Banner (the "Consumer Product Portfolio"), $7.7 million in the portfolio of consumer finance contracts from sales by independent retailers (the "Independent Retail Finance Portfolio"), $5.6 million in the portfolio of travel finance contracts (the "Travel Finance Portfolio"), $7.3 million in the portfolio of insurance premium finance contracts (the "Premium Finance Portfolio") and $9.0 million in the portfolio of automobile finance contracts (the "Automobile Finance Portfolio"). At June 30, 1997, the range of average net contract balances in each of the portfolios was between approximately $386 and $648, except for the Automobile Finance Portfolio, where the average net contract balance was approximately $5,500. The Company's principal executive offices are located at 5480 Ferguson Drive, Commerce, California, 90022, and its telephone number is (213) 720-8600. CFAC CAPITAL CFAC Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with the Delaware Secretary of State on September 26, 1997. CFAC Capital's business and affairs are conducted by the Property Trustee, Delaware Trustee and three individual Administrative Trustees who are officers of the Company. CFAC Capital exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures issued by Central, and (iii) engaging in only those other activities necessary, advisable or incidental thereto. The Junior Subordinated Debentures will be the sole assets of CFAC Capital, and payments by Central under the Junior Subordinated Debentures and the Expense Agreement will be the sole revenues of CFAC Capital. All of the Common Securities will be owned by Central. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of Central as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. See "Description of the Trust Preferred Securities -- Subordination of Common Securities of CFAC Capital Held by Central." Central will acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of CFAC Capital. CFAC Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. CFAC Capital's principal offices are located at 5480 East Ferguson Drive, Commerce, California 90022 and its telephone number is (213) 720-8600. THE OFFERING Trust Preferred Securities issuer................... CFAC Capital Securities offered......... 2,100,000 Trust Preferred Securities having a Liquidation Amount of $25 per Trust Preferred Security. The Trust Preferred Securities represent preferred undivided beneficial interests in CFAC Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. CFAC Capital has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an additional 315,000 Trust Preferred Securities at the initial offering price, solely to cover over-allotments, if any. Distributions.............. The Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Trust Preferred Security, will be cumulative, will accrue from the date of issuance of the Trust Preferred Securities, and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on December 15, 1997 (subject to possible deferral as described below). The amount of each Distribution due with respect to the Trust Preferred Securities will include amounts accrued through the date the Distribution payment is due. See "Description of the Trust Preferred Securities." Extension periods.......... So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, Central will have the right, at any time, to defer payments of interest on the Junior Subordinated Debentures by extending the interest payment period thereon for a period not exceeding 20 consecutive quarters with respect to each deferral period (each an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. If interest payments are so deferred, Distributions on the Trust Preferred Securities will also be deferred and Central will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to Central's capital stock or debt securities that rank pari passu with or junior to the Junior Subordinated Debentures. During an Extension Period, Central would have the ability to continue to make payments on Senior and Subordinated Debt. During an Extension Period, Distributions will continue to accumulate with interest thereon compounded quarterly. Because interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law, holders of the Trust Preferred Securities will be required to accrue income for United States federal income tax purposes. See "Description of Junior Subordinated Debentures -- Option to Defer Interest Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income and Original Issue Discount." Maturity................... The Junior Subordinated Debentures will mature on , 2027, which date may be shortened (such date, as it may be shortened, the "Stated Maturity") to a date not earlier than , 2002, subject to redemption on earlier dates as described below. Redemption................. The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Junior Subordinated Debentures at their Stated Maturity or their earlier redemption at a redemption price equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. Subject to restrictions contained in any Senior and Subordinated Debt and regulatory approval, if then required under applicable regulatory policies, the Junior Subordinated Debentures are redeemable prior to maturity at the option of Central (i) on or after , 2002 in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 90 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Trust Preferred Securities -- Redemption" and "Description of Junior Subordinated Debentures -- Redemption." Distribution of Junior Subordinated Debentures............... Central has the right at any time to dissolve CFAC Capital, after satisfaction of creditors of CFAC Capital as required by applicable law, and cause the Junior Subordinated Debentures to be distributed to holders of Trust Preferred Securities in liquidation of CFAC Capital, subject to Central having received prior approval of the primary federal regulator of Central to do so if then required under applicable capital guidelines or policies of such primary regulator. See "Description of the Trust Preferred Securities -- Distribution of Junior Subordinated Debentures." Guarantee.................. Taken together, Central's obligations under various documents described herein, including the Guarantee Agreement, provide a full, irrevocable and unconditional guarantee of payments by CFAC Capital of Distributions and other amounts due on the Trust Preferred Securities. Under the Guarantee Agreement, Central guarantees the payment of Distributions by CFAC Capital and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of Senior and Subordinated Debt of Central, as defined herein) to the extent of funds held by CFAC Capital. If CFAC Capital has insufficient funds to pay Distributions on the Trust Preferred Securities (i.e., if Central has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Central to enforce payment of such Distributions to such holder. See "Description of Junior Subordinated Debentures -- Enforcement of Certain Rights by Holders of the Trust Preferred Securities," "Description of Junior Subordinated Debentures -- Debenture Events of Default" and "Description of Guarantee." Ranking.................... The Trust Preferred Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities of CFAC Capital held by Central, except as described under "Description of the Trust Preferred Securities -- Subordination of Common Securities of CFAC Capital Held by Central." The obligations of Central under the Guarantee, the Junior Subordinated Debentures and other documents described herein are unsecured and rank subordinate and junior in right of payment to all current and future Senior and Subordinated Debt, the amount of which is unlimited. Central has a revolving loan agreement with several banks and Wells Fargo Bank, N.A., as agent (the "Line of Credit") that provides for borrowings by Central of up to $100 million, subject to an allowable borrowing base. Borrowings under the Line of Credit are guaranteed by all of the significant domestic subsidiaries of the Company and are secured by substantially all of the assets, including the receivables, of the Company and a pledge by Central of the stock of all of its significant subsidiaries. All borrowings under the Line of Credit are Senior and Subordinated Debt. At June 30, 1997, Central had approximately $66.7 million aggregate principal amount outstanding under the Line of Credit, including letters of credit. As of June 30, 1997, on a pro forma basis after giving effect to the offering and application of the net proceeds therefrom to temporarily reduce the balance outstanding under the Line of Credit, Central would have approximately $16.6 million in Senior and Subordinated Debt outstanding. As a result of the funds which would be made available to the Company upon completion of this offering, the Company does not anticipate that it will have an immediate need for a $100.0 million credit facility. Concurrent with the consummation of this offering, there will be a reduction in the maximum amount committed by the lenders to be available for borrowing under the Line of Credit from $100.0 million to between $30.0 million to $43.0 million. Concurrent with the consummation of the offering and such reduction in the maximum amount available for borrowing under the Line of Credit, Wells Fargo Bank, N.A. will be paid off in full and Union Bank of California, N.A. may be paid off in full and, to the extent paid off, will no longer participate as a lender under the Line of Credit. Both Wells Fargo Bank, N.A. and Union Bank of California, N.A. either directly or through an affiliate, have an indirect ownership interest in Central. If the offering is not consummated, the Line of Credit will remain in place with all of the current lenders. Since the Line of Credit requires Central to pay the lenders fees for the unused portion available under the Line of Credit, the reduction in the lenders' commitment will reduce the amount of fees payable by Central. In addition, because Central is a holding company, substantially all of Central's assets consist of the capital stock of its subsidiaries. All obligations of Central relating to the securities described herein will be effectively subordinated to all existing and future liabilities of Central's subsidiaries. Central may cause additional Trust Preferred Securities to be issued by trusts similar to CFAC Capital in the future, and there is no limit on the amount of such securities that may be issued. In this event, Central's obligations under the Junior Subordinated Debentures to be issued to such other trusts and Central's guarantees of the payments by such trusts will rank pari passu with Central's obligations under the Junior Subordinated Debentures and the Guarantee, respectively. See "Description of Junior Subordinated Debentures -- Subordination" and "Description of Guarantee -- Status of Guarantee." Voting rights.............. The holders of the Trust Preferred Securities will generally have limited voting rights relating only to the modification of the Trust Preferred Securities, the dissolution, winding-up or termination of CFAC Capital and certain other matters described herein. See "Description of the Trust Preferred Securities -- Voting Rights; Amendment of the Trust Agreement." ERISA considerations....... Prospective purchasers must carefully consider the information set forth under "ERISA Considerations." Nasdaq National Market symbol................... The Trust Preferred Securities have been approved for listing on the Nasdaq National Market, subject to official notice of issuance, under the symbol CFACP. Use of proceeds............ The proceeds to CFAC Capital from the sale of the Trust Preferred Securities offered hereby will be invested by CFAC Capital in the Junior Subordinated Debentures of Central. Central intends to use the proceeds to temporarily reduce the balance outstanding under the Line of Credit. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001012623_imc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001012623_imc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f68d34b8b45f2e544aa352938ba629b0de929cb8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001012623_imc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and related notes appearing elsewhere in this Prospectus. Unless the context otherwise requires, the terms the 'Company' and 'IMC' refer to IMC Mortgage Company, its subsidiaries, including its wholly owned subsidiary Industry Mortgage Company, L.P. (the 'Partnership'), and their respective operations. Unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option and has been adjusted to reflect a two-for-one stock split of the Common Stock paid on February 13, 1997. This Prospectus contains forward-looking statements which involve risks and uncertainties. Actual events or results may differ materially as a result of various factors, including those set forth under 'Risk Factors' and elsewhere in this Prospectus. THE COMPANY IMC is a specialized consumer finance company engaged in purchasing, originating, servicing and selling home equity loans secured primarily by first liens on one- to four-family residential properties. The Company focuses on lending to individuals whose borrowing needs are generally not being served by traditional financial institutions due to such individuals' impaired credit profiles and other factors. Loan proceeds typically are used by such individuals to consolidate debt, to finance home improvements, to pay educational expenses and for a variety of other uses. By focusing on individuals with impaired credit profiles and by providing prompt responses to their borrowing requests, the Company has been able to charge higher interest rates for its loan products than typically are charged by conventional mortgage lenders. IMC was formed in 1993 by a team of executives experienced in the non-conforming home equity loan industry. IMC was originally structured as a partnership, with the limited partners consisting of originators of non-conforming home equity loans (the 'Industry Partners') and certain members of management. The original Industry Partners included: Approved Financial Corp. (formerly American Industrial Loan Association) ('Approved'); Champion Mortgage Co. Inc.; Cityscape Corp.; Equitysafe, a Rhode Island General Partnership; Investors Mortgage, a Washington LP ('Investors Mortgage'); Mortgage America Inc. ('Mortgage America'); Residential Money Centers; First Government Mortgage and Investors Corp.; Investaid Corp.; and New Jersey Mortgage and Investment Corp. In 1994, TMS Mortgage Inc., a wholly-owned subsidiary of The Money Store Inc., ('The Money Store'), and Equity Mortgage, a Maryland LP ('Equity Mortgage'), became Industry Partners. Branchview, Inc., a wholly-owned subsidiary of Lakeview Savings Bank ('Lakeview'), became an Industry Partner in 1995. IMC purchases and originates non-conforming home equity loans through a diversified network of correspondents (which includes the Industry Partners) and mortgage loan brokers and on a retail basis through its direct consumer lending effort. As of December 31, 1996, IMC had a network of 374 approved correspondents, including the Industry Partners, 1,693 approved mortgage loan brokers and 17 Company-owned retail branches. During January and February 1997, IMC added 49 retail branches through the acquisition of four retail non-conforming mortgage lenders. Since its inception in August 1993, IMC has experienced considerable growth in loan production, with total purchases and originations of $29.6 million, $282.9 million, $621.6 million and $1.77 billion in 1993, 1994, 1995 and 1996, respectively. IMC's direct consumer lending effort, which began in 1995, contributed approximately 1.8% and 3.8% of loan production in 1995 and 1996, respectively. IMC is continuing to expand its direct consumer lending by opening branch offices and expanding its use of advertising, direct mail and other marketing strategies, as well as through acquisitions. As of December 31, 1996, a majority of the Industry Partners were required to sell to IMC, on prevailing market terms and conditions, an aggregate of $162.0 million of home equity loans per year. IMC has consistently purchased loan production from the Industry Partners in excess of such aggregate annual commitment. Actual sales to IMC by the Industry Partners aggregated $337.5 million for the year ended December 31, 1996. As a result of IMC's acquisition of two of the Industry Partners (Mortgage America and Equity Mortgage) effective January 1, 1997, the contractual annual sales commitment from the Industry Partners was reduced by $36.0 million to $126.0 million. The two acquired Industry Partners originated an aggregate of approximately $284 million residential loans in 1996. These acquisitions reflect IMC's business strategy to increase its retail loan origination channels through acquisitions of retail non-conforming lenders. See 'Business -- Acquisitions and Strategic Alliances' and 'Certain Relationships and Related Transactions.' IMC sells the majority of its loans through its securitization program and retains rights to service such loans. Through December 31, 1996, IMC had completed eight securitizations totaling $1.4 billion of loans. The Company earns servicing fees on a monthly basis of 0.50% per year and ancillary fees on the loans it services in the securitization pools. As of December 31, 1995 and 1996, IMC had a servicing portfolio of $535.8 million and $2.15 billion, respectively. The Company's total revenues increased from $19.7 million for the year ended December 31, 1995 to $65.7 million for the year ended December 31, 1996, while pro forma net income increased from $4.0 million to $17.9 million in those periods. Gain on sale of loans, net represented $15.1 million, or 76.9% of total revenues, for the year ended December 31, 1995 compared to $42.1 million, or 64.1% of total revenues, for the year ended December 31, 1996. Servicing income, net warehouse interest income and other revenues in the aggregate increased from $4.5 million, or 23.0% of total revenues, for the year ended December 31, 1995 to $23.6 million, or 35.9% of total revenues, for the year ended December 31, 1996. IMC's strategy is to continue to increase its servicing portfolio and portfolio of loans held for sale in order to generate increased revenues from these two sources. As a result of its increased volume of loan purchases and originations and its growing use of securitizations, the Company has operated and, like similar companies in the non-conforming home equity loan industry, expects to continue to operate for the foreseeable future on a negative cash flow basis. The Company has funded its growth through access to the capital markets and borrowings. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources.' The Company is a Florida corporation. Its principal offices are located at 3450 Buschwood Park Drive, Tampa, Florida 33618 and its telephone number is (813) 932-2211. BUSINESS STRATEGY The Company utilizes the following strategies to maintain and expand its core business: Expansion through Acquisitions. The Company is actively pursuing a strategy of acquiring originators of non-conforming home equity loans. IMC's acquisition strategy focuses on entities that originate non-conforming mortgages either directly from the consumer or through broker networks. In 1996, IMC acquired Mortgage Central Corp. ('Equitystars,' an affiliate of Equitysafe) and in January and February 1997 completed the acquisitions of Mortgage America, CoreWest Banc ('CoreWest'), Equity Mortgage and American Mortgage Reduction, Inc. ('American Reduction'). Equitystars, Mortgage America and Equity Mortgage were Industry Partners. Management believes that the acquisition of non-conforming home equity loan originators will benefit IMC by: (i) increasing IMC's loan production volume by capturing all of the acquired company's production instead of only a portion; (ii) improving IMC's profitability and profit margins because broker and direct-to-consumer originated loans typically result in better profit margins than loans purchased from correspondents; (iii) adding experienced management; and (iv) broadening IMC's distribution system for offering new products. In order to incent management of the acquired companies, IMC typically structures its acquisitions to include an initial payment upon closing of the transaction and to provide for contingent payments tied to future production and profitability of the acquired company. Expansion of Direct Consumer Lending. IMC intends to expand its direct consumer lending efforts by opening additional branch offices which will allow the Company to focus on developing contacts with individual borrowers, local brokers and referral sources such as accountants, attorneys and financial planners. Through December 31, 1996, IMC opened 17 retail branch offices. In January and February 1997, IMC added 49 retail branches through acquisitions. Expansion of Correspondent and Broker Networks. The Company intends to continue to increase its loan production from correspondents and brokers by increasing its market share through geographic expansion, tailored marketing strategies and a continued focus on servicing smaller correspondents in regions that historically have not been actively served by non-conforming home equity lenders. Broadening of Product Offerings. The Company continues to introduce new non-conforming home equity loan products to meet the needs of its correspondents, brokers and borrowers and to expand its market share by attracting new customers. The Company is in the process of introducing two such products, Home Equity Lines of Credit ('HELOCs') and secured credit cards. Strategic Alliances and Joint Ventures. In order to increase the Company's volume and diversify its sources of loan originations over the long term, the Company seeks to enter into strategic alliances with selected mortgage lenders, pursuant to which the Company provides working capital and financing arrangements and a commitment to purchase qualifying loans. In return, the Company expects to receive a more predictable flow of loans and, in some cases, an option to acquire an equity interest in the strategic partner. To date, the Company has entered into two strategic alliances in the United States and a joint venture in the United Kingdom. Maintenance of Underwriting Quality and Loan Servicing. The Company's underwriting and servicing staff have extensive experience in the non-conforming home equity loan industry. The management of IMC believes that the depth and experience of its underwriting and servicing staff provide the Company with the infrastructure necessary to sustain its recent growth and maintain its commitment to high standards in its underwriting and loan servicing. As the Company continues to grow, it is committed to applying consistent underwriting procedures and criteria and to attracting, training and retaining experienced staff. Maximize Financial Flexibility and Improve Cash Flow. The Company intends to maximize its financial flexibility in a number of ways, including by maintaining a significant quantity of mortgage loans held for sale on its balance sheet. Maintenance of a substantial amount of mortgage loans held for sale, which the Company can sell when necessary or desirable either through securitizations or whole loans sales, permits IMC to improve management of its cash flow by increasing its net interest income and to reduce its exposure to the volatility of the capital markets. During 1996, the Company securitized approximately 53% of its loan production. RECENT DEVELOPMENTS Earnings. On April 18, 1997 the Company reported net income of $8.9 million for the first quarter of 1997, compared to pro forma net income of $1.6 million for the first quarter of 1996, and earnings per share of $.34 for the first quarter of 1997, compared to pro forma earnings per share of $.10 for the first quarter of 1996, on a fully diluted basis. Acquisitions. Pursuant to its strategy to expand direct lending origination channels through acquisitions of non-conforming home equity lenders, IMC acquired Mortgage America, CoreWest, Equity Mortgage and American Reduction in January and February 1997. The purchase price for each acquisition was paid in either cash or Common Stock and most acquisitions included earn-out arrangements that provide the sellers with additional consideration if the acquired company reaches certain performance targets after acquisition. While the Company believes that the acquisitions described below are important to the Company's business strategy, none of the acquisitions individually, or in the aggregate, represents a significant amount of revenues, income or assets in relation to the Company. See 'Business -- Acquisitions and Strategic Alliances.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001013027_market_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001013027_market_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2642d0ed1cab02f7836711155d5e5354111fe1ba
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001013027_market_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING INFORMATION IS NOT COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. MARKET FINANCIAL CORPORATION MFC was incorporated under Ohio law in April 1996 at the direction of the Association for the purpose of purchasing all of the capital stock of the Association to be issued in connection with the Conversion. MFC has not conducted and will not conduct any business before the completion of the Conversion, other than business related to the Conversion. Upon the consummation of the Conversion, MFC will be a unitary savings and loan holding company, the principal assets of which initially will consist of the capital stock of the Association, a promissory note from the ESOP and the investments made with the net proceeds retained from the sale of Common Shares in connection with the Conversion. See "USE OF PROCEEDS." The executive office of MFC is located at 7522 Hamilton Avenue, Mt. Healthy, Ohio 45231, and its telephone number is (513) 521-9772. THE MARKET BUILDING AND SAVING COMPANY The Association is a mutual savings and loan association organized under Ohio law in 1883 under the name "The Court Street Market Building and Saving Company." In 1926, the Association adopted its current name. In 1960, the Hilltop Savings and Loan Company of Mt. Healthy, Ohio, was merged into the Association. The Cleves-North Bend Building and Loan Company ("Cleves-North Bend") of North Bend, Ohio, was merged into the Association in 1994. As an Ohio savings and loan association, the Association is subject to supervision and regulation by the OTS and the Division. The Association is a member of the Federal Home Loan Bank (the "FHLB") of Cincinnati, and the deposit accounts of the Association are insured up to applicable limits by the Savings Association Insurance Fund (the "SAIF") administered by the FDIC. See "REGULATION." The Association conducts business from its main office located at 7522 Hamilton Avenue, Mt. Healthy, Ohio, and its full-service branch office at 125 Miami Avenue, North Bend, Ohio. As a community-oriented institution, the Association focuses on providing a high level of customer service to the families and businesses located in the Mt. Healthy and North Bend communities. The Association's strategy is to continue its historic commitment to one- to four-family mortgage lending while maintaining strong asset quality and a high level of capital. The principal business of the Association is the origination of permanent mortgage loans secured by first mortgages on one- to four-family residential real estate located in Hamilton County, Ohio, the Association's primary market area. The Association also originates a limited number of loans for the construction of one- to four-family residences and permanent mortgage loans secured by multifamily real estate (over four units) and nonresidential real estate in its market area. See "THE BUSINESS OF THE ASSOCIATION - Lending Activities." In addition to real estate lending, the Association originates a limited number of loans secured by deposits at the Association. For liquidity and interest rate risk management purposes, the Association invests in interest- bearing deposits in other financial institutions, U.S. Government and agency obligations and mortgage-backed securities. See "THE BUSINESS OF THE ASSOCIATION - Investment Activities." Funds for lending and other investment activities are obtained primarily from savings deposits, which are insured up to applicable limits by the FDIC, and principal repayments on loans. See "THE BUSINESS OF THE ASSOCIATION - Deposits and Borrowings." THE CONVERSION GENERAL. The Boards of Directors of MFC and the Association have unanimously approved the Plan. The Plan provides for the conversion of the Association from a mutual savings and loan association to a permanent capital stock savings and loan association incorporated under the laws of the State of Ohio. The OTS and the Division have approved the Plan, subject to the approval of the Plan by the Association's voting members at the Special Meeting, and to the satisfaction of certain other conditions. See "THE CONVERSION - Conditions and Termination." THE SUBSCRIPTION OFFERING AND THE COMMUNITY OFFERING. Pursuant to the Plan, subscription rights to purchase Common Shares at a price of $10 per share are hereby offered to (a) each Eligible Account Holder, (b) the ESOP, (c) each Supplemental Eligible Account Holder and (d) Other Eligible Members. See "THE CONVERSION - Subscription Offering." In accordance with the Plan, nontransferable subscription rights to purchase Common Shares at a price of $10 per share are offered hereby in a subscription offering (the "Subscription Offering"), subject to the rights and restrictions established by the Plan, to (a) each account holder who, at the close of business on December 31, 1994 (the "Eligibility Record Date"), had deposit accounts with deposit balances, in the aggregate, of $50 or more (a "Qualifying Deposit") with the Association (the "Eligible Account Holders"), (b) the ESOP, (c) each account holder who, at the close of business on September 30, 1996 (the "Supplemental Eligibility Record Date"), had a Qualifying Deposit with the Association (the "Supplemental Eligible Account Holders"), and (d) members of the Association having a deposit account of record on ______________, 1997 ("Other Eligible Members"). ALL SUBSCRIPTION RIGHTS TO PURCHASE COMMON SHARES IN THE SUBSCRIPTION OFFERING ARE NONTRANSFERABLE AND WILL EXPIRE AT 4:30 P.M., EASTERN TIME, ON ________, 1997 (THE "SUBSCRIPTION EXPIRATION DATE"), UNLESS EXTENDED BY THE ASSOCIATION AND MFC FOR UP TO 45 DAYS TO __________, 1997. Persons found to be transferring subscription rights will be subject to forfeiture of such rights and possible further penalties imposed by the OTS. See "THE CONVERSION - Subscription Offering." To the extent that all of the Common Shares are not subscribed for in the Subscription Offering, the remaining Common Shares are hereby being concurrently offered to the general public in a direct community offering in which preference will be given to natural persons residing in Hamilton County, Ohio (the "Community Offering"). See "THE CONVERSION - Community Offering." The Board of Directors of MFC may terminate the Community Offering at any time after subscriptions or orders for at least 858,500 Common Shares have been received and in no event will the Community Offering extend beyond 45 days after the Subscription Expiration Date or __________, 1997, unless extended by the Association and MFC with the approval of the OTS and the Division, if necessary. In accordance with the Plan, the Subscription Offering and the Community Offering (collectively, the "Offering") may not be extended beyond ____________, 199__. See "THE CONVERSION - Subscription Offering; - Community Offering; and - Marketing Plan." The Plan and federal regulations limit the number of Common Shares which may be purchased by various categories of persons, including the limitation that no person may purchase fewer than 25 shares, nor more than 2% of the Common Shares sold in connection with the Conversion (26,715 Common Shares at the maximum of the Valuation Range, as adjusted). Such limitation does not apply to the ESOP. In addition, no person together with such person's Associates (hereinafter defined) and persons Acting in Concert (hereinafter defined) with such person, may purchase more than 4% of the Common Shares sold in connection with the Conversion (53,429 Common Shares at the maximum of the Valuation Range, as adjusted) in the Subscription Offering, or 2% in the Community Offering. Subject to applicable OTS regulations, the limitations set forth in the Plan may be changed at any time in the sole discretion of the Board of Directors of MFC and the Association. See "THE CONVERSION - Limitations on Purchases of Common Shares." Common Shares may be subscribed for or ordered in the Offering only by returning the accompanying order form (the "Order Form"), along with full payment of the purchase price per share for all Common Shares for which a subscription is made or an order is submitted, so that it is received by the Association no later than 4:30 p.m., Eastern Time, on __________, 1997. See "THE CONVERSION - Use of Order Forms." Payment may be made in cash, if delivered in person, or by check or money order and will be held at the Association in a segregated account insured by the FDIC up to the applicable limits and earning interest at the Association's then current passbook savings account rate from the date of receipt until the completion of the Conversion. Payment may also be made by authorized withdrawal from an existing deposit account at the Association, the amount of which will continue to earn interest until completion of the Conversion at the rate normally in effect from time to time for such accounts. See "THE CONVERSION - Payment for Common Shares." AN EXECUTED ORDER FORM, ONCE RECEIVED BY MFC, MAY NOT BE MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF MFC, UNLESS (I) THE COMMUNITY OFFERING IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION EXPIRATION DATE, OR (II) THE FINAL VALUATION OF THE ASSOCIATION, AS CONVERTED, IS LESS THAN $8,585,000 OR MORE THAN $13,357,250. IF EITHER OF THOSE EVENTS OCCUR, PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN THE OFFERING WILL RECEIVE WRITTEN NOTICE THAT, UNTIL A DATE SPECIFIED IN THE NOTICE, THEY HAVE A RIGHT TO AFFIRM, INCREASE, DECREASE OR RESCIND THEIR SUBSCRIPTIONS. ANY PERSON WHO DOES NOT AFFIRMATIVELY ELECT TO CONTINUE HIS SUBSCRIPTION OR ELECTS TO RESCIND HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE ALL OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. ANY PERSON WHO ELECTS TO DECREASE HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE THE APPROPRIATE PORTION OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. IN ADDITION, IF THE MAXIMUM PURCHASE LIMITATION IS INCREASED TO MORE THAN 2% OF THE COMMON SHARES SOLD IN THE CONVERSION, PERSONS WHO HAVE SUBSCRIBED FOR 2% OF THE COMMON SHARES WILL BE GIVEN THE OPPORTUNITY TO INCREASE THEIR SUBSCRIPTIONS. THE CONVERSION OF THE ASSOCIATION FROM A MUTUAL SAVINGS AND LOAN ASSOCIATION TO A PERMANENT CAPITAL STOCK SAVINGS AND LOAN ASSOCIATION IS CONTINGENT UPON (I) THE APPROVAL OF THE PLAN AND THE ADOPTION OF THE AMENDED ARTICLES OF INCORPORATION AND THE AMENDED CONSTITUTION BY THE ASSOCIATION'S VOTING MEMBERS, (II) THE SALE OF THE REQUISITE NUMBER OF COMMON SHARES AND (III) CERTAIN OTHER FACTORS. SEE "THE CONVERSION." Concurrently with the Subscription Offering, MFC is hereby offering Common Shares in the Community Offering, subject to certain limitations and to the extent such shares remain available after the satisfaction of all subscriptions received in the Subscription Offering. Preference will be given in the Community Offering to natural persons residing in Hamilton County, Ohio. The Boards of Directors of MFC and the Association have the right to reject, in whole or in part, any order for Common Shares submitted in the Community Offering. See "THE CONVERSION - Community Offering." The Offering will terminate at, and subscription rights will expire if not exercised by, 4:30 p.m., Eastern Time, on the Subscription Expiration Date. If necessary, the Community Offering may be extended by MFC and the Association to 45 days after the Subscription Expiration Date or _________, 1997. Any extension of the Community Offering beyond ________, 1997, would require the consent of the OTS and the Division. If the Community Offering extends beyond _________, persons who have subscribed for or ordered Common Shares in the Offering will receive a notice that they have the right to affirm, increase, decrease or rescind their subscriptions or orders for Common Shares. Persons who do not affirmatively elect to continue their subscriptions or who elect to rescind their subscriptions during any such extension will have all of their funds promptly refunded with interest. Persons who elect to decrease their subscriptions will have the appropriate portion of their funds promptly refunded with interest. See "THE CONVERSION - Pricing and Number of Common Shares to be Sold." The sale of Common Shares pursuant to subscriptions and orders received in the Offering will be subject to the approval of the Plan by the voting members of the Association at the Special Meeting, to the determination by the Board of Directors of MFC and the Association of the total number of Common Shares to be sold and to the satisfaction or waiver of certain other conditions. See "THE CONVERSION - Subscription Offering; - Community Offering; and - Pricing and Number of Common Shares to be Sold." PURCHASE LIMITATIONS. The Plan authorizes the Boards of Directors of MFC and the Association to establish limits on the amount of Common Shares which may be purchased by various categories of persons. The Plan also permits the Boards of Directors of MFC and the Association, subject to any required regulatory approval and the requirements of applicable laws and regulations, to increase or decrease such purchase limitations, in their sole discretion. Pursuant to such authority, the Boards of Directors have established the preliminary limitation that, generally, an Eligible Account Holder or Supplemental Eligible Account Holder may purchase in the Subscription Offering a number of Common Shares equal to the greater of (i) 2% of the total number of Common Shares to be sold in connection with the Conversion (26,715 shares at the maximum of the Valuation Range, as adjusted), or (ii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of Common Shares to be sold in connection with the Conversion by a fraction, the numerator of which is the amount of such Eligible Account Holder's or Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of which is the total amount of Qualifying Deposits of all Eligible Account Holders or Supplemental Eligible Account Holders, as the case may be. Other Eligible Members in the Subscription Offering may purchase a number of Common Shares equal to up to 2% of the total number of Common Shares sold in connection with the Conversion. No person in the Subscription Offering, however, together with his or her Associates and other persons Acting in Concert with him or her, may purchase more than 4% of the Common Shares sold in connection with the Conversion (53,429 shares at the maximum of the Valuation Range, as adjusted). Such limitations do not apply to the ESOP, which intends to purchase up to 8% of the Common Shares sold in the Offering. The ESOP may purchase Common Shares if shares remain available after satisfying the subscriptions of Eligible Account Holders up to $11,615,000, the maximum of the Valuation Range. If the ESOP is unable to purchase all or part of the Common Shares for which it subscribes, the ESOP may purchase Common Shares on the open market or may purchase authorized but unissued Common Shares from MFC. If the ESOP purchases authorized but unissued Common Shares from MFC, such purchases could have a dilutive effect on the interests of MFC's shareholders. See "RISK FACTORS - Dilutive Effect of Purchases by the ESOP and the RRP." Each person in the Community Offering, together with such person's Associates and other persons Acting in Concert with him or her, may purchase 2% of the Common Shares to be sold in connection with the Conversion (26,715 shares at the maximum of the Valuation Range, as adjusted). Subject to applicable regulations, the purchase limitation may be increased or decreased after the commencement of the Offering in the sole discretion of the Boards of Directors of MFC and the Association. See "THE CONVERSION - Limitations on Purchases of Common Shares" and "RESTRICTIONS ON ACQUISITION OF MFC AND THE ASSOCIATION AND RELATED ANTI-TAKEOVER PROVISIONS." NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS. OTS and Ohio regulations provide that subscription rights are non-transferable. OTS regulations specifically prohibit any person from transferring or entering into any agreement or understanding before the completion of the Conversion to transfer the ownership of the subscription rights issued in the Conversion or the shares to be issued upon the exercise of such subscription rights. Persons attempting to violate such provision may lose their rights to purchase Common Shares in the Conversion and may be subject to penalties imposed by the OTS. Each person THE MARKET BUILDING AND SAVING COMPANY Established in 1883 Headquarters: 7522 Hamilton Avenue Mt. Healthy, Ohio 45231 (513) 521-9772 [Map of the states of Ohio, Indiana and Kentucky with the capital cities noted and indicating the City of Cincinnati and the location of the main office and branch office of the Association. Above the tri-state map is an enlargement of Hamilton County showing the location of the City of Cincinnati and the Association's main office and branch office within Hamilton County.] exercising subscription rights will be required to certify that his or her purchase of Common Shares is solely for the subscriber's own account and that there is no agreement or understanding regarding the sale or transfer of such Common Shares. PARTICIPATION OF WEBB IN THE OFFERING. The Association and MFC have retained Webb as a consultant and advisor in connection with the Offering. Webb will also assist in soliciting subscriptions in the Subscription Offering and the Community Offering. Such solicitations will be made on a "best efforts" basis. Webb is not obligated to purchase any of the Common Shares. See "THE CONVERSION - Marketing Plan." PRICING OF THE COMMON SHARES. Keller & Company, Inc. ("Keller"), a Columbus, Ohio, firm experienced in valuing thrift institutions, has prepared an independent valuation of the estimated pro forma market value of the Association, as converted. Keller was selected by the Board of Directors because Keller has extensive experience in the valuation of thrift institutions, particularly in the mutual-to-stock conversion context. Keller is certified by the OTS as a mutual-to-stock conversion appraiser. The Association and Keller have no relationship which would affect Keller's independence. Keller's valuation of the estimated pro forma market value of the Association, as converted, is $10,100,000 as of August 2, 1996 (the "Pro Forma Value"). Based on the Pro Forma Value of the Association, the Valuation Range established in accordance with the Plan is $8,585,000 to $13,357,250. MFC will issue the Common Shares at a fixed price of $10 per share and, by dividing the price per share into the aggregate pro forma value at the close of the Offering, will determine the number of Common Shares to be issued. In the event that Keller determines at the close of the Offering that the aggregate pro forma value of the Association is higher or lower than the Pro Forma Value, but is nevertheless equal to or greater than $8,585,000 or equal to or less than $13,357,250, MFC will make an appropriate adjustment by raising or lowering the total number of Common Shares to be sold in the Conversion consistent with the final valuation. The total number of Common Shares to be sold in the Conversion will be determined in the discretion of the Board of Directors consistent with the final valuation. If, due to changing market conditions, the final valuation is less than $8,585,000 or more than $13,357,250, subscribers will be given notice of such final valuation and the right to affirm, increase, decrease or rescind their subscriptions. USE OF PROCEEDS. MFC will retain 50% of the net proceeds from the sale of the Common Shares, or approximately $4.8 million at the mid-point of the Valuation Range, including the value of a promissory note from the ESOP which MFC intends to accept in exchange for the issuance of Common Shares to the ESOP. Such proceeds will be used by MFC to fund the Market Financial Corporation Recognition and Retention Plan (the "RRP") which is expected to purchase on the open market a number of shares of MFC equal to up to 4% of the Common Shares sold in connection with the Conversion and for general corporate purposes, including payment of dividends, purchases of Common Shares and acquisitions of other financial institutions. The remainder of the net proceeds received from the sale of the Common Shares, approximately $4.8 million at the mid-point of the Valuation Range, will be invested by MFC in the capital stock to be issued by the Association to MFC as a result of the Conversion and will increase the regulatory capital of the Association. The Association will utilize such proceeds to originate adjustable- and fixed-rate loans and as a source of liquidity through investments in short- to intermediate- term U.S. Government securities. See "USE OF PROCEEDS." TAX CONSEQUENCES The consummation of the Conversion is expressly conditioned upon the receipt by MFC and the Association of a private letter ruling from the Internal Revenue Service (the "IRS") or an opinion of counsel to the effect that, for federal income tax purposes, the Conversion will constitute a tax-free reorganization as defined in Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). MFC and the Association intend to proceed with the Conversion based upon an opinion received from Vorys, Sater, Seymour and Pease that states, in part, that (1) no gain or loss will be recognized by the Association in connection with the Conversion or the receipt from MFC of proceeds from the sale of the Common Shares, (2) assuming that the subscription rights received by deposit account holders in connection with the Conversion have no ascertainable fair market value, no gain or loss will be recognized to the deposit account holders of the Association upon issuance to them of subscription rights or interests in the Liquidation Account (hereinafter defined) and (3) no taxable income will be realized by deposit account holders as a result of their exercise of such subscription rights. Although the IRS could challenge the assumption that the subscription rights have no ascertainable fair market value, MFC and the Association have received an opinion from Keller supporting such assumption. See "THE CONVERSION - Principal Effects of the Conversion -- Tax Consequences." MARKET FOR COMMON SHARES There is presently no market for the Common Shares. No assurance can be given that an active or liquid market for the Common Shares will develop after the completion of the Conversion or, if such a market does develop, that it will continue. Investors should consider, therefore, the potentially illiquid and long-term nature of an investment in the Common Shares. See "RISK FACTORS - Absence of Market of Common Shares." MFC has received conditional approval from The Nasdaq Small Cap Market ("Nasdaq Small Cap") to have the Common Shares quoted on Nasdaq Small Cap under the symbol "MRKF" upon the completion of the Conversion, subject to certain conditions which the Association and MFC believe will be satisfied, although no assurance can be provided that the conditions will be met. One of the conditions to the Nasdaq Small Cap listing is the commitment of at least two brokerage firms to make a market in the Common Shares. Keefe, Bruyette & Woods, Inc. ("KBW"), intends to make a market in the Common Shares but has no obligation to do so. Webb does not intend to make a market in the Common Shares. The aggregate offering price for the Common Shares is based upon an independent appraisal of the Association. The appraisal does not represent Keller's opinion as to the price at which the Common Shares may trade and is not a recommendation as to the advisability of purchasing Common Shares. No assurance can be given that the Common Shares may later be resold at the price at which they are purchased in connection with the Conversion. See "THE CONVERSION - Pricing and Number of Common Shares to be Sold." DIVIDEND POLICY The declaration and payment of dividends or other capital distributions by MFC will be subject to the discretion of the Board of Directors of MFC, to the earnings and financial condition of MFC and the Association and to general economic conditions. If the Board of Directors of MFC determines in the exercise of its discretion that the net income, capital and financial condition of MFC and the general economy justify the declaration and payment of dividends by MFC, dividends may be paid on the Common Shares. No assurance can be given, however, that dividends will be paid or, if paid, will continue in the future. See "DIVIDEND POLICY" and "REGULATION - Office of Thrift Supervision -- Limitations on Capital Distributions." BENEFITS OF THE CONVERSION TO DIRECTORS, OFFICERS AND EMPLOYEES OF MFC AND THE ASSOCIATION GENERAL. Among the factors considered by the Board of Directors of the Association in making the decision to pursue the Conversion is the ability of MFC and the Association to utilize various types of stock benefit plans to attract and retain qualified directors and employees. See "THE CONVERSION - Reasons for the Conversion." Such benefit plans include the ESOP, the RRP and the Market Financial Corporation 1997 Stock Option and Incentive Plan (the "Stock Option Plan"). It is expected that the ESOP will purchase 8% of the Common Shares sold in connection with the Conversion. The officers of the Association who are employees will be eligible to receive allocations of shares of MFC thereunder based upon the officers' compensation as a percentage of the compensation of all employees, calculated at the end of each plan year end. Assuming the sale of a number of Common Shares between 858,500 and 1,161,500 and the purchase by the RRP of a number of shares equal to 4% of the Common Shares issued in the Conversion at a purchase price of $10 per share, the shares available for distribution under the RRP to directors and employees would have an aggregate market value of between $343,400 and $464,600. Based on the sale of a number of Common Shares between 858,500 and 1,161,500 and the purchase price of $10 per share in the Conversion, the aggregate market value of shares which could be issued under the Stock Option Plan to employees and directors is between $858,500 and $1,161,500. The ultimate value of any stock option granted at fair market value will depend on future appreciation in the fair market value of the shares to which the option relates. No decisions have been made as to anticipated awards under either the RRP or the Stock Option Plan. EMPLOYEE STOCK OWNERSHIP PLAN. In connection with the Conversion, MFC will establish the ESOP, which intends to use a loan from MFC to purchase 8% of the Common Shares issued in the Conversion. The ESOP intends to repay the loan with discretionary contributions made by the Association to the ESOP. As the loan is repaid, the Common Shares held by the ESOP will be allocated to the accounts of employees of the Association and MFC, including executive officers, at the discretion of the Board of Directors of MFC. See "PRO FORMA DATA" for a discussion of the impact of the ESOP on pro forma earnings per share. All full- time employees of MFC and the Association who meet certain age and years of service criteria will be eligible to participate in the ESOP. See "MANAGEMENT - Stock Benefit Plans -- Employee Stock Ownership Plan." STOCK OPTION PLAN. After the completion of the Conversion, MFC intends to establish the Stock Option Plan. The Board of Directors of MFC anticipates that a number of shares equal to 10% of the Common Shares sold in the Offering will be reserved for issuance to directors, officers and employees of MFC and the Association upon the exercise of options granted under the Stock Option Plan. The Stock Option Plan will be administered by a committee comprised of three directors of MFC (the "Stock Option Committee"). Persons eligible for awards under the Stock Option Plan will consist of directors, officers and key employees of MFC or the Association who hold positions with significant responsibilities or whose performance or potential contribution, in the judgment of the Stock Option Committee, will contribute to the future success of MFC or the Association. The Stock Option Committee will consider the position, duties and responsibilities of the directors, officers and key employees of MFC and the Association, the value of their services to MFC and the Association and any other factors the Stock Option Committee may deem relevant. Under OTS regulations, no stock options may be awarded until after the approval of the Stock Option Plan by the shareholders of MFC at an annual or a special meeting of shareholders held not less than six months following the completion of the Conversion. If the Stock Option Plan is approved by the MFC shareholders at such meeting and implemented during the first year after the completion of the Conversion, the following restrictions will apply: (i) the number of shares which may be subject to options awarded under the Stock Option Plan to directors who are not full-time employees of MFC may not exceed 5% per person and 30% in the aggregate of the available awards; (ii) the number of shares which may be subject to options awarded under the Stock Option Plan to any individual who is a full-time employee of MFC or its subsidiaries may not exceed 25% of the plan shares; (iii) stock options must be awarded with an exercise price at least equal to the fair market value of common shares of MFC at the time of the grant; and (iv) stock options will become exercisable at the rate of one-fifth per year commencing no earlier than one year from the date the Stock Option Plan is approved by the shareholders, subject to acceleration of vesting only in the event of the death or disability of a participant. The ultimate value of any option granted at fair market value will depend on future appreciation in the fair market value of the shares to which the option relates. No decision has been made as to anticipated awards under the Stock Option Plan. See "MANAGEMENT - Stock Benefit Plans -- Stock Option Plan." RECOGNITION AND RETENTION PLAN AND TRUST. MFC intends to establish the RRP after the completion of the Conversion and anticipates that a number of shares equal to 4% of the number of Common Shares sold in connection with the Conversion will be purchased by, or issued to, the RRP. Shares held in the RRP will be available for awards to directors, officers and employees of MFC and the Association. The RRP will be administered by a committee comprised of three directors of MFC (the "RRP Committee"). In selecting the directors, officers and employees to whom awards will be granted and the number of shares covered by such awards, the RRP Committee will consider the position, duties and responsibilities of such persons, the value of their services to MFC and the Association and any other factors the RRP Committee may deem relevant. No determination has been made with respect to RRP awards. Under OTS regulations, no RRP shares may be awarded until after the approval of the RRP by the shareholders of MFC at an annual meeting or a special meeting of shareholders to be held no less than six months after the completion of the Conversion. If the RRP is approved by the MFC shareholders at such meeting and implemented during the first year after the completion of the Conversion, the following restrictions will apply: (i) the number of shares that may be subject to awards under the RRP to directors who are not full-time employees of MFC or its subsidiaries may not exceed 5% per person and 30% in the aggregate of the available awards; (ii) the number of shares which may be subject to RRP awards to any individual who is a full-time employee of MFC or its subsidiaries may not exceed 25% of the plan shares; and (iii) RRP awards may not be earned more quickly than one-fifth per year commencing on the date which is one year from the date of grant of the award; provided, however, that in the event of the death or the disability of the participant and RRP awards shall be deemed earned and nonforfeitable on such date. Dividends paid by MFC on shares awarded under the RRP but not yet earned will be held in the RRP Trust. When the awarded shares are earned, the dividends accumulated with respect to such shares will be distributed to the participant along with the shares. While held in the RRP Trust, shares of MFC will be voted by the RRP Trustee. See "MANAGEMENT - Stock Benefit Plans -- Recognition and Retention Plan and Trust." EMPLOYMENT AGREEMENT. In connection with the Conversion, the Association will enter into an employment agreement with John T. Larimer, the President and Managing Officer of the Association. The employment contract will provide for a term of three years, with an annual salary not less than Mr. Larimer's current salary, which is $94,500. The employment agreement will also provide for severance payments in the event the agreement is terminated prior to the expiration of its term. See "MANAGEMENT - Employment Agreement."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001013058_precision_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001013058_precision_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5c3a66474c497ed64143ef3f363f791d8877a8dd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001013058_precision_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Financial Statements and notes thereto appearing elsewhere in this Prospectus. See "Risk Factors" for information prospective investors should consider. All references in this Prospectus to "PRC" or the "Company" refer to Precision Response Corporation. Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting". THE COMPANY PRC is a leading full-service provider of telephone-based customer service and marketing solutions on an outsourced basis to large corporations. Through the integration of its teleservicing, database marketing and management, and fulfillment capabilities, the Company is able to provide a "one-stop" solution to meet its clients' needs. The Company believes that its one-stop solution approach, combined with its sophisticated use of advanced technology, provide a distinct competitive advantage in attracting clients seeking to cost-effectively contact or service prospective or existing customers. The Company's ongoing clients include several divisions of AT&T Corp. ("AT&T"), British Airways, DirecTV, Lucent Technologies, Pizza Hut, Ryder Truck Rental, Taco Bell and UPS. These clients collectively accounted for 87.2% of the Company's revenues for the first nine months of 1996. AT&T is the only client that accounted for more than 10% of the Company's revenues in such period. New clients expected to contribute to revenues include American Express Travel Related Services Company, Ameritech, Cox Communications, John Hancock and The College Entrance Examination Board. Since 1993, the Company has focused primarily on attracting large corporate clients that have significant customer service needs, including database design and management and substantial ongoing teleservicing needs. Typically, the Company's customer service representatives are dedicated to a specific PRC client. Most of the Company's teleservicing activities involve inbound (customer-initiated) calls. In almost all cases, outbound (PRC-initiated) calls are made to existing customers of a PRC client or to respond to customer-initiated inquiries. For the first nine months of 1996, approximately 75.5% of the Company's teleservicing revenues were from inbound calls. PRC's revenues for 1995 increased 101.4% to $30.2 million from $15.0 million for 1994, while its pro forma net income for 1995 increased to $0.8 million from a loss of $0.3 million for 1994. For the first nine months of 1996, revenues increased 211.1% to $63.6 million from $20.4 million for the comparable period of 1995, while pro forma net income increased 569.1% to $3.8 million from $0.6 million for the comparable period of 1995. PRC's operating margin for the first nine months of 1996 was 10.9% of revenues compared to 6.1% of revenues for the comparable period of 1995. The Company currently operates approximately 3,200 workstations in eight telephone call centers capable of handling up to 46 million calls per month. The Company anticipates that it will open two additional call centers of approximately 500 workstations each during the first quarter of 1997. The telephone-based marketing and customer service industry has experienced substantial growth over the past ten years. Telephone-based direct marketing expenditures increased from an estimated $34 billion in 1984 to an estimated $81 billion in 1995. The Company believes that only a small percentage of those 1995 expenditures was for outsourced services. The Company expects that large companies increasingly will outsource telephone-based customer service and marketing activities in order to focus internal resources on their core competencies and to improve the quality and cost-effectiveness of their customer service and marketing efforts by using the expertise and specialized capability of larger scale teleservices providers. The Company also believes that organizations with superior customer service and sophisticated, advanced technology, such as PRC, will particularly benefit from this outsourcing trend. [Precision Response Corporation Logo] PRC IS A FULL-SERVICE PROVIDER OF TELEPHONE-BASED CUSTOMER SERVICE AND MARKETING SOLUTIONS ON AN OUTSOURCED BASIS TO LARGE CORPORATIONS - -------------------------------------------------------------------------------- TELESERVICES Most of PRC's teleservicing activities involve responding to inbound calls from its clients' customers. PRC currently operates approximately 3,200 workstations in eight call centers capable of handling 46 million calls per month. [Photograph depicting PRC customer service representatives] [Photograph depicting PRC On-Line screen] <TABLE> <S> <C> DATABASE MARKETING AND MANAGEMENT [Photograph depicting fulfillment operations] The Company helps its clients more FULFILLMENT effectively target marketing programs and designs customer service programs which Fulfillment services include high-speed laser and capture information useful in the client's electronic document printing, lettershop and marketing efforts. PRC On-Line, the Company's mechanical inserting, sorting, packaging and proprietary software application, allows PRC mailing capabilities. These services enable PRC to clients to review their programs' progress on support its clients' customer service and marketing line, in real time. programs. </TABLE> --------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING". STRATEGY PRC's objective is to become the premier full-service provider of telephone-based customer service and marketing solutions. The Company's strategy for achieving this objective is to offer high-quality, fully integrated services to its clients that are customized to address each client's unique needs, and to improve the quality and cost-effectiveness of the client's customer service and marketing operations. The Company seeks to implement this strategy through the following: I. "ONE-STOP" SOLUTIONS THROUGH FULLY INTEGRATED SERVICES. The Company's integration of teleservicing, database marketing and management, and fulfillment services as part of a one-stop solution provides a cost-effective and efficient method for its clients to manage their growing customer service and direct marketing needs. The Company is typically involved in all stages of formulating, designing and implementing its clients' customer service and marketing programs. II. INFORMATION SERVICES CAPABILITIES. Through the efforts of its information services group, which is currently comprised of over 200 information systems specialists, the Company is able to rapidly design, develop and implement application software for each client's unique customer service and marketing programs. PRC offers a wide array of services, including formulating, designing and customizing teleservicing applications, programming, and demographic and psychographic profiling. The Company believes that the services provided by its information systems specialists attract clients with long-term, complex teleservicing needs. III. ADVANCED TECHNOLOGY. The Company's sophisticated use of advanced technology enables it to develop and deliver solutions to its clients' complex customer service and marketing needs. CCPro, a call management software program, is able to predict when an overflow of inbound calls is imminent and automatically redirects inbound calls to outbound customer service representatives working on universal workstations. PRC On-Line, a proprietary software package, allows PRC clients to review their programs on line, in real time, to obtain comprehensive trend analyses and to instantly alter program parameters. IV. RAPID DEPLOYMENT OF CALL CENTERS. PRC has the ability to have a call center fully operational in approximately 60 days, as demonstrated by the openings of two call centers in April 1996 and a call center in each of June, September and December 1996. This ability to rapidly expand its capacity has enabled the Company to timely respond to its clients' needs and to compete effectively for new business opportunities. V. LONG-TERM CLIENT RELATIONSHIPS. The Company seeks to develop long-term client relationships by becoming an integral part of its clients' overall customer service and marketing efforts. Dedicated account services teams, comprised of representatives of the teleservices, information services and fulfillment departments, are assigned to and work closely with each client to formulate, design, implement, and operate the client's program throughout its term. In addition, the Company's customer service representatives typically are trained for and work on only one client's program. This close working relationship and continuity of personnel positions PRC as a strategic partner with its clients. VI. STRONG COMMITMENT TO QUALITY. PRC strives to achieve the highest quality standards in the industry. Approximately 97% of PRC's customer service representatives currently are full-time, which the Company believes results in greater stability and quality in the workforce. The Company utilizes a rigorous screening process for new hires and extensive classroom and on-the-job training programs. Each representative's performance is monitored regularly by a quality assurance team, and the client commitment team ensures that the Company fulfills its commitments in connection with each client program in a timely manner. The Company is a Florida corporation and its principal executive office is located at 1505 N.W. 167th Street, Miami, Florida 33169. Its telephone number is (305) 626-4600. THE OFFERING Common Stock offered by the Company... 1,500,000 shares Common Stock offered by the Selling Shareholders.......................... 3,240,000 shares Common Stock to be outstanding after this offering......................... 21,500,000 shares(1) Nasdaq National Market Symbol......... PRRC Use of proceeds by the Company........ Call center expansion, other capital expenditures necessary to support growth, working capital and other general corporate purposes. - --------------- (1) Excludes 1,104,750 shares of Common Stock issuable upon exercise of stock options granted under the Company's Stock Plans as of January 2, 1997, of which options for 21,000 shares have exercise prices of $0.01 per share and options for 1,083,750 shares have exercise prices equal to the fair market value per share of the Common Stock on the date of grant of the options, with a weighted average exercise price of $28.72 per share. Also excludes 923,518 additional shares of Common Stock reserved for future issuance under the Company's Stock Plans. See "Management -- Employee Stock Plan and Director Stock Plan" and Note 11 of Notes to Financial Statements. SUMMARY FINANCIAL AND OPERATING DATA The following table presents certain summary financial and operating data as of and for each of the periods indicated. The financial data for the five years ended December 31, 1991, 1992, 1993, 1994 and 1995 have been derived from the audited financial statements of the Company. The financial data for the nine months ended September 30, 1995 and 1996 are derived from the Company's unaudited financial statements which, in the opinion of management, include all adjustments (which consist only of normal recurring accruals) necessary for a fair presentation of the financial position and results of operations of the Company for such interim periods. Such unaudited financial statements have been reviewed by Coopers & Lybrand L.L.P. The following information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements of the Company included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------------------- -------------------- 1991 1992 1993 1994 1995 1995 1996 ------- ------- ------- ------- ---------- ------- ---------- ($ IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues...................................... $16,206 $16,107 $18,218 $14,998 $30,204 $20,439 $63,592 Operating income (loss)....................... 1,955 725 265 (81) 1,828 1,256 6,904 Net income (loss)(1).......................... 1,849 539 (246) (372) 1,456 988 5,137 Pro forma net income (loss)(1)................ 1,132 292 (200) (286) 837 568 3,800 Pro forma net income per common share(1)(2)(3).............................. $ 0.05 $ 0.22 Weighted average number of common shares outstanding(2).............................. 16,527,061 17,439,658 NUMBER OF WORKSTATIONS (AT END OF PERIOD)....... 120 320 320 320 550 550 2,610(4) </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ------------------------ ACTUAL AS ADJUSTED(5) ------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital....................................................................... $28,488 $ 77,891 Total assets.......................................................................... 76,334 125,737 Short-term obligations(6)............................................................. 1,644 1,644 Long-term obligations, less current maturities........................................ 5,749 5,749 Shareholders' equity.................................................................. 50,353 99,756 </TABLE> (1) Prior to the Company's initial public offering of Common Stock (the "Initial Public Offering"), the Company was an S corporation and not subject to Federal and Florida corporate income taxes. On July 16, 1996, the Company revoked its S election and changed its tax status from an S corporation to a C corporation, recorded deferred income taxes totaling $90,000 and began providing for Federal and Florida corporate income taxes from and after that date. The statement of operations data reflects a pro forma provision (benefit) for income taxes as if the Company were subject to Federal and Florida corporate income taxes for all periods. This pro forma provision (benefit) for income taxes is computed using a combined Federal and state tax rate of 37.6%. See Note 10 of Notes to Financial Statements. (2) The actual weighted average numbers of common shares outstanding for the year ended December 31, 1995 and the nine months ended September 30, 1996 were 16,400,000 and 17,345,985, respectively; however, as required by generally accepted accounting principles, the weighted average number of common shares outstanding has been increased by 127,061 shares (weighted for the applicable period), which shares are not actually outstanding. This number is equal to the number of shares which, when multiplied by $14.50 per share (the price in the Initial Public Offering), would have been sufficient to replace the amount of the Dividend (see "Distribution of S Corporation Earnings") in excess of pro forma earnings for the twelve months ended June 30, 1996. See Note 10 of Notes to Financial Statements. (3) Supplemental pro forma net income per common share would have been $0.06 per share and $0.22 per share for the year ended December 31, 1995 and the nine months ended September 30, 1996, respectively, giving effect to the use of a portion of the net proceeds of the Initial Public Offering to repay the Company's bank borrowings at January 1, 1995, and assuming an increase in the weighted average number of common shares outstanding to 16,729,131 and 17,641,728, respectively (based on the price in the Initial Public Offering of $14.50 per share). (4) Does not include approximately 600 additional workstations that the Company added in late December 1996. (5) Adjusted to give effect to the sale of the Common Stock offered by the Company hereby and the application of the estimated net proceeds therefrom as set forth under "Use of Proceeds". (6) Short-term obligations consist of short-term debt, if applicable, and current maturities of long-term obligations, which include notes payable, installment loans and capital leases.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001013351_maxim_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001013351_maxim_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..67558bd6ebe91cf557e4f26c6ff15dd8abc287d3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001013351_maxim_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE U.S. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AS AMENDED. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS OR OUTCOMES TO BE MATERIALLY DIFFERENT FROM THOSE ANTICIPATED AND DISCUSSED HEREIN. SUCH DIFFERENCES ARE DISCUSSED IN THE CAUTIONARY STATEMENTS ACCOMPANYING THE FORWARD-LOOKING STATEMENTS AND IN THE RISK FACTORS CONTAINED IN THIS PROSPECTUS AND IN THE RISK FACTORS DETAILED IN THE COMPANY'S OTHER FILINGS WITH THE SEC DURING THE PAST 12 MONTHS. IN ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, READERS ARE URGED TO READ CAREFULLY ALL RISK FACTORS AND CAUTIONARY STATEMENTS CONTAINED IN THIS PROSPECTUS AND IN THE COMPANY'S OTHER FILINGS WITH THE SEC. UNLESS OTHERWISE INDICATED, ALL FINANCIAL AND SHARE INFORMATION SET FORTH IN THIS PROSPECTUS ASSUMES (I) A PUBLIC OFFERING PRICE OF $18 7/8 PER SHARE AND (II) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY Maxim Pharmaceuticals, Inc. ("Maxim" or the "Company") is developing novel therapeutics for the treatment of cancer and infectious disease. The Company's lead drug, MAXAMINE, is designed to be self-administered on an outpatient basis in combination with cytokines such as interleukin-2 ("IL-2") and interferon-alpha ("IFN-a"). MAXAMINE therapy may be used to facilitate an immune system mechanism that allows these cytokines and other biological response modifiers to achieve full anti-tumor and anti-infective potential for the treatment of cancer and infectious disease. The Company believes that MAXAMINE therapy has the potential to: (i) significantly increase overall survival outcomes in certain cancers over existing approved therapies and standards of care; (ii) lower cytokine dosage requirements and reduce related toxicity; (iii) provide a more cost-effective treatment; and (iv) improve patient quality of life during therapy. The Company anticipates that by early 1998 it will be conducting three Phase III clinical trials of MAXAMINE for the treatment of cancer. In June 1997 the Company commenced a 200-patient Phase III clinical trial of MAXAMINE for advanced malignant melanoma in the United States. A separate Phase III advanced malignant melanoma trial is planned to commence in Sweden and Australia by the end of 1997. The Company also intends to commence a Phase III clinical trial for acute myelogenous leukemia ("AML") in Europe and the United States in early 1998. Furthermore, the Company has initiated earlier stage clinical trials of MAXAMINE for the treatment of renal cell carcinoma, hepatitis C, and multiple myeloma, and expects to commence clinical trials of MAXAMINE for the treatment of additional cancers, such as prostate adenocarcinoma, in 1998. In the Company's two completed Phase II clinical trials for the treatment of advanced malignant melanoma, MAXAMINE therapy produced improved patient survival outcomes. Mean survival time for patients treated with MAXAMINE in each of the two studies exceeded 14 months as compared with reported mean survival times of approximately seven months for existing available treatments. In patients where the melanoma metastasized to the liver, MAXAMINE therapy improved mean survival time to 20 months as compared with a reported mean survival time of approximately four months for existing available treatments. The Company's Phase II clinical trials for the treatment of AML have demonstrated an improvement of disease-free remission intervals. Patients treated with MAXAMINE during their first complete remission ("CR1") had mean time in remission in excess of 20 months as compared with reported mean time in remission of approximately 12 months for patients under the current standard of care. Patients who relapsed and achieved a second or greater remission ("CR2+") and were subsequently treated with MAXAMINE had a mean time in remission in excess of 20 months as compared with reported mean time in remission of approximately six months under the current standard of care. In the Company's ongoing Phase II clinical trial, remission inversion (prolonging the duration of CR2+ to that equal to or exceeding the patient's prior remission duration) was achieved in 8 of 10 (80%) evaluable patients treated with MAXAMINE therapy as compared with approximately 10% to 20% under the current standard of care. There are significant patient populations in the markets targeted by MAXAMINE. The American Cancer Society estimates that approximately 1,380,000 new cases and approximately 560,000 deaths will be reported for invasive cancers in the United States in 1997. The Company estimates that the size of the anti- cancer market in Europe is approximately equivalent to that of the United States market. The U.S. Centers for Disease Control and Prevention estimates that approximately four million Americans are infected with the hepatitis C virus ("HCV"). The World Health Organization and other sources estimate that approximately 60 million people are chronically infected worldwide with HCV. Maxim is also developing MAXVAX, a mucosal vaccine carrier/adjuvant platform. The MAXVAX technology is based on the B subunit of cholera toxin ("CTB"), generally regarded as a safe and effective mucosal vaccine carrier. The Company expects that its future product development efforts will focus on mucosal vaccines against sexually transmitted diseases, major respiratory diseases and gastrointensinal tract diseases. The MAXVAX platform is also being evaluated for therapeutic vaccines and gene-based vaccines. The Company intends to seek collaborations with pharmaceutical and biopharmaceutical partners for the development of mucosal vaccine candidates. Maxim's drug development strategy is designed to facilitate product development from preclinical to FDA approval and product launch. Once a product has been launched, Maxim plans to work with numerous collaborators, both pharmaceutical and clinical, in the oncology and infectious disease communities to extend the labeling of the drug to other indications. In order to market its products effectively, the Company intends to develop marketing alliances with corporate partners and may co-promote and/or co-market in certain territories. The Company's principal offices are located at 3099 Science Park Road, Suite 150, San Diego, California 92121, United States, and its telephone number is (619) 453-4040. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company Internationally.................................. 2,000,000 shares Common Stock Offered by the Company in the U.S..... 500,000 shares Total Common Stock Offered by the Company...... 2,500,000 shares Common Stock to be Outstanding after the Offering......................................... 9,191,501 shares (1) Use of Proceeds.................................... To finance product development activities and clinical trials of the Company's MAXAMINE product, research and development activities for the Company's MAXVAX technology and for working capital and general corporate purposes. See "Use of Proceeds." AMEX Symbol........................................ "MMP" Proposed SSE Symbol (2)............................ "MAXM" </TABLE> - -------------------------- (1) Excludes, as of October 15, 1997, an aggregate of (i) 2,875,000 shares of Common Stock reserved for issuance upon exercise of publicly traded warrants (the "Redeemable Warrants") at an exercise price of $10.50 per share, (ii) 987,600 shares of Common Stock issuable under the Company's 1993 Long Term Incentive Plan (the "Incentive Plan") of which 770,332 shares of Common Stock are reserved for issuance upon exercise of outstanding stock options with a weighted average exercise price of $5.69 per share, (iii) 250,000 shares of Common Stock issuable at $9.00 per share and 250,000 shares of Common Stock issuable at $12.50 per share, reserved for issuance upon exercise of warrants held by the underwriter of the Company's initial public offering or its designees and (iv) 305,976 shares of Common Stock issuable upon exercise of other outstanding warrants with an exercise price of $3.00 per share. See "Description of Securities" and "Shares Eligible for Future Sale." (2) The Company's Common Stock has been approved for listing on the Stockholm Stock Exchange ("SSE"). The Company expects that the Common Stock will commence trading on the SSE upon completion of the Offering. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED SEPTEMBER 30, ENDED JUNE 30, ------------------------------- ---------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- ----------- <S> <C> <C> <C> <C> <C> SELECTED STATEMENT OF OPERATIONS DATA: Research and development expenses..................... $ 999 $ 985 $ 1,609 $ 1,078 $ 3,294 General and administrative expenses (1)............... 1,024 1,116 1,355 1,027 1,680 Net loss.............................................. (2,433) (2,790) (833) (2,378) (4,315) SELECTED PER SHARE DATA: Net loss per share.................................... $ (0.82) $ (0.87) $ (0.20) $ (0.42) $ (0.65) Weighted average shares outstanding................... 2,961 3,209 4,075 5,656 6,671 </TABLE> <TABLE> <CAPTION> AS OF AS OF JUNE 30, 1997 SEPTEMBER 30, -------------------------- 1996 ACTUAL AS ADJUSTED(2) ------------- ---------- -------------- <S> <C> <C> <C> SELECTED BALANCE SHEET DATA: Cash, cash equivalents and investments.............................. $ 19,144 $ 14,275 $ 57,831 Working capital..................................................... 16,212 10,499 54,055 Total assets........................................................ 21,255 17,516 61,072 Long-term debt, less current portion................................ - 548 548 Deficit accumulated during the development stage.................... (13,937) (18,252) (18,252) Stockholders' equity................................................ 20,124 15,860 59,416 </TABLE> - ------------------------ (1) Business development expenses for the nine months ended June 30, 1996 and 1997 have been included in general and administrative expenses to conform to the presentation for the years ended September 30, 1994, 1995 and 1996. (2) Adjusted to reflect the sale by the Company of 2,500,000 shares of Common Stock offered hereby and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001013609_scpie_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001013609_scpie_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6c5367b0a5126cdf18cbced8f285c3cc81302915
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001013609_scpie_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. Financial data and ratios set forth in this Prospectus have been presented in accordance with generally accepted accounting principles, unless otherwise indicated. Except as otherwise specified, all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. See "Glossary of Selected Insurance Terms" for definitions of certain terms used in this Prospectus. For purposes of this Prospectus, the terms "SCPIE" and the "Company" refer, at all times prior to the effective date of the Reorganization, to Southern California Physicians Insurance Exchange (the "Exchange") and its subsidiaries, collectively, and at all times on or after such effective date, to SCPIE Holdings Inc. and its subsidiaries, collectively; the term "SCPIE Holdings" refers at all times to SCPIE Holdings Inc., excluding its subsidiaries; and the term "Insurance Subsidiaries" refers, at all times prior to such effective date, to the Exchange, SCPIE Indemnity Company, a California stock insurer ("SCPIE Indemnity"), and two substantially inactive insurance companies, and at all times on or after such effective date, to SCPIE Indemnity and such inactive insurance companies. The offering of the common stock of SCPIE Holdings is referred to herein as the "Offering" and will be consummated substantially concurrent with the effective date of the Reorganization. THE COMPANY OVERVIEW The Company is the largest provider of medical malpractice insurance in California, based on direct premiums written in 1995. SCPIE currently insures approximately 9,800 California physicians and oral and maxillofacial surgeons practicing alone or in medical groups or clinics or other healthcare organizations. The Company also insures a variety of other healthcare providers, including hospitals, emergency department facilities, outpatient surgery centers and hemodialysis, clinical and pathology laboratories. The Company's total revenues and net income were $165.0 million and $24.4 million, respectively, for the year ended December 31, 1995 and were $133.1 million and $19.8 million, respectively, for the nine months ended September 30, 1996. As of September 30, 1996, the Company had $790.4 million of total assets and $271.9 million of total equity. Medical malpractice insurance, or medical professional liability insurance, insures the physician, hospital or other healthcare provider against liabilities arising from the rendering of or failure to render professional medical services. Under the typical medical malpractice insurance policy, the insurer also defends the insured against potentially covered claims. Based on data compiled by A.M. Best Company, Inc. ("A.M. Best"), in 1995, total medical malpractice premiums in the United States were $6.0 billion. In California, the second largest market for medical malpractice insurance based on premiums written, approximately $587.7 million of medical malpractice premiums were written in 1995. The Company's share of the medical malpractice premiums written in California in 1995 was approximately 21%. The Company's market share is substantially higher in Southern California where more than 95% of the Company's insureds are located. The Company believes that its leading market share for medical malpractice insurance in California is, in large part, due to the loyalty of its insured physicians. The Company attributes this loyalty to the high quality, personalized service it provides and its traditional focus on the California physician marketplace. The medical malpractice insurance offered by the Company has been endorsed by twelve county medical associations and specialty societies in California. The Company believes that the growth in managed healthcare and the emergence of multi-state integrated healthcare providers and delivery systems will lead to major changes in the medical malpractice insurance industry. Practice management organizations, hospitals, administrators of large group practices and managed care organizations have an increasing influence over the purchasing decision for the medical malpractice insurance coverages of their affiliated physicians. As the consolidation of healthcare providers continues, the number of physicians insured through such organizations will increase and the Company believes that such organizations increasingly will seek well-capitalized medical malpractice insurers that can provide a full range of products and a high level of service in each state in which such organizations conduct business. BUSINESS STRATEGY To position the Company to compete and grow its business successfully in this changing environment, the Company has adopted a strategy that includes: (i) expanding the Company's product offerings, particularly to meet the liability insurance needs of larger, more diverse healthcare entities; (ii) diversifying geographically by increasing writings of medical malpractice insurance in states other than California; (iii) positioning the Company to take advantage of acquisition and consolidation opportunities relating to medical malpractice insurance; (iv) maintaining the Company's relationship with its primary policyholder base of California physician and medical group insureds; and (v) maintaining sufficient capital to take advantage of future market opportunities and to retain strong insurance ratings. The Company's business primarily has been providing medical malpractice insurance to physicians. In the future, the Company believes hospitals and other healthcare entities will represent an increasing share of the market for medical malpractice insurance and provide it with a significant area for growth. As a result, SCPIE increasingly has focused its efforts on providing products designed to meet the liability insurance needs of these entities. In 1994, the Company began writing malpractice insurance for California hospitals and directors and officers' liability insurance for healthcare entities. In 1995, the Company began offering errors and omissions coverage to managed care organizations. In addition to its traditional direct insurance operations, SCPIE assumes reinsurance of medical malpractice insurance and participates in excess medical malpractice insurance programs. The Company believes that these lines of business will become an increasingly important aspect of its operations as healthcare entities become larger and obtain higher policy limits. To further enable it to grow, SCPIE has begun to expand its operations beyond California. As part of this expansion, the Company entered into an exclusive marketing agreement with a leading hospital malpractice insurance broker. Through this broker, the Company has issued policies or binders as of December 31, 1996 to 75 hospitals, healthcare providers and managed care organizations in seven states representing approximately $11.0 million in estimated annual premiums. Approximately 76.3% of these premiums are from states other than California. As a result of the termination of its relationship with a large insurance group, this broker has experienced financial difficulties and recently filed a voluntary bankruptcy petition. Although this broker continues to market SCPIE's products and SCPIE continues to write new business through this broker, there can be no assurance that it will be able to reorganize successfully. See "Risk Factors -- Entry into New Markets; Relationship with SKA." To facilitate its geographic expansion, in March 1996, SCPIE acquired the outstanding stock of two inactive property and casualty insurance companies, one of which is licensed in 44 states plus the District of Columbia and the other of which is licensed in one state. The Company will capitalize these companies with a portion of the proceeds of the Offering, and will attempt to ensure that they are fully licensed and able to underwrite medical malpractice insurance as quickly as possible. In the meantime, the Company has a fronting arrangement to allow the Company to write business outside of California. SCPIE believes that there will be an increasing number of opportunities for consolidation of the highly fragmented medical malpractice market. SCPIE further believes that a number of malpractice insurers lack the size, capital strength, product breadth and geographic diversity required to meet the needs of larger healthcare entities. Following the Reorganization and the Offering, SCPIE believes that it will have the financial flexibility to selectively pursue mergers, acquisitions and strategic alliances. The Company also believes that such transactions will facilitate its geographic expansion, allow it to grow its business and enable it to achieve cost savings. The Company believes that the medical malpractice insurance industry in California is currently experiencing a "soft insurance market," that is, an insurance market in which the underwriting capacity exceeds current demand and premium rates are relatively low. The Company believes that its strategy will position it to expand premium writings and market share when the market "hardens," that is, when demand coincides more closely with capacity and premium rates increase to more appropriate levels. THE REORGANIZATION The Exchange is a California reciprocal insurer. The business of the Exchange has been managed by SCPIE Management Company, the attorney-in-fact for the Exchange, which is a wholly owned subsidiary of the Exchange. Prior to July 1996, SCPIE Management Company was a wholly owned subsidiary of Organization of Southern California Physicians, Inc., a California mutual benefit corporation indirectly controlled by the Exchange ("OSCAP"). On March 21, 1996, the Board of Governors of SCPIE (the "Board of Governors") adopted a Plan and Agreement of Merger and on August 8, 1996 the Board of Governors adopted an Amended and Restated Plan and Agreement of Merger (the "Merger Agreement") whereby the Exchange will reorganize from a reciprocal insurer to a stock insurance company and become a wholly owned subsidiary of SCPIE Holdings. Pursuant to the Reorganization, the Exchange will merge (the "Merger") with and into SCPIE Indemnity, a newly organized California stock insurer and a wholly owned subsidiary of SCPIE Holdings that will be the surviving corporation in the Reorganization. SCPIE Indemnity is licensed to write property and casualty insurance in the State of California, but has not conducted business prior to the Reorganization. In connection with the Reorganization, in July 1996, OSCAP was liquidated into the Exchange and SCPIE Management Company became a subsidiary of the Exchange. The principal purpose of the Reorganization is to improve the Company's access to the capital markets and to raise capital to permit the growth of existing business and develop new business opportunities in the professional liability insurance industry. The Reorganization will also provide members of the Exchange with shares of Common Stock in exchange for their membership interests in the Exchange. The Merger Agreement was submitted to the members of the Exchange for approval at a special meeting (the "Special Meeting") held on November 5, 1996. At the Special Meeting, 8,844 members, or 80% of the members of the Exchange entitled to vote, voted in favor of the Merger Agreement, which substantially exceeded the two-thirds vote necessary for approval. The Reorganization is expected to be consummated substantially concurrent with closing of the Offering. In connection with the Reorganization, 9,994,491 shares of Common Stock will be issued to members of the Exchange and 500,000 shares of Common Stock will be issued to SCPIE Indemnity. See "Shares Eligible for Future Sale." The Company has requested a ruling from the Internal Revenue Service (the "Service") that the Merger, which is a part of the Reorganization, will constitute a tax-free reorganization for Federal income tax purposes. In the event the Service does not so rule or does not issue the ruling prior to the time the Merger becomes effective, Latham & Watkins, tax counsel to the Exchange ("Tax Counsel"), will render its opinion to the Company to the effect that the Merger will constitute a tax-free reorganization for Federal income tax purposes. See "The Reorganization -- Federal Tax Consequences to the Company." THE OFFERING <TABLE> <S> <C> Common Stock offered hereby.................. 2,000,000 shares Common Stock to be outstanding after the Offering(1)................................ 11,994,491 shares Use of Proceeds.............................. Of the $36.5 million estimated net proceeds from the Offering, approximately $34.0 million will be contributed to the Insurance Subsidiaries to support the continued growth of the Company's business and the balance will be retained by SCPIE Holdings for general corporate purposes. Dividend Policy.............................. Subject to declaration by the Board of Directors of the Company, the Company currently intends to pay a quarterly cash dividend of $.05 per share of Common Stock commencing in the first quarter of 1997. See "Dividend Policy." New York Stock Exchange Symbol............... "SKP" </TABLE> - --------------- (1) Excludes 300,000 shares subject to the Underwriters' over-allotment option and 500,000 shares to be issued to SCPIE Indemnity. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001014187_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001014187_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..97abe70fbf1e135abc960ed5cb20c555955d64db
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001014187_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED BY THE CONTEXT, (I) INFORMATION HEREIN RESPECTING THE COMPANY'S OPERATIONS GIVES EFFECT TO THE COMPANY'S ACQUISITIONS COMPLETED THROUGH JUNE 4, 1997 AND (II) REFERENCES HEREIN TO (A) "ARS" MEAN AMERICAN RESIDENTIAL SERVICES, INC. AND (B) THE "COMPANY" MEAN ARS TOGETHER WITH ALL ITS SUBSIDIARIES. THE COMPANY ARS was founded in October 1995 to create the leading national provider of comprehensive maintenance, repair, replacement and new equipment installation services for heating, ventilating and air conditioning ("HVAC"), plumbing, electrical and indoor air quality systems and major home appliances, primarily in homes and small commercial buildings, including those under construction (collectively, "residential services"). To achieve this goal, the Company embarked on an aggressive acquisition program and implemented a national operating strategy designed to increase internal growth and capitalize on cost efficiencies. Today, the Company is the largest publicly held company in the United States engaged principally in providing these services. The Company also has the goal of becoming a leading provider of comprehensive maintenance, repair and replacement services for HVAC, plumbing and electrical systems in existing large commercial facilities such as office buildings, health care facilities, educational institutions and large retail outlets (collectively, "commercial maintenance services"). The Company recently acquired its first business engaged principally in providing commercial maintenance services and, through June 4, 1997, has acquired a total of three businesses providing commercial maintenance services exclusively and ten businesses providing both commercial and residential services. The Company intends to apply the same acquisition and national operating strategies to its commercial maintenance services business that it has implemented in its residential services business. On September 27, 1996, ARS acquired seven residential services businesses (together with the common parent of two of those businesses, the "Founding Companies") in separate transactions (the "Initial Acquisitions") simultaneously with the closing of ARS's initial public offering of Common Stock (the "IPO"). The Company acquired 13 additional residential services businesses in the fourth quarter of 1996 (the "Fourth Quarter 1996 Acquisitions"), 10 additional residential services businesses in the first quarter of 1997 (the "First Quarter 1997 Acquisitions") and 14 additional residential services and commercial maintenance businesses in the second quarter of 1997 through June 4 (collectively, the "Second Quarter 1997 Acquisitions" and, together with the Initial Acquisitions, the Fourth Quarter 1996 Acquisitions and the First Quarter 1997 Acquisitions, the "Acquired Businesses"). With the inclusion of all the Acquired Businesses, management estimates maintenance, repair and replacement services currently account for approximately 55% of the Company's total revenues and new installation services currently account for approximately 45%. The Company believes the profitability of its maintenance, repair and replacement business benefits from its installation services operations as a result of (i) the significant volume of purchases of HVAC systems for its high-volume installation services and (ii) the addition of new customer and equipment information in the Company's marketing database. This database provides the Company with valuable information it can use to expand its future residential services revenue base. In addition, new installation services provide the Company with cooperative advertising credits from HVAC system manufacturers which it uses for promoting its maintenance, repair and replacement services for residential HVAC systems. Through leveraging these benefits, acquiring new service companies and internal development, the Company intends to emphasize the growth of its higher-margin maintenance, repair and replacement services business. The Company believes the HVAC, plumbing and electrical industries in the United States represent an annual market in excess of $40 billion, of which residential maintenance, repair and replacement services account for in excess of $25 billion. It estimates this market is served by over 50,000 companies, consisting predominantly of small, owner-operated businesses operating in single local geographic areas and providing a limited range of services. It also believes the majority of owners in its industry have limited access to adequate capital for modernization, training and expansion and limited opportunities for liquidity in their businesses. The Company believes significant opportunities are available to a well-capitalized, national company employing professionally trained, customer-oriented service technicians and providing a full complement of high-quality residential services in an industry that has often been characterized by inconsistent quality, reliability and pricing. It also believes the highly fragmented nature of the residential services industry will provide it with significant opportunities to consolidate the capabilities and resources of a large number of existing residential services businesses. BUSINESS STRATEGY The Company plans to enhance its market position as a leading national provider of professional, high-quality residential services by emphasizing growth through acquisitions and by continuing to implement a national operating strategy that enhances internal revenue growth and profitability and achieves cost efficiencies. In addition, through its subsidiary, American Mechanical Services ("AMS"), the Company intends to become a leading provider of commercial maintenance services. GROWTH THROUGH ACQUISITION. The Company has implemented an aggressive acquisition program targeting large metropolitan and high-growth suburban areas with attractive demographics. The Company's acquisition strategy involves entering new geographic markets, expanding within existing markets for residential services and developing opportunities to expand into providing commercial maintenance services. The Company believes it can leverage its experience and success in developing a leading market position in the residential services business to capitalize on consolidation opportunities in the commercial maintenance services business. o ENTERING NEW GEOGRAPHIC MARKETS. In each new market, the Company initially targets for acquisition one or more leading local or regional companies providing residential or commercial maintenance services and having the critical mass necessary to be a core business with which other residential or commercial maintenance services operations can be consolidated. An important criterion for these acquisition candidates is superior operational management personnel, whom the Company generally seeks to retain. o EXPANDING WITHIN EXISTING MARKETS. Once the Company has entered a market, it generally seeks to acquire other well-established service companies operating within that region, in order to expand its market penetration and the range of services it offers in that market. The Company also pursues "tuck-in" acquisitions of smaller companies whose operations can be incorporated into the Company's existing operations without a significant increase in infrastructure. IMPLEMENTATION OF A NATIONAL OPERATING STRATEGY. The Company has implemented a national operating strategy employing "best practices" designed to increase internal growth and profitability through enhanced operations and the achievement of cost efficiencies. o INTERNAL GROWTH. The Company reviews its operations at the local and regional operating levels in order to identify certain "best practices" that will be implemented throughout its operations. For example, the Company is in the process of expanding its 24-hour emergency service to substantially all its locations and its monitoring of service call quality by attempting to contact each of its service customers promptly following a service call. In addition, the Company is developing a national training program to improve and keep current the technical, selling and customer relations skills of its service technicians. The Company is implementing specialized computer and modern communications technology at each of its locations to improve productivity, communications, vehicle dispatch and service quality and responsiveness. Management believes these practices will enable the Company to provide superior customer service and maximize sales opportunities. This service-oriented strategy also will allow the Company to reinforce its brand images at the local level while fostering its efforts to develop a national brand name. o COST EFFICIENCIES. The Company believes it will continue to reduce the total operating expenses of acquired businesses by eliminating duplicative administrative functions in tuck-in acquisitions and consolidating certain functions performed separately by each business prior to its acquisition. In addition, the Company is currently implementing programs to reduce costs (as a percentage of revenues) compared to those of individual acquired businesses in such areas as: the purchase of HVAC and other equipment for resale, service vehicles, parts and tools; vehicle and equipment maintenance; financing arrangements; employee benefits; and insurance and bonding. ------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001014488_saxton-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001014488_saxton-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..eee12eee03862aed7c80ba8f689ada6ccacbba4a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001014488_saxton-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following material is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. In this Prospectus, the term "Company" includes Saxton Incorporated, its wholly owned subsidiaries and its predecessors, including Jim Saxton, Inc. ("JSI"). Unless otherwise indicated or the context otherwise requires, all information in this Prospectus (i) assumes consummation of the Reorganization concurrently with the closing of the Offering, (ii) gives effect to a 1-for-0.51312465 reverse split of the Common Stock to be effected prior to the closing of the Offering, (iii) assumes no exercise of the Underwriters' over-allotment option and (iv) assumes no exercise of outstanding options or warrants. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in the section entitled "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Saxton Incorporated is an integrated real estate development company engaged in the design, development, construction, operation, ownership and sale of residential, commercial and industrial properties in the greater Las Vegas metropolitan area. The Company's business is comprised of three components: (i) the design, development, construction and sale of single-family homes and properties for its own portfolio ("portfolio properties"); (ii) the performance of design, development and construction services for third-party clients ("design-build services") and (iii) property operations and management. The Company's principal focus historically has been the design and development of properties for third-party clients and for its own portfolio. Since its inception in 1986, the Company has completed over 125 projects, including professional office buildings, retail and industrial facilities and apartment complexes. The Company's development experience and expertise enable it to identify and take advantage of market opportunities and to minimize the risk of real estate cycles. In 1995, management recognized the need for affordable housing in the Las Vegas market and began to develop value-priced single-family detached homes. For 1996, the Company's initial home development was ranked fourth in number of units sold out of over 400 home developments in Clark County (which includes Las Vegas). Based on this strong response, management has made a commitment to expand the Company's homebuilding activities and to make them a significant component of its business operations. The Company strives to deliver superior value to low and moderate income families and senior citizens by pricing its homes competitively while providing innovative designs, quality construction and features and amenities not usually found in affordable housing. Its two-, three- and four-bedroom homes, which range from 950 square feet to 1,250 square feet, are currently base priced from $69,990 to $89,990 to appeal to the growing population of low and moderate income families and senior citizens in Las Vegas. Management believes that the Company is currently one of only two developers offering single-family detached homes for sale under $70,000 in the greater Las Vegas metropolitan area. In 1996, the year during which the Company began selling single-family homes, the Company closed sales of 173 homes. The Company currently owns or has under option or contract approximately 282 acres of land on which management expects to develop approximately 1,445 single-family detached homes, condominiums, cluster homes and townhouses, which management believes represents at least a three-year inventory, based on the Company's current absorption rate. The Company also provides design-build development services to clients which have included large nationally recognized public companies as well as smaller regional businesses. The Company strives to deliver high quality projects on time and on budget. During the past year, the Company has begun to perform many of the functions previously performed by subcontractors, including concrete, masonry, wood framing, painting, drywall and landscaping. Management believes that the Company's ability to perform these construction services provides the Company with a competitive advantage by enabling it to better control the costs, timing and, therefore, profitability of its projects. In 1996, the Company completed nine design-build projects and had total construction revenue of approximately $41.9 million. At March 31, 1997, the Company had eight uncompleted design-build projects under contract, representing approximately $28.8 million of backlog (the uncompleted portion of work on signed fixed-price contracts), and an additional three design-build projects in the initial stages of development, but not yet under contract. At March 31, 1997, the Company owned and operated a portfolio of rental properties which includes 14 properties comprised of approximately 334,150 square feet of office, retail and industrial space. In addition, since March 31, 1997, the Company has completed construction of three portfolio properties, one of which has been sold, one of which is under contract to be sold and one of which is in initial lease-up. The Company currently has seven proposed portfolio properties in the initial stages of development. Management monitors the market for the Company's properties on an ongoing basis to take advantage of opportunities for strategic sales of its holdings when conditions are favorable. The rapid economic growth of Las Vegas and the surrounding areas and the positive demographic trends associated with such growth make Clark County a favorable location for real estate investment and development. Clark County has experienced increasing levels of business and employment over the past decade which have helped drive large increases in population and demand for new construction of both commercial and residential developments. The expansion of gaming has led to population and employment increases that are among the highest in the country. These increases have in turn driven increases in new home sales, apartment rents and occupancy rates. Additionally, a favorable business environment has led to growth of non-gaming businesses and the local population growth has attracted additional retail and service businesses to Clark County leading to increases in commercial rents and occupancy rates. The Company's business and growth strategy includes the following key elements: Reducing the risk of economic and real estate cycles through operating diversification. The Company seeks to enhance its financial stability and reduce the potential impact of economic and real estate cycles by operating in three components of the real estate business: (i) the design, development, construction and sale of single-family homes and portfolio properties; (ii) design-build services for third-party clients and (iii) property operations and management. Enhancing profitability through an opportunistic approach to development. The Company seeks to take advantage of market opportunities by employing its experience and expertise to identify and enter new markets. Most recently, in response to the identified shortage of affordable housing, the Company expanded its development operations to include value-priced homes and increased its development of apartments for low and middle income families and senior citizens. Increasing profit margins through vertical integration. The Company's real estate and construction expertise allows the integration of most aspects of development and construction, thereby enabling the Company to provide one-stop shopping to its customers, maintain greater control over its projects and generate higher operating margins. The Company intends to integrate certain additional construction trades to further increase its profitability and strengthen its competitive position. Reducing development risks through conservative land policies. The Company seeks to maximize its return on capital by limiting its investment in land while maintaining an inventory of owned and controlled sites sufficient to accommodate demand for its homes and other development requirements. The Company seeks to further maximize its return by acquiring undeveloped land and using its expertise to obtain all entitlements and develop the land. To implement this strategy and to reduce the risks associated with investments in land, the Company uses options or conditional land sales contracts to control land whenever possible and seeks to purchase land only for specific developments. Expanding business opportunities by taking advantage of government-sponsored programs. The Company has expanded its business opportunities by building projects which are eligible for various government-sponsored programs that provide down payment assistance or lower cost financing. These government-sponsored programs include private activity revenue bonds, small business loans and mortgage loan programs of federal agencies. By building properties which are eligible for such programs, the Company is able to expand the pool of qualified purchasers for its homes and other properties. Pursuing geographic expansion. While the Company believes that the outlook for the Las Vegas market is favorable, geographic expansion is a key element in achieving long-term stability and growth. The Company intends to capitalize on its experience and demonstrated capabilities in real estate by targeting other viable geographic markets, including other areas of Nevada and selected markets in the southwestern United States, such as Arizona and New Mexico. Pursuing growth through strategic acquisitions. The Company believes that there are significant opportunities to acquire existing homebuilding companies, particularly in and around the Las Vegas area and selected markets in the southwestern United States. The Company intends to pursue strategic acquisitions to provide the Company with additional market share, desirable land and local market experience. The Company has no agreements, understandings or arrangements with respect to any such acquisition and there can be no assurance that the Company will be able to consummate such an acquisition. The Company was incorporated under the laws of the State of Nevada on December 21, 1995, as the successor to JSI, a diversified real estate company founded by James C. Saxton in 1986. The Company's principal executive offices are located at 5440 West Sahara Avenue, Third Floor, Las Vegas, Nevada 89102, and its telephone number is (702) 221-1111. THE OFFERING <TABLE> <S> <C> Common Stock offered hereby............... 2,275,000 shares Common Stock to be outstanding after the Offering(1)............................. 7,619,142 shares Use of proceeds........................... To repay certain indebtedness, including indebtedness to existing stockholders and other related parties, to acquire land for planned home development, to acquire the interests of various parties in certain properties in connection with the Reorganization, to fund the Company's development activities and for general corporate purposes, which may include the repayment of additional indebtedness and strategic acquisitions. Nasdaq National Market symbol............. SXTN </TABLE> - --------------- (1) Excludes (i) 104,410 shares issuable upon the exercise of options granted by the Company to certain employees and others in December 1994, (ii) 500,000 shares reserved for issuance upon the exercise of options issuable under the Company's Management Stock Option Incentive Plan, (iii) 50,000 shares reserved for issuance upon the exercise of options issuable under the Company's Non-Employee Director Stock Option Plan, (iv) 400,000 shares reserved for issuance upon the exercise of warrants to be purchased as part of the Reorganization, exercisable at 120% of the initial public offering price if the Company achieves specified levels of after tax net income in 1997 and 1998 (the "Saxton Warrants"), and (v) 227,500 shares reserved for issuance upon the exercise of warrants to be granted to the Representatives of the Underwriters, exercisable at 120% of the initial public offering price (the "Representatives' Warrants"). See "The Reorganization,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001014552_dtm-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001014552_dtm-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..97105e7cddd0aa636290064807b1d95dae6db98e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001014552_dtm-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY SHOULD BE READ WITH AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATED TO THE PURCHASE OF COMMON STOCK. SEE "RISK FACTORS." UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THERE HAS BEEN NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND REFLECTS AN EFFECTIVE 1.022-FOR-1 STOCK SPLIT EFFECTED AS A SERIES OF RECAPITALIZATIONS COMPLETED IN APRIL 1997. SUCH STOCK SPLIT HAS BEEN RETROACTIVELY APPLIED TO ALL SHARE AND PER SHARE AMOUNTS CONTAINED HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO "DTM" AND THE "COMPANY" REFER TO DTM CORPORATION AND ITS SUBSIDIARY ON A CONSOLIDATED BASIS. "DTM," "PROTOFORM," "RAPIDSTEEL," "RAPIDTOOL," "SANDFORM," "SINTERSTATION(R)," "SLS(R)" AND "TRUEFORM" ARE TRADEMARKS OR SERVICE MARKS OF DTM CORPORATION. "SOMOS(R)" IS A TRADEMARK OF E.I. DUPONT DE NEMOURS AND COMPANY ("DUPONT"). THE COMPANY DTM Corporation develops, designs, manufactures, markets and supports, on an international basis, rapid prototyping and rapid tooling systems, powdered materials and related services. The Company's selective laser sintering systems ("Systems") and materials are based on proprietary and patented selective laser sintering technology. Rapid prototyping is the creation of a solid three- dimensional model, prototype or pattern directly from three-dimensional computer aided design ("CAD") data. Rapid tooling is the creation of durable tooling from CAD data that can be subsequently employed to produce substantial quantities of parts for market introduction of a product. Use of the Company's SLS Systems significantly reduces the time required to produce models and prototypes for testing actual product fit and form, ergonomic design and functionality from what otherwise could be months or weeks to days or, in some cases, hours. The Company's SLS Systems are used to accelerate the design, development and market introduction of products in a wide range of industries, including but not limited to the automotive, aerospace, medical, electronics, telecommunications, computer, appliance, footwear, toy and power tool industries. The B.F. Goodrich Company currently owns approximately 92 percent of the outstanding Common Stock. The Company has experienced substantial sales growth since the sale of its first commercial SLS System, the Sinterstation 2000, in December 1992. Sales of Sinterstation Systems, powdered materials and related services have increased each year. As of December 31, 1996, the Company had sold 136 SLS Systems and placed an additional two SLS Systems through a rental program resulting in a total of 138 SLS Systems shipped worldwide. Revenue has increased from approximately $1.1 million in 1991 to approximately $24.4 million in 1996, a level that the Company believes makes it the second largest industry participant as measured by revenues. The Company attributes its revenue growth primarily to the increasing worldwide acceptance of rapid prototyping as a technology capable of accelerating development and design of new products, as well as the refinement of its selective laser sintering process to a level which affords users distinct advantages over other rapid prototyping technologies. The selective laser sintering rapid prototyping process employed by the Company replicates a CAD model by using laser energy to convert heat-fusible powders into three-dimensional solid objects within DTM's commercial SLS Systems. A focused carbon dioxide laser beam melts and bonds ("sinters") the surface of a bed of powder into a solid horizontal cross-section of the object being modeled. Subsequent powder layers are deposited, sintered and bonded to the previous layer as the energy from the laser beam fuses sequential layers together. This layered manufacturing process is continued until the CAD model has been fully replicated as a plastic part or metal tool insert. Upon completion of the part build, the excess, or unsintered, plastic or metal powder is removed for use in subsequent part builds. The Company either owns or has exclusive licenses under various patents covering the technology utilized in its SLS Systems and related products. DTM believes that its SLS Systems have distinct advantages relative to competing rapid prototyping technologies. SLS Systems have the ability to (i) process multiple powdered materials for a wide range of applications, (ii) produce strong and durable functional plastic prototypes that can be drilled, painted, equipped with electronics and mounted in working product assemblies that duplicate the final product, (iii) rapidly produce prototype metal mold inserts from metal powder, thereby significantly reducing the time required to manufacture prototype tooling, (iv) build parts more quickly by sequencing and stacking multiple parts in a single production run and (v) accommodate new powdered plastic, metal and ceramic materials and expanded applications. Past purchasers of the Company's SLS Systems include The Boeing Company, Eastman Kodak Company, Fiskars Oy, Ford Motor Company, General Motors Corporation, Hughes Christensen, LG Electronics, Inc. (Goldstar), Mercedes-Benz AG, Pratt & Whitney, Rockwell International Corporation, Samsung Electronics Co., Ltd., Toyota Motor Corporation and Whirlpool Corporation, among others. The Company also sells a substantial portion of its SLS Systems to service bureaus, which are businesses that use rapid prototyping technology to fabricate and sell models and prototype parts. DTM has devoted substantial effort to developing what it believes is a leading position in the high end of the rapid prototyping industry and to protecting its intellectual property rights. In the last two years, the Company has introduced four new powdered sintering materials, a new tooling process and a new Sinterstation System. The Company introduced ProtoForm powder in 1995, which is specifically designed for the production of strong and durable functional plastic prototypes. During 1995, the Company also introduced the RapidTool process and RapidSteel powder, which allow customers who desire multiple parts in their material of choice to directly create metal mold inserts for injection mold tooling. The Company believes that, with the introduction of its TrueForm powder in early 1996, it provides the most effective solution for the rapid creation of patterns for investment casting. Also in 1996 the Company introduced SandForm powder, a sand-based material that enables foundries to create sand cores (without tooling) that can be used in the sand casting of metal parts. The Company recently announced the expected availability of two new powders: Somos 201 powder, a new material supplied by DuPont that yields highly flexible parts with rubber-like characteristics, and VeriForm powder, a significantly improved material for functional prototypes. These developments continue to expand the potential end uses for rapid prototyping from the original concept models to more functional plastic and metal parts. The Company believes that its selective laser sintering technology is the only commercially practiced rapid prototyping process that allows a user to access all of these capabilities from a single platform. The Company believes that it further expanded the potential end user market with the September 1996 introduction of the Sinterstation 2500 System, a new Sinterstation System with twice the build volume of the original System and with a significantly higher scan speed. The Company believes that it is positioned to capitalize on its competitive advantages and increase its share of the rapid prototyping market through the following strategies: (i) using its ProtoForm powder to increase the Company's SLS System and materials sales for strong durable part applications; (ii) targeting the RapidTool process, the TrueForm powder, and the SandForm powder to the growing rapid prototyping markets of metal prototype tools, investment cast parts, and sand cast parts; (iii) developing and marketing new and improved metal, plastic and ceramic powdered materials; (iv) continuing to significantly upgrade the performance of the Sinterstation Systems in both productivity and accuracy; and (v) expanding the Company's distribution network, including the Company's direct sales force and agent network. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......................... 2,852,191 Shares Common Stock offered by the Selling Shareholder.............. 186,809 Shares Common Stock to be outstanding after the Offering............... 6,907,306 Shares(1) Risk Factors...................... The Offering involves a high degree of risk and immediate and substantial dilution. See "Risk Factors" and "Dilution." Use of Proceeds................... To retire existing indebtedness and for general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol..... DTMC </TABLE> - -------- (1) Based upon the number of shares outstanding as of March 31, 1997. Includes (i) 187,500 shares of Common Stock to be issued to BFGoodrich simultaneously with the closing of the Offering upon conversion of $1.5 million of indebtedness owed by the Company to BFGoodrich and (ii) 624,224 shares of Common Stock issuable to employees upon the exercise of immediately exercisable stock options that will be outstanding in connection with the closing of the Offering under the DTM Corporation Equity Appreciation Plan. See "Management--Equity Appreciation Plan." SUMMARY CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, -------------------------------------------------- 1992 1993 1994 1995 1996 -------- -------- -------- -------- ---------- <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenue: Products................. $ 2,841 $ 6,989 $ 8,127 $ 12,632 $ 22,070 Service and support(1)... 2,027 2,593 1,112 1,579 2,309 -------- -------- -------- -------- ---------- Total revenue........... 4,868 9,582 9,239 14,211 24,379 Cost of sales: Products................. 2,462 5,699 5,370 8,803 13,021 Service and support...... 1,705 2,141 511 873 1,424 -------- -------- -------- -------- ---------- Total cost of sales..... 4,167 7,840 5,881 9,676 14,445 -------- -------- -------- -------- ---------- Gross profit............. 701 1,742 3,358 4,535 9,934 Operating loss........... (9,624) (9,644) (5,731) (5,606) (4,338) Interest expense, net.... (10) (328) (178) (530) (1,066) Cost of discontinued registration............ -- -- -- -- (752) Income tax benefit allocated from BFGoodrich.............. 3,032 3,084 1,825 2,138 1,667 Net loss................. $ (6,602) $ (6,650) $ (4,084) $ (3,998) $ (4,489) ======== ======== ======== ======== ========== Pro forma(2): Net loss................. $ (6,156) Net loss per share(3).... $ (1.71) Number of shares used(4)................. 3,609,211 Pro forma, as adjusted for the Offering(2)(5): Net loss................. $ (5,069) Net loss per share(3).... $ (0.88) Number of shares used(4)................. 5,760,476 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------- ACTUAL AS ADJUSTED(4)(6) ------- ----------------- <S> <C> <C> BALANCE SHEET DATA: Working capital..................................... $ 1,622 $ 8,864 Total assets........................................ 17,897 24,370 Total debt.......................................... 15,809 -- Total liabilities................................... 26,382 10,573 Shareholders' equity (deficit)...................... (8,485) 13,797 </TABLE> - -------- (1) Includes domestic rapid prototyping service bureau activity through December 1993, at which time the Company sold its domestic service bureau. Revenues associated with the service bureau operations for the years ended December 31, 1992 and 1993 totaled approximately $1.9 million for each year. (2) Computed on a stand-alone basis, without allocation of income tax benefit from BFGoodrich. (3) See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Impact of Recently Issued Accounting Standard" for the potential impact on earnings per share of future periods under Statement of Financial Accounting Standards No. 128, Earnings per Share. (4) Gives effect to the issuance of an estimated 507,045 shares of Common Stock issuable to employees upon the exercise of immediately exercisable options, which will have exercise prices substantially less than the Offering price of $8.00 per share, that will be outstanding in connection with the closing of the Offering under the DTM Corporation Equity Appreciation Plan. See "Management--Equity Appreciation Plan." (5) Gives effect to (i) that number of offered shares the net proceeds from which are necessary to fund debt repayments as described in "Use of Proceeds" and (ii) the elimination of historically incurred interest expense of approximately $1.1 million related to such debt. (6) Reflects the sale of 2,852,191 shares of Common Stock by the Company at the Offering price of $8.00 per share, less the underwriting discount, estimated offering expenses and the application of the net proceeds to the Company therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001014733_old-point_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001014733_old-point_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1b4b5ddaa7c31cf6a7c3d136bd3d130ccb970fa7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001014733_old-point_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. THE COMPANY VDI Media ("VDI" or the "Company") provides broadcast quality video duplication, distribution and related value-added services including distribution of national television spot advertising, trailers and electronic press kits. The primary users of the Company's videotape duplication and distribution services are those motion picture companies and advertising agencies which generally outsource such services. The Company serviced over 1,200 customers in the nine months ended September 30, 1996, including the Columbia/Tri Star Motion Picture Companies, Metro-Goldwyn-Mayer Film Group, Fox Filmed Entertainment, MCA Motion Picture Group, The Walt Disney Motion Picture Group, Paramount Pictures Corporation and Warner Bros. Services provided to this group of major studio clients constituted approximately 50.5% of the Company's revenues for the nine months ended September 30, 1996. The Company's advertising agency customers include Saatchi & Saatchi, Young & Rubicam and Dailey & Associates. The Company's services include (i) the physical and electronic delivery of broadcast quality advertising, including spots, trailers, electronic press kits and infomercials, and syndicated television programming to more than 945 television stations, cable companies and other end-users nationwide and (ii) a broad range of video services including the duplication of video in all formats, element storage, standards conversion, closed captioning and transcription services, and video encoding for air play verification purposes. The value-added services provided by the Company further strengthen customer relationships and create opportunities for increased duplication and distribution business. The primary method of distribution by the Company, and by others in the industry, continues to be the physical delivery of videotape to end-users. In 1994, to enhance its competitive position, the Company created Broadcast One, a national distribution network which employs fiber optic and satellite technologies in combination with physical distribution methods to deliver broadcast quality material throughout the United States. The Company's use of fiber optic and satellite technologies provides rapid and reliable electronic transmission of video spots and other content with a high level of quality, accountability and flexibility to both advertisers and broadcasters. Through the Company's state-of-the-art distribution hub in Tulsa, Oklahoma (the "Tulsa Control Center"), Broadcast One has enabled the Company to expand its presence in the national advertising market, allowing for greater diversification of its customer base. The Company currently derives a small percentage of its revenue from electronic deliveries and anticipates that this percentage will increase as such technologies become more widely accepted. The Company intends to add new methods of distribution as technologies become both standardized and cost-effective. The Company operates broadcast tape duplication facilities at its two California locations and at the Tulsa Control Center, which the Company believes together currently distribute on average 3,600 videotapes a day. By capitalizing on Broadcast One's ability through fiber optic and satellite technologies to link instantaneously the Company's facilities in Los Angeles with its other facilities and by leveraging the Tulsa Control Center's geographic proximity to the center of the country, the Company is able to utilize the optimal delivery method to extend its deadline for same or next-day delivery of time-sensitive material. As the Company develops or acquires facilities in new markets, the Broadcast One network will enable it to maximize the usage of its network-wide duplication capacity by instantaneously transmitting video content to facilities with available capacity. The Company's Broadcast One network and California facilities are designed to serve cost-effectively the time-sensitive distribution needs of the Company's clients. Management believes that the Company's success is based on its strong customer relationships which are maintained through the reliability, quality and cost-effectiveness of its services, and its extended deadline for processing customer orders. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The broadcast video duplication industry is service-oriented, highly fragmented and primarily comprised of numerous small companies with regional customer bases. The Company has targeted a number of these companies, certain of which VDI currently outsources duplication and production work, as potential acquisitions. To the extent any such companies are acquired, the Company intends to integrate their operations into its "hub and spoke" distribution network controlled through the Tulsa Control Center. The Company will seek to increase revenues and realize margin gains from such acquisitions through the (i) greater utilization of its existing high volume duplication and distribution facilities, (ii) addition of value-added services which the Company currently does not provide, (iii) capture of a larger percentage of its existing customers' duplication and distribution business, (iv) addition of new customers, (v) elimination of redundant management and administrative functions and (vi) elimination of sub-contracted duplication and production work in markets in which it does not yet have such capabilities. The Company recently implemented this acquisition strategy by acquiring substantially all of the assets and assuming certain liabilities of Woodholly Productions ("Woodholly") (the "Woodholly Acquisition"). Woodholly provides videotape duplication and distribution, video content storage and ancillary services to major motion picture studios, advertising agencies and independent production companies for both domestic and international use. VDI believes the acquisition of Woodholly will allow it to gain valuable customer relationships, offer a more complete range of services to its customers and give VDI the opportunity to capture a larger portion of its current customers' video duplication and distribution business. The purchase price, which is subject to adjustment and offset, consists of $4.0 million in promissory notes and up to $4.0 million in earn-out payments for a total purchase price of up to $8.0 million. The Company intends to repay the $4.0 million in promissory notes from the net proceeds of this Offering. See "Use of Proceeds" and "Business--Woodholly Acquisition." The Company's strategy is to increase its market share within the video duplication and distribution industry by (i) further penetrating the marketplace by providing a broad array of high quality, reliable value-added services, (ii) acquiring companies with strong customer relationships in businesses complementary to the Company's operations, (iii) continuing to develop value-added services such as audio encryption, electronic order entry and order status and air play verification and (iv) increasing the timeliness and efficiency of its operations by exploiting new technologies as they become both standardized and cost-effective. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company................... 2,600,000 shares Common Stock Offered by the Selling Shareholder....... 200,000 shares Common Stock to be Outstanding after the Offering..... 9,260,000 shares (1) Use of Proceeds by the Company........................ To repay indebtedness of $5.8 million, including acquisition indebtedness of $4.0 million, to pay an S Corp distribution to the Company's current shareholders of approximately $4.5 million and for general corporate purposes, including the potential acquisition of businesses complementary to the Company's operations and capital expend- itures. See "Use of Proceeds." Nasdaq National Market Symbol......................... VDIM </TABLE> - -------------------------- (1) Excludes 900,000 shares of Common Stock reserved for issuance with respect to options to be issued under the Company's 1996 Stock Incentive Plan (the "1996 Plan"). Upon consummation of this Offering, the Company intends to grant options to purchase an aggregate of 300,000 shares of Common Stock under the 1996 Plan to the Company's employees (a majority of which will be granted to members of the Company's senior management), each at an exercise price per share equal to the initial public offering price per share of Common Stock. See "Capitalization" and "Management -- 1996 Stock Incentive Plan." SUMMARY SELECTED FINANCIAL AND OTHER DATA The summary selected financial and other data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and Notes thereto included elsewhere in this Prospectus. The historical statement of operations data set forth below with respect to the years ended December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1995 and 1996 and the historical balance sheet data as of September 30, 1996 are derived from the Company's audited Financial Statements and the Notes thereto included elsewhere in this Prospectus. The statement of operations data with respect to the years ended December 31, 1991 and 1992 have been derived from the Company's unaudited financial statements, which, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the unaudited periods. The summary pro forma as adjusted information set forth below reflects (i) the distribution by the Company to its shareholders of previously taxed and undistributed earnings calculated as of September 30, 1996, which amount is expected to increase to the extent of taxable earnings for the period from October 1, 1996 to the closing date of this Offering, (ii) the recording by the Company of income taxes, including additional deferred taxes, as if the Company were treated as a C Corporation at September 30, 1996, (iii) the Woodholly Acquisition and (iv) the sale by the Company of 2,600,000 shares of Common Stock offered hereby at an assumed initial public offering price of $7.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." This information should be read in conjunction with the Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. This information should also be read in conjunction with the Company's and Woodholly's financial statements and "Certain Pro Forma Combined Financial Statements" set forth elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------------------- --------------------------- PRO FORMA PRO FORMA HISTORICAL AS HISTORICAL AS -------------------------------------------- ADJUSTED ---------------- ADJUSTED 1991 1992 1993 1994 (1) 1995 1995 1995 1996 1996 ------ ------- ------- -------- ------- --------- ------- ------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA Revenues.............................. $6,597 $11,546 $17,044 $14,468 $18,538 $25,661 $13,208 $18,182 $23,738 Cost of goods sold.................... 3,297 7,710 10,595 10,042 11,256 15,776 7,924 11,080 14,994 ------ ------- ------- -------- ------- --------- ------- ------- --------- Gross profit.......................... 3,300 3,836 6,449 4,426 7,282 9,885 5,284 7,102 8,744 Selling, general and administrative expense.............................. 2,858 3,498 4,290 3,545 5,181 6,860 3,761 4,204 5,564 Costs related to establishing a new facility............................. -- -- -- 981 -- -- -- -- -- Dispute settlement.................... -- -- -- 458 -- -- -- -- -- ------ ------- ------- -------- ------- --------- ------- ------- --------- Operating income (loss)............... 442 338 2,159 (558) 2,101 3,025 1,523 2,898 3,180 Interest expense, net................. 38 170 241 271 333 679 251 223 463 Provision for income taxes............ 17 -- 29 -- 26 938 19 45 1,087 ------ ------- ------- -------- ------- --------- ------- ------- --------- Net income (loss)..................... $ 387 $ 168 $ 1,889 $ (829) $ 1,742 $ 1,408 $ 1,253 $ 2,630 $ 1,630 ------ ------- ------- -------- ------- --------- ------- ------- --------- ------ ------- ------- -------- ------- --------- ------- ------- --------- PRO FORMA STATEMENT OF OPERATIONS DATA (2) Pro forma provision (benefit) for income taxes.................................. $ 162 $ 67 $ 767 $ (332) $ 707 $ 509 $ 1,070 Pro forma net income (loss)............. 242 101 1,151 (497) 1,061 763 1,605 Pro forma net income per share.......... 0.16 0.24 Pro forma weighted average common shares outstanding............................ 6,716 6,716 Supplemental pro forma net income per share (3).............................. 0.18 0.24 Supplemental weighted average common shares outstanding..................... 7,243 7,243 OTHER DATA EBITDA (4)............................ $ 728 $ 1,059 $ 3,152 $ 2,209 $ 3,680 $ 5,648 $ 2,692 $ 4,120 Cash flows provided by operating activities........................... 248 710 2,003 1,121 2,553 4,796 2,214 3,860 Cash flows (used in) provided by financing activities................. 491 971 (635) 977 (1,061) (1,535) (757) (2,959) Capital expenditures.................. 765 1,672 1,379 2,071 1,137 2,905 722 1,043 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1996 ------------------------ PRO FORMA HISTORICAL AS ADJUSTED ----------- ----------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA Cash and cash equivalents............................................................... $ 273 $ 6,150 Working capital......................................................................... 1,229 8,944 Property and equipment, net............................................................. 3,820 7,082 Total assets............................................................................ 11,555 24,119 Borrowings under revolving credit agreement............................................. 1,114 22 Long-term debt, net of current portion.................................................. 1,354 1,390 Shareholders' equity.................................................................... 4,385 17,141 </TABLE> - ------------------------ (1) The 1994 results of operations reflect (i) the disposition of the Company's telecine (film-to-videotape transfer) business during the first quarter of 1994, (ii) one-time start-up costs of $1.0 million related to establishing the Tulsa Control Center, which costs were in addition to capital expenditures of $0.9 million and (iii) one-time costs of $0.5 million in connection with a settlement of a dispute. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001014764_capstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001014764_capstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c62b4e591dec4bb73118dfb14e28119a298b580d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001014764_capstar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS WILL NOT BE EXERCISED. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO "CAPSTAR" OR THE "COMPANY" INCLUDE CAPSTAR HOTEL COMPANY AND ITS SUBSIDIARIES (INCLUDING THE COMPANY'S SUBSIDIARY OPERATING PARTNERSHIP, CAPSTAR MANAGEMENT COMPANY, L.P., THROUGH WHICH THE COMPANY OPERATES ALL OF ITS BUSINESSES). THE OFFERING BY THE COMPANY OF 5,000,000 SHARES OF COMMON STOCK IS REFERRED TO HEREIN AS THE "OFFERING." ALL STATISTICS IN THIS PROSPECTUS RELATING TO THE LODGING INDUSTRY GENERALLY (OTHER THAN COMPANY STATISTICS) ARE FROM, OR HAVE BEEN DERIVED FROM, INFORMATION PUBLISHED OR PROVIDED BY SMITH TRAVEL RESEARCH, AN INDEPENDENT INDUSTRY RESEARCH ORGANIZATION. SMITH TRAVEL RESEARCH HAS NOT CONSENTED TO THE USE OF THE DATA PRESENTED IN THIS PROSPECTUS AND HAS NOT PROVIDED ANY FORM OF CONSULTATION, ADVICE OR COUNSEL REGARDING ANY ASPECT OF THE OFFERING. THE COMPANY CapStar is a hotel management and investment company which acquires, renovates, repositions and manages hotels throughout the United States. CapStar owns and manages 22 upscale, full-service hotels (the "Owned Hotels") which contain 5,981 rooms and manages an additional 31 hotels owned by third parties which contain 5,488 rooms (the "Managed Hotels"). CapStar's portfolio of Owned Hotels and Managed Hotels includes 53 hotels which contain 11,469 rooms (the "Hotels"). The Company's business strategy is to acquire hotel properties with the potential for cash flow growth and to renovate, reposition and operate each hotel according to a business plan specifically tailored to the characteristics of the hotel and its market. The Owned Hotels are located in markets which have recently experienced strong economic growth, including Albuquerque, Atlanta, Charlotte, Chicago, Cleveland, Denver, Houston, Los Angeles, Salt Lake City, Seattle and Washington, D.C. The Owned Hotels include hotels operated under nationally recognized brand names such as Hilton-TM-, Sheraton-Registered Trademark-, Westin-TM-, Marriott-Registered Trademark-, Doubletree-TM- and Embassy Suites-Registered Trademark-. For the year ended December 31, 1996, on a pro forma basis, the operating performance of the Owned Hotels (excluding the ten hotels purchased since September 30, 1996) improved significantly, as demonstrated by the following table: <TABLE> <CAPTION> PRO FORMA YEAR ENDED DECEMBER 31, ---------------------- PERCENTAGE 1995 1996 INCREASE ---------- ---------- ------------- <S> <C> <C> <C> Revenues (in thousands)............................... $ 109,798 $ 118,329 7.8% Gross Operating Profit (in thousands)................. $ 30,947 $ 37,909 22.5% Average Occupancy..................................... 72.4% 72.9% 0.7% Average Daily Rate ("ADR")............................ $ 75.25 $ 83.82 11.4% Revenue Per Available Room ("RevPAR")................. $ 54.44 $ 61.11 12.3% </TABLE> Additionally, the performance of the Owned Hotels compares favorably with that of the industry in general. For the year ended December 31, 1996, RevPAR for the Owned Hotels (excluding the ten hotels purchased since September 30, 1996) increased 12.3%, while RevPAR for all upscale hotels, as reported by Smith Travel Research, increased 5.4%. For the year ended December 31, 1996, RevPAR at all of the Owned Hotels (including the ten hotels purchased since September 30, 1996) increased 10.1%. The Company completed its initial public offering (the "IPO") in August 1996. Since the IPO, the Company has significantly expanded its portfolio by completing the purchase of ten upscale, full-service hotels containing 2,465 rooms for an aggregate total acquisition cost, including estimated closing costs, planned renovations and initial working capital ("Total Acquisition Cost"), of $181.6 million. The Company has also entered into a contract with Highgate Hotels, Inc. and certain affiliated entities ("Highgate Hotels") to acquire a portfolio of six upscale, full-service hotels containing 1,358 rooms (the "Highgate Portfolio") for a Total Acquisition Cost of approximately $104.7 million. See "Recent Developments--The Highgate Portfolio." The Company has also entered into contracts to acquire two additional hotels containing 367 rooms for a Total Acquisition Cost of $26.7 million (the "Additional Acquisitions"). In addition to the acquisition of these hotels, since the IPO the Company has invested in a joint venture which owns the 456-room Holiday Inn Riverfront in St. Louis, Missouri and has entered into three new long-term management agreements. During the year ended December 31, 1996, the Company spent a total of $21.6 million on renovations at the Owned Hotels and intends to spend an additional $21.7 million completing the renovation programs (including approximately $8.4 million to renovate and reposition the Highgate Portfolio and the Additional Acquisitions). See "Special Note Regarding Forward-Looking Statements." As a fully integrated owner and manager, CapStar intends to capitalize on its management experience and expertise by continuing to make opportunistic acquisitions of full-service hotels, securing additional management contracts and improving the operating performance of the Hotels. The Company's senior management team has successfully managed hotels in all segments of the lodging industry, with particular emphasis on upscale, full-service hotels. Senior management has an average of approximately 20 years of experience in the hotel industry. Since the inception of the Company's management business in 1987, the Company has achieved consistent growth, even during periods of relative industry weakness. The Company attributes its management success to its ability (i) to analyze each hotel as a unique property and identify those particular cash flow growth opportunities which each hotel presents, (ii) to create and implement marketing plans that properly position each hotel within its local market, and (iii) to develop management programs that emphasize guest service, labor productivity, revenue yield and cost control. The Company has a distinct management culture that stresses creativity, loyalty and entrepreneurship and was developed to emphasize operations from an owner's perspective. This culture is reinforced by the fact that 33 members of management will hold, directly or indirectly, an aggregate of 5.5% of the Common Stock upon completion of the Offering. See "Principal Stockholders." The Company believes that the upscale, full-service segment of the lodging industry is the most attractive segment in which to acquire, own and manage hotels and further believes that there are currently many attractive opportunities to acquire properties in this segment of the industry at prices below replacement cost. The upscale, full-service segment is attractive for several reasons. First, the Company expects that there will be no significant increases in the supply of upscale, full-service hotels in the next several years because the cost of new construction generally does not justify new hotel development. Second, upscale, full-service hotels appeal to a wide variety of customers, thus reducing the risk of decreasing demand from any particular customer group. Additionally, such hotels have particular appeal to both business executives and upscale leisure travelers, customers who are generally less price sensitive than travelers who use limited-service hotels. Third, because full-service hotels have a higher proportion of fixed costs to variable costs than other segments of the lodging industry, full-service hotels afford greater operating leverage than limited-service hotels, resulting in increasingly higher profit margins as revenues increase. Finally, full-service hotels require a greater depth of management expertise than limited-service hotels, and the Company believes that its superior management skills provide it with a significant competitive advantage in their operation. RECENT DEVELOPMENTS In August 1996, the Company completed its IPO at a price of $18 per share, generating net proceeds of approximately $110 million to the Company. Since completing the IPO, the Company has continued to execute the hotel acquisition and operating strategies that it had pursued prior to the IPO which has resulted in significant growth in the Company's hotel portfolio. The Company's acquisition, financing, and management activities since the IPO are discussed below. POST-IPO ACQUISITIONS At the time of the IPO, the Company owned 12 upscale, full-service hotels, containing 3,516 rooms. Since the IPO, the Company has acquired ten additional upscale, full-service hotels containing 2,465 rooms. These newly acquired hotels are operated under nationally recognized brand names such as Hilton, Doubletree, Embassy Suites and Holiday Inn-Registered Trademark-. The Company expects to improve the operating performance of these newly acquired hotels by implementing the detailed management plans that have been created for each property as part of its operation strategy. The Company believes that all of its post-IPO acquisitions represent attractive investment opportunities because (i) they are located in major metropolitan or growing secondary markets and are well-located within these markets (ii) they were acquired at an average cost of approximately $74,000 per room, which represents more than a 30% discount to replacement cost and (iii) they have attractive current returns and potential for significant revenue and cash flow growth through implementation of the Company's operating strategy. THE HIGHGATE PORTFOLIO The Company has entered into a contract with Highgate Hotels to acquire the Highgate Portfolio, a group of six upscale, full-service hotels containing 1,358 rooms for a Total Acquisition Cost of approximately $104.7 million. The acquisition will be financed with $75.2 million in cash and $29.5 million of units in the Company's subsidiary operating partnership ("OP Units"). See "Recent Developments--The Highgate Portfolio." The Highgate Portfolio hotels are operated under nationally recognized brand names including Sheraton, Doubletree, Radisson-Registered Trademark-, Ramada-Registered Trademark- and Holiday Inn, and are located in Dallas, Indianapolis, Calgary and Vancouver. The Highgate Portfolio enhances the Company's geographic diversity by expanding its portfolio into Canada and, in connection with the acquisition of the Highgate Portfolio, the Company has entered into agreements to manage two additional hotels owned by principals of Highgate Hotels: the 414-room Pontchartrain-Crowne Plaza in Detroit, Michigan and the 393-room Four Points Hotel in suburban Atlanta. The Company believes that the acquisition of the Highgate Portfolio and the establishment of a strategic alliance with Highgate Hotels (one of the principals of which the Company has agreed to nominate to a new seat on its board of directors) will provide significant benefits to its on-going acquisition and corporate development activities. A portion of the net proceeds from the Offering will be used by the Company to consummate the acquisition of the Highgate Portfolio. The Company expects to complete the acquisition of the Highgate Portfolio in April 1997. There can be no assurance, however, that the closing will occur. See "Risk Factors--Risks Associated with Expansion" and "Special Note Regarding Forward-Looking Statements." THE ADDITIONAL ACQUISITIONS The Company has also entered into contracts to acquire the Additional Acquisitions: the 213-room Four Points Hotel in Cherry Hill, New Jersey for a Total Acquisition Cost of $8.2 million and the 154-room Great Valley Sheraton in Frazer, Pennsylvania for a Total Acquisition Cost of $18.5 million. MANAGEMENT AGREEMENTS/JOINT VENTURES In January 1997, the Company invested in a joint venture with Hallmark Investment Corp. which owns the Holiday Inn Riverfront, located in downtown St. Louis at the base of the Gateway Arch. In connection with the joint venture, the Company has signed a long-term agreement to manage the 456-room property. Since August 1996 the Company has entered into significant new long-term management agreements with three other hotel owners. The Company expects to form additional joint ventures and strategic alliances with institutional and private hotel owners to invest in future acquisitions and sale and leaseback transactions, and to secure additional fee management arrangements. See "Special Note Regarding Forward-Looking Statements." FINANCING ACTIVITIES In September 1996, the Company entered into a $225 million revolving credit facility (the "Credit Facility") led by Bankers Trust Company ("Bankers Trust"), as agent, to fund post-IPO acquisitions, to repay outstanding indebtedness and for general corporate purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." In December 1996, the Company modified the terms of the Credit Facility to increase the Company's permitted nonrecourse indebtedness from $25 million to $50 million and to permit it to incur up to $100 million of subordinated indebtedness. In December 1996, the Company borrowed $50 million of subordinated indebtedness (the "Subordinated Debt") to provide additional funding for acquisitions and for general corporate purposes. THE PROPERTIES The following table sets forth certain information for each of the Owned Hotels, the Highgate Portfolio and the Additional Acquisitions for the year ended December 31, 1996: <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1996 ------------------------ <S> <C> <C> <C> <C> GUEST AVERAGE HOTEL LOCATION ROOMS ADR OCCUPANCY - ---------------------------------------------------------- ------------------------- ----------- --------- ------------- <CAPTION> <S> <C> <C> <C> <C> OWNED HOTELS Orange County Airport Hilton.............................. Irvine, CA 290 $ 78.48 66.0% Hilton Hotel.............................................. Sacramento, CA 326 75.89 71.7 Santa Barbara Inn......................................... Santa Barbara, CA 71 129.86 85.1 Hilton Hotel.............................................. San Pedro, CA 226 67.23 62.3 Holiday Inn............................................... Colorado Springs, CO 201 60.57 72.6 Sheraton Hotel............................................ Colorado Springs, CO 502 65.95 70.1 Embassy Suites Denver..................................... Englewood, CO 236 102.57 74.1 Embassy Row Hilton........................................ Washington, DC 195 111.24 60.8 The Latham Hotel.......................................... Washington, DC 143 108.17 72.0 Westin Atlanta Airport.................................... Atlanta, GA 496 79.44 79.3 Radisson Hotel............................................ Schaumburg, IL 202 75.54 66.1 Hilton Hotel & Towers..................................... Lafayette, LA 328 70.05 74.1 Marriott Hotel............................................ Somerset, NJ 434 104.36 72.4 Doubletree Hotel.......................................... Albuquerque, NM 294 77.12 66.6 Sheraton Airport Plaza.................................... Charlotte, NC 226 83.97 70.8 Holiday Inn............................................... Cleveland, OH 237 70.11 73.1 Hilton Hotel.............................................. Arlington, TX 310 81.03 73.3 Southwest Hilton.......................................... Houston, TX 293 72.17 53.9 Westchase Hilton.......................................... Houston, TX 295 89.87 77.9 Salt Lake Airport Hilton.................................. Salt Lake City, UT 287 79.18 75.5 Hilton Hotel.............................................. Arlington, VA 209 109.21 74.5 Hilton Hotel.............................................. Bellevue, WA 180 91.70 80.8 ----- --------- --- Subtotal/Weighted Average--Owned Hotels................. 5,981 $ 83.02 71.3% HIGHGATE PORTFOLIO Doubletree Guest Suites................................... Indianapolis, IN 137 $ 79.53 73.5% Holiday Inn Select........................................ Dallas, TX 348 59.04 61.7 Radisson Hotel............................................ Dallas, TX 305 60.69 74.6 Holiday Inn Calgary Airport............................... Calgary, Alberta 170 53.09 59.3 Sheraton Hotel............................................ Guildford, B.C. 280 69.17 75.2 Ramada Vancouver Centre................................... Vancouver, B.C. 118 70.40 79.4 ----- --------- --- Subtotal/Weighted Average--Highgate Portfolio........... 1,358 $ 64.35 69.8% ADDITIONAL ACQUISITIONS Four Points Hotel......................................... Cherry Hill, NJ 213 $ 73.40 61.8% Great Valley Sheraton..................................... Frazer, PA 154 88.80 72.0 ----- --------- --- Subtotal/Weighted Average--Additional Acquisitions 367 $ 80.43 66.1% ----- --------- --- Total/Weighted Average.................................. 7,706 $ 79.64 70.8% ----- --------- --- ----- --------- --- </TABLE> The Company's principal executive offices are located at 1010 Wisconsin Avenue, N.W., Suite 650, Washington, DC 20007, and its telephone number is (202) 965-4455. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company........................... 5,000,000 shares Common Stock to be Outstanding after the Offering...................... 17,754,321 shares(1)(2) Use of Proceeds..................... The net proceeds of the Offering will be used to fund the acquisition of the Highgate Portfolio and the Additional Acquisitions, to retire outstanding balances under the Credit Facility and for general corporate purposes. NYSE Symbol......................... "CHO" </TABLE> - ------------------------ (1) Does not include up to 750,000 shares of Common Stock subject to an over-allotment option granted to the Underwriters. See "Underwriting." (2) Does not include 1,201,680 shares of Common Stock issuable upon the conversion of 809,523 Common OP Units (as defined herein) and 392,157 Preferred OP Units (as defined herein). See "Recent Developments--The Highgate Portfolio." Also does not include 1,740,000 shares of Common Stock reserved for issuance under the Equity Incentive Plan (as defined herein) under which the Company has currently granted 745,254 options to purchase shares of Common Stock. See "Management--Compensation of Directors," "--Stock Option Grants" and "--Compensation Plans." Summary Financial and Other Information Prior to the IPO, the business of the Company was conducted through EquiStar Hotel Investors, L.P. ("EquiStar") and CapStar Management Company, L.P. ("CapStar Management"). CapStar Management has been in the hotel management business since 1987. EquiStar, however, was not formed until January 12, 1995 and the Company did not own any hotels in any prior periods. Therefore, the Company's financial statements prior to 1995 reflect only the management business of CapStar Management. In 1994, the Company began to invest in additional professional staff and incurred related costs in order to position itself to acquire hotel properties. From January 12, 1995 through December 31, 1996, the Company acquired 19 hotels on various dates. Thus, the historical financial statements for the years ended December 31, 1996 and 1995 reflect differing numbers of hotels owned throughout the periods. The unaudited pro forma financial statements for the year ended December 31, 1996 assume 30 hotels owned. <TABLE> <CAPTION> FISCAL YEAR ENDED DECEMBER 31, PRO ---------------------------------------------------------- FORMA 1992 1993 1994 1995 1996 1996(A) ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA) <CAPTION> <S> <C> <C> <C> <C> <C> <C> OPERATING RESULTS: Revenues: Rooms............................. $ 0 $ 0 $ 0 $ 14,456 $ 68,498 $ 158,293 Food, beverage and other.......... 0 0 0 7,471 36,949 81,543 Management services and other revenues........................ 3,479 4,234 4,418 4,436 4,345 3,169 ---------- ---------- ---------- ---------- ---------- ---------- Total revenues................ 3,479 4,234 4,418 26,363 109,792 243,005 ---------- ---------- ---------- ---------- ---------- ---------- Operating expenses: Departmental expenses: Rooms............................. 0 0 0 4,190 17,509 39,732 Food, beverage and other.......... 0 0 0 5,437 27,102 60,496 Undistributed operating expenses: Selling, general and administrative.................. 2,836 4,065 4,508 8,078 20,448 43,450 Property operating costs.......... 0 0 0 3,934 17,151 39,769 Depreciation and amortization..... 12 14 23 2,098 8,248 18,801 ---------- ---------- ---------- ---------- ---------- ---------- Total operating expenses...... 2,848 4,079 4,531 23,737 90,458 202,248 ---------- ---------- ---------- ---------- ---------- ---------- Operating income/(loss)............. 631 155 (113) 2,626 19,334 40,757 Interest expense, net............... 0 0 0 2,413 12,346 16,843 Minority interest................... 0 0 0 17 39 (1,663) Provision for income taxes(B)....... 0 0 0 0 2,674 8,901 Income/(loss) before extraordinary item.............................. 631 155 (113) 230 4,353 13,350 Extraordinary item(C)............... 0 0 0 (887) (1,956) 0 ---------- ---------- ---------- ---------- ---------- ---------- Net income/(loss)............... 631 155 (113) (657) 2,397 13,350 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings per share before extraordinary item(D)............. $ -- $ -- $ -- $ -- $ 0.31 $ 0.75 Number of shares of common stock and common stock equivalents outstanding....................... -- -- -- -- 12,754,321 18,563,844 OTHER FINANCIAL DATA: EBITDA(E)........................... $ 643 $ 169 $ (90) $ 4,741 $ 27,621 $ 57,895 Net cash provided by (used in) operating activities.............. 87 (101) 66 4,357 13,373 33,164 Net cash used in investing activities........................ (65) (24) (41) (116,573) (225,251) (403,077) Net cash provided by (used in) financing activities.............. (219) 244 0 119,048 226,830 389,514 BALANCE SHEET DATA: Property and equipment, gross....... $ 110 $ 134 $ 176 $ 110,883 $ 343,092 $ 520,657 Total assets........................ 586 1,458 1,232 132,650 379,161 542,749 Long term obligations............... 0 0 0 73,574 200,361 219,470 </TABLE> SUMMARY FINANCIAL AND OTHER INFORMATION <TABLE> <CAPTION> FISCAL YEAR ENDED DECEMBER 31, PRO ---------------------------------------------------------- FORMA 1992 1993 1994 1995 1996 1996(A) ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> OPERATING DATA: Owned Hotels: Number of hotels.................. -- -- -- 6 19 30 Number of guest rooms............. -- -- -- 2,101 5,166 7,706 Total revenues (in thousands)..... -- -- -- $ 21,927 $ 105,447 $ 239,836 Average occupancy................. -- -- -- 72.3% 71.6% 70.8% ADR(F)............................ -- -- -- $ 71.58 $ 82.84 $ 79.64 RevPAR(G)......................... -- -- -- $ 51.75 $ 59.31 $ 56.39 All Hotels(H): Number of hotels(I)............... 34 34 39 46 47 -- Number of guest rooms(I).......... 5,918 5,971 5,847 7,895 9,785 -- Total revenues (in thousands)..... $ 109,837 $ 123,124 $ 128,151 $ 170,888 $ 193,092 -- </TABLE> - ------------------------------ (A) The pro forma Operating Results, Other Financial Data and Operating Data for the year ended December 31, 1996 have been prepared as if the Offering and the acquisition of the Owned Hotels, the Highgate Portfolio and the Additional Acquisitions had been consummated at the beginning of 1996, and the pro forma Balance Sheet Data as of December 31, 1996 has been prepared as if the Offering and the acquisition of the Owned Hotels, the Highgate Portfolio and the Additional Acquisitions had been consummated on such date. (B) No provision for federal income taxes is included in the historical data other than for 1996 because CapStar Management and EquiStar were partnerships and all federal income tax liabilities were passed through to the individual partners. (C) During 1995 and 1996, certain loan facilities were refinanced and the write-offs of deferred costs associated with the prior facilities were recorded as extraordinary losses. (D) Earnings per share before extraordinary item for the historical year ended December 31, 1996 is based on earnings for the period from the IPO on August 20, 1996 through December 31, 1996. (E) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Management believes that EBITDA is a useful measure of operating performance because it is industry practice to evaluate hotel properties based on operating income before interest, income taxes, depreciation and amortization, which is generally equivalent to EBITDA, and EBITDA is unaffected by the debt and equity structure of the property owner. EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles ("GAAP"), is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income under GAAP for purposes of evaluating the Company's results of operations. (F) Represents total room revenues divided by total number of rooms occupied by hotel guests on a paid basis. (G) Represents total room revenues divided by total available rooms, net of rooms out of service due to significant renovations. (H) Represents operating data for all hotels managed by the Company during all or a portion of the periods presented. (I) As of December 31 for the periods presented.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015126_nextlink_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015126_nextlink_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8ebbd2dfa9d6e1fce0f9c25c21c0f8a10a34149a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015126_nextlink_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. REFERENCE IS MADE TO, AND THIS PROSPECTUS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION, INCLUDING THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, CONTAINED HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS "NEXTLINK" AND THE "COMPANY" REFER TO NEXTLINK COMMUNICATIONS, INC., A WASHINGTON CORPORATION, ITS CONSOLIDATED SUBSIDIARIES AND 40% MEMBERSHIP INTEREST IN TELECOMMUNICATIONS OF NEVADA, LLC, WHICH OPERATES A NETWORK THAT IS MANAGED BY THE COMPANY. ALL OPERATIONAL STATISTICS OF THE COMPANY INCLUDED IN THIS PROSPECTUS INCLUDE 100% OF THE OPERATIONAL STATISTICS OF TELECOMMUNICATIONS OF NEVADA, LLC. THE COMPANY IS THE SUCCESSOR TO NEXTLINK COMMUNICATIONS, L.L.C., A WASHINGTON LIMITED LIABILITY COMPANY THAT MERGED WITH AND INTO THE COMPANY EFFECTIVE JANUARY 31, 1997. ALL FINANCIAL AND OPERATIONAL DATA PRESENTED FOR PERIODS PRIOR TO JANUARY 31, 1997 RELATE TO NEXTLINK COMMUNICATIONS, L.L.C. CAPITALIZED TERMS USED IN THIS PROSPECTUS, WHICH ARE NOT OTHERWISE DEFINED HEREIN, HAVE THE RESPECTIVE MEANINGS ASCRIBED TO THEM IN THE GLOSSARY INCLUDED AS ANNEX A HERETO. INFORMATION IN THIS PROSPECTUS, UNLESS OTHERWISE INDICATED, (I) GIVES EFFECT TO THE 0.441336-FOR-1 REVERSE STOCK SPLIT OF BOTH THE CLASS A COMMON STOCK AND THE CLASS B COMMON STOCK EFFECTED IN CONNECTION WITH THE STOCK OFFERING, (II) ASSUMES THAT THE SELLING SHAREHOLDER IN THE STOCK OFFERING WILL CONVERT 3,200,000 SHARES OF CLASS B COMMON STOCK INTO 3,200,000 SHARES OF CLASS A COMMON STOCK AT THE CLOSING OF THE STOCK OFFERING, WHICH SHARES ARE BEING OFFERED AS PART OF THE STOCK OFFERING AND (III) ASSUMES THAT THE OVER-ALLOTMENT OPTION THAT HAS BEEN GRANTED TO THE UNDERWRITERS IN THE STOCK OFFERING WILL NOT BE EXERCISED. THE COMPANY NEXTLINK was founded in 1994 by Craig O. McCaw, its principal equity owner, to provide local facilities-based telecommunications services to its targeted customer base of small and medium-sized businesses. In July 1996, NEXTLINK became one of the first competitive local exchange carriers ("CLECs") in the United States to provide facilities-based switched local services under the Telecommunications Act of 1996 (the "Telecom Act"), which opened the entire local exchange market to competition. In each of the markets it serves, NEXTLINK seeks to become a principal competitor to the incumbent local exchange carrier ("ILEC") for its targeted customers by providing an integrated package of high quality local, long distance and enhanced telecommunications services at competitive prices. The market potential for competitive telecommunications services is large and growing. Industry sources estimate that in 1996 the total revenues from local and long distance telecommunications services were approximately $183 billion, of which approximately $101 billion were derived from local exchange services and approximately $82 billion from long distance services. Based upon FCC information, aggregate revenues for local and long distance services grew at a compounded annual rate of approximately 5.5% between 1991 and 1996. The Telecom Act, the FCC's issuance of rules for competition and pro-competitive policies developed by state regulatory commissions have created opportunities for new entrants, including the Company, to capture a portion of the ILEC's dominant, and historically monopoly controlled, market share of local services. The development of switched local services competition, however, is in its early stages, and the Company believes that CLECs currently serve fewer than 1% of the total business lines in the United States. The Company's targeted customer base within the national telecommunications market is small to medium-sized businesses, generally those businesses with fewer than 50 access lines. Based on consultants' reports, the Company estimates that as of year end 1996, there were approximately 170 million access lines nationwide, including approximately 55 million business lines. The Company develops and operates high capacity, fiber optic networks with broad market coverage in a growing number of markets across the United States. In its switched local service markets, the Company offers its customers a bundled package of local and long distance services and also offers dedicated transmission and competitive access services to long distance carriers and end users. In addition, NEXTLINK offers several non-network-based enhanced communications services to customers nationwide, including a variety of interactive voice response ("IVR") products and a virtual communications center for mobile professionals and workgroups. The Company currently operates 14 facilities-based networks providing switched local and long distance services in 23 markets in seven states. The Company anticipates that an additional three markets will be served by three additional networks by December 1997. These 26 markets, in addition to four other markets currently under development, have a total of approximately 8.0 million addressable business lines. The Company's goal is to add or expand markets and market clusters to increase its addressable business lines to approximately 11 million by the end of 1998. NEXTLINK is pursuing its targeted customer base in markets of all sizes. In larger markets, the Company has operational networks in Los Angeles and Philadelphia, and networks under development in Chicago and New York City. The Company also has operational networks in medium-sized markets such as Las Vegas and Nashville as well as smaller markets that have been clustered in Orange County, California and central Pennsylvania. The Company will enter larger markets on a stand-alone basis where it is economically attractive to do so and where competitive and other market factors warrant such entry. The Company also considers pursuing smaller markets where it can extend or cluster an existing network with relatively little incremental capital. The Company anticipates that the addressable business lines in the larger markets that it is currently operating and developing will represent the majority of the Company's addressable business lines by year end 1998. NEXTLINK has experienced significant growth in its customer base. NEXTLINK's customer access lines in service have increased from 8,511 access lines at December 31, 1996 to 17,409 access lines at June 30, 1997. In those markets where the Company has offered switched local services for at least 12 months, the Company has increased its access lines in service from 8,511 at December 31, 1996 to 15,450 at June 30, 1997. The Company has also achieved significant growth in the rate of quarterly installations of new customer access lines, from a total of 1,604 in the fourth quarter of 1996 to 6,153 in the second quarter of 1997. At the end of August 1997, the Company had a total of 26,921 installed access lines. For those markets in which the Company has offered switched local services for at least 12 months, the rate increased from 1,604 installations in the fourth quarter of 1996 to 4,310 in the second quarter of 1997. NEXTLINK believes that a critical factor in the successful implementation of its strategy is the quality of its management team and their extensive experience in the telecommunications industry. The Company has built a management team that it believes is well suited to challenge the dominance of the ILECs in the local exchange market. Craig O. McCaw, the Company's founder and principal equity owner, Steven W. Hooper, the Company's Chairman of the Board, Wayne M. Perry, the Company's Vice Chairman and Chief Executive Officer, and James F. Voelker, the Company's President, each has 15 or more years of experience in leading companies in competitive segments of the telecommunications industry. In addition, the presidents of the Company's operating subsidiaries and the Company's senior officers have an average of 14 years of experience in the telecommunications industry. Mr. Hooper and Mr. Perry are the most recent additions to the NEXTLINK executive management team, both of whom were members of the senior management team at McCaw Cellular Communications, Inc. ("McCaw Cellular") during the years in which it became the nation's largest cellular telephone company. Following McCaw Cellular's sale to AT&T Corp. in 1994, Messrs. Perry and Hooper were Vice Chairman and Chief Executive Officer, respectively, of AT&T Wireless Services, Inc. BUSINESS STRATEGY The Company has built an end user-focused, locally oriented organization dedicated to providing switched local and long distance telephone service at competitive prices to small and medium-sized businesses. The key components of the Company's strategy to become a leading provider of competitive telecommunications services and maximize penetration of its targeted customer base are: PROVIDE INTEGRATED TELECOMMUNICATIONS SERVICES TO SMALL AND MEDIUM-SIZED BUSINESSES. The Company primarily focuses its sales efforts for switched local and long distance services on small and medium-sized businesses and professional groups, those businesses having fewer than 50 business lines. The Company's market research indicates that these customers prefer a single source for all of their telecommunications requirements, including products, billing, installation, maintenance and customer service. The Company has chosen to focus on this segment based on its expectations that higher gross margins will generally be available on services provided to these customers as compared with larger businesses, and that ILECs may be less likely to apply significant resources towards retaining these customers. The Company expects to attract and retain these customers through a direct sales effort by offering: (i) bundled local and long distance services, as well as the Company's enhanced communications services; (ii) up to a 10% to 15% discount to comparable pricing by the ILEC, depending on the individual market; and (iii) responsive customer service and support provided on a local level. FOSTER DECENTRALIZED LOCAL MANAGEMENT AND CONTROL. The Company believes that its success will be enhanced by building locally based management teams that are responsible for the success of each of its operational markets. The Company has recruited experienced entrepreneurs and industry executives as presidents of each of the Company's operating subsidiaries, many of whom have previously built and led their own start-up telecommunications businesses. The local presidents and their teams are charged with achieving growth objectives in their respective markets and have decision making authority in key operating areas, including customer care, network growth and building connectivity, and managing the relationship and provisioning efforts with the ILEC. The Company has established an incentive based compensation policy for these management teams that is based upon the achievement of targeted growth and operational objectives. The Company believes that this local management focus will provide a critical competitive edge in customer acquisition and retention in each market. FURTHER DEVELOP EFFECTIVE DIRECT SALES AND CUSTOMER CARE ORGANIZATIONS. NEXTLINK is building a highly motivated and experienced direct sales force and customer care organization that is designed to establish a direct and personal relationship with its customers. The Company has expanded its sales force from 98 salespeople at year end 1996 to 150 salespeople at June 30, 1997. The Company expects to further increase its sales force to approximately 200 salespeople by year end 1997. Salespeople are given incentives through a commission structure that targets 40% of a salesperson's compensation to be based on performance. To ensure customer satisfaction, each customer will have a single point of contact for customer care who is responsible for solving problems and responding to customer inquiries. The Company has expanded its customer care organization from 36 customer care employees at year end 1996 to 81 customer care employees at June 30, 1997. CONTINUOUSLY IMPROVE PROVISIONING PROCESSES TO ACCELERATE REVENUE GROWTH. The Company believes that the immediate challenge for CLECs will be developing effective provisioning systems, which include the complex process of transitioning ILEC customers to the Company's network. Accordingly, the Company has begun to identify and will focus, as a key competitive strategy, on implementing best provisioning practices in each of its markets that will provide for rapid and seamless transitions of customers from the ILEC to the Company. To support the provisioning of its services, the Company has begun the long-term development of a comprehensive information technology platform geared toward delivering information and automated ordering and provisioning capability directly to the end-user as well as to the Company's internal staff. The Company believes that these practices and its comprehensive information technology platform, as developed, will provide the Company with a long-term competitive advantage and allow it to implement more rapidly switched local services in its markets and to shorten the time between the receipt of a customer order and the generation of revenues. DEVELOP HIGH CAPACITY FIBER OPTIC NETWORKS WITH BROAD MARKET COVERAGE. NEXTLINK has and intends to continue to approach network design with a long-term view focusing on three key elements. First, the Company designs and builds its networks to provide extensive coverage of those areas where the density of business lines is highest and to enable the Company to provide direct connections to a high percentage of commercial buildings and ILEC central offices situated near the network. Over time, this broad coverage is expected to result in a higher proportion of traffic that is both originated and terminated on the Company's networks, which should provide higher long-term operating margins. Second, the Company constructs high capacity networks that utilize large fiber bundles capable of carrying high volumes of voice, data, video and Internet traffic as well as other high bandwidth services. This strategy should reduce potential "overbuild" costs and provide added network capacity as the Company adds high bandwidth services in the future. In Atlanta, Chicago, New York and Newark, New Jersey, the Company will utilize leased dark fiber and fiber capacity to launch facilities-based services and begin building a customer base in advance of completing construction of its own fiber optic network in these markets. Third, the Company employs a uniform technology platform based on Nortel DMS 500 switches (ten of which are currently installed, including one switch that has been installed at the Company's testing and network operations control center, and an additional four of which are currently planned to be installed by the end of the first quarter of 1998), associated distribution technology and other common transmission technologies enabling the Company to (i) deploy features and functions quickly in all of its networks, (ii) expand switching capacity in a cost effective manner and (iii) lower maintenance costs through reduced training and spare parts requirements. The Company also utilizes unbundled loops from the ILEC to connect the Company's switch and network to end user buildings and is evaluating other alternatives for building connectivity, including wireless connections, for the "last mile" of transport. CONTINUE MARKET EXPANSION. The Company's goal is to add or expand markets and market clusters to increase its addressable business lines to approximately 11 million by the end of 1998. The Company anticipates continuing to expand into new geographic areas, including additional large markets, as opportunities arise either through building new networks, acquiring existing networks or acquiring or leasing dark fiber and fiber capacity. NEXTLINK also believes that its strategy of operating its networks in clusters (i) offers substantial advantages including economies of scale in management, marketing, sales and network operations, (ii) enables the Company to capture a greater percentage of regional traffic and to develop regional pricing plans, because the Company believes that a significant level of traffic terminates within 300 miles of its origination and (iii) provides opportunities in smaller markets that are too small to develop on a stand alone basis. OFFER ENHANCED COMMUNICATIONS SERVICES. NEXTLINK offers customers value-added services that are not dependent on the Company's local facilities. The Company believes that with these services it can establish a customer base in a market in advance of constructing network facilities as well as offer additional services in markets where the Company has constructed facilities. The Company plans to market its enhanced communications service offerings in all of its markets, as well as in areas of planned network expansion. This should increase the Company's visibility, develop customer relationships and assist the Company in attracting local exchange customers when it operates networks in these markets. THE DEBT OFFERING <TABLE> <S> <C> Gross Proceeds............... $400,000,000 Securities Offered........... $400,000,000 principal amount of % Senior Notes due 2007 (the "Notes"). Issuer....................... NEXTLINK Communications, Inc. Issue Price.................. % Maturity..................... , 2007 Interest..................... The Notes will accrue interest at the rate of % per annum from , 1997, payable semi-annually in arrears on and , commencing , 1998. Ranking...................... The Notes will be senior obligations of the Company, will rank PARI PASSU in right of payment with all existing and future senior obligations of the Company and will rank senior in right of payment to any future subordinated obligations of the Company. Holders of secured obligations of the Company will, however, have claims that are prior to the claims of the holders of the Notes with respect to the assets securing such obligations. The Notes will be effectively subordinated to all indebtedness and other liabilities and commitments (including trade payables) of the Company's subsidiaries. As of June 30, 1997, on a pro forma basis (giving effect to the Debt Offering and the application of the net proceeds thereof), (i) the total amount of outstanding consolidated liabilities of the Company, including trade payables, would have been approximately $791.8 million, $6.7 million of which would have been secured obligations (excluding the 12 1/2% Notes, which are secured by a pledge of $82.3 million of U.S. Treasury securities as of June 30, 1997) and (ii) the total amount of outstanding liabilities of the Company's subsidiaries, including trade payables, would have been $23.9 million, $6.7 million of which would have been secured obligations. See "Covenants" below. Optional Redemption.......... The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002 at the redemption prices set forth herein plus accrued and unpaid interest, if any, to the date of redemption. In the event that, on or before , 2000, the Company receives net proceeds from a sale of its Common Equity (as defined in the Indenture), up to a maximum of 33 1/3% of the aggregate principal amount of the Notes originally issued will, at the option of the Company, be redeemable from the net cash proceeds of such sale at a redemption price equal to % of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, PROVIDED, HOWEVER, that Notes in an aggregate principal amount equal to at least $266.7 million remain outstanding after such redemption. </TABLE> <TABLE> <S> <C> Change of Control............ In the event of a Change of Control (as defined), holders of the Notes will have the right to require the Company to purchase their Notes, in whole or in part, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of purchase. Covenants.................... The indenture pursuant to which the Notes will be issued (the "Indenture") will contain certain covenants that, among other things, will limit the ability of the Company and its subsidiaries to incur additional indebtedness, issue stock in subsidiaries, pay dividends or make other distributions, repurchase equity interests or subordinated indebtedness, engage in sale and leaseback transactions, create certain liens, enter into certain transactions with affiliates, sell assets of the Company and its subsidiaries, and enter into certain mergers and consolidations. The Indenture contains provisions that allow for the modification and amendment of the covenants contained in the Indenture by a vote of holders owning a majority of the Outstanding Notes (as defined in the Indenture), including the covenant relating to a Change of Control, except during the pendency of an Offer to Purchase (as defined). In addition, the holders of a majority in aggregate principal amount of the Outstanding Notes, on behalf of all holders of Notes, may waive compliance by the Company with certain restrictive provisions of the Indenture. See "Description of the Notes--Modification and Waiver". Use of Proceeds.............. The Company intends to use substantially all of the net proceeds from the Debt Offering for expenditures relating to the expansion of existing networks and services, the development and acquisition of new networks and services and the funding of operating losses and working capital. See "Use of Proceeds." Concurrent Stock Offering.... Concurrently with the Debt Offering, NEXTLINK and a selling shareholder are offering 12,000,000 and 3,200,000 shares, respectively, of Class A Common Stock (17,480,000 shares if the underwriters' over-allotment option is exercised in full). The Debt Offering is conditioned upon the consummation of the Stock Offering. See "Use of Proceeds." </TABLE> For additional information regarding the Notes, see "Description of the Notes" and "Certain United States Federal Income Tax Consequences."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015155_charles_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015155_charles_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..82fe6d3e0b6dec1191f045477193c8a4e9170484
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015155_charles_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, information in this Prospectus (i) reflects the automatic conversion of all outstanding shares of 1996 Series A Preferred Stock, no par value ("Series A Preferred Stock"), and 1997 Series B Preferred Stock, no par value ("Series B Preferred Stock"), into an aggregate of 1,677,375 shares of Common Stock upon consummation of this offering; (ii) reflects a 2.13-for-1 stock split effected in September 1997; and (iii) assumes no exercise of the Over-allotment Option. See "Underwriting." THE COMPANY The Company is finalizing the development of, and intends to begin marketing during the first half of 1998, colorless lab-created moissanite gemstones which it will sell as a substitute for diamond in the jewelry market. The physical properties of lab-created moissanite gemstones more closely match those of diamond than any other known gemstone material. The Company believes that its products are superior to other commercially available diamond substitutes and intends to position its gemstone products as the ideal substitute for diamond. The Company believes that its products will be attractive to working women who desire an affordable alternative to diamond and to middle and upper-income women who desire affordable "everyday" or "security" jewelry. Moissanite, also known by its chemical name, silicon carbide ("SiC"), is a rare, naturally occurring mineral found primarily in meteorites. Moissanite and diamond are both carbon-based minerals; moissanite is composed of silicon and carbon while diamond is composed of carbon. The Company's lab-created moissanite gemstones are made from crystals of SiC grown by Cree Research, Inc. ("Cree") using patented and proprietary technology. Cree has an exclusive license to the patent related to a process for growing large single crystals of SiC. To the Company's knowledge, there are no producers of SiC other than Cree that could supply lab-grown SiC crystals in colors, sizes or volumes suitable for use as a diamond substitute. The Company has undertaken a significant development program with Cree to develop a fully repeatable process to grow SiC crystals in the desired diamond color grades and sizes. The Company has certain exclusive licenses and supply rights with Cree for SiC materials to be used for gemstone applications. In addition, the Company has developed certain proprietary methods and processes for the production of gemstones from lab-grown SiC crystals and has patent applications pending for certain of these methods and processes. As a result, the Company believes that its lab-created moissanite gemstones are proprietary products and that there are technological barriers to prevent other competitors from developing or marketing lab-created moissanite gemstones at affordable prices. The Company currently intends to sell only loose lab-created gemstones, rather than finished jewelry products, in round brilliant cuts of approximately 1/2 to 1 carat in colors and clarities comparable to those commonly used in diamond jewelry. The Company plans to begin delivery of its products in the first half of 1998 in selected cities in the United States and the Pacific Rim. The Company believes that these market areas represent a significant portion of the worldwide jewelry market and that consumers in these markets are relatively accepting of diamond substitutes. The Company intends to grant to select retail jewelry chains and high volume independent retail jewelry stores in certain U.S. cities the right to be the exclusive retail store selling lab-created moissanite gemstones within a limited geographic territory. The Company is also exploring distribution arrangements for the Pacific Rim. The Company believes that neither visual inspection by jewelers who are not trained gemologists nor commonly used test instruments reliably distinguish its products from diamond. The Company recently began production of a moissanite/diamond test instrument that distinguishes lab-created moissanite gemstones from diamonds in the colors and clarities most commonly sold by retail jewelers. The Company plans to introduce this new test instrument for sale to jewelers, gemologists and pawnbrokers during the first half of 1998. The Company was incorporated as a North Carolina corporation in June 1995. The Company's principal executive offices are located at 3800 Gateway Boulevard, Suite 310, Morrisville, North Carolina 27560, and its telephone number is (919) 468-0399. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED HEREBY, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." C3(TM), THE STYLIZED C3, INC. LOGO, THE STYLIZED LOGO FOR "MOISSANITE" AND THE STYLIZED LOGO FOR "MOISSANITE GEMSTONES" ARE TRADEMARKS OF THE COMPANY. THIS PROSPECTUS MAY CONTAIN CERTAIN OTHER TRADEMARKS AND SERVICE MARKS OF OTHER PARTIES. THE OFFERING Common Stock offered.................. 3,000,000 shares Common Stock outstanding after the offering.............................. 6,938,476 shares(1) Use of proceeds....................... For product development, acquisition of manufacturing equipment, sales and marketing, working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol......... CTHR - --------------- (1) Excludes 1,009,066 shares of Common Stock issuable upon the exercise of stock options outstanding at November 3, 1997. See "Dilution," "Management -- Stock Option Plans" and "Description of Capital Stock." SUMMARY FINANCIAL DATA C3, INC. (A COMPANY IN THE DEVELOPMENT STAGE) <TABLE> <CAPTION> CUMULATIVE CUMULATIVE PERIOD FROM FOR THE FOR THE INCEPTION PERIOD PERIOD (JUNE 28, JUNE 28, JUNE 28, 1995) 1995 NINE MONTHS ENDED 1995 TO YEAR ENDED TO SEPTEMBER 30, TO DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------------- SEPTEMBER 30, 1995 1996 1996 1996 1997 1997 ------------ ------------ ------------ -------- ---------- ------------- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues....................... -- -- -- -- -- -- Operating expenses: Marketing and sales.......... $10,313 $ 47,019 $ 57,332 $ 8,567 $ 233,397 $ 290,729 General and administrative(1).......... 10,024 131,097 141,121 62,456 660,993 802,114 Research and development..... 6,052 236,047 242,099 134,598 1,029,918 1,272,017 Depreciation and amortization............... 798 3,618 4,416 2,180 14,668 19,084 ------- -------- -------- -------- ---------- ---------- Operating loss................. 27,187 417,781 444,968 207,801 1,938,976 2,383,944 Interest income, net........... -- (35,173) (35,173) (17,530) (184,407) (219,580) ------- -------- -------- -------- ---------- ---------- Net loss....................... $27,187 $382,608 $409,795 $190,271 $1,754,569 $2,164,364 ======= ======== ======== ======== ========== ========== Pro forma net loss per share... $ 0.14 $ 0.16 $ 0.41 $ 0.71 ======== ======== ========== ========== Shares used in computing pro forma net loss per share(2)..................... 2,652,250 2,487,128 4,279,498 3,063,247 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------- ACTUAL AS ADJUSTED(3) ---------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and equivalents........................................ $4,737,864 $34,037,864 Working capital............................................. 4,405,234 33,705,234 Total assets................................................ 5,085,048 37,185,048 Shareholders' equity........................................ 4,615,086 41,615,086 </TABLE> - --------------- (1) For the nine months ended September 30, 1997, includes $66,000 of compensation expense related to the issuance of Common Stock to Cree pursuant to a stock option agreement and $109,000 of compensation expense related to the issuance of other stock options. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 5 and 10 of Notes to Financial Statements. (2) The calculation of shares for all periods reflects a 2.13-for-1 stock split effected in September 1997 and the automatic conversion of the Series A Preferred Stock and Series B Preferred Stock to be effected upon completion of this Offering. See Notes 2 and 9 of Notes to Financial Statements. (3) Adjusted to give effect to the sale by the Company of 3,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13.50 per share, after deducting the underwriting discount and estimated offering expenses and the application of net proceeds therefrom. See "Use of Proceeds." The Company is reserving $15.9 million from the net proceeds of the offering (currently shown as cash) to fund the acquisition of additional crystal growth systems from Cree in the event that Cree elects to require the Company to purchase systems anticipated to be required to support the Company's business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Business -- Manufacturing."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015464_flexiinter_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015464_flexiinter_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea870b7d7a9011e7532ab54376fd48f629adfde8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015464_flexiinter_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," and the Company's Financial Statements and the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus (i) reflects the conversion of all outstanding shares of the Company's Series A, Series B and Series C Convertible Preferred Stock (collectively, the "Convertible Preferred Stock") into an aggregate of 7,861,350 shares of Common Stock at the closing of this offering, (ii) gives effect to a three-for-four reverse split of the Common Stock effected on November 6, 1997 and (iii) assumes no exercise of the Underwriters' over-allotment option. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY FlexiInternational Software, Inc. ("Flexi" or the "Company") designs, develops, markets and supports the Flexi family of financial and accounting software applications and related tools. The Flexi solution -- FlexiFinancials, FlexiInfoSuite and FlexiTools -- is designed to address the needs of users with sophisticated financial accounting requirements. The Company believes that the Flexi solution's distributed, object-oriented, component-based architecture provides significant advantages over traditional financial accounting software, including greater transaction throughput and scalability, ease of implementation, modification and use, and reduced cost of ownership. Flexi products are designed to support new technologies as they develop, including the Internet and corporate intranets, can be modified quickly and efficiently by users to create tailored business solutions, and can readily be integrated with new applications to support evolving business processes. Rapidly changing market conditions and intensifying competitive pressures have in recent years increased the need for highly functional, flexible financial accounting systems. The systems must have sufficient performance and adaptability to continue to provide timely and accurate information as organizations change business processes to meet evolving market and operational requirements. This is particularly true for organizations experiencing rapid growth in dynamic markets, and for multinational organizations, which face the complex task of managing financial information in multiple tax jurisdictions, currencies and languages. Furthermore, large organizations require financial accounting systems that offer broad functionality across dispersed locations and workgroups. These functional and technological requirements are especially critical in businesses centered around the timely collection, analysis and dissemination of vast amounts of numerical information, such as banking, insurance and other financial services organizations, as well as healthcare and technology organizations. A new generation of object-oriented, component-based technology has evolved in recent years to address many of the limitations associated with mainframe or legacy client/server solutions. Object-oriented development methodologies facilitate the reuse of application logic to adapt to changing technological and accounting requirements. Component-based architecture allows the timely creation of tailored business solutions by simplifying and shortening the integration of software applications from multiple sources and facilitating use of applications over the Internet. Additionally, the distributed model of computing, in which processing logic resides at the appropriate level within a client/server architecture, has created the potential for a higher degree of functionality, flexibility and scalability than available with legacy client/server or mainframe systems. The advantages inherent in these new technologies have led many vendors of legacy client/server solutions, including the Company's principal competitors, to announce their intention to transition to these new technologies -- often at the cost of replacing or rewriting their current products. The Company believes that the Flexi solution is particularly suited for adoption by users with sophisticated financial accounting requirements and intends to continue to target its sales and marketing efforts at such users. The Company sells its products through direct and indirect channels. The Company believes there is a significant market for the advanced functionality of its products and intends to supplement its direct sales force by expanding its distribution network in selected foreign markets. The Company's indirect sales channel consists of resellers that address select vertical markets ("Flexi Industry Partners" or "FIPs") and international distributors. The Company currently has relationships with FIPs in the healthcare, real estate, retail and manufacturing industries. In addition, the Company has an international distributor in Hong Kong and plans to establish additional distributorships to complement its direct sales force and FIPs and to provide penetration into additional geographic and vertical markets. The Company's customers include Banco Popular del Ecuador, Blue Cross/Blue Shield of South Carolina, Canada Trust, Citibank, N.A., Compaq Capital, Excite, Mutual of America, Presbyterian Healthcare Systems, Sikorsky Aircraft and Skandinaviska Enskilda Banken. The Company's goal is to establish itself as a global leader in the financial accounting software market. Key elements of the Company's strategy include: (i) extending its technological leadership by continuing to invest in research and development to strengthen the Flexi financial accounting solution; (ii) continuing to target the solution to users with sophisticated financial accounting requirements; (iii) delivering a reduced overall cost of ownership of financial accounting systems to current and prospective customers; (iv) leveraging strategic relationships, including its relationship with Microsoft Corporation; and (v) expanding sales and distribution capabilities both in the U.S. and internationally. The Company released its first products in 1993, and most of the Company's revenues to date have been attributable to the licensing of its Flexi family of financial accounting software products and the provision of related consulting, training and software installation services. See "Risk Factors." The Company was organized as a Connecticut corporation in 1990 and reincorporated in Delaware in 1993. The Company's principal office is located at Two Enterprise Drive, Shelton, Connecticut 06484, and its telephone number is (203) 925-3040. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company....................... 2,250,000 shares Common Stock offered by the Selling Stockholders.......... 750,000 shares Common Stock to be outstanding after the offering......... 16,274,764 shares(1) Use of proceeds........................................... Working capital and other general corporate purposes Nasdaq National Market symbol............................. FLXI </TABLE> - --------------- (1) Based on the number of shares of Common Stock outstanding on September 30, 1997. Excludes an aggregate of 1,034,594 shares subject to options outstanding as of September 30, 1997 at a weighted average exercise price of $2.28 per share. Also excludes an aggregate of 2,325,000 shares of Common Stock reserved under the Company's 1997 Stock Incentive Plan, 1997 Director Stock Option Plan and 1997 Employee Stock Purchase Plan, none of which were subject to outstanding options as of September 30, 1997. Also excludes an aggregate of 168,773 shares of Common Stock issuable upon the exercise of outstanding warrants as of September 30, 1997 at a weighted average exercise price of $4.58 per share. See "Management -- Executive Compensation" and Note 7 of Notes to the Company's Financial Statements. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------------- ------------------ 1992 1993 1994 1995 1996 1996 1997 ----- ------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues............ $ 25 $ 155 $ 853 $ 4,683 $ 8,347 $ 5,136 $12,460 Operating loss............ (346) (1,185) (4,100) (6,439) (7,309) (5,845) (4,635) Net loss.................. (342) (1,182) (4,087) (6,487) (7,447) (5,956) (4,640) Pro forma net loss per share(1)............... $ (0.69) $ (0.33) Weighted average shares used to compute pro forma net loss per share(1)............... 10,788 13,975 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------------------------- PRO FORMA ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3) -------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......................... $ 3,257 $ 3,257 $25,525 Working capital.................................... 1,670 1,670 23,938 Total assets....................................... 10,232 10,232 32,500 Redeemable convertible preferred stock............. 15,509 -- -- Stockholders' equity (deficit)..................... (12,728) 2,781 25,049 </TABLE> - --------------- (1) See Note 2 of Notes to the Company's Financial Statements. (2) Reflects conversion of all outstanding shares of Convertible Preferred Stock into an aggregate of 7,861,350 shares of Common Stock upon the closing of this offering. See Note 2 of Notes to the Company's Financial Statements. (3) Adjusted to give effect to the sale by the Company of 2,250,000 shares of Common Stock offered hereby at an assumed public offering price of $11.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by the Company. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015580_earthlink_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015580_earthlink_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c485b937c7616e5f6290849f8bcb0291a2d6c6a2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015580_earthlink_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL EVENTS AND RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO THE CONVERSION, UPON CONSUMMATION OF THIS OFFERING, OF ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK INTO 1,363,624 SHARES OF COMMON STOCK AND OF $725,000 OF OUTSTANDING INDEBTEDNESS INTO 55,767 SHARES OF COMMON STOCK, AND ALSO ASSUMES THE UNDERWRITER'S OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING." THE PROSPECTUS REFLECTS A ONE-FOR-TWO REVERSE STOCK SPLIT EFFECTIVE ON DECEMBER 4, 1996. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY EarthLink Network, Inc. ("EarthLink" or the "Company") is an Internet service provider ("ISP") that was formed to help users derive meaningful benefits from the extensive resources of the Internet. The Company focuses on providing reliable access, useful information, assistance and services to its customers to encourage their introduction to the Internet and to help them have a satisfying user experience. The Company believes that many users have not been able to enjoy the benefits of the Internet. Particularly for non-technical users, access to the Internet is often difficult. In addition, for some users the volume and lack of organization of the information on the Internet makes accessing useful information and entertainment an intimidating task. EarthLink's principal strategy is to rapidly expand its customer base and retain those customers who use its services principally by addressing these problems. The Company provides its services through its EarthLink Network TotalAccess software ("TotalAccess"), which is designed to simplify access to the Internet through an online registration feature and a "point and click" graphical user interface. This software permits users to browse the Internet through use of Netscape Communications Corporation's ("Netscape") Navigator ("Netscape Navigator") or Microsoft Corporation's ("Microsoft") Internet Explorer ("Microsoft Explorer") (one or the other of which is included in each copy of TotalAccess), or any other third-party browser that a customer may wish to use. The Company also provides useful information to users through its extensive World Wide Web site. On this site, users can find technical assistance information, an on-line newsletter, links to numerous popular categories of information and entertainment and many other items and services designed to enhance users' satisfaction with their Internet experience. In addition, the Company provides a monthly printed newsletter, as well as 24 hour customer and technical support. The Company markets its services through print advertisements, an affinity marketing program, a customer referral program and other marketing activities. Its affinity marketing program includes relationships with, among others, prominent print publication, software and hardware companies. For example, Macmillan Publishing USA bundles TotalAccess with several Internet-related book titles. Customer referrals have also been an important source of new customers, and the Company provides economic incentives to its customers to encourage these referrals. The Company believes that these programs are a cost-effective means of acquiring new customers. The Company believes that its long-term success largely depends on maintaining customer satisfaction with its services. Therefore, the Company will continue to devote substantial resources to enhancing its service offerings, expanding its technical support staff and expanding its World Wide Web site. EarthLink also seeks to enhance its revenues by offering business services, including business Web sites, high-speed ISDN communications capability and frame relay connectivity. In addition, the Company offers consumer services such as multiplayer Internet games and the EarthLink online store. The Company has achieved a nationwide presence, without incurring significant capital costs, by leasing access to dial-up points-of-presence ("POPs") from UUNET Technologies, Inc. ("UUNET") on a non-exclusive basis. The Company also operates its own POPs in California. In addition, EarthLink has agreed to lease POP access from PSINet, Inc. ("PSINet") on a non-exclusive basis. In January 1997, certain of the Company's customers began to access the Internet through some of PSINet's POPs. The Company plans to expand its own POPs in Northern California within the next year and will consider establishing its own POPs in other areas if there is sufficient concentration of customers to support the required capital investment. The Company was incorporated as a California corporation in May 1994 and reincorporated as a Delaware corporation in June 1996. The Company's principal executive offices are located at 3100 New York Drive, Pasadena, California 91107, and its telephone number is (818) 296-2400. THE OFFERING <TABLE> <S> <C> Common Stock Offered.......................... 2,000,000 shares Common Stock Outstanding after this Offering..................................... 9,442,115 shares (1) Use of Proceeds............................... To finance sales and marketing activities, leasehold improvements and investments in network equipment, information systems and office equipment, new service introductions and for working capital and other general corporate purposes, including the repayment of indebtedness and possibly acquisitions. Nasdaq National Market Symbol................. ELNK Risk Factors.................................. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." </TABLE> - --------------- (1) Based on shares of Common Stock outstanding as of October 31, 1996, and 1,363,624 additional shares of Common Stock that will be outstanding upon consummation of this Offering pursuant to the automatic conversion of all of the Company's outstanding shares of Series A Convertible Preferred Stock. This amount excludes (i) 1,028,250 shares of Common Stock subject to options outstanding under the Company's 1995 Stock Option Plan having a weighted average exercise price of $7.48 per share, (ii) 1,331,438 shares of Common Stock subject to outstanding warrants and non-plan stock options having a weighted average exercise price of $5.82 per share, (iii) 221,750 and 62,500 shares of Common Stock reserved for future grant of options under the Company's 1995 Stock Option Plan and Directors Stock Option Plan, respectively, (iv) up to approximately 382,000 shares of Common Stock into which $5,000,000 of outstanding indebtedness will be convertible upon consummation of this Offering, and (v) 360,000 shares of Common Stock underlying warrants and options that the Company has committed to issue if certain future events occur. See "Capitalization," "Management -- 1995 Stock Option Plan and Other Option and Warrant Issuances," "Management -- Directors Stock Option Plan and Other Director Option Issuances," "Description of Capital Stock" and Notes 7 and 8 of Notes to Financial Statements. SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> INCEPTION NINE MONTHS ENDED (MAY 26, 1994) YEAR ENDED ---------------------------- THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DEC. 31, 1994 1995 1995 1996 -------------- ------------ ------------- ------------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues......................................... $ 111 $ 3,028 $ 1,447 $ 20,162 Loss from operations................................... (148) (6,018) (2,914) (21,240) Net loss............................................... (148) (6,120) (2,972) (21,809) Net loss per share (1)................................. $ (0.04) $ (1.25) $ (0.65) $ (3.32) Weighted average shares outstanding (1)....................................... 3,653 4,903 4,596 6,568 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ------------------------------------------- ACTUAL PRO FORMA (2) AS ADJUSTED (3) ---------- -------------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)............................................. $ (6,439) $ (6,439) $ 14,916 Total assets.......................................................... 26,033 31,033 47,388 Capital lease obligations, net of current portion..................... 5,388 5,388 5,388 Total liabilities..................................................... 23,941 28,941 21,716 Accumulated deficit................................................... (26,816) (26,816) (26,816) Stockholders' equity (deficit)........................................ (11,921) (11,921) 26,397 </TABLE> - ------------ (1) See Note 1 of Notes to Financial Statements for an explanation of the determination of the number of weighted average shares outstanding used in the net loss per share computation. (2) Adjusted to give effect to the issuance of a $5.0 million convertible promissory note, as if such event occurred on September 30, 1996. (3) Adjusted to reflect the conversion upon consummation of this Offering of the Series A Convertible Preferred Stock into 1,363,624 shares of Common Stock and $725,000 of outstanding indebtedness into 55,767 shares of Common Stock, the sale of the 2,000,000 shares of Common Stock offered hereby and application by the Company of a portion of the estimated net proceeds therefrom (after deduction of estimated offering expenses and underwriting discounts and commissions) to repay certain indebtedness. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015625_rentx_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015625_rentx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2df3b89c1ae05879ba040a2bc7ab5bfd63df57c4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015625_rentx_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, and the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the terms "RentX" or the "Company" include RentX Industries, Inc. and the businesses of its subsidiaries. Unless otherwise indicated, all information in this Prospectus (i) assumes an initial public offering price of $9.00 per share (the midpoint of the estimated range of the initial public offering price), (ii) assumes no exercise of the Underwriters' over-allotment option and (iii) assumes the conversion of all of the outstanding shares of the Company's Series A, Series B and Series C Preferred Stock and Class A Common Stock into an aggregate of 5,722,018 shares of Common Stock, and the conversion of all outstanding options to purchase shares of the Company's Class B Common Stock into options to purchase a total of 248,308 shares of Common Stock, upon consummation of this offering. References in this Prospectus to fiscal 1996 mean the Company's fiscal year ended January 31, 1997. THE COMPANY RentX is a leading equipment rental company serving the needs of the homeowner, light commercial and special events segments of the rental market. RentX was formed in March 1996 to pursue a national consolidation and growth strategy. Management believes RentX is unique in focusing on these fragmented segments of the equipment rental market on a national scale. RentX is implementing a branded national retail concept to offer a broad range of light construction, industrial, general tool and special events equipment in a service-oriented, customer-friendly and well-merchandised store. Company-wide emphasis is placed on helping customers find "project solutions," backed by a guarantee of complete customer satisfaction. On a pro forma basis, the Company had revenues of $47.1 million in fiscal 1996 and revenues of $22.9 million for the six months ended July 31, 1997. The Company's net income (loss) for the year ended January 31, 1997 and the six months ended July 31, 1997 was $(76,000) and $(404,000), respectively, on an historical basis and $2.5 million and $19,000, respectively, on a pro forma basis. Since May 1996, the Company has pursued an aggressive growth strategy, acquiring 14 businesses with 57 stores in 10 states (the "Completed Acquisitions"). The acquired businesses had been in operation for an average of 25 years. The Company currently has letters of intent to acquire an additional business with two stores in Tennessee (the "Pending Acquisition"), and one other immaterial business which would add one store in Colorado. The Company continues to evaluate a large number of additional acquisitions. In addition to its acquisition activity, the Company has built a substantial corporate infrastructure by assembling an experienced management team, customizing and commencing installation of a sophisticated management information system, developing initiatives designed to enhance the performance of acquired stores and developing refined concepts and prototypes for start-up stores, including both general equipment rental stores to expand market coverage and special events hubs. The Company's management includes executives with substantial experience operating and growing multi-location, marketing-driven consumer and commercial businesses, as well as executives with extensive experience in the rental industry. The Company's goal is to increase repeat business, attract new customers, and ultimately to expand its target markets, while maximizing economies of scale that arise from consolidation. RentX's strategy to achieve its goals includes: providing total project solutions with guaranteed customer satisfaction; developing a hub and spoke store structure in appropriate markets; implementing sophisticated retailing techniques and marketing programs; generating incremental revenue through tie-in merchandise sales; and implementing an advanced management information system capable of integrating and analyzing store data. RentX also endeavors to leverage the expertise of local managers by preserving their autonomy and allows area managers sufficient flexibility to tailor operations to their particular markets. Management believes that RentX is well positioned to capitalize on consolidation and growth opportunities in the homeowner, light commercial, and special events segments of the equipment rental industry. The Company has adopted a strategy for expansion through a combination of acquisitions, new start-up stores in areas where it has an existing platform and increased sales in existing stores. Acquisitions will include multi-store businesses to serve as platforms in new markets and smaller "tuck-in" acquisitions in existing markets. Management believes that the RentX concept can be adapted to a wide variety of markets, including large, densely developed areas, smaller suburban markets and rural areas, by tailoring the mix of equipment and merchandise, store size and concentration of stores to fit the local customer base. THE OFFERING Common Stock Offered.......................... 3,750,000 Common Stock Outstanding after the Offering... 9,472,018(1) Use of Proceeds............................... To reduce borrowings under the Company's bank line of credit, thereby increasing available borrowing capacity for acquisitions and working capital, and to pay accrued dividends on preferred stock. See "Use of Proceeds."(2) Proposed Nasdaq National Market Symbol........ RNTX - --------------- (1) Excludes (i) 248,308 shares subject to outstanding options granted pursuant to the Company's stock option plans described in "Management -- Stock Option Plans" (the "Stock Option Plans") or pursuant to individual agreements with executive officers at a weighted average exercise price of $4.88 per share, (ii) 193,400 shares subject to options to be granted pursuant to the Stock Option Plans on the completion of this offering at an exercise price equal to the offering price and (iii) 83,600 shares reserved for issuance pursuant to the Stock Option Plans. See "Management -- Option Grants and -- Stock Option Plans." (2) All of the Company's outstanding preferred stock will be converted into Common Stock upon completion of this offering and accrued dividends are payable upon such conversion. ------------------------ SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements under the captions "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this Prospectus constitute "forward-looking statements" within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, those described under "Risk Factors" and the following: general economic and business conditions; competition; success of operating initiatives and implementation of the RentX model; development and operating costs; advertising and promotional efforts; brand awareness; the occurrence or timing of acquisitions; availability, locations and terms of sites for store development; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; business abilities and judgment of personnel; availability of qualified personnel; labor and employee benefit costs; changes in, or the failure to comply with, government regulations; construction costs; and other factors referenced in this Prospectus. See "Risk Factors." SUMMARY FINANCIAL INFORMATION AND OPERATING DATA (In thousands, except selected operating data and per share amounts) <TABLE> <CAPTION> MAY 15, 1996 (COMMENCEMENT PRO FORMA PRO FORMA OF OPERATIONS) AS ADJUSTED AS ADJUSTED THROUGH YEAR ENDED SIX MONTHS SIX MONTHS JANUARY 31, JANUARY 31, ENDED ENDED 1997(1) 1997(2) JULY 31, 1997 JULY 31, 1997(2) -------------- ----------- ------------- ---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues Rental revenue.............................. $ 9,221 $40,148 $13,598 $19,318 Rental equipment sales...................... 280 986 537 696 Merchandise and other....................... 1,337 5,921 1,933 2,903 ------- ------- ------- -------- Total revenues....................... 10,838 47,055 16,068 22,917 Cost of revenues Rental equipment expense.................... 1,285 4,895 1,634 2,212 Rental equipment depreciation............... 436 2,775 1,176 1,677 Cost of rental equipment sales.............. 272 907 512 655 Cost of merchandise sales................... 625 3,904 1,204 1,956 Direct operating expense.................... 4,864 19,469 6,763 10,235 ------- ------- ------- -------- Total cost of revenues............... 7,482 31,950 11,289 16,735 Store contribution............................ 3,356 15,105 4,779 6,182 Selling, general and administrative expense... 2,351 9,209 3,504 4,964 Depreciation and amortization, excluding rental equipment depreciation............... 293 944 422 538 ------- ------- ------- -------- Operating income.............................. 712 4,952 853 680 Other expense (income), net................... 4 30 (38) (38) Interest expense.............................. 784 738 1,295 687 ------- ------- ------- -------- Income (loss) before income taxes............. (76) 4,184 (404) 31 Income taxes.................................. -- 1,677 -- 12 ------- ------- ------- -------- Net income (loss)............................. (76) 2,507 (404) 19 Preferred stock dividends..................... (302) -- (384) -- ------- ------- ------- -------- Net income (loss) attributable to common stockholders................................ $ (378) $ 2,507 $ (788) $ 19 ======= ======= ======= ======== Net income (loss) per common share............ $ (.01) $ .26 $ (.07) $ -- ======= ======= ======= ======== Common shares used in computing net income (loss) per common share.............. 5,812 9,562 5,812 9,562 ======= ======= ======= ======== Store contribution margin..................... 31.0% 32.1% 29.7% 27.0% Operating margin.............................. 6.6% 10.5% 5.3% 3.0% SELECTED OPERATING DATA: Opening store count........................... -- -- 24 24 Stores purchased in acquisitions............ 24 59 33 35 New stores opened........................... -- -- 1 1 Stores closed............................... -- -- (1) (1) ------- ------- ------- -------- Ending store count............................ 24 59 57 59 ======= ======= ======= ======== </TABLE> <TABLE> <CAPTION> JULY 31, 1997 ------------------------- JANUARY 31, PRO FORMA 1997 ACTUAL AS ADJUSTED(2) ----------- ------- -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Total assets................................................ $29,083 $67,990 $71,642 Rental equipment, net....................................... 9,087 27,261 28,641 Total debt.................................................. 17,048 41,121 16,621 Redeemable preferred stock.................................. 10,050 20,295 -- Stockholders' (deficit) equity.............................. (270) (1,057) 48,826 Purchase price of acquisitions.............................. 26,526 27,747 31,747 Capital expenditures........................................ 1,811 9,586 NA </TABLE> - --------------- (1) Includes information concerning the Company after the date of its first acquisition. For information concerning the Company's predecessor, see "Selected Financial Information and Operating Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015629_pegasus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015629_pegasus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8dbed621da165a96108ff025264f53ef47d4f215
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015629_pegasus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, all references herein to the "Company" refer to Pegasus Communications Corporation ("Pegasus") together with its direct and indirect subsidiaries. The historical financial and other data for the Company are presented herein on a consolidated basis. Unless otherwise indicated, the discussion below refers to and the information in this Prospectus gives effect to certain Completed Transactions. See "Glossary of Defined Terms," which begins on page 10 of this Prospectus Summary, for definitions of certain terms used in this Prospectus, including "Completed Transactions." THE COMPANY The Company is a diversified media and communications company operating in two business segments: multichannel television, consisting of direct broadcast satellite television ("DBS") and cable television ("Cable"), and broadcast television ("TV"). The Company has grown through the acquisition and operation of media and communications properties characterized by clearly identifiable "franchises" and significant operating leverage, which enables increases in revenues to be converted into disproportionately greater increases in Location Cash Flow. The Company's business segments are described below. Multichannel Television. The Company provides multichannel television to 92,000 subscribers in twelve states and Puerto Rico in franchise areas that include 1.5 million households and 149,000 businesses: DBS. The Company is the largest independent provider of DIRECTV(R) ("DIRECTV") services with an exclusive DIRECTV service territory that includes approximately 1,396,000 television households and 120,000 business locations in rural areas of Arkansas, Connecticut, Indiana, Massachusetts, Michigan, Mississippi, New Hampshire, New York, Ohio, Texas, Virginia and West Virginia. The Company has approximately 51,300 DIRECTV subscribers in territories that include approximately 1,396,000 television households and approximately 120,000 business locations or a household penetration rate of 3.7%. Although the Company's service territories are exclusive for DIRECTV, other DBS operators may compete with the Company in its service territories. See "Business -- Competition." Cable. The Company owns and operates cable systems in Puerto Rico and New England serving approximately 41,200 subscribers. The Company recently acquired a contiguous cable system in Puerto Rico (the "Cable Acquisition"), which will be interconnected with the Company's existing system. It is anticipated that as a result of the Cable Acquisition, the Company's Puerto Rico Cable system will serve approximately 26,200 subscribers in a franchise area comprising approximately 111,000 households from a single headend. The Company's New England Cable systems currently serve approximately 15,000 subscribers in a franchise area comprising approximately 22,900 households. Broadcast Television. The Company owns and operates five Fox affiliates in midsize television markets. The Company has entered into agreements to program additional television stations in two of these markets in 1997, which stations the Company anticipates will be affiliated with the United Paramount Network ("UPN"). The Company is awaiting certain FCC approvals in one of these markets. After giving effect to the Completed Transactions the Company would have had pro forma net revenues and Operating Cash Flow of $63.3 million and $18.6 million, respectively, for the year ended December 31, 1996. The Company's net revenues and Operating Cash Flow have increased at compound annual growth rates of 87% and 79%, respectively, from 1991 to 1996. MARKET OVERVIEW BROADCAST TELEVISION <TABLE> <CAPTION> Number Ratings Rank Acquisition Station Market of TV -------------------- Oversell Station Date Affiliation Area DMA Households(1) Competitors(2) Prime(3) Access(4) Ratio(5) ---------------- -------------- ------------- --------------- ----- ------------- -------------- --------- --------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Existing Stations: WWLF-56/WILF-53/ WOLF-38(6) ....May 1993 Fox Northeastern PA 49 553,000 3 3 (tie) 1 169% WPXT-51 ........January 1996 Fox Portland, ME 79 344,000 3 2 4 127% WDSI-61 ........May 1993 Fox Chattanooga, TN 82 320,000 4 4 3 174% WDBD-40 ........May 1993 Fox Jackson, MS 91 287,000 3 2 (tie) 2 126% WTLH-49 ........March 1996 Fox Tallahassee, FL 116 210,000 3 2 2 122% Additional Stations: WOLF-38(6) .....May 1993 UPN Northeastern PA 49 553,000 3 N/A N/A N/A WWLA-35(7) .....May 1996 UPN Portland, ME 79 344,000 3 N/A N/A N/A </TABLE> DIRECT BROADCAST SATELLITE <TABLE> <CAPTION> Homes Average Not Homes Monthly Total Passed Passed Penetration Revenue Homes in by by Total -------------------------------- Per DIRECTV Territory Territory Cable(8) Cable(9) Subscribers(10) Total Uncabled Cabled Subscriber(11) ---------------------- ----------- --------- ---------- --------------- ------- ---------- -------- ------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Owned: Western New England ............. 288,273 41,465 246,808 6,969 2.4% 13.1% 0.6% New Hampshire ........ 167,531 42,075 125,456 4,210 2.5% 8.1% 0.6% Martha's Vineyard and Nantucket ........... 20,154 1,007 19,147 818 4.1% 61.4% 1.0% Michigan ............. 241,713 61,774 179,939 7,326 3.0% 8.7% 1.1% Texas ................ 149,530 54,504 95,026 5,735 3.8% 7.6% 1.7% Ohio ................. 167,558 32,180 135,378 5,477 3.3% 12.1% 1.2% Indiana .............. 131,025 34,811 96,214 6,479 4.9% 12.6% 2.2% Mississippi .......... 101,799 38,797 63,002 6,705 6.6% 14.6% 1.6% Arkansas ............. 36,458 2,408 34,050 1,734 4.8% 34.4% 2.7% Virginia/West Virginia 92,097 10,015 82,082 5,830 6.3% 45.8% 1.5% ----------- --------- ---------- --------------- ------- ---------- -------- Total .............. 1,396,138 319,036 1,077,102 51,283 3.7% 12.0% 1.2% $41.45 =========== ========= ========== =============== ======= ========== ======== ========== </TABLE> CABLE TELEVISION <TABLE> <CAPTION> Average Homes Monthly Homes in Passed Basic Revenue Channel Franchise by Basic Service per Cable Systems Capacity Area(12) Cable(13) Subscribers(14) Penetration(15) Subscriber ------------------- ---------- ----------- --------- --------------- --------------- ------------ <S> <C> <C> <C> <C> <C> <C> New England ....... (16) 22,900 22,500 15,000 67% $33.55 Mayaguez .......... 62 38,300 34,000 10,400 31% $31.55 San German(17) .... 50(18) 72,400 47,700 15,800 33% $30.40 ----------- --------- --------------- --------------- ------------ Total Puerto Rico 110,700 81,700 26,200 32% $30.85 ----------- --------- --------------- --------------- ------------ Total ........... 133,600 104,200 41,200 40% $32.45 =========== ========= =============== =============== ============ </TABLE> (See footnotes on the following page) NOTES TO MARKET OVERVIEW (1) Represents total homes in a DMA for each TV station as estimated by Broadcast Investment Analysts ("BIA"). (2) Commercial stations not owned by the Company which are licensed to and operating in the DMA. (3) "Prime" represents local station rank in the 18 to 49 age category during "prime time" based on A.C. Nielsen Company ("Nielsen") estimates for May 1996. (4) "Access" indicates local station rank in the 18 to 49 age category during "prime time access" (6:00 p.m. to 8:00 p.m.) based on Nielsen estimates for May 1996. (5) The oversell ratio is the station's share of the television market net revenue divided by its in-market commercial audience share. The oversell ratio is calculated using estimated market data and 1996 Nielsen audience share data. (6) WOLF, WILF and WWLF are currently simulcast. Pending receipt of certain FCC approvals and assuming no adverse regulatory requirements, the Company intends to separately program WOLF as an affiliate of UPN. (7) The Company anticipates programming WWLA pursuant to an LMA as an affiliate of UPN assuming no adverse change in current FCC regulatory requirements. (8) Based on NRTC estimates of primary residences derived from 1990 U.S. Census data and after giving effect to a 1% annual housing growth rate and seasonal residence data obtained from county offices. Does not include business locations. Includes approximately 24,400 seasonal residences. (9) A home is deemed to be "passed" by cable if it can be connected to the distribution system without any further extension of the cable distribution plant. Based on NRTC estimates of primary residences derived from 1990 U.S. Census data and after giving effect to a 1% annual housing growth rate and seasonal residence data obtained from county offices. Does not include business locations. Includes approximately 92,400 seasonal residences. (10) As of February 7, 1997. (11) Based upon 1996 revenues and weighted average 1996 subscribers. (12) Based on information obtained from municipal offices. (13) These data are the Company's estimates as of December 31, 1996. (14) A home with one or more television sets connected to a cable system is counted as one basic subscriber. Bulk accounts (such as motels or apartments) are included on a "subscriber equivalent" basis whereby the total monthly bill for the account is divided by the basic monthly charge for a single outlet in the area. This information is as of January 31, 1997. (15) Basic subscribers as a percentage of homes passed by cable. (16) The channel capacities of the New England Cable systems are 36 and 62 and represent 29% and 71% of the Company's New England Cable subscribers in Connecticut and Massachusetts, respectively. (17) Acquired upon consummation of the Cable Acquisition in August 1996. (18) After giving effect to certain system upgrades, this system will be capable of delivering 62 channels. OPERATING AND ACQUISITION STRATEGY The Company's operating strategy is to generate consistent revenue growth and to convert this revenue growth into disproportionately greater increases in Location Cash Flow. The Company's acquisition strategy is to identify media and communications businesses in which significant increases in Location Cash Flow can be realized and where the ratio of required investment to potential Location Cash Flow is low. MULTICHANNEL TELEVISION Direct Broadcast Satellite. The Company believes that DBS is the lowest cost medium for delivering high capacity, high quality, digital video, audio and data services to television households and commercial locations in rural areas and that DIRECTV offers superior video and audio quality and a substantially greater variety of programming than is available from other multichannel video services. DIRECTV initiated service to consumers in 1994 and, as of December 31, 1996, there were over 2.3 million DIRECTV subscribers. The introduction of DIRECTV is widely reported to be one of the most successful rollouts of a consumer service ever. As the exclusive provider of DIRECTV services in its purchased territories, the Company provides a full range of services, including installation, authorization and financing of equipment for new customers as well as billing, collections and customer service support for existing subscribers. The Company's business strategy in DBS is to (i) establish strong relationships with retailers, (ii) build its own direct sales and distribution channels, (iii) develop local and regional marketing and promotion to supplement DIRECTV's national advertising, and (iv) offer equipment rental, lease and purchase options. The Company anticipates continued growth in subscribers and operating profitability in DBS through increased penetration of DIRECTV territories it currently owns and will acquire. The Company's New England DBS Territory achieved positive Location Cash Flow in 1995, its first full year of operations. The Company's DIRECTV subscribers currently generate revenues of approximately $41 per month at an average gross margin of 34%. The Company's remaining expenses consist of marketing costs incurred to build its growing base of subscribers and overhead costs which are predominantly fixed. As a result, the Company believes that future increases in its DBS revenues will result in disproportionately greater increases in Location Cash Flow. For the twelve months ended December 31, 1996, the Company has added 5,809 new DIRECTV subscribers in its New England DBS Territory as compared to 3,895 for the same period in 1995. The Company also believes that there is an opportunity for additional growth through the acquisition of DIRECTV territories held by other NRTC members. NRTC members are the only independent providers of DIRECTV services. Approximately 245 NRTC members collectively own DIRECTV territories consisting of approximately 7.7 million television households in predominantly rural areas of the United States, which the Company believes are the most likely to subscribe to DBS services. These territories comprise 8% of United States television households, but represent approximately 23% of DIRECTV's existing subscriber base. As the largest, and only publicly held, independent provider of DIRECTV services, the Company believes that it is well positioned to achieve economies of scale through the acquisition of DIRECTV territories held by other NRTC members. Cable Television. The Company's business strategy in cable is to achieve revenue growth by (i) adding new subscribers through improved signal quality, increases in the quality and the quantity of programming, housing growth and line extensions, (ii) increasing revenues per subscriber through new program offerings and rate increases and (iii) consolidating its Puerto Rico Cable systems. BROADCAST TELEVISION The Company's business strategy in broadcast television is to acquire and operate television stations whose revenues and market shares can be substantially improved with limited increases in fixed costs. The Company has focused upon midsize markets because it believes that they have exhibited consistent and stable increases in local advertising and that television stations in them have fewer and less aggressive direct competitors. The Company seeks to increase the audience ratings of its TV stations in key demographic segments and to capture a greater share of their markets' advertising revenues than their share of the local television audience. The Company accomplishes this by developing aggressive, opportunistic local sales forces and investing in a cost-effective manner in programming, promotion and technical facilities. The Company is actively seeking to acquire additional stations in new markets and to enter into LMAs with owners of stations or construction permits in markets where it currently owns and operates Fox affiliates. The Company has historically purchased Fox affiliates because (i) Fox affiliates generally have had lower ratings and revenue shares than stations affiliated with ABC, CBS and NBC, and, therefore, greater opportunities for improved performance, and (ii) Fox-affiliated stations retain a greater percentage of their inventory of advertising spots than do affiliates of ABC, CBS and NBC, thereby enabling these stations to retain a greater share of any increase in the value of their inventory. The Company is pursuing expansion in its existing markets through LMAs because second stations can be operated with limited additional fixed costs (resulting in high incremental operating margins) and can allow the Company to create more attractive packages for advertisers and program providers. The Company's ability to enter into future LMAs may be restricted by changes in FCC regulations. RECENT TRANSACTIONS COMPLETED ACQUISITIONS Since January 1, 1996, the Company has acquired the following media and communications properties: Television Station WPXT. The Company acquired WPXT, the Fox-affiliated television station serving the Portland, Maine DMA (the "Portland Acquisition"). Television Station WTLH. The Company acquired WTLH, the Fox-affiliated television station serving the Tallahassee, Florida DMA (the "Tallahassee Acquisition"). Television Station WWLA. The Company acquired an LMA with the holder of a construction permit for WWLA, a new television station authorized to operate UHF channel 35 in the Portland, Maine DMA (the "Portland LMA"). Under the Portland LMA, the Company will lease facilities and provide programming to WWLA. Construction of WWLA is expected to be completed in 1997. Cable Acquisition. In August 1996, the Company acquired substantially all of the assets of a cable system (the "San German Cable System"), serving ten communities contiguous to the Company's Mayaguez Cable system. Michigan/Texas DBS Acquisition. In October 1996, the Company acquired the DIRECTV distribution rights for portions of Texas and Michigan and related assets (the "Michigan/Texas DBS Acquisition"). Ohio DBS Acquisition. In November 1996, the Company acquired the DIRECTV distribution rights for portions of Ohio and related assets (the "Ohio DBS Acquisition"). Indiana DBS Acquisition. In January 1997, the Company acquired the DIRECTV distribution rights for portions of Indiana and related assets (the "Indiana DBS Acquisition"). Mississippi DBS Acquisition. In February 1997, the Company acquired the DIRECTV distribution rights for portions of Mississippi and related assets (including receivables) (the "Mississippi DBS Acquisition"). Arkansas DBS Acquisition. In March 1997, the Company acquired the DIRECTV distribution rights for portions of Arkansas and related assets (the "Arkansas DBS Acquisition"). Virginia/West Virginia DBS Acquisition. In March 1997, the Company acquired the DIRECTV distribution rights for portions of Virginia and West Virginia and related assets (the "Virginia/West Virginia DBS Acquisition"). Recent Sale New Hampshire Cable Sale. In January 1997, the Company sold its New Hampshire Cable systems (the "New Hampshire Cable Sale"). The New Hampshire Cable Sale resulted in net proceeds to the Company of approximately $7.1 million. PUBLIC OFFERINGS INITIAL PUBLIC OFFERING Pegasus consummated the initial public offering of its Class A Common Stock on October 8, 1996 pursuant to an underwritten offering (the "Initial Public Offering"). The initial public offering price of the Class A Common Stock was $14.00 per share and resulted in net proceeds to the Company of approximately $38.1 million. The Company applied the net proceeds from the Initial Public Offering as follows: (i) $17.9 million for the payment of the cash portion of the purchase price of the Michigan/Texas DBS Acquisition, (ii) $12.0 million to the Ohio DBS Acquisition, (iii) $3.0 million to repay indebtedness under the New Credit Facility, (iv) $1.9 million to make a payment on account of the Portland Acquisition, (v) $1.5 million for the payment of the cash portion of the purchase price of the Management Agreement Acquisition, (vi) $1.4 million for the Towers Purchase and (vii) $444,000 for general corporate purposes. REGISTERED EXCHANGE OFFER Purchasers of the Notes in PM&C's 1995 Notes offering held all of the PM&C Class B Shares. The Company through a registered exchange offer (the "Registered Exchange Offer") exchanged all of the PM&C Class B Shares for 191,775 shares in the aggregate of Class A Common Stock. The Registered Exchange Offer terminated on December 30, 1996. As a result of the Registered Exchange Offer, PM&C became a wholly owned subsidiary of Pegasus. This Prospectus gives effect to the exchange of all of the PM&C Class B Shares for Class A Common Stock pursuant to the Registered Exchange Offer. UNIT OFFERING Pegasus consummated the Unit Offering on January 27, 1997. The Unit Offering resulted in net proceeds to the Company of approximately $96.0 million. The Company applied the net proceeds from the Unit Offering as follows: (i) $29.6 million to the repayment of indebtedness of PM&C under the New Credit Facility, which represented all indebtedness under the New Credit Facility at the time of the consummation of the Unit Offering, (ii) $15.0 million for the Mississippi DBS Acquisition, (iii) $8.8 million for the cash portion of the Indiana DBS Acquisition, (iv) $7.0 million for the cash portion of the purchase price of the Virginia/West Virginia DBS Acquisition, (v) $2.4 million for the Arkansas DBS Acquisition and (vi) approximately $558,000 to the retirement of the Pegasus Credit Facility and expenses related thereto.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001015780_e-trade_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001015780_e-trade_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cbf00cf4c97e0bcd0cae5294583d297ce903a001
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001015780_e-trade_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," and the consolidated financial statements and notes thereto, appearing elsewhere in this Prospectus. Investors should consider carefully the information discussed under the heading "Risk Factors." THE COMPANY E*TRADE Group, Inc. ("E*TRADE" or the "Company") is a leading provider of online investing services and has established a popular, branded destination Web site for self-directed investors. The Company offers automated order placement and execution, along with a suite of products and services that can be personalized, including portfolio tracking, Java-based charting and quote applications, real-time market commentary and analysis, news and other information services. The Company provides these services 24 hours a day, seven days a week by means of the Internet, touch-tone telephone, online service providers (America Online, AT&T WorldNet, CompuServe, Microsoft Network and Prodigy) and direct modem access. E*TRADE's proprietary transaction-enabling technology supports highly automated, easy-to-use and cost-effective services that empower its customers to take greater control of their investment decisions and financial transactions. Further, the Company believes that its technology can be adapted to provide transaction-enabling services related to other aspects of electronic commerce. As of June 30, 1997, the Company had over 182,000 accounts (with assets under management in excess of $5.5 billion) representing a compounded annual growth rate in new accounts of 127% since October 1, 1994. Average daily transaction volumes were approximately 17,800 in June 1997, as compared to approximately 8,000 transactions per day in June 1996. For the month ended June 30, 1997, the Company opened an average of 680 new accounts per day with average daily deposits of $13.5 million. The Company began offering online investing services through the Internet in February 1996 and it is the Company's most rapidly growing channel. Transactions over the Internet represented 60% of the Company's June 1997 transaction volume. E*TRADE's objective is to be a leading, branded provider of online investing services through automation, innovation, technology, service and value. The Company's strategy to accomplish this objective includes continued aggressive marketing of its online investing services to further establish E*TRADE's brand name recognition and increase its share of the online investing market and continued broadening of its suite of value-added services that personalize and enhance its customers' online investing experience. In addition, the Company plans to leverage its E*TRADE brand equity and large customer base to pursue additional related revenue opportunities, including advertising and subscription-based revenue streams. The Company was incorporated in California in 1982 and was reincorporated in Delaware in July 1996. Its principal corporate offices are located at Four Embarcadero Place, 2400 Geng Road, Palo Alto, California 94303, and its telephone number is (415) 842-2500. Unless otherwise indicated, all references in this Prospectus to "E*TRADE" or the "Company" refer to E*TRADE Group, Inc., a Delaware corporation, E*TRADE Securities, Inc., its principal broker-dealer subsidiary ("E*TRADE Securities"), its other subsidiaries and its predecessor California corporation. The Company's World Wide Web site is located at www.etrade.com. Information contained in the Company's Web site shall not be deemed to be part of this Prospectus. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company.......... 5,000,000 shares Common Stock offered by the Selling Stockholders................................ 2,000,000 shares Common Stock to be outstanding after the Offering.................................... 35,958,147 shares(1) Use of Proceeds.............................. For working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol................ EGRP </TABLE> SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (in thousands, except per share and operating data) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED SEPTEMBER 30, ENDED JUNE 30, -------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net revenues............ $ 848 $2,974 $10,905 $23,340 $51,595 $34,423 $94,260 Pre-tax income (loss)... (283) 103 244 4,309 (1,383) (2,224) 14,110 Net income (loss)....... (285) 99 785 2,581 (828) (1,334) 8,382 Net income (loss) per common share........... $(0.01) -- $ 0.03 $ 0.10 $ (0.03) $ (0.05) $ 0.24 Weighted average number of common and common equivalent shares...... 24,828 26,677 26,186 26,481 28,564 28,477 34,719 OPERATING DATA: Average customer transactions per day... 12 194 869 2,335 6,148 5,667 13,769 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------------- ACTUAL AS ADJUSTED(2) -------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and equivalents.................................... $ 18,116 $150,510 Total assets............................................ 719,845 852,239 Stockholders' equity.................................... 83,057 215,451 </TABLE> - -------- (1) Based on 30,958,147 shares of Common Stock outstanding as of June 30, 1997. Excludes 5,250,120 shares of Common Stock issuable upon the exercise of outstanding options to purchase Common Stock as of June 30, 1997. See "Management--Associate Benefit Plans" and Note 7 of Notes to Consolidated Financial Statements. (2) Adjusted to give effect to the sale of 5,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price per share of $28.13 and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016006_closure_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016006_closure_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..df4ca8c6ecf534c26612bb474469474ecce6cdcb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016006_closure_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMMON STOCK. REFERENCES IN THIS PROSPECTUS TO THE COMPANY OR CLOSURE ALSO INCLUDE, UNLESS THE CONTEXT REQUIRES OTHERWISE, CLOSURE'S PREDECESSOR, TRI-POINT MEDICAL L.P. (THE "PARTNERSHIP"). EFFECTIVE JANUARY 13, 1997, THE COMPANY CHANGED ITS NAME FROM TRI-POINT MEDICAL CORPORATION TO CLOSURE MEDICAL CORPORATION. UNLESS OTHERWISE INDICATED, ALL INFORMATION PRESENTED IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS HAVE NOT EXERCISED THE OVER-ALLOTMENT OPTION. "TRAUMASEAL," "NEXACRYL," "NEXABAND S/C" AND "NEXABAND QUICKSEAL" ARE TRADEMARKS OF THE COMPANY. ALL OTHER TRADE NAMES AND TRADEMARKS APPEARING IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS. THE COMPANY Closure develops, commercializes and manufactures medical tissue cohesive products based on its proprietary cyanoacrylate technology. The Company's medical tissue cohesives can be used to close and seal wounds and incisions rapidly and stop leakage of blood and other body fluids from injured tissue. The Company's NONABSORBABLE products can be used to replace sutures and staples for certain topical wound closure applications, while the Company's ABSORBABLE products can potentially be used as surgical sealants and surgical tissue cohesives for internal wound closure and management. Closure's medical tissue cohesive products align injured tissue without the trauma caused by suturing or stapling and allow natural healing to proceed. In addition, Closure believes that its medical tissue cohesive products result in lower overall procedure costs and are easier and quicker to prepare and use than sutures or staples. The worldwide market for sutures and staples for topical and internal applications is currently estimated to be $2.6 billion annually, and the Company expects that it will compete for a portion of this market. The Company has three products for human use and has a product line for veterinary uses, which are described below: TRAUMASEAL is a topical tissue cohesive used to close wounds from skin lacerations and incisions. The Company filed a premarket approval ("PMA") application for TRAUMASEAL with the U.S. Food and Drug Administration (the "FDA") in December 1996, which was granted "expedited processing." Product launch of TRAUMASEAL is expected in France, Italy and Australia in mid-1997 and in Canada in late 1997. The Company has entered into a marketing agreement with Ethicon, Inc. ("Ethicon"), a subsidiary of Johnson & Johnson, for exclusive worldwide marketing and distribution of TRAUMASEAL. OCTYLDENT is a topical sealant currently used in conjunction with Actisite(Register mark), a site-specific drug delivery system manufactured by ALZA Corporation ("ALZA"), to treat adult periodontal disease. OCTYLDENT received 510(k) clearance ("510(k)") for use as a cohesive for the temporary fixing of periodontal fibers to teeth or other hard surface abutments from the FDA in 1990 and is marketed with Actisite(Register mark) in the United States by Procter & Gamble/ALZA, Partners for Oral Health Care (the "Procter & Gamble/ALZA Partnership") and outside the United States by ALZA. NEXACRYL is a topical sealant to be used in the repair of corneal ulcers and lacerations. The Company received an FDA approvable letter for NEXACRYL in January 1996. If approved, the Company believes NEXACRYL will be the first cyanoacrylate cohesive product to receive PMA approval from the FDA. The Company has entered into a marketing agreement with Chiron Vision Corporation ("Chiron") for exclusive worldwide marketing and distribution of NEXACRYL. NEXABAND is a product line of five topical tissue cohesives currently used in veterinary wound closure and management. NEXABAND products have been marketed by Farnam Companies, Inc. ("Farnam") since 1993. Closure is also developing absorbable products for internal applications. The Company has two products in development, a surgical sealant to be used to control post-surgical leakage from coronary artery bypass graft and bowel resection procedures and a surgical tissue cohesive to be used to close internal surgical incisions and traumatic wounds. These future products require further development, clinical trials and regulatory clearance or approval prior to commercialization. Closure's medical tissue cohesive products are based on its proprietary cyanoacrylate technology. Cyanoacrylates are a family of liquid monomers that react under a variety of conditions to form polymer films with strong adhesive properties. Using its technology, Closure has overcome several obstacles to regulatory approval, including demonstrating that its cyanoacrylates are safe for human use. The Company's ability to manufacture highly purified base material allows Closure to satisfy toxicity tests and, the Company believes, to meet biocompatability standards. Closure has also developed novel assays to demonstrate sterility. In addition, Closure has patented a "scavenger" process that permits degradation of cyanoacrylates without a cytotoxic reaction, enabling the Company to develop absorbable formulations for internal applications. Closure's technology allows it to customize the physical and chemical properties of cyanoacrylates, such as viscosity and setting times, to meet specific market needs. Closure's products perform consistently and reproducibly, do not require special preparation or refrigeration and have shelf-lives of 18 to 24 months. Closure has also developed delivery technology to enhance the utility of its products. The Company's TRAUMASEAL applicator contains a catalyst that controls the polymerization process and allows the cohesive film to be applied in multiple layers, which enhances bond strength. The Company is building a strong portfolio of patent and trade secret protection on its cyanoacrylate technology, delivery technology and manufacturing processes. The Company has nine U.S. patents with expiration dates ranging from 2004 to 2013 and has filed applications for five additional U.S. patents, as well as certain corresponding patent applications outside the United States. The Company's objective is to become the leader in the medical tissue cohesive market by capitalizing on its proprietary cyanoacrylate technology. The Company's strategy is to focus initially on commercializing and launching topical tissue cohesive products based on its nonabsorbable formulations. Initial target markets are topical wound closure in emergency rooms and operating rooms and for plastic surgery procedures. For its nonabsorbable products, the Company has entered into agreements with market leaders to market and distribute the Company's products. The Company is also pursuing the development and commercialization of absorbable formulations. The Company intends to implement this strategy by (i) expanding and accelerating its research and development activities, (ii) expanding manufacturing capacity by adding facilities, equipment and personnel and continuing to research processes to improve manufacturing capacity and efficiency, (iii) seeking rapid regulatory approval by targeting product applications classified as medical devices and (iv) establishing a focused sales force to market its absorbable products, or, where appropriate, establishing partnerships with recognized market leaders. The Company completed its initial public offering of 3,000,000 shares of Common Stock, of which 2,550,000 shares were sold by the Company, in September 1996, raising net proceeds of approximately $17.9 million. Immediately prior to the initial public offering, the Company consummated an exchange of obligations of and interests in Tri-Point Medical L.P., the Company's predecessor, for 9,600,000 shares of Common Stock (the "Exchange"). See "Prior Partnership Status." The Company's executive offices are located at 5265 Capital Boulevard, Raleigh, North Carolina 27616, and its telephone number is (919) 876-7800.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016152_cornell_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016152_cornell_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d69262195427aa8580dc4d5f004baf365987edf2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016152_cornell_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE INDICATES: (I) ALL REFERENCES TO THE "COMPANY" INCLUDE CORNELL CORRECTIONS, INC. AND ITS SUBSIDIARIES AND THEIR RESPECTIVE PREDECESSORS; (II) THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION; (III) ALL REFERENCES TO NUMBER OF BEDS WITH RESPECT TO THE COMPANY'S RESIDENTIAL FACILITIES ARE TO DESIGN CAPACITY AND (IV) ALL REFERENCES TO TOTAL OFFENDER CAPACITY INCLUDE DESIGN CAPACITY BEDS PLUS THE PROGRAM CAPACITY OF THE COMPANY'S NON-RESIDENTIAL, COMMUNITY-BASED OPERATIONS. THE COMPANY The Company is one of the leading providers of privatized correctional, detention and pre-release services in the United States based on total offender capacity. The Company is the successor to entities that began developing secure institutional correctional and detention facilities in 1987, pre-release facilities in 1977 and juvenile facilities in 1973. The Company has significantly expanded its operations through acquisitions and internal growth and is currently operating or developing facilities in 10 states and the District of Columbia. As of September 9, 1997, the Company has contracts to operate 41 facilities with a total offender capacity of 7,072, which has significantly increased from 3,577 offenders at December 31, 1996. For the six months ended June 30, 1997, the Company's revenues were $28.0 million, representing an increase of 147% from $11.3 million for the six months ended June 30, 1996. The Company had net income of $1.3 million compared to a net loss of $710,000 for the same respective six month periods. The Company provides integrated facility development, design, construction and operational services to governmental agencies within three areas of operational focus: (i) secure institutional correctional and detention services; (ii) pre-release correctional services and (iii) juvenile correctional and detention services. Secure institutional correctional and detention services primarily consist of the operation of secure adult incarceration facilities. Pre-release correctional services primarily consist of providing pre-release and halfway house programs for adult offenders who are either on probation or serving the last three to six months of their sentences on parole and preparing for re-entry into society at large. Juvenile correctional and detention services primarily consist of providing residential treatment and educational programs and non-residential community-based programs to juvenile offenders between the ages of 10 and 17 who have either been adjudicated or suffer from behavioral problems. At the adult facilities it operates, the Company generally provides maximum and medium security incarceration and minimum security residential services, institutional food services, certain transportation services, general education programs (such as high school equivalency and English as a second language programs), health care (including medical, dental and psychiatric services), work and recreational programs and chemical dependency and substance abuse programs. Additional services provided in the Company's pre-release facilities typically include life skills and employment training and job placement assistance. Juvenile services provided by the Company include counseling, wilderness, medical and accredited educational programs tailored to meet the special needs of juveniles. The Company derives substantially all its revenues from operating correctional, detention and pre-release facilities for federal, state and local governmental agencies in the United States. Of the facilities operated by the Company, 11 are owned, 26 are leased and four are operated or currently under development through other arrangements. See "Business -- Properties." In the United States, there is a growing trend toward privatization of government services and functions, including correctional and detention services, as governments of all types face continuing pressure to control costs and improve the quality of services. According to the Private Adult Correctional Facility Census dated March 15, 1997 ("1996 Facility Census"), the design capacity of privately managed adult secure institutional correctional and detention facilities in operation or under construction worldwide increased from 10,973 beds at December 31, 1989 to 85,201 beds at December 31, 1996, a compound annual growth rate of 34%. In addition, the design capacity of privately managed adult secure institutional correctional and detention facilities increased 34% in the last year. The United States leads the world in private prison management contracts. The 1996 Facility Census reports that at December 31, 1996 there were private adult secure institutional correctional and detention facilities in operation or under construction in 25 states, the District of Columbia and Puerto Rico. According to reports issued by the United States Department of Justice, Bureau of Justice Statistics (the "BJS"), the number of adult offenders housed in United States federal and state prison facilities and in local jails increased from 744,208 at December 31, 1985 to 1,630,940 at June 30, 1996, a compound annual growth rate of 7.8%. Management believes that the increase in the demand for privatized adult secure institutional correctional and detention facilities is also a result, in large part, of the general shortage of beds available in United States adult secure institutional correctional and detention facilities. The pre-release correctional services industry has experienced substantial growth. According to the BJS, the number of parolees increased from 220,438 at December 31, 1980 to 690,159 at December 31, 1994, a compound annual growth rate of 8.5%. During the same period, the number of individuals on probation increased from 1.1 million to approximately 3.0 million, a compound annual growth rate of 7.4%. The probation and parole populations represent approximately 71% of the total number of adults under correctional supervision in the United States. The pre-release correctional services industry is extremely fragmented with several thousand providers across the country, most of which are small and operate in a specific geographic area. The juvenile corrections industry has also expanded rapidly in recent years as the need for services for at-risk and adjudicated youth has risen. According to the Criminal Justice Institute, the population in the juvenile correctional system, both residential and non-residential community-based, has increased from 62,268 youths at January 1, 1988 to 102,582 youths at January 1, 1995, a compound annual growth rate of 7.4%. In 1994, there were approximately 2.7 million juvenile arrests and 5.3 million youths in special education programs. The juvenile corrections industry is also fragmented with several thousand providers across the country, most of which are small and operate in a specific geographic area. OPERATING STRATEGIES The Company's objective is to enhance its position as one of the leading providers of privatized correctional, detention and pre-release services. The Company is committed to the following operating strategies: (i) diversifying its business within all three areas of its operational focus; (ii) delivering cost effective and quality management programs in all of its markets and (iii) providing specialized and innovative services to address the unique needs of governmental agencies and certain segments of the offender population. GROWTH STRATEGIES The Company expects the growth in privatization of correctional, detention and pre-release facilities by governmental agencies to continue in the foreseeable future. The Company continues to seek to increase revenues by pursuing the following growth strategies: (i) selectively pursuing opportunities to obtain contract awards for new privatized facilities; (ii) increasing design capacity and program capacity at existing facilities and (iii) pursuing strategic acquisitions. By expanding the number of beds under contract and its program capacities, the Company increases economies of scale and purchasing power and enhances its opportunities for larger contract awards. RECENT DEVELOPMENTS ACQUISITIONS The Company has completed four acquisitions since May 1996 and believes that the private correctional and detention industry is positioned for further consolidation. The Company believes that the larger, better capitalized providers will continue to acquire smaller providers that are insufficiently capitalized to pursue the industry's growth opportunities. The Company intends to pursue selective acquisitions of other operators of private correctional and detention facilities in secure institutional, pre-release and juvenile areas of operational focus to enhance its position in its current markets, to expand into new markets and to broaden the types of services which the Company can provide. In addition, the Company believes there are opportunities to eliminate costs through consolidation and coordination of the Company's current and subsequently acquired operations. In September 1997, the Company acquired substantially all of the assets of The Abraxas Group, Inc. and four related entities (collectively, "Abraxas"). Abraxas is a non-profit provider of residential and non-residential community-based juvenile programs, serving approximately 1,400 juvenile offenders throughout Pennsylvania, Ohio, Delaware and the District of Columbia. In January 1997, the Company acquired substantially all of the assets of Interventions Co. ("Interventions"), a non-profit operator of a 300 bed adult residential pre-release facility in Dallas, Texas and a 150 bed capacity residential transitional living center for juveniles in San Antonio, Texas. During 1996 the Company acquired (i) a 310 bed adult residential pre-release facility located in Houston, Texas (the "Reid Center") and (ii) substantially all of the assets of MidTex Detentions, Inc. ("MidTex"), a private correctional operator for the Federal Bureau of Prisons ("FBOP"). MidTex operated secure institutional facilities in Big Spring, Texas with a design capacity of 1,305 beds (the "Big Spring Complex"). NEW CONTRACT AWARDS In June 1997, the Company was awarded a contract with the State of Georgia to design, build, finance and operate a 550 bed minimum to medium security adult correctional facility. The facility will be owned and financed by the Company, and is scheduled to be completed during the third quarter of 1998. In February 1997, the Company received an award from Santa Fe County to design, build and operate a 760 total bed project in Santa Fe, New Mexico, which will be completed in phases. The Company took over the operation of an existing 240 bed adult and juvenile jail on July 1, 1997, with construction of a new 604 bed adult detention facility currently scheduled to be completed during the second quarter of 1998. The 240 bed jail will subsequently be converted into a 156 bed residential juvenile detention facility and is scheduled to be completed during the fourth quarter of 1998. INTERNAL EXPANSION In addition to smaller expansions within certain of its existing facilities, the Company recently began construction of a 516 bed expansion of the Big Spring Complex. This expansion is scheduled to be completed during the second quarter of 1998 and will bring the total design capacity at the Big Spring Complex to 1,868 beds, making it one of the largest correctional facilities operated by a private provider in the State of Texas. EXPANDED CREDIT FACILITY To fund its growth and operating strategies, in September 1997 the Company entered into a new $60 million revolving line of credit (the "1997 Credit Facility"), which replaced its prior $15 million revolving line of credit (the "1996 Credit Facility"). The 1997 Credit Facility, which matures in 2003, will be used by the Company for acquisitions and working capital purposes. ------------------------ The Company's principal executive offices are located at 4801 Woodway, Suite 100E, Houston, Texas 77056, and its telephone number at such address is (713) 623-0790. THE OFFERING Common Stock offered by the Company............................ 2,250,000 shares Common Stock offered by the Selling Stockholders....................... 670,000 shares(1) --------- Total Common Stock offered...... 2,920,000 shares ========= Common Stock to be outstanding after the Offering....................... 9,355,404 shares(2) Use of Proceeds by the Company....... For repayment of borrowings, future acquisitions, working capital and general corporate purposes. See "Use of Proceeds." American Stock Exchange symbol....... CRN - ------------ (1) An aggregate of 209,073 of the shares of Common Stock offered by the Selling Stockholders results from warrant exercises immediately prior to the Offering. See "Principal and Selling Stockholders." (2) Excludes an aggregate of: (i) 594,498 shares of Common Stock reserved for issuance upon exercise of outstanding stock options granted under the Company's 1996 Stock Option Plan (the "Stock Option Plan"); (ii) 295,856 shares of Common Stock reserved for issuance upon exercise of outstanding stock options and warrants not included under the Stock Option Plan and (iii) 354,334 shares of Common Stock to be reserved for issuance upon the exercise of long-term incentive stock options proposed to be granted by the Company's Board of Directors which grants will be subject to approval by the stockholders of an amendment to the Stock Option Plan or the adoption of a new stock option plan (the "Long-Term Incentive Options"). See "Management -- Stock Option Plan," "Management -- Proposed Stock Option Grants" and Note 6 of Notes to the Company's Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The summary consolidated financial data set forth below should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto, "Pro Forma Financial Data" and "Selected Consolidated Historical and Pro Forma Financial Data" included elsewhere in this Prospectus. The Pro Forma Statement of Operations Data for the year ended December 31, 1996 and for the six months ended June 30, 1997 and the Pro Forma Balance Sheet Data as of June 30, 1997 reflect the results of operations and consolidated financial position of the Company and its subsidiaries as if: (i) the acquisitions by the Company in 1996 and 1997; (ii) the exercise of outstanding warrants relating to the shares of Common Stock to be sold by the Selling Stockholders in the Offering and (iii) the Offering and the application of the estimated net proceeds therefrom by the Company, had occurred, in the case of the Statement of Operations Data, on January 1, 1996, and, in the case of the Balance Sheet Data, on June 30, 1997. <TABLE> <CAPTION> HISTORICAL ---------------------------------------------------------------------------- PRO FORMA SIX MONTHS ------------ ENDED YEAR YEAR ENDED DECEMBER 31, JUNE 30, ENDED ---------------------------------------------------- --------------------- DECEMBER 31, 1992 1993 1994(1) 1995 1996(2) 1996 1997 1996 --------- --------- ------- --------- ------- --------- --------- ------------ (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues........................... $ 2,540 $ 3,198 $15,689 $ 20,692 $32,327 $ 11,337 $28,041 $ 80,385 Income (loss) from operations...... 910 (960) (343) (10) 339 (263) 2,147 4,500 Interest expense(3)................ -- -- 294 1,115 2,810 498 209 177 Income (loss) before income taxes............................. 940 (915) (499) (989) (2,304) (710) 2,024 4,504 Net income (loss).................. 940 (915) (600) (989) (2,379) (710) 1,295 2,702 Earnings (loss) per share.......... $ .38 $ (.34) $ (.16) $ (.25) $ (.53) $ (.20) $ .18 $ .31 Number of shares used in per share computation(4).................... 2,491 2,695 3,811 3,983 4,466 3,523 7,139 8,775 OPERATING DATA: Total offender capacity: Residential...................... -- 302 1,281 1,640 3,577 2,044 5,872 4,527 Non-residential community- based........................... -- -- -- -- -- -- -- 900 Total........................ -- 302 1,281 1,640 3,577 2,044 5,872 5,427 Beds under contract (end of period)........................... -- 282 1,155 1,478 3,254 1,796 5,367 4,098 Contracted beds in operation (end of period)........................ -- 282 1,155 1,135 2,899 1,561 3,541 3,743 Average occupancy based on contracted beds in operation(5)... -- -- 92.1% 98.9% 97.0% 95.8% 96.4% 92.7% </TABLE> SIX MONTHS ENDED JUNE 30, 1997 ----------- STATEMENT OF OPERATIONS DATA: Revenues........................... $45,165 Income (loss) from operations...... 3,347 Interest expense(3)................ 88 Income (loss) before income taxes............................. 3,345 Net income (loss).................. 2,141 Earnings (loss) per share.......... $ .24 Number of shares used in per share computation(4).................... 8,795 OPERATING DATA: Total offender capacity: Residential...................... 6,372 Non-residential community- based........................... 900 Total........................ 7,272 Beds under contract (end of period)........................... 5,867 Contracted beds in operation (end of period)........................ 4,041 Average occupancy based on contracted beds in operation(5)... 95.1% JUNE 30, 1997 ------------------------- HISTORICAL PRO FORMA ---------- --------- (UNAUDITED) BALANCE SHEET DATA: Working capital.................... $ 5,318 $23,573 Total assets....................... 53,282 89,641 Long-term debt, including current portion........................... 2,592 592 Stockholders' equity............... 42,537 75,722 - ------------ (1) Includes operations purchased by the Company in March 1994. (2) Includes operations purchased by the Company in May and July 1996. (3) Interest expense for 1996 includes a $1.3 million non-recurring charge ($726,000 of which was non-cash) to expense deferred financing costs associated with the early retirement of debt. (4) Prior to March 31, 1994, the Company was organized as a partnership. For purposes of computing average shares outstanding for the period prior to March 31, 1994, the partnership units were converted to common shares using a one-to-one unit-to-share conversion ratio. (5) For any applicable residential facilities, includes reduced occupancy during the start-up phase. See "Business -- Facility Management Contracts." For the year ended December 31, 1993, occupancy did not commence until December 1993.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016168_atria_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016168_atria_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..83cda7feb0c62aa38981b16ed2838df2564b759b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016168_atria_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Atria is a leading national provider of assisted and independent living services for the elderly. At May 31, 1997, the Company operated 40 communities in 17 states with a total of 3,977 units. The Company also had 35 assisted living communities under development, including 14 communities under construction. The Company's communities included 1,718 assisted living units and 2,259 independent living units. The Company owns 27 of its communities, holds a majority interest in two communities, leases two communities and manages nine communities. The Company is in the process of terminating management contracts for four communities. Assisted living is a rapidly emerging component of the non-acute health care system for the elderly. The assisted and independent living industries serve the long-term care needs of the elderly who do not require the more extensive medical services available in skilled nursing facilities, yet who are no longer capable of a totally independent lifestyle. Assisted living residents typically require assistance with two or more activities of daily living ("ADLs"), such as eating, grooming and bathing, personal hygiene and toileting, dressing, transportation, walking and medication management. The independent living industry serves the long-term care needs of the elderly who require only occasional assistance with ADLs. According to industry estimates, the assisted living industry represented approximately $12 billion in revenue in 1996. The Company believes that growth in the demand for assisted and independent living services is being driven by: the growing elderly population segment; changing societal patterns that make it difficult for families to provide in-home care to the elderly; increasing recognition among the elderly and their families that assisted and independent living communities afford a cost-effective, independent, secure and attractive lifestyle; and the limited supply of purpose-built assisted living communities currently available. Atria's objective is to expand its position as a leading national provider of high-quality assisted living services. Key elements of the Company's strategy are to continue to: (i) develop or acquire, in geographic clusters, 60 to 85 additional assisted living communities consisting of approximately 5,400 to 7,650 units by the year 2000 (including the 35 communities under development at May 31, 1997 and the communities developed or acquired since the Company's IPO) to achieve regional density; (ii) convert at least 750 of its existing independent living units to assisted living units by the year 2000 (approximately 250 per year); (iii) focus on private pay, middle- and upper- income residents; (iv) develop network relationships and strategic alliances with leading national and regional health care providers; (v) offer a broad range of high-quality services that meet the individual needs of residents to enable them to "age in place"; and (vi) develop the Atria prototype model in targeted markets to increase brand awareness and achieve construction and operational efficiencies. Prior to completion of the Company's initial public offering in August 1996 (the "IPO"), certain of the Company's assisted and independent living communities had been operated by Vencor, Inc. ("Vencor") and its predecessors for over a decade. Vencor operates an integrated network of health care services primarily focusing on the needs of the elderly. After completion of this offering, Vencor will own 44.5% of the outstanding Common Stock (42.8% if the Underwriters' over-allotment option is exercised in full). RECENT DEVELOPMENTS Atria has made significant progress in implementing its business plan since the IPO. Through a combination of acquisitions and new development, Atria has increased its total number of communities and units in operation from 22 communities with 3,022 units in August 1996 to 40 communities with 3,977 units at May 31, 1997. The number of communities and units in operation increased as a result of: (i) the acquisition in April 1997 of American Elderserve Corporation ("American Elderserve"), an operator of 12 assisted living communities with 503 units; (ii) the opening in March 1997 of an assisted living community with 92 units in Memphis, Tennessee, one of the five assisted living community development sites being acquired from The Carra Company, LLC ("Carra"); (iii) the acquisition in February 1997 of two communities in Knoxville, Tennessee with a total of 129 units; (iv) the commencement of the management of one community in Stamford, Connecticut with 123 units; and (v) the opening of three communities with 188 units that have been developed by the Company since the IPO. In addition, the Company terminated the lease of one community (80 units) in October 1996 and is in the process of terminating management contracts for four communities (156 units). Atria has also significantly expanded its new community development efforts. The number of communities under development has increased from 13 in August 1996 to 35 at May 31, 1997, including ongoing development projects assumed by Atria through various acquisitions. In addition, the Company has entered into a development agreement with Elder Healthcare Developers, LLC ("Elder Healthcare") to develop at least 15 communities over the next three years. The Company is continuing to execute its strategy to develop network relationships and strategic alliances with leading national and regional health care providers. These providers include Massachusetts General Hospital, University of Louisville Medical School, Jewish Hospital HealthCare Services, Inc. ("Jewish HealthCare") and Vencor. Specifically, in June 1997, the Company and Jewish HealthCare, one of the largest operators of health care facilities in Kentucky and southern Indiana, finalized a joint venture arrangement whereby Atria will develop assisted living communities within the market areas of existing Jewish HealthCare facilities. The Company is in discussions with other major health care providers and leading academic institutions regarding additional network relationships and strategic alliances. The Company's residents will gain increased access to a broad array of health care services from other providers as a result of these network relationships and strategic alliances. See "Recent Developments" on page 13. THE OFFERING <TABLE> <S> <C> Common Stock offered............. 6,000,000 shares Common Stock to be outstanding after the offering.............. 22,466,487 shares (1) Use of proceeds.................. To finance the development and acquisition of assisted living communities and for general corporate purposes. Nasdaq National Market symbol.... ATRC </TABLE> - -------- (1) Excludes options outstanding at May 31, 1997 to purchase 1,059,000 shares of Common Stock at a weighted average exercise price of $10.09 per share, and includes 80,000 restricted shares of Common Stock that vest over the two year period following August 20, 1996. See "Management--Non-Employee Directors 1996 Stock Incentive Plan," "--Vencor Employee Option Grants" and "--1996 Stock Ownership Incentive Plan." SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS Certain statements in this Prospectus Summary and under the captions "Risk Factors," "Recent Developments," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business," and elsewhere in this Prospectus, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things: (i) the successful implementation of the Company's acquisition and development strategy; (ii) the Company's ability to obtain financing on acceptable terms to finance its growth strategy and to operate within the limitations imposed by financing arrangements; and (iii) other factors referenced in this Prospectus. See "Risk Factors." SUMMARY CONSOLIDATED FINANCIAL AND STATISTICAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA) <TABLE> <CAPTION> THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, -------------------------------------- ---------------- 1993 (1) 1994 (2) 1995 (3) 1996 (4) 1996 1997 -------- -------- -------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................ $35,870 $39,758 $47,976 $51,846 $12,611 $14,217 Operating income........ 4,156 9,551 10,100 9,904 2,861 3,054 Income before income taxes and extraordinary loss................... 1,003 6,343 5,925 7,056 1,927 2,625 Income before extraordinary loss..... 607 3,837 3,584 4,269 1,166 1,578 Net income.............. 504 3,837 3,438 4,269 1,166 1,578 Earnings per common share before extraordinary loss..... -- -- $ 0.36 $ 0.35 $ 0.11 $ 0.10 Shares used in computing earnings per common and common equivalent share.................. -- -- 10,095 12,226 10,095 15,987 STATISTICAL DATA: Number of communities (at end of period): Owned and leased....... 19 19 20 19 20 23 Managed................ 2 2 2 2 2 2 ------- ------- ------- ------- ------- ------- Total (5)............. 21 21 22 21 22 25 Number of units (at end of period): Owned and leased....... 2,574 2,531 2,603 2,523 2,603 2,807 Managed................ 419 419 419 419 419 419 ------- ------- ------- ------- ------- ------- Total (5)............. 2,993 2,950 3,022 2,942 3,022 3,226 Average occupancy (6)... 90.8% 93.8% 94.5% 96.1% 95.7% 94.6% Same community average occupancy (6)(7)....... -- -- -- -- 95.9% 95.7% </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED (8) -------- --------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................ $ 50,004 $128,383 Total assets......................................... 217,099 295,478 Total long-term debt, including amounts due within one year............................................ 113,642 113,642 Stockholders' equity................................. 90,626 169,005 </TABLE> - -------- (1) Income includes $266,000 ($160,000 net of tax) of income related to settlement of certain litigation. (2) Income includes $1.3 million ($750,000 net of tax) of income related to settlement of certain litigation and a $425,000 ($255,000 net of tax) gain on the sale of property. (3) Income includes a charge of $600,000 ($360,000 net of tax or $0.03 per common share on a pro forma basis) related to the writedown of undeveloped property to net realizable value. (4) Income includes a charge of $1.1 million ($630,000 net of tax or $0.05 per common share on a pro forma basis) related to the settlement of certain litigation. (5) At May 31, 1997, the Company operated 40 communities with 3,977 units. (6) Average occupancy is calculated on a daily basis by dividing the number of occupied units by the number of available units. (7) Includes only those communities operated by the Company for at least the previous 12 months. (8) Adjusted to give effect to the sale by the Company of 6,000,000 shares of Common Stock (based on an assumed public offering price of $13.88) and the application of the estimated net proceeds therefrom. Concurrent with the completion of the IPO, Vencor contributed to the Company substantially all of its assisted and independent living communities in exchange for 10,000,000 shares of Common Stock and the Company assumed certain liabilities related to such communities (the "Contribution Transaction"). Unless otherwise indicated, all share and financial information set forth herein reflect no exercise of the Underwriters' over-allotment option. All references in this Prospectus to the "Company" or "Atria" mean Atria Communities, Inc. and its subsidiaries, or the assisted and independent living communities held by Vencor prior to the Contribution Transaction.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016518_apollon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016518_apollon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1e2af362c044bd548b863d1fd8208332c222360d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016518_apollon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS." FOR DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS, REFER TO THE "GLOSSARY OF SCIENTIFIC TERMS" ON PAGE 61. THE COMPANY Apollon, Inc. ("Apollon" or the "Company") is a leader in the development of non-viral DNA-based vaccines and other DNA-based gene therapy products for the prevention and treatment of infectious and autoimmune diseases. Apollon's product candidates are currently being evaluated in nine clinical trials. In such trials, Apollon is evaluating DNA-based vaccine product candidates in both normal, healthy adults (prevention) and in individuals afflicted with the disease (therapy). To the Company's knowledge, no other company in the field of DNA-based vaccine products is conducting more than one clinical trial in such field and all such trials are focused solely on developing DNA-based products for disease prevention. DNA-based vaccine and other gene therapy products deliver DNA (genes) directly to the body for treatment of disease or protection from infection. Apollon's proprietary facilitated DNA vaccine product candidates are designed to produce immune responses which may be useful for therapy and prevention of disease. Apollon's vaccine product candidates contain two key components, DNA (genes) and a facilitating agent, such as the local anesthetic drug called bupivacaine. These components directly interact with each other to form small enclosed vesicles containing DNA. The role of the facilitating agent is to assist or enhance the delivery of the DNA (genes) into the cell. The cell then produces specific antigenic proteins, or antigens, encoded by the genes. Antigens are the targets of antibodies, special proteins produced by the immune system to fight invading pathogens. Parts of antigens are also displayed on the surface of infected cells, which are then destroyed by special white blood cells called cytotoxic T cells. The Company believes that its GENEVAX vaccine product candidates may have several positive attributes, including the ability to: (i) stimulate both humoral (antibody) and cellular (cytotoxic T-cell) immune responses; (ii) target different strains of the same pathogen, as well as multiple pathogens, with a single vaccine; (iii) be conveniently administered using conventional methods; (iv) demonstrate increased safety relative to other vaccine types such as live virus vaccines; and (v) be manufactured with relative ease. The Company believes that its technology represents a new paradigm for the development of preventive and therapeutic vaccines (gene therapy) directed against a range of infectious diseases, including genital and oral/labial herpes, viral hepatitis, AIDS, genital warts and tuberculosis, as well as autoimmune diseases and cancer. In order to develop DNA-based vaccine products successfully, the Company is focusing a significant proportion of its resources on the advancement of its vaccine product candidates into human clinical trials, including both clinical trials of preventive product candidates in healthy adults and clinical trials of therapeutic product candidates in patients afflicted with a target disease. Using its facilitated DNA-based vaccine technology, the Company has demonstrated that its vaccines can stimulate humoral and cellular immune responses that have provided preventive and therapeutic outcomes in preclinical studies. Based on the results of these preclinical studies, Apollon has advanced multiple product candidates into human clinical trials. The Company believes that it initiated the first ever clinical trial of a therapeutic DNA-based vaccine in adults infected with human immunodeficiency virus ("HIV") in June 1995 and the first ever clinical trial of a preventive DNA-based vaccine for HIV in healthy adults in March 1996. Apollon believes that it also commenced the first ever clinical trial in healthy adults of a DNA-based preventive vaccine for herpes simplex virus ("HSV") in September 1996 and the first ever clinical trial of a DNA-based therapeutic vaccine in HSV-infected, genital herpes patients in March 1997. The Company also initiated a clinical trial in healthy adults of its DNA-based vaccine for treatment of individuals persistently infected with hepatitis B virus ("HBV") in July 1997. In addition, the Company initiated a clinical trial in December 1995 with a therapeutic DNA vaccine for cutaneous T-cell lymphoma ("CTCL"), which is a part of the first phase of the Company's program to develop therapeutic vaccines for autoimmune diseases such as psoriasis. Apollon is currently conducting nine Phase I and Phase I/II clinical trials of its GENEVAX vaccine product candidates for the prevention or treatment of infection by HSV, HBV and HIV, as well as the treatment of CTCL. As of September 30, 1997, 163 people have been enrolled in these clinical trials. To date, Apollon's vaccine product candidates have been safe and well tolerated in its clinical trials. In addition to evaluating safety, an objective of the ongoing clinical trials is to evaluate the ability of Apollon's DNA-based vaccine product candidates to stimulate immune responses. The Company is currently reviewing the results of its June 1995 HIV clinical trial, and has observed increases in immune responses in some HIV-infected patients. Subject to favorable clinical results, the Company expects to initiate Phase II clinical trials of its therapeutic HSV-, HBV- and HIV-directed vaccine product candidates within the next 15 months. The Company's goal is to develop and commercialize a portfolio of DNA-based vaccine and gene therapy products aimed at the prevention and treatment of infectious and autoimmune diseases. The Company intends to achieve this goal by pursuing the following strategy: (i) developing a diversified product pipeline; (ii) expanding its DNA delivery technology platform; (iii) leveraging its corporate, governmental and academic collaborations; and (iv) enhancing its manufacturing capabilities. Apollon has entered into collaborative agreements with three corporate partners, Wyeth-Lederle Vaccines and Pediatrics ("Wyeth-Lederle"), a business unit of the Wyeth-Ayerst Division of American Home Products Corporation ("AHP"), as well as Centocor, Inc. ("Centocor"), and Biogen, Inc. ("Biogen"), both publicly traded biopharmaceutical companies. The collaborative agreements with Wyeth-Lederle were entered into in July 1995 between the Company and American Cyanamid Company, a business unit of AHP, and provide for the joint development, manufacture and marketing of preventive and therapeutic GENEVAX products directed against HSV, HIV and human papillomavirus ("HPV"). The activities of American Cyanamid Company under these agreements are performed by Wyeth-Lederle. Pursuant to the agreements, Wyeth-Lederle has made a number of payments to Apollon to fund development of the GENEVAX product candidates directed against the three viruses and is required to make additional payments subject to the achievement of certain milestones in connection with clinical trials. Apollon is primarily responsible for product development and clinical testing expenses through the completion of Phase II clinical trials and Wyeth-Lederle will assume all Phase III clinical trial expenses. As of September 30, 1997, the Company has received $15.1 million from Wyeth-Lederle pursuant to the agreements. Apollon has granted Wyeth-Lederle worldwide rights to market and sell these vaccine product candidates and has retained exclusive worldwide manufacturing rights. In October 1997, A.H. Investments Ltd., an affiliate of AHP, invested $3.0 million in the Company in exchange for a convertible promissory note in the principal amount of $3.0 million and a warrant to purchase 68,910 shares of the Company's Common Stock at a price equal to 115% of the initial public offering price. The promissory note will be converted into shares of Common Stock upon the closing of the Offering at a conversion price equal to the initial public offering price. Apollon's agreement with Centocor, executed in March 1995, grants Centocor exclusive worldwide rights to use the Company's facilitated DNA-based technology to develop products directed at most cancers. Under the terms of this agreement, Centocor is required to provide research funding, to make additional payments upon the achievement of specified milestones by Centocor and to pay royalties to Apollon on any sales of these products. In June 1997, Centocor initiated a Phase I/II clinical trial in colorectal cancer patients using the Company's GENEVAX technology. In November 1997, Biogen and the Company entered into a license and option agreement pursuant to which the Company received a license to Biogen's intellectual property related to DNA sequences encoding hepatitis B viral antigens. In addition, Biogen received an option to market and sell on an exclusive basis in Japan GENEVAX therapeutic product candidates directed against HBV that are developed by Apollon and which incorporate Biogen's intellectual property. The Company is currently prosecuting 40 U.S. patent applications. A majority of these patent applications have foreign counterparts. These patent applications include specifications and claims regarding methods of facilitated DNA delivery and expression by target cells IN VIVO, methods of patient treatment and routes of administration, methods of discovery of novel vaccines and pharmaceutical agents, molecular targets and methods of utilizing these targets and compositions of matter for vaccines and pharmaceutical products. Apollon holds exclusive rights to a method patent which was issued to inventors at the University of Pennsylvania and The Wistar Institute of Anatomy and Biology (the "Wistar Institute") in January 1997. This patent describes an important portion of the Company's core technology using bupivacaine-facilitated DNA-based immunization. THE OFFERING <TABLE> <S> <C> Common Stock being offered.................. 2,500,000 shares (1) Common Stock to be outstanding after the Offering.................................. 8,145,568 shares(1) (2) (3) Use of proceeds............................. To fund research and development, including preclinical and clinical studies, and for working capital. See "Use of Proceeds." Proposed Nasdaq National Market symbol...... APLN </TABLE> - ------------------------ (1) Excludes 375,000 shares of Common Stock that may be sold by the Company pursuant to the Underwriters' over-allotment option. See "Underwriting." (2) Based on the number of shares of Common Stock outstanding as of September 30, 1997. Includes 4,748,021 shares of Common Stock issuable upon the automatic conversion of all outstanding shares of the Company's ClassA Convertible Preferred Stock, Class B Convertible Preferred Stock and Class C Convertible Preferred Stock (collectively, the "Convertible Preferred Stock"), upon completion of the Offering (the "Conversion") and 250,000 shares of Common Stock issuable upon the automatic conversion of the $3.0 million convertible promissory note issued to A.H. Investments Ltd. (the "AHP Financing"). Excludes 457,171 and 416,428 shares of Common Stock issuable upon the exercise of options and warrants, respectively, outstanding as of September 30, 1997, with a weighted average exercise price of $1.86 and $6.40, respectively. (3) Of the 8,145,568 shares of Common Stock to be outstanding after the Offering, holders of an aggregate of 5,043,961 shares of Common Stock have been granted certain rights with respect to the registration of such shares under the Securities Act. In addition, the holders of warrants to purchase 485,338 shares of Common Stock have similar registration rights upon the exercise thereof. Under agreements with the Company, the holders of these shares have rights to require the Company, on not more than two occasions, to register such shares of Common Stock under the Securities Act or to include their shares of Common Stock in future registered offerings by the Company for its own account or for the account of selling securityholders. See "Description of Capital Stock--Registration Rights." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM NINE MONTHS JANUARY 31, 1992 ENDED (DATE OF INCEPTION) YEAR ENDED DECEMBER 31, SEPTEMBER 30, TO ------------------------------------------ -------------------- DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997 ------------------- --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> (UNAUDITED) STATEMENT OF OPERATIONS DATA: Research, development and contract revenues............................... $ -- $ -- $ -- $ 7,825 $ 8,249 $ 4,039 $ 711 Operating costs and expenses: Research and development........... 1,213 3,440 6,179 5,253 7,310 4,942 7,088 General and administrative......... 529 947 1,538 2,193 3,050 2,120 2,852 ------- --------- --------- --------- --------- --------- --------- Total operating costs and expenses..... 1,742 4,387 7,717 7,446 10,360 7,062 9,940 ------- --------- --------- --------- --------- --------- --------- (Loss) income from operations............ (1,742) (4,387) (7,717) 379 (2,111) (3,023) (9,229) Interest income........................ 100 94 54 110 373 220 210 Interest expense....................... (6) (35) (89) (415) (123) (116) (22) ------- --------- --------- --------- --------- --------- --------- Net (loss) income........................ $ (1,648) $ (4,328) $ (7,752) $ 74 $ (1,861) $ (2,919) $ (9,041) ------- --------- --------- --------- --------- --------- --------- ------- --------- --------- --------- --------- --------- --------- Pro forma net loss per share (unaudited)(1)......................... $(.33) $(1.59) Shares used in computing pro forma net loss per share (unaudited)(1).......... 5,608,888 5,687,791 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------- ACTUAL AS ADJUSTED(2) ----------- -------------- <S> <C> <C> (UNAUDITED) BALANCE SHEET DATA: Cash, cash equivalents and investments available for sale............................ $ 1,746 $ 32,046 Redeemable cumulative convertible preferred stock.................................... 30,703 -- Accumulated deficit.................................................................. (28,153) (28,153) Total shareholders' (deficit) equity................................................. (28,147) 32,856 </TABLE> - ------------------------ (1) Reflects the Conversion and the AHP Financing. See Note 2 of Notes to Financial Statements for discussion of the calculation of pro forma net loss per share. (2) Gives effect to (i) the sale of 2,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $12.00 per share after deduction of estimated underwriting discounts, commissions and offering expenses; (ii) the AHP Financing; and (iii) the Conversion. ------------------------ UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED; (II) HAS BEEN RETROACTIVELY ADJUSTED TO GIVE EFFECT TO A 0.4594-FOR-ONE REVERSE STOCK SPLIT (THE "REVERSE STOCK SPLIT") OF THE COMMON STOCK THAT WAS EFFECTED DECEMBER 11, 1997; AND (III) REFLECTS THE CONVERSION AND THE AHP FINANCING WHICH WILL AUTOMATICALLY OCCUR UPON COMPLETION OF THE OFFERING. ALL SHARE AMOUNTS CONTAINED HEREIN WITH RESPECT TO SHARES OF COMMON STOCK ISSUED IN THE AHP FINANCING AND THE EXERCISE PRICE OF THE WARRANT ISSUED TO A.H. INVESTMENTS LTD. IN SUCH FINANCING ASSUME AN INITIAL PUBLIC OFFERING PRICE OF $12.00 PER SHARE. UPON COMPLETION OF THE OFFERING, THE CONVERTIBLE PREFERRED STOCK OUTSTANDING WILL CONVERT TO COMMON STOCK SUCH THAT EACH SHARE OF CONVERTIBLE PREFERRED STOCK WILL BE CONVERTED INTO 0.4594 SHARES OF COMMON STOCK.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016607_prevu-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016607_prevu-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..010f53f0ff76813172864a061ae06c5695e323e8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016607_prevu-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and consolidated financial statements (including the notes thereto) and pro forma financial information appearing elsewhere in this Prospectus. Unless otherwise indicated, all references to the "Company" or "Wilsons" mean Wilsons The Leather Experts Inc. and its subsidiaries, including the Predecessor Companies, and all references to the "Predecessor Companies" mean Wilsons Center, Inc., Rosedale Wilsons, Inc. and their subsidiaries prior to the acquisition of such companies by the Company from CVS New York, Inc. (formerly Melville Corporation) ("CVS") on May 25, 1996 (the "Acquisition"). THE COMPANY Wilsons is the leading specialty retailer of men's and women's leather outerwear, apparel and accessories in the United States. For the year ended February 1, 1997, the Company had, on a pro forma basis, net sales of $422.6 million. As of February 1, 1997, the Company operated 461 stores and, during its peak selling season in 1996, the Company also operated 376 holiday stores and seasonal kiosks. Wilsons operates in 45 states, the District of Columbia and England under several formats including "Wilsons The Leather Experts," the Company's traditional mall-based concept which offers moderately priced merchandise, and "Tannery West" and "Georgetown Leather Design," mall-based concepts which offer more upscale merchandise. In addition to the traditional mall-based stores, as of February 1, 1997, Wilsons also operated eleven airport stores that focus on selling accessories, such as gloves, handbags, wallets, briefcases, planners and computer cases, to business travelers and tourists. Unlike many retailers, Wilsons designs, purchases leather for, and contracts for the manufacturing of most of the apparel and accessories sold in its stores. This vertical integration enables the Company to reduce its order lead times, respond more quickly to changing consumer preferences and fashion trends, and offer its customers a better value through consistently high quality products at competitive prices. In May 1996, an investor group, including management, formed the Company to acquire the Predecessor Companies from CVS. As part of a program to enhance the Company's profitability, between January 1, 1995 and May 25, 1996, management closed 156 stores that had not achieved cash flow targets, wrote off an amount of goodwill and certain other non-productive assets and recorded certain related lease obligations. Such store closings and charges are referred to herein as the "Restructuring." As a part of the Restructuring, in 1995 the Company recorded a restructuring charge of $134.3 million related to store closings and the write-off of goodwill and other intangibles, and an asset impairment charge of $47.9 million related to the write-off of certain assets upon the adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). Upon completion of the Offering, Wilsons believes that it will have the capital resources and management information systems to implement its long-term growth strategy, which emphasizes store locations and products that offer growth opportunities and higher profit margins. Specifically, this long-term growth strategy currently calls for annual openings of eight to 15 traditional stores and eight to 15 airport stores commencing in 1997. The Company is also exploring the opening of additional stores outside of the United States and wholesale opportunities. The Company was incorporated as a Minnesota corporation in 1996. The Company's principal executive offices are located at 7401 Boone Avenue North, Brooklyn Park, Minnesota 55428 and its telephone number is (612) 391-4000. Reports. The Company intends to furnish to its shareholders annual reports containing audited financial statements and to make available quarterly reports containing unaudited interim financial information for each of the first three quarters of each fiscal year of the Company. THE OFFERING <TABLE> <S> <C> Securities offered........................ 1,100,000 Units, each Unit consisting of one share of Common Stock and one Redeemable Warrant. Each Redeemable Warrant is immediately exercisable and transferable separately from the Common Stock. Each Redeemable Warrant entitles the holder to purchase, at any time until three years after the Effective Date, one share of Common Stock at an exercise price of $13.50 per warrant, subject to adjustment. The Redeemable Warrants are subject to redemption by the Company for $.01 per warrant at any time 90 or more days after the Effective Date, on 30 days written notice, provided that the closing bid price of the Common Stock exceeds $14.50 per share (subject to adjustment) for any 10 consecutive trading days prior to such notice. Common Stock outstanding after the Offering................................. 10,717,083 shares(1)(2) Use of proceeds........................... The net proceeds will be used for anticipated capital expenditures, including expenditures for new stores, and for working capital purposes. See "Use of Proceeds." Nasdaq National Market symbols............ Common Stock: WLSN Warrants: WLSNW </TABLE> - ------- (1) Includes 1,350,000 shares of Common Stock issuable upon exercise of a warrant issued to CVS, with an exercise price of $.60 per share (the "CVS Warrant"); excludes (i) 195,060 shares of Common Stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $4.77 per share and 804,940 shares of Common Stock reserved for issuance pursuant to the Company's 1996 Stock Option Plan (the "1996 Option Plan"), as of April 15, 1997, (ii) 110,000 shares of Common Stock issuable upon exercise of certain warrants issuable upon consummation of the Offering, and (iii) 1,100,000 shares of Common Stock issuable upon exercise of the Redeemable Warrants comprising a part of the Units in the Offering. See "Management," "Certain Transactions," "Description of Securities" and "Underwriting." (2) Includes 1,080,000 shares of Common Stock purchased by management as part of the Acquisition that are subject to vesting upon the occurrence of certain events (the "Restricted Stock"). As of February 1, 1997, 198,018 shares of such Restricted Stock had vested. To the extent that any remaining shares of Restricted Stock do not vest by April 30, 2001, such shares will be repurchased by the Company at a price of $.60 per share (the original purchase price paid by management for such shares), and will no longer be outstanding. CVS holds a second warrant (the "Manager Warrant") that will become exercisable commencing April 30, 2001, at $.60 per share, for the same number of shares of Common Stock that do not vest. See "Management," "Certain Transactions" and "Description of Securities." -------------- Except as set forth in the consolidated financial statements or as otherwise indicated herein, the information contained in this Prospectus (i) reflects the conversion, upon completion of the Offering, of all of the Company's issued and outstanding Class A Common Stock, Class B Common Stock and Class C Common Stock (together, the "Class Stock") and all of the Class Stock to be issued and outstanding upon exercise of the CVS Warrant and the Manager Warrant and options under the 1996 Option Plan into a single class of common stock of the Company, par value $.01 per share (the "Common Stock"), (ii) reflects a 0.9- for-one reverse split of the Company's Common Stock effected October 11, 1996, (iii) reflects the exchange of all of the Company's outstanding Series A Preferred Stock (the "Series A Preferred") for 617,083 shares of Common Stock, effected May 27, 1997, and (iv) assumes the Underwriter does not exercise its over-allotment option. When information herein is said to be on a "pro forma" basis, such information gives effect to the Restructuring and the Acquisition accounted for under the purchase method of accounting, as if such events had occurred on January 28, 1996. See "Pro Forma Unaudited Consolidated Statement of Operations." The fiscal year of the Predecessor Companies prior to the Acquisition was the year ended on December 31. In February 1997, the Company changed the end of its fiscal year to the Saturday closest to January 31, in conformity with the general practice in the retail industry, which for the most recent period was February 1, 1997. Unless otherwise indicated, references to 1996 in this Prospectus refer to the twelve months ended February 1, 1997. As a result of the Acquisition, certain financial information for the five months ended May 27, 1995 and May 25, 1996 and for the period from inception (May 26, 1996) to February 1, 1997 is presented in this Prospectus. SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA (IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS AND STORE DATA) <TABLE> <CAPTION> PREDECESSOR COMPANIES COMPANY ------------------------------------------------------------------- ----------- PERIOD FROM FIVE MONTHS EIGHT INCEPTION PRO YEARS ENDED DECEMBER 31, ENDED MONTHS (MAY 26, FORMA(1) ------------------------------------ ---------------- ENDED 1996) TO YEAR ENDED MAY 27, MAY 25, JANUARY 27, FEBRUARY 1, FEBRUARY 1, 1991 1992 1993 1994 1995 1995 1996 1996 1997 1997 ------ ------ ------ ------ ------- ------- ------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............... $456.7 $509.2 $478.5 $474.6 $ 462.4 $124.7 $109.6 $ 367.6 $ 345.1 $ 422.6 Costs and expenses: Cost of goods sold, buying and occupancy costs................. 289.9 327.2 320.5 329.4 317.0 99.9 86.2 238.5 222.1 285.2 Selling, general and administrative expenses.............. 104.8 117.2 120.1 130.2 114.9 45.9 34.8 76.4 75.8 102.4 Depreciation and amortization.......... 14.8 17.4 20.7 22.3 21.4 9.0 4.7 13.3 1.0 1.4 Restricted stock compensation expense.. -- -- -- -- -- -- -- -- 1.5 1.5 Restructuring and asset impairment charges.... -- -- -- -- 182.2 -- -- 182.2 -- -- ------ ------ ------ ------ ------- ------ ------ ------- --------- ---------- Income (loss) from operations............. 47.2 47.4 17.2 (7.3) (173.1) (30.1) (16.1) (142.8) 44.7 32.1 Interest expense, net... 9.4 6.9 5.1 8.4 10.4 3.4 1.6 7.4 5.3 7.5 ------ ------ ------ ------ ------- ------ ------ ------- --------- ---------- Income (loss) before income taxes........... 37.8 40.5 12.1 (15.7) (183.5) (33.5) (17.7) (150.2) 39.4 24.6 Income tax provision (benefit).............. 16.5 17.0 7.0 (3.1) (10.1) (5.5) (6.6) (4.6) 15.5 9.8 ------ ------ ------ ------ ------- ------ ------ ------- --------- ---------- Net income (loss)....... $ 21.3 $ 23.5 $ 5.1 $(12.6) $(173.4) $(28.0) $(11.1) $(145.6) $ 23.9 $ 14.8 ====== ====== ====== ====== ======= ====== ====== ======= ========= ========== Pro forma net income per common share(2)................................................ $ 2.49 $ 1.38 ========= ========== Weighted average common shares outstanding(2)........................................... 9,602,826 10,702,826 ========= ========== Other Data: Income (loss) from operations before depreciation, amortization, restricted stock compensation expense and restructuring charges(3)............ $ 62.0 $ 64.8 $ 37.9 $ 15.0 $ 30.5 $(21.1) $(11.4) $ 52.7 $ 47.2 $ 35.0 ====== ====== ====== ====== ======= ====== ====== ======= ========= ========== </TABLE> <TABLE> <CAPTION> PREDECESSOR COMPANIES COMPANY -------------------------------------------------------------- ----------- PERIOD FROM FIVE MONTHS EIGHT INCEPTION YEARS ENDED DECEMBER 31, ENDED MONTHS (MAY 26, PRO FORMA(1) -------------------------------- --------------- ENDED 1996) TO YEAR ENDED MAY 27, MAY 25, JANUARY 27, FEBRUARY 1, FEBRUARY 1, 1991 1992 1993 1994 1995 1995 1996 1996 1997 1997 ---- ---- ----- ---- ---- ------- ------- ----------- ----------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> STORE DATA: Traditional stores: Open at end of period.. 552 583 631 628 548 567 480 494 461 461 Net sales per square foot for stores open entire year........... $406 $415 $355 $340 $373 -- -- -- -- $389 Change in comparable store sales(4)........ (3.1)% 2.1% (13.8)% (5.1)% (1.5)% 4.4% 3.9% (3.1)% (2.7)% (1.3)% Peak number of seasonal stores during period... 0 32 80 135 227 -- -- 227 376 376 </TABLE> <TABLE> <CAPTION> COMPANY ------------------------------- FEBRUARY 1, 1997 ------------------------------- AS FURTHER ADJUSTED FOR AS OFFERING ADJUSTED FOR AND ACTUAL WARRANTS(5) EXCHANGE(6) ------ ------------ ----------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital................................. $ 83.8 $ 84.6 $ 92.9 Total assets.................................... 172.4 173.2 181.5 Total long-term debt............................ 55.8 55.8 55.8 Total liabilities............................... 128.9 128.9 128.9 Shareholders' equity............................ 43.5 44.3 52.6 </TABLE> - ------- (1) The unaudited pro forma data give effect to the Restructuring and the Acquisition accounted for under the purchase method of accounting, as if such events had occurred on January 28, 1996. See "Pro Forma Unaudited Consolidated Statement of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001016628_homeside_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001016628_homeside_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea862cfe68f33e8eb8950a614d77c0b73c195f5a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001016628_homeside_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information, risk factors and financial statements, including the related notes, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes that the over-allotment option granted to the Underwriters has not been exercised, (ii) reflects the filing of an amendment to the Company's Certificate of Incorporation increasing the number of authorized shares of capital stock, and (iii) gives effect to a 17 for 1 stock split which occurred immediately prior to the date of this Prospectus. THE COMPANY HomeSide is one of the largest full-service residential mortgage banking companies in the United States, formed through the acquisition of the mortgage banking operations of The First National Bank of Boston ("Bank of Boston" or "BKB") and Barnett Banks, Inc. ("Barnett"). HomeSide's strategy emphasizes variable cost mortgage origination and low cost servicing. On a combined basis HomeSide's origination volume and servicing portfolio would have been $14.7 billion and $75.0 billion, respectively, for and as of the year ended December 31, 1995, ranking the Company as the 5th largest originator and 7th largest servicer in the United States for 1995 based on data published by National Mortgage News. For and as of the nine months ended November 30, 1996, HomeSide's loan originations and acquisitions were $18.9 billion and its servicing portfolio was $88.7 billion. The residential mortgage market totaled over $3.6 trillion in 1995 and is the second largest debt market in the world, exceeded only by the United States Treasury market. The residential mortgage market has grown at a compound annual rate of approximately 8% since 1985. HomeSide competes in a mortgage banking market which is highly fragmented with no single company controlling or dominating the market. In 1995 the largest originator represented 5.2% of the market and the largest servicer represented 3.7%, while the top 25 originators and servicers represented 38.1% and 39.1% of their markets, respectively. Residential mortgage lenders compete primarily on the basis of loan pricing and service, making effective cost management essential. The industry has experienced rapid consolidation which has been accelerated by the introduction of significant technology improvements and the economies of scale present in mortgage servicing. The top 25 mortgage loan servicers have increased their aggregate market share from 20.7% in 1990 to 39.1% in 1995. HomeSide's business strategy is to increase the volume of its loan originations and the size of its servicing portfolio while continuing to improve operating efficiencies. In originating mortgages, HomeSide focuses on variable cost channels of production, including correspondent, broker, consumer direct, affinity, and co-issue sources. HomeSide also pursues strategic relationships such as its existing 5-year agreements to acquire and service residential mortgage loans from BKB and Barnett production sources, which, for the period May 31, 1996 through November 30, 1996, represented 19.5% of HomeSide's loan production. Management believes that these variable cost channels of production deliver consistent origination opportunities for HomeSide without the fixed cost investment associated with traditional retail mortgage branch networks. The Company believes that its ongoing investment in technology will further enhance and expand existing processing capabilities and improve its efficiency. Based on independent surveys of direct cost per loan and loans serviced per employee, management believes that the Company has been one of the industry's most efficient mortgage servicers. HomeSide plans to build its core operations through (i) improved economies of scale in servicing costs; (ii) increased productivity using proprietary technology; and (iii) expanded and diversified variable cost origination channels. In addition, the Company intends to pursue additional loan portfolio acquisitions and strategic origination relationships similar to the existing BKB and Barnett arrangements. HomeSide's business activities consist primarily of: - Mortgage production: origination and purchase of residential single family mortgage loans through multiple channels including correspondents, strategic partners (BKB and Barnett), mortgage brokers, co-issue partners, direct consumer telemarketing and affinity programs; - ------------------------------------------------------------------------------- - Servicing: administration, collection and remittance of monthly mortgage principal and interest payments, collection and payment of property taxes and insurance premiums and management of certain loan default activities; - Secondary marketing: sale of residential single family mortgage loans as pools underlying mortgage-backed securities guaranteed or issued by governmental or quasi-governmental agencies or as whole loans or private securities to investors; and - Risk management: management of a program designed primarily to protect the economic performance of the servicing portfolio that could otherwise be adversely affected by increased loan prepayments due to declines in interest rates. Ownership. Prior to the issuance of the Common Stock offered hereby, Thomas H. Lee Equity Fund III, L.P. (the "Fund") and certain affiliates of Thomas H. Lee Company (collectively, "THL") and Madison Dearborn Capital Partners, L.P. ("MDP") collectively owned approximately 33% of HomeSide; Bank of Boston and Siesta Holdings, Inc., an affiliate of Barnett ("Siesta"), each owned approximately 33%; and management of HomeSide and certain unaffiliated investors owned the remainder. THL, MDP, Bank of Boston and Siesta are collectively referred to herein as the "Principal Shareholders." Immediately following the Offering, the Principal Shareholders will own approximately 82% of the outstanding Common Stock (approximately 79% if the Underwriters' over-allotment option is exercised in full). See "Security Ownership of Certain Beneficial Owners and Management." THE OFFERING COMMON STOCK OFFERED....... 7,350,000 shares(a) COMMON STOCK TO BE OUTSTANDING AFTER THE OFFERING................. 42,272,930 shares(b)(c)(d) PROPOSED NYSE SYMBOL....... HSL USE OF PROCEEDS............ $77,875,000 of the net proceeds of this Offering will be used to repay, at the applicable redemption premium of 11 1/4%, $70,000,000 principal amount of the Company's 11 1/4% Senior Secured Second Priority Notes due 2003 (the "Notes") and $37,266,000 of the net proceeds will be used to reduce amounts outstanding under a bank credit facility extended to certain of the Company's subsidiaries. See "Use of Proceeds." - --------------- (a) If the Underwriters exercise their over-allotment option in full, the total number of shares of Common Stock offered will be 8,452,500. (b) Excludes an aggregate of 1,748,569 shares of Common Stock reserved for issuance upon the exercise of options granted under employee stock option plans. See "Management -- Executive Compensation."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017096_votan-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017096_votan-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a73044936df7f2ab84fe8ada4897eca8b9a9a143
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017096_votan-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements of the Company, including the notes thereto, contained elsewhere in this Prospectus. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Prospectus, including the matters set forth under the caption "Risk Factors," which could cause actual results to differ materially from those indicated by such forward-looking statements. THE COMPANY Votan Corporation is a developer of advanced speech technologies utilized in voice verification and speech recognition applications. The Company's primary focus is the development of commercially feasible voice verification applications that address the growing demand for enhanced security of financial transactions, electronic databases and physical facilities. The Company's products are designed to verify the user's identity without the need for cumbersome or invasive procedures. Votan offers its customers either a standard or customized single vendor solution and integrates its voice verification and speech recognition software technology on a single proprietary board. The Company's voice verification technologies and products may be used in a variety of applications to authenticate the identity of a speaker by establishing a match between the speaker's speech patterns and previously stored templates. The Company's technologies consist of proprietary algorithms and patented methods that are highly resistant to extraneous noise interference such as the electronic static of a telephone line, the clamor of a public area (such as a bank lobby or retail store) or unintended non-speech sounds made by the speaker. The ability of Votan's speech technologies to distinguish and ultimately ignore extraneous noises enables the Company's products to perform accurately in noisy, uncontrolled environments and makes its products particularly suitable for a variety of real-world applications. In addition to its voice verification technologies, Votan has developed speech recognition technologies that have been utilized in a number of products for the telecommunications market. These speech recognition technologies complement the Company's voice verification products and applications. The Company intends to actively market its voice verification technologies and products for computer network, electronic commerce, Internet, cellular phone and physical access applications. Votan's initial focus will be to market its voice verification technologies and products directly to banks and other financial institutions for use in a variety of applications, including bank teller verification, home banking, wire transfers, credit cards, smart cards and automatic teller machines ("ATMs"). The Company's voice verification technologies and products are designed to enhance the security of financial transactions and improve productivity by reducing the amount of time required to process a transaction. Votan's voice verification products have been developed and tested for a variety of applications but are still in early stages of commercialization. The Company recently worked with The Chase Manhattan Bank, N.A. ("Chase") to analyze the results of a pilot program which utilized the Company's voice verification products to authenticate the identity of customers prior to a teller transaction. Over 9,000 Chase customers were enrolled in the program. The Company's voice verification and speech recognition technologies have to date been incorporated into various products sold by MOSCOM, the sole stockholder of the Company, to numerous leading telecommunications systems providers, including Siemens AG, Lucent Technologies, Inc. and Alcatel SEL AG. These technologies are being used in a variety of telecommunications applications, particularly in international markets that do not utilize touch tone telephone systems and, therefore, must rely on speech recognition technologies to permit interactive telephonic services such as voice mail. The Company and MOSCOM have entered into certain agreements that will enable the Company to continue to market its products and technologies through MOSCOM's existing channels of distribution. See "Certain Transactions -- MOSCOM Relationship." The key elements of the Company's strategy are to: (i) exploit its technological leadership in the voice verification market; (ii) actively market its proprietary technologies and products directly and through original equipment manufacturers ("OEMs"), value-added resellers ("VARs") and systems integrators for use with computer networks, electronic commerce, cellular phones, the Internet and physical access applications; (iii) focus on direct sales of its proprietary technologies and products to banks and other financial institutions; (iv) leverage MOSCOM's existing relationships with leading telecommunications systems manufacturers and suppliers in order to market its voice verification and speech recognition technologies internationally; and (v) accelerate the development of the auditory model and a line of software-only products. Votan's business and operations were acquired by MOSCOM in September 1991 for $332,730 from a predecessor company that had been engaged in voice verification and speech recognition development since its inception in 1979. The Company has, until recently, conducted its business and operations as the Votan division of MOSCOM. In June 1996, MOSCOM transferred substantially all of the voice verification and speech recognition business, operations (including research and development), assets and liabilities of the Votan division to the Company (the "Formation"). After the consummation of this offering, MOSCOM will own approximately 50% of the outstanding shares of Common Stock of the Company (45% if the Underwriters' over-allotment option is exercised in full). Votan was incorporated in Delaware in June 1996. The Company's executive offices are located at 6920 Koll Center Parkway #214, Pleasanton, California 94566, and its telephone number is (510) 426-5600. NOTICE TO CALIFORNIA AND OREGON INVESTORS Each purchaser of shares of Common Stock in California and Oregon must meet one of the following suitability standards: (i) a liquid net worth (excluding home, furnishings and automobiles) of $250,000 or more and gross annual income during 1995, and estimated during 1996, of $65,000 or more from all sources; or (ii) a liquid net worth (excluding home, furnishings and automobiles) of $500,000 or more. Each California and Oregon resident purchasing shares of Common Stock offered hereby will be required to execute a representation that it comes within one of the aforementioned categories. SUMMARY FINANCIAL DATA The summary information set forth below should be read in conjunction with the financial statements and the notes contained in this Prospectus. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The historical financial information may not be indicative of the Company's future performance and does not necessarily reflect what the financial position and results of operations of the Company would have been had the Company operated as a separate, stand-alone entity during the periods covered. See "Risk Factors -- Recent Organization; Absence of Operating History as an Independent Business; Limited Relevance of Historical Financial Information." (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ------------------------------------------ 1993 1994 1995 1996 -------- ---------- -------- ---------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Sales..................................... $ 517 $ 593 $ 572 $ 246 Gross profit ............................. 210 288 243 18 Engineering and software development, net...................................... 342 579 424 521 Net loss.................................. $(846) $(1,003) $(891) $(1,875) Net loss per share (1).................... $ (1.17) Weighted average shares outstanding (2) .. 1,600 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------ AS ACTUAL ADJUSTED (3) ---------- ------------ (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit) .... $(1,426) $4,978 Total assets.................. 363 5,396 Total liabilities............. 1,459 92 Due to MOSCOM Corporation(4)............... 1,367 -- Total stockholder's equity ... (1,096) 5,304 </TABLE> - ------------ (1) Pursuant to Securities and Exchange Commission (the "Commission") requirements, net loss per share of the Company is presented on a pro forma basis for the most recent year presented. See Note 3 of the Notes to Financial Statements. (2) Gives retroactive effect to the capitalization of the Company and reflects an effective 1,600-to-1 stock split of the Common Stock. See Notes 11 and 12 of the Notes to Financial Statements. (3) Adjusted to give effect to the sale of 1,600,000 shares of Common Stock offered by the Company at an assumed initial public offering price of $5.00 per share (after deducting the estimated underwriting discounts and estimated offering expenses) and the application of the estimated net proceeds therefrom. See "Use of Proceeds." (4) Pursuant to an agreement between MOSCOM and the Company (the "Inter-company Loan"), the Company has agreed to reimburse MOSCOM up to $1.6 million for amounts loaned to the Company to fund operations since the Formation and MOSCOM has agreed to forgive any amounts owed by the Company to MOSCOM in excess of $1.6 million. Such amounts, if any, in excess of $1.6 million will be used to increase the equity of the Company on a dollar-for-dollar basis. See "Use of Proceeds" and "Certain Transactions -- MOSCOM Relationship." THE OFFERING <TABLE> <CAPTION> <S> <C> Common Stock offered by the Company................... 1,600,000 shares Common Stock to be outstanding after this offering ... 3,200,000 shares Use of Proceeds ...................................... For expansion of sales and marketing activities; research and development; repayment of the Inter-company Loan; reimbursement of MOSCOM for certain expenses; and working capital and general corporate purposes. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017334_jyra_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017334_jyra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..87748bc7c83a5f33471ebd72679d67ae9383b354
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017334_jyra_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, "Company" shall include its English subsidiary, Jyra Research Ltd. Each prospective investor is urged to read this Prospectus in its entirety. THE COMPANY The principal executive offices of the Company are located at Hamilton House, 111 Marlowes, Hemel Hempstead, Hertfordshire HP1 1BB, England, and its telephone number is 44 171 371 0702. The Company was incorporated on May 2, 1996 under the laws of Delaware. The Company's plans are to design, develop, manufacture, and market new computer network management systems to (i) maximize network productivity, (ii) minimize network downtime, and (iii) solve network problems caused by the constant increase in network traffic, combined with the growing complexity of networks. These problems result in escalating costs and major systems failures across the corporate spectrum. Management believes that current network management systems do not have the capability to effectively deal with these issues. Management proposes to develop distributed monitoring systems incorporating a proprietary technology linking advanced protocol decodes with expert analysis capabilities to facilitate real-time identification, diagnosis and resolution of network problems. THE OFFERING Common Stock Offered on Behalf of Selling Shareholders.........................1,043,100 shares Common Stock Outstanding Prior to this Offering ...............................6,276,600 shares Common Stock to be Outstanding After this Offering...........................6,276,600 shares USE OF PROCEEDS The Shares being registered pursuant to this prospectus were originally sold to persons residing in Europe who purchased the Shares from the Company in October and November 1996 (the "European Offering"). These Shares will be offered for resale by the purchasers in the European Offering (the "Selling Shareholders"). The Company will receive no proceeds from sales by the Selling Shareholders.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017480_hibbett_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017480_hibbett_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ad6d7d23871242145e6e3526062208647b742b92
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017480_hibbett_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL REFERENCES TO FISCAL YEARS OF THE COMPANY IN THIS PROSPECTUS REFER TO THE FISCAL YEARS ENDED ON THE SATURDAY NEAREST TO JANUARY 31 OF SUCH YEAR, EXCEPT THAT REFERENCES TO THE COMPANY'S FISCAL YEAR 1993 REFER TO THE FISCAL YEAR ENDED ON JANUARY 31 OF SUCH YEAR. ALL REFERENCES IN THIS PROSPECTUS TO THE NUMBER OF STORES CURRENTLY OPERATED BY THE COMPANY ARE MADE AS OF SEPTEMBER 15, 1997. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVERALLOTMENT OPTION IS NOT EXERCISED. THE COMPANY Hibbett Sporting Goods, Inc. ("Hibbett" or the "Company") is a rapidly-growing operator of full-line sporting goods stores in small to mid-sized markets primarily in the southeastern United States. Hibbett's stores offer a broad assortment of quality athletic equipment, footwear and apparel at competitive prices with superior customer service. The Company's merchandise assortment features a core selection of brand name merchandise emphasizing team and individual sports complemented by a selection of localized apparel and accessories designed to appeal to a wide range of customers within each market. The Company believes that its stores are among the primary retail distribution alternatives for brand name vendors that seek to reach Hibbett's target markets. Hibbett has received the Nike Retailer Excellence Award for the Southeast region for nine consecutive years based on its performance in the full-line sporting goods category. The Company operates 96 Hibbett Sports stores as well as nine smaller-format Sports Addition athletic shoe stores and four larger-format Sports & Co. superstores. Hibbett's primary retail format and growth vehicle is Hibbett Sports, a 5,000 square foot store located primarily in enclosed malls as well as dominant strip centers. Although competitors in some markets may carry product lines and national brands similar to Hibbett, the Company believes that Hibbett Sports stores are typically the primary, full-line sporting goods retailers in their markets because of, among other factors, their extensive selection of traditional team and individual sports merchandise and their superior customer service. KEY BUSINESS STRATEGIES UNIQUE EMPHASIS ON SMALL MARKETS. The Company targets markets ranging in population from 30,000 to 250,000. Hibbett will continue to aggressively target markets of this size. By targeting smaller markets, the Company believes that it is able to achieve significant strategic advantages, including numerous expansion opportunities, comparatively low operating costs and a more limited competitive environment than generally faced in larger markets. In addition, the Company establishes greater customer and vendor recognition as the leading full-line sporting goods retailer in the local community. STRONG REGIONAL FOCUS. With over 30 years of experience as a full-line sporting goods retailer in the Southeast, the Company believes that Hibbett benefits from strong name recognition, a loyal customer base and operating and cost efficiencies. Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local and regional differences frequently exist. Management believes that its ability to merchandise to local sporting or community interests differentiates Hibbett from its national competitors. The Company's regional focus also enables it to achieve significant cost benefits including lower corporate expenses, reduced distribution costs and increased economies of scale from its marketing activities. LOW COST OPERATING STRATEGY. In addition to the cost benefits of the Company's small market emphasis and regional focus, Hibbett maintains tight control over its operating costs through the use of its management information systems. The Company's systems assist management in making timely and informed merchandise decisions, maintaining tight inventory control and monitoring store-level and corporate expenses. EMPHASIS ON TRAINING AND CUSTOMER SATISFACTION. Management seeks to exceed customer expectations in order to build loyalty and generate repeat business. The Company strives to hire enthusiastic sales personnel with an interest in sports and provides them with extensive training to create a sales staff with strong product knowledge dedicated to outstanding customer service. Hibbett's training programs focus on both selling skills and continuing product/technical training and are conducted through in-store clinics, video presentations and interactive group discussions. INVESTMENT IN MANAGEMENT AND INFRASTRUCTURE. The Company's experienced management team and its sophisticated information and distribution systems are expected to facilitate the Company's future growth. The Company's headquarters and distribution center has significant expansion potential to support the Company's growth for the foreseeable future. Through its comprehensive information systems, the Company monitors all aspects of store operations on a daily basis and is able to control inventory levels and operating costs. EXPANSION STRATEGY The Company's expansion strategy is to continue to open new Hibbett Sports stores in its target markets. The Company plans to open approximately 32 Hibbett Sports stores in fiscal 1998 (19 have been opened to date) and at least 42 Hibbett Sports stores in fiscal 1999. The Company also opened an additional Sports Addition store in July 1997. The Company anticipates that it will selectively open Sports Addition stores and Sports & Co. superstores as opportunities arise in the future. The Company has identified over 500 potential markets for future Hibbett Sports stores within the states in which it operates and in contiguous states. Hibbett's clustered expansion program, which calls for opening new stores within a two-hour driving radius of another Company location, allows it to take advantage of efficiencies in distribution, marketing and regional management. The Company believes its business and expansion strategies have contributed to its increasing net sales and operating profits. Over the past five fiscal years, net sales have increased at a 24.2% compound annual growth rate to $86.4 million in fiscal 1997, and operating income has increased at a 28.0% compound annual growth rate to $7.2 million in fiscal 1997. The Company increased its store base from 39 stores at the end of fiscal 1993 to 109 stores as of September 15, 1997. The Company's net sales have increased 28.8% to $86.4 million in fiscal 1997 and 34.7% to $52.6 million in the first twenty-six weeks of fiscal 1998 versus the prior periods. The Company's net sales growth has been driven by new store openings and increases in comparable store net sales. The Company opened 22 new stores in fiscal 1997 and 17 new stores in the first twenty-six weeks of fiscal 1998. The Company achieved comparable store net sales increases of 10.2% in fiscal 1997 and 8.8% during the first twenty-six weeks of fiscal 1998. The Company's principal executive offices are located at 451 Industrial Lane, Birmingham, Alabama 35211, and its telephone number is 205-942-4292. THE OFFERING <TABLE> <CAPTION> <S> <C> Common Stock Offered Company.............................. 200,000 shares Selling Stockholders................. 933,197 shares (1) -------- Total.............................. 1,133,197 shares Common Stock to be outstanding after the Offering......................... 6,392,330 shares of Common Stock(1) The net proceeds to the Company from the Offering will be used to fund future growth and for working capital and general corporate purposes. The Company will not receive any of the proceeds from the sale of the shares of Common Stock offered by the Selling Stockholders. See "Use of Proceeds" and "Principal and Selling Stockholders." Use of Proceeds........................ Nasdaq National Market symbol.......... "HIBB" </TABLE> - ------------------------ (1) Excludes 68,676 shares of Common Stock that are issuable under outstanding options that are currently exercisable or will become exercisable within 90 days after the closing of the Offering. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA) <TABLE> <CAPTION> TWENTY-SIX WEEK FISCAL YEAR ENDED PERIOD ENDED -------------------------------------------------------------------- --------------------- <S> <C> <C> <C> <C> <C> <C> <C> JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2, 1993 1994(1) 1995 1996 1997 1996 1997 ----------- ----------- ----------- ------------ ----------- --------- --------- <CAPTION> (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales..................... $36,366 $40,119 $52,266 $67,077 $86,401 $39,019 $52,558 Gross profit.................. 11,368 12,388 16,041 20,435 26,384 11,747 15,877 Operating income.............. 2,693 2,877 4,522 5,642 7,224(2) 3,154(2) 3,892 Interest expense (income), net......................... 325 488 654 1,685(3) 2,642(3) 1,814(3) (11)(3) Income before provision for income taxes................ 2,368 2,389 3,868 3,957 4,582 1,340 3,903 Extraordinary item, net....... -- -- -- -- (1,093)(4) -- -- Net income.................... 1,462(5) 1,469 2,389 2,443 1,737 826 2,410 Net income per share.......... $ .22(5) $ .23 $ .37 $ .42 $ .37 $ .21 $ .38 Weighted average shares outstanding................. 6,505 6,505 6,505 5,838(3) 4,666(3) 3,938(3) 6,264(3) SELECTED OPERATING DATA: Number of stores open at end of period: Hibbett Sports.............. 33 41 52 56 77 62 93 Sports & Co................. 0 0 0 3 4 3 4 Sports Addition............. 6 8 8 8 8 8 9 ----------- ----------- ----------- ------------ ----------- --------- --------- Total..................... 39 49 60 67 89 73 106 ----------- ----------- ----------- ------------ ----------- --------- --------- ----------- ----------- ----------- ------------ ----------- --------- --------- Net sales growth.............. 13.5% 10.3% 30.3% 28.3% 28.8% 32.9% 34.7% Comparable store net sales increase (decrease)(6)...... 10.6% (0.3)% 15.6% 6.2% 10.2% 13.9% 8.8% </TABLE> <TABLE> <CAPTION> AT AUGUST 2, 1997 -------------------------- <S> <C> <C> ACTUAL AS ADJUSTED (7) --------- --------------- <CAPTION> (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Working capital...................................................................................... $ 19,641 $ 24,042 Total assets......................................................................................... 49,994 54,395 Total debt........................................................................................... 704 0 Stockholders' investment............................................................................. 29,789 34,894 </TABLE> - ------------------------ (1) During fiscal year 1994, the Company changed its fiscal year from a twelve-month period ending January 31 to a 52-53 week period ending on the Saturday nearest to January 31. (2) Includes a $513,000 pre-tax gain on the sale of the Company's former headquarters and distribution facility and a one-time pre-tax compensation expense of $462,000 related to stock options issued on August 1, 1996. See "Certain Transactions--Advisory Agreements." (3) In November 1995, the Company completed a series of equity and debt transactions which resulted in the Recapitalization (as defined herein) of the Company and a change in controlling ownership of the common stock outstanding. The Recapitalization included the repurchase and retirement of 5,609,836 shares of common stock for cash and debt and the issuance of 2,886,721 new shares of common stock and debt in exchange for cash. The Recapitalization resulted in a substantial increase in total debt outstanding and a deficit in stockholders' investment. In October 1996, the Company completed its initial public offering of 2,300,000 shares of common stock at the initial public offering price of $16 per share. The net proceeds to the Company of $32,868,000 were used to repay long-term debt and accrued interest thereon, incurred as a result of the Recapitalization. (4) In connection with the initial public offering, a substantial portion of the Company's long-term debt was repaid, resulting in a loss of $1,093,000 (net of applicable tax benefit of $677,000). The loss was classified as an extraordinary item. (5) Prior to July 1, 1992, the Company was a Subchapter S corporation. Under these provisions the taxable income of the Company was included in the individual income tax returns of the stockholders. Effective July 1, 1992, the Company and its stockholders terminated the S corporation election and the Company became a taxable corporation. Thus, the provisions for income taxes for the fiscal year ended January 31, 1993 gives effect to the application of pro forma income taxes that would have been reported had the Company been a taxable corporation for federal and state income tax purposes for such fiscal year. (6) Comparable store net sales data for a period reflect stores open throughout that period and the corresponding period of the prior fiscal year. For the periods indicated, comparable store net sales do not include sales by Sports & Co. superstores or Team Sales (as defined herein). (7) As adjusted to give effect to the sale by the Company of 200,000 shares of Common Stock offered hereby at an assumed public offering price of $29.50 per share (the last reported sale price on October 7, 1997), less the estimated underwriting discount and offering expenses payable by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017550_consolidat_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017550_consolidat_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea5ae01a8f69fd714aab8dda5e73f6828a04f579
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017550_consolidat_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements of the Company contained elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus assumes the Underwriters' over-allotment options are not exercised. Unless the context otherwise requires, references to the Selling Stockholder shall mean Mafco Consolidated Group Inc. and references to the Company shall mean Consolidated Cigar Holdings Inc. and its subsidiaries, including its operating subsidiary Consolidated Cigar Corporation ("Consolidated Cigar"). THE COMPANY Consolidated Cigar Holdings Inc. is the largest manufacturer and marketer of cigars sold in the United States in terms of dollar sales, with a 1996 market share of approximately 23% according to the Company's estimates. The Company markets its cigar products under a number of well-known brand names at all price levels and in all segments of the growing cigar market, including premium large cigars, mass market large cigars and mass market little cigars. The Company attributes its leading market position to the following competitive strengths: (i) well-known brand names, many of which are the leading brands in their category; (ii) broad range of product offerings within both the premium and mass market segments of the United States cigar market; (iii) commitment to and reputation for manufacturing quality cigars; (iv) marketing expertise and close attention to customer service; (v) efficient manufacturing operations; and (vi) an experienced management team. The Company is also a leading producer of pipe tobacco and is the largest supplier of private label and branded generic pipe tobacco to mass market retailers. In addition, the Company distributes a variety of pipe and cigar smokers' accessories. The Company's cigars and pipe tobacco products are marketed under a number of well-known brand names. The Company's premium cigars include the H. UPMANN, MONTECRISTO, DON DIEGO, TE-AMO, SANTA DAMIANA, ROYAL JAMAICA, PRIMO DEL REY and MONTECRUZ brands. The Company's mass market large cigars include the ANTONIO Y CLEOPATRA (also known as AYC), DUTCH MASTERS, EL PRODUCTO, MURIEL, BACKWOODS, SUPER VALUE and SUPRE SWEETS brands. The Company's mass market little cigars include the DUTCH TREATS, SUPER VALUE and SUPRE SWEETS brands. The Company's pipe tobacco products include the MIXTURE NO. 79 and CHINA BLACK brands. The Company believes that the growing cigar market and increased demand for cigars continue to offer the Company substantial growth opportunities. Recently, cigar smoking has gained popularity in the United States, resulting in a significant increase in consumption and retail sales of cigars, particularly for premium cigars. Management believes that this increase in cigar consumption and retail sales is the result of a number of factors, including: (i) the increase in the number of adults over the age of 50 (a demographic group believed to smoke more cigars than any other demographic segment) and (ii) the emergence of an expanding base of younger affluent adults who have recently started smoking cigars and who tend to smoke premium cigars. The Company believes the increase in cigar smoking is in large part attributable to a positive and improving image of cigar smoking resulting from increased publicity, including the success of cigar magazines, the increased visibility of use by celebrities and the proliferation of "Cigar Smokers" dinners and other special events for cigar smokers. Consumption of cigars in the United States is currently increasing following a decline in consumption at a compound annual unit rate of 3.6% from 1964 to 1993. Consumption of cigars increased to 4.0 billion units in 1995 from 3.4 billion units in 1993, with substantial growth in premium cigars. Preliminary industry statistics indicate that consumption of cigars increased to 4.5 billion units in 1996. Consumption of premium cigars increased at a compound annual unit rate of 2.4% from 1976 to 1991, at a compound annual unit rate of 8.9% from 1991 to 1994 and at a unit rate of 30.5% from 1994 to 164.3 million units in 1995. Preliminary industry statistics indicate that consumption of premium cigars increased at a unit rate of approximately 67.0% from 1995 to 275.0 million units in 1996. The mass market segment of the industry has also experienced increased consumption with a compound annual unit rate of 7.2% from 1993 to 3.8 billion units in 1995, with consumption of mass market large cigars increasing at a compound annual unit rate of 8.8% from 1993 to 2.4 billion units in 1995. Preliminary industry statistics indicate that consumption of mass market cigars increased at a unit rate of approximately 11.0% from 1995 to 4.2 billion units in 1996, with consumption of mass market large cigars increasing at a unit rate of approximately 13.0% from 1995 to 2.7 billion units in 1996. Consumption of large (premium and mass market) cigars increased at a unit rate of approximately 17.1% from 1995 to 3.0 billion units in 1996. Retail sales of cigars, which generally declined from 1964 to 1987 and grew modestly from 1987 to 1993, experienced significant growth from 1993 to 1995 with retail sales of cigars outpacing unit growth since 1991. This growth in retail sales of cigars was primarily the result of a combination of increased prices and a shift in the sales mix to more expensive cigars. Total retail sales have increased at a compound annual rate of 9.3% from 1991 to $1.0 billion in 1995, while the corresponding compound annual unit rate was only 3.6%. Preliminary industry statistics indicate that total retail sales increased 24.4% from 1995 to $1.3 billion in 1996. The Company believes that unit consumption of cigars and retail sales in the cigar industry should continue to increase in 1997 at rates similar to those experienced by the industry in 1996 and is very optimistic about the long-term future of the cigar industry and the Company. There can be no assurance, however, that unit consumption and retail sales of cigars will continue to increase in the future. See "Risk Factors--Declining Market for Cigars through 1993" and "--Extensive and Increasing Regulation of Tobacco Products." The Company's financial results reflect the strength of the cigar industry and the Company's leadership position in that industry. In 1996, the Company had net sales of $216.9 million, operating income of $54.1 million and net income of $29.8 million, representing increases of 37.1%, 72.1%, and 113.9%, respectively, from 1995 results. For the year ended December 31, 1996, cigars accounted for approximately 92% of the Company's net sales. The Company believes that its competitive strengths, together with the following initiatives, will enable the Company to accelerate its growth, increase its profitability and enhance its market share: CAPITALIZE ON GROWTH OPPORTUNITIES IN THE PREMIUM MARKET SEGMENT. The Company intends to capitalize on the rapidly growing premium cigar market by (i) increasing the Company's production capabilities through its recently completed facility in Jamaica and continued expansion of its facilities in the Dominican Republic and Honduras, (ii) improving the market's awareness and recognition of its premium cigars through targeted marketing programs and (iii) expanding its premium cigar product offerings through the introduction of super-premium cigars, such as H. UPMANN CHAIRMAN'S RESERVE and PLAYBOY by DON DIEGO, and the extension of its existing brands. EXPAND MASS MARKET CIGAR BUSINESS. The Company will seek to expand further its mass market cigar business by leveraging its well-known brand names and capitalizing on the growth in the premium segment with brand extensions in higher priced categories within the mass market segment. In addition, the Company intends to introduce new flavors, sizes, packaging and other new features and improvements to its existing mass market cigar products. The Company plans to increase production capacity for its mass market cigars by acquiring additional manufacturing equipment. BROADEN MASS MARKET CIGAR DISTRIBUTION CHANNELS. The Company intends to broaden its existing relationships and actively develop new relationships with mass market retailers. The Company is also pursuing opportunities in other distribution channels, including marketing its mass market cigars to convenience stores to take advantage of the increase in consumer demand for mass market cigars in such locations. IMPROVE MANUFACTURING PROCESSES AND RAW MATERIAL PROCUREMENT. The Company continually seeks ways to improve further the efficiency of its manufacturing operations in order to ensure quality and realize cost savings. To ensure the quality of its raw materials while also maximizing cost savings, the Company will (i) continue to develop long-term relationships with tobacco suppliers, (ii) expand its commercial and technical ties with local growers, (iii) obtain its tobacco raw materials from a variety of suppliers and growers and (iv) take advantage of its large purchasing requirements to negotiate favorable terms from suppliers. PURSUE SELECTIVELY STRATEGIC ACQUISITIONS. The Company intends to pursue selectively strategic acquisitions in the cigar and pipe tobacco products industry to expand its market share and product lines and benefit from synergies. RECENT DEVELOPMENTS On January 21, 1997, Mafco Consolidated Group announced that Mafco Holdings, its 85% stockholder, had proposed a transaction (the "Going Private Transaction") to the Board of Directors of Mafco Consolidated Group pursuant to which Mafco Consolidated Group would acquire all publicly held shares of its common stock. On February 20, 1997, Mafco Consolidated Group announced that it had entered into a definitive Agreement and Plan of Merger with Mafco Consolidated Holdings Inc. and MCG Acquisition Inc. pursuant to which the Going Private Transaction would be consummated. Consummation of the Offerings is not contingent upon consummation of the Going Private Transaction and there can be no assurance that the Going Private Transaction will be completed. OWNERSHIP OF THE COMPANY The following chart sets forth in simplified form the ownership structure of the Company immediately following consummation of the Offerings and prior to consummation of the Going Private Transaction. Ronald O. Perelman 100% Mafco Holdings Inc. ("Mafco Holdings") 85% Mafco Consolidated Group Inc. ("Mafco Consolidated Group") 63.9% CONSOLIDATED CIGAR HOLDINGS INC. (THE "COMPANY") 100% Consolidated Cigar Corporation ("Consolidated Cigar") The Company is a holding company with no business operations of its own. The Company's only material asset is all of the outstanding capital stock of Consolidated Cigar, through which the Company conducts its business operations. On August 21, 1996, the Company completed an initial public offering (the "IPO") of 6,075,000 shares of Class A Common Stock. Immediately after consummation of the Offerings, Mafco Consolidated Group will beneficially own all of the remaining 19,600,000 outstanding shares of Class B Common Stock, which will represent approximately 94.7% of the combined voting power of the outstanding shares of Common Stock (or 18,850,000 shares, representing approximately 94.1% of the combined voting power if the Underwriters' over-allotment options are exercised in full). Mafco Consolidated Group is 85% owned through Mafco Holdings by Ronald O. Perelman. See "Security Ownership of Certain Beneficial Holders" and "Certain Relationships and Related Transactions." The Company was incorporated on January 6, 1993 under the laws of the state of Delaware. The Company's principal executive offices are located at 5900 North Andrews Avenue, Suite 700, Fort Lauderdale, Florida 33309-2369 and its telephone number is (954) 772-9000. THE OFFERINGS The offering of 4,000,000 shares of Class A Common Stock initially being offered in the United States (the "U.S. Offering") and the offering of 1,000,000 shares of Class A Common Stock initially being offered in a concurrent international offering outside the United States (the "International Offering") are collectively referred to as the "Offerings." The closing of each of the Offerings is conditioned upon the closing of the other Offering. <TABLE> <CAPTION> <S> <C> U.S. Offering .....................4,000,000 shares International Offering ............ 1,000,000 shares Common Stock to be outstanding after the Offerings .............. 11,075,000 shares of Class A Common Stock (a) 19,600,000 shares of Class B Common Stock (b) ------------ 30,675,000 shares of Common Stock (a) ============ Voting rights ..................... The Class A Common Stock and Class B Common Stock vote as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to ten votes. All of the shares of Class B Common Stock are owned by Mafco Consolidated Group, an indirect 85% owned subsidiary of Mafco Holdings. Immediately after consummation of the Offerings, Mafco Consolidated Group will beneficially own shares of Class B Common Stock representing approximately 94.7% of the combined voting power of the outstanding shares of Common Stock (approximately 94.1% if the Underwriters' over-allotment options are exercised in full). Use of Proceeds ................... The Company will not receive any of the proceeds from the sale of the shares. See "Use of Proceeds." New York Stock Exchange symbol .... CIG </TABLE> - ------------ (a) Based on the number of shares outstanding as of February 28, 1997. Excludes an aggregate of 3,000,000 shares of Class A Common Stock reserved for issuance under the Consolidated Cigar Holdings Inc. 1996 Stock Plan (the "Stock Plan"). As of February 28, 1997, 1,537,500 options were outstanding, none of which were exercisable as of such date. (b) Each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock and converts automatically into one share of Class A Common Stock upon a transfer to any person other than a Permitted Transferee (as defined herein) of Mafco Consolidated Group. See "Description of Capital Stock -- Class A Common Stock and Class B Common Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017609_service_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017609_service_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..17793bba18231cc8fe2118cf6476b25b562a71e8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017609_service_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Company" or "Service Experts" shall mean Service Experts, Inc. Unless otherwise indicated, the information in this Prospectus does not give effect to the Underwriters' over-allotment option. The Company completed the initial public offering of its Common Stock on August 16, 1996 (the "IPO"). Simultaneously with the closing of the IPO, the Company acquired 12 heating, ventilating and air conditioning ("HVAC") service and replacement businesses and Contractor Success Group, Inc. ("CSG") (collectively the "Predecessor Companies") in exchange for shares of Common Stock and cash (the "Combination"). See "Business -- Acquisitions" for a list of the Predecessor Companies. The term "Service Centers" refers to HVAC service and replacement businesses operated by the Company. THE COMPANY The Company is one of the leading providers of residential HVAC services and replacement equipment in the United States, and management believes that the Company will continue to be a leading consolidator of the fragmented HVAC service and replacement industry. The Company currently operates 32 Service Centers in 17 states. The Service Centers install, service and maintain central air conditioners, furnaces and heat pumps, primarily in existing homes. Management estimates that over 80% of the Company's pro forma net revenue in 1996, after giving effect to all completed and pending acquisitions, was derived from replacing, maintaining and servicing HVAC equipment at existing residences. The Company focuses on the service and replacement segment of the HVAC industry rather than the new construction segment because management believes that the service and replacement segment offers higher margins and exposes the Company to less credit risk. The service and replacement segment offers more attractive pricing because of customers' demands for immediate, convenient and reliable service. CSG was formed in 1991 to offer HVAC companies proprietary products as well as marketing, management, educational and advisory services not available from industry trade associations. CSG's products and services are designed to provide its members with a competitive advantage by utilizing proven marketing and operational strategies and by enabling members to operate their businesses with a higher degree of professionalism. All of the Service Centers are members of CSG and operate in accordance with its recommended methods and procedures. CSG currently has over 270 members serving distinct market areas of the United States. Management estimates that the aggregate annual revenues of the CSG members not owned by the Company are in excess of $500 million. The HVAC service and replacement industry is large and growing. Management estimates, based upon industry information, that the market for the service and replacement of HVAC systems in existing homes is approximately $24 billion annually. The service and replacement segment of the industry has increased in size as a result of the aging of the installed base of residential systems, the introduction of new, energy efficient systems and the upgrading of existing homes to central air conditioning. Management believes that the fragmentation of the HVAC industry creates an opportunity for further acquisitions of HVAC companies. According to Air Conditioning, Heating and Refrigeration News, over 30,000 independent HVAC contractors are currently operating in the United States. Management believes that these businesses are typically closely held, single-center operations that serve a limited geographic area. The businesses are heavily dependent upon referrals to generate business. In many cases, these businesses are operated by service technicians who lack the business and marketing expertise to expand their businesses, increase their profitability and compete effectively with larger operators. ACQUISITION STRATEGY AND RECENT ACQUISITIONS Management believes that the Company is positioned to capitalize on the fragmentation and growth of the HVAC service and replacement industry. In addition, management believes that the Company's visibility within the industry and its operational philosophy of decentralized operations and centralized administration provide the Company with a competitive advantage, particularly in enabling the Company to identify and acquire well-managed, profitable HVAC businesses. By allowing former owners of Service Centers the opportunity to continue managing their business after acquisition and to increase their focus on customer service rather than administration, management believes that the Company offers owners of independent HVAC businesses an attractive alternative. Management intends to develop a national presence through acquisitions and a national reputation for superior, high quality service that will enable the Company to appeal to a large number of customers. The Company has implemented an aggressive acquisition strategy, acquiring 25 HVAC businesses (the "Acquired Companies" and, together with the Predecessor Companies, the "Subsidiaries") since the IPO with aggregate revenue for the 12 months ended December 31, 1996 of approximately $79.1 million. The Company currently has agreements in principle to acquire 11 HVAC businesses (the "Pending Acquisitions") with aggregate revenue in 1996 of approximately $35.7 million. The Pending Acquisitions are expected to close during the first six months of 1997. See "Business -- Acquisitions" for a list of the Acquired Companies and the companies included in the Pending Acquisitions. The Company's 1996 pro forma net revenue, reflecting the acquisition of the Subsidiaries and eight Pending Acquisitions, was approximately $172.3 million. See the Pro Forma Combined Financial Statements and the Notes thereto for a listing of the companies included. Management targets for acquisition as "hubs" CSG members that are geographically desirable, financially stable and whose management is experienced in the industry and CSG operating methods. Of the Company's 32 Service Centers and the 11 companies to be acquired in the Pending Acquisitions, all but two are CSG members. The Company also plans to increase its market presence through acquisitions of other HVAC businesses that have large customer bases and that present opportunities for overhead savings or asset sales to improve profitability. In many cases, the assets of acquired "spoke" companies will be combined with the operations of existing Service Centers. In addition, management believes that it will be able to improve the performance of these acquired companies through the implementation of the methods and procedures developed by CSG. The Company's principal executive offices are located at 111 Westwood Place, Suite 420, Brentwood, Tennessee 37027, and its telephone number is (615) 371-9990. THE OFFERING Common Stock offered by the Company..... 1,850,000 shares Common Stock offered by the Selling Stockholders............................ 650,000 shares Common Stock to be outstanding after the Offering................................ 13,671,722 shares(1) Use of Proceeds......................... $15.5 million to fund the cash portion of the consideration for the Pending Acquisitions, including the repayment of certain indebtedness arising from the Pending Acquisitions, certain other indebtedness and capital lease obligations, and the remainder for future acquisitions and general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol........... SERX - --------------- (1) Does not include 758,202 shares of Common Stock issuable upon the exercise of stock options granted under the Company's stock option plans and outstanding warrants. See "Management -- Compensation Pursuant to Plans" and "Description of Capital Stock -- Stock Purchase Warrants." Also does not include shares of Common Stock to be issued in connection with the Pending Acquisitions. See "Business -- Acquisitions." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following table presents summary financial data of the Company. The Company was incorporated on March 27, 1996. On August 21, 1996, and simultaneously with the closing of the IPO, the Company acquired the Predecessor Companies in the Combination. The acquisitions of the Predecessor Companies have been accounted for using the historical cost basis of the Predecessor Companies in accordance with the Securities and Exchange Commission (the "Commission") Staff Accounting Bulletin No. 48 ("SAB 48"). In accordance with the provisions of Commission Staff Accounting Bulletin No. 97 ("SAB 97"), the historical financial statements of the Company for periods prior to August 21, 1996 are the combined financial statements of AC Service & Installation Co., Inc. and Donelson Air Conditioning Company, Inc. (collectively, the "Acquiring Company"). In addition, the historical financial statements of the Company for all periods presented include the financial statements of Custom Air Conditioning, Inc. and Freschi Air Systems, Inc. (collectively, the "Pooled Companies"), which were acquired effective December 1, 1996 in business combinations accounted for as poolings of interests, and the operations of all other Subsidiaries are included from their respective effective dates of acquisition. The following should be read with the historical financial statements and the Pro Forma Combined Financial Statements and Notes thereto appearing elsewhere in this Prospectus. <TABLE> <CAPTION> PRO FORMA YEAR ENDED DECEMBER 31, 1996, GIVING EFFECT TO: YEAR ENDED DECEMBER 31, --------------------------------------------- --------------------------- PREDECESSOR ACQUIRED PENDING 1994 1995 1996 COMPANIES(1) COMPANIES(2) ACQUISITIONS(3) ------- ------- ------- ------------ ------------ --------------- <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net revenue..................... $22,193 $24,876 $46,856 $76,984 $140,654 $172,303 Cost of goods sold.............. 15,999 16,916 30,198 49,250 90,656 113,627 Gross margin.................... 6,194 7,960 16,658 27,734 49,998 58,676 Selling, general and administrative expenses....... 5,723 7,162 12,837 18,999 36,619 42,487 Income from operations.......... 471 798 3,821 8,735 13,379 16,189 Interest (expense) income, net........................... (64) (56) 271 459 527 610 Pro forma net income(4)......... 281 466 2,794 6,176 8,487 10,166 Pro forma net income per share(5)...................... $ .63 $ .67 $ .71 $ .77 Pro forma weighted average shares outstanding(5)......... 4,451 9,220 11,885 13,256 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------------------------------- PRO FORMA AS ACTUAL PRO FORMA(3) ADJUSTED(3)(6) ----------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)......................... $12,387 $(1,157) $ 37,733 Total assets...................................... 68,504 100,434 131,845 Total debt........................................ 275 8,344 -- Stockholders' equity.............................. 53,071 72,656 112,411 </TABLE> - --------------- (1) Gives effect to the Combination which was accounted for using the historical cost basis of the Predecessor Companies in accordance with SAB 48. In addition, the pro forma information is based on certain assumptions and adjustments. See Notes to the Pro Forma Combined Financial Statements. (2) Gives effect to the acquisition of the Predecessor Companies and the Acquired Companies (excluding the Pooled Companies) as if such transactions were completed as of January 1, 1996. In addition, the pro forma information is based on certain assumptions and adjustments. Does not include the results of two Acquired Companies which are immaterial to the pro forma presentation. See the Pro Forma Combined Financial Statements and the Notes thereto. (3) Gives effect to the acquisition of the Predecessor Companies and the Acquired Companies (excluding the Pooled Companies) and to the Pending Acquisitions, as if such transactions were completed as of January 1, 1996. In addition, the pro forma information is based on certain assumptions and adjustments. Does not give effect to the acquisition of two Acquired Companies and three Pending Acquisitions which are immaterial to the pro forma presentation. See the Pro Forma Combined Financial Statements and the Notes thereto. (4) Historical net income and income tax expense have been omitted because these amounts are not meaningful as a result of the different tax status of the Subsidiaries. Pro forma net income represents the effect of taxing the entities under Subchapter C of the Internal Revenue Code. (5) The computation of pro forma net income per share is based upon 13,256,235 weighted average shares of Common Stock outstanding, which includes (i) 4,522,636 shares distributed to the former stockholders of the Predecessor Companies, (ii) 1,462,100 shares outstanding held by existing stockholders of the Company prior to the IPO, (iii) 2,587,500 shares sold in the IPO, (iv) 3,540,034 shares issued to former stockholders of the 23 Acquired Companies and in the eight Pending Acquisitions listed on page F-2 hereof, (v) 1,066,170 shares being issued in this Offering and (vi) 77,795 shares which reflect the dilutive effect of the options and warrants. (6) Adjusted to give effect to the application of the net proceeds to the Company of this Offering, assuming a public offering price of $23.25.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017747_trigon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017747_trigon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7ff04508d7cf7e441e1d35d06333fbfb20c71f78
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017747_trigon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES THERETO OR AS OTHERWISE NOTED HEREIN, THE INFORMATION CONTAINED IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) GIVES EFFECT TO THE CONSUMMATION OF THE TRANSACTIONS DESCRIBED UNDER "THE DEMUTUALIZATION." PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN "RISK FACTORS." FOR PURPOSES OF THIS PROSPECTUS, THE TERM THE "COMPANY" OR "TRIGON" REFERS, AT ALL TIMES PRIOR TO THE EFFECTIVE DATE (THE "EFFECTIVE DATE") OF THE DEMUTUALIZATION (AS DEFINED BELOW), TO BLUE CROSS AND BLUE SHIELD OF VIRGINIA ("VIRGINIA BCBS") AND ITS SUBSIDIARIES, COLLECTIVELY, AND, AT ALL TIMES ON OR AFTER THE EFFECTIVE DATE, TO TRIGON HEALTHCARE, INC. ("TRIGON HEALTHCARE") AND ITS SUBSIDIARIES, COLLECTIVELY, INCLUDING TRIGON INSURANCE COMPANY ("TRIGON INSURANCE," THE SUCCESSOR TO VIRGINIA BCBS). MEMBER ENROLLMENT INFORMATION FOR THE FEDERAL EMPLOYEE PROGRAM, MID-SOUTH INSURANCE COMPANY, A SUBSIDIARY OF TRIGON HEALTHCARE, AND CERTAIN NATIONAL GROUP ACCOUNTS ARE NOT MAINTAINED ON THE COMPANY'S SYSTEMS. MEMBER ENROLLMENT INFORMATION PRESENTED HEREIN FOR SUCH GROUPS ARE CALCULATED BASED ON POLICY COUNTS PROVIDED TO THE COMPANY FOR THESE GROUPS WHICH ARE CONVERTED TO A MEMBERSHIP NUMBER THROUGH THE USE OF ACTUARIALLY DETERMINED CONVERSION FACTORS. FOR PURPOSES OF THIS PROSPECTUS, THE TERM "MEMBER" REFERS TO INDIVIDUALS OR GROUPS COVERED BY ANY OF THE COMPANY'S PRODUCTS AND THE TERM "ELIGIBLE MEMBER" REFERS TO THOSE INDIVIDUALS OR ENTITIES HOLDING MEMBERSHIP INTERESTS IN VIRGINIA BCBS AS OF DECEMBER 31, 1995, WHICH WILL BE CONVERTED INTO SHARES OF COMMON STOCK OR CASH AS A RESULT OF THE DEMUTUALIZATION. THE TERM "COMMON STOCK" MEANS CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE, OF TRIGON HEALTHCARE. CERTAIN DEFINED TERMS RELATING TO THE BUSINESS OF THE COMPANY ARE SET FORTH IN THE GLOSSARY. SEE "GLOSSARY." THE COMPANY OVERVIEW Trigon is the largest managed health care company in Virginia, serving approximately 1.9 million members primarily through statewide and regional provider networks. The Company's membership represents approximately 26% of the Virginia population and 31% of the Virginia population in those areas where Trigon has the exclusive right to use the Blue Cross and Blue Shield service marks and tradenames. Within Virginia, Trigon provides a comprehensive spectrum of managed care products through three network systems with a range of utilization and cost containment controls. The Company is pursuing a growth strategy which includes expansion within Virginia and outside of Virginia into other southeastern and mid-Atlantic states. As of September 30, 1996, the Company's network systems consisted of: the health maintenance organization ("HMO") networks which, with 251,399 members, are the Company's most tightly managed and cost efficient networks; the preferred provider organization ("PPO") networks which, with 774,473 members, offer greater choice of providers than Trigon's HMOs and may include a primary care physician point of service ("POS") feature; and the participating provider ("PAR") network which, with 615,655 members, is the Company's broadest and most flexible network. The Company also serves 218,814 additional members through Medicare supplemental plans (128,006 members), third-party administration of health care claims (40,383 members) and through Mid-South Insurance Company, a Fayetteville, North Carolina-based health and life insurance company, which was acquired by the Company in 1996 (50,425 members). Within the Company's managed care product offerings, customers may choose between at-risk arrangements (in which the Company bears the cost of providing specified health care services for a fixed payment) and self-funded arrangements (in which the customer bears all or a portion of the risk). As of September 30, 1996, 47.6% of members were covered under at-risk arrangements and 41.8% were covered under self-funded arrangements, with the remaining 10.6% covered under the Federal Employee Program ("FEP") administered under contract with the Blue Cross and Blue Shield Association (the "BCBSA"). Trigon, formerly doing business as Blue Cross and Blue Shield of Virginia, was first established in Virginia in 1935, and retains its license to use the Blue Cross and Blue Shield service marks and tradenames for the purpose of doing business throughout Virginia other than certain northern Virginia suburbs adjacent to Washington, D.C. The portion of the Commonwealth in which the Company has the exclusive right to use the Blue Cross and Blue Shield service marks and tradenames includes approximately 5.6 million of the Commonwealth's population of 6.6 million. In June 1994, the Company adopted the name Trigon to reflect its intention to pursue growth opportunities outside of Virginia, where it does not have the right to use the Blue Cross and Blue Shield service marks and tradenames. TRANSITION TO MANAGED CARE In 1990 the Company began to institute greater managed care controls in all of its product lines and networks, focusing in particular on its PPO and HMO networks and, depending on market readiness, designing, pricing and marketing its products to encourage members to migrate into these more tightly managed networks where the Company is better able to manage health care costs. While members decide which network to select, the Company generally offers more attractive rates in its more tightly managed networks to encourage members to choose these products. This strategy contributed to accelerated enrollment growth for the Company's HMO and PPO networks and a decline in enrollment in the Company's more traditional PAR network, resulting in a compound annual growth rate in total enrollment of 2.7% from December 31, 1991 through September 30, 1996. Trigon operates six HMOs which are licensed to serve most areas of Virginia. Trigon has the largest number of HMO members in Virginia. Trigon's total HMO enrollment has grown from 60,154 members at December 31, 1991 to 251,399 members as of September 30, 1996, representing a compound annual growth rate of 35.1%. The Company's PPO network system is the largest in Virginia. Trigon's total PPO enrollment has grown from 396,584 members at December 31, 1991 to 774,473 members as of September 30, 1996, representing a compound annual growth rate of 15.1%. Membership in the Company's HMOs and PPOs increased from 27.9% of total enrollment at December 31, 1991 to 55.1% as of September 30, 1996. Trigon's more traditional products are offered through its PAR network which is the Company's largest network. As a result of the Company's strategy of encouraging members to migrate to its more tightly managed networks, total membership in the PAR network decreased from 951,020 members at December 31, 1991 to 615,655 members at September 30, 1996. The Company believes that it will be necessary to significantly expand its market share in the HMO market, in part by successfully transitioning its PAR and PPO members into HMOs, if it is to succeed in retaining a high overall market share in its existing geographic markets. See "Risk Factors." Trigon also offers several specialty health care and related products, such as dental, wellness, mental health and life, accident and disability insurance coverage. Trigon has the largest membership base in Virginia, which generally allows the Company to negotiate contracts with its Virginia providers that specify favorable rates and incorporate utilization management and other cost controls. As a result of its extensive networks, managed care expertise and broad product offerings, the Company competes favorably in all of its Virginia lines of business including the individual, small, mid-sized and large employer groups and state and federal agency markets. In addition, Trigon's emphasis on utilization management and cost control, as well as favorable pricing arrangements with providers and hospitals, led to a decrease in the Company's medical loss ratio (medical costs expense as a percentage of premium revenues) from 1991 through 1994. However, the medical loss ratio has increased in both 1995 and through the first nine months of 1996, primarily as a result of greater pressure on premium levels due to increased competition and an increase in medical costs, which, in part, reflects industry trends. See "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." GROWTH STRATEGY The Company is pursuing the following growth strategy: o OFFERING A CHOICE ALONG A CONTINUUM OF MANAGED CARE PRODUCTS -- from the broad PAR network to the tightly managed HMO -- to meet the demands of its current customers and the needs of new customers. The breadth and flexibility of the Company's benefit plan options are designed to appeal to a broad variety of employer groups and individuals with differing product and service preferences, including freedom of choice, cost containment, scope of coverage and risk assumption. The Company believes its broad range of products gives it a unique market advantage, allowing Trigon to become the sole managed care provider to many of its customers. o ENCOURAGING MEMBERS TO TRANSITION FROM TRADITIONAL HEALTH INSURANCE INTO A CONTINUUM OF MANAGED CARE PRODUCTS in Virginia by using the Company's expertise in designing, pricing and marketing managed care products, and utilizing this expertise to enter into other states that remain dominated by traditional insurance coverage. Products such as PPO, POS and Blue Advantage (a combination PPO/HMO product) are designed to facilitate the transition of members to managed care. (Bullet) CONTINUALLY INCREASING THE MANAGED CARE CONTENT AND COST EFFECTIVENESS OF ITS PPO AND HMO NETWORKS AND PRODUCTS. To enhance the cost effectiveness of its PPO networks, the Company offers an optional POS feature which utilizes a primary care physician to coordinate all health care services for the member. Within its PPOs and HMOs, the Company is utilizing physician profiling techniques, risk-sharing arrangements, ancillary networks for high volume or high cost services, wellness programs and more aggressive fee scheduling to reduce health care costs. o GROWING ITS BUSINESS IN VIRGINIA by increasing utilization of the Company's HMO products particularly in the more densely populated areas of Eastern and Central Virginia, entering into new markets such as Medicaid and Medicare HMOs, increasing utilization of the Company's PPO and POS products in rural communities, which have been slow to embrace managed care, and forming collaborative relationships with provider groups and acquiring other managed care companies. o EXPANDING OUTSIDE OF VIRGINIA to markets that have certain of the following characteristics: reasonably large populations, low market penetration of managed care products and a reasonable regulatory environment. The Company considers the southeastern and mid-Atlantic United States to be attractive and believes that it can utilize its expertise in marketing, underwriting, network development and cost control in these markets. The Company intends to expand its out-of-state managed care business primarily through a combination of acquisitions and strategic alliances with managed care companies, traditional indemnity companies whose customers can be transitioned to managed care, other health care providers and other Blue Cross and Blue Shield companies. In line with this strategy, Trigon completed the purchase of Mid-South Insurance Company ("Mid-South") in February 1996. Mid-South provides health insurance coverage to 50,425 members primarily through PPOs in rural and suburban markets in North Carolina, South Carolina, Georgia, Virginia and Tennessee. The Company currently has no other material commitments or agreements with respect to expansion outside of Virginia; however, the Company is in the process of evaluating several potential acquisition opportunities outside of Virginia. There can be no assurance that the Company's efforts to expand outside of Virginia will be successful. See "Risk Factors" and "Business -- Strategy." THE DEMUTUALIZATION The Company's conversion from a mutual insurance company to a stock insurance company (the "Demutualization") pursuant to a Plan of Demutualization (the "Plan of Demutualization") was approved on September 6, 1996 by the members of Virginia BCBS entitled to vote. On November 5, 1996, the Virginia State Corporation Commission (the "State Corporation Commission") entered a final order approving the Plan of Demutualization after a public hearing. The principal purpose of the Demutualization is to allow the Company access to the equity capital markets in order to finance its expansion plans and to enhance its strategic position in the consolidating managed care industry. The Demutualization will also enable the Company to enter into strategic alliances, including acquisitions, by issuing shares of its stock. Prior to the Demutualization, sources of financing were limited to internally generated funds or borrowings. Additionally, by creating a holding company structure through demutualization, the Company will no longer be subject to the regulatory limitations on subsidiary investments that currently restrict its ability to effect acquisitions. The Demutualization and related transactions are expected to be tax-free transactions for the Company. The Plan of Demutualization requires that, pursuant to applicable Virginia law, the Treasurer of the Commonwealth of Virginia must receive in connection with the Demutualization an amount (the "Commonwealth Payment") equal to the surplus, computed in accordance with generally accepted accounting principles, of Virginia BCBS on December 31, 1987, plus $10 million. The Commonwealth Payment will be approximately $175 million. The Commonwealth Payment is in addition to any shares of Common Stock to which the Commonwealth of Virginia is entitled as an Eligible Member. The Plan of Demutualization provides that at least one-half of the Commonwealth Payment will be made in cash and the remainder will be in cash or shares of Class C Common Stock, par value $.01 ("Class C Common Stock") (valued at the initial per share price of the Common Stock to the public in the Offerings). The Company expects to use proceeds of the Offerings to pay $65.0 million of the Commonwealth Payment and to fund the balance from borrowings under a revolving credit agreement or other available cash. Consequently, the Company does not expect to issue Class C Common Stock as part of the Commonwealth Payment. However, the Company has not received any binding commitments with respect to such revolving credit agreement and there can be no assurance that the Company will be able to enter into such an agreement in connection with the Offerings. In this event, the Company would issue Class C Common Stock in payment of one-half of the Commonwealth Payment and use proceeds of the Offerings and other available cash to fund the balance. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Liquidity and Capital Resources."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017793_sun_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017793_sun_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e8bc21c9d8a37c05ab175b5b47b3d07adbbbcec4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017793_sun_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus is based on the assumption that the Underwriters (as defined herein) will not exercise their over-allotment option. In August 1997, the Board of Directors declared a three for two stock split of the Company's common stock, par value $1.00 per share, effected in the form of a 50% common stock dividend paid in September 1997. Where appropriate, amounts throughout this Prospectus have been adjusted to reflect the stock split. ^ The Company The Company, a New Jersey corporation, is a bank holding company headquartered in Vineland, New Jersey with two subsidiaries, Sun National Bank (the "Bank"), a national banking association and Sun Capital Trust, a Delaware business trust. At June 30, 1997, the Company had total assets of $585.2 million, total deposits of $467.4 million and total shareholders' equity of $29.1 million. Substantially all of the Bank's deposits are federally insured by the Bank Insurance Fund ("BIF"), which is administered by the Federal Deposit Insurance Corporation ("FDIC"). The deposits acquired pursuant to the Oritani branch purchase are federally insured by the Savings Association Insurance Fund ("SAIF") which is also administered by the FDIC. The Company's principal business is to serve as a holding company for the Bank. As a registered bank holding company, the Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the "Federal Reserve"). The Company was incorporated, and the Bank was chartered, in 1985. In April 1995, the Company changed its name from Citizens Investments, Inc. to its present name. It is the Company's strategy to expand its ^ banking market throughout southern and central New Jersey. Since 1994, the Company has successfully completed the acquisition of two commercial banks with a total of $117 million in assets as well as four purchase and assumption transactions in which the Company acquired fifteen branches with $229 million in deposits. The Company opened three de novo branches: Cape May in March 1997, Toms River in June 1997 and Long Beach Island in June 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." In addition, the Company entered into an agreement to acquire eleven branches, with $177 million in deposits, from The Bank of New York, New York, New York (see "Oritani and Bank of New York Branch Purchases"). Through its acquisition and expansion program, the Company has significantly increased its asset size as well as the Bank's retail network. At December 31, 1993, the Company's total consolidated assets were $112.0 million as compared to $585.2 million at June 30, 1997. The Bank provides community banking services through 28 branches located in southern New Jersey. The Bank offers a wide variety of consumer and commercial lending and deposit services. The loans offered by the Bank include commercial and industrial loans, commercial real estate loans, home equity loans, mortgage loans and installment loans. The Bank also offers deposit and personal banking services including checking, regular savings, money market deposits, term certificate accounts and individual retirement accounts. Through a third party arrangement, the Bank also offers mutual funds, securities brokerage and investment advisory services. The Bank considers its primary market area to be the New Jersey counties of Atlantic, Burlington, Camden, Cape May, Cumberland, Mercer, Ocean and Salem. The Bank's market area contains a diverse base of customers, including agricultural, manufacturing, transportation and retail consumer businesses. The executive office of the Company is located at 226 Landis Avenue, Vineland, New Jersey 08360 and its telephone number is (609) 691-7700. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Financial Summary <TABLE> <CAPTION> At or for the Six Months Ended June 30, At or for Year Ended December 31, ------------------ --------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 ------------------ --------- ---------- ----------- ----------- ----------- (Dollars in thousands, except per share amounts and ratios) <S> <C> <C> <C> <C> <C> <C> Net income .............. $ 1,482 $ 3,013 $ 2,819 $ 1,840 $ 1,128 $ 813 Net income per share (fully diluted) ........ 0.47 0.99 0.97 0.90 0.64 0.46 Total assets ............ 585,219 436,795 369,895 217,351 112,015 104,162 Loans receivable (net) . 363,705 295,501 183,634 134,861 83,387 82,080 Shareholders' equity .... 29,071 27,415 24,671 20,571 12,306 11,178 Return on average assets ................. 0.62% 0.74% 1.03% 1.09% 1.04% 0.74% Return on average equity ................. 10.69% 11.99% 12.42% 11.74% 9.61% 7.56% Net yield on interest-earning assets 4.33% 4.57% 5.30% 5.39% 5.29% 4.96% </TABLE> - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ^ The Offering <TABLE> <CAPTION> <S> <C> Common Shares Offered................................... ^ 900,000 shares of Common Stock. Common Shares Outstanding prior to the Offering......... ^ 2,918,125 shares Common Shares Outstanding after the Offering............ ^ 3,818,125 shares. Assumes no exercise of the Underwriters' over-allotment option to purchase up to ^ 135,000 Common Shares. See "Underwriting." Estimated Net Proceeds to the Company.................. ^ $ . Assumes no exercise of the Underwriters' over-allotment option to purchase up to ^135,000 Common Shares. See "Underwriting." Dividends on Common Shares.............................. Historically, the Company has not paid cash dividends on its Common Shares. The Company paid a 5% stock dividend on October 30, 1996 and a 5% stock dividend on June 25, 1997. In August 1997, the Company declared a three for two common stock split effected by means of a 50% stock dividend paid in September 1997. Future declarations of dividends by the Board of Directors will depend upon a number of factors, including the Company's and the Bank's financial condition and results of operations, investment opportunities available to the Company or the Bank, capital requirements, regulatory limitations, tax considerations, the amount of net proceeds retained by the Company and general economic conditions. See "Price Range of Common Shares; Dividends," and "Risk Factors -- Limitations on Payment of Dividends." Use of Proceeds......................................... The proceeds received by the Company from the sale of the Common Shares will be used to contribute capital to the Bank. The Bank intends to use the capital for general corporate purposes, primarily to support The Bank of New York branch purchase. See "Use of Proceeds" and "Oritani and Bank of New York Branch Purchases." Nasdaq National Market Symbol........................... Application has been made to have the Common Shares approved for quotation on the Nasdaq National Market under the symbol "SNBC." Purchases by Directors and Officers of the The Underwriters have reserved 225,000 Common Company................................................. Shares offered in the Offering (25% of the Shares to be offered) for sale at the public offering price to directors, officers and employees of the Company and the Bank (and their associates). See "Underwriting". </TABLE> ^ Risk Factors Prospective investors should carefully consider the matters set forth under "Risk Factors," beginning on page 11. - --------------------------------------------------------------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017904_excelsior_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017904_excelsior_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f8a7cce60854215c4fafa6b7492e07a84d64cf1e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017904_excelsior_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) REFLECTS A 2-FOR-3 REVERSE STOCK SPLIT EFFECTED ON MAY 22, 1997 AND (III) ASSUMES PRO FORMA ISSUANCE OF 3,066,527 SHARES OF COMMON STOCK UPON THE CONVERSION OF THE OUTSTANDING SHARES OF THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK (THE "PREFERRED STOCK"), WHICH UNDER THE TERMS OF THE PREFERRED STOCK, WILL OCCUR AUTOMATICALLY UPON THE CLOSING OF THIS OFFERING. SEE "DESCRIPTION OF CAPITAL STOCK." FORWARD-LOOKING STATEMENTS ARE MARKED BY AN ASTERISK (*) AND ARE INTENDED TO BE COVERED BY CERTAIN SAFE HARBOR PROVISIONS OF THE FEDERAL SECURITIES LAWS, SEE "FORWARD-LOOKING STATEMENTS." THE COMPANY Excelsior-Henderson Motorcycle Manufacturing Company (the "Company"), a development stage company, plans to manufacture, market and sell premium heavyweight cruiser and touring motorcycles with a brand that evokes an authentic American motorcycling heritage and lifestyle.* The Company's motorcycles will feature current technology but will reflect distinctive designs, styling and names reminiscent of the motorcycles produced in the early part of this century by Excelsior Supply Company ("Excelsior Supply") under the brand names Excelsior and Henderson. Excelsior Supply ceased business in 1931. The Company is a new company incorporated in 1993 and is not related to the former Excelsior Supply, except that the Company believes it has secured certain trademarks previously used by the former Excelsior Supply. During the early 1900s, Excelsior Supply was one of the "Big Three" motorcycle manufacturers, along with Harley-Davidson and Indian. The motorcycles manufactured by Excelsior Supply were considered to be among the best motorcycles of their time, set many performance records and were among the originators of the classic American heavyweight cruiser motorcycle design. The Company intends to commence mass production of its initial motorcycle, a heavyweight cruiser named the Excelsior- Henderson Super X (the "Super X"), in late 1998.* The Company's strategy is to market a brand that is based on the authentic American motorcycling heritage of Excelsior Supply and to manufacture products that represent a distinct alternative to the products of Harley-Davidson. To create a strong brand identity for its motorcycles and related products and to establish the authenticity of the Company's brand, the Company intends to foster among consumers and dealers a culture and lifestyle that are reminiscent of the classic American motorcycling heritage.* Such heritage refers to the "soul" of the traditional American motorcycling experience, fostered by motorcycle events, motorcyclists and media, which associates riding motorcycles with individuality and freedom. Owner customization of motorcycles is also an important part of this heritage, and the Company intends to design its motorcycles and to make custom parts and accessories available to facilitate customization.* In addition, the Company intends to sponsor and promote a motorcycle owners' group, rallies and a magazine for owners and enthusiasts.* The Company plans to manufacture and market only heavyweight cruiser and touring motorcycles. Heavyweight motorcycles are defined as motorcycles with an engine displacement of 651cc or greater and represent approximately half of retail motorcycle unit sales in the overall U.S. market. The market segment of cruiser and touring models comprise approximately 80% of retail unit sales in the U.S. heavyweight motorcycle market. Based on information in Harley-Davidson's public reports, in 1996 U.S. registrations of new heavyweight motorcycles increased by approximately 9.6% (to 165,700 units) over 1995 registrations, and U.S. registrations of new heavyweight motorcycles have increased by 59% from 1992 through 1996. In 1996, Harley-Davidson reported a 48% market share of new U.S. heavyweight motorcycle registrations. Trade publications and dealers have reported that there are substantial waiting lists at the dealers for certain models of Harley-Davidson's motorcycles. The Super X is a new motorcycle featuring modern engineering and performance whose design is inspired by the classic American heavyweight styling features of the motorcycles produced by Excelsior Supply and Henderson, including a large displacement "X-twin" engine, a sleekly styled, teardrop shaped fuel tank, full valanced fenders, a curved front frame that follows the contour of the front fender, a low slung seat in which a rider will sit into the bike, a leading link front suspension with fork tubes that pass through the front fender, a tank-mounted instrument panel, wide profile tires and modern, high gloss, single and two-tone paint finishes. The Super X design incorporates a proprietary long-stroke engine designed to produce a distinctive sound, as well as a proprietary transmission and electronic fuel injection system and computer controlled-engine management system. The Company has developed several generations of prototypes of the Super X and first unveiled a running prototype at the Sturgis Motorcycle Rally in Sturgis, South Dakota in August 1996. The Company is building its nationwide dealer network and plans to have dealers in the major population centers and in the major motorcycling markets.* The Company will also have dealers along the major motorcycle traveling routes, providing a nationwide network of dealers to serve the Company's customers.* The Company has identified a dealer profile for the dealers it believes will be successful in selling its products and is currently soliciting dealers in the key areas who meet this profile. The Company began signing agreements with its initial dealers in the second quarter of 1997. Prior to production, the Company expects to select 80 to 100 dealers from the over 3,000 authorized dealers of new motorcycles in the United States, and will then add dealers as its production increases.* The Company intends to manufacture its motorcycles in a 160,000 square foot manufacturing and administrative facility under construction in Belle Plaine, Minnesota.* The Company has signed a Construction Agreement and a Lease Agreement with a real estate development company, which has commenced construction of the facility. The facility has been designed to have a production capacity of up to 20,000 motorcycles per year, prior to any facility expansion. The Company anticipates relocating its operations to the facility during late 1997.* The Company, which was incorporated in Minnesota in December 1993 under the name "Hanlon Manufacturing Company," changed its name to Excelsior-Henderson Motorcycle Manufacturing Company in March 1996. The Company currently is located at 607 West Travelers Trail, Burnsville, Minnesota 55337. Its telephone number is (612) 894-9229.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017906_snyder_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017906_snyder_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..63792256c45ad57ac89dfde4330fddae16faec23
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017906_snyder_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (a) assumes no exercise of the Underwriters' over-allotment options and (b) assumes that MMD, Inc. ("MMD"), Brann Holdings Limited ("Brann"), American List Corporation ("American List"), Sampling Corporation of America ("SCA") and Bounty Group Holdings Limited ("Bounty") (collectively, the "New Acquisitions"), because the acquisition of each such company was accounted for as a pooling of interests, were all wholly- owned subsidiaries of the Company. As used herein, the "Company" means Snyder Communications, Inc., including the New Acquisitions and its other directly and indirectly owned subsidiaries. In this Prospectus, references to "dollar" and "$" are to United States dollars, and the terms "United States" and "U.S." mean the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. References to "United Kingdom" and "U.K." refer to the United Kingdom of Great Britain and Northern Ireland. THE COMPANY The Company is a rapidly growing international provider of complete marketing solutions primarily to Fortune 500 size companies that outsource elements of their global sales and marketing efforts. The Company integrates its various capabilities, including its proprietary distribution channels, into innovative, value-added marketing programs that supplement its clients' sales and marketing activities. The Company identifies high-value consumer segments; designs and implements marketing programs to reach them; initiates and closes sales on behalf of its clients; and provides customer care and retention services. The Company's resources include proprietary databases of targeted consumers and small businesses, database management services, proprietary product sampling programs and publications, sponsored information displays in proprietary locations, marketing program consultants, field sales and marketing representatives, inbound and outbound teleservice representatives, and direct mail and fulfillment capabilities. By expanding the range of its capabilities, its specialized distribution channels and its geographic presence, the Company seeks to provide a single source for its clients' outsourced sales and marketing needs. The Company's revenues, exclusive of acquisitions, in 1995 and 1996 were $42.9 million and $82.8 million, respectively. The Company's consolidated revenues, restated to include revenues from the New Acquisitions for all reported periods, increased from $169.6 million in 1995 to $235.8 million in 1996, and from $106.3 million in the first six months of 1996 to $132.6 million in the first six months of 1997. To date, substantially all of the Company's revenues have been generated from operations in the U.S. and U.K. The Company's clients primarily are global companies with large annual sales and marketing expenditures facing significant competitive pressures to retain or expand market share. The clients operate in various industries, including telecommunications, pharmaceuticals, consumer packaged goods, financial services and gas and electric utilities. Based on 1996 revenues, the ten largest clients of the Company, listed alphabetically, were AT&T, Barclays Bank, Bayer, Bristol Myers Squibb, MCI, Microsoft, Novartis Consumer Health, Procter & Gamble, Royal Mail and Zurich Municipal. The Company's marketing programs utilize the resources of one or more of the Company's five service groups: Direct Services, Media and Sampling Services, Medical Services, Data Delivery Services and International Services. Prior to September 1996 when the Company had its initial public offering of common stock, substantially all of the Company's capabilities were located in the United States and consisted of field sales representatives and teleservices associates in its Direct Services group and information displays and sampling pack programs in its Media and Sampling Services group. In order to broaden the range of services it provides to its clients and to expand geographically, since January 1, 1997, the Company has made the six major acquisitions described below. To complement and supplement its existing management depth, the Company retained the key members of management of each of the acquired companies. . In January, the Company established its Medical Services group through the acquisition of MMD, which provides outsourced medical sales and marketing services and has over 1,200 detailing representatives conducting sales and marketing programs for some of the world's premier pharmaceutical companies. In August, the Company expanded the Medical Services group's operations into the U.K. through the acquisition of Halliday Jones Sales Limited ("Halliday Jones"). Halliday Jones has approximately 300 representatives providing pharmaceutical detailing services for its clients, including major pharmaceutical companies. The acquisitions of MMD and Halliday Jones not only afford the Company's preexisting clients the services of the two companies' detailing representatives but also expand the Company's business relationships within the pharmaceutical industry. . In March, the Company established its International Services group through the acquisition of Brann, a leading provider of complete marketing solutions in the U.K., offering a full range of creative, telemarketing and database services to over 70 companies, government agencies and charitable organizations. The acquisition of Brann significantly strengthens the Company's presence in the U.K. The Company believes that Brann's infrastructure, existing client relationships and position as a leading provider of complete marketing solutions in the U.K. provide the Company with the opportunity to significantly expand its relationships with existing multinational clients and to attract new European-based and multinational clients. . In July, the Company expanded its data delivery service capabilities and established its Data Delivery Services group through the acquisition of American List, which develops, maintains and markets some of the largest and most comprehensive databases of high school, college, and pre-school through junior high school students in the United States. The databases currently contain information on more than 30 million individuals. The Company expects that access to American List's proprietary databases, in addition to the Company's existing database, will augment the Company's ability to market products and services on behalf of the Company's clients to targeted customers and will enable the Company to offer additional marketing services to the existing customers of American List. . In July, the Company expanded its Media and Sampling Services group through the acquisitions of SCA and Bounty. SCA is a U.S. provider of targeted product sampling programs for packaged goods manufacturers, with distribution channels that include over 150,000 separate locations reaching primary and secondary schools, daycare/preschool centers, colleges and immigrant organizations. Bounty is a U.K.-based provider of targeted product sampling services and proprietary health-oriented publications to expectant mothers, new mothers and parents of toddlers in the U.K. and Ireland. The Company believes that SCA's and Bounty's services and products will complement its existing product sampling programs and that the acquisition of Bounty, along with that of Brann, positions the Company for continued growth in Europe. GROWTH STRATEGY The Company believes that it is well-positioned to capitalize on five dynamic social and commercial trends: the outsourcing of marketing and sales functions; changes in demographics; changes in the regulatory environment; globalization; and increased demand for direct marketing services in the U.K. and Europe. In order to capitalize on these trends and continue its growth, the Company plans to broaden the range of services offered to existing and future clients, expand its geographic presence and pursue strategic acquisitions. Broaden Range of Services and Leverage Client Base. The Company intends to continue its growth by providing a broader range of services to its existing clients. Through its recent acquisitions and internal growth, the Company has significantly increased the types of services and the range of targeted marketing channels that the Company can offer its clients. The Company is actively leveraging its demonstrated success on behalf of existing clients by offering such clients additional Company services. The Company also believes it can more successfully attract new clients as a result of its increased capabilities. Expand Geographic Presence. The Company intends to continue expanding the geographic markets in which it provides services. Many of the Company's existing and potential clients are large companies that market products globally. Developing an expanded geographic market reach will enable the Company to offer single-source solutions for its clients' global outsourced sales and marketing needs. In furtherance of this strategy, the Company's recent acquisitions of Brann and Bounty significantly enhanced the Company's presence in the U.K. In addition, the Company believes that expansion into and operating in foreign markets gives the Company an understanding of local markets and cultures which is essential for designing global sales and marketing programs. The Company expects that its further geographic expansion will be accomplished by performing services for existing clients in new geographic markets and by acquiring companies that perform services in new geographic markets similar to those already provided by the Company. Pursue Strategic Acquisitions. The Company intends to continue its growth through strategic acquisitions. The Company expects to pursue acquisition opportunities that give the Company additional proprietary channels of distribution to important demographic segments, offer complementary services or replicate the Company's existing marketing capabilities in unserved geographic markets. The Company believes that the fragmentation in the marketing services industry provides opportunities for the Company to selectively pursue complementary domestic and international acquisitions. Although there are no definitive agreements, understandings or arrangements at this time, the Company is currently and expects to continue evaluating acquisition opportunities. The Company also seeks growth in order to obtain the benefits of economies of scale. In certain of the Company's service groups, such as Media and Sampling Services and Data Delivery Services, a high proportion of the Company's costs is fixed. The Company believes it will realize improved profit margins by spreading these costs over a larger revenue base. The Company anticipates that its existing infrastructure in these groups can accommodate additional clients and additional services. The Company's corporate headquarters are located at Two Democracy Center, 6903 Rockledge Drive, Bethesda, Maryland, 20817, and its telephone number is (301) 468-1010. THE OFFERINGS The offering of 6,105,276 shares of the Company's Common Stock, par value $.001 per share, in the United States and Canada (the "U.S. Offering") and the offering of 1,526,319 shares of the Common Stock outside the United States and Canada (the "International Offering") are collectively referred to herein as the "Offerings." <TABLE> <S> <C> Common Stock Offered: By the Company.......... 1,850,000 shares By the Selling Stockholders........... 5,781,595 shares ---------------- Total................. 7,631,595 shares ================ Common Stock to be Outstanding After the Offerings(1)............. 48,904,920 shares Use of Proceeds........... The net proceeds to be received by the Company from the Offerings will be used to fund potential acquisitions and for working capital, capital expenditures and general corporate purposes. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholders. See "Use of Proceeds." New York Stock Exchange Symbol................... SNC </TABLE> - -------- (1) Includes 500,000 shares issuable upon exercise of outstanding options as indicated in "Selling Stockholders." Does not include (i) 5,447,890 shares of Common Stock reserved for issuance upon exercise of outstanding options and (ii) 2,146,171 shares of Common Stock available for future issuance under the Company's 1996 Stock Incentive Plan. See "Shares Eligible for Future Sale." SUMMARY FINANCIAL AND OPERATING DATA In July 1997, the Company acquired American List and SCA in merger transactions and Bounty in a share exchange transaction, each of which has been accounted for as a pooling of interests for accounting and financial reporting purposes. In addition, in January 1997 and March 1997, respectively, the Company acquired MMD and Brann in transactions accounted for as poolings of interests for accounting and financial reporting purposes. The New Acquisitions are discussed in "Business--General" and in Note 1 to the Consolidated Financial Statements of the Company contained elsewhere in this Prospectus. The following table sets forth summary consolidated financial data of the Company as of and for each of the years in the five year period ended December 31, 1996, and for the six month periods ended June 30, 1996 and June 30, 1997, after giving effect to the New Acquisitions. The table below gives effect to all of the New Acquisitions, as if they had occurred on January 1 of each period presented. The table also sets forth unaudited pro forma income statement data for each of the years in the five year period ended December 31, 1996, and for the six month periods ended June 30, 1996 and June 30, 1997, which gives pro forma effect to federal, state and city income taxes as if all operations of the Company were subject to such taxes for all periods presented. The income statement data for each of the years in the three year period ended December 31, 1996 and the balance sheet data as of December 31, 1996 and December 31, 1995 are derived from the audited Consolidated Financial Statements of the Company. All other income statement and balance sheet data presented are derived from unaudited Consolidated Financial Statements of the Company and in the opinion of the management of the Company include all adjustments, consisting of normal and recurring adjustments, which are necessary to present fairly the results of operations and financial position of the Company for each period presented. The following summary financial data should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. Table on following page <TABLE> <CAPTION> FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997(8) ----------- ----------- ----------- -------- -------- -------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA:(1)(2) Revenues............... $22,430 $38,594 $105,146 $169,642 $235,811 $106,341 $132,630 Operating expenses: Cost of services....... 9,911 20,874 61,177 106,993 161,387 73,303 86,862 Selling, general and administrative expenses.............. 5,465 7,789 21,076 30,960 48,116 21,768 28,035 Compensation to stockholders.......... 955 1,381 4,169 7,709 2,223 906 -- Acquisition costs(3)... -- -- -- -- -- -- 16,181 ------- ------- -------- -------- -------- -------- -------- Income from operations............ 6,099 8,550 18,724 23,980 24,085 10,364 1,552 Interest expense, net.. 107 75 936 1,569 2,084 1,469 85 ------- ------- -------- -------- -------- -------- -------- Income before taxes and extraordinary item.... 5,992 8,475 17,788 22,411 22,001 8,895 1,467 Income tax provision .. 2,244 2,975 5,405 6,101 5,603 2,003 5,734 ------- ------- -------- -------- -------- -------- -------- Income (loss) before extraordinary item.... 3,748 5,500 12,383 16,310 16,398 6,892 (4,267) Extraordinary item(4).. -- -- -- -- (1,215) -- -- ------- ------- -------- -------- -------- -------- -------- Net income (loss) ..... $ 3,748 $ 5,500 $ 12,383 $ 16,310 $ 15,183 $ 6,892 $ (4,267) ======= ======= ======== ======== ======== ======== ======== Unaudited: Pro forma net income (loss)(5)............. $ 3,758 $ 5,170 $ 10,717 $ 13,813 $ 11,464 $ 5,126 $ (4,875) ======= ======= ======== ======== ======== ======== ======== Pro forma fully diluted net income (loss) per share(6).............. $ 0.10 $ 0.14 $ 0.27 $ 0.33 $ 0.27 $ 0.12 $ (0.11) ======= ======= ======== ======== ======== ======== ======== Pro forma net income before extraordinary item and excluding non-recurring acquisition costs(5).. $ 3,758 $ 5,170 $ 10,717 $ 13,813 $ 12,679 $ 5,126 $ 10,557 ======= ======= ======== ======== ======== ======== ======== Pro forma fully diluted net income per share before extraordinary item and excluding non-recurring acquisition costs(6).. $ 0.10 $ 0.14 $ 0.27 $ 0.33 $ 0.30 $ 0.12 $ 0.23 ======= ======= ======== ======== ======== ======== ======== Shares used in computing pro forma fully diluted per share amounts(6)...... 37,557 37,557 39,928 41,531 42,913 41,228 45,518 <CAPTION> AS OF DECEMBER 31, AS OF ----------------------------------------------------- JUNE 30, 1992 1993 1994 1995 1996 1997(8) ----------- ----------- ----------- -------- -------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA:(1)(2) Total assets........... $17,539 $25,278 $ 61,439 $ 90,608 $149,261 $157,507 Long-term debt(7)...... 3,234 2,638 15,584 29,354 28,796 16,361 Total equity........... 8,967 10,740 19,133 21,225 63,474 70,535 </TABLE> Footnotes on following page (1) Prior to the consummation on September 24, 1996 of the reorganization (the "Reorganization") in which the Company acquired all of the limited partnership interests in Snyder Communications, L.P. (the "Partnership") and all of the issued and outstanding stock of the corporate general partner, Snyder Marketing Services, Inc. ("SMS"), the operations of the Company were conducted through the Partnership. The Partnership was owned 63.85% by SMS and 36.15% by the limited partners. The Reorganization resulted in the stockholders of SMS exchanging 100% of their SMS stock for Common Stock simultaneously with the limited partners exchanging their limited partner interests in the Partnership for Common Stock. After the Reorganization, the Company owned 100% of the stock of SMS and, directly and indirectly through its ownership of SMS, 100% of the interest of the Partnership. Because of the continuity of ownership, the Reorganization was accounted for by combining the assets, liabilities, and operations of SMS, the Partnership and the Company at their historical cost basis. Accordingly, for the periods prior to the Reorganization, the income statement and balance sheet data include a combination of the accounts of SMS and the Partnership. Prior to its acquisition by the Company, American List had a fiscal year which ended in February. The accompanying balance sheet data as of December 31 reflects the combination of American List's accounts as of the following February month-end while the income statement data for each of the years ended December 31 reflects the combination of American List operations for the twelve months which end in the February following the respective income statement date. The income statement data for the six months ended June 30, 1996 and 1997 reflects the combination of American List's trailing six months ending August 30, 1996, for 1996 and the six months ending June 30, 1997 for 1997 while the balance sheet data as of June 30, 1997 reflects the combination of American List data as of June 30, 1997. (2) On January 25, 1994, Brann acquired all of the issued and outstanding common stock of Brann Direct Marketing Limited ("Brann Limited") in a transaction accounted for as a purchase, while on August 24, 1995, Bounty acquired all of the outstanding common stock of Bounty Holdings Limited ("Bounty Limited") in a transaction accounted for as a purchase. Accordingly, financial data for Brann is included only for periods from January 26, 1994, and financial data for Bounty is included only for periods from August 25, 1995. (3) These costs are directly related to the acquisitions of MMD in January 1997 and Brann in March 1997. They include primarily banking fees, other professional service fees, certain United Kingdom excise and transfer taxes, as well as a non-cash charge of $9.1 million related to the accelerated vesting of options held by Brann employees. Net income and net income per share for the six months ended June 30, 1997, exclusive of these acquisition costs was $10.6 million and $0.23 per share, respectively. The Company recorded $17.0 million (before tax) in acquisition and related costs during July 1997 that are related to the acquisitions of American List, SCA and Bounty in July 1997. (4) An extraordinary item was recorded in conjunction with the early redemption of subordinated debentures which were due to related parties. The extraordinary item is net of a $0.8 million tax benefit and consists of prepayment penalties and the write-off of unamortized discount and debt issuance cost. Pro forma fully diluted net income before extraordinary item per share was $0.30 for the year ended December 31, 1996. (5) Prior to the Reorganization and the New Acquisitions, the Company, MMD and, since January 1, 1995, SCA's principal operations were not subject to federal or state corporate income taxes. In addition, both Brann and Bounty are foreign subsidiaries, subject to different statutory income tax rates. The pro forma provision for income taxes is calculated using a combined federal and state tax rate of 39.8% for 1994, 38.4% for 1995, 42.4% for 1996 and 42.4% and 40.2% for the six months ended 1996 and 1997, respectively, as if the Company, MMD and SCA had been taxable C corporations for each of the periods presented. (6) The shares used in computing pro forma fully diluted net income per share amounts assume that the Reorganization and the New Acquisitions had occurred at the beginning of each of the periods presented and reflect the issuance of additional shares as a result of the Company's initial public offering on September 24, 1996, the impact of stock options and certain share repurchases. (7) Includes mandatorily redeemable preferred stock of $4.6 million, $4.6 million, $6.3 million and $1.2 million at December 31, 1994, December 31, 1995, December 31, 1996 and June 30, 1997, respectively. In October 1995 and January 1994, Bounty and Brann, respectively, issued fixed cumulative mandatorily redeemable preferred stock. The preferred stock does not carry voting rights unless dividends are in arrears, which has not occurred, and is not convertible into common stock. Accordingly, the preferred stock is classified as long-term debt. The Bounty and Brann preferred stock was redeemed in July 1997 and March 1997, respectively. (8) As of August 31, 1997, the Company had consolidated current assets and noncurrent assets of $89.0 million and $71.2 million, respectively. Also at August 31, 1997, the Company had current liabilities and noncurrent liabilities of $76.6 million and $9.2 million, respectively. For the two months ended August 31, 1997, the Company recorded $47.7 million in consolidated revenues and $15.8 million in gross profit. The Company recorded $17.0 million (before tax) in acquisition and related costs during the two months ended August 31, 1997 related to the acquisitions of American List, Bounty and SCA. For the two-month period ended August 31, 1997, the Company had income before taxes and acquisition and related costs of $7.2 million and a loss before taxes of $9.8 million. For the same period, the Company had net income before acquisition and related costs of $4.3 million and a net loss of $9.7 million.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001017968_edgewater_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001017968_edgewater_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d79e9cf9b9f568ebdc8a17168d8e73e971539f70
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001017968_edgewater_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the pro forma and historical financial statements and the related notes thereto appearing elsewhere in this Prospectus. Prospective investors should carefully consider the matters set forth under "Risk Factors" herein. All references to the "Company" or "StaffMark" refer to StaffMark, Inc. and where appropriate, its subsidiaries and their respective operations and include the Company's predecessors. Unless otherwise indicated, the information in this Prospectus assumes no exercise of options granted or reserved under the Company's 1996 Stock Option Plan. Industry information used in this Prospectus was obtained from industry publications that the Company believes to be reliable, but such information has not been independently verified. THE COMPANY StaffMark is a leading provider of diversified staffing, professional and consulting services to businesses, professional and service organizations, medical niches and governmental agencies. The Company offers these services through over 160 branches located in 21 states, Canada and the United Kingdom. Since the Company's initial public offering in October 1996 (the "Initial Public Offering"), the Company has grown both internally and through the acquisition of 15 additional staffing and professional service companies with 68 branches and 1996 revenues of approximately $168.4 million. The Company believes that this balance of internal growth and selective acquisitions will best allow the Company to capitalize on its growth opportunities. For the year ended December 31, 1996 and the six months ended June 30, 1997, the Company's combined revenues and operating income were $198.4 million and $11.2 million, and $160.0 million and $9.7 million, respectively. The Company's services are provided through three divisions: Commercial, Professional and Information Technology ("Professional/IT") and Specialty Medical. The Commercial division provides clerical and light industrial staffing services and generated approximately 88.1% and 76.4% of the Company's combined revenues for the year ended December 31, 1996 and for the six months ended June 30, 1997, respectively. The Professional/IT division provides information technology staffing, consulting and support services, as well as professional and technical services and generated 4.5% and 16.8% of the Company's combined revenues for the year ended December 31, 1996 and for the six months ended June 30, 1997, respectively. The Specialty Medical division provides clinical trial support services, medical office staffing, physical and occupational therapists and speech pathologists and generated 7.4% and 6.8% of the Company's combined revenues for the year ended December 31, 1996 and for the six months ended June 30, 1997, respectively. The Company's operating strategy is to continue to: (i) develop long-term relationships with its customers as a primary provider of quality, customized and diversified staffing and professional services; (ii) adopt on a Company-wide basis the best practices, policies and procedures of existing StaffMark operations and newly acquired companies; (iii) increase operating efficiencies and provide a strong level of corporate support by combining a number of general and administrative functions at the corporate level and by reducing or eliminating redundant functions; and (iv) maintain a decentralized entrepreneurial environment that rewards performance and attracts and retains self-motivated, achievement-oriented individuals. The Company's internal growth strategy consists of the following key components: (i) focusing on further penetration in existing geographic markets by continuing to provide high-quality services, by enhancing and expanding new services and by spinning off new branch offices; (ii) expanding and cross-developing the Professional/IT and Specialty Medical services offered by the Company and increasing the percentage of revenues and gross profits derived from these divisions; and (iii) increasing Vendor-on-Premises ("VOP") relationships which the Company believes provide a more stable source of revenues and attractive operating profits. The Company believes that it is successfully implementing its internal growth strategy as each of its three operating divisions achieved growth rates in excess of 20% for the six months ended June 30, 1997 as compared to the same period in 1996. The Company's acquisition strategy is to acquire and integrate independent staffing and professional service companies with strong management, profitable operating results and recognized local and regional presence. The Company pursues acquisitions that expand the geographic scope of its operations, increase its penetration of existing markets, offer complementary services and expand the percentage of revenues generated by the Professional/IT and Specialty Medical divisions. Since the Initial Public Offering in October 1996, the Company has implemented this strategy and completed 15 acquisitions (the "Post-IPO Acquisitions"). Certain information related to such acquisitions is summarized in the following table: <TABLE> <CAPTION> 1996 DATE OF REVENUES BRANCHES ACQUIRED COMPANY(1) ACQUISITION (IN MILLIONS)(2) ACQUIRED HEADQUARTERS SERVICES PROVIDED - ------------------- ----------- ----------------- ---------- -------------------- --------------------------- <S> <C> <C> <C> <C> <C> Technology Source.. Nov. 1996 $ 6.8 1 St. Louis, MO Professional/IT Advantage........ Dec. 1996 3.6 2 Spartanburg, SC Commercial Tom Bain......... Dec. 1996 3.6 1 Brentwood, TN Commercial, Professional/IT Advance.......... Feb. 1997 6.3 1 Memphis, TN Commercial MRIC............. Feb. 1997 2.5 2 Vancouver, BC Specialty Medical Flexible......... Mar. 1997 49.3 40 Fort Wayne, IN Commercial, Professional/IT Global........... Apr. 1997 17.2 1 Walnut Creek, CA Professional/IT Lindenberg....... Apr. 1997 18.0 4 St. Louis, MO Professional/IT TPS/Furr......... May 1997 4.5 1 Monroe, NC Commercial HR Alternatives... Jun. 1997 8.4 8 Kingsport, TN Commercial Kleven........... Jun. 1997 5.0 1 Lexington, MA Professional/IT, Commercial Sterling......... Jun. 1997 19.0 2 Phoenix, AZ Commercial, Professional/IT Baker Street..... Jul. 1997 11.0 1 Houston, TX Professional/IT, Commercial Temp Technology.. Jul. 1997 7.5 2 Portland, OR Commercial EBS.............. Aug. 1997 5.7 1 Dallas/Ft. Worth, TX Professional/IT ------- -- Total.......... $168.4 68 ======= == </TABLE> - --------------- (1) See "Business -- Post-IPO Acquisitions" for the full legal name of the acquired companies. (2) The revenue amounts presented in the table are for the fiscal year ended December 31, 1996 for all of the referenced entities, other than with respect to Baker Street which is for the 12 months ended May 31, 1997 and EBS which is for the 12 months ended June 30, 1997. The acquisition of Baker Street will be accounted for as a pooling-of-interests, while all other acquisitions have been accounted for as purchases. The revenues for 1996 were not audited except for Flexible, Global and Lindenberg. Substantially all of the 1996 revenues represent a period of time when the companies were operating independently from the Company and, thus, are not included in the Company's 1996 revenues. See "Business -- Post-IPO Acquisitions." The staffing industry has grown rapidly in recent years as companies have utilized supplemental employees to control personnel costs and to meet specialized or fluctuating personnel needs. According to the National Association of Temporary and Staffing Services, the U.S. market for staffing services grew at a compound annual growth rate of approximately 18% from $20.4 billion in revenues in 1991 to $47.1 billion in 1996. Furthermore, according to Staffing Industry Report, revenues from the domestic information technology sector in 1996 are estimated to have been $12.0 billion, and grew at a compound annual rate of approximately 20% over the past five years. The Company believes the staffing industry is highly fragmented with over 6,000 staffing companies and 2,500 Professional/IT companies. Although the industry is experiencing increasing consolidation, largely in response to opportunities to provide comprehensive supplemental staffing solutions to regional and national accounts, the Company believes that there are numerous attractive acquisition targets available. The Company which is incorporated under the laws of the State of Delaware maintains its principal executive offices at 302 East Millsap Road, Fayetteville, Arkansas 72703. Its telephone number is (501) 973-6000. The Company maintains various sites on the Internet's world wide web. Information contained in the Company's world wide web sites shall not be deemed to be part of this Prospectus. RECENT DEVELOPMENTS The Company acquired Temp Technology, Inc. ("Temp Technology") on July 31, 1997. Through two offices located in the Portland, Oregon area, Temp Technology provides electronics assembly, light industrial, office/clerical, and information technology staffing services. Temp Technology had 1996 revenues of approximately $7.5 million and operates in the Commercial division. See "Business -- Post-IPO Acquisition." The Company acquired Expert Business Systems, Incorporated ("EBS") on August 4, 1997. EBS, located in the Dallas/Fort Worth metropolitan area provides information technology services, specializing in help desk support, distributed services and application developments. EBS has developed a model for providing information technology outsourcing services to a variety of businesses. EBS, which had revenues for the 12 months ended June 30, 1997 of approximately $5.7 million, operates in the Professional/IT division. See "Business -- Post-IPO Acquisitions." On August 27, 1997, the Company sold 3,665,000 shares of Common Stock in an underwritten public offering, while certain stockholders sold 285,000 shares of Common Stock as part of the same public offering (collectively, the "Second Public Offering") for an aggregate offering of 3,950,000 shares of the Common Stock. For the shares sold by the Company in the Second Public Offering, the Company received net proceeds of $95,839,750 before the payment of related expenses. As of August 27, 1997, the Company had outstanding 18,584,296 shares of Common Stock. On August 27, 1997, the Company used $51,349,818 of the proceeds from the Second Public Offering to repay indebtedness under its line of credit facility (the "Credit Facility") with Mercantile Bank National Association ("Mercantile"). The remaining proceeds from the Second Public Offering will be used for working capital and general corporate purposes, including the possible acquisition of staffing and professional service companies. See "Second Public Offering." USE OF PROCEEDS The Company will not receive any of the proceeds from the sale of the Shares offered by the Selling Stockholders pursuant to this Prospectus. SUMMARY FINANCIAL DATA StaffMark acquired in separate transactions (the "Mergers"), simultaneously with the closing of the Initial Public Offering, the Founding Companies (defined below). Pursuant to the requirements of the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") No. 97, which was issued and became effective July 31, 1996, Brewer Personnel Services, Inc. ("Brewer") was designated, for financial reporting purposes, as the acquirer of Prostaff Personnel, Inc. and its related entities ("Prostaff"), Maxwell Staffing, Inc. and its related entities ("Maxwell"), HRA, Inc. ("HRA"); First Choice Staffing, Inc. ("First Choice"); and Blethen Temporaries, Inc. and its related entities ("Blethen") (collectively, the "Other Founding Companies" and together with Brewer, the "Founding Companies"). Accordingly, the primary financial information presented below relates to Brewer through the date of the Initial Public Offering and to StaffMark on a consolidated basis for all periods subsequent to the Initial Public Offering. The Summary Financial Data should be read in conjunction with the Company's consolidated financial statements and the related notes thereto appearing elsewhere in this Prospectus as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations" which includes a presentation and discussion of the results of operations on a combined basis for the three years ended December 31, 1996 and for the six months ended June 30, 1997. For a discussion of pro forma operating results, see the StaffMark, Inc. Unaudited Pro Forma Financial Statements and the related notes thereto appearing elsewhere in this Prospectus. <TABLE> <CAPTION> SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------- ------------------- 1994 1995 1996 1996 1997 ------- ------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues.................................................. $27,894 $43,874 $104,476 $ 30,556 $159,987 Cost of services.......................................... 22,906 35,115 81,607 24,028 124,515 ------- ------- -------- -------- -------- Gross profit.............................................. 4,988 8,759 22,869 6,528 35,472 Operating expenses: Selling, general and administrative..................... 3,483 5,804 14,623 4,445 24,006 Depreciation and amortization........................... 256 591 1,374 566 1,749 ------- ------- -------- -------- -------- Operating income.......................................... 1,249 2,364 6,872 1,517 9,717 Interest expense.......................................... 92 801 1,376 880 507 Net income................................................ 1,177 1,587 4,023 634 5,583 PRO FORMA:(1) Revenues(2)............................................... $266,074 $123,432 $173,298 Operating income(3)....................................... 13,887 5,049 10,210 Net income(3)(4).......................................... 6,664 2,067 5,668 Primary net income per share.............................. $ 0.64 $ 0.23 $ 0.39 Fully diluted net income per share........................ $ 0.64 $ 0.23 $ 0.38 Primary weighted average shares outstanding............... 10,444 9,174 14,562 Fully diluted weighted average shares outstanding......... 10,444 9,174 14,816 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ---------------------- AS ACTUAL ADJUSTED(5) -------- ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital...................................................................... $ 24,088 $ 74,498 Total assets......................................................................... 141,908 192,318 Long-term debt....................................................................... 43,430 -- Stockholders' equity................................................................. 75,475 169,315 </TABLE> - --------------- (1) See the StaffMark, Inc. Unaudited Pro Forma Financial Statements and the related notes thereto appearing elsewhere in this Prospectus for information relating to the pro forma results of operations for the year ended December 31, 1996 and the six months ended June 30, 1997 and 1996. (2) Adjusted to reflect: (i) Brewer's October 1996 acquisition of the Other Founding Companies; (ii) Brewer's February 1996 acquisition of On Call Employment Services, Inc. ("On Call"); (iii) StaffMark's March 1997 acquisition of Flexible Personnel, Inc., Great Lakes Search Associates, Inc. and HR America, Inc. (collectively "Flexible"); and (iv) StaffMark's April 1997 acquisition of Global Dynamics, Inc. ("Global"), as if such acquisitions had occurred at the beginning of the periods presented. (3) Adjusted to reflect: (i) the acquisitions discussed in Note 2 above; (ii) the adjustment to compensation expense for the difference between historical compensation paid to certain previous owners of the Founding Companies, Flexible and Global and the employment contract compensation negotiated in conjunction with the Mergers and the respective acquisitions (the "Compensation Differential"); and (iii) the amortization expense relating to the intangible assets recorded in conjunction with the acquisitions discussed in Note 2 above. (4) Gives effect to certain tax adjustments related to the taxation of certain Founding Companies, Flexible and Global as S Corporations prior to the consummation of the acquisitions discussed in Note 2 above and the tax impact of the Compensation Differential. Pro forma income tax expense is based upon a combined effective tax rate of 39%, adjusted for the impact of nondeductible goodwill amortization. (5) Adjusted for the sale of 3,665,000 shares of common stock of the Company in the Second Public Offering and the application of the estimated net proceeds therefrom. See "Second Public Offering."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018003_ingram_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018003_ingram_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f567443725469a0df0149bd63233242e53bd11c1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018003_ingram_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and the notes thereto appearing elsewhere in this Prospectus. THE COMPANY Ingram Micro is the leading wholesale distributor of microcomputer products and services worldwide. The Company markets microcomputer hardware, networking equipment, and software products to more than 100,000 reseller customers in approximately 120 countries worldwide. Ingram Micro distributes microcomputer products through warehouses in eight strategic locations in the continental United States and 22 international distribution centers located in Canada, Mexico, most countries of the European Union, Norway, Malaysia, and Singapore. The Company believes that it is the market share leader in the United States, Canada, and Mexico, and the third largest full-line distributor in Europe. In 1996, approximately 31% of the Company's net sales were derived from operations outside the United States. Ingram Micro offers one-stop shopping to its reseller customers by providing a comprehensive inventory of more than 100,000 distinct items from over 1,100 suppliers, including most of the microcomputer industry's leading hardware manufacturers, networking equipment suppliers, and software publishers. The Company's suppliers include Apple Computer, Cisco Systems, Compaq Computer, Creative Labs, Hewlett-Packard, IBM, Intel, Microsoft, NEC, Novell, Quantum, Seagate, 3Com, Sun Microsystems, Toshiba, and U.S. Robotics. The Company conducts business with most of the leading resellers of microcomputer products around the world, including, in the United States, CDW Computer Centers, CompuCom, CompUSA, Computer City, Electronic Data Systems, En Pointe Technologies, Entex Information Services, GE Capital Information Technologies Solutions, Micro Warehouse, Sam's Club, Staples, and Vanstar. The Company's reseller customers outside the United States include Complet Data A/S, Consultores en Diagnostico Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre Europe, B.V., GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk Datasenter, Owell Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema SPA. The Company has grown rapidly over the past four years, with net sales and net income increasing to $12.0 billion and $110.7 million, respectively, in 1996 from $2.7 billion and $31.0 million, respectively, in 1992, representing compound annual growth rates of 44.8% and 37.5%, respectively. The Company's growth during this period reflects substantial expansion of its existing domestic and international operations, resulting from the addition of new customers, increased sales to the existing customer base, the addition of new product categories and suppliers, and the establishment of Ingram Alliance, the Company's master reseller business launched in late 1994, as well as the successful integration of ten acquisitions worldwide. Because of intense price competition in the microcomputer products wholesale distribution industry, the Company's margins have historically been narrow and are expected in the future to continue to be narrow. In addition, the Company has relied heavily on debt financing for its increasing working capital needs in connection with the expansion of its business. Prior to the Split-Off (as defined herein), the Company was a subsidiary of Ingram Industries Inc. ("Ingram Industries"). Immediately prior to the closing of the IPO, Ingram Industries consummated the Split-Off. See "The Company" and "The Split-Off and the Reorganization." THE OFFERING <TABLE> <S> <C> Class A Common Stock offered: Class A Common Stock offered by the Company................... 1,378,369 Shares Class A Common Stock offered by Thrift Plans (1): Class A Common Stock offered by the II Thrift Plan....... 1,900,000 Shares Class A Common Stock offered by the IM Thrift Plan....... 65,000 Shares Class A Common Stock offered by the IE Thrift Plan....... 40,000 Shares Total offered by the Company and the Thrift Plans... 3,383,369 Shares Common Stock to be outstanding after this offering (2): Class A Common Stock........................................... 29,170,148 Shares Class B Common Stock(3)........................................ 107,038,762 Shares Total.................................................. 136,208,910 Shares Voting rights: Class A Common Stock........................................... One vote per share Class B Common Stock........................................... Ten votes per share NYSE Symbol......................................................... IM </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in millions, except earnings per share) <TABLE> <CAPTION> FISCAL YEAR THIRTEEN WEEKS ENDED ---------------------------------------------------------- --------------------------- MARCH 30, MARCH 29, 1992 1993 1994 1995 1996 1996 1997 ---------- ---------- --------- ---------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales.................. $2,731.3 $4,044.2 $5,830.2 $8,616.9 $12,023.5 $2,752.7 $3,650.0 Gross profit............... 227.6 329.6 439.0 605.7 812.4 186.6 234.7 Income from operations... 68.9 103.0 140.3 186.9 247.5 (4) 54.9 (4) 78.8 (4) Net income(5).............. 31.0 50.4 63.3 84.3 110.7 (4) 23.8 (4) 40.4 (4) Earnings per share......... 0.26 0.41 0.52 0.69 0.88 (4) 0.20 (4) 0.28 (4) Weighted average common shares outstanding(6)... 121.4 121.4 121.4 121.4 125.4 121.4 145.4 </TABLE> <TABLE> <CAPTION> MARCH 29, 1997(7) ------------------ <S> <C> BALANCE SHEET DATA: Working capital...................................................... $1,176.6 Total assets......................................................... 3,744.0 Total debt(8)........................................................ 508.5 Stockholders' equity................................................. 865.1 </TABLE> - ------------------------- (footnotes on following page) - ------------------------- (1) The II Thrift Plan, the IM Thrift Plan and the IE Thrift Plan hold 6,688,708 shares, 1,691,509 shares, and 856,783 shares, respectively, of Class B Common Stock prior to this offering and will hold 4,788,708 shares, 1,626,509 shares and 816,783 shares, respectively, of Class B Common Stock assuming all shares offered hereby are purchased. The Company has certain obligations with respect to the registration of the remaining shares of Class B Common Stock held by the Thrift Plans. See "The Split-Off and the Reorganization--The Split-Off." (2) Assumes all shares offered in this offering are actually sold, based on shares outstanding at March 29, 1997. The 2,005,000 shares offered in this offering by the Thrift Plans are currently outstanding shares of Class B Common Stock, which will convert to Class A Common Stock automatically upon purchase in this offering. See "Selling Stockholders" and "Principal Stockholders." Excludes approximately 19,000,000 shares of Common Stock issuable in connection with outstanding stock options. See "Management--1996 Plan" and "--Rollover Plan; Incentive Stock Units." See "Shares Eligible for Future Sale." (3) Each share of Class B Common Stock is convertible, at any time at the option of the holder, into one share of Class A Common Stock. In addition, the Class B Common Stock will be automatically converted into Class A Common Stock upon the occurrence of certain events. See "Description of Capital Stock." (4) Income Statement Data reflects a noncash compensation charge in connection with the granting of the Options of $23.4 million ($19.5 million, or $0.16 per share, net of tax) for fiscal year 1996, of $6.7 million ($4.1 million, or $0.03 per share, net of tax) for the thirteen weeks ended March 30, 1996, and of $1.8 million ($1.4 million, or $0.01 per share, net of tax) for the thirteen weeks ended March 29, 1997. See "The Split-Off and the Reorganization--The Split-Off".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018005_coldwater_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018005_coldwater_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d94a4e29cb49e40f56ee1e43ded67f116345536
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018005_coldwater_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS "COLDWATER CREEK" AND "COMPANY" INCLUDE COLDWATER CREEK INC. AND INCLUDE THE BUSINESS OF THE COMPANY'S PREDECESSOR. UNLESS OTHERWISE INDICATED, ALL INFORMATION INCLUDED IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND GIVES RETROACTIVE EFFECT TO (I) THE REINCORPORATION INTO DELAWARE OF THE COMPANY ON APRIL 17, 1996 AND (II) A 1.67 FOR 1 STOCK SPLIT OF THE COMMON STOCK EFFECTED IN JANUARY 1997. SEE NOTES 8 AND 12 OF NOTES TO FINANCIAL STATEMENTS. REFERENCES TO "FISCAL YEAR" REFER TO THE CALENDAR YEAR IN WHICH SUCH FISCAL YEAR COMMENCES. FOR EXAMPLE, FISCAL 1995 BEGAN ON MARCH 5, 1995 AND ENDED ON MARCH 2, 1996. THE COMPANY Coldwater Creek is a specialty direct mail retailer of apparel, gifts and jewelry. The Company currently markets its merchandise primarily through a family of four distinctive catalogs. Coldwater Creek targets well-educated, middle- to upper-income households and seeks to differentiate itself from other retail and catalog operations by offering exceptional value through superior customer service and a merchandise assortment that reflects a casual, uniquely American spirit. The Company believes that the successful execution of its marketing and merchandising strategies coupled with its high customer service standards and efficient order entry and fulfillment operations has allowed it to develop a unique brand identity and strong relationships with its loyal customer base. Coldwater Creek's rapid growth has been accompanied by a consistently high degree of profitability. The Company has increased sales every year since it commenced operations in 1984 and has been profitable every year since fiscal 1986. Over the past five fiscal years, the Company's net sales have grown at a compound annual growth rate of 61.8% from $11.1 million to $75.9 million. Despite significant increases in paper and postage costs in recent years, the Company's operating income has grown at a compound annual growth rate of 36.8% from $1.6 million in fiscal 1991 to $5.8 million in fiscal 1995. During fiscal 1995, the Company's mailing list grew 45.2% to include approximately 2.5 million names. During the first nine months of fiscal 1996, the Company successfully introduced a men's apparel catalog, re-merchandised and initiated a Spring edition of its women's apparel catalog and expanded and broadened its merchandise offerings in its core catalog. These merchandising changes have resulted in dramatic growth in sales and profitability. Net sales during the first nine months of fiscal 1996 grew 90.1% to $84.7 million from $44.6 million during the same period in fiscal 1995, while operating income grew to $6.2 million from $1.8 million. In addition, the average order increased to $133 in the first nine months of fiscal 1996 from $91 during the same period in fiscal 1995. At the end of the third quarter of fiscal 1996, the number of active customers was 947,051, an increase of 292,563 from the end of the third quarter of fiscal 1995. During fiscal 1994, fiscal 1995 and the first nine months of fiscal 1996, the Company hired additional key management personnel and invested $19.7 million in infrastructure improvements. These investments were made to expand the Company's distribution facilities, upgrade its telecommunications systems and install and implement more sophisticated database technologies and management information systems. Coldwater Creek believes that this timely investment of capital in its infrastructure has been critical in successfully executing its customer service-based strategy and supporting its rapid growth. Coldwater Creek focuses on providing customer service well above industry standards. All aspects of the Company's operations are designed to provide a superior catalog buying experience as well as strengthen relationships with existing and new customers. During fiscal 1995, the Company achieved faster telephone answer times, lower abandoned call rates, and faster order processing than industry averages. The Company plans to stimulate future growth through a variety of strategic initiatives designed to increase catalog circulation, yield higher customer response rates and expand merchandise offerings. In addition, the Company believes that significant opportunities exist to expand its customer base by targeting new members of existing customer households with additional merchandise offerings and catalog titles. DECEMBER SALES RESULTS The Company's net sales for the calendar month of December 1996 were approximately $30.5 million, an increase of 52.5% over net sales of $20.0 million for the calendar month of December 1995. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............ 2,500,000 shares Common Stock to be outstanding after the offering..................................... 9,745,118 shares(1) Use of proceeds................................ To fund a distribution of approximately $16.2 million in S corporation earnings, repay certain outstanding indebtedness and for working capital and other general corporate purposes. Proposed Nasdaq National Market symbol......... CWTR </TABLE> - ------------------------------ (1) Excludes (i) 443,067 shares of Common Stock issuable upon exercise of stock options, outstanding as of November 30, 1996, at an average exercise price of $6.58 per share and (ii) an additional 668,780 shares of Common Stock reserved for future issuance under the Company's stock option plan, of which options to purchase 40,128 shares of Common Stock will be granted to non- employee directors and options to purchase an estimated 400,000 shares of Common Stock will be granted to over 75 employees of the Company who have not received options from the Company in the past, all upon the execution of the Underwriting Agreement at an exercise price equal to the offering price. See "Management--1996 Stock Option/Stock Issuance Plan." ------------------------------ REPORTS TO SECURITY HOLDERS The Company intends to furnish to its stockholders annual reports containing audited financial statements and an opinion thereon expressed by its independent public accountants and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year. ------------------------ Coldwater Creek-Registered Trademark-, SPIRIT OF THE WEST-Registered Trademark- and ECOSONG-Registered Trademark- are registered trademarks of the Company. An application has been filed to register the mark MILEPOST FOUR-TM- as a trademark of the Company. Tradenames and trademarks of other companies appearing in this Prospectus are the property of their respective holders. ------------------------ NOTWITHSTANDING THE COMPANY'S DRAMATIC GROWTH IN SALES AND PROFITABILITY DURING RECENT PERIODS, THE COMPANY FACES SIGNIFICANT RISKS SUCH AS INTENSE COMPETITION, RELIANCE ON ITS CATALOG OPERATIONS AND FLUCTUATIONS IN CONSUMER PREFERENCES AND CATALOG COSTS, AND, AS A RESULT OF THESE AND OTHER RISKS, THERE CAN BE NO ASSURANCE THAT THE COMPANY'S HISTORICAL GROWTH IS INDICATIVE OF FUTURE PERFORMANCE. IN ADDITION, THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS." SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA) <TABLE> <CAPTION> NINE MONTHS ENDED(1) FISCAL YEAR ENDED(1) --------------------------------------------------------- -------------------- FEB. 29, FEB. 27, FEB. 26, MARCH 4, MARCH 2, DEC. 2, NOV. 30, 1992 1993 1994 1995 1996 1995 1996 --------- --------- --------- ----------- ----------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales.................................... $ 11,085 $ 18,785 $ 31,763 $ 45,223 $ 75,905 $ 44,572 $ 84,710 Gross profit................................. 6,534 11,073 18,258 26,161 43,119 25,274 45,402 Income from operations....................... 1,644 1,726 5,321 4,659 5,763 1,830 6,163 Net income(2)................................ 1,702 1,684 5,352 4,757 5,614 1,643 5,963 PRO FORMA STATEMENT OF OPERATIONS DATA: Pro forma net income(3)...................... $ 1,021 $ 1,010 $ 3,211 $ 2,854 $ 3,368 $ 986 $ 3,578 Pro forma net income per share(4)............ $ 0.40 $ 0.43 Pro forma shares outstanding(4).............. 8,514 8,331 SELECTED OPERATING DATA: Net sales growth............................. n/a 69.5% 69.1% 42.4% 67.8% 61.3% 90.1% Total catalogs mailed (000s)................. n/a 12,273 19,045 31,625 45,868 36,349 63,684 Total active customers(5).................... n/a 247,520 382,862 493,946 747,234 654,488 947,051 Average order (in dollars)(6)................ n/a $ 56.26 $ 72.69 $ 81.85 $ 97.16 $ 91.01 $ 133.28 </TABLE> <TABLE> <CAPTION> NOVEMBER 30, 1996 -------------------------- ACTUAL AS ADJUSTED(7) --------- --------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................................................... $ (3,044) $ 5,091 Total assets.............................................................................. 53,358 57,493 Long-term debt (net of current maturities)................................................ 11,515 15 Stockholders' equity...................................................................... 11,988 30,584 </TABLE> - ------------------------------ (1) References to a fiscal year refers to the calendar year in which such fiscal year commences. The Company has a 52/53 week fiscal year that ends on the Saturday closest to February 28. Fiscal 1994 is the only fiscal year presented that consists of 53 weeks. References to a nine month period refer to the 39 weeks ended on the date indicated. (2) For all periods indicated, the Company has operated as an S corporation and has not been subject to federal and certain state income taxes. (3) Pro forma net income reflects historical net income less pro forma income taxes. Pro forma income taxes are provided at an assumed 40% effective rate, as if the Company had been a C corporation rather than an S corporation for the above periods. Prior to the closing of this offering, the Company's S corporation status will terminate; at that date, the Company will provide a non-recurring, non-cash charge to earnings to recognize deferred income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"). See "S Corporation Distributions" and Notes 1 and 11 of Notes to Financial Statements. (4) Pro forma net income per share is based on the weighted average shares of Common Stock and stock equivalents outstanding, including actual shares outstanding, shares deemed to be outstanding and the dilutive effect of shares issuable under stock options. The shares deemed to be outstanding represent the number of shares being offered by the Company hereby sufficient to fund an assumed S corporation distribution of approximately $14.5 million at March 2, 1996 or approximately $11.9 million at November 30, 1996 (based on the amount of previously undistributed S corporation earnings at such dates). Supplemental earnings per share for the periods ended March 2, 1996 and November 30, 1996 would have been $0.40 and $0.40, respectively, had the Company also assumed issuance of common shares at the beginning of those periods sufficient to retire the debt outstanding (shares outstanding would have been approximately 8.5 million and 9.2 million, respectively). See "S Corporation Distributions." (5) An "active customer" is defined as a customer who has purchased merchandise from the Company within the 12 months preceding the end of the period indicated. (6) An "order" is defined as the dollar amount of a processed customer invoice or a pending order on file. The "average order" is calculated by dividing the aggregate amount of all customer invoices and pending orders processed in a period by the number of customer orders placed in such period. (7) As adjusted to reflect (i) the sale of 2.5 million shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $14.00 per share and the application of the estimated net proceeds therefrom, including the assumed November 30, 1996 distribution of an estimated $11.9 million to stockholders upon termination of the Company's S corporation status (further distributions of approximately $4.3 million are expected to be made related to earnings for the period December 1, 1996 through the assumed termination of the Company's S corporation status) and the repayment of the $11.5 million outstanding under the long-term revolving line of credit as of November 30, 1996, and (ii) recognition of approximately $1.0 million of deferred income taxes for the net effect of cumulative temporary differences upon termination of the Company's S corporation status in accordance with SFAS 109. See "S Corporation Distributions" and "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018371_cn_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018371_cn_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e33952d03bda7fc3f5d88d3d5f6a1df4f8a6948a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018371_cn_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus, including the information under "Risk Factors." Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results in the future could differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such a difference include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." THE COMPANY CN Biosciences, Inc. ("CN Biosciences" or the "Company") is engaged in the development, production, marketing and distribution of a broad array of products used worldwide in disease-related life sciences research at pharmaceutical and biotechnology companies, academic institutions and government laboratories. The Company's products include biochemical and biological reagents, antibodies, assays and research kits which it sells principally through its general and specialty catalogs under its well-established brand names, including Calbiochem, Novabiochem and Oncogene Research Products. With over 7,800 products, the Company offers scientists the convenience of obtaining from a single source both innovative and fundamental research products, many of which are instrumental to areas of research such as cancer, cardiovascular disease, Alzheimer's and AIDS. The Company believes it has established a long-standing reputation in the life sciences research products market for product quality, product reliability, extensive technical service and strong customer support. Industry sources estimate that there are over 300,000 scientists worldwide currently engaged in life sciences research who utilize specialty biochemical products such as those offered by the Company. Recent advances in understanding physiological processes at the molecular and cellular level, genomics and the development of other basic life sciences technologies have increased the demand for innovative product solutions designed to assist scientists in improving the efficiency and quality of their research. Life sciences research can often involve experimentation carried out over months or even years, and as a result researchers seek quality products to minimize extraneous variables in their research protocols. Research products range broadly in complexity, purity, scarcity, cost and function, and their availability, consistency and quality are often critical to a project's success. In its most recent industry survey published in 1994, Frost & Sullivan estimated that $1.6 billion was spent worldwide in 1992 on specialty biochemical products, such as those offered by the Company for research in biochemistry, immunology, cellular biology and molecular biology. According to Frost & Sullivan, the compounded annual growth rate from 1992 through 1999 for the U.S. life sciences research products market (which represents approximately one-third of the worldwide market) is estimated to be approximately 13%. The Company believes that it is strategically positioned with both the breadth of research products and critical mass that are characteristic of the industry's larger providers, as well as the innovative research and development capabilities that are characteristic of the industry's smaller specialty companies. The larger companies typically generate revenues from the sale of a broad range of equipment, laboratory supplies and other products, including research products which compete with many of the Company's product offerings. The smaller companies, the majority of which are substantially smaller than the Company, typically supply a highly focused product offering to very specific markets. Based upon the Company's strategic positioning, it believes it can establish itself as a leading supplier of higher margin research products for selected emerging, high growth niche research markets by offering innovative products through specialty catalogs. In recent years, the Company has implemented its niche research market strategy in areas that the Company believes to be particularly strong areas of growth. In 1994, the Company published its first specialty catalog in the area of signal transduction, which it followed with the introduction of its Apoptosis and Combinatorial Chemistry specialty catalogs in February 1996. The life sciences research products industry is highly fragmented and may offer opportunities for consolidation. One key element of the Company's strategy is the selective acquisition of companies with research and development capabilities and product offerings in areas targeted for future growth. In August 1995, the Company significantly expanded its immunochemical and molecular biology capabilities with the $6.2 million cash purchase of the Oncogene Research Products business from Oncogene Science, Inc. ("OSI"), a biopharmaceutical company. The acquisition of this business enhanced the depth and breadth of the Company's scientific resources, while providing a complementary base of products and customers which has been successfully integrated into the Company's operations and infrastructure. As a result of this acquisition, the Company added over 700 new product offerings, many of which are included in the Company's Apoptosis specialty catalog. During 1996, the Company sold products to over 8,000 accounts, including individual research scientists, institutions, companies and distributors, filled over 90,000 orders in 48 countries and generated sales of $33.7 million and net income of $2.0 million. The Company's numerous products, represented by over 14,000 stock keeping units (SKUs), are principally sold through its three general catalogs and four specialty catalogs. The Company also develops and distributes a variety of supporting publications designed to highlight its new products and target specific market segments with selected product offerings. These catalogs and supporting publications are distributed utilizing the Company's proprietary database of more than 100,000 research scientists and institutions. The Company's customers include many leading pharmaceutical and biotechnology companies, academic institutions and government laboratories. The Company continually adds new products, introducing in excess of 700 products during 1996. Development, marketing and distribution activities are supported by the Company's highly experienced scientific staff, which includes 42 professionals holding Ph.D.s in a variety of life sciences disciplines, as well as other personnel located at seven facilities in the United States, Europe, Japan and Australia. The Company was incorporated by Warburg, Pincus Investors, L.P. ("Warburg"), ABS MB (C-N) Limited Partnership ("ABS") and certain current and former members of management to acquire the businesses conducted by the Company's subsidiaries. See "Certain Transactions." The Company was incorporated under the laws of the State of Delaware on March 11, 1992. The Company's principal executive offices are located at 10394 Pacific Center Court, San Diego, California 92121, and its telephone number is (619) 450-5500. As used in this Prospectus, references to the "Company" and "CN Biosciences" refer to CN Biosciences, Inc. and its direct and indirect subsidiaries, unless otherwise indicated or the context otherwise requires. The Company's subsidiaries, all of which are wholly owned, include a U.S. operating subsidiary based in San Diego and international subsidiaries organized under the local laws of their jurisdiction of operation. Calbiochem(R), Novabiochem(R) and Clinalfa(R) are registered trademarks of the Company. References are made herein to trademarks of companies other than the Company. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company......... 89,810 shares Common Stock Offered by the Selling Stockholder............................... 910,190 shares Common Stock Outstanding after the Offering.................................. 5,262,177 shares (1) Use of Proceeds by the Company.............. Working capital, general corporate purposes and possible acquisitions. Nasdaq National Market Symbol............... CNBI </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM INCEPTION YEARS ENDED DECEMBER 31, (MARCH 11, 1992) TO ------------------------------------- DECEMBER 31, 1992 1993 1994 1995 1996 ------------------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Sales.................................... $17,719 $22,771 $24,188 $26,966 $33,725 Cost of sales............................ 9,691 14,195 13,183 13,185 15,388 ------- ------- ------- ------- ------- Gross profit............................. 8,028 8,576 11,005 13,781 18,337 ------- ------- ------- ------- ------- Operating expenses: Selling, general and administrative.... 7,742 10,292 10,343 10,608 12,700 Research and development............... 290 462 736 1,338 2,144 ------- ------- ------- ------- ------- Total operating expenses............ 8,032 10,754 11,079 11,946 14,844 ------- ------- ------- ------- ------- Income (loss) from operations............ (4) (2,178) (74) 1,835 3,493 Interest expense, net.................... 61 170 326 527 532 ------- ------- ------- ------- ------- Income (loss) before income taxes........ (65) (2,348) (400) 1,308 2,961 Provision (benefit) for income taxes..... 401 (195) 62 291 960 ------- ------- ------- ------- ------- Net income (loss)................... $ (466) $(2,153) $ (462) $ 1,017 $ 2,001 ======= ======= ======= ======= ======= Net income (loss) per share.............. $ (.14) $ (.65) $ (.14) $ .30 $ .50 ======= ======= ======= ======= ======= Shares used in per share computations (2).................................... 3,242 3,318 3,328 3,422 3,995 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.................... $14,704 $ 15,459 Working capital...................................................... 30,231 30,986 Total assets......................................................... 46,262 47,017 Long-term debt and other obligations, net of current portion......... 1,233 1,233 Stockholders' equity................................................. 38,900 39,655 </TABLE> - --------------- (1) Excludes (i) 640,545 shares of Common Stock, par value $.01 per share (the "Common Stock"), issuable upon the exercise of outstanding stock options issued under the Company's 1992 Stock Option Plan, as amended (the "Stock Option Plan"), (ii) an additional 92,675 shares of Common Stock reserved for future issuance under the Company's Stock Option Plan and (iii) 3,028 shares issuable upon the exercise of an outstanding warrant (the "Warrant"). The Company intends to seek approval from its stockholders at its 1997 annual meeting to increase the number of shares of Common Stock reserved for future issuance under the Stock Option Plan by an additional 250,000 shares. (2) See Note 1 of notes to consolidated financial statements for an explanation of the method used to determine the number of shares used to compute per share amounts. (3) Adjusted to give effect to the sale of 89,810 shares of Common Stock offered by the Company hereby (at an assumed public offering price of $14.25 per share), and the receipt and application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018693_prosoft_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018693_prosoft_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6efc781d1297239e6f523a918b6b4dcd25c4375a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018693_prosoft_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. Unless otherwise indicated, references to "Company" or "Prosoft" are to the consolidated operations of Prosoft I-Net Solutions, Inc. and its wholly-owned subsidiary, Pro-Soft Development Corp. This Prospectus contains certain forward-looking statements and intentions. The cautionary statements made in this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed under "Risk Factors," as well as those discussed elsewhere herein. THE COMPANY The Company is engaged in the business of training individuals in small, medium and large organizations in Internet and Intranet technologies, with a current emphasis on Netscape- and Microsoft-based Internet/Intranet products and solutions. In addition, Prosoft is a certified Microsoft Authorized Technical Education Center ("ATEC"), a certified Private Post Secondary Institution in the State of California, and an approved recipient of Job Training Partnership Act (the "JTPA") funding, the last of which enables the Company to recruit, train and hire its own advanced technology instructor staff. Prosoft also develops proprietary Internet/Intranet courseware and offers more than 40 customized, on- line, hands-on and instructor-led Internet/Intranet-related courses for end- users, system engineers and developers. While for the period from December 8, 1995 to April 30, 1997, approximately 56% of the Company's revenues were generated from JTPA funded vocational training, the Company expects a significant majority of its revenues in the future will come from the delivery of commercial Internet/Intranet training to the employees of organizations ranging from Fortune 1000 corporations to small entrepreneurial enterprises throughout the United States. The Company believes that the market for Internet and Intranet training is substantial. The Internet is the world's largest network of computer networks, and one which grows everyday. Companies are also beginning to develop private internal networking systems called Intranets, which use the infrastructure, standards and many of the technologies of the Internet and the World Wide Web, but are cordoned off and protected from the public through software technologies known as "fire walls." Companies are developing Intranets in order to improve internal communications, facilitate employee training and motivation, and to reduce the need for paper-based materials such as operational and procedural manuals, internal phone books, requisition forms, and other items that must be updated frequently. Intranets can integrate all of the computers within an organization, including software and databases, into a unified system that allows employees to quickly access and utilize information. Prosoft's Internet/Intranet instruction is made available through Company operated Internet/Intranet Training and Resource Centers ("Training Centers") as well as through on-site tailored training for large organizations. Each Prosoft student who takes an Internet or Intranet class is taught using a personal computer that is connected to the Internet. As of September 1, 1997, the Company had opened 37 Training Centers in 22 states. The Company plans to continue to expand the number of Training Centers across the country, with the goal of creating a nationwide network of Training Centers that will make Prosoft a primary choice for Fortune 1000 corporations and other smaller firms that require unified, quality Internet and Intranet training. The Company also offers tailored on-site training, usually for larger organizations with a significant number of trainees. Because Prosoft's typical customer is expected to be a medium or large organization with offices in different geographic locations, the Company believes that effective Internet and Intranet training must be available at many locations throughout the country and must be consistently delivered so that all members of the organization have a common understanding of the uses and applicability of the technologies being taught. As such, Prosoft believes that the development of a nationwide network of Prosoft Training Centers is essential to the delivery of quality Internet/Intranet instruction. A typical Training Center ranges in size from 600 to 5,000 square feet and is comprised of from one to four classrooms that can accommodate approximately 12 to 16 students per classroom. The Company has either leased commercial space for the Training Centers or has entered into marketing affiliations with existing computer training, consulting, distribution and reseller companies. Under such marketing affiliations, the affiliate typically makes classroom space available to Prosoft in exchange for a royalty payment based upon the training revenue collected by Prosoft. Whether Prosoft leases commercial space or enters into a marketing affiliation, the Company is responsible for building the infrastructure of the Training Center to its specifications. The Company's commercial Internet/Intranet training courses range in length from one to five days at a cost of between $295 to $795 per day per student. Prosoft has offered and will continue to offer a significant number of courses relating to Microsoft products. In addition, the Company will continue to attempt to develop strategic alliances with local training affiliates under its Affiliate Program and with software manufacturers. Because of these strategic alliances and the Company's broad categorical expertise in Internet and Intranet training ranging from the most advanced system engineering to end-user training, Prosoft believes that it is well-positioned to sell its training to small, medium and large corporations and other organizations. As a result of the Company's approach to Internet/Intranet training, which features highly-trained instructors, course materials designed by the Company's internal courseware department, live T-1 lines connected to the Internet, individual computers for each student and rigorous pre- and post-testing of students, the Company believes it can offer among the highest quality, consistent Internet curriculum in the industry. In addition, because of the short curriculum development cycle that the Company maintains, it can quickly create new course offerings to support new and emerging technologies. Internet/Intranet software offerings and technology will continue to evolve and training related to such software and technology will need to keep pace. Technology trends indicate that end-user interfaces are and will become more intuitive and user-friendly while system engineering and solution development required to support these simple interfaces will become increasingly complex. Because Prosoft addresses the full range of Internet and Intranet technology training, the Company believes it is well positioned to pursue and deliver on the expanding advanced Internet technology training opportunities. In June 1996, Prosoft created a division to develop and publish Internet, Intranet and distant learning courseware and curriculum, which Prosoft uses in its Internet/Intranet classes. The Company has several proprietary courseware projects under development that support Microsoft, Netscape and Sun Microsystems Internet/Intranet technologies. The business of the Company was initially operated as a sole proprietorship (the "Proprietorship") beginning in February 1995. In December 1995, Pro-Soft Development Corp., a California corporation ("Old ProSoft") was incorporated and acquired the business from the Proprietorship effective January 1, 1996. In March 1996, the Company entered into a reorganization (the "Reorganization") with Old ProSoft and the Old ProSoft shareholders, whereby (i) the Old ProSoft shareholders received shares of Common Stock of the Company in exchange for their shares of Old ProSoft, (ii) the Company changed its name to ProSoft Development, Inc., and (iii) Old ProSoft became a wholly-owned subsidiary of the Company. The Company changed its name to Prosoft I-Net Solutions, Inc. in October 1996. The Company was incorporated in Nevada in March 1985 as Tel-Fed, Inc. From its incorporation until the Reorganization, the Company had no significant operations. Under applicable accounting rules, for financial statement purposes, the Reorganization is required to be accounted for as an acquisition of the Company by Old ProSoft, with the additional shares held by the Company's prior shareholders reflected as a recapitalization of Old ProSoft. As a result, the consolidated financial statements included in this Prospectus for the Company reflect, for the period prior to the Reorganization, the operations of Old ProSoft. Financial statements of the Proprietorship are also included herein. The Company's executive offices are located at 2333 North Broadway, Suite 300, Santa Ana, California 92706 and its telephone number is (714) 953-1200. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Selling Stockholders.............. 5,309,259 shares(1) Common Stock to be outstanding after this Offering............... 10,459,399 shares(1)(2) Use of Proceeds.................... Other than the exercise price of such of the Warrants as may be exercised, none of the proceeds from the sale of shares by the Selling Stockholders will be received by the Company. The gross proceeds to the Company in the event that all of the Warrants are exercised would be approximately $1,786,414. Any proceeds received by the Company will be utilized for working capital and general corporate purposes. NASDAQ SmallCap Symbol............ POSO </TABLE> ____________________ (1) Includes 321,664 shares issuable upon exercise of the Warrants. (2) Does not include 2,190,694 shares reserved for issuance upon the exercise of outstanding stock options and warrants, other than the Warrants.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018761_computer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018761_computer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4a5bbdbe0435b8cf7f87218abbcf272c3a7a7628
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018761_computer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, or the context otherwise requires, all information in this Prospectus (i) gives effect to the amendment and restatement of the Company's certificate of incorporation and by- laws and certain other related actions regarding the conversion of the Company from S corporation to C corporation and the restructuring of the Company's capital stock, all of which will take place immediately prior to the consummation of this offering and is more fully described below under "The Company," and (ii) assumes the Underwriters' over-allotment option is not exercised. THE COMPANY Computer Generated Solutions, Inc. offers its clients a Composite Solution for their information technology ("IT") requirements. The Composite Solution is based on a modular approach which allows the Company to utilize its products and services to create customized solutions for its clients. Products and services provided by the Company range from the ACS Optima Software (as defined) bundled with IBM AS/400 hardware and related support services, to professional services, technical training, full service on-site and remote help desk support and call management services. The marketing of many of the Company's products and services is enhanced through its strategic and other relationships with recognized leaders in the IT industry, including International Business Machines Corporation ("IBM") and AT&T Corp. ("AT&T"). IBM and AT&T accounted for, in the aggregate, approximately 40% of the Company's total revenues in 1996. The Company is a leading supplier of integrated business information systems to the apparel industry. Its solution includes its proprietary ACS Optima software and a number of fully integrated complementary products licensed to the Company (the "ACS Optima Software"), a comprehensive, integrated business information system specifically designed for the apparel industry. The Company provides the ACS Optima Software to many leading United States apparel manufacturers. Representative examples of the Company's ACS Optima Software clients include several divisions of Polo Ralph Lauren Corporation ("Polo Ralph Lauren"), Quicksilver, Inc. ("Quicksilver") and Fritzi of California ("Fritzi"). These representative clients accounted for, in the aggregate, approximately 14% of the Company's total revenues in 1996. The Company also provides a variety of professional services, delivered on a project basis or through staff augmentation, to address clients' systems requirements, ranging from strategy and design through development and implementation to maintenance and support. The Company provides these professional services primarily to clients in the financial, entertainment and communications industries. Representative examples of the Company's clients for professional services include Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Merrill Lynch & Co., Inc. ("Merrill Lynch") and EMI Music Publishing ("EMI Music"). These representative clients accounted for, in the aggregate, approximately 4% of the Company's total revenues in 1996. Through its technical training services, the Company provides approximately 350 comprehensive technical and end-user training classes to its clients' personnel in many leading-edge technologies, including Visual Basic, PowerBuilder, Visual C++ and Sybase. To meet the Company's needs for technical resources, the Company maintains a national proprietary database consisting of technical profiles and resumes of approximately 30,000 professionals. The Company believes that this database, its existing technical staff and other software tools enable it to offer its clients the technical resources necessary to meet their IT requirements and address the challenges of creating "Year 2000" compliant systems. Pursuant to an agreement between IBM and the Company entered into in November 1996, the Company has been designated by IBM as one of six current national "Business Partners" for its "Year 2000" engagements. IBM will utilize the Company and its personnel to meet certain resource requirements for IBM and IBM clients in connection with its "Year 2000" engagements. To date, the Company has not recognized any revenues in connection with this agreement. The Company provides a complete range of IT outsourcing support services, including on-site and remote help desks and integrated call management centers staffed and managed by the Company's personnel. In providing these services, the Company uses sophisticated tools that enable it to serve as the transparent extension of its clients' technical support infrastructure. These services provide the Company's clients with immediate access to skilled technical personnel and a cost-effective solution to their IT outsourcing support needs. Representative examples of the Company's IT outsourcing support clients include IBM and AT&T. The Company was advised by IBM that, effective January 1, 1997, call management services previously provided by the Company to IBM would be provided directly by IBM with IBM personnel as a part of its worldwide call center strategy to support IBM's "core" business functions. The Company recognized revenues of approximately $8.7 million for providing these services to IBM in 1996, representing approximately 15% of the Company's total revenues. In January 1997, the Company and IBM agreed to extend a separate agreement whereby the Company will continue to provide help desk services to IBM and its customers for an additional three-year term. All of the Company's contracts are generally cancellable by the client at any time or, with respect to some of the Company's larger contracts, including those with IBM, on 30 to 90 days notice. At January 31, 1997, the Company had 690 employees operating through facilities located in New York, Atlanta, Chicago, Dallas, Los Angeles, Tampa and Rochester, MN. The Company's total revenue increased from $12.2 million in 1992 to $57.5 million in 1996. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 2,900,000 shares Common Stock offered by the Selling Stockholders... 640,000 shares Common Stock to be outstanding after the offering.. 12,700,000 shares (1) Use of proceeds.................................... Repayment of certain indebtedness, including approximately $2.5 million of indebtedness owed to Philip Friedman, the Company's President and Chief Executive Officer, fund distributions to the Company's existing stockholders of the cumulative amount of the Company's undistributed taxable earnings for the entire period it was an S corporation (approximately $4.8 million at December 31, 1996) and for general corporate purposes, including working capital, potential strategic acquisitions, strategic business partnerships and future product enhancements. See "Use of Proceeds." Proposed Nasdaq National Market symbol............. CGSI </TABLE> - -------- (1) Excludes 1,270,000 shares of Common Stock to be reserved for issuance under the Company's 1997 Long-Term Incentive Plan. The Company currently anticipates that options to purchase 587,500 shares of Common Stock will be granted immediately prior to consummation of this offering. See "Management--1997 Long Term Incentive Plan." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ---------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA(1): Revenues: Services, software license and maintenance fees................... $ 6,270 $ 8,514 $19,962 $31,704 $47,846 Hardware............................ 5,919 17,489 4,748 4,243 9,641 ------- ------- ------- ------- ------- Total revenues.................... 12,189 26,003 24,710 35,947 57,487 Direct costs: Services, software license and maintenance fees................... 3,751 5,186 12,988 22,970 35,734 Hardware............................ 5,112 15,796 3,882 3,007 8,123 ------- ------- ------- ------- ------- Total direct costs................ 8,863 20,982 16,870 25,977 43,857 ------- ------- ------- ------- ------- Gross profit......................... 3,326 5,021 7,840 9,970 13,630 Selling, general and administrative expenses............................ 1,973 2,916 4,725 6,690 9,995 Compensation amounts to S corporation stockholders........................ 1,232 1,950 3,041 1,502 760 Amortization of cost in excess of fair value of assets purchased...... -- -- 213 320 320 ------- ------- ------- ------- ------- 3,205 4,866 7,979 8,512 11,075 ------- ------- ------- ------- ------- Operating income (loss).............. 121 155 (139) 1,458 2,555 Interest expense..................... -- -- 77 473 540 ------- ------- ------- ------- ------- Income (loss) before income taxes.... 121 155 (216) 985 2,015 Income taxes......................... 31 39 60 33 169 ------- ------- ------- ------- ------- Net income (loss).................... $ 90 $ 116 $ (276) $ 952 $ 1,846 ======= ======= ======= ======= ======= PRO FORMA (UNAUDITED) Historical income before income taxes................................ $ 2,015 Pro forma provision for income taxes(2).............................. 829 ------- Pro forma net income................................................. $ 1,186 ======= Pro forma net income per share(3).................................... $ 0.12 ======= </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ---------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital....................................... $ 3,023 $27,866 Total assets.......................................... 13,776 36,133 Short-term debt, including current portion of capital lease obligations.................................... 2,670 164 Long-term debt, including capital lease obligations... 2,617 471 Stockholders' equity.................................. 3,254 30,263 </TABLE> - -------- (1) For all periods shown, the Company was treated as an S corporation for income tax purposes. Therefore, the Company's historical statements of operations data do not include a provision for U.S. federal income taxes. (2) Adjusted for all periods to record a provision for income taxes as if the Company had been a C corporation. See "The Company." (3) Computed by dividing pro forma net income by the weighted average number of shares of Common Stock outstanding during the periods. Pro forma net income per share for the year ended December 31, 1996 is based on the weighted average number of shares of Common Stock of the Company outstanding prior to this offering, after giving effect to the stock split described in Note 12 of Notes to Financial Statements and increased by the sale of approximately 441,700 shares of Common Stock assuming an offering price of $12.00 per share ($10.87, net of underwriting discount and expenses), the proceeds of which would be necessary to pay the cumulative amount of undistributed taxable earnings to the Company's existing stockholders. See "Use of Proceeds." Supplemental pro forma net income per share is $0.14 for the year ended December 31, 1996 and is based on the weighted average number of shares of Common Stock of the Company outstanding prior to this offering after giving effect to the stock split described in Note 12 of Notes to Financial Statements and increased by the sale of approximately 869,800 shares of Common Stock assuming an offering price of $12.00 per share ($10.87, net of underwriting discount and expenses), the proceeds of which would be necessary to repay bank and stockholder indebtedness and to pay the cumulative amount of undistributed taxable earnings to the Company's existing stockholders. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001018952_kos_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001018952_kos_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..846264cbeca9582fe60c205cb05a720b6d9d0257
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001018952_kos_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements appearing elsewhere in this Prospectus, including "risk factors" herein. Except as otherwise noted, all information in this Prospectus assumes conversion of the Convertible Note (as defined below) and no exercise of the Underwriters' over-allotment option. THE COMPANY Kos Pharmaceuticals, Inc. ("Kos", pronounced Kos, or the "Company") is a fully integrated specialty pharmaceutical company engaged in developing and commercializing proprietary prescription pharmaceutical products, primarily for the treatment of certain chronic cardiovascular and respiratory diseases. The Company developed and is currently manufacturing and marketing its lead product, Niaspan. The Company intends also to manufacture its products under development and to market such products directly through its own specialty sales force. The Company's cardiovascular products under development consist of controlled-release, once-a-day, oral dosage formulations. The Company's respiratory products under development consist of aerosolized inhalation formulations to be used primarily with the Company's proprietary inhalation devices. On July 28, 1997, Kos received clearance from the U.S. Food and Drug Administration ("FDA") to market Niaspan. Niaspan is the first once-a-day formulation of niacin approved by the FDA for the treatment of mixed lipid disorders, which are primary risk factors for coronary heart disease ("CHD"). In addition, Niaspan is the only patient-friendly lipid-altering product that moves all of the major lipid components in the proper direction. Niaspan has been approved for the following indications: (i) to reduce elevated total cholesterol, low-density lipoprotein ("LDL") cholesterol, and apolipoprotein B; (ii) to reduce elevated total and LDL cholesterol when used in combination with a bile-acid binding resin; (iii) to reduce elevated serum triglycerides; (iv) to reduce the risk of recurrent nonfatal myocardial infarction; (v) to promote the regression or slow the progression of atherosclerosis when used in combination with a bile-acid binding resin. The Company began shipping Niaspan to wholesalers in mid-August 1997, and it began detailing Niaspan to physicians in September 1997. Since the mid-1980's, clinical research has revealed that abnormal levels of several lipids are atherogenic risk factors for CHD. Such lipid disorders afflict approximately 56 million adults in the United States. Niacin, the active ingredient in Niaspan, is a water soluble vitamin long recognized by the National Institutes of Health ("NIH") and the American Heart Association ("AHA") as an effective pharmacological agent for the treatment of mixed lipid disorders, including elevated LDL cholesterol, total cholesterol, and triglycerides and depressed high-density lipoprotein ("HDL") cholesterol. The Company's NDA for Niaspan was based principally on three double-blinded, placebo-controlled pivotal clinical trials and one long-term, open label safety study involving an aggregate of 633 Niaspan-treated subjects at 17 sites throughout the United States. The results of these trials produced statistically significant changes in all major lipid components without serious treatment-related adverse events. Treatment with Niaspan demonstrated a 14% to 18% reduction in LDL cholesterol, a 24% to 35% reduction in triglycerides, a 22% to 32% increase in HDL cholesterol, and a 24% to 36% reduction in lipoprotein (a) ("Lp(a)"). Moreover, Niaspan's controlled-release formulation and Once-A-Night(TM) dosing regimen reduced the liver toxicity and intolerable side effects generally associated with currently available formulations of niacin. As of September 2, 1997, the Company's field sales force consisted of 94 experienced pharmaceutical sales representatives. These representatives have begun marketing Niaspan to the approximately 18,000 physicians who account for approximately 40% of the prescriptions for lipid-altering medications in the United States. Kos intends to expand its field sales force to more than 125 representatives and to use this sales force to inform the physicians as to Niaspan's safety and efficacy profile and the manner in which Niaspan achieves such profile. In 1996, the market for cholesterol reducing drugs was nearly $3.0 billion in the United States and was one of the fastest growing sectors of the cardiovascular market. The Company is seeking licensors to market Niaspan outside the United States, where sales of cholesterol reducing drugs approximated $3.0 billion in 1996. The Company was founded in 1988 by the former Chief Executive Officer, Chief Operating Officer, and Director of Product Development of Key Pharmaceuticals, Inc., which was acquired by Schering-Plough Corporation in June 1986. The Company believes that substantial market opportunities exist for developing drugs that are reformulations of existing approved prescription pharmaceutical products but which offer certain safety advantages (such as reduced harmful side effects) or patient compliance advantages (such as once-a-day rather than multiple daily dosing regimens) over such products. Kos believes that developing proprietary products based on currently approved drugs, rather than new chemical entities ("NCEs"), may reduce regulatory and development risks and, in addition, may facilitate the marketing of such products because physicians are generally familiar with the safety and efficacy of such products. Six of the Company's seven products under development require new drug application ("NDA") filings with the FDA. Although such NDA filings are more expensive and time consuming, developing products that require NDA approval offers several advantages compared with generic products, including potential for higher gross margins, limited competition resulting from significant clinical and formulation development challenges, and a three-year statutory barrier to generic competition. The Company's management has significant experience in implementing the principal elements of the Company's business strategy. These elements consist of the following: (i) select products with unrealized commercial potential where safety or patient compliance may be improved; (ii) focus initially on the large, rapidly growing cardiovascular and respiratory markets, which include many chronic diseases requiring long-term therapy; (iii) develop proprietary formulations of currently approved pharmaceutical compounds, which can reduce regulatory and development risks typically associated with the development of new chemical entities; (iv) manage directly the clinical development of its products; (v) manufacture its products internally; (vi) market its products directly through the Company's specialty sales force; and (vii) leverage its core competencies through corporate and academic alliances. Kos has three other once-a-day, controlled-release cardiovascular products that are currently under development: (i) Nicostatin(TM), a combination of Niaspan and a currently approved HMG CoA reductase inhibitor (or "statin") for the treatment of mixed lipid disorders; (ii) a branded generic form of isosorbide-5-mononitrate ("IS-5-MN"), a nitrate for angina; and (iii) a formulation of captopril, an angiotensin converting enzyme ("ACE") inhibitor for hypertension. In 1996, the disease segments of the cardiovascular market for which the Company is developing its products achieved aggregate sales in the United States of approximately $11.5 billion. Kos also is developing four respiratory products, dispensed in aerosolized metered-dose inhalation ("MDI") devices for the treatment of asthma. All four aerosol products use non-CFC propellants, which are generally regarded as environmentally safe, and all four require NDA filings. The Company's aerosol products consist of two inhaled steroids, triamcinolone and flunisolide, dispensed in a proprietary breath coordinated inhaler being developed by the Company; a beta-agonist, albuterol, dispensed in a generic MDI; and either albuterol or triamcinolone dispensed in a proprietary breath actuated inhaler being developed by the Company, principally for pediatric and geriatric uses. The market for asthma products in 1996 was $2.5 billion in the United States. The Company currently collaborates with third parties in the development of certain products and sponsors basic research at universities. Kos also intends to pursue the acquisition of products or drug-delivery technologies for development by Kos, particularly acquisitions or licenses for currently marketed or late-development-stage cardiovascular products that complement Niaspan for detailing by the Company's sales force. The Company completed an initial public offering of its Common Stock on March 12, 1997 (the "IPO"). Prior to the IPO, the Company's operations were funded entirely by Kos Investments, Inc. ("Kos Investments"), which is controlled by Michael Jaharis, one of the Company's founders and its Chairman. At September 2, 1997, the Company employed 249 people, of whom 111 were in marketing and sales, 76 were in product development, 39 were in manufacturing, and 23 were in administration. THE OFFERING <TABLE> <S> <C> Common Stock being offered by: The Company..................................... 1,000,000 shares The Selling Shareholders........................ 2,200,000 shares Common Stock to be outstanding after this offering........................................ 16,974,793(1) Use of proceeds................................... For certain operating requirements, including sales and marketing and research and development expenses, working capital, and other general corporate purposes, including potential acquisitions. Nasdaq National Market symbol..................... KOSP </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except share data) <TABLE> <CAPTION> YEAR ENDED JUNE 30, ------------------------------------ 1995 1996 1997 ---------- ---------- ---------- <S> <C> <C> <C> STATEMENT OF OPERATIONS: Revenues.................................................... $ 14 $ -- $ -- Operating expenses: Research and development.................................. 8,387 13,816 17,881 General, selling and administrative....................... 1,614 1,772 5,522 Expense recognized on modification of stock option grants(2)............................................... -- 5,436 -- ---------- ---------- ---------- Total operating expenses.................................... 10,001 21,024 23,403 Interest (income) expense, net.............................. 1,052 (14) (282) Minority interest(3)........................................ 1 16 -- ---------- ---------- ---------- Net loss.................................................... $ (11,038) $ (20,994) $ (23,121) ========== ========== ========== Net loss per share(4)....................................... $ (0.97) $ (1.85) $ (1.87) Weighted average common shares in computing net loss per share(4).................................................. 11,340,000 11,340,000 12,341,146 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------- ACTUAL AS ADJUSTED(6) -------- --------------- <S> <C> <C> BALANCE SHEET(5): Cash and marketable securities.............................. $ 58,362 $ 99,105 Working capital............................................. 39,987 95,147 Total assets................................................ 65,106 105,849 Convertible Note............................................ 13,395 -- Deficit accumulated during the development stage(7)......... (79,780) (79,780) Shareholders' equity........................................ 44,989 100,149 </TABLE> - --------------- (1) Excludes 3,784,090 shares of Common Stock authorized for issuance under the Company's 1996 Stock Option Plan and 300,000 shares of Common Stock reserved for issuance upon exercise of other outstanding options. Options to acquire an aggregate of 2,749,300 shares of Common Stock at a weighted average exercise price of $9.36 per share were issued and outstanding as of September 2, 1997. Includes 961,168 shares of Common Stock issuable to Kos Investments upon the conversion of a note representing a loan made to the Company by Kos Investments (the "Convertible Note"), assuming a conversion date of October 31, 1997, and including accrued interest of $1,022,524. See "Management -- Stock Option Plan" and "Certain Relationships and Related Transactions." (2) Reflects a non-cash charge associated with an extension of the exercise period for stock options granted during 1988 to 1990 to the Company's Chief Executive Officer and two independent consultants; no other material economic terms of these options were changed. (3) Represents the minority shareholder's interest in Aeropharm Technology, Inc. ("Aeropharm"), the Company's aerosol subsidiary, which interest was acquired by the Company in June 1996. (4) See Note 2 of Notes to Consolidated Financial Statements for information concerning the computation of net loss per share. (5) The Company funded its operations from July 1, 1996, to the completion of the Company's IPO using the proceeds of the Convertible Note issued to Kos Investments, a company that is controlled by, and serves as an investment vehicle for, Michael Jaharis, the Company's Chairman and one of its founders. As of June 30, 1997, the Company had outstanding borrowings of $13,395,000 and $643,000 of interest under such loan. See "Use of Proceeds." (6) Adjusted to reflect the sale of 1,000,000 shares of Common Stock offered by the Company hereby and receipt by the Company of the estimated net proceeds therefrom, the exercise of certain stock options, and conversion of the Convertible Note. See "Use of Proceeds" and "Capitalization." (7) In connection with the transfer on June 30, 1996, of assets and liabilities from Holdings to the Company, net operating loss carry-forwards amounting to approximately $51.0 million and related tax benefits were not transferred to the Company. The Company can only utilize net operating loss carryforwards subsequent to June 30, 1996 (amounting to $22.3 million as of June 30, 1997), to offset future taxable net income, if any. See "The Company" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001019695_arqule-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001019695_arqule-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..035157759a9c7a73a9847ba2f2b3aa5073531bbf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001019695_arqule-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including notes thereto, appearing elsewhere in this Prospectus. ArQule, Inc. (the "Company" or "ArQule") has created a new technology platform for the discovery and production of novel chemical compounds with commercial potential. The Company has developed proprietary technologies for the identification and optimization of drug development candidates and agrichemicals. Using combinatorial chemistry, a modular building block approach to the development of compounds, structure-guided compound design, high speed parallel chemical synthesis and information technology, the Company rapidly develops large, diverse collections of compounds that have the potential to be biologically active. To date, the Company has entered into collaborative arrangements with Abbott Laboratories, Monsanto Company, Pharmacia Biotech AB, Roche Bioscience and Solvay Duphar B.V., and has formed joint discovery programs with several biotechnology companies. The Company's goal is to penetrate the product development pipelines of major pharmaceutical, biotechnology and agrichemical companies and to maximize the likelihood that active compounds are discovered and successfully developed. In order to achieve this goal, the Company pursues a strategy designed to maximize the number of biological targets against which its compounds are screened. ArQule believes that its technologies will allow its collaborative partners in the pharmaceutical, biotechnology and agrichemical industries to accelerate the product development process by several years, permitting them to realize significant cost reductions and the earlier recovery of research and development expenditures for successful drugs and agrichemicals. In addition, the Company believes its technologies will allow researchers to seek solutions to product development challenges previously deemed too costly or otherwise impractical because of the inherent limitations of traditional medicinal chemistry. Using its proprietary "automated molecular assembly plant" (AMAP(TM)) system and structure-activity relationship ("SAR") data regarding biological targets and molecular components, ArQule produces significant quantities of pure small organic compounds in logically structured spatially addressable arrays. Unlike most current approaches to compound development, ArQule's compound arrays are created by using structure-guided and rational design tools to systematically assemble molecular components with properties the Company's scientists believe are likely to exhibit biological activity. ArQule's compound arrays are designed around certain core structures or themes. Each compound in the array is different from the adjacent compounds as a result of a single structural modification. Each ArQule array omits compounds that are closely analogous to other compounds in the array, using representative diversity to create a logical representation of a virtual library of hundreds of times as many compounds as are in the array. The Company's collaborative partners are able to realize significant savings by screening the thousands of compounds in each ArQule array rather than the millions of compounds they represent. ArQule manufactures and delivers two types of arrays of synthesized compounds to its pharmaceutical, biotechnology and agrichemical partners: (i) Mapping Array(TM) compound sets, which are arrays of novel, diverse small molecule compounds used in screening for lead generation and (ii) Directed Array(TM) compound sets, which are arrays of compounds that are closely related, often referred to as "analogs" of a particular lead compound. Both Mapping Array and Directed Array sets are shipped in industry-standard 96-well microtiter plates that are compatible with most screening protocols. Under its Mapping Array Program, ArQule ships a minimum of 100,000 compounds per year in 15 to 20 separate Mapping Array sets, each consisting of 3,000 to 10,000 individual compounds based on a different theme or core structure chosen by ArQule. Under a typical Directed Array Program, ArQule provides three to seven Directed Array sets, each averaging about 1,000 analogs of a particular lead compound chosen by a collaborator in consultation with ArQule. ArQule provides its Mapping Array and Directed Array Programs primarily to partners in the pharmaceutical, biotechnology and agrichemical industries. To date, ArQule has entered into collabo- rative arrangements with Abbott Laboratories, Monsanto Company, Pharmacia Biotech AB, Roche Bioscience and Solvay Duphar B.V., and has formed joint discovery programs with several biotechnology companies. In exchange for non-exclusive access to ArQule's Mapping Array Program, the Company's pharmaceutical and agrichemical partners pay ArQule a combination of up-front and annual subscription fees as well as a fixed amount for each Directed Array Program. In addition, these companies have agreed to make payments upon the achievement of certain milestones and to pay royalties upon the commercialization of products based on compounds from either the Mapping Array or the Directed Array Programs. In exchange for providing the arrays to the Company's biotechnology partners, the Company receives joint ownership of any potential drugs identified by the biotechnology partner. ArQule's integrated technologies also present the Company with opportunities in a number of biological and non-biological fields outside of drug discovery and agrichemicals. These opportunities include the development of industrial catalysts and nano-scale polymeric structures for specialized mechanical applications. - ------------------------------------------------------------------------------- THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................ 1,632,500 shares Common Stock offered by the Selling Stockholders... 367,500 shares Common Stock to be outstanding after the offering......................................... 11,490,862 shares(1) Use of proceeds.................................... To fund research and product development programs and for general corporate and working capital purposes. Nasdaq National Market symbol...................... ARQL </TABLE> SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM INCEPTION (MAY 6, 1993) THROUGH YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------- ------------------------------- 1993 1994 1995 1996 --------------------- ------- ------- ------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue................................ $ -- $ 85 $ 3,330 $ 7,255 Loss from operations................... (1,456) (4,067) (1,966) (3,410) Net loss............................... $(1,465) $(4,206) $(2,252) $(2,993) Unaudited pro forma net loss per share(2)........................ $ (0.33) $ (0.39) Shares used in computing unaudited pro forma net loss per share(2)..... 6,853 7,705 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and marketable securities.................. $37,086 $55,324 Working capital................................................... 31,440 49,678 Total assets...................................................... 43,509 61,747 Capital lease obligations, less current portion................... 1,728 1,728 Total stockholders' equity........................................ 34,621 52,859 </TABLE> - ------------------------------ (1) Excludes 1,394,920 shares issuable upon the exercise of options outstanding as of December 31, 1996 with a weighted average exercise price of $3.62 per share. (2) Unaudited pro forma net loss per share is determined by dividing Net loss by Shares used in computing unaudited pro forma net loss per share. For information regarding Shares used in computing unaudited pro forma net loss per share, see Note 2 of Notes to Financial Statements. (3) As adjusted to give effect to the sale of 1,632,500 shares of Common Stock offered by the Company hereby, after deducting the underwriting discount and offering expenses, at the public offering price of $12.00 per share and the application of the estimated net proceeds therefrom as set forth in "Use of Proceeds." ------------------------------ Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. The shares of Common Stock offered hereby involve a high degree of risk. Investors should carefully consider the information set forth under "Risk Factors." - --------------------------------------------------------------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001019731_ascent_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001019731_ascent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..41fde34210ae841969f7056847e87ef3d4bb5e61
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001019731_ascent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including "Risk Factors" herein. Ascent is a development stage company and, to date, has generated no revenues from product sales. See "Risk Factors -- Early Stage of Development; History of Operating Losses and Cumulative Deficit." Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option and reflects (i) the conversion of all outstanding shares of the Company's Convertible Preferred Stock into an aggregate of 4,440,564 shares of Common Stock upon the consummation of this offering (the "Preferred Stock Conversion") and (ii) a 0.85-for-one reverse stock split of the Common Stock of the Company effective May 27, 1997. THE COMPANY Ascent Pediatrics, Inc. ("Ascent" or the "Company"), is a drug development and marketing company focused exclusively on the pediatric market. The Company's strategy is to address unmet medical needs of children through the development of differentiated, proprietary products based on approved compounds with well known clinical profiles. Ascent is developing a range of pharmaceuticals designed to improve upon currently available products for common pediatric illnesses through the application of its drug delivery and reformulation technologies. The Company is developing most of these products for sale on a prescription basis. By developing products based on currently approved drugs, rather than new chemical entities, Ascent believes that it can reduce regulatory and development risks and shorten the product development cycle. In addition, Ascent believes that market acceptance of its products will be enhanced by the familiarity of pediatricians with the compounds that serve as the basis of these products. The Company plans to introduce its first three products to the market in the second half of 1997 and has seven other principal products in development. The Company intends to market its products in the United States through a direct sales force focused exclusively on the pediatric market. The United States market for prescription pharmaceutical products for children age 16 years and younger was estimated by Scott-Levin, a healthcare consulting firm ("Scott-Levin"), to be approximately $3.5 billion in 1996, representing a compound annual growth rate of approximately 9% over the 1992 level. Despite the size of the pediatric pharmaceutical market, the Company believes that this market has been underserved by the large pharmaceutical companies and will be receptive to a company whose sole mission is developing and marketing drugs for children. Pharmaceutical companies historically have concentrated their drug development efforts on the adult market or have pursued pediatric presentations only as product line extensions. In addition, there are a number of drug administration and patient compliance issues particular to the pediatric market which result from the unpleasant taste and texture, frequent dosing regimens, complex or difficult delivery methods or unfavorable side effect profiles of certain drugs. The Company believes that the special needs of this market and the relatively low number of drugs developed specifically for pediatric use have resulted in an opportunity to address unmet medical needs of children. In January 1997, the Division of Anti-Infective Drugs of the United States Food and Drug Administration (the "FDA") notified Ascent that it recommended approval of the Company's New Drug Application ("NDA") for Primsol trimethoprim solution, a prescription antibiotic for the treatment of ear infections in patients age six months to twelve years, with a label reflecting that Primsol solution would not be a product for first line therapy (i.e., the first course of treatment selected in most instances by a physician) for this indication. The FDA has not yet approved the Company's NDA for Primsol solution. Trimethoprim for the treatment of ear infections in children is currently available only in combination with a sulfa compound that is associated with allergic reactions. Primsol solution contains trimethoprim only and in clinical trials demonstrated a more favorable side effect profile than the combination therapy. Because of this improved side effect profile, the Company believes that pediatricians will be more likely to prescribe an antibiotic comprised only of trimethoprim for the treatment of ear infections in children than they historically have been to prescribe the combination therapy. In March 1997, the Company entered into an agreement with Upsher-Smith Laboratories, Inc. ("Upsher-Smith"), to acquire the currently marketed Feverall line of acetaminophen rectal suppository products. The Company plans to introduce Primsol solution and Feverall suppositories to the market in the second half of 1997, along with Pediamist, an over-the-counter nasal saline spray developed by Ascent that uses a metering device to facilitate pediatric use. In addition to these three products, the Company has seven other products in various stages of development. Prednisolone sodium phosphate syrup is a steroid for the treatment of inflammation, including inflammation resulting from respiratory conditions, for which the Company expects to file Abbreviated New Drug Applications ("ANDAs") with the FDA in the second half of 1997. Pediatemp acetaminophen controlled-release beads is an analgesic and antipyretic for the treatment of pain and fever for which the Company recently completed Phase III clinical trials and, subject to the results of these trials being satisfactory, plans to file an NDA in the second half of 1997. Pediavent albuterol controlled-release suspension is a bronchodilator for the treatment of asthma which currently is in Phase I clinical trials. Cromolyn sodium cream is a topical cream for the treatment of moderate to severe contact dermatitis which currently is in Phase I clinical trials. Cromolyn sodium controlled-release nasal spray is a drug for the treatment of nasal allergies that is undergoing preclinical testing. The Company also is developing a line of over-the-counter cough/cold products and an over-the-counter acetaminophen controlled-release solution. Ascent believes that an important part of fulfilling its mission of becoming a leader in the development and marketing of pediatric pharmaceuticals is the establishment of a corporate identity. Accordingly, even before the launch of its first products, Ascent has initiated a program to familiarize pediatricians with the Ascent name. Ascent is establishing a domestic sales organization to promote the Company's products to high prescribing pediatricians, influential pediatricians and pediatric nurses. Ascent plans to supplement these activities with telemarketing, direct mail and advertisements in speciality pediatric journals. Ascent also intends to promote its products directly to managed care providers in order to obtain inclusion on these providers' formularies and has retained a consulting firm to assist it in this process. Ascent seeks competitive protection for its products in a variety of ways, including the creation of proprietary formulations using technologies, such as taste masking and controlled-release systems, that are covered by patents or patent applications owned by or licensed to the Company or its suppliers. THE OFFERING <TABLE> <S> <C> Common Stock offered hereby................................. 2,000,000 shares Common Stock to be outstanding after the offering........... 6,638,719 shares(1) Use of proceeds............................................. To fund a portion of the purchase price of the Feverall product line and for product development and sales and marketing costs and general corporate purposes. Proposed Nasdaq National Market symbol...................... ASCT </TABLE> - --------------- (1) Reflects the Preferred Stock Conversion. Excludes (i) 1,675,248 shares reserved for issuance upon the exercise of options and warrants outstanding as of March 31, 1997 at a weighted average exercise price of $6.28 per share, (ii) up to an aggregate of 583,332 shares of Common Stock (assuming an initial public offering price of $12.00 per share) issuable upon the conversion of the Company's Convertible Subordinated Secured Notes (the "Triumph Notes") in the aggregate original principal amount of $7,000,000 issued or issuable no later than the closing of this offering and (iii) 561,073 shares of Common Stock at an exercise price of $0.01 per share and 218,195 shares of Common Stock at an exercise price of $5.29 per share reserved for issuance upon the exercise of warrants issued or issuable in connection with the Triumph Notes (the "Triumph Warrants"). Warrants for 699,783 shares referred to in clause (i) of the preceding sentence contain a cashless exercise feature which, if exercised in full prior to the closing of this offering (and assuming an initial public offering price of $12.00 per share), would result in the issuance of 266,072 shares of Common Stock with no additional proceeds to the Company. See "Dilution," "Capitalization," "Certain Transactions" and "Description of Capital Stock." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31, COMBINED PRO ----------------------------- CUMULATIVE FORMA 1997 FROM INCEPTION YEAR ENDED DECEMBER 31, YEAR ENDED COMBINED (MARCH 16, ---------------------------------------------- DECEMBER 31, PRO 1989) TO 1992 1993 1994 1995 1996 1996(1) 1996 1997 FORMA(1) MARCH 31, 1997 ------- ------- ------- ------- ---------- ------------ ----- ---------- ---------- -------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues............. $ -- $ -- $ -- $ 304 $ -- $ 3,877 $ -- $ -- $ 795 $ 304 Costs and expenses: Cost of sales...... -- -- -- -- -- 1,434 -- -- 356 -- Research and development...... 558 1,221 2,551 2,986 3,761 3,761 475 1,528 1,528 13,538 Selling, general and administrative... 706 723 1,141 1,532 2,805 5,142 428 973 1,606 9,176 ------- ------- ------- ------- ---------- ---------- ----- ---------- ---------- -------- Loss from operations......... (1,264) (1,944) (3,692) (4,214) (6,566) (6,460) (903) (2,501) (2,695) (22,410) Interest income...... 47 123 147 113 79 79 25 73 73 826 Interest expense..... -- -- -- -- -- (468) -- (20) (147) (20) Gain on sale of fixed assets............. -- -- -- -- -- -- -- 9 9 9 ------- ------- ------- ------- ---------- ---------- ----- ---------- ---------- -------- Net loss............. $(1,217) $(1,821) $(3,545) $(4,101) $ (6,487) $ (6,849) $(878) $ (2,439) $ (2,760) $(21,595) ======= ======= ======= ======= ========== ========== ===== ========== ========== ======== Pro forma and combined pro forma net loss per share(2)........... $ (1.48) $ (1.56) $ (0.56) $ (0.63) ========== ========== ========== ========== Pro forma weighted average common and common equivalent shares(2).......... 4,384,197 4,384,197 4,384,197 4,384,197 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ----------------------------------------------------- COMBINED PRO FORMA AS ACTUAL COMBINED PRO FORMA(1) ADJUSTED(1)(3) -------- --------------------- ------------------ <S> <C> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and marketable securities..................... $ 8,300 $ 7,154 $ 28,674 Working capital...................................................... 6,431 35 21,555 Total assets......................................................... 9,672 20,172 41,692 Long-term debt, net of current portion............................... 2,020 4,514 4,514 Redeemable preferred stock........................................... 25,010 -- -- Deficit accumulated during the development stage..................... (22,292) (22,292) (22,292) Total stockholders' equity (deficit)................................. (19,437) 8,079 29,599 </TABLE> - --------------- (1) Presented on a combined pro forma basis to give effect to (i) the probable acquisition of the Feverall product line from Upsher-Smith for $11,500,000 plus the cost of certain related inventory (assumed for this purpose to be $235,696) as if such acquisition had occurred on January 1, 1996 with respect to Statement of Operations Data and on March 31, 1997 with respect to Balance Sheet Data, (ii) the issuance of $5,000,000 of Triumph Notes no later than the closing of this offering presented as if this transaction occurred on January 1, 1996 with respect to Statement of Operations Data and on March 31, 1997 with respect to Balance Sheet Data with such Triumph Notes recorded as a liability (after allocating $1,668,746 as value attributable to warrants) of $3,331,254, which will be accreted up to the Triumph Notes' face value of $5,000,000 over the term of the Triumph Notes and such accretion in the amount of $1,668,746 will be recorded as interest expense in addition to the stated interest rate, (iii) the Preferred Stock Conversion and (iv) the reclassification of $2,505,740 of warrant obligations to additional paid in capital as described in Note L to Notes to Financial Statements. See "Capitalization," "Certain Transactions" and "Unaudited Combined Pro Forma Financial Statements." (2) See Note B to Notes to Financial Statements for information concerning the computation of pro forma net loss per share and shares used in computing pro forma net loss per share. (3) Reflects the sale of the 2,000,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $12.00 per share and the application of net proceeds therefrom, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company. See "Capitalization," "Use of Proceeds" and "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001019756_markwest_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001019756_markwest_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..51d39a895658f7c107e6e1e5e653522481c4eeb2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001019756_markwest_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. As used in this Prospectus, the terms "Company" and "MarkWest" refer, unless the context requires otherwise, to the Company, its predecessor, subsidiaries, joint venture entities managed by the Company or its subsidiaries, or their interests therein. THE COMPANY MarkWest Hydrocarbon, Inc. ("MarkWest" or the "Company") is engaged in natural gas processing and related services. The Company, which has grown substantially since its founding in 1988, is the largest processor of natural gas in Appalachia and, in 1996, established a venture to provide natural gas processing services in western Michigan. The independent gas processing industry has grown rapidly in the last 10 years, and the Company believes there will be substantial opportunities to grow its gas processing operations within these existing core regions and in new markets. The Company provides compression, gathering, treatment, and natural gas liquid ("NGL") extraction services to natural gas producers and pipeline companies and fractionates NGLs into marketable products for sale to third parties. The Company also purchases, stores and markets natural gas and NGLs and has begun to conduct strategic exploration for new natural gas sources for its processing activities. For the year ended December 31, 1996, MarkWest produced approximately 95 million gallons of NGLs and marketed approximately 137 million gallons of NGLs. The Company's processing and marketing operations are concentrated in two core areas which are significant gas producing basins: the southern Appalachian region of eastern Kentucky, southern West Virginia, and southern Ohio (the "Appalachian Core Area"), and western Michigan (the "Michigan Core Area"). At the Company's processing plants, natural gas is treated to remove contaminants, and NGLs are extracted and fractionated into propane, normal butane, isobutane and natural gasoline. The Company then markets the fractionated NGLs to refiners, petrochemical companies, gasoline blenders, multistate and independent propane dealers, and propane resellers. In addition to processing and NGL marketing, the Company engages in terminalling and storage of NGLs in a number of NGL storage complexes in the central and eastern United States, and operates propane terminals in Arkansas and Tennessee. During 1996, the Company took several key steps intended to expand its operations. In January 1996, the Company commissioned a new natural gas liquids extraction plant in Wayne County, West Virginia, which replaced a 1958 vintage extraction facility owned and operated by Columbia Gas Transmission Company ("Columbia Gas"). Because the Company owns and operates this new facility, which is situated on a main gathering line of Columbia Gas, the Company will generate fee revenues related to processing operations. In addition, the Company believes this new facility will generate greater NGL recovery from natural gas, reduce downtime for maintenance, and significantly decrease fuel costs compared to the replaced facility. In May 1996, the Company established West Shore Processing Company, LLC ("West Shore"), a venture in western Michigan, which the Company will develop as its Michigan Core Area. West Shore has exclusive gathering, treatment and processing agreements with Michigan Energy Company, LLC ("MEC") and Michigan Production Company ("MPC") covering the natural gas production from all wells and leases owned by them within western Michigan. West Shore also is negotiating agreements with several exploration and production companies that would result in additional dedication of natural gas production to the gathering, treatment and processing facilities of West Shore. The natural gas streams to be dedicated to West Shore will primarily be produced from an extension of the Northern Niagaran Reef trend in western Michigan. To date, over 2.5 trillion cubic feet equivalent of natural gas have been produced from the Northern Niagaran Reef trend. Upon completion of the first two phases of development, West Shore's processing operations are expected to have 30 million cubic feet per day (MMcf/D) of capacity provided by Shell Offshore, Inc. ("Shell"), and approximately 25 MMcf/D of dedicated production from currently drilled and proven wells. With a current pipeline capacity of 35 MMcf/D and deliverabilities of individual wells commonly exceeding 5 MMcf/D, the Company expects that demand at West Shore will exceed capacity. The Company also has entered into an agreement with Longwood Exploration Company ("Longwood") to conduct exploration activity in the Michigan Core Area. See "-Recent Developments." INDUSTRY OVERVIEW Natural gas processing and related services represent a major segment of the oil and gas industry, providing the necessary service of converting natural gas into marketable energy products. When natural gas is produced at the wellhead, it must be gathered, and in some cases compressed or pressurized, for transportation via pipelines (described as gathering services) to gas processing plants. The processing plants remove water vapor, solids and other contaminants, such as hydrogen sulfide or carbon dioxide in the natural gas stream that would interfere with pipeline transportation or marketing of the gas to consumers and also extract the NGLs from the natural gas (described as treatment and extraction services, respectively). The NGLs are then subjected to various processes that cause the NGLs to separate, or fractionate, into marketable products such as propane, normal butane, isobutane and natural gasoline (described as fractionation services). Over the past 10 years, independent natural gas processing has experienced significant growth. In 1995, independent natural gas processing companies accounted for 319,000 barrels per day of NGL production, or approximately 23% of total U.S. NGL production by the 20 largest U.S. natural gas producers, compared to less than 4% of such producers' NGL production in 1985. The increase in the independent natural gas processing industry has resulted in part from the divestiture by major energy companies and interstate pipeline companies of their gas gathering and processing assets and the decision by many such companies to outsource their gas processing needs. An important factor expected to contribute to the continuing growth of independent natural gas processing companies is the upward trend of natural gas consumption and production in the United States. Natural gas consumption in the United States has increased from 16.2 trillion cubic feet (Tcf) per year in 1986 to 21.3 Tcf per year in 1995, and is forecast to increase to 24.0 Tcf per year by the year 2000. The number of natural gas rigs in service also has recently increased. From June 1995 to June 1996, the number of natural gas rigs in service rose from 340 to 464. This natural gas rig count is the highest in over four years, and, as a percentage of total oil and gas rigs in service, the highest in the last decade. Many newly discovered natural gas wells and fields will require access to gathering and processing infrastructure, providing significant opportunities for growth-oriented independent natural gas processing companies such as MarkWest. STRATEGY The Company's primary objective is to achieve sustainable growth in cash flow and earnings by increasing the volume of natural gas that it gathers and processes and the volume of NGLs that it produces and markets. To achieve this objective, the Company employs a number of related strategies. Geographic Core Areas. The Company emphasizes opportunities for investment in geographic core areas where there is significant potential to achieve a position as the area's dominant natural gas processor. The Company believes that growth in core areas can be achieved by developing processing facilities both in areas where a large energy or pipeline company requires processing services and in areas where there is significant potential for natural gas production but not significant processing capacity. Long-Term Strategic Relationships. The Company seeks strategic relationships with the dominant pipelines and gas producers in each area in which the Company operates. In the Appalachian Core Area, MarkWest owns three processing plants that process natural gas or NGLs dedicated by Columbia Gas. In its Michigan Core Area, the Company has entered into gas supply and processing relationships with Shell and MPC. NGL Marketing. The Company strives to maximize the downstream value of its gas and liquid products by marketing directly to distributors and resellers. Particularly in the area of NGL marketing, the Company minimizes the use of third party brokers and instead supports a direct marketing staff focused on refiners, petrochemical companies, gasoline blenders, and multistate and independent propane dealers. Additionally, the Company uses its own truck and tank car fleet, as well as its own terminals and storage facilities, to provide supply reliability to its customers. All of these efforts have allowed the Company to maintain pricing of its NGL products at a premium to Gulf Coast spot prices. Cost-Efficient Operations. The Company seeks a competitive advantage by utilizing in-house processing and operating expertise to provide lower-cost service. To provide competitive processing services, the Company emphasizes facility design, project management and operating expertise that permits efficient installation and operation of its facilities. The Company has in- house engineering personnel who oversee the design and construction of the Company's processing plants and equipment. Acquisitions. The Company believes that there are significant opportunities to make strategic acquisitions of gathering and processing assets because of the divestiture by major energy companies and interstate pipeline companies of their gas gathering and processing assets. The Company pursues acquisitions that can add to existing core area investments or can lead to new core area investments. Exploration as a Tool to Enhance Gas Processing. The Company maintains a strategic gas exploration effort that is designed to permit the Company to gain access to additional natural gas supplies within its existing core areas and to gain foothold positions in production regions that the Company might develop as new core processing areas. RECENT DEVELOPMENTS In May 1996, the Company entered into arrangements for the establishment of West Shore, a company jointly owned with MEC. At that time, the most significant assets of West Shore consisted of a 31-mile sour gas pipeline that is situated in Manistee and Mason Counties, Michigan (the "Basin Pipeline"), the rights to obtain a sour gas treatment plant located in Manistee County and various agreements that dedicate natural gas production to West Shore for processing. West Shore is currently completing a 30-mile extension to provide access to existing shut-in wells owned by MPC. West Shore is dedicated to natural gas gathering, treatment and processing and NGL marketing in western Michigan. MarkWest is the operator of West Shore. The Company has entered into agreements to construct approximately 27 miles of additional pipeline to provide access to processing services to existing shut-in wells and providing it the right to construct a new 50 million cubic feet per day plant to extract NGLs. In addition, the Company expects either to construct a new treatment plant or to expand Shell's existing plant capacity to treat the sour gas predominant in the Michigan Core Area. The activities contemplated by such agreements, together with the further development of West Shore and the Basin Pipeline, are referred to herein as the "Michigan Project." Substantially all of the natural gas produced from the western region of the Michigan Core Area is sour. While several successful large wells have been developed in the region, the natural gas producers have lacked adequate gathering and processing facilities for sour gas, and development of the trend has been inhibited as a result. With the additional capacity to be provided by West Shore's sour gas pipeline and processing and treatment facilities, the Company expects further development in western Michigan which will create demand for West Shore's gathering and processing services. See "Business-Natural Gas Processing and Related Services-Michigan Core Area." In late 1996, Columbia Gas filed a settlement document with the FERC relating to its most recent rate case. The settlement was approved by the FERC by order dated April 17, 1997 (the "Columbia Abandonment Order") and is effective as of February 1, 1997. As a part of the Columbia Abandonment Order, the Company agreed to take over operations of the Boldman plant, and Columbia Gas agreed to sell its Cobb natural gas liquids extraction plant located in West Virginia to the Company for a purchase price of $.9 million. The Company and Columbia Gas have signed a "Points of Agreement" and are currently negotiating definitive agreements to complete both the assumption of operations at the Boldman plant by the Company and the sale of the Cobb plant to the Company. Execution of definitive agreements is anticipated in the third or fourth quarter of 1997. See "Business-Natural Gas Processing and Related Services-Appalachian Core Area." In April 1997, Domain Energy Corporation ("Domain") and EnCap Investments, L.C. ("EnCap") informed the Company that they had purported to transfer their interests in MEC and MPC to Energy Acquisition Corp. The Company believes the transfer of the interests in MEC is invalid. The Company does not anticipate any change in the operation or management of West Shore, regardless of whether or not the transfer of the interests in MEC is effective. Moreover, the purported transfer of the interests in MPC has no effect on the Company's gathering, treatment and processing arrangements with MPC. See "Business- Natural Gas Processing and Related Services-Michigan Core Area" and "-Legal Proceedings." REORGANIZATION The Company was incorporated as a Delaware corporation in 1996 to act as the successor to the business of MarkWest Partnership, a Colorado limited partnership formed in 1988. Upon effectiveness of the Company's initial public offering in October 1996, the Company succeeded to the business, assets and liabilities of MarkWest Partnership. See "Certain Transactions." The Company's principal executive offices are located at 5613 DTC Parkway, Suite 400, Englewood, Colorado 80111. Its telephone number is (303) 290-8700. THE OFFERING Common Stock offered by the Selling Stockholders.............. 322,464 shares Common Stock to be Outstanding after this Offering (1)........ 8,485,000 shares Nasdaq National Market Symbol................................. MWHX - -------------- (1) Based upon an examination of the stock ledger of the Company as of March 31, 1997. Excludes (i) 281,171 shares issuable upon exercise of stock options outstanding as of the effective date of this offering (the "Offering") with a weighted average exercise price of $8.55 per share under the Company's 1996 Stock Incentive Option Plan (the "Stock Incentive Plan") (including options to purchase an aggregate of 14,000 shares of Common Stock granted by the Compensation Committee of the Board of Directors, subject to stockholder approval of certain amendments to the Stock Incentive Plan at the annual meeting of stockholders scheduled for June 1997); (ii) 568,829 shares reserved for future issuance under the Stock Incentive Plan (including 250,000 shares of Common Stock authorized for issuance under the Stock Incentive Plan by the Board of Directors, subject to stockholder approval of certain amendments to the Stock Incentive Plan at the annual meeting of stockholders scheduled for June 1997); (iii) 3,000 shares issuable upon exercise of stock options outstanding as of the effective date of the Offering, each with an exercise price of $10 per share, under the Company's 1996 Non-Employee Director Stock Option Plan (the "Non- Employee Director Plan") (including options to purchase an aggregate of 1,500 shares of Common Stock approved by the Board of Directors, subject to stockholder approval of certain amendments to the Non-Employee Director Plan at the annual meeting of stockholders scheduled for June 1997); and (iv) 17,000 shares reserved for future issuance under the Non-Employee Director Plan. SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA (IN THOUSANDS, EXCEPT PER SHARE DATA AND OTHER DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, --------------------------------------------------- 1996 1995 1994 ----------- ------------- ------------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues.......................................... $ 71,952 $ 48,226 $ 52,963 Income before taxes and extraordinary item........ 14,760 7,824 5,120 Income tax provision: Arising from reorganization................... 3,745 Subsequent to reorganization.................. 3,246 - - ----------- ----------- ----------- Income before extraordinary item.................. 7,769 7,824 5,120 Extraordinary loss................................ - (1,750) - ----------- ----------- ----------- Net income........................................ $ 7,769 $ 6,074 $ 5,120 =========== =========== =========== PRO FORMA INFORMATION (1): Historical income before income taxes............. and extraordinary item........................ $ 14,760 $ 7,824 $ 5,120 Pro forma provision for income taxes.............. 5,609 2,937 1,424 ----------- ----------- ----------- Pro forma income before extraordinary item........ $ 9,151 $ 4,887 $3,696 =========== =========== =========== Pro forma earnings per share of Common Stock (2).. $1.16 $0.85 =========== =========== Pro forma weighted average number of outstanding shares of Common Stock (2)........ 7,908 5,725 =========== =========== BALANCE SHEET DATA (as of December 31): Total assets...................................... $ 78,254 $ 46,896 $ 35,913 Long-term debt.................................... 11,257 17,500 9,887 Partners' capital................................. -- 25,161 22,183 Stockholders' equity.............................. 43,664 -- -- OTHER DATA: Fee gas processed (MMBtu)......................... 33,899,744 -- -- NGL production (gallons) 94,908,534 92,239,000 99,735,000 Terminal throughput (gallons)..................... 37,851,450 31,206,000 32,664,584 Michigan pipeline throughput (Mcf)................ 1,161,182 -- -- </TABLE> (1) Prior to October 7, 1996, the Company was organized as a partnership, MarkWest Partnership, and consequently, was not subject to income tax. Effective October 7, 1996, the Company reorganized and the existing general and limited partners exchanged 100% of their interests in MarkWest Partnership for 5,725,000 shares of Common Stock. A pro forma provision for income taxes has been presented for purposes of comparability as if the Company had been a taxable entity for all periods presented. (2) Pro forma weighted average shares outstanding at December 31, 1996 represents the weighted average of, for the period prior to the Company's initial public offering in October 1996, the number of shares of Common Stock issued in the initial public offering for which the net proceeds were used to repay outstanding indebtedness and, for the period subsequent to the initial public offering, the total number of shares of Common Stock outstanding. CERTAIN DEFINITIONS The definitions set forth below apply to the terms used in this Prospectus: "Bcf" means billion cubic feet of natural gas. "BTUs" means British thermal units. "Dedicated reserves" means natural gas reserves subject to long-term contracts providing for the dedication to the Company's facilities for purchase or processing of all gas produced from all formations on designated properties for periods typically ranging from 10 to 20 years. "EPA" means the Environmental Protection Agency. "Extraction" means removing liquid and liquefiable hydrocarbons from natural gas. "FERC" means the Federal Energy Regulatory Commission. "Fractionation" is the process by which the NGL stream is subjected to controlled temperatures, causing the NGLs to separate, or fractionate, into the separate NGL products ethane, propane, butane, isobutane and natural gasoline. "Mcf" means thousand cubic feet of natural gas. "MGal/D" or "MGal per day" mean thousand gallons per day. "MMbtu" means million British thermal units. "MMcf" means million cubic feet of natural gas. "MMcf/D" or "MMcf per day" means million cubic feet per day. "NGLs" means natural gas liquids. "Processing" includes treatment, extraction and fractionation. "Processing contracts" are those supply contracts dedicated to Company facilities whereby title to the gas and marketing rights for such gas may remain with the gas producer. "Sour gas" means natural gas which contains sulfur compounds in excess of a specified amount. "Tcf" means trillion cubic feet of natural gas. "Treatment" refers to the removal of water vapor, solids and other contaminants, such as hydrogen sulfide or carbon dioxide, contained in the natural gas stream that would interfere with pipeline transportation or marketing of the gas to consumers.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001019791_alternativ_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001019791_alternativ_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..99d38d477607a076341f196158e982e599405721
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001019791_alternativ_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the related notes thereto, included elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) has been adjusted to reflect a reorganization of the Company described under the caption "Company Background," (ii) assumes the Underwriters' over-allotment option is not exercised and (iii) assumes the effectiveness of the Company's Amended and Restated Certificate of Incorporation which will, among other things, effect a reclassification of each share of the Company's Common Stock into 3,349 shares of Common Stock prior to the consummation of the offering. See "Underwriting." Unless otherwise specified, references to the "Company" include Alternative Distribution Systems, Inc., its five wholly-owned subsidiaries and the historical business and operations undertaken by the six companies formerly comprising the Alternative Transportation Systems Group (the "ATS Group"). See "Company Background." THE COMPANY The Company believes it is the leading national provider to the metals industry of fully integrated distribution services, including transportation, warehousing and third-party logistics services. Over the course of more than 15 years in the metals distribution business, the Company has developed specialized systems, equipment and expertise which enable it to handle, warehouse and transport high-value metals (primarily steel and aluminum) requiring time-sensitive delivery in coordination with end-users' increasingly sophisticated inventory management requirements. The Company's capabilities allow it to offer integrated, turn-key solutions to the distribution demands of steel and other metals producers. These distribution demands are increasingly complex, as producers increase their outsourcing of metals processing while their customers (metals-consuming manufacturers) embrace just-in-time inventory systems and higher raw materials quality standards. The Company serves metals producers, traders, processors and consumers (such as manufacturers of automobiles, appliances, construction and agricultural equipment, metal buildings components and food and beverage packaging) through a network of 16 warehousing and distribution centers and an approximately 285 tractor, primarily short-haul truck fleet operating in the Midwest, East and West Coast markets. The Company's intermodal operations combine and package rail, truck, barge and ship transportation to provide various materials movement management services between distant and intermediate markets. As a logistics manager, the Company integrates these services to provide seamless "door-to-door" transportation and distribution services to its customers. The Company's sophisticated and computerized inventory management systems, together with electronic data interchange links to customers, enable producers and end- users to monitor inventories in the Company's warehouses, plan and schedule production and transmit shipment requirements. Demand for the Company's services is driven by several industry trends. Metals-consuming manufacturers and others in the metals supply chain increasingly rely on "just-in-time" inventory delivery systems to reduce inventory carrying costs and to improve customer service. As a result, a need has arisen for increasingly sophisticated inventory management and information systems. Metals-consuming manufacturers' increasing emphasis on input quality has created a demand for controlled-environment warehousing and transportation of processed metals to prevent damage in storage and in transit. A majority of the Company's warehouse capacity affords a pressurized, dust-free, heat and humidity-controlled environment for metals storage. Moreover, in an effort to reduce overhead costs, many metals producers and end-users have begun to focus primarily on production and, as a result, have outsourced their in-house transportation, warehousing and logistics functions to third-party providers. The increasingly complex and demanding distribution requirements arising from these trends have led to growth in demand for the Company's services. The Company commenced operations in the mid-1970s as a trucking firm serving Midwest-based metals producers. In 1986, the Company incurred significant indebtedness to purchase the ownership interest of a majority stockholder, and during the next several years the Company focused on reducing its indebtedness and strengthening its existing operations. Responding to the changes in the metals supply chain, in 1991, the Company implemented its growth strategy and began to make significant capital investments to open additional metals warehouse and distribution centers, and since the beginning of 1991, the Company has opened 10 such facilities with an aggregate capacity of approximately 925,000 square feet. As a result of start-up expenses and initial build up of through-put, new warehouse and distribution facilities typically do not achieve positive pre-tax income until 12 to 18 months following the commencement of operations. From 1993 to 1996, the Company's net operating revenues have increased from approximately $44.9 million to approximately $67.5 million, and the Company's operating income has grown from approximately $2.3 million to approximately $5.6 million. The Company believes that the ongoing proliferation of just-in-time delivery systems, the increasing emphasis on input quality, the continued outsourcing of distribution and logistics capabilities and the resulting changes in the metals supply and distribution chain pose significant opportunities for future growth. As part of its growth strategy, the Company is scheduled to open two new warehouse and distribution centers with an aggregate capacity of approximately 212,000 square feet by the summer of 1997. In addition, the Company intends to further expand its warehouse and distribution capacity by 25% to 40% over the next five years by identifying three to five new geographic locations for additional warehouse and distribution centers and/or by expanding the capacity of its existing centers. In addition to generating warehousing revenues, warehouse and distribution facilities promote growth in the Company's trucking, intermodal and logistics operations. Furthermore, the Company intends to market its just-in-time and total quality management expertise to new customer segments, and to increase its import-export, "core-carrier" regional trucking and intermodal businesses. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company............... 1,600,000 shares Common Stock to be Outstanding After the Offering. 4,949,000 shares (1) Use of Proceeds................................... For repayment of outstand- ing indebtedness, to fund a capital distribution (re- lated to termination of the Company's S Corporation status) to the Company's current stockholders, and for other general corporate purposes. See "Use of Pro- ceeds." Proposed Nasdaq National Market Symbol............ ADSX </TABLE> - -------------------- (1) Excludes 400,000 shares of Common Stock reserved for issuance under the Company's 1997 Stock Option Plan (including 150,000 shares issuable upon the exercise of outstanding options to be granted under the Company's 1997 Stock Option Plan, none of which will be exercisable prior to December 31, 1997). See "Management--Employee Benefit Plans--1997 Stock Option Plan." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, --------------------------------------------- 1992 1993 1994 1995 1996 ------- ------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net operating revenues......... $42,874 $44,915 $ 53,498 $ 59,421 $ 67,473 Gross profit................... 6,700 8,119 9,876 11,128 13,364 Operating income............... 1,260 2,339 3,312 3,760 5,612 Interest expense............... 388 390 544 835 1,089 Interest income and other, net. 24 23 114 131 182 Income before S Corp Stockholder Compensation and income taxes (1)........................... 896 1,972 2,882 3,056 4,705 Pro forma net income (1)(2).... $ 2,826 SUPPLEMENTAL PRO FORMA INCOME STATEMENT DATA (3): Net income..................... $ 3,362 ========= Net income per share (4)....... $ 0.68 ========= SELECTED OPERATING DATA: Number of warehouse facilities (at period end)............... 13 13 14 15 16 Warehouse square footage (at period end)................... 711,000 864,000 841,000 1,213,000 1,358,000 Number of truck tractors (at period end)................... 222 219 243 286 286 Warehouse "through-put" (in tons) (5)..................... 705,000 820,000 1,049,000 1,317,000 1,777,000 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 --------------------- AS ACTUAL ADJUSTED (6) ------- ------------ (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................ $(9,705) $ 515 Total assets............................................. 38,321 38,321 Total debt............................................... 22,042 9,935 Stockholders' equity..................................... 3,116 18,984 </TABLE> - -------------------- (1) For all periods shown prior to February 1, 1996, the Company elected to be treated as an S Corporation and, as a result, the income of the Company was taxed for federal and state income tax purposes directly to the Company's stockholders rather than to the Company. S Corp Stockholder Compensation represents additional compensation paid to the Company's stockholders in the amounts of $923,590, $1,971,875, $2,882,359 and $3,055,695 in 1992, 1993, 1994 and 1995, respectively, and $309,762 for the period from January 1, 1996 to February 1, 1996, when the Company's S Corporation status was terminated. Amounts not utilized by the stockholders to pay or provide for the stockholders' applicable current and deferred federal and state income taxes attributable to such additional compensation were reinvested in the Company as capital. See "S Corporation Status--Related Distribution," "Management's Discussion and Analysis of Financial Condition and Results of Operations--General" and Notes 6 and 7 of Notes to Consolidated Financial Statements. (2) Pro forma income statement data have been computed by adjusting historical net income for the year ended December 31, 1996, as if the Company had been a C corporation for the entire period and had not recorded any S Corp Stockholder Compensation during such period. See "S Corporation Status-- Related Distribution" and Notes 6, 7 and 12 of Notes to Consolidated Financial Statements. (3) Supplemental pro forma income statement data have been computed by (i) adjusting historical net income for the year ended December 31, 1996, as if the Company had been a C corporation for the entire period and had not recorded any S Corp Stockholder Compensation during such period and (ii) giving effect to the offering of 1,600,000 shares of Common Stock made hereby and the application of the estimated net proceeds therefrom as described in "Use of Proceeds," as if the offering had occurred on January 1, 1996. See "Use of Proceeds," "S Corporation Status--Related Distribution" and Notes 6, 7 and 12 of Notes to Consolidated Financial Statements. (4) Supplemental pro forma net income per share has been calculated by dividing supplemental pro forma net income by pro forma weighted average shares assumed to be outstanding, after giving effect to the issuance of the number of shares of Common Stock to be issued in the offering made hereby (1,600,000 shares). See "Use of Proceeds" and "S Corporation Status-- Related Distribution."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020167_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020167_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2932f69d57fe2ec86c463bbe2eb20fab4366f290
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020167_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The Company American International Consolidated Inc. (the "Company") is a manufacturer and general contractor that focuses primarily on three types of construction products: mini-warehouses and self-storage facilities; metal buildings and structural steel projects; and cold storage, including refrigerated and freezer, buildings. The Company's services range from the start, or construction design, phase to the finish, or erection, phase of a project, including general construction, construction management, design, manufacture, building, and turnkey services. The Company selects, coordinates and manages subcontractors for substantially all phases of the work, except for design, erection and manufacture of certain metal building components. The Company also provides oversight and supervision of the entire construction process for each project. The Company intends to take advantage of its increased capital and improved financial condition resulting from this Offering by (i) increasing business volume through increasing bonding capacity in order to access larger projects and other new business, undertaking planned domestic and international marketing programs, and increasing business referrals from suppliers and other business contacts, and (ii) increasing operating margins and profitability through decreasing interest expense (from reduction of debt) and decreasing bonding costs. See "BUSINESS--Business Plan And Strategy" for a more detailed description of this strategy and each of these items. See also "USE OF PROCEEDS". The Company's principal executive and administrative offices are located at 14603 Chrisman, Houston, Texas 77039, telephone number (281) 449-9000. The Company was incorporated under the laws of Texas in May 1985 and changed its state of incorporation to Delaware in June 1994. In July 1996, the Company changed its name to American International Consolidated Inc. from American International Construction Inc. The Offering Securities Offered The Company is offering (i) a minimum of 700,000 and a maximum of 800,000 shares of the Company's common stock (the "Common Stock") and (ii) a minimum of 700,000 and a maximum of 800,000 redeemable common stock purchase warrants (the "Warrants"). Each Warrant entitles the holder to purchase one share of Common Stock for $5.00 per share during the period beginning on the date of this prospectus and ending five years from the date of this prospectus. See "DESCRIPTION OF SECURITIES". Offering Price $ 5.00 per share of Common Stock $ .10 per Warrant Warrant Exercise Price $ 5.00 per share of Common Stock, subject to adjustments in certain circumstances Warrant Exercise Period The Period commencing on the date of this prospectus and expiring on __________, 2002. Shares of Common Stock outstanding: prior to Offering: 2,900,100 Shares of Common Stock offered (1): 700,000 in the Minimum Offering and 800,000 in the Maximum Offering Shares of Common Stock outstanding after the Minimum Offering(1): 3,600,100 Shares of Common Stock outstanding after the Maximum Offering(1): 3,700,100 -6- <PAGE> Warrants outstanding prior to Offering(1): 3,000,000 Warrants offered(1): 700,000 in the Minimum Offering and 800,000 in the Maximum Offering Warrants outstanding after the Minimum Offering: 3,700,000 Warrants outstanding after the Maximum Offering: 3,800,000 Shares of Common Stock Outstanding after the Minimum Offering assuming exercise of all Warrants offered in the Minimum Offering and previously outstanding: 7,300,100 Shares of Common Stock Outstanding after the Maximum Offering assuming exercise of all Warrants offered in the Maximum Offering and previously outstanding: 7,500,100 Estimated net proceeds to the Company in the Minimum Offering (2): $2,988,300 Estimated net proceeds to the Company in the Maximum Offering(3): $3,432,000 - -------------------- (1) Does not include (i) up to 800,000 shares of Common Stock issuable upon exercise of the Warrants included in the Maximum Offering and (ii) if the Maximum Offering is sold, up to 160,000 shares of Common Stock issuable upon exercise of the Underwriters' Warrants and the warrants issuable to the Underwriters upon the exercise of the Underwriters' Warrants. See "UNDERWRITING". (2) This amount is after deduction of aggregate selling commissions of $357,000 in the Minimum Offering and $408,000 in the Maximum Offering and of $224,700 in the Minimum Offering and $240,000 in the Maximum Offering as the unpaid portion of the other total estimated offering expenses of $509,700 in the Minimum Offering and $525,000 in the Maximum Offering. Redemption Of The Warrants The Warrants are redeemable by the Company at a price of $.01 per Warrant upon 30 days prior written or published notice at any time commencing 12 months after the date of this Prospectus and prior to their exercise or expiration, provided however, that the closing bid quotation for the Common Stock for each of the 20 consecutive business days end- ing on the third day prior to the Company's giving notice of redemption has been at least 150 percent of the then effective exercise price of the Warrants. The Warrants remain exercisable during the 30-day notice period. Any Warrantholder who does not exercise that holder's Warrants prior to their expiration or redemption, as the case may be, forfeits that holder's right to purchase the shares of Common Stock underlying the Warrants. See "DESCRIPTION OF SECURITIES--Common Stock Purchase Warrants--Redemption". Use Of Proceeds Net proceeds are intended to be used primarily for undertaking additional marketing activities, payment of outstanding indebtedness, and increasing -7- <PAGE> working capital, which is anticipated to enable the Company to increase its bonding line. See "USE OF PROCEEDS" and "BUSINESS". Subscriptions And Escrow Account All funds collected from subscribers will be placed in an escrow account entitled "American International Consolidated Inc. Escrow Account" at Union Bank & Trust, Denver, Colorado, for which American Securities Transfer & Trust, Incorporated shall serve as escrow agent. Potential investors desiring to purchase shares of Common Stock and/or Warrants who are customers of I.A. Rabinowitz & Co. should make their checks payable to "Hanifen Imhoff Clearing Corp.", and their checks will be sent directly to Hanifen Imhoff Clearing Corp., 1125 Seventeenth Street, Suite 1700, Denver, Colorado 80202, the clearing agent of I.A. Rabinowitz & Co., who will remit such proceeds to the escrow agent by noon of the next business day after receipt. All other potential investors should make their checks payable to the "American International Consolidated Inc. Escrow Account" and those potential investors' checks will be transmitted by participating broker-dealers directly to the escrow agent by noon of the next business day after receipt. The Underwriters have the right to reject any subscription, in whole or in part, or to withdraw or cancel the Offering without notice. Subscriptions are irrevocable and potential investors will not be able to withdraw their subscription or funds paid with those subscriptions. If the Minimum Offering is not subscribed for, or if the Offering is cancelled, within the offering period, all funds will be promptly refunded to subscribers without interest or deduction. See "UNDERWRITING" - Subscription Procedures". Risk Factors The securities offered hereby involve a high degree of risk and substantial immediate dilution to new investors. See "RISK FACTORS" and "DILUTION". OTC Bulletin Board Symbols Common Stock - AICI Warrants - AICIW Summary Selected Financial Data The financial statements included in this Prospectus set forth information regarding the Company as of and for the fiscal years ended April 30, 1996, 1995 and 1994 (audited) and as of and for the six-month period ended October 31, 1996 (unaudited). See "FINANCIAL INFORMATION". The summary selected financial data shown below is derived from, and is qualified in its entirety by, those financial statements, which are contained in the "FINANCIAL INFORMATION" section of this Prospectus. Six Months Fiscal Year Ended April 30, Ended October 31, --------------------------- ----------------- 1995 1996 1996 ------------ ------------ ----------- (Unaudited) Operating Results: Revenues.............. $24,317,051 $31,184,828 $18,088,507 Net Income 186,662 351,570 (1,665,329) (Loss)(1)............. Net Income Per .06 .12 (.57) share................. -8- <PAGE> <TABLE> <CAPTION> April 30, ---------------------------- October 31, 1996 October 31, 1996 (Unaudited) (Unaudited) Balance Sheet 1995 1996 Actual As Adjusted Data: - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Working Capital (Deficit)............. $(1,405,511) $836,774 $(1,974,936) $1,013,364 Total assets.......... 5,487,091 7,346,083 9,739,169 10,142,469 Long Term Debt ....... 453,868 2,422,292 369,334 369,334 Total liabilities..... 6,059,154 7,566,576 10,374,741 8,074,741 Accumulated (deficit)............. (720,218) (368,648) (2,033,977) (2,033,977) Stockholders' equity (deficit)........... (572,063) (220,493) (635,572) 2,067,728 </TABLE> -------------------- (1) Includes a pre-tax charge of $1,105,249 as the amortized portion of the one-time non-recurring pre-tax charge to earnings of approximately $1,250,000 for the 500,100 shares of the Company's Common Stock that were issued in connection with the issuance of $300,000 of unsecured promissory notes in July 1996. This one-time non-recurring charge will be amortized over the term of the promissory notes. See Note 18 to "Notes To Consolidated Financial Statements" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". (2) As adjusted to reflect the net proceeds from the Minimum Offering, including repayment of $1.2 million of long-term debt, $300,000 of unsecured notes and $800,000 of trade accounts. See "USE OF PROCEEDS". -9- <PAGE> RISK FACTORS THE COMMON STOCK AND WARRANTS BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THEIR ENTIRE INVESTMENT. Prospective investors should consider carefully, among other factors, the risk factors and other special considerations relating to the Company and this offering set forth below. Risk Factors Relating To The Business Of The Company - ---------------------------------------------------- 1. Substantial Doubt About The Company's Ability To Continue As A Going Concern Without Completion Of Public Offering. The Company's operating results for each of the fiscal years ended April 30, 1996 and 1995 resulted in a profit; however, the Company incurred operating losses for the six months ended October 31, 1996, with additional operating losses of $804,000 for the two months ended December 31, 1996, and for each of the fiscal years ended April 30, 1994, 1993 and 1992, and there is no assurance that the operations of the Company will be profitable in the future. As a result of the Company's current fiscal year losses from May 1, 1996 through January 31, 1997 (approximately $2.5 million, including a non-recurring charge of $1.1 million), the Company's working capital position and ability to generate sufficient cash flows from operations to meet its operating and capital requirements has further deteriorated and these matters raise substantial doubt about the Company's ability to continue as a going concern without completion of this Offering or a substantial infusion of equity capital. The Company believes that it will be successful in removing the threat concerning its ability to continue as a going concern by adhering to closer and stricter scrutiny of its contract bids and utilizing the estimated minimum net proceeds of approximately $2.9 million from this Offering to achieve profitability through lower interest and bonding costs and expanded volume. Management believes that approximately $1.0 to $1.2 million of the proceeds from this Offering are necessary to remove the threat concerning the Company's ability to continue as a going concern and that if this Offering is completed, the minimum proceeds from this Offering will enable the Company to continue operating for the foreseeable future at its current level of operations. The length of the period that the minimum proceeds would enable the Company to continue operating at its current level of operations is dependent upon a number of factors, including primarily the Company's profitability. Assuming the Company incurs, during fiscal 1998 and 1999, aditional net losses (excluding non-cash, non-recurring charges) at the same rate as estimated for fiscal 1997 ($1.4 million), the minimum net proceeds would allow the Company to operate at its current level of operations for approximately 1.2 years. However, management of the Company does not believe that the Company will incur cumulative net losses for fiscal 1998 and 1999. There is no assurance that management's belief is accurate and that the Company will not incur future cumulative net losses. To the extent that management's belief is accurate, then the minimum net proceeds from the Offering would allow the Company to continue operations as long as the Company had not sustained future cumulative net losses of approximately $1.7 million. There is no assurance these results will occur even if this Offering is consummated. If this does not occur, the Company will pursue other sources of financing, but there is no assurance any other source of financing will be available. The Company is current in its obligations to all lenders and major suppliers except the Supplier described in Risk Factor No. 3 below. That Supplier has indicated that it has no intent of accelerating payment on any obligations as long as this Offering is completed. The Supplier has not indicated what it will do if this Offering is abandoned or otherwise terminated unsuccesfully. As a result of the losses incurred in November and December 1996, the audit report of the Company's independent auditors indicates that there is substantial doubt concerning the Company's ability to continue as a going concern without a substantial infusion of equity capital, such as that contemplated from this Offering. The implication of this to investors is that successful completion of this Offering (or an equity infusion from another source) is necessary for the Company to continue operations. See "BUSINESS - Business Plan And Strategy", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", "FINANCIAL INFORMATION", and Note 19 to the Financial Statements. 2. Limited Financial Resources, Negative Net Worth, And Outstanding Obligations. The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity. Its activities and operations to date have resulted in a negative net worth. There is no assurance that the proceeds of this Offering will be sufficient to successfully develop, produce, and market the Company's services. The Company may be forced to limit its activities because of the lack of availability of adequate financing. In the past, the Company's limited liquidity has limited the amount of credit available from the Company's suppliers. If the Company were not to have adequate financing available in the future, it is likely that this credit limitation would continue and that the Company's domestic and international marketing would be directly affected, which would impair the Company's ability to increase its business volume. -10- <PAGE> The Company's negative net worth and financial condition in general have prevented the Company from being able to obtain performance and payment bonds, which has limited the Company's ability to obtain certain projects. If this Offering is successfully completed, the Company believes that it will be able to increase its bonding line and thereby increase the jobs available to it. See "BUSINESS--Business Plan and Strategy--Strengthen Financial Condition and Increase Bonding Capacity". 3. Outstanding Indebtedness. As of December 31, 1996, the Company owed its major supplier of raw materials (the "Supplier") $1,800,000 for accounts payable and an additional $2,133,000 that is evidenced by a note (the "Note") and other related loan documents. The Company is required to make weekly payments of $11,537 for outstanding principal and accrued interest on the Note until April 30, 2001. If this Offering is successfully completed, of which there is no assurance, the Company intends to use $1.2 million of the proceeds to reduce the balance of the Note to approximately $935,000, which will reduce the weekly payments to approximately $5,100 per week. Pursuant to the terms of the Note, it is an event of default if the Company's net income before interest expense is less than 1.5 percent of the Company's total sales for any fiscal year beginning with the fiscal year ending April 30, 1997. The Supplier has agreed to waive this requirement for the first eight months (through December 31, 1996) of the fiscal year ending April 30, 1997, but the Company will be required to satisfy it for the last four months of the fiscal year ending April 30, 1997 and subsequent fiscal years. Although the Company would not have satisfied this requirement for any of its previous fiscal years or for the first eight months of its current fiscal year, management believes that if this Offering is completed, it will be able to satisfy the requirement for the last four months of the fiscal year ending April 30, 1997 and for fiscal 1998 and thereafter while the Note is outstanding, or that it will be close enough to satisfying it that the Supplier will waive it. Nevertheless, there is no assurance that the Company will satisfy this requirement. As of December 31, 1996, the Company also was in violation of certain other covenants for which it has received a waiver from the Supplier and for which there is no assurance that the Company will be able to satisfy in the future. If all these requirements are not satisfied as required in the future, the Company will be required to obtain alternate financing, receive a waiver from the Supplier, or default on the Note. See "BUSINESS--Indebtedness To Major Supplier". As of October 31, 1996, the Company also owed an aggregate of approximately $349,000 to FCLT, L.P., a Texas limited partnership ("FCLT"), pursuant to two loans that are payable in June 1998, are collateralized by the Company's land and buildings, and are guaranteed by the three principal stockholders of the Company. Aggregate monthly payments on these two loans are $6,082. See "BUSINESS--Outstanding Bank Loans". The Company had other obligations of an aggregate of approximately $173,000 at December 31, 1996 that require aggregate monthly payments of approximately $13,100. The Company also is the obligor on an aggregate of $300,000 principal amount of unsecured notes that will be repaid from the proceeds of this Offering. See "USE OF PROCEEDS". 4. Fluctuations In Industry Construction Activity. Although most recently, new construction projects for storage facilities, warehouses and pre-engineered metal buildings and freezer/refrigerated facilities, as well as renovations and remodeling projects, have occurred at a historically active rate, new projects were not as numerous in prior years. These fluctuations in industry activity result from numerous factors, including general economic conditions, interest rates and the general real estate market. There can be no assurance that future demand for the Company's services will be adequate for the Company to operate profitably. 5. Uncertain Markets And Market Acceptance. No assurance can be given of market acceptance or profitability from sales of the Company's current services or that sales of future services will be profitable. The Company's industry is extremely competitive and subject to numerous changes. See "BUSINESS". 6. Competition. The Company competes, in a highly competitive environment, with many companies in the manufacture, construction and erection of storage facilities, warehouses, pre-engineered metal buildings, freezer/refrigerated facilities, and other construction services. Many of the Company's primary competitors not only have greater resources than the Company, they also have larger administrative staffs and more available service personnel. The larger competitors also may use their greater financial resources to develop and market their services. The presence of these competitors may be a significant impediment to any attempts by the Company to develop its business. Major competitive factors include product knowledge, experience, past relationships, quality of performance, financial condition, reputation, timeliness, and pricing. The Company believes that it ranks highly and therefore will have certain competitive advantages in attempting to develop and market its services, including the Company's excellent relationships with its past and current customers, which has led to "repeat" business, the Company's product knowledge, experience, past relationships, quality of performance, reputation and pricing, and the Company's ability to respond to customer requests more quickly than some larger competitors. For the year ended April 30, 1996, approximately 45 percent, and for the six months ended October 31, 1996, approximately 28 percent, of the Company's business was derived from repeat customers; however there is no assurance that this will occur in the future. None of the Company's repeat business is derived from long-term contracts, and all repeat business results -11- <PAGE> from separately negotiated contracts. With respect to lower rankings for competitive factors, the Company's capitalization prior to this Offering has placed it at a competitive disadvantage in the past but the Company believes that as a result of this Offering it will increase its ability to compete on the basis of financial condition. However, there is no assurance that this will prove correct. See "BUSINESS--Marketing" and "BUSINESS--Industry Environment". 7. Exposure To Construction Related Litigation. The construction industry has a high incidence of litigation, and as a participant in this industry, the Company is constantly exposed to the risk of litigation. Even though the Company maintains insurance for these matters in amounts customary in the industry, and even if the Company prevails in any such litigation, of which there is no assurance, the management time and out-of-pocket expense expended in commercial litigation could have an adverse impact on the Company. 8. Past Dependence On Major Customers. During the six months ended October 31, 1996 and the fiscal year ended April 30, 1996, U-Haul, Inc. accounted for approximately $3.2 million and $8.1 million, respectively, or 18 percent and 26 percent, respectively, of the Company's total revenues. During the fiscal years ended April 30, 1995 and 1994, U-Haul, Inc. accounted for approximately $4.9 and $4.9 million, respectively, or approximately 20 percent and 19 percent, respectively, of the Company's total revenues. The Company negotiates each project with U-Haul separately as there is no contract with U-Haul covering the construction of future projects. The loss of U-Haul, Inc.'s business could have a materially adverse effect on the Company. Also during the fiscal year ended April 30, 1994, another customer, with a contract for cold storage construction, accounted for approximately 22 percent of the Company's total revenues. This contract was entered into as a one-time project, and the Company does not anticipate any future business from this customer. See "BUSINESS--Reliance On Major Customers". 9. Previous Unprofitable International Operations. The Company plans to expand its business in international markets but a significant portion of its past experiences in international markets has been unprofitable. The past losses from international business occurred in situations in which the Company had set up satellite offices in other countries, such as Guam and Puerto Rico, and the cost of operating and maintaining these offices was too great to operate profitably. The Company has closed its offices in Puerto Rico and in Guam, and believes that it will be able to conduct business internationally without opening satellite offices. The Company currently is doing a small amount of business internationally through an international sales force located in its Houston, Texas headquarters. 10. Availability Of Labor. In order to minimize overhead, the Company often contracts with independent third parties to provide a substantial portion of the labor for its construction projects. Therefore, the Company's ability to provide these services is dependent upon outside sources of workers and this may result in delays in the completion of contracts due to the unavailability of such labor. The Company is not currently experiencing, and has not in the past experienced, a shortage of labor. 11. Possible Effect Of Subcontractors' Use Of Unionized Labor. At the current time, the use of unionized labor by subcontractors engaged by the Company does not have a significant effect on the Company because subcontractors tend to use unionized labor only in areas where there is a heavy concentration of unionized labor, and because in those areas other contractors in competition with the Company most often utilize unionized labor so that there would be no competitive advantages or disadvantages to the Company. There is no assurance that this situation will remain constant in the future. -12- <PAGE> 12. Dependence On Key Personnel. The success of the Company is largely dependent upon the efforts of John Wilson, Chief Executive Officer and a director of the Company, Danny Clemons, President and a director of the Company, R. L. Farrar, Vice President of Operations, Treasurer, Secretary and a director of the Company, and Jim Williams, Vice President of Finance, Assistant Secretary and a director of the Company. The loss of the services of any of these persons or the loss of the services of Jimmy M. Rogers, head of the Company's Thermal System Division, could be detrimental to the Company as there is no assurance that the Company could replace any of them adequately at an affordable compensation level. See "MANAGEMENT". The Company has entered into employment agreements with each of the above officers. See "EXECUTIVE COMPENSATION--Employments Contracts And Termination Of Employment And Change-In-Control Arrangements". The Company is the beneficiary for $500,000 of key-man term life insurance coverage on each of Messrs. Wilson, Clemons, Farrar, Rogers and Williams. There is no assurance that these insurance policies will provide the Company with adequate compensation in the event of the death of any of the insured. 13. Government Regulation And Workers Compensation Insurance. The Company is subject to government regulation of its business operations. In addition, the Company's construction activities must meet with the requirements of local building codes, and the Company is required to provide workers compensation or alternate insurance coverage for the Company's employees. Because of the nature of the Company's business in construction services, the cost of this insurance for the Company's on-site employees is higher relative to the cost of insurance coverage for the Company's office personnel. When construction work is performed on behalf of the Company by subcontractors, the subcontractors, and not the Company, pay the direct costs of insurance for the construction workers. There is no assurance that subsequent changes in laws or regulations will not affect the Company's operations adversely. 14. Possible Need For Future Financing. The Company believes that the proceeds of this offering will enable it to accomplish the purposes set forth under "BUSINESS", although there can be no assurance that this will be the case. If the proceeds of this offering are not sufficient, the Company would be required to seek additional financing to enable it to conduct its business operations. There can be no assurance that the Company will be able to obtain such financing on acceptable terms. Any such additional financing may entail substantial dilution of the equity of the then-existing stockholders of the Company. The availability of additional financing may be restricted by provisions in the underwriting agreement with the Representative that require, for a period of 24 months after this Offering, that the Company obtain the Representative's permission in order to issue securities for financing purposes. See "UNDERWRITING". 15. Broad Discretion To Allocate Use Of Proceeds. The proceeds of this offering have been allocated only generally. The specific uses of investors' funds will depend upon the business judgment of management, upon which the investors must rely, with only limited information about management's specific intentions. See "USE OF PROCEEDS" and "BUSINESS". 16. No Proceeds To Company From Sales By Selling Securities Holders. The Company will not receive any of the proceeds from the sale by the Selling Securities Holders of the 500,100 shares of Common Stock and 3,000,000 Warrants being registered pursuant to the registration statement of which this Prospectus is a part. However, in the event that any of the 3,000,000 Warrants are exercised, the Company will receive the proceeds from the exercise of those warrants. 17. Benefits Of The Offering To Current Stockholders. Current stockholders of the Company will benefit from the Offering, including the following: (i) creation of a public trading market for the Common Stock, which is intended but for which there is no assurance; (ii) the sale of up to an aggregate of 500,100 -13- <PAGE> shares by certain non-management, non-employee stockholders at the time of the public offering; and (iii) the substantial unrealized gain, based upon the difference between the acquisition costs and the initial public offering price, for stockholders who acquired their stock prior to the public offering. This difference is $5.00 per share for the non-management, non-employee stockholders who received an aggregate of 500,100 shares as partial consideration for loaning the Company an aggregate of $300,000, and may be considered to be as much as $4.99 for the shareholders who founded the Company in 1985 and during the interim developed the business of the Company to its current level. 18. Potential Conflicts Of Interest. Potential conflicts of interest may arise between the Company and its officers and directors. Although each of the Company's officers and directors is committed to devote full working time to the business of the Company, they also may be engaged in other business activities. If these business activities are of the same type as those engaged in or contemplated by the Company, conflicts of interest will arise in the area of corporate opportunities or in the area of conflicting time commitments with respect to the officers and directors of the Company. Conflicts of interest also will develop with respect to any contractual relationships that may be entered into between the Company and any of its officers and directors. See "TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIE--Conflicts Of Interest Policy". At the present time, there are not any material conflicts of interest between the Company and any of its officers or directors, except to the extent that their respective positions as large stockholders might present conflicts of interest and except to the extent that a consulting arrangement with one director might present conflicts of interest. A previously existing conflict of interest was resolved in May 1994 when AIC Management, Inc. merged with and into the Company. At the time of the merger, AIC Management, Inc. owned the land and buildings that are utilized for the Company's administrative offices as well as its metal buildings manufacturing facility. The shareholders and directors of AIC Management, Inc. at the time of the merger were Messrs. Clemons, Farrar and Wilson, who are the three largest stockholders and three of the four directors of the Company. The Company has established a policy pursuant to which the Board Of Directors will consider transactions with officers, directors, and shareholders of the Company and their respective affiliates. Pursuant to this policy, the Board Of Directors will not approve any transaction unless it determines that the terms of the transaction are no less favorable to the Company than those available from unaffiliated parties. Because this policy is not contained in the Company's Certificate Of Incorporation or Bylaws, the policy is subject to change by the Board Of Directors, although it currently is not contemplated that the policy will be changed. In addition, in the event any conflicts of interest arise with respect to any officer or director of the Company, the Company anticipates that its officers and directors will exercise their judgment consistent with their fiduciary duties arising under the applicable state laws. There can be no assurance that all conflicts of interest will be resolved in favor of the Company. 19. Lack Of Outside Directors. At the present time, only one of the Company's directors is not also an officer and employee of the Company. However, this director also serves as a paid consultant to the Company, which may present conflicts of interest. See above, "Risk Factor No. 18--Potential Conflicts Of Interest". Risk Factors Concerning This Offering And The Securities Offered - ---------------------------------------------------------------- 20. Lack of Experience Of Worthington Capital Group, Inc.. Worthington Capital Group, Inc., formerly known as M.D. Walsh & Co., was licensed as a broker/dealer in July 1991 and has not participated in public offerings prior to this Offering. Worthington Capital Group, Inc. may participate in public offerings only if they are made on a best efforts basis. The limited experience -14- <PAGE> of Worthington Capital Group, Inc. may adversely affect the development of a market for the Common Stock and/or Warrants. See below, "Risk Factor No. 24--No Assurance Of Market For Common Stock Or Warrants" and "Risk Factor No. 26--Underwriters' Influence On Possible Market For Common Stock And Warrants". 21. Significant Dilution To Investors. An investor in this Offering will, immediately after the Offering, incur significant dilution from the amount of his initial investment, as compared to the book value per share of the Common Stock purchased. Dilution to new investors, assuming the Minimum Offering amount is sold, will be $4.43, or 89 percent, ($4.32, or 86 percent if the Maximum Offering amount is sold) per share of Common Stock. It appears that significant dilution also will be the case for any exercise of Warrants in the foreseeable future, although this cannot be certain because the amount of any such dilution will depend on the future business operations and other activities of the Company. See "DILUTION". 22. Control By Present Stockholders And Management. Each of Messrs. Clemons, Farrar, and Wilson, who are officers and directors of the Company, will own 19.6 percent and 19.1 percent, and Mr. Williams, who is an officer and director of the Company, will own 3.8 percent and 3.7 percent of the Company's outstanding Common Stock, respectively, after the Minimum Offering and the Maximum Offering. Also after the Minimum Offering and the Maximum Offering, Management of the Company as a group will own approximately 62.7 percent and 61.0 percent, respectively, of the outstanding shares of Common Stock and will remain in effective control of the Company as it will own enough shares in the aggregate that it would be able to elect all of the directors of the Company, and the investors in this Offering, voting by themselves as a group, would not be able to elect any of the directors of the Company. See "PRINCIPAL STOCKHOLDERS" and "DESCRIPTION OF SECURITIES". 23. No Dividends. Since its inception, the Company has paid no dividends with respect to its Common Stock and it does not contemplate paying dividends in the foreseeable future. The Company currently is prohibited from paying dividends by its agreements with a supplier to whom it is indebted. See "BUSINESS--Indebtedness To Major Supplier". 24. No Assurance Of Market For Common Stock Or Warrants. There currently is no public market for the Common Stock or Warrants (collectively, the "Securities") being offered, and no assurance can be given that a market will develop. The Company has not taken any steps to create an aftermarket for the Securities and has made no arrangements with broker-dealers to serve as market makers in the Securities. If a trading market does develop for any of the Securities, the prices may be highly volatile. Neither of the Underwriters is obligated to make a market in any of the Securities upon completion of this offering, and, even if an Underwriter makes a market following the Offering, there is no assurance that it will continue to do so in the future. In addition, if a market for any of the Securities does develop, and the Securities are traded below certain prices, many brokerage firms may not effect transactions in the Securities, and sales of the Securities will be subject to Securities And Exchange Commission ("SEC") Rule 15g-9. See below, "Risk Factor No. 25--Possible Effects Of SEC Rules On Market For Common Stock And Warrants". Trading in the Securities, if any, will be limited to the OTC Bulletin Board or the "pink sheets" used by members of the NASD. If a market does not develop for the Securities, it may be difficult or impossible for purchasers to resell the Securities. The Company withdrew its application to list its securities on the NASDAQ SmallCap Market ("NASDAQ") because NASDAQ indicated that the application would not be approved. There is no assurance that any of the Securities can ever be sold at the offered price or at any price. -15- <PAGE> 25. Possible Effects Of SEC Rules On Market For Common Stock And Warrants. If the Company's Securities are traded for less than $5 per security, then unless the Company's net tangible assets exceed $2,000,000 or the Company has had average revenue of at least $6,000,000 for the last three (3) years, the respective security (a "Low-Priced Security") will be subject to SEC Rule 15g-9 concerning sales of low-priced securities or "penny stock" unless the security is otherwise exempt from Rule 15g-9. Pursuant to Rule 15g-9, prior to concluding a sale, a broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written representations and agreement concerning the transaction. In addition, Rule 15g-9 generally requires broker-dealers to provide customers for whom they are effecting transactions in a Low-Priced Security, before the transactions, with a standard risk disclosure document describing the customer's right to disclosures of the (i) current bid and ask quotations, if any, (ii) compensation of the broker-dealer and the salesperson in the transaction, and (iii) monthly account statements showing the market value of such stock held in the customer's account. If the Common Stock or Warrants individually trade for more than $5 per security, then these rules will not apply to transactions in the respective security trading for over $5. To the extent that the respective security becomes a Low-Priced Security, these rules will apply and would be expected to have a negative effect on the desire of brokers to sell the Company's Securities, would be expected to have a negative effect on the brokers' ability to do so, and also would be expected to have a negative effect on the ability of purchasers in this Offering to sell the Company's securities in the secondary market. 26. Underwriters' Influence On Possible Market For Common Stock And Warrants. A significant amount of the Securities to be sold in this Offering may be sold to customers of the Underwriters. These customers subsequently may engage in transactions for the sale or purchase of such Securities through or with the Underwriters. Although it has no legal obligation or commitment to do so, one or both of the Underwriters may from time to time become a market maker and otherwise effect transactions in such Securities. An Underwriter, if it participates in the market, may be the sole or primary market maker, it may effect a large proportion of all transactions in the Securities, and it may for these or other reasons be a dominating influence in the market, if one develops, for the Securities. The prices and liquidity of the Securities may be significantly affected by the degree, if any, of the Underwriters' participation in such market. In these situations, the price of the Securities as quoted by an Underwriter may not be subject to an independent market for the Securities. 27. Shares Eligible For Future Sales. The Company has a total of 2,900,100 shares of Common Stock issued and outstanding that are "restricted securities". Restricted securities may be sold in a registered public offering under the Securities Act of 1933, as amended (the "1933 Act"), or in open-market transactions in compliance with Rule 144 adopted under the 1933 Act if the conditions of Rule 144 are satisfied. Generally, Rule 144 provides that, subject to current information being publicly available concerning the Company, after a person has held the restricted securities for a period of two years, that person may sell, in any three-month period, an amount of up to one percent of the Company's outstanding Common Stock. Persons who have not been affiliates of the Company for at least three months and who have held their shares for more than three years are not subject to any limitations on the sale of their restricted securities. Under Rule 144, and subject to the sales volume limitations described above, 2,400,000 shares of Common Stock would become eligible for resale 90 days after the date of this Prospectus; however, the holders of 2,257,401 of these shares have agreed with the Representative not to sell any of these shares until two years after the date of this Prospectus without first obtaining the prior written consent of the Representative. In addition, the sale by the Selling Securities Holders of 500,100 shares of restricted Common Stock, 3,000,000 Warrants, and the 3,000,000 shares of Common Stock underlying those -16- <PAGE> Warrants is being registered pursuant to the registration statement of which this Prospectus is a part. Although the sale of the securities by the Selling Securities Holders is being registered, the Selling Securities Holders may not sell any of these Securities until _________, 1998 [one year after the effective date of this Registration Statement] without first obtaining the prior written consent of the Underwriters. Sales under Rule 144 and by the Selling Securities Holders, whenever they are made, may have a depressive effect on the price of the Common Stock. 28. Possible Issuance Of Additional Shares Of Common Stock And Preferred Stock. Subject to the Representative's right to approve any additional issuances of Common Stock, preferred stock, and other securities of the Company for one year after the effective date of the Offering, under the Company's Certificate Of Incorporation, the Board Of Directors of the Company has the power to issue up to an aggregate of 20,000,000 shares of Common Stock of the Company, of which 2,900,100 were issued and outstanding as of December 31, 1996, and of which an additional 3,000,000 are reserved for issuance upon the exercise of previously outstanding Warrants, without stockholder approval under certain circumstances. If this were to occur, of which there is no present intention, there would be additional equity dilution to the investors in this Offering. Under the Company's Certificate Of Incorporation, the Board Of Directors of the Company also has the power to issue all the 1,000,000 authorized and unissued shares of the Company's $1.00 par value preferred stock without stockholder approval under certain circumstances. The Board Of Directors of the Company has the right to fix the rights, privileges and preferences of any class of preferred stock to be issued in the future. Any class of preferred stock that may be authorized in the future may have rights, privileges, and preferences senior to the Common Stock. The creation of a class of preferred stock with rights senior to the Common Stock could be authorized by the Board Of Directors of the Company without the approval of the holders of the Common Stock and may adversely affect the rights of the holders of Common Stock. See "DESCRIPTION OF SECURITIES" and "UNDERWRITING". 29. Arbitrary Determination Of Offering Price Of Units And Exercise Price Of Warrants. The price at which the Units are being offered to the public and the price at which the Warrants are exercisable for shares of Common Stock have been determined arbitrarily. The offering price and exercise price were arrived at after negotiations between the Company and the Representative and were based upon the Company's and the Representative's assessment of the history and prospects of the Company, the background of the Company's management and current conditions in the securities markets. Each of these factors was given approximately equal weight. There is no relationship between the offering price or the exercise price and the Company's assets, book value, net worth or any other economic or recognized criteria of value. See "DESCRIPTION OF SECURITIES". 30. Registration Or Exemption Required To Exercise Warrants. Holders of Warrants have the right to exercise their Warrants to purchase Common Stock only if a registration statement relating to those shares is then in effect or an exemption from registration is available and only if those shares are qualified for sale, or are deemed to be exempt from qualification, under applicable securities laws of the state of residence of the holder of those shares. The Company intends to have a registration statement in effect at times that the Warrants are eligible for exercise, although there can be no assurance that the Company will be able to do so. However, the Company will not be required to honor the exercise of the Warrants if, in its opinion, the issuance of Common Stock would be unlawful because of the absence of an effective registration statement or for other reasons. If the Company were unable to cause a required registration statement to be effective during a period of time when holders wished to exercise, the market value of the Warrants could be adversely affected. 31. Best Efforts Offering; No Interest Or Escrowed Funds. The shares of Common Stock and Warrants are offered on a "best efforts, minimum/maximum basis", subject to the subscription and payment for not less than 700,000 shares of common Stock and 700,000 Warrants (the "Minimum Offering"). Funds will be held in a non-interest bearing escrow account until the Minimum Offering has been completed. The escrow agreement provides that if the Minimum Offering is not subscribed for within the offering period, or if the Offering is cancelled, the escrow agent will refund to subscribers as promptly as possible the funds paid by subscribers without interest or deduction. See "UNDERWRITING - Subscription Procedures". -17- <PAGE> USE OF PROCEEDS The net proceeds to the Company from this Offering are estimated to be $2,988,300 if the Minimum Offering amount is sold and $3,432,000 if the Maximum Offering amount is sold after deducting selling commissions and other unpaid expenses of the Offering. The Offering is made on a "best efforts, minimum/maximum basis" and there is no assurance that at least the Minimum Offering amount will be sold and that the Company will receive any proceeds from the Offering. Total selling commissions equal to ten percent of the gross offering proceeds from the Common Stock and Warrants, together with a three percent non-accountable expense allowance, will be allowed to the Underwriter upon consummation of the Offering. Other expenses of the Offering, estimated to be $509,700 for the Minimum Offering and $525,000 for the Maximum Offering, include the non-accountable expense allowance, printing costs, legal fees, accounting fees, blue sky fees and costs, transfer agent fees, SEC and NASD filing fees and other miscellaneous costs. Approximately $285,000 of the total offering expenses will have been paid prior to closing by the Company, leaving $224,700 in the Minimum Offering and $240,000 in the Maximum Offering of offering expenses and $357,000 in the Minimum Offering and $408,000 in the Maximum Offering of selling commissions to be paid from the offering proceeds. The $2,988,300 in the Minimum Offering and $3,432,000 in the Maximum Offering of net proceeds are expected to be allocated substantially as follows and applied in the following order of priority, during the 12 month period following the offering(1): <TABLE> <CAPTION> Minimum Offering Maximum Offering ---------------------------------- ----------------------------------- Approximate Approximate Percentage Percentage Approximate Of Net Approximate Of Net Amount Proceeds Amount Proceeds ------------- ----------- ------------ ------------ <S> <C> <C> <C> <C> Domestic and International Marketing Program.................... $100,000 3.3% $200,000 5.8% Reduction of Secured Note to Major Supplier (2)................... 1,200,000 40.2% 1,200,000 35.0% Repayment of Unsecured Notes (3)............................ 300,000 10.0% 300,000 8.7% Upgrade Computer Software Systems.............................. 50,000 1.7% 50,000 1.5% Reduction of Trade Accounts ......... 800,000 26.8% 800,000 23.3% Other Working Capital (4)............ 538,300 18.0% 882,000 25.7% ------- ----- ------- ----- TOTAL NET $2,988,300 100% $3,432,000 100% PROCEEDS ========= ==== ========== ==== </TABLE> - -------------------- (1) See "BUSINESS--Business Plan And Strategy" for a description of how the proposed allocation of proceeds of this Offering applies to the Company's plans. -18- <PAGE> (2) The Company intends to reduce by $1.2 million the outstanding principal balance on the outstanding note dated April 24, 1996, to its major supplier. When this occurs, that note, which accrues interest at one percent over the Prime Rate (as designated in The Wall Street Journal) and matures on April 30, 2001, will be adjusted to decrease the weekly payments from $11,537 to approximately $5,100. See "BUSINESS--Indebtedness To Major Supplier". (3) The Company intends to repay the $300,000 of indebtedness that was incurred in July 1996 in order to pay for costs of this Offering and to provide immediate working capital. This indebtedness accrues interest at 10 percent per annum and is due and payable upon the earliest to occur of April 24, 1997 or the closing of any public debt or equity financing of the Company or the closing of any transaction in which the Company's securities are exchanged for securities of another entity (whether by merger or otherwise). (4) The Company's working capital will be utilized for general corporate purposes and operating expenses, including payment of $55,000 for the Representative's consulting fee. See "UNDERWRITING". Although the amounts set forth above indicate management's present estimate of the Company's use of the net proceeds from the Offering, the Company may reallocate the proceeds or utilize the proceeds for other corporate purposes based on the contingencies described below. The actual expenditures may vary from the estimates in the table because of a number of factors, including whether the Company has been operating profitably, what other obligations have been incurred by the Company, whether the Company desires to expand its existing operations, and other changes in circumstances. Although no alternate plans currently exist, other uses could include additional funds for increased marketing, expanded operations or additional payment on accounts. If the Company's need for working capital increases, the Company could seek additional funds through loans or other financing. No such arrangements exist or are currently contemplated, and there can be no assurance that they may be obtained in the future should the need arise. If the use of the proceeds of the Offering in the manner described above proves impractical or it is otherwise deemed by Management to be in the Company's best interests to utilize the proceeds in another manner, the Company may apply the proceeds of the Offering in such manner as it deems appropriate under the then existing circumstances. The Company has no present intention, agreements or understandings to make any material acquisitions of businesses, assets, or technologies. DIVIDEND POLICY The Company has not paid any cash dividends to date. As indicated under "BUSINESS--Indebtedness To Major Supplier", the Company's Note to the Supplier prohibits the payment of any dividends until the Note is paid in full. The Company currently intends to retain its future earnings, if any, to fund the development and growth of its business and, therefore, does not anticipate paying cash dividends on its Common Stock in the future. -19- <PAGE> DILUTION The net tangible book value of the Company as of October 31, 1996 was $(1,026,432) or $(.35) per share. Net tangible book value per share represents the amount of total tangible assets of the Company, reduced by the amount of its total liabilities, divided by the total number of shares of Common Stock outstanding. After giving effect to the sale by the Company of the Minimum Offering of 700,000 shares of Common Stock and 700,000 Warrants at the initial public offering price of $5.00 per share of Common Stock and $.10 per Warrant, the as adjusted net tangible book value of the Company as of October 31, 1996 would have been $2,067,728, or $.57 per share of Common Stock. This represents an immediate increase in net tangible book value of $.92 per share to existing stockholders and an immediate dilution of $4.43 per share, or 89 percent, to new investors. After giving effect to the sale by the Company of the Maximum Offering of 800,000 shares of Common Stock and 800,000 Warrants at the initial public offering price of $5.00 per share of Common Stock and $.10 per Warrant, the as adjusted net tangible book value of the Company as of October 31, 1996 would have been $2,511,428, or $.68 per share of Common Stock. This represents an immediate increase in net tangible book value of $1.03 per share to existing stockholders and an immediate dilution of $4.32 per share, or 86 percent, to new investors. The following table illustrates the per share dilution in net tangible book value to new investors: <TABLE> <CAPTION> Assuming Assuming Minimum Maximum Offering Offering -------- -------- <S> <C> <C> Public offering price per share $5.00 $5.00 Net tangible book value per share before the Offering $(.35) $(.35) Increase per share attributable to new investors $ .92 $1.03 Net tangible book value per share after the Offering $ .57 $ .68 Dilution per share to new investors $4.43 $4.32 </TABLE> The following table summarizes, on a pro forma basis, assuming closing of the Minimum Offering, the differences in total consideration paid for Common Stock and the average price per share paid by existing stockholders and new investors with respect to the number of shares of Common Stock purchased from the Company assuming an initial public offering price of $5.00 per share: <TABLE> <CAPTION> Shares Purchased Total Consideration ----------------------- ------------------------- Average Number Percent Amount Percent Price/share ------ ------- ------ ------- ----------- <S> <C> <C> <C> <C> <C> Existing stockholders 2,900,100 80.6% $ 148,155 4.1% $0.05 New investors 700,000 19.4% $3,500,000 95.9% $5.00 --------- ------ ---------- ----- Total 3,600,100 100.0% $3,648,155 100.0% ========= ===== ========== ===== </TABLE> -20- <PAGE> The following table summarizes, on a pro forma basis, assuming closing of the Maximum Offering, the differences in total consideration paid for Common Stock and the average price per share paid by existing stockholders and new investors with respect to the number of shares of Common Stock purchased from the Company assuming an initial public offering price of $5.00 per share: <TABLE> <CAPTION> Shares Purchased Total Consideration --------------------- ----------------------- Average Number Percent Amount Percent Price/share ---------- ------- --------- ------- ----------- <S> <C> <C> <C> <C> <C> Existing stockholders 2,900,100 78.4% $ 148,155 3.6% $ 0.05 New investors 800,000 21.6% $4,000,000 96.4% $ 5.00 --------- ------- ---------- ----- Total 3,700,100 100.0% $4,148,155 100.0% ========= ======= ========== ===== </TABLE> The information presented above, with respect to existing stockholders, assumes no exercise of the Underwriter's Warrants, the Warrants included in the Offering, or the Warrants outstanding prior to the Offering. In addition, 200,000 shares of Common Stock have been reserved for issuance upon the exercise of options granted pursuant to the Company's 1994 Stock Option Plan. Options to purchase 175,000 shares currently are outstanding. The issuance of Common Stock under this plan may result in further dilution to new investors. -21- <PAGE> BUSINESS Overview American International Consolidated Inc. (the "Company") is a manufacturer and general contractor that focuses primarily on three types of construction products: the manufacture of metal buildings and structural steel projects; the construction of mini-warehouses and self-storage facilities; and the construction of cold storage, including refrigerated and freezer, buildings. The Company's services range from the start, or design, phase to the finish, or erection, phase of a project, including design, manufacture, general construction, construction management, building, and turnkey services. The Company selects, coordinates and manages subcontractors for substantially all phases of the work, except for design, erection, and manufacture of certain metal building components. The Company also provides oversight and supervision of the entire construction process for each project. The Company's principal executive and administrative offices are located at 14603 Chrisman, Houston, Texas 77039, telephone number (281) 449-9000. Description Of Business Within its manufacturing and construction operations, the Company operates three specialty divisions: (i) the manufacture of metal buildings and structural steel projects; (ii) mini-warehouses and other self-storage facilities; and (iii) cold storage buildings, including refrigerated and freezer facilities. The actual manufacturing, construction and other operating services related to these are generally provided separately by the particular specialty division of the Company, and the administrative or non- construction services are provided by the same marketing, accounting, billing, collection, capital financing, in-house legal, and other general administrative portions of the Company. Set forth below is a description of each of the three specialty operations of the Company. Manufacture Of Metal Buildings ------------------------------ The Company provides different variations of services in its metal buildings and metal roof activities. Most often, the Company will be engaged to pre-engineer, prepare construction drawings, manufacture the building frames, procure all non-structural steel, sheeting and trim, and then ship these products to the customer, with the customer being responsible for erection and installation as well as site preparation for the building. The Company also may be engaged, in some instances, in the actual erection of the building. In other situations, the Company may be engaged only to provide the material components or to provide the frame itself in the form of cut and welded pieces of steel that are based on drawings provided by the customer. In all cases, the Company generally will rely on the owner's being responsible for site preparation, including work on the slab or other foundation. The Company's metal buildings division also provides both conventional and pre-engineered building face lifts and retrofits, and performs the dismantling and relocation of metal buildings. The experience and knowledge to provide these services are a natural by-product of the other services provided by the Company. For the fiscal year ended April 30, 1996 and for the six months ended October 31, 1996, the Company realized approximately $9.2 million and $8.8 million, respectively, in gross revenues from its metal buildings manufacturing and construction services. Approximately $1.7 million, or 18 percent, of these revenues for the 1996 fiscal year, and approximately $1.1 million of these -22- <PAGE> revenues, or 13 percent, for the six months ended October 31, 1996 resulted from international sales despite the fact that the Company has virtually no continuing marketing effort for international sales. For the fiscal years ended April 30, 1995 and 1994, the Company's revenue from this division was $10.0 million and $7.6 million, respectively. The Company believes that it could increase its international metal buildings manufacturing and construction services significantly through a marketing program that would entail attendance at trade shows and direct sales visits to U.S. based companies with international operations. These two methods of expansion appear preferable to attempting to establish more sales representatives. The Company believes that international expansion is desirable at this time because (i) there does not appear to be local competition in most countries, (ii) international projects tend to have higher margins, and (iii) with respect to Mexico in particular, the North American Free Trade Agreement ("NAFTA") significantly reduces taxes and makes transportation of products and materials both easier and less expensive. The Company believes it may be at a competitive advantage for international business because its metal buildings are generally more simple to erect, the Company is better able to provide continued service after the completion of the transaction, and the Company tends to be able to customize its proposals to deal with international needs that may be different from those for domestic projects. Because the Company's metal frames generally include more of the component pieces already welded on than those of its competitors, they are simple to erect. The Company also is attempting to increase the volume and profitability of its metal buildings manufacturing and construction services by pursuing specialty buildings, such as wood processing plants, shopping centers, medical centers, professional buildings and office buildings, and undertaking projects in areas where local competition does not exist. The Company has built four wood processing plants in the past, was awarded a contract for another wood processing plant in July 1996 which is presently under construction, and submitted bids for two additional wood processing plants in early August 1996. The Company has received a non-binding oral indication that it will be awarded the contract for one of these projects with construction scheduled to start in March. A formal contract and certain specific terms are pending. These plants, which make various types of particle board, pressboard and strand board out of wood, tend to be located in thinly populated or wilderness areas where there are no local construction companies able to undertake the required project. This should provide the Company with a competitive advantage because it is accustomed to constructing its projects in localities other than its headquarters and to bringing its workers and subcontractors into areas away from home. In constructing metal buildings, the Company utilizes steel frames and steel roof materials, however the walls can be made of brick or any other material. The Company believes it is at a competitive advantage in bidding projects utilizing non-steel materials for the walls because most of its competitors prefer to use metal walls that they manufacture and thereby increase their profit, whereas the Company purchases all walls from other companies, regardless of whether they are metal, and therefore, there is no incentive for the Company's bids for projects with non-steel walls to be structured to favor the steel wall alternative. There are approximately 38 full time employees working in the metal buildings divisions, including one salesperson, one estimator, one customer service representative, one shop manager, four draftspersons, two secretaries, two international sales persons, four installation laborers, and 22 shop personnel including machine operators, welders, foremen and helpers. -23- <PAGE> Construction Of Mini-Warehouses ------------------------------- During the fiscal year ended April 30, 1996 and the six months ended October 31, 1996, the Company realized revenue of approximately $20.6 million and $8.8 million, respectively, from its mini- warehouse construction. For the fiscal years ended April 30, 1995 and 1994, the Company's revenue from this division was $11.5 million and $10.3 million, respectively. Generally, mini-warehouse projects are undertaken in one of the following three ways: (1) the Company is engaged to provide all aspects of the project from breaking ground to turnkey installation; (2) the Company is engaged as a subcontractor to provide the building frame, the walls, roof and interior partitions; and (3) the Company is engaged to convert existing buildings, such as office buildings, strip centers, warehouses and manufacturing buildings, into mini-warehouse facilities. In all three of the above situations, the Company provides its own trained job foreman and crew to erect the steel portion (walls, roof, partitions) and subcontracts the remaining work to regional contractors. Approximately 36 percent of the Company's mini-warehouse construction work currently is being undertaken on behalf of U-Haul Inc. For the fiscal year ended April 30, 1996 and April 30, 1995, U- Haul Inc. represented approximately 39 percent and 41 percent, respectively, of the Company's mini- warehouse construction business although the Company has also transacted construction work for Public Storage, Inc., Shurguard Corporation, and other companies. The Company believes that it is the contractor for approximately 25 to 35 percent of U-Haul Inc.'s mini-warehouse construction business and that the Company 's relationship with U-Haul Inc. continues to be excellent. The Company's employees for its mini-warehouse construction business include a chief operating officer, a construction manager, one architectural draftsperson, three project managers, an operations coordinator, a project assistant, an executive secretary, two purchasing department employees, three estimators, four draftspersons, four salespeople, nine field superintendents, and 40 to 50 crew members. Construction Of Cold Storage (Refrigerated And Freezer) Buildings ----------------------------------------------------------------- The Company's cold storage construction services are performed with the Company serving either as a specialty subcontractor that is responsible only for constructing the refrigerated or freezer portions of the building, or as a general contractor that is responsible for the entire building. When the Company acts in the capacity of a general contractor, it subcontracts out most aspects of the construction that do not deal directly with the cold storage function. For the fiscal year ended April 30, 1996 and the six months ended October 31, 1996, revenue from cold storage construction services accounted for approximately $1.4 million and $.5 million, respectively. For the fiscal years ended April 30, 1995 and 1994, the Company's revenue from this division was $2.8 million and $7.9 million, respectively. Much of the business and many of the referrals in the cold storage line of business are influenced heavily by a contractor's financial condition, bonding capacity, and rapidity of payment. The Company believes that as a result of this Offering, it will improve its financial condition, increase the frequency of payment of its accounts, and obtain more desirable terms for its bonding arrangements and material purchases. These factors are particularly important in obtaining cold storage construction business because a very high percentage of the referrals for cold storage construction come from suppliers, and the suppliers tend to favor those construction companies that pay their bills on a timely basis. In addition, a high percentage of the work available in cold storage construction is for companies with national or international operations. Financial strength and bonding ability are considered quite important by companies of that nature. -24- <PAGE> Competition in cold storage construction is highly specialized and limited. The Company believes that if it is able to improve the timing of its payments and its credit standing, it will lower its costs by obtaining better terms from suppliers and increase its business by the improved supplier relationships and image of the Company. It also believes that its business will improve to the extent that any of the Offering proceeds are spent on additional marketing activities. Personnel involved in the Company's cold storage construction services include a chief operating officer, a vice president-in-charge of field work and purchasing, a general superintendent, a site supervisor, an administrative secretary and two salespersons. Backlog As of October 31, 1996 the Company had an aggregate backlog of approximately $17.6 million, including a backlog of $6.6 million related to its metal building manufacturing division, $9.7 million related to its mini-warehouse construction division, and approximately $1.3 million related to its cold storage construction division. The Company expects to complete all of this backlog by April 30, 1997. By comparison, as of October 31, 1995, the Company had an aggregate backlog of approximately $14.7 million in the respective amounts of $2.5 million, $12.0 million, and $.2 million related to its metal building manufacturing, mini-warehouse construction, and cold storage construction divisions, respectively. Industry Environment Management believes that the current industry environment complements the Company's plan to focus on its three types of specialty manufacturing and construction services. The demand for mini- warehouses and pre-engineered metal buildings has increased dramatically in the past few years. The Company believes that the demand for these structures will continue to increase, and that it is well positioned to meet this demand because of its expertise and business reputation in these areas. Management also believes that the general increase in the level of business internationally, coupled with the Company's ability to service those areas and the relatively low level of competition for the Company in many of those areas, also positions the Company extremely well for growth, most particularly with respect to cold storage and metal buildings. See "RISK FACTORS--Risk Factor No. 9-Previous Unprofitable International Operations". Although there is no assurance that the growth of the industry or of the Company will continue, the Company believes its business will continue to increase and that it will benefit from a future increase in new construction in these and other areas. Business Plan And Strategy Management of the Company believes that the Company's significant business experience, quality of services, client relationships and efficient operations are attributes that will enable the Company to continue to progress in the current industry environment. Management's business plan and strategy in following through from this Offering is summarized as follows: -25- <PAGE> Increase Business Volume ------------------------ Strengthen Financial Condition And Increase Bonding Capacity. By strengthening its financial condition, the Company recently has increased, and anticipates it will be able to further increase, its bonding capacity. Based on its financial results for the fiscal year ended April 30, 1996, the Company has increased its bonding capacity for a single job from $250,000 to $500,000 and its aggregate bonding capacity from approximately $1.5 million to $2.5 million. It is anticipated, based on discussions with the Company's bonding agent, that as a result of this Offering the Company's bonding capacity would increase to $5 million per job and that its aggregate bonding capacity also would increase significantly; however, there is no assurance that this will occur. Each increase in the Company's bonding capacity expands the number, nature and size of contracts that are available for the Company to submit bids. Undertake Planned Domestic And International Marketing Programs. The Company intends to utilize a portion of the proceeds of this Offering to undertake planned domestic and international marketing programs through attendance at industry trade shows, direct sales visits, and advertisements in publications. See "USE OF PROCEEDS". In the past, the Company has not budgeted or expended a significant or otherwise meaningful amount of funds for marketing. Management of the Company believes that because of the Company's experience, reputation and expertise, a planned marketing effort should be successful in deriving new business; however, there is no assurance that this will be the case. Management of the Company believes that despite past losses in international markets, it will be able to operate profitably in international markets in the future. This is based on the Company's belief that because it is accustomed to undertaking projects in areas geographically separated from its home office, it will be better suited to serving customers in foreign markets than competitors that generally operate in proximity to their home base. The Company also believes that it will be able to operate profitably in foreign markets because it believes the demand in those markets currently exceeds the availability of qualified companies to service them. See "RISK FACTORS--Risk Factor No. 9--Previous Unprofitable International Operations". Increase Business Referrals From Suppliers And Other Business Contacts. Management of the Company believes that this Offering will enable the Company to have sufficient working capital to be more timely in payment of its trade accounts and that this, together with other aspects of its improved financial condition, will result in an increase in business referrals received by the Company from its suppliers and other business contacts. Nevertheless, there is no assurance that this will occur. Increase Margins And Profitability ---------------------------------- Decrease Cost Of Metal Building Panels, Roofing, and Trim Components. As a result of the successful completion of this Offering and reduction of the Note to the Supplier, the Company believes it will be able to obtain purchase discounts on metal building components, which will enable it to increase margins and profitability; however there is no assurance that these purchase discounts will be available. Decrease Interest Expense. The Company will utilize $1.2 million of the proceeds of this Offering to reduce outstanding indebtedness to the Supplier. This indebtedness currently accrues interest at one percentage point above the prime rate. See "USE OF PROCEEDS" and "--Indebtedness To Major Supplier". As a result of this debt reduction, the Company's weekly payment on this debt, which is currently $11,537 will decrease to approximately $5,100. Decrease Bonding Costs. During its fiscal year ended April 30, 1996, the Company paid aggregate premium expenses of approximately $38,000, or approximately four percent of the respective gross contract price to obtain -26- <PAGE> performance bonds for its work. Management believes, based on discussions with its bonding agent, that the improvement in the Company's financial condition resulting from the Offering will enable the Company to obtain performance bonds for a premium cost of 1.5 to 2.0 percent of the respective gross contract prices; however there is no assurance that this will occur. Although the total amount that would have been saved in bonding costs during fiscal 1996 is limited, future savings are anticipated to be more significant because the Company believes that in the future it will be utilizing greater amounts of performance bonds because of the increased bonding capacity it believes will be available. See "--Increase Business Volume: Strengthen Financial Condition And Increase Bonding Capacity" above. Management's Plan To Remove The Threat To The Company's Ability To Continue As A Going Concern As a result of the Company's current fiscal year losses from May 1, 1996 through January 31, 1997 (approximately $2.5 million, including a non-recurring charge of $1.1 million), the Company's working capital position and ability to generate sufficient cash flows from operations to meet its operating and capital requirements has further deteriorated and these matters raise substantial doubt about the Company's ability to continue as a going concern without completion of this Offering or a substantial infusion of equity capital. The Company believes that it will be successful in removing the threat concerning its ability to continue as a going concern by adhering to closer and stricter scrutiny of its contract bids and utilizing the estimated minimum net proceeds of approximately $2.9 million from this Offering to achieve profitability through lower interest and bonding costs and expanded volume as described above under "--Increase Business Volume" and "-- Increase Margins And Profibabiliy". Management believes that approximately $1.0 to $1.2 million of the proceeds from this Offering are necessary to remove the threat concerning the Company's ability to continue as a going concern and that if this Offering is completed, the minimum proceeds from this Offering will enable the Company to continue operating for the foreseeable future at its current level of operations. There is no assurance these results will occur even if this Offering is consummated. If this does not occur, the Company will pursue other sources of financing, but there is no assurance any other source of financing will be available. The Company is current in its obligations to all lenders and major suppliers except the supplier described in "--Indebtedness To Major Supplier", below. That Supplier has indicated that it has no intent of accelerating payment on any obligations as long as this Offering is completed. The Supplier has not indicated what it will do if this Offering is abandoned or otherwise terminated unsuccessfully. As a result of the losses incurred in November and December 1996, the audit report of the Company's independent auditors indicates that there is substantial doubt concerning the Company's ability to continue as a going concern without a substantial infusion of equity capital, such as that conetmplated from this Offering. The implication of this to investors is that successful completion of this Offering (or an equity infusion from another source) is necessary for the Company to continue operations. See "RISK FACTORS -- Risk Factor No. 1. Substantial Doubt About The Company's Ability To Continue As A Going Concern Without Completion Of Public Offering", "MANAGMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OEPRATIONS", and Note 19 to the Financial Statements. Marketing The Company obtains business primarily through repeat business from previous and existing customers and recommendations from customers and vendors. As indicated elsewhere in this Prospectus, the Company intends to utilize a portion of the proceeds of this offering to undertake a marketing program that includes trade show attendance, sales call visits, and advertising. Management believes that a marketing program of this nature will have a positive impact on the Company's business. See "USE OF PROCEEDS" and foregoing subsections under "Description Of Business". Reliance On Major Customers During the six months ended October 31, 1996 and the fiscal year ended April 30, 1996, one of the Company's customers, U-Haul, Inc., accounted for approximately $3.2 million and $8.1 million, respectively, or approximately 18 percent and 26 percent, respectively, of the Company's total revenues. For the fiscal year ended April 30, 1995, U-Haul, Inc. represented $4.9 million, or 20 percent, of the Company's total revenues. Although the loss of U-Haul Inc.'s business could have a material adverse effect on the Company, the Company believes that this is unlikely to occur in the near future and that the potential effect on the Company will decrease over time as the Company's revenues from other customers increase. -27- <PAGE> Subsidiaries C.H.O.A. Construction Company ("C.H.O.A.") was formed in September 1993 to perform general construction services in the State of Louisiana. C.H.O.A. was formed as a Louisiana corporation and originally was owned 80 percent by the Company and 20 percent by a general contractor licensed in Louisiana. Subsequently, the Company acquired the 20 percent minority interest, and C.H.O.A. currently is a wholly-owned subsidiary of the Company. C.H.O.A. was dissolved on September 13, 1996. L. Campbell Construction, Inc. ("Campbell") was formed as a wholly-owned subsidiary of the Company in order to handle the Company's turnkey and general construction operations. Campbell was incorporated under the laws of the State of Texas in January 1991. Since its inception in January 1991, much of the general construction work has been performed by the Company directly under agreement with U-Haul. Consequently, the Company has little or no future need to perform general construction operations under Campbell and expects to dissolve Campbell or merge Campbell with and into the Company. Campbell currently has no assets and no liabilities. In November 1994, two wholly-owned subsidiaries of the Company, American International Thermal Systems, Inc. ("AI Thermal") and American International Building Systems, Inc. ("AI Building"), merged with and into the Company. AI Thermal performed cold storage construction services and AI Building manufactured metal buildings and structural steel projects. The Company performs these same services through two of its divisions. In May 1994, AIC Management, Inc. ("AIC Management") merged with and into the Company. Before the merger, AIC Management was wholly-owned by Messrs. Clemons, Farrar and Wilson, each of whom is an officer, director and 29.47 percent stockholder of the Company. AIC Management was formed in February 1987 to provide management and consulting services to the construction industry, however all such services were provided to the Company. Prior to the merger, AIC Management owned the Company's office building and warehouse/assembly plant and leased them to the Company. In August 1994 and November 1994, respectively, the Company dissolved two of its inactive, wholly-owned subsidiaries, Belko Construction, Inc. and AIC Export Corporation. Indebtedness To Major Supplier As of December 31, 1996, the Company owed its major supplier (the "Supplier") of metal building components $1,800,000 in accounts payable and $2,133,000 in principal and interest under a note (the "Note") dated April 24, 1996 executed by the Company. The Note is payable in installments and accrues interest at one percent above the prime rate designated in The Wall Street Journal. The Company is required to make consecutive weekly payments of $11,537 for outstanding accrued interest and principal, until April 24, 2001 when the Note will have been paid in full. The Company, which has the right to prepay the Note in full or in part at any time without penalty, intends, and is required under the Loan Agreement, to pay $1.2 million to reduce the principal on the Note from the proceeds of the Offering. At the time this payment is made, the weekly payment on the Note will be reduced so that the remaining principal balance will be amortized evenly, including payments of interest, over the remaining term of the Note. If this payment were made on December 31, 1996, the weekly payment on the Note would be reduced from $11,537 to approximately $5,100. See "RISK FACTORS--Risk Factor No. 3" and "USE OF PROCEEDS". Pursuant to the Loan Agreement effective April 24, 1996 between and among the Supplier, the Company, and Danny and Teresa Clemons, Ralph and Judith Farrar, Jim and Shirley Williams and John Wilson (collectively, the five individuals are referred to as the "Guarantors"), the Note is secured by a blanket security interest in all the Company's accounts, equipment, and inventory, whenever acquired, and all proceeds and products of such assets (collectively, the "Collateral"), subject only to security interests previously granted to FCLT, L.P., a Texas limited partnership. The Collateral secures the Note and all other obligations of the Company to the Supplier. The Company also must provide the Supplier with monthly financial statements prepared in accordance with generally accepted accounting principles and with audited annual financial statements that are not subject to a qualification of the auditors' opinion. The Loan Agreement prohibits the Company from assuming any additional liabilities except for (a) accounts payable and unsecured liabilities to vendors and suppliers, (b) up to $500,000 of private placement debt, and (c) those expenditures for goods and services incurred in the ordinary course of business on ordinary trade terms. The Company also is prohibited from: (i) compensating any of the Guarantors who are employees of the Company in excess of $150,000 per year during the term of the Loan Agreement, (ii) making any advances to third parties other than in the ordinary course of business and advances to employees for emergencies up to $25,000, (iii) investing in any other third parties, (iv) making any capital expenditure in excess of $25,000 or cumulative capital expenditures in excess of $120,000 in the aggregate annually, except for capital expenditures made with proceeds of this Offering and except for trade debt incurred in the ordinary course of business, (v) declaring or paying dividends, -28- <PAGE> (vi) changing its corporate organization by merger, consolidation, joint venture or any other method without the written consent of the Supplier, (vii) substantially changing its management personnel or the general character of its business, and (viii) permitting the ratio of each of its current assets to current liabilities to decrease below 60 percent, but notwithstanding the foregoing, the Loan Agreement expressly states that the Company is in no way inhibited or prohibited from undertaking an initial public offering of stock. Pursuant to the Note and/or the Loan Agreement, if (a) any terms, covenants, or other obligations under the Loan Documents are breached or any representation or warranty is incorrect or materially misleading, (b) any judgment against any the Company remains undischarged for a period of 90 days, (c) any Guarantor shall be adjudicated bankrupt or dies and the life insurance proceeds are not first applied to repay the Note, (d) the Company makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated bankrupt or becomes insolvent, or (e) the Company fails to maintain earnings before interest expense equal to at least 1.5% of gross revenues, then all of the outstanding amounts due under the Note shall become immediately due and payable. In addition, upon the occurrence of any of the above events, the Supplier may exercise its right of offset against the Collateral. The Loan Agreement terminates upon the satisfaction of all obligations of the Guarantors and the Company under the Loan Documents. The Loan Agreement also requires that the Company use $1.2 million of the proceeds from this Offering to reduce the balance of the Note. As indicated above, when that payment is made, the weekly payment on the Note will be reduced so that the remaining balance will be amortized evenly, including payments of interest, over the remaining term of the Note. As of December 31, 1996, the Company was in default of a number of covenants under the Loan Agreement, and the Supplier agreed to waive these defaults. See "RISK FACTORS--Risk Factor No. 3--Outstanding Indebtedness". Also pursuant to the terms of the Loan Agreement, the Company and the Supplier have agreed that, prior to commencement of this Offering, the Supplier may review a draft of the Prospectus or Registration Statement used in connection with this Offering and that the Company and the Supplier will attempt to cooperate with one another in agreeing upon language in the Prospectus or Registration Statement relating to the Supplier. Pursuant to the Security Agreement-Pledge effective April 24, 1996, the Company and Guarantors pledged to the Supplier all the issued and outstanding stock of the Company and its subsidiaries that they respectively own, and they agreed not to transfer or otherwise encumber any of these shares during the term of the Loan Agreement. Further, the Company and Guarantors executed Irrevocable Limited Stock Powers appointing the Supplier's legal counsel as attorney to transfer the above stock to the Supplier in the event of a default under the Loan Documents. The shares pledged as collateral are to be returned to the Guarantors and the Company upon the payment of all amounts due under the Note. The Guarantors also executed Continuing Guarantees to the Supplier which fully guaranteed all outstanding amounts due under the Note in the event of default under the Loan Documents. FCLT Loans As of October 31, 1996, the Company owed FCLT, L.P., a Texas limited partnership ("FCLT"), an aggregate of approximately $349,000 (the "Debt") under two loan agreements. See "RISK FACTORS--Risk Factor No. 3--Outstanding Indebtedness". One loan is evidenced by a promissory note in the face amount of $414,000, with an outstanding principal balance of $269,000 at October 31, 1996. The Company is required to make monthly payments on this note, including interest, of $4,907 to FCLT until June 1998, at which time all outstanding principal and -29- <PAGE> interest become payable. The other loan is evidenced by a promissory note in the face amount of $180,000, with an outstanding principal balance of $80,000 at October 31, 1996. The Company is required to make monthly payments on this note, including interest, of $1,175 to FCLT until June 1998, at which time all outstanding principal and interest become payable. The Company's aggregate monthly payments, including interest, currently are $6,082 to FCLT. Interest accrues on the outstanding Debt at the rate of 10 percent per annum until maturity and at the rate of 18 percent per annum after maturity. The Company may prepay part of or all the Debt at any time without penalty. The Debt is secured by two Deeds of Trust on the Company's real property on which the Company's offices and warehouse/assembly plant are located. In the event that the Company sells any of this property, FCLT has the right to declare the entire outstanding Debt immediately due and payable. The Debt is guaranteed by each of Messrs. Wilson, Clemons and Farrar. Government Regulation The Company's business is subject to a variety of governmental regulations and licensing requirements relating to construction activities. Prior to commencing work on a project in the United States, the Company is required to obtain building permits and, in some jurisdictions, a general contractor license is required by the state or local licensing authorities. In addition, the construction projects are required to meet federal, state and local code requirements relating to construction, building, fire and safety codes. In order to complete a project and obtain a certificate of occupancy, the Company is required to obtain the approval of local authorities confirming compliance with these requirements. The Company is subject to similar and sometimes more onerous government regulations and licensing requirements of any foreign countries in which it operates. Although the Company has not researched the applicable laws of all foreign countries, the Company is not aware of any significant impediments to doing business in most other countries. If significant impediments do arise in certain countries, the Company does not intend to pursue business there. Employees The Company has 147 employees including its Chief Executive Officer, the Presidents for each of its three divisions, an in-house legal counsel, one Vice President, five project managers, one Project Engineer, two project coordinators, 4 estimators, a manager of manufacturing operations, 13 draftsmen, 8 salesmen, 20 superintendents, 36 shop workers, 40 to 50 construction employees, a purchasing manager and a coordinator, five accounting personnel and 8 secretarial, administrative and clerical employees. There are no family relationships among the Company's officers and directors. Properties The Company occupies, approximately 16,000 square feet of space in an office building and 21,450 square feet of space in a warehouse/assembly plant/office at 14603 Chrisman, Houston, Texas. Both buildings, together with the approximately 7.3 acres on which they are located, are owned by the Company. The office building includes offices for the Company's metal buildings and mini-warehouse operations as well as for the Company's administrative and financial operations. The warehouse/assembly plant/office houses the Company's metal buildings manufacturing operations. Both buildings are encumbered by the Debt described under "FCLT Loans" and by the Note described under "Indebtedness -30- <PAGE> To Major Supplier". The Company also leases 824 square feet of space in Conroe, Texas, for its cold storage construction services. Legal Proceedings No material legal proceedings, other than ordinary routine litigation incidental to the business of the Company are pending in which the Company is a party, or to which the property of the Company is subject, and no such material proceeding is known by management of the Company to be contemplated. -31- <PAGE> SELECTED CONSOLIDATED FINANCIAL DATA The selected financial data of the Company presented below for each of the years in the five-year period ended April 30, 1996 are derived from the audited consolidated financial statements of the Company for these periods. The selected financial data presented for the nine-month periods ended October 31, 1996 and 1995 are derived from the unaudited consolidated financial statements included elsewhere in this Prospectus, which in the opinion of management include all normal and recurring adjustments necessary for fair presentation of information. This information should be read in conjunction with the Consolidated Financial Statements and Notes thereto and "Management's Discussion And Analysis Of Financial Condition And Results Of Operations" included elsewhere in this Prospectus. The selected consolidated financial data provided below is not necessarily indicative of the future results of operations or financial performance of the Company. <TABLE> <CAPTION> Six Months Years Ended April 30, Ended October 31 --------------------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1995 1996 -------- ------- ---------- ------- ------- ------- -------- Statement of Operations Data: (in thousands, except per share data) (Unaudited) <S> <C> <C> <C> <C> <C> <C> <C> Contract revenues $19,918 $16,843 $25,845(1) $24,317 $31,185 $15,581 $18,089 Contract cost 18,277 13,905 22,566 20,812 27,204 13,959 16,244 Gross profit 1,641 2,938 3,279 3,505 3,981 1,622 1,845 Selling, general and administrative 2,391 3,091 3,303 3,021 3,359 1,838 2,060 Provision for doubtful accounts 30 35 156 48 62 35 254 Bridge financing costs -0- -0- -0- -0- -0- -0- 1,105 Interest and other financing costs 79 192 219 188 184 93 159 Federal income tax expense -- -- -- -- 35 -- -- Net income (loss) after pro forma (565) (361) (420) 187 352 (332) (1,665) income taxes Net income (loss) per share after (.19) (.12) (.14) .06 .12 (.11) (.57) pro forma income taxes Dividends paid per share .04 .03 .01 -0- -0- -0- -0- </TABLE> -32- <PAGE> <TABLE> <CAPTION> April 30, October 31, --------------------------------------------------------------- ----------- 1992 1993 1994 1995 1996 1996 -------- -------- --------- -------- ------- -------- Balance Sheet Data: (Unaudited) <S> <C> <C> <C> <C> <C> <C> Current Assets $3,026 $3,058 $4,581 $4,163 $5,944 $7,993 Current Liabilities 3,258 4,076 5,974 5,568 5,107 9,968 Working capital (deficiency) (232) (1,018) (1,393) (1,405) 837 (1,975) Total assets 4,382 4,265 5,717 5,487 7,346 9,739 Long-term debt 1,029 519 495 454 2,422 369 Stockholders' equity (deficit) 94 (330) (759) (572) (220) (636) </TABLE> - -------------- (1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for discussion of a non-recurring contract for $5.58 million that was performed during 1994. (2) Prior to its acquisition during the year ended April 30, 1994, AIC Management, Inc. was a nontaxable entity. Pro forma income taxes were reflected herein as if AIC Management, Inc. had been a taxable entity for the periods preceding its acquisition. -33- <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results Of Operations The following table sets forth for the periods indicated the percentages that certain items are of total revenues and the percentage of change of that ratio from the corresponding year-earlier period: <TABLE> <CAPTION> Percentage of Total Revenues Percentage Change From Prior Period ---------------------------------------------------------- ---------------------------------------- Six Months Six Months Ended Ended Year Ended April 30, October 31, Year Ended April 30, October 31, -------------------------------- --------------------- ---------------------- ------------ 1994 1995 1996 1995 1996 1995 1996 1996 -------- --------- ------- -------- -------- --------- -------- ------- Revenues: <S> <C> <C> <C> <C> <C> <C> <C> <C> Contract revenues: 100.0% 100.0% 100.0% 100.0% 100.0% (5.9%) 28.2% 16.1 Costs and expenses: Contract costs: 87.3% 85.6% 87.2% 89.6% 89.8% (7.8%) 30.7% 16.4 Selling, general and 12.8% 12.4% 10.8% 11.8% 11.4% (8.6%) 11.2% 12.1 administrative: Provision for doubtful .6% .2% .2% .2% 1.4% (69.3%) 28.3% 624.6% --- --- --- --- ---- ------- ----- ------ accounts Private Placement --- --- --- --- 6.1% --- --- 100.0% --- --- --- --- ---- --- --- ------ financing costs Interest and other financing costs: .8% .8% .6% .6% .8% (14.2%) (1.9%) 71.0% ----- ------ ------- --- --- ------- ------ -------- Total costs and expenses: 101.5% 99.0% 98.8% 102.2% 109.5% (8.3%) 28.0% 24.5% ====== ===== ===== ====== ====== ====== ===== ========= </TABLE> Six Months Ended October 31, 1996 Compared With Six Months Ended October 31, 1995. For the six months ended October 31, 1996, the Company reported a net loss of $1,665,000, or $.57 per share, on revenues of $18,089,000 as compared with a net loss of $332,000, or $.11 per share, on revenues of $15,581,000. The increase in net loss is primarily attributable to the following: (a) the Company recorded a one time non-cash charge of $1,105,000 for private placement costs; and (b) the Company incurred an expense of $200,000 as a provision for doubtful accounts resulting from an anticipated loss for outstanding accounts receivable in the amount of $325,000. The Company agreed to accept an offer of payment of $125,000 as full payment for the disputed account balance. The total margins decreased .2% when comparing October 31, 1995 margin of 10.4% with 10.1% at October 31, 1996. This decreased margin is attributed to the metal building division which earned revenues of $8.8 million with a margin of 5.2% for the six months ended October 31, 1996 as compared with earned revenues of $4.1 million with a margin of 8.4% for the six months ended October 31, 1995. This decline in overall margins was offset by the results of improved margins within the mini- warehouse and Thermal Systems Divisions. -34- <PAGE> The mini-warehouse division improved its margin to 14.1% on revenues of $8.8 million for the six months ended October 31, 1996 as compared with a margin of 12.0% on revenues of $11.1 million for the six months ended October 31, 1995. In addition, the Thermal Systems Division earned revenues of $.5 million with a margin of 18.0% for the six months ended October 31, 1996 as compared with revenues of $.4 million with a margin of 10.6% for the comparable period in 1995. Selling, general and administrative expenses as a percentage of revenues decreased to 11.4% for the six months ended October 31, 1996 as compared with 11.8% for the six months ended October 31, 1995. This decrease in percentage is a result of revenues increasing at a greater rate than expenses. The Company anticipates that, to the extent that revenues continue to increase in the future, of which there is no assurance, selling, general and administrative expenses will increase at a lower rate. Interest expense increased $66,000 from $93,000 for the six months ended October 31, 1995 as compared with $159,000 for the six months ended October 31, 1996. This increase is the result of the conversion of accounts payables to interest-bearing Notes Payable to Supplier effective in April 1996. The Company's contract backlog as of October 31, 1996 was $17.6 million as compared to $14.7 million as of October 31, 1995, an increase of $2.9 million, which is primarily attributable to a $4.1 million increase in the backlog for the metal building manufacturing division, a $2.3 million decrease in the backlog for the mini-warehouse construction division, and a $1.1 million increase for the thermal systems division. As of the date of this Prospectus, the Company estimates that its operations for November and December 1996 resulted in losses of $804,000. These losses result primarily from recognition that the currently estimated gross margin on a number of contracts still in progress in mid-February 1997 is substantially less than had been estimated at the time of the bid and is substantially less than is necessary to maintain profitable operations. These contracts were erroneously estimated by a salesperson, and erroneously approved by the general manager of the Company's metal building manufacturing division; and the errors in underestimating costs were not discovered until after the Company had entered into the contracts and had commenced the respective projects. The Company has terminated the employment of the salesperson that prepared and submitted the bids for, and the general manager overseeing, a majority of the projects representing the negative and below average gross margins incurred during the November-December 1996 period. The Company believes that its operating results for January 1997 will be slightly above a break even level and that its operating results for the three-month period from February 1997 through April 1997 will be profitable. See Note 19 to the Company's Financial Statements. The Company's belief that operations for the three months ending April 30, 1997 will be profitable is based on the following: (i) at January 31, 1997, the Company had a backlog of $18.7 million, and after careful analysis of this backlog the Company believes it will be able to work off a significant portion of this backlog at profitable gross margins during the quarter ending April 30, 1997; and (ii) the Company believes, that after having recognized the losses described above, it has recognized any potential losses on all contracts currently in progress and that it will not incur any material deterioration of gross margins on these contracts. For additional discussions concerning recent losses and the Company's ability to continue as a going concern, see "RISK FACTORS -- Risk Factor No. 1 - -- Substantial Doubt About The Company's Ability To Continue As A Going Concern Without Completion Of A Public Offering" and "BUSINESS -- BUsiness Plan And Stragegy" above and "-- Liquidity And Capital Resources" below. Fiscal Year Ended April 30, 1996 Compared With Fiscal Year Ended April 30, 1995. For the fiscal year ended April 30, 1996, the Company reported a net profit of $352,000 or $.12 per share, on revenues of $31,185,000 as compared with net profit of $187,000, or $.06 per share, on revenues of $24,317,000 for the prior year. The increased profit resulted primarily from increased revenues and from a reduction in selling, general and administrative expenses as a percentage of revenues, which decreased to 10.8% of gross revenues in fiscal 1996 from 12.4% of gross revenues in fiscal 1995. See discussion above of selling, general and administrative expenses for the six months ended October 31, 1996 for additional information. The increase in total revenues from $24,317,000 in fiscal 1995 to $31,185,000 in fiscal 1996 is due primarily to a large increase in sales of the mini-warehouses and other general construction products. Although these increased sales were realized at a lower overall gross profit margin, management believes that the increase in volume more than justified growth in this area. The decrease in gross profit margin was from 14.4% for fiscal 1995 to 12.7% for fiscal 1996. -35- <PAGE> The Company's contract backlog as of April 30, 1996 decreased to $12,037,000 from $13,305,000 as of April 30, 1995, which is primarily attributable to a lower volume of mini-warehouse general construction products. From April 30, 1994 to April 30, 1995, the Company's backlog increased from $10,500,000 to $13,305,000, which was primarily attributable to both the metal building and mini-warehouse general construction products. Interest expense decreased by $4,000 even though gross revenues increased by almost $7 million in fiscal 1996. This was primarily due to a favorable financing agreement negotiated with its major supplier which allowed the Company to substantially increase its existing outstanding accounts payable and therefore reduce its borrowings to finance accounts receivables. Fiscal Year Ended April 30, 1995 Compared With Fiscal Year Ended April 30, 1994. For the fiscal year ended April 30, 1995, the Company reported a net profit of $187,000, or $.06 per share, on total revenues of $24,317,000 as compared with a net loss of $420,000, or $.14 per share, in fiscal 1994, on total revenues of $25,845,000. The decrease in revenues for fiscal 1995 as compared with fiscal 1994 is primarily due to a large one-time contract for a cold storage facility in fiscal 1994. This contract resulted in revenues of $5,583,000 in fiscal 1994 versus $1,268,000 in 1995. The increase in profitability for fiscal 1995 over fiscal 1994 resulted primarily from an increase in gross margin percentage from 12.7% in fiscal 1994 to 14.4% in fiscal 1995 and a reduction in selling general and administrative expenses of $282,000 in fiscal 1995 as compared to fiscal 1994. The Company experienced lower margins in fiscal 1994 as a result of the aforementioned cold storage facility contract that contributed $5,583,000 of revenues during fiscal 1994. The Company accepted this contract at a "cost plus a fixed fee". The fixed fee was well below the Company's usual profit margin, but management felt that the increase in volume coupled with the relatively low risk of a cost plus contract more than justified acceptance of this contract. Selling, general and administrative expenses, as a percentage of gross revenues, declined in fiscal 1995 to 12.4% from 12.8% in fiscal 1994. This was a result of management's decision to manage international sales from its corporate headquarters, and thereby eliminate overhead in other locations. Interest expense decreased by $31,000 from fiscal 1994 to fiscal 1995 because of reduced borrowings to finance receivables during fiscal 1995. Interest expense in connection with receivable financing amounted to $101,000 in fiscal 1994 as compared to $58,000 for fiscal 1995. The Company was able to lower its usage of receivable financing in fiscal 1995 because of the improvement in gross margins and the reduction in overhead as previously discussed. Liquidity And Capital Resources As of October 31, 1996, the Company had current assets of $7,993,000 and current liabilities of $9,968,000 which represents a negative working capital of $1,975,000. Working capital decreased $2,812,000 as compared to April 30, 1996. As of April 30, 1996, the Company had current assets of $5,944,000 and current liabilities of $5,107,000, which represents a positive working capital of $837,000 as compared with a working capital deficit of $1,405,000 as of April 30, 1995. The $2,812,000 decrease in working capital is primarily the result of recognizing the entire balance on the Note Payable to Supplier of $2,201,000 as a current payable. See "RISK FACTORS--Risk Factor No. 3--Outstanding Indebtedness" and "BUSINESS--Indebtedness To Major Supplier". The balance of the decrease in working capital is attributed to the loss incurred from operations for the six months ended October 31, 1996. -36- <PAGE> As of October 31, 1996 the Company's cash balance decreased $75,000 as compared to the balance at April 30, 1996. This decrease is primarily attributable to the Company's utilizing available cash to reduce notes payable and capital lease obligations by $287,000 and costs associated with the Company's initial public offering. The Company's net cash flow is materially affected by the timing of payments of accounts payable, other amounts owed, and collection of accounts receivable. The Company's cash flow from operations increased by $198,000 for fiscal 1996 as compared with fiscal 1995. The cash flow from operations for the six months ended October 31, 1996 as compared to October 31, 1995 improved $494,000 even though the Company incurred an increased loss from operations of $1,333,000 which is primarily attributable to incurring a $1,105,000 non-cash expense for Bridge financing costs. For the fiscal year ending April 30, 1997, the Company is planning to make capital expenditures described under "USE OF PROCEEDS", which assumes the successful completion of this Offering. The current maturities of long-term debt and capital lease obligations that are required to be paid during fiscal 1997 are approximately $552,000 in the aggregate. Management of the Company believes that for fiscal 1997, the Company's funding from this Offering, and its financing arrangement with its major supplier, will be adequate for the Company to meet its requirements for operations, debt service and necessary capital expenditures. See "RISK FACTORS--Risk Factor No. 3-- Outstanding Indebtedness". However, without the successful completion of this Offering, the Company does not anticipate being able to undertake the majority of the capital expenditures described under "USE OF PROCEEDS" in the near future. As indicated above and in the Company's financial statements, the Company incurred operating losses for the six months ended October 31, 1996, with additional operating losses of $804,000 for the two months ended December 31, 1996, and for each of the fiscal years ended April 30, 1994, 1993 and 1992, and there is no assurance that the operations of the Company will be profitable in the future. As a result of the Company's current fiscal year losses from May 1, 1996 through January 31, 1997 (approximately $2.5 million, including a non-recurring charge of $1.1 million), the Company's working capital position and ability to generate sufficient cash flows from operations to meet its operating and capital requirements has further deteriorated and these matters raise substantial doubt about the Company's ability to continue as a going concern without completion of this Offering or a substantial infusion of equity capital. The Company believes that it will be successful in removing the threat concerning its ability to continue as a going concern by adhering to closer and stricter scrutiny of its contract bids and utilizing the estimated minimum net proceeds of approximately $2.9 million from this Offering to achieve profitability through lower interest and bonding costs and expanded volume. Management believes that approximately $1.0 to $1.2 million of the proceeds from this Offering are necessary to remove the threat concerning the Company's ability to continue as a going concern and that if this Offering is completed, the minimum procees from this Offering will enable the Company to continue operating for the foreseeable future at its current level of operations. There is no assurance these results will occur even if this Offering is consummated. If this does not occur, the Company will pursue other sources of financing, but there is no assurance any other source of financing will be available. The Company is current in its obligations to all lenders and major suppliers except the Supplier described in "Risk Factor No. 3 -- Outstanding Indebtedness" and "Business -- Indebtedness To Major Suppliers". That Supplier has indicated that it has no intent of accelerating payment on any obligations as long as this Offering is completed. The Supplier has not indicated what it will do if this Offering is abandoned or otherwise terminated unsuccesfully. As a result of the losses incurred in November and December 1996, the audit report of the Company's independent auditors indicates that there is substantial doubt concerning the Company's ability to continue as a going concern without a substantial infusion of equity capital, such as that contemplated from this Offering. The implication of this to investors is that successful completion of this Offering (or an equity infusion from another source) is necessary for the Company to continue operations. See "RISK FACTORS -- Risk Factor No. 1 -- Substantial Doubt About The Company's Ability To Continue As A Going Concern Without Completion Of Public Offering". "BUSINESS -- Business Plan And Strategy", "FINANCIAL INFORMATION", and Note 19 to the Financial Statements. -37- <PAGE> As of October 31, 1996, the Company's backlog was $17.6 million as compared with $14.7 million as of October 31, 1995. The Company anticipates increased volume for fiscal 1997 and does not anticipate that its liquidity or capital resources will be significantly altered by its operating results for fiscal 1997. MANAGEMENT The Officers and Directors of the Company are as follows: Name Age Position - ---- --- -------- John T. Wilson 42 Chief Executive Officer, Chairman Of The Board and Director Danny R. Clemons 46 President/Mini-Warehouse Division and Director Ralph L. Farrar 49 President/Metal Buildings Division, Secretary and Director Jim W. Williams 42 Vice President/Finance, Chief Financial Officer, Assistant Secretary and Director Louis S. Carmisciano 55 Director John T. Wilson has served as Chief Executive Officer of the Company since May 1992 after having served as Vice President from May 1985 to May 1992. Mr. Wilson also has served as a Director of the Company since its formation in May 1985 and as Chairman Of The Board since November 1994. In addition to his other responsibilities as Chief Executive Officer, Mr. Wilson coordinates the Company's marketing, administrative and financial activities. Mr. Wilson has in excess of 22 years of experience working in the construction industry. Danny R. Clemons has served as President of the Mini-Warehouse Division of the Company since November 1994 after having served as President of the Company from December 1986 to November 1994. Mr. Clemons also has served as a Director of the Company since May 1985. Mr. Clemons has in excess of 25 years of experience working in the construction industry. Ralph L. Farrar has served as President of the Metal Buildings Division of the Company since November 1994 and Secretary and a Director of the Company since May 1985. Mr. Farrar also served as Treasurer of the Company from May 1985 to November 1994. Mr. Farrar has in excess of 27 years of experience working in the construction industry. Jim W. Williams has served as Vice President of Finance and Chief Financial Officer of the Company since January 1990, and as a Director since June 1996. From January 1989 to January 1990, Mr. Williams served as Controller of Care Shipping, Inc., which engaged in the business of marine terminal and stevedoring operations. From January 1981 to January 1989, Mr. Williams served as Treasurer and Controller of Shippers Stevedoring, Inc., which engaged in the business of marine terminal and stevedoring operations. Mr. Williams received a B.A. Degree in Business Administration from Hardin-Simmons University in Abilene, Texas in 1977. Louis S. Carmisciano became a Director of the Company on January 14, 1997. Since 1984, Mr. Carmisciano has served as the President of LSC Associates, Inc., a firm providing consulting services to the construction and real estate industries. Mr. Carmisciano, as President of LSC Associates, Inc., has provided consulting services to the Company since July 1996. Prior to 1984, Mr. Carmisciano was the senior vice president of Dimeo Enterprises, Inc., a real -38- <PAGE> estate developer and contractor, and also served as an audit manager for Touche Ross & Co. In addition, since 1978, Mr. Carmisciano has served as a professional lecturer at the Hartford Graduate Center in Hartford, Connecticut and has lectured for the American Subcontractors Association, the Rhode Island Bankers Association, and the Massachusetts and Rhode Island Societies Of Certified Public Accountants. Mr. Carmisciano is a member of the Association of General Contractors, the American Subcontractors Association, the Construction Financial Management Association, the American Institute of Certified Public Accountants, the Massachusetts Society of Certified Public Accountants, and the Rhode Island Society of Certified Public Accountants. Mr. Carmisciano is a certified public accountant licensed in the Commonwealth of Massachusetts and the State of Illinois and received a B.S. Degree in Business Administration from Northeastern University in Boston, Massachusetts in 1963. Another key employee of the Company is as follows: Jimmy M. Rogers, 44, has been in charge of the Company's cold storage services since September 1990 and has served as President of the Thermal Systems Division of the Company since November 1994. From 1982 to September 1990, Mr. Rogers served as Vice President of Cold Storage Construction Company, which engaged in freezer and refrigerated unit installation. Mr. Rogers has in excess of 12 years of experience working in the freezer and refrigerated installation industry. Mr. Rogers received a B.S. Degree in Business Agriculture from Hardin-Simmons University in Abilene, Texas in 1980. There are no family relationships between any of the above officers, directors and key employees of the Company. If the Offering is successfully completed, for a period of five years commencing after the closing of the Offering, the Representative will have the right to designate to the Company's Board Of Directors one person to serve as an advisor to or member of the Company's Board of Directors. The Company has not been notified of whether the Representative intends to designate an advisor to or a member of the Company's Board of Directors. -39- <PAGE> EXECUTIVE COMPENSATION The following table sets forth in summary form the compensation received during each of the Company's last three completed fiscal years by certain officers of the Company. No other employee of the Company, except as set forth below, received total salary and bonus exceeding $100,000 during any of the last three fiscal years. Summary Of Annual Compensation Table ------------------------------------ Fiscal Year All Other Name and Principal Ended Compensation Position April 30, Salary ($) (1) ($) (2) ================================================================================ John T. Wilson 1996 72,000 6,811 Chief Executive Officer, 1995 72,000 6,120 Chairman Of The 1994 107,406 13,648 Board and a director Danny R. Clemons 1996 72,000 8,329 President/Mini- 1995 72,000 6,661 Warehouse Division 1994 107,406 13,678 and a director Ralph L. Farrar 1996 72,000 8,286 President/Metal 1995 72,000 7,533 Buildings Division 1994 107,406 11,718 and a director - ------------------------- (1) The dollar value of base salary (cash and non-cash) received. Each of the named individuals currently is receiving a salary of $85,000 per year. For a description of employment agreements with the named individuals, see below, "Employment Contracts And Termination Of Employment And Change-In-Control Agreements". (2) All other compensation received that the Company could not properly report in any other column of the Summary Compensation Table, consisting of annual Company contributions or other allocations to the Company's 401(k) plan, amounts paid for group medical insurance premiums, amounts paid on behalf of the named person for life insurance premiums, and "S" Corporation dividends. The amounts shown consist of the following: 1996: John T. Wilson - $1,184 for 401(k) contributions, $4,292 for group medical insurance premiums, and $1,335 for life insurance premiums; Danny R. Clemons - $1,579 for 401(k) plan contributions, $4,292 for group medical insurance premiums, and $2,458 for life insurance premiums; and Ralph L. Farrar - $1,184 for 401(k) plan contributions, $4,490 for group medical insurance premiums, and $2,612 for life insurance premiums; 1995: John T. Wilson - $1,016 in 401(k) contributions, $4,107 for group medical insurance premiums, and $997 for life insurance premiums; Danny R. Clemons - $897 for 401(k) plan contributions, $4,107 for group medical insurance premiums, and $1,657 -40- <PAGE> for life insurance premiums; and Ralph L. Farrar - $1,016 for 401(k) plan contributions, $4,681 for group medical insurance premiums, and $1,836 for life insurance premiums; and 1994: John T. Wilson - $965 for 401(k) plan contributions, $5,183 for group medical insurance premiums, and $7,500 for "S" Corporation dividends; Danny R. Clemons - $995 for 401(k) plan contributions, $5,183 for group medical insurance premiums, and $7,500 for "S" Corporation dividends; and Ralph L. Farrar - $966 for 401(k) plan contributions, $3,252 for group medical insurance premiums, and $7,500 for "S" Corporation dividends. Compensation Of Directors - ------------------------- Louis S. Carmisciano, a Director of the Company who is neither an officer nor an employee of the Company, will be paid $150 per hour for his services as a Director of the Company. Mr. Carmisciano also is the President of LSC Associates, Inc. ("LSC"), which provides consulting services to the Company. This arrangement is described under "TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES--Consulting Agreement". Jim W. Williams, The Vice President Of Finance, Chief Financial Officer and a Director of the Company, received options to purchase up to 10,000 shares of the Company's Common Stock in January 1997. For a description of the terms of these options, see below "--Option Grants". he Company has no other arrangement pursuant to which the other directors of the Company are compensated for any services provided as a director or for committee participation or special assignments. Employment Contracts And Termination Of Employment And Change-In-Control Arrangements - -------------------------------------------------------------------------------- The Company has entered into three-year employment agreements that began on January 1, 1995 with each of the following executive officers: John T. Wilson, Danny R. Clemons, Ralph L. Farrar, and Jim W. Williams. Each of the agreements is terminable at will and automatically renews for consecutive one-year terms unless a party provides written notice of its desire not to renew. The annual salary during the term of the agreements are the following amounts, although the Board Of Directors of the Company may increase the salary in its sole discretion: John T. Wilson, Danny R. Clemons, Ralph L. Farrar, and Jim W. Williams, $85,000 each. The Company also will pay all the premiums on two $500,000 term life insurance policies covering each of the above executive officers, of which one policy covering each of them is a key-man policy for which the Company is the beneficiary and the other policy is for the benefit of a beneficiary designated by the respective executive officer. The Company also has entered into a ten-year employment agreement with Jimmy M. Rogers that became effective on May 1, 1993. This agreement is terminable at will and automatically renews for consecutive one-year terms unless either party provides written notice of its desire not to renew. The annual salary during the term of the agreement is presently $66,000 although the Board Of Directors of the Company may increase this amount in its sole discretion. The agreement also provides for Mr. Rogers to receive the following: (i) an incentive bonus equal to 18 percent of the annual net operating profit of the thermal systems division of the Company; (ii) bonus payments of $17,000 on November 16, 1993 and of $13,600 on each December 1 from and including 1994 through 1998, provided that he still is employed by the Company on those respective dates; and (iii) payment by the Company of the premiums on a $1 million key-man life insurance policy covering Mr. Rogers, of which 50 percent of the proceeds is distributable to the Company and 50 percent to a beneficiary designated by Mr. Rogers. The Company has no compensatory plan or arrangement that results or will result from the resignation, retirement, or any other termination of an executive officer's employment with the Company or from a change-in-control of the Company, unless the Company terminates the employment of an executive officer without cause before the full term of the employment agreement expires, in which case the Company is required to pay three months salary to that executive officer. -41- <PAGE> Compensation Committee Interlocks And Insider Participation. - ------------------------------------------------------------ The Company's Board Of Directors determines the compensation for the Company's executive officers. The Company has no compensation committee or other committee of the Board Of Directors that performs a similar function. Each of the Company's current directors except for Louis S. Carmisciano also is an executive officer of the Company. John T. Wilson, Danny R. Clemons, and Ralph F. Farrar, each of whom is an executive officer and employee of the Company, participated in deliberations of the Company's Board Of Directors concerning executive officer compensation during the fiscal year ended April 30, 1996. Jim W. Williams became a director of the Company in June 1996. Mr. Williams also is the Vice President/Finance and Chief Financial Officer of the Company. Option Grants - ------------- On January 14, 1997, the Company issued incentive stock options to purchase an aggregate of 172,000 shares of Common Stock to employees of the Company, including options to purchase 10,000 shares issued to each of Jim W. Williams, the Vice President Of Finance, Chief Financial Officer and a Director of the Company, and Jimmy M. Rogers, President of the Thermal Systems Division of the Company. These options were granted pursuant to the Company's 1994 Stock Option Plan and allow the recipients to purchase shares of the Common Stock at an exercise price of $5.00 per share. With respect to each recipient of options, one-fourth of their options become exercisable on each of January 14, 1998, 1999, 2000 and 2001, and all their options expire on January 14, 2002. -42- <PAGE> PRINCIPAL STOCKHOLDERS The following table summarizes certain information as of December 31, 1996 with respect to the beneficial ownership of the Company's Common Stock (i) by the Company's officers and directors, (ii) by stockholders known by the Company to own five percent or more of the Company's Common Stock, and (iii) by all officers and directors as a group. <TABLE> <CAPTION> Percent Of Percent Of Amount And Na- Percent Of Class After Class After Name And Address ture Of Beneficial Class Prior To Minimum Maximum Of Beneficial Owner Ownership Offering Offering (1) Offering (1) - ------------------- ----------------- -------------- ------------ ------------ <S> <C> <C> <C> <C> Danny R. Clemons(2) 707,319 24.4% 19.6% 19.1% 14603 Chrisman Houston, Texas 77039 Ralph L. Farrar(2) 707,319 24.4% 19.6% 19.1% 14603 Chrisman Houston, Texas 77039 John T. Wilson(2) 707,319 24.4% 19.6% 19.1% 14603 Chrisman Houston, Texas 77039 Jim W. Williams(2) 135,444 4.7% 3.8% 3.7% 14603 Chrisman Houston, Texas 77039 Louis S. Carmisciano 0 0% 0 0% P.O. Box 1114 Chicago, Illinois 60690-1114 All Officers And 2,257,401 77.8% 62.7% 61.0% Directors As A Group (Five Persons)(2) </TABLE> -43- <PAGE> - -------------------- (1) Assumes that all the shares of Common Stock offered pursuant to this Prospectus are sold, that none of the Warrants offered or previously outstanding are exercised, and that the respective beneficial owners listed in the table will not purchase any shares of Common Stock in this Offering. (2) All the shares owned by each of Messrs. Clemons, Farrar, Wilson and Williams are pledged as collateral for the Company's indebtedness to the Supplier as described under "BUSINESS--Indebtedness To Major Supplier". If there were a default in this indebtedness and the Supplier were to foreclose on the pledged shares, a change of control of the Company could result. See "BUSINESS--Indebtedness To Major Supplier". -44- <PAGE> TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES Conflicts Of Interest Policy. - ----------------------------- The Company has established a policy for considering transactions with directors, officers, and shareholders of the Company and their affiliates. Pursuant to this policy, the Board Of Directors of the Company will not approve any such related party transactions unless the Board Of Directors has determined that the terms of the transaction are no less favorable to the Company than those available from unaffiliated parties. Because this policy is not contained in the Company's Certificate Of Incorporation or Bylaws, this policy is subject to change at any time by the vote of the Board Of Directors. It currently is not contemplated that this policy will be changed. The Board has determined that the transactions described below were made on terms no less favorable to the Company than would have been available from unaffiliated parties. Issuances And Transfers Of Stock. - --------------------------------- The Company was incorporated in Texas on May 14, 1985. At that time, each of John T. Wilson, Danny R. Clemons, and Ralph L. Farrar paid $250, or $.01 per share, for 25,000 shares (an aggregate total of 75,000 shares) of stock of American International Construction, Inc., a Texas corporation ("AIC-Texas"). In May 1994, AIC Management, Inc. merged with and into the Company. As part of the merger, the shareholders of AIC Management, Inc. received an aggregate of 75,000 shares of the Company's common stock, which after its issuance constituted 50 percent of the Company's outstanding shares. The shareholders of AIC Management, Inc. at the time of the merger were John T. Wilson, Danny R. Clemons and Ralph L. Farrar. In determining that the values of the two companies were approximately equal, the Company and AIC Management, Inc. considered the net book value of the assets of each, an appraisal of the value of the land and a building owned by AIC Management, Inc., and their respective estimates of the fair market value of the land and building. In April 1992, each of John T. Wilson, Danny R. Clemons and Ralph L. Farrar transferred to Jim W. Williams 3,000 shares of the common stock of AIC-Texas owned by each of them respectively. The shares were given to Mr. Williams as an incentive bonus. Grants Of Stock Options. - ------------------------ On January 14, 1997, the Company granted options to purchase an aggregate of 175,000 shares of the Company's Common Stock to employees of the Company pursuant to the Company's 1994 Stock Option Plan. Included in these option grants were options to purchase 10,000 shares granted to each of Jim W. Williams and Jimmy M. Rogers. The exercise price of these options is $5 per share. None of these options are exercisable for one year after the date of grant. One fourth of the options granted become exercisable on each of January 14, 1998, 1999, 2000 and 2001, and all of these options expire on January 14, 2002. -45- <PAGE> Delaware Reincorporation And Capital Restructurings. - ---------------------------------------------------- In June 1994, the Company changed its state of incorporation and effected a 16-for-1 stock split by forming a wholly owned Delaware subsidiary into which the Company was merged. As a result of this transaction, the Company became a Delaware corporation with 2,400,000 shares of Common Stock outstanding. All references in this Prospectus to numbers of shares give effect to this stock split and the issuance of 75,000 shares to the shareholders of AIC Management. Employment Agreements. - ---------------------- The Company is a party to employment agreements with each of its four officers. These agreements are described under "EXECUTIVE COMPENSATION". Consulting Agreement. - --------------------- LSC Associates, Inc. ("LSC"), of which Louis S. Carmisciano is the President, has served as a consultant to the Company since July 1, 1996. Pursuant to the original agreement, which terminated on December 31, 1996, LSC received $5,000 per month plus expenses for consulting services provided to the Company during the six month period ended December 31, 1996. This agreement provided that the Company and LSC would evaluate the arrangement at December 31, 1996 and determine whether to enter into a new arrangement, which might include continuing to retain LSC as a consultant and electing Mr. Carmisciano as a Director. Effective January 1, 1997, the arrangement was modified to retain LSC as a consultant on an as needed basis for $150 per hour, with no minimum hour requirement. Mr. Carmisciano was elected a Director of the Company on January 14, 1997. Mr. Carmisciano will be paid at the same hourly rate for services provided to the Company as a Director. Interests In U.S. Storage, Inc. And U.S. Storage Management Services, Inc. - -------------------------------------------------------------------------- As of October 16, 1996, each of Danny Clemons, Leroy Farrar, and John T. Wilson transferred to the Company all of their interests in U.S. Storage, Inc. ("U.S. Storage") and U.S. Storage Management Services, Inc. ("Management Services"). U.S. Storage was formed for the purpose of owning mini-warehouse facilities, and Management Services was formed for the purpose of providing management services for mini-warehouse facilities. In exchange for these transfers, each of Messrs. Clemons, Farrar and Wilson received the right to receive eight and one-third percent of any cash distributions received by the Company from U.S. Storage or its successors. Messrs. Clemons, Farrar, and Wilson had acquired their respective interests in U.S. Storage consisting, for each of them, of 25 percent of the common stock of U.S. Storage, in February 1996 for $500 each. Messrs. Clemons, Farrar, and Wilson had acquired their respective interests in Management Services, consisting, for each of them, of 25 percent of the common stock of Management Services, in May 1996 for $250 each. On October 17, 1996, the Company exchanged all its interest in U.S. Storage for a 37.5 percent interest in U.S. Storage/Westheimer G.P.L.C. ("Westheimer") and it sold all its interest in Management Services to a former employee for $15,000 including $7,500 cash and release of the Company from $7,500 in commissions owed to the individual. Westheimer is involved in the ownership of mini-warehouse facilities. -46- <PAGE> As of October 23, 1996, Messrs. Clemons, Farrar and Wilson each transferred to Jim W. Williams, an officer and director of the Company, the right to receive one and two-thirds percent of any cash distributions received by the Company from U.S. Storage or its successors. As a result of these transfers, each of Messrs. Clemons, Farrar and Wilson has the right to receive six and two-thirds percent, and Mr. Williams has the right to receive five percent, of any cash distributions received by the Company from U.S. Storage or its successors. None of Messrs. Clemons, Farrar or Wilson ever has received any payment, distribution, or other economic benefit from either U.S. Storage or Management Services. In May 1996, prior to assignment of all the interests of Messrs. Clemons, Farrar and Wilson in U.S. Storage and Management Services to the Company, the Company entered into a contract with U.S. Storage/Westheimer, Ltd. for the Company to construct a mini-warehouse facility for approximately $1.36 million. U.S. Storage/Westheimer, Ltd. is a limited partnership in which Westheimer owns a 45 percent interest, which results in the Company's owning a 16.875 percent beneficial interest in U.S. Storage/Westheimer, Ltd. The Company believes that the terms of this contract were at least as favorable to the Company as the terms and conditions of all other similar contracts for construction of mini-warehouse facilities that the Company enters into with unrelated parties. As indicated above, none of Messrs. Clemons, Farrar or Wilson has ever received any payment, distribution or any other economic benefit from U.S. Storage or Management Services, and each of these three individuals has transferred all of his respective right, title, and interest in and to each of U.S. Storage and Management Services to the Company. -47- <PAGE> CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On August 5, 1994, Melton & Melton, L.L.P. ("Melton"), the Company's independent accountant at that date, informed the Company that it is not Melton's usual policy to issue audit opinions for inclusion in registration statements filed with the Securities And Exchange Commission, and therefore, Melton would not consent to the inclusion of its audit opinions in the Company's registration statement. As a result, the Company engaged HEIN + ASSOCIATES LLP as the Company's independent accountant, which decision was approved by the Board Of Directors of the Company. Melton's prior reports concerning the Company's financial statements did not contain adverse opinions or disclaimers of opinion, and they were not qualified as to uncertainty, audit scope or accounting principles. There have been no disagreements with Melton on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. -48- <PAGE> DESCRIPTION OF SECURITIES The Company's authorized capital consists of 20 million shares of $.001 par value Common Stock and one million shares of $1.00 par value Preferred Stock. The Company's issued and outstanding capital as of December 31, 1996 consisted of 2,900,100 shares of $.001 par value Common Stock which were held by 44 stockholders and 3,000,000 Warrants held by 38 holders. The Company is offering a minimum of 700,000 and a maximum of 800,000 shares of Common Stock and a minimum of 700,000 and a maximum of 800,000 Warrants pursuant to this Prospectus. Common Stock Each share of the Common Stock is entitled to share equally with each other share of Common Stock in dividends from sources legally available therefore, subject to the rights of the Preferred Stock, when, as, and if declared by the Board of Directors and, upon liquidation or dissolution of the Company, whether voluntary or involuntary, to share equally in the assets of the Company that are available for distribution to the holders of the Common Stock. Each holder of Common Stock of the Company is entitled to one vote per share for all purposes, except that in the election of directors, each holder shall have the right to cast one vote per share for each nominee for director. Cumulative voting shall not be allowed in the election of directors or for any other purpose, and the holders of Common Stock have no preemptive rights, redemption rights or rights of conversion with respect to the Common Stock. All outstanding shares of Common Stock and all shares to be sold and issued upon exercise of the Warrants will be fully paid and nonassessable by the Company. The Board Of Directors is authorized to issue additional shares of Common Stock within the limits authorized by the Company's Certificate Of Incorporation and without stockholder action. The Company has not paid any dividends during its last two fiscal years or in any subsequent periods. The Company has reserved a sufficient number of shares of Common Stock for issuance in the event that all the Warrants are exercised. In addition, the Company has reserved a sufficient number of shares of Common Stock for issuance upon the exercise of options under the Company's 1994 Stock Option Plan. The issuance of additional shares of Common Stock and other securities of the Company is subject to the Representative's right of approval for two years after the effective date of the Offering. Common Stock Purchase Warrants General. The redeemable Common Stock Purchase Warrants (the "Warrants") offered by the Company are to be in registered form. They are tradeable separately from the Common Stock. Each Warrant is exercisable at $5.00 per Warrant during the period commencing on the date of this Prospectus and ending five years from the date of this Prospectus. Although there currently is no plan or other intention to do so, the Board Of Directors of the Company, in its sole discretion, may extend the exercise period of the Warrants and/or reduce the exercise price of the Warrants. It is anticipated that the Board would make such a modification only if it deemed it to be in the Company's best interests. Possible circumstances that may lead to modification of the terms of the Warrants, of which there is no assurance, would include circumstances in which -49- <PAGE> the market price of the Company's Common Stock is less than the exercise price of the Warrants and the Board would reduce the exercise price of the Warrants in order to encourage their being exercised. This would be based on the Board's belief that it would be in the Company's best interests to receive additional capital funds from that source. The exercise price of the Warrants was arbitrarily established and there is no assurance that the price of the Common Stock of the Company will ever rise to a level where exercise of the Warrants would be of any economic value to a holder of the Warrants. Current Registration Statement Required For Exercise. In order for a holder to exercise that holder's Warrants, there must be a current registration statement on file with the Securities and Exchange Commission and various state securities commissions to continue registration of the issuance of the shares of Common Stock underlying the Warrants. The Company intends to maintain a current registration statement during the period that the Warrants are exercisable unless the market price of the Common Stock underlying the Warrants would create no economic incentive for exercise of the Warrants. If those circumstances were to exist during the entire exercise period of the Warrants, the Warrants could expire without the holders having had an opportunity to exercise their Warrants. The maintenance of a currently effective registration statement could result in substantial expense to the Company, and there is no assurance that the Company will be able to maintain a current registration statement covering the shares of Common Stock issuable upon exercise of the Warrants. Although there can be no assurance, the Company believes that it will be able to qualify the shares of Common Stock underlying the Warrants for sale in those states where the Units are to be offered. The Warrants may be deprived of any value if a current Prospectus covering the shares of Common Stock issuable upon exercise of the Warrants is not kept effective or if the underlying shares are not qualified in the states in which the Warrantholders reside. Exercise Of Warrants. The Warrants may be exercised upon the surrender of the Warrant certificate on or prior to the expiration of the exercise period, with the form of "Election To Purchase" on the reverse side of the certificate executed as indicated, and accompanied by payment of the full exercise price for the number of Warrants being exercised. No rights of a stockholder inure to a holder of Warrants until such time as a holder has exercised Warrants and has been issued shares of Common Stock. Redemption. The Warrants are redeemable by the Company at any time prior to their exercise or expiration upon 30 days prior written or published notice, provided however, that the closing bid quotation for the Common Stock for all 20 business days ending on the third day prior to the Company's giving notice of redemption has been at least 150 percent of the then effective exercise price of the Warrants. The redemption price for the Warrants will be $.01 per Warrant. Any Warrant holder that does not exercise prior to the date set forth in the Company's notice of redemption will forfeit the right to exercise the Warrants and purchase the shares of Common Stock underlying those Warrants. Any Warrants outstanding after the redemption date will be deprived of any value except the right to receive the redemption price of $.01 per Warrant. Tax Consequences Of Warrants. For federal income tax purposes, no gain or loss will be realized upon exercise of a Warrant. The holder's basis in the Common Stock received will be equal to the holder's basis in the Warrant -50- <PAGE> exercised, plus the amount of the exercise price. If the Warrant being exercised has been purchased by the holder in this Offering, the holder's basis in the Warrant will be determined based on the consideration paid for the Warrants. Any loss realized by a holder of a Warrant due to a failure to exercise a Warrant prior to the expiration of the exercise period will be treated for federal income tax purposes as a loss from the sale or exchange of property that has the same character as any shares of Common Stock acquired from the exercise of the Warrants. Warrant exercise price adjustments, or the omission of such adjustments, may under certain circumstances be deemed to be distributions that could be taxable as dividends for federal income tax purposes to holders of the Warrants or the holders of the Common Stock. The Internal Revenue Code provides that a corporation does not recognize gain or loss upon the issuance, lapse or repurchase of a warrant to acquire its own stock. Therefore, the Company will not recognize income upon the expiration of any unexercised Warrants. Preferred Stock The Company is authorized to issue up to 1,000,000 shares of $1.00 par value Preferred Stock. The Board Of Directors of the Company has the right to fix the rights, privileges and preferences of any class of Preferred Stock to be issued in the future out of authorized but unissued shares of Preferred Stock and can issue such shares after adopting and filing a Certificate Of Designations with the Secretary Of State of Delaware. Any class of Preferred Stock that may be authorized in the future may have rights, privileges, and preferences senior to the Common Stock. The Company currently does not have a plan to authorize any class of Preferred Stock. The foregoing description concerning capital stock of the Company does not purport to be complete. Reference is made to the Company's Certificate Of Incorporation, Bylaws, and Underwriting Agreement which are filed as exhibits to the Registration Statement of which this Prospectus is part, as well as to the applicable statutes of the State of Delaware for a more complete description of the rights and liabilities of stockholders. The issuance of additional shares of Preferred Stock and other securities of the Company is subject to the Representative's right of approval for one year after the effective date of the Offering. Registration Rights Concurrently with the closing of the Offering, there is being registered on behalf of the Selling Securities Holders an aggregate of 500,100 shares of Common Stock and 3,000,000 Warrants issued in connection with the $300,000 loan to the Company consummated in July 1996. The Selling Securities Holders have entered into a Lock-Up Agreement which, in general, provides that the Selling Securities Holders will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of the shares of Common Stock or Warrants of the Company issued to them in connection with the loan for a period of one year after the Effective Date without the prior written consent of the Underwriters. If the Underwriters do not consent to the sale of such securities concurrently with the Offering, the Selling Security Holders will be entitled to certain demand and "piggyback" registration rights with respect to -51- <PAGE> the registration of such shares under the Securities Act until ______, 1998. Generally, the Company is required to bear the expense of all such registrations, except that the Selling Securities Holders will be required to bear their pro rata share of the underwriting discounts and commissions, if any. Substantially similar demand and "piggyback rights" have also been granted to the Underwriters with respect to the Underwriters' Warrant and the securities underlying the Underwriters' Warrant. Delaware Law and Certain Charter Provisions The Company is a Delaware corporation and subject to Section 203 of the Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In general, Section 203 of the Delaware Law prevents an "interested stockholder" (defined generally as a person owning 15% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (as defined) with a Delaware corporation for three years following the date such person became an interested stockholder, subject to certain exceptions such as the approval of the Board of Directors and the holders of at least 66 2/3% of the outstanding shares of voting stock not owned by the interested stockholder. The existence of this provision would be expected to have the effect of discouraging takeover attempts including attempts that might result in a premium over the market price for the shares of Common Stock held by stockholders. Transfer Agent The Transfer Agent for the Common Stock and Warrants is American Securities Transfer & Trust, Incorporated. -52- <PAGE> UNDERWRITING The Company has entered into an Underwriting Agreement with I.A. Rabinowitz & Co. and Worthington Capital Group, Inc. (the "Underwriters"), with I.A. Rabinowitz & Co. as the representative (the "Representative") of the Underwriters , which Underwriting Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and which governs the terms and conditions of the sale of the Common Stock and Warrants offered hereby. Pursuant to the terms of the Underwriting Agreement, the Underwriters, as the Company's exclusive agents, have agreed to offer on a "best efforts, minimum/maximum basis" a minimum of 700,000 and a maximum of 800,000 shares of Common Stock at a price of $5.00 per share and a minimum of 700,000 and a maximum of 800,000 Warrants at a price of $.10 per Warrant, within a period of 30 days from the date of this Prospectus, subject to a 60-day extension, if necessary, as agreed by the Company and the Underwriters. Each Warrant entitles its holder to purchase one share of Common Stock at an exercise price of $ 5.00 per share. In the Offering, the aggregate number of shares of Common Stock sold will be equal to the aggregate number of Warrants sold. If at least 700,000 shares of Common Stock and 700,000 Warrants are not sold within the Offering period, all subscriptions received will be refunded to subscribers without deduction or interest. All subscriptions from the sale of the Common Stock and Warrants will be transmitted to the escrow agent, American Securities Transfer & Trust, Incorporated, by noon of the business day following receipt. Until such time as the funds have been released from the escrow and the share and Warrant certificates delivered to the purchasers thereof, such purchasers will be deemed subscribers and not security holders. The funds in escrow will be held for the benefit of those subscribers until released to the Company and will not be subject to creditors of the Company or used for the expenses of this Offering. The Company intends to have the Common Stock and Warrants quoted on the OTC Bulletin Board, an electronic quotation system maintained by the NASD, under the trading symbols "AICI" and "AICIW", respectively. There is no assurance that quotation on the OTC Bulletin Board will occur or that a trading market will develop for the Common Stock and/or Warrants. See "RISK FACTORS--Risk Factor No. 24. No Assurance Of Market For Common Stock Or Warrants". The public offering price of the shares of Common Stock and the exercise price of the Warrants were determined by negotiation between the Representative and the Company. The Warrant offering price and other terms were determined arbitrarily by negotiation between the Company and the Representative and do not necessarily bear any direct relationship to the Company's assets, earnings or other generally accepted criteria of value. Other factors considered in determining the offering and exercise price of the Warrants include the business in which the Company is engaged, the Company's financial condition, an assessment of the Company's management, the general condition of the securities markets and the demand for similar securities of comparable companies. -53- <PAGE> Subject to the sale of the Minimum Offering amount, the Underwriters will receive a commission equal to 10% of the gross proceeds from the sale of the Common Stock and Warrants sold or $357,000 in the Minimum Offering and $408,000 in the Maximum Offering. The Underwriters also will receive a non-accountable expense allowance in an amount equal to 3% of the gross proceeds of this Offering of which $25,000 has been paid to date. The Representative has advised the Company that the Underwriters propose to offer the shares and the Warrants to the public at the public offering price set forth on the Cover Page of this Prospectus for each separate security, and that the Underwriters may allow to certain dealers who are members of the NASD, and to certain foreign dealers not eligible for membership in the NASD, concessions of not in excess of $______ for each share of Common Stock and $ ______ for each Warrant. After commencement of this Offering, the concession and the re-allowance may be changed. No such modification shall change the amount of proceeds to be received by the Company. Pursuant to the Underwriting Agreement, the Company has agreed to sell to the Underwriters, at a nominal cost, Underwriters' Warrants to purchase up to a maximum of 80,000 shares of Common Stock and 80,000 Warrants, with the actual number equal to one share of Common Stock for each ten shares sold in this Offering and one Warrant for each ten Warrants sold in this Offering. The Underwriters' Warrants will be non-exercisable for one year after the date of this Prospectus. Thereafter, for a period of four years, the Underwriters' Warrants will be exercisable at $8.25 per share of Common Stock and $.165 per Warrant. These Warrants are exercisable at $8.25 per share during the four year period commencing one year after the date of this Prospectus. The Underwriters' Warrants are not transferable for a period of one year after the date of this Prospectus, except to officers and stockholders of the Underwriters and to members of the selling group and its officers and partners. The Company has also granted one demand and certain "piggy-back" registration rights to the holders of the Underwriters' Warrants. For the life of the Underwriters' Warrants, the holders thereof are given, at a nominal cost, the opportunity to profit from a rise in the market price of the Company's securities with a resulting dilution in the interest of other stockholders. Further, the holders may be expected to exercise the Underwriters' Warrants at a time when the Company would in all likelihood be able to obtain equity capital on terms more favorable than those provided in the Underwriters' Warrants. The Representative has informed the Company that is does not expect any sales of the Common Stock and Warrants offered hereby to be made to discretionary accounts. The Company may provide the Underwriters with the names of persons contacting the Company with an interest in purchasing Common Stock or Warrants in this Offering, and it is possible that the Company's officers, directors, and employees will refer subscribers to the Underwriters. Although the Company will not provide any names for the express purpose of closing the Offering, sales may be made to those persons for that purpose. The Underwriters may sell a portion of the Common Stock or Warrants offered hereby to such persons if they reside in a state in which the Common Stock or Warrants can be sold. The Underwriters are not obligated to sell any Common Stock or Warrants to such persons and will do so only to the extent that such sales would not be inconsistent with the public distribution of the shares. Neither the Company nor the Underwriters will directly or indirectly arrange for the financing of such purchases, and the proceeds of the Offering will not directly or indirectly be used for such purchases. Officers, directors and stockholders of the Company may purchase Common Stock or Warrants offered hereby. -54- <PAGE> For a period of five years after the closing of the Offering, the Representative has the right to designate one person to serve as an advisor to or member of the Company's Board of Directors. There is no restriction on whether the person designated is a director, officer, partner, employee, or affiliate of any of the Underwriters. The Representative has not yet informed the Company of whether it intends to designate an advisor or director. The Company will enter into on the date of this Prospectus a consulting agreement with the Underwriters pursuant to which the Underwriters will receive a consulting fee of $55,000, payable at the closing of the Offering, for services to be rendered by the Underwriters to the Company for three years commencing on the closing date of the Offering. Such services shall include but not be limited to advising the Company in connection with management and financial matters and possible acquisition opportunities. The Underwriting Agreement provides that the Company will not sell any shares of Common Stock, Preferred Stock, Warrants or options for a period of two years following the date of this Prospectus without the Underwriters' consent except that the Company may, without the Underwriters' consent, issue Common Stock, or options pursuant to the Company's 1994 Stock Option Plan. The Company also has agreed to engage the Representative as the warrant solicitation agent on behalf of the Company for the solicitation of the exercise of the Warrants commencing one year after the date of this Prospectus and continuing for four years thereafter. The Representative will be paid a warrant solicitation fee of five percent of the exercise price for each Warrant exercised during that period. Unless granted an exemption by the Commission from Rule 10b-6 under the Exchange Act, the Representative and any other soliciting broker-dealers will be prohibited from engaging in any market-making activities or solicited brokerage activities with regard to the Company's securities during the periods prescribed by exemption (xi) to Rule 10b-6 before the solicitation of the exercise of any Warrant until the later of the termination of such solicitation activity or the termination of any right the Representative and any other soliciting broker-dealer may have to receive a fee for the solicitation of the exercise of the Warrants. The Underwriting Agreement provides for reciprocal indemnification between the Company and the Underwriters against certain liabilities in connection with this Offering, including liabilities under the Securities Act. See "SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION". -55- <PAGE> Worthington Capital Group, Inc., formerly known as M.D. Walsh & Co., was licensed as a broker/dealer in July 1991 and has not participated in public offerings prior to this Offering. Worthington Capital Group, Inc. may participate in public offerings only if they are made on a best efforts basis. See "RISK FACTORS--Risk Factor No. 20. Lack Of Experience Of Worthington Capital Group, Inc.". The foregoing does not purport to be a complete summary of the terms and conditions of the Underwriting Agreement, copies of which are on file at the offices of the Representative, the Company and the Securities And Exchange Commission in Washington, D.C. See "ADDITIONAL INFORMATION". There are no material relationships between the Company and any of the Underwriters other than the relationships created by the Underwriting Agreement. Subscription Procedures Potential investors desiring to subscribe for Common Stock and/or Warrants in the Offering should place an order for the Common Stock and/or Warrants with one of the Underwriters or another dealer participating in the Offering. Subscribers will be required to make payment for the securities subscribed in the form of a check. All funds collected from subscribers will be placed in an escrow account entitled "American International Consolidated Inc. Escrow Account" at Union Bank & Trust, Denver, Colorado, for which American Securities Transfer & Trust, Incorporated shall serve as escrow agent. Customers of I.A. Rabinowitz & Co. should make their checks payable to "Hanifen Imhoff Clearing Corp.", and their checks will be sent directly to Hanifen Imhoff Clearing Corp., 1125 Seventeenth Street, Suite 1700, Denver, Colorado 80202, the clearing agent of I.A. Rabinowitz & Co., who will remit such proceeds to the escrow agent by noon of the next business day after receipt. All other potential investors, who are not customers of I.A. Rabinowitz & Co., should make their checks payable to "American International Consolidated Inc. Escrow Account" and those potential investors' checks will be transmitted by the participating broker-dealers directly to the escrow agent by noon of the next business day after receipt. The Underwriters have the right to reject any subscription, in whole or in part, for any reason, including because the subscriber is from a state in which the Offering may not be made or because the Maximum Offering amount has been exceeded, or to withdraw or cancel the Offering without notice. Subscriptions are irrevocable and potential investors may not withdraw their subscriptions or the funds paid with those subscriptions. If the Minimum Offering amount is not subscribed for, or if Offering is cancelled, within the offering period, the escrow agent will refund to subscribers the amounts paid by them, without interest or deduction, as promptly as possible after the termination of the offering period. Prior to the closing of the next business day following the receipt by the Company of notice from the escrow agent that the Minimum Offering amount has been received within the offering period, the funds in the escrow account will be delivered to the Company, less amounts payable to the Underwriters for commissions and the balance of the nonaccountable expense allowance, and certificates representing the Common Stock and Warrants will be delivered to the Underwriters at the offices of I.A. Rabinowitz & Co., 99 Wall Street, New York, New York 10005 or to Depository Trust Company as nominee for the Underwriters. The Underwriters will then credit to the account of their customers the number of shares of Common Stock and Warrants for which subscriptions were accepted by the Company. -56- <PAGE> SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION The Company has agreed to indemnify directors, officers, and other representatives of the Company for costs incurred by each of them in connection with any action, suit, or proceeding brought by reason of their position as a director, officer, or representative. This would include actions, suits, or proceedings with respect to liability under the 1933 Act. To be eligible for indemnification, the person being indemnified must have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. The Board Of Directors is empowered to make other indemnification as authorized by the Company's Certificate Of Incorporation, Bylaws, or corporate resolutions so long as the indemnification is consistent with the General Corporation Law Of Delaware. Under the Company's Bylaws, the Company is required to indemnify its directors to the full extent permitted by the General Corporation Law Of Delaware, the common law, and any other statutory provisions. These provisions also may include indemnification for liabilities arising under the 1933 Act. In the Underwriting Agreement, the Company and the Underwriters have agreed to indemnify each other against civil liabilities, including liabilities under the 1933 Act. See "UNDERWRITING". Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities And Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. LEGAL MATTERS Bearman Talesnick & Clowdus Professional Corporation, Denver, Colorado, has acted as counsel for the Company in connection with this offering. Certain legal matters will be passed upon for the Underwriter by Schneck Weltman Hashmall & Mischel LLP, 1285 Avenue of the Americas, New York, New York. EXPERTS The audited financial statements of the Company appearing in this Prospectus have been examined by HEIN + ASSOCIATES LLP, independent certified public accountants, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report and upon the authority of said firm as experts in accounting and auditing. -57- <PAGE> CONCURRENT OFFERING The Registration Statement of which this Prospectus is a part also covers 500,100 shares of Common Stock and 3,000,000 warrants offered by the Selling Securities Holders made pursuant to the Selling Securities Holders Prospectus. ADDITIONAL INFORMATION The Company has filed a Registration Statement under the Securities Act Of 1933 with respect to the securities offered hereby with the United States Securities And Exchange Commission. This Prospectus does not contain all of the information contained in the Registration Statement. For further information regarding both the Company and the securities offered hereby, reference is made to the Registration Statement, including all exhibits and schedules therein, filed at the Commission's Washington, D.C. office. Copies of the Registration Statement and exhibits are on file with the Commission and may be obtained, upon payment of the fee prescribed by the Commission, or may be examined free of charge at the offices of the Commission, Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Worldwide Web site at http:\\www.sec.gov that contains reports, proxies, and information statements regarding registrants that file electronically with the Commission. -58- <PAGE> INDEX TO FINANCIAL STATEMENTS Page ---- Independent Auditor's Report................................................ F-2 Financial Statements: Consolidated Balance Sheets as of April 30, 1995 and 1996 and October 31, 1996 (unaudited)...................................... F-3 Consolidated Statements of Operations for each of the three years ended April 30, 1994, 1995 and 1996 and for each of the six months ended October 31, 1995 and 1996 (unaudited)............ F-4 Consolidated Statements of Stockholders' Equity (Deficit) for each of the three years in the period ended April 30, 1996 and for the six months ended October 31, 1996 (unaudited)................. F-5 Consolidated Statements of Cash Flows for each of the three years ended April 30, 1994, 1995 and 1996 and for each of the six months ended October 31, 1995 and 1996 (unaudited)............ F-6 Notes to Consolidated Financial Statements............................... F-7 Independent Auditor's Report Consolidated Financial Statement Schedule... S-1 Schedule II - Consolidated Valuation and Qualifying Accounts............. S-2 F-1 <PAGE> INDEPENDENT AUDITOR'S REPORT To the Stockholders American International Consolidated, Inc. Houston, Texas We have audited the accompanying consolidated balance sheets of American International Consolidated, Inc. and Subsidiaries as of April 30, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended April 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American International Consolidated, Inc. and Subsidiaries as of April 30, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1996, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As more fully discussed in Note 19 to the consolidated financial statements, the Company has incurred a net loss of approximately $2,500,000 for the eight month period ended December 31, 1996, which includes a non-recurring charge of $1,105,000 related to the Company's private placement of securities in July, 1996. As a result of this loss, the Company's working capital position and ability to generate sufficient cash flows from operations to meet its operating and capital requirements, has further deteriorated. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 19. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ HEIN + ASSOCIATES, LLP HEIN + ASSOCIATES, LLP Houston, Texas July 1, 1996, except as to Note 19, which is dated March 6, 1997 F-2 <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Consolidated Balance Sheets April 30, October 31, 1995 1996 1996 ----------- ------------- ------------ (unaudited) ASSETS <S> <C> <C> <C> Current assets: Cash $ 628,979 $ 265,949 $ 190,683 Accounts receivable: Contracts, less allowance for doubtful accounts 2,677,558 4,874,421 5,966,316 Employee 11,815 26,543 20,410 Costs and estimated earnings in excess of billings on uncompleted contracts 709,635 645,420 1,648,751 Other current assets 134,788 131,725 167,311 ----------- ------------- ------------- Total current assets 4,162,775 5,944,058 7,993,471 ----------- ------------- ------------- Property and equipment, net 1,207,700 1,185,841 1,228,506 Other assets 116,616 216,184 517,192 ----------- ------------- ------------- Total assets $ 5,487,091 $ 7,346,083 $ 9,739,169 =========== ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Note payable to financial institutions $ 408,889 $ - $ - Notes payable to stockholders, net of discount - - 99,999 Current portion of long-term debt and capital lease obligation 469,635 552,264 2,374,233 Accounts payable 3,715,390 3,826,207 6,331,847 Accrued payroll and related expenses 158,558 108,970 37,887 Billings in excess of costs and estimated earnings on uncompleted contracts 487,814 261,319 635,563 Other current liabilities 328,000 358,524 488,878 ----------- ------------- ------------- Total current liabilities 5,568,286 5,107,284 9,968,407 ----------- ------------- ------------- Long-term debt, net of current portion 409,482 2,400,005 319,483 Capital lease obligation, net of current portion 44,386 22,287 49,851 Other liabilities 37,000 37,000 37,000 ----------- ------------- ------------- Total liabilities 6,059,154 7,566,576 10,374,741 Contingencies (Note 9) Stockholders' equity (deficit): Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued - - - Common stock, $.001 par value; 20,000,000 shares authorized; 2,400,000 shares issued and outstanding 2,400 2,400 2,900 at April 30, 1995 and 1996; and 2,900,100 issued and outstanding at October 31, 1996 Additional paid-in capital 145,755 145,755 1,395,505 Accumulated deficit (720,218) (368,648) (2,033,977) ----------- ------------- ------------- Total stockholders' equity (deficit) (572,063) (220,493) (635,572) ----------- ------------- ------------- Total liabilities and stockholders' equity (deficit) $ 5,487,091 $ 7,346,083 $ 9,739,169 =========== ============= ============= See accompanying notes to these consolidated financial statements. F-3 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Consolidated Statements of Operations Year Ended April 30, Six Months Ended October 31, -------------------------------------------- ----------------------------- 1994 1995 1996 1995 1996 ------------ ------------ ------------ ------------ ------------- (unaudited) <S> <C> <C> <C> <C> <C> Contract revenue $ 25,844,725 $ 24,317,051 $ 31,184,828 $ 15,580,900 $ 18,088,507 Contract cost 22,565,928 20,812,194 27,204,243 13,958,876 16,243,640 ------------ ------------ ------------ ------------ ------------ Gross profit 3,278,797 3,504,857 3,980,585 1,622,024 1,844,867 Selling, general and administrative 3,303,466 3,020,997 3,359,653 1,838,008 2,060,106 Provision for doubtful accounts 156,016 47,919 61,504 35,027 253,792 Other income (expense): Interest and other financing costs (219,155) (187,908) (184,277) (93,245) (159,475) Writeoff of capitalized costs in connection with delayed offering -- (105,743) -- -- -- Private placement financing costs -- -- -- -- (1,105,249) Interest income and other, net (20,618) 44,372 11,419 12,238 68,426 ------------ ------------ ------------ ------------ ------------ Income (loss) before federal income taxes (420,458) 186,662 386,570 (332,018) (1,665,329) Federal income tax (expense) benefit -- -- (35,000) -- -- ------------ ------------ ------------ ------------ ------------ Net income (loss) $ (420,458) $ 186,662 $ 351,570 $ (332,018) $ (1,665,329) ============ ============ ============ ============ ============ Net income (loss) per share $ (.14) $ .06 $ .12 $ (.11) $ (.57) ============ ============ ============ ============ ============ Weighted average common shares outstanding 2,910,000 2,910,000 2,910,000 2,910,000 2,910,000 ============ ============ ============ ============ ============ See accompanying notes to these consolidated financial statements. F-4 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) Common Stock Additional ------------------------- Paid-In Accumulated Shares Amount Capital Deficit Total --------- ------------- ------------ -------------- ------------- <S> <C> <C> <C> <C> <C> Balances, May 1, 1993 2,400,000 $ 2,400 $ 15,621 $ (348,048) $ (330,027) Net loss - - - (420,458) (420,458) 142,599 shares of common stock transferred by the major stock- holders at estimated fair market value - - 14,260 - 14,260 Distributions to AIC Management, Inc. stockholders - - - (22,500) (22,500) Conversion of AIC Management, Inc. from a non-taxable to taxable entity - - 115,874 (115,874) - ------------- ------------- ------------ ------------- ------------- Balances, April 30, 1994 2,400,000 2,400 145,755 (906,880) (758,725) Net income - - - 186,662 186,662 ------------- ------------- ------------ ------------- ------------- Balances, April 30, 1995 2,400,000 2,400 145,755 (720,218) (572,063) Net income - - - 351,570 351,570 ------------- ------------- ------------ ------------- ------------- Balances, April 30, 1996 2,400,000 2,400 145,755 (368,648) (220,493) Common stock issued in connection with private placement financing (unaudited) 500,100 500 1,249,750 - 1,250,250 Net loss (unaudited) - - - (1,665,329) (1,665,329) ------------- ------------- ------------ ------------- ------------- Balances, October 31, 1996 (unaudited) 2,900,100 $ 2,900 $ 1,395,505 $ (2,033,977) $ (635,572) ============= ============= ============ ============= ============= See accompanying notes to these consolidated financial statements. F-5 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended April 30, Six Months Ended October 31, ----------------------------------------------- ----------------------------- 1994 1995 1996 1995 1996 ------------ ----------- ------------ ----------- ----------- (unaudited) <S> <C> <C> <C> <C> <C> Cash flows from operating activities: Net income (loss) $ (420,458) $ 186,662 $ 351,570 $ (332,018) $ (1,665,329) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Fair value of common stock issued in connection with private placement financing - - - - 1,050,249 Depreciation and amortization 137,492 141,176 170,123 92,591 82,598 (Increase) decrease in: Receivables, net (200,705) (12,353) (2,211,591) (861,979) (1,085,762) Costs and estimated earnings in excess of billings on uncompleted contracts (1,072,648) 673,380 64,215 (281,005) (1,003,331) Other current assets 26,262 (96,016) 3,063 29,476 (41,586) Increase (decrease) in: Accounts payable 2,272,397 (415,777) 2,510,817 704,193 2,505,640 Billings in excess of costs and estimated earnings 88,759 98,668 (226,495) 212,870 374,244 Other current liabilities 240,665 (74,152) (19,064) 226,305 65,660 Other, net 165,096 (55,788) 1,130 (71,060) ( 69,300) ------------ ----------- ------------ ----------- ------------ Net cash provided by (used in) operating activities 1,236,860 445,800 643,768 (280,627) 213,083 Cash flows from investing activities: Capital expenditures (13,842) (169,485) (148,264) (117,241) (68,931) Proceeds from sale of investments - 19,050 - - - ------------ ----------- ------------ ----------- ------------ Net cash used in investing activities (13,842) (150,435) (148,264) (117,241) (68,931) Cash flows from financing activities: Net borrowings (payments) under receivables factoring agreements (460,808) 177,239 (408,889) 28,515 - Proceeds from notes payable to stockholders - - - - 300,000 Issuance of long-term debt - 173,585 - - - Principal payments on long-term debt, capital leases and other notes payable (342,796) (439,303) (348,947) (190,854) (287,321) Other - (60,325) (98,438) (53,648) (232,097) Distributions to stockholders (22,500) - - - - ------------ ----------- ------------ ----------- ------------ Net cash used in financing activities (826,104) (148,804) (856,274) (215,987) (219,418) ------------ ----------- ------------ ----------- ------------ Net increase (decrease) in cash 396,914 146,561 (360,770) (613,855) (75,266) Cash, beginning of period 85,504 482,418 628,979 628,979 265,949 ------------ ----------- ------------ ----------- ------------ Cash, end of period $ 482,418 $ 628,979 $ 268,209 $ 15,124 $ 190,683 ============ ========== ============ =========== ============ - Continued - See accompanying notes to these consolidated financial statements. F-6 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Year Ended April 30, Six Months Ended October 31, ----------------------------------------------- ----------------------------- 1994 1995 1996 1995 1996 ------------ ----------- ------------ ----------- ----------- (unaudited) <S> <C> <C> <C> <C> <C> Supplemental disclosures: Interest paid $ 203,629 $ 197,661 $ 184,277 $ 107,800 $ 155,760 Equipment and vehicles acquired in exchange for long-term debt $ 28,182 $ - $ - $ - $ - Advances to stockholders converted to compensation $ 120,500 $ - $ - $ - $ - Land acquired in exchange for long- term debt $ 49,430 $ - $ - $ - $ - Trade payable converted to long-term debt $ - $ - $ 2,400,000 $ - $ - Equipment acquired under capital leases $ 3,845 $ 63,361 $ - $ - $ 56,320 ============ =========== ============ =========== ============ See accompanying notes to these consolidated financial statements. F-7 </TABLE> <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------------ Organization: The accompanying consolidated financial statements include the accounts of American International Consolidated, Inc. (AIC), a Delaware corporation, and its wholly-owned subsidiaries: C.H.O.A. Construction Company and L. Campbell Construction, Inc., which is currently inactive. Effective July 26, 1996, the Company changed its name from American International Construction Inc. to American International Consolidated, Inc. Effective April 30, 1994, the Company acquired all of the outstanding shares of AIC Management, Inc., a corporation wholly owned by the stockholders of the Company, for $1,015,000, consisting of 75,000 shares of the Company's common stock, with an assigned value of $44,000, and liabilities assumed totalling $971,000. This acquisition, which was accounted for under the purchase method of accounting, gave rise to no goodwill. The results of operations of AIC Management, Inc. are included with those of the Company, begining on May 1, 1994. In June 1994, American International Construction , Inc., a Texas corporation, formed AIC, a Delaware corporation, as a wholly-owned subsidiary. Subsequent to this, the Texas corporation was merged into the Delaware corporation in a reverse tax-free exchange. All significant intercompany balances and transactions have been eliminated in consolidation. The Company is primarily engaged in the design and erection of metal buildings for use as self-storage, commercial and cold storage facilities and fabrication of metal building components. The Company also participates in major construction projects as a general contractor. Revenue and Cost Recognition: Profits and losses on construction and fabrication contracts are recorded on the percentage-of-completion method of accounting, measured by the percentage of contract costs incurred to date to estimated total contract costs for each contract. Contract costs include raw materials, direct labor, amounts paid to subcontractors and an allocation of overhead expenses. General and administrative costs are charged to expense as incurred. Anticipated losses on uncompleted construction contracts are charged to operations as soon as such losses can be estimated. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The asset, "costs and estimated earnings in excess of billings on uncompleted contracts", represents revenues recognized in excess of amounts billed. The liability, "billings in excess of costs and estimated earnings on uncompleted contracts", represents billings in excess of revenues recognized. Cash: Cash includes all highly liquid investments with original maturities of less than three months. Property and Equipment: Property and equipment is carried at cost. Property and equipment acquired through capital leases is stated at the present value of the future minimum lease payments at the inception of the lease. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Property and equipment held under capital leases is amortized on the straight-line method over the lesser of the asset's estimated useful life or the term of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. The cost of maintenance and repairs are expensed as incurred; however, significant refurbishments or improvements are capitalized. Pro forma results of operations for the year ended April 30, 1994, as if the acquisition of AIC Management, Inc. had occurred on May 1, 1993, have not been presented because the pro forma results of operations would not materially differ from the company's actual results for that year. F-8 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) ------------------------------------------------ Federal Income Taxes: AIC files a consolidated federal income tax return, which includes the results of its operations and those of its wholly-owned subsidiaries. The Company accounts for income taxes in conformity with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Income tax expense or benefit represents the current tax payable or refundable for the period plus or minus the tax effect of the net change in the deferred tax assets and liabilities. Prior to its acquisition in fiscal 1994, AIC Management, Inc. was a subchapter S corporation, as provided under the Internal Revenue Code. Accordingly, the taxable income or loss for this entity was reported in the stockholders' individual tax returns. Deferred Offering Costs: Direct costs incurred in connection with the Company's proposed offering of common stock have been capitalized in the accompanying balance sheet. Upon closing of the proposed offering, these costs, which amount to $390,860 at October 31, 1996, will be applied as a reduction of the offering proceeds. Deferred Financing Costs: Direct costs incurred in the origination of debt are capitalized and netted with related debt and amortized over the related term of the debt on the interest method. Use of Estimates: The preparation of the Company's consolidated financial statements, in conformity with generally accepted accounting principles, requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. New Accounting Standards: The Financial Accounting Standards Board issued SFAS No. 121 entitled, Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which is effective for fiscal years beginning after December 15, 1995. SFAS No. 121 specifies certain events and circumstances which indicate the cost of an asset or assets may be impaired, the method by which the evaluation should be performed and the method by which writedowns, if any, of the asset or assets are to be determined and recognized. SFAS No. 121 had no material impact on the Company's financial condition or operating results upon implementation. The FASB also issued SFAS No. 123 entitled, Accounting for Stock Based Compensation, effective for fiscal years beginning after December 15, 1995. This statement allows companies to choose to adopt the statement's new rules for accounting for employee stock-based compensation plans. For those companies which choose not to adopt the new rules, the statement requires disclosures as to what earnings and earnings per share would have been if the new rules had been adopted. Management adopted the disclosure requirements of this statement in fiscal 1997. Net Income (Loss) Per Share and Common Stock Split: Net income (loss) per share is based upon the weighted average common shares outstanding. All share and per share amounts in the accompanying financial statements have been adjusted to reflect a 16 to 1 stock split which was authorized in June 1994. There were no common stock equivalents during the years presented. For purposes of determining the weighted average common shares outstanding, the 500,100 shares of common stock issued in connection with the bridge financing (see Note 18) were deemed to be outstanding for all periods presented. F-9 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) ------------------------------------------------ Unaudited Interim Information: The consolidated balance sheet as of October 31, 1996 and the consolidated statements of operations for the six-month periods ended October 31, 1995 and 1996 were taken from the Company's books and records without audit. However, in the opinion of management, such information includes all adjustments (consisting only of normal recurring accruals), which are necessary to properly reflect the financial position of the American International Consolidated, Inc. and Subsidiaries as of October 31, 1996 and the results of their operations and their cash flows for the six months ended October 31, 1995 and 1996. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year. NOTE 2 - HISTORICAL OPERATIONS --------------------- The Company experienced substantial losses prior to fiscal 1995 and has an accumulated deficit of $479,548 at April 30, 1996. The Company's ability to continue to fund its future operating and capital needs is dependent upon its ability to continue profitable operations and to generate adequate cash flows from operations. For the year ended April 30, 1996, the Company reported net income of $351,570, cash flow from operations of $644,898 and an increase in its working capital to $836,774 as a result of converting $2,400,000 of trade accounts payable to long-term debt. For the six-month period ended October 31, 1996, the Company incurred a net loss of $1,665,329, of which $1,050,249 represented noncash costs associated with the Company's bridge financing (see Note 13), positive cash flow from operations of $213,083. As of October 31, 1996, the Company had negative working capital of $1,975,886, primarily as a result of the classification of the entire balance of the note payable to supplier (see Note 8) in current liabilities. NOTE 3 - CONCENTRATION OF CREDIT RISK ---------------------------- The Company provides construction services to commercial companies primarily in the continental United States which are principally concentrated in Texas and Florida. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company assesses its credit risk and provides an allowance for doubtful accounts for any accounts which it deems doubtful of collection. The Company maintains deposits in banks which may exceed the amount of federal deposit insurance available. Management believes that the risk of any possible deposit loss is minimal. F-10 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 4 - PROPERTY AND EQUIPMENT ---------------------- Property and equipment consists of the following: <TABLE> <CAPTION> April 30, ------------------------------------- October 31, 1995 1996 1996 ---------------- --------------- -------------- <S> <C> <C> <C> Land $ 167,461 $ 167,461 $ 167,461 Buildings 825,172 834,944 834,944 Construction equipment 213,575 213,575 265,321 Office equipment 445,385 583,877 657,394 Automobiles 296,471 296,471 296,471 ---------------- --------------- ------------- 1,948,064 2,096,328 2,221,591 Less accumulated depreciation and amortization (740,364) (910,487) (993,084) ---------------- --------------- -------------- $ 1,207,700 $ 1,185,841 $ 1,228,507 ================ =============== ============== </TABLE> NOTE 5 - CONSTRUCTION ACCOUNTS --------------------- Costs and billings on uncompleted contracts consists of the following: <TABLE> <CAPTION> April 30, ------------------------------------ October 31, 1995 1996 1996 ---------------- --------------- -------------- <S> <C> <C> <C> Costs incurred on uncompleted contracts $ 5,171,015 $ 7,739,410 $ 12,355,987 Estimated earnings on uncompleted contracts 456,387 1,239,522 1,844,526 ---------------- --------------- -------------- 5,627,402 8,978,932 14,200,513 Less: Billings to date (5,405,581) (8,594,831) (13,187,325) ---------------- --------------- --------------- $ 221,821 $ 384,101 $ 1,013,188 ================ =============== ============== Included in the accompanying consolidated balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 709,635 $ 645,420 $ 1,648,751 Billings in excess of costs and estimated earnings on uncompleted contracts (487,814) (261,319) (635,563) ---------------- --------------- -------------- $ 221,821 $ 384,101 $ 1,013,188 ================ =============== ============== F-11 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 6 - CONTRACTS RECEIVABLE -------------------- Contracts receivable consisted of the following: April 30, ------------------------------------- October 31, 1995 1996 1996 ---------------- --------------- -------------- <S> <C> <C> <C> Completed contracts $ 1,138,660 $ 1,458,204 $ 1,729,194 Uncompleted contracts 1,350,298 3,158,551 3,771,615 Retainage 285,653 337,523 528,885 ---------------- --------------- -------------- 2,774,611 4,954,278 6,029,694 Less allowance for doubtful accounts (97,053) (79,857) (63,378) ---------------- --------------- -------------- $ 2,677,558 $ 4,874,421 $ 5,966,316 ================ =============== ============== </TABLE> NOTE 7 - NOTES PAYABLE TO FINANCIAL INSTITUTIONS --------------------------------------- The Company had a credit line with a financing company under which certain of the Company's contract receivables are purchased at a discount of 9%. The Company was refunded a portion of the discount provided the receivable was collected promptly. The agreement was guaranteed by the Company's four principal stockholders, all of whom are officers, and three of whom are directors of the Company. The outstanding balance under this credit agreement was $408,889 as of April 30, 1995. This credit line was terminated effective April 24, 1996. NOTE 8 - LONG-TERM DEBT ---------------- Long-term debt consists of the following: <TABLE> <CAPTION> April 30, -------------------------------- October 31, 1995 1996 1996 ------------- --------------- ------------ <S> <C> <C> <C> Note payable to supplier, due in weekly installments of $11,537, including interest at prime plus 1% (9.25% at October 31, 1996) through April 30, 2001. The note is collateralized by certain contract receivables, inventory, equipment, land, buildings and substantially all shares of the Company's common stock. The note is guaranteed by the four stockholders of the Company. If the Company completes the initial public offering described in Note 17, $1,200,000 of the remaining principal is immediately payable under the provisions of the loan agreement and the weekly payment will be reduced to provide for amortization at an even rate over the remaining term of the note. $ - $ 2,400,000 $ 2,201,352 - Continued - F-12 </TABLE> <PAGE> <TABLE> <CAPTION> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 8 - LONG-TERM DEBT (continued) ------------- April 30, -------------------------------- October 31, 1995 1996 1996 ------------- --------------- ------------ <S> <C> <C> <C> Note payable to supplier, due in weekly installments of $6,000, including interest at prime plus 1% (10% at April 30, 1995) through March 1, 1996. The note was repaid during fiscal 1996. 229,588 - - Note payable to a bank, due in monthly installments of $4,907, including interest at 8.75% (10% beginning March 15, 1995) through June 1998 when the remaining principal is due. The note is collateralized by the Company's land and buildings and guaranteed by three principal stockholders of the Company. 314,150 289,153 269,314 Note payable to a bank, due in monthly installments of $1,175, including interest at 8.75%, (10% beginning March 15, 1995) with a final payment of principal and interest due the earlier of 30 days after consummation of a proposed public offering or June 5, 1998. The note is collateralized by a second lien on the Company's land and buildings and guaranteed by three principal stockholders of the Company. 88,038 83,416 79,564 Real estate note payable, due in monthly installments of $1,018, including interest at 8.7%, through October 1998. The note is collateralized by a first lien on a portion of the Company's land. 36,021 26,556 19,737 Notes payable to the State of Florida for sales and use tax, due in monthly installments of $7,930, including interest at 12%, through June 1997. 168,584 135,042 92,716 Other equipment and automobile notes 21,979 1,228 - ----------- ----------- ----------- 858,360 2,935,395 2,662,683 Less: Current maturities (448,878) (535,390) (2,343,200) ----------- ----------- ----------- $ 409,482 $ 2,400,005 $ 319,483 =========== =========== =========== </TABLE> F-13 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) The note payable to supplier includes various financial covenants, among other things, which require the Company to limit its capital expenditures, without prior approval of the supplier, to $120,000 annually, submit audited financial statements within 90 days of year end, prohibit the payment of dividends, require the Company to maintain a ratio of current assets to current liabilities of at least .60 to 1 and maintain earnings before interest expense of at least 1.5% of gross revenues. The Company is in violation of certain of these debt covenants, all of which have been waived. Accordingly, the entire balance of this note was classified as current in the accompanying balance sheet. The Company was in violation of the covenant which requires the Company to limit its capital expenditures to $120,000 annually for the year ended April 30, 1996. The Company obtained a waiver of such violation from the supplier for such year. The distributions to AIC Management, Inc. in fiscal year 1994 preceded the merger of the Company and AIC Management, Inc. and therefore were not in violation of the loan covenants. The Company also had trade payables due this supplier of $1,758,352; $1,065,825 and $1,111,731 at April 30, 1995 and 1996 and October 31, 1996, respectively. Scheduled maturities of long-term debt are as follows: Year Ending October 31, ----------------------- 1997 $ 550,310 1998 507,760 1999 765,467 2000 553,140 2001 286,006 -------------- $ 2,662,683 ============== NOTE 9 - CONTINGENCIES -------------- The owner of one of the Company's construction projects has disputed some of the costs charged to a job which was completed in the fourth quarter of fiscal 1996. The Company settled this dispute during November 1996 for $125,000, resulting in a reduction in amounts due from this owner by $200,000 during the second quarter of fiscal 1997. Additionally, the Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial condition, liquidity or results of operations. NOTE 10 - STOCKHOLDERS' EQUITY -------------------- In October 1993, the four stockholders of the Company transferred an aggregate of 142,599 shares of the Company's common stock as a consideration for services provided to the Company. Expense of $14,260 was recognized in fiscal 1994 for the estimated fair value of the shares transferred. The Company may issue one or more series of preferred stock, with such designations, preferences, rights, dividends and restrictions as may be determined by the Board of Directors. F-14 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 11 - FEDERAL INCOME TAXES -------------------- Deferred tax assets and liabilities as of April 30, 1995 consisted of the following: <TABLE> <CAPTION> Current Noncurrent Total -------------- ------------- -------------- <S> <C> <C> <C> Deferred tax assets: Net operating loss carryforwards $ 157,000 $ - $ 157,000 Deferred compensation and other accruals 27,700 - 27,700 Other, net 62,300 - 62,300 -------------- -------------- -------------- Total deferred tax asset 247,000 - 247,000 Less: Valuation allowance (210,000) - (210,000) -------------- -------------- -------------- Deferred tax asset, net 37,000 - 37,000 -------------- -------------- -------------- Deferred tax liability - accumulated depreciation - (37,000) (37,000) -------------- -------------- -------------- $ 37,000 $ (37,000) $ - ============== ============== ============== </TABLE> Deferred tax assets and liabilities as of April 30, 1996 consisted of the following: <TABLE> <CAPTION> Current Noncurrent Total -------------- ------------- -------------- <S> <C> <C> <C> Deferred tax asset - deferred compensation and other accruals $ 52,000 $ - $ 52,000 Less: Valuation allowance (9,000) - (9,000) -------------- -------------- -------------- Deferred tax asset, net 43,000 - 43,000 -------------- -------------- -------------- Deferred tax liability - accumulated depreciation - (37,000) (37,000) -------------- -------------- -------------- $ 43,000 $ (37,000) $ 6,000 ============== ============== ============== </TABLE> NOTE 12 - EMPLOYEE BENEFIT PLANS ---------------------- The Company sponsors a 401(k) plan (the Plan) which covers substantially all of its employees meeting minimum age and service requirements. The Plan provides for elective contributions by employees up to the lesser of 15% of the employee's compensation or the maximum limit allowed by tax regulations. Under the terms of the Plan, the Company makes matching contributions equal to 25% of the first 6% of each employee's elective contributions to the Plan. In addition, the Company may make discretionary contributions up to 15% of total participant compensation. During the years ended April 30, 1994, 1995 and 1996, the Company made contributions to the Plan of $20,965, $25,692 and $24,626, respectively, and $10,250 and $17,137 for the six-month periods ended October 31, 1995 and 1996, respectively. F-15 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 13 - INCENTIVE STOCK OPTION PLAN --------------------------- The Company has a Stock Option Plan (the Option Plan) pursuant to which options to purchase 200,000 shares of the Company's common stock may be granted to officers and employees of the Company or its subsidiaries and to other persons. As of October 31, 1996, no stock options had been granted pursuant to the Option Plan. Options granted pursuant to the Option Plan may be "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, or non-qualified stock options," which are options that do not meet the requirements of Section 422. Incentive options may be granted only to key employees of the Company, as defined in the Option Plan, and non-qualified options may be granted to both key employees and other persons, other than an employee of the Company, who are committed to the interests of the Company. The Option Plan expires November 21, 2004, except as to options previously granted and outstanding under the Option Plan at that time. NOTE 14 - INVESTMENT IN JOINT VENTURE --------------------------- The Company had an ownership interest of 13% in Saxon International Building Systems (Saxon) a Polish limited liability company in which the three major stockholders of the Company have a 26% ownership interest. The Company recognized losses from Saxon, which was accounted for on the equity method of accounting, of $36,666 for the year ended April 30, 1994. The Company's investment in Saxon had been reduced to zero at April 30, 1994, and the Company ceased recognizing its proportionate share of Saxon's losses. During 1995, the Company ceased all funding of Saxon and sold its ownership interest in Saxon to an unrelated third party. Management does not believe it has any contingent liabilities arising from its prior ownership in Saxon. NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS ----------------------------------- The Company's financial instruments consist of trade receivables, trade payables and various notes payable to banks, a financing company and a supplier. The Company believes the carrying value of these financial instruments approximate their estimated fair value. F-16 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 16 - MAJOR CUSTOMERS The following is a summary of customers accounting for ten percent (10%) or more of the Company's revenues and trade accounts receivable for the periods indicated: <TABLE> <CAPTION> Revenues -------------------------------------------------------------------------------------------- Year Ended April 30, Six Months Ended October 31, ----------------------------------------------- ----------------------------------- 1994 1995 1996 1995 1996 --------- --------- --------- --------- ---------- <S> <C> <C> <C> <C> <C> Customer A 19.0% 19.8% 26.0% 32.0% 18.0% Customer B 21.6 - - - - Customer C - 10.2 - - - Customer D - - - - - Customer E - - - - 18.0 --------- --------- --------- --------- --------- 40.6% 30.0% 26.0% 32.0% 36.0% ========= ========= ========= ========= ========= </TABLE> <TABLE> <CAPTION> Receivables ------------------------------------------------------------------- April 30, October 31, ----------------------------------------------- 1994 1995 1996 1996 --------- --------- --------- -------- <S> <C> <C> <C> <C> Customer A 11% 20% 11% 23% Customer B - - - - Customer C - - - - Customer D - 13 - - Customer E - - - 24% --------- --------- --------- --------- 11% 33% 11% 47% ========= ========= ========= ========= </TABLE> NOTE 17 - INITIAL PUBLIC OFFERING ----------------------- The Company is preparing to register the sale of a minimum of 700,000 shares and a maximum of 800,000 shares of common stock, and a minimum of 700,000 and a maximum of 800,000 common stock purchase warrants with the Securities and Exchange Commission as part of an initial public offering. Each warrant is exercisable to purchase one share of common stock at an exercise price of $5.00 per share. The Company intends to offer these securities through an underwriter on a "best efforts basis". If the offering is consummated, the underwriter will receive underwriters' warrants to purchase one share of common stock for each ten shares sold in the offering and one warrant for each ten warrants sold in the offering, with each warrant exercisable at 165% of the initial offering price for a period of four years beginning twelve months after the effective date of the registration statement concerning the offering. The Company has granted registration rights with respect to the common stock and warrants underlying the underwriters' warrants. F-17 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (Information Subsequent to April 30, 1996 is Unaudited) NOTE 18 - PRIVATE PLACEMENT FINANCING --------------------------- In July 1996, the Company issued an aggregate of 500,100 shares of Common Stock, 3,000,000 Warrants, and $300,000 aggregate face amount of unsecured promissory notes, payable in a balloon payment plus accrued interest at 10 percent per annum due on the earlier of April 24, 1997 or the closing of any public debt or equity offering by the Company or the closing of any transaction in which the Company's securities are exchanged for securities of a public entity. The Company incurred a charge to earnings of approximately $1,005,000, which represents the amount by which the estimated fair value of the 500,100 shares issued to the noteholders exceeded the face amount of the promissory notes. This excess was charged to expense as opposed to being capitalized as direct financing costs because it was deemed to be unrecoverable. An additional $100,000 of expense was recognized during the six-month period ending October 31, 1996, which represented the amortization of the discount on the promissory notes. The discount on the promissory notes is being amortized on the interest method over the term of the notes. The effective interest rate on these promissory notes, which includes both the stated interest rate on the notes plus the fair value of the common stock issued to the noteholders, amounts to 580%. NOTE 19 - GOING CONCERN - -------------------------------------------------------------------------------- The Company's year to date loss, which includes a non-cash charge of $1,105,000 related to the Company's private placement of securities in July 1996 (see Note 18), increased from approximately $1,665,000 for the six months ended October 31, 1996 to $2,469,000 for the eight months ended December 31, 1996, an increase of $804,000. The additional loss arose from the erosion of gross margins on contracts which were in progress at December 31, 1996. As a result of these additional losses, the Company's working capital position and ability to generate sufficient cash flows from operations to meet its operating and capital requirements has further deteriorated. These matters raise substantial doubt about the Company's ability to continue as a going concern without a substantial infusion of equity capital (see Note 17). The Company believes that it will be successful in removing the threat concerning its ability to continue as a going concern by adhering to closer and stricter scrutiny of its contract bids and utilizing the estimated minimum net proceeds of approximately $2.9 million from the proposed best efforts public offering to achieve profitability through lower interest and bonding costs and expanded volume. There is no assurance these results will occur even if the proposed best efforts public offering is consummated. If this does not occur, the Company will pursue other sources of financing, but there is no assurance any other source of financing will be available. * * * * * * F-18 <PAGE> INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE To the Stockholders American International Consolidated Inc. Houston, Texas We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of American International Consolidated Inc. and Subsidiaries included in this Registration Statement and have issued our report thereon dated July 1, 1996. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The accompanying financial statement schedule (Schedule II - Consolidated Valuation and Qualifying Accounts) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This consolidated financial statement schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects with the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ HEIN + ASSOCIATES, LLP HEIN + ASSOCIATES, LLP Houston, Texas July 1, 1996 S-1 <PAGE> AMERICAN INTERNATIONAL CONSOLIDATED INC. AND SUBSIDIARIES Schedule II - Consolidated Valuation and Qualifying Accounts <TABLE> <CAPTION> Balance at Charged to Balance Beginning Costs and End of Description of Year Expenses Write-Offs Year ----------- ---------- ---------- ---------- --------- <S> <C> <C> <C> <C> Year Ended April 30, 1994 allowance $50,000 $156,016 $99,422 $106,594 for doubtful accounts Year Ended April 30, 1995 allowance $106,594 $47,919 $57,460 $97,053 for doubtful accounts Year ended April 30, 1996 allowance $97,053 $61,504 $78,700 $79,857 for doubtful accounts </TABLE> S-2 <PAGE> ======================================== ===================================== NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR- MATION OR TO MAKE ANY REPRESENTATION AMERICAN INTERNATIONAL OTHER THAN THOSE CONTAINED IN THIS CONSOLIDATED INC. PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU- THORIZED BY THE COMPANY. THIS PROSPEC- Common Stock TUS SHALL NOT CONSTITUTE AN OFFER TO Minimum 700,000 Shares SELL OR THE SOLICITATION OF AN OFFER TO Maximum 800,000 Shares BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR Redeemable Common QUALIFICATION UNDER THE SECURITIES LAWS Stock Purchase Warrants OF ANY SUCH STATE. Minimum 700,000 Warrants ------------------------------ Maximum 800,000 Warrants TABLE OF CONTENTS Page ---- PROSPECTUS SUMMARY......................... 7 RISK FACTORS.............................. 10 USE OF PROCEEDS........................... 18 DIVIDEND POLICY............................19 DILUTION...................................20 BUSINESS.................................. 22 ------------------- SELECTED CONSOLIDATED FINANCIAL DATA...... 32 MANAGEMENT'S DISCUSSION AND ANALYSIS PROSPECTUS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................... 34 ------------------- MANAGEMENT................................ 38 EXECUTIVE COMPENSATION.................... 40 PRINCIPAL STOCKHOLDERS.................... 43 TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES.......................... 45 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................... 48 DESCRIPTION OF SECURITIES................. 49 UNDERWRITING.............................. 53 I.A. Rabinowitz & Co. SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION...... 57 Worthington Capital Group LEGAL MATTERS............................. 57 EXPERTS................................... 57 CONCURRENT OFFERING........................58 , 1997 ADDITIONAL INFORMATION.................... 58 ------------- FINANCIAL INFORMATION.....................F-1 ============================================= ================================ <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] [Logo red, white and blue flag] SUBJECT TO COMPLETION March 11, 1997 [Red Ink] PROSPECTUS AMERICAN INTERNATIONAL CONSOLIDATED INC. 500,100 Shares Of Common Stock And 3,000,000 Redeemable Common Stock Purchase Warrants This Prospectus relates to 500,100 shares of Common Stock and 3,000,000 Redeemable Common Stock Purchase Warrants ("Warrants") of American International Consolidated Inc. (the "Company") offered by the persons named herein (the "Selling Securities Holders"). See "OFFERING BY SELLING SECURITIES HOLDERS". The Common Stock and Warrants being offered hereby were acquired pursuant to a private offering of Common Stock and Warrants (the "Private Placement") completed in July 1996. Each Warrant entitles the registered holder thereof to purchase one share of Common Stock at an exercise price of $5.00 per share, subject to adjustment in certain events, at any time during the period commencing on the date hereof and expiring on the fifth anniversary of the date hereof. The Warrants are subject to redemption by the Company at $.01 per Warrant at any time commencing 12 months after the date hereof, on not less than 30 days' prior written notice to the holders of the Warrants, provided that the average closing bid quotation of the Common Stock, as reported on the OTC Bulletin Board or the average closing sale price if listed on a national securities exchange, has been at least 150% of the then current exercise price of the Warrants for each of the 20 consecutive business days ending on the third day prior to the date on which the Company gives notice of redemption. The Warrants will be exercisable until the close of business on the day immediately preceding the date fixed for redemption. See "DESCRIPTION OF SECURITIES-Warrants". The Company will receive no proceeds from the sales of the Common Stock and Warrants by the Selling Securities Holders. The Common Stock and Warrants offered by this Prospectus may be sold from time to time by the Selling Securities Holders, or by transferees. No underwriting arrangements have been entered into by the Selling Securities Holders. The distribution of the Common Stock and Warrants by the Selling Warrant Holders may be offered in one or more transactions that may take place on the over-the-counter market, including ordinary broker's transactions, privately-negotiated transactions or through sales to one or more dealers for resale of such Common Stock and Warrants as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Securities Holders in connection with sales of the Warrants by Selling Securities Holders. See "OFFERING BY SELLING SECURITIES HOLDERS". Prior to this Offering, there has been no public market for the Common Stock or the Warrants, and there can be no assurance that any such market for the Common Stock or the Warrants will develop after the closing of this Offering, or that, if developed, it will be sustained. The offering price of the ALT-COVER <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] Common Stock and the Warrants and the initial exercise price and other terms of the Warrants were established by negotiation between the Company and the Representative and do not necessarily bear any direct relationship to the Company's assets, earnings, book value per share or other generally accepted criteria of value. See "UNDERWRITING". The Company intends to have the Common Stock and Warrants quoted on the OTC Bulletin Board, an electronic quotation system maintained by the National Association Of Securities Dealers, Inc. ("NASD"), under the trading symbols "AICI" and "AICIW," respectively. See "RISK FACTORS--Risk Factor No. 25--Possible Effects Of SEC Rules On Market For Common Stock And Warrants". On _________ 1997, the Company commenced an initial public offering of a minimum of 700,000 and a maximum of 800,000 shares of Common Stock and a minimum of 700,000 and a maximum of 800,000 Warrants on a "best efforts, minimum/maximum basis" through I. A. Rabinowitz & Co. which is also the representative (the "Representative") of Worthington Capital Group, Inc. (collectively, the "Underwriters") for purposes of that offering. There is no assurance that the Company will complete at least the minimum offering and receive any proceeds from that offering. THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVESTMENT THEREIN INVOLVES A HIGH DEGREE OF RISK. FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN THE COMPANY AND IMMEDIATE SUBSTANTIAL DILUTION, SEE "RISK FACTORS" PAGE (10) AND "DILUTION" (PAGE 20). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is March __, 1997 ALT-COVER <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] PROSPECTUS SUMMARY The Company American International Consolidated Inc. (the "Company") is a manufacturer and general contractor that focuses primarily on three types of construction products: mini-warehouses and self-storage facilities; metal buildings and structural steel projects; and cold storage, including refrigerated and freezer, buildings. The Company's services range from the start, or construction design, phase to the finish, or erection, phase of a project, including general construction, construction management, design, manufacture, building, and turnkey services. The Company selects, coordinates and manages subcontractors for substantially all phases of the work, except for design, erection and manufacture of certain metal building components. The Company also provides oversight and supervision of the entire construction process for each project. The Company intends to take advantage of its increased capital and improved financial condition resulting from its Offering by (i) increasing business volume through increasing bonding capacity in order to access larger projects and other new business, undertaking planned domestic and international marketing programs, and increasing business referrals from suppliers and other business contacts, and (ii) increasing operating margins and profitability through decreasing interest expense (from reduction of debt) and decreasing bonding costs. See "BUSINESS--Business Plan And Strategy" for a more detailed description of this strategy and each of these items. See also "USE OF PROCEEDS". The Company's principal executive and administrative offices are located at 14603 Chrisman, Houston, Texas 77039, telephone number (281) 449-9000. The Company was incorporated under the laws of Texas in May 1985 and changed its state of incorporation to Delaware in June 1994. In June 1996, the Company changed its name to American International Consolidated Inc. from American International Construction Inc. The Offering Securities Offered 500,100 shares of Common Stock and 3,000,000 Warrants to purchase one share of Common Stock for $5.00 per share during the five-year period beginning on the date of this Prospectus. The Common Stock and Warrants offered by the Selling Securities Holders, when purchased by buyers, are identical to the Common Stock and Warrants offered by the Company pursuant to the Offering Prospectus. See, "DESCRIPTION OF SECURITIES" and "OFFERING BY SELLING SECURITIES HOLDERS". Offering Price $ 5.00 per share of Common Stock $ .10 per Warrant Warrant Exercise Price $5.00 per share of Common Stock, subject to adjustments in certain circumstances Warrant Exercise Period The Period commencing on the date of this prospectus and expiring on __________, 2002. Shares of Common Stock outstanding prior to Offering: 2,900,100 Shares of Common Stock offered (1): 700,000 in the Minimum Offering and 800,000 in the Maximum Offering Shares of Common Stock outstanding after the Minimum Offering(1): 3,600,100 Shares of Common Stock outstanding after the Maximum Offering(1): 3,700,100 ALT-6 <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] Warrants outstanding prior to Offering(1): 3,000,000 Warrants offered(1): 700,000 in the Minimum Offering and 800,000 in the Maximum Offering Warrants outstanding after the Minimum Offering: 3,700,000 Warrants outstanding after the Maximum Offering: 3,800,000 Shares of Common Stock Outstanding after the Minimum Offering assuming exercise of all Warrants offered in the Minimum Offering and previously outstanding: 7,300,100 Shares of Common Stock Outstanding after the Maximum Offering assuming exercise of all Warrants offered in the Maximum Offering and previously outstanding: 7,500,100 - --------------- (1) Does not include (i) up to 800,000 shares of common Stock issuable upon exercise of the Warrants included in the Maximum Offering and (ii) if the Maximum Offering is sold, up to 160,000 shares of Common Stock issuable upon exercise of the Underwriters' Warrants and the warrants issuable to the Underwriters upon the exercise of the Underwriters' Warrants. Redemption Of The Warrants The Warrants are redeemable by the Company at a price of $.01 per Warrant upon 30 days prior written or published notice at any time commencing 12 months after the date of this Prospectus and prior to their exercise or expiration, provided however, that the closing bid quotation for the Common Stock for each of the 20 consecutive business days ending on the third day prior to the Company's giving notice of redemption has been at least 150 percent of the then effective exercise price of the Warrants. The Warrants remain exercisable during the 30-day notice period. Any Warrantholder who does not exercise that holder's Warrants prior to their expiration or redemption, as the case may be, forfeits that holder's right to purchase the shares of Common Stock underlying the Warrants. See "DE- SCRIPTION OF SECURITIES--Common Stock Purchase Warrants--Redemption". Use Of Proceeds The Company will not receive any of the proceeds from the sales of the Common Stock and Warrants by the Selling Securities Holders. In the event that any holder of Warrants elects to exercise Warrants, the proceeds from the exercise of the those Warrants will be utilized by the Company for working capital purposes. See "USE OF PROCEEDS" and "OFFERING BY SELLING SECURITIES HOLDERS". Risk Factors The securities offered hereby involve a high degree of risk and substantial immediate dilution to new investors. See "CERTAIN RISK FACTORS" and "DILUTION". OTC Bulletin Board Symbols Common Stock - AICI Warrants - AICIW ALT-7 <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] Summary Selected Financial Data The financial statements included in this Prospectus set forth information regarding the Company as of and for the fiscal years ended April 30, 1996, 1995 and 1994 (audited) and as of and for the six-month period ended October 31, 1996 (unaudited). See "FINANCIAL INFORMATION". The summary selected financial data shown below is derived from, and is qualified in its entirety by, those financial statements, which are contained in the "FINANCIAL INFORMATION" section of this Prospectus. <TABLE> <CAPTION> Six Months Fiscal Year Ended April 30, Ended October 31, ---------------------------------- ----------------- 1995 1996 1996 ---------- ------------ ----------------- (Unaudited) Operating Results: <S> <C> <C> <C> Revenues.............. $24,317,051 $31,184,828 $18,088,507 Net Income 186,662 351,570 (1,665,329) (Loss)(1)............. Net Income Per .06 .12 (.57) share................. </TABLE> <TABLE> <CAPTION> <S> <C> <C> <C> Balance Sheet Data: April 30, October 31, 1996 October 31, 1996 -------------------------- (Unaudited) (Unaudited) 1995 1996 Actual As Adjusted ----------- ------------ ----------- ------------ </TABLE> ALT-8 <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Selling Securities Holders Common Stock and Warrants. In the event that any holder of Warrants elects to exercise Warrants, the proceeds from the exercise of those Warrants will be utilized by the Company for working capital purposes. The net proceeds to the Company from the sale of Common Stock and Warrants pursuant to the Offering Prospectus are estimated to be $2,988,300 if the Minimum Offering amount is sold and $3,432,000 if the Maximum Offering amount is sold after deducting selling commissions and other unpaid expenses of the offering. The offering pursuant to the Offering Prospectus is being made on a "best efforts, minimum/maximum basis" and there is no assurance that at least the Minimum Offering amount will be sold and that the Company will receive any proceeds from that offering. Total selling commissions equal to ten percent of the gross offering proceeds from the Common Stock and Warrants, together with a three percent non-accountable expense allowance, will be allowed to the Underwriter upon consummation of the offering. Other expenses of the offering, estimated to be $509,700 for the Minimum Offering and $525,000 for the Maximum Offering, include the non-accountable expense allowance, printing costs, legal fees, accounting fees, blue sky fees and costs, transfer agent fees, SEC and NASD filing fees and other miscellaneous costs. Approximately $285,000 of the total offering expenses will have been paid prior to closing by the Company, leaving $224,700 in the Minimum Offering and $240,000 in the Maximum Offering of offering expenses and $357,000 in the Minimum Offering and $408,000 in the Maximum Offering of selling commissions to be paid from the offering proceeds. The $2,988,300 in the Minimum Offering and $3,432,000 in the Maximum Offering of net proceeds are expected to be allocated substantially as follows and applied in the following order of priority, during the 12 month period following the offering(1): <TABLE> <CAPTION> Minimum Offering Maximum Offering --------------------------------- ----------------------------------- Approximate Approximate Percentage Percentage Approximate Of Net Approximate Of Net Amount Proceeds Amount Proceeds ----------- ----------- ------------ ------------ <S> <C> <C> <C> <C> Domestic and International Marketing Program.................... $100,000 3.3% $200,000 5.8% Reduction of Secured Note to Major Supplier (2)................... 1,200,000 40.2% 1,200,000 35.0% Repayment of Unsecured Notes (3)............................ 300,000 10.0% 300,000 8.7% Upgrade Computer Software Systems.............................. 50,000 1.7% 50,000 1.5% Reduction of Trade Accounts ......... 800,000 26.8% 800,000 23.3% Other Working Capital (4)............ 538,300 18.0% 882,000 25.7% ------- ----- ------- ----- TOTAL NET $2,988,300 100% $3,432,000 100% PROCEEDS ========== ==== ========== ==== </TABLE> - ------------------- ALT-18 <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] (1) See "BUSINESS--Business Plan And Strategy" for a description of how the proposed allocation of proceeds of this Offering applies to the Company's plans. (2) The Company intends to reduce by $1.2 million the outstanding principal balance on the outstanding note dated April 24, 1996, to its major supplier. When this occurs, that note, which accrues interest at one percent over the Prime Rate (as designated in The Wall Street Journal) and matures on April 30, 2001, will be adjusted to decrease the weekly payments from $11,537 to approximately $5,100. See "BUSINESS--Indebtedness To Major Supplier". (3) The Company intends to repay the $300,000 of indebtedness that was incurred in July 1996 in order to pay for costs of this Offering and to provide immediate working capital. This indebtedness accrues interest at 10 percent per annum and is due and payable upon the earliest to occur of January 24, 1997 or the closing of any public debt or equity financing of the Company or the closing of any transaction in which the Company's securities are exchanged for securities of another entity (whether by merger or otherwise). (4) The Company's working capital will be utilized for general corporate purposes and operating expenses, including payment of $55,000 for the Representative's consulting fee. Although the amounts set forth above indicate management's present estimate of the Company's use of the net proceeds from the Offering, the Company may reallocate the proceeds or utilize the proceeds for other corporate purposes based on the contingencies described below. The actual expenditures may vary from the estimates in the table because of a number of factors, including whether the Company has been operating profitably, what other obligations have been incurred by the Company, whether the Company desires to expand its existing operations, and other changes in circumstances. Although no alternate plans currently exist, other uses could include additional funds for increased marketing, expanded operations or additional payment on accounts. If the Company's need for working capital increases, the Company could seek additional funds through loans or other financing. No such arrangements exist or are currently contemplated, and there can be no assurance that they may be obtained in the future should the need arise. If the use of the proceeds of the Offering in the manner described above proves impractical or it is otherwise deemed by Management to be in the Company's best interests to utilize the proceeds in another manner, the Company may apply the proceeds of the Offering in such manner as it deems appropriate under the then existing circumstances. The Company has no present intention, agreements or understandings to make any material acquisitions of businesses, assets, or technologies. DIVIDEND POLICY The Company has not paid any cash dividends to date. As indicated under "BUSINESS--Indebtedness To Major Supplier", the Company's Note to the Supplier prohibits the payment of any dividends until the Note is paid in full. The Company currently intends to retain its future earnings, if any, to fund the development and growth of its business and, therefore, does not anticipate paying cash dividends on its Common Stock in the future. ALT-19 <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] SELLING SECURITIES HOLDERS The Company is registering the sale of Common Stock and Warrants by persons who received an aggregate of 500,100 shares of Common Stock and 3,000,000 Warrants (the "Selling Securities Holders") in the Private Placement pursuant to exemptions from registration under federal and state securities laws. In addition, the Company is registering the exercise of those Warrants by the persons who purchase those Warrants from the Selling Securities Holders pursuant to this Prospectus and, in the alternative, the sale of Common Stock received by the Selling Securities Holders upon the exercise of the Warrants by the Selling Securities Holders. The Selling Securities Holders may sell their Warrants or Common Stock at such prices as they are able to obtain in the market, if any market develops. The Company will receive no proceeds from the sale of Warrants or Common Stock by the Selling Securities Holders. The following table sets forth the name of each Selling Securities Holder, the number of Warrants beneficially owned by each Selling Securities Holder before this Offering, the number of Warrants proposed to be sold by each Selling Securities Holder, the number of Warrants owned after this Offering assuming the sale of all the Warrants offered by the Selling Securities Holders, the number of shares of Common Stock owned by the Selling Securities Holders before the Offering, the number of shares of Common Stock to be sold by the Selling Securities Holders assuming they exercise their Warrants, and the number of shares owned by the Selling Securities Holders after the Offering. <TABLE> <CAPTION> Number Of Shares Number of Number Of Of Common Stock Number of Number Of Shares Warrants Owned Warrants Warrants Owned Owned Before Shares To Be Owned After Name Before Offering to Be Sold After Offering Offering(1) Sold (2) Offering - -------------------- --------------- ----------- --------------- ---------------- ------------- ---------------- <S> <C> <C> <C> <C> <C> <C> Norman Goldstein 40,000 40,000 0 46,668 46,668 0 Glen Nortman 20,000 20,000 0 23,334 23,334 0 Maria Quacinella 80,000 80,000 0 93,336 93,336 0 Richard Bower 10,000 10,000 0 11,667 11,667 0 Mogul Capital Corp. 150,000 150,000 0 175,005 175,005 0 Euro Pharmaceuticals Distributors Ltd. 650,000 650,000 0 758,355 758,355 0 John Donnadio 20,000 20,000 0 23,334 23,334 0 LTA Holding Corp. 10,000 10,000 0 11,667 11,667 0 Frank Signorile 20,000 20,000 0 23,334 23,334 0 Abe Heyman 10,000 10,000 0 11,667 11,667 0 Maria Capello 20,000 20,000 0 23,334 23,334 0 Geneva Partners 10,000 10,000 0 11,667 11,667 0 Al Abramovitch 10,000 10,000 0 11,667 11,667 0 Princess Export Associates, Inc. 50,000 50,000 0 58,335 58,335 0 E.P. Ong 10,000 10,000 0 11,667 11,667 0 Mordecai Goldzweig 10,000 10,000 0 11,667 11,667 0 Irwin and Michelle Raymer 10,000 10,000 0 11,667 11,667 0 Tammy L. Gross 60,000 60,000 0 70,002 70,002 0 Randy Bobkin 190,000 190,000 0 221,673 221,673 0 Elull Development Corp. 50,000 50,000 0 58,335 58,335 0 Christopher Mackie 50,000 50,000 0 58,335 58,335 0 Dunkirk Capital Corp. 500,000 500,000 0 583,350 583,350 0 J.A.A.M. Corp 325,000 325,000 0 379,177 379,177 0 Gary Lyle Brunstein 75,000 75,000 0 87,503 87,503 0 Ronald J. Drucker 50,000 50,000 0 58,335 58,335 0 Patrick Colombo, Jr. 50,000 50,000 0 58,335 58,335 0 Robert Zarin 75,000 75,000 0 87,502 87,502 0 Jay G. Goldman 75,000 75,000 0 87,503 87,503 0 Rifky Weiner 200,000 200,000 0 233,340 233,340 0 Lance Viscuso 10,000 10,000 0 11,667 11,667 0 Richard Arote 10,000 10,000 0 11,667 11,667 0 Joseph Misseri 10,000 10,000 0 11,667 11,667 0 148 New Dorp Corp. 10,000 10,000 0 11,667 11,667 0 Adam Presser 10,000 10,000 0 11,667 11,667 0 Lawrence Presser 10,000 10,000 0 11,667 11,667 0 C & E Development Corp. 10,000 10,000 0 11,667 11,667 0 Zycor Corp. 50,000 50,000 0 58,335 58,335 0 Ronald J. Brescia 50,000 50,000 0 58,335 58,335 0 --------- ---------- - --------- ---------- - TOTAL 3,000,000 3,000,000 0 3,500,100 3,500,100 0 ALT-53 </TABLE> <PAGE> [ALTERNATE PAGE FOR SELLING SECURITIES HOLDERS' PROSPECTUS] - ------------- (1) Because the Warrants currently are exercisable, the shares issuable upon the exercise of the Warrants are considered beneficially owned by the Selling Securities Holders. The number of shares underlying the Warrants shown for each Selling Securities Holder under "Number Of Warrants Before Offering" are included in the "Number Of Share Of Common Stock Owned Before Offering." (2) The number of shares of Common Stock to be sold assumes that the Selling Securities Holders exercise all their Warrants and elect to sell all the shares of Common Stock received upon the exercise of the Warrants and all the shares of Common Stock received in the Private Placement. Upon the exercise of the Warrants by the Selling Securities Holders, they would receive restricted shares of Common Stock pursuant to an exemption from registration under Rule 506 under the Securities Act and those shares of Common Stock could be transferred only pursuant to an effective registration statement or an exemption from registration. CONCURRENT OFFERING The registration statement of which this Prospectus forms a part also covers up to 800,000 shares of Common Stock and 800,000 Warrants being offered by the Company in the offering made pursuant to the Offering Prospectus. ALT-54 <PAGE> ======================================== ===================================== NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR AMERICAN INTERNATIONAL REPRESENTATION MUST NOT BE RELIED UPON CONSOLIDATED INC. AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OF- FER TO BUY NOR SHALL THERE BE ANY SALE OF THESE 500,100 Shares Of Common Stock SECURITIES IN ANY STATE IN WHICH SUCH 3,000,000 Redeemable Common OFFER, SOLICITATION OR SALE WOULD BE Stock Purchase Warrants UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. ------------------------------ TABLE OF CONTENTS Page ---- PROSPECTUS SUMMARY.................... 6 RISK FACTORS..........................10 USE OF PROCEEDS.......................18 DIVIDEND POLICY.......................19 DILUTION..............................20 BUSINESS..............................22 SELECTED CONSOLIDATED FINANCIAL DATA..32 MANAGEMENT'S DISCUSSION AND ANALYSIS --------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................34 MANAGEMENT............................38 PROSPECTUS EXECUTIVE COMPENSATION................40 PRINCIPAL STOCKHOLDERS................43 TRANSACTIONS BETWEEN THE COMPANY AND --------------------- RELATED PARTIES......................45 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................48 DESCRIPTION OF SECURITIES.............49 SELLING SECURITIES HOLDERS............53 CONCURRENT OFFERING...................54 SECURITIES AND EXCHANGE COMMISSION , 1997 POSITION ON CERTAIN INDEMNIFICATION..57 ---------- LEGAL MATTERS.........................57 EXPERTS...............................57 ADDITIONAL INFORMATION................58 FINANCIAL INFORMATION.................F-1 ========================================= ==================================== ALT-BACK COVER <PAGE> PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses Of Issuance And Distribution. The following is an itemization of all expenses (subject to future contingencies) incurred or to be incurred by the Registrant in connection with the issuance and distribution of the securities being offered. Registration and filing fee................................. $ 10,530 Transfer agent's fee(1)..................................... 3,000 Printing and engraving(1)................................... 22,000 Accounting fees and expenses(1)............................. 100,000 Legal fees and expenses(1).................................. 175,000 Blue sky fees and expenses(1)............................... 50,000 NASD filing fee............................................. 3,224 Boston Stock Exchange application fee (2)................... 1,000 Underwriter's non-accountable expense allowance(3).......... 122,400 Standard & Poor's listing................................... 2,380 Miscellaneous(1)............................................ 35,466 -------- Total(1)(4) $525,000 ======== - -------------------- (1) Estimated (2) This represents the non-refundable portion of the application fee paid prior to notice of non-approval. (3) Assumes Maximum Offering amount is sold. Would be $107,100 if Minimum Offering is sold. (4) Assumes Maximum Offering amount is sold. Would be $509,700 if Minimum Offering is sold. Item 14. Indemnification Of Directors And Officers. The Delaware General Corporation Law provides for indemnification by a corporation of costs incurred by directors, employees, and agents in connection with an action, suit, or proceeding brought by reason of their position as a director, employee, or agent. The person being indemnified must have acted in good faith and in a manner that the person reasonably believed to be in or not opposed to the best interests of the corporation. In addition to the general indemnification section, Delaware law provides further protection for directors under Section 102(b)(7) of the General Corporation Law of Delaware. This section was enacted in June 1986 and allows a Delaware corporation to include in its Certificate Of Incorporation a provision that eliminates and limits certain personal liability of a director for monetary damages for certain breaches of the director's fiduciary duty of care, provided that any such provision does not (in the words of the statute) do any of the following: "eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith II-1 <PAGE> or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of this Title [dealing with willful or negligent violation of the statutory provision concerning dividends, stock purchases and redemptions], or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective..." The Board Of Directors is empowered to make other indemnification as authorized by the Certificate Of Incorporation, Bylaws or corporate resolution so long as the indemnification is consistent with the Delaware General Corporation Law. Under the Company's Bylaws, the Company is required to indemnify its directors to the full extent permitted by the Delaware General Corporation Law, common law and any other statutory provisions. Item 15. Recent Sales Of Unregistered Securities. In July 1996, the Company sold an aggregate of 500,100 shares of Common Stock, 3,000,000 Warrants, and $300,000 aggregate face amount of promissory notes in reliance upon exemptions pursuant to Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (the "Securities Act"). These securities were sold solely to accredited investors in 300 units at a price of $1,000 per unit. Each unit consisted of 1,667 shares of Common Stock, 10,000 Warrants, and one promissory note in the face amount of $1,000. In January 1997, pursuant to the Company's 1994 Stock Option Plan, the Company granted stock options to purchase an aggregate of 172,000 shares of the Company's Common Stock at a purchase price of $5.00 per share to 52 persons who were employed by the Company. These grants were made pursuant to an exemption from registration under Section 3(b) of the Securities Act pursuant to Rule 701 under the Securities Act. Item 16. Exhibits. The following is a complete list of Exhibits filed as part of this Registration Statement, which Exhibits are incorporated herein. Number Description - ------ ----------- 1.1 Form of Underwriting Agreement between and among American International Consolidated Inc., ("Registrant")I.A. Rabinowitz & Co. and Worthington Capital Group, Inc. (5) 1.2 Form of Fund Escrow Agreement between and among Registrant, the Underwriters, and American Securities Transfer & Trust, Incorporated. (5) 2.1 Agreement And Plan Of Merger of American International Construction, Inc., a Texas Corporation, and American International Construction Inc., a Delaware Corporation.(1) 2.2 Plan Of Merger of American International Construction, Inc. and AIC Management, Inc.(1) II-2 <PAGE> <TABLE> <CAPTION> <S> <C> 2.3 Plan Of Merger of American International Construction, Inc. and American International Thermal Systems, Inc.(1) 2.4 Plan Of Merger of American International Construction, Inc. and American International Building Systems, Inc.(1) 3.1(a) Certificate Of Incorporation filed with the Delaware Secretary Of State on June 7, 1994.(1) 3.1(b) Certificate of Amendment To The Certificate of Incorporation filed with the Delaware Secretary of Sate on July 26, 1996. (5) 3.2 Bylaws.(1) 4.1(a) Specimen Common Stock Certificate.(1) 4.1(b) Specimen Common Stock Purchase Warrant. (5) 4.2 Form of Underwriter's Warrant (5) 4.3 Form of Warrant Agreement concerning Common Stock Purchase Warrants. (5) 5.1 Opinion of Bearman Talesnick & Clowdus Professional Corporation concerning legality of issuance of Common Stock, Warrants, and underlying securities. (5) 10.1A Loan Agreement effective April 24, 1996 between and among the Company, Metal Building Components, Inc. ("MBCI"), Danny Roy Clemons, Ralph Leroy Farrar, Judith Ann Farrar, Jimmy Wayne Williams, Shirley Beth Williams, and John Thomas Wilson. (5) 10.1B Letter Agreement dated October 8, 1996 modifying Loan Agreement dated April 24, 1996.(5) 10.1C Letter Agreement dated December 31, 1996 modifying Loan Agreement dated April 24, 1996.(5) 10.2 Renewal, Extension And Modification Agreement effective as of September 3, 1993 between American International Construction, Inc. and Texas Commerce Bank National Association.(1) 10.3 Renewal, Extension And Modification Agreement effective as of September 5, 1993 between American International Construction, Inc. and Texas Commerce Bank National Association.(1) II-3 </TABLE> <PAGE> <TABLE> <CAPTION> <S> <C> 10.4A Renewal, Extension And Modification Agreement effective as of March 5, 1995 between American International Construction, Inc. and Texas Commerce Bank National Association.(4) 10.4B Renewal, Extension And Modification Agreement effective as of March 5, 1995 between American International Construction, Inc. and Texas Commerce Bank National Association.(4) 10.5 Employee Stock Option Plan.(1) 10.8 Revised Form of Executive Service Agreement between the Company and each of John T. Wilson, Danny R. Clemons, Ralph L. Farrar and Jim W. Williams.(3) 10.8A Schedule Identifying Material Differences Among Executive Service Agreements between the Company and each of John T. Wilson, Danny R. Clemons, Ralph L. Farrar and Jim W. Williams.(1) 10.9 Executive Service Agreement between the Company and Jimmy M. Rogers dated November 16, 1994.(1) 10.10 Agreement dated May 23, 1996 between the Company and U.S. Storage\Westheimer, Ltd. concerning site preparation for the U.S. Storage mini-warehouse facilities in Houston, Texas.(5) 10.11 Agreement dated May 23, 1996 between the Company and U.S. Storage\Westheimer, Ltd. concerning the construction of the U.S. Storage mini-warehouse facilities in Houston, Texas.(5) 10.12 Form of Conveyance, Transfer And Assignment Of Corporate Stock Separate From A Certificate executed by each of Messrs. Clemons, Farrar and Wilson transferring their respective interests in the U.S. Storage, Inc. and U.S. Storage Management Services, Inc. to the Company.(5) 16 Letter to Securities and Exchange Commission from the Company's former independent accountant, MELTON & MELTON, L.L.P.(2) 21 List of subsidiaries of Registrant. (1) 23.1 Consent of Bearman Talesnick & Clowdus Professional Corporation (included in Opinion in Exhibit 5.1). 23.2 Consent of HEIN + ASSOCIATES LLP. 24 Power of Attorney (5) - --------------------- </TABLE> II-4 <PAGE> (1) Incorporated by reference from the Company's Registration Statement on Form S-1 filed with the Securities And Exchange Commission ("SEC") on December 12, 1994, File No. 33-87336. (2) Incorporated by reference from the Company's Amendment No. 1 to Registration Statement on Form S-1 filed with the SEC on January 24, 1995, File No. 33-87336. (3) Incorporated by reference from the Company's Amendment No. 2 to Registration Statement on Form S-1 filed with the SEC on February 15, 1995, File No. 33-87336. (4) Incorporated by reference from the Company's Amendment No. 3 to Registration Statement on Form S-1 filed with the SEC on March 16, 1995, File No. 33-87336. (5) Previously filed. Item 17. Undertakings. 1. The Company hereby undertakes: (a) to file, during any period in which offers or sales are being made, a post-effective amendment to the Registration Statement: (1) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (2) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (3) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (b) That for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The Company hereby undertakes to provide to the Underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser. II-5 <PAGE> 3. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities And Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or a controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or a controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. 4. The Company hereby undertakes that: (a) for purposes of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of the Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the 1933 Act shall be deemed to be part of the Registration Statement as of the time it was declared effective. (b) for the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 5. The Company hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms different from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering. II-6 <PAGE> SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on March 11, 1997. AMERICAN INTERNATIONAL CONSOLIDATED INC. By: /s/ John T. Wilson ------------------------------------------ John T. Wilson, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signatures Title Date - ---------- ----- ---- /s/ John T. Wilson Chief Executive Officer and March 11, 1997 - --------------------- Director John T. Wilson /s/ Danny R. Clemons President/Mini-Warehouse March 11, 1997 - ---------------------- Division and Director Danny R. Clemons /s/ Ralph L. Farrar President/Metal Buildings March 11, 1997 - ----------------------- Division, Secretary and Director Ralph L. Farrar /s/ Jim W. Williams Chief Financial Officer, Vice March 11, 1997 - ------------------------ President/Finance, Principal Jim W. Williams Financial Officer, Principal Accounting Officer, and Assistant Secretary /s/ Louis S. Carmisciano Director March 11, 1997 - ------------------------- Louis S. Carmisciano <PAGE> EXHIBIT INDEX (Attached To And Made A Part Of Amendment No. 7 To The Registration Statement On Form S-1 For American International Consolidated Inc. Dated March 11, 1997) The following is a complete list of Exhibits filed as part of this Registration Statement: <TABLE> <CAPTION> Number Description - ------ ----------- <S> <C> 1.1 Form of Underwriting Agreement between and among American International Consolidated Inc., ("Registrant"), I.A. Rabinowitz & Co. and Worthington Capital Group, Inc. (5) 1.2 Form of Fund Escrow Agreement between and among Registrant, the Underwriters, and American Securities Transfer & Trust, Incorporated (5) 2.1 Agreement And Plan Of Merger of American International Construction, Inc., a Texas Corporation, and American International Construction Inc., a Delaware Corporation.(1) 2.2 Plan Of Merger of American International Construction, Inc. and AIC Management, Inc.(1) 2.3 Plan Of Merger of American International Construction, Inc. and American International Thermal Systems, Inc.(1) 2.4 Plan Of Merger of American International Construction, Inc. and American International Building Systems, Inc.(1) 3.1(a) Certificate Of Incorporation filed with the Delaware Secretary Of State on June 7, 1994.(1) 3.1(b) Certificate of Amendment To The Certificate of Incorporation filed with the Delaware Secretary of Sate on July 26, 1996.(5) 3.2 Bylaws.(1) 4.1(a) Specimen Common Stock Certificate.(1) 4.1(b) Specimen Common Stock Purchase Warrant.(5) 4.2 Form of Underwriter's Warrant.(5) 4.3 Form of Warrant Agreement concerning Common Stock Purchase Warrants.(5) 5.1 Opinion of Bearman Talesnick & Clowdus Professional Corporation concerning legality of issuance of Common Stock, Warrants, and underlying securities.(5) 10.1A Loan Agreement effective April 24, 1996 between and among the Company, Metal Building Components, Inc. ("MBCI"), Danny Roy Clemons, Ralph Leroy Farrar, Judith Ann Farrar, Jimmy Wayne Williams, Shirley Beth Williams, and John Thomas Wilson.(5) 10.1B Letter Agreement dated October 8, 1996 modifying Loan Agreement dated April 24, 1996.(5) 10.1C Letter Agreement dated December 31, 1996 modifying Loan Agreement dated April 24, 1996.(5) 10.2 Renewal, Extension And Modification Agreement effective as of September 3, 1993 between American International Construction, Inc. and Texas Commerce Bank National Association.(1) 10.3 Renewal, Extension And Modification Agreement effective as of September 5, 1993 between American International Construction, Inc. and Texas Commerce Bank National Association.(1) <PAGE> 10.4A Renewal, Extension And Modification Agreement effective as of March 5, 1995 between American International Construction, Inc. and Texas Commerce Bank National Association.(4) 10.4B Renewal, Extension And Modification Agreement effective as of March 5, 1995 between American International Construction, Inc. and Texas Commerce Bank National Association.(4) 10.5 Employee Stock Option Plan.(1) 10.8 Revised Form of Executive Service Agreement between the Company and each of John T. Wilson, Danny R. Clemons, Ralph L. Farrar and Jim W. Williams.(3) 10.8A Schedule Identifying Material Differences Among Executive Service Agreements between the Company and each of John T. Wilson, Danny R. Clemons, Ralph L. Farrar and Jim W. Williams.(1) 10.9 Executive Service Agreement between the Company and Jimmy M. Rogers dated November 16, 1994.(1) 10.10 Agreement dated May 23, 1996 between the Company and U.S. Storage\Westheimer, Ltd. concerning site preparation for the U.S. Storage mini-warehouse facilities in Houston, Texas.(5) 10.11 Agreement dated May 23, 1996 between the Company and U.S. Storage\Westheimer, Ltd. concerning the construction of the U.S. Storage mini-warehouse facilities in Houston, Texas.(5) 10.12 Form of Conveyance, Transfer And Assignment Of Corporate Stock Separate From A Certificate executed by each of Messrs. Clemons, Farrar and Wilson transferring their respective interests in the U.S. Storage, Inc. and U.S. Storage Management Services, Inc. to the Company.(5) 16 Letter to Securities and Exchange Commission from the Company's former independent accountant, MELTON & MELTON, L.L.P.(2) 21 List of subsidiaries of Registrant. (1) 23.1 Consent of Bearman Talesnick & Clowdus Professional Corporation (included in Opinion in Exhibit 5.1). 23.2 Consent of HEIN + ASSOCIATES LLP. 24 Power of Attorney (5) - --------------------- </TABLE> (1) Incorporated by reference from the Company's Registration Statement on Form S-1 filed with the Securities And Exchange Commission ("SEC") on December 12, 1994, File No. 33-87336. (2) Incorporated by reference from the Company's Amendment No. 1 to Registration Statement on Form S-1 filed with the SEC on January 24, 1995, File No. 33-87336. (3) Incorporated by reference from the Company's Amendment No. 2 to Registration Statement on Form S-1 filed with the SEC on February 15, 1995, File No. 33-87336. (4) Incorporated by reference from the Company's Amendment No. 3 to Registration Statement on Form S-1 filed with the SEC on March 16, 1995, File No. 33-87336. (5) Previously filed. </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.2 <SEQUENCE>2 <DESCRIPTION>CONSENT OF ACCOUNTANTS <TEXT> CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the use of our reports, included herein, and to the reference to our firm under the heading "Experts" in the Prospectus and the Registration Statement on Amendment No. 7 to Form S-1. /s/ HEIN + ASSOCIATES LLP HEIN + ASSOCIATES LLP Certified Public Accountants Houston, Texas March 11, 1997 </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020319_hayes-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020319_hayes-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..84f706851a637b2f955b992400599f558c499a4f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020319_hayes-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus and is qualified by the more detailed information set forth elsewhere in this Prospectus which should be read in its entirety. Unless otherwise indicated, (i) all references to the operations of the Company in this Prospectus shall include the operations of the Remote Access Business (as hereinafter defined) of Penril DataComm Networks, Inc. ("Penril") prior to November 18, 1996; (ii) all references to Hayes capital stock, options and warrants assume the application of the Conversion Ratio; and (iii) all references to beneficial ownership of the Company are before taking into account shares of Common Stock issued or issuable upon conversion of the Company's 6% Cumulative Convertible Preferred Stock ("6% Convertible Stock") (see "Description of Capital Stock of the Company -- 6% Cumulative Convertible Preferred Stock"). Capitalized terms used but not defined in this Summary have the respective meanings ascribed to them elsewhere in this Prospectus. Portions of this Prospectus contain certain "forward looking" statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward looking statements. Factors that might cause such a difference include, but are not limited to, market acceptance of the Company's products and services, other factors discussed in this Prospectus, including factors discussed in "RISK FACTORS," as well as factors discussed in other filings made with the Commission. Although the Company believes that the assumptions underlying the forward looking statements contained herein are reasonable, any of the assumptions could prove inaccurate, and therefore, there can be no assurance that the forward looking statements included herein will prove to be accurate. The following technical terms used in this Prospectus are defined as follows: IP......................... Internet Protocol -- A protocol designed for routers to deliver information across the Internet from router to router until the final destination is reached. IP is used to track the Internet addresses of nodes, route outgoing and incoming messages. IPX........................ Internet Packet eXchange -- A Novell protocol that performs addressing and internetwork routing functions to ensure data reaches the appropriate destination. IPX moves data between programs running on different nodes. APPLETALK(TM).............. A proprietary networking protocol developed by Apple Computer, Inc. to enable Apple computers to talk to other computers. PPP........................ Point-to-Point Protocol -- Supports transmissions of IP, IPX, and AppleTalk(TM) packets over a serial line that directly connects two points. SLIP....................... Serial Line Internet Protocol -- allows users to exchange data with devices that cannot be connected directly to the Ethernet or that reside on an Ethernet other than the one in which the source user resides. CSLIP...................... Compressed Serial Line Internet Protocol -- TCP/IP packet headers are compressed using a technique known as the Van Jacobson header compression algorithm. The same algorithm used to compress the packet headers is also used to expand them upon arrival at the destination host. LAT........................ Local Area Transport -- A protocol which allows large numbers of asynchronous devices to be connected through a terminal server to an Ethernet connection. TELNET..................... The process by which a person using one computer can sign on to a computer in another location. Using TELNET, you can work from your PC as if it were a terminal attached to another machine by a hard-wired line. SNMP....................... Simple Network Management Protocol -- The most common management protocol used in networks. This TCP/IP domain management function gives an administrator an overview of network status and direct control over network devices. PRI-ISDN................... DSI configured for 23 bearer and 1 control channel. Usually associated with ISDN. Bearer DSQs are suitable for audio (voice), V.xx series modulation, and clear channel synchronous data. VCX........................ Switching Statistical Multiplexer -- It connects local and remote asynchronous devices, such as host computers, terminals and printers. It also provides remote connectivity to VCX networks. CSX........................ CSXs are terminal servers that connect local and remote asynchronous devices, such as host computers, terminals and printers to a Local Area Network (LAN). NACS/NASI.................. NetWare Asynchronous Services Interface. A Novell networking communication protocol. T1 CSU/DSU................. Channel Service Unit and Data Service Unit. It converts digital signals from the LAN to analog signals suitable for transmission across the line. T1-PRI(ISDN-PRI)........... DSI configured for 23 bearer and 1 control channel. Usually associated with ISDN. Bearer DSOs are suitable for audio (voice), V.xx series modulation, and clear channel synchronous data. ISDN-BRI................... ISDN connection which uses two B channels (DSO) for data and one D channel used mainly for call control information. Each DSO provides a bandwidth of 64 kbps and the D channel 16 kbps. THE COMPANY The Company is in the business of developing and marketing products which enable local, remote or mobile users to access network resources (the "Remote Access Business"). The Company was incorporated on July 23, 1996 and was spun-off from Penril on November 18, 1996 pursuant to the distribution (the "Distribution") to the Penril stockholders on such date of shares of Common Stock in connection with the merger of Penril with a wholly-owned subsidiary of Bay Networks, Inc. (the "Penril/Bay Merger"). The Company retains the historical financial information of Penril through November 18, 1996. The Company's product line consists of the product family called Access Beyond, serving the remote access market and products which serve the LAN and Host Access product markets. The Company's Access Beyond product family is targeted at the remote access market, providing a scalable modular platform combining advanced modem, ISDN BRI/PRI, remote access, internet working and terminal connectivity capabilities within a single family of products. The Access Beyond products currently use three chassis configurations supporting from one to eight interface modules for end users to choose from, based on current needs and anticipated future growth. Interface modules are then selected based upon WAN and LAN technology and port density requirements. The result is a fully integrated solution that effectively solves the end user's specific remote access needs. The Access Beyond advanced remote access software delivers complete IP, IPX and Appletalk routing, remote node and remote control capabilities including NACS/NASI, all combined with full support for PPP, SLIP, CSLIP, LAT, Telnet, and a wealth of security and management capabilities. In addition to full support for SNMP, it provides an advanced, easy to use Windows based management and configuration utility. The Company recently introduced a new class of remote access solutions that integrates both T1 and PRI-ISDN directly within Microsoft Windows NT servers. This new technology, dubbed "Hawk", supports either digital or analog (modem or ISDN) remote access transmission and can be easily plugged into any Microsoft Windows NT or Novell Netware Connect and Border Manager configured server. Servers can be configured to simultaneously support existing network applications as well as remote access, with the Dynamic Access Switching available in the Hawk solution. This substantially reduces network traffic by connecting users directly into the server hosting the network applications. The LAN and Host Access Products currently sold by the Company include statistical multiplexers and host access servers (VCX) and Ethernet terminal servers (CSX), and a line of CSU/DSU wide area products. Each of the LAN and Host Access Products provides the Company with an existing revenue stream as well as an installed base. The VCX product line of multiplexers ranges from 4-port remote site multiplexers to enterprise solutions providing up to 304 ports or 36 trunk lines and multipurpose communication servers that combine both WAN and LAN capabilities. These products can function as a data PBX, X.25 PAD, statistical multiplexer, terminal server or any combination of these. Although the market for these products is in decline, the Company continues to serve the installed base and fulfill customer applications. The CSX Ethernet communications server family provides local and dialup access to Ethernet LANs. Available as either 8-port or 16-port stand alone units or as a modular chassis based solution, the CSX server provides terminal and dialup access for TCP/IP networks. On November 12, 1997 the Company and several investors entered into a Preferred Stock Investment Agreement pursuant to which the Company agreed to sell to the investors up to 45,000 shares of the Company's 6% Convertible Stock, with a liquidation preference of $1,000 per share, at a purchase price of $1,000 per share. On November 12, 1997 10,000 shares of 6% Convertible Stock were sold for $10,000,000. The Preferred Stock Investment Agreement provides that the remaining up to 35,000 shares of 6% Convertible Stock will be purchased for $1,000 per share (up to $35,000,000) immediately following closing of the Merger, provided that no material adverse change occurs in the interim. Pending Merger. On July 29, 1997, the Company entered into an Agreement and Plan of Reorganization, as amended by the First Amendment to Merger Agreement dated as of November 7, 1997, and the Second Amendment to Merger Agreement dated as of November 21, 1997 (as so amended, the "Merger Agreement") with Hayes Microcomputer Products, Inc., a Georgia corporation ("Hayes"). Under the terms of the Merger Agreement, H & A Merger Sub, Inc., a Georgia corporation ("Subsidiary") and a wholly-owned subsidiary of the Company, will merge with Hayes (the "Merger"). As a result of the Merger, Hayes will become a wholly-owned subsidiary of the Company, and the shareholders of Hayes at the time the Merger becomes effective (the "Effective Time") will own approximately 79% of the outstanding equity securities of the Company (excluding options of the 6% Convertible Stock and shares of Access Beyond's common stock issued or issuable upon conversion thereof). After giving effect to the Merger and assuming that (x) all then vested and exercisable options and warrants to purchase Hayes common stock are exercised and (y) none of the then vested and exercisable options to purchase Access Beyond's common stock are exercised, the Hayes shareholders will own approximately 80.08% of the issued and outstanding securities of the Company. At the Effective Time, (a) each outstanding share of Hayes (i) common stock, $.01 par value per share ("Hayes Common Stock"), will be converted into a right to receive such number of shares of the Company's Common Stock, as is equal to the Conversion Ratio (as defined below), (ii) Series A Preferred Stock, no par value ("Hayes Series A Preferred Stock"), will be converted into the right to receive such number of shares of Common Stock as is equal to the Conversion Ratio multiplied by the number of shares of Hayes Common Stock into which such shares of Hayes Series A Preferred Stock is then convertible, and (iii) Series B Preferred Stock, no par value ("Hayes Series B Preferred Stock"), will be converted into the right to receive such number of shares of the Company's Series A Preferred Stock (the "Series A Preferred Stock") as is equal to the Conversion Ratio multiplied by the number of shares of Hayes Common Stock into which such shares of Hayes Series B Preferred Stock is then convertible; (b) the Company will amend its certificate of incorporation to (i) change its name to Hayes Corporation, (ii) increase the number of authorized shares of capital stock and (iii) create the Series A Preferred Stock; (c) the Board of Directors of the Company will be increased to seven members, five of whom will be designated by the Hayes shareholders; and (d) the obligations of Hayes under the Hayes Stock Option Plan will be assumed by the Company. Based on the number of Hayes and Company shares outstanding as of November 30, 1997, the Conversion Ratio would equal 4.62892 Company shares for each Hayes share. There can be no assurance that the Merger will be consummated. The Conversion Ratio is equal to the percentage ownership immediately following the closing of the Merger of the issued and outstanding equity securities of the Company (excluding options of the 6% Conversion Stock and shares of Access Beyond's common stock issued or issuable upon conversion thereof). (the "Securities") that the holders of all classes of Hayes stock, in the aggregate, are entitled to receive in the Merger (which the Company and Hayes have agreed is 79%), multiplied by a ratio, the numerator of which is the number of shares of the Securities issued and outstanding on a fully diluted basis (excluding stock options) prior to the Effective Date, and the denominator of which is .21, all divided by the number of shares of Hayes common and preferred stock issued and outstanding on a fully diluted basis (excluding all outstanding options and warrants) prior to the Effective Date. The exact number of shares of Common Stock and Series A Preferred Stock to be issued in the Merger cannot be determined as of the date hereof due to the fact that any shares of Hayes capital stock issued and outstanding immediately prior to the Merger, which are held by Hayes shareholders who comply with all of the relevant provisions of the Georgia Business Corporation Code (the "GBCC") for perfecting shareholders' rights of appraisal will not be converted into or be exchangeable for the right to receive the corresponding Securities, unless and until such shareholders fail to perfect or effectively withdraw or lose their rights to appraisal under such statute. Pursuant to a shareholders agreement by and among Hayes and the holders of Hayes capital stock dated April 16, 1996, as amended on April 23, 1997, Hayes and the Hayes shareholders have agreed that a 70% affirmative vote shall be required for a transaction such as the Merger. In connection with the Merger Agreement, holders of 69.5% of Hayes capital stock have already agreed to vote in favor of the Merger. Hayes will hold an annual shareholders' meeting to consider and vote upon a proposal to approve the Merger and adopt the Merger Agreement and the transactions contemplated thereby. The proposal will include the conversion of all outstanding shares of (a) Hayes Common Stock into a right to receive such number of shares of Company Common Stock as is equal to the Conversion Ratio, (b) Hayes Series A Preferred Stock into the right to receive such number of shares of Company Common Stock as is equal to the Conversion Ratio multiplied by the number of shares of Hayes Common Stock into which such shares of Hayes Series A preferred Stock is then convertible and (c) Hayes Series B Preferred Stock into the right to receive such number of shares of Series A Preferred Stock as is equal to the Conversion Ratio multiplied by the number of shares of Hayes Common Stock into which such shares of Hayes Series B Preferred Stock is then convertible. The mailing address of the Company's principal executive offices is currently 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878, and the phone number at that address is (301) 921-8600 ACQUISITION OF SHARES BY SELLING SHAREHOLDER On May 2, 1997, the Company and the Selling Shareholder entered into the 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement (the "Technology Agreement") pursuant to which the Selling Shareholder (i) transferred to the Company technology relating to certain open remote dial access cards (in the form of a comprehensive set of specifications, technical information, hardware and software) (the "Hawk Technology"), (ii) sold to the Company certain inventory tools and equipment used in the application of the Hawk Technology to develop and manufacture products ("Hawk Products") which include the Hawk Technology, (iii) licensed to the Company certain intellectual property in connection with the Hawk Technology , and (iv) agreed to provide the Company with technical, engineering, manufacturing and marketing support, for an aggregate purchase price of 503,704 shares of the Company's common stock, par value $.01 per share (the "Shares"), and $425,000 in cash. The Company and the Selling Shareholder also entered into a Stock Purchase Agreement, dated as of May 2, 1997, as amended in September 1997 (the "Purchase Agreement"), pursuant to which the Company sold and issued the Shares to the Selling Shareholder. In accordance with the terms of the Purchase Agreement, the Company is registering the resale of the Shares in a Registration Statement on Form S-1 of which this Prospectus is a part. THE OFFERING Selling Shareholder............. Paradyne Corporation, a Delaware corporation. Shares of Common Stock Offered.. 503,704 Use of Proceeds................. The Company will not receive any proceeds from the sale of the Shares. Nasdaq National Market Symbol... ACCB Risk Factors.................... The Shares offered hereby are highly speculative and involve a high degree of risk. In addition to the other information in this Prospectus, prospective purchasers of the Shares should consider carefully such risks. See "Risk Factors" beginning on page 9. SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY The table below sets forth selected consolidated historical financial data of the Company. The selected financial data for the Company for the year ended July 31, 1997 has been obtained from audited financial statements of the Company. The selected financial data for the Company for the fiscal years ended July 31, 1996, 1995, 1994, and 1993 have been derived from the audited consolidated financial statements of Penril, the former parent company of Access Beyond. All of the data derived from the audited financial statements should be read in conjunction with Access Beyond's "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere herein. (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FISCAL YEAR ENDED JULY 31, ------------------------------------------------------------ 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues(1) ................................. $ 44,108 $ 61,838 $ 52,611 $ 39,435 $ 18,000 Net income (loss) Continuing operations(2) ..................... 1,027 2,345 (4,614) (20,668) (13,890) Discontinued operations ...................... (896) (828) (1,661) 404 -- Loss on disposal of discontinued operations -- -- (1,400) (640) (3,735) Earnings (loss) per share Continuing operations ........................ 0.15 0.30 (0.61) (2.14) (1.16) Discontinued operations ...................... (0.13) (0.11) (0.22) 0.04 -- Loss on disposal ............................. -- -- (0.19) (0.07) (0.31) Cash dividends per share ........................ -- 0.02 -- -- -- BALANCE SHEET DATA: Total assets(3) ................................. $ 49,178 $ 51,061 $ 44,388 $ 33,780 $ 13,906 Working capital ................................. 11,727 13,502 12,158 16,798 3,631 Long-term debt .................................. 10,217 8,890 5,681 905 743 Stockholders' equity ............................ 27,501 28,580 21,723 18,215 7,311 Book value per common share ..................... 3.96 3.66 2.87 1.89 0.61 </TABLE> - ------------- (1) Included in net revenues are the following net revenues relating to Penril's modem business which was acquired by Bay Networks, Inc. ("Bay") immediately prior to the Penril/Bay Merger, including $4.5 million paid in the fourth quarter of fiscal 1996 to Penril for a license agreement with Bay: <TABLE> <CAPTION> FISCAL YEAR ENDED JULY 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> Net revenues ....... $21,768 $22,828 $18,974 $19,519 $4,228 </TABLE> (2) Net income from continuing operations for fiscal 1996 included a charge of $9.7 million for restructuring costs and $500,000 for costs incurred through July 31, 1996 related to the Penril/Bay Merger. (3) Included in total assets are the following net assets related to two discontinued operations (Technipower, Inc., a subsidiary the assets of which were sold by Penril on October 11, 1996, and Electro-Metrics, Inc. ("EMI"), a subsidiary the assets of which were sold on June 30, 1997): <TABLE> <CAPTION> FISCAL YEAR ENDED JULY 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> Net assets $ 7,299 $ 6,830 $ 5,145 $ 7,337 $ 0 </TABLE> SELECTED HISTORICAL FINANCIAL DATA OF HAYES The following selected consolidated historical financial data of Hayes has been derived from its audited consolidated historical financial statements except for the nine months ended September 30, 1996 and 1997 and should be read in conjunction therewith and the notes thereto included herein. All of the data derived from the audited financial statements should be read in conjunction with Hayes' "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein and the consolidated financial statements and the notes thereto included herein. The unaudited amounts have been derived from the financial records, include only normal recurring adjustments and are not indicative of a full year. <TABLE> <CAPTION> THREE NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, MONTHS SEPTEMBER 30, (UNAUDITED) --------------------------------------- ENDED YEAR ENDED -------------------- DECEMBER 31, DECEMBER 31, 1992 1993 1994 1995(1)(3) 1995(1)(2)(3) 1996(1)(3) 1996(1)(3) 1997(1) ---- ---- ---- ------- ------- --------- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues ..................... $171,453 $206,191 $246,277 $269,155 $70,111 $257,452 $201,434 $146,701 Net income (loss)(3) ............. 3,883 887 (28,066) (14,383) (4,637) (13,154) (9,664) (14,522) Earnings (loss) per share ........ $ .68 $ .16 $ (4.98) $ (2.56) $ (.82) $ (2.52) $ (1.82) $ (2.91) BALANCE SHEET DATA: Total assets ..................... $ 93,409 $103,939 $124,964 $100,964 $91,696 $ 69,215 $ 77,342 $101,948 Working capital .................. 29,687 30,314 15,840 25,994 25,270 3,654 8,353 (14,444) Total debt ....................... 9,108 10,307 28,685 -- 11,134 20,854 25,657 36,231 Redeemable preferred stock, Series B ......................... -- -- -- -- -- -- -- 5,455 Stockholders' equity (deficit).... 43,039 44,125 15,897 1,683 (3,012) 5,741 9,489 (9,603) </TABLE> - -------------- (1) On November 15, 1994, Hayes filed petition for relief under Chapter 11 of the United States Bankruptcy Code. On March 8, 1996, Hayes' Chapter 11 Plan was confirmed by the U.S. Bankruptcy Court and became effective on April 16, 1996. Hayes received the final decree bringing its Chapter 11 case to a close on October 9, 1997. (2) Effective October 1, 1995, Hayes changed its year end from September 30 to December 31. (3) Included in net income (loss) are the following reorganization costs related to the Chapter 11 filing: <TABLE> <CAPTION> YEAR ENDED THREE MONTHS YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30, ENDED DECEMBER DECEMBER 31, SEPTEMBER 30, 1995 31, 1995 1996 1996 (UNAUDITED) ---- -------- ---- ---------------- <S> <C> <C> <C> <C> $5,026 $4,301 $5,378 $5,378 </TABLE> The net loss for the year ended December 31, 1996 and nine months ended September 30, 1996 also includes a gain on the sale of land of $8.2 million and includes a plant closure and inventory write-down costs associated with such plant closure of $6.0 million. Quarterly Financial Data A summary of the Company's consolidated results of continuing operations for each of the fiscal quarters for the years ended July 31, 1997 and 1996 is shown in the table below. This data includes the revenue, gross profit, and net loss of Penril for the period August 1, 1995 through November 18, 1996. The net loss from continuing operations for the fourth quarter of fiscal 1996 includes a charge of $9.7 million for restructuring charges, which are more fully described in Note 2 of the Consolidated Financial Statements and $500,000 for costs incurred related to the Penril/Bay Merger Agreement with Bay. In the first quarter of fiscal 1997 the Company recorded a one time gain on the settlement of its lawsuit with SMC of $3.5 million. In the first and second quarters of fiscal 1997, the Company paid one time merger related expenses totaling $4.0 million. <TABLE> <CAPTION> Fiscal 1997 Quarters Ended: October 31,1996 January 31, 1997 April 30, 1997 July 31, 1997 - -------------------------- --------------- ---------------- -------------- ------------- <S> <C> <C> <C> <C> Revenues $ 6,915 $ 4,593 $ 3,673 $ 2,819 Gross profit 2,323 1,279 1,768 631 Net loss (1,040) (6,232) (1,997) (4,621) Net loss per share (.12) (.52) (.17) (.35) </TABLE> <TABLE> <CAPTION> Fiscal 1996 Quarters Ended: October 31,1995 January 31, 1996 April 30, 1996 July 31, 1996 - -------------------------- --------------- ---------------- -------------- ------------- <S> <C> <C> <C> <C> Revenues $ 9,656 $ 7,691 $ 8,973 $ 13,115 Gross profit 4,757 2,691 3,304 6,274 Net loss (1,597) (3,999) (3,168) (11,904) Net loss per share (0.19) (0.43) (0.31) (1.11) </TABLE> SELECTED PRO FORMA FINANCIAL DATA The unaudited pro forma condensed combined statement of operations data gives effect to the Merger as if it had occurred at the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet data gives effect to the Merger as if it had occurred on September 30, 1997. <TABLE> <CAPTION> YEAR ENDED NINE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ----------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues .............. 278,682 157,786 Net income (loss) ......... (42,463) (28,909) Earnings (loss) per share . ( .73) (0.50) BALANCE SHEET DATA: Total assets .............. 127,840 Working capital ........... (14,064) Total debt ................ 36,974 Redeemable preferred stock, Series B ................. 5,455 Stockholders' equity ...... 5,694 </TABLE> See "Unaudited Pro Forma Condensed Combined Financial Statements"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020394_splash_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020394_splash_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2795445ff700f2cb3f0304127b6965f0d18a71a7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020394_splash_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and consolidated financial statements and notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Risk Factors." Unless the context otherwise specifies, references in this Prospectus to "Splash" and the "Company" refer to Splash Technology Holdings, Inc. and its subsidiaries, including its principal operating subsidiary, Splash Technology, Inc., as well as predecessor entities. THE COMPANY Splash develops, produces and markets color servers that provide an integrated link between desktop computers and digital color laser copiers and enable such copiers to provide high quality, high speed, networked color printing and scanning. These hybrid systems, consisting of color servers and digital color laser copiers (referred to as connected or multifunction copiers), support multiple uses including image scanning, image manipulation, printing and photocopying. The Company's products feature advanced color correction, color calibration and separations support, ease of use, time-saving workflow functionality, simulation of many color monitors and printing presses, and automatic correction for certain printing workflow problems. Commercial color printing customarily involves multiple iterations of complex, labor-intensive and costly steps, including design and composition, color retouching and other manipulation, color separation, image setting and proofing, and, finally, preparation of printing plates and printing on a large, expensive commercial press. The process involves high fixed costs and considerable time, and historically has been justified only for printing in large volumes. The broader use of desktop color displays, desktop publishing software, and desktop-based color scanners, as well as the increased availability of digital color copiers and networked and desktop color printers, has enabled a greater amount of color design and print preparation to be performed more rapidly and at lower costs than previously possible. Although the quality of both color copiers and desktop color displays has improved in recent years, users hoping to take advantage of such improvements have faced considerable difficulties due to the complexities inherent in color technology, thus creating a need for advanced, integrated, high quality, easy-to-use, and cost-effective color printing solutions. Splash servers transform color copiers into effective network-based system solutions for a variety of color printer applications from commercial and short run printing to desktop publishing and office color printing. The Company's products utilize open systems that can be readily integrated with corporate networks, enabling easy access by a broad range of end users. The use of open systems enables the Company to concentrate its development resources on value- added solutions for end users, and provides greater flexibility by allowing use of standard peripheral products and software. The Company believes it was the first among its direct competitors to commercially offer a number of significant features for multifunction copiers, including features in the areas of color calibration, color corrections, color separations and scanning. Splash sells its color server products to two of the leading providers of color copiers, Xerox Corporation (including its affiliate in Europe, Rank Xerox) ("Xerox") and Fuji Xerox Company Ltd. ("Fuji Xerox"). These original equipment manufacturers ("OEMs") integrate the Company's color servers with their digital color copiers and sell the connected systems to end users through a worldwide direct distribution network. Users of the Company's color servers include magazine publishers, advertising firms, graphic arts firms, publishing services providers, prepress and printing firms, and Fortune 500 companies with in-house graphics, marketing and advertising and publishing needs. On May 28, 1997, Splash acquired Quintar Holdings Corporation ("Quintar"), a company that designs, manufactures and markets embedded controllers for desktop color printers, as well as proprietary servers for high-speed, multifunction monochrome and color printers and copiers. Pursuant to the acquisition agreement, Splash paid to Quintar shareholders an aggregate of approximately $11.5 million in cash at closing, assumed Quintar's outstanding stock options valued at $1.6 million and agreed to pay aggregate contingent earn-out payments of up to $3.2 million, subject to achieving certain net revenue and operating income targets. See "Risk Factors--Risks Associated with Quintar Acquisition; General Risks Associated with Acquisitions," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Combined Condensed Statements of Operations," and "Business--Quintar Acquisition." Splash Technology Holdings, Inc. was incorporated in Delaware in December 1995. The Company's business operated as the Color Server Group ("CSG") division of SuperMac Technology, Inc. ("SuperMac") from late 1992 to August 1994, and after the merger of SuperMac into Radius Inc. ("Radius") as the CSG division of Radius from August 1994 until January 1996. In January 1996, the Company was acquired by an investor group led by certain entities affiliated with Summit Partners, L.P. and Sigma Partners, L.P. (the "Splash Acquisition"). The Company's executive offices are located at 555 Del Rey Avenue, Sunnyvale, CA 94086, and its telephone number is (408) 328-6300. See "Splash Acquisition" and "Certain Transactions." THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company.......... 1,250,000 shares Common Stock offered by the Selling Stockholders................................ 2,000,000 shares Common Stock to be outstanding after the offering (the "Offering")................... 13,358,561 shares(1) Use of proceeds.............................. For working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol................ SPLH </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS) <TABLE> <CAPTION> PREDECESSOR BUSINESS SPLASH TECHNOLOGY HOLDINGS, INC. --------------- ---------------------------------- NINE MONTHS -------------------- YEAR ENDED SEPTEMBER 30, YEAR ENDED ENDED ENDED --------------- SEPTEMBER 30, JUNE 30, JUNE 30, 1994 1995 1996(2) 1996(3) 1997 ------- ------- ------------- ----------- -------- (PRO FORMA) (PRO FORMA) (UNAUDITED) <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net revenue............. $16,354 $30,472 $ 47,721 $ 31,334 $51,227 Cost of net revenue..... 12,068 20,723 27,808 19,882 24,864 Gross profit............ 4,286 9,749 19,913 11,452 26,363 Operating expenses: Research and development........... 1,999 3,295 4,125 3,122 3,972 Sales and marketing.... 562 2,076 2,444 1,494 4,126 General and administrative........ 377 891 1,563 955 1,945 Amortization and write- off of technology..... -- -- 22,803 22,729 11,039 Income (loss) from operations............. 1,348 3,487 (11,022) (16,848) 5,281 Other income............ -- -- -- -- (600) Interest (income) expense, net........... -- -- 593 406 (379) Income (loss) before provision for income taxes.................. 1,348 3,487 (11,615) (17,254) 6,260 Provision for (benefit from) income taxes..... 99 1,395 (4,673) (6,929) 6,447 Net income (loss)....... $ 1,249 $ 2,092 $ (6,942) $(10,325) $ (187) </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital.......................................... $10,010 $54,438 Total assets............................................. 40,051 84,479 Total liabilities........................................ 16,099 16,099 Total stockholders' equity............................... 23,952 68,380 </TABLE> - -------- (1) Based on the number of shares outstanding as of June 30, 1997. Excludes an aggregate of approximately 802,000 shares of Common Stock issuable on the exercise of options outstanding as of June 30, 1997 at a weighted average exercise price of $15.17 per share; approximately 21,000 shares of Common Stock issuable on the exercise of options granted after June 30, 1997; approximately 1,749,000 shares of Common Stock reserved for future grants under the Company's 1996 Stock Option Plan as of the date of this Prospectus; and approximately 125,000 shares of Common Stock reserved for issuance under the Company's 1996 Employee Stock Purchase Plan. See "Use of Proceeds," "Management--Compensation Plans" and Note 8 of Notes to Consolidated Financial Statements. (2) Represents the results of operations of CSG for the four months ended January 31, 1996 plus the results of operations of the Company for the eight months ended September 30, 1996. There were no material pro forma adjustments. (3) Represents the results of operations of CSG for the four months ended January 31, 1996 plus the results of operations of the Company for the five months ended June 30, 1996. There were no material pro forma adjustments. (4) Adjusted to reflect the sale of 1,250,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $37.75 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses. See "Capitalization." ---------------- This Prospectus includes trademarks and trade names of the Company and other corporations. ---------------- Except as otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option and (ii) gives effect to the 3.5-for-1 split of the Common Stock that occurred in connection with the Company's initial public offering in October 1996. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020579_omtool-ltd_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020579_omtool-ltd_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f6b3098656003e36da907d0882535be3ab9d1cb2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020579_omtool-ltd_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," and the Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." THE COMPANY Omtool designs, develops, markets and supports open, client/server facsimile software, delivering solutions which automate and integrate fax communication throughout the enterprise. Omtool's Fax Sr. product family, licensed typically on a shrink-wrap basis, provides users with an extensive, flexible feature set for transmitting and receiving faxes and improves an organization's management of its fax communications processes by providing a suite of utility and control functions. Fax Sr. can be deployed on heterogeneous, multi-platform networks and can be integrated with both desktop and enterprise software applications as well as e-mail and groupware systems. To address the needs of large enterprises, Fax Sr. is modular and scaleable as servers, clients and fax lines can be implemented and added over time. Fax Sr. is available on the Windows NT, Hewlett Packard ("HP") UNIX and Digital Equipment Corporation ("DEC") UNIX and VMS server operating systems, and Windows 95, Windows NT, Windows 3.1.x, HTML, Macintosh, Motif and MS-DOS clients. The Company currently derives substantially all of its revenues from licenses of Fax Sr. NT, first released in March 1995, and related services and resale of related hardware. Facsimile continues to be a world-wide standard for electronic communications. With corporate communications becoming more critical and complex, a need has arisen for a facsimile software solution which enables an organization to automate and integrate fax communications throughout the enterprise and address a broad range of users' faxing requirements from person-to-person to volume broadcast transmissions. A comprehensive fax solution must take advantage of the proliferation of personal computers in the corporate workplace and the growth of the client/server computing environment. The solution must also be complementary to other communications methods such as traditional telephone and facsimile as well as emerging e-mail and groupware solutions. Fax Sr. provides a robust and flexible facsimile solution which addresses the multiple needs of corporate fax users and leverages the power of advanced computing platforms. The Company's goal is to become the leading provider of enterprise, client/server facsimile software solutions. The Company's strategy to achieve this goal includes extending technology leadership in the enterprise market and increasing its market share on the Windows NT platform. The Company intends to leverage its installed base of customers in order to promote expanded use of Fax Sr. across more users and applications at existing customer installations. In addition, the Company intends to expand its direct and indirect distribution channels to increase both domestic and international sales and to form strategic relationships with leading providers of complementary fax services and products in order to broaden market awareness of Fax Sr. The Company has recently entered into strategic alliances with UNIFI Communications, Inc. (formerly FAX International) and Xpedite Systems, Inc., providers of enhanced fax carrier services, and with Active Voice Corporation, a provider of PC-based voice mail systems and computer-telephony integration solutions. Omtool has licensed Fax Sr. to more than 1,500 customers worldwide, including Alfred Berg Inc., AT&T Corp., Bloomberg Financial Markets, Boeing, Dow Chemical, Honeywell, SmithKline Beecham and United Technologies. The Company targets large and mid-sized corporations, organizations and government entities as the primary market for Fax Sr. To address the broad range of its sales opportunities, Omtool relies on the coordinated efforts of its centralized telesales organization, its key executives and corporate account team, its marketing department and its indirect channels, including resellers, international distributors and systems integrators. The Company also resells complementary hardware products and provides customer services, including technical support. To complement its existing products and services, the Company intends to offer enhanced consulting, configuration and installation services in the future. - -------------------------------------------------------------------------------- THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company.................... 3,000,000 shares Common Stock Offered by the Selling Stockholders....... 1,000,000 shares Common Stock Outstanding after the Offering............ 11,428,239 shares(1) Use of Proceeds........................................ For working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market Symbol................. OMTL </TABLE> SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------- ----------------- 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------ <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues................................. $1,948 $3,928 $8,401 $3,271 $8,278 Gross profit................................... 1,669 3,296 6,392 2,536 6,351 Income (loss) from operations.................. (315) 417 646 288 1,080 Net income (loss).............................. (233) 416 440 187 704 Pro forma net income per common and common equivalent share(2).......................... $ 0.04 $ 0.07 Pro forma weighted average number of common and common equivalent shares outstanding(2)...... 9,929 9,488 <CAPTION> JUNE 30, 1997 ---------------------------------------- PRO PRO FORMA ACTUAL FORMA(3) AS ADJUSTED(3)(4) ------ -------- ---------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................ $ 810 $ 810 $ 25,234 Working capital...................................... 3,413 3,413 27,723 Total assets......................................... 7,669 7,669 31,979 Long-term debt, net of current portion............... 153 153 153 Convertible redeemable preferred stock............... 5,367 -- -- Total stockholders' equity (deficit)................. (944) 4,423 28,733 </TABLE> - ------------ (1) Based upon the number of shares of Common Stock outstanding at June 30, 1997. Excludes (i) 1,309,218 shares of Common Stock issuable upon the exercise of stock options outstanding at June 30, 1997 at a weighted average exercise price of $1.28 per share, of which options to purchase 321,665 shares were then exercisable and (ii) 2,114,783 shares of Common Stock reserved for future issuance pursuant to the Company's stock plans. See "Capitalization," "Management -- Stock Plans" and Notes 11 and 14 of Notes to Financial Statements. (2) Computed on the basis described in Note 2 of Notes to Financial Statements. (3) Adjusted to give effect to the automatic conversion upon the closing of this offering of all outstanding shares of Convertible Preferred Stock into an aggregate of 3,037,232 shares of Common Stock. (4) Adjusted to reflect the sale of 3,000,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $9.00 per share and the application of the estimated net proceeds therefrom. --------------------- Unless otherwise indicated, all information contained in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option; (ii) reflects the 2-for-1 stock split of the Company's Common Stock effected in January 1997; (iii) reflects the filing, prior to the closing of this offering, of an Amendment to the Certificate of Incorporation of the Company increasing the number of authorized shares of Common Stock; (iv) reflects the filing upon the closing of this offering of the Amended and Restated Certificate of Incorporation of the Company; and (v) gives effect to the conversion of all outstanding shares of Convertible Preferred Stock into Common Stock upon the closing of this offering. See "Certain Transactions," "Description of Capital Stock," "Underwriting" and Notes 2, 9, 10 and 14 of Notes to Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020620_at-home_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020620_at-home_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..16df6a0cb494b03e7c84bd276313e65af944a890
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020620_at-home_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise noted herein, information in this Prospectus assumes (i) no exercise of the Underwriters' over-allotment option and (ii) the conversion of all outstanding shares of Preferred Stock of the Company into shares of Common Stock of the Company, which will occur upon the closing of this offering. THE COMPANY At Home Corporation (the "Company") is a leading provider of Internet services over the cable television infrastructure to consumers and businesses. The Company's primary offering, the @Home service, allows residential subscribers to connect their personal computers via cable modems to a new high- speed network developed and managed by the Company. This service enables subscribers to receive the "@Home Experience," which includes Internet service over hybrid fiber-coaxial ("HFC") cable at a peak data transmission speed over 300 times faster than typical dial-up connections, "always on" availability and rich multimedia programming through an intuitive graphical user interface. The technology foundation of the @Home Experience is the Company's scalable, distributed, intelligent network architecture (the "@Network"), a "parallel Internet" that optimizes traffic routing, improves security and consistency of service, and facilitates end-to-end network management, enhancing the Company's ability to address performance bottlenecks before they affect the user experience. See "Business--@Network Architecture." The content foundation of the @Home Experience is provided by the Company's @Media group, which aggregates content, sells advertising to businesses and will provide premium services to @Home subscribers. For businesses, the Company's @Work services provide a platform for Internet, intranet and extranet connectivity solutions and networked business applications over both cable infrastructure and leased digital telecommunications lines. By combining the @Network's distributed architecture with cable, telephone and technology relationships, the @Work services provide a compelling platform for nationwide delivery of network-based business applications. The Company has developed this platform at a low incremental cost by leveraging its existing @Network investment. The Company has entered into distribution arrangements for the @Home service with affiliates of Tele-Communications, Inc. ("TCI"), Comcast Corporation ("Comcast"), Cox Enterprises, Inc. ("Cox"), Rogers Cablesystems Limited ("Rogers"), Shaw Cablesystems Ltd. ("Shaw"), Marcus Cable Operating Company, L.P. ("Marcus") and InterMedia Partners IV L.P. ("Intermedia") (collectively, together with their affiliates, the "Cable Partners"), whose cable systems "pass" (i.e., can be connected to) approximately 44 million homes in North America. The Company believes that approximately two million of these homes are currently passed by upgraded two-way HFC cable and that the Cable Partners will complete the upgrade of systems passing a majority of these homes within five years. The Company has launched its service through TCI, Comcast, Cox (collectively, the "Principal Cable Stockholders") and Intermedia in portions of 13 cities and communities (of which 11 have revenue-paying subscribers) in the United States and had more than 7,000 U.S. subscribers as of June 30, 1997. To expand distribution, the Company is aggressively seeking to work with additional United States and international cable system operators. In order to shorten time to market for cable operators, the Company provides a turnkey solution, which includes not only a technology platform, but also marketing, customer service, billing and a national brand. According to Paul Kagan Associates, Inc., cable is available to approximately 96% of the homes in the United States, and, according to Baskerville Communications, there will be approximately 203 million homes passed in Europe and the Asia Pacific region in the year 2000. The Company was founded in March 1995 on the premise that the cable infrastructure could enable the fastest, most cost-effective delivery mechanism for residential Internet services but that the actual speed of these services would ultimately be limited by the fundamental architecture of the Internet. As a result, the Company assembled a team of industry experts to develop an advanced network architecture and the custom hardware and software products that would address these limitations. Prior to launching the @Home service in September 1996, the Company implemented a nationwide backbone, designed and built its Network Operations Center with 24X7 end-to-end management capabilities, deployed regional data centers and headend equipment, implemented an integrated customer management system including billing and support for those operators that elect to obtain such services from the Company, implemented a customized browser and aggregated the multimedia content required to deliver the @Home Experience to its first subscribers. THE OFFERING <TABLE> <C> <S> Total Common Stock outstanding prior to this offering... 108,520,996 shares(1) Series A Common Stock offered........................... 9,000,000 shares Common Stock to be outstanding after this offering: Series A Common Stock outstanding after this offering.. 87,243,336 shares(1) Series B Common Stock outstanding after this offering.. 15,400,000 shares Series K Common Stock outstanding after this offering.. 14,877,660 shares Total................................................ 117,520,996 shares Use of proceeds......................................... For general corporate purposes, including working capital and capital expenditures. See "Use of Proceeds." Nasdaq National Market symbol........................... ATHM </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM MARCH 28, SIX MONTHS 1995 ENDED (INCEPTION) TO YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------- 1995 1996 1996 1997 -------------- ------------ ------- -------- <S> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues....................... $ -- $ 676 $ -- $ 1,830 Total costs and expenses....... 2,886 25,703 8,442 24,977 Loss from operations........... (2,886) (25,027) (8,442) (23,147) Net loss....................... (2,756) (24,513) (8,279) (22,804) Pro forma net loss per share(2)...................... $ (.22) $ (.21) ======== ======== Pro forma shares used in per share calculations(2)......... 111,065 111,065 ======== ======== </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term cash investments........................................... $40,929 $127,814 Working capital........................................ 29,032 115,917 Total assets........................................... 69,145 156,030 Capital lease obligations, less current portion, and other long-term liabilities........................... 11,953 11,953 Stockholders' equity................................... 42,936 129,821 </TABLE> - ------- (1) Based on the number of shares outstanding as of June 30, 1997. Excludes (i) 1,687,000 shares of Series A Common Stock then issuable upon the exercise of options outstanding under the Company's 1996 Incentive Stock Option Plan (the "First 1996 Plan") and the Company's 1996 Incentive Stock Option Plan No. 2 (the "Second 1996 Plan" and with the First 1996 Plan, the "1996 Plans") with a weighted average exercise price of $2.03 per share, (ii) 664,264 shares of Series A Common Stock reserved for issuance under the Company's 1997 Equity Incentive Plan, (iii) 400,000 shares reserved for issuance under the Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan"), (iv) 200,000 shares of Series A Common Stock issuable upon the exercise of an outstanding warrant with an exercise price of $15.00 per share and (v) 2,000,000 shares of Series A Common Stock issuable upon the exercise of outstanding warrants with an exercise price of $10.00 per share. See "Management--Employee Benefit Plans," "Description of Capital Stock" and Notes 5 and 9 of Notes to Consolidated Financial Statements. (2) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the determination of the number of pro forma shares used in per share calculations. (3) Reflects the sale of the 9,000,000 Shares of Series A Common Stock offered hereby, after deducting underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020905_boca_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020905_boca_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2cc4ede23acb78609a743ea7be4aa40ca7f832d0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020905_boca_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains certain forward-looking statements which may involve certain risks and uncertainties. The actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under "Risk Factors" and elsewhere in this Prospectus. Florida Panthers Holdings, Inc. (the "Company") currently conducts substantially all of its business through its subsidiaries, which include (i) the Boca Raton Resort and Club ("Boca Resort"), the Registry Resort at Pelican Bay ("Registry Resort"), the Hyatt Regency Pier 66 Hotel and Marina ("Pier 66") and the Radisson Bahia Mar Resort and Yachting Center ("Bahia Mar"), (ii) the Florida Panthers Hockey Club (the "Panthers"), (iii) Arena Development Company, Ltd. ("Arena Development"), a limited partnership formed for the purpose of developing the Broward County Arena, a new multi-purpose, state-of-the-art entertainment and sports facility in Broward County, Florida, (iv) Arena Operating Company, Ltd. ("Arena Operations"), a limited partnership formed for the purpose of managing and operating the Broward County Arena and (v) Florida Panthers Ice Ventures, Inc., a corporation formed for the purpose of developing ice rink facilities. In addition, the Company owns approximately 78% of Decoma Miami Associates, Inc. ("Decoma"), the entity which operates the Miami Arena, the Arena where the Panthers currently play. Unless the context otherwise requires, all references to the Company shall mean Florida Panthers Holdings, Inc. and its subsidiaries. THE COMPANY The Company is a holding company with subsidiaries currently operating in two business segments: (i) leisure and recreation (the "Leisure and Recreation Business") and (ii) entertainment and sports (the "Entertainment and Sports Business"). The Company was formed in July 1996 and, upon the completion of its initial public offering and concurrent offering (the "Initial Offerings") in November 1996, continued the operations of the Florida Panthers Hockey Club (the "Panthers"), a professional hockey team which has been a member of the NHL since 1993. Following completion of the Initial Offerings, the Company expanded into the Leisure and Recreation Business, through the ownership and operation of high-end destination luxury resorts, and diversified the Entertainment and Sports Business to include ice skating rink operations. The Company's current focus is on expanding the Leisure and Recreation Business. The primary elements of the Company's current business strategy include: (i) the development of capital projects (additional unit construction, recreational amenities and conference space) at its existing luxury resorts, (ii) the expansion of the core upscale clientele of the Leisure and Recreation Business, which will increase the Company's ability to cross-market other services to this customer base and (iii) the acquisition of other luxury resorts. In executing its business strategy, the Company continuously evaluates opportunities in other industries and businesses for potential strategic acquisitions where the Company believes it can leverage its competitive strengths and increase stockholder value. The Leisure and Recreation Business currently consists of the Company's interests in four high-end destination luxury resort operations: Boca Resort, Registry Resort, Pier 66 and Bahia Mar. Boca Resort, Registry Resort, Pier 66 and Bahia Mar are collectively referred to as the "Resort Facilities." Boca Resort is a destination luxury resort and private club fronting both the Atlantic Ocean and Intracoastal Waterway in Boca Raton, Florida. Boca Resort includes 963 luxury guest rooms, a 50,000 sq. ft. conference center, a separate 140,000 sq. ft. conference center currently under construction, a 25 slip marina, two 18 hole championship golf courses, a 31 court tennis club, five swimming pools, an indoor basketball court, two indoor racquetball courts, a fitness center, a half mile of private beach with various water sports facilities and 15 food and beverage sites ranging from five-star cuisine to beach side grills. Boca Resort has consistently been awarded the Readers' Award as one of the "Top 25 Hotels in North America" by Travel & Leisure magazine. Registry Resort is a luxury resort fronting the Gulf of Mexico in Naples, Florida, within a 90-minute drive of the east coast of South Florida. The Company currently owns approximately 68% of Registry Resort and has made offers to acquire the remaining 32%. Registry Resort includes 474 luxury guest rooms, a conference center, recreational areas, restaurant and retail outlets, a 15 court tennis facility and a nature reserve boardwalk, as well as water sports and other beach amenities. Registry Resort has received Mobile Travel Guide's Four Star Award, as well as AAA's Four Diamond Award, and has been cited by Conde Nast Traveler magazine as one of the best resorts in the United States. Pier 66 is a luxury resort and marina fronting the Intracoastal Waterway in Fort Lauderdale, Florida. Pier 66 includes 380 luxury guest rooms, a 142 slip marina, three swimming pools, meeting space and six restaurants and lounges. Pier 66 has received the Mobil Travel Guide's Four Star Award and AAA's Four Diamond Award. Bahia Mar is a resort and marina complex fronting the Atlantic Ocean in Fort Lauderdale, Florida. Bahia Mar includes 300 luxury guest rooms, a 350 slip marina, four tennis courts, meeting space and retail space. Bahia Mar has received the Mobil Travel Guide's Three Star Award and AAA's Three Diamond Award, as well as the 1995 Radisson President's Award and a City of Fort Lauderdale Community Appearance Award. The Company's Entertainment and Sports Business currently consists of the Company's hockey operations, arena development and management operations and ice skating rink operations. The Company's hockey operations consist of the ownership and operation of the Panthers. The Company's arena development and management operations involve the Broward County Arena, a new multi-purpose, state-of-the-art entertainment and sports center in Broward County, Florida. Pursuant to an operating agreement between the Company and Broward County, upon completion of the Broward County Arena, the Company will manage and operate the Broward County Arena, where the Panthers will play their home games. The Company also owns approximately 78% of Decoma, the entity which operates the Miami Arena, the arena where the Panthers play their home games. The Company's ice skating rink activities consist of the operation of Incredible Ice, a twin-pad ice skating rink facility in Coral Springs, Florida, and Gold Coast, an ice skating rink facility in Pompano Beach, Florida. The Company was incorporated in Florida on July 3, 1996. In connection with the Initial Offerings, the Class A Common Stock began trading on The Nasdaq National Market on November 13, 1996 under the symbol "PUCK." On July 11, 1997, the Class A Common Stock began trading on the NYSE under the symbol "PAW." RECENT DEVELOPEMENTS On September 8, 1997, the Company announced that it had entered into a definitive agreement to acquire the Rolling Hills Golf Course, which is located in Davie, Florida, for approximately $8.0 million in cash. The consummation of the transaction is subject to customary conditions and approvals. The Company's principal executive offices are located at 450 East Las Olas Boulevard, Fort Lauderdale, Florida 33301 and its telephone number is (954) 712-1300. THE OFFERING <TABLE> <S> <C> Class A Common Stock Offered................. 18,609,491 shares Common Stock to be Outstanding after the Offering Class A Common Stock(1)................. 34,643,796 shares Class B Common Stock(2)................. 255,000 shares ----------------- Total................................. 34,898,796 shares Use of Proceeds.............................. The Company will not receive any proceeds from the sale of Class A Common Stock hereby offered by the Selling Stockholders. New York Stock Exchange Symbol............... PAW </TABLE> - ------------------------------ (1) Includes 2,921,900 shares of Class A Common Stock reserved for issuance upon exercise of exchange rights which were issued in connection with the acquisition of Boca Resort. Does not include 869,810 shares of Class A Common Stock reserved for issuance upon the exercise of warrants to purchase shares of Class A Common Stock at a purchase price of $29.01 per share, which were issued in connection with the acquisition of Boca Resort, or 2,600,000 shares of Class A Common Stock reserved for issuance under the Company's stock option plan (the "Stock Option Plan"), of which 2,077,454 shares are subject to outstanding options with exercise prices ranging from $10 per share to $27.30 per share. The exercise price of each of these options is the fair market value of the Class A Common Stock on the date of grant. See "Management -- Stock Option Plan." (2) All the outstanding shares of Class B Common Stock are currently owned by Mr. Huizenga.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020910_transcend_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020910_transcend_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d3ede8a58ff5b51a1845eab994c42c7abab6629c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020910_transcend_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including information under "Risk Factors." THE COMPANY Transcend Therapeutics, Inc. ("Transcend" or the "Company") develops novel pharmaceuticals for the critical care market, with its initial compounds focusing on the treatment of diseases associated with oxidative stress and resultant tissue damage. The Company's lead product candidate, Procysteine(R), has been evaluated in two Phase II clinical trials involving patients with acute respiratory distress syndrome ("ARDS"). In the second quarter of 1997, the Company began a Phase III clinical trial to determine the safety and efficacy of Procysteine in the treatment of ARDS. In February 1997, the Company and Boehringer Ingelheim International GmbH ("BI") entered into a Development and License Agreement (the "BI Agreement") relating to the worldwide development and marketing of intravenous formulations of Procysteine ("Procysteine i.v.") for the treatment and prevention of ARDS and the related condition, multiple organ dysfunction ("MOD"). BI has agreed to pay Transcend up to $46.0 million (consisting of a $5.0 million license fee paid in March 1997, a $5.0 million equity investment and $36.0 million in contingent milestone payments related to ARDS and MOD), as well as royalties on any related product sales. The Company's initial product candidates are small molecule, glutathione-repleting agents designed to prevent or limit oxidative tissue damage from reactive oxygen species ("ROS"), highly reactive toxic molecules produced as part of the body's immune response. Glutathione, a molecule found in high concentrations throughout the body, is one of the principal mechanisms for neutralizing ROS. Preclinical and clinical studies have demonstrated that in some conditions involving massive acute inflammation, including severe infection, multiple trauma and extensive burns, large quantities of ROS may be produced. Studies have also indicated decreased levels of glutathione in such conditions. When the body's production of ROS increases and exceeds the capacity of glutathione and other antioxidant systems to combat oxidative stress, tissue damage in the body's major organs can result, leading to organ dysfunction and, in many cases, death. The Company's strategy is to exploit the potential of the glutathione-repleting agents currently in its portfolio, with a particular focus on products for the critical care market, and to enhance its product pipeline through collaborations with academic and research institutions. The Company plans to commercialize its product candidates through strategic alliances, as in its alliance with BI, and to retain strategically important development, marketing or co-promotion rights in order to enhance its product development opportunities. ARDS, a disorder characterized by severe lung dysfunction, is a devastating complication of conditions associated with massive acute inflammation, such as severe infection, multiple trauma and extensive burns. This disorder affects an estimated 150,000 patients in the United States annually, and has a mortality rate of approximately 40 percent. There are currently no commercially available drug treatments for ARDS. Treatment for patients suffering from ARDS is administered in a hospital intensive care unit and is generally limited to supportive care consisting of highly invasive mechanical ventilation. Mechanical ventilation involves forcing air containing high concentrations of oxygen into the lungs via an endotracheal tube inserted through a patient's nose or mouth. Due to the invasive nature of this procedure, mechanical ventilation places a patient at an increased risk of serious complications, including hospital-acquired infection with drug resistant organisms. MOD, the failure of two or more organs, generally has catastrophic consequences for the patient. Organ systems that are frequently involved in MOD include the lungs (ARDS), the kidneys (acute renal failure), the liver (acute hepatic failure) and the heart (cardiovascular collapse). The mortality rate for MOD patients is approximately 60 percent when two organs fail and exceeds 90 percent when a - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- third organ fails. The Company estimates that there are over 750,000 patients annually in the United States at risk of MOD. Currently, there are no commercially available drugs to prevent or treat MOD. Treatment with Procysteine is a novel pharmacological approach to diseases associated with oxidative stress and resultant tissue damage such as ARDS and MOD. Procysteine provides a method for introducing into cells the amino acid cysteine, an essential building block of glutathione. Preclinical studies have documented Procysteine's ability to increase intracellular levels of glutathione and prevent ROS damage. The Company has developed intravenous and oral formulations of Procysteine and has characterized the safety profile and pharmacokinetics of these formulations in clinical trials involving over 265 subjects in total. Company-sponsored Phase II trials with intravenously administered Procysteine have indicated the potential efficacy of Procysteine in the treatment of patients with ARDS. In the first Phase II trial, which involved 32 patients treated with Procysteine or placebo, Procysteine-treated patients gained independence from mechanical ventilation a median of five days earlier than did placebo-treated patients. The second Phase II trial, which involved a total of 25 patients, indicated a similar reduction in median days on mechanical ventilation among Procysteine-treated patients as compared with placebo-treated patients. Procysteine-treated patients also regained efficiency in transporting oxygen to the blood stream to a greater degree than did placebo-treated patients, as indicated by an established measure of lung function. Based on these results, in May 1997, the Company began a pivotal Phase III clinical trial of Procysteine i.v. for use in the treatment of ARDS. Although two clinical trials are a customary basis for approval of new drugs, based on discussions with the United States Food and Drug Administration, if the results of the ongoing Phase III clinical trial are conclusive, the Company expects to be able to submit an NDA upon completion of one trial. If the results of the current Phase III trial alone are not conclusive, the Company does not currently plan to conduct further Phase III clinical trials of Procysteine for the treatment of ARDS. See "Risk Factors -- Uncertainty Associated with Clinical Trials." Under the BI Agreement, the Company granted BI an exclusive worldwide license to use and sell Procysteine i.v. for all pharmaceutical applications. The Company has principal responsibility for, and will bear all expenses related to, clinical development of Procysteine i.v. for use in the treatment of ARDS. The Company has also granted BI the right, at its election, to participate in the development of and to commercialize Procysteine i.v. worldwide for the treatment and prevention of MOD. The Company has retained the right to co-promote Procysteine i.v. in the United States. The Company is responsible for manufacturing and supplying BI with Procysteine i.v. for clinical trials and commercial purposes, including responsibility for manufacturing-related regulatory compliance. Pursuant to the BI Agreement, BI has paid the Company an upfront license fee of $5.0 million and has agreed to purchase $5.0 million of equity securities of the Company in a private placement. BI has expressed its intention to fulfill this obligation by purchasing 500,000 shares of Common Stock in the Offering. BI has also agreed to make additional payments to the Company, which could total up to $36.0 million, upon the achievement of clinical development and regulatory milestones relating to ARDS and, if BI exercises its participation rights, to MOD. More than half of the milestone payments are payable with respect to MOD-related development. In addition, BI will pay the Company royalties (and, if applicable, co-promotion payments in the United States) on any sales of Procysteine i.v. Based on Procysteine's mechanism of action, the Company believes that the drug has potential applications in other diseases. Transcend has conducted Phase I/II clinical trials with Procysteine to determine its potential application for the treatment of amyotrophic lateral sclerosis and atherosclerotic cardiovascular disease. The Company plans to evaluate the results of these trials to determine whether to conduct further Phase II clinical trials for either or both of these indications. If such studies are conducted and yield positive results, the Company would seek to outlicense its rights to oral Procysteine for these indications. The Company was organized in Delaware in December 1992 under the name Free Radical Sciences, Inc. and changed its name to Transcend Therapeutics, Inc. in June 1995. The Company's - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- executive office is located at 640 Memorial Drive, Cambridge, Massachusetts 02139 and its telephone number is (617) 374-1200. THE OFFERING <TABLE> <S> <C> Common Stock offered.................................... 1,800,000 shares Common Stock to be outstanding after the Offering....... 5,712,065 shares(1) Use of proceeds......................................... To fund clinical trials and research and development programs, to acquire and/or license technology rights or compounds and for other general corporate purposes. Proposed Nasdaq National Market symbol.................. TSND </TABLE> - --------------- (1) Based on shares outstanding as of March 31, 1997. Includes an aggregate of 3,018,282 shares of Common Stock issuable upon the automatic conversion of outstanding shares of Series A, Series B and Series C Convertible Preferred Stock upon the closing of the Offering. Also includes an aggregate of 103,900 shares of Common Stock, to be issued upon the closing of the Offering in exchange for all of the Company's outstanding Nonconvertible Redeemable Preferred Stock. Excludes (i) 362,152 shares of Common Stock issuable upon exercise of outstanding options as of March 31, 1997 at a weighted average exercise price of $1.20 per share; (ii) 375,965 additional shares of Common Stock reserved for future grants of options or awards under the Company's Amended and Restated 1994 Equity Incentive Plan as of March 31, 1997; (iii) 5,000 shares of Common Stock reserved for issuance upon exercise of a warrant outstanding as of March 31, 1997 at an exercise price of $5.00 per share; and (iv) 51,950 shares of Common Stock reserved for issuance upon the exercise of warrants to purchase such stock. See "Management -- Amended and Restated 1994 Equity Incentive Plan," "Business -- Boehringer Ingelheim," "Certain Transactions" and "Description of Capital Stock." - ------------------------------------------------------------------------------- SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, --------------------------------------- ----------------- 1993 1994 1995 1996 1996 1997 ------ ------- ------- ------- ------- ------ <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue........................................ $6,095(1) $ -- $ -- $ -- $ -- $5,000(2) Total operating expenses....................... 6,124 3,742 4,384 3,802 874 1,472 ------ ------- ------- ------- ------- ------- Income (loss) from operations.................. (29) (3,742) (4,384) (3,802) (874) 3,528 Other income (expense)......................... -- 139 (66) (325) (138) 25 ------ ------- ------- ------- ------- ------- Net income (loss).............................. $ (29) $(3,603) $(4,450) $(4,127) (1,012) 3,553 ====== ======= ======= ======= ======= ======= Net income (loss) to common stockholders....... $ (29) $(4,714) $(5,931) $(9,207) $(1,382) $3,523 ====== ======= ======= ======= ======= ======= Pro forma net income (loss) per common share(3)..................................... $ (2.31) $ .88 ======= ======= Pro forma weighted average common shares outstanding(3)............................... 3,981 3,981 ======= ======= </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------------------------- PRO FORMA ACTUAL PRO FORMA(4) AS ADJUSTED(5) -------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Restricted cash(6)............................................ $ 4,350 $ 4,350 $ 9,350 Unrestricted cash and cash equivalents........................ 1,146 1,146 12,218 Working capital............................................... 4,354 4,354 20,927 Total assets.................................................. 6,797 6,797 22,036 Redeemable preferred stock.................................... 891(7) 891 -- Deficit accumulated during the development stage.............. (16,166) (16,166) (16,344) Total stockholders' equity (deficit).......................... (15,460) 4,716 21,347 </TABLE> - --------------- (1) Reflects a one-time contract research fee of $6,095,000 for various research and development services. See Note 2 of Notes to Financial Statements. (2) Reflects a one-time license fee of $5.0 million received in connection with the signing of the BI Agreement. See "Business -- Boehringer Ingelheim." (3) See Note 2 of Notes to Financial Statements for information concerning the computation of pro forma net loss per common share. (4) Presented on a pro forma basis to give effect to the automatic conversion of all of the outstanding shares of Series A, Series B and Series C Convertible Preferred Stock upon the closing of the Offering into an aggregate of 3,018,282 shares of Common Stock. See "Certain Transactions" and "Description of Capital Stock -- Series Convertible Preferred Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001020999_superior_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001020999_superior_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9d9802861f11f534298830a131efc6715973bc8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001020999_superior_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. Unless indicated otherwise, all information contained in this Prospectus assumes that the Underwriters over-allotment option is not exercised. The Company has two wholly-owned operating subsidiaries, Superior Consultant Company, Inc. ("Superior") and Enterprise Consulting Group, Inc. ("Enterprise," formerly known as UNITIVE Corporation). Unless the context otherwise indicates, all references to the "Company" include Superior and Enterprise. THE COMPANY The Company, through Superior, is a national healthcare consulting firm that provides a wide range of information technology ("IT") consulting and strategic and operations management consulting services to a broad cross-section of healthcare industry participants and healthcare information system vendors. The Company uses its in-depth institutional knowledge and nationally deployed group of experienced consultants to help clients plan and execute business strategies. The Company's comprehensive continuum of solutions includes: strategic planning and operations management consulting; information systems planning, implementation and integration; and interim management and outsourcing. The Company's healthcare consulting services integrate many diverse facets and constituencies of the healthcare industry. Through its strategic consulting, the Company brings together the healthcare and business relationships required to establish and maintain efficient and collaborative Integrated Delivery Networks ("IDNs"). Through its operations management consulting, IT project consulting, interim management and IT outsourcing, the Company links the needs and optimizes the contributions of clinical, information and management personnel. Through its IT implementation, planning and integration consulting, the Company forges a value-added link between healthcare information systems vendors and their customers by maximizing the potential of existing technology and providing a bridge to emerging technologies. The Company's broad expertise in numerous healthcare information systems and technologies and its independent status enable the Company to recommend and implement customized solutions that are unbiased toward specific organizations including hardware and software vendors. The Company believes several competitive factors distinguish it from other participants in the healthcare consulting market, including: (i) an extensive healthcare focus giving the Company an in-depth knowledge of the healthcare industry and a detailed understanding of each client's particular business environment and market dynamics; (ii) proprietary information and communication systems which are used by the Company's consultants on a daily basis to access product and industry knowledge, facilitate seamless geographic communication and effectively manage and complete engagements; (iii) recognized expertise resulting from Superior's experienced healthcare consultants, who have an average of over 17 years of healthcare and IT experience; (iv) a demonstrated ability to attract outsourcing clients; (v) an ability to recruit and retain highly experienced personnel which is enhanced by the Company's motivational and interactive work environment; (vi) a structured framework and supportive culture for education, skills enhancement and personnel development; (vii) an extensive knowledge of the products and technologies of major healthcare information system vendors; and (viii) long-term client relationships that often create opportunities for additional engagements. The Company serves clients across a broad cross-section of the healthcare industry. From January 1, 1996 through June 30, 1997, the Company provided services to over 420 healthcare clients on over 1,000 engagements. The Company believes that its long-term relationships, in-depth knowledge of its client's needs and its broad range of services provide it with significant advantages over its competitors in marketing additional services and winning new engagements. In each of the last three completed fiscal years, the Company's revenues from clients served in the prior year exceeded 75% of total revenues. The Company's goal is to be the preferred, if not sole, provider of a broad range of solutions for each of its clients. The healthcare industry continues to undergo rapid, profound change as healthcare providers face external and internal pressures to meet the competitive demands of the marketplace, comply with increasing government regulations and cope with the advent of managed care. As industry consolidation and the formation of IDNs create larger and increasingly far-reaching healthcare organizations, providers must place greater focus on information management and business process solutions to control costs, demonstrate quality, measure performance and increase efficiency. Those pressures have driven the healthcare industry's substantial spending on IT, which was estimated by International Data Corporation to have been approximately $9.9 billion in 1995. Healthcare IT has grown increasingly complex, costly and burdensome due to the challenges of deploying new technology, implementing new enterprise-wide information systems, maintaining older systems and meeting staffing requirements in a market with an insufficient pool of qualified IT professionals. In addition, the changing business environment has also produced an evolving range of strategic and operational options for healthcare entities, many of which are unfamiliar to an industry that has historically operated under a non-aligned, third-party payor environment. As a result, the Company believes that healthcare organizations will continue to turn to outside consultants for a wide range of IT, strategic and operational solutions. For example, according to DataQuest, expenditures by healthcare industry participants on IT professional services have grown at a compound annual rate of 14.9% from an estimated $2.5 billion in 1994 to an estimated $3.3 billion in 1996. The Company's growth strategy is focused on: (i) growing the core business; (ii) providing outsourcing; (iii) pursuing strategic acquisitions and alliances; and (iv) intensifying its geographic presence. By successfully achieving these goals, the Company believes it can further enhance its leadership position in the healthcare consulting industry. In addition, the Company's strategy focuses on expanding Enterprise, which assists its diverse group of clients in various industries with network and telecommunication design and acquisition, enterprise messaging, intranet and web strategies, workgroup consulting and software and application development solutions. The Company intends to capitalize on opportunities to cross-market Enterprise's groupware development and management services to its healthcare clients while continuing to expand Enterprise's business across a broad range of industries. RECENT DEVELOPMENTS In pursuit of its growth strategy, in 1997 the Company entered into three multi-year IT outsourcing agreements and acquired three companies which had combined aggregate revenue of approximately $21.1 million for their most recently completed fiscal years. . In January 1997, the Company entered into a five-year outsourcing agreement with a new client, Zieger Healthcare Corporation ("Zieger"). Under the Zieger agreement, the Company assumed responsibility for the information systems function, including planning, project management, "just-in-time" opportunities and data center operations, for Botsford General Hospital in Farmington Hills, Michigan ("Botsford"). The Company hired most of Botsford's existing IT staff who now serve Botsford or other clients of the Company. . In March 1997, the Company entered into a five-year outsourcing agreement with The Detroit Medical Center ("Detroit Medical"), an existing client. The agreement with Detroit Medical encompasses a wide array of applications management services, including patient, financial, clinical and operational projects. A portion of Detroit Medical's IT staff joined the Company and continue to serve Detroit Medical or other Company clients. . In September 1997, the Company entered into a comprehensive three-year IT outsourcing agreement with the Georgetown University Medical Center, an existing client which serves the entire Georgetown academic research clinical enterprise, including the faculty practice group ("Georgetown"). Under the Georgetown agreement, the Company will assume responsibility for Georgetown's entire IT function, including planning, applications implementation, project management, data center operations and implementation of a multi-year strategic plan. A majority of Georgetown's IT staff has joined the Company and will provide service to Georgetown or other clients of the Company. . On March 12, 1997, the Company acquired The Kaufman Group, Inc. ("The Kaufman Group"), a California-based healthcare consulting business, for up to approximately $4.7 million in cash and $1.6 million in Common Stock (74,590 shares). The Kaufman Group is a managed care consulting leader, advising provider organizations on a wide range of matters including mergers, acquisitions and alliances. The Kaufman Group is operating as a practice area within Superior, and its market research, strategy, transaction and valuation services complement the Company's existing services, broaden its service offerings and open new opportunities for cross-selling its other services. . On July 29, 1997, the Company acquired COMSUL, Ltd. ("COMSUL") for approximately $7.7 million in Common Stock (240,630 shares). COMSUL specializes in information systems, telecommunications, and corporate facilities and organizational design for a wide range of clients and has offices in New York, California and Texas. COMSUL has become the Network and Telecommunications Division of Enterprise, enhancing the geographic reach and scope of its business. . On August 14, 1997, the Company acquired Chi Systems, Inc. ("Chi"), for approximately $11.2 million in Common Stock (331,509 shares). Chi, based in Ann Arbor, Michigan, became an operating division of Superior and has offices in Philadelphia, Chicago and Denver. Chi's service offerings encompass strategic and business planning, facility planning and reconfiguration, ambulatory care planning, operations and quality improvement, clinical program planning, case management, patient-centered care, post-acute care and quality outcomes management. On October 22, 1997, the Company reported financial results for the three and nine month periods ended September 30, 1997. See "Recent Financial Results." THE OFFERING <TABLE> <S> <C> Common Stock offered by the 2,000,000 shares Company........................... Common Stock offered by the Selling 1,000,000 shares Stockholders...................... Common Stock outstanding immediately after the Offering.... 10,206,464 shares (1) Use of proceeds.................... Expansion of existing operations, including outsourcing, development of new service of- ferings, possible acquisitions of related businesses and general corporate purposes, including working capital. See "Use of Pro- ceeds." Nasdaq National Market Symbol...... SUPC </TABLE> - -------------------- (1) Excludes (i) 539,478 shares of Common Stock reserved for issuance pursuant to stock options granted under the Company's Long-Term Incentive Plan as of September 30, 1997 at a weighted average exercise price of $21.22 per share; and (ii) 1,860,522 additional shares of Common Stock reserved for future issuance under the Company's Long-Term Incentive Plan. See "Management--Employee Benefit Plans--Long-Term Incentive Plan" and Note 6 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- ------------------------- PRO PRO FORMA FORMA 1992 1993 1994 1995 1996 1996(1)(2) 1996 1997 1997(2) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues............... $14,316 $15,559 $19,234 $25,906 $35,925 $40,130 $16,547 $25,974 $26,975 Cost of services....... 6,822 6,802 8,505 12,008 17,743 18,926 8,197 12,963 13,275 Selling, general and administrative expenses.............. 5,712 6,200 8,223 10,045 13,498 14,380 6,250 9,925 10,180 Executive compensation expense(3)............ 3,480 1,931 2,445 3,730 4,579 1,885 2,600 444 604 ------- ------- ------- ------- ------- ------- ------- ------- ------- Earnings (loss) from operations............ (1,698) 626 61 123 105 4,939 (500) 2,642 2,916 Interest and other expense (income)...... (34) 22 (28) (58) (359) (380) (6) (976) (976) ------- ------- ------- ------- ------- ------- ------- ------- ------- Earnings (loss) before income taxes.......... (1,664) 604 89 181 464 5,319 (494) 3,618 3,892 Income taxes........... -- -- -- 165 886 2,177 13 1,440 1,767 ------- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings (loss).... $(1,664) $ 604 $ 89 $ 16 $ (422) $ 3,142 $ (507) $ 2,178 $ 2,125 ======= ======= ======= ======= ======= ======= ======= ======= ======= Net earnings per share. $ 0.57 $ 0.28 $ 0.28 ======= ======= ======= Weighted average number of common and common equivalent shares outstanding........... 5,530 7,688 7,718 ======= ======= ======= </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ---------------------- ACTUAL AS ADJUSTED(4) <S> <C> <C> BALANCE SHEET DATA: Working capital......................................... $36,752 $104,565 Total assets............................................ 51,993 119,806 Total debt.............................................. -- -- Total stockholders' equity.............................. 45,188 113,001 </TABLE> - -------------------- (1) The pro forma statement of operations data for the year ended December 31, 1996 has been computed by adjusting the Company's net earnings to (i) eliminate executive compensation expense in excess of the amount of executive compensation (including the full amount of potential bonus) that would have been paid had executive compensation agreements, which became effective on October 16, 1996, the closing date of the Company's initial public offering, been effective throughout such period; and (ii) record income taxes, assuming an effective tax rate of 39.4%, which would have been recorded had Superior been a C Corporation during such period. (2) Gives effect to the acquisition of The Kaufman Group as if it had occurred on January 1, 1996. Does not give effect to the acquisitions of COMSUL and Chi which will be reflected in the Company's financial statements for the quarter ending September 30, 1997. COMSUL and Chi had aggregate revenues of approximately $16.9 million for their most recently completed fiscal years. (3) Executive compensation expense includes salary and bonuses for Richard D. Helppie, Jr., Charles O. Bracken and Robert R. Tashiro. The Company entered into agreements with these three officers, effective October 16, 1996, the closing date of the Company's initial public offering, through December 31, 1997, which will provide them with annual compensation in the aggregate amount of approximately $1.1 million, comprised of base salary and bonus compensation based on achievement of certain pre-determined performance criteria. These limitations did not apply to amounts paid to these three officers on or prior to the closing of the Company's initial public offering. (4) Adjusted to give effect to the sale by the Company of 2,000,000 shares of Common Stock offered hereby at an assumed public offering price of $35 7/8 per share, net of underwriting discounts and commissions and estimated costs of this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021010_edge_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021010_edge_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..585c3b50c68021be85f44c7c9ccc6a6ac6297564
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021010_edge_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) gives effect to the Combination Transactions (as defined below under "--The Combination Transactions") and assumes that all interests that are the subject of such transactions are acquired by the Company in exchange for the issuance of approximately 4,700,000 shares of common stock, par value $.01 per share, of the Company (the "Common Stock") and (ii) assumes that the Underwriters' over-allotment option will not be exercised. Unless otherwise indicated by the context, references herein to the "Company" mean Edge Petroleum Corporation, a Delaware corporation that is the issuer of the Common Stock offered hereby, and its corporate and partnership subsidiaries and predecessors. Certain terms used herein relating to the oil and natural gas industry are defined in the Glossary of Certain Industry Terms included elsewhere in this Prospectus. THE COMPANY OVERVIEW The Company explores for oil and natural gas by emphasizing the integrated application of highly advanced data visualization techniques and computerized 3-D seismic data analysis to identify potential hydrocarbon accumulations. The Company believes its approach to processing and analyzing geophysical data differentiates it from other independent exploration and production companies and is more effective than conventional 3-D seismic data interpretation methods. The Company utilizes a fully integrated, client-server environment including nine workstation nodes with a high performance Silicon Graphics server. This hardware configuration enables the Company to utilize advanced interpretation software, including both Earth Cube and Voxel Geo technology. The Company also believes that it maintains one of the largest databases of onshore South Texas Gulf Coast 3-D seismic data of any independent oil and gas company, and is continuously acquiring substantial additional data within this core region. The Company acquires 3-D seismic data by organizing and designing regional data acquisition surveys for its proprietary use, as well as through selective participation in regional non-proprietary 3-D surveys. The Company negotiates seismic options for a substantial majority of the areas encompassed by its proprietary surveys, thereby allowing it to secure identified prospect leasehold interests on a non-competitive, pre-arranged basis. In the Company's non-proprietary 3-D survey areas, the Company's technical capabilities allow it to rapidly and comprehensively evaluate large volumes of regional 3-D seismic data, facilitating its ability to identify attractive prospects within a surveyed region and to secure the corresponding leasehold interests ahead of other industry participants. The Company's extensive technical expertise has enabled it to internally generate all of its 3-D prospects drilled to date and to assemble a large portfolio of 3-D based drilling prospects. The Company pursues drilling opportunities that include a blend of shallower, normally pressured reservoirs that generally involve moderate costs and risks as well as deeper, over- pressured reservoirs that generally involve greater costs and risks, but have higher economic potential. The Company mitigates its exposure to exploration costs and risk by conducting its operations with industry partners, including major oil companies and large independents, that generally pay a disproportionately greater share of seismic acquisition and, in many instances, leasing and drilling costs than the Company. The Company has experienced rapid increases in reserves, production and cash flow since early 1995 due to the growth of its 3-D based drilling activities and the retention of progressively larger interests in its exploration projects. From January 1, 1995 to December 31, 1996, reserves discovered from Company-generated prospects totaled 99.4 Bcfe, while the Company's net proved reserves increased from 5.9 Bcfe to 17.3 Bcfe at an average cost to the Company of $0.59 per Mcfe. The Company drilled 13 gross (0.42 net) wells in 1994, 35 gross (13.5 net) wells in 1995 and 45 gross (19.8 net) wells in 1996. For the period from January 1, 1995 through December 31, 1996, the Company's commercial well success rate was approximately 68% for the 80 gross (33.3 net) exploratory wells drilled (of which 73 were based on its interpretation of 3-D seismic data). The Company's future growth will be driven by the drilling and development of existing opportunities from its prospect portfolio as well as new 3-D based prospects that are continually being identified by the Company's exploration team. The Company intends to substantially increase its drilling activities and has budgeted 120 gross (46.3 net) wells to be drilled in 1997. The Company currently anticipates increasing its capital expenditure budget to at least $20.0 million in 1997 from $10.5 million in 1996. The Company believes the proceeds of this Offering will enable it to increase the number and size of additional 3-D seismic acquisition projects in which it participates, accelerate its drilling activities and retain a greater share of the reserves it discovers. BUSINESS STRATEGY The Company's business strategy is to expand its reserves, production and cash flow through a disciplined, integrated technology-based program of exploring for oil and natural gas, which emphasizes the following key components: FOCUSED EXPLORATION. The Company intends to maintain its exploration focus along the onshore Gulf Coast with continued emphasis in South Texas because of its 3-D seismic expertise in this region. The Company believes, based on the results of its recent exploration activities, that significant undiscovered reserves remain in this region. The Company also plans to utilize its existing database consisting of 567 square miles of 3-D seismic and geologic data (509 square miles of which are in South Texas) and its knowledge of the region's producing fields and trends to further expand its operations within this core region. The Company is currently in the process of acquiring an additional 459 square miles of 3-D seismic data in South Texas, which the Company believes will generate a significant number of additional prospects in 1997 and beyond. TECHNOLOGICAL EXPERTISE. The Company seeks to explore for and add oil and natural gas reserves through its advanced 3-D seismic data visualization and interpretation techniques. These techniques enable its exploration team to analyze large amounts of 3-D seismic information and to rapidly identify important patterns or attributes in the data which may indicate hydrocarbon traps. The Company's technical abilities have allowed it to discover oil and natural gas reservoirs in existing producing trends with geological complexities that have eluded conventional interpretation. The Company plans to continue to enhance its visualization and interpretation strengths as new technologies and processes are developed. SOPHISTICATED AND EXPERIENCED TECHNICAL TEAM. The Company has assembled a team of highly talented geoscientists and other technical personnel who are experienced in the use of advanced exploration methodologies, and it actively seeks to identify and attract new members to its exploration team. The Company provides its personnel with a technologically advanced work environment, training and results-oriented compensation, including participation in the Company's stock option plan. The Company believes that the use of advanced technology by its technical personnel together with increased capital resources will be critical components to implementing its business strategy. PROSPECTS WITH ATTRACTIVE RISK/REWARD BALANCE. The Company typically retains all or the majority of its interests in prospects with normally pressured and generally shallow reservoirs. Such prospects are often located in areas with existing pipelines and production infrastructure, which facilitate and expedite the commencement of production and cash flow. The Company typically sells to industry partners, on a promoted basis, a portion of its interests in prospects that involve higher costs and greater risks, or consist of deep, over-pressured and often larger reservoirs, in order to mitigate its exploration risk and fund the anticipated capital requirements for the portion of those prospects it retains. CONTROL OVER CRITICAL EXPLORATION FUNCTIONS. In its participation agreements with industry partners, the Company generally seeks to exercise control over what it believes to be the most critical functions in the exploration process. These functions include determining the area to explore; managing the land permitting and optioning process; determining seismic survey design; overseeing data acquisition and processing; preparing, integrating and interpreting the data; and identifying each prospect and drill site. The Company seeks operator status and control over the remaining aspects of field operations when it believes its expertise can add value to these functions. CURRENT EXPLORATORY PROJECTS The Company is currently evaluating 14 exploration project areas covering approximately 1,026 square miles (656,640 acres) that are based on 3-D seismic surveys ranging from regional non-proprietary group shoots to single field proprietary surveys. To date, all project areas for which seismic data has been interpreted have yielded multiple prospects and drill sites. The Company is continuing to receive and interpret data covering these project areas and believes that each project area has the potential for additional prospects and drill sites. The Company's partners in these projects include, among others, Belco Oil and Gas Corp., Carrizo Oil and Gas, Inc., Chevron Corporation, Cheyenne Petroleum Company, IP Petroleum Company, Inc., KCS Energy, Inc., Pennzoil Company, Phillips Petroleum Company and Texaco Inc. For additional information as to these project areas, see "Business--Significant Project Areas." 1997 3-D BASED EXPLORATION PROGRAM <TABLE> <CAPTION> SQUARE MILES OF GROSS ACREAGE 3-D SEISMIC DATA SCHEDULED ADDITIONAL LEASED OR RELATING TO 1997 1997 BUDGETED TOTAL 1997 UNDER OPTION AT PROJECT AREAS PROJECT AREA WELLS (/1/) WELLS (/2/) BUDGETED WELLS DECEMBER 31, 1996 - ------------- ---------------- ----------- ------------- -------------- ----------------- <S> <C> <C> <C> <C> <C> TEXAS Encinitas/Kelsey...... 32 6 2 8 9,110 Everest............... 340 (/3/) 8 11 19 4,888 Cameron............... 325*(/3/) * * * * Nita/Austin........... 42 2 2 4 19,119 Spartan............... 23 5 1 6 5,855 Belco................. 114* * 41(/4/) 41(/4/) 36,657 Tyler................. 25 1 -- 1 3,750 Buckeye............... 20* * 11(/4/) 11(/4/) 12,000 Hiawatha.............. 23 3 9 12 14,985 East McFaddin......... 11 2 5 7 6,640 Triple "A"............ 13 -- 1 1 2,830 MISSISSIPPI Tallahala Creek....... 28 4 -- 4 3,240 Quito................. 10 1 3 4 2,760 ALABAMA Barnett............... 20 2 -- 2 578 ----- --- --- --- ------- Total................... 1,026 34 86 120 122,412 ===== === === === ======= </TABLE> - -------- * 3-D seismic data is currently being acquired and/or processed in the project area. (1) Consists of identified drill sites that are fully evaluated, leased and have been or are scheduled to be drilled during 1997. (2) Consists of budgeted wells based upon the Company's 1997 capital budget. The number of budgeted wells drilled could be materially affected by drilling results of other scheduled or budgeted wells. There is less certainty as to the drilling of these wells than with scheduled wells. (3) Represents non-proprietary group shoots in which the Company is a participant. (4) Includes prospects for which 3-D seismic data is being acquired. The number of wells indicated is based upon statistical results of drilling activities in adjoining Company 3-D project areas that the Company believes are geologically similar. Although the Company is currently pursuing each scheduled or budgeted well as set out in the preceding table, there can be no assurance that these wells will be drilled at all or within the expected timeframe. The final determination with respect to the drilling of any scheduled or budgeted wells will be dependent upon a number of factors, including (i) the results of exploration efforts and the acquisition, review and analysis of the seismic data, (ii) the availability of sufficient capital resources by the Company and the other participants for the drilling of the prospects, (iii) the approval of the prospects by other participants after additional data has been compiled, (iv) economic and industry conditions at the time of drilling, including prevailing and anticipated prices for oil and natural gas and the availability of drilling rigs and crews, (v) the financial resources and results of the Company, and (vi) the availability of leases on reasonable terms and permitting for the prospect. There can be no assurance that any of the scheduled or budgeted wells identified on the preceding table will, if drilled, encounter reservoirs of commercially productive oil or natural gas. See "Risk Factors--Dependence on Exploratory Drilling Activities," "--Reserve Replacement Risk" and "-- Uncertainty of Reserve Information and Future Net Revenue Estimates." THE COMBINATION TRANSACTIONS Substantially all of the operations of the Company are currently conducted through Edge Joint Venture II (the "Joint Venture"), the interests in which are currently owned by certain affiliates of the Company. Concurrently with this Offering, the Company plans to acquire, directly or indirectly, substantially all of the interests in the Joint Venture in exchange for shares of Common Stock (the "Combination Transactions"). If the Company acquires all of the interests that are the subject of the Combination Transactions, an aggregate of approximately 4,700,000 shares of Common Stock will be issued in the Combination Transactions. Although the Company is seeking to acquire all of the interests in the Joint Venture, if any interest holders elect to retain their current interests, the Company will not own all of the interests in the Joint Venture. The Joint Venture was dissolved on December 31, 1996 and entered into a two year windup period. During such period the Company will continue to develop existing properties and identified prospect areas through the Joint Venture. Thereafter, the Joint Venture will liquidate and distribute its assets to the Company and any interest holders who elect to retain their current interests. The Company will be required to allow any non-exchanging offerees in the Combination Transactions to participate in the continued development of certain prospects and areas of mutual interest following the distribution of such assets. See "Certain Transactions--The Combination Transactions." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company...... 2,000,000 shares Common Stock to be outstanding after this Offering................................ 6,700,000 shares(1) Proposed Nasdaq National Market Symbol... EPEX Use of proceeds.......................... To repay indebtedness, to provide working capital and for general corporate purposes, including funding the Company's 3-D seismic data acquisition, exploration and development activities. See "Use of Proceeds." </TABLE> - -------- (1) Assumes approximately 4,700,000 shares will be issued in connection with the Combination Transactions. Does not include (i) 250,585 shares of Common Stock that will be issued pursuant to restricted stock awards that will be granted to officers of the Company concurrent with this Offering, (ii) approximately 350,000 shares of Common Stock issuable pursuant to options at an exercise price per share equal to the initial public offering price that will be granted to directors, officers and employees of the Company concurrent with this Offering and (iii) 97,844 shares of Common Stock that may be issued pursuant to outstanding options that will be assumed by the Company from a predecessor entity at a weighted average exercise price of $3.06 per share. See "Management--Incentive Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021097_emergent_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021097_emergent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d989283bdfe35361bd25f2dba7b152dad3b6cc28
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021097_emergent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Prospective investors should read this Prospectus carefully before making any investment decision regarding the Company, and should pay particular attention to the information contained in this Prospectus under the heading "Risk Factors" and in the financial statements and related notes appearing elsewhere in this Prospectus. In addition, prospective investors should consult their own advisors in order to understand fully the consequences of an investment in the Company. Unless indicated otherwise, the information contained herein gives effect to a one for five reverse split of the Company's issued and outstanding Common Stock that was completed in September 1997 (the "Reverse Stock Split"). The following summary does not purport to be complete and is qualified by the more detailed information appearing elsewhere in this Prospectus. THE COMPANY Dynamic International, Ltd., a Nevada corporation ("DIL"), is engaged in the design, marketing and sale of a diverse line of hand exercise and light exercise equipment, including hand grips, running weights, jump ropes and aerobic steps and slides. It markets these products under the licensed trademarks SPALDING(R) and KATHY IRELAND(R) as well as under its own trademarked name SHAPE SHOP(R). In addition, it designs and markets sports bags and luggage, which are marketed primarily under the licensed name JEEP(R) and under its own names PROTECH and SPORTS GEAR(R). The Company's objective is to become a designer and marketer of goods that are associated with a free-spirited lifestyle and leisure time. The Company is the successor to Dynamic Classics, Ltd., a Delaware corporation, incorporated in 1986 ("DCL," together with DIL, the "Company"), which was the successor to a New York company incorporated in 1964. In August 1996, DCL merged with and into DIL, which had been newly formed for the purpose of this merger. The objective of the merger was to change the Company's state of incorporation from Delaware to Nevada. PLAN OF REORGANIZATION In 1994, the Company added a new line of products consisting primarily of treadmills and ski machines. Initially, the Company was successful in marketing these products. For the fiscal year ended April 30, 1995, sales of these products represented approximately 53% of the Company's gross sales. However, due to serious manufacturing defects and poor construction of the Company's products delivered by the Company's manufacturers, primarily located in the People's Republic of China, the Company was forced to allow substantial charge backs by its customers. Although, pursuant to a written agreement, one of the manufacturers, China National Metals and Minerals ("CNM"), acknowledged the defects and agreed to pay for returns and to provide replacement goods at no cost, it breached this agreement soon thereafter. In March 1995, CNM sued the Company for monetary damages alleging, among other things, breach of contract. The Company and CNM subsequently settled the matter by releasing each other from any claims and allowing CNM to collect an aggregate of $15,000 from the Company. The Company suffered severe losses from its venture into this line of business and in August 1995 filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Reform Act of 1978 (the "Bankruptcy Code"). In May 1996, the Bankruptcy Court approved a plan of reorganization pursuant to which creditors received partial satisfaction of their claims. MG Holdings Corp. ("MG Holdings"), which had purchased a promissory note from the Company's principal lender, received 2,976,000 shares of Common Stock in full satisfaction of the promissory note. The number of shares issued to MG Holdings represented 93% of the issued and outstanding shares. As a result, MG Holdings acquired absolute control over the Company's affairs. MG Holdings is wholly-owned by Marton Grossman, the Company's Chairman and President. See "Principal Stockholders" and "Certain Relationships and Related Transactions." In addition, as part of the plan of reorganization, the Company, then known as DCL, merged into DIL, a newly formed Nevada corporation, for the purpose of changing its state of incorporation. See "Business--Plan of Reorganization" and "--Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." SUBJECT TO COMPLETION DATED DECEMBER 5, 1997 ----------------- DYNAMIC INTERNATIONAL, LTD. ---------------------- 1,200,000 Units Each Consisting of One Share of Common Stock One Class A Redeemable Warrant and One Class B Redeemable Warrant Dynamic International, Ltd., a Nevada corporation (the "Company"), hereby offers through Patterson Travis, Inc., the underwriter for the offering (the "Underwriter") 1,200,000 units ("Units"), each Unit consisting of one share of Common Stock, $.001 par value (the "Common Stock"), one redeemable Class A Warrant (the "Class A Warrants) and one redeemable Class B Warrant (the Class B Warrants, together with the Class A Warrants, the "Warrants") at a price of $5.00 per Unit. The Units, the Common Stock and the Warrants are herein sometimes referred to as the "Securities." The Common Stock and the Warrants will be separately tradable commencing __________ [90 days after the effective date] (the "Separation Date"). Each Class A Warrant entitles the holder to purchase one share of Common Stock at $6.00, commencing on the Separation Date until [18 months from the date of this Prospectus]. Each Class B Warrant entitles the holder to purchase one share of Common Stock at $10.00, commencing on the Separation Date until [three years from the date of this Prospectus]. The A Warrants and the B Warrants are redeemable by the Company at $.01 per Warrant on thirty days' prior written notice at any time provided that the average closing bid price for the Common Stock is no less than $9.00 per share with respect to the A Warrants and $15.00 with respect to the B Warrants for any ten trading days within a period of 30 consecutive trading days as reported on the principal exchange or market on which the Common Stock is then traded. The Units, and, commencing on the Separation Date, the Common Stock and Warrants are expected to be quoted in the OTC Bulletin Board Service under the symbols DYNIU, DYNI, DYNIW and DYNIZ, respectively. No assurance can be given that an active trading market will develop, or if developed, will be sustained. See "Description of Securities." Currently, no active public market exists for the Units, Common Stock or Warrants. There can be no assurance that an active public market will develop after the completion of this offering. See "Risk Factors-No Assurance for Public Market for the Units, Common Stock or Warrants." The offering price of the Units and the exercise price of the Warrants have been arbitrarily determined by the Company and the Underwriter and do not necessarily bear any relationship to the Company's assets, book value, results of operations or other generally accepted criteria of value. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION AS DESCRIBED HEREIN. SEE "RISK FACTORS" AND "DILUTION" COMMENCING ON PAGES 6 AND 12, RESPECTIVELY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> ================================================================================= Price to Public Underwriting Proceeds to Discount(1) Company - --------------------------------------------------------------------------------- <S> <C> <C> <C> Per Unit (2) $5.00 $0.50 $4.50 - --------------------------------------------------------------------------------- Total $6,000,000 $600,000 $5,400,000 ================================================================================= </TABLE> (1) Does not include additional compensation to the Underwriter in the form of (a) a non-accountable expense allowance of three percent of the gross proceeds of this offering and (b) warrants, purchasable at a nominal price, to acquire 120,000 Units at an initial exercise price of $8.25 per Unit (the "Underwriter's Warrants"), subject to adjustment in the event of issuances of securities by the Company below the then current exercise price of the Underwriter's Warrants, or a reorganization, consolidation, merger or similar corporate transaction involving the Company. Also, under certain circumstances, in accordance with NASD rules and regulations, the Underwriter will receive a warrant solicitation fee equal to 8% of the exercise price of the Warrants it causes to be exercised (or $1,536,000, assuming exercise of all Warrants). In addition, the Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, and to retain the Underwriter as a financial consultant for the two years following the closing of this offering for an aggregate fee of $20,000 payable at closing. See "Underwriting." (2) For the purpose of covering over-allotments, if any, the Company has granted to the Underwriter an option, exercisable within forty five days of the date hereof, to purchase up to an additional 180,000 Units upon the same terms and conditions as the Securities offered hereby. If such over- allotment option is exercised in full, the Total Price to Public will be $6,900,000, the Total Underwriting Discount will be $690,000 and the Proceeds to the Company will be $6,210,000. See "Underwriting." PATTERSON TRAVIS, INC. The date of the Prospectus is December ____, 1997. THE OFFERING <TABLE> <S> <C> Securities Offered ...................... 1,200,000 Units, each consisting of one share of Common Stock, one Class A Warrant and one Class B Warrant (1) Price Per Unit........................... $5.00 Common Stock Outstanding Before Offering..................... 3,198,798 shares Common Stock Outstanding After Offering..................... 4,398,798 shares (2) Estimated Net Proceeds................... $4,920,000 ($5,683,000 if the over-allotment option is exercised in full), after deducting commissions and filing, printing, legal, accounting and miscellaneous expenses payable by the Company estimated at $1,080,000. Use of Proceeds.......................... To purchase inventory, debt repayment, advertising, marketing and for working capital. See "Use of Proceeds." Proposed Symbols Units.......................... DYNIU Common Stock................. DYNI Class A Warrants............. DYNIW Class B Warrants............. DYNIZ </TABLE> - ------------------------------ (1) The A Warrants will be exercisable at $6.00 per share for a period of 18 months from the date of this Prospectus. The B Warrants will be exercisable at $10.00 per share for a period of three years from the date of this Prospectus. The Warrants will be redeemable at $.01 per Warrant upon the giving of thirty (30) days provided that the price of the Common Stock has equaled or exceeded $9.00 with respect to the A Warrants and $15.00 with respect to the B Warrants for any ten trading days within a period of 30 consecutive trading days. (2) Assumes the Underwriter's over allotment option for 180,000 Units is not exercised. See "Underwriting." Excludes (i) up to 2,400,000 shares of authorized but unissued Common Stock reserved for issuance upon exercise of the Warrants included in the offering (ii) up to 120,000 shares of Common Stock issuable upon exercise of the Underwriter's Warrants; (iii) up to 240,000 shares of Common Stock issuable upon exercise of the Warrants underlying the Underwriter's Warrants; (iv) up to an additional 540,000 shares of Common Stock (including 360,000 shares of Common Stock underlying warrants) issuable upon exercise of the Underwriter's over-allotment option; and (v) 2,000,000 shares of Common Stock issuable to Mr. Grossman, the Company's Chairman and President over a three year period, provided the Company meets certain earnings criteria. See "Description of Securities," "Underwriting" and "Management." BENEFITS OF OFFERING TO COMPANY'S CHAIRMAN AND PRESIDENT A portion of the proceeds of this offering will be used for the benefit of affiliates of the Company. Specifically, approximately $1.2 million will be paid to MG Holdings, which is wholly owned by the Company's Chairman and President, in repayment of loans, including accrued interest, made during the Company's Chapter 11 proceedings. See "Use of Proceeds" and "Certain Relationships and Related Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021113_guitar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021113_guitar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..83359dc9739028d5ac2b1a2af3daba8d3523d647
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021113_guitar_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT WHERE OTHERWISE SPECIFIED, INFORMATION IN THIS PROSPECTUS REGARDING THE SALE OF THE COMMON STOCK, $.01 PAR VALUE (THE "COMON STOCK"), OFFERED IN THE CONCURRENT UNITED STATES AND INTERNATIONAL OFFERINGS (TOGETHER, THE "OFFERING") GIVES EFFECT TO THE FOLLOWING EVENTS: (I) A 100-TO-1 STOCK SPLIT EFFECTUATED ON JUNE 5, 1996; (II) THE REINCORPORATION OF THE COMPANY FROM A CALIFORNIA TO A DELAWARE CORPORATION, EFFECTUATED ON OCTOBER 11, 1996; (III) A 2.582-TO-1 STOCK SPLIT EFFECTUATED ON JANUARY 15, 1997; AND (IV) THE MANDATORY CONVERSION OF EACH OUTSTANDING SHARE OF 8% JUNIOR PREFERRED STOCK, $.01 PAR VALUE (THE "JUNIOR PREFERRED STOCK"), OF THE COMPANY UPON CONSUMMATION OF THIS OFFERING INTO 6.667 SHARES OF COMMON STOCK AS DESCRIBED UNDER "DESCRIPTION OF CAPITAL STOCK -- PREFERRED STOCK -- JUNIOR PREFERRED STOCK" (THE "JUNIOR PREFERRED STOCK CONVERSION"). UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY Guitar Center, Inc. (the "Company" or "Guitar Center") is the nation's leading retailer of guitars, amplifiers, percussion instruments, keyboards and pro audio and recording equipment with 28 stores operating in 14 major U.S. markets as of December 31, 1996, including, among others, areas in or near Los Angeles, San Francisco, Chicago, Miami, Houston, Dallas, Detroit, Boston and Minneapolis. From fiscal 1992 through fiscal 1996, the Company's net sales and operating income before deferred compensation expense grew at compound annual rates of 25.6% and 43.0%, respectively. This growth was principally the result of strong and consistent comparable store sales growth, averaging 14.8% per year over such five-year period, and the opening of 13 new stores. Guitar Center offers a unique retail concept in the music products industry, combining an interactive, hands-on shopping experience with superior customer service and a broad selection of brand name, high-quality products at guaranteed low prices. The Company creates an entertaining and exciting atmosphere in its stores with bold and dramatic merchandise presentations, highlighted by bright, multi-colored lighting, high ceilings, music and videos. Management believes approximately 80% of the Company's sales are to professional and aspiring musicians who generally view the purchase of music products as a career necessity. These sophisticated customers rely upon the Company's knowledgeable and highly trained salespeople to answer technical questions and to assist in product demonstrations. The Guitar Center prototype store generally ranges in size from 12,000 to 15,000 square feet (as compared to a typical music products retail store which averages approximately 3,200 square feet) and is designed to encourage customers to hold and play instruments. Each store carries an average of 7,000 core stock keeping units ("SKUs"), which management believes is significantly greater than a typical music products retail store, and is organized into five departments, each focused on one product category. These departments cater to a musician's specific product needs and are staffed by specialized salespeople, many of whom are practicing musicians. Management believes this retail concept differentiates the Company from its competitors and encourages repeat business. Guitar Center stores historically have generated strong and stable operating results. All of the Company's stores, after being open for at least twelve months, have had positive store-level operating income in each of the past five fiscal years. The following summarizes certain key operating statistics of a Guitar Center store and is based upon the 21 stores operated by the Company for the full year ended December 31, 1996: <TABLE> <S> <C> Average 1996 net sales per square foot......................... $ 707 Average 1996 net sales per store............................... 9,148,000 Average 1996 store-level operating income (1).................. 1,402,000 Average 1996 store-level operating income margin (1)........... 15.3% </TABLE> - ------------------------ (1) Store-level operating income includes individual store revenue and expenses plus allocated rebates, cash discounts and purchasing department salaries (based upon individual store sales). Guitar Center stores have typically generated positive store-level operating income within the first three months of opening. In addition, based on stores which have opened since fiscal 1993 and operated for at least 14 months, Guitar Center stores have demonstrated high store-level operating income and store-level operating income margins averaging approximately $0.6 million and 11.5%, respectively, and sales per square foot averaging $498, during the first full twelve months of operations. The United States retail market for music products in 1995 was estimated in a study by MUSIC TRADES magazine to be approximately $5.5 billion in net sales, representing a five-year compound annual growth rate of 7.9%. Products currently offered by Guitar Center include categories of products which account for approximately $4.0 billion of this market, representing a five-year compound annual growth rate of 8.6%. The industry is highly fragmented with the nation's leading five music products retailers (as measured by the number of stores operated by such retailers) accounting for approximately 8.4% of the industry's estimated net sales in 1995. Furthermore, approximately 90% of the industry's estimated 8,200 retailers operate only one or two stores. The Company believes it benefits from several advantages relative to smaller competitors, including volume purchasing discounts, centralized operations and financial controls, advertising economies and the ability to offer an extremely broad and deep selection of merchandise. For the fiscal years ended December 31, 1994, 1995 and 1996, the Company recorded net income (loss) of $8.8 million, $10.9 million and ($72.4) million, respectively. The results for 1996 reflect $11.6 million for transaction costs and financing fees incurred in connection with the Recapitalization (as defined herein) and non-recurring deferred compensation expense of $71.8 million, substantially all of which related to the Recapitalization. BUSINESS STRATEGY EXPANSION STRATEGY. Guitar Center's expansion strategy is to continue to increase its market share in existing markets and to penetrate strategically selected new markets. The Company plans to continue pursuing its strategy of clustering stores in major markets to take advantage of operating and advertising efficiencies and to enhance awareness of the Guitar Center name in new markets. The Company opened seven stores in fiscal 1996, and currently anticipates opening approximately eight stores in each of fiscal 1997 and 1998. In preparation for this expansion, management has dedicated substantial resources over the past several years to building the infrastructure and management information systems necessary to support a large national chain. In addition, the Company believes that it has developed a methodology for targeting prospective store sites which includes analyzing demographic and psychographic characteristics of potential store locations. Management also believes that there may be attractive opportunities to expand by selectively acquiring existing music products retailers. EXTENSIVE SELECTION OF MERCHANDISE. Guitar Center offers an extensive selection of brand name music products complemented by lesser known, hard to find items and unique vintage equipment. The average 7,000 core SKUs offered through each Guitar Center store provide a breadth and depth of in-stock items which management believes is not available from traditional music products retailers. HIGHLY INTERACTIVE, MUSICIAN-FRIENDLY STORE CONCEPT. Each Guitar Center store contains creative instrument presentations and colorful, interactive displays which encourage the customer to hold and play instruments as well as to participate in product demonstrations. In addition, private sound-controlled rooms enhance a customer's listening experience while testing various instruments. EXCEPTIONAL CUSTOMER SERVICE. The Company conducts extensive training programs for its salespeople, who specialize in one of the Company's five product categories. Many of the Company's salespeople are also musicians. With the advances in technology and continuous new product introductions in the music products industry, customers increasingly rely on qualified salespeople to offer expert advice and assist in product demonstrations. Management believes that its emphasis on training and customer service distinguishes the Company within the industry and is a critical part of Guitar Center's success. INNOVATIVE PROMOTIONAL AND MARKETING PROGRAMS. Guitar Center sponsors innovative promotional and marketing events which include in-store demonstrations, famous artist appearances and weekend themed sales events designed to create significant store traffic and exposure. In addition, the Company's special grand opening activities in new markets are designed to generate consumer awareness for each new store. Management believes that these events help the Company build a loyal customer base and encourage repeat business. Since its inception, the Company has compiled a unique, proprietary database containing information on more than one million customers. This database enables Guitar Center to advertise to select target customers based on historical buying patterns. GUARANTEED LOW PRICES. Guitar Center endeavors to be the low price leader in each of its markets which is underscored by a 30-day low price guarantee. The Company's size permits it to take advantage of volume discounts for large orders and other vendor supported programs. Although prices are usually determined on a regional basis, store managers are trained and authorized to adjust prices in response to local market conditions. EXPERIENCED AND MOTIVATED MANAGEMENT TEAM. The executive officers and key managers have an average of 11 years with the Company. In addition, upon consummation of this Offering and the application of the net proceeds therefrom, executive officers and key managers will beneficially own approximately 18.8% of the Company's outstanding Common Stock. THE RECAPITALIZATION On June 5, 1996, the Company consummated a series of transactions to effect a recapitalization of the Company (the "Recapitalization") in order to transfer ownership of the Company from its sole stockholder, the Scherr Living Trust (the "Scherr Trust"), to members of management, Chase Venture Capital Associates, L.P. ("Chase Ventures") and an affiliated entity, Wells Fargo Small Business Investment Company, Inc. ("Wells Fargo") and Weston Presidio Capital II, L.P. ("Weston Presidio"). Chase Ventures, Wells Fargo and Weston Presidio are collectively referred to herein as the "Investors." See "The Recapitalization and Related Transactions." FORWARD LOOKING STATEMENTS Information contained in this Prospectus includes "forward-looking statements" that are based largely on the Company's current expectations and are subject to a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "estimate," "continue," "plans," "intends" or other similar terminology. See "Risk Factors." The Company is a Delaware corporation with its principal executive offices located at 5155 Clareton Drive, Agoura Hills, California 91301, and its telephone number is (818) 735-8800. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company: United States Offering............... 5,400,000 shares International Offering............... 1,350,000 shares Total.............................. 6,750,000 shares Common Stock to be outstanding after the Offering (1)..................... 18,316,579 shares Proposed Nasdaq National Market Symbol............................... GTRC Use of proceeds........................ The net proceeds of this Offering are currently intended to be used to: (i) redeem (or repurchase through open market purchases or otherwise) at a premium, and pay all accrued and unpaid interest with respect to, an aggregate of approximately $33.3 million principal amount of the Company's 11% Senior Notes due 2006 (approximately $37.9 million); (ii) redeem at a premium, and pay all accrued and unpaid dividends with respect to, all of the outstanding shares of the Company's 14% Senior Preferred Stock, $.01 par value (the "Senior Preferred Stock"), having an original aggregate liquidation value of $20.0 million (approximately $22.9 million); and (iii) redeem approximately 1,317,000 shares of Common Stock held by certain executive officers and other employees of the Company (approximately $18.4 million) (the "Management Tax Redemption"). The balance will be used for general corporate purposes, including the repayment of amounts outstanding under the 1996 Credit Facility (as defined herein) which are expected to be approximately $6.0 million at the consummation of this Offering and possible acquisitions. See "Use of Proceeds." </TABLE> - ------------------------ (1) Assumes the Underwriters' over-allotment option is not exercised. Gives effect to the Junior Preferred Stock Conversion. See "Description of Capital Stock -- Preferred Stock -- Junior Preferred Stock." Excludes: (i) outstanding employee stock options for the purchase of 1,509,752 shares of Common Stock (at an exercise price per share of $10.89), none of which are exercisable as of the date of this Prospectus; and (ii) outstanding Warrants (as defined herein) for the purchase of 676,566 shares of Common Stock (at an exercise price per share of $0.01), all of which are exercisable as of the date of this Prospectus. See "Management -- Management Stock Option Agreements; -- 1996 Performance Stock Option Plan" and "Certain Transactions -- Transactions with DLJ and Chase Securities." Also excludes 875,000 shares of Common Stock reserved for issuance under the 1997 Plan (as defined herein), none of which have been granted as of the date of this Prospectus. See "Management -- 1997 Equity Participation Plan." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The financial data for the fiscal year ended October 31, 1992, the two months ended December 31, 1992 and the fiscal years ended December 31, 1993, 1994, 1995 and 1996 has been derived from the audited financial statements of the Company. The PRO FORMA financial data set forth below is not necessarily indicative of the results that would have been achieved or that may be achieved in the future. The summary historical and PRO FORMA financial data should be read in conjunction with "The Recapitalization and Related Transactions," "Selected Historical Financial Data," "Unaudited Pro Forma Condensed Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of the Company and the notes thereto included elsewhere herein. <TABLE> <CAPTION> FISCAL YEAR ENDED TWO MONTHS FISCAL YEAR OCTOBER ENDED ENDED 31, DECEMBER 31, DECEMBER 31, ------- ------------ ------------------------------------- 1992 1992 1993 1994 1995 1996 ------- ------------ ------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND STORE AND INVENTORY OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales....................................... $85,592 $18,726 $97,305 $129,039 $170,671 $213,294 Gross profit.................................... 25,472 5,393 28,778 36,764 47,256 60,072 Selling, general and administrative expenses.... 20,998 3,547 21,889 26,143 32,664 41,345 Deferred compensation expense (1)............... -- 373 1,390 1,259 3,087 71,760 Operating income (loss)......................... 4,474 1,473 5,499 9,362 11,505 (53,033) Non recurring transaction expense............... -- -- -- -- -- (6,942) Net income (loss)............................... 3,987 1,385 5,105 8,829 10,857 (72,409) PRO FORMA FOR INCOME TAX PROVISION: (2) Historical income (loss) before provision for income taxes................................... $4,076 $ 1,424 $ 5,251 $ 9,155 $ 11,202 $(72,270) Pro forma provision for income taxes............ 1,753 773 2,856 4,478 6,144 -- ------- ------------ ------- -------- -------- -------- Pro forma net income (loss)..................... $2,323 $ 651 $ 2,395 $ 4,677 $ 5,058 $(72,270) ------- ------------ ------- -------- -------- -------- ------- ------------ ------- -------- -------- -------- Pro forma net income (loss) per common share.... $ (3.72) -------- -------- Weighted average shares outstanding (3)......... 19,408 -------- -------- OPERATING DATA: Net sales per gross square foot (4)............. $ 429 -- $ 478 $ 546 $ 661 $ 707 Stores open at end of period.................... 15 15 17 20 21 28 Net sales growth................................ 14.3% 18.7% 13.7% 32.6% 32.3% 25.0% Increase in comparable store sales (5).......... 11.5% 18.7% 11.4% 17.3% 23.4% 10.2% Inventory turns................................. 3.3x 3.4x 3.1x 3.4x 3.7x 3.4x Capital expenditures............................ $ 445 $ 966 $ 2,618 $ 3,277 $ 3,432 $ 6,133 </TABLE> <TABLE> <CAPTION> FISCAL YEAR ENDED DECEMBER 31, 1996 ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> PRO FORMA DATA: (6) Net sales................................................................................ $ 213,294 Operating income......................................................................... 19,159 Net income............................................................................... 6,456 Net income per share..................................................................... $ 0.33 Weighted average shares outstanding (3).................................................. 19,408 </TABLE> FOOTNOTES APPEAR ON FOLLOWING PAGE. <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 ------------------------------ HISTORICAL AS ADJUSTED (7) ----------- ----------------- (IN THOUSANDS) <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................ $ 47 $ 11,750 Net working capital...................................... 27,436 42,675 Total assets............................................. 74,849 85,429 Total long term and revolving debt (including current maturities)............................................. 103,536 66,667 Senior preferred stock................................... 15,186 -- Junior preferred stock................................... 138,610 -- Warrants................................................. 6,500 6,500 Stockholders' equity (deficit)........................... (68,815) (6,180) </TABLE> - ------------------------------ (1) For 1996, the Company recorded a non-recurring deferred compensation expense of $71.8 million, of which $69.9 million related to the cancellation and exchange of management stock options pursuant to the Recapitalization and $1.9 million related to a non-cash charge resulting from the grant of stock options to management by the Investors. The Company has not, and will not, incur any obligation in connection with such grant of options by the Investors. See "The Recapitalization and Related Transactions" and "Certain Transactions -- Options Granted by the Investors to Certain Members of Management."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021252_trendwest_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021252_trendwest_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9aebd26d9a4077c3d9c575484c8f3b0f280d04fd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021252_trendwest_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the financial statements and notes thereto, included elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) gives effect to the consummation of the Consolidation Transactions (as defined herein), and (iii) reflects an adjustment for an approximately 513-for-1 stock split effected in July 1997. Unless the context otherwise indicates, the "Company" and "Trendwest" mean Trendwest Resorts, Inc. after giving effect to the consummation of the Consolidation Transactions. THE COMPANY Trendwest Resorts, Inc. markets, sells and finances timeshare ownership interests ("Vacation Ownership Interests") and acquires, develops and manages timeshare resorts. In 1996, Trendwest was ranked as one of the largest timeshare companies in the United States, according to published sales volume data in the Vacation Ownership World trade magazine. The Company's timeshare resorts are owned by and operated through WorldMark, the Club ("WorldMark"), a nonprofit mutual benefit corporation organized by Trendwest in 1989 to provide an innovative, flexible vacation ownership system. As of June 30, 1997, WorldMark had in excess of 45,000 members ("Owners") and owned and maintained an aggregate of 811 condominium-style units at 19 recreational resorts (the "WorldMark Resorts") in the western United States, Hawaii, British Columbia and Mexico. The Company presently sells Vacation Ownership Interests in Washington, Oregon and California, primarily through eight off-site sales offices. Trendwest sells Vacation Ownership Interests in the form of perpetual timeshare credits ("Vacation Credits") which are created by the transfer to WorldMark of resort units purchased or developed by the Company. Vacation Credits can be used by Owners to reserve units at any of the WorldMark Resorts, at any time during the year and in time increments as short as one day. The use of Vacation Credits is not tied to any particular resort unit or time period as is typical in the timeshare industry. The Company believes that the combination of multiple resorts and its Vacation Credit system provides Owners with an attractive range of vacation planning choices and values not generally available within the timeshare industry. The Company's Vacation Credit system with multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site sales offices located in major metropolitan areas and reduces dependence on on-site sales centers located at more remote resort locations. According to the American Resort Development Association ("ARDA"), the total annual sales volume for the timeshare industry increased from $490 million in 1980 to $4.76 billion in 1994. Based on other industry information, the Company believes that timeshare sales volume for the timeshare industry exceeded $5 billion in 1995. The Company believes that, based on ARDA reports, the timeshare industry has benefited recently from increased consumer acceptance of the timeshare concept resulting from more effective governmental regulation of the industry, the entry into the industry by national lodging and hospitality companies and increased vacation flexibility resulting from the growth of timeshare exchange networks. The Company expects the timeshare industry to continue to grow as consumer awareness of the timeshare industry increases and as the baby boom generation (currently ages 32-50) moves through the 40-55 year age bracket, the age group of persons who purchased the most timeshare interests in 1994. The Company believes its operating strategy and vacation ownership system provide the following advantages over other timeshare companies: - Vacation Flexibility. The Company's Vacation Credit system allows Owners access to multiple WorldMark Resorts, permitting them to tailor their vacation according to their schedules, desired vacation length, location preferences and space requirements. The 19 WorldMark Resort locations provide access to a variety of vacation experiences, from skiing to golf, and a variety of settings, from beaches to mountains. Vacation time is reserved on a first come, first served basis. In 1996, based on information provided by Owner comment cards, the Company believes that approximately 73% of Owners received their first choice of resort location when reserving vacation time. To enhance Owner usage and facilitate weekend stays and stays shorter than one week, the Company purchases and develops a large percentage of WorldMark Resort units within a reasonable driving distance of the Company's primary metropolitan sales markets. - Appeal to Broad Consumer Base. The Company believes its Vacation Credit system enables it to market more effectively to potential customers with a broader range of income levels and vacation requirements than is addressed by most timeshare companies. The Company provides prospective purchasers with the opportunity to purchase varying increments of Vacation Credits suitable for their financial position and vacation needs. The Company's minimum purchase requirement of 6,000 Vacation Credits, which presently costs $7,800, makes entry into WorldMark affordable for a significant number of households. The Company also offers additional Vacation Credits to existing Owners ("Upgrades") in smaller increments, which accounted for approximately 12% of Vacation Credit sales in 1996. - Marketing Through Off-Site Sales Offices. The Company's Vacation Credit system facilitates marketing Vacation Ownership Interests effectively at off-site sales offices. The Company believes the use of off-site sales offices enables it to attract a larger number of prospective purchasers to sales presentations than at sales offices at more remote resort locations. In addition, the location of sales offices in metropolitan areas provides the Company with the flexibility to establish sales offices in the most demographically attractive areas within a geographic market and to relocate sales offices quickly at a modest cost when conditions warrant. - Inventory Control. The Company's sale of Vacation Credits, rather than deeded interests with weekly intervals at individual resorts, enables it to schedule its resort acquisition and development activities in accordance with its anticipated sales volumes and to diversify the risk of its capital commitments among several resorts. Since all Vacation Credits have the same use rights and sell for the same price, the Company does not experience a buildup of inventory of less desirable resort units or interval dates which are difficult to sell. The Company can also develop resorts at desirable remote locations since it does not depend on on-site sales offices to generate sales. - Owner Satisfaction. The Company places great importance on Owner satisfaction. The Company believes that Owner satisfaction is achieved by maintaining a high level of quality at WorldMark Resorts, by increasing the number of resort locations and by satisfying Owners' first vacation requests a high percentage of the time. Of the 19 WorldMark Resorts, 12 have the highest rating from Resort Condominiums International Inc. ("RCI"), the world's largest timeshare exchange network, four have the second-highest rating from RCI, and three have been recently opened and have not yet been rated. The Company has increased the number of WorldMark Resorts from three in 1989 to its present 19 and intends to transfer two additional WorldMark Resorts during the remainder of 1997 and 1998. Although Owners have exchange privileges through the RCI network, the Company believes that Owner satisfaction with the WorldMark Resorts is demonstrated by the Owners' usage of approximately 74% of their Vacation Credits at WorldMark Resorts in 1996. The satisfaction of existing Owners with the WorldMark Resorts generates additional revenues to the Company through the sale of Upgrades ("Upgrade Sales") and from Owner referrals of new prospects. The Company's growth strategy is to (i) expand existing WorldMark Resorts and acquire and develop additional resorts primarily in the western United States, Hawaii, British Columbia and Mexico to provide additional Vacation Credits for sale by the Company and a wider range of WorldMark Resorts for use by Owners; (ii) increase sales and financings of Vacation Credits to new customers by expanding sales and marketing efforts, including opening additional off-site sales offices; and (iii) increase Upgrade Sales by establishing and maintaining long-term relationships with Owners through effective customer service programs and innovative benefit programs and discount packages. The Company's Vacation Ownership Interests are generally targeted to purchasers in an age range from 35 to 60 with annual household incomes ranging from $30,000 to $100,000. The average number of Vacation Credits purchased by a new Owner in 1996 was approximately 6,600 at a cost of approximately $8,400. The number of Vacation Credits purchased are available each year for use by an Owner. Unused Vacation Credits can be carried forward for one year. The number of Vacation Credits that is required to stay one day at the WorldMark Resorts varies, depending upon the resort location, the size of the unit, the vacation season and the day of the week. For example, a Friday or Saturday night stay at a one-bedroom unit may require 825 Vacation Credits per night off-season and 1,450 Vacation Credits per night in peak season. WorldMark Resort units are fully furnished, condominium style accommodations and range in size from studios to three bedrooms. WorldMark's participation in RCI provides Owners with access to over 3,000 resorts worldwide which participate in the RCI network. The Company sells Vacation Credits at its 11 sales offices, eight of which are located off-site in metropolitan areas. The other sales offices are located on-site at three of the WorldMark Resorts. The Company intends to establish an additional off-site sales office in California in late 1997. The Company transferred 224 resort units to WorldMark in 1996, 146 resort units in 1995 and 86 resort units in 1994. Revenues from Vacation Credit sales increased to approximately $100.0 million in 1996 from approximately $77.8 million in 1995 and approximately $54.9 million in 1994. The Company transferred 61 resort units to WorldMark during the first six months of 1997. As of June 30, 1997, the Company had purchase agreements and developments in progress to obtain an additional 150 units that are expected to be available during the remainder of 1997 and an additional 201 units that are expected to be available during 1998. See "Business -- Growth Strategy." Since an important component of the Company's sales strategy is the affordability of Vacation Credits, a significant portion of its sales of Vacation Credits to new Owners is financed by the Company, thereby allowing Owners to make monthly payments. In addition, existing Owners have the opportunity to finance the purchase of Upgrades through the Company. At June 30, 1997, loans to Owners to finance the purchase of Vacation Credits ("Notes Receivable") with an aggregate balance of $207.8 million were outstanding, of which approximately $65.3 million with a weighted average interest rate of 14.1% per annum had been retained by the Company. The remaining Notes Receivable balance of approximately $142.5 million had been sold by the Company prior to that date, although the Company retained limited recourse liability with respect to these Notes Receivable. The Company may continue to sell a substantial amount of its Notes Receivable. See "Business -- Customer Financing" and "-- Finance Subsidiaries." THE WORLDMARK RESORTS The following table sets forth certain information as of June 30, 1997 regarding each existing WorldMark Resort, planned expansion at existing WorldMark Resorts through 1998, and planned new WorldMark Resorts through 1998. <TABLE> <CAPTION> EXISTING DATE UNITS CONTRIBUTED IN PLANNED TOTAL UNITS EXISTING RESORTS LOCATION TO WORLDMARK(A) SERVICE EXPANSION ANTICIPATED RCI RATING(B) - ------------------------- ------------------ --------------- -------- --------- ------------ --------------------- <S> <C> <C> <C> <C> <C> <C> BRITISH COLUMBIA Sundance Whistler February 1992 25 -- 25 R.I.D. CALIFORNIA North Shore Estates Bass Lake October 1991 61 -- 61 Gold Crown Beachcomber Pismo Beach April 1993 20 -- 20 Gold Crown Palm Springs Palm Springs July 1995 64 -- 64 Gold Crown Big Bear Big Bear Lake April 1996 25 45(c) 70 (d) HAWAII Valley Isle Maui April 1990 14 -- 14(e) Gold Crown Kapaa Shores Kauai July 1991 42 -- 42(e) R.I.D. NEVADA Lake Tahoe Stateline January 1991 50 -- 50 Gold Crown/R.I.D.(f) Las Vegas Las Vegas December 1996 42 -- 42 (d) OREGON Eagle Crest Redmond September 1989 62 --(g) 62(e) Gold Crown Gleneden Beach Lincoln City March 1996 80 -- 80 Gold Crown Running Y Ranch Klamath Falls February 1997 26 40(h) 66 (d) WASHINGTON Lake Chelan Shores Chelan August 1990 13 -- 13(e) R.I.D. Surfside Long Beach September 1991 25 -- 25 R.I.D. Discovery Bay Sequim January 1992 32 -- 32 Gold Crown Park Village Leavenworth July 1992 72 -- 72 Gold Crown Mariner Village Ocean Shores June 1994 32 -- 32 Gold Crown Birch Bay Blaine January 1995 52 52(i) 104 Gold Crown MEXICO Coral Baja San Jose del Cabo November 1994 74 62(j) 136 Gold Crown PLANNED RESORTS - ------------------------- Clear Lake Nice, California (k) -- 88 88 Kona Hawaii, Hawaii (l) -- 64 64 --- --- ---- Total........ 811 351 1,162 === === ==== </TABLE> - --------------- (a) The dates in this column indicate, for each resort, the month and year in which the first completed units at such resort were transferred to WorldMark. At certain resorts, additional units were transferred to WorldMark at later dates. (b) Gold Crown and Resort of International Distinction ("R.I.D.") are resort ratings awarded annually by RCI. In 1996, approximately 13% of the resorts reviewed by RCI received a Gold Crown rating, the highest rating awarded by RCI, and approximately 14% of the resorts reviewed by RCI received an R.I.D. rating, the second-highest rating awarded by RCI. (c) Construction began on these units in January 1997. These units are expected to be completed and transferred to WorldMark in the third quarter of 1997. (d) This resort has recently become available to WorldMark and has not yet been rated by RCI. (e) These units represent less than one-half of the total number of units at this resort. (f) Consists of three locations totalling 50 units. The units at Tahoe I and II (totalling 15 units) are rated R.I.D., and the units at Tahoe III (totalling 35 units) are rated Gold Crown. (g) The Company has an agreement with Eagle Crest, Inc. ("Eagle Crest") whereby the Company has assigned to Eagle Crest the right to sell Vacation Credits in WorldMark at the Eagle Crest Resort and to retain the gross proceeds from such sales. In exchange for such sales, Eagle Crest must transfer condominium units to WorldMark at no cost to either the Company or WorldMark. In addition, commencing September 1997, the Company will receive a fee from Eagle Crest equal to 3% of net sales of Vacation Credits occurring at the Eagle Crest Resort. See "Certain Transactions -- Relationship with Jeld-Wen." The number of additional units to be deeded to WorldMark will depend on the number of Vacation Credits sold by Eagle Crest, an estimate of which is not provided in this table. (h) The Company is obligated to purchase 20 units in April 1998 and 20 units in July 1998. Units will be transferred to WorldMark as they are purchased. The Company has an agreement with Running Y Resort, Inc. ("Running Y") whereby the Company has assigned to Running Y the right to sell Vacation Credits in WorldMark at the Running Y Resort and to retain the gross proceeds from such sales. In exchange for such sales, Running Y must transfer condominium units to WorldMark at no cost to either the Company or WorldMark. In addition, commencing September 1997, the Company will receive a fee from Running Y equal to 3% of net sales of Vacation Credits occurring at the Running Y Resort. See "Certain Transactions -- Relationship with Jeld-Wen." The number of additional units to be deeded to WorldMark will depend on the number of Vacation Credits sold by Running Y, an estimate of which is not provided in this table. (i) The Company expects to obtain all necessary permits for construction by the end of the second quarter of 1998. All 52 units are expected to be completed and transferred to WorldMark by the end of 1998. (j) Construction on these units began in July 1996. The project is expected to add 62 units, with five units transferred to WorldMark each month beginning December 1997 and all units are expected to be transferred by the end of 1998. (k) Construction on these units began in April 1997. Of these units, 56 are expected to be completed and transferred to WorldMark in the third quarter of 1997, and the remaining 32 units are expected to be completed and transferred to WorldMark in the first quarter of 1998. (l) Construction on these units began in February 1997. Of these units, 44 are expected to be completed and transferred to WorldMark in the fourth quarter of 1997 and the remaining 20 units are expected to be completed and transferred to WorldMark in the first quarter of 1998. SALES REGIONS The Company's sales of Vacation Credits primarily occur at eight off-site sales offices located in metropolitan areas in three regions. The remainder of the Company's sales of Vacation Credits occur at three on-site sales offices. The Company plans to open a new off-site sales office in California in late 1997. Certain information with respect to the Company's sales offices in the three regions is provided below. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------------------------- 1994 1995 1996 --------------------------------------- --------------------------------------- --------------------------------------- (DOLLARS IN THOUSANDS) AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER OF SALES NUMBER OF OF SALES NUMBER OF OF SALES NUMBER OF REGION REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) - ------- ------------------- --------- ------- ------------------- --------- ------- ------------------ --------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Pacific Northwest(4).. 61 11,414 $31,654 75 17,290 $43,926 86 23,979 $ 54,313 Northern California(5).. 32 7,326 23,250 58 10,371 31,324 55 13,786 37,287 Southern California(6).. --- -- -- 7 304 2,533 24 1,232 8,440 --- ------ ------- --- ------ ------- --- ------ -------- Total... 93 18,740 $54,904 140 27,965 $77,783 165 38,997 $100,040 === ====== ======= === ====== ======= === ====== ======== </TABLE> - ------------------------ (1) Represents the average number of sales representatives during the year. This calculation is based on the number of sales representatives at the end of each calendar quarter during the indicated year. (2) Cumulative number of Owners at the end of the year, including Owners who purchased Vacation Credits at Eagle Crest and Running Y. (3) Includes Upgrade Sales. (4) Comprised of three off-site sales offices (Kirkland, Washington, which opened in October 1989 and moved to Seatac, Washington in February 1994; Vancouver, Washington, which opened in February 1994; and Lynnwood, Washington, which opened in June 1995) and three on-site sales offices (Leavenworth, Washington, which opened in September 1994, Birch Bay, Washington, which opened in June 1995, and Gleneden Beach, Oregon, which opened in February 1996). These figures include an off-site sales office in Bellingham, Washington, which opened in July 1990, and was consolidated into the Lynnwood and Birch Bay offices in June 1995. (5) Comprised of three off-site sales offices: Santa Clara, which opened in April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened in May 1995. (6) Comprised of the Ontario off-site sales office which opened in April 1996. These figures include sales from an on-site sales office at Palm Springs, which opened in April 1995 and was consolidated into the Ontario sales office in August 1996. The Company opened a new off-site sales office in Costa Mesa in February 1997. CORPORATE BACKGROUND AND CONSOLIDATION OF FINANCE SUBSIDIARIES The Company commenced its timeshare business as a wholly-owned subsidiary of JELD-WEN, inc. ("Jeld-Wen") in 1989 with three condominium units. Jeld-Wen is currently the Company's principal stockholder. See "Principal and Selling Stockholders." Jeld-Wen is a privately owned company that was founded in 1960 and is a major manufacturer of doors, windows and millwork products. Headquartered in Klamath Falls, Oregon, Jeld-Wen has diversified operations located throughout the United States and in nine foreign countries that include manufacturing, hospitality and recreation, retail, financial services and real estate. Along with its subsidiaries, Jeld-Wen employs approximately 12,000 people. The Company raises capital for property acquisitions and working capital by selling or securitizing Notes Receivable through two subsidiaries of Jeld-Wen (the "Finance Subsidiaries"). Effective June 30, 1997, the Company acquired the Finance Subsidiaries from Jeld-Wen for 5,193,693 shares of the Company's Common Stock (the "Consolidation Transactions"). The value of the shares of the Finance Subsidiaries and the value of the shares of the Company's Common Stock were determined in negotiations between Jeld-Wen and the Company, based on a multiple of the historical earnings of the respective companies. Based on an assumed initial offering price of $17.00 per share, the value of the shares of Common Stock issued to Jeld-Wen for the Finance Subsidiaries was approximately $88.3 million. The Company may continue its program of selling and securitizing Notes Receivable through the Finance Subsidiaries or similar entities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Transactions -- Acquisition of Finance Subsidiaries." All of the WorldMark Resort units are owned by WorldMark, a California nonprofit mutual benefit corporation that was formed by Trendwest in 1989 in order to implement its Vacation Credit system and to protect the WorldMark Resorts from claims of the Company's creditors. WorldMark's articles of incorporation provide that the specific purpose for which it was formed is to own, operate and manage the real property transferred to it by the Company. The Company transfers properties to WorldMark, free from all monetary encumbrances, which are then added to the inventory of WorldMark Resort units available for use by Owners. In return for the transfer of property to WorldMark, Trendwest has the exclusive right to market and sell Vacation Credits. Owners receive the right to use all WorldMark Resort units at any available time and interval selected by the Owner. Trendwest has a management agreement with WorldMark whereby Trendwest acts as the exclusive manager and servicing agent of WorldMark and the Vacation Ownership Interest program. The Company was incorporated in Oregon in 1989. The Company's principal executive offices are located at 12301 N.E. 10th Place, Bellevue, Washington 98005, and its telephone number is (425) 990-2300. THE OFFERING <TABLE> <S> <C> Common Stock offered: By the Company.................................... 2,745,000 shares By the Selling Stockholder........................ 130,000 shares Common Stock to be outstanding after the Offering... 17,162,116 shares(1) Use of proceeds..................................... To repay outstanding indebtedness, to purchase and develop additional resorts and for working capital and other general corporate purposes. Nasdaq National Market symbol....................... TWRI </TABLE> - --------------- (1) Does not include approximately 858,000 shares of Common Stock authorized for issuance under the Company's stock option plan. The Company has granted no options under this plan. See "Management -- 1997 Stock Option Plan." SUMMARY COMBINED AND CONSOLIDATED FINANCIAL AND OPERATING INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ----------- ------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Vacation Credit sales, net................... $35,798 $38,743 $54,904 $77,783 $ 100,040 $48,540 $ 60,820 Finance income............................... 3,069 3,813 3,736 5,368 7,143 3,264 5,836 Gains on sales of notes receivable........... -- 1,558 1,635 3,222 5,673 2,850 3,164 Resort management services................... 219 1,102 2,805 1,579 1,501 575 1,278 Other........................................ 241 344 763 1,226 2,552 989 1,351 ------- ------- ------- ------- -------- ------- ------- Total revenues................................. 39,327 45,560 63,843 89,178 116,909 56,218 72,449 ------- ------- ------- ------- -------- ------- ------- Costs and operating expenses: Vacation Credit cost of sales................ 9,083 8,743 15,070 20,484 27,400 12,922 16,225 Resort management services................... 301 959 2,613 1,283 859 416 529 Sales and marketing.......................... 17,954 19,523 25,615 36,374 47,810 23,432 28,539 General and administrative................... 3,253 4,056 6,588 8,391 10,904 5,062 6,266 Provision for doubtful accounts and recourse liability.................................. 2,031 2,805 4,537 6,522 7,467 3,633 4,160 Interest..................................... 2,457 1,929 881 2,380 2,445 1,109 1,445 ------- ------- ------- ------- -------- ------- ------- Total costs and operating expenses............. 35,079 38,015 55,304 75,434 96,885 46,574 57,164 ------- ------- ------- ------- -------- ------- ------- Income before income taxes....................... 4,248 7,545 8,539 13,744 20,024 9,644 15,285 Income tax expense........................... 1,542 2,909 3,214 4,979 7,348 3,544 5,505 ------- ------- ------- ------- -------- ------- ------- Net income....................................... $ 2,706 $ 4,636 $ 5,325 $ 8,765 $ 12,676 $ 6,100 $ 9,780 ======= ======= ======= ======= ======== ======= ======= PRO FORMA DATA: Pro forma net income per share of Common Stock... $ 0.88 $ 0.68 Shares used in computing pro forma net income per share of Common Stock(1)....................... 14,417,116 14,417,116 Supplemental pro forma net income per share of Common Stock(2)................................ $ 0.89 $ 0.66 Shares used in computing supplemental pro forma net income per share of Common Stock(2)........ 16,115,963 16,115,963 OPERATING DATA: Number of WorldMark Resorts (at end of period) ............................................... 11 12 14 16 19 18 19 Number of units (at end of period)............... 147 239 325 499 746 593 811 Number of Vacation Credits sold (in thousands)... 32,636 34,296 47,025 65,308 82,270 40,206 46,768 Average price per Vacation Credit sold........... $ 1.11 $ 1.14 $ 1.18 $ 1.21 $ 1.24 $ 1.23 $ 1.27 Average cost per Vacation Credit sold............ $ 0.28 $ 0.25 $ 0.32 $ 0.31 $ 0.33 $ 0.32 $ 0.35 Number of Owners (at end of period).............. 8,252 12,732 18,740 27,965 38,997 33,475 45,197 Average purchase price for new Owners............ $ 7,693 $ 7,879 $ 8,141 $ 8,325 $ 8,432 $ 8,457 $ 8,548 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------- ACTUAL AS ADJUSTED(3) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, including restricted cash........................................................ $ 1,197 $ 17,317 Total assets........................................................................... 103,599 119,719 Indebtedness(4)........................................................................ 26,574 396 Stockholders' equity................................................................... 59,524 101,822 </TABLE> - --------------- (1) Includes the 5,193,693 shares to be issued to Jeld-Wen in connection with the Consolidation Transactions. (2) Includes the 5,193,693 shares to be issued to Jeld-Wen in connection with the Consolidation Transactions; the 1,698,847 shares offered at an assumed initial public offering price of $17.00 per share to be used to retire $26.2 million in debt; and the elimination of interest expense related to the retirement of $26.2 million in debt. (3) Adjusted to give effect to (i) the sale of 2,745,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $17.00 per share less the underwriting discount and the payment by the Company of the estimated offering expenses and (ii) the retirement of $26.2 million of debt. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021723_pj_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021723_pj_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..db36db8b127aa3ddb1fe87bcd863edc8b5051c0b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021723_pj_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the financial statements and the more detailed information appearing elsewhere in this Prospectus. Unless otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option, and all references to the "Company" include PJ America, Inc. and its subsidiaries. See "The Company" and Note 1 of Notes to PJ America, Inc. and Subsidiaries Supplemental Consolidated Financial Statements. The Company succeeded to the businesses of five Papa John's International, Inc. franchisees (the "Reorganization"). The Reorganization was completed on October 30, 1996, concurrent with the closing of the Company's initial public offering (the "IPO"). On June 5, 1997, a subsidiary of the Company merged with Ohio Pizza Delivery Co. ("OPD") in a transaction accounted for as a pooling of interests. Accordingly, supplemental consolidated financial statements reflecting such transaction are included in this Prospectus. The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December of each year. Fiscal year 1995 had 53 weeks. THE COMPANY PJ America is the largest franchisee of "Papa John's" pizza delivery and carry-out restaurants. At June 24, 1997, the Company owned and operated 58 Papa John's restaurants in the Birmingham, Alabama area; in the Norfolk, Richmond and Virginia Beach, Virginia areas; in East Texas; and in the Akron, Ohio area. In addition to its existing territories, the Company has entered into a development agreement with its franchisor, Papa John's International, Inc. ("PJI"), to develop Papa John's restaurants in the Ventura, Kern, San Luis Obispo, and Santa Barbara counties, as well as the northwestern portion of Los Angeles County (the "California Counties"). Further, the Company has been granted by PJI the rights to enter into development agreements for Papa John's restaurants in the Vancouver, Canada area and Puerto Rico. In addition, the Company has an option, exercisable during 1998, to acquire the operations and development rights for Papa John's restaurants in Utah from an affiliate of the Company. On June 5, 1997, the Company acquired through a merger eight Papa John's restaurants in the Akron, Ohio area. The Company intends to continue pursuing selective strategic acquisitions of existing Papa John's franchisees. At June 24, 1997, PJI and its franchisees (including the Company) operated 1,320 Papa John's restaurants in 39 states. The key elements of the Papa John's concept include a focused menu of high quality pizza and related items, an effective commissary, distribution and equipment supply system and an efficient in-store operating design. Papa John's original, medium thick crust is made from fresh dough (never frozen) produced in PJI's regional commissaries. Every pizza is prepared using real mozzarella cheese, pizza sauce made from fresh-packed tomatoes (not concentrate), a proprietary mix of savory spices and a choice of high quality meat and vegetable toppings in generous portions. This focused menu and the use of quality ingredients enables Papa John's restaurants to concentrate on consistently "Delivering the Perfect Pizza!"(TM) PJI's commissary system supplies pizza dough, food products and paper products twice weekly to each of the Company's restaurants. This commissary system enables PJI to closely monitor and control product quality and consistency, while lowering food costs for its franchisees. PJI also provides the Company assistance with restaurant design and site selection and a complete equipment package for new restaurants. This assistance provides the Company with a convenient, cost-effective means of opening restaurants while ensuring a consistent restaurant appearance. The in- store operating design includes specific areas for order taking, pizza preparation and routing, resulting in simplified operations, lower training and labor costs, increased efficiency and improved consistency and product quality. The Company's restaurants are typically 1,200 to 1,500 square feet in size and are located in strip centers or free-standing buildings which provide visibility, curb appeal and accessibility. The Company believes the performance of its Papa John's restaurants has been exceptional. The Company's average unit volumes have historically exceeded the average of the Papa John's franchise system. During the 52 weeks ended March 30, 1997, the 41 restaurants that were open throughout the period generated average sales of $732,000, average restaurant cash flow (operating income plus depreciation) of $135,000 (or 18.4% of sales) and average restaurant operating income after royalties of $114,000 (or 15.6% of sales). However, there can be no assurance that such results can be maintained. The average cash investment, including franchise fees, to open the 41 new restaurants was approximately $175,000, exclusive of land and pre-opening expenses. The Company expects that its average cash investment for restaurants opened in 1997 will approximate $210,000, as the Company may increase the proportion of free standing units. The Company also anticipates that occupancy costs and the cash investment required to open restaurants in its new territories will be higher than those experienced in its existing markets. The Company's growth strategy focuses on further developing the Papa John's concept through: (i) building out its existing markets; (ii) acquiring and developing new territories; and (iii) strategically acquiring existing Papa John's franchisee groups and territories, if available. The Company's objective is to become the leading chain of pizza delivery restaurants in each of its markets. Through a market-by-market expansion strategy focused on clustering restaurants, the Company seeks to increase consumer awareness and take advantage of operational and advertising efficiencies. During 1996, the Company opened seven restaurants. In 1997 to date, the Company has opened four restaurants and acquired eight restaurants from another Papa John's franchisee. The Company anticipates that it will open an additional eight restaurants by the end of 1997 and twelve restaurants in 1998. The Company was organized as a Delaware corporation in August 1996, its principal executive offices are located at 9109 Parkway East, Birmingham, Alabama 35206, and its telephone number is (205) 836-1212. RECENT DEVELOPMENTS Recent Acquisition. On June 5, 1997, the Company acquired eight Papa John's restaurants from OPD in the Akron, Ohio area in a transaction that has been accounted for as a pooling of interests. Supplemental Consolidated Financial Statements are presented elsewhere in this Prospectus. In addition, on June 26, 1997, the Company entered into an agreement with a PJI franchisee to acquire one Papa John's restaurant adjacent to its Akron, Ohio area and a development agreement to develop three additional Papa John's restaurants in such territory. See "Selected Consolidated Financial Data" and "Certain Transactions." Recent Financial Results. The Comany had pro forma revenues of $12.0 million and pro forma net income of $841,000 for its second fiscal quarter ended June 29, 1997 as compared to pro forma revenues of $9.4 million and pro forma net income of $458,000 for the comparable period in 1996. Pro forma revenues and pro forma net income for the six-month period ended June 29, 1997 were $22.6 million and $1.7 million, respectively, as compared to pro forma revenues of $17.9 million and pro forma net income of $885,000 for the comparable period in 1996. The pro forma results for the second quarter and the six-month period in 1997 include expenses of $124,000 incurred in connection with the merger with OPD, which were expensed in the second quarter of 1997. See "Recent Developments." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 750,000 shares Common Stock offered by the Selling Stockholders............ 450,000 shares Common Stock to be outstanding after the offering........... 5,783,084 shares(1) Use of proceeds............................................. To fund restaurant development and acquisitions and for general corporate purposes Nasdaq National Market symbol............................... PJAM </TABLE> - -------- (1) Excludes (i) a warrant issued to PJI to purchase 225,000 shares of Common Stock at $11.25 per share and (ii) 375,500 shares of Common Stock issuable upon the exercise of stock options as of June 24, 1997. See "Management-- Compensation of Directors," "--1996 Stock Ownership Incentive Plan" and "Certain Transactions." SUMMARY FINANCIAL AND RESTAURANT DATA (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RESTAURANTS) The following tables set forth summary financial and restaurant data for the Company. The table "Income Statement Data--PJ America" represents the results of operations of the Company for the entire period presented and the acquisition of the Virginia restaurants from October 30, 1996 (the closing date of the IPO). The table "Income Statement Data--PJ America Supplemental" represents the results of operations of the Company restated to give retroactive effect to the merger with OPD on June 5, 1997, which was accounted for as a pooling of interests, as if the merger had occurred at the beginning of fiscal 1995. The table "Pro Forma Income Statement Data--PJ America" represents the results of operations of the Company as if the acquisition of the Virginia restaurants had occurred at the beginning of 1995 and has been retroactively restated to reflect the merger with OPD as if it also had occurred at the beginning of 1995. In addition, the table "Restaurant Data--PJ America" represents certain restaurant data for the Company's restaurants for each of the years presented. See Note 3 below and "Certain Transactions." <TABLE> <CAPTION> FISCAL YEAR ENDED THREE MONTHS ENDED ----------------------------- ----------------------- DEC. 25, DEC. 31, DEC. 29, MAR. 29, MAR. 30, 1994 1995 1996 1996 1997 -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA-- PJ AMERICA: Restaurant sales....... $6,415 $10,457 $16,846 $2,998 $ 8,770 Operating income....... 554 1,074 1,662 290 982 Income before income taxes ................ 532 1,009 1,670 272 1,137 Net income(1).......... 338 641 1,078 172 728 INCOME STATEMENT DATA-- PJ AMERICA SUPPLEMENTAL: Restaurant sales....... $16,744 $24,550 $4,915 $10,606 Operating income....... 1,856 2,510 520 1,181 Income before income taxes................. 1,779 2,521 503 1,336 Net income(1).......... 1,095 1,580 309 845 PRO FORMA INCOME STATEMENT DATA--PJ AMERICA: Restaurant sales....... $29,386 $37,968 $8,523 $10,606 Operating income....... 2,815 3,530 756 1,181 Income before income taxes................. 2,582 3,405 689 1,336 Net income............. 1,605 2,143 427 845 Net income per share... $ 0.47 $ 0.57 $ 0.12 $ 0.16 Weighted average shares................ 3,435(2) 3,750(2) 3,444 5,191 RESTAURANT DATA--PJ AMERICA: Percentage change in comparable restaurant sales(3) ............. 24.1% 3.3% 4.7% (1.7%) 11.9% Average sales for restaurants open for full period(3)........ $ 731 $ 727 $ 721 $ 166 $ 187 Number of restaurants open at end of period. 27 46 54 49 57 </TABLE> <TABLE> <CAPTION> MARCH 30, 1997 ---------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA--PJ AMERICA SUPPLEMENTAL: Total assets........................................... $24,779 $36,460 Total debt, including current maturities............... -- -- Stockholders' equity................................... 22,324 34,005 </TABLE> - -------- (1) Net income reflects a pro forma provision for income taxes assuming the Company's predecessors, and OPD where appropriate, were C corporations rather than S corporations for each period. See "Prior S Corporation Status of the Company's Predecessors" and "Certain Transactions." (2) See Note 6 of PJ America, Inc. and Subsidiaries Supplemental Consolidated Financial Statements and "Certain Transactions." (3) Includes restaurants open throughout the periods being compared excluding the eight Papa John's restaurants acquired in the OPD merger. Fiscal 1995 comparable restaurant sales have been adjusted to reflect a 52-week period versus a 53-week period. (4) Adjusted to reflect the sale of 750,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $17.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021772_imrglobal_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021772_imrglobal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d8e4883996d5e1cc135939e3987f58b69b0a3da7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021772_imrglobal_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information contained in this Prospectus, including "Risk Factors," and the Consolidated Financial Statements and Notes thereto. Except as otherwise noted, all information in this Prospectus: (i) assumes a public offering price of $29.46 per share and no exercise of the Underwriters' over-allotment option; and (ii) gives effect to the three-for-two stock split, in the form of a stock dividend, payable on July 10, 1997 to shareholders of record as of June 26, 1997. See "Underwriting" and "Description of Capital Stock." THE COMPANY Information Management Resources, Inc. ("IMR" or the "Company") provides applications software outsourcing solutions for the information technology ("IT") departments of large businesses through an integrated network of global resources. The Company's services, which generally are offered on a fixed- price, fixed-time frame basis, include software development, application maintenance, migration and re-engineering services, and Year 2000 conversion services. In addition, the Company offers programming and consulting services on a time-and-materials basis in order to optimize employee utilization and provide a potential source of future outsourcing contracts. The Company's services, which it terms "transitional outsourcing," assist clients in the maintenance of mainframe-based legacy applications and in the transition from legacy systems to open architecture, client/server and other emerging technologies. IMR delivers many of its transitional outsourcing services using its proprietary Total Software Quality Management ("TSQM") software engineering process and its offshore software development facilities in Bangalore and Mumbai (formerly Bombay), India. The Company plans to establish additional offshore software development facilities in Belfast, Northern Ireland and New Delhi, India. The Company links offshore software development facilities by satellite communications to both the Company's offices and the offices of many of its clients. A global network of offices allows IMR to offer its services on a 24-hour basis through an on-site, off-site and offshore project team working multiple shifts made possible by the time differences between a client's office and the Company's offshore software development facilities. The Company believes that its proprietary TSQM process, software engineering methodologies and toolsets, and its offshore software development centers enable it to provide high quality, cost-effective IT solutions. Faced with intense competition, deregulation, innovation and rapid technological advancements, companies worldwide are seeking to enhance or completely replace their IT systems in order to achieve greater productivity and manage their operations more efficiently. Although client/server and other emerging technologies offer the promise of faster, more functional and more flexible software applications, the implementation of business solutions encompassing these new technologies presents major challenges for companies that lack highly skilled technical personnel and project management skills. As a result, many large companies are pursuing ways to outsource their IT projects, particularly on a fixed-price, fixed-time frame basis in order to minimize the risks associated with such large scale technology projects. Dataquest, a recognized market research firm, estimated that the market for systems integration, consulting, applications development and outsourcing services was approximately $107.0 billion worldwide in 1995 and estimated this market to be growing by approximately 17.3% annually through 2000. Outsourcing represents a particularly cost-effective solution for IT projects such as the Year 2000 problem. Resolving a Year 2000 problem, which occurs because many existing computer systems run software programs permitting only two-digit entries for years (e.g., 1997 is read as "97") and therefore cannot properly process dates in the next century, is a highly time- and labor-intensive project often requiring software development professionals to analyze millions of lines of code. Although the size of the Year 2000 problem is difficult to estimate, the Gartner Group, a recognized industry source, has estimated that the worldwide costs (including in-house costs) to resolve the Year 2000 problem could range from $300 billion to $600 billion. The Company believes that outsourcing of Year 2000 projects has been, and will increasingly become, a catalyst that encourages many companies to outsource additional IT projects. The IMR solution is a systematic and disciplined approach that the Company employs in every outsourcing engagement. There are three critical components of the IMR solution which management believes differentiate the Company from other IT providers. First, the Company has a two-phased TSQM software engineering process that encompasses an extensive front-end project assessment and a fixed- price, fixed-time frame implementation stage. Through the rigorous adherence to its TSQM software engineering process, the Company is able to identify, monitor and manage the risks associated with the cost, schedule, performance, support and delivery of projects on a fixed-price, fixed-time frame basis. Second, the Company's offshore software development facilities provide IMR with a significant cost advantage compared to costs in the United States, as well as the ability to create a virtual "second shift" for its clients. Third, IMR's proprietary toolsets are used to facilitate and streamline a Year 2000 conversion project as well as the migration from mainframe computing environments to flexible open systems and relational database management systems computing environments. Together, these elements of the Company's service delivery model help to optimize cost savings, accelerate project delivery and mitigate risk to both IMR and its clients. The Company's clients are primarily Fortune 500 or comparably sized companies with significant IT budgets and recurring needs for software development, application maintenance, migration and re-engineering, Year 2000 conversion and IT programming and consulting services. IMR serves clients in a variety of industries including financial services, insurance, manufacturing, retail and utilities. The Company has provided transitional outsourcing services for such companies as Commercial Union Insurance Companies, Dayton Hudson Corporation, John Hancock Financial Services, Michelin North America, Inc. ("Michelin"), SPS Payment Systems and Xerox Corporation. Through a staff of approximately 800 software development professionals, the Company serves its clients from its U.S. headquarters in Clearwater, Florida, its office in London, England, its offshore software development centers in Bangalore and Mumbai, India, and its branch sales offices located in Boston, Chicago and Dallas. The Company plans to establish additional offshore software development facilities in Belfast, Northern Ireland and New Delhi, India and is considering other locations in Europe and southeast Asia to expand the Company's global presence. The Company's objective is to be a leading provider of comprehensive transitional IT outsourcing services and solutions. In order to achieve this objective, the Company focuses on the following key business strategies: (i) develop long-term strategic partner relationships with clients; (ii) develop and enhance processes, methodologies and productivity-enhancing software tools; (iii) focus on fixed-price, fixed-time frame projects; (iv) concentrate on key technologies; and (v) attract, train and retain highly skilled employees. A key element of the Company's long-term growth strategy is to expand the scope of IT services it provides to each client. The Company believes that as a result of the detailed work required to analyze and convert legacy applications, many of its Year 2000 clients may look to IMR as an outsourcing partner for future application maintenance, migration and development services. The current demand for the Company's Year 2000 services provides the opportunity to select those accounts with the greatest potential for long-term client relationships. To date, the Company has successfully leveraged the systems knowledge gained through IT services to cross-sell additional services to such diverse customers as SPS Payment Systems, Dayton Hudson and Michelin. IMR is a Florida corporation organized in 1988. The Company's principal executive offices are located at 26750 U.S. Highway 19 North, Suite 500, Clearwater, Florida 33761, and its telephone number is (813) 797-7080. FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and such statements are intended to be covered by the safe harbors created thereunder. Forward-looking statements include statements relating to the anticipated growth in the application maintenance outsourcing and Year 2000 conversion services markets, the ability of the Company to leverage current client contracts into additional contracts, the Company's strategy for expanding its services and for expanding its geographic presence and the Company's ability to distinguish itself from its current and future competitors. Other forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "estimate," "continue," "plans," and "intends." Prospective purchasers are cautioned that all forward-looking statements are subject to risks and uncertainties, including but not limited to the risks set forth herein under the caption "Risk Factors." THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company............. 1,500,000 shares Common Stock offered by the Selling Shareholders................................... 1,500,000 shares Common Stock to be outstanding after the Offering....................................... 23,166,855 shares (1) Use of proceeds................................. The net proceeds of the Offering will be used for the establishment of new offshore software development facilities, and for working capital and other general corporate purposes, including capital expenditures and possible acquisitions. See "Use of Proceeds." Nasdaq National Market symbol................... IMRS </TABLE> - -------- (1) Determined with respect to shares outstanding on June 27, 1997. Includes options for the purchase of 6,403,167 shares of Common Stock which are exercisable as of, or within 60 days of, June 30, 1997 at a weighted average exercise price of $0.31 per share (of which options for the purchase of 6,096,825 shares of Common Stock are held by Satish K. Sanan, the Company's Chief Executive Officer and principal shareholder). See "Certain Transactions--Options Issued to Mr. Sanan." Excludes: (i) options for the purchase of 832,284 shares of Common Stock at a weighted average exercise price of $4.22 per share which are outstanding as of the date of this Prospectus but which will generally be exercisable over the next five years; (ii) 347,019 shares of Common Stock reserved for issuance under the Stock Option Plan (as defined herein); (iii) 180,000 shares reserved for issuance under the Directors Stock Option Plan (as defined herein); and (iv) 235,761 shares reserved for issuance under the Stock Purchase Plan (as defined herein). See "Capitalization," "Management--Director Compensation," "--Executive Compensation," "--Employee Benefit Plans," "Principal and Selling Shareholders" and Note 16 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------- -------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ------ ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues................ $10,132 $12,429 $14,102 $22,700 $27,948 $6,090 $14,347 Gross profit............ 3,724 2,298 5,439 9,229 12,290 2,600 6,305 Income (loss) from operations............. 701 (3,246) 829 3,508 4,684 1,010 2,113 Net income (loss)....... 656 (3,673) 814 2,518 2,588 702 1,432 Pro forma net income (1).................... $ 1,612 $ 2,545 $ 423 $ 1,432 ======= ======= ====== ======= Pro forma net income per share (1).............. $0.08 $0.14 $0.03 $0.07 ======= ======= ====== ======= Weighted average number of common and common stock equivalent shares outstanding (2)........ 20,554 17,581 16,763 21,944 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 -------------------- AS ACTUAL ADJUSTED (3) ------- ------------ <S> <C> <C> BALANCE SHEET DATA: Working capital............................................ $25,939 $67,275 Total assets............................................... 55,989 97,326 Long-term debt, net of current portion..................... 698 698 Total shareholders' equity................................. 43,262 84,598 </TABLE> - -------- (1) Net income and net income per share for 1995 and 1996 and the three months ended March 31, 1996 give pro forma effect to the Company's conversion on November 7, 1996 from an S Corporation to a C Corporation for U.S. federal and state income tax purposes. As an S Corporation, the Company was not subject to income taxes but instead passed its tax attributes through to its shareholders. As a C Corporation, the Company is subject to income taxes at corporate income tax rates. The statements of operations data above present pro forma net income and pro forma net income per share as if the Company had been subject to corporate income taxes for the full year in each of the years ended December 31, 1995 and 1996 and for the full three months for the quarter ended March 31, 1996. See Notes 2 and 14 of Notes to Consolidated Financial Statements. (2) Weighted average number of shares outstanding for the year ended December 31, 1996 reflects the repurchase by the Company of approximately 4,015,410 shares in January 1996 from certain shareholders and the subsequent grant to Mr. Sanan in February 1996 of options to acquire approximately 3,965,010 shares, which shares are retroactively treated as outstanding for such periods. See "Certain Transactions--Options Issued to Mr. Sanan." (3) Adjusted to reflect the sale by the Company of 1,500,000 shares of Common Stock offered hereby at an assumed offering price of $29.46 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021848_delta_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021848_delta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01747c8104eb52f657a3b84582ad6c81d47d6c0a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021848_delta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references herein to the 'Company' or 'Delta' refer to Delta Financial Corporation and its wholly-owned subsidiaries. All financial information gives pro forma effect to the termination in October 1996 of the S corporation status of Delta Funding Corporation, a wholly-owned subsidiary, and the transactions described in 'Selected Consolidated Financial Data' and the related notes thereto and in 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Termination of S Corporation Status and Income Taxes.' THE COMPANY Delta is a specialty consumer finance company that has engaged in originating, acquiring, selling and servicing home equity loans since 1982. Throughout its 15 years of operating history, Delta has focused on lending to individuals who generally have impaired or limited credit profiles or higher debt to income ratios and typically have substantial equity in their homes. Management believes that these borrowers have been largely unsatisfied by the more traditional sources of mortgage credit which underwrite loans to conventional guidelines established by the Federal National Mortgage Association ('FNMA') and the Federal Home Loan Mortgage Corporation ('FHLMC'). The Company makes loans to these borrowers for such purposes as debt consolidation, home improvement, mortgage refinancing or education, and these loans are primarily secured by first mortgages on one- to four-family residential properties. Through its wholly-owned subsidiary, Delta Funding Corporation, the Company originates home equity loans indirectly through licensed brokers and other real estate professionals who submit loan applications on behalf of the borrower ('Brokered Loans') and also purchases loans from mortgage bankers and smaller financial institutions that satisfy Delta's underwriting guidelines ('Correspondent Loans'). Delta Funding Corporation currently originates and purchases the majority of its loans in 21 states, through its network of approximately 1,000 brokers and correspondents. The Company believes that it has a competitive advantage in serving brokers and correspondents in the non-conforming home equity market that stems from its substantial experience in this sector and its emphasis on providing quality service that is prompt, responsive and consistent. The 19 members of Delta Funding Corporation's senior management have an average of over 13 years of non-conforming mortgage loan experience. Management believes this industry-specific experience, coupled with the systems and programs it has developed over the past 15 years, enable the Company to provide quality services that include preliminary approval of most Brokered Loans and certain Correspondent Loans within one day, consistent application of its underwriting guidelines and funding or purchasing of loans within 14 to 21 days of preliminary approval. In addition, the Company seeks to establish and maintain productive relationships with its network of brokers and correspondents by servicing each one with a business development representative, a team of experienced underwriters and, in the case of Brokered Loans, a team of loan officers and processors assigned to specific brokers to process all applications submitted by such brokers. The Company currently originates and purchases the majority of its loans through the Company's main office in Woodbury, New York, its full service office in Atlanta, Georgia, its full processing offices in St. Louis, Missouri, Chicago, Illinois and Warwick, Rhode Island and from seven business development offices located in Michigan (2), New Jersey, Ohio (2), Pennsylvania and Virginia. The Company historically made loans primarily in New York, New Jersey and Pennsylvania. Commencing in 1995, the Company implemented a program to expand its geographic presence into the New England, Mid-Atlantic, Midwest and Southeast regions. As a consequence of its expansion into new markets, as well as its further penetration of existing markets, the Company increased its loan production substantially in 1995 and 1996. Total loan originations and purchases increased $168.1 million, or 140%, from $119.7 million in 1994 to $287.8 million in 1995, and increased $371.0 million, or 129%, in 1996 to $658.8 million. In February 1997, in an effort to broaden its origination sources and to expand its geographic presence in the Company's new markets, the Company acquired two related retail originators of home equity loans, Fidelity Mortgage, Inc., based in Cincinnati, Ohio, and Fidelity Mortgage (Florida), Inc., based in West Palm Beach, Florida (together, 'Fidelity Mortgage'). The Company acquired Fidelity Mortgage with the expectation that the acquisition would result in beneficial synergies, with Fidelity Mortgage providing a dedicated source of mortgage loans for Delta Funding Corporation's securitization pools and for its servicing arm, and Delta Financial Corporation providing capital to Fidelity Mortgage for the expansion of its retail network. Fidelity Mortgage develops retail loan leads primarily through its telemarketing system and its network of nine retail offices located in Florida (2), Georgia, Indiana, Ohio (4) and North Carolina. Four of these offices were opened in the second quarter of 1997, and the Company intends to expand the Fidelity Mortgage network further. The Company has been profitable in each of its 15 years of operation. The Company's results of operations have improved significantly in recent periods as a result of increased loan production and improved operating efficiencies. Total revenues increased $37.4 million, or 103%, to $73.5 million in 1996 from $36.1 million in 1995, and pro forma income before extraordinary item increased 630% to $19.1 million in 1996 from $2.6 million in 1995. During 1995 compared to 1994, the Company's total revenues increased 66% from $21.8 million to $36.1 million and pro forma income increased 128% from $1.1 million to $2.6 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' The Company generates earnings and cash flow primarily through the origination, purchase, securitization and servicing of home equity loans. In a securitization, the Company sells the loans that it originates or purchases to a trust for cash and records certain assets and income based upon (a) the difference between all principal and interest received from the mortgage loans sold and (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on the loans (the 'Excess Servicing') and (b) the difference between the contractual and estimated ancillary servicing revenue with respect to the loans and the estimated cost to service them ('Mortgage Servicing Rights'). At the time of the securitization, the Company estimates these amounts based upon a declining principal balance of the underlying loans, which has been calculated by using an estimated prepayment rate, and capitalizes these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded on the Company's balance sheet as interest-only and residual certificates and capitalized Mortgage Servicing Rights, respectively, and are aggregated and reported on the income statement as net gain on sale of mortgage loans, after being reduced (increased) by (i) loan acquisition premiums paid to correspondents and brokers, (ii) costs of securitization and (iii) any hedge losses (gains). The Company typically begins to receive Excess Servicing cash flow eight to twelve months from the date of securitization, although this time period may be shorter or longer depending upon the structure and performance of the securitization. Prior to such time, a reserve provision is created within the securitization trust which uses Excess Servicing cash flows to retire a portion of the securitization bond debt until the spread between the outstanding principal balance of the mortgage loans in the securitization trust and the securitization bond debt equals 2-3% of the initial securitization principal balance (hereinafter, the 'overcollateralization limit'). Once this overcollateralization limit is met, excess cash flows are distributed to Delta. The Company begins to receive contractual mortgage servicing cash flows in the month following the securitization. Since 1991, Delta has sold approximately $1.7 billion of its mortgage loans through 15 real estate mortgage investment conduit ('REMIC') securitizations. Each of these securitizations has been credit-enhanced by an insurance policy provided through a monoline insurance company to receive ratings of 'Aaa' from Moody's Investors Service, Inc. ('Moody's') and 'AAA' from Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ('Standard & Poor's'). The Company sells loans through securitizations and, from time to time, on a whole loan basis, to enhance its operating leverage and liquidity, to minimize financing costs and to reduce its exposure to fluctuations in interest rates. In addition to the excess cash flow from securitizations and proceeds from whole loan sales, the Company earns the net interest spread on loans held for sale, origination fees on its Brokered Loans and retail loans (which are included in other income) and servicing fees of between 0.50% and 0.65% per annum of the outstanding balance of the loans it services. Since its inception, the Company has serviced substantially all of the loans it has originated and purchased, including all of those that it has subsequently sold through securitizations. Management believes that servicing this loan portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. As of March 31, 1997, Delta had a servicing portfolio of $1.1 billion of loans. See 'Business--Loans.' The Company's business objective is to increase profitably the volume of its loan originations and purchases and the size of its servicing portfolio by implementing the following strategies: Continuing to Provide Quality Service. The Company believes its commitment to service provides it with a competitive advantage in establishing and maintaining productive broker and correspondent relationships. The Company's loan officers and underwriters endeavor to respond promptly and consistently on every loan submission. In addition, through its business development representatives, Delta regularly communicates with brokers and correspondents in order to better understand and respond to their needs. Maintaining Underwriting Standards. The Company believes the depth and experience of its underwriting staff, coupled with the consistent application of its underwriting procedures and criteria, provide the infrastructure needed to manage and sustain the Company's recent growth, while maintaining the quality of loans originated or purchased. The depth and experience in the Company's underwriting department provide two significant competitive advantages. First, they help to ensure that the Company's underwriting standards and subjective judgments required in the non-conforming market are consistently applied, thus enabling the Company to effectively implement a risk-based pricing strategy. Second, they provide the opportunity to expand underwriting activities beyond the Company's headquarters while maintaining consistent underwriting standards. Further Penetrating Existing and Recently Entered Markets and Expanding into New Markets. The Company intends to continue to increase the volume of its loan originations and purchases through a three-pronged strategy that includes greater originations and purchases from its existing brokers and correspondents, establishment of new broker and correspondent relationships in both existing and recently-entered markets and expansion into new markets. Expanding its Retail Origination Capabilities. The Company intends to devote management and capital resources to expanding its retail network in order to continue to broaden its origination capabilities and strengthen its geographic presence. Since the acquisition of Fidelity Mortgage and its five retail offices, the Company has opened additional Fidelity Mortgage branch offices in Atlanta, Georgia, Fort Lauderdale, Florida, Charlotte, North Carolina and Cleveland, Ohio. Expanding Through Acquisitions. Management believes acquisitions can be a means of cost effectively increasing or diversifying the Company's loan production capabilities. The Company continually considers acquisition candidates which operate in geographic or product areas that complement the Company's existing business. Leveraging its Information and Processing Technologies. In recent years, the Company has made significant capital investments to upgrade and expand its information and processing technologies. These investments have included the acquisition and implementation of a new servicing system and have enabled the Company to achieve operating efficiencies and cost savings. The Company's recent and anticipated geographic expansion and growth in originations and servicing portfolio were considered when these systems were designed, and management believes its strategic plans can be met by leveraging its existing systems without substantial additional investment in the near future. See 'Business--Business Strategy.' All of the Company's operations are conducted through its wholly-owned subsidiaries, Delta Funding Corporation, DF Special Holdings Corporation, Fidelity Mortgage, Inc. and Fidelity Mortgage (Florida), Inc. In November 1996, Delta completed the initial public offering of its common stock which trades on the New York Stock Exchange under the symbol 'DFC.' The principal executive offices of the Company are located at 1000 Woodbury Road, Suite 200, Woodbury, New York 11797, and its telephone number is (516) 364-8500. RECENT DEVELOPMENTS On June 18, 1997, Delta Funding Corporation entered into a $100 million syndicated credit agreement (the 'Credit Agreement') with a group of banks for which the First National Bank of Chicago ('First Chicago') acts as agent. The Credit Agreement will be used primarily to finance mortgage loans held for sale and to fund advances to securitization trusts by Delta Funding Corporation. The Credit Agreement provides for a $100 million secured revolving credit facility with various borrowing base sublimits, including, but not limited to, a $15 million secured recoverable servicing advance sublimit. Delta Funding Corporation's obligations under the Credit Facility are guaranteed by the Company. Advances under the Credit Facility are secured by a first priority lien on warehouse collateral and receivables created from recoverable servicing advances. In connection with the Credit Agreement, Delta Funding Corporation has agreed to certain standard affirmative covenants, including corporate existence, maintenance of its properties and insurance coverage, prompt payment of taxes and other claims and maintenance of a standard accounting system. Delta Funding Corporation also made certain negative covenants which, among other things: (i) specify maximum leverage ratios, (ii) limit its ability to incur additional indebtedness, (iii) require a minimum net worth, (iv) limit its ability to pledge, mortgage or encumber its assets and (v) limit its ability to merge with another entity or dispose of more than a specified percentage of its total assets. THE OFFERING <TABLE> <S> <C> Securities Offered........................ $150,000,000 aggregate principal amount of % Senior Notes due 2004. Maturity Date............................. July , 2004. Interest Payment Dates.................... Each , and , commencing , 1997. Guarantees................................ The obligations of the Company under the Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the existing and future Subsidiaries of the Company, other than Subsidiaries designated as 'Unrestricted Subsidiaries' in accordance with the Indenture. See 'Description of the Notes--Guarantees.' Optional Redemption....................... On or after July , 2001, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. See 'Description of the Notes--Optional Redemption.' Change of Control......................... Upon a Change of Control (as defined), each Holder of the Notes may require the Company to repurchase the Notes held by such Holder at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. See 'Description of the Notes--Repurchase at the Option of Holders--Change of Control.' Asset Sales............................... The Indenture relating to the Notes (the 'Indenture') requires that the proceeds of certain Asset Sales (as defined) be applied as specified in the Indenture or be used to repurchase the Notes, at the option of the Holder thereof, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. Ranking................................... The Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future unsecured unsubordinated Indebtedness of the Company and senior in right of payment to all existing and future subordinated Indebtedness of the Company. The Subsidiary Guarantee of each of the Subsidiary Guarantors will rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes and Subsidiary Guarantees will be effectively subordinated to all existing and future secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the value of the collateral securing such indebtedness). As of March 31, 1997, after giving pro forma effect to the Offering, the Company and the Subsidiary Guarantors had approximately $3.3 million of secured Indebtedness outstanding. </TABLE> <TABLE> <S> <C> Certain Covenants......................... The Indenture will contain certain covenants, including, but not limited to, covenants with limitations on the following matters: (i) restricted payments; (ii) incurrence of additional indebtedness; (iii) issuance of preferred stock; (iv) incurrence of additional liens; (v) dividends and other payment restrictions affecting subsidiaries; (vi) restrictions on distributions from subsidiaries; (vii) merger, consolidation or sale of assets; (viii) transactions with affiliates; and (ix) lines of business. However, all these limitations are subject to a number of important exceptions and qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds........................... The net proceeds will be used (i) to pay off all residual financing agreements (approximately $57.5 million at March 31, 1997), (ii) to repay amounts outstanding under certain of the Company's warehouse lines of credit (lines of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans) (approximately $51.8 million as of March 31, 1997), (iii) to fund future loan originations and purchases, (iv) to support securitization transactions, (v) to fund expansion of Fidelity Mortgage's retail network and (vi) for general corporate purposes, including to fund acquisitions. See 'Use of Proceeds' and 'Underwriting.' </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001021968_premium_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001021968_premium_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..88ef5fcd9b91d21a818d49a1cf6c95bb6c68503c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001021968_premium_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, when used in this Prospectus, all references to the "Company" refer collectively to PSF Holdings, L.L.C. ("Holdings"), its wholly-owned subsidiary, Premium Standard Farms, Inc. ("PSF"), and PSF's wholly-owned subsidiary, Princeton Development Corp. ("Princeton"). Unless otherwise indicated, as it relates to the Company's operations, references herein to fiscal years or years and quarters are to the Company's fiscal year which, beginning with 1996, ends on the last Saturday in December and, prior to 1996, was December 31. The end of any such fiscal year of the Company, unless otherwise stated, shall be referred to herein as December 31. THE COMPANY The Company is a vertically integrated provider of pork and pork products to the wholesale and retail food markets in the United States and abroad. The Company believes that it is the largest vertically integrated pork producer in the Midwest and that it is one of the largest owners of sows in the United States. The Company utilizes modern, efficient building designs, sophisticated genetic methods, and strict control of animal health and diet to produce premium pork and pork products. As of March 31, 1997, the Company had approximately 89,000 sows in production operations located on over 37,000 acres in northwest Missouri and approximately 19,000 sows located on approximately 14,000 acres located in the Texas Panhandle area, with an aggregate capacity to produce approximately 1.9 million hogs annually. The Company's operations include hog production facilities, a pork processing facility capable of processing 7,000 hogs per day (on a single shift), feed mills, genetic improvement facilities, office and training facilities and additional production infrastructure. The Company's Milan, Missouri pork processing facility is among the most modern facilities of its kind, and is capable of processing all of the approximately 1.5 million hogs expected to be produced annually from the Company's Missouri operations. The Milan plant has the capacity to process approximately 2.6 million hogs annually on two shifts. The Company's products include fresh pork. The Company currently markets these products to a variety of wholesale and retail customers in the U.S. and abroad. The Company's fresh pork, which includes loins, tenderloins, hams, butts, picnics, bellies and other products are sold to supermarket chains, meat distributors, further processors, food service companies, and institutional food customers and the export market. The Company's operations also include the sale of live hogs, and the sale of processed pork products in the variety meat industry, the feed processing industry and the pet food industry. The Company's business strategy is to produce and market high quality pork and pork products in a cost-efficient manner by combining state-of-the-art hog production with strategically located modern pork processing facilities. The Company's highly automated processing operations have been designed to enable it to capitalize on the value of its hog supply by achieving benefits of vertical integration that generally are not available to its non-integrated competitors. For example, the integrated management of strategically located production and processing operations enables the Company to streamline logistics, transportation and production schedules to enhance asset utilization and reduce the Company's cost structure. Vertical integration also enables the Company to capture the incremental carcass value of its hogs rather than passing this value on to other processors. Founded in 1988, the Company expanded from 3,300 sows with the capacity to produce 73,600 hogs annually in 1990 to approximately 106,000 sows with the capacity to produce approximately 1.9 million hogs annually in 1996. During this period, the Company developed its entire Missouri operation, including its hog production facilities and the Milan, Missouri pork processing facility. In 1994, the Company began the development of a second pork production operation located in the Texas Panhandle (the "Texas Facilities"). The first phase in this expansion was the acquisition, in June 1994, of a 16,800 sow hog production operation from National Hog Farms of Texas Inc. ("Perico") and the High Plains Ranch, a 33,000 acre parcel of land near the Perico operations. The planned second phase of that expansion was to create a fully integrated production and processing operation in Texas through the construction of additional hog production facilities on the High Plains Ranch, a state-of-the-art processing plant (based on the Milan, Missouri facility), and the acquisition of an adjacent 7,000 acre ranch. The Company commenced the construction of additional hog production facilities on the High Plains Ranch and related infrastructure between June 1994 and May 1995. In May 1995, the Company indefinitely suspended expansion of the Texas Facilities. During 1995, the Company did not meet its operating plans as hog prices continued at historically low levels, feed costs increased, the deficiency of earnings to fixed charges increased, and the Company suspended construction of the Texas Facilities incurring substantial losses. As a result, the Company was unable to service certain of its debt obligations. As of June 30, 1996, the Company had $515 million of long-term debt and associated accrued interest outstanding. On July 2, 1996, the Company filed a pre-negotiated, consensual reorganization under Chapter 11 of the United States Bankruptcy Code (the "Reorganization") which was successfully completed on September 17, 1996 (the "Effective Date") and which enabled the Company to significantly improve its financial structure by restructuring its debt and converting a significant portion of its outstanding debt to equity. As of December 28, 1996, the Company had $153 million of long-term debt outstanding. The Company has initiated organizational and operational changes during and following the Reorganization which it believes, together with decreased debt service obligations and increased hog and pork prices, has resulted in the Company's improved performance since the Effective Date. The Company resumed work on the Texas Facilities in early 1997 through the planned investment of approximately $5 million in hog production facilities. Following the completion of such construction, the Company's Missouri and Texas operations will have approximately 110,000 sows in production operations. The Company intends to periodically evaluate the desirability of further expansion of its Texas operations based on the Company's production and processing needs, operating performance, capital requirements and growth strategy. PSF Finance L.P. ("Finance"), the predecessor to Holdings, was organized as a Delaware limited partnership. Premium Standard Farms, Inc. ("Farms"), the predecessor to PSF, was incorporated as a Missouri corporation and was consolidated as a unilaterally controlled special-purpose entity of Finance. Finance and Farms are sometimes collectively referred to herein as "Predecessor," and Holdings and PSF are sometimes collectively referred to herein as "Successor." The Successor commenced operations on September 17, 1996 by merging Finance into Holdings, which then transferred the net assets it received from Finance to PSF. Farms transferred all of its net assets to PSF in satisfaction of debt. The Predecessor was then dissolved and all Predecessor operations were continued by the Successor. References to the Company in this Prospectus for any period prior to the Reorganization (as defined) shall mean the Predecessor. Holdings is a limited liability company organized under the laws of the state of Delaware in 1996. PSF was incorporated in Delaware in 1996 and Princeton was incorporated in Delaware in 1992. The principal executive offices of each of Holdings, PSF and Princeton are located at 423 West 8th Street, Suite 200, Kansas City, Missouri 64105 and their telephone number is (816) 472-7675. THE OFFERINGS LLC Units offered by the Selling Securityholders....... 10,000,000 LLC Units LLC Units outstanding on the date of this Prospectus(1).... 10,000,000 LLC Units LLC Units issuable upon exercise of Warrants and to be resold by the Selling Securityholders............... 2,048,192 LLC Units Warrants offered by the Selling Securityholders....... 2,048,192 Warrants to acquire LLC Units Notes offered by the Selling Securityholders(2)............ $248,640,672 aggregate principal amount Use of Proceeds............... The Company will not receive any proceeds from the sale of Securities by the Selling Securityholders. Absence of Public Market...... There is currently no public market for the LLC Units or the Warrants and the Company does not presently intend to list any of the Securities on a stock exchange or quotation service. Bankers Trust Company currently makes a market in the Notes. However, Bankers Trust Company is not obligated to do so and any market-making activities with respect to the Notes may be discontinued at any time without notice. Accordingly, no assurance can be given as to the liquidity of the trading market for any of the Securities or that an active public market for the Notes will develop. See "Risk Factors -- Absence of Public Market." - ------------------------- (1) Does not include 620,000 LLC Units issuable upon the exercise of outstanding options. See "Management -- Executive Compensation" and "Management -- Management Option Plan." (2) Includes (i) $117,500,000 aggregate principal amount of Notes issued on the Effective Date, (ii) $6,390,699 aggregate principal amount of Secondary Notes (as defined) issued March 15, 1997 in payment of interest then due on the Notes, and (iii) $124,749,973 aggregate principal amount of Secondary Notes that may be issued after the date of this Prospectus in lieu of cash payments of interest on the Notes. THE NOTES Maturity Date................. September 17, 2003 Interest Payment Dates........ Interest on the Notes accrues from the date of issuance at 11% and is payable semi-annually on each March 15 and September 15, commencing March 15, 1997. Until the date the Term Loan (as defined) is paid in full whether upon maturity or by earlier prepayment ("the Term Loan Payout Date") or the maturity of any Note, at the option of PSF, interest is payable by the issuance of additional Notes (valued at 100% of the face amount thereof) in lieu of cash interest. After any such date, interest on the Notes is payable solely in cash. Optional Redemption........... The Notes are redeemable, in whole or in part, at the option of PSF during the twelve-month periods beginning on each September 1 for the years 1996 through 2001, at the redemption prices set forth herein plus accrued interest to the date of redemption. Change of Control............. In the event of a Change of Control (as defined), each holder of Notes will have the right, subject to the terms and conditions of the Indenture (as defined) for the Notes, to have all or any portion of such holder's Notes (equal to $1,000 or an integral multiple thereof) repurchased by PSF at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to a Change of Control. Offers to Purchase............ In the event of certain asset sales, to the extent that the proceeds thereof are not used to purchase certain lines of business or to repay the Term Loan (as defined) or the Second Priority Note Agreement (as defined), PSF will be required to offer to purchase the Notes at 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase with the net proceeds of such asset sales. But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to such an offer to purchase. Security...................... The Notes are guaranteed by Holdings and Princeton and are collaterally secured by a lien on substantially all of the assets of the Company. Ranking....................... The liens securing the Notes and the right of payment pursuant to the Notes are junior to the liens and right of payment under the Credit Agreement (as defined) and all indebtedness under the Second Priority Note Agreement. Restrictive Covenants......... The Indenture imposes certain limitations on the ability of the Company to, among other things, (i) incur additional indebtedness, (ii) pay dividends or make certain restricted payments or make certain investments, (iii) consummate certain asset sales, (iv) enter into certain transactions with affiliates, (v) incur certain liens, (vi) impose restrictions on the ability of a Subsidiary to issue capital stock, and (vii) impose restrictions on the Company from engaging in certain businesses. The restrictive covenants are subject to certain exceptions and qualifications. See "Description of the Notes -- Certain Covenants." THE WARRANTS Warrants...................... The Warrants entitle the holders thereof to purchase from Holdings an aggregate of 2,048,192 LLC Units of Holdings which represents 17% of the LLC Units on a fully diluted basis as of the date of this Prospectus. Exercise...................... Each Warrant entitles the holder thereof to purchase one LLC Unit of Holdings at an exercise price of $45.00 per LLC Unit. The Warrants are exercisable (i) in the case of a holder which is not a MS Member (as defined), at any time during the ten year period commencing on the original issue date and terminating on the first business day after the tenth anniversary of the original issue date (the "Termination Date") and (ii) in the case of a holder which is a MS Member, at any time during the period that commences on January 1, 2000 and that terminates on the Termination Date, subject to earlier exercise in certain circumstances, and in each case, subject to earlier cancellation under certain circumstances. The number of LLC Units of Holdings for which, and the price per LLC Unit at which, a Warrant is exercisable are subject to adjustment upon the occurrence of certain events as provided in the Warrant Agreement (as defined). See "Description of the Warrants." Expiration of Warrants........ The Warrants shall expire at the close of business on the Termination Date. THE LLC UNITS LLC Units..................... The LLC Units are divided into two classes, Class A Units and Class B Units. Class A Units and Class B Units are identical and entitle the holders thereof to the same rights and privileges, except that Class B Members of Holdings shall have no right, power or authority to participate in the management of Holdings in any manner, including without limitation, voting rights. Conversion of LLC Units....... Each Class B Unit transferred to a party other than a MS Member is convertible, at the election of such party, into one Class A Unit immediately following such transfer, and each Class A Unit transferred to a MS Member shall convert automatically, immediately following such transfer, into one Class B Unit, subject in each case to certain adjustments under certain circumstances in the number and kind of LLC Units. Repurchase of Units........... In the event of termination of employment of a holder of LLC Units who is an Employee Member (as defined) of the Company as a result of death or disability, Holdings is obligated to purchase such holder's LLC Units at fair value generally within 90 days after such termination. As of the date of this Prospectus, none of the outstanding LLC Units are held by Employee Members of the Company. In the event of termination of employment of such a holder other than as a result of death or disability, Holdings has the right for a period of six months following the last date on which such employee was a member of the board of directors or manager or an employee of the Company to repurchase the LLC Units held by such employee for fair value, or if such LLC Units have not vested, at such price specified in the agreement or plan pursuant to which such unvested LLC Units were acquired. See "Description of the Units -- Right to Repurchase Units." Restrictions on Transfer...... A holder of LLC Units who is a Member (as defined) of Holdings is subject to certain restrictions on transfer of such holder's LLC Units. Prior written notice of such transfer must be given to Holdings and certain other conditions must be met before such transfer is made. A transferee of LLC Units shall not be admitted as a Member of Holdings unless certain conditions, as set forth in the LLC Agreement, are met, and unless admitted as a Member (holding Class A Units), such transferee shall have no voting rights. Transfers which would cause Holdings to become a Foreign Business (as defined) are not permitted. See "Description of the Units -- Restrictions on Transfer."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022147_medical_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022147_medical_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c5b3b21217c342f049c38da3ffb2b8d170049295
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022147_medical_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the historical and pro forma financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Simultaneously with the closing of its initial public offering of Common Stock (the "Offering"), Medical Manager Corporation ("MMC") acquired, in separate transactions (the "Mergers") in exchange for cash and shares of its Common Stock, five businesses (each, a "Founding Company" and, collectively, the "Founding Companies") involved in one or more aspects of the development, sale and support of The Medical Manager practice management system. Unless otherwise indicated, all references herein to "MMC" mean Medical Manager Corporation prior to the consummation of the Mergers. Unless otherwise indicated, all share, per share and financial data set forth herein have been adjusted to give effect to all of the Mergers.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022368_schiff_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022368_schiff_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a229e827c00f6de41a61da0be1de6bdaf167a2b8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022368_schiff_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Information contained in this Prospectus contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology or by discussions of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. This Prospectus also contains important cautionary statements identifying factors with respect to such forward-looking statements. See "Risk Factors." Unless otherwise indicated, all information contained herein assumes no exercise by the U.S. Underwriters and the Managers of their over-allotment options. Unless the context otherwise requires, all references to the "Company" mean Weider Nutrition International, Inc. and its subsidiaries and all references to "Weider" or the "Parent" mean Weider Health and Fitness, the principal stockholder of the Company. All references to numbers of shares of Common Stock reflect the exchange of all outstanding common stock of Weider Nutrition Group, Inc. ("Weider Nutrition") for Common Stock of the Company and a 14,371.3-for-one stock split of the Common Stock. THE COMPANY The Company is a leading manufacturer of branded and private label nutritional supplements and is a leading marketer of multiple brands of nutritional supplements through multiple distribution channels. The Company manufactures a broad range of capsules and tablets, powdered drink mixes, bottled beverages and nutrition bars and markets branded products in four principal categories: sports nutrition; vitamins, minerals and herbs; diet; and healthy snacks. The Company markets its branded products through each key distribution channel and is one of the leading marketers of nutritional supplement products to the mass volume retail channel, one of the most significant and growing distribution channels in the nutritional supplement industry. Consistent with management's multi-channel strategy, sales of the Company's products in fiscal 1996 were balanced among mass volume retailers, health food stores and a combination of other channels, including health clubs and gyms, international markets and private label manufacturing. According to a 1996 survey conducted by Packaged Facts, an independent consumer market research firm, the principal domestic markets in which the Company's products compete totalled approximately $6.5 billion in 1996 and grew at a compound annual growth rate of approximately 15% from 1992 through 1996. Because of the Company's broad portfolio of leading brands, multiple distribution channels and state-of-the art manufacturing capabilities, the Company believes that it is uniquely positioned to capitalize on the anticipated growth in the nutritional supplement industry. The Company's products are currently sold in over 38,000 retail outlets in all 50 states. The Company's customers in the mass volume retail channel include: mass merchandisers -- Wal-Mart, Target and Kmart; drug stores -- Walgreens, CVS, American Drug and Thrifty/Payless; warehouse clubs -- Price Costco and Sam's Club; and supermarkets -- Albertson's, Giant and Ralphs. The Company services the health food market by distributing its products to General Nutrition Center ("GNC") and the leading health food distributors (such as Tree-of-Life, Stow Mills and Nature's Best). The Company also sells through other distribution channels, including its network of exclusive distributors to health clubs and gyms (such as Bally's Health and Fitness and Gold's Gym), international markets, and private label manufacturing for other nutritional supplement companies. The Company pursues a multi-channel distribution strategy in order to participate in the growth being experienced in each of these channels, thereby increasing its overall share of the nutritional supplement market. The Company also distributes its products to all major markets worldwide. As part of its multi-brand, multi-channel strategy, the Company has created a portfolio of recognized brands designed for specific distribution channels. The Company manufactures and markets approximately 1,400 products and has approximately 1,800 SKUs. The positioning of the Company's brand names is supported by significant advertising and marketing expenditures as well as the Company's historical association with the Weider name. As a result, the Company believes that it has many of the leading brands in the nutritional supplement industry. The following table identifies the Company's 12 leading brands and illustrates the Company's multi-brand, multi-channel strategy: <TABLE> <CAPTION> BRAND PRIMARY CHANNEL PRIMARY CATEGORY --------------------------- --------------------------- --------------------------- <S> <C> <C> Great American Mass volume retailers Vitamins and diet Nutrition(TM) Joe Weider Signature(TM) Mass volume retailers Sports nutrition and diet Prime Time(R) Mass volume retailers Vitamins and diet Tiger's Milk(TM) Mass volume retailers Healthy snacks Fi-Bar(R) Mass volume retailers Healthy snacks Schiff(R) Health food stores Vitamins and diet Metaform(TM) Health food stores Sports nutrition and diet Victory(TM) Health food stores Sports nutrition Mega Mass(R) Health food stores Sports nutrition American Body Building(TM) Health clubs and gyms Sports nutrition and diet Science Foods(R) Health clubs and gyms Sports nutrition and diet Steel Bar(R) Health clubs and gyms Sports nutrition </TABLE> To support its multi-brand, multi-channel strategy, the Company will continue to invest in research and development and state-of-the-art manufacturing and distribution facilities. The Company's research and development group has successfully developed new brands targeted to specific consumers, such as Great American Nutrition and Metaform, and new products, such as Schiff 's Melatonin and Whole Food Phytonutrients. In addition, the Company manufactures over 80% of its branded products and is building additional state-of-the-art facilities that it believes will more than double current capacity. The Company expects its additional facilities to be operational in mid-1997. The Company believes its research and development commitment and integrated manufacturing capabilities will continue to provide a significant advantage in capturing an increasing share of the growing nutritional supplement market. The Company intends to broaden its leadership position in the nutritional supplement industry by combining internal growth with strategic acquisitions. Specifically, the Company's strategy is to: (i) leverage its portfolio of established brands to increase its share of the nutritional supplement market; (ii) develop new brands and product line extensions through its commitment to research and development; (iii) continue the growth of its balanced distribution network; (iv) further penetrate international markets; and (v) supplement internal growth through strategic acquisitions of related businesses and product lines. The Company believes that its multiple distribution channels, broad portfolio of leading brands and state-of-the-art manufacturing and distribution capabilities position it to be the long-term competitive leader in the nutritional supplement industry. During the three fiscal years ended May 31, 1996, the Company achieved compound growth rates in net sales and net income of 43.5% and 61.3%, respectively. The Company's growth has been a result of increased demand for the Company's products, the Company's increased penetration of the growing mass volume retail distribution channel, an aggressive acquisition strategy and new product introductions. The Company has not experienced revenue and net income growth during fiscal 1997 at the rates experienced in fiscal 1996 because of manufacturing and distribution capacity constraints, fewer acquisitions and decreased sales of melatonin. The nutritional supplement industry is influenced by products, such as melatonin, that can become popular due to changing consumer tastes and heightened media attention. In addition, the Company has made significant investments in manufacturing and distribution infrastructure in fiscal 1997 to support future growth. These expenditures include higher depreciation associated with additional capital equipment as well as costs associated with hiring additional personnel and upgrading information systems. The Company believes that these investments and the new manufacturing and distribution capacity expected to be operational in mid-1997 will enable the Company to meet increased demand in the growing nutritional supplements industry. The Company has its principal executive offices at 1960 South 4250 West, Salt Lake City, Utah 84104-4836, and its telephone number is (801) 975-5000. The Company was incorporated under the laws of the State of Delaware in 1996. THE OFFERINGS <TABLE> <S> <C> Class A Common Stock Offered(1): U.S. Offering......................... 4,480,000 shares International Offering................ 1,120,000 shares Total.............................. 5,600,000 shares Common Stock Outstanding: Before the Offerings.................. 1,551,384 shares of Class A Common Stock and 15,624,807 shares of Class B Common Stock After the Offerings(1)(2)............. 8,186,240 shares of Class A Common Stock and 15,624,807 shares of Class B Common Stock Dividends............................... Upon completion of the Offerings, the Company intends to commence paying quarterly cash dividends on its Class A Common Stock and its Class B Common Stock (together, the "Common Stock") at an initial annual rate of $0.15 per share. See "Dividend Policy." Use of Proceeds......................... The Company intends to apply the net proceeds as follows: (i) approximately $35.9 million, together with approximately $28.1 million of borrowings under the New Credit Agreement (as defined herein), is expected to be used to repay all outstanding indebtedness under the Existing Credit Agreement (as defined herein); (ii) $25.0 million is expected to be paid at the closing of the Offerings in connection with a one-time dividend to the holder of the Class B Common Stock; and (iii) approximately $15.9 million is expected to be used to repay intercompany indebtedness owed to Parent, which indebtedness was incurred primarily in connection with certain acquisitions and taxes payable by the Parent on behalf of the Company pursuant to a tax sharing agreement. Pending such uses, net proceeds received by the Company will be invested by the Company in short-term interest bearing instruments. See "Use of Proceeds." Voting Rights........................... Except as otherwise required by law, the Class A Common Stock and Class B Common Stock vote as a single class on all matters, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to ten votes. All of the shares of Class B Common Stock are owned by the Parent. Immediately after consummation of the Offerings, the Parent will beneficially own shares of Class B Common Stock representing approximately 95.0% of the combined voting power of the outstanding shares of Common Stock (approximately 94.5% if the over-allotment options of the U.S. Underwriters and the Managers are exercised in full). New York Stock Exchange Symbol.......... "WNI." </TABLE> - --------------- (1) Does not include up to 840,000 shares of Class A Common Stock subject to the over-allotment options granted by the Company to the U.S. Underwriters and the Managers. (2) Does not include 1,604,000 shares of Class A Common Stock reserved for issuance under the 1997 Equity Participation Plan of Weider Nutrition International, Inc. (the "Equity Plan") or 188,948 shares of Class A Common Stock issuable to certain senior executives of the Company pursuant to the Management Incentive Agreements (as defined herein) but does include 992,856 shares of Class A Common Stock issuable upon consummation of the Offerings to certain senior executives of the Company pursuant to the Management Incentive Agreements and approximately 42,000 shares of Class A Common Stock to be issued to certain employees of the Company who have a minimum service period of six months. See "Management -- Equity Plan" and "-- Management Incentive Agreements." SUMMARY FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR ENDED MAY 31, FEBRUARY 28, -------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- -------- -------- -------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales....................... $58,170 $63,144 $67,870 $90,927 $186,405 $128,448 $151,407 Gross profit.................... 24,343 26,142 28,583 35,516 70,228 48,029 57,399 Impairment of intangible assets(1).................... -- -- -- -- -- -- 2,095 Operating expenses.............. 18,385 19,036 20,344 24,226 41,068 28,191 36,750 Income from operations.......... 5,958 7,106 8,239 11,290 29,160 19,838 18,554(1) Net income...................... 2,598 3,563 4,134 6,092 14,964 10,055 8,075(1) Pro forma net income per common and common equivalent share(2)..................... -- -- -- -- $ 0.79 -- $ 0.43 Pro forma common and common equivalent shares outstanding(2)............... -- -- -- -- 18,842,858 -- 18,842,858 Supplemental pro forma net income per common and common equivalent share(3).......... -- -- -- -- $ 0.71(4) -- $ 0.43(4) Supplemental pro forma common and common equivalent shares outstanding(3)............... -- -- -- -- 23,811,047 -- 23,811,047 OTHER DATA: EBITDA(5)....................... $ 6,435 $ 7,429 $ 8,629 $13,438 $ 33,908 $ 23,216 $ 24,651 Capital expenditures............ 380 1,469 5,171 1,295 6,084 5,434 6,343 Net sales increase.............. --% 9% 7% 34% 105% --% 18% Income from operations increase(6).................. -- 19 16 37 158 -- 4 Net income increase (decrease)(6)................ -- 37 16 47 146 -- (7) </TABLE> <TABLE> <CAPTION> FEBRUARY 28, 1997 MAY 31, --------------------------- -------------------------------- PRO FORMA 1994 1995 1996 ACTUAL AS ADJUSTED(7) ------- ------- -------- -------- -------------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......... $ 2 $ 2,272 $ 1,592 $ 1,065 $ 1,065 Working capital.................... 14,082 25,044 47,505 61,802 61,802 Total assets....................... 39,548 70,048 133,147 148,685 154,391 Total debt......................... 7,410 28,616 68,054 88,288 38,593 Total stockholders' equity......... 22,946 28,100 39,332 40,303 95,703 </TABLE> - --------------- (1) Reflects an impairment of intangible assets recognized as a result of adopting SFAS No. 121 (as defined herein). (2) Gives effect to the 14,371.3-for-one stock split and the issuance of 1,666,667 shares of Class A Common Stock as part of the Offerings, the proceeds from which would be necessary to pay the one-time, $25.0 million Class B Dividend (as defined herein); otherwise does not give effect to the Offerings. (3) Gives effect to (i) the Offerings and the application of the net proceeds therefrom, including the one-time, $25.0 million Class B Dividend, (ii) the issuance of 992,856 shares of Class A Common Stock pursuant to the Management Incentive Agreements, and (iii) the issuance of approximately 42,000 shares of Class A Common Stock to certain employees who have a minimum service period of six months. Does not give effect to the one-time compensation expense estimated at approximately $19.9 million ($12.0 million, net of tax) arising from (a) the conversion of performance units granted to certain senior executive officers under the Management Incentive Agreements upon consummation of the Offerings, or (b) certain other stock grants to be effected upon consummation of the Offerings. See "Management -- Management Incentive Agreements," "-- Equity Plans" and "Use of Proceeds." (4) Reflects the retirement of debt with the proceeds of the Offerings as if such debt was retired at the beginning of the period, which would have the effect of reducing after-tax interest expense by $2.0 million in fiscal 1996 and $2.2 million in the nine months ended February 28, 1997. The one-time $19.9 million ($12.0 million, net of taxes) compensation expense described in note 3 above will take effect upon consummation of the Offerings; this is expected to impact the Company's net income and stockholders' equity in the fourth quarter of fiscal 1997. Giving pro forma effect to such compensation expense would reduce supplemental pro forma net income per common and common equivalent share by approximately $0.50. (5) Earnings before interest expense, income taxes, depreciation and amortization and excluding certain extraordinary or nonrecurring events ("EBITDA") is presented because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (6) The nine month period ended February 28, 1997 excludes the impairment of intangible assets loss of $2.1 million ($1.3 million, net of taxes) described in note 1 above. (7) Gives effect to the adjustments described in (i), (ii) and (iii) of note 3 above as well as the one-time compensation expense estimated at approximately $19.9 million ($12.0 million, net of tax) arising from (a) the conversion of performance units granted to certain senior executive officers under the Management Incentive Agreements upon consummation of the Offerings, and (b) certain other stock grants to be effected upon consummation of the Offerings.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022381_commodore_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022381_commodore_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dded8826cc83d8caaf173ae119d61d8cb0f39853
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022381_commodore_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified by, and must be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all references in the Prospectus to (a) share and per share information reflects a 150,000-for-one stock split effected on September 5, 1996 and a one-for-1.5 reverse stock split effected on November 26, 1996, and (b) the Company's authorized and outstanding securities give effect to the filing prior to the date of this Prospectus of a Certificate of Designation, Preferences and Rights amending the Company's Certificate of Incorporation to authorize the Convertible Preferred Stock, and does not give effect to (i) any exercise of the Underwriters' Over-allotment Option, (ii) the issuance of up to 1,000,000 shares of Common Stock upon conversion of the Convertible Preferred Stock, (iii) the issuance of up to 2,100,000 shares of Common Stock upon exercise of the Warrants, (iv) the issuance of up to 60,000 shares of Convertible Preferred Stock, 150,000 shares of Common Stock and/or 210,000 Warrants upon exercise of the Representative's Warrants, (v) the issuance of up to 310,000 shares of Common Stock upon conversion of the Convertible Preferred Stock and exercise of the Warrants included in the Representative's Warrants, (vi) the issuance of up to 766,689 shares of Common Stock upon exercise of stock options outstanding as of the date of this Prospectus, and (vii) the issuance of up to 583,311 additional shares of Common Stock reserved for issuance upon exercise of additional stock options that may be granted under the Company's 1996 Stock Option Plan. See "Executive Compensation -- Stock Options" and "Underwriting." The Company is a development stage company which has had no commercial operations to date. THE COMPANY Commodore Separation Technologies, Inc. (the "Company") has developed and intends to commercialize its membrane separation and recovery system called CST. Based on the results of more than 100 laboratory and other tests to date, the Company believes that CST can separate and recover chrome, chromium, cadmium, silver, mercury, platinum, lead, zinc, nickel, trichlorethylene, polychlorinated biphenyls, methylene chloride, amino acids, antibiotics, radionuclides, and other organic and inorganic targeted substances from liquid or gaseous feedstreams. CST utilizes a process whereby a contaminated liquid or gaseous feedstream is introduced into a fibrous membrane unit or module containing a proprietary chemical solution, the composition of which is customized depending on the types and concentrations of compounds in the feedstream. As the feedstream enters the membrane, the targeted substance reacts with CST's proprietary chemical solution and is extracted through the membrane into a strip solution where it is then stored. The remaining feedstream is either recycled or discharged as non-toxic effluent. In some instances, additional treatment may be required prior to disposal. CST is distinguishable from other existing forms of membrane filtration technology in that it: o requires low initial capital costs and low operating costs; o has the capability of treating a wide variety of elements and compounds in a wide variety of industrial settings at great speed and with a high degree of effectiveness, regardless of contaminant concentrations, volume requirements and other variables; o is environmentally safe, in most instances producing no sludges or other harmful by-products which would require additional post-treatment prior to disposal; o can selectively extract target substances, while extracting substantially fewer unwanted substances; o can typically operate on-site and in less than 40 square feet of space for the entire system; o can extract metals, organic chemicals and other elements and compounds in degrees of concentration and purity which permit their reuse; and o has the capability, in a single process application, of selectively extracting multiple elements or compounds from a mixed process stream. In August 1996, the Company completed an on-site demonstration of CST for the decontamination of chromium-contaminated groundwater at the Port of Baltimore, Maryland. During this demonstration, a CST unit, in a single feedstream pass-through, reduced the contamination level of chromium from more than 400 parts per million (ppm) to less than one ppm. The results of this test were verified by Artesian Laboratories, Inc., an independent testing laboratory. The Company has since completed additional on-site demonstrations of CST at the Port of Baltimore with similar results. Due to the success of such demonstrations, in February 1997 the State of Maryland informed the Company that it will recommend including the CST process as an eligible technology in the bid specifications to remediate the groundwater at the Port of Baltimore. Based on management studies and discussions with metals industry executives, the Company believes that CST represents a significant technological advancement in the area of environmental remediation as the only technology capable of on-site chromium removal and recovery that enables effluent discharge without additional treatment. In September 1996, the Company installed a commercial scale CST unit at a Columbus, Ohio metal plating company. DLZ Laboratories, Inc., an independent testing laboratory, verified that the CST unit processed the initial batch of process effluent stream and reduced nickel and zinc contamination from 900 ppm to 2 ppm in one hour. The Company has continued to operate this CST unit to process nickel and zinc effluent streams containing concentrations of 200 to 400 ppm, and the unit has consistently reduced the contaminant levels to 1 to 5 ppm. The decontaminated process effluent stream is being recycled into the plating line rinse tanks, saving the plating company its normal consumption of make-up water at a rate of five gallons per minute. The recovered nickel and zinc solution is currently being analyzed by the plating company for reuse in its plating operations. In January 1997, the Company entered into a license agreement with Lockheed Martin Energy Research Corporation ("Lockheed Martin"), manager of the Oak Ridge National Laboratory, a U.S. Department of Energy national laboratory ("Oak Ridge"). Under the terms of the agreement, the Company received the exclusive worldwide license, subject to a government use license, to use and develop the technology related to the separation of the radionuclides technetium and rhenium from mixed wastes containing radioactive materials. Based on tests conducted at Oak Ridge since May 1994, the Company believes that this technology is capable of selectively extracting and recovering technetium, rhenium and other radioactive isotopes as a concentrated aqueous solution which can be reused in various scientific applications or disposed of by government-approved techniques including long-term storage. The Company believes that this technology can be used to remediate nuclear waste tanks stored at the U.S. Department of Energy's atomic energy plants in Rocky Flats, Colorado, Idaho Falls, Idaho, Paducah, Kentucky, Weldon Springs, Missouri, Frenchman Flat, Nevada, Los Alamos, New Mexico, Aiken, South Carolina, Oak Ridge, Tennessee, Pantex, Texas and Hanford, Washington, and intends to pursue such opportunities. According to Department of Energy sources, there are approximately 100 million gallons of mixed radioactive and hazardous chemical waste stored at these plants. The Company will market its technology to industries engaged in metallurgical processing, metal plating and mining, as well as companies producing organic chemicals and biochemicals and those engaged in gas separation. The Company is also targeting governmental agencies that have sites which require remediation, and has already completed an on-site demonstration at the Port of Baltimore. The Company intends to pursue collaborative joint working and marketing arrangements with, or acquisitions of or investments in, companies that have a presence in target markets and those that focus on obtaining environmental remediation projects, including clean-up of harbors, groundwater and nuclear waste sites. Although the Company has entered into memorandums of understanding for proposed working arrangements with Teledyne Brown Engineering, Inc., a subsidiary of Allegheny Teledyne Inc. ("Teledyne Brown"), and Sverdrup Environmental, Inc. ("Sverdrup"), and is bidding on certain projects, there can be no assurance that any of these activities will result in definitive collaborative agreements or project awards. Even if project contracts are awarded to the Company, CST has never been utilized on a large-scale basis, and there is no assurance that this technology will perform successfully on a large-scale commercial basis, or that it will be profitable to the Company. There can also be no assurance that this technology will not be superseded by other competing technologies. The Company was incorporated in the State of Delaware in November 1995, and is a wholly-owned subsidiary of Commodore Applied Technologies, Inc. ("Applied"), which, in turn, is a 69.3%-owned subsidiary of Commodore Environmental Services, Inc. ("Commodore"). To date, Commodore and Applied have financed the Company's development through direct equity investments and loans. The principal executive offices of the Company are located at 8000 Towers Crescent Drive, Suite 1350, Vienna, Virginia 22182, and its telephone number is (703) 748-0200. THE OFFERING <TABLE> <CAPTION> <S> <C> Securities Offered .................... 600,000 Preferred Units, each unit consisting of one share of Convertible Preferred Stock and one Warrant, and 1,500,000 Common Units, each unit consisting of one share of Common Stock and one Warrant. Offering Prices: Preferred Units ..................... $10.10 per unit. Convertible Preferred Stock ........ $10.00 per share. Warrants ........................... $.10 per Warrant. Common Units ........................ $5.10 per unit. Common Stock ....................... $5.00 per share. Warrants ........................... $.10 per Warrant. Securities outstanding prior to the Offering ............................ 10,000,000 shares of Common Stock, no shares of Convertible Preferred Stock, and no Warrants. Securities to be outstanding after the Offering: Prior to conversion of the Convertible Preferred Stock and 11,500,000 shares of Common Stock, 600,000 shares of Convertible Preferred exercise of Warrants ............. Stock, and 2,100,000 Warrants. Giving effect to full conversion of the Convertible Preferred Stock and full exercise of Warrants .... 14,600,000 shares of Common Stock. Terms of Convertible Preferred Stock: Dividend Rate and Payment Dates ..... Cumulative dividends are payable at the rate of $1.00 per share per annum, quarterly on the last business day of March, June, September and December of each year, commencing June 30, 1997, when, as and if declared by the Board of Directors, before any dividends are declared or paid on the Common Stock or any capital stock ranking junior to the Convertible Preferred Stock. Failure to pay any quarterly dividend will result in a reduction of the conversion price. See "Dividend Policy" and "Description of Securities -- Convertible Preferred Stock." <S> <C> Conversion Rights ................... Convertible into Common Stock at any time prior to redemption at a conversion rate of 1.67 shares of Common Stock for each share of Convertible Preferred Stock (an effective conversion price of $6.00 per share or 120% of the initial public offering price per share of Common Stock), subject to adjustment under certain circumstances including in the event of the failure of the Company to pay a dividend on the Convertible Preferred Stock within 30 days of a dividend payment date, which will result in each instance in a reduction of $.50 per share in the conversion price but not below $3.75 per share. See "Description of Securities -- Convertible Preferred Stock." Optional Cash Redemption ........... Redeemable, in whole but not in part, by the Company upon 30 days' prior written notice after April , 2000 at $10.00 per share, plus accumulated and unpaid dividends, provided the closing bid price of the Common Stock for at least 20 consecutive trading days ending not more than 10 trading days prior to the date of the notice of redemption equals or exceeds $10.00 per share or, after April , 2001, at the cash redemption prices set forth herein, plus accumulated and unpaid dividends. See "Description of Securities -- Convertible Preferred Stock." Voting Rights ...................... The holders of Convertible Preferred Stock have the right, voting as a class, to approve or disapprove of the issuance of any class or series of stock ranking senior to or on a parity with the Convertible Preferred Stock with respect to declaration and payment of dividends or the distribution of assets on liquidation, dissolution or winding-up. In addition, if the Company fails to pay dividends on the Convertible Preferred Stock for four consecutive quarterly dividend payment periods, holders of Convertible Preferred Stock voting separately as a class will be entitled to elect one director; such voting right will be terminated as of the next annual meeting of stockholders of the Company following payment of all accrued dividends. See "Description of Securities -- Convertible Preferred Stock." Liquidation Preference ............. Upon liquidation, dissolution or winding up of the Company, holders of Convertible Preferred Stock are entitled to receive liquidation distributions equivalent to $10.00 per share (plus accumulated and unpaid dividends) before any distribution to holders of the Common Stock or any capital stock ranking junior to the Convertible Preferred Stock. See "Description of Securities -- Convertible Preferred Stock." Priority ........................... The Convertible Preferred Stock will be senior to and have priority over the Common Stock with respect to the payment of dividends and upon liquidation, dissolution or winding-up of the Company. <S> <C> Terms of Warrants ................... Each Warrant entitles the holder thereof to purchase, at any time commencing one year after the date of this Prospectus until five years after the date of this Prospectus, one share of Common Stock at a price of $5.50 per share, subject to adjustment. Commencing 18 months after the date of this Prospectus, the Warrants are subject to redemption by the Company, in whole but not in part, at $.10 per Warrant on 30 days' prior written notice provided that the average closing sale price of the Common Stock equals or exceeds $15.00 per share, subject to adjustment, for any 20 trading days within a period of 30 consecutive trading days ending on the fifth trading day prior to the date of the notice of redemption. See "Description of Securities -- Warrants." Use of Proceeds ..................... The Company intends to apply the net proceeds of this Offering to purchase CST module systems; conduct ongoing development of its technology; acquire manufacturing equipment; fund proposed collaborative arrangements; complete its Atlanta facility; repay an outstanding line of credit; and for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq Symbols:(1) Common Stock .................... CXOT Convertible Preferred Stock ....... CXOTP Warrants .......................... CXOTW Risk Factors ........................ An investment in the Securities offered hereby involves a high degree of risk and immediate and substantial dilution, and should be made only by investors who can afford the loss of their entire investment. See "Risk Factors" and "Dilution." </TABLE> SUMMARY FINANCIAL DATA The summary financial data included in the following table as of June 30, 1996 and for the period from November 15, 1995 (date of inception) to June 30, 1996 are derived from the audited Financial Statements appearing elsewhere herein. The summary financial data as of December 31, 1996, for the six months then ended and for the period from November 15, 1995 (date of inception) to December 31, 1996 are unaudited and, in the opinion of management, include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of such data. Financial data for the periods through December 31, 1996 are not necessarily indicative of the results of operations to be expected for the Company's fiscal year ending June 30, 1997. The summary financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and notes thereto appearing elsewhere herein. <TABLE> <CAPTION> November 15, 1995 (date of Six Months November 15, 1995 inception) Ended (date of inception) Statement of Operations Data(1) to June 30, 1996 December 31, 1996 to December 31, 1996 ----------------- ----------------- -------------------- <S> <C> <C> <C> Revenue ...................................... $ 0 $ 7,758 $ 7,758 ----------------- ----------------- -------------------- Costs and expenses: Research and development ................ 50,080 412,340 462,420 General and administrative .............. 9,720 443,423 453,143 Amortization ............................ 101 1,199 1,300 ----------------- ----------------- -------------------- Loss before interest and taxes ............... (59,901) (849,204) (909,105) Interest expense ............................. 1,035 4,600 5,635 ----------------- ----------------- -------------------- Net loss ..................................... $(60,936) $(853,804) $(914,740) ================= ================= ==================== Net loss per share(2) ........................ (.01) (.08) (.09) Ratio of earnings to preferred stock dividends --(3) --(3) --(3) </TABLE> <TABLE> <CAPTION> June 30, 1996 December 31, 1996 --------------- ------------------------------ Balance Sheet Data: Actual As Adjusted(4) ------------ -------------- <S> <C> <C> <C> Working capital (deficit) .................. $(81,630) $(134,677) $11,533,723 Total assets ............................... 23,327 530,644 12,219,044 Total current liabilities .................. 84,163 454,184 454,184 Deficit accumulated during development stage (60,936) (914,740) (914,740) Stockholders' equity (deficit) ............. (60,836) 76,460 11,744,860 </TABLE> - ------ (1) The Company is in the development stage, and has had no commercial operations to date. See Note 1 of Notes to Financial Statements. (2) Net loss per share is calculated on the basis of 10,000,000 shares of Common Stock being outstanding for the period presented. See Note 1 of Notes to Financial Statements. (3) The Company's operating results are not sufficient to cover the Convertible Preferred Stock cash dividends. See "Risk Factors -- Inadequate Dividend Coverage" and "Dividend Policy." (4) Gives effect on an as adjusted basis to the sale by the Company of the Units offered hereby at an assumed initial public offering price of $10.10 per Preferred Unit, consisting of one share of Convertible Preferred Stock at $10.00 per share and one Warrant at $.10 per Warrant, and $5.10 per Common Unit, consisting of one share of Common Stock at $5.00 per share and one Warrant at $.10 per Warrant, and the initial application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022570_cardima_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022570_cardima_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ca9e4bfb218aebc8fc380b567b2c638d31425b6d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022570_cardima_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus (i) assumes that the Underwriters' over-allotment option is not exercised and (ii) assumes the conversion of the Company's Preferred Stock into Common Stock upon the closing of the Offering. THE COMPANY Cardima, Inc. designs, develops, manufactures and markets minimally invasive, single-use, microcatheter-based systems for the mapping and ablation of the two most common forms of cardiac arrhythmias: atrial fibrillation ("AF") and ventricular tachycardia ("VT"). Arrhythmias are abnormal electrical heart rhythms that adversely affect the mechanical activities of the heart and can potentially be fatal. The Company is developing microcatheter systems designed to provide enhanced access to arrhythmia causing tissue, to diagnose the arrhythmia by locating its origin ("mapping") and to restore normal heart rhythms by isolating and destroying the arrhythmia causing sites ("ablation") using radiofrequency ("RF") energy. The Company's microcatheters incorporate multiple electrodes in the catheter tip that are designed to receive electrical signals for mapping and to emit RF energy for ablation, allowing physicians to both map and ablate using a single catheter. Cardima's microcatheters are designed with variable stiffness and a highly flexible distal tip to allow enhanced access to the vasculature of the heart. In addition, they are designed to be compatible with existing signal display systems and RF generators, eliminating the need for significant new investment in capital equipment. The Company's microcatheter technology was originally conceived at Advanced Cardiovascular Systems, Inc. ("ACS," now a division of Guidant Corporation), from 1979 to 1982. Target Therapeutics, Inc. ("Target," now a division of Boston Scientific Corporation ("Boston Scientific")) purchased this technology in 1985 from ACS for use in neurological applications. In 1993, Target granted Cardima an exclusive, royalty-free license to use the microcatheter technology in the treatment of electrophysiological diseases affecting areas other than the central nervous system. AF is characterized by the irregular and very rapid beating of the heart's atrial chambers and results when the normal electrical conduction malfunctions, leading to irregular, disorganized and quivering spasms of atrial tissue. These spasms may lead to reduced blood flow, blood clots, stroke and even death. AF affects an estimated two million people in the United States alone, with 160,000 new cases being diagnosed each year. Drug therapy is the most common treatment for AF, but is often associated with severe side effects and becomes less effective over time, with approximately 50% of patients eventually developing resistance to drug therapy. The Company believes that the only curative therapy for AF in use today is an open heart operation, often referred to as the "maze" procedure, which is used infrequently because of the high risks and costs associated with open heart surgery. The Company is developing the Cardima Pathfinder AF microcatheter system to provide a minimally invasive ablation procedure that mimics the results of the maze procedure by isolating and containing the arrhythmia causing tissue. The Company believes this procedure will restore the normal electrical function of the heart by controlling and reorganizing the random, chaotic electrical activity that characterizes AF. Cardima's microcatheter systems have been designed to deliver a small amount of RF energy and to create thin lesions, thus preserving a greater amount of atrial tissue for improved atrial and heart function following the procedure. The Company believes this approach has the potential to be as effective as the open heart surgical cure for AF, but with significantly less trauma, fewer complications, reduced pain, shorter hospital stays and lower procedure costs. VT is a life-threatening condition in which heartbeats are improperly initiated from within the ventricular wall, thus bypassing the heart's normal conduction system. VT affects an estimated 450,000 people in the United States. Similar to AF, current treatments for VT are primarily supportive and are intended to alleviate the symptoms rather than to cure the condition ("palliative"). Antiarrhythmic drugs are the most common treatment, although these drugs have been shown to have a number of unwanted side effects, and in some circumstances may actually induce VT. A recent study has demonstrated that the implantable cardiac defibrillator is a more effective treatment for VT than antiarrythmic drugs, but it also is a palliative treatment and is associated with a number of undesirable characteristics, including the high cost of the implantation procedure. Existing catheter technology is also being tested for the treatment of VT; however, the Company believes that this endocardial approach (i.e., applied from within the heart's chamber) is suboptimal because the normal ventricular wall is up to 20 millimeters thick, requiring the use of large amounts of RF energy which increases the amount of ventricular tissue destroyed in the procedure. The Company's intravascular approach (i.e., accessed from within the veins of the heart wall) for the treatment of VT is designed to allow the microcatheters to be positioned in close proximity to the arrhythmia causing tissue, permitting accurate and precise mapping, and the creation of small, focused lesions using RF energy. Once positioned, the Cardima Pathfinder AF and Tracer VT microcatheter systems have the ability to map and ablate using the same catheter, which the Company believes should result in a short, cost- effective procedure. The Company's microcatheter systems are being developed to offer the following advantages: (i) a minimally invasive curative approach to AF and VT; (ii) the ability to map and ablate arrhythmias using a single catheter; (iii) smaller diameter catheters incorporating Target variable stiffness technology and a highly flexible distal tip to allow enhanced access to the vasculature of the heart; (iv) microcatheters designed with large numbers of electrodes to gather more information; (v) compatibility with existing electrophysiology signal display systems and RF ablation generators; and (vi) shorter procedure times resulting in reduced exposure to fluoroscopy and more cost effective treatment. In January 1997, the Cardima Pathfinder microcatheter system received 510(k) clearance from the United States Food and Drug Administration ("FDA") for use in mapping VT, and it is currently being marketed for this application in the United States, Europe, Japan, Australia and Canada. Also in January 1997, the Company filed an Investigational Device Exemption ("IDE") for clinical testing of the Cardima Pathfinder AF microcatheter system for the mapping and ablation of AF and subsequently received conditional approval from the FDA to begin the mapping phase of the feasibility study. In March 1997, the Company submitted a 510(k) premarket notification for the Cardima Pathfinder AF for atrial mapping. The Company expects to file an IDE for its Tracer VT microcatheter system for the ablation of VT in late 1997. THE OFFERING Common Stock offered by the Company........................ 2,275,000 shares Common Stock to be outstanding after the Offering (1)............. 8,076,541 shares Use of proceeds..................... To fund preclinical and clinical trials of its microcatheter systems, research and new product development, to continue to expand its marketing and sales force, to fund capital equipment investment to increase manufacturing capabilities and for working capital. See "Use of Proceeds." Nasdaq National Market symbol....... CRDM - -------- (1) Excludes (i) 877,570 shares of Common Stock issuable upon exercise of outstanding options with a weighted average price of $1.28 per share, (ii) 513,745 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $1.62 per share, and (iii) 864,091 shares of Common Stock reserved for future issuance under the Company's equity incentive plans. See "Management--Stock Option and Incentive Plans" and "Description of Capital Stock." SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM NOVEMBER 12, THREE MONTHS 1992 ENDED (INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31, DECEMBER 31, ------------------------- ---------------- 1993(1) 1994 1995 1996 1996 1997 -------------- ------- ------- ------- ------- ------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales............... $ -- $ 86 $ 362 $ 593 $132 $217 Cost of goods sold...... -- 211 830 1,413 384 374 ------- ------- ------- ------- ------- ------- Gross profit.......... -- (125) (468) (820) (252) (157) Operating expenses: Research and development.......... 1,083 2,205 2,581 3,319 596 810 Selling, general and administrative....... 491 1,309 2,046 3,690 734 1,331 ------- ------- ------- ------- ------- ------- Total operating expenses........... 1,574 3,514 4,627 7,009 1,330 2,141 ------- ------- ------- ------- ------- ------- Operating loss.......... (1,574) (3,639) (5,095) (7,829) (1,582) (2,298) Interest and other income (expense), net.. 33 (16) (105) 75 62 (28) ------- ------- ------- ------- ------- ------- Net loss................ $(1,541) $(3,655) $(5,200) $(7,754) $(1,520) $(2,326) ======= ======= ======= ======= ======= ======= Pro forma net loss per share(2)............... $ (1.22) $ (0.25) $ (0.36) ======= ======= ======= Shares used in computing pro forma net loss per share(2)............... 6,372 6,195 6,434 ======= ======= ======= </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 (UNAUDITED) --------------------------------- PRO ACTUAL FORMA(3) AS ADJUSTED(4) -------- -------- -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................... $ 9,008 $ 9,008 $24,984 Working capital............................. 8,729 8,729 24,705 Total assets................................ 12,746 12,746 28,722 Capital lease obligation, noncurrent portion.................................... 660 660 660 Total stockholders' equity.................. (12,656) 10,526 26,502 </TABLE> - -------- (1) The Company's financial data for 1992 and 1993 is not presented separately as the Company's operations from November 12, 1992 (inception) to December 31, 1992 were immaterial. (2) See Note 1 of Notes to Financial Statements for information concerning calculation of the pro forma net loss per share. (3) Reflects the conversion of outstanding Preferred Stock into Common Stock upon the completion of the Offering. (4) Adjusted to reflect the sale of the 2,275,000 shares of Common Stock offered hereby at an assumed initial public offering price of $8.00 per share and the use of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022591_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022591_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..136e17a01105e8be09575f9ebdaaffeeade10e3c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022591_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, THE TERM THE "COMPANY" REFERS TO INTERNATIONAL WIRELESS COMMUNICATIONS HOLDINGS, INC. ("IWC HOLDINGS") AND ITS SUBSIDIARY INTERNATIONAL WIRELESS COMMUNICATIONS, INC. ("IWC"), UNLESS THE CONTEXT OTHERWISE REQUIRES OR UNLESS OTHERWISE EXPRESSLY STATED. AN OPERATING COMPANY REFERS TO A WIRELESS COMMUNICATIONS COMPANY OR PROJECT IN WHICH THE COMPANY HAS INVESTED AND THAT HAS COMMENCED PROVIDING WIRELESS COMMUNICATIONS SERVICE ON A COMMERCIAL BASIS. A DEVELOPMENTAL STAGE PROJECT REFERS TO A WIRELESS COMMUNICATIONS COMPANY OR PROJECT IN WHICH THE COMPANY HAS MADE OR PROPOSES TO MAKE AN INVESTMENT, BUT WHICH HAS NOT COMMENCED PROVIDING WIRELESS COMMUNICATIONS SERVICE ON A COMMERCIAL BASIS. REFERENCE TO "DOLLARS" AND "$" REFERS TO UNITED STATES DOLLARS, UNLESS OTHERWISE EXPRESSLY STATED. CERTAIN OF THE DEMOGRAPHIC AND STATISTICAL DATA APPEARING IN THIS PROSPECTUS HAVE BEEN DERIVED FROM THE SOURCES SET FORTH UNDER "BUSINESS--BACKGROUND--DEMAND FOR COMMUNICATIONS SERVICES IN DEVELOPING COUNTRIES." THE COMPANY The Company is a leading developer, owner and operator of wireless communications companies and projects in emerging markets in Asia and Latin America. These companies and projects provide, or are developing, a variety of wireless communications services, including cellular telephone, wireless local loop ("WLL"), enhanced capacity trunked radio ("ECTR") and paging. The Company currently has interests in nine operating companies in Brazil, China, India, Indonesia, Malaysia, Mexico, New Zealand and the Philippines. In addition, the Company has interests in five developmental stage projects in Mexico, Pakistan, Peru and Taiwan and is actively pursuing other development and acquisition opportunities. As of December 31, 1996, the Company's operating companies had licenses covering an estimated 585 million people ("POPs") which, based on the Company's equity interests in these operating companies, represented an estimated 205 million equity POPs. As of December 31, 1996, the Company's operating companies, which are generally in the early stages of operating and expanding their networks, served approximately 136,700 subscribers. The Company operates primarily in countries in Asia and Latin America where management believes that there exists substantial unmet demand for communications services, attractive license opportunities and political and regulatory environments which encourage foreign investment in private telecommunications companies. These markets are generally characterized by substantial populations, growing economies and inadequate local land-line telephone service. According to industry data, in many of the countries where the Company has established operating companies or is pursuing developmental stage projects, there were estimated to be less than 10 telephone lines per 100 POPs in 1994 (compared to an estimated 59 telephone lines per 100 POPs in the United States in 1994) and significant waiting times for installation of land-line telephone service. The Company believes that existing and emerging wireless technologies generally offer comparable functionality to, and lower construction costs and more rapid deployment than, land-line technologies. As a result, the Company believes that wireless communications services will frequently be used in these markets as a substitute for traditional land-line telephone service. A large and growing number of wireless technologies are available to address communications needs in the Company's target markets. The Company's operating companies and developmental stage projects provide or are developing the following services: cellular telephone, using both analog and digital technologies; WLL, which provides a wireless telephone service linking the home or business into the local telephone network; ECTR, which combines the attributes of cellular and dispatch radio, and paging. Once the Company enters a market with a wireless communications service, it generally seeks to develop additional wireless communications services. This strategy is expected to allow the Company to build on its expertise in the host country as well as to achieve cost savings and operating efficiencies through the sharing of cell sites, microwave transmission networks and marketing and administrative functions. BUSINESS STRATEGY The Company's principal business objective is to become a pre-eminent provider of wireless communications services in selected developing countries. Key elements of the Company's strategy for achieving this objective include: DEVELOP LONG-TERM RELATIONSHIPS WITH STRONG LOCAL PARTNERS. The Company seeks to develop long-term relationships with financially strong and strategically well-positioned local partners. These partners often own or have access to an existing telecommunications asset base (such as cell sites and microwave or fiber optic transmission networks) that can be used by the Company's operating companies to reduce capital expenditures, operating costs and deployment time. Local partners frequently play an active role in securing licenses and obtaining necessary regulatory approvals, assisting in arranging and providing local financing and identifying opportunities for additional wireless projects. OBTAIN LICENSES WITH BROAD FREQUENCY RANGES AND SUBSTANTIAL GEOGRAPHIC COVERAGE. The Company seeks to obtain licenses with broad frequency ranges, substantial geographic coverage and flexible operating terms. The Company believes that continuing advances in wireless technologies will allow numerous technologies to provide services with similar functionality. As a result, the Company believes that market opportunities for such services will be determined predominantly by license terms rather than by technological factors. Licenses with broad frequency allocation and flexible operating terms also enable the Company to provide additional services and facilitate the adoption of new technologies. In addition, the ability to provide service over a broad geographic area is frequently an important selling point for users of services such as cellular telephone and ECTR. OFFER MULTIPLE WIRELESS SERVICES IN EXISTING MARKETS. The Company seeks to expand by developing multiple wireless services in those countries where it has existing operations. This strategy is intended to allow the Company to build on its expertise in the host country as well as to achieve cost savings and operating efficiencies through the sharing of cell sites, microwave transmission networks and marketing and administrative functions. For example, in Indonesia and Mexico, the Company initially established a national or large regional ECTR business that is providing opportunities for developing additional services such as cellular and WLL. REMAIN TECHNOLOGY AND VENDOR INDEPENDENT. The Company seeks to obtain licenses that do not stipulate the type of technology to be used in the provision of a particular communications service. This flexibility allows the Company to match appropriate technology to a given business opportunity on the basis of cost, capacity, reliability, functionality and availability. It also allows operating companies to migrate to superior technologies as they develop. Where possible, the operating companies select non-proprietary or open-standard technologies with multiple vendor sources, thereby reducing their dependence on any single supplier. PURSUE LOW COST STRUCTURE. The Company pursues strategies designed to allow its operating companies to reduce capital expenditures and operating costs. First, it seeks to form partnerships with local partners that have existing telecommunications assets, including licenses, that can be used to reduce the costs of developing and operating its wireless networks. Second, where appropriate, the Company seeks to obtain licenses through private negotiation with the host government, rather than through competitive bidding. Third, the Company seeks to provide multiple wireless services within an existing market to reap certain economies of scale. Fourth, when a common technology is selected for multiple operating companies, the Company seeks to secure discounts with selected vendors. ACTIVELY MANAGE OPERATING COMPANIES AND DEVELOPMENTAL STAGE PROJECTS. The Company generally seeks to play an active role in the development and management of its operating companies and developmental stage projects. Its local country managers and corporate staff provide technical, administrative and in some cases financial support to these companies, including serving as senior executives of operating companies and developmental stage projects and/or serving on the boards of directors of these companies. Moreover, shareholder agreements often provide the Company with the right to approve key decisions at the operating company or developmental stage project level, including approval of operating budgets, business plans and major corporate transactions, even though the Company may own less than 50% of the equity of the operating company or developmental stage project. PROMOTE FLEXIBLE MANAGEMENT STRUCTURE. The Company relies heavily on local country managers to develop existing operating companies and developmental stage projects and to identify new wireless communications opportunities. These managers are often natives of the local country with significant managerial and operating experience. Although Company employees, they typically serve as senior executives of operating companies. They are supported by a corporate staff located primarily in the United States with extensive experience in wireless communications and international operations. The Company believes that the use of local country managers, supported by the Company's experienced corporate staff, allows it to rapidly and effectively respond to operational matters, develop and maintain close working relationships with local partners and quickly capitalize on wireless communications opportunities as they arise. FINANCING STRATEGY AND HISTORY The Company generally seeks to finance its operating companies and developmental stage projects at the project level. Initial funding is typically provided by equity contributions from the Company and its project partners. During the initial construction and expansion of the wireless network, debt financing may be provided by equipment vendors, commercial banks and other third parties. Such financing may be guaranteed by the Company and its local partners. Once the project becomes operational, the Company seeks to obtain long-term project financing with limited or no recourse to the Company or its partners. In addition, shareholder agreements for many of the Company's projects provide for raising public equity at the operating company level, subject to market conditions and the status of the project. As of September 30, 1996, the Company had directly raised an aggregate of approximately $132.5 million in equity capital through private placements and $94.2 million through the sale of units (the "Unit Offering") consisting of $196,720,000 aggregate principal amount of 14% Senior Secured Discount Notes and warrants to purchase an aggregate of 2,289,927 shares of Common Stock (the "Warrants"). The notes sold in the Unit Offering were subsequently exchanged for registered notes (the "Notes") that are substantially identical (including principal amount, interest rate, maturity, exchange and ranking) to the original notes. The Notes are governed by the terms of an indenture (the "Indenture"). OWNERSHIP AND MANAGEMENT Vanguard Cellular Systems, Inc. ("Vanguard"), one of the largest independent cellular operators in the United States, through its indirect wholly owned operating company, Vanguard Cellular Operating Corp., is the Company's principal strategic partner as well as its largest stockholder. As of December 31, 1996, Vanguard beneficially owned approximately 39% of the Company's equity. Vanguard has provided and continues to provide a number of services relating to the formation, development and operation of the Company's wireless communications businesses, including identification and evaluation of wireless communications opportunities, review of business and technical plans, and assistance in training operating company personnel. Haynes G. Griffin, Chairman of the Board of Directors of the Company, is Co-Chief Executive Officer and Chairman of the Board of Directors of Vanguard. The Company's senior management has extensive experience in developing and operating wireless communications networks and managing international operations. Collectively, the seven members of the Company's senior management have over 83 years of experience in the wireless communications industry and over 65 years of experience conducting business in the Company's existing markets. SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data as of and for the years ended December 31, 1993, 1994 and 1995 have been derived from the Company's consolidated financial statements which have been audited by KPMG Peat Marwick LLP, independent public accountants, whose report indicated a reliance on other auditors relative to certain amounts relating to the Company's investment in PT Rajasa Hazanah Perkasa ("RHP") as of and for the year ended December 31, 1995. The audited financial statements of RHP as of and for the year ended December 31, 1995, together with the independent auditors' reports thereon, are included elsewhere in this Prospectus. The summary consolidated financial data as of and for the year ended December 31, 1992 were derived from financial statements which have been audited by other auditors. The Company was incorporated in January 1992. The following summary consolidated financial data as of September 30, 1996 and for the nine-month periods ended September 30, 1995 and 1996 have been derived from unaudited financial statements that, in the opinion of management of the Company, reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial data for such periods and as of such date. Operating results for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the entire year. The unaudited pro forma financial data do not purport to represent what the Company's results of operations would have been if the Unit Offering and the acquisitions and mergers reflected therein had in fact occurred as of the beginning of the period or on the date indicated, as applicable, or to project the Company's financial position or results of operations for any future date or period. The data set forth below are qualified by reference to, and should be read in conjunction with, the consolidated financial statements and notes thereto, the Unaudited Pro Forma Consolidated Condensed Financial Statements and notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Prospectus." <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ------------------------------------------------------------------- PRO FORMA 1992 1993 1994 1995 1995(1) ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Revenue...................................... $ -- $ -- $ -- $ -- $ 369 Cost of sales................................ -- -- -- -- 785 ----------- ----------- ----------- ----------- ----------- -- -- -- -- (416) General and administrative expenses.......... 169 809 2,481 6,365 8,698 Equity in losses of affiliates............... -- -- -- 3,756 5,825 ----------- ----------- ----------- ----------- ----------- Loss from operations......................... (169) (809) (2,481) (10,121) (14,939) ----------- ----------- ----------- ----------- ----------- Interest income.............................. 5 2 106 232 232 Interest expense............................. -- (33) (115) (1,354) (18,397) Other expense................................ -- (1) (13) (28) (28) ----------- ----------- ----------- ----------- ----------- Net loss..................................... $ (164) $ (841) $ (2,503) $ (11,271) $ (33,132) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Pro forma net loss per share(2).............. $ (0.98) $ (2.89) ----------- ----------- ----------- ----------- Shares used in calculation of pro forma net loss per share(2).......................... 11,460 11,460 <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, --------------------------------------- PRO FORMA 1995 1996 1996(1) ----------- ----------- ----------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED) Revenue...................................... $ -- $ 532 $ 814 Cost of sales................................ -- 541 879 ----------- ----------- ----------- -- (9) (65) General and administrative expenses.......... 3,565 10,610 11,369 Equity in losses of affiliates............... 1,171 5,507 5,629 ----------- ----------- ----------- Loss from operations......................... (4,736) (16,126) (17,063) ----------- ----------- ----------- Interest income.............................. 130 937 937 Interest expense............................. (785) (2,663) (15,961) Other expense................................ (10) 1 1 ----------- ----------- ----------- Net loss..................................... $ (5,401) $ (17,851) $ (32,086) ----------- ----------- ----------- ----------- ----------- ----------- Pro forma net loss per share(2).............. $ (0.84) $ (1.50) ----------- ----------- ----------- ----------- Shares used in calculation of pro forma net loss per share(2).......................... 21,367 21,367 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 ----- ----------- ----------- ----------- <S> <C> <C> <C> <C> BALANCE SHEET DATA: (IN THOUSANDS) Total assets................................................. $ 536 $ 2,640 $ 18,424 $ 95,643 Long-term debt, net.......................................... -- -- -- -- Redeemable convertible preferred stock....................... -- -- 19,578 98,845 Total stockholders' equity (deficit)......................... 486 425 (3,154) (14,759) Working capital.............................................. (46) (1,514) 10,580 15,294 <CAPTION> AS OF SEPTEMBER 30, ------------------------- AS 1996 ADJUSTED(3) ----------- ----------- <S> <C> <C> BALANCE SHEET DATA: (UNAUDITED) (UNAUDITED) Total assets................................................. $ 183,475 $ 240,886 Long-term debt, net.......................................... 71,623 71,623 Redeemable convertible preferred stock....................... 102,519 -- Total stockholders' equity (deficit)......................... (3,563) 156,367 Working capital.............................................. 79,272 136,683 </TABLE> - ------------------------------ (1) Pro forma financial data for the year ended December 31, 1995 and for the nine months ended September 30, 1996 give effect to the Unit Offering and the acquisitions and mergers as described in "Unaudited Pro Forma Consolidated Condensed Financial Statements" included elsewhere in this Prospectus, as if such transactions had occurred on January 1, 1995 for purposes of the statement of operations data and as of September 30, 1996 for purposes of the balance sheet data. Pro forma adjustments to statement of operations data for the year ended December 31, 1995 and for the nine months ended September 30, 1996 include (i) adjustments to interest expense reflecting the addition of interest expense associated with the Unit Offering, (ii) amortization of debt issuance costs associated with the Unit Offering, (iii) the consolidation of TeamTalk (as defined below), (iv) the amortization of licenses and other intangibles for consolidated subsidiaries, (v) the amortization of the excess of the cost of the Company's investments over its proportionate interest in the net assets in entities accounted for by the equity method, and (vi) the additional equity in net losses of RHP (as defined below) assuming the Company's investment for ownership interest of 29.2% had been made on January 1, 1995. (2) See Note 1 of Notes to Consolidated Financial Statements for information concerning the computation of pro forma net loss per share. (3) The "as adjusted" balance sheet data gives effect to (i) the automatic conversion of all outstanding shares of Preferred Stock to Common Stock, (ii) the assumed exercise, on a cash basis, of warrants to purchase 1,173,360 shares of Preferred Stock, as such warrants terminate upon the closing of these Offerings, and (iii) the receipt of the estimated net proceeds of $50 million from these Offerings. Total assets include proceeds of $7,411,000 from the exercise of the warrants. Actual cash proceeds may be up to $4,117,000 less than this amount as warrants to purchase 456,360 shares are exercisable on a net basis. If such warrants are exercised on a net basis, the number of shares issued would be reduced accordingly. OPERATING COMPANIES As of December 31, 1996, the Company had direct or indirect interests in the following nine operating companies. The information set forth below is as of December 31, 1996, and is qualified by reference to and should be read in conjunction with the more complete descriptions of the operating companies set forth under "Business--Operating Companies." <TABLE> <CAPTION> EQUITY POPS POPS COVERED BY COVERED BY EQUITY LICENSES LICENSES OPERATING COMPANY LOCATION TYPE OF PROJECT INTEREST (MM)(1) (MM)(1) SUBSCRIBERS - ------------------------------ --------------- -------------------- ----------- ------------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Via 1 Communicacoes S.A. ("Via 1") Brazil Regional ECTR 65.1%(2) 60.0 39.1(2) 900 Star Digitel Limited ("SDL") China Regional Cellular 40.0% 200.0 80.0 21,000 RPG Paging Service Limited ("RPSL") India Regional Paging 7.0%(3) 14.0 1.0(3) 55,000 PT Mobile Selular Indonesia ("Mobisel") Indonesia National Cellular 20.4%(4) 195.3 39.8(4) 17,000 PT Mobilkom Telekomindo ("Mobilkom") Indonesia National ECTR 15.0% 195.3 29.3 4,000 Syarikat Telefon Wireless (M) SDN BHD ("STW") Malaysia National WLL 30.0%(5) 20.0 6.0(5) 5,000 Corporacion Mobilcom, S.A. de C.V. ("Mobilcom Mexico") Mexico Regional ECTR 2.2%(6) 65.0 1.4(6) 28,000 TeamTalk Limited ("TeamTalk") New Zealand National ECTR 100.0% 3.5 3.5 5,600 Universal Telecommunications Service, Inc. ("UTS") Philippines Regional ECTR 19.0%(7) 27.0 5.1(7) 180 </TABLE> - ------------------------------ (1) Based on the Company's estimate of the 1995 population covered by the operating license(s) of each project and on DRI/ McGraw-Hill World Markets Executive Overview, Second Quarter 1996. (2) Reflects the Company's anticipated equity interest in Via 1, a joint venture to be formed. Does not give effect to exercise of options presently being negotiated with the Company's local partners that, if exercised in their entirety, would reduce the Company's interest in Via 1 below 50%. (3) Does not include a proposed increase in the Company's indirect ownership interest in RPSL to 13.3%, which is expected to occur in February 1997, with final governmental approval of the share transfer by June 1997. (4) Does not reflect the anticipated sale of a 3.0% equity interest in RHP, the 70.0% shareholder of Mobisel, to a financial institution that has provided a credit facility to Mobisel, which, upon its consummation would reduce the Company's indirect interest in Mobisel to 19.8%. (5) Does not give effect to an option held by a bank syndicate that has provided project financing to STW which, if exercised, would reduce the Company's interest in STW to 27.8%. (6) Does not reflect the potential dilution to the Company's interest to 1.8% if the Company does not participate in a capital call proposed to be made on or before March 31, 1997. Also does not give effect to options held by a local partner which, if exercised in their entirety, would further dilute the Company's interest to 1.3% (7) Assumes the completion of certain registration formalities in connection with the Company's acquisition of approximately 6.0% of the UTS stock, and excludes an additional 3.0% of UTS' stock which is currently under option to the Company and which will vest upon completion of certain performance milestones. DEVELOPMENTAL STAGE PROJECTS As of December 31, 1996, the Company had direct or indirect interests in the following five developmental stage projects. The information set forth below is as of December 31, 1996, and is qualified by reference to and should be read in conjunction with the more complete descriptions of the developmental stage projects set forth under "Business--Developmental Stage Projects." <TABLE> <CAPTION> EQUITY POPS POPS COVERED BY COVERED BY DEVELOPMENTAL EQUITY LICENSES LICENSES STAGE PROJECT LOCATION TYPE OF PROJECT INTEREST(1) (MM)(2) (MM)(2) - ------------------------------ ---------- ------------------ -------------- ------------- ------------- <S> <C> <C> <C> <C> <C> Mexico National WLL Mexico National WLL 40.0%(3) 94.8 37.9 (3) Mobilcom (Private) Limited ("Mobilcom Pakistan") Pakistan National ECTR 90.0%(4) 130.1 117.1 (4) PeruTel S.A. ("PeruTel") Peru National ECTR 98.7% 23.8 23.5 Promociones Telefonicas S.A. ("Protelsa") Peru National Paging 66.0% 23.8 15.7 Taiwan Mobile Communications Corporation ("TMCC") Taiwan National ECTR 20.0% 21.3 4.3 </TABLE> - ------------------------ (1) The developmental stage projects are generally subject to ongoing negotiations, compliance with local law, receipt of necessary governmental licenses and approvals and receipt of necessary corporate and other third party approvals. Accordingly, the Company's proposed participation in the developmental stage projects, as well as the nature and scope of the projects themselves, are subject to change. Likewise, there can be no assurance that necessary licenses and other approvals or financing will be received for these developmental stage projects, and the Company otherwise may elect not to pursue one or more of these developmental stage projects. (2) Based on the Company's estimate of the 1995 population covered by the operating license(s) of each project and on DRI/ McGraw-Hill World Markets Executive Overview, Second Quarter 1996. (3) Represents the Company's proposed equity interest in this developmental stage project, which, under the terms of a memorandum of understanding ("MOU") with the Company's local partner project may be increased to 49.0%. (4) Reflects the anticipated sale of a 10.0% interest in this developmental stage project to the Company's local partner. SUMMARY OF OPERATING COMPANIES The Company has ownership interests in nine operating companies. The following briefly describes these operating companies and sets forth the amount of the Company's investment and its equity interest in the operating companies as of December 31, 1996, and its anticipated additional investment in the operating companies through December 31, 1997. See "Use of Proceeds." The aggregate amount of the Company's investment in the following operating companies includes shares of the Company's preferred stock ("Preferred Stock") to which the Company has assigned a value of $19.1 million, which shares were issued by the Company to acquire Vanguard's interests in such operating companies pursuant to the Vanguard Exchange (as defined below). See "Certain Transactions--The Vanguard Exchange." This summary is qualified by reference to, and should be read in conjunction with, the more complete descriptions of the operating companies set forth below in "Business--Operating Companies." The actual additional amount invested by the Company may vary significantly from the anticipated amount indicated below. See "Risk Factors--Project Level Risks." <TABLE> <CAPTION> ANTICIPATED ADDITIONAL COMPANY COMPANY INVESTMENT INVESTMENT AS OF THROUGH DECEMBER 31, DECEMBER 31, OPERATING COMPANY 1996 1997 DESCRIPTION OF OPERATING COMPANY - ------------------------ ------------- ------------- -------------------------------------------------- (IN MILLIONS) <S> <C> <C> <C> Via 1 $ 17.9 $ 10.0 Following fulfillment of certain regulatory and (Brazil Regional ECTR) corporate requirements, the Company will obtain a 65.1% equity interest in Via 1, a company formed to hold and develop certain existing ECTR operations in Brazil. The Company's primary partner in Via 1 is Rede Brasil Sul ("RBS"), one of Brazil's largest media companies, with operations in television and radio broadcasting and newspaper publishing. Pending completion of the Company's contribution of licenses to Via 1, the Company and its partners are operating the project as if Via 1 had been formed and the contributions consummated (the "Via 1 Project"). The licenses under which Via 1 will operate cover major cities in Southern and Central Brazil, including Rio de Janeiro, Curitiba and Sao Paulo. The continued operation of the Via 1 Project and the transfer of certain licenses to Via 1 are subject to certain governmental approvals or authorizations. In October 1996, in anticipation of the formation of Via 1, SRC Servicos de Rario Comunicacoes Ltda, the Company's wholly owned Brazilian subsidiary, entered into a contract with Nokia pursuant to which Nokia will provide equipment for the project. The Via 1 project commenced operations in July 1996 and, as of December 31, 1996, served approximately 900 subscribers. SDL (China Regional $ 20.0 $ 28.0 The Company holds a 40.0% equity interest in SDL, Cellular) a Hong Kong corporation engaged </TABLE> <TABLE> <CAPTION> ANTICIPATED ADDITIONAL COMPANY COMPANY INVESTMENT INVESTMENT AS OF THROUGH DECEMBER 31, DECEMBER 31, OPERATING COMPANY 1996 1997 DESCRIPTION OF OPERATING COMPANY - ------------------------ ------------- ------------- -------------------------------------------------- (IN MILLIONS) <S> <C> <C> <C> in various cellular projects in China. The Company's partner in SDL is Star Telecom Holding Limited ("STHL"), one of the largest paging and internet service providers in Hong Kong. As foreign ownership of telecommunications ventures is prohibited in China, SDL has entered into agreements with various business entities affiliated with the People's Liberation Army ("PLA") and the Chinese Ministry of Posts and Telecommunication ("MPT") to provide equipment and certain services relating to the development and operation of cellular networks in several major provinces of China, covering an estimated 200 million POPs. SDL is currently also in negotiations for future projects with China Telecom Great Wall Mobile Communications, which comprises a number of joint ventures set up, or being established, between the PLA and the MPT. The projects to which SDL provides equipment and services (the "SDL Projects") commenced operations in the mid 1980s. As of December 31, 1996, the SDL Projects served approximately 21,000 subscribers. RPSL (India Regional $ 1.4 $ 2.1 The Company owns a 7.0% indirect interest in RPSL, Paging) a provider of regional paging services in India, through its 70.0% interest in Star Telecom Overseas (Cayman Islands) Limited ("STOL"), a Cayman Islands company that is pursuing paging opportunities in various countries in Asia, including India, Indonesia and Thailand. The Company's partner in STOL is STHL, the Company's partner in SDL, its China Regional Cellular operating company. STOL has agreed to acquire an additional 9.0% interest in RPSL, thereby increasing the Company's indirect equity interest in RPSL to 13.3%. RPSL commenced operations in early 1995, and, as of December 31, 1996, served approximately 55,000 subscribers. Mobisel (Indonesia $ 34.1 $ 0 The Company holds a 20.4% indirect interest in National Cellular) Mobisel, a provider of cellular services in Indonesia through its 29.2% equity interest in RHP, the 70.0% shareholder of </TABLE> <TABLE> <CAPTION> ANTICIPATED ADDITIONAL COMPANY COMPANY INVESTMENT INVESTMENT AS OF THROUGH DECEMBER 31, DECEMBER 31, OPERATING COMPANY 1996 1997 DESCRIPTION OF OPERATING COMPANY - ------------------------ ------------- ------------- -------------------------------------------------- (IN MILLIONS) <S> <C> <C> <C> Mobisel. RHP was formed in 1985 to provide cellular services in Indonesia and, in 1995, RHP contributed its cellular operations to Mobisel in return for a 70.0% interest in Mobisel. The Company's partners in Mobisel include PT (Persero) Telekomunikasi Indonesia ("Telkom Indonesia"), the state-owned telecommunications company. Mobisel holds a provisional license covering all of Indonesia, the fourth most populous country in the world. As of December 31, 1996, Mobisel served approximately 17,000 subscribers. Mobilkom (Indonesia $ 1.5 $ 0 The Company indirectly owns a 15.0% equity National ECTR) interest in Mobilkom, a provider of ECTR services in Indonesia. The Company's partners in Mobilkom include PT Telekomindo Prima Bhakti ("Telekomindo"), the investment subsidiary of Telkom Indonesia, PT Inka Forindo Jaya ("PT Inka"), an Indonesian telecommunications and engi- neering company, and Jasmine International Public Company Limited ("Jasmine"), a Thai telecommunications company with operations throughout Asia. Mobilkom's five-year license covers all of Indonesia and its ECTR system is operational in the three largest cities of Java, including Jakarta. Mobilkom commenced operations in September 1995 and, as of December 31, 1996, served approximately 4,000 subscribers. STW (Malaysia National $ 23.4 $ 2.8 The Company holds a 30.0% equity interest in STW, WLL) a provider of WLL communications services in Malaysia. The Company's partners, Shubila Holding SDN BHD and Laranda SDN BHD ("Laranda"), own 60.0% and 10.0% of STW, respectively. STW holds a national license to provide telephone services in Malaysia. STW commenced operations in Northern Malaysia in late 1993 and, as of December 31, 1996, served approximately 5,000 subscribers. Mobilcom Mexico (Mexico $ 2.1 $ 0 The Company owns a 2.2% equity interest in Regional ECTR) Mobilcom Mexico, a provider of ECTR services in Mexico. The Company's partners in </TABLE> <TABLE> <CAPTION> ANTICIPATED ADDITIONAL COMPANY COMPANY INVESTMENT INVESTMENT AS OF THROUGH DECEMBER 31, DECEMBER 31, OPERATING COMPANY 1996 1997 DESCRIPTION OF OPERATING COMPANY - ------------------------ ------------- ------------- -------------------------------------------------- (IN MILLIONS) <S> <C> <C> <C> Mobilcom Mexico include Grupo Comunicaciones San Luis S.A. de C.V. and NEXTEL Communications, Inc. ("NEXTEL"), one of the largest operators of specialized mobile radio in the world. Mobilcom Mexico operates under licenses covering the major cities in Northern Mexico and Central Mexico, including Mexico City. Mobilcom Mexico commenced commercial service in 1993 and, as of December 31, 1996, served approximately 28,000 subscribers. TeamTalk (New Zealand $ 13.5 $ 6.8 The Company, through its wholly owned subsidiary, National ECTR) TeamTalk, currently provides ECTR coverage in the major population centers throughout the North Island of New Zealand as well as in the city of Christchurch, the largest city on the South Island. TeamTalk commenced operations in 1994 and, as of December 31, 1996, served approximately 5,600 subscribers. UTS (Philippines $ 2.0 $ 1.8 The Company owns a 19.0% equity interest in UTS, a Regional ECTR) provider of ECTR services in the Philippines. The Company's partners in UTS include Marsman-Drysdale Corporation ("MDC"), a large Philippine company with interests and operations in agribusiness, food processing, tourism and communications businesses, among other businesses, and Filinvest Development Corporation ("FDC"), a large Philippine real estate investment company. UTS operates under a provisional license permitting it to provide ECTR services in the Visayas and Mindanao regions of the country and has applied for the authority to extend its provisional license and expand service into Luzon, the third Philippine region which includes metropolitan Manila. UTS commenced operations in October 1996 and as of December 31, 1996, served approximately 180 subscribers. </TABLE> SUMMARY OF DEVELOPMENTAL STAGE PROJECTS The Company is currently involved in five developmental stage projects. The following summarizes the status of these projects, the Company's actual or proposed equity interest as of December 31, 1996 and the amount of the Company's proposed investment in these projects through December 31, 1997. This summary is qualified by reference to, and should be read in conjunction with the more complete descriptions of the developmental stage projects set forth below in "Business--Developmental Stage Projects." The Company's developmental stage projects are generally subject to ongoing negotiations, compliance with local law, receipt of necessary licenses and governmental approvals and receipt of necessary corporate and other third party approvals. Accordingly, the Company's proposed participation in the developmental stage projects, as well as the nature and scope of the projects themselves, are subject to change. Likewise, there can be no assurance that necessary licenses and other approvals will be received for these developmental stage projects and the Company otherwise may elect not to pursue one or more of these developmental stage projects. <TABLE> <CAPTION> PROPOSED COMPANY COMPANY INVESTMENT EQUITY THROUGH INTEREST AS OF DECEMBER 31, DECEMBER 31, PROJECT 1997 1996 STATUS OF DEVELOPMENTAL STAGE PROJECT - ------------------------ --------------- --------------- ------------------------------------------------------------ (IN MILLIONS) <S> <C> <C> <C> Mexico National WLL $ 18.5 40.0%(1) The Company has entered into an MOU with an individual member of a prominent Mexican industrial group to provide national WLL services in Mexico. It is the parties' intent to operate the WLL business in alliance with an existing long distance telecommunications business, whereby the Company believes it will be able to realize operational and marketing advantages. Mobilcom (Private) $ 12.8(2) 90.0%(2)(3) Mobilcom Pakistan has been awarded a national license to Limited ("Mobilcom provide ECTR services in Pakistan. The Company is currently Pakistan") (Pakistan evaluating the economics of regional networks covering most National ECTR) of the major population centers of the country, including Karachi, Lahore and Islamabad. Pakistan has a population of approximately 130 million. PeruTel S.A. ("PeruTel") $ 17.6 98.7% The Company owns a 98.7% equity interest in PeruTel, which (Peru National ECTR) has been awarded a national license to provide ECTR services in Peru. With a population of approximately 24 million, real GDP growth of 6.6% during the year ended December 31, 1995 and one of the least developed telephone networks in Latin America, the Company believes there exists a significant opportunity to provide telecommunications services in Peru. Promociones Telefonicas $ 3.0(4) 66.0% The Company owns a 66.0% equity interest in Protelsa, which S.A. ("Protelsa") has been awarded a national license to provide paging (Peru National Paging) services in Peru. The Company's partner in Protelsa </TABLE> <TABLE> <CAPTION> PROPOSED COMPANY COMPANY INVESTMENT EQUITY THROUGH INTEREST AS OF DECEMBER 31, DECEMBER 31, PROJECT 1997 1996 STATUS OF DEVELOPMENTAL STAGE PROJECT - ------------------------ --------------- --------------- ------------------------------------------------------------ (IN MILLIONS) <S> <C> <C> <C> is Marmaud S.A. ("Marmaud"), a local telecommunications engineering company. Protelsa has recently begun construction of its paging network. Taiwan Mobile $ 3.0(5) 20.0%(6) The Company and its Taiwanese partner have submitted a joint Communications application for a variety of voice and data licenses to Corporation ("TMCC") provide national ECTR services in Taiwan. License awards are (Taiwan National ECTR) expected to be announced in the first six months of 1997. Based on its experience in providing ECTR services, the Company believes that it is well-positioned to receive a number of these licenses, although there can be no assurance in this regard. </TABLE> - ------------------------ (1) Represents the Company's proposed equity interest in this project pursuant to the terms of an MOU with the Company's local partner. (2) Includes Preferred Stock to which the Company has assigned a value of $5.4 million which shares were issued by the Company to acquire Vanguard's interest in this developmental stage project pursuant to the Vanguard Exchange. See "Certain Transactions--The Vanguard Exchange." (3) Reflects the anticipated sale of a 10.0% interest in this project to the Company's local partner. (4) Includes $1.6 million paid by the Company to acquire its 66.0% equity interest in Protelsa in December 1996. (5) As part of the application process and in accordance with applicable regulations, the Company has deposited its proposed investment in a Taiwanese bank account as a license deposit to support the joint application discussed above. (6) In order to comply with foreign ownership restrictions on Taiwanese telecommunications ventures, the Company's interest is anticipated to be structured in part as a direct equity investment and in part through contractual agreements that, taken as a whole, will give the Company a 20.0% aggregate interest in the project. OTHER IWC was incorporated in Delaware in January 1992. In July 1996, IWC Holdings was formed as a holding company with no business operations of its own. Its only assets consist of all of the outstanding capital stock of IWC, its wholly owned subsidiary, and an intercompany note executed by IWC in a principal amount equal to the net proceeds of the Unit Offering. The Company's principal executive offices are located at 400 South El Camino Real, Suite 1275, San Mateo, California 94402, USA. Its telephone number at this address is (415) 548-0808. The Company also has offices in Sao Paulo, Brazil; Jakarta, Indonesia; Kuala Lumpur, Malaysia; Singapore and Hong Kong. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... Common Stock Outstanding After these Offerings(1)............................... Use of Proceeds.............................. For general corporate purposes and working capital. Proposed Nasdaq National Market Symbol....... IWCH </TABLE> - ------------------------ (1) Based on the number of shares outstanding as of December 31, 1996. Excludes 1,982,000 shares of Common Stock issuable upon the exercise of outstanding options as of December 31, 1996. See "Capitalization" and "Management--1996 Stock Option/Stock Issuance Plan".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022608_nco-group_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022608_nco-group_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7d531e8343b97cb324fd37a024ebf8adb25b6511
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022608_nco-group_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, contained elsewhere in this Prospectus. Unless the context otherwise requires, all references in this Prospectus to the "Company" or "NCO" mean NCO Group, Inc., a Pennsylvania corporation and its subsidiaries and predecessors. Unless otherwise indicated, all information in this Prospectus: (i) assumes no exercise of the Underwriters' over-allotment option; and (ii) gives effect to the Company's acquisitions of Goodyear & Associates, Inc. ("Goodyear"), Tele-Research Center, Inc. ("TRC") and CMS A/R Services ("CMS A/R") in January 1997 and the Collection Division of CRW Financial, Inc. ("CRWCD") in February 1997 (collectively, the "1997 Acquisitions"). The Company NCO is a leading provider of accounts receivable management and related services utilizing an extensive teleservices infrastructure. The Company develops and implements customized accounts receivable management solutions for clients. The Company provides these services on a national basis from 18 call centers located in 15 states. The Company employs advanced workstations and sophisticated call management systems comprised of predictive dialers, automated call distribution systems, digital switching and customized computer software. Through efficient utilization of technology and intensive management of human resources, the Company has achieved rapid growth in recent years. Since April 1994, the Company has completed eight acquisitions, including four in the first quarter of 1997, which have enabled it to increase its penetration of existing markets, establish a presence in certain new markets and realize significant operating efficiencies. In addition, the Company has leveraged its infrastructure by offering additional services including telemarketing, customer service call centers and other outsourced administrative services. The Company believes that it is currently among the 10 largest accounts receivable management companies in the United States. The Company provides its services principally to clients in the financial services, government, education, healthcare, retail and commercial, telecommunications and utilities sectors. The Company has over 7,000 clients, including Bell Atlantic Corporation, Pennsylvania Higher Education Assistance Agency, First Union Corporation, Medical Center of Delaware, PECO Energy Company, Federal Express Corporation and MCI Communications Corporation. No client accounted for more than 10% of the Company's revenue (no more than 5% on a pro forma basis) in 1996. For its accounts receivable management services, the Company generates substantially all of its revenue on a contingency fee basis. The Company seeks to be a low cost provider, and as such its fees typically range from 15% to 35% of the amount recovered on behalf of the Company's clients, with an average of 23.7% in 1996 on a pro forma basis. According to the 1995 Top Collection Markets Survey published by the American Collectors Association, Inc. ("ACA"), an industry trade group, the average fees realized by the accounts receivable management companies surveyed were in the range of 30% to 43% depending upon the industries served. For many of its other outsourced teleservices, the Company is paid on a fixed fee basis. While NCO's contracts are relatively short-term, the Company seeks to develop long-term relationships with its clients and works closely with them to provide quality, customized solutions. Increasingly, companies are outsourcing many non-core functions to focus on revenue generating activities, reduce costs and improve productivity. In particular, many corporations are recognizing the advantages of outsourcing accounts receivable management and other teleservices as a result of numerous factors including: (i) the increasing complexity of such functions; (ii) changing regulations and increased competition in certain industries; and (iii) the development of sophisticated call management systems requiring substantial capital investment, technical capabilities and human resource commitments. Consequently, receivables referred to third parties for management and recovery in the United States have grown substantially from approximately $43.7 billion in 1990 to approximately $84.3 billion in 1995, according to estimates published by the ACA. While significant economies of scale exist for large accounts receivable management companies, the industry remains highly fragmented. Based on information obtained from the ACA, there are approximately 6,300 accounts receivable management companies in operation, the majority of which are small, local businesses. Given the financial and competitive constraints facing these small companies and the limited number of liquidity options for the owners of such businesses, the Company believes that the industry will experience consolidation in the future. See "Business -- Industry Background." The Company strives to be a cost-effective, client service driven provider of accounts receivable management and other related teleservices to companies with substantial outsourcing needs. The Company's business strategy encompasses a number of key elements which management believes are necessary to ensure quality service and to achieve consistently strong financial performance. First, the Company focuses on the efficient utilization of its technology and infrastructure to constantly improve productivity. The Company's teleservices infrastructure enables it to perform large scale accounts receivable management programs cost effectively and to rapidly and efficiently integrate the Company's acquisitions. A second critical component is NCO's commitment to client service. Management believes that the Company's emphasis on designing and implementing customized accounts receivable management programs for its clients provides it with a significant competitive advantage. Third, the Company seeks to be a low cost provider of accounts receivable management services by centralizing all administrative functions and minimizing overhead at all branch locations. Lastly, the Company is targeting larger clients which offer significant cross-selling opportunities and have greater teleservices outsourcing requirements. See "Business -- Business Strategy." The Company seeks to continue its rapid expansion through both internal and external growth. The Company has experienced and expects to continue to experience strong internal growth by continually striving to increase its market share, expand its industry-specific market expertise and develop and offer new value-added teleservices. In addition, Company intends to continue to take advantage of the fragmented nature of the accounts receivable management industry by making strategic acquisitions. Through selected acquisitions, the Company will seek to serve new geographic markets, expand its presence in its existing markets and add complementary services. Since the Company's initial public offering in November 1996 ("IPO"), the Company has completed four acquisitions. Certain information related to such acquisitions is summarized in the following table. <TABLE> <CAPTION> Fiscal 1996 Acquired Year Acquisition Revenues Company Founded Date (millions) Headquarters Primary Services - ---------- --------- ------------- ------------ ------------------ ------------------------------- <S> <C> <C> <C> <C> <C> CRWCD 1957 Feb. 1997 $ 25.9 Philadelphia, PA Accounts Receivable Management CMS A/R 1972 Jan. 1997 6.8 Jackson, MI Accounts Receivable Management Goodyear 1974 Jan. 1997 5.5 Charlotte, NC Accounts Receivable Management TRC 1992 Jan. 1997 1.9 Philadelphia, PA Market Research/Teleservices </TABLE> The Company regularly reviews various strategic acquisition opportunities and periodically engages in discussions regarding such possible acquisitions. Currently, the Company is not a party to any agreements, understandings, arrangements or negotiations regarding any material acquisitions; however as the result of the Company's process of regularly reviewing acquisition prospects, negotiations may occur from time to time if appropriate opportunities arise. See "Acquisition History" and the Pro Forma Consolidated Financial Statements. The Company's principal executive offices are located at 1740 Walton Road, Blue Bell, Pennsylvania 19422, and its telephone number is (800) 220-2274. Effective July 7, 1997, the Company's principal executive offices will be relocated to 515 Pennsylvania Avenue, Fort Washington, Pennsylvania 19034. The Offering <TABLE> <S> <C> Common Stock offered by: The Company .......................................... 1,200,000 shares The Selling Shareholders .............................. 1,056,000 shares Common Stock to be outstanding after the Offering ...... 8,535,868 shares (1) Use of proceeds ....................................... For repayment of bank debt incurred to finance the 1997 Acquisitions and for working capital and other general corpo- rate purposes, including possible acquisi- tions. Nasdaq National Market symbol ........................... NCOG </TABLE> - ------------ (1) Includes an aggregate of 200,320 shares of Common Stock which are being sold by certain Selling Shareholders upon the exercise of outstanding warrants and stock options and 76,923 shares of Common Stock which are being sold by a certain Selling Shareholder upon the conversion of a $1.0 million Convertible Note. Excludes: (i) an aggregate of 749,680 shares of Common Stock reserved for issuance under the Company's 1995 Stock Option Plan, 1996 Stock Option Plan and 1996 Non-Employee Director Stock Option Plan; (ii) 90,591 shares of Common Stock reserved for issuance upon the exercise of warrants granted by the Company to Mellon Bank, N.A.; (iii) 42,503 shares of Common Stock reserved for issuance upon the conversion of the Company's $900,000 Convertible Note issued as partial consideration for the Goodyear acquisition; and (iv) 250,000 shares of Common Stock reserved for issuance upon the exercise of warrants issued as partial consideration for the CRWCD acquisition. See "Acquisition History," "Management -- Stock Option Plans" and "Description of Capital Stock -- Warrants and Convertible Notes." March 31, 1997 ----------------------- As Actual Adjusted(7) -------- ------------ Balance Sheet Data: Cash and cash equivalents .................. $5,793 $ 33,042 Working capital .............................. 7,996 35,245 Total assets ................................. 61,436 88,685 Long-term debt, net of current portion ...... 10,733 1,383 Shareholders' equity ........................ 41,044 77,644 - ------------ (1) Assumes that the acquisition of Management Adjustment Bureau, Inc. and the 1997 Acquisitions occurred on January 1, 1996. (2) Gives effect to: (i) the reduction of certain redundant operating costs and expenses that were immediately identifiable at the time of the acquisitions; (ii) the increase in amortization expense as if the acquisitions had occurred on January 1, 1996 and the elimination of depreciation and amortization expense related to assets revalued or not acquired by NCO as part of the acquisitions; (iii) the elimination of interest expense associated with acquisition-related debt repaid with proceeds of the Company's IPO and the proceeds of the Offering; (iv) the issuance of 1,604,620 shares of Common Stock at the IPO price of $13.00 per share which, net of the underwriting discount and offering expenses payable by the Company, was sufficient to repay acquisition related debt of $15.0 million and to fund the distribution of undistributed S Corporation earnings of $3.2 million through September 3, 1996, the termination date of the Company's S Corporation status, to existing shareholders of the Company; (v) the issuance of 345,178 shares of Common Stock and warrants exercisable for 250,000 shares of Common Stock in connection with the acquisition of CRWCD; and (vi) the issuance of 305,886 shares of Common Stock at an assumed public offering price of $32.00 per share which, net of the estimated underwriting discount and offering expenses payable by the Company, would be sufficient to repay acquisition related debt of $8.4 million. See Pro Forma Consolidated Financial Statements. (3) Assumes that the 1997 Acquisitions occurred on January 1, 1997. (4) Gives effect to: (i) the reduction of certain redundant operating costs and expenses that were immediately identifiable at the time of the acquisitions; (ii) the increase in amortization expense as if the acquisitions had occurred on January 1, 1997 and the elimination of depreciation and amortization expense related to assets revalued or not acquired by NCO as part of the acquisitions; (iii) the elimination of interest expense associated with acquisition related debt to be repaid with proceeds of the Offering; (iv) the issuance of 345,178 shares of Common Stock and warrants exercisable for 250,000 shares of Common Stock in connection with the acquisition of CRWCD; and (v) the issuance of 305,886 shares of Common Stock at an assumed public offering price of $32.00 per share which, net of the estimated underwriting discount and offering expenses payable by the Company, would be sufficient to repay acquisition related debt of $8.4 million. See Pro Forma Consolidated Financial Statements. (5) Prior to September 3, 1996 the Company operated as an S Corporation for income tax purposes and accordingly was not subject to federal or state income taxes prior to such date. Accordingly, the historical financial statements do not include a provision for federal and state income taxes for such periods. Pro forma net income and pro forma net income per share have been computed as if the Company had been fully subject to federal and state income taxes for all periods presented. See Note 8 of Notes to Consolidated Financial Statements. (6) Assumes that the Company issued 249,758 shares of Common Stock at $13.00 per share to fund the distribution of undistributed S Corporation earnings of $3.2 million through September 3, 1996, the termination date of the Company's S Corporation status, to existing shareholders of the Company. (7) Gives effect to: (i) the sale of the 1,200,000 shares of Common Stock offered by the Company hereby (at an assumed public offering price of $32.00 per share) and the application of the net proceeds therefrom as set forth in "Use of Proceeds" and (ii) the exercise of warrants and stock options to purchase an aggregate of 200,320 shares of Common Stock which are being sold by certain Selling Shareholders in the Offering and the receipt by the Company of the aggregate exercise price of $211,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022728_panda_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022728_panda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..eb1cc2714a26fef1c8f3945bbd59356d52fc6ab9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022728_panda_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Company's financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Investors should carefully consider the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Bonds. For definitions of certain terms used herein, see the glossary included as Appendix A to this Prospectus. The Company, the Issuer, Panda Interholding and Panda International General Panda Interfunding Corporation (the "Company") is an indirect wholly-owned Delaware subsidiary of Panda Energy International, Inc., a Texas corporation ("Panda International"). Panda Funding Corporation (the "Issuer") is a wholly- owned Delaware subsidiary of the Company organized for the sole purpose of issuing the Existing Bonds and additional series of Pooled Project Bonds (the Existing Bonds and all additional series, if any, are collectively referred to herein as the "Bonds"). Panda International is an independent (i.e., non- utility) power company that is engaged principally in the development, acquisition, ownership and operation of electric power generation facilities, both in the United States and internationally. The Company, the Issuer and Panda Interholding Corporation, a Delaware corporation and wholly-owned subsidiary of the Company ("Panda Interholding"), were formed by Panda International in 1996 as vehicles for financing Project development, including the making of equity and debt investments in Projects. Panda International has transferred, and intends to continue to transfer, to subsidiaries of the Company, including Panda Interholding, a portfolio of Projects (the "Project Portfolio") developed and to be developed by Panda International. Future transfers will be made at the time that such Projects reach Financial Closing or achieve Commercial Operations, thereby reducing development risk to the Company. Distributions (including payments of principal and interest on loans) received by the Company from its subsidiaries that own, directly or indirectly, interests in Projects in the Project Portfolio ("Project Entities") will be used to make payments on the Existing Bonds and on any additional series of Bonds issued in connection with the inclusion of additional Projects in the Project Portfolio. Panda Interholding was organized for the sole purpose of holding interests in Project Entities owning U.S. Projects. As of the date of this Prospectus, the Project Portfolio consists of indirect 100% equity interests in Project Entities that own (i) a 180 megawatt ("MW") natural gas-fired, combined-cycle cogeneration facility located in Roanoke Rapids, North Carolina (the "Panda-Rosemary Facility"), which commenced commercial operations in December 1990, and (ii) a 230 MW natural gas-fired, combined-cycle cogeneration facility located in Brandywine, Maryland (the "Panda-Brandywine Facility"), which commenced commercial operations in October 1996. The Project Entities that own the Panda-Rosemary Facility and the Panda- Brandywine Facility were transferred to Panda Interholding and became part of the Project Portfolio in July 1996. The transfer to the Company of any additional Projects in the future, will be made pursuant to an agreement (the "Additional Projects Contract") among Panda International, its principal development subsidiary and the Company. See "Additional Projects Contract" below. Initial Project Portfolio Panda-Rosemary Facility The Panda-Rosemary Facility is owned by Panda-Rosemary, L.P., a Delaware limited partnership (the "Panda-Rosemary Partnership"). The only partners of the Panda-Rosemary Partnership are indirect wholly-owned subsidiaries of the Company. The Panda-Rosemary Facility uses natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Panda-Rosemary Facility is sold to Virginia Electric and Power Company ("VEPCO"). Steam and chilled water produced by the Panda-Rosemary Facility are sold to The Bibb Company ("Bibb"), which operates a textile mill adjacent to the Panda-Rosemary Facility. The Panda-Rosemary Partnership has entered into agreements with Natural Gas Clearinghouse ("NGC") for natural gas supply and fuel management services, with Transcontinental Gas Pipe Line Corporation ("Transco"), Texas Gas Transmission Corporation ("Texas Gas") and CNG Transmission Corporation ("CNG") for firm transportation of natural gas and with certain other parties to provide pipeline operation, gas balancing and interruptible transportation services. The Panda-Rosemary Partnership recently entered into an operations and maintenance agreement with Panda Global Services, Inc. ("Panda Global Services"), an indirect wholly-owned subsidiary of Panda International that was recently organized to provide operations and maintenance services to Projects such as the Panda-Rosemary Facility. Such agreement is on substantially similar terms as the Panda-Rosemary Partnership's previous operations and maintenance agreement with University Technical Services, Inc. ("U-Tech"), a subsidiary of EMCOR Group, Inc., which was obtained through a competitive bid process and expired in December 1996. Concurrently with the offering of the Old Bonds (the "Prior Offering"), Panda-Rosemary Funding Corporation, a wholly-owned Delaware special purpose finance subsidiary of the Panda-Rosemary Partnership, consummated the offering and sale of $111.4 million in aggregate principal amount of its 8-5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds"). The Rosemary Bonds were issued pursuant to an indenture among the Panda-Rosemary Partnership, Panda-Rosemary Funding Corporation and Fleet National Bank, as trustee (the "Rosemary Indenture"). The Rosemary Indenture contains various affirmative and negative covenants, including limitations on the ability of the Panda-Rosemary Partnership to make distributions to its partners. Subject to certain other conditions, the Panda-Rosemary Partnership may make distributions to its partners only if: (i) amounts deposited in certain funds established pursuant to the Rosemary Indenture are equal to or greater than the amounts required to be deposited therein, including debt service and debt service reserve funds; (ii) no default or event of default under the Rosemary Indenture has occurred and is continuing; (iii) certain gas supply and transportation contracts that expire in November 2005 and October 2006 have been extended or replaced prior to November 30, 2005; and (iv) the Panda-Rosemary Facility meets certain historical and projected debt service coverage requirements. If the Panda- Rosemary Partnership is unable to make distributions to its partners, the ability of the Issuer to make payments on the Exchange Bonds would be materially and adversely affected. See "Risk Factors - Financial Risks" and "- Project Risks." An unaffiliated third party holds a cash flow participation in distributions from the Panda-Rosemary Partnership (which the Company believes is 0.433% and would increase to 1.732% after 2008 based on projected distributions, but which percentages are the subject of a dispute). All references in this Prospectus to distributions from U.S. Projects shall mean distributions after giving effect to such cash flow participation. See "Description of the Projects - The Panda-Rosemary Facility - Cash Flow Participation" and "Legal Proceedings - NNW, Inc. Proceeding." For more detailed information regarding the Panda-Rosemary Facility, including the various contracts and financing arrangements referred to above and regulatory matters affecting the Panda-Rosemary Facility, see "Description of the Projects - The Panda-Rosemary Facility," "Regulation" and "Description of Outstanding Project-Level Debt - The Panda-Rosemary Financing." Panda-Brandywine Facility The Panda-Brandywine Facility is leased by Panda-Brandywine, L.P., a Delaware limited partnership (the "Panda-Brandywine Partnership"). The Panda- Brandywine Partnership has two partners, each of which is an indirect wholly- owned subsidiary of the Company. The Panda-Brandywine Facility utilizes natural gas as its primary fuel. The electric capacity of and electric energy produced by the Panda-Brandywine Facility is sold to Potomac Electric Power Company ("PEPCO") pursuant to a power purchase agreement (the "Brandywine Power Purchase Agreement"). The Panda-Brandywine Facility commenced commercial operations under the Brandywine Power Purchase Agreement in October 1996. The thermal energy produced by the Panda-Brandywine Facility is sold to a distilled water production facility which is owned by an indirect wholly-owned subsidiary of the Company. The Panda-Brandywine Partnership purchases firm and interruptible natural gas supplies from Cogen Development Company, which are transported to the Panda-Brandywine Facility on either a firm or interruptible basis through the interstate pipeline facilities of Columbia Gas Transmission Corporation and Cove Point LNG Limited Partnership and the local gas distribution facilities of Washington Gas Light Company. The Panda-Brandywine Partnership has contracted with Ogden Brandywine Operations, Inc. ("Ogden Brandywine"), a subsidiary of Ogden Power Corporation, to operate and maintain the Panda-Brandywine Facility. Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed the Panda-Brandywine Facility pursuant to a fixed-price, turnkey engineering, procurement and construction contract (the "Brandywine EPC Agreement") with the Panda-Brandywine Partnership. Raytheon completed the start-up of the Panda- Brandywine Facility and has met the requirements for commercial operations and substantial completion under the Brandywine EPC Agreement, although the date on which commercial operations were achieved and the amount of the early completion bonus to which Raytheon is entitled under the Brandywine EPC Agreement are the subject of a dispute between the Panda-Brandywine Partnership and Raytheon. The Company estimates that the amount in dispute is less than $1.0 million and believes that the resolution of this dispute will not have a material adverse effect on the Panda-Brandywine Facility or the Panda- Brandywine Partnership. See "Description of the Projects - The Panda- Brandywine Facility - Construction Contract." General Electric Capital Corporation ("GE Capital") provided a $215 million construction loan to finance construction of the Panda-Brandywine Facility, which construction loan was converted in December 1996 to long-term financing in the form of a leveraged lease (together with the construction loan, the "Panda-Brandywine Financing"). To effect the lease financing, title to the Panda-Brandywine Facility was transferred to a third party trustee and leased back to the Panda-Brandywine Partnership. The Brandywine Facility Lease is a net lease and its initial term is 20 years. The documents governing the Panda-Brandywine Financing (the "Brandywine Financing Documents") contain various affirmative and negative covenants, including limitations on the ability of the Panda-Brandywine Partnership to make distributions to its partners. Subject to certain other conditions, the Panda-Brandywine Partnership may make distributions to its partners only if: (i) all amounts then required to be deposited in certain reserve accounts established pursuant to the Brandywine Financing Documents have been deposited, including rent reserve and operation and maintenance reserve accounts; (ii) all rent payments then due under the Brandywine Facility Lease have been paid; (iii) the Panda-Brandywine Facility meets an operating cash flow to debt service ratio of 1.2:1; and (iv) at the time of such distribution, and after giving effect thereto, no default or event of default has occurred and is continuing under the Brandywine Financing Documents. If the Panda-Brandywine Partnership is unable to make distributions to its partners, the ability of the Issuer to make payments on the Exchange Bonds would be materially and adversely affected. See "Risk Factors - Financial Risks" and "- Project Risks." In August 1996, the Panda-Brandywine Partnership and PEPCO commenced discussions concerning commercial operational requirements of the Panda- Brandywine Facility and conversion of the construction loan to long-term financing. During these discussions, disagreements arose between the Panda- Brandywine Partnership and PEPCO with respect to certain provisions of the Brandywine Power Purchase Agreement, one of which relates to the determination of the interest rate that is the basis for reduction in capacity payments thereunder (the "PEPCO Interest Rate Dispute"). PEPCO and the Panda-Brandywine Partnership are presently attempting to resolve these disagreements but there are no assurances that such efforts will be successful. If the PEPCO Interest Rate Dispute is determined adversely to the Panda-Brandywine Partnership, the capacity payments paid by PEPCO under the Brandywine Power Purchase Agreement will be less than originally anticipated, thereby adversely affecting the revenues realized by the Panda-Brandywine Partnership, and consequently, reducing the amount of funds that would be available for distribution to the Company and ultimately repayment of the Exchange Bonds. In addition, the ability of the Company to raise debt for Projects in the future would be impaired. See "Risk Factors - Dependence on Distributions from Project Entities" and "- Dispute With PEPCO Over Calculation of Capacity Payments," "Description of the Projects - The Panda-Brandywine Facility - Dispute With PEPCO Over Calculation of Capacity Payments," "Offering Circular Summary - Independent Engineers' and Consultants' Reports - Consolidating Engineer's Pro Forma Report" and "- Independent Pro Forma Analysis - Brandywine," and "Description of the Exchange Bonds - Certain Covenants - Limitations on Debt." For more detailed information regarding the Panda-Brandywine Facility, including the current disputes with Raytheon and PEPCO, the various contracts and financing arrangements referred to above and regulatory matters affecting the Panda-Brandywine Facility, see "Description of the Projects - The Panda- Brandywine Facility," "Regulation" and "Description of Outstanding Project- Level Debt - The Panda-Brandywine Financing." Additional Projects Contract Subject to certain conditions, including those set forth below, the Additional Projects Contract requires Panda International and its affiliates to transfer to the Company, or to certain wholly-owned direct subsidiaries thereof (the "PIC Entities"), their interests in each Project for which a power purchase agreement is entered into prior to July 31, 2001 and which has reached Financial Closing or achieved Commercial Operations prior to July 31, 2006. Panda International and its affiliates will be required to transfer their interests in a Project to the Project Portfolio only if the principal amount of additional series of Bonds that can be issued after giving effect to the inclusion of the Project in the Project Portfolio equals or exceeds the amount of Anticipated Additional Debt. For a description of how the amount of Anticipated Additional Debt is calculated, see "The Company, the Issuer, Panda Interholding and Panda International - The Additional Projects Contract." Interests in a Project will not be transferred if the Project has not reached Financial Closing or achieved Commercial Operations. Additionally, except for the Panda-Kathleen Project described below, which must be transferred to the Project Portfolio if it reaches Financial Closing, interests in a Project will not be transferred if: (i) Panda International does not own a controlling interest in the Project; (ii) the transfer would be prohibited under any Project-level financing, power purchase or related agreement; or (iii) after giving effect to the issuance of the additional series of Bonds in connection with the inclusion of the Project in the Project Portfolio (a) the rating of previously issued Bonds is not Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to the issuance of such additional series or (b) the projected Company Debt Service Coverage Ratio or the projected Consolidated Debt Service Coverage Ratio (if then applicable) would be less than 1.7:1 or 1.25:1, respectively, for (1) the period beginning with the date of determination through December 31 of that calendar year, (2) each period consisting of a calendar year thereafter through the calendar year immediately prior to the calendar year in which the Final Stated Maturity occurs and (3) the period thereafter beginning with January 1 and ending with such Final Stated Maturity (each such period, a "Future Ratio Determination Period"). The Additional Projects Contract requires Panda International to use commercially reasonable efforts to cause each Project to meet the conditions for transfer to the Project Portfolio as of the date a Project reaches Financial Closing or achieves Commercial Operations, whichever occurs first, or within a 90-day period thereafter. If, however, the conditions for such a transfer cannot be satisfied using commercially reasonable efforts, Panda International will have no further obligation to the Company in respect of such Project and may retain its interest in such Project or sell it to third parties. The Company believes that Panda International will continue to actively develop Projects; however, Panda International is under no obligation to do so, or to use any proceeds from the Prior Offering or future distributions from the Company to fund such future development. In addition, there can be no assurance that the Projects currently under development by Panda International will reach Financial Closing, achieve Commercial Operations or satisfy the other conditions for transfer to the Project Portfolio pursuant to the Additional Projects Contract. See "Risk Factors - Financial Risks," "- Project Risks" and "- Risks Relating to Future Non-U.S. Projects" and "The Company, the Issuer and Panda International - The Additional Projects Contract." Panda International Panda International is an independent power company engaged principally in the development, acquisition, ownership and operation of electric power generation facilities, both in the United States and internationally. It also owns a subsidiary engaged in oil and gas exploration and development. Panda International's principal business strategy is to use its experience in developing, constructing, financing and managing electric power generation facilities to provide low cost electricity and electric generating capacity. Panda International is seeking to expand its presence in the electric power industry by implementing this strategy in the United States and certain other countries. Panda International has placed into commercial operations facilities with electric generating capacity of approximately 410 MW. In addition, Panda International has executed power purchase agreements or entered into other development arrangements relating to four potential Projects with a combined electric generating capacity of approximately 750 MW. Panda International is continually engaged in the evaluation of various opportunities for the development and acquisition of additional electric power generation facilities, both in the United States and internationally. The Company believes that there is and will continue to be significant demand for new generating capacity worldwide and that much of this new capacity will be provided by independent power developers such as Panda International. See "Risk Factors - Project Risks" and "- Risks Relating to Future Non-U.S. Projects," "The Company, the Issuer and Panda International" and "Business - The Independent Power Industry." Panda International was formed as part of a corporate reorganization that took place in October 1995 in which all of the issued and outstanding capital stock of Panda Energy Corporation, a Texas corporation ("PEC"), was exchanged for shares of capital stock of Panda International, with the result that PEC became a wholly-owned subsidiary of Panda International. PEC was organized in 1982 by Robert and Janice Carter, who are the Chairman of the Board, President and Chief Executive Officer, and the Executive Vice President, Treasurer and Secretary, respectively, of Panda International, PEC, the Company, the Issuer and Panda Interholding. See "Management." Robert and Janice Carter and members of their family and family trusts together own approximately 38.8% of the outstanding shares of capital stock of Panda International. See "Risk Factors - Control by Principal Stockholders." The principal executive offices of the Issuer, the Company, Panda Interholding, PEC and Panda International are located at 4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244. The telephone number at such offices is (972) 980-7159. Projects under Development by Panda International The following are Projects that Panda International and its affiliates are developing. There are substantial risks associated with the development of Projects, and increased risks associated with the development of Projects outside the United States. There can be no assurance that any Project under development will reach Financial Closing, achieve Commercial Operations or satisfy the other conditions for transfer to the Project Portfolio pursuant to the Additional Projects Contract. See "Risk Factors - Project Risks" and "- Risks Relating to Future Non-U.S. Projects." Panda-Luannan (China) The Company expects that, during the first quarter of 1997, a 2 x 50 MW coal-fired cogeneration facility (the "Panda-Luannan Facility") to be located in Luannan County, Tangshan Municipality, Hebei Province, People's Republic of China ("PRC" or "China") will reach Financial Closing and will be eligible for transfer to the Project Portfolio if the other conditions to such transfer contained in the Additional Projects Contract can be satisfied. Subject to output limitations during certain periods, all of the electric output of the Panda-Luannan Facility will be sold to North China Power Group Company, the business arm of North China Power Group ("NCPG"), which is one of the five interprovincial power groups in China under the supervision of the Ministry of Electric Power of the PRC. The Panda-Luannan Facility is to be connected to one of the largest power grids in China, which is operated by NCPG and serves the region which includes the Beijing-Tianjin-Tangshan area. It is anticipated that the steam generated will be sold to industrial and possibly to governmental purchasers. Panda of Nepal Panda International has formed a joint venture company with a major international hydroelectric engineering company and a local Nepalese party to build a 36 MW hydroelectric facility on the upper Bhote Koshi River in Nepal. A power purchase agreement with the Nepal Electricity Authority ("NEA"), and a project agreement with the Government of Nepal obligating the Government of Nepal to guarantee NEA's obligations and to provide certain other support and incentives, were signed in July 1996. An engineering, procurement and construction contract for the facility was entered into in October 1996 with China Gezhouba Construction Group Corporation for Water Resources and Hydropower, a Chinese engineering and construction firm. The construction contract provides that the contractor will construct the facility on a fixed- price turnkey basis. Panda International has received commitment letters from two multilateral agencies to provide debt financing for this Project, subject to their satisfaction with due diligence reviews and other matters. The Company expects that this Project will reach Financial Closing during the first quarter of 1997 and will be eligible for transfer to the Project Portfolio if the other conditions to such transfer contained in the Additional Projects Contract can be satisfied. Panda-Lapanga (India) In August 1994, Panda International acquired from another independent power developer a 90% interest in a company that has executed a power purchase agreement with the Orissa State Electricity Board for a proposed 500 MW coal- fired electric generating facility to be located in the State of Orissa, India. Certain of the central government approvals for this facility have been obtained. Although Panda International believes this power purchase agreement is valid and enforceable, the State of Orissa has given a notice of cancellation of such agreement to Panda International, as well as to several other third parties with respect to power purchase agreements relating to their projects. Panda International has objected to such notice. Development efforts have been delayed pending resolution of this dispute. Panda-Kathleen (United States) Panda International owns an indirect 100% equity interest in Panda- Kathleen, L.P., a Delaware limited partnership (the "Panda-Kathleen Partnership"), which in 1991 entered into a power purchase agreement with Florida Power Corporation ("Florida Power") for the sale of capacity and all energy made available from a natural gas-fired, combined-cycle cogeneration facility (the "Panda-Kathleen Facility"). Construction of the Panda-Kathleen Facility was originally scheduled to begin in 1995, but has been delayed because of litigation with Florida Power and may never commence. The Brandywine Financing Documents require the Panda-Kathleen Project to be transferred to the Project Portfolio if it reaches Financial Closing, whether or not the other conditions to transfer contained in the Additional Projects Contract are satisfied. See "Legal Proceedings - Florida Power Proceedings." Guaranty and Collateral; Effective Subordination The Existing Bonds are, and all additional series of Bonds will be issued pursuant to an indenture (the "Indenture") among the Issuer, the Company and Bankers Trust Company, as trustee (the "Trustee"). The Bonds will be paid from payments by the Company to the Issuer on promissory notes (including the Initial Company Note, the "Company Notes") evidencing loans by the Issuer to the Company. The aggregate outstanding principal amount of the Company Notes will at all times equal the aggregate outstanding principal amount of the Bonds. Upon completion of the Exchange Offer, the Existing Bonds will be the only Bonds issued and outstanding under the Indenture. The Existing Bonds are, and all additional series of Bonds will be, fully and unconditionally guaranteed (such guaranty, the "Company Guaranty") by the Company. In addition, the Existing Bonds are, and all additional series of Bonds will be, secured by pledges, or grants of security interests, to the Trustee for the benefit of the holders of the Bonds: (i) by PEC of and in all of the capital stock of the Company; (ii) by the Company, of and in all of the capital stock of the Issuer and the PIC Entities (the "PIC U.S. Entities") that indirectly own Projects located in the United States and certain international Projects for which no U.S. tax deferral will be sought (the "U.S. Projects") and 60% of the capital stock of the PIC Entities (the "PIC International Entities") that indirectly own Projects not located in the United States and for which U.S. tax deferral will be sought (the "Non-U.S. Projects"); (iii) by the Issuer, of and in the Company Notes; (iv) by the Company, of and in its interest in the Additional Projects Contract; and (v) by the Company, of and in its interest in all distributions from the PIC U.S. Entities and its interest in accounts, established in the Company's name with the Trustee, into which such distributions are deposited (all of the foregoing collateral so pledged, the "Collateral"). Currently, there exists one PIC U.S. Entity, Panda Interholding, and one PIC International Entity, Panda Cayman Interfunding Company, a Cayman Islands corporation ("Panda Cayman"). Individually, the pledges of the capital stock of each of the Issuer, Panda Interholding and Panda Cayman do not constitute a "substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated under the Securities Act) of the Collateral securing the Existing Bonds. Except as discussed in the following paragraph, separate financial statements of each of the Issuer, Panda Interholding and Panda Cayman are not presented in this Prospectus because the Company believes that such disclosure is not material to a prospective purchaser of the Exchange Bonds. The financial statements of the Company contained in this Prospectus present the financial position and results of operations of the Company and all of its subsidiaries on a consolidated basis. The obligations under the Company Guaranty and Bonds are also guaranteed in a limited amount by Panda Interholding and will be guaranteed in a limited amount by future PIC U.S. Entities, if any, which will be wholly-owned subsidiaries of the Company (the "PIC Entity Guaranties"). The consolidated financial statements of the Company as of December 31, 1994 and December 31, 1995 and for each of the three years in the period ended December 31, 1995 are also the consolidated financial statements of Panda Interholding as of such dates and for such periods. The unaudited condensed consolidated financial statements of Panda Interholding as of September 30, 1996 and for the nine months then ended are included separately in Appendix F to this Prospecus. The Bonds will not be secured by any direct equity interest in, or by a mortgage on, or other security interest in the assets of, any Project nor will the Bonds be directly secured by any interest in any distributions to PIC International Entities, if any, or any accounts into which such distributions are deposited. Each PIC International Entity, however, will be required to pledge to the Company, as security for the repayment of certain loans by the Company to such PIC International Entity (the "PIC International Entity Loans"), such PIC International Entity's interest in all distributions received by it in respect of Non-U.S. Projects, if any, and all accounts, established in the name of such PIC International Entity with the Trustee, acting in its capacity as the International Collateral Agent for the benefit of the Company (the "International Collateral Agent"), into which such distributions are deposited. See "Description of the Exchange Bonds - Collateral for the Exchange Bonds." The Exchange Bonds will be exclusively the obligations of the Issuer and, to the extent of the Company Guaranty and the PIC Entity Guaranties (the "Guaranties"), the Company and PIC U.S. Entities, and not of any of their affiliates. Because the operations of the Company are conducted by Project Entities, the Company's cash flow and its ability to service its debt, including its ability to make payments on the Company Notes, and consequently the Issuer's ability to make payments on the Bonds (including the Exchange Bonds), are almost entirely dependent upon the earnings of the Project Entities and the distribution of those earnings to the Company through the PIC Entities. The Project-level financing arrangements for the Projects generally restrict the ability of the Project Entities to pay dividends, make distributions or otherwise transfer funds to equity owners of such Projects, including the PIC Entities and, indirectly, the Company. These restrictions generally require that, prior to the payment of dividends or distributions or the making of other transfers of funds, the Project Entity proposing to make the dividend, distribution or transfer must provide for the payment of other obligations of the Project, including operating expenses and debt service, fund a debt service reserve and other reserves and meet certain debt service coverage ratios and other tests. Additionally, the indebtedness incurred by a Project Entity to finance a Project would generally be secured by a mortgage on the applicable Project and a security interest in substantially all of the assets of, and the equity interests in, the Project Entity. As a result of the foregoing, the Bonds (including the Exchange Bonds) and the Guaranties will be effectively subordinated, both in terms of security and in priority of rights to receive distributions, to creditors of the Project Entities and the PIC Entities. As of September 30, 1996, the Project Entities had outstanding $314.6 million of indebtedness and other liabilities, which are effectively senior to the Existing Bonds and the Guaranties. See "Risk Factors - - Financial Risks" and "Description of the Outstanding Project-Level Debt." PRIOR OFFERING On July 31, 1996 (the "Issue Date"), the Issuer issued $105,525,000 aggregate principal amount of its 11-5/8% Pooled Project Bonds, Series A due 2012 in a private placement under Section 4(2) of the Securities Act and Rule 144A. The Old Bonds were sold to Jefferies & Company, Inc. (the "Initial Purchaser") pursuant to the Purchase Agreement and were placed by the Initial Purchaser with Qualified Institutional Buyers and Institutional Accredited Investors (as defined in Section 501(a) (1), (2), (3) or (7) under the Securities Act). Pursuant to the Registration Rights Agreement entered into between the Company, the Issuer and the Initial Purchaser in connection with the Prior Offering, the Issuer and the Company agreed to file a shelf registration statement covering the Old Bonds (a "Shelf Registration Statement") or to effect a registered exchange offer for the Old Bonds pursuant to which the holders of the Old Bonds would be offered the opportunity to exchange their Old Bonds for registered Exchange Bonds. The Registration Rights Agreement provides that if such an exchange offer registration statement (an "Exchange Offer Registration Statement") or a Shelf Registration Statement is not declared effective within 180 days after the Issue Date, the interest rate on the Old Bonds will increase by 50 basis points effective on the 181st day following the Issue Date until such a registration statement is declared effective. If such a registration statement is not declared effective within two years following the Issue Date, such increase in interest rate would become permanent. The Registration Statement with respect to the Exchange Offer was declared effective by the Commission on February 14, 1997, and accordingly, Additional Interest on the Old Bonds accrued commencing on January 28, 1997 through February 13, 1997 and is payable on February 20, 1997, the next Interest Payment Date, in the aggregate amount of $24,916. THE EXCHANGE OFFER The Issuer is making the following Exchange Offer to holders of all Old Bonds presently outstanding: The Exchange Offer For each $1,000 principal amount of Old Bonds tendered, a holder will be entitled to receive $1,000 principal amount of Exchange Bonds. As of the date of this Prospectus, $105,525,000 principal amount of Old Bonds is outstanding. The terms of the Exchange Bonds are substantially identical to the terms of the Old Bonds, except that the Exchange Bonds (i) will have been registered under the Securities Act, and (ii) holders of the Exchange Bonds will not be entitled to certain rights of holders of the Old Bonds under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Old Bonds Registration Rights." Expiration Date The Exchange Offer will expire at 5:00 p.m., New York City time, on March 19, 1997, unless extended in the Issuer's sole discretion. See "The Exchange Offer - Expiration Date; Extensions; Termination; Amendments." Withdrawal of Tenders Tenders of Old Bonds may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable. See "The Exchange Offer - Withdrawal of Tenders." Interest on the Exchange Bonds and Accrued Interest on the Old Bonds The Exchange Bonds will bear interest from the date of their issuance. Interest on the Old Bonds accepted for exchange will accrue thereon to, but not including, the date of issuance of the Exchange Bonds and will be paid together with the first interest payment on the Exchange Bonds issued in exchange therefor. Conditions of the Exchange Offer The Exchange Offer is subject to certain customary conditions. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Bonds being tendered or accepted for exchange. Old Bonds may be tendered only in integral multiples of $1,000. See "The Exchange Offer - Conditions of the Exchange Offer." Procedures for Tendering Old Bonds Each holder of Old Bonds wishing to accept the Exchange Offer must, prior to the Expiration Date, either (i) complete and sign the Letter of Transmittal, in accordance with the instructions contained herein and therein, and deliver such Letter of Transmittal, together with any signature guarantees and any other documents required by the Letter of Transmittal, to the Exchange Agent at its address set forth on the back cover page of this Prospectus and the tendered Old Bonds must either be (a) physically delivered to the Exchange Agent or (b) transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures set forth herein. By executing the Letter of Transmittal, each holder will represent that, among other things, the Exchange Bonds acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Bonds (whether or not such person is the registered holder of such Exchange Bonds), that neither the holder of such Exchange Bonds nor any such other person has an arrangement with any person to participate in the distribution (within the meaning of the Exchange Act) of such Exchange Bonds and that neither the holder of such Exchange Bonds or any such other person is an Affiliate of the Issuer, the Company or Panda Interholding, or if it is an Affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. See "The Exchange Offer - Procedures for Tendering." Special Procedures for Beneficial Owners Any beneficial owner whose Old Bonds are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Bonds in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "The Exchange Offer - Procedures for Tendering." Guaranteed Delivery Procedures Holders of Old Bonds who wish to tender their Old Bonds and whose Old Bonds are not immediately available or who cannot deliver their Old Bonds, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Bonds according to the guaranteed delivery procedures set forth in "The Exchange Offer - Guaranteed Delivery Procedures." Acceptance of the Old Bonds and Delivery of the Exchange Bonds Upon satisfaction or waiver of the conditions of the Exchange Offer, the Issuer will accept for exchange any and all Old Bonds which are properly tendered and not withdrawn prior to the Expiration Date. The Exchange Bonds issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer - Acceptance of Old Bonds for Exchange; Delivery of Exchange Bonds." Certain Federal Income Tax Considerations Generally, there should not be federal income tax consequences to holders as a result of the exchange of the Old Bonds for the Exchange Bonds pursuant to the Exchange Offer. If, however, the exchange of the Old Bonds for the Exchange Bonds were treated as an "exchange" for federal income tax purposes, such exchange should constitute a recapitalization for federal income tax purposes. Holders exchanging the Old Bonds pursuant to such recapitalization should not recognize any gain or loss upon the exchange. The foregoing discussion of certain federal income tax consequences is for general information only and is not tax advice. Federal income tax consequences may vary depending upon individual circumstances. See "Certain U.S. Federal Income Tax Considerations of the Exchange Offer." Effect on Holders of Old Bonds Holders of the Old Bonds who do not tender their Old Bonds in the Exchange Offer will continue to hold such Old Bonds and will be entitled to all the rights and benefits, and will be subject to all limitations applicable thereto, under the Indenture. All Old Bonds not exchanged in the Exchange Offer will continue to be subject to the restrictions on transfer provided for in the Old Bonds and the Indenture. To the extent that Old Bonds are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Bonds not so tendered could be adversely affected. See "Risk Factors - Consequences of Failure to Exchange Old Bonds." Rights of Dissenting Holders Holders of Old Bonds do not have any appraisal or dissenters' rights under the Delaware General Corporation Law or the Indenture in connection with the Exchange Offer. Exchange Agent Bankers Trust Company. See "The Exchange Offer - The Exchange Agent." TERMS OF THE EXCHANGE BONDS The Exchange Offer applies to $105,525,000 aggregate principal amount of Old Bonds. The form and terms of the Exchange Bonds are substantially identical to the terms of the Old Bonds, except that the Exchange Bonds (i) have been registered under the Securities Act, and therefore, will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Bonds will not be entitled to certain rights of holders of the Old Bonds under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights." The Exchange Bonds will evidence the same debt as the Old Bonds which they replace and will be issued under, and be entitled to the benefits of, the Indenture. Upon completion of the Exchange Offer, the Existing Bonds will be the only Bonds issued and outstanding under the Indenture. Securities Offered $105,525,000 11-5/8% Pooled Project Bonds, Series A-1 due 2012. Final Maturity Date August 20, 2012. Interest Payment Dates February 20 and August 20, commencing February 20, 1997. Ratings In October 1996, the Exchange Bonds were rated Ba3 by Moody's Investors Service, Inc. and BB- by Duff & Phelps Credit Rating Co. Initial Average Life The initial average life to maturity of the Exchange Bonds is 11.7 years. Scheduled Principal Payments Semiannually commencing February 20, 1997, as follows: Percentage of Original Payment Date Principal Amount Payable February 20, 1997 0.2045% August 20, 1997 0.0000% February 20, 1998 0.0000% August 20, 1998 0.0000% February 20, 1999 0.0000% August 20, 1999 0.5933% February 20, 2000 0.6129% August 20, 2000 0.0000% February 20, 2001 0.0000% August 20, 2001 1.3753% February 20, 2002 1.4691% August 20, 2002 2.2184% February 20, 2003 2.3565% August 20, 2003 2.9328% February 20, 2004 3.1031% August 20, 2004 3.2796% February 20, 2005 3.4687% August 20, 2005 3.5977% February 20, 2006 3.7820% August 20, 2006 2.8098% February 20, 2007 3.0076% August 20, 2007 4.8415% February 20, 2008 5.1145% August 20, 2008 5.0057% February 20, 2009 5.2945% August 20, 2009 5.5185% February 20, 2010 5.8300% August 20, 2010 5.7248% February 20, 2011 6.0590% August 20, 2011 6.4800% February 20, 2012 6.8808% August 20, 2012 8.4390% Denominations and Form The Exchange Bonds will be issuable in denominations of any integral multiple of $1,000 in exchange for a like principal amount of Old Bonds. The Exchange Bonds will be issuable in book-entry form through the facilities of The Depository Trust Company ("DTC"), which will act as depositary for the Exchange Bonds. One fully-registered certificate will be issued and will be deposited with DTC, and interests therein will be shown on, and transfers will be effected through, records maintained by DTC and its participants. See "Description of the Exchange Bonds - Book Entry; Delivery and Form." Mandatory Redemption The Existing Bonds and all additional series of Bonds, if any, then outstanding will be subject to mandatory redemption, in whole or in part, to the extent that, at any time (after giving effect to transfers required to be made to other Accounts and Funds on such date), the aggregate amount of monies on deposit in the U.S. and International Mandatory Redemption Accounts is in excess of $2.0 million. In the event of a sale or other disposition of any Collateral or any interest in a Project or any event of casualty, loss or condemnation with respect to a Project (each, a "Mandatory Redemption Event"), all proceeds of any distributions resulting from such Mandatory Redemption Event in excess of $2.0 million in the aggregate in any calendar year that may be legally distributed or paid to the Company or any PIC Entity without contravention of any Project debt agreement shall be deposited into the appropriate Mandatory Redemption Account, unless (i) the Company provides a certificate to the Trustee (supported by a certificate to the Trustee from the Consolidating Engineer) stating that such Mandatory Redemption Event would not result in either the projected Company Debt Service Coverage Ratio being less than 1.7:1 or the projected Consolidated Debt Service Coverage Ratio (if then applicable) being less than 1.25:1, for each Future Ratio Determination Period; and (ii) the rating of the Bonds is Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to such Mandatory Redemption Event. Mandatory redemptions will be made at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus interest thereon accrued to the date of such redemption, plus a premium, if any, provided in the supplemental indenture for each series of Bonds to be redeemed. For the Exchange Bonds, such premium is equal to that payable were the Exchange Bonds to be redeemed at the Issuer's option on such date to the extent that the mandatory redemption results from a sale or other voluntary disposition of any Collateral or any interest in a Project (or if no optional redemption is then available, a premium determined as the excess, if any, of the present value of the remaining payments due on the Exchange Bonds, discounted at a rate which is equal to the Applicable Treasury Rate plus one-half of one percent over the par value of such Exchange Bonds). Notwithstanding the foregoing, the amount of Bonds required to be redeemed shall not exceed the amount necessary to cause (after giving effect to such redemption) the coverage ratio requirements set forth above to be met and to achieve a Reaffirmation of the rating on the Bonds by at least two rating agencies. See "Description of the Exchange Bonds - Redemption - Mandatory Redemption." The applicable Consolidated Debt Service Coverage Ratio, for purposes of determining whether amounts are to be deposited in the Mandatory Redemption Accounts or for any other purposes under the Indenture, need not be satisfied on and after the time that more than four Projects have been transferred to the Project Portfolio. There can be no assurance that the Issuer will have available funds sufficient to fund the redemption of Bonds upon the occurrence of a Mandatory Redemption Event. In the event a Mandatory Redemption Event occurs at a time when the Issuer does not have available funds sufficient to redeem all of the Bonds subject to such redemption, an Event of Default would occur under the Indenture. See "Risk Factors - Mandatory Redemption and Repurchase of Bonds Upon a Change in Control." Optional Redemption The Exchange Bonds will be subject to redemption, in whole or in part, at the option of the Issuer at any time on or after August 20, 2001, at the following redemption prices (expressed as a percentage of principal amount) plus interest accrued to the date of redemption, if redeemed during the 12-month period commencing on or after August 20 of the year set forth below: Year Redemption Price 2001 105.8125% 2002 104.3594% 2003 102.9063% 2004 101.4532% 2005 100.0000% and thereafter The Exchange Bonds are also subject to redemption, in whole or in part, at the option of the Issuer at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus interest thereon accrued to the date of such redemption if an Extraordinary Financial Distribution in excess of $2.0 million is applied to prepay the Company Notes. "Extraordinary Financial Distributions" are distributions and other amounts received by the Company or any PIC Entity without contravention of any Project debt agreement in respect of settlements, judgments and other payments received in respect of a Project in connection with legal proceedings, monies released from certain escrows relating to Projects, buy-outs or settlements of Project contracts and certain other transactions resulting in the receipt of cash or other property upon the sale, transfer or other disposition of contractual rights relating to a Project (in each case, other than in respect of a Mandatory Redemption Event). See "Description of the Exchange Bonds - Redemption - Optional Redemption." Change of Control Upon the occurrence of a Change of Control, each holder of Existing Bonds and all additional series of Bonds, if any, will have the right to require the Issuer to purchase all or a portion of such holder's Bonds at a price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of purchase. See "Description of the Exchange Bonds - Certain Covenants - Change of Control." There can be no assurance that the Issuer will have available funds sufficient to fund the purchase of the Bonds upon a Change of Control. In the event a Change of Control occurs at a time when the Issuer does not have available funds sufficient to pay for all of the Bonds delivered by holders seeking to accept the Issuer's repurchase offer, an Event of Default would occur under the Indenture. See "Risk Factors - Mandatory Redemption and Repurchase of Bonds Upon a Change in Control." Certain Covenants The Indenture contains affirmative and negative covenants that restrict the activities of the Issuer, the Company and the PIC Entities, including limitations on: (i) distributions to the Company and the PIC International Entities out of the Accounts and Funds described below under "Flow of Funds"; (ii) the ability of Project Entities to incur new debt or amend Project agreements if such actions could reasonably be expected to reduce Cash Available for Distribution by 10% for any Future Ratio Determination Period; (iii) how the proceeds of the Prior Offering may be used; (iv) the incurrence of indebtedness or lease obligations, or the provision of guaranties (see "Additional Debt" below); (v) the payment of dividends on and redemptions of capital stock; (vi) the use of proceeds from the sale of assets and certain other events; (vii) transactions with affiliates and (viii) the creation of liens. The Indenture will also (a) require the Company to maintain at least a 50% (direct or indirect) ownership interest in each Project, or a 25% (direct or indirect) ownership interest in each Project and controlling influence over the management and policies with respect to such Project, provided that no other entity has greater control than the Company over such management and policies (except in certain circumstances, including the sale by the Company of its entire interest in a Project), (b) restrict the ability of the Company, the Issuer and the PIC Entities to consolidate with or merge into, or to transfer all or substantially all of their respective assets to, another person, (c) require the Issuer to pledge additional collateral in certain instances and (d) require the Issuer to offer to redeem the Bonds upon the occurrence of a Change of Control. See "Description of the Exchange Bonds - Certain Covenants." Noncompliance with the covenants contained in the Indenture would constitute an Event of Default under the Indenture after any applicable time periods or notice and cure periods. If an Event of Default due to the bankruptcy, insolvency or reorganization of the Company, the Issuer or any PIC Entity occurs, all unpaid principal, premium, if any, and interest under all Existing Bonds and all additional series of Bonds, if any, then outstanding will immediately become due and payable. In other cases of an Event of Default, the Trustee may, and upon the request of the holders of at least one-third or one-half (depending on the circumstances) in aggregate principal amount of all Existing Bonds and all additional series of Bonds, if any, then outstanding shall, declare all unpaid principal, premium, if any, and interest thereunder to immediately become due and payable. If any Event of Default is not cured or waived, the Trustee may, and upon the request of a majority in aggregate principal amount of the Existing Bonds and all additional series of Bonds, if any, then outstanding, and the offering to it of any indemnity required under the Indenture shall (unless the Trustee in good faith shall determine that such exercise would involve it in personal liability or expense), enforce every right available to it under the Indenture and under the Security Documents. See "Description of the Exchange Bonds - Defaults and Remedies." Additional Debt...... The Indenture permits the Issuer to incur additional debt only in the form of additional series of Bonds for the purpose of loaning the proceeds thereof to the Company, which the Company may use either to make investments in Projects in connection with their transfer to the Project Portfolio or for distribution or loan to Panda International and its affiliates. Panda International and its affiliates may, but are under no obligation to, use such funds for future project development. Additional series of Bonds may be issued only if, at the time of such issuance, (i) the Company provides a certificate to the Trustee (supported by a certificate to the Trustee from the Consolidating Engineer) stating that, after giving effect to the issuance of such additional series of Bonds and the application of the proceeds therefrom, the projected Company Debt Service Coverage Ratio and the projected Consolidated Debt Service Coverage Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1, respectively, for each Future Ratio Determination Period and (ii) the rating of the Bonds is Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to the issuance of such additional series; provided, however, that such Reaffirmation of the rating shall not be required if (a) neither the Company nor any PIC Entity has, since the last date upon which the Bonds were rated or a Reaffirmation of rating was given in respect thereof, acquired (or is acquiring in connection with the issuance of such additional series), sold or otherwise disposed of direct or indirect interests in one or more Projects in an aggregate amount in excess of the lesser of the amounts set forth in subclauses (1) and (2) of clause (b) below and (b) the principal amount of such additional series to be issued is less than the lesser of (1) $50 million and (2) 25% of the aggregate principal amount of all series of Bonds then outstanding. The Company and the PIC Entities will be prohibited from incurring any debt, other than (i) in the case of the Company, the Company Guaranty and the Company Notes, (ii) in the case of the PIC International Entities, the PIC International Entity Notes, certain subordinated debt (including Other International Notes) payable to the Company or any PIC Entity, (iii) in the case of the PIC U.S. Entities, the PIC Entity Guaranties and certain subordinated debt payable to the Company or any PIC Entity and (iv) in the case of Project Entities, Project debt and certain guaranties. See "Description of the Exchange Bonds - Certain Covenants." Guaranty and Ranking. The Exchange Bonds will rank pari passu with all other series of Bonds (including the Old Bonds). The Existing Bonds are, and all other series of Bonds will be, fully and unconditionally guaranteed by the Company. The obligations under the Company Guaranty and Bonds are also guaranteed in a limited amount by Panda Interholding and will be guaranteed in a limited amount by future PIC U.S. Entities, if any, which will be wholly-owned subsidiaries of the Company. The Existing Bonds are, and all other series of Bonds will be, secured indebtedness of the Issuer; however, payments on the Bonds, and payments under the Guaranties, will be effectively subordinated to all liabilities of the Project Entities incurred in respect of the Projects, including Project-level debt financing and trade payables. As of September 30, 1996, the Project Entities had outstanding $314.6 million of indebtedness and other liabilities, which are effectively senior to the Existing Bonds and the Guaranties. The consolidated financial statements of the Company as of December 31, 1994 and December 31, 1995 and for each of the three years in the period ended December 31, 1995 are also the consolidated financial statements of Panda Interholding as of such dates and for such periods..The unaudited condensed consolidated finanical statements of Panda Interholding as of September 30, 1996 and for the nine months then ended are included separately in Appendix F to this Prospectus. See "Risk Factors - Financial Risks," "Description of the Outstanding Project-Level Debt" and "Description of the Exchange Bonds - Ranking." Flow of Funds All distributions in respect of U.S. Projects received by or on behalf of the Company or any PIC U.S. Entity, including Panda Interholding (other than Extraordinary Financial Distributions and distributions received as a result of Mandatory Redemption Events that are required to be deposited in the U.S. Mandatory Redemption Account), all regularly scheduled interest and principal payments on the PIC International Entity Notes and any payments resulting from the redemption or partial redemption of any Other International Notes shall be deposited directly into the U.S. Project Account. All distributions in respect of Non-U.S. Projects received by or on behalf of any PIC International Entity (other than Extraordinary Financial Distributions and distributions received as a result of Mandatory Redemption Events that are required to be deposited in the International Mandatory Redemption Account) shall be deposited directly into the International Project Account. The Trustee shall, on the first Business Day of each month (a "Monthly Distribution Date"), transfer amounts on deposit in the U.S. Project Account in the following order of priority: (i) to the Debt Service Fund (for application to payments on the Bonds), an amount equal to the excess, if any, of (a) the aggregate amount of interest (less any amount on deposit in the Capitalized Interest Fund in respect of such payment) and, if applicable, principal, in each case due and payable on the Company Notes (including any past due amounts) on the Payment Date for each series of Bonds then outstanding next following the day immediately preceding such Monthly Distribution Date (other than in connection with a call for redemption) over (b) the amount then on deposit in the Debt Service Fund; (ii) to the Capitalized Interest Fund, an amount equal to the excess, if any, of the Capitalized Interest Requirement over the amount then on deposit in the Capitalized Interest Fund; (iii)	to the Debt Service Reserve Fund, an amount equal to the excess, if any, of the Debt Service Reserve Requirement over the sum of (a) the amount then on deposit in the Debt Service Reserve Fund plus (b) the aggregate amount, if any, available to be drawn under a Letter of Credit; (iv) to the Company Expense Fund, an amount equal to the excess, if any, of (a) the sum of (1) the Company Expenses Amount for the applicable calendar year plus (2) the Annual Letter of Credit Fee over (b) the aggregate amount deposited to the Company Expense Fund since the beginning of such calendar year; and (v) to the U.S. Distribution Suspense Fund, the remaining balance, if any, on deposit in the U.S. Project Account. On each Monthly Distribution Date, the International Collateral Agent shall transfer monies from the International Project Account (i) first to the payment of interest then due on any PIC International Entity Note and (ii) then to the International Distribution Suspense Fund, the remaining balance, if any, on deposit in the International Project Account. Extraordinary Financial Distributions will be initially deposited in the appropriate Extraordinary Distribution Account (U.S. or International) and, if required pursuant to the Indenture, proceeds received by the Company or any PIC Entity as a result of Mandatory Redemption Events will be initially deposited in the appropriate Mandatory Redemption Account (U.S. or International). All amounts held in the foregoing Accounts and Funds (other than the International Accounts and Funds) will be in the sole control of the Trustee, acting in its capacity as agent for the Collateral Agent, and will be pledged to secure the obligations of the Issuer under the Bonds. The International Accounts and Funds will be in the sole control of the International Collateral Agent, acting in its capacity as agent for the PIC International Entities, and will be pledged to the Company to secure the PIC International Entity Notes and the Other International Notes. In addition to the foregoing Accounts and Funds, a U.S. Distribution Fund and an International Distribution Fund will be established in the name and be in the control of the Company and the PIC International Entities, respectively. See "Description of the Exchange Bonds - The Accounts and Funds." Debt Service Fund Amounts on deposit in the Debt Service Fund shall be used to pay interest and principal, if applicable, due and payable on the Company Notes, as and when provided in the Company Notes. Payments on the Company Notes shall be applied by the Trustee to the payment of interest and principal on the Bonds. If, on any Payment Date the amounts on deposit in the Debt Service Fund, after giving effect to all transfers to the Debt Service Fund on such date, are insufficient for the payment in full of the interest and, if applicable, principal on the Company Notes then due and payable, including any past due amounts (such deficiency hereinafter referred to as a "Debt Service Deficiency"), an amount equal to such Debt Service Deficiency shall be withdrawn and transferred to the Debt Service Fund, first from the U.S. Distribution Suspense Fund, then from the U.S. Extraordinary Distribution Account (using Available Amounts only), then from the Company Expense Fund, then from the Debt Service Reserve Fund, then from the Capitalized Interest Fund and then from the U.S. Mandatory Redemption Account (using Available Amounts only); provided, however, that if there are not sufficient funds in the U.S. Accounts and Funds to eliminate a Debt Service Deficiency, monies will be transferred from the International Accounts and Funds by the International Collateral Agent to effect a redemption of the Other International Notes in an amount equal to the lesser of (a) the amounts on deposit in the International Accounts and Funds, (b) the outstanding principal amount of the Other International Notes and (c) the amount of such Debt Service Deficiency. The amounts realized from the redemption of any Other International Notes for purposes of eliminating a Debt Service Deficiency will be transferred to the U.S. Project Account and then from the U.S. Project Account to the Debt Service Reserve Fund. PEC has agreed to cause the Company (and, if necessary, to make capital contributions to the Company) to loan $6.4 million to a PIC International Entity evidenced by an Other International Note, on or prior to the earlier of (A) the first date on which Commercial Operations have been achieved by any Non-U.S. Project in the Project Portfolio and (B) the date of transfer to the Project Portfolio of any Non-U.S. Project that has already achieved Commercial Operations. The Company may, but is under no obligation to, lend additional amounts to the PIC International Entities to create additional Other International Notes. Capitalized Interest Fund Upon the issuance of the Old Bonds, the Company deposited approximately $9,834,000 into the Capitalized Interest Fund out of the loan by the Issuer to the Company of the proceeds from the issuance of the Old Bonds. Monies held on deposit in the Capitalized Interest Fund shall be transferred to the Debt Service Fund on the Interest Payment Dates on February 20, 1997, August 20, 1997, February 20, 1998, August 20, 1998, February 20, 1999, August 20, 2000, and February 20, 2001 in the amounts of approximately $618,000, $1,188,000, $1,233,000, $3,385,000, $3,304,000, $71,000 and $35,000 respectively. See "Description of the Exchange Bonds - The Accounts and Funds - Capitalized Interest Fund." Debt Service Reserve Fund Upon the issuance of the Old Bonds, the Company deposited into the Debt Service Reserve Fund $6.4 million, which is equal to the amount of interest due on the Existing Bonds on the first Payment Date less the amount deposited upon the issuance of the Old Bonds in the Capitalized Interest Fund in respect of such interest payment. The Company funded this deposit with a portion of the loan by the Issuer to the Company of the proceeds from the issuance of the Old Bonds. Except as may be provided in any Series Supplemental Indenture with respect to any particular series of Bonds, until the amount on deposit in the Debt Service Reserve Fund on any Monthly Distribution Date equals the amount of principal and interest payments on all Bonds outstanding due for the immediately succeeding 12 months (less the amount on deposit in the Capitalized Interest Fund in respect of interest payments scheduled to be made during such 12-month period), all funds deposited in the U.S. Project Account not required to be transferred into the Debt Service Fund or the Capitalized Interest Fund shall be deposited into the Debt Service Reserve Fund. Thereafter, so long as any Bonds remain outstanding, the Company will be required (unless otherwise provided in a Series Supplemental Indenture with respect to a particular series of Bonds) to maintain in the Debt Service Reserve Fund an amount equal to the amount of debt service due in respect of all Bonds then outstanding for the next 12-month period, except that, if less than 12 months remain before the Final Stated Maturity for any series of Bonds, then an amount equal to the scheduled principal and interest payments for such series for such period will constitute the amount required to be on deposit in the Debt Service Reserve Fund with respect to such series of Bonds. The Debt Service Reserve Fund may be drawn upon to pay the principal of, and premium, if any, and interest on all series of the Bonds, to the extent of funds allocated within the Debt Service Reserve Fund to each series of Bonds, if funds otherwise available to the Trustee for such payments are insufficient. At any time when the Capitalized Interest Requirement for any series of the Bonds equals zero, Panda International or PEC may arrange for a Letter of Credit to be provided in lieu of cash for all or a part of the amount in respect of such series required to be maintained in the Debt Service Reserve Fund. See "Description of the Exchange Bonds - The Accounts and Funds - Debt Service Reserve Fund." Distributions Subject to certain limited exceptions, distributions may be made to the Company and the PIC International Entities only from, and to the extent of, monies then on deposit in the U.S. Distribution Fund and the International Distribution Fund, respectively. Transfers into the Distribution Funds may be made on any Monthly Distribution Date subject to the prior satisfaction of the following conditions: (i) the amount on deposit in the Debt Service Fund is equal to or greater than the amount of interest (less amounts on deposit in the Capitalized Interest Fund in respect of such interest payment) and, if applicable, principal due on all series of the Bonds (including all past due amounts) on the Payment Date for each series of Bonds outstanding next following the day immediately preceding such Monthly Distribution Date (other than in connection with a call for redemption); (ii) the amount on deposit in each of the Capitalized Interest Fund, the Debt Service Reserve Fund (together with the aggregate amount of any Letters of Credit provided in respect of the Debt Service Reserve Requirement), the Company Expense Fund, the Mandatory Redemption Accounts and the Extraordinary Distribution Accounts is equal to or greater than the amount then required to be deposited therein under the Indenture; (iii) no Default or Event of Default under the Indenture shall have occurred and be continuing; and (iv) with certain exceptions, the Company can certify that (a) the historical Company Debt Service Coverage Ratio is equal to or greater than 1.4:1 for the 12 months immediately preceding the month in which such Monthly Distribution Date is to occur (or for such shorter period as the Bonds have been outstanding) and (b) the projected Company Debt Service Coverage Ratio is equal to or greater than 1.4:1 for the 12 months immediately succeeding the month in which such Monthly Distribution Date is to occur (or for such shorter period as the series of Bonds with the latest Final Stated Maturity is scheduled to be outstanding). See "Description of the Exchange Bonds - Certain Covenants - Limitations on Distributions." Registration Rights This Exchange Offer is intended to satisfy certain rights under the Registration Rights Agreement, which rights terminate upon the consummation of the Exchange Offer. Therefore, the holders of Exchange Bonds are not entitled to any exchange or registration rights with respect to the Exchange Bonds. In addition, such exchange and registration rights will terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Old Bonds Registration Rights." Transfer of Exchange Bonds Based upon its view of interpretations provided to third parties by the staff of the Commission, the Company believes that the Exchange Bonds issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company, the Issuer or Panda Interholding, (ii) a broker-dealer who acquired Old Bonds directly from the Issuer or (iii) a broker- dealer who acquired Old Bonds as a result of market making or other trading activities) without registration under the Securities Act, provided that such Exchange Bonds are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of such Exchange Bonds. Each broker-dealer that receives Exchange Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Old Bonds where such Old Bonds were acquired by such broker- dealer as a result of market making activities or other trading activities. The Company and the Issuer have agreed, for a period of 180 days after the consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any such resale. A broker-dealer that delivers such a prospectus to a purchaser in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification provisions). Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Bonds and any other holder that cannot rely upon such interpretations must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Bonds may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the conditions thereto have been met. See "The Exchange Offer - Purpose and Effects of the Exchange Offer" and "Plan of Distribution." Use of Proceeds There will be no cash proceeds to the Issuer, the Company or Panda Interholding from the exchange of Exchange Bonds for Old Bonds pursuant to the Exchange Offer.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022794_old-guard_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022794_old-guard_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d9e1ebe79866061968dbccab46f1d77345d5f1e7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022794_old-guard_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and the Combined Financial Statements and Notes thereto of the Insurance Companies appearing elsewhere in this Prospectus. Old Guard Group, Inc........... The Company was formed under Pennsylvania law in May 1996 for the purpose of becoming the holding company for the Insurance Companies upon completion of the Conversion. Prior to the Conversion, the Company will not engage in any significant operations. After the Conversion, the Company's primary assets will be the outstanding capital stock of the Insurance Companies and a portion of the net proceeds of the Conversion. The Insurance Companies........ Old Guard Mutual, Old Guard Fire and Goschenhoppen are each Pennsylvania mutual insurance companies that currently operate as members of the Old Guard Insurance Group (the "Group"), a group of mutual insurance companies under common management. The Group also includes Neffsville Mutual Fire Insurance Company ("Neffsville"), which is not a party to the Plan. Old Guard Mutual, Old Guard Fire and Goschenhoppen began operations in 1896, 1872, and 1843, respectively. The Insurance Companies are property and casualty insurers of farms, small and medium-sized businesses and residents primarily in rural and suburban communities in Pennsylvania, Maryland and Delaware. The Insurance Companies market farmowners, homeowners and businessowners policies, as well as personal and commercial automobile, workers' compensation and commercial multi-peril coverages through approximately 1,600 independent agents. For 1995, the Insurance Companies had combined revenues of $72.4 million and a net loss of $684,000. For the nine-month period ended September 30, 1996, the Insurance Companies had combined revenues of $45.0 million and a net loss of $2.5 million. The losses for the year ended December 31, 1995 and the nine-month period ended September 30, 1996 resulted directly from insured property losses associated with late-1995 wind storms and the severe winter weather experienced in the Middle Atlantic states in the first quarter of 1996. A January blizzard in 1996 contributed to record seasonal snowfalls for much of the Insurance Companies' market area that resulted in increased property loss claims. At September 30, 1996, the Insurance Companies had combined assets of $137.5 million, total equity of $37.7 million and over 139,000 property and casualty policies in force. Effective January 1, 1996, the Insurance Companies entered into a quota share reinsurance treaty designed to lessen the potential financial impact of catastrophic or severe weather losses. Under this treaty, the Insurance Companies cede 20% of their liability remaining after cessions of excess and catastrophic risks through other reinsurance contracts in exchange for a reinsurance premium equal to 20% of premiums collected net of other reinsurance costs and further reduced by a ceding allowance to the Company equal to 35% of the reinsurance premium. The treaty has a moderating effect on the underwriting losses or gains experienced PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and the Combined Financial Statements and Notes thereto of the Insurance Companies appearing elsewhere in this Prospectus. Old Guard Group, Inc........... The Company was formed under Pennsylvania law in May 1996 for the purpose of becoming the holding company for the Insurance Companies upon completion of the Conversion. Prior to the Conversion, the Company will not engage in any significant operations. After the Conversion, the Company's primary assets will be the outstanding capital stock of the Insurance Companies and a portion of the net proceeds of the Conversion. The Insurance Companies........ Old Guard Mutual, Old Guard Fire and Goschenhoppen are each Pennsylvania mutual insurance companies that currently operate as members of the Old Guard Insurance Group (the "Group"), a group of mutual insurance companies under common management. The Group also includes Neffsville Mutual Fire Insurance Company ("Neffsville"), which is not a party to the Plan. Old Guard Mutual, Old Guard Fire and Goschenhoppen began operations in 1896, 1872, and 1843, respectively. The Insurance Companies are property and casualty insurers of farms, small and medium-sized businesses and residents primarily in rural and suburban communities in Pennsylvania, Maryland and Delaware. The Insurance Companies market farmowners, homeowners and businessowners policies, as well as personal and commercial automobile, workers' compensation and commercial multi-peril coverages through approximately 1,600 independent agents. For 1995, the Insurance Companies had combined revenues of $72.4 million and a net loss of $684,000. For the nine-month period ended September 30, 1996, the Insurance Companies had combined revenues of $45.0 million and a net loss of $2.5 million. The losses for the year ended December 31, 1995 and the nine-month period ended September 30, 1996 resulted directly from insured property losses associated with late-1995 wind storms and the severe winter weather experienced in the Middle Atlantic states in the first quarter of 1996. A January blizzard in 1996 contributed to record seasonal snowfalls for much of the Insurance Companies' market area that resulted in increased property loss claims. At September 30, 1996, the Insurance Companies had combined assets of $137.5 million, total equity of $37.7 million and over 139,000 property and casualty policies in force. Effective January 1, 1996, the Insurance Companies entered into a quota share reinsurance treaty designed to lessen the potential financial impact of catastrophic or severe weather losses. Under this treaty, the Insurance Companies cede 20% of their liability remaining after cessions of excess and catastrophic risks through other reinsurance contracts in exchange for a reinsurance premium equal to 20% of premiums collected net of other reinsurance costs and further reduced by a ceding allowance to the Company equal to 35% of the reinsurance premium. The treaty has a moderating effect on the underwriting losses or gains experienced by the Insurance Companies because underwriting risk is shared with the reinsurer. Accordingly, this reinsurance treaty has had, and will continue to have, a material effect on the financial condition and results of operations of the Insurance Companies. See "Business -- Reinsurance." The principal strategies of the Company for the future are to: -- Achieve geographic diversification of risk by acquisition of other insurance companies or licensing of the Insurance Companies in other jurisdictions with reduced or different loss exposure; -- Improve the mix of business by increasing commercial writings and emphasizing casualty coverages in order to enhance profitability and lessen the impact of property losses on overall results; and -- Improve efficiency and maintain the high level of personal service delivered to agents and insureds through continued enhancement of the Company's management information systems (MIS). Management has taken steps to implement each of these strategies and views the Conversion as a critical component of its strategic plan. The additional capital generated by the Conversion will permit the Insurance Companies to accelerate implementation of these strategies. The resulting holding company structure will also provide needed flexibility to achieve the Company's goals by permitting the Company to use its Common Stock and/or preferred stock to effect future acquisitions or raise additional capital. See "The Conversion -- Business Purposes." The Conversion ................ Pursuant to the Plan each Insurance Company will (i) convert from a Pennsylvania-chartered mutual insurance company to a Pennsylvania-chartered stock insurance company, and (ii) simultaneously issue shares of its capital stock to the Company in exchange for a portion of the net proceeds from the sale of Common Stock in the Conversion. The Conversion will be accounted for as a simultaneous reorganization, recapitalization and share offering which will not change the historical accounting basis of the Insurance Companies' financial statements. Background and Reasons For the Converson.................... The Insurance Companies annually review and adopt a strategic plan expressly predicated upon company independence and capital strength. The Insurance Companies have considered various capital formation alternatives and have elected to proceed with the Conversion in accordance with the provisions of the Pennsylvania Insurance Company Mutual to Stock Conversion Act (the "Act"). The Act was passed by the Pennsylvania General Assembly in early December 1995. On December 12, 1995, management was directed by the Boards of Directors of each Insurance Company to explore the process and feasibility of conversion under the Act. On January 12, 1996, the Boards of Directors authorized further study and by the Insurance Companies because underwriting risk is shared with the reinsurer. Accordingly, this reinsurance treaty has had, and will continue to have, a material effect on the financial condition and results of operations of the Insurance Companies. See "Business -- Reinsurance." The principal strategies of the Company for the future are to: -- Achieve geographic diversification of risk by acquisition of other insurance companies or licensing of the Insurance Companies in other jurisdictions with reduced or different loss exposure; -- Improve the mix of business by increasing commercial writings and emphasizing casualty coverages in order to enhance profitability and lessen the impact of property losses on overall results; and -- Improve efficiency and maintain the high level of personal service delivered to agents and insureds through continued enhancement of the Company's management information systems (MIS). Management has taken steps to implement each of these strategies and views the Conversion as a critical component of its strategic plan. The additional capital generated by the Conversion will permit the Insurance Companies to accelerate implementation of these strategies. The resulting holding company structure will also provide needed flexibility to achieve the Company's goals by permitting the Company to use its Common Stock and/or preferred stock to effect future acquisitions or raise additional capital. See "The Conversion -- Business Purposes." The Conversion ................ Pursuant to the Plan each Insurance Company will (i) convert from a Pennsylvania-chartered mutual insurance company to a Pennsylvania-chartered stock insurance company, and (ii) simultaneously issue shares of its capital stock to the Company in exchange for a portion of the net proceeds from the sale of Common Stock in the Conversion. The Conversion will be accounted for as a simultaneous reorganization, recapitalization and share offering which will not change the historical accounting basis of the Insurance Companies' financial statements. Background and Reasons For the Converson.................... The Insurance Companies annually review and adopt a strategic plan expressly predicated upon company independence and capital strength. The Insurance Companies have considered various capital formation alternatives and have elected to proceed with the Conversion in accordance with the provisions of the Pennsylvania Insurance Company Mutual to Stock Conversion Act (the "Act"). The Act was passed by the Pennsylvania General Assembly in early December 1995. On December 12, 1995, management was directed by the Boards of Directors of each Insurance Company to explore the process and feasibility of conversion under the Act. On January 12, 1996, the Boards of Directors authorized further study and requested a presentation with respect to the process at its meeting on March 31, 1996. At a meeting of the Board of Directors of each Insurance Company held on April 22, 1996, management was directed to prepare the Plan for consideration at a special meeting to be held in May. Effective May 31, 1996, the Board of Directors of each of the Insurance Companies unanimously adopted the Plan, subject to approval by the Department and the policyholders of each of the Insurance Companies. Each Board of Directors unanimously adopted amendments to the Plan on July 19, 1996. An application with respect to the Conversion was filed by the Insurance Companies with Pennsylvania Department of Insurance (the "Department") on August 21, 1996 and notice of the filing and the opportunity to comment was simultaneously mailed to all Eligible Policyholders as required by law. The Department informed the Insurance Companies on November 27, 1996 that it did not intend to hold any hearings regarding the Conversion. The Plan was approved by the Department on December 27, 1996 and is subject to the approval of Eligible Policyholders at the Special Meetings. The Company also has received approval of the Department to acquire control of the Insurance Companies. On November 19, 1996, the Company received an unsolicited request from Donegal Group, Inc., an insurance holding company located in Marietta, Pennsylvania ("Donegal"), to amend the Plan to provide for the merger of the Company into Donegal in exchange for an aggregate payment of $27.5 million to all policyholders of the Insurance Companies, or less than $200 per policyholder assuming equal distribution to all policyholders. Such amount was proposed to be payable one-half in cash and one-half in a new class of preferred stock of Donegal, the terms of which were not specified. Because such a transaction would not provide additional capital to the Insurance Companies, would be inconsistent with their strategic plan of continued independence and would be tantamount to a sale and liquidation of the Insurance Companies, the Boards of Directors of the Company and the Insurance Companies determined that the request was contrary to the best interests of the Insurance Companies, including its policyholders, agents, employees, suppliers and the communities they serve, and further declined to consider the request. Therefore, the respective Boards of Directors affirmed their course of independence and commitment to the Plan. An application to acquire the Company was contemporaneously filed with the Department by Donegal. The Department informed Donegal that its application was both deficient and premature and, as a result, the Department informed Donegal that it is prohibited from (i) making any public announcement of its request to the Company to amend the Plan, and (ii) soliciting policyholders of the Insurance Companies in any way, including in connection with the policyholder votes to be held on the Plan at the Special Meetings. If Eligible Policyholders do not approve the Plan, the Boards of Directors of the Insurance Companies intend to maintain their current course of independence. Separately, on January 7, 1997, Donald Nikolaus, the President of Donegal, purportedly in his individual requested a presentation with respect to the process at its meeting on March 31, 1996. At a meeting of the Board of Directors of each Insurance Company held on April 22, 1996, management was directed to prepare the Plan for consideration at a special meeting to be held in May. Effective May 31, 1996, the Board of Directors of each of the Insurance Companies unanimously adopted the Plan, subject to approval by the Department and the policyholders of each of the Insurance Companies. Each Board of Directors unanimously adopted amendments to the Plan on July 19, 1996. An application with respect to the Conversion was filed by the Insurance Companies with Pennsylvania Department of Insurance (the "Department") on August 21, 1996 and notice of the filing and the opportunity to comment was simultaneously mailed to all Eligible Policyholders as required by law. The Department informed the Insurance Companies on November 27, 1996 that it did not intend to hold any hearings regarding the Conversion. The Plan was approved by the Department on December 27, 1996 and is subject to the approval of Eligible Policyholders at the Special Meetings. The Company also has received approval of the Department to acquire control of the Insurance Companies. On November 19, 1996, the Company received an unsolicited request from Donegal Group, Inc., an insurance holding company located in Marietta, Pennsylvania ("Donegal"), to amend the Plan to provide for the merger of the Company into Donegal in exchange for an aggregate payment of $27.5 million to all policyholders of the Insurance Companies, or less than $200 per policyholder assuming equal distribution to all policyholders. Such amount was proposed to be payable one-half in cash and one-half in a new class of preferred stock of Donegal, the terms of which were not specified. Because such a transaction would not provide additional capital to the Insurance Companies, would be inconsistent with their strategic plan of continued independence and would be tantamount to a sale and liquidation of the Insurance Companies, the Boards of Directors of the Company and the Insurance Companies determined that the request was contrary to the best interests of the Insurance Companies, including its policyholders, agents, employees, suppliers and the communities they serve, and further declined to consider the request. Therefore, the respective Boards of Directors affirmed their course of independence and commitment to the Plan. An application to acquire the Company was contemporaneously filed with the Department by Donegal. The Department informed Donegal that its application was both deficient and premature and, as a result, the Department informed Donegal that it is prohibited from (i) making any public announcement of its request to the Company to amend the Plan, and (ii) soliciting policyholders of the Insurance Companies in any way, including in connection with the policyholder votes to be held on the Plan at the Special Meetings. If Eligible Policyholders do not approve the Plan, the Boards of Directors of the Insurance Companies intend to maintain their current course of independence. Separately, on January 7, 1997, Donald Nikolaus, the President of Donegal, purportedly in his individual capacity as an Eligible Policyholder, and through the same law firm that represents Donegal, filed in the Commonwealth Court of Pennsylvania a Petition for Review against the Department, the Honorable Linda Kaiser, the Pennsylvania Insurance Commissioner, the Company and the Insurance Companies alleging that the Act is unconstitutional and seeking to have the Department's order approving the Conversion rescinded and the holding of the Special Meetings enjoined. See "Risk Factors -- Possible Adverse Impact of Litigation," "Business -- Legal Proceedings," and "The Conversion -- Background and Reasons for the Conversion." Organization Before and After the Conversion............... Set forth on page 3 of the Prospectus is an illustration of the organizational structure of the Insurance Companies before the Conversion and of the Company and the Insurance Companies after the Conversion. After completion of the Conversion, the Insurance Companies intend to transfer all of the capital stock of Old Guard Investment Holding Company, Inc. ("Old Guard Investment") to the Company and, as a result, Old Guard Investment will become a direct wholly-owned subsidiary of the Company. Stock Pricing and Number of Shares to be Issued.......... Pennsylvania law requires that the aggregate purchase price of the Common Stock to be issued in the Conversion be consistent with an independent appraisal of the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company following the Conversion. Berwind, a firm experienced in corporate valuations, has made an independent appraisal of the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company and has determined that, as of August 19, 1996, such estimated pro forma market value was $33,570,000. The resulting valuation range in Berwind's appraisal, which extends 15% below and 15% above the estimated value, is from $28,535,000 to $38,606,000 (the "Estimated Valuation Range"). The Company, in consultation with its advisors, has determined to offer the shares in the Conversion at the Purchase Price. The appraisal is intended to be an estimate of the pro forma market value of the Insurance Companies as subsidiaries of the Company and is based on a review of internal projections and a comparison of the combined financial condition and results of operations of the Insurance Companies to property and casualty insurance industry averages and a peer group of representative publicly-owned property and casualty insurance companies. The appraisal is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing Common Stock. In preparing the valuation, Berwind has relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Company and the Insurance Companies. Berwind did not independently verify the financial statements, projections and other information provided by the Company and the Insurance Companies, perform an independent analysis of the assumptions underlying the financial statements or projections or value independently the assets and liabilities of the Company and the Insurance capacity as an Eligible Policyholder, and through the same law firm that represents Donegal, filed in the Commonwealth Court of Pennsylvania a Petition for Review against the Department, the Honorable Linda Kaiser, the Pennsylvania Insurance Commissioner, the Company and the Insurance Companies alleging that the Act is unconstitutional and seeking to have the Department's order approving the Conversion rescinded and the holding of the Special Meetings enjoined. See "Risk Factors -- Possible Adverse Impact of Litigation," "Business -- Legal Proceedings," and "The Conversion -- Background and Reasons for the Conversion." Organization Before and After the Conversion............... Set forth on page 4 of the Prospectus is an illustration of the organizational structure of the Insurance Companies before the Conversion and of the Company and the Insurance Companies after the Conversion. After completion of the Conversion, the Insurance Companies intend to transfer all of the capital stock of Old Guard Investment Holding Company, Inc. ("Old Guard Investment") to the Company and, as a result, Old Guard Investment will become a direct wholly-owned subsidiary of the Company. Stock Pricing and Number of Shares to be Issued.......... Pennsylvania law requires that the aggregate purchase price of the Common Stock to be issued in the Conversion be consistent with an independent appraisal of the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company following the Conversion. Berwind, a firm experienced in corporate valuations, has made an independent appraisal of the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company and has determined that, as of August 19, 1996, such estimated pro forma market value was $33,570,000. The resulting valuation range in Berwind's appraisal, which extends 15% below and 15% above the estimated value, is from $28,535,000 to $38,606,000 (the "Estimated Valuation Range"). The Company, in consultation with its advisors, has determined to offer the shares in the Conversion at the Purchase Price. The appraisal is intended to be an estimate of the pro forma market value of the Insurance Companies as subsidiaries of the Company and is based on a review of internal projections and a comparison of the combined financial condition and results of operations of the Insurance Companies to property and casualty insurance industry averages and a peer group of representative publicly owned property and casualty insurance companies. The appraisal is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing Common Stock. In preparing the valuation, Berwind has relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Company and the Insurance Companies. Berwind did not independently verify the financial statements, projections and other information provided by the Company and the Insurance Companies, perform an independent analysis of the assumptions underlying the financial statements or projections or value independently the assets and liabilities of the Company and the Insurance Companies. The valuation considers the Company and the Insurance Companies only as a going concern and should not be considered as an indication of Companies. The valuation considers the Company and the Insurance Companies only as a going concern and should not be considered as an indication of the liquidation value of the Company and the Insurance Companies. The appraisal was updated upon completion of the Subscription and Community Offerings and was $ as of February , 1997. [There is a difference of approximately $ million between the updated appraisal and the aggregate dollar amount of Common Stock to be sold in the Conversion. Therefore, purchasers, in the aggregate and on a per share basis, are paying more for the Common Stock than the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company. Accordingly, no assurance can be given that the market price for the Common Stock immediately following the Conversion will equal or exceed the Purchase Price.] The Subscription and Community Offerings.......... shares of Common Stock were subscribed for at the Purchase Price in the Subscription Offering pursuant to nontransferable subscription rights by: (i) certain Eligible Policyholders, (ii) the ESOP, and (iii) certain directors, officers and employees of the Insurance Companies and shares of Common Stock were subscribed for in the Community Offering by Eligible Policyholders and members of the general public. The Subscription Offering and the Community Offering terminated on February 1, 1997. The Public Offering ........... Common Stock being offered in a firm commitment public offering (the "Public Offering") to be co-managed by the Underwriters. See "Underwriting." Purchase Limitations .......... No person may purchase fewer than 25 shares in the Offering. The ESOP may purchase up to an aggregate of 10% of the shares of Common Stock to be issued in the Conversion and is expected to do so. With the exception of the ESOP, no person (including Eligible Policyholders who elect to purchase stock in the Conversion), together with associates or persons acting in concert, may purchase in the aggregate, more than 193,030 shares of Common Stock (5% of the number of shares equal to the maximum of the Estimated Valuation Range divided by the Purchase Price). See "The Conversion -- Limitations on Purchases of Shares." Purchase of Common Stock by Management................... The directors and executive officers of the Company and the Insurance Companies, together with their associates, propose to purchase, in the aggregate, approximately 56,250 shares of Common Stock in the Conversion, or 1.7% of the shares of Common Stock issued in the Conversion, assuming an offering at the midpoint of the Estimated Valuation Range. See "The Conversion -- Proposed Management Purchases." Benefits to Management......... The Company's ESOP is expected to purchase 10% of the shares of Common Stock sold in the Offering, which will be awarded to substantially all employees without payment by such persons of cash consideration. In addition, the Company adopted a Management Recognition Plan (the "MRP") pursuant to which the Company the liquidation value of the Company and the Insurance Companies. The appraisal will be updated at the completion of the Offering and such updated appraisal and the consent of Berwind will be filed with the Securities and Exchange Commission pursuant to a post-effective amendment to the registration statement of which this prospectus is a part. If the updated appraisal is within the Estimated Valuation Range, the Company will not notify subscribers of the updated appraisal and the Conversion will be consummated. If participants in the Subscription Offering subscribe for 3,860,600 shares or more, the Company, as required by the Plan, will sell all 3,860,600 shares offered hereby to participants in the Subscription Offering and will sell up to an additional 386,060 shares to the ESOP to satisfy its subscription in full. Shares will be allocated among participants in the Subscription Offering in accordance with the terms of the Plan and excess funds will be promptly returned to subscribers without interest. If participants in the Subscription Offering subscribe for at least 2,853,500 shares but less than 3,860,600 shares, then, as required by the Plan, the Company will sell to participants in the Subscription Offering the number of shares of Common Stock sufficient to satisfy their subscriptions in full. The Company, in its sole discretion, may accept subscriptions in the Community Offering and/or sell shares in a Public Offering provided the total number of shares of Common Stock sold in the Conversion does not exceed 3,860,600 shares. Any excess funds received in the Community Offering will be promptly returned to subscribers without interest. If participants in the Subscription Offering subscribe for fewer than 2,853,500 shares, then the Company will sell to participants in the Subscription Offering the number of shares of Common Stock sufficient to satisfy their subscriptions in full and will accept subscriptions in the Community Offering and/or sell shares in the Public Offering in an amount sufficient to sell at least 2,853,500 shares in the aggregate. The Company, in its sole discretion, may accept additional subscriptions in the Community Offering and sell additional shares in the Public Offering provided the total number of shares sold in the Conversion does not exceed 3,860,600. Any excess funds received in the Community Offering will be promptly returned to subscribers without interest. If the number of shares sold in the Subscription Offering, Community Offering and Public Offering is less than 2,853,500, then the Company will cancel the Offering and all subscription funds will be returned promptly to subscribers without interest. If the updated appraisal is not within the Estimated Valuation Range, then, in such event, the Offering will be terminated and the funds of all subscribers will be returned promptly without interest. Subscription orders may not be withdrawn for any reason if the updated appraisal is within the Estimated Valuation Range. There is a difference of approximately $10.1 million between the minimum and the maximum of the Estimated Valuation Range. As a result, the percentage interest in the Company that a subscriber for a fixed number of shares of Common Stock will have is approximately 26.1% smaller if 3,860,000 shares are sold than if 2,853,500 shares are sold. Furthermore, as a result of this broad range, the updated appraisal may estimate a pro forma market value for the Insurance Companies as subsidiaries of the Company that is mate- intends to award to employees and directors of the Company up to 4% of the number of shares of Common Stock which were sold in the Offering without payment by such persons of cash consideration, and a Stock Compensation Plan pursuant to which the Company intends to grant options to acquire Common Stock to employees and directors of the Company of up to 10% of the number of shares of Common Stock sold in the Offering at an exercise price equal to the Purchase Price. The Company intends to grant stock options upon the closing of the Conversion. The MRP and the Stock Compensation Plan are subject to approval by shareholders at the Company's first annual meeting. Use of Proceeds ............... Net proceeds from the Conversion will depend upon the total number of shares sold and the expenses of the Conversion. As a result, net proceeds cannot be determined until the Conversion is completed. The Company anticipates that net proceeds (less the debt incurred to purchase the ESOP shares) will be approximately $ million if the aggregate purchase price is within the Estimated Valuation Range. See "Use of Proceeds" for the assumptions used to arrive at these estimates.The Company has received Department approval to exchange $16.0 million of net proceeds from the Offering for all of the capital stock of Old Guard Mutual, Old Guard Fire and Goschenhoppen to be issued in the Conversion. Assuming net proceeds from the Offering of approximately $ million, the Company would retain approximately $ million after acquiring the stock of the Insurance Companies. A portion of the net proceeds retained by the Company will be used to repay approximately $5.8 million in financing incurred in connection with the pending acquisition of First Delaware Insurance Company, if completed as planned, and the investment in New Castle Mutual Insurance Company. The balance of the net proceeds retained by the Company will be available for a variety of corporate purposes, including, but not limited to, additional capital contributions to the Insurance Companies, future acquisitions and diversification within the property and casualty insurance industry, dividends to shareholders and future repurchases of Common Stock to the extent permitted by Pennsylvania law and the Department. With the exception of the payment of dividends and the pending acquisition of First Delaware Insurance Company and the investment in New Castle Mutual Insurance Company, the Company currently has no specific plans, intentions, arrangements or understandings regarding any of the foregoing activities. See "Dividend Policy," "The Company -- Acquisition of First Delaware Insurance Company" and -- Investment in New Castle Mutual Insurance Company." Market for the Common Stock.... The Company has received approval to have the Common Stock quoted on the Nasdaq NMS under the symbol "OGGI" upon closing of the Conversion. Hopper Soliday, Legg Mason and McDonald have each advised the Company that, upon completion of the Conversion, it intends to act as a market maker in the Common Stock, subject to market conditions and compliance with applicable laws and regulatory requirements. Prior to the Public Offering, there was rially more or less than the aggregate dollar amount of subscriptions received by the Company. Subscribers will not receive a refund or have any right to withdraw subscriptions if the updated appraisal estimates a pro forma market value that is less than the aggregate dollar amount of subscriptions received by the Company. Therefore, subscribers, in the aggregate and on a per share basis, may pay materially more for the Common Stock than the estimated pro forma market value of the Insurance Companies as subsidiaries of the Company. Accordingly, no assurance can be given that the market price for the Common Stock immediately following the Conversion will equal or exceed the Purchase Price. Also, subscribers should be aware that they will not have available to them information concerning the final appraisal. Purchasers of Common Stock in the Public Offering will have such information available to them and therefore will have a greater ability to assess the merits of an investment in the Common Stock than subscribers in the Subscription and Community Offerings. The Subscription and Community Offerings.......... The shares of Common Stock to be issued in the Conversion are being offered at the Purchase Price in the Subscription Offering pursuant to nontransferable subscription rights in the following order of priority: (i) Eligible Policyholders, (ii) the ESOP, and (iii) directors, officers and employees of the Insurance Companies. Subscription rights in any category will be subordinated to subscription rights in a prior category. Concurrently, and subject to the prior rights of holders of subscription rights, any shares of Common Stock not subscribed for in the Subscription Offering are being offered at the Purchase Price in the Community Offering to members of the general public. Preference will be given in the Community Offering to (i) natural persons and trusts of natural persons who are permanent residents of Berks, Bucks, Chester, Cumberland, Dauphin, Lancaster, Lebanon, Lehigh, Montgomery, Northampton and York Counties, Pennsylvania (the "Local Community"), (ii) principals of Eligible Policyholders in the case of an Eligible Policyholder that is not a natural person, (iii) licensed insurance agents that have been appointed by any of the Insurance Companies to market and distribute policies of insurance, (iv) named insureds under policies of insurance issued by the Insurance Companies after May 31, 1996, and (v) providers of goods and services to any or all of the Insurance Companies. Subscription rights will expire if not exercised by 1:00 p.m., local time, on February 8, 1997, unless extended by action of the Company taken prior to February 8, 1997 for up to an additional 10 days. The Community Offering will terminate on the Community Offering Termination Date, unless extended by action of the Company taken prior to February 8, 1997, for up to an additional 45 days. If the Company extends the Subscription Offering or the Community Offering, it will give written notice of such extension to all subscribers on or before February 8, 1997, at which time each subscriber may immediately withdraw the subscriber's subscription or affirmatively reconfirm the subscriber's subscription by the extended Subscription Offering Termination Date or the extended Community Offering Termination Date, as the case may be. If a Subscriber does not affirmatively reconfirm a subscription by the extended Subscription Offering Termination Date or the extended Community Offering Termination no public market for the Common Stock and there can be no assurance that an active and liquid market for the Common Stock will develop in the foreseeable future. Even if a market develops, there can be no assurance that shareholders will be able to sell their shares at or above the Purchase Price after completion of the Conversion. See "Market for the Common Stock." Dividends ..................... Declaration of dividends by the Board of Directors of the Company will depend on a number of factors, including the requirements of applicable law and the determination by the Board of Directors of the Company that the net income, capital and financial condition of the Company and the Insurance Companies, industry trends, general economic conditions and other factors justify the payment of dividends. In addition, the payment of dividends from the Insurance Companies to the Company and from the Company to shareholders is subject to a number of regulatory conditions, including conditions imposed by the Department in connection with the approval of the Conversion. The Company presently intends to pay an annual dividend of $.10 per share, but no assurance can be given that dividends in such amount will be permitted to be paid under the terms of the Department's approval order or will ultimately be declared and paid by the Board of Directors of the Company. See "Dividend Policy" and "Business -- Regulation." Antitakeover Provisions ....... The Articles of Incorporation and Bylaws of the Company, Pennsylvania statutory provisions and employee benefit arrangements, as well as certain other provisions of state and federal law, may have the effect of discouraging or preventing a non-negotiated change in control of the Company, as well as a proxy contest for control of the Board of Directors of the Company. For a detailed discussion of those provisions, see "Investment Considerations -- Articles of Incorporation, Bylaw and Statutory Provisions that could Discourage Hostile Acquisitions of Control," "Management -- Certain Benefit Plans and Agreements," "Certain Restrictions on Acquisition of the Company -- Pennsylvania Law" and -- "Certain Anti-Takeover Provisions in the Articles of Incorporation and Bylaws" and "Description of Capital Stock." Date, as the case may be, the subscriber's funds will be returned promptly without interest. No action to extend the Subscription Offering or Community Offering will be taken by the Company after February 8, 1997. The Company reserves the absolute right to accept or reject any orders in the Community Offering, in whole or in part, either upon receipt of an order or as soon as practicable following the Community Offering Termination Date. The Company and the Insurance Companies have engaged Hopper Soliday to provide sales assistance in connection with the Offering. The sale of shares of Common Stock in the Subscription Offering and the Community Offering will be conducted by Hopper Soliday on a best efforts basis. How to Purchase Shares of Common Stock................. The Company has established a Stock Information Center to coordinate the Offering, including tabulation of proxies and orders and answering questions about the Offering by telephone. Any person who desires to subscribe for shares of Common Stock in the Offering must do so prior to the Subscription Offering Termination Date or Community Offering Termination Date, as the case may be, by delivering (by mail or in person) to the Stock Information Center at the Company's principal executive offices located at 2929 Lititz Pike, Lancaster, Pennsylvania 17601 a properly executed and completed Stock Order Form, together with full payment for all shares for which the subscription is made. A Stock Order Form will be included with each prospectus delivered to a prospective purchaser of Common Stock and no Stock Order Form will be delivered to a prospective purchaser unless accompanied by a prospectus or prior delivery of a prospectus can be verified. Payment for shares of Common Stock may be made by cash (if delivered in person), check or money order. All checks or money orders must be made payable to "Old Guard Group, Inc." Subscriptions will be held in a separate escrow account at Dauphin. Such funds will not be released until the Conversion is completed or terminated. All subscription rights under the Plan will expire on the Subscription Offering Termination Date whether or not the Company has been able to locate each person entitled to such subscription rights. Once tendered, orders to purchase Common Stock in the Offering cannot be revoked. In the event of an oversubscription in the Subscription Offering, shares of Common Stock will be allocated among subscribing Eligible Policyholders, as follows. First, shares of Common Stock will be allocated among subscribing Eligible Policyholders so as to permit each such Eligible Policyholder, to the extent possible, to purchase the lesser of (i) 100 shares, or (ii) the number of shares for which such Eligible Policyholder has subscribed. Second, any shares of Common Stock remaining after such initial allocation will be allocated among the subscribing Eligible Policyholders whose subscriptions remain unsatisfied in the proportion in which the aggregate premiums payable to the Insurance Companies by each such Eligible Policyholder in respect of all policies issued to such Eligible Policyholder and in force on May 31, 1996, bears to the aggregate premiums payable to the Insurance Companies in respect of all policies issued to all such Eligible Policyholders and in force on May 31, 1996, provided, however, that no fractional shares of Common SELECTED COMBINED FINANCIAL DATA The following table sets forth selected combined financial data for the Insurance Companies prior to the Conversion at and for the periods indicated and should be read in conjunction with the Combined Financial Statements, and accompanying notes thereto and other financial information included elsewhere herein, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations." See Note 3 in "Notes to Combined Financial Statements" for a discussion of the principal differences between generally accepted accounting principles ("GAAP") and statutory accounting practices, and for a reconciliation of combined net income and equity, as reported in conformity with GAAP, with combined statutory net income and statutory surplus, as determined in accordance with statutory accounting practices, as prescribed or permitted by the Department. The combined statement of income data for the years ended December 31, 1991 and 1992 and for the nine months ended September 30, 1995 and 1996 and the combined balance sheet data at December 31, 1991, 1992 and 1993 and at September 30, 1995 and 1996 are derived from the unaudited combined financial statements of the Insurance Companies. The Company believes that such unaudited financial data fairly reflect the combined results of operations and the combined financial condition of the Insurance Companies for such periods. For a presentation of the pro forma effect of the Conversion and related transactions on the Company, see "Pro Forma Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001022949_preferred_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001022949_preferred_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8e7f660eb495cce14482423081802ab5eab64dfb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001022949_preferred_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated or the context otherwise requires, all information in this Prospectus (a) gives effect to a -for-1 stock split to occur immediately prior to consummation of the Offering and the conversion of all outstanding Convertible Subordinated Notes (as defined herein) into 968,316 shares of Common Stock upon consummation of the Offering; and (b) assumes no exercise of the Underwriters' over-allotment option. All references in this Prospectus to the "Company" or to "PPS" refer to the Company and its subsidiary, collectively. THE COMPANY PPS is a leading nationwide provider of specialized cost containment and outsourcing services for healthcare payors. Through its comprehensive portfolio of services, the Company reduces for its clients costs ordinarily payable on medical bills submitted by healthcare providers and the administrative expense associated with reviewing and analyzing medical bills. These services include professional negotiation services, line-item analysis and other specialized audit and bill review processes ("Non-Network Services"), as well as access to a nationwide PPO network (the "PPO Network"). PPS serves as a one-stop outsourcing solution for cost containment with respect to medical bills that are outside a healthcare payor's contracted network of providers. The Company's net revenue is based primarily on the amount of price reductions realized by the Company's clients as a result of its services. On a pro forma basis after giving effect to the About Health Transaction (as defined herein), for the year ended December 31, 1996, the Company analyzed approximately $1.1 billion in bill volume, representing 154,134 medical bills, and for the nine months ended September 30, 1997, the Company analyzed approximately $1.1 billion in bill volume, representing 176,101 medical bills. PPS analyzes each bill using its Healthcare Bill Management System ("HBMS"), which incorporates proprietary software, Company-developed and licensed databases and client-specific preference profiles. HBMS analyzes all medical bills sent to the Company and automatically selects the appropriate PPS service that will maximize savings for the client. HBMS then incorporates all cost- savings information from the analysis into its databases in order to improve future bill analysis. The Company, by incorporating all of its services into HBMS, believes that it produces superior results when compared to single- product cost containment companies. The Company's clients include indemnity health insurers, health maintenance organizations ("HMOs") and other managed care organizations, third-party administrators, reinsurers, large self-insured employers, Blue Cross and Blue Shield organizations and Taft-Hartley funds. The Company's clients include leading healthcare payors such as CIGNA Healthcare, Inc. ("CIGNA"), Aetna Inc. ("Aetna"), Great-West Life Assurance Company ("Great-West Life"), The Guardian Life Insurance Company of America ("The Guardian"), PacifiCare Health Systems Inc. and Eli Lilly & Company. All healthcare payors have out-of-network exposure due to healthcare claims that are outside their coverage area or network either as a matter of choice on the part of the insured or as a result of geographic circumstances where the insured does not have local access to contracted providers. With the growth in popularity of point of service ("POS") and open-access products, consumers have greater freedom to choose healthcare providers that are outside a payor's contracted network. Out-of-network healthcare claims expose payors to greater incidence of over-utilization, cost shifting, omission of appropriate discounts and possible billing errors. In the Company's experience, the potential savings available to payors from cost containment efforts for out-of-network claims have increased significantly in the past several years and range from several hundred dollars to $100,000 or more per claim. While many payors have an internal cost containment department to review claims, cost containment is not one of the core competencies of a typical payor. Payors are increasingly outsourcing this function to independent cost containment firms because of: (i) the growing regulatory complexity of healthcare claims; (ii) an inability to replicate the breadth of data and industry expertise of an independent vendor; (iii) a need for significant investment in technology and systems to accomplish meaningful savings; (iv) a desire on the part of the payors to focus on their core business; and (v) a desire for larger and more meaningful cost savings on claims. The cost containment industry is highly fragmented, with most participants operating on a regional or local level. The Company believes that national, single-source vendors, such as the Company, have the economies of scale and expertise to deliver the requisite services at lower cost and similar or higher quality than the payors could achieve for themselves or access through regional or local vendors. GROWTH STRATEGY The Company's growth strategy is to increase net revenue and profitability by enhancing its position as the single-source cost containment and administrative outsourcing partner of choice for healthcare payors. In order to implement its growth strategy, the Company focuses on the following business imperatives: Access Greater Bill Volume from Existing Clients. The Company has a significant opportunity to increase bill volume, and therefore net revenue, from existing clients. The Company contracts with its clients to receive medical bills with certain characteristics, including type of medical service, size of bill and other factors. However, because most of its clients have manual bill identification and transfer procedures, the Company believes that it receives fewer than half of the bills that are eligible for review. The Company believes that it can receive a greater portion of its clients' bills by implementing automated bill selection criteria coupled with electronic data interchange ("EDI") and utilizing on- site PPS personnel. The Company also intends to increase its bill volume by expanding the types of bills it reviews. With the About Health Transaction, the Company has expanded the scope of its bill review services from inpatient, outpatient and physician bills to include various types of ancillary medical bills such as chemotherapy, home infusion and durable medical equipment. Maximize Savings Per Bill. The Company seeks to maximize its savings performance for its clients, thereby increasing its net revenue, by continuing to improve its technology, educating and deploying its employees to build on best demonstrated practices and expanding the scope of its services. The Company makes continuous improvements to HBMS, and automatically incorporates all bill review results into its databases, enabling its professionals to utilize these data to achieve greater savings across all of the Company's services. Provide Superior Customer Service. The Company believes that it can strengthen its client relationships by continually upgrading its customer service capabilities to help make its clients' administrative functions more efficient. HBMS employs a customer preference profile to tailor its services to meet each client's unique needs for administration and analysis of medical bills. Expand Client Base. The Company believes that it can expand its client base to additional healthcare payors in certain of the sectors that it has traditionally served, such as HMOs and other managed care organizations, and to other types of risk-bearing entities with non-network exposure, such as automobile liability insurers, workers' compensation insurers, governmental entities and provider organizations that accept capitation. The Company also plans to expand its client base through the introduction of new services such as subrogation and credit recovery. Pursue Strategic Acquisitions and Develop New Services. The Company intends to enhance its position as a leading single-source vendor of cost containment services by continuing to develop new services or by acquiring assets or businesses that can expand its client base, improve its technological and human resource capabilities, provide access to greater bill volume or broaden its service lines. As part of its growth strategy, in August 1997, the Company combined its operations with the operations of About Health, Inc. ("About Health") and About Health merged into the Company effective as of October 31, 1997. About Health, which was founded in 1992, is a leading professional medical bill negotiation services company. About Health utilizes an internal staff of senior-level medical professionals, including primary care physicians and hospital administrators, to negotiate savings for its clients on medical bills. During the year ended December 31, 1996, About Health analyzed approximately $287.7 million in bill volume, representing 31,388 medical bills. THE OFFERING Common Stock offered by the shares Company.......................... Common Stock to be outstanding after the Offering(1)............ shares Use of proceeds................... The estimated net proceeds to the Company from the Offering will be used as follows: (i) approximately $41.5 million to repay the Company's outstanding indebtedness un- der the 1997 Credit Facility, including accrued and unpaid interest; (ii) approxi- mately $7.8 million to repay and retire all outstanding Subordinated Notes, including accrued interest thereon, and to pay ac- crued interest on the Convertible Subordi- nated Notes; (iii) $5.0 million to redeem all outstanding Redeemable Preferred Stock; and (iv) the balance for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market PPSX Symbol........................... - -------- (1) Excludes 190,040 shares of Common Stock issuable upon exercise of outstanding stock options, 30,600 of which will be exercisable immediately following the Offering. Assumes the over-allotment option granted to the Underwriters will not be exercised. See "Shares Eligible for Future Sale" and "Underwriters."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023052_linens-n_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023052_linens-n_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..26a3b927033e16d0fd14c91fd6e69ae738a9447e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023052_linens-n_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes the Underwriters' over-allotment option is not exercised. THE COMPANY Linens 'n Things, Inc. (with its subsidiaries and its predecessors, "Linens 'n Things" or the "Company") is one of the leading, national large format retailers of home textiles, housewares and home accessories operating in 34 states. According to Home Textiles Today, Linens 'n Things was the largest specialty retailer (as measured by sales) in the home linens category in 1995, the most recent year for which such information was published. As of March 29, 1997, the Company operated 132 superstores averaging approximately 33,000 gross square feet in size and 33 smaller traditional stores averaging approximately 10,000 gross square feet in size. The Company's newest superstores range between 35,000 and 40,000 gross square feet in size and are located in strip malls or power center locations. The Company's business strategy is to offer a broad assortment of high quality, brand name merchandise at everyday low prices, provide efficient customer service and maintain low operating costs. Linens 'n Things' extensive selection of over 25,000 stock keeping units ("SKUs") in its superstores is driven by the Company's commitment to offering a broad and deep assortment of high quality, brand name "linens" (e.g., bedding, towels and pillows) and "things" (e.g., housewares and home accessories). Brand names sold by the Company include Wamsutta, Cannon, Laura Ashley, Martex, Waverly, Royal Velvet, Braun, Krups, Calphalon and Henckels. The Company also sells an increasing amount of merchandise under its own private label (approximately 10% of 1996 sales) which is designed to supplement the Company's offering of brand name products by offering high quality merchandise at value prices. The Company's merchandise offering is coupled with a "won't be undersold" everyday low pricing strategy with price points substantially below regular department store prices and comparable with or below department store sale prices. From its founding in 1975 through the late 1980s, the Company operated traditional stores ranging between 7,500 and 10,000 gross square feet in size. Beginning in 1990, the Company introduced its superstore format which has evolved from 20,000 gross square feet in size to its current size of 35,000 to 40,000 gross square feet, offering a broad merchandise assortment in a more visually appealing, customer friendly format. The Company's introduction of superstores has resulted in the closing or relocation of 108 of the Company's traditional stores through March 29, 1997. As a result of superstore openings and traditional store closings, the Company's gross square footage more than tripled from 1.2 million to 4.7 million between January 1991 and March 29, 1997, although its store base only increased 17%, from 141 to 165 stores during this period. Over this same period, the Company's net sales increased from $202.1 million for the year ended December 31, 1990 to $737.9 million for the 12 months ended March 29, 1997. In addition, as part of its strategic initiative to capitalize on customer demand for one-stop shopping destinations, the Company has balanced its merchandise mix from being driven primarily by the "linens" side of its business to a fuller assortment of "linens" and "things." The Company estimates that the "things" side of its business has increased from less than 10% of net sales in 1991 to 35% in 1996. Key components of the Company's strategy to increase sales and profitability are: (i) new superstore expansion and (ii) increasing productivity of the existing store base. Principal elements of the Company's growth strategy are highlighted as follows: NEW SUPERSTORE EXPANSION. The Company's expansion strategy is to increase market share in existing markets and to penetrate new markets in which the Company believes it can become a leading operator of home furnishings superstores. Management believes that these new markets will be primarily located in the western region of the United States in trading areas of 200,000 persons within a ten-mile radius and with demographic characteristics that match the Company's target profile. The Company believes that it is well-positioned to take advantage of the continued market share gain by the superstore chains in the home furnishings sector. The Company believes there is an opportunity to more than triple the number of its current prototype superstores across the country, providing the Company with significant growth opportunities to profitably enter new markets, as well as backfill in existing markets. In 1997, the Company plans to open 20 to 25 new superstores, of which four were opened as of May 15, 1997, and close 12 to 17 stores (primarily traditional stores), of which seven were closed as of May 15, 1997. In 1998, the Company plans to open 25 to 30 new superstores and close 10 to 15 stores (primarily traditional stores). As of March 29, 1997, the Company operated 132 superstores, representing 80% of its total stores, and 33 traditional stores. The Company's long-term plans include closing most of the remaining traditional stores as opportunities arise. INCREASE PRODUCTIVITY OF EXISTING STORE BASE. The Company is committed to increasing its sales per square foot, inventory turnover ratio and return on invested capital. The Company believes the following initiatives will allow it to achieve this goal: Enhance Merchandise Mix and Presentation. The Company continues to explore opportunities to increase sales of "things" merchandise while maintaining the strength of its "linens" side of the business. The Company's long-term goal is to increase the sales of "things" merchandise to approximately 50% of net sales as part of its strategic initiative to capitalize on customer demand for one-stop shopping destinations. The Company expects this shift to positively impact net sales per square foot and inventory turnover since "things" merchandise tends to be more impulse driven merchandise as compared to the "linens" portion of the business and therefore increases the average sale per customer. In addition, sales of "things" merchandise typically result in higher margins than "linens" products. The Company intends to continue improving its merchandising presentation and techniques, space planning and store layout to further improve the productivity of its existing and future superstore locations. Increase Operating Efficiencies. As part of its strategy to increase operating efficiencies, the Company has invested significant capital in building a centralized infrastructure, including a distribution center and a management information system, which it believes will allow it to maintain low operating costs as it pursues its superstore expansion strategy. In July 1995, the Company began full operations of its 275,000 square foot distribution center in Greensboro, North Carolina. By the end of 1996, approximately 80% of merchandise was received at the Company's distribution center, as compared to approximately 20% at the end of 1995. The utilization of the distribution center has resulted in lower average freight costs, more efficient scheduling of inventory shipments to the stores, improved inventory turnover, better in-stock positions and improved information flow. In addition, the Company believes that the transfer of inventory receiving responsibilities from the stores to the distribution center has allowed store sales associates to redirect their focus to the sales floor, thereby increasing the level of customer service. The Company's ability to effectively manage its inventory is also enhanced by a centralized merchandising management team and its MIS system which allows the Company to more accurately monitor and better balance inventory levels and improve in-stock positions in its stores. ------------------------ The Company was founded in 1975 and was acquired in 1983 by CVS Corporation (formerly known as Melville Corporation) (CVS Corporation together with its subsidiaries, "CVS"). From its formation, the Company was operated as a wholly owned indirect subsidiary of CVS until November 1996, when CVS sold 13,000,000 shares representing approximately 67.5% of the outstanding shares of the Company, in an initial public offering (the "IPO"). CVS currently owns approximately 32.5% of the outstanding shares of the Company's Common Stock. Upon completion of the sale of the shares offered hereby (the "Offering") CVS will own approximately 5.3% (1.4% if the Underwriters' over-allotment option is exercised in full) of the Company's Common Stock. The Company's corporate offices are located at 6 Brighton Road, Clifton, New Jersey 07015, and its telephone number is (201) 778-1300. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling 5,250,000 shares(1) Shareholder................................ Common Stock outstanding(2).................. 19,268,458 shares(2) Dividend policy.............................. The Company intends to retain all its earnings for the foreseeable future for use in the operation and expansion of its business and, accordingly, the Company currently has no plans to pay cash dividends on the Common Stock. See "Dividend Policy." New York Stock Exchange symbol............... "LIN" </TABLE> - --------------- (1) 6,000,000, if the Underwriters' over-allotment option is exercised in full. (2) The number of outstanding shares will not change upon completion of the Offering. The number shown excludes approximately 163,000 shares of deferred stock grants and approximately 1,001,000 shares issuable upon the exercise of outstanding stock options. See "Underwriting" and "Management -- 1996 Incentive Compensation Plan" and "Management -- Compensation of Directors." SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> THIRTEEN WEEKS ENDED(1) YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------- MARCH 30, MARCH 29, 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Net sales............................ $270,889 $333,178 $440,118 $555,095 $696,107 $138,167 $179,911 Gross profit......................... 108,794 133,871 174,397 209,933(2) 269,911 50,498 68,315 Selling, general & administrative expense............................ 95,904 112,135 142,155 190,826(2) 239,228 51,509 67,371 Restructuring and asset impairment charges............................ 13,100(3) -- -- 10,974(2) -- -- -- Operating profit (loss).............. (210)(3) 21,736 32,242 8,133(2) 30,683 (1,011) 944 Interest expense, net................ 1,301 1,398 3,170 7,059 4,692 2,082 336 Income (loss) before provision for income taxes and cumulative effect of change in accounting principle.......................... (1,511) 20,338 29,072 1,074 25,991 (3,093) 608 Net income (loss).................... (1,201) 11,719 17,198 (212) 15,039 (1,786) 352 Net income (loss) per share.......... $(0.06) $0.61 $0.89 $(0.01) $0.78 $(0.09) $0.02 Weighted average number of shares outstanding (in thousands)......... 19,268 19,268 19,268 19,268 19,286 19,268 19,706 SELECTED OPERATING DATA: Number of stores: At beginning of period............. 143 144 143 145 155 155 169 Opened during period............... 22 20 29 28 36 3 1 Closed during period............... 21 21 27 18 22 10 5 -------- -------- -------- -------- -------- -------- -------- At end of period: Traditional stores............... 119 98 71 54 37 46 33 Superstores...................... 25 45 74 101 132 102 132 -------- -------- -------- -------- -------- -------- -------- Total stores................... 144 143 145 155 169 148 165 ======== ======== ======== ======== ======== ======== ======== Total gross square feet of store space (000's)(4)................... 1,633 2,078 2,865 3,691 4,727 3,680 4,696 Net sales per gross square foot(4)(5)......................... $185 $187 $190 $178 $171 $175(6) $173(6) Increase (decrease) in comparable store net sales(7)................. 7.5% 5.0% 5.4% (1.5)% 1.1% 1.7% 5.7% </TABLE> <TABLE> <CAPTION> MARCH 29, 1997 -------------- (DOLLARS IN THOUSANDS) <S> <C> BALANCE SHEET DATA: Working capital....................................................................... $113,701 Total assets.......................................................................... 396,879 Total debt(8)......................................................................... 19,220 Shareholders' equity.................................................................. 250,079 </TABLE> - --------------- (1) The operating results for the interim periods are not necessarily indicative of the results that may be expected for a full year. The Company's quarters end on the Saturday nearest to the end of the last month of such quarter, except the fourth quarter which ends on December 31. (2) Reflects certain one-time special charges related to the CVS Strategic Program (as defined in "Management's Discussion and Analysis of Financial Condition and Results of Operations"). Gross profit and operating profit in 1995 excluding the effect of these charges would have been $218.1 million and $31.5 million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) Reflects a $13.1 million realignment charge associated with the anticipated costs of closing 66 traditional stores from 1993 to 1995. This charge includes the write-down of fixed assets, lease settlement costs, severance and inventory liquidation costs. Operating profit in 1992 excluding the effect of this charge would have been $12.9 million. (4) Store space includes the storage, receiving and office space that generally occupies 10% to 15% of total store space. All numbers provided are for the end of the respective periods. (5) Net sales per square foot is the result of dividing net sales for the period by the average gross square footage at the beginning of the year and at the end of each interim quarterly and year period. (6) Amounts for interim periods are calculated based on annual net sales for the 52 weeks ending at the end of such interim period. (7) New store net sales become comparable in the first full month following 13 full months of operations. Stores that undergo major expansion or that are relocated are not included in the comparable store base. Comparable store net sales include traditional stores and superstores. (8) Total debt consists of a $13.5 million subordinated note issued to CVS, the balance of short-term debt outstanding of $0.7 million under the Revolving Credit Facility (as defined herein), and $5.0 million of borrowings under uncommitted lines of credit unrelated to the Revolving Credit Facility. See "Relationship with CVS and Related Party Transactions -- Financing."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023184_rogue_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023184_rogue_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9e7b7436695c7bb1b5e0c725ff388f4218706c19
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023184_rogue_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS." THE COMPANY Rogue Wave is a leading provider of object-oriented software parts and related tools. The Company's C++ and Java-based products are used to develop robust, scalable software applications for a wide variety of environments, including client-server, Internet and intranet environments. These products enable customers to construct software applications more quickly, with higher quality and across multiple platforms, and reduce the complexity associated with the software development process. The Company's software parts provide the functionality to perform fundamental operations such as network and database connectivity, thereby allowing programmers to focus on the core functionality of the software under development. Software is increasingly the most critical component of today's information systems. Businesses typically rely on such information systems as a strategic resource and as a way of differentiating themselves from their competitors. However, software development technologies and methods have not kept pace with the increasing reliance on software systems. In fact, the intricacies of modern software systems have tended to make the software development process longer, more complicated and increasingly error prone. To address these difficulties in developing and maintaining complex software systems, organizations are increasingly adopting object-oriented technologies and development methodologies. For object-oriented software development, C++ has emerged as the industry standard programming language. Java, another object-oriented programming language that is similar to C++, has been recently popularized through the growth of the Internet and intranet environments. Java offers additional benefits in the areas of platform independence and distributed computing. While objects are easy to use once built, developing robust, well-designed objects can be extremely difficult and time consuming. Organizations are seeking to improve quality and time-to-market by purchasing pre-written objects or "parts" from independent vendors to handle fundamental operations ranging from simple functions such as date handling to more complex functions such as network communications. The Company believes that the use of third-party software parts will enable organizations to develop robust software applications more rapidly, at lower cost and with more functionality than applications using only internally developed objects. The Company's objective is to be the leading provider of high quality, reusable software parts and related tools for the development of object-oriented software applications. The Company's products have the features and functionality necessary to provide customers with the benefits of increased software flexibility and quality, accelerated development times and reduced maintenance costs. The Company follows a cross-platform strategy allowing most objects to be used on the most popular operating systems, such as Windows and UNIX. The Company's strategy is to leverage its installed base of Tools.h++ customers by offering additional object-oriented software parts and related tools. The Company also intends to develop strategic partnerships, extend its technological leadership, promote the enterprise-wide adoption of Rogue Wave products and expand its worldwide distribution. To date, Rogue Wave has sold over 50,000 end-user licenses. Rogue Wave markets its software primarily through its telesales and direct field sales organization, and to a lesser extent through indirect channel partners. The Company bundles its Tools.h++ and/or Standard C++ Library products with popular compilers offered by leading vendors, including Hewlett-Packard, Microware, Siemens-Nixdorf, Silicon Graphics and Sun Microsystems. The Company's products are used by programmers to develop software applications for organizations in a wide variety of industries. The Company's customers include 3Com, Boeing, Hewlett-Packard, IBM, MCI, Morgan Stanley, Motorola and Netscape. The Company was founded in 1989 and operated as an unincorporated business until its incorporation in Oregon in July 1991. The Company reincorporated into Delaware on November 21, 1996. Unless the context otherwise requires, "Rogue Wave" and the "Company" refer to Rogue Wave Software, Inc. and its subsidiaries. The Company's executive offices are located at 850 SW 35th Street, Corvallis, Oregon 97333. Its telephone number is (541) 754-3010. The Company maintains a Web site on the World Wide Web. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..................... 205,000 shares Common Stock offered by the Selling Stockholders........ 1,795,000 shares Common Stock to be outstanding after the offering....... 7,915,063 shares (1) Use of proceeds......................................... Working capital and other corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol........................... RWAV </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, JUNE 30, ------------------------------------------ -------------------- 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenue................................. $ 3,212 $ 7,209 $ 11,937 $ 18,845 $ 13,192 $ 21,043 Income (loss) from operations................. 180 644 195 (80) (255) 1,686 Net income (loss)............................. 175 568 79 35 (114) 1,728 Net income (loss) per common share (2)........ $ 0.04 $ 0.14 $ 0.02 $ 0.01 $ (0.03) $ 0.21 Shares used in per share calculation (2)...... 3,914 4,154 5,009 6,045 4,088 8,348 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------- ACTUAL AS ADJUSTED(3) --------- -------------- (UNAUDITED) <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments.................................... $ 30,540 $ 32,552 Total assets......................................................................... 42,175 44,187 Long-term obligations, less current portion.......................................... 370 370 Total stockholders' equity........................................................... 32,575 34,587 </TABLE> - ------------------------ (1) Excludes 2,061,150 shares of the Company's Common Stock issuable upon exercise of stock options outstanding as of June 30, 1997 at a weighted average exercise price of $5.85 per share. See "Management--Equity Incentive Plans." (2) See Note 1 of Notes to Consolidated Financial Statements for a description of the calculation of the number of shares used in the calculation of net income per common share. (3) As adjusted to reflect the sale of the 205,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $12.00 per share. See "Capitalization." ------------------------ EXCEPT AS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "UNDERWRITING."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023228_panda_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023228_panda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d4fa89bfafdf36b0d71f1bf82bea28d8d15fe25
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023228_panda_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Company's financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Investors should carefully consider the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Bonds. For definitions of certain terms used herein, see the glossary included as Appendix A to this Prospectus. The Company, the Issuer and Panda International General Panda Interfunding Corporation (the "Company") is an indirect wholly-owned Delaware subsidiary of Panda Energy International, Inc., a Texas corporation ("Panda International"). Panda Funding Corporation (the "Issuer") is a wholly-owned Delaware subsidiary of the Company organized for the sole purpose of issuing the Existing Bonds and additional series of Pooled Project Bonds (the Existing Bonds and all additional series, if any, are collectively referred to herein as the "Bonds"). Panda International is an independent (i.e., non-utility) power company that is engaged principally in the development, acquisition, ownership and operation of electric power generation facilities, both in the United States and internationally. The Company and the Issuer were formed by Panda International in 1996 as vehicles for financing Project development, including the making of equity and debt investments in Projects. Panda International has transferred, and intends to continue to transfer, to subsidiaries of the Company a portfolio of Projects (the "Project Portfolio") developed and to be developed by Panda International. Future transfers will be made at the time that such Projects reach Financial Closing or achieve Commercial Operations, thereby reducing development risk to the Company. Distributions (including payments of principal and interest on loans) received by the Company from its subsidiaries that own, directly or indirectly, interests in Projects in the Project Portfolio ("Project Entities") will be used to make payments on the Existing Bonds and on any additional series of Bonds issued in connection with the inclusion of additional Projects in the Project Portfolio. As of the date of this Prospectus, the Project Portfolio consists of indirect 100% equity interests in Project Entities that own (i) a 180 megawatt ("MW") natural gas-fired, combined-cycle cogeneration facility located in Roanoke Rapids, North Carolina (the "Panda-Rosemary Facility"), which commenced commercial operations in December 1990, and (ii) a 230 MW natural gas-fired, combined-cycle cogeneration facility located in Brandywine, Maryland (the "Panda- Brandywine Facility"), which commenced commercial operations in October 1996. The Project Entities that own the Panda-Rosemary Facility and the Panda-Brandywine Facility were transferred to a wholly-owned subsidiary of the Company and became part of the Project Portfolio in July 1996. The transfer to the Company of any additional Projects in the future, will be made pursuant to an agreement (the "Additional Projects Contract") among Panda International, its principal development subsidiary and the Company. See "Additional Projects Contract" below. Initial Project Portfolio Panda-Rosemary Facility The Panda-Rosemary Facility is owned by Panda-Rosemary, L.P., a Delaware limited partnership (the "Panda-Rosemary Partnership"). The only partners of the Panda-Rosemary Partnership are indirect wholly- owned subsidiaries of the Company. The Panda-Rosemary Facility uses natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Panda-Rosemary Facility is sold to Virginia Electric and Power Company ("VEPCO"). Steam and chilled water produced by the Panda-Rosemary Facility are sold to The Bibb Company ("Bibb"), which operates a textile mill adjacent to the Panda- Rosemary Facility. The Panda-Rosemary Partnership has entered into agreements with Natural Gas Clearinghouse ("NGC") for natural gas supply and fuel management services, with Transcontinental Gas Pipe Line Corporation ("Transco"), Texas Gas Transmission Corporation ("Texas Gas") and CNG Transmission Corporation ("CNG") for firm transportation of natural gas and with certain other parties to provide pipeline operation, gas balancing and interruptible transportation services. The Panda-Rosemary Partnership recently entered into an operations and maintenance agreement with Panda Global Services, Inc. ("Panda Global Services"), an indirect wholly- owned subsidiary of Panda International that was recently organized to provide operations and maintenance services to Projects such as the Panda-Rosemary Facility. Such agreement is on substantially similar terms as the Panda-Rosemary Partnership's previous operations and maintenance agreement with University Technical Services, Inc. ("U-Tech"), a subsidiary of EMCOR Group, Inc., which was obtained through a competitive bid process and expired in December 1996. Concurrently with the offering of the Old Bonds (the "Prior Offering"), Panda-Rosemary Funding Corporation, a wholly-owned Delaware special purpose finance subsidiary of the Panda-Rosemary Partnership, consummated the offering and sale of $111.4 million in aggregate principal amount of its 8-5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds"). The Rosemary Bonds were issued pursuant to an indenture among the Panda-Rosemary Partnership, Panda-Rosemary Funding Corporation and Fleet National Bank, as trustee (the "Rosemary Indenture"). The Rosemary Indenture contains various affirmative and negative covenants, including limitations on the ability of the Panda-Rosemary Partnership to make distributions to its partners. Subject to certain other conditions, the Panda-Rosemary Partnership may make distributions to its partners only if: (i) amounts deposited in certain funds established pursuant to the Rosemary Indenture are equal to or greater than the amounts required to be deposited therein, including debt service and debt service reserve funds; (ii) no default or event of default under the Rosemary Indenture has occurred and is continuing; (iii) certain gas supply and transportation contracts that expire in November 2005 and October 2006 have been extended or replaced prior to November 30, 2005; and (iv) the Panda-Rosemary Facility meets certain historical and projected debt service coverage requirements. If the Panda-Rosemary Partnership is unable to make distributions to its partners, the ability of the Issuer to make payments on the Exchange Bonds would be materially and adversely affected. See "Risk Factors - Financial Risks" and "- Project Risks." An unaffiliated third party holds a cash flow participation in distributions from the Panda-Rosemary Partnership (which the Company believes is 0.433% and would increase to 1.732% after 2008 based on projected distributions, but which percentages are the subject of a dispute). All references in this Prospectus to distributions from U.S. Projects shall mean distributions after giving effect to such cash flow participation. See "Description of the Projects - The Panda-Rosemary Facility - Cash Flow Participation" and "Legal Proceedings - NNW, Inc. Proceeding." For more detailed information regarding the Panda-Rosemary Facility, including the various contracts and financing arrangements referred to above and regulatory matters affecting the Panda-Rosemary Facility, see "Description of the Projects - The Panda-Rosemary Facility," "Regulation" and "Description of Outstanding Project-Level Debt - The Panda-Rosemary Financing." Panda-Brandywine Facility The Panda-Brandywine Facility is leased by Panda-Brandywine, L.P., a Delaware limited partnership (the "Panda-Brandywine Partnership"). The Panda-Brandywine Partnership has two partners, each of which is an indirect wholly-owned subsidiary of the Company. The Panda-Brandywine Facility utilizes natural gas as its primary fuel. The electric capacity of and electric energy produced by the Panda-Brandywine Facility is sold to Potomac Electric Power Company ("PEPCO") pursuant to a power purchase agreement (the "Brandywine Power Purchase Agreement"). The Panda-Brandywine Facility commenced commercial operations under the Brandywine Power Purchase Agreement in October 1996. The thermal energy produced by the Panda-Brandywine Facility is sold to a distilled water production facility which is owned by an indirect wholly-owned subsidiary of the Company. The Panda-Brandywine Partnership purchases firm and interruptible natural gas supplies from Cogen Development Company, which are transported to the Panda-Brandywine Facility on either a firm or interruptible basis through the interstate pipeline facilities of Columbia Gas Transmission Corporation and Cove Point LNG Limited Partnership and the local gas distribution facilities of Washington Gas Light Company. The Panda-Brandywine Partnership has contracted with Ogden Brandywine Operations, Inc. ("Ogden Brandywine"), a subsidiary of Ogden Power Corporation, to operate and maintain the Panda-Brandywine Facility. Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed the Panda-Brandywine Facility pursuant to a fixed-price, turnkey engineering, procurement and construction contract (the "Brandywine EPC Agreement") with the Panda-Brandywine Partnership. Raytheon completed the start-up of the Panda-Brandywine Facility and has met the requirements for commercial operations and substantial completion under the Brandywine EPC Agreement, although the date on which commercial operations were achieved and the amount of the early completion bonus to which Raytheon is entitled under the Brandywine EPC Agreement are the subject of a dispute between the Panda- Brandywine Partnership and Raytheon. The Company estimates that the amount in dispute is less than $1.0 million and believes that the resolution of this dispute will not have a material adverse effect on the Panda-Brandywine Facility or the Panda-Brandywine Partnership. See "Description of the Projects - The Panda-Brandywine Facility - Construction Contract." General Electric Capital Corporation ("GE Capital") provided a $215 million construction loan to finance construction of the Panda- Brandywine Facility, which construction loan was converted in December 1996 to long-term financing in the form of a leveraged lease (together with the construction loan, the "Panda-Brandywine Financing"). To effect the lease financing, title to the Panda- Brandywine Facility was transferred to a third party trustee and leased back to the Panda-Brandywine Partnership. The Brandywine Facility Lease is a net lease and its initial term is 20 years. The documents governing the Panda-Brandywine Financing (the "Brandywine Financing Documents") contain various affirmative and negative covenants, including limitations on the ability of the Panda- Brandywine Partnership to make distributions to its partners. Subject to certain other conditions, the Panda-Brandywine Partnership may make distributions to its partners only if: (i) all amounts then required to be deposited in certain reserve accounts established pursuant to the Brandywine Financing Documents have been deposited, including rent reserve and operation and maintenance reserve accounts; (ii) all rent payments then due under the Brandywine Facility Lease have been paid; (iii) the Panda-Brandywine Facility meets an operating cash flow to debt service ratio of 1.2:1; and (iv) at the time of such distribution, and after giving effect thereto, no default or event of default has occurred and is continuing under the Brandywine Financing Documents. If the Panda-Brandywine Partnership is unable to make distributions to its partners, the ability of the Issuer to make payments on the Exchange Bonds would be materially and adversely affected. See "Risk Factors - Financial Risks" and "- Project Risks." In August 1996, the Panda-Brandywine Partnership and PEPCO commenced discussions concerning commercial operational requirements of the Panda-Brandywine Facility and conversion of the construction loan to long-term financing. During these discussions, disagreements arose between the Panda-Brandywine Partnership and PEPCO with respect to certain provisions of the Brandywine Power Purchase Agreement, one of which relates to the determination of the interest rate that is the basis for reduction in capacity payments thereunder (the "PEPCO Interest Rate Dispute"). PEPCO and the Panda-Brandywine Partnership are presently attempting to resolve these disagreements but there are no assurances that such efforts will be successful. If the PEPCO Interest Rate Dispute is determined adversely to the Panda-Brandywine Partnership, the capacity payments paid by PEPCO under the Brandywine Power Purchase Agreement will be less than originally anticipated, thereby adversely affecting the revenues realized by the Panda- Brandywine Partnership, and consequently, reducing the amount of funds that would be available for distribution to the Company and ultimately repayment of the Exchange Bonds. In addition, the ability of the Company to raise debt for Projects in the future would be impaired. See "Risk Factors - Dependence on Distributions from Project Entities" and "- Dispute With PEPCO Over Calculation of Capacity Payments," "Description of the Projects - The Panda- Brandywine Facility - Dispute With PEPCO Over Calculation of Capacity Payments," "Offering Circular Summary - Independent Engineers' and Consultants' Reports - Consolidating Engineer's Pro Forma Report" and "- Independent Pro Forma Analysis - Brandywine," and "Description of the Exchange Bonds - Certain Covenants - Limitations on Debt." For more detailed information regarding the Panda-Brandywine Facility, including the current disputes with Raytheon and PEPCO, the various contracts and financing arrangements referred to above and regulatory matters affecting the Panda-Brandywine Facility, see "Description of the Projects - The Panda-Brandywine Facility," "Regulation" and "Description of Outstanding Project-Level Debt - The Panda-Brandywine Financing." Additional Projects Contract Subject to certain conditions, including those set forth below, the Additional Projects Contract requires Panda International and its affiliates to transfer to the Company, or to certain wholly-owned direct subsidiaries thereof (the "PIC Entities"), their interests in each Project for which a power purchase agreement is entered into prior to July 31, 2001 and which has reached Financial Closing or achieved Commercial Operations prior to July 31, 2006. Panda International and its affiliates will be required to transfer their interests in a Project to the Project Portfolio only if the principal amount of additional series of Bonds that can be issued after giving effect to the inclusion of the Project in the Project Portfolio equals or exceeds the amount of Anticipated Additional Debt. For a description of how the amount of Anticipated Additional Debt is calculated, see "The Company, the Issuer and Panda International - The Additional Projects Contract." Interests in a Project will not be transferred if the Project has not reached Financial Closing or achieved Commercial Operations. Additionally, except for the Panda- Kathleen Project described below, which must be transferred to the Project Portfolio if it reaches Financial Closing, interests in a Project will not be transferred if: (i) Panda International does not own a controlling interest in the Project; (ii) the transfer would be prohibited under any Project-level financing, power purchase or related agreement; or (iii) after giving effect to the issuance of the additional series of Bonds in connection with the inclusion of the Project in the Project Portfolio (a) the rating of previously issued Bonds is not Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to the issuance of such additional series or (b) the projected Company Debt Service Coverage Ratio or the projected Consolidated Debt Service Coverage Ratio (if then applicable) would be less than 1.7:1 or 1.25:1, respectively, for (1) the period beginning with the date of determination through December 31 of that calendar year, (2) each period consisting of a calendar year thereafter through the calendar year immediately prior to the calendar year in which the Final Stated Maturity occurs and (3) the period thereafter beginning with January 1 and ending with such Final Stated Maturity (each such period, a "Future Ratio Determination Period"). The Additional Projects Contract requires Panda International to use commercially reasonable efforts to cause each Project to meet the conditions for transfer to the Project Portfolio as of the date a Project reaches Financial Closing or achieves Commercial Operations, whichever occurs first, or within a 90-day period thereafter. If, however, the conditions for such a transfer cannot be satisfied using commercially reasonable efforts, Panda International will have no further obligation to the Company in respect of such Project and may retain its interest in such Project or sell it to third parties. The Company believes that Panda International will continue to actively develop Projects; however, Panda International is under no obligation to do so, or to use any proceeds from the Prior Offering or future distributions from the Company to fund such future development. In addition, there can be no assurance that the Projects currently under development by Panda International will reach Financial Closing, achieve Commercial Operations or satisfy the other conditions for transfer to the Project Portfolio pursuant to the Additional Projects Contract. See "Risk Factors - Financial Risks," "- Project Risks" and "- Risks Relating to Future Non-U.S. Projects" and "The Company, the Issuer and Panda International - The Additional Projects Contract." Panda International Panda International is an independent power company engaged principally in the development, acquisition, ownership and operation of electric power generation facilities, both in the United States and internationally. It also owns a subsidiary engaged in oil and gas exploration and development. Panda International's principal business strategy is to use its experience in developing, constructing, financing and managing electric power generation facilities to provide low cost electricity and electric generating capacity. Panda International is seeking to expand its presence in the electric power industry by implementing this strategy in the United States and certain other countries. Panda International has placed into commercial operations facilities with electric generating capacity of approximately 410 MW. In addition, Panda International has executed power purchase agreements or entered into other development arrangements relating to four potential Projects with a combined electric generating capacity of approximately 750 MW. Panda International is continually engaged in the evaluation of various opportunities for the development and acquisition of additional electric power generation facilities, both in the United States and internationally. The Company believes that there is and will continue to be significant demand for new generating capacity worldwide and that much of this new capacity will be provided by independent power developers such as Panda International. See "Risk Factors - Project Risks" and "- Risks Relating to Future Non-U.S. Projects," "The Company, the Issuer and Panda International" and "Business - The Independent Power Industry." Panda International was formed as part of a corporate reorganization that took place in October 1995 in which all of the issued and outstanding capital stock of Panda Energy Corporation, a Texas corporation ("PEC"), was exchanged for shares of capital stock of Panda International, with the result that PEC became a wholly- owned subsidiary of Panda International. PEC was organized in 1982 by Robert and Janice Carter, who are the Chairman of the Board, President and Chief Executive Officer, and the Executive Vice President, Treasurer and Secretary, respectively, of Panda International, PEC, the Company and the Issuer. See "Management." Robert and Janice Carter and members of their family and family trusts together own approximately 38.8% of the outstanding shares of capital stock of Panda International. See "Risk Factors - Control by Principal Stockholders." The principal executive offices of the Issuer, the Company, PEC and Panda International are located at 4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244. The telephone number at such offices is (972) 980-7159. Projects under Development by Panda International The following are Projects that Panda International and its affiliates are developing. There are substantial risks associated with the development of Projects, and increased risks associated with the development of Projects outside the United States. There can be no assurance that any Project under development will reach Financial Closing, achieve Commercial Operations or satisfy the other conditions for transfer to the Project Portfolio pursuant to the Additional Projects Contract. See "Risk Factors - Project Risks" and "- Risks Relating to Future Non-U.S. Projects." Panda-Luannan (China) The Company expects that, during the first quarter of 1997, a 2 x 50 MW coal-fired cogeneration facility (the "Panda-Luannan Facility") to be located in Luannan County, Tangshan Municipality, Hebei Province, People's Republic of China ("PRC" or "China") will reach Financial Closing and will be eligible for transfer to the Project Portfolio if the other conditions to such transfer contained in the Additional Projects Contract can be satisfied. Subject to output limitations during certain periods, all of the electric output of the Panda-Luannan Facility will be sold to North China Power Group Company, the business arm of North China Power Group ("NCPG"), which is one of the five interprovincial power groups in China under the supervision of the Ministry of Electric Power of the PRC. The Panda- Luannan Facility is to be connected to one of the largest power grids in China, which is operated by NCPG and serves the region which includes the Beijing-Tianjin-Tangshan area. It is anticipated that the steam generated will be sold to industrial and possibly to governmental purchasers. Panda of Nepal Panda International has formed a joint venture company with a major international hydroelectric engineering company and a local Nepalese party to build a 36 MW hydroelectric facility on the upper Bhote Koshi River in Nepal. A power purchase agreement with the Nepal Electricity Authority ("NEA"), and a project agreement with the Government of Nepal obligating the Government of Nepal to guarantee NEA's obligations and to provide certain other support and incentives, were signed in July 1996. An engineering, procurement and construction contract for the facility was entered into in October 1996 with China Gezhouba Construction Group Corporation for Water Resources and Hydropower, a Chinese engineering and construction firm. The construction contract provides that the contractor will construct the facility on a fixed-price turnkey basis. Panda International has received commitment letters from two multilateral agencies to provide debt financing for this Project, subject to their satisfaction with due diligence reviews and other matters. The Company expects that this Project will reach Financial Closing during the first quarter of 1997 and will be eligible for transfer to the Project Portfolio if the other conditions to such transfer contained in the Additional Projects Contract can be satisfied. Panda-Lapanga (India) In August 1994, Panda International acquired from another independent power developer a 90% interest in a company that has executed a power purchase agreement with the Orissa State Electricity Board for a proposed 500 MW coal-fired electric generating facility to be located in the State of Orissa, India. Certain of the central government approvals for this facility have been obtained. Although Panda International believes this power purchase agreement is valid and enforceable, the State of Orissa has given a notice of cancellation of such agreement to Panda International, as well as to several other third parties with respect to power purchase agreements relating to their projects. Panda International has objected to such notice. Development efforts have been delayed pending resolution of this dispute. Panda-Kathleen (United States) Panda International owns an indirect 100% equity interest in Panda-Kathleen, L.P., a Delaware limited partnership (the "Panda- Kathleen Partnership"), which in 1991 entered into a power purchase agreement with Florida Power Corporation ("Florida Power") for the sale of capacity and all energy made available from a natural gas- fired, combined-cycle cogeneration facility (the "Panda-Kathleen Facility"). Construction of the Panda-Kathleen Facility was originally scheduled to begin in 1995, but has been delayed because of litigation with Florida Power and may never commence. The Brandywine Financing Documents require the Panda-Kathleen Project to be transferred to the Project Portfolio if it reaches Financial Closing, whether or not the other conditions to transfer contained in the Additional Projects Contract are satisfied. See "Legal Proceedings - Florida Power Proceedings." Guaranty and Collateral; Effective Subordination The Existing Bonds are, and all additional series of Bonds will be issued pursuant to an indenture (the "Indenture") among the Issuer, the Company and Bankers Trust Company, as trustee (the "Trustee"). The Bonds will be paid from payments by the Company to the Issuer on promissory notes (including the Initial Company Note, the "Company Notes") evidencing loans by the Issuer to the Company. The aggregate outstanding principal amount of the Company Notes will at all times equal the aggregate outstanding principal amount of the Bonds. Upon completion of the Exchange Offer, the Existing Bonds will be the only Bonds issued and outstanding under the Indenture. The Existing Bonds are, and all additional series of Bonds will be, fully and unconditionally guaranteed (such guaranty, the "Company Guaranty") by the Company. In addition, the Existing Bonds are, and all additional series of Bonds will be, secured by pledges, or grants of security interests, to the Trustee for the benefit of the holders of the Bonds: (i) by PEC of and in all of the capital stock of the Company; (ii) by the Company, of and in all of the capital stock of the Issuer and the PIC Entities (the "PIC U.S. Entities") that indirectly own Projects located in the United States and certain international Projects for which no U.S. tax deferral will be sought (the "U.S. Projects") and 60% of the capital stock of the PIC Entities (the "PIC International Entities") that indirectly own Projects not located in the United States and for which U.S. tax deferral will be sought (the "Non-U.S. Projects"); (iii) by the Issuer, of and in the Company Notes; (iv) by the Company, of and in its interest in the Additional Projects Contract; and (v) by the Company, of and in its interest in all distributions from the PIC U.S. Entities and its interest in accounts, established in the Company's name with the Trustee, into which such distributions are deposited (all of the foregoing collateral so pledged, the "Collateral"). The Bonds will not be secured by any direct equity interest in, or by a mortgage on, or other security interest in the assets of, any Project nor will the Bonds be directly secured by any interest in any distributions to PIC International Entities, if any, or any accounts into which such distributions are deposited. Each PIC International Entity, however, will be required to pledge to the Company, as security for the repayment of certain loans by the Company to such PIC International Entity (the "PIC International Entity Loans"), such PIC International Entity's interest in all distributions received by it in respect of Non-U.S. Projects, if any, and all accounts, established in the name of such PIC International Entity with the Trustee, acting in its capacity as the International Collateral Agent for the benefit of the Company (the "International Collateral Agent"), into which such distributions are deposited. See "Description of the Exchange Bonds - Collateral for the Exchange Bonds." The Exchange Bonds will be exclusively the obligations of the Issuer and, to the extent of the Company Guaranty, the Company, and not of any of their affiliates. Because the operations of the Company are conducted by Project Entities, the Company's cash flow and its ability to service its debt, including its ability to make payments on the Company Notes, and consequently the Issuer's ability to make payments on the Bonds (including the Exchange Bonds), are almost entirely dependent upon the earnings of the Project Entities and the distribution of those earnings to the Company. The Project-level financing arrangements for the Projects generally restrict the ability of the Project Entities to pay dividends, make distributions or otherwise transfer funds to equity owners of such Projects, including the PIC Entities and, indirectly, the Company. These restrictions generally require that, prior to the payment of dividends or distributions or the making of other transfers of funds, the Project Entity proposing to make the dividend, distribution or transfer must provide for the payment of other obligations of the Project, including operating expenses and debt service, fund a debt service reserve and other reserves and meet certain debt service coverage ratios and other tests. Additionally, the indebtedness incurred by a Project Entity to finance a Project would generally be secured by a mortgage on the applicable Project and a security interest in substantially all of the assets of, and the equity interests in, the Project Entity. As a result of the foregoing, the Bonds (including the Exchange Bonds) and the Company Guaranty will be effectively subordinated, both in terms of security and in priority of rights to receive distributions, to creditors of the Project Entities and the PIC Entities. As of September 30, 1996, the Project Entities had outstanding $314.6 million of indebtedness and other liabilities, which are effectively senior to the Existing Bonds and the Company Guaranty. See "Risk Factors - Financial Risks" and "Description of the Outstanding Project-Level Debt." PRIOR OFFERING On July 31, 1996 (the "Issue Date"), the Issuer issued $105,525,000 aggregate principal amount of its 11-5/8% Pooled Project Bonds, Series A due 2012 in a private placement under Section 4(2) of the Securities Act and Rule 144A. The Old Bonds were sold to Jefferies & Company, Inc. (the "Initial Purchaser") pursuant to the Purchase Agreement and were placed by the Initial Purchaser with Qualified Institutional Buyers and Institutional Accredited Investors (as defined in Section 501(a) (1), (2), (3) or (7) under the Securities Act). Pursuant to the Registration Rights Agreement entered into between the Company, the Issuer and the Initial Purchaser in connection with the Prior Offering, the Issuer and the Company agreed to file a shelf registration statement covering the Old Bonds (a "Shelf Registration Statement") or to effect a registered exchange offer for the Old Bonds pursuant to which the holders of the Old Bonds would be offered the opportunity to exchange their Old Bonds for registered Exchange Bonds. The Registration Rights Agreement provides that if such an exchange offer registration statement (an "Exchange Offer Registration Statement") or a Shelf Registration Statement is not declared effective within 180 days after the Issue Date, the interest rate on the Old Bonds will increase by 50 basis points effective on the 181st day following the Issue Date until such a registration statement is declared effective. If such a registration statement is not declared effective within two years following the Issue Date, such increase in interest rate would become permanent. The Registration Statement with respect to the Exchange Offer was declared effective by the Commission on __________, 1997, thereby avoiding the aforementioned interest rate increase. THE EXCHANGE OFFER The Issuer is making the following Exchange Offer to holders of all Old Bonds presently outstanding: The Exchange Offer For each $1,000 principal amount of Old Bonds tendered, a holder will be entitled to receive $1,000 principal amount of Exchange Bonds. As of the date of this Prospectus, $105,525,000 principal amount of Old Bonds is outstanding. The terms of the Exchange Bonds are substantially identical to the terms of the Old Bonds, except that the Exchange Bonds (i) will have been registered under the Securities Act, and (ii) holders of the Exchange Bonds will not be entitled to certain rights of holders of the Old Bonds under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Old Bonds Registration Rights." Expiration Date The Exchange Offer will expire at 5:00 p.m., New York City time, on ____________, 1997, unless extended in the Issuer's sole discretion. See "The Exchange Offer - Expiration Date; Extensions; Termination; Amendments." Withdrawal of Tenders Tenders of Old Bonds may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable. See "The Exchange Offer - Withdrawal of Tenders." Interest on the Exchange Bonds and Accrued Interest on the Old Bonds The Exchange Bonds will bear interest from the date of their issuance. Interest on the Old Bonds accepted for exchange will accrue thereon to, but not including, the date of issuance of the Exchange Bonds and will be paid together with the first interest payment on the Exchange Bonds issued in exchange therefor. Conditions of the Exchange Offer The Exchange Offer is subject to certain customary conditions. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Bonds being tendered or accepted for exchange. Old Bonds may be tendered only in integral multiples of $1,000. See "The Exchange Offer - Conditions of the Exchange Offer." Procedures for Tendering Old Bonds Each holder of Old Bonds wishing to accept the Exchange Offer must, prior to the Expiration Date, either (i) complete and sign the Letter of Transmittal, in accordance with the instructions contained herein and therein, and deliver such Letter of Transmittal, together with any signature guarantees and any other documents required by the Letter of Transmittal, to the Exchange Agent at its address set forth on the back cover page of this Prospectus and the tendered Old Bonds must either be (a) physically delivered to the Exchange Agent or (b) transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures set forth herein. By executing the Letter of Transmittal, each holder will represent that, among other things, the Exchange Bonds acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Bonds (whether or not such person is the registered holder of such Exchange Bonds), that neither the holder of such Exchange Bonds nor any such other person has an arrangement with any person to participate in the distribution (within the meaning of the Exchange Act) of such Exchange Bonds and that neither the holder of such Exchange Bonds or any such other person is an Affiliate of the Issuer or the Company, or if it is an Affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. See "The Exchange Offer - Procedures for Tendering." Special Procedures for Beneficial Owners Any beneficial owner whose Old Bonds are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Bonds in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "The Exchange Offer - Procedures for Tendering." Guaranteed Delivery Procedures Holders of Old Bonds who wish to tender their Old Bonds and whose Old Bonds are not immediately available or who cannot deliver their Old Bonds, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Bonds according to the guaranteed delivery procedures set forth in "The Exchange Offer - Guaranteed Delivery Procedures." Acceptance of the Old Bonds and Delivery of the Exchange Bonds Upon satisfaction or waiver of the conditions of the Exchange Offer, the Issuer will accept for exchange any and all Old Bonds which are properly tendered and not withdrawn prior to the Expiration Date. The Exchange Bonds issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer - Acceptance of Old Bonds for Exchange; Delivery of Exchange Bonds." Certain Federal Income Tax Considerations Generally, there should not be federal income tax consequences to holders as a result of the exchange of the Old Bonds for the Exchange Bonds pursuant to the Exchange Offer. If, however, the exchange of the Old Bonds for the Exchange Bonds were treated as an "exchange" for federal income tax purposes, such exchange should constitute a recapitalization for federal income tax purposes. Holders exchanging the Old Bonds pursuant to such recapitalization should not recognize any gain or loss upon the exchange. The foregoing discussion of certain federal income tax consequences is for general information only and is not tax advice. Federal income tax consequences may vary depending upon individual circumstances. See "Certain U.S. Federal Income Tax Considerations of the Exchange Offer." Effect on Holders of Old Bonds Holders of the Old Bonds who do not tender their Old Bonds in the Exchange Offer will continue to hold such Old Bonds and will be entitled to all the rights and benefits, and will be subject to all limitations applicable thereto, under the Indenture. All Old Bonds not exchanged in the Exchange Offer will continue to be subject to the restrictions on transfer provided for in the Old Bonds and the Indenture. To the extent that Old Bonds are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Bonds not so tendered could be adversely affected. See "Risk Factors - Consequences of Failure to Exchange Old Bonds." Rights of Dissenting Holders Holders of Old Bonds do not have any appraisal or dissenters' rights under the Delaware General Corporation Law or the Indenture in connection with the Exchange Offer. Exchange Agent Bankers Trust Company. See "The Exchange Offer - The Exchange Agent." TERMS OF THE EXCHANGE BONDS The Exchange Offer applies to $105,525,000 aggregate principal amount of Old Bonds. The form and terms of the Exchange Bonds are substantially identical to the terms of the Old Bonds, except that the Exchange Bonds (i) will have been registered under the Securities Act, and therefore, will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Bonds will not be entitled to certain rights of holders of the Old Bonds under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights." The Exchange Bonds will evidence the same debt as the Old Bonds which they replace and will be issued under, and be entitled to the benefits of, the Indenture. Upon completion of the Exchange Offer, the Existing Bonds will be the only Bonds issued and outstanding under the Indenture. Securities Offered $105,525,000 11-5/8% Pooled Project Bonds, Series A-1 due 2012. Final Maturity Date August 20, 2012. Interest Payment Dates February 20 and August 20, commencing February 20, 1997. Ratings In October 1996, the Exchange Bonds were rated Ba3 by Moody's Investors Service, Inc. and BB- by Duff & Phelps Credit Rating Co. Initial Average Life The initial average life to maturity of the Exchange Bonds is 11.7 years. Scheduled Principal Payments Semiannually commencing February 20, 1997, as follows: Percentage of Payment Date Original Principal Amount Payable February 20, 1997 0.2045% August 20, 1997 0.0000% February 20, 1998 0.0000% August 20, 1998 0.0000% February 20, 1999 0.0000% August 20, 1999 0.5933% February 20, 2000 0.6129% August 20, 2000 0.0000% February 20, 2001 0.0000% August 20, 2001 1.3753% February 20, 2002 1.4691% August 20, 2002 2.2184% February 20, 2003 2.3565% August 20, 2003 2.9328% February 20, 2004 3.1031% August 20, 2004 3.2796% February 20, 2005 3.4687% August 20, 2005 3.5977% February 20, 2006 3.7820% August 20, 2006 2.8098% February 20, 2007 3.0076% August 20, 2007 4.8415% February 20, 2008 5.1145% August 20, 2008 5.0057% February 20, 2009 5.2945% August 20, 2009 5.5185% February 20, 2010 5.8300% August 20, 2010 5.7248% February 20, 2011 6.0590% August 20, 2011 6.4800% February 20, 2012 6.8808% August 20, 2012 8.4390% Denominations and Form The Exchange Bonds will be issuable in denominations of any integral multiple of $1,000 in exchange for a like principal amount of Old Bonds. The Exchange Bonds will be issuable in book- entry form through the facilities of The Depository Trust Company ("DTC"), which will act as depositary for the Exchange Bonds. One fully-registered certificate will be issued and will be deposited with DTC, and interests therein will be shown on, and transfers will be effected through, records maintained by DTC and its participants. Exchange Bonds issued to Institutional Accredited Investors, and Exchange Bonds issued in other limited circumstances described herein, will be issued in registered certificated form. See "Description of the Exchange Bonds - Book Entry; Delivery and Form." Mandatory Redemption The Existing Bonds and all additional series of Bonds, if any, then outstanding will be subject to mandatory redemption, in whole or in part, to the extent that, at any time (after giving effect to transfers required to be made to other Accounts and Funds on such date), the aggregate amount of monies on deposit in the U.S. and International Mandatory Redemption Accounts is in excess of $2.0 million. In the event of a sale or other disposition of any Collateral or any interest in a Project or any event of casualty, loss or condemnation with respect to a Project (each, a "Mandatory Redemption Event"), all proceeds of any distributions resulting from such Mandatory Redemption Event in excess of $2.0 million in the aggregate in any calendar year that may be legally distributed or paid to the Company or any PIC Entity without contravention of any Project debt agreement shall be deposited into the appropriate Mandatory Redemption Account, unless (i) the Company provides a certificate to the Trustee (supported by a certificate to the Trustee from the Consolidating Engineer) stating that such Mandatory Redemption Event would not result in either the projected Company Debt Service Coverage Ratio being less than 1.7:1 or the projected Consolidated Debt Service Coverage Ratio (if then applicable) being less than 1.25:1, for each Future Ratio Determination Period; and (ii) the rating of the Bonds is Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to such Mandatory Redemption Event. Mandatory redemptions will be made at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus interest thereon accrued to the date of such redemption, plus a premium, if any, provided in the supplemental indenture for each series of Bonds to be redeemed. For the Exchange Bonds, such premium is equal to that payable were the Exchange Bonds to be redeemed at the Issuer's option on such date to the extent that the mandatory redemption results from a sale or other voluntary disposition of any Collateral or any interest in a Project (or if no optional redemption is then available, a premium determined as the excess, if any, of the present value of the remaining payments due on the Exchange Bonds, discounted at a rate which is equal to the Applicable Treasury Rate plus one- half of one percent over the par value of such Exchange Bonds). Notwithstanding the foregoing, the amount of Bonds required to be redeemed shall not exceed the amount necessary to cause (after giving effect to such redemption) the coverage ratio requirements set forth above to be met and to achieve a Reaffirmation of the rating on the Bonds by at least two rating agencies. See "Description of the Exchange Bonds - Redemption - Mandatory Redemption." The applicable Consolidated Debt Service Coverage Ratio, for purposes of determining whether amounts are to be deposited in the Mandatory Redemption Accounts or for any other purposes under the Indenture, need not be satisfied on and after the time that more than four Projects have been transferred to the Project Portfolio. There can be no assurance that the Issuer will have available funds sufficient to fund the redemption of Bonds upon the occurrence of a Mandatory Redemption Event. In the event a Mandatory Redemption Event occurs at a time when the Issuer does not have available funds sufficient to redeem all of the Bonds subject to such redemption, an Event of Default would occur under the Indenture. See "Risk Factors - Mandatory Redemption and Repurchase of Bonds Upon a Change in Control." Optional Redemption The Exchange Bonds will be subject to redemption, in whole or in part, at the option of the Issuer at any time on or after August 20, 2001, at the following redemption prices (expressed as a percentage of principal amount) plus interest accrued to the date of redemption, if redeemed during the 12- month period commencing on or after August 20 of the year set forth below: Year Redemption Price 2001 105.8125% 2002 104.3594% 2003 102.9063% 2004 101.4532% 2005 100.0000% and thereafter The Exchange Bonds are also subject to redemption, in whole or in part, at the option of the Issuer at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus interest thereon accrued to the date of such redemption if an Extraordinary Financial Distribution in excess of $2.0 million is applied to prepay the Company Notes. "Extraordinary Financial Distributions" are distributions and other amounts received by the Company or any PIC Entity without contravention of any Project debt agreement in respect of settlements, judgments and other payments received in respect of a Project in connection with legal proceedings, monies released from certain escrows relating to Projects, buy-outs or settlements of Project contracts and certain other transactions resulting in the receipt of cash or other property upon the sale, transfer or other disposition of contractual rights relating to a Project (in each case, other than in respect of a Mandatory Redemption Event). See "Description of the Exchange Bonds - Redemption - Optional Redemption." Change of Control Upon the occurrence of a Change of Control, each holder of Existing Bonds and all additional series of Bonds, if any, will have the right to require the Issuer to purchase all or a portion of such holder's Bonds at a price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of purchase. See "Description of the Exchange Bonds - Certain Covenants - Change of Control." There can be no assurance that the Issuer will have available funds sufficient to fund the purchase of the Bonds upon a Change of Control. In the event a Change of Control occurs at a time when the Issuer does not have available funds sufficient to pay for all of the Bonds delivered by holders seeking to accept the Issuer's repurchase offer, an Event of Default would occur under the Indenture. See "Risk Factors - Mandatory Redemption and Repurchase of Bonds Upon a Change in Control." Certain Covenants The Indenture contains affirmative and negative covenants that restrict the activities of the Issuer, the Company and the PIC Entities, including limitations on: (i) distributions to the Company and the PIC International Entities out of the Accounts and Funds described below under "Flow of Funds"; (ii) the ability of Project Entities to incur new debt or amend Project agreements if such actions could reasonably be expected to reduce Cash Available for Distribution by 10% for any Future Ratio Determination Period; (iii) how the proceeds of the Prior Offering may be used; (iv) the incurrence of indebtedness or lease obligations, or the provision of guaranties (see "Additional Debt" below); (v) the payment of dividends on and redemptions of capital stock; (vi) the use of proceeds from the sale of assets and certain other events; (vii) transactions with affiliates and (viii) the creation of liens. The Indenture will also (a) require the Company to maintain at least a 50% (direct or indirect) ownership interest in each Project, or a 25% (direct or indirect) ownership interest in each Project and controlling influence over the management and policies with respect to such Project, provided that no other entity has greater control than the Company over such management and policies (except in certain circumstances, including the sale by the Company of its entire interest in a Project), (b) restrict the ability of the Company, the Issuer and the PIC Entities to consolidate with or merge into, or to transfer all or substantially all of their respective assets to, another person, (c) require the Issuer to pledge additional collateral in certain instances and (d) require the Issuer to offer to redeem the Bonds upon the occurrence of a Change of Control. See "Description of the Exchange Bonds - Certain Covenants." Noncompliance with the covenants contained in the Indenture would constitute an Event of Default under the Indenture after any applicable time periods or notice and cure periods. If an Event of Default due to the bankruptcy, insolvency or reorganization of the Company, the Issuer or any PIC Entity occurs, all unpaid principal, premium, if any, and interest under all Existing Bonds and all additional series of Bonds, if any, then outstanding will immediately become due and payable. In other cases of an Event of Default, the Trustee may, and upon the request of the holders of at least one-third or one-half (depending on the circumstances) in aggregate principal amount of all Existing Bonds and all additional series of Bonds, if any, then outstanding shall, declare all unpaid principal, premium, if any, and interest thereunder to immediately become due and payable. If any Event of Default is not cured or waived, the Trustee may, and upon the request of a majority in aggregate principal amount of the Existing Bonds and all additional series of Bonds, if any, then outstanding, and the offering to it of any indemnity required under the Indenture shall (unless the Trustee in good faith shall determine that such exercise would involve it in personal liability or expense), enforce every right available to it under the Indenture and under the Security Documents. See "Description of the Exchange Bonds - Defaults and Remedies." Additional Debt The Indenture permits the Issuer to incur additional debt only in the form of additional series of Bonds for the purpose of loaning the proceeds thereof to the Company, which the Company may use either to make investments in Projects in connection with their transfer to the Project Portfolio or for distribution or loan to Panda International and its affiliates. Panda International and its affiliates may, but are under no obligation to, use such funds for future project development. Additional series of Bonds may be issued only if, at the time of such issuance, (i) the Company provides a certificate to the Trustee (supported by a certificate to the Trustee from the Consolidating Engineer) stating that, after giving effect to the issuance of such additional series of Bonds and the application of the proceeds therefrom, the projected Company Debt Service Coverage Ratio and the projected Consolidated Debt Service Coverage Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1, respectively, for each Future Ratio Determination Period and (ii) the rating of the Bonds is Reaffirmed by at least two rating agencies at a rating equal to or higher than that in effect immediately prior to the issuance of such additional series; provided, however, that such Reaffirmation of the rating shall not be required if (a) neither the Company nor any PIC Entity has, since the last date upon which the Bonds were rated or a Reaffirmation of rating was given in respect thereof, acquired (or is acquiring in connection with the issuance of such additional series), sold or otherwise disposed of direct or indirect interests in one or more Projects in an aggregate amount in excess of the lesser of the amounts set forth in subclauses (1) and (2) of clause (b) below and (b) the principal amount of such additional series to be issued is less than the lesser of (1) $50 million and (2) 25% of the aggregate principal amount of all series of Bonds then outstanding. The Company and the PIC Entities will be prohibited from incurring any debt, other than (i) in the case of the Company, the Company Guaranty and the Company Notes, (ii) in the case of the PIC International Entities, the PIC International Entity Notes, certain subordinated debt (including Other International Notes) payable to the Company or any PIC Entity, (iii) in the case of the PIC U.S. Entities, the PIC Entity Guaranties and certain subordinated debt payable to the Company or any PIC Entity and (iv) in the case of Project Entities, Project debt and certain guaranties. See "Description of the Exchange Bonds - Certain Covenants." Guaranty and Ranking The Exchange Bonds will rank pari passu with all other series of Bonds (including the Old Bonds). The Existing Bonds are, and all other series of Bonds will be, fully and unconditionally guaranteed by the Company Guaranty. The Existing Bonds are, and all other series of Bonds will be, secured indebtedness of the Issuer; however, payments on the Bonds, and payments under the Company Guaranty, will be effectively subordinated to all liabilities of the Project Entities incurred in respect of the Projects, including Project-level debt financing and trade payables. As of September 30, 1996, the Project Entities had outstanding $314.6 million of indebtedness and other liabilities, which are effectively senior to the Existing Bonds and the Company Guaranty. See "Risk Factors - Financial Risks," "Description of the Outstanding Project- Level Debt" and "Description of the Exchange Bonds - Ranking." Flow of Funds All distributions in respect of U.S. Projects received by or on behalf of the Company or any PIC U.S. Entity (other than Extraordinary Financial Distributions and distributions received as a result of Mandatory Redemption Events that are required to be deposited in the U.S. Mandatory Redemption Account), all regularly scheduled interest and principal payments on the PIC International Entity Notes and any payments resulting from the redemption or partial redemption of any Other International Notes shall be deposited directly into the U.S. Project Account. All distributions in respect of Non-U.S. Projects received by or on behalf of any PIC International Entity (other than Extraordinary Financial Distributions and distributions received as a result of Mandatory Redemption Events that are required to be deposited in the International Mandatory Redemption Account) shall be deposited directly into the International Project Account. The Trustee shall, on the first Business Day of each month (a "Monthly Distribution Date"), transfer amounts on deposit in the U.S. Project Account in the following order of priority: (i)to the Debt Service Fund (for application to payments on the Bonds), an amount equal to the excess, if any, of (a) the aggregate amount of interest (less any amount on deposit in the Capitalized Interest Fund in respect of such payment) and, if applicable, principal, in each case due and payable on the Company Notes (including any past due amounts) on the Payment Date for each series of Bonds then outstanding next following the day immediately preceding such Monthly Distribution Date (other than in connection with a call for redemption) over (b) the amount then on deposit in the Debt Service Fund; (ii) to the Capitalized Interest Fund, an amount equal to the excess, if any, of the Capitalized Interest Requirement over the amount then on deposit in the Capitalized Interest Fund; (iii) to the Debt Service Reserve Fund, an amount equal to the excess, if any, of the Debt Service Reserve Requirement over the sum of (a) the amount then on deposit in the Debt Service Reserve Fund plus (b) the aggregate amount, if any, available to be drawn under a Letter of Credit; (iv) to the Company Expense Fund, an amount equal to the excess, if any, of (a) the sum of (1) the Company Expenses Amount for the applicable calendar year plus (2) the Annual Letter of Credit Fee over (b) the aggregate amount deposited to the Company Expense Fund since the beginning of such calendar year; and (v) to the U.S. Distribution Suspense Fund, the remaining balance, if any, on deposit in the U.S. Project Account. On each Monthly Distribution Date, the International Collateral Agent shall transfer monies from the International Project Account (i) first to the payment of interest then due on any PIC International Entity Note and (ii) then to the International Distribution Suspense Fund, the remaining balance, if any, on deposit in the International Project Account. Extraordinary Financial Distributions will be initially deposited in the appropriate Extraordinary Distribution Account (U.S. or International) and, if required pursuant to the Indenture, proceeds received by the Company or any PIC Entity as a result of Mandatory Redemption Events will be initially deposited in the appropriate Mandatory Redemption Account (U.S. or International). All amounts held in the foregoing Accounts and Funds (other than the International Accounts and Funds) will be in the sole control of the Trustee, acting in its capacity as agent for the Collateral Agent, and will be pledged to secure the obligations of the Issuer under the Bonds. The International Accounts and Funds will be in the sole control of the International Collateral Agent, acting in its capacity as agent for the PIC International Entities, and will be pledged to the Company to secure the PIC International Entity Notes and the Other International Notes. In addition to the foregoing Accounts and Funds, a U.S. Distribution Fund and an International Distribution Fund will be established in the name and be in the control of the Company and the PIC International Entities, respectively. See "Description of the Exchange Bonds - The Accounts and Funds." Debt Service Fund Amounts on deposit in the Debt Service Fund shall be used to pay interest and principal, if applicable, due and payable on the Company Notes, as and when provided in the Company Notes. Payments on the Company Notes shall be applied by the Trustee to the payment of interest and principal on the Bonds. If, on any Payment Date the amounts on deposit in the Debt Service Fund, after giving effect to all transfers to the Debt Service Fund on such date, are insufficient for the payment in full of the interest and, if applicable, principal on the Company Notes then due and payable, including any past due amounts (such deficiency hereinafter referred to as a "Debt Service Deficiency"), an amount equal to such Debt Service Deficiency shall be withdrawn and transferred to the Debt Service Fund, first from the U.S. Distribution Suspense Fund, then from the U.S. Extraordinary Distribution Account (using Available Amounts only), then from the Company Expense Fund, then from the Debt Service Reserve Fund, then from the Capitalized Interest Fund and then from the U.S. Mandatory Redemption Account (using Available Amounts only); provided, however, that if there are not sufficient funds in the U.S. Accounts and Funds to eliminate a Debt Service Deficiency, monies will be transferred from the International Accounts and Funds by the International Collateral Agent to effect a redemption of the Other International Notes in an amount equal to the lesser of (a) the amounts on deposit in the International Accounts and Funds, (b) the outstanding principal amount of the Other International Notes and (c) the amount of such Debt Service Deficiency. The amounts realized from the redemption of any Other International Notes for purposes of eliminating a Debt Service Deficiency will be transferred to the U.S. Project Account and then from the U.S. Project Account to the Debt Service Reserve Fund. PEC has agreed to cause the Company (and, if necessary, to make capital contributions to the Company) to loan $6.4 million to a PIC International Entity evidenced by an Other International Note, on or prior to the earlier of (A) the first date on which Commercial Operations have been achieved by any Non-U.S. Project in the Project Portfolio and (B) the date of transfer to the Project Portfolio of any Non-U.S. Project that has already achieved Commercial Operations. The Company may, but is under no obligation to, lend additional amounts to the PIC International Entities to create additional Other International Notes. Capitalized Interest Fund Upon the issuance of the Old Bonds, the Company deposited approximately $9,834,000 into the Capitalized Interest Fund out of the loan by the Issuer to the Company of the proceeds from the issuance of the Old Bonds. Monies held on deposit in the Capitalized Interest Fund shall be transferred to the Debt Service Fund on the Interest Payment Dates on February 20, 1997, August 20, 1997, February 20, 1998, August 20, 1998, February 20, 1999, August 20, 2000, and February 20, 2001 in the amounts of approximately $618,000, $1,188,000, $1,233,000, $3,385,000, $3,304,000, $71,000 and $35,000 respectively. See "Description of the Exchange Bonds - The Accounts and Funds - Capitalized Interest Fund." Debt Service Reserve Fund Upon the issuance of the Old Bonds, the Company deposited into the Debt Service Reserve Fund $6.4 million, which is equal to the amount of interest due on the Existing Bonds on the first Payment Date less the amount deposited upon the issuance of the Old Bonds in the Capitalized Interest Fund in respect of such interest payment. The Company funded this deposit with a portion of the loan by the Issuer to the Company of the proceeds from the issuance of the Old Bonds. Except as may be provided in any Series Supplemental Indenture with respect to any particular series of Bonds, until the amount on deposit in the Debt Service Reserve Fund on any Monthly Distribution Date equals the amount of principal and interest payments on all Bonds outstanding due for the immediately succeeding 12 months (less the amount on deposit in the Capitalized Interest Fund in respect of interest payments scheduled to be made during such 12-month period), all funds deposited in the U.S. Project Account not required to be transferred into the Debt Service Fund or the Capitalized Interest Fund shall be deposited into the Debt Service Reserve Fund. Thereafter, so long as any Bonds remain outstanding, the Company will be required (unless otherwise provided in a Series Supplemental Indenture with respect to a particular series of Bonds) to maintain in the Debt Service Reserve Fund an amount equal to the amount of debt service due in respect of all Bonds then outstanding for the next 12-month period, except that, if less than 12 months remain before the Final Stated Maturity for any series of Bonds, then an amount equal to the scheduled principal and interest payments for such series for such period will constitute the amount required to be on deposit in the Debt Service Reserve Fund with respect to such series of Bonds. The Debt Service Reserve Fund may be drawn upon to pay the principal of, and premium, if any, and interest on all series of the Bonds, to the extent of funds allocated within the Debt Service Reserve Fund to each series of Bonds, if funds otherwise available to the Trustee for such payments are insufficient. At any time when the Capitalized Interest Requirement for any series of the Bonds equals zero, Panda International or PEC may arrange for a Letter of Credit to be provided in lieu of cash for all or a part of the amount in respect of such series required to be maintained in the Debt Service Reserve Fund. See "Description of the Exchange Bonds - The Accounts and Funds - Debt Service Reserve Fund." Distributions Subject to certain limited exceptions, distributions may be made to the Company and the PIC International Entities only from, and to the extent of, monies then on deposit in the U.S. Distribution Fund and the International Distribution Fund, respectively. Transfers into the Distribution Funds may be made on any Monthly Distribution Date subject to the prior satisfaction of the following conditions: (i) the amount on deposit in the Debt Service Fund is equal to or greater than the amount of interest (less amounts on deposit in the Capitalized Interest Fund in respect of such interest payment) and, if applicable, principal due on all series of the Bonds (including all past due amounts) on the Payment Date for each series of Bonds outstanding next following the day immediately preceding such Monthly Distribution Date (other than in connection with a call for redemption); (ii) the amount on deposit in each of the Capitalized Interest Fund, the Debt Service Reserve Fund (together with the aggregate amount of any Letters of Credit provided in respect of the Debt Service Reserve Requirement), the Company Expense Fund, the Mandatory Redemption Accounts and the Extraordinary Distribution Accounts is equal to or greater than the amount then required to be deposited therein under the Indenture; (iii) no Default or Event of Default under the Indenture shall have occurred and be continuing; and (iv) with certain exceptions, the Company can certify that (a) the historical Company Debt Service Coverage Ratio is equal to or greater than 1.4:1 for the 12 months immediately preceding the month in which such Monthly Distribution Date is to occur (or for such shorter period as the Bonds have been outstanding) and (b) the projected Company Debt Service Coverage Ratio is equal to or greater than 1.4:1 for the 12 months immediately succeeding the month in which such Monthly Distribution Date is to occur (or for such shorter period as the series of Bonds with the latest Final Stated Maturity is scheduled to be outstanding). See "Description of the Exchange Bonds - Certain Covenants - Limitations on Distributions." Registration Rights This Exchange Offer is intended to satisfy certain rights under the Registration Rights Agreement, which rights terminate upon the consummation of the Exchange Offer. Therefore, the holders of Exchange Bonds are not entitled to any exchange or registration rights with respect to the Exchange Bonds. In addition, such exchange and registration rights will terminate as to holders of Old Bonds who are eligible to tender their Old Bonds for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Old Bonds Registration Rights." Transfer of Exchange Bonds Based upon its view of interpretations provided to third parties by the staff of the Commission, the Company believes that the Exchange Bonds issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company or the Issuer, (ii) a broker-dealer who acquired Old Bonds directly from the Issuer or (iii) a broker-dealer who acquired Old Bonds as a result of market making or other trading activities) without registration under the Securities Act, provided that such Exchange Bonds are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of such Exchange Bonds. Each broker- dealer that receives Exchange Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Old Bonds where such Old Bonds were acquired by such broker-dealer as a result of market making activities or other trading activities. The Company and the Issuer have agreed, for a period of 180 days after the consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any such resale. A broker-dealer that delivers such a prospectus to a purchaser in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification provisions). Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Bonds and any other holder that cannot rely upon such interpretations must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Bonds may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the conditions thereto have been met. See "The Exchange Offer - Purpose and Effects of the Exchange Offer" and "Plan of Distribution." Use of Proceeds There will be no cash proceeds to the Issuer or the Company from the exchange of Exchange Bonds for Old Bonds pursuant to the Exchange Offer.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023300_healthcare_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023300_healthcare_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9087ee1fe1d3ead0cae6b0604480f31a4166e829
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023300_healthcare_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including "Risk Factors," appearing elsewhere in this Prospectus, and the financial statements and notes thereto and other information incorporated by reference herein. Unless the context otherwise requires, the information set forth in this Prospectus gives effect to the transactions described herein under "The Reorganization," which were completed in November 1996, in connection with the Company's initial public offering of Common Stock (the "Initial Public Offering"), and the term "Company" refers to HealthCare Financial Partners, Inc. and its former partnerships and consolidated subsidiaries after giving effect to such transactions. Unless otherwise indicated, the information set forth in this Prospectus does not give effect to the exercise of the Underwriters' over- allotment option. THE COMPANY HealthCare Financial Partners, Inc. (the "Company") is a specialty finance company offering asset-based financing to healthcare service providers, with a primary focus on clients operating in sub-markets of the healthcare industry, including long-term care, home healthcare and physician practices. The Company also provides asset-based financing to clients in other sub-markets of the healthcare industry, including pharmacies, durable medical equipment suppliers, hospitals, mental health providers, rehabilitation companies, disease state management companies and other providers of finance and management services to the healthcare industry. The Company targets small and middle market healthcare service providers with financing needs in the $100,000 to $10 million range in healthcare sub-markets which have favorable characteristics for working capital financing, such as those where growth, consolidation or restructuring appear likely in the near to medium term. Management believes, based on its industry experience, that the Company's healthcare industry expertise and specialized information systems, combined with its responsiveness to clients, willingness to finance relatively small transactions, and flexibility in structuring transactions, give it a competitive advantage in its target markets over commercial banks, diversified finance companies and traditional asset-based lenders. See "Business." From its inception in 1993 through March 31, 1997, the Company has advanced $891.5 million to its clients in over 200 transactions, including $225.0 million advanced during the three months ended March 31, 1997. The Company had 143 clients as of March 31, 1997, of which 72 were affiliates of one or more other clients. The average amount outstanding per client or affiliated client group at March 31, 1997 was approximately $1.2 million. For the years ended December 31, 1995 and 1996, the Company's pro forma net income was $1.5 million and $3.0 million, respectively, and for the three months ended March 31, 1996, the Company's pro forma net income was $421,707. See "Pro Forma Financial Information." For the three months ended March 31, 1997, the Company's consolidated net income was $1.1 milion. See "Selected Financial Information." For the three months ended March 31, 1997, the Company's yield on finance receivables (total interest and fee income divided by average finance receivables for the period) was 17.2%. See "Management's Discussion and Analysis of Historical Financial Condition and Historical Results of Operations" for a discussion of the effect of a change of portfolio composition on expected yields. At March 31, 1996, 52.6% of the Company's portfolio consisted of finance receivables from businesses in the long-term care and home healthcare sub- markets. Estimated expenditures in 1996 for the long-term care, home healthcare and physician practice sub-markets, which the Company currently emphasizes, collectively constituted approximately $334.9 billion of the over $1 trillion U.S. healthcare market. These sub-markets are highly fragmented, and companies operating in these sub-markets generally have significant working capital finance requirements. The Company's clients operating in these sub-markets tend to be smaller, growing companies with limited access to traditional sources of working capital financing from commercial banks, diversified finance companies and asset-based lenders because many such lenders have not developed the healthcare industry expertise needed to underwrite smaller healthcare service companies or the specialized systems necessary to track and monitor healthcare accounts receivable transactions. Some of the Company's clients are also constrained from obtaining financing from more traditional working capital sources, due to their inadequate equity capitalization, limited operating history, lack of profitability, or financing needs below commercial bank size requirements. As an asset-based lender, the Company provides financing to its clients based principally on an assessment of the net collectible value of client receivables from third-party payors. See "Business--Market for Healthcare Receivables Financing." The Company currently provides financing to its clients through (i) revolving lines of credit secured by accounts receivable (the "ABL Program"), (ii) advances against accounts receivable (the "AR Advance Program"), and (iii) term loans secured by accounts receivable and other assets (the "STL Program"), often in conjunction with financing provided under either the ABL Program or the AR Advance Program. In all cases, the accounts receivable are obligations of third-party payors, such as federal and state Medicare and Medicaid programs and other government financed programs ("Government Programs"), commercial insurance companies, health maintenance organizations and other managed healthcare concerns, self-insured corporations and, to a limited extent, other healthcare service providers. Under both the ABL Program and AR Advance Program, the Company generally advances only 65% to 85% of the Company's estimate of the net collectible value of client receivables from third-party payors. The Company's credit risk is mitigated by the Company's ownership of or security interest in the remaining balance of such receivables ("Excess Collateral"). Clients continue to bill and collect the accounts receivable, subject to lockbox collection and sweep arrangements established for the benefit of the Company. The Company uses its proprietary information systems to monitor its clients' accounts receivable base on a daily basis and to assist its clients in improving and streamlining their billing and collection efforts with respect to such receivables. The Company conducts extensive due diligence on potential clients for all its financing programs and follows written underwriting and credit policies in providing financing to clients. To date, the Company has not incurred any credit losses, although it periodically makes provisions for possible future losses in the ordinary course of its business. See "Business--Financing Programs." In late 1996, the Company began to expand its STL Program. As part of this expansion, the Company obtained a commitment from an affiliate of Farallon Capital Management, LLC ("Farallon"), a fund manager, to provide up to $20 million to fund secured term loans to healthcare providers through a limited partnership of which a wholly-owned subsidiary of the Company is the general partner. See "--Recent Developments." Affiliates of Farallon are Selling Stockholders in the Offering. See "Principal and Selling Stockholders." The Company has developed low cost means of marketing its services on a nationwide basis to selected healthcare sub-markets. The Company primarily markets its services by telemarketing to prospective clients identified by the Company, advertising in industry specific periodicals and participating in industry trade shows. The Company also markets its services by developing referral relationships with accountants, lawyers, venture capital firms, billing and collection companies and investment banks. The Company's clients also assist the Company's marketing efforts by providing referrals and references. Prior to the Initial Public Offering, the Company funded its activities primarily through a bank line of credit, partnership capital and stockholders' equity. On December 5, 1996 the Company entered into a financing arrangement with ING Baring (U.S.) Capital Markets, Inc. ("ING") for $100 million of financing under an investment grade, asset-backed commercial paper program (the "CP Facility"). The Company is a Delaware corporation which was organized in April 1993 and commenced its business in September 1993. The Company's principal executive offices are located at 2 Wisconsin Circle, Suite 320, Chevy Chase, Maryland 20815, and its telephone number is (301) 961-1640. STRATEGY The Company's goal is to be the leading finance company in its targeted sub- markets of the healthcare services industry. The Company's strategy for growth is based on the following key elements (see "Business--Strategy"): . Target sub-markets within the healthcare industry that have favorable characteristics for working capital financing, such as fragmented sub- markets experiencing growth, consolidation or restructuring; . Focus on healthcare service providers with financing needs of between $100,000 and $10 million, a market that has been under served by commercial banks, diversified finance companies, traditional asset-based lenders and other competitors of the Company; . Introduce new financial products to leverage the Company's existing expertise in healthcare finance and its origination, underwriting and servicing capabilities within its target sub-markets; . Seek to make strategic acquisitions of and investments in businesses which are engaged in the same or similar business as the Company or which are engaged in lines of business complementary to the Company's business; and . Enhance the Company's credit risk management and improve servicing capabilities through continued development of information management systems, which can also be used to assist the Company's clients in managing the growth of their businesses. THE REORGANIZATION Prior to the Initial Public Offering, the Company conducted its operations principally in its capacity as the general partner of HealthPartners Funding, L.P. ("Funding") and HealthPartners DEL, L.P. ("DEL"). Management concluded that the Company's future financial position and results of operations would be enhanced if the Company directly owned the portfolio assets of each of these limited partnerships and the transactions described below (the "Reorganization") were effected by the Company prior to or simultaneously with the Initial Public Offering. See "Pro Forma Financial Information" and "Certain Transactions." Effective as of September 1, 1996, Funding acquired all of the net assets of DEL, consisting principally of finance receivables, for $486,630 in cash, which amount approximated the fair value of DEL's net assets. Following the acquisition, DEL distributed the purchase price to its partners and was dissolved. The purpose of the transaction was to consolidate the assets of DEL and Funding in anticipation of the acquisition by the Company of the limited partnership interests of Funding described below. See "Certain Transactions." Effective upon completion of the Initial Public Offering, the Company acquired from HealthPartners Investors, LLC ("HP Investors"), the sole limited partner of Funding, all of the limited partnership interests in Funding and paid the $21.8 million purchase price for such assets from the proceeds of the Initial Public Offering. Such purchase price represented the limited partner's interest in the net assets of Funding and approximated both the fair value and book value of the net assets. Funding was subsequently liquidated and dissolved, and all of its net assets at the date of transfer, consisting principally of advances made under the ABL Program and the AR Advance Program were transferred to the Company. In connection with the liquidation of Funding, Farallon Capital Partners L.P. ("FCP") and RR Capital Partners, L.P. ("RR Partners"), the only two members of HP Investors, exercised warrants for the purchase of an aggregate of 379,998 shares of Common Stock, which warrants were acquired on December 28, 1994 for an aggregate payment of $500, which represented the fair value of the warrants at that date. No additional consideration was paid in connection with the exercise of the warrants. HP Investors transferred the warrants to FCP and RR Partners in contemplation of the liquidation of Funding. In November 1996, Fleet Capital Corporation ("Fleet") made available to the Company a line of credit (the "Bank Facility") which prior to such time had been available to Funding. This line of credit currently enables the Company to borrow from Fleet up to $35 million on a revolving basis. See "Business-- Capital Resources." RECENT DEVELOPMENTS In May 1997, the Company obtained a proposal from an institutional lender which would allow the Company to securitize certain loans under its STL Program. Under the proposal STL Program loans which meet certain criteria would first be transferred to a single purpose bankruptcy remote corporation formed by the Company and subsequently would be sold to a trust formed pursuant to a trust agreement among the Company, the single purpose corporation and an independent trustee. The purchase price for the loans would be provided in part by the institutional lender through the purchase of certificates of participation issued by the trust. Under the proposal, the principal amount of the certificates of participation purchased by the institutional lender would not exceed 88% of the principal amount of the STL Program loans held by the trust, subject to a $50 million maximum. Interest would accrue on the certificates of participation at a rate equal to LIBOR plus 3.75%. Consummation of this arrangement is subject to a number of conditions, including mutually satisfactory documentation. Also in May 1997, the Company acquired a portfolio of 13 performing loans of a type similar to loans made by the Company under its ABL Program, with a total commitment value of $11.7 million. All of the acquired loans are secured by accounts receivable and are made to companies in the rehabilitation, home health care and medical transportation industries. The purchase price paid for the portfolio was $8.2 million, which approximated the then current outstanding balances of such loans. In March 1997, to obtain funding for an expanded STL Program, the Company formed a Delaware limited partnership known as HealthCare Financial Partners-- Funding II, L.P. ("Funding II"). An affiliate of Farallon has a 99% limited partnership interest in Funding II, and a wholly-owned subsidiary of the Company has a 1% general partnership interest in such partnership. The limited partner has committed to provide up to $20 million to Funding II to fund STL Program loans made to healthcare providers. Utilizing funds available under this partnership structure to make STL Program loans will provide liquidity to the Company for the initial stages of the STL Program without requiring the Company to incur significant additional credit risk. Cash available for distribution from the partnership (other than cash received upon the sale or refinancing of the loans or principal repayments) is distributed 20% to the Company and 80% to the limited partner, with preference given to the limited partner until such partner receives a cumulative, compounded return of 10% per annum on invested capital. Cash received from the sale or refinancing or repayment of the loans is distributed 99% to the limited partner and 1% to the general partner. Under the terms of the partnership agreement, the Company has the right to acquire the loans made by Funding II at any time for 100% of book value thereof. Upon dissolution of Funding II, the Company is required to pay to the limited partner an amount equal to 10% of the limited partner's maximum invested capital. If there is any successor to the business of Funding II which is not an affiliate of the Company, the limited partner is entitled to receive 10% of the equity of such successor. The Company has guaranteed the obligations of the general partner under the partnership agreement. As of May 20, 1997, a total of six secured term loans in an aggregate amount of $14.5 million had been made by Funding II. In April 1997, Funding II executed a letter of intent with Shattuck Hammond Partners ("SHP") providing for the acquisition by Funding II of a 9.9% non- voting preferred stock interest in SHP for a purchase price of $5.75 million. SHP is a privately held, healthcare-focused investment bank with offices in New York, San Francisco and Atlanta. SHP employs 28 investment banking professionals who provide financial advisory services to healthcare companies nationwide. SHP had revenues of approximately $20 million in 1996. The purchase by Funding II of this minority interest is subject to completion of due diligence and mutually satisfactory documentation and is expected to be consummated in July 1997. The right of Funding II to acquire this interest is assignable to the Company. SHP's broad client list includes a number of well known academic medical centers and a large number of growing entrepreneurial healthcare service providers. In addition to a preferred return on the investment, the Company believes that an ownership interest in SHP will provide an additional distribution channel for the Company's products and that SHP will be able to assist the Company in developing new financial products for the healthcare market. In January 1997, the Company, through one of its wholly-owned subsidiaries, provided a $3.3 million subordinated term loan to Health Charge Corporation, a Delaware corporation ("Health Charge"), due January 2002 (subject to certain mandatory prepayment provisions) which is secured by a second lien on all of the assets of Health Charge and by a pledge of all of the issued and outstanding shares of voting capital stock of such corporation. Health Charge provides financing and accounts receivable and medical records management services to hospitals. Financing is provided to patients by Health Charge in the form of a line of credit made available upon the issuance of a credit card. The line of credit can be utilized by hospital patients to pay hospital charges. Health Charge currently has approximately 5,000 active cardholders. The 14 hospitals currently using the services offered by Health Charge are generally larger than the healthcare service providers currently targeted by the Company. The Company believes that its relationship with Health Charge will provide joint marketing opportunities. As part of the transaction with Health Charge, the Company received a warrant to purchase approximately 30% of the capital stock of Health Charge at an aggregate exercise price equal to the greater of $100,000 or an amount equal to 1 1/2% per annum of the outstanding balance of the term loan during any quarter in which Health Charge is profitable, and a right of first refusal to match any offer made by a third party to acquire Health Charge. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............. 2,500,000 shares Common Stock offered by the Selling Stockholders................................... 750,000 shares Common Stock to be outstanding after the Offering....................................... 8,714,991 shares(1) Use of Proceeds................................. To finance the anticipated growth of the Company's ABL Program, AR Advance Program and STL Program. The balance of the net proceeds will be used for general corporate purposes, which may include strategic acquisitions and investments. See "Use of Proceeds." Nasdaq National Market symbol................... "HCFP" </TABLE> - -------- (1) Does not include 750,000 shares of Common Stock reserved for issuance pursuant to the HealthCare Financial Partners, Inc. 1996 Stock Incentive Plan (the "Incentive Plan"). Options to purchase 472,750 shares have been granted under the Incentive Plan (of which 1,875 are presently exercisable). See "Management--Stock Incentive Plan." Also does not include 100,000 shares of Common Stock reserved for issuance pursuant to the HealthCare Financial Partners, Inc. 1996 Director Incentive Plan, under which options to purchase 22,510 shares have been granted (none of which is presently exercisable). See "Management--Director Plan." Also does not include an option to purchase 38,381 shares of Common Stock granted outside the Incentive Plan on November 1, 1995, which option is presently exercisable. SUMMARY FINANCIAL INFORMATION The following sets forth summary unaudited pro forma statements of operations derived from the unaudited pro forma financial information for the years ended December 31, 1995 and 1996, and for the three months ended March 31, 1996 included elsewhere in this Prospectus. The summary unaudited pro forma statements of operations give effect to the Reorganization as if it had occurred at the beginning of the respective periods. Management believes the pro forma information giving effect to the Reorganization is the most meaningful presentation of the Company's operating results. The summary unaudited consolidated statement of operations for the three months ended March 31, 1997 and the balance sheet data as of March 31, 1997 are taken from the Company's historical financial statements. The summary unaudited pro forma statements of operations do not purport to present the actual results of operations of the Company had the transactions and events assumed therein in fact occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The summary unaudited pro forma statements of operations are based on certain assumptions and adjustments further described herein. See "Pro Forma Financial Information" and "Management's Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results of Operations." SUMMARY STATEMENTS OF OPERATIONS <TABLE> <CAPTION> PRO FORMA PRO FORMA HISTORICAL FOR THE YEAR ENDED FOR THE FOR THE DECEMBER 31, THREE MONTHS ENDED THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 1995 1996 1996 1997 ---------- ---------- ------------------- ------------------ <S> <C> <C> <C> <C> Fee and interest income Fee income............ $4,814,504(1) $8,518,215 $1,869,433 $2,570,411 Interest income....... 403,659 3,497,756 411,703 1,917,922 ---------- ---------- ---------- ---------- Total fee and interest income............... 5,218,163 12,015,971 2,281,136 4,488,333 Interest expense........ 634,556 3,408,562 580,030 1,133,156 ---------- ---------- ---------- ---------- Net fee and interest income............... 4,583,607 8,607,409 1,701,106 3,355,177 Provision for losses on receivables............ 217,388 656,116 343,155 150,000 ---------- ---------- ---------- ---------- Net fee and interest income after provision for losses on receivables....... 4,366,219 7,951,293 1,357,951 3,205,177 Operating expenses...... 2,096,297 3,326,994 676,627 1,866,483 Other income............ 224,691 233,982 10,000 429,399 ---------- ---------- ---------- ---------- Income before income taxes.................. 2,494,613 4,858,281 691,324 1,768,093 Income taxes............ 972,899 1,894,730 269,617 647,089 ---------- ---------- ---------- ---------- Net income.............. $1,521,714 $2,963,551 $ 421,707 $1,121,004 ========== ========== ========== ========== Net income per share(2)............... $ 0.26 $ 0.50 $ 0.07 $ 0.18 Weighted average shares outstanding(2)......... 5,938,372 5,945,276 5,938,372 6,214,991 </TABLE> - -------- (Footnotes appear on next page) BALANCE SHEET DATA <TABLE> <CAPTION> AS OF MARCH 31, 1997 -------------- <S> <C> Total assets................................................... $129,243,377 Finance receivables............................................ 116,788,160 Client holdbacks............................................... 12,621,653 Line of credit................................................. 33,538,765 Commercial paper............................................... 44,769,505 Total liabilities.............................................. 101,401,397 Stockholders' equity........................................... 27,841,980 OTHER DATA Number of clients being provided financing at period end(3).... 143 Yield on finance receivables(4)................................ 17.2% Net interest and fee margin.................................... 12.8% Finance receivable turnover ratio(5)........................... 2.6x Allowance for losses on receivables as a percentage of finance receivables................................................... 1.1% Total operating expenses as a percentage of average assets..... 6.5% </TABLE> - -------- (1) Includes $430,000 of fees resulting from the acquisition of certain receivables from MediMax Receivables Funding II, L.P. ("MediMax"). See "Management's Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results of Operations--Overview."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023362_powerwave_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023362_powerwave_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ee947f8a9da19bc7040bf3644f3ed7ab3ab4e046
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023362_powerwave_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Powerwave designs, manufactures and markets ultra-linear radio frequency ("RF") power amplifiers for use in the wireless communications market. The Company's amplifiers, which are key components in wireless communications networks, increase the signal strength of wireless transmissions while reducing interference, or "noise." The reduction of noise enables wireless service providers to offer improved service to subscribers by offering clearer call connections with less interference. Increasing the signal strength of wireless transmissions also improves service by reducing the number of interrupted or dropped calls. Powerwave's RF power amplifiers achieve ultra-linearity at increased levels of amplification through the application of "feedforward" technology, which enables the Company's multi-carrier power amplifiers to significantly reduce RF interference thereby increasing the efficiency of the wireless service provider's network. Powerwave manufactures both single carrier and multi-carrier amplifiers, with a primary focus on multi-carrier products. Multi-carrier amplifiers integrate the functions of several power amplifiers and cavity filters within a single unit, thereby reducing service providers' equipment and maintenance costs and space requirements while providing increased call capacity. The Company's products are currently being utilized in cellular and personal communications services ("PCS") base stations in both digital and analog-based networks. The Company's products support a wide range of digital and analog transmission protocols including CDMA, TDMA, GSM, AMPS and TACS. The Company also produces power amplifiers for the specialized mobile radio ("SMR") market, which is characterized as a two-way radio market with devices commonly utilized by police and emergency personnel and the business dispatch marketplace. The Company began selling RF power amplifiers for use in analog wireless networks in 1985. In 1995, the Company began selling multi-carrier ultra-linear amplifiers for installation in digital cellular base stations in South Korea, and the Company believes that it is the leading supplier of amplifiers to the South Korean market. South Korea is experiencing rapid economic development and is one of the first countries to install a nationwide digital cellular network. In the first quarter of 1997, the Company began initial volume shipments of PCS amplifiers to customers in South Korea which, in addition to installing a digital cellular network, is implementing a new nationwide digital PCS network. The Company's customers in the South Korean market include Hyundai Electronics Industries Co., Ltd. ("Hyundai"), LG Information & Communications Co., Ltd. ("LGIC") and Samsung Electronics Co. Ltd. ("Samsung"). The Company also sells amplifiers domestically to numerous wireless infrastructure equipment suppliers, including ADC Wireless Systems, Inc., AirNet Communications Corp., AT&T Wireless Services, BellSouth Cellular Corp., Metawave Communications Corporation and Phoenix Wireless Group, Inc. The worldwide wireless communications market, which consists of cellular, PCS, SMR, paging, air-to-ground and other applications, has experienced significant growth in recent years. The growth in wireless communications is largely attributable to increased affordability in consumer equipment, such as cellular phones and pagers, more comprehensive service coverage at lower prices and technological advancements which have resulted in improved transmission quality and reliability. International growth has also been driven by the build-out of cellular networks, including those designed to serve as primary telephone systems in part due to inadequacies in existing wireline infrastructures. As demand continues to grow for wireless communications, many service providers either are switching from analog networks to digital networks, which provide for a greater number of transmissions and improved call quality over the same range of existing frequencies, or are further upgrading the capacity of their existing analog networks. Consumer demand for additional services, combined with capacity constraints and other limitations of cellular networks, has also led to the development of PCS which utilizes a higher frequency range and lower power than traditional cellular networks. The continued growth of wireless communications networks throughout the world along with continued upgrading of existing analog systems is expected to result in increased demand for wireless infrastructure equipment, such as the ultra-linear RF power amplifiers manufactured by the Company. The Company's strategic objective is to be the leading third-party supplier of high performance RF power amplifiers for use in both digital and analog wireless networks worldwide. The Company's strategy includes the following key elements: (i) provide leading technology to the RF amplifier industry; (ii) leverage its position as a leading multi-carrier amplifier supplier; (iii) expand relationships with leading original equipment manufacturers ("OEMs"); (iv) increase penetration in the PCS market; (v) maintain its commitment to quality, reliability and manufacturability; and (vi) increase Powerwave's involvement in its customers' product development process. The Company intends to pursue each of these elements of its strategy by focusing its core strengths on the global wireless communications market. The Company was incorporated in Delaware in January 1985 under the name Milcom International, Inc. and changed its name to Powerwave Technologies, Inc. in June 1996. The Company's headquarters and principal place of business are located at 2026 McGaw Avenue, Irvine, California 92614, and its telephone number is (714) 757-0530. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company.............. 750,000 shares Common Stock offered by the Selling Shareholders. 2,250,000 shares Common Stock to be outstanding after the Offering 17,031,324 shares(1) Use of proceeds.................................. The net proceeds of the Offering will be used for capital expenditures, new product development, working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol.................... PWAV </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> YEAR ENDED THREE MONTHS ENDED -------------------------------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 29, MARCH 31, MARCH 30, 1994 1995 1996 1996 1997 ------------ ------------ ------------ --------- --------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales.............. $22,861 $36,044 $60,331 $13,807 $20,243 Cost of sales.......... 14,466 22,713 34,770 8,229 11,528 Gross profit........... 8,395 13,331 25,561 5,578 8,715 Operating expenses: Sales and marketing.. 570 1,557 4,365 1,056 1,581 Research and development......... 1,433 2,252 5,770 1,075 2,211 General and administrative...... 1,518 1,958 2,991 612 943 Total operating expenses.............. 3,521 5,767 13,126 2,743 4,735 Operating income....... 4,874 7,564 12,435 2,835 3,980 Other income (expense)............. (20) 32 484 59 473 Income before income taxes................. 4,854 7,596 12,919 2,894 4,453 Provision for income taxes................. 1,908 3,116 5,297 1,186 1,692 Net income ............ $ 2,946 $ 4,480 $ 7,622 $ 1,708 $ 2,761 Pro forma net income and net income per share(2).............. $ .31 $ .52 $ .12 $ .17 Pro forma weighted average and weighted average common shares................ 14,475 14,606 14,475 16,728 </TABLE> <TABLE> <CAPTION> MARCH 30, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................ $37,341 $50,221 Total assets........................................... 58,381 71,261 Long-term debt......................................... 631 631 Total shareholders' equity............................. 43,702 56,582 </TABLE> - -------- (1) Excludes 1,949,375 shares of Common Stock issuable upon exercise of outstanding stock options as of March 30, 1997 at a weighted average exercise price of $4.36 per share, other than options to acquire 40,000 shares that will be exercised, and which underlying shares will be sold in the Offering, by certain Selling Shareholders. Under an agreement with the Company, certain shareholders have agreed that, once the Company has issued an initial 1,095,000 shares of Common Stock under the 1995 Stock Option Plan, the next 843,615 shares issued under that Plan upon option exercises will be coupled with a pro rata redemption from those shareholders of an equal number of shares at a redemption price equaling the option exercise price. See "Capitalization" and "Management--1995 Stock Option Plan." (2) See Note 2 of Notes to Consolidated Financial Statements. (3) Adjusted to reflect the sale by the Company of 750,000 shares of Common Stock at an assumed public offering price of $18.625 per share and the application of the estimated net proceeds therefrom and the receipt of the exercise price related to the exercise of options to purchase 40,000 shares which are being sold in the Offering. See "Use of Proceeds," "Capitalization" and "Selected Financial Data." Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023388_four_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023388_four_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..35069a04a034b156501d6dbc532e4f93dd25b8fc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023388_four_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (and related notes thereto) included elsewhere in this Prospectus. The discussion in this Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Risk Factors" and elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option or any outstanding stock options, and (ii) reflects the Company's reorganization effected in 1996. See "Certain Transactions-- Reorganization." THE COMPANY Four Media Company is a leading provider of technical and creative services to owners, producers and distributors of television programming, feature films and other entertainment content in the United States and Asia. The name Four Media Company is derived from the Company's core competencies in film, video, sound and data. The Company's services integrate and apply a variety of systems and processes to enhance the creation and distribution of entertainment content. The Company seeks to capitalize on growth in domestic and international demand for original entertainment content and for existing television and film libraries without taking production or ownership risk with respect to any specific television program, feature film or other content. Since its formation in 1993 through the first quarter of fiscal 1997, the Company has invested $72.6 million in infrastructure, primarily for new digital systems and equipment. In addition, the Company has successfully identified, acquired and integrated four complementary businesses. The Company acquired the assets of three companies in connection with its formation in 1993, acquired the assets of a fourth company in 1994, and capitalized and commenced its Singapore broadcast operations in 1995. As a result of its investments and acquisitions, the Company is one of the largest and most diversified independent (not affiliated with or related to a content owner) providers of technical and creative services to the entertainment industry, and therefore is able to offer its customers a single source for such services. The Company has organized its activities into four divisions through which it provides services to a diverse base of customers, including all of the major domestic studios (and their international divisions), as well as independent producers and owners of television and film libraries, and broadcast networks. Studio Services. The studio services division, located in Burbank, California, provides owners of television and film libraries with the facilities and technical services necessary to manage, format and distribute content worldwide. These technical services include duplicating videotape for professional applications, restoring and preserving film, transferring film to videotape and transforming videotape to film. Broadcast Services. The broadcast services division, located in Burbank and the Republic of Singapore, provides domestic and international programmers with the facilities and services necessary to assemble and distribute programming via satellite to viewers in the United States, Canada and Asia. These services include assembling programming into a 24-hour "network" format, creating promotional graphics, providing production support and facilities for the creation of programming, and providing automated systems to deliver the programming via satellite. Television Services. The television services division, located in Burbank and Santa Monica, California, provides producers of original television programming with technical and creative services necessary to convert original film or video to a final product suitable for airing on network, syndicated, cable or foreign television. These services include developing film, converting film to videotape and/or digital formats, creating music, sound and visual effects, and assembling a program master for broadcast. Visual Effects Services. The visual effects services division, located in Burbank and Santa Monica, commenced operations in January 1995 and provides creators of special visual effects with certain services required to digitally create or manipulate images in high resolution formats for integration into feature films. These services include pre-production consulting, the design and creation of visual effects, scanning film to a digital format, and recording the digital information on film. The Company believes that several trends in the entertainment industry will have a positive impact on the Company's business. These trends include growth in worldwide demand for original entertainment content, the development of new markets for existing content libraries, increased demand for innovation and creative quality in entertainment markets and wider application of digital technologies to content manipulation and distribution, including the emergence of new distribution channels. The Company believes that its current and prospective customers increasingly will outsource services and "buy" rather than "make" technical and creative services as the creation and distribution of content becomes more technology driven and capital intensive. Also, the Company anticipates that as entertainment companies continue to consolidate, they increasingly will seek services from full-service providers such as the Company. The Company intends to pursue the following growth strategies: . Seek Consolidation Opportunities. The Company believes that its industry is highly fragmented and presents numerous consolidation opportunities. The Company plans to pursue acquisitions that complement existing operations, increase market share and diversify product lines. . Offer Complete Outsourcing Solutions. The Company offers complete outsourcing solutions by bundling services, which reduces the capital costs and certain financial and operating risks of customers. . Deploy Leading Technologies. The Company plans to continue its investment in component digital equipment, information systems and other leading technologies in order to enhance its reputation for technological leadership in its industry. . Expand Internationally. The Company intends to expand internationally in response to specific customer demand, particularly where the Company's technical expertise, financial strength and the ability to execute quickly are competitive advantages. . Establish Strategic Alliances. The Company seeks to generate additional revenue from its technological resources and facilities by establishing strategic alliances with content creators and others. . Capitalize on Increasing Application of Digital Technology. The Company intends to capitalize on new methods of applying digital technology for storing, retrieving and manipulating content, as well as increased demand for digital technology for use in high quality motion video, multimedia applications and new content distribution channels. The executive officers and directors of the Company and their affiliates, as a group, will beneficially own approximately 42% of the outstanding shares of Common Stock and are subject to three year lockup agreements (other than Messrs. Kirtman and Topor in respect of Common Stock pursuant to a distribution from the Selling Stockholder). See "Risk Factors--Concentration of Ownership," "Shares Eligible for Future Sale" and "Underwriting." THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company.............. 3,077,502 shares Common Stock offered by the Selling Stockholder.. 2,622,498 shares Common Stock outstanding after the offering...... 9,552,502 shares(1) Use of proceeds to the Company................... For repayment of certain indebtedness (including approximately $9.0 million plus accrued interest outstanding to the Selling Stockholder), capital expenditures, working capital and other general corporate purposes, including potential acquisitions. See "Use of Proceeds." Nasdaq National Market symbol.................... FOUR </TABLE> - ------------------- (1) Excludes 1,415,125 shares of Common Stock issuable upon exercise of stock options to be outstanding upon completion of the offering. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FISCAL YEARS ENDED THREE MONTHS ENDED ------------------------------------------ --------------------------------- JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996 OCTOBER 29, 1995 NOVEMBER 3, 1996 ------------- ------------- -------------- ---------------- ---------------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues.............. $42,261 $61,004 $70,028 $17,632 $18,947 Income from operations........... 2,488 5,149 5,336 1,030 1,338 Net income............ 1,235 3,220 2,424 313 124 Net income per share.. .19 .50 .37 .05 .02 Weighted average number of common shares outstanding(1)....... 6,475 6,475 6,475 6,475 6,475 OTHER DATA: EBITDA(2)............. $ 5,772 $11,390 $15,501 $ 3,527 $ 4,133 Net cash provided by operations........... 3,047 4,588 9,387 1,585 796 Net cash used in investing activities........... 7,877 30,902 10,318 3,071 8,753 Net cash provided by (used in) financing activities........... 8,972 28,102 (410) 332 8,135 </TABLE> <TABLE> <CAPTION> AS OF NOVEMBER 3, 1996 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash, including restricted cash........................ $ 6,199 $ 13,001 Working capital........................................ 3,549 13,885 Total assets........................................... 99,301 106,812 Total debt(4).......................................... 62,970 39,970 Total stockholder's equity............................. 22,264 52,774 </TABLE> - ------------------- (1) Weighted average number of common shares outstanding has been presented to reflect retroactively the Company's reorganization and related stock exchange with and stock dividend to its sole stockholder in October and November 1996. See notes to the financial statements. (2) "EBITDA" is defined herein as earnings before interest, taxes, depreciation and amortization, excluding gains and losses on asset sales and nonrecurring charges. EBITDA does not take into account normal capital expenditures and does not represent cash generated from operating activities in accordance with generally accepted accounting principles ("GAAP"), is not to be considered as an alternative to net income or any other GAAP measurements as a measure of operating performance and is not indicative of cash available to fund all cash needs. The Company's definition of EBITDA may not be identical to similarly titled measures of other companies. The Company believes that in addition to cash flows and net income, EBITDA is a useful financial performance measurement for assessing the operating performance of the Company because, together with net income and cash flows, EBITDA widely is used to provide investors with an additional basis to evaluate the ability of the Company to incur and service debt and to fund acquisitions or invest in new technologies. To evaluate EBITDA and the trends it depicts, the components of EBITDA, such as net revenues, cost of services, and sales, general and administrative expenses, should be considered. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." A reconciliation of net income to EBITDA is as follows: <TABLE> <CAPTION> FISCAL YEARS ENDED THREE MONTHS ENDED ------------------------------------------ --------------------------------- JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996 OCTOBER 29, 1995 NOVEMBER 3, 1996 ------------- ------------- -------------- ---------------- ---------------- <S> <C> <C> <C> <C> <C> Net income.............. $1,235 $ 3,220 $ 2,424 $ 313 $ 124 Add (deduct): Interest expense, net................. 1,253 2,917 3,906 921 1,214 Income tax benefits.. -- (988) (994) (204) -- Depreciation and amortization........ 3,284 6,241 10,165 2,497 2,795 ------ ------- ------- ------ ------ EBITDA.................. $5,772 $11,390 $15,501 $3,527 $4,133 ====== ======= ======= ====== ====== </TABLE> (3) Adjusted to give effect to the sale of 3,077,502 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $11.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses, and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." (4) Includes a revolving line of credit, current and long term portions of term loan facilities, short and long term notes payable, capital lease obligations and a subordinated note due to the Company's sole stockholder.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023389_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023389_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c086d6368d75ae491ce8797fb0bb54facdcdea35
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023389_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following discussion summarizes certain information contained in this Prospectus. It does not purport to be complete and is qualified in its entirety by reference to more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. All share and per share information in this Prospectus has been restated to reflect the recapitalization effective November 1996 pursuant to which the 1,000 outstanding shares of Common Stock were converted into 9,200,000 shares of Common Stock, 1,000,000 shares of Class A Common Stock, 5,000 shares of Series A Redeemable Preferred Stock and 5,000 shares of Series B Convertible Redeemable Preferred Stock and the cancellation of the Series B Convertible Redeemable Preferred Stock as of December 31, 1996. THE COMPANY International Magnetic Imaging, Inc. ("IMI" or the "Company") owns and operates ten medical diagnostic imaging centers (the "Centers"), of which three are multi-modality Centers and seven are exclusively magnetic resonance imaging ("MRI") Centers. One of the MRI Centers is owned and operated by a joint venture in which the Company has a 50% interest. The Company also operates a referral network through which patients are referred to diagnostic imaging centers, including the Company's Centers. Medical diagnostic imaging procedures, such as MRI, are used to diagnose various diseases and physical injuries. The multi-modality Centers use various imaging procedures, which may include any one or more of MRI, computed axial tomography ("CT"), mammography, X-ray, fluoroscopy, ultrasound and other technologies, while the MRI centers only offer MRI. Since the commercial introduction of MRI in the early 1980's, the use of MRI has experienced rapid growth due to the technology's ability to provide anatomical images of high contrast and detail without the use of radiation or x-ray based technologies. MRI employs high-strength magnetic fields, high frequency radio waves and high-speed computers to process data. In addition, the development of pharmaceutical contrast agents, software advancements and new hardware peripherals continue to expand the clinical applications and throughput efficiency of MRI technology. The major components of an MRI system are (i) a large, cylindrical magnet, (ii) radio wave equipment, and (iii) a computer for data storage and image processing. During an MRI study, a patient lies on a table which is then placed into the magnet. Although patients have historically spent 30 to 45 minutes inside the magnet during which time images of multiple planes are acquired, the newest MRI machines allow patients to spend significantly less time inside the magnet. Additional time is required for computer processing of the images. The Company is not engaged in the practice of medicine and does not employ any physicians to provide medical services. The Company's bills include fees for the technical services provided by it and the professional services rendered by the radiologists. The radiologists, who are independent contractors engaged by the Company to read the scans, are compensated by the Company pursuant to agreements with the radiologists. See "Business -- Agreements with Radiologists." The Company is a Delaware corporation, organized on March 8, 1994 to acquire ten Centers which were managed by International Magnetic Imaging, Inc., a Florida corporation ("IMI-Florida"). The Company was organized under the name IMI Acquisition Corp. and its name was changed to International Magnetic Imaging, Inc. in May 1995. The Company commenced operations on September 30, 1994 with the acquisition of nine of the Centers. The tenth Center was acquired in January 1995. The Company's executive offices are located at 2424 North Federal Highway, Suite 410, Boca Raton, Florida 33431, telephone (561) 362-0917. Each of the Centers was acquired by a separate subsidiary of the Company, except that each of the seven Centers in Florida, which are owned and operated by limited partnerships, was acquired by two subsidiaries, one which acquired the general partnership interest and the other which acquired the limited partnership interest. References to the Company include the Company, its subsidiaries and IMI-Florida unless the context indicates otherwise. The purchase price of the ten Centers, together with certain related companies, including the capital stock of IMI-Florida and the assets of J. Sternberg and S. Schulman M.D. Corp., a Florida corporation ("MD Corp."), which provided the services of radiologists to the Centers, was $30.6 million, of which $7.0 million was paid in cash, $20.7 million was paid by the issuance of subordinated notes (the "Subordinated Notes"), and $2.9 million was paid through the issuance of shares of common stock of Consolidated Technology Group Ltd. ("Consolidated"), the parent of the Company, exclusive of acquisition costs of $1.3 million. See "Certain Transactions -- Acquisition of the Centers." As of March 31, 1997, all of the Company's Common Stock was owned by SIS Capital Corp. ("SISC"), a wholly-owned subsidiary of Consolidated, a public company. At such date, SISC owned approximately 90.2% of the Common Stock and Class A Common Stock outstanding on a combined basis. The Class A Common Stock is non-voting stock. At March 31, 1997, the Company owed SISC approximately $1.1 million. See "Certain Transactions" and "Principal Stockholders." Mr. Lewis S. - 3 - <PAGE> Schiller, chairman of the board and a director of the Company, is also chairman of the board, chief executive officer and a director of Consolidated and SISC. Mr. Schiller is also chairman of the board of Netsmart Technologies, Inc. ("Netsmart"), and Trans Global Services, Inc. ("Trans Global"), which are public corporations of which SISC is the principal stockholder. Mr. George W. Mahoney, chief financial officer of the Company, is also the chief financial officer of Consolidated. Mr. Norman J. Hoskin, a director of the Company, is also a director of Consolidated, Trans Global and Netsmart. Mr. E. Gerald Kay, a director of the Company, is also a director of Trans Global. See "Management -- Directors and Executive Officers." Stephen A. Schulman, M.D., president and chief executive officer of the Company, was president of IMI-Florida prior to the Company's acquisition of the Centers. At the time of the acquisition of nine of the Centers in September 1994, the Company entered into a five-year employment agreement with Dr. Schulman pursuant to which he receives annual compensation at the rate of $350,000 and an annual bonus of not less than $100,000 nor more than $700,000. See "Management --Remuneration." In connection with the acquisition of the Centers, certain of the Company's subsidiaries issued to Dr. Schulman, his wife, the other two former stockholder-directors of IMI-Florida, to MD Corp. and to entities in which Dr. Schulman has an equity interest (collectively, the "Schulman Affiliated Entities") Subordinated Notes in the aggregate principal amount of $8.7 million, of which Subordinated Notes in the amount of $6.9 million were outstanding at March 31, 1997. The Company's subsidiaries have not made certain payments under certain of such Subordinated Notes, and the failure to make such payments gives the holders the right to declare a default. In addition, Dr. Schulman and the other two former stockholder-directors of IMI-Florida, have personally guaranteed certain obligations of certain of the partnerships which operate Centers. The total amount personally guaranteed was approximately $1.9 million at March 31, 1997. See "Certain Transactions." In November 1996, prior to the filing of the registration statement of which this Prospectus is a part, the Company effected a recapitalization pursuant to which the 1,000 then outstanding shares of Common Stock became and were converted into (a) 9,200,000 shares of Common Stock, all of which are owned by SISC, (b) 1,000,000 shares of Class A Common Stock, which were owned by Mr. Schiller (150,000 shares), Mr. Schiller's designees (700,000 shares) and three other transferees of SISC, one of whom is an officer and director of Consolidated and the other two of whom have no affiliation with either the Company or SISC (150,000 shares), (c) 5,000 shares of Series A Redeemable Preferred Stock ("Series A Preferred Stock"), all of which are owned by SISC, and (d) 5,000 shares of Series B Preferred Stock. The recapitalization was effected by the filing in November 1996 of the Company's restated certificate of incorporation and a certificate of designation setting forth the rights of the holders of the Class A Common Stock, the Series A Preferred Stock and the Series B Preferred Stock. The stockholders other than SISC agreed to accept only Class A Common Stock, except Mr. Schiller who accepted Class A Common Stock and Series B Preferred Stock, in respect of their equity interests in the Company. The Common Stock and the Class A Common Stock are identical except that the holders of the Class A Common Stock have no voting rights, except as required by law. The Series A Preferred Stock is non-voting, except as required by law. At December 31, 1996, all of the shares of Series B Preferred Stock were canceled. THE OFFERING Securities Offered: 600,000 Units at $7.00 per Unit. Each Unit consists of two shares of Common Stock and two Series A Redeemable Common Stock Purchase Warrants (the "Warrants"). The shares of Common Stock and Warrants comprising the Units are separately transferrable immediately upon issuance. Description of Warrants: Exercise of Warrants The Warrants are exercisable commencing one year from the date of this Prospectus. Subject to redemption by the Company, the Warrants may be exercised at any time during the two-year period commencing one year from the date of this Prospectus at an exercise price of $4.00 per share, subject to adjustment. Redemption of Warrants The Warrants are redeemable by the Company commencing 18 months from the date of this Prospectus, or earlier with the consent of the Underwriter, at $.10 per Warrant, on not more than 60 nor less than 30 days written notice, provided that the average closing price of the Common Stock is at least $12.00 per share, subject to adjustment, for a period of ten consecutive trading days ending not earlier than three days prior to the date the Warrants are called for redemption. The consent of the Underwriter cannot be granted with respect to a redemption prior to the date the Warrants may be exercised. Use of Proceeds: The net proceeds of this Offering will be used for working capital and other corporate purposes. See "Use of Proceeds." - 4 - <PAGE> Risk Factors: Purchase of the Units involves a high degree of risk and substantial dilution, and should be considered only by investors who can afford to sustain a loss of their entire investment. See "Risk Factors" and "Dilution." Proposed OTC Bulletin Board Symbols: Units Common Stock Warrants Common Stock and Common Stock Purchase Warrants Outstanding: At the date of this Prospectus: 9,200,000 shares of Common Stock(1) 1,000,000 Series B Warrants(2) As Adjusted(3): 10,400,000 shares of Common Stock(1) 1,200,000 Warrants 1,000,000 Series B Warrants (1) Does not include 1,000,000 shares of Common Stock issuable pursuant to the Series B Warrants or any shares of Common Stock issuable upon exercise of the Warrants, the Underwriters' over-allotment option or Underwriter's Options or the securities underlying the Underwriter's Options. In addition, 1,000,000 shares of Class A Common Stock, which is non-voting, are outstanding and an aggregate of 3,450,000 shares of Class A Common Stock are reserved for issuance upon exercise of warrants (2,250,000 shares) and options granted or available for grant pursuant to the Company's 1994 Long Term Incentive Plan (1,200,000 shares). In addition, warrants to purchase 25,000 shares of Class A Common Stock may be issued to Dr. Schulman in connection with a proposed exchange of his Subordinated Notes. The Class A Common Stock automatically converts into shares of Common Stock under certain conditions. See "Description of Securities -- Capital Stock." (2) The Series B Warrants have an exercise price of $2.00 per share. See "Certain Transactions" and "Description of Securities -- Series B Common Stock Purchase Warrants." (3) Reflects the issuance of the 1,200,000 shares of Common Stock and 1,200,000 Warrants included in the 600,000 Units offered hereby. - 5 - <PAGE> SUMMARY FINANCIAL DATA (in thousands, except per share amounts) INTERNATIONAL MAGNETIC IMAGING, INC. Statement of Operations Data: <TABLE> <CAPTION> Three Months Ended March 31, Years Ended December 31, September 30, 1994 ---------------------------- ------------------------ (Inception)1 to December 31, 1994 ----------------- 1997 1996 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> Revenue $7,700 $8,114 $31,110 $28,044 $6,557 Operating income before other income and taxes 898 1,883 4,425 5,367 1,036 Income before income taxes 584 1,266 1,958 2,891 473 Net income 106 547 1,041 1,761 1,775 Net income per share of Common Stock:2 Primary .01 .04 .08 .13 .11 Fully diluted .01 .04 .08 .13 .11 Weighted average number of shares of Common Stock outstanding:2,3 Primary 12,728 16,600 16,711 16,600 16,529 Fully diluted 12,728 16,600 17,029 16,600 16,529 </TABLE> Balance Sheet Data: <TABLE> <CAPTION> March 31, 1997 ------------------------------- As Adjusted(4) Actual December 31, 1996 -------------- ------ ----------------- <S> <C> <C> <C> Working capital (deficiency) $ (660) $ (5,073) $(5,018) Total assets 46,281 43,644 44,638 Long-term debt 19,550 19,550 21,159 Total liabilities 35,999 36,923 38,408 Redeemable Preferred Stock 624 -- -- Accumulated earnings 4,684 4,684 4,578 Liquidation preference of Series A Preferred Stock 5,377 5,377 4,984 Stockholders' equity(2),(5) 4,825 6,721 6,230 Net tangible book value (deficiency) per share of Common Stock(2),(6) (.93) (1.38) (1.42) </TABLE> =================== No dividends were paid since inception. (1) Although the Company was organized in March 1994, it did not commence operations until September 30, 1994, when it acquired nine of the Centers. (2) For purposes of net income per share of Common Stock, stockholders' equity and net tangible book value per share of Common Stock, the Common Stock and Class A Common Stock are treated as a single class, and the weighted average number of shares of Common Stock outstanding includes both the outstanding Common Stock and the Class A Common Stock. (3) All shares of Common Stock and Class A Common Stock issued prior to the date of this Prospectus are treated as outstanding since inception. (4) As adjusted to reflect (a) the receipt by the Company of the estimated net proceeds from the sale of the 600,000 Units offered hereby and (b) the issuance of shares of Series C Redeemable Preferred Stock ("Series C Preferred Stock") upon the exchange of certain Subordinated Notes for shares of Series C Preferred Stock. See "Capitalization" and "Certain Transactions -- Schulman Agreement." - 6 - <PAGE> (5) Stockholders' equity at March 31, 1997, as adjusted, is net of the liquidation preferences relating to the Series A Preferred Stock. The historical financial information at March 31, 1997 and December 31, 1996 includes such liquidation preference in stockholders' equity. See "Description of Securities -- Series A Preferred Stock." (6) Net tangible book value per share of Common Stock represents the amount of the Company's tangible assets reduced by the amount of its liabilities and the liquidation preference of the Series A Preferred Stock divided by the number of outstanding shares of Common Stock and Class A Common Stock. INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR]1 Statement of Operations Data: <TABLE> <CAPTION> Year Ended December 31, Nine Months Ended September 30, 1994 1993 1992 ---- ---- <S> <C> <C> <C> Revenue $21,162 $26,572 $26,718 Net income 3,681 3,516 3,462 Pro forma net income(2) 2,208 2,109 2,077 </TABLE> Balance Sheet Data: <TABLE> <CAPTION> September 30, 1994 December 31, 1993 December 31, 1992 ------------------ ----------------- ----------------- <S> <C> <C> <C> Working capital $ 6,315 $ 3,832 $ 4,299 Total assets 22,080 24,585 27,966 Long-term debt 5,823 5,835 8,514 Total liabilities 10,970 13,495 16,963 Accumulated earnings 6,052 6,032 7,145 Stockholders' equity 11,109 11,090 11,030 </TABLE> (1) The financial information for International Magnetic Imaging, Inc. [Predecessor] reflects the combined financial statements of IMI-Florida and its wholly-owned subsidiaries and related partnerships. (2) The pro forma effects of income tax expense have been computed based on an effective rate of 40% for Federal and state income taxes which were in effect for the respective periods.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023516_ef_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023516_ef_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..493c1912de3a9bd3cfca4c927ad46fce9b8224e5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023516_ef_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, included elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Unless the context otherwise provides, all references to the "Company" include Transcrypt International, Inc., its predecessor entities and E.F. Johnson Company, on a Pro Forma combined basis; all references to "Transcrypt" refer to Transcrypt International, Inc.; and all references to "E.F. Johnson" refer to E.F. Johnson Company. In addition to the historical information contained herein, certain statements in this Prospectus constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and as such, may involve risks and uncertainties. The Company's actual results may differ significantly from those discussed herein. Factors that might cause such a difference include, but are not limited to, those discussed under the caption "Risk Factors." See "Risk Factors -- Forward-Looking Statements." THE COMPANY The Company is a leading manufacturer of information security products and wireless communications products and systems. The Company designs and manufactures information security products which prevent unauthorized access to sensitive voice and data communications. These products are based on a wide range of analog scrambling and digital encryption technologies and are sold principally to the land mobile radio ("LMR"), telephony and data security markets. The Company manufactures a wide range of wireless communications products and systems principally for the LMR market. Typical end users of the Company's products include state, local and foreign government agencies, including police and other public safety departments, and industrial and commercial organizations such as taxi fleets, railroads and construction and oil and gas companies. The Company's objective is to leverage its expertise in information security and digital communications technologies to provide new and expanded business solutions for the telecommunications industry. The Company's strategy to accomplish its objective includes the following elements: developing new products based on its existing core technologies; offering complete, stand-alone secure communications solutions; fostering key strategic relationships; and exploring strategic acquisitions. The Company believes that its expertise in both analog and digital information security, including the ability to provide "dual mode" analog and digital security in the same product, provides a competitive advantage as communications products migrate from analog to digital technology. The Company is also using its technological expertise to transition from supplying principally "add-on" information security components for installation in products manufactured by others to also providing complete, stand-alone secure communications systems. For example, in August 1996, the Company introduced a hand-held LMR which is compatible with "APCO 25," a recently adopted industry standard for digital LMRs. The Company is also developing a complete secure APCO 25 compliant LMR system incorporating this product. The Company intends to continue developing key strategic relationships in the areas of distribution, marketing and technology licensing, and exploring strategic acquisitions to complement and support the Company's products and technologies. THE E.F. JOHNSON ACQUISITION As part of its growth strategy, in July 1997 the Company expanded its presence in the wireless communications market by acquiring E.F. Johnson Company ("E.F. Johnson"), an established provider of products and systems for the LMR market. The Company acquired the capital stock of E.F. Johnson for $436,000 in cash and 832,465 shares of Common Stock. Through its E.F. Johnson subsidiary, the Company designs, develops, manufactures and markets stationary LMR transmitters/receivers (base stations and repeaters) and mobile and portable radios. The Company markets its LMR products and systems principally in two broad markets: business and industrial ("B&I") users and public safety and other governmental users. Management believes that the E.F. Johnson acquisition has benefited the Company by accelerating the implementation of its growth strategy. As a significant participant in the LMR market, E.F. Johnson provides the Company with a broad line of LMR products and systems and a platform to leverage its information security and digital technologies. E.F. Johnson also provides the Company with a significantly expanded distribution network in domestic and overseas markets and with additional manufacturing capacity to support increased sales of information security and wireless communications products. Furthermore, the acquisition has provided the Company with additional research and development resources, particularly in radio frequency ("RF") technology and other technologies which management believes may provide further expansion opportunities. In December 1991, the Company acquired the business of its predecessor, which was founded in 1978. The Company's principal offices are located at 4800 NW 1st Street, Lincoln, Nebraska 68521, and its telephone number is (402) 474-4800. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,000,000 shares Common Stock offered by the Selling Stockholders............................... 2,000,000 shares Common Stock outstanding after the offering(1)................................ 12,210,543 shares Use of proceeds to the Company............... Reduction of bank indebtedness; facilities expansion and improvement; working capital; potential acquisitions; and general corporate purposes. Nasdaq National Market symbol................ TRII </TABLE> - --------------- (1) Excludes 1,075,533 shares of Common Stock reserved for issuance upon exercise of options outstanding as of the date of this Prospectus under the Company's stock option plan, at a weighted average exercise price of $4.39 per share, and an aggregate of 124,467 shares available for future issuance thereunder. Includes 95,000 shares to be issued upon the exercise of options by a Selling Stockholder, John T. Connor, which shares are being offered hereby. "Management -- 1996 Stock Incentive Plan" and "Principal and Selling Stockholders." RECENT DEVELOPMENTS On October 13, 1997, the Company reported preliminary results of operations for the quarter and nine months ended September 30, 1997, including two months of operations of E.F. Johnson, which the Company acquired effective July 31, 1997. Third quarter revenues were $17.6 million. Including a one-time $9.8 million charge for the write-off of in-process research and development relating to E.F. Johnson and an additional $120,000 charge for increased tax expense relating to tax losses as a result of the acquisition of E.F. Johnson, the Company's net loss for the third quarter of 1997 was $(8.3) million, or net loss per share of $(0.78). Excluding such charges, the Company's net income for the third quarter would have been $1.7 million or $0.16 per share. For the nine months ended September 30, 1997, revenues were $27.9 million. Including the $9.8 million charge relating to the write-off of in-process research and development and the $120,000 charge for additional taxes, the Company's net loss for the nine months ended September 30, 1997 was $(6.7) million, or net loss per share of $(0.67). Excluding such charges, the Company's net income for the nine months would have been $3.3 million or $0.33 per share. The per share figures for the three and nine months ended September 30, 1997 are based on 10,590,589 and 9,954,373 weighted average shares outstanding, respectively, reflecting the issuance of additional shares in July 1997 in connection with the E.F. Johnson acquisition. During the quarter and nine months ended September 30, 1996, the Company had revenues of $3.5 million and $9.3 million, respectively. For the third quarter of 1996, the Company had a pro forma net loss of $(3.2) million and a pro forma net loss per share of $(0.46). For the nine months ended September 30, 1996, the Company had a pro forma net loss of $(2.7) million and a pro forma net loss per share of $(0.38), based on 6,969,000 shares outstanding. Pro forma results for the 1996 periods reflect a provision for income taxes as if the Company had been taxed as a Subchapter "C" corporation for the entire periods, and include a non-recurring, non-cash special compensation expense of $5.4 million resulting from the vesting of stock options and the accrual of a special compensation expense of $210,000. Excluding these special compensation expenses, pro forma net income for the three and nine months ended September 30, 1996 would have been $.5 million and $1.0 million, respectively, and pro forma net income per share for these periods would have been $0.07 and $0.16, respectively. SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE DATA) <TABLE> <CAPTION> PRO FORMA(1) ----------------------------- SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, -------------------------------------------- ---------------- ------------ -------------- 1992 1993 1994 1995 1996 1996 1997 1996 1997 ------ ------ ------ ------- ------- ------ ------- ------------ -------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF INCOME (LOSS) DATA: Revenues.............. $4,974 $6,900 $9,155 $ 8,128 $13,776 $5,728 $10,278 $ 92,188 $ 37,964 Gross profit.......... 3,738 5,284 6,254 5,145 8,911 3,878 6,413 37,254 16,479 Amortization of intangible assets... 1,100 1,092.. 1,092 1,093 1,001 546 -- 1,595 297 Income (loss) from operations before special compensation expense............. (453) 921 1,318 (1,201) 2,160 718 2,094 (19,937) (1,372) Special compensation expense(2).......... -- -- -- -- 5,568 -- -- 5,568 -- Income (loss) from operations.......... (453) 921 1,318 (1,201) (3,408) 718 2,094 (25,505) (1,372) Net income (loss)..... $ (596) $ 788 $1,207 $(1,338) $(2,011) $ 667 $ 1,658 $(18,983) $ (1,962) PRO FORMA TAX CALCULATION: Income (loss) before taxes and Pro Forma taxes........... $(3,539) $ 667 $ 2,330 $(28,333) $ (2,929) Pro Forma and provision (benefit) for income taxes(3).... (1,393) 134 672 (9,350) (967) Pro Forma and net income (loss).......................... $(2,146) $ 533 $ 1,658 $(18,983) $ (1,962) Pro Forma and net income (loss) per share(4)............. $ (0.31) $ 0.08 $ 0.17 $ (2.43) $ (0.19) Shares used to compute Pro Forma and net income (loss) per share(4)........................................... 6,969 6,969 9,596 7,801 10,428 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ----------------------------------- PRO FORMA AS PRO ADJUSTED ACTUAL FORMA(5) (5)(6) ------- -------- -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital....................................................... $21,277 $ 8,749 $ 33,438 Total assets.......................................................... 31,851 72,998 91,376 Current maturities of long-term debt and capitalized lease obligations......................................................... 159 14,311 -- Long-term debt and capitalized lease obligations, net of current portion............................................................. 2,850 4,558 4,558 Stockholders' equity.................................................. 26,441 26,613 59,302 </TABLE> - --------------- (1) Represents the results of operations as if the acquisition of E.F. Johnson had occurred on January 1, 1996. See "Selected Financial Data of E.F. Johnson Company", "Pro Forma Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of E.F. Johnson appearing elsewhere in this Prospectus. (2) Represents a non-recurring, non-cash compensation expense of $5.4 million resulting from the vesting in September 1996 of 716,916 stock options for 10 executive officers and key employees of the Company at a weighted average exercise price of $1.81 per share, and the accrual of a special compensation expense of $210,000 in September 1996. See "Management -- 1996 Stock Incentive Plan" and "Management -- Employment Agreements." (3) Prior to June 30, 1996, the Company operated as a partnership. The Pro Forma provision for income taxes reflects the provision for income taxes as if the Company had been taxed as a Subchapter "C" corporation under the Internal Revenue Code. (4) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used to compute Pro Forma and net income (loss) per share. (5) Represents the balance sheet as if the acquisition of E.F. Johnson had occurred on June 30, 1997. See "Selected Financial Data of E.F. Johnson Company", "Pro Forma Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of E.F. Johnson appearing elsewhere in this Prospectus. (6) Adjusted to reflect the sale of the 2,000,000 shares of Common Stock offered by the Company hereby (at the assumed offering price of $17.625 per share) after deducting underwriting discounts and commissions and estimated offering expenses, and the receipt and application of the net proceeds therefrom. Also reflects the issuance of 95,000 shares upon exercise of stock options by a Selling Stockholder. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023874_ergobilt_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023874_ergobilt_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..71ad53dfd39cbbe13378f1b3559126974dfb1cc9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023874_ergobilt_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this prospectus. Except as otherwise specified, the information in this prospectus (i) gives effect to a 2,826-for-1 split of Common Stock paid as a dividend on January 9, 1997; (ii) gives effect to the merger of ErgoBilt, Inc. ("ErgoBilt") with BodyBilt Seating, Inc. ("BodyBilt"), which will occur contemporaneously with the closing of this offering (the "Merger"), which is accounted for as a purchase; (iii) gives effect to a change in the par value of the Common Stock to $.01 per share; and (iv) assumes the Underwriters' over-allotment option is not exercised. Since its incorporation in 1995, ErgoBilt's operations have consisted primarily of providing advertising and marketing services to BodyBilt, and ErgoBilt's assets and results of operations are not significant to the combined operations on a going forward basis. Accordingly, the financial information presented in the "Summary Historical and Pro Forma Financial and Operating Data," "Selected Financial Data," "Selected Pro Forma Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" relates solely to the historical operations of BodyBilt. All references in this prospectus to the "Company" include ErgoBilt and BodyBilt, unless otherwise indicated. See "The Reorganization." THE COMPANY The Company is a rapidly-growing developer, manufacturer and marketer of customized, high-end ergonomic office products that re-engineer the workplace and the home office by scientifically minimizing physical stress imposed upon the human body. Its current product line primarily consists of four series of premium-priced, ergonomic office chairs, marketed under the BodyBilt(R) tradename, that can be customized through proprietary modular designs to meet the needs of each customer. The Company has positioned itself to capitalize on consumer trends, possible government regulation and recent national publicity, which have increased the awareness of and desire for ergonomic products in the workplace and home office. The Company intends to use its current product line as a platform to develop and acquire complementary ergonomic products. Such products may include workstations, computer work surfaces, executive office side chairs and a second line of ergonomic chairs priced to appeal to a broader market segment. The Company's objective is to become "the primary source" for ergonomic products for the workplace and the home office. BodyBilt(R) chairs are based on research conducted by the National Aeronautics and Space Commission ("NASA") conducted during its SkyLab missions that identified the least stressful body position for astronauts during extended missions in space. BodyBilt(R) chairs have a 10-Point Posture Control(TM) system that allows each individual user to assume a posture similar to the stress-free posture of astronauts in space. BodyBilt(R) chairs have received national publicity in newspapers, magazines and television, including the New York Times, Wall Street Journal, People magazine, Entertainment Tonight, The CBS Morning Show and The Tonight Show. As a result, the Company believes that BodyBilt(R) chairs enjoy a relatively high degree of brand recognition and consumer awareness. MARKET TRENDS. The Company believes that certain trends in the workplace have expanded the market opportunity for ergonomic office products. First, increased reliance on personal computers has resulted in workers spending more time in a constantly seated position. A result has been a significant increase in the number of work-related employee injury claims and lost employee time from (i) back and upper extremity injuries, which account for approximately 40% of all workers' compensation dollars, and (ii) repetitive stress injuries or "RSI," including carpal tunnel syndrome, which affects approximately 22% of seated workers. Second, the Occupational Safety and Health Administration ("OSHA") has required employers to provide safe work environments, which may include the acquisition of ergonomic office products. Third, the emergence of the corporate "telecommuter" has produced significant growth in the number of home offices, now estimated at 41.1 million in the United States alone. These trends suggest an opportunity for the Company to grow by increasing its market penetration of the corporate community and by expanding its marketing, sales and distribution directly to end users. COMPETITIVE STRENGTHS. The Company believes that it is well-positioned to capitalize profitably on the expanding ergonomic office furniture market segment. The Company's competitive strengths include: (i) the modular design and interchangeable components of BodyBilt(R) chairs permit customization to each individual's specifications, and the chairs' mechanisms allow adjustment to fit changing individual needs; (ii) the Company's manufacturing, marketing, sales, distribution and customer service operations are equipped to handle efficiently small customized orders, the traditional mainstay of the ergonomic business; (iii) orders are generally processed, manufactured and delivered in four weeks or less, approximately half the time normally required by large companies; (iv) the use of interchangeable components allows on-site service and repair; and (v) by targeting its marketing efforts to corporate ergonomists and health, human services and safety managers, rather than traditional facilities or purchasing managers, the Company has been able to establish a market niche in which it believes it is difficult for large office furniture producers to compete effectively. GROWTH STRATEGY. The Company believes its growth has been driven by increasing market acceptance of ergonomics and its success in (i) providing superior quality products and service; (ii) expanding its direct sales force; (iii) upgrading the quality of its independent sales representative firms; and (iv) educating consumers about the benefits of ergonomics and the solutions provided by the Company's products. The Company has developed a strategy to continue to grow and to achieve its objective of becoming "the primary source" for ergonomic products for the workplace and the home office. The key elements of this strategy include (i) increase market penetration by expanding its direct sales force; (ii) broaden the product line by developing or acquiring other ergonomic products; (iii) develop new distribution channels, including telemarketing, catalog sales and the use of the Internet; and (iv) build consumer recognition for ergonomic products. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........................ 1,500,000 shares Common Stock to be outstanding after the offering.......... 5,756,000 shares(1) Use of proceeds............................................ To pay the cash portion of the Merger consideration, borrowings for S Corporation distribution made in connection with the Merger and related expenses, to repay certain indebtedness, to fund the non-contingent cash portion of the purchase price for certain intellectual property described under "Recent Developments" and for other gen- eral corporate purposes. Nasdaq National Market symbol.............................. ERGB </TABLE> - --------------- (1) Includes 678,644 shares of Series A Preferred Stock that are convertible into shares of Common Stock in the ratio that the Common Stock's initial public offering price bears to its average closing price for the 30 trading days immediately preceding the date on which notice of conversion is delivered to the Company, but not less than one. See "Description of Capital Stock -- Series A Preferred Stock." Excludes 400,000 shares of Common Stock reserved for issuance under the Company's stock option plan, 150,000 shares of Common Stock subject to the Representatives' Warrants and up to 45,000 shares of Common Stock subject to a lender's warrant (the "Lender's Warrant"). See "Management -- Stock Option Plan," "Shares Eligible for Future Sale," "Underwriting" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- Credit Facilities." --------------------- The Company was incorporated as the Chafferton Company, Inc. in 1995 to provide advertising and marketing services to BodyBilt, a manufacturer of premium-priced, ergonomic office chairs since 1988. Simultaneously with the closing of this offering, the Company will use a portion of the proceeds to complete its Merger with BodyBilt. The Company's principal executive offices are located at 5000 Quorum Drive, Dallas, Texas 75240, and its telephone number is (972) 233-8504. ERGOBILT INC ERGONOMICS [GRAPHIC IMAGE OF DA VINCIS' DRAWING OF A HUMAN MALE] "Sitting is blamed for most of the lower back pain that strikes 90% of Americans sooner or later at an estimated cost of $70 billion a year." The Wall Street Journal, September 12, 1995 "Almost two thirds of all occupational illnesses are for culminative trauma... almost 40% of all the workers' compensation dollars go to pay for back and upper extremity injuries." Dr. Roger Stephens, Director of Ergonomics, OSHA "Repetitive stress injuries -- RSIs -- have become the workplace curse of the '90s...[and] cost companies an estimated $100 billion a year." USA Today, January 9, 1997 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA The financial information presented below is derived from the financial statements of BodyBilt. The pro forma data is unaudited and presents financial information of the Company. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 ------ ------ ------ ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Sales...................... $2,484 $4,448 $6,535 $ 9,189 $13,672 $ 9,251 $12,553 Cost of sales.............. 1,380 2,053 3,237 4,789 7,218 5,080 6,617 ------ ------ ------ ------- ------- ------- ------- Gross profit............... 1,104 2,395 3,298 4,400 6,454 4,171 5,936 Selling, general and administrative expenses................ 914 1,353 2,164 3,266 4,555 3,107 4,082 ------ ------ ------ ------- ------- ------- ------- Operating income........... 190 1,042 1,134 1,134 1,899 1,064 1,854 Interest expense and other, net..................... -- 14 24 24 20 50 108 ------ ------ ------ ------- ------- ------- ------- Income before income taxes................... 190 1,028 1,110 1,110 1,879 1,014 1,746 Income tax expense......... -- 46 50 50 85 42 40 ------ ------ ------ ------- ------- ------- ------- Net income................. $ 190 $ 982 $1,060 $ 1,060 $ 1,794 $ 972 $ 1,706 ====== ====== ====== ======= ======= ======= ======= PRO FORMA DATA: Pro forma net income(1)........................................ $ 885 $ 698 Pro forma earnings per share................................... $ .16 $ .13 Pro forma shares outstanding(2)................................ 5,400 5,400 OPERATING DATA: Units sold................. 5,262 8,882 13,549 18,946 25,759 17,401 22,248 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ------------------------------ PRO FORMA(3) AS ADJUSTED(4) ------------ -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $(3,781) $ 5,629 Total assets.............................................. 20,810 22,387 Long-term debt, including current portion................. 1,596 1,521 Shareholders' equity...................................... 10,457 19,942 </TABLE> - --------------- (1) The unaudited pro forma adjustments reflect the adjustments necessary to (i) combine the results of operations and financial position of ErgoBilt with BodyBilt; (ii) recognize goodwill associated with the acquisition of BodyBilt; and (iii) recognize tax expense related to BodyBilt as if its S corporation status had terminated at the beginning of the period presented. See "Selected Pro Forma Financial Data." (2) The computation of pro forma shares outstanding is based on 4,256,000 weighted average shares of Common Stock outstanding and 1,144,000 shares assumed to be issued at an initial public offering price of $7.50 per share (after deducting the estimated underwriting discount) to (i) fund payments of $6.875 million to BodyBilt Shareholders (as defined herein) and (ii) pay approximately $850,000 of indebtedness. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- Credit Facilities." The computation of pro forma shares outstanding excludes an additional 356,000 shares to be sold in the offering, the proceeds of which may be used to fund the non-contingent cash portion of the purchase price for certain intellectual property and for other general corporate purposes. See "Use of Proceeds." (3) Assumes that the Merger was completed on September 30, 1996, and that the cash consideration to be paid (including an S corporation distribution of approximately $4.4 million) is reflected as a reduction of working capital. Approximately $13.2 million of goodwill is recorded as a result of the Merger. (4) As adjusted to reflect the sale of 1,500,000 shares of Common Stock by the Company and the application of the estimated net proceeds therefrom. See "Use of Proceeds." from space to the workplace ERGOBILT INC A SAMPLING OF ERGONOMIC PRODUCT APPLICATIONS ----------------------------------------- PHOTOGRAPH OF ASTRONAUT FLOATING IN SPACE ----------------------------------------- Gemini Astronaut 6/3/65 Photo Courtesy of NASA --------------------------------------------------------- DIAGRAM OF HUMAN BODY OUTLINE SEATED IN DIAGRAM OF CHAIR, SURROUNDED BY SIX EQUATIONS AND 10 DEGREES. --------------------------------------------------------- - -------------------------------------------------------------------------------- NASA studies reveal that, in the absence of gravity, the "human body automatically assumes and indefinitely maintains a singular, characteristic posture." This body posture can be mathematically defined through a series of specific measurements. "To force other postures on the body..., frequently leads to discomfort, fatigue, and inefficiency." NASA Reference Publication 1024 - -------------------------------------------------------------------------------- By adapting NASA findings, seating and work stations have been engineered to allow each user to emulate the same single characteristic posture. - -------------------------------------------------------------------------------- "As the body moves toward a more open trunk-to-thigh alignment, muscle tension in key muscle groups (including the neck, shoulders, and lower back) is reduced significantly." - Dr. Steve Brooks, Neurologist - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Partial listing of the media coverage on the BodyBilt chair. Listing of these publications is not meant to imply endorsements therefrom of any kind. ENTERTAINMENT TONIGHT WINDOWS MAGAZINE WASHINGTON POST GOOD MORNING AMERICA NEW YORK DAILY NEWS INVESTOR'S BUSINESS DAILY PEOPLE MAGAZINE LOS ANGELES TIMES CBS THIS MORNING WIRED MAGAZINE NEWSWEEK TEXAS BUSINESS MAGAZINE NEW YORK TIMES CRAIN'S SMALL BUSINESS CONSUMER REPORTS COMPUTER USER NBC TODAY SHOW DALLAS MORNING NEWS USA TODAY CHICAGO SUN TIMES WALL STREET JOURNAL PC WORLD - -------------------------------------------------------------------------------- ------------------------------------- PHOTOGRAPH OF SCULPT(TM) CONTOUR SEAT ------------------------------------- - -------------------------------------------------------------------------------- A study by the Internal Revenue Service Austin Service Center showed an 8% increase in productivity when using the company's chairs. A study by the Safety Department of Lockheed Austin Division experienced a 12% increase in productivity and identified the company's chairs as the highest ranked contributing factor. - -------------------------------------------------------------------------------- ----------------------------------- PHOTOGRAPH OF EXECUTIVE SERIES 10 POINT POSTURE CONTROL(TM) CHAIR ----------------------------------- ------------------------------------- PHOTOGRAPH OF LINEAR TRACKING(TM) ARM ------------------------------------- - -------------------------------------------------------------------------------- BodyBilt Seating's Linear Tracking(TM) Arms cradle and move with your arms to provide support when typing, mousing or writing. - -------------------------------------------------------------------------------- ------------------------------- PHOTOGRAPH OF X-TENSION(TM) ARM ------------------------------- ---------------------------------- PHOTOGRAPH OF *BUTTERFLY(TM) BOARD ---------------------------------- -------------------------------- PHOTOGRAPH OF *POWER STATION(TM) -------------------------------- * Subject to acquisition pursuant to a letter of intent. See "Recent Developments."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001023902_rdo_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001023902_rdo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6a66581f23a3cfdb20c9cbe1d3723cf98c23445a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001023902_rdo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND COMBINED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED OR CONTAINED IN THE COMBINED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION GRANTED BY THE COMPANY, AND (II) REFLECTS CHANGES TO THE COMPANY'S CAPITAL STRUCTURE EFFECTED PRIOR TO THE CONSUMMATION OF THIS OFFERING, INCLUDING THE 44.5-FOR-ONE STOCK SPLIT AND SHARE EXCHANGE IN CONNECTION WITH THE REINCORPORATION OF THE COMPANY IN DELAWARE, EFFECTIVE IN JANUARY 1997. IN ADDITION, (I) REFERENCES TO THE COMPANY ON A PRO FORMA BASIS REFLECT ADJUSTMENTS TO GIVE EFFECT TO THE COMPANY'S RECENT ACQUISITIONS OF INDUSTRIAL OPERATIONS IN CENTRAL TEXAS AND AGRICULTURAL OPERATIONS IN WASHINGTON, AS IF SUCH ACQUISITIONS HAD OCCURRED ON FEBRUARY 1, 1995 WITH RESPECT TO STATEMENTS OF OPERATIONS DATA, AND (II) REFERENCES TO THE COMPANY INCLUDE ITS WHOLLY-OWNED SUBSIDIARIES. SEE "REINCORPORATION" AND "BUSINESS--GROWTH STRATEGY." THE CLASS A COMMON STOCK AND THE CLASS B COMMON STOCK ARE SOMETIMES COLLECTIVELY REFERRED TO AS THE "COMMON STOCK." THE COMPANY RDO Equipment Co. (the "Company") owns and operates the largest networks of John Deere industrial stores and agricultural stores in the United States. Through its 32 stores, the Company sells, services, and rents industrial and agricultural equipment, primarily supplied by Deere & Company and its subsidiaries ("Deere" or "John Deere"). The Company's revenues have grown at a compound annual rate of 33% over the past five fiscal years, from $71.2 million in fiscal 1992 to $223.6 million in fiscal 1996. INDUSTRIAL EQUIPMENT INDUSTRY. Management estimates that United States retail sales of new industrial equipment in its target product market in calendar 1995 totaled approximately $5.7 billion. Deere is one of the leading suppliers of industrial equipment in the United States for light to medium applications and offers a broad array of products. Currently, Deere has approximately 110 industrial dealers which operate approximately 355 stores in the United States. Each dealer within the Deere industrial system is assigned specific geographic areas of responsibility within which it has the right to sell new Deere products. Over the last five years, while the number of Deere industrial stores has remained constant, the number of Deere industrial dealers has declined by more than 30%. This dealer consolidation is being driven, in part, by an increasing need for capital, owners' concerns about succession, and Deere's support for consolidation of its dealers. The Company expects to benefit from this consolidation trend by continuing its strategic acquisition of Deere industrial dealerships. AGRICULTURAL EQUIPMENT INDUSTRY. Management estimates that United States retail sales of new agricultural equipment in its target product market in calendar 1995 totaled approximately $10.1 billion. Deere is the leading supplier of agricultural equipment in the United States. Currently, Deere has approximately 1,275 agricultural dealers which operate approximately 1,545 stores in the United States. Deere agricultural dealers are not assigned exclusive territories, but have authorized store locations. The Company believes that Deere agricultural dealerships also face an increasing need for capital, owners' concerns about succession, and Deere's support for consolidation and, as a result, that a consolidation of Deere agricultural dealerships will occur. The Company expects that it will have increasing opportunities to complete strategic acquisitions of Deere agricultural dealerships as this consolidation trend develops. GROWTH STRATEGY. The Company's growth strategy is to continue to expand and improve its operations through a combination of (i) increasing market share within its existing Deere areas of responsibility, (ii) capitalizing on the consolidation trends among Deere dealers by acquiring additional dealerships, (iii) improving the operating performance of its store networks by implementing its operating model, and (iv) continuing the business and geographic diversification of its operations. Over the last five years, the Company has acquired 13 stores from seven dealers, including five stores acquired in calendar 1996. The acquisitions completed in calendar 1996 establish new industrial operations in Texas and new agricultural operations in Washington, which the Company believes will provide platforms for further growth. Approximately $34.4 million of the net proceeds of this Offering is expected to be used to finance future acquisitions, new stores, and internal growth. In addition to its acquisitions, the Company also has opened four stores in the last five years. INDUSTRIAL DIVISION The Company operates the largest network of Deere industrial stores, representing approximately 6% of Deere's United States industrial equipment sales in calendar 1995. The Industrial Division operates 21 stores located primarily in areas with significant construction activity within the Company's designated Deere areas of responsibility, including Dallas-Fort Worth, southern Los Angeles, Minneapolis-St. Paul, Phoenix, and San Diego. Customers of the Company's industrial stores include contractors, for both residential and commercial construction, utility companies, and federal, state, and local government agencies. Revenues of the Industrial Division increased from $30.5 million in fiscal 1992 to $139.0 million in fiscal 1996, representing a compound annual growth rate of 46%. The growth in the Industrial Division's revenues are due to same store sales increases and the acquisition of 11 stores over the last five years. The increases in same store sales are attributable to the continued implementation of the Company's operating model, particularly at acquired stores, as well as a favorable construction environment. Industrial acquisitions have been made in Arizona, California, and Texas due to the favorable construction economies and year-round construction seasons in these locations, as well as the Company's strategy to diversify geographically. The Company's industrial stores offer a full range of new and used Deere equipment, replacement parts, and fully-equipped service and repair facilities. In addition, the Company sells industrial equipment supplied by other manufacturers which is complementary to the Deere lines, as well as used industrial equipment taken as trade-ins. The Company believes that product support, through its parts and service programs, has been and will be increasingly important to the profitability of its industrial equipment operations and its ability to attract and retain customers. In the Southwest region, the Industrial Division has established a rental fleet of industrial equipment, which the Company intends to continue to expand. See "Business--Recent and Contemplated Acquisitions." AGRICULTURAL DIVISION The Company operates the largest network of Deere agricultural stores, representing approximately 1% of Deere's U.S. agricultural equipment sales in calendar 1995. The Agricultural Division operates 11 stores located in Minnesota, North Dakota, South Dakota, and Washington. Revenues of the Agricultural Division increased from $40.7 million in fiscal 1992 to $84.6 million in fiscal 1996, representing a compound annual growth rate of 20%. The growth in the Agricultural Division's revenues is almost entirely due to same store sales increases. The increase in same store sales is attributable to the continued implementation of the Company's operating model, as well as a favorable agricultural economy. As full-service suppliers to farmers, the Company's agricultural stores offer a broad range of farm equipment and related products, with sales of new Deere equipment the primary focus. The Company also sells agricultural equipment supplied by other manufacturers which is complementary to the Deere lines, as well as used agricultural equipment taken as trade-ins. In addition, the agricultural stores offer lawn and grounds care equipment, primarily supplied by Deere. As part of its strategy to provide a full complement of product support services to its agricultural customers, the Company offers a broad range of replacement parts and fully-equipped service and repair facilities at each store. GROWTH STRATEGY In order to capitalize on industry consolidation trends, expand its market leadership position, and further develop its industrial and agricultural equipment operations, the Company has developed its growth strategy, the key elements of which are: - INCREASING MARKET SHARE. The Company seeks to increase its market share by enhancing customer service and generating customer loyalty. With a larger installed base of equipment, the Company has the opportunity to generate additional parts and service business, which currently accounts for approximately 26% of the Company's total revenues and which has higher profit margins than wholegoods sales. - PURSUING ADDITIONAL ACQUISITIONS. Acquisitions have been and will continue to be an important element of the Company's growth strategy, particularly given the consolidation trends among industrial and agricultural equipment dealers. Over the past five years, the Company has acquired 11 industrial stores and two agricultural stores from seven dealers. Due to its leadership position in the industry and its track record in completing and integrating acquisitions, the Company believes that attractive acquisition candidates will continue to become available to the Company. Approximately $34.4 million of the net proceeds of this Offering is expected to be used to finance future acquisitions, new stores, and internal growth. Completion of any prospective acquisition of a Deere dealership, or the opening of a new Deere store, requires Deere's consent. See "Risk Factors-- Risks Associated with Expansion" and "Business--Recent and Contemplated Acquisitions." - IMPLEMENTING THE RDO OPERATING MODEL. The Company has developed a proven operating model designed to improve the performance and profitability of each of its stores. Components of this operating model include (i) pursuing aggressive marketing programs, (ii) allowing store employees to focus on customers by managing administrative functions, training, and purchasing at the corporate level, (iii) providing a full complement of parts and state-of-the-art service functions, including a computerized real-time inventory system and quick response, on-site repair service, (iv) motivating store level management in accordance with corporate goals, and (v) focusing on cost structures at the store level. - CAPITALIZING ON DIVERSITY OF OPERATIONS. A major focus of the Company's strategy is to expand its networks of industrial and agricultural stores into geographic areas that have a large base of construction or agricultural activity and that provide the Company with opportunities to continue to develop its store networks. The Company believes that its business diversification into both industrial and agricultural store operations has significantly increased its customer base, while also mitigating the effects of industry-specific economic cycles. Similarly, the Company's geographic diversification into regions outside the Midwest helps to diminish the effects of seasonality, as well as local and regional economic fluctuations. Typically, other Deere dealers operate only industrial or agricultural dealerships, with a limited number of stores concentrated in a specific geographic region. RECENT ACQUISITIONS The Company recently acquired three industrial stores and two agricultural stores, thereby extending the Company's store networks into Texas and Washington, which the Company believes will provide platforms for future growth. The Company recently completed the purchase of a Deere industrial dealership in Central Texas, with three stores located in the Dallas-Fort Worth and Waco, Texas metropolitan areas with a Deere area of responsibility covering the 35 surrounding counties (the "Central Texas Acquisition"). The Company also recently completed the acquisition of a Deere agricultural dealership, with two stores located in Pasco and Sunnyside, Washington (the "Washington Acquisition"). Completion of any prospective acquisition of a Deere dealership requires Deere's consent. See "Risk Factors--Risks Associated with Expansion" and "Business--Recent and Contemplated Acquisitions." The Company was incorporated in North Dakota on March 13, 1968 and will be reincorporated in Delaware in January 1997. The Company's executive offices are located at 2829 South University Drive, Fargo, North Dakota 58109. The Company's phone number is (701) 237-7363. THE OFFERING <TABLE> <S> <C> <C> Class A Common Stock offered...................... 4,200,000 shares of Class A Common Stock Common Stock to be outstanding after this Offering Class A Common Stock........ 5,091,508 shares(1) Class B Common Stock........ 7,458,492 shares --------- Total..................... 12,550,000 shares --------- --------- Use of Proceeds............... The net proceeds from this Offering will be used (i) to repay indebtedness incurred to finance recent acquisitions in the aggregate amount of approximately $10.1 million, (ii) to make an S corporation distribution in the amount of approximately $15.0 million to the Company's existing stockholders in connection with termination of the Company's S corporation status, and (iii) to finance future acquisitions, new stores, internal growth, and working capital needs. See "Use of Proceeds," "S Corporation Distributions," and "Certain Relationships and Related Transactions." Voting Rights................. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to four votes. All of the outstanding Class B Common Stock is held by Ronald D. Offutt, the Company's Chairman, Chief Executive Officer, and principal stockholder. Under certain circumstances, Class B Common Stock automatically converts into Class A Common Stock. See "Description of Capital Stock-- Common Stock." NYSE symbol................... RDO </TABLE> - ------------------------ (1) Excludes 1,250,000 shares of Class A Common Stock reserved for issuance pursuant to the Company's stock incentive plan of which approximately 600,000 shares will be subject to options to be granted upon consummation of this Offering at an exercise price equal to the initial public offering price. See "Management--1996 Stock Incentive Plan." SUMMARY COMBINED AND PRO FORMA FINANCIAL AND OPERATING DATA (in thousands, except store and per share data) <TABLE> <CAPTION> FISCAL YEAR ENDED JANUARY 31, --------------------------------------------------------------------------------- ACTUAL ------------------------------------------------------------------- PRO FORMA 1992 1993 1994 1995 1996 1996 (1)(2) ----------- ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues..................................... $ 71,226 $ 105,378 $ 144,112 $ 183,910 $ 223,557 $ 265,478 Cost of sales................................ 56,422 83,548 116,369 148,111 180,839 212,824 ----------- ----------- ----------- ----------- ----------- ----------- Gross profit................................. 14,804 21,830 27,743 35,799 42,718 52,654 Selling, general, and administrative expense..................................... 11,929 16,737 20,577 24,893 31,655 38,858 ----------- ----------- ----------- ----------- ----------- ----------- Operating income............................. 2,875 5,093 7,166 10,906 11,063 13,796 Interest expense............................. (1,299) (1,284) (1,670) (1,895) (3,817) (1,584) Interest income.............................. 173 376 336 802 823 1,031 ----------- ----------- ----------- ----------- ----------- ----------- Net income................................... $ 1,749 $ 4,185 $ 5,832 $ 9,813 $ 8,069 $ 13,243 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- PRO FORMA INCOME STATEMENT DATA: (UNAUDITED) Income before taxes.......................... $ 1,749 $ 4,185 $ 5,832 $ 9,813 $ 8,069 $ 13,243 Provision for income taxes(3)................ 700 1,674 2,332 3,925 3,228 5,297 ----------- ----------- ----------- ----------- ----------- ----------- Net income................................... $ 1,049 $ 2,511 $ 3,500 $ 5,888 $ 4,841 $ 7,946 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share ............................................................................... $ .51 $ .63 ----------- ----------- ----------- ----------- Weighted average shares outstanding ................................................................ 9,429 12,570 ----------- ----------- ----------- ----------- SELECTED OPERATING DATA: Comparable store net sales increase.......... -- 12% 32% 25% 11% -- Stores open at beginning of period........... 15 17 21 22 22 22 Stores opened.............................. 1 0 0 0 2 2 Stores acquired............................ 1 4 1 0 2 7 ----------- ----------- ----------- ----------- ----------- ----------- Stores open at end of period................. 17 21 22 22 26 31 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Capital expenditures......................... $ 561 $ 681 $ 627 $ 1,208 $ 9,993 $ 10,131 Depreciation................................. 504 584 668 690 1,326 1,653 <CAPTION> NINE MONTHS ENDED OCTOBER 31, --------------------------------------- ACTUAL ------------------------- PRO FORMA 1995 1996 1996 (1)(2) ----------- ----------- ----------- <S> <C> <C> <C> INCOME STATEMENT DATA: Revenues..................................... $ 176,825 $ 229,260 $ 257,823 Cost of sales................................ 143,718 186,451 208,581 ----------- ----------- ----------- Gross profit................................. 33,107 42,809 49,242 Selling, general, and administrative expense..................................... 23,600 29,492 33,908 ----------- ----------- ----------- Operating income............................. 9,507 13,317 15,334 Interest expense............................. (2,435) (4,116) (2,247) Interest income.............................. 586 633 816 ----------- ----------- ----------- Net income................................... $ 7,658 $ 9,834 $ 13,903 ----------- ----------- ----------- ----------- ----------- ----------- PRO FORMA INCOME STATEMENT DATA: (UNAUDITED) Income before taxes.......................... $ 7,658 $ 9,834 $ 13,903 Provision for income taxes(3)................ 3,063 3,934 5,561 ----------- ----------- ----------- Net income................................... $ 4,595 $ 5,900 $ 8,342 ----------- ----------- ----------- ----------- ----------- ----------- Net income per share ........................ $ .63 $ .66 ----------- ----------- ----------- ----------- Weighted average shares outstanding ......... 9,414 12,555 ----------- ----------- ----------- ----------- SELECTED OPERATING DATA: Comparable store net sales increase.......... 13% 23% -- Stores open at beginning of period........... 22 26 26 Stores opened.............................. 1 1 1 Stores acquired............................ 2 5 5 ----------- ----------- ----------- Stores open at end of period................. 25 32 32 ----------- ----------- ----------- ----------- ----------- ----------- Capital expenditures......................... $ 9,674 $ 3,182 $ 3,328 Depreciation................................. 614 1,930 2,155 </TABLE> <TABLE> <CAPTION> AS OF OCTOBER 31, 1996 --------------------------------------------- PRO FORMA ACTUAL PRO FORMA (4) AS ADJUSTED (2)(4) --------- -------------- ------------------ <S> <C> <C> <C> BALANCE SHEET DATA: Working capital................................... $ 20,778 $ 5,778 $ 65,278 Inventories....................................... 125,766 125,766 125,766 Total assets...................................... 176,712 177,562 177,562 Floor plan payables(5)............................ 100,612 100,612 66,212 Total debt........................................ 26,758 26,758 16,658 Stockholders' equity.............................. 34,284 20,134 79,634 </TABLE> (SEE FOOTNOTES ON FOLLOWING PAGE) NOTES TO SUMMARY COMBINED AND PRO FORMA FINANCIAL AND OPERATING DATA (1) Reflects adjustment to give effect to the Central Texas and the Washington Acquisitions as if such acquisitions had occurred February 1, 1995. The pro forma information is not necessarily indicative of the results that actually would have been achieved had such transactions been consummated as of February 1, 1995, or that may be achieved in the future. See "Selected Combined and Pro Forma Financial and Operating Data" and Pro Forma Unaudited Financial Statements and the Notes thereto. (2) Adjusted to give effect to the sale of 4,200,000 shares of Class A Common Stock offered hereby at an assumed initial offering price of $15.50 per share and the application of the net proceeds therefrom. See "Use of Proceeds," "S Corporation Distributions," "Capitalization," Pro Forma Unaudited Financial Statements and the Notes thereto, and the Combined Financial Statements and the Notes thereto. (3) For all periods presented, the Company was an S corporation and was not generally subject to corporate income taxes. The pro forma income tax provision has been computed as if the Company were subject to corporate income taxes for all periods presented based on the tax laws in effect during the respective periods. See "S Corporation Distributions" and the Combined Financial Statements and the Notes thereto. (4) Adjusted to give effect to (i) the deferred tax asset of approximately $850,000 resulting from the termination of the Company's status as an S corporation, and (ii) the $15.0 million S corporation distribution to existing stockholders which will be paid out of the net proceeds of this Offering. (5) Includes interest bearing and non-interest bearing liabilities incurred in connection with inventory financing. See Note 5 to the Combined Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001024124_thousand_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001024124_thousand_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..be02b4c1c5e0653ae4769db706006ae057455f23
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001024124_thousand_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, the term "the Company" refers to Thousands Trails, Inc., a Delaware corporation, and its predecessors and subsidiaries. THE COMPANY The Company and its subsidiaries own and operate a system of 58 membership-based campgrounds located in 19 states and British Columbia, Canada, serving 126,000 members as of December 31, 1996. Through a subsidiary, the Company also provides a reciprocal use program for members of approximately 310 recreational facilities. The Company's operations in the campground and resort business commenced on June 30, 1991, when the Company acquired 100% of the capital stock of National American Corporation (collectively with its subsidiaries, "NACO," unless the context otherwise requires) and 69% of the capital stock of Thousand Trails, Inc., a Washington corporation (collectively with its subsidiaries, "TTI," unless the context otherwise requires), in connection with the reorganization of the Company in a proceeding under Chapter 11 of the Bankruptcy Code. The Company subsequently increased its ownership in TTI to 80% through a tender offer and acquired the remaining 20% of the stock of TTI in a merger. In July 1996, TTI was merged into the Company. Prior to the acquisitions of NACO and TTI, the Company purchased contracts receivable generated principally by NACO and TTI from the sale of campground memberships and resort interests on an installment basis. THE SELLING SECURITY HOLDERS The Selling Security Holders received their 1991/1992 Warrants in two transactions, one in 1991 as part of the Company's reorganization and the other in 1992 as part of the retirement of the debt of TTI. In each transaction, recipients of the 1991/1992 Warrants became entitled to the benefits of registration rights agreements, which included "piggyback" registration rights. The Common Stock issuable upon exercise of the 1991/1992 Warrants is being included in the Registration Statement to satisfy any obligations of the Company under such agreements in connection with the registration of shares of Common Stock offered by the Company under the 1994 Warrants. THE OFFERINGS Offering by the Company..... The Company is offering to holders of the 1994 Warrants 10,170 shares of Common Stock, subject to certain antidilution provisions, issuable upon the exercise of their 1994 Warrants. The current exercise price of the 1994 Warrants is $1.625 per share. Offering by Selling Security Holders..... From time to time, the Selling Security Holders may offer up to 409,442 shares of Common Stock, subject to certain antidilution provisions, that are issuable upon the exercise of the 1991/1992 Warrants. The current exercise price of the Warrants is $4.24 per share and the current expiration date of the 1991/1992 Warrants is June 30, 1999. The 1991/1992 Warrants themselves are not being offered by the Selling Security Holders. - -------------------------------------------------------------------------------- INDEX TO EXHIBITS Exhibit Number Description Page - ------- ----------- ---- 2.1 Agreement and Plan of Merger, dated as of October 1, 1996, between the Registrant and USTrails Inc. (predecessor in interest to the Registrant) (incorporated by reference to the proxy statement/prospectus filed with the SEC on October 3, 1996 as part of the Registration Statement on Form S-4, Registration Statement No. 333-13339 (the "S-4 Registration Statement")). 2.2 Plan of Reorganization of USTrails Inc. ("USTrails") (which was formerly known as NACO Finance Corporation), dated October 15, 1991, as supplemented (incorporated by reference to Exhibit 2.1 to USTrails' Annual Report on Form 10-K for the year ended June 30, 1992). 2.3 Offer to Purchase for Cash USTrails' 12% Secured Notes Due 1998 and Additional Series 12% Secured Notes Due 1998 by USTrails, dated June 5, 1996 (the "Offer to Purchase") (incorporated by reference to Exhibit 99.2 to USTrails' Current Report on Form 8-K filed with the SEC on June 7, 1996). 2.4 Supplement to the Offer to Purchase, dated June 21, 1996 (incorporated by reference to Exhibit 2.5 to USTrails' Annual Report on Form 10-K filed with the SEC for the year ended June 30, 1996). 2.5 Private Placement Memorandum by USTrails offering to exchange USTrails' 12% Secured Notes Due 1998 and Additional Series 12% Secured Notes Due 1998 to certain holders of such notes, dated June 28, 1996 (the "Private Placement Memorandum") (incorporated by reference to Exhibit 2.6 to USTrails' Annual Report on Form 10-K filed with the SEC for the year ended June 30, 1996). 2.6 Letter of Transmittal pertaining to the transmittal of USTrails' 12% Secured Notes Due 1998 and Additional Series 12% Secured Notes Due 1998 by certain holders of such notes pursuant to the exchange offer made by USTrails in the Private Placement Memorandum (incorporated by reference to Exhibit 2.7 to USTrails' Annual Report on Form 10-K filed with the SEC for the year ended June 30, 1996). <TABLE> <CAPTION> ITEM LOCATION IN PROSPECTUS ---- ---------------------- <S> <C> (h) Management's Discussion and Management's Discussion and Analysis of Financial Analysis of Financial Condition Condition and Results of Operations and Results of Operations (i) Changes in and Disagreements with * Accountants on Accounting and Financial Disclosure (j) Directors and Executive Officers Management (k) Executive Compensation Executive Compensation (l) Security Ownership of Certain Security Ownership Beneficial Owners and Management (m) Certain Relationships and Related Management; Executive Compensation; Certain Transactions Transactions 12. Disclosure of Commission Position on * Indemnification for Securities Act Liabilities </TABLE> __________________ *Not applicable or answer thereto is negative. ADDITIONAL INFORMATION The Company has filed a Registration Statement on Form S-1 (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. Statements made in this Prospectus as to the contents of any indenture, contract, agreement or other document referred to are not necessarily complete. With respect to each such indenture, contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description thereof, and each such statement shall be deemed qualified in its entirety by such reference. The Registration Statement and the exhibits and schedules thereto may be inspected and copied (at prescribed rates) at the public reference facilities maintained by the Commission and without charge electronically at the Commission's World Wide Web site. See "Available Information" for the office and World Wide Web site addresses of the Commission.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001024332_national_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001024332_national_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4c58a485fd7b1fc99ae9e3288d5ef6b6031eafe7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001024332_national_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes (i) the consummation of the Reorganization (as described in 'The Reorganization') and (ii) no exercise of the Underwriters' over-allotment option. THE COMPANY National Auto Finance Company, Inc. ('NAFCO' or the 'Company') is a specialized consumer finance company engaged in the purchase, securitization and servicing of motor vehicle retail installment sale contracts ('Loans') originated by automobile dealers ('Dealers') for Non-Prime Consumers (i.e., borrowers with limited financial resources or past credit problems). The Company purchases Loans principally from manufacturer-franchised Dealers in connection with their sale of new and used automobiles. The Company's strategy is to develop a network of Dealers throughout the United States that will refer Non-Prime Consumer Loan applications to the Company. To implement this strategy, the Company offers to Dealers products and services designed to enhance their ability to sell vehicles to Non-Prime Consumers. The Company markets these products and services to Dealers through the efforts of its direct sales force and through strategic referral and marketing alliances with financial institutions which have established relationships with Dealers. Automobile financing is the second largest sector, by dollar amount, of consumer installment debt in the United States. According to the United States Federal Reserve Board, approximately $350 billion of automobile installment credit was outstanding at the end of 1995. The Company estimates that the outstanding automobile installment credit attributable to Non-Prime Consumers is in excess of $60 billion. The Company believes that the portion of the automobile finance market attributable to Non-Prime Consumers has grown significantly in recent years and is poised for further growth. Factors contributing to such growth include the rise of personal bankruptcy filings over the past ten years, the rise of total consumer debt service payments as a percentage of disposable income over the past three years, the increase in the supply of used cars relative to new cars and the increased awareness among Dealers of Non-Prime Consumer financing opportunities. Historically, the market for Non-Prime Consumer credit has been highly fragmented, with no one company controlling more than 3% of the market. The Company believes that it is well-positioned to gain an increasing share of this market through its emphasis on Dealer support and service. Since the commencement of the Company's operations in October 1994, the Company has established contractual relationships with over 1,200 Dealers. The Company attributes its success in rapidly establishing its Dealer base to the following: o Dealer Products and Services--The Company seeks to differentiate itself from its competitors by introducing products and services designed to enhance the ability of Dealers to sell vehicles to Non-Prime Consumers. In developing such products and services, the Company relies on its senior management's extensive experience in automobile finance as well as on ideas the Company solicits and receives from Dealers. The Company is constantly seeking to improve its existing products and services and develop new ones in order to respond to changing market conditions and serve specific niches in the Non-Prime Consumer market. o Dealer Assistance--The Company believes that a Dealer's ability to sell automobiles is enhanced if a Dealer understands the product and service offerings, underwriting criteria and financing capabilities of its financing sources. Accordingly, the Company employs regional salespersons located in strategic geographic areas ('Dealer Relations Managers') who spend considerable time on-site with Dealers in order to augment Dealers' understanding of the Non-Prime Consumer market and the Company's products and services. o Experienced Senior Management--Each of the Company's four senior operating executives has over 14 years of direct experience in automobile finance. The Company believes that this experienced management team provides it with the ability to maintain acceptable credit quality, supervise its operations, further expand its business in existing markets and penetrate new markets. o Timely Communication of Credit Decisions--In the Company's experience, a rapid response to Dealers' requests for financing is critical to developing strong relationships with Dealers and having frequent opportunities to purchase Loans from Dealers. The Company believes that it provides this timely response to Dealers for their Non-Prime Consumers. The Company typically communicates its credit decisions to Dealers within 75 minutes of receipt of a Loan application and provides next-day funding after the submission of completed Loan documentation. o Centralized Underwriting--The Company maintains centralized control over the underwriting and Loan approval functions. The Company believes that this centralized control ensures consistent and efficient underwriting and Loan approval functions. The Company's centralized underwriting policy has enabled the Company to purchase a portfolio of Loans that management believes will allow the Company to maintain acceptable credit quality as its Loan portfolio grows. o Underwriting Consistency--The Company employs a proprietary credit scoring system and well-defined underwriting criteria to ensure consistency in the underlying credit risks associated with the Loans it purchases. The Company believes that this consistency enhances the efficiency of the financing process from a Dealer's perspective by enabling a Dealer to gauge accurately which of its Non-Prime Consumer Loan applications will be approved by the Company. o Financing Strategy--The Company currently finances its purchases of Loans primarily through an asset securitization program that involves (i) the securitized warehousing of all of its Loans through their daily sale ('Revolving Securitization') to a bankruptcy remote master trust (the 'Master Trust'), followed by (ii) the refinancing of such warehoused Loans, from time to time, through their transfer by the Master Trust to a discrete trust ('Permanent Securitization'), thereby creating additional availability of capital from the Master Trust. Specifically, pursuant to the Revolving Securitization, the Company sells Loans that it has purchased from Dealers on a daily basis to a special-purpose subsidiary, which then sells the Loans to the Master Trust in exchange for certain residual interests in future excess cash flows from the Master Trust. The capacity of the Revolving Securitization is dependent, in part, upon the subsequent refinancings of Loans pursuant to Permanent Securitizations. In November 1995, the Master Trust refinanced $42 million of its receivables in a private placement of asset-backed securities through a Permanent Securitization rated AAA and Aaa by Standard & Poor's Rating Services ('S&P') and Moody's Investors Service, Inc. ('Moody's'), respectively. In November 1996, the Master Trust refinanced $68 million of its receivables in a public offering of asset-backed securities through a Permanent Securitization also rated AAA and Aaa by S&P and Moody's, respectively. The Company expects to increase the number of Loans that it purchases, securitizes and services by (i) utilizing its Dealer Relations Managers to market the Company's products and services directly to Dealers (including Dealers with which the Company currently does not have a contractual relationship) and (ii) forming strategic referral and marketing alliances with financial institutions that have established relationships with Dealers. Although the Company is currently doing business with Dealers in 26 states, approximately 75% of the principal balance of the Company's Loan portfolio was purchased through Dealers located in Georgia, North Carolina, South Carolina and Virginia. The Company intends to increase its volume of business in the states in which it currently operates and to expand into additional states. In April 1996, the Company entered into its first strategic referral and marketing alliance (the 'First Union Strategic Alliance'), with First Union National Bank of North Carolina and certain of its national bank affiliates (collectively, 'First Union'). The First Union Strategic Alliance initially provided for (i) joint marketing of the Company's products and services by the Company's sales force and the sales personnel in First Union's indirect sales finance division ('FUSF') to the approximately 1,800 Dealers throughout seven southeastern states and the District of Columbia (the 'Southeastern Franchise') with which FUSF has an existing relationship, and (ii) exclusive referral by FUSF to the Company of all applications for Non-Prime Consumer Loans falling below certain established credit guidelines. The First Union Strategic Alliance significantly enhances the Company's ability to further its market penetration and increase the size of its Dealer base through the marketing assistance, support and exclusive referrals provided by FUSF. Though still in the introductory phase, through September 30, 1996, the Company established relationships with over 400 additional Dealers through the First Union Strategic Alliance and financed approximately 1,571 Loans having an aggregate principal balance of $18.9 million. On December 13, 1996, First Union exercised its option to expand the scope of the First Union Strategic Alliance to include approximately 1,500 additional Dealers throughout five northeastern states (the 'Northeastern Franchise') with which FUSF has existing relationships. The Company anticipates commencing the introduction of its products and services throughout the Northeastern Franchise in March 1997. IronBrand Capital, LLC, a subsidiary of First Union National Bank of North Carolina (the 'First Union Partner'), is a limited partner of National Auto Finance Company L.P., a Delaware limited partnership organized in October 1994 (the 'NAFCO Partnership'). Upon consummation of this offering (this 'Offering'), the NAFCO Partnership will own approximately 62.89% of the Common Stock of the Company. As a limited partner of the NAFCO Partnership, the First Union Partner currently has an economic interest with respect to approximately 15% of the Common Stock of the Company held by the NAFCO Partnership (or 9.43% of the outstanding shares of Common Stock upon consummation of this Offering). Based upon several factors, including the overall performance of the First Union Strategic Alliance and the total market value of the Company over a specified time period, the First Union Partner may obtain an economic interest with respect to an approximate additional 34% of the Common Stock held by the NAFCO Partnership. Any such increase would be non-dilutive to the public stockholders of the Company. The national banks comprising the First Union Strategic Alliance are subsidiaries of First Union Corporation, a bank holding company headquartered in Charlotte, North Carolina. As of September 30, 1996, First Union Corporation was the nation's sixth largest bank holding company in terms of total assets. For the fiscal year ended December 31, 1995, which was the Company's first full year of operations, the Company generated revenues of $7.8 million and pre-tax income of $3.28 million on annual Loan volume of $43.5 million. Through the end of fiscal 1995, the Company had purchased 3,886 Loans with aggregate gross receivables of $73.6 million and net receivables of $49.8 million, as adjusted for unearned finance charges and before taking into account Dealer discounts and allowance for possible Loan losses. For the nine months ended September 30, 1996, the Company generated revenues of approximately $9.9 million and pre-tax income of approximately $3.1 million on Loan volume of approximately $56.1 million. Through September 30, 1996, the Company purchased 8,423 Loans with aggregate gross receivables of approximately $157 million and net receivables of approximately $105.9 million, as adjusted for unearned finance charges and before taking into account Dealer discounts and allowance for possible Loan losses. National Auto Finance Company, Inc. was incorporated in Delaware in October 1996. The NAFCO Partnership and Auto Credit Clearinghouse L.P., a Delaware limited partnership organized in September 1995 (the 'ACCH Partnership' and together with the NAFCO Partnership, the 'Partnerships'), are affiliated entities that are the predecessors to the business of the Company. Unless the context otherwise requires, references in this Prospectus to 'NAFCO' or the 'Company' refer to National Auto Finance Company, Inc., and the business previously conducted by the Partnerships. See 'The Reorganization.' The Company's executive offices are located at 621 N.W. 53rd Street, Suite 200, Boca Raton, Florida 33487 and its telephone number is (561) 997-2747. THE OFFERING <TABLE> <S> <C> Common Stock offered hereby............... 2,000,000 shares Common Stock to be outstanding after this Offering................................ 6,726,000 shares(1) Use of Proceeds........................... To support securitizations and other long-term financing arrangements; to repay a portion of the subordinated indebtedness held by certain affiliates of the Company; and for working capital and other general corporate purposes. See 'Use of Proceeds.' Proposed NASDAQ National Market symbol.... NAFI </TABLE> - ---------------- 1. Does not include 260,000 shares of Common Stock subject to outstanding stock options. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------- ------------------- (THREE MONTHS) 1994 1995 1995 1996 -------------- ------ ------ ------ <S> <C> <C> <C> <C> INCOME STATEMENT DATA: Gain on sales of Loans.................................... $ 0 6,487 4,920 8,189 Gain on securitization of Loans purchased prior to January 16, 1995(1)............................................. 0 639 639 0 Deferred gain on sales of Loans........................... 0 241 140 491 Deferred servicing income................................. 0 219 109 587 Deferred income from 1995-1 securitization.......................................... 0 0 0 479 Interest income from cash investments..................... 32 11 8 56 Other income.............................................. 0 32 31 54 Finance charges earned.................................... 95 0 0 0 Provision for credit losses(2)............................ (182) 182 0 0 ------ ------ ------ ------ Total revenue............................................. (55) 7,811 5,847 9,856 Operating expenses........................................ (420) (4,530) (3,098) (6,754) ------ ------ ------ ------ Total expenses............................................ (420) (4,530) (3,098) (6,754) ------ ------ ------ ------ Net income (loss) before pro forma income tax expense..... (475) 3,281 2,749 3,102 Pro forma income taxes(3)................................. 0 (1,066) (865) (1,167) ------ ------ ------ ------ Pro forma net income (loss)............................... $ (475) 2,215 1,884 1,935 ------ ------ ------ ------ ------ ------ ------ ------ Pro forma earnings (loss) per share $ (.07) .33(4) .28(4) .29 Pro forma weighted average shares outstanding(5).......... 6,726,000 6,726,000 6,726,000 6,726,000 </TABLE> - ------------------ (1) Represents $639,000 gain on sale for Loans purchased between October 12, 1994 and January 16, 1995 and sold to the Master Trust on January 16, 1995 in connection with the Revolving Securitization. (2) Approximately 5% or $182,000 of the $3.6 million of Loans funded during the three months ended December 31, 1994 was set aside as a provision for possible Loan losses. This reserve was reversed when these Loans were sold to the Master Trust on January 16, 1995 in connection with the Revolving Securitization. Subsequently, all reserves for Loan losses have been accounted for by the Master Trust. (3) The pro forma income taxes reflect the application of a combined federal and state income tax rate of approximately 38% as if the Company had been taxed as a C corporation for all periods presented. For the periods ended December 31, 1995 and September 30, 1995, taxes have been calculated at 38% after netting prior years net operating losses from pro forma net income. (4) Includes approximately $0.07 per share attributable to gains on Loans purchased between the Company's commencement of operations on October 12, 1994 and January 16, 1995, when the Company initiated its Revolving Securitization program. (5) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock in this Offering. <TABLE> <CAPTION> SEPTEMBER 30, 1996 --------------------------------------------- PRO FORMA (AS ACTUAL PRO FORMA(6)(7) ADJUSTED)(6)(8) ------- --------------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Total assets........................................................... $28,446 28,445 38,602 Senior Subordinated Notes.............................................. 12,000 12,000 12,000 Junior Subordinated Notes.............................................. 7,218 7,218 2,934 Total liabilities...................................................... 20,292 22,475 18,191 Partners' preferred equity............................................. 2,251 0 0 Partners' equity....................................................... 5,903 0 0 Stockholders' equity................................................... 0 5,970 20,411 </TABLE> <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ----------------------- NINE MONTHS ENDED SEPTEMBER 30, (THREE MONTHS) ------------------------- 1994 1995 1995 1996 -------------- ------ ----------- ----------- <S> <C> <C> <C> <C> LOAN PORTFOLIO INFORMATION: Number of Loans purchased during period (not in thousands)..... 300 3,586 2,718 4,537 Principal balance of Loans purchased........................... $3,820 45,972 34,594 56,152 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, ----------------------- ------------------------- 1994 1995 1995 1996 -------------- ------ ----------- ----------- <S> <C> <C> <C> <C> Aggregate number of Loans purchased (not in thousands)......... 300 3,886 3,018 8,423 Aggregate principal balance of Loans purchased................. $3,820 49,792 38,414 105,944 Number of outstanding Loans (not in thousands)(9).............. 300 3,586 2,884 7,286 Principal balance of Loans outstanding(9)...................... $3,800 43,145 35,064 82,792 Net charge-offs as a percentage of aggregate principal balance of Loans purchased(9)........................................ 0.00% 1.31% 0.55% 2.43% </TABLE> - ------------------ (6) Pro forma amounts are unaudited. (7) Reflects the Reorganization as if it had occurred on September 30, 1996. See 'The Reorganization' and 'Unaudited Pro Forma Financial Statements.' (8) Reflects the Reorganization and the issuance of 2,000,000 shares in the Offering, all as if they had occurred on September 30, 1996. See 'Certain Transactions--Senior Subordinated Indebtedness' and 'Unaudited Pro Forma Financial Statements.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001024338_cornerston_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001024338_cornerston_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6d55baaaf348b03a4a780d3ed3f0a982d207bd14
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001024338_cornerston_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. THE TRANSACTIONS RELATED TO THE FORMATION OF THE PARTNERSHIP, THE PARTNERSHIP'S ACQUISITION OF THE COMBINED OPERATIONS, THE PARTNERSHIP'S INITIAL PUBLIC OFFERING OF COMMON UNITS IN DECEMBER 1996 (THE "IPO"), THE ISSUANCE OF $220.0 MILLION OF SENIOR SECURED NOTES DUE 2010 (THE "NOTES") BY CORNERSTONE PROPANE, L.P., THE PARTNERSHIP'S OPERATING SUBSIDIARY (THE "OPERATING PARTNERSHIP"), THE ENTERING INTO BANK CREDIT FACILITIES AND THE OTHER TRANSACTIONS THAT OCCURRED IN CONNECTION THEREWITH ARE REFERRED TO IN THIS PROSPECTUS AS THE "TRANSACTIONS." SEE "THE IPO AND RELATED TRANSACTIONS." EXCEPT AS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO, OR DESCRIPTIONS OF, THE ASSETS, BUSINESS AND OPERATIONS OF THE PARTNERSHIP GIVE PRO FORMA EFFECT TO THE TRANSACTIONS AND, ACCORDINGLY, INCLUDE THE PROPANE ASSETS, BUSINESSES AND OPERATIONS OF SYN INC. ("SYNERGY"; IN ITS CAPACITY AS THE SPECIAL GENERAL PARTNER OF THE PARTNERSHIP, THE "SPECIAL GENERAL PARTNER" AND, TOGETHER WITH THE MANAGING GENERAL PARTNER, THE "GENERAL PARTNERS"), EMPIRE ENERGY CORPORATION ("EMPIRE ENERGY") AND CGI HOLDINGS, INC. ("COAST") AS CONDUCTED PRIOR TO THE IPO. THE COMMON UNITS AND THE SUBORDINATED UNITS ARE COLLECTIVELY REFERRED TO HEREIN AS THE "UNITS," AND HOLDERS OF THE COMMON UNITS AND SUBORDINATED UNITS ARE COLLECTIVELY REFERRED TO HEREIN AS "UNITHOLDERS." UNLESS OTHERWISE SPECIFIED, REFERENCES TO THE PARTNERSHIP IN THIS PROSPECTUS INCLUDE THE OPERATING PARTNERSHIP, AND REFERENCES TO PERCENTAGE OWNERSHIP OF THE PARTNERSHIP REFLECT THE APPROXIMATE EFFECTIVE OWNERSHIP INTEREST OF THE UNITHOLDERS AND THE GENERAL PARTNERS IN THE PARTNERSHIP AND THE OPERATING PARTNERSHIP ON A COMBINED BASIS. FOR EASE OF REFERENCE, A GLOSSARY OF CERTAIN TERMS USED IN THIS PROSPECTUS IS INCLUDED AS APPENDIX B TO THIS PROSPECTUS. CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS GIVEN IN THE GLOSSARY.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001024732_igate-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001024732_igate-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..de612b424d40540bf79e469b664308131148155f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001024732_igate-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. Unless otherwise indicated, references to the "Company" or "Mastech" include Mastech Corporation and its wholly owned subsidiaries. THE COMPANY Mastech Corporation ("Mastech" or the "Company") is a worldwide provider of information technology ("IT") services to large and medium-sized organizations. Mastech provides its clients with a single source for a broad range of applications solutions and services, including client/server design and development, conversion/migration services, Year 2000 services, Enterprise Resource Planning ("ERP") package implementation services, Internet/intranet services and applications maintenance outsourcing. These services are provided in a variety of computing environments and use leading technologies, including client/server architectures, object-oriented programming languages and tools, distributed database management systems and the latest networking and communications technologies. To enhance its services, Mastech has formed business alliances with leading software companies such as Baan, Oracle and PeopleSoft. In addition, the Company has developed its own proprietary methodologies and tools, under the name SmartAPPS, that enhance the productivity of the Company's Year 2000 and other services. Mastech's revenues have grown from $13.5 million in 1991 to $123.4 million in 1996 and $135.8 million for the nine months ended September 30, 1997. During 1997, Mastech has provided IT services to over 475 clients worldwide in a diverse range of industries. These clients include AT&T, Citibank, EDS, IBM, Intel, Oracle and Wal-Mart. The Company sets high standards for client responsiveness and project quality. A significant number of the Company's clients have selected Mastech on a recurring basis to provide additional services. Mastech believes that the growth of the IT services industry offers significant opportunities and has developed a set of strategies that the Company believes differentiate it from competitors. These strategies include: (i) the development of a global recruitment network through which the Company recruits and deploys qualified IT professionals from a number of countries to address the shortage of IT professionals in the U.S. and other developed countries; (ii) a focus on applications services including ERP package implementation, Year 2000 and Internet/intranet services; (iii) the development of proprietary technology, including an automated tool for Year 2000 code conversions and other programming language translations; (iv) international expansion to leverage the growing need for value-added IT services in areas outside the U.S.; and (v) the development of an extensive offshore software development infrastructure to provide cost advantages to clients that are increasingly short of resources. One of the key elements of Mastech's growth has been its ability to recruit and deploy, on short notice, experienced IT professionals on a worldwide basis. As of September 30, 1997, the Company employed approximately 2,400 IT professionals, over 1,500 of whom were in the U.S., with the remainder in Canada, Europe, the Middle East, Singapore, Japan, India and Australia. To support the Company's growth and to meet the increased demand for IT professionals, the Company has embarked on an aggressive recruiting strategy, designed to significantly increase the number of IT professionals hired. The Company is also establishing a network of training centers in which it trains new recruits in value-added technologies such as PeopleSoft, Oracle Applications, Java/HTML and Year 2000 solutions. In 1995, the Company began marketing its services in key international markets to meet the large and growing demand for IT services overseas and to serve its client base of large multinational corporations that need support on a global basis. In addition to offices in the U.S., the Company maintains international offices in Toronto, Singapore, London, Sydney, Tokyo, Amsterdam and the Middle East. As a result of the Company's expanding international operations, as of September 30, 1997, it had over 470 employees working with over 90 clients outside the U.S. To provide cost advantages to clients that are increasingly short of resources, Mastech is investing in an extensive offshore software development infrastructure in India, including three state-of-the-art software development centers. The center in Bangalore, India has been operational for over a year and is conducting over 30 engagements for Mastech clients in the U.S. and Canada. Two additional centers are under development in Pune and Madras, India. The Company believes that this offshore infrastructure, with the ability to accommodate 1,500 IT professionals when complete, will represent one of the largest offshore presences in the industry. RECENT DEVELOPMENTS In October 1997, the Company entered into a non-binding letter of intent to purchase for cash the assets of an Australian IT services company. The aggregate purchase price is not expected to exceed $6 million. The Company anticipates closing this transaction prior to December 31, 1997. While there can be no assurance that the Company will be successful in closing this acquisition, the Company believes that the acquisition, if consummated, will enhance its ability to service clients' needs and expand its market presence in Australia. See "Risk Factors--Risks Related to Possible Acquisitions." THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company............. 1,800,000 shares Common Stock offered by the Selling Shareholders.................................... 1,200,000 shares Common Stock to be outstanding after the offering........................................ 23,457,500 shares (1) Use of proceeds................................. Expansion of existing operations, including the Company's international marketing and offshore software development operations, development of new service lines and possible acquisitions of related businesses; and general corporate purposes, including working capital. Nasdaq National Market symbol................... MAST </TABLE> - -------------------- (1) Excludes 2,160,000 shares of Common Stock reserved for issuance under the Company's 1996 Stock Incentive Plan under which options to purchase 1,253,150 shares were outstanding as of October 15, 1997 at a weighted average exercise price of $16.48 per share. See "Management--Employee Benefit Plans" and "--Employment Agreements." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues............... $20,161 $38,709 $70,050 $103,676 $123,400 $90,336 $135,821 Gross profit........... 7,314 12,573 20,135 31,262 33,947 24,778 41,113 Income from operations (1).................. 2,707 2,744 11,349 18,259 12,874 10,108 16,096 Income before income taxes................ 2,732 2,724 11,444 18,396 12,828 10,087 17,130 Provision for income taxes (2)............ -- -- -- -- 4,136 -- 6,852 ------- ------- ------- -------- -------- ------- -------- Net income............. $ 2,732 $ 2,724 $11,444 $ 18,396 $ 8,692 $10,087 $ 10,278 Net income per common share................ $ 0.47 Pro forma income taxes (2).................. 1,093 1,090 4,578 7,358 4,915 4,035 Pro forma net income... $ 1,639 $ 1,634 $ 6,866 $ 11,038 $ 3,777 $ 6,052 Pro forma net income per common share (2)............ $ 0.09 $ 0.09 $ 0.38 $ 0.60 $ 0.20 $ 0.32 Weighted average number of common shares outstanding.......... 18,255 18,255 18,255 18,255 18,790 18,665 21,855 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 --------------------------- ACTUAL AS ADJUSTED(3) (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......................... $31,497 $ 84,035 Working capital.................................... 56,603 109,141 Total assets....................................... 88,124 140,662 Total shareholders' equity......................... 61,606 114,144 </TABLE> - -------------------- (1) Income from operations for the year ended December 31, 1996 reflects a non- recurring charge of $875,000 incurred pursuant to an agreement with an executive to pay, as compensation for past services, an amount equal to the value of 54,600 shares of Common Stock at the initial public offering price of $15 per share. The Company has reflected this payment along with the applicable tax withholdings as a non-recurring charge. In the nine months ended September 30, 1997, income from operations reflects a non-recurring charge of $389,000 relating to the amortization of deferred compensation of this same executive. (2) The Company's S-corporation status terminated on December 16, 1996 in connection with the Company's initial public offering of Common Stock, thereby subjecting the Company's income to federal and state taxes at the corporate level. Pro forma net income and pro forma net income per common share reflect federal and state income taxes (assuming a 40% effective tax rate) as if the Company had been taxed as a C corporation for all periods presented. See Note 10 of Notes to Consolidated Financial Statements for information concerning the computation of pro forma net income per common share. In connection with the Company's conversion from S-corporation status to C-corporation status, the Company recorded a provision for income taxes of $3.9 million in the fourth quarter of 1996. (3) Adjusted to give effect to the sale of 1,800,000 shares of Common Stock offered by the Company at an assumed public offering price of $31 1/4 per share, net of underwriting discounts and commissions and estimated costs of this offering. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001025560_general_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001025560_general_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bcca858ee0913026ecea4a79149fce9acff4342a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001025560_general_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including financial statements and notes thereto, included elsewhere in this Prospectus. Except where the context otherwise requires, all references to the "Company" or to "General" include General Housing, Inc., its wholly owned subsidiary and the subsidiary's predecessor. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the Underwriters' over-allotment option and has been adjusted to reflect approximately a 0.82 for 1 reverse stock split to be effected immediately prior to the closing of the Offering. THE COMPANY General produces manufactured homes in the southeastern United States, with an emphasis on value-pricing and enhanced customer service. The Company sells its homes through a network of independent dealers with more than 400 retail sales centers principally located in the Company's primary markets of Georgia, South Carolina, Florida, Alabama and North Carolina (the "Primary Markets") and uses a variety of brand names in order to better penetrate its markets. The Company's principal focus is on the production of multi-section homes, which, for the first nine months of 1996, represented approximately 63% of the homes sold by the Company. Since 1994, in the Company's Primary Markets, sales of multi-section homes have exceeded sales of single-section homes. The Company believes that wider and more flexible floor plan designs and site-built appearance are features of multi-section homes that have contributed to this trend. The Company manufactures its homes in five production facilities, four of which are located in Waycross, Georgia, and one of which is located in Lamar, South Carolina. The Company's single-section homes generally sell at retail prices between $12,000 and $29,000 and its multi-section homes generally sell at retail prices between $18,000 and $44,000. Since its founding in 1987, the Company has experienced rapid growth. Net sales have increased from $20.2 million in 1991 to $89.3 million in 1995, a compound annual growth rate of 45%. During the first nine months of 1996, net sales were $100.8 million compared to $63.2 million for the comparable period in 1995, a 59% increase. In addition, the Company believes that its operating margins are among the highest in the industry based on the publicly available information of its competitors. The Company began production at its third and fourth manufacturing facilities in January 1994 and August 1995, and began production at its fifth manufacturing facility, located in South Carolina, in December 1995. BUSINESS STRATEGY The key elements of the Company's business strategy are as follows: Comprehensive Approach to Customer Service. The Company is committed to providing comprehensive service to its independent dealers and to retail buyers of its homes. To differentiate itself in the market, the Company created the Gold Card service program. Under the Gold Card service program, the retail home buyer is able to contact the Company directly with respect to all warranty service claims. The Company believes that its Gold Card program: (1) ensures prompt customer service, (2) develops loyalty among dealers by reducing their need to provide time-consuming customer service and (3) enhances the Company's reputation in the marketplace. The Company believes the Gold Card service program has contributed to its success and that it continues to be the only warranty service program in the industry administered directly by the manufacturer. The Company provides all retail buyers of its homes with one-year limited warranties and, with respect to most of its homes, pays for a third party to provide limited warranties against structural defects for a period of nine years beginning after the initial one-year warranty period. Product Focus. The Company targets its homes to the value-priced segment of the manufactured housing market. In 1995, the Company's average wholesale price per home sold was $20,358. In designing its homes, the Company incorporates certain high-visibility and structural features that are valued by home buyers and which are typically characteristic of higher- priced manufactured homes, while avoiding other features that add to production cost without significantly enhancing marketability. Standard high-visibility and structural features typically include vaulted and textured ceilings, plywood floors and higher-quality cabinets. Because of this design emphasis, together with its manufacturing expertise and strict cost controls, the Company believes that it is able to offer multi-section homes that compete directly with the single-section homes offered by certain of its competitors. Geographic Focus. General's objective is to become one of the leading producers of value-priced manufactured homes across the southeastern United States. Historically, the Company has focused on marketing its homes through independent dealers in the Company's Primary Markets. The states comprising the Company's Primary Markets represent five of the six largest markets for manufactured housing and accounted for approximately 31% of industry shipments during the first nine months of 1996 according to the Manufactured Housing Institute, an industry trade association (the "MHI"). The Company plans to continue to grow by increasing its presence in its Primary Markets and by further expanding into contiguous markets in the southeastern United States. Through its existing facilities, the Company believes that its level of production can be increased to approximately 54 floors per day from its current average production of approximately 40 floors per day. Low-Cost Production. The Company strives to achieve low-cost production through the use of (1) manufacturing-focused information systems, (2) incentive-based compensation programs, (3) cost-efficient product designs and (4) a centralized manufacturing strategy. The Company's information systems provide management with daily reports that enable management to: identify potential quality concerns; react to raw material price changes; recognize changes in production efficiency; and tightly control costs. The Company relies heavily on incentive-based compensation programs that are designed to motivate employees to achieve production and sales volume goals and to maintain cost and quality control standards. To help effect production efficiencies, the Company uses innovative product designs and construction systems combined with standardized base construction materials across product lines. The Company's centralized manufacturing strategy allows the Company to reduce costs through plant specialization and decreased overhead. INDUSTRY In 1995, the manufactured housing industry had estimated retail sales of $12.3 billion in the United States, an increase of 21% over the previous year according to the MHI. From 1991 through 1995, shipments of manufactured homes increased from approximately 171,000 homes to 340,000 homes, a compound annual growth rate of 18.7%. Growth has continued through the first nine months of 1996 as home shipments increased 9.2% over the comparable period in 1995. Manufactured housing shipments have benefited from the continuing cost advantage of manufactured homes relative to site-built homes, the improved quality and appearance of manufactured homes, a stable economic environment and increased availability of financing for manufactured home buyers. During the first nine months of 1996, total manufactured home shipments within the Company's Primary Markets increased by 11.8% over the comparable period in 1995, exceeding the national rate of increase, and the Company's total home shipments increased by 45.9% for the same period. Shipments of multi-section manufactured homes in the Company's Primary Markets increased from 47,566 in 1994 to 53,990 in 1995, an increase of 13.5%, and through the first nine months of 1996, increased by 19.9% over the comparable period in 1995. The Company's shipments of multi-section homes increased 41% and 43%, respectively, for the same periods. ACQUISITION AND RESTRUCTURING The Company is the successor to General Manufactured Housing, Inc. which commenced operations in 1987 (the "Predecessor"). The Predecessor was acquired on December 21, 1995, in a leveraged buyout transaction accounted for as a purchase, for an aggregate consideration of approximately $50.6 million (the "Acquisition"). Strategic Investments & Holdings, Inc., a private investment firm headquartered in Buffalo, New York ("Strategic Investments"), was instrumental in structuring the Acquisition. Certain principals of Strategic Investments actively participate in the management of the Company and an affiliate of Strategic Investments is a principal stockholder of the Company. See "Certain Transactions--Management Agreement" and "Principal Stockholders." The Acquisition was funded through the issuance of the Company's capital stock and indebtedness. The proceeds of the Offering will be used to reduce such indebtedness and to redeem the Company's Series A Redeemable Preferred Stock (the "Redeemable Preferred Stock"). See "Use of Proceeds," "Capitalization" and "Certain Transactions--The Restructuring." Simultaneous with the closing of the Offering, all classes of the Company's issued and outstanding capital stock will be converted into a single class of Common Stock and the deferred consideration payable to the former stockholders of the Predecessor will be converted into promissory notes (together, with certain other changes to the Company's capital structure, the "Restructuring"). In the fiscal quarter in which the Restructuring and the Offering are consummated, the Company will record the following non-recurring charges: (1) a non-cash charge of approximately $2.2 million resulting from the issuance of Common Stock to holders of the Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock") in satisfaction of the liquidation preference payable to such holders upon the conversion of the Series B Preferred Stock into Common Stock, and (2) approximately $258,000 resulting from the redemption of the Redeemable Preferred Stock, representing the difference between the consideration received upon issuance (plus accretion) and the redemption price. The non-cash charge of $2.2 million will reduce net income available to common stockholders for such quarter, but will not reduce total stockholders' equity. In addition, at the same time, the Company will record an extraordinary after- tax charge to income of approximately $400,000 resulting from the prepayment of a substantial portion of the Company's outstanding long-term debt. See "Certain Transactions--The Acquisition" and "--The Restructuring." THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................... 2,000,000 shares Common Stock to be outstanding after the Offering(1).. 5,769,231 shares Use of proceeds....................................... To redeem all of the shares of the Company's Redeemable Preferred Stock, and to reduce indebtedness incurred in connection with the Acquisition. See "Use of Proceeds." Proposed Nasdaq National Market symbol................ GNHG </TABLE> - -------- (1) Excludes 461,500 shares reserved for issuance under the Company's Stock Option Plan, including 208,000 shares issuable upon the exercise of options (all of which will be granted to officers and employees of the Company immediately prior to the completion of the Offering) with an exercise price equal to the initial public offering price. See "Management--Compensation Pursuant to Plans" and "Principal Stockholders." The Company's principal executive offices are located at 2255 Industrial Boulevard, Waycross, Georgia 31501 and its telephone number is (912) 285-5068. SUMMARY FINANCIAL AND OPERATING INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> PREDECESSOR(1) COMPANY -------------------------------------- -------------------------------------------- PRO FORMA(2) ------------------------------- NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED NINE MONTHS ---------------------------- --------------------- DECEMBER 31, ENDED 1993 1994 1995(3) 1995 1996 1995(3) SEPTEMBER 30, 1996 -------- -------- ---------- -------- --------- ------------ ------------------ <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales............... $ 42,904 $ 66,574 $ 89,292 $ 63,154 $ 100,823 $89,292 $100,823 Gross profit............ 8,618 14,304 19,720 13,838 25,195 19,720 25,195 Income from operations(4).......... 1,951 3,552 7,946 5,572 12,609 8,063 12,534 Interest expense........ 100 95 283 107 3,552 3,702 2,750 Net income.............. 1,093 2,106 7,251 5,181 5,207(6) -- -- Pro forma net income.... -- -- 4,784(5) 3,417(5) -- 2,326 5,658 Net income per common share.................. -- -- --- -- $ 1.24 $ 0.40 $ 0.98 Weighted average number of common shares outstanding............ -- -- -- -- 3,604 5,769 5,769 OPERATING DATA: Average wholesale price per home: Single-section homes.. $ 12,271 $ 13,617 $ 15,226 $ 15,019 $ 17,023 Multi-section homes... 19,291 22,007 22,995 22,664 24,691 Average per home...... 15,223 18,385 20,358 19,962 21,872 Homes sold: Single-section homes.. 1,662 1,583 1,512 1,136 1,719 Multi-section homes... 1,206 2,084 2,942 2,078 2,969 -------- -------- -------- -------- --------- Total homes......... 2,868 3,667 4,454 3,214 4,688 Manufacturing facilities(7).......... 2 3 5 4 5 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ----------------------------------- PRO FORMA ACTUAL PRO FORMA(8) AS ADJUSTED(9) ------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Total assets.............................. $56,496 $58,853 $58,409 Long-term debt............................ 30,479 32,479 17,249 Redeemable Preferred Stock................ 7,742 7,742 -- Stockholders' equity...................... 3,159 2,904 25,432 </TABLE> - -------- (1) On December 21, 1995, the Company acquired all of the capital stock of the Predecessor in the Acquisition. The financial information assumes that the Acquisition was consummated after the close of business on December 30, 1995. (2) Pro forma to give effect to the Acquisition, the Restructuring and the Offering as if such transactions had occurred on January 1, 1995. See "Unaudited Pro Forma Financial Statements." (3) Year ended December 30. (4) Includes management compensation of approximately $2,049, $4,121, $1,855 and $1,391 for the years ended 1993, 1994 and 1995 and for the nine months ended September 30, 1995, respectively, which would not have been paid under the current executive salary and bonus plan. (5) Reflects a pro forma provision for federal and state income taxes for the Predecessor at a blended rate of 38% for 1995. During 1995, the Predecessor elected to be treated as an S corporation for federal income tax purposes and therefore recorded no provision for federal income taxes for the year or for the nine months ended September 30, 1995. (6) Before preferred stock dividends of $720 and accretion on preferred stock of $22, which have been deducted from net income in determining net income per common share. (7) The Company's third, fourth and fifth facilities began operations in January 1994, August 1995 and December 1995, respectively. (8) Pro forma to give effect to the Restructuring. See "Unaudited Pro Forma Financial Statements."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001025702_bright_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001025702_bright_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7bcf3621411283321628b742f6c321442c434cef
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001025702_bright_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." Unless the context otherwise requires, all references herein to "Bright Horizons" or the "Company" refer to Bright Horizons, Inc. and its subsidiaries. The Company's fiscal year ends on June 30. All references to fiscal years in this Prospectus refer to the fiscal years ending in the calendar years indicated (e.g., fiscal 1997 refers to the fiscal year ended June 30, 1997). THE COMPANY Bright Horizons is the nation's largest provider of early education and family support services for the corporate market, operating 140 child development centers for 134 clients. The Company serves more than 13,500 children and their families in 25 states and the District of Columbia. With the changing demographics of today's workforce and the prevalence of dual career families, a growing number of corporations are creating family benefits to attract and retain employees and support them as parents. The Company provides early childhood education, full and part-time child care, emergency backup care, before and after school care for school age children, summer camps, vacation care, special event child care, elementary school (kindergarten through third grade) and family support services. Bright Horizons partners with corporate sponsors to provide these services. Bright Horizons serves many of the nation's leading corporations including Allstate Insurance Company, Apple Computer, Duke Power, DuPont, First Union National Bank, Glaxo Wellcome, IBM (through the American Business Collaborative), Merck & Co., Inc., Motorola, Paramount Pictures, Pfizer, Salomon Brothers, Sony Pictures Entertainment, Time Warner, Inc., Universal Studios, Inc., Warner Bros. and Xerox. In addition, the Company provides early education services for well known institutions such as the United Nations, New York Hospital, The George Washington University, John F. Kennedy Airport and Beth Israel Deaconess Medical Center. None of these corporations or institutions accounted for more than 4% of the Company's revenues during fiscal 1997. The Company operates multiple centers and services for 13 of its clients. Bright Horizons has achieved 37% average annual growth, compounded annually, in revenues over the last four years, growing from $23.8 million in fiscal 1993 to $85.0 million in fiscal 1997. During the same period, income from operations increased from $167,000 in fiscal 1993 to $2.2 million in fiscal 1997 and income before income taxes increased from $153,000 in fiscal 1993 to $1.9 million in fiscal 1997. The Company has increased the number of its child development centers from 54 at the end of fiscal 1993 to 140 at the end of fiscal 1997, most of which are operated under contracts with initial terms of five to ten years. In addition, Bright Horizons has 25 new centers under development and six existing centers undergoing expansion. The Company has concentrated on building a strong market presence in major metropolitan markets including Boston, Charlotte, Chicago, Hartford, Los Angeles, New York, Raleigh/Durham, San Francisco, Seattle and Washington, D.C. The key elements of the Company's growth strategy are to: (i) open centers for new corporate sponsors; (ii) increase revenue from existing corporate sponsor relationships by opening new centers and adding new services; (iii) assume the management of corporate-sponsored centers that are currently operated by sponsors or other providers of early education; (iv) acquire smaller work-site early education companies capable of providing high quality care; and (v) market additional, complementary early education and family support services. Bright Horizons is well-positioned to serve corporate sponsors due to the Company's national scale, track record of serving major corporate sponsors, established reputation and position as a quality leader. The Company and its management were selected by BusinessWeek as one of 1997's "Best Entrepreneurs." In addition, co-founders Roger Brown and Linda Mason were selected by Ernst & Young and Nasdaq to be the 1996 national winners of "The Entrepreneur of the Year" in the service category. Bright Horizons is the only early education company to be selected as one of WorkingMother magazine's "100 Best Companies for Working Mothers." Bright Horizons is taking advantage of the growing demand for corporate- sponsored early education and family support services. Over 60% of mothers with children under six are currently in the work force, compared to 22% in 1960. The Company estimates the total market size for early education and family support services to be in excess of $2.0 billion. An increasing number of corporations, hospitals, real estate developers, government agencies and universities sponsor work-site centers in order to increase the productivity, loyalty and commitment of their work forces and to gain a competitive advantage in recruiting and retaining talented employees. Work-site child development centers are often the most convenient child care option for parents with demanding commuting and work schedule needs. Bright Horizons' mission is to be a quality leader in the education and care of young children. Bright Horizons operates its child development centers to qualify for accreditation under the stringent criteria developed by the National Association for the Education of Young Children ("NAEYC"), and has more NAEYC-accredited work-site centers than any other provider. Bright Horizon's innovative, age-appropriate curricula distinguish it in an industry typically lacking educational programs by creating a dynamic and interactive environment that stimulates learning and development. As part of its comprehensive curricula, the Company has developed the proprietary !Language Works! preschool curriculum which facilitates mastery of language by early exposure to words and symbols, extensive use of language in all activity areas, composition of books and immersion in literature. Bright Horizons is currently advised by several education experts. Dr. T. Berry Brazelton, a well known pediatrician, and Dr. Ed Zigler and Dr. Sharon Lynn Kagan of Yale University serve on its Advisory Board. Dr. Sara Lawrence-Lightfoot of the Harvard School of Education serves on its Board of Directors. The Company is a holding company incorporated in Delaware in May 1997. The principal operations of the Company are conducted through its wholly owned subsidiary Bright Horizons Children's Centers, Inc., a Delaware corporation incorporated in 1986. Bright Horizons' home office is located at One Kendall Square, Building 200, Cambridge, Massachusetts 02139 and its telephone number is (617) 577-8020. RECENT DEVELOPMENTS For the three months ended September 30, 1997, net revenues increased $4.5 million, or 22.6%, to $24.2 million from $19.7 million for the three months ended September 30, 1996. Gross profit increased $852,000, or 34.1%, to $3.3 million for the three months ended September 30, 1997 from $2.5 million for the three months ended September 30, 1996. As a percentage of net revenues, gross profit increased to 13.9% for the three months ended September 30, 1997 from 12.7% for the three months ended September 30, 1996. Income from operations increased $303,000 to $612,000 for the three months ended September 30, 1997 from $309,000 for the three months ended September 30, 1996. As a percentage of net revenues, income from operations increased to 2.5% for the three months ended September 30, 1997 from 1.6% for the three months ended September 30, 1996. Net income increased $172,000, or $0.04 per share on a pro forma basis, to $314,000, or $0.07 per share, for the three months ended September 30, 1997 from $142,000, or $0.03 per share, for the three months ended September 30, 1996. As a percentage of net revenues, net income increased to 1.3% for the three months ended September 30, 1997 from 0.7% for the three months ended September 30, 1996. The growth in revenues is primarily attributable to the addition of 11 centers, including the four Learning Garden Centers acquired on July 1, 1997. The increases in gross profit and income from operations resulted from an increase in the percentage of centers that have reached mature operating levels and, to a lesser extent, an increased use of summer programs during the three months ended September 30, 1997. In addition, the increase in income from operations is attributable, in part, to the decrease in amortization of non-compete agreements to $70,000 for the three months ended September 30, 1997 from $140,000 for the three months ended September 30, 1996. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company........... 1,350,000 shares The Selling Stockholders............ 1,350,000 shares Total............... 2,700,000 shares Common Stock to be outstanding after the offering............... 5,444,436 shares(1)(2) Use of proceeds......... Repayment of indebtedness, working capital and other general corporate purposes, including possible acquisitions. Nasdaq National Market symbol................. BRHZ </TABLE> - -------- (1) Based upon the number of shares outstanding as of September 30, 1997. Excludes (i) 889,902 shares of Common Stock reserved for issuance upon exercise of options outstanding with a weighted average exercise price of $5.49 per share, (ii) 66,666 shares of Common Stock reserved for issuance upon exercise of a warrant issued to The ServiceMaster Company, L.P. ("ServiceMaster") at an exercise price of $10.50 per share and (iii) 576,066 shares of Common Stock reserved for future grants of Common Stock or options to purchase Common Stock under the Company's 1997 Equity Incentive Plan. See "Management--Stock Plans." (2) Gives effect to the conversion of all outstanding shares of the Company's Series A Mandatorily Redeemable Convertible Preferred Stock, Series B Mandatorily Redeemable Convertible Preferred Stock, and Series C Mandatorily Redeemable Convertible Preferred Stock (collectively, the "Convertible Preferred Stock") into an aggregate of 3,100,512 shares of Common Stock and the exercise of outstanding warrants (which would otherwise expire upon the closing of the offering) into 305,045 shares of Common Stock. See Notes 7 and 8 to Consolidated Financial Statements. SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> FISCAL YEAR ENDED JUNE 30, ------------------------------------------ 1993 1994 1995 1996(1) 1997 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues..................... $23,812 $32,012 $43,693 $64,181 $85,001 Cost of services(2).............. 20,611 27,592 37,209 55,615 72,675 ------- ------- ------- ------- ------- Gross profit................... 3,201 4,420 6,484 8,566 12,326 Selling, general and administrative expenses(2)...... 3,034 3,578 5,174 6,376 9,007 Amortization of non-compete agreements(2)(3)................ -- -- 80 1,680 560 Transaction costs(4)............. -- -- -- -- 543 ------- ------- ------- ------- ------- Income from operations......... 167 842 1,230 510 2,216 Interest income (expense), net... (14) (17) 21 (194) (275) ------- ------- ------- ------- ------- Income before income taxes....... 153 825 1,251 316 1,941 Income tax benefit (provision)(5).................. -- 319 382 1,005 (794) ------- ------- ------- ------- ------- Net income....................... $ 153 $ 1,144 $ 1,633 $ 1,321 $ 1,147 ======= ======= ======= ======= ======= Pro forma net income per share(6)........................ $ 0.26 ======= Pro forma weighted average number of common and common equivalent shares(6)....................... 4,413 ======= SELECTED OPERATING DATA: Number of centers at end of period.......................... 54 72 87 124 140 Number of clients at end of period.......................... 53 70 85 119 134 Licensed capacity at end of period(7)....................... 4,625 6,318 7,607 12,642 14,156 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------ PRO FORMA ACTUAL AS ADJUSTED(8) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital..................................... $ 87 $10,130 Total assets........................................ 28,519 37,762 Long-term debt and capital lease obligations, net of current portion(9)............................. 3,440 89 Mandatorily redeemable convertible preferred stock.. 19,705 -- Total stockholders' equity (deficit)................ $(11,160) $21,939 </TABLE> - -------- (1) Effective December 1, 1995, the Company acquired the business and some of the assets and liabilities of GreenTree Child Care Services, Inc. ("GreenTree"). Fiscal 1996 results include seven months of GreenTree operating results. If the GreenTree acquisition had occurred on July 1, 1995, the Company's pro forma net revenues, gross profit and net income for fiscal 1996 would have been $70.4 million, $8.8 million and $988,000, respectively. (2) Total depreciation and amortization is comprised of (i) center depreciation included in cost of services, (ii) corporate facility depreciation and amortization of goodwill included in selling, general and administrative expenses and (iii) amortization of non-compete agreements discussed in Note 3 below. Total depreciation and amortization was approximately $517,000, $652,000, $871,000, $2.8 million and $2.2 million in fiscal 1993, 1994, 1995, 1996 and 1997, respectively. (3) In connection with the acquisitions of Burud & Associates, Inc. ("Burud") in fiscal 1995 and GreenTree in fiscal 1996, the Company received, in each case, an agreement from the seller not to compete with the Company for a certain future period. The Company recorded intangible assets for the non- compete agreements of $600,000 in fiscal 1995 and $2.0 million in fiscal 1996. These amounts are being amortized over the estimated period of benefit. The Company anticipates recording the remaining $280,000 in amortization expense associated with these non-compete agreements in fiscal 1998. (4) In fiscal 1997, the Company incurred costs of $543,000 associated with a proposed public offering of securities. Because the offering was delayed, the amounts incurred were treated as a period cost. (5) In each of fiscal 1994, 1995 and 1996 the Company recorded an income tax benefit on pre-tax earnings. These benefits include $652,000, $1.0 million and $1.4 million for fiscal 1994, 1995 and 1996, respectively, representing decreases in the tax valuation allowance, net of $1.1 million applied to reduce goodwill in 1996. In fiscal 1997, the Company recorded an income tax provision which was not materially affected by changes in the valuation allowance net of amounts applied to reduce goodwill. See Note 10 to Consolidated Financial Statements. (6) Assumes conversion of all Convertible Preferred Stock and the exercise of warrants which would otherwise expire upon the closing of the offering. Calculated on the basis described in Note 1 to Consolidated Financial Statements. (7) Represents the total capacity permitted under applicable state licenses. (8) As adjusted to reflect (i) the conversion of all Convertible Preferred Stock into an aggregate of 3,100,512 shares of Common Stock, (ii) the exercise of outstanding warrants (which would otherwise expire upon the closing of the offering) into 305,045 shares of Common Stock and (iii) the sale by the Company of the 1,350,000 shares of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share and the application of the estimated net proceeds therefrom. (9) Excludes $480,000 of debt incurred subsequent to June 30, 1997 associated with the mortgage for the Company's Orange, Connecticut child development center. Except as otherwise noted, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) reflects a one-for- three reverse split of the Company's Common Stock, (iii) reflects the conversion of all outstanding shares of Convertible Preferred Stock into an aggregate of 3,100,512 shares of Common Stock; (iv) assumes the exercise of outstanding warrants (which would otherwise expire upon the closing of the offering) into 305,045 shares of Common Stock; and (v) reflects an amendment to the Company's Certificate of Incorporation, to be filed upon the closing of this offering, to remove the Company's existing series of Convertible Preferred Stock and to create a class of authorized but undesignated Preferred Stock. See "Capitalization," "Description of Capital Stock," "Underwriting" and Notes 7 and 8 to Consolidated Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001025743_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001025743_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0cdf2085109dc6acba77bdabac57452273c380d6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001025743_first_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information, including "Risk Factors" and Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all references in this Prospectus to the "Company" are to First Aviation Services Inc. ("First Aviation") and its subsidiaries, National Airmotive Corporation ("NAC") and Aircraft Parts International Combs, Inc. ("API Combs"). "Old API" refers to the assets of Aircraft Parts International, a division of AMR Combs, Inc. ("AMR Combs") to be acquired by API Combs concurrently with the closing of the Offering (the "API Combs Acquisition"). All references to "Allison" refer to the Allison Engine Company, a subsidiary of Rolls Royce USA. Unless otherwise indicated, the information in this Prospectus (i) reflects a 6.4549 to 1 stock split to be effected as a stock dividend in February 1997, (ii) assumes all currently outstanding warrants to purchase the Company's Common Stock have been exercised in full, (iii) gives effect to the API Combs Acquisition, and (iv) assumes no exercise of the Underwriters' over-allotment option.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001025994_pra_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001025994_pra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..769c944250901d606f311ade7b17e7d241fa6600
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001025994_pra_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. All references to the "Company" in this Prospectus refer to PRA International, Inc., a Delaware corporation, and its subsidiaries. Unless otherwise indicated, all financial information and share and per share data in this Prospectus reflect the relevant data for the Company, and assume that the Underwriters' over-allotment option will not be exercised. The offering of the shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Company is referred to herein as the "Offering." Simultaneously with the closing of the Offering, all of the 1,658,082 outstanding shares of Series A 9% Cumulative Redeemable Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), of the Company shall be converted into 3,266,421 shares of Common Stock, which conversion is on the same ratio as the stock split described below, and the certificate of designations establishing the Series A Preferred Stock shall be eliminated from the Company's Restated Certificate of Incorporation. Except as otherwise indicated, all information presented in this Prospectus is adjusted to give effect to such conversion of, and elimination of the certificate of designations for, the Series A Preferred Stock. In addition, except as otherwise noted, all information presented in this Prospectus reflects a 1.97- for-1 stock split of the Common Stock and the amendment of the Company's Certificate of Incorporation, each of which is to be effected prior to the closing of the Offering. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Many of these forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "plans," "anticipate," "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. The matters described in "Risk Factors" and certain other factors noted throughout this Prospectus (and in exhibits to the Registration Statement of which this Prospectus is a part), constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those indicated by such forward-looking statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026114_delias-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026114_delias-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..87436f5a10575a61eff921ddd04eeec0c33a79bf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026114_delias-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." The Company dELiA*s is a direct marketer of casual apparel and related accessories to girls and young women primarily between the ages of 10 and 24 (an age group known as "Generation Y"). The Company believes that it is one of a limited number of direct marketers distributing an apparel-based catalog exclusively for this market. The Company offers a carefully edited assortment of recognized and emerging brands of teen apparel and accessories, complemented by dELiA*s own branded products. Merchandise ranges from basics, such as jeans, shorts and t-shirts, to more fashion-oriented apparel and accessories, such as woven and knit junior dresses, swimwear, sunglasses, watches, costume jewelry and cosmetics. The Company believes that its selection and presentation of merchandise have contributed to a growing recognition of dELiA*s as a teen fashion resource. With the large "baby boom" generation maturing and having children, the younger segments of the U.S. population are increasing in size. According to the U.S. Census Bureau, the population of 10 to 24-year olds is currently 55 million and is expected to grow by 12% to approximately 62 million by 2005. According to data from one independent research firm, teens spent approximately $109 billion in 1995. Another independent research firm estimated that apparel accounted for over one-third of teen spending on certain major categories of goods and services. As a result of the growing population and spending patterns of Generation Y and the limited number of national apparel retailers and catalogers exclusively targeting this age group, the Company believes that this large and underserved market represents a significant direct marketing opportunity. dELiA*s catalogs are designed to create a distinctive and entertaining shopping experience by combining the feel and editorial flair of a teen-focused fashion magazine with the convenience of direct mail shopping. The catalogs include colorful layouts and creative "catch phrases" and feature teen models who convey a culture and attitude unique to dELiA*s. Merchandise items are styled and arranged to encourage customers to create their own outfits, which typically can be purchased for under $100. The Company believes that its proprietary database is one of its key competitive advantages. This database has been developed primarily through referrals, word-of-mouth, returns of catalog request cards and targeted advertising. The Company believes that this database yields response rates that exceed average response rates for the consumer catalog industry and that this database would be difficult to replicate primarily because it consists mostly of names of persons who specifically requested the dELiA*s catalog and which may not be available through purchased or rented lists. The Company's database currently includes approximately 1.8 million names, including approximately 456,000 customers (as of April 30, 1997) who had made purchases from the Company within the preceding 36 months. The Company has customers in all 50 states, Japan and Canada. dELiA*s plans to increase distribution of its catalog from 8 million in fiscal 1996 to in excess of 20 million in fiscal 1997, and to increase the number of catalog editions from six in fiscal 1996 to eight in fiscal 1997. The Company's operations are supported by its integrated, state-of-the-art telephone and management information systems, which allow teleservice representatives to provide real-time product availability and order status information. As of April 30, 1997, the Company employed approximately 225 teleservice representatives to provide 24-hour, seven-day-a-week customer service. dELiA*s goal is to be the leading direct marketer of casual apparel, accessories and other related products to Generation Y girls and young women. The Company plans to build on its core catalog business and to leverage the dELiA*s brand identity and its proprietary database to develop new channels of distribution, products and services aimed at the Generation Y market. Notwithstanding the significant direct marketing opportunities the Company believes exist for apparel, accessories and other related products targeted at the Generation Y market, the Company expects to face increased competition and has a limited operating history that makes it difficult to predict the Company's results of operations. In view of those risks and those more fully described under "Risk Factors," there can be no assurance the Company will achieve its goal of becoming the leading direct marketer of casual apparel, accessories and other related products to Generation Y girls and young women. The Company was incorporated in Delaware in October 1996 and is a successor to a business founded in September 1993. The Company completed an initial public offering of 2,702,500 shares at an offering price of $11.00 per share in December 1996 (the "IPO"). The Company's executive offices are located at 435 Hudson Street, New York, New York 10014, and its telephone number is (212) 807-9060. The Offering <TABLE> <S> <C> Common Stock offered by the Company ..................... 1,000,000 shares Common Stock offered by the Selling Stockholders ...... 1,000,000 shares Common Stock to be outstanding after the offering ...... 13,002,977 shares (1) Use of proceeds ....................................... For working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq Stock Market symbol .............................. DLIA </TABLE> Summary Financial Information (in thousands, except per share data) <TABLE> <CAPTION> Three Months Ended Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 April 30, Ended Ended Ended -------------------- January 31, 1995 January 31, 1996 January 31, 1997 1996 1997 ------------------- ------------------- ------------------ --------- --------- <S> <C> <C> <C> <C> <C> Statements of Operations Data: Net sales ........................... $ 139 $ 5,652 $30,225 $ 3,709 $12,928 Gross profit ........................ 50 2,574 15,601 1,984 6,536 Net income (loss) ..................... $ (332) $ 27 $ 4,255 $ 497 $ 928 Pro forma net income (loss) (2) ...... $ (202) $ 18 $ 2,307 $ 297 $ 928 Pro forma net income (loss) per share (3) ........................ $ (0.02) $ 0.00 $ 0.23 $ 0.03 $ 0.08 Shares used in the calculation of pro forma net income (loss) per share (3) ........................ 10,000 10,000 10,214 10,000 12,014 Selected Operating Data: Number of catalogs distributed ...... 26 1,700 8,000 1,059 4,800 House names (4) ..................... 17 290 1,335 420 1,732 Buyers (5) ........................... 1 82 373 88 456 </TABLE> <TABLE> <CAPTION> April 30, 1997 ------------------------------ Actual As Adjusted (6) ---------- ----------------- <S> <C> <C> Balance Sheet Data: Cash and cash equivalents ...... $15,269 $35,995 Working capital .................. 15,893 36,619 Total assets ..................... 29,822 50,548 Total stockholders' equity ...... 22,081 42,807 </TABLE> - --------------------- (1) Excludes 1,250,000 shares of Common Stock reserved for issuance under the Company's 1996 Stock Incentive Plan (under which options to purchase an aggregate of 331,750 shares of Common Stock were outstanding as of May 19, 1997 at a weighted average exercise price of $15.07 per share) and 250,000 shares of Common Stock reserved for issuance pursuant to an outstanding non-plan stock option the Company has granted to an executive. See "Management--Options/SAR Grants and Exercises." (2) Computed for all periods prior to the three months ended April 30, 1997 on the basis described in Note 6 of Notes to Financial Statements and assuming the pro forma tax provisions described therein. Prior to the IPO, the Company effected the Reorganization, defined under "Certain Transactions," in which the Company converted from a limited liability company to a C corporation. Pro forma net income for the three months ended April 30, 1997 represents actual reported net income. See "Certain Transactions" and Note 1 of Notes to Financial Statements. (3) See Note 2 of Notes to Financial Statements for an explanation of the determination of shares used in computing pro forma net income per share. (4) House names represents the number of customers who have made at least one purchase or have requested a catalog from the Company in the preceding 36 months, determined at the end of the applicable fiscal period. The number of house names as of May 19, 1997 is approximately 1.8 million. (5) Buyers represents the number of customers who have made at least one purchase from the Company in the preceding 36 months, determined at the end of the applicable first period. (6) As adjusted to reflect the sale of 1,000,000 shares of Common Stock by the Company at an assumed offering price of $22.25 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026221_general_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026221_general_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..67a5c07b048b28cac10fdb620bd5deb2993c6792
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026221_general_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and must be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Investors should consider carefully the information set forth under "Risk Factors." Unless otherwise indicated, (i) the information set forth in this Prospectus assumes no exercise of the Underwriters' over-allotment option and (ii) all share and per share data gives effect to a 3,000-for-one stock split effective as of October 10, 1996. Certain of the information contained in this Prospectus Summary and elsewhere in this Prospectus, including information with regard to the Company's strategy for expanding operations and market share and related financing requirements, are forward looking statements. For a discussion of important factors that could affect such matters, see "Risk Factors." All references to the Company's operations for a particular fiscal year refer to the 52-53 week period ended on the last Saturday in December of such year. The 39 week periods ended September 30, 1995 and September 28, 1996 are referred to herein as the "1995 Interim Period" and the "1996 Interim Period," respectively.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026348_lexington_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026348_lexington_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9e3087cd571e57e93757c86b0f5f1f5542623cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026348_lexington_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO LEXINGTON HEALTH CARE GROUP, LLC ("LLC"), LEXINGTON HEALTHCARE GROUP, INC. ("LHG"), ITS SUBSIDIARIES AND THEIR RESPECTIVE OPERATIONS, INCLUDING PROFESSIONAL RELIEF NURSES, INC. ("PRN") AND BALZ MEDICAL SERVICES, INC. ("BALZ"), TWO ENTITIES WHICH ARE PRESENTLY PARTIALLY OWNED AND OPERATED BY AFFILIATES OF THE COMPANY, WHICH LHG INTENDS TO ACQUIRE SIMULTANEOUSLY WITH THE CLOSING OF THIS OFFERING, IN CONSIDERATION FOR A PORTION OF THE NET PROCEEDS OF THIS OFFERING AND THE ISSUANCE OF THE COMPANY'S COMMON STOCK. SEE "USE OF PROCEEDS" AND "BUSINESS." ALL INFORMATION IN THIS PROSPECTUS, UNLESS OTHERWISE NOTED, ASSUMES THE EFFECTIVENESS OF THE REORGANIZATION AND NO EXERCISE OF THE OVER-ALLOTMENT OPTION OR THE REPRESENTATIVE'S WARRANTS. IN ADDITION, ALL SHARE OUTSTANDING AMOUNTS ASSUME THE REPURCHASE OF THE 500,000 SHARES OF COMMON STOCK AND 500,000 WARRANTS ISSUED IN THE NOVEMBER 1996 PRIVATE PLACEMENT, AS HEREINAFTER DEFINED. SEE "UNDERWRITING--DETERMINATION OF OFFERING PRICE." EACH OF THE THREE MEMBERS OF LLC HAVE AGREED TO EXCHANGE THEIR RESPECTIVE INTERESTS IN THE LLC, IMMEDIATELY PRIOR TO THE EFFECTIVE DATE, IN EXCHANGE FOR AN AGGREGATE OF 2,462,000 SHARES OF THE COMPANY'S COMMON STOCK (THE "REORGANIZATION"). SEE "CERTAIN TRANSACTIONS." THE COMPANY GENERAL The Company is a long-term and subacute care provider, which operates four nursing home facilities (the "Facilities") with 628 licensed beds in the State of Connecticut. The Facilities provide a broad range of healthcare services, including nursing care, subacute care, including rehabilitation therapy and other specialized services (such as care to Alzheimer's patients). In addition, the Company has recently begun to offer a variety of products and services to non-affiliated long-term care facilities. The Company's strategy in healthcare is to integrate the main disciplines of nursing, pharmacy, social services and other therapies under one program. The Facilities are leased pursuant to a long-term lease from a partnership of which Jack Friedler, the Company's principal stockholder, Chief Executive Officer and Chairman of the Board, is a 33.33% limited partner. The individuals owning the remaining portion of the partnership are shareholders of PRN. The four nursing home facilities were previously operated as traditional nursing homes by Beverly Enterprises, an unrelated entity which previously leased the facilities from the Company's current landlord. The Company, as the operator of the Facilities, received certain Medicaid reimbursement in the aggregate amount of approximately $3,100,000 (net of Medicaid charge backs) that related to the time that the Facilities were operated by Beverly. The arrangement providing for collection by the Company of certain receivables of Beverly's arose in as much as Beverly's outstanding Medicaid billings (constituting the overwhelming majority of its receivables) were paid by Connecticut in accordance with procedure to the then current operator of the facility where the services were performed. Accordingly, the only way to enable Beverly to collect its fees for services rendered through cessation of its operations was to have the subsequent operator collect on its behalf and remit. This constituted a standard operating procedure. However, because of certain delays experienced by the Company in billing and collection which arose during the earlier months of its operation of the facilities, Beverly agreed to allow the Company to repay collections made on behalf of Beverly over time, with interest at 12%. The amounts collected through November 30,1995, net of payments made through that date to Beverly were memoralized in a promissory note of $1,948,000, dated December 5, 1995. As of March 31, 1997, there was a $153,000 balance on the note which is to be repaid out of the proceeds of the Offering. See "Use of Proceeds". In addition, as of March 31, 1997, the Company owes Beverly an additional $393,700 which is treated as an account payable. To date, the Company has paid approximately $2,500,000 to Beverly in consideration for amounts collected on its behalf and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Since the Company began operating the Facilities, it has broadened the services provided and occupancy and reimbursement rates have increased. In addition, the Company manages two nursing homes (the "Managed Facilities"), Lexington House, Inc. in Connecticut and Oak Island Skilled Nursing Center ("Oak Island") in Massachusetts, pursuant to management agreements. Lexington House, Inc. is owned by a partnership controlled by Jack Friedler. As of April 30, 1997, Lexington House owes the Company an aggregate of $520,393. Upon the expiration of the management agreement on June 30, 1997, the Company intends to consider discontinuing providing management services to Lexington House. See "Certain Transactions." Oak Island is a non-affiliated facility in Massachusetts. The Facilities and the Managed Facilities service two basic patient populations: the traditional geriatric patient population and the emerging population of subacute care patients with higher acuity disorders who require complex and intensive medical services. Subacute care patients generally require more rehabilitative therapy and are residents for a shorter stay than traditional geriatric patients. An important part of the Company's strategy is to achieve high occupancy and a favorable payor mix by offering specialty medical services. The Facilities have an occupancy rate of approximately 94% as of December 31, 1996. Occupancy rate is determined by dividing the total number of patients by the amount of beds available for patients at the Facilities. Specialty medical services include subacute care to patients requiring complex medical care, intensive rehabilitation therapies and in-house pharmaceutical services. These services are usually provided at higher profit margins than routine services and compete with significantly higher cost hospital care. The Company operates a dedicated subacute unit within one of the Facilities, in addition to providing subacute services in each of the other Facilities. STRATEGY The Company believes that the demand for long-term care and specialty medical services will increase substantially over the next decade due primarily to favorable demographic trends, advances in medical technology and emphasis on healthcare cost containment. At the same time, government restrictions and high construction and start-up costs are expected to limit the supply of long-term care facilities. In addition, the Company anticipates that recent trends toward industry consolidation will continue and will provide future acquisition opportunities. The Company's operating strategy is to: (i) increase Facility profitability levels, through aggressive marketing and by offering rehabilitation therapies and other specialized services; (ii) adhere to strict cost standards at the Facility level while providing effective patient care and containing corporate overhead expenses; and (iii) become a fully integrated health network whereby the Company will market medical products and supplies, rehabilitative services, institutional pharmaceutical services and nursing services to affiliated and non-affiliated nursing homes and hospitals, as well as patients at home. By concentrating its facilities within a selected geographic region, the Company's strategy is to achieve operating efficiencies through economies of scale, reduced corporate overhead, more effective management supervision and financial controls. In addition, the Company believes that geographic concentration also enhances the Company's ability to establish more effective relationships with referral sources and regulatory authorities in the states where the Company operates. The Company's strategy is to gradually expand the Company's nursing home services into additional states, including Massachusetts, New Jersey and Vermont. RECENT DEVELOPMENTS The Company recently formed a wholly-owned subsidiary, LEV Rehab Services, Inc. ("LEV") to provide physical, occupational, speech and other therapies to patients at the Facilities, the Managed Facilities, unaffiliated facilities and persons in their homes. LEV has not commenced any substantial business activities and has not generated any significant revenues to date. The Company intends to utilize a portion of the net proceeds of the Offering to hire personnel to implement this strategy. The Company intends to form a subsidiary to provide pharmaceutical services to affiliated and non-affiliated long-term and subacute care facilities. See "Use of Proceeds." The Company has negotiated an agreement to acquire all of the capital stock of BALZ Medical Services, Inc. ("BALZ") from the shareholders of BALZ simultaneously with the closing of this Offering. BALZ is not currently operated by the Company. Two of such shareholders, Jack Friedler and Harry Dermer, both officers and directors of the Company, own an aggregate of 44% of BALZ. BALZ is currently managed by Mary Archambault, the Company's secretary who will become an executive vice president of the Company upon the consummation of the acquisition. Ms. Archambault owns 20% of BALZ. The Company has an agreement to acquire all of the capital stock of BALZ in exchange for an aggregate of 300,000 shares of the Company's Common Stock. The consideration for the acquisition was negotiated, based on past performance and projections and the acquisition price of other medical supply companies, between the Company's President and the shareholders of BALZ who are not affiliated with the Company. The acquisition will be accounted for as a purchase. The Company did not obtain an independent appraisal in connection with the acquisition. See "Business--BALZ Acquisition" and "Certain Transactions." BALZ provides a variety of medical supplies, nutritional supplements, institutional cleaning products, linens and everyday products including toothpaste and incontinence products, to affiliated and non-affiliated nursing homes, other institutional facilities and private persons. The medical supplies provided include band aids, wound care supplies and durable medical products such as wheelchairs and beds. The Company's strategy is to expand BALZ's business to become more of a traditional medical supply company by supplying products to hospitals, doctor's offices and persons at their homes through Professional Relief Nurses, Inc. ("PRN") which will become a wholly-owned subisdiary of the Company, as well. The Company has negotiated an agreement to acquire all of the capital stock of PRN immediately prior to the Effective Date in exchange for $1,620,000, payable out of the net proceeds of the Offering and 108,000 shares of Common Stock (valued at $540,000), which shares will be issued upon the closing of this Offering. Jack Friedler, the Company's principal stockholder owns 25% of the capital stock of PRN. Including the value assigned to the 108,000 shares, the total purchase price is $2,160,000. PRN is currently managed by Suzanne Nettleton, who will become an officer of the Company upon the consummation of the acquisition. Ms. Nettleton own 25% of the capital stock of PRN. The remaining 50% of PRN is owned by two individuals who collectively own 66.66% of Fairfield, the landlord for the Facilities. The acquisition will be accounted for as a purchase. The Company did not obtain an independent appraisal in connection with the acquisition. In connection with the acquisition, PRN will distribute 100% of its book value to its shareholders prior to the acquisition and accordingly, at the time of the acquisition, PRN will have a book value of zero. See "Lexington Healthcare Group, Inc. and subsidiaries pro forma balance sheet December 31, 1996," "Business--PRN Acquisition" and "Certain Transactions." PRN is not currently operated by the Company. PRN provides skilled nursing services to persons at home. PRN's personnel includes (i) registered nurses, who provide a broad range of nursing care services, including skilled observation and assessment, instruction of patients regarding medical and technical procedures, direct hands-on treatment, and communication and coordination with the attending physician or other service agencies; (ii) licensed practical nurses who perform, under the supervision of a registered nurse, technical nursing procedures, which include injections, dressing changes, and assistance with ambulation and catheter care; (iii) physical and rehabilitation therapists who provide services related to the reduction of pain and improved rehabilitation of joints and muscles; and (iv) certified nurses aides, who, under the supervision of a nurse, provide health-related services and personal care such as assistance with ambulation, limited range-of-motion exercises, monitoring of vital signs, non-sterile dressing changes and bathing. The Company intends to expand PRN's activities to include the provision of intravenous therapy to patients at home. The Company also intends to establish PRN as a nursing pool agency whereby it supplies nurses and other skilled personnel to hospitals, affiliated and non-affiliated nursing homes and other home healthcare agencies on a temporary basis. The Company believes that the acquisitions of BALZ and PRN will be a significant step towards creating a fully integrated healthcare company. BALZ currently sells products to each of the Facilities, the Managed Facilities and other facilities. Approximately 42% of BALZ revenues from October 1995 to December 31, 1996 were derived from sales to patients in the Facilities and the Managed Facilities. Following the acquisitions, the Company intends to offer BALZ' products to patients of PRN. Since BALZ' inception, the Company has provided BALZ with certain management services, in addition to office space for which BALZ paid the Company an aggregate of $25,000. The management services included bookkeeping and secretarial services, which were provided on an as needed basis, as well as routine office supplies. After the Offering, PRN intends to begin to accept homecare patients after they are released from the Facilities. The Company intends to integrate the finance, billing, marketing and computer services for each of its divisions to eliminate duplicate overhead. As a condition to listing on the NASDAQ/NMS, the Company and the November 1996 Private Placement investors agreed to a repurchase of the securities sold in the Private Placement for an aggregate of $250,000 (the original purchase price). NASDAQ objected to the terms of the Private Placement as not being in the public interest because of the disparity between the public offering price and the price paid by the investors in the Private Placement. According to Rule 4300 of the NASDAQ Marketplace Rules, NASDAQ may deny initial inclusion based on any count, condition or circumstance which exists or occurs that makes initial inclusion unwarranted in its opinion. The Company has repurchased 250,000 shares of Common Stock and 250,000 Warrants for an aggregate of $125,000. The remaining 250,000 shares and 250,000 Warrants will be repurchased with $125,000 of the net proceeds of the Offering. See "Use of Proceeds". Lexington Healthcare Group, Inc. was incorporated on February 23, 1996. Prior to the Effective Date, LHG has operated as Lexington Health Care Group, LLC, a limited liability company that was formed on March 8, 1995 and commenced operations on July 1, 1995. The LLC is owned 37.5% by Jack Friedler, 37.5% by Stephanie Friedler and 25% by Harry Dermer. Immediately prior to the Effective Date, the members of the LLC will exchange their LLC interests and all of the operations, assets and liabilities of the LLC for shares of Common Stock of LHG, except that Stephanie Friedler's shares of the Company will be issued to her husband, Jack Friedler. See "Certain Transactions." PRN was incorporated on September 20, 1981, and BALZ was incorporated on October 5, 1995 and commenced operations on November 1, 1995. The Company's principal offices are located at 35 Park Place, New Britain, Connecticut 06052 and its telephone number is (860) 223-6902. THE OFFERING <TABLE> <S> <C> Securities Offered................ 1,125,000 shares of Common Stock and 1,687,500 Warrants. The Common Stock and the Warrants (sometimes hereinafter collectively referred to as the "Securities") may be purchased separately and will be transferable separately upon issuance. See "Description of Securities" and "Underwriting." Warrants.......................... Each Warrant is exercisable at an exercise price of $6.00 per share. The exercise price of the Warrants is subject to adjustment in certain circumstances. The Warrants are exercisable commencing one year from the Effective Date until , 2003, the sixth anniversary of the Effective Date. The Warrants are redeemable by the Company commencing on the first anniversary of the Effective Date at a price of $.05 per Warrant on 30 days' prior written notice provided the last sale price of the Common Stock for 20 consecutive trading days equals or exceeds $10.00. See "Description of Securities-- Warrants." Common Stock Outstanding Prior to the Offering(1)........ 2,592,000 After the Offering(1)(2)........ 4,125,000 Warrants Outstanding Prior to the Offering........... -- After the Offering.............. 1,687,500 Risk Factors...................... The Securities offered hereby are speculative and involve a high degree of risk and immediate substantial dilution. Prospective investors should review carefully and consider the information set forth under "Risk Factors" and "Dilution." Use of Proceeds................... The net proceeds of this Offering ($4,671,500) will be used for the repayment of certain indebtedness, the acquisition of PRN ($540,000 of which will be paid to an officer of the Company), the establishment of institutional pharmaceutical services, the expansion of rehabilitation and nursing home services and working capital. See "Use of Proceeds." Proposed Nasdaq Symbol(3)......... Common Stock--LEXI Warrants--LEXIW </TABLE> - ------------------------ (1) Does not include up to 450,000 shares of Common Stock reserved for issuance pursuant to stock options which may be granted pursuant to the Company's 1997 Stock Option Plan (none of which have been granted to date). See "Management--Stock Option Plan." Excludes the 500,000 shares issued in the November 1996 Private Placement which shares are being repurchased. See "Underwriting--Determination of Offering Price." (2) Includes (i) 300,000 shares of Common Stock to be issued in connection with the acquisition of BALZ and (ii) 108,000 shares of Common Stock to be issued in connection with the acquisition of PRN. (3) The proposed Nasdaq trading symbols do not imply that a liquid and active market will be developed or sustained for the Shares and Warrants upon completion of the Offering. LEXINGTON HEALTHCARE GROUP, INC. SUMMARY FINANCIAL INFORMATION The following table presents, for the periods and dates indicated, summary historical, pro forma and pro forma as adjusted financial data of the Company and the historical financial data for the four Facilities operated by Beverly Enterprises, Inc. (the Predecessor Entity). The pro forma condensed statement of operations data for the period July 1, 1995 (commencement of operations) to June 30, 1996 and for the six months ended December 31, 1996 gives effect to the acquisition of PRN and BALZ as if the acquisitions had been consummated as of July 1, 1995. The pro forma condensed statement of operations data for the six months ended December 31, 1996 also gives effect to the sale of 111,000 shares of Common Stock and Warrants offered hereby by the Company at an offering price of $5.00 per Share and $.10 per Warrant and the application of the net proceeds therefrom to repay certain indebtedness in the amount of $453,000 as described under "Use of Proceeds" as if such transaction had occurred on July 1, 1996. Also gives effect to the repurchase of 500,000 shares and Warrants issued in connection with the Private Placement as described in Note 4 of the following paragraph. The pro forma balance sheet data reflects the transactions indicated below as if they had occurred on December 31, 1996: (1) the acquisitions of BALZ and PRN (the "Acquired Companies") for (i) 408,000 shares of Common Stock and (ii) cash of $1,620,000, payable from the net proceeds arising from the sale of 395,000 shares of Common Stock and Warrants, (2) payment of a cash dividend estimated at $485,000 to the stockholders of PRN representing its net book value, (3) the assumed repayment of $453,000 of certain short term notes payable from the net proceeds arising from the sale of 111,000 shares of Common Stock and Warrants and (4) the repurchase of 500,000 shares of stock and 500,000 Warrants issued in the private placement for $250,000, $125,000 which was paid prior to the Offering and the balance will be paid from the net proceeds arising from the sale of 31,000 shares of Common Stock and Warrants at an offering price of $5.00 per share and $0.10 per Warrant (See "Use of Proceeds"). The acquisitions are accounted for as purchases. The pro forma as adjusted balance sheet data at December 31, 1996 also gives effect to the sale of the balance of 588,000 Shares of Common Stock and the balance of 1,150,500 Warrants offered hereby by the Company at an offering price of $5.00 per Share and $.10 per Warrant. This information should be read in conjunction with "Capitalization," "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," Pro Forma Unaudited Condensed Financial Information and the Company's Financial Statements and the notes thereto, each included elsewhere herein. The pro forma data set forth below is not necessarily indicative of what the actual results of operations would have been had the transactions occurred at the dates referred to above, nor do they purport to indicate the results of future operations. <TABLE> <CAPTION> SIX MONTHS ENDED DECEMBER 31, ----------------------------------- JULY 1, 1995 1996 (COMMENCEMENT OF ----------- OPERATIONS TO) 1995 1996 JUNE 30, 1996 --------- ----------- ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------------------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> (IN THOUSANDS, EXCEPT PER SHARE DATA) Statement of Operations Data: Net revenue.......................................... $ 17,447 $ 16,939 $ 20,195 $ 33,641 $ 38,102 Operating costs and expenses......................... 17,145 16,115 19,290 32,926 36,780 ----------- --------- ----------- ----------- ----------- Income from operations............................... 302 824 905 715 1,322 Other (expense)-net.................................. (70) (100) (38) (254) (89) ----------- --------- ----------- ----------- ----------- Income before income taxes........................... 232 724 867 461 1,233 Provision for income taxes*.......................... 96 294 391 195 575 ----------- --------- ----------- ----------- ----------- NET INCOME........................................... $ 136 $ 430 $ 476 $ 266 $ 658 ----------- --------- ----------- ----------- ----------- Net income per share................................. $ 0.04 $ 0.14 $ 0.13 $ 0.09 $ 0.19 ----------- --------- ----------- ----------- ----------- Weighted number of common shares outstanding......... 3,092 3,092 3,537 3,092 3,537 ----------- --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- </TABLE> - ------------------------ * Historical or pro forma as applicable <TABLE> <CAPTION> JUNE 30, 1996 DECEMBER 31, 1996 ----------- ------------------------------------- <S> <C> <C> <C> <C> PRO FORMA ----------- HISTORICAL PRO FORMA HISTORICAL ----------- ----------- AS ADJUSTED ----------- <CAPTION> (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> Balance Sheet Data: Cash and cash equivalents...................................... $ 1,333 $ 934 $ 3,694 $ 212 Working capital (deficiency)................................... (2,278) (1,379) 1,381 (2,381) Total assets................................................... 10,159 14,881 17,355 9,614 Short-term borrowings.......................................... 914(a) 504 504 2,580 Total long-term debt excluding current maturities.............. 79 127 127 102 Total stockholders' equity..................................... 994 5,330 7,804 487 </TABLE> - ------------------------ (a) Includes $453,000 of notes payable to lenders which have not been paid timely. The Company has verbal understandings with the lenders that these notes will be repaid from the net proceeds of the Offering. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026405_somnus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026405_somnus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b0ffa8989481b02d2db1b5a3a7e5672c342e5bb4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026405_somnus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The discussion in this Prospectus contains forward looking statements that involve risks and uncertainties including, but not limited to, those specifically identified herein. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes (i) the conversion on a one-for-one basis of all outstanding shares of Preferred Stock into shares of Common Stock to be effected upon the consummation of the Offering (the "Preferred Stock Conversion") and (ii) no exercise of the Underwriters' over- allotment option. Selected data presented in this Prospectus is based on interviews conducted by the Company with various industry sources. THE COMPANY Somnus Medical Technologies, Inc. ("Somnus" or the "Company") designs, develops, manufactures and markets innovative medical devices that utilize its proprietary radiofrequency ("RF") technology for the treatment of upper airway disorders. The Company's Somnoplasty System provides physicians with a suite of products designed to offer minimally-invasive, curative treatment alternatives for disorders of the upper airway, including snoring, obstructive sleep apnea ("OSA") and enlarged turbinates. The Somnoplasty System shrinks tissue in the upper airway by utilizing automated RF generators and a suite of disposable, single-use, needle electrode devices which deliver controlled thermal energy to obstructed areas, while protecting the delicate mucosal lining of the tissue. The Company received U.S. Food and Drug Administration ("FDA") 510(k) premarket clearance ("510(k) clearance") in July 1997 for the use of the Somnoplasty System in the treatment of snoring and officially launched the marketing of the Somnoplasty System at the American Academy of Otolaryngology--Head and Neck Surgery Foundation, Inc. conference in September 1997. See "Business-- Government Regulation." The Company has also received the European Union CE Mark (the "CE Mark") for use of the Somnoplasty System in the treatment of upper airway disorders. In September 1997, the Company submitted a premarket notification seeking 510(k) clearance for the treatment of enlarged turbinates associated with chronic rhinitis. The Company believes that the clinical and patient benefits of the Somnoplasty System include its effectiveness, quick procedure time, outpatient setting, use of local anesthesia and low post- procedural pain. These benefits represent a significant advancement to physicians and patients over existing treatment options, which, depending upon the disorder, are highly-invasive, non-curative and/or expensive. To date, the Somnoplasty procedure has been performed for the treatment of snoring on over 125 patients in clinical centers in the United States and internationally. The Company is developing a direct sales force to market its products in the United States and Canada. The Company intends to market the Somnoplasty System primarily to ear, nose and throat physicians, oral and maxillofacial surgeons, pulmonologists, sleep medicine specialists and other physicians who treat upper airway disorders. There are approximately 9,000 ear, nose and throat physicians, 5,000 oral and maxillofacial surgeons, 5,200 pulmonologists and, the Company believes, 3,100 sleep disorder medical centers in the United States. As of September 30, 1997, the Company has shipped 14 Model 215 RF Generators in the United States, including six in the month of September. In April 1997, the Company entered into a three-year distribution arrangement with Medtronic, Inc. ("Medtronic") for the exclusive distribution of the Somnoplasty System in the European Union, Australia, Southeast Asia and certain other areas. The Company will seek to enter into additional agreements for product distribution in Japan and other international markets. The Company also intends to establish a marketing program directed at consumers to further establish awareness of the Somnoplasty procedure. As of September 30, 1997, the Company has shipped 29 Model 215 RF Generators to Medtronic, including seven in the month of September. Currently, Somnus has commercially available or in development three models of RF generators and five disposable devices designed to treat a variety of upper airway disorders. In the United States, the Company currently has four issued patents, eight allowed patents and an additional 34 pending patent applica- tions. The Company also has two issued foreign patents and 17 pending foreign patent applications. MARKET OPPORTUNITIES Habitual snoring. The Company estimates that there are more than 40 million habitual snorers in the United States. Traditional treatment alternatives for habitual snoring range from laser surgery to the use of non-surgical devices such as nasal tapes and oral appliances. The surgical alternatives, including laser-assisted uvulopalatoplasty ("LAUP"), are invasive procedures which result in significant post-operative pain, swelling and recovery periods. Despite these drawbacks, the Company estimates that there were approximately 45,000 to 50,000 LAUP procedures performed in 1996 in the United States. In contrast to traditional treatments, the Company's Somnoplasty System is designed to be a minimally-invasive, curative outpatient procedure which can be performed in one or more sessions of less than 30 minutes each, and causes minimal pain and swelling and requires only a brief recovery period. The Company's treatment for snoring uses the SP 1000 single needle electrode or SP 2000 dual needle electrode to reduce tissue in the uvula and soft palate. Obstructive sleep apnea. According to a 1993 report to Congress, the National Commission on Sleep Disorders Research estimated that approximately 20 million people in the United States were afflicted with OSA, of whom an estimated 6.4 million experienced the disorder at a moderate to severe level. OSA is a serious disorder which occurs when enlarged anatomical structures block the upper airway during sleep. Currently, the most common approach to the management of OSA is Continuous Positive Airway Pressure ("CPAP"), which requires the sleeping patient to wear a mask over the nose, and sometimes the mouth, while pressure from a compressor forces air through the upper airway to keep excess tissue from collapsing. While CPAP is successful in managing OSA, it is not a cure and must be used on a nightly basis for life. CPAP can also result in a variety of adverse side effects. These side effects and the inconvenience of the device result in low patient compliance which was estimated by the American Sleep Disorders Association ("ASDA") at only 46% in 1993. Despite these drawbacks, the Company estimates that the market for CPAP will be approximately $140 million in 1997, representing an approximate 25% growth rate from the previous year. Other existing treatments for OSA include uvulopalatopharyngoplasty ("UPPP") (the surgical resection of the uvula, part of the soft palate, tonsils and excess tissue in the throat), tracheostomies (surgical openings in the neck which bypass the obstruction) and other highly- invasive surgical procedures. In contrast, the Somnoplasty System is intended to treat, in a minimally-invasive manner, the causes of OSA, not the symptoms, by reducing the tissues which cause the obstruction. The Company's suite of disposable devices, including the SP 1000, SP 1100, SP 2000 and SP 3000, are designed to allow physicians to treat any combination of the uvula, soft palate, turbinates and tongue to enlarge the upper airway passage. Enlarged turbinates. Chronic nasal obstructions are most frequently caused by enlarged turbinates. Turbinates, the soft tissue in the nasal cavity, can become chronically enlarged as a reaction to diseases, such as chronic and drug-induced rhinitis, and allergy-causing substances. Existing treatments include prescription and over-the-counter drugs, as well as surgical procedures which generally entail using a scalpel or an electrocautery or laser device to resect the turbinates. These surgical procedures are generally effective, but can lead to discomfort in the form of occasional post- operative bleeding and frequent crusting. In 1995, there were an estimated 129,000 turbinate resection procedures performed in the United States, nearly all of which were performed in an outpatient setting. The Company's SP 1100 single needle electrode device is intended to offer a minimally-invasive, curative treatment for sufferers of enlarged turbinates. BUSINESS STRATEGY The Company's strategy is to establish the Somnoplasty System, which utilizes its proprietary RF technology, as the standard of care for the treatment of a variety of upper airway disorders. Key elements of the Company's strategy include: (i) providing physicians with a suite of products designed to offer minimally-invasive, curative treatment alternatives for upper airway disorders; (ii) pursuing clearance or approval for additional indications to achieve the broadest possible application of the Somnoplasty System; (iii) creating global distribution through a direct sales force in the United States and strategic and distributor relationships internationally; and (iv) acquiring and licensing complementary technologies and products to broaden the Company's product line, leverage its distribution network and help accelerate the market acceptance and penetration of the Somnoplasty System.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026516_capstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026516_capstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..454cbfc3f3856ef44a9c79cbcca1cc77a964593c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026516_capstar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing in this Prospectus. Unless otherwise specified, this Prospectus assumes the consummation of the Pending Acquisitions (as defined). As used in this Prospectus, unless otherwise specified, the "Company" and "Capstar" each means Capstar Broadcasting Partners, Inc. and its subsidiaries after giving effect to the consummation of the Pending Acquisitions. Commodore Media, Inc. ("Commodore") is a subsidiary of Capstar and conducts its business through its subsidiaries, Atlantic Star Communications, Inc. (formerly named Commodore Holdings, Inc.), Southern Star Communications, Inc. (formerly named Osborn Communications Corporation ("Osborn")) and Pacific Star Communications, Inc. ("Pacific Star"). Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Certain capitalized terms used in this Prospectus are defined herein under the caption "Glossary of Certain Terms and Market and Industry Data." THE COMPANY The Company is the largest radio broadcaster in the United States operating exclusively in mid-sized markets. The Company currently owns and operates or provides services to 99 radio broadcasting stations in 28 mid-sized markets located primarily in the northeastern, southeastern and western United States. The Company has entered into seven agreements to acquire 32 additional stations in seven new markets (including ten stations in four new markets for which the Company currently provides services pursuant to an LMA (as defined)) and three existing markets, which acquisitions are expected to occur subsequent to the Offering (the "Pending Acquisitions"). Upon completion of the Pending Acquisitions, the Company will own and operate or provide services to 121 radio broadcasting stations in 31 mid-sized markets located throughout the country. These stations comprise the leading radio group, in terms of revenue share and/or audience share, in 20 of these markets. In February 1996, as a result of the passage of the Telecommunications Act of 1996 (the "Telecom Act"), radio broadcasting companies were permitted to increase their ownership of stations within a single market from a maximum of four to a maximum of between five and eight stations, depending on market size. More importantly, the Telecom Act also eliminated the national ownership restriction that generally had limited companies to the ownership of no more than 40 stations (20 AM and 20 FM) throughout the United States. In order to capitalize on the opportunities created by the Telecom Act, R. Steven Hicks, an executive with over 30 years of experience in the radio broadcasting industry, and Hicks Muse formed Capstar to acquire and operate radio station clusters in mid-sized markets. The Company generally defines mid-sized markets as those Metropolitan Statistical Areas ("MSAs") ranked between 50 and 200, each of which has approximately $10.0 million to $35.0 million in radio advertising revenue. The Company believes that mid-sized markets represent attractive operating environments because, as compared to the 50 largest markets in the United States, they are generally characterized by (i) lower radio station purchase prices as a multiple of broadcast cash flow, (ii) less sophisticated and undercapitalized competitors, including both radio and competing advertising media such as newspaper and television, and (iii) less direct format competition resulting from fewer stations in any given market. The Company believes that the attractive operating characteristics of mid-sized markets coupled with the opportunity provided by the Telecom Act to create in-market radio station cluster groups will enable the Company to achieve substantial revenue growth and cost efficiencies. As a result, management believes that the Company can generate broadcast cash flow margins that are comparable to the higher margins that heretofore were generally achievable only in the top 50 markets. To effectively and efficiently manage its stations, the Company has developed a flexible management structure designed to manage a large and growing portfolio of radio stations throughout the United States. Initially, the station portfolio has been organized into three regions, the Northeast, the Southeast and the West, each of which is managed by regional executives in conjunction with general managers in each of the Company's markets. STATION PORTFOLIO In October 1996, the Company consummated its first acquisition when it purchased Commodore (the "Commodore Acquisition"). Since such time, the Company has consummated the purchase of (i) Osborn in February 1997 (the "Osborn Acquisition"), (ii) substantially all of the assets of EZY Com, Inc. ("EZY"), City Broadcasting Co., Inc. ("City") and Roper Broadcasting, Inc. ("Roper" and, collectively, with EZY and City, "Space Coast") in April 1997 (collectively, the "Space Coast Acquisitions") and (iii) Benchmark Communications Radio Limited Partnership, L.P. and certain of its subsidiary partnerships (collectively, "Benchmark") in June 1997 (the "Benchmark Acquisition"). On a pro forma basis after giving effect to such acquisitions as if they had occurred on January 1, 1996, the Company would have had net revenue and broadcast cash flow of $ million and $ million, respectively, for the year ended December 31, 1996. The Company has agreed, subject to various conditions, to acquire 32 additional radio stations ( 22 FM and 10 AM) in seven separate transactions. Upon completion of the Pending Acquisitions, the Company's portfolio will include a total of 121 stations located in 31 mid-sized markets in the United States. On a pro forma basis after giving effect to the Pending Acquisitions as if they had occurred on January 1, 1996, the Company would have had net revenue and broadcast cash flow of $ million and $ million, respectively, for the year ended December 31, 1996. <TABLE> <CAPTION> COMPANY COMPANY COMPANY STATIONS REVENUE AUDIENCE MSA -------- SHARE SHARE MARKET(1) RANK FM AM RANK RANK SOURCE COMPANY --------- ---- -- -- ------- --------- -------------- <S> <C> <C> <C> <C> <C> NORTHEAST REGION Allentown-Bethlehem, PA ................... 64 2 2 1 1 Commodore Melbourne-Titusville-Cocoa, FL ............ 96 3 2 1 1 Space Coast Fairfield County, CT ...................... 112 3 3 2 2 Commodore Ft. Pierce-Stuart-Vero Beach, FL .......... 121 5 1 1 1 Commodore Huntington, WV-Ashland, KY ................ 153 2 -- 3 4 Benchmark Dover, DE ................................. NA 2 1 1 1 Benchmark Wilmington, DE ............................ NA 1 1 2 2 Commodore Westchester-Putnam Counties, NY ........... NA 3 2 NA 1 Commodore --- -- SUBTOTAL ........................... 26 17 SOUTHEAST REGION Greenville, SC ........................... 59 3 1 2 2 Benchmark Columbia, SC ............................. 88 4 2 1 1 Benchmark/Emerald City Huntsville, AL ........................... 114 1 2 1 1 Osborn Jackson, MS .............................. 118 2 2 2 2 Benchmark Shreveport, LA ........................... 126 1 1 2 3 Benchmark Montgomery, AL ........................... 142 3 -- 2 2 Benchmark Asheville, NC ............................ 179 1 1 1 1 Osborn Tuscaloosa, AL ........................... 212 2 1 1 1 Osborn Wheeling, WV ............................. 213 5 2 1 1 Osborn Winchester, VA ........................... 219 2 1 2 1 Benchmark Jackson, TN .............................. 257 2 1 1 1 Osborn Roanoke, VA .............................. NA 4 1 2 1 Benchmark/Cavalier/WRIS Lynchburg, VA ............................ NA 3 1 1 1 Benchmark/Cavalier Statesville, NC .......................... NA 1 1 NA NA Benchmark Gadsden, AL .............................. NA 1 1 NA 1 Osborn --- -- SUBTOTAL........................... 35 18 WEST REGION Stockton, CA ............................. 85 1 1 3 3 Community Pacific Des Moines, IA ........................... 89 2 1 4 4 Community Pacific Madison, WI .............................. 120 4 2 1 1 Madison Modesto, CA .............................. 121 1 1 2 2 Community Pacific Anchorage, AK ............................ 165 4 2 2 1 Community Pacific/COMCO Fairbanks, AK ............................ NA 2 1 NA 1 COMCO Yuma, AZ ................................. NA 2 1 NA 1 Commonwealth --- --- SUBTOTAL........................... 16 9 --- --- TOTAL.............................. 77 44 === === </TABLE> - --------------- NA Information not available. (1) See explanatory notes to this table on page 46 of this Prospectus. ACQUISITION STRATEGY The Company is the leading consolidator of radio stations in mid-sized markets throughout the United States. Management has achieved this position through the application of an acquisition strategy that it believes allows the Company to develop radio station clusters at attractive prices. First, the Company enters attractive new mid-sized markets by acquiring a leading station (or a group that owns a leading station) in such market. The Company then utilizes the initial acquisition as a platform to acquire additional stations which further enhance the Company's position in a given market. Management believes that once it has established operations in a market with an initial acquisition, it can acquire additional stations at reasonable prices and, by leveraging its existing infrastructure, knowledge of and relationships with advertisers and substantial management experience, improve the operating performance and financial results of those stations. OPERATING STRATEGY The Company's objective is to maximize the broadcast cash flow of each of its radio station clusters through the application of the following strategies: Enhance Revenue Growth through Multiple Station Ownership. Management believes that the ownership of multiple stations in a market allows the Company to coordinate its programming to appeal to a broad spectrum of listeners. Once the station cluster has been created, the Company can provide one-stop shopping to advertisers attempting to reach a wide range of demographic groups. Simplifying the buying of advertising time for customers encourages increased advertiser usage thereby enhancing the Company's revenue generating potential. Broad demographic coverage also allows the Company to compete more effectively against alternative media, such as newspaper and television, thus potentially increasing radio's share of the total advertising dollars spent in a given market. Create Low Cost Operating Structure. Management believes that it is less expensive to operate radio stations in mid-sized markets than in large markets for several reasons. First, because stations in mid-sized markets typically have less direct format competition, the Company is less reliant on expensive on-air talent and costly advertising and promotional campaigns to capture listeners. Second, the ownership of multiple stations within a market allows the Company to achieve substantial cost savings through the consolidation of facilities, management, sales and administrative personnel, operating resources (such as on-air talent, programming and music research) and through the reduction of redundant corporate expenses. Furthermore, management expects that the Company, as a result of the large size of its portfolio, combined with the consolidated purchasing power of the Hicks Muse portfolio companies, will be able to realize substantial economies of scale in such areas as national representation commissions, employee benefits, casualty insurance premiums, long distance telephone rates and other operating expenses. Finally, the incorporation of digital automation in certain markets allows the Company to operate radio stations at off-peak hours with minimal human involvement while improving the quality of programming. Utilize Sophisticated Operating Techniques. Following the acquisition of a station or station group, the Company seeks to capitalize on management's extensive large market operating experience by implementing sophisticated techniques such as advertising inventory management systems, sales training programs and in-depth music research studies which improve both the efficiency and profitability of its stations. Prior to the passage of the Telecom Act, management believes that many operators in mid-sized markets did not generate sufficient revenue to justify the incurrence of expenditures to develop these techniques. Provide Superior Customer Service. The Company believes that advertising customers in mid-sized markets typically do not have extensive resources to create and implement advertising campaigns. The Company provides many of its advertising customers with extensive advertising support which may include (i) assistance in structuring advertising and promotional campaigns, (ii) creating and producing customer advertisements and (iii) analyzing the effectiveness of the customer's media programs. Management believes that this type of superior customer service attracts new customers to the Company and increases the loyalty of the Company's existing customers, thereby providing stability to the Company's revenue, often despite fluctuations in station ratings. Develop Decentralized Management Structure. The Company has developed experienced and highly motivated regional and local management teams, derived primarily from station groups acquired by the Company, and has decentralized decision-making so that these regional and local managers have the flexibility to develop operating cultures that capitalize on the unique qualities of each region and market. The Company also relies on local managers to source additional acquisition opportunities. In addition, in order to motivate regional management, the Company intends to link compensation to regional operating performance as well as the combined results of the Company. OWNERSHIP AND MANAGEMENT In April 1996, Hicks Muse combined its financial expertise with the operating experience of R. Steven Hicks to form the Company. Mr. Hicks is a 30-year veteran of the radio broadcasting industry (including 18 years as a station owner) who has owned and operated or managed in excess of 150 radio stations in large and mid-sized markets throughout the United States. In addition, in 1993, Mr. Hicks co-founded SFX Broadcasting, Inc., a publicly traded company ("SFX"), for which he served as Chief Executive Officer for three years until his resignation in 1996. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since the firm's inception in 1989, affiliates of Hicks Muse have completed more than 70 transactions having a combined transaction value exceeding $19.0 billion. In 1994, an affiliate of Hicks Muse made its first major investment in the radio broadcasting industry when Hicks, Muse, Tate & Furst Equity Fund II, L.P. founded Chancellor Broadcasting Company ("Chancellor"), a company which owns and operates radio stations exclusively within the 40 largest MSAs in the United States and which, in the three years since its inception, has become one of the largest radio broadcasting companies in the United States. The Company has designed an organizational structure to effectively manage its existing station portfolio as well as to accommodate future in-market or group acquisitions. Each of the Company's existing and future operating regions is, or will be, headquartered within the region and staffed with a team of regional executives which manage, or will manage, the operations of that region's station portfolio. A chief executive officer and/or a chief operating officer of each region oversees the regional and general managers of the stations within a particular region. In addition, a controller in each region directly oversees the business managers of the stations within a region. Each regional operating executive reports directly to R. Steven Hicks, while each regional controller reports to the Company's chief financial officer. In assembling each of the existing regional management teams, the Company has sought to retain the senior management of some of the station groups that it has acquired so as to (i) retain and capitalize on the local market experience and knowledge of these experienced executives and (ii) foster a culture that is consistent with the unique attributes of each of the local markets acquired. Furthermore, the Company believes that each of its regional executives possesses considerable knowledge of its region's competitors and is therefore well situated to identify strategic acquisition candidates. R. Steven Hicks, the President and Chief Executive Officer of the Company, has invested $3.1 million in Class C Common Stock. Certain other members of the Company's management, including certain of the Company's regional executives, have invested an additional $6.1 million in Class A Common Stock. The Company's regional executive management teams will be compensated based upon the financial performance of their respective regions and the Company as a whole with such compensation to be awarded in the form of cash bonuses and stock options. Management believes that the ownership interests of management and this compensation structure foster teamwork and the sharing of the best practices across regions to maximize the overall financial performance of the Company. Each of the Company's regional executives has extensive experience operating radio stations in mid-sized markets, as described below. Northeast Region. The chief executive officer of the Northeast Region is James T. Shea, Jr., the President (and former Chief Operating Officer) of Commodore. Mr. Shea has more than 20 years of experience in the radio broadcasting industry. Mr. Shea's operating knowledge and strong advertiser relationships helped Commodore become a leading radio group in each of its markets. Pro forma for the Pending Acquisitions, Mr. Shea will manage 43 stations in nine markets in the Northeast Region. Southeast Region. Frank D. Osborn, President and Chief Executive Officer of Osborn since its inception in 1984, is the chief executive officer of the Southeast Region. Mr. Osborn brings more than 19 years of radio industry experience to the Company, including prior positions as Senior Vice President of Price Communications, Vice President of Finance and Administration at NBC Radio and General Manager of WYNY-FM in New York City. Mr. Osborn has been successful in developing leading station clusters in each of Osborn's markets. The Company intends to hire a chief operating officer for the Southeast Region, who will assist Mr. Osborn in overseeing the operations of the radio stations in the region. Pro forma for the Pending Acquisitions, the Southeast Region will include 53 stations in 15 markets. West Region. The West Region will be managed by two radio executives, David J. Benjamin III and Claude C. Turner (also known as Dex Allen), with an aggregate of 52 years of experience in the radio broadcasting industry. Mr. Benjamin, the current President and Chief Executive Officer of Community Pacific Broadcasting Company L.P. ("Community Pacific"), will serve as the chief executive officer of the West Region upon consummation of the Community Pacific Acquisition. Mr. Allen has served as the managing member of Commonwealth Broadcasting of Arizona, L.L.C. ("Commonwealth") since 1984 and is expected to continue to serve in such position until the consummation of the Commonwealth Acquisition (as defined). Mr. Allen became the president and chief operating officer of the West Region effective January 1, 1997. Pro forma for the Pending Acquisitions, the West Region will include 25 stations in seven markets. THE PENDING ACQUISITIONS The Company has agreed, subject to various conditions, to acquire (i) in the Southeast Region, substantially all of the assets of Emerald City Radio Partners, L.P. ("Emerald City"), WRIS, Inc. ("WRIS"), and Cavalier Communications, L.P. ("Cavalier"), and (ii) in the West Region, substantially all of the assets of COMCO Broadcasting, Inc. ("COMCO"), Commonwealth, The Madison Radio Group ("Madison") and Community Pacific. After consummation of the Pending Acquisitions, the Company will own and operate or provide services to a total of 121 radio stations. <TABLE> <CAPTION> COMPANY STATIONS -------- EXPECTED COMPANY FM AM REGION CLOSING DATE - ------- -- -- ------------ ------------- <S> <C> <C> <C> <C> Emerald City ............ 1 -- Southeast July 1997 WRIS .................... 1 -- Southeast August 1997 Cavalier ................ 4 1 Southeast October 1997 COMCO ................... 4 2 West October 1997 Commonwealth ............ 2 1 West October 1997 Madison ................. 4 2 West October 1997 Community Pacific ....... 6 4 West November 1997 --- --- Total ............... 22 10 === === </TABLE> Consummation of each of the Pending Acquisitions is subject to numerous conditions, including approval of the FCC and, where applicable, satisfaction of any requirements and any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Accordingly, the actual date of consummation of each of the Pending Acquisitions may vary from the anticipated closing dates. The consummation of the Offering is not conditioned on the consummation of any of the Pending Acquisitions. For further information concerning the Pending Acquisitions, see "Risk Factors -- Risks of Acquisition Strategy," "Business" and "The Pending Acquisitions." THE OFFERING Class A Common Stock offered hereby....... shares (1) Common Stock to be outstanding after the Offering (2) Class A Common Stock ................... shares (3) Class B Common Stock ................... 1,818,181 shares Class C Common Stock ................... 15,248,452 shares Total ........................... shares Use of Proceeds........................... The net proceeds of the Offering will be used by the Company to repay a portion of the indebtedness incurred in connection with the Benchmark Acquisition under the New Credit (as defined). See "Use of Proceeds." Voting Rights............................. The Class A Common Stock entitles the holders thereof to one vote per share; the Class B Common Stock has no voting rights except as otherwise required by law; and the Class C Common Stock entitles the holder thereof to ten votes per share. The Class A Common Stock and the Class C Common Stock vote together as a single class on all matters submitted to a vote of stockholders, except as otherwise required by law and except that the holders of Class A Common Stock , voting as a separate class, are entitled to elect two members of the Board of Directors of Capstar. Notwithstanding the foregoing, upon the earlier to occur of (i) the date on which Hicks Muse and its affiliates ceases to own beneficially more than 50% of the number of shares of Class C Common Stock owned by them upon completion of the Offering and (ii) the third anniversary date of the completion of the Offering, the holders of Class A Common Stock and Class C Common Stock shall vote together as a single class upon the election of all directors. Upon completion of the Offering and after giving effect to the Recapitalization, (i) the holders of the Class A Common Stock offered hereby will have approximately % of the total voting power of the outstanding Common Stock and (ii) the holders of the Class C Common Stock will have approximately % of the total voting power of the outstanding Common Stock. R. Steven Hicks, Capstar's President and Chief Executive Officer, and Capstar L.P. will hold all of the outstanding Class C Common Stock. See "Risk Factors -- Control of the Company" and "Description of Capital Stock." Also see "Security Ownership of Certain Beneficial Owners" and "Certain Transactions" as to the voting and other interests of certain beneficial owners of the capital stock of Capstar. Other Rights............................... Each class of Common Stock has the same rights to dividends and upon liquidation. Upon the sale or transfer of shares of Class B Common Stock or Class C Common Stock to any person or entity other than Hicks Muse or its affiliates, such shares shall automatically convert into shares of Class A Common Stock on a share-for-share basis, subject, in the case of Class B Common Stock, to certain conditions. See "Description of Stock." Dividend Policy........................... Capstar intends to retain future earnings for use in the Company's business and does not anticipate declaring or paying any cash or stock dividends on shares of its Common Stock in the foreseeable future. Symbol................................... " " - ---------------- (1) Does not include shares of Class A Common Stock issuable pursuant to the Underwriters' over-allotment option. (2) Prior to the Offering, Capstar will effect the Recapitalization in which Class C Common Stock will be issued. See "-- The Recapitalization." (3) Excludes (a) 744,000 shares currently issuable upon exercise of the Warrant (as defined) at an exercise price of $10.00 per share as increased by an annual rate of interest equal to 8.0% per year commencing as of October 16, 1996 and (b) 204,255 shares currently issuable upon exercise of the New Warrant (as defined) at an exercise price of $11.00 per share as increased by an annual rate of interest equal to 8.0% per year commencing as of February 20, 1997. See "Certain Transactions-- Warrants." Also excludes shares issuable upon exercise of outstanding options, none of which are currently exercisable, to purchase an aggregate of 706,895 shares of Class A Common Stock at a weighted average exercise price of $10.58 per share. See "Management-- Benefit Plans-- Stock Option Plan." THE RECAPITALIZATION The information provided in this Prospectus gives effect to a 1 for 10 reverse stock split of Capstar's Class A Common Stock and Class B Common Stock and the exchange by R. Steven Hicks and Capstar L.P. of their respective shares of Class A Common Stock for an equal number of shares of Class C Common Stock (collectively, the "Recapitalization"), all of which will occur prior to the Offering. RISK FACTORS Prospective purchasers of the Class A Common Stock should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under the caption "Risk Factors" beginning on page 12, which provides a discussion of the risks involved in an investment in the Class A Common Stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026650_eresearcht_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026650_eresearcht_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f0fe79cbeafcd9bcac58e7e2d43e841c65d64085
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026650_eresearcht_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Such statements are only predictions and actual events or results may differ materially from those indicated by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under "Risk Factors." All references to the "Company" in this Prospectus refer to Premier Research Worldwide, Ltd., a Delaware corporation, and its subsidiaries and predecessors. Except as otherwise noted, all information in this Prospectus (i) reflects a 2,201-for-one stock split effected on November 26, 1996, (ii) reflects the mandatory conversion of PREMIER, Inc.'s minority interest in Premier Research, LLC into 330,150 shares of Common Stock of the Company upon closing of this offering, and (iii) assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Premier Research Worldwide, Ltd. (the "Company") is a clinical research organization ("CRO") providing a broad range of integrated product development services to its clients in the pharmaceutical, biotechnology and medical device industries. The Company complements the research and development departments of its clients by offering high quality clinical research services on an as-needed basis, thereby providing a variable cost alternative to certain fixed costs typically associated with internal product development. Over the last three years, the Company has built a base of over 85 clients, including 21 of the 25 largest pharmaceutical companies in the world (on the basis of 1995 research and development expeditures as reported by Med Ad News). During 1996, the Company performed services under 199 contracts for 60 clients. The Company's services include centralized diagnostic testing, clinical trial management, clinical data management, biostatistical analysis, Phase I clinical research, health care economics and outcomes research and regulatory affairs services. The Company and its predecessors have operated since 1977 as direct or indirect subsidiaries or as divisions of UM Holdings, Ltd., a private holding company that owns several companies in different industries. Throughout its history, the Company has been an innovator in the use of new technologies that speed product development and regulatory review. For example, the Company created and filed the first computer-assisted new drug application ("CANDA") with the United States Food & Drug Administration ("FDA"). The Company's technology is designed to simplify and make more efficient the collection, transfer, analysis and preparation of clinical trial data. The Company believes that its proprietary technology links all facets of clinical development, produces cost advantages, facilitates superior levels of service, improves the quality of clinical research, and enhances the Company's global capabilities. All of the Company's services are designed to help clients reduce their product development time in a cost-effective manner. In 1977, the Company's predecessor, Cardio Data Systems, began providing diagnostic testing services used to evaluate the safety and efficacy of new drugs. Today, the Company provides these services, which include electrocardiograms ("ECGs"), Holter monitoring, pulmonary function testing, blood and urine sampling, and other tests, on a centralized basis. To take advantage of the potential synergies and cross-selling opportunities with its centralized diagnostic testing services, the Company added clinical trial management capabilities in September 1995 by forming with PREMIER, Inc. a limited liability company, which is owned 65% by the Company and 35% by PREMIER, Inc. Upon the closing of this offering, PREMIER, Inc.'s minority interest will convert into 330,150 shares of Common Stock of the Company in accordance with an agreement entered into by the parties in 1995. Upon such conversion, the limited liability company will be wholly-owned by the Company. Although a substantial majority of the Company's net revenues is still derived from centralized diagnostic testing services, the Company today has the capacity to provide the full range of CRO services on a global basis. The Company believes that its affiliation with PREMIER, Inc. will improve its ability to market and enhance its clinical research services to its clients. PREMIER, Inc. is the largest voluntary healthcare alliance in the United States, with 1,800 affiliated hospitals and institutions throughout the United States, representing over 300,000 hospital beds. PREMIER, Inc. negotiated, on behalf of the alliance, group purchases of approximately $6 billion and $10 billion of medical devices, supplies and pharmaceuticals in 1995 and 1996, respectively. The Company seeks to leverage its strategic relationship with PREMIER, Inc. in the following ways: (i) PREMIER, Inc. has agreed to introduce the Company to all pharmaceutical and device companies that sell or propose to sell products to the alliance; (ii) PREMIER, Inc. has agreed to include as a standard provision in all of its future drug and device group purchasing agreements that the pharmaceutical or device company consider using the Company's services in its clinical trials; (iii) the Company is the exclusive CRO for the trial management organization being developed by PREMIER, Inc. with the assistance of the Company; and (iv) the Company has access to PREMIER, Inc.'s databases, which should facilitate the Company's ability to identify specific patient populations, investigators and sites and to offer pharmacoeconomic and outcomes data to its clients. The global pharmaceutical and biotechnology industries spent an estimated $35 billion in 1995 on research and development, of which the Company estimates $20 billion was spent on the types of services offered by the Company. Of this amount, approximately $2.5 billion was outsourced to CROs. The Company believes that the following trends will lead to increased outsourcing of product development activities by pharmaceutical, biotechnology and medical device companies: (i) clients in these industries are increasingly seeking faster product development times in order to maximize the period of patent protection and marketing exclusivity; (ii) as these companies respond to cost containment pressures, they are looking to develop their products as inexpensively as possible and therefore are taking advantage of the variable cost structure of outsourcing to CROs versus the fixed cost structure of internal development; (iii) as increasingly complex and stringent regulatory requirements have added to the volume of data required for regulatory filings, the demand for comprehensive capabilities to collect, analyze and prepare clinical data for regulatory submission is growing; (iv) as pharmaceutical and biotechnology companies are developing more advanced therapeutics for complex chronic diseases, these companies are looking to outsource to CROs with product development expertise in specialized therapeutic areas; (v) biotechnology companies are developing an increasing number of new drugs submitted for regulatory review and continue to depend largely on outside sources for clinical research services; (vi) the shift by pharmaceutical, biotechnology and medical device companies from making sequential filings of registration packages to simultaneous filings in several countries is creating growing demand for CROs with an international presence and experience in preparing such filings; and (vii) the need for sophisticated data management is increasing. The Company's objective is to accelerate its clients' product development timelines. The Company's strategies for meeting this objective include: (i) using innovative technology to accelerate and improve product development; (ii) providing comprehensive product development services, including centralized diagnostic testing services; (iii) expanding its capacity for global product development services; (iv) developing its strategic relationship with PREMIER, Inc.; and (v) pursuing strategic acquisitions. THE OFFERING <TABLE> <CAPTION> <S> <C> Common Stock offered by the Company ................. 2,000,000 shares Common Stock offered by the Selling Stockholder ..... 750,000 shares Common Stock to be outstanding after the offering ... 6,732,150 shares(1)(2) Use of proceeds ..................................... To fund capital expenditures, geographic expansion, possible future acquisitions, working capital and other general corporate purposes Nasdaq National Market symbol ....................... PRWW </TABLE> - ------ (1) Excludes (i) 521,637 shares of Common Stock reserved for issuance upon the exercise of outstanding options at an average exercise price of $2.26, (ii) 23,206 shares of Common Stock reserved for issuance upon exercise of outstanding options at an assumed initial public offering price of $15.00, and (iii) 490,000 shares reserved for future grant under the Company's 1996 Stock Option Plan. See "Management -- Stock Option Plans" and Note 8 of Notes to Consolidated Financial Statements. (2) Following this offering, the Company's current stockholders will beneficially own approximately 61.7% of the outstanding shares of Common Stock. The Company does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The representatives of the Underwriters are Montgomery Securities, Furman Selz LLC and Genesis Merchant Group Securities. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> Year Ended December 31, --------------------------------------------------------- 1992(1) 1993(1) 1994(1) 1995 1996 -------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> Statement of Operations Data: Revenues .............................................. $8,083 $10,245 $12,910 $12,218 $15,396 Less: Reimbursed costs ................................ -- -- -- (154) (113) -------- --------- --------- --------- --------- Net revenues .......................................... 8,083 10,245 12,910 12,064 15,283 -------- --------- --------- --------- --------- Costs and expenses: Direct costs ........................................ 1,971 2,428 3,473 4,124 6,285 Selling, general and administrative ................. 4,017 7,278 7,245 6,375 6,783 Depreciation and amortization ....................... 688 785 1,197 1,013 704 -------- --------- --------- --------- --------- Total costs and expenses .............................. 6,676 10,491 11,915 11,512 13,772 -------- --------- --------- --------- --------- Income (loss) before income taxes and minority interest. 1,407 (246) 995 552 1,511 Minority interest in limited liability company's loss... -- -- -- 48 332 -------- --------- --------- --------- --------- Income (loss) before income taxes ..................... 1,407 (246) 995 600 1,843 Income tax provision (benefit) (2) .................... 562 (69) 415 259 773 -------- --------- --------- --------- --------- Net income (loss) (3) ................................. $ 845 $ (177) $ 580 $ 341 $ 1,070 ======== ========= ========= ========= ========= Pro forma net income (4) .............................. $ 878 ========= Pro forma net income per share (4) .................... .18 ========= Shares used in computing pro forma net income per share (4) 4,997 ========= </TABLE> <TABLE> <CAPTION> December 31, 1996 ----------------------- As Actual Adjusted(5) -------- ----------- <S> <C> <C> Balance Sheet Data: Cash and cash equivalents..................................................................... $1,498 $28,798 Working capital ............................................................................. 1,595 28,895 Total assets ................................................................................ 5,748 33,048 Total stockholders' equity.................................................................... 2,516 29,816 </TABLE> - ------ (1) For periods prior to June 1, 1994, the Company operated as direct or indirect subsidiaries or as divisions of UM Holdings, Ltd. ("UM"). Effective June 1, 1994, the Company was capitalized through the transfer of the net assets and operations of the division by UM. (2) The Company is included in the consolidated income tax returns of UM. The historical financial statements reflect income taxes calculated on a separate company basis. See Note 6 of Notes to Consolidated Financial Statements. (3) Net income (loss) for all periods presented includes various transactions with related parties, including administrative services and a facility lease with UM and consulting fees paid to the Company's President, who is a stockholder. See Note 7 of Notes to Consolidated Financial Statements. (4) Reflects the conversion of PREMIER, Inc.'s minority interest in limited liability company into Common Stock of the Company upon the closing of this offering. See Note 1 of Notes to Consolidated Financial Statements for discussion of the calculation of pro forma net income, pro forma net income per share and the shares used in computing pro forma net income per share. (5) As adjusted to give effect to the sale by the Company of 2,000,000 shares of Common Stock in this offering at an assumed initial public offering price of $15.00 per share (after deducting the estimated underwriting discount and offering expenses payable by the Company). See "Use of Proceeds," "Dividend Policy," "Capitalization" and "Description of Capital Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026671_lottery_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026671_lottery_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..aedd53e01b979745aa51b3764245f9a4eb54fee5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026671_lottery_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." Unless otherwise indicated, all information in this Prospectus (i) assumes the Over-allotment Option is not exercised, and (ii) assumes the Underwriter's Warrants to purchase 220,000 shares of Common Stock issued to the Underwriter in connection with this Offering (the "Underwriter's Warrants") are not exercised. Such information also assumes (i) that $750,000 in principal amount of outstanding indebtedness of the Company which, by its terms, can be converted into 150,000 shares of Common Stock, is not converted, (ii) outstanding options to acquire 1,720,000 shares of Common Stock, as well as up to 495,000 shares of Common Stock issuable upon exercise of future stock option grants under the Company's 1996 Stock Option Plan, are not exercised, (iii) outstanding warrants to purchase 325,000 shares of Common Stock are not exercised, and (iv) warrants to be issued to a holder of convertible debt and its affiliate, upon the consummation of the Offering, to purchase 550,000 shares of Common Stock are not exercised. All references to shares of the Company's Common Stock reflect a 1-for-2.269793 reverse stock split approved by the Board of Directors in April 1997 to counteract the 2.2128874-for-1 stock split adopted by the Board of Directors in November 1996 and the 1.066144-for-1 split adopted in December 1996. The reverse split was adopted by the Board of Directors based on negotiations with the Underwriter, regarding a diminution of the Company's authorized capital. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company has not engaged in any revenue producing activities to date and anticipates commencing commercial operations no later than two months following consummation of this Offering. As a result, the Company's actual performance may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under the heading "Risk Factors" and elsewhere in this Prospectus. THE COMPANY Conserver Corporation of America (the "Company") has licensed the exclusive right to distribute, market, sell and otherwise commercially exploit Conserver 21(TM), a product composed of a non-toxic mixture of sepiolite and mineral salts, in the United States and Canada through March 2022, subject to extension. The Company also holds an option and a right of first refusal to exercise such rights throughout the world. Tests have been performed on Conserver 21(TM) over the past 35 months variously by the Company, the manufacturer of Conserver 21(TM), its predecessor in interest and companies with which it contracted. In addition, various non-affiliated laboratories, commissioned by certain of the aforementioned entities from time to time in various parts of the world, utilizing independently derived protocols, have demonstrated that the use of Conserver 21(TM) can extend the post-harvest life of fruits, vegetables and flowers. Conserver 21(TM) works like a sponge by cleansing from the atmosphere of a storage or transport container ethylene and other gases emitted by fruits, vegetables and flowers, thereby retarding their spoilage, lengthening their post-harvest life and minimizing their shrinkage during ripening. These gases, if allowed to remain in the atmosphere of the container, would be reabsorbed by the perishable cargo during its maturation process, resulting in its accelerated decay. Conserver 21(TM) also releases carbon dioxide and water vapor, thereby assisting fruits, vegetables and flowers to maintain their freshness. Conserver 21(TM), a non-invasive product, is manufactured in the form of cylindrical granules and placed in sealed filters or packets which are then positioned within a storage or transport space. The Company believes that Conserver 21(TM) can be used in conjunction with a comprehensive quality assurance maintenance program to provide more commercially saleable fruits, vegetables and flowers more reliably and cost effectively than is achieved by current industry practices. It is currently common for some growers of fresh fruits and vegetables to pick and ship their products prior to their being fully ripened in an effort to reduce spoilage and to minimize the extent of the natural decay that occurs in the transportation of perishables. This often results in delivery of fruits and vegetables that are unevenly ripened, have less mass and a compromised taste. Growers and distributors have resorted to using expensive storage and transportation methods in an effort to reduce the incidence of such commercially unsatisfactory products. The Company believes that Conserver 21(TM) which, for illustrative purposes, has the capacity, as demonstrated by independent testing, to extend the post-harvest life of certain varieties of tomatoes, strawberries, sweet peppers and lilies by as much as 7, 10, 9 and 5 days, respectively, offers an improved alternative to such methods. The Company intends to develop a quality assurance maintenance program utilizing Conserver 21(TM) that will provide fruit, vegetable and/or flower inspection and supervision services from point of harvesting or packing to point of retail sale (the "Conserver 21(TM) Program"). The Company intends to market the Conserver 21(TM) Program to growers, distributors, supermarket chains and other retailers who can benefit from the availability of more saleable perishables. The Company believes that the Conserver 21(TM) Program can offer the following benefits: - Increase the shelf-life of fruits, vegetables and flowers. - Increase the sugar content, enrich the color and enhance the weight and taste of fruits and vegetables which will be able to be harvested nearer their height of ripeness. - Reduce the shrinkage and spoilage of fruits and vegetables during storage resulting in a greater product yield available for sale by supermarkets and other retailers. - Reduce the time and expense involved in handling and sorting produce in storage and transport. - Extend the selling season for many fruits and vegetables. - Reduce the costs of transporting highly perishable fruits, vegetables and flowers as slower and less expensive means can be utilized due to the longer post-harvest life of the perishables. The Company has the right to commercially exploit Conserver 21(TM) throughout the world and, as its business develops, intends to explore the commercial opportunities presented by Conserver 21(TM)in the international trade of fresh fruits and vegetables. The Company's distribution and marketing rights are derived from a distribution agreement (the "Distribution Agreement") with Agrotech 2000 S.L., a Spanish company ("Agrotech") that manufactures and packages Conserver 21(TM) near Madrid, Spain and whose principal stockholder is Alfonso de Sande Moreno, the developer of Conserver 21(TM). Agrotech holds the patent rights to Conserver 21(TM) and has represented and warranted that the rights to exclusively market, sell, distribute and commercially exploit Conserver 21(TM), granted to the Company by the Distribution Agreement, do not violate the rights of any third parties and are granted to the Company pursuant to Agrotech's full right and authority to so provide. The Company was incorporated in the State of Delaware in March 1996. The principal executive offices of the Company are located at 2655 LeJeune Road, Suite 535, Coral Gables, Florida 33134, and its telephone number is (305) 444-3888. THE OFFERING Securities Offered by the Company....................... 2,200,000 Shares. Common Stock Outstanding Before the Offering........... 4,210,404 shares Common Stock to be Outstanding After the Offering.......... 6,385,404 shares(1) Use of Proceeds............... The net proceeds of this Offering will be used for direct and collaborative marketing and distribution, Conserver 21(TM) inventory purchases, research and development, repayment of indebtedness and working capital and general corporate purposes. See "Use of Proceeds." Risk Factors and Dilution..... An investment in the Securities offered hereby involves a high degree of risk and immediate and substantial dilution. Prospective investors should consider carefully the factors set forth under "Risk Factors" and "Dilution." Proposed Symbol for Nasdaq(2) Common Stock................ "RIPE" - --------------- (1) Assumes the Company's re-acquisition of an aggregate of 25,000 shares upon the consummation of this Offering from an affiliate of a holder of a convertible debenture issued by the Company (the "SES Reacquisition"). See "Management's Discussion and Analysis of Financial Condition and Plan of Operation." (2) The Nasdaq quotation does not imply that a liquid and active market will develop, or be sustained, for the Securities upon completion of the Offering. There can be no assurance that the Securities will continue to meet the maintenance criteria for quotation on Nasdaq. See Risk Factors -- No Assurance of Nasdaq Quotation. SUMMARY FINANCIAL INFORMATION The following summary financial data have been derived from the financial statements of the Company. The statement of operations data set forth below with respect to the period from March 6, 1996 (date of incorporation) to August 31, 1996, for the six months ended February 28, 1997 and the period from March 6, 1996 (date of incorporation) to February 28, 1997 and the balance sheet at August 31, 1996 and February 28, 1997 are derived from, and are qualified by reference to, the Financial Statements included elsewhere in this Prospectus and should be read in conjunction with those financial statements and notes thereto. STATEMENT OF OPERATIONS DATA(1): <TABLE> <CAPTION> MARCH 6, 1996 MARCH 6, 1996 (DATE OF SIX MONTHS (DATE OF INCORPORATION) TO ENDED INCORPORATION) TO AUGUST 31, 1996 FEBRUARY 28, 1997 FEBRUARY 28, 1997 ----------------- ----------------- ----------------- <S> <C> <C> <C> Revenues............................... $ -- $ -- $ -- Compensation charges in connection with issuance of options and warrants(2).......................... 907,201 223,000 1,130,201 General and administrative expenses.... 458,611 849,888 1,308,499 ----------- ----------- ----------- Operating (loss)....................... (1,365,812) (1,072,888) (2,438,700) Interest expense, net of interest income............................... 21,259 185,833 207,092 ----------- ----------- ----------- Net (loss)............................. $(1,387,071) $(1,258,721) $(2,645,792) =========== =========== =========== Net (loss) per share of Common Stock... $ (.32) $ (.26) ----------- ----------- Weighted average number of shares of Common Stock outstanding............. 4,390,767 4,844,733 =========== =========== Pro-forma net (loss) per share of Common Stock(5)...................... $ (.88) ----------- </TABLE> BALANCE SHEET DATA: <TABLE> <CAPTION> FEBRUARY 28, 1997 --------------------------- AUGUST 31, AS 1996 ACTUAL ADJUSTED(3) ----------- ----------- ----------- <S> <C> <C> <C> Working capital........................... $ 2,239,902 $ 1,015,585 $ 9,324,562 Total assets.............................. 2,443,436 2,156,075 10,076,075 Total current liabilities................. 199,156 833,749 743,749 Deficit accumulated during development stage................................... (1,387,071) (2,645,792) (6,250,792)(4) Stockholders' equity...................... 1,244,280 322,326 9,332,326 </TABLE> - --------------- (1) The Company is in the development stage, and has had no commercial operations to date. See Note A of Notes to Financial Statements. (2) Relates to non-cash charges recorded by the Company in connection with the value attributed to options and warrants issued by the Company in March and August 1996 and January 1997. See "Management's Discussion and Analysis of Financial Condition and Plan of Operation" and Note E and J of Notes to Financial Statements. (3) Gives effect to the sale by the Company of the Securities offered hereby the initial public offering price of $5.00 per Share and the initial application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026964_vanstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026964_vanstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d905fe1978b21e35f3b45ae5bfb0170469395b60
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026964_vanstar_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." SEE "SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995." THE COMPANY The Company is a leading provider of services and products designed to build and manage personal computer ("PC") network infrastructures, primarily for Fortune 1000 companies and other large enterprises. The Company provides customized, integrated solutions for its customers' distributed computing networks by combining a comprehensive offering of value-added services with its expertise in sourcing and distributing PCs, network products, computer peripherals and software from a variety of vendors. These integrated solutions are designed to support the customer's client/server environments throughout its life cycle. The Company refers to these solutions as "Life Cycle Management." Life Cycle Management integrates the offerings of design and consulting, acquisition and deployment, operation and support, and enhancement and migration. Large organizations are becoming increasingly dependent on information technology to compete effectively in today's global markets. The decision-making process that organizations face when planning, selecting and implementing information technology solutions is growing more complex, and, as a result, many organizations are outsourcing the management and support of their PC network infrastructure needs. The Company believes that its customers require increasingly sophisticated PC network systems and support infrastructures. The Company seeks to satisfy these requirements while seeking to minimize its customers' internal staff requirements and systems development risk. The Company enhances the delivery of its services and products with proprietary automated systems, such as the Vanstar Navigator, and proprietary process methodologies, such as Horizon, to analyze, design and manage its customers' PC network infrastructures better. The Company's goal, through the use of these systems and methodologies, is to reduce the labor component of PC life cycle management and thereby increase efficiency, reduce costs and make network systems more reliable and easier to use. The Company's service and product offerings are developed, delivered and managed by a technical force of over 3,500 employees nationwide, including a rapidly expanding systems engineering force, which grew from approximately 200 professionals in March 1994 to approximately 1,200 in November 1996. The Company believes that certain segments of its industry have begun to consolidate. In order to maintain its position as a leading provider of PC network infrastructure solutions to large businesses, the Company believes that expansion through acquisitions, as well as internal growth, will be necessary. Effective May 24, 1996, the Company consummated the acquisition of certain of the assets and business operations of Dataflex Corporation ("Dataflex"), previously known as the Dataflex Western Region and Dataflex Southwest Region (the "Dataflex Regions"). These Dataflex Regions offer PC product distribution, service and support in the states of Arizona, California, Colorado, Nevada, New Mexico and Utah and reported revenues of approximately $145 million for the fiscal year ended March 31, 1996. Effective December 16, 1996, the Company consummated the merger of Contract Data Services, Inc., a North Carolina corporation ("CDS"), with and into a wholly-owned subsidiary of the Company. CDS provides outsourcing of integrated information technology services, related technical support services and procurement of computer hardware and software. CDS reported total revenues of approximately $74.3 million for its fiscal year ended March 31, 1996. In addition, the Company has recently consummated certain other acquisitions in the areas of education services and acquisition and deployment services. The Company expects, for the foreseeable future, to continue to evaluate other potential acquisition opportunities, and to make additional acquisitions as economic and market conditions, and the availability of attractive candidates, permit. See "Recent Developments." In fiscal 1996 and the first six months of fiscal 1997, the Company's operating performance improved over prior periods due to higher professional services, and life cycle services and product revenue, higher product gross margins, decreased fixed costs as a percentage of revenue, as well as cost reduction efforts and operational improvements. In order to achieve its objective of continuing to be a leading provider of PC network infrastructure solutions to large businesses throughout the world, the Company intends to leverage its broad customer base, to develop and enhance its value-added service offerings and to expand its worldwide service capabilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The principal executive offices of the Company are located at 5964 West Las Positas Boulevard, Pleasanton, California 94588, and its telephone number is (510) 734-4000. THE OFFERING <TABLE> <S> <C> The Issuer............................. Vanstar Financing Trust, a Delaware statutory business trust. The assets of the Trust consist solely of the Convertible Debentures. Securities Offered..................... 4,025,000 6 3/4% Trust Convertible Preferred Securities, 6 3/4% Convertible Subordinated Debentures, Company Common Stock issuable upon conversion thereof, and the associated Guarantee. Selling Holders........................ The Preferred Securities were originally issued by the Trust and sold by the Initial Purchasers in transactions exempt from registration under the Securities Act to (i) "qualified institutional buyers" pursuant to Rule 144A under the Securities Act, (ii) institutional "accredited investors" pursuant to Rule 501(a)(1), (2), (3) or (7) under the Securities Act and (iii) non-U.S. persons in offshore transactions under Regulation S promulgated under the Securities Act. These purchasers or their transferees, pledgees, donees or successors may from time to time offer and sell the Offered Securities pursuant to this Prospectus. See "Selling Holders." Prior to the resale of Preferred Securities pursuant to this Prospectus, each of the Preferred Securities was eligible for trading in the PORTAL Market. Preferred Securities resold pursuant to this Prospectus will no longer be eligible for trading in the PORTAL Market. Distributions.......................... Distributions on the Preferred Securities have accrued from the Original Offering Date and are payable at the annual rate of 6 3/4% of the liquidation preference of $50 per Preferred Security. Subject to the distribution deferral provisions described below, distributions will be payable quarterly in arrears on each January 1, April 1, July 1 and October 1. The first distribution on the Preferred Securities was paid January 2, 1997. Corporate holders of Preferred Securities will not be entitled to a dividends- received deduction. </TABLE> <TABLE> <S> <C> Option to Extend Distribution Payment Period............................... The ability of the Trust to pay distributions on the Preferred Securities is solely dependent on its receipt of interest payments on the Convertible Debentures. The Company has the right at any time, and from time to time, to defer the interest payments due on the Convertible Debentures for successive periods not exceeding 20 consecutive quarters for each such Extension Period. As a consequence of such extension, quarterly distributions on the Preferred Securities would be deferred by the Trust (but would continue to accumulate quarterly and would accrue interest) until the end of any such Extension Period. The Company will give written notice of deferral of an interest payment to the Trust, and the Trust shall give notice thereof to the holders of the Preferred Securities. See "Risk Factors--Option to Extend Interest Payment Period; Tax Consequences," "Description of the Preferred Securities--Distributions" and "Description of the Convertible Debentures--Option to Extend Interest Payment Period." If an extension of an interest payment occurs, the holders of the Preferred Securities will continue to accrue income for United States Federal income tax purposes in advance of any corresponding cash distribution. Moreover, if a holder of Preferred Securities converts its Preferred Securities into Company Common Stock during an Extension Period, the holder will not receive any cash related to the deferred distributions. See "Risk Factors--Option to Extend Interest Payment Period; Tax Consequences" and "Certain United States Federal Income Tax Considerations--Potential Extension of Interest Payment Period and Original Issue Discount." Rights Upon Deferral of Distributions........................ During any Extension Period, interest on the Convertible Debentures will compound quarterly and quarterly distributions (compounded quarterly at the distribution rate) will accrue on the Preferred Securities. The Company has agreed, among other things, not to declare or pay any dividend on any class of its capital stock during any Extension Period, subject to the right of the Company to pay dividends or distributions in shares of Company Common Stock on Company Common Stock or on the preferred stock, par value $.01 per share, of the Company (the "Preferred Stock"), and to certain other exceptions. See "Description of the Convertible Debentures--Option to Extend Interest Payment Period" and "Description of the Guarantee--Certain Covenants of the Company." Conversion into Company Common Stock... Each Preferred Security is convertible at the option of the holder into shares of Company Common Stock, at the rate of 1.739 shares of Company Common Stock for each Preferred Security (equivalent to a conversion price of $28.75 per share of Company Common Stock), subject to </TABLE> <TABLE> <S> <C> adjustment in certain circumstances. The closing price of Company Common Stock on the NYSE Composite Tape on January 9, 1997 was $21.75 per share. In connection with any conversion of a Preferred Security, the Conversion Agent (as defined herein) will exchange such Preferred Security for the appropriate principal amount of Convertible Debentures and immediately convert such Convertible Debentures into shares of Company Common Stock. No fractional shares of Company Common Stock will be issued as a result of conversion, but in lieu thereof such fractional interest will be paid by the Company in cash. See "Description of the Preferred Securities-- Conversion Rights." Liquidation Amount..................... Upon any liquidation of the Trust, holders will be entitled to receive $50 per Preferred Security plus an amount equal to any accrued and unpaid distributions thereon to the date of payment, unless Convertible Debentures are distributed to such holders. See "Description of the Preferred Securities--Liquidation Distribution Upon Dissolution." Redemption............................. The Convertible Debentures will be redeemable for cash, at the option of the Company, in whole or in part, from time to time, on or after October 5, 1999 at the prices specified herein. Upon any redemption of the Convertible Debentures, the Preferred Securities will be redeemed at the applicable redemption price. The Preferred Securities will not have a stated maturity date, although they will be subject to mandatory redemption upon the repayment of the Convertible Debentures at their stated maturity (October 1, 2016), upon acceleration, earlier redemption or otherwise. See "Description of the Preferred Securities--Redemption" and "Description of the Convertible Debentures--Optional Redemption." Guarantee.............................. The Company has irrevocably guaranteed, to the extent set forth herein, the payment in full of (i) the distributions on the Preferred Securities to the extent of funds of the Trust available therefor, (ii) the amount payable upon redemption of the Preferred Securities to the extent of funds of the Trust available therefor and (iii) generally, the liquidation preference of the Preferred Securities to the extent of the assets of the Trust available for distribution to holders of Preferred Securities. The Guarantee is unsecured and (i) subordinate and junior to all other liabilities of the Company except any liabilities that may be PARI PASSU expressly by their terms, (ii) PARI PASSU in right of payment with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock or preferred securities of any </TABLE> <TABLE> <S> <C> affiliate of the Company and (iii) senior to Company Common Stock. Upon the liquidation, dissolution or winding up of the Company, its obligations under the Guarantee will rank junior to all of its other liabilities, except as aforesaid, and, as a result, funds may not be available for payment under the Guarantee. See "Risk Factors--Ranking of Obligations Under Guarantee and Convertible Debentures," "Description of the Guarantee" and "Description of the Convertible Debentures-- Subordination." Voting Rights.......................... Generally, holders of the Preferred Securities do not have any voting rights. See "Description of the Preferred Securities--Voting Rights." Tax Event or Investment Company Event Redemption or Distribution........... Upon the occurrence of a Tax Event or an Investment Company Event (each as defined herein), except in certain limited circumstances, the Issuer Trustees (as defined herein) shall cause the liquidation of the Trust and cause the Convertible Debentures to be distributed to the holders of the Preferred Securities. In certain circumstances involving a Tax Event, the Company will have the right to redeem the Convertible Debentures, in whole (but not in part), at the applicable redemption price plus accrued and unpaid interest, in lieu of a distribution of the Convertible Debentures, in which event the Trust Securities will be redeemed at the applicable redemption price. See "Description of the Preferred Securities-- Special Event Redemption or Distribution." Convertible Debentures................. The Convertible Debentures are unsecured obligations of the Company. The Convertible Debentures mature on October 1, 2016, and bear interest at the rate of 6 3/4% per annum, payable quarterly in arrears. Interest payments may be extended from time to time by the Company for successive periods not exceeding 20 consecutive quarters for each such period (during which interest will continue to accrue and compound quarterly). Prior to the termination of any Extension Period, the Company may further extend the Extension Period provided that such Extension Period, together with all previous and further extensions thereof, may not exceed 20 consecutive quarters and may not extend beyond the stated maturity date of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the preceding sentence. No interest shall be due and payable during an Extension Period until the end of such period. During an Extension Period, the Company and its subsidiaries (other than its wholly-owned subsidiaries) will be prohibited from paying dividends on any class of their </TABLE> <TABLE> <S> <C> preferred or common stock (except for (i) dividends or distributions in shares of Company Common Stock on Company Common Stock or on its Preferred Stock, (ii) purchases or acquisitions of shares of Company Common Stock made in connection with employee benefit plans of the Company or its subsidiaries in the ordinary course of business or purchases made from employees or officers pursuant to employment agreements, subject to certain limitations, (iii) conversions or exchanges of common stock of one class into common stock of another class, and (iv) purchases of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of any of the Company's securities being converted or exchanged) and making certain other restricted payments until quarterly interest payments are resumed and all accumulated and unpaid interest (including any interest thereon) on the Convertible Debentures is made current. The Convertible Debentures have provisions with respect to interest, optional redemption and conversion into the Company Common Stock and certain other terms substantially similar to those of the Preferred Securities. See "Description of the Convertible Debentures." Form of Preferred Securities........... Beneficial interests in the Preferred Securities resold pursuant to this Prospectus will be evidenced by, and transfers thereof will be effected only through, records maintained by DTC (as defined herein) in a single, permanent global security bearing a CUSIP number distinct from the CUSIP number for the Preferred Securities issued in the Original Offering and the Over-Allotment Offering. Except under the limited circumstances described herein, Preferred Securities in certificated form will not be issued in exchange for an interest in the global certificate or certificates. In the event of a transfer of securities that were initially issued in fully registered, certificated form, the holder of such certificates will be required to exchange them for interests in the global certificates representing the number of Preferred Securities transferred. See "Description of the Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001026965_metro_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001026965_metro_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d399f762255bc3f38e2f3b1506dfed7d3c86475f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001026965_metro_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) CONTAINED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS REFLECTS A 3,507.2952 FOR ONE STOCK SPLIT OF THE COMMON STOCK TO BE EFFECTED BEFORE COMPLETION OF THE OFFERING BY MEANS OF A STOCK DIVIDEND AND ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY Metro Information Services, Inc. ("Metro" or the "Company") provides a wide range of information technology ("IT") consulting and custom software development services through 24 offices in the United States and Puerto Rico. The Company's approximately 1,300 consultants, 65% of whom are salaried, work with clients' internal IT departments on all aspects of computer systems and applications development. The Company believes its experienced consultants and proprietary systems allow it to deliver high-quality, on-schedule services to its clients in a cost-effective and efficient manner. Services performed by Metro include application systems development and maintenance, IT architecture and engineering, systems consulting, project outsourcing and general support services. The Company supports all major computer technology platforms (mainframe, mid-range, client/server and network environments) and supports client projects using a broad range of software applications. For example, the Company implements SAP's client/ server software, custom develops Oracle, Informix, DB2, VisualBasic and C++ applications, implements and supports Windows NT, Novell and UNIX based network environments and supports numerous other application environments. The Company's goal is to become a leading national provider of IT services. Metro's clients operate in a wide variety of industries including communications, distribution, financial services, health care, information technology, manufacturing and utilities. The Company's clients include GTE Data Services, Inc., Microsoft Corporation, NationsBank of Virginia, N.A., Newport News Shipbuilding Inc., Norfolk Southern Corporation, Northern Telecom, Inc. ("NORTEL") and Virginia Power Company. During the 12 months ended September 30, 1996, the Company performed IT services for 328 clients (excluding clients that generated less than $25,000 in revenue during such period). The Company emphasizes long-term relationships with its clients rather than one-time projects or assignments. In 1995, each of the Company's 10 largest clients by revenue had been a client for five or more years and each of the Company's three largest clients had been a client for 10 or more years. Rapid technological advances have accelerated the growth of the IT industry. These advances in recent years include more powerful and less expensive computer technology, the transition from mainframe computer systems to open and distributed computing environments and the advent of capabilities such as relational databases, imaging and software development productivity tools. While these advances have enhanced the benefits of computer systems, the development and implementation of such systems have become more complex. Accordingly, organizations are increasingly turning to IT services firms to develop, support and strengthen their internal IT departments and systems. In July 1996, Dataquest, an industry research organization, estimated that in 1995 the size of the IT professional services market in the United States was $48.6 billion. Dataquest estimates that this market will grow at a compound annual rate of 14.8%, reaching $96.7 billion by 2000. The Company has competed successfully in the rapidly changing IT environment and has capitalized on the growing demand for IT services. The Company's revenue grew at a compound annual rate of 29.2% over the last 10 years and 24.6% over the last five years and grew 33.6% for the nine months ended September 30, 1996, compared to the same period in 1995. These growth rates have been achieved solely through internal growth and without the benefit of acquisitions. The Company has grown from 15 offices in 1993 to 24 offices currently, eight of which have opened since April 1, 1995, and anticipates that it will open three to five additional offices annually for the next several years. The Company's growth strategy consists of three primary components: (i) developing and expanding its client base, (ii) opening new offices and (iii) selectively acquiring other IT businesses. Metro's management personnel have substantial experience in the IT services industry. Metro's five executive officers have an average of 24 years of experience in the IT industry and have worked together at Metro for the past nine years. The Company was co-founded by John H. Fain in 1979 in Virginia Beach, Virginia. Following this offering, Mr. Fain, the Company's President and Chief Executive Officer, will beneficially own 56.9% of its outstanding Common Stock. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,300,000 shares Common Stock offered by the Selling Shareholder........................ 800,000 shares(1) Common Stock to be outstanding after the Offering................................... 14,800,000 shares(2) Use of Proceeds.............................. Repay bank borrowings, open additional offices, make additional capital expenditures for upgraded technology and for working capital and general corporate purposes, including possible acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... MISI </TABLE> - ------------------------ (1) See "Principal and Selling Shareholders" and "Description of Capital Stock." (2) Excludes 389,100 shares of the Common Stock issuable on exercise of stock options, which will be granted immediately on the completion of this offering at an exercise price equal to the initial public offering price per share and are reserved for issuance under the Company's 1997 Incentive Stock Option Plan. Also excludes any shares of the Common Stock issuable on exercise of stock options, which will be granted to outside directors and are reserved for issuance under the Company's Outside Directors Stock Plan. See "Management--Director Compensation," "Management--Stock Option Plan and Employee Stock Purchase Plan" and "Description of Capital Stock." -------------------------- THE FOLLOWING TRANSACTIONS (THE "PRE-OFFERING TRANSACTIONS") ARE ANTICIPATED TO OCCUR BEFORE THE COMPLETION OF THIS OFFERING AND ARE REFLECTED IN THE PRO FORMA AMOUNTS APPEARING IN THIS PROSPECTUS: (I) THE DISTRIBUTIONS (THE "DISTRIBUTIONS") TO THE COMPANY'S EXISTING SHAREHOLDERS OF THE AGGREGATE UNDISTRIBUTED AMOUNT OF INCOME THAT WAS ALLOCATED TO THEM DURING THE PERIOD THE COMPANY WAS AN S CORPORATION FOR FEDERAL AND CERTAIN STATE INCOME TAX PURPOSES, (II) THE RELEASE OF ALL REDEEMABLE COMMON STOCK FROM ANY AGREEMENT REQUIRING ITS REDEMPTION AND THE CONVERSION OF SUCH STOCK INTO COMMON STOCK, (III) THE REPAYMENT OF THE SELLING SHAREHOLDER'S NOTE RECEIVABLE TO THE COMPANY (THE "NOTE RECEIVABLE") AND (IV) THE ELECTION TO TERMINATE THE COMPANY'S S CORPORATION ELECTION CAUSING THE COMPANY TO BECOME A C CORPORATION FOR INCOME TAX PURPOSES, EFFECTIVE AS OF JANUARY 1, 1997, WHICH WILL RESULT IN THE RECOGNITION OF A NET DEFERRED TAX ASSET (THE "NET DEFERRED TAX ASSET"). THE COMPANY ESTIMATES THAT: (I) THE DISTRIBUTIONS WOULD HAVE AGGREGATED APPROXIMATELY $9.0 MILLION IF THEY OCCURRED AS OF SEPTEMBER 30, 1996, (II) THERE WAS $351,422 OUTSTANDING ON THE NOTE RECEIVABLE AS OF SEPTEMBER 30, 1996 AND (III) THE NET DEFERRED TAX ASSET WOULD HAVE BEEN $410,000 IF THE COMPANY WERE CONVERTED TO A C CORPORATION AS OF SEPTEMBER 30, 1996. THE ACTUAL AMOUNTS OF THE DISTRIBUTIONS, NOTE RECEIVABLE AND NET DEFERRED TAX ASSET MAY DIFFER ON THE DATES THE PRE-OFFERING TRANSACTIONS ACTUALLY OCCUR. SEE "PRIOR S CORPORATION STATUS," "USE OF PROCEEDS," "DESCRIPTION OF CAPITAL STOCK" AND "CERTAIN TRANSACTIONS." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------------------------- ---------------------- 1991 1992 1993 1994 1995(1) 1995 1996 ---------- ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF INCOME DATA: (UNAUDITED) (UNAUDITED) (UNAUDITED) Revenue................................. $33,954 $43,720 $53,344 $68,669 $85,904 $62,336 $83,282 Cost of revenue......................... 24,168 30,394 37,646 48,221 61,074 44,292 58,287 ------ ------ ------ ------ ------ ------ ------ Gross profit............................ 9,786 13,326 15,698 20,448 24,830 18,044 24,995 Selling, general and administrative expenses.............................. 7,782 9,794 11,461 14,595 19,507 13,511 18,209 ------ ------ ------ ------ ------ ------ ------ Operating income........................ 2,004 3,532 4,237 5,853 5,323 4,533 6,786 Net interest income (expense)........... 7 43 8 (215) (323) (233) (209) ------ ------ ------ ------ ------ ------ ------ Income before income taxes.............. 2,011 3,575 4,245 5,638 5,000 4,300 6,577 Pro forma provision for income taxes(2).............................. 804 1,430 1,698 2,255 2,000 1,720 2,631 ------ ------ ------ ------ ------ ------ ------ Pro forma net income(2)................. $ 1,207 $ 2,145 $ 2,547 $ 3,383 $ 3,000 $ 2,580 $ 3,946 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Pro forma net income per share(2)....... $ 0.23 $ 0.31 ------ ------ ------ ------ Weighted average shares outstanding..... 12,823 12,920 SELECTED OPERATING DATA:(3) Offices................................. 13 14 15 16 20 19 22 Consultants............................. 483 548 675 838 1,074 1,013 1,266 Total employees......................... 557 636 779 963 1,239 1,175 1,471 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1996 ------------------------ PRO FORMA AS ACTUAL ADJUSTED(4) ----------- ----------- <S> <C> <C> BALANCE SHEET DATA: (UNAUDITED) Working capital............................................................................. $ 6,356 $25,438 Total assets................................................................................ 23,502 37,653 Total debt.................................................................................. 4,606 -- Redeemable common stock..................................................................... 2,651 -- Total shareholders' equity.................................................................. 7,940 29,108 </TABLE> - ------------------------ (1) Includes $770,000 of non-recurring, non-cash compensation expense charged to selling, general and administrative expenses accrued in the fourth quarter of 1995 for stock issued for services performed by employees in 1995. (2) For periods shown, the Company was an S corporation for federal and certain state income tax purposes. The pro forma provision for income taxes for each period shown reflects a provision for income taxes, as if the Company were a C corporation for income tax purposes during such periods, at an assumed effective tax rate of 40%. See "Prior S Corporation Status" and Note 5 of Notes to Financial Statements. (3) All data shown is at the end of the period. Consultant data include only the Company's full-time consultants and total employees data include only the Company's full-time employees. (4) Pro forma to reflect the Pre-Offering Transactions as if they occurred as of September 30, 1996. As adjusted to reflect the sale of 2,300,000 shares of Common Stock by the Company being offered hereby (assuming an initial public offering price of $13.00 per share) and the application of the estimated net proceeds therefrom. See "Prior S Corporation Status," "Use of Proceeds," "Selected Financial and Operating Data," "Certain Transactions," "Description of Capital Stock" and Notes 1, 2, 4 and 10 of Notes to Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027032_artecon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027032_artecon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..aa0291d1c4338cc0d552a381551215a6dcb037c3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027032_artecon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Storage Dimensions designs, manufactures, markets and supports high-performance data storage systems for open systems network applications. Storage Dimensions currently focuses on the Intel-based local area network market (the "PC-LAN market") by developing and marketing a broad family of disk and tape storage systems that are designed to satisfy the high-performance, fault-tolerance and high-availability (minimum downtime) requirements of its customers while at the same time reducing life-cycle cost of ownership. The Company's products combine its proprietary software with industry-standard hardware, such as disk drives, tape drives and RAID (Redundant Arrays of Independent Disks) controllers, which allows the Company to leverage the product development and manufacturing capabilities and efficiencies of industry OEM manufacturers and to offer its customers products that take advantage of what the Company believes to be the best technology available. Storage Dimensions' products have won numerous industry awards in product comparisons and editorial reviews. As the leading independent supplier of high capacity RAID storage systems for the PC-LAN market, Storage Dimensions believes that it is well-positioned to take advantage of new opportunities being created by the projected growth in the PC-LAN market, in particular the market for systems utilizing Microsoft Windows NT ("Windows NT") and Novell NetWare ("NetWare"). The increased use of network computing to support business-critical enterprise applications is fueling rapid demand growth for network disk storage systems incorporating high performance, fault tolerance and high availability. In addition, capacity requirements for network storage are accelerating due to the deployment of data-intensive new applications, such as relational databases, decision support systems, the Internet and intranets, video/multimedia and document management. The Company believes that these factors will also increase the demand for tape backup systems, which provide additional protection against data loss in the event of various system malfunctions. While these factors are driving the overall expansion of network storage, the PC-LAN storage market is expected to grow disproportionately due, in part, to the deployment of Intel-based servers using Pentium and Pentium Pro microprocessors, which offer the computing power of RISC-based architectures at a significantly lower cost. International Data Corporation ("IDC") projects that the U.S. market for PC-LAN storage systems employing RAID technology will grow from $1.4 billion in 1995 to $6.0 billion in 2000, a compound annual growth rate of 34%. These trends are reinforced by the rapid adoption of the Windows NT operating system, which is increasingly being used in mid-range database and application servers instead of UNIX operating systems. IDC projects that the U.S. market for PC-LAN RAID storage systems running on Windows NT servers will grow from $0.3 billion in 1995 to $2.1 billion in 2000, a compound annual growth rate of 50%. Storage Dimensions' objective is to leverage its position as the leading independent supplier of PC-LAN storage systems to capitalize on opportunities presented by the projected growth in this market. Key elements of the Company's strategy include the following: (i) focus on developing and marketing products for the PC-LAN storage systems market, primarily for Windows NT and NetWare applications; (ii) support customers' transition to Windows NT by designing products that can be used in heterogeneous and dynamic network environments; (iii) leverage proprietary systems integration software to bring new products and features to market quickly; (iv) incorporate leading edge hardware in new products through close relationships with key suppliers of storage system components and technologies; (v) differentiate its products through proprietary storage management software; (vi) provide comprehensive, proactive and responsive customer service and support programs to end-user customers; and (vii) leverage prior field sales and channel investments by maintaining both a direct sales force and reseller distribution channels. [GRAPHIC OF A ILLUSTRATIVE CLIENT/SERVER NETWORK] ARTWORK CAPTIONS 1. Networks employing the client/server architecture provide information and computing resources to an organization's users (the "clients") by means of shared computer servers (the "servers"). Storage Dimensions' products are designed for deployment in a wide range of server applications found within the client/server enterprise networks of large corporations, institutions and government agencies. 2. Storage Dimensions' SuperFlex and MegaFlex disk storage products are engineered to provide redundancy and fault-tolerance for critical components such as disk drives, power supplies and cooling systems. Redundant components are easily serviced and hot-swappable, to allow replacement by end-user service personnel while the system remains on-line. Moreover, the Company's storage management software is designed to provide ease of installation and use, robust management of failure conditions, remote monitoring, automatic notification of failure events, and on-line diagnostic and trouble-shooting support. To complement its disk products, Storage Dimensions has engineered a family of high-speed, high-reliability tape backup systems that are designed to address the challenges of backing up increasing amounts of data in ever-shortening time periods. These tape products are developed and tested to be easily integrated and fully compatible with the Company's storage systems. The Company supplies external storage systems that are easily integrated with the computer systems from a broad range of manufacturers. This cross-platform capability affords significant economic advantages to end-users who have heterogeneous and dynamic network environments, by letting them standardize on a single external storage system that can be easily reconfigured and redeployed as requirements change, as compared to the internal storage which is dedicated to a specific manufacturer's server. The Company sells its products through a field sales force located in 15 domestic sales offices. In addition, the Company maintains multi-tiered distribution channels comprised of distributors, national computer dealers, systems integrators and VARs. Smaller customers have ready access to its products through these indirect sales channels, and larger customers have the option of sourcing directly from the Company or from a number of alternate channels. Storage Dimensions' end-user customers include a broad range of Fortune 1000 companies, including Cabletron Systems, Inc., the Centers for Disease Control and Prevention, CNA Financial Corporation, Fleet Financial Group, Inc., The Gap, Inc., Gateway 2000, MCI Telecommunications Corporation, Pfizer Inc., The Southern Company and 3Com Corporation, as well as other major corporations, institutions and governmental agencies. The Company was incorporated in the State of Delaware in November 1992. In an acquisition effected on December 26, 1992 (the "Acquisition"), the Company acquired the assets and assumed the liabilities of the "Storage Dimensions" subsidiary of Maxtor Corporation ("Maxtor") for an aggregate purchase price of $21.4 million. The Acquisition was financed through equity investments in the Company made by Capital Partners, Inc. ("Capital Partners") and certain of its affiliates (collectively, the "Capital Partners Group"), by certain members of the Company's management and by Maxtor. In addition, the Company entered into an Investment Advisory Services Agreement (the "Advisory Agreement") with Capital Partners, pursuant to which Capital Partners was to provide advisory services to the Company for a term of five years and the Company was to pay Capital Partners advisory fees of $360,000 per year. The Advisory Agreement was terminated in December 1996. See "Certain Transactions." References herein to the "Predecessor" are references to the Storage Dimensions subsidiary of Maxtor prior to the Acquisition. The Company's address is 1656 McCarthy Boulevard, Milpitas, California 95035 and its telephone number is (408) 954-0710. "Storage Dimensions" and "LANStor" are registered trademarks of the Company. This Prospectus also contains trademarks of other companies. THE OFFERING <TABLE> <S> <C> Common Stock to be offered........................... 2,700,000 shares Common Stock to be outstanding after the offering.... 7,836,623 shares(1) Use of proceeds...................................... For repayment of outstanding debt and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol............... STDM </TABLE> - --------------- (1) Based on the number of shares outstanding as of December 31, 1996. Excludes 481,754 shares of Common Stock issuable upon exercise of stock options outstanding as of December 31, 1996. See "Management -- Employee Stock Plans" and Notes 6 and 7 of the Notes to Consolidated Financial Statements. ------------------------ Except as set forth in the consolidated financial statements or as otherwise indicated, all information in this Prospectus (i) reflects the conversion of all of the Company's outstanding shares of Preferred Stock into shares of Common Stock, which will occur automatically upon the closing of this offering, (ii) reflects a one-for-four reverse stock split of the Company's Common Stock effected in January 1997, and (iii) assumes that the Underwriters' over-allotment option is not exercised. See "Description of Capital Stock," "Underwriting," and Notes 6 and 11 of Notes to Consolidated Financial Statements. The Company operates and reports financial results on a fifty-two/fifty-three week fiscal year cycle ending on the Saturday nearest December 31. The Company also follows a five-four-four week quarterly cycle. For convenience, the Company has presented its fiscal years as ending on December 31 and its fiscal quarters as ending on March 31, June 30, September 30 and December 31. See Note 1 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PREDECESSOR COMPANY ------------ ---------------------------------------------------------------------------- NINE QUARTER ENDED MONTHS YEAR ENDED -------------------------------------- ENDED DECEMBER 31, JUNE DEC. DECEMBER 31, ---------------------------------- MARCH 31, 30, SEPT. 30, 31, 1992 1993 1994 1995 1996 1996 1996 1996 1996 ------------ ------- ------- ------- ------- --------- ------- --------- ------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net sales: Enterprise and OEM...... $ 8,764 $22,706 $40,088 $52,475 $69,873 $14,899 $17,795 $18,174 $19,005 Desktop................. 53,421 42,662 21,136 7,683 2,437 1,033 524 320 560 ------- ------- ------- ------- ------- ------- ------- ------- ------- Total net sales....... 62,185 65,368 61,224 60,158 72,310 15,932 18,319 18,494 19,565 ------- ------- ------- ------- ------- ------- ------- ------- ------- Gross profit.............. 18,807 17,128 19,226 22,988 26,983 5,820 6,525 7,014 7,624 ------- ------- ------- ------- ------- ------- ------- ------- ------- Operating expenses: Sales and marketing..... 9,040 10,108 10,662 13,344 14,081 3,130 3,492 3,507 3,952 Research and development........... 2,943 3,623 4,339 5,377 5,872 1,340 1,409 1,616 1,507 General and administrative........ 3,067 6,986 3,293 3,390 3,819 876 902 927 1,114 Advisory fee(1)......... -- 340 362 360 729 91 91 91 456 ------- ------- ------- ------- ------- ------- ------- ------- ------- Total operating expenses............ 15,050 21,057 18,656 22,471 24,501 5,437 5,894 6,141 7,029 ------- ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) from operations.............. 3,757 (3,929) 570 517 2,482 383 631 873 595 Net income (loss)......... 2,301 (5,527) (437) (636) 1,195 119 271 550 255 Pro forma net income per share(2)................ 0.22 0.02 0.05 0.10 0.05 Supplemental pro forma net income(3)............... 1,946 285 499 736 426 Supplemental pro forma net income per share(3)..... 0.29 0.04 0.07 0.11 0.06 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------ ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents...................................................... $ 1,682 $ 10,203 Working capital................................................................ 2,513 20,396 Total assets................................................................... 22,898 31,419 Short-term borrowings.......................................................... 9,629 267 Accumulated deficit............................................................ (5,405) (5,405) Total stockholders' equity..................................................... 4,628 22,511 </TABLE> - --------------- (1) Represents an advisory fee paid to Capital Partners pursuant to the Advisory Agreement between the Company and Capital Partners. Two of the Company's directors, Mr. Brian D. Fitzgerald and Mr. A. George Gebauer, are also officers of Capital Partners and Mr. Fitzgerald is the founder of Capital Partners. The Advisory Agreement was terminated in December 1996. The 1996 amount includes a one-time termination payment of $360,000. See "Certain Transactions." (2) Per share information for periods prior to the year ended December 31, 1996 has been omitted because it is not meaningful. See Note 1 of Notes to Consolidated Financial Statements for an explanation of shares used in computing pro forma net income per share. (3) The supplemental pro forma information gives effect to the sale by the Company of that number of shares of Common Stock sufficient to generate net assets equal to the amount of the debt to be paid from the proceeds of this offering, and the repayment of such debt, all as if the offering and debt repayment had occurred at the beginning of the period. See "Use of Proceeds" and "Certain Transactions." (4) Adjusted to reflect the sale of 2,700,000 shares of Common Stock by the Company hereby at an assumed initial public offering price of $7.50 per share, after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company and the application of the estimated net proceeds therefrom, including the use of approximately $9.4 million to repay amounts owed under a bank line of credit and a note payable to Maxtor. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027131_talbert_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027131_talbert_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c4c60614f47dbb32366ac229468b1fe4de1c1c88
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027131_talbert_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY The Company, through its wholly-owned subsidiary, Talbert Medical Management Corporation, a Delaware corporation ("TMMC"), organizes and manages physician and dentist practice groups that contract with health maintenance organizations ("HMOs") and other payors to provide health care services to their members. As of December 31, 1996, TMMC had management services agreements with ten practice groups and directly employed the physicians in one practice group (collectively, the "Talbert Medical Groups"). The Talbert Medical Groups employed approximately 316 physicians and 70 dentists and provided care through 52 medical, dental and/or vision centers (the "Medical Centers") located in southern California, Utah, Arizona, New Mexico and Nevada as of December 31, 1996. Together with the Talbert Medical Groups, TMMC managed approximately 288,000 capitated enrollees as of February 28, 1997, and generated, for the year ended December 31, 1996, revenues of more than $460 million. Under a managed care system, HMOs and other payors arrange to provide health care for their members either by employing physicians and other health care professionals directly (the "staff model") or by contracting with independent groups (the "contracted care model"). Under the contracted care model, HMOs often use "capitation" payments (i.e., payments based solely on the number of members enrolled with the medical group) to control costs and minimize risk. However, most physicians practice individually or in small groups that often do not have the administrative capacity, risk management expertise or information systems necessary to manage capitation arrangements with multiple payors. Physician practice management companies ("PPMCs"), such as TMMC, have evolved recently to provide these services, freeing physicians to focus on the practice of medicine. TMMC provides a broad range of practice management services to the Talbert Medical Groups, including (i) provider contract negotiation and administration, (ii) Medicare risk management, (iii) management information systems (development, implementation and maintenance), (iv) medical management (claims administration, utilization and case management, quality assurance and risk management, and physician credentialing and recruitment), and (v) support services (including nursing, billing, collection and accounting). TMMC provides services under a management services agreement with each Talbert Medical Group, and in return is reimbursed for certain clinic operating expenses and receives a management fee of 15% of the Talbert Medical Group's revenues after deducting certain reimbursed clinic operating expenses (except in California, where the management fee is 60% of the Talbert Medical Group's gross revenues, and in New Mexico, where TMMC directly employs the physicians in the Talbert Medical Group). TMMC currently has management services agreements with four physician practice groups and six dental practice groups. See "Business--The Company--Contractual Relationships." All of the present Talbert Medical Groups were formerly a part of FHP's staff model operations. Over time, the Company intends to seek acquisitions of or affiliations with additional practice groups in new and existing markets. TMMC represents the Talbert Medical Groups in obtaining and negotiating provider agreements with HMOs and other payors. Under a typical provider agreement between a Talbert Medical Group and an HMO, a Talbert Medical Group is responsible for managing all physician-related covered medical care for each member of the HMO enrolled with the Talbert Medical Group, in exchange for a prepaid monthly capitation payment for each such enrollee. Provider agreements generally include shared risk arrangements and other financial incentives designed to encourage the provision of high-quality, cost-effective health care. When a Talbert Medical Group assumes risk for over-utilization through participation in such incentive funds, its exposure is generally limited to no more than 10% of the fund. The Company currently does not share any hospital risk other than participation in such incentive funds. See "Business--The Company--Contractual Relationships." The Talbert Medical Groups are solely and exclusively in control of and responsible for all aspects of the practice of medicine and the delivery of medical services. TMMC and THSC facilitate the delivery of medical care by providing practice management and ancillary clinical services, respectively, to the Talbert Medical Groups. From the enrollee's perspective, TMMC is responsible for all aspects of a physician encounter other than medical care, including scheduling, reception, nursing, clinical space, and administrative and clerical support. Capitation payments, copayments and fee-for-service payments provide revenues to the Talbert Medical Groups and provide the basis for TMMC's management fees. The Talbert Medical Groups and TMMC currently have a total of 11 provider agreements with FHP, which accounted for nearly 100% of the Company's revenues for the year ended December 31, 1996. The financial results of the Talbert Medical Groups are consolidated with those of the Company for financial reporting purposes because the assets and non-medical operations of the Talbert Medical Groups are substantially controlled by TMMC. See "Consolidated Financial Statements-- Note 1." TMMC has recently entered into provider agreements with a number of other payors on behalf of certain of the Talbert Medical Groups, and expects to further diversify its payor base following its separation from FHP (as described below). Provider agreements with other payors do not currently constitute a significant source of revenue. See "Business--The Company--Payor Relationships." The Company, through its other wholly-owned subsidiary, Talbert Health Services Corporation, a Delaware corporation ("THSC"), provides ancillary clinical services (including pharmacy, radiology, optometry, laboratory, home health, hospice, rehabilitation and physical therapy) that are entirely dependent upon, and largely integrated with, the business of TMMC. The Company established THSC in order to facilitate compliance with federal and state regulations regarding physician referrals and kickbacks. See "Business--Government Regulation." The following table sets forth the number of managed Medical Centers, Talbert Medical Group physicians, and capitated enrollees for each of the states in which the Company does business: <TABLE> <CAPTION> MANAGED TALBERT CAPITATED MEDICAL MEDICAL GROUP ENROLLEES CENTERS PHYSICIANS (1) (1) ------------- ----------------- ------------ <S> <C> <C> <C> California.............................. 24 172 124,369 Utah.................................... 7 79 100,381 Arizona................................. 14 34 35,195 New Mexico.............................. 5 29 24,154 Nevada.................................. 2 2 3,802 -- --- ------------ Total................................. 52 316 287,901 -- -- --- ------------ --- ------------ </TABLE> - ------------------------ (1) As of February 28, 1997. The Talbert Medical Groups contract with HMOs and others to provide medical care at the Medical Centers managed by the Company. SEPARATION FROM FHP The Company's predecessor businesses formed a part of the staff model operations of FHP, and had been active in managed care since 1961. Since January 1, 1996, TMMC and THSC have operated as subsidiaries of FHP, providing practice management and ancillary clinical services to the medical groups that formerly were a part of FHP's staff model operations and that provided health care to approximately 15.2% of FHP's members as of December 31, 1996. In July 1996, FHP determined to pursue a tax-free spin-off of TMMC and THSC in the belief that their services would be more attractive to other payors if they operated independently from FHP. Soon after FHP's decision to spin off TMMC and THSC, FHP agreed to merge with PacifiCare. FHP and PacifiCare agreed to abandon the tax-free spin-off of TMMC and THSC, and instead to proceed with the separation of TMMC and THSC from FHP concurrently with the merger of FHP and PacifiCare (the "FHP Merger"). To effect this separation, FHP sold its 92.4% equity interest in both TMMC and THSC to the Company at the closing of the FHP Merger (the "Acquisition"). In exchange, FHP received rights to purchase 92.4% of the Company's Common Stock, plus a note (the "Talbert Note") for $59,598,000, the estimated proceeds of the Offering if fully subscribed. By virtue of the FHP Merger, shares of FHP Common Stock and FHP Preferred Stock have been converted, in part, into the Rights, which confer upon the holders, collectively, the right to purchase 92.4% of the Company's Common Stock. The Company has agreed to sell to FHP any shares of Common Stock unsubscribed in the Offering in exchange for cancellation of any remaining indebtedness under the Talbert Note. See "Relationship with FHP and PacifiCare Following the Offering--Acquisition Agreement." Prior to the Acquisition, TMMC received, in connection with the FHP Merger, a capital contribution of $67 million, sufficient to increase its net worth to approximately $60 million at the Effective Time (the "Capital Contribution"). A diagram and timeline describing these transactions is provided under "The Company--Separation from FHP." At the time of the FHP Merger, the Company, FHP and the holding company that acquired 100% of FHP and PacifiCare as a result of the FHP Merger ("PacifiCare Holdings") entered into an agreement to govern certain aspects of the Company's operations during the period from the closing of the FHP Merger through the completion of the Offering (the "Interim Operations Agreement"). Among other things, the Interim Operations Agreement provides for (i) certain limitations on the Company's operations prior to completion of the Offering without the consent of PacifiCare Holdings and (ii) the election of two persons designated by PacifiCare Holdings to the Company's Board of Directors until the completion of the Offering. See "The Company--Separation from FHP" and "Relationship with FHP and Pacificare Following the Offering--Interim Operations Agreement." If the Offering is not fully subscribed, the unsubscribed portion of the Common Stock will be reacquired by FHP (and therefore indirectly by PacifiCare Holdings). Depending upon the number of shares of Common Stock subscribed for in the Offering, FHP could acquire in excess of 20% of the outstanding Common Stock. The Company and FHP have entered into an agreement with respect to any Common Stock obtained by FHP following the Acquisition (the "Standstill Agreement"). The Standstill Agreement provides, among other restrictions, that if FHP reacquires 20% or less of the Company's outstanding Common Stock after the consummation of the Offering, FHP (i) will vote its shares of Common Stock in accordance with the votes of the non-FHP stockholders, (ii) will not acquire additional shares of Common Stock, (iii) will be subject to certain restrictions with respect to its ability to solicit proxies, make acquisition proposals, become a member of a "group" (as defined in federal securities laws), or otherwise use its holdings of Common Stock to seek to exercise control over the Company's management. If FHP acquires in excess of 20% of the outstanding Common Stock, these restrictions will not apply. In such circumstances, FHP could exercise the powers of a substantial stockholder, including the voting of shares of Common Stock in its discretion. See "Relationship with FHP and PacifiCare Following the Offering." The Standstill Agreement also provides that FHP will be entitled to certain registration rights. The number of shares subject to these rights is limited to 20% of the outstanding Common Stock. See "Description of Capital Stock--Registration Rights." TMMC will continue to provide practice management services to the Talbert Medical Groups following the Acquisition. Pursuant to the terms of the FHP Merger, FHP and the Talbert Medical Groups were required to renegotiate their existing provider agreements to reflect rates based on market capitation rates. New provider agreements covering FHP members (the "New FHP Provider Agreements") took effect as of March 1, 1997. The New FHP Provider Agreements do not provide the subsidies included in the existing provider agreements with FHP and are expected to adversely affect the Company's per enrollee revenue and expenses. See "Relationship with FHP and PacifiCare Following the Offering-- Provider Agreements." FHP will provide certain administrative services to the Company on an interim basis. FHP also will continue to lease to the Company certain Medical Center facilities and equipment. See "Relationship with FHP and PacifiCare Following the Offering."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027183_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027183_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f9afa0fa91b34d5fd99009746b24f33d8d1dee2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027183_first_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and the Financial Statements and accompanying Notes appearing elsewhere in this Prospectus. NewSouth Bancorp, Inc. The Company was incorporated under the laws of the State of Delaware in October 1996 at the direction of the Board of Directors of the Bank for the purpose of serving as a holding company of the Converted Bank upon its conversion from mutual to stock form, and of the Commercial Bank following the Bank Conversion. The Company has received approval from the Administrator, and has applied for approval from the Board of Governors of the Federal Reserve System ("Federal Reserve Board"), to acquire control of the Converted Bank and the Commercial Bank subject to satisfaction of certain conditions. Prior to the Conversion, the Company has not engaged and will not engage in any material operations. Upon consummation of the Stock Conversion, the Company will have no significant assets other than the outstanding capital stock of the Converted Bank (or, following the Bank Conversion, the Commercial Bank), a portion of the net proceeds of the Stock Conversion and a note receivable from the ESOP. Upon consummation of the Conversion, the Company's principal business will be overseeing and directing the business of the Commercial Bank and investing the net Stock Conversion proceeds retained by it. Following the Conversion, the Board of Directors intends to manage the Company to promote the long-term best interests of the Company and its stockholders. Initially following the Conversion, the Company will have capital in excess of the level required to support its current asset size and level of operations, and the Bank's business plan is to pursue a strategy of conservative, long-term growth through competing for loans and deposits in its market area, establishing new branch offices or making selective acquisitions of other financial institutions or branches of other institutions. The Boards of Directors of the Company and the Bank currently have no specific plans regarding new branch offices or acquisitions of other financial institutions or branches. With respect to the evaluation of any business combination or tender or exchange offer that may be presented in the future, the Company's Certificate of Incorporation directs the Board of Directors to consider, in addition to the adequacy of the amount to be paid in connection with any such transaction, certain specified factors and any other factors the Board deems relevant, including (i) the social and economic effects of the transaction on the Company and its subsidiaries, employees, depositors, loan and other customers, creditors and other elements of the communities in which the Company and its subsidiaries operate or are located; (ii) the business and financial condition and earnings prospects of the acquiring person or entity; and (iii) the competence, experience and integrity of the acquiring person or entity and its or their management. See "Risk Factors -- Uncertainty as to Existence of Growth Opportunities" and "Certain Anti-Takeover Provisions in the Certificate of Incorporation and Bylaws -- Board Consideration of Certain Nonmonetary Factors in the Event of an Offer by Another Party." Home Savings Bank, SSB The Bank is a North Carolina-chartered mutual savings bank headquartered in Washington, North Carolina and serving northeastern North Carolina. The Bank was chartered by the State of North Carolina in 1902 under the name The Home Building and Loan Association. The Bank received federal insurance of its deposit accounts in 1959. In 1992, the Bank converted to a North Carolina-chartered savings bank, at which time it adopted its present name of Home Savings Bank, SSB. At September 30, 1996, the Bank had total assets of $194.1 million, total deposits of $171.2 million and retained income, substantially restricted, of $18.3 million. HOME SAVINGS BANK, SSB AND SUBSIDIARY Consolidated Statements of Cash Flows for the years ended September 30, 1996 ,1995 and 1994 <TABLE> <CAPTION> 1996 1995 1994 <S> <C> <C> <C> Operating activities: Net income $ 820,489 $ 1,865,240 $ 2,236,992 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses 511,000 20,000 210,000 Provision for loss on mortgage-backed securities held for sale - - 8,415 Depreciation 449,104 228,684 183,771 Amortization (accretion) of discounts on securities 19,918 123 (375) Provision for deferred income taxes (440,704) (241,196) 200,995 Gain on disposal of premises and equipment and real estate acquired in settlement of loans (36,293) (64,432) (3,568) Gain on sale of mortgage loans and mortgage- backed securities (423,113) (312,325) (580,663) Loan originations, net of principal repayments, of loans held for sale (55,047,196) (47,101,448) (49,765,496) Proceeds from principal repayments and sales of mortgage-backed securities available-for-sale 8,832,521 2,877,591 12,685,406 Proceeds from sale of loans held for sale 51,656,899 37,707,880 74,135,564 Changes in assets and liabilities: Accrued interest receivable (139,547) (224,259) (128,021) Income taxes refundable (385,373) 259,334 (259,334) Prepaid expenses and other assets (140,607) 139,817 51,786 Accrued interest payable 5,324 (40,069) (43,240) Income taxes payable (75,720) 75,720 (308,541) Other liabilities and advance payments 1,372,298 350,304 (98,897) ------------ ----------- ----------- Net cash provided by (used in) operating activities 6,979,000 (4,459,036) 38,524,794 ------------ ----------- ----------- Investing activities: Proceeds from maturities of securities held-to-maturity 1,000,000 1,000,000 - Proceeds from disposal of premises and equipment and real estate acquired in settlement of loans 238,564 282,474 208,049 Purchases of investment securities (6,043,438) (3,001,857) - Redemptions (purchases) of Federal Home Loan Bank stock - (38,400) 125,900 Purchases of premises and equipment (351,588) (594,301) (917,643) Loan originations, net of principal repayments of loans held for investment (9,827,513) (5,580,606) (56,548,580) ------------ ----------- ----------- Net cash used in investing activities (14,983,975) (7,932,690) (57,132,274) ------------ ----------- ----------- </TABLE> (Continued) Historically, the Bank operated as a traditional savings and loan association, emphasizing the origination of loans secured by one- to four-family ("single-family") residences. Beginning in the early 1980's, the Board of Directors determined that the Bank's market area was not adequately served by the existing financial institutions and there was local demand for commercial real estate, commercial business and consumer loans. As a result, the Board of Directors determined to refocus the Bank's strategy. Pursuant to this strategy, while continuing to pursue its existing business of originating single-family residential mortgage loans, the Bank took advantage of the business opportunities identified by the Board of Directors by gradually expanding into commercial real estate, commercial business and consumer lending. In furtherance of this strategy, the Bank recruited experienced commercial real estate, commercial business and consumer lending officers and developed commercial real estate, commercial business and consumer loan products. As a result of these efforts over the years, at September 30, 1996, the Bank had commercial real estate, commercial business and consumer loans totaling $31.2 million, $10.3 million and $37.4 million, respectively, which represented 17.9%, 6.0% and 21.5%, respectively, of total loans. At September 30, 1996, $94.8 million, or 54.6% of total loans, consisted of residential real estate mortgage loans. In addition, since the late 1980's, mortgage banking activities have constituted an increasingly significant business activity for the Bank. The Bank's mortgage banking activities consist of originating single-family residential mortgage loans and primarily selling those loans for cash to the Federal Home Loan Mortgage Corporation ("FHLMC"), with servicing retained. On occasion, the Bank also will swap single-family residential mortgage loans with the FHLMC, while retaining servicing, in exchange for mortgage-backed securities backed by those loans. At September 30, 1996, the Bank had $21.6 million of loans available for sale and $253.7 million of loans serviced for others. The Bank earned servicing income of $632,000 on its portfolio of loans serviced for others for the year ended September 30, 1996. Following the Conversion, management intends to continue to follow its current strategy of seeking growth opportunities through increasing its portfolio of commercial real estate, commercial business and consumer loans while continuing to pursue single-family residential mortgage loan origination and mortgage banking activities. The Bank is subject to examination and comprehensive regulation by the Federal Deposit Insurance Corporation ("FDIC") and the Administrator, and the Bank's savings deposits are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF"), which is administered by the FDIC. The Bank is a member of and owns capital stock in the Federal Home Loan Bank ("FHLB") of Atlanta, which is one of 12 regional banks in the FHLB System. The Bank is further subject to regulations of the Federal Reserve Board governing reserves to be maintained and certain other matters. Regulations significantly affect the operations of the Bank. See "Regulation -- Depository Institution Regulation." NewSouth Bank Upon consummation of the Bank Conversion, the Commercial Bank will succeed to all of the assets and liabilities of the Converted Bank (which, pursuant to the Stock Conversion, will have succeeded to all of the assets and liabilities of the Bank). Following the Conversion, management intends to continue to follow the Bank's current strategy of seeking growth opportunities through increasing its portfolio of commercial real estate, commercial business and consumer loans while continuing to pursue single-family residential mortgage loan origination and mortgage banking activities. HOME SAVINGS BANK, SSB AND SUBSIDIARY Consolidated Statements of Cash Flows (Continued) for the years ended September 30, 1996, 1995 and 1994 <TABLE> <CAPTION> 1996 1995 1994 <S> <C> <C> <C> Financing activities: Net increase in deposit accounts $ 17,756,258 $ 21,864,747 $ 27,947,329 Proceeds from borrowings 25,039,608 42,000,000 71,500,000 Repayments of borrowings (28,000,000) (54,500,000) (81,500,000) ------------- ------------- ------------- Net cash provided by financing activities 14,795,866 9,364,747 17,947,329 ------------- ------------- ------------- Increase (decrease) in cash and cash equivalents 6,790,891 (3,026,979) (660,151) Cash and cash equivalents, beginning of year 1,785,686 4,812,665 5,472,816 ------------- ------------- ------------- Cash and cash equivalents, end of year $ 8,576,577 $ 1,785,686 $ 4,812,665 ============= ============= ============= Supplemental disclosures: Real estate acquired in settlement of loans $ 296,690 $ 110,636 $ 259,948 Exchange of loans for mortgage-backed securities $ 1,545,859 $ 6,288,164 $ 15,017,369 Proceeds from note payable for balance owed on purchase of property $ - $ - $ 49,329 Unrealized securities gains (losses), net $ (161,987) $ 202,522 $ - Transfers to securities held-to-maturity $ - $ 3,233,839 $ - Transfers to securities available-for-sale $ 16,140,485 $ - $ - Cash paid for interest $ 8,100,128 $ 7,384,085 $ 5,256,901 Cash paid for income taxes $ 1,327,315 $ 904,222 $ 1,273,949 </TABLE> The accompanying notes are an integral part of the consolidated financial statements. The deposits of the Commercial Bank will continue to be insured by the SAIF of the FDIC, and, as such, the Commercial Bank will continue to be subject to regulation and supervision by the FDIC. The Commercial Bank will not be subject to regulation and supervision by the Administrator. Rather, the primary regulator of the Commercial Bank will be the State Banking Commission of North Carolina (the "Commission"; as used herein, the Commission refers to the State Banking Commission of North Carolina as well as the State Banking Commissioner of North Carolina, whose powers are exercised under the supervision of the Commission.) In addition, the Commercial Bank will remain a member of the FHLB of Atlanta. For information regarding regulations applicable to the Converted Bank and the Commercial Bank, see "Regulation." The Conversion The Board of Directors of the Bank adopted the Plan, which provides for both the Stock Conversion and the Bank Conversion. Pursuant to the Stock Conversion, the Bank will convert from a North Carolina-chartered mutual savings bank to a North Carolina-chartered stock savings bank, and the Converted Bank will operate as a wholly owned subsidiary of a newly organized holding company formed by the Bank. Upon consummation of the Stock Conversion, the Converted Bank will issue all of its outstanding capital stock to the Company in exchange for a portion of the net proceeds from the sale of the Common Stock in the Stock Conversion. Thereafter, pursuant to the Bank Conversion, the Converted Bank will convert to a North Carolina commercial bank. The Administrator has approved the Plan, subject to member approval and satisfaction of certain other conditions. The Administrator has also approved the Company's application to acquire all of the capital stock of the Converted Bank, and thereby become a savings and loan holding company, as part of the Stock Conversion. The FDIC has issued a notification that it does not intend to object to the Stock Conversion, subject to the satisfaction of certain conditions. The Commission has conditionally approved the conversion of the Converted Bank to the Commercial Bank, and the Company has applied to the Federal Reserve Board for approval to own all of the capital stock of the Commercial Bank and thereby become a bank holding company following completion of the Bank Conversion. The Conversion is subject to certain conditions, including the prior approval of the Plan at a special meeting of members to be held on _____________, 1997 (the "Special Meeting"). The portion of the net proceeds from the sale of Common Stock in the Stock Conversion to be distributed to the Converted Bank by the Company will substantially increase the Converted Bank's (and the Commercial Bank's) capital position, which will in turn increase the amount of funds available for lending and investment and provide greater resources to support the Bank's operations. The holding company structure will provide greater flexibility than the Bank alone would have for diversification of business activities and expansion. Management believes that this increased capital will enable the Converted Bank (and the Commercial Bank) to compete more effectively with other types of financial services organizations. In addition, the Conversion will enhance the future access of the Company and the Converted Bank (and the Commercial Bank) to the capital markets and will afford depositors and others the opportunity to become stockholders of the Company and thereby participate in any future growth of the Converted Bank and the Commercial Bank. HOME SAVINGS BANK, SSB AND SUBSIDIARY Notes to Consolidated Financial Statements 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES Home Savings Bank, SSB is a North Carolina chartered savings bank regulated by the Federal Deposit Insurance Corporation and the North Carolina Savings Institutions Administrator. Effective September 30, 1996, Home Savings Bank, SSB dissolved its wholly- owned subsidiary, Tidewater Financial Services Corporation. The results of operations of the subsidiary are included through the date of dissolution in these financial statements. Significant intercompany balances and transactions were eliminated in consolidation. The significant policies are summarized below: a. Investments and Mortgage-Backed Securities - On October 1, 1994, the ------------------------------------------ Bank adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS No. 115). Investments in certain securities are classified into three categories and accounted for as follows: (1) debt securities that the entity has the positive intent and the ability to hold to maturity are classified as held-to-maturity and reported at amortized cost; (2) debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings; (3) debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of equity. As of September 30, 1996, the Bank has classified all investments as available-for-sale. During 1996 the Bank transferred investments classified as held-to-maturity to available-for- sale in accordance with a one-time amnesty on transfers provided by the Financial Accounting Standards Board. Premium and discounts on debt securities are recognized in interest income on the level interest yield method over the period to maturity. Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by the issuers of the securities. Premiums and discounts are amortized using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Gains and losses on the sale of securities are determined using the specific identification method. Stock Pricing and Number of Shares to be Issued Federal regulations require that the aggregate purchase price of the Common Stock to be issued in the Stock Conversion be consistent with an independent appraisal of the estimated pro forma market value of the Common Stock following the Stock Conversion. Ferguson, a firm experienced in valuing savings institutions, has made an independent appraisal of the estimated aggregate pro forma market value of the Common Stock to be issued in the Stock Conversion. Ferguson has determined that as of December 13, 1996 such estimated pro forma market value was $33,000,000. The resulting valuation range in Ferguson's appraisal, which under applicable regulations extends 15% below and above the estimated value, is from $28,050,000 to $37,950,000 (the "Estimated Valuation Range"). The Company, in consultation with its advisors, has determined to offer the shares of Common Stock in the Stock Conversion at the Purchase Price of $15.00 per share. Such appraisal is not intended and must not be construed as a recommendation of any kind as to the advisability of purchasing such shares or as any form of assurance that, after the Stock Conversion, such shares may be resold at or above the Purchase Price. The appraisal considered a number of factors and was based upon estimates derived from those factors, all of which are subject to change from time to time. In preparing the valuation, Ferguson relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Bank and the Company. Ferguson did not verify the financial statements provided or independently value the assets of the Bank. The appraisal will be further updated immediately prior to the completion of the Stock Conversion and could be increased to up to $43,642,500 without a resolicitation of subscribers based on market and financial conditions at the completion of the Stock Conversion. Ferguson received a fee of $35,000 for its appraisal and for assisting in the preparation of the Company's business plan. The total number of shares to be issued in the Stock Conversion may be increased or decreased without a resolicitation of subscribers so long as the aggregate purchase price is not less than the minimum or more than 15% above the maximum of the Estimated Valuation Range. Based on the Purchase Price of $15.00 per share, the total number of shares which may be issued without a resolicitation of subscribers is from 1,870,000 to 2,909,500. For further information, see "The Conversion -- Stock Pricing and Number of Shares to be Issued." The Subscription, Community and Syndicated Community Offerings The shares of Common Stock to be issued in the Stock Conversion are being offered at the Purchase Price of $15.00 per share in the Subscription Offering pursuant to nontransferable Subscription Rights in the following order of priority: (i) Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on June 30, 1992); (ii) the ESOP (i.e., the Company's tax-qualified stock benefit plan); (iii) Supplemental Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on __________, 1996, other than Eligible Account Holders); and (iv) Other Members (i.e., certain depositors and borrower members of the Bank as of ____________, 1997, other than Eligible Account Holders and Supplemental Eligible Account Holders). Subscription Rights received in any of the foregoing categories will be subordinated to the Subscription Rights received by those in a prior category. If all the shares of Common Stock offered in the Subscription Offering are purchased by Eligible Account Holders, then the ESOP will purchase shares in the open market following consummation of the Stock Conversion and will not purchase newly issued shares from the Company. The Board of Directors of the Bank selected June 30, 1992 as the Eligibility Record Date because it believed that first priority in the Subscription Offering should be accorded the Bank's longstanding customers who maintained accounts HOME SAVINGS BANK, SSB AND SUBSIDIARY Notes to Consolidated Financial Statements 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued) b. Loans Receivable Held for Investment - Loans receivable held for ------------------------------------ investment are stated at the amount of unpaid principal, reduced by an allowance for loan losses and net deferred origination fees. Interest on loans is accrued based on the principal amount outstanding and is recognized on a level yield method. The accrual of interest is discontinued, and accrued but unpaid interest is reversed when, in management's judgment, it is determined that the collectibility of interest, but not necessarily principal, is doubtful. Generally, this occurs when payment is delinquent in excess of ninety days. Loan origination fees are deferred, as well as certain direct loan origination costs. Such costs and fees are recognized as an adjustment to yield over the contractual lives of the related loans utilizing the interest method. Commitment fees to originate or purchase loans are deferred, and if the commitment is exercised, recognized over the life of the loan as an adjustment of yield. If the commitment expires unexercised, commitment fees are recognized in income upon expiration of the commitment. Fees for originating loans for other financial institutions are recognized as loan fee income. Effective October 1, 1995, the Bank adopted Statement of Financial Accounting Standards No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment of a Loan," and Statement of Financial Accounting Standards No. 118 (SFAS No. 118), "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure." A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Uncollaterlized loans are measured for impairment based on the present value of expected future cash flows discounted at the historical effective interest rate, while all collateral-dependent loans are measured for impairment based on the fair value of the collateral. The adoption of SFAS 114 and 118 resulted in no additional provision for credit losses, at October 1, 1995. At September 30, 1996 there were no loans for which impairment was required to be recorded in accordance with SFAS 114 and SFAS 118. The Bank uses several factors in determining if a loan is impaired under SFAS No. 114. The internal asset classification procedures include a thorough review of significant loans and lending relationships and include the accumulation of related data. This data includes loan payment status, borrowers' financial data and borrowers' operating factors such as cash flows, operating income or loss, etc. with the Bank prior to the inflow of considerable deposits from individuals who opened deposit accounts in the Bank for the purpose of obtaining subscription rights for the purchase of conversion stock in the event the Bank determined to convert to stock form. In making this decision, the Board of Directors considered the interests of all members and determined that it was in the best interests of the Bank and all the members to ensure that the Bank's longstanding customers, which are the customers that supported the Bank during the past when savings institutions were not highly regarded, will have preference in the Subscription Offering over speculative depositors. While the Board realizes that many of the Bank's customers opening deposits subsequent to the Eligibility Record Date are valued customers, the Board of Directors balanced the interests of longstanding customers with those of recent customers and concluded that the fairest decision was to ensure that the longstanding customers received priority in the Subscription Offering by setting the Eligibility Record Date at June 30, 1992. The Board of Directors also considered the fact that recent customers would continue to receive Subscription Rights in the Subscription Offering as Supplemental Eligible Account Holders or Other Members. The Company may offer any shares of Common Stock not subscribed for in the Subscription Offering at the same price in the Community Offering to members of the general public to whom the Company delivers a copy of this Prospectus and the Stock Order Form. In the Community Offering, preference will be given to natural persons and trusts of natural persons who are permanent residents of the Local Community. Subscription Rights will expire if not exercised by 12:00 Noon, Eastern Time, on _____________, 1997, unless extended (the "Expiration Date"). The Company and the Bank reserve the absolute right to accept or reject any orders in the Community Offering, in whole or in part, either at the time of receipt of an order or as soon as practicable following the Expiration Date. It is anticipated that shares of Common Stock not otherwise subscribed for in the Subscription Offering and Community Offering, if any, may be offered at the discretion of the Company to certain members of the general public as part of a Syndicated Community Offering on a best efforts basis by a selling group of selected broker-dealers to be managed by Trident Securities. See "The Conversion - -- Syndicated Community Offering." The Subscription and Community Offerings and Syndicated Community Offering are referred to collectively herein as the "Offerings." The Bank and the Company have engaged Trident Securities to consult with and advise the Company and the Bank with respect to the Offerings, and Trident Securities has agreed to solicit subscriptions for shares of Common Stock in the Offerings. Trident Securities will receive sales commissions with respect to shares sold in the Subscription Offering and the Community and Syndicated Community Offerings, if any. The Company and the Bank have agreed to indemnify Trident Securities against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Trident Securities has not prepared or delivered any opinion or recommendation with respect to the suitability of the Common Stock or the appropriateness of the amount of Common Stock to be issued in the Stock Conversion. The engagement of Trident Securities by the Bank and the work performed pursuant to such engagement, including any due diligence investigation, should not be construed by purchasers of the Common Stock as constituting an opinion or recommendation relating to investment in the Common Stock offered hereby. HOME SAVINGS BANK, SSB AND SUBSIDIARY Notes to Consolidated Financial Statements 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued) c. Loans Held for Sale - Loans originated and intended for sale are carried ------------------- at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized in a valuation allowance by charges to income. Gains and losses on sales of whole or participating interests in real estate loans are recognized at the time of sale and are determined by the difference between net sales proceeds and the Bank's basis of the loans sold, adjusted for the present value of any yield differential after allowing for a normal servicing fee in subsequent periods. d. Allowance for Loan Losses - The allowance for loan losses is increased by ------------------------- charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the allowance is based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management believes that it has established the allowance in accordance with generally accepted accounting principles and has taken into account the views of its regulators and the current economic environment, there can be no assurance that in the future the Bank's regulators or its economic environment will not require further increases in the allowance. e. Income Recognition on Impaired and Nonaccrual Loans - Loans, including --------------------------------------------------- impaired loans, are generally classified as nonaccrual if they are past due as to maturity or payment of principal or interest for a period of more than 90 days, unless such loans are well-secured and in the process of collection. If a loan or a portion of a loan is classified as doubtful or is partially charged off, the loan is generally classified as nonaccrual. Loans that are on a current payment status or past due less than 90 days may also be classified as nonaccrual if repayment in full of principal and/or interest is in doubt. Loans may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within an acceptable period of time, and there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with the contractual terms of interest and principal. While a loan is classified as nonaccrual and the future collectibility of the recorded loan balance is doubtful, collections of interest and principal are generally applied as a reduction to principal outstanding, except in the case of loans with scheduled amortization where the payment is generally applied to the oldest payment due. When the future collectibility of the recorded loan balance is expected, interest income may be recognized on a cash basis limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have been fully recovered. See "Risk Factors - - No Opinion or Recommendation by Sales Agent; Best Efforts Offering" and "The Conversion --Plan of Distribution and Marketing Agent." The Bank has established a Stock Information Center, which will be managed by Trident Securities, to coordinate the Offerings, including tabulation of orders and answering questions about the Offerings by telephone. All subscribers will be instructed to mail payment to the Stock Information Center or deliver payment directly to any full-service office of the Bank. Payment for shares of Common Stock may be made by cash (if delivered in person), check or money order or by authorization of withdrawal from deposit accounts maintained with the Bank (without penalty for early withdrawal). Such funds will not be available for withdrawal and will not be released until the Stock Conversion is completed or terminated. See "The Conversion -- Subscriptions for Stock in Subscription and Community Offerings." Non-transferability of Subscription Rights Applicable federal regulations provide that prior to the completion of the Stock Conversion, no person shall transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the Subscription Rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Persons violating such prohibition may lose their right to subscribe for stock in the Stock Conversion and may be subject to sanctions by the Administrator or the FDIC. Each person exercising Subscription Rights will be required to certify that his or her purchase of Common Stock is solely for the purchaser's own account and that there is no agreement or understanding regarding the sale or transfer of such shares. Purchase Limitations No person may purchase fewer than 25 shares in the Offerings. The ESOP may purchase up to an aggregate of 10% of the shares of the Common Stock to be issued in the Stock Conversion and is expected to purchase 8% of such shares. With the exception of the ESOP, no Eligible Account Holder, Supplemental Eligible Account Holder or Other Member, including individuals on a joint account, may purchase in their capacity as such in the Subscription Offering more than 20,000 shares, or $300,000, of Common Stock. No person, including associates of and persons acting in concert with such person, may purchase in the Community Offering more than 20,000 shares, or $300,000, of Common Stock. The maximum number of shares that may be purchased in the Stock Conversion by any person, together with associates or a group of persons acting in concert, currently is 40,000 shares, or $600,000, of the Common Stock offered in the Stock Conversion. The Board of Directors may increase or decrease the purchase limitation at any time, subject to any required regulatory approval. In the event of an oversubscription, shares will be allocated as provided in the Plan. See "The Conversion -- Subscription Rights," -- Community Offering" and " -- Syndicated Community Offering." In the event of an increase in the total number of shares up to 15% above the maximum of the Estimated Valuation Range, the additional shares may be distributed and allocated without the resolicitation of subscribers. See "The Conversion -- Limitations on Purchase of Shares."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027287_summit_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027287_summit_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b2b2e48f29f70da4386182394046f552d8d9c2b0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027287_summit_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Pursuant to the Plan of Conversion, and upon approval of the Conversion by the members of ESIF at a Special Meeting of Policyholders on May 9, 1997 (the "SPECIAL MEETING"), ESIF will convert from a Florida group self-insurance fund to a Florida stock insurance company, Bridgefield Employers Insurance Company ("BRIDGEFIELD"), and become a wholly owned subsidiary of a newly formed holding company, Summit. Unless the context requires otherwise, as used herein, the "Company" refers to Summit and its subsidiaries as of and following the completion of the Conversion and a simultaneous reorganization of the Company's operating structure. Unless otherwise indicated, information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. All financial information set forth herein is presented in accordance with generally accepted accounting principles ("GAAP"), unless otherwise noted. The following summary is qualified in its entirety by the more detailed information and consolidated financial statements (including the notes thereto) appearing elsewhere in this Prospectus. THE COMPANY The Company provides a variety of managed care workers' compensation products and services to employers and self-insured employer groups primarily in Florida, as well as in Louisiana and Kentucky. Through the Company's administrative group (the "ADMINISTRATIVE SUBSIDIARIES"), the Company provides administrative services for four self-insurance funds (the "FUNDS"), for the Company's two wholly owned workers' compensation insurance companies (the "INSURANCE SUBSIDIARIES") and for certain municipalities. These administrative services include most aspects of the daily operations of the Funds and the Insurance Subsidiaries, including sales and marketing, underwriting, claims administration, loss control and policy administration. These services are provided for a fee, with the Company generally receiving a percentage of premiums. The Administrative Subsidiaries do not assume any underwriting risk of the Funds, which are entities formed to provide workers' compensation coverage for self-insured employer groups on a pooled basis. The Insurance Subsidiaries, which include Bridgefield and Bridgefield Casualty Insurance Company ("BRIDGEFIELD CASUALTY"), underwrite and assume the underwriting risk with respect to workers' compensation insurance policies for Florida employers of all sizes, primarily in the construction, manufacturing, wholesale and retail and service industries. As of December 31, 1996, in the aggregate, the Company's insurance products and administrative services are provided to approximately 15,800 employers representing approximately $217.4 million in premiums, including approximately $101.0 million in premiums attributable to the Funds and $116.4 million in premiums attributable to the Insurance Subsidiaries. See "BUSINESS." The Company's approach to managed care workers' compensation is to select responsible employers for coverage, assist such employers in creating a safe work place and proactively manage claims, thereby returning employees to work promptly and minimizing losses. Employers' safety programs are monitored by the Company's staff of approximately 25 loss control field representatives who visit an employer's work place on at least an annual basis. Reported claims are proactively managed by the Company so that employees receive prompt care by healthcare professionals which are part of the Company's provider network. The Company's claims management professionals direct care through the provider network, monitor employee treatment and progress toward returning to work and perform utilization and peer review to control costs. The Company's approach to managed care workers' compensation has produced an average net ultimate loss ratio for ESIF during the three fiscal years ended March 31, 1996 of 69.8%, which is better than the national average of 75.0% during the period 1993 through 1995, based on information published by A.M. Best Company ("A.M. BEST"). See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." See "BUSINESS -- Strategy" and "-- Managed Care." The Company believes that the Conversion provides new opportunities for improving its return on invested capital through growth in its core workers' compensation business. Following the Conversion, the Company will be able to offer both self-insurance and traditional indemnity products, which will improve its ability to service its markets. In addition, as a stock corporation, the Company may have access to additional capital to finance growth by acquisition and to expand into other geographic markets (subject to any necessary regulatory approvals). Key aspects of the Company's business strategy following the Conversion include: EMPLOYERS SELF INSURERS FUND 2310 A-Z PARK ROAD LAKELAND, FLORIDA 33801 (941) 665-6060 --------------------- NOTICE OF SPECIAL MEETING OF MEMBERS TO VOTE ON A PROPOSAL TO APPROVE AN AMENDED PLAN OF CONVERSION AND RECAPITALIZATION --------------------- TO THE MEMBERS OF EMPLOYERS SELF INSURERS FUND: Notice is hereby given that a special meeting of members (the "Special Meeting") of Employers Self Insurers Fund ("ESIF") will be held at Four Points Hotel by ITT Sheraton, 4141 Florida Avenue South, Lakeland, Florida, on Friday, May 9, 1997, at 9:00 a.m. Eastern Time. The purpose of the Special Meeting is for the members to consider and vote upon an Amended Plan of Conversion and Recapitalization (the "Plan of Conversion") and the transactions contemplated thereby, pursuant to which ESIF will convert from a group self-insurance fund to a stock insurance company with the name Bridgefield Employers Insurance Company ("Bridgefield"). Also pursuant to the Plan of Conversion, Summit Holding Southeast, Inc. ("Summit"), a Florida corporation formed at the direction of ESIF, will acquire all of the common stock of the converted stock insurance company in return for shares of Summit's Series A Preferred Stock, which will be issued to eligible members of ESIF, and subscription rights to purchase shares of Summit's Common Stock, which will be issued to eligible members of ESIF and certain other persons. The approval of the Plan of Conversion by the members will constitute approval and adoption of the Restated Articles of Incorporation and Restated Bylaws of Bridgefield, which contain provisions appropriate for a stock insurance company. Information related to this proposal is set forth in the attached Proxy Statement/Prospectus. The members who shall be entitled to receive notice of and to vote at the Special Meeting shall be all persons who, as reflected on the records of ESIF, were owners of In-Force Policies (as defined below) of ESIF at the close of business on March 10, 1997. "In-Force Policies" means the indemnity agreements issued by ESIF (other than any agreement pursuant to which ESIF has ceded or assumed reinsurance) pursuant to which a binder has been issued, provided that the effective date noted in such binder has passed and such indemnity agreement has not been surrendered or otherwise terminated and has not expired by its terms. In general, the owner of an individual In-Force Policy is the person specified on ESIF's records as the insured. The owner of a group In-Force Policy is the person or persons specified on ESIF's records as the owner or "policyholder." THE BOARD OF TRUSTEES OF ESIF HAS DETERMINED THAT THE CONVERSION IS IN THE BEST INTERESTS OF ESIF AND ITS MEMBERS AND UNANIMOUSLY RECOMMENDS THAT MEMBERS VOTE "FOR" APPROVAL OF THE PLAN OF CONVERSION AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING ADOPTION AND APPROVAL OF THE RESTATED ARTICLES OF INCORPORATION AND THE RESTATED BYLAWS OF BRIDGEFIELD. By Order of the Board of Trustees, GREG C. BRANCH Chairman of the Board of Trustees April 18, 1997 Lakeland, Florida THE BOARD OF TRUSTEES URGES YOU TO CONSIDER CAREFULLY THE ATTACHED PROXY STATEMENT/PROSPECTUS AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE TO ENSURE THAT YOUR VOTE WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. <TABLE> <CAPTION> ========================================================================================================================= ESTIMATED EXPENSES ESTIMATED NET TOTAL ESTIMATED COMMON STOCK NUMBER OF SHARES PER SHARE(1) PROCEEDS PER SHARE(2) NET PROCEEDS(2) - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Minimum Price Per Share: $11.00................... 5,000,000 $1.00 $10.00 $50,000,000 - ------------------------------------------------------------------------------------------------------------------------ Maximum Price Per Share: $13.00................... 5,000,000 $1.12 $11.88 $59,400,000 ======================================================================================================================== </TABLE> (1) Consists of estimated expenses of ESIF and Summit incurred in connection with the Conversion, including the Offerings, but does not include expenses already paid. See "USE OF PROCEEDS." (2) The Conversion is contingent upon the receipt by Summit of net proceeds from the Offerings sufficient to capitalize Bridgefield in accordance with all applicable requirements of the Florida Insurance Code as of the Effective Date. Summit's current estimate of such amount is approximately $50,000,000. See "USE OF PROCEEDS." THIS PROXY STATEMENT/PROSPECTUS RELATES SOLELY TO THE OFFERING OF SERIES A PREFERRED STOCK TO ELIGIBLE POLICYHOLDERS AND TO THE SUBSCRIPTION OFFERING AND DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, COMMON STOCK IN THE PUBLIC OFFERING. COMMON STOCK, IF ANY, TO BE OFFERED IN THE ANTICIPATED PUBLIC OFFERING WILL BE OFFERED ONLY BY MEANS OF A SEPARATE PROSPECTUS. CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." APPROVAL OF THE PLAN OF CONVERSION WILL NOT ALTER MEMBERS' INSURANCE COVERAGE UNDER POLICIES WITH ESIF, INCLUDING, WITHOUT LIMITATION, POLICY COVERAGES AND BENEFITS. APPROVAL OF THE PLAN OF CONVERSION WILL NOT AFFECT MEMBERS' ENTITLEMENT TO RECEIVE DIVIDENDS AS PROVIDED IN THEIR FLEXIBLE RETENTION POLICIES. HOWEVER, FROM AND AFTER THE EFFECTIVE DATE OF THE PLAN OF CONVERSION, (A) THE MEMBERSHIP INTERESTS WHICH MEMBERS HAVE IN ESIF WILL NO LONGER EXIST, (B) MEMBERS WILL NO LONGER BE SUBJECT TO ANY ASSESSMENT FOR THE LIABILITIES OF ESIF ARISING EITHER BEFORE OR AFTER THE EFFECTIVE DATE, AND (C) MEMBERS WILL NO LONGER BE ELIGIBLE TO RECEIVE DIVIDENDS OF THE EARNINGS AND PROFITS OF ESIF. ADDITIONALLY, ELIGIBLE POLICYHOLDERS WILL RECEIVE OTHER CONSIDERATION IN EXCHANGE FOR THEIR MEMBERSHIP INTERESTS AS DESCRIBED HEREIN, INCLUDING THE SERIES A PREFERRED STOCK OF SUMMIT AND THE RIGHT TO PURCHASE COMMON STOCK OF SUMMIT. THE FLORIDA DOI RECOGNIZES ONLY STATUTORY ACCOUNTING PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS SOLVENCY UNDER THE FLORIDA INSURANCE CODE, AND FOR DETERMINING WHETHER ITS FINANCIAL CONDITION WARRANTS THE PAYMENT OF A DIVIDEND TO ITS SHAREHOLDERS. NO CONSIDERATION IS GIVEN BY THE FLORIDA DOI TO FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN MAKING SUCH DETERMINATIONS. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF SO GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS SHALL NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN OR IN THE DOCUMENTS thereby, including the adoption and approval of the Articles and Bylaws of Bridgefield. The affirmative vote of at least two-thirds of all validly cast votes, and the affirmative vote of a majority of all Voting Policyholders entitled to vote thereon, will be required to approve the Plan of Conversion. As further described herein, the term "VOTING POLICYHOLDER" generally means a person whose name appears on ESIF's records as of March 10, 1997 (the "RECORD DATE") as the owner of an In-Force Policy. As further described herein, an "IN-FORCE POLICY" is a policy that has been issued by ESIF (other than any agreement or policy pursuant to which ESIF has ceded or assumed reinsurance) pursuant to which a binder has been issued, provided that the effective date noted in such binder has passed and such policy has not been surrendered or otherwise terminated and has not expired by its terms. Abstentions will not be counted at the Special Meeting as votes cast for or against the Plan of Conversion and, therefore, will have the same effect as votes against the Plan of Conversion. The presence in person or by proxy of any number of Voting Policyholders constitutes a quorum for the transaction of business at the Special Meeting. THE BOARD OF TRUSTEES OF ESIF RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF CONVERSION AND TRANSACTIONS CONTEMPLATED THEREBY. Conditions to Effectiveness. For the Conversion to become effective, all of the conditions listed below must be satisfied: (i) The Plan of Conversion must be approved by not less than two-thirds of the votes cast in person or by proxy by the Voting Policyholders at the Special Meeting and by a majority of all Voting Policyholders entitled to vote thereon. (ii) The Board of Trustees of ESIF must declare the Plan of Conversion effective. The Plan of Conversion required that the Effective Date occur on or before May 14, 1997, which is 180 days after the date of the Order. However, the Board of Trustees has requested, and the Florida DOI has granted, a 90-day extension through August 12, 1997. (iii) The Articles and Bylaws of Bridgefield must have been approved by the Florida DOI and the Articles must have been filed with the Florida Secretary of State. (iv) Bridgefield must have surplus as to policyholders and a ratio of premiums to surplus sufficient to satisfy the requirements of the Florida Insurance Code for a stock property and casualty insurance company. Currently, the Company estimates that it must receive net proceeds from the offerings of at least $50.0 million in order for Bridgefield to satisfy the minimum surplus requirement under the Florida Insurance Code. (v) ESIF must not have imposed any assessments against its members. (vi) The Company must have received an opinion of tax counsel to the effect that the Conversion will be treated as a tax-free transaction under Sections 368 and 351 of the Internal Revenue Code of 1986, as amended (together with all regulations promulgated thereunder, the "TAX CODE"). Extinguishment of Membership Interests. Each person who holds an In-Force Policy on the Effective Date is a member of ESIF and, regardless of whether such person is also an Eligible Policyholder or a Voting Policyholder, such person has certain Membership Interests in ESIF. Pursuant to the Conversion, each member of ESIF will retain all ownership rights and coverage with respect to its In-Force Policy, but will automatically relinquish its Membership Interests, including the right to vote for the election of trustees, the right to receive any dividends that may be declared by the ESIF Board of Trustees, and the right to participate in any distribution of the surplus of ESIF in the event of its liquidation. Following the Conversion, Summit, as the holder of 100% of Bridgefield's common stock, will be the only person entitled to vote for Bridgefield's directors and to receive a distribution of assets upon any liquidation of Bridgefield. The holders of the Common Stock of Summit, including, without limitation, any Eligible Policyholders who purchase shares in the Subscription Offering, will be entitled to vote for the election of Summit's directors and to share in any distribution of assets in the event of a liquidation of Summit. Certain Federal Income Tax Consequences. It is intended that the Conversion, the Subscription Offering and the Public Offering will be regarded for federal income tax purposes as one transaction with several discrete steps having the tax consequences outlined herein. The Conversion of ESIF into an assessable approval of the reorganization of the holding company system as required under Section 628.461, Florida Statutes. No separate approval by the Department will therefore be required in connection with the acquisition of one hundred percent (100%) of the voting securities of Stock Company or its stock insurer subsidiary by the Holding Company or the reorganization of the holding company system. Approval of this Plan shall constitute approval of said acquisition, or, alternatively, a determination that no such approval is required. 2.3 The Department may deem it appropriate to conduct a public or evidentiary hearing in connection with its review of this Plan. ARTICLE III POLICYHOLDER VOTING 3.1 Special Meeting. After approval of the Plan by the Department, ESIF shall provide notice of the Special Meeting (the "Special Meeting") of its Members at which the Plan and the Amended and Restated Articles of Incorporation of the Stock Company (in the form attached hereto as Exhibit D) and the amended and restated bylaws of the Stock Company (in the form attached hereto as Exhibit E) reflecting the conversion to the Stock Company (the "Restated Articles of Incorporation" and "Restated Bylaws," respectively) shall be submitted for the approval of the Voting Policyholders. Such Special Meeting shall be held at the home office of the Mutual Company or at such other reasonable location as may be determined by the Mutual Company. Prior to such Special Meeting, ESIF shall send to its Voting Policyholders, at their addresses as most recently reflected in the records of ESIF, such notices, disclosure documents, proxy or ballot forms and information or explanatory statements as shall be necessary and appropriate. 3.2 Approval. This Plan, the Articles of Incorporation of the Mutual Company, and the Restated Articles of Incorporation and Bylaws of the Stock Company shall be approved by the Voting Policyholders if (i) not less than two-thirds of the votes cast by the Voting Policyholders voting thereon in person or by proxy and (ii) not less than a majority of the votes eligible to be cast by Voting Policyholders, are cast in favor of the Plan. No member of ESIF and no policyholder of the Mutual Company shall be entitled to any dissenters', appraisal or other similar rights in connection with the transactions contemplated by this Plan. 3.3 Supervision by Department. The Department may supervise the tabulation of votes and may appoint such voting inspectors as it deems necessary or advisable. 3.4 Certifying and Filing the Approved Plan. If this Plan and the Articles of Incorporation of the Mutual Company and the Restated Articles of Incorporation and Bylaws of the Stock Company are approved at the Special Meeting, then within five days after the Special Meeting, the Mutual Company shall prepare under its corporate seal a certificate setting forth the date and results of the vote cast at the Special Meeting and a copy of the Plan as approved. Such certificate shall be executed by both ESIF's chairman and Mutual Company's chairman and secretary (or assistant secretary) and duly sworn to by one of them. The certificate shall be delivered to the Department. ARTICLE IV PROCESS OF CONVERSION The Florida Insurance Code does not currently provide for conversion directly from a GSIF to a stock insurer. In order to effect such a conversion, a GSIF must convert first to an assessable mutual. The application process for conversion to an assessable mutual is separate and distinct from this Plan. Nevertheless, in the interest of expediting ESIF's transformation to a stock company, this Plan shall be filed for approval by the Department concurrently with ESIF's application to convert to an assessable mutual. It is anticipated that both review and approval processes will run concurrently. It is further anticipated that ESIF's application to become an assessable mutual and approval of this Plan will occur simultaneously. ARTICLE IX AMENDMENTS These Articles of Incorporation may be amended by a majority vote of the shareholders of the Corporation; provided that such amendment is approved by the Florida Department of Insurance. IN WITNESS WHEREOF, the initial directors of the Corporation have hereunto set our hands and seals this day of , 1996. <TABLE> <S> <C> - -------------------------------------------- -------------------------------------------- Director Director - -------------------------------------------- -------------------------------------------- Director Director - -------------------------------------------- -------------------------------------------- Director Director </TABLE> Attest: ------------------------------------------------------------- Secretary (SEAL) CERTIFICATION OF VOTING RESULTS The Members of BRIDGEFIELD EMPLOYERS INSURANCE COMPANY, an Assessable Mutual, in the course of their annual meeting held on , adopted the attached Restated Articles of Incorporation. The restatement included amendments which require stockholder approval pursuant to Chapter 607 of the Florida Statutes. I hereby certify that the amendments were approved by a majority of the voting Members and that there are not multiple voting groups. -------------------------------------- Secretary (SEAL) Section 16. Limitation of Directors' Liability. A member of the Board of Directors shall not be personally liable for monetary damages to any person, including but not limited to the Corporation, for any statement, vote, decision, or failure to act, regarding the management or policy of the Corporation, by such director, unless: a. The director breached or failed to perform his duties as a director; and b. The director's breach of, or failure to perform, his duties constitutes: 1. A violation of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful. A final judgment or other final adjudication against a director in any criminal proceeding for violation of the criminal law estops that director from contesting the fact that his breach, or failure to perform, constitutes a violation of the criminal law; but does not estop the director from establishing that he had reasonable cause to believe that his conduct was lawful or had no reasonable cause to believe that his conduct was unlawful. 2. A transaction from which the director derived an improper personal benefit, either directly or indirectly; or 3. Recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. For purposes of this subdivision, the term "recklessness" means the acting, or omission to act, in conscious disregard of a risk: a. Known, or so obvious that it should have been known, to the director; and b. Known to the director, or so obvious that it should have been known, to be so great as to make it highly probable that harm would follow from such action or omission. ARTICLE IV OFFICERS Section 1. Officers. The corporate officers of this Corporation shall be a president, one or more vice-president(s), a secretary, and a treasurer, each of whom shall be appointed by the Board of Directors. The Board officers of this Corporation shall be a Chairman of the Board and a Vice-Chairman of the Board. Any two or more offices may be held by the same person. A failure to appoint a president, vice president(s), secretary, or treasurer shall not affect the existence of the Corporation, and the president, vice president(s), secretary, or treasurer shall continue to serve in office until new officers are appointed by the Board of Directors. Section 2. Appointment and Term of Office. The corporate officers and board officers of the Corporation shall be appointed by the Board of Directors and shall serve at the pleasure of the Board of Directors. Each officer shall hold office until his successor shall have been duly appointed and shall have qualified, or until his death, or until he shall resign or have been removed in the manner hereafter provided. Section 3. Removal. Any officer may be removed from office on the affirmative vote of a majority of the entire Board of Directors whenever, in its judgment, the best interests of the Corporation shall be served thereby. Removal shall be without prejudice to any contract rights of the person so removed, but the election of an officer shall not of itself create contract rights. Section 4. Vacancies. Vacancies in offices, however occasioned, may be filled at any time by appointment by the Board of Directors of officers to serve the unexpired terms of such offices. Section 5. Duties. The corporate officers and board officers shall have the following duties: a. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and of the shareholders. IT IS THEREFORE ORDERED: 17. Subject to the terms and conditions contained herein, the Treasurer and Insurance Commissioner hereby approves the transactions contemplated by the APPLICATION to include the proposed conversion of ESIF to BEIC MUTUAL, the proposed immediately subsequent conversion of BEIC MUTUAL to BEIC STOCK, and the proposed immediately subsequent acquisition of BEIC STOCK by SUMMIT SOUTHEAST pursuant to the Amended Plan of Conversion and Recapitalization submitted with the APPLICATION. 18. APPLICANTS shall not mail the Proxy Statement and related enclosures, without first obtaining separate written approval of the DEPARTMENT for the final draft of said documents. 19. BEIC STOCK shall file with the DEPARTMENT all premium growth reports as required by Section 624.4243, Florida Statutes, in a complete and timely manner. 20. BEIC STOCK shall report Unearned Premiums on all of its financial statements in compliance with Section 625.051, Florida Statutes. 21. BEIC STOCK shall follow the guidelines of the NAIC Practices & Procedures Manual and the NAIC Annual Statement Instructions for Property & Casualty Companies when accounting for retrospective premiums and when accounting for return premiums on all of its financial statements. 22. Summit Consulting, Inc. shall file annual audited financial statements with the DEPARTMENT no later than June 1st of each of the first three years following the Effective Date. In addition, all affiliates of BEIC STOCK shall provide the DEPARTMENT with access to their books and records, if so requested. 23. For the three year period following the Effective Date (as defined herein), BEIC STOCK shall not have or enter into any contract or any other agreement for a fee with an affiliated entity other than a contract or agreement that has been approved in writing by the DEPARTMENT. For the three year period following the Effective Date, fees payable under any such contract with an affiliated entity shall not be materially increased without the prior written approval of the DEPARTMENT. For the three year period following the Effective Date, no such contract shall contain any minimum fee provisions. For the three year period following the Effective Date, BEIC STOCK shall provide written notice to the DEPARTMENT and receive its written approval prior to executing any material amendment to any such contract or agreement, thereafter, BEIC STOCK shall provide written notice to the DEPARTMENT within thirty (30) days of executing any material amendment to any such contract or agreement. 24. BEIC STOCK shall not use any type of discounting when computing its loss reserves and shall not report discounted loss reserves on any of its financial statements, except for the discounting of loss reserves allowed by Section 625.091, Florida Statutes. 25. As a condition of the granting of approval of the conversion of ESIF to BEIC MUTUAL and from there to BEIC STOCK, ESIF has placed a $5 million security and collateral deposit with the DEPARTMENT's Bureau of Collateral Securities. In addition, ESIF shall immediately take all steps necessary to make the DEPARTMENT a co-signor on First Union National Bank of Florida account number 4022015600 (hereinafter referred to as the "First Union Account") currently held in the name of ESIF with all assets deposited therein pledged to the DEPARTMENT for the protection of ESIF's members. The balance on the First Union Account shall exceed $45,000,000 at the time of entry of this Order. No withdrawals shall be made on this account without the prior written approval of the DEPARTMENT. Furthermore, APPLICANTS shall provide the DEPARTMENT with monthly reporting on the balance and activity of such account. If the conversion of ESIF to BEIC MUTUAL and from there to BEIC STOCK is not effectuated within the time frame allowed by paragraph 33 of this Order, ESIF shall immediately increase the amount of the security and collateral deposit it has placed with the DEPARTMENT's Bureau of Collateral Securities from $5 million to $25 million. If the conversion of ESIF to BEIC MUTUAL and from there to BEIC STOCK is effectuated, ESIF, by signing this Consent Order authorizes the transfer of the $5 million security and collateral deposit now being held by the DEPARTMENT's Bureau of Collateral Securities to the name of BEIC STOCK. APPLICANTS agree to sign all necessary documents and render other assistance as Holders of Series A Preferred Stock have no preemptive or preferential right to purchase or subscribe for any unissued or additional authorized stock or any securities of New Holding and have no rights to convert their Series A Preferred Stock into common stock or any other securities. The rights, preferences, limitations and restrictions of the Series A Preferred Stock are set forth in the Certificate of Designation, Preferences and Rights of Series A Preferred Stock of New Holding (the "Series A Designation"). In summary: (i) The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, dissolution and winding up of New Holding, rank prior to all classes or series of equity securities of New Holding, including the common stock. (ii) The holders of Series A Preferred Stock shall be entitled to receive, out of funds legally available for the payment of dividends, cash dividends at the rate of four percent (4%) per annum. Such dividends shall cumulate whether or not declared by the Board of Directors, but shall be payable only as and when declared by the Board; provided, however, that all cumulated but unpaid dividends shall be paid upon any redemption of the Series A Preferred Stock or any liquidation. (iii) In the event of any liquidation of New Holding, after payment or provision for payment of the debts and other liabilities of New Holding, and before any payment or distribution of New Holding's assets shall be made or set apart for the holders of any securities ranking junior to the Series A Preferred Stock, the holders of the Series A Preferred Stock shall be entitled to receive $10 per share of Series A Preferred Stock plus an amount equal to all cumulated but unpaid dividends thereon. (iv) The Series A Preferred Stock shall be redeemable by New Holding at any time and from time to time, in whole or in part. (v) The redemption price shall be $10 per share, together with an amount equal to all cumulated but unpaid dividends thereon to the date of redemption. (vi) In the event that New Holding enters into any Business Combination (as defined in the Series A Designation), New Holding or some other person shall make an offer to purchase the then outstanding Series A Preferred Stock for $10 per share plus an amount equal to all cumulated but unpaid dividends. COMMON STOCK New Holding is authorized to issue up to 20,000,000 shares of common stock, par value $.01 per share. Immediately before the planned transaction, New Holding will have seven shareholders of record and seven shares of common stock outstanding. Holders of common stock are entitled to one vote for each share held of record at all shareholder meetings for any purpose, including the election of directors. There is no cumulative voting for election of directors. The Bylaws of New Holding require that a majority of the issued and outstanding shares of New Holding be represented to constitute a quorum and transact business at a shareholders' meeting. Holders of common stock have no preemptive or preferential right to purchase or subscribe for any unissued or additional authorized stock or any securities of New Holding and have no rights to convert their common stock into any other securities. Subject to the prior rights of any series of preferred stock that from time to time may be outstanding, holders of common stock are entitled to receive dividends ratably when, as, and if, declared by the Board of Directors out of funds legally available therefor and, upon the liquidation, dissolution or winding up of New Holding, are entitled to share ratably in all assets remaining after payment of liabilities and payment of accumulated dividends and liquidation preferences on the preferred stock. (i) continued use of both self-insurance and indemnity products; (ii) emphasis on profitable underwriting results; (iii) proactive implementation of managed care; (iv) leveraging of administrative services capabilities; and (v) emphasis on excellent customer service. See "BUSINESS -- Strategy." The Company's business was started in 1977, when Summit Consulting, Inc. ("SCI") was formed to establish and administer workers' compensation self-insurance programs for group self-insurance funds that are sponsored and formed by trade associations. The Company's primary Insurance Subsidiary, ESIF (which pursuant to the Conversion will become Bridgefield), was formed in 1978 as a group self-insurance fund under Florida law and SCI became its administrator at that time. Between 1979 and 1982, SCI assisted with the formation of, and became the administrator of, three of the Funds, located in Florida and Louisiana, and in 1995, SCI became the administrator of the fourth Fund, located in Kentucky. See "BUSINESS -- Products and Services." None of the Funds are related to the Company, except that certain of the directors of Summit are trustees of certain of the Funds, as described in "MANAGEMENT OF THE COMPANY -- Compensation Committee Interlocks and Insider Participation" and "CERTAIN TRANSACTIONS." Until January 16, 1996, ESIF was also unrelated to SCI. Effective on that date, ESIF acquired SCI, its holding company, Summit Holding Corporation ("SHC"), and all of their affiliates (the "ACQUISITION"). Pursuant to the Conversion, Summit will become a holding company for ESIF (which will be Bridgefield after the Conversion) and the other Company subsidiaries. Summit is a Florida corporation formed in November 1996 solely for this purpose at the direction of the ESIF Board of Trustees. Prior to the Conversion, Summit has not commenced operations and has nominal assets and no liabilities. See "THE COMPANY." The executive offices of the Company are located at 2310 A-Z Park Road, Lakeland, Florida 33801. The telephone number at such office is (941) 665-6060. THE CONVERSION The Board of Trustees of ESIF has unanimously adopted the Plan of Conversion whereby ESIF, subject to the approval of its policyholders at the Special Meeting, will convert from a Florida group self-insurance fund to a Florida stock insurance company and become a wholly owned subsidiary of Summit. The trustees of ESIF stated that they adopted the Plan of Conversion because they believe that the Conversion will provide several important benefits. The conversion of ESIF to a stock insurance company that is wholly owned by a publicly traded holding company is expected to provide improved access to the capital markets and increased flexibility for raising additional capital in the form of equity and debt financings. The holding company structure is also expected to provide increased opportunities for growth, either internally or through acquisitions, that are generally not available to a group self-insurance fund and provide greater flexibility for the diversification of business activities through existing or newly formed subsidiaries or through strategic partnerships. See "THE CONVERSION -- Reasons for the Conversion." Currently, each member of ESIF has certain membership interests in ESIF ("MEMBERSHIP INTERESTS") arising under the organizational documents of ESIF, the insurance laws of the State of Florida (together with all applicable regulations, the "FLORIDA INSURANCE CODE") and otherwise, including, without limitation, the right to vote for the election of trustees and the right to participate in any distribution of the surplus of ESIF in the event of its liquidation. If the Plan of Conversion is approved at the Special Meeting and thereafter becomes effective, all Membership Interests will be extinguished in the Conversion. In exchange for such Membership Interests, the Plan of Conversion provides that certain policyholders (the "ELIGIBLE POLICYHOLDERS") will receive certain consideration including the elimination of potential assessments, an allocable portion of shares of the Series A Preferred Stock, $10.00 par value per share (the "SERIES A PREFERRED STOCK"), of Summit and subscription rights to purchase shares of Common Stock of Summit in the Subscription Offering at a price (the "SUBSCRIPTION PRICE") equal to the price per share of the Common Stock being offered for sale to the public in the Public Offering. Up to 5,000,000 shares of the Common Stock are being offered to Eligible Policyholders less the amount of shares subscribed for by the Management Group, who are being offered up to 500,000 shares of the Common Stock in the Subscription Offering. All or a portion of any shares of Common Stock that are not subscribed for by Eligible Policyholders in the Subscription Offering are simultaneously being offered for sale to the public in the Public Offering. See "THE CONVERSION." APRIL 16, 1997 PROXY STATEMENT FOR A SPECIAL MEETING OF MEMBERS OF EMPLOYERS SELF INSURERS FUND --------------------- PROSPECTUS RELATED TO 1,639,701 SHARES OF SERIES A PREFERRED STOCK AND 5,000,000 SHARES OF COMMON STOCK OF SUMMIT HOLDING SOUTHEAST, INC. This Proxy Statement and Prospectus (the "PROXY STATEMENT/PROSPECTUS") relates to the proposed conversion of Employers Self Insurers Fund ("ESIF") from a Florida group self-insurance fund to a Florida stock insurance company pursuant to an Amended Plan of Conversion and Recapitalization (the "PLAN OF CONVERSION"), a copy of which is attached hereto as Exhibit A, and the related issuance by Summit Holding Southeast, Inc. ("SUMMIT"), a Florida corporation formed at the direction of ESIF to serve as a holding company for the new stock insurance company, of: (i) 1,639,701 shares of its Series A Preferred Stock, par value $10.00 per share (the "SERIES A PREFERRED STOCK"), to Eligible Policyholders (as defined below) of ESIF and (ii) non-transferable subscription rights to purchase up to 5,000,000 shares of its Common Stock, par value $.01 per share (the "COMMON STOCK"), to Eligible Policyholders and all directors and officers and certain other management employees (the "MANAGEMENT GROUP") of Summit and its subsidiaries (including the converted stock insurance company) (the "SUBSCRIPTION OFFERING"). Summit is currently offering to sell all or a portion of the shares of Common Stock not subscribed for in the Subscription Offering to the public in an underwritten public offering (the "PUBLIC OFFERING"). The Subscription Offering and the Public Offering are hereinafter referred to collectively as the "OFFERINGS." The transactions contemplated by the Plan of Conversion are hereinafter referred to collectively as the "CONVERSION." Pursuant to the Plan of Conversion, Summit will acquire all of the capital stock of the converted stock insurance company, the name of which will be Bridgefield Employers Insurance Company ("BRIDGEFIELD"), and Bridgefield will thereby become a wholly owned subsidiary of Summit. See "THE CONVERSION -- General." Each Eligible Policyholder will receive in exchange for its membership interests in ESIF ("MEMBERSHIP INTERESTS") the number of shares of the Series A Preferred Stock indicated on the Policyholder Record Card furnished to each Eligible Policyholder with this Proxy Statement/Prospectus and rights to subscribe for shares of the Common Stock in an amount up to the Purchase Limit as defined below. In addition, pursuant to the Conversion, the members of ESIF will no longer be subject to assessments for any liabilities of ESIF arising before or after the effective date of the Conversion (the "EFFECTIVE DATE"). Pursuant to the Subscription Offering, Summit will offer up to an aggregate of 5,000,000 shares of the Common Stock to the Eligible Policyholders less the amount of shares subscribed for by the Management Group, who are being offered up to 500,000 shares of the Common Stock, all subject to the limitations described herein and in the Plan of Conversion. Each member of the Management Group will be subject to the same terms and conditions of the Subscription Offering as the Eligible Policyholders, including without limitation, the requirement to pay the Subscription Price as set forth below. "ELIGIBLE POLICYHOLDERS" include any person who owned an indemnity agreement (hereinafter a "POLICY") issued by ESIF at any time during the period August 20, 1993 through and including March 10, 1997 (the "ELIGIBILITY PERIOD"). See "THE CONVERSION -- Consideration." The Series A Preferred Stock and the subscription rights to purchase Common Stock will be issued to Eligible Policyholders without consideration other than the extinguishment of their Membership Interests. The number of shares of Series A Preferred Stock that will be issued to each Eligible Policyholder and the number of shares of Common Stock that each Eligible Policyholder will be entitled to subscribe for in the Subscription Offering were determined in accordance with formulas established by the Plan of Conversion. In accordance with the Plan of Conversion, each Eligible Policyholder will be issued (a) 10 shares of Series A Preferred Stock, plus (b) an additional number of shares of Series A Preferred Stock based on the Eligible Policyholder's contribution to ESIF's ATTACHED HERETO IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION FOR A PROXY IN ANY JURISDICTION IN WHICH SUCH SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH SOLICITATION IS NOT QUALIFIED TO DO SO, OR FROM ANY PERSON FROM WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION IN SUCH JURISDICTION. NOTICE TO NORTH CAROLINA PURCHASERS: THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. UNTIL MAY 11, 1997 (25 DAYS AFTER THE DATE OF THIS PROXY STATEMENT/PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROXY STATEMENT/PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROXY STATEMENT/PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. mutual insurance company is intended to be treated as a tax-free reorganization under Section 368(a)(1)(F) of the Tax Code. The Conversion of the assessable mutual company into a stock insurance company is intended to be treated as a tax-free recapitalization under Section 368(a)(1)(E) of the Tax Code. The exchange by Eligible Policyholders of their Membership Interests in ESIF in return for the Series A Preferred Stock, and the exchange by Eligible Policyholders, the Management Group and the purchasers in the Public Offering of cash for Common Stock, are intended to be treated as tax-free exchanges under Section 351 of the Tax Code. The Plan of Conversion should constitute a plan to effect a change in the identity of ESIF, a plan of recapitalization and a plan of exchange under Section 351 of the Tax Code. ESIF has received an opinion of Alston & Bird LLP, tax counsel to ESIF, supporting the above-described intended tax consequences, and a copy of such tax opinion is attached hereto as Exhibit F. However, such opinion is not binding on the Internal Revenue Service (the "IRS"), and there can be no assurance that the IRS will agree with the opinion. ESIF does not intend to seek a ruling from the IRS with respect to the tax consequences of the Conversion. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES." In addition to the foregoing tax matters, the receipt of subscription rights to purchase Common Stock by the Eligible Policyholders also should be treated as tax free so long as the terms of purchase in the Subscription Offering and the Public Offering are the same, as they will be, and, as is also anticipated, the purchase price in the Offerings represents the fair market value of the Common Stock of Summit. Finally, although the receipt of the Series A Preferred Stock should be tax free, holders of such stock may be taxed at ordinary income rates when the Series A Preferred Stock is sold or redeemed by Summit. Each Eligible Policyholder will be required to complete a Taxpayer Identification Card to prevent the application of certain tax withholding requirements. The rules described above do not apply to all Eligible Policyholders, some of whom may be subject to special rules. For a more complete discussion of the tax consequences of receipt of consideration and a discussion of special rules that may apply to Eligible Policyholders, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES." Description of Cards and Forms Enclosed with this Proxy Statement/Prospectus. Enclosed with this Proxy Statement/Prospectus for each Eligible Policyholder is (i) a Policyholder Record Card that shows the number of shares of Series A Preferred Stock that such Eligible Policyholder will receive if the Plan of Conversion becomes effective; (ii) a Subscription Order Form for the Eligible Policyholder's use in subscribing for shares of Common Stock; and (iii) a Taxpayer Identification Card that gives information about tax withholding in connection with any dividends that such Eligible Policyholder may receive on the Series A Preferred Stock or any Common Stock. Enclosed with this Proxy Statement/Prospectus for each Voting Policyholder is a Proxy Card that shows the number of In-Force Policies held by the Voting Policyholder on the Record Date (and, therefore, the number of votes that such Voting Policyholder is entitled to cast). This Proxy Card allows such Voting Policyholder to cast its vote(s) on the Plan of Conversion without attending the Special Meeting. The Board of Trustees urges each Voting Policyholder to mark, sign, date and return its Proxy Card as soon as possible, so that it will be received by ESIF no later than 5:00 p.m. Eastern Time on Thursday, May 8, 1997, to ensure that its vote will be counted, even if such Voting Policyholder does not plan to purchase Common Stock. For more information about each card and form, see the instructions indicated on each such card and form enclosed with this mailing or call ESIF's Information Center at 1-800-331-7742. INTERESTS OF CERTAIN PERSONS IN THE OFFERINGS All directors and officers and certain other management employees of the Company have been granted subscription rights to purchase in the Subscription Offering an aggregate of up to 10% of the Common Stock being offered in the Subscription Offering. The Board of Trustees of ESIF determined subjectively that it would be appropriate and in the best interests of the shareholders of the Company to make such shares of Common Stock available to the Management Group to enhance the Management Group's commitment to the Company, provide incentive to the Management Group and encourage management continuity. No additional consideration or contributions were provided by the Management Group in exchange for the right to purchase such shares. Each member of the Management Group will be subject to the same terms and conditions of the ARTICLE V REORGANIZATION 5.1 Conversion of the Mutual Company. On the Effective Date, the Mutual Company will convert from an assessable mutual insurer to a non-assessable stock insurer, pursuant to Section 628.6017 of the Florida Statutes. 5.2 Restatement of Articles of Incorporation and Bylaws. On the Effective Date, the Restated Articles of Incorporation and Bylaws of the Stock Company shall be filed with the Department and the Florida Secretary of State as required by applicable law. Such Restated Articles of Incorporation and Bylaws may be further amended after the Effective Date in accordance with their provisions and the laws of the State of Florida. 5.3 Recapitalization of Stock Company. On the Effective Date, the Restated Articles of Incorporation of the Stock Company shall authorize it to issue fifteen thousand (15,000) shares of Common Stock with a par value of one hundred dollars ($100) per share. On the Effective Date, the Eligible Policyholders will exchange their Membership Interests for Preferred Stock in the Holding Company and Subscription Rights as described in Sections 6.1 and 6.2 below, pursuant to the Recapitalization Agreement attached hereto as Exhibit F and this Plan. Such exchange shall occur by conversion of Mutual Company to the Stock Company and by the effective exchange of rights to stock in the Stock Company for Preferred Stock of the Holding Company. In order to avoid the expense and inconvenience of issuing shares of Stock Company to Eligible Policyholders, which shares would then be exchanged for shares of Preferred Stock, an exchange mechanism will be employed to evidence that the Eligible Policyholders are entitled to receive shares of Stock Company but will receive in lieu thereof shares of the Holding Company's Preferred Stock. The Holding Company shall contribute in cash an amount adequate to capitalize Stock Company in the manner described in Section 13.4 of this Plan. ARTICLE VI CONSIDERATION FOR MEMBERSHIP INTERESTS Upon the Effective Date, Policyholders will cease to have any rights as Members of ESIF or the Mutual Company, including, without limitation, the right to elect trustees or directors and vote as to other matters, and any rights to the distribution of surplus in liquidation, subject to the provisions of Articles VII and VIII of this Plan. Upon conversion of Mutual Company to Stock Company, Policyholders will (i) no longer be subject to assessment by ESIF or the Mutual Company during their current policy year or for any prior year in which they held a Policy, unless such assessment was imposed prior to the Effective Date; (ii) be relieved of all future contingent liabilities of ESIF and the Mutual Company arising after the Effective Date. In further exchange for their interests in Stock Company, Eligible Policyholders will receive that number of shares of Preferred Stock determined in accordance with Section 7.1 below and receive subscription rights to purchase that number of shares of Common Stock determined in accordance with Section 7.2. 6.1 Preferred Stock. Pursuant to the complete consummation of this Plan, as consideration for their Membership Interests, Eligible Policyholders shall receive consideration, the principal component of which will be shares of Preferred Stock in the Holding Company. Such Preferred Stock shall be issued to Eligible Policyholders based upon the Allocation of Policyholder Consideration described in Section 7.1 below and shall be issued as soon as practicable after the Effective Date. The aggregate number of shares of Preferred Stock to be given to Eligible Policyholders pursuant to this Plan shall be 1,639,701 shares with a par value of Ten Dollars ($10.00) per share. The Preferred Stock is described in detail in the Certificate of Designation, Preferences and Rights of Series A Preferred Stock, a copy of which is attached hereto as Exhibit C. 6.2 Subscription Rights. In addition to the Preferred Stock described above, Eligible Policyholders shall receive Subscription Rights in the Common Stock to be issued by the Holding Company. The Subscription Rights shall, in the aggregate, entitle the Eligible Policyholders to purchase up to ninety percent (90%) of the Aggregate Common Shares (as defined in Section 7.2(a) below). Thus, should the Eligible b. Vice-Chairman of the Board. In the case of the death, absence of, inability of the Chairman of the Board to act, the Vice-Chairman of the Board shall preside at meetings of the Board of Directors and of the shareholders. c. President. The president shall perform all the usual and customary duties of that office, including, without limitation, the general supervision of the business of the Corporation. d. Vice Presidents. The vice presidents shall have such power and perform such duties as may be delegated to them by the President. In the case of the death, absence, or inability of the president to act, except as may be expressly limited by action of the Board of Directors, a vice president expressly designated by the Board of Directors shall perform the duties and exercise the power of the president following such death of the president or during the absence or inability of the president to act. e. Secretary. The secretary shall keep the minutes of all meetings of the shareholders and of the Board of Directors in a book or books to be kept for such purposes, and also, when so requested, the minutes of all meetings of committees in a book or books to be kept for such purposes. He shall attend to giving and serving of all notices, and he shall have charge of all books and papers of the Corporation, except those hereinafter described to be in the charge of the treasurer or except as otherwise expressly directed by the Board of Directors. The secretary shall be the custodian of the seal of the Corporation. The secretary shall have and perform such other duties as may be delegated to him by the president. f. Treasurer. The treasurer shall perform all the usual and customary duties of that office. The treasurer shall also have the power and perform such duties as may be delegated to him by the president. Section 6. Compensation. The compensation of all officers of the Corporation shall be fixed by the Board of Directors. Section 7. Indemnification. The Corporation shall indemnify the officers of the Corporation in accordance with the policy of indemnification set forth in Article XII and Exhibit A to these Bylaws. ARTICLE V COMMITTEES Section 1. Creation of Committees. The Board of Directors shall, by resolution passed by a majority of the whole Board, designate an Audit Committee and may, by resolution passed by a majority of the whole Board, designate a Finance and Investment Committee, and such other committees as the Board shall deem appropriate. Section 2. Committee Functions. Such committees shall have such functions and may exercise such power as can be lawfully delegated by the Board of Directors and to the extent provided in the resolution creating such committee or committees. Section 3. Meetings. Regular committee meetings may be held without notice at such time and at such place as shall from time to time be determined by the committees, and additional meetings of the committees may be called by any member thereof upon two (2) days' notice to the other members of such committee, or on such shorter notice as may be agreed to in writing by each of the other members of such committee, given either personally or in the manner provided in these Bylaws pertaining to notice for directors' meetings. Section 4. Members. Members of the committees shall be directors and shall be appointed by a majority of the Board. Section 5. Quorum. At all meetings of the committees, a majority of the committee's members then in office shall constitute a quorum for the transaction of business. Section 6. Manner of Acting. The vote of a majority of the members of any committee present at any meeting at which there is a quorum shall constitute the action of such committee. necessary to effectuate such transfer. Both the funds on deposit with the DEPARTMENT's Bureau of Collateral Securities as well as the funds on deposit in the First Union Account shall be designated deposits pursuant to section 624.411, Florida Statutes. 26. For the three year period following the Effective Date, BEIC STOCK shall, for purposes of financial examinations, be classified as an insurer which is required to be examined in accordance with Section 624.316(2)(f), Florida Statutes. Thereafter, BEIC STOCK shall remain subject to other applicable provisions of Section 624.316, Florida Statutes. 27. BEIC STOCK shall not include the following assets on any financial statement filed with the DEPARTMENT, as such assets shall not be admitted for purposes of determining BEIC STOCK's compliance with the requirements of the Florida Insurance Code: (i) Any amount representing ceded reinsurance loss that is disputed by the reinsurer; (ii) Any amount representing the prepayment of Income Taxes as required by section 625.031, Florida Statutes; (iii) Any amounts representing assets that are allowed for self-insurance funds or assessable mutual insurers that are not assets under accounting standards for domestic insurers under Florida law; and (iv) Any assets that are hypothecated, pledged, or otherwise encumbered, excluding real estate and mortgages on such held in the normal course of business and assets pledged to the DEPARTMENT. 28. Any surplus from the transfer of all of the assets and liabilities of ESIF to BEIC STOCK under the Amended Plan of Conversion and Recapitalization submitted to the DEPARTMENT is considered contributed surplus and shall be reported as such on all financial statements of BEIC STOCK. 29. BEIC STOCK shall maintain all assets physically in the State of Florida in accordance with Section 628.271, Florida Statutes or in compliance with Section 628.511, Florida Statutes, for as long as BEIC STOCK is a domestic insurer. 30. Any material deviation from the three year Plan of Operations submitted as part of the APPLICATION must be approved in advance and in writing by the DEPARTMENT. APPLICANTS shall substantially comply with the Plan of Operations as submitted as part of the APPLICATION. If the DEPARTMENT determines that APPLICANTS are not acting in substantial compliance with the Plan of Operations or have materially deviated from the Plan of Operations without prior written approval from the DEPARTMENT, the DEPARTMENT may take administrative action as appropriate, including, but not limited to, requiring APPLICANTS to bring their activities into substantial compliance with the Plan of Operations and eliminate any material deviation from the Plan of Operations and imposing penalties for the violation of this Consent Order. In any proceeding resulting from the DEPARTMENT'S administrative action, APPLICANTS shall have the burden of proving substantial compliance and absence of material deviation by a preponderance of evidence. 31. A loan from First Union National Bank of North Carolina (hereinafter the "Bank") to Summit Holding Corporation (hereinafter the "Loan"), is a subject of the January 11, 1996 Consent Order in DEPARTMENT case number 13402-95-C-AJL. Any restructuring of the Loan, including revisions to the Credit Agreement between the Bank and Summit Holding (hereinafter the "Credit Agreement") shall be subject to prior approval of the DEPARTMENT. No such restructuring of the Loan shall create any obligation for repayment by Bridgefield Casualty Insurance Company (hereinafter BRIDGEFIELD CASUALTY) or BEIC STOCK and no assets of BRIDGEFIELD CASUALTY or BEIC STOCK shall be pledged as collateral or otherwise encumbered in conjunction with the Loan. Neither BRIDGEFIELD CASUALTY, BEIC STOCK, nor U.S. EMPLOYERS INSURANCE COMPANY shall make any direct or indirect investments in subsidiaries or affiliated entities without the DEPARTMENT's prior written approval. The DEPARTMENT shall grant such approval if the proposed investment complies with applicable provisions of the Florida Insurance Code relating to investments in subsidiaries and affiliates and is made in such a manner to prevent the investment from being subject to recovery under the Credit Agreement. Custody of the assets of U.S. EMPLOYERS shall be maintained in Florida, or in the United States with a financial institution which maintains banking operations in Florida. The physical form, if any, of the assets shall be maintained in Florida, or in compliance with section 628.511, Florida Statutes. BRIDGEFIELD CASUALTY and BEIC STOCK shall record any investments in affiliates as a non-admitted asset in its statutory financial statements, until such SHARES OF NEW HOLDING EXCHANGED FOR MEMBERSHIP INTERESTS In connection with the Conversions and the Exchange, New Holding will issue the Series A Preferred Stock to the Policyholders in exchange for their rights to common stock of Stock Company. The aggregate number of shares of Series A Preferred Stock that is being offered hereby is 1,639,701, for an aggregate par value of $16,398,701. In approving the Plan of Conversion, the Florida Department of Insurance determined that all the terms of the Plan of Conversion, including the value of the Series A Preferred Stock proposed to be issued to the Policyholders, is equitable to the policyholders of ESIF. Each Policyholder will receive a total number of shares of Series A Preferred Stock that includes a fixed number of shares for each Policy of which such Policyholder was the owner of record during the Eligibility Period, plus a variable number of shares depending upon certain factors, including earned premium attributable to policies of which such Policyholder was the owner of record during the Eligibility Period. No fractional shares of Series A Preferred Stock will be issued, and no cash will be paid in lieu of any fraction of a share that is otherwise calculated to be due pursuant to the above formulae. No shares of Series A Preferred Stock will be issued to any person other than a Policyholder. SUBSCRIPTION OFFERING In connection with the Conversions and the Exchange, Policyholders shall have the right to subscribe for up to ninety percent of the shares of common stock of New Holding. In addition to the shares of common stock that may be subscribed for by Policyholders, Management may purchase up to an aggregate of 10% of the Post Offering Outstanding Shares. However, no person, either individually or in conjunction with any affiliated person and whether subscribing as a Policyholder or as a member of Management, shall be permitted to acquire directly or indirectly more than 4.99% of the Post Offering Outstanding Shares except with the approval of the Florida Department of Insurance. In the event of an over subscription by Policyholders of their allocated amount, the Plan provides a mechanism for allotting shares among Policyholders. In the event the shares are undersubscribed, such shares will be offered to the public through an underwritten offering on the same terms available to Policyholders and/or possibly to private investors. New Holding will not be required to offer shares in the Subscription Offering to any Policyholder who resides in a foreign country or who resides in a jurisdiction of the United States with respect to which such compliance would, in the opinion of New Holding, be onerous and impractical for reasons of cost or otherwise. REPRESENTATIONS The following representations are made with respect to the First Conversion: 1. All liabilities and assets of ESIF will be assumed by and transferred to Mutual Company in exchange for the membership interests in Mutual Company. 2. The fair market value of the Mutual Company membership interests received by each ESIF Policyholder will be approximately equal to the fair market value of the ESIF membership interests surrendered in the exchange. 3. There is no plan or intention by the Policyholders of ESIF who own one percent or more of the ESIF membership interests, and to the best of the knowledge of Management of ESIF, there is no plan or intention on the part of the remaining Policyholders of ESIF, to sell, exchange or otherwise dispose of any of the Mutual Company membership interests received in the transaction, except for transfers occurring pursuant to the Second Conversion and the Exchange. 4. Immediately following the First Conversion, the Policyholders of ESIF will own all of the outstanding Mutual Company membership interests and will own such membership interests solely by reason of their ownership of ESIF membership interests immediately prior to the transaction. 5. Mutual Company has no plan or intention to issue additional membership interests following the transaction. The Florida DOI has approved the Plan of Conversion. However, such approval does not constitute a recommendation or endorsement of the Plan of Conversion by the Department of Insurance of the State of Florida (the "FLORIDA DOI"). The Conversion will become effective upon the satisfaction of certain conditions identified in the Plan of Conversion and upon the Board of Trustees of ESIF declaring the Plan of Conversion effective. The Board of Trustees may amend the Plan of Conversion, with the concurrence of the Florida DOI, or withdraw the Plan of Conversion, at any time prior to the Effective Date. In accordance with the terms of the Plan of Conversion, no person or entity, together with associates and persons acting in concert, may purchase in the Offerings more than 4.99% (the "PURCHASE LIMIT") of the shares of Common Stock to be outstanding after the Conversion (the "POST OFFERING OUTSTANDING SHARES"). Notwithstanding the foregoing, Summit will permit any "investment company" as defined in Section 3 of the Investment Company Act of 1940, as amended, and may, in its discretion, permit any other purchaser in the Offerings, to purchase more than 4.99% but less than 10% of the Post Offering Outstanding Shares, subject to each such purchaser obtaining any required approval of the Florida DOI. Following the effective date of the Conversion (the "EFFECTIVE DATE"), the Florida Insurance Code, as applicable to Summit as the holding company of a wholly owned Florida insurance company, will prohibit any person from acquiring 10% or more of the outstanding voting securities of Summit without the prior approval of the Florida DOI. Any person who acquires at least 5% but less than 10% of the outstanding voting securities of Summit will be permitted to do so only by filing a disclaimer of affiliation and control that is not disallowed by the Florida DOI. THE OFFERINGS Common Stock Offered by Summit...... 5,000,000 shares(1) Common Stock to be Outstanding After the Effective Date................ 5,000,000 shares(2) Series A Preferred Stock Offered to Policyholders by Summit and to be Outstanding After the Effective Date.............................. 1,639,701 shares(3) Use of Proceeds..................... To increase Bridgefield's capital to satisfy applicable requirements of the Florida Insurance Code, and the remainder of such proceeds, if any, will be retained by Summit for general corporate purposes. Proposed Nasdaq National Market Symbol.............................. SHSE - --------------- (1) The number of shares of Common Stock available for sale in the Public Offering will be such portion of the 5,000,000 shares not subscribed for by Eligible Policyholders in the Subscription Offering. (2) Assumes that all shares of Common Stock offered pursuant to the Offerings are sold and does not include 500,000 shares of Common Stock reserved for issuance under the Incentive Plan and 45,000 shares of Common Stock reserved for issuance under the 401(k) Plan, as such terms are defined in "RISK FACTORS -- Shares Eligible for Future Sale; Possible Volatility of Stock Price." See "MANAGEMENT OF THE COMPANY -- Incentive Plan" and "-- 401(k) Plan." (3) The holders of the Series A Preferred Stock will be entitled to receive annual cash dividends of $0.40 per share, reflecting the rate of 4% per year, cumulating from the date of issue but payable only as and when declared by the Board of Directors of Summit; provided, however, that all cumulated but unpaid dividends shall be paid upon any redemption of the Series A Preferred Stock or liquidation of Summit. See "DIVIDEND POLICY -- Series A Preferred Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027401_ameritrade_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027401_ameritrade_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f64082e61c85b7ff5a85a1c9c2de1f8bd4dcadc8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027401_ameritrade_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE INFORMATION IN THIS SUMMARY IS QUALIFIED BY REFERENCE TO THE MORE DETAILED FINANCIAL AND OTHER INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES (I) AN INITIAL PUBLIC OFFERING PRICE OF $15.00 PER SHARE OF CLASS A STOCK (THE MID-POINT OF THE ESTIMATED INITIAL PUBLIC OFFERING PRICE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS) AND (II) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. ALL REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" SHALL REFER TO AMERITRADE HOLDING CORPORATION, A DELAWARE CORPORATION, ITS SUBSIDIARIES AND ITS PREDECESSORS, UNLESS THE CONTEXT INDICATES OTHERWISE. THE TEXTUAL PORTION OF THIS PROSPECTUS AND A DEMONSTRATION OF CERTAIN OF THE COMPANY'S PRODUCTS AND SERVICES, WHICH DEMONSTRATION IS PART OF THIS PROSPECTUS, ARE AVAILABLE ON THE CD-ROM PORTION OF THIS PROSPECTUS ATTACHED TO THE INSIDE BACK COVER PAGE HEREOF. THE COMPANY The Company is a technology and service driven provider of discount securities brokerage and related financial services. The Company provides retail brokerage services to individual investors throughout the United States and internationally through a variety of electronic mediums, including the Internet, and through registered representatives. The Company offers trade execution for stocks, mutual funds, options and bonds, as well as market data and research. The Company also provides clearing and execution services to its own retail brokerage operations, as well as to independent broker-dealers, depository institutions, registered investment advisors and financial planners. The Company had approximately 110,000 active accounts as of December 31, 1996, an increase from approximately 90,000 active accounts as of December 31, 1995. Approximately 40% of this increase was the result of a strategic acquisition made in July 1995, and the remainder was due primarily to increases in the Company's advertising expenditures. Average daily trading volume during the month of December 1996 increased to approximately 5,200 executed transactions from approximately 3,700 executed transactions during fiscal 1996. The Company has experienced significant growth over the past five years while expanding profitability. Trading volumes have increased at an average annual rate of 45% from fiscal 1992 through fiscal 1996. Net revenues and net income have grown at average annual rates of 43% and 61%, respectively, over the same period. These increases, along with the Company's ability to decrease costs through the use of new technologies and its aggressive marketing, have resulted in an average return on equity over the same five-year period of 51% and an operating margin that has increased from 21% in fiscal 1992 to 34% in fiscal 1996. Net revenues for the quarter ended December 31, 1996 increased 27% over net revenues for the quarter ended December 31, 1995. As a result of significantly increased advertising expenditures incurred in the quarter ended December 31, 1996, the Company recorded a net loss of $0.1 million for such quarter, compared to net income of $2.6 million for the quarter ended December 31, 1995. The advertising expenditures were increased in response to favorable market conditions as part of the Company's ongoing marketing efforts. The Company expects that account activity resulting from such increased advertising expenditures will yield results for fiscal 1997 that are consistent with the Company's prior financial history; however, there can be no assurances in this regard. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview." The Company's success in the discount brokerage industry is a result of its creative approach to the delivery of retail brokerage and execution and clearing services. Retail brokerage services are provided under four distinct brand names, each of which offers a range of services and commission rates designed to appeal to specific groups of investors within the discount brokerage market. Accutrade, Inc. ("Accutrade") offers advanced technology delivery systems to sophisticated investors. K. Aufhauser & Company, Inc. ("Aufhauser") provides third-party research and investment analysis to experienced investors. Ceres Securities, Inc. ("Ceres") offers execution services to customers who want minimal transaction costs. eBroker, a division of the Company's subsidiary, All American Brokers, Inc. ("All American"), provides execution services exclusively through the Internet. This branding strategy allows the Company to align the cost structures of its discount brokerage businesses with the level of services desired by their customers. By providing clearing and execution services, the Company is able to expand its customer base, provide synergies to the Company's retail brokerage businesses and diversify its revenues. The Company offers its retail brokerage customers the opportunity to conduct business through a diversity of electronic mediums, including the Internet, automated touchtone telephone, personal computer, the Sharp Zaurus personal digital assistant and facsimile machine. During the quarter ended December 31, 1996, approximately 39% of the Company's transactions were generated through electronic mediums. The Company also maintains a staff of over 130 registered representatives to service customers directly. By combining innovative technology and a range of delivery systems with over 21 years of industry expertise, the Company is able to provide sophisticated services and efficient transaction execution while offering commissions that are among the lowest in the discount brokerage industry. Commissions charged to customers of discount brokerage services have steadily decreased over the past several years; however, the Company believes based on published reports that its brokerage commissions are still substantially lower than those charged by full-commission or traditional discount brokerage firms and are in many cases lower than those charged for similar transactions by other brokers that offer their services through electronic mediums. See "Risk Factors--Volatile Nature of Securities Business." The Company also provides services to over 70 independent broker-dealers, depository institutions, registered investment advisers and financial planners through AmeriTrade Clearing, Inc. ("AmeriTrade Clearing") and AmeriVest, a division of All American. AmeriTrade Clearing provides complete securities transaction clearing and execution services to each of the Company's discount brokerage businesses, as well as to independent broker-dealers, registered investment advisors and financial planners. AmeriVest provides discount brokerage services to depository institutions that do not operate their own registered broker-dealers. Providing services to these correspondents allows the Company to reach investors who rely on more traditional investment services, such as investment advice, or who prefer to deal with local or regional financial service providers. During the year ended September 27, 1996 and the quarter ended December 31, 1996, the delivery of financial services to unaffiliated correspondents accounted for approximately 11% and 9%, respectively, of the Company's net revenues. The Company seeks to capitalize on the changing financial services industry and to increase its market share by continuing with an approach based on four key strategies. First, the Company markets distinct brands with a range of services and commission rates designed to appeal to specific groups of investors within the discount brokerage market. Through this market segmentation approach, the Company is able to deliver products and services tailored to the specific needs of its customers in the most cost efficient manner. Second, the Company is a technology leader in the retail brokerage and clearing and execution businesses. The Company was the first broker to implement automated touchtone trading technology and to offer trading services over the Internet. The Company's proprietary product, Accutrade FOR WINDOWS, is the first online investing system that permits individual investors to engage in program investing and basket trading. Third, the Company strives to offer investors transaction value by providing specified services at prices that are among the lowest in the discount brokerage industry. eBroker offers a flat $12.00 commission on Internet-only trades for an equity order of any size, and Ceres charges a flat $18.00 fee for an equity order of any size. Finally, the Company intends to leverage the advanced technology offered to its retail brokerage customers to increase its clearing and execution business with correspondents. See "Business--Business Strategy."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027600_nact_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027600_nact_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c44605ef7c3001e042281946973577e670c24464
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027600_nact_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto appearing elsewhere in this Prospectus. THE COMPANY The Company provides advanced telecommunications switching platforms with integrated applications software and network telemanagement capabilities. As a single source provider, the Company believes that it is the only company in its market that designs, develops and manufactures all hardware and software elements necessary for a fully integrated, turnkey telecommunications switching solution. Because the Company provides a complete, integrated solution, its customers do not require the multiple suppliers of hardware and value added resellers of software that would otherwise be necessary to provide a wide range of services and applications. The Company's customers include long distance carriers, prepaid debit (calling) card and prepaid cellular network operators, international call back/reorigination providers and other specialty telecommunications service providers. The Company's products and services include the STX application switching platform (the "STX"), the NTS telemanagement and billing system (the "NTS") and facilities management services. In May 1996, the Company introduced the STX, an integrated digital tandem switching system that currently supports up to 1,024 ports per switch and can be combined with three additional STXs to provide a total capacity of 4,096 ports per system. The STX includes proprietary systems software that enables standard applications such as 1+ and optional advanced applications such as international call back/reorigination, prepaid debit card and prepaid cellular. The Company has targeted the STX, with its enhanced features and scaleable capacity, to an expanded group of customers, including independent telephone companies, CAPs/CLECs, shared tenant service providers, Fortune 1000 corporations and local telephone companies outside the United States. The Company believes that the STX offers value added features and capacity at price points typically lower than those offered by its competitors. The NTS performs call rating, accounting, switch management, invoicing and traffic engineering for multiple switches that may either be NACT switches or a number of other industry switches. In conjunction with the sale of a system, the Company offers a facilities management service whereby the Company will operate and maintain a customer's switch for a fee. In providing this service, the Company enables its customers to direct their attention toward marketing their products rather than focusing on the technical aspects of operating a switch. Deregulation of long distance telecommunications as a result of the divestiture of AT&T in 1984 and increased competition fostered by the Telecommunications Act of 1996 have materially altered the dynamics of the telecommunications industry by opening competition in the market to a wide group of telecommunications companies, including a large number of specialty telecommunications service providers that constitute a substantial portion of the Company's targeted market. The Company believes that the STX and NTS are well suited to exploit the opportunities being created in this deregulated market environment. Certain technical terms and acronyms used in this Prospectus are defined in the "Glossary of Terms" beginning on page 58. Upon completion of this offering, GST USA will own approximately 63% of the outstanding Common Stock of the Company (approximately 60% if the Underwriters' over-allotment option is exercised in full) and will continue to control the Company. GST, the parent of GST USA, is a federally chartered Canadian corporation that provides a broad range of telecommunications products and services. The Common Shares of GST are traded on the American Stock Exchange under the symbol "GST." The Company was incorporated in Utah in January 1982. The Company reincorporated in Delaware on February 13, 1997. The Company's address is 382 East 720 South, Orem, Utah 84058 and its telephone number is (801) 225-6248. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.............. 2,000,000 shares Common Stock offered by the Selling Stockholder.................................... 1,000,000 shares Common Stock to be outstanding after the offering....................................... 8,113,712 shares(1) Use of proceeds.................................. For product development, sales and marketing, the purchase of land and a building for the Company's headquarters and the construction costs to complete the building, other working capital and general corporate purposes and possible acquisitions of or investments in complementary businesses or products. Proposed Nasdaq National Market symbol........... NACT </TABLE> SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> FISCAL YEAR NINE MONTHS THREE MONTHS ENDED ENDED FISCAL YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, ---------------- ------------- ---------------------------- ---------------- 1991 1992 1993(2) 1994 1995 1996 1995 1996 ------ ------ ------------- ------ ------- ------- ------ ------ <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues....................... $1,666 $1,860 $ 2,422 $5,479 $11,484 $16,285 $2,820 $6,390 Gross profit................... 913 1,047 1,619 3,449 4,878 6,027 1,208 3,011 Income (loss) from operations................... (15) (75) 585 705 97 124 (15) 1,251 Net income..................... $ 67 $ 179 $ 459 $ 493 $ 80 $ 194 $ 4 $ 708 Net income per share........... $ 0.02 $ 0.06 $ 0.12 $ 0.08 $ 0.01 $ 0.03 $ 0.00 $ 0.12 Weighted average shares outstanding(3)............... 2,856 2,870 3,847 5,998 6,114 6,114 6,114 6,114 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents........................................... $ 552 $ 20,579 Working capital..................................................... 6,382 26,409 Total assets........................................................ 17,041 37,068 Total stockholders' equity.......................................... 11,416 31,442 </TABLE> OTHER DATA(5): <TABLE> <CAPTION> THREE MONTHS NINE MONTHS FISCAL YEAR ENDED ENDED ENDED SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, -------------------------- --------------- 1993(2) 1994 1995 1996 1995 1996 ------------- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> Amortization of acquired intangibles included in cost of sales.............................. $ 14 $185 $443 $362 $ 91 $ 91 Amortization of acquired intangibles included in operating expenses........................ $ 20 $257 $520 $573 $143 $143 Total amortization of acquired intangibles..... $ 34 $442 $963 $935 $234 $234 </TABLE> - ------------------------------ (1) Based on the number of shares of Common Stock outstanding as of February 4, 1997. Excludes 1,250,000 shares of Common Stock reserved for issuance pursuant to the exercise of stock options, 850,000 of which were outstanding as of February 4, 1997 having an exercise price of $9.35 per share. See "Management--1996 Stock Option Plan." (2) The Company changed its fiscal year-end to September 30th, effective with the fiscal year ended September 30, 1993. Accordingly, the fiscal year ended September 30, 1993 was a nine-month period. (3) See Note 1 of Notes to Financial Statements for an explanation of the method used to determine the number of shares used in computing net income per share. (4) Adjusted to reflect the sale of 2,000,000 shares offered by the Company hereby at an assumed initial public offering price of $11.00 per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027821_nexar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027821_nexar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd4517b128bb8ec2b57f8e4a664ce23216e33c4a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027821_nexar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Nexar Technologies, Inc. develops, manufactures and markets high-performance, competitively-priced desktop personal computers (PCs) based on patent-pending technologies. Unlike conventional PCs, NEXAR systems permit (i) resellers to offer a custom-configured PC on demand, and (ii) end-users to easily upgrade or switch important components of the PC to accommodate emerging and future technologies resulting in a significant extension of the computer's useful life. NEXAR sells a high-performance system which is typically shipped to resellers without the key system-defining components (microprocessor, memory and hard drive), but which is otherwise fully configured. This approach: * Enables the end-user, whether corporate or individual, to buy a system configured exactly to that customer's technical and budgetary requirements and, later, to easily upgrade the PC's key components with industry-standard products. * Enables the Company's channel resellers to reduce their exposure to inventory depreciation caused by rapid advances in technology and frequent price reductions of the key system components, which typically account for more than 50% of the cost of a PC. * Enables the Company's resellers to compete with direct marketers, such as Dell Computer and Gateway 2000, because a NEXAR PC provides resellers with the ability to promptly deliver a custom-configured, high-performance PC at a competitive price. * Enables the Company to maintain profit margins unaffected by the forecasting risks borne by conventional PC manufacturers who operate within a several-month-long cycle from (i) component procurement to (ii) assembly to (iii) date-of-sale, all conducted in an environment of rapid technological advances and frequent price reductions. The Company's objective is to become the industry leader in designing and marketing PCs with technology which enables resellers and end-users, in an easy and cost-effective manner, to upgrade and transition the central processing unit (CPU) and the other key system defining components in accordance with the known and anticipated roadmaps of various makers of fundamental and leading-edge PC technology. The Company does not market its products directly to end-users, but instead distributes its products through a growing network of international, national and regional distributors, value-added and other resellers, original equipment manufacturers, system integrators, computer superstores, direct response resellers, and independent dealers. The Company's current PCs are based on an industry-standard, open architecture design, co-engineered by HCL Hewlett Packard Ltd., which allows the CPU, random access memory (RAM), and cache memory to be replaced by end-users without technical assistance and without opening the entire chassis. The Company's current model accepts Intel Corporation's Pentium(R) and compatible CPUs, including the recently released Pentium processor with MMX multimedia extension technology. NEXAR PCs also include, as a standard feature, a removable hard drive, permitting its replacement and the further advantages of increased data portability and security, and the use of multiple operating systems in a single PC. NEXAR has developed and expects to soon market a new generation of PCs featuring the Company's patent-pending Cross-Processor Architecture(tm) (NEXAR XPA(tm)) in which any one of several state-of-the-art CPUs can be initially included or later installed, including Intel's Pentium or Pentium Pro and compatible CPUs. The NEXAR XPA technology is being designed to also accommodate microprocessors based on other technologies, such as the Alpha CPU made by Digital Equipment Corporation. NEXAR is led by its Chairman and Chief Executive Officer, Albert J. Agbay, who has more than twenty years experience at various computer companies, including senior management positions at PC makers such as NEC, Panasonic and Leading Edge. 3 THE OFFERING Unless otherwise indicated herein, the information in this Prospectus (i) has been adjusted to give effect to a 120-for-1 stock split of the Company's common stock, $0.01 par value (the "Common Stock"), effected on December 18, 1996, (ii) gives effect to the conversion of $10,000,000 of indebtedness owed to related parties into 1,900,000 shares of Common Stock upon closing of the Offering, and (iii) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock," "Certain Transactions" and "Underwriting." Common Stock offered by the Company.............. 2,500,000 shares Common Stock to be outstanding after the Offering......................... 9,200,000 shares(1)(2) Use of proceeds ............................. For repayment of $8,249,549 of indebtedness to related parties and general corporate purposes, including working capital, product development and capital expenditures. See "Use of Proceeds." Proposed Nasdaq National Market symbol ....... NEXR - ------------ (1) Based on the number of shares of Common Stock outstanding on December 31, 1996. Includes 1,200,000 shares of Common Stock to be held by Palomar subject to a contingent repurchase right of the Company at a nominal price per share in the event the Company does not achieve certain performance milestones. Such 1,200,000 shares are not includable in the computation of earnings per common and common equivalent share while subject to such contingency. See Note 3 of Notes to Consolidated Financial Statements. (2) Excludes (i) 3,055,920 shares of Common Stock issuable upon exercise of stock options outstanding as of December 31, 1996 at a weighted average exercise price of $0.52 per share, of which options to purchase 1,063,973 shares were then exercisable, (ii) 304,560 shares (assuming an initial public offering price of $12.00 per share) of Common Stock reserved for issuance upon conversion of shares of Convertible Preferred Stock, and (iii) 1,050,000, 50,000 and 50,000 shares of Common Stock reserved for issuance under stock options to be granted upon the effectiveness of the Offering at exercise prices equal to 100%, 85% and 50%, respectively, of the initial public offering price. See "Certain Transactions," "Capitalization," "Management -- Stock Plans" and "Beneficial Ownership of Management."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027881_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027881_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a597f71fbabe93bcec3aaff500c1c38be90b17d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027881_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated, (i) all references to market, category, segment sales, market share percentages and market positions reflect grocery sales dollars for the 52-week period ended September 27, 1997, as gathered by A.C. Nielsen ("Nielsen") for United States and Mexico markets, (ii) the information provided in this Prospectus assumes no exercise of the U.S. Underwriters' over-allotment option and (iii) references to the Company include the Company and its subsidiaries. "Aggregate net sales" includes the effect of (i) the acquisition (the "Bumble Bee Acquisition") of the assets and certain liabilities of Bumble Bee Seafoods, Inc. and its operating subsidiaries ("Bumble Bee Seafoods"), (ii) the purchase of Heritage Brands Holding, Inc. ("Heritage"), (iii) the purchase of Productos Del Monte S.A. de C.V. ("Productos Del Monte") and (iv) the purchase of Creative Products, Inc. ("Creative Products") as if they had occurred at the beginning of the period discussed. The branded canned seafood business acquired in the Bumble Bee Acquisition is referred to herein as the Bumble Bee Business. All information in this Prospectus reflects a 5.3292 for one reverse stock split effected prior to the closing of the Offering. Certain statements contained in this summary and elsewhere in this Prospectus, including, but not limited to, information with respect to the Company's business and liquidity and capital resources, are forward-looking statements. BUSINESS OVERVIEW The Company is a leading North American manufacturer and marketer of a diversified, well-established portfolio of shelf-stable food products with popular brand names, including Chef Boyardee prepared foods, Bumble Bee premium canned seafood, PAM cooking spray, Polaner fruit spreads and spices and Gulden's mustard. In the United States, 11 of the Company's 14 principal branded product lines command the number one position in their defined markets. For the fiscal year ended December 31, 1996, these 11 branded product lines accounted for $863.2 million or 58.3% of the Company's aggregate net sales. Many of the Company's brands also command leading market positions in Canada, Mexico and Puerto Rico. The Company's portfolio of leading brands provides the Company with a strong presence in the United States as well as an attractive platform for continued international expansion. The Company's brand name business is complemented by growing food service and private label businesses and sales to the U.S. military. In November 1996, the Company was the subject of a leveraged recapitalization pursuant to which affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") and C. Dean Metropoulos, the Company's new Chairman and Chief Executive Officer, acquired control of the Company (the "IHF Acquisition") from American Home Products Corporation ("American Home Products"), the parent of the Selling Stockholder. Under Mr. Metropoulos' direction, the Company has implemented a strategy to increase sales and profits by (i) growing sales of existing brands, (ii) expanding distribution into alternative markets, (iii) completing strategic acquisitions and (iv) achieving cost savings. The Company's pro forma as adjusted net sales and operating profit for the fiscal year ended December 31, 1996 were $1,338.4 million and $157.7 million, respectively. For the nine month period ended September 30, 1997, the Company's pro forma as adjusted net sales were $1,022.9 million, and the Company's pro forma as adjusted operating profit, before giving effect to a non-cash stock option compensation charge of $44.8 million, was $134.5 million. See "Unaudited Pro Forma Financial Statements." In the United States, the Company groups its brands into five general categories consisting of Chef Boyardee branded products, Bumble Bee branded products, specialty brands, southwestern cuisine and snack foods. The Company's two largest brands, the nationally distributed families of Chef Boyardee prepared foods and Bumble Bee premium canned seafoods, represented 27.0% and 26.7%, respectively, of the Company's aggregate net sales in 1996. Chef Boyardee is one of the nation's most widely recognized brands and is found in over half of American homes with children. Bumble Bee is one of the leading brands of premium canned seafood in the U.S. and is the leading brand of canned white meat tuna and salmon in the U.S. The Company's strong Chef Boyardee and Bumble Bee brands are complemented by its specialty brands, including [The inside cover will contain art work of colored brand trademarks and logos of the Company including "Chef Boyardee(R)," "Bumble Bee(R)," "PAM(R)," "Polaner(R) All Fruit," "Original Ro*Tel(R)," "Campfire(R)," "Ranch Style(R)," "Crunch 'n Munch(R)," "Gulden's(R)," "Luck's," "Dennison's(R) Since 1915," "Jiffy Pop(R)," "Wheatena(R)," "Maypo(R)" and "G. Washington's(R)."] CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." --------------------- "Chef Boyardee," "Bumble Bee," "PAM," "Polaner," "Franklin Crunch 'n Munch" (hereinafter "Crunch 'n Munch"), "Gulden's," "Campfire," "Marshmallow Munchie," "Ranch Style," "Luck's," "Dennison's," "Ro*Tel," "Jiffy Pop" and "G. Washington's" are registered trademarks of the Company. Registration of the Chef Jr. trademark is pending. "Wheatena," "Maypo" and "Maltex" are registered trademarks licensed to the Company. This Prospectus also includes trademarks of companies other than the Company. PAM cooking spray, Polaner fruit spreads and spices, Gulden's mustard, Maypo, Wheatena and Maltex hot cereals and G. Washington's dry seasonings and broths. In the growing market for southwestern cuisine, the Company's products include Ro*Tel canned tomatoes with green chilies and strong regional brands such as Ranch Style and Luck's canned beans and Dennison's chili. In the snack foods category, the Company's brands include Crunch 'n Munch glazed popcorn and pretzels, Campfire marshmallows and marshmallow crisp rice bars and Jiffy Pop unpopped popcorn. The Company, through its Productos Del Monte subsidiary, is also a leading processor and marketer of branded catsup, canned vegetables and bottled salsa in Mexico. The Company's recognizable portfolio of leading brands provides a critical mass of brand name sales that (i) allows the Company to realize synergies in manufacturing, marketing, distribution and raw material sourcing, (ii) creates a position of strength with retailers that is critical in maintaining and securing valuable retail shelf space for its products and (iii) provides a strong platform for introducing product line extensions and new products. The following table sets forth market positions and market shares of the Company's principal product lines, along with certain competitors' market share information. MARKET POSITION OF PRINCIPAL PRODUCT LINES <TABLE> <CAPTION> MARKET SHARE NUMBER TWO ------------------------------- COMPETITOR'S PRODUCT LINE CATEGORY/SEGMENT POSITION PERCENTAGE PERCENTAGE ------------ ---------------- ------------------ ---------- ------------ <S> <C> <C> <C> <C> UNITED STATES CHEF BOYARDEE BRANDED PRODUCTS Chef Boyardee.................. Canned Pasta....................... #1 57% 37% Chef Boyardee.................. Pizza Mixes........................ #1 69% 15% BUMBLE BEE BRANDED PRODUCTS Bumble Bee..................... Canned White Meat Tuna............. #1 40% 34% Bumble Bee..................... Canned Light Meat Tuna............. #3 16% NA Bumble Bee..................... Canned Salmon...................... #1 21% 9% SPECIALTY BRANDS PAM............................ Cooking Spray...................... #1 52% 13% Polaner........................ Fruit-Juice-Sweetened Spreads...... #1 48% 32% Gulden's....................... Brown Mustard...................... #1 50% 25% SOUTHWESTERN CUISINE Ro*Tel......................... Canned Tomatoes with Green Chilies............................ #1 76% 1% Ranch Style.................... Canned Beans(1).................... #1 in Southwest(2) 27% 13% Luck's......................... Canned Beans(1).................... #1 in Southeast(2) 30% 26% Dennison's..................... Canned Chili....................... #4 in West(2)(3) 18% NA SNACK FOODS Crunch 'n Munch................ Glazed Popcorn..................... #1 37% 33% Campfire....................... Marshmallow Crisp Rice Bars........ #3 7% NA MEXICO Productos Del Monte............ Catsup............................. #1 46% 29% </TABLE> - --------------- (1) The canned beans category includes both the pork and beans and miscellaneous beans categories. In their respective regions, Ranch Style leads both categories with a total market share of 27%, and Luck's leads the miscellaneous beans category with a market share of 30%. (2) The Company defines (i) the Southwest region to include Nielsen reported information for Texas, Oklahoma, New Mexico and Arizona, (ii) the Southeast region to include Nielsen reported information for Georgia, Alabama, North Carolina, South Carolina, Kentucky, Tennessee and Virginia and (iii) the West region to include Nielsen reported information for Colorado, Wyoming, Idaho, Nevada, California, Oregon, Arizona, Washington and Utah. (3) Dennison's has the #2 market share in California, which represents approximately 74% of Dennison's net sales. BUSINESS STRATEGY The Company's objectives are to increase sales and earnings by (i) growing sales of existing brands through expansion of the Company's product offerings and refocused marketing efforts, (ii) expanding distribution in food service, private label and international markets, (iii) completing strategic acquisitions and (iv) continuing to achieve cost savings. - Leverage Leading Brands. The Company intends to expand its product offerings by leveraging its existing portfolio of leading brands. Management believes that (i) Chef Boyardee and Bumble Bee can serve as a strong platform to expand the Company's product line into other quick-meal products, (ii) Dennison's, Ranch Style, Luck's and Ro*Tel can be utilized to develop a broader southwestern cuisine business and (iii) Crunch 'n Munch, Campfire and Jiffy Pop can be the cornerstone of a diversified snack foods business. In addition, management has formulated a number of new products in its existing product lines to capitalize on the growing trends toward healthy and convenient foods. In the last 12 months, the Company has introduced 10 new products under its existing brand names, two of which were the first fat-free or 99% fat-free entries into the categories in which they compete. - Refocus Marketing Efforts. To revitalize its established brand names, the Company has refocused its marketing and packaging efforts. Specifically, the Company has (i) changed its marketing and promotional campaigns to more effectively address its target markets, (ii) increased advertising expenditures to enhance brand equity and (iii) introduced new packaging for a majority of its products. Since 1995, the Company has refocused its marketing efforts by emphasizing consumer advertising (a "pull" strategy) and de-emphasizing trade spending and discounting (a "push" strategy). As a result, advertising costs as a percentage of total marketing expenses increased from 16.3% in 1994 to 25.7% in the first nine months of 1997 while trade promotion expenses as a percentage of total marketing expenditures declined from 63.5% to 59.8%. The Company recently introduced several new television advertising campaigns, such as those promoting Chef Boyardee as an ideal "fourth meal" to be served after school and PAM cooking spray as a flavorful, healthy alternative to cooking oils, butter and margarine. Since the new Chef Boyardee television campaign was introduced in November 1996, consumer sales of Chef Boyardee's principal product group, the "All Family" product line, has increased significantly, with consumer sales through September 1997 increasing 7.7% over the comparable 1996 period. In addition, the Company recently began television advertising for its Ranch Style brand for the first time in five years. The Company has also redesigned the packaging of a majority of its products to emphasize the brand name, contemporize the presentation and make the products visually more appealing to consumers. - Expand into Food Service, Private Label and International Markets. Management believes that the food service and private label businesses, which together represent 8.8% of the Company's aggregate 1996 net sales, offer significant growth opportunities. Management believes that it can further develop these businesses by utilizing the Company's established sales and distribution capabilities and excess plant capacity. As part of this strategy, the Company recently acquired Creative Products, the leading manufacturer of cooking spray sold to private label and food service customers in the U.S. Management believes that Creative Products' dedicated private label and food service sales force can help the Company increase sales of many of its other products in these markets. In addition, management believes that attractive opportunities exist to expand the Company's sales in international markets with growing economies and attractive demographics. The Company recently acquired Productos Del Monte, a leading producer and distributor of branded catsup, canned vegetables and bottled salsa in Mexico. The Company plans to leverage the infrastructure of Productos Del Monte as a platform to expand the Company's southwestern cuisine, cooking spray, canned pasta and canned seafood products into Mexico. - Complete Strategic Acquisitions. The Company will continue to pursue opportunities to make acquisitions that complement and expand its core businesses or that enable the Company to enter new markets. Since the IHF Acquisition, the Company has more aggressively pursued acquisitions and has acquired (i) Heritage, the manufacturer of the Company's Campfire branded products, (ii) the Bumble Bee Business, (iii) Productos Del Monte and (iv) Creative Products. Management believes that additional strategic acquisition opportunities exist and that incremental revenue and earnings can be generated by leveraging the Company's production, distribution, sales and administrative capabilities. In addition, an important element of management's evaluation of a strategic acquisition is the potential savings attainable through rationalization of the target company's cost structure. - Continue to Achieve Cost Savings. Since the IHF Acquisition, the Company has achieved annualized net cost savings of approximately $25.3 million, including approximately $11.1 million associated with the integration of the Bumble Bee Business. These savings have been achieved primarily through (i) reductions in overhead and duplicative administrative, sales and other personnel ($15.5 million), (ii) streamlining production, distribution, research and administrative functions ($7.3 million) and (iii) savings in packaging and brokerage expenses ($2.5 million). To achieve these cost savings, the Company incurred one time charges of approximately $5.0 million, most of which was recognized in the year ended December 31, 1996. Management expects to be able to achieve further cost savings by continuing these initiatives. COMPETITIVE STRENGTHS Management believes that the Company has the following competitive strengths that will enable it to execute its business strategy effectively. - Well-Positioned Products in Growing Markets. The Company's diversified portfolio of branded products is well-positioned to meet the growing demand for convenient and healthy foods. Many of the Company's products, such as Chef Boyardee canned pasta and Bumble Bee canned seafood, are quick and easy to prepare and nutritionally sound. As such, management believes these products are particularly appealing to families with children. Many of the Company's other brands also benefit from the trend toward healthier eating, including PAM, Polaner, Ro*Tel and Ranch Style. The Company has introduced several new products that capitalize on the trend toward fat-free foods such as Chef Boyardee 99% Fat-Free, Crunch 'n Munch Fat-Free and Luck's Fat-Free Beans. In addition, the Company's strong southwestern cuisine products provide a platform to capitalize on the cuisine's growing national popularity. Furthermore, through the acquisition of Productos Del Monte, the Company has established a presence in the growing Mexico market for processed food products. - Well-Developed Infrastructure with Capacity for Growth. The Company's manufacturing plants and distribution network have significant excess capacity that can be utilized to support the (i) growth of the Company's existing branded and nonbranded businesses, (ii) introduction of new products and entry into new markets and (iii) integration of strategic acquisitions. The Company's principal manufacturing facilities in Milton, Pennsylvania and Vacaville, California are operating at approximately 55% and 28% of their respective capacities (based on a five-day, two-shift work schedule). In addition, the Company has a comprehensive U.S. sales force and distribution network which management believes has the capacity to support substantial increases in volume. Management believes this sales and distribution network enables the Company to meet or exceed customer service requirements by delivering 85% of its sales volume to customers within 24 hours and 100% within 48 hours. - Strong Management. The Company's senior management team is comprised of food and consumer product industry veterans led by C. Dean Metropoulos, the Company's Chairman and CEO, and John Bess, the Company's President and COO. Mr. Metropoulos is CEO of The Morningstar Group, Inc. ("Morningstar") and has been CEO of several other food companies, including Stella Foods, Inc. ("Stella"). During Mr. Metropoulos' tenure at Morningstar and Stella, he implemented successful sales growth and cost reduction strategies which dramatically increased sales and earnings at both companies. Many of these strategies are similar to those that are being implemented by the Company. Mr. Bess has extensive experience in growing established brand names by implementing aggressive consumer based marketing programs. Mr. Bess has 21 years of management and consumer marketing experience at The Procter & Gamble Company ("Procter & Gamble"), most recently serving as Vice President and Managing Director of Worldwide Strategic Planning for Procter & Gamble's global hair care business, which generated 1996 sales of $2.6 billion. In addition, the Company's six general managers overseeing brand performance have an average of approximately 20 years of experience in the food industry. - Strong Profit Margins to Fund Growth. Management believes that the Company's strong operating profit margins provide financial resources necessary to fund the Company's internal growth strategy. From 1991 through 1996 (prior to the Bumble Bee Acquisition), the Company achieved an average annual operating profit margin of 15.2%. As a result of the Company's strong operating profit margins, the Company generated cash flow from operations of $146.0 million in 1996. Management believes that its high operating profit margins and cash flow from operations result from the Company's leading market position in high margin food categories as well as the cost efficiencies gained from significant historical investment in the Company's manufacturing and distribution network. The Company's strong financial performance and its relatively low capital expenditure requirements are expected to generate significant cash flow to fund the Company's internal growth strategy. OWNERSHIP AND MANAGEMENT Upon completion of the Offering, Hicks Muse will beneficially own approximately 58.0% and C. Dean Metropoulos will beneficially own approximately 4.8% of the outstanding shares of Common Stock. None of Hicks Muse, Mr. Metropoulos or their related entities is selling any shares in the Offering. See "Principal and Selling Stockholders." Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Hicks Muse has a distinctive investment philosophy emphasizing growth of sales and earnings in existing portfolio companies by pursuing strategic acquisitions. Since the firm's inception in 1989, Hicks Muse has completed or has pending 148 transactions having a combined transaction value exceeding $24.1 billion. Of the completed or pending transactions, 44 have been acquisitions of platform companies such as International Home Foods and 104 have been strategic acquisitions by a platform company such as the Bumble Bee Acquisition by International Home Foods. This strategy has been successfully employed in a number of Hicks Muse portfolio companies such as Berg Electronics, Inc. and Chancellor Media Corporation. In International Home Foods, Hicks Muse has combined its financial experience with the operating management experience of Mr. Metropoulos. Hicks Muse and Mr. Metropoulos have established an exclusive relationship to pursue acquisitions of food companies that Mr. Metropoulos will manage. See "Risk Factors -- Control by Principal Stockholder; Relationship with Principal Stockholder and Management; Allocation of Corporate Opportunities." THE OFFERING <TABLE> <S> <C> <C> Common Stock Offered: By the Company U.S. Offering................... 8,421,087 shares International Offering.......... 2,105,272 shares ----------- Subtotal................... 10,526,359 shares By the Selling Shareholder U.S. Offering................... 2,476,913 shares International Offering.......... 619,228 shares ----------- Subtotal................... 3,096,141 shares Total.............................. 13,622,500 shares ----------- Common Stock to be outstanding after the Offering(1).................... 75,576,596 shares Use of proceeds...................... Repayment of indebtedness under the Company's senior secured credit facilities (the "Senior Bank Facilities"). New York Stock Exchange symbol....... IHF </TABLE> - --------------- (1) Excludes 7,645,253 shares of Common Stock issuable upon exercise of outstanding stock options granted to certain employees of the Company. The Company has reserved an additional 798,768 shares of Common Stock for issuance in connection with options that may be granted under the Company's 1997 Stock Option Plan (the "Stock Option Plan"). See "Management -- Benefit Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001027884_chicago_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001027884_chicago_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..db880e14093dc775dfec0ae0d0081bcf56952845
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001027884_chicago_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE "ISSUER" HEREIN REFER TO CHICAGO BRIDGE & IRON COMPANY N.V., A CORPORATION ORGANIZED UNDER THE LAWS OF THE NETHERLANDS, ALL REFERENCES TO THE "COMPANY" OR "CB&I" HEREIN REFER TO THE ISSUER, TOGETHER WITH ITS PREDECESSORS AND SUBSIDIARIES, IN EACH CASE AFTER GIVING EFFECT TO THE REORGANIZATION (AS DEFINED BELOW), ALL REFERENCES TO "PRAXAIR" HEREIN REFER TO PRAXAIR, INC. AND ITS SUBSIDIARIES AND ALL REFERENCES TO THE "SELLING SHAREHOLDER" HEREIN REFER TO PRAXAIR, INC. IN THIS PROSPECTUS, REFERENCES TO "GUILDERS" AND "NLG" ARE TO DUTCH GUILDERS, AND REFERENCES TO "DOLLARS," "U.S. $" AND "$" ARE TO UNITED STATES DOLLARS. THE COMPANY CB&I is a global engineering and construction company specializing in the engineering, design, fabrication, erection and repair of petroleum terminals, steel tanks, refinery pressure vessels, low temperature and cryogenic storage facilities and other steel plate structures and their associated systems. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. CB&I seeks to maintain its leading industry position by focusing on its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. CB&I has been continuously engaged in the engineering and construction industry since its founding in 1889. In 1996, the Company was involved in over 500 projects for over 250 customers in 34 countries. In the first nine months of 1997 and in fiscal year 1996, the Company generated revenues of $477.5 and $663.7 million, respectively, and its project backlog as of September 30, 1997 was $559.0 million. The Company had operating income of $14.3 million in the first nine months of 1997, excluding the effect of a one-time, non-cash charge associated with the Company's Management Plan (as defined below), and had operating income of $31.3 million in fiscal year 1996. CB&I primarily serves customers in the petroleum, petrochemical, chemical, electric and gas utility, pulp and paper, and metals and mining industries, both directly and through other companies which service these customers. Approximately 60% of the Company's revenues in 1996 were attributable to petroleum and petrochemical industry-related projects. The Company operates on a global basis and has the supporting infrastructure to compete in key geographic markets worldwide. In the first nine months of 1997 and in fiscal year 1996, CB&I derived approximately 55% and 50%, respectively, of its revenues from operations outside of North America. Demand for the Company's products and services depends primarily on its clients' capital expenditures for construction. The Company seeks to benefit from recently higher levels of current and projected capital expenditures by its primary customer base in the petroleum and petrochemical industries, which it believes have resulted from increases in worldwide crude oil prices during 1996. In the first quarter of 1996, Praxair acquired CBI Industries, Inc. ("Industries"), then the parent company of CB&I, for the purpose of owning its industrial gas operations. At that time, Praxair announced its intention to divest those businesses of Industries which were not strategic to Praxair, including the Company. Praxair undertook to strategically reposition the Company and, as part of this process, a new management team was assembled for the Company, headed by Gerald M. Glenn as President and Chief Executive Officer. Mr. Glenn has over 30 years of combined experience with Fluor Corporation, the world's largest publicly owned engineering and construction company, and Daniel International Corporation, and from 1986 to 1994 served as Group President of Fluor Corporation's principal operating subsidiary, Fluor Daniel, Inc. The new management team has focused its efforts on (i) redirecting and accelerating a restructuring program designed to increase the Company's base profitability; (ii) implementing a new compensation program linking management incentives to improvements in shareholder value; and (iii) developing a business strategy to enhance CB&I's future growth and profitability. Recent Developments On October 30, 1997, the Company released the following news release. Chicago Bridge & Iron Company N.V. (NYSE & ASE:CBI) today reported . . . [f]or the nine months ended September 30, 1997, net income was $9.0 million or $0.72 per share, excluding the effect of the previously announced one-time, non-cash special charge of $16.7 million ($10.1 million after tax). This one-time, non-cash special charge related to the contribution of common shares to a management compensation program in connection with the Company's initial public offering. Including the one-time, non-cash special charge, the Company reported a net loss of ($1.1) million or ($0.09) per share for the nine-month period ended September 30, 1997, compared with net income of $10.9 million for the same period of 1996. As previously announced, third quarter income from operations was affected by start-up problems associated with the expansion of the Houston fabricating facility and implementation of new integrated computerized systems being piloted at Houston. These factors have resulted in additional costs and delays in some materials reaching construction sites, thereby postponing the recognition of revenue and resulting in lower operating income. Based on September results and a more in-depth examination of contracts, the Company recognized it will incur additional costs to complete existing contracts. . . . New business taken remained strong in what has normally been a weak third quarter. . . . For the nine months ended September 30, 1997, new business taken of $561.1 million was 18% greater than the $474.3 million reported in the first nine months of 1996. Over 60% of the new business taken during the nine months was for contracts awarded outside of North America. Backlog at September 30, 1997, increased $102.4 million or 22.4% to $559.0 million, compared with a backlog of $456.6 million at September 30, 1996, and was $73.3 million or 15.1% higher than the $485.7 million backlog reported at December 31, 1996. . . . For the first nine months of 1997, revenues of $477.5 million were 1.2% lower than the $483.5 million earned in the first nine months of 1996. . . For the nine-month period, gross profit decreased by $9.6 million to $43.4 million or 9.1% of revenues compared with $53.0 million or 11.0% for the nine months ended September 30, 1996. Also as previously announced, income from operations for the three months ended September 30, 1997 was favorably impacted by non-recurring income of approximately $4.1 million from the resolution of disputed liabilities and recognition of income related to a favorable appeals court decision. The third quarter was also positively impacted by an $0.8 million reduction in the cost of revenues for the capitalization of tools previously expensed during the first half of 1997. . . . On April 2, 1997 the Company consummated the Initial Common Share Offering. As part of the Initial Common Share Offering, the Selling Shareholder sold 11,045,941 Common Shares representing approximately 88% of the Common Shares outstanding on the date of such sale. As of the date of this Prospectus, the 545,941 Common Shares owned by the Selling Shareholder represent approximately 4.4% of the outstanding Common Shares. If all of the Common Shares covered hereby are sold, the Selling Shareholder would own no Common Shares. RESTRUCTURING PROGRAM The comprehensive restructuring program (the "Restructuring Program") currently being implemented by the Company's new management team achieved estimated cost savings of approximately $10 million in 1996, and is expected to result in estimated annual cost savings of approximately $21 million in 1997 and approximately $23 million in 1998, relative to the Company's 1995 cost base. The Restructuring Program is based on initiatives begun in 1994, and was significantly refocused and accelerated in 1996 following the appointment of the new management team. The program is expected to be fully implemented by the end of 1997. The Restructuring Program initially focused on consolidating the Company's organizational structure from six separate, decentralized business units into a single global business operation. On-going enhancements in connection with such consolidation include centralization of procurement, equipment and personnel mobilization, and certain financial functions, as well as streamlining and consolidating administrative and engineering support. As part of the program, eight fabrication plants or warehouses have been closed and three administrative office sites have been downsized or relocated, including the headquarters of the Company's United States operations. The Company also has targeted a reduction of approximately 160 salaried positions, all of which had been eliminated as of September 30, 1997. COMPENSATION PROGRAM In order to more closely align the interests of the Company's management and employees with those of its shareholders, CB&I has redesigned its compensation program to include long-term, equity-based incentives. In addition, Praxair and the Company agreed to compensate approximately 70 officers and key management employees of the Company for their services in connection with the further development and implementation of the Restructuring Program and the Company's initial public offering (the "Initial Common Share Offering"), which was consummated in April 1997. As a result, the Company adopted the CB&I Management Defined Contribution Plan (the "Management Plan") and upon consummation of the Initial Common Share Offering, contributed to the Management Plan 925,670 Common Shares (the "Management Plan Shares"), representing approximately 7% of the total number of Common Shares outstanding upon consummation of the Initial Common Share Offering. The Management Plan Shares will vest three years (and, with respect to one participant, two years) after the date of the Initial Common Share Offering. BUSINESS STRATEGY The Company is committed to increasing shareholder value by seeking to build on the success established in 1996 and growing its business in the global marketplace through a combination of strategic initiatives including the following: * FOCUS ON CORE BUSINESS. The Company seeks to leverage its perceived competitive advantages in design engineering, metallurgy and welding, and its ability to execute projects virtually anywhere in the world, to actively pursue growth opportunities in its core business. Prior management of the Company's former parent pursued a diversification strategy during the 1980s and 1990s, which included acquisitions of significant unrelated businesses. Under CB&I's new management team, the Company is committed to focusing on its core activities of engineering and design, fabrication, erection, repair and modification of steel tanks and other steel plate structures. * CONTINUE COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. CB&I's management believes that the Company's Restructuring Program represents the foundation for a long-term strategy of reducing the costs of its products and services, with the goal of establishing and maintaining a position as a low cost provider in its markets. All key functions of the organization--engineering, procurement, construction, project management, finance and administrative support--will be required to demonstrate improvements in productivity, and will be provided compensation incentives for achieving such goals. * TARGET GLOBAL GROWTH MARKETS. The Company intends to aggressively pursue business opportunities in selected key growth markets, such as China, India, Mexico and the former Soviet Union, on which prior management placed relatively low priority. CB&I intends to leverage its significant international experience and technological strengths to expand into these new geographic areas, where it believes that its ability to rapidly mobilize project management and skilled craft personnel, combined with its global material supply and equipment logistics capabilities, provides a key competitive advantage. * IMPROVE FINANCIAL CONTROLS AND MANAGEMENT. The Company believes it will improve the management of project profitability through the on-going implementation of new systems which enhance cost estimating, bidding, capital utilization and project execution. Under the new systems, project economics will be evaluated on a centralized basis under various risk and costing assumptions, using global software systems tailored specifically for the Company's operations. * PURSUE PARTNERING AND STRATEGIC ALLIANCES. The Company intends to expand its use of partnering and strategic alliances with customers and vendors. These relationships can serve as a vehicle for improvements in quality, productivity and profitability for both parties. CB&I's existing partnering relationships include several with major international oil companies. The Company believes that such customers recognize CB&I's ability to deliver high quality, on-time projects and select CB&I as a preferred supplier to achieve significant cost savings in building and operating tankage and related systems. CORPORATE STRUCTURE Since the Company's reorganization in March 1997 (the "Reorganization"), the Company's operations have been conducted through subsidiaries of Chicago Bridge & Iron Company ("CBIC"), a wholly owned Delaware subsidiary of the Issuer and the primary holding company for the Company's United States subsidiaries, and through subsidiaries of Chicago Bridge & Iron Company B.V. ("CBICBV"), a wholly owned subsidiary of the Issuer organized under the laws of The Netherlands with its registered seat in Amsterdam and the Company's primary holding company for non-United States subsidiaries. Prior to the Reorganization, the Company's operations were conducted by subsidiaries of a company then known as Chicago Bridge & Iron Company ("Old CBIC") which is currently not affiliated with the Company. The Issuer, with its corporate seat in Amsterdam, The Netherlands, maintains its registered office and the principal office of CBICBV at Koningslaan 34, 1075 AD Amsterdam, The Netherlands, and their mailing address is P.O. Box 74658, 1070 BR Amsterdam, The Netherlands, and their telephone number at such address is 31-20-578-9588. The executive office of CBIC is located at 1501 North Division Street, Plainfield, Illinois 60544, and its telephone number at that address is (815) 439-6000. THE OFFERING Use of Proceeds .................. The Company will not receive any of the proceeds from the sale of shares offered hereby. Listing of Shares................. The Common Shares of New York Registry ("New York Shares") are listed on the New York Stock Exchange (the "NYSE"). The Common Shares in bearer form (the "Bearer Shares") are listed on the Amsterdam Stock Exchange. New York Stock Exchange Symbol.... CBI Amsterdam Stock Exchange Symbol... CBI Payment and Delivery.............. Delivery of any New York Shares offered pursuant hereto will be made to purchasers' book-entry accounts at The Depository Trust Company ("DTC"), against payment in U.S. dollars in same-day funds. Any Bearer Shares offered pursuant hereto will also be delivered to purchasers' book entry accounts at Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. ("NECIGEF"), Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear"), and Cedel Bank, societe anonyme ("Cedel") against payment in Dutch guilders in same-day funds. Thereafter, trading of New York Shares effected at the NYSE will be settled in dollars and trading of Bearer Shares effected on the Amsterdam Stock Exchange generally will be settled in guilders, in each case in accordance with the normal settlement practices of those markets. A fee of $0.05 per share will be charged to shareholders for the exchange of New York Shares for Bearer Shares (and for the reverse). See "Share Certificates and Transfer." Price Range of Common Shares and Dividend Policy................... Subject to restrictions contained in the agreements governing the Company's indebtedness, the Issuer currently expects to continue to pay a quarterly dividend of $0.06 per share. The Issuer's first quarterly dividend was paid on June 30, 1997 to shareholders of record at the close of business on June 20, 1997. In addition, a quarterly dividend was paid on September 30, 1997 to shareholders of record at the close of business on September 19, 1997. The declaration of any dividend, including the amount thereof, generally will be at the discretion of the Issuer's supervisory and management boards and, in the case of annual dividends, the general shareholders meeting, and will depend on the Issuer's then financial condition, results of operations and capital requirements, and such other factors as such boards or the general shareholders meeting deems relevant. See "Price Range of Common Shares and Dividend Policy."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028299_iwl_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028299_iwl_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd96cc0de075bff161839ac5423040ac22a46c33
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028299_iwl_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL REFERENCES IN THIS PROSPECTUS TO "IWL" OR THE "COMPANY" ARE TO IWL COMMUNICATIONS, INCORPORATED, ITS CONSOLIDATED SUBSIDIARIES AND ITS PREDECESSOR. UNLESS OTHERWISE INDICATED, ALL REFERENCES IN THIS PROSPECTUS TO NUMBERS AND PERCENTAGES OF SHARES OF COMMON STOCK ASSUME NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS (INCLUDING THOSE GRANTED BY THE SELLING SHAREHOLDER). THE COMPANY The Company provides advanced communications solutions to customers with operations in remote, difficult-access regions and in areas around the world where government deregulation has created new market opportunities. The Company delivers comprehensive communications services to its customers by utilizing a broad range of analog and digital technologies, including satellite, microwave radio, conventional two-way radio and fiber optic cable. The Company's core business to date has focused on the provision of communications solutions for customers in the oil and gas industry, such as AMOCO, British Gas, Chevron, Conoco, Exxon and Shell. Such customers exemplify users with unique communications needs related to the remote, difficult-access nature of their operating locations. By providing a wide range of communications solutions to its oil and gas customers, the Company has developed a high level of expertise and a unique skill set in planning, designing and implementing total communications solutions for multi-site customers with operations located in remote regions or underdeveloped areas where the existing communications infrastructure is insufficient to meet advanced telecommunications needs. The Company intends to leverage this skill set and expertise by supplying communications services to multi-site customers outside of the oil and gas industry, particularly customers with operations located near the Company's existing and planned telecommunications infrastructure. Potential additional customers include health care providers, financial institutions and other multi-location communication-intensive companies, such as large publishing companies. The Company recently has installed a tandem switch and a value-added services platform in Houston, Texas. This switch and platform enable the Company to connect its digital network with the networks of other carriers, thereby permitting the routing of phone calls in a cost-competitive manner. As the Company's communications network in the U.S. Gulf Coast region expands, the Company intends to install additional switches in other strategic locations. The Company recently has received approval to serve as a competitive local exchange carrier ("CLEC") in select locations in Texas and has applied for CLEC status in Louisiana. As a result, the Company believes that it is well positioned to use the full capacity of its existing and planned infrastructure by providing call routing to other carriers and, in select locations, by providing call completion services at profit margins that the Company believes will be higher than those achievable without CLEC status. As a CLEC offering competitive rates for call completion services, the Company believes that providers of cellular and personal communications services ("PCS") and other long distance carriers will become additional customers. The telecom services industry is being transformed by the deregulation of telecommunications markets around the world. In the United States, efforts at deregulating the telecommunications industry resulted in the separation of the long distance market from the local exchange services market, with the outcome being an opening of the long distance market to competition. The enactment of the Telecommunications Act of 1996 (the "1996 Telecommunications Act") established an expansive framework for greater competition, including within the local exchange services market. Under the 1996 Telecommunications Act, state laws prohibiting competition are preempted and CLECs, such as the Company, have legal rights to interconnect with the facilities of the Bell Operating Companies ("BOCs") and GTE Operating Companies ("GTOCs"), resell local services that were previously provided only by the BOCs and GTOCs and deliver CLEC-provided local services as well as long distance services. Telecommunications revenues of CLECs grew almost 80% in 1996 to $2.1 billion, compared with nearly $1.2 billion in 1995, according to the 8th Edition of the ANNUAL REPORT ON THE COMPETITIVE TELECOMMUNICATIONS INDUSTRY. International deregulation has also gained momentum, as demonstrated by the recent 68-nation World Trade Organization agreement on communications services, which reflects efforts to eliminate barriers to competition in basic telecommunications services throughout Europe, Asia and India. The introduction and proliferation of new communications technologies, together with global socioeconomic development, are also contributing to significant increases in demand for telecommunications services throughout the world. Advances in communications delivery technology, including those achieved through the deployment of satellite systems and the development of data compression technologies, have expanded the variety of information that can be digitized as well as the geographic scope of where such data may be transmitted or received. Political and economic changes in many regions of the world have contributed to the emergence of additional global market opportunities in a variety of industries and an increased rate of adoption of Western business practices in previously non-Westernized areas. The Company believes that these changes have escalated the demand for Western telecommunications services, particularly in remote regions of the world or in regions where the telecommunications infrastructure is underdeveloped. While the demand for telecommunications services is increasing worldwide, the Company believes that the exploration and development activities characteristic of the oil and gas industry have placed that industry, in particular, at the forefront in applying modern communications technologies in remote regions of the world or regions that lack developed telecommunications infrastructure. The Company also believes that numerous other industries are taking advantage of technological advances and socioeconomic development by pursuing opportunities to expand their operations into remote regions or areas with underdeveloped telecommunications infrastructure. Following the installation of additional infrastructure in these regions, the local communities in such regions may be able to make use of the available extra carrier capacity, even though the additional infrastructure might have been installed originally as a specific communications solution for a particular company or end user. The Company believes that a significant opportunity exists to provide advanced communications services to end users outside the oil and gas industry by delivering effective temporary or permanent solutions at competitive rates and, in doing so, the Company intends to position itself to serve the telecommunications carrier service needs of neighboring communities and businesses. The Company's goal is to become a leading provider of total communications solutions to end users with operations in remote, difficult-access regions or in areas around the world where government deregulation has created new market opportunities and to leverage this position by providing carrier services to additional customers located in these same regions. To reach this goal, the Company intends to pursue the following strategies: (i) develop additional Company-owned infrastructure; (ii) vertically integrate its service offerings; (iii) diversify its customer base; (iv) capitalize on opportunities created by government deregulation and globalization trends in various industries; and (v) expand existing strategic alliances and establish new alliances. The Company commenced doing business as IWL Communications in 1981 and was incorporated as a Texas corporation in 1983. The Company currently has domestic branch offices in Houston and Friendswood, Texas and Lafayette and New Orleans, Louisiana and an international office in Moscow, Russia. The Company's principal executive office is located at 12000 Aerospace Avenue, Suite 200, Houston, Texas, 77034 and its telephone number is (281) 482-0289. The Company's Internet addresses are www.iwlcom.com and www.iwl.net. THE OFFERING <TABLE> <S> <C> Common Stock Offered........................ 1,250,000 shares Common Stock Outstanding after the Offering................................... 3,477,816 shares(1) Use of Proceeds............................. To acquire equipment for the continued development of communications infrastructure, to repay a term note under its bank credit facility and for working capital and general corporate purposes. Proposed Nasdaq National Market symbol...... IWLC </TABLE> - ------------------------ (1) Excludes 160,614 shares of Common Stock, par value $.01 per share (the "Common Stock"), reserved for issuance upon exercise of options outstanding as of the date of this Prospectus under the Company's Employee Incentive Stock Option Plan at a weighted average exercise price of $3.62 per share, 130,000 shares of Common Stock reserved for issuance upon exercise of options outstanding as of the date of this Prospectus under the Company's 1997 Stock Option Plan at an average exercise price per share equal to the initial price of the Common Stock being offered hereby to the public, and 125,000 shares of Common Stock issuable upon exercise of the Representative's Warrant at an exercise price equal to 120% of the initial price of the Common Stock being offered hereby to the public. See "Management--Benefit Plans," "Description of Capital Stock-- Representative's Warrant," "Shares Eligible for Future Sale" and "Underwriting." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Sales: Telecom and carrier...................................... $ 13,642 $ 14,566 $ 15,683 $ 11,600 $ 14,151 Land mobile.............................................. 1,218 1,228 1,559 1,298 2,256 Product resales(1)....................................... -- -- 10,554 3,450 7,202 --------- --------- --------- --------- --------- Total sales............................................ 14,860 15,794 27,796 16,348 23,609 Cost of sales.............................................. 10,071 9,639 10,743 7,915 10,742 Cost of sales--product resales............................. -- -- 9,672 3,104 6,616 --------- --------- --------- --------- --------- Gross profit............................................... 4,789 6,155 7,381 5,329 6,251 Selling expenses........................................... 892 862 842 628 832 General and administrative expenses........................ 3,178 3,537 4,257 3,015 3,514 Depreciation and amortization.............................. 571 820 1,003 733 982 --------- --------- --------- --------- --------- Income from operations..................................... 148 936 1,279 953 923 --------- --------- --------- --------- --------- Net income................................................. $ 144 $ 536 $ 734 $ 541 $ 488 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net income per share....................................... $ 0.07 $ 0.24 $ 0.33 $ 0.24 $ 0.22 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Weighted average shares outstanding(2)..................... 2,011 2,233 2,233 2,233 2,233 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ---------------------- AS ACTUAL ADJUSTED(3) --------- ----------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................................................. $ 340 $ 8,340 Working capital........................................................................... 1,984 10,484 Total assets.............................................................................. 16,318 24,183 Notes payable, noncurrent portion......................................................... 6,151 6,151 Shareholders' equity...................................................................... 4,197 12,697 </TABLE> - ------------------------ (1) Comprised of the resale of Alcatel products and other equipment and hardware to Shell Offshore Services Oil Company. (2) Weighted average shares outstanding have been restated to reflect a 200-for-one stock split of the Common Stock effected in November 1995. (3) Adjusted to reflect the sale of 1,250,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $8.00 per share (the midpoint of the range of the proposed initial public offering price) and the receipt of the estimated net proceeds therefrom as if the Offering had occurred at March 31, 1997. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028337_new_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028337_new_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1c341d2bbfd291bca1351147e3fe63efc18155c0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028337_new_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus is furnished to shareholders of the Company together with the Proxy Statement/Prospectus. The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus and the Proxy Statement/Prospectus. Except where otherwise indicated, the description of New GranCare and its businesses contained herein assumes the completion of the Distribution and the Merger. NEW GRANCARE New GranCare is currently a wholly-owned subsidiary of the Company incorporated under the laws of the State of Delaware. In order to effect the Distribution, all of the assets and businesses of the Company, other than those used primarily in the conduct of its Institutional Pharmacy Business, will be contributed to New GranCare prior to the Distribution. The mailing address of the Company's principal executive offices is One Ravinia Drive, Suite 1500, Atlanta, Georgia 30346, and the telephone number at such address is (770) 393- 0199. Following the Distribution, New GranCare's principal executive offices and phone number will be the same as indicated above. In addition, immediately following the Distribution and the Merger, New GranCare will change its name to "GranCare, Inc.". THE TRANSACTIONS The Company has entered into the Merger Agreement whereby, upon the terms and subject to the conditions set forth therein, the Company will be merged with and into Vitalink, with Vitalink as the surviving corporation. As a condition to and in order to facilitate the Merger, the Company has agreed to effect the Distribution, pursuant to which all of the outstanding shares of New GranCare Common Stock will be distributed to the Company's shareholders on the basis of one share of New GranCare Common Stock for each share of Company Common Stock held by a shareholder as of the Distribution Record Date. The Distribution is intended to be tax-free to the Company's shareholders for federal income tax purposes. See "Certain Federal Income Tax Consequences." Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time") each issued and outstanding share of Company Common Stock (other than shares of Company Common Stock that are owned by the Company as treasury stock and any shares of Company Common Stock that are owned by Vitalink or any wholly-owned subsidiary of Vitalink, which will be cancelled) shall be converted into the right to receive 0.478 (the "Exchange Ratio") of a share of common stock, par value $0.01 per share, of Vitalink (the "Vitalink Common Stock") as described under "Description of the Transactions--Merger Terms" in the Proxy Statement/Prospectus. In addition, as a consequence of the Merger, Vitalink's consolidated indebtedness will increase by approximately $108.0 million (prior to an offsetting compensatory payment by the Company) due to the assumption or funding of the discharge of the obligations of the Company in respect of the $100.0 million principal amount of 9 3/8% Senior Subordinated Notes due 2005 (the "9 3/8% Notes") issued by the Company. In order to obtain a third party consent of Health and Retirement Properties Trust ("HRPT"), a creditor and landlord the Company, required in connection with the Distribution and Merger, Vitalink will pay a consent fee of $10.0 million, which will be promptly reimbursed by New GranCare following the consummation of the Distribution and Merger. Vitalink will also enter into a limited guaranty of certain obligations of New GranCare to HRPT. To support Vitalink's limited guaranty of New GranCare's obligations, New GranCare will provide an irrevocable letter of credit in the amount of $15.0 million payable to Vitalink in the event Vitalink makes any payments under the limited guaranty. See "The Distribution--Treatment of Certain Indebtedness." As a consequence of the Distribution and in accordance with the terms of the Agreement Respecting Employee Benefit Matters by and between the Company and New GranCare (the "Employee Benefits Agreement"), each holder of an option to purchase shares of Company Common Stock (the "Company Options") will receive an option (the "New GranCare Options") to purchase a number of shares of New GranCare Common Stock as is equal to the number of shares of Company Common Stock subject to Company Options held by such holder as of the Distribution Record Date. The exercise price of all Company Options will be allocated between the New GranCare Options issued in respect of such Company Options and the existing Company Options pursuant to a formula. As a result of the application of such formula, subsequent to the Distribution approximately 61.568% of the exercise price of each Company Option will be allocated to, and shall become, the exercise price of each existing Company Option (the "Adjusted Company Options") and 38.432% of the exercise price of each Company Option will be allocated to each New GranCare option. The terms and conditions of the New GranCare Options will be the same as the terms of the Company Options prior to the Distribution. As a result of the Merger, Vitalink will assume all of the Adjusted Company Options. Each Adjusted Company Option will be exercisable upon the same terms and conditions as under the applicable Company plan and the applicable option agreement issued thereunder, except that (i) each such option shall be exercisable for that number of shares of Vitalink Common Stock as is equal to the number of shares of Company Common Stock that would have been acquired upon exercise of such option as of the Effective Time of the Merger multiplied by the Exchange Ratio. As a result of the Merger, the exercise price of each Adjusted Company Option will be further adjusted by dividing such exercise price by the Exchange Ratio. See "The Distribution--Consummation of the Distribution; Treatment of Company Stock Options." The terms of the Company Options provide that upon the occurrence of certain events (a "Change of Control"), all unvested Company Options shall vest and become fully and immediately exercisable. The Merger constitutes a Change of Control for purposes of the Company Options. Furthermore, the consummation of the Merger will not constitute a termination of employment and holders of Adjusted Company Options will continue to be able to exercise such options following the completion of the Merger even if such holder is not an employee of Vitalink. As a result of the foregoing, approximately 2,355,250 shares of New GranCare Common Stock will be issuable upon the exercise of New GranCare Options and 1,125,809 shares of Vitalink Common Stock will be issuable upon the exercise of Adjusted Company Options following the completion of the Distribution and the Merger. Pursuant to the Distribution Agreement, prior to the Distribution the Company will transfer or cause to be transferred to New GranCare all of the Company's assets and liabilities relating to the Skilled Nursing Business other than (i) the capital stock of the Pharmacy Subsidiaries (as defined in the Distribution Agreement), (ii) the assets and liabilities used or arising primarily in connection with the conduct of the Institutional Pharmacy Business and (iii) the payment obligations in respect of the Company's 9 3/8% Notes. In addition, pursuant to the Distribution Agreement, the Company and its subsidiaries other than the Pharmacy Subsidiaries, on the one hand, and the Pharmacy Subsidiaries, on the other hand, will net out all intercompany accounts and the expected net balance due from the Pharmacy Subsidiaries to the Company and the Company's subsidiaries will be contributed by the Company or the appropriate subsidiary of the Company to which such amount (or portion thereof) is owing, to the appropriate Pharmacy Subsidiary as additional capital. In accordance with the terms of the Distribution Agreement and the Tax Allocation and Indemnification Agreement (the "Tax Allocation Agreement") by and among the Company, New GranCare and certain subsidiaries of the Company, the Company and New GranCare have agreed to indemnify one another after the Distribution Date (as defined in the Distribution Agreement) with respect to certain losses, damages, claims and liabilities arising from their respective businesses or as a consequence of the occurrence of certain events following the Distribution Date that result in the proposed transactions not being accorded tax-free treatment. See "The Distribution--Terms of the Tax Allocation Agreement." The foregoing is a brief summary of certain terms of the Distribution and the Merger. A more complete description of the Merger and the Merger Agreement may be found in the Proxy Statement/Prospectus under "The Merger Agreement." The Distribution and the Distribution Agreement are more fully described herein under "The Distribution." The Merger Agreement and the Distribution Agreement are attached as Annexes B and C to the Proxy Statement/Prospectus, respectively. Copies of the Tax Allocation Agreement and the Employee Benefits Agreement have been filed as exhibits to the Registration Statement of which this Prospectus is a part. THE DISTRIBUTION <TABLE> <S> <C> Distributing Corporation.......... The Company. Distributed Corporation........... New GranCare, which, by the Distribution Date, will hold all of the assets of, and will have assumed all of the liabilities associated with, the Skilled Nursing Business. Distribution Ratio................ One share of New GranCare Common Stock for each share of Company Common Stock owned as of the Distribution Record Date. See "The Distribution--Manner of Effecting the Distribution;" and "--Terms of the Distribution Agreement." Federal Income Tax Consequences... It is the opinion of Powell, Goldstein, Frazer & Murphy LLP (the "Tax Opinion"), that the Distribution will qualify as a tax-free reorganization pursuant to Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"), the Merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code and that no gain or loss will be recognized by shareholders of the Company in connection with their receipt of New GranCare Common Stock and Vitalink Common Stock in the Distribution and the Merger, respectively, except with respect to cash received in lieu of fractional shares of Vitalink Common Stock. See "Certain Federal Income Tax Consequences." Trading Market and Symbol......... There is currently no public market for New GranCare Common Stock. New GranCare intends to apply for the listing of New GranCare Common Stock on the NYSE under the Trading Symbol "GC". Indemnification Obligations After the Distribution and Merger...... The Company and New GranCare (and Vitalink as the successor to the Company following the Merger) have agreed to indemnify each other after the Distribution with respect to certain losses, damages, claims and liabilities arising primarily from their respective businesses, including certain tax liabilities. See "Risk Factors-- Relationship with Vitalink" and "The Distribution--Terms of the Distribution Agreement" and "--Terms of the Tax Allocation Agreement." Relationship With Vitalink After the Distribution and the Merger.. As of the Effective Time of the Merger, New GranCare, Vitalink and Manor Care, Inc., a Delaware corporation ("Manor Care") and the beneficial owner of approximately 82.3% of the issued and outstanding shares of Vitalink Common Stock prior to the </TABLE> <TABLE> <S> <C> Effective Time of the Merger, will enter into a Non-competition Agreement (the "Non- competition Agreement") pursuant to which New GranCare and Manor Care will agree not to engage in the institutional pharmacy business for a period of three years and Vitalink will agree not to engage in the skilled nursing business for a similar period of time. See "The Distribution-- Terms of the Non-competition Agreement." Following the Merger, Manor Care will own approximately 45% of the issued and outstanding Vitalink Common Stock. In addition, as a consequence of the Merger, Vitalink will succeed to the various pharmaceutical supply agreements between TeamCare and substantially all of New GranCare's skilled nursing and other facilities. New GranCare has agreed that for so long as Vitalink's limited guaranty of certain obligations of New GranCare to HRPT is in effect, New GranCare will not terminate any such agreements. As a result, New GranCare anticipates that these pharmaceutical supply agreements may extend through December 31, 2010, depending on certain circumstances. See "The Distribution--Terms of the Pharmaceutical Supply Agreements" and "--Treatment of Certain Indebtedness--HRPT Obligations." Distribution Record Date.......... It is expected that the Distribution Record Date will be immediately prior to the Effective Time of the Merger. Distribution Agent, Transfer Agent and Registrar.................... American Stock Transfer & Trust Company. Risk Factors...................... Shareholders should carefully evaluate certain considerations in evaluating the securities offered hereby, including New GranCare's debt and lease obligations, the uncertainty associated with health care reform and government regulations, the risk associated with reimbursement by third party payers, New GranCare dependence on acquisitions for growth, competition in the skilled nursing business and the absence of a prior trading market in New GranCare Common Stock. See "Risk Factors." </TABLE> NEW GRANCARE STOCK OPTION PLANS New GranCare will have various employee benefit plans pursuant to which shares or options to purchase shares of New GranCare Common Stock will be issued or issuable to or for the benefit of employees, former employees and directors. It is expected that a total of 2,355,250 shares will be reserved and issued under the Replacement Stock Option Plan (the "Replacement Plan") pursuant to which current holders of Company Options will be granted New GranCare Options in connection with the Distribution. See "The Distribution -- Consummation of the Distribution; Treatment of Company Stock Options." In addition, New GranCare has adopted, and the Company as its sole shareholder has approved, the 1996 Stock Incentive Plan (the "New GranCare Plan") pursuant to which New GranCare will be able to make stock incentive awards to its officers, directors and key employees on a going forward basis. See "Management-- Compensation of Executive Officers--1996 Stock Incentive Plan." New GranCare has reserved 1,500,000 shares of New GranCare Common Stock for issuance under the New GranCare Plan. The New GranCare Plan will be submitted for the approval of the stockholders of New GranCare in connection with the Proxy/Statement Prospectus. Approximately 500,000 shares are expected to be used for options granted to officers and key employees shortly after the date of the Distribution. New GranCare has also reserved up to 200,000 shares to cover stock options to be granted to non-employee directors under a separate plan (the "Directors Plan"), of which approximately 90,000 shares are expected to be used for options granted to non-employee directors shortly after the date of the Distribution. See "Management--Compensation of Directors--Directors Plan." SUMMARY CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND STATISTICAL AMOUNTS) The following summary historical consolidated financial data of the Company has been derived from the historical financial statements and should be read in conjunction with such financial statements and notes thereto, which are included elsewhere herein. The Company data for the nine months ended September 30, 1995 and 1996 have been derived from the unaudited consolidated financial statements which are also included elsewhere herein. The pro forma adjusted data gives retroactive effect to the Merger and reflects the recapitalization/ reorganization of the Company, the contribution to TeamCare's capital of the Company's receivable from TeamCare, and the redemption or assumption of certain indebtedness. The pro forma adjusted financial operating information gives effect to the Merger as if the transaction had occurred on January 1, 1995. The pro forma adjusted balance sheet data gives retroactive effect to the Merger as if it had occurred on September 30, 1996. The pro forma adjusted data should be read in conjunction with the pro forma balance sheet, pro forma statements of income, and notes thereto included elsewhere herein. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------------- ----------------- 1991(4) 1992(5) 1993(5) 1994(5) 1995(5) 1995(5) 1996(5) -------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues........... $290,958 $434,638 $611,689 $717,471 $816,462 $604,569 $745,653 Depreciation and amortization.......... 5,064 6,922 12,349 16,440 21,611 14,785 19,400 Interest expense and financing charges..... 7,256 7,908 19,601 21,481 27,054 19,557 26,228 Income from continuing operations: Before income taxes and extraordinary charge............... 12,297 25,507 26,178 37,814 35,329 23,571 38,971 Before extraordinary charge(1)............ 8,347 16,806 16,089 24,290 20,564 13,274 24,162 Net income............. $ 11,275 $ 16,806 $ 14,804 $ 24,290 $ 20,564 $ 13,274 $ 24,162 ======== ======== ======== ======== ======== ======== ======== Pro forma net income(1)............. $ 9,994 $ 15,350 $ 14,019 $ N/A $ N/A $ N/A $ N/A ======== ======== ======== ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> PRO FORMA, AS ADJUSTED PRO FORMA, AS ADJUSTED YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, 1995 (2)(3) 1996 (2)(3) ----------------------- ------------------------------- <S> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues........... $639,780 $577,165 Depreciation and amortization.......... 16,906 14,420 Interest............... 19,275 20,104 Income from continuing operations before income taxes.......... 25,203 23,980 Net income............. 14,525 15,167 Earnings per share..... 0.61 0.63 </TABLE> <TABLE> <CAPTION> PRO FORMA, AS ADJUSTED SEPTEMBER 30, 1996 (2) ---------------------- <S> <C> BALANCE SHEET DATA: Cash and cash equivalents............................... $ 34,882 Working capital......................................... 135,446 Total assets............................................ 584,988 Long-term debt, including current portion............... 298,148 Shareholders' equity.................................... 137,945 </TABLE> (Footnotes appear on following page) (Footnotes from the previous page) - -------- (1) Prior to June 30, 1993, the Evergreen predecessor entity consisted of two partnerships and, accordingly, Evergreen was not subject to federal or state income taxes. For informational purposes, the pro forma net income for the years 1991 through 1993 includes a pro forma provision for income taxes as if Evergreen had been a taxable corporation for these periods. Such pro forma calculations were based on the income tax laws and rates in effect during those periods, and FASB Statement No. 109. (2) Adjusted to reflect the redemption or assumption of the Company's Convertible Debentures (defined hereafter) and 9 3/8% Notes as if such amounts were redeemed or assumed as of January 1, 1995 for income statement data and as of September 30, 1996 for balance sheet data. (3) Does not reflect Merger related costs estimated at $30.0 million which are expected to be recognized by the Company in the results of operations for the fourth quarter of 1996. (4) The ARA Living Centers--Pacific, Inc. ("ARA") acquisition occurred on September 27, 1991 and, therefore, (i) the operating results of the ARA facilities are included in the historical operating results of the Company for the fourth quarter of 1991 and (ii) the assets and liabilities of the ARA facilities, as adjusted for related financing transactions, are included in the balance sheet of the Company as of December 31, 1991. (5) All acquisitions which occurred in 1992, 1993, 1994, 1995 and 1996 except for the CompuPharm, Inc. ("CompuPharm") acquisition and the merger with Evergreen (defined below), are reflected from the date of each acquisition in the historical operating results of the Company and the assets and liabilities relating to these acquisitions are included in the balance sheets of the Company since that time. All years presented includes CompuPharm and Evergreen which were combined with the Company in pooling- of-interests transactions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028461_covansys_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028461_covansys_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ebec942028373ab4f184a041637d893bb9b573e2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028461_covansys_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Consolidated and Unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. Per share data for periods prior to March 5, 1997 have been adjusted to give retroactive effect to the conversion by JF Electra (Mauritius) Limited ("JF Electra") of its shares of common stock in CBS Complete Business Solutions (Mauritius) Limited ("CBS Mauritius") into 552,632 shares of no par value common stock of the Company (the "Common Stock"). Unless otherwise indicated, the terms "Company" and "CBSI" refer collectively to Complete Business Solutions, Inc. and its subsidiaries. THE COMPANY CBSI is a worldwide provider of information technology ("IT") services to large and mid-size organizations. The Company offers its clients a broad range of IT services, from advising clients on strategic technology plans to developing and implementing appropriate IT applications solutions. CBSI offers custom-tailored solutions based on an assessment of each client's needs. The Company's services include: (i) Year 2000 conversion and testing services; (ii) large systems applications development and maintenance; (iii) reengineering legacy applications to client/server technology; (iv) client/server applications development; (v) IT consulting services; (vi) packaged software implementation; and (vii) contract programming services. CBSI provides services in a wide variety of computing environments and uses leading technologies, including Year 2000 tools, client/server architectures, object-oriented programming languages and tools, distributed database management systems, and the latest network and communications technologies. The Company believes that the breadth of its service offerings foster long-term client relationships, affords cross-selling opportunities, minimizes dependence on any single technology or client and enables the Company to serve as a single source provider for its clients' IT applications solutions. This single or preferred provider approach is consistent with CBSI's full life-cycle, client-oriented approach to IT solutions. CBSI provides IT services to clients in a diverse range of industries. Its clients include American President Lines, Chrysler Corporation, Citibank, Ford Motor Company, IBM, IBM Global Solutions/Foremost Insurance, Lands' End, the State of Indiana, the State of Nevada, S.W.I.F.T., Spartan Stores and UNUM Ltd. During 1996, the Company provided services to over 220 clients in the U.S., Europe and Asia. The Company's strategy is to maximize its client retention rate and secure additional engagements by providing both quality services and client responsiveness. For each of the fiscal years 1994, 1995, and 1996, and for the six-month period ended June 30, 1997, existing clients from the previous fiscal year generated at least 80% of the Company's revenues. These recurring revenues have contributed significantly to the Company's 29% compound annual revenue growth rate over the past five fiscal years. Since 1992, CBSI has developed an extensive offshore infrastructure in India, including two modern software development centers in Bangalore and Madras and a training center in Hyderabad. The Company believes this established offshore infrastructure is one of the largest in the industry and differentiates it from those competitors who have no offshore capability, have only recently established offshore capability or rely mostly on contract service providers to offer such services. With its offsite and offshore development options, the Company can quickly provide clients with IT applications solutions on a cost-effective basis. The Company's goal is to become the preferred provider of IT services to an expanding base of clients. The Company's strategy to achieve this goal is to: (i) cross-sell services to existing clients; (ii) increase and build upon Year 2000 engagements; (iii) capitalize on significant investments in infrastructure and increase its international capabilities; (iv) expand service offerings such as Enterprise Resource Planning software package installation and Internet/intranet applications; and (v) pursue targeted acquisitions. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 1,250,000 shares Common Stock offered by the Selling Shareholders............ 1,000,000 shares Common Stock to be outstanding after the offering........... 10,580,000 shares(1) Use of proceeds............................................. Expansion of existing operations, including the Company's offshore software development operations; development of new service lines and possible acquisitions of related businesses; and general corporate purposes, including working capital. Nasdaq National Market symbol............................... CBSL </TABLE> - ------------------------- (1) Excludes: (i) options outstanding on the date hereof to purchase 622,368 shares of Common Stock at a weighted average exercise price of $9.19 per share; and (ii) 466,266 additional shares of Common Stock reserved for issuance upon exercise of options that may be granted in the future under the Company's 1996 Stock Option Plan. See "Management -- Employee Benefit Plans." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ----------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> HISTORICAL STATEMENT OF INCOME DATA: Revenues......................... $32,382 $43,795 $56,358 $67,399 $83,241 $39,548 $50,937 Gross profit..................... 7,159 10,290 13,522 13,790 19,939 9,746 13,540 Income from operations........... 1,410 1,937 2,635 1,966 4,484 2,515 4,155 Interest expense (income)........ 185 197 345 692 539 300 (378) Provision for income taxes....... -- -- -- -- 84 36 1,991 Minority interest................ 36 127 176 252 158 113 82 Net income....................... $ 1,189 $ 1,613 $ 2,114 $ 1,022 $ 3,703 $ 2,066 $ 2,460 PRO FORMA STATEMENT OF INCOME DATA: Revenues................................................................ $83,241 $39,548 $50,937 Gross profit............................................................ 19,939 9,746 13,540 Income from operations(1)............................................... 4,337 2,442 4,131 Interest income(2)...................................................... (71) (11) (431) Provision for income taxes(3)........................................... 1,582 881 1,440 Net income(4)........................................................... $ 2,826 $ 1,572 $ 3,122 Net income per common share............................................. $ 0.34 $ 0.19 $ 0.36 Weighted average shares outstanding(5).................................. 8,213 8,130 8,712 </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 --------------------- AS ACTUAL ADJUSTED(6) (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents......................................................... $17,763 $49,313 Working capital................................................................... 27,512 59,062 Total assets...................................................................... 48,778 80,328 Total shareholders' equity........................................................ 35,521 67,071 </TABLE> - ------------------------- (1) Reflects the amortization of goodwill over a period of 20 years as a result of the Company's purchase of the 28% minority interest in CBS Mauritius. See Notes 1 and 16 of Notes to Consolidated Financial Statements. (2) Reflects the elimination of interest expense to give effect to the repayment of the Company's revolving credit facility and long-term debt. See Note 16 of Notes to Consolidated Financial Statements. (3) Reflects provision for federal and state income taxes at the effective income tax rate as if the Company had been taxed as a C corporation and no foreign tax holidays had been granted during the periods presented. The effective tax rate was 35.9%, 35.9% and 31.6% for the fiscal year ended December 31, 1996, and the six-month periods ended June 30, 1996 and 1997, respectively. (4) Reflects the elimination of minority interest due to the issuance of 552,632 shares of Common Stock in exchange for the minority interest in CBS Mauritius. See Notes 1 and 16 of Notes to Consolidated Financial Statements. (5) Reflects pro forma weighted average shares of Common Stock, plus the portion of the Common Stock sold in the Company's initial public offering needed to generate proceeds sufficient to repay the Company's revolving credit facility and long-term debt at the end of each period. (6) Adjusted to give effect to the sale of 1,250,000 shares of Common Stock by the Company offered hereby at an assumed public offering price of $27 1/2 per share, net of underwriting discounts and commissions and estimated costs of this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028671_msh_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028671_msh_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b768a915e5b45ffe55165197b483d461df260fa3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028671_msh_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the detailed information and financial data appearing elsewhere in this offering circular. MSH ENTERTAINMENT CORPORATION, (the "Company"), a development stage Utah Corporation, is offering 3,000,000 shares of common stock and 250,000 shares are being offered by the Selling Stockholders. The Company will not receive any of the proceeds from the sale of the shares by the Selling Stockholders. See "Principal and Selling Stockholders." The Company is in the business of film, video, music and television production and distribution, and computer software development. The Company was organized in Utah in 1983 and through recent acquisitions, new strategic alliances and the proceeds from this offering the Company intends to expand its business operations to include creating, developing, producing, licensing, distributing and merchandising of entertainment media products and software. The Company's business plan is focused toward the generation of profits and equity growth by developing, producing and distributing both live action and animated TV specials, TV movies, TV series, movies for broadcast TV, cable, satellite and syndicated TV, and video cassettes. The Company also intends to participate in revenue generated from music, software licensing and the ancillary merchandising of toys and associated products which are related to the Company's created works. The Company's strategy for growth emphasizes the development of new products, selected acquisitions and participation in strategic alliances. The new consolidated Company plans to utilize a substantial portion of the proceeds from this offering to expand its entertainment business operations. During June 1996, in exchange for cash and a promissory note, the Company acquired all of the rights and, assets of East End Communication Inc., East End Productions Inc., and J.B. Dubs Inc., ("East End"), all of which were California corporations. During September 1996, in conjunction with the execution of an animated children's production agreement, the Company participated in the formation of and received a 60% equity interest in Happy Zone Entertainment Corporation (HZE), a California corporation. The other major HZE shareholder is AGE, Inc. Through its ownership interest in HZE, the Company is participating in the development, production and licensing of animated television programs and televisions series. It is also pursuing opportunities in licensing of related children's toys and merchandising. See "Business - HZE." During November 1996 the Company entered into a strategic product development agreement with Abrams/Gentile Entertainment Inc. (AGE). Under terms of the agreement AGE acquired warrants to acquire up to 1,000,000 shares of Common Stock of the Company and the Company acquired the rights to produce a new children's TV series entitled "Vanpires" developed by AGE and scheduled to commence network broadcast during fall 1997. The company also acquired an interest in the potential revenue from toys and merchandising related to the new series. See "Business - AGE Agreement." During November 1996 the Company entered into a strategic marketing and product development agreement with Intel Corporation (Intel). Under terms of the agreement Intel acquired warrants to acquire 1,000,000 shares of Common Stock of the Company and the Company acquired the rights to develop joint marketing and awareness programs and a marketing and promotion plan for the Company's products including its new animation production management system which is designed to operate on Intel micro processors and Microsoft Windows NT. See "Business - Intel Agreement." The Company is proceeding with development and marketing of an advance technology software program which utilizes the parallel processing capabilities of the Intel MP platform and the related Intel computer chips to provide a significant increase in the production performance in the creation, development and rendering of computer animation products. The Company intends to begin limited application testing of the software by Mid 1997 followed by the licensing and distribution of this advanced software product to the entertainment industry. 3 <PAGE> The software technology provides efficient computerized management of the TV and movie animation production process. Specifically the software technology is designed to enhance the production of animated feature films, such as "Toy Story," animated TV Series, such as the "Simpsons" and children's programs, such as "Sky Dancers." The development and licensing of this advanced software technology is being supported by Intel through the marketing and technology development agreement and the AGE marketing and product development agreement. The Company's headquarters are located at 3330 Ocean Park Boulevard, Santa Monica, CA 90405. The Company has production studios, an animation and software development center, and support facilities in San Francisco, California. The Company also maintains an office in Houston, Texas. Gross income from operations of the Company will depend upon a number of key factors including but not limited to: sales; product sales mix; pricing; production rates; distribution; merchandising; and other factors. Because the Company has recently commenced significant expansion, an investment in the shares of the Company involves risks. Accordingly, potential investors should carefully review this entire prospectus and particularly the section entitled "Risk Factors." The Company is offering a maximum of 3,000,000 shares of common stock at a price of $_____ per share. The shares are being offered on behalf of the Company by the officers and directors of the Company, who will not be separately paid for such services, on a "best efforts" basis with respect to all 3,000,000 shares. There is no minimum number of shares that must be purchased. In addition, the Company may offer the shares through broker-dealers who, in the USA, are members of the National Association of Securities Dealers, Inc. ("NASD"), or outside of the USA, through broker-dealers or others. If the shares are sold through broker-dealers, they may receive commissions of up to 10% of the price of the shares sold by them. The table on the cover page assumes a commission will be paid with respect to all of the shares being offered hereby. There can be no assurance that any or all of the shares being offered will be sold. Subscriptions may not be withdrawn once made. The proceeds will be released to the Company upon receipt and acceptance of subscriptions. See "Plan of Distribution." The Company has 50,000,000 shares of common stock authorized with a par value of $0.001. As of September 30, 1996 the Company had 9,391,649 shares issued and outstanding. Upon completion of the offering, with all options, all warrants and all credit agreement conversions, at the estimated conversion rate, executed, there will be 15,551,646 shares issued and outstanding, assuming all shares are sold. The Company has 25,000,000 shares of preferred stock authorized, none are issued or outstanding.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028726_u-s_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028726_u-s_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8b380a218bcb8263edf19b9cf19e9cbcaea7a910
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028726_u-s_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by the more detailed information, including "Risk Factors" and the Combined Financial Statements and notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) gives effect to the Offering Related Transactions described below, (ii) assumes no exercise of the over-allotment option granted to the U.S. Underwriters as described in "Underwriting" and (iii) assumes an initial public offering price of $20.00 per share of Common Stock of the Company, the midpoint of the offering price range set forth on the cover of this Prospectus. Unless otherwise indicated, all references to the "Company" and "U.S. Rentals" refer to U.S. Rentals, Inc. and its predecessor (the "Predecessor"). See "Offering Related Transactions." THE COMPANY U.S. Rentals is the second largest equipment rental company in the United States based on 1995 rental revenues. The Company currently operates 80 equipment rental yards ("Profit Centers") in 11 states and in 1996 generated an average of approximately 95,000 rental contracts per month from a diverse base of customers including commercial and residential construction, industrial and homeowner customers. Management estimates that more than 200,000 customers did business with the Company in 1996. U.S. Rentals owns more than 60,000 pieces of rental equipment, comprised of approximately 600 equipment types, including aerial work platforms, forklifts, paving and concrete equipment, compaction equipment, air compressors, hand tools and plumbing, landscaping and gardening equipment. Management believes that the Company's fleet, which had a weighted average age of approximately 28 months and an original equipment cost of approximately $367.7 million at December 31, 1996, is one of the most comprehensive and well-maintained equipment rental fleets in the industry. U.S. Rentals also sells new equipment manufactured by nationally known companies, used equipment from its rental fleet and rental-related merchandise, parts and supplies. The Company's strategic objective is to continue to grow profitably in both existing and new markets by acquiring rental yards, opening start-up rental yards and expanding its equipment fleet. U.S. Rentals routinely evaluates attractive markets for expansion where a leading position can be created by acquiring an existing business or opening a new rental yard. The Company has grown internally through the expansion of its equipment fleet at existing locations and through the integration of 28 start-up and acquired equipment rental yards since January 1992. As a result of the Company's strategy, total revenues increased to $305.8 million in 1996 from $120.2 million in 1992, a compound annual growth rate of 26.3%. During the same period, operating income before non-rental depreciation increased to $49.7 million from $11.7 million, a compound annual growth rate of 43.6%. U.S. Rentals has been profitable in every year since 1984. U.S. Rentals attributes its leadership position in the equipment rental industry primarily to its innovative operating philosophy, which is based upon a decentralized management structure, a unique profit sharing program available to all levels of employees, a strong emphasis on personalized customer service and maintenance of one of the most comprehensive and modern rental fleets of brand name equipment in the industry. The Company's bottoms-up management structure allows each Profit Center manager to tailor the equipment fleet to the local market, make equipment fleet purchases and sales and pricing and staffing decisions. Corporate headquarters coordinates equipment purchases and supports Profit Center managers by providing capital, accounting, internal audit, risk management and other services to each Profit Center. The Company's unique incentive-based profit sharing program does not limit employee compensation. This program motivates Profit Center managers to act as entrepreneurs, to purchase only equipment that can be profitably deployed, to sell rental equipment from the fleet as maintenance costs increase or as rental demand for such equipment decreases and to minimize operating expenses. In 1996, managers of profitable locations earned an average of approximately 92% of their base salaries in profit sharing compensation. Management believes that its innovative operating and compensation philosophy significantly contributed to same Profit Center revenue growth of 20.0% and 17.1% in 1995 and 1996, respectively. INDUSTRY The equipment rental industry serves a wide variety of commercial and residential construction, industrial and homeowner customers. Equipment available for rent ranges from small hand tools costing less than $100 to large earth-moving equipment costing over $200,000. According to a survey conducted for 1995 and published in 1996 by the Associated Equipment Distributors ("AED"), an industry trade association, the United States equipment rental industry has grown from approximately $610 million in annual revenues in 1982 to an estimated $15 billion in annual revenues in 1995, a compound annual growth rate of approximately 28%. Management believes that this growth reflects, in part, increased outsourcing trends by commercial and industrial construction customers that increasingly seek to reduce their capital invested in equipment and to reduce the costs associated with maintaining and servicing such equipment. While equipment users traditionally have rented equipment for specific purposes, such as supplementing capacity during peak periods and in connection with special projects, the convenience and cost-saving factors of utilizing rental equipment have encouraged customers to look to suppliers such as the Company as ongoing, comprehensive sources of equipment. Management believes that demand for rental equipment by the commercial and industrial segments will continue to increase as these customers continue to outsource non-core operations. A survey conducted by The CIT Group for 1995 and published in 1996 showed that commercial construction contractors intended to increase the percentage of equipment they rent without a purchase option to an estimated 8% of their total equipment requirements in 1996, from an estimated 5% in 1995. The equipment rental industry is highly fragmented and primarily consists of a large number of relatively small, independent businesses serving discrete local markets and a small number of multi-yard regional and multi-regional operators. According to a May 1996 article published by Rental Equipment Register, an industry trade magazine, the 100 largest rental equipment companies, based on 1995 rental revenue, represented less than 20% of total industry rental revenue estimated at $15 billion. Management believes that an estimated 85% of the approximately 20,000 equipment rental operators in the United States have fewer than five locations and, therefore, believes the equipment rental industry offers substantial consolidation opportunities for large, well-capitalized rental companies such as U.S. Rentals. Relative to smaller competitors, multi-regional operators such as the Company benefit from several competitive advantages, including access to capital, the ability to offer a broad range of modern equipment, purchasing power with equipment suppliers, sophisticated management information systems, national brand identity and the ability to service national accounts. In addition, management believes multi-regional operators such as the Company are less sensitive to local economic downturns. BUSINESS STRATEGY U.S. Rentals' strategic objective is to continue its profitable growth in both existing and new markets by acquiring rental yards, opening start-up rental yards and expanding its equipment fleet. U.S. Rentals routinely evaluates attractive markets for expansion where a leading position can be created by acquiring an existing business or opening a new rental yard. Primarily due to its entrepreneurial, decentralized organizational structure that focuses on bottoms-up management and an innovative profit-driven compensation program, the Company has been profitable each of the past 12 years. Specifically, U.S. Rentals' business strategy centers upon the following factors: Profitable Expansion. The Company strives to operate the most profitable equipment rental yards in each of its markets. Management believes U.S. Rentals is well positioned to be a leader in the consolidation of the highly fragmented equipment rental industry. Management believes that there are numerous attractive acquisition opportunities available and that the Company's reputation, stability, access to capital, sophisticated management information systems and operating expertise provide competitive advantages in making acquisitions. These strengths allow U.S. Rentals to (i) quickly integrate acquired companies into its information systems and operating structure, (ii) realize synergies in the form of reduced overhead and lower costs through greater purchasing power and (iii) significantly enhance revenue by supplying acquired yards with additional equipment to optimize the mix of rental equipment and modernize the fleet. In addition, the Company will open new rental yards when a suitable business is not available for acquisition on favorable terms. Pursuant to this strategy, U.S. Rentals has acquired 15 rental yards and has opened 13 start-up rental yards since January 1, 1992. The Company routinely analyzes potential acquisitions of rental yards but is not currently a party to any material acquisition agreement. Market Leadership. U.S. Rentals is the second largest equipment rental company in the United States based on 1995 rental revenues. The Company strives to create a leading market position in each of its markets by capitalizing on its substantial competitive advantages, which include offering personalized customer service, flexible rental terms, seven-days-a-week operating hours and a diverse and modern equipment rental fleet specifically tailored to the needs of local customers. Further, U.S. Rentals' historical strength has been in small and medium-sized markets that the Company believes are not well served by its competition. Extensive Customer Base. In 1996 U.S. Rentals generated an average of approximately 95,000 customer contracts per month from a diverse customer base. Management estimates that more than 200,000 customers did business with the Company in 1996. Historically, U.S. Rentals has served a large number of small and medium-sized customers, which the Company believes are not well served by its competition. The Company is also increasing its emphasis on multi-regional and national customers through its national accounts program. In addition to the Company's strong brand name recognition, comprehensive and modern equipment rental fleet, well-located rental yards and competitive pricing, management believes that the Company's customers value the convenience of U.S. Rentals Profit Centers' seven-days-a-week operating hours and flexible rental terms. Further, U.S. Rentals offers its customers "one-stop shopping" through the sale of rental-related merchandise, parts and supplies, sales of new and used equipment and maintenance and delivery services. Innovative, Decentralized Operating Philosophy. U.S. Rentals' decentralized operating philosophy encourages entrepreneurial behavior at each Profit Center and rewards managers and employees through a profit-driven incentive compensation program. Profit Center managers are given the necessary freedom and flexibility to operate their respective equipment rental yards to maximize profits. Each Profit Center manager is responsible for every aspect of a yard's operation, including establishing rental rates, selecting equipment and determining employee compensation. Managers and employees of profitable locations are rewarded by the Company's profit sharing program that is based on each location's operating income in excess of a pre-determined return on its net assets. In 1996, managers of profitable locations earned an average of approximately 92% of their base salaries in profit sharing compensation. Strong Internal Controls. U.S. Rentals balances its decentralized organizational structure and entrepreneurial operating philosophy with extensive systems and procedures to monitor and track the performance of each Profit Center. The Company's proprietary management information systems, including the Company's point-of-sale ("POS") system, allow management and Profit Center managers to review all aspects of each Profit Center's business and assist management in closely monitoring and quickly reacting to opportunities to increase profits at each Profit Center. These systems are used to open customer accounts, generate rental contracts, track equipment usage, report customer credit histories, compile accounts receivable aging reports and monitor monthly profitability. Seven internal auditors monitor and ensure adherence to the Company's well-established, disciplined and documented policies and procedures. In addition, six independent division credit offices review and approve all credit applications submitted to the Profit Centers. Management believes that the Company's strong internal controls and proprietary management information systems lower overall costs and increase profitability for the Company. Attracting, Motivating and Retaining the Best People in the Industry. Through its decentralized, entrepreneurial approach and innovative profit sharing program, the Company believes it has generally been able to attract, motivate and retain the most successful, experienced group of employees in the industry. Management believes U.S. Rentals' successful employees are more highly compensated than those of its competitors because of the Company's unique profit sharing program. As a result, the Company has had voluntary turnover of only two Profit Center managers during the past five years. In addition, U.S. Rentals' senior operating management, which has an average of 21 years of rental industry experience, is among the most experienced in the industry. William F. Berry, the Company's 44-year old President and Chief Executive Officer, has over 30 years of experience in the equipment rental business and has worked in numerous operational and managerial capacities in the Company during his career. The Company was incorporated in Delaware in November 1987 but has not had operations prior to the Offerings. See "Offering Related Transactions." The Company's principal executive offices are located at 1581 Cummins Drive, Suite 155, Modesto, California 95358, and its telephone number is (209) 544-9000. THE OFFERINGS Common Stock offered hereby: <TABLE> <S> <C> U.S. Offering .................. 8,000,000.shares. International Offering ......... 2,000,000.shares. ----------------- Total.........................10,000,000.shares. ================= </TABLE> <TABLE> <S> <C> Common Stock to be outstanding after the Offerings........................ 30,748,975 shares(a) Use of proceeds ...................... The estimated net proceeds to the Company of $186.2 million from the Offerings will be used to repay substantially all outstanding indebtedness of the Company, pay related prepayment penalties and for working capital and general corporate purposes, including possible future acquisitions. See "Use of Proceeds." New York Stock Exchange symbol........ USR </TABLE> - -------------------- (a) Excludes 4,600,000 shares reserved for future issuance under the Company's 1997 Performance Award Plan (the "1997 Plan"). See "Management--Employment Agreements" and "--1997 Performance Award Plan." SUMMARY FINANCIAL DATA The following summary historical and pro forma financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Combined Financial Statements and notes thereto and the Unaudited Pro Forma Combined Financial Statements and notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- PRO FORMA AS ADJUSTED(A) 1992 1993 1994 1995 1996 1996 -------- -------- -------- -------- -------- -------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues.......... $120,172 $143,582 $187,758 $242,847 $305,837 $305,837 Gross profit............ 27,213 36,129 55,151 74,975 85,616 85,616 Operating income........ 8,638 12,686 23,786 38,022 (b) 42,154 (b) 43,678 Other income (expense), net.................... 782 (31) (242) (1,620) (665)(c) 62 Interest income (expense), net......... 1,219 1,236 (1,060) (5,310) (8,031) (13) Income before income taxes.................. 10,639 13,891 22,484 31,092 33,458 43,727 Income taxes............ 529 405 499 468 374 17,598 Net income.............. 10,110 13,486 21,985 30,624 33,084 Pro forma net income(d). 6,318 8,181 13,263 18,312 20,002 26,129 Pro forma net income per share.................. 0.85 BALANCE SHEET DATA (END OF PERIOD): Rental equipment, net... $ 49,326 $ 65,606 $112,563 $152,848 $205,982 $205,982 Total assets............ 102,085 125,390 187,525 245,184 324,448 294,895 Total debt.............. 31,392 48,419 84,751 105,696 186,710 500 Total stockholder's equity................. 51,739 48,608 57,951 83,077 80,730 231,834 SELECTED OPERATING DATA: Gross equipment capital expenditures........... $ 24,279 $ 42,892 $ 83,157 $ 88,861 $119,348 $119,348 Rental equipment depreciation........... 20,231 24,300 33,754 43,885 56,105 56,105 Non-rental depreciation. 3,060 3,294 4,092 5,513 7,528 7,528 Profit Centers (end of period)................ 57 57 65 71 80 80 Same Profit Center revenue growth(e)...... 2.6% 16.0% 23.5% 20.0% 17.1% 17.1% </TABLE> - -------------------- (a) Gives effect to (i) the Offering Related Transactions, (ii) the sale of 10,000,000 shares of Common Stock in the Offerings (assuming no exercise of the U.S. Underwriters' over-allotment option) at an assumed initial public offering price of $20.00 per share, (iii) a reduction in interest expense as a result of reductions in indebtedness upon application of a portion of the net proceeds to the Company from the Offerings, (iv) change from S corporation income tax expense to C corporation income tax expense and recording of the related deferred tax liabilities and (v) termination of deferred incentive compensation agreements with certain employees. See "Offering Related Transactions," "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Combined Financial Statements and notes thereto and the Unaudited Pro Forma Combined Financial Statements and notes thereto included elsewhere in this Prospectus. (b) Operating income for the years ended December 31, 1995 and 1996 includes $645,000 and $1,524,000 of non-recurring compensation expense related to the Predecessor's deferred incentive compensation agreements that were terminated in January 1997. See "Certain Transactions--Offering Related Agreements." (c) Includes $1,300,000 of non-recurring expense from non-operating assets of the Predecessor not transferred to the Company as part of the Offering Related Transactions. (d) The pro forma net income reflects the estimated pro forma effect of income taxes as if the Predecessor had been taxed as a C corporation for all periods presented. See "Offering Related Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028852_kinetics_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028852_kinetics_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..36ff5b77252e700ca05b159578539105f91b7632
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028852_kinetics_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Prospective investors should carefully consider the information set forth under "Risk Factors." Unless otherwise indicated, all information in this Prospectus, including financial information, shares and per share data: (i) gives effect to a three-for-four reverse stock split to be effected upon closing of the Offering, (ii) reflects the conversion of all outstanding shares of Preferred Stock into an aggregate of 1,793,693 shares of Common Stock, which will occur automatically upon closing of the Offering, (iii) reflects the conversion and reconstitution of all outstanding shares of Class A Common Stock and Class B Common Stock into an aggregate of 7,567,500 shares of Common Stock, which will occur upon closing of the Offering, (iv) reflects the net exercise of all outstanding warrants into an aggregate of 163,225 shares of Common Stock and (v) assumes the Underwriters' over-allotment option is not exercised. References herein to "Kinetics" and the "Company" include certain predecessors and subsidiaries, unless the context otherwise requires. References in this Prospectus to a specific fiscal year of the Company refer to the 12 months ended September 30 of the designated year. THE COMPANY Kinetics is the leading domestic provider of sophisticated high-purity process piping systems, based on revenues. These systems are used primarily in the semiconductor, pharmaceutical and biotechnology industries. Kinetics offers its customers turnkey solutions by providing, as a complement to its specialty high-purity contracting business, comprehensive and technically advanced engineering and design services, quality assurance and control services, program management services, and manufacturing of specialty components. Operations and sales efforts are conducted from its strategically located facilities throughout the United States and at several international sites. Within the semiconductor industry, the Company provides its services primarily to industry-leading manufacturers of integrated circuits and semiconductor original equipment manufacturers. Generally, high-purity process piping systems in semiconductor manufacturing facilities ("fabs") distribute gases, water and chemicals from generating equipment or storage tanks to the process manufacturing equipment. In pharmaceutical and biotechnology facilities, high-purity process piping systems are used both to transfer product through various stages of manufacturing and to distribute gases, water and chemicals that support manufacturing. The Company prides itself on its ability to secure repeat business with its customers on both new construction and retrofit projects. In fiscal 1996, 87% of revenues was derived from repeat customers. The Company's semiconductor customers currently include AMD, DEC, Hyundai, Intel, LAM Research, LSI Logic, Lucent Technologies, Motorola, Rockwell, SGS Thomson Semiconductor and Texas Instruments. The Company's pharmaceutical and biotechnology customers currently include Alcon, Bayer, Chiron, Genentech, Genetics Institute, IDEC, Merck, Ortho Diagnostics and Warner Lambert. Of the aforementioned customers, only AMD and Rockwell accounted for more than 10% of the Company's revenues in fiscal 1996. The Company was founded in 1971 by William A. Bianco, Jr., its current chairman and chief executive officer. The Company initially provided high- purity process piping services to the early Silicon Valley semiconductor companies and focused primarily on this regional market until 1990. Recognizing the growth opportunity in the semiconductor industry and the opportunity to apply high-purity process piping technology to other rapidly growing and capital intensive industries, the Company began expanding its operations into the pharmaceutical and biotechnology markets in the United States. The Company has also expanded geographically throughout the United States as well as at selected international locations. Concurrent with its expansion, the Company developed high-end value-added services such as engineering and quality assurance to respond to the changing construction and manufacturing strategies of its customers. Through these actions, the Company has acquired the capital equipment, fabrication facilities, engineering database and highly trained personnel to serve these rapidly growing industries and has developed the capability to perform turnkey high-purity process piping system projects. The Company has increased its revenues to $278.4 million for fiscal 1996 from $145.5 million for fiscal 1994, and income from operations to $16.0 million from $6.4 million during that period, representing compound annual growth rates of 38.3% and 58.6%, respectively, while growing its business solely through internal expansion. With its experience in the design, fabrication and installation of high-purity process piping systems in sophisticated manufacturing facilities, its accumulated resources, its financial accomplishments and its presence in numerous local markets, Kinetics believes that it has a strong competitive advantage and is well positioned as a key supplier to meet the technological challenges and growth of the semiconductor, pharmaceutical and biotechnology industries. The Company is committed to strengthening its position as a high-quality provider of sophisticated high-purity process piping systems, as well as expanding into the broader process systems market, for the semiconductor, pharmaceutical and biotechnology industries while increasing its revenues and profitability. To achieve these objectives, the Company has adopted a strategy consisting of the following key elements: . Increase Market Share. The Company intends to further increase its market share by opening and expanding branch offices, leveraging existing customer relationships, investing in fabrication and cleanroom facilities, acquiring capital equipment, and continuing to hire and train personnel. The Company also plans to broaden its customer base by increasing its direct sales force and by pursuing strategic alliances with specialty gas and high-purity water providers. . Expand Its Turnkey and Design/Build Operations. The Company believes that its turnkey and design/build operations will allow it to provide its customers with higher quality systems within a shortened project cycle time, while significantly expanding the range of services offered by the Company beyond its traditional contractor services. The Company has recently formed two subsidiaries to focus on the development of its turnkey and design/build operations: microKINETICS to focus on the semiconductor industry and bioKINETICS to focus on the biotechnology industry. . Further Develop Its International Operations. The Company plans to provide to international customers its complete range of value-added services, make additional strategic investments in local fabrication facilities, capital equipment and marketing resources, and hire and train local personnel. As a result of its extensive domestic experience and its relationships with major international manufacturers, the Company believes it is well-positioned to execute its international expansion plans. . Leverage Its Investment in Quality Leadership. The Company intends to continue to develop, refine and market its proprietary standard operating procedures ("SOPs"). These SOPs allow the Company to effectively compete for projects requiring fast-track schedules, custom design, extensive documentation and contamination-free installation procedures, and to consistently perform its work anywhere in the world. The Company has an extensive knowledge base regarding the requirements and expectations of various regulatory bodies, including the FDA. The Company is committed to continuing to understand and interpret the evolving requirements of these regulatory bodies and is in the process of applying for ISO 9000 certification to aid the Company's international expansion efforts. . Reduce Operating Costs and Increase Operating Efficiencies. The Company has identified and will continue to seek additional "best practice" techniques and is committed to implementing them throughout its entire organization. Such techniques include the increased use of its proprietary management software, consolidation of key suppliers in an effort to increase purchasing power, and consolidation of fabrication and administration into selected regional centers in order to reduce costs and increase operating efficiencies. . Develop Specialty Products. The Company has successfully introduced several product lines over the past two years, including semiconductor valve assemblies and portable high-purity gas and liquid analysis carts. The Company plans to grow these product lines and to introduce new products to meet the needs of its existing customer base. THE OFFERING <TABLE> <C> <S> Common Stock Offered Hereby: The Company..................................... 3,050,000 shares The Selling Stockholders........................ 86,674 shares Common Stock to be outstanding after the Offering.. 12,574,418 shares(1) Use of Proceeds.................................... To fund domestic and international expansion, including operations, facilities and equipment, as well as potential acquisitions; and repayment of debt. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001028965_special_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001028965_special_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..733b6b2869ecbd8478ce41dfc054f7e0273b2253
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001028965_special_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by reference to, the more detailed information and the Financial Statements of the Company, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes (i) the consummation of the merger of the Company with Special Metals and Technologies Corporation ('SMTC') pursuant to which each share of common stock of SMTC will be exchanged for 12,400 shares of Common Stock of the Company and (ii) that the Underwriters' over-allotment option is not exercised. References in this Prospectus to the 'Company' or 'Special Metals' refer to Special Metals Corporation, its subsidiaries and their predecessors, or any of them, depending on the context. Certain information contained in this summary and elsewhere in this Prospectus, including information with respect to the Company's plans and strategy for its business, are forward-looking statements. For a discussion of important factors which could cause actual results to differ materially from the forward-looking statements contained herein, see 'Risk Factors.' THE COMPANY Special Metals is one of the world's leading producers of superalloy and special alloy long products. Superalloys are highly engineered metal alloys designed to withstand extreme heat and stress and are principally used in the manufacture of jet engine parts. Compared to any other known metal or material, superalloys offer a superior combination of heat resistance, high temperature corrosion resistance, toughness and strength. Special alloys are vacuum melted alloys and dental alloys which have unique physical, chemical, and/or mechanical properties that are optimized by the Company's melting and processing capabilities. In 1952, a predecessor of Special Metals pioneered the melting technology that led to the practical development of the superalloys that are the critical materials used in the 'hot' section of modern jet engines. The Company believes that its 45 million pounds of vacuum induction melting capacity makes it one of the largest producers in the superalloy industry and that its substantial market share, comprehensive product line, proprietary know-how and technological experience make it a leader in its field. Special Metals' total net sales have increased from $80.4 million in 1993 to $162.3 million in 1996. The Company's backlog was approximately $146.2 million at December 31, 1996 compared to approximately $81.8 million at December 31, 1995. Approximately 77% of the Company's net sales in 1996 were to jet engine component manufacturers. The Company's products are also used in other technically demanding applications, such as land-based power generating equipment, oil well drilling hardware, die materials, chemical processing applications and medical applications. Special Metals operates three divisions. The Superalloy Billet and Bar Division manufactures a wide array of wrought superalloy and special alloy products in billet, bar and cast form, which are used primarily in jet engines. This division also produces 'shape memory' alloys, such as Nitinol, which are primarily used in medical and dental applications. The Company believes it has the leading worldwide market share of approximately 32% (excluding China and the countries of the former Soviet Union) in superalloy billet products and a North American market share of approximately 20% in superalloy bar products. The Powder Division produces powder metallurgy superalloy products for military jet engines and the latest generation of large commercial jet engines and is the world's largest independent manufacturer of superalloy powder products. The Dental Division is the leading North American producer of amalgamable dental alloys. In 1996, the Superalloy Billet and Bar Division, the Powder Division and the Dental Division accounted for 86%, 10% and 4%, respectively, of the Company's net sales. INDUSTRY OVERVIEW Superalloys were originally developed to meet the highly demanding design requirements of jet engines and are currently used to make jet engine components such as turbine blades, vanes, disks, rings, seals and shafts. These applications require very high strength, toughness and resistance to metal fatigue and creep while operating in environments where temperatures can sometimes exceed 2,200 degreesF. Management believes that over 70% of all superalloy sales worldwide are to jet engine component manufacturers. Superalloy products are also used in other technically demanding applications such as land-based power generating equipment, oil well drilling hardware, die materials and chemical processing applications. The complexity of the production process is reflected in the Company's relatively high average selling prices of $9.84 and $12.26 per pound shipped of superalloys and special alloys, respectively, for 1996, compared to the average selling price of other metals such as carbon steel and stainless steel, which currently range from $.20 to $4.00 per pound shipped. The highly demanding technical nature of superalloy products, specialized multi-stage production processes and the stringency of jet engine manufacturers' qualification requirements and certification processes have created what management believes are high barriers to entry in the superalloy industry. The superalloy industry has recently entered a period of increased demand primarily because of improving conditions in the aerospace industry. The superalloy industry reached a cyclical and historical peak in 1990 and subsequently declined to a cyclical bottom in 1993. Management believes that the demand for superalloy long products has almost doubled since 1993 and that the industry (including the Company) is operating at close to 100% of available capacity. As a result, since 1993, there have been significant increases in market prices for superalloy products. Based on industry data, the Company believes that the superalloy industry will operate at a utilization rate in excess of 90% for the next three years and that demand for superalloy products will increase at a 6% to 10% annual rate for the next three years. See 'Business--Industry Overview.' In 1995, the commercial aircraft industry started to recover from the recession of the early 1990s. The firm order backlog of The Boeing Co. ('Boeing'), McDonnell Douglas Corp. ('McDonnell Douglas') and Airbus Industrie, as reported by Speednews, was 2,370 planes at December 31, 1996. Roll-outs of commercial aircraft with more than 100 seats are expected to increase by more than 40% from 1995 to 1997. Boeing's production rate is scheduled to increase from 18 aircraft per month in early 1996 to 40 aircraft per month by the end of 1997. More importantly, the number of wide-body aircraft under production or on order is increasing, which is expected to increase demand for larger engines and larger components made with superalloys. The superalloy industry has substantially benefitted from this recovery. The Company believes that demand for jet engines will remain strong through 1999 because of projected increases in revenue passenger miles both domestically and internationally (especially in the Pacific Rim) and the imposition of federal Stage III noise regulations in the United States, which will require airlines to replace existing Stage II engines or retrofit such engines with engine hush kits. In addition, because of Federal Aviation Administration regulations mandating maintenance of aircraft engines based in part on the number of hours flown and the number of takeoff and landing cycles, a large number of commercial aircraft built in the 1980s are scheduled to undergo engine rebuilds in the next five years. As a result, management believes that demand for jet engine spare parts will remain strong. BUSINESS STRATEGY The Company's primary objective is to continue the growth of its superalloy and special alloy business and to focus on both the aerospace and non-aerospace markets. To achieve its objectives, the Company has implemented a business strategy which is designed to: (i) capitalize on the Company's leading position in the aerospace market; (ii) develop new products and markets; (iii) continue to reduce the Company's costs; and (iv) explore potential acquisitions. Capitalize on Leading Position in Aerospace Market. Special Metals' largest single product line is superalloy billet used primarily in the manufacture of jet engines. Management believes the Company's worldwide market share (excluding China and the countries of the former Soviet Union) in superalloy billet was approximately 32% in 1996 and, in certain key high technology applications, approached 40%. To meet the increased level of aerospace demand, the Company has increased its annual billet production capacity by 15% during 1996. The Company believes that its capital investment programs and commitment to high quality have contributed to its ability to obtain a wider variety of user certifications from major jet engine producers, such as General Electric Company ('General Electric'), Rolls Royce plc ('Rolls Royce'), Pratt & Whitney, a division of United Technologies Corporation ('Pratt & Whitney'), and Societe Nationale D'Etude Et De Construction De Moteurs D'Aviation ('SNECMA'), than any of its competitors. Over the last seven years (principally in 1990, 1991 and 1992), the Company invested over $28 million in new state-of-the-art forging, melting and other facilities and over the next five years, the Company currently plans to invest an additional $50 million to expand and modernize its facilities. Develop New Products and Markets. Special Metals plans to grow its business through the development of new products and new applications and markets for its existing products. Between 1990 and 1996, Special Metals engaged in an aggressive product line expansion effort. Over 20% of the Company's net sales in 1996 were from sales of enhancements of existing products or new products that did not exist in 1990. Given the brief commercial history of superalloys, the non-aerospace market for superalloy products is relatively immature. The Company believes that it is well positioned to exploit this market and capitalize on new opportunities. Continue to Reduce Costs. The Company has undertaken numerous projects to maintain and improve its efficiency and cost position over the last few years. Since 1992, Special Metals has enhanced its operating leverage, reduced its billet cycle time by 33%, and improved its inventory turnover by 37%. The Company continues to pursue opportunities to further reduce costs and improve efficiency. Explore Potential Acquisitions. The Company will examine opportunities to acquire or invest in companies, technologies or products that complement the Company's business or its product offerings. In particular, the Company will consider acquisitions or investments that will leverage its expertise in superalloy and special alloy products and enable it to enter new markets or sell new products. Currently, the Company has no agreements or understandings regarding any such acquisition or investment. See 'Risk Factors--Risks Associated With Potential Acquisitions.' THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............... 3,000,000 shares Common Stock offered by the Selling Stockholders.................................... 700,000 shares Total........................................ 3,700,000 shares Common Stock to be outstanding after the Offering(1)..................................... 15,400,000 shares Use of Proceeds................................... The net proceeds to the Company will be used to repay indebtedness under the Company's credit facility and, if available following the repayment of such indebtedness, for general corporate purposes, including working capital and capital expenditures. The Company will not receive any proceeds from the sale by the Selling Stockholders of the Common Stock in the Offering. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029030_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029030_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1040e874281c5d2ab38fa8c481822baa0af92ce4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029030_first_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. SEE THE INDEX OF PRINCIPAL TERMS, BEGINNING ON PAGE 55, FOR THE LOCATION HEREIN OF THE DEFINITIONS OF CAPITALIZED TERMS. <TABLE> <S> <C> Issuer....................... First Security Auto Grantor Trust 1997-A (the "Trust") Seller and Servicer.......... First Security Bank, N.A. (the "Seller" and the "Servicer" in its capacity as such; and otherwise sometimes referred to herein as the "Bank"). Securities Offered........... % Asset Backed Certificates, Class A (the "Class A Certificates"). % Asset Backed Certificates, Class B (the "Class B Certificates" together with the Class A Certificates, the "Certificates"). The Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. See "The Certificates--General." Trust Assets................. The property of the Trust (the "Trust Property") will include (i) a pool of fixed rate retail motor vehicle installment sale contracts and installment loans originated by the Seller that provide for the allocation of payments between principal and interest according to the simple interest method (collectively, the "Receivables"), (ii) all monies received under the Receivables after the close of business of the Servicer on February 25, 1997 (the "Cutoff Date"), (iii) security interests in the new and used automobiles and light trucks financed thereby (collectively, the "Financed Vehicles"), (iv) certain rights of the Trust under the Yield Supplement Agreement as described below, (v) the Seller's rights (if any) to receive proceeds from claims under certain insurance policies relating to the Financed Vehicles or the obligors under the Receivables (each, an "Obligor"), (vi) certain of the Seller's rights relating to the Receivables under agreements between the Seller and the motor vehicle dealers ("Dealers") that sold the Financed Vehicles and any assignments and other documents related thereto (collectively, the "Dealer Agreements") and under the documents and instruments contained in the Receivable Files, (vii) all rights of the Trust under the Pooling and Servicing Agreement with respect to the Trust (the "Agreement") between the Bank, as Seller and Servicer, and the Trustee, (viii) certain amounts from time to time on deposit in the Certificate Account, the Class A Distribution Account and the Class B Distribution Account and (ix) all proceeds of the foregoing within the meaning of the UCC. The Reserve Account and the Yield Supplement Account, and any amounts therein, will not be property of the Trust, but will be pledged to and held by the Collateral Agent, as secured party for the benefit of the Certificateholders. Certificates................. The Class A Certificates will be issued in an initial principal amount equal to $286,568,473.85 (the "Original Class A Certificate Balance"), and the Class B Certificates will be issued in an initial principal amount equal to $13,503,000.00 (the "Original Class B Certificate Balance" and, together with the Original Class A Certificate Balance, the "Original Certificate Balance"). The Original Class A Certificate Balance will equal approximately 95.50% of the aggregate outstanding principal balance of the Receivables determined in accordance with the Agreement (the "Pool Balance") as of the </TABLE> <TABLE> <S> <C> Cutoff Date (the "Original Pool Balance"). The Original Class B Certificate Balance will equal approximately 4.50% of the Original Pool Balance. Registration of Certificates............... The Class A Certificates and the Class B Certificates will each be represented initially by global certificates registered in the name of the Certificateholders, initially Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC"). No person acquiring a beneficial ownership interest in the Certificates (a "Certificate Owner") will be entitled to receive a Definitive Certificate representing such person's interest in the Trust except in certain limited circumstances. Under the terms of the Agreement, Certificate Owners will not be recognized as Certificateholders and will be permitted to exercise the rights of the Certificateholders only indirectly through DTC. See "Risk Factors--The Certificates" and "The Certificates." Class A Pass-Through Rate.... % per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months (the "Class A Pass-Through Rate"). Class B Pass Through Rate.... % per annum, calculated on the basis of a 360-day year consisting of twelve 30-day months (the "Class B Pass-Through Rate" and, together with the Class A Pass-Through Rate, the "Pass-Through Rates"). Distribution Date............ The 15th day of each month (or, if such day is not a business day, the next succeeding business day) (each, a "Distribution Date"), beginning April 15, 1997. Interest..................... On each Distribution Date, interest at the Class A Pass-Through Rate on the Class A Certificate Balance and interest at the Class B Pass-Through Rate on the Class B Certificate Balance, in each case as of the immediately preceding Distribution Date (after giving effect to any payments of principal made on such Distribution Date) will be distributed to the registered holders of the Class A Certificates ("Class A Certificateholders") and the registered holders of the Class B Certificates ("Class B Certificateholders" and, together with the Class A Certificateholders, the "Certificateholders"), initially, Cede as nominee of DTC, as of the day immediately preceding such Distribution Date (or, if Definitive Certificates are issued, the last day of the related Collection Period) (the "Record Date") to the extent that sufficient funds are on deposit for such Distribution Date in the Certificate Account or available in the Reserve Account to make such distribution. A "Collection Period" means a period during the term of the Agreement from and including the 26th day of a calendar month to and including the 25th day of the succeeding calendar month (or, in the case of the initial Collection Period, the period from but not including the Cutoff Date to and including March 25, 1997). See "The Certificates--Distributions on Certificates" and "--Reserve Account." The rights of Class B Certificateholders to receive payments of interest will be subordinated to the rights of the Class A Certificateholders to receive payments of interest to the extent described herein. See "Risk Factors-- Limited Assets; Subordination." Principal.................... On each Distribution Date, as described more fully herein, all payments of principal on the Receivables received by the Servicer during the related Collection Period, plus all Liquidation Proceeds, to the extent allocable to principal will be distributed by the Trustee PRO RATA to the Class A Certificateholders and to the Class B Certificate holders of record on the related Record Date to the extent that sufficient funds are on deposit in the </TABLE> <TABLE> <S> <C> Certificate Account or available in the Reserve Account to make such distribution. See "The Certificates--Distributions on Certificates" and "--Reserve Account." The rights of the Class B Certificateholders to receive payments of principal will be subordinated to the rights of the Class A Certificateholders to receive payments of interest and principal to the extent described herein. Servicing Fees............... On each Distribution Date, the Servicer will receive a fee for servicing the Receivables, equal to the product of (i) one-twelfth of the Basic Servicing Fee Rate (as defined below), multiplied by (ii) the Pool Balance as of the first day of the related Collection Period (the "Basic Servicing Fee"). In addition, the Servicer will be entitled to retain any late fees, prepayment charges (other than Deferral Fees) and other fees and charges collected during such Collection Period on the Receivables it services, plus any interest earned during the Collection Period on the amounts deposited by it in the Accounts (as such terms are defined below) (the "Supplemental Servicing Fee"). The "Basic Servicing Fee Rate" will equal 1.0% per annum. See "The Certificates--Servicing Compensation." Subordination of Class B Certificates............... Distributions of interest and principal on the Class B Certificates will be subordinated in priority of payment to distributions of interest and principal due on the Class A Certificates in the event of defaults on the Receivables to the extent described herein. The Class B Certificateholders will not receive any distributions of interest with respect to a Collection Period until the full amount of interest on the Class A Certificates relating to such Collection Period has been deposited in the Class A Distribution Account. The Class B Certificateholders will not receive any distributions of principal with respect to such Collection Period until the full amount of interest on and principal of the Class A Certificates relating to such Collection Period has been deposited in the Class A Distribution Account. See "Risk Factors--Limited Assets; Subordination." Advances..................... On each Deposit Date, the Servicer shall, subject to the following, make a payment (an "Advance") with respect to each Receivable serviced by it (other than a Defaulted Receivable) equal to the excess, if any, of (x) the product of the principal balance of such Receivable as of the first day of the related Collection Period and one-twelfth of its Contract Rate (calculated on the basis of a 360-day year comprised of twelve 30-day months), over (y) the interest actually received by the Servicer with respect to such Receivable from the Obligor or from payments of the Purchase Amount, Liquidation Proceeds or Recoveries (in each case for the related Collection Period and to the extent allocable to interest) during or with respect to such Collection Period. The Servicer may elect not to make an Advance of interest due and unpaid with respect to a Receivable to the extent that the Servicer, in its sole discretion, determines that such Advance is not recoverable from subsequent payments on such Receivable or from funds in the Reserve Account. See "The Certificates--Advances." Yield Supplement Agreement... The Seller will enter into a yield supplement agreement with the Trust (the "Yield Supplement Agreement") which will provide funds to supplement the interest collections on Receivables that have Contract Rates that are below the Class A Pass-Through Rate or the Class B Pass-Through Rate, plus the </TABLE> <TABLE> <S> <C> Basic Servicing Fee Rate, as described below. The Yield Supplement Agreement will, with respect to each Receivable, provide for payment by the Seller on or prior to the business day preceding each Distribution Date (such date, the "Deposit Date") of an amount (if positive) calculated by the Servicer equal to one-twelfth of the difference between (i) the sum of interest on the Class A Percentage of such Receivable's principal balance as of the first day of the related Collection Period at a rate equal to the sum of the Class A Pass-Through Rate and the Basic Servicing Fee Rate and interest on the Class B Percentage of such Receivable's principal balance as of the first day of the related Collection Period at a rate equal to the sum of the Class B Pass-Through Rate and the Basic Servicing Fee Rate and (ii) interest at the Contract Rate on such Receivable's principal balance as of the first day of the related Collection Period (in the aggregate for all Receivables with respect to any Deposit Date, the "Yield Supplement Amount"). The Seller's obligations under the Yield Supplement Agreement will be secured by funds on deposit in an account to be maintained by the Seller in the name of the Collateral Agent (the "Yield Supplement Account"). The amount on deposit in the Yield Supplement Account and available on any Distribution Date will be equal to at least the sum of all projected Yield Supplement Amounts for all future Distribution Dates, assuming that future scheduled payments on the Receivables are made on their scheduled due dates; provided that if on any date the Seller shall fail to pay the amount payable under the Yield Supplement Agreement in accordance with the terms thereof, then, in such event, the Specified Yield Supplement Balance shall not thereafter be reduced (the "Specified Yield Supplement Balance"). The amount required to be deposited by the Seller into the Yield Supplement Account on or prior to the Closing Date will be $ (the "Yield Supplement Initial Deposit"). Reserve Account.............. A reserve account (the "Reserve Account") will be established and maintained by the Seller, in the name of, and under the control of, the Collateral Agent with an initial deposit of cash or certain investments having an aggregate value of at least $7,501,786.85 (the "Reserve Account Initial Deposit"). In addition, on each Distribution Date, any amounts on deposit in the Certificate Account with respect to the related Collection Period after payments to the Certificateholders and the Servicer have been made will be deposited into the Reserve Account until the amount of the Reserve Account is equal to the Specified Reserve Account Balance. The Reserve Account provides credit enhancement and liquidity to the Certificateholders that will be available in the event that, as a result of defaults or delinquencies, Collections on the Receivables are insufficient to make the distributions on the Certificates. On or prior to each Deposit Date, the Collateral Agent will withdraw funds from the Reserve Account, to the extent of the funds therein (net of investment earnings), (i) to the extent required to reimburse the Servicer for Advances previously made and not reimbursed ("Outstanding Advances") to the extent provided in the Agreement and (ii) to the extent (x) the sum of the amounts required to be distributed to Certificateholders and the Servicer on the related Distribution Date exceeds (y) the amount on deposit in the Certificate Account as of the last day of the related Collection Period (net of investment income). If the amount in the Reserve Account is reduced to zero, Certificateholders will bear directly the credit and other risks associated with </TABLE> <TABLE> <S> <C> ownership of the Receivables, including the risk that the Trust may not have a perfected security interest in the Financed Vehicles. See "Risk Factors," "The Certificates--Reserve Account," "Certain Legal Aspects of the Receivables." Specified Reserve Account Balance.................... On any Distribution Date, the Specified Reserve Account Balance will equal 4.50% (9.00% under certain circumstances described herein) of the Pool Balance as of the last day of the related Collection Period, but in any event not less than the lesser of (i) $6,001,429.48 and (ii) the sum of the Pool Balance and an amount sufficient to pay interest on (a) the Class A Percentage of such Pool Balance at a rate equal to the sum of the Class A Pass-Through Rate and the Basic Servicing Fee Rate through the Final Scheduled Distribution Date and (b) the Class B Percentage of such Pool Balance at a rate equal to the sum of the Class B Pass-Through Rate and the Basic Servicing Fee Rate through the Final Scheduled Distribution Date. The Specified Reserve Account Balance may be reduced to a lesser amount as determined by the Seller, provided that such reduction does not adversely affect the ratings of the Certificates by the Rating Agencies. Amounts in the Reserve Account on any Distribution Date (after giving effect to all distributions made on that date) in excess of the Specified Reserve Account Balance for such Distribution Date will be paid to the Seller. Optional Purchase............ If the Pool Balance as of the last day of a Collection Period has declined to 10% or less of the Original Pool Balance, the Servicer may purchase all remaining Trust Property on any Distribution Date occurring in a subsequent Collection Period at a purchase price equal to the aggregate of the Purchase Amounts of the remaining Receivables (other than Defaulted Receivables). See "The Certificates--Termination." Trustee...................... Bankers Trust Company (the "Trustee"). Collateral Agent............. Bankers Trust Company (the "Collateral Agent"). Tax Status................... In the opinion of Kirkland & Ellis, special tax counsel to the Seller, the Trust will be classified for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Certificate Owners must report their respective allocable shares of income earned on Trust assets and, subject to certain limitations applicable to individuals, estates and trusts, may deduct their respective allocable shares of reasonable servicing and other fees. See "Federal Income Tax Consequences." Prepayment Considerations.... The weighted average life of the Certificates may be reduced by full or partial prepayments on the Receivables. The Receivables are prepayable at any time. Prepayments may also result from liquidations due to default, the receipt of monthly installments earlier than the scheduled due dates for such installments, the receipt of proceeds from credit life, disability, theft or physical damage insurance, repurchases by the Seller as result of certain uncured breaches of the warranties made by it in the Agreement with respect to the Receivables, purchases by the Servicer as a result of certain uncured breaches of the covenants made by it in the Agreement with respect to the Receivables, or the Servicer exercising its optional purchase right. The rate of prepayments on the Receivables may be influenced by a variety of economic, social, and other factors, including Obligor refinancings resulting from </TABLE> <TABLE> <S> <C> decreases in interest rates and the fact that the Obligor may not sell or transfer the Financed Vehicle securing a Receivable without the consent of the Seller. No prediction can be made as to the actual prepayment rates which will be experienced on the Receivables. If prepayments were to occur after a decline in interest rates, investors seeking to reinvest their distributed funds might be required to invest at a return lower than the applicable Pass-Through Rate. Certificate Owners will bear all reinvestment risk resulting from prepayment of the Receivables. See "Risk Factors--Prepayment Considerations" and "The Receivables--Maturity and Prepayment Assumptions." Rating....................... It is a condition to the issuance of the Certificates that the Class A Certificates be rated in the "AAA" category or its equivalent, and the Class B Certificates be rated at least in the "A" category or its equivalent, in each case by at least one nationally recognized rating agency (a "Rating Agency"). A security rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn at any time by the assigning Rating Agency. The ratings on the Certificates do not address the timing of distributions of principal on the Certificates prior to the Final Scheduled Distribution Date. ERISA Considerations......... The Class A Certificates may be purchased by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended, upon satisfaction of certain conditions described herein. Because the Class B Certificates are subordinated to the Class A Certificates, employee benefit plans subject to ERISA will not be eligible to purchase Class B Certificates. Any benefit plan fiduciary considering a purchase of Certificates should, among other things, consult with experienced legal counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029298_pci_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029298_pci_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e240798e30e1df3d2c22fb952323213e77a87cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029298_pci_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Company" or "ICF Kaiser" in this Prospectus may refer to ICF Kaiser International, Inc. and/or any of its consolidated subsidiaries. Effective December 31, 1995, the Company changed its fiscal year end from February 28 to December 31. THE COMPANY ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its other operating subsidiaries, is one of the nation's largest engineering, construction, program management and consulting services companies. The Company's Federal Programs, Engineers and Consulting Groups provide fully integrated services to domestic and foreign clients in the private and public sectors of the environment, infrastructure and basic metals and mining industry markets. For the latest nine-month period ended September 30, 1996, ICF Kaiser had gross and service revenue of $1,023.4 million and $433.6 million, respectively. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of income (loss) of joint ventures and affiliated companies. As of November 30, 1996, the Company employed 5,176 people located in more than 80 offices worldwide. In the environmental market, the Company provides services in connection with the remediation of hazardous and radioactive waste, waste minimization and disposal, risk assessment, global warming and acid rain, alternative fuels and clean up of harbors and waterways. Demand for environmental services is driven by a number of factors, including: the need to improve the quality of the environment; federal, state and municipal regulation and enforcement; and increased liability associated with pollution-related injury and damage. ICF Kaiser is well-positioned to take advantage of the growing market arising from the increased awareness internationally of the need for additional and/or initial environmental regulations, studies and remediation. ICF Kaiser also provides services to the infrastructure market. This market is driven by the need to maintain and expand, among other things, ports, roads, highways, mass transit systems and airports. Increasingly, environmental concerns, such as wastewater treatment and reducing automotive air pollutant emissions, are a driving force behind new infrastructure and transportation initiatives. The Company has capitalized on its specialized technical and environmental skills to win projects that provide consulting, planning, design and construction services. Internationally, there is a critical need for infrastructure projects where population growth of major cities has been and will continue to be extremely high. The Company currently provides engineering and construction management services for mass transit and wastewater treatment facilities in many such major cities worldwide. ICF Kaiser assists its basic metals and mining industry clients by providing the engineering and construction skills needed to maintain and retrofit existing plants and replace aging production capacity with newer, more efficient and more environmentally responsible facilities. The Company's engineering and construction skills, as well as its access to process technologies, have helped establish it as a worldwide leader in serving the basic metals and mining industries, especially aluminum and steel. ICF Kaiser is currently expanding its operations internationally, particularly engineering and construction management services related to alumina production from bauxite, aluminum smelting and other basic industry facilities. The Company is currently working on several large, highly visible projects, including, but not limited to, (i) a five-year contract at the U.S. Department of Energy's Rocky Flats Environmental Technology site near Golden, Colorado, (ii) a two-year contract with Nova Hut, an integrated steel maker based in the Czech Republic, (iii) two four-year Total Environmental Restoration Contracts ("TERC") to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers, (iv) a five-year construction management contract for the Boston Harbor wastewater treatment facility and (v) a three-year contract as the project manager at the light rail transit system in Manila. ICF Kaiser International, Inc. was incorporated in Delaware in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1988, the Company acquired the Kaiser Engineers business which dates from 1914. The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, telephone number (703) 934-3600. THE EXCHANGE OFFER The Company is offering to exchange (the "Exchange The Exchange Offer........ Offer") up to $15,000,000 aggregate principal amount of its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), for up to $15,000,000 ag- gregate principal amount of its outstanding 12% Se- nior Notes due 2003, Series A, that were issued and sold in a transaction exempt from registration un- der the Securities Act (the "Old Notes" and to- gether with the Exchange Notes, the "Notes"). The form and terms of the Exchange Notes are substan- tially identical (including principal amount, in- terest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer--Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain additional interest provisions that are ap- plicable to the Old Notes under a registration rights agreement dated as of December 23, 1996 (the "Registration Rights Agreement") between the Com- pany and BT Securities Corporation as initial pur- chaser (the "Initial Purchaser") of the Old Notes. Exchange Notes issued pursuant to the Exchange Of- fer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder that is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activi- ties), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not in- tend to engage in, and have no arrangement or un- derstanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition......... The Exchange Offer is not conditioned upon any min- imum aggregate amount of Old Notes being tendered or accepted for exchange. Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, of March 6, 1997, unless extended (the "Expiration Date"). Exchange Date............. The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer........... The obligation of the Company to consummate the Ex- change Offer is subject to certain conditions. See "The Exchange Offer--Conditions to the Exchange Of- fer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights......... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expira- tion Date. Any Old Notes not accepted for any rea- son will be returned without expense to the tendering holders thereof as promptly as practica- ble after the expiration or termination of the Ex- change Offer. Procedures for Tendering Old Notes................. See "The Exchange Offer--How to Tender." Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old Notes..................... As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Additional Interest." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes." TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $15,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." Securities Offered........ $15,000,000 of 12% Senior Notes due 2003, Series B Maturity Date............. December 31, 2003 Interest Rate and Payment Dates.................... The Exchange Notes will bear interest at a rate of 12% per annum. Interest will accrue from December 31, 1996 and will be paid semiannually on June 30 and December 31 of each year, commencing June 30, 1997. Temporary Interest Rate Increase................. The interest rate on the Exchange Notes will be 13% until (i) the Company achieves and maintains for two consecutive quarters on a trailing twelve-month basis $36 million of earnings after deducting mi- nority interests and before interest, taxes, depre- ciation and amortization calculated in accordance with generally accepted accounting principles ("Earnings") or (ii) March 31, 1998, provided that the Company's Earnings are $36 million as of that date on a trailing twelve-month basis. If the Company's Earnings are not $36 million as of that date on a trailing twelve-month basis, then the in- terest rate will continue at 13% until the Company's Earnings are $36 million for one quarter on a trailing twelve-month basis. See "Description of the Notes--Interest Rate Increase." Optional Redemption....... The Exchange Notes are redeemable, in whole or in part, at the option of the Company on or after De- cember 31, 1998 at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the redemption date. Change of Control......... In the event of a Change of Control, the Company will be required to offer to purchase all of the outstanding Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "De- scription of the Notes--Change of Control." Ranking................... The Exchange Notes will be unsecured obligations of the Company, will rank senior to all subordinated indebtedness of the Company and will rank pari passu in right of payment with all existing and fu- ture senior indebtedness of the Company, including the Old Notes and indebtedness under the Credit Fa- cility (as defined). Guarantees................ The Exchange Notes will be unconditionally guaran- teed by the Subsidiary Guarantors. Certain Covenants......... The Indenture contains certain covenants that, among other things, limit: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the pay- ment of dividends; (iii) the repurchase of capital stock or subordinated indebtedness; (iv) the making of certain other distributions, loans and invest- ments; (v) the sale of assets and the sale of the stock of Restricted Subsidiaries; (vi) the creation of restrictions on the ability of Restricted Sub- sidiaries to pay dividends or make other payments to the Company; and (vii) the ability of the Com- pany and its Restricted Subsidiaries to enter into certain transactions with affiliates or to merge, consolidate or transfer substantially all assets. All of these limitations and restrictions are sub- ject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of the Notes." EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST Pursuant to the Registration Rights Agreement, the Company has agreed (i) to file the Registration Statement on or prior to February 6, 1997 with respect to the Exchange Offer, (ii) to use its best efforts to cause the Registration Statement to become effective under the Securities Act on or prior to April 27, 1997 and (iii) to use its best efforts to consummate the Exchange Offer on or prior to June 11, 1997. In the event that applicable interpretations of the Staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated, the Company will use its best efforts to cause to become effective a shelf registration statement with respect to the resale of the Old Notes and to keep such shelf registration statement effective until December 23, 1999. The Company will be obligated to pay additional interest as liquidated damages to holders of the Old Notes under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Old Notes Registration Rights; Additional Interest."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029323_cygna_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029323_cygna_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e240798e30e1df3d2c22fb952323213e77a87cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029323_cygna_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Company" or "ICF Kaiser" in this Prospectus may refer to ICF Kaiser International, Inc. and/or any of its consolidated subsidiaries. Effective December 31, 1995, the Company changed its fiscal year end from February 28 to December 31. THE COMPANY ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its other operating subsidiaries, is one of the nation's largest engineering, construction, program management and consulting services companies. The Company's Federal Programs, Engineers and Consulting Groups provide fully integrated services to domestic and foreign clients in the private and public sectors of the environment, infrastructure and basic metals and mining industry markets. For the latest nine-month period ended September 30, 1996, ICF Kaiser had gross and service revenue of $1,023.4 million and $433.6 million, respectively. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of income (loss) of joint ventures and affiliated companies. As of November 30, 1996, the Company employed 5,176 people located in more than 80 offices worldwide. In the environmental market, the Company provides services in connection with the remediation of hazardous and radioactive waste, waste minimization and disposal, risk assessment, global warming and acid rain, alternative fuels and clean up of harbors and waterways. Demand for environmental services is driven by a number of factors, including: the need to improve the quality of the environment; federal, state and municipal regulation and enforcement; and increased liability associated with pollution-related injury and damage. ICF Kaiser is well-positioned to take advantage of the growing market arising from the increased awareness internationally of the need for additional and/or initial environmental regulations, studies and remediation. ICF Kaiser also provides services to the infrastructure market. This market is driven by the need to maintain and expand, among other things, ports, roads, highways, mass transit systems and airports. Increasingly, environmental concerns, such as wastewater treatment and reducing automotive air pollutant emissions, are a driving force behind new infrastructure and transportation initiatives. The Company has capitalized on its specialized technical and environmental skills to win projects that provide consulting, planning, design and construction services. Internationally, there is a critical need for infrastructure projects where population growth of major cities has been and will continue to be extremely high. The Company currently provides engineering and construction management services for mass transit and wastewater treatment facilities in many such major cities worldwide. ICF Kaiser assists its basic metals and mining industry clients by providing the engineering and construction skills needed to maintain and retrofit existing plants and replace aging production capacity with newer, more efficient and more environmentally responsible facilities. The Company's engineering and construction skills, as well as its access to process technologies, have helped establish it as a worldwide leader in serving the basic metals and mining industries, especially aluminum and steel. ICF Kaiser is currently expanding its operations internationally, particularly engineering and construction management services related to alumina production from bauxite, aluminum smelting and other basic industry facilities. The Company is currently working on several large, highly visible projects, including, but not limited to, (i) a five-year contract at the U.S. Department of Energy's Rocky Flats Environmental Technology site near Golden, Colorado, (ii) a two-year contract with Nova Hut, an integrated steel maker based in the Czech Republic, (iii) two four-year Total Environmental Restoration Contracts ("TERC") to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers, (iv) a five-year construction management contract for the Boston Harbor wastewater treatment facility and (v) a three-year contract as the project manager at the light rail transit system in Manila. ICF Kaiser International, Inc. was incorporated in Delaware in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1988, the Company acquired the Kaiser Engineers business which dates from 1914. The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, telephone number (703) 934-3600. THE EXCHANGE OFFER The Company is offering to exchange (the "Exchange The Exchange Offer........ Offer") up to $15,000,000 aggregate principal amount of its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), for up to $15,000,000 ag- gregate principal amount of its outstanding 12% Se- nior Notes due 2003, Series A, that were issued and sold in a transaction exempt from registration un- der the Securities Act (the "Old Notes" and to- gether with the Exchange Notes, the "Notes"). The form and terms of the Exchange Notes are substan- tially identical (including principal amount, in- terest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer--Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain additional interest provisions that are ap- plicable to the Old Notes under a registration rights agreement dated as of December 23, 1996 (the "Registration Rights Agreement") between the Com- pany and BT Securities Corporation as initial pur- chaser (the "Initial Purchaser") of the Old Notes. Exchange Notes issued pursuant to the Exchange Of- fer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder that is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activi- ties), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not in- tend to engage in, and have no arrangement or un- derstanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition......... The Exchange Offer is not conditioned upon any min- imum aggregate amount of Old Notes being tendered or accepted for exchange. Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, of March 6, 1997, unless extended (the "Expiration Date"). Exchange Date............. The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer........... The obligation of the Company to consummate the Ex- change Offer is subject to certain conditions. See "The Exchange Offer--Conditions to the Exchange Of- fer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights......... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expira- tion Date. Any Old Notes not accepted for any rea- son will be returned without expense to the tendering holders thereof as promptly as practica- ble after the expiration or termination of the Ex- change Offer. Procedures for Tendering Old Notes................. See "The Exchange Offer--How to Tender." Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old Notes..................... As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Additional Interest." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes." TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $15,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." Securities Offered........ $15,000,000 of 12% Senior Notes due 2003, Series B Maturity Date............. December 31, 2003 Interest Rate and Payment Dates.................... The Exchange Notes will bear interest at a rate of 12% per annum. Interest will accrue from December 31, 1996 and will be paid semiannually on June 30 and December 31 of each year, commencing June 30, 1997. Temporary Interest Rate Increase................. The interest rate on the Exchange Notes will be 13% until (i) the Company achieves and maintains for two consecutive quarters on a trailing twelve-month basis $36 million of earnings after deducting mi- nority interests and before interest, taxes, depre- ciation and amortization calculated in accordance with generally accepted accounting principles ("Earnings") or (ii) March 31, 1998, provided that the Company's Earnings are $36 million as of that date on a trailing twelve-month basis. If the Company's Earnings are not $36 million as of that date on a trailing twelve-month basis, then the in- terest rate will continue at 13% until the Company's Earnings are $36 million for one quarter on a trailing twelve-month basis. See "Description of the Notes--Interest Rate Increase." Optional Redemption....... The Exchange Notes are redeemable, in whole or in part, at the option of the Company on or after De- cember 31, 1998 at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the redemption date. Change of Control......... In the event of a Change of Control, the Company will be required to offer to purchase all of the outstanding Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "De- scription of the Notes--Change of Control." Ranking................... The Exchange Notes will be unsecured obligations of the Company, will rank senior to all subordinated indebtedness of the Company and will rank pari passu in right of payment with all existing and fu- ture senior indebtedness of the Company, including the Old Notes and indebtedness under the Credit Fa- cility (as defined). Guarantees................ The Exchange Notes will be unconditionally guaran- teed by the Subsidiary Guarantors. Certain Covenants......... The Indenture contains certain covenants that, among other things, limit: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the pay- ment of dividends; (iii) the repurchase of capital stock or subordinated indebtedness; (iv) the making of certain other distributions, loans and invest- ments; (v) the sale of assets and the sale of the stock of Restricted Subsidiaries; (vi) the creation of restrictions on the ability of Restricted Sub- sidiaries to pay dividends or make other payments to the Company; and (vii) the ability of the Com- pany and its Restricted Subsidiaries to enter into certain transactions with affiliates or to merge, consolidate or transfer substantially all assets. All of these limitations and restrictions are sub- ject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of the Notes." EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST Pursuant to the Registration Rights Agreement, the Company has agreed (i) to file the Registration Statement on or prior to February 6, 1997 with respect to the Exchange Offer, (ii) to use its best efforts to cause the Registration Statement to become effective under the Securities Act on or prior to April 27, 1997 and (iii) to use its best efforts to consummate the Exchange Offer on or prior to June 11, 1997. In the event that applicable interpretations of the Staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated, the Company will use its best efforts to cause to become effective a shelf registration statement with respect to the resale of the Old Notes and to keep such shelf registration statement effective until December 23, 1999. The Company will be obligated to pay additional interest as liquidated damages to holders of the Old Notes under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Old Notes Registration Rights; Additional Interest."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029325_icf_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029325_icf_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e240798e30e1df3d2c22fb952323213e77a87cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029325_icf_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Company" or "ICF Kaiser" in this Prospectus may refer to ICF Kaiser International, Inc. and/or any of its consolidated subsidiaries. Effective December 31, 1995, the Company changed its fiscal year end from February 28 to December 31. THE COMPANY ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its other operating subsidiaries, is one of the nation's largest engineering, construction, program management and consulting services companies. The Company's Federal Programs, Engineers and Consulting Groups provide fully integrated services to domestic and foreign clients in the private and public sectors of the environment, infrastructure and basic metals and mining industry markets. For the latest nine-month period ended September 30, 1996, ICF Kaiser had gross and service revenue of $1,023.4 million and $433.6 million, respectively. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of income (loss) of joint ventures and affiliated companies. As of November 30, 1996, the Company employed 5,176 people located in more than 80 offices worldwide. In the environmental market, the Company provides services in connection with the remediation of hazardous and radioactive waste, waste minimization and disposal, risk assessment, global warming and acid rain, alternative fuels and clean up of harbors and waterways. Demand for environmental services is driven by a number of factors, including: the need to improve the quality of the environment; federal, state and municipal regulation and enforcement; and increased liability associated with pollution-related injury and damage. ICF Kaiser is well-positioned to take advantage of the growing market arising from the increased awareness internationally of the need for additional and/or initial environmental regulations, studies and remediation. ICF Kaiser also provides services to the infrastructure market. This market is driven by the need to maintain and expand, among other things, ports, roads, highways, mass transit systems and airports. Increasingly, environmental concerns, such as wastewater treatment and reducing automotive air pollutant emissions, are a driving force behind new infrastructure and transportation initiatives. The Company has capitalized on its specialized technical and environmental skills to win projects that provide consulting, planning, design and construction services. Internationally, there is a critical need for infrastructure projects where population growth of major cities has been and will continue to be extremely high. The Company currently provides engineering and construction management services for mass transit and wastewater treatment facilities in many such major cities worldwide. ICF Kaiser assists its basic metals and mining industry clients by providing the engineering and construction skills needed to maintain and retrofit existing plants and replace aging production capacity with newer, more efficient and more environmentally responsible facilities. The Company's engineering and construction skills, as well as its access to process technologies, have helped establish it as a worldwide leader in serving the basic metals and mining industries, especially aluminum and steel. ICF Kaiser is currently expanding its operations internationally, particularly engineering and construction management services related to alumina production from bauxite, aluminum smelting and other basic industry facilities. The Company is currently working on several large, highly visible projects, including, but not limited to, (i) a five-year contract at the U.S. Department of Energy's Rocky Flats Environmental Technology site near Golden, Colorado, (ii) a two-year contract with Nova Hut, an integrated steel maker based in the Czech Republic, (iii) two four-year Total Environmental Restoration Contracts ("TERC") to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers, (iv) a five-year construction management contract for the Boston Harbor wastewater treatment facility and (v) a three-year contract as the project manager at the light rail transit system in Manila. ICF Kaiser International, Inc. was incorporated in Delaware in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1988, the Company acquired the Kaiser Engineers business which dates from 1914. The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, telephone number (703) 934-3600. THE EXCHANGE OFFER The Company is offering to exchange (the "Exchange The Exchange Offer........ Offer") up to $15,000,000 aggregate principal amount of its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), for up to $15,000,000 ag- gregate principal amount of its outstanding 12% Se- nior Notes due 2003, Series A, that were issued and sold in a transaction exempt from registration un- der the Securities Act (the "Old Notes" and to- gether with the Exchange Notes, the "Notes"). The form and terms of the Exchange Notes are substan- tially identical (including principal amount, in- terest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer--Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain additional interest provisions that are ap- plicable to the Old Notes under a registration rights agreement dated as of December 23, 1996 (the "Registration Rights Agreement") between the Com- pany and BT Securities Corporation as initial pur- chaser (the "Initial Purchaser") of the Old Notes. Exchange Notes issued pursuant to the Exchange Of- fer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder that is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activi- ties), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not in- tend to engage in, and have no arrangement or un- derstanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition......... The Exchange Offer is not conditioned upon any min- imum aggregate amount of Old Notes being tendered or accepted for exchange. Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, of March 6, 1997, unless extended (the "Expiration Date"). Exchange Date............. The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer........... The obligation of the Company to consummate the Ex- change Offer is subject to certain conditions. See "The Exchange Offer--Conditions to the Exchange Of- fer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights......... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expira- tion Date. Any Old Notes not accepted for any rea- son will be returned without expense to the tendering holders thereof as promptly as practica- ble after the expiration or termination of the Ex- change Offer. Procedures for Tendering Old Notes................. See "The Exchange Offer--How to Tender." Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old Notes..................... As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Additional Interest." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes." TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $15,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." Securities Offered........ $15,000,000 of 12% Senior Notes due 2003, Series B Maturity Date............. December 31, 2003 Interest Rate and Payment Dates.................... The Exchange Notes will bear interest at a rate of 12% per annum. Interest will accrue from December 31, 1996 and will be paid semiannually on June 30 and December 31 of each year, commencing June 30, 1997. Temporary Interest Rate Increase................. The interest rate on the Exchange Notes will be 13% until (i) the Company achieves and maintains for two consecutive quarters on a trailing twelve-month basis $36 million of earnings after deducting mi- nority interests and before interest, taxes, depre- ciation and amortization calculated in accordance with generally accepted accounting principles ("Earnings") or (ii) March 31, 1998, provided that the Company's Earnings are $36 million as of that date on a trailing twelve-month basis. If the Company's Earnings are not $36 million as of that date on a trailing twelve-month basis, then the in- terest rate will continue at 13% until the Company's Earnings are $36 million for one quarter on a trailing twelve-month basis. See "Description of the Notes--Interest Rate Increase." Optional Redemption....... The Exchange Notes are redeemable, in whole or in part, at the option of the Company on or after De- cember 31, 1998 at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the redemption date. Change of Control......... In the event of a Change of Control, the Company will be required to offer to purchase all of the outstanding Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "De- scription of the Notes--Change of Control." Ranking................... The Exchange Notes will be unsecured obligations of the Company, will rank senior to all subordinated indebtedness of the Company and will rank pari passu in right of payment with all existing and fu- ture senior indebtedness of the Company, including the Old Notes and indebtedness under the Credit Fa- cility (as defined). Guarantees................ The Exchange Notes will be unconditionally guaran- teed by the Subsidiary Guarantors. Certain Covenants......... The Indenture contains certain covenants that, among other things, limit: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the pay- ment of dividends; (iii) the repurchase of capital stock or subordinated indebtedness; (iv) the making of certain other distributions, loans and invest- ments; (v) the sale of assets and the sale of the stock of Restricted Subsidiaries; (vi) the creation of restrictions on the ability of Restricted Sub- sidiaries to pay dividends or make other payments to the Company; and (vii) the ability of the Com- pany and its Restricted Subsidiaries to enter into certain transactions with affiliates or to merge, consolidate or transfer substantially all assets. All of these limitations and restrictions are sub- ject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of the Notes." EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST Pursuant to the Registration Rights Agreement, the Company has agreed (i) to file the Registration Statement on or prior to February 6, 1997 with respect to the Exchange Offer, (ii) to use its best efforts to cause the Registration Statement to become effective under the Securities Act on or prior to April 27, 1997 and (iii) to use its best efforts to consummate the Exchange Offer on or prior to June 11, 1997. In the event that applicable interpretations of the Staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated, the Company will use its best efforts to cause to become effective a shelf registration statement with respect to the resale of the Old Notes and to keep such shelf registration statement effective until December 23, 1999. The Company will be obligated to pay additional interest as liquidated damages to holders of the Old Notes under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Old Notes Registration Rights; Additional Interest."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029326_systems_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029326_systems_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e240798e30e1df3d2c22fb952323213e77a87cfe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029326_systems_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Company" or "ICF Kaiser" in this Prospectus may refer to ICF Kaiser International, Inc. and/or any of its consolidated subsidiaries. Effective December 31, 1995, the Company changed its fiscal year end from February 28 to December 31. THE COMPANY ICF Kaiser International, Inc., through ICF Kaiser Engineers, Inc. and its other operating subsidiaries, is one of the nation's largest engineering, construction, program management and consulting services companies. The Company's Federal Programs, Engineers and Consulting Groups provide fully integrated services to domestic and foreign clients in the private and public sectors of the environment, infrastructure and basic metals and mining industry markets. For the latest nine-month period ended September 30, 1996, ICF Kaiser had gross and service revenue of $1,023.4 million and $433.6 million, respectively. Service revenue is derived by deducting the costs of subcontracted services and direct project costs from gross revenue and adding the Company's share of income (loss) of joint ventures and affiliated companies. As of November 30, 1996, the Company employed 5,176 people located in more than 80 offices worldwide. In the environmental market, the Company provides services in connection with the remediation of hazardous and radioactive waste, waste minimization and disposal, risk assessment, global warming and acid rain, alternative fuels and clean up of harbors and waterways. Demand for environmental services is driven by a number of factors, including: the need to improve the quality of the environment; federal, state and municipal regulation and enforcement; and increased liability associated with pollution-related injury and damage. ICF Kaiser is well-positioned to take advantage of the growing market arising from the increased awareness internationally of the need for additional and/or initial environmental regulations, studies and remediation. ICF Kaiser also provides services to the infrastructure market. This market is driven by the need to maintain and expand, among other things, ports, roads, highways, mass transit systems and airports. Increasingly, environmental concerns, such as wastewater treatment and reducing automotive air pollutant emissions, are a driving force behind new infrastructure and transportation initiatives. The Company has capitalized on its specialized technical and environmental skills to win projects that provide consulting, planning, design and construction services. Internationally, there is a critical need for infrastructure projects where population growth of major cities has been and will continue to be extremely high. The Company currently provides engineering and construction management services for mass transit and wastewater treatment facilities in many such major cities worldwide. ICF Kaiser assists its basic metals and mining industry clients by providing the engineering and construction skills needed to maintain and retrofit existing plants and replace aging production capacity with newer, more efficient and more environmentally responsible facilities. The Company's engineering and construction skills, as well as its access to process technologies, have helped establish it as a worldwide leader in serving the basic metals and mining industries, especially aluminum and steel. ICF Kaiser is currently expanding its operations internationally, particularly engineering and construction management services related to alumina production from bauxite, aluminum smelting and other basic industry facilities. The Company is currently working on several large, highly visible projects, including, but not limited to, (i) a five-year contract at the U.S. Department of Energy's Rocky Flats Environmental Technology site near Golden, Colorado, (ii) a two-year contract with Nova Hut, an integrated steel maker based in the Czech Republic, (iii) two four-year Total Environmental Restoration Contracts ("TERC") to perform environmental restoration work at federal installations for the U.S. Army Corps of Engineers, (iv) a five-year construction management contract for the Boston Harbor wastewater treatment facility and (v) a three-year contract as the project manager at the light rail transit system in Manila. ICF Kaiser International, Inc. was incorporated in Delaware in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1988, the Company acquired the Kaiser Engineers business which dates from 1914. The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, telephone number (703) 934-3600. THE EXCHANGE OFFER The Company is offering to exchange (the "Exchange The Exchange Offer........ Offer") up to $15,000,000 aggregate principal amount of its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), for up to $15,000,000 ag- gregate principal amount of its outstanding 12% Se- nior Notes due 2003, Series A, that were issued and sold in a transaction exempt from registration un- der the Securities Act (the "Old Notes" and to- gether with the Exchange Notes, the "Notes"). The form and terms of the Exchange Notes are substan- tially identical (including principal amount, in- terest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer--Terms of the Exchange" and "--Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain additional interest provisions that are ap- plicable to the Old Notes under a registration rights agreement dated as of December 23, 1996 (the "Registration Rights Agreement") between the Com- pany and BT Securities Corporation as initial pur- chaser (the "Initial Purchaser") of the Old Notes. Exchange Notes issued pursuant to the Exchange Of- fer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder that is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activi- ties), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not in- tend to engage in, and have no arrangement or un- derstanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition......... The Exchange Offer is not conditioned upon any min- imum aggregate amount of Old Notes being tendered or accepted for exchange. Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, of March 6, 1997, unless extended (the "Expiration Date"). Exchange Date............. The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer........... The obligation of the Company to consummate the Ex- change Offer is subject to certain conditions. See "The Exchange Offer--Conditions to the Exchange Of- fer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights......... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expira- tion Date. Any Old Notes not accepted for any rea- son will be returned without expense to the tendering holders thereof as promptly as practica- ble after the expiration or termination of the Ex- change Offer. Procedures for Tendering Old Notes................. See "The Exchange Offer--How to Tender." Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old Notes..................... As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Additional Interest." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors--Consequences of Failure to Exchange Old Notes." TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $15,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." Securities Offered........ $15,000,000 of 12% Senior Notes due 2003, Series B Maturity Date............. December 31, 2003 Interest Rate and Payment Dates.................... The Exchange Notes will bear interest at a rate of 12% per annum. Interest will accrue from December 31, 1996 and will be paid semiannually on June 30 and December 31 of each year, commencing June 30, 1997. Temporary Interest Rate Increase................. The interest rate on the Exchange Notes will be 13% until (i) the Company achieves and maintains for two consecutive quarters on a trailing twelve-month basis $36 million of earnings after deducting mi- nority interests and before interest, taxes, depre- ciation and amortization calculated in accordance with generally accepted accounting principles ("Earnings") or (ii) March 31, 1998, provided that the Company's Earnings are $36 million as of that date on a trailing twelve-month basis. If the Company's Earnings are not $36 million as of that date on a trailing twelve-month basis, then the in- terest rate will continue at 13% until the Company's Earnings are $36 million for one quarter on a trailing twelve-month basis. See "Description of the Notes--Interest Rate Increase." Optional Redemption....... The Exchange Notes are redeemable, in whole or in part, at the option of the Company on or after De- cember 31, 1998 at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the redemption date. Change of Control......... In the event of a Change of Control, the Company will be required to offer to purchase all of the outstanding Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "De- scription of the Notes--Change of Control." Ranking................... The Exchange Notes will be unsecured obligations of the Company, will rank senior to all subordinated indebtedness of the Company and will rank pari passu in right of payment with all existing and fu- ture senior indebtedness of the Company, including the Old Notes and indebtedness under the Credit Fa- cility (as defined). Guarantees................ The Exchange Notes will be unconditionally guaran- teed by the Subsidiary Guarantors. Certain Covenants......... The Indenture contains certain covenants that, among other things, limit: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the pay- ment of dividends; (iii) the repurchase of capital stock or subordinated indebtedness; (iv) the making of certain other distributions, loans and invest- ments; (v) the sale of assets and the sale of the stock of Restricted Subsidiaries; (vi) the creation of restrictions on the ability of Restricted Sub- sidiaries to pay dividends or make other payments to the Company; and (vii) the ability of the Com- pany and its Restricted Subsidiaries to enter into certain transactions with affiliates or to merge, consolidate or transfer substantially all assets. All of these limitations and restrictions are sub- ject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of the Notes." EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST Pursuant to the Registration Rights Agreement, the Company has agreed (i) to file the Registration Statement on or prior to February 6, 1997 with respect to the Exchange Offer, (ii) to use its best efforts to cause the Registration Statement to become effective under the Securities Act on or prior to April 27, 1997 and (iii) to use its best efforts to consummate the Exchange Offer on or prior to June 11, 1997. In the event that applicable interpretations of the Staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated, the Company will use its best efforts to cause to become effective a shelf registration statement with respect to the resale of the Old Notes and to keep such shelf registration statement effective until December 23, 1999. The Company will be obligated to pay additional interest as liquidated damages to holders of the Old Notes under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Old Notes Registration Rights; Additional Interest."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029392_visual_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029392_visual_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..50e087e12490c0d9b3f9a22f8a52baec360eb167
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029392_visual_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." THE COMPANY Visual Numerics, Inc. ("Visual Numerics" or the "Company") is a leading supplier of computational algorithm libraries and visual data analysis software. Its IMSL libraries are proprietary sets of algorithms used by scientists, researchers, engineers and information technology professionals to perform complex numerical and computational functions and to develop computer applications. The Company has been developing, enhancing and supplementing the IMSL libraries for 26 years. The Company's PV-WAVE visual data analysis products facilitate analysis of complex, multi-variable data sets in a wide variety of industries and applications. Visual Numerics is enhancing its existing products to enable their use in intranet- and Internet-computing environments and is developing new products based upon its existing technologies that are specifically designed for use in Java-based applications in those environments. The Company's products help customers create high- quality applications across multiple platforms. The Company's customers include approximately 240 of the Fortune 1000 companies and are widely dispersed among telecommunications, financial, life sciences, transportation, defense, earth sciences, research and educational markets. The IMSL libraries are collections of mathematical and statistical formulae and functions coded into computer algorithms that are fully tested, supported and maintained. These algorithms include linear matrix algebra, eigenvalue analysis, interpolation and approximation algorithms, integral and differential equations, optimization, transforms and statistics. The IMSL Fortran, Fortran 90 and C Libraries allow users to deploy the same algorithms across an array of computing platforms and programming languages. PV-WAVE, the Company's powerful visual data analysis software, allows its users to visualize, manipulate and analyze complex or extremely large data sets to detect and display patterns, trends, anomalies and other information. PV-WAVE facilitates data comprehension and can reveal important information that might otherwise be hidden. The Company believes that its IMSL numerical libraries and PV-WAVE products are the most reliable and efficient products of their kind. The rapid growth of intranets and the Internet is accelerating the need for tools to analyze and manipulate data in heterogeneous distributed computing environments. Fulfilling such need requires both a computer language that works across diverse operating systems, platforms and protocols and the technology to analyze and manipulate data. The Company believes that the object-oriented language known as Java will become the preferred language for distributed systems, such as intranets and the Internet, because of its ability to operate across platforms and operating systems, its architectural design which provides enhanced security, its built-in "multi-threading" which facilitates graphical applications and other distributed features. The Company's strategy is to enhance its position as a premier provider of complex computational algorithms and visual data analysis software by maintaining its technology leadership, focusing on development of platform- independent applications and leveraging its market position, installed customer base and brand names to exploit intranet and Internet market opportunities. Visual Numerics is actively participating in setting industry standards in intranet and Internet technologies and is extending its existing products for use on intranets and the Internet and developing new products in Java. Visual Numerics markets and sells its software through its global direct sales force, international distributors and Internet sales in North America, Europe and Asia. The Company's customers include Boeing, Caterpillar, Deutsche Bank, Ford, GTE, Hewlett-Packard, Johns Hopkins University, Lockheed Martin, Motorola, Northrop Grumman, and Siemens. The Company was incorporated in 1970 under the name International Mathematical and Statistical Libraries, Inc. in the State of Texas. The Company changed its name to IMSL, Inc. in 1981 and to Visual Numerics, Inc. in 1993. Unless the context otherwise requires, the "Company" and "Visual Numerics" refer to Visual Numerics, Inc. and its subsidiaries. The Company's principal executive offices are located at 9990 Richmond Avenue, Suite 400, Houston, Texas 77042 and its telephone number is (713) 784-3131. Its Web site is located at www.vni.com. Information contained in the Company's Web site shall not be deemed a part of this Prospectus. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 1,650,000 shares Common Stock to be outstanding after the offering.. 8,128,129 shares(1) Use of proceeds.................................... For development and marketing of new products and for working capital and other general corporate purposes. See "Use of Proceeds." </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------- -------------------- 1993 1994 1995 1995 1996 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenue................. $ 30,322 $ 32,713 $ 30,001 $ 21,963 $ 19,102 Costs and expenses: Operating............. 16,405 16,052 15,296 11,373 9,156 General and administrative....... 13,656 11,610 10,290 7,925 6,909 Research and development.......... 3,822 2,918 4,215 3,100 3,537 Other................. 2,387 -- -- -- -- --------- --------- --------- --------- --------- Total costs and expenses........... 36,270 30,580 29,801 22,398 19,602 --------- --------- --------- --------- --------- Operating income (loss)................. (5,948) 2,133 200 (435) (500) Other income (expense).. (185) (329) (272) (121) (209) Net income (loss)....... $ (5,046) $ 1,605 $ (82) $ (367) $ (709) Net income (loss) per share(2)............... $ (2.56) $ 0.38 $ (0.04) $ (0.17) $ (0.32) Pro forma net income (loss) per share(2).... $ (0.81) $ 0.19 $ (0.01) $ (0.06) $ (0.11) Shares used in computing pro forma net income (loss) per share(2).... 6,220,553 8,470,099 6,478,129 6,478,129 6,478,129 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1996 ----------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.............................. $ 1,071 $ 4,532 Total current assets................................... 9,319 12,780 Working capital(4)..................................... 2,187 5,648 Long-term debt......................................... 2,576 2,576 Capital lease obligations, net of current portion...... 407 407 Redeemable preferred stock(5).......................... 3,608 -- Total shareholders' equity (deficit)(5)................ (7) 7,061 </TABLE> - -------- (1) Excludes (i) 2,077,750 shares of Common Stock issuable upon exercise of employee stock options with a weighted average exercise price of $0.40 per share, (ii) 123,331 shares of Common Stock issuable upon exercise of warrants with exercise prices of $3.90 per share, and (iii) an aggregate of 2,292,250 shares reserved for future issuance under the Company's existing stock option plan. See "Management--Stock Plans" and "Description of Capital Stock." (2) Net income (loss) per share reflects the occurrence of a five-for-one stock split in April 1993 and is computed based upon the weighted average number of common shares and common stock equivalents outstanding during the period. The weighted average shares used in the net income (loss) per share calculations were 1,971,178, 4,182,920 and 2,190,950 for 1993, 1994 and 1995, respectively and were 2,190,950 and 2,190,950 for September 30, 1995 and September 30, 1996, respectively. Pro forma net income (loss) per share reflects the conversion of all outstanding shares of preferred stock ("Preferred Stock") into Common Stock and is computed based upon the weighted average number of common shares and common stock equivalents outstanding during the period. (3) Adjusted to give effect to the sale of the 1,650,000 shares of Common Stock offered by this Prospectus at an assumed initial public offering price of $2.50 per share and the use of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029448_palex-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029448_palex-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4b1bd2c1270f5678d79aa43234ddccc7a50c2a1f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029448_palex-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION AND SHARE AND PER SHARE DATA IN THIS PROSPECTUS GIVE EFFECT TO A 1,021-FOR-1 STOCK SPLIT OF THE COMMON STOCK EFFECTED IN DECEMBER 1996. THE COMPANY PalEx was formed in January 1996 to create a national provider of pallets and related services. Concurrently with the closing of its initial public offering on March 25, 1997 (the "Offering"), PalEx acquired in separate transactions (the "Acquisitions") three of the leading U.S. pallet businesses, making it one of the largest producers of new pallets and one of the largest pallet recyclers in the U.S. The Company believes that these acquisitions will enable it to capitalize on the significant trends currently affecting product manufacturing and distribution practices throughout the U.S., including the increasing reliance by shippers and logistics agents on a smaller number of better capitalized, more sophisticated vendors. The Company provides a broad variety of pallet products and related services, including the manufacture and distribution of new pallets; the recycling of pallets (including used pallet retrieval, repair, remanufacture and secondary marketing); maintenance of depot operations and the sorting and storage of pallets for selected customers; and the processing and marketing of various wood-based by-products derived from pallet recycling operations. The Company operates from 21 facilities in Florida, Texas, Virginia, California, Arkansas, Georgia, Illinois, Mississippi and South Carolina. Ridge Pallets, Inc. ("Ridge") and Fraser Industries, Inc. ("Fraser"), two of the businesses acquired by the Company in connection with the Offering, are currently among the largest pallet businesses in the U.S., based on revenues, and Interstate Pallet Co., Inc. ("Interstate" and together with Ridge and Fraser the "Founding Companies") is regarded in the pallet industry as a leading developer of pallet recycling services and products. The Company intends to actively pursue acquisitions of additional leading pallet companies as part of its growth strategy. The pallet industry produces a variety of storage and shipping platforms. Pallets are typically constructed of wood and used in virtually all U.S. industries where products are physically distributed, including the automotive, chemical, consumer products, grocery, produce and food production, paper and forest products, retail, and steel and metals industries. Based on information supplied by industry sources, the Company estimates that the U.S. pallet industry generated revenues of approximately $5 billion in 1995 and that it is served by approximately 3,600 companies, most of which are small, privately held, operate in only one location and serve customers within a limited geographic radius. The pallet industry has experienced significant changes and growth during the past several years. These changes are due, among other factors, to the focus by FORTUNE 1000 businesses on improving the logistical efficiency of their manufacturing and distribution systems. This focus has caused many of these businesses to attempt to reduce significantly the number of vendors serving them in order to simplify their procurement and product distribution processes. It has also prompted large manufacturers and distributors to outsource key elements of those processes that are not within their core competencies and to develop just-in-time procurement, manufacturing and distribution systems. With the adoption of these systems, expedited product movement has become increasingly important and the demand for a high quality source of pallets has increased. Palletized freight facilitates movement through the supply chain, reducing costly loading and unloading delays at distribution centers and warehouse facilities. However, the use of low-quality or improperly sized pallets may increase the level of product damage during shipping or storage. As a result, there has been an increased demand for high-quality pallets in an attempt to reduce product damage during shipping and storage. The broad changes affecting U.S. industry have created significant demand for higher quality pallets distributed through an efficient, more sophisticated system. Environmental and cost concerns have also accelerated the trend toward increased reuse or "recycling" of previously used pallets, further increasing the importance of the quality of newly manufactured pallets. In recognition of these trends, Chep USA ("CHEP") has established a national pallet leasing program that provides high-quality pallets to customers throughout the U.S. for a daily fee. CHEP is a partnership created by Brambles Industries Limited, an Australian publicly-held corporation, and GKN, Ltd., a publicly-held U.K. corporation. Ridge and Fraser manufacture and repair pallets for CHEP and provide a variety of logistical services with respect to its existing pallet pool, including the repair, storage and just-in-time delivery of pallets. CHEP currently does not manufacture pallets and engages in limited repair operations. During the fiscal year ended November 30, 1996, approximately 34% of the Company's pro forma combined revenues and a significant percentage of the Company's growth were attributable to CHEP. The Company expects to continue to build its relationship with CHEP both geographically and by providing additional logistical services. GROWTH STRATEGY The Company's goal is to become a leading national provider of pallets and related services by pursuing an aggressive acquisition strategy and by continuing to expand its existing operations. GROWTH THROUGH ACQUISITIONS. The Company intends to actively pursue acquisitions of leading companies whose management and operating philosophies are complementary to those of the Founding Companies. The Company also intends to expand within its existing markets through "tuck-in" acquisitions to increase its market penetration as well as to provide a broader range of services to existing customers in those markets. These tuck-in acquisitions will generally involve smaller pallet companies whose operations can be incorporated into the Company's existing operations without a significant increase in infrastructure. INTERNAL GROWTH. The Company has opened nine new locations in the past three years and expects to open additional locations in the future. The Company intends to expand the service offerings at many of its locations to include a combination of manufacturing, repair, recycling and the sale of by-products. The Company also expects to be able to accelerate the internal growth of the Founding Companies and businesses acquired in the future by continuing to develop the Company's relationship with CHEP and other large customers and by developing and implementing a "best practices" program. PalEx believes that a significant market opportunity exists for a company that can consistently offer high-quality pallets and related value-added services to large pallet users in the U.S. The Company believes that the prominence and operating strength of the Founding Companies and the experience of its executive management will provide the Company with a significant competitive advantage as it pursues its growth strategy. SUMMARY PRO FORMA COMBINED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) PalEx acquired the Founding Companies simultaneously with the consummation of the Offering. For financial statement presentation purposes, however, Fraser, one of the Founding Companies, has been identified as the "accounting acquiror." The following summary unaudited pro forma combined financial data presents certain data for the Company, as adjusted for (i) the Acquisitions, (ii) the effects of certain pro forma adjustments to the historical financial statements and (iii) the consummation of the Offering. See "Selected Financial Data," the Unaudited Pro Forma Combined Financial Statements and the notes thereto and the historical financial statements for each of Fraser and Ridge and the notes thereto included elsewhere in this Prospectus. PRO FORMA PRO FORMA ------------------- ----------------- THREE MONTHS FISCAL YEAR ENDED ENDED NOVEMBER 30, 1996 MARCH 21, 1997 ----------------- ------------------- INCOME STATEMENT DATA(1): Revenues........................ $ 102,030 $ 28,117 Gross profit.................... 15,852 4,211 Selling, general and administrative expenses(2).... 6,628 1,710 Supplemental profit sharing contribution.................. -- 1,069 Goodwill amortization(3)........ 556 139 Income from operations.......... 8,668 1,293 Interest income (expense), net(4)........................ (324) (108) Net income...................... 4,876 717 Net income per share............ $ 0.48 $ 0.07(6) Shares used in computing pro forma net income per share(5)...................... 10,123,889 10,123,889 PRO FORMA AS OF MARCH 2, 1997(7) ----------------- BALANCE SHEET DATA: Working capital................. $12,332 Total assets.................... 49,862 Total debt, including current portion........................ 6,824 Stockholders' equity............ 35,576 - ------------ (1) The pro forma combined income statement data assume that the Acquisitions and the Offering were closed on December 1, 1995 and are not necessarily indicative of the results the Company would have obtained had these events actually then occurred or of the Company's future results. During the periods presented above, the Founding Companies were not under common control or management and, therefore, the data presented may not be comparable to or indicative of post-combination results to be achieved by the Company. The pro forma combined income statement data is based on preliminary estimates, available information and certain assumptions that management deems appropriate and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. The pro forma income statement data for 1996 include operating results of Ridge for the twelve months ended December 1, 1996 and Interstate for the fiscal year ended August 31, 1996. The pro forma income statement data for the three months ended March 2, 1997 include operating results of Ridge and Interstate for the three months ended March 2, 1997. (2) The pro forma combined income statement data for the fiscal year ended November 30, 1996 and the three months ended March 2, 1997 reflect an aggregate of approximately $666,000 and $226,000, respectively, in pro forma reductions in salary and benefits of the owners of the Founding Companies to (FOOTNOTES CONTINUED ON FOLLOWING PAGE) which they have agreed prospectively, and the effect of revisions of certain lease agreements between one of the Founding Companies and its stockholder. In addition, the pro forma combined income statement for 1996 includes a $300,000 non-recurring, non-cash charge representing the difference between the amounts paid for shares issued to the Company's President and Chief Executive Officer and their estimated fair value on the date of sale assuming the Acquisitions would be consummated, reduced by $125,000 to adjust compensation to the amount that he will receive prospectively. See "Certain Transactions." (3) Reflects amortization of the goodwill to be recorded as a result of the Acquisitions over a 30-year period and computed on the basis described in the Notes to the Unaudited Pro Forma Combined Financial Statements. (4) Includes interest income (expense) and other income (expense), net and reflects the reduction of interest expense attributed to the repayment of debt with proceeds from the Offering and the increase in interest expense attributed to incremental borrowings. (5) Includes (i) 5,910,000 shares issued to the owners of the Founding Companies, (ii) 50,000 shares issued to the management of PalEx, (iii) 1,021,389 shares issued to Main Street, (iv) 3,000,000 shares sold in the Offering and (v) 142,500 shares issued to the Founding Companies' profit sharing plans. Excludes 450,000 shares issued in April 1997 as a result of the exercise of the over-allotment option by the underwriters and options to purchase 925,000 shares which are currently outstanding which were granted upon consummation of the Offering. See "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029456_general_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029456_general_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1710fc420c60b31ea0b37d67b6381c3df7135f55
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029456_general_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE COMBINED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO CONTAINED ELSEWHERE IN THIS PROSPECTUS. CERTAIN FINANCIAL AND OPERATING DATA IN THIS PROSPECTUS ARE PRESENTED ON A PRO FORMA BASIS TO GIVE EFFECT TO THE ACQUISITION (THE "VILLAZON ACQUISITION") BY THE COMPANY IN JANUARY 1997 OF SUBSTANTIALLY ALL OF THE ASSETS OF VILLAZON & COMPANY, INC. ("VILLAZON & CO.") AND ALL OF THE STOCK OF ITS AFFILIATE, HONDURAS AMERICAN TABACO, S.A. DE C.V. ("HATSA" AND, TOGETHER WITH VILLAZON & CO., REFERRED TO HEREIN AS "VILLAZON"). ALL REFERENCES TO A PARTICULAR FISCAL YEAR REFER TO THE 12 MONTHS ENDED ON THE SATURDAY NEAREST NOVEMBER 30 OF THE YEAR REFERENCED. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "GENERAL CIGAR" MEAN GENERAL CIGAR HOLDINGS, INC. AND ITS SUBSIDIARIES. THE COMPANY IS A HOLDING COMPANY WITH NO BUSINESS OPERATIONS OF ITS OWN. THE COMPANY'S ONLY MATERIAL ASSETS ARE ALL OF THE OUTSTANDING CAPITAL STOCK OF ITS SUBSIDIARIES, GENERAL CIGAR CO., INC., GCH TRANSPORTATION, INC., CLUB MACANUDO, INC. AND CLUB MACANUDO (CHICAGO), INC. AND ALL OF THE OWNERSHIP INTERESTS IN THE COMPANY'S OFFICE BUILDING IN NEW YORK CITY. THE COMPANY Founded in 1906, General Cigar is the largest manufacturer and marketer in the U.S. in both units and dollar sales of brand name premium cigars (imported, hand-made or hand-rolled cigars made with long filler and all natural tobacco leaf). The Company's MACANUDO and PARTAGAS brands are the two top selling premium cigar brands sold in the U.S. The Company believes that higher priced branded premium cigars constitute the fastest growing segment of the premium cigar market. Approximately 80.2% of the Company's premium cigar sales in fiscal 1996 were at suggested retail prices of $3.00 or more per unit. The Company's unit sales at or above this price point have increased at a 90.2% compound annual growth rate ("CAGR") during the past four years. The Company, through its well known brands such as GARCIA Y VEGA, also is a leading participant in the growing mass market cigar segment. From fiscal 1993 to fiscal 1996, the Company's net sales increased from $76.8 million to $154.7 million and operating profit increased from $2.4 million to $20.2 million, representing CAGRs of 26.3% and 104.2%, respectively. After giving effect to the Villazon Acquisition, on a pro forma basis, the Company's net sales and operating profit for fiscal 1996 would have been $196.7 million and $32.3 million, respectively. The Company markets its cigars under a number of well-known brand names. The Company's premium cigars include the MACANUDO, PARTAGAS, TEMPLE HALL, CANARIA D'ORO, CIFUENTES and RAMON ALLONES brands. The Company also owns the rights to market cigars in the U.S. under the names COHIBA and BOLIVAR. The Villazon Acquisition has added a variety of other brand names to the Company's line of premium cigars, including PUNCH, HOYO DE MONTERREY and EL REY DEL MUNDO. The Company, after giving effect to the Villazon Acquisition, owns the U.S. trademark rights to seven of the top ten traditional premium Cuban brand names ranked according to 1995 worldwide sales by all cigar marketers. MACANUDO was rated "best cigar" by ROBB REPORT-Registered Trademark- in 1992, the first year in which ROBB REPORT rated cigars, and "best cigar" again in 1994 and 1995 (the category was not included in the 1993 ROBB REPORT). In 1996, ROBB REPORT chose eight "best cigars," including MACANUDO, PARTAGAS 150 SIGNATURE, HOYO DE MONTERREY EXCALIBUR NO. 2 and COHIBA. The Company's mass market large cigars include GARCIA Y VEGA, WHITE OWL, ROBT. BURNS and WM. PENN. The Company's mass market small cigars include the TIPARILLO and TIJUANA SMALLS brands, as well as smaller sizes of its other mass market brands. The Company does not participate in the market for little cigars, which are cigars that resemble cigarettes. The Company also is the exclusive U.S. distributor of French made DJEEP disposable lighters, and it operates CLUB MACANUDO, a cigar bar located in New York City. The Company believes that increasing demand for cigars continues to offer the Company substantial growth opportunities. Since 1993, cigar smoking has experienced a resurgence resulting in an increase in consumption and retail sales of cigars across all major categories, especially in the premium cigar segment. This growth produced overall retail sales in the U.S. cigar market of an estimated $1.25 billion in 1996, the largest dollar sales in the industry's history. Based on industry estimates of 1996 results, unit sales of premium and mass market cigars (excluding little cigars) in the U.S. have increased at CAGRs of 35.4% and 9.6%, respectively, from 1993 to 1996, while retail dollar sales of both categories have increased more rapidly due to price increases. The Company believes that sales of premium cigars exceeded 270 million units in the U.S. in 1996, an increase of over 60% from 1995 unit sales. The Company believes that this increase in cigar consumption and retail sales is the result of a number of factors, including: (i) the improving image of cigar smoking resulting from increased publicity, including the success of CIGAR AFICIONADO and SMOKE magazines and the increased visibility of cigar smoking by celebrities (such as Arnold Schwarzenegger, Mel Gibson, Demi Moore and Jack Nicholson); (ii) the emergence of an expanding base of younger, highly educated, affluent adults age 25 to 35 and the growing interest of this group in luxury goods, including premium cigars; (iii) the increase in the number of adults over the age of 40 (a demographic group believed to smoke more cigars than any other demographic group); and (iv) the proliferation of establishments, such as restaurants and clubs, where cigar smoking is encouraged, as well as "cigar smokers" dinners and other special events for cigar smokers. The Company's pro forma financial results, including the effect of the Villazon Acquisition, reflect its strong position within the growing cigar industry. In fiscal 1996, the Company had pro forma net sales of $196.7 million and pro forma operating profit of $32.3 million. The Company's backorders of cigars, excluding Villazon backorders, increased from $21.0 million at wholesale at December 2, 1995 to $78.0 million at wholesale at November 30, 1996. During 1996, the Company discontinued accepting premium cigar orders from its nine largest customers and currently allocates product to such customers as it becomes available. The Company attributes its strong market position to the following competitive strengths: (i) well-known brand names, which in the premium cigar market are the leading brands in their categories; (ii) a broad range of product offerings within both the premium and mass market segments of the U.S. cigar markets; (iii) its positioning as the only cigar manufacturer that is also a major grower and supplier of Connecticut Shade wrapper tobacco, one of the most popular premium wrapper tobaccos in the world; (iv) a commitment to, and reputation for, manufacturing quality cigars; (v) its marketing expertise; (vi) its efficient manufacturing operations; and (vii) a highly experienced management team that includes individuals from families with up to five generations of experience in the U.S. and Cuban cigar/tobacco businesses. The Company believes that its competitive strengths, together with the following strategies, will enable the Company to continue its growth, increase its profitability and enhance its market share: / / INCREASE LEADING MARKET SHARE IN THE U.S. PREMIUM SEGMENT. The Company intends to capitalize on the rapidly growing premium cigar market by: (i) continuing to improve awareness and recognition of its premium cigar brands through extensive advertising, increased penetration of targeted retail outlets and professional sales management; (ii) developing and selling more broadly certain new premium cigars that carry well recognized traditional premium Cuban brand names, such as COHIBA and BOLIVAR; (iii) developing line extensions in higher price categories, such as MACANUDO VINTAGE and PARTAGAS LIMITED RESERVE, that leverage the Company's already established premium brands; and (iv) using the Company's national sales force and extensive channels of distribution to increase sales of the brands acquired in the Villazon Acquisition. / / DEVELOP "PREMIUM" MASS MARKET CIGAR BUSINESS. The Company is seeking to increase revenues and profits in its mass market cigar business by extending its well-known mass market brand names into higher price categories within the mass market segment. The Company believes that the higher-end mass market segment recently has experienced growth similar to that of the premium segment. The Company is attempting to capitalize on this growth by expanding products such as the GARCIA Y VEGA HAND MADE cigars and by developing similar higher-end cigars under several of its other mass market brand names, such as the WHITE OWL SELECT, a natural leaf wrapper mass market cigar. / / EXPAND MASS MARKET CIGAR BUSINESS. The Company believes that the resurgence in the premium segment also has positively affected the demand for traditional mass market cigars. The Company's leading high-end mass market brand, GARCIA Y VEGA, experienced a 27.9% increase in unit growth in 1996 compared to 1995. The Company intends to increase its sales and production of traditional mass market cigars to capitalize on the increasing demand in the mass market segment. / / EXPAND PRODUCTION CAPACITY AND TOBACCO INVENTORY. The Company intends to expand manufacturing capacity in order to meet increasing demand for its products while adhering to its traditionally high quality standards. The Company recently completed the expansion of its manufacturing facilities in the Dominican Republic, has begun to expand its facilities in Jamaica and intends to expand production at the Villazon facilities in Honduras. In addition, the Company has implemented a unique "training center" program at its Dominican Republic facility through which it has been able to train a greater number of cigar rollers in a shorter period of time and attain a higher rate of completion of the training program than had been its experience using traditional training methods. The Company intends to implement a similar program in its Jamaican and Honduran facilities. The Company also has substantially increased its tobacco inventory for making premium cigars. / / SELECTIVELY BROADEN CIGAR DISTRIBUTION CHANNELS. The Company intends to broaden its existing customer relationships and actively develop new channels and methods of distribution. With respect to premium cigars, the Company is pursuing opportunities in a number of developing distribution channels, including cigar bars and clubs, hotel shops, wine shops, restaurants and upscale specialty retail stores (such as Neiman Marcus and Orvis). With respect to mass market cigars, the Company is seeking to enhance relations with existing retailers by acting as the tobacco "category manager," assisting such retailers in increasing their sales of tobacco products. / / EXPAND INTERNATIONAL CIGAR BUSINESS. The Company plans to increase its international presence, particularly with respect to the MACANUDO brand. The Company will focus its efforts in the United Kingdom, Germany, France, Spain, China and certain countries in South America, as well as duty free markets worldwide. The Company intends to implement this strategy in a variety of ways, including building on its existing relationships with major international distributors and entering into joint ventures. / / DEVELOP SALES OF BRANDED SMOKING ACCESSORIES AND LIFESTYLE PRODUCTS. The Company intends to become a leading marketer and licensor of high-quality branded smoking accessories, such as humidors and cigar cutters, and branded luxury lifestyle products, such as leather goods and apparel. The Company believes such expansion will improve brand recognition among premium cigar consumers. The Company also may open additional CLUB MACANUDO locations, including one location in Chicago expected to open in the spring of 1997. CLUB MACANUDO promotes the Company's premium brands as well as cigar smoking as part of the luxury lifestyle. The Winter 1996/97 issue of CIGAR AFICIONADO called CLUB MACANUDO New York City's "preeminent cigar lounge," and SMOKE magazine recently said of CLUB MACANUDO, "this place is pure 'cigar.' " The Company's executive offices are located at 387 Park Avenue South, New York, New York 10016-8899, and the telephone number is (212) 448-3800. Its website is http://cigarworld.com. Information on the Company's website is not deemed to be a part of or incorporated by reference into this Prospectus. THE VILLAZON ACQUISITION On January 21, 1997 the Company acquired Villazon for approximately $81.4 million, including certain direct acquisition costs and net of $9.1 million of cash. The acquisition was funded in part by the issuance of $24.4 million aggregate principal amount of notes (the "Seller Notes"). Through the Villazon Acquisition, the Company acquired facilities in Tampa, Florida, San Pedro Sula and Danli, Honduras, and Upper Saddle River, New Jersey, as well as the U.S. trademark rights to several traditional Cuban trademarks and widely recognized names in the premium cigar industry, including PUNCH, HOYO DE MONTERREY and EL REY DEL MUNDO. The acquisition of Villazon gives the Company a broader taste spectrum in cigars, substantially increases its manufacturing capacity and provides access to new sources of tobacco for all of its product offerings. The addition of cigars made in Honduras, one of the fastest-growing countries of origin for cigars worldwide, complements the Company's Dominican and Jamaican made cigars in addition to diversifying its manufacturing base across three countries. Management believes that Villazon's operations complement the Company's and will enable the Company to leverage, over time, its cost structure, its sales and distribution networks and its marketing expertise, resulting in improved growth and profitability. THE ASSET TRANSFERS, THE DISTRIBUTION AND THE MERGER Prior to the Offering, Culbro will complete certain asset transfers (the "Asset Transfers"), pursuant to which (i) all of Culbro's assets and liabilities relating to the cigar business, including approximately 1,100 acres of land used in the tobacco growing operations and CLUB MACANUDO, and certain other assets and liabilities, including Culbro's corporate headquarters, will be transferred to the Company, and (ii) substantially all of Culbro's non-tobacco related assets and liabilities, including all of its assets and liabilities relating to its nursery business and real estate business, together with Culbro's 25% interest in Centaur Communications Limited ("Centaur") and its interests in The Eli Witt Company ("Eli Witt") and related liabilities, will be transferred to Culbro Land Resources, Inc. ("CLR"). Upon consummation of the Asset Transfers, Culbro will be a holding company with substantially no assets other than its ownership interests in the Company and CLR. See "The Asset Transfers, the Distribution and the Merger." Subsequent to the Offering, Culbro intends to effect a distribution (the "Distribution") to the shareholders of Culbro of all issued and outstanding shares of common stock of CLR. The Distribution will be contingent principally upon (i) either a tax ruling or an opinion of counsel satisfactory to Culbro that the Distribution constitutes a tax-free reorganization under Section 355 of the Internal Revenue Code and (ii) the approval by the holders of 66 2/3% of Culbro's common stock of the Merger. The Company will be the surviving corporation in the Merger and will issue to the holders of the common stock of Culbro 4.44557 shares of Class B Common Stock for each share of the Culbro common stock outstanding on the date of the Merger, or approximately 20,087,182 shares of Class B Common Stock in the aggregate, subject to adjustment for any options exercised prior to the Merger. The shareholders of Culbro will not vote with respect to the adoption of the Merger until April 1997. The members of the Cullman & Ernst Group, however, who collectively hold approximately 50% of Culbro's common stock, have indicated that they will vote their shares of Culbro common stock in favor of the Merger and will not sell or otherwise transfer any of their shares of Culbro common stock prior to the earlier to occur of 180 days after the date of this Prospectus or the consummation of the Merger. The Merger has been approved by Culbro as the sole stockholder of the Company and, consequently, the holders of the Class A Common Stock offered hereby will not vote in connection with the Merger. The Merger will not take place until August 1997 without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). The pro forma information on pages 21 to 24 hereof gives effect to the Asset Transfers, the Villazon Acquisition and the Offering. See page 57 for a chart illustrating the effect of the Distribution and the Merger. ------------------------ Macanudo-Registered Trademark-, Partagas-Registered Trademark-, Punch-Registered Trademark-, Hoyo De Monterrey-Registered Trademark-, Cohiba-Registered Trademark-, Excalibur-Registered Trademark-, Ramon Allones-Registered Trademark-, Temple Hall-Registered Trademark-, El Rey Del Mundo-Registered Trademark-, Canaria d'Oro-Registered Trademark-, Cifuentes-Registered Trademark-, Bolivar-Registered Trademark-, Garcia y Vega-Registered Trademark-, White Owl-Registered Trademark-, Tiparillo-Registered Trademark-, Robt. Burns-Registered Trademark-, Tijuana Smalls-Registered Trademark-, Wm. Penn-Registered Trademark-, Bances-Registered Trademark-, Belinda-Registered Trademark-, Lord Beaconsfield-Registered Trademark-, Villa De Cuba-TM-, Pedro Iglesias-Registered Trademark-, Top Stone-Registered Trademark- and Villazon Deluxe-Registered Trademark- are trademarks of the Company. The Djeep-TM- trademark included in this Prospectus is owned by Societe Industrielle Du Briquet Jetable. THE OFFERING <TABLE> <S> <C> Class A Common Stock offered................. 6,000,000 shares Common Stock outstanding after the 6,000,000 shares of Class A Common Stock (1) Offering................................... 20,087,182 shares of Class B Common Stock (2) 26,087,182 total shares of Common Stock Voting rights................................ The Class A Common Stock and Class B Common Stock vote as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to ten votes. All of the shares of Class B Common Stock are owned by Culbro. Immediately after consummation of the Offering, Culbro will beneficially own shares of Class B Common Stock representing approximately 97% of the combined voting power of the outstanding shares of Common Stock. After giving effect to the Merger, all shares of Class B Common Stock will be held by the holders of the Common Stock of Culbro (including the Cullman & Ernst Group). Use of proceeds.............................. The Company intends to use approximately $67.8 million of the net proceeds from the Offering to reduce outstanding indebtedness under the Credit Facility ($67.1 million of which was incurred in connection with the closing of the Villazon Acquisition and $0.7 million of which was incurred for general corporate purposes) and $14.4 million of the net proceeds will be used to repay a portion of the Seller Notes. See "Use of Proceeds." New York Stock Exchange symbol............... MPP (3) </TABLE> See "Risk Factors" beginning on page 10 for a discussion of certain risks that should be considered in connection with an investment in the Class A Common Stock offered hereby. - ------------------------ (1) Excludes 3,300,000 shares of Class A Common Stock reserved for issuance under the 1997 Stock Option Plan, 581,666 of which will be subject to options issued upon consummation of the Offering and 2,162,818 of which are reserved for issuance upon exercise of outstanding options under Culbro's option plans. See "Certain Employee Benefit Matters--1997 Stock Option Plan." (2) Each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock and converts automatically into one share of Class A Common Stock upon a sale to any person other than a Permitted Transferee (as defined herein). Issuance of all Class B Common Stock to the shareholders of Culbro as a result of the Merger is not a transfer but will constitute an issuance to a Permitted Transferee. See "Description of Capital Stock." (3) Selected as representative of the Company's MACANUDO, PARTAGAS and PUNCH brands. SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The summary historical data for fiscal 1992 have been derived from the unaudited combined financial statements of the Company. The summary historical data for fiscal 1993 have been derived from the audited combined financial statements of the Company. The summary historical data for fiscal 1994, fiscal 1995 and fiscal 1996 have been derived from the audited Combined Financial Statements of the Company included elsewhere in this Prospectus. The summary unaudited combined pro forma statement of operations data for fiscal 1996 and the summary pro forma balance sheet data as of November 30, 1996 give effect to (i) the liability portion of the Asset Transfers pursuant to which the Company acquired, among other assets, the stock of General Cigar Co. Inc., Club Macanudo, Inc., 387 PAS Corp., GCH Transportation, Inc. and Club Macanudo (Chicago), Inc., (ii) the Villazon Acquisition and (iii) the Offering. The pro forma adjustments are based upon available information and certain assumptions that the management of the Company believes are reasonable. The summary unaudited combined pro forma data do not purport to represent the results of operations or the financial position of the Company that actually would have occurred had the liability portion of the Asset Transfers, the Villazon Acquisition and the Offering occurred as of the dates indicated nor do they project the financial position or results of the Company for any future date. The following summary historical financial data should be read in conjunction with "Selected Combined Financial Data," "Unaudited Pro Forma Combined Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Combined Financial Statements of the Company and Notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> FISCAL YEAR ------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> 1996 ---------------------- <CAPTION> PRO 1992 1993 1994 1995 ACTUAL FORMA(1) --------- --------- --------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............................................ $ 77,131 $ 76,825 $ 89,538 $ 124,033 $ 154,676 $ 196,694 Cost of goods sold................................... 48,651 49,165 54,285 69,683 86,240 107,650 --------- --------- --------- ---------- ---------- ---------- Gross profit......................................... 28,480 27,660 35,253 54,350 68,436 89,044 Selling, general and administrative expenses......... 27,059 25,282 27,210 36,726 44,593 53,120 Other nonrecurring expense........................... -- -- -- -- 3,600 3,600 --------- --------- --------- ---------- ---------- ---------- Operating profit..................................... 1,421 2,378 8,043 17,624 20,243 32,324 Interest expense..................................... 327 264 607 1,049 951 4,828 Income before income taxes........................... 1,393 2,248 7,413 18,564 20,145 29,028 Net income (loss) (2)................................ 814 (3,049) 4,550 11,324 12,407 17,825 Pro forma earnings per share (3)..................... $ 0.67 Pro forma number of weighted average shares outstanding (3).................................... 26,528 </TABLE> FOOTNOTES APPEAR ON THE FOLLOWING PAGE <TABLE> <CAPTION> NOV. 30, 1996 ----------------------------------------- <S> <C> <C> <C> PRO FORMA AS ADJUSTED ACTUAL PRO FORMA (4) (5) ---------- ------------- -------------- <CAPTION> (DOLLARS IN THOUSANDS) <S> <C> <C> <C> BALANCE SHEET DATA: Working capital....................................................... $ 65,121 $ 9,493 $ 83,863 Total assets.......................................................... 145,042 244,795 244,795 Long-term debt........................................................ 11,079 72,029 64,199 Culbro investment/stockholders' equity................................ 93,719 45,258 127,458 </TABLE> <TABLE> <CAPTION> FISCAL YEAR ---------------------------------------------------------------------- 1996 ------------------------- 1992 1993 1994 1995 ACTUAL PRO FORMA (1) --------- --------- ---------- --------- ---------- ------------- <S> <C> <C> <C> <C> <C> <C> (DOLLARS IN THOUSANDS) OTHER DATA: Gross margin....................................... 36.9% 36.0% 39.4% 43.8% 44.2% 45.3% Operating margin................................... 1.8% 3.1% 9.0% 14.2% 13.1% 16.4% EBITDA (6)(7)...................................... $ 5,541 $ 5,923 $ 11,291 $ 23,163 $ 24,909 $ 40,454 EBITDA margin (7)(8)............................... 7.2% 7.7% 12.6% 18.7% 16.1% 20.6% Net cash provided by (used in) operating activities....................................... $ 8,224 $ (3,835) $ 12,683 $ 9,536 $ (4,919) -- Net cash used in investing activities.............. (4,435) (1,691) (1,384) (616) (9,701) -- Net cash (used in) provided by financing activities....................................... (3,799) 5,526 (10,865) (9,062) 14,707 -- Capital expenditures............................... 4,435 1,691 1,884 2,841 9,701 $ 10,014 </TABLE> - ------------------------ (1) As adjusted to give effect to the liability portion of the Asset Transfers, the Villazon Acquisition and the Offering. (2) Includes a $4.4 million charge, net of related taxes, to reflect the adoption of SFAS No. 106 in 1993. Includes a pre-tax gain of $2.6 million in fiscal 1995 to reflect an insurance settlement. (3) The pro forma number of weighted average shares outstanding includes all of the outstanding shares of Class A Common Stock and Class B Common Stock expected to be outstanding after the Offering. The total number of weighted average shares outstanding used in the computation of pro forma earnings per share also includes the dilutive effect of additional shares issuable upon exercise of all Culbro stock options outstanding at the Offering date. See "Certain Employee Benefit Matters--Culbro Employee Benefit Plans to be Assumed by the Company--Culbro Stock Option Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029553_go2net-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029553_go2net-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..19dfe871c1049697a90cb0b34293b1b574f54e85
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029553_go2net-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. The shares of Common Stock offered hereby involve a high degree of risk. See "Risk Factors." THE COMPANY go2net, Inc. (the "Company") is an interactive technology and media company that provides through its Internet site proprietary content and commodity information relating to business and finance, sports and the Internet. In addition, the Company offers a search/index guide that combines various existing search/index guides into one guide (a "metasearch engine") and a Java-based desktop content delivery system which allows users to obtain commodity information and search the World Wide Web while simultaneously accessing other Internet sites or running other applications. The Company focuses its editorial, design and programming resources on developing proprietary content that seeks to be original, entertaining, informative and compelling. The Company's Internet site seeks to attract what the Company believes is the typical Internet user of today (18 to 39 years old, middle- to upper-middle class and college-educated) and the advertisers wishing to reach this target market. The Company launched its Internet site on November 7, 1996. The Company's Internet site is located at ,URL:http://www.go2net.com/.. On January 31, 1997, the Company sublicensed from Netbot, Inc. ("Netbot") on an exclusive basis (with certain limited exceptions) Metacrawler ,URL:http://www.metacrawler.com., a metasearch engine developed by the University of Washington and Netbot, and associated intellectual property rights (the "Metacrawler Service"). The Metacrawler Service is a free World Wide Web search service which sends search queries to several Web search engines. The Company integrated the Metacrawler Service into the Company's product offerings under the go2search name in March 1997. The Company's objective is to be a leading provider of content on the World Wide Web, specifically in the areas of business and finance, sports and the Internet, complemented by technologies such as search/index guides and Java-based desktop content delivery systems. The Company focuses on utilizing innovative technologies to deliver its content and to enhance the attractiveness and utility of its product offerings with specially designed graphics and animation. The Company's goal is to provide interactive content in all of its content areas, and to seek advertisers and sponsors who wish to access the demographic groups using the Company's Internet site. The Company was incorporated on February 12, 1996 under the laws of the State of Delaware. THE OFFERING <TABLE> <S> <C> Common Stock offered........................... 1,600,000 shares Common Stock to be outstanding after the Offering........................... 4,257,850 shares(1) Use of proceeds................................ For working capital, capital expenditures, and other general corporate purposes. See "Use of Proceeds." Nasdaq SmallCap Market symbol.................. GNET Boston Stock Exchange symbol................... GO </TABLE> SUMMARY FINANCIAL DATA <TABLE> <CAPTION> PERIOD FROM INCEPTION (FEBRUARY 12, 1996) THREE MONTHS ENDED TO SEPTEMBER 30, 1996 DECEMBER 31, 1996 --------------------- --------------------- <S> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues......................................... $ -- $ -- Total operating expenses............................... 431,141 369,951 Loss from operations................................... (431,141) (369,951) Interest income, net................................... 13,383 7,280 Net loss............................................... (417,757) (362,671) Net loss per share (2)................................. (0.16) (0.14) Shares used in net loss per share computation (2)...... 2,548,680 2,644,260 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------- AS ACTUAL ADJUSTED(3) -------- ------------ <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents......................................... $692,938 12,012,938 Working capital................................................... 668,540 11,988,540 Total assets...................................................... 921,086 12,241,086 Stockholders' equity.............................................. 888,472 12,208,472 </TABLE> - --------------- (1) Excludes 587,500 shares of Common Stock issuable upon the exercise of outstanding options as of March 31, 1997 at an exercise price equal to the initial public offering price of the shares of Common Stock offered hereby and 50,000 shares of Common Stock issuable upon exercise of the Representative's Warrants. See "Management -- 1996 Stock Option Plan" and "Underwriting." (2) Net loss per share is calculated using the weighted average number of shares of Common Stock outstanding during such period. See Note 1 to Notes to Financial Statements. (3) Reflects the receipt of the estimated net proceeds of the sale by the Company of 1,600,000 shares of Common Stock offered hereby at an assumed initial public offering price of $8.00 per share and the application of the net proceeds therefrom, and no exercise of the Underwriters' over-allotment. See "Use of Proceeds" and "Capitalization".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029654_hemlock_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029654_hemlock_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2b18ba5343fc946d5b14eabcad464f24f6aff977
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029654_hemlock_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the detailed information and financial statements appearing elsewhere herein. Hemlock Federal Financial Corporation The Holding Company, Hemlock Federal Financial Corporation was recently formed by Hemlock Federal under the laws of Delaware for the purpose of becoming a savings and loan holding company which will own all of the outstanding capital stock that Hemlock Federal will issue in connection with the Conversion. Immediately following the Conversion, the only significant assets of the Holding Company will be the capital stock of Hemlock Federal, a note evidencing the Holding Company's loan to the ESOP and up to approximately 50% of the net proceeds from the Conversion. See "Use of Proceeds." Upon completion of the Conversion, the Holding Company's business initially will consist only of the business of Hemlock Federal. See "Hemlock Federal Financial Corporation." Hemlock Federal General. Hemlock Federal is a federally chartered mutual savings bank headquartered in Oak Forest, Illinois. Hemlock Federal was originally chartered in 1904. In 1959, Hemlock Federal converted to a federal charter. Hemlock Federal currently serves the financial needs of communities in its market area through its main office located at 5700 West 159th Street, Oak Forest, Illinois 60452-3198 and its two branch offices located in the village of Oak Lawn and Chicago. Its deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation ("FDIC"). At September 30, 1996, Hemlock Federal had total assets of $146.6 million, deposits of $129.2 million and equity of $12.0 million (or 8.2% of total assets). Hemlock Federal has been, and intends to continue to be, an independent, community oriented, financial institution. Hemlock Federal's business involves attracting deposits from the general public and using such deposits, together with other funds, to originate primarily one- to four-family residential mortgages and, to a much lesser extent, multi-family, consumer and other loans primarily in its market area. At September 30, 1996, $47.7 million, or 88.7%, of the Bank's total loan portfolio consisted of one- to four-family residential mortgage loans. The Bank also invests in mortgage-backed and other securities and other permissible investments. See "Business - Investment Activities - Securities" and "- Mortgage-Backed and Related Securities." Financial and operational highlights of the Bank include the following: o Asset Quality. Reflecting its emphasis on residential mortgage lending in its market area and on government-backed or investment grade mortgage-backed and investment securities, the Bank's ratio of non-performing assets to total assets was .05% at September 30, 1996. On such date, Hemlock Federal had no foreclosed real estate. At September 30, 1996, the Bank's ratio of allowance for loan losses to total loans receivable was 1.24%. See "Business - Delinquencies and Non-Performing Assets." o Recent Increased Emphasis on Lending Activities. During much of the 1980s, as a result of fierce competition as well as volatility in interest rates and real estate values, the Bank deemphasized residential lending. However, in the early 1990s, the Bank determined to increase its lending staff and its loan marketing efforts in order to increase its residential loans. As a result of these efforts, the Bank's residential loans increased from $37.0 million at December 31, 1993 to $53.1 million at September 30, 1996. See "Business - Lending Activities." o Capital Strength. At September 30, 1996, the Bank had total equity of $12.0 million (8.2% of total assets) and substantially exceeded all of the applicable regulatory capital requirements with tangible, core and risk-based capital ratios of 7.8%, 7.8% and 24.9%, respectively. Assuming on a pro forma basis that $15.7 million, the midpoint of the Estimated Valuation Range, of shares were sold in the Conversion and approximately 50% of the net proceeds were retained by the Holding Company, as of September 30, 1996, the Bank's capital would have been $17.7 million (11.6% of assets). See "Pro Forma Regulatory Capital Analysis." o Profitability. Hemlock Federal recorded net income of $952,000 and $539,000, respectively, and a return on average assets of .66% and .37%, respectively, for the years ended December 31, 1995 and December 31, 1994. For the nine months ended September 30, 1996, the Bank had a net income of $108,000. The decrease in net income was due to an $840,000 one time special assessment to recapitalize the Savings Association Insurance Fund ("SAIF"). See "Hemlock Federal Charitable Foundation." During the 1990's the Bank's net interest margin has exceeded its ratio of operating expense (excluding the special SAIF assessment) to average total assets. o Interest Rate Sensitivity. The Bank's profitability, like that of most financial institutions, is dependent to a large extent upon its net interest income, which is the difference between its interest income and interest expense. In managing its asset/liability mix, Hemlock Federal at times, depending on the relationship between long and short-term interest rates, market conditions and consumer preference, places greater emphasis on maximizing its net interest margin than on matching the interest rate sensitivity of its assets and liabilities. At September 30, 1996, the net value of the Bank's portfolio equity was projected to decline by 14% and 36% if there were instantaneous increases in interest rates of 200 and 400 basis points, respectively. See "Risk Factors - Interest Rate Risk Exposure" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset/Liability Management." o Mortgage-backed and related securities portfolio. In order to supplement its lending portfolio and to increase the proportion of short and medium term and/or adjustable-rate assets in its portfolio, the Bank has maintained a very significant portfolio of mortgage-backed securities. At September 30, 1996, $65.9 million or 44.9% of the Bank's assets consisted of mortgage-backed securities. Since such securities generally carry a lower yield than residential loans, to the extent that the proportion of the Bank's assets consisting of securities increases, its asset yield and hence its interest rate spread could The Foundation will be a private foundation under the Internal Revenue Code of 1986, as amended (the "Code"). As a private Foundation, the Foundation will be required to distribute annually in grants or donations at least 5% of its net investment assets. The Foundation will be dedicated to the promotion of charitable purposes within the communities in which the Bank operates, including, but not limited to, providing grants or donations to support housing assistance, community groups and other types of organizations or projects. While the Foundation is authorized to engage directly in charitable activities, in order to limt overhead costs, it is currently anticipated that the Foundation's primary activity will consist of making grants to other charitable organizations. The authority for the affairs of the Foundation will be vested in the Board of Trustees of the Foundation which will be comprised of Chairman Partynski, President Stevens and at least two other trustees selected by the Holding Company. Ms. Partynski and Mr. Stevens recused themselves from voting on the establishment of the Foundation. After the establishment of the Foundation, trustees may be selected only by the Foundation's Board of Trustees. Under the Foundation's Articles of Incorporation, not more than 50% of the Foundation's trustees may be directors or officers of the Bank or the Holding Company without OTS approval. The Articles of Incorporation currently provide that the earnings of the Foundation shall not result in any private benefit for its members, trustees or officers. In addition, it is anticipated that the Because the funding of the Foundation will result in a decline in the pro forma capital of the Holding Company, it reduced the conversion appraisal. The anticipated initial contributions to the Foundation aggregate $1.0 million which will result in a $612,000 reduction in pro forma capital and, in the quarter accrued, in pro forma earnings. This pro forma reduction in capital reduced the conversion appraisal by approximately $1.2 million at the midpoint of the Estimated Valuation Range. As a result of the combination of these factors, the pro forma capital of the Holding Company will be $1.7 million lower at the midpoint of the Estimated Valuation Range than it would have been without the Foundation. However, because of the lower number of shares which are being offered (as a result of the lower appraisal), per share capital and earnings are believed to be essentially identical. See "Comparison of Valuation and Pro forma Valuation with No Foundation." As a result of the $1.2 million reduction of appraisal caused by the Foundation, the amount of shares purchased by directors, assuming the sale of the midpoint number of shares, increases from 7.3% to 7.9%. See "The Conversion-- Participation by the Board and Executive Officers." The establishment of the Foundation is subject to the approval of a majority of the total outstanding votes of the Bank's members eligible to be cast at the Special Meeting. The establishment of the Foundation will be considered as a separate matter from approval of the Plan of Conversion. If the Bank's members approve the Plan of Conversion, but not the establishment of the Foundation, the Bank intends to complete the Conversion without the Foundation. Failure to approve the Foundation may materially increase the pro forma market value of the Common Stock being offered since the Valuation Rate, as set forth herein, takes into account the after-tax impact of $1.0 million of initial contributions. If the pro forma market value of the Company without the Foundation is either greater than $20.8 million or less than $13.3 million or if the OTS otherwise requires a resolicitation of subscribers, the Bank will establish a new Estimated Price Range and commence a resolicitation of subscribers (i.e., subscribers will be permitted to continue their orders, in which case they will need to affirmatively reconfirm their subscriptions prior to the expiration of the resolicitation offering or their subscription funds will be promptly refunded with interest.) Any change in the Estimated Price Range must be approved by the OTS. See "Pro Forma Data" and "The Conversion - Establishment of a Charitable Foundation" and "The Conversion--Stock Pricing." The Conversion The Offering is being made in connection with the conversion of Hemlock Federal from a federally chartered mutual savings bank to a federally chartered stock savings bank and the formation of Hemlock Federal Financial Corporation as the holding company of Hemlock Federal. The Conversion is subject to certain conditions, including the prior approval of the Plan by the Bank's members at a Special Meeting to be held on March ___, 1997. After the Conversion, the Bank's current voting members (who include certain deposit account holders and borrowers) will have no voting rights in Hemlock Federal and will have no voting rights in the Holding Company unless they become Holding Company stockholders. Eligible Account Holders and Supplemental Eligible Account Holders, however, will have certain liquidation rights in the Bank. See "The Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of the Bank - Liquidation Rights." The Offering. The shares of Common Stock to be issued in the Conversion are being offered at a Purchase Price of $10.00 per share in the Subscription Offering pursuant to nontransferable Subscription Rights in the following order of priority: (i) Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on June 30, 1995); (ii) Tax-Qualified Employee Plans; provided, however, that the Tax Qualified Employee Plans shall have first priority Subscription Rights to the extent that the total number of shares of Common Stock sold in the Conversion exceeds the maximum of the Estimated Valuation Range; (iii) Supplemental Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on December 31, 1996); (iv) Other Members (i.e., depositors and certain borrowers of the Bank as of _______, 1996); and (v) employees, officers and directors of the Bank. Subscription Rights received in any of the foregoing categories will be subordinated to the Subscription Rights received by those in a prior category. Subscription Rights will expire if not exercised by noon, Oak Forest, Illinois time, on March __, 1997, unless extended (the "Expiration Date"). Subject to the prior rights of holders of Subscription Rights and market conditions at or near the completion of the Subscription Offering, any shares of Common Stock not subscribed for in the Subscription Offering may be offered at the same price in the Public Offering through KBW to selected persons to whom this prospectus is delivered. To order Common Stock in connection with the Public Offering, if any, an executed stock order form and account withdrawal authorization and certification must be received by KBW prior to the termination of the Public Offering. The date by which orders must be received in the Public Offering, if any, will be set by the Holding Company at the time of such offering provided that if the Offering is extended beyond ________, 1997, each subscriber will have the right to modify or rescind his or her subscription. The Holding Company and the Bank reserve the absolute right to accept or reject any orders in the Public Offering, in whole or in part. If necessary, shares of Common Stock may also be offered in connection with the Public Offering for sale on a best-efforts basis by selected dealers managed by KBW. See "The Conversion - Public Offering and Direct Community Offering." The Bank and the Holding Company have engaged KBW to consult with and advise the Holding Company and the Bank with respect to the Offering, and KBW has agreed to solicit subscriptions and purchase orders for shares of Common Stock in the Offering. Neither KBW nor any selected broker-dealers will have any obligation to purchase shares of Common Stock in the Offering. KBW will receive for its services a marketing fee of 1.5% of the total dollar amount of Common Stock sold in the Conversion (excluding purchases by directors, officers, employees and members of their immediate families and the employee benefit plans of the Holding Company and for the Bank, and shares sold by selected broker-dealers). To the extent selected broker-dealers are utilized in connection with the sale of shares in the Public Offering, the selected dealers will receive a fee of up to 4.5% and KBW will receive a fee of 1.0% of the aggregate Purchase Price for all shares of Common Stock sold through such broker-dealers. KBW will also receive reimbursement for certain expenses incurred in connection with the Offering. The Holding Company has agreed to indemnify KBW against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended ("Securities Act"). See "The Conversion - Marketing Arrangements." The Bank has established a Stock Information Center, which will be managed by KBW, to coordinate the Offering, and answer questions about the Offering received by telephone. All subscribers will be instructed to mail payment to the Stock Information Center or deliver payment directly to the Bank's office. Payment for shares of Common Stock may be made by cash (if delivered in person), check or money order or by authorization of withdrawal from deposit accounts maintained with the Bank. Such funds will not be available for withdrawal and will not be released until the Conversion is completed or terminated. See "The Conversion - Method of Payment for Subscriptions." Purchase Limitations. The Plan of Conversion places limitations on the number of shares which may be purchased in the Conversion by various categories of persons. With the exception of the Tax-Qualified Employee Plans, no Eligible Account Holder, Supplemental Eligible Account Holder, Other Member or director, officer or employee may purchase in their capacity as such in the Subscription Offering more than $200,000 of Common Stock; no person, together with associates of and persons acting in concert with such person, may purchase more than $200,000 of Common Stock in the Public Offering; and no person or group of persons acting in concert (other than the Tax-Qualified Employee Plans) may purchase more than $900,000 of Common Stock in the Conversion. The minimum purchase limitation is 25 shares of Common Stock. These purchase limits may be increased or decreased consistent with the Office of Thrift Supervision ("OTS") regulations at the sole discretion of the Holding Company and the Bank. See "The Conversion - Offering of Holding Company Common Stock." Restrictions on Transfer of Subscription Rights. Prior to the completion of the Conversion, no person may transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Persons found to be selling or otherwise transferring their right to purchase stock in the Subscription Offering or purchasing Common Stock on behalf of another person will be subject to forfeiture of such rights and possible federal penalties and sanctions. See "The Conversion - Restrictions on Transfer of Subscription Rights and Shares." Stock Pricing and Number of Shares of Common Stock to be Issued in the Conversion. The Purchase Price of the Common Stock is $10.00 per share and is the same for all purchasers. The aggregate pro forma market value of the Holding Company and Hemlock Federal, as converted, was estimated by Keller, which is experienced in appraising converting thrift institutions, to be the Estimated Valuation Range. The Board of Directors has reviewed the Estimated Valuation Range as stated in the appraisal and compared it with recent stock trading prices as well as other recent pro forma market value estimates. The Board of Directors has also reviewed the appraisal report, including the assumptions and methodology utilized therein, and determined that it was not unreasonable. Depending on market and financial conditions at the time of the completion of the Offering, the total number of shares of Common Stock to be issued in the Conversion may be increased or decreased significantly from the 1,805,500 shares offered hereby and the Purchase Price may be decreased. However, subscribers will be permitted to modify or rescind their subscriptions if the product of the total number of shares to be issued multiplied by the price per share is less than $13,345,000 or more than $20,763,250. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any kind as to the advisability of voting to approve the Conversion or of purchasing shares of Common Stock. The appraisal considers Hemlock Federal and the Holding Company only as going concerns and should not be considered as any indication of the liquidation value of Hemlock Federal or the Holding Company. Moreover, the appraisal is necessarily based on many factors which change from time to time. There can be no assurance that persons who purchase shares in the Conversion will be able to sell such shares at prices at or above the Purchase Price. See "Pro Forma Data" and "The Conversion - Stock Pricing and Number of Shares to be Issued" for a description of the manner in which such valuation was made and the limitations on its use. Purchases by Directors and Executive Officers The directors and executive officers of Hemlock Federal intend to purchase, for investment purposes and at the same price as the shares are sold to other investors in the Conversion, approximately $1,246,000 of Common Stock, or 9.3%, 7.9% or 6.9% of the shares to be sold in the Conversion at the minimum, midpoint and maximum of the Estimated Valuation Range, respectively. In addition, an amount of shares equal to an aggregate of 8% of the shares to be issued in the Conversion is anticipated to be purchased by the ESOP. See "The Conversion - Participation by the Board and Executive Officers." Potential Benefits of Conversion to Directors and Executive Officers Employee Stock Ownership Plan. The Board of Directors of the Bank has adopted an ESOP, a tax-qualified employee benefit plan for officers and employees of the Holding Company and the Bank. All employees of the Bank are eligible to participate in the ESOP after they attain age 21 and complete one year of service. The Bank's contribution to the ESOP is allocated among participants on the basis of their relative compensation. Each participant's account will be credited with cash and shares of Holding Company Common Stock based upon compensation earned during the year with respect to which the contribution is made. The ESOP intends to buy up to 8% of the Common Stock issued in the Conversion (approximately $1.1 million to $1.4 million of the Common Stock based on the issuance of the minimum and the maximum of the Estimated Valuation Range and the $10.00 per share Purchase Price). The ESOP will purchase the shares with funds borrowed from the Holding Company, and it is anticipated that the ESOP will repay the loans through periodic tax-deductible contributions from the Bank over a ten-year period. These contributions will increase the compensation expense of the Bank. See "Management - Benefit Plans - Employee Stock Ownership Plan" for a description of this plan. Stock Option and Incentive Plan and Recognition and Retention Plan. The Board of Directors of the Holding Company intends to adopt a Stock Option and Incentive Plan (the "Stock Option Plan") and a Recognition and Retention Plan ("RRP") to become effective upon ratification by stockholders following the Conversion. Certain of the directors and executive officers of the Holding Company and the Bank will receive awards under these plans. It is currently anticipated that an amount of shares equal to 10% and 4% of the shares sold in the Conversion will be reserved for issuance under the Stock Option Plan and RRP, respectively. Depending upon market conditions in the future, the Holding Company may purchase shares in the open market to fund these plans. See "Management - Benefit Plans" for a description of these plans. Under the proposed Stock Option Plan, it is presently intended that the directors and executive officers be granted options to purchase, in addition to the shares to be issued in the Conversion, an amount of shares equal to 8.2% of the shares sold in the Conversion (or 109,429 and 148,051 shares, respectively, of Common Stock based on the minimum and maximum of the Estimated Valuation Range) at an exercise price equal to the market value per share of the Common Stock on the date of grant. Such options will be awarded at no expense to the recipients and pose no financial risk to the recipients until exercised. It is presently anticipated that Maureen Partynski, Chairman of the Board and Michael Stevens, President will each receive an option to purchase an amount of shares equal to 2.5% of the shares sold in the Conversion (or 33,363 and 45,138 shares, assuming the minimum and maximum of the Estimated Valuation Range). See "Management - Benefit Plans - Stock Option and Incentive Plan." The award and exercise of options pursuant to the Stock Option Plan will not result in any expense to the Holding Company; however, when the options are exercised, the per share earnings and book value of existing stockholders will likely be diluted. It is also intended that directors and executive officers be granted (without any requirement of payment by the grantee) an amount of shares of restricted stock awards equal to 2.8% of the shares sold in the Conversion (or 37,366 and 50,554 shares, respectively, based on the minimum and maximum of the Estimated Valuation Range) which will vest over five years commencing one year from stockholder ratification and which will have a total value of $373,660 and $505,540 based on the Purchase Price of $10.00 per share at the minimum and maximum of the Estimated Valuation Range, respectively. It is presently anticipated that Chairman Partynski and President Stevens each will receive a restricted stock award equal to 1.0% of the shares sold in the Conversion (or 13,345 and 18,055 shares, assuming the minimum and maximum of the Estimated Valuation Range). The restricted stock award to Chairman Partynski and President Stevens each would have an aggregate value ranging from $133,450 to $180,550 (at the minimum and maximum of the Estimated Valuation Range) based upon the original Purchase Price of $10.00 per share. See "Risk Factors - Takeover Defensive Provisions" and "Management - Benefit Plans - Recognition and Retention Plan." Following stockholder ratification of the RRP, the RRP will be funded either with shares purchased in the open market or with authorized but unissued shares. Based upon the Purchase Price of $10.00 per share, the amount required to fund the RRP through open-market purchases would range from approximately $533,800 (based upon the sale of shares at the minimum of the Estimated Valuation Range) to approximately $722,200 (based upon the sale of shares at the maximum of the Estimated Valuation Range). In the event that the per share price of the Common Stock increases above the $10.00 per share Purchase Price following completion of the Offering, the amount necessary to fund the RRP would also increase. The expense related to the cost of the RRP will be recognized over the five-year vesting period of the awards made pursuant to such plan. The use of authorized but unissued shares to fund the RRP would dilute the holdings of stockholders who purchase Common Stock in the Conversion. See "Management - Benefit Plans - Recognition and Retention Plan." The Holding Company intends to submit the RRP and the Stock Option Plan to stockholders for ratification following completion of the Offering, but in no event prior to six months following the completion of the Conversion. These plans will only be effective if ratified by the stockholders. In the event the Stock Option Plan and the RRP are not ratified by stockholders, management may consider the adoption of alternate incentive plans, although no such plans are currently contemplated. While the Bank believes that the RRP and the Stock Option Plan will provide important incentives for the performance and retention of management, the Bank has no reason to believe that the failure to obtain shareholder ratification of such plans would result in the departure of any members of senior management. Employment and Severance Agreements. The Bank intends to enter into employment agreements with Chairman Partynski and President Stevens. It is anticipated that the agreements will provide for a salary equal to the employee's current salary, will have an initial term of three years, subject to annual extension for an additional year following the Bank's annual performance review and will become effective upon the completion of the Conversion. Under certain circumstances including a change in control, as defined in the employment agreements, the employee will be entitled to a severance payment in lieu of salary equal to a percentage of his or her base amount of compensation, as defined. See "Management - Executive Compensation." The Bank also intends to enter into change in control severance agreements with three other executive officers. Such agreements have initial terms of 12 months and become effective upon completion of the Conversion. In the event the officer is terminated following a "change in control" (as defined in the agreements) such officer will be entitled to a severance payment of 100% of their current compensation. See "Management - Executive Compensation Employment Agreements and Severance Agreements" for the definition of "change in control" and a more detailed description of these agreements. Use of Proceeds The net proceeds from the sale of Common Stock in the Conversion (estimated at $12.8 million, $15.2 million, $17.5 million and $20.2 million based on sales at the minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation Range, respectively) will substantially increase the capital of Hemlock Federal. See "Pro Forma Data." The Holding Company will utilize approximately 50% of the net proceeds from the issuance of the Common Stock to purchase all of the common stock of Hemlock Federal to be issued upon Conversion and will retain approximately 50% of the net proceeds. The proceeds retained by the Holding Company will be invested initially in short-term investments similar to those currently in the Bank's portfolio. Such proceeds will subsequently be invested in mortgage-backed securities and investment securities and will be available for general corporate purposes, including the possible repurchase of shares of the Common Stock, as permitted by the OTS. The Holding Company currently has no specific plan to make any such repurchases of any of its Common Stock. In addition, the Holding Company intends to provide the funding for the ESOP loan. Based upon the initial Purchase Price of $10.00 per share, the dollar amount of the ESOP loan would range from $1.1 million (based upon the sale of shares at the minimum of the Estimated Valuation Range) to $1.4 million (based upon the sale of shares at the maximum of the Estimated Valuation Range). It is anticipated that the ESOP will repay the loan through periodic tax-deductible contributions from the Bank over a ten-year period. The interest rate to be charged by the Holding Company on the ESOP loan will be based upon the Internal Revenue Service ("IRS") prescribed applicable federal rate at the time of origination. The Holding Company also intends to use $1.0 million of the net proceeds to fund the Foundation. See "--Establishment of the Charitable Foundation." Finally, the Holding Company currently intends to use a portion of the proceeds to fund a Recognition and Retention Plan ("RRP"), subject to stockholder ratification. Compensation expense related to the RRP will be recognized as share awards vest. See "Pro Forma Data." Following stockholder ratification of the RRP, the RRP will be funded either with shares purchased in the open market or with authorized but unissued shares. Based upon the Purchase Price of $10.00 per share, the amount required to fund the RRP through open-market purchases would range from approximately $533,800 (based upon the sale of shares at the minimum of the Estimated Valuation Range) to approximately $722,200 (based upon the sale of shares at the maximum of the Estimated Valuation Range). In the event that the per share price of the Common Stock increases above the $10.00 per share Purchase Price following completion of the Offering, the amount necessary to fund the RRP would also increase. The use of authorized but unissued shares to fund the RRP could dilute the holdings of stockholders who purchase Common Stock in the Conversion. See "Management - Benefit Plans - Recognition and Retention Plan." The net proceeds received by Hemlock Federal will become part of Hemlock Federal's general funds for use in its business and will be used to support the Bank's existing operations, subject to applicable regulatory restrictions. Immediately upon the completion of the Conversion, it is anticipated that the Bank will invest such proceeds into short-term assets. Subsequently, the Bank intends to redirect the net proceeds to the origination of residential loans and, to a lesser extent, multi-family real estate and consumer loans, subject to market conditions. In addition, the Bank may direct a portion of the proceeds towards the establishment of a new branch office in the southwestern suburbs of Chicago, although the Bank had no specific plans regarding any such new office as of the date hereof. Finally, such proceeds will be available for the acquisition of deposits or assets or both from other institutions, although no such acquisitions are contemplated at this time. See "Use of Proceeds" for additional information on the utilization of the offering proceeds as well as OTS restrictions on repurchases of the Holding Company's stock. Dividends The declaration and payment of dividends are subject to, among other things, the Holding Company's financial condition and results of operations, Hemlock Federal's compliance with its regulatory capital requirements, including the fully phased-in capital requirements, tax considerations, industry standards, economic conditions, regulatory restrictions, general business practices and other factors. There can be no assurance as to whether or when the Holding Company will pay a dividend. See "Dividends." Market for Common Stock The Holding Company has received preliminary approval to have the Common Stock traded on the Nasdaq National Market System under the symbol "____." In order to be traded on the Nasdaq National Market System, there must be at least two market makers for the Common Stock. Keefe, Bruyette & Woods has indicated its intention to make a market in the Holding Company's Common Stock following completion of the Conversion, depending upon the volume of trading activity in the Common Stock and subject to compliance with applicable laws and other regulatory requirements. A second market marker has not yet been secured by the Holding Company. The Holding Company anticipates that it will be able to secure the two market makers necessary to enable the Common Stock to be traded on the Nasdaq National Market System. A public market having the desirable characteristics of depth, liquidity and orderliness, however, depends upon the presence in the marketplace of both willing buyers and sellers of the Common Stock at any given time, which is not within the control of the Holding Company, Hemlock Federal or any market maker. Further, no assurance can be given that an investor will be able to resell the Common Stock at or above the Purchase Price after the Conversion. See "Market for Common Stock" and "The Conversion - Stock Pricing and Number of Shares to be Issued." Risk Factors See "Risk Factors" for information regarding certain factors which should be considered by prospective investors, including the Bank's limited growth potential, difficulty in fully leveraging capital, mortgage-backed securities portfolio; effect on asset yield, interest rate risk exposure, establishment of a charitable foundation, competition, takeover defensive provisions contained in the Holding Company's certificate of incorporation and bylaws, post- conversion overhead expenses, regulatory oversight, the risk of a delayed offering, the absence of an active market for the Common Stock and the possible consequences of amendment of the Plan of Conversion. SELECTED FINANCIAL INFORMATION Set forth below are selected financial and other data of the Bank. Operating results for the interim periods are not necessarily indicative of results of any other interim periods. The financial data is derived in part from, and should be read in conjunction with, the Financial Statements and Notes of the Bank presented elsewhere in this Prospectus. In the opinion of management, the unaudited condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial condition of Hemlock Federal Bank as of September 30, 1996 and for the nine month periods ended September 30, 1996 and 1995. <TABLE> <CAPTION> December 31, --------------------------------------------------------- September 30, 1996(1) 1995 1994 1993 1992 1991 ------------- ------ ------ ------ ------ ----- (In Thousands) <S> <C> <C> <C> <C> <C> <C> Selected Financial Condition Data: Total assets....................................... $146,595 $145,626 $143,877 $146,679 $141,175 $133,239 Cash and cash equivalents.......................... 16,376 13,301 16,827 18,131 6,430 6,440 Loans receivable, net(2)........................... 53,121 45,232 37,659 37,041 31,739 33,750 Mortgage-backed securities(3): Held-to-maturity................................. 31,860 43,106 66,040 81,439 89,757 86,980 Available for sale............................... 34,064 25,620 8,244 --- --- --- Investment securities:(3) Held-to-maturity................................. --- 1,500 3,500 6,003 9,291 1,717 Available for sale............................... 7,095 13,125 7,934 --- --- --- FHLMC stock........................................ 667 549 332 26 49 106 Deposits........................................... 129,159 130,741 130,771 132,583 128,149 120,703 Total borrowings................................... 1,500 1,500 1,500 3,000 3,000 3,000 Retained earnings - substantially restricted....... 11,454 11,346 10,394 9,855 8,878 8,114 </TABLE> <TABLE> <CAPTION> Nine Months Year Ended Ended September 30,(1) December 31, ---------------------- ------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ ------ ------ (In Thousands) <S> <C> <C> <C> <C> <C> <C> <C> Selected Operations Data: Total interest income........................ $7,673 $7,365 $9,935 $8,501 $8,815 $10,060 $10,798 Total interest expense....................... 4,235 3,994 5,416 4,672 4,948 6,196 7,542 ------ ------ ------ ------ ------ ------- ------- Net interest income........................ 3,438 3,371 4,519 3,829 3,867 3,864 3,256 Provision for loan losses.................... 75 122 134 150 149 357 33 ------ ------ ------ ------ ------ ------- ------- Net interest income after provision for loan losses..................................... 3,363 3,249 4,385 3,679 3,718 3,507 3,223 Fees and service charges..................... 297 252 352 308 345 326 226 Gain (loss) on sales of mortgage-backed securities and investment securities....... (80) (161) (161) (89) 270 466 324 Other non-interest income.................... 104 107 146 164 112 104 259 ------ ------- ------ ------ ------ ------- ------- Total non-interest income.................... 321 198 337 383 727 896 809 Total non-interest expense................... 3,529 2,281 3,211 3,180 3,313 3,033 3,100 ----- ------- ------ ------ ------ ------ ------ Income (loss) before taxes and cumulative effect..................................... 155 1,166 1,511 882 1,132 1,370 932 Income tax provision (benefit)............... 47 433 559 343 411 606 364 Cumulative effect............................ --- --- --- --- 256 --- --- ------- -------- ------- ------ ------ ------- ------- Net income (loss)............................ $ 108 $733 $ 952 $ 539 $ 977 $ 764 $ 568 <FN> - ---------------- (1) Financial information at September 30, 1996 and for the nine month periods ended September 30, 1996 and 1995 is derived from unaudited financial data, but in the opinion of management, reflects all adjustment (consisting only of normal recurring adjustments) which are necessary to present fairly the results for such interim periods. Interim results at and for the nine months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. (2) The allowance for loan losses at September 30, 1996, December 31, 1995, 1994, 1993, 1992 and 1991 was $670,000, $600,000, $469,000, $234,000, 497,000 and $174,000, respectively. (3) The Bank adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective as of January 1, 1994. Prior to the adoption of SFAS No. 115, investment securities and mortgage-backed securities held for sale were carried at the lower of amortized cost or market value, as adjusted for amortization of premiums and accretion of discounts over the remaining terms of the securities from the dates of purchase. </FN> </TABLE> <TABLE> <CAPTION> Nine Months Year Ended Ended September 30,(1) December 31, ---------------------- ------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> Selected Financial Ratios and Other Data: Performance Ratios: Return on assets (ratio of net income to average total assets)................................... 0.10% 0.68% 0.66% 0.37% 0.68% 0.65% 0.45% Return on equity (ratio of net income to average equity)(3)...................................... 1.23 9.05 8.72 5.27 10.40 8.95 7.20 Interest rate spread information: Average during period........................... 2.96 3.00 3.01 2.49 2.54 2.68 2.38 End of period................................... 2.56 2.83 3.11 2.93 3.58 2.84 2.29 Net interest margin(2).......................... 3.24 3.24 3.25 2.69 2.74 2.90 2.65 Ratio of operating expense to average total assets.......................................... 3.22 2.12 2.23 2.16 2.30 2.18 2.44 Ratio of average interest-earning assets to average interest-bearing liabilities............ 107.16 106.24 106.31 106.27 105.58 104.84 104.53 Quality Ratios: Non-performing assets to total assets at end of period.......................................... 0.05 0.32 0.40 0.43 0.80 1.17 1.50 Allowance for loan losses to non-performing loans........................................... 870.13 125.11 103.63 76.01 19.95 30.18 8.73 Allowance for loan losses to gross loans receivable...................................... 1.24 1.32 1.31 1.23 0.62 1.53 0.51 Capital Ratios:(3) Equity to total assets at end of period........... 7.81 7.65 7.79 7.22 6.72 6.29 6.09 Average equity to average assets.................. 8.01 7.53 7.59 7.01 6.51 6.14 6.21 Other data: Number of full service offices.................... 3 3 3 3 3 3 3 <FN> - -------------- (1) Ratios for the nine-month periods have been annualized. (2) Net interest income divided by average interest-earning assets. (3) Ratios are exclusive of SFAS 115 valuation. </FN> </TABLE> RECENT FINANCIAL DATA The selected financial and other data of the Bank set forth below at and for the three and twelve months ended December 31, 1996 and 1995 were derived from unaudited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial condition and results of operations for the unaudited periods presented have been included. The information presented below is qualified in its entirety by the detailed information and financial statements included elsewhere in this Prospectus and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and the audited Financial Statements of the Bank and Notes thereto included elsewhere in this Prospectus. At December 31, At September 30, 1996 1996 --------------- ---------------- (In Thousands) Selected Financial Condition Data: Total assets............................. $146,405 $146,595 Cash and cash equivalents................ 17,410 16,376 Securities available-for-sale............ 42,619 41,826 Securities held-to-maturity.............. 29,537 31,860 Loans receivable, net.................... 53,536 53,121 Deposits................................. 131,243 129,159 Retained earnings........................ 11,508 11,454 <TABLE> <CAPTION> Three Months Ended Twelve Months Ended December 31, December 31, ---------------------------- ------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ------- (In Thousands) <S> <C> <C> <C> <C> Selected Operations Data: Interest income............................. $ 2,464 $ 2,569 $ 10,137 $ 9,935 Interest expense............................ 1,408 1,422 5,643 5,416 ------- ------- -------- ------ Net interest income before provision for loan losses.......................... 1,056 1,147 4,494 4,519 Provision for loan losses................... 75 11 150 134 -------- -------- -------- ------ Net interest income after provision for loan losses............................ 981 1,136 4,344 4,385 Loss on sale of securities.................. (44) --- (124) (161) Other non-interest income................... 110 139 511 498 Non-interest expense........................ 958 930 4,487 3,211 ------ -------- ------- ------- Income before income taxes.................. 89 345 244 1,511 Income taxes................................ 36 126 83 559 ------- -------- ------- ------- Net income ............................... $ 53 $ 219 $ 161 $ 952 ======= ======== ======= ======= </TABLE> <TABLE> <CAPTION> At or for the At or for the Three Months Ended Twelve Months Ended December 31, December 31, ------------------ ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets(1)........................ 0.15% 0.59% 0.11% 0.66% Return on average equity(1)........................ 1.86 7.61 1.38 8.72 Average equity to average assets................... 7.80 7.76 7.97 7.59 Equity to total assets at end of period............ 7.86 7.78 7.86 7.79 Average interest rate spread(1).................... 2.72 2.96 2.93 3.01 Net interest margin(1)(2).......................... 3.01 3.25 3.20 3.25 Average interest-earning assets to average interest-bearing liabilities..................... 106.71 107.40 106.67 106.31 Efficiency ratio(3)................................ 0.85 0.72 0.92 0.66 Non-interest expense to average assets(1).......... 2.62 2.58 3.07 2.23 Asset Quality Ratios: Allowance for loan losses as a percent of gross loans receivable............................ 1.37 1.31 1.37 1.37 Allowance for loan losses as a percent of non- performing loans.................................. 116.51 103.63 116.51 103.63 <FN> - ------------------ (1) Ratios for the three month periods have been annualized. (2) Net interest income divided by average interest earning assets. (3) The efficiency ratio represents noninterest expense as a percent of net interest income and noninterest income before provision for loan losses. </FN> </TABLE> MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT RESULTS Comparison of Financial Condition at December 31, 1996 and September 30, 1996 Total assets at December 31, 1996 were $146.4 million compared to $147.0 million at September 30, 1996, a decrease of $600,000, or 0.4%. The decrease in total assets was due primarily to decreases in securities held-to-maturity and other assets, partially offset by increases in securities available-for-sale and cash and cash equivalents. Total liabilities at December 31, 1996 were $134.3 million compared to $134.6 million at September 30, 1996, a decrease of $300,000, or 0.2%. The decrease is primarily due to the payment of a $2.1 million liability for the purchase of a security at September 30, 1996 and the payment of the one-time special SAIF assessment of $840,000. These decreases were partially offset by an increase in deposits of $2.0 million from $129.2 million at September 30, 1996 to $131.2 million at December 31, 1996 due to market demand. In addition, advance payments by borrowers for taxes and insurance increased by $394,000 due to the receipt of payments after the second installment of real estate taxes in September, and other liabilities increased due to an increase in deferred tax liabilities of approximately $56,000. Total equity at December 31, 1996 was $12.1 million compared to $12.0 million at September 30, 1996, an increase of $100,000, or 0.8% as a result of $53,000 net income for the period combined with a change in unrealized gain on securities available-for-sale from $519,000 at September 30, 1996 to $607,000 at December 31, 1996. Comparison of Operating Results for the Three Months Ended December 31, 1996 and December 31, 1995 General. Net income for the three months ended December 31, 1996 was $53,000, a decrease of $166,000, from net earnings of $219,000 for the three months ended December 31, 1995. The decrease was primarily due to a $91,000 decrease in net interest income combined with a loss on sale of securities of $44,000 in 1996. In addition, there was an increase in other expense of $28,000 and an increase in the provision for loan losses of $64,000. These items are more fully discussed below. Interest Income. Interest income for the three months ended December 31, 1996 was $2.5 million compared to $2.6 million for the three months ended December 31, 1995, a decrease of $105,000, or 4.1%. The decrease resulted primarily from a decrease in the average yield. The annualized average yield decreased 28 basis points from 7.28% for the three months ended December 31, 1995 to 7.00% for the three months ended December 31, 1996 largely as a result of a decrease in the yield on loans and mortgage-backed securities. The decrease in the annualized yield on loans from 8.35% for the three months ended December 31, 1995 to 8.23% for the three months ended December 31, 1996 was a result of offering more competitive rates due to management's concerted effort to increase loan growth. Interest Expense. Interest expense was $1.4 million for the three months ended December 31, 1996 and 1995. The average balance of interest-bearing liabilities increased slightly by $240,000. However, this was offset by a slight decrease in the average cost of funds from 4.32% for the three months ended December 31, 1995 to 4.28% for the three months ended December 31, 1996. Net Interest Income. Net interest income was $1.1 million for the three months ended December 31, 1996 and 1995. The average net interest spread narrowed from 2.96% for the three months ended December 31, 1995 to 2.72% for the three months ended December 31, 1996 due to the decrease in the average annualized yield of interest-earning assets. Provision for Loan Losses. The Bank recorded a $75,000 provision for loan losses for the three months ended December 31, 1996 compared to $11,000 for the three months ended December 31, 1995. At December 31, 1996, the Bank's allowance for loan losses totaled $745,000, or 1.4% of total loans and 116.5% of total non-performing loans. The amount of the provision and allowance for estimated losses on loans is influenced by current economic conditions, actual loss experience, industry trends and other factors, such as adverse economic conditions, including declining real estate values, in the Bank's market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for estimated losses on loans. Such agencies may require the Bank to provide additions to the allowance based upon judgments which differ from those of management. Although management uses the best information available and maintains the Bank's allowance for losses at a level it believes adequate to provide for losses, future adjustments to the allowance may be necessary due to economic, operating, regulatory and other conditions that may be beyond the Bank's control. Noninterest Income. Noninterest income for the three months ended December 31, 1996 was $66,000 compared to $139,000 for the three months ended December 31, 1995, a decrease of $73,000, or 52.5%. The decrease was primarily a result of losses on sale of securities of $44,000 for the three months ended December 31, 1996 compared to no losses for the three months ended December 31, 1995. In addition, service fee income decreased $18,000 as a result of decreased service charges on NOW accounts. Other income decreased $11,000 due to a decrease in fee income resulting from a decrease in fees on FHA and VA loans on which applications were taken for other lenders. Noninterest Expense. Noninterest expense was $958,000 for the three months ended December 31, 1996 compared to $930,000 for the three months ended December 31, 1995, an increase of $28,000, or 3.0%. The increase was primarily a result of an increase in occupancy expense of $22,000 as a result of increased assessment on real estate taxes combined with an increase in data processing fees of $22,000 and an increase in other expense of $33,000. The increase in other expense was largely due to increased supplies as a result of the growth in loan originations and an increase in outside services. These increases in expense were partially offset by a decrease in compensation and benefits of $51,000 due primarily to the freezing of the money purchase pension plan in October 1996, resulting in decreased contributions. Income Tax Expense. The provision for income taxes totaled $36,000 for the three months ended December 31, 1996 compared to $126,000 for the three months ended December 31, 1995. The decrease was primarily due to a decrease in income before income taxes of $256,000. Comparison of Operating Results for the Years Ended December 31, 1996 and December 31, 1995 General. Net income for the year ended December 31, 1996 was $161,000 compared to net income of $952,000 for the year ended December 31, 1995, a decrease of $791,000, or 83.1%. The decrease was primarily a result of an $840,000 FDIC special assessment on SAIF insured deposits effective September 30, 1996. In addition, the Bank realized a $223,000 gain on sale of real estate owned in 1995 compared to $0 in 1996. Interest Income. Interest income for the year ended December 31, 1996 was $10.1 million compared to $9.9 million for the year ended December 31, 1995, an increase of $200,000, or 2.0%. The contributing factor in the increase in interest income was the 6 basis point increase in the yield on average interest-earning assets from 7.15% for the year ended December 31, 1995 to 7.21% for the year ended December 31, 1996. The average yield on mortgage-backed securities increased from 6.80% for the year ended December 31, 1995 to 7.02% for the year ended December 31, 1996 due to the upward repricing of adjustable rate securities coupled with the reduced amortization of premiums as a result of a slowdown in prepayments from the prior year as anticipated by management. Although the yield on average loans receivable decreased from 8.21% for the year ended December 31, 1995 to 8.05% for the year ended December 31, 1996, the average balance of loans receivable increased by $9.4 million due to the shift from lower yielding securities and mortgage-backed securities to higher yielding loans receivable. The increase in the average balance of loans receivable was the result of management's concerted effort through the addition of lending personnel and increased emphasis on loan marketing. Interest Expense. Interest expense for the year ended December 31, 1996 was $5.6 million compared to $5.4 million for the year ended December 31, 1995, an increase of $200,000, or 3.7%. The increase in interest expense reflects a higher interest rate environment, as the average cost of interest-bearing liabilities increased by 14 basis points from 4.14% for the year ended December 31, 1995 to 4.28% for the year ended December 31, 1996. The increase in the average cost of funds was also attributable to a shift of deposits from money market accounts to higher yielding certificates of deposit. The average cost of certificates of deposit increased from 5.23% for the year ended December 31, 1995 to 5.45% for the year ended December 31, 1996. In addition, the average balance of interest-bearing liabilities increased $1.1 million from $130.7 million for the year ended December 31, 1995 to $131.8 million for the year ended December 31, 1996 as a result of market demand. Net Interest Income. Net interest income of $4.5 million for the year ended December 31, 1996 represented no increase from the $4.5 million reported for the year ended December 31, 1995. There was a decrease in the net interest spread from 3.01% for the year ended December 31, 1995 to 2.93% for the year ended December 31, 1996. The decrease in the net interest rate spread was a result of the average cost of interest-bearing deposits increasing at a more rapid rate than the average yield on interest-earning assets. Provision for Loan Losses. The Bank's provision for loan losses for the year ended December 31, 1996 was $150,000 compared to $134,000 for the year ended December 31, 1995. The allowance for loan losses represented 1.4% and 1.3% of gross loans receivable at December 31, 1996 and 1995, respectively. The amount of the provision and allowance for estimated losses on loans is influenced by current economic conditions, actual loss experience, industry trends and other factors, such as adverse economic conditions, including declining real estate values, in the Bank's market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for estimated losses on loans. Such agencies may require the Bank to provide additions to the allowance based upon judgments which differ from those of management. Although management uses the best information available and maintains the Bank's allowance for losses at a level it believes adequate to provide for losses, future adjustments to the allowance may be necessary due to economic, operating, regulatory and other conditions that may be beyond the Bank's control. Noninterest Income. Noninterest income for the year ended December 31, 1996, was $387,000 compared to $337,000 for the year ended December 31, 1995, an increase of $50,000, or 14.8%. The increase was the result of a decrease in the loss on sale of securities of $38,000 combined with the $27,000 increase in service fees related to NOW accounts. This was partially offset by a decrease of $18,000 in other income on FHA and VA loans on which the applications were taken for other lenders. Noninterest Expense. Noninterest expense was $4.5 million for the year ended December 31, 1996 compared to $3.2 million for the year ended December 31, 1995, an increase of $1.3 million, or 40.6%. The increase was primarily due to an $840,000 one-time special assessment on SAIF insured deposits resulting from federal legislation enacted on September 30, 1996. The Bank also recognized a gain on the sale of other real estate owned of $223,000 in 1995 compared to zero in 1996 and experienced an increase in occupancy expense of $82,000 due primarily to increased real estate tax assessments in 1996. Income Taxes. The provision for income taxes was $83,000 for the year ended December 31, 1996 compared to $559,000 for the year ended December 31, 1995. The decrease was primarily due to a decrease in pretax income of $1.3 million.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029688_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029688_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a5f261fb494b9d66a5203aa63f1c59b9b8d37bfc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029688_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus, including the information appearing under "Risk Factors." Unless otherwise indicated, all financial information and share and per share data in this Prospectus, other than the Consolidated Financial Statements, (i) reflect a 1-for-4.5 reverse split of Common Stock prior to the closing of the offering, (ii) assume no exercise of the Underwriters' over-allotment option, (iii) assume the conversion of all the outstanding shares of Convertible Preferred Stock (the "Preferred Stock") into 1,097,969 shares of Common Stock upon the closing of this offering, (iv) assume the exercise of options to purchase 477,391 shares of Common Stock, and (v) exclude up to 260,000 shares of Common Stock issuable upon exercise of a warrant to be issued to Sutro & Co. Incorporated (the "Sutro Warrant") upon the closing of this offering. See "Management -- Stock Option Plan," "Description of Capital Stock" and "Underwriting." References in this Prospectus to the Company or IAI shall be deemed to include International Aircraft Investors and its subsidiaries unless otherwise stated. THE COMPANY International Aircraft Investors (the "Company" or "IAI") is primarily engaged in the acquisition of used, single-aisle jet aircraft and engines for lease and sale to domestic and foreign airlines and other customers. As of June 30, 1997, the Company's portfolio, appraised at approximately $121 million, had eight aircraft on lease to eight customers. In September 1997, the Company acquired from International Lease Finance Corporation ("ILFC") a Boeing 737-300QC (Quick Change) on lease to Air Belgium until September 2000 and agreed to acquire from ILFC a Boeing 757-200ER (Extended Range) on lease to Air Transat, a Canadian charter airline, until April 2003. The Company leases its aircraft under "triple net" operating leases where the lessee is responsible for all operating costs (i.e., crew, fuel, insurance, taxes, licenses, landing fees, navigation charges, maintenance, repairs and associated expenses) and the Company retains the potential benefit and assumes the risk of the residual value of the aircraft, as distinct from finance leases where the full cost of the aircraft is recovered over the term of the lease at usually lower monthly rates. The profits of the global airline industry are on the rise and passenger traffic is expected to grow through 2016, according to the 1997 Current Market Outlook published by the Boeing Commercial Airplane Group ("Boeing") in March 1997 (the "Boeing Report"). Boeing projects that traffic will increase 4.9% annually through 2016 and that 16,162 new commercial jet aircraft will be required over the next approximately 20 years. Airlines will confront an increasingly competitive environment with long-term profitability dependent on successful cost reductions. Such reductions will include improvements in fleet planning designed to more closely match aircraft capacity with passenger demand. An important element of fleet planning for many airlines is the use of operating leases which tend to maximize fleet flexibility due to their short-term nature and relatively small capital outlay, while minimizing financial risks. While most operating leases are made for new aircraft, emphasis on cost containment has been increasing the attractiveness of leasing used commercial jet aircraft. The Boeing Report estimates that 16,162 new commercial jet aircraft will be required over the next approximately 20 years, resulting in a projected worldwide fleet of approximately 23,600 commercial jet aircraft in 2016, net of 4,069 retired aircraft. Single-aisle jet aircraft with seating capacity of 121 to 170 are projected by the Boeing Report to account for approximately 29.7% of new commercial jet aircraft deliveries over the next approximately 20 years. Due to the increasing cost of commercial jet aircraft, the anticipated modernization of the worldwide aircraft fleet, and the emergence of new niche-focused airlines which generally use leasing for capital asset acquisitions, the Company believes that airlines will increasingly turn to operating leases as an alternative method to finance their fleets. Although Boeing estimated in its 1996 Current Market Outlook that the fleets of operating lessors have grown from over 200 aircraft in 1986 to over 1,000 in 1995, commercial jet aircraft under operating lease represented only approximately 10% of total commercial jet aircraft in service at year-end 1995. Aviation Week & Space Technology ("Aviation Week") reports that leasing will be the primary means by which the global air transport industry acquires new aircraft between now and 1999, and probably beyond. Aviation Week, based upon data provided by GE Capital Aviation Services, states that in 1986, 41% of the world's airlines owned all of their equipment, 15% leased all of their equipment and 44% used a mix of the two (with 80% owned and 20% leased). By contrast, in 1996, 16% owned all of their equipment, 42% leased all of their equipment and 42% used a mix of the two (with 60% leased and 40% owned). The larger operating lessors appear to be focused on the lease of new, rather than used, commercial jet aircraft. The Company believes that the market for the operating lease of used commercial jet aircraft, including for single-aisle jet aircraft with seating capacity of 121 to 170, should grow due to the factors discussed above as well as the emphasis on airline cost reduction, the desire of airlines for fleet flexibility and the growth in air travel. The Company's strategy is to focus on operating leases of used, single-aisle jet aircraft to a diversified base of customers worldwide, while employing strict risk management criteria. Key elements of the Company's business strategy include the following: Focus on Operating Leases. The Company believes that airlines are becoming increasingly aware of the benefits of financing their fleet equipment on an operating lease basis, including preservation of cash flow and flexibility regarding fleet size and composition. The Company believes the operating lease of jet aircraft, especially used jet aircraft, offers the potential for a higher rate of return to the Company than other methods of aircraft financing, such as finance leases. Focus on Used Commercial Jet Aircraft with a Broad Market Acceptance. The Company leases used, single-aisle jet aircraft, particularly aircraft between five and 15 years old at the time the aircraft is acquired by the Company. The Company is currently focusing on the acquisition and lease of single-aisle jet aircraft, primarily aircraft with a seating capacity of 121 to 170 passengers, which, according to the Boeing Report, accounted for approximately 35.9% of the world fleet at December 31, 1996. The Boeing Report estimates that the commercial replacement cycle for this type of aircraft is 25 to 28 years from manufacture date. This category of jet aircraft includes aircraft such as the Boeing 737-300/-400, the Airbus A320 and the McDonnell Douglas MD80 series. The Company is in the process of acquiring and leasing a Boeing 757-200ER aircraft. The Boeing 757 is a single-aisle aircraft with a seating capacity of 171 to 240 passengers. The Company will continue to purchase aircraft which enjoy significant manufacturer's support and fit the Company's criteria. Optimize Relationship with ILFC. The Company has had a long and continuous relationship with ILFC, a wholly owned subsidiary of American International Group, Inc. ILFC was an initial investor in the Company and prior to the offering owned approximately 4.1% of the Company's equity. ILFC is a major owner-lessor of commercial jet aircraft having contacts with most airlines worldwide, the aircraft and engine manufacturers and most of the significant participants in the aircraft industry worldwide. Boeing and Airbus each recently announced a multi-billion dollar order of aircraft by ILFC. The Company intends to use its relationship with ILFC to seek to gain access, where appropriate, to various airlines and other participants in the market to facilitate the purchase, lease, re-lease and sale of aircraft. ILFC's primary focus is the acquisition and leasing of new commercial jet aircraft. Thus, the Company believes that its business complements rather than competes with ILFC. See "Business -- Relationship With ILFC." Leverage Management Experience. The successful purchase and leasing of used commercial jet aircraft requires skilled management in order to evaluate the condition and price of the aircraft to be purchased and the current and anticipated market demand for that aircraft. The management of the Company and the Board of Directors of the Company have significant global experience in the aviation industry, with an average of more than 20 years of experience, especially in the purchase, sale and financing of commercial jet aircraft, and have extensive contacts with airlines worldwide. See "Management -- Directors and Executive Officers." Access a Diversified Global Customer Base. The Company's objective is to diversify its customer base to avoid dependence on any one lessee, geographic area or economic trend. Employ Strict Risk Management Criteria. The Company will only purchase aircraft that are currently under lease or are subject to a contractual commitment for lease or purchase, will not purchase aircraft on speculation, and will generally seek financing using a non-recourse loan structure. The Company evaluates carefully the credit risk associated with each of its lessees and the lessee's ability to operate and properly maintain the aircraft. The Company also evaluates the return conditions in each lease since the condition of an aircraft at the end of a lease can significantly impact the amount the Company will receive on the re-lease or sale of an aircraft. The Company was incorporated in California in 1988, its principal executive offices are located at 3655 Torrance Boulevard, Suite 410, Torrance, California 90503, and its telephone and facsimile numbers are (310) 316-3080 and (310) 316-8145, respectively. RECENT DEVELOPMENTS In September 1997, the Company agreed to acquire two aircraft from ILFC. The first aircraft, a Boeing 737-300QC manufactured in 1987, was purchased in September 1997. This aircraft may be changed quickly by the lessee between passenger and cargo configurations. The seats are palletized and can slide in and out of the aircraft with minimal downtime, giving the operator increased operational capability and utilization. This aircraft is on lease to Air Belgium until September 2000 and was initially financed through ILFC. The second aircraft will be delivered prior to the end of 1997 and is a Boeing 757-200ER manufactured in 1990. This aircraft is on lease to Air Transat, a Canadian charter airline, until April 2003. These acquisitions will increase the Company's total assets by approximately $59 million. The annual rentals revenues for these two aircraft will aggregate approximately $7 million over their existing lease terms. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.. 2,600,000 shares Common Stock to be outstanding after the offering....................... 4,256,467 shares(1) Use of proceeds...................... To repay a portion of the debt incurred to acquire two aircraft, to finance the acquisition of additional aircraft, and for working capital and other general corporate purposes Proposed Nasdaq-NM symbol............ IAIS </TABLE> - --------------- (1) Excludes (i) 485,554 shares of Common Stock subject to options outstanding on the date of this Prospectus with an exercise price of $4.50 per share; (ii) 155,555 shares of Common Stock issuable upon conversion of a 5% Subordinated Convertible Note due August 13, 1998 in the principal amount of $700,000 (the "Convertible Note"); (iii) 260,000 shares of Common Stock issuable upon exercise of the Sutro Warrant; and (iv) 100,000 shares of Common Stock reserved for issuance under the Company's 1997 Employee Stock Option and Award Plan (the "1997 Option Plan") and the Company's 1997 Eligible Directors Stock Option Plan (the "1997 Directors Plan").
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029690_world_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029690_world_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..361336bd5d9c2391552cdcfdc8d1c525ec1d5927
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029690_world_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Capitalized Terms at page 104 for the location herein of certain capitalized terms. Overview................... Certain motor vehicle dealers ("Dealers") in the World Omni Financial Corp. ("World Omni") network of dealers have assigned, and will assign, closed-end retail automobile and light duty truck leases to World Omni LT, an Alabama trust (the "Origination Trust"). The Origination Trust was created in 1993 to avoid the administrative difficulty and expense associated with retitling leased vehicles in the securitization of automobile and light duty truck leases. The Origination Trust has issued to Auto Lease Finance L.P. ("ALFI L.P.") an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated assets of the Origination Trust. ALFI L.P. will instruct the trustee of the Origination Trust to allocate a separate portfolio of leases and leased vehicles within the Origination Trust and create a special unit of beneficial interest (the "SUBI") which will represent the entire beneficial interest in such portfolio. Upon its creation, such portfolio will no longer be a part of the Origination Trust Assets represented by the UTI. ALFI L.P. will sell its interest in the SUBI to World Omni Lease Securitization L.P. (the "Transferor") and the Transferor will in turn contribute a 99.8% interest in the SUBI to the World Omni 1997-A Automobile Lease Securitization Trust (the "Trust"). In return, the Trust will issue five classes of Certificates, including the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates and Class A-4 Certificates being offered hereby. The undivided interest in the Trust not evidenced by the Certificates will be permanently retained by the Transferor. ALFI L.P. has caused and from time to time in the future may cause additional special units of beneficial interest similar to the SUBI ("Other SUBIs") to be created out of the UTI and sold to the Transferor or one or more other entities. The Trust and the Certificateholders will have no interest in the UTI, any Other SUBI or any assets of the Origination Trust evidenced by the UTI or any Other SUBI. The Trust.................. The Trust will be formed pursuant to a securitization trust agreement dated as of May 1, 1997 (the "Agreement"), between the Transferor and First Bank National Association ("First Bank"), as trustee (in such capacity, the "Trustee"). The property of the Trust will consist primarily of an undivided 99.8% interest (the "SUBI Interest") in the SUBI, which will evidence a beneficial interest in certain specified assets of the Origination Trust (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy), and monies on deposit in the Reserve Fund, the Residual Value Surplus Account and in certain other accounts established as described herein. The Origination Trust was formed by ALFI L.P., as grantor and initial beneficiary, and VT Inc., as trustee (the "Origination Trustee"). The sole general partner of ALFI L.P. is Auto Lease Finance, Inc., a Delaware corporation ("ALFI") which is a wholly owned, special purpose subsidiary of World Omni. ALFI may not transfer its general partnership interest in ALFI L.P. so long as any financings involving interests in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of ALFI L.P. is World Omni. VT Inc. is an Alabama corporation and a wholly owned, special purpose subsidiary of First Bank that was organized solely for the purpose of acting as Origination Trustee. VT Inc. is not affiliated with World Omni or any affiliate thereof. For further information regarding the Origination Trustee, see "The Origination Trust -- The Origination Trustee". The Origination Trust Assets consist of retail closed-end lease contracts assigned to the Origination Trust by Dealers, the automobiles and light duty trucks relating thereto and all proceeds thereof and payments made under certain insurance policies relating to such contracts, the related lessees or such leased vehicles, including the Residual Value Insurance Policy. The SUBI initially will evidence a beneficial interest in a specified portion of the Origination Trust Assets, including certain lease contracts (the "Initial Contracts") originated by Dealers located throughout the United States, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles"), certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after March 1, 1997 (the "Initial Cutoff Date"), payments made under certain insurance policies (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) relating to the Initial Contracts, the related lessees and the Initial Leased Vehicles and certain related assets and rights (collectively, the "SUBI Assets"). For further information regarding the SUBI Assets, see "The Trust and the SUBI -- The SUBI". Prior to the time when principal is first distributed to Certificateholders as described herein, payments made on or in respect of the SUBI Assets allocable to principal will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") originated and assigned to the Origination Trust by Dealers located throughout the United States and the automobiles and light duty trucks relating thereto (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles, together with certain related Origination Trust Assets, will become SUBI Assets. For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles" and "The Trust and the SUBI -- The SUBI". The Dealers comprising the sources for Contracts and Leased Vehicles are members of World Omni's network of dealers. These Dealers offer automobiles and light duty trucks for lease pursuant to World Omni-approved terms and documentation. For further information regarding World Omni's lease business, see "World Omni". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Origination Trust Assets other than the SUBI Assets. Payments made on or in respect of Origination Trust Assets other than the SUBI Assets will not be available to make payments on the Certificates. The 0.2% interest in the SUBI not transferred to the Trustee will be permanently retained by the Transferor (the "Retained SUBI Interest"). Accordingly, the Transferor will be entitled to receive 0.2% of all payments made on or in respect of the SUBI Assets and will share in 0.2% of all losses and liabilities incurred by the SUBI Assets. Any payments made in respect of the Retained SUBI Interest will not be available to make payments on the Certificates. For further information regarding the SUBI, see "Summary -- Security for the Certificates -- The SUBI", "The Trust and the SUBI -- The SUBI" and "The Origination Trust". The Transferor............. The Transferor is a Delaware limited partnership, the sole general partner of which is World Omni Lease Securitization, Inc., a Delaware corporation ("WOLSI"), which is a wholly owned, special purpose subsidiary of World Omni. WOLSI may not transfer its general partnership interest in the Transferor so long as any financings involving interests formerly or partially held by it in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of the Transferor is World Omni. World Omni................. World Omni is a Florida corporation that is a wholly owned subsidiary of JM Family Enterprises, Inc., a Delaware corporation ("JMFE"). JMFE also wholly owns Southeast Toyota Distributors, Inc. ("SET"), which is the exclusive distributor of Toyota automobiles and light duty trucks in Florida, Alabama, Georgia, North Carolina and South Carolina (the "Five State Area"). As more fully described under "World Omni", World Omni provides consumer lease and installment contract financing to retail customers of, and floorplan and other dealer financing to, Dealers that are located throughout the United States. World Omni wholly owns both ALFI and WOLSI. Pursuant to an amended and restated servicing agreement dated as of July 1, 1994, as amended, to be supplemented by a servicing supplement dated as of May 1, 1997 (collectively, the "Servicing Agreement"), each between World Omni and the Origination Trustee, World Omni will act as the initial servicer of the Origination Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). The Trustee will be a third party beneficiary of the Servicing Agreement, as described under "Additional Document Provisions -- The Servicing Agreement -- Trustee as Third-Party Beneficiary". Securities Offered......... The Automobile Lease Asset Backed Certificates (the "Certificates") will represent fractional undivided interests in the Trust. The Certificates will consist of four classes of senior certificates (the "Class A-1 Certificates", the "Class A-2 Certificates", the "Class A-3 Certificates" and the "Class A-4 Certificates", respectively, and collectively, the "Class A Certificates") and one class of subordinated certificates (the "Class B Certificates"). Generally, no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-1 Certificates and the Class A-2 Certificates have been paid in full, and no principal payments will be made on the Class A-4 Certificates until the Class A-1 Certificates, Class A-2 Certificates and Class A-3 Certificates have been paid in full, in each case as more fully described under "Description of the Certificates -- Distributions on the Certificates -- Application and Distributions of Principal -- Amortization Period". The Class B Certificates will be subordinated to the Class A Certificates so that (i) interest payments generally will not be made in respect of the Class B Certificates until interest in respect of the Class A Certificates has been paid, (ii) principal payments generally will not be made in respect of the Class B Certificates until the Class A-1, Class A-2 and Class A-3 Certificates have been paid in full and (iii) if other sources available to make payments of principal and interest on the Class A-4 Certificates are insufficient, amounts that otherwise would be paid in respect of the Class B Certificates generally will be available for that purpose, as more fully described under "Description of the Certificates -- Distributions on the Certificates". The undivided interest in the Trust not represented by the Certificates will be permanently retained by the Transferor (the "Transferor Interest"). The Transferor Interest will be subordinated to the Certificates as described under "Summary -- Security for the Certificates -- Subordination of the Transferor Interest". Only the Class A Certificates are being offered hereby. The Class A Certificates will be issued in book-entry form in minimum denominations of $1,000 and integral multiples thereof, as set forth under "Description of the Certificates -- Book-Entry Registration" and "-- Definitive Certificates". The Class B Certificates will be sold in one or more private placements. Each Certificate will represent the right to receive monthly payments of interest at the related Certificate Rate and, to the extent described herein, monthly payments of principal during the Amortization Period. These payments will be funded from a portion of the payments received by the Trust on or in respect of the SUBI Interest (i.e., from a portion of 99.8% of the payments received on or in respect of the Contracts and the Leased Vehicles) and, in certain circumstances, from Excess Collections, monies on deposit in the Residual Value Surplus Account, the Servicing Fee (so long as World Omni is the Servicer), Transferor Amounts that otherwise would be distributable in respect of the Transferor Interest, Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy and monies on deposit in the Reserve Fund. Interests in the assets of the Trust will be allocated among the Class A-1 Certificateholders (the "Class A-1 Interest"), the Class A-2 Certificateholders (the "Class A-2 Interest"), the Class A-3 Certificateholders (the "Class A-3 Interest"), the Class A-4 Certificateholders (the "Class A-4 Interest" and, together with the Class A-1 Interest, the Class A-2 Interest and the Class A-3 Interest, the "Class A Interest"), the Class B Certificateholders (the "Class B Interest" and, together with the Class A Interest, the "Investor Interest") and the Transferor Interest. On the date of initial issuance of the Certificates (the "Closing Date"), the Trust will issue $250,000,000 aggregate principal amount of Class A-1 Certificates (the "Initial Class A-1 Certificate Balance"), $290,000,000 aggregate principal amount of Class A-2 Certificates (the "Initial Class A-2 Certificate Balance"), $290,000,000 aggregate principal amount of Class A-3 Certificates (the "Initial Class A-3 Certificate Balance"), $277,297,857 aggregate principal amount of Class A-4 Certificates (the "Initial Class A-4 Certificate Balance" and, together with the Initial Class A-1 Certificate Balance, the Initial Class A-2 Certifi cate Balance and the Initial Class A-3 Certificate Balance, the "Initial Class A Certificate Balance") and $65,839,332 aggregate principal amount of Class B Certificates (the "Initial Class B Certificate Balance" and, together with the Initial Class A Certificate Balance, the "Initial Certificate Balance"). The aggregate principal amounts of the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates and the Class B Certificates will, except in certain circumstances described under "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles", remain fixed at their respective Initial Certificate Balances during the Revolving Period and, to the extent described herein, will decline thereafter during the Amortization Period as principal is paid on the Certificates. The "Class Certificate Balance" of any Class of Certificates on any day will equal the Initial Class Certificate Balance, reduced by the sum of all distributions made in respect of principal (including any reimbursements of Loss Amounts allocable to such Class and Certificate Principal Loss Amounts in respect of such Class) on or prior to such day on the related Class of Certificates and those Certificate Principal Loss Amounts in respect of such Class, if any, which have not been reimbursed as described herein. The "Class A Certificate Balance" will mean the sum of the Class A-1, Class A-2, Class A-3 and Class A-4 Certificate Balances. The "Certificate Balance" with respect to the Certificates will mean the sum of the Class A Certificate Balance and the Class B Certificate Balance. The amount of the Transferor Interest will initially equal $23,941,575 (which amount will equal 2.0% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date) and on any day will equal the difference between 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Certificates -- The SUBI -- The Contracts", and the Certificate Balance. As more fully described under "Description of the Certificates -- General", the Aggregate Net Investment Value can change daily. Because the Transferor Interest will represent the interest in the Trust not represented by the Certificates, the amount of the Transferor Interest can decrease daily as the Aggregate Net Investment Value decreases and can increase on a Distribution Date to reflect reductions in the Certificate Balance, but will never exceed the initial amount of the Transferor Interest. Registration of the Certificates............... Each Class of Class A Certificates initially will be represented by one or more certificates registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). A person acquiring an interest in the Class A Certificates (each, a "Certificate Owner") may elect to hold his or her interest through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. No Certificate Owner will be able to receive a definitive certificate representing such person's interest, except in the limited circumstances described under "Description of the Certificates -- Definitive Certificates". Unless and until definitive certificates are issued, Certificate Owners will not be recognized as holders of record of Class A Certificates and will be permitted to exercise the rights of such holders only indirectly through DTC. For further information regarding book-entry registration of the Class A Certificates, see "Description of the Certificates -- General" and "-- Book-Entry Registration". Interest................... On the twenty-fifth day of each month or, if such day is not a Business Day, on the next succeeding Business Day, beginning May 27, 1997 (each, a "Distribution Date"), distributions in respect of the Class A Certificates will be made to the holders of record of the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates (respectively, the "Class A-1 Certificateholders", the "Class A-2 Certificateholders", the "Class A-3 Certificateholders" and the "Class A-4 Certificateholders", and collectively, the "Class A Certificateholders") as of the day immediately preceding such Distribution Date or, if Definitive Certificates are issued, the last day of the immediately preceding calendar month (each such date, a "Record Date"). On each Distribution Date, the Trustee will distribute interest for the related Interest Period to the Class A Certificateholders, based on the related Class Certificate Balance as of the immediately preceding Distribution Date (after giving effect to reductions in such Class Certificate Balance as of such immediately preceding Distribution Date) or, in the case of the first Distribution Date, on the Initial Class Certificate Balance, in the case of (i) the Class A-1 Certificates, at an annual percentage rate equal to 6.60% (the "Class A-1 Certificate Rate"), (ii) the Class A-2 Certificates, at an annual percentage rate equal to 6.75% (the "Class A-2 Certificate Rate"), (iii) the Class A-3 Certificates, at an annual percentage rate equal to 6.85% (the "Class A-3 Certificate Rate") and (iv) the Class A-4 Certificates, at an annual percentage rate equal to 6.90% (the "Class A-4 Certificate Rate"). Interest in respect of the Class A Certificates will accrue for the period from and including the Distribution Date in each month to but excluding the Distribution Date in the immediately succeeding month (or, in the case of the first Distribution Date, from and including May 5, 1997) (each, an "Interest Period"). All such payments will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The final scheduled Distribution Date for the Certificates (the "Final Scheduled Distribution Date") will be the June 2003 Distribution Date. A "Business Day" will be a day other than a Saturday or Sunday or a day on which banking institutions in the States of Alabama, Florida, Illinois or New York are authorized or obligated by law, executive order or government decree to be closed. As described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest", distributions in respect of interest on the Class B Certificates will be subordinated to distributions in respect of interest on the Class A Certificates under certain circumstances. The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles................. No principal will be payable on the Certificates until the June 1998 Distribution Date or, upon the occurrence of an Early Amortization Event, until the Distribution Date in the month immediately succeeding the month in which such Early Amortization Event occurs. From and including the Closing Date and ending on the day immediately preceding the commencement of the Amortization Period (i.e., the earlier of May 1, 1998 or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and reimbursements of Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Class A-1, Class A-2, Class A-3, Class A-4 and Class B Certificate Balances at constant levels during the Revolving Period, except to the extent there are unreimbursed Certificate Principal Loss Amounts in respect of any such Class, in which case the Certificate Balance of the related Class of Certificates will decrease until such time, if any, as such Certificate Principal Loss Amounts are reimbursed as described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest". The events that might lead to the termination of the Revolving Period prior to its scheduled termination date are described under "Description of the Certificates -- Early Amortization Events". Prior to the twenty-fifth calendar day (i) in each month (beginning May 1997) during the Revolving Period and (ii) if no Early Amortization Event has occurred, in the month in which the Amortization Date occurs, on one or more days selected by the Servicer (each, a "Transfer Date"), the Servicer will direct the Origination Trustee to reinvest Principal Collections and certain Loss Amounts that otherwise would be reimbursed to the Certificateholders in certain lease contracts and the related leased vehicles of the Origination Trust that are not evidenced by the SUBI or any Other SUBI. Upon such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the twenty-fifth calendar day of any month (beginning May 1997) during the Revolving Period the amount of Principal Collections and such otherwise reimbursable Loss Amounts as of the last day of the immediately preceding month that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles exceeds $1,000,000, an Early Amortization Event will occur, the Revolving Period will terminate as of such day and all unreinvested Principal Collections and all such Loss Amounts will be distributed as principal to Certificateholders on the immediately succeeding Distribution Date. For further details concerning the application of Principal Collections and Loss Amounts, see "Summary -- Amortization Period; Principal Payments", "Risk Factors -- Reimbursement of Loss Amounts", "The Trust and the SUBI -- The SUBI" and "Description of the Certificates -- Distributions on the Certificates -- Application and Distributions of Principal -- Revolving Period". The Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Origination Trust's portfolio of lease contracts and related vehicles that are not allocated to (or reserved for allocation to) any Other SUBI, based on the same criteria as are applicable to the Initial Contracts and the other criteria described under "The Con- tracts -- Representations, Warranties and Covenants". The reinvestment of Principal Collections (and reimbursement of Loss Amounts) will be made in the available lease contracts with the earliest origination dates, except that certain lease contracts booked from February 28, 1997 through April 7, 1997 shall be reserved for allocation to the SUBI and will be used first, and if allocations are being made in respect of any one or more previous Other SUBIs at the same time out of the Origination Trust's general pool of unreserved lease contracts, reinvestment will be made first in respect of such previous Other SUBI(s). For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract (including any payment in respect of the related Leased Vehicle, but other than any payment as to which a Loss Amount has been realized and allocated during any prior Collection Period), discounted to the extent required below. A "Collection Period" will be each calendar month (or, with respect to the first Collection Period, the months of March and April 1997). For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than 9.25% (each, a "Discounted Contract") will be discounted at a rate of 9.25%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Certificateholders. "Collections" with respect to any Collection Period will include all net collections collected or received in respect of the Contracts and Leased Vehicles during such Collection Period other than Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy, such as Monthly Payments (including amounts in the SUBI Collection Account that previously constituted Payments Ahead but which represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds (including amounts withdrawn from the Residual Value Surplus Account to offset certain Residual Value Losses in respect of Leased Vehicles relating to Matured Contracts and certain Matured Leased Vehicle Expenses, but not including any Residual Value Surplus deposited into the Residual Value Surplus Account in respect of such Collection Period), Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds and any Undistributed Transferor Excess Collections in respect of the immediately preceding Collection Period, less an amount equal to the sum of (i) Payments Ahead with respect to one or more future Collection Periods, (ii) amounts paid to the Servicer in respect of outstanding Advances and (iii) Additional Loss Amounts in respect of such Collection Period. In addition, if such Collection Period occurs during the Revolving Period, amounts otherwise payable to the Certificateholders on the related Distribution Date as reimbursement of Loss Amounts allocable to the Investor Interest (as described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest") will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. "Interest Collections" with respect to any Collection Period generally will equal the amount by which Collections exceed Principal Collections. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses. Amortization Period; Principal Payments....... The "Amortization Period" will commence on the earlier of May 1, 1998 (the "Amortization Date") or the day on which an Early Amortization Event occurs, and will end when each Class of Certificates has been paid in full and all Certificate Principal Loss Amounts and Class B Certificate Principal Carryover Shortfalls, if any, have been repaid in full, together with accrued interest thereon, or when the Trust otherwise terminates. During the Amortization Period, Principal Collections and certain reimbursed Loss Amounts will no longer be reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. Instead, on each Distribution Date beginning with the Distribution Date in the month following the month in which the Amortization Period commences and ending on the Distribution Date on which the Class A-3 Certificates have been paid in full, all Principal Collections for the related Collection Period that are allocable to the Investor Interest will be distributed as principal payments first to the Class A-1 Certificateholders until the Class A-1 Certificates have been paid in full, second, to the Class A-2 Certificateholders until the Class A-2 Certificates have been paid in full, third, to the Class A-3 Certificateholders until the Class A-3 Certificates have been paid in full and thereafter the Class A Percentage and the Class B Percentage of any remaining such Principal Collections will be distributed as principal payments to the Class A-4 Certificateholders and to the holders of record of the Class B Certificates (the "Class B Certificateholders" and, together with the Class A Certificateholders, the "Certificateholders"), respectively. On each Distribution Date after the Class A-3 Certificates have been paid in full, the Class A Percentage and the Class B Percentage of Principal Collections for the related Collection Period allocable to the Investor Interest will be distributed to the Class A-4 Certificateholders and the Class B Certificateholders, respectively, until the related Class of Certificates has been paid in full. Certain Loss Amounts incurred during the Amortization Period will be reimbursed to the Certificateholders as described below. The "Class A Percentage" will mean the Class A Certificate Balance immediately after the Class A-3 Certificates have been paid in full, as a percentage of the Certificate Balance at such time, and the "Class B Percentage" will mean the Class B Certificate Balance immediately after the Class A-3 Certificates have been paid in full, as a percentage of the Certificate Balance at such time. The Class A Percentage and the Class B Percentage will not change after they are set. In no event will the principal distributed in respect of any Class of Certificates exceed its Certificate Balance. In addition, under certain circumstances, (i) Class A Certificateholders will be entitled to receive reimbursement of an allocable percentage of Loss Amounts as a distribution of principal from sources other than Principal Collections and (ii) principal allocable to the Class B Certificates may instead be distributed in respect of Loss Amounts allocable to the Class A-4 Certificates, Class A-4 Certificate Principal Loss Amounts and accrued and unpaid interest thereon, as described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest", "-- Application and Distributions of Principal" and "Risk Factors -- Reimbursement of Loss Amounts". See "Description of the Certificates -- Early Amortization Events" for a description of the events that might lead to the commencement of the Amortization Period prior to the Amortization Date. During the Amortization Period, the amount of Principal Collections allocable to the Investor Interest in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period allocable to the SUBI Interest multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Certificate Balance and the denominator of which is 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Certificates -- The SUBI -- The Contracts", as of the last day of the last Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. See "Description of the Certificates -- Calculation of Investor Percentage and Transferor Percentage" for a description of calculation of the Investor Percentage relating to Interest Collections and Loss Amounts. Allocations based upon the Principal Allocation for Principal Collections during the Amortization Period may result in distributions of principal with respect to a Collection Period during the Amortization Period to Certificateholders in amounts that are greater relative to the declining balance of the Certificate Balance than would be the case if no fixed Investor Percentage were used to determine the percentage of Principal Collections distributed in respect of the Certificates. Additionally, to the extent that on any Distribution Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period allocable to the SUBI Interest remains after required distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Reserve Fund Cash Requirement. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of 0.25%, (ii) 99.8% and (iii) the Aggregate Net Investment Value as of the last day of such Collection Period (the "Accelerated Principal Distribution Amount"), will be distributed as an additional payment of principal to the Certificateholders in the same manner and priority as principal is distributed in respect of the Certificates as described in the preceding paragraphs. See "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest" and "Security for the Certificates -- The Accounts -- The SUBI Collection Account -- Withdrawals from the SUBI Collection Account" for further information regarding the foregoing matters. Optional Purchase.......... The Certificates will be subject to purchase at the option of the Transferor on any Distribution Date if, either before or after giving effect to any payment of principal required to be made on such Distribution Date, the Certificate Balance has been reduced to an amount less than or equal to 10% of the Initial Certificate Balance, at a purchase price determined as described under "Description of the Certificates -- Termination of the Trust; Retirement of the Certificates". Security for the Certificates............... The security for the Certificates will consist primarily of the following: A. The SUBI.............. The SUBI will evidence a beneficial interest in the SUBI Assets. The Origination Trust was created pursuant to a trust agreement (the "Origination Trust Agreement"), among ALFI L.P., as grantor and initial beneficiary, the Origination Trustee and First Bank, as trust agent (in such capacity, the "Trust Agent"). The SUBI Interest will be evidenced by a certificate (the "SUBI Certificate") evidencing a 99.8% beneficial interest in the SUBI Assets that will be issued by the Origination Trust pursuant to a supplement to the Origination Trust Agreement dated as of May 1, 1997 (the "SUBI Supplement" and, together with the Origination Trust Agreement, the "SUBI Trust Agreement"). The Trustee will be a third party beneficiary of the SUBI Trust Agreement. The Transferor will permanently hold the Retained SUBI Interest, representing the 0.2% beneficial interest in the SUBI Assets not evidenced by the SUBI Certificate. The Origination Trust Assets evidenced by the SUBI will primarily include the Contracts and the Leased Vehicles. The SUBI will not evidence an interest in any Origination Trust Assets other than the SUBI Assets, and payments made on or in respect of all other Origination Trust Assets will not be available to make payments on the Certificates. For more information regarding the SUBI, see "The Trust and the SUBI" and "The Origination Trust". 1. The Contracts......... The Contracts will consist of a pool of retail closed-end lease contracts originated by Dealers located throughout the United States, each of which will have an original term of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price), plus an implicit rate in each Lease calculated as an annual percentage rate (the "Lease Rate") on a constant yield basis. The Contracts will provide for equal monthly payments (the "Monthly Payments") such that at the end of the related Contract term such capitalized cost will have been amortized to an amount equal to the residual value of the related Leased Vehicle established at the time of origination of such Contract (the "Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of 51,898 lease contracts. As of the Initial Cutoff Date, the Lease Rate of the Initial Contracts ranged from 2.14% to 12.95%, with a weighted average Lease Rate of 8.30%. The aggregate of the original principal balances of the Initial Contracts as of their respective dates of origination was $1,269,396,602. As of the Initial Cutoff Date, the aggregate Outstanding Principal Balance of the Initial Contracts was $1,227,193,400, the aggregate Residual Value of the Initial Leased Vehicles was $804,381,005 and the Initial Contracts had a weighted average original term of 40.99 months and a weighted average remaining term to scheduled maturity of 36.98 months. See "The Contracts" for further information regarding the Initial Contracts. The Initial Contracts were, and the Subsequent Contracts will be, identified by the Servicer from the Origination Trust's portfolio of lease contracts originated by Dealers located throughout the United States that are not evidenced by (or reserved for allocation to) any Other SUBI, based upon the criteria specified in the SUBI Trust Agreement and described under "The Contracts -- Characteristics of the Contracts" and "-- Representations, Warranties and Covenants". The "Aggregate Net Investment Value" as of any day will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than two full Collection Periods (the "Matured Leased Vehicle Inventory") and (iii) during the Revolving Period, the amount of Principal Collections and Loss Amounts that otherwise would be reimbursed to the Certificateholders, if any, that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The "Discounted Principal Balance" of (i) a Discounted Contract will equal its Outstanding Principal Balance, discounted by 9.25%, and (ii) all Contracts other than Discounted Contracts will equal their Outstanding Principal Balance. As of the Initial Cutoff Date, the aggregate Discounted Principal Balance of the Initial Contracts and the Aggregate Net Investment Value was $1,199,477,720. 2. The Leased Vehicles... The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will be either new vehicles, dealer demonstrator vehicles or manufacturers' program vehicles, as described under "The Contracts -- General". Manufacturers' program vehicles are vehicles which have been sold directly by manufacturers to rental car companies and returned to the manufacturer for resale. The certificates of title to the Initial Leased Vehicles have been, and the certificates of title to the Subsequent Leased Vehicles will be, registered at all times in the name of the Origination Trustee (in its capacity as trustee of the Origination Trust). Such certificates of title will not reflect the indirect interest of the Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI. Therefore, if the Class A Certificates were recharacterized as secured loans, the Trustee would not have a perfected lien in the Leased Vehicles, although it would be deemed to have a perfected security interest in the SUBI Certificate and the Contracts and certain related rights. For further information regarding the titling of the Leased Vehicles and the interest of the Trustee therein, see "The Origination Trust -- Contract Origination; Titling of Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles -- Back-up Security Interests". B. The Accounts.......... The Origination Trustee will maintain the SUBI Collection Account and the Residual Value Surplus Account for the benefit of the holders of interests in the SUBI. Within two Business Days of receipt, payments made on or in respect of the Contracts or the Leased Vehicles generally will be deposited by the Servicer into the SUBI Collection Account. Such payments will include, but will not be limited to, Monthly Payments made by lessees, Monthly Payments determined by the Servicer to be due in one or more future Collection Periods (each, a "Payment Ahead"), Prepayments, proceeds from the sale or other disposition of Leased Vehicles relating to Matured Contracts (including payments for excess mileage and excess wear and use, but excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) ("Matured Leased Vehicle Proceeds"), proceeds received in connection with the sale or other disposition of Leased Vehicles that have been repossessed ("Repossessed Vehicle Proceeds") and other amounts received in connection with the realization of the amounts due under any Contract (excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), either from amounts on deposit in the SUBI Collection Account or, to the extent described herein, the Residual Value Surplus Account, or as a deduction from Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds or other Liquidation Proceeds, as appropriate, deposited into the SUBI Collection Account. For further details regarding these deposits and reimbursements, see "Security for the Certificates -- The Accounts -- The SUBI Collection Account" and "-- The Residual Value Surplus Account". On the Business Day immediately preceding each Distribution Date (each, a "Deposit Date"), the following amounts will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) Reallocation Payments by World Omni (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred and (iii) certain amounts in respect of the Residual Value of Leased Vehicles relating to Matured Contracts withdrawn from the Residual Value Surplus Account. Thereafter, 99.8% of Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, 99.8% of Principal Collections) on deposit in the SUBI Collection Account in respect of the related Collection Period will be allocable to the SUBI Interest and deposited into the Distribution Account maintained with the Trustee for the benefit of the Certificateholders and the Transferor. Any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy will be deposited into the SUBI Collection Account (if it relates to the Revolving Period) or the Distribution Account (if it relates to the Amortization Period) within one Business Day of receipt by the Servicer. Any Required Amount will be withdrawn from the Reserve Fund and deposited into the Distribution Account on each Distribution Date. All payments to Certificateholders will be made from the Distribution Account. The remaining 0.2% of Collections will be distributed on such Distribution Date to the Transferor in respect of the Retained SUBI Interest, which amounts in no event will be available to make payments on the Certificates. Any funds remaining in the Distribution Account on a Distribution Date in respect of the related Collection Period following the payment of amounts required to be paid therefrom generally will be paid to the Transferor. For further information regarding these deposits and payments, see "Security for the Certificates -- The Accounts -- The Distribution Account" and "-- The SUBI Collection Account". On each Deposit Date, if Matured Leased Vehicle Proceeds received during the related Collection Period with respect to Leased Vehicles relating to Matured Contracts that were sold or otherwise disposed of during such Collection Period, net of related Matured Leased Vehicle Expenses incurred during such Collection Period ("Net Matured Leased Vehicle Proceeds"), exceed the aggregate Residual Value of the related Leased Vehicles (the "Residual Value Surplus"), then such excess will be deposited into the Residual Value Surplus Account maintained with the Origination Trustee for the benefit of holders of interests in the SUBI. On each Deposit Date, funds on deposit in the Residual Value Surplus Account, if any, will be withdrawn and deposited into the SUBI Collection Account up to an amount equal to the sum of (a) the aggregate of the Residual Values of those Leased Vehicles that were a part of Matured Leased Vehicle Inventory but that had remained unsold and not otherwise disposed of for at least two full Collection Periods as of the last day of the most recent Collection Period, (b) the amount by which Net Matured Leased Vehicle Proceeds (after application of amounts withdrawn pursuant to the next sentence) for the related Collection Period are less than the aggregate of the Residual Values of all Leased Vehicles included in Matured Leased Vehicle Inventory that were sold or otherwise disposed of during such Collection Period and (c) any losses on Contracts terminated on or prior to their Maturity Dates during the related Collection Period by agreement between the Servicer and the lessee in connection with the payment of less than their respective Outstanding Principal Balances. Also on each Deposit Date, funds on deposit in the Residual Value Surplus Account will be withdrawn and paid to the Servicer in reimbursement for any Matured Leased Vehicle Expenses incurred during such Collection Period, but only to the extent that, after such reimbursement (but exclusive of any other reimbursement from any other source), Net Matured Leased Vehicle Proceeds would be no more than the aggregate of the Residual Values of all Leased Vehicles sold or otherwise disposed of during such Collection Period. For further information regarding the Residual Value Surplus Account, see "Security for the Certificates -- The Accounts -- The Residual Value Surplus Account". C. The Residual Value Insurance Policy...... Automobile and light duty truck leasing companies such as World Omni sometimes obtain residual value insurance to minimize losses in respect of the residual values of leased vehicles. Although many forms of such insurance are available, in general, claims are made if the proceeds of the sale of a leased vehicle are less than its residual value established at the time of origination of the related closed-end lease contract. On the Closing Date, American International Specialty Lines Insurance Company ("AISLIC"), an indirect subsidiary of American International Group, Inc. ("AIG"), will issue an insurance policy (the "Residual Value Insurance Policy") to the Transferor (with the Origination Trustee, the Trustee, the Servicer and ALFI L.P. also named as insureds), which will provide coverage for the Insured Residual Value Loss Amount for any Collection Period. The aggregate maximum amount payable under the Residual Value Insurance Policy with respect to any Leased Vehicle will be the lesser of $60,000 and its insured residual value, calculated as described under "Security for the Certificates -- The Residual Value Insurance Policy". Additionally, the aggregate maximum amount payable under the Residual Value Insurance Policy will not exceed the aggregate insured residual values of all Leased Vehicles. Prior to each Distribution Date, the Servicer will make a claim for any Insured Residual Value Loss Amount under the Residual Value Insurance Policy. The proceeds of any such claim will be used to make the payments described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest". For a fuller description of these mechanics, see "Security for the Certificates -- The Residual Value Insurance Policy". The "Insured Residual Value Loss Amount" for any Collection Period will be the lesser of (i) the Investor Percentage of the Residual Value Loss Amount allocable to the SUBI Interest, and (ii) any shortfall in the amount required to make all payments (other than deposits into the Reserve Fund) required to be made on the related Distribution Date that are described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest", after application of the Investor Percentage of Interest Collections allocable to the SUBI Interest and Transferor Amounts otherwise payable in respect of the Transferor Interest, as described below under "Summary -- Security for the Certificates -- Subordination of the Transferor Interest". D. The Reserve Fund...... The Trust will have the benefit of the Reserve Fund maintained with the Trustee for the benefit of the Certificateholders and the Transferor (as holder of the Transferor Interest). The Reserve Fund is designed to provide additional funds for the benefit of the Certificateholders in the event that on any Distribution Date Interest Collections allocable to the Investor Interest for the related Collection Period, plus Transferor Amounts otherwise distributable in respect of the Transferor Interest, plus any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy for the related Collection Period, are insufficient to pay, among other things, the sum of (i) accrued interest and any overdue interest (with interest thereon) at the applicable Certificate Rate on the Certificates on such Distribution Date, (ii) any Loss Amount for such Collection Period allocable to the Investor Interest, calculated as described under "Description of the Certificates -- Calculation of Investor Percentage and Transferor Percentage", and (iii) any unreimbursed Certificate Principal Loss Amounts, together with interest thereon at the applicable Certificate Rate. Monies on deposit in the Reserve Fund also will be available to Certificateholders should Collections ultimately be insufficient to pay in full any Class of Certificates. For further information regarding the Reserve Fund, see "Security for the Certificates -- The Accounts -- The Reserve Fund". The Reserve Fund will be created with an initial deposit by the Transferor of $11,970,788 (the "Initial Deposit") (which amount will equal 1.0% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). On each Distribution Date, the funds in the Reserve Fund will be supplemented by (i) certain Interest Collections, as more fully described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest", (ii) income realized on the investment of amounts on deposit in the Reserve Fund and (iii) in certain circumstances, the deposit of monies in respect of the related Collection Period remaining in the Distribution Account after making all payments required to be made therefrom on such Distribution Date prior to such deposit, including monies that would otherwise be distributed or applied in respect of the Transferor Interest, until the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement then in effect, calculated as described under "Security for the Certificates -- The Accounts -- The Reserve Fund -- The Reserve Fund Cash Requirement". The Transferor may be required under certain circumstances to deposit funds into the Reserve Fund in an amount equal to certain Reserve Fund supplemental requirements. For a description of the circumstances under which the Transferor will be required to make such deposits, see "Security for the Certificates -- The Accounts -- The Reserve Fund". For further information regarding deposits into the Reserve Fund, see "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest". After giving effect to all payments from the Reserve Fund on a Distribution Date, monies on deposit therein that are in excess of the Reserve Fund Cash Requirement generally will be paid to the Transferor, free and clear of any lien of the Trust. E. Subordination of the Transferor Interest... The Transferor Interest will initially equal $23,941,575, and will represent the interest in the Trust not represented by the Investor Interest. However, to provide additional credit enhancement for the Certificates, on each Distribution Date, no payments will be made to the Transferor in respect of the Transferor Interest until all payments required to be made on such Distribution Date that are described under "Description of the Certificates -- Distributions on the Certificates -- Distributions of Interest" have been made and the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement. For a description of certain payments made to the Transferor, see "Description of the Certificates -- Certain Payments to the Transferor". Advances................... On each Deposit Date the Servicer will be obligated to make, by deposit into the SUBI Collection Account, an advance equal to the aggregate Monthly Payments due but not received during the related Collection Period with respect to Contracts that are 31 days or more past due as of the end of such Collection Period, and the Servicer may (but shall not be required to) make such an advance with respect to Contracts that are one or more days, but less than 31 days, past due as of the end of such Collection Period (each, an "Advance"). The Servicer will not be required to make any Advance to the extent that it determines that such Advance may not be ultimately recoverable by the Servicer from Net Liquidation Proceeds or otherwise. For further information regarding Advances, see "Additional Document Provisions -- The Servicing Agreement -- Advances". Servicing Compensation..... The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets allocable to the SUBI Interest (the "Servicing Fee"), payable on each Distribution Date, equal to one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Distribution Date, one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees and other administrative fees or similar charges under the Contracts. For further information regarding Servicer compensation, see "Additional Document Provisions -- The Servicing Agreement -- Servicing Compensation". Tax Status................. Brown & Wood LLP, special federal income tax counsel to the Transferor and counsel for the Underwriters, is of the opinion that the Class A Certificates will be characterized as indebtedness for federal income tax purposes, as described under "Material Income Tax Considerations -- Federal Taxation". Each Class A Certificateholder, by its acceptance of a Class A Certificate, and each Certificate Owner, by its acquisition of an interest in the Class A Certificates, will agree to treat the Class A Certificates as indebtedness for federal, state and local income tax purposes. Prospective investors are advised to consult their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of Class A Certificates, and the tax consequences arising under the laws of any state or other taxing jurisdiction. For further information regarding material federal income tax considerations with respect to the Class A Certificates, see "Material Income Tax Considerations -- Federal Taxation". ERISA Considerations....... As more fully described under "ERISA Considerations", an employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the provisions of Section 4975 of the Internal Revenue Code of 1986, as amended, contemplating the purchase of Class A Certificates should consult its counsel before making a purchase, and the fiduciary of such plan and such legal advisors should consider the application of the ERISA prohibited transaction exemption described herein. Ratings.................... It is a condition of issuance of the Class A Certificates that each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") rates each Class of Class A Certificates in its highest rating category. The ratings of the Class A Certificates should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold the related Class A Certificates, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The ratings of the Class A Certificates address the likelihood of the payment of principal of and interest on the Class A Certificates pursuant to their terms. For further information concerning the ratings assigned to the Class A Certificates, including the limitations of such ratings, see "Ratings of the Class A Certificates".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029753_vistana_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029753_vistana_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cb006b09d331e6191ac14e6e2a4b429b12ba08ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029753_vistana_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Combined Financial Statements of Vistana, Inc. included elsewhere in this Prospectus. Except where otherwise indicated, the information contained in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment options; (ii) assumes that any outstanding options to purchase Common Stock, par value $.01 per share, of Vistana, Inc. have not been exercised; and (iii) assumes Vacation Ownership Interests (as defined herein) are presented on an annual, as opposed to an alternate-year, basis. See "--The Resorts." Unless the context otherwise requires, the "Company" means Vistana, Inc., its consolidated subsidiaries, its corporate and partnership predecessors, partnerships in which the Company owns a controlling interest and, following the Acquisition (as defined herein), Success and Points (as defined herein). Unless otherwise indicated, all vacation ownership industry data contained herein is derived from information prepared by the American Resort Development Association ("ARDA"), the industry's principal trade association. Statements in this Prospectus, including statements contained in the "Prospectus Summary--Growth Strategy," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Business--Growth Strategies," and "Business--Participation in Vacation Ownership Interest Exchange Networks" sections regarding the Company's prospective business opportunities, financial performance and expansion plans, are forward-looking statements that involve substantial risks and uncertainties. Such forward-looking statements include, without limitation, (i) the strategy to improve operating margins, (ii) the plan to develop and sell additional resorts, (iii) the intention to acquire additional land for the expansion of existing resorts and for the development of future resorts, (iv) the anticipation of when construction will commence for existing and future vacation resorts, (v) the plan to develop future PGA of America (as defined herein) and Promus (as defined herein) affiliated resorts, and (vi) statements relating to the Company or its operations that are preceded by terms such as "anticipates," "believes," "intends," "expects" and similar expressions. In accordance with the Private Securities Litigation Reform Act of 1995, the following are important risk factors that could cause the Company's actual results, performance or achievements to differ materially from those implied by such forward-looking statements: The Company lacks experience in certain of the markets where it has purchased land and is developing vacation ownership resorts. The Company is subject to significant competition from other entities in the leisure and vacation industry. The Company's success depends to a significant extent on its ability to hire, train and retain qualified employees. The Company's indebtedness and related service obligations may increase its vulnerability to adverse economic conditions. Prospective investors should consider the "Risk Factors" section in this Prospectus for other factors that may cause actual results to differ materially from the forward-looking statements. THE COMPANY Founded in 1980, the Company is a leading developer and operator of high quality timeshare resorts in the United States. The Company's principal operations consist of (i) acquiring, developing and operating timeshare resorts, also known as vacation ownership resorts; (ii) marketing and selling vacation ownership interests in its resorts, which typically entitle the buyer to ownership of a fully-furnished unit for a one-week period on either an annual or an alternate-year basis ("Vacation Ownership Interests"); and (iii) providing financing to its customers for their purchase of Vacation Ownership Interests at the Company's vacation ownership resorts. The Company's pro forma total revenues for the year ended December 31, 1996 and the nine months ended September 30, 1997 were approximately $113 million and $119 million, respectively. The Company's pro forma net income for the year ended December 31, 1996 and the nine months ended September 30, 1997 was approximately $10.0 million and $11.6 million (before extraordinary item), respectively. See "-- Summary Combined Historical and Pro Forma Financial Information of the Company." The Company currently operates and sells Vacation Ownership Interests at six vacation ownership resorts. Three of these resorts are in Florida (Vistana Resort in Orlando, Hampton Vacation Resort--Oak Plantation in Kissimmee, and Vistana's Beach Club on Hutchinson Island), two in Colorado (Eagle Point in Vail and Falcon Point in Avon) and one in Arizona (Villas of Cave Creek located north of Scottsdale). As of September 30, 1997, these resorts represented a combined total of 1,630 existing units (an aggregate of 89,486 sold and unsold Vacation Ownership Interests) and a combined total of 398 planned units (20,298 Vacation Ownership Interests) of which 95 were under construction. The Company has four new resorts under development. These resorts (Embassy Vacation Resort--Myrtle Beach in South Carolina with 44 units under construction and pre-construction sales underway, Vistana Resort at World Golf Village near St. Augustine, Florida with 102 units under construction, PGA Vacation Resort by Vistana in Port St. Lucie, Florida with construction of 40 units scheduled to commence in early 1998 and Embassy Vacation Resort--Scottsdale with construction of a minimum of 40 units scheduled to commence during the first quarter of 1998) are anticipated to add approximately 226 units (11,526 Vacation Ownership Interests) to the Company's selling capacity during 1998. In addition, the Company acts as exclusive sales and marketing agent for The Christie Lodge, a large vacation ownership resort in Avon, Colorado. During its 17-year history, the Company has sold in excess of $600 million of Vacation Ownership Interests and has developed an ownership base of over 60,000 Vacation Ownership Interest owners residing in more than 100 countries. The Company was the first to open a vacation ownership resort in the Orlando, Florida market, which has become one of the largest vacation ownership resort markets in the world in terms of Vacation Ownership Interests sold. Raymond L. Gellein, Jr., the Company's Chairman and Co-Chief Executive Officer, and Jeffrey A. Adler, its President and Co-Chief Executive Officer, have been employed by the Company since 1980 and 1983, respectively. Additionally, Messrs. Gellein and Adler serve as the chairman of the Florida chapter of ARDA and as a director of ARDA, respectively. Under their direction, the Company has fostered a values-driven business culture that emphasizes excellence and quality relationships with its employees, customers and business partners. The quality and customer appeal of the Company's vacation ownership resorts have been recognized through industry awards and by several leading travel publications. At September 30, 1997, the Company's flagship resort, Vistana Resort in Orlando, Florida, contained 1,175 units developed in eight phases on a 135-acre landscaped complex featuring swimming pools, tennis courts, restaurants and other recreational amenities. In 1995 and 1996, Conde Nast Traveler magazine selected Vistana Resort as a "Gold List" resort, the only vacation ownership resort to be included as one of the top 500 resorts in the world. Similarly, the most recent Zagat Survey of U.S. Hotels, Resorts & Spas ranked Vistana Resort as one of the top resorts in Orlando, commenting that it contains the "most luxurious villas in Orlando." Each of the Company's existing Florida-based resorts is rated as a Gold Crown resort by Resort Condominiums International ("RCI"), and the Villas of Cave Creek and Falcon Point Resort are rated as Five Star Resorts by Interval International ("II"). Two of the Company's resorts under development, Vistana Resort at World Golf Village and the Embassy Vacation Resort--Myrtle Beach, have received the Gold Crown designation from RCI prior to their official openings. In 1996, approximately 13% of the resorts reviewed by RCI received a Gold Crown rating, the highest rating awarded by RCI, and approximately 18% of the resorts reviewed by II received a Five Star rating, the highest rating awarded by II. As part of its operating strategy, the Company seeks to develop strategic relationships with selected parties in order to broaden and enhance its marketing and sales efforts and to provide additional vacation ownership resort development opportunities. In furtherance of this strategy, as described below, the Company has entered into (i) an exclusive joint venture agreement with Promus Hotels, Inc. ("Promus"), a leading hotel company in the United States; (ii) a long-term affiliation agreement with a subsidiary of The Professional Golfers' Association of America ("PGA of America"); and (iii) a limited partnership (in which the Company is the general partner) which has the exclusive right to develop and market Vacation Ownership Interests at World Golf Village. The Company intends to continue to expand existing and develop new strategic alliances that will create opportunities to develop unique, high quality vacation ownership resorts and further broaden and enhance its marketing and sales efforts. GROWTH STRATEGIES The Company's goal is to expand its position as a leading developer and operator of vacation ownership resorts by (i) continuing sales at the Company's existing resorts; (ii) developing and selling additional resorts; (iii) improving operating margins; and (iv) pursuing selected acquisition opportunities. To achieve this goal, the Company intends to adhere to its core operating strategies of obtaining extensive access to qualified buyers, promoting sales and marketing excellence and delivering memorable vacation experiences to its owners and guests. Continuing Sales at the Company's Existing Resorts. The Company sold 8,628 Vacation Ownership Interests (including 517 Vacation Ownership Interests at The Christie Lodge) during the nine months ended September 30, 1997 at existing resort properties, generating $85.2 million in Vacation Ownership Interest sales, on a pro forma basis. The Company intends to continue to market its existing inventory of Vacation Ownership Interests and to make available for sale, based on consumer demand, additional Vacation Ownership Interests through expansion of certain of the Company's existing vacation ownership resorts. At September 30, 1997, the inventory of unsold Vacation Ownership Interests at existing resorts was 15,570. The Company intends to maintain its position as a leader in the Orlando vacation ownership market (a popular vacation destination with over 36 million visitors annually) by developing and selling an additional 364 units at Vistana Resort (representing an additional 18,564 Vacation Ownership Interests), of which 95 units (representing 4,845 Vacation Ownership Interests) are currently under construction. In addition, the Company plans to continue sales at the Hampton Vacation Resort--Oak Plantation, a 242-unit former apartment complex located in the Orlando market, which the Company is converting in phases into a vacation ownership resort. This property is owned by a partnership in which the Company holds an approximate 67% controlling ownership interest. As of September 30, 1997, the Hampton Vacation Resort--Oak Plantation had an unsold inventory of approximately 11,403 Vacation Ownership Interests. The Company added resorts in Arizona and Colorado in September 1997 as a result of the acquisition of Success and Points. It plans to continue sales of existing inventory at these resorts and to expand these resorts where land is available. At the Company's 58-unit Falcon Point Resort, located in Avon, Colorado, 337 Vacation Ownership Interests remained for sale at September 30, 1997, with an additional 24 units (representing 1,224 Vacation Ownership Interests) planned for future development. At the Company's 54-unit Eagle Point Resort, located in Vail, Colorado, 33 Vacation Ownership Interests remained available for sale at September 30, 1997. At the Company's 25-unit Villas of Cave Creek Resort, 621 Vacation Ownership Interests remained available for sale at September 30, 1997 with another 10 units (representing 510 Vacation Ownership Interests) planned for future development. Developing and Selling Additional Resorts. The Company intends to rely on its operating knowledge and strategic alliances to develop additional vacation ownership resorts, including the following projects currently in development: . Vistana Resort at World Golf Village. In the fall of 1996, the Company commenced construction of the 102-unit first phase (representing 5,202 Vacation Ownership Interests) of a 408-unit vacation ownership resort at World Golf Village. The first phase is expected to be completed in the second quarter of 1998. The centerpiece of a planned community near St. Augustine, Florida, World Golf Village is a destination resort which will contain the World Golf Hall of Fame, championship golf courses, a golf academy, a hotel and convention center, restaurants, retail facilities and related amenities which are being developed by others. The Company holds a 37.5% controlling ownership interest in a limited partnership which has the exclusive right to develop and market Vacation Ownership Interests at World Golf Village. The Company believes that World Golf Village and the golf industry in general represent attractive opportunities for Company expansion and the development of future vacation ownership resorts. . Embassy Vacation Resort--Myrtle Beach. In December 1996, the Company acquired an initial 14 acres of unimproved land in Myrtle Beach, South Carolina for the development of the Embassy Vacation Resort--Myrtle Beach. The Company also has an option until December 31, 2003 to acquire up to 26 additional acres of contiguous property for phased expansion of this resort. The Company began pre-sales in May 1997 and commenced construction of the 44-unit first phase (representing 2,244 Vacation Ownership Interests) of a 550-unit vacation ownership resort during the third quarter of 1997. The first phase is expected to be completed in the first quarter of 1998. The Company believes Myrtle Beach represents an attractive, growing market for the expansion of its portfolio of vacation ownership resorts. Similar to Orlando, Myrtle Beach has a large number of visitors whose length of stay averages approximately five days. Consistent with its key operating strategies, the Company has procured substantial marketing affiliations with significant tourist venues in the Myrtle Beach area. . PGA Vacation Resort by Vistana. The Company is the exclusive vacation ownership development company of the PGA of America. In September 1997, the Company acquired 25 acres of land adjacent to an existing 36-hole championship golf facility owned by a subsidiary of PGA of America in Port St. Lucie, Florida. The property, located approximately 40 miles north of Palm Beach Gardens, Florida, is planned to contain approximately 387 units (representing a total of 19,737 Vacation Ownership Interests). The 40-unit first phase (representing 2,040 Vacation Ownership Interests) is expected to be completed during the fourth quarter of 1998. The Company believes that PGA of America, through its approximately 20,000 affiliated golf professionals and the Company's license to use the PGA of America name, initials, trademark and logo, will provide strategic marketing opportunities for the Port St. Lucie vacation ownership resort and any future PGA Vacation Resorts developed by the Company. See "Business--Affiliation with PGA of America." . Embassy Vacation Resort--Scottsdale. The Embassy Vacation Resort-- Scottsdale will consist of an estimated 150 units, representing 7,650 Vacation Ownership Interests, and will be constructed by the Company on approximately 10 acres of land which the Company recently acquired near the TPC Scottsdale golf course. The Company anticipates that it will commence construction during the first quarter of 1998. The Scottsdale property will be operated as an Embassy Vacation Resort franchise pursuant to the Promus Agreement (as defined herein). . Promus Relationship. In December 1996, the Company and Promus entered into an exclusive five-year agreement (the "Promus Agreement") to jointly acquire, develop, market and operate vacation ownership resorts in North America. The Company believes it will benefit from Promus' strong brand recognition, large customer base, marketing capabilities and hospitality management expertise. Subject to certain exceptions, the Promus Agreement precludes the Company from acquiring or developing vacation ownership resorts with any other multi-hotel brand. Promus has agreed that the Company will be the sole franchisee in North America of the Hampton Vacation Resort and the Homewood Vacation Resort brands, and one of only two franchisees in North America of the Embassy Vacation Resort brand. The Company currently operates the Hampton Vacation Resort--Oak Plantation, is developing the Embassy Vacation Resort--Myrtle Beach and intends to develop the Embassy Vacation Resort--Scottsdale, in each case under a franchise arrangement. The Company and Promus have agreed on six markets in which the Company and Promus will focus their joint venture efforts. These six markets consist of three coastal areas of Florida (including portions of the southeastern and western coasts of Florida and the Panhandle); the coastal region between Jacksonville, Florida and Myrtle Beach, South Carolina; Phoenix and Scottsdale, Arizona; and Palm Springs and Palm Desert, California. The Company intends to franchise and/or jointly develop additional vacation ownership resorts under the Hampton Vacation Resort and the Embassy Vacation Resort brand names in the future and may exercise its right to develop vacation ownership resorts under the Homewood Vacation Resort name either jointly or as a franchise. The Company and Promus are actively evaluating locations for the joint development of vacation ownership resorts; however, at this time no firm commitments exist for any joint venture resorts. See "Business--Affiliation with Promus." . Vistana Branded Resorts. To capitalize on the Vistana brand and reputation, the Company intends to seek other vacation ownership resort development opportunities, including resorts affiliated with unique, non- multi-hotel brand hotel properties, in selected vacation markets where, among other things, it believes it can obtain effective marketing access to potential customers. In furtherance of this strategy, the Company recently entered into an agreement with the operator of a non-multi-hotel brand resort which contemplates the formation of a joint venture to develop, construct, market and operate a vacation ownership resort in the Caribbean region which would be the Company's first resort outside the United States. If the joint venture is formed and development of the planned resort is commenced, the Company currently estimates that it will be required to make an initial equity investment of approximately $5 million in this project. There can be no assurance, however, that the joint venture will be formed, the contemplated resort will be constructed, or if constructed, that it will prove to be profitable. Each of the foregoing projects and agreements requires the Company to make substantial capital commitments and is subject to various risks, including risks related to availability of financing, construction and development activities, and the Company's ability to execute its sales and marketing strategies at new locations. See "Risk Factors." Improving Operating Margins. The Company intends to improve operating margins by reducing (i) its financing costs by entering into more favorable borrowing agreements and (ii) its general and administrative costs as a percentage of revenues. In furtherance of this intention, the Company has recently entered into new project financing and receivables financing at more favorable rates than it has historically enjoyed and is negotiating new credit facilities which, if established, will be on terms that management believes are favorable. See "Business--Growth Strategies--Improving Operating Margins." Pursuing Selected Acquisition Opportunities. The Company from time to time seeks opportunities to acquire vacation ownership assets and additional land upon which vacation ownership resorts may be expanded or developed. The Company is currently considering the acquisition of several additional land parcels for expansion of an existing resort and for the development of new resorts. The Company also from time to time evaluates the acquisition of operating companies that may be successfully integrated into the Company's existing operations and enhance the Company's sales, marketing and resort ownership. However, the Company currently has no contracts or capital commitments relating to any such acquisitions. Consistent with this strategy, on September 16, 1997, the Company completed the acquisition (the "Acquisition") of entities comprising The Success Companies, Success Developments, L.L.C. and Points of Colorado, Inc. (collectively, "Success and Points"), the developers of Eagle Point, Falcon Point and Villas of Cave Creek. The Company acquired the entire equity interest in Success and Points for a purchase price of approximately $24.0 million in cash and 638,444 shares of Common Stock of the Company. Delivery of 430,814 of such shares is contingent upon Success and Points achieving certain operating results for calendar years 1998 through 2000. As a result of the Acquisition, the Company recently acquired undeveloped land in Scottsdale, Arizona on which it is developing the Embassy Vacation Resort--Scottsdale. The Company believes Success and Points will serve as a strong foundation for sales, marketing and resort operations in the western region of the United States and will provide the Company with experience in direct marketing to consumers in Arizona and Colorado. As a result of the strategic relationships and operational expertise gained in the Acquisition, the Company believes it will be better able to identify other potential developments and acquisitions in Arizona, Colorado and other western states. Similarly, in order to enhance its sales and marketing operations, in November 1997, the Company acquired substantially all of the assets of three related entities engaged in the tour generation, guest services and marketing businesses in Florida. See "Business--Sales and Marketing." The Company has historically provided financing for approximately 93% of its customers, who are required to make a down payment of at least 10% of the Vacation Ownership Interest's sales price and generally pay the balance of the sales price over a period of seven years. The Company typically borrows from third-party lending institutions in order to finance its loans to Vacation Ownership Interest buyers. As of September 30, 1997, the Company had a portfolio of approximately 25,600 loans to customers totaling approximately $158.5 million, with an average contractual yield of 14.2% per annum (compared to the Company's weighted average cost of funds of 9.9% per annum). As of September 30, 1997 (i) approximately 3.2% of the Company's customer mortgages receivable were 60 to 120 days past due; and (ii) approximately 4.8% of the Company's customer mortgages receivable were more than 120 days past due and the subject of legal proceedings. In addition, as of such date, the Company's allowance for loss on customer mortgages receivable was approximately $11.6 million. During the nine months ended September 30, 1997, the Company charged approximately $4.4 million against such reserve (net of recoveries of related Vacation Ownership Interests). The Company also provides hospitality management, operations, maintenance and telecommunications services at its resorts. Pursuant to management agreements between the Company and the homeowners' associations at its existing resorts, the Company has the responsibility and authority for the day-to-day operation of these resorts. In addition, the Company also provides telecommunications design and installation services for third parties on a limited basis. THE RESORTS The following table sets forth certain information as of September 30, 1997 and for the nine months then ended regarding each of the Company's existing vacation ownership resorts, resorts under development and planned resorts (including existing and planned resorts acquired in the Acquisition), including location, the year sales of Vacation Ownership Interests commenced (or are expected to commence), the number of existing and total planned units, the number of Vacation Ownership Interests sold at each existing resort since its development by the Company and the number of Vacation Ownership Interests sold during the nine months ended September 30, 1997, the average sales price of Vacation Ownership Interests sold during the nine months ended September 30, 1997 and the number of Vacation Ownership Interests available for sale currently and after giving effect to planned expansion. The exact number of units ultimately constructed and Vacation Ownership Interests available for sale at each resort may differ from the following planned estimates based on, among other things, future land use, project development, site layout considerations and customer demand. In addition, the Company's construction and development of new vacation ownership resorts or additional units at its existing resorts (and sales of the related Vacation Ownership Interests) is dependent upon general economic conditions and other factors and may also be subject to delay as a result of certain circumstances, some of which are not within the Company's control. See "Risk Factors." <TABLE> <CAPTION> VACATION UNSOLD OWNERSHIP VACATION OWNERSHIP INTERESTS AVERAGE INTERESTS AT YEAR SALES UNITS AT RESORT SOLD(A) SALES RESORTS(A) COMMENCED/ --------------- ------------ PRICE ------------------- VACATION OWNERSHIP EXPECTED TO TOTAL IN CURRENT PLANNED RESORT LOCATION COMMENCE(B) CURRENT PLANNED TOTAL 1997 1997(A) INVENTORY EXPANSION - ------------------------ ------------------- ----------- ------- ------- ------ ----- ------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> EXISTING RESORTS: Vistana Resort (c) Orlando, Florida 1980 1,175 1,539 60,590 5,666(d) $10,341(d) 3,145 18,564 Vistana's Beach Hutchinson Island, Club (e) Florida 1989 76 76 3,925 76 $ 9,386 31 0 Hampton Vacation Resort--Oak Plantation (f) Kissimmee, Florida 1996 242 242 1,093 960 $ 7,609 11,403 0 Eagle Point Resort (g) Vail, Colorado 1987 54 54 3,813 289 $ 7,967 33 0 Falcon Point Resort (h) Avon, Colorado 1986 58 82 3,547 269 $11,149 337 1,224 Villas of Cave Creek (i) Cave Creek, Arizona 1996 25 35 922 825 $10,816 621 510 RESORTS UNDER DEVELOPMENT: Embassy Vacation Resort--Myrtle Beach Myrtle Beach, (j) South Carolina 1997 -- 550 26 26 $10,030 -- 28,050 Vistana Resort at World St. Augustine, Golf Village (k) Florida 1998 -- 408 -- -- -- -- 20,808 PGA Vacation Resort by Port St. Lucie, Vistana (l) Florida 1998 -- 387 -- -- -- -- 19,737 Embassy Vacation Scottsdale, Resort--Scottsdale (m) Arizona 1998 -- 150 -- -- -- -- 7,650 ----- ----- ------ ----- ------ ------ TOTAL 1,630 3,523 73,916 8,111 15,570 96,543 ===== ===== ====== ===== ====== ====== </TABLE> - -------- (a) The Company sells both annual Vacation Ownership Interests (entitling the owner to the use of a unit for a one-week period on an annual basis) and alternate-year Vacation Ownership Interests (entitling the owner to the use of a unit for a one-week period on an alternate-year basis) with respect to 51 weeks per unit per year, with one week reserved for maintenance of the unit. Accordingly, the Company is able to sell 51 annual Vacation Ownership Interests or 102 alternate-year Vacation Ownership Interests per unit (although historically sales at Eagle Point, Falcon Point and the Villas of Cave Creek have been based on 52 weeks per unit per year). For purposes of calculating Vacation Ownership Interests Sold and Average Sales Price in 1997, data with respect to Vacation Ownership Interests reflects Vacation Ownership Interests sold regardless of classification as an annual or alternate-year Vacation Ownership Interest. For purposes of calculating Unsold Vacation Ownership Interests at Resorts, both the Current Inventory and Planned Expansion numbers are based on sales of Vacation Ownership Interests on an annual basis only and assume the sale of 51 weeks per unit per year. To the extent that alternate-year Vacation Ownership Interests or 52 weeks per unit per year are sold, the actual number of unsold Vacation Ownership Interests at Resorts would be increased. (b) Dates listed represent the dates the Company began recording (or expects to begin recording) sales of Vacation Ownership Interests for financial reporting purposes. (c) At September 30, 1997, Vistana Resort consisted of eight development phases, six of which had been completed and two which were in development. The number of units at Vistana Resort at September 30, 1997 included (i) 1,175 current existing units and (ii) 364 additional planned units (representing an additional 18,564 unsold annual Vacation Ownership Interests). Construction of 95 of the additional units (representing 4,845 Vacation Ownership Interests) is currently underway. The Company constructs additional units at various times depending upon general market conditions and other factors. Accordingly, construction of the remaining 269 additional units will be commenced from time to time as demand and other conditions merit. Figures with respect to this resort assume that all units to be constructed will consist of one- and two-bedroom units; however, the actual number of additional Vacation Ownership Interests resulting from planned construction could vary depending upon the configuration of these units. (d) Includes 1,705 alternate-year Vacation Ownership Interests with an average sales price of $7,503 and 3,961 annual Vacation Ownership Interests with an average sales price of $11,562. (e) Vistana's Beach Club consists of two buildings containing a total of 76 current existing units, which represent 3,876 Vacation Ownership Interests. The Company's Current Inventory of 31 annual Vacation Ownership Interests at this resort consists primarily of previously-sold Vacation Ownership Interests that the Company has since reacquired in connection with defaults under customer mortgages. The Company has no plans to build any additional units at this resort. (f) Hampton Vacation Resort--Oak Plantation consists of 242 current existing units, representing 12,342 annual Vacation Ownership Interests. Prior to its acquisition by the Company in June 1996, this property was operated by a third party as a rental apartment complex. The Company commenced conversion of the property into a vacation ownership resort in July 1996. As of September 30, 1997, the conversion of 156 units (representing 7,956 annual Vacation Ownership Interests) had been completed. The Company intends to convert the remaining 86 units at various times depending upon general market conditions and other factors. The Company currently has no plans to build any additional units at this resort. Hampton Vacation Resort--Oak Plantation is operated on a franchise basis as the first Hampton Vacation Resort pursuant to the Promus Agreement. (g) Eagle Point Resort consists of 54 existing units, representing 2,808 Vacation Ownership Interests. This resort was acquired by the Company pursuant to the Acquisition in September 1997, and is owned and operated by the Company. (h) Falcon Point Resort consists of 58 existing units, representing 3,016 Vacation Ownership Interests and 24 additional planned units to be constructed on property which the Company has a contract to purchase (representing an additional 1,224 unsold annual Vacation Ownership Interests). This resort was acquired by the Company pursuant to the Acquisition in September 1997, and is owned and operated by the Company. (i) Villas of Cave Creek consists of 25 existing units, representing 1,300 Vacation Ownership Interests and 10 additional planned units (representing an additional 510 unsold annual Vacation Ownership Interests). This resort was acquired by the Company pursuant to the Acquisition in September 1997, and is owned and operated by the Company. (j) In December 1996, the Company acquired the initial 14 acres of unimproved land in Myrtle Beach, South Carolina for the development of the Embassy Vacation Resort--Myrtle Beach. The Company also has an option until December 31, 2003 to acquire up to 26 additional acres of contiguous property for phased expansion of this resort. The Company commenced construction of the 44-unit first phase of this resort (representing 2,244 annual Vacation Ownership Interests) during the third quarter of 1997. Because the Company constructs additional units at its resorts based on general market conditions and other factors, construction of the remaining 506 units at this resort (assuming acquisition of the remaining 26 acres) will be commenced from time to time as demand and other conditions merit. Myrtle Beach will be operated as an Embassy Vacation Resort franchise pursuant to the terms of the Promus Agreement. (k) Vistana Resort at World Golf Village will consist of an estimated 408 units, representing an estimated 20,808 annual Vacation Ownership Interests, of which 102 units, representing 5,202 annual Vacation Ownership Interests, are currently under construction and scheduled for completion in the first quarter of 1998. The Company intends to commence construction of the remaining 306 additional units from time to time as demand and other conditions merit. (l) PGA Vacation Resort by Vistana will consist of an estimated 387 units, representing an estimated 19,737 annual Vacation Ownership Interests, and will be constructed by the Company on 25 acres of land which the Company acquired in September 1997. The Company anticipates that it will commence construction of the 40-unit first phase of this resort (representing 2,040 annual Vacation Ownership Interests) during the first quarter of 1998. Because the Company constructs additional units at its resorts based on general market conditions and other factors, construction of the remaining 347 units at this resort are expected to be commenced from time to time as demand and other conditions merit. (m) The Embassy Vacation Resort--Scottsdale will consist of an estimated 150 units, representing 7,650 Vacation Ownership Interests, and will be constructed by the Company on approximately 10 acres of land which the Company recently acquired. The Company anticipates that it will commence construction during the first quarter of 1998. The Scottsdale property will be operated as an Embassy Vacation Resort franchise pursuant to the Promus Agreement. CORPORATE BACKGROUND The Company, through its predecessor corporations and partnerships, has operated in the vacation ownership industry since 1980. In December 1986, the Company was sold to a corporate acquiror. In November 1991, Messrs. Gellein and Adler, together with a third individual, acquired the Company from the corporate acquiror. In May 1995, the Company repurchased the interest in the Company held by the third individual. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company was incorporated in the State of Florida in December 1996 to effect the Formation Transactions (as defined herein) and the initial public offering of 6,382,500 shares of the Common Stock which was completed on March 5, 1997 (the "Initial Public Offering"). The Company's principal executive offices are located at 8801 Vistana Centre Drive, Orlando, Florida 32821, and its telephone number at that address is (407) 239-3000. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........................ 2,000,000 shares(1) Common Stock to be outstanding after the Offering............. 21,007,630 shares(1)(2) Use of Proceeds................. The Company intends to use all of the net proceeds of the Offering to repay outstanding indebtedness. Nasdaq National Market symbol... VSTN </TABLE> - -------- (1) Assumes no exercise of the Underwriter's over-allotment option. See "Underwriting." (2) Does not include 2,075,750 shares of Common Stock issuable upon exercise of options outstanding as of the date of this Prospectus under the Vistana, Inc. Stock Plan (the "Stock Plan"), the issuance of 180,000 shares of which is subject to the approval by the Company's shareholders of an amendment to the Stock Plan to increase the number of shares reserved for issuance thereunder, or 430,814 shares of Common Stock deliverable on a contingent basis in connection with the Acquisition. See "Management--Stock Plan" and "Business--the Acquisition."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029786_nationwide_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029786_nationwide_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..16dc33318d9e5a72ee114d676817eb541d697d84
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029786_nationwide_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements appearing elsewhere in this Prospectus. The Company was formed in November 1996 as a holding company for Nationwide Life Insurance Company and the other companies within the Nationwide Insurance Enterprise that offer or distribute long-term savings and retirement products. The information contained in this Prospectus gives effect to the contribution by Nationwide Corporation to the Company of Nationwide Life and such other companies described under "Recent History." Except as otherwise indicated, all financial data and ratios presented herein have been prepared using generally accepted accounting principles ("GAAP"). See "Glossary of Selected Insurance Terms" for the definitions of certain insurance terms used herein. As used in this Prospectus, the "Company" means Nationwide Financial Services, Inc. and, unless the context otherwise requires, its subsidiaries; "Nationwide Life" means Nationwide Life Insurance Company and, unless the context otherwise requires, Nationwide Life and Annuity Insurance Company; "Nationwide Corp." means Nationwide Corporation; "Nationwide Mutual" means Nationwide Mutual Insurance Company; and "Nationwide Insurance Enterprise" means Nationwide Mutual and its subsidiaries and affiliates. Nationwide(R) is a registered service mark of Nationwide Mutual, and The Best of America(R) is a registered service mark of Nationwide Life. THE COMPANY OVERVIEW The Company is a leading provider of long-term savings and retirement products to retail and institutional customers throughout the United States. The Company offers variable annuities, fixed annuities and life insurance as well as mutual funds and pension products and administrative services. By developing and offering a wide variety of products, the Company believes that it has positioned itself to compete effectively in various stock market and interest rate environments. The Company markets its products through a broad spectrum of wholesale and retail distribution channels, including financial planners, pension plan administrators, securities firms, banks and Nationwide Insurance Enterprise insurance agents. The Company is one of the leaders in the development and sale of variable annuities. For the year ended December 31, 1996, the Company was the fourth largest U.S. writer of individual variable annuity contracts based on sales, according to The Variable Annuity Research & Data Service ("VARDS"). Its principal variable annuity series, The Best of America, allows the customer to choose from 36 investment options, including mutual funds managed by such well- known firms as American Century, Dreyfus, Fidelity, Janus, Neuberger & Berman, Oppenheimer, T. Rowe Price, Templeton, Vanguard and Warburg Pincus, as well as mutual funds managed by the Company. The Company is a member of the Nationwide Insurance Enterprise, which is known nationally as a writer of automobile and homeowners' insurance throughout the United States. The property/casualty insurers within the Nationwide Insurance Enterprise are the fifth largest property/casualty insurance group in the United States based on 1995 net premiums written, according to A.M. Best Company, Inc. ("A.M. Best"). In the mid-1970s, to capitalize on anticipated opportunities in the growing market for long-term savings and retirement products, the Company embarked on a specific strategy of broadening its distribution channels and product offerings beyond selling traditional life insurance to the automobile and homeowner customers of the Nationwide Insurance Enterprise. Over a 20-year period, the Company added financial planners, pension plan administrators, securities firms and banks as new distribution channels. Such distribution channels in the aggregate accounted for approximately 93.8% of the Company's sales in 1996. Currently, the Company administers approximately 15,000 pension plans and has distribution arrangements with 125 banks and other financial institutions, over 1,000 broker/dealers and over 30,000 registered representatives. The Company has payroll deduction variable annuity enrollee customers in approximately 6,000 state and local government entities and 1,800 school districts, which have been obtained principally through sponsorship relationships with the National Association of Counties and The United States Conference of Mayors and an exclusive contractual arrangement with The National Education Association of the United States. The Company has grown substantially in recent years as a result of its long- term investment in developing the distribution channels necessary to reach its target customers and the products required to meet the demands of these customers. The Company believes its growth has been further enhanced by favorable demographic trends, the growing tendency of Americans to supplement traditional sources of retirement income with self-directed investments, such as products offered by the Company, and the performance of the financial markets, particularly the U.S. stock markets, in recent years. From 1992 to 1996, the Company's assets grew from $20.8 billion to $47.8 billion, a compound annual growth rate of 23.1%. Asset growth during this period resulted from sales of the Company's products as well as market appreciation of assets in the Company's separate accounts and in its general account investment portfolio. During the same period, the Company's net operating income (i.e., net income excluding realized gains and losses on investments (net of related federal income tax), discontinued operations and cumulative effect of accounting changes) grew from $97.0 million to $211.3 million, a compound annual growth rate of 21.5%. The Company's sales of variable annuities grew from $1.56 billion in 1992 to $6.50 billion in 1996, a compound annual growth rate of 42.9%. The Company's separate account assets, which are generated by the sale of variable annuities and variable universal life insurance, grew from 29.3% of total assets at December 31, 1992 to 56.4% of total assets at December 31, 1996. During this period of substantial growth, the Company controlled its operating expenses by taking advantage of economies of scale and by increasing productivity through investments in technology. From 1992 to 1996, the Company's total assets increased by 130.1% while operating expenses increased by only 55.1%. As a result, its ratio of operating expenses to total assets fell from 1.10% in 1992 to 0.74% in 1996. The Company believes that demographic trends and shifts in attitudes toward retirement savings will continue to support increased consumer demand for its products. According to U.S. Census Bureau projections, the number of Americans between the ages of 45 and 64 will grow from 55.7 million in 1996 to 71.1 million in 2005, making this "preretirement" age group the fastest growing segment of the U.S. population. The Company believes that Americans increasingly are supplementing traditional sources of retirement income, such as employer-provided defined benefit plans and Social Security, with self- directed investments. Reflecting this shift, industry sales of individual variable annuity products grew from $28.5 billion in 1992 to $73.8 billion in 1996, a compound annual growth rate of 26.9%, according to VARDS. During the same period, industry individual variable annuity assets grew from $212 billion to $501 billion, a compound annual growth rate of 24.0%, according to VARDS. The Company has three product segments: Variable Annuities, Fixed Annuities and Life Insurance. The Variable Annuities segment, which accounted for $90.3 million (or 27.5%) of the Company's operating income before federal income tax expense in 1996, consists of annuity contracts that provide the customer with the opportunity to invest in mutual funds managed by independent investment managers and the Company, with investment returns accumulating on a tax- deferred basis. The Fixed Annuities segment, which accounted for $135.4 million (or 41.2%) of the Company's operating income before federal income tax expense in 1996, consists of annuity contracts that generate a return for the customer at a specified interest rate, fixed for a prescribed period, with returns accumulating on a tax-deferred basis. Such contracts consist of single premium deferred annuities, flexible premium deferred annuities and single premium immediate annuities. The Fixed Annuities segment also includes the fixed option under the Company's variable annuity contracts, which accounted for 70.5% of the Company's fixed annuity policy reserves as of December 31, 1996. For the year ended December 31, 1996, the average crediting rate on contracts (including the fixed option under the Company's variable annuity contracts) in the Fixed Annuities segment was 6.3%. Substantially all of the Company's crediting rates on its fixed annuity contracts are guaranteed for a period not exceeding 15 months. See "Business--Product Segments--Fixed Annuities." The Life Insurance segment, which accounted for $67.2 million (or 20.5%) of the Company's operating income before federal income tax expense in 1996, consists of insurance products, including variable life insurance, that provide a death benefit and may also allow the customer to build cash value on a tax-deferred basis. BUSINESS STRATEGIES The Company's objective is to continue its record of profitable growth by following the strategies set forth below: Enhance the Company's Leading Position in the Market for Variable Annuities. The Company believes that the variable annuity business is attractive because it generates fee income and requires significantly less capital support than fixed annuities and life insurance. The Company also believes, based on the aging of the U.S. population and recent increases in sales of retirement savings products, that variable annuities will continue to experience high rates of industry sales growth and that the Company possesses distinct competitive advantages that will allow it to continue to benefit from this anticipated growth. Some of the Company's most important advantages include its innovative product offerings and strong relationships with independent, well-known fund managers. For example, the Company's The Best of America IV and The Best of America--America's Vision individual variable annuity contracts allow the customer to choose from 36 investment options, including mutual funds managed by a variety of well-known fund managers and the Company. In the aggregate, the Company's group variable annuity products offer over 100 underlying investment options. The Company works closely with its investment managers and product distributors to adapt the Company's products and services to changes in the retail and institutional marketplace. Capture a Growing Share of Sales in all Distribution Channels. The Company's broad distribution system permits it to offer its products across a wide range of markets and customers. The Company continually seeks to gain a larger share of each of its distributor's sales by offering products that are attractive to its distributors from both a financial perspective and in helping the distributor build relationships with its customers. In addition to providing new products to its distributors, the Company seeks to increase sales in each of its existing distribution channels by cross-selling those products not currently offered through such channel. The Company also seeks to add new distributors to its existing channels and regularly evaluates possible new distribution channels. While many of the Company's competitors employ a variety of distribution channels, the Company believes that few of its competitors have a developed distribution system that is as broad as the Company's and that this distinguishing characteristic provides the Company with an important competitive advantage. Maintain a Diverse Product Portfolio. The Company offers a diverse mix of variable annuity, fixed annuity, mutual fund and life insurance products. Based on its experience, the Company believes that demand for, and financial results of, certain of these products are sensitive to stock market and/or interest rate environments, while some products are relatively insensitive to such factors. The Company emphasizes the sale and development of variable annuities, which tend to experience higher sales growth when interest rates are low, and fixed annuities, which tend to experience higher sales growth when interest rates are high. The Company also sells traditional life insurance products which it believes provide it with a stable source of revenues throughout changing market conditions. The Company's strategy is to rely on a variety of products, each of which may perform differently in given stock market and interest rate environments, so that the Company will be able to grow profitably in a variety of such environments. Emphasize Payroll Deductions and Tax-Qualified and Group Annuities. To further enable it to grow profitably in a variety of stock market and interest rate environments, the Company concentrates on the sale of annuities through payroll deductions and the sale of tax-qualified and group annuities. Annuities sold through payroll deductions are somewhat insulated from changes in market conditions because of the recurring nature of their deposits. In 1996, 38.2% of the Company's total annuity statutory premiums and deposits were attributable to payroll deductions. Group annuities and tax-qualified annuities are also somewhat insulated from changes in market conditions because they usually are provided through employers as a voluntary retirement benefit with a limited number of competing investment options. In addition, tax-qualified annuities subject the customer to a tax penalty for early withdrawal. Tax-qualified annuities accounted for 70.3% and group annuities accounted for 43.6% of the Company's total annuity statutory premiums and deposits in 1996. Build on the Company's Brand Strength. The Company believes that the brand names it uses in connection with its products, such as Nationwide and The Best of America, are well-known and have a strong reputation in the financial services market. The Company intends to extend its brand names across markets, applying The Best of America name across many of its wholesale and retail distribution channels. The Company believes that, as the numbers of products and competitors in its markets grow, consumers, distributors, retirement plan sponsors and other decision makers in the market for long-term savings and retirement products will continue to emphasize nationally known brand names. See "Certain Relationships and Related Transactions--New Agreements with the Nationwide Insurance Enterprise--Intercompany Agreement." Continue Commitment to Technological Excellence. The Company has made and is committed to continue making significant investments in information systems to enable it to offer innovative products, to more effectively cross-sell products across distribution channels and to offer high quality service. The information systems that the Company has developed for its variable products are costly to replicate. The Company believes that these systems provide it with a significant competitive advantage and impose a barrier to entry for new competitors. PRINCIPAL STOCKHOLDER Following the Equity Offerings, Nationwide Corp. will be the controlling stockholder of the Company. Upon completion of the Equity Offerings, Nationwide Corp. will own all of the outstanding shares of the Class B Common Stock, $0.01 par value, of the Company ("Class B Common Stock and, together with Class A Common Stock, the "Common Stock"), representing 83.6% and 98.1% (81.6% and 97.8% if the Underwriters' over-allotment option is exercised in full) of the total number of shares of Common Stock outstanding and the combined voting power of the stockholders of the Company, respectively. Nationwide Corp. is a subsidiary of Nationwide Mutual. Nationwide Mutual and Nationwide Mutual Fire Insurance Company ("Nationwide Mutual Fire") are mutual companies which are the controlling entities of the Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise is an affiliated group of over 100 companies that offers a wide range of insurance and investment products and services. Nationwide Mutual and Nationwide Mutual Fire control the companies within the Nationwide Insurance Enterprise through a variety of means, including security ownership, management contracts and common directors. The Nationwide Insurance Enterprise had $68.0 billion in total statutory assets as of December 31, 1996. See "Risk Factors--Control by and Relationship with the Nationwide Insurance Enterprise; Conflicts of Interest" and "Certain Relationships and Related Transactions." THE EQUITY OFFERINGS, THE NOTE OFFERING AND THE CAPITAL SECURITIES OFFERING Prior to the Capital Securities Offering, the Company expects to consummate the Equity Offerings, and, concurrently with the Capital Securities Offering, the Company expects to consummate the Note Offering. The consummation of the Capital Securities Offering is not conditioned on the completion of the Note Offering. There can be no assurance that the Note Offering will be consummated. See "Use of Proceeds," "Recent History" and "The Equity Offerings, the Note Offering and the Capital Securities Offering." The Equity Offerings and the Note Offering are being made pursuant to separate prospectuses. ---------------- The Company's executive offices are located at One Nationwide Plaza, Columbus, Ohio 43215, and its telephone number is (614) 249-7111. The place of business and the telephone number of the Trust are the principal executive offices and telephone number of the Company. THE CAPITAL SECURITIES OFFERING The Trust..................... Nationwide Financial Services Capital Trust, a Delaware business trust. Securities Offered............ $100,000,000 aggregate liquidation amount of % Capital Securities (Liquidation Amount, $1,000 per Capital Security). Distributions................. Distributions on the Capital Securities will accrue from the date of original issuance of the Capital Securities and will be payable at the annual rate of % of the liquidation amount of $1,000 per Capital Security. Subject to the distribution deferral provisions described below, distributions will be payable semi-annually in arrears on and of each year, commencing , 1997. Because distributions on the Capital Securities constitute interest, corporate holders thereof will not be entitled to a dividends-received deduction. Distribution Deferral The ability of the Trust to pay distributions Provisions.................... on the Capital Securities is solely dependent on its receipt of principal and interest payments from the Company on the Junior Subordinated Debentures. So long as no Event of Default has occurred and is continuing, the Company has the right at any time to defer the interest payments due from time to time on the Junior Subordinated Debentures during any Deferral Period for a period not exceeding 10 consecutive semi-annual periods. Semi-annual distributions on the Capital Securities would be deferred by the Trust (but would continue to accumulate semi-annually and would accrue interest to the extent permitted by law) until the end of any such Deferral Period. There could be multiple Deferral Periods of varying lengths throughout the term of the Junior Subordinated Debentures. See "Risk Factors-- Factors Relating to the Capital Securities-- Option to Extend Interest Payment Period" and "--Tax Consequences of Extension of Interest Payment Period," "Description of the Capital Securities--Distributions" and "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period." If a deferral of an interest payment occurs, the holders of the Capital Securities will continue to accrue income for United States federal income tax purposes in advance of any corresponding cash distribution. See "Risk Factors--Factors Relating to the Capital Securities--Option to Extend Interest Payment Period" and "--Tax Consequences of Extension of Interest Payment Period," and "United States Federal Income Taxation--Original Issue Discount." Rights Upon Deferral of During any Deferral Period, interest on the Distributions................. Junior Subordinated Debentures will compound semi-annually and semi-annual distributions (compounded semi-annually at the distribution rate) will accrue on the Capital Securities. The Company has agreed, among other things, not to declare or pay any dividend on its capital stock (subject to certain exceptions) or make certain other restricted payments during any Deferral Period. See "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period" and "Description of the Guarantee--Certain Covenants of the Company." Distribution of Junior Subordinated Debentures Upon Liquidation of the Trust..... At any time, the Company will have the right to terminate the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, cause Junior Subordinated Debentures to be distributed to the holders of the Trust Securities in connection with the liquidation of the Trust. Such Junior Subordinated Debentures shall have an aggregate principal amount, an interest rate and accrued and unpaid interest equal to, respectively, the aggregate liquidation amount, distribution rate and accrued and unpaid distributions of the Trust Securities. See "Description of the Capital Securities-- Distribution of Junior Subordinated Debentures Upon Liquidation of the Trust." Distribution of Cash Upon Liquidation of the Trust..... In the event of a Liquidation of the Trust, the holders will be entitled, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to receive $1,000 per Capital Security plus any additional amount payable upon redemption of the Junior Subordinated Debentures as a result of the Make-Whole Premium and accrued and unpaid distributions thereon to the date of payment, unless, in connection with such Liquidation, Junior Subordinated Debentures are distributed to such holders. See "Description of the Capital Securities--Distribution of Cash Upon Liquidation of the Trust" and "--Distribution of Junior Subordinated Debentures Upon Liquidation of the Trust." Mandatory Redemption.......... Upon the repayment or payment of the Junior Subordinated Debentures, whether at maturity or upon redemption or otherwise, the Trust must use the proceeds from such repayment or redemption to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of Junior Subordinated Debentures so repaid or redeemed at the Redemption Price. See "Description of the Capital Securities--Mandatory Redemption." Tax Event..................... If at any time a Tax Event shall occur and be continuing, the Trust shall, except in limited circumstances, be dissolved and Junior Subordinated Debentures shall be distributed to the holders of Trust Securities. See "-- Distribution of Junior Subordinated Debentures Upon Liquidation of the Trust." In certain circumstances, upon the occurrence of a Tax Event, cash will be distributed in redemption of the Junior Subordinated Debentures at the Redemption Price; provided, that no Make-Whole Premium shall be payable in connection with such redemption. See "Description of the Capital Securities--Tax Event Distribution." Guarantee..................... The Company will guarantee, as described herein, the payment in full of (i) the distributions on the Capital Securities to the extent of funds held by the Trust, (ii) the amount payable upon redemption of the Capital Securities to the extent of funds held by the Trust and (iii) generally, the liquidation amount of the Capital Securities to the extent of the assets of the Trust available for distribution to holders of Capital Securities. The Guarantee will be subordinated and junior in right of payment to all other liabilities of the Company, except any liabilities that may be made pari passu expressly by their terms. The Guarantee will rank pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock or preferred securities of any affiliate of the Company. Upon the liquidation, dissolution or winding up of the Company, its obligations under the Guarantee will rank junior to all of its other liabilities, except as aforesaid, and as a result, funds may not be available for payment under the Guarantee. See "Risk Factors--Factors Relating to the Capital Securities--Subordination of Guarantee and Junior Subordinated Debentures" and "Description of the Guarantee--Status of the Guarantee; Subordination." The Company has, through the Guarantee, the Junior Subordinated Debentures, the Indenture and the Declaration, taken together, fully and unconditionally guaranteed all of the Trust's obligations under the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full and unconditional guarantee of the Trust's obligations under the Capital Securities. See "Description of the Guarantee" and "Effect of Obligations Under the Junior Subordinated Debentures, the Guarantee and the Declaration." Voting Rights................. Except as specified herein, holders of the Capital Securities will have no voting rights. See "Description of the Capital Securities-- Voting Rights; Amendment of Declaration." Junior Subordinated The Junior Subordinated Debentures will mature Debentures.................... on , 2037 and will bear interest at the rate of % per annum, payable semi- annually in arrears. So long as no Event of Default has occurred and is continuing, interest payments may be deferred from time to time by the Company (during any Deferral Period, interest would continue to accrue and compound semi-annually) for a Deferral Period not to exceed 10 consecutive semi-annual periods, provided that no such Deferral Period may extend beyond the maturity date of the Junior Subordinated Debentures. Prior to the termination of any Deferral Period of less than 10 consecutive semi-annual periods, so long as no Event of Default has occurred and is continuing, the Company may further extend the Deferral Period; provided, that no such Deferral Period, as extended, may exceed 10 consecutive semi-annual periods or extend beyond the maturity date of the Junior Subordinated Debentures. Upon the termination of any Deferral Period, the Company is required to pay all amounts then due and, upon such payment, the Company may select a new Deferral Period, subject to the preceding sentence. No interest shall be due during a Deferral Period until the end of such period. During a Deferral Period, the Company will be prohibited from paying dividends on any of its capital stock (subject to certain exceptions) and making certain other restricted payments until semi- annual interest payments are resumed and all accumulated and unpaid interest (including interest thereon to the extent permitted by law) on the Junior Subordinated Debentures is made current. The Company may optionally redeem the Junior Subordinated Debentures at any time at the Redemption Price, which includes (except in the case of a redemption following a Tax Event) the Make-Whole Premium. The payment of the principal of and interest on the Junior Subordinated Debentures will be subordinated and junior in right of payment, to the extent set forth herein, to all existing and future Senior Indebtedness of the Company. Further, the Junior Subordinated Debentures (and therefore the Capital Securities) will be effectively subordinated to all existing and future liabilities and obligations of the Company's subsidiaries, including obligations to policyholders. At December 31, 1996, after giving effect to the Note Offering, the aggregate amount of Senior Indebtedness and liabilities and obligations of the Company's subsidiaries, including obligations to policyholders, that would effectively rank senior to the Junior Subordinated Debentures was approximately $45.9 billion. See "Capitalization" and "Pro Forma Selected Consolidated Financial Data." See "Description of the Junior Subordinated Debentures" and "Risk Factors--Factors Relating to the Capital Securities--Subordination of Guarantee and Junior Subordinated Debentures." Form of Capital Securities.... The Capital Securities will be issued only as fully-registered securities registered in the name of Cede & Co., as nominee for DTC. One or more fully registered global Capital Security certificates will be issued, representing in the aggregate the total number of Capital Securities, and will be deposited with DTC. See "Description of the Capital Securities--Book- Entry-Only Issuance--The Depository Trust Company." Use of Proceeds............... All of the proceeds from the sale of the Capital Securities will be invested by the Trust in Junior Subordinated Debentures and the net proceeds to the Company of $98.6 million from the sale of Junior Subordinated Debentures will be contributed by the Company to the capital of Nationwide Life. Of the $426.6 million estimated net proceeds from the Equity Offerings, the Company will contribute $371.6 million to the capital of Nationwide Life and retain the balance for general corporate purposes. All of the net proceeds from the Note Offering will be contributed by the Company to the capital of Nationwide Life. See "Use of Proceeds" and "The Equity Offerings, the Note Offering and the Capital Securities Offering."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001029932_track-n_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001029932_track-n_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dbf1e09cda6ad4aa3ce32a2e0ed9950401d2b6d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001029932_track-n_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OR OTHERWISE AS SPECIFIED HEREIN, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) REFLECTS THE CONSUMMATION IN OCTOBER 1997 OF THE TRANSACTION IN WHICH TRACK 'N TRAIL, A CALIFORNIA CORPORATION ("TRACK 'N TRAIL-CALIFORNIA"), AND OVERLAND MANAGEMENT CORPORATION ("OVERLAND") BECAME SUBSIDIARIES OF THE COMPANY (THE "REORGANIZATION"). SEE "UNDERWRITING" AND NOTE 14 OF NOTES TO THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS. EFFECTIVE JUNE 28, 1992, THE COMPANY CHANGED ITS FISCAL YEAR-END FROM THE LAST SATURDAY IN JUNE TO THE LAST SATURDAY IN DECEMBER. AS USED IN THIS PROSPECTUS, "FISCAL 1992," "FISCAL 1993," "FISCAL 1994," "FISCAL 1995" AND "FISCAL 1996" REFER TO THE COMPANY'S FISCAL YEARS ENDED JUNE 27, 1992, DECEMBER 25, 1993, DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996, RESPECTIVELY, AND "FISCAL 1997" REFERS TO THE COMPANY'S FISCAL YEAR ENDING DECEMBER 27, 1997. "STORE CONTRIBUTION" REFERS TO GROSS PROFIT AFTER DEDUCTING SELLING AND MARKETING EXPENSES. EXCEPT AS OTHERWISE SPECIFIED OR WHERE THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "TRACK 'N TRAIL" INCLUDE THE RESULTS OF OVERLAND FROM AND AFTER THE ACQUISITION OF OVERLAND.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030199_nxtrend_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030199_nxtrend_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd095010b7668a9fccaa255136eda76b68d98f87
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030199_nxtrend_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Prospectus, including the matters set forth under the caption "Risk Factors," which could cause actual results to differ materially from those indicated in such forward- looking statements. Except as otherwise indicated in this Prospectus or the financial statements, all references to "NxTrend" and the "Company" refer to NxTrend Technology, Inc. and its predecessors. THE COMPANY NxTrend is a leading provider of enterprise-wide software solutions that address the critical business information requirements of durable goods wholesale distributors. NxTrend offers wholesale distributors a single source solution for information systems that are designed to enable the distributor to increase profitability, enhance customer service and implement "best business practices" in such critical areas as inventory management, order processing, sales, customer service, warehouse logistics and strategic business analysis. The Company seeks to serve as its customers' technology partner, helping them respond to and anticipate the changing demands of the wholesale distribution industry by designing, implementing and continuously improving their business information systems. The Company's primary software products are open systems based on the UNIX platform, and the Company's newest generation of products utilize a Windows NT-based client/server architecture with Internet and intranet capabilities. Over the course of its 17 year history of profitable operations, the Company has established itself as the leading provider of business information systems within its target market segments of the distribution industry and as of February 28, 1997 had an installed base of over 1,000 customers. Durable goods wholesale distributors are operating in a rapidly changing and intensely competitive environment. Industry consolidation has resulted in fewer and more powerful distributors competing for market share while new entrants are targeting increasingly specialized market segments. The proliferation of "big box" retailers and wholesale clubs has also significantly altered the competitive landscape, as such new competitors typically bypass traditional distributors and instead purchase directly from manufacturers. While the competitive environment has intensified, demand for increased value and improved service from both manufacturers and customers has placed additional pressures on wholesale distributors. Manufacturers are seeking increased levels of marketing support from wholesale distributors, more efficient ordering procedures and better information on distributors' inventory levels to monitor "sell through." Concurrently, customers are attempting to better manage their inventory levels and costs by demanding that their distributors provide prompt information on product availability and rapid and reliable product delivery. Both manufacturers and customers are endeavoring to rationalize their selling and purchasing efforts by concentrating their business with a smaller number of distributors. As a result of these factors, many distributors have been forced to lower their margins in order to remain competitive. The various pressures facing wholesale distributors have created a growing need for enterprise-wide software solutions that provide a broad range of accurate and current information to wholesale distributors and enable them to respond more quickly to the needs of their manufacturers and customers and to manage their businesses more efficiently and profitably. The Company's primary software packages, Trend, WDS-II and SHIMS, are designed to automate key business processes and to integrate information among customers and manufacturers. These products offer numerous modules in the areas of (i) inventory management, (ii) warehouse logistics, (iii) electronic commerce, (iv) business analysis, (v) sales, distribution and customer service, and (vi) finance and administration, which can be configured to meet customers' specific needs. The Company's Strategic Exchange client/server family of products, based on Windows NT, complements the Company's primary products by allowing customers to access, organize and analyze the information collected by such products and to integrate that information into Windows-based productivity tools. The Company's recently introduced Distribution@Work family of products adds Internet and intranet capabilities to NxTrend's other software products. The Company's objective is to maintain and enhance its position as a leading supplier of enterprise-wide software solutions for the durable goods wholesale distribution market. The Company seeks to achieve this objective by (i) leveraging its industry specific focus and industry reputation to further penetrate its primary target market segments within the durable goods wholesale distribution industry; (ii) providing a total solution to customers' information technology needs; (iii) extending its solutions into additional market segments within the durable goods distribution industry; (iv) enhancing its technology leadership position through ongoing product development; (v) continuing to offer products and services which generate significant recurring and ongoing revenue; and (vi) increasing its product offerings, customer base, skilled personnel and market segments by pursuing strategic acquisitions. The Company was incorporated in Iowa in 1979, was reincorporated in Colorado in 1991 and was reincorporated in Delaware in 1996. The Company's principal executive offices are located at 5225 North Academy Boulevard, Colorado Springs, Colorado 80918, and its telephone number is (719) 590-8940. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 4,300,000 shares Common Stock to be outstanding after the offering.. 13,370,331 shares(1) Use of proceeds.................................... For payments in connection with the redemption of preferred stock, repayment of indebtedness, working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol............. NXTT </TABLE> - -------- (1) Based on shares outstanding as of February 28, 1997. Excludes (i) 1,335,932 shares of Common Stock reserved for issuance upon exercise of options outstanding under the Company's 1996 Stock Option and Grant Plan as of February 28, 1997 at a weighted average exercise price of $2.43 per share, (ii) 1,393,294 additional shares reserved for issuance pursuant to the Company's 1996 Stock Option and Grant Plan, and (iii) shares reserved for issuance pursuant to the Company's Employee Stock Purchase Plan. See "Capitalization," "Management--1996 Stock Option and Grant Plan," "-- Employee Stock Purchase Plan," "Description of Capital Stock" and Note 9 of Notes to Financial Statements. ---------------- Except as otherwise specified, all information in this Prospectus assumes (i) a 2.3-for-1 stock split of the Common Stock to be effected prior to the closing of this offering, (ii) the conversion of each outstanding share of convertible preferred stock into Common Stock upon the closing of this offering, and (iii) no exercise of the Underwriters' over-allotment option. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ----------------------------------------- 1992(1) 1993 1994 1995 1996 ------- ------- ------- ------- --------- <S> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenue: Software license fees............... $ 5,585 $ 4,575 $ 6,446 $10,625 $12,429 Annual license and support fees..... 2,306 3,127 3,210 8,702 10,759 Services............................ 2,584 3,325 3,909 6,229 7,011 Hardware............................ 5,268 5,482 5,207 9,568 9,421 ------- ------- ------- ------- --------- Total revenue.................... 15,743 16,509 18,772 35,124 39,620 Gross profit......................... 9,298 6,830 8,886 17,998 21,417 Operating income..................... 2,396 88 2,785 3,834 5,819 Interest expense..................... -- 170 45 -- 1,757 Net income........................... 1,507 241 2,134 2,981 3,129 Unaudited pro forma net income per common and common equivalent share(2)............................ $ 0.32 Shares used to compute unaudited pro forma net income per common and common equivalent share(2).......... 9,919,287 UNAUDITED SUPPLEMENTAL DATA(3): Adjusted operating income............ $ 7,030 $ 9,623 Adjusted net income.................. 5,013 5,595 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------ PRO FORMA ACTUAL AS ADJUSTED(4) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Current assets....................................... $ 11,854 $21,791 Current liabilities (including current portion of long-term bank and other debt)...................... 15,583 11,083 Total assets......................................... 16,596 26,146 Bank and other long-term debt........................ 15,500 500 Mandatorily redeemable, convertible preferred stock.. 32,500 -- Stockholders' equity (deficit)....................... (47,047) 14,503 </TABLE> - -------- (1) Results of operations for 1992 reflect the Company's status as an S corporation until December 31, 1992. Net income includes an unaudited, pro forma tax provision, calculated as if the Company were a C corporation for 1992. (2) Calculated on the basis described in Note 2 of Notes to Financial Statements. (3) Excludes nonrecurring compensation expense of $3.2 million and $3.8 million incurred by the Company in 1995 and 1996, respectively, under the Company's Unit Incentive Plan. In connection with the Company's recapitalization in March 1996, this plan was settled and terminated. See "Recapitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Recapitalization." (4) Adjusted to reflect (i) the conversion of all outstanding convertible preferred stock into Common Stock and redeemable preferred stock, (ii) the sale of the 4,300,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $13.00, and (iii) the application of the estimated net proceeds therefrom, including $22.0 million for the immediate redemption of all redeemable preferred stock. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030341_network_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030341_network_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b8ebbf1ccf588db1e8f05d2e4d5ea3d3c72033db
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030341_network_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless the context requires otherwise, all references to the "Company," "Network Solutions" and "NSI" shall refer to Network Solutions, Inc., a Delaware corporation, and its predecessor, Network Solutions Incorporated, a Washington, D.C. corporation. The Class A Common Stock offered hereby involves a high degree of risk. See "Risk Factors." References in this Prospectus to the "Common Stock" shall include both the Company's Class A Common Stock, par value $0.001 per share (the "Class A Common Stock"), and the Company's Class B Common Stock, par value $0.001 per share (the "Class B Common Stock"). As used herein, net registrations are defined as the gross number of domain name registrations less management's estimates of uncollectible registrations and of non-renewals. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock," "Underwriting" and Notes to Financial Statements. THE COMPANY Network Solutions is the leading Internet domain name registration service provider worldwide. The Company currently acts as the exclusive registrar for second level domain names within the .com, .org, .net, .edu and .gov top-level domains ("TLDs"). By registering Internet domain names, the Company enables businesses, other organizations and individuals to establish a unique Internet presence from which to communicate and conduct commerce. Net registrations within the TLDs maintained by the Company increased by 206% from approximately 340,000 domain names registered at June 30, 1996 to approximately 1,040,000 domain names registered at June 30, 1997. The Company believes that commercial enterprises and individual Internet users worldwide are increasingly recognizing the .com TLD as a desirable address for commercial presence on the Internet. Net registrations in the .com TLD increased from approximately 304,000 at June 30, 1996 to approximately 908,000 at June 30, 1997, representing 87% of the Company's total net registrations at June 30, 1997. With over 10 million businesses and over 750,000 active trademarks and service marks in the United States alone, the Company believes that the potential for continued growth of domain name registrations by commercial entities and services related to those registrations is substantial. Net revenue from Internet domain name registration subscriptions accounted for 81.0% of the Company's net revenue for the six months ended June 30, 1997. The Company also provides Intranet consulting and network design and implementation services to large companies that desire to establish or enhance their Internet presence or "re-engineer" legacy network infrastructures to accommodate the integration of both Internet connectivity and Intranet network technology into their information technology base. The Company's Intranet services presently include: (i) Intranet development and re-engineering; (ii) network and systems security; and (iii) Intranet-enabled business solutions. According to Zona Research, Inc., the market for Intranet services in the year 1999 will exceed $14 billion, up from $3 billion in 1996. There can be no assurance that such market forecast will be achieved. Net revenue from Intranet services accounted for 19.0% of the Company's net revenue for the six months ended June 30, 1997. The Company currently acts as the registrar for second level domain names within the .com, .org, .net, .edu and .gov TLDs pursuant to a cooperative agreement (the "Cooperative Agreement") with the National Science Foundation (the "NSF"). Prior to September 14, 1995, the Cooperative Agreement was a cost reimbursement plus fixed-fee contract and the Company was paid directly by the NSF for providing registration services. Effective September 14, 1995, the NSF and the Company amended the Cooperative Agreement to authorize the Company to charge customers a subscription fee of $50 per year for each second level domain name registered. The Company's registration services customers in the .com, .org and .net TLDs are invoiced for a two-year subscription fee of $100 for initial registrations and $50 per year for renewals of initial registrations. Pursuant to the Cooperative Agreement, the Company presently is required to set aside 30% of the subscription fees collected for the enhancement of the intellectual infrastructure of the Internet. These funds are not recognized as revenue by the Company and will be disbursed in a manner approved by the NSF. The Cooperative Agreement by its terms expires in March 1998, although the NSF may, at its option, extend the Cooperative Agreement through September 1998. The Cooperative Agreement is subject to review by the NSF and may be terminated at any time by the NSF at its discretion or by mutual agreement. The NSF has stated that the Cooperative Agreement will not be re-awarded to the Company or awarded to any other entity. See "Risk Factors -- Uncertain Status of the Cooperative Agreement," "-- Recommendations and [GATE FOLD] Depiction of Registration Process <TABLE> <S> <C> THE REGISTRATION PROCESS DEPICTION OF DOMAIN NAME REQUEST COMPUTER SCREEN RECEIVED VIA INTERNET NETWORK SOLUTIONS LOGO NSI ASSIGNS DOMAIN NAME DEPICTION OF ROOT SERVERS POPULATED ROOT SERVERS DAILY BY NSI .GOV .NET .COM .ORG .NET DOMAIN NAME GLOBALLY ACCESSIBLE </TABLE> Proposals to Increase Competition in Registration Services" and "Business -- Relationship with the NSF; Recent Developments in the Internet Community." The Company believes that it has certain competitive advantages in the domain name registration business, including: (i) a large established customer base; (ii) recognition of the .com TLD; (iii) strategic agreements with Internet access providers; (iv) an established technical infrastructure; (v) experience in the administration of a domain name dispute policy; and (vi) skilled technical personnel who are experienced in the domain name registration business. The Company believes that the technical and procedural requirements to build and to operate a competitive domain name registry are significant. Substantial portions of the Company's registration software have been custom- developed and are proprietary. The Company's in-house registration software includes an automated registration capability which currently processes in excess of 90% of all new registration requests without human intervention. In connection with the Company's domain name registration service, the Company: (i) cooperates with government and nonprofit organizations that develop and implement Internet standards and policies; (ii) provides customer service support, which includes back office capability, a telephone help desk and electronic support via e-mail and the World Wide Web; and (iii) disseminates domain name database information to root servers throughout the world. The Company is working to expand its domain name registration business and to continue to improve the registration process by: (i) increasing the use of the .com TLD worldwide; (ii) expanding its relationships with Internet access providers by offering enhanced registration services to their customers; (iii) stimulating demand for domain names in targeted customer segments; (iv) working with major platform providers to embed the registration function into server software applications; (v) facilitating ease of use of and access to registration services; and (vi) establishing international alliances and developing multilingual capability. In addition, the Company intends to develop a portfolio of Internet-enabling products and services, which may include directory and distribution services, that allows the Company to build upon its position in the registration process and makes proper use of the customer data that the Company collects. The Company was incorporated in Washington, D.C. in 1979 as Network Solutions Incorporated and was reincorporated as Network Solutions, Inc. in Delaware in November 1996. The Company's principal executive offices are located at 505 Huntmar Park Drive, Herndon, Virginia 20170, and its telephone number is (703) 742-0400. THE OFFERING <TABLE> <S> <C> Class A Common Stock offered by the Company...... 2,800,000 shares Class A Common Stock offered by SAIC............. 500,000 shares Common Stock to be outstanding after the offering Class A Common Stock........................... 3,300,000 shares(1) Class B Common Stock........................... 12,000,000 shares(2) Total.................................. 15,300,000 shares Voting Rights.................................... Holders of Class A Common Stock vote together as a class with, and generally have identical rights, including as to dividends, to, those of holders of Class B Common Stock, except that holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes per share. See "Description of Capital Stock -- Common Stock -- Voting Rights." Use of Proceeds.................................. For payment of a $10,000,000 dividend to SAIC and for working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol........... NSOL </TABLE> - ------------------------------ (1) Excludes 2,556,250 shares of Class A Common Stock reserved for issuance under the Company's 1996 Stock Incentive Plan, of which 1,669,225 shares were subject to options outstanding as of September 18, 1997, with a weighted average exercise price of $13.24 per share. See "Capitalization" and "Management -- 1996 Stock Incentive Plan" and Notes 10 and 14 of Notes to Financial Statements. (2) Upon completion of the offering, SAIC will own 100% of the Class B Common Stock. SUMMARY FINANCIAL AND OPERATING INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS FISCAL YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------- ----------------- 1992 1993 1994 1995(1) 1996 1996 1997 ------ ------ ------ ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenue............................................. $1,160 $4,369 $5,029 $ 6,486 $18,862 $ 6,829 $18,724 Income (loss) from continuing operations................ 93 (110) 189 (1,434) (1,625) (1,458) 1,256 Net income (loss)....................................... $ 681 $ (386) $ (980) $(2,837) $(1,625) $(1,458) $ 1,256 Unaudited pro forma net income (loss) per share......... $ (0.12) $ (0.11) $ 0.09 Unaudited pro forma shares used in computing net income (loss) per share(2)................................... 13,349 13,349 13,349 OTHER OPERATING DATA(3): Net new registrations................................... -- 13 24 141 489 180 429 Less: registrations not renewed......................... -- -- -- 1 39 17 16 Net registrations at period end......................... -- 13 37 177 627 340 1,040 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------- ACTUAL AS ADJUSTED(4) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................................................. $25,967 $ 60,437 Working capital(5).................................................................... 6,280 40,750 Total assets(6)....................................................................... 92,250 126,720 Deferred revenue, net(5).............................................................. 45,628 45,628 Capital lease obligations............................................................. 2,348 2,348 Total stockholders' equity............................................................ 2,693 37,163 </TABLE> SUMMARY QUARTERLY FINANCIAL AND OPERATING INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> QUARTER ENDED --------------------------------------------------------------------------- DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, 1995 1996 1996 1996 1996 1997 1997 -------- -------- -------- --------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenue..................................... $1,533 $ 2,333 $ 4,496 $ 5,180 $ 6,853 $ 8,655 $10,069 Income (loss) from continuing operations........ (844) (1,102) (356) (293) 126 516 740 Net income (loss)............................... $ (851) $(1,102) $ (356) $ (293) $ 126 $ 516 $ 740 Unaudited pro forma net income (loss) per share......................................... $ (0.08) $ (0.03) $ (0.02) $ 0.01 $ 0.04 $ 0.06 Unaudited pro forma shares used in computing net income (loss) per share(2).................... 13,349 13,349 13,349 13,349 13,349 13,349 OTHER OPERATING DATA(3): Net new registrations........................... 43 75 105 139 170 197 232 Less: registrations not renewed................. 1 6 11 18 4 6 10 Net registrations as of period end.............. 177 246 340 461 627 818 1,040 </TABLE> - ------------------------------ (1) The Summary Financial Data for the year ended December 31, 1995 was derived by combining the Company's Results of Operations for the period January 1, 1995 through March 10, 1995 and the period March 11, 1995 through December 31, 1995 which, respectively, are periods before and after the date of the SAIC acquisition discussed below. The data for these two periods were prepared on differing bases of accounting and, accordingly, the comparability of such data with other periods is limited, primarily as a result of goodwill amortization, new corporate services agreements and the repayment of outstanding debt balances. See Note 1 of Notes to Financial Statements for a discussion of the presentation for each of these periods. (2) See Note 2 of Notes to Financial Statements for an explanation of the determination of shares used in computing the unaudited pro forma net income (loss) per share. (3) Net new registrations for each period include gross new registrations less an estimate of registrations that are uncollectible. Net registrations include net new registrations less management's estimate of registrations not renewed. Prior to September 14, 1995, net registrations equaled gross registrations because the Company was reimbursed by the NSF for all registrations under a cost reimbursement plus fixed-fee contract. (4) As adjusted to give effect to the $10,000 dividend to be paid to SAIC upon consummation of the offering and to reflect the sale of 2,800,000 shares of Class A Common Stock offered by the Company hereby at an assumed initial public offering price of $17.50 per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds," "Dividend Policy" and "Capitalization." (5) Includes $31,990 of current deferred revenue at June 30, 1997. (6) Total assets include $31,056 of restricted assets at June 30, 1997. See Notes 2 and 3 of Notes to Financial Statements. RELATIONSHIP WITH SAIC AND FINANCIAL PRESENTATION The Company was acquired by Science Applications International Corporation ("SAIC"), an employee-owned, diversified professional and technical services company, on March 10, 1995. The financial statements of the Company presented for periods subsequent to March 10, 1995 are presented on the new basis of accounting arising from the SAIC acquisition. The Company is currently a wholly- owned subsidiary of SAIC. Upon completion of the offering, SAIC will own 100% of the Company's outstanding Class B Common Stock, which will represent approximately 78.4% of the outstanding Common Stock of the Company (approximately 75.9% if the Underwriters' over-allotment option is exercised in full) and approximately 97.3% of the combined voting power of the Company's outstanding Common Stock (approximately 96.9% if the Underwriters' over-allotment option is exercised in full). As a result, SAIC will continue to have the ability to elect all of the directors of the Company and otherwise exercise control over the business and affairs of the Company. See "Risk Factors -- Control By SAIC," "-- Potential Conflicts of Interest" and "Relationship with SAIC and Certain Transactions" and "Principal and Selling Stockholders." Upon completion of the offering, SAIC will continue to provide certain services to the Company in a manner generally consistent with past practices. Prior to completion of the offering, the Company and SAIC will enter into a number of intercompany agreements with respect to such services and other matters, including a tax sharing agreement. See "Risk Factors -- Intercompany Agreements Not Subject to Arm's Length Negotiations; Reliance on SAIC for Certain Corporate Services," "-- Control of Tax Matters; Tax and ERISA Liability" and "Relationship With SAIC and Certain Transactions." Prior to the acquisition of the Company by SAIC, the Company's business included commercial and government contracts awarded to the Company on a competitive basis, including government contracts that were awarded to the Company based partially upon the Company's then minority-owned status. The contracts which had been awarded to the Company based partially upon the Company's then minority-owned status were transferred into a separately-owned entity prior to the acquisition of the Company by SAIC. In November 1995, SAIC adopted a plan to transfer the Company's remaining government-based business to SAIC in order to enable the Company to focus on the growth of its commercial business, which includes registration services and Intranet services. This transfer was effective as of February 1996. The operating results of both the minority-based government contracts business and the remaining government-based business are reflected as discontinued operations in the Company's financial statements for all periods presented.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030418_bionx_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030418_bionx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d859b1699239d5f9b76c7ec8075a559bed83fdc4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030418_bionx_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." THE COMPANY Bionx Implants, Inc. (the "Company") is a leading developer, manufacturer and marketer of Self-Reinforced, resorbable polymer implants, including screws, pins, arrows and stents, for use in a variety of applications which include orthopaedic surgery, urology, dentistry and maxillo-facial surgery. The Company's proprietary manufacturing processes self-reinforce a resorbable polymer, modifying the gel-like or brittle polymer structure into a physiologically strong structure with controlled, variable strength retention (ranging from three weeks to six months depending upon the medical indication). The Company currently markets its products through managed networks of independent sales agents in the U.S. and independent distributors and dealers in markets outside of the U.S. The Company's nine product lines, representing more than 100 distinct products, were designed to address recognized clinical needs. The Company estimates that its products have been used in over 150,000 surgeries. The Company has received 510(k) clearance from the Food and Drug Administration ("FDA") for the six product lines that it currently markets in the U.S. The Company has also received regulatory approvals for its product lines in certain European and Asian markets. The Company uses several proprietary manufacturing and processing technologies to modify well characterized resorbable polymers (e.g., poly-l- lactic acid ("PLLA") and polyglycolic acid ("PGA")) into appropriately designed, Self-Reinforced (reinforced with material of the same chemical composition as the bulk of the polymer), resorbable implants which can be used safely and reliably in surgical applications. In addition to providing the strength necessary for these applications, the Company's Self-Reinforcing technology also imparts to the resorbable polymer a number of characteristics which enhance the manufacturability of the implants and broaden their potential clinical applications. For example, the Self-Reinforced polymers can be machined (e.g., lathed, heat-treated and forged) into clinically appropriate sizes and modified using custom metal forming techniques to incorporate features, such as ridges and barbs, for improved fixation. See "Business-- Manufacturing." The Company's implants are resorbed by the body (i.e., broken down into sizes that enable the body to dispose of them naturally) over a controlled period of time, based on the indicated use of the particular product. The human skeletal system is comprised of bone, connective tissue (ligaments and tendons) and cartilage, all of which may be damaged as a result of trauma, degenerative disease or surgical intervention. For more than four decades, orthopaedic surgeons have used implantable metal devices, including screws, pins and tacks, to repair skeletal tissue and to facilitate healing. While metal implants have been recognized as the standard of care for fixation of skeletal tissue due to their high strength and low complication rates, these devices have several limitations, including reduction of healed bone strength due to stress shielding (prevention of the transfer of weight-bearing load from the implant to the bone) and the need to remove the implants. First generation resorbable implants were developed in response to the limitations of metal fixation devices. These implants do not require removal following surgery, but are either brittle or overly flexible due to the processes, such as injection molding, which are used in their manufacture. As a result of their low strength, these implants had to be produced in large sizes which limited their clinical utility. The Company developed its Self-Reinforced, resorbable polymer implants -- including pins, screws and other profiled (nonsmooth-surfaced) implants -- in clinically appropriate sizes to address the limitations of metal implants and first generation resorbable implants. See "Business-- Traditional Approaches to Fixation," "--Limitations of Traditional Approaches" and "--Self-Reinforced, Resorbable Implants." The Company has leveraged its Self-Reinforcing platform technology to develop and introduce high quality, clinically proven, resorbable implants into major segments of the medical device industry. The Company's Self-Reinforced, resorbable implants include pins and screws for repair of fractures of the ankle, hand, knee, elbow, wrist and foot, resorbable stents for use in urological procedures, and the Meniscus Arrow, the first resorbable, arthroscopically administered fixation device designed for use in the repair of longitudinal, vertical tears of the medial and lateral meniscus of the knee. Prior to the introduction of the Meniscus Arrow, damaged menisci could only be treated through complex suturing techniques or removal of the torn section. The Meniscus Arrow has demonstrated the ability to reduce operating room time by approximately 50% and to decrease the risk of arterial and nervous system complications which may occur with suturing techniques. See "Business-- Products." The Company is also developing more than ten additional Self-Reinforced, resorbable polymer implants for approximately 18 different applications. Products under development include PLLA plates and anchors, intramedullary nails, resorbable joint prostheses, and ultra-high strength resorbable composites, all of which are planned for commercial introduction within the next several years. See "Business--Product Development." The Company's use of well known and well characterized polymers has, to date, allowed for clearance of the Company's orthopaedic products by 510(k) submissions. The FDA is familiar with the toxicological properties of these polymers, and has not required extensive preclinical or clinical tests prior to granting marketing clearance. In certain recent cases, clearances have been obtained within 90 days after submission. The Company believes that many of its products under development for orthopaedic and related applications will be subject to clearance by 510(k) submissions, while certain of its other products, including urology stents, are or may be subject to a more extensive regulatory approval process. No assurances can be given as to whether or when products to be submitted by the Company to the FDA will receive the necessary clearances or approvals. See "Business--Government Regulation." THE OFFERING Common Stock Offered................ 2,000,000 shares Common Stock Outstanding after this Offering............................ 8,638,122 shares(1) Use of Proceeds..................... To establish a manufacturing capability in the U.S. and expand manufacturing capacity in Finland, to fund increased research and development, to expand sales and marketing, to fund working capital and for other general corporate purposes, including repayment of certain long-term debt. Proposed Nasdaq National Market Symbol.............................. BINX - -------- (1) Excludes 424,382 shares of Common Stock reserved for issuance pursuant to stock options outstanding as of December 31, 1996. Also excludes an aggregate of 425,618 shares of Common Stock reserved for future issuance under the Company's Stock Option/Stock Issuance Plan as of December 31, 1996. See "Management -- Stock Option/Stock Issuance Plan" and "Description of Capital Stock" and Note 11 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, --------------------------------------------- 1992(1) 1993(1) 1994 1995 1996 --------- --------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPER- ATIONS DATA: Revenues....................... $1,522 $1,177 $ 1,280 $ 1,622 $ 5,379 Gross profit................... 951 831 804 1,084 3,165 Operating expenses............. 1,668 1,135 883 2,439 7,819 Operating loss................. (717) (304) (79) (1,355) (4,654) Net loss....................... (651) (219) (162) (1,478) (4,992) Pro forma net loss per share(2)...................... (0.78) Shares used in computing pro forma net loss per share(2)... 6,400 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 -------------------------------------- PRO FORMA ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4) ------ ------------ ----------------- (IN THOUSANDS) <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital........................ $2,046 $2,546 $25,741 Total assets........................... 9,370 9,870 33,065 Long-term debt less current portion.... 590 590 590 Mandatorily redeemable convertible preferred stock....................... 5,000 -- -- Accumulated deficit.................... (7,686) (7,686) (7,686) Total stockholders' equity............. 1,023 6,523 29,718 </TABLE> - -------- (1) Consolidated Statement of Operations data for the years ended December 31, 1992 and 1993 have been derived from unaudited financial statements of the Company. (2) See Note 2 of Notes to Consolidated Financial Statements for information concerning the computation of pro forma net loss per share. (3) Gives effect to the automatic conversion of all outstanding shares of Preferred Stock of the Company into 1,052,638 shares of Common Stock, the assumed issuance of 267,060 shares of Common Stock upon the exercise of warrants and the assumed receipt of net proceeds of $500,000 in connection with the exercise of warrants. (4) Adjusted to give effect to the receipt of the net proceeds from the sale of the 2,000,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $13.00 per share and after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company). ---------------- Unless otherwise indicated, all information in this Prospectus (i) assumes the Underwriters' over-allotment option is not exercised, (ii) reflects a 1 for 1.9 reverse stock split of the Common Stock effected on February 24, 1997 (the "Reverse Stock Split"), (iii) gives effect to the conversion of all outstanding shares of Preferred Stock into 1,052,638 shares of Common Stock which will occur upon the closing of this Offering (the "Preferred Stock Conversion") and (iv) assumes that a total of 267,060 shares of Common Stock will be issued upon the exercise of warrants and that the Company will receive net proceeds of $500,000 in connection with the exercise of warrants on or before the Closing of this Offering (the "Warrant Exercise"). See "Description of Capital Stock,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030480_telepasspo_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030480_telepasspo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8d8bd7843ba103af8e54d61a2c3680e501f953ea
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030480_telepasspo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and Consolidated Financial Statements and other financial data appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus (i) assumes no exercise of the overallotment option and (ii) has been adjusted to give effect to the Reorganization (as defined herein). As used herein unless the context otherwise indicates, the terms "Company" and "TelePassport" refer to the TelePassport Companies (as defined herein) as of dates and periods prior to the closing of the Reorganization and, thereafter, collectively, TelePassport Inc. and its subsidiaries. See "Business--Reorganization." See "Glossary of Terms" for definitions of certain technical terms used in this Prospectus. THE COMPANY GENERAL TelePassport is a provider of international telecommunications services. The Company conducts business on a global basis with a principal focus on small and medium-sized businesses and residential customers with significant international long distance traffic in the United Kingdom, Germany, Austria, Switzerland and other targeted areas of Europe, in Japan and other targeted Asian countries and in certain countries of southern Africa. The Company has also commenced efforts to sell national telecommunications services in certain of these areas. The Company is developing a digital switch-based telecommunications network connected by leased fiber optic transmission facilities (the "TelePassport Network"). The TelePassport Network currently has international gateway switching centers in New York and Tokyo and has switching facilities in London and Vienna. The Company intends to use a significant portion of the net proceeds of the Offering to expand and upgrade the TelePassport Network. The construction of a state-of-the-art international gateway switching center and network management facility in New Jersey is substantially completed and will replace the New York international gateway switching center. The Company intends to further develop the TelePassport Network by upgrading existing facilities and by adding switching facilities in up to 30 cities over the next three years. These switching facilities will be located principally in primary markets where the Company has an established customer base or has existing key contracts, as well as in secondary markets in proximity to the Company's primary markets. Switching facilities are expected to be installed in Frankfurt, Milan, Naples, Paris and Zurich by the end of 1997. In areas in which the Company believes it is not optimal to own network facilities, the Company typically enters into agreements to resell the facilities of other operators in order to enhance the TelePassport Network. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company provides international long distance services with value-added features, primarily under the "TelePassport" brand. The Company believes its services are typically competitively priced below those of the incumbent telecommunications operators ("ITOs"), which are often government-owned or protected telephone companies. Customer access to the TelePassport Network and the Company's services may be obtained through customer-paid local access, domestic and international toll-free access, direct digital access through dedicated lines for high volume business users, equal access through automated routing from the public switched telephone network ("PSTN"), or call reorigination. The availability of a particular access method in any geographic area is governed by local laws and regulations, customer size and the degree to which the Company has infrastructure to support the access method in such area. The Company's services include virtual private network ("VPN") services, customized calling cards and prepaid debit cards. The Company also offers value-added features such as itemized billing and multiple payment methods. In addition, the Company provides application platform services and resells switched minutes on a wholesale basis to other telecommunications providers and carriers. The Company believes that Japan and certain other Asian countries provide the Company with significant opportunities for growth. In order to facilitate entry into the Japanese telecommunications market, the Company has established strategic relationships with certain Japanese telecommunications providers. In March 1995, the Company and Asahi Telecom Co., Ltd. ("Asahi Telecom") began operating a joint venture that provided international long distance services in Japan. Asahi Telecom is owned 33.5% by Japan Telecom [MAP INSERTED ON INSIDE FRONT COVER FOLDOUT] MAP -- reflecting the various locations in the United States, Europe and Asia in which the Company has existing switching facilities and intends to locate additional switching facilities over the next three years. The map also reflects United States Air Force -- Europe bases where the Company has installed and is installing telecommunications systems. Co., Ltd. ("Japan Telecom") and 9.0% by NEC Corporation ("NEC"), and is an agent for Japan Telecom's long distance services and a distributor of NEC PBXs in Japan. Asahi Telecom recently commenced the construction of a nationwide network and began offering one of Japan's first integrated national and international long distance telecommunications services through its wholly owned subsidiary, A.T. NET K.K. ("A.T. NET"). In an effort to enhance its presence in the Japanese telecommunications market, in March 1997, the Company, together with A.T. NET and Asahi Telecom, entered into a series of agreements (the "A.T. NET Agreements") pursuant to which the Company, in replacement of the joint venture, became the carrier of international long distance traffic for A.T. NET, Asahi Telecom and their respective affiliates, the Company sold its interest in the joint venture to Asahi Telecom and purchased certain equipment and other assets of the joint venture, including the rights to the joint venture's non-Japanese and private line customers, which accounted for approximately 10% of its revenues, and the Company became entitled to receive preferential pricing as a reseller of A.T. NET's national long distance services in Japan. To the extent allowed by applicable regulations, the Company intends to resell A.T. NET's national long distance services and offer, along with its own international long distance services, an integrated TelePassport national and international long distance service primarily to non-Japanese companies located in Japan, a significant customer segment that A.T. NET does not currently target. The A.T. NET Agreements also provide that, to the extent A.T. NET offers customized calling cards and prepaid debit cards for its customers, the Company will provide such cards and will supply the related national and international long distance services to such cardholders, and that A.T. NET and Asahi Telecom are required to enter into arrangements to provide to the Company's customers those services permitted by A.T. NET's Special Type II registration, which would effectively permit the Company to provide additional telecommunications services in Japan. In addition, the Company has exercised an option to acquire a 10% ownership interest in A.T. NET and the Company is entitled to designate one representative to A.T. NET's board of directors. The Company believes that its relationship with Asahi Telecom and ownership interest in A.T. NET provide the Company with both a greater opportunity to competitively penetrate the Japanese market and advance the TelePassport brand and an added competitive advantage with respect to its wholesale business by allowing it to originate and terminate international traffic cost effectively from and to major metropolitan areas of Japan. The Company intends to utilize the TelePassport brand recognition that it is creating in Japan as a platform from which to expand into other targeted Asian countries. In addition to targeting small and medium-sized businesses and residential customers, the Company markets its services to supra-national and governmental organizations. The Company believes that contracts to provide services to such entities are strategically important because they present the Company with the opportunity to establish a high profile in the regions surrounding the locality of each contract, enhancing opportunities for new customer development. In addition, contracts of this type will usually require the Company to establish switching facilities and other infrastructure which the Company can then utilize to expand its customer base in the region. In May 1996, the Company was awarded a contract to provide, on a ten-year basis, local exchange and national and international telecommunications services to the temporary lodging facilities on currently up to 14 United States Air Force--Europe ("USAFE") bases (the "USAFE Contract"). Under the terms of the USAFE Contract, the Company, to date, has received delivery orders for two bases in Germany and one base in Italy and has received requests for pricing ("RFPs") for nine bases: two in Germany, five in the United Kingdom, one in Spain and one in Turkey. The Company has completed the installation of telecommunications systems providing voice and data service to temporary lodging facilities at the Ramstein and Rhein Main Air Force Bases in Germany. The Company expects to complete the installation of systems at nine additional bases by the end of 1997. The Company believes that the USAFE Contract will also provide an opportunity to expand its services to the permanent dormitories at USAFE bases. In addition, pursuant to the terms of the USAFE Contract, certain agencies within the other branches of the United States armed forces in Europe have the option to designate the Company as a supplier of telecommunications services and to present delivery orders for certain of their facilities. The Company intends to take advantage of these contractual terms by actively pursuing delivery orders from other United States military facilities in Europe. Further, the Company is a supplier of call reorigination services for offices of certain United Nations ("UN") agencies and their affiliates in over 100 countries and for other supra-national food, health, fiscal and labor organizations (collectively, the "UN Arrangements"). The Company believes that the services it provides to these organizations help to develop its customer base by establishing a high profile in local regions surrounding their offices. The Company typically relies on local independent sales agents for distribution of its services. In locations the Company deems strategic, the Company generally seeks to integrate distribution and interface directly with its customers by acquiring independent agents, establishing country managers, and/or creating direct sales organizations. The Company believes that the integration of its distribution network will give it greater control over its sales and marketing functions and provide a higher level of service to its customers. Accordingly, in March 1997, the Company entered into agreements to acquire all the capital stock of each of Telepassport GmbH ("TelePassport Germany"), its independent agent in Germany, and TelePassport Telekom GmbH ("TelePassport Austria"), its independent agent in Austria (collectively, the "Agent Acquisitions"). The Agent Acquisitions are expected to be consummated concurrently with the closing of the Offering. An important element of the Company's business plan is the pursuit of strategic acquisitions, investments and alliances. In January 1997, the Company entered into an agreement with Intelenet, Inc. ("Intelenet"), a reseller of telecommunications services, pursuant to which Intelenet granted the Company an option to purchase Intelenet's customer accounts principally in Naples and Milan, Italy, as well as telecommunications equipment (the "Intelenet Agreement"). The acquisition of these assets (the "Intelenet Acquisition") will provide the Company with an immediate customer base in the Milan and Naples markets, which should enable the Company thereafter to expand the TelePassport Network into additional cities in Italy. Also, in March 1997, the Company entered into an agreement (the "HCL Agreement") to acquire all the capital stock of Hercules Consultants, Limited ("HCL"), an alternative network access consultant and installer of PBXs in the United Kingdom. The Company anticipates that the acquisition of HCL (the "HCL Acquisition;" and together with the Agent Acquisitions, the "Acquisitions") will expand the Company's existing customer base in the United Kingdom through the marketing of TelePassport services to HCL's customers, and will enable the Company to offer an integrated package of PBXs and TelePassport services in the United Kingdom. The Company has achieved significant growth since its inception in 1993 with revenues increasing from $2.1 million in 1993 to $12.8 million in 1994, $27.6 million in 1995 and $36.6 million in 1996. The number of customers (at the end of the period) and billable minutes, respectively, increased from 9,118 and 11.9 million in 1994 to 12,378 and 32.8 million in 1995 and 15,683 and 53.5 million in 1996. STRATEGY The Company seeks to capitalize on the fundamental changes occurring in the telecommunications industry as a result of increasing demand for international telecommunications services, rapid advances in technology and a growing worldwide trend toward deregulation. The Company believes that these factors have created opportunities for alternative network operators to effectively compete with ITOs and major global commercial carriers. The Company believes it is strategically positioned to take advantage of these fundamental changes for the following reasons: - The Company's services are sold in over 100 countries, primarily under the "TelePassport" brand, which the Company can leverage as it expands into new locations and introduces additional services; - The development of the TelePassport Network in the United Kingdom, Germany, Austria, Switzerland, Italy and other targeted areas of Europe, and in Japan and other targeted Asian countries, will enable the Company to take advantage of deregulation in these markets; - The unique relationship with Asahi Telecom and A.T. NET provides the Company with competitive advantages in accessing the Japanese market and a platform from which to expand to other targeted Asian countries; - Contracts and arrangements with governmental and supra-national organizations, such as the USAFE Contract and the UN Arrangements, present the Company with long-term revenue potential and opportunities to enhance its reputation and profile in underserved markets; - The Company's call reorigination business enables it to gain low-cost entry into numerous markets, to establish distribution networks, to build customer bases and to identify opportunities prior to significant investment; and - The Company's management team, with its substantial combined telecommunications and related businesses experience and strong entrepreneurial leadership, provides the Company with the managerial skills to exploit available market opportunities. The Company's objective is to become a leading provider of switch-based international and national telecommunications services in its target markets. The Company's business strategy includes the following key elements: (i) development of the TelePassport Network in primary markets where the Company has an established customer base or has existing key contracts and into secondary markets in proximity to the Company's primary markets; (ii) maximizing operating efficiency by achieving economies of scale in the operation of the TelePassport Network and enhancing its information systems; (iii) integrating its distribution and interfacing directly with customers by acquiring independent agents, establishing country managers, and/or creating direct sales organizations in strategic locations; (iv) focusing on small and medium-sized businesses, and providing those customers with a wide range of services; (v) expanding the government services and supra-national sectors; (vi) expanding distribution, customer bases and brand recognition through the use of call reorigination; (vii) expanding wholesale services to increase the utilization of the TelePassport Network; and (viii) pursuing acquisitions, investments and strategic alliances. ------------------------ TelePassport was organized in Delaware on December 9, 1996 to acquire and continue the various businesses conducted by USFI, Inc., USFI-Japan, L.L.C. and TelePassport L.L.C. and its operating subsidiaries (collectively, the "TelePassport Companies"). USFI, Inc., the Company's principal operating subsidiary, was incorporated in New York in January 1993. Prior to the effective date of the registration statement of which this Prospectus is a part, the Company will complete the Reorganization pursuant to which TelePassport L.L.C. will be merged with TelePassport Inc. and all the outstanding shares and interests in USFI, Inc. and USFI-Japan, L.L.C. will be contributed to TelePassport Inc. From and after the date of the Reorganization, all the assets and business of USFI, Inc. and USFI-Japan, L.L.C. will be owned and conducted by TelePassport Inc. and such entities will become wholly owned subsidiaries of TelePassport Inc. The Company's executive offices are located at 1212 Avenue of the Americas, New York, New York, 10036-9998, and its telephone number is (212) 302-3365. THE OFFERING <TABLE> <S> <C> Class B Common Stock offered hereby: U.S. Offering...................... 4,000,000 shares International Offering............. 1,000,000 shares --------- Total Offering.................. 5,000,000 shares ========= Common Stock to be outstanding after the Offering: Class A Common Stock............... 7,350,000 shares Class B Common Stock............... 5,340,000 shares(1) Voting Rights........................ The Class A Common Stock and the Class B Common Stock will vote together as a single class on all matters, except as otherwise required by law, with each share of Class B Common Stock having one vote and each share of Class A Common Stock having ten votes. Upon completion of the Offering and after giving effect to the Acquisitions, the Company's current stockholders will own 100% of the outstanding Class A Common Stock, which will represent 92.7% of the combined voting power of the shares of Class A Common Stock and Class B Common Stock. See "Principal Stockholders" and "Description of Capital Stock." Use of Proceeds...................... To upgrade and expand the TelePassport Network; to integrate distribution through acquisitions (including the Agent Acquisitions); to acquire businesses or invest in joint ventures or strategic alliances (including A.T. NET and HCL); for research and development and general corporate and working capital purposes. See "Risk Factors--Substantial Capital Requirements; Need for Additional Financing to Complete Network Expansion; Uncertainty of Additional Financing; Broad Discretion Over Use of Proceeds" and "Use of Proceeds." Proposed NNM Symbol.................. TEPP </TABLE> - --------------- (1) Includes: (i) 66,667 shares of Class B Common Stock to be issued in connection with the HCL Acquisition; (ii) 253,333 shares of Class B Common Stock to be issued in connection with the acquisition of TelePassport Germany, including 80,000 shares of Class B Common Stock to be issued and held in escrow subject to vesting over 36 months; and (iii) 20,000 shares of Class B Common Stock to be issued in connection with the acquisition of TelePassport Austria and held in escrow subject to vesting over 36 months (in each case, assuming that the initial public offering price of the Class B Common Stock is the mid-point of the range indicated on the front cover of this Prospectus). Excludes: an aggregate of 1,903,500 shares of Class B Common Stock, consisting of (i) 886,390 shares of Class B Common Stock reserved for issuance upon exercise of options outstanding as of the date of this Prospectus under the Company's Long Term Incentive Plan (the "Long Term Incentive Plan"); and (ii) 1,017,110 shares of Class B Common Stock reserved for issuance pursuant to options to be issued in the future under the Long Term Incentive Plan. In the event the over-allotment option is exercised in full, the total number of shares of Class B Common Stock to be outstanding after the Offering would be 6,090,000. See "Business--Acquisitions,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030484_renaissanc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030484_renaissanc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..89fb89e5502a780a85b77be6baf20b8e9205a5f5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030484_renaissanc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, the term "Company" includes Advantage Learning Systems, Inc. ("ALS") and its wholly-owned subsidiaries, IPS Publishing, Inc. ("IPS") and the Institute for Academic Excellence, Inc. (the "Institute"), including their operations while owned by affiliates of the Company. The historical financial information presented herein represents the combined results of these three entities prior to January 2, 1997, at which time IPS and the Institute became wholly-owned subsidiaries of ALS. See "Certain Transactions." For periods subsequent to January 2, 1997, the historical financial information represents the consolidated results of ALS and its subsidiaries. In addition, unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) has been adjusted to reflect the filing of the Company's Amended and Restated Articles of Incorporation, and (iii) has been adjusted to reflect a 133.31 for 1 stock split in the form of two stock dividends. THE COMPANY The Company is a leading provider of learning information systems to kindergarten through senior high ("K-12") schools in the United States and Canada. The Company's learning information systems consist of computer software and related training designed to improve student academic performance by increasing the quality, quantity and timeliness of performance data available to educators and by facilitating increased student practice of essential skills. The Company's flagship product, the Accelerated Reader, is software for motivating and monitoring increased literature-based reading practice. As of June 30, 1997, the Accelerated Reader had been sold to approximately 29,700, or 24%, of the K-12 schools in the United States and Canada. In a survey by Quality Education Data, Inc., the Accelerated Reader was the software product that educators most frequently cited as being used to improve the quality of education in K-12 schools. The Company believes that the Accelerated Reader has achieved this leading market position as a result of its demonstrated effectiveness in improving student reading levels and overall academic performance. The Company's learning information system products also include the Standardized Test for Assessment of Reading (S.T.A.R.), a computer-adaptive reading test and database, and the Reading Renaissance program, through which the Company provides professional development training for educators. Originally introduced in 1986, the Accelerated Reader administers computer- based multiple choice tests on books popular among students in grades K-12 and provides educators with more than 20 reports from which to monitor the amount and quality of each student's reading practice. Through June 30, 1997, the Company had developed tests on approximately 12,000 books and expects to develop approximately 1,500 additional tests in the second half of 1997. In 1994, the Company began offering Reading Renaissance training seminars to provide educators with professional development training to most effectively use the Accelerated Reader and the information it generates. As of June 30, 1997, approximately 39,500 educators have attended Reading Renaissance training seminars. In 1996, the Company released S.T.A.R. which enables educators to quickly obtain student reading scores statistically correlated to national norms. The results from S.T.A.R. provide educators with a database of statistically accurate reading level information on their students, from which they can generate useful reports and adjust instructional strategies accordingly. To expand its learning information system offerings into additional academic areas, in August 1996 the Company acquired IPS, a provider of algorithm-based software for assessment and skills practice in math and science. Educators, parents and opinion leaders in the United States are increasingly focusing on improving essential academic skills of students, and, in particular, their reading and math proficiency. President Clinton's emphasis on education in his State of the Union address earlier this year, the Department of Education's Goals 2000 program, the Learning to Read, Reading to Learn campaign, an increase in Title I funding, and the activities of the Education Commission of the States are indicative of this growing focus. This focus and the resulting initiatives, as well as the growing role of technology in the K- 12 marketplace, have created an increased demand for effective technology-based solutions which improve academic performance. The Accelerated Reader, coupled with S.T.A.R. and the techniques taught in the Reading Renaissance training program, improves student academic performance by providing educators with an effective system to motivate students to practice reading. The Company's products also provide educators with objective, timely and accurate information to manage the learning process. Unlike many technology-based solutions which compete with the educators' role, the Company's products support educators and complement their existing curricula and instructional methodologies. In addition, the Company's products utilize a school's existing computers and books commonly found in most K-12 school libraries, while the cost of the Company's products generally enables schools to purchase such products within their normal budgets. The Company seeks to establish its products as the de facto standard for facilitating growth in reading ability, and ultimately in other essential academic skill areas in grades K-12. The key elements of this strategy consist of adding new customer schools, intensifying and expanding the use of the Company's products in existing customer schools, offering new products in other areas of the curriculum, expanding the Company's international marketing and sales, and expanding the Company's strategic marketing alliances. The Company was founded in 1986 and is incorporated under the laws of the State of Wisconsin. The Company's principal executive offices are located at 2911 Peach Street, Wisconsin Rapids, Wisconsin 54495-8036 and its telephone number is (715) 424-3636. The Company's World Wide Website is located at http:\\www.advlearn.com. Information contained in this Website is not deemed to be a part of this Prospectus. THE OFFERING <TABLE> <S> <C> Common Stock offered by the 2,800,000 shares Company........................... Common Stock to be outstanding 16,489,594 shares(1) after the Offering................ Use of Proceeds.................... For payment of undistributed S corporation earnings, repayment of construction-related indebtedness, repayment of acquisition-re- lated indebtedness to principal sharehold- ers, payment to Company employees pursuant to certain employee benefit plans and gen- eral corporate purposes, including working capital and new product development. See "Use of Proceeds." Nasdaq National Market symbol...... ALSI </TABLE> - -------- (1) Includes 38,461 shares to be issued upon closing of the Offering in connection with the Company's acquisition of IPS (assuming an initial public offering price of $13.00 per share). Excludes 1,500,000 shares of Common Stock reserved for issuance pursuant to the Company's 1997 Stock Incentive Plan, of which 277,846 shares were subject to options outstanding immediately prior to the Offering (assuming an initial public offering price of $13.00 per share). See "Certain Transactions" and "Management-- Executive Compensation--1997 Stock Incentive Plan." SUMMARY HISTORICAL AND PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA) <TABLE> <CAPTION> SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------------------------- --------------- PRO FORMA 1992 1993 1994 1995 1996 1996(1) 1996 1997 ------ ------- ------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales............... $3,171 $ 5,288 $ 8,251 $12,605 $22,381 $23,062 $ 9,474 $16,545 Gross profit............ 2,742 4,718 7,148 10,542 18,154 18,928 7,875 13,565 Purchased research and development(2)......... -- -- -- -- 3,400 3,400 -- -- Operating income........ 1,276 2,047 2,999 3,449 3,013 2,784 2,938 5,117 Income before taxes..... 1,298 2,070 3,022 3,462 2,858 2,419 2,955 4,752 Net income(2)........... 1,298 2,070 3,022 3,462 4,460 4,199 2,955 3,151 PRO FORMA DATA: Income before taxes..... $ 2,419 $ 5,121 Net income(3)........... 1,440 3,047 Net income per share(4). $ 0.11 $ 0.22 Weighted average shares outstanding(4)......... 13,651 13,651 OTHER OPERATING DATA(5): Number of Accelerated Reader customer schools................ 7,000 10,400 14,500 19,500 26,000 23,500 29,700 Number of Accelerated Reader book test titles................. 1,700 2,800 5,000 7,500 10,000 8,200 12,000 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------ AS ACTUAL ADJUSTED(6) ------- ---------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................ $ 1,343 $15,269 Total assets............................................... 20,319 34,794 Notes payable and long-term debt, including current portion................................................... 11,550 -- Shareholders' equity....................................... 2,370 28,873 </TABLE> - -------- (1) Reflects the acquisition of IPS as if it occurred on January 1, 1996. Adjustments consist of (i) IPS results for the seven months ended July 31, 1996, (ii) the exclusion of revenues ($744,000) and related costs ($180,000) associated with an IPS contract not acquired in the acquisition, (iii) additional amortization of intangibles ($143,000), (iv) additional interest expense ($268,000) and (v) the income tax effect related to such adjustments ($178,000). (2) In connection with the acquisition of IPS, $3.4 million of the purchase price was allocated to purchased research and development which was expensed in August 1996. See Note 3 of Notes to the Company's Financial Statements. As a result, net income exceeds income before taxes in 1996 due to the tax benefit recorded by IPS which is primarily related to the expensed purchased research and development. Effective January 1, 1997, IPS elected S corporation status. As a result, the 1997 tax provision represents the write-off of the deferred tax asset associated with IPS when it was a C corporation. The previously recognized deferred tax asset will be reinstated upon the completion of the Offering. (3) Pro forma net income has been computed as if the Company had been a C corporation rather than an S corporation for income tax purposes, based upon an assumed effective federal and state tax rate of 40.5%. See "S Corporation Distribution." (4) Pro forma net income per share and weighted average shares outstanding reflect (i) the shares outstanding as of January 2, 1997, reflecting the issuance of shares by ALS to acquire IPS and the Institute and (ii) the 133.31 for 1 stock split. (5) Represents the cumulative number of schools to which the Accelerated Reader has been sold at year end and the cumulative number of book test titles available at year end, as indicated. (6) As adjusted to reflect the sale of 2,800,000 shares of Common Stock offered hereby, at an assumed initial public offering price of $13.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030485_neomagic_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030485_neomagic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7884ebd33291cb921715cd329e424c0954b0928b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030485_neomagic_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY NeoMagic Corporation ("NeoMagic" or the "Company") designs, develops and markets multimedia accelerators for sale to notebook PC manufacturers. The Company, based on its knowledge of and experience in the industry, believes it has developed the first commercially available silicon technology that integrates large DRAM memory with analog and logic circuitry to provide high performance multimedia solutions on a single chip. The Company's MagicGraph128 family of pin-compatible, multimedia accelerator products incorporates a 128- bit memory bus. The Company believes these products enable notebook PC manufacturers to deliver state-of-the-art multimedia capability while decreasing power consumption, size, weight, system design complexity and cost. Eight of the world's ten largest notebook PC manufacturers have designed or are designing notebook PCs to include MagicGraph128 products. MagicGraph128 products are currently used in notebook PCs sold by Acer, Compaq, Dell, Digital Equipment, Fujitsu, Hewlett-Packard, Hitachi, Mitsubishi, NEC, Sharp and Texas Instruments. NeoMagic sells its products either directly to these companies or to subcontractors of such companies. NeoMagic's MagicGraph128 family of products ranges from accelerators designed for notebook PCs that target cost-conscious consumers to fully-featured multimedia systems designed for high-end notebook PCs. The Company introduced its first MagicGraph128 product in March 1995, is currently in production with three products and is sampling the fourth generation of its MagicGraph128 product family. NeoMagic has established strategic relationships with Mitsubishi Electric Corporation and Toshiba Corporation to produce semiconductor wafers for the Company's products. Pursuant to these strategic relationships, NeoMagic designs the overall product, including the logic and analog circuitry, and the manufacturing partner designs the DRAM module, manufactures the wafers and performs memory testing and repair. NeoMagic is focused on leveraging its core competencies in logic, analog and memory integration, graphics/video multimedia technologies, driver and BIOS software, and power management to continue developing solutions to further facilitate the mobilization of multimedia applications. THE OFFERING <TABLE> <S> <C> Common Stock offered.... 3,000,000 shares Common Stock to be outstanding after the offering............... 23,332,205 shares(1) Use of proceeds......... For general corporate purposes, including working capital and capital expenditures Proposed Nasdaq National Market symbol.......... NMGC </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> FISCAL YEAR ENDED PERIOD FROM MAY 26, JANUARY 31, 1993 (INCEPTION) THROUGH ------------------------- JANUARY 31, 1994 1995 1996 1997 ------------------------ ------- ------- ------- <S> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net sales.................. $ -- $ -- $ 243 $40,792 Gross profit............... -- -- 78 12,142 Loss from operations....... (773) (4,891) (7,072) (1,483) Net loss................... $(757) $(4,791) $(6,869) $(1,163) Pro forma net loss per share(2).................. $ (.05) Shares used in computing pro forma net loss per share(2).............. 21,754 </TABLE> <TABLE> <CAPTION> JANUARY 31, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents................................ $13,458 $40,458 Working capital.......................................... 1,398 28,398 Total assets............................................. 27,464 54,464 Long-term obligations.................................... 1,194 1,194 Total stockholders' equity............................... 4,200 31,200 </TABLE> - ------- (1) Based on shares of Common Stock outstanding as of January 31, 1997. Excludes shares to be sold in the Direct Sales. Also excludes 2,440,750 shares of Common Stock issuable upon the exercise of options under the Company's Amended and Restated 1993 Stock Plan (the "Stock Plan"), 316,743 shares of Common Stock issuable upon the exercise of warrants outstanding as of January 31, 1997, 2,427,387 shares reserved for future grant under the Stock Plan as of January 31, 1997 and 500,000 shares of Common Stock reserved for issuance under the Company's Employee Stock Purchase Plan. See "Management--Employee Benefit Plans" and Note 6 of Notes to Consolidated Financial Statements. (2) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the determination of shares used in computing pro forma net loss per share. (3) As adjusted to reflect the conversion of Preferred Stock to Common Stock which will occur upon the closing of the offering and the sale by the Company of 3,000,000 shares of Common Stock offered hereby at an assumed offering price of $10.00 per share (after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company). See "Use of Proceeds" and "Capitalization." Does not reflect the sale of any shares pursuant to the Direct Sales.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030517_falconite_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030517_falconite_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0a7d361943a0104e530e51e513b2d3380d6202d8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030517_falconite_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. For purposes of this Prospectus, unless the context otherwise requires, the "Company" or "Falconite" refers to Falconite, Inc. and its subsidiaries. Unless otherwise indicated, the information in this Prospectus: (i) gives effect to the Combination (as defined below); and (ii) assumes that the over-allotment option granted to the Underwriters is not exercised. See "The Company" and "Underwriting." THE COMPANY Falconite is a leading rental equipment company serving a diverse range of more than 5,000 active commercial customers from locations in nine southern and midwestern states. The Company's rental fleet includes over 3,000 units and consists primarily of large equipment, such as aerial work platforms, cranes and forklifts, as well as other industrial and construction equipment. The Company rents equipment on a daily, weekly and monthly basis and, occasionally, for periods of up to one year. The Company also is a distributor of new equipment for several leading manufacturers and sells used equipment from its rental fleet, in addition to complementary parts, supplies and accessories. The Company's customers operate in a wide range of industries, including commercial construction, chemical, petrochemical, pulp and paper, automotive and utilities. The Company focuses on renting large equipment, which generates high revenue per unit, and believes that it differentiates itself by seeking to offer one of the most comprehensive and well maintained fleets of such equipment in its market areas. Aerial work platforms, which include scissor lifts, boom lifts and personnel lifts, together with cranes and forklifts comprised approximately 88% of the Company's rental fleet as of December 31, 1996, based on original cost. The original per unit cost of the Company's rental fleet ranges up to $1.2 million, with an average per unit cost of approximately $27,200 as of December 31, 1996. At such date, the Company's fleet had an average age of approximately 19 months and an aggregate original cost of $94.6 million. Falconite currently operates from 17 locations, eight of which were opened in November and December 1996, and plans to open one additional location during 1997. The Company tailors its equipment fleet at each location to meet the needs and preferences of the local customer base. The Company's locations are managed by experienced professionals who average approximately 15 years of service in the rental equipment industry, and who have knowledge of their local markets and substantial established customer contacts. The Company's products and services are marketed through a dedicated sales force consisting of approximately 70 individuals. Each location generally serves customers within a 100-mile radius and offers a broad selection of equipment for rental and sale, as well as repair and maintenance services. The Company has sought to position its product and service offerings to enable its customers to outsource non-core operations. Outsourcing of equipment needs allows customers to more efficiently deploy capital, substitute variable costs for fixed costs, eliminate maintenance and storage costs associated with equipment ownership and ensure access to new and modern equipment. The Company believes that this trend has created significant growth opportunities in the equipment rental industry. The industry, which is highly fragmented, generated revenues estimated at $15 billion in 1995, with the largest 100 companies accounting for approximately 20% of such amount, according to published reports. From 1994 to 1996, the Company's revenues increased at a compound annual rate of 43.8%, from $23.2 million to $48.1 million, while its operating income increased at a compound annual rate of 33.1%, from $6.8 million to $12.1 million. The Company believes it can continue its growth in revenue and income by pursuing the following business and growth strategies: BUSINESS STRATEGIES - Focus on Large, High Revenue Per Unit Equipment. The Company focuses on renting large equipment, which generates higher revenue per unit than smaller, less costly equipment. The Company believes this focus allows it to favorably leverage its overhead costs over a larger stream of rental revenue per unit. In addition, the Company believes that there is strong demand for renting this larger equipment because it enables customers to avoid the significant capital investments required to purchase such equipment, as well as ongoing expenses for maintenance, repair and storage. - Operate as an Efficient Low Cost Provider. As a distributor with high volume purchases of equipment in its primary product categories, Falconite is able to acquire a significant portion of its equipment directly from manufacturers at wholesale prices. This purchasing power enhances the Company's ability to offer competitive rental rates and resell its used equipment at favorable margins. Moreover, the Company's focus on large equipment with high revenue per unit has enabled it to operate more efficiently and with a lower level of staffing than that required by other equipment rental companies that have lower revenue per unit fleets. - Serve Diverse Commercial Customer Base. Falconite primarily serves commercial customers that operate in a wide variety of commercial construction and industrial sectors. By serving commercial accounts, the Company is able to provide large equipment and maximize its revenue per customer. Also, by serving a well diversified base of customers, the Company is able to reduce its dependence on a single industry. In addition, Falconite is not dependent on a single large customer, with no customer accounting for more than 2% of Falconite's revenues in 1995 or 1996. Falconite provides its products and services to companies such as Amoco Corporation, Brown & Root, Inc., Champion Papers, Inc., Chrysler Corporation, Fluor Daniel, Inc. and the Tennessee Valley Authority. - Offer Superior Products and Customer Service. The Company attracts new customers and retains existing customers by offering: (i) a comprehensive selection of aerial work platforms, cranes and forklifts, which in many cases is not available from its competitors in the Company's market areas; (ii) timely delivery of rental equipment seven days a week, generally within 24 hours, through its own radio-dispatched fleet; (iii) high quality equipment from leading manufacturers including JLG, Genie, Manitex, Broderson, Gehl and Lull; (iv) well maintained and modern equipment, which as of December 31, 1996, had an average age of approximately 19 months; (v) on-site maintenance and repair services available 24 hours a day; and (vi) equipment safety and training programs. GROWTH STRATEGIES - Expand Through New Locations. The Company intends to expand by opening new locations in selected markets. In 1997, the Company plans to focus on the growth and development of the eight locations opened in November and December 1996, of which five were start-up and three were acquired locations. The Company also intends to open one additional location during 1997 and eight additional locations in 1998. The Company generally establishes new locations in markets contiguous to its existing markets, which has allowed it to rent equipment into these markets prior to opening a new location. As a result, the Company gains valuable customer and market information, builds name recognition among its customer base in new markets and facilitates the opening of new locations with a significant initial base of business. - Pursue Selected Acquisitions. The Company intends to selectively pursue acquisitions of rental equipment companies located in its current markets, as well as in other markets perceived to offer favorable business potential. The equipment rental industry is highly fragmented and consists primarily of a large number of relatively small independent businesses serving local markets. Five of the Company's locations were obtained through acquisitions since 1993. The Company believes that there are significant opportunities for larger, well-capitalized companies such as Falconite to grow through the acquisition of other rental equipment companies. - Expand Relationships With Existing Customer Base. The Company seeks to broaden the selection of lighter equipment and complementary products and services provided to existing customers. For example, the Company cross-sells products such as safety equipment and small tools to its rental customers. The Company believes that this strategy will enhance its ability to leverage its customer relationships, and thereby increase revenues without significant incremental operating expenses. - Establish New Equipment Remanufacturing Center. The Company has begun construction of an equipment remanufacturing center scheduled to be completed during the third quarter of 1997, at an estimated cost of approximately $2.0 million. This facility will enhance the Company's ability to perform major repair and maintenance operations and ensure that Falconite's rental fleet remains in top condition. Management anticipates that the center will increase resale profit margins by maximizing the value of the used equipment the Company sells from its rental fleet. The Company also expects that the center will provide an additional source of revenue by allowing Falconite to perform repair and rebuild services for third party equipment owners. THE OFFERING <TABLE> <S> <C> Common Stock offered hereby.................. shares Common Stock to be outstanding after the Offering................................... shares(1) Use of proceeds.............................. The estimated net proceeds to the Company of $ million from the Offering will be used to repay the substantial majority of the Company's outstanding indebtedness. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Nasdaq National Market symbol................ FCNT </TABLE> - ------------------------------ (1) Does not include (i) shares of Common Stock reserved for issuance pursuant to the Falconite, Inc. Amended and Restated 1997 Long Term Incentive Plan (the "Plan") pursuant to which options for shares presently are outstanding with an exercise price equal to the initial public offering price of the Common Stock and (ii) shares of Common Stock reserved for issuance pursuant to the Falconite, Inc. Directors Stock Option Plan (the "Directors' Plan") pursuant to which no options presently are outstanding with an exercise price equal to the initial public offering price of the Common Stock. See "Management -- Long Term Incentive Plan" and "-- Director Compensation." SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary financial and other data for the Company as of and for the five years in the period ended December 31, 1996. See "The Company," "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the Notes thereto. <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, ---------------------------------------------------------- PRO FORMA AS ADJUSTED 1992 1993 1994 1995 1996 1996(1) ---- ---- ---- ---- ---- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues.......................................... $ 6,147 $10,289 $23,249 $35,661 $48,086 $48,086 Gross profit............................................ 2,663 4,889 10,229 17,576 22,824 22,623 Operating income........................................ 1,550 3,160 6,816 11,306 12,075 11,326(2) Interest expense, net................................... 368 684 1,734 3,172 4,298 164 Income before income taxes and minority interests....... 1,182 2,517 5,130 8,094 7,959 11,344 Income taxes............................................ 490 963 1,919 2,893 2,328 4,486 Minority interests(3)................................... 83 301 725 1,429 1,714 -- Net income.............................................. 609 1,253 2,486 3,772 3,917 6,858 Pro forma net income per share.......................... $ Pro forma weighted average common shares................ SELECTED OPERATING DATA: Number of locations at end of year...................... 2 3 5 9 17 Rental equipment capital expenditures................... $ 5,851 $12,855 $21,840 $29,100 $41,092 Original cost of rental equipment at end of year(4)..... 11,819 21,832 35,922 60,758 94,572 </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------- PRO FORMA ACTUAL AS ADJUSTED(1) ------ -------------- (DOLLARS IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Net book value of rental equipment.......................... $ 81,583 $ 81,583 Total assets................................................ 117,458 Total debt(5)............................................... 60,619(6) Shareholders' equity........................................ 34,156 </TABLE> - ------------------------------ (1) Gives effect to: (i) the sale of shares of Common Stock in the Offering, at an assumed initial public offering price of $ per share; (ii) a reduction in interest expense as a result of repayment of substantially all outstanding debt with the proceeds of the Offering; (iii) the change from S corporation to C corporation status of M&F Equipment (as defined below); and (iv) the Combination, in each case as if such transactions had occurred on January 1, 1996 in the case of the consolidated statements of operations and as of December 31, 1996 in the case of the consolidated balance sheets. The Company's Consolidated Financial Statements include the results of McCurry & Falconite Equipment Co., Inc. ("M&F Equipment"), which was organized in March 1995. The pro forma provision for income taxes includes amounts to reflect the results of operations as if M&F Equipment had been liable for income taxes. S corporation distributions were $320,000 and $431,000 in 1995 and 1996, respectively. M&F Equipment's status as an S corporation was terminated as of the time of the Combination. See "The Company," "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the Notes thereto. (2) Pro forma operating income reflects additional goodwill amortization of $539,000 and additional depreciation expense of $210,000 attributable to the Combination. (3) The minority interests were eliminated as a result of the acquisition of the minority interest in Erzinger Equipment (as defined below) in September 1996 and the acquisition of the minority interest in M&M Equipment (as defined below) pursuant to the Combination in December 1996. See "The Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the Notes thereto. (4) Original cost represents the undepreciated original price paid by the Company for rental equipment. (5) Total debt includes term debt, revolving lines of credit and obligations under capital leases. (6) Subsequent to December 31, 1996, the Company has incurred additional indebtedness, the proceeds of which were utilized primarily to pay accounts payable in respect to rental equipment purchases. The Company expects that total debt (excluding capital leases) will be approximately $ million immediately prior to the completion of the Offering. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030621_household_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030621_household_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a2b4fb477590c7dfbabd965e309ba15ed3061493
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030621_household_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary of certain pertinent information is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Reference is made to the Index of Defined Terms for the location of the definitions of certain capitalized terms. ISSUER........................... The Household Consumer Loan Trust 1997-1 (the "Issuer"), a Delaware business trust to be formed by the Seller and the Owner Trustee pursuant to the Trust Agreement (the "Trust Agreement"). SECURITIES ISSUED BY THE ISSUER........................... The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class B Notes and the Certificates. The Notes will be issued pursuant to the Indenture and will be secured by the Trust Assets (as defined below). Pursuant to the terms of the Indenture, the Class B Notes will be subordinate to the Class A Notes, the Class A-3 Notes will be subordinate to the Class A-2 and Class A-1 Notes and the Class A-2 Notes will be subordinate to the Class A-1 Notes. The Certificates will be issued by the Issuer pursuant to the Trust Agreement. The Certificates will be subordinate to the Notes pursuant to the terms of the Indenture. The Notes represent obligations solely of the Issuer and do not represent interests in or obligations of the Seller, the Servicer, the Deposit Trustee, the Owner Trustee, the Indenture Trustee or any affiliate thereof, except to the extent described herein. None of the Notes, the Series 1997-1 Participation or the Credit Lines are insured or guaranteed by any governmental agency or instrumentality. Only the Class A Notes are offered hereby. A. THE CLASS A-1 NOTES......... $729,600,000 Consumer Loan Asset Backed Notes, Series 1997-1 (the "Class A-1 Notes"). THE CLASS A-2 NOTES......... $48,000,000 Consumer Loan Asset Backed Notes, Series 1997-1 (the "Class A-2 Notes"). THE CLASS A-3 NOTES......... $62,400,000 Consumer Loan Asset Backed Notes, Series 1997-1 (the "Class A-3 Notes"). Collectively, the Class A-1 Notes, Class A-2 Notes and the Class A-3 Notes are referred to herein as the "Class A Notes". The Class A Notes will be issued pursuant to the Indenture (the "Indenture") between the Issuer and The Bank of New York, as indenture trustee (the "Indenture Trustee"). B. THE CLASS B NOTES........... $45,600,000 Consumer Loan Asset Backed Notes, Series 1997-1 (the "Class B Notes"). The Class B Notes will be issued pursuant to the Indenture and are not offered hereby. C. THE CERTIFICATES............ $33,600,000 Consumer Loan Asset Backed Certificates, Series 1997-1 (the "Certificates"). The Certificates will be issued pursuant to the Trust Agreement and are not offered hereby. The Certificates will represent fractional undivided beneficial interests in the Issuer. TRUST ASSETS..................... The "Trust Assets" include (i) a participation interest (the "Series 1997-1 Participation") in (x) the Receivables arising under the Credit Lines and the proceeds thereof, and (y) the preferred stock of the Seller held by the Deposit Trustee (the "Preferred Stock") and (ii) monies on deposit in certain accounts of the Issuer for the benefit of Securityholders. In addition to the Trust Assets, as described herein, payments to Noteholders will be supported by the Overcollateralization Amount, the subordination of certain classes of Notes to other classes of Notes and by the subordination of the Certificates to the Notes. See "Description of the Deposit Trust" herein for a description of the Preferred Stock of the Seller held by the Deposit Trust. SELLER........................... Household Consumer Loan Corporation is a corporation organized under the laws of the State of Nevada and is a wholly-owned special purpose subsidiary of Household Finance Corporation ("HFC"). The Seller purchases Receivables from the Subservicers (as defined below). The Seller then sells the Receivables and all rights with respect thereto to the Deposit Trust. See "Description of the Deposit Trust -- Assignment of Receivables" herein. DEPOSIT TRUST.................... Household Consumer Loan Deposit Trust I (the "Deposit Trust") is a common law trust. Texas Commerce Bank National Association acts as trustee for the Deposit Trust. The Deposit Trust previously issued three participation interests in the pool of Receivables in connection with the issuance of three series of asset-backed securities, a participation interest to the Seller (the "Seller's Interest") and is expected to issue additional interests in the pool of Receivables from time to time (each such interest, a "Series Participation Interest"). See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. Each Series Participation Interest will be issued in connection with the issuance of a series of securities (each, a "Series"). The Series 1997-1 Participation will be the only Series Participation Interest held by the Issuer. SERVICER......................... HFC, a subsidiary of Household International, Inc., is the servicer of the Credit Lines pursuant to the Pooling and Servicing Agreement dated as of September 1, 1995 (the "Pooling and Servicing Agreement") among the Seller, the Deposit Trustee and the Servicer. Each Credit Line is subserviced by the appropriate Subservicer (as defined below) on behalf of HFC as Servicer. SUBSERVICERS..................... Household Realty Corporation, Household Finance Corporation of California, Household Finance Corporation II, Household Finance Corporation III, Household Finance Industrial Loan Company, Household Finance Realty Corporation of New York, Household Financial Center Inc., Household Finance Corporation of Nevada, Household Finance Realty Corporation of Nevada, Household Industrial Loan Company of Kentucky, Household Finance Industrial Loan Company of Iowa, Household Finance Consumer Discount Company, Household Industrial Finance Company and Mortgage One Corporation (collectively, the "Subservicers" and each individually, a "Subservicer"), are wholly-owned subsidiaries of HFC, licensed to make and service consumer loans in the states in which the Credit Lines were originated. The Subservicers originated the Credit Lines or purchased them from third parties. ADMINISTRATOR.................... HFC is the Administrator pursuant to an Administration Agreement dated as of March 1, 1997 (the "Administration Agreement") among HFC, the Seller, the Issuer and the Owner Trustee. Pursuant to the Administration Agreement, HFC will perform certain duties of the Issuer, Owner Trustee and Seller under the Indenture and Trust Agreement. See "Description of the Securities -- Administration Agreement" herein. THE CREDIT LINES................. The Credit Lines which generate the Receivables held by the Deposit Trust consist of a portion of the total pool of revolving consumer credit lines originated or purchased by the Subservicers (and any other consumer lending affiliates of HFC that become Subservicers) from time to time (the "Portfolio"). The Credit Lines are designated to the Deposit Trust and are required to satisfy the criteria set forth in the Pooling and Servicing Agreement for Eligible Credit Lines (as defined herein). The Receivables arising under each Credit Line, whether existing on the applicable Cut-Off Date (as defined herein) for such Receivables or thereafter generated have been or will be sold by the Subservicers to the Seller, which has sold or will sell such Receivables to the Deposit Trust. The Credit Lines are not being sold or transferred to the Seller or to the Deposit Trust and will continue to be held and administered by the Subservicers. See "Risk Factors -- Change in Loan Terms and Finance Charges", "Description of the Deposit Trust -- Assignment of Receivables"; "Description of the Receivables Purchase Agreement -- Sale of Receivables" herein. The Seller entered into a receivables purchase agreement dated as of September 1, 1995 (the "Initial Cut-Off Date"), with each Subservicer (the "Receivables Purchase Agreement"), and may enter into a similar agreement with other affiliates of HFC. On September 28, 1995 (the "Initial Issuance Date"), pursuant to the Receivables Purchase Agreement, each of the Subservicers sold to the Seller all of their respective rights, title and interest in the Receivables existing under the Credit Lines designated to the Deposit Trust as of the Initial Cut-Off Date (the "Initial Credit Lines", and such Receivables outstanding under the Initial Credit Lines as of the Initial Cut-Off Date, the "Initial Receivables"). Each Subservicer has sold and will continue to sell to the Seller all of its right, title and interest in new Principal Receivables and Finance Charge and Administrative Receivables arising under the Initial Credit Lines from time to time. Pursuant to the Pooling and Servicing Agreement, all Receivables purchased by the Seller from the Subservicers will be sold to the Deposit Trust. Pursuant to the Pooling and Servicing Agreement, the Seller expects (subject to certain limitations and conditions), to continue to add Receivables to the Deposit Trust. To do so, the Seller may designate additional Credit Lines, the Receivables of which will be purchased and assigned by the Seller to the Deposit Trust. Such additional Credit Lines may include New Credit Lines and Additional Credit Lines (each, as defined herein). Since the Initial Cut-Off Date, the Seller has conveyed to the Deposit Trust the Receivables arising in certain Additional Credit Lines in accordance with the provisions of the Pooling and Servicing Agreement. All Receivables arising under Credit Lines designated to the Deposit Trust, whether existing at the time such Credit Lines are designated, or subsequently generated, will be conveyed to the Deposit Trust. The Seller will also have the right, in certain circumstances, to remove certain Credit Lines and the Receivables arising thereunder from the Deposit Trust, in which case, no further interest in Receivables arising under such Credit Lines will be transferred to the Deposit Trust (the "Removed Credit Lines"). See "Description of the Deposit Trust -- Additions of Credit Lines" and "-- Removal of Deposit Trust Assets". THE RECEIVABLES.................. The Receivables include (a) all periodic finance charges, and other amounts as described in the Series 1997-1 Supplement (as defined herein) (as increased by any Principal Discount, the "Finance Charge Receivables") (b) all administrative fees and late charges and all other fees or charges billed to obligors on the Credit Lines (the "Administrative Receivables" and together with the Finance Charge Receivables, the "Finance Charge and Administrative Receivables") and (c) all amounts owed by obligors under the Credit Line Agreements (as defined herein) and other amounts in respect of principal as described in the Series 1997-1 Supplement (as decreased by any Principal Discount) (the "Principal Receivables"). Recoveries (as defined below) attributed to Defaulted Credit Lines (as defined below) will be treated as collections of Finance Charge Receivables. Finance Charge and Administrative Receivables and Principal Receivables will be allocated to the Series 1997-1 Participation in accordance with the applicable Allocation Percentage (as defined herein) for the related Collection Period. Finance charges are assessed on principal receivables and on certain of the finance charge receivables at rates determined by the Subservicers with respect to the respective Credit Lines generated by each such party. As of the close of business on January 31, 1997 (the "Series 1997-1 Cut-Off Date"), the interest rates on the Receivables ranged from 0.00% to 36.00% with a weighted average interest rate (by principal balance) of 18.98%. As of the Series 1997-1 Cut-Off Date, the average principal balance of the Credit Lines designated to the Deposit Trust was $5,658.71. Pursuant to the option to discount receivables contained in the Pooling and Servicing Agreement (see "Description of the Deposit Trust -- Discount Option"), the Seller has the option to designate or redesignate a fixed percentage of each Principal Receivable assigned to the Deposit Trust as a finance charge receivable (the "Principal Discount"). As of the date of this Prospectus, the Seller has not elected to exercise such option with respect to the Receivables; however, it may do so at any time in the future. In the event of such election, such percentage designated by the Seller is the "Discount Percentage." The Discount Percentage may be designated by the Seller at any time, and once designated, may be increased, decreased or withdrawn by the Seller. The Principal Discount may apply to Principal Receivables assigned to the Deposit Trust prior to, on or after the date the Seller makes such designation or redesignation. When the Discount Option has been elected, the Discount Percentage of Principal Receivables will instead be treated as Finance Charge and Administrative Receivables, and the Discount Percentage of all collections of Receivables that would otherwise be Principal Receivables will be applied as collections of Finance Charge and Administrative Receivables. The applicable Allocation Percentage of such discounted amount treated as Finance Charge and Administrative receivables will be available to make distributions of the Participation Pass-Through Rate and Defaulted Amounts allocated to the Series 1997-1 Participation. See "Risk Factors -- Discounted Principal Receivables" herein. If such election is made, as described in this Prospectus, all references herein to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust to refer to such Receivables, or collections with respect thereto, as defined above, after application of the Principal Discount. In such event, references in this Prospectus to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust prior to such election to refer to such Receivables, or collections with respect thereto, without application of a Discount Percentage. All historical and current data herein regarding credit lines and receivables is presented without adjustment for a Principal Discount. The amount of Receivables will fluctuate from day to day as new Receivables are generated and sold by the Subservicers to the Seller and then by the Seller to the Deposit Trust, and as existing Receivables are collected, charged-off as uncollectible or otherwise adjusted. The amount represented by the Series 1997-1 Participation will not increase as a result of additional Principal Receivables being generated under any designated Credit Line ("Additional Balances"). Additional Balances and Receivables attributable to Aggregate Additional Credit Lines exceeding the amount of reinvested collections for the Series 1997-1 Participation and all other Series Participation Interests will be reflected in the principal balance of the Seller's Interest. However, the principal balance of the Series 1997-1 Participation will be adjusted to reflect payments made on the Series 1997-1 Participation. The aggregate amount of Receivables in the Deposit Trust on the Series 1997-1 Cut-Off Date was $3,811,479,951.85 of which $3,688,140,775.71 were Principal Receivables and $123,339,176.14 were Finance Charge and Administrative Receivables. With respect to any date, the "Pool Balance" will be equal to the aggregate of the Principal Balances of all Credit Lines as of such date. The "Principal Balance" of a Credit Line on any day is equal to its principal balance on the date the Credit Line is designated to the Deposit Trust (each such date, a "Cut-Off Date"), plus (i) any Additional Balance in respect of such Credit Line, minus (ii) all Principal Collections credited against the Principal Balance prior to such day, minus (iii) all related Defaulted Amounts, and plus or minus (iv) any correcting adjustments. Notwithstanding the above, the Principal Balance of Receivables for a Defaulted Credit Line shall be zero. With respect to any Distribution Date, a "Defaulted Credit Line" is a defaulted Credit Line as to which the Servicer has charged off all of the related Principal Balance during the related Collection Period. A "Defaulted Amount" is the amount equal to the Principal Balance of a Defaulted Credit Line that the Servicer has charged off on its servicing records in such Collection Period. SERIES 1997-1 PARTICIPATION...... Pursuant to the Series 1997-1 Supplement, the Seller will convey the Series 1997-1 Participation to the Issuer. The Series 1997-1 Participation shall initially be $960,000,000 (the "Initial Series 1997-1 Participation Invested Amount"). Thereafter, the "Series 1997-1 Participation Invested Amount" with respect to any date will be an amount equal to the Initial Series 1997-1 Participation Invested Amount minus the sum of the Series 1997-1 Participation Principal Distribution Amount (as defined herein) paid for all Distribution Dates and the Defaulted Amounts allocated to the Series 1997-1 Participation during the related and all prior Collection Periods that have not been included in the Series 1997-1 Participation Principal Distribution Amount on the current or any prior Distribution Date. The Series 1997-1 Participation will be entitled to receive a percentage of the Interest Collections (which shall include Recoveries), Principal Collections or Net Principal Collections (as defined below) and Defaulted Amounts received or incurred during each Collection Period. With respect to any Collection Period prior to the occurrence of an Amortization Event, Interest Collections and Defaulted Amounts allocated to the Series 1997-1 Participation will be based upon the Floating Allocation Percentage. With respect to any Collection Period during an Early Amortization Period, Interest Collections will be allocated to the Series 1997-1 Participation based upon the Fixed Allocation Percentage. However, Defaulted Amounts allocated to the Series 1997-1 Participation with respect to any Collection Period after an Amortization Event shall continue to be made based upon the Floating Allocation Percentage. Interest Collections with respect to any Collection Period will be distributable to the Issuer as holder of the Series 1997-1 Participation as described under "Remittance on the Series 1997-1 Participation." Allocated Interest Collections not so distributed will be distributable to the Seller. With respect to any Collection Period prior to the Accelerated Amortization Date or the commencement of an Early Amortization Period, Principal Collections will be allocated to the Series 1997-1 Participation based upon the greater of: (i) the Floating Allocation Percentage of Net Principal Collections (as defined below) or (ii) the Minimum Principal Amount. With respect to any Collection Period after the Accelerated Amortization Date or during the Early Amortization Period, the Series 1997-1 Participation will be entitled to Principal Collections based upon the Fixed Allocation Percentage. For any Distribution Date, the Fixed Allocation Percentage applicable to Principal Collections may be different than the Fixed Allocation Percentage applicable to Interest Collections if an Amortization Event occurs after the Accelerated Amortization Date. "Net Principal Collections" will equal the excess, if any, of Principal Collections for the related Collection Period, minus Additional Balances sold to the Deposit Trust during any Collection Period. If there is no excess, Net Principal Collections will equal zero. The Floating Allocation Percentage and the Fixed Allocation Percentage are defined herein under "Description of the Deposit Trust -- Allocations and Collections". The Minimum Principal Amount is defined herein under "Description of the Deposit Trust -- Distributions on the Series 1997-1 Participation". COLLECTIONS...................... All collections on the Receivables will be allocated by the Servicer as payments on Credit Lines in accordance with the terms of the Credit Line Agreements. See "Description of the Deposit Trust -- Allocations and Collections" herein. As to any Payment Date, "Interest Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Finance Charge and Administrative Receivables, including Recoveries and (ii) the interest portion of the Transfer Price (as defined herein) received in the event the Series 1997-1 Participation is reassigned to the Seller, reduced, if HFC is no longer the Servicer, by the Servicing Fee for such Collection Period. As to any Payment Date, "Principal Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Principal Receivables (other than the principal portion of any Recoveries), and (ii) the principal portion of the price received for any repurchased Receivable and the Transfer Price. As to any Payment Date, the "Collection Period" is the calendar month preceding the month of such Payment Date. On the Business Day prior to each Payment Date, the Servicer will deposit the remittances on the Series 1997-1 Participation for such Payment Date into an account (the "Collection Account") established and maintained by the Deposit Trustee under the Pooling and Servicing Agreement. ACCELERATED AMORTIZATION DATE.... The "Accelerated Amortization Date" is February 28, 2002. EARLY AMORTIZATION PERIOD........ An Early Amortization Period will begin with the first day of the Collection Period in which an Amortization Event has occurred and will continue until the unpaid principal balance of the Series 1997-1 Participation is zero. "Amortization Events" will include, but are not limited to: (a) failure of the Seller to observe certain covenants; (b) certain breaches of representations and warranties; (c) the occurrence of certain events of bankruptcy, insolvency or receivership related to the Seller or the Servicer; (d) the Deposit Trust or the Issuer becomes an investment company under the Investment Company Act of 1940; (e) a Servicer Default occurs under the Pooling and Servicing Agreement; (f) the percentage (averaged over any three consecutive months) obtained by dividing i) the Overcollateralization Amount by ii) the outstanding unpaid principal balance of the Series 1997-1 Participation, is reduced below 4.25%; and (g) the portion of the Seller's Trust Amount owned by Household Consumer Loan Corporation is reduced below 1.01% of the aggregate invested amounts of all outstanding Series Participation Interests. See "Description of the Securities -- Early Amortization Period." REMITTANCE ON THE SERIES 1997-1 PARTICIPATION.................. On each Distribution Date the Deposit Trust will make the following remittances to the Indenture Trustee in respect of collections during the preceding Collection Period: INTEREST.................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer from the applicable Allocation Percentage of Interest Collections for the preceding Collection Period equal to the amount accrued at the Participation Pass-Through Rate on the unpaid principal balance of the Series 1997-1 Participation. The "Participation Pass-Through Rate" for each Distribution Date is a per annum rate equal to Prime Rate (as defined herein), less 1.50%, subject to a minimum rate equal to a per annum rate which will result in an amount sufficient to pay the full amount of interest due on the Notes and to make a full distribution on the Certificates at the Certificate Rate, plus one-twelfth of the Series 1997-1 Participation Invested Amount, multiplied for each Distribution Date occurring prior to April 1998, by 0.75%, and for each Distribution Date occurring in April 1998 or thereafter, by 0.25% (the "Series 1997-1 Participation Interest Distribution Amount"). PRINCIPAL................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer equal to the sum of the applicable Allocation Percentage of Principal Collections, or during any Collection Period prior to the Accelerated Amortization Date or commencement of an Early Amortization Period, equal to the sum of (a) the greater of: (i) the Floating Allocation Percentage of Net Principal Collections or (ii) the Minimum Principal Amount, as defined herein, and (b) to the extent of the applicable Allocation Percentage of Interest Collections remaining after providing for the distribution of the Participation Pass-Through Rate on the Series 1997-1 Participation, Defaulted Amounts and the amount of any Defaulted Amounts previously allocated to the Series 1997-1 Participation that have not been included in the Series 1997-1 Principal Distribution Amount on any prior Distribution Date (the "Series 1997-1 Participation Principal Distribution Amount"). SECURITIES INTEREST.............. Interest on each Class of Notes will be payable monthly on the fifteenth day of each month or, if such day is not a Business Day (as defined herein), on the next succeeding Business Day (each, a "Payment Date"), commencing in April 1997, in an amount equal to interest accrued during the related Interest Period (as defined below) at the applicable Note Rate on the Security Balance for the related class of Notes. The applicable Note Rate for an Interest Period will be the per annum rate equal to the sum of (a) the London interbank offered rate for one-month United States dollar deposits ("LIBOR"), determined as specified herein, as of the second LIBOR Business Day (as defined herein) prior to the first day of such Interest Period (or as of two LIBOR Business Days prior to the Closing Date, in the case of the first Interest Period) and (b) 0. %, 0. %, 0. % and a rate specified in the Indenture not to exceed 0.875% per annum in the case of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class B Notes, respectively, in each case, subject to a maximum rate for each class as described under "Description of the Securities -- Distributions on the Securities" herein. Interest on the Notes in respect of any Payment Date will accrue from (and including) the preceding Payment Date (or in the case of the first Payment Date, from the date of the initial issuance of the Notes (the "Closing Date")) through (and including) the day preceding such Payment Date (each such period, an "Interest Period") on the basis of a 360-day year and the actual number of days in such interest period. See "Description of the Securities -- Distributions on the Securities". Interest for any Payment Date due but not paid on such Payment Date shall bear interest, to the extent permitted by applicable law, at the related Note Rate until paid. Failure to pay interest in full on any Payment Date after expiration of the applicable grace period is an Event of Default under the Indenture. Distributions on Certificates will be payable monthly on each Payment Date, commencing in April 1997, at the Certificate Rate on the Security Balance of the Certificates for the related Interest Period. The "Certificate Rate" will generally equal the sum of (a) LIBOR (calculated in the manner described above for the Class A and Class B Notes for such Interest Period) and (b) the rate specified in the Trust Agreement not to exceed 1.25% per annum, subject to certain limitations as described herein under "Description of the Securities -- Distributions on the Securities." The Certificate Rate will accrue on any amounts distributable in payment of the Certificate Rate, but not paid on any monthly Payment Date. SECURITIES PRINCIPAL............. On each Payment Date, to the extent funds are available therefore, other than the Payment Date in March 2007 (the "Final Payment Date"), principal payments will be due and payable on the Notes and distributions will be due on the Certificates in respective amounts described below under "Allocation of Remittances on the Series 1997-1 Participation". On the Final Payment Date, principal will be due and payable on the Notes in an amount equal to the Security Balance thereof on such Payment Date. In addition, on any Payment Date, to the extent of funds available therefor, Noteholders will also be entitled to receive principal payments in respect of the Accelerated Principal Payment Amount as described in this Prospectus Summary under "Allocation of Remittances on the Series 1997-1 Participation". In no event will principal payments on the Notes on any Payment Date exceed the Security Balance thereof on such date. ALLOCATION OF REMITTANCES ON THE SERIES 1997-1 PARTICIPATION...... The majority of the defined terms used in this Allocation of Remittances on the Series 1997-1 Participation are defined beginning on page 64 under "Description of the Securities -- Distributions on the Securities -- Allocations of Remittances on the Series 1997-1 Participation". Except as provided below, on each Payment Date other than a Payment Date occurring after an Event of Default, remittances on the Series 1997-1 Participation will be allocated in the following order of priority: (i) sequentially, as payment for the amount of interest due on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class B Notes; (ii) except as otherwise specified below, to the Certificates on behalf of the Issuer, as payment of the amount distributable in respect of the Certificate Rate on the Security Balance of the Certificates and previously unpaid; (iii) sequentially, up to the Optimum Monthly Principal, (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes; (iv) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Targeted Balance, to the extent the Adjusted Security Balance of the Certificates is not reduced below $11,200,000; (v) to the Seller, in reduction of the Overcollateralization Amount, up to the remaining Optimum Monthly Principal provided the Overcollateralization Amount is not less than $13,600,000; (vi) as principal on the Notes, sequentially, up to the Accelerated Principal Payment Amount for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes, (e) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (f) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (g) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (h) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (vii) as principal on the Notes, sequentially, up to the remaining Optimum Monthly Principal for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (viii) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Minimum Balance, or if the Series 1997-1 Participation Invested Amount is zero, then to the Certificates until the Security Balance of the Certificates equals zero; (ix) to the Seller in reduction of the Overcollateralization Amount, to an amount not less than zero, the remaining Optimum Monthly Principal; and (x) any remaining amounts to the Issuer or its designee. In the event (a) immediately prior to a Distribution Date the Series 1997-1 Participation Invested Amount is less than the aggregate Security Balance of the Class A and Class B Notes immediately prior to the related Payment Date, or (b) the remittances on the Series 1997-1 Participation for a Payment Date is less than the aggregate amount to be paid pursuant to clauses (i) and (ii) above, the amount to be paid pursuant to clause (ii) above will be paid only after payments are made on the Notes pursuant to clause (iii). OVERCOLLATERALIZATION AMOUNT..... As of the Closing Date, the Overcollateralization Amount is equal to $40,800,000 (the "Initial Overcollateralization Amount") or 4.25% (the "Initial Overcollateralization Percentage") of the Initial Series 1997-1 Participation Invested Amount. For each Payment Date the "Overcollateralization Amount" equals the amount by which the Series 1997-1 Participation Invested Amount exceeds the aggregate Security Balance of the Series 1997-1 Securities, in each case after giving effect to distributions on such Payment Date. For each Payment Date, the "Accelerated Principal Payment Amount" is equal to the lesser of (i) the amount by which the remittance on the Series 1997-1 Participation exceeds the sum of (a) the amount to be distributed on the Notes with respect to interest and the Certificates with respect to the Certificate Rate on such Payment Date and (b) the Optimum Monthly Principal for such Payment Date and (ii) one-twelfth of the Series 1997-1 Participation Invested Amount, multiplied for each Payment Date occurring prior to April 1998, by 0.75%, and for each Payment Date occurring in April 1998 or thereafter, by 0.25%. The distribution of Accelerated Principal Payment Amounts, if any, to Noteholders will increase the Overcollateralization Amount. The Overcollateralization Amount will be available to absorb any Defaulted Amounts that are allocated to Noteholders and not covered by remittances on the Series 1997-1 Securities. See "Description of the Securities -- Distributions on the Securities -- Overcollateralization Amount" herein. ISSUANCE OF ADDITIONAL SERIES.... Three Series were previously issued through the sale of Series Participation Interests in the Receivables of the Deposit Trust. See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. Additional Series are expected to be issued from time to time through the sale of additional Series Participation Interests to new issuers. It is anticipated that the securities of other Series will have expected final payment dates, rapid amortization dates, amortization periods, non-amortization periods, accelerated amortization periods and periods during which the principal amount of such securities is accumulated in a principal funding account or paid to holders of such securities which differ from those for the Series 1997-1 Securities. Accordingly, each Series may have entirely different methods for calculating the amount and timing of principal and interest distributions to securityholders and Series Enhancements (as defined below) and may utilize other methods for determining the portion of collections allocable to such securityholders and Series Enhancements. See "Deposit Trust Risk Factors." "Series Enhancement" means any letter of credit, surety bond, subordinated interest in the trust assets, collateral invested amount, collateral account, spread account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement or other similar arrangement for the benefit of holders of interests in a Series. DENOMINATIONS.................... The Notes will be issued in the aggregate principal amounts set forth on the cover page hereof, in fully registered denominations of $100,000 and integral multiples of $1,000 in excess thereof. REGISTRATION OF NOTES............ The Notes will initially be issued in book-entry form. Persons acquiring beneficial ownership interests in the Notes ("Note Owners") may elect to hold their Notes through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or The Chase Manhattan Bank, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. So long as the Notes are in book-entry form, such Notes will be evidenced by one or more Notes registered in the name of CEDE & Co., the nominee of DTC. The interests of the Note Owners will be represented by book-entries on the records of DTC and participating members thereof. Notes will be available in definitive form only under the limited circumstances described herein. All references in this Prospectus to "Holders" or "Noteholders" shall be deemed, unless the context clearly requires otherwise, to refer to CEDE & Co., as nominee of DTC. See "Risk Factors" and "Description of the Securities -- Registration of Notes" herein. RECORD DATE...................... The last day preceding a Payment Date, or if the Notes are no longer book-entry securities, the last day of a month preceding a Payment Date. SERVICING........................ The Servicer will be responsible for servicing and managing the Credit Lines and making collections on the Receivables. Each Credit Line will be subserviced by the appropriate Subservicer on behalf of HFC, as Servicer. The Servicer will cause Interest Collections and Principal Collections to be deposited into the Collection Account, except as described herein. On the fifth Business Day prior to any Payment Date (the "Determination Date"), the Servicer will calculate, and instruct the Deposit Trust, the Issuer and the Indenture Trustee regarding the amounts to be paid to the Noteholders with respect to the related Collection Period. See "Description of the Securities -- Distributions on the Securities." As long as HFC is the Servicer it will receive, or be entitled to retain on behalf of itself and the Subservicers, a portion of the Interest Collections remaining after distribution of the Series 1997-1 Participation Interest Distribution Amount and the Series 1997-1 Participation Principal Distribution Amount a monthly servicing fee (the "Servicing Fee") attributable to the Series 1997-1 Participation in the amount of 2.00% per annum of the Series 1997-1 Participation Invested Amount as of the end of the related Collection Period. See "Description of the Deposit Trust -- Servicing Compensation and Payment of Expenses." In certain limited circumstances, the Servicer may resign or be removed under the Pooling and Servicing Agreement, in which event either the Deposit Trustee or, so long as it meets certain eligibility standards as set forth in the Pooling and Servicing Agreement, a third-party servicer will be appointed as a successor Servicer. In such event, the Servicing Fee will be paid to the successor Servicer from Interest Collections prior to any distributions on the Series 1997-1 Participation. See "Description of the Deposit Trust -- Certain Matters Regarding the Servicer and the Seller." If the Servicer fails to comply with certain representations, warranties or covenants with respect to any Credit Line and such noncompliance is not cured within a specified period and has a material adverse effect on the Noteholders, or if certain events of insolvency occur with respect to the Servicer, the Deposit Trustee may appoint a successor Servicer. See "Description of the Deposit Trust -- Assignment of Receivables." FINAL PAYMENT OF PRINCIPAL; TERMINATION...................... The Notes will mature on the earlier of the date the Notes are paid in full or on the Payment Date occurring in March 2007. In addition, the Issuer of the Notes will pay the Notes in full upon the exercise by the Seller of its option to purchase the Series 1997-1 Participation after the aggregate Security Balance of the Series 1997-1 Securities is reduced to an amount less than or equal to $91,920,000 (10% of the initial aggregate Security Balance of the Series 1997-1 Securities). See "Description of the Securities -- Maturity." MANDATORY RETRANSFER OF CERTAIN RECEIVABLES.................... The Seller will make certain representations and warranties with respect to the Trust Assets, the Credit Lines and the Receivables. If the Seller breaches certain of its representations and warranties with respect to any Receivable, then depending upon the representation or warranty breached, if such breach has a material adverse effect on the interest of the Noteholders and the persons holding the Certificates ("Certificateholders") and is not cured within the specified period, such Receivable will be removed from the Deposit Trust and assigned to the Seller for reassignment to the related Subservicer. TAX STATUS....................... Special tax counsel to the Seller is of the opinion that under existing law, the Class A Notes will be characterized as indebtedness, and neither the Deposit Trust nor the Issuer will be characterized as an association (or publicly traded partnership) taxable as a corporation. The Seller, the Indenture Trustee, the Owner Trustee and the Class A Noteholders will agree to treat the Class A Notes as indebtedness for all federal, state and local income and franchise tax purposes. See "Certain Federal and State Income Tax Consequences" for additional information concerning the application of federal income tax laws. ERISA CONSIDERATIONS............. Generally a pension or an employee benefit plan (a "Plan") subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the "Code") is permitted to purchase instruments like the Notes that are debt under applicable state law and have no "substantial equity features" without reference to the prohibited transaction requirements of ERISA and the Code, absent certain circumstances described in "ERISA Considerations" herein. In the opinion of ERISA Counsel (as defined herein), the Class A Notes will be classified as indebtedness without substantial equity features for ERISA purposes. However, if the Class A Notes are deemed to be equity interests and no statutory, regulatory or administrative exemption applies, the Issuer will hold plan assets by reason of a Plan's investment in the Class A Notes. Any Plan fiduciary considering whether to purchase any Class A Notes on behalf of a Plan should consult with its counsel regarding the applicability of the provisions of ERISA and the Code. See "ERISA Considerations"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030740_ahl_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030740_ahl_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7547d85c659a2d7a11a1ab3ffcdaf4d096ec298f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030740_ahl_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY AHL provides contract staffing and management of its clients' labor-intensive operational support functions on an outsourced basis throughout the United States and Europe. The Company's core competencies include recruiting, hiring, training, motivating and managing the large numbers of personnel required to provide many of the support services needed by its clients while incorporating quality systems and cost efficiency in its operations. Founded in 1979, the Company is a leader in providing pre-departure screening, passenger profiling and other passenger services to the aviation industry and, increasingly, provides services to other large corporations, including Federal Express, America Online, Georgia Power, BellSouth, Nike and Motorola. Through its 62 offices in the United States and 27 offices in seven European countries, AHL is able to service the multinational outsourcing needs of its largely Fortune 1000 client base. The Company currently has approximately 500 contracts to provide services and has established long-term relationships with its largest clients, providing the Company with a significant source of predictable recurring revenues. The Company intends to take advantage of market trends toward contract staffing and become the preferred provider of outsourced labor management solutions for its clients by leveraging its core competencies, international scale, reputation for quality, performance-based quality measurement systems, management depth and senior-level relationships with its key clients. To capitalize on these market trends and to enter new complementary business lines, the Company has completed three acquisitions since its initial public offering in March 1997 and has two acquisitions pending. Large corporations and other institutions are seeking to outsource a variety of non-core functions to enable them to better focus on their core competencies. Many enterprises need to recruit, hire, train, motivate and manage large numbers of personnel to handle non-core functions, in labor environments often characterized by relatively low pay and high turnover rates. Increasingly, enterprises are contracting with specialized third party providers to better ensure long-term labor availability for support functions. Outsourcing these functions shifts employment costs and risks, such as workers' compensation, recruitment and turnover costs and changes in labor regulations, to outside vendors and allows enterprises to reduce the administrative overhead and time necessary to properly manage non-core functions. Large enterprises are increasingly seeking partnering opportunities whereby the third party provider, in addition to providing on-site management of staff, assumes responsibility for a particular function, including designing and implementing a solution for its client, and may share in the economic benefits derived from improved execution. The Company provides a variety of services to its clients, all of which are focused on labor-intensive operational support functions. The Company's services to its airline clients include pre-departure screening, passenger profiling, cargo handling and a number of passenger services, such as baggage claim and check, aircraft clean and search, lost baggage delivery and replacement, sky cap, wheelchair assistance, escorting of unaccompanied minors, inter-gate cart services and frequent flyer lounge operation. Management believes, based on its knowledge of the industry, that the Company is the largest provider of pre-departure screening and passenger profiling services in the United States and Europe combined. The Company also provides commercial security and shuttle bus services and, as a result of a recent acquisition, staffing for warehouse "pick and pack" and light industrial functions. The Company believes that it is well-positioned to expand the operational support services it provides to its clients and to deliver additional services to its clients, such as order fulfillment and inbound call management functions. The Company believes that its national and international scale provides it with a significant advantage in competing for contracts from targeted clients, given market trends toward outsourced solutions and vendor consolidation. To demonstrate its ability to deliver quality services at lower cost, AHL is developing performance-based quality measurement systems to further differentiate itself in the contract staffing industry in which quality measurement has not been prevalent. The Company typically enters into multi-year agreements with clients under which the client pays an hourly rate for services performed. The Company has grown rapidly during the past five years as it has entered new markets on behalf of its clients and expanded its range of services. Revenues have grown from $82.6 million in 1992 to $210.2 million in 1996, a compound annual growth rate of 26.3%. The Company follows a disciplined model for growth, entering a new market only after it has signed a contract with a client to provide specific services in that market. Once an initial contract is awarded, the Company establishes an office and begins building management depth in that market. After establishing operations in a new market and demonstrating its ability to provide high quality services, the Company has successfully leveraged its local infrastructure by marketing additional services to its initial client and by providing services to additional clients in that region. The Company's field management and direct sales force market AHL's services to clients in their assigned regions, while senior executives concentrate on senior-level relationships and national account management. The key elements of the Company's growth strategy are to (i) continue to penetrate existing accounts, (ii) expand service offerings, (iii) obtain new clients and (iv) continue to seek strategic acquisitions. The Company believes that substantial opportunities exist in the United States as enterprises are increasingly outsourcing support functions which have traditionally been performed in-house, as well as in Europe, where the trends toward labor management outsourcing are less developed than in the United States. In addition, the Company believes that it is well-positioned to benefit if more stringent aviation security measures are implemented by the Federal Aviation Administration ("FAA"). RECENT DEVELOPMENTS Recent Financial Results. On October 23, 1997, the Company announced results for the three months and nine months ended September 30, 1997. For the three months ended September 30, 1997, revenues increased $15.1 million, or 26.3%, to $72.4 million from $57.3 million for the three months ended September 30, 1996. Net income for the three months ended September 30, 1997 increased $1.1 million, or 124.7%, to $2.0 million from $0.9 million for the three months ended September 30, 1996, and earnings per share for the three months ended September 30, 1997 increased $0.07, or 63.6%, to $0.18 from $0.11 for the three months ended September 30, 1996. For the nine months ended September 30, 1997, revenues increased $46.1 million, or 30.6%, to $196.6 million from $150.5 million for the nine months ended September 30, 1996. Net income for the nine months ended September 30, 1997 increased $2.0 million, or 114.0%, to $3.7 million from $1.7 million for the nine months ended September 30, 1996, and earnings per share for the nine months ended September 30, 1997 increased $0.16, or 8.0%, to $0.36 from $0.20 for the nine months ended September 30, 1996. The foregoing financial results are not audited and are not necessarily indicative of the results that may be expected for future periods. Completed Acquisitions. In September 1997, AHL acquired Lloyd Creative Temporaries, Inc. ("Lloyd"), a Chicago-based company that provides staffing for warehouse "pick and pack" and light industrial (such as product assembly) functions, for approximately $5.0 million in cash plus contingent consideration (the "Lloyd Acquisition"). Lloyd had revenues for the twelve months prior to the acquisition of approximately $14.0 million. In May 1997, AHL acquired the commercial security business of New Jersey-based USA Security Services, Inc. ("USA Security") for approximately $2.6 million in cash (the "USA Security Acquisition"). USA Security had revenues for the twelve months prior to the acquisition of approximately $8.6 million. In May 1997, AHL acquired British Airways' executive aircraft services business at Heathrow Airport ("EAS") for approximately $2.8 million in cash plus contingent consideration (the "EAS Acquisition"). EAS provides ground handling and passenger services for executive aircraft and had revenues for the twelve months prior to the acquisition of approximately $2.4 million. All of these acquisitions have been accounted for under the purchase method of accounting. Potential Acquisitions. In September 1997, the Company signed a letter of intent to purchase RightSide Up, Inc. ("RightSide Up"), a California-based company that provides order fulfillment and inbound call management services principally for clients in the entertainment industry, for $6.0 million in cash plus contingent consideration (the "RightSide Up Acquisition"). RightSide Up had revenues for the twelve months prior to execution of the letter of intent of approximately $6.4 million. In October 1997, the Company signed a letter of intent to purchase a Chicago-based company that provides staffing for warehouse "pick and pack" and light industrial functions, for $5.0 million in cash (the "Chicago Acquisition", and together with the RightSide Up Acquisition, the "Potential Acquisitions"). The Chicago-based company had revenues for the twelve months ended December 31, 1996 of approximately $6.2 million. The Company expects to execute a definitive purchase agreement for each of the Potential Acquisitions following consummation of this offering. However, there can be no assurance that a definitive purchase agreement will be executed for either Potential Acquisition or that either Potential Acquisition will be consummated. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..................... 2,700,000 shares Common Stock to be outstanding after the offering....... 13,553,430 shares(1) Use of proceeds......................................... To repay outstanding indebtedness and for general corporate purposes, including working capital and possible acquisitions. Nasdaq National Market symbol........................... AHLS </TABLE> - --------------- (1) Excludes 1,099,500 shares of Common Stock reserved for issuance upon exercise of outstanding options with a weighted average exercise price of $10.21 per share. See "Management -- Employee Benefit Plans -- Stock Option Plan." SUMMARY COMBINED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> SIX MONTHS ENDED FISCAL YEAR ENDED DECEMBER 31,(1) JUNE 30, --------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- -------- -------- -------- -------- ------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues........................... $82,576 $104,143 $123,234 $168,601 $210,153 $93,162 $124,194 Operating income................... 2,410 1,044 1,633 2,844 5,043 1,887 4,056 Income before income taxes and extraordinary items.............. 2,089 540 755 2,355 3,618 1,415 3,480 Income (loss) before extraordinary items............................ 1,444 (160) 128 1,438 2,171 849 2,105(2) Income per share before extraordinary items.............. 0.25(3) 0.10(3) 0.21(2) Weighted average common and common equivalent shares................ 8,557(3) 8,557(3) 9,895 OPERATING DATA (AT PERIOD END): Number of employees................ 3,972 5,714 7,334 9,954 12,980 10,085 13,590 Number of offices.................. 11 26 33 69 83 80 89 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------------ PRO FORMA ACTUAL AS ADJUSTED(4) ------------ -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $21,368 $ 56,137 Total assets.............................................. 62,908 103,188 Long-term debt, net of current portion.................... 7,808 1,935 Shareholders' equity...................................... 29,414 75,356 </TABLE> - --------------- (1) The Company's fiscal year ends on the last Friday in December. Each of the fiscal years presented consists of 52 weeks, except that fiscal 1993 consists of 53 weeks. (2) Excludes extraordinary items, net of taxes, of $385,000, or $0.04 per share, resulting from early extinguishment of debt. Including the extraordinary items, net income was $1,720,000 and net income per share was $0.17. (3) Pro forma to give effect to the Reorganization (as hereinafter defined). (4) Pro forma to give effect to the Lloyd Acquisition and adjusted to give effect to the sale of the 2,700,000 shares of Common Stock offered hereby (at an assumed public offering price of $18.25 per share) and application of the estimated net proceeds therefrom as described in "Use of Proceeds." As of February 1, 1997, all of the outstanding shares of common stock of Argenbright Holdings Limited ("Argenbright"), a holding company for U.S. operations, and The ADI Group Limited (together with its predecessors, "ADI"), a holding company for European operations, were contributed to AHL by Mr. Frank A. Argenbright, Jr., who founded both companies. As a result, Argenbright and ADI became wholly-owned subsidiaries of the Company. The Company's executive offices are located at 3353 Peachtree Road, NE, Atlanta, Georgia 30326 and its telephone number is (404) 267-2222. --------------------- Unless the context otherwise requires, (i) the "Company" or "AHL" refers to AHL Services, Inc., including Argenbright and ADI and their predecessors and subsidiaries, (ii) all information in this Prospectus gives effect to the Reorganization (as hereinafter defined) and (iii) all information in this Prospectus assumes no exercise of the Underwriters' over-allotment options. The "Reorganization" refers to the transactions in which Mr. Argenbright contributed to the Company (i) the outstanding common stock of Argenbright and ADI, (ii) certain real estate, a portion of which was previously rented by the Company (with the Company assuming the related mortgage debt) and (iii) a note with a balance of $528,000 as of December 31, 1996 payable by the Company to Mr. Argenbright. All of the above transactions in the Reorganization were brought forward at historical values. See "Management -- Compensation Committee Interlocks and Insider Participation."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030859_bryan_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030859_bryan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..edbee9034c1246531befde9e82821a0087e96d8c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030859_bryan_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the detailed information and Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. THE HOLDING COMPANY The Holding Company is a newly formed company organized under Delaware law to become a financial institution holding company by acquiring 100% of the stock of First Federal through the exchange of First Federal Common Stock for Holding Company Common Stock and through the purchase of First Federal Common Stock for cash. The Holding Company was formed to enable First Federal to remain as a predominantly community-owned, independent financial institution. The Holding Company has entered into a merger agreement dated May 12, 1997 (the "Merger Agreement") to acquire 100% of First Federal's outstanding shares in exchange for shares of Holding Company Common Stock and cash, subject to, among other customary conditions, regulatory and shareholder approvals, the condition that holders of no more than 80% of First Federal Common Stock elect to receive cash as merger consideration (approximately $4.6 million of cash elections) and consummation of this Offering. The Offering will be consummated only if every condition required to be met pursuant to the Merger Agreement has been met or waived, and only if at least the minimum amount of Units and Common Stock are subscribed for in the Offering. The requirement that elections by existing First Federal common stockholders representing at least 20% of the consideration to be paid by the Holding Company in the Merger must consist of elections to exchange existing First Federal Common Stock for Holding Company Common Stock was based on management's determination as to the amount of debt and common stock the Holding Company should issue and the minimum amount of desired capital at the Holding Company level to support such debt. The Merger is contingent upon the subscription for the minimum amounts of Units and Common Stock in the Offering. The Offering will close immediately prior to the acquisition of the shares of First Federal Common Stock by the Holding Company. See "The Offering." The principal executive offices of the Holding Company are located at 2900 Texas Avenue, Bryan, Texas 77802, and its telephone number at that address is (409) 779-2900. The Holding Company upon consummation of the Merger will be a thrift institution holding company under the Home Owners Loan Act of 1993, as amended (the "HOLA") and, therefore, will be regulated and supervised by the Office of Thrift Supervision (the "OTS"). FIRST FEDERAL SAVINGS BANK First Federal Savings Bank ("First Federal"), is a federally chartered community-owned, independent thrift institution, headquartered in Bryan-College Station, Texas, which began operations in 1965. Historically, First Federal has been predominantly a locally-based home lender, originating loans primarily in Bryan-College Station and the surrounding trade area, and to a lesser extent other communities in the general area between Houston, Austin and Dallas, Texas. First Federal also originates consumer loans, construction loans, U.S. Small Business Administration ("SBA") partially guaranteed loans, small commercial real estate and small to medium commercial business loans. First Federal's deposits are insured up to applicable limits by the Savings Association Insurance Fund (the "SAIF"), which is administered by the Federal Deposit Insurance Corporation (the "FDIC"). At December 31, 1996, First Federal had assets of $59.7 million, deposits of $53.0 million and total stockholders' equity of $4.4 million. New senior management was appointed in early 1991 to recapitalize and convert First Federal from a mutual savings institution to a federal stock institution, which was completed in April, 1993. Beginning in fiscal 1994, senior management of First Federal began its transition to full-service retail banking in order to compete more effectively and to increase its overall profitability. In addition to its core single-family lending business, since fiscal 1994 First Federal has increased its focus on the following products: o Commercial real estate lending o Commercial business lending o Small Business Administration loans (partially government guaranteed) o Home improvement loans o Indirect automobile financing through dealers o Credit-default insured "second chance" auto finance program PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the detailed information and Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. THE HOLDING COMPANY The Holding Company is a newly formed company organized under Delaware law to become a financial institution holding company by acquiring 100% of the stock of First Federal through the exchange of First Federal Common Stock for Holding Company Common Stock and through the purchase of First Federal Common Stock for cash. The Holding Company was formed to enable First Federal to remain as a predominantly community-owned, independent financial institution. The Holding Company has entered into a merger agreement dated May 21, 1997 (the "Merger Agreement") to acquire 100% of First Federal's outstanding shares in exchange for shares of Holding Company Common Stock and cash, subject to, among other customary conditions, regulatory and shareholder approvals, the condition that holders of no more than 80% of First Federal Common Stock elect to receive cash as merger consideration (approximately $4.6 million of cash elections) and consummation of this Offering. The Offering will be consummated only if every condition required to be met pursuant to the Merger Agreement has been met or waived, and only if at least the minimum amount of Units and Common Stock are subscribed for in the Offering. The requirement that elections by existing First Federal Common stockholders representing at least 20% of the consideration to be paid by the Holding Company in the Merger must consist of elections to exchange existing First Federal Common Stock for Holding Company Common Stock was based on management's determination as to the amount of debt and common stock the Holding Company should issue and the minimum amount of desired capital at the Holding Company level to support such debt. The Merger is contingent upon the subscription for the minimum amounts of Units and Common Stock in the Offering. The Offering will close immediately prior to the acquisition of the shares of First Federal Common Stock by the Holding Company. See "The Offering." The principal executive offices of the Holding Company are located at 2900 Texas Avenue, Bryan, Texas 77802, and its telephone number at that address is (409) 779-2900. The Holding Company upon consummation of the Merger will be a thrift institution holding company under the Home Owners Loan Act of 1993, as amended (the "HOLA") and, therefore, will be regulated and supervised by the Office of Thrift Supervision (the "OTS"). FIRST FEDERAL SAVINGS BANK First Federal Savings Bank ("First Federal"), is a federally chartered community-owned, independent thrift institution, headquartered in Bryan-College Station, Texas, which began operations in 1965. Historically, First Federal has been predominantly a locally-based home lender, originating loans primarily in Bryan-College Station and the surrounding trade area, and to a lesser extent other communities in the general area between Houston, Austin and Dallas, Texas. First Federal also originates consumer loans, construction loans, U.S. Small Business Administration ("SBA") partially guaranteed loans, small commercial real estate and small to medium commercial business loans. First Federal's deposits are insured up to applicable limits by the Savings Association Insurance Fund (the "SAIF"), which is administered by the Federal Deposit Insurance Corporation (the "FDIC"). At December 31, 1996, First Federal had assets of $59.7 million, deposits of $53.0 million and total stockholders' equity of $4.4 million. New senior management was appointed in early 1991 to recapitalize and convert First Federal from a mutual savings institution to a federal stock institution, which was completed in April, 1993. Beginning in fiscal 1994, senior management of First Federal began its transition to full-service retail banking in order to compete more effectively and to increase its overall profitability. In addition to its core single-family lending business, since fiscal 1994 First Federal has increased its focus on the following products: o Commercial real estate lending o Commercial business lending o Small Business Administration loans (partially government guaranteed) o Home improvement loans o Indirect automobile financing through dealers o Credit-default insured "second chance" auto finance program First Federal funds these lending products using a retail deposit base gathered in its home market of Bryan-College Station as well as in the surrounding counties of Burleson, Grimes, Leon, Madison, Robertson and Washington. First Federal currently operates two full service offices located in Bryan (headquarters office) and adjacent College Station. In addition, a site has been acquired for another full service branch in the northern portion of Bryan. The Bryan-College Station area has a population of more than 110,000 permanent residents and is home to Texas A&M University, one of the three largest universities in the United States. In order to expand its lending base First Federal has opened loan production offices in Waco and Huntsville, Texas and has redefined its general lending area to include the triangle between Dallas, Houston and Austin. The pursuit of this strategy entails risks different from those present in traditional single family mortgage lending. However, First Federal's management believes that the transition to full service retail banking has had several positive effects including increasing the net interest margin, increasing the portfolio of loans outstanding, diversifying the types of loans in the loan portfolio and increasing overall profitability, including increasing fee income and service charges. THE UNIT OFFERING Units Offered............... A minimum of 3,400 and a maximum of 3,700 Units, each Unit consisting of $1,000 aggregate principal amount of 11 1/2% Debentures due March 31, 2003 and nine Warrants, for a price of $1,000 per Unit. Each Warrant entitles the holder thereof to purchase one share of Holding Company Common Stock at an exercise price of $12.50 at any time prior to 5:00 p.m., Central Time, on March 31, 2003. The Debentures are to be issued under an indenture (the "Indenture") between the Holding Company and Harris Trust Company of New York, as trustee (the "Trustee"). Debenture Maturity Date..... March 31, 2003 Interest Payment Dates...... The 15th calendar day of each of July, October, January and April of each year, if such calendar day is a business day, and otherwise the next succeeding business day, commencing on the first payment date subsequent to the closing of the Offering. Redemption.................. The Debentures may not be redeemed prior to their maturity and no sinking fund is provided for the Debentures. Subordination............... The Debentures will be subordinate in right of payment to all present and future Senior Indebtedness and General Obligations (each as defined herein) of the Holding Company and will be effectively subordinated to all indebtedness and other liabilities and commitments (including deposits, trade payables, lease obligations and obligations of holders of preferred stock) of First Federal. As a newly formed entity, the Holding Company has no debt outstanding and will have no debt outstanding prior to the issuance of the Debentures. The Indenture governing the Debentures' terms and conditions does not prohibit or limit the occurrence of additional Senior Indebtedness or General Obligations. Sinking Fund................ None. The Holding Company anticipates retiring the Debentures upon maturity through dividends from First Federal, the sale of additional common stock or preferred stock, and, if necessary, a loan to the Holding Company from a third party financial institution. There can be no assurance funds will be available for repayment. See "Risk Factors." First Federal funds these lending products using a retail deposit base gathered in its home market of Bryan-College Station as well as in the surrounding counties of Burleson, Grimes, Leon, Madison, Robertson and Washington. First Federal currently operates two full service offices located in Bryan (headquarters office) and adjacent College Station. In addition, a site has been acquired for another full service branch in the northern portion of Bryan. The Bryan-College Station area has a population of more than 110,000 permanent residents and is home to Texas A&M University, one of the three largest universities in the United States. In order to expand its lending base First Federal has opened loan production offices in Waco and Huntsville, Texas and has redefined its general lending area to include the triangle between Dallas, Houston and Austin. The pursuit of this strategy entails risks different from those present in traditional single family mortgage lending. However, First Federal's management believes that the transition to full service retail banking has had several positive effects including increasing the net interest margin, increasing the portfolio of loans outstanding, diversifying the types of loans in the loan portfolio and increasing overall profitability, including increasing fee income and service charges. THE HOLDING COMPANY COMMON STOCK OFFERING Common Stock Offered................... The Holding Company is hereby offering up to a maximum of 200,000 shares of Holding Company Common Stock, $.01 par value per share, with a purchase price to the public of $10.00 per share of Holding Company Common Stock. Subscriptions will be filled first on a when received basis subject to the minimum and maximum purchase and other limitations, described below. Par value per share has no relation to the inherent value of the stock. Determination of Offering Price........ The offering price of the Holding Company Common Stock and the exchange ratio of Holding Company Common Stock for First Federal Common Stock have been determined by the Holding Company and do not necessarily bear any relation to any established investment criteria of value such as book value, earnings or assets or the intrinsic value, if any, of the Holding Company or First Federal. The future value of the Holding Company Common Stock will be dependent in part on the Holding Company's and First Federal's future operating results which are subject in part to economic and other factors beyond the Holding Company's and First Federal's control. See "The Offering." Maximum Purchase Limitation............ The Holding Company may reject any subscription or part thereof for shares of Holding Company Common Stock or Units for any reason including if the total amount of shares of Holding Company Common Stock owned by any person following the Merger would constitute more than 9.9% of the issued and outstanding Holding Company Common Stock, unless such condition has been waived at the discretion of the Holding Company's Board of Directors in one or more instances with the approval of the OTS. THE UNIT OFFERING Concurrently with the Common Stock Offering, the Holding Company is offering through the Agent up to 3,700 Units at a price of $1,000 per Unit. Each Unit consists of $1,000 principal amount of 11 1/2% subordinated debentures due March 31, 2003 (the "Debentures") and nine detachable warrants (the "Warrants"). Each Warrant entitles the holder thereof to purchase one share of Holding Company Common Stock at an exercise price of $12.50, subject to adjustment, at any time prior to 5:00 p.m. Central Time on March 31, 2003. The Debentures included in the Units will be unsecured and subordinate in right of payment to all present and future Senior Indebtedness and General Obligations (as such terms are hereinafter defined) and will be effectively subordinated to all indebtedness and Covenants................... The Indenture, among its other provisions, restricts the ability of the Holding Company under certain circumstances to pay dividends on, or repurchase, its Holding Company Common Stock, and prohibits the Holding Company from consolidating or merging with another entity unless: (i) such other entity assumes the Holding Company's obligations under the Indenture, (ii) immediately after such merger or consolidation takes effect, the Holding Company will not be in Default (as defined herein) under the Indenture, and (iii) the Holding Company has delivered to the Indenture trustee an appropriate opinion of counsel. See "Description of the Debentures -Consolidation, Merger and Sales of Assets" and "--Limitations on Dividends, Redemptions, Etc." The Indenture will also contain covenants with respect to the maintenance of the status of its thrift subsidiaries as insured depositary institutions, the payment of taxes and the maintenance of its properties. Events of Default........... The (i) occurrence of certain events involving the bankruptcy, insolvency, reorganization, receivership or similar proceedings of the Company or any Major Depositary Institution Subsidiary (as defined in the Indenture), (ii) failure to pay the principal of (and premium, if any, on) the Debentures when due, whether at stated maturity, by acceleration or otherwise, (ii) failure to pay any installment of interest upon the Debentures when due and the continuance of such failure for a period of 30 days, (iii) failure to comply with any covenant contained in the Indenture and continuance of such failure for 60 days after notice of such failure has been given to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Debentures then outstanding, and (iv) failure to pay $1.0 million aggregate principal amount when due under any indebtedness of the Company or a Subsidiary, or in the maturity of indebtedness of such amount being accelerated, constitute Events of Default under the Indenture. See "Description of Debentures -- Events of Default." Remedies ................... If an Event of Default, as defined in the Indenture, has occurred and is continuing, the Trustee or the holders of at least 25% in principal amount of the then outstanding Debentures may declare the principal amount of all the Debentures, together with unpaid interest thereon, to be immediately due and payable, subject in certain circumstances to rescission or waiver by the holders of at least a majority in principal amount of Debentures. There can be no assurance that the Holding Company would have or be able to acquire sufficient funds to make payment on the Debentures if their maturity were accelerated due to an Event of Default. See "Description of the Debentures - Events of Default." Warrants.................... Each Warrant entitles the holder thereof to purchase one share of Holding Company Common Stock at an exercise price of $12.50, subject to adjustment, at any time prior to 5:00 p.m. Central Time on March 31, 2003. The Warrants are detachable and may trade separately from the Debentures. See "Description of Warrants." THE COMMON STOCK OFFERING Concurrently with the Unit Offering, the Holding Company is offering directly, and not through the Agent, up to 200,000 shares of Holding Company Common Stock at a price of $10.00 per share. The offering price of the Holding Company Common Stock in the Common Stock Offering has been determined by the Company and does not necessarily bear any relation to any established investment criteria of value, such as book value, earnings or the intrinsic value, if any, of the Holding Company or First Federal. Although the Holding Company Common Stock other liabilities and commitments (including deposits, trade payables, lease obligations and obligations of holders of preferred stock) of First Federal.Although the Units are not offered pursuant to this Prospectus, consummation of the Unit Offering is conditioned on the contemporaneous completion of the Common Stock Offering. See "Description of Unit Offering." NO PRIOR TRADING MARKET The Holding Company has never issued capital stock. Consequently, there is no existing market for the Holding Company Common Stock at this time. Therefore, no assurance can be given that an established and liquid trading market for the Holding Company Common Stock will develop. Following the Offering the Holding Company Common Stock will be traded in the over-the-counter market. Although it has no obligation to do so, Hoefer & Arnett intends to make a market for the Holding Company Common Stock if the volume of trading and other market-making considerations justify such an undertaking. See "Risk Factors -- No Prior Market for Holding Company Common Stock; Potential Illiquidity of Holding Company Common Stock." The development of a public market that has depth, liquidity and orderliness depends upon the presence in the marketplace of a sufficient number of willing buyers and sellers at any given time, over which neither the Holding Company nor any market maker has any control. Accordingly, there can be no assurance that an active or liquid trading market for the Holding Company Common Stock will develop, or that if a market develops, it will continue. Furthermore, there can no assurance that purchasers will be able to sell their shares at or above their purchase price. See "Market Information." USE OF PROCEEDS The net proceeds from the Offering (estimated at $4.3 million and $5.1 million based on the minimum and maximum number of Holding Company Common Stock and Units offered) will be used to purchase for cash all of the shares of First Federal Common Stock not exchanged for Holding Company Common Stock pursuant to the Merger Agreement, and to reimburse First Federal for expenses paid by First Federal in connection with the Merger and Offering, and the balance, if any, will become part of the Holding Company's general funds for use in its business. On an interim basis, such proceeds will be invested primarily in short-term marketable securities. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001030999_gorges_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001030999_gorges_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ed52db1829f6905e6e04e9a0a144bcd8c96ade3a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001030999_gorges_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by, and should be read in conjunction with the more detailed information and financial data, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context requires otherwise, as used herein, the "Company" refers to Gorges/Quik-to-Fix Foods, Inc. following the completion of the Transactions (as defined herein) and the processed beef operations of Tyson Foods, Inc. prior to the completion of the Transactions. Historically, the Company's fiscal year has ended on the Saturday closest to September 30, and references to particular fiscal years of the Company refer to the 12 months ended on the Saturday closest to September 30 of the year indicated. See the Financial Statements and the Notes thereto. Statements in this Prospectus regarding management's beliefs with respect to the Company's competitive position in the foodservice industry are based on management's extensive experience in the foodservice industry and independent sources which management believes are accurate and reliable. THE COMPANY Management believes the Company is a leading producer of value added processed beef products for the foodservice industry and is one of the few companies in this segment of the industry that markets and distributes nationally. The Company's products are marketed under the nationally recognized Quik-to-Fix and Gorges brand names, as well as the private labels of leading national foodservice distributors. The Company believes that its products are well positioned to take advantage of what it believes is a trend within the foodservice industry towards greater outsourcing of the food preparation process. For the fiscal year ended September 28, 1996, the Company had sales of $232.8 million. The Company purchases fresh and frozen beef and, to a lesser extent, pork and poultry, which it processes into a broad range of fully cooked and ready to cook products. The Company's two product categories are value added processed products ("value added products") and ground beef. Value added product offerings include (i) breaded beef items, such as country fried steak and beef fingers, (ii) charbroiled beef, such as fully cooked hamburger patties, fajita strips, meatballs, meatloaf and taco meat and (iii) other specialty products, such as fully cooked and ready to cook pork sausage, breaded pork and turkey, cubed steaks and Philly steak slices. Ground beef product offerings consist primarily of uncooked individually quick frozen ("IQF") hamburger patties. The Company's products are sold primarily to the foodservice industry, which encompasses all aspects of away-from-home food preparation, including commercial establishments such as fast food restaurants and family dining restaurants and non-commercial establishments such as healthcare providers, schools and corporations. The Company sells its products principally through broadline and specialty foodservice distributors. The Company acquired the Gorges/Quik-to-Fix Foods operations (the "Business") of Tyson Foods, Inc. ("Tyson") on November 25, 1996 (the "Acquisition"). The Company's principal business objective is to build its higher margin value added business. Value added products address many of the concerns within the foodservice industry, including cost reduction, food safety and product quality and consistency. The Company also intends to utilize its ground beef manufacturing capabilities to target higher volume multi-unit accounts, especially where opportunities exist to cross-sell its higher margin value added products. Management believes that by operating as an integrated, stand alone enterprise, the Company will be better able to capitalize on its strengths and favorable industry trends, including the following. . Favorable Trends in the Foodservice Industry. Purchases of food prepared away from home have grown consistently for over forty years and currently represent approximately 45% of total food purchases. Demand has risen due to various demographic changes, including increases in personal disposable income, the increasing number of single-parent households and the rising number of dual income families. Driven by the continuing consumer trend toward purchasing food prepared away from home, the foodservice industry is projected to grow at a nominal rate of 5.0% in 1996, superior to the growth prospects of the food industry in general, according to Technomic Inc. The Company believes that there is also an increasing trend within the foodservice industry toward outsourcing more of the food preparation process to reduce preparation costs and to ensure product safety, quality and consistency. The Company addresses these outsourcing needs by producing products that are precooked or ready to cook (e.g., breaded, portioned and seasoned) and require little "back-of-the-house" preparation. . Strong Brand Names. The Gorges and Quik-to-Fix brands have been established for over 50 and 30 years, respectively. The Company believes its charbroiled beef and country fried steak customers associate the Gorges and Quik-to-Fix brand names with products that are high quality, safe and reasonably priced. The Company intends to capitalize on this brand recognition to increase the market penetration of its breaded beef and charbroiled beef products and to promote additional products under the Gorges and Quik-to-Fix brand names. . Focused Sales and Marketing Team. The Company's sales and marketing team consists of 16 experienced professionals, most of whom worked with Gorges Foodservice, Inc. ("Gorges, Inc.") or Quik-to-Fix Foods, Inc. ("Quik-to- Fix, Inc.") prior to their acquisition by Tyson. Until May 1996, these sales professionals marketed substantially all of the Tyson product line. With volume based incentives, sales were dominated by high volume chicken products. The Company's sales force, now selling only the Company's product line, continues to be compensated based on sales volume and growth based incentive programs, all of which are tied to sales of the Company's predominantly beef based product lines. . Extensive Foodservice Broker Network. Management believes that the Company's extensive independent foodservice broker network, consisting of 51 brokers covering 49 states, is one of its most valuable assets. The brokers act as extensions of the Company's in-house sales force, providing sales and marketing support and an intensive sales effort focused on the major foodservice distributors in each of their respective regions. Management anticipates that the existing strong broker relationships will continue because of the revenue stream created by the Company's products, the continuity of the Company's sales and marketing team and the increased responsiveness to broker and customer needs resulting from the Company's exclusive focus on its own products. . Strong and Diverse Customer Base. The Company has a strong and diverse customer base, anchored by 48 of the 50 largest broadline foodservice distributors. The Company's products are purchased by 28 of the 50 largest multi-unit restaurant chains in the United States, including Shoney's, Chili's, Ponderosa and Cracker Barrel, as well as by institutional customers such as Marriott Corporation and school districts through the USDA Commodity Reprocessing Program. The Company's products are also purchased by wholesale club stores. . Modern Facilities With Excess Capacity. The Company operates four modern facilities using state-of-the-art equipment with capacity that will allow significant volume increases without major additional capital expenditures. Until recently, several plants had duplicative capabilities, creating production inefficiencies. During late fiscal 1995 and the first half of fiscal 1996, Tyson reconfigured the facilities (the "Reconfiguration"), significantly enhancing the operating efficiency of the facilities, increasing capacity and reducing the Company's overall labor expenditures. The Company believes the full benefits of the Reconfiguration will first be realized in fiscal 1997. . Experienced and Focused Management Team. Prior to the Acquisition, the Company's four plants operated primarily as independent facilities rather than as an integrated unit. Furthermore, strategic decisions were made by corporate level managers whose principal focus was on Tyson's core poultry business. The Company is now operated by a team of managers almost all of whom have spent the majority of their careers in the beef processing industry. Most members of the management team were employed by Gorges, Inc., Quik-to-Fix, Inc. or Harker's, Inc. ("Harker's") prior to their acquisition by Tyson. The management team has developed valuable industry relationships and has extensive experience in key aspects of the Company's operations, including procurement, production, sales and marketing, research and development and distribution. Beef is the most consumed protein in the United States on the basis of boneless, per capita consumption. Although per capita beef consumption in the United States declined through the late 1980s as consumers became more concerned about the level of fat in their diet, the beef industry has taken steps to maintain beef as the nation's number one protein. Beef is now leaner than ever, with the average cut of beef 27% leaner than in 1985, due to closer trimming of fat, new leaner cuts of beef and the use of leaner cattle. According to the National Livestock and Meat Board, U.S. beef consumption is projected to be 65.2 boneless pounds per capita in 1996, up slightly from 64.1 pounds in 1990 and representing 32.5% of projected total meat consumption. Furthermore, according to the Beef Industry Council, within the foodservice industry, beef consumption increased from 6.22 billion beef servings in commercial restaurants in 1991 to 6.68 billion servings in 1994, a 7.4% increase. In fiscal 1996, the Company's sales decreased to $232.8 million from $304.5 million in fiscal 1995, primarily reflecting (i) the Company's decision to discontinue production of frozen portion-controlled steak products resulting in a decrease in sales of $24.7 million, (ii) the completion of a temporary contract to supply IQF hamburger patties to a national fast food chain (the "IQF Contract") related to a product promotion by the chain resulting in a decrease in sales of $21.2 million and (iii) decreases in selling prices for certain of the Company's products as a result of lower raw materials prices. See "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." THE ACQUISITION, FINANCING AND RELATED TRANSACTIONS On November 25, 1996, the Company acquired the Business (the "Acquisition Closing"). The purchase price for the Acquisition was $184.3 million (the "Cash Consideration"). The Company assumed no liabilities or obligations of Tyson associated with the Business, other than future obligations under non-binding executory contracts of the Business, such as agreements to purchase inventory or to supply products, accrued vacation pay and certain property tax obligations. Tyson agreed to indemnify the Company for any and all liabilities and obligations relating to the Business prior to the Acquisition Closing, other than the aforementioned liabilities assumed by the Company. In addition, the Company and Tyson agreed, subject to certain exceptions and limitations, not to compete with each other in the production and/or sale of beef and pork products, in the case of Tyson, or certain poultry products, in the case of the Company, for a period of two years from the Acquisition Closing. Pursuant to a Transition Services Agreement (the "Transition Services Agreement"), Tyson currently is providing certain services to the Company with respect to the operation of the Business, such as computer processing services, and will continue to provide such services for up to twelve months after the Acquisition Closing. Such services will be provided at no cost to the Company for the first six months. Thereafter, the Company will pay Tyson $120,000 per month for services rendered under the Transition Services Agreement. It is the Company's current intention to begin providing such services for itself within six months following the Acquisition Closing or as soon thereafter as practicable. See "The Acquisition, Financing and Related Transactions." In connection with the establishment of its administrative structure, the Company is in the process of hiring employees for its headquarters, making certain capital expenditures and leasing additional facilities. Management estimates that the Company's fiscal 1997 stand-alone general and administrative expenses will be approximately $3.4 million. Capital expenditures of approximately $2.0 million, principally for computer equipment and software, as well as office furniture, fixtures and equipment, will be required in fiscal 1997 to establish the Company's administrative structure. Additionally, the Company has leased office space for its headquarters. The Company expects total fiscal 1997 capital expenditures to be approximately $4.4 million, primarily related to capital maintenance of current facilities and equipment and the purchase of the computer equipment and software. The Company expects the aggregate capital cost of implementing operations separate from Tyson will be approximately $2.0 million, all of which will be incurred during fiscal 1997. See "Risk Factors--Lack of Operating History" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The $184.3 purchase price for the Acquisition, together with approximately $9.5 million of related fees and expenses (of which $900,000 has been allocated to the Equity Private Placement (as defined herein)), was financed (the "Financing") with the proceeds of: (i) the offering of the Senior Notes; (ii) the borrowing of $40.0 million pursuant to a term loan (the "Term Loan Facility") and the borrowing of $8.0 million under a $30.0 million revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facility, the "Credit Facilities"); and (iii) an equity contribution by GHC of $45.0 million. The Acquisition, Financing and related transactions are referred to herein as the "Transactions." CERTAIN TRANSACTIONS At the Acquisition Closing, CGW Southeast III, L.L.C. (the "General Partner") entered into a consulting agreement (the "Consulting Agreement") with the Company whereby the Company will pay the General Partner a monthly retainer fee of $30,000 for financial and management consulting services. The General Partner may also receive additional compensation (not to exceed an aggregate of $500,000 annually) if approved by the Board of Directors of the Company at the end of the Company's fiscal year, based upon the overall performance of the Company. The Consulting Agreement expires five years from the Acquisition Closing. At the Acquisition Closing, the General Partner delegated its rights and obligations under the Consulting Agreement to CGW Southeast Management III, L.L.C. (the "Management Company"), an affiliate of CGW Southeast Partners III, L.P. ("CGW"). At the Acquisition Closing, the Company paid to the Management Company, an affiliate of CGW, a fee of $2.65 million for its services in assisting the Company in structuring and negotiating the Transactions. The Company believes that the terms and conditions of the Consulting Agreement, the fees paid to the General Partner thereunder and the fees paid to the Management Company are consistent with arms-length transactions with unaffiliated parties. In addition, the terms and conditions of the Credit Agreement and the Indenture restrict the Company's ability to enter into certain transactions with Affiliates. See "Certain Transactions" and "Description of Notes--Certain Transactions--Transactions with Affiliates." NationsBank of Texas, N.A. (the "Bank"), an affiliate of NBIC and the Initial Purchaser, was paid usual and customary fees of approximately $1.5 million for underwriting, structuring, syndicating and administering the Credit Facilities. The Initial Purchaser received a portion of the fees related to underwriting, structuring and syndicating the Credit Facilities. The Initial Purchaser received $3.0 million in discounts and commissions in connection with the Initial Offering. See "Description of Credit Facilities." THE EXCHANGE OFFER Securities Offered.......... $100 million aggregate principal amount of 11 1/2% Senior Subordinated Notes Due December 1, 2006, Series B. The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in exchange for each $1,000 principal amount of Senior Notes. As of the date hereof, all of the aggregate principal amount of Senior Notes are outstanding. The Company will issue the Exchange Notes to eligible holders on or promptly after the Expiration Date of the Exchange Offer. Based on interpretations by the staff of the Commission set forth in no-action letters issued to unrelated third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Senior Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any holder which is (i) a broker-dealer that holds Notes acquired for its own account as a result of market-making or other trading activities, (ii) an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (iii) a broker-dealer that acquired Senior Notes directly from the Company) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in a distribution of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from to time, may be used for 180 days after the Expiration Date by a broker-dealer in connection with resales of Exchange Notes received in exchange for Senior Notes where such Senior Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who is an affiliate of the Company and any person who intends to participate, or is participating, in a distribution of the Exchange Notes, will not be able to rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co., Inc. (available June 5, 1991), and Shearman & Sterling (available July 2, 1993) or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the Exchange Notes. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder will not be indemnified by the Company. Expiration Date............. 5:00 p.m., Eastern Time, on , 1997, unless the Exchange Offer is extended by the Company in its sole discretion to a date not later than , 1997, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Conditions to the Exchange The Exchange Offer is subject to certain Offer...................... customary conditions, which may be waived, to the extent permitted by law, by the Company. See "The Exchange Offer--Terms of the Exchange" and "--How to Tender." Procedures for Tendering Each eligible holder of Senior Notes wishing to Notes...................... accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Senior Notes and any other required documentation to the Exchange Agent (as defined herein) at the address set forth in the Letter of Transmittal. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the holder or the person receiving such Exchange Notes, whether or not such person is the holder, is acquiring the Exchange Notes in the ordinary course of business and that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes, that neither the holder nor any such person is an "affiliate" (as defined under Rule 405 of the Securities Act) of the Company, and if such holder is a broker-dealer that holds the Senior Notes as a result of market-making or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes. In lieu of physical delivery of the certificates representing Senior Notes, tendering holders may transfer Senior Notes pursuant to the procedure for book-entry transfer as set forth under "The Exchange Offer--How to Tender." Special Procedures for Beneficial Owners.......... Any beneficial owner whose Senior Notes are held in book-entry form or are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to exchange such Senior Notes for the Exchange Notes should contact such registered holder promptly and instruct such registered holder to tender the Senior Notes for exchange on such beneficial owner's behalf. See "The Exchange Offer--How to Tender." Guaranteed Delivery Procedures................. Holders of Senior Notes who wish to tender their Senior Notes and whose Senior Notes are not immediately available or who cannot deliver their Senior Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Senior Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--How to Tender--Guaranteed Delivery Procedures." Withdrawal Rights........... Tenders may be withdrawn at any time prior to 5:00 p.m., Eastern Time, on the Expiration Date pursuant to the procedures described under "The Exchange Offer--Withdrawal Rights." Acceptance of Notes and Delivery of Exchange The Company will accept for exchange any and all Notes...................... Senior Notes that are properly tendered in the Exchange Offer, and not withdrawn, prior to 5:00 p.m., Eastern Time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer--Terms of the Exchange." Federal Income Tax Consequences............... The issuance of the Exchange Notes to holders of the Senior Notes pursuant to the terms set forth in this Prospectus should not constitute an exchange for federal income tax purposes. Consequently, no gain or loss should be recognized by holders of the Senior Notes upon receipt of the Exchange Notes. See "Certain Federal Income Tax Considerations." Effect on holders of the As a result of the making of this Exchange Offer, Senior Notes............... the Company will have fulfilled certain of its obligations under the Registration Rights Agreement, and holders of Senior Notes who do not tender their Senior Notes will generally not have any further registration rights under the Registration Rights Agreement or otherwise. Such holders will continue to hold the untendered Senior Notes and will be entitled to all the rights and subject to all the limitations, including, without limitation, transfer restrictions, applicable thereto under the Indenture dated as of November 25, 1996 (the "Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), except to the extent such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. Accordingly, if any Senior Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the untendered Senior Notes could be adversely affected. Exchange Agent.............. IBJ Schroder Bank & Trust Company is serving as exchange agent (the "Exchange Agent") with respect to the Senior Notes. SUMMARY OF TERMS OF EXCHANGE NOTES The form and terms of the Exchange Notes are substantially identical to the form and terms of the Senior Notes which they replace except that (i) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (ii) the holders of Exchange Notes generally will not be entitled to further registration rights under the Registration Rights Agreement, which rights generally will have been satisfied when the Exchange Offer is consummated. The Exchange Notes will evidence the same indebtedness as the Senior Notes which they replace and will be issued under, and be entitled to the benefits of the Indenture. See "Description of Notes." Maturity Date............... December 1, 2006 Interest Payment Dates...... June 1 and December 1, commencing June 1, 1997. Subordination............... The Exchange Notes will be general unsecured obligations of the Company, subordinated in right of payment to all existing and future Senior Indebtedness of the Company, which will include borrowings under the Credit Facilities. At December 28, 1996, as a result of the Transactions and additional borrowings under the Credit Facilities to finance working capital needs, the Company had $49.0 million of outstanding Senior Indebtedness, which would rank senior in right of payment to the Notes. See "Description of Notes--Subordination." Optional Redemption......... On or after December 1, 2001, the Company may redeem the Exchange Notes, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the applicable redemption date. Notwithstanding the foregoing, any time on or before December 1, 1999, the Company may redeem up to 35% of the original aggregate principal amount of the Notes with the net proceeds of a Public Equity Offering (as defined herein) at the redemption prices set forth herein, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the applicable redemption date, provided that at least 65% of the original aggregate principal amount of the Notes remains outstanding immediately after such redemption. Mandatory Redemption........ None, except at maturity on December 1, 2006. Change in Control........... Upon a Change in Control (as defined herein), each holder will have the right to require the Company to repurchase all or any part of such holder's Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the date of repurchase. The Credit Agreement prohibits the Company from purchasing or redeeming the Exchange Notes upon a Change of Control. The Credit Agreement also prohibits the prepayment or redemption of the Exchange Notes for any other reason except with respect to certain prepayments from the net proceeds of an initial Public Equity Offering. Accordingly, prior to any repurchase of Exchange Notes upon a Change of Control, the Company would be required to either (i) repay all outstanding Senior Indebtedness or (ii) obtain the requisite consents, if any, of the holders of outstanding Senior Indebtedness to permit the repurchase of Exchange Notes upon such Change of Control. The source of funds for any such repurchase will be the Company's available cash or cash generated from operating or other sources, including borrowings, sales of equity or funds provided by a new controlling person. However, there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of Notes tendered, or that restrictions in the Credit Facilities will allow the Company to make such required repurchases. If the Company is unable or otherwise fails to make any required repurchases of Notes upon a Change in Control, the Trustee or the holders of at least 25% in aggregate principal amount of all of the then outstanding Notes may declare all the Notes to be due and payable immediately. See "Description of Notes--Certain Covenants--Events of Default and Remedies." A "change of control" under the Credit Agreement may, but does not necessarily, constitute a Change of Control under the Indenture. Conversely, a Change of Control under the Indenture would constitute a "change in control" under the Credit Agreement and therefore an "event of default" under the Credit Agreement. The following events would constitute a "change of control" under the Credit Agreement without necessarily causing a Change of Control under the Indenture: (i) prior to an initial public offering (a) the failure of GHC to own directly all of the issued and outstanding capital stock of the Company, (b) the failure of CGW to own directly a larger percentage of the capital stock of GHC than NationsBanc Investment Corp. or Mellon Bank, N.A., as trustee of First Plaza Group Trust, a General Motors Pension Plan ("FPGT"), (c) the failure of CGW, NBIC and FPGT own directly at least 51% of the capital stock of GHC, and (d) any person other than members of CGW, NBIC and FPGT or two or more persons acting in concert other than members of CGW, NBIC and FPGT acquire beneficial ownership, directly or indirectly, of, or acquire by contract or otherwise, or enter into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, 35% or more of the capital stock of GHC; and (ii) after an initial public offering (a) the failure of CGW, NBIC and FPGT to own directly at least 51% of the capital stock of the Company or GHC that was issued and outstanding immediately prior to giving effect to the initial public offering and (b) the failure of CGW to own directly a larger percentage of the capital stock of the Company or GHC that was issued and outstanding immediately prior to giving effect to the initial public offering than NBIC or FPGT. Under the Indenture upon the occurrence of such an "event of default" under the Credit Agreement, the lenders thereunder would be permitted to accelerate the entire amount of the Senior Indebtedness and any such acceleration would constitute an Event of Default under the Indenture. In addition, the Indenture contains cross-default and cross-acceleration provisions relating to other Indebtedness (as defined herein) for money borrowed by the Company or its Subsidiaries. The Indenture provides that the occurrence of a default by the Company or any of its subsidiaries for failure to make certain payments of principal (in certain threshold amounts ) in respect of Indebtedness for money borrowed will constitute an Event of Default under the Indenture. In addition, a default by the Company or any of its subsidiaries in respect of Indebtedness for money borrowed (in certain threshold amounts) which results in the acceleration of such Indebtedness prior to its express maturity date will constitute an Event of Default under the Indenture. The threshold amounts are met if the principal of such Indebtedness, together with the principal amount of any other such Indebtedness as to which there has been a payment default or the maturity of which has been so accelerated, exceeds $10,000,000 in the aggregate. See "Description of Notes--Repurchase at Option of Holder;" "--Certain Covenants--Events of Default and Remedies;" "Description of Credit Facilities--Events of Default" and "Risk Factors--Restrictions on Ability to Consummate Initial Public Offering." Asset Sale.................. The Company is required to purchase certain Exchange Notes upon the consummation of an Asset Sale(s) (as defined herein) in which the aggregate amount of Excess Proceeds (as defined herein) exceeds $5.0 Million. Under the Credit Agreement, the Company is prohibited from purchasing or redeeming any of the Exchange Notes as a result of an Asset Sale. The obligation of the Company to purchase certain Exchange Notes as a result of an Asset Sale is further subject to the subordination provisions contained in the Indenture. Accordingly, prior to any repurchase of Exchange Notes as a result of an Asset Sale, the Company would be required to either (i) repay all outstanding Senior Indebtedness or (ii) obtain the requisite consents, if any, of the holders of outstanding Senior Indebtedness to permit the repurchase of Exchange Notes as a result of such Asset Sale. See "Description of Notes--Repurchase at Option of Holders." Covenants................... The Indenture pursuant to which the Exchange Notes will be issued restricts, among other things, the Company's ability to incur additional indebtedness, pay dividends or make certain other restricted payments, incur liens to secure pari passu or subordinated indebtedness, engage in any sale and leaseback transaction, sell stock of subsidiaries, apply net proceeds from certain asset sales, merge or lease, convey or otherwise dispose of substantially all of the assets of the Company, enter into certain transactions with affiliates or incur indebtedness that is subordinate in right of payment to any Senior Indebtedness and senior in right of payment to the Exchange Notes. See "Description of Notes-- Certain Covenants." Exchange Offer; If (i) the Exchange Offer is not permitted by Registration Rights........ applicable law or (ii) any holder of Notes notifies the Company that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and this Prospectus is not appropriate or available for such resales or (C) it is a broker-dealer and holds Senior Notes acquired directly from the Company or an affiliate of the Company, and such holders timely notify the Company of such facts, the Company will be required to provide a shelf registration statement (the "Shelf Registration Statement") to cover resales of the Notes by the holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay liquidated damages ("Liquidated Damages") to such holders of Notes under certain circumstances. See "Senior Notes Registration Rights" certain circumstances. See "Senior Notes Registration Rights" Limitation on Liability..... No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Exchange Notes or the Indenture for any claim based on, in respect of, or by reason of, such obligations or their creation. See "Description of Notes--No Personal Liabilities of Directors, Officers, Employees and Stockholders."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031028_globecomm_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031028_globecomm_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1c2e85ff6f7d8dc7d4cc727f2fc45af0b8a06a36
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031028_globecomm_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS: (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) REFLECTS A 2.85-FOR-ONE STOCK SPLIT OF THE COMMON STOCK OF THE COMPANY, $.001 PAR VALUE ("COMMON STOCK") PRIOR TO THE CLOSING OF THIS OFFERING (THE "STOCK SPLIT"), (III) REFLECTS THE FILING, PRIOR TO THE CLOSING OF THIS OFFERING, OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY AND (IV) REFLECTS THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF ALL SERIES OF THE COMPANY'S CONVERTIBLE CLASS A PREFERRED STOCK AND CONVERTIBLE CLASS B PREFERRED STOCK (COLLECTIVELY, THE "CONVERTIBLE PREFERRED STOCK") INTO AN AGGREGATE OF 1,958,001 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING (THE "PREFERRED STOCK CONVERSION"). ------------------------ THE COMPANY Globecomm Systems Inc. ("GSI" or the "Company") designs, assembles and installs satellite ground segment systems and networks which support a wide range of satellite communications applications, including fixed, mobile and direct broadcast services as well as certain military applications. The Company's customers include prime communications infrastructure contractors, government-owned postal, telephone and telegraph providers ("PTTs"), other telecommunications carriers, producers and distributors of news and entertainment content and other corporations. The Company's ground segment systems typically consist of an earth station, which is an integrated system designed to transmit and receive signals to and from satellites, together with ancillary subsystems. The Company's ground segment networks are typically comprised of two or more ground segment systems communicating with a satellite and interconnected with a terrestrial network. Since the Company commenced operations in August 1994, it has completed, or is in the process of completing, the installation of 77 ground segment systems and networks in 31 countries. The Company's revenue grew from $72,000 at the end of its first fiscal year to $13.5 million for the fiscal year ended June 30, 1996, and to $36.2 million for the fiscal year ended June 30, 1997. During the fiscal year ended June 30, 1997, the Company booked $65.4 million in contract orders and, at June 30, 1997, had a backlog of $40.8 million of contract orders. The Company believes that its revenue growth and its ability to compete are based on its unique combination of competitive advantages which include: (i) an experienced management group with extensive technological and engineering expertise, (ii) the proven ability to meet the complex satellite ground segment requirements of its customers in diverse political, economic and regulatory environments in various locations around the world and (iii) its ability to identify, develop and maintain strategic relationships with developers and suppliers of leading-edge technologies which enhance performance, reduce costs and broaden applications of the Company's ground segment systems and networks. An industry source has recently reported that the Company ranks among the world's seven major manufacturers-suppliers of large ground segment systems for fixed telecommunications and currently ranks second behind the industry leader, which has 50% of this market. The Company has recently established a subsidiary, NetSat Express, Inc. ("NetSat"), to develop service revenues by providing high-speed, satellite-delivered data communications to developing markets worldwide. In order to accomplish this objective, NetSat intends to leverage: (i) the Company's expertise in satellite ground segment system and network implementation, (ii) extensive management experience in providing satellite-delivered communications services, (iii) the knowledge and capabilities of local market strategic partners and (iv) DirecPC and Personal Earth Station technology developed and owned by Hughes Network Systems, Inc., a subsidiary of Hughes Electronics Corp. ("Hughes Network Systems" or "HNS"). Each project for which NetSat uses HNS' DirecPC technology will require the grant of a license from HNS to NetSat. NetSat currently is pursuing a joint venture with local partners in Russia to market low-cost, high-speed satellite Internet access services, as well as intranet services, to corporate, educational and government customers who have limited or no access to terrestrial network infrastructure capable of supporting the economical delivery of such services. To date, NetSat has generated only limited revenues. According to Federal Communications Commission (the "FCC") estimates, providers of satellite-delivered communications services generated approximately $13.8 billion in revenues in 1995, which amount is projected to grow at a compound annual rate of 21% to approximately $37.0 billion in 2000. The Company believes this expected growth in satellite communications services will require significant investment in new ground segment system and network infrastructure. Based on industry sources, the markets for ground segment systems and networks in which the Company competes had aggregate revenues of approximately $1.6 billion in 1996 and are projected to grow at a compound annual rate of approximately 11% to revenues of approximately $2.5 billion by the year 2000. Although there are currently no reliable data available on the market for satellite-delivered Internet and intranet applications in developing countries, a market in which the Company participates through NetSat, the Company believes such market has potential for rapid growth. The FCC has estimated that satellite-delivered data communications services accounted for approximately $1.3 billion of service revenues worldwide in 1995 and that this amount will grow at a compound annual rate of approximately 26% to revenues of approximately $4.2 billion in 2000. The Company believes that the growth in demand for ground segment infrastructure is principally a result of the following major factors: (i) global deregulation and privatization of government-owned monopoly telecommunications carriers and the emergence of competitive carriers, each of which is driving capital investment, (ii) rapidly growing worldwide demand for communications services generally, including data communications services over the Internet and corporate intranets, (iii) relative cost-efficiency of satellite communications for many applications and (iv) technological advancements which reduce costs and increase capacity, thereby broadening applications for both satellite and terrestrial networks. The Company's business strategy is to expand its market share in its ground segment systems and networks business, improve its profitability and create opportunities to capture recurring service revenues. The Company intends to execute this strategy by: (i) targeting communications infrastructure development opportunities worldwide, (ii) focusing on high margin engineering-intensive ground segment system and network projects, (iii) developing strategic customer relationships, (iv) developing strategic supplier relationships and (v) entering the satellite-delivered data communications services business through NetSat. The Company seeks to build close relationships with customers for whom it can provide complementary engineering skills by working as part of their system development teams. A key objective of this strategy is to obtain this business on a negotiated basis, rather than through the competitive bidding process, which is likely to carry a lower margin. To date, the Company has developed strategic relationships with two of its customers: Hughes Network Systems and Thomson-CSF ("Thomson"). The Company sought the establishment of these relationships based on these customers' abilities to: (i) generate significant potential revenues for the Company, (ii) provide access to a large number of potential business opportunities as a result of their size and global operations and (iii) provide access to complementary technologies and expertise that could serve as competitive advantages for the Company. At June 30, 1997, Hughes Network Systems and Thomson owned equity interests in the Company of 3.7% and 6.3%, respectively. In addition, Hughes Network Systems owns a 19.0% equity stake in NetSat, with an option to increase this position to 29.0%. In addition to its strategic customer relationships, the Company also seeks to develop strategic relationships with suppliers, each of which it believes is in a position to supply products, technologies or services which will improve the Company's competitive position in one or more of the market segments it serves. As of June 30, 1997, the Company has made equity investments aggregating approximately $1.0 million in three such companies. These suppliers enable the Company to outsource a significant portion of its research and development efforts and gain access to advanced technology while the Company continues its independence to select the most suitable products and technologies to deliver to its customers from any suppliers. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company.......... 2,750,000 shares Common Stock to be outstanding after the Offering(1)................................ 8,614,120 shares Use of Proceeds.............................. Working capital, capital expenditures, investments in strategic suppliers, start-up expenses and investments associated with NetSat, potential acquisitions and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... GCOM </TABLE> - ------------------------------ (1) Based on the number of shares outstanding as of June 30, 1997. Excludes 1,717,482 shares of Common Stock issuable upon the exercise of stock options outstanding at June 30, 1997. Also excludes 64,125 shares of Common Stock issuable upon exercise of warrants. See "Capitalization," "Management--1997 Stock Incentive Plan" and Notes 6 and 8 of Notes to Consolidated Financial Statements. ------------------------------ The Company was incorporated in Delaware on August 17, 1994. The Company's principal executive offices are located at 45 Oser Avenue, Hauppauge, New York 11788, and its telephone number is (516) 231-9800. ------------------------ THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY HAS RECENTLY CHANGED ITS NAME FROM WORLDCOMM SYSTEMS INC. TO GLOBECOMM SYSTEMS INC. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <TABLE> <CAPTION> PERIOD FROM AUGUST 17, 1994 (INCEPTION) THROUGH JUNE 30, YEAR ENDED YEAR ENDED 1995 JUNE 30,1996 JUNE 30, 1997 ----------------- ------------- ------------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues........................................................... $ 72 $ 13,476 $ 36,220 Costs of revenues.................................................. 58 11,238 32,060 ------- ------------- ------------- Gross profit................................................. 14 2,238 4,160 ------- ------------- ------------- Operating expenses: Selling and marketing............................................ 346 1,915 3,282 Research and development......................................... -- 712 649 General and administrative....................................... 772 1,945 3,449 ------- ------------- ------------- Total operating expenses........................................... 1,118 4,572 7,380 ------- ------------- ------------- Loss from operations......................................... (1,104) (2,334) (3,220) Interest income, net............................................... 39 89 276 ------- ------------- ------------- Loss before minority interests in operations of consolidated subsidiary....................................................... (1,065) (2,245) (2,944) Minority interests in operations of consolidated subsidiary........ -- -- 275 ------- ------------- ------------- Net loss..................................................... $ (1,065) $ (2,245) $ (2,669) ------- ------------- ------------- ------- ------------- ------------- Pro forma net loss per share (unaudited)(1)........................ $ (.44) ------------- ------------- Shares used in computing pro forma net loss per share (unaudited)(1)................................................... 6,086,049 ------------- ------------- OTHER OPERATING DATA: EBITDA(2).......................................................... $ (1,036) $ (2,142) $ (2,857) Cash flows used in operating activities............................ (454) (2,510) (1,958) Cash flows used in investing activities............................ (593) (1,714) (8,221) Cash flows provided by financing activities........................ 4,554 4,151 11,908 Capital expenditures............................................... 437 339 6,765 Backlog at end of period(3)........................................ 7,716 11,588 40,807 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 -------------------------- <S> <C> <C> PRO FORMA ACTUAL AS ADJUSTED(4) --------- --------------- BALANCE SHEET DATA: Cash and cash equivalents................................................................ $ 5,164 $ 32,857 Working capital.......................................................................... 6,379 34,072 Total assets............................................................................. 33,286 60,218 Long-term debt........................................................................... 18 18 Stockholders' equity..................................................................... 15,995 42,928 </TABLE> - ------------------------ (1) Computed on the basis described in Note 2 of Notes to Consolidated Financial Statements. (2) EBITDA represents earnings before minority interests in operations of consolidated subsidiary, interest income, net, income taxes, depreciation and amortization expense. EBITDA does not represent cash flows as defined by generally accepted accounting principles and does not necessarily indicate that cash flows are sufficient to fund all the Company's cash needs. EBITDA is a financial measure commonly used in the Company's industry and should not be considered in isolation or as a substitute for net income, cash flows from operating activities or other measures of liquidity determined in accordance with generally accepted accounting principles. EBITDA may not be comparable to other similarily titled measures of other companies. (3) The Company records an order in backlog when it receives a firm contract or purchase order which identifies product quantities, sales price and delivery dates. Backlog represents the amount of unrecorded revenue on undelivered orders and a percentage of revenues from sales of products that have been shipped but have not been accepted by the customer. The Company's backlog at any given time is not necessarily indicative of future period revenues. See "Business--Backlog."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031029_startek_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031029_startek_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..84fb455ab1d3f029402c2dbe40c1fd86962ba085
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031029_startek_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO THE OFFERING RELATED TRANSACTIONS (DEFINED AND DESCRIBED BELOW), (II) GIVES EFFECT TO A 322.1064 FOR ONE STOCK SPLIT OF THE COMMON STOCK TO BE EFFECTED BY A STOCK DIVIDEND IMMEDIATELY PRIOR TO THE CLOSING OF THIS OFFERING AND (III) ASSUMES AN INITIAL PUBLIC OFFERING PRICE OF $15.00 PER SHARE OF COMMON STOCK, THE MIDPOINT OF THE OFFERING PRICE RANGE SET FORTH ON THE COVER OF THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, REFERENCES TO "STARTEK" AND THE "COMPANY" REFER TO STARTEK, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES, STARPAK, INC. AND STARPAK INTERNATIONAL, LTD., COLLECTIVELY, OR, FOR PERIODS PRIOR TO JANUARY 1997, REFER TO STARPAK, INC. AND STARPAK INTERNATIONAL, LTD., COLLECTIVELY. SEE "OFFERING RELATED TRANSACTIONS." THE COMPANY StarTek is a leading international provider of integrated, value-added outsourced services primarily for Fortune 500 companies in targeted industries. The Company's integrated outsourced services encompass a wide spectrum of process management services and customer-initiated ("inbound") teleservices throughout a product's life cycle, including product order teleservices, supplier management, product assembly and packaging, product distribution, product order fulfillment, and customer care and technical support teleservices. By focusing on these services as its core business, StarTek allows its clients to focus on their primary businesses, reduce overhead, replace fixed costs with variable costs and reduce working capital needs. The Company has continuously expanded its business and facilities to offer additional services on an outsourced basis in response to the growing needs of its clients and to capitalize on market opportunities both domestically and internationally. StarTek operates from its Colorado facilities located in Denver and Greeley and from a facility located in Hartlepool, England. The Company also operates through a subcontract relationship in Singapore. For the year ended December 31, 1996, the Company's revenues increased approximately 72.5% to $71.6 million from $41.5 million for the year ended December 31, 1995. Pro forma net income increased approximately 144% to $3.9 million from $1.6 million during the same period. For the three months ended March 31, 1997, the Company's revenues increased approximately 9.5% to $16.7 million from $15.2 million for the three months ended March 31, 1996. Pro forma net income increased approximately 131% to $1.1 million from $459,000 during the same period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." StarTek's goal is to grow profitably by focusing on providing high-quality integrated, value-added outsourced services. StarTek has a strategic partnership philosophy, through which the Company assesses each of its client's needs and, together with the client, develops and implements customized outsourcing solutions. Management believes that its entrepreneurial culture, long-term relationships with clients and suppliers, efficient operations, dedication to quality and use of advanced technology and management techniques provide StarTek a competitive advantage in attracting and retaining clients that outsource non- core operations. Three of the Company's top four clients have utilized its outsourced services for more than five years and the fourth client initiated services with the Company in April 1996. StarTek has focused primarily on the computer software, computer hardware, electronics, telecommunications and other technology-related industries because of their rapid growth, complex and evolving product offerings and large customer bases, which require frequent, often sophisticated, customer interaction. Management believes that there are substantial opportunities to cross-sell StarTek's wide spectrum of outsourced services to its existing base of approximately 75 clients, which includes Broderbund Software, Inc., Canon Inc., Electronic Arts, Inc., Federal Express Corporation, Hewlett-Packard Company, Microsoft Corporation, Polaroid Corporation, Sony Electronics, Inc., The 3DO Company, and Viacom International, Inc. The Company intends to capitalize on the increasing trend toward outsourcing by focusing on potential clients in additional targeted industries, including health care, financial services, transportation services and consumer products, which could benefit from the Company's expertise in developing and delivering integrated, cost-effective outsourced services. STARTEK'S INTEGRATED SERVICES The Company's interaction with a client's customers may begin with an inbound call or message via the Internet requesting information or placing an order for the client's product. A StarTek service representative takes the order, and if the Company manages the client's inventory, the Company packs and ships the order. If the Company does not manage the client's inventory, the Company transmits the customer's request directly to the client. In the event the Company manages the client's inventory, the Company may receive finished goods directly from a client or the Company may manage the production process on an outsourced basis, following product specifications provided by the client. In the latter case, the Company selects and contracts with the necessary suppliers and performs all tasks necessary to assemble and package the finished product, which may be held by the Company pending receipt of customer orders or shipped in bulk to distributors or retail outlets. The Company's clients typically provide their customers with telephone numbers for product questions and technical support. Calls are routed to StarTek customer care or technical support service representatives who have been trained to support specific products. A call may also lead to an order for another product or service offered by the client, in which case the Company takes the order and the cycle begins again. StarTek's clients may utilize one or more of the Company's outsourced services. BUSINESS STRATEGY StarTek's strategic objective is to increase revenues and earnings by maintaining and enhancing its position as a leading international provider of integrated, value-added outsourced services. To reach this objective, the Company intends to: PROVIDE INTEGRATED OUTSOURCED SERVICES. StarTek seeks to provide integrated outsourced services which enable its clients to provide their customers with high-quality services at lower cost than through a client's own in-house operations. The Company believes that its ability to tailor operations, materials and employee resources objectively and to provide integrated value-added outsourced services on a cost-effective basis will allow the Company to become an integral part of its clients' businesses. DEVELOP STRATEGIC PARTNERSHIPS AND LONG-TERM RELATIONSHIPS. StarTek seeks to develop long-term client relationships, primarily with Fortune 500 companies in targeted industries. The Company invests significant resources to establish strategic partnership relationships and to understand each client's processes, culture, decision parameters and goals, so as to develop and implement customized solutions. The Company believes that this solution-oriented, value-added integrated approach to addressing its clients' needs distinguishes StarTek from its competitors and plays a key role in the Company's ability to attract and retain clients on a long-term basis. MAINTAIN LOW-COST POSITION THROUGH MODERN PROCESS MANAGEMENT. StarTek strives to establish a competitive advantage by frequently redefining its operational processes to reduce costs and improve quality. StarTek's continuous improvement philosophy and modern process management techniques enable the Company to reduce waste and increase efficiency in the following areas: (i) controlling overproduction; (ii) minimizing waiting time due to inefficient work sequences; (iii) reducing inessential handling of materials; (iv) eliminating nonessential movement and processing; (v) implementing fail-safe processes; (vi) improving inventory management; and (vii) preventing defects. EMPHASIZE QUALITY. StarTek strives to achieve the highest quality standards in the industry. To this end, the Company has received ISO 9002 certification, an international standard for quality assurance and consistency in operating procedures, for all of its domestic facilities and services, and expects to receive ISO 9002 certification for its United Kingdom facility in mid-1997. Certain of the Company's existing clients require evidence of ISO 9002 certification, and the Company anticipates that many potential clients may require ISO 9002 certification prior to selecting an outsourcing provider. CAPITALIZE ON SOPHISTICATED TECHNOLOGY. The Company believes it has established a competitive advantage by capitalizing on sophisticated technology and proprietary software, including automatic call distributors, inventory management software, transportation management software, call tracking systems and telephone-computer integration software. These capabilities enable StarTek to improve efficiency, serve as a transparent extension of its clients, receive telephone calls and data directly from its clients' systems, and report detailed information concerning the status and results of the Company's services and interaction with clients on a daily basis. GROWTH STRATEGY The Company's growth strategy is designed to capitalize on the increasing demand for outsourced services and improve and expand StarTek's position as an international provider of integrated, value-added outsourced services. This strategy includes the following key elements: INCREASE CAPACITY. Management believes that as a provider of outsourced services it must be ready to serve its clients in periods of peak demand for its clients' products or services. Accordingly, the Company intends to continue to increase product handling and teleservice workstation capacity to meet anticipated demand for the Company's outsourced services. During 1996, the Company increased its teleservice workstations by 54.6%, to 558 from 361. In addition, the Company reengineered and expanded its primary product handling facility to increase its daily capacity by approximately 200%, to 180,000 units from 60,000 units for certain types of products. CROSS-SELL SERVICES TO EXISTING CLIENTS. Management believes there are substantial opportunities to cross-sell its wide spectrum of outsourced services to other divisions or operations within its existing clients' organizations. StarTek capitalizes on its relationships and comprehensive understanding of its clients' businesses to identify additional divisions and areas where the Company could provide its services. For example, the Company's two longest current client relationships, which began in 1987 and 1988 utilizing only one service each, today utilize substantially all of the Company's outsourced services. Management further believes that its ability to provide integrated solutions helps the Company to create strategic partnership relationships and gives the Company a competitive advantage to be selected as the service provider of choice. EXPAND CLIENT BASE. The Company intends to capitalize on its low-cost position and extensive offering of services to penetrate further the industries which the Company currently serves and to seek clients in other industries. Management believes that there are several additional industries, including health care, financial services, transportation services and consumer products, which provide significant market opportunities to the Company. To facilitate the Company's anticipated growth, the Company increased its sales force to 10 full-time professionals as of the date of this offering, from four at the end of 1996. INCREASE INTERNATIONAL OPERATIONS. The Company currently conducts business in North America, Europe and Asia. Management believes that many of the trends leading to the growth of outsourced services in the United States are occurring in international markets as well. Management also believes that many companies, including several of its existing multinational clients, are seeking outsourced services on an international basis. To capitalize on these international opportunities, the Company intends to expand its international operations. DEVELOP NEW SERVICES. Management believes that the trend toward outsourcing and rapid technological advances will result in new products and types of customer interactions which will create opportunities for the Company to provide additional outsourced services. StarTek intends to capitalize upon its strategic long-term relationships to provide new outsourced services to its clients as opportunities arise. ACQUIRE COMPLEMENTARY COMPANIES AND EXPAND STRATEGIC ALLIANCES. StarTek intends to evaluate the acquisition of complementary companies that could extend its presence into new geographic markets or industries, expand its client base, add new product or service applications and/or provide operating synergies. Management believes that there could be many domestic and international acquisition and strategic alliance opportunities as companies consider selling their existing in-house operations and as smaller companies seek growth capital and economies of scale to remain competitive. The Company is a Delaware corporation with its executive offices at 111 Havana Street, Denver, Colorado 80010, and its telephone number is (303) 361-6000. THE OFFERING <TABLE> <S> <C> Common Stock Offered: By the Company.................. 3,000,000 shares By Selling Stockholders(a)...... 666,667 shares Total......................... 3,666,667 shares Common Stock Outstanding after this Offering(b)................ 13,828,571 shares Use of Proceeds................... The estimated net proceeds to the Company of $41.4 million from this offering will be used to repay substantially all outstanding indebtedness of the Company (including notes payable to the Principal Stockholders), related prepayment premiums, and for working capital and other general corporate purposes, including capital expenditures to increase its capacity and for possible future acquisitions. See "Use of Proceeds." Proposed New York Stock Exchange Symbol.......................... SRT </TABLE> - ------------------------ (a) Assumes no exercise of the over-allotment option to purchase up to 550,000 additional shares granted by the Selling Stockholders to the Underwriters. See "Principal and Selling Stockholders" and "Underwriting." (b) Excludes 985,000 shares and 90,000 shares reserved for future issuance under the Company's Option Plan and Director Option Plan, respectively. See "Management--Compensation of Directors" and "Management--Stock Option Plan." SUMMARY FINANCIAL DATA The following summary historical and pro forma consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> SIX MONTHS YEARS ENDED DECEMBER 31, YEAR ENDED ENDED --------------------------------------------- JUNE 30, DECEMBER 31, PRO FORMA 1992 1992 1993 1994 1995 1996 1996(A) ---------- ------------ ------- ------- ------- ------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues................ $16,791 $11,880 $23,044 $26,341 $41,509 $71,584 $71,584 Gross profit............ 3,518 2,101 5,005 4,986 8,279 14,346 14,346 Management fee expense.. -- 400 1,702 612 2,600 6,172 -- Operating profit (loss)................ 1,705 432 (176) (115) 338 410 6,582 Income (loss) before income taxes.......... 1,618 424 (369) (331) (58) 38 6,210 Net income (loss)(b).... 1,031 482 (369) (331) (58) (74) 3,894 Net income per share(c).............. $0.34 Shares outstanding(c)... 11,293 SELECTED OPERATING DATA: Capital expenditures.... $136 $153 $1,239 $670 $2,105 $1,333 $1,333 Depreciation and amortization.......... 149 79 456 588 873 1,438 1,438 <CAPTION> THREE MONTHS ENDED MARCH 31, --------------------------- PRO FORMA 1996 1997 1997 (A) ------- ------- --------- <S> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues................ $15,219 $16,667 $16,667 Gross profit............ 2,564 3,935 3,935 Management fee expense.. 199 793 -- Operating profit (loss)................ 659 978 1,771 Income (loss) before income taxes.......... 533 894 1,687 Net income (loss)(b).... 533 894 1,058 Net income per share(c).............. $ 0.09 Shares outstanding(c)... 11,367 SELECTED OPERATING DATA: Capital expenditures.... $412 $267 $267 Depreciation and amortization.......... 290 495 495 </TABLE> <TABLE> <CAPTION> AT MARCH 31, 1997 ----------------------------------------- ACTUAL PRO FORMA(D) AS ADJUSTED(E) --------- ------------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit).............................................. $ 4,874 $ (3,207) $ 35,705 Total assets........................................................... 23,459 23,459 49,863 Total debt............................................................. 7,360 15,441 545 Total stockholders' equity............................................. 8,159 78 41,378 </TABLE> - ------------------------------ (a) The Company was a C corporation for federal and state income tax purposes through June 30, 1992. From and after July 1, 1992, the Company has been an S corporation and, accordingly, has not been subject to federal or state income taxes. Pro forma net income (i) reflects the elimination of management fee expense and (ii) includes a provision for federal, state and foreign income taxes at an effective rate of 37.3%. See "Offering Related Transactions." (b) After the elimination of management fee expense of $612 in 1994, $2,600 in 1995 and $199 in the three months ended March 31, 1996, and including a provision for federal, state and foreign income taxes, at an effective rate of 37.3% for each period, of $105 for 1994, $948 for 1995 and $273 for the three months ended March 31, 1996, pro forma net income was $176, $1,594 and $459 in 1994, 1995 and the three months ended March 31, 1996, respectively. (c) Calculated in the manner described in Note 2 to the Consolidated Financial Statements. (d) The pro forma consolidated balance sheet at March 31, 1997 reflects notes payable to the Principal Stockholders and amounts relating to accumulated retained earnings and additional paid-in capital without reflecting any proceeds from the sale by the Company of 3,000,000 shares of Common Stock. (e) Gives effect to the sale by the Company of 3,000,000 shares of Common Stock in this offering and the application of the estimated net proceeds therefrom, including repayment of indebtedness of the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031107_peregrine_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031107_peregrine_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e906c03f39787fc99ab534eef05a55cad8d698b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031107_peregrine_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND "ACQUISITION OF APSYLOG" AS WELL AS IN THE PROSPECTUS GENERALLY. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Peregrine is a leading provider of Enterprise Service Desk software. The Company develops, markets and supports SERVICECENTER, an integrated suite of applications that automates the management of complex, enterprise-wide information technology ("IT") infrastructures. SERVICECENTER is designed to address the IT management requirements of large organizations and can be deployed across all major hardware platforms and network operating systems and protocols. SERVICECENTER utilizes advanced client/server and sophisticated intelligent agent technologies and a modular architecture. The development of the market for the Company's products reflects an increasingly competitive business environment in which information technology has become an important source of competitive advantage. Organizations rely heavily on information technology in efforts to improve operational efficiency, react more quickly to changes in the marketplace, and better understand and respond to customer needs. IT is an integral part of many core business functions, including plant management, inventory management, and customer billing, and is critical to many new tactical and strategic initiatives such as business process reengineering, supply chain management, and enhanced customer care. Most traditional IT management solutions have been designed to address a limited set of problems, principally problem tracking and problem resolution. These applications have been deployed on a departmental or divisional level or have otherwise taken a segmented approach to IT management that requires a specific and separate application to manage each component or system within the IT infrastructure and that does not permit integration with other third party IT applications. The Company's SERVICECENTER suite of applications offers capabilities beyond those of traditional internal help desk solutions and is intended to create an Enterprise Service Desk capable of meeting the broader operational and strategic needs of business enterprises. SERVICECENTER provides an integrated and automated suite of six applications, consisting of problem management, knowledge-based resolution, change management, inventory/configuration management, order and catalog management, and financial management. The Company believes that its future growth and profitability will depend on a number of factors, including, among others, factors relating to the quality of its products and to its ability to further penetrate existing markets and to penetrate new markets. In that regard, the Company's strategy is focused on maintaining and enhancing its technological position and the functionality of its products; broadening its target markets from the Fortune 500 to include smaller organizations worldwide comprising the Global 2000; expanding international sales; leveraging a product authorship model that rewards individual product developers based on sales of products developed by them; leveraging a direct sales model intended to minimize the number of remote sales offices and focus on effective use of telephone and network communications; implementing and expanding existing programs aimed at improving customer relationships through information exchanges among the Company, existing customers, and prospective customers; and expanding its distribution channels through relationships with third party distributors; system integrators, and original equipment manufacturers. ACQUISITION OF APSYLOG On August 29, 1997, the Company's Board of Directors approved the acquisition of Apsylog S.A., a corporation organized under the laws of the Republic of France, through the acquisition of all the outstanding shares of United Software, Inc., a Delaware corporation that holds all the outstanding share capital of Apsylog S.A. (the "Apsylog Acquisition"). The Apsylog Acquisition was completed in September 1997. Unless the context otherwise requires, Apsylog S.A. and United Software, Inc. are referred to collectively in this Prospectus as "Apsylog." Apsylog is a leading provider of IT asset management software solutions. The development of a market for asset management solutions in recent years has paralleled that of the market for Enterprise Service Desk solutions and reflects the need of large organizations to manage increasingly complex and dispersed IT infrastructures. Apsylog's ASSETMANAGER product line, now renamed ASSETCENTER, provides asset management capabilities for IT infrastructures by tracking an organization's assets throughout their life cycles, thereby permitting more informed investment decisions in the acquisition, change and disposition of IT assets. The Company believes that ASSETCENTER will complement SERVICECENTER, allowing the Company to deliver an integrated suite of software applications and enabling organizations to take a more comprehensive approach to managing their IT infrastructures. In connection with the Apsylog Acquisition, the Company issued an aggregate of 1,916,213 shares of the Company's Common Stock to the stockholders of United Software, Inc., including 32,021 shares issuable upon exercise of outstanding options held by employees of Apsylog and assumed by the Company. The Company issued such shares to the stockholders of Apsylog in reliance on the exemptions from the registration requirements of the Securities Act set forth in Section 4(2) thereof and Regulation D and Regulation S promulgated thereunder. The Apsylog Acquisition was treated as a "purchase" for accounting and financial reporting purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Acquisition of Apsylog" and "Acquisition of Apsylog." ------------------------ The Company was incorporated in California in 1981 and reincorporated in Delaware in 1994. Unless the context otherwise requires, references in this Prospectus to "Peregrine" and the "Company" refer to Peregrine Systems, Inc., a Delaware corporation, its predecessor, Peregrine Systems, Inc., a California corporation, and except as otherwise indicated, its subsidiaries, including Apsylog. The Company's executive offices are located at 12670 High Bluff Drive, San Diego, California 92130, and its telephone number at that address is (619) 481-5000. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling Stockholders.............................. 1,301,419 shares Common Stock to be outstanding after the offering.................................. 17,175,094 shares (1) Nasdaq National Market symbol............... PRGN </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, ----------------------------------------- ---------------------- 1997 1997 -------------------- ---------------------- PRO PRO 1995 1996 ACTUAL FORMA (2) ACTUAL FORMA (3) -------- -------- -------- ---------- --------- ---------- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues........................ $19,628 $ 23,766 $ 35,035 $ 41,503 $ 23,218 $ 27,697 Gross profit.......................... 15,662 19,825 30,159 33,114 19,214 21,739 Acquired in-process research and development......................... 606 -- -- -- 34,775(4) -- Operating income (loss)............... (3,919) (4,266) 4,688 (1,117 ) (30,101) 2,563 Net income (loss)..................... 51(5) (6,411) 5,802 322 (31,577) 1,077 Net income (loss) per share........... $ (0.52) $ 0.39 $ 0.02 $ (2.14) $ 0.05 Shares used in per share calculation......................... 12,250 12,331 14,964 16,880 14,777 19,933 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ----------------- <S> <C> BALANCE SHEET DATA: Cash and equivalents................................. $ 16,754 Working capital...................................... 9,101 Total assets......................................... 40,343 Stockholders' equity................................. 14,060 </TABLE> - -------------------------- (1) Based upon shares outstanding as of September 30, 1997. Excludes 4,202,180 shares of Common Stock issuable upon exercise of options outstanding at September 30, 1997 under the Company's Nonqualified Stock Option Plan, 1991 Nonqualified Stock Option Plan and 1994 Stock Option Plan at a weighted average exercise price of $2.74 and 32,021 shares of Common Stock issuable upon exercise of options assumed in connection with the Apsylog Acquisition at a weighted average exercise price of $0.32. Also excludes 766,602 shares reserved at September 30, 1997 for future issuance under the 1994 Stock Option Plan, the 1997 Director Option Plan and the 1997 Employee Stock Purchase Plan and 1,842,000 shares reserved after September 30, 1997 for future issuance under the 1994 Stock Option Plan. Also excludes 50,000 shares issued after September 30, 1997 to Stephen P. Gardner, the Company's Vice President, Strategic Acquisitions, in connection with a restricted stock agreement between the Company and Mr. Gardner. See "Management--Stock Plans," "Management--Employment Agreements and Change in Control Arrangements," "Description of Capital Stock" and Notes 10 and 13 of Notes to Consolidated Financial Statements. (2) Pro forma to give effect to the Apsylog Acquisition as if such acquisition had taken place as of April 1, 1996 (excluding the impact of $34.8 million in acquired in-process research and development associated with the Apsylog Acquisition). The Apsylog Acquisition was accounted for as a "purchase" transaction. See "Acquisition of Apsylog." (3) Pro forma to give effect to the Apsylog Acquisition as if such acquisition had taken place as of April 1, 1997 (excluding the impact of $34.8 million in acquired in-process research and development associated with the Apsylog Acquisition). (4) Acquired in-process research and development charge relates to the Apsylog Acquisition. See Note 13 of Notes to Consolidated Financial Statements. (5) Includes a gain on the sale of a software product line in April 1994 of $4,025,000. See Note 4 of Notes to Consolidated Financial Statements. -------------------------- EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO A TWO-FOR-ONE SPLIT OF THE COMPANY'S COMMON STOCK EFFECTED IN FEBRUARY 1997 IN THE FORM OF A STOCK DIVIDEND. SEE "DESCRIPTION OF CAPITAL STOCK."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031176_apple_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031176_apple_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..049c6b6eb2591d4a83dfae346726db1516909e7b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031176_apple_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (i) "APPLE" OR THE "COMPANY" MEAN APPLE ORTHODONTIX, INC., (ii) "AFFILIATED PRACTICES" MEAN THE ORTHODONTIC PRACTICES WITH WHICH THE COMPANY HAS AFFILIATED AND THOSE, IF ANY, WITH WHICH THE COMPANY AFFILIATES IN THE FUTURE, (iii) "NEW CASE STARTS" MEAN THE NUMBER OF NEW PATIENTS BEGINNING TREATMENT DURING A PERIOD OF TIME AND (iv) "CASE ACCEPTANCE RATE" MEAN, FOR ANY SPECIFIED PERIOD OF TIME, THE PERCENTAGE OF POTENTIAL PATIENTS WHO UNDERGO AN INITIAL EXAMINATION AT AN ORTHODONTIC PRACTICE WHO IN FACT ELECT TO BEGIN TREATMENT WITH SUCH EXAMINING ORTHODONTIST. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." THE COMPANY Apple is a leading provider of practice management services (which exclude the management and delivery of orthodontic services) to orthodontic practices in the United States and Canada. The Company offers its Affiliated Practices a full range of such services designed to facilitate the delivery of high-quality, affordable orthodontic treatment to consumers. The Company's Affiliated Practices benefit from a sophisticated, Company-developed practice operating approach designed to (i) stimulate demand in their local markets by increasing consumer awareness of the benefits, availability and affordability of orthodontic treatment, (ii) improve the productivity and profitability of their practices and (iii) leverage the benefits of orthodontist affiliation by providing basic services that include clinical and financial information management, access to capital and sophisticated technology, group purchasing and comprehensive marketing techniques. The Company seeks to grow through affiliations with additional orthodontic practices and the development of new offices that complement geographic areas served by Affiliated Practices. The Company earns revenue by providing management, administrative, development and other services to its Affiliated Practices. As of October 24, 1997, the Company provided management services to 48 orthodontic practices representing 61 orthodontists operating in 14 states in the United States and 3 provinces in Canada. The orthodontic services industry is highly fragmented, with over 90% of the approximately 9,000 orthodontists in the United States operating as sole practitioners and approximately 3% being affiliated with public orthodontic practice management companies. The industry currently generates approximately $3.5 billion in annual gross revenues, which have grown steadily at an average rate of 7.5% per year in recent years. Seventy percent of orthodontic services are performed on a private pay, fee-for-service basis, 25% are covered by traditional dental insurance (generally with a 50% or greater copayment by the patient) and less than 5% are reimbursed from managed care payor sources because of the elective nature of the service. Management believes that the potential market for orthodontic services could be significantly increased based on growing acceptance among adult consumers and industry data that indicate that only one out of five children who could benefit from orthodontics receives treatment. According to the most recent statistics available from studies by the Journal of Clinical Orthodontists, the median orthodontic practice in the United States generated $518,800 in revenues and started 180 new cases in 1996 and experienced a case acceptance rate of 60% in 1994. The traditional orthodontic practice relies primarily on referrals from general dentists and less than 8% of practices utilize sophisticated marketing techniques such as commercial advertising. Through its practice operating approach, the Company seeks to stimulate productivity and internal growth within its Affiliated Practices. To accomplish this objective, the Company has developed an operating approach consisting primarily of (i) implementing practice-building and external marketing programs designed to generate new case starts through increased referrals from existing and former patients and the use of multimedia advertising to stimulate demand for treatment services, (ii) offering more affordable payment plans to patients to broaden the market for orthodontic services, (iii) increasing the operating efficiency of the Affiliated Practices by relieving the orthodontists from various time-consuming administrative responsibilities and realizing economies of scale, (iv) providing a systems-oriented approach to training and education of clinic personnel to improve communications with patients and prospective patients and increase productivity, (v) developing new offices to expand the scope of the geographic markets served by Affiliated Practices and (vi) utilizing a customized management information system to provide detailed financial and operating data and related analyses to Affiliated Practices and management. The Company believes that its approach has resulted in local market expansion, increased new case starts and practice profitability, greater orthodontist productivity and heightened patient satisfaction within its existing Affiliated Practices. The Company is pursuing an aggressive expansion program designed to strengthen its position in its current markets and expand its network of Affiliated Practices into markets it does not currently serve. The Company intends to expand its network of Affiliated Practices through future affiliations and new office development. Management believes that, because of the highly fragmented nature of the industry, there are numerous orthodontic practices that are attractive candidates to become Affiliated Practices. The Company focuses on candidates that have favorable reputations in their local markets and the desire to implement the Company's practice operating approach. The Company seeks to build upon the reputations and relationships of the orthodontists associated with the existing Affiliated Practices to identify and develop candidates to become future Affiliated Practices. Many of these orthodontists hold, or have previously held, leadership roles in various state, regional and national associations or are affiliated with or teach at graduate orthodontic programs at dental schools. The Company believes the visibility and reputation of these individuals, combined with the acquisition experience of management, provides the Company with advantages in identifying, negotiating and consummating future affiliations. RECENT DEVELOPMENTS In connection with its initial public offering (the "IPO") in May 1997, the Company acquired substantially all the tangible and intangible assets and assumed certain liabilities of, and entered into agreements to provide long-term management services to, 31 orthodontists operating in 58 offices located in 13 states in the United States and in Alberta, Canada (the "Founding Affiliated Practices"). From the date of the IPO through October 24, 1997, the Company has affiliated with an additional 17 practices and 30 orthodontists operating in 30 offices, increasing the total number of existing Affiliated Practices to 48. These additional practices had combined historical gross patient revenues of $18.7 million for their most recently completed fiscal year, and expand the Company's geographic base into Georgia, as well as Ontario and British Columbia, Canada. In addition to these affiliations, the Company is negotiating and will continue to negotiate to affiliate with additional orthodontic practices; however, although the Company intends to aggressively pursue these and other affiliations, there can be no assurance that any of such affiliations will be consummated. THE OFFERING Common Stock Offered by the Company............. 1,250,000 shares Offered by the Selling Stockholders..................... 424,986 shares(1) Common Stock outstanding after the Offering.............................. 9,510,692 shares(2)(3) Class B Stock outstanding after the Offering.............................. 3,176,774 shares Voting Rights........................... Holders of Common Stock are entitled to one vote per share and the holders of Class B Stock are entitled to three-tenths (3/10ths) of a vote per share. In addition, holders of the Class B Stock are currently entitled to elect as a class one member of the Board of Directors, and the holders of the Common Stock are entitled to elect as a class all other members of the Board of Directors. The Common Stock and the Class B Stock possess ordinary voting rights and vote together as a single class in respect of other corporate matters. The Class B Stock is convertible into Common Stock in certain circumstances. See "Description of Capital Stock." Use of Proceeds......................... Net proceeds to the Company from the Offering will be used to repay bank debt and for future affiliations, the development of new offices, future capital expenditures and general corporate purposes. See "Use of Proceeds." American Stock Exchange Symbol.......... AOI - ------------ (1) Of such shares, 170,310 are currently shares of Class B Stock. Such shares will automatically convert into an equal number of shares of Common Stock upon their sale in the Offering. (2) Includes 1,027,354 shares of Common Stock issuable in connection with certain Canadian affiliations. See "Shares Eligible for Future Sale." (3) Excludes (i) an aggregate of approximately 839,350 shares of Common Stock issuable upon exercise of stock options outstanding at a weighted average exercise price of $7.18 per share under Apple's 1997 Stock Compensation Plan (the "1997 Stock Compensation Plan"), (ii) approximately 513,996 shares available for future awards under the 1997 Stock Compensation Plan and (iii) 180,000 shares of Common Stock issuable upon the exercise of a warrant issued to an affiliate of TriCap Funding I, L.L.C. ("TriCap"), with an exercise price per share of $7.00, which warrant was subsequently distributed to three investors in such affiliate, including William Sherrill, a director of the Company. See "Management -- 1997 Stock Compensation Plan" and "Certain Transactions." EXCEPT WHERE OTHERWISE SPECIFIED, INDUSTRY INFORMATION USED IN THIS PROSPECTUS IS DERIVED FROM THE 1995 JOURNAL OF CLINICAL ORTHODONTISTS ORTHODONTIC PRACTICE STUDY ("1995 JCO STUDY"), A BIENNIAL STUDY, AND RELATES TO 1994 UNLESS OTHERWISE INDICATED. PARTS I AND II OF THE 1997 JOURNAL OF CLINICAL ORTHODONTISTS ORTHODONTIC PRACTICE STUDY (THE "1997 JCO STUDY"), WHICH CONTAINS CERTAIN COMPARABLE INFORMATION FOR 1995 AND 1996, HAVE RECENTLY BECOME AVAILABLE AND ARE CITED HEREIN AS APPROPRIATE. THE REMAINDER OF THE 1997 JCO STUDY IS NOT EXPECTED TO BE AVAILABLE UNTIL LATE 1997. THE INFORMATION COMPILED IN THE 1995 JCO STUDY AND THE 1997 JCO STUDY RELATES TO ORTHODONTISTS WHO HAVE COMPLETED ACCREDITED GRADUATE ORTHODONTIC TRAINING PROGRAMS AND NEITHER THAT INFORMATION NOR ANY OTHER INDUSTRY INFORMATION SET FORTH IN THIS PROSPECTUS RELATES TO GENERAL AND SPECIALTY DENTISTS WHO ALSO PERFORM ORTHODONTIC SERVICES. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following information is derived from the financial statements of Apple included elsewhere in this Prospectus. Comparative results have not been presented as the Company was effectively not in operation in 1996. For certain additional information concerning the existing Affiliated Practices, see Note 6 of Notes to the Audited Financial Statements and Notes 3 and 6 of Notes to the Unaudited Financial Statements. PERIOD FROM INCEPTION (JULY 15, 1996) THROUGH THREE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ (UNAUDITED) STATEMENT OF OPERATIONS DATA: Service fee revenues................... $-- $ 7,480(1) Costs and expenses(2): Salaries and benefits............. 627 3,094 Orthodontic supplies.............. -- 998 Rent.............................. 20 786 Advertising and marketing......... -- 146 General and administrative........ 232 1,241 Depreciation and amortization..... 5 341 Compensation expense related to issuance of stock(3)..................... 13,812 -- Consulting expense related to issuance of stock(3)............ 9,613 -- ----------------- ------------------ Total costs and expenses.......... 24,309 6,606 ----------------- ------------------ Operating income (loss)................ (24,309) 874 Interest expense....................... -- 141 Interest and other income.............. -- (94) ----------------- ------------------ Income (loss) before income taxes...... (24,309) 827 Provision for income taxes............. -- 314 ----------------- ------------------ Net income (loss)...................... $ (24,309) $ 513 ================= ================== Weighted average shares outstanding.... 3,359 11,205 Earnings per share..................... $ (7.24) $ 0.05 SEPTEMBER 30, 1997 -------------------------------- ACTUAL AS ADJUSTED(4) -------------- -------------- (UNAUDITED) BALANCE SHEET DATA: Working capital........................ $ 693 $ 4,236 Total assets........................... 40,783 44,326 Long-term debt and capital lease obligations, net of current portion.. 9,410 210 Stockholders' equity................... 16,132 28,875 - ------------ (1) Reflects service fees for the Founding Affiliated Practices for the entire three-month period and for affiliations during the three-month period, from the date of such affiliation. (2) Corporate office expenses are included for all periods presented. (3) Reflects non-recurring charges related to shares issued to management and advisors of the Company in October and December 1996, at $7.00 per share. See Note 1 of the Notes to the Audited Financial Statements included elsewhere in this Prospectus. (4) Adjusted to give effect to the sale of the 1,250,000 shares of Common Stock offered by the Company in the Offering and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031230_global_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031230_global_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e172400bc2a4cca1916107f12f069484139c56da
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031230_global_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, all statements made in this Prospectus assume no exercise of the Over-allotment Option (as defined), the Representatives' Warrants or outstanding options to acquire Class A Common Stock. As of [March 31,] 1997, Global Broadcasting Systems, Inc. had acquired two full-power UHF television stations and had entered into agreements to acquire [18] full-power UHF television stations (the "Acquisitions"). Unless the context otherwise requires, the information contained in this Prospectus gives effect to the Acquisitions. All information herein gives effect to the 13,924.0888-for-1 stock split (the "Stock Split") to be effected prior to consummation of the Offerings. See "Description of Capital Stock." THE COMPANY The Company is a national televised home-shopping retailer offering high- quality merchandise at manufacturers' direct prices that are up to 25% to 50% below those of its principal competitors. On March 1, 1996, the Company began full-time, national distribution of its video home-shopping programming via satellite to all home satellite dishes in the United States. As of [March 31], 1997, the Company owned [two] independent full-power UHF television stations and had agreements to acquire an additional [18] independent full-power UHF stations. Following the Acquisitions, the Company's national station group will broadcast the Company's programming in 12 of the top 25 markets (based on the Nielsen designated market area or DMA ranking) throughout the United States (including New York, Los Angeles, Chicago, Philadelphia, San Francisco, Boston, Dallas, Detroit, Houston, Seattle, Denver and St. Louis). The Company's national station group, following the Acquisitions, will have an aggregate acquisition value in excess of $430.0 million and a total over-the-air audience reach of approximately 30 million homes. Pursuant to current "must carry" regulations, which require local cable television operators to carry certain over-the-air broadcasters' programming without payment of a fee, approximately 21.9 million of the television households in the DMAs of the Company's stations will also receive the Company's programming by cable. Following the Acquisitions, the Company will be the third largest television station operator in the United States (based on the aggregate number of television households which will receive the Company's programming over-the-air) or the ninth largest television station operator in the United States (based on the aggregate number of television households which will receive its programming over-the-air, discounted by 50% for UHF stations pursuant to Federal Communications Commission ("FCC") rules). The Company's acquisition strategy is designed to capitalize on the national scope of its station group to maximize revenues and profits. Home-shopping involves the sale of merchandise through dedicated television channels and blocks of television programming that reach consumers via broadcast television, cable television or satellite dish. The home-shopping industry has experienced strong growth since its inception in 1982 and aggregate revenues for the industry have increased steadily from approximately $4.0 million in 1983 to over $3.0 billion in 1996, representing a compound annual growth rate of approximately 66%. The industry is currently dominated by only two companies--The Home Shopping Network ("HSN") and QVC Network, Inc. ("QVC")--whose combined sales represented approximately 95% of the industry's 1996 revenues. As of [March 31], 1997, approximately 4.2 million homes were receiving the Company's programming over-the-air, 3.3 million homes were receiving the Company's programming over cable pursuant to "must carry" regulations and 2.3 million homes were receiving the Company's programming by home satellite dish. The "must carry" rules have been challenged by the cable industry and the United States Supreme Court is expected to rule definitively on this issue by June 1997. If the "must carry" rules are overturned, the Company will continue to utilize the UHF stations owned by it to broadcast its programming over-the- air and may also elect to enter into affiliation agreements with cable operators to carry the Company's programming in exchange for the payment of a carriage fee. The Company believes that, even if the "must carry" rules are overturned, it can compete effectively against other home shopping companies because (i) the experience of HSN indicates that a significant proportion of sales can be made over-the-air and (ii) the Company's low overhead should enable it to operate profitably even if it is required to pay cable carriage fees. The Company currently offers a wide variety of high-quality brand name and non-branded jewelry, sports memorabilia, health and beauty products, fitness equipment, electronics and fashion merchandise. The Company's programming is broadcast 24 hours a day, 7 days a week and consists of both one-hour and multi-hour program segments. During each segment, merchandise is described and demonstrated by show hosts, and orders are placed directly with GBS by viewers who call a toll-free telephone number. Each program segment has a theme devoted to a particular category of product or lifestyle. From time to time, GBS broadcasts special program segments devoted to merchandise associated with a particular celebrity, geographical region or seasonal interest. During both regular and special program segments, show hosts talk to viewers live on the air, and the Company will offer viewers opportunities to win prizes in the form of credits that may be applied toward future purchases. STRATEGY The Company's objective is to establish the leading trademark on television for discounted high-quality fashion and lifestyle merchandise by implementing the following strategy: . National Television Station Base. The experience of other home-shopping companies indicates that, without access to at least 20 million full- time television households, an electronic retailer will not be successful. The Company's station acquisition strategy is designed to ensure that the Company is able to attain this critical mass. Accordingly, the Company intends to consummate the Acquisitions and to pursue additional television station acquisitions up to the maximum number permissible under current laws and regulations. The Company's national station group will enable the Company to reach a significant television audience without payment of carriage fees to cable system operators which its competitors incur. . Favorable Supplier Arrangements and Low Cost Operations. The Company believes its supplier arrangements and low cost structure should enable it to operate profitably while continuing to offer savings to its customers of up to 25% to 50% over its principal competitors. The Company's "ZERO INVENTORY" policy, under which it maintains no inventory of merchandise sold on its programming, enables it to pay 50% of the cost of all merchandise sold on its programming to suppliers within one day of delivery. As a result, the Company's suppliers offer merchandise to the Company at substantially lower prices than those available to the Company's competitors and have agreed to accept all returns from the Company's customers within 30 to 45 days. This enables the Company to operate without incurring significant costs associated with warehousing, distributing and managing inventory. The Company believes that it will be difficult for its current competitors to implement similar supply arrangements because those competitors incur significantly higher overhead expenses and working capital requirements than the Company in connection with warehousing, distributing and managing inventory, which would likely preclude such competitors from paying suppliers 50% of the cost of merchandise within one day of delivery. . Low-Priced, High-Quality Merchandise. Industry data demonstrates that price is a key factor affecting home-shopping sales. Due to its favorable supplier arrangements and low cost structure, the Company is able to offer high-quality merchandise that is comparable to that of its principal home-shopping competitors at prices that are up to 25% to 50% lower. . Strategic Relationships. According to industry research, sales attributable to jewelry range from approximately 40% to 70% of a home- shopping company's aggregate sales. Through family members of the co- founder, Chairman and Chief Executive Officer of the Company, GBS enjoys strategic relationships with many of its jewelry suppliers. The Company believes that these relationships will provide an advantage to the Company in terms of merchandise variety, quality control and price. . Flexible Payment Terms. The Company offers extended payment terms that permit a customer to pay for a product in up to 12 monthly installments using any major credit card or the Company's own credit card. The Company believes that the availability of these flexible payment terms should enable it to compete effectively for home-shopping sales. . Multiple Distribution Channels. Through a combination of innovative programming, interactive information services, print media and online access, the Company believes it can increase sales per television household by increasing active and repeat customers. In areas where interactive television is available, the Company's interactive shopping database will work in concert with its televised programming and will allow consumers to access additional information regarding any merchandise displayed on the Company's televised programming. The Company also plans to distribute a print catalogue highlighting products presented on its televised program. The Company will maintain a web site on the internet where customers will be able to view and obtain information regarding its products and to place orders. In addition, the Company will distribute a video, or "electronic catalogue," highlighting its most popular products. . Full-Time Broadcast. Industry research indicates that, to be successful, a home-shopping company must distribute its programming to at least 20 million television households 24 hours a day, seven days a week. Following the Acquisitions, approximately 30 million over-the-air homes will receive the Company's programming on a full-time basis. . Satellite Access. The Company is party to an agreement with GE American Communications, Inc. ("GE Americom") which provides the Company access until December 31, 2004 to a preemptible transponder on domestic communications satellite C-4 ("Satcom C-4"). Satcom C-4 is one of four primary satellites from which cable operators receive their programming. Pursuant to the agreement with GE Americom, the Company has purchased unusual transponder protection, which the Company believes should enable it to distribute its programming continuously to all home satellite dishes in the United States and to all of its television stations for retransmission over-the-air and to cable operators that carry the Company's programming. . International Expansion. The Company intends to market its products in international markets, particularly in Asia and Europe where the success of electronic retailers such as FujiSankei TV indicate that demand exists for home-shopping. The Company's distribution methods in international markets are expected to be similar to those utilized in the United States, and the Company intends to pursue joint ventures and other strategic partnerships to increase international sales. . Strong Capitalization. Upon consummation of the Offerings, the Company will have raised at least $300.0 million of equity capital and $270.0 million of long-term debt. On a pro forma basis, as of December 31, 1996, the Company's ratio of debt to equity would have been approximately 0.90 to 1.00. The Company maintains its principal executive offices at 1740 Broadway, New York, New York 10019, and its telephone number is (212) 246-9000. COMPANY TELEVISION STATIONS The following table summarizes certain information with respect to the television stations that the Company expects to own and operate or have agreements to acquire as of [March 31,] 1997. See "Risk Factors--Risks Related to the Acquisitions." <TABLE> <CAPTION> NUMBER OF TOTAL TELEVISION NUMBER OF HOMES ACTUAL OR TELEVISION REACHED NUMBER EXPECTED MARKET DMA HOMES IN BY STATION'S OF CABLE ACQUISITION ACQUISITION AREA RANK (1)(2) DMA(2) SIGNAL(3) HOMES(4) STATUS DATE PRICE --------------------- ----------- ------------- ------------ ------------ ------- ----------- --------------- <S> <C> <C> <C> <C> <C> <C> <C> New York, NY 1 6.7 million 1.6 million 4.6 million Pending 6/1/97 $ Los Angeles, CA 2 4.9 million 3.6 million 3.0 million Pending 7/1/97 $ Los Angeles, CA 2 4.9 million 4.7 million 3.0 million Pending 7/1/97 $ Los Angeles, CA 2 4.9 million 1.3 million 3.0 million Pending 7/1/97 $ Chicago, IL 3 3.1 million -- (5) 1.8 million Pending 6/30/97 $ Philadelphia, PA 4 2.6 million .9 million 2.0 million Pending 7/15/97 $ San Francisco, CA 5 2.3 million 2.2 million 1.6 million Closed 3/6/97 $ Boston, MA 6 2.1 million 2.0 million 1.7 million [Closed] 3/28/97 $ Dallas-Ft. Worth, TX 8 1.8 million 1.4 million .9 million Pending 7/30/97 $ Detroit, MI 9 1.7 million 2.2 million 1.1 million Pending 9/15/97 $ Houston, TX 11 1.6 million 1.5 million .9 million Pending 7/30/97 $ Seattle, WA 12 1.5 million -- (5) 1.0 million Pending [5/30/97] $ Denver, CO 18 1.2 million .7 million .7 million Pending [6/1/97] $ St. Louis, MO 20 1.1 million 1.0 million .6 million Pending [6/1/97] $ Fayetteville, NC 29 .8 million .3 million .5 million Pending 6/1/97 $ Raleigh-Durham, NC 29 .8 million .7 million .5 million Pending [4/1/97] $ Nashville, TN 33 .8 million .4 million .5 million Pending 7/15/97 $ Louisville, KY 50 .5 million .2 million .4 million Pending 7/15/97 $ Mobile, AL 61 .4 million .5 million .3 million Pending [4/1/97] $ Knoxville, TN 62 .4 million .2 million .3 million Pending 7/15/97 $ ------------- ----------- ------------ --------------- Total................ [33.5 million(6) 21.9 million(6) $433.85 million(7)] ============= ============ =============== </TABLE> - -------- (1) Represents the designated market area ("DMA") or the area in which television stations licensed to a particular city have a greater audience share than television stations licensed to another city. See "Business-- Industry Overview--U.S. Television Industry." (2) Source: BIA's Investing in Television '96 Market Report. (3) Source: 1996 Television and Cable Factbook. (4) Represents the number of cable homes in the DMA that will receive the Company's programming pursuant to the FCC's "must carry" rules. Source: BIA's Investing in Television '96 Market Report. (5) Current information is unavailable. (6) Represents total number of unduplicated homes. (7) Station acquisition prices are currently subject to confidentiality provisions. SPONSOR The Company's co-founder, Chairman and Chief Executive Officer (the "Sponsor") has agreed that, on or prior to consummation of the Offerings, he will have invested at least $100 million in the common equity of the Company (the "Sponsor's Capital Contribution") through the acquisition of common stock and capital contributions. The Sponsor has agreed that the disinterested members of the Company's Board of Directors may elect to increase the Sponsor's Capital Contribution by up to an additional $50 million on or prior to the closing of the Offerings. The Sponsor is one of the founders of USA Detergents, Inc. ("USA Detergents"), a leading manufacturer and marketer of low-priced, high-quality laundry and household cleaning products. USA Detergents consummated an initial public offering of its common stock on August 7, 1995 at a price to the public of $14.50 per share (or $9.67 per share after giving effect to a 3-for-2 stock split in February 1996). The common stock of USA Detergents is listed on The Nasdaq National Market under the symbol "USAD." SOURCES AND USES OF FUNDS The Company intends to use the proceeds of the Offerings to finance the Acquisitions, to purchase the Pledged Securities, to repay certain indebtedness, to pay fees and expenses in connection with the Offerings and for general corporate purposes, as set forth below: <TABLE> <S> <C> SOURCES OF FUNDS(1): Notes Offering.................................................. $270,000,000 Common Stock Offering........................................... 200,000,000 ------------ Total sources of funds........................................ $470,000,000 ============ USES OF FUNDS: Acquisitions(2)................................................. $373,950,000 Pledged Securities.............................................. 36,450,000 Bridge Loan(3).................................................. 28,500,000 Fees and expenses............................................... 27,000,000 General corporate purposes...................................... 4,100,000 ------------ Total uses of funds........................................... $470,000,000 ============ </TABLE> - -------- (1) Excludes the Sponsor's Capital Contribution. (2) Excludes brokers' fees payable in connection with the Acquisitions. The Company has entered into an agreement pursuant to which the Company has agreed to pay a consultant (the "Consultant") a fee in connection with each Acquisition introduced by the Consultant and closed by the Company equal, at the Consultant's option, to either (i) .0161% of the outstanding Common Stock or (ii) the sum of (A) 5% of the first $1.0 million of the Acquisition purchase price, (B) 4% of the second $1.0 million of the Acquisition purchase price, (C) 3% of the third $1.0 million of the Acquisition purchase price, (D) 2% of the fourth $1.0 million of the Acquisition purchase price and (E) 1% of the remaining Acquisition purchase price. The Company currently estimates that it will pay approximately $[3.1 million] in the aggregate in connection with the Acquisitions if the Consultant elects to receive a cash fee. However, the Consultant has informed the Company that it intends to receive its fee in the form of Class A Common Stock, which, if issued, would result in the issuance of shares of Class A Common Stock representing approximately .0161% of the outstanding Common Stock. (3) Represents approximately $25 million in indebtedness outstanding under a term loan with a group of lenders. This debt has a final maturity of May 15, 1998 and provides for interest at a rate of 13% per annum through May 15, 1997 and 15% thereafter (the "Bridge Loan"). Also represents a prepayment premium equal to approximately $2.5 million and a deferred placement fee of $1.0 million. The proceeds of all borrowings under the Bridge Loan were used to finance the acquisition of two stations. THE OFFERING Securities Offered..... $270.0 million in aggregate principal amount of % Senior Subordinated Notes due 2007. Issuer................. Global Broadcasting Systems, Inc. Maturity............... , 2007. Interest............... Interest on the Notes will accrue at a rate of % per annum and will be payable semi-annually in arrears on and of each year, commencing on , 1997. Optional Redemption.... The Notes will be redeemable at the option of the Company, in whole or in part, at any time on and after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the applicable redemption date. In addition, on or prior to , 2000, the Company may redeem up to 35% of the then outstanding principal amount of the Notes at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date with the net proceeds of one or more Equity Offerings; provided that at least $175.5 million in aggregate principal amount of Notes remain outstanding immediately after the occurrence of each such redemption. Change of Control...... Upon the occurrence of a Change of Control, the Company will be required to make an offer to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes--Repurchase at the Option of Holders--Change of Control." Security............... At the closing of the Offerings, the Company will use approximately $36.45 million of the net proceeds from the issuance of the Notes to purchase a portfolio of securities, consisting of U.S. government securities (the "Pledged Securities"), that will be pledged as security for the payment of the first two scheduled interest payments due on the Notes. Proceeds from the Pledged Securities will be used by the Company to make interest payments on the Notes through , 1998 and as security for repayment of principal of the Notes. See "Description of Notes--Security." The Pledged Securities will be held by the Trustee under the Pledge Agreement (as defined herein) pending disbursement. Ranking................ The Notes will rank subordinate to all existing and future Senior Indebtedness of the Company. As of December 31, 1996, after giving pro forma effect to the Offerings and the application of the net proceeds therefrom, the aggregate principal amount of outstanding indebtedness of the Company would have been $270.0 million, all of which would have been attributable to the Notes. See "Use of Proceeds," "Capitalization" and "Description of Notes." Certain Covenants...... The indenture pursuant to which the Notes will be issued (the "Indenture") will contain certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined) to incur additional Indebtedness (as defined), pay dividends or make other distributions, repurchase Equity Interests (as defined) or subordinated Indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets and issue or sell Equity Interests of Restricted Subsidiaries and limit the ability of the Company to enter into certain mergers and consolidations. See "Description of Notes." Use of Proceeds......... The proceeds from the Notes Offering, together with the proceeds from the Common Stock Offering, will be used to finance the Acquisitions, to purchase the Pledged Securities, to repay certain indebtedness, for fees and expenses in connection with the Offerings and for general corporate purposes. See "Use of Proceeds." CONCURRENT OFFERING Concurrently with the Notes Offering, the Company is offering 12,500,000 shares of its Class A Common Stock, par value $0.01 per share, to the public. In connection therewith, the Company has granted the Underwriters a 30-day option (the "Over-allotment Option") to purchase up to 1,875,000 additional shares of Class A Common Stock to cover over-allotments, if any. The Notes Offering is contingent upon the consummation of the Common Stock Offering, and the Common Stock Offering is contingent upon the consummation of the Notes Offering. RISK FACTORS Prior to making an investment in the Notes offered hereby, prospective purchasers should carefully review the information set forth under the caption "Risk Factors" as well as other information set forth in this Prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031264_fiberite_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031264_fiberite_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6c1535501d7e2c942ac33e61388920ea0074ac7a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031264_fiberite_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Fiberite Holdings, Inc. conducts all of its operations through its wholly owned subsidiary, Fiberite, Inc. ("Fiberite"). As used in this Prospectus, unless the context otherwise requires, the term "Company" includes Fiberite Holdings, Inc. and all of its subsidiaries and its and their respective predecessors and subsidiaries. The term "Predecessor" refers to the business predecessors of the Company prior to October 6, 1995. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY The Company is a leading supplier of advanced composite materials to the worldwide aerospace, industrial and recreational markets. The Company's composite materials are comprised of carbon, glass or other fibers that are impregnated with one of the Company's proprietary resin matrices, creating materials with more favorable strength- and stiffness-to-weight, dimensional stability and thermal insulative properties than those of many high performance materials, including metals and alloys. The Company's final products are principally sold in rolls, sheets or in granular or chopped forms and are subsequently incorporated by the Company's customers into a manufactured component. The Company's advanced composite materials are qualified to a broad range of specifications within the commercial and military aerospace industries and are used in interior and exterior aircraft structures, satellite and missile components, and solid rocket motor ablative insulation structures. The Company also sells carbon-carbon materials for use in the manufacture of commercial and military aircraft brakes. Additionally, the Company's composite materials are qualified to a wide range of industrial and recreational specifications, including electronic and small engine components, under-the-hood automotive applications, golf club shafts and fishing rods. The Company's strong position in its markets resulted in an increase in net sales of approximately 36% from fiscal 1993 to fiscal 1996. Over the last two decades, there has been significant growth in the use of composite materials as a result of improvements in applications engineering, advances in composites technology and declining costs to the customer in manufacturing its final products. In particular, the use of composite materials on commercial aircraft has increased as a result of both the growth in commercial aircraft deliveries and the increase in composites used on a per-aircraft basis as manufacturers strive to reduce aircraft weight and to maximize both fuel efficiency and payload capacity. Industry analysts believe the demand for commercial aircraft will be favorably influenced by a significant increase in air travel expected over the next decade, and the Company believes its established position and broad range of qualifications in the commercial aircraft market position it to capitalize on this trend. The Company's sales for commercial aircraft interior and exterior applications were approximately 31%, 33% and 35% of net sales in fiscal 1994, 1995 and 1996, respectively. In addition, sales of carbon-carbon materials, the substantial majority of which are used in commercial aircraft brakes, were approximately 8%, 10% and 10% of net sales in fiscal 1994, 1995 and 1996, respectively. The Company is also a leading supplier of advanced composite materials for military aircraft and for satellite applications. The Company believes there will be increased use of advanced composite materials in defense programs over the next several years primarily as a result of military aircraft moving from the development stage to the production phase. Sales for military aircraft exterior applications were approximately 13%, 14% and 12% of net sales in fiscal 1994, 1995, and 1996, respectively. Recently, there has also been a significant increase in the use of advanced composite materials by the U.S. satellite market due in large part to the growth in the telecommunications industry and the associated need for commercial satellites. In October 1995, a group of financial investors led by DLJ Merchant Banking Partners, L.P. and related investors and Carlisle Group, L.P. acquired all of the outstanding stock of ICI Composites, Inc., a wholly owned subsidiary of ICI American Holdings, Inc., and substantially all of the assets of Fiberite Europe GmbH, a wholly owned subsidiary of Deutsche ICI GmbH. FIBERITE COMPETITIVE STRENGTHS The Company believes it benefits from the following competitive strengths: Strong Market Position and Reputation. The Company has been a leading supplier of advanced composite materials for over 40 years, and management believes the Company has established a reputation in its markets for high quality products and excellent customer service. The Company has been integral in the development of advanced composite materials for strategic missile programs since 1955, has engineered materials for the space industry since the early 1960s and has developed advanced composite materials for virtually every major commercial and military aircraft program since the early 1970s. The Company believes its established position and broad range of qualifications position it to capitalize on emerging opportunities for composite applications in new and existing markets. Broad Range of Qualifications. Management believes Fiberite has one of the broadest ranges of qualifications of any composite materials manufacturer. The Company's materials are qualified and used by substantially all of the leading aerospace prime contractors, including Airbus Industrie, AlliedSignal, Inc., Bell Helicopter Textron Inc., The Boeing Company, General Electric Company, Lockheed Martin Corporation, McDonnell Douglas Corp., Northrop-Grumman Corporation and Thiokol Corp. The Company's industrial composite materials are sold to numerous blue chip manufacturers such as International Business Machines Corporation and Motorola, Inc. The Company's materials are also used by suppliers of technologically advanced recreational products, such as Callaway Golf Company and Cobra Golf Inc. Favorable Operating Leverage. Over the past 10 years, the Company has invested more than $75.0 million in updating and maintaining its equipment and expanding its operating facilities. As a result, the Company believes it has the manufacturing capacity to meet its anticipated growth for the next several years. In addition, in recent years the Company has improved its manufacturing processes, thereby reducing company-wide cycle time. Also, as a result of a successful structural reorganization, the Company believes its operations are among the most efficient in the industry, with net sales per employee of $291,000 for fiscal 1996. Technological Expertise. Fiberite has extensive experience in manufacturing, materials science, process engineering, polymer chemistry and textiles. The Company's chemists, technical service engineers, process engineers, applications engineers and technically orientated sales force work with customers to identify and engineer solutions to meet such customers' material requirements. In addition, the Company's relationship with the Wilton Centre, a research division of Imperial Chemical Industries, PLC, provides the Company with access to substantial research facilities and expertise. Experienced Management Team. Fiberite's management has extensive experience in the composite and aerospace industries. James E. Ashton, Ph.D., Chief Executive Officer, has nearly 28 years of experience in the composites industry and has led research in composites design and analysis and managed significant commercial and military composites production programs. Carl W. Smith, President and Chief Operating Officer, has over 25 years of experience in the composites industry, including 11 years with large aerospace prime contractors. Jon B. DeVault, Senior Vice President, Marketing, has over 30 years of experience with composite materials and structures used in the aerospace industry. FIBERITE STRATEGY The Company has adopted the following strategies to enhance its position as a leading supplier of advanced composite materials: Capitalize on Growth in the Commercial Aerospace Industry. Industry analysts believe that the demand for commercial aircraft will be favorably influenced by the projected increase in annual revenue passenger miles from approximately 1.6 trillion in 1995 to approximately 4.3 trillion in 2015. Additionally, the Company believes suppliers of advanced composite and carbon-carbon materials will benefit from greater utilization of such materials on modern aircraft. The Company also believes there will be an increase in the use of composites as a result of growth in the telecommunications industry and the associated need for commercial satellites. The Company's objective is to capitalize on these trends by continuing to supply a wide variety of advanced composite and carbon-carbon materials to the commercial aerospace market. Maximize Growth Opportunities in the Defense Industry. The Company believes there will be increased demand for advanced composite materials in defense programs over the next several years primarily due to military aircraft moving from the development stage into the production phase. As a result, the Company's strategy is to increase sales to its military customers by capitalizing on prior development activities and current qualifications and by maximizing customer service. Additionally, the Company plans to continue working with its defense customers to develop composite materials for next generation military aircraft. Pursue Opportunities for New Applications. The Company believes that improvements in applications engineering and composites technology will result in increased utilization of advanced composite materials both within the Company's existing markets and in new markets. The Company's objective is to pursue new opportunities, focusing on applications where the Company can add value through its composite development and applications experience. Grow Through Strategic Acquisitions. Over the past two years, the Company has completed a series of acquisitions designed to extend and expand the range of the Company's product offerings. Such acquisitions included the acquisition of: (i) BP Chemicals (Hitco) Inc.'s Fibers and Materials Division, which solidified the Company's position as the world's leading supplier of aerospace ablative materials; (ii) Ligustica SA's polyester/epoxy blend continuous fiber technology, which provided entry into certain marine and industrial markets; and (iii) Simmaco SARL's polyester bulk molding compound business, which expanded the Company's range of products for industrial markets. The Company intends to continue pursuing strategic acquisitions that will complement or extend its product lines or add new manufacturing and service capabilities. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 3,000,000 shares Common Stock offered by the Selling Stockholders............ 2,000,000 shares Common Stock to be outstanding after the Offering........... 14,494,657 shares(1) Use of proceeds............................................. Retirement of certain indebtedness. See "Use of Proceeds." Proposed New York Stock Exchange Symbol..................... FBT </TABLE> - ------------------------------ (1) Based upon shares outstanding as of January 15, 1997. Excludes 403,000 shares of Common Stock issuable upon exercise of outstanding options. See "Management -- 1995 Long Term Incentive and Share Award Plan," "Description of Capital Stock" and Note 14 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA The following table is derived from the Company's and the Predecessor's respective Consolidated Financial Statements and should be read in conjunction with such Consolidated Financial Statements and the Notes thereto, "Selected Financial Data" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" included elsewhere in this Prospectus. <TABLE> <CAPTION> FISCAL YEAR ENDED(1) -------------------------------------------------------------------------------------------- PRO FORMA DEC. 27, 1992 DEC. 26, 1993 DEC. 25, 1994 DEC. 31, 1995(2) DEC. 31, 1996 ------------- ------------- -------------- ------------------ -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales........................ $ 164,530 $ 161,190 $172,970 $207,325 $218,827 Gross profit..................... 15,395 18,781 33,501 34,965 42,739 Marketing, general and administrative................. 13,984 17,871 10,315 24,386 20,495 Research and technology.......... 10,858 10,655 8,134 10,002 8,890 Stock-based compensation(3)...... -- -- -- -- 9,678 Amortization..................... 1,600 -- -- 1,691 2,879 Other expense(4)................. 14,318 -- -- -- -- -------- -------- -------- -------- -------- Operating income (loss)(5)....... (25,365) (9,745) 15,052 (1,114) 797 Interest (income) expense, net(6)......................... 769 (3) (127) 11,794 10,775 Income tax expense (benefit)..... -- (3,100) 5,788 -- -- Cumulative effect of accounting change(7)...................... -- (9,390) -- -- -- -------- -------- -------- -------- -------- Net income (loss)(6)............. $ (26,134) $ (16,032) $ 9,391 $(12,908) $ (9,978) ======== ======== ======== ======== ======== Net income (loss) per common and common equivalent share........ $ (2.60) $ (1.59) $ 0.93 $ (1.19) $ (0.90) Common and common equivalent shares......................... 10,068 10,068 10,068 11,131 11,131 OTHER DATA: Adjusted operating income(8)..... $ 10,936 Adjusted interest expense(8)..... 6,547 Adjusted net income before extraordinary item(8).......... 2,633 Adjusted net income per share before extraordinary item(8)... 0.18 Adjusted common and common equivalent shares(8)........... 14,915 EBITDA(9)........................ $ (13,325) $ (11,406) $ 23,436 $ 15,203 $ 16,662 Depreciation..................... 10,440 7,729 8,384 14,626 12,986 Capital expenditures............. 3,295 2,372 3,574 4,713 6,317 Net sales per average number of employees...................... 148 172 218 270 292 </TABLE> <TABLE> <CAPTION> AT DECEMBER 31, 1996 ------------------------------------- AS ACTUAL ADJUSTED(10) ------------------ -------------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......................................................... $ 755 $ 755 Working capital.................................................................... 17,764 17,764 Total assets....................................................................... 161,188 158,997 Long-term debt, net of current portion............................................. 105,702 62,112 Stockholders' equity (deficit)..................................................... (2,087) 39,312 </TABLE> - ------------------------------ (1) Prior to December 23, 1994, the Company's fiscal year coincided with ICI American's fiscal year, which ended the last Sunday in December. Subsequent to October 6, 1995, the Company adopted a calendar fiscal year. (2) Reflects the effects of the Acquisition (as defined) as if the Acquisition had taken place as of January 1, 1995. Adjustments include increasing depreciation and amortization to reflect the effect of the re-valuation of assets to fair market value as discussed in note 5 below and increasing interest expense to reflect the effect of the Credit Agreement (as defined) and the 11.3% Subordinated Discount Notes (as defined). See "The Company" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) Stock-based compensation was $9.7 million in fiscal 1996, reflecting the impact of an amendment to the Company's stock option plans which removed the variable features related to certain performance criteria. (4) Represents write-off of intangibles and other fixed assets. (5) As of the date of the Acquisition, which was accounted for as a purchase, the assets of the Company were re-valued to fair market value and the Company began to recognize increased depreciation and amortization expense associated with such re-valued assets. Depreciation and amortization expenses were approximately $8.3 million, $16.3 million and $15.9 million for fiscal 1994, 1995 and 1996, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (6) In connection with the Acquisition, the Company incurred $120.1 million in long-term debt, including $90.0 million under the Credit Agreement and $30.1 million in 11.3% Subordinated Discount Notes. Interest expense associated with debt incurred in connection with the Acquisition was $2.9 million and $11.0 million for fiscal 1995 and 1996, respectively. (7) Cumulative effect of change in accounting for post-retirement benefits other than pensions resulting from adoption of SFAS No. 106. (8) Adjusted to give effect to (i) the Offering and the use of proceeds therefrom including (a) reduction of interest expense related to the prepayment in full of the 11.3% Subordinated Discount Notes and a repayment of a portion of the Credit Agreement and (b) reduction of amortization expense related to the write-off of deferred financing costs associated with the 11.3% Subordinated Discount Notes and (ii) the elimination of the non-recurring, stock-based compensation discussed in note 3 above. (9) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. See the Consolidated Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. (10) Adjusted to give effect to the sale by the Company of 3,000,000 shares of Common Stock at an initial public offering price of $16.00 per share and the application of the net proceeds therefrom, including recognition of a $2.2 million extraordinary loss related to the write-off of deferred financing costs associated with the 11.3% Subordinated Discount Notes. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031761_hartford_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031761_hartford_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0c27726695b2e2bd9097e5e6f2d47dff2ff39e28
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031761_hartford_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. This Prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this Prospectus, the words "anticipate," "believe," "estimate," "intend" and "expect" and similar expressions are intended to identify such forward-looking statements. The Company's actual results, performance or achievements could differ materially from the results expressed in or implied by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed in "Risk Factors." As used in this Prospectus, "Fiscal 1992" is the year ending January 31, 1993; "Fiscal 1993" is the year ending January 31, 1994; "Fiscal 1994" is the year ending January 31, 1995; "Fiscal 1995" is the year ending January 31, 1996 and "Fiscal 1996" is the eleven months ending December 31, 1996. THE COMPANY Hartford Computer is a leading provider of microcomputer products and related services, primarily to Fortune 1000 companies and other large enterprises. The Company has grown rapidly over the past four fiscal years following its entry into the microcomputer market in the early 1990s, with revenues increasing from $32.7 million in Fiscal 1993 to $253.1 million in Fiscal 1996 (an eleven month period), a compound annual growth rate of 101.7%. The Company's objective is to establish long-term relationships with its customers and provide them with a single source, cost-effective solution for all their microcomputer equipment and related services and financing needs. To achieve this goal, the Company has developed a comprehensive approach, called the "Full Cycle" solution, that provides its customers with "one-stop shopping" for their microcomputer needs. Under its Full Cycle solution, the Company (i) sells a broad range of new microcomputer products at competitive prices, (ii) sources used or constrained parts and equipment, (iii) rents and leases equipment, (iv) customizes product and system configurations in a cost- efficient manner, (v) buys, sells and accepts trade-ins of used equipment and (vi) offers a wide variety of technical services. Despite growing demand, most major distributors and resellers remain unable or unwilling to meet short-term equipment needs, accept trade-ins, dispose of and utilize used equipment or offer custom configurations in a cost-efficient manner. The Company believes that its ability to offer these additional services and used equipment differentiates it from its competitors. The Company offers over 36,000 microcomputer products to its customers, including desktop and laptop computers, monitors, servers, memory, peripherals and networking application tools and software. The Company is authorized to purchase products directly from IBM and certain peripherals manufacturers, and is an authorized reseller for most major microcomputer product manufacturers. In 1996, the Company began offering an expanded range of technical services, including technology management, enterprise consulting, life cycle management and application development. In recent years, the microcomputer industry has grown rapidly due to (i) the ease of use, relatively low cost and increasing processor power of microcomputers, (ii) the development of personal productivity software and (iii) the increase in the popularity of networks using a client/server design. In addition, the microcomputer products of a variety of manufacturers are increasingly being integrated into individual systems. As product and service choices multiply and system designs become more complex, many organizations require more assistance to understand, evaluate, select and implement cost- efficient solutions to their information processing needs. At the same time, to reduce costs and achieve a more consistent, reliable level of service, many organizations are seeking to reduce their number of vendors. Based on these trends, the Company believes that larger resellers which possess substantial buying power and access to constrained equipment, and which offer a broad range of products and financial and technical services, have an increasing competitive advantage over smaller resellers and specialized service providers. The Company was founded in 1978 as a leasing and rental company for mainframe computers. In the late 1980s, the Company developed a sophisticated purchasing and sourcing system for used mainframe computers. In the early 1990s, the Company leveraged this purchasing and sourcing experience to enter the microcomputer market and substantially de-emphasized its mainframe business. The Company significantly expanded its efforts selling and servicing new microcomputer equipment after it became an authorized reseller of IBM products in June 1993 and received authorization to purchase products directly from IBM in November 1993. The Company believes that establishing its direct relationship with IBM was a critical step in achieving its recent rapid growth because it provided the Company with improved product acquisition pricing, better product availability, increased manufacturer support and greater credibility among prospective customers. The Company continually evaluates opportunities to establish direct purchasing relationships with additional manufacturers. The Company's growth strategy is designed to capitalize on the growing, consolidating microcomputer product and technical services industry. The Company has developed several complementary growth strategies, including (i) leveraging its relationships with existing customers, (ii) leveraging its recently expanded sales force, (iii) expanding its manufacturer relationships, (iv) expanding and enhancing its technical services offerings, (v) increasing rental and leasing activities and (vi) developing its complementary direct marketing effort. To further these growth strategies, the Company has recently made significant investments in its infrastructure and added experienced sales professionals and technical services personnel. The Company was incorporated in Illinois in 1978. The Company's executive offices are located at 1610 Colonial Parkway, Inverness, Illinois 60067, and its telephone number is (847) 934-3380. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company..... 2,625,000 shares Common Stock offered by the Selling Stockholder............................ 875,000 shares Common Stock to be outstanding after the offering............................... 12,405,188 shares(1) Use of proceeds......................... Repayment of certain indebtedness, payment of the S Corporation Dividend and general corporate purposes, in- cluding working capital. See "Use of Proceeds" and "S Corporation Divi- dend." Proposed Nasdaq National Market symbol.. HCGI </TABLE> - -------- (1) Excludes 595,500 shares of Common Stock issuable upon exercise of stock options outstanding as of January 28, 1997, at a weighted average exercise price of $12.00 per share. Also excludes 404,500 shares of Common Stock reserved for future issuance under the Company's Long-Term Incentive Plan. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> ELEVEN MONTHS YEARS ENDED JANUARY 31, ENDED --------------------------------- DECEMBER 31, 1993 1994 1995 1996 1996(1) ------- ------- ------- -------- ------------- <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues..................... $31,041 $32,713 $73,023 $137,258 $253,146 Gross profit................. 5,987 8,338 10,102 17,451 32,150 Operating expenses........... 4,359 7,126 9,302 15,537 25,272 Income from operations....... 1,628 1,212 800 1,914 6,878 Interest expense............. 1,131 435 1,004 2,483 3,284 Reserve for litigation settlement.................. -- -- 190 -- 525 Income (loss) before provision (benefit) for income taxes................ 497 777 (394) (569) 3,069 Provision (benefit) for income taxes................ 190 298 (153) (221) 611 Net income (loss)............ $ 307 $ 1,033 $ (241) $ (348) $ 2,458 PRO FORMA INFORMATION: Pro forma net income(2)...... $ 3,922 Pro forma net income per common share(2)............. $ 0.38 Pro forma weighted average number of common shares outstanding(3).............. 10,233 Supplemental pro forma net income(4)................... $ 5,570 Supplemental pro forma net income per share(4)......... $ 0.46 Supplemental pro forma weighted average number of common shares outstanding(3)(5)........... 12,080 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 -------------------- AS ACTUAL ADJUSTED(6) ------- ----------- <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................. $(1,440) $29,479 Total assets.............................................. 84,624 84,624 Total debt................................................ 45,922 15,003 Total stockholders' equity................................ 8,963 39,882 </TABLE> - -------- (1) Effective February 1, 1996, the Company changed its fiscal year end from January 31 to December 31 in connection with its election to be treated as an S corporation. (2) Effective February 1, 1996, the Company elected to be treated as an S corporation. As an S corporation, the Company is not subject to federal and certain state income taxes. The pro forma information for Fiscal 1996 has been computed by (i) eliminating from operating expenses $3.2 million of employee compensation that exceeded the compensation that would have been paid had the compensation agreements adopted in January 1997 been in effect for all of Fiscal 1996 and $219,000 of certain expenditures related to employee-stockholders which will not be incurred in the future and (ii) adjusting the Company's net income to record income tax expense that would have been recorded had the Company been a C corporation assuming an effective tax rate of 39.4%. In Fiscal 1995, the Company paid discretionary bonuses to its officers who are stockholders in the amount of $1.3 million and incurred a noncash compensation expense related to the issuance of stock in the amount of $897,000. The Company's S corporation status will terminate upon consummation of this offering. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 16 of Notes to Financial Statements. (3) Includes option shares deemed outstanding under the treasury stock method and shares deemed issued to pay the S Corporation Dividend (as defined in "S Corporation Dividend"). (4) The supplemental pro forma information for Fiscal 1996 has been computed by adjusting pro forma net income to eliminate approximately $1.6 million of interest expense, net of income tax, associated with the assumed repayment of certain indebtedness with a portion of the proceeds of this offering. (5) Also includes shares deemed issued in connection with the assumed repayment of certain indebtedness. (6) Adjusted to reflect (i) the sale by the Company of 2,625,000 shares of Common Stock pursuant to this offering at an assumed initial public offering price of $15.00 and (ii) the application of the estimated net proceeds therefrom including the declaration and payment of the S Corporation Dividend, which is expected to be approximately $5.0 million. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031792_fulcrum_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031792_fulcrum_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ee212724ea270212be7e2bf45c27315c64320965
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031792_fulcrum_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." The Company uses a 52- to 53-week fiscal year ending the Saturday nearest to December 31, and all references in this Prospectus to "fiscal year" refer to the year ended on that day. The fiscal years ended December 28, 1996 and December 30, 1995 both include 52 weeks. The fiscal year ended December 31, 1994 refers to the period from inception on March 16, 1994 through December 31, 1994. As used herein, the term "pro forma" gives effect to the Storybook Acquisition (as defined herein). THE COMPANY Fulcrum Direct, Inc. ("Fulcrum" or the "Company") is a leading catalog retailer of branded apparel, shoes and accessories for children, teens and young women up to 24 years of age. The Company's strategy is to capitalize on the large opportunity in the children's and teen apparel catalog markets by building a portfolio of distinct brands targeting discrete market segments. The Company believes that its portfolio of brands combined with strong customer relationships, provide unique cross marketing opportunities that allow the Company to increase customer lifetime value and decrease customer acquisition costs. As of June 30, 1997, the Company's housefile included 4.4 million names of which 1.4 million had made at least one purchase from one of the Company's brands in the last 24 months. Since 1994, Fulcrum has introduced eight brands through in-house development, acquisition or strategic alliance. Each of these brands target specific style and price point segments of the children's and teen apparel markets. The Company's first brand, After the Stork, offers value priced, basic children's apparel made primarily of natural fibers. In contrast, the Playclothes brand presents value priced, everyday children's novelty outfits targeting specialty store shoppers. The Company's most recent acquisition, Storybook Heirlooms, presents an upscale array of dressy outfits and accessories for girls up to age 12. The Company's other children's brands include Little Feet, a catalog offering a wide assortment of shoes and hosiery, SunSkins, a line of sun protective clothing, Discount Direct, the Company's direct mail liquidation vehicle for all of its brands, and a test catalog with Sears Roebuck and Co. ("Sears"). In August 1997, the Company entered the teen market with zoe, which offers popular teen branded apparel to Generation Y girls and young women, ages 10 to 24 years. Fulcrum intends to continue growing its portfolio of distinct children's and teen brands by: maximizing the potential of its brands through targeted marketing, mailing and merchandising strategies; developing new brands that appeal to its growing customer base through in-house brand creation and strategic alliances; developing new markets and product categories that leverage the Company's large housefile and build strong customer relationships; and pursuing strategic acquisitions. Since 1995, the Company has made significant investments in its management team and infrastructure, which it believes position the Company to support substantial growth. Fulcrum markets its products to the large U.S. population of 95 million children, teens and young adults up to age 24 who account for more than one-third of the U.S. population. Because less than 3% of the $27 billion children's apparel purchases were made by catalog, as compared to nearly 10% of the $85 billion women's apparel purchases, the Company believes that the children's apparel catalog market has been underserved and undermailed. Furthermore, the Company believes that since women are largely responsible for, or significantly influence, children's and teen apparel purchase decisions, the penetration for children's and teen apparel catalog sales should, over time, grow to more closely approximate the penetration of women's catalog apparel purchases. The Company's executive offices are located at 4321 Fulcrum Way NE, Rio Rancho, New Mexico 87124-8447. Fulcrum's telephone number is (505) 867-7000, its toll-free order number is (888) 563-FLCM (563-3526), and its e-mail address is invest@fulcrumdirect.com. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 3,000,000 shares Common Stock to be outstanding after the Offering................................... 11,076,648 shares(1) Use of proceeds.............................. To repay $10.0 million principal amount of subordinated debt, plus accrued interest, to purchase trademarks in connection with certain of the Company's brands for approximately $1.75 million, to purchase the Company's headquarters, call center and distribution center for approximately $2.5 million in cash, plus assumed liabilities, to fund potential acquisitions and for working capital and general corporate purposes. Proposed Nasdaq National Market symbol....... FLCM </TABLE> - --------------- (1) Based on the number of shares outstanding as of June 30, 1997. Excludes (i) 765,000 shares of Common Stock reserved for issuance under the Company's Management Team Equity Plan (the "Option Plan"), of which 404,350 shares were subject to options outstanding as of June 30, 1997 at a weighted average exercise price of $5.50 per share and (ii) warrants to purchase 1,576,810 shares of Common Stock outstanding as of June 30, 1997 at a weighted average exercise price per share of $2.32. See "Capitalization," "Management -- Stock Option Plan" and Note 5 of Notes to Consolidated Financial Statements. PROCEEDS OF THE OFFERING Approximately $3.2 million of the estimated $24.2 million net proceeds of the Offering will be paid to certain officers and directors of the Company and entities affiliated with them in connection with the purchase by the Company of the trademarks and its headquarters, as a return of capital invested in Fulcrum Properties L.P. and Fulcrum Brands L.P. and gains associated therewith. Of this amount, $1.9 million will be paid to Michael G. Lederman (and entities and Persons affiliated with him), the Company's Chairman and Chief Executive Officer, $278,000 will be paid to Scott A. Budoff (and entities and Persons affiliated with him), the Company's President and Chief Operating Officer, $809,000 will be paid to Arnold Greenberg (and entities affiliated with him), a director of the Company, $147,000 will be paid to Patrick K. Sullivan (and entities and Persons affiliated with him) a director of the Company, and $74,000 will be paid to Carrie K. Cole, Vice President, Finance and Accounting and Chief Financial Officer. See "Use of Proceeds" and "Certain Relationships and Related Transactions." SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND PER CATALOG DATA) <TABLE> <CAPTION> PERIOD OF MARCH 16, FISCAL YEAR ENDED SIX MONTHS ENDED (INCEPTION) ------------------------------------------ -------------------------------------- THROUGH PRO FORMA PRO FORMA DECEMBER 31, DECEMBER 30, DECEMBER 28, DECEMBER 28, JUNE 30, JUNE 30, JUNE 30, 1994 1995 1996 1996(1) 1996 1997 1997(1) ------------ ------------ ------------ ------------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net revenues................ $ 11,997 $ 28,581 $ 36,457 $67,405 $16,815 $ 23,111 $38,074 Gross profit................ 6,910 15,370 20,891 36,730 9,290 13,661 21,630 Income (loss)from operations................ 293 1,057 843(2) 1,870(2) (402) (4,915)(2) (5,195)(2) Income (loss) before cumulative effect of change in accounting principle................. 91 320 406 310 (280) (5,124) (5,886) Cumulative effect of change in accounting principle(3).............. -- -- -- -- -- (1,802) (1,802) Net income (loss)(3)........ $ 91 $ 320 $ 406(2) $ 310(2) $ (280) $ (6,926)(2) $(7,688)(2) ======= ======= ======== ======= ======= ======== ======= Pro forma net loss(3)....... $ (41) $ (189) $ (755)(2) $ (851)(2) $ (590) $ (6,926)(2) $(7,688)(2) ======= ======= ======== ======= ======= ======== ======= Net income (loss) per common and common equivalent share before cumulative effect of change in accounting principle(3)(5)........... $ 0.02 $ 0.04 $ (0.02)(2) $ (0.03)(2) $ (0.07) $ (0.62)(2) $ (0.59)(2) ======= ======= ======== ======= ======= ======== ======= Cumulative effect of change in accounting principle per common and common equivalent share(3)....... -- -- -- -- -- $ (0.22) $ (0.18) Net income (loss) per common and common equivalent share(3)(5)(6)............ $ 0.02 $ 0.04 $ (0.02)(2) $ (0.03)(2) $ (0.07) $ (0.84)(2) $ (0.77)(2) ======= ======= ======== ======= ======= ======== ======= Pro forma net loss per common and common equivalent share(3)(5).... $ (0.01) $ (0.03) $ (0.16)(2) $ (0.14)(2) $ (0.11) $ (0.84)(2) $ (0.77)(2) ======= ======= ======== ======= ======= ======== ======= Weighted average number of common and common equivalent shares outstanding(4)............ 5,476 5,781 8,266 9,931 7,708 8,294 9,959 CONSOLIDATED SUMMARY OPERATING DATA: Total catalogs mailed..... 11,083(6) 14,841 15,544(7) 24,657 6,078 14,051(2) 20,963(2) Net revenues per catalog ($ per catalog)........ $ 1.08(6) $ 1.93 $ 2.35 $ 2.73 $ 2.77 $ 1.64(2) $ 1.82(2) </TABLE> <TABLE> <CAPTION> PRO FORMA PRO FORMA DECEMBER 31, JANUARY 12, JANUARY 1, JANUARY 1, JUNE 30, 1994 1996 1997 1997(1) 1997(1) --------------- ------------ ------------ ------------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> Housefile names(8)..... 710 1,021 3,040 4,228 4,388 Active customers(9).... 347 471 1,049 1,320 1,395 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------------- ACTUAL AS ADJUSTED(10) ----------- --------------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents............................................................ $ 4,727 $14,687 Working capital...................................................................... 15,212 25,172 Total assets......................................................................... 59,874 76,923 Long-term debt, net of current portion............................................... 30,915 28,129 Total stockholders' equity........................................................... 13,190 33,793 </TABLE> - --------------- (1) Pro forma combined financial and operating information was derived from the Unaudited Pro Forma Statements of Operations of the Company and gives effect to the Storybook Acquisition and the June Whitney Investment (as hereinafter defined), as if such transactions had occurred at the beginning of the period presented. See "Unaudited Pro Forma Statements of Operations." (2) Includes nonrecurring Playclothes start up expenses of $338 and $2,116 before taxes for the fiscal year ended December 28, 1996 and the six months ended June 30, 1997, respectively. Specifically, a significant portion of the 1997 expenses relate to the mailing of approximately 3.9 million catalogs mailed to test the Playclothes housefile. Such catalogs have been excluded here for purposes of comparison. See Note 2.p. of Notes to Consolidated Financial Statements. (3) As of December 29, 1996, the Company changed its policy of capitalizing list rental costs in connection with the Storybook Acquisition. Storybook has historically followed a policy of expensing such costs as incurred and, while practices may vary, the Company has decided to conform to Storybook's practices and expense such costs as incurred. The pro forma net loss and net loss per common and common equivalent share represent those amounts as if the new accounting policy had been applied in all the periods presented. See Note 2.i. of Notes to Consolidated Financial Statements. (4) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the determination of shares used in computing net income per common and common equivalent share. (5) Calculated after deducting Preferred Stock dividends of $60 and $583 for fiscal 1995 and fiscal 1996, respectively. Prior to December 28, 1996, all shares of Preferred Stock were called or converted to Common Stock. (6) Includes catalogs mailed by, and net revenues (unaudited) of, the Company's predecessor for the period January 1, 1994 through March 15, 1994. Net revenues during this period were $934. (7) Excluding Playclothes catalogs mailed by The Walt Disney Company in 1996. (8) Housefile names include both historical customers and catalog inquirers, but excludes the Just for Kids list of 3.4 million names (which has not been validated by the Company or added to its housefile). (9) Active customers include customers who have purchased from one of the Company's brands within the preceding 24-month period. (10) As adjusted to reflect the sale of 3,000 shares of Common Stock offered hereby (the "Offering") at an assumed initial public offering price of $9.00 per share and application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001031896_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001031896_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a5670fe0ac9f7597496149cd2f0bfd3e28402e2a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001031896_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Financial Statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise specifically referenced, all references to dollar amounts refer to United States dollars. The Company The Company was incorporated under the laws of the state of Nevada on January 9, 1997. In July 1996, Sean F. Lee acquired an option to purchase 100% of the issued and outstanding common stock of New Directions-Manufacturers of Contemporary Furniture, Inc., an Arizona corporation ("New Directions"), a manufacturer and distributor of contemporary oak wood furniture in exchange for $20,000. The Company acquired the option ("Option") to purchase the outstanding capital stock of New Directions from Mr. Lee in exchange for the opportunity to purchase 1,530,000 shares of the Company at par value, and the reimbursement of Mr. Lee's costs associated with acquiring the option ($20,000). The Company then paid the initial purchase price of the Option of $100,000. The Stock Purchase Agreement and the companion agreements pertaining to the acquisition of New Directions by the Company shall collectively be referred to herein as the "Acquisition Agreement." The terms of the Acquisition Agreement include the following: 1. The Company held the option to purchase 100% of the issued and outstanding common stock of New Directions for the stated purchase price of $2.08 million, of which approximately $1.18 million was to be paid in cash on or before January 31, 1997, the purchase price of the option of $100,000 would be credited, and $800,000 was to be financed by the Sellers under the terms of a four year promissory note bearing interest at the rate of 8% annually with level principal and interest payments due monthly. The amount of the cash payments to be made at closing was dependent upon the amount of New Directions' accounts receivable on the closing date. 2. The selling shareholders of New Directions, which included its current officers and directors, have agreed to a five year non-compete covenant. 3. Except as noted in (4) below, the officers and directors of New Directions would resign and be replaced with the nominees of the Company. (See "Management.") 4. Jack Horner, Jr., a co-founder, shareholder and executive officer of New Directions, would continue to serve as the Vice-President of the Company after the Company's acquisition of New Directions. 5. Two key executive officers of the Company, Donald A. Metke and Jack Horner, Jr., were each issued 510,000 shares of restricted common stock of the Company in exchange for the payment of par value ($510 each) and to ensure their long term commitment to the Company. Sean F. Lee was issued 1,530,000 shares of restricted common stock of the Company. On January 10, 1997, the Company entered into an Exchange Agreement with Premier Ventures & Exploration, Inc., a Louisiana corporation ("Premier") whereby the Company became a wholly-owned subsidiary of Premier. On January 15, 1997, the Company exercised the Option with a cash payment of $1,180,000. The Company paid the cash payment of $1,180,000 with funds raised in its private offering commenced on January 9, 1997 as well as a short-term loan from a private individual in the amount of $500,000. The loan was completely paid off, including principal and interest, upon the completion of the private offering on May 14, 1997. The remaining balance of the purchase price of $800,000 was financed by the sellers according to a promissory note under the terms set forth in (1) above. There remains due and owing $713,382 under the note, as of June 30, 1997. The Company entered into a Plan of Merger (the "Merger Agreement") with Premier on February 25, 1997. The Company had no relationship with Premier prior to the transactions related to the Merger. The purpose of the merger was to change the corporate domicile of the Company from Louisiana to Nevada. Prior to the execution of the Merger Agreement, Premier was a public company with dormant operations and had 3,560,296 shares of common stock outstanding. Premier became a "public company" pursuant to two Regulation D, Rule 504 offerings, one in 1996 and one in 1997. Premier's common stock was listed on the NASD's over-the- counter market as of January 6, 1997 under the symbol "PVEI" and quoted pursuant to SEC Rule 15c2-11. Premier's predecessor-in-interest was Omni Answers, Inc. ("Omni") which was incorporated on September 11, 1985 in the State of Louisiana. Omni operated a consultation by mail business. Omni changed its name to Premier on December 20, 1996. Pursuant to the terms of the Merger Agreement, the Premier shareholders received one share of the Company for every share of Premier common stock they held, all Premier stock was cancelled, and Premier was merged with and into the Company, leaving the Company as the surviving entity. The Merger was effective on April 16, 1997. New Directions changed its name to New Directions Manufacturing, Inc., an Arizona corporation and the Company (New Directions Manufacturing, Inc., a Nevada corporation) then became the 100% owner of New Directions (the Arizona corporation) which conducts business as the Company's wholly-owned operating subsidiary. The Selling Shareholders hereunder are identified in the "Selling Shareholders" section of this Prospectus. The address of the Company's principal executive offices is 2940 W. Willetta, Phoenix, AZ 85009. The Company's telephone number is (602) 352-1165. Unless otherwise noted, the "Company" as used in this Prospectus, will refer to the consolidated entities described above. The Offering <TABLE> <CAPTION> <S> <C> Common Stock Outstanding on September 15, 1997 4,987,770 Common Stock Offered by Selling Shareholders 1,000,000 Risk Factors The securities offered hereby involve a high degree of risk and immediate substantial dilution. See "Risk Factors." OTC Bulletin Board Symbol NDMI </TABLE> Summary Financial Information The following table presents selected historical financial data for the Company derived from the Company's Financial Statements. The historical financial data are qualified in their entirety by reference to, and should be read in conjunction with, the Financial Statements and notes thereto of the Company, which are incorporated by reference into this Prospectus. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements of the Company and the notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> Period from January 9, 1997 Six Months Ended (date of incorporation) December 31 Fiscal Year Ended through (unaudited) June 30 June 30, 1997 1996 1995 1996 1995 ------------------------ ----------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> Statement of Operations Data: Revenue $ 3,215,985 $2,872,989 $2,789,447 $5,802,840 $4,607,085 Net income (loss) $(2,339,798) $ (213,734) $ (111,210) $ 50,078 $ (30,370) Net income (loss) per share $ (0.47) $ (214) $ (111) $ 50 $ (30) </TABLE> <TABLE> <CAPTION> June 30, 1997 December 31, 1996 June 30, 1996 ------------- ----------------- ------------- <S> <C> <C> <C> Balance Sheet Data: Working Capital $ 796,761 $385,689 $576,812 Total assets $ 3,045,171 $681,063 $890,070 Total liabilities $ 1,177,733 $273,653 $268,925 Stockholder's equity $ 1,867,438 $407,410 $621,145 </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001032037_champion_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001032037_champion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9005e9f8df567bb56a71cb646217b644b2e869e3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001032037_champion_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and combined financial statements and notes thereto appearing elsewhere in this Prospectus. Prospective investors should consider carefully the information set forth under 'Risk Factors.' This Prospectus gives effect to the reorganization of the Company, pursuant to which, immediately prior to the Offering, Champion Mortgage Corp., Champion Wholesale Corp., Champion Financial Corp. and Champion Mortgage Servicing Corp. (collectively, the 'Consolidating Companies') will consolidate into Champion Mortgage Co., Inc. (together with the Consolidating Companies, the 'Champion Companies'). See 'Reorganization and Termination of S Corporation Status.' Unless the context indicates otherwise, (a) all references herein to the 'Company' or 'Champion' refer to Champion Mortgage Holdings Corp. and its wholly owned subsidiary, Champion Mortgage Co., Inc., (b) all references to the Company's or Champion's activities, results of operations or financial condition prior to the date of this Prospectus relate to the activities, results of operations or financial condition of the Champion Companies, taken as a whole, and (c) all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Champion is a licensed retail mortgage banker which originates, sells and services higher-yielding home equity mortgage loans secured by first or second liens primarily on one- to four-family residential properties. Champion originates loans to individuals with sufficient income and equity in their homes to satisfy the Company's underwriting criteria, but who may be unwilling to seek or unable to obtain home equity financing from conventional sources. The Company conducts its activities through its growing network of fourteen retail branch offices located in New Jersey, New York, Pennsylvania and Maryland as well as its corporate headquarters in Parsippany, New Jersey. The Company has developed widespread name recognition in its target markets with its trademarked and widely recognized slogan, 'When your bank says No, Champion says Yes!' OVERVIEW The Company, founded in 1981 by Joseph P. Goryeb, one of the pioneers of the non-conforming home equity lending business, serves a distinct segment of the home equity lending market by originating loans to homeowners whose borrowing needs may not be served by traditional financial institutions due to impaired or limited credit profiles, credit exceptions or other factors. The Company originates loans to homeowners seeking funds to consolidate debts, to undertake home improvements or to finance other consumer needs. By offering homeowners a variety of loan products with a high degree of personalized service, the Company has been able to generate higher margins than those typically earned by conventional mortgage lenders. The Company believes that it has a competitive advantage in the non-conforming home equity market stemming from its significant experience in this market, widespread name recognition, excellent reputation, expanding retail branch network, range of products, competitive pricing and superior customer service. From October 1, 1987 to September 30, 1996, Champion has funded approximately $2.1 billion of mortgage loans. For the year ended September 30, 1996, Champion originated $501.5 million in loans (representing a 29% three-year compounded annual growth rate) and increased its servicing portfolio to $526.8 million. The members of the Company's senior management have an average of over 14 years of home equity loan experience, and more than 25% of the Company's 351 employees (at December 31, 1996) have been with the Company for at least five years. Management believes this industry- and company-specific experience, coupled with the systems and programs it has developed over the past 16 years, enable the Company to provide high quality products and services to its customer base. BUSINESS STRATEGY The Company's business strategy is to penetrate further its established markets and expand into new geographic markets in an effort to increase profitably the volume of its loan originations and the size of its servicing portfolio by (i) expanding its retail branch network, (ii) increasing its marketing efforts through television advertising and direct mail campaigns, (iii) continuing to emphasize customer service to maintain high customer satisfaction and retention rates, (iv) investing in employee training and information systems to enhance customer responsiveness, (v) improving loan processing efficiencies, (vi) maintaining its underwriting standards and (vii) securitizing its mortgage loan portfolios. See 'Business -- Business Strategy.' ORIGINATIONS Through its branch network, Champion originates retail mortgage loans secured by residential properties located in New Jersey, New York, Pennsylvania, Delaware, Connecticut, Maryland, Virginia and the District of Columbia. Champion makes extensive use of multi-media advertising campaigns, including television, radio and print advertising, and direct mail campaigns, to attract potential customers. Management believes the fact that the Company does not rely upon third party brokers or wholesalers for loan originations makes its franchise unique in the non-conforming home equity lending business. Historically, the Company conducted the application and loan approval process from its corporate headquarters. Beginning in 1995, Champion refocused its loan origination strategy from a centralized operation to a strategy dominated by loan origination through its expanding retail branch network. Since January 1, 1996, the Company has opened eight new retail branch offices in New Jersey, New York, Pennsylvania and Maryland. The Company intends to continue to expand its retail branch network in selected states in the Northeast and Mid- Atlantic regions and currently plans to open several new retail branches in the next twelve months. As a consequence of the Company's recent expansion of its retail branch network, corresponding growth of its sales force, aggressive direct mail campaigns and enhanced loan processing efficiencies, the Company increased its retail loan production from $297.0 million in fiscal 1995 to $501.5 million in fiscal 1996. See 'Business -- Loans.' SECONDARY MARKETING Champion sells its loans through whole loan sales, which involve selling blocks of loans to institutional purchasers in the secondary market, and through securitizations, which involve the private placement or public offering of asset-backed securities. Securitization provides significant benefits in the financing of home equity loans, including enhanced operating leverage and liquidity, reduced costs of funds and reduced exposure to interest rate fluctuation. Since 1994, Champion has sold $604.9 million of its mortgage loans through eight real estate mortgage investment conduit ('REMIC') securitizations. In fiscal 1996, securitizations accounted for approximately 70% of the Company's loan sales. See 'Business -- Financing and Sale of Loans.' Moreover, the improved structure of the Company's recent securitizations and the higher percentage of its loan production sold in such securitizations have significantly improved the Company's financial performance. During fiscal 1996 as compared to fiscal 1995, the Company's total revenues increased 93% from $35.0 million to $67.4 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' While the Company anticipates securitizing a majority of its loan originations in fiscal 1997 and thereafter, the Company will continue to sell, on a whole loan basis, those loans that do not satisfy the Company's criteria for securitization. Such loans are sold on a servicing-released or -retained basis to unaffiliated wholesale purchasers on either a bulk or flow-through basis. These whole loan sales enable the Company to realize a return on all loans it originates by retaining loan origination fees without the credit risk associated with loans sold in securitizations. See 'Business -- Financing and Sale of Loans.' SERVICING In June 1993, Champion began to sell mortgage loans on a servicing-retained basis, including all of those mortgage loans that it has subsequently sold through securitizations. Management believes that servicing its loan portfolio enhances certain operating efficiencies and provides a steady and profitable revenue stream. At September 30, 1996, Champion had a servicing portfolio of approximately $526.8 million of mortgage loans. See 'Business -- Loan Servicing.' REORGANIZATION In January 1997, Champion Mortgage Holdings Corp. was incorporated in Delaware. Prior to the consummation of the Offering, the stockholders of the Consolidating Companies will, pursuant to the consolidation of the Consolidating Companies into Champion Mortgage Co., Inc., exchange their shares of common stock of the Champion Companies for shares of common stock of Champion Mortgage Co., Inc. Subsequent to the consolidation of the Champion Companies, the stockholders of Champion Mortgage Co., Inc. (the 'Existing Stockholders') will contribute their shares of common stock of Champion Mortgage Co., Inc. to Champion Mortgage Holdings Corp. in exchange for 11,500,000 shares of Common Stock which will constitute all of the outstanding shares of Champion Mortgage Holdings Corp. (the 'Reorganization'). Subsequent to the effective date of the Reorganization, all of the Company's operations will be conducted through Champion Mortgage Co., Inc. Until the effective date of the Reorganization, each of the Champion Companies was treated and will be treated as an S corporation under Subchapter S (an 'S corporation') of the Internal Revenue Code of 1986, as amended (the 'Code'). At the effective date of the Reorganization, the Consolidating Companies will consolidate into Champion Mortgage Co., Inc. and Champion Mortgage Co., Inc. will terminate its status as an S Corporation and will thereafter be treated as a C corporation under Subchapter C of the Code (a 'C corporation'). See 'Reorganization and Termination of S Corporation Status.' Champion's principal offices are located at 20 Waterview Boulevard, Parsippany, New Jersey 07054, and its telephone number is (201) 402-7700. THE OFFERING <TABLE> <S> <C> Common Stock offered......................... 3,500,000 shares Common Stock to be outstanding after the Offering(1)................................ 15,000,000 shares Use of Proceeds(2)........................... To fund a distribution to the Existing Stockholders of accumulated S corporation earnings and profits of the Champion Companies in the amount of $11.4 million (as calculated through September 30, 1996), plus additional accumulated S corporation earnings and profits of the Champion Companies from October 1, 1996 to the effective date of the Reorganization, to repay approximately $10.2 million in notes payable to certain stockholders of the Champion Companies, and to pay approximately $45.4 million (amount outstanding at January 31, 1997) outstanding under the Company's warehouse financing facility (a line of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans). Following repayment of the notes payable to stockholders and payment of the amounts outstanding under the warehouse financing facility, remaining proceeds, if any, will be used to fund expansion of the Company's retail branch network, to fund future loan originations, to support securitization transactions and for general corporate purposes. See 'Reorganization and Termination of S Corporation Status' and 'Use of Proceeds.' Proposed Nasdaq National Market Symbol....... 'CMPN' </TABLE> - ------------ (1) Excludes approximately shares of Common Stock subject to options to be granted upon the consummation of the Offering at an exercise price equal to the initial public offering price. See 'Management -- Stock Option Plan' and 'Shares Eligible for Future Sale.' (2) In the event that the Underwriters exercise their over-allotment option in full, the net proceeds to the Company from the sale of the 525,000 shares of Common Stock offered pursuant to the Underwriters' over-allotment option are estimated to be $ , after deducting the underwriting discount and estimated expenses and assuming an initial public offering price of $ per share (the midpoint of the estimated range for the initial public offering price).
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001032204_hartford_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001032204_hartford_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8021be4b97396a2f8c0f37fdbfd7377eab798dde
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001032204_hartford_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and consolidated financial statements appearing elsewhere in this Prospectus. Unless the context otherwise requires, the "Company" means Hartford Life, Inc. and its consolidated subsidiaries. See "Glossary of Selected Insurance and Other Terms" for the definitions of certain insurance-related terms which are printed in boldface type the first time they appear in this Prospectus. Unless otherwise indicated, financial information, operating statistics and ratios applicable to the Company set forth in this Prospectus are based on United States generally accepted accounting principles ("GAAP") rather than STATUTORY ACCOUNTING PRACTICES. In addition, unless otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment options. GENERAL The Company is a leading insurance and financial services company with operations that provide (i) annuity products such as individual VARIABLE ANNUITIES and FIXED MVA ANNUITIES, deferred compensation and retirement plan services and mutual funds for savings and retirement needs to over 1 million customers, (ii) life insurance for income protection and estate planning to approximately 500,000 customers and (iii) employee benefits products such as group life and group disability insurance for the benefit of over 15 million individuals. According to the latest publicly available data identified below, with respect to the United States, the Company is the largest writer of both total individual annuities and individual variable annuities based on sales for the year ended December 31, 1996, the eighth largest consolidated life insurance company based on STATUTORY ASSETS as of December 31, 1995, and the largest writer of group short-term disability benefit plans and the second largest writer of group long-term disability insurance based on full-year 1995 new PREMIUMS and PREMIUM EQUIVALENTS. The Company's assets have grown at a compound annual growth rate of 36%, from $23 billion in 1992 to $80 billion in 1996. The Company has achieved rapid growth of assets by pursuing a strategy of selling diverse and innovative products through multiple distribution channels, achieving cost efficiencies through economies of scale and improved technology, maintaining effective risk management and prudent UNDERWRITING techniques and capitalizing on its brand name and customer recognition of the Hartford stag logo (the "Stag Logo"), one of the most recognized symbols in the financial services industry. During this period, the Company has attained strong market positions for its principal product offerings -- annuities, individual life insurance and employee benefits. In particular, the Company holds the leading market position in the individual variable annuity industry based on sales for the year ended December 31, 1996. The Company's sales of individual variable annuities grew from $1.8 billion in 1992 to $9.3 billion in 1996, and, for the year ended December 31, 1996, the Company had a 13% market share (according to information compiled by Variable Annuities Research and Data Service ("VARDS")). During this period of growth, the Company's separate account assets, which are generated principally by the sale of annuities, grew from 36% of total assets at December 31, 1992 to 62% of total assets at December 31, 1996. The Company believes that such asset growth stems from various factors, including the variety and quality of its product offerings, the performance of its products, the effectiveness of its multiple channel distribution network, the quality of its customer service and the overall growth of the variable annuity industry and the stock and bond markets. However, there is no assurance that the Company's historical growth rate will continue. See "Risk Factors -- Risks Associated with Certain Economic and Market Factors". Management believes the Company's substantial growth in assets, together with management's effort to control expenses, has made the Company one of the most efficient competitors in the insurance industry. In 1995, the Company had the ninth lowest ratio of GENERAL INSURANCE EXPENSES to statutory assets, an industry measure of operating efficiency, of the fifty largest U.S. life insurers, based on statutory assets. The Company's ratio improved to .64% in 1996, from .72% in 1995 and 1.38% in 1992, as compared with the average ratio of 1.50% for the fifty largest U.S. life insurers for the year ended December 31, 1995, based on information compiled by A.M. Best Company, Inc. ("A.M. Best"). ANALYSIS OF NET INCOME As shown in the following table, the Company's operating results by segment reflect: (i) strong results from its Annuity, Individual Life Insurance and Employee Benefits segments, offset by (ii) results in its Guaranteed Investment Contracts segment, from which management expects no material income or loss in the future as described herein, and (iii) results in the Company's corporate operation (the "Corporate Operation"). In response to the results in the Guaranteed Investment Contracts segment in 1994, the Company undertook a thorough review of the guaranteed investment contract market and determined to substantially withdraw from the GENERAL ACCOUNT guaranteed rate contract ("GRC") business in 1995. In 1996, the Company initiated certain asset sales and hedging transactions to insulate itself from any ongoing income or loss associated with the investment portfolio of Closed Book GRC (as defined below). Because the Company does not expect any material income or loss from the Guaranteed Investment Contracts segment in the years subsequent to 1996, management believes that future earnings will be dependent on income from the Annuity, Individual Life Insurance and Employee Benefits segments, net of the Corporate Operation. In the first quarter of 1997, net income increased by $24 million, or 62%, to $63 million from $39 million in the first quarter of 1996 due to growth in the Annuity, Individual Life Insurance and Employee Benefits segments of 30%, 22% and 13%, respectively, and the elimination of losses in the Guaranteed Investment Contracts segment. These results were partially offset by higher unallocated expense in the Corporate Operation primarily due to an increase in interest expense related to the Pre-Offering Indebtedness. See "-- Company Financing Plan". <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED MARCH FOR THE YEAR ENDED DECEMBER 31, 31, --------------------------------- ------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ----- ---- ---- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> Annuity.................................... $ 35 $ 54 $ 84 $113 $ 145 $ 33 $ 43 Individual Life Insurance.................. 17 21 27 37 44 9 11 Employee Benefits.......................... 36 48 53 67 78 16 18 Guaranteed Investment Contracts(1)......... 21 30 1 (67) (225) (15) -- Corporate Operation(2)..................... (16) (28) (14) 3 (18) (4) (10) Unallocated net realized capital gains (losses)(3).............................. 8 5 -- (3) -- -- 1 Cumulative effect of changes in accounting principles(4)............................ (47) -- -- -- -- -- -- ---- ---- ---- ---- ---- --- ---- Net income............................... $ 54 $130 $151 $150 $ 24 $ 39 $ 63 ==== ==== ==== ==== ==== === ==== </TABLE> - --------------- (1) The Company substantially withdrew from the general account GRC business in 1995. Management expects no material income or loss from the Guaranteed Investment Contracts segment in the future as described herein. (2) The Company maintains a Corporate Operation through which it reports items that are not directly allocable to any of its business segments. Included in the Corporate Operation are: (i) unallocated income and expense, (ii) the Company's group medical business, which it exited in 1993, and (iii) certain other items not directly allocable to any segment such as items related to the ITT Spin-Off (as defined herein). For a discussion of the Corporate Operation, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations for the Years Ended December 31, 1994, 1995 and 1996 -- Corporate Operation". The following table details the components of the Corporate Operation: <TABLE> <CAPTION> FOR THE THREE MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------------------- ----------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ----- ---- ------ (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> Unallocated income and expense.......... $(11) $ (3) $ (7) $(14) $ (18) $ (4) $ (10) Group medical business.................. (5) (25) (7) (1) 1 -- -- ITT Spin-Off related items and other.... -- -- -- 18 (1) -- -- ---- ---- ---- ---- ---- --- ---- Total Corporate Operation....... $(16) $(28) $(14) $ 3 $ (18) $ (4) $ (10) ==== ==== ==== ==== ==== === ==== </TABLE> (3) Represents net realized capital gains (losses) that are not allocable to any of the Company's business segments. (4) Reflects the cumulative effect of adoption of Statement of Financial Accounting Standards ("SFAS") No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and SFAS No. 112, Employers' Accounting for Postemployment Benefits. SEGMENT ANALYSIS Annuity net income has grown at a compound annual rate of 43%, from $35 million in 1992 to $145 million in 1996. This segment offers individual variable annuities and fixed MVA annuities, deferred compensation and retirement plan services, mutual funds, investment management services and other financial products. As indicated above, the Company is the largest writer of individual annuities (according to information compiled by Life Insurance Marketing and Research Association ("LIMRA")) and the largest writer of individual variable annuities (according to information compiled by VARDS). In 1996, the Company sold $9.8 billion of individual annuities, of which $9.3 billion were individual variable annuities; of the Company's total individual annuities, $6.6 billion were sold through broker-dealers and $3.2 billion were sold through banks. The Company's variable annuity product offerings include the Putnam Capital Manager Variable Annuity and The Director, two of the four highest selling variable annuity contracts in the United States for the year ended December 31, 1996. These variable annuity products allow customers to save for retirement on a tax-deferred basis through a variety of mutual funds provided by the Company. The Company's fixed MVA annuity also provides customers a tax-deferred savings vehicle with fixed rates for guaranteed periods. As of December 31, 1996, such fixed rates ranged from 3.4% to 9.3% and averaged 6.53%, while the periods over which such rates are to be paid ranged from one to ten years and averaged approximately seven years. The Company has distribution arrangements to sell its individual annuity products with approximately 1,350 national and regional broker-dealers and approximately 450 banks. Management believes that it has established a strong distribution franchise through its long-standing relationships with the members of its bank and broker-dealer network and is committed both to expanding sales through these established channels of distribution and promoting new distributors for all its products and services. Individual Life Insurance net income has grown at a compound annual rate of 27%, from $17 million in 1992 to $44 million in 1996. This segment, which focuses on the high-end estate and business planning markets, sells a variety of individual life insurance products, including VARIABLE LIFE and UNIVERSAL LIFE INSURANCE policies. The Company believes that it is one of the leading competitors in the high-end estate and business planning markets as indicated by its relatively high average face value per POLICY. The Company has distribution arrangements to sell its individual life insurance products in the United States with approximately 137,000 licensed life insurance agents. Employee Benefits net income has grown at a compound annual rate of 21%, from $36 million in 1992 to $78 million in 1996. This segment sells group insurance products, including group life and group disability insurance and corporate-owned life insurance ("COLI"), and engages in certain international operations. As indicated above, the Company is the largest writer of group short-term disability benefit plans and the second largest writer of group long-term disability insurance, as well as the fourth largest writer of group life insurance, based on full-year 1995 new premiums and premium equivalents (according to information reported to the Employee Benefits Plan Review ("EBPR")). Management believes that, as a result of the Company's name recognition, the value-added nature of its managed disability products and its effective claims administration, it is one of the leading sellers in the "large case" group market (companies with over 1,000 employees) and that further growth opportunities exist in the "small" and "medium case" group markets. The Company uses an experienced group of employees to distribute its Employee Benefits products through a variety of distribution outlets, including insurance agents, brokers, associations and THIRD-PARTY ADMINISTRATORS. Guaranteed Investment Contracts net income has declined from net income of $21 million in 1992 to a net loss of $225 million in 1996. The results of this segment have been primarily affected by prepayments substantially in excess of assumed and historical levels of mortgage-backed securities ("MBSS") and collateralized mortgage obligations ("CMOS") supporting a block of traditional general account GRC written by the Company prior to 1995 ("Closed Book GRC"). The Company substantially withdrew from the general account GRC business in 1995 and now writes a limited amount of such business primarily as an accommodation to customers. For example, in the first quarter of 1997 the Company wrote $13 million of general account GRC (most of which was renewals to existing customers), representing an expected annual net income of less than $30,000. In 1996, the Company initiated certain asset sales and hedging transactions to insulate itself from any ongoing income or loss associated with the Closed Book GRC investment portfolio. The Company expects no material income or loss from the Guaranteed Investment Contracts segment in the future. For a discussion of Closed Book GRC and the risk of future losses, see "Risk Factors -- Interest Rate Risk" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations for the Years Ended December 31, 1994, 1995 and 1996 -- Comparison of Guaranteed Investment Contracts Segment Results -- Closed Book GRC". The Company maintains a Corporate Operation through which it reports items that are not directly allocable to any of its business segments. The Corporate Operation includes (i) unallocated income and expense, (ii) the Company's group medical business, which it exited in 1993, and (iii) certain other items not directly allocable to any business segment such as items related to the ITT Spin-Off (as defined below). The Company's principal insurance subsidiaries currently are rated "A+ (superior)" by A.M. Best and have claims-paying ability ratings of "AA" from Standard and Poor's ("S&P") and "AA+" from Duff & Phelps Credit Rating Co. ("Duff & Phelps"), and one such insurance subsidiary, Hartford Life Insurance Company ("Hartford Life"), has an insurance financial strength rating of "Aa3" from Moody's Investors Service, Inc. ("Moody's"). The Company is a direct subsidiary of Hartford Accident and Indemnity Company ("Hartford Accident and Indemnity") and an indirect subsidiary of The Hartford Financial Services Group, Inc. (formerly known as ITT Hartford Group, Inc.) ("The Hartford"). The Hartford is among the largest domestic and international providers of commercial property-casualty insurance, property-casualty REINSURANCE and personal lines (including homeowners and auto) coverages. On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation) ("ITT") distributed all of the outstanding shares of capital stock of The Hartford to ITT stockholders of record on such date (the transactions relating to such distribution are referred to herein as the "ITT Spin-Off"). As a result of the ITT Spin-Off, The Hartford became an independent, publicly traded company. The Company's principal offices are located at 200 Hopmeadow Street, Simsbury, Connecticut 06089. The Company's telephone number is (860) 843-7716. BUSINESS STRATEGY Management believes that its corporate strategies will maintain and enhance its position as a market leader within the financial services industry and will maximize stockholder value. In addition, the Company's strong positions in each of its businesses, coupled with the growth potential management believes exists in its markets, provide opportunities to increase sales of its products and services, as individuals increasingly save and plan for retirement, protect themselves and their families against disability or death and prepare their estates for an efficient transfer of wealth between generations. Management has established the following strategic priorities for the Company: LEVERAGE THE COMPANY'S MULTIPLE CHANNEL DISTRIBUTION NETWORK. Management believes that the Company's multiple channel distribution network provides a distinct competitive advantage in selling its products and services to a broad cross-section of customers throughout varying economic and market cycles. The Company has access to a variety of distribution outlets through which it sells its products and services, including approximately 1,350 national and regional broker-dealers, approximately 450 banks (including 21 of the 25 largest banks in the United States), 137,000 licensed life insurance agents, 2,900 insurance brokers, 244 third-party administrators and 165 associations. In particular, the Company believes that the bank and broker-dealer network employed by its Annuity segment is among the largest in the insurance industry. Management believes that this extensive distribution system generally provides the Company with greater opportunities to access its customer base than its competitors and allows the Company to introduce new products and services quickly through this established distribution network as well as new channels of distribution. For example, the Company sells fixed MVA annuities, variable annuities, mutual funds, SINGLE PREMIUM VARIABLE LIFE INSURANCE and Section 401(k) plan services through its broker-dealer and bank distribution systems. OFFER DIVERSE AND INNOVATIVE PRODUCTS. The Company provides its customers a diverse mix of products and services aimed at serving their needs throughout the different stages of their lives and during varying economic cycles. The Company offers a variety of variable and fixed MVA annuity products with funds managed both internally and by outside money managers such as Wellington Management Company, LLP ("Wellington"), Putnam Financial Services, Inc. ("Putnam") and Dean Witter InterCapital, Inc. ("Dean Witter"). The Company also regularly develops and brings to market innovative products and services. For example, the Company was the first major seller of individual annuities to successfully develop and market fixed annuities with an MVA feature which protects the Company from losses due to higher interest rates in the event of early surrender. The Company also was a leader in introducing the "managed disability" approach to the group disability insurance market. This approach focuses on early claimant intervention in an effort to facilitate a claimant's return to work and to contain costs. CAPITALIZE ON ECONOMIES OF SCALE, CUSTOMER SERVICE AND TECHNOLOGY. As a result of its growth and attention to maintaining low expenses, the Company believes it has achieved advantageous economies of scale and operating efficiencies in its businesses which together enable the Company to competitively price its products for its distribution network and policyholders. For example, as noted above, the Company is the eighth largest consolidated life insurance company based on statutory assets as of December 31, 1995, with a ratio (as of such date) of general insurance expenses to statutory assets that is less than half the average ratio for the fifty largest U.S. life insurers. In addition, the Company has reduced its individual annuity expenses as a percentage of total individual annuity account value to 28 BASIS POINTS in 1996 from 43 basis points in 1992. In addition, the Company believes that it maintains high-quality service for its customers and utilizes computer technology to enhance communications within the Company and throughout its distribution network in order to improve the Company's efficiency in marketing, selling and servicing its products. In 1996, the Company received one of the five Quality Tested Service Seals awarded by DALBAR Inc. ("DALBAR"), a recognized independent research organization, for its achievement of the highest tier of customer service in the variable annuity industry. CONTINUE PRUDENT RISK MANAGEMENT. The Company's product designs, prudent underwriting standards and risk management techniques protect it against DISINTERMEDIATION risk and greater than expected MORTALITY and MORBIDITY. As of December 31, 1996, the Company had limited exposure to disintermediation risk on approximately 99% of its insurance liabilities through the use of NON-GUARANTEED SEPARATE ACCOUNTS, MVA features, policy loans, SURRENDER CHARGES and non- surrenderability provisions. With respect to the Company's individual annuities, 97% of the related total account value was subject to surrender charges as of December 31, 1996. The Company also enforces disciplined claims management to protect the Company against greater than expected mortality and morbidity. The Company regularly monitors its underwriting, mortality and morbidity assumptions to determine whether its experience remains consistent with these assumptions and to ensure that the Company's product pricing remains appropriate. BUILD ON BRAND NAME AND FINANCIAL STRENGTH. Management believes that the combined effect of the above-mentioned strengths, The Hartford's 187-year history and customer recognition of the Stag Logo have produced a distinguished brand name for the Company. The Company's financial strength, characterized by sound ratings and a balance sheet of well-protected liabilities and highly rated assets, also has enhanced the Company's brand name within the financial services industry. Management believes that brand awareness, an established reputation and financial strength will continue to be important factors in maintaining distribution relationships, enhancing investment advisory alliances and generating new sales with customers. RELATIONSHIP BETWEEN THE COMPANY AND THE HARTFORD Following the completion of the Equity Offerings, The Hartford will continue to be the controlling stockholder of the Company and will beneficially own 100% of the outstanding Class B Common Stock, par value $.01 per share (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock"), which will represent approximately 96.1% of the combined voting power of all the outstanding Common Stock and approximately 83.2% of the economic interest in the Company (or approximately 95.6% and 81.4%, respectively, if the over-allotment options of the Underwriters are exercised in full). The Hartford has advised the Company that its current intention is to continue to hold all the shares of Class B Common Stock it beneficially owns. However, The Hartford has no contractual obligation to retain its shares of Class B Common Stock, except for a limited period described in "Underwriting". Promptly following the completion of the Equity Offerings, The Hartford and the Company expect to elect two additional directors of the Company who will be persons not currently or formerly associated with The Hartford or the Company. The Board of Directors of the Company (the "Board of Directors") will then consist of ten members, including eight who are directors and/or officers of The Hartford. See "Management -- Directors". The Hartford will have the ability to change the size and composition of the Company's Board of Directors. For additional information concerning the Company's relationship with The Hartford following the Equity Offerings, see "Risk Factors -- Control by and Relationship with The Hartford" and "Certain Relationships and Transactions". COMPANY FINANCING PLAN Historically, for financial reporting purposes, The Hartford internally allocated a portion of its third-party indebtedness (referred to as the "Allocated Advances") to the Company's life insurance subsidiaries. Cash was contributed to the life insurance subsidiaries in connection with certain of such Allocated Advances. In February 1997, the Company (i) declared a dividend of $1.184 billion payable to Hartford Accident and Indemnity, (ii) obtained a line of credit from a syndicate of four banks (the "Line of Credit") in the amount of $1.3 billion, (iii) borrowed $1.084 billion under the Line of Credit and (iv) paid to Hartford Accident and Indemnity the $1.184 billion dividend, which consisted of the $1.084 billion in cash borrowed under the Line of Credit and $100 million in the form of a promissory note executed by the Company for the benefit of Hartford Accident and Indemnity (the "$100 Million Promissory Note"). $893 million of such dividend constituted a repayment of the Allocated Advances. In addition, on April 4, 1997, the Company declared and paid a dividend of $25 million to Hartford Accident and Indemnity in the form of a promissory note executed by the Company for the benefit of Hartford Accident and Indemnity (the "$25 Million Promissory Note" and, together with the $100 Million Promissory Note, the "Promissory Notes"). The Line of Credit and the Promissory Notes are hereinafter referred to as the "Pre-Offering Indebtedness". The Company will use the net proceeds from the Equity Offerings to make a capital contribution of at least $150 million to its life insurance subsidiaries, to reduce the Pre-Offering Indebtedness and for other general corporate purposes. Promptly following the Equity Offerings, subject to market conditions, the Company plans to offer approximately $650 million of debt securities (the "Debt Securities") in one or more offerings (the "Debt Offering") pursuant to a shelf registration statement. The completion of the Equity Offerings will not be conditioned on the completion of the Debt Offering. The Company will use the net proceeds from the Debt Offering to further reduce the Pre-Offering Indebtedness. For a description of certain transactions effected prior to the Equity Offerings and the actions to be taken concurrently with or promptly after the Equity Offerings, see "Company Financing Plan". THE EQUITY OFFERINGS <TABLE> <S> <C> <C> Class A Common Stock offered(1): United States Offering..... 18,400,000 shares International Offering..... 4,600,000 shares ------------ Total................. 23,000,000 shares Common Stock to be outstanding after the Equity Offerings(1)(2): Class A Common Stock....... 23,000,000 shares Class B Common Stock....... 114,000,000 shares ------------ Total................. 137,000,000 shares </TABLE> - --------------- (1) Assumes the Underwriters' over-allotment options are not exercised. See "Underwriting". If the Underwriters exercise such over-allotment options in full, the number of shares of Class A Common Stock sold in the U.S. Offering and the International Offering will be 20,800,000 and 5,200,000, respectively. (2) Does not include shares reserved for issuance pursuant to the Company's benefit plans and its restricted stock plan for non-employee directors. Dividend Policy............ The holders of Class A Common Stock and Class B Common Stock will share ratably on a per share basis in all dividends and other distributions declared by the Board of Directors. The Board of Directors currently intends to declare quarterly dividends on the Common Stock and expects that the first quarterly dividend payment will be $.09 per share, with the initial dividend to be declared and paid in the third quarter of 1997. For a discussion of the tax treatment of such dividends, see "Dividend Policy". For a discussion of the factors that affect the determination by the Board of Directors to declare dividends, as well as certain other matters concerning the Company's dividend policy, see "Dividend Policy" and "Risk Factors -- Holding Company Structure; Restrictions on Dividends". Voting Rights.............. On all matters submitted to a vote of stockholders, holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to five votes per share. The Class A Common Stock and Class B Common Stock generally will vote together as a single class on all matters, except as otherwise required by law. See "Description of Capital Stock -- Class A Common Stock and Class B Common Stock -- Voting Rights". Conversion................. Under certain circumstances, shares of Class B Common Stock will convert or are convertible into an equivalent number of shares of Class A Common Stock. See "Description of Capital Stock -- Class A Common Stock and Class B Common Stock -- Conversion". Use of Proceeds............ Based upon an assumed initial public offering price of $25.50 per share (the midpoint of the range of initial public offering prices set forth on the cover page of this Prospectus), the net proceeds to the Company from the Equity Offerings are estimated to be $546.3 million (or $618.2 million if the Underwriters' over-allotment options are exercised in full), after deducting the underwriting discounts and estimated expenses for the Equity Offerings payable by the Company. The Company will use the net proceeds of the Equity Offerings to make a capital contribution of at least $150 million to its life insurance subsidiaries, to reduce the Pre-Offering Indebtedness and for other general corporate purposes. See "Use of Proceeds".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001032716_paranet_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001032716_paranet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..12a6f49ce33eb9e1620a4b9fdcfb9c643a8ea4b2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001032716_paranet_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted herein, all information in this Prospectus (i) gives effect to the Company's expected reorganization as a Delaware holding company prior to the consummation of this Offering, which will have the effect of a -for- stock split and (ii) assumes no exercise of the Underwriters' over-allotment option. See "Underwriting". Unless otherwise indicated, all references to "Paranet" or the "Company" include the Company, its subsidiary and its predecessor. Certain technical terms used in this Prospectus are defined in the Glossary. THE COMPANY Paranet designs, integrates, manages and supports complex distributed computing environments, principally for major commercial organizations. The Company believes that it is uniquely responsive to its customers' needs as a result of its exclusive focus on distributed computing environments, its commitment to vendor independence, its franchise-like organizational structure and its flexibility in services and contract terms. Paranet focuses on a broad range of information technology ("IT") challenges inherent in distributed computing environments, such as system and network management, security management, technology management and business mapping. These technical areas are outlined in the Company's NOMAN(R) framework (see chart on inside front cover). The Company's service offerings in each of these technical areas include, among others, problem assessment, system design, implementation and/or operation of a chosen solution (see chart on inside back cover). Company projects include LAN/WAN design and upgrades, intranet implementation, disaster recovery planning, help desk support, day-to-day facilities management of large networks and many other support services. The Company's expertise encompasses the latest networking and computing technologies, including Internet firewalls, ATM, Fast Ethernet, Frame Relay, FDDI, Unix and Windows NT. Today's rapidly changing business environment is characterized by increased competition, globalization and technological innovation. At the same time, companies face increased pressure to improve customer service and profitability. In order to compete more effectively, businesses are increasing their reliance on IT as a means of achieving faster response times, shorter product cycles and reduced costs. To realize these benefits, many companies are migrating to distributed computing environments. As a result, distributed applications have become mission critical, necessitating the implementation and continuous enhancement of an efficient, reliable and flexible computing infrastructure. The need for greater network speed and capacity drives the demand for installation and operation services. In addition, new information-intensive applications and Internet-based protocols further increase the burdens placed on networks. Effective in-house management and support of these increasingly decentralized computing resources and complex networks are technically challenging, time-consuming and costly. Paranet delivers enterprise-wide IT solutions for distributed computing environments through its nationwide branch network. The Company's franchise-like organizational structure enables it to offer customers the advantages of local or regional external service providers, such as increased focus and responsiveness, while providing the comprehensive range of services and support generally available from large, centralized national organizations. In order to provide consistent, comprehensive and high-quality services to its customers throughout the nation, the Company has developed NOMAN(R) (an acronym for Network Operations Management). NOMAN(R) has many different components, including a knowledge base of industry best practices, a detailed structural framework, a maturity assessment model and a host of processes, metrics, tools and procedures that provide a uniform methodology for the delivery of all Paranet services. NOMAN(R) is organized to address every aspect of the design, integration, management and support of distributed systems in a manner driven by the customer's business needs mapped to the customer's computing infrastruc- ture. Paranet believes that NOMAN(R) increases the quality, consistency, efficiency and scope of the Company's approach to resolving customers' distributed computing problems. Paranet believes that its independence from hardware and software vendors, combined with the benefits provided by NOMAN(R), permits it to offer customers "best-of-breed" solutions. By design, Paranet is flexible in customizing its service offerings and the manner in which those services are delivered to accommodate diverse customer needs, capabilities, time constraints and knowledge. The Company strives to establish long-term relationships with customers by delivering its services in a variety of manners, ranging from consulting or integration to complete outsourced solutions. Paranet is also flexible in designing the contractual terms of its engagements to meet customers' preferences. Paranet's customers include American Express, Amoco, Chevron, Motorola, Siemens Medical, Texas Instruments and US Robotics, among others. The Company also has a group of customers, currently including GTE, Hewlett-Packard, ISSC (IBM) and Sun Microsystems, that resell the Company's services to their own customer bases. No single customer in either group accounted for more than 8% of Paranet's 1996 revenues. The Company serves customers across a wide range of industries, including telecommunications, financial services, energy, manufacturing, semiconductors and professional services. During 1996, Paranet served over 200 customers through its growing nationwide branch network. At December 31, 1996, Paranet operated 27 branches in 23 cities and had 818 full-time employees.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001033067_earth_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001033067_earth_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..18bfcf41cd7f391124e905b70e6877cdbc1c65a4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001033067_earth_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the financial statements and the notes thereto, appearing elsewhere in this prospectus. Investors should carefully consider the information set forth under the caption "Risk Factors." THE COMPANY The Company is a designer, manufacturer and marketer of branded active sports products. The Company currently offers five brands and over 40 models of bodyboards, two brands and nine models of wakeboards and two brands and over 20 models of snowboards, as well as complementary sports apparel and accessories. In the United States, the Company sells its products primarily through a network of over 100 independent sales representatives working with the Company's internal sales and technical specialists, and internationally through a network of over 30 distributors. The Company's domestic customers include over 1,000 specialty shops, 20 national and regional sporting goods retail chains and over 20 mass merchandisers. An increasing number of consumers are participating in active sports, which generally require the purchase of non-team sports products. Active sports products include those currently marketed by the Company -- bodyboards, wakeboards and snowboards -- as well as in-line skates, skateboards, surfboards and similar sports products. Bodyboards are surf riding boards that are shorter, wider, smaller, lighter, more maneuverable and easier to learn than surfboards, and can be used in a much broader range of locations and surf conditions. A bodyboarder rides waves primarily lying prone on the board and is able to complete a variety of aerial maneuvers. Wakeboards are towed behind a boat or personal watercraft and are ridden standing sideways like a surfboard. Wakeboards are more buoyant than water skis and allow the rider to perform a wide range of aerial jumps and acrobatic tricks. The typical active sports enthusiast is a "dedicated consumer" who devotes significant time, attention and disposable income to a chosen sport. Active sports enthusiasts frequently become participants in multiple sports that are appropriate for different seasons and spend a significant portion of their recreational budget on active sports equipment. There has been significant recent growth in the active sports industry. The Surf Industry Manufacturing Association projected that an estimated 1.75 million Americans would actively (at least four times) surf in 1996, compared to 1.1 million people in 1992. In addition, the Company believes that wakeboarding is having the same effect on water skiing as snowboarding has had on alpine skiing. According to the Water Sports Industry Association, water ski participants have declined from 13.8 million in 1991 to 11.1 million in 1994, while sales of wakeboards have increased at a compound annual growth rate of 58%. According to Snow Industries America, snowboard unit sales have grown at an annual compound growth rate of 50% from 135,000 units in the 1992-1993 season to 456,000 in the 1995-1996 season. The Company implements a multi-sport, multi-brand market segmentation approach in which each product brand is sold only into its designated channel of distribution, thereby protecting the integrity of each brand and the longevity of its unique market position. The Company's multi-brand strategy is to initially develop premium sports products for dedicated consumers, and to subsequently introduce multiple brands with multiple price points and performance characteristics. High, middle and lower range bodyboard brands are marketed to specialty shops, sporting goods retailers and mass merchandisers, respectively. The Company currently markets high and middle range wakeboard and snowboard brands through specialty shops and sporting goods retailers, respectively. Unlike many other active sports companies that purchase products for resale, the Company has developed broad process manufacturing expertise and is an integrated manufacturer of all of its own bodyboards, wakeboards and snowboards. In addition, the Company believes that it is the largest manufacturer of bodyboards in the United States. The Company's manufacturing expertise and integrated manufacturing operations have enabled it to be a low cost producer, to become a leader in product innovation, to carefully maintain performance features and quality control, and to quickly respond to market trends and incorporate technological improvements. 3 The Company has grown through internal product development and through six product line acquisitions since 1993. The Company's growth strategy is to become a leading provider of active sports products in each of its target markets by (i) identifying growth segments within the active sports industry and entering these markets through either the introduction or acquisition of new products; (ii) extending the Company's well-recognized brand names into new global markets; (iii) fully utilizing the Company's extensive distribution network through increased product penetration; and (iv) pursuing strategic acquisitions. The Company was incorporated in Massachusetts in 1993. Its executive offices are located at 70 Airport Road, Hyannis, Massachusetts 02601, and its telephone number is (508) 778-5528. THE OFFERING Common Stock offered by the Company............. 1,375,000 shares Common Stock to be outstanding after the Offering(1)............. 3,196,457 shares Use of proceeds........... To repay indebtedness to the Company's senior lender and to the principal stockholder, for working capital and other general corporate purposes, and for possible acquisitions. Proposed Nasdaq National Market symbol........... EOSI - --------------- (1) Excludes (i) 208,214 shares issuable upon the exercise of unvested outstanding employee stock options with a $0.66 weighted average exercise price, (ii) 600,000 shares reserved for issuance upon exercise of options to purchase Common Stock under the Company's employee and outside director stock plans, of which unvested options for 60,000 shares have been granted at an exercise price equal to the initial public offering price, (iii) 237,175 shares reserved for issuance upon exercise of warrants held by the Company's senior lender at an exercise price equal to 90% of the initial public offering price and (iv) 137,500 shares issuable upon exercise of the Representatives' Warrants. See "Management," "Certain Transactions" and "Underwriting." SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except per share data) <TABLE> <CAPTION> FISCAL YEARS ENDED OCTOBER 31, THREE MONTHS ENDED JANUARY 31, ------------------------------ ------------------------------ 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales $ 9,144 $ 11,372 $ 12,404 $ 2,029 $ 2,875 Gross profit 3,575 4,342 4,819 753 844 Income (loss) from operations 456 629 306 (204) (137) Net income (loss) 37 58 (291) (338) (321) Net income (loss) per common and common equivalent share(1) $ 0.02 $ 0.03 $ (0.14) $ (0.17) $ (0.16) Weighted average common and common equivalent shares outstanding(1) 2,039,720 2,039,720 2,039,720 2,039,720 2,039,720 Supplemental net income (loss)(2) $ 305 $ (150) Supplemental net income (loss) per common and common equivalent share(2) $ 0.11 $ (0.05) Supplemental weighted average common and common equivalent shares outstanding(3) 2,721,891 2,812,815 </TABLE> 4 <TABLE> <CAPTION> JANUARY 31, 1997 ------------------------------------------- PRO FORMA AS ACTUAL PRO FORMA ADJUSTED(4)(5) ------ --------- -------- (UNAUDITED) <S> <C> <C> <C> BALANCE SHEET DATA: Cash ........................................................ $ 4 $ 4 $ 5,324 Working capital (deficit) ................................... (375) (375) 9,565 Total assets ................................................ 10,174 10,174 15,344 Short-term obligations ...................................... 4,267 4,267 84 Long-term obligations, less current portion ................. 345 345 33 Subordinated note payable to principal stockholder .......... 3,800 2,050 -- Stockholders' equity (deficit) .............................. (664) 1,086 13,239 </TABLE> - ------------- (1) Computed as described in Note 2(j) of Notes to Financial Statements. (2) Supplemental net income (loss) and net income (loss) per common and common equivalent shares gives effect to (i) the conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997 for the periods ended October 31, 1996 and January 31, 1997, and (ii) the use of net proceeds of the Offering to repay $1,189,463 and $2,337,200 at October 31, 1996 and January 31, 1997, respectively, to the principal stockholder for all remaining outstanding subordinated indebtedness and accrued interest thereon and to repay $4,839,689 and $4,495,500 at October 31, 1996 and January 31, 1997, respectively, to the Company's senior lender as if these events had occurred at the beginning of each period. Supplemental net income (loss) consists of net income (loss) increased or decreased by the effect of reduced interest expense associated with (i) and (ii) above. Supplemental net income (loss) per common and common equivalent shares represents supplemental net income (loss) divided by the supplemental weighted average common and common equivalent shares outstanding. (3) Supplemental weighted average common and common equivalent shares outstanding consists of the weighted average common and common equivalent shares outstanding plus (i) shares issued upon conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997, and (ii) the number of shares of Common Stock issued in the Offering to generate net proceeds, at an assumed initial public offering price of $10.00 share, necessary to repay $2,337,200 of subordinated indebtedness and accrued interest to the principal stockholder and $4,495,500 to the Company's bank. (4) Presented on a pro forma basis to give effect to (i) the conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997 and (ii) the issuance of 109,500 shares valued at $10 per share to CR Management Associates, L.P.(CRM) as consideration amending their Management Agreement. (5) Adjusted to reflect the sale by the Company of 1,375,000 shares of Common Stock offered hereby at an assumed initial public offering price of $10.00 per share, the receipt of the estimated net proceeds therefrom and the application of the net proceeds to repay $2,337,200 of subordinated indebtedness and accrued interest thereon to the principal stockholder and $4,495,500 to the Company's senior lender. Except as otherwise noted or the context otherwise requires, all information contained in this prospectus (i) assumes no exercise of the Underwriters' overallotment option, (ii) reflects a 750-for-one stock split effected in February 1997, (iii) reflects the conversion of $1.75 million of subordinated indebtedness into 218,750 shares of Common Stock (the "Indebtedness Conversion"), and (iv) reflects the filing of Amended and Restated Articles of Organization prior to the closing of the Offering to effect a 1.684575-for-one stock split (together with the stock split previously effected, the "Stock Splits") of the Company's outstanding Common Stock, to increase the authorized Common Stock, to create an undesignated class of Preferred Stock and to effect certain other changes. See "Description of Capital Stock," "Underwriting" and Note 11 of Notes to Financial Statements. The Company's fiscal year ends on October 31. All references to fiscal years in this prospectus refer to the fiscal years ending in the calendar years indicated (e.g., fiscal 1996 refers to the fiscal year ended October 31, 1996). 5 RISK FACTORS THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES" AND SIMILAR TERMS AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW. IN EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION PRESENTED IN THIS PROSPECTUS. Seasonality; Fluctuations in Quarterly Operating Results. Because the substantial majority of the Company's net sales currently are derived from water sports products, sales of the Company's products are generally highly seasonal and dependent on weather conditions. This results in a disproportionately low percentage of the Company's sales occurring in the first and fourth quarters when sales of water sports products are typically lowest. Net sales in the first and fourth quarters of fiscal 1996 accounted for approximately 16.5% and 14.1%, respectively, of net sales for the full year, and the Company incurred operating losses in both such quarters. Because much of the Company's operating expenses are fixed in nature, a decline in net sales relative to internal expectations would have a material adverse effect on the Company's results of operations. In addition, the nature of the Company's business requires it to make relatively large investments in inventory in anticipation of these products' selling seasons, and relatively large investments in receivables during and shortly after such seasons. Moreover, the contraction and expansion of the Company's operations resulting from seasonal demand for the Company's products is difficult to manage efficiently. Apart from seasonal factors and weather conditions, demand for the Company's products fluctuates in response to consumer buying patterns, discretionary spending habits, general economic conditions in the United States and abroad and other factors. The Company's operating results also fluctuate from quarter to quarter as a result of the timing of order shipments and new product introductions. Furthermore, the Company's gross margins will fluctuate with product mix, the timing of product price adjustments and the mix of domestic sales and international sales (which are international distributor-based and consequently have lower gross margins). The Company's operating results for any interim period are not indicative of the results for the entire year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Industry and Product Concentration. The Company's future success depends significantly on continued growth in the active sports industry. In general, purchases of discretionary sporting goods tend to decline in periods of economic uncertainty, and the popularity of particular sports tends to be cyclical. Moreover, the market for active sports products is characterized largely by image-conscious, brand-driven, young consumers. Consequently, the Company's future success is highly dependent upon its ability to regularly update its products and maintain brand images that are attractive to these consumers. Any failure by the Company to accurately predict and target future trends or to maintain such brand images and products could have a material adverse effect on the Company's business. Additionally, a substantial majority of the Company's current sales are derived from bodyboards and wakeboards. Although the Company has also begun to sell snowboards, the Company's sales of snowboards to date have not comprised a significant portion of the Company's total sales. The Company's sales growth has been attributable in part to its introduction of internally developed wakeboard products and its continuing introduction of a number of bodyboard brands. There can be no assurance that the active sports market will continue to grow generally or with respect to the products currently marketed by the Company, or that the Company will be in a position to take advantage of any future growth opportunities in the active sports market. See "Business -- Industry Background" and "Business -- Products." Competition and Product Innovation. The active sports industry is highly competitive, with competition mainly centering on product innovation, performance and styling, brand name recognition, price, marketing and delivery. The Company's historical sales growth has been attributable in part to its 6 ability to introduce new products either through internal development or acquisition. The Company believes that a major factor in its future success will be its ability to continue to develop and acquire in a timely manner innovative new products and brands in anticipation of market trends and to improve its existing products, and there can be no assurance of its ability to do so. Competitors in each of the Company's product lines include companies with greater brand recognition and financial, distribution, marketing and other resources than the Company. In addition, there are no significant capital, technological or manufacturing barriers to entry in the sporting goods markets currently served by the Company. Furthermore, each of these markets faces competition from other sports and leisure activities, and sales of sports and leisure products are affected by changes in consumer preferences, which are difficult to predict. There can be no assurance that competitors will not emerge or rapidly acquire market share in these markets or that these markets will not be adversely effected by increased competition from other sports and leisure activities. See "Business -- Competition." Acquisition-Related Risks. The Company may, when and if the opportunity arises, acquire other businesses or product lines that are compatible with the Company's business. The Company may face significant competition from other companies with greater financial resources in pursuing such acquisition candidates. There can be no assurance that the Company will find any suitable acquisition candidates and complete any future acquisitions, or that, with respect to any future acquisitions that may be completed, the Company will be successful in integrating the operations, technologies and products of the acquired companies, in avoiding the diversion of management attention from other business concerns or in conducting operations in markets with which the Company has limited or no prior experience. Moreover, there can be no assurance that the anticipated benefits of an acquisition will be realized. Future acquisitions by the Company could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, all of which could materially adversely affect the Company. See "Business -- Growth Strategy." Manufacturing Risks. The Company manufactures all of its own bodyboards, wakeboards and snowboards. As a manufacturer, the Company continually faces risks regarding the availability and cost of raw materials and labor, the potential need for additional capital equipment, increased maintenance costs, plant and equipment obsolescence, quality control and excess capacity. The Company has manufacturing facilities located in California, which are subject to the risk of earthquakes or other natural disasters. Although the Company maintains business interruption insurance to reduce the potential effect of any such disaster, a disruption in the Company's manufacturing or distribution caused by a natural disaster affecting one of its manufacturing facilities could have a material adverse effect on the Company's financial condition and results of operations. In addition, the Company may need to add production capacity in the future, and there can be no assurance that the Company will be able to add such capacity either on a cost effective basis or in a timely manner. See "Business -- Manufacturing and Suppliers." Dependence on Polyethylene Foam and other Component Suppliers. The polyethylene foam used in the Company's products is available from only three suppliers in the United States. The Company has developed a close working relationship with two of these foam suppliers, and has a supply contract with one of these suppliers that expires in June 1998. The Company's future success may depend on its ability to maintain such relationships, concerning which there can be no assurance. During fiscal 1996, one foam supplier experienced a significant interruption in its production and delivery of polyethylene foam, as well as quality problems. As a result of this interruption, the Company sustained a substantial loss of business due to material shortages and having to pay spot market prices. Any future interruption in the Company's ability to obtain adequate supplies of polyethylene foam could have a material adverse effect on the Company's business, financial condition and results of operations. Most component materials other than polyethylene foam are available from a broad range of suppliers in the United States. However, growth in the snowboard industry and other factors have resulted in shortages and, in some cases, price increases in certain raw materials necessary for the production of the Company's products, and such shortages or price increases may recur. At times, the Company has also experienced delays in the receipt of products from its suppliers as a result of shortages in raw materials, including fiberglass and P-Tex. Such shortages and delays could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Manufacturing and Suppliers." 7 Material Benefit to Principal Stockholders. SSPR, L.P. is the Company's principal stockholder and provided the Company's initial capital, consisting of $150,000 in equity and subordinated debt in the amount of $1.35 million. SSPR, L.P. subsequently advanced a total of $2.6 million in subordinated debt. On March 17, 1997, $1.75 million of the subordinated indebtedness was converted into 218,750 shares of Common Stock. The Company will repay the remaining principal and accrued interest on this subordinated indebtedness (which at March 26, 1997 was $2,580,342) upon completion of the Offering. See "Principal Stockholders." Messrs. Conway and Roth, directors of the Company, are general partners of SSPR, L.P. See "Certain Transactions." Risks of International Business. The Company's business is subject to the risks generally associated with doing business internationally, including changes in demand resulting from fluctuations in exchange rates, foreign governmental regulation and changes in economic conditions. These factors, among others, could influence the Company's ability to sell its products in international markets. Unanticipated changes in the value of the U.S. dollar relative to that of certain foreign currencies could have a material adverse effect on the Company's sales or results of operations. These factors have resulted in recent weakness in the Company's sales in Japan, and the Company expects that this weakness will continue. The Company has not engaged, and does not presently intend to engage, in currency hedging activities. In addition, the Company's business is subject to the risks associated with legislation and regulation relating to imports, including quotas, duties or taxes and other charges, restrictions or retaliatory actions on imports to the United States and other countries in which the Company's products are sold or manufactured. Product Liability. The Company's products are used in recreational settings involving a high degree of inherent risk. In many cases, users of the Company's products may engage in imprudent or even reckless behavior while using such products, thereby increasing the risk of injury. Although, with one exception, the Company has never been a party to any product liability litigation, the Company may be subject in the future to product liability lawsuits involving serious personal injuries or death allegedly relating to its products. Product liability claims may include allegations of failure to warn, design defects or defects in the manufacturing process. The Company maintains product liability, general liability and excess liability insurance coverage. There can be no assurance that such coverage will continue to be available at a reasonable cost to the Company, that such coverage will be available in sufficient amounts to cover one or more large claims, or that the Company's insurer will not disclaim coverage as to any future claim. The successful assertion of one or more large claims against the Company that exceed available insurance coverage or changes in the Company's insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on the Company's financial condition and results of operations. See "Business -- Legal Proceedings." Dependence on Third-Party Selling Efforts. The Company relies on third parties to sell, and in some cases to distribute, its products to retailers. In general, many factors, such as general economic conditions, financial conditions, marketing considerations or governmental regulations may affect the ability of these parties to sell the Company's products, which, in turn, may adversely affect the Company's financial performance. In the United States, the Company uses independent sales representatives who work under contract. Generally, such contracts may be terminated by either party upon ninety days' notice. Internationally, the Company uses distributors under informal arrangements. Several of the Company's international distributors carry and distribute competing product lines. The Company's Japanese distributor accounted for approximately 11.5%, 15.5%, 11.4% and 22% of the Company's net sales in fiscal 1994, 1995 and 1996 and for the three months ended January 31, 1997, respectively. The loss of the services of the Company's Japanese distributor or difficulties encountered with any of the Company's independent sales representatives or distributors would have a material adverse effect on the Company's financial condition and results of operations. See "Business -- Sales and Distribution." Limited Protection of Intellectual Property. There are relatively few technological or other barriers to entry into the Company's business, and the Company's products may be replicated by competitors. There can be no assurance that current or future competitors will not offer competing 8 products or products substantially identical to the Company's products at lower prices. Although the Company has patents and patent applications pending in the United States and certain foreign countries and expects to file for patent protection for future innovations, where available, the Company does not believe that its existing patent portfolio affords material protection to its business. The Company relies to a significant extent on both common law and registered trademarks in the United States and certain foreign countries. There can be no assurance that existing or additional trademarks will not be infringed or asserted to be invalid. The Company has received from time to time, and may receive in the future, claims from third parties asserting intellectual property rights relating to the Company's products and product features. The Company has received notice from a competitor challenging the Company's right to register its Liquid Force trademark for its wakeboards. The Company believes that it is entitled to such registration. There can be no assurance, however, that the Company will be successful in registering this trademark or that an infringement action will not be brought by this competitor challenging the Company's right to use its Liquid Force trademark. See "Business -- Intellectual Property" and "Business -- Legal Proceedings." Dependence on Key Personnel. The Company is highly dependent upon the ability and experience of its senior executives, none of whom have employment agreements with the Company. The loss of the services of any of the Company's executive officers could adversely affect the Company's ability to conduct its operations. Furthermore, the market for key personnel in the active sports industry is highly competitive. There can be no assurance that the Company will be able to attract and retain key personnel with the skills and expertise necessary to manage its business in the future. Liquidity. The Company from time-to-time has been in violation of certain operating covenants under its credit facilities. The Company intends to repay amounts outstanding under its existing credit facilities with a portion of the net proceeds of the Offering. There can be no assurance, however, that in the future the Company will be able to obtain credit on favorable terms. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Potential Adverse Impact of Environmental Regulations. The Company is subject to federal, state and local governmental regulations relating to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in its manufacturing process. There can be no assurance that changes in environmental regulations or in the kinds of raw materials used by the Company will not impose the need for additional capital equipment or other requirements. Any failure by the Company to control the use of, or adequately restrict the discharge of, hazardous substances under present or future regulations could subject it to substantial liability or could cause its manufacturing operations to be suspended. Such liability or suspension of manufacturing operations could have a material adverse effect on the Company's results of operations. See "Business -- Environmental and Regulatory Matters." No Prior Public Market; Offering Price; Possible Volatility of Stock Price. Prior to the Offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market will develop or be sustained after completion of the Offering. The initial public offering price of the shares offered hereby will be determined by negotiation among the Company and the representatives of the Underwriters. See "Underwriting" for a description of the factors to be considered in determining the initial public offering price. Following the completion of the Offering, future announcements concerning the Company or its competitors, quarterly variations in operating results, the introduction of new products or changes in product pricing policies by the Company or its competitors, weather patterns that may be perceived to affect the demand for the Company's products, changes in earnings estimates by analysts or changes in accounting policies, among other factors, could cause the market price of the Common Stock to decline, perhaps substantially. In addition, stock markets in general and the Nasdaq National Market in particular have experienced extreme price and volume fluctuations, which have particularly affected the market prices of securities of many smaller public companies for reasons frequently unrelated to the operating performance of such companies. See "Underwriting." 9 Effective Control by Principal Stockholders. After giving effect to the sale of the shares of Common Stock offered hereby, SSPR, L.P., Mr. Glydon and the other members of management of the Company will beneficially own in the aggregate over 50% of the outstanding shares of Common Stock. As a result, these stockholders will have the ability to control or exert significant influence over the outcome of fundamental corporate transactions requiring stockholder approval, including mergers and sales of assets and the election of the members of the Company's Board of Directors. See "Certain Transactions," "Principal Stockholders" and "Shares Eligible for Future Sale." Potential Adverse Impact of Shares Eligible for Future Sale. Sales of substantial amounts of Common Stock in the public market following the Offering could adversely affect the market price of the Common Stock. In addition to the 1,375,000 shares of Common Stock offered hereby, substantially all of the shares of Common Stock owned by current stockholders of the Company will be eligible for sale in accordance with Rule 144 or Rule 701 beginning 90 days after the date of this Prospectus. However, holders of all of such shares have agreed not to offer, sell or otherwise dispose of any shares of Common Stock owned by them for 180 days from the date of this Prospectus without the prior written consent of H.C. Wainwright & Co., Inc. In addition, SSPR, L.P. and the Company's senior lender, which owns a warrant to purchase shares of Common Stock, have the right in certain circumstances to require the Company to register their shares under the Securities Act for resale to the public. Sales of substantial amounts of the Common Stock (including through the issuance of such shares in connection with future acquisitions), or the availability of such shares for sale, may adversely affect the prevailing market price for the Common Stock and could impair the Company's ability to obtain additional capital through an offering of its equity securities. See "Description of Capital Stock," "Shares Eligible for Future Sale" and "Underwriting." Potential Adverse Impact of Issuance of Preferred Stock; Antitakeover Effect of Charter and Bylaw Provisions and Massachusetts Law. The Company's Board of Directors has the authority to issue up to 500,000 shares of Preferred Stock and to fix the rights, preferences, privileges and restrictions of such shares without any further vote or action by the Company's stockholders. Although the Company has no current plans to issue shares of Preferred Stock, the potential issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company, may discourage bids for the Common Stock at a premium over the market price of the Common Stock and may adversely affect the market price of, and the voting and other rights of the holders of, Common Stock. In addition, certain provisions of the Company's corporate charter and bylaws and of Massachusetts law may be deemed to have an anti-takeover effect and may discourage takeover attempts not first approved by the Board of Directors (including takeovers which certain stockholders may deem to be in their best interests). See "Description of Capital Stock." Absence of Dividends. The Company has never declared or paid cash dividends on the Common Stock and does not anticipate paying cash dividends in the foreseeable future. In addition, the terms of the Company's credit facility with its bank prohibit the payment of dividends. Furthermore, any future decision with respect to dividends will depend on future earnings, future capital needs and the Company's operating and financial condition, among other factors. Dilution. The Offering involves immediate and substantial dilution to new investors in the net tangible book value per share of their Common Stock. At the assumed initial public offering price of $10 per share, investors in the Offering will incur dilution of $6.18 per share. At March 31, 1997, 208,214 shares of Common Stock were subject to outstanding stock options at a $0.66 weighted average exercise price. To the extent these options and certain outstanding warrants are exercised, further dilution may be experienced. See "Dilution." 10 USE OF PROCEEDS The net proceeds to the Company from the sale of the 1,375,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $10.00 per share, after deducting the estimated underwriting discount and offering expenses) are estimated to be $12,152,500 ($14,050,000 if the Underwriters' overallotment option is exercised in full). The Company intends to use the net proceeds of the Offering to repay its outstanding indebtedness to its senior lender ($6,100,000 at March 26, 1997) and its outstanding indebtedness ($2,580,342 at March 26, 1997), including accrued interest, to its principal stockholder, SSPR, L.P., and for working capital and general corporate purposes. The Company's credit facilities are described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- New Credit Facilities." The indebtedness to SSPR, L.P. is represented by demand notes with interest at 10%. In addition, the Company considers on a continuing basis potential acquisitions of technologies, businesses or product lines complementary to the Company's business and may use a portion of the net proceeds for such acquisitions. The Company has no present understandings, agreements or commitments with respect to any such acquisitions. Pending such uses, the Company expects to invest the net proceeds in short-term, investment grade, interest-bearing securities. DIVIDEND POLICY The Company has never declared or paid cash dividends on its Common Stock. The Company currently intends to retain any earnings for use in its business and does not anticipate paying any cash dividends on its capital stock in the foreseeable future. In addition, the Company's loan agreement with its commercial bank prohibits the payment of cash dividends. 11 CAPITALIZATION The following table sets forth, as of January 31, 1997, the capitalization of the Company stated on a pro forma basis to reflect the Stock Splits, the Indebtedness Conversion, the filing of Amended and Restated Articles of Organization and the issuance of 109,500 shares of Common Stock to CR Management Associates, L.P.("CRM") and stated on a pro forma as adjusted basis to reflect the sale by the Company of the 1,375,000 shares of Common Stock offered hereby at an assumed initial public offering price of $10.00 per share and the application of the net proceeds of the Offering as described in "Use of Proceeds." The information in this table is qualified by, and should be read in conjunction with, the financial statements and the notes thereto appearing elsewhere in this prospectus. <TABLE> <CAPTION> JANUARY 31, 1997 ---------------- PRO FORMA AS PRO FORMA(1) ADJUSTED(2) --------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> Short-term obligations $ 4,267 $ 84 ======= ======== Long-term obligations $ 345 33 Subordinated note to principal stockholder 2,050 -- Stockholders' equity: Preferred Stock, $.01 par value, 500,000 shares authorized, no shares issued or outstanding -- -- Common Stock, $.01 par value, 15,000,000 shares authorized; 1,821,457 shares issued and outstanding, pro forma; 3,196,457 shares issued and outstanding, pro forma as adjusted (1),(2),(3) 18 32 Additional paid-in capital 2,979 15,118 Accumulated deficit (1,911) (1,911) ------ ------ Total stockholders' equity 1,086 13,239 ----- ------ Total capitalization $ 3,481 $13,272 ======= ======= </TABLE> - --------------- (1) Presented on a pro forma basis to give effect to (i) the conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997 and (ii) the issuance of 109,500 shares to CRM as consideration for amending the management agreement upon consummation of the Offering. (2) Adjusted to reflect the sale by the Company of 1,375,000 shares of Common Stock offered hereby at an assumed initial public offering price of $10.00 per share, and the application of the net proceeds as described in "Use of Proceeds." (3) Excludes (i) 208,214 shares issuable upon the exercise of unvested outstanding employee stock options with a $0.66 weighted average exercise price, (ii) 600,000 shares reserved for issuance upon exercise of options to purchase Common Stock under the Company's employee and outside director stock plans, of which unvested options for 60,000 shares have been granted at an exercise price equal to the initial public offering price, (iii) 237,175 shares reserved for issuance upon exercise of warrants held by the Company's senior lender at an exercise price equal to 90% of the initial public offering price and (iv) 137,500 shares issuable upon exercise of the Representatives' Warrants. Includes 109,500 shares to be issued to CRM upon consummation of the Offering. See "Management," "Certain Transactions" and "Underwriting." 12 DILUTION The pro forma net tangible book value of the Company at January 31, 1997 was $(93,320), or ($0.05) per share of Common Stock. Pro forma net tangible book value per share represents the amount of total tangible assets less total liabilities after giving effect to (i) the conversion of $1.75 million of subordinated indebtedness to principal stockholder into 218,750 shares of Common Stock that occurred on March 17, 1997 and (ii) the issuance of 109,500 shares of Common Stock to CRM (as described in "Certain Transactions") divided by the total number of shares of Common Stock outstanding on a pro forma basis. After giving effect to the sale of the 1,375,000 shares of Common Stock offered by the Company hereby, at an assumed initial public offering price of $10.00 per share and after deducting the estimated underwriting discount and offering expenses, the pro forma net tangible book value of the Company at January 31, 1997 would have been $12,209,180, or $3.82 per share of Common Stock. This represents an immediate increase in such pro forma net tangible book value of $3.87 per share to existing stockholders and an immediate dilution of $6.18 per share to investors purchasing shares in the Offering. The following table illustrates this per share dilution: <TABLE> <CAPTION> <S> <C> <C> Assumed initial public offering price per share $10.00 Pro forma net tangible book value per share before the Offering $ (0.05) Increase in net tangible book value per share attributable to new investors 3.87 ---- Pro forma net tangible book value per share after the Offering 3.82 ---- Dilution per share to new investors $6.18 ===== </TABLE> The following table sets forth, as of March 26, 1997, on a pro forma basis giving effect to the issuance of 109,500 shares of Common Stock to CRM (as described in "Certain Transactions"), the number of shares of Common Stock purchased from the Company, the total consideration paid to the Company, and the average price paid per share by existing stockholders and to be paid by the purchasers of the shares offered by the Company hereby (at an assumed initial public offering price of $10.00 per share and before deducting the estimated underwriting discount and offering expenses): <TABLE> <CAPTION> SHARES PURCHASED TOTAL CONSIDERATION ---------------- ------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ------ ------- ------ ------- --------- <S> <C> <C> <C> <C> <C> Existing stockholders 1,821,457 57.0% $ 1,902,298 12.2% $ 1.04 New investors 1,375,000 43.0% 13,750,000 87.8% $10.00 --------- ---- ---------- ---- Total 3,196,457 100.0% $15,652,298 100.0% ========= ===== =========== ===== </TABLE> The foregoing tables assume no exercise of the Underwriters' overallotment option. The foregoing tables exclude 208,214 shares of Common Stock issuable upon exercise of outstanding employee stock options with a $0.66 weighted average exercise price, and 237,175 shares issuable upon exercise of a warrant held by the Company's senior lender with an exercise price equal to 90% of the initial public offering price. To the extent these options and warrant are exercised, there will be further dilution to new investors. The foregoing tables include 109,500 shares to be issued to CRM as consideration for amending the management agreement upon consummation of the Offering. See "Capitalization." 13 SELECTED FINANCIAL DATA The following table sets forth for the periods indicated selected financial data of the Company. The statement of operations data for the year ended October 31, 1996 and the balance sheet data as of October 31, 1996 have been derived from the Company's financial statements audited by Arthur Andersen LLP, independent public accountants, which are included elsewhere in this prospectus. The statement of operations data for the years ended October 31, 1994 and 1995 and the balance sheet data as of October 31, 1995 have been derived from financial statements audited by Richard A. Eisner & Company, LLP, independent public accountants, which are included elsewhere in this prospectus. The statement of operations data for the period from inception (July 13, 1993) to October 31, 1993 and the balance sheet data as of October 31, 1993 and 1994 have been derived from financial statements audited by Richard A. Eisner & Company, LLP, not included in this prospectus. The selected financial data as of January 31, 1997 and for the three months ended January 31, 1996 and 1997 have been derived from the Company's unaudited financial statements which have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended January 31, 1997 are not necessarily indicative of the results to be expected for the year. This data is qualified by the more detailed financial statements and notes thereto included elsewhere in this prospectus and should be read in conjunction therewith and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein. <TABLE> <CAPTION> FISCAL YEARS ENDED THREE MONTHS ENDED OCTOBER 31, JANUARY 31, ----------- ----------- PERIOD FROM INCEPTION (JULY 13, 1993 TO OCTOBER 31, 1993) 1994 1995 1996 1996 1997 ----------------- ---- ---- ---- ---- ---- (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales $ 1,641 $ 9,144 $ 11,372 $ 12,404 $ 2,029 $ 2,875 Cost of goods sold 1,148 5,569 7,030 7,585 1,276 2,031 ---------- ---------- ---------- ---------- ---------- ----------- Gross profit 493 3,575 4,342 4,819 753 844 Operating expenses: Product development and engineering -- 188 236 338 68 153 Selling and marketing 249 1,634 1,898 2,704 534 501 General and administrative 266 797 898 938 190 285 Amortization of intangible assets 170 500 681 533 165 43 ---------- ---------- ---------- ---------- ---------- ----------- Total operating expenses 685 3,119 3,713 4,513 957 981 ---------- ---------- ---------- ---------- ---------- ----------- Income (loss) from operations (192) 456 629 306 (204) (137) Interest expense (80) (439) (555) (597) (134) (184) ---------- ---------- ---------- ---------- ---------- ----------- Income (loss) before provision (benefit) for income taxes (272) 17 74 (291) (338) (321) Provision (benefit) for income taxes -- (20) 16 -- -- -- ---------- ---------- ---------- ---------- ---------- ----------- Net income (loss) $ (272) $ 37 $ 58 $ (291) $ (338) $ (321) ========== ========== =========== =========== ========== =========== Net income (loss) per common and common equivalent share $ (0.13) $ 0.02 $ 0.03 $ (0.14) $ (0.17) $ (0.16) ========== ========== ========== ========== ========== =========== Weighted average common and common equivalent shares outstanding(1) 2,039,720 2,039,720 2,039,720 2,039,720 2,039,720 2,039,720 ========= ========= ========= ========= ========= ========= Supplemental net income (loss)(2) $ 305 $ (150) ========== =========== Supplemental net income (loss) per common and common equivalent share(2) $ 0.11 $ (0.05) ========== =========== Supplemental weighted average common and common equivalent shares outstanding(3) 2,721,891 2,812,815 ========= ========= </TABLE> 14 <TABLE> <CAPTION> OCTOBER 31, JANUARY 31, 1997 -------------------------------- --------------------- 1993 1994 1995 1996 ACTUAL PROFORMA(4) ---- ---- ---- ---- ------ -------- (UNAUDITED) ----------- <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash $ 6 $ 33 $ 34 $ 8 $ 4 $ 4 Working capital (deficit) (272) (364) (496) (964) (375) (375) Total assets 4,479 5,414 6,234 9,665 10,174 10,174 Short-term obligations 1,595 2,255 2,685 4,425 4,267 4,267 Long-term obligations, less current portion 767 556 434 539 345 345 Subordinated note payable to principal stockholder 1,775 1,775 1,775 2,700 3,800 2,050 Stockholders' equity (deficit) (149) (113) (54) (343) (664) 1,086 </TABLE> - ----------- (1) Computed as described in Note 2(j) of Notes to Financial Statements. (2) Supplemental net income (loss) and net income (loss) per common and common equivalent shares gives effect to (i) the conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997 for the periods ended October 31, 1996 and January 31, 1997 and (ii) the use of net proceeds of the Offering to repay $1,189,463 and $2,337,200 at October 31, 1996 and January 31, 1997, respectively, to the principal stockholder for all remaining outstanding subordinated indebtedness and accrued interest thereon and to repay $4,839,689 and $4,495,500 at October 31, 1996 and January 31, 1997, respectively, to the Company's senior lender as if these events had occurred at the beginning of each period. Supplemental net income (loss) consists of net income (loss) decreased by the effect of reduced interest expense associated with (i) and (ii) above. Supplemental net income (loss) per common and common equivalent shares represents supplemental net income (loss) divided by supplemental weighted average common and common equivalent shares outstanding. (3) Supplemental weighted average common and common equivalent shares outstanding consists of the weighted average common and common equivalent shares outstanding plus (i) shares issued upon conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock on March 17, 1997 and (ii) the number of shares of Common Stock issued in the Offering (1,375,000 shares) to generate $12,152,500 in net proceeds, at an assumed initial public offering price of $10 per share, necessary to repay $2,337,200 of subordinated indebtedness and accrued interest thereon to the principal stockholder and $4,495,500 to the Company's senior lender. (4) Presented on a pro forma basis to give effect to the conversion of $1.75 million of subordinated indebtedness to the principal stockholder into 218,750 shares of Common Stock upon the consummation of the Offering. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a designer, manufacturer and marketer of branded active sports products. The Company currently offers five brands and over 40 models of bodyboards, two brands and nine models of wakeboards and two brands and over 20 models of snowboards, as well as complementary sports apparel and accessories. The Company was formed in July 1993 through the acquisition of the BZ bodyboard product line from Packaging Industries, Inc. The Company has grown through internal product development as well as through the acquisition of additional product lines. The Company began selling snowboards in fiscal 1994 as a distributor of two European snowboard brands and, through the acquisition of the Spiral brand, began manufacturing snowboards in 1996. The Company developed its own line of wakeboards and began manufacturing and selling wakeboards in fiscal 1996. The Company markets apparel, accessories and other products which leverage the name recognition of its core products as well as its expertise in the use of certain materials. The Company also markets spa covers, kickboards, exercise mats and other products which leverage its knoweledge of foam materials. The components of the Company's net sales by product line are as follows: <TABLE> <CAPTION> THREE MONTHS ENDED FISCAL YEAR ENDED OCTOBER 31, JANUARY 31, ----------------------------- ----------- PRODUCT LINE 1994 1995 1996 1996 1997 ------------ ---- ---- ---- ---- ---- (UNAUDITED) ----------- <S> <C> <C> <C> <C> <C> Bodyboards $7,408,000 $ 7,771,000 $ 6,809,000 $1,282,000 $ 1,071,000 Snowboards 111,000 926,000 873,000 130,000 221,000 Wakeboards(1) -- -- 1,517,000 71,000 553,000 Accessories 1,146,000 1,900,000 1,726,000 366,000 608,000 Other 479,000 775,000 1,479,000 180,000 422,000 ------- ------- --------- ------- ------- $9,144,000 $11,372,000 $12,404,000 $2,029,000 $2,875,000 ========== =========== =========== ========== ========== </TABLE> =========== (1) Includes bindings Cost of goods sold consists of materials, labor and manufacturing overhead. The Company manufactures bodyboards in two leased facilities in California. The cost of bodyboards is substantially impacted by the Company's ability to receive favorable pricing for the primary component, polyethylene foam. The Company began manufacturing snowboards and wakeboards in its Kirkland, Washington facility in fiscal 1996. The Company was able to convert this facility from snowboard manufacturing to wakeboard and snowboard manufacturing. The Company's ability to manufacture both snowboards and wakeboards at this facility enables it to spread the fixed cost of this facility over a larger number of production units thereby reducing its per board manufacturing costs. Prior to establishing its manufacturing facility, the Company purchased snowboards from contract manufacturers for resale. Gross profit varies by brand and by channel of distribution. Accordingly, gross margin will vary each period depending on both the sales mix by brand and by channel of distribution. Product development and engineering expense consists of costs incurred to develop, design and engineer new products and product enhancements. These costs consist primarily of salary and related costs and outside consultant costs. The Company sells its products in the United States primarily through a network of independent sales representatives. Internationally, the Company sells its products through a network of independent local distributors. Selling and marketing expense includes costs incurred by the Company to establish brand identity and support its brands in the market. The Company also incurs expenses to support its sales representatives and distributors. These expenses include the cost of internal sales and marketing personnel, advertising in dedicated consumer magazines, sponsorship and attendance at major industry trade shows and sponsorship of professional team riders. 16 General and administrative expense consists of salaries and related costs of finance and administrative personnel, computer and communication costs, liability insurance and management fees to CR Management Associates, L.P. ("CRM"). CRM is an affiliate of the Company's principal stockholder, and provides the Company with various management consulting services, including assistance in strategic planning, sales and marketing, acquisition strategy and implementation, and financial and treasury planning. Management believes that the consulting fees paid to CRM are comparable to those that would be payable to an unaffiliated third party. The Company has, from time-to-time, used the services of up to five employees of CRM. Upon the consummation of the Company's proposed initial public offering, the agreement with CRM will be amended to provide for a fixed term and an annual fee cap of $300,000. CRM will receive 109,500 shares of Common Stock as compensation for this amendment. Upon consummation of the proposed initial public offering, the Company will record a noncash charge of $1,095,000 representing the fair market value of the securities to be issued to CRM. Amortization of intangible assets consists of the write-off of intangible assets over their estimated useful lives of 3-15 years (see Note 2(g) of Notes to Financial Statements). The intangible assets were acquired as part of the acquisition of the Company in 1993 and from subsequent product line acquisitions. Based upon intangible asset balances as of October 31, 1996, the Company expects amortization expense related to these intangibles to decrease in future periods. The Company experiences seasonal fluctuations in its operating results. In fiscal 1996 the Company generated approximately 70% of its net sales from water sports products. Sales of water sports products occur principally in the second and third fiscal quarters. Because much of the Company's operating expenses are fixed, seasonal fluctuations in net sales have resulted in operating losses in certain quarters. The Company has historically incurred an operating loss in the first and fourth quarters due to lower net sales from water sports products. The Company also experiences fluctuations in its operating results due to weather conditions. RESULTS OF OPERATIONS The following table sets forth certain financial data for the periods indicated as a percentage of net sales: <TABLE> <CAPTION> FISCAL YEAR ENDED THREE MONTHS ENDED OCTOBER 31, JANUARY 31, ----------- ----------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) <S> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold 60.9 61.8 61.1 62.9 70.7 ---- ---- ---- ---- ---- Gross profit 39.1 38.2 38.9 37.1 29.3 Operating expenses: Product development and engineering 2.0 2.1 2.7 3.3 5.3 Selling and marketing 17.9 16.7 21.8 26.3 17.4 General and administrative 8.7 7.9 7.6 9.4 9.9 Amortization of intangible assets 5.5 6.0 4.3 8.2 1.5 --- --- --- --- --- Total operating expenses 34.1 32.7 36.4 47.2 34.1 ---- ---- ---- ---- ---- Income loss from operations 5.0 5.5 2.5 (10.1) (4.8) Interest expense (4.8) (4.9) (4.8) (6.6) (6.4) --- --- ---- ----- ----- Income (loss) before provision (benefit) for income taxes 0.2 0.6 (2.3) (16.7) (11.2) Provision (benefit) for income taxes 0.2 0.1 -- -- -- --- --- ---- ----- ----- Net income (loss) 0.4% 0.5% (2.3)% (16.7)% (11.2)% === === ==== ===== ===== </TABLE> Fiscal Quarter Ended January 31, 1997 compared to Fiscal Quarter Ended January 31, 1996 Net sales. Net sales increased 41.7% to $2,875,000 in the first quarter of fiscal 1997 from $2,029,000 in the first quarter of fiscal 1996. The increase of $846,000 was primarily due to increased sales of the Company's wakeboards, accessories and other product categories, partially offset by a 16.5% decline in the sale of bodyboards. Bodyboard sales were negatively impacted by the Company's decision to effect certain strategic realignments among three of its distributors during the first quarter of fiscal 1997. Net sales for the 17 first quarter of 1997 included approximately $200,000 in sales of two discontinued brands of snowboards which the Company had previously purchased for resale prior to establishing its own snowboard manufacturing facility in Kirkland, Washington. Gross profit. Gross profit increased 12.1% to $844,000 in the first quarter of fiscal 1997 from $753,000 in the first quarter of fiscal 1996. The increase of $91,000 was primarily due to higher net sales for the period. Gross profit for the first quarter of fiscal 1997 as a percentage of net sales was 29.3% compared to 37.1% in the first quarter of fiscal 1996. The decrease in gross profit as a percentage of net sales was partially due to the lower margins realized on the close-out sales of imported snowboards. In addition, the decline in bodyboard sales caused the Company to scale back levels of production at its Madera and Oceanside, California manufacturing facilities. The lower production rates resulted in idle manufacturing capacity and unfavorable manufacturing variances during the first quarter of fiscal 1997. Product development and engineering. Product development and engineering expense increased 125% to $153,000 in the first quarter of fiscal 1997 from $68,000 in the first quarter of fiscal 1996. The increase of $85,000 was primarily due to design costs for new wakeboard products and start-up expense for the Company's new multi-product manufacturing facility in Orlando, Florida. Selling and marketing. Selling and marketing expenses were $501,000 in the first quarter of fiscal 1997 as compared to $534,000 in the first quarter of fiscal 1996. As a percentage of net sales, selling and marketing expenses decreased to 17.4% in the first quarter of fiscal 1997 as compared to 26.3% in the first quarter of fiscal 1996. The decrease in selling and marketing expenses as a percentage of net sales was primarily the result of higher net sales for the first quarter of fiscal 1997. General and administrative. General and administrative expenses increased 50.0% to $285,000 in the first quarter of fiscal 1997 from $190,000 in the first quarter of fiscal 1996. The $95,000 increase in general and administrative expense was primarily due to increases in payroll and related benefits as the Company continued to expand its administrative capabilities to manage the growth of the business. Amortization of intangible assets. Amortization of intangible assets in the first quarter of fiscal 1997 was $43,000, a decrease of $122,000 from $165,000 of amortization expense for the first quarter of fiscal 1996. The decrease was primarily due to certain intangible assets which were acquired in July 1993 becoming fully amortized during fiscal 1996. Interest expense. Interest expense increased 37.3% to $184,000 in the first quarter of fiscal 1997 from $134,000 in the first quarter of fiscal 1996. The increase of $50,000 was primarily due to higher average debt borrowings in the first quarter of fiscal 1997 as compared to the first quarter of fiscal 1996. Fiscal Year Ended October 31, 1996 compared to Fiscal Year Ended October 31, 1995 Net sales. Net sales increased 9.1% to $12,404,000 in fiscal 1996 from $11,372,000 in fiscal 1995. The increase of $1,032,000 in fiscal 1996 was primarily the result of wakeboard product sales which began in 1996. Sales of bodyboard products decreased in fiscal 1996 from fiscal 1995 primarily due to the Company's inability to fill certain orders as a result of delays in receiving raw material from its principal foam supplier. This supplier experienced problems in manufacturing commencing in March 1996. This delay prevented the Company from meeting shipment targets and resulted in the cancellation of a significant number of customer orders. The Company has submittted a claim to its business interruption insurance carrier with respect to losses incurred as a result of this delay, although there can be no assurance that the Company will succeed in recovering such losses under this claim. Bodyboard and snowboard sales in 1996 were also negatively impacted by the increased strength of the U.S. Dollar against the Japanese Yen and French Franc. Product sales to the Company's Japanese and French distributors are denominated in U.S. Dollars. Sales of other products increased in fiscal 1996 from fiscal 1995 primarily due to an increase of approximately $430,000 in sales of camp and exercise mats and the receipt of $250,000 of royalties from the license of the Company's trademark for use in certain merchandise. Gross profit. Gross profit increased 11% to $4,819,000 in fiscal 1996 from $4,342,000 in fiscal 1995. The increase of $477,000 in fiscal 1996 was primarily due to an increase in net sales. Gross profit as a percentage of net sales was 38.9% in fiscal 1996 as compared to 38.2% in fiscal 1995. The increase in gross profit as a percentage of net sales was primarily due to an increase, as a percentage of total net sales, in higher margin wakeboard and other product sales and the $250,000 license fee discussed above. 18 Product development and engineering. Product development and engineering expense increased 43.2% to $338,000 in fiscal 1996 from $236,000 in fiscal 1995. The increase of $102,000 was primarily due to the development of wakeboard products that were first introduced in the second quarter of fiscal 1996. Selling and marketing. Selling and marketing expense increased 42.4% to $2,704,000 in fiscal 1996 from $1,899,000 in fiscal 1995. The increase of $805,000 was primarily due to selling and marketing expense related to the introduction of wakeboard products in fiscal 1996. In addition, snowboard selling and marketing expense increased in fiscal 1996 from fiscal 1995 due primarily to the introduction of team rider sponsorships. Selling and marketing expense increased to 21.8% of net sales in fiscal 1996 from 16.7% of net sales in fiscal 1995. General and administrative. General and administrative expense was $938,000 in fiscal 1996 and $898,000 in fiscal 1995. The Company has made a concerted effort to control general and administrative expense despite the growth in sales. The increase of $40,000 was due primarily to an increase in payroll and related costs and professional fees. General and administrative expense decreased to 7.6% of net sales in fiscal 1996 from 7.9% of net sales in fiscal 1995. Amortization of intangible assets. Amortization of intangible assets decreased 21.9% to $532,000 in fiscal 1996 from $681,000 in fiscal 1995, a decrease of $149,000. The decrease in amortization expense resulted primarily from a non-compete agreement becoming fully amortized during 1996. Interest expense. Interest expense increased 7.6% to $597,000 in fiscal 1996 from $555,000 in fiscal 1995. The increase of $42,000 is primarily due to an increase in average borrowings in 1996 from 1995. Income tax expense. The Company had no federal or state income tax expense in fiscal 1996 as it generated a net loss. In fiscal 1995, the Company had a state income tax provision but had no federal tax liability due to the use of net operating loss carryforwards. Fiscal year Ended October 31, 1995 Compared To Fiscal Year Ended October 31, 1994 Net sales. Net sales increased 24.4% to $11,372,000 in fiscal 1995 from $9,144,000 in fiscal 1994. The increase of $2,228,000 in fiscal 1995 was primarily the result of snowboard product sales which began in 1995 through the acquisition of the Spiral brand. Sales of accessories, and other products also increased in fiscal 1995 from fiscal 1994 principally due to a full year's sales of TracTop accessories. Gross profit. Gross profit increased 21.5% to $4,342,000 in fiscal 1995 from $3,575,000 in fiscal 1994. The increase of $767,000 in fiscal 1995 was primarily due to an increase in net sales. Gross profit as a percentage of net sales was 38.2% in fiscal 1995 as compared to 39.1% in fiscal 1994. The decrease in gross profit percentage in fiscal 1995 was due primarily to the introduction of snowboards in 1995 which generated a lower gross margin percentage than bodyboards. Product development and engineering. Product development and engineering expense increased 25.5% to $236,000 in fiscal 1995 from $188,000 in fiscal 1994. The increase of $48,000 was primarily due to the hiring of bodyboard team riders in fiscal 1995 who expend a certain percentage of their efforts in product development. Selling and marketing. Selling and marketing expense increased 16.2% to $1,899,000 in fiscal 1995 from $1,634,000 in fiscal 1994. The increase of $265,000 was primarily due to selling and marketing expense related to snowboard products first introduced in fiscal 1995 as well as an increase in bodyboard selling and marketing expense. Selling and marketing expense decreased to 16.7% of net sales in fiscal 1995 from 17.9% of net sales in fiscal 1994 primarily due to an increase in net sales. General and administrative. General and administrative expense increased 10.4% to $898,000 in fiscal 1995 from $797,000 in fiscal 1994. The increase of $101,000 in general and administrative expenses was primarily due to general increases in expenses associated with growth as well as an increase in bad debt expense in 1995. General and administrative expenses decreased to 7.9% of net sales in fiscal 1995 from 8.7% of net sales in fiscal 1994 primarily due to an increase in net sales. Amortization of intangible assets. Amortization of intangible assets increased 36.2% to $681,000 in fiscal 1995 from $500,000 in fiscal 1994. The increase of $181,000 in amortization expense primarily relates to a full year of amortization of intangible assets acquired in 1994 and amortization of intangibles assets acquired in 1995. 19 Interest expense. Interest expense increased 26.4% to $555,000 in fiscal 1995 from $439,000 in fiscal 1994. The increase of $116,000 is primarily due to an increase in average borrowings in 1995 from 1994. Income tax expense. The Company had no federal income tax provision in 1995 and 1994 due to operating loss carryforwards. In fiscal 1995, the Company had a state income tax provision. LIQUIDITY AND CAPITAL RESOURCES The Company financed its operations in fiscal 1996 and the first quarter of fiscal 1997 primarily through borrowings from various sources including its principal stockholder and its bank. During the first quarter of fiscal 1997, the Company borrowed $1,100,000 under a subordinated note to its principal stockholder. The Company utilized cash in the first quarter of 1997 to fund operating activities of $721,000, for the repayment of debt of $351,000 and for purchases of property and equipment of $50,000. Cash used for operating activities in the first quarter of fiscal 1997 consisted primarily of an increase in accounts receivable. During fiscal 1996, net borrowings under the revolving line of credit with a bank, the subordinated note payable to its principal stockholder and capital leases were $1,600,000, $925,000 and $65,386, respectively. The Company utilized the proceeds from these financings in fiscal 1996 to fund operating activities of $806,000, product line acquisitions of $607,000 and capital equipment purchases of $986,000. Cash used for operating activities in 1996 consisted primarily of increases in accounts receivable and inventory of $736,000 and $1,380,000, respectively, partially offset by an increase in accounts payable of $975,000. These increases reflect the impact of the acquisitions of the Flite brand and QPI products in 1996 and the introduction of wakeboard products in 1996. Capital expenditures in 1996 were primarily attributable to the expansion of manufacturing capacity for wakeboards and snowboards. In fiscal 1995, the Company financed its operations primarily through cash generated from operating activities of $487,000 and from financing activities of $315,000. Cash was used for acquisitions of product lines and capital equipment purchases of $168,000 and $633,000, respectively. Cash generated from operations consisted primarily of the cash earnings of the Company partially offset by an increase in accounts receivable. The Company had a $3,800,000 subordinated note payable to its principal stockholder at January 31, 1997 which is payable upon demand and which bears interest at 10%. The Company has accrued $287,000 of interest payable on this note as of January 31, 1997. The note is subordinated to bank borrowings and its repayment is subject to repayment of outstanding bank debt. On March 17, 1997, outstanding indebtedness of $1,750,000 to the principal stockholder was converted into 218,750 shares of Common Stock. The Company intends to utilize the proceeds of the Offering to repay the remaining balance of approximately $2,200,000 in principal and $380,000 in interest outstanding on the subordinated note. At January 31, 1997, the Company had a revolving line of credit and term loan agreement with a bank. The Company has entered into new credit facilities. See "New Credit Facilities" below. The Company has entered into various capital lease arrangements to finance the purchase of capital equipment. These capital lease agreements require monthly payments of approximately $16,000 including interest at rates ranging from 9.0% to 16.7%. The Company is a party to a management consulting agreement with CRM. The fee payable under this agreement is $15,000 per month plus 1% of consolidated net sales in excess of $12 million. During fiscal 1994, 1995 and 1996, the Company paid CRM $180,000 per year. This agreement has been amended to provide for different terms effective upon the consummation of the Offering. See "Certain Transactions." The Company requires capital to finance the growth of its operations, including working capital, for capital expenditures and for the acquisition of additional product lines. The Company estimates that cash required for capital expenditures over the next twelve months is approximately $550,000. In addition, the Company acquired a product line subsequent to January 31, 1997 which required cash payments of $100,000. The Company believes that its current cash flow from operations, its new credit 20 facilities and the anticipated net proceeds of the offering will be adequate to meet its anticipated cash requirements, excluding cash expended for additional product lines for at least the next 12 months although the Company's cash requirements may change due to acquisitions or if its working capital requirements are greater than expected. There can be no assurance that the Company will be able to raise additional capital on terms acceptable to the Company or on a timely basis if such need should occur. The Company does not believe that inflation has had or is likely to have a material impact on its results of operations or liquidity, although it is difficult to accurately anticipate the effects of inflation. NEW CREDIT FACILITIES On March 26, 1997, the Company entered into new credit facilities with Jackson National Life Insurance Company consisting of a $7 million revolving credit facility, a $3.45 million term loan and a $30 million discretionary acquisition facility (together, the "Credit Facilities"). The Credit Facilities are secured by first priority liens on all of the assets of the Company and its subsidiaries, if any. Furthermore, two of the Company's stockholders have pledged their Common Stock as additional security for the loans. The revolving credit facility provides for borrowings of up to a maximum of $7 million. The interest rate payable on the revolving credit facility is a floating rate equal to 30-day LIBOR plus 3.0%, as well as a 0.5% per annum charge on the unused line. Borrowings under the revolving credit facility may be used for general corporate purposes, including working capital requirements. The Company may prepay borrowings under the revolving credit facility (subject to certain conditions), and may reborrow (up to the maximum limit then in effect) any amounts that are repaid or prepaid. The revolving credit facility terminates on March 31, 2005, or earlier upon a change of control of the Company (as defined), at which time all borrowings become due and payable. The term loan is a $3.45 million eight-year loan due March 31, 2005, or earlier upon a change of control of the Company (as defined). This loan will be repaid from the proceeds of the Offering, and the Company will not be able to re-borrow under this portion of the Credit Facilities. The acquisition facility provides for up to $30 million to be advanced to the Company to finance future acquisitions. Advances are subject to credit approval by the lender. Therefore, no assurance can be given that any such advances will be available to the Company. The acquisition facility terminates on March 31, 2005, or earlier upon a change of control of the Company (as defined). The Credit Facilities also provide for certain fees to be paid to the lender. In addition, at the closing of the Credit Facilities, the lender was issued a warrant to purchase up to 187,175 shares of the Company's Common Stock at a price to be fixed at 90% of the initial public offering price of the Offering. Upon the consummation of the Offering, the senior lender will be issued warrants to purchase an additional 50,000 shares of the Company's Common Stock at 90% of the initial public offering price. The Company will amortize the value of the warrants (estimated to be $887,000) over the eight-year term of the credit facilities. The Credit Facilities contain restrictions upon the Company's ability to incur indebtedness, grant liens, make capital expenditures, enter into acquisitions, mergers or consolidations; and dispose of assets; make dividend payments, other restricted payments or investments. In addition, the Credit Facilities require the Company to meet certain financial covenants, including maintenance of minimum cash flow levels and of fixed charge coverage, interest expense coverage and total indebtedness to cash flow ratios. 21 QUARTERLY RESULTS OF OPERATIONS The following table presents certain unaudited quarterly financial information for the nine fiscal quarters ended January 31, 1997. In the opinion of the Company's management, this information has been prepared on the same basis as the audited financial statements appearing elsewhere in this prospectus and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results set forth herein. The Company's quarterly results may fluctuate significantly in the future. See "Risk Factors -- Seasonality; Fluctuations in Quarterly Operating Results." <TABLE> <CAPTION> QUARTER ENDED FISCAL YEAR ENDED OCTOBER 31, 1995 FISCAL YEAR ENDED OCTOBER 31, 1996 JANUARY 31, ---------------------------------- ---------------------------------- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1997 -- -- -- -- -- -- -- -- ---- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Net sales $1,933 $3,835 $3,417 $2,187 $2,029 $4,684 $3,929 $1,762 $2,875 Cost of goods sold 1,163 2,285 2,162 1,420 1,276 2,899 2,370 1,040 2,031 ----- ----- ----- ----- ----- ----- ----- ----- ----- Gross profit 770 1,550 1,255 767 753 1,785 1,559 722 844 Operating expenses: Product development and engineering 53 60 70 54 68 86 95 89 153 Selling and marketing 346 579 557 417 534 750 802 618 500 General and administrative 160 194 295 248 190 236 214 299 285 Amortization of intangible assets 164 165 165 186 165 160 144 63 43 ----- ----- ----- ----- ----- ----- ----- ----- ----- Total operating expenses 723 998 1,087 905 957 1,232 1,255 1,069 981 ----- ----- ----- ----- ----- ----- ----- ----- ----- Income (loss) from operations 47 552 168 (138) (204) 553 304 (347) (137) Interest expense (127) (149) (142) (137) (134) (119) (203) (141) (184) ----- ----- ----- ----- ----- ----- ----- ----- ----- Income (loss) before provision (benefit) for income taxes (80) 403 26 (275) (338) 434 101 (488) (321) Provision (benefit) for income taxes -- -- -- 16 -- -- -- -- -- ----- ----- ----- ----- ----- ----- ----- ----- ----- Net income (loss) $ (80) $ 403 $ 26 $ (291) $ (338) $ 434 $ 101 $ (488) $ (321) ====== ====== ====== ====== ====== ====== ====== ====== ====== </TABLE> The following table sets forth the quarterly financial data for the periods indicated as a percentage of net sales: <TABLE> <CAPTION> QUARTER ENDED FISCAL YEAR ENDED OCTOBER 31, 1995 FISCAL YEAR ENDED OCTOBER 31, 1996 JANUARY 31, ---------------------------------- ---------------------------------- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1997 -- -- -- -- -- -- -- -- ---- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold 60.2 59.6 63.3 64.9 62.9 61.9 60.3 59.0 70.6 ---- ---- ---- ---- ---- ---- ---- ---- ---- Gross profit 39.8 40.4 36.7 35.1 37.1 38.1 39.7 41.0 29.4 Operating Expenses: Product development and engineering 2.7 1.6 2.0 2.5 3.4 1.8 2.4 5.0 5.3 Selling and marketing 17.9 15.1 16.3 19.1 26.3 16.0 20.4 35.1 17.4 General and administrative 8.3 5.1 8.6 11.3 9.4 5.0 5.4 17.0 9.9 Amortization of intangible assets 8.5 4.3 4.8 8.5 8.1 3.4 3.7 3.6 1.5 ---- ---- ---- ---- ---- ---- ---- ---- ---- Total operating expenses 37.4 26.1 31.7 41.4 47.2 26.2 31.9 60.7 34.1 Income (loss) from operations 2.4 14.3 5.0 (6.3) (10.1) 11.9 7.8 (19.7) (4.7) Interest expense (6.6) (3.9) (4.2) (6.3) (6.6) (2.5) (5.2) (8.0) (6.4) Income (loss) before provision (benefit) for income taxes (4.2) 10.4 0.8 (12.6) (16.7) 9.4 2.6 (27.7) (11.1) Provision (benefit) for income taxes 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 ---- ---- ---- ---- ---- ---- ---- ---- ---- Net income (loss) (4.1)% 10.4% 0.8% (13.3)% (16.7)% 9.4% 2.6% (27.7)% (11.1)% ==== ==== === ===== ===== === === ===== ===== </TABLE> The Company's net sales and operating results are subject to quarterly and seasonal fluctuations. As discussed previously, the Company has experienced lower net sales and operating losses in the first and fourth fiscal quarters due to the seasonality of water sports products. In addition, the Company is 22 susceptible to quarterly fluctuations due to material shortages, problems at key suppliers, weather conditions and the impact of foreign currency exchange rates. The Company's expense levels are based, in part, on its expectation of future net sales. Therefore, if net sales levels are below expectations, the Company's operating results are likely to be adversely affected. In addition, a high percentage of the Company's expenses are fixed in the short-term and significant fluctuations in revenue could adversely impact operating results from quarter to quarter. Net sales for the fourth quarter of fiscal 1996 were $1,762,000, a decrease of 19.4% from net sales for the comparable quarter in fiscal 1995. This decline in net sales in comparable fourth quarters in 1996 and 1995 is due to a decrease in sales of bodyboards and snowboards partially offset by wakeboard sales which began in fiscal 1996. The decrease in bodyboard sales was primarily due to the impact of the strengthening U.S. Dollar against the Japanese Yen and French Franc on Japanese and French sales as well as the timing of certain shipments. The decrease in snowboard sales was primarily due to the impact of the strengthening U.S. Dollar against the Japanese Yen and French Franc on Japanese and French sales, the lack of snow in Southern California and the impact of an oversupply of snowboards on demand for the Company's products. See "Overview" for a description of a non-cash charge to be recorded upon consummation of the Offering. Impact of Inflation Increases in the inflation rate are not expected to materially impact the Company's operating expenses. 23 BUSINESS INTRODUCTION The Company is a designer, manufacturer and marketer of branded active sports products. The Company currently offers five brands and over 40 models of bodyboards, two brands and nine models of wakeboards and two brands and over 20 models of snowboards, as well as complementary sports apparel and accessories. In the United States, the Company sells its products primarily through a network of over 100 independent sales representatives working with the Company's internal sales and technical specialists, and internationally through a network of over 30 distributors. The Company's domestic customers include over 1,000 specialty shops, 20 national and regional sporting goods retail chains and over 20 mass merchandisers. The Company's growth strategy is based in part upon offering additional products and brands through its existing distribution channels. The Company implements a multi-sport, multi-brand market segmentation approach in which each product brand is sold only into its designated channel of distribution, thereby protecting the integrity of each brand and the longevity of its unique market position. The Company's multi-brand strategy is to initially develop premium sports products for dedicated consumers, and to subsequently introduce multiple brands with multiple price points and performance characteristics. High, middle and lower range bodyboard brands are marketed to specialty shops, sporting goods retailers and mass merchandisers, respectively. The Company currently markets high and middle range wakeboard and snowboard brands through specialty shops and sporting goods retailers, respectively. Unlike many other active sports companies that purchase products for resale, the Company has developed broad process manufacturing expertise and is an integrated manufacturer of all of its own bodyboards, wakeboards and snowboards. In addition, the Company believes that it is the largest manufacturer of bodyboards in the United States. The Company's manufacturing expertise and integrated manufacturing operations have enabled it to be a low cost producer, to become a leader in product innovation, to carefully maintain performance features and quality control, and to quickly respond to market trends and incorporate technological improvements. INDUSTRY BACKGROUND An increasing number of consumers are participating in active sports, which generally require the purchase of non-team sports products. Active sports products include those currently marketed by the Company -- bodyboards, wakeboards and snowboards -- as well as in-line skates, skateboards, surfboards and similar sports products. Bodyboards are surf riding boards that are shorter, wider, smaller, lighter, more maneuverable and easier to learn than surfboards, and can be used in a much broader range of locations and surf conditions. A bodyboarder rides waves primarily lying prone on the board and is able to complete a variety of aerial maneuvers. Wakeboards are towed behind a boat or personal watercraft and are ridden standing sideways like a surfboard. Wakeboards are more buoyant than water skis and allow the rider to perform a wide range of aerial jumps and acrobatic tricks. There has been significant recent growth in the active sports industry. The Surf Industry Manufacturing Association projected that an estimated 1.75 million Americans would actively (at least four times) surf in 1996, compared to 1.1 million people in 1992. Although these statistics reflect growth in the overall surf industry, the Company believes that growth rates in the bodyboard segment are similar to those of the broader surf industry. In addition, the Company believes that wakeboarding is having the same effect on water skiing as snowboarding has had on alpine skiing. According to the Water Sports Industry Association, water ski participants have declined from 13.8 million in 1991 to 11.1 million in 1994, while sales of wakeboards have grown at a compound annual rate of 58%. According to Snow Industries America, snowboard unit sales have grown at an annual compound growth rate of 50% from 135,000 units in the 1992-1993 season to 456,000 in the 1995-1996 season. The typical active sports enthusiast is a "dedicated consumer" who devotes significant time, attention and disposable income to a chosen sport. Active sports enthusiasts frequently become participants in multiple sports that are appropriate for different seasons and spend a significant portion of their recreational budget on active sports equipment. Participants in active sports are principally in the 10 to 24 year old age 24 bracket, which numbers approximately 55 million people in the United States and is expected to grow over the next ten years to 62 million people, representing a growth rate of twice the rest of the population. The Company believes that international participation in active sports also is growing rapidly. The active sports industry is highly fragmented, and consists of many sporting goods companies that market multiple brands in one or more active sports markets. There are also multiple channels of distribution in this market, principally consisting of specialty shops, which market high-performance product lines, sporting goods retailers which market middle- and high-performance product lines, and mass merchandisers, such as nationwide chain stores and membership clubs, which market lower-cost, lower-performance product lines. BUSINESS STRATEGY The Company's business strategy is to focus on active sports products and markets where the Company believes it can establish itself as a market leader or significant participant at multiple price points. The following are the key components of this business strategy: Multi-Brand Approach to Market Segmentation. The Company has implemented a multi-brand product approach pursuant to which, as a market matures, the Company increases its market penetration by offering not only premium products but also a broad range of products with multiple price points and performance characteristics. For example, high, middle and lower range bodyboard brands are marketed to specialty shops, sporting goods retailers and mass merchandisers, respectively. The Company markets wakeboard and snowboard brands through specialty shops and sporting goods retailers. This multi-brand approach preserves the integrity of each brand within its designated distribution channel and promotes retailer loyalty by protecting against brand erosion from other distribution channels. Multi-Sport Approach. Active sports are subject to consumer trends and seasonal factors. To mitigate the impact of such factors, the Company has diversified its product lines from bodyboards to wakeboards and snowboards. For example, the Company introduced snowboards to provide revenue during the winter season. The Company has grown, and intends to continue to grow, through a combination of brand acquisitions and development in these and other growing active sports markets. Integrated Low-Cost Manufacturing. Unlike many other companies that purchase active sports products for resale, the Company is an integrated manufacturer of all of its own bodyboards, wakeboards and snowboards, as well as all principal subassemblies. The Company is the largest manufacturer of bodyboards in the United States, and has developed broad process technology expertise, with particular expertise in foam-based and compression molded plastics manufacturing and other materials technologies. The Company manufactures multiple products in the same plant and is able to conduct year-round research and development at its facilities. This manufacturing expertise and integrated manufacturing operations have enabled the Company to be a low cost producer, to become a leader in product innovation, to carefully maintain performance features and quality control, and to quickly respond to market trends and incorporate technological improvements. Product Innovation. The Company believes that innovative product design and styling are important to the Company's ability to meet changing consumer needs. The Company believes it is a leader in innovation in the products that it offers, and many of its products have been designed with distinctive features for consumers who demand high performance and advanced capabilities. For example, in 1996 the Company introduced Green Cell foam for its bodyboards which, due to its cell structure, provides enhanced performance and appearance. The Company also introduced the first skateboard-shaped wakeboard and invented a lightweight boot binding system with half the weight of some competitive bindings. Worldwide Distribution Network. The Company has established distribution networks for its products both in the U.S. and internationally. Products are sold through a combination of over 100 independent sales representatives, twelve Company sales personnel and over 30 distributors. Each product is carefully matched to a particular distribution channel. The Company believes that the strength of its distribution network, combined with the Company's well-recognized brand names and reputation for developing innovative products, have allowed it to quickly introduce new products. The Company's new product and branding strategies are based in part upon offering additional products through its existing distribution channels. 25 GROWTH STRATEGY The Company has grown through internal product development and through six product line acquisitions since 1993. The Company's growth strategy is to become a leading provider of active sports products in each of its target markets by (i) identifying growth segments within the active sports industry and entering these markets through either the introduction or acquisition of new products; (ii) extending the Company's well recognized brand names into new global markets; (iii) fully utilizing the Company's extensive distribution network through increased product penetration; and (iv) pursuing strategic acquisitions. Internal Growth. The Company believes that its established distribution network and reputation for developing and introducing high quality innovative products has enabled and will continue to enable the Company to introduce new products to its established customer base. The Company's strategy of initially developing premium products for dedicated consumers, and subsequently introducing multiple brands with multiple price points, has enabled the Company to grow while preserving the reputation of its premium brands. The Company is constantly researching and evaluating new global markets into which its brands can be introduced. Strategic Acquisitions. The Company has made a number of strategic product line and brand acquisitions which have expanded its range of active sports products and increased the number of markets in which the Company operates. The acquisitions consist of the following: Madrid. This bodyboard company was acquired in 1993 to provide a branded bodyboard product line to warehouse price clubs. Since the acquisition, sales of this line have increased over 300%. TracTop. This surf accessory company was acquired in 1994 to leverage the Company's knowledge and skills in the surf products industry while adding a new product category. The Company has successfully expanded this product line to include surfboard and bodyboard bags and other related accessories. Spiral. This snowboard brand was acquired in 1995 to provide the Company with a snowboard brand for the sporting goods retailer market. Spiral has been a recognized snowboard brand for almost seven years, and its snowboards are known for their lightweight design. QPI. This product line consists of bodyboards, kickboards and camp mats and was acquired in 1996 to leverage the manufacturing expertise of the Company and its distribution network. Flite. This snowboard brand was acquired in 1996 to give the Company a snowboard brand for the specialty shop market. The Flite brand, which has been in existence for over 20 years, also increased the Company's molding capabilities and added another snowboard manufacturing technology. FM. This wakeboard brand was acquired in 1997 to provide the Company with an established, well-recognized brand for the sporting goods retailer market. Consistent with its growth strategy, the Company continuously evaluates acquisition opportunities where the Company has a strategic advantage. Ideal acquisition candidates include companies, product lines or brands that: (i) are supported by a dedicated consumer base served by dedicated consumer publications; (ii) have a reputation for quality and performance; (iii) have potential for growth; or (iv) can be manufactured at the Company's facilities or utilize raw materials or technology that is within the Company's special expertise. The Company frequently becomes aware of acquisition opportunities because it is an established active sports marketer and has successfully integrated into its business several acquired product lines and employees of acquired businesses. 26 TECHNOLOGY AND DESIGN The Company has developed particular expertise in foam-based and compression molded plastics manufacturing and other materials technologies. The Company believes it is a leader in product innovation, and many of its products have been designed with distinctive features for consumers who demand high performance and advanced capabilities. The key components of the Company's technology expertise and innovative designs include: Extrusion Technology. The Company acts as its own source of extrusion-coated materials and manufactures its own extruded products. The Company has developed unique blends of copolymer materials with multiple density resins and high molecular strength for the bottoms and rails of its bodyboards. This technology creates superior flex characteristics that allow the rider to pull up on the nose of the board trapping air between the board and the water, which increases the speed and maneuverability of the board. Foam and Other Materials Expertise. The Company's materials expertise has enabled it to develop proprietary materials not available to competitors. The Company often works with foam manufacturers to create unique materials. This expertise has allowed the Company to achieve a higher standard of performance in its boards. Proprietary Lamination Technology. The Company has created its own method for laminating foam and has successfully eliminated the use of glue to bond different foams together. Machinery developed by the Company laminates multiple densities of materials together, which changes a lightweight foam core into a high performance product. Proprietary Compression Molding Techniques. Using proprietary compression molding techniques, the Company has created lightweight, improved-performance wakeboards and snowboards. Its most recent innovation involves using high pressure to produce hermetically sealed pinch lines on the infinitely variable surfaces of a complex curve. This technique increases the life of the board and creates a more consistent flex pattern that improves performance. The following diagrams depict certain elements of the technologies used in the Company's products. BODYBOARD WRAP-UP RAIL CONSTRUCTION SPIRAL SNOWBOARD AND WAKEBOARD CAP CONSTRUCTION SEAM/TOP DECK TOPSHEET MEETS BOTTOM STAINLESS STEEL INSERT GRAPHIC FIBERGLASS HIGH-DENSITY FOAM POLYMATRIX CORE TOP DECK FOAM CORE HIGH-DENSITY INNER FOAM LAYER FIBERGLASS PRINTED FILM/ STEEL EDGE BOTTOM GRAPHIC LOW FRICTION BASE BODYBOARD EXTRUDED SLICK-SKIN FLITE SNOWBOARD BOTTOM CONSTRUCTION SANDWICH CONSTRUCTION HIGH-DENSITY FOAM TOPSHEET TOP DECK STAINLESS STEEL INSERT FIBERGLASS HIGH-DENSITY ABS FOAM TAIL PIECE VERTICALLY LAMINATED ASPEN WOOD CORE HIGH-DENSITY FIBERGLASS FOAM CORE STEEL EDGE LOW FRICTION BASE HIGH-DENSITY FOAM INNER DECK SLICK BOTTOM HIGH-DENSITY FOAM RAIL 27 PRODUCTS The Company designs, manufactures and markets a full line of bodyboards, wakeboards, snowboards and accessories for the active sports industry. The following chart shows the suggested retail price range and the primary distribution channel for each of the Company's product lines. <TABLE> <CAPTION> SPORTING SUGGESTED SPECIALTY GOODS MASS RETAIL BRANDS SHOPS RETAILERS MERCHANDISERS PRICE($) <S> <C> <C> <C> <C> BODYBOARDS BZ X 75-300 R-Lite X 90-175 A-Tach X 40-200 Madrid X 30-60 Wave Master X 10-30 WAKEBOARDS Liquid Force X 250-600 FM X 200-400 SNOWBOARDS Flite X 350-550 Spiral X 250-350 ACCESSORIES AND APPAREL X X 10-100 OTHER PRODUCTS X X X 10-100 </TABLE> BODYBOARDS Bodyboards are surf riding boards that are shorter, wider, smaller, lighter, more maneuverable and easier to learn than surfboards, and can be used in a much broader range of locations and surf conditions. A bodyboarder rides waves primarily lying prone on the board and is able to complete a variety of aerial maneuvers. Bodyboards range in price from approximately $10 to $300, versus $600 to $800 for a surfboard. The Company's experience has been that many bodyboard enthusiasts purchase up to three or four bodyboards per year. Bodyboards vary widely in complexity of design and construction and resulting performance and endurance characteristics, and range from a simple piece of exposed foam, to boards with a foam core plus a "top deck" or skin, to a foam core with a top and bottom deck with an extra bottom layer or "slick skin." The extra layers prolong the life of the board, enhance performance and give a faster and more controllable ride. The Company extrusion coats the bottoms of its high-end boards and uses no glue in their assembly, which results in enhanced performance and durability. The Company designs and manufactures a full line of bodyboards with a variety of performance characteristics and prices. The Company has five brands and over 40 models of bodyboards. The Company has been selected by an Hawaiian lifeguard association to exclusively develop and market specialized rescue boards. The Company also works with lifeguard associations around the world to develop specialized boards for their rescue needs. BZ ProBoards. BZ ProBoards are the Company's highest performance bodyboards and incorporate the industry's most advanced technology. Every board is hand shaped and finished in the Company's plant in Oceanside, California using proprietary technology to produce a multi- density extruded slick skin that provides the rider with a board of superior stiffness with low weight and a controlled performance ride. The 33 models of BZ ProBoards are sold exclusively through more than 1,000 surf shops in 20 countries. 28 R-Lite. The Company created the R-Lite brand in 1990 to fill a need for extremely lightweight, high-end performance boards. These boards are less durable than BZ ProBoards. Like BZ ProBoards, they are sold exclusively through specialty shops. A-Tach. A-Tach bodyboards are the Company's mid-range bodyboards in price and performance. Using patent pending, co-extrusion film-to-foam technology, and made from many of the same premium materials as BZ ProBoards, A-Tach boards are known for their light weight and high flex characteristics, which makes them attractive to the intermediate level rider. A-Tach bodyboards are sold to sporting goods stores. Among A-Tach's largest customers are Sports Chalet, Sports Authority, SportMart and Oshmans. Madrid/Wave Master. The Company acquired the Madrid line to gain an additional export brand of bodyboard and to provide a line suitable for warehouse clubs. The Wave Master brand is sold to chain stores and mass merchandisers. Net sales of bodyboards in fiscal 1996 accounted for approximately 55% of the Company's total net sales. WAKEBOARDS Wakeboards are towed behind a boat or personal watercraft and are ridden standing sideways like a surfboard. Wakeboards are more buoyant than water skis and allow the rider to perform a wide range of aerial jumps and acrobatic tricks. Wakeboards can also be towed behind a relatively low power boat or a personal water craft (such as a Jet Ski(R)) allowing them to be used by a broader range of consumers. Wakeboards range in price from approximately $130 to $800, versus $90 to $700 for water skis. High performance wakeboards require precision engineering and precise tolerances. The Company believes that these manufacturing requirements can serve as a barrier to companies seeking entry to the high performance segment of the wakeboard market. The Company designs and manufactures wakeboards under its Liquid Force and FM brands. Liquid Force. The Company developed this brand internally through the combined efforts of its research and development and marketing departments. Liquid Force uses advanced materials and unique construction techniques providing competitive performance characteristics, including multi-concave venturi hulls and low profile rails. These boards were used by three of the top ten riders in the 1996 World Championships. In addition, the Company has recently introduced the first wakeboard designed specifically for women, a specialty board designed for competition and tricks, and a full line of performance clothing. The Company's seven models of Liquid Force wakeboards are sold domestically primarily through over 200 specialty shops, including snow and surf, water ski and skate stores, and internationally through distributors in more than 20 countries. FM. The Company acquired the FM brand to expand its distribution of high quality wakeboards into sporting good retailers and to marine and ski board catalogues. The Company plans to expand its selection of boards available under the FM brand as well as the brand's international distribution. The Company also has introduced high performance wakeboard bindings under the trademarks Suction, High Suction and Super Suction, which are extremely lightweight. These bindings use durable thermoplastics rather than rubber, which permit the use of vivid graphics. These bindings range in price from $130 to $260. The Company offers both brands of bindings on its Liquid Force and FM boards. Net sales of wakeboards and bindings in fiscal 1996 accounted for approximately 12% of the Company's total net sales. 29 SNOWBOARDS In 1994, the Company entered the snowboard market with distribution agreements with two Austrian snowboard manufacturers, F2 and Duotone. The Company acquired its Spiral brand and its compression molding technology in 1995 and the Flite brand in 1996. These brands are targeted at the mid-range and premium markets, respectively. The Company currently sells more than 20 models of snowboards. Performance characteristics in snowboards vary widely and are dependent on the materials used in their construction, shape and weight. The Company has developed two specific technologies, one for full cap construction and one for laminated (or sandwich) construction. The Company believes that its snowboard manufacturing technologies are among the most advanced in the world and that its snowboards are among the lightest in the industry. In recent East Coast competitions, the Company's amateur and professional teams placed first through third in multiple competition categories. The Company's snowboard brands are as follows: Flite. Flite snowboards, introduced by the Company in 1997 for the 1997/1998 season, incorporate advanced technology and are positioned at the high performance, free-style segment of the snowboard market. The Company manufactures its Flite snowboards utilizing a vertically laminated wood core with triaxially braided fiberglass resulting in outstanding torsion control (flex) characteristics. The line of ten boards includes two new professional rider endorsed boards. Spiral. The Company manufactures and markets the Spiral brand to mainstream riders who require a quality board at a competitive price. Because of their performance characteristics, these snowboards are also suitable for advanced snowboarders. Spiral's hermetically sealed cap construction boards feature a matrix core which extends the life of the board, have low distortion ratios, and are extremely lightweight. The Spiral line features seven models of boards. BZ. In 1995 the Company introduced BZ snowboards into Japan, successfully leveraging the brand loyalty of its high quality bodyboards. BZ snowboards are designed to be lightweight, facilitating use by lighter riders. This line consists of five models and are marketed exclusively in Japan. Net sales of snowboards in fiscal 1996 accounted for approximately 7% of the Company's total net sales. ACCESSORIES AND APPAREL The Company designs, manufactures and markets related accessories for its bodyboard, wakeboard and snowboard products. Such accessories include carrying and storage bags which protect boards from dents, scrapes and high temperatures during transport; TracTop traction enhancing pressure-sensitive stick-ons and coatings which increase a rider's stability; surf fins for bodyboarders; leashes used by riders to maintain contact with their boards; and other products used in the maintenance and care of surfboards. The Company has designed and markets performance-related clothing under its BZ, A-Tach and Liquid Force brands. The Company sells its apparel through the Company's existing channels of distribution for display alongside its existing hardgoods products in retail outlets. The Company's objective for its apparel line is to capitalize on the strong personal association that the core group of enthusiasts have for their chosen sport and brand. Management believes that the dollar volume of softgoods in the bodyboard, wakeboard and snowboard markets is at least 50% of total sales while it represented less than 1% of the Company's 1996 revenues. In 1996, the Company entered into a licensing agreement with a Japanese company that markets high-end apparel under the BZ name to Japanese department stores. Net sales of accessories and apparel in fiscal 1996 accounted for approximately 14% of the Company's total net sales. 30 OTHER PRODUCTS The Company also manufactures and sells a series of products which capitalize on its expertise in foam technology and manufacturing or which leverage its existing relationships with distributors and retailers. These products accounted for approximately 12% of the Company's total net sales in fiscal 1996. SALES AND DISTRIBUTION Each of the Company's brands is developed for a specific target market and distribution channel with appropriate price points, features and performance characteristics. The Company uses this marketing and distribution strategy to protect the integrity of its brands. The Company believes that its track record in protecting its brands and distribution channels is an important competitive advantage. The Company's new product and branding strategies are based in part upon offering additional products through its existing distribution channels. The three main retail channels of distribution for the Company's products in the United States are as follows: Specialty Shops. These retailers, which include snow and surf, water ski and skate stores, sell the Company's premium bodyboard, snowboard and wakeboard brands, including BZ ProBoards and R-Lite bodyboards, Liquid Force wakeboards and Flite snowboards. The Company's products are sold through more than 1,000 specialty shops. Specialty shops cater to dedicated consumers looking for performance products, sports enthusiasts and more experienced riders. Sporting Goods Retailers. These stores sell the Company's A-Tach bodyboards, FM wakeboards and Spiral snowboards. Sporting goods retailers target mainstream consumers looking for value and performance. Sporting goods retailers that sell the Company's products include Big Five, Oshmans, SportMart, Sports Authority and Sports Chalet. Mass Merchandisers. These retailers, which include large chain stores and membership clubs, offer the Company's entry-level brands, such as Wavemaster and Madrid bodyboards. These retailers sell primarily to consumers motivated by price rather than design and performance. Mass merchandisers that sell the Company's products include BJ's Wholesale Club, Costco, Kmart, Sam's Club and Walmart. In the United States, the Company sells its brands primarily through a network of over 100 independent sales representatives chosen for their expertise in specific retail channels. The sales representatives collaborate with the Company's internal team of sales and technical specialists. Internationally, the Company sells its products through a network of over 30 distributors in 33 countries. The Company works closely with its international distributors to help ensure that its policies of limited distribution and market segmentation are followed worldwide. MARKETING The Company markets by extensive advertising in "consumer enthusiast" magazines. The Company has made a significant investment in professional team riders in all sports for all advertised brands. The Company has endorsement relationships with well-known riding professionals who compete around the world using products within each product category. Brands are featured at all major trade shows. The Company conducts numerous special event marketing activities in all global markets, including on-snow demonstrations, water sports clinics and demonstrations featuring team riders and local enthusiasts. PRODUCT DEVELOPMENT The Company's goal is for 25% of its sales to come from products that are less than four years old. The Company strives to be a technological leader in each of its product lines by drawing on the expertise of its internal product development team. In addition, the Company has integrated its professional team 31 riders into its product development process, allowing regular testing of both prototypes and finished products. The Company's integrated manufacturing facilities allow it to rapidly produce, test and bring to market production models incorporating new designs. In fiscal 1994, 1995 and 1996, the Company spent approximately $188,000, $236,000 and $338,000, respectively, on research and development. MANUFACTURING AND SUPPLIERS The Company manufactures virtually all of its products and their principal subassemblies. Bodyboards are manufactured at its California and Florida manufacturing facilities, and wakeboards and snowboards are manufactured at the Company's Washington State manufacturing facility. By manufacturing both wakeboards and snowboards in the same plant, the Company is able to leverage its proprietary process technology and manufacturing techniques to enhance the performance characteristics of its product lines. The Company believes that its internal manufacturing capabilities provide it with a competitive advantage over companies that outsource their products. The Company believes that its cost of these goods is generally 20%-30% less than most of its competitors and that its ability to work year round on research and development allows the Company to be a leader in innovation. By using its manufacturing facilities to make products in more than one sports season and by selling in both hemispheres, plant utilization is maintained throughout most of the year. Continuous capital investment in tools and equipment, as well as manufacturing expertise, have allowed the Company to increase levels of production and improve manufacturing efficiencies. Capital expenditures for the 1996 fiscal year were approximately $1.6 million. Each of the Company's products undergoes quality assurance testing throughout the manufacturing process. The Company is able to produce uniform products as a result of its integrated manufacturing process and a continuous quality assurance program. The Company purchases component materials from third parties. Most component materials, other than polyethylene foam, are available from a broad range of suppliers in the United States. The polyethylene foam used in the Company's bodyboards is available from only three suppliers in the United States. Because it is one of the largest users of polyethylene foam in the United States, the Company believes that it receives favorable pricing for the foam it purchases. The Company has developed a close working relationship with two foam suppliers, and has a supply contract with one of these suppliers that expires in June 1998. During 1996 one vendor had a significant interruption to its manufacturing, as well as quality problems. This caused the Company to sustain a loss of business due to the consequential material shortages. The Company has submitted a claim to its business interruption insurance carrier with respect to this loss although there can be no assurance that the Company will succeed in recovering under this claim. Any future interruption in the Company's ability to obtain adequate supplies of polyethylene foam could have a material adverse effect on its business. See "Risk Factors -- Manufacturing Risks" and "Risk Factors -- Dependence on Polyethylene Foam and Other Component Suppliers." CUSTOMERS In fiscal 1996, the Company's customers included over 1,000 specialty shops, over 20 national and regional sporting goods retailers and over 20 mass merchandisers. Tasker, Ltd., the Company's exclusive distributor in Japan, accounted for approximately 11.5%, 15.5% and 11.4% of the Company's net sales in fiscal 1994, 1995 and 1996, respectively. Costco, Inc. accounted for approximately 10% of the Company's net sales for fiscal year 1994. No other customer accounted for more than 10% of sales in 1994, 1995 or 1996. COMPETITION The active sports industry is highly competitive, with competition mainly centering on product innovation, performance and styling, brand name recognition, price, marketing and delivery. Competitors in each of the Company's product lines include companies with a greater market share and companies with greater brand recognition and financial, distribution, marketing and other resources than the Company. In bodyboards, the Company competes principally against Mattel, Inc. (Morey), and a number of small competitors. In wakeboards, the Company competes principally against HO, Inc. (Hyperlite). In snowboards, the dominant competitor is Burton Industries, Inc. There are several other companies with significant market shares including K2, Inc. (K2), Morrow Snowboards, Inc. and Ride, 32 Inc., and numerous other competitors. There are no technological or manufacturing barriers to entry that would preclude a large ski or sporting goods company or any other well-financed competitor from entering the Company's markets. Each of these markets faces competition from other sports and leisure activities, and sales of sports and other leisure products typically are affected by changes in consumer preferences. See "Risk Factors -- Competition and Product Innovation." INTELLECTUAL PROPERTY In the course of its business, the Company employs various trademarks, trade names and service marks, including its logos, in the packaging and advertising of its products. The Company is the owner of 20 registered trademarks, as well as numerous foreign trademark registrations and unregistered trademarks. The Company believes the strength of its service marks, trademarks and trade names are of considerable value and importance to its business and intends to continue to protect and promote them as appropriate. There can be no assurance, however, that any of the Company's trademarks are enforceable or are otherwise capable of protecting the goodwill associated with them. The loss of any significant mark could have a material adverse effect on the Company. The Company currently holds 12 United States patents and has filed four patent applications, as well as various foreign counterparts. Included among these patents are the Company's Rainbow Plank patent covering coloration technology used to decorate its boards and its Slick Skins patent covering the use of slick skins on the top deck of bodyboards. Although the Company believes that such patents have some utility in maintaining the Company's competitive position, it does not consider its patents to be material to its business. It is the practice of the Company to require its employees involved in research and product development activities to execute confidentiality and invention assignment agreements. The Company does not believe that it is infringing any intellectual property rights of third parties, and except as described under "Legal Proceedings," is not engaged in any intellectual property disputes. See "Risk Factors -- Limited Protection of Intellectual Property." EMPLOYEES As of March 1, 1997, the Company employed 75 full-time employees and 235 part-time and seasonal employees, including five full-time employees in general and administrative, 20 in sales, marketing and customer service, ten in product engineering, research and development and 40 in manufacturing. The Company's employees are not subject to a collective bargaining agreement, and the Company considers its employee relations to be good. In addition, the Company engages the services of over 100 professional team riders, most of whom are independent contractors. FACILITIES The Company's headquarters are located in Hyannis, Massachusetts and consist of approximately 10,000 square feet of office and general warehouse space. This facility is used by corporate management and the customer service, accounting and finance staff. The Company's Oceanside, California and Madeira, California facilities consist of approximately 35,000 square feet and 42,000 square feet, respectively, of leased plant, warehousing and office space, and are used by corporate marketing, and sales management, manufacturing and research staff. The Company manufactures bodyboards at its California facilities. The Company's Kirkland, Washington State facility consists of approximately 18,000 square feet of leased plant, warehousing and office space, and is used by corporate marketing, sales management and manufacturing staff. The Company's wakeboards and snowboards are manufactured at its Washington State facility. The Company also leases approximately 15,000 square feet of plant and warehousing space in Lakeland, Florida. The Company manufactures bodyboards and accessories at this facility. The Company rents its headquarters office and warehouse space in Hyannis as a tenant-at-will. The Company's other leases expire at various dates through July 1999 with certain renewal options. The Company believes that if any of its leases were not to be renewed, adequate alternative space would be available. The Company believes that its existing facilities are adequate for at least its current and near-term future needs. 33 ENVIRONMENTAL AND REGULATORY MATTERS The Company's operations are subject to Federal, state and local laws and regulations relating to the environment, consumer products, health and safety, and other regulatory matters. The Company believes that it has obtained all material permits and that its operations are in substantial compliance with all material applicable laws and regulations. See "Risk Factors -- Potential Adverse Impact of Environmental Regulations." LEGAL PROCEEDINGS The Company is not a party to any litigation except as set forth below and except for non-material litigation incidental to its business. One of the Company's competitors challenged the Company's trademark application for the Company's Liquid Force trademark for its wakeboards. See "Risk Factors -- Limited Protection of Intellectual Property." In August 1996, the Company was one of several named defendants in a product liability action for an unspecified amount of damages arising out of the death of one of the plaintiffs. The Company believes that such claim is without merit. The Company has asserted that it never owned the product line involved in the accident and expects to be dismissed from the case. With this exception, the Company has never been a party to any product liability litigation. The Company may in the future, due to the nature of its products, become a defendant in a product liability lawsuit for serious personal injuries or death allegedly relating to its products. Product liability claims may include allegations of failure to warn, design defects or defects in the manufacturing process. The Company believes, however, that injuries resulting from the use of bodyboards, wakeboards and snowboards, unlike certain other sports such as skiing, virtually always arise from the inherent dangers of the sport itself, rather than from product defects. The Company believes that it has adequate liability insurance for the risks arising in the normal course of its business, including product liability insurance for all of its products. No assurance can be given, however, that the Company will not be the subject of claims in excess of its coverage limits, or that insurance will continue to be available on commercially reasonable terms, or at all. See "Risk Factors -- Product Liability" and "Risk Factors -- Limited Protection of Intellectual Property." 34 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company and their ages as of March 1, 1997 are as follows: <TABLE> <CAPTION> NAME AGE POSITION ---- --- -------- <S> <C> <C> Jon A. Glydon 49 President, Chief Executive Officer and Director Brooks R. Herrick 59 Senior Vice President, Chief Financial Officer and Treasurer Eric S. George 36 Senior Vice President of Engineering Steven J. Roth 48 Chairman of the Board Gustav A. Christensen(1)(2) 49 Director Thomas H. Conway 57 Director Dr. James L. McKenney (1)(2) 67 Director </TABLE> - --------- (1) Member of Compensation Committee. (2) Member of Audit Committee. JON A. GLYDON has been the President, Chief Executive Officer and a director of the Company since its organization in 1993. Prior to that, Mr. Glydon was President of PI, Inc., a foam manufacturing and consumer products company, for more than two years. The Company purchased its bodyboard business from PI, Inc. in 1993. Mr. Glydon has more than twenty years of marketing and manufacturing experience in the consumer products industry. BROOKS R. HERRICK joined the Company in March 1997 as Senior Vice President, Chief Financial Officer and Treasurer. From 1993 to 1996, Mr. Herrick was Vice President -- Finance and Corporate Controller of Amtrol, Inc., a manufacturer and marketer of flow and expansion control technology. From 1989 to 1993, he was the Director of Internal Audit of Damon Corporation, which operates clinical laboratories. ERIC S. GEORGE joined the Company in 1995 as Vice President of Engineering and in March 1997 was promoted to Senior Vice President of Engineering. From 1994 to 1995, he was Vice President of Operations of Next Generation Films, a manufacturer of coextruded polyethylene films. From 1989 to 1994, Mr. George was a manufacturing manager for Beresford Packaging, a polyethylene film bag manufacturing company. Mr. George has 15 years of experience in manufacturing management. STEVEN J. ROTH has been a director of the Company since its organization. Mr. Roth has been a general partner of CR Management Associates, L.P., a private equity investment firm and the Company's founding stockholder, for more than five years. Mr. Roth has been involved in the venture capital industry for more than 13 years. GUSTAV A. CHRISTENSEN joined the Board of Directors of the Company in February 1997. Mr. Christensen has been Chairman of the Board of Alpha-Beta Technologies, Inc., a biotechnology firm, since August 1991. 35 THOMAS H. CONWAY has been a director of the Company since its organization. Mr. Conway has been a general partner of CR Management Associates, L.P., a private equity investment firm and the Company's founding stockholder, for more than five years. For more than 15 years, Mr. Conway has been involved in corporate turnaround activities, including as President, Chief Executive Officer and a director of Xyvision, Inc., a text processing software company, from August 1991 to October 1996. DR. JAMES L. MCKENNEY joined the Board of Directors of the Company in February 1997. Dr. McKenney is the John G. McLean Professor of Business Administration (Emeritus) at the Harvard Business School, and has been a faculty member of the Harvard Business School since 1960. He is also a director of Xyvision, Inc. Executive officers of the Company are elected by the Board of Directors on an annual basis and serve until their successors are duly elected and qualified. There are no family relationships among any of the executive officers or directors of the Company. Upon the closing of the Offering, the Company's Board of Directors will be divided into three classes, with the members of each class of directors serving for staggered three-year terms. Mr. Christensen and Dr. McKenney will serve in the class the term of which expires in 1998; Mr. Glydon will serve in the class the term of which expires in 1999; and Messrs. Conway and Roth will serve in the class the term of which expires in 2000. Upon the expiration of the term of each class of directors, directors comprising such class of directors will be elected for a three-year term at the next succeeding annual meeting of stockholders. COMPENSATION COMMITTEE -- INTERLOCKS AND INSIDER PARTICIPATION Prior to February 1997, the Company did not have a Compensation Committee of the Board of Directors. In February 1997, the Board of Directors established a Compensation Committee which consists of Mr. Christensen and Dr. McKenney, both of whom are non-employee directors. DIRECTOR COMMITTEES AND COMPENSATION Committees. The Audit Committee consists of Mr. Christensen and Dr. McKenney. The Audit Committee will review with the Company's independent auditors the scope and timing of their audit services and any other services they are asked to perform, the auditor's report on the Company's financial statements following completion of their audit and the Company's policies and procedures with respect to internal accounting and financial controls. In addition, the Audit Committee will make annual recommendations to the Board of Directors for the appointment of independent auditors for the ensuing year. The Compensation Committee consists of Mr. Christensen and Dr. McKenney. The Compensation Committee will review and evaluate the compensation and benefits of all officers of the Company, review general policy matters relating to compensation and benefits of employees of the Company and make recommendations concerning these matters to the Board of Directors. The Compensation Committee also will administer the Company's 1997 Equity Incentive Plan. See " -- Equity Plans." Director Compensation. Directors who are not employees of the Company (also referred to as "outside directors"), who currently consist of Messrs. Christensen, Conway, McKenney and Roth, receive an annual retainer of $2,000 and fees of $500 per day for attending regular meetings of the Board of Directors and $250 per day for participating in meetings of the Board of Directors held by means of conference telephone and for participating in certain meetings of committees of the Board of Directors. Payment of director fees is made quarterly. Directors are also reimbursed for reasonable out-of-pocket expenses incurred in attending such meetings. The Company is a party to a management consulting agreement (the "Consulting Agreement") with CR Management Associates, L.P. ("CRM"). Messrs. Conway and Roth, directors of the Company, are principals of CRM. During fiscal 1996, the Company paid CRM an aggregate of $180,000 pursuant to the Consulting Agreement. See "Certain Transactions." 36 1997 Non-Employee Directors Stock Option Plan. The Company has adopted a directors stock option plan (the "Directors Plan") providing for the annual grant of stock options to purchase shares of Common Stock to outside directors. A total of 150,000 shares of Common Stock have been reserved for issuance under the Directors Plan. Under the Directors Plan, each eligible director has been or will be granted an option to purchase 15,000 shares of Common Stock upon the later of the adoption of the plan or the director's first appointment or election to the Board of Directors. Each such option granted prior to the date of the final prospectus for the Offering will be deemed to be granted simultaneously with the execution of the underwriting agreement for the Offering at an exercise price equal to the initial public offering price. When and if the initial option is fully vested after a five-year vesting period, options to purchase 3,000 shares of Common Stock will be granted on the date of the Company's next annual meeting of stockholders following the final vesting date of the initial option, provided that such director's service as a director will continue after such meeting. The exercise price of options granted under the Directors Plan will be 100% of the fair market value per share of the Common Stock on the date the option is granted. Options initially granted to each director under the Directors Plan will become exercisable at the rate of 20% of the shares subject to the option on the first through fifth anniversaries of the date of grant of the initial option. Options granted after the initial five-year vesting period will be fully vested upon grant. The options will expire on the tenth anniversary of the grant date. If an optionee ceases to be a director of the Company after his or her option becomes exercisable, the option will remain exercisable in accordance with its terms. If an optionee ceases to be a director of the Company for any reason prior to the time his or her option becomes fully exercisable, the option will terminate with respect to the shares as to which the option is not then exercisable. EXECUTIVE COMPENSATION Summary Compensation. The following table sets forth the compensation earned by the Company's Chief Executive Officer for services rendered in all capacities to the Company in fiscal 1996. No other executive officer of the Company received salary and bonus of $100,000 or more for fiscal 1996. SUMMARY COMPENSATION TABLE <TABLE> <CAPTION> LONG-TERM ANNUAL COMPENSATION(1) COMPENSATION(1) ------------------- ------------ SECURITIES UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(2) COMPENSATION($) --------------------------- --------- -------- ------- --------------- <S> <C> <C> <C> <C> Jon A. Glydon ........................ $125,000 $10,000 104,444 0 President, Chief Executive Officer and Director </TABLE> - ---------- (1) In accordance with the rules of the Securities and Exchange Commission, the compensation set forth in the table does not include medical, group life insurance or other benefits which are available to all salaried employees of the Company, and certain perquisites and other benefits, securities or property which do not exceed the lesser of $50,000 or 10% of the person's salary and bonus shown in the table. (2) The Company did not make any restricted stock awards, grant any stock appreciation rights or make any long-term incentive payments during fiscal 1996 to its executive officers. Subsequent to October 31, 1996, Mr. Glydon, in connection with a Management Equity Reorganization Plan dated as of October 31, 1996, was permitted to purchase 156,666 shares of Common Stock at a nominal purchase price, and was granted an option to purchase 104,444 shares of Common Stock at a nominal exercise price per share. The option is shown in the table for clarity of presentation. (3) Mr. Herrick, who joined the Company in March 1997, would be among the four most highly compensated individuals had he been with the Company during fiscal 1996. Mr. Herrick's base salary is $125,000. 37 Option Grants. The following table provides information concerning grants of stock options made during fiscal 1996 by the Company to the Company's Chief Executive Officer: OPTION GRANTS IN LAST FISCAL YEAR <TABLE> <CAPTION> INDIVIDUAL GRANTS POTENTIAL REALIZABLE ---------------------------------------------------------- VALUE AT PERCENT OF ASSUMED ANNUAL NUMBER OF TOTAL OPTIONS RATES OF STOCK SECURITIES GRANTED TO EXERCISE OR PRICE APPRECIATION UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM(2) NAME OPTIONS GRANTED FISCAL YEAR $/SHARE(1) DATE 5%($) 10%($) ---- --------------- ----------- ------- ---- ----- ------ <S> <C> <C> <C> <C> <C> <C> JON A. GLYDON 104,444 55% $.01 1/31/02 $289 $638 </TABLE> - ---------- (1) All options were granted at not less than fair market value as determined by the Board of Directors of the Company as of the date of grant. Subsequent to October 31, 1996, Mr. Glydon, in connection with a Management Equity Reorganization Plan dated as of October 31, 1996, was permitted to purchase 156,666 shares of Common Stock at a nominal purchase price, and was granted an option to purchase 104,444 shares of Common Stock at a nominal exercise price per share. The options are shown in the table for clarity of presentation. (2) Amounts reported in this column represent hypothetical values that may be realized upon exercise of the options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation of the Company's Common Stock over the term of the options. These numbers are calculated based on rules promulgated by the Securities and Exchange Commission. Actual gains, if any, on stock option exercises and Common Stock holdings are dependent on the time of such exercise and the future performance of the Company's Common Stock. (3) Mr. Herrick, who joined the Company in March 1997, was granted an option to purchase 16,846 shares of Common Stock at an exercise price per share of $8.00. Option Exercises and Unexercised Option Holdings. The following table provides information regarding unexercised stock options held as of October 31, 1996 by the Company's Chief Executive Officer. Such person did not exercise any stock options in fiscal 1996. FISCAL YEAR-END OPTION VALUES <TABLE> <CAPTION> SHARES OF COMMON STOCK VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT YEAR-END(1) OPTIONS AT YEAR-END(2) ---------------------- ------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ------------- ----------- ------------- <S> <C> <C> JON A. GLYDON -- 104,444 -- 1,042,352 </TABLE> - ------------- (1) Subsequent To October 31, 1996, Mr. Glydon, In Connection With A Management Equity Reorganization Plan Dated As Of October 31, 1996, Was Permitted To Purchase 156,666 Shares Of Common Stock At A Nominal Purchase Price, And Was Granted An Option To Purchase 104,444 Shares Of Common Stock At A Nominal Exercise Price Per Share. The Options Are Shown In The Table For Clarity Of Presentation. (2) There Was No Public Trading Market For The Common Stock As Of October 31, 1996. Accordingly, These Values Have Been Calculated On The Basis Of An Assumed Initial Public Offering Price Of $10.00 Per Share, Less The Applicable Exercise Price. 38 EQUITY PLANS Management Incentive Program. The Company Management Incentive Program was established in 1993 for the benefit of employees designated to participate in the program. The program was terminated as of October 31, 1996, as described below. Under the cash incentive portion of this program, an aggregate of 25% of the Company's net income was distributable to employee participants in the program. Under a "phantom stock" portion of this program, upon the sale of the business of the Company to an unaffiliated third party, the employee participants were entitled to receive an aggregate of up to 25% of the net proceeds of sale that are available for distribution to the stockholders of the Company after deducting a return to all stockholders of their invested capital (debt and equity) plus a 10% compounded return thereon. A total of 25 points was allocable under the phantom stock portion of the program. Upon the adoption of the program in 1993, an aggregate of 5.0 phantom stock points were allocated to six employee participants for each year of service with the Company, including 4.0 points per year allocated to Mr. Glydon. Additional point allocations were made to a total of 18 employee participants after the initial point allocation. As of October 31, 1996, a total of 25 points had been allocated pursuant to the program. The program provided that in the event of an initial public offering of the Company's Common Stock, the Board of Directors was entitled to terminate the program and substitute an equity program on terms deemed equitable by the Board of Directors. As of October 31, 1996, pursuant to a Management Equity Reorganization Plan, the program was terminated, and each participant was permitted to purchase, at a nominal price, shares of Common Stock corresponding to the participant's vested phantom equity percentage in the Company, and each participant received a stock option, at a nominal exercise price per share, corresponding to the participant's unvested phantom equity percentage. Mr. Glydon purchased 156,666 shares, and 11 other employee participants purchased an aggregate of 73,110 shares. In addition, Mr. Glydon was granted an option to purchase 104,444 shares of Common Stock, and 18 other employee participants were granted stock options to purchase an aggregate of 86,924 shares. The options vest in accordance with the vesting schedule of the 1993 Management Incentive Program. 1997 Equity Incentive Plan. The Company's 1997 Equity Incentive Plan (the "1997 Plan") was adopted by the Board of Directors and approved by the Company's stockholders in February 1997. The 1997 Plan provides for the issuance of a maximum of 450,000 shares of Common Stock pursuant to the grant to employees of "incentive stock options" within the meaning of the Internal Revenue Code and the grant of non-qualified stock options, stock awards or opportunities to make direct purchases of stock in the Company to employees, consultants, directors and officers of the Company. The 1997 Plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the 1997 Plan, the Compensation Committee has the authority to select the optionees and determine the terms of the options granted, including: (i) the number of shares subject to each option, (ii) when the option becomes exercisable, (iii) the exercise price of the option (which in the case of an incentive stock option cannot be less than the market price of the Common Stock as of the date of grant), (iv) the duration of the option and (v) the time, manner and form of payment upon exercise of an option. An option is not transferable by the optionholder except by will or by the laws of descent and distribution. Generally, no incentive stock option plan may be exercised more than 90 days following termination of employment. However, in the event that termination is due to death or disibility, the option is exercisable for a maximum of 180 days after such termination. No options have been granted to date under the 1997 Plan. 401(K) PLAN The Company maintains a 401(k) retirement savings plan (the "401(k) Plan"). All employees of the Company who have worked at the Company for more than one year and are over 21 years old are eligible to participate in the 401(k) Plan. The 401(k) Plan provides that each participant may contribute a portion of his or her pre-tax compensation (up to 15% and to a statutorily prescribed annual limit) to the 401(k) Plan. The percentage elected by certain highly compensated participants may be required to be lower. All amounts contributed to the 401(k) Plan by employee participants and earnings on these contributions are fully vested at all times. The Company, at its discretion, may contribute to the 401(k) Plan. Such Company contributions become fully vested upon a participant's completion of six years of service. The Company has never made a discretionary contribution. 39 CERTAIN TRANSACTIONS Consulting Agreement with CR Management Associates, L.P. The Company is a party to a Consulting Agreement, dated July 19, 1993, with CR Management Associates, L.P. ("CRM"), a management consulting firm. CRM is an affiliate of SSPR, L.P., the Company's principal stockholder, and Messrs. Conway and Roth, directors of the Company, are principals of CRM. Pursuant to the terms of the Consulting Agreement, CRM has provided, and continues to provide the Company with, various management consulting services. During 1996, CRM provided assistance in strategic planning; sales and marketing; new product development; acquisition strategy, prospect evaluation and implementation; financial planning and budgeting; and sourcing new credit facilities. CRM has advised the Company that it estimates that it provided more than two person-years of assistance during 1996. The fee payable by the Company to CRM under the Consulting Agreement is $15,000 per month plus 1% of consolidated net sales in excess of $12,000,000 per year. Following the closing of the Offering, the Consulting Agreement provides that the annual fee shall be capped at $300,000 with a five-year term. The Consulting Agreement may be amended or modified, or extended at the end of its term, only with the approval of a majority of the outside directors of the Company who are not affiliated with CRM. In exchange for this amendment, the Company will issue 109,500 shares of Common Stock to CRM at the closing of the Offering. Indebtedness to SSPR, L.P. SSPR, L.P. is the Company's principal stockholder and provided the Company's initial capital, consisting of $150,000 in equity and subordinated debt in the amount of $1.35 million. SSPR, L.P. subsequently advanced an aggregate of $2.6 million in subordinated debt. The subordinated notes are payable on demand, with interest at 10% per year, and are subordinated to senior debt, as defined. In March 1997, SSPR, L.P. converted $1.75 million principal amount into 218,750 shares of Common Stock. The remaining principal and interest owing under the subordinated notes will be repaid from the proceeds of the Offering. Equity Issuances to Management and Certain Directors. Subsequent to the end of its 1996 fiscal year, the Company issued shares of Common Stock and options to purchase Common Stock to Mr. Glydon pursuant to the Company's Management Equity Reorganization Plan, and to Messrs. Conway and Roth pursuant to the Company's 1997 Non-Employee Directors Stock Option Plan. See "Management -- Director Committees and Compensation" and "Management -- Equity Plans." 40 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock as of March 31, 1997 (i) by each person or entity known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) by each director of the Company, (iii) by the Company's chief executive officer and (iv) by all directors and executive officers of the Company as a group. Unless otherwise indicated below, to the knowledge of the Company, each person or entity listed below has sole voting and investment power over the shares of Common Stock shown as beneficially owned, except to the extent authority is shared by spouses under applicable law. <TABLE> <CAPTION> PERCENT BENEFICIALLY OWNED(1) --------------------- NUMBER OF SHARES PRIOR TO AFTER NAME AND ADDRESS BENEFICIALLY OWNED OFFERING OFFERING ---------------- ------------------ -------- -------- <S> <C> <C> SSPR, L.P. 1,482,181 86.6% 46.4% c/o CR Management Associates, L.P. 92 Hayden Avenue Lexington, Massachusetts 02173 Jackson National Life Insurance Company(2) 187,175 9.9 6.9 c/o PPM America, Inc. 225 W. Wacker Drive Chicago, Illinois 60606 Jon A. Glydon (3) 156,666 9.2 4.9 Gustav A. Christensen (4) -- -- -- Thomas H. Conway (4)(5) 1,482,181 86.6 49.8 Dr. James J. McKenney (4) -- -- -- Steven J. Roth (4)(6) 1,482,181 86.6 49.8 All executive officers and directors as a group (7 persons) (7) 1,638,847 95.7 54.7 </TABLE> (1) The number of shares of Common Stock deemed outstanding prior to the Offering consists of 1,711,957 shares of Common Stock outstanding as of March 31, 1997. The number of shares of Common Stock deemed outstanding after the Offering includes an additional 1,375,000 shares of Common Stock which are being offered for sale by the Company in the Offering and 109,500 shares which are being issued to CR Management Associates, L.P. ("CRM"), an affiliate of SSPR, L.P., in connection with a reduction of the consulting fee currently being charged to the Company by CRM, or a total of 3,196,457 shares. The number of shares deemed outstanding after the Offering does not include any employee or director stock options or the Representatives' Warrants, none of which are exercisable within 60 days of March 31, 1997. The number of shares deemed outstanding does not include the 187,175 shares issuable upon exercise of warrants held by Jackson National Life Insurance Company ("JNL") or the 50,000 shares issuable upon exercise of a warrant to be issued to JNL upon the closing of the Offering, except as noted in note below. (2) Shares used to calculate the percentage of the Company's Common Stock beneficially owned by JNL include 187,185 shares of Common Stock issuable upon exercise of a warrant held by JNL, and, after the Offering, also include 50,000 shares issuable upon exercise of a warrant being issued to JNL upon the closing of the Offering. (3) Does not include 104,444 shares issuable upon exercise of an unvested stock option. (4) Does not include shares subject to an unvested option granted under the 1997 Non-Employee Directors Stock Option Plan. (5) Consists, prior to the Offering, solely of the shares held by SSPR, L.P., of which Mr. Conway is a general partner and may be deemed to share voting and investment power. Mr. Conway disclaims beneficial ownership of such shares. Shares used to calculate the percentage of the Company's Common Stock beneficially owned after the Offering include 109,500 shares being issued to CRM upon the closing of the Offering; Mr. Conway is a general partner of CRM and may be deemed to share voting and investment power with respect to such shares. Mr. Conway disclaims beneficial ownership of such shares. (6) Consists, prior to the Offering, solely of the shares held by SSPR, L.P., of which Mr. Roth is a general partner and may be deemed to share voting and investment power. Mr. Roth disclaims beneficial ownership of such shares. Shares used to calculate the percentage of the Company's Common Stock beneficially owned after the Offering include 109,500 shares being issued to CRM upon the closing of the Offering; Mr. Roth is a general partner of CRM and may be deemed to share voting and investment power with respect to such shares. Mr. Roth disclaims beneficial ownership of such shares. (7) See preceding footnotes. 41 DESCRIPTION OF CAPITAL STOCK Effective upon the closing of the Offering and the filing of Restated Articles of Organization (the "Restated Articles"), the authorized capital stock of the Company will consist of 15,000,000 shares of Common Stock, $.01 par value per share, and 500,000 shares of preferred stock, $.01 par value per share (the "Preferred Stock"). COMMON STOCK As of March 31, 1997, there were 1,711,957 shares of Common Stock outstanding (giving effect to the Stock Splits), held of record by 13 stockholders. Based upon the number of shares outstanding as of that date and giving effect to the issuance of the 1,375,000 shares of Common Stock offered hereby and the 109,500 shares to be issued to CRM (see "Certain Transactions"), there will be 3,196,457 shares of Common Stock outstanding upon the closing of the Offering. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividend rights of outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding Preferred Stock. Holders of the Common Stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of Common Stock are, and the shares offered by the Company in the Offering will be, when issued and paid for, fully paid and nonassessable. The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock which the Company may designate and issue in the future. There are no shares of Preferred Stock outstanding. PREFERRED STOCK Upon the closing of the Offering, the Board of Directors will be authorized, subject to certain limitations prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 500,000 shares of Preferred Stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change of control of the Company. The Company has no present plans to issue any shares of Preferred Stock. WARRANTS In connection with the Offering, the Company will issue to the Representatives warrants to purchase a number of shares of Common Stock equal to ten percent (10%) of the number of shares being offered hereby at an exercise price of 150% of the initial offering price. In addition, the Company's senior lender, Jackson National Life Insurance Company ("JNL"), is the holder of a warrant to purchase 187,175 shares of Common Stock, and at the closing of the Offering will be issued a warrant to purchase an additional 50,000 shares of Common Stock, each with an exercise price equal to 90% of the initial public offering price. REGISTRATION RIGHTS The Company, SSPR, L.P. ("SSPR"), CRM, Mr. Glydon and JNL (the "Rights Holders") are parties to a Registration Rights Agreement, pursuant to which, upon the request of the Rights Holders, the Company will use its best efforts to effect the registration under the applicable federal and state 42 securities laws of any of the shares of Common Stock held by them for sale in accordance with their intended method of disposition thereof, and will take such other actions as may be necessary to permit the sale thereof in other jurisdictions, subject to certain limitations specified in the Registration Rights Agreement. The Rights Holders will also have the right, which they may exercise at any time and from time-to-time, to include the shares of Common Stock held by it in certain other registrations of common equity securities of the Company initiated by the Company on its own behalf or on behalf of its other stockholders. The Company will agree to pay all out-of-pocket costs and expenses (other than underwriters' discounts and commissions and transfer taxes) in connection with each such registration. The Registration Rights Agreement will contain indemnification and contribution provisions: (i) by the Rights Holders for the benefit of the Company and related persons; and (ii) by the Company for the benefit of the Rights Holders and the other persons entitled to effect registrations of Common Stock pursuant to its terms and related persons. MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION AND BY-LAWS Following the Offering, the Company expects that it will have more than 200 stockholders, thus making it subject to Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In general, this statute prohibits a publicly-held Massachusetts corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless (i) the interested stockholder obtains the approval of the Board of Directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time it becomes an interested stockholder, or (iii) the business combination is approved by both the Board of Directors and the holders of two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with affiliates and associates, owns (or at any time within the prior three years did own) 5% or more of the outstanding voting stock of the corporation. A "business combination" includes a merger, a stock or asset sale, and certain other transactions resulting in a financial benefit to the interested stockholder. Massachusetts General Laws Chapter 156B, Section 50A generally requires that publicly-held Massachusetts corporations have a classified board of directors consisting of three classes as nearly equal in size as possible, unless the corporation elects to opt out of the statute's coverage. The Company's Restated By-Laws, as amended (the "Restated By-Laws"), contain provisions which give effect to Section 50A. See "Management -- Executive Officers and Directors." The Company's Restated By-Laws include a provision excluding the Company from the applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation of Control Share Acquisitions." In general, this statute provides that any stockholder of a corporation subject to this statute who acquires 20% or more of the outstanding voting stock of a corporation may not vote such stock unless the stockholders of the corporation so authorize. The Board of Directors may amend the Company's Restated By-Laws at any time to subject the Company to this statute prospectively. The Restated By-Laws require that nominations for the Board of Directors made by a stockholder comply with certain notice procedures. A notice by a stockholder of a planned nomination must be given not less than 60 and not more than 90 days prior to a scheduled meeting, provided that if less than 70 days' notice is given of the date of the meeting, a stockholder will have ten days within which to give such notice. The stockholder's notice of nomination must include particular information about the stockholder, the nominee and any beneficial owner on whose behalf the nomination is made. The Company may require any proposed nominee to provide such additional information as is reasonably required to determine the eligibility of the proposed nominee. The Restated By-Laws also require that a stockholder seeking to have any business conducted at a meeting of stockholders give notice to the Company not less than 60 and not more than 90 days prior to the scheduled meeting, provided in certain circumstances that a ten-day notice rule applies. The notice from the stockholder must describe the proposed business to be brought before the meeting and 43 include information about the stockholder making the proposal, any beneficial owner on whose behalf the proposal is made, and any other stockholder known to be supporting the proposal. The Restated By-Laws require the Company to call a special stockholders meeting at the request of stockholders holding at least 75% of the voting power of the Company. The Restated Bylaws provide that the directors and officers of the Company shall be indemnified by the Company to the fullest extent authorized by Massachusetts law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with service for or on behalf of the Company. In addition, the Restated Articles provide that the directors of the Company will not be personally liable for monetary damages to the Company for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to the Company or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper personal benefit from their action as directors. The Restated Articles provide that any amendment to the Restated Articles, the sale, lease or exchange of all or substantially all of the Company's property and assets, or the merger or consolidation of the Company into or with any other corporation may be authorized by the approval of the holders of a majority of the shares of each class of stock entitled to vote thereon, rather than by two-thirds as otherwise provided by statute, provided that the transactions have been authorized by a majority of the members of the Board of Directors and the requirements of any other applicable provisions of the Restated Articles have been met. In addition, the Restated Articles provide that shares of the Company's Preferred Stock may be issued in the future without stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. See "Description of Capital Stock -- Preferred Stock". TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company. 44 SHARES ELIGIBLE FOR FUTURE SALE Upon the closing of the Offering, the Company will have 3,196,457 shares of Common Stock outstanding. Of these shares, the 1,375,000 shares sold in the Offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 described below. SALES OF RESTRICTED SHARES The remaining 1,821,457 shares of Common Stock are deemed "Restricted Shares" under Rule 144. All of the Restricted Shares will become eligible for sale in the public market in accordance with Rule 144 or Rule 701 under the Securities Act beginning 90 days after the date hereof; all of these shares are subject to Lock-up Agreements. In addition, SSPR has the right to have its Restricted Shares registered by the Company under the Securities Act as described below. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an Affiliate, who has beneficially owned Restricted Shares for at least one year is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of (i) one percent of the then outstanding shares of Common Stock (approximately 31,965 shares immediately after the Offering) or (ii) the average weekly trading volume in the Common Stock in the Nasdaq National Market during the four calendar weeks preceding the date on which notice of such sale is filed. In addition, under Rule 144(k), a person who is not an Affiliate and has not been an Affiliate for at least three months prior to the sale and who has beneficially owned Restricted Shares for at least two years may resell such shares without compliance with the foregoing requirements. In meeting the one and two year holding periods described above, a holder of Restricted Shares can include the holding periods of a prior owner who was not an Affiliate. Rule 701 under the Securities Act provides that the shares of Common Stock acquired on the exercise of currently outstanding options may be resold by persons, other than Affiliates, beginning 90 days after the date of this prospectus, subject only to the manner of sale provisions of Rule 144, and by Affiliates, beginning 90 days after the date of this prospectus, subject to all of the provisions of Rule 144 other than the minimum holding period. OPTIONS AND WARRANTS As of the closing of the Offering, options to purchase a total of 268,214 shares of Common Stock will be outstanding and held by employees and directors of the Company. In addition, as of such date, JNL will hold warrants to purchase 237,175 shares of Common Stock. All of the shares issuable pursuant to such options and warrants are subject to Lock-up Agreements. The Company intends to file one or more registration statements on Form S-8 under the Securities Act to register all shares of Common Stock subject to outstanding employee stock options and Common Stock issuable pursuant to the Company's stock option plans that do not qualify for an exemption under Rule 701 from the registration requirements of the Securities Act. The Company expects to file these registration statements shortly following the closing of the Offering, and such registration statements are expected to become effective upon filing. Shares covered by these registration statements will thereupon be eligible for sale in the public markets, subject to the Lock-up Agreements. LOCK-UP AGREEMENTS All of the Company's stockholders, optionholders and warrantholders have agreed, pursuant to the Lock-up Agreements, that they will not, directly or indirectly, offer, sell, offer to sell, contract to sell, grant any option to purchase or otherwise sell or dispose of (or announce any offer, sale, offer of sale, contract of sale, grant of any option to purchase or any other sale or disposition) any shares of Common 45 Stock or other capital stock of the Company or any securities convertible into, or exercisable or exchangeable for, any shares of Common Stock or other capital stock of the Company for a period of 180 days after the date of this prospectus without the prior written consent of H.C. Wainwright & Co., Inc. REGISTRATION RIGHTS SSPR, CRM, JNL and Mr. Glydon are parties to a registration rights agreement with the Company pursuant to which they will be entitled to require the Company to register under the Securities Act all or any portion of the outstanding Common Stock then owned by them. See "Description of Capital Stock - -- Registration Rights." 46 UNDERWRITING Subject to the terms and conditions contained in an underwriting agreement (the "Underwriting Agreement"), the Company has agreed to sell to each of the Underwriters named below (the "Underwriters"), for whom H.C. Wainwright & Co., Inc. and Cruttenden Roth Incorporated are acting as representatives (the "Representatives"), and each of the Underwriters has severally agreed to purchase from the Company the respective number of shares of Common Stock set forth opposite its name below at the initial public offering price less the underwriting discount set forth on the cover page of this prospectus. The Underwriting Agreement provides that subject to the terms and conditions set forth therein, the Underwriters are obligated to purchase all of the shares of Common Stock being sold pursuant to the Underwriting Agreement if any of the shares of Common Stock are purchased. Under certain circumstances, under the Underwriting Agreement, the commitments of non-defaulting Underwriters may be increased. <TABLE> <CAPTION> NUMBER OF UNDERWRITER SHARES ----------- ------ <S> <C> H.C. Wainwright & Co., Inc. Cruttenden Roth Incorporated --------- Total 1,375,000 ========= </TABLE> The Representatives have advised the Company that the Underwriters propose initially to offer the shares of Common Stock to the public at the public offering price set forth on the cover page of this prospectus, and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share of Common Stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted the Underwriters an option to purchase up to an additional 206,250 shares of Common Stock at the initial public offering price set forth on the cover page of this prospectus, less the underwriting discount. Such option, which will expire 30 days after the date of this prospectus, may be exercised solely to cover overallotments, if any, made in connection with the sale of shares of Common Stock offered hereby. To the extent that the Underwriters exercise this option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased initially by that Underwriter bears to the total number of shares of Common Stock to be purchased initially by the Underwriters. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 1,375,000 shares of Common Stock are being offered hereby. In connection with the Offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock, including overallotments, entering stabilizing bids, effecting syndicate short covering transactions and penalty bids. An overallotment means the confirming of sales of Common Stock in excess of the number of shares of Common Stock offered hereby. A stabilizing bid means the placing of any bid, or effecting of any purchase, for the purpose of pegging, fixing or maintaining the price of the Common Stock. A syndicate short covering transaction means the placing of any bid on behalf of the underwriting syndicate or the effecting of any purchase to reduce a short position created in connection with the Offering. A penalty bid means an arrangement that permits the Representatives to reclaim a selling concession from a syndicate member in connection with the Offering when shares of Common Stock sold by the syndicate member are 47 purchased in syndicate covering transactions. Such transactions may stabilize the market price of the Common Stock at a level above that which might otherwise prevail and, if commenced, may be discontinued at any time. On the closing of the Offering, the Company will sell to the Representatives, individually and not as representatives of the Underwriters, for nominal consideration, the Representatives' Warrants entitling the Representatives to purchase an aggregate of 137,500 shares of Common Stock at an initial exercise price per share equal to 150% of the initial public offering price hereunder. The Representatives' Warrants will be exercisable for a period of four years commencing one year after the date of this prospectus and will contain certain demand and incidental registration rights relating to the underlying Common Stock. The Representatives' Warrants cannot be transferred, assigned or hypothecated, in whole or in part, for a period of twelve months from the date of their issuance, except that they may be assigned to any officer or partner of the Representatives. For the life of the Representatives' Warrants, their holders have the opportunity to profit from a rise in the market price of the Common Stock without assuming the risk of ownership, with a resulting dilution in the interest of other security holders. As long as the Representatives' Warrants remain unexercised, the terms under which the Company could obtain additional capital may be adversely affected. Moreover, the holders of the Representatives' Warrants might be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital by a new offering of its securities on terms more favorable than those provided by the Representatives' Warrants. Additionally, if the Representatives should exercise their registration rights to effect a distribution of the underlying shares of Common Stock, the Representatives, prior to and during such distribution, would be unable to make a market in the Common Stock. If the Representatives must cease making a market, the market and market price for the Common Stock may be adversely affected and holders of the Common Stock may be unable to sell the Common Stock. The Company has agreed to pay the Representatives a non-accountable expense allowance of one percent (1.0%) of the gross proceeds of the Offering, which will include proceeds from the overallotment option, if exercised. The Representatives' expenses in excess of the non-accountable expense allowance, including their legal expenses, will be borne by the Representatives. The Company has granted H.C. Wainwright & Co., Inc. the right to act as the Company's managing underwriter and financial advisor on an exclusive basis until December 16, 1998 with respect to any sales of equity securities by the Company, any sale or disposition of the Company or any of its assets or the acquisition by the Company of any securities or assets of any other business entity. The Underwriters do not intend to sell any of the Company's securities to accounts for which they exercise discretionary authority. The Company and the holders of all of the Common Stock and options and warrants to purchase Common Stock outstanding prior to the Offering have agreed that they will not offer, contract, sell or otherwise dispose of directly or indirectly any shares of Common Stock for a period of 180 days following the date of this prospectus, without the prior written consent of the Representatives except, in the case of the Company, for the shares of Common Stock offered hereby, the issuance of shares of Common Stock upon the exercise of outstanding stock options and any additional stock options granted under the 1997 Equity Incentive Plan and 1997 Non-Employee Director Stock Option Plan, and the issuance of shares of Common Stock as consideration for the acquisition of one or more businesses provided the recipients thereof agree in writing to be bound by the same restrictions, and, in the case of the stockholders, for gifts of the Common Stock provided the donee agrees in writing to be bound by the same restrictions. Prior to the Offering, there has been no public market for the Common Stock. The initial public offering price of the Common Stock will be determined by negotiations among the Company and the Underwriters. Among the factors to be considered in such negotiations, in addition to prevailing market conditions, will be certain financial information of the Company, an assessment of the Company's management, estimates of the business potential and earnings prospects of the Company, the present state of the Company's development and operations, the present 48 state of the Company's industry in general and other factors deemed relevant. The initial public offering price set forth on the cover page of this prospectus should not, however, be considered an indication of the actual value of the Common Stock. Such price is subject to change as a result of market conditions and other factors. There can be no assurance that an active trading market will develop for the Common Stock or that the Common Stock will trade in the public market subsequent to the Offering at or above the initial public offering price. The Company has agreed to indemnify the Underwriters against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended, or contribute to payments the Underwriters may be required to make in respect thereof. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. EXPERTS The financial statements of the Company as of and for the fiscal year ended October 31, 1996 included in this prospectus and elsewhere in this Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of the Company as of October 31, 1995 and for the fiscal years ended October 31, 1994 and 1995 included in this prospectus have been so included in reliance on the report of Richard A. Eisner & Company, LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS Richard A. Eisner & Company, LLP was the Company's independent accountant for the periods prior to October 31, 1995. The change in the independent accountant from Richard A. Eisner & Company, LLP to Arthur Andersen LLP was approved by the Board of Directors. During the period of Richard A. Eisner & Company, LLP's engagement by the Company, there were no disagreements between Richard A. Eisner & Company, LLP and the Company on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure and no reportable events relating to the relationship between the Company and Richard A. Eisner & Company, LLP. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (including all amendments thereto, the "Registration Statement") under the Securities Act with respect to the Common Stock offered hereby. As permitted by the rules and regulations of the Commission, this prospectus omits certain information contained in the Registration Statement. For further information with respect to the Company and the Common Stock offered hereby, reference is hereby made to the Registration Statement and to the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any agreement or other document filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance reference is made to the copy of such agreement filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including the exhibits and schedules thereto, may be inspected at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, DC 20549, and copies of all or any part thereof may be obtained from such office upon payment of the prescribed fees. In addition, the Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants (including the Company) that file electronically with the Commission which can be accessed at http://www.sec.gov. The Company intends to furnish holders of its Common Stock offered hereby with annual reports containing financial statements audited by an independent accounting firm and with quarterly reports containing unaudited summary financial statements for each of the first three quarters of each fiscal year. 49 EARTH AND OCEAN SPORTS, INC. INDEX TO FINANCIAL STATEMENTS <TABLE> <CAPTION> PAGE ---- <S> <C> Report of Independent Public Accountants ............................................................... F-2 Report of Independent Public Accountants ............................................................... F-3 Balance Sheets As of October 31, 1995 and 1996 and January 31, 1997 (Unaudited) and Pro Forma Balance Sheet as of January 31, 1997 (Unaudited) ..................................................... F-4 Statements of Operations for the Years Ended October 31, 1994, 1995 and 1996 and the Three Months Ended January 31, 1996 and 1997 (Unaudited) ......................................... F-5 Statements of Stockholders' Equity (Deficit) for the Years Ended October 31, 1994, 1995 and 1996 and the Three Months Ended January 31, 1997 (Unaudited) and Pro Forma Statement of Stockholders' Equity (Deficit) for the Three Months Ended January 31, 1997 (Unaudited) .................................... F-6 Statements of Cash Flows for the Years Ended October 31, 1994, 1995 and 1996 and the Three Months Ended January 31, 1996 and 1997 (Unaudited) ......................................... F-7 Notes to Financial Statements .......................................................................... F-8 </TABLE> F-1 After the 1.684575-for-1 stock split discussed in Note 11 (a) to the Company's financial statements is effected, we expect to be in a position to render the following audit report. ARTHUR ANDERSEN LLP Boston, Massachusetts March 27, 1997 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Earth and Ocean Sports, Inc.: We have audited the accompanying balance sheet of Earth and Ocean Sports, Inc. ( a Massachusetts Corporation) as of October 31, 1996, and the related statements of operations, stockholders' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Earth and Ocean Sports, Inc. as of October 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Boston, Massachusetts February 13, 1997 (except with respect to Note (6), as to which the date is March 27, 1997) F-2 After the 1.684575-for-1 stock split discussed in Note 11 (a) to the Company's financial statements is effected, we expect to be in a position to render the following audit report. /s/ RICHARD A. EISNER & COMPANY, LLP Cambridge, Massachusetts March 27, 1997 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To EARTH AND OCEAN SPORTS, INC.: We have audited the accompanying balance sheet of Earth and Ocean Sports, Inc. (a Massachusetts Corporation) as of October 31, 1995, and the related statements of operations, stockholders' equity (deficit) and cash flows for each of the two years in the period ended October 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements enumerated above present fairly, in all material respects, the financial position of Earth and Ocean Sports, Inc. at October 31, 1995, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 1995, in conformity with generally accepted accounting principles. Cambridge, Massachusetts December 29, 1995 F-3 EARTH AND OCEAN SPORTS, INC. BALANCE SHEETS <TABLE> <CAPTION> OCTOBER 31, ------------------- PRO FORMA JANUARY 31, JANUARY 31, 1995 1996 1997 1997 ---- ---- ---- ---- (UNAUDITED) <S> <C> <C> <C> <C> ASSETS CURRENT ASSETS: Cash $ 33,800 $ 8,055 $ 4,115 $ 4,115 Accounts receivable, net of allowance for doubtful accounts of $38,000, $152,000 and $162,000 in 1995, 1996 and 1997, respectively 1,431,200 2,167,653 2,767,074 2,767,074 Inventories 1,813,600 3,220,612 3,133,588 3,133,588 Prepaid expenses and other current assets 305,000 408,630 413,194 413,194 ------- ------- ------- ------- Total current assets 3,583,600 5,804,950 6,317,971 6,317,971 PROPERTY AND EQUIPMENT, NET 1,570,700 2,779,770 2,676,625 2,676,625 INTANGIBLE ASSETS, NET 1,079,900 1,080,104 1,179,618 1,179,618 --------- --------- --------- --------- $ 6,234,200 $ 9,664,824 $ 10,174,214 $ 10,174,214 =========== =========== ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Revolving line of credit $ 2,365,500 $ 3,964,697 $ 3,739,992 $ 3,739,992 Current portion of long-term debt obligations 319,700 460,034 527,446 527,446 Accounts payable 710,700 1,593,533 1,961,647 1,961,647 Accrued expenses 370,800 510,937 176,481 176,481 Interest payable to principal stockholder 312,600 239,463 287,255 287,255 ------- ------- ------- ------- Total current liabilities 4,079,300 6,768,664 6,692,821 6,692,821 --------- --------- --------- --------- LONG-TERM DEBT OBLIGATIONS, LESS CURRENT PORTION 434,200 538,836 345,095 345,095 ------- ------- ------- ------- SUBORDINATED NOTE PAYABLE TO PRINCIPAL STOCKHOLDER 1,775,000 2,700,000 3,800,000 2,050,000 --------- --------- --------- --------- COMMITMENTS AND CONTINGENCIES (NOTE 9) STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock -- $.01 par value -- Authorized -- 500,000 shares Issued and outstanding -- none -- -- -- -- Common stock -- $.01 par value -- Authorized -- 15,000,000 shares Issued and outstanding -- 1,263,431 shares in 1995, 1,493,207 shares in 1996 and 1997 and 1,821,457 shares pro forma 12,634 14,932 14,932 18,214 Additional paid-in capital 137,366 137,366 137,366 2,979,084 Accumulated deficit (204,300) (494,974) (816,000) (1,911,000) -------- -------- -------- ---------- Total stockholders' equity (deficit) (54,300) (342,676) (663,702) 1,086,298 ------- -------- -------- --------- $ 6,234,200 $ 9,664,824 $ 10,174,214 $ 10,174,214 =========== =========== ============ ============ </TABLE> The accompanying notes are an integral part of these financial statements. F-4 EARTH AND OCEAN SPORTS, INC. STATEMENTS OF OPERATIONS <TABLE> <CAPTION> YEARS ENDED THREE MONTHS ENDED OCTOBER 31, JANUARY 31, ------------------------------- ------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) <S> <C> <C> <C> <C> <C> NET SALES $ 9,143,800 $ 11,371,900 $ 12,404,051 $ 2,028,900 $ 2,874,662 COST OF GOODS SOLD 5,568,900 7,029,600 7,585,115 1,275,900 2,030,589 --------- --------- --------- --------- --------- Gross profit 3,574,900 4,342,300 4,818,936 753,000 844,073 --------- --------- --------- ------- ------- OPERATING EXPENSES: Product development and engineering 188,400 236,300 338,300 67,500 152,900 Selling and marketing 1,633,600 1,898,600 2,704,179 533,700 500,669 General and administrative 797,100 897,600 938,055 190,100 284,632 Amortization of intangible assets 499,600 680,700 532,424 165,500 43,289 ------- ------- ------- ------- ------ Total operating expenses 3,118,700 3,713,200 4,512,958 956,800 981,490 --------- --------- --------- ------- ------- Income (loss) from operations 456,200 629,100 305,978 (203,800) (137,417) INTEREST EXPENSE (439,400) (554,700) (596,652) (133,700) (183,609) -------- -------- -------- -------- -------- Income (loss) before provision (benefit) for income taxes 16,800 74,400 (290,674) (337,500) (321,026) PROVISION (BENEFIT) FOR INCOME TAXES (19,900) 16,000 -- -- -- -------- -------- -------- -------- -------- Net income (loss) $ 36,700 $ 58,400 $ (290,674) $ (337,500) $ (321,026) ========== =========== =========== =========== =========== NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (Note 2) $ 0.02 $ 0.03 $ (0.14) $ (0.17) $ (0.16) ========== =========== =========== ========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (Note 2) 2,039,720 2,039,720 2,039,720 2,039,720 2,039,720 ========= ========= ========= ========= ========= SUPPLEMENTAL NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (Note 2) $ 0.11 $ (0.05) =========== =========== SUPPLEMENTAL WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (Note 2) 2,721,891 2,812,815 ========= ========= </TABLE> The accompanying notes are an integral part of these financial statements. F-5 EARTH AND OCEAN SPORTS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) <TABLE> <CAPTION> COMMON STOCK ------------ TOTAL ADDITIONAL STOCKHOLDERS' $.01 PAR PAID-IN ACCUMULATED EQUITY SHARES VALUE CAPITAL DEFICIT (DEFICIT) ------ ----- ------- ------- --------- <S> <C> <C> <C> <C> <C> BALANCE, OCTOBER 31, 1993 1,263,431 $12,634 $ 137,366 $ (299,400) $ (149,400) Net income -- -- -- 36,700 36,700 ------- ----- --------- ---------- --------- BALANCE, OCTOBER 31, 1994 1,263,431 12,634 137,366 (262,700) (112,700) Net income -- -- -- 58,400 58,400 ------- ----- --------- ---------- --------- BALANCE, OCTOBER 31, 1995 1,263,431 12,634 137,366 (204,300) (54,300) Issuance of common stock under management incentive plan 229,776 2,298 -- -- 2,298 Net loss -- -- -- (290,674) (290,674) ------- ----- --------- ---------- --------- BALANCE, OCTOBER 31, 1996 1,493,207 14,932 137,366 (494,974) (342,676) Net loss (Unaudited) -- -- -- (321,026) (321,026) ------- ----- --------- ---------- --------- BALANCE, JANUARY 31, 1997 (Unaudited) 1,493,207 14,932 137,366 (816,000) (663,702) ========= ======= ========== =========== ============ Issuance of common stock to CRM (Unaudited) 109,500 1,095 1,093,905 (1,095,000) -- ------- ----- --------- ---------- --------- Conversion of subordinated note payable to principal stockholder (Unaudited) 218,750 2,187 1,747,813 -- 1,750,000 ------- ----- --------- ---------- --------- PRO FORMA BALANCE, JANUARY 31, 1997 (Unaudited) $1,821,457 $18,214 $2,979,084 $(1,911,000) $1,086,298 ========= ====== ========= ========== ========= </TABLE> The accompanying notes are an integral part of these financial statements. F-6 EARTH AND OCEAN SPORTS, INC. STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> FOR THE YEARS ENDED THREE MONTHS ENDED OCTOBER 31, JANUARY 31, ----------------------------------- ----------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) <S> <C> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 36,700 $ 58,400 $ (290,674) $ (337,500) $ (321,026) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities-- Depreciation and amortization 801,800 843,500 1,012,404 236,400 210,665 Changes in current assets and liabilities, net of acquisition of product lines -- Accounts receivable (124,900) (566,800) (736,453) (526,100) (599,421) Inventories (780,200) 117,000 (1,380,258) (666,400) 87,024 Prepaid expenses and other current assets (32,500) (238,700) (103,629) 254,500 (4,565) Accounts payable 287,700 123,300 975,214 539,800 368,114 Accrued expenses (85,000) 41,100 (209,863) (298,600) (509,456) Interest payable to principal stockholder 162,900 109,000 (73,137) (22,000) 47,792 ------- ------- ------- ------- ------ Net cash provided by (used in) operating activities 266,500 486,800 (806,396) (819,900) (720,873) ------- ------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of product lines (see below) (143,400) (168,000) (607,342) -- -- Increase (decrease) in intangible assets -- -- (93,657) (28,900) 17,858 Purchases of property and equipment (283,300) (632,600) (986,276) (112,200) (49,890) -------- -------- -------- -------- ------- Net cash used in investing activities (426,700) (800,600) (1,687,275) (141,100) (32,032) -------- -------- ---------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line of credit 1,129,600 541,500 1,599,197 666,300 (224,705) Proceeds from long-term debt obligations 400,000 3,224,800 925,000 400,000 1,100,000 Payments on long-term debt obligations (1,318,900) (3,435,900) (232,526) (108,300) (77,776) Proceeds under capital leases -- -- 239,343 -- -- Payments under capital leases (24,100) (15,500) (65,386) (18,300) (48,554) Proceeds from issuance of stock under management incentive plan -- -- 2,298 -- -- -------- -------- ---------- -------- ------- Net cash provided by financing activities 186,600 314,900 2,467,926 939,700 748,965 -------- -------- ---------- -------- ------- NET INCREASE (DECREASE) IN CASH 26,400 1,100 (25,745) (21,300) (3,940) CASH, BEGINNING OF PERIOD 6,300 32,700 33,800 33,800 8,055 -------- -------- ---------- -------- ------- CASH, END OF PERIOD $ 32,700 $ 33,800 $ 8,055 $ 12,500 $ 4,115 =========== ============ ============ ========== =========== ACQUISITION OF PRODUCT LINES: Working capital $ 5,400 $ (61,700) $ (119,136) $ -- $ -- Property and equipment (275,300) (92,400) (354,014) -- -- Patents and trademarks (86,700) (150,000) (407,692) -- -- Goodwill (15,000) (43,900) (76,500) -- -- Liabilities assumed -- 180,000 350,000 -- -- Note payable issued 228,200 -- -- -- -- -------- -------- ---------- -------- ------- Net cash used to acquire product lines $ (143,400) $ (168,000) $ (607,342) $ -- $ -- =========== ============ ============ ========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for -- Interest $ 274,000 $ 444,000 $ 669,818 $ 155,700 $ 135,817 =========== ============ ============ ========= ========== Income taxes $ 18,500 $ 800 $ 1,256 $ -- $ -- =========== ============ ============ ========= ========== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Equipment acquired under capital leases $ -- $ 23,047 $ 303,539 $ -- $ -- =========== ============ ============ ========= ========== </TABLE> The accompanying notes are an integral part of these financial statements. F-7 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS Earth and Ocean Sports, Inc. (the Company) is a manufacturer, distributor and marketer of premium name brand surf, water and snow sports products for recreational markets. The Company's products include bodyboards, wakeboards, snowboards and related accessories. The Company was incorporated in Massachusetts on July 13, 1993. The Company is subject to a number of risks which include the ability to finance future operations. The Company has historically financed its operations with borowings from its principal stockholder and its bank. On March 26, 1997, the Company entered into a new credit facility (see Note 6). (2) SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements reflect the application of certain accounting policies described below and elsewhere in the accompanying notes to financial statements. (a) Pro Forma Information The pro forma balance sheet and statement of stockholders' equity (deficit) as of January 31, 1997 gives effect to the conversion of $1,750,000 of subordinated indebtedness to the principal stockholder into 218,750 shares of common stock on March 17, 1997 and the issuance of 109,500 shares valued at $10 per share to CR Management Associates, L.P. (CRM) as consideration for amending the management agreement effective upon consummation of the Company's proposed initial public offering (see Note 9). The Company will record a charge to operations for the value of such shares upon the consummation of the Company's proposed initial public offering. (b) Interim Financial Statements The accompanying balance sheet as of January 31, 1997, and the statements of operations and cash flows for the three months ended January 31, 1996 and January 31, 1997, and the statement of stockholders' equity (deficit) for the three months ended January 31, 1997 are unaudited, but in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. The results of operations for the three months ended January 31, 1997 are not necessarily indicative of the results to be expected for the entire fiscal year. (c) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (d) Cash Equivalents The Company considers all highly liquid investments with original purchase maturities of three months or less to be cash equivalents. There were no cash equivalents at October 31, 1995 and 1996 and January 31, 1997. (e) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: OCTOBER 31, ---------------------- JANUARY 31, 1995 1996 1997 --------- --------- --------- Raw materials ................... $ 642,200 $ 1,380,743 $ 1,457,804 Work-in-process ................. 7,300 -- 101,929 Finished goods .................. 1,164,100 1,839,869 1,573,855 --------- --------- --------- $ 1,813,600 $ 3,220,612 $ 3,133,588 =========== =========== =========== Work-in-process and finished goods inventories consist of material, labor and manufacturing overhead. F-8 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (2) SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) (f) Depreciation and Amortization Property and equipment are stated at cost. The Company provides for depreciation and amortization on property and equipment using the straight-line method by charges to operations that allocate the cost of assets over their estimated useful lives. The cost of property and equipment and their estimated useful lives are as follows: <TABLE> <CAPTION> OCTOBER 31, ESTIMATED ---------------------- JANUARY 31, ASSET CLASSIFICATION USEFUL LIFE 1995 1996 1997 - -------------------- ----------- ---- ---- ---- <S> <C> <C> <C> <C> Machinery and equipment ..................... 7 Years $1,263,835 $ 1,598,330 $ 1,607,007 Equipment under capital leases .............. Life of lease 95,565 636,714 636,714 Plates, dies and molds ...................... 5 Years 555,600 1,256,248 1,297,406 Construction in progress .................... -- 98,700 9,165 26,213 Leasehold improvements ...................... Life of lease 9,000 166,072 149,079 ----- ------- ------- 2,022,700 3,666,529 3,716,419 Less -- Accumulated depreciation and amortization .............................. 452,000 886,759 1,039,794 ------- ------- --------- $1,570,700 $ 2,779,770 $ 2,676,625 ========== =========== ============ </TABLE> (g) Intangible Assets Patents, trademarks and goodwill are being amortized on a straight-line basis over their estimated useful lives. Noncompete, consulting and supply agreements are amortized on a straight-line basis over the lives of the agreements. Intangible assets consist of the following: <TABLE> <CAPTION> OCTOBER 31, ESTIMATED ---------------------- JANUARY 31, ASSET CLASSIFICATION USEFUL LIFE 1995 1996 1997 - -------------------- ----------- ---- ---- ---- <S> <C> <C> <C> <C> Noncompete agreement ....................... 3 Years $1,318,000 $ 1,318,000 $ 1,318,000 Supply agreement ........................... 5 Years 500,000 500,000 500,000 Goodwill ................................... 15 Years 93,700 173,920 175,200 Patents .................................... 7-15 Years 208,000 253,727 254,112 Trademarks ................................. 15 Years 150,000 566,949 570,427 Other ...................................... 3 Years 115,900 141,053 143,053 Deferred financing costs ................... 3 Years 68,100 77,900 227,899 ------ ------ ------- 2,453,700 3,031,549 3,188,691 Less -- Accumulated amortization ........... 1,373,800 1,951,445 2,009,073 --------- --------- --------- $1,079,900 $ 1,080,104 $ 1,179,618 ========== =========== ============ </TABLE> F-9 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (2) SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) (h) Concentration of Credit Risk Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, requires disclosure of any significant off-balance-sheet and credit risk concentrations. The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company's accounts receivable credit risk is not concentrated within any geographic area and no customer represented a significant credit risk to the Company. One customer accounted for approximately 11.5%, 15.5%, 11.4%, 10.4% and 21.7% of net sales for the years ended October 31, 1994, 1995 and 1996 and the three months ended January 31, 1996 and 1997, respectively. (i) Fair Value of Financial Instruments The carrying amount of the Company's financial instruments, which include cash, accounts receivable, revolving line of credit, accounts payable and notes payable, approximate their fair value. (j) Net Income (Loss) Per Common and Common Equivalent Share Net income per common and common equivalent share is based on the weighted average number of common and common equivalent shares outstanding during the periods, computed in accordance with the treasury stock method. Net loss per common and common equivalent share is based upon the weighted average number of common shares outstanding. The weighted average number of common and common equivalent shares outstanding used in computing net income (loss) assumes that common stock issued and common stock options and warrants granted in the twelve months preceding the Company's proposed initial public offering have been outstanding for all periods presented, computed in accordance with the treasury stock method. (k) Supplemental Net Income (Loss) Per Common and Common Equivalent Share Supplemental net income (loss) per common and common equivalent share gives effect to the (i) the conversion of $1,750,000 of subordinated indebtedness to principal stockholder into 218,750 shares of common stock and (ii) the use of net proceeds of the proposed initial public offering to repay $1,189,463 and $2,337,200 at October 31, 1996 and January 31, 1997, respectively, to principal stockholder and $4,839,689 and $4,495,500 at October 31, 1996 and January 31, 1997, respectively, to the Company's bank as if these events had occurred at the beginning of each period. Supplemental net income (loss) consists of net income (loss) increased or decreased by the effect of reduced interest expense associated with (i) and (ii) above. Supplemental net income (loss) per common and common equivalent share represents supplemental net income (loss) divided by the supplemental weighted average common and common equivalent shares outstanding. (l) Postretirement Benefits The Company has no obligations for postretirement benefits under SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, or postemployment benefits under SFAS No. 112, Employers' Accounting for Postemployment Benefits, as it does not currently offer such benefits. F-10 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (2) SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) (m) Asset Carrying Values The Company applies SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. SFAS No. 121 requires the Company to continually evaluate whether events and circumstances have occurred that indicate that the estimated remaining useful life of long-lived assets and certain identifiable intangibles and goodwill may warrant revision or that the carrying value of these assets may be impaired. To compute whether assets have been impaired, the estimated gross cash flows for the estimated remaining useful life of the asset are compared to the carrying value. To the extent that the gross cash flows are less than the carrying value, the assets are written down to the estimated fair value of the asset. The application of this standard did not have a material effect on the Company's financial position or results of operations. (n) Accounting for Stock-based Compensation In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation. The Company has determined that it will continue to account for stock-based compensation for employees under Accounting Principles Board (APB) Opinion No. 25 and elect the disclosure-only alternative under SFAS No. 123. The Company is required to disclose the pro forma net income or loss and per share amounts in the notes to the financial statements using the fair-value-based method. The Company has computed the pro forma disclosures required under SFAS No. 123 for all options granted for the year ended October 31, 1996 and the three months ended January 31, 1997 using the Black-Scholes option pricing model prescribed by SFAS No. 123. The effect of SFAS No. 123 on pro forma net loss was not material for the year ended October 31, 1996 or the three months ended January 31, 1997. The Company has not computed the pro forma effect for the year ended October 31, 1995 or the three months ended January 31, 1996, as there were no options granted or outstanding during those periods. (o) Reclassifications Certain amounts in the prior year's financial statements have been reclassified in order to conform with the current year's presentation. (3) ACQUISITIONS On July 13, 1993, in connection with the Company's formation, pursuant to an asset purchase and sale agreement with a corporation, the Company acquired certain assets and assumed certain liabilities of a division of a business for consideration consisting of $2,525,000 in cash and $1,100,000 of deferred payments, which were recorded at their discounted value of $929,700 to reflect imputed interest. The purchase price was allocated to the assets acquired and liabilities assumed as follows: Inventory ........................................ $ 919,600 Property and equipment ........................... 714,700 Covenant not to compete .......................... 1,300,000 Supply agreement ................................. 500,000 Goodwill and other assets ........................ 209,300 Assumed liabilities .............................. (188,900) -------- Total ..................................... 3,454,700 ========= F-11 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (3) ACQUISITIONS -- (CONTINUED) In March 1994, pursuant to an asset purchase agreement with a corporation, the Company acquired certain assets and assumed certain liabilities for consideration consisting of $143,400 in cash, including acquisition costs, and a $253,300 note payable, which was recorded at this discounted value of $228,200 to reflect imputed interest. The purchase price was allocated to the assets acquired and liabilities assumed as follows: Accounts receivable ....................... $ 53,700 Inventory ................................. 62,900 Property and equipment .................... 275,300 Patents ................................... 86,700 Goodwill .................................. 15,000 Assumed liabilities ....................... (122,000) -------- Total ............................... $ 371,600 ========= In September 1995, the Company acquired certain assets and assumed certain liabilities of a snowboard manufacturer, for consideration of approximately $168,000 in cash, including acquisition costs. The purchase price was allocated to the assets acquired and liabilities assumed as follows: Inventory ................................. $ 61,700 Property and equipment .................... 92,400 Trademark ................................. 150,000 Goodwill .................................. 43,900 Assumed liabilities ....................... (180,000) -------- Total ............................... $ 168,000 ========= In addition, the previous owners will receive certain royalties on future sales of the corporation's products, as defined. In July 1996, pursuant to an asset purchase agreement with a corporation, the Company acquired certain assets for consideration of $476,500 in cash, including acquisition costs. The purchase price was allocated to the assets acquired as follows: Inventory ................................ $ 77,336 Property and equipment ................... 222,664 Trademark ................................ 100,000 Goodwill ................................. 76,500 ------ Total .............................. $ 476,500 ========= In July 1996, the Company purchased from a bank certain assets and assumed certain liabilities of a bankrupt snowboard manufacturer for consideration of approximately $131,000 in cash, including acquisition costs. The purchase price was allocated to assets acquired and liabilities assumed as follows: Inventory ................................ $ 41,800 Property and equipment ................... 131,350 Trademarks ............................... 307,692 Assumed liabilities ...................... (350,000) -------- Total .............................. $ 130,842 ========= In February 1997, pursuant to an asset purchase agreement, the Company acquired certain assets of a wakeboard manufacturer for consideration of $100,000 in cash. F-12 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (4) ACCRUED EXPENSES Accrued expenses consist of the following: <TABLE> <CAPTION> OCTOBER 31, ------------------- JANUARY 31, 1995 1996 1997 ---- ---- ---- <S> <C> <C> <C> Assumed liabilities from acquisitions ......... $ 180,000 $ 353,440 $ 45,916 Deferred tax liability ........................ 128,000 -- -- Accrued payroll ............................... -- 59,949 63,989 Other ......................................... 62,800 97,553 66,576 ------ ------ ------ $ 370,800 $510,937 $ 176,481 ========= ======== ========= </TABLE> (5) REVOLVING LINE OF CREDIT In April 1995, the Company entered into a secured revolving line-of-credit agreement with a bank, that expires on March 31, 1997, pursuant to which the Company may borrow a maximum of $4,000,000 based on a borrowing formula related to inventory and accounts receivable levels, as defined. Subsequent to year-end, the borrowing maximum was increased from $4,000,000 to $4,400,000. The line of credit bears interest at the bank's base rate (8.25% at January 31, 1997) plus 1%. At October 31, 1995 and 1996 and January 31, 1997, borrowings under the revolving line of credit were $2,365,500, $3,964,697 and $3,739,992, respectively. The bank has a first priority perfected interest in all assets of the Company. The revolving line-of-credit agreement contains certain restrictive covenants, including, but not limited to, maintenance of certain levels of working capital and debt ratios. At October 31, 1996, the Company was in default with certain of these ratios. The covenants in default have been waived by the bank through March 31, 1997, at which time the revolving loan is scheduled for renewal. Amounts outstanding under this line of credit agreement were repaid from the proceeds of the Credit Facility on March 26, 1997 as discussed in Note 6 below. (6) CREDIT FACILITY The Company entered into new credit facilities with Jackson National Life Insurance Company on March 26, 1997 consisting of a $7,000,000 revolving credit facility, a $3,450,000 term loan and a $30,000,000 discretionary acquisition facility (together, the "Credit Facilities"). The Credit Facilities are secured by first priority liens on all of the assets of the Company and its subsidiaries, if any. In addition, two of the Company's stockholders have pledged their common stock of the Company as additional security for the loans. The revolving credit facility provides for borrowings of up to a maximum of $7,000,000 based upon 85% of eligible receivables and 50% of inventory, as defined. The interest rate on the revolving credit facility is a floating rate equal to 30-day LIBOR plus 3%, as well as a 0.5% per annum charge on the unused portion of the line. Borrowings under the revolving credit facility may be used for general corporate purposes, including working capital requirements. The Company may prepay borrowings under the revolving credit facility, subject to certain conditions, and may reborrow, up to the maximum limit then in effect, any amounts that are repaid or prepaid. The revolving credit facility terminates on March 31, 2005 or earlier upon a change of control of the Company, as defined, at which time all borrowings become due and payable. The term loan is a $3,450,000 eight year loan due March 31, 2005, or earlier upon a change of control of the Company, as defined. The interest rate on the term loan is a floating rate equal to 30-day LIBOR plus 3.25%. Annual prepayments are required equal to 50% of free cash flow and 100% of net cash proceeds, as defined, of certain financing transactions, sales of property and other events. Such prepayments will be applied first to the term loans and then to the revolving credit facility. F-13 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (6) CREDIT FACILITY -- (CONTINUED) The acquisition facility provides for up to $30,000,000 to be advanced to the Company to finance future acquisitions. Advances are subject to credit approval by the lender. Therefore, no assurance can be given that any such advances will be available to the Company. The acquisition facility terminates on March 31, 2005, or if earlier upon a change of control of the Company, as defined. The Credit Facilities also provide for certain fees to be paid to the lender. In addition, the lender was issued a warrant to purchase up to 187,175 shares of the Company's common stock at a price to be fixed at 90% of the initial public offering price of the Company's proposed initial public offering. Upon the consummation of the proposed initial public offering, the senior lender will be issued warrants to purchase an additional 50,000 shares of the Company's common stock at 90% of the initial public offering price. The Company has estimated the value of the Warrants to be $887,000 using the Black-Scholes option pricing model. The Company will amortize the value of the warrants over the eight-year term of the credit facilities. The Credit Facilities contain restrictions upon the Company's ability to incur indebtedness, grant liens, make capital expenditures, enter into acquisitions, mergers or consolidations, dispose of assets, make dividend payments, make other restricted payments or investments. In addition, the Credit Facilities require the Company to meet certain financial covenants, including maintenance of minimum cash flow levels and of fixed charge coverage, interest expense coverage and total indebtedness to cash flow ratios. (7) LONG-TERM DEBT OBLIGATIONS Long-term debt obligations consist of the following: <TABLE> <CAPTION> OCTOBER 31, -------------------- JANUARY 31, 1995 1996 1997 ---- ---- ---- <S> <C> <C> <C> Capital lease obligations ..................... $ 39,700 $ 517,196 $ 468,643 Term note payable to bank, due in monthly payments of $19,444 through June 1998, interest at the bank's base rate plus 1.25% (8.25% at October 31, 1996 and January 31, 1997) ....................................... 622,200 408,340 330,564 Deferred payments to subcontractor, net of debt discount of $11,900 and $3,500 in 1995 and 1996, respectively, payable at $6,111 per month through March 31, 1997 ............ 92,000 73,334 73,334 ------ ------ ------ 753,900 998,870 872,541 Less -- Current portion ....................... 319,700 460,034 527,446 ------- ------- ------- $ 434,200 $ 538,836 $345,095 ========= ========= ======== </TABLE> The term note payable to bank was repaid from the proceeds of the Credit Facility on March 26, 1997 as discussed in Note 6. The Company leases manufacturing and other equipment under several lease agreements that require monthly payments totaling approximately $16,000, including interest at rates ranging from 9.0% to 16.7%, and expire at various dates through October 2000. F-14 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (7) LONG-TERM DEBT OBLIGATIONS -- (CONTINUED) Future minimum lease payments under capital lease obligations at October 31, 1996 were as follows: <TABLE> <CAPTION> FISCAL YEAR AMOUNT ----------- ------ <S> <C> 1997 ................................................................ $ 182,632 1998 ................................................................ 161,350 1999 ................................................................ 155,077 2000 ................................................................ 100,121 ------- Total minimum lease payments ...................................... 599,180 Less -- Amount representing interest ................................ 81,984 ------ Obligations under capital leases .................................. 517,196 Less -- Current portion of capital lease obligations ................ 149,461 ------- $ 367,735 ========= </TABLE> (8) SUBORDINATED NOTE PAYABLE TO PRINCIPAL STOCKHOLDER The Company has a subordinated note payable to its principal stockholder, which bears interest at 10%. The note is due upon demand but no sooner than the date of full payment of amounts outstanding from the bank (see Note 5). The balances outstanding under this note were $1,775,000, $2,7000,000 and $3,800,000 at October 31, 1995 and 1996 and January 31, 1997, respectively. On March 17, 1997, the principal stockholder converted $1,750,000 of indebtedness under this note into 218,750 shares of common stock. (9) COMMITMENTS AND CONTINGENCIES (a) Facility Leases The Company rents its corporate headquarters office and warehouse space in Massachusetts as a tenant at will and leases its California, Washington and Florida manufacturing facilities under operating lease arrangements. The leases expire at various dates, through July, 1999 with certain renewal options. Rent expense for the years ended October 31, 1994, 1995 and 1996 amounted to approximately $270,000, $270,000 and $362,000, respectively. Future minimum lease payments under these leases are as follows: <TABLE> <CAPTION> FISCAL YEAR TOTAL ----------- ----- <S> <C> 1997 ...................................... $ 251,000 1998 ...................................... 133,000 1999 ...................................... 62,000 ------ Total ................................... $ 446,000 ========= </TABLE> (b) Consulting Agreement with Related Party The Company has an agreement with CRM to provide services to the Company for payments of $15,000 monthly plus 1% of annual revenues over $12,000,000. This agreement continues until terminated by mutual consent. The general partner of the limited partnership that owns the majority of the common stock of the Company and that made the subordinated loan to the Company described in Note 8 is also the F-15 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (9) COMMITMENTS AND CONTINGENCIES -- (Continued) (b) Consulting Agreement with Related Party -- (Continued) Chairman of the consulting firm. Management fees amounted to $180,000 for each of the years ended October 31, 1994, 1995 and 1996 and are included in general and administrative expenses in the accompanying statements of operations. Upon the consummation of the Company's proposed initial public offering, the management agreement with CRM will be amended to provide for a fixed annual fee of $300,000. CRM will receive 109,500 shares of common stock as consideration for this amendment. Upon consummation of the proposed initial public offering, the Company will record a noncash charge of $1,095,000 representing the fair market value of the securities to be issued to CRM. (c) Litigation In the ordinary course of business, the Company is party to various types of litigation. The Company believes it has meritorious defenses to all claims, and, in its opinion, all litigation currently pending or threatened will not have a material effect on the Company's financial position or results of operations. (10) INCOME TAXES The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under the provisions of SFAS No. 109, deferred tax assets or liabilities are computed based on the differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. Deferred income tax expenses or credits are based on changes in the assets or liabilities from period to period. Through October 31, 1996, the Company had generated net operating loss carryforwards for federal and state income tax purposes of approximately $1,031,000, which expire through 2011. Net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain cumulative changes in ownership interests of significant stockholders over a three-year period in excess of 50%, as defined. In the event of a public offering, the Company may experience a change in ownership in excess of 50%. The Company does not believe that these changes in ownership will significantly impact the Company's ability to utilize its net operating loss carryforwards. At October 31, 1995 and 1996, the Company had no current tax liability. The Company's deferred tax assets and liabilities consist of the following : <TABLE> <CAPTION> OCTOBER 31, ----------------------- 1995 1996 ---- ---- <S> <C> <C> Net operating loss carryforwards ..................... $ 116,800 $ 413,000 Allowance for doubtful accounts ...................... 9,000 47,000 Other temporary differences .......................... 4,800 36,000 Depreciation ......................................... (96,800) (307,000) Amortization and depreciation ........................ (25,300) (34,000) Employment and promotion agreement ................... (5,900) -- --------- -------- 2,600 155,000 Less -- Valuation allowance .......................... -- (155,000) --------- -------- $ 2,600 $ -- ========= ========== </TABLE> F-16 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (10) INCOME TAXES -- (Continued) Under SFAS No. 109, the Company cannot recognize a deferred tax asset unless it concludes that it is "more likely than not" that the deferred tax asset would be realized. Due to the net loss in the fiscal year ended October 31, 1996, the Company has recorded a full valuation allowance against its otherwise recognizable deferred tax asset. Current income tax expense (benefit), amounting to $(19,900) and $16,000 for the years ended October 31, 1994 and 1995, respectively, included in the accompanying statements of operations, represents state income tax expense (benefit). The Company had no current federal income tax expense in 1994 and 1995 due to utilization of net operating loss carryforwards. The principal permanent adjustments to book taxable income relate to the nondeductibility of meals and entertainment expenses and goodwill amortization. (11) STOCKHOLDERS' EQUITY (DEFICIT) (a) Increase in Authorized Shares and Stock Split The accompanying financial statements have been retroactively restated for an increase in authorized capital stock to 500,000 shares of $.01 par value preferred stock and 15,000,000 shares of $.01 par value common stock and to reflect a 1.684575-for-1 split of the common stock. These changes will be effective upon the consummation of the Company's proposed initial public offering of common stock. (b) Recapitalization In February 1997, the Company amended its Articles of Incorporation increasing the number of authorized shares of the Company's common stock to 1,500,000 shares and declared a 750-for-1 stock split, to be effective prior to the closing of the Company's proposed initial public offering of common stock contemplated herein. Accordingly, all share and per share amounts of common stock have been retroactively restated for all periods presented to reflect the stock split. (c) Management Incentive and Stock Option Plans The Company had a Management Incentive Plan (the Incentive Plan) that provided for the distribution to certain key employees of 25% of net income. The Incentive Plan was to terminate when, and if, an initial public offering occurs. The Company charged a total of $37,800 and $55,000 to expense under the Incentive Plan for the years ended October 31, 1994 and 1995, respectively. The Company terminated the Incentive Plan in 1996 and issued 229,776 shares of common stock for $.01 per share and granted options to purchase 191,368 shares of common stock for $.01 per share to the key employees who participated in the Incentive Plan. The employees purchased the shares and the options were granted at the fair market value on October 31, 1996 as determined by an independent appraisal. These options vest ratably over a period of up to five years, depending upon the employee's length of service with the Company. In March 1997, the Company granted 16,846 options to a senior executive at an exercise price of $8.00 per share, which is 80% of the assumed initial public offering price. (d) Option Plans In February 1997, the Company's 1997 Equity Incentive Plan (the "1997 Plan") was adopted by the Board of Directors and approved by the Company's stockholders. The 1997 Plan provides for the issuance of a maximum of 450,000 shares of Common Stock pursuant to the grant to employees of "incentive stock options" within the meaning of the Internal Revenue Code and the grant of non-qualified stock options, stock awards or opportunities to make direct purchases of stock in the Company to employees, consultants, directors and officers of the Company. F-17 EARTH AND OCEAN SPORTS, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (11) STOCKHOLDERS' EQUITY (DEFICIT) -- (Continued) (d) Option Plans -- (Continued) The 1997 Plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the 1997 Plan, the Compensation Committee has the authority to select the optionees and determine the terms of the options granted, including: (i) the number of shares subject to each option, (ii) when the option becomes exercisable, (iii) the exercise price of the option (which in the case of an incentive stock option cannot be less than the market price of the Common Stock as of the date of grant), (iv) the duration of the option and (v) the time, manner and form of payment upon exercise of an option. No options have been granted to date under the 1997 Plan. In January 1997, the 1997 Stock Option Plan for Nonemployee Directors (the Directors Plan) was adopted by the Company's Board of Directors and will become effective upon the closing of the Company's proposed initial public offering. Under the terms of the Directors Plan, an aggregate of 150,000 options may be granted and individuals who become members of the board prior to January 1, 1998 shall automatically receive 15,000 options. In addition, each non-employee director will receive annually options to purchase 3,000 shares on the date of each annual meeting of the Company's stockholders held after the closing of initial public offering. The options will vest ratably over five years on each yearly anniversary of the date such options were granted and expire ten years from the date of grant. (12) TRADEMARK LICENSE In August 1996, the Company entered into a License Agreement under which the licensee has the right to sell merchandise bearing certain of the Company's trademark names. The Company received and recorded as revenue in fiscal 1996 the initial license fee of $250,000. The Company is entitled to additional license fees of $300,000 for the period January 1, 1998 to December 31, 1998 and $350,000 for the period January 1, 1999 to December 31, 1999. The Company is also entitled to a royalty on sales of merchandise bearing the licensed trademark names in excess of certain minimum amounts. The license agreement expires on December 31, 1999, unless extended by both parties. (13) 401(K) PLAN In January 1995, the Company established the Earth and Ocean Sports, Inc. Employee Pension Plan (the Plan), which is a deferred contribution plan under Section 401(k) of the Internal Revenue Code. The Plan allows all full-time employees over 21 years of age who have completed one year of service with the Company to make pretax deferred contributions to the Plan of up to 15% of annual compensation or the maximum annual limitations, as defined. Contributions by the Company to the Plan are discretionary and determined by the Board of Directors. There were no discretionary contributions to the Plan for the years ended October 31, 1995 and 1996. (14) NEW ACCOUNTING STANDARD In March 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share. SFAS No. 128, establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This statement is effective for fiscal years ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fiscal year ended October 31, 1998 and does not believe that the effect of the adoption of this standard would be materially different from the amounts presented in the accompanying statements of operations. F-18 INSIDE BACK COVER: - ------------------ [Four action photographs of the Company's snowboards in use; plus Spiral and Flite product logo's] ================================================================================ NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. -------------------- TABLE OF CONTENTS PAGE ---- Prospectus Summary 3 Risk Factors 6 Use of Proceeds 11 Dividend Policy 11 Capitalization 12 Dilution 13 Selected Financial Data 14 Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Business 24 Management 35 Certain Transactions 40 Principal Stockholders 41 Description of Capital Stock 42 Shares Eligible for Future Sale 45 Underwriting 47 Legal Matters 49 Experts 49 Change in Independent Public Accountants 49 Additional Information 49 Index to Financial Statements F-1 ---------------------- UNTIL _____ , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ================================================================================ ================================================================================ 1,375,000 SHARES [LOGO] EARTH AND OCEAN SPORTS, INC. COMMON STOCK ---------- PROSPECTUS ---------- H.C. WAINWRIGHT & CO., INC. CRUTTENDEN ROTH INCORPORATED , 1997 ================================================================================ PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses (other than underwriting discount) payable in connection with the sale of the Common Stock offered hereby are as follows: SEC registration fee .............................................. $ 5,731 NASD filing fee ................................................... 2,391 Nasdaq National Market listing fee ................................ 27,900 Representatives' non-accountable expense allowance ................ 137,500 Printing and engraving expenses ................................... 75,000 Legal fees and expenses ........................................... 200,000 Accounting fees and expenses ...................................... 100,000 Blue Sky fees and expenses (including legal fees) ................. 10,000 Transfer agent and registrar fees and expenses .................... 10,000 Miscellaneous ..................................................... 66,478 ------ Total ........................................................... $635,000 ======== The Company will bear all expenses shown above. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Massachusetts Business Corporation Law provides for indemnification of the Company's directors and officers for liabilities and expenses that they may incur in such capacities, except with respect to any matter that the indemnified person shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Company. Reference is made to the Company's amended and restated corporate charter and by-laws filed as Exhibits 3.2 and 3.4 hereto, respectively. The Underwriting Agreement provides that the Underwriters are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of the Company against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1 hereto. The Company expects to obtain a directors and officers liability insurance for the benefit of its directors and officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The Company has not issued any unregistered securities except upon its incorporation and except as follows. The Company issued unregistered securities to an aggregate of 19 employees in connection with a reorganization of management's equity interest in the Company pursuant to a Management Equity Reorganization Plan, dated as of October 31, 1996. Pursuant to the Management Equity Reorganization Plan, the Company's "phantom stock" plan was terminated and the participating employees were issued an aggregate of 136,400 shares of Common Stock at a nominal purchase price and options to purchase an aggregate of 113,600 shares of Common Stock in consideration thereof. The Company's chief financial officer, who joined the Company in March 1997, was granted an option to purchase 16,846 shares of Common Stock at an exercise price per share of $8.00. In addition, the Company's senior lender has been or will be issued warrants to purchase an aggregate of 237,175 shares of Common Stock at an exercise price to be equal to 90% of the initial public offering price. No underwriters were involved in the foregoing sales of securities. Such sales were made in reliance upon an exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof relative to sales by an issuer not involving any public offering or the rules and regulations thereunder, or, in the case of options to purchase Common Stock, Rule 701 under the Securities Act. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (A) EXHIBITS: <TABLE> <CAPTION> EXHIBIT NO. ----------- <S> <C> 1.1 -- Form of Underwriting Agreement. 1.2* -- Form of Warrant Agreement between the Registrant and the Representatives. 3.1 -- Current form of Articles of Organization of the Company, as amended. 3.2 -- Form of Amended and Restated Articles of Organization of the Company, to be effective upon completion of the Offering. 3.3 -- Current form of By-laws of the Company. 3.4 -- Form of Amended and Restated By-laws of the Company, to be effective upon completion of the Offering. 4.1* -- Specimen certificate representing the Common Stock. 5.1* -- Opinion of Testa, Hurwitz & Thibeault, LLP. 10.1 -- Management Equity Reorganization Plan. 10.2 -- 1997 Equity Incentive Plan. 10.3 -- 1997 Non-Employee Director Stock Option Plan. 10.4* -- Registration Rights Agreement among the Company, SSPR, L.P. CR Management Associates, L.P. ("CRM"), Jon A. Glydon and Jackson National Life ("JNL"). 10.5 -- Consulting Agreement between the Company and CRM dated July 13, 1993, as amended. 10.6 -- Lease between the Company and Oceanside Associates dated March 30, 1992 as amended. 10.7 -- Lease between the Company and Allied Venture Number 1 dated December 13, 1995. 10.8 -- Lease between the Company and Joe P. Ruthven Investments dated July 9, 1996. 10.9* -- Loan Agreement among the Registrant, SSPR, L.P. and Jackson National Life dated March 26, 1997. 11.1 -- Calculation of earnings per share. 16.1* -- Letter re Change in Certifying Accountant. 23.1 -- Consent of Arthur Andersen LLP. 23.2 -- Consent of Richard A. Eisner & Company, LLP. 23.3 -- Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1). 24.1 -- Power of Attorney (see page II-4). 27.1 -- Financial Data Schedule. </TABLE> - ----------- * To be filed by amendment. (B) FINANCIAL STATEMENT SCHEDULES: Schedule II Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. II-2 ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes (1) to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser; (2) that for purposes of determining any liability under the Securities Act , the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and (3) that for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN HYANNIS, MASSACHUSETTS ON MARCH 26, 1997. EARTH AND OCEAN SPORTS, INC. By: /s/ JON A. GLYDON --------------------------------- JON A. GLYDON PRESIDENT AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of Earth and Ocean Sports, Inc., hereby severally constitute and appoint Jon A. Glydon, Brooks R. Herrick and Edwin L. Miller Jr., and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, any registration statement related to the Offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933 (a "462(b) Registration Statement"), any and all amendments and exhibits to this registration statement or any 462(b) Registration Statement, and any and all applications and other documents to be filed with the Securities and Exchange Commission pertaining to the registration of the securities covered hereby or thereby, and generally to do all things in our names and on our behalf in such capacities to enable Earth and Ocean Sports, Inc. to comply with the provisions of the Securities Act of 1933 and all requirements of the Securities and Exchange Commission. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. <TABLE> <CAPTION> SIGNATURE TITLE(S) DATE --------- -------- ---- <S> <C> <C> /s/ JON A. GLYDON PRESIDENT, CHIEF EXECUTIVE OFFICER AND MARCH 26, 1997 ---------------------------------- DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) JON A. GLYDON /s/ BROOKS R. HERRICK SENIOR VICE PRESIDENT, CHIEF FINANCIAL MARCH 26, 1997 ---------------------------------- OFFICER AND TREASURER (PRINCIPAL BROOKS R. HERRICK FINANCIAL AND ACCOUNTING OFFICER) /s/ GUSTAV A. CHRISTENSEN DIRECTOR MARCH 26, 1997 ---------------------------------- GUSTAV A. CHRISTENSEN /s/ THOMAS H. CONWAY DIRECTOR MARCH 26, 1997 ---------------------------------- THOMAS H. CONWAY /s/ DR. JAMES L. MCKENNEY DIRECTOR MARCH 26, 1997 ---------------------------------- DR. JAMES L. MCKENNEY /s/ STEVEN J. ROTH DIRECTOR MARCH 26, 1997 ---------------------------------- STEVEN J. ROTH </TABLE> II-4 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To Earth and Ocean Sports, Inc.: We have audited, in accordance with generally accepted auditing standards, the financial statements of Earth and Ocean Sports, Inc. included in this registration statement and have issued our report thereon dated February 13, 1997 (except with respect to Note (6), as to which the date is March 27, 1997). Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 16(b) above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein, in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Boston, Massachusetts February 13, 1997 S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To Earth and Ocean Sports, Inc.: We have audited, in accordance with generally accepted auditing standards, the financial statements of Earth and Ocean Sports, Inc. included in this registration statement and have issued our report thereon dated December 29, 1995. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 16(b) above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein, in relation to the basic financial statements taken as a whole. /s/ RICHARD A. EISNER & COMPANY, LLP Cambridge, Massachusetts December 29, 1995 S-2 EARTH AND OCEAN SPORTS, INC. VALUATION AND QUALIFYING ACCOUNTS <TABLE> <CAPTION> BALANCE, BALANCE, BEGINNING OF END OF PERIOD INCREASES(1) DEDUCTIONS PERIOD ------ --------- ---------- ------ <S> <C> <C> <C> <C> ACCOUNTS RECEIVABLE RESERVE: October 31, 1995 ....................... $ 36,900 $240,501 $(239,801) $ 37,600 ======== ======== ========= ========= October 31, 1996 ....................... $ 37,600 $245,857 $(131,557) $ 151,900 ======== ======== ========= ========= January 31, 1997 ....................... $151,900 $ 27,638 $ (18,038) $ 161,500 ======== ======== ========= ========= (1) Includes allowances for doubtful accounts and sales returns. </TABLE> S-3 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-1.1 <SEQUENCE>2 <DESCRIPTION>UNDERWRITING AGREEMENT <TEXT> EXHIBIT 1.1 [_____________] Shares1 EARTH AND OCEAN SPORTS, INC. Common Stock FORM OF UNDERWRITING AGREEMENT ___________, 1997 H.C. Wainwright & Co., Inc. Cruttenden Roth Incorporated As Representatives of the several Underwriters c/o H.C. Wainwright & Co., Inc. One Boston Place Boston, Massachusetts 02108 Dear Sirs and Madams: Earth and Ocean Sports, Inc., a Massachusetts corporation (the "Company"), proposes to issue and sell [__________] shares (the "Firm Shares") of its authorized but unissued Common Stock. In addition, the Company proposes to grant to the Underwriters (as defined below) an option to purchase up to [_________] additional shares of Common Stock (the "Optional Shares" and, with the Firm Shares, collectively, the "Shares"). The Common Stock is more fully described in the Registration Statement and the Prospectus hereinafter mentioned. The Company hereby confirms the agreements made with respect to the purchase of the Shares by the several underwriters, for whom you are acting, named in Schedule I hereto (collectively, the "Underwriters," which term shall also include any underwriter purchasing Common Stock pursuant to Section 2(b) hereof). You represent and warrant that you have been authorized by each of the other Underwriters to enter into this Underwriting Agreement (the "Agreement") on its behalf and to act for it in the manner herein provided. SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the several Underwriters as of the date hereof and as of each Closing Date (as defined below) that: The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 (No. 333-_____), including the related preliminary prospectus, for the registration under the Securities Act of 1933, as amended (the "Securities Act") of the Shares. Copies of such registration statement and of each amendment thereto, if any, including the related preliminary prospectus (meeting the requirements of Rule 430A of the rules and regulations of the Commission) heretofore filed by the Company with the Commission have been delivered to you. - ---------------- 1 Plus an option to purchase from the Company up to [______] additional shares to cover over-allotments. 1 The term Registration Statement as used in this Agreement shall mean such registration statement, including all exhibits and financial statements, all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, in the form in which it became effective, and any registration statement filed pursuant to Rule 462(b) of the rules and regulations of the Commission with respect to the Shares (a "Rule 462(b) registration statement"), and, in the event of any amendment thereto after the effective date of such registration statement (the "Effective Date"), shall also mean (from and after the effectiveness of such amendment) such registration statement as so amended (including any Rule 462(b) registration statement). The term Prospectus as used in this Agreement shall mean the prospectus relating to the Shares first filed with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as included in the Registration Statement) and, in the event of any supplement or amendment to such prospectus after the Effective Date, shall also mean (from and after the filing with the Commission of such supplement or the effectiveness of such amendment) such prospectus as so supplemented or amended. The term Preliminary Prospectus as used in this Agreement shall mean each preliminary prospectus included in such registration statement prior to the time it becomes effective. The Registration Statement has been declared effective under the Securities Act, and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. The Company has caused to be delivered to you copies of each Preliminary Prospectus and has consented to the use of such copies for the purposes permitted by the Securities Act. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has full corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus and as being conducted, and is duly qualified as a foreign corporation and in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary (except where the failure to be so qualified would not have a material adverse effect on the business, business prospects, properties, condition (financial or otherwise) or results of operations of the Company. The Company does not own or control, directly or indirectly, any corporation, association or other entity. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change in the business, business prospects, properties, condition (financial or otherwise) or results of operations of the Company, whether or not arising from transactions in the ordinary course of business, other than as set forth in the Registration Statement and the Prospectus, and since such dates, except in the ordinary course of business, the Company has not entered into any material transaction not referred to in the Registration Statement and the Prospectus. The Registration Statement and the Prospectus comply and on the Closing Date (as hereinafter defined) and any later date on which Optional Shares are to be purchased, the Prospectus will comply, in all material respects, with the provisions of the Securities Act and the rules and regulations of the Commission thereunder; on the Effective Date, the Registration Statement did not contain any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date the Prospectus did not and, on the Closing Date and any later date on which Optional Shares are to be purchased, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that none of the representations and warranties in this 2 paragraph shall apply to statements in, or omissions from, the Registration Statement or the Prospectus made in reliance upon and in conformity with information herein or otherwise furnished in writing to the Company by or on behalf of the Underwriters for use in the Registration Statement or the Prospectus. The Company has authorized and outstanding capital stock and outstanding long term-debt as set forth under the heading "Capitalization" in the Prospectus. The issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. Except as disclosed in or contemplated by the Prospectus and the financial statements of the Company and the related notes thereto included in the Prospectus, the Company does not have any outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted and exercised thereunder, set forth in the Prospectus accurately and fairly presents the information required by the Securities Act and the rules and regulations promulgated thereunder ("Rules and Regulations") to be shown with respect to such plans, arrangements, options and rights. The Shares are duly authorized, will be (when issued and sold to the Underwriters as provided herein) validly issued, fully paid and nonassessable and conform to the description thereof in the Prospectus. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein. The Warrants (as defined in Section 5 below) will conform to the description thereof in the Prospectus and, when sold to and paid for by the Representatives in accordance with the Warrant Agreement (as defined in Section 5 below), will be duly authorized and validly issued and will be valid and binding obligations of the Company entitled to all the benefits of the Warrant Agreement. The Warrant Shares (as defined in Section 5 below) will be duly authorized and reserved for issuance upon exercise of the Warrants and, when issued upon such exercise in accordance with the terms of the Warrants and the Warrant Agreement, will be duly and validly issued, fully paid and nonassessable, free of preemptive rights and will conform to the description thereof in the Prospectus. PRIOR TO THE CLOSING DATE, (I) THE SHARES TO BE ISSUED AND SOLD BY THE COMPANY AND (II) THE WARRANT SHARES, WILL BE AUTHORIZED FOR LISTING ON THE NASDAQ NATIONAL MARKET UPON OFFICIAL NOTICE OF ISSUANCE. The Shares to be sold by the Company will be sold free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, and will conform to the description thereof contained in the Prospectus. No preemptive right, co-sale right, registration right, right of first refusal or other similar right to subscribe for or purchase securities of the Company exists with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement. No person or entity has any right which has not been waived, or complied with, to require the Company to register the sale of any shares of Common Stock under the Securities Act in the public offering contemplated by this Agreement and, except as described in the Prospectus, no person or entity holds a right to require the Company to register the sale of any shares of Common Stock at any other time. 3 The Company has full corporate power and authority to enter into this Agreement and perform the transactions contemplated hereby and thereby. This Agreement and the Warrant Agreement have been duly authorized, executed and delivered by the Company and constitute valid and binding obligations of the Company enforceable in accordance with their terms, except as enforceability may be limited by general equitable principles, bankruptcy, insolvency, reorganization, moratorium laws affecting creditors' rights generally and except as to those provisions relating to indemnity or contribution for liabilities arising under federal and state securities laws. The making and performance of this Agreement and the Warrant Agreement by the Company and the consummation of the transactions contemplated hereby and thereby (i) will not violate any provisions of the Articles of Organization, Bylaws or other organizational documents of the Company, and (ii) will not conflict with, result in a material breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a material default under (A) any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected, or (B) any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body that has not already been obtained is required for the execution and delivery of this Agreement and the Warrant Agreement or the consummation of the transactions contemplated by this Agreement and the Warrant Agreement, except for compliance with the Securities Act, the Blue Sky laws applicable to the public offering of the Shares by the several Underwriters and the clearance of such offering with the National Association of Securities Dealers, Inc. (the "NASD"). The consolidated financial statements and schedules of the Company and the related notes thereto included in the Registration Statement and the Prospectus present fairly the financial position of the Company as of the respective dates of such financial statements and schedules, and the results of operations and cash flows of the Company for the respective periods covered thereby. Such statements, schedules and related notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods specified, as certified by the independent accountants named in subsection 8(f). No other financial statements or schedules are required to be included in the Registration Statement. The selected financial data set forth in the Prospectus under the captions "Capitalization" and "Selected Consolidated Financial Information" fairly present the information set forth therein on the basis stated in the Registration Statement. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The representations and warranties given by the Company and its officers to its independent public accountants for the purpose of supporting the letters referred to in Sections 8(f) and (g) are true and correct. The Company is not (i) in violation or default of any provision of its Articles of Organization, Bylaws or other organizational documents, or (ii) in material breach of, or default with respect to, any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are 4 bound; and there does not exist any state of facts which, with notice or lapse of time or both, would constitute such a breach or default on the part of the Company. There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described or filed as required. The contracts so described in the Prospectus are in full force and effect on the date hereof. Except as disclosed in the Prospectus, there are no legal or governmental actions, suits or proceedings pending or threatened to which the Company is or is threatened to be made a party or of which property owned or leased by the Company is or has been threatened to be made the subject, which actions, suits or proceedings could, individually or in the aggregate, prevent or adversely affect the transactions contemplated by this Agreement or the Warrant Agreement or result in a material adverse change in the business, business prospects, properties, condition (financial or otherwise), or results of operations of the Company; there are no outstanding claims, asserted or otherwise, against the Company, or any of its officers or directors, for violations of any federal or state securities laws, or any other applicable laws, relating to any purchase, sale, or redemption of, or other transaction with respect to, the Common Stock; and no labor disturbance by the employees of the Company exists or is imminent which could materially adversely affect the business, business prospects, properties, condition (financial or otherwise), or results of operations of the Company. The Company is not a party or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body. Except as disclosed in the Prospectus, there are no material legal or governmental actions, suits or proceedings pending or, to the Company's knowledge, threatened against any executive officers or directors of the Company. The Company has good and marketable title to all the properties and assets reflected as owned in the financial statements hereinabove described (or elsewhere in the Prospectus), subject to no lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in such financial statements (or elsewhere in the Prospectus), or (ii) those which are not material in amount to the Company, and do not adversely affect the use made and proposed to be made of such property by the Company. The Company holds its leased properties under valid and binding leases. Except as described in the Prospectus, the Company owns or leases all such properties as are necessary to its operations as now conducted or as proposed to be conducted. Since the respective dates as of which information is given in the Registration Statement and Prospectus, and except as described in or specifically contemplated by the Prospectus: (i) the Company has not (A) incurred any liabilities or obligations, indirect, direct or contingent, or (B) entered into any oral or written agreement or other transaction, which in the case of (A) or (B) is not in the ordinary course of business; (ii) the Company has not sustained any material loss or interference with its businesses or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance; (iii) the Company has not paid or declared any dividends or other distributions with respect to its capital stock and the Company is not in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change in the capital stock of the Company (other than upon the sale of the Shares hereunder or upon the exercise of any options or warrants disclosed in the Prospectus); (v) there has not been any material increase in the short- or long-term debt of the Company; and (vi) there has not been any material adverse change or any development involving or which may reasonably be expected to involve a prospective material adverse change, in the business, business prospects, condition (financial or otherwise), properties, or results of operations of the Company. 5 The Company is conducting business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, except where the failure to be so in compliance would not have a material adverse effect on the business, business prospects, properties, condition (financial or otherwise) or results of operations of the Company. The Company has filed all necessary federal, state and foreign income and franchise tax returns, and all such tax returns are complete and correct in all material respects, and the Company has not failed to pay any taxes which were payable pursuant to said returns or any assessments with respect thereto. The Company has no knowledge of any tax deficiency which has been or is likely to be threatened or asserted against the Company. The Company has not distributed, and will not distribute prior to the later to occur of (i) completion of the distribution of the Shares, or (ii) the expiration of any time period within which a dealer is required under the Securities Act to deliver a prospectus relating to the Shares, any offering material in connection with the offering and sale of the Shares other than the Prospectus, the Registration Statement and any other materials permitted by the Securities Act and consented to by the Underwriters. The Company maintains insurance of the types and in the amounts generally deemed adequate for their business, including, but not limited to, directors' and officers' insurance, insurance covering real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect. The Company has not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially adversely affect the business, business prospects, properties, condition (financial or otherwise) or results of operations of the Company. The Company nor, to the best of the Company's knowledge, any of its employees or agents has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any foreign, federal or state governmental officer or official or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares. The Company has caused (i) each of its executive officers and directors as set forth in the Prospectus and (ii) the holders of all of the outstanding Common Stock, options therefor, warrants or other security of the Company to furnish to the Underwriters an agreement in form and substance satisfactory to H.C. Wainwright & Co., Inc. pursuant to which each such party has agreed that during the period of one hundred eighty (180) days after the date the Registration Statement becomes effective, without the prior written consent of H.C. Wainwright & Co., such party will not, directly or indirectly, offer, sell, pledge, contract to sell, grant any option to purchase or otherwise dispose of any shares of Common Stock beneficially owned or otherwise held by such party (including, without limitation, shares of Common Stock which may be deemed to be beneficially owned by such party in accordance 6 with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock which may be issued upon exercise of a stock option or warrant) or any securities convertible into, derivative of or exercisable or exchangeable for such Common Stock; provided, however, that if such party is an individual, he or she may transfer any or all of the Common Stock held by such party either during his or her lifetime or on death, by gift, will or intestacy, to his or her immediate family or to a trust the beneficiaries of which are exclusively such party and/or a member or members of his or her immediate family; provided, that in any such case the transferee executes a lock-up agreement in substantially the same form covering the remainder of the lock-up period. Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba. Except as specifically disclosed in the Prospectus, the Company has sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals and governmental authorizations to conduct their businesses as now conducted; the expiration of any trademarks, trade names, patent rights, copyrights, licenses, approvals or governmental authorizations would not have a material adverse effect on the business, business prospects, properties, condition (financial or otherwise) or results of operations of the Company; the Company does not have any knowledge of any infringement by the Company of trademark, trade name rights, patent rights, copyrights, licenses, trade secret or other similar rights of others; and no claims have been made or are threatened against the Company regarding trademark, trade name, patent, copyright, license, trade secret or other infringement which could have a material adverse effect on the business, business prospects, properties, condition (financial or otherwise) or results of operations or prospects of the Company, nor, to the best of the Company's knowledge, is there any basis therefore. Except as disclosed in the Prospectus, (i) the Company is in compliance in all material respects with all rules, laws and regulation relating to the use, treatment, storage and disposal of toxic substances and protection of health or the environment ("Environmental Laws") which are applicable to its business, (ii) the Company has not received any notice from any governmental authority or third party of an asserted claim under Environmental Laws, (iii) no facts currently exist that will require the Company to make future material capital expenditures to comply with Environmental Laws, and (iv) to the knowledge of the Company, no property which is or has been owned, leased or occupied by the Company has been designated as a Superfund site pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated site under applicable state or local law. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. (a) On the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell the [_________] Firm Shares to the several Underwriters, and each of the Underwriters agrees to purchase from the Company the respective aggregate number of Firm Shares set forth opposite its name in Schedule I. The price at which such Firm Shares shall be sold by the Company and purchased by the several Underwriters shall be $___ per share. The obligation of each Underwriter to the Company shall be to purchase from the Company that number of Firm Shares which represents the same proportion of the total number of Firm Shares to be sold by the Company pursuant to this Agreement as the number of Firm Shares set 7 forth opposite the name of such Underwriter in Schedule I hereto represents of the total number of Firm Shares to be purchased by all Underwriters pursuant to this Agreement, as adjusted by you in such manner as you deem advisable to avoid fractional shares. In making this Agreement, each Underwriter is contracting severally and not jointly; except as provided in paragraphs (b) and (c) of this Section 2, the agreement of each Underwriter is to purchase only the respective number of shares of the Firm Shares specified in Schedule I. (b) If for any reason one or more of the Underwriters shall fail or refuse (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for the number of Shares agreed to be purchased by such Underwriter or Underwriters, the Company shall immediately give notice thereof to you, and the non-defaulting Underwriters shall have the right within 24 hours after the receipt by you of such notice to purchase, or procure one or more other Underwriters to purchase, in such proportions as may be agreed upon between you and such purchasing Underwriter or Underwriters and upon the terms herein set forth, all or any part of Shares which such defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to make such arrangements with respect to all such shares and portion, the number of Shares which each non-defaulting Underwriter is otherwise obligated to purchase under this Agreement shall be automatically increased on a pro rata basis to absorb the remaining shares and portion which the defaulting Underwriter or Underwriters agreed to purchase; provided, however, that the non-defaulting Underwriters shall not be obligated to purchase the portion which the defaulting Underwriter or Underwriters agreed to purchase if the aggregate number of such Shares exceeds 10% of the total number of Shares which all Underwriters agreed to purchase hereunder. If the total number of Shares which the defaulting Underwriter or Underwriters agreed to purchase shall not be purchased or absorbed in accordance with the two preceding sentences, the Company shall have the right, within 24 hours next succeeding the 24-hour period above referred to, to make arrangements with other underwriters or purchasers satisfactory to you for purchase of such Shares and portion on the terms herein set forth. In any such case, either you or the Company shall have the right to postpone the Closing Date determined as provided in Section 4 hereof for not more than seven business days after the date originally fixed as the Closing Date pursuant to Section 4 in order that any necessary changes in the Registration Statement, the Prospectus or any other documents or arrangements may be made. If neither the non-defaulting Underwriters nor the Company shall make arrangements within the 24-hour periods stated above for the purchase of all of the Shares which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall be terminated without further act or deed and without any liability on the part of the Company to any non-defaulting Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. (c) On the basis of the representations, warranties and covenants herein contained, and subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly up to [________] Optional Shares from the Company at the same price per share as the Underwriters shall pay for the Firm Shares. Said option may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters and may be exercised in whole or in part at any time on or before the thirtieth day after the date of this Agreement upon written or telegraphic notice by you to the Company setting forth the aggregate number of Optional Shares as to which the several Underwriters are exercising the option. Delivery of certificates for the Optional Shares, and payment therefor, shall be made as provided in Section 4 hereof. The number of Optional Shares to be purchased by each Underwriter shall be the same 8 percentage of the total number of Optional Shares to be purchased by the several Underwriters as such Underwriter is purchasing of the Firm Shares, as adjusted by you in such manner as you deem advisable to avoid fractional shares. SECTION 3. OFFERING BY UNDERWRITERS. (a) The terms of the initial public offering by the Underwriters of the Shares to be purchased by them shall be as set forth in the Prospectus. The Underwriters may from time to time change the public offering price after the closing of the initial public offering and increase or decrease the concessions and discounts to dealers as they may determine. (b) The information (insofar as such information relates to the Underwriters) set forth in the last paragraph on the front cover page and under "Underwriting" in the Registration Statement, any Preliminary Prospectus and the Prospectus relating to the Shares constitutes the only information furnished by the Underwriters to the Company for inclusion in the Registration Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of the respective Underwriters represent and warrant to the Company that the statements made therein are correct. SECTION 4. DELIVERY OF AND PAYMENT FOR THE SHARES. (a) Delivery of certificates for the Firm Shares, the Optional Shares (if the option granted by Section 2(c) hereof shall have been exercised not later than 10:00 A.M., Boston time, on the date two business days preceding the Closing Date), and the Warrant Shares, and payment therefor, shall be made at the office of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts at 10:00 a.m., Boston time, on the fourth business day after the date of this Agreement, or at such time on such other day, not later than seven full business days after such fourth business day, as shall be agreed upon in writing by the Company and you. The date and hour of such delivery and payment (which may be postponed as provided in Section 2(b) hereof) are herein called the "Closing Date". (b) If the option granted by Section 2(c) hereof shall be exercised after 10:00 a.m., Boston time, on the date two business days preceding the Closing Date, delivery of certificates for the shares of Optional Shares, and payment therefor, shall be made at the office of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts at 10:00 a.m., Boston time, on the third business day after the exercise of such option. (c) Payment for the Shares and the Warrants purchased from the Company shall be made to the Company or its order by (i) certified or official bank check in next day funds (and the Company agrees not to deposit any such check in the bank on which drawn until the day following the date of its delivery to the Company) or (ii) federal funds wire transfer. Such payment shall be made upon delivery of certificates for the Shares and the Warrants to you for your account and the respective accounts of the several Underwriters (including without limitation by "full-fast" electronic transfer by Depository Trust Company) against receipt therefor signed by you. Certificates for the Shares and the Warrants to be delivered to you shall be registered in such name or names and shall be in such denominations as you may request at least one business day before the Closing Date, in the case of Firm Shares and the Warrants, and at least one business day prior to the purchase thereof, in the case of the Optional Shares. Such certificates will be made available to the Underwriters for inspection, checking and packaging at the offices of H.C. Wainwright & Co., Inc.'s clearing agent, __________________________, on the business day prior to the Closing Date or, in the case of the Optional Shares, by 3:00 p.m., New York time, on the business day preceding the date of purchase. 9 It is understood that you, individually and not on behalf of the Underwriters, may (but shall not be obligated to) make payment to the Company for shares to be purchased by any Underwriter whose check shall not have been received by you on the Closing Date or any later date on which Optional Shares are purchased for the account of such Underwriter. Any such payment by you shall not relieve such Underwriter from any of its obligations hereunder. SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows: (a) The Company will (i) prepare and timely file with the Commission under Rule 424(b) a Prospectus containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A and (ii) not file any amendment to the Registration Statement or supplement to the Prospectus of which you shall not previously have been advised and furnished with a copy or to which you shall have reasonably objected in writing or which is not in compliance with the Securities Act or the rules and regulations of the Commission. (b) The Company will promptly notify each Underwriter in the event of (i) the request by the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, (iii) the institution or notice of intended institution of any action or proceeding for that purpose, (iv) the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction, or (v) the receipt by it of notice of the initiation or threatening of any proceeding for such purpose. The Company will make every reasonable effort to prevent the issuance of such a stop order and, if such an order shall at any time be issued, to obtain the withdrawal thereof at the earliest possible moment. (c) The Company will (i) on or before the Closing Date, deliver to you a signed copy of the Registration Statement as originally filed and of each amendment thereto filed prior to the time the Registration Statement becomes effective and, promptly upon the filing thereof, a signed copy of each post-effective amendment, if any, to the Registration Statement (together with, in each case, all exhibits thereto unless previously furnished to you) and will also deliver to you, for distribution to the Underwriters, a sufficient number of additional conformed copies of each of the foregoing (but without exhibits) so that one copy of each may be distributed to each Underwriter, (ii) as promptly as possible deliver to you and send to the several Underwriters, at such office or offices as you may designate, as many copies of the Prospectus as you may reasonably request, and (iii) thereafter from time to time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, likewise send to the Underwriters as many additional copies of the Prospectus and as many copies of any supplement to the Prospectus and of any amended prospectus, filed by the Company with the Commission, as you may reasonably request for the purposes contemplated by the Securities Act. (d) If at any time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer any event relating to or affecting the Company, or of which the Company shall be advised in writing by you, shall occur as a result of which it is necessary, in the opinion of counsel for the Company or of counsel for the Underwriters, to supplement or amend the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Shares, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus so that the Prospectus as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time such Prospectus is delivered to such purchaser, not misleading. If, after the initial 10 public offering of the Shares by the Underwriters and during such period, the Underwriters shall propose to vary the terms of offering thereof by reason of changes in general market conditions or otherwise, you will advise the Company in writing of the proposed variation, and, if in the opinion either of counsel for the Company or of counsel for the Underwriters such proposed variation requires that the Prospectus be supplemented or amended, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus setting forth such variation. The Company authorizes the Underwriters and all dealers to whom any of the Shares may be sold by the several Underwriters to use the Prospectus, as from time to time amended or supplemented, in connection with the sale of the Shares in accordance with the applicable provisions of the Securities Act and the Rules and Regulations thereunder for such period. (e) Prior to the filing thereof with the Commission, the Company will submit to you, for your information, a copy of any post-effective amendment to the Registration Statement and any supplement to the Prospectus or any amended prospectus proposed to be filed. (f) The Company will cooperate, when and as requested by you, in the qualification of the Shares for offer and sale under the securities or blue sky laws of such jurisdictions as you may designate and, during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, in keeping such qualifications in good standing under said securities or blue sky laws; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. The Company will, from time to time, prepare and file such statements, reports, and other documents as are or may be required to continue such qualifications in effect for so long a period as you may reasonably request for distribution of the Shares. (g) During a period of five years commencing with the date hereof, the Company will furnish to you, and to each Underwriter who may so request in writing, copies of all periodic and special reports furnished to stockholders of the Company and of all information, documents and reports filed with the Commission (including the Report on Form SR required by Rule 463 of the Commission under the Securities Act). (h) Not later than the 45th day following the end of the fiscal quarter first occurring after the first anniversary of the Effective Date, the Company will make generally available to its security holders an earnings statement in accordance with Section 11(a) of the Securities Act and Rule 158 thereunder. (i) The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, including all costs and expenses incident to (i) the preparation, printing 11 and filing with the Commission and the NASD of the Registration Statement, any Preliminary Prospectus and the Prospectus, (ii) the furnishing to the Underwriters and, if applicable, the persons designated by them of copies of any Preliminary Prospectus and of the several documents required by paragraph (c) of this Section 5 to be so furnished, (iii) the printing of this Agreement and related documents delivered to the Underwriters, (iv) the preparation, printing and filing of all supplements and amendments to the Prospectus referred to in paragraph (d) of this Section 5, (v) the furnishing to you and the Underwriters of the reports and information referred to in paragraph (g) of this Section 5 and (vi) the printing and issuance of stock certificates, including the transfer agent's fees. (j) The Company agrees to reimburse you, for the account of the several Underwriters, for blue sky fees and related disbursements (including counsel fees and disbursements and cost of printing memoranda for the Underwriters) paid by or for the account of the Underwriters or their counsel in qualifying the shares under state securities or blue sky laws and in the review of the offering by the NASD. (k) The Company hereby agrees that, without the prior written consent of H.C. Wainwright & Co., Inc., the Company will not, for a period of 180 days following the date the Registration Statement becomes effective, directly or indirectly, offer, sell, pledge, contract to sell, grant any option to purchase or otherwise dispose of any shares of Common Stock owned beneficially or otherwise (including, without limitation, shares of Common Stock which may be deemed to be beneficially owned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock which may be issued upon exercise of a stock option or warrant) or any securities convertible into, derivative of or exercisable or exchangeable for such Common Stock, except for the issuance of shares of Common Stock upon the exercise of options to purchase Common Stock which are outstanding on the date hereof. (l) If at any time during the 25-day period after the Registration Statement becomes effective any rumor, publication or event relating to or affecting the Company shall occur as a result of which in your opinion the market price for the shares has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus), the Company will, after written notice from you advising the Company to the effect set forth above, forthwith prepare, consult with you concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to you, responding to or commenting on such rumor, publication or event. (m) The Company is familiar with the Investment Company Act of 1940, as amended, and has in the past conducted its affairs, and will in the future conduct its affairs, in such a manner to ensure that the Company was not and will not be an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (n) The Company agrees to maintain directors' and officers' insurance customary for the size and nature of the Company's business for a period of two years from the date of this Agreement. (o) At the Closing Date, the Company will further issue and sell to the Representatives or, at their direction, to their bona fide officers or partners, as described below, for a total purchase price of $_____, warrants (the "Warrants") entitling the holders thereof to purchase up to an aggregate of __________ shares of Common Stock (subject to adjustment) (the "Warrant Shares") for a period of four (4) years, such period to commence one year after the effective date of the Registration Statement (except as otherwise set forth in the Warrant Agreement referred to below). Said Warrants shall contain terms and provisions set forth in the Warrant Agreement of even date among the Company and the Representatives (the "Warrant Agreement"). As provided in the Warrant Agreement, the Representatives may designate that some of all of the Warrants be issued in varying amounts directly to their bona fide officers or partners and not to the Representatives. Such designation will be made by the Representatives only if they determine that such issuances would not violate the rules and interpretations of the Board of Governors of the NASD relating to the review of corporate financing arrangements and subject to applicable federal and state securities laws. As further provided, no transfer, assignment or hypothecation of the Warrants shall be made by the Representatives for a period of 12 months from the issuance of the Warrants, except to their bona fide officers or partners and subject to applicable federal and state securities laws. 12 SECTION 6. INDEMNIFICATION AND CONTRIBUTION. (a) Subject to the provisions of paragraph (f) of this Section 6, the Company agrees to indemnify and hold harmless each Underwriter and each person (including each partner or officer thereof) who controls any Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the common law or otherwise, and the Company agrees to reimburse each such Underwriter and controlling person for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) registration statement) or any post-effective amendment thereto (including any Rule 462(b) registration statement), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus or the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that (1) the indemnity agreement of the Company contained in this paragraph (a) shall not apply to any such losses, claims, damages, liabilities or expenses if such statement or omission describe in clauses (i) or (ii) was made in reliance upon and in conformity with information furnished as herein stated in writing to the Company by or on behalf of any Underwriter for use in any Preliminary Prospectus or the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto, and (2) the indemnity agreement contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages, liabilities or expenses purchased the Shares which is the subject thereof (or to the benefit of any person controlling such Underwriter) if at or prior to the written confirmation of the sale of such Shares a copy of the Prospectus (or the Prospectus as amended or supplemented) was not sent or delivered to such person and the untrue statement or omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented) unless the failure is the result of noncompliance by the Company with subparagraphs (ii) and (iii) of paragraph (c) of Section 5 hereof. The indemnity agreement of the Company contained in this paragraph (a) and the representations and warranties of the Company contained in Section 1 hereof shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the delivery of and payment for the Shares. (b) Each Underwriter severally agrees to indemnify and hold harmless the Company, each of its officers who signs the Registration Statement on his own behalf or pursuant to a power of attorney, each of its directors, each other Underwriter and each person (including each partner or officer thereof) who controls the Company or any such other Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Exchange Act, or the common law or otherwise and to reimburse each of them for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and 13 disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) registration statement) or any post-effective amendment thereto (including any Rule 462(b) registration statement) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, if such statement or omission described in clauses (i) and (ii) was made in reliance upon and in conformity with information furnished as herein stated in writing to the Company by or on behalf of such indemnifying Underwriter for use in the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto. The indemnity agreement of each Underwriter contained in this paragraph (b) shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the delivery of and payment for the shares. (c) Each party indemnified under the provision of paragraphs (a) and (b) of this Section 6 agrees that, upon the service of a summons or other initial legal process upon it in any action or suit instituted against it or upon its receipt of written notification of the commencement of any investigation or inquiry of, or proceeding against, it in respect of which indemnity may be sought on account of any indemnity agreement contained in such paragraphs, it will promptly give written notice (the "Notice") of such service or notification to the party or parties from whom indemnification may be sought hereunder. No indemnification provided for in such paragraphs shall be available to any party who shall fail so to give the Notice if the party to whom such Notice was not given was unaware of the action, suit, investigation, inquiry or proceeding to which the Notice would have related and was prejudiced by the failure to give the Notice, but the omission so to notify such indemnifying party or parties of any such service or notification shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of such indemnity agreement. Any indemnifying party shall be entitled at its own expense to participate in the defense of any action, suit or proceeding against, or investigation or inquiry of, an indemnified party. Any indemnifying party shall be entitled, if it so elects within a reasonable time after receipt of the Notice by giving written notice (the "Notice of Defense") to the indemnified party, to assume (alone or in conjunction with any other indemnifying party or parties) the entire defense of such action, suit, investigation, inquiry or proceeding, in which event such defense shall be conducted, at the expense of the indemnifying party or parties, by counsel chosen by such indemnifying party or parties and reasonably satisfactory to the indemnified party or parties; provided, however, that (i) if the indemnified party or parties reasonably determine that there may be a conflict between the positions of the indemnifying party or parties and of the indemnified party or parties in conducting the defense of such action, suit, investigation, inquiry or proceeding or that there may be legal defenses available to such indemnified party or parties different from or in addition to those available to the indemnifying party or parties, then counsel for the indemnified party or parties shall be entitled to conduct the defense to the extent reasonably determined by such counsel to be necessary to protect the interests of the indemnified party or parties and (ii) in any event, the indemnified party or parties shall be entitled to have counsel chosen by such indemnified party or parties participate in, but not conduct, the defense. If, within a reasonable time after receipt of the Notice, an indemnifying party gives a Notice 14 of Defense and the counsel chosen by the indemnifying party or parties is reasonably satisfactory to the indemnified party or parties, the indemnifying party or parties will not be liable under paragraphs (a) through (c) of this Section 6 for any legal or other expenses subsequently incurred by the indemnified party or parties in connection with the defense of the action, suit, investigation, inquiry or proceeding, except that (A) the indemnifying party or parties shall bear the legal and other expenses incurred in connection with the conduct of the defense as referred to in clause (i) of the proviso to the preceding sentence and (B) the indemnifying party or parties shall bear such other expenses as it or they have authorized to be incurred by the indemnified party or parties. If, within a reasonable time after receipt of the Notice, no Notice of Defense has been given, the indemnifying party or parties shall be responsible for any legal or other expenses incurred by the indemnified party or parties in connection with the defense of the action, suit, investigation, inquiry or proceeding. (d) If the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an indemnified party under paragraph (a) or (b) of this Section 6, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in paragraph (a) or (b) of this Section 6 (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each indemnifying party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, or actions in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the shares received by the Company and the total underwriting discount received by the Underwriters, as set forth in the table on the cover page of the Prospectus, bear to the aggregate public offering price of the shares. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by each indemnifying party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contributions pursuant to this paragraph (d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities, or actions in respect thereof, referred to in the first sentence of this paragraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation, preparing to defend or defending against any action or claim which is the subject of this paragraph (d). Notwithstanding the provisions of this paragraph (d), no Underwriter shall be required to contribute any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this paragraph (d) to contribute are several in proportion to their respective underwriting obligations and not joint. Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it will promptly give written notice of such service to the party or parties from whom contribution may 15 be sought, but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought from any obligation it may have hereunder or otherwise (except as specifically provided in paragraph (c) of this Section 6). (e) The Company will not, without the prior written consent of each Underwriter, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Underwriter or any person who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of such Underwriter and each such controlling person from all liability arising out of such claim, action, suit or proceeding. SECTION 7. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other obligations under Section 6 of this Agreement, the Company hereby agrees to reimburse on a monthly basis the Underwriters for all reasonable legal and other expenses incurred in connection with investigating or defending any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in paragraph (a) of Section 5 of this Agreement, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this Section 6 and the possibility that such payments might later be held to be improper; provided, however, that (i) to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them and (ii) such persons shall provide to the Company, upon request, reasonable assurances of their ability to effect any refund, when and if due. SECTION 8. TERMINATION. This Agreement may be terminated by you at any time prior to the Closing Date by giving written notice to the Company in accordance with Section 9, or if after the date of this Agreement trading in the Common Stock shall have been suspended, or if there shall have occurred (i) the engagement in hostilities or an escalation of major hostilities by the United States or the declaration of war or a national emergency by the United States on or after the date hereof, (ii) any outbreak of hostilities or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, calamity, crisis or change in economic or political conditions in the financial markets of the United States or the Company's industry sector would, in the Underwriters' reasonable judgment, make the offering or delivery of the shares impracticable, (iii) suspension of trading in securities generally or a material adverse decline in value of securities generally on the New York Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices (other than limitations on hours or numbers of days of trading) for securities on either such exchange or system, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of, or commencement of any proceeding or investigation by, any court, legislative body, agency or other governmental authority which in the Underwriters' reasonable opinion materially and adversely affects or will materially or adversely affect the business or operations of the Company, (v) declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in the Underwriters' reasonable opinion has a material adverse effect on the securities markets in the United States. If this Agreement shall be terminated pursuant to this Section 8, there shall be no liability of the Company to the Underwriters and no liability of the Underwriters to the Company; provided, however, that in the event of any such termination, the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 5 hereof. 16 SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several Underwriters to purchase and pay for the Shares shall be subject to the performance by the Company of all its obligations to be performed hereunder at or prior to the Closing Date or any later date on which Optional Shares are to be purchased, as the case may be, and to the following further conditions: (a) The Registration Statement shall have become effective; and no stop order suspending the effectiveness thereof shall have been issued and no proceedings therefor shall be pending or threatened by the Commission. (b) The legality and sufficiency of the sale of the Shares hereunder and the validity and form of the certificates representing the Shares, all corporate proceedings and other legal matters incident to the foregoing, and the form of the Registration Statement and of the Prospectus (except as to the financial statements contained therein), shall have been approved at or prior to the Closing Date by Goodwin, Procter & Hoar LLP, counsel for the Underwriters. (c) You shall have received from Testa, Hurwitz & Thibeault, LLP, counsel for the Company, an opinion, addressed to the Underwriters and dated the Closing Date, covering the matters set forth in Annex A hereto, and if Optional Shares are purchased at any date after the Closing Date, additional opinions from such counsel, addressed to the Underwriters and dated such later date, confirming that the statements expressed as of the Closing Date in such opinion remains valid as of such later date. (d) You shall be satisfied that (i) as of the Effective Date, the statements made in the Registration Statement and the Prospectus were true and correct, and neither the Registration Statement nor the Prospectus omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, respectively, not misleading; (ii) since the Effective Date, no event has occurred which should have been set forth in a supplement or amendment to the Prospectus which has not been set forth in such a supplement or amendment; (iii) since the respective dates as of which information is given in the Registration Statement in the form in which it originally became effective and the Prospectus contained therein, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the business, properties, financial condition or results of operations of the Company, whether or not arising from transactions in the ordinary course of business, and, since such dates, except in the ordinary course of business, the Company has not entered into any material transaction not referred to in the Registration Statement in the form in which it originally became effective and the Prospectus contained therein; (iv) the Commission has not issued any order preventing or suspending the use of the Prospectus or any Preliminary Prospectus filed as a part of the Registration Statement or any amendment thereto; no stop order suspending the effectiveness of the Registration Statement has been issued; and to the best knowledge of the respective signers, no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act; (v) the Company does not have any material contingent obligations which are not disclosed in the Registration Statement and the Prospectus; (vi) there are not any pending or known threatened legal proceedings to which the Company is a party or of which property of the Company is the subject which are material and which are not disclosed in the Registration Statement and the Prospectus; (vii) there are not any franchises, contracts, leases or other documents which are required to be filed as exhibits to the Registration Statement which have not been filed as required; and (vii) the representations and warranties of the Company herein are true and correct in all material respects as of the Closing Date or any later date on which Optional Shares are to be purchased, as the case may be. 17 (e) You shall have received on the Closing Date and on any later date on which Optional Shares are purchased a certificate, dated the Closing Date or such later date, as the case may be, and signed by the President and the Chief Financial Officer of the Company, stating that the respective signers of said certificate have carefully examined the Registration Statement in the form in which it originally became effective and the Prospectus contained therein and any supplements or amendments thereto, and that the statements included in clauses (i) through (viii) of paragraph (d) of this Section 9 are true and correct. (f) You shall have received from Arthur Andersen LLP, a letter or letters, addressed to the Underwriters and dated the Closing Date and any later date on which Optional Shares are purchased, confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder and based upon the procedures described in their letter delivered to you concurrently with the execution of this Agreement (the "Original Letter"), but carried out to a date not more than three business days prior to the Closing Date or such later date on which Optional Shares are purchased (i) confirming, to the extent true, that the statements and conclusions set forth in the Original Letter are accurate as of the Closing Date or such later date, as the case may be, and (ii) setting forth any revisions and additions to the statements and conclusions set forth in the Original Letter which are necessary to reflect any changes in the facts described in the Original Letter since the date of the Original Letter or to reflect the availability of more recent financial statements, data or information. The letters shall not disclose any change, or any development involving a prospective change, in or affecting the business or properties of the Company which, in your sole judgment, makes it impractical or inadvisable to proceed with the public offering of the Shares or the purchase of the Optional Shares as contemplated by the Prospectus. (g) You shall have received from Arthur Andersen LLP, a letter stating that their review of the Company's system of internal accounting controls, to the extent they deemed necessary in establishing the scope of their examination of the Company's financial statements as at [October 31, 1996], did not disclose any weakness in internal controls that they considered to be material weaknesses. (h) You shall have been furnished evidence in usual written or telegraphic form from the appropriate authorities of the several jurisdictions, or other evidence satisfactory to you, of the qualification referred to in paragraph (f) of Section 4 hereof. (i) Prior to the Closing Date, the Shares and the Warrant Shares shall have been duly authorized for listing by the Nasdaq National Market upon official notice of issuance. (j) The Warrant Agreement and the Warrants shall have been executed and delivered to the Representatives on behalf of the Company. (k) On or prior to the Closing Date, you shall have received agreements from all executive officers and directors as set forth in the Prospectus and the holders of all shares of outstanding Common Stock or options therefor, warrants or other security of the Company, in form reasonably satisfactory to H.C. Wainwright & Co., Inc., stating that without the prior written consent of H. C. Wainwright & Co., Inc., such person or entity will not, for a period of 180 days following the date the Registration Statement became effective, directly or indirectly, offer, sell, pledge, contract to sell, grant any option to purchase or otherwise dispose of any shares of Common Stock beneficially owned or otherwise held by such person or entity (including, without limitation, shares of Common Stock 18 which may be deemed to be beneficially owned by such person or entity in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock which may be issued upon exercise of a stock option or warrant) or any securities convertible into, derivative of or exercisable or exchangeable for such Common Stock; provided, however, that, in the case of any such person, he or she may transfer any or all of the Common Stock held by such person either during his or her lifetime or on death, by gift, will or intestacy, to his or her immediate family or to a trust the beneficiaries of which are exclusively such person and/or a member or members of his or her immediate family; provided, that in any such case the transferee executes a lock-up agreement in substantially the same form covering the remainder of the lock-up period. All the agreements, opinions, certificates and letters mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if Goodwin, Procter & Hoar LLP, counsel for the Underwriters, shall be satisfied that they comply in form and scope. In case any of the conditions specified in this Section 9 shall not be fulfilled, this Agreement may be terminated by you by giving notice to the Company. Any such termination shall be without liability of the Company to the Underwriters and without liability of the Underwriters to the Company; provided, however, that (i) in the event of such termination, the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 5 hereof, and (ii) if this Agreement is terminated by you because of any refusal, inability or failure on the part of the Company to perform any agreement herein, to fulfill any of the conditions herein, or to comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally upon demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the transactions contemplated hereby. SECTION 10. CONDITIONS OF THE COMPANY'S OBLIGATION. The obligation of the Company to deliver the Shares shall be subject to the conditions that (a) the Registration Statement shall have become effective and (b) no stop order suspending the effectiveness thereof shall be in effect and no proceedings therefor shall be pending or threatened by the Commission. In case either of the conditions specified in this Section 10 shall not be fulfilled, this Agreement may be terminated by the Company by giving notice to you. Any such termination shall be without liability of the Company to the Underwriters and without liability of the Underwriters to the Company; provided, however, that in the event of any such termination the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 5 hereof. SECTION 11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of the Company and the several Underwriters and, with respect to the provisions of Section 6 hereof, the several parties (in addition to the Company and the several Underwriters) indemnified under the provisions of said Section 6, and their respective personal representatives, successors and assigns. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable remedy or claim under or in respect of this Agreement or any provision herein contained. The term "successors and assigns" as herein used shall not include any purchaser, as such purchaser, of any of the shares from any of the several Underwriters. 19 SECTION 12. NOTICES. Except as otherwise provided herein, all communications hereunder shall be in writing or by telegraph and, if to the Underwriters, shall be mailed, telegraphed or delivered to H.C. Wainwright & Co., Inc., One Boston Place, Boston, Massachusetts 02108, Attention: ___________; and if to the Company, shall be mailed, telegraphed or delivered to it at its office, 70 Airport Road, Hyannis, Massachusetts 02601, Attention: Jon Anthony Glydon. All notices given by telegraph shall be promptly confirmed by letter. SECTION 13. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers, and (c) delivery and payment for the Shares under this Agreement; provided, however, that if this Agreement is terminated prior to the Closing Date, the provisions of paragraphs (k), (l) and (m) of Section 5 hereof shall be of no further force or effect. SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. SECTION 16. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws (and not the laws pertaining to conflicts of laws) of The Commonwealth of Massachusetts. SECTION 17. GENERAL. This Agreement and the Warrant Agreement constitute the entire agreement of the parties to this Agreement and the Warrant Agreement and supersede all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof and thereof. This Agreement may be executed in several counterparts, each one of which shall be an original, and all of which shall constitute one and the same document. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company and you. 20 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed copies hereof, whereupon it will become a binding agreement among the Company and the several Underwriters, including you, all in accordance with its terms. Very truly yours, EARTH AND OCEAN SPORTS, INC. By: ------------------------------------- Title: The foregoing Underwriting Agreement is hereby confirmed and accepted by us in Boston, Massachusetts as of the date first above written. H.C. WAINWRIGHT & CO., INC. CRUTTENDEN ROTH INCORPORATED By: H.C. Wainright & Co., Inc. By: ------------------------------------ Principal Acting for ourselves and on behalf of the several Underwriters named in the attached Schedule A 21 SCHEDULE I UNDERWRITERS Number of Firm Underwriters Shares to be Purchased H.C. Wainwright & Co., Inc.................................................... Cruttenden Roth Incorporated.................................................. Total .............................................................. I-1 ANNEX A MATTERS TO BE COVERED IN THE OPINION OF TESTA, HURWITZ & THIBEAULT, LLP COUNSEL FOR THE COMPANY (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, is duly qualified as a foreign corporation and in good standing in each state of the United States of America in which the nature of its business or its ownership or leasing of property requires such qualification (except where the failure to be so qualified would not have a material adverse effect on the business, properties, financial condition or results of operations of the Company) and has full corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; (ii) the authorized capital stock of the Company consists of [_________] shares of Preferred Stock, $.01 par value, none of which are outstanding, and [_________] shares of Common Stock, $.01 par value, of which there are outstanding [_________] shares; all of the outstanding shares of such capital stock (including the Firm Shares and the Optional Shares issued, if any) have been duly authorized and validly issued and are fully paid and nonassessable; any Optional Shares purchased after the Closing Date have been duly authorized and, when issued and delivered to, and paid for by, the Underwriters as provided in the Underwriting Agreement, will be validly issued and fully paid and nonassessable; and no preemptive rights of, or rights of refusal in favor of, stockholders exist with respect to the Shares, or the issue and sale thereof, pursuant to the Articles of Organization or Bylaws of the Company or any other instrument and, to the knowledge of such counsel, there are no contractual preemptive rights that have not been waived, rights of first refusal or rights of co-sale which exist with respect to the issuance and sale of the Shares by the Company; (iii) the Registration Statement has become effective under the Securities Act and, to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus is in effect and no proceedings for that purpose have been instituted or are pending or contemplated by the Commission; (iv) the Registration Statement and the Prospectus (except as to the financial statements and schedules and other financial data contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act, and with the rules and regulations of the Commission thereunder; (v) such counsel have no reason to believe that the Registration Statement (except as to the financial statements and schedules and other financial and statistical data contained therein, as to which such counsel need not express any opinion or belief) at the Effective Date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus (except as to the financial statements and schedules and other financial and statistical data contained therein, as to which such counsel need not express any opinion or belief) as of its date or at the Closing Date (or any later date on which Optional Shares are purchased), contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) the information required to be set forth in the Registration Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and 11(c) of Form S-1 is, to such counsel's knowledge, I-2 accurately and adequately set forth therein in all material respects or no response is required with respect to such Items, and the description of the Company's stock option plan and the options granted and which may be granted thereunder in the Prospectus accurately and fairly presents the information required to be shown with respect to said plan and options to the extent required by the Securities Act and the rules and regulations of the Commission thereunder; (vii) such counsel do not know of any franchises, contracts, leases, documents or legal proceedings, pending or threatened, which in the opinion of such counsel are of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement, which are not described and filed as required; (viii) there are no outstanding claims, asserted or otherwise, against the Company or any of its officers or directors, for violations of any federal or state securities laws, or any other applicable laws, relating to any purchase, sale, or redemption of, or other transaction with respect to, the Common Stock; (ix) the Underwriting Agreement and the Warrant Agreement have been duly authorized, executed and delivered by the Company; (x) the Company has full corporate power and authority to enter into the Underwriting Agreement and the Warrant Agreement and to sell and deliver the Shares and the Warrants to be sold by it to the several Underwriters; (xi) the issue and sale by the Company of the Shares and the Warrants sold by the Company as contemplated by the Underwriting Agreement and the Warrant Agreement will not conflict with, or result in a breach of, or constitute a default under the Articles of Organization or Bylaws of the Company or any agreement or instrument known to such counsel to which the Company is a party or by which any of its properties may be bound or any applicable law or regulation, or so far as is known to such counsel, any order, writ, injunction or decree, of any jurisdiction, court or governmental instrumentality; (xii) all holders of securities of the Company having rights to the registration of shares of Common Stock, or other securities, because of the filing of the Registration Statement by the Company have waived such rights or such rights have expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement; (xiii) good and marketable title to the Shares under the Underwriting Agreement, free and clear of all liens, encumbrances, equities, security interests and claims, has been transferred to the Underwriters who have severally purchased such Shares under the Underwriting Agreement, assuming for the purpose of this opinion that the Underwriters purchased the same in good faith without notice of any adverse claims; (xiv) good and marketable title to the Warrants under the Warrant Agreement, free and clear of all liens, encumbrances, equities, security interests and claims, has been transferred to the Representative who has purchased such Warrants under the Warrant Agreement, assuming for the purpose of this opinion that the Representative purchased the same in good faith without notice of any adverse claims; I-3 (xv) no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated in the Underwriting Agreement, except such as have been obtained under the Securities Act and such as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Shares by the Underwriters and the clearance of the offering with the NASD; (xvi) the Shares issued and sold by the Company and the WARRANT SHARES will be duly authorized for listing by the Nasdaq National Market upon official notice of issuance. (xvi) The Warrants conform to the description thereof in the Prospectus (it being understood that with respect to the fair presentation of such description and whether it is an accurate summary such counsel's opinion is limited to that set forth in clause (vi) above) and have been duly authorized and validly issued and are valid and binding obligations of the Company entitled to all the benefits of the Warrant Agreement and are enforceable against the Company, (except (1) as such enforcement may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent transfer, or other similar laws now or hereinafter in effect relating to or affecting creditors' rights generally and by general principles of equity, (2) that the remedies of specific performance and injunctive and other forms of relief are subject to general equitable principles, whether such enforcement is sought at law or in equity, and such enforcement may be subject to the discretion of the court before which any proceedings therefor may be brought and (3) as rights to indemnity and contribution may be limited by state or federal laws or by policies underlying such laws). The Warrant Shares have been duly authorized and reserved for issuance upon exercise of the Warrants and, when issued upon such exercise in accordance with the terms of Warrants and the Warrant Agreement, will be duly and validly issued, fully paid and nonassessable, free of preemptive rights and will conform to the description thereof in the Prospectus. ------------------------------------ I-4 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-3.1 <SEQUENCE>3 <DESCRIPTION>ARTICLES OF INCORPORATION <TEXT> EXHIBIT 3.1 THE COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE MICHAEL J. CONNOLLY, SECRETARY One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF ORGANIZATION (UNDER G.L. CHAPTER 156B) ARTICLE I The name of the corporation is: Earth and Ocean Sports, Inc. ARTICLE II The purpose of the corporation is to engage in the following business activities: To engage directly or indirectly in the acquisition of rights to and the manufacturing and/or distribution of and otherwise engaging in the business of bodyboards, surfboards, rescue boards and related products and accessories; to engage in any activities related to the foregoing, and otherwise to do any and all acts and things permitted to be done by business corporations under the provisions of Chapter 156B, as amended, of the General Laws of the Commonwealth of Massachusetts. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated. ARTICLE III The type and classes of stock and the total number of shares and par value, if any, of each type and class of stock which the corporation is authorized to issue is as follows: <TABLE> <CAPTION> WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS <S> <C> <C> <C> <C> - ---------------------------------------------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - -------------------- ----------------------------- ------------------ ----------------------------- ------------------ COMMON: None COMMON: 100,000 $0.01 - -------------------- ----------------------------- ------------------ ----------------------------- ------------------ PREFERRED: None PREFERRED: None - -------------------- ----------------------------- ------------------ ----------------------------- ------------------ </TABLE> ARTICLE IV If more than one type, class or series is authorized, a description of each with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each type and class thereof and any series now established. Not Applicable ARTICLE V The restrictions, if any, imposed by the Articles of Organization upon the transfer of shares of stock of any class are as follows: None ARTICLE VI Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: (If there are no provisions state "None.") See Continuation Sheet 1 Note: The preceding six (6) articles are considered to be permanent and may ONLY be changed by filing appropriate Articles Amendment. ARTICLE VII The effective date of the organization of the corporation shall be the date approved and filed by the Secretary of the Commonwealth. If a later effective date is desired, specify such date which shall not be more than thirty days after the date of filing. The information contained in ARTICLE VIII is NOT a PERMANENT part of the Articles of Organization and may be changed ONLY by filing the appropriate form provided therefor. ARTICLE VIII a. The street address of the corporation IN MASSACHUSETTS is: (post office boxes are not acceptable) 192 E. Emerson Road, Lexington, MA 02173 b. The name, residence and post office address (if different) of the directors and officers of the corporation are as follows: <TABLE> <CAPTION> NAME RESIDENCE POST OFFICE ADDRESS <S> <C> <C> <C> President: Jon Anthony Glydon 100 Alderbrook Lane Same West Barnstable, MA 02668 Treasurer: Jon Anthon Glydon (see above) Clerk: Edwin L. Miller, Jr. 82 Sudbury Road Same Weston, MA 02193 Directors: Thomas H. Conway 138 Baker Avenue Same Concord, MA 01742 Steven J. Roth 192 E. Emerson Road Same Lexington, MA 02173 </TABLE> c. The fiscal year (i.e., tax year) of the corporation shall end on the last day of the month of: December d. The name and BUSINESS address of the RESIDENT AGENT, of the corporation, if any, is: Edwin L. Miller, Jr., Esq. Testa, Hurwitz & Thibeault 53 State Street Boston, MA 02109 ARTICLE IX By-laws of the corporation have been duly adopted and the president, treasurer, clerk and directors whose names are set forth above, have been duly elected. IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose signature(s) appear below as incorporator(s) and whose names and business or residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do hereby associated with the intention of forming this corporation under the provisions of General Laws Chapter 156B and do hereby sign these Articles of Organization as incorporator(s) this 24th day of June, 1993 Testa, Hurwitz & Thibeault, 125 High Street, High Street Tower, Boston, MA 02110 - -------------------------------------------------------------------------------- Note: If an already-existing corporation is acting as incorporator, type in the exact name of the corporation, the state or other jurisdiction where it was incorporated, the name of the person signing on behalf of said corporation and the title he/she holds or other authority by which such action is taken. THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF ORGANIZATION GENERAL LAWS, CHAPTER 156B, SECTION 12 ------------------------------------------- I hereby certify that, upon an examination of these articles of organization, duly submitted to me, it appears that the provisions of the General Laws relative to the organization of corporations have been complied with, and I hereby approve said articles; and the filing fee in the amount of $200.00 having been paid, said articles are deemed to have been filed with me this 24th day of June, 1993 Effective Date: June 24, 1993 ------------------------------------------- MICHAEL J. CONNOLLY Secretary of State FILING FEE: 1/10 of 1% of the total amount of the authorized capital stock, but not less than $200.00. For the purpose of filing, shares of stock with a par value less than one dollar or no par stock shall be deemed to have a par value of one dollar per share PHOTOCOPY OF ARTICLES OF ORGANIZATION TO BE SENT -------------------------------------- -------------------------------------- -------------------------------------- Telephone: ---------------------------- CONTINUATION SHEET 1 ARTICLE VI. Other lawful provisions, if any, for the conduct and regulation of business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: The corporation eliminates the personal liability of each director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that, to the extent provided by applicable law, this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omission not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 or 62 or successor provisions of the Massachusetts Business Corporation Law, or (iv) for any transaction from which the direct derived an improper personal benefit. This provision shall not eliminate or limit the liability of a director of the corporation for any act or omission occurring prior to the date on which this provision becomes effective. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. Meetings of the stockholders of the corporation may be held anywhere in the United States. The directors of the corporation may make, amend or repeal the by-laws in whole or in part, except with respect to any provision thereof which by law or the by-laws requires action by the stockholders. The whole or any part of the authorized but unissued shares of capital stock of the corporation may be issued at any time or from time to time by the Board of Directors without further action by the stockholders. The corporation may become a partner in any business. FEDERAL IDENTIFICATION NO. 04-3136105 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) We, Jon Anthony Glydon , *President --------------------------------------------- and Edwin L. Miller, Jr. , *Assistant Clerk, --------------------------------------------- of Earth and Ocean Sports, Inc. , ------------------------------------------------------- (Exact name of corporation) located at 70 Airport Road, Hyannis, MA 02601 , ------------------------------------------------------- (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: Article 3 -------------------------------------------------------------------- (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were duly adopted by unanimous written consent dated January 31, 1997, by vote of: 1,000 shares of Common Stock, $.01 par value of 1,000 shares outstanding, - ------------ ----------------------------- ----- (type, class & series, if any) shares of of shares outstanding, ------------ ---------------------------- ----- (type, class & series, if any) and shares of of shares outstanding. - ------------ ---------------------------- ----- (type, class & series, if any) 1** being at least two-thirds of each type, class or series outstanding and entitled to vote thereon and each type, class or series of stock whose rights are adversely affected thereby: *Delete the inapplicable words. **Delete the inapplicable clause. 1 For amendments adopted pursuant to Chapter 156B, Section 70. 2 For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet as long as each article requiring each addition is clearly indicated. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is: <TABLE> <CAPTION> - ------------------------------------------------ ---------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------ ----------------------------- ------------- ------------------------------ ------------------- <S> <C> <C> <C> <C> TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------ ----------------------------- ------------- ------------------------------ ------------------- Common: None Common: 100,000 $.01 - ------------------ ----------------------------- ------------- ------------------------------ ------------------- - ------------------ ----------------------------- ------------- ------------------------------ ------------------- Preferred: None Preferred: None - ------------------ ----------------------------- ------------- ------------------------------ ------------------- - ------------------ ----------------------------- ------------- ------------------------------ ------------------- Change the total authorized to: - ------------------------------------------------ ---------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------ ----------------------------- ------------- ------------------------------ ------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------ ----------------------------- ------------- ------------------------------ ------------------- Common: None Common: 1,500,000 $.01 - ------------------ ----------------------------- ------------- ------------------------------ ------------------- - ------------------ ----------------------------- ------------- ------------------------------ ------------------- Preferred: None Preferred: None - ------------------ ----------------------------- ------------- ------------------------------ ------------------- - ------------------ ----------------------------- ------------- ------------------------------ ------------------- </TABLE> VOTED: That Article III of the Articles of Organization of the Corporation is hereby amended such that the total number of shares and par value of the Common Stock which the Corporation is authorized to issue is as follows: 1,500,000 shares, par value $0.01 per share. VOTED: That each of the 1,000 shares of Common Stock, par value $.01 per share, of the Corporation issued and outstanding at the close of business on February 12, 1997 are automatically split and converted into 750 shares of Common Stock, par value $0.01 per share. The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: ---------------------- SIGNED UNDER THE PENALTIES OF PERJURY, this 13th day of February, 1997, /s/ Jon Anthony Glydon , *President, - ------------------------------------------------------------ /s/ Edwin L. Miller, Jr. , *Assistant Clerk - ------------------------------------------------------------ *Delete the inapplicable words. THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) ================================================== I hereby approve the within Articles of Amendment, and the filing fee in the amount of $____having been paid, said article is deemed to have been filed with me this ____ day of _________________ 19______. Effective date: ---------------------------- WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION PHOTOCOPY OF DOCUMENT TO BE SENT TO: Edwin L. Miller, Jr., Esq. ------------------------------------- Testa, Hurwitz & Thibeault, LLP ------------------------------------- 125 High Street, High Street Tower Boston, MA 02110 ------------------------------------- </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-3.2 <SEQUENCE>4 <DESCRIPTION>RESTATED ARTICLES OF ORGANIZATION <TEXT> EXHIBIT 3.2 FEDERAL IDENTIFICATION No. 04-3195264 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 RESTATED ARTICLES OF ORGANIZATION (General Laws, Chapter 156B, Section 74) We, Jon A. Glydon, President, and Edwin L. Miller, Jr., Clerk, of Earth and Ocean Sports, Inc. (Exact name of corporation) located at 70 Airport Road, Hyannis, Massachusetts 02601 (Street address of corporation Massachusetts) do hereby certify that the following Restatement of the Articles of Organization was duly adopted by unanimous written consent of the directors and stockholders of the Corporation dated _________________: _____________ shares of ______________ of _____________ shares outstanding being at least two-thirds of each type, class or series outstanding and entitled to vote thereon and of each type, class or series of stock whose rights are adversely affected thereby: ARTICLE I THE NAME OF THE CORPORATION IS: EARTH AND OCEAN SPORTS, INC. ARTICLE II The purpose of the corporation is to engage in the following business activities: To engage, directly or indirectly, in the business of developing, acquiring, manufacturing and distributing sports products and related products and accessories; to engage in all activities related to the foregoing; and otherwise to do any and all acts and things permitted to be done by business corporations under the provisions of Chapter 156B, as amended, of the General Laws of the Commonwealth of Massachusetts. ARTICLE III State the total number of shares and par value, if any, of each class of stock which the corporation is authorized to issue <TABLE> <CAPTION> - ------------------------------------------------- -------------------------------------------------------------------- WITHOUT PAR VALUE WITH PAR VALUE - ------------------- ----------------------------- ---------------- ------------------------------- ------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------- ----------------------------- ---------------- ------------------------------- ------------------- <S> <C> <C> <C> <C> Common: None Common 15,000,000 $0.01 - ------------------- ----------------------------- ---------------- ------------------------------- ------------------- Preferred: None Preferred: 500,000 $0.01 - ------------------- ----------------------------- ---------------- ------------------------------- ------------------- </TABLE> ARTICLE IV If more than one class of stock is authorized, state a distinguishing designation for each class. Prior to the issuance of any shares of a class, if shares of another class are outstanding, the corporation must provide a description of the preferences, voting powers, qualifications, and special or relative rights or privileges of that class and of each other class of which shares are outstanding and of each series then established within any class. See Continuation Pages 4-1 through 4-2. ARTICLE V The restrictions, if any, imposed by the Articles of Organization upon the transfer of shares of stock of any class are: None. ARTICLE VI **Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: See Continuation Page 6-1. **If there are no provisions state "None". NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT. ARTICLE VII The effective date of the restated Articles of Organization of the corporation shall be the date approved and filed by the Secretary of the Commonwealth. If a later effective date is desired, specify such date which shall not be more than thirty days after the date of filing. ARTICLE VIII THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE ARTICLES OF ORGANIZATION. a. The street address (post office boxes are not acceptable) of the principal office of the Corporation in Massachusetts is: b. The name, residential address and post office address of each director and officer of the corporation is as follows: <TABLE> <CAPTION> NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS <S> <C> <C> <C> President: Jon A. Glydon 100 Alderbrook Lane 70 Airport Road West Barnstable, MA 02668 Hyannis, Massachusetts 02601 Treasurer: Brooks R. Herrick 30 Larkspor Road 70 Airport Road E. Greenwich, RI 02818 Hyannis, Massachusetts 02601 Clerk: Edwin L. Miller, Jr. 82 Sudbury Road c/o Testa, Hurwitz & Thibeault, LLP Weston, MA 02193 125 High Street Boston, MA 02109 Directors: Jon A. Glydon 100 Alderbrook Lane 70 Airport Road West Barnstable, MA 02668 Hyannis, Massachusetts 02601 Steven J. Roth 192 East Emerson Road 92 Hayden Avenue Lexington, MA 02173 Lexington, MA 02173 Thomas H. Conway 138 Barker Avenue 92 Hayden Avenue Concord, MA 01742 Lexington, MA 02173 Dr. James J. McKenney 5 Winthrop Street 5 Winthrop Street Lexington, MA 02173 Lexington, MA 02173 Gustav A. Christensen 3 Idlewild Drive 3 Idlewild Drive Lexington, MA 02173 Lexington, MA 02173 </TABLE> c. The fiscal year (i.e., tax year) of the corporation shall end on the last day of the month of: October. d. The name and business address of the resident agent, if any, of the corporation is: Edwin L. Miller, Jr. Testa, Hurwitz & Thibeault, LLP 125 High Street Boston, MA 02109 **We further certify that the foregoing Restated Articles of Organization affect no amendments to the Articles of Organization of the corporation as heretofore amended, except amendments to the following articles. Briefly describe amendments below: Article II -- Amend purpose clause. Article III -- Authorize class of preferred stock and additional shares of common stock. Article IV -- State the rights of the authorized classes of stock. Article VI -- State other corporate governance provisions. SIGNED UNDER THE PENALTIES OF PERJURY, this ____ day of ___________________, 1997. ______________________________________________________________, President ________________________________________________________________, Clerk/ THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) ------------------------------------------- I hereby approve the within Restated Articles of Organization and, the filing fee in the amount of $___________ having been paid, said articles are deemed to have been filed with me this ____ day of _____________________, 1997. Effective Date:____________________________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION PHOTOCOPY OF DOCUMENT TO BE SENT TO: Edwin L. Miller, Jr., Esq. Testa, Hurwitz & Thibeault, LLP 125 High Street Boston, MA 02109 Telephone: 617-248-7516 EARTH AND OCEAN SPORTS, INC. Restated Articles of Organization ARTICLE 4 The total number of shares of all classes of stock which the Corporation shall have authority to issue is 15,500,000 shares, consisting of the following classes of stock: (A) 15,000,000 shares of Common Stock, $.01 par value per share (the "Common Stock"), and (B) 500,000 shares of Preferred Stock, $.01 par value per share (the "Preferred Stock"). The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of each class of authorized capital stock of the Corporation are as follows: A. COMMON STOCK 1. After the requirements with respect to preferential dividends on the Preferred Stock shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. 2. After distribution in full of the preferential amount to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of the Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation, tangible or intangible, of whatever kind available for distribution to the stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. 3. Except as may otherwise be required by law or the provisions of these Restated Articles, or by the Board of Directors pursuant to authority granted in these Restated Articles, each holder of Common Stock shall have one vote in respect of each share of stock held by him in all matters voted upon by the stockholders. B. UNDESIGNATED PREFERRED STOCK Up to 500,000 shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors may determine. Each series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. Except as to the relative preferences, powers, qualifications, rights and privileges referred to below, in respect of any or all of which there may be variations between different series, all shares of Preferred Stock shall be identical. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes. The Board of Directors is expressly authorized, subject to the limitations prescribed by law and the provisions of these Restated Articles of Organization, to provide by adopting a vote or votes, a certificate of which shall be filed in accordance with the Business Corporation Law of the Commonwealth of Massachusetts, for the issuance of the Preferred Stock in one or more series, each Continuation Page 4-1 with such designations, preferences, voting powers, qualifications, special or relative rights and privileges as shall be stated in the vote or votes creating such series. The authority of the Board of Directors with respect to each such series shall include without limitation of the foregoing the right to determine and fix: (1) The distinctive designation of such series and the number of shares to constitute such series; (2) The rate at which dividends on the shares of such series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative, and whether the shares of such series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so on what terms; (3) The right, if any, of the Corporation to redeem shares of the particular series and, if redeemable, the price, terms and manner of such redemption; (4) The special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such series shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (5) The terms and conditions, if any, upon which shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; (6) The obligation, if any, of the Corporation to retire or purchase shares of such series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation; (7) Voting rights, if any; (8) Limitations, if any, on the issuance of additional shares of such series or any shares of any other series of Preferred Stock; and (9) Such other preferences, powers, qualifications, special or relative rights and privileges thereof as the Board of Directors may deem advisable and are not inconsistent with law and the provisions of these Restated Articles. Continuation Page 4-2 EARTH AND OCEAN SPORTS, INC. Restated Articles of Organization ARTICLE 6 1. The Corporation eliminates the personal liability of each director to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that, to the extent provided by applicable law, this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 or 62 or successor provisions of the Massachusetts Business Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. This provision shall not eliminate or limit the liability of a director of the Corporation for any act or omission occurring prior to the date on which this provision becomes effective. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. 2. Meetings of the stockholders of the Corporation may be held anywhere in the United States. 3. The directors of the Corporation may make, amend or repeal the by-laws in whole or in part, except with respect to any provision thereof which by law or the by-laws requires action by the stockholders. 4. The whole or any part of the authorized but unissued shares of capital stock of the Corporation may be issued at any time or from time to time by the Board of Directors without further action by the stockholders. 5. The Corporation may become a partner in any business. 6. The Corporation, by vote of a majority of the stock outstanding and entitled to vote thereon (or if there are two or more classes of stock entitled to vote as separate classes, then by vote of a majority of each such class of stock outstanding) may (i) authorize any amendment to its Restated Articles of Organization, (ii) authorize the sale, lease or exchange of all or substantially all of the Corporation's property and assets, including its goodwill and (iii) approve a merger or consolidation of the Corporation with or into any other corporation, provided that such amendment, sale, lease, exchange, merger or consolidation shall have been approved by the Board of Directors. Continuation Page 6-1 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-3.3 <SEQUENCE>5 <DESCRIPTION>BY-LAWS <TEXT> EXHIBIT 3.3 DOCUMENT MANAGEMENT SOLUTIONS, INC. **************** BY-LAWS **************** ARTICLE I Stockholders 1. Annual Meeting. The annual meeting of stockholders shall be held on the second Tuesday of May in each year (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day) at 10:00 A.M. unless a different hour is fixed by the Directors or the President and stated in the notice of the meeting. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Articles of Organization or by these By-laws, may be specified by the Directors or the President. In the event an annual meeting has not been held on the date fixed in these By-laws, a special meeting in lieu of the annual meeting may be held with all the force and effect of an annual meeting. 2. Special Meetings. Special meetings of stockholders may be called by the President or by the Directors. Upon written application of one or more stockholders who hold at least 10% in interest of the capital stock entitled to vote at a meeting, a special meeting shall be called by the Clerk, or in the case of the death, absence, incapacity or refusal of the Clerk, by another officer. 3. Place of Meetings. All meetings of stockholders shall be held at the principal office of the corporation unless a different place (within or without Massachusetts, but within the United States) is fixed by the Directors or the President and stated in the notice of the meeting. 4. Notice of Meetings. A written notice of the place, date and hour of all meetings of stockholders stating the purpose of the meeting shall be given by the Clerk or an Assistant -2- Clerk or by the person calling the meeting at least seven days before the meeting or such longer period as is required by law to each stockholder entitled to vote thereat and to each stockholder who under the law, under the Articles of Organization or under these By-laws, is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. Whenever notice of a meeting is required to be given a stockholder under any provision of the Massachusetts Business Corporation Law or of the Articles of Organization or these By-laws, a written waiver thereof, executed before or after the meeting by such stockholder or his attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice. 5. Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum, but a lesser number may adjourn any meeting from time to time without further notice; except that, if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class, a quorum shall consist of the holders of a majority in interest of the stock of that class issued, outstanding and entitled to vote. 6. Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote owned by him and a proportionate vote for a fractional share, unless otherwise provided by the Articles of Organization in the case that the corporation has two or more classes or series of stock. Capital stock shall not be voted if any installment of the subscription therefor has been duly demanded in accordance with the law of the Commonwealth of Massachusetts and is overdue and unpaid. Stockholders may vote either in person or by written proxy. Proxies shall be filed with the clerk of the meeting, or of any adjournment thereof, before being voted. No proxy dated more than six months before the date named therein shall be valid and no proxy shall be valid after the final adjournment of such meeting. Notwithstanding the provisions of the preceding sentence, a proxy coupled with an interest sufficient in law to support an irrevocable power, including, without limitation, an interest in shares or in the corporation generally, may be -3- made irrevocable if it so provides, need not specify the meeting to which it relates, and shall be valid and enforceable until the interest terminates, or for such shorter period as may be specified in the proxy. Except as otherwise limited therein, proxies shall entitle the persons named therein to vote at any adjournment of such meeting but shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. 7. Action at Meeting. When a quorum is present, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter), except where a larger vote is required by law, the Articles of Organization or these By-laws, shall decide any matter to be voted on by the stockholders. Any election of directors or officers by the stockholders shall be determined by a plurality of the votes cast by stockholders entitled to vote at the election. Any such elections shall be by ballot if so requested by any stockholder entitled to vote thereon. The corporation shall not directly or indirectly vote any share of its own stock. 8. Action without Meeting. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. -4- ARTICLE II Directors 1. Powers. The business of the corporation shall be managed by a Board of Directors who may exercise all the powers of the corporation except as otherwise provided by law, by the Articles of Organization or by these By-laws. In the event of vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2. Election. A Board of Directors shall be elected by the stockholders at the annual meeting. The number of directors shall be fixed by the stockholders (except as that number may be enlarged by the Board of Directors acting pursuant to Section 4 of this Article), but shall be not less than three, except that whenever there shall be only two stockholders the number of directors shall be not less than two and whenever there shall be only one stockholder or prior to the issuance of any stock, there shall be at least one director, and shall be not more than nine. 3. Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from the enlargement of the Board, may be filled by the stockholders or, in the absence of stockholder action, by the Directors. 4. Enlargement of the Board. The Board of Directors may be enlarged by the stockholders at any meeting or by vote of a majority of the Directors then in office. 5. Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-laws, Directors shall hold office until the next annual meeting of stockholders and until their successors are chosen and qualified. Any Director may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. -5- 6. Removal. A Director may be removed from office (a) with or without cause by the vote of the holders of a majority of the shares entitled to vote in the election of Directors, provided that the Directors of a class elected by a particular class of stockholders may be removed only by the vote of the holders of a majority of the shares of the particular class of stockholders entitled to vote for the election of such Directors; or (b) for cause by vote of a majority of the Directors then in office. A Director may be removed for cause only after a reasonable notice and opportunity to be heard before the body proposing to remove him. 7. Meetings. Regular meetings of the Directors may be held without call or notice at such places and at such times as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice at the same place as the annual meeting of stockholders. Special meetings of the Directors may be held at any time and place designated in a call by the President or two or more Directors. 8. Telephone Conference Meetings. Members of the Board of Directors may participate in a meeting of the board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 9. Notice of Meetings. Notice of all special meetings of the Directors shall be given to each Director by the Secretary, or Assistant Secretary, or if there be no Secretary or Assistant Secretary, by the Clerk, or Assistant Clerk, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or by telephone or by telegram sent to his business or home address at least twenty-four hours in advance of the meeting, or by written notice mailed to his business or home address at least forty-eight hours in advance of the meeting. Notice of a meeting need not be given to any Director if a written waiver of notice, executed by him before or after the -6- meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purposes of the meeting. 10. Quorum. At any meeting of the Directors, a majority of the Directors then in office shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice. 11. Action at Meeting. At any meeting of the Directors at which a quorum is present, a majority of the Directors present may take any action on behalf of the Board except to the extent that a larger number is required by law or the Articles of Organization or these By-laws. 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Directors may be taken without a meeting, if all the Directors consent to the action in writing and the written consents are filed with the records of the meetings of Directors. Such consents shall be treated for all purposes as a vote at a meeting. 13. Committees. The Directors may, by vote of a majority of the Directors then in office, elect from their number an executive or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Articles of Organization or these By-laws they are prohibited from delegating to such committee. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By-laws for the Directors. ARTICLE III Officers 1. Enumeration. The officers of the corporation shall consist of a President, a Treasurer, a Clerk, and such other officers, including a Chairman of the Board of Directors, one -7- or more Vice-Presidents, Assistant Treasurers, Assistant Clerks, Secretary and Assistant Secretaries as the Directors may determine. 2. Election. The President, Treasurer and Clerk shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Directors at such meeting or at any other meeting. 3. Qualification. The President may, but need not be, a Director. No officer need be a stockholder. Any two or more offices may be held by the same person, provided that the President and Clerk shall not be the same person. The Clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. 4. Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-laws, the President, Treasurer and Clerk shall hold office until the first meeting of the Directors following the next annual meeting of stockholders and until their successors are chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the next annual meeting of stockholders and until their successors are chosen and qualified, unless a shorter term is specified in the vote choosing or appointing them. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 5. Removal. The Directors may remove any officer with or without cause by vote of a majority of the Directors then in office; provided, that an officer may be removed for cause only after a reasonable notice and opportunity to be heard before the Board of Directors. 6. President, Chairman of the Board, and Vice-President. The President shall, unless otherwise provided by the Directors, be the chief executive officer of the corporation and shall, subject to the direction of the Directors, have general supervision and control of its business. Unless otherwise provided by the Directors he shall preside, when present, at all meetings of -8- stockholders and, unless a Chairman of the Board has been elected and is present, of the Directors. If a Chairman of the Board of Directors is elected he shall preside at all meetings of the Board of Directors at which he is present. The Chairman shall have such other powers as the Directors may from time to time designate. Any Vice-President shall have such powers as the Directors may from time to time designate. 7. Treasurer and Assistant Treasurer. The Treasurer shall, subject to the direction of the Directors, have general charge of the financial affairs of the corporation and shall cause accurate books of account to be kept. He shall have custody of all funds, securities, and valuable documents of the corporation, except as the Directors may otherwise provide. Any Assistant Treasurer shall have such powers as the Directors may from time to time designate. 8. Clerk and Assistant Clerks. The Clerk shall record all proceedings of the stockholders in a book to be kept therefor. Unless a transfer agent is appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the principal office of the corporation or at his office, the stock and transfer records of the corporation, in which are contained the names of all stockholders and the record address and the amount of stock held by each. In case a Secretary is not elected, the Clerk shall record all proceedings of the Directors in a book to be kept therefor. In the absence of the Clerk from any meeting of the stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by the person presiding at the meeting, shall perform the duties of the Clerk. Any Assistant Clerk shall have such additional powers as the Directors may from time to time designate. 9. Secretary and Assistant Secretaries. If a Secretary is elected, he shall keep a record of the meetings of the Directors and in his absence, an Assistant Secretary, if one be -9- elected, otherwise a Temporary Secretary designated by the person presiding at the meeting, shall keep a record of the meetings of the Directors. Any Assistant Secretary shall have such additional powers as the Directors may from time to time designate. 10. Other Powers and Duties. Each officer shall, subject to these By-laws, have in addition to the duties and powers specifically set forth in these By-laws, such duties and powers as are customarily incident to his office, and such duties and powers as the Directors may from time to time designate. ARTICLE IV Capital Stock 1. Certificates of Stock. Subject to the provisions of Section 2 below, each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the President or a Vice-President, and by the Treasurer or an Assistant Treasurer; provided, however, such signatures may be facsimiles if the certificate is signed by a transfer agent, or by a registrar, other than a Director, officer or employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue. Every certificate issued for shares of stock at a time when such shares are subject to any restriction on transfer pursuant to the Articles of Organization, these By-laws or any agreement to which the corporation is a party shall have the restriction noted conspicuously on the certificate and shall also set forth on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without -10- charge. Every stock certificate issued by the corporation at a time when it is authorized to issue more than one class or series of stock shall set forth upon the face or back of the certificate either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series, if any, authorized to be issued, as set forth in the Articles of Organization, or a statement of the existence of such preferences, powers, qualifications, and rights, and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. 2. Stockholder Open Accounts. The corporation may maintain or caused to be maintained stockholder open accounts in which may be recorded all stockholders' ownership of stock and all changes therein. Certificates need not be issued for shares so recorded in a stockholder open account unless requested by the stockholder. 3. Transfers. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred in the records of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor, properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the corporation or its transfer agent may reasonably require. When such stock certificates are thus properly surrendered to the corporation or its transfer agent, the corporation or transfer agent shall cause the records of the corporation to reflect the transfer of the shares of stock. Except as may be otherwise required by law, by the Articles of Organization or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown in its records as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereof, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws. It shall be the duty of each stockholder to notify the corporation of his post office address. -11- 4. Record Date. The Directors may fix in advance a time which shall be not more than sixty (60) days before the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date the Directors may for any of such purposes close the transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed, the record date for determining stockholders having the right to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors acts with respect thereto. 5. Replacement of Certificates. In case of the alleged loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms and conditions as the Directors may prescribe. 6. Issue of Capital Stock. The whole or any part of the then authorized but unissued shares of each class of stock may be issued at any time or from time to time by the Board of Directors without action by the stockholders. 7. Reacquisition of Stock. Shares of stock previously issued which have been reacquired by the corporation, may be restored to the status of authorized but unissued shares by vote of the Board of Directors, without amendment of the Articles of Organization. -12- ARTICLE V Provisions Relative to Directors, Officers, Stockholders and Employees 1. Certain Contracts and Transactions. In the absence of fraud or bad faith, no contract or transaction by this corporation shall be void, voidable or in any way affected by reason of the fact that the contract or transaction is (a) with one or more of its officers, Directors, stockholders or employees, (b) with a person who is in any way interested in this corporation or (c) with a corporation, organization or other concern in which an officer, Director, stockholder or employee of this corporation is an officer, director, stockholder, employee or in any way interested. The provisions of this section shall apply notwithstanding the fact that the presence of a Director or stockholder, with whom a contract or transaction is made or entered into or who is an officer, director, stockholder or employee of a corporation, organization or other concern with which a contract or transaction is made or entered into or who is in any way interested in such contract or transaction, was necessary to constitute a quorum at the meeting of the Directors (or any authorized committee thereof) or stockholders at which such contract or transaction was authorized and/or that the vote of such Director or stockholder was necessary for the adoption of such contract or transaction, provided that if said interest was material, it shall have been known or disclosed to the Directors or stockholders voting at said meeting on said contract or transaction. A general notice to any person voting on said contract or transaction that an officer, Director, stockholder or employee has a material interest in any corporation, organization or other concern shall be sufficient disclosure as to such officer, Director, stockholder or employee with respect to all contracts and transactions with such corporation, organization or other concern. This section shall be subject to amendment or repeal only by action of the stockholders. 2. Indemnification. Each Director and officer of the corporation, and any person who, at the request of the corporation, serves as a director or officer of another organization shall -13- be indemnified by the corporation against any cost, expense (including attorneys' fees), judgment, liability and/or amount paid in settlement reasonably incurred by or imposed upon him in connection with any action, suit or proceeding (including any proceeding before any administrative or legislative body or agency), to which he may be made a party or otherwise involved or with which he shall be threatened, by reason of his being, or related to his status as, a Director or officer of the corporation or of any other organization, which other organization he serves or has served as director or officer at the request of the corporation (whether or not he continues to be an officer or Director of the corporation or such other organization at the time such action, suit or proceeding is brought or threatened), unless such indemnification is prohibited by the Business Corporation Law of the Commonwealth of Massachusetts. The foregoing right of indemnification shall be in addition to any rights to which any such person may otherwise be entitled and shall inure to the benefit of the executors or administrators of each such person. The corporation may pay the expenses incurred by any such person in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit, or proceeding, upon receipt of an undertaking by such person to repay such payment if it is determined that such person is not entitled to indemnification hereunder. This section shall not affect any rights to indemnification to which corporate personnel other than Directors and officers may be entitled by contract or otherwise under law. This section shall be subject to amendment or repeal only by action of the stockholders. ARTICLE VI Miscellaneous Provisions 1. Fiscal Year. Except as from time to time otherwise determined by the Directors, the fiscal year of the corporation shall be the twelve (12) months ending the last day of December. Following any change in the fiscal year previously adopted, a certificate of such -14- change, signed under the penalties of perjury by the Clerk or an Assistant Clerk, shall be filed forthwith with the state secretary. 2. Seal. The seal of this corporation shall, subject to alteration by the Directors, bear its name, the word "Massachusetts", and the year of its incorporation. 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized to be executed by an officer of the corporation in its behalf shall be signed by the President or the Treasurer except as the Directors may generally or in particular cases otherwise determine. 4. Voting of Securities. Except as the Directors may otherwise designate, the President or Treasurer may waive notice of, and appoint any person or persons to act as proxy or attorney in fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by the corporation. 5. Corporate Records. The original, or attested copies, of the Articles of Organization, By-laws and records of all meetings of incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation or at an office of its transfer agent or of the Clerk or of its resident agent. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose but not to secure a list of stockholders or other information for the purpose of selling said list or information or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. 6. Articles of Organization. All references in these By-laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation, as amended and in effect from time to time. -15- 7. Amendments. These By-laws, to the extent provided in these By-laws, may be amended or repealed, in whole or in part, and new By-laws adopted either (a) by the stockholders at any meeting of the stockholders by the affirmative vote of the holders of at least a majority in interest of the capital stock present and entitled to vote, provided that notice of the proposed amendment or repeal or of the proposed making of new By-laws shall have been given in the notice of such meeting, or (b) if so authorized by the Articles of Organization, by the Board of Directors at any meeting of the Board by the affirmative vote of a majority of the Directors then in office, but no amendment or repeal of a By-law shall be voted by the Board of Directors and no new By-law shall be made by the Board of Directors which alters the provisions of these By-laws with respect to removal of Directors, or the election of committees by Directors and the delegation of powers thereto, nor shall the Board of Directors make, amend or repeal any provision of the By-laws which by law, the Articles of Organization or the By-laws requires action by the stockholders. Not later than the time of giving notice of the meeting of stockholders next following the making, amending, or repealing by the Directors of any By-law, notice thereof stating the substance of such change shall be given to all stockholders entitled to vote on amending the By-laws. Any By-law or amendment of a By-law made the Board of Directors may be amended or repealed by the stockholders by affirmative vote as above provided in this Section 7. </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-3.4 <SEQUENCE>6 <DESCRIPTION>RESTATED BY-LAWS <TEXT> EXHIBIT 3.4 EARTH AND OCEAN SPORTS, INC. RESTATED BY-LAWS ARTICLE I Stockholders 1. Annual Meeting. The annual meeting of stockholders shall be held on the date and at the time fixed, from time to time, by the directors, provided that the date so fixed is within six months of the end of the fiscal year of the corporation. If the day fixed for the annual meeting shall fall on a legal holiday, the meeting shall be held on the next succeeding day not a legal holiday. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Articles of Organization or by these By-laws, may be specified by the Directors or the President. In the event an annual meeting has not been held on the date fixed in these By-laws, a special meeting in lieu of the annual meeting may be held with all the force and effect of an annual meeting. 2. Special Meetings. Special meetings of stockholders may be called by the President or by the Directors. Upon written application of one or more stockholders who hold at least 10% of the capital stock entitled to vote at a meeting, a special meeting shall be called by the Clerk, or in case of the death, absence, incapacity or refusal of the Clerk, by any other officer. Notwithstanding the immediately preceding sentence, if the corporation has a class of voting stock registered under the Securities Exchange Act of 1934, as amended, upon written application of one or more stockholders who hold at least 75% in interest of the capital stock entitled to vote at a meeting, a special meeting shall be called by the Clerk, or in case of the death, absence, incapacity or refusal of the Clerk, by any other officer. 3. Place of Meetings. All meetings of stockholders shall be held at the principal office of the corporation unless a different place (within or without Massachusetts, but within the United States) is fixed by the Directors or the President and stated in the notice of the meeting. 4. Notice of Meetings. A written notice of the place, date and hour of all meetings of stockholders stating the purpose of the meeting shall be given by the Clerk or an Assistant Clerk or by the person calling the meeting at least seven days before the meeting to each stockholder entitled to vote thereat and to each stockholder who under the law, under the Articles of Organization or under these By-laws, is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. Whenever notice of a meeting is required to be given a stockholder under any provision of the Massachusetts Business Corporation Law or of the Articles of Organization or these By-laws, a written waiver thereof, executed before or after the meeting by such stockholder or his attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice. 5. Notice of Stockholder Business. The following provisions of this Section 5 shall apply to the conduct of business at any meeting of the stockholders. (As used in this Section 5, the term annual meeting shall include a special meeting in lieu of annual meeting.) (a) At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the corporation who is a stockholder of record at the time of giving of the notice provided for in paragraph (b) of this Section 5, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in paragraph (b) of this Section 5. (b) For business to be properly brought before any meeting of the stockholders by a stockholder pursuant to clause (iii) of paragraph (a) of this By-law, the stockholder must have given timely notice thereof in writing to the Clerk of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation (i) in the case of any annual meeting, not less than sixty days nor more than ninety days prior to the date specified in Section 1 above for such annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if a special meeting in lieu of annual meeting of stockholders is to be held on a date prior to the date specified in Section 1 above, and if less than seventy days' notice or prior public disclosure of the date of such special meeting in lieu of annual meeting is given or made, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the tenth day following the earlier of the date on which notice of the date of such special meeting in lieu of annual meeting was mailed or the day on which public disclosure was made of the date of such special meeting in lieu of annual meeting; and (ii) in the case of a special meeting (other than a special meeting in lieu of an annual meeting), not later than the tenth day following the earlier of the day on which notice of the date of the scheduled meeting was mailed or the day on which public disclosure was made of the date of the scheduled meeting. A stockholder's notice to the Clerk shall set forth as to each matter the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, the name and address of the beneficial owner, if any, on whose behalf the proposal is made, and the name and address of any other stockholders or beneficial owners known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder of record, by the beneficial owner, if any, on whose behalf the proposal is made and by any other stockholders or beneficial owners known by such stockholder of record and/or of the beneficial owner, if any, on whose behalf the proposal is made, in such proposed business and any material interest of any other stockholders or beneficial owners known by such stockholder to be supporting such proposal in such proposed business, to the extent known by such stockholder. (c) Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in these By-laws. The person presiding at the meeting shall, if the facts warrant, determine that business was not properly brought before the meeting and in accordance with the procedures prescribed by these By-laws, and if he should so determine, he shall so declare at the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (or any successor provision), and the rules and regulations thereunder with respect to the matters set forth in this By-law. (d) This provision shall not prevent the consideration and approval or disapproval at the meeting of reports of officers, Directors and committees of the Board of Directors, but, in connection with such reports, no new business shall be acted upon at such meeting unless properly brought before the meeting as herein provided. 6. Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum, but a lesser number may adjourn any meeting from time to time without further notice; except that, if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class, a quorum shall consist of the holders of a majority in interest of the stock of that class issued, outstanding and entitled to vote. 7. Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote owned by him and a proportionate vote for a fractional share, unless otherwise provided by the Articles of Organization in the case that the corporation has two or more classes or series of stock. Capital stock shall not be voted if any installment of the subscription therefor has been duly demanded in accordance with the law of the Commonwealth of Massachusetts and is overdue and unpaid. Stockholders may vote either in person or by written proxy dated not more than six months before the meeting named therein. Proxies shall be filed with the clerk of the meeting, or of any adjournment thereof, before being voted. Except as otherwise limited therein, proxies shall entitle the persons named therein to vote at any adjournment of such meeting but shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. 8. Action at Meeting. When a quorum is present, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter), except where a larger vote is required by law, the Articles of Organization or these By-laws, shall decide any matter to be voted on by the stockholders. Any election of directors or officers by the stockholders shall be determined by a plurality of the votes cast by stockholders entitled to vote at the election. Any such elections shall be by ballot if so requested by any stockholder entitled to vote thereon. The corporation shall not directly or indirectly vote any share of its own stock. 9. Action Without Meeting. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE II Directors 1. Powers. The business of the corporation shall be managed by a Board of Directors who may exercise all the powers of the corporation except as otherwise provided by law, by the Articles of Organization or by these By-laws. In the event of vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2. Election. A Board of Directors shall be elected by the stockholders at the annual meeting. The number of directors shall be fixed by the stockholders (except as that number may be enlarged by the Board of Directors acting pursuant to Section 4 of this Article), but shall be not less than three, except that whenever there shall be only two stockholders the number of directors shall be not less than two and whenever there shall be only one stockholder or prior to the issuance of any stock, there shall be at least one director, and shall be not more than nine. Notwithstanding the foregoing provisions, if the corporation is a "registered corporation" within the meaning of Section 50A of the Massachusetts Business Corporation Law and has not elected, pursuant to paragraph (b) of such Section 50A, to be exempt from the provisions of paragraph (a) of such Section 50A, then: (i) In accordance with paragraph (d), clause (iv) of such Section 50A, the number of Directors shall be fixed only by vote of the Board of Directors. (ii) In accordance with paragraph (a) of such Section 50A, the Directors of the corporation shall be classified with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible; the term of office of those of the first class ("Class I Directors") to continue until the first annual meeting following the date the corporation becomes subject to such paragraph (a) and until their successors are duly elected and qualified; the term of office of those of the second class ("Class II Directors") to continue until the second annual meeting following the date the corporation becomes subject to such paragraph (a) and until their successors are duly elected and qualified; and the term of office of those of the third class ("Class III Directors") to continue until the third annual meeting following the date the corporation becomes subject to such paragraph (a) and until their successors are duly elected and qualified. At each annual meeting of the corporation, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a term continuing until the annual meeting held in the third year following the year of their election and until successors are duly elected and qualified. 3. Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from the enlargement of the Board, may be filled by the stockholders or, in the absence of stockholder action, by the Directors. Each such successor shall hold office for the unexpired term of his or her predecessor and until his or her successor is chosen and qualified or until his or her earlier death, resignation or removal. Notwithstanding the foregoing provisions, if the Directors of the corporation are classified with respect to the time for which they severally hold office pursuant to paragraph (a) of Section 50A of the Massachusetts Business Corporation Law, as it may be amended from time to time, any vacancy in the Board of Directors, however occurring, shall be filled in accordance with the provisions of paragraph (d) of such Section 50A. 4. Enlargement of the Board. The Board of Directors may be enlarged by the stockholders at any meeting or by vote of a majority of the Directors then in office. Notwithstanding the foregoing provisions, if the Directors of the corporation are classified with respect to the time for which they severally hold office pursuant to paragraph (a) of Section 50A of the Massachusetts Business Corporation Law, as it may be amended from time to time, the Board of Directors may be enlarged only in accordance with the provisions of paragraph (d) of such Section 50A. 5. Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-laws, Directors shall hold office until the next annual meeting of stockholders and until their successors are chosen and qualified. Any Director may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 6. Removal. A Director may be removed from office (a) with or without cause by the vote of the holders of a majority of the shares entitled to vote in the election of Directors, provided that the Directors of a class elected by a particular class of stockholders may be removed only by the vote of the holders of a majority of the shares of the particular class of stockholders entitled to vote for the election of such Directors; or (b) for cause by vote of a majority of the Directors then in office. A Director may be removed for cause only after a reasonable notice and opportunity to be heard before the body proposing to remove him. Notwithstanding the foregoing provisions, if the Directors of the corporation are classified with respect to the time for which they severally hold office pursuant to paragraph (a) of Section 50A of the Massachusetts Corporation Law, as it may be amended from time to time, the removal of Directors shall be governed by the provisions of paragraph (c) of such Section 50A. 7. Meetings. Regular meetings of the Directors may be held without call or notice at such places and at such times as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice at the same place as the annual meeting of stockholders. Special meetings of the Directors may be held at any time and place designated in a call by the President or two or more Directors. 8. Telephone Conference Meetings. Members of the Board of Directors may participate in a meeting of the board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 9. Notice of Meetings. Notice of all special meetings of the Directors shall be given to each Director by the Secretary, or Assistant Secretary, or if there be no Secretary or Assistant Secretary, by the Clerk, or Assistant Clerk, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or by telephone or by telegram sent to his business or home address at least twenty-four hours in advance of the meeting, or by written notice mailed to his business or home address at least forty-eight hours in advance of the meeting. Notice of a meeting need not be given to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purposes of the meeting. 10. Quorum. At any meeting of the Directors, a majority of the Directors then in office shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice. l1. Action at Meeting. At any meeting of the Directors at which a quorum is present, a majority of the Directors present may take any action on behalf of the Board except to the extent that a larger number is required by law or the Articles of Organization or these By-laws. 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Directors may be taken without a meeting, if all the Directors consent to the action in writing and the written consents are filed with the records of the meetings of Directors. Such consents shall be treated for all purposes as a vote at a meeting. 13. Committees. The Directors may, by vote of a majority of the Directors then in office, elect from their number an executive or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Articles of Organization or these By-laws they are prohibited from delegating to such committee. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By-laws for the Directors. ARTICLE III Officers 1. Enumeration. The officers of the corporation shall consist of a President, a Treasurer, a Clerk, and such other officers, including a Chairman of the Board of Directors, one or more Vice Presidents, Assistant Treasurers, Assistant Clerks, Secretary and Assistant Secretaries as the Directors may determine. 2. Election. The President, Treasurer and Clerk shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Directors at such meeting or at any other meeting. 3. Qualification. The President may, but need not be, a Director. No officer need be a stockholder. Any two or more offices may be held by the same person, provided that the President and Clerk shall not be the same person. The Clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. 4. Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-laws, the President, Treasurer and Clerk shall hold office until the first meeting of the Directors following the next annual meeting of stockholders and until their successors are chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the next annual meeting of stockholders and until their successors are chosen and qualified, unless a shorter term is specified in the vote choosing or appointing them. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 5. Removal. The Directors may remove any officer with or without cause by vote of a majority of the Directors then in office; provided, that an officer may be removed for cause only after a reasonable notice and opportunity to be heard before the Board of Directors. 6. President, Chairman of the Board, and Vice-President. The President shall, unless otherwise provided by the Directors, be the chief executive officer of the corporation and shall, subject to the direction of the Directors, have general supervision and control of its business. Unless otherwise provided by the Directors he shall preside, when present, at all meetings of stockholders and, unless a Chairman of the Board has been elected and is present, of the Directors. If a Chairman of the Board of Directors is elected he shall preside at all meetings of the Board of Directors at which he is present. The Chairman shall have such other powers as the Directors may from time to time designate. Any Vice-President shall have such powers as the Directors may from time to time designate. 7. Treasurer and Assistant Treasurer. The Treasurer shall, subject to the direction of the Directors, have general charge of the financial affairs of the corporation and shall cause accurate books of account to be kept. He shall have custody of all funds, securities, and valuable documents of the corporation, except as the Directors may otherwise provide. Any assistant treasurer shall have such powers as the Directors may from time to time designate. 8. Clerk and Assistant Clerks. The Clerk shall record all proceedings of the stockholders in a book to be kept therefor. Unless a transfer agent is appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the principal office of the corporation or at his office, the stock and transfer records of the corporation, in which are contained the names of all stockholders and the record address and the amount of stock held by each. In case a Secretary is not elected, the Clerk shall record all proceedings of the Directors in a book to be kept therefor. In the absence of the Clerk from any meeting of the stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by the person presiding at the meeting, shall perform the duties of the Clerk. Any Assistant Clerk shall have such additional powers as the Directors may from time to time designate. 9. Secretary and Assistant Secretaries. If a Secretary is elected, he shall keep a record of the meetings of the Directors and in his absence, an Assistant Secretary, if one be elected, otherwise a Temporary Secretary designated by the person presiding at the meeting, shall keep a record of the meetings of the Directors. Any Assistant Secretary shall have such additional powers as the Directors may from time to time designate. 10. Other Powers and Duties. Each officer shall, subject to these By-laws, have in addition to the duties and powers specifically set forth in these By-laws, such duties and powers as are customarily incident to his office, and such duties and powers as the Directors may from time to time designate. ARTICLE IV Capital Stock 1. Certificates of Stock. Subject to the provisions of Section 2 below, each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the President or a Vice-President, and by the Treasurer or an Assistant Treasurer; provided, however, such signatures may be facsimiles if the certificate is signed by a transfer agent, or by a registrar, other than a Director, officer or employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue. Every certificate issued for shares of stock at a time when such shares are subject to any restriction on transfer pursuant to the Articles of Organization, these By-laws or any agreement to which the corporation is a party shall have the restriction noted conspicuously on the certificate and shall also set forth on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every stock certificate issued by the corporation at a time when it is authorized to issue more than one class or series of stock shall set forth upon the face or back of the certificate either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series, if any, authorized to be issued, as set forth in the Articles of Organization, or a statement of the existence of such preferences, powers, qualifications, and rights, and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. 2. Stockholder Open Accounts. The corporation may maintain or cause to be maintained stockholder open accounts in which may be recorded all stockholders' ownership of stock and all changes therein. Certificates need not be issued for shares so recorded in a stockholder open account unless requested by the stockholder. 3. Transfers. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred in the records of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor, properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the corporation or its transfer agent may reasonably require. When such stock certificates are thus properly surrendered to the corporation or its transfer agent, the corporation or transfer agent shall cause the records of the corporation to reflect the transfer of the shares of stock. Except as may be otherwise required by law, by the Articles of Organization or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown in its records as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereof, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws. It shall be the duty of each stockholder to notify the corporation of his post office address. 4. Record Date. The Directors may fix in advance a time which shall be not more than sixty (60) days before the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date the Directors may for any of such purposes close the transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed, the record date for determining stockholders having the right to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors acts with respect thereto. 5. Replacement of Certificates. In case of the alleged loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms and conditions as the Directors may prescribe. 6. Issue of Capital Stock. The whole or any part of the then authorized but unissued shares of each class of stock may be issued at any time or from time to time by the Board of Directors without action by the stockholders. 7. Reacquisition of Stock. Shares of stock previously issued which have been reacquired by the corporation, may be restored to the status of authorized but unissued shares by vote of the Board of Directors, without amendment of the Articles of Organization. Within sixty (60) days after the meeting at which such vote is taken there shall be submitted to the state secretary a certificate of restoration of reacquired shares. The certificate of restoration shall be signed under penalties of perjury by the President or a Vice-President and by the Clerk or an Assistant Clerk and shall set forth (i) the number of reacquired shares so restored to the status of authorized but unissued shares, itemized by classes and series, and the par value, if any, (ii) after giving effect to such restoration, the aggregate number of authorized and of issued and outstanding shares, itemized by classes and series and the par value, if any, (iii) the date of adoption of such vote, and (iv) a certification that such vote was duly adopted by the Directors. ARTICLE V Provisions Relative to Directors, Officers, Stockholders and Employees 1. Certain Contracts and Transactions. In the absence of fraud or bad faith, no contract or transaction by this corporation shall be void, voidable or in any way affected by reason of the fact that the contract or transaction is (a) with one or more of its officers, Directors, stockholders or employees, (b) with a person who is in any way interested in this corporation, or (c) with a corporation, organization or other concern in which an officer, Director, stockholder or employee of this corporation is an officer, director, stockholder, employee or in any way interested. The provisions of this section shall apply notwithstanding the fact that the presence of a Director or stockholder, with whom a contract or transaction is made or entered into or who is an officer, director, stockholder or employee of a corporation, organization or other concern with which a contract or transaction is made or entered into or who is in any way interested in such contract or transaction, was necessary to constitute a quorum at the meeting of the Directors (or any authorized committee thereof) or stockholders at which such contract or transaction was authorized and/or that the vote of such Director or stockholder was necessary for the adoption of such contract or transaction, provided that if said interest was material, it shall have been known or disclosed to the Directors or stockholders voting at said meeting on said contract or transaction. A general notice to any person voting on said contract or transaction that an officer, Director, stockholder or employee has a material interest in any corporation, organization or other concern shall be sufficient disclosure as to such officer, Director, stockholder or employee with respect to all contracts and transactions with such corporation, organization or other concern. This section shall be subject to amendment or repeal only by action of the stockholders. 2. Indemnification. Each Director, officer, employee and other agent of the corporation, and any person who, at the request of the corporation, serves as a director, officer, employee or other agent of another organization in which the corporation directly or indirectly owns shares or of which it is a creditor shall be indemnified by the corporation against any cost, expense (including attorneys' fees), judgment, liability and/or amount paid in settlement reasonably incurred by or imposed upon him in connection with any action, suit or proceeding (including any proceeding before any administrative or legislative body or agency), to which he may be made a party or otherwise involved or with which he shall be threatened, by reason of his being, or related to his status as a director, officer, employee or other agent of the corporation or of any other organization in which the corporation directly or indirectly owns shares or of which the corporation is a creditor, which other organization he serves or has served as director, officer, employee or other agent at the request of the corporation (whether or not he continues to be an officer, Director, employee or other agent of the corporation or such other organization at the time such action, suit or proceeding is brought or threatened), unless such indemnification is prohibited by the Business Corporation Law of the Commonwealth of Massachusetts. The foregoing right of indemnification shall be in addition to any rights to which any such person may otherwise be entitled and shall inure to the benefit of the executors or administrators of each such person. The corporation may pay the expenses incurred by any such person in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit, or proceeding, upon receipt of an undertaking by such person to repay such payment if it is determined that such person is not entitled to indemnification hereunder. This section shall be subject to amendment or repeal only by action of the stockholders. ARTICLE VI Miscellaneous Provisions 1. Fiscal Year. Except as from time to time otherwise determined by the Directors, the fiscal year of the corporation shall end on the last day of October in each year. Following any change in the fiscal year previously adopted, a certificate of such change, signed under the penalties of perjury by the Clerk or an Assistant Clerk, shall be filed forthwith with the state secretary. 2. Seal. The seal of this corporation shall, subject to alteration by the Directors, bear its name, the word "Massachusetts," and the year of its incorporation. 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized to be executed by an officer of the corporation in its behalf shall be signed by the President or the Treasurer except as the Directors may generally or in particular cases otherwise determine. 4. Voting of Securities. Except as the Directors may otherwise designate, the President or Treasurer may waive notice of, and appoint any person or persons to act as proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. 5. Corporate Records. The original, or attested copies, of the Articles of Organization, By-laws and records of all meetings of incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation or at an office of its transfer agent or of the Clerk or of its resident agent. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose but not to secure a list of stockholders or other information for the purpose of selling said list or information or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. 6. Articles of Organization. All references in these By-laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation, as amended and in effect from time to time. 7. Amendments. These By-laws, to the extent provided in these By-laws, may be amended or repealed, in whole or in part, and new By-laws adopted either (a) by the stockholders at any meeting of the stockholders by the affirmative vote of the holders of at least a majority in interest of the capital stock present and entitled to vote, provided that notice of the proposed amendment or repeal or of the proposed making of new By-laws shall have been given in the notice of such meeting, or (b) if so authorized by the Articles of Organization, by the Board of Directors at any meeting of the Board by the affirmative vote of a majority of the Directors then in office, but no amendment or repeal of a By-law shall be voted by the Board of Directors and no new By-law shall be made by the Board of Directors which alters the provisions of these By-laws with respect to removal of Directors, or the election of committees by Directors and the delegation of powers thereto, nor shall the Board of Directors make, amend or repeal any provision of the By-laws which by law, the Articles of Organization or the By-laws requires action by the stockholders. Not later than the time of giving notice of the meeting of stockholders next following the making, amending, or repealing by the Directors of any By-law, notice thereof stating the substance of such change shall be given to all stockholders entitled to vote on amending the By-laws. Any By-law or amendment of a By-law made by the Board of Directors may be amended or repealed by the stockholders by affirmative vote as above provided in this Section 7. 8. 1987 Massachusetts Control Share Acquisition Act. The 1987 Massachusetts Control Share Acquisition Act, Chapter 110D of the Massachusetts General Laws, as it may be amended from time to time, shall not apply to the corporation. </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.1 <SEQUENCE>7 <DESCRIPTION>MANAGEMENT EQUITY REORGANIZATION PLAN <TEXT> Exhibit 10.1 EARTH AND OCEAN SPORTS, INC. MANAGEMENT EQUITY REORGANIZATION PLAN Earth and Ocean Sports, Inc. (the "Company") previously adopted its Management Incentive Program (the "Plan"). The Company now desires to terminate the Plan, and to substitute for the interests in the Plan direct equity interests in the Company in an aggregate amount equal to the total number of shares of Common Stock listed below. The method of implementing the foregoing shall be to permit each participant in the Plan (i) to purchase shares of the Company's Common Stock at the fair market value thereof as of October 31, 1996, equivalent to the indirect equity interest held in the Company by such participant that is vested, and (ii) to grant to each participant an option to purchase shares of the Company's Common Stock equivalent to the indirect equity interest held in the Company by such participant that is unvested, such option to vest in accordance with the existing vesting schedule of the Plan. All purchases of shares of Common Stock and options therefor are to be pursuant to agreements in such form as the Board of Directors shall determine. In accordance with the foregoing, the Plan is hereby terminated, and the following Plan participants shall be permitted to purchase the number of shares of Common Stock indicated below and shall receive the options to purchase Common Stock indicated below. An investment banking firm retained by the Company has determined that the fair market value of the Company's outstanding Common Stock is nominal. The purchase price of the Common Stock purchased pursuant to this reorganization plan, and the exercise price of the options to purchase Common Stock issued pursuant to this reorganization plan, shall therefore be $0.01 per share. The number of shares of Common Stock shown below gives effect the 750-for-1 stock split effected or to be effected pursuant to resolutions of the Board of Directors dated January 31, 1997, and no adjustment shall be made herein with respect to such stock split. <TABLE> <CAPTION> Name of Participant No. of Shares to be Purchased Shares Subject to Options - ------------------- ----------------------------- ------------------------- <S> <C> <C> Jon A. Glydon 93,000 62,000 Robert F. Szabad, Jr. 6,000 4,000 Charles Flathers, Jr. 6,000 4,000 Rita F. Kerr 6,000 4,000 Scott D. Burke 6,000 4,000 Patrick T. Dugan 6,000 4,000 Meredith M. Glydon 6,000 4,000 Tony Finn 2,000 8,000 Eric S. George 2,000 8,000 Alexander E. McAra 2,000 3,000 Susan C. Masure 1,200 800 Gregory L. Szabad 200 800 Michael Petersen _____ 1,000 James J. Redmon _____ 1,000 Name of Participant No. of Shares to be Purchased Shares Subject to Options - ------------------- ----------------------------- ------------------------- Gregg Vukclic _____ 1,000 Timothy Hollobon _____ 1,000 James E. Roman _____ 1,000 Charles Mehrmann _____ 1,000 J. Mark Kelly _____ 1,000 136,400 113,600 ======= ======= </TABLE> Dated: January 31, 1997, but effective as of October 31, 1996 EARTH AND OCEAN SPORTS, INC. By: /s/ Jon A. Glydon ------------------------- Title: </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.2 <SEQUENCE>8 <DESCRIPTION>1997 EQUITY INCENTIVE PLAN <TEXT> EXHIBIT 10.2 EARTH AND OCEAN SPORTS, INC. 1997 EQUITY INCENTIVE PLAN 1. Purpose The purpose of this 1997 Equity Incentive Plan (the "Plan") is to secure for Earth and Ocean Sports, Inc. (the "Company") and its stockholders the benefits arising from capital stock ownership by employees, officers and directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board. 3. Effective Date The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Company's stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan by the Company's stockholders. 4. Shares Subject to the Plan Subject to adjustment as provided in Section 9.6, the total number of shares of the Common Stock, $.01 par value per share, of the Company (the "Common Stock"), reserved and available for distribution under the Plan shall be 450,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees, officers and directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided, however, that no Participant may be granted Awards, in the aggregate, for more than 25% of the shares of Common Stock then subject to the Plan during any fiscal year of the Company. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part or shall be repurchased by the Company, the shares subject to such option shall be included in the determination of the aggregate number of shares of Common Stock deemed to have been granted to such employee under the Plan. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. 2 Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422 ("non-statutory stock options"). 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory stock option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory stock option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) at the discretion of the Committee and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the 3 Participant's direction at the time of exercise, or (iii) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined pursuant to Section 6.1.7 hereof. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent stockholder of the Company) of the date of grant, as determined by the Board. Each Participant may be granted options treated as incentive stock options only to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any present or future parent or subsidiary (as those terms are used in Section 424 of the Code), incentive stock options do not become exercisable for the first time by such employee during any calendar year with respect to stock having a fair market value (determined at the time the incentive stock options were granted) in excess of $100,000. The Company intends to designate any options granted in excess of such limitation as non-statutory stock options, and the Company shall issue separate certificates to the optionee with respect to options that are non-statutory stock options and options that are incentive stock options. 6.1.7 Determination of Fair Market Value. If, at the time an option is granted under the Plan, the Common Stock is publicly traded, "fair market value" shall be determined as of the date of grant or, if the prices or quotes discussed in this sentence are unavailable for such date, the last business day for which such prices or quotes are available prior to the date of grant and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq National Market. If the Common Stock is not publicly traded at the time an option is granted under the Plan, "fair market value" shall mean the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it 4 deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arms' length. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may 5 specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Change in Control 8.1 Impact of Event In the event of a "Change in Control" as defined in Section 8.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. 6 (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 8.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when any Person (other than SSPR, L.P. and its partners and affiliates) is or becomes the beneficial owner (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 under the Exchange Act) of such Person, directly or indirectly, of 50% or more (by voting power) of the outstanding common stock of the Company, without the prior approval of the Prior Directors of the Company, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors of the Company, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933, as amended, and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the Board of Directors on the date of completion of the Company's initial underwritten public offering) and any future director of the Company who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's Common Stock, not approved by the Prior Directors, by any Person other than the Company. 9. General Provisions 9.1 Documentation of Awards 7 Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 9.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 9.3 Conditions on Delivery of Stock The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange or trading system, until the shares have been listed or authorized to be listed on such exchange or trading system upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 9.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common 8 Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 9.5 Nontransferability of Awards Except as otherwise specifically provided by the Board, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, except pursuant to the terms of a qualified domestic relations order as defined in the Code, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 9.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization, reclassification or other change in the Company's capitalization, or other distribution with respect to common stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. The foregoing shall not apply to any stock split effected after the date of adoption of the Plan but on or prior to the effective date of the Company's initial underwritten public offering under the Securities Act of 1933. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. 9.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. 9 Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 9.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 9.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 9.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 10. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 10, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) under the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. 10 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.3 <SEQUENCE>9 <DESCRIPTION>STOCK OPTION PLAN <TEXT> EXHIBIT 10.3 EARTH AND OCEAN SPORTS, INC. 1997 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS SECTION 1 -- PURPOSE The purpose of the 1997 Stock Option Plan for Nonemployee Directors (the "Plan") is to increase the proprietary interest of nonemployee members of the Board of Directors in the continued success of Earth and Ocean Sports, Inc. (the "Company") and to provide them with an incentive to continue to serve as directors. SECTION 2 -- ADMINISTRATION The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"), or any successor committee thereto. The Committee shall have responsibility finally and conclusively to interpret the provisions of the Plan and to decide all questions of fact arising in its application. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan. SECTION 3 -- TYPE OF OPTIONS Options granted pursuant to the Plan shall be nonstatutory options which are not intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 4 -- ELIGIBILITY Directors of the Company who are not employees of the Company or any subsidiary or affiliate thereof ("Nonemployee Directors") shall be eligible to participate in the Plan. Each Nonemployee Director to whom options are granted hereunder shall be a participant ("Participant") under the Plan. SECTION 5 -- STOCK AVAILABLE UNDER THE PLAN Subject to adjustment as provided in Section 9 below, an aggregate of 150,000 shares of the Company's Common Stock shall be available for issuance pursuant to the provisions of the Plan. Such shares may be authorized and unissued shares or may be shares issued and thereafter acquired by the Company. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in whole or in part, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. -2- SECTION 6 -- AUTOMATIC GRANT OF OPTIONS (a) Each Participant who becomes a member of the Board of Directors prior to January 1, 1998, shall receive automatically and without further action by the Board of Directors or the Committee, on the later of such Participant's election to the Board of Directors and the adoption of this Plan by the Board of Directors and the stockholders of the Company, 15,000 shares of Common Stock in accordance with the provisions of Section 7, and subject to adjustment as provided in Section 9. If a Participant becomes a member of the Board of Directors prior to the Company's initial underwritten public offering of Common Stock, then such option shall be deemed granted simultaneously with the execution of the underwriting agreement with respect to such offering at an exercise price equal to the price to the public of such underwritten public offering. (b) Each year, beginning on the date of the Company's first Annual Meeting of Stockholders that follows by more than 30 days the last vesting date of the option granted pursuant to clause (a) above, but only if the Company's Common Stock is then publicly traded, each Participant who continues in office after said Annual Meeting, shall receive automatically and without further action by the Board of Directors or the Committee, a grant of an option to purchase 3,000 shares of Common Stock in accordance with the provisions of Section 7, and subject to adjustment as provided in Section 9. SECTION 7 -- TERMS AND CONDITIONS OF OPTIONS 7.1 EXERCISE OF OPTIONS. (a) Each option granted under the Plan shall become exercisable (or "vest") at the rate of 20% of the number of shares subject to the option on each yearly anniversary of the date such option was granted, subject to the provisions of Section 8 hereof. (b) In the event that the Participant ceases to be a director of the Company for any reason whatsoever prior to the time a Participant's option becomes fully exercisable, the option will terminate with respect to the shares as to which the option is not then exercisable and all rights of the Participant to such unvested shares shall terminate without further obligation on the part of the Company. (c) In the event that the Participant ceases to be a director of the Company after his or her option has become exercisable in whole or in part, such option shall remain exercisable in whole or in part, as the case may be, in accordance with the terms hereof. (d) Options granted under the Plan shall expire ten years from the date on which the option is granted, unless terminated earlier in accordance with the Plan. 7.2 EXERCISE PRICE. The exercise price of an option shall be 100% of the fair market value per share of Common Stock of the Company on the date the option is granted. "Fair market value" shall be -3- determined as of the date of grant or, if the prices or quotes discussed in this sentence are unavailable for such date, the last business day for which such prices or quotes are available prior to the date of grant and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq National Market. 7.3 PAYMENT OF EXERCISE PRICE. (a) Subject to the terms and conditions of the Plan and the documentation of the options pursuant to Section 7.5 hereof, an option granted hereunder shall, to the extent then exercisable, be exercisable in whole or in part by giving written notice to the Company stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares; provided, however, that there shall be no such exercise at any one time as to fewer than one hundred (100) shares or all of the remaining shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) shares. (b) Options granted under the Plan may be paid for by (i) delivery of cash, bank draft, money order or a check to the order of the Company in an amount equal to the exercise price of such options, (ii) by delivery to the Company of shares of Common Stock of the Company already owned by the Participant having a fair market value equal in amount to the exercise price of the option being exercised, provided that such method is consistent with applicable tax laws, (iii) if permitted by applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of Common Stock of the Company acquired upon exercise to pay for all of the Common Stock so acquired and an authorization to the broker or selling agent to pay that to the Company, or (iv) by any combination of such methods of payment. 7.4 RIGHTS AS A STOCKHOLDER. Except as specifically provided by the Plan, the grant of an option will not give a Participant rights as a stockholder; the Participant will obtain such rights, subject to any limitations imposed by the Plan, upon actual receipt of Common Stock of the Company. 7.5 DOCUMENTATION OF OPTION GRANTS. Option grants shall be evidenced by written instruments prescribed by the Committee from time to time. The instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters of similar instruments, which need not be executed by the Participant but acceptance of which will evidence agreement to the terms of the grant. -4- 7.6 NONTRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be assignable or transferable by the Participant to whom it is granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. During the life of the Participant, the option shall be exercisable only by such person (or in the event of incapacity, by the person or persons properly appointed to act on his or her behalf). 7.7 APPROVALS. The effectiveness of the Plan and of the grant of all options is subject to the approval of the Plan by the affirmative vote of a majority of the shares of the Company's capital stock present in person or by proxy and entitled to vote at a meeting of the stockholders at which the Plan is presented for approval. Notwithstanding anything to the contrary in the Plan, no options granted hereunder shall become exercisable until such approval has been received. The Company's obligation to sell and deliver shares of stock under the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of the stock. SECTION 8 -- REGULATORY COMPLIANCE AND LISTING (a) The issuance or delivery of any shares of stock subject to exercisable options hereunder may be postponed by the Committee for such period as may be required to comply with any applicable requirements under the Federal securities laws, any applicable listing requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares. The Company shall not be obligated to issue or deliver any such shares if the issuance or delivery thereof would constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange. (b) Should any provision of this Plan require modification or be unnecessary to comply with the requirements of Section 16 of and Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("1934 Act"), the Committee may waive such provision and/or amend this Plan to add to or modify the provisions hereof accordingly. (c) It is the Company's intent that the Plan comply in all respects with Rule 16b-3 of the 1934 Act (or any successor or amended provisions thereof) and any applicable Securities and Exchange Commission interpretations thereof. If any provision of this Plan is deemed not to be in compliance with Rule 16b-3, the provision shall be null and void. SECTION 9 -- ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to holders of the Company's Common Stock other than normal cash dividends, automatic adjustment shall be -5- made in the number and kind of shares as to which outstanding options or portions thereof then unexercised shall be exercisable and in the available shares set forth in Section 5 hereof, to the end that the proportionate interest of the option holder shall be maintained as before the occurrence of such event. Such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. Automatic adjustment shall also be made in the number and kind of shares subject to options subsequently granted under the Plan. For purposes of the foregoing provisions, the Plan shall be deemed to be adopted on the effective date of the Company's initial underwritten public offering of its Common Stock. SECTION 10 -- NO RIGHT TO REELECTION Nothing in the Plan shall be deemed to create any obligation on the part of the Board of Directors or standing Committee thereof to nominate any Nonemployee Director for reelection by the Company's stockholders, nor confer upon any Nonemployee Director the right to remain a member of the Board of Directors for any period of time, or at any particular rate of compensation. SECTION 11 -- AMENDMENT AND TERMINATION (a) The Board of Directors shall have the right to amend, modify or terminate the Plan at any time and from time to time; provided, however, that unless required by law, no such amendment or modification shall (a) affect any right or obligation with respect to any grant theretofore made; or (b) unless previously approved by the stockholders, increase the number of shares of Common Stock available for grants as provided in Section 5 hereof (as adjusted pursuant to Section 9 hereof). In addition, no such amendment shall, unless previously approved by the stockholders (where such approval is necessary to satisfy then applicable requirements of federal securities laws, the Code or rules of any stock exchange on which the Company's Common Stock is listed), (i) in any manner affect the eligibility requirements set forth in Section 4 hereof, (ii) except to the extent provided for in Section 9 hereof, increase the number of shares of Common Stock subject to any option, (iii) except to the extent provided for in Section 9 hereof, change the purchase price of the shares of Common Stock subject to any option, (iv) extend the period during which options may be. granted under the Plan, (v) materially increase the benefits to Participants under the Plan, or (vi) in any manner cause Rule 16b-3 under the 1934 Act (or any successor provision thereof) to become inapplicable to this Plan. (b) Unless earlier terminated by the Board of Directors, the Plan shall terminate on December 31, 2005; provided, however, that options which are granted on or before this date shall remain exercisable in accordance with their respective terms after the termination of the Plan. SECTION 12 -- GOVERNING LAW The Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. -6- </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.5 <SEQUENCE>10 <DESCRIPTION>CONSULTING AGREEMENT <TEXT> EXHIBIT 10.5 AMENDED AND RESTATED CONSULTING AGREEMENT This Agreement is made as of the 26th day of March, 1997 by and between Earth and Ocean Sports, Inc., a Massachusetts corporation (the "Company"), and CR Management Associates, Inc., a Massachusetts corporation (the "Consultant"). In consideration of the terms and conditions set forth in this Agreement, the parties agree as follows: 1. Provision of Services. (a) The Consultant agrees, to the extent reasonably required in the conduct of the business of the Company, to place at the disposal of the Company its judgment and experience and to provide business development services to the Company, including the following: (i) advise with regard to sales and marketing activities and acquisition strategy; (ii) evaluate financial and treasury requirements and assist in financing arrangements and the structuring of financial and acquisition transactions, including, without limitation, review of banking and leasing relationships, financial projections and investments of the Company; (iii) advise the Company on matters of strategic planning; (iv) make available at least one professional to serve on the Board of Directors of the Company at the Company's request; and (v) provide other general advice to management of the Company. All such services shall at all times be subject to the direction and control of the management of the Company. (b) The Consultant shall at all times maintain an adequate organization of competent personnel for the performance of its obligations under this Agreement. 2. Compensation. The Company agrees to compensate the Consultant in consideration of the services set forth in Paragraph 1 above, including without limitation the services provided in respect of membership on the Board of Directors of the Company, at the rate of $15,000 per month plus 1% of the Company's annual consolidated revenues in excess of $12,000,000. The first such payment shall be made on the date hereof (pro rated for a partial month). Subsequent payments shall be made on the first business day of each month in advance. -2- Beginning January 2, 1994, payments shall be made on the first business day of each month in the amount of $15,000 plus (i) in the month of each fiscal year when actual year-to-year net sales through the end of the preceding month first exceed $12,000,000, 1% of such excess over $12,000,000 and (ii) thereafter through the end of the fiscal year, 1% of the preceding month's net sales. In addition to such compensation, the Company agrees to reimburse the Consultant for all out-of-pocket expenses incurred by the Consultant and its personnel in rendering the services to be provided hereunder. 3. Liability of the Consultant. In furnishing the Company with management advice and other services as herein provided, neither the Consultant nor any employee, officer, director, shareholder or agent thereof shall be liable to the Company or its creditors for errors of judgment or for anything except willful misconduct or fraud in the performance of their duties. It is further understood and agreed that the Consultant may rely upon information furnished to it reasonably believed to be accurate and reliable and that, except as herein provided, the Consultant shall not be accountable for any loss suffered by the Company by reason of the Company's action or non-action on the basis of any advice, recommendation or approval of the Consultant, its employees, officers, directors or agents. 4. Status of the Consultant. The Consultant shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act or represent the Company. 5. Other Activities of the Consultant. The Company recognizes that the Consultant may render management and other services to other companies that may or may not have policies and conduct activities similar to those of the Company. The Consultant shall be free to render such advice and other services, and the Company hereby consents thereto. The Consultant shall not be required to devote its full time and attention to the performance of its duties under this Agreement, but shall devote only so much of its time and attention as it deems reasonable or necessary for such purposes. 6. Control. Nothing contained herein shall be deemed to require the Company to take any action contrary to its charter or by-laws or any applicable statute or regulation, or to relieve or deprive management of the Company of its responsibility for and control of the conduct or the affairs of the Company. 7. Term. The term of this Agreement shall begin on the date first set forth above and shall continue in effect until terminated by mutual written consent of the parties. 8. Amendment Upon Public Offering. Effective upon closing of an underwritten initial public offering (the "IPO") of the Company under the Securities Act of 1933, as amended, this Agreement shall be amended such that the term of this Agreement shall be five years from the closing date of such IPO and the fee payable hereunder shall be a fixed annual rate of $300,000. -3- After the closing of such IPO, this Agreement may be amended by the parties only with the approval of a majority of the directors of the Company who are neither employees of the Company nor affiliated with the Consultant. 9. Miscellaneous. This Agreement may not be amended, transferred, assigned, sold or in any manner hypothecated or pledged without the affirmative written consent of the parties hereto; and any proposed assignment without such consent shall be null and void. This Agreement sets forth the entire agreement and understanding between the parties and supersedes all prior discussions, agreements and understandings of every and any nature between them. This Agreement shall be deemed to be a sealed instrument and shall be construed and interpreted according to the laws of the Commonwealth of Massachusetts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall be deemed one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers duly authorized as of the day and year first written above. EARTH AND OCEAN SPORTS, INC. By:/s/ Jon A Glydon ---------------------------- Jon A Glydon, President CR MANAGEMENT ASSOCIATES, INC. By: /s/ Steve J. Roth ---------------------------- Steven J. Roth, Chairman </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.6 <SEQUENCE>11 <DESCRIPTION>STANDARD INDUSTRIAL LEASE <TEXT> Exhibit 10.6 STANDARD INDUSTRIAL LEASE -- NET AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION 1. Parties. This Lease, dated, for reference purposes only, March 30, 1992, is made by and between Oceanside Associates (herein called "Lessor" and Packaging Industrial Group, Inc. (herein called "Lessee"). 2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, that certain real property situated in the County of Sand Diego State of California commonly known as 572 and 576 Airport Road, Oceanside and described as two (2) industrial building of approximately 29, 996 square feet combined area. Said real property including the land and all Improvements therein, is herein called "the Premises". 3. Term. 3.1 Term. The term of this Lease shall be for three (3) years commencing on April 1, 1992 and ending on March 31, 1995 unless sooner terminated pursuant to any provision hereof. 3.2 Delay In Possession. Notwithstanding said commencement date, if for any reason Lessor cannot deliver possession of the Premises Lessee on said date, Lessee shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations Lessee hereunder or extend the term hereof, but in such case, lessee shall not be obligated to pay rent until possession of the Premises is tendered to Lessee; provided, however, that if Lessor shall not have delivered possession of the Premises within sixty (60) days from said commencement date, Lessee may, at Lessee's option, by notice in writing to Lessor within ten (10) days thereafter, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder; provided further, however, that if such written notice of Lessee is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. 3.3 Early Possession. If Lessee occupies the Premises prior to said commencement date, such occupancy shall be subject to all provision hereof, such occupancy shall not advance the termination date, and Lessee shall pay rent for such period at the initial monthly rates set forth below. 4. Rent. Lessee shall pay to Lessor as rent for the premises, monthly payments of see Addendum, in advance, on the 1st day of each month of the term hereof. Lessee shall pay Lessor upon the execution hereof $ -0- as rent for ___________. Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the monthly installment. Rent shall be payable in lawful money of the United States to Lessor at the address stated herein or to such other persons or at such other places as Lessor may designate in writing. 5. Security Deposit. Lessee has on deposit with Lessor upon execution hereof $12,322.72 as security for Lessee's faithful performance of Lessee's obligations hereunder. If Lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or if the payment of any other sum to which Lessor may become obligated by reason of Lessee's default, or to compensate Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within ten (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount hereinabove stated and Lessee's failure to do so shall be a material breach of this Lease. If the monthly rent shall, from time to time, increase during the term of this Lessee shall thereupon deposit with Lessor additional security deposit so that the amount of security deposit held by Lessor shall at all times bear the same proportion to current rent as the original security deposit so that the amount of security deposit held by Lessor shall at all times bear the same proportion to current rent as the original security deposit bears to the original monthly rent set forth in paragraph 4 hereof, lessor shall not be required to keep said deposit separate from its general accounts. If Lessee performs all of Lessee's obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use, to Lessee (or, Lessor's option, to the last assignee, if any, of Lessee's Interest hereunder) at the expiration of the term hereof, and after Lessee has vacated the Premises. NO trust relationship is created herein between Lessor and Lessee with respect to said Security Deposit. 6. Use 6.1 Use. The premises shall be used and occupied only by BZ Pro Boards, Inc., a related company for the manufacture and distribution of water sport toys and equipment or any other use which is reasonably comparable and for no other purpose. 6.2 Compliance with Law (a) Lessor warrants to Lessee that the Premises, in its state existing on the date that the Lease term commences, but without regard to the use for which Lessee will use the premises, does not violate any covenants or restrictions of record, or any applicable building code, regulation or ordinance in effect on such Lease term commencement date. In the event it is determined that this warranty has been violated, then it shall be the obligation of the Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such violation, in the event Lessee does not give to Lessor written notice of the violation of this warranty within six months from the date that the Lease term commences, the correction of same shall be the obligation of the Lessee at Lessee's sole cost. The warranty contained in his paragraph 6.2(a) shall be of no force or affect if, prior to the date of this Lease, Lessee was the owner or occupant of the premises, and, in such event, lessee shall correct any such violation at Lessee's sole cost. (b) Except as provided in paragraph 6.2(a), Lessee shall, at Lessee's expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record and requirements in effect during the term or any part of the term hereof, regulating the use by Lessee of the Premises. Lessee shall not use nor permit the use of the Premises in any manner that will tend to create waste or a nuisance or, if there shall be more than one tenant in the building containing the premises, shall tend to disturb such other tenants. 6.3 Condition of Premises. (a) Lessor shall delivery the Premises to Lessee clean and free of debris on Lease commencement date (unless Lessee is already in possession) and Lessor further warrants to Lessee that the plumbing, lighting, air conditioning, heating and loading doors in the Premises shall be in good operating condition on the Lease commencement date. In the even that it is determined that this warranty has been violated, then it shall be the obligation of Lessor, after receipt of written notice from Lessee setting growth with specificity the nature of the violation, to promptly, at Lessor's sole cost, rectify such violation. Lessee's failure to give such written notice to Lessor within thirty (30) days after the Lease commencement date shall cause the conclusive presumption that Lessor has complied with all of Lessor's obligations hereunder. The warranty contained in this paragraph 6.3(a) shall be of no force or effect if prior to the date of this Lease, Lessee was the owner or occupant of the Premises. (b) Except as otherwise provided in this Lease, Lessee hereby accepts the Premises in their conditions existing as of the Last commencement date or the date that Lessee takes possession of the Premises, whichever is earlier, subject to all applicable zoning, municipal county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any representation or warranty as to the present or future suitability of the premises for the conduct of Lessee's business. 7. Maintenance, Repairs and Alterations. 7.1 Lessee's Obligations. Lessee shall keep in good order, condition and repair the Premises and every part thereof, structural and non structural, (whether or not such portion of the Premises requiring repair, or the means of repairing the same are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises) including, without limiting the generality of the foregoing, all plumbing, heating, air conditioning , (Lessee shall procure and maintain at Lessee's expense, an air conditioning system maintenance contract) ventilating, electrical, lighting facilities and equipment within the Premises fixtures, walls, (interior and exterior), floors, windows, doors, plate glass and skylights located within the Premises, and all landscaping, driveways, parking lots, fences and signs located on the Premises and sidewalks and parkways adjacent to the Premises. 7.2 Surrender. On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the premises to Lessor in the same condition as when received ordinary wear and tear except clean and __________ shall repair any damage to the Premises ____________ and fencing on the premises in good operating condition. 7.3 Lessor's Rights. If Lessee fails to perform Lessee's obligations under this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its option (but shall not be required to) enter upon the Premises after ten (10) days' prior written Notice to Lessee (except in the case of an emergency in which case no notice shall be required), perform such obligations on Lessee's behalf and put the same in good order, condition and repair and the cost thereof together with interest thereon at the maximum rate then allowable by law shall become due and payable as additional rental to Lessor together with Lessee's next rental installment. 7.4 Lessor's Obligations. Except for the obligations of Lessor under Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9 (relating to destruction of the Premises) and under Paragraph 14 (relating to condemnation of the Premises), it is intended by the parties thereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises nor the building located thereon nor the equipment therein, whether structural or non structural, all of which obligations are intended to be that of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives the benefit of any statute now or hereinafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the premises in good order, condition and repair. 7.5 Alternations and Additions. (a) Lessee shall not, without Lessor's prior written consent make any alterations, improvements, additions, or Utility installations, on or about the premises, except for nonstructural alterations not exceeding $2,500 in cumulative costs during the term of this Lease. In any event, whether or not in excess of $2,500 in cumulative Cost, lessee shall make no change or alteration to the exterior of the Premises nor the exterior of the building(s) on the Premises without Lessor's prior written consent. As used in this Paragraph 7.5 the term "Utility Installation" shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee remove any or all of said alterations, improvements, additions or Utility installations a the expiration of the term, and restore the Premises to their prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such improvements, to insure, Lessor against any liability for mechanic's and materialmen's liens and to insure completion of the work. Should Lessee make any alterations, improvements, additions or Utility Installations without the prior approval of Lessor, lessor may require that Lessee remove any or all of the same. (b) Any alternations, improvements, additions or Utility Installations in , or about the Premises that Lessee shall desire to make and which requires the consent of the Lessor shall be presented to Lessor in written form, with proposed detailed plans. If Lessor shall give its consent, the consent shall be deemed conditioned upon Lessee acquiring a permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Lessor prior to the commencement of the work and the compliance by Lessee of all conditions of said permit in a prompt and expeditious manner. (c) Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use in the Premises, which claims are or may be secured by any mechanics' or materialmen's lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days' notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises as provided by law. If lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien claim or demand indemnifying Lessor against attorneys fees and costs in participating in such action if Lessor shall decide it is to its best interest to do so. (d) Unless Lessor requires their removal, as set forth in Paragraph 7.5(a), all alterations, improvements, additions and Utility Installations (whether or not such Utility Installations constitute trade fixtures of Lessee), which may be made on the Premises, shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term. Notwithstanding the provisions of this Paragraph 7.5(d), Lessee's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain the property of Lessee and may be removed by lessee subject to the provisions of Paragraph 7.2. 8. Insurance Indemnity. 8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party" shall mean the party who has the obligation to obtain the Property Insurance required hereunder. The insuring party shall be designated in Paragraph 46 hereof. In the event Lessor is the insuring party, lessor shall also maintain the liability insurance described in paragraph 8.2 hereof. In addition, to and, not in lieu of, the insurance required to be maintained by Lessee under said paragraph 8.2, but Lessor shall not be required to name Lessee as an additional insured on such policy. Whether the insuring party is the Lessor or the Lessee. Lessee shall, as additional rent for the premises, pay the cost of all insurance required hereunder, except for that portion of the cost attributable to Lessor's liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor is the insuring party Lessee shall, within ten (10) days following demand by Lessor, reimburse Lessor for the cost of the insurance so obtained. 8.2 Liability Insurance. Lessee shall, at Lessee's expense obtain and keep in force during the term of this Lease a policy of Combined Single Limit, Bodily Injury and Property Damage Insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be a combined single limit policy in an amount not less than $500,00 per occurrence. The policy shall insure performance by Lessee of the indemnify provisions of this Paragraph 8. The limits of said insurance shall not however, limit the liability of Lessee hereunder. 8.3 Property Insurance. (a) The insuring party shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, in the amount of the full replacement value thereof, as the same may exist from time to time, which replacement value is now $1,100,000.00, but in no event less than the total amount required by lenders having liens on the Premises, against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Premises), and special extended perils ("all risk" as such term is used in the Insurance Industry). Said Insurance shall provide for payment of loss thereunder to Lessor or to the holders of mortgages or deeds of trust on the Premises. The Insuring Party shall, in addition, obtain and keep in force during the term of this Lease a policy of rental value insurance covering a period of one year, with loss payable to Lessor, which insurance shall also cover all real estate taxes and insurance costs for said period. A stipulated value or agreed amount endorsement deleting the coinsurance provision of the policy shall be procured with said insurance as well as an automatic increase in insurance endorsement causing the increase in annual property insurance coverage by 2% per quarter. If the insuring party shall fall to procure and maintain said insurance the other party may, but shall not be require to, procure and maintain the same, but at the expense of Lessee. If such insurance coverage has a deductible clause, the deductible amount shall not exceed 1,000 per occurrence, and Lessee shall be liable for such deductible amount. (b) If the Premises are part of a larger building, or if the Premises are part of a group of buildings owned by lessor which are adjacent to the Premises, then Lessee shall pay for any increase in the property insurance of such other building or buildings if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises. (c) If the Lessor is the insuring party the Lessor will not insure Lessee's fixtures, equipment or tenant improvements unless the tenant improvements have become a part of the premises under paragraph 7, hereof. But if Lessee is the insuring party the Lessee shall insure its fixtures, equipment and tenant improvements. 8.4 Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of at least B plus, or such other rating as may be required by a lender having a lien on the Premises, as set forth in the most current issue of "Best's Insurance Guide." The insuring party shall deliver to the other party copies of policies of such insurance or certificates evidencing the existence and amounts of such insurance with loss payable clauses as required by this paragraph 8. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days' prior written notice to Lessor. If Lessee is the insuring party Lessee shall, at least thirty (30) days prior to the expiration of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor may order such insurance and charge the cost thereof to lessee, which amount shall be payable by Lessee upon demand. Lessee shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Paragraph 8.3. If Lessee does nor permits to be done anything which shall increase the cost of the insurance policies referred to in Paragraph 8.3, then Lessee shall forthwith upon Lessor's demand reimburse Lessor for any additional premiums attributable to any act or omission or operation of Lessee causing such increase in the cost of insurance. If Lessor is the insuring party, and if the insurance policies maintained hereunder cover other improvements in addition tot the Premises, Lessor shall delivery to Lessee a written statement setting forth the amount of any such insurance cost increase and showing in reasonable detail the manner in which it has been computed. 8.5 Waiver of Subrogation. Lessee and Lessor each hereby release and relieve the other , and waive their entire right of recovery against the other for loss or damage arising out of or incident to the perils insured against under paragraph 8.3, which perils occur in, on or about the premises, whether due to the negligence of Lessor or Lessee or their agents, employees, contractors and/or Invitees. lessee and Lessor shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the Premises, or from the conduct of Lessee's business or from any activity, work or things done, permitted or suffered by Lessee in or about the Premises or elsewhere and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any negligence of the Lessee, or any of Lessee's agents, contractors, or employees, and from and against all costs, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Lessor by reason of any such claim. Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel satisfactory to Lessor. Lessee, a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises arising from any cause and Lessee hereby waives all claims in respect thereof against Lessor. 8.7 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Lessee, Lessee's employees, invitees, customers, or any other person in or about the Premises, nor shall Lessor be liable for injury to the person of Lessee, lessee's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the said damage or injury results from conditions arising upon the premises or upon other portions of the building of which the premises are a part or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Lessee. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant, if any, of the building in which the Premises are located. 9. Damage or Destruction. 9.1 Definitions. (a) "Promises Partial Damage" shall herein mean damage or destruction to the Premises to the extent that the cost of repair is less than 50% of the then replacement cost of the Premises. "Premises Building Partial Damage" shall herein mean damage or destruction to the building of which the Premises are a part to the extent that the cost of repair is less than 50% of the then replacement cost of such building as a whole. (b) "Premises Total Destruction" shall herein mean damage or destruction to the Premises to the extent that the cost of repair is 50% or more of the then replacement cost of the Premises. "Premises Building Partial Damage" shall herein mean damage or destruction to the building of which the Premises are a part to the extent that the cost of repair is less than 50% of the then replacement cost of such building as a whole. (c) "Insured Loss" shall herein mean damage or destruction which was caused by an event require d to be covered by the insurance described in paragraph 8. 9.2 Partial Damage -- Insured Loss. Subject to the provisions of paragraph s 9.4, 9.5 and 9.6, if at any time during the term of this Lease there is damage which is an insured Loss and which falls into the classification of Premises Partial Damage or Premises Building Partial Damage, then Lessor shall, at Lessor's expense, repair such damage, but not Lessee's fixtures, d equipment or tenant improvements unless the same have become a part of the Premises pursuant to Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall continue in full force and effect. Notwithstanding the above, if the Lessee is the insuring party, and if the insurance proceeds received by Lessor are not sufficient to effect such repair, Lessor shall give notice to Lessee of the amount required in addition to the insurance proceeds to effect such repair. lessee shall contribute the required amount to Lessor within ten days after Lessee has received notice from Lessor of the shortage in the insurance. When Lessee shall contribute such amount to Lessor, Lessor shall make such repairs as soon as reasonably possible and this Lease shall continue in full force and effect. Lessee shall in no event have any right to reimbursement for any such amounts so contributed. 9.3 Partial Damage -- Uninsured Loss. Subject to the provisions of Paragraph 9.4, 9.5 and 9.6, if at any time during the term of this Lease there is damage which is not an insured Loss and which falls within the classification of Premises Partial Damage or Premises Building Partial Damage, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may at Lessor's option either (i) repair such damage as soon as reasonably possible at Lessor's expense, in which even this Lease shall continue in full force and effect, or (ii) given written notice to Lessee within thirty (30) days after the date of the occurrence of such damage of Lessor's intention to cancel and terminate this Lease, as of the date of the occurrence of such damage. In the event Lessor elects to give such notice of Lessor's intention to cancel and terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's intention to repair such damage at Lessee's expense, without reimbursement form Lessor, in which even this Lease shall continue in full force and effect, and Lessee shall proceed to make such repairs as soon as reasonably possible. If Lessee does not give such notice within such 10-day period this Lease shall be cancelled and terminated as of the date of the occurrence of such damage. 9.4 Total Destruction. If at any time during the term of this Lease there is damage whether or not an Insured Loss. (Add Party) Including destruction required by any authorized public authority), which falls into the classification of Premises Total Destruction or Premises Building Total Destruction, this Lease shall automatically terminate as of the date of such total destruction. 9.5 Damage Near End of Term. (a) If at any time during the last six months of the term of this Lease there is damage, whether or not an Insured Loss, which falls within the classification of Premises Partial Damage, Lessor may at Lessor's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to lessee of Lessor's election to do so within 30 days after the date of occurrence of such damage. (b) Notwithstanding paragraph 9.5(a), in the event that Lessee has an option to extend or renew this Lease, and the time within which said option may be exercised has not yet expired, lessee shall exercise such option. If it is to be exercised at all, no later than 20 days after the occurrence of an insured Loss falling within the classification of Premises Partial Damage during the last six months of the term of this Lease. If Lessee duly exercises such option during said 20 day period, Lessor shall, at Lessor's expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option during said 20 day period, then Lessor may at Lessor's option terminate and cancel this lease as of the expiration of said 20 day period by giving written notice to Lessee of Lessor's election to do so within 10 days after the expiration of said 20 day period, notwithstanding any term or provision in the grant of option to the contrary. 9.6 Abatement of Rent; Lessee's Remedies. (a) In the event of damage described in paragraphs 9.2 or 9.3, and Lessor or Lessee repairs or restores the Premises pursuant to the provisions of this Paragraph 9, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Lessee's use of the premises is impaired. Except for abatement of rent, if any, lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration. (b) If lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 and shall not commence such repair or restoration within 90 days after such obligations shall accure , Lessee may at Lessee's option cancel and terminate this Lease by giving Lessor written notice of Lessee's election to do so at any time prior to the commencement of such repair or restoration. In such event his Lease shall terminate as of the date of such notice. 9.7 Termination -- Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, an equitable adjustment shall be made concerning advance rent and any advance payments made by lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not theretofore been applied by Lessor. 9.8 Waiver. Lessor and Lessee waive the provisions of any statutes which relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease. 10. Real Property Taxes. 10.1 Payment of Taxes. Lessee shall pay the real property tax, as defined in paragraph 10.2, applicable to the Premises during the term of the Lease. All such payments shall be made at least ten (10) days prior to the delinquency date of such payment. Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes have been paid. If any such taxes paid by Lessee shall cover any period of time prior to or after the expiration of the term hereof, Lessee's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect, and Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to pay any such taxes, Lessor shall have the right to pay the same, in which case Lessee shall repay such amount to Lessor with Lessee's next rent installment together with interest at the maximum rate than allowable by law. 10.2 Definition of "Real Property Tax". As used herein, the term "real property tax" shall include any form of real-estate tax or assessment, general , special, ordinary or extraordinary, and any license fee, commercial rental tax. Improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed on the premises by any authority having the direct or indirect power to tax. Including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Lessor in the premises or in the real property of which the Premises are a part, as against Lessor's right to rent or other income therefrom, and as against Lessor's business of leasing the premises. The term "real property tax" shall also include any tax, fee, levy, assessment or charger (i) in substitution, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "real property tax," or (ii) the nature of which was hereinbefore included within the definition of "real property tax," or (iii) which is imposed for a service or right not charged prior to June 1, 1976, or if previously charged, has been increased since June 1, 1978, or (iv) which is imposed as a result of a transfer, either partial or total, of Lessor's interest in the premises or which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this transaction, any modifications or changes hereto, or any transfers hereof. 10.3 Joint Assessment. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive. 10.4 Personal Property Taxes. (a) Lessee shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Lessee contained in the premises or elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. (b) If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 11. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to Lessee, lessee shall pay a reasonable proportion to be determined by Lessor of all charges jointly metered with other premises. 12. Assignment and Subletting. 12.1 Lessor's Consent Required. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises, without Lessor's prior written consent, which Lessor shall not unreasonably withhold. Lessor shall respond to Lessee's request for consent hereunder in a timely manner and any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease. 12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1 hereof, lessee may assign or sublet the Premises, or any portion thereof, without Lessor's consent, to any corporation which controls, is controlled by or is under common control with Lessee, or to any corporation resulting from the merger or consolidation with Lessee, or to any person or entity which acquires all the assets of Lessee as a going concern of the business that is being conducted on the Premises, provided that said assignee assumes, in full, the obligations of Lessee under this Lease. Any such assignment shall not in any way, affect or limit the liability of Lessee under the terms of this Lease even if after such assignment or subletting the terms of this Lease are materially changed or altered without the consent of Lessee, the consent of whom shall not be necessary. 12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or assignment shall release Lessee of Lessee's obligation or alter the primary liability of Lessee to pay the rent and to perform all other obligations to be performed by Lessee hereunder. THE acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by lessor of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Lessee or any successor of Lessee, in the performance of any of the terms hereof, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said assignee. Lessor may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees ___________. In the event Lessee shall assign or sublet the Premises or request the consent of Lessor to any assignment or subletting or if Lessee shall request the consent of lessor for any act Lessee proposes to do then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection therewith, such attorneys fees not to exceed $350,000 for each such request. 13. Defaults; Remedies. 13.1 Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee: (a) The vacating or abandonment of the Premises by Lessee. (b) The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three days after written notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph. (c) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee, other than described in paragraph (b) above, where such failure shall continue for a period of 30 days after written notice thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's default is such that more than 30 days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said 30-day period and thereafter diligently prosecutes such cure to completion. (d) (i) The making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days. Provided, however, in the event that any provision of this paragraph 13.1(d) is contrary to any applicable law, such provision shall be of no force or effect. (e) The discovery by Lessor that any financial statement given to Lessor by Lessee; any assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee or any guarantor of Lessee's obligation hereunder, and any of them, was materially false. 13.2 Remedies. In the event of any such material default or breach by Lessee, Lessor may at any time thereafter, with or without notice or demand and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or breach: (a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessees shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorney's fees, and any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided; that portion of the leasing commission paid by Lessor pursuant to Paragraph 15 applicable to the unexpired term of this Lease. (b) Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder. (c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of Lessee under the terms of this Lease shall bear interest from the date due at the maximum rate then allowable by law. 13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than thirty (30) days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation; provided, however, that if the nature of Lessor's obligations is such that more than thirty (30) days are required for performance then Lessor shall not be in default if Lessor commences performance within such 30-day period and thereafter diligently prosecutes the same to completion. 13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Premises. Accordingly, if any installment of rent or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of rent, then rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding paragraph 4 or any other provision of this Lease to the contrary. 13.5 Impounds. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of rent or any other monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to Lessor, if Lessor shall so request, in addition to any other payments required under this Lease, a monthly advance installment, payable at the same time as the monthly rent, as estimated by Lessor, for real property tax and insurance expenses on the Premises which are payable by Lessee under the terms of this Lease. Such fund shall be established to insure payment when due, before delinquency, of any or all such real property taxes and insurance premiums. If the amounts paid to Lessor by Lessee under the provisions of this paragraph are insufficient to discharge the obligations of Lessee to pay such real property taxes and insurance premiums as the same become due, Lessee shall pay to Lessor, upon Lessor's demand, such additional sums necessary to pay such obligations. All moneys paid to Lessor under this paragraph may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a default in the obligations of Lessee to perform under this Lease, then any balance remaining from funds paid to Lessor under the provisions of this paragraph may, at the option of Lessor, be applied to the payment of any monetary default of Lessee in lieu of being applied to the payment of real property tax and insurance premiums. 14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the building on the Premises, or more than 25% of the land area of the Premises which is not occupied by any building, is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the building situated on the Premises. No reduction of rent shall occur if the only area taken is that which does not have a building located thereon. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to any award for loss of or damage to Lessee's trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority. Lessee shall pay any amount in excess of such severance damages required to complete such repair. 15. Broker's Fee. (a) Upon execution of this Lease by both parties, Lessor shall pay to Scher-Voit Commercial Brokerage Company, Inc. as per letter agreement dated September 24, 1992 Licensed real estate broker(s), a fee as set forth in a separate agreement between lessor and said broker(s), or in the event there is no separate agreement between Lessor and said broker(s), the sum of $_______, for brokerage services rendered by said broker(s) to Lessor in this transaction. (b) Lessor further agrees that if Lessee exercises any Option as defined in paragraph 39.1 of this Lease, which is granted to Lessee under any rights to the Premises or other premises described in this Lease which are substantially similar to what Lessee would have acquired had an Option herein granted to Lessee been exercised, or if Lessee remains in possession of the Premises after the expiration of the term of this Lease after having failed to exercise an Option, or if said broker(s) are the procuring cause of any other lease or sale entered into between the parties pertaining to the Premises and/or any adjacent property in which Lessor has an interest, then as to any of said transaction, Lessor shall pay said broker(s) a fee in accordance with the schedule of said broker(s) in effect at the time of execution of this Lease. (c) Lessor agrees to pay said fee not only on behalf of Lessor but also on behalf of any person, corporation, association, or other entity having an ownership interest in said real property or any part thereof, when such fee is due hereunder. Any transferee of Lessor's interest in this Lease, whether such transfer is by agreement or by operation of law, shall be deemed to have assumed Lessor's obligation under this Paragraph 15. Said broker shall be a third party beneficiary of the provisions of this Paragraph 15. 16. Estoppel Certificate. (a) Lessee shall at any time upon not less than ten (10) days' prior written notice from Lessor execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. (b) At Lessor's option, Lessee's failure to deliver such statement within such time shall be a material breach of this Lease or shall be conclusive upon Lessee (I) that this Lease is in full force and effect, without modification except as may be represented by Lessor, (II) that there are no uncured defaults in Lessor's performance, and (III) that not more than one month's rent has been paid in advance or such failure may be considered by Lessor as a default by Lessee under this Lease. (c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee hereby agrees to deliver to any lender or purchaser designated by Lessor such financial statements of Lessee as may be reasonably required by such lender or purchaser. Such statements shall include the past three years' financial statements of Lessee. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners at the time in question of the fee title or a lessor's interest in a ground lease of the Premises, and except as expressly provided in Paragraph 15, in the event of any transfer of such title or interest Lessor herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership. 18. Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 19. Interest on Past-Due Obligations. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at the maximum rate then allowable by law from the date due. Payment of such interest shall not excuse or cure any default by Lessee under this Lease, provided, however, that interest shall not be payable on late charges incurred by Lessee nor on any amounts upon which late charges are paid by Lessee. 20. Time of Essence. Time is of the essence. 21. Additional Rent. Any monetary obligations of Lessee to Lessor under the terms of this Lease shall be deemed to be rent. 22. Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease, Lessee hereby acknowledges that neither the real estate broker listed in Paragraph 15 hereof nor any cooperating broker on this transaction nor the Lessor or any employees or agents of any of sales persons has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of said Premises and Lessee acknowledges that Lessee assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease except as otherwise specifically stated in this Lease. 23. Notices. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery or by certified mail and if given personally or by mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at the address noted below the signature of the respective parties, as the case may be. Either party may by notice to the other specify a different address for notice purposes except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice purposes. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by notice to Lessee. 24. Waivers. No waiver by Lessor or any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent. 25. Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a "short form" memorandum of this Lease for recording purposes. 26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the Premises or any part thereof after the expiration of the term hereof, such occupancy shall be a tenancy from month to month upon all the provisions of this Lease pertaining to the obligations of Lessee, but all options and rights of first refusal, if any, granted under the terms of this Lease shall be deemed terminated and be of no further effect during said month to month tenancy. 27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 28. Convenants and Conditions. Each provision of this Lease preformable by Lessee shall be deemed both a covenant and a condition. 29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of Paragraph 17, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State wherein the Premises are located. 30. Subordination. (a) This Lease, at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the real property of which the Premises are a part and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof. (b) Lessee agrees to execute any documents required to effectuate an attornment, a subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to execute such documents within 10 days after written demand shall constitute a material default by Lessee hereunder, or, at Lessor's option, Lessor shall execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to execute such documents in accordance with this paragraph 30(b). 31. Attorney's Fees. If either party or the broker named herein brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, or trial or appeal, shall be entitled to his reasonable attorney's fees to be paid by the losing party as fixed by the court. The provisions of this paragraph shall inure to the benefit of the broker named herein who seeks to enforce a right hereunder. 32. Lessor's Access. Lessor and Lessors agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, improvements or additions to the Premises or to the building of which they are a part as Lessor may deem necessary or desirable. Lessor may at any time place on or about the Premises any ordinary "For Sale" signs and Lessor may at any time during the last 120 days of the term hereof place on or about the Premises an ordinary "For Lease" signs, all without rebate of rent or liability to Lessee. 33. Auctions. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor's prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent. 34. Signs. Lessee shall not place any sign upon the Premises without Lessor's prior written consent except that Lessee shall have the right without prior permission of Lessor to place ordinary and usual for rent or sublet signs thereon. 35. Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work, merger, and shall, at the option of Lessor, terminate all or any existing subtenancles or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancles. 36. Consents. Except for paragraph 33 hereof, wherever in this Lease the consent of one party is required to an act of the other party such consent shall not be unreasonably withheld. 37. Guarantor. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Lessee under this Lease. 38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions on Lessee's part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executive this Lease on behalf of Lessor represent and warrant to Lessee that they are fully authorized and legally capable of executing this Lease on behalf of Lessor and that such execution is binding upon all parties holding an ownership interest in the Premises. 39. Options. 39.1 Definition. As used in this paragraph the word "Options" has the following meaning: (1) the right or option to extend the term of this Lease or to renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (2) the option or right of first refusal to lease the Premises or the right of first offer to leas the Premises or the right of first refusal to lease other property of Lessor or the right of first offer to lease other property of Lessor; (3) the right or option to purchase the Premises, or the right of first refusal to purchase the Premises, or the right of first offer to purchase the Premises or the right or option to purchase other property of Lessor, or the right of first refusal to purchase other property of Lessor or the right of first offer to purchase other property of Lessor. 39.2 [Illegible] _______________________________________ 39.3 Multiple Options. In the event that Lessee has any multiple options to extend or renew this Lease a later option cannot be exercised unless the prior option to extend or renew this Lease has been so exercised. 39.4 Effect of Default on Options. (a) Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary, (I) during the time commencing from the date Lessor gives to Lessee a notice of default pursuant to paragraph 13.1(b) or 13/1(c) and continuing until the default alleged in said notice of default is cured, or (II) during the period of time commencing on the day after a monetary obligation to Lessor is due from Lessee and unpaid (without any necessity for notice thereof to Lessee) continuing until the obligation is paid, or (III) at any time after an event of default described in paragraph 13.1(a), 13.1(d), or 13.1(e) (with any necessity of Lessor to give notice of such default to Lessee), or (IV) in the event that Lessor has given to Lessee three or more notices of default under paragraph 13.1(b), where a late charge has become payable under paragraph 13.4 for each of such defaults, or paragraph 13.1(c), whether or not the defaults are cured, during the 12 month period prior to the time that Lessee intends to exercise the subject Option. (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of paragraph 39.4(a). (c) All rights of Lessee under the provisions of an Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and time exercise of the Option, if, after such exercise and during the term of this Lease, (I) Lessee fails to pay to Lessor a monetary obligation of Lessee for a period of 30 days after such obligation becomes due (without any necessity of Lessor to give notice thereof to Lessee), or (II) Lessee fails to commence to cure a default specified in paragraph 13.1(c) within 30 days after the date that Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to diligently prosecute said cure to completion, or (III) Lessee commits a default described in paragraph 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of such default to Lessee), or (IV) Lessor gives to Lessee three or more notices of default under paragraph 13.1(b), where a late charge becomes payable under paragraph 13.4 for each such default, or paragraph 13.1(c), whether or note the defaults are cured. 40. Multiple Tenant Building. In the event that the Premises are part of a larger building or group of buildings then Lessee agrees that it will abide by, keep and observe all reasonable rules and regulations which Lessor may make from time to time for the management, safety, care, and cleanliness of the building and grounds, the parking of vehicles and the preservation of good order therein as well as for the convenience of other occupants and tenants of the building. The violations of any such rules and regulations shall be deemed a material breach of this Lease by Lessee. 41. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of Lessee, its agents and invitees from acts of third parties. 42. Easements. Lessor reserves to itself the right, from time to time, to grant such easements, rights and dedications that Lessor deems necessary or desirable, and to cause the recordation of Parcel Maps and restrictions, so long as such easements, rights, dedications, Maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign any of the aforementioned documents upon request of Lessor and failure to do so shall constitute a material breach of this Lease. 43. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment, and there shall survive the right on the part of said party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease. 44. Authority. If Lessee is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity. If Lessee is a corporation, trust or partnership, Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor. 45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 46. Insuring Party. The insuring party under this lease shall be the Lessee for 572 ($500,000)/Lessor for 576 ($600,000). 47. Addendum. Attached hereto is an addendum or addenda containing paragraphs A through D which constitutes a part of this Lease. 48. See attached Exhibit "A" for description of premises and tenant improvements. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSES OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. The parties hereto have executed this Lease at the place on the dates specified immediately adjacent to their respective signatures. Executed at OCEANSIDE ASSOCIATES ----------------------------- ------------------------------- on By /s/ Kenneth Smith -------------------------------------- ------------------------ Kenneth Smith Address 232 West Cerritos Boulevard By ------------------------------- ------------------------ Anaheim, California 92805 ------------------------------- "LESSOR" (Corporate Seal) Executed at Hyannis, Massachusetts PACKAGING INDUSTRIES GROUP, INC. ------------------------ ------------------------------------ on April 1, 1992 By /s/ Carlton Bolton ---------------------------------- ----------------------------- Carlton Bolton Address 70 Airport Road By /s/ Jon Anthony Glydon ------------------------------ ----------------------------- Jon Anthony Glydon Hyannis, Massachusetts 02601 "LESSEE" (Corporate Seal) - ------------------------------------- 47. A. RENTAL SCHEDULE: April 1, 1992 through March 31, 1993: The rent shall be Ten Thousand Four Hundred Ninety-Eight and 50/100ths Dollars ($10,498.50) per month; April 1, 1993 through March 3,1 1994: The rent shall be Eleven Thousand Six Hundred Ninety-Eight and 44/100ths Dollars ($11,698.44) per month; April 1, 1994 through March 31, 1995: The rent shall be Twelve Thousand Two Hundred Ninety-Eight and 36/100ths Dollars ($12,298.36) per month. B. OPTION TO EXTEND THE LEASE TERM: I. Provided that the Lease is still in full force and effect and that Lessee is not in default in the payment of rent or of any of the terms and conditions of the Lease, Lessor grants to Lessee the right and option to extend the term of this Lease for an additional two (2) year period ("Extended Term") commencing on April 1, 1995, the date of the first day following the expiration of the original term, and ending on March 31, 1997; provided, that Lessee shall have exercised this option by having given Lessor written notice of election to extend the term of this Lease at least ninety (90) days prior to the expiration of the original term of this Lease. Except for the rental adjustment as hereinafter set forth, all other terms and conditions of the Lease shall apply to the Extended Term. II. Lessee agrees to pay to Lessor in advance on the first day of each and every month during the Extended Term the monthly rent determined in the following manner: a. The parties hereto shall attempt to agree upon the then prevailing market rent for similar property for the Extended Term during the ninety (90) through sixty (60) days immediately preceding the first day of the Extended Term. If the parties agree on the adjusted rent within the time specified, the parties will forthwith execute a letter agreement reflecting the monthly rent for the Extended Term. b. If the parties are unable to agree upon the adjusted rent for the Extended Term within the time provided above, then within five (5) days thereafter Lessor shall appoint an arbitrator and immediately notify Lessee in writing of said appointment and of the name and address of the arbitrator so appointed, and Lessee shall also similarly at said time appoint an arbitrator and immediately notify Lessor in writing of aid appointment and of the name and address of the arbitrator so appointed. If the two arbitrators do not within thirty (30) days after their appointment agree on the monthly rent for the premises, then the two (2) arbitrators shall immediately appoint a third arbitrator, and the decision of any two of said arbitrators shall be binding on the parties thereto. Such decision in each respective instance shall be rendered on or before twenty-five (25) days before the commencement of the Extended Term. The decision of the arbitrators shall be made in writing and signed by the arbitrators in duplicate. One of the writings shall be delivered to Lessor and the other to Lessee. Lessor and Lessee shall pay the respective charges and expenses of the arbitrator appointed by each party. the charges for services of the third arbitrator and the other expenses of the arbitration shall be borne by the parties hereto in equal shares. c. If for any of such periods the parties hereto do not mutually agree on the monthly rent for the Extended Term and fail to appoint an arbitrator as hereinabove provided, or if for any of such periods said arbitrators fail to agree, and failing to agree do not appoint a third arbitrator as herein provided, or if for any of such periods said arbitrator or any two of them, as hereinabove provided, do not agree on the monthly rent before the twenty-fifth (25th) day preceding the commencement of the Extended Term, then the monthly rent shall be determined by the Superior Court of the State of California for the County of San Diego in a declaratory relief or other action or actions brought therein for that purpose and in any such action or actions, each party hereto shall bear his own attorneys' fees and costs. d. All arbitrators shall be licensed M.A.I. appraisers. e. In no event shall the monthly rent for any Extended Term be less than the monthly rent in effect immediately prior to the commencement of the Extended Term. C. TENANT IMPROVEMENTS: Lessor, at Lessor's cost, shall make the following improvements to the premises beginning immediately upon execution of this Lease: I. Add sufficient heating, ventilating and air conditioning (HVAC) units to service the office area currently unserviced at 562 Airport Road, Oceanside (see Exhibit "A"); II. Fill-in the truck well area at the rear end of 572 airport Road, Oceanside in such a manner that it will be of the same grade and level as the existing parking/loading area (see Exhibit "A"); III. Install a fence and a gate enclosing the parking area on the east side of 572 Airport Road, Oceanside (see Exhibit "A"); -24- Initials:____ ____ IV. Install a fence and a gate between the buildings at 572 and 576 Airport Road, Oceanside (see Exhibit "A"); V. Install some warehouse strip lighting at 576 Airport Road, Oceanside; VI. Construct an additional office of about 400 square feet to include HVAC, drop ceiling, lights, carpet and finish paint (See Exhibit "A"); VII. Repair existing exterior lighting system. -25- Initials:____ ____ D. RIGHT OF FIRST REFUSAL: Lessor hereby grants to Lessee the right of first refusal to purchase the premises upon the terms and conditions of a bona fide offer to purchase the premises acceptable to Lessor from a third party up to and including March 31, 1993. Lessee shall have ten (10) days form receipt of notice of such bona fide offer in which to elect to purchase the premises. Said notice shall contain a true copy of the bona fide offer to purchase. In the event Lessee does not timely elect to purchase on such terms, lessor may sell the premises to said third party upon the terms and conditions set forth in the notice. In the event Lessor does not consummate the sale of the premises to such third party upon the terms and conditions contained in the notice to lessee, this right of first refusal shall be revived in its entirety, but in no event shall this right extend beyond March 31, 1993. Should Lessee purchase the premises, this Lease shall terminate upon the date title vests in Lessee, and Lessor shall remit to Lessee all unearned rent. In addition, should Lessee purchase the premises, lessor shall pay to Scher-Voit Commercial Brokerage Company, Inc. a commission in accordance with its standard Schedule of Commissions. OCEANSIDE ASSOCIATES By: /s/ KENNETH SMITH ------------------------------ -------------------- KENNETH SMITH Date PACKAGING INDUSTRIES GROUP, INC. By: /s/ CARLTON BOLTON APRIL 1, 1992 ------------------------------ -------------------- CARLTON BOLTON Date By: /s/ JON ANTHONY GLYDON ------------------------------ -------------------- JON ANTHONY GLYDON Date -26- Initials:____ ____ ADDENDUM DATE _____________________________ ADDENDUM TO LEASE DATED MARCH 30, 1992 BY AND BETWEEN OCEANSIDE ASSOCIATES, AS LESSOR, AND PACKAGING INDUSTRIES GROUP, INC., AS LESSEE, FOR THE PREMISES KNOWN AS 572 AND 576 AIRPORT ROAD, OCEANSIDE, CALIFORNIA. - -------------------------------------------------------------------------------- 47. A. RENTAL SCHEDULE: April 1, 1992 through March 31, 1993: The rent shall be Ten Thousand Four Hundred Ninety-Eight and 50/100ths Dollars ($10,498.50) per month; April 1, 1993 through March 31, 1994: The rent shall be Eleven Thousand Six Hundred Ninety-Eight and 44/100ths ($11,698.44) per month; April 1, 1994 through March 31, 1995: The rent shall be Twelve Thousand Two Hundred Ninety-Eight and 36/100ths Dollars ($12,298.36) per month. B. OPTION TO EXTEND THE LEASE TERM: I. Provided that the Lease is still in force and effect and that Lessee is not in default in the payment of rent or of any of the terms and conditions of the Lease, Lessor grants to Lessee the right and option to extend the term of this Lease for an additional two (2) year period ("Extended Term") commencing on April 1, 1995, the date of the first day following the expiration of the original term, and ending on March 31, 1997; provided, that Lessee shall have exercised this option by having given Lessor written notice of election to extend the term of this Lease at least ninety (90) days prior to the expiration of the original term of this Lease. Except for the rental adjustment as hereinafter set forth, all other terms and conditions of the Lease shall apply to the Extended Term. II. Lessee agrees to pay to Lessor in advance on the first day of each and every month during the Extended Term the monthly rent determined in the following manner: a. The parties hereto shall attempt to agree upon the then prevailing market rent for similar property for the Extended Term during the ninety (90) through sixty (60) days immediately preceding the first day of the Extended Term. If the parties agree on the adjusted rent within the time specified, the parties will forthwith execute a letter agreement reflecting the monthly rent for the Extended Term. -27- Initials:____ ____ b. If the parties are unable to agree upon the adjusted rent for the Extended Term within the time provided above, then within five (5) days thereafter Lessor shall appoint an arbitrator and immediately notify Lessee in writing of said appointment and of the name and address of the arbitrator so appointed, and Lessee shall also similarly at said time appoint an arbitrator and immediately notify Lessor in writing of said appointment and of the name and address of the arbitrator so appointed. If the two arbitrators do not within thirty (30) days after their appointment agree on the monthly rent for the premises, then the two (2) arbitrators shall immediately appoint a third arbitrator, and the decision of any two of said arbitrators shall be binding on the parties hereto. Such decision in each respective instance shall be rendered on or before twenty-five -28- Initials:____ ____ SECOND ADDENDUM TO LEASE DATED MARCH 30, 1992 BY AND BETWEEN OCEANSIDE ASSOCIATES, AS LESSOR, AND PACKAGING INDUSTRIES GROUP, INC., AS LESSEE, FOR THE PREMISES KNOWN AS 572 AND 576 AIRPORT ROAD, OCEANSIDE, CALIFORNIA - -------------------------------------------------------------------------------- 1. TERM: The term of the Lease shall be extended to and including March 31, 1997. 2. RENT: The rent for this extended period shall be as follows: April 1, 1995 thru March 31, 1996: The rent shall be $12,298.36 per month ("Base Rent"); April 1, 1996 thru March 31, 1997: The rent shall be the base rent plus a cost of living increase as set forth below: a) RENT - COST OF LIVING ADJUSTMENT: The monthly rent provided for above ("Base Rent") shall be subject to adjustment in the following manner: At the commencement of the second (2nd) year of the extended term ("Adjustment Date") the Consumer Price Index for Urban Wage Earners and Clerical Workers for the Los Angeles/Long Beach Metropolitan Area published by the Department of Labor, Bureau of Labor Statistics, United States Government, All Items, 1982=100, as it exists on the Adjustment Date in question shall be compared with the Index as the same existed on April 1, 1995 ("Base Index"). In the event the Index as of such Adjustment Date is higher than the Base Index, the monthly rent until the next Adjustment Date, or until the expiration of the lease term as the cause may be, shall be increased by multiplying the Base Rent by a fraction the numerator of which is the Index as the same exists on such Adjustment Date, and the denominator of which is the Base Index. In no event shall the monthly rent at any time during the term be less than the monthly rent payable immediately prior to the Adjustment Date in question, and the Lessee shall continue to pay the rent for the prior period until the index is made public. When the Index is made public, Lessee shall immediately pay to Lessor the deficiency in rent due to the time lag upon Lessor's submission to Lessee of a statement setting forth the adjusted monthly rent reflecting the increase in the Index. Upon adjustment of the monthly rent as herein provided, the parties will forthwith execute a letter agreement reflecting the new monthly rent. -29- Initials:____ ____ If, in the future, the Index shall be changed so that the base year differs from 1982=100, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. In the event the Index is discontinued or revised during the term hereof, such other governmental index or computation with which it is replaced shall be used on order to obtain substantially the same result that would be obtained if said present Index had not been discontinued or revised. In the event the Index is not replaced with another governmental index or computation, Lessor and Lessee shall accept comparable statistics on the purchasing power of the consumer dollar as published at the time of said discontinuance by a responsible financial periodical or recognized authority chosen by the parties. If the parties cannot agree upon a financial periodical as the source of comparable statistics after attempting for twenty (20) days to reach such agreement, the percentage increase for the ensuing period shall be determined by arbitration according to the rules of the American Arbitration Association and the decision of the arbitrators shall be binding on the parties. 3. TENANT IMPROVEMENTS: Lessor, at Lessor's cost, shall make the following improvements to the Premises: a) Install a new roof on both buildings; by June 30, 1995 b) Repair or service (as the case prescribes) the heating, ventilating and air conditioning (HVAC) units in both buildings bringing the units to good working condition; c) Trim all of the trees on the premises. AGREED AND ACCEPTED: LESSOR: /s/ (illegible) DATE 3/20/95 ---------------------------------------- ------- LESSEE: /s/ JON ANTHONY GLYDON, President DATE 3/10/95 ---------------------------------------- ------- Earth and ocean Sports, Inc. successor in interest to Packaging Industries Group, Inc. -30- Initials:____ ____ THIRD ADDENDUM TO LEASE DATED MARCH 30, 1992 BY AND BETWEEN OCEANSIDE ASSOCIATES, AS LESSOR, AND PACKAGING INDUSTRIES GROUP, INC., AS LESSEE, FOR THE PREMISES KNOWN AS 572 AND 576 AIRPORT ROAD, OCEANSIDE, CALIFORNIA - -------------------------------------------------------------------------------- 1. TERM: The term of the Lease shall be extended to and including March 31, 1998. 2. RENT: The rent for the extended period shall remain the same as the rent currently payable. 3. OPTION TO EXTEND LEASE TERM: (a) Provided that the Lease is still in full force and effect and that Lessee is not in default in the payment of rent or of any of the terms and conditions of the Lease, Lessor grants to Lessee the right and option to extend the term of this Lease for an additional two (2) year period ("Extended Term") commencing on April 1, 1998, the date of the first day following the expiration of the original term, and ending on March 31, 2000; provided, that Lessee shall have exercised this option by having given Lessor written notice of election to extend the term of this Lease at least one hundred eighty (180) days prior to the expiration of the original term of this Lease. Except for the rental adjustment as hereinafter set forth, all other terms and conditions of the Lease shall apply to the Extended Term. (b) Lessee agrees to pay to Lessor in advance on the first day of each and every month during the Extended Term the monthly rent determined in the following manner: (i) The parties hereto shall attempt to agree upon the then prevailing market rent for the Extended Term during the one hundred eighty (180) through the one hundred fifty (150) days immediately preceding the first day of the applicable Extended Term. If the parties agree on the adjusted rent within the time specified, the parties will forthwith execute a letter agreement reflecting the monthly rent for the applicable Extended Term. (ii) If the parties are unable to agree upon the adjusted rent for an applicable Extended Term within the time provided above, then within ten (10) days thereafter Lessor shall appoint an arbitrator and immediately notify Lessee in writing of said appointment and of the name and address of the arbitrator so appointed, and Lessee shall also similarly at said time appoint an arbitrator and immediately notify Lessor in writing of said appointment and of the name and address of the arbitrator so appointed. If the two arbitrators do not within twenty -31- Initials:____ ____ (20) days after their appointment agree on the monthly rent for the Premises, then the two (2) arbitrators shall immediately appoint a third arbitrator, and the decision of any two of said arbitrators shall be binding on the parties hereto. Such decision in each respective instance shall be rendered on or before ninety (90) days before the commencement of the Extended Term. The decision of the arbitrators shall be made in writing and signed by the arbitrators in duplicate. One of the writings shall be delivered to Lessor and the other to Lessee. Lessor and Lessee shall pay the respective charges and expenses of the arbitrator appointed by each party. The charges for services of the third arbitrator and the other expenses of the arbitration shall be borne by the parties hereto in equal shares. (iii) If for any of such periods the parties hereto do not mutually agree on the monthly rent for the applicable Extended Term and fail to appoint an arbitrator as hereinabove provided, or if for any of such periods said arbitrators fail to agree, and failing to agree do not appoint a third arbitrator as herein provided, or if for any of such periods said arbitrator or any two of them, as hereinabove provided, do not agree on the monthly rent before the ninetieth (90th) day preceding the commencement of the applicable Extended Term, then the monthly rent shall be determined by the Superior Court of the State of California for the County of Los Angeles in declaratory relief or other action or actions brought therein for that purpose and in any such action or actions, each party hereto shall bear his own attorneys' fees and cost. (iv) All arbitrators shall be licensed M.A.I. appraisers. (v) In no event shall the monthly rent for any Extended Term be less than the monthly rent in effect immediately prior to the commencement of the applicable Extended Term. 4. HEATING AND AIR CONDITIONING: Lessor agrees to adjust the heating, ventilating and air conditioning (HVAC) in the buildings so that they function more efficiently. However, Lessor will not be required to add any capacity or ducting to the existing system. AGREED AND ACCEPTED: LESSOR: /s/ BRIAN FRANK DATE: 3/19/97 -------------------------------------------- --------------- OCEANSIDE ASSOCIATES LESSEE: /s/ JON ANTHONY GLYDON DATE: 2/24/97 -------------------------------------------- --------------- EARTH AND OCEAN SPORTS, INC., SUCCESSOR IN INTEREST TO PACKAGING INDUSTRIES GROUP, INC. -32- Initials:_______ _______ </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.7 <SEQUENCE>12 <DESCRIPTION>LEASE AGREEMENT - COMMERCIAL PREMISES <TEXT> Exhibit 10.7 LEASE AGREEMENT - COMMERCIAL PREMISES THIS LEASE made this 13th day of December, 1995, by and between (Names and Addresses): Allied Venture Number 1, a Washington General Partnership, (hereinafter called Lessor) and Earth and Ocean Sports, Inc., a Massachusetts Corporation, (hereinafter called Lessee): WITNESSETH: 1. PREMISES: Lessor does hereby lease to Lessee, those certain premises commonly known as The free standing building known as and having the physical address of 11425 - 120th Avenue N.E., City of Kirkland, WA containing approximately 12,000 square feet of warehouse and 1,440 square feet of office. as shown on Exhibit B attached hereto, (hereinafter called "premises"), being situated upon land described in Exhibit A attached hereto together with the right to use exclusively all entrances and exists, lobbies, corridors stairways, elevators, restrooms, sidewalks, access roads and parking areas located on the Land described in Exhibit A. 2. TERM: The term of the Lease shall be for thirty-seven and one-half (37 1/2) months commencing the 15th day of December, 1995, and shall terminate on the 31st day of January, 1999. 3. RENT: Lessee covenants and agrees to pay Lessor, at the offices of Lessor, 901 Kirkland Avenue, Kirkland, WA 98033 or to such other party or at such other place as Lessor may hereafter designated in writing, monthly rent in the amount of Six Thousand Six Hundred Twenty-Four Dollars ($6,624.00), in advance, on the first day of each month of the lease term, Lessor hereby acknowledges receipt of Six Thousand Six Hundred Twenty Four Dollars ($6,624.00), for the second month's rent. Lessor hereby acknowledges receipt of Six Thousand Six Hundred Twenty Four Dollars ($6,624.00), for the second month's rent. If Lessee is in possession of the premises for a portion of a month, the monthly rent shall be prorated for the number of days of Lessee's possession during that month. Any rental payments receipt eleven or more days after the beginning date of each rental period will be subject to a service charge of $331.00. Lessee has deposited the sum of Six Thousand Six Hundred Twenty Four Dollars ($6,624.00), (the "Security Deposit") receipt of which is hereby acknowledge, which sum is security for Lessee's full performance of the obligations hereunder and those pursuant Chapter 59 Revised Code of Washington, or as such may be subsequently amended. -2- 4. UTILITIES AND FEES: Lessee agrees to pay all charges for light, heat, water, sewer, garbage, drainage, metro and all other utilities and services to the premises during the full term of this lease. Above items, if any, included in the rent payment are none. All other items including all license fees and other governmental charges levied on the operation of the Lessee's business on the premises will be paid directly by Lessee. 5. TAXES: In addition to the rent provided in paragraph 3, Lessee agrees to pay the real estate taxes and assessments applicable to the premises which are due and payable during the term of the Lease or any extension hereof. Lessee shall pay the real estate taxes on the building leased to Lessee, plus the real estate taxes applicable to the land contained in the tax parcel described in Exhibit A. Lessor shall submit to Lessee a copy of the actual statements received from the taxing authority as they become due and shall invoice Lessee according to the provisions of this paragraph. Lessee shall pay one-twelfth (1/12) of the real estate taxes to Lessor monthly as additional rent. If the term of this Lease commences and terminates on dates other than January 1 and December 31, respectively, taxes payable shall be prorated in the first and last calendar years of the term of the Lease. Should there presently be in effect or should there be enacted during the term of this Lease any law, statute or ordinance levying any tax (other than Federal or State income taxes) upon rents, Lessee shall pay such tax or shall reimburse Lessor on demand for any such taxes paid by Lessor. 6. COMMON AREAS: N/A 7. REPAIRS AND MAINTENANCE: Premises have been inspected and are accepted by Lessee in their present condition. Lessee shall, at its own expense and at all times, keep the premises neat, clean and in a sanitary condition, and keep and use the premises in accordance with applicable laws ordinances, rules, regulations and requirements of governmental authorities due to Lessee's particular use of the Premises. Lessor represents and warrants that, to the best of its knowledge, the premises, the building and parking areas are in compliance with all applicable laws, ordinances, rules, regulations and requirements of government, governmental authorities including, without limitation, the Americans with Disabilities Act. Lessee shall permit no waste, damage or injury to the premises; keep all drain pipes free and open; protect water heating, gas and other pipes to prevent freezing or clogging; repair all leaks and damage caused by leaks; replace all glass in windows and doors of the premises which may become cracked or broken; and remove ice and snow from sidewalks adjoining the premises. Except for the roof, exterior walls and foundations which are the responsibility of the Lessor, Lessee shall make such repairs as necessary to maintain the premises in as good condition as they now are, reasonable use and wear and damage by fire and other casualty excepted. -3- 8. SIGNS: All signs or symbols placed by Lessee in the windows and doors of the premises, or upon any exterior part of the building, shall be subject to Lessor's prior written approval which consent shall not be unreasonably withheld conditioned or delayed. Lessor may demand the removal of signs which are not so approved, and Lessee's failure to comply with said request within forty-eight (48) hours will constitute a breach of this paragraph and will entitle Lessor to cause the sign to be removed and the building repaired at the sole expense of the Lessee. At the termination of this Lease, Lessee will remove all signs placed by it upon the premises, and will repair any damage caused by such removal. All signs must comply with sign ordinances and be placed in accordance with required permits. 9. ALTERATIONS: After prior written consent of Lessor, which shall not be unreasonably withheld, conditioned or delayed Lessee may make alterations, additions and improvements in said premises, at Lessee's sole cost and expense. In the performance of such work, Lessee agrees to comply with all laws, ordinances, rules and regulations of any proper public authority, and to save Lessor harmless from damage loss or expense. Upon termination of this Lease and upon Lessor's request which will be made at the time Lessor's consent is requested, or Lessor's approval, Lessee shall remove such improvements and restore the premises to its original condition not later than the termination date, at Lessee's sole cost and expense. Any improvements not so removed shall be removed at Lessee's expense provided that Lessee shall pay for any damage caused by such removal. 10. CONDEMNATION: In any event a substantial part of the premises is taken or damaged by the right of eminent domain, or purchased by the condemnor, in lieu thereof, so as to render the remaining premises economically untenantable, then this Lease shall be cancelled as of the time of taking at the option of either party. In the event of a partial taking which does not render the premises economically untenantable, the rent shall be reduced in direct proportion to the square footage of the premises taken. Lessee shall have no claim to any portion of the compensation for the taking or damaging of the land or building. Nothing herein contained shall prevent the Lessee from his entitlement to negotiate for compensation for his own moving costs and his leasehold improvements. 11. PARKING: Lessee shall be entitled to the exclusive use of all parking areas located on the land described in Exhibit A. If portions of the Premises are sublet, it is the obligation of the Lessee to provide parking for the Sublessee. 12. LIENS AND INSOLVENCY: Lessee shall keep the premises free from any liens arising out of work performed for, materials furnished to, or obligations incurred by Lessee and shall hold Lessor harmless against the same. In the event Lessee becomes insolvent, bankrupt, or if a receiver, assignee or other liquidating officer is appointed for the business of Lessee, Lessor may cancel this Lease at its option. -4- 13. SUBLETTING OR ASSIGNMENT: Lessee shall not sublet the whole or any part of the premises nor assign this lease without the written consent of Lessor, which will not be unreasonably withheld, conditioned or delayed. This Lease shall not be assignable by operation of law. Notwithstanding the first sentence of this section, Lessee shall have the absolute right to assign its interest in the Lease or sublet all or any portion of the premises without prior notice to Lessor and without Lessor's consent in connection with any of the following: any reorganization, recomposition, merger or consolidation of Lessee with any entity or entities; provided that such sublessor or assignee has a net worth substantially the same to Lessee immediately prior to the transaction and such use of Premises is substantially similar in use and does not differ from Paragraph 27 of the Lease. 14. ACCESS: Lessor shall have the right to enter the premises at all reasonable times upon reasonable advance notice to Lessee for the purpose of inspection or of making repairs, additions or alterations, and to show the premises to prospective tenants for sixty (60) days prior to the expiration of the Lease term. 15. POSSESSION: If for any reason Lessor is unable to deliver possession of the premises at the commencement of the term of the Lease, Lessee may give Lessor written notice of its intention to cancel this Lease if possession is not delivered within thirty (30) days after receipt of such notice by Lessor. Lessor shall not be liable for any damages caused by delay, and Lessee shall not be liable for any rent until such times as Lessor delivers possession. A delay of possession shall not extend the term or the termination date. If Lessor offers possession of the premises prior to the commencement date of the term of this Lease, and if Lessee accepts such early possession, then both parties shall be bound by all of the covenants and terms contained herein, including the payment of rent during such period of early possession. 16. DAMAGE OR DESTRUCTION: In the event the premises are rendered substantially untenantable by fire, the elements, or other casualty, Lessor may elect, at its option, not to restore or rebuild the premises and shall so notify Lessee within 30 days after such casualty, in which event Lessee shall vacate the premises and this Lease shall be terminated; or, in the alternative, Lessor shall notify Lessee, within thirty (30) days after such casualty, that Lessor will undertake to rebuild or restore the premises, and that such work can be completed within one hundred eighty (180) days from date of such notice of intent. If Lessor is unable to restore or rebuild the premises within the said one hundred eight (180) days, then the Lease may be terminated at Lessee's option by written ten (10) day notice to Lessor. During the period of untenantability, rent shall abate in the same ratio as the portion of the premises rendered untenantable bears to the whole of the premises. 17. ACCIDENTS AND LIABILITY: Lessor or its agent shall not be liable for any injury or damage to persons or property sustained by Lessee or other, in the -5- premises unless caused by Lessor's (or its agents, employees or contractors negligence or willful misconduct). Lessee agrees to defend and hold Lessor and its agents harmless from any claim, action and/or judgment for damages to property or injury to persons suffered or alleged to be suffered on the premises by any person, firm or corporation, unless caused by Lessor's (or its agents', employees' or contractors') negligence or willful misconduct. Lessee agrees to maintain public liability insurance on the premises in the minimum limit of $25,000 for property damage and in the minimum of $100,000/$300,0000 for bodily injuries and death, and shall name Lessor as an additional insured, and that the policy may not be cancelled unless ten (10) days prior written notice of the proposed cancellation has been given to Lessor. 18. SUBROGATION WAIVER: Lessor and Lessee each herewith and hereby releases and relieves the other and waives its entire right of recovery against the other for loss or damage arising out of or incident to the perils described in standard fire insurance policies and all perils described in the "Extended Coverage" insurance endorsement approved for use in the state where the premises are located, which occurs in, on or about the Premises, unless due to the negligence of either party, their agents, employees or otherwise. 19. DEFAULT AND RE-ENTRY: If Lessee shall fail to keep and perform any of the covenants and agreement herein contained, other than the payment of rent, and such failure continues for thirty (30) days after written notice from Lessor, unless appropriate action has been taken by Lessee in good faith to cure such failure, Lessor may terminate this Lease and re-enter the premises, or Lessor may, without terminating this Lease, re-enter said premises, and sublet the whole or any part thereof for the account of the Lessee upon as favorable terms and conditions as the market will allow for the balance of the term of this Lease and Lessee covenants and agrees to pay to Lessor any deficiency arising from a reletting of the premises at a lesser amount than herein agreed to. Lessee shall pay such deficiency each month as the amount thereof is ascertained by Lessor. However, the ability of Lessor to re-enter and sublet shall not impose upon Lessor the obligation to do so. 20. REMOVAL OF PROPERTY: In the event Lessor lawfully re-enters the premises as provided herein Lessor shall have the right, but not the obligation, to remove all the personal property located therein and to place such property in storage at the expense and risk of Lessee. 21. COSTS AND ATTORNEY'S FEES: If, by reason of any default or breach on the part of either party in the performance of any of the provisions of this Lease, a legal action is instituted, the losing party agrees to pay all reasonable costs and attorney's fees in connection therewith. It is agreed that the venue of any action brought under the terms of this Lease may be in the county in which the premises are situated. -6- 22. SUBORDINATION: Lessee agrees that this Lease shall be subordinate to any mortgages or deeds of trust, placed on the property described in Exhibit A, provided, that in the event of foreclosure or a deed in lieu of foreclosure, if Lessee is not then in default beyond applicable cure periods and agrees to attorn to the mortgage or beneficiary under deed of trust, such mortgagee or beneficiary shall recognize Lessee's right of possession for the term of this Lease. Lessor agrees to use best efforts to provide Lessee with a written agreement ("Non-Disturbance Agreement') within sixty (60) days from the date of this Lease from the holder of any current mortgage or from the Lessor under any current ground lease affecting the premises to the effect that, if such holder forecloses such mortgage, or such ground lessor terminates such ground lease, or either holder, or such ground lessor otherwise exercises their respective rights, such holder or ground lessor shall recognize Lessor's rights under this Lease and shall not disturb Lessee's occupancy of the Premises to any mortgages, deeds of trust or ground leases on the land described in Exhibit A. 23. NO WAIVER OF COVENANTS: Any waiver by either party of any breach hereof by the other shall not be considered a waiver of any future similar breach. This Lease contains all the agreements between the parties; and there shall be no modification of the agreements contained herein except by written instrument. 24. SURRENDER OF PREMISES: Lessee agrees, upon termination of this Lease, to peacefully quit and surrender the premises without notice, leave the premises neat and clean and to deliver all keys to the premises to Lessor. 25. HOLDING OVER: If Lessee, with the implied or express consent of Lessor, shall hold over after the expiration of the term of this Lease, Lessee shall remain bound by all the covenants and agreements herein, except that the tenancy shall be from month to month and the rent shall increase twenty-five percent (25%). 26. BINDING ON HEIRS, SUCCESSORS AND ASSIGNS: The covenants and agreements of this Lease shall be binding upon the heirs, executors, administrators, successors and assigns of both parties hereto, except as hereinabove provided. 27. USE: Lessee shall use the premises for the purposes of design, manufacturing, assembly, sales, general office, storage, administration and shipping of snowboards, wakeboards and related products, and for no other purposes, without written consent of Lessor, which consent shall not be unreasonably withheld, conditioned, or delayed except if prohibited by law. In the event Lessee's use of the premises increases the fire and extended coverage or liability insurance rates on the building of which the premises are a part, Lessee agrees to pay for such increase. 28. NOTICE: Any notice required to be given by either party to the other shall be deposited in the United States mail, postage prepaid, addressed to the Lessor at 901 Kirkland Avenue, Kirkland, WA 98033 or to the Lessee at 70 Airport Road, Hyannis, -7- MA 02601 with a copy to: Joseph R. Torpy; Testa, Hurwitz & Thibeault, High Street Tower, 125 High Street, Boston, MA 02110. 29. RIDERS: Riders, if any, attached hereto, are made a part of this lease by reference and are described as follows: Riders 1 - 12. 30. TIME IS OF THE ESSENCE OF THIS LEASE. 31. If Lessee is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the By-Laws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. If Lessee is a corporation, Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor a certified copy of a resolution of the Board of Directors of said corporation authorizing or ratifying the execution of this Lease. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the date first above written. LESSOR: /s/ James G. Vaux LESSEE(S) /s/ Jon A. Glydon, President ----------------------------- ------------------------------- James G. Vaux, Partner Earth and Ocean Sports, Inc. Allied Venture Number 1 STATE OF Washington ----------------- COUNTY OF King } ss.(Individual Acknowledgement) ----------------- On this day personally appeared before me James G. Vaux to me known to be the individual described in and who executed the within and foregoing instrument, and acknowledged that he signed the same as his free and voluntary act and deed, for the uses and purposes therein mentioned. GIVEN Under My Hand and Official Seal this 19th day of December , 1995. /s/ Ray M. Dunlap Notary Public in and for the State of Washington residing at LaConner My commissions expires: Oct. 18, 1997 -8- STATE OF Massachusetts ------------------ COUNTY OF Barnstable } ss.(Corporate Acknowledgement) ----------------- On this 15th day of December, 1995, before me personally appeared Jon Anthony Glydon to me known to be President of the corporation that executed the within and foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he is authorized to execute said instrument and that the seal affixed, if any, is the corporate seal of said corporation. IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal the day and year first above written. /s/ Susan C. Masure Notary Public in and for the State of Massachusetts residing at 70 Airport Road, Hyannis, MA 02601 My commissions expires: 10/30/98 -9- RIDER TO LEASE DATED DECEMBER 13, 1995, BETWEEN ALLIED VENTURE NUMBER 1, LESSOR, AND EARTH AND OCEAN SPORTS, INC., LESSEE The following provisions attached to this Rider are a part of the Lease: 1. Broker's Commissions 2. Recordation 3. Hazardous Substances 4. Insurance 5. Tax and Insurance Payments 6. Repairs and Maintenance 7. Lessor's Improvements 8. Lessee's Improvements 9. Renewal Option 10. Security Deposit 11. Rent Abatement 12. Quiet Enjoyment -10- 1. BROKER'S COMMISSION Each party represents the other that it has not had dealings with any real estate broker, finder, or other person who would be entitled to any commission or fee in connection with the negotiation, execution or delivery of this lease, except Leibsohn & Company, Norris Beggs & Simpson and Hallwood Commercial Real Estate whose fees shall be paid by Lessor in accordance with the separate commission agreement between Leibsohn & Company and Lessor. If any other claims for brokerage, commission, finder's fees, or like payments, arise out of or in connection with this transaction, such claims shall be defended and if sustained, paid by the party whose alleged actions or commitment form the basis of such claims. 2. RECORDATION This lease shall not be recorded, except that if either party requests the other party to do so, the parties shall execute a memorandum of lease in recordable form. 3. HAZARDOUS SUBSTANCES Lessee shall not cause or permit any Hazardous Substances, as defined below, to be brought upon, kept or used in or about the premises, the building, or the land by Lessee, its agents, employees, contractors of invitees, unless such Hazardous Substances are necessary for Lessee's business (and such business is a permitted use) and will be used, kept, and stored in a manner that complies with this Lease and all laws regulating any such Hazardous Substances, provided that Lessee indemnifies Lessor from and against any and all liability with respect to such Hazardous Substances. If Lessee breaches the covenants and obligations set forth herein or, if the presence of Hazardous Substances on, in or about the premises or any part of the building or land caused or permitted by Lessee, its agents, employees, contractors or invitees, resulting in contamination of the premises or any part of the building or land by Hazardous Substances otherwise occurs for which Lessee is legally liable to Lessor, then Lessee shall indemnify and hold Lessor harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities and losses (including, without limitation, diminution in the value of the premises, the building or land, damages for the loss or restriction on the use of rentable or useable space or any part of the building or land, and sums paid in settlement of claims, reasonable attorneys' fees, consultant fees and expert fees which arise during or after the lease term as a result of such contamination. This indemnification by Lessee of Lessor includes without limitation any and all reasonable and actual costs incurred in connection with any investigation of site conditions and any cleanup, remedial, removal or restoration work required by any federal, state or local government agency or political subdivision because of the presence of such Hazardous Substances in, or about the premises, the building or land or the soil or ground water on or under the building or the surface of the land. The provisions of this section shall survive the termination of this Lease. For purposes of this section, the term "Hazardous Substances" shall be interpreted to include substances designated as -11- hazardous under the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq., the Federal Water Pollution Control act, 33 U.S.C. 1257, et seq., the Clean Air Act, 42 U.S.C. 2001, et seq., or the Comprehensive Environmental Response Compensation and Liability Act or 1980, 42 U.S.C. 9601, et seq. 4. INSURANCE The Second paragraph of Paragraph 17 of the Lease is hereby amended as follows: "Lessee agrees to maintain a commercial general liability policy, including coverage for premises/operations, independent contractors, broad form contractual in support of the indemnity provision of this Lease, and personal injury liability, with an insurer licensed to do business in the State of Washington, with a minimum limit of $1,000,000 each occurrence, and shall name Lessor as an additional insured and shall state that the insurance is primary over property insurance carried by Lessor. Lessee shall furnish Lessor a certificate indicating that the insurance policy is in full force and effect the Lessor has been named as an additional insured, and that the policy may not be canceled unless ten (10) days prior written notice of the proposed cancellation has been given to Lessor." Property Insurance Landlord shall obtain and keep in force during the term of this Lease at the expense of the Tenant, property insurance on the building and any improvements and additions permanently affixed thereto of which the Premises are a part, against loss by fire and other causes. Said insurance shall provide for payment of loss thereunder to Landlord or the holder of the Existing Mortgage on the Premises. 5. TAX AND INSURANCE PAYMENTS In addition to the monthly rent provided in Paragraph 3 of the Lease, Lessee shall pay to Lessor Lessee's share of taxes and insurance expenses for each calendar year during the term of the Lease. During the month prior to the commencement of each calendar year, or as soon thereafter as practicable, lessor shall give Lessee notice of Lessor's estimate of the amounts payable under this section for the ensuing calendar year. On the first day of each month during the ensuing calendar year, Lessee shall pay to Lessor one-twelfth (1/12) of such estimated amounts, provided that if such notice is not given prior to the commencement of such calendar year, Lessee shall continue to pay on the basis of the prior year's estimate until the month after such notice is given. Within 90 days after the end of each calendar year in which Lessee is obligated to pay said expenses, Lessor shall furnish Lessee with a statement ("Lessor's Expense Statement") setting forth in reasonable detail the expenses for such calendar year, and Lessee's share of said expenses. If Lessee's share of the actual expenses for such calendar year exceeds the estimated expenses paid by Lessee, Lessee shall pay to Lessor the difference within -12- thirty (30) days after receipt of Lessor's Expenses Statement; and if the total amount paid by Lessee for any such calendar year shall exceed Lessee's share of actual expenses for such calendar year, such excess shall be credited against the next installment of estimated expenses or other rent due from Lessee to Lessor hereunder. If any part of the first or the last years of the term of the Lease shall include any part of an calendar year, Lessee's obligations under this section shall be apportioned based on a 365 day year so that Lessee shall pay only for such parts of such calendar years as are included in the Lease term. For purposes of this section, the following terms shall have the meanings hereinafter set forth: (a) "Lessee's Share" shall be the ratio that the rentable area of the premises bears to the total rentable area of the building (exclusive of common area). At the date hereof, Lessee's share is 100%. 6. REPAIRS AND MAINTENANCE Lessee's repair and maintenance obligation shall include general maintenance and repairs, resurfacing, painting, striping, restriping, cleaning, snow removal, sweeping and janitorial services, maintenance and repair of sidewalks, curbs and signs, landscaping, irrigation or sprinkling systems, planting and landscaping; lighting, water, sewer and other utilities; directional signs and other markers and bumpers; maintenance and repair of any fire protection systems, lighting systems, storm drainage systems and other utility systems; all cost or expense incurred by reason of any repairs or modification to the improvements and/or for repair or installation or equipment required for energy or safety purposes as required by governmental statutes, ordinances, rules or regulations in force from time to time; all costs and expenses pertaining to a security alarm system. Lessor may cause any or all of said services to be provided by an independent contractor or contractors if Lessee fails, after notice from Lessor to maintain the Premises in substantially the same condition in which they were received, wear and tear and damage by fire or other casualty excepted. 7. LESSOR'S IMPROVEMENTS Lessor shall repaint and recarpet all of the office area at Lessor's sole cost. Lessor shall deliver the Premises with broom clean concrete floors, all walls and floor coverings cleaned, and all hardware, mechanical, plumbing and electrical systems, lighting and overhead doors in good working condition. All of the foregoing shall be completed by January 5, 1996 by Lessor. If such work is not complete by January 15, 1996, Base Rent shall abate until the work is completed. Any additional improvements shall be made by Lessee at Lessee's sole cost. -13- 8. LESSEE'S IMPROVEMENTS Lessee may modify the loading dock to an angled configuration in order to better accommodate freight-handling trucks. Lessee may also demolish the office/break area (excluding the bathroom) located in the warehouse. All costs for modifications shall be paid by Lessee and completed in accordance with Paragraph 9 of the Lease. 9. RENEWAL OPTION Provided Lessee is not in default of any of the conditions and/or provisions of this Lease, including payment of rent, Lessee shall have the option to extend the Lease term for an additional two (2) year period commencing February 1, 1999. In order to exercise said option to renew, Lessee must provide Lessor with at least six (6) months prior written notice of its intention to renew. Rental rate for the renewal period shall be at the then prevailing market rates. If Lessor and Lessee are unable to agree on the rental rate for the renewal period within 60 days after the exercise of the renewal option, Lessee shall be entitled to terminate its exercise of the renewal option. 10. SECURITY DEPOSIT The following sentence is to be added to paragraph 3 of the Lease: The security deposit and any balance thereof shall be returned to Lessee within ten (10) days following expiration of the lease term. In the event of termination of Lessor's interest in this Lease, Lessor shall transfer said deposit to Lessor's successor in interest. 11. RENT ABATEMENT Lessee shall not be responsible for any payments of rent, taxes or insurance until January 15, 1996. All other conditions of this Lease are in full force and effect as of December 15, 1995. 12. QUIET ENJOYMENT Lessor covenants and agrees that Lessee shall peaceably and quietly have, hold and enjoy the premises throughout the term of this Lease without hindrance or ejection. -14- EXHIBIT "A" The land is legally described as follows: That portion of the northeast quarter of the Northwest quarter of the Northwest quarter of Section 33, Township 26 North, Range 5 East, W.M. in King Country, Washington, lying East of the Northern Pacific Railroad tracks and West of 120th Avenue Northeast. Being Lot A of King County Short Plat #78-6-2-JV, as recorded under King County Recorder's #7806061000. -15- EXHIBIT "B" [THE FLOORPLAN] </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.8 <SEQUENCE>13 <DESCRIPTION>LEASE AGREEMENT <TEXT> Exhibit 10.8 LEASE AGREEMENT THIS LEASE AGREEMENT (the "Lease") is entered into on this 9th day of July, 1996, by and between Joe P. Ruthven Investments (the "Lessor"), whose address is P.O. Box 2187, Lakeland, Florida 33806-2187, and Earth and Ocean Sports, Inc. (the "Lessee"), whose address is 70 Airport Road, Hyannis, Massachusetts 02601. In consideration of the rents herein reserved and of the covenants, agreements, and conditions herein contained to be kept and performed by the parties hereto, Lessor and Lessee agree as follows: 1. Lease and Description of Premises. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, for the term, at the rental, and upon all of the conditions set forth herein the premises known as 3010 Reynolds Road, Unit(s) 1-3, Lakeland, Florida, containing approximately 12,242 square feet of warehouse space and 1383 square feet of office space (the "Premises"). 2. Term. The term of this Lease shall be for Three (3) years, commencing on August 1, 1996, and ending at midnight on July 31, 1999, (the "lease Term"), unless sooner terminated pursuant to any provisions hereof. Occupancy may commence on July 13, 1996, and the effective date of this Lease for the accrual and payment of rent is September 15, 1996. 3. Rental. Lessee hereby covenants and agrees to pay Lessor as rental for the demised Premises the following amounts, plus Florida sales tax: <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> MONTHLY ANNUAL SALES TERM RENT + SALES TAX* = TOTAL RENT + TAX* = TOTAL - ---- --------- --------- ----- ---- ---- ----- 9/15/96-9/30/96 $2187.50 $131.25 $2318.75 10/1/96-7/31/99 $4375.00 $262.50 $4,637.50 per month </TABLE> *Sales tax subject to change. Receipt is hereby acknowledged of the payment of Six Thousand Five Hundred Sixty Two Dollars and 50/100 Dollars ($6,562.50), representing the first and last month's rent, plus Florida sales tax in the amount of Three Hundred Ninety Three Dollars and 75/100 cents Dollars ($393.75) for a total of Six Thousand Nine Hundred Fifty Six Dollars and 25/100 Dollars ($6,956.25), paid in advance. 4. Option to Renew. Lessor grants to Lessee, subject to the conditions set forth below, the right and option to renew this Lease for the time and at the monthly and annual rents as follows: -2- <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> MONTHLY ANNUAL SALES TERM RENT + SALES TAX* = TOTAL RENT + TAX* = TOTAL - ---- --------- --------- ----- ---- ---- ----- 8/1/99-7/31/2000 $4,593.75 + $275.63 = $4,869.38 8/1/2000-7/31/2001 $4,823.44 + $289.41 = $5,112.84 </TABLE> This is one two year option. SEE TAB A * Sales Tax Subject to Change If Lessee exercises this option, Lessee shall continue to maintain a total of one month's rent, plus Florida sales tax, as a deposit. Except as provided above, and otherwise subject to and on all of the terms and conditions herein contained, all other terms and conditions of this Lease are to be and remain in full force and effect. This option must be exercised by the giving to Lessor, on or before ninety (90) days of the expiration date of this Lease, written notice of the exercise thereof by Lessee; but Lessee shall in no event be entitled to renew the term hereof, even though such notice be timely given, unless Lessee shall have timely performed all of its obligations hereunder, and shall not then be in default in the performance of any terms of this Lease, on the date the option is exercised and through and including the date of the expiration of the initial term hereof. 5. Late Charge: Any installment of rent accruing under the provisions of this Lease that is not paid when due is subject to a late charge of the greater of: (i) Twenty-five Dollars ($25.00) or (ii) five percent (5%) of the monthly rent, plus Florida State sales tax. All rent is due on the first day of each month and is late and subject to the foregoing late charge if not received by the Lessor on or before the fifth (5th) day of each month. In the event a check is returned by a financial institution for any reason, the Lessee shall pay late charges as if the check had not been delivered to the Lessee. 6. Date and Place of Payment: Lessee shall pay Lessor the monthly rental herein required to be paid in advance on the first day of each and every month without demand and at any place that shall be designated in writing by Lessor. Until notice is furnished to the contrary, the rental shall be mailed to Lessor at Post Office Box 2187, Lakeland, Florida 33806-2187. 7. Use. (a) Use. The Premises shall be used and occupied only for the purposes of __________ and for no other purpose of manufacturing, storage and distribution. (b) Compliance with Law. Lessor warrants to Lessee that the Premises, in its existing state but without regard to the use for which Lessee will use the Premises, does not violate any applicable building code, regulation, or ordinance at the time this Lease is executed. In the event it is -3- determined that this warranty has been violated, then it shall be the obligation of the Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such violation. In the event Lessee does not give to Lessor written notice of the violation of this warranty within thirty (30) days from the commencement of the term of this Lease, it shall be conclusively deemed that such violation did not exist and the correction of the same shall be the obligation of the Lessee. Except as provided in Paragraph 7(b), Lessee hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county, and state laws, ordinances, and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any representation or warranty as to the suitability of the Premises for the conduct of Lessee's business. 8. Maintenance Repairs and Alterations. (a) Lessor's Obligations. Subject to the provisions of Paragraphs 7(b) and 10, and except for damage caused by any negligent or intentional act or omission of Lessee, Lessee's agents, employees, or invitees in which event Lessee shall repair the damage, Lessor, at Lessor's expense, shall keep in good order, condition, and repair the foundations, exterior walls, and the exterior roof of the Premises. Lessor shall not, however, be obligated to paint such exterior, nor shall Lessor be required to maintain the interior surface of exterior walls, windows, doors or plate glass. Lessor shall have no obligation to make repairs under this paragraph until a reasonable time after receipt of written notice of the need for such repairs. Lessee expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Premises in good order, condition, and repair. (b) Lessee's Obligations. Subject to the provisions of Paragraphs 7(b) , 8(a), and 10, Lessee, at Lessee's expense, shall keep in good order, condition, and repair the Premises and every part thereof (whether or not the damaged portion of the Premises or the means of repairing the same are reasonably or readily accessible to Lessee otherwise), including, without limiting the generality of the foregoing, all plumbing, heating, air conditioning including changing filters monthly, ventilating, electrical and lighting and bulbs and ballasts, interior walls and interior surface of exterior walls, ceilings, windows, interior and exterior doors, skylights located within the premises and the septic tank. In the event only part of the building is leased by Lessee, the cost of the maintenance of the septic tank shall be shared by the other tenants of the building on a pro rata basis based on the number of employees of each tenant. Lessee expressly waives the benefit of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the premises in good order, condition, and repair. Lessee will be responsible for own pest control. -4- If Lessee fails to perform Lessee's obligations under this Paragraph 8(b), Lessor may, at Lessor's option, enter upon the Premises after ten (10) days' prior written notice to Lessee, and put the same in good order, condition, and repair, and the costs thereof, together with interest thereon at the rate of ten percent (10%) per annum, shall be due and payable as additional rent to Lessor, together with Lessee's next rental installment. On the last day of the term hereof or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as received, broom clean, ordinary wear and tear excepted. Lessee shall repair any damage to the Premises occasioned by the removal of its trade fixtures, furnishings, and equipment pursuant to Paragraph 8(c), which repair shall include the patching and filling of holes and repair of structural damage. (c) Alterations and Additions. Lessee shall not, without Lessor's prior written consent, make any alternations, improvements, additions, or utility installments in , on, or about the Premises, except upon the consent of the Lessor. As used in this paragraph, the term "Utility Installation" shall mean ducting, power panels, wiring fluorescent fixtures, space heaters, conduits, air conditioning, and plumbing. Lessor may require that Lessee remove any or all of said alterations, improvements, additions, or Utility Installations at the expiration of the term, and restore the Premises to their prior condition. Lessor may require Lessee to prove Lessor, at Lessee's sole cost and expense, a lien and completion bond in an amount equal to the estimated cost of such improvements, to insure Lessor against any liability for mechanic's and materialmen's liens and to ensure completion of the work. Should Lessee make any alterations, improvements, additions, or Utility Installations without the prior approval of Lessor, Lessor may require that Lessee remove any or all of such. Any alternations, improvements, additions, or Utility Installations in, on, or about the Premises that Lessee shall desire to make and which require the consent of Lessor shall be presented to Lessor in written form, with proposed detailed plans. If Lessor shall give its consent, the consent shall e deemed conditioned upon Lessee acquiring a permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Lessor prior to the commencement of the work, and the compliance by Lessee of all conditions of said permit in a prompt and expeditious manner. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall given Lessor not less than ten (10) days' notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises. If Lessee shall, in good faith, contest the validity of any such lien, claim, or demand, then Lessee shall, at its sole expense, defend itself and Lessor against the same, and shall pay and satisfy any such enforcement thereof against Lessor or the Premises, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to -5- Lessor in an amount equal to such contested lien, claim, or demand indemnifying lessor against liability for the same and holding the Premises free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in participating in such action if Lessor shall decide it is to its best interest to do so. Unless Lessor requires their removal, as set forth in Paragraph 8(c), all alterations, improvements, additions, and Utility Installations (whether or not such Utility Installations constitute trade fixtures of Lessee), which may be made on the Premises, shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term of this Lease. Notwithstanding the provisions of this paragraph, Lessee's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain the property of Lessee and may be removed by Lessee subject to the provisions of Paragraph 8(b). (d) No Violation of Roof. Lessee shall not do anything to violate the warranty, if any, for the roof by piercing, cutting, or altering the roof or place equipment, machinery, structures, or any other thing upon the roof without the express written consent o f Lessor. Notwithstanding the written consent of Lessor as described in this paragraph, and notwithstanding the Lessor's obligations for repair of the roof set forth in Paragraph 8(a) of this Lease, Lessee shall immediately be responsible for repairing (to Lessor's reasonable satisfaction) any leak that results from any piercing, cutting or altering of the roof or the placement of equipment, machinery, structures, or any other thing upon the roof by Lessee, if any such leak occurs during the term of this Lease or any time during the three (3) months immediately following the expiration or termination of this Lease. 9. Insurance; Indemnity. (a) Liability Insurance. Lessee shall, at Lessee's sole expense, obtain and keep in force during the term of this Lease a policy of combined single limit, bodily injury, and property damage insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy, or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be a combined single limit policy in an amount not less than Five Hundred Thousand Dollars ($500,00.00). The policy shall contain cross liability endorsements and shall insure performance by Lessee of the indemnity provisions of this Paragraph 9. The limits of said insurance shall not, however, limit the liability of Lessee hereunder. If Lessee shall fail to procure and maintain said insurance Lessor may, but shall not be required to, procure and maintain the same, but at the expense of Lessee. Not more frequently than each other, if, in the reasonable opinion of the Lessor, the amount of the liability insurance required hereunder is not adequate, Lessee shall increase said insurance coverage as required by lessor; provided, however, that in no event shall the amount of the liability insurance increase be more than fifty percent (50%) greater than the amount thereof during the preceding year of the term of this Lease. However, the failure of Lessor to require any additional insurance coverage shall not be deemed to relieve Lessee form any obligations under this Lease. -6- (b) Property Insurance. Lessor shall obtain and keep in force during the term of this Lease a policy or policies covering loss or damage to the Premises, but not Lessee's fixtures, equipment, or tenant improvements, in the amount of the full replacement value thereof, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, and special extended perils (all risk), but not plate glass insurance. (c) Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of A or better as set forth in the most current issue of "Best Insurance Guide." Lessee shall deliver to Lessor copies of policies of liability insurance required under Paragraph 9(a)) or certificates evidencing the existence and amounts of such insurance with loss payable clauses satisfactory to Lessor. No such policy shall be cancelable or subject to reduction of coverage or other modification except after ten (10) days' prior written notice to Lessor. Lessee shall, within then (10) days' prior to the expiration of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee upon demand. Lessee shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Paragraph 9(b). (d) No Use that Increases Insurance Risk. In no event shall Lessee sue the Premises in any manner that will increase risks covered by insurance on the Premises or cause lack of coverage or cancellation of any insurance policy covering the Premises or any portion of the Premises, regardless of whether Lessee's use of the Premises complies with Paragraph 7 of this Lease. Lessee shall not keep on the Premises, or permit to be kept, used, or sold thereon, anything prohibited by the policy of fire insurance covering the Premises. If the use of the Premises by Lessee causes an increase in the insurance premium rate on the Premises, Lessee shall, at his own expense, pay the additional insurance premium that is charged due to the increased hazard. If any increased hazard insurance premium is not paid by Lessee when due, Lessor may at Lessor's option pay the premium and such premium shall be repaid to Lessor as an additional rent installment for the month following the date on which such increased hazard premiums are paid. (e) Indemnity. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the Premises, or from the conduct of Lessee's business, or from any activity, work or things done, permitted, or suffered by Lessee in or about the Premises or elsewhere, and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any negligence of the Lessee, or any of Lessee's agents, contractors, or employees, and from and against all costs, attorneys' fees, expenses, and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Lessor by reason of any such claim, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons in, -7- upon, or about the Premises arising from any cause, and Lessee hereby waives all claims in respect thereof against Lessor. (f) Exemption of Lessor from Liability. Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise, or other property of Lessee, Lessee's employees, invitees, customers, or any other person in or about the Premises, nor shall Lessor be liable for injury to the person of Lessee, Lessee's employees, agents, or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water, or rain, or from the breakage, leakage, obstruction, or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures, or form any other cause, whether the said damage or injury results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other damage or injury or the means of repairing the same is inaccessible to Lessee. (g) Waiver of Subrogation. Lessee and Lessor each hereby waives any and all rights of recovery against the other, or against the officers, employees, agents, and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, where such loss or damage is insured against under and any insurance policy in force at the time of such loss or damage. Lessee and Lessor shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 10. Damage or Destruction. (a) Total Destruction. If at any time during the term of this Lease the Premises are totally destroyed from any cause, whether or not covered by insurance required to be maintained pursuant to Paragraph 9(b) hereof (including any total destruction required by any authorized public authority), this Lease shall automatically terminate as of the date of such total destruction. (b) Damage Near End of Term. If the Premises are partially destroyed or damaged during the last six (6) months of the term of this Lease, Lessor may, at Lessor's option, cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Lessee of Lessor's election to do so within thirty (30) days after the date of occurrence of such damage. (c) Abatement of Rent; Lessee's Remedies. If the Premises are partially destroyed or damaged and Lessor or Lessee repairs or restores them pursuant to the provisions of this Paragraph 10, the rent payable hereunder for the period during which such damage, repair, or restoration continues shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair, or restoration. -8- If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 10 and shall not commence such repair or restoration within ninety (90) days after such obligations shall accrue, Lessee may, at Lessee's option, cancel and terminate this Lease by giving Lessor written notice of Lessee's election to do so at any time prior to the commencement of such repair restoration. In such even this Lease shall terminate as of the date of such notice. (d) Termination - Advance Payments. Upon termination of this Lease pursuant to this Paragraph 10, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not theretofore been applied by Lessor. 11. Real Property Taxes. Lessor shall pay all real property taxes assessed against the Premises prior to the time such taxes become delinquent. 12. Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment, and all other personal property of Lessee contained in the Premises or elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings, equipment, and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 13. Utilities. Lessee shall pay for all electric, water, gas, heat, light, power, telephone, sprinkler surcharges, and other utilities and services supplied to the Premises, together with any taxes or deposits thereon. If any such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of all charges jointly metered with other Premises. 14. Assignment and Subletting. (a) Lessor's Consent Required. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, subject, or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent, which Lessor shall not unreasonably withhold. Any attempted assignment, transfer, mortgagee, encumbrance, or subletting without such consent shall be void and shall constitute a breach of this Lease. (b) No Release of Lessee. Regardless of Lessor's consent, no subletting or assignment shall release Lessee of Lessee's obligation or alter the primarily liability of Lessee to -9- pay the rent and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Lessee or any successor of Lessee, in the performance of any of the terms hereof, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said assignee. Lessor may consent to assignments or subletting of this Lease or amendments of modifications to this Lease with assignees of Lessee, without notifying lessee, or any successor of Lessee, and without obtaining its or their consent thereto, and such action shall not relieve Lessee of liability under this Lease. (c) Attorneys' Fees. In the event Lessee shall assign or sublet the Premises or request the consent of Lessor to any assignment or subletting, or if Lessee shall request the consent of Lessor for any act Lessee proposed to do, then Lessee shall pay Lessor's reasonable attorneys' fees incurred in connection therewith. 15. Hazardous Waste. Lessee agrees that the leased Premises comply with all applicable federal, state, and local environmental laws, regulations, and rulings before and up to the commencement of the term of this Lease and that there are not any hazardous or toxic substances prohibited by environmental protection and enforcement agencies on or at the leased Premises. Lessee will defend, indemnify, and hold Lessor harmless from and against any and all actions, losses, liabilities, damages, claims, obligations, debts, costs, and expenses (including attorneys' fees), known or unknown, contingent or absolute, arising out of or resulting from any (i) petroleum based products, (ii) oil, (iii) waste, (iv) chemical substance or mixture, (v) toxic, hazardous, or regulated substance, mixture, or waste, and/or (vi) radioactive substance stored, released, and/or disposed of this Lease by Lessee through and including the date Lessor retakes possession of the leased Premises. Lessee's obligations to take any action and indemnify Lessor pursuant to Paragraphs 9(f) and 15 will survive the termination of this Lease and continue until Lessee's obligations have been fulfilled. 16. Defaults; Remedies. (a) Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee: (1) The vacating or abandonment of the Premises by Lessee for ten (10) days; or (2) The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Lessor to Lessee; or -10- (3) The failure by Lessee to observe or perform any of the covenants, conditions, or provisions of this Lease to be observed or performed by Lessee, other than described in Paragraph 16(a)(2) above, where such failure shall continue for a period of thirty (30) days after written notice hereof from Lessor to Lessee; provided, that if the nature of Lessee's default is such that more than thirty (30) days are reasonably required for its cure, then Lessee shall not be deemed in default if Lessee commenced such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion; or (4) (i) The making by Lessee of any general arrangement for the benefit of creditors; (ii) the filing by or against Lessee of a petition to have Lessee adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days); (ii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30) days; or (5) The discovery by Lessor that any financial statement given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee, or any guarantor of Lessee's obligation hereunder, and any of them, was materially false. (b) Remedies. In the event of any such material default or breach by Lessee, Lessor may at any time thereafter, with or without notice or demand and without limiting lessor in the exercise of any right or remedy which Lessor may have by reason of such default or breach: (1) Without written notice or demand to Lessee, re-enter the demised Premises and remove all persons thereon by force or otherwise without being liable to indictment, prosecution, or damages therefor; and/or (2) Relet the demised Premises or any part thereof for the balance of the Lease term as agent for the Lessee and receive rents therefor and apply the same first to the payment of the expenses of reasonable redecorating and making necessary repairs to the Premises, attorneys' fees, broker's commission, advertising, and all other reasonable expenses of the Lessor in re-entering the Premises and reletting the same; and/or (3) Elect to accelerate the rent to be paid under this Lease to make it all immediately due and payable. Lessor shall also be entitled to recover from Lessee any special damages suffered by Lessor as a result of Lessee's default. These remedies are not in limitation of any other remedies at law. Lessee shall be responsible for all costs, including attorneys' fees, incurred by Lessor in enforcing any of the terms and provisions of this Lease Agreement. In addition and in -11- connection with the reletting of the demised Premises for the account of Lessee as hereinabove provided, Lessor shall have the right to declare all monthly installments due and payable and to proceed to obtain a judgment therefor against Lessee. Thereafter, all sums collected from the reletting of the Premises, less costs in connection therewith, shall be applied on said judgment or if the judgment has been paid, turned over to Lessee. Further, in the event of default on the part of Lessee, the Lessor shall have the right to pursue any legal remedy available to it, and Lessor shall have the right to bring distress proceedings without in any way affecting its right to accelerate the balance of rental due and to bring an action therefor. (c) Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than thirty (30) days after written notice by Lessee to Lessor; provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance, then Lessor shall not be in default if Lessor commences performance within such thirty (30) days period and thereafter diligently prosecutes the same to completion. 17. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than twenty-five percent (25%) of the land area of the Premises which is not occupied by any improvements is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice within ten (10) days after the condemnation authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the rent shall be reduced in the proportion that the land area taken bears to the total land area of the premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to any award for loss of or damage to Lessee's trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall, to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority. Lessee shall pay any amount in excess of such severance damages to complete such repair. 18. Surrender of Premises. Lessee shall, at the termination of the Lease term or any renewal or extension thereof, quietly and peacefully surrender said Premises in as good condition and substantially in the same condition as such Premises existed at the commencement of the Lease term, ordinary wear and tear or damage or loss by fire or the elements excepted, unless -12- Lessee shall be responsible for maintenance and repair by the terms of this Lease, in which case Lessee shall repair such damage, regardless of cause, except damage by fire, provided otherwise in this Lease, damage hereunder, Lessee shall have full authority to remove from the demised Premises all of its merchandise and trade fixtures, notwithstanding the fact that the same may have heretofore been bolted or otherwise affixed to such Premises, all conditioned upon the Lessee not then being in default hereunder and the repair by Lessee of any damage resulting from such removal. 19. General Provisions. (a) Estoppel Certificate. Lessee shall at any time upon not less than ten (10) days' prior written notice from Lessor execute, acknowledge, and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. Lessee's failure to deliver such statement within such time shall be conclusive upon lessee (i) that this Lease is in full force and effect, without notification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor's performance, and (iii) that not more than on two (2) months' rent has been paid in advance or such failure may be considered by Lessor as a default by Lessee under this Lease. (b) Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners at the time in question of the fee title or a lessee's interest in a ground lease of the Premises, and in the event of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successor and assigns, only during their respective periods of ownership. (c) Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. (d) Interest on Past-Due Obligations. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at ten percent (10%) per annum from the date due. Payment of such interest shall not excuse or cure any default by Lessee under this Lease, provided, however, that interest shall not be payable on late charges incurred by Lessee, nor on any amounts upon which late charges are paid by Lessee. -13- (e) Time of Essence. Time is of the essence. (f) Captions. Article and paragraph captions are not a part hereof. (g) Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only signed by the parties in interest of the time of the modification. Except as otherwise stated in this Lease, Lessee hereby acknowledges that neither a real estate broker, nor any cooperating broker on this transaction, nor the Lessor or any employees or agents of any of said persons, has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of said Premises, and Lessee acknowledges that Lessee assumes all responsibility regarding the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease, except as otherwise specifically stated in this Lease. (h) Notices; Communications; Time. Any notice demand, or communication given or required to be given hereunder shall be in writing and shall be either (i) personally delivered, or by written notice hand-delivered to Lessee at the foregoing address, or if to Lessee posted to the entrance to the demised Premises, or (ii) transmitted by United States express, certified, or registered mail, postage prepaid, at the parties' respective addresses appearing on the first page hereof. Except as otherwise specified herein, all notices, demands, and other communications given by express, certified, or registered mail shall be deemed given when deposited into the United States mail, properly addressed and with postage prepaid, and if given by personal delivery, on the date of receipt. If the last day for giving notice or demand or performing any act hereunder falls on a Saturday, Sunday, or day on which the main post offices at Lakeland, Florida, is not open for regular transaction of business, the time shall be extended to the next day that is not a Saturday, Sunday, or post office holiday. Any party may change its address for purposes hereof by notice to the others in accordance with the provisions of this paragraph. (i) Waivers. No waiver by Lessor of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent. (j) Recording. Lessee shall not record this lease without Lessor's prior written consent, and such recordation shall, at the option of Lessor, constitute a non-curable default of Lessee hereunder. -14- (k) Holding Over. If Lessee remains in possession of the Premises or any part thereof after the expiration of the term hereof without the express written consent of Lessor, such occupancy shall be a tenancy from month to month at a rental in the amount of the last monthly rental, plus all other charges payable hereunder, and upon all the terms hereof applicable to a month-to-month tenancy. (l) Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. (m) Covenants and Conditions. Each provision of this Lease performance by Lessee shall be deemed both a covenant and a condition. (n) Binding Effect and Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of Paragraph 17(b), this Lease shall bind the parties and their respective heirs, devisees, personal representatives, successors, and assigns. This Lease shall be governed by the law of the State of Florida. (o) Subordination. This Lease, at Lessor's option, shall be subordinate to any ground lease, mortgage, or any other hypothecation for security now or hereafter placed upon the real property of which the Premises are a part, and to any and advances made on the security thereof and to all renewals, modifications, consolidations, replacements, and extensions thereof. Notwithstanding such subordination, Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgage or ground lessor shall elect to have this Lease prior to the lien of its mortgage or ground lease, and shall give written notice thereof to Lessee, this lease shall be deemed prior to such mortgage or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage or ground lease or the date of recording thereof. Lessee agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any mortgage or ground lease, as the case may be, and failing to do so within ten (10) days after written demand, does hereby make, constitute, and irrevocably appoint Lessor at Lessee's attorney-in-fact and in Lessee's name, place, and stead, to do so. (p) Attorneys' Fees. If either party hereto brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, at or before trial or on appeal, shall be entitled to that party's reasonable attorneys' fees and costs to be paid by the losing party as fixed by the court. Such costs include, but are not limited to, costs of appeal, court costs, and court reporter's fees. (q) Lessor's Access. Lessor and Lessor's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, improvements, or additions to the Premises or to the building of which they are a part as Lessor may deem -15- necessary or desirable. Lessor may at any time place on or about the Premises any ordinary "For Sale" signs, and Lessor may at any time during the last one hundred twenty (120) days of the term hereof place on or about the Premises any ordinary "For Lease" signs, all without rebate of rent or liability to Lease. (r) Signs. Lessee must secure permission in writing from Lessor to erect or place any awning, marquee, or sign of any type on the exterior of the demised Premises. All signs shall comply with all governmental sign ordinances. No sign may be erected which, in Lessor's opinion, is offensive, not in conformity with signs of other tenants, or otherwise objectionable. Upon the expiration of the Lease term, Lessee shall remove such signs and shall repair any damage and close any holes caused by removal. Lessee is responsible for all expenses regarding signs, including any electrical costs with respect to lighted signs. Any property not removed from the Premises upon the expiration of the term shall become the property of Lessor. (s) Trash. Lessee shall be responsible for the removal and proper disposal of all trash from the leased Premises. If Lessee fails to promptly remove and dispose of its trash and keep the Premises in a clean, sightly, and healthful condition, as provided in this Lease, Lessor or his agents, servants, or employees may enter the Premises without such entrance causing or constituting a termination of this Lease or an interference with Lessee's possession of the Premises, and Lessor may remove all trash and place the Premises in a clean, sightly, and healthful condition; and Lessee shall pay Lessor, in addition to the rent hereby reserved, a minimum charge of Fifty Dollars ($50.00) per occasion or Lessor's actual expenses if more than Fifty Dollars ($50.00). (t) Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenancies or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancies. (u) Corporate Authority. If the Lessee is a corporation, the individual executing this Lease on behalf of Lessee represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the Bylaws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. (v) Consents. Wherever in this Lease the consent of one party is required to an act of the other party, such consent shall not be unreasonably withheld. (w) Guarantor. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Lessee for payment of and all monetary claims or items under this Lease. (x) Quiet Possession. Upon Lessee paying the fixed rent reserved hereunder and observing and performing all of the covenants, conditions, and provisions on Lessee's part to -16- be observed and performed hereunder, Lessee shall have quiet possession of the premises for the entire term hereof subject to all of the provisions of this Lease. (y) Sidewalk and Common Areas. Lessee agrees not to obstruct the sidewalk or common parking area in front of the demised Premises or the area in the rear of the demised Premises. Lessee further agrees that it shall maintain the good appearance of the sidewalk immediately in front of the demised Premises and the area immediately to the rear of the demised Premises. (z) Mechanic's Lien. Said Premises shall not be subject to any lien under the Mechanic's Lien Law of the State of Florida as a result of any improvements made by Lessee. Lessee shall not permit the Premises to be subject to any lien for labor, services, or material furnished at the request of Lessee or its agent, and it shall ensure that all amounts owed for labor, services, or materials shall be paid for by it promptly. (aa) Binding on Successors, Heirs, and Assigns: This Lease Agreement shall be binding and obligatory upon the heirs, assigns and successors of the respective parties. (bb) Outside Lighting. An additional [Lessee will contract directly with the city] $_______ per month for area lights per five thousand (5,000) square feet of building space leased or fraction thereof shall be added to the rent unless Lessee contracts directly with the City of Lakeland to provide a minimum of one (1) area light per five thousand (5,000) square feet or fraction thereof. The City of Lakeland is responsible for maintenance and electricity for area lights per their contract agreement. (cc) No Broker. Lessee represents to Lessor that the Premises, or any portion of the buildings of which the Premises are a part, were not presented to it or any person representing it by any broker or other person, and that no broker or other person was involved in the leasing of the Premises, and warrants that no claim for commission for said leasing shall be presented to Lessor. (dd) Radon Gas. Section 404.056(a), Florida Statutes, requires that the following notification be given on real estate documents: "Radon Gas: Radon is a naturally occurring radioactive gas that, when it is accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information may be obtained from your county public health unit." (ee) Impact Fees. The Lessee shall be responsible for the payment of any impact or growth fees or assessments which may be imposed upon the demised Premises by any governmental agency by virtue of the Lessee's occupation of the Premises, or by virtue of any -17- alterations to the Premises or increased use in the Premises by the Lessee or any use by the Lessee which causes the imposition of such fees or assessments. 20. Special Conditions. [ ] Attached as Exhibit "A" [ ] None IN WITNESS WHEREOF, the parties have hereunto set their hands and seals. Signed, sealed and delivered in the presence of: JOE P. RUTHVEN INVESTMENTS By: - -------------------------------- -------------------------------- Joe P. Ruthven - -------------------------------- "Lessor" (Witnesses as to Lessor) Signed, sealed and delivered in the presence of: EARTH AND OCEAN SPORTS, INC. By: - -------------------------------- -------------------------------- Tony Glydon - -------------------------------- "Lessee" (Witnesses as to Lessee) LESSEE'S HOME ADDRESS: ---------------------------------------------------------- DRIVER'S LICENSE #: DATE OF BIRTH STATE ---------------------- ------------- ------- PHONE: SOCIAL SECURITY #: ----------------------------------- --------------------- </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-11.1 <SEQUENCE>14 <DESCRIPTION>STATEMENT RE: EARNINGS PER SHARE <TEXT> EXHIBIT 11.1 EARTH AND OCEAN SPORTS, INC. STATEMENT RE: EARNINGS PER SHARE <TABLE> <CAPTION> YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, JANUARY 31, ----------- ----------- ----------- ----------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> Net income (loss) $ 36,700 $ 58,400 $ (290,674) $ (337,500) $ (321,026) ========== ========== ========== ========== ========== Weighted average common shares outstanding 1,263,431 1,263,431 1,493,207 1,263,431 1,493,207 Common stock equivalents issued within twelve months of initial public offering 776,289 776,289 546,513 776,289 546,513 Weighted average number of common and common equivalent shares outstanding 2,039,720 2,039,720 2,039,720 2,039,720 2,039,720 ========= ========= ========= ========= ========= Net income (loss) per share $ 0.02 $ 0.03 $ (0.14) $ (0.17) $ (0.16) ========== ========== ========== ========== ========== </TABLE> - ------ Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, stock, stock options and stock warrants issued at prices below the initial public offering price during the 12-month period immediately preceding the initial filing date of the Company's Registration Statement of its initial public offering have been included as outstanding for all periods presented. The dilutive effect of the common stock equivalents was computed in accordance with the treasury-stock method. </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.1 <SEQUENCE>15 <DESCRIPTION>CONSENT OF ARTHUR ANDERSEN LLP <TEXT> EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our Firm included in or made a part of this registration statement. /s/ ARTHUR ANDERSEN LLP Boston, Massachusetts March 27, 1997 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.2 <SEQUENCE>16 <DESCRIPTION>CONSENT OF RICHARD A. EISNER & COMPANY, LLP <TEXT> EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our Firm included in or made a part of this registration statement. /s/ RICHARD A. EISNER & COMPANY, LLP Cambridge, Massachusetts March 27, 1997 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-27 <SEQUENCE>17 <DESCRIPTION>FINANCIAL DATA SCHEDULE <TEXT> <TABLE> <S> <C> <ARTICLE> 5 <LEGEND> After the 1.684575-for-1 stock split discussed in Note 11(a) to the Company's financial statements is effected, we expect to be in a position to render the following audit report. </LEGEND> <S> <C> <C> <PERIOD-TYPE> 3-MOS 12-MOS <FISCAL-YEAR-END> JAN-31-1997 OCT-31-1996 <PERIOD-START> NOV-01-1996 NOV-01-1995 <PERIOD-END> JAN-31-1997 OCT-31-1996 <CASH> 4115 8055 <SECURITIES> 0 0 <RECEIVABLES> 2928574 2319553 <ALLOWANCES> 161500 151900 <INVENTORY> 3133588 3220612 <CURRENT-ASSETS> 6317971 5804950 <PP&E> 3716419 3666529 <DEPRECIATION> 1039794 886759 <TOTAL-ASSETS> 10174214 9664824 <CURRENT-LIABILITIES> 6692821 6768664 <BONDS> 0 0 <PREFERRED-MANDATORY> 0 0 <PREFERRED> 0 0 <COMMON> 14932 14932 <OTHER-SE> (678634) (357608) <TOTAL-LIABILITY-AND-EQUITY> 10174214 9664824 <SALES> 2874662 12404051 <TOTAL-REVENUES> 2874662 12404051 <CGS> 2030589 7585115 <TOTAL-COSTS> 2030589 7585115 <OTHER-EXPENSES> 953852 4267101 <LOSS-PROVISION> 27638 245857 <INTEREST-EXPENSE> 183609 596652 <INCOME-PRETAX> (321026) (290674) <INCOME-TAX> 0 0 <INCOME-CONTINUING> (321026) (290674) <DISCONTINUED> 0 0 <EXTRAORDINARY> 0 0 <CHANGES> 0 0 <NET-INCOME> (321026) (290674) <EPS-PRIMARY> (.16) (.14) <EPS-DILUTED> (.16) (.14) </TABLE> </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001033491_vlps_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001033491_vlps_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd89e8e161f19d4f08cdc2024440dea4fec7af8a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001033491_vlps_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (A) REFLECTS THE REINCORPORATION ("REINCORPORATION") OF THE COMPANY AS A DELAWARE CORPORATION PURSUANT TO A MERGER OF VARI-LITE INTERNATIONAL, INC., A TEXAS CORPORATION ("VARI-LITE TEXAS"), INTO THE COMPANY, WHICH WILL BE EFFECTED IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE OFFERING AND IN WHICH THE SHARES OF CLASS A AND CLASS B COMMON STOCK OF VARI-LITE TEXAS WILL BE CONVERTED INTO SHARES OF THE COMPANY'S COMMON STOCK ON A 3.76368-FOR-ONE BASIS AND (B) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION UNLESS SPECIFICALLY PROVIDED OTHERWISE. ALL REFERENCES TO THE COMPANY IN THIS PROSPECTUS REFER TO VARI-LITE INTERNATIONAL, INC. AND ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE CONTEXT INDICATES OTHERWISE. THE COMPANY The Company is a leading international provider of proprietary automated lighting systems and related services to the entertainment industry, servicing markets such as concert touring , theatre, television and film and corporate events. In 1981, the Company revolutionized the professional entertainment lighting industry by inventing the VARI*LITE-Registered Trademark- system, the first automated lighting system that allowed real-time, computerized, remote control of light beam features such as color, size, shape, position and intensity. As a result, the VARI*LITE-Registered Trademark- brand name has become recognized as the preeminent brand name for automated lighting. The Company rents its VARI*LITE-Registered Trademark- automated lighting systems exclusively through a domestic and international network of Company-owned offices and independent distributors. The Company believes that its position as an industry leader results from its broad range of innovative and technologically superior products, its long-standing collaborative relationship with participants in the entertainment industry, its worldwide distribution system and its dedication to customer service. The Company continuously addresses the technical and creative needs of its customers by designing and manufacturing products that in many instances have become the industry standard. Lighting designers using the Company's automated lighting systems have won Tony-Registered Trademark- Awards for Broadway lighting design every year since 1990 and have won five Emmy-Registered Trademark- Awards for network television broadcast lighting design. The Company won an Emmy-Registered Trademark- Award for Outstanding Achievement in Engineering for television in 1991 and 1994. For its accomplishments in the concert touring market, the Company was named by Performance Magazine as the "Lighting Company of the Year" six times since 1989 and the "Equipment Manufacturer of the Year/Lighting" ten times since 1983. The Company has capitalized on the growth of the entertainment industry and has demonstrated its ability to broaden the application of its existing technology and to develop new lighting systems and products to create and penetrate new markets. - CONCERT TOURING. The Company initially designed its systems to serve the concert touring market and remains a leader in that market. The Company's customers have included such notable performers as The Rolling Stones, Phil Collins, Genesis, Fleetwood Mac, Pink Floyd, Paul McCartney, David Bowie, Elton John, Tina Turner, Sting, Reba McEntire, Vince Gill, Garth Brooks, Mary Chapin Carpenter, Wynona Judd, Barbra Streisand, Diana Ross, Whitney Houston, Celine Dion, Sheryl Crow, Pearl Jam, Aerosmith, Bush and the Indigo Girls. - THEATRE. By developing the first virtually silent automated lighting fixture, the Company secured a significant competitive advantage in the theatre market, including touring theatre shows. The Company's systems have been used in such shows as CHICAGO, RAGTIME, SHOW BOAT, RENT, LORD OF THE DANCE, CAROUSEL, SMOKEY JOE'S CAFE, MISS SAIGON, SUNSET BOULEVARD, KISS OF THE SPIDER WOMAN, THE WILL ROGERS FOLLIES, TOMMY, GREASE, HOW TO SUCCEED IN BUSINESS WITHOUT REALLY TRYING, BRING IN 'DA NOISE BRING IN 'DA FUNK, JESUS CHRIST SUPERSTAR, MARTIN GUERRE, JEKYLL & HYDE and OLIVER. - TELEVISION AND FILM. The Company successfully leveraged its versatile product line to become a leading provider of automated lighting to the television market and to increase its penetration of the film market. The Company has provided automated lighting for the Academy Awards, Emmy-Registered Trademark- Awards, Tony-Registered Trademark- Awards, Grammy Awards, Country Music Awards, MTV Music Awards and other awards shows, as well as television shows such as THE TONIGHT SHOW WITH JAY LENO, THE LATE SHOW WITH DAVID LETTERMAN, LATE NIGHT WITH CONAN O'BRIEN, VIBE, WHEEL OF FORTUNE, SATURDAY NIGHT LIVE, HOME IMPROVEMENT and AMERICAN GLADIATORS, and the movies CONTACT, FORREST GUMP, BATMAN FOREVER, WAYNE'S WORLD and SISTER ACT, among others. VARI*LITE-Registered Trademark- automated lighting fixtures or "luminaires" are also installed in ABC's New York studios, where they are used for PRIME TIME LIVE, 20/20 and GOOD MORNING AMERICA. - CORPORATE EVENTS. The Company is continuing to expand its presence in the corporate events market by providing automated lighting systems for conventions, business meetings, new product launches and special events. The Company's systems have been used in events for Microsoft, Compaq, IBM, Sony, Sprint, Nike, Reebok, Oldsmobile, Ford, Lincoln, BMW, Upjohn, Glaxo, Whirlpool and Gillette, among others. - ARCHITECTURAL. Recently, the Company has targeted the lighting needs of architectural markets such as restaurants, casinos, retail stores, corporate showrooms, shopping malls, building exteriors and landmarks. The Company's Irideon-Registered Trademark-automated lighting system product line, which is in the development stage, is designed specifically for such architectural lighting applications. The Company's VARI*LITE-Registered Trademark- systems incorporate advanced proprietary and patented technology in both lighting fixtures and control consoles. The Company is the only industry participant which combines patented dichroic filter color changing systems, advanced heat removal techniques and computer control systems that utilize distributed processing and resident cue memory in each luminaire. By using such technology to execute a lighting effect (or cue), an operator can transmit a single command to up to 1,000 luminaires simultaneously, each of which stores its own set of cues. As a result, customers using the Company's systems can create lighting presentations with greater flexibility, complexity, speed and precision than with competing products. The Company is also a leader in providing complementary products and services to the entertainment industry, including concert sound systems, conventional lighting equipment, custom stage construction and stage set design services, and design and production management services for conventions, business meetings and special events. The Company's principal objectives are to maintain its worldwide leadership positions in its existing markets and to create demand for its products in new markets. The key elements of this strategy include (i) maintaining its commitment to innovation, (ii) expanding its worldwide distribution capabilities and (iii) continuing to offer value-added complementary services. The Company's predecessor, Vari-Lite Texas, was incorporated in 1988 in the State of Texas as a holding company to own Showco, Inc. ("Showco"), which began operations in 1970, and Vari-Lite, Inc. ("Vari-Lite"), which began operations in 1981. Immediately prior to the consummation of the Offering, the Company was reincorporated in the State of Delaware. The Company's principal executive offices are located at 201 Regal Row, Dallas, Texas 75247 and its telephone number is (214) 630-1963. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......... 2,000,000 shares Common Stock to be outstanding after the Offering................................... 7,800,003 shares(1) Use of Proceeds............................. The net proceeds will be used to repay indebtedness under the Company's Credit Agreement (as hereinafter defined). See "Use of Proceeds." Nasdaq National Market symbol............... "LITE" </TABLE> - ------- (1) Excludes 552,400 shares of Common Stock issuable upon exercise of options to be granted effective concurrently with consummation of the Offering at an exercise price equal to the Offering price and 242,233 shares of Common Stock issuable upon exercise of warrants with an exercise price of $11.53 per share. See "Management--Employee Benefit Plans--Omnibus Plan" and "Shares Eligible for Future Sale."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001033923_circe_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001033923_circe_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..df895e054a3ef2a4599254bdbd3b7018fcf92866
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001033923_circe_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. The factors that might cause such differences include, but are not limited to, those discussed under "Risk Factors." THE COMPANY Circe Biomedical is engaged in the development, production and commercialization of novel bioartificial organs. The Company's lead product in development, the HepatAssist Liver Assist System (the "HepatAssist System"), is an extracorporeal, bioartificial liver incorporating porcine hepatocytes (pig liver cells), and is designed to treat acute and chronic liver failure by temporarily providing essential liver functions. The Company believes that the HepatAssist System is the most clinically advanced bioartificial liver in the world. Circe has completed a Phase I/II clinical trial of the HepatAssist System and has submitted to the United States Food and Drug Administration (the "FDA") a proposed protocol for a Phase II/III clinical trial that it expects to begin as early as the third quarter of 1997, subject to FDA approval. The Company's PancreAssist Artificial Pancreas System (the "PancreAssist System"), which is in preclinical development, is an implantable bioartificial pancreas, incorporating porcine pancreatic islets (pig pancreatic cells), and is designed as a novel therapy for the treatment of insulin-dependent diabetes. In addition to the HepatAssist and PancreAssist Systems, the Company is pursuing other research and development programs based on its proprietary technologies. These technologies enable the Company to (i) isolate, purify, handle and preserve primary mammalian cells; (ii) fabricate semipermeable, biocompatible membranes designed to regulate the passage of selected molecules; and (iii) design and develop novel biomedical systems incorporating these isolated cells and membranes to provide essential organ functions. The Company believes that the data from its Phase I/II clinical trial of the HepatAssist System indicate a safety profile and preliminary evidence of clinical efficacy sufficient to warrant initiation of the Company's proposed Phase II/III clinical trial for the treatment of patients with no history of liver disease who experience rapid liver failure (fulminant hepatic failure or "FHF") or who have received liver transplants that fail to function (primary non-function or "PNF"). For example, of the 26 patients with indications of FHF or PNF treated with the HepatAssist System during the Phase I/II clinical trial, 96% (25 patients) either were temporarily supported until they received a liver transplant (21 patients) or experienced liver regeneration sufficient to avoid the need for a transplant (4 patients), and 88% (23 patients) survived at least 30 days after the transplant or, if there was no transplant, after the patient's most recent HepatAssist System treatment. Survival at 30 days is considered to be clinically significant and is therefore the anticipated primary end point of the Company's planned Phase II/III clinical trial. Based on this data, the Company has submitted to the FDA a proposed protocol for a Phase II/III clinical trial for the treatment of FHF and PNF patients, which it expects to begin as early as the third quarter of 1997, subject to FDA approval. The Company believes that evidence of clinical efficacy sufficient for FDA approval may be available at an interim review point during the clinical trial and that the HepatAssist System qualifies for expedited review from the FDA. Based upon these and other factors, the Company expects that it could file with the FDA for approval of the HepatAssist System for these indications by the end of 1998. For a more detailed discussion of the results of the Company's Phase I/II clinical trial, as well as the anticipated Phase II/III clinical trial, see "Business - -- Products in Development -- The HepatAssist System -- Clinical Development." The Company believes that the initial market for the HepatAssist System will be FHF and PNF patients in late-stage comas. The Company estimates that, in 1996 in the United States, there were approximately 1,700 emergency liver transplants, 1,000 patients on the waiting list who died while waiting for a liver transplant and 1,000 patients with FHF or other sudden onsets of liver failure who either had not been placed on the waiting list or who died before being placed on the waiting list. Based on data from the United Network for Organ Sharing ("UNOS") and discussions with physicians, the Company believes that FHF and PNF patients accounted for approximately half of these 3,700 patients. The Company estimates that the size of the prospective patient population for the HepatAssist System in Europe is similar to that of the United States. The Company believes that, in addition to the FHF and PNF indications, the HepatAssist System will ultimately be used as a key therapy to enhance liver function during episodes of acute liver failure in chronic liver disease patients ("acute-on-chronic" liver failure or "AOC") and to compensate for liver insufficiency resulting from the surgical removal of liver tissue in cancer and trauma patients. Based on data from its Phase I/II clinical trial, the Company is preparing additional protocols for controlled Phase II clinical trials addressing significant portions of these patient populations. When and if additional data supporting safety and efficacy become available, the Company intends to proceed with Phase III clinical trials, subject to FDA approval, and ultimately to seek approval of the HepatAssist System for these additional indications. If approved for such indications, the Company believes that treatment with the HepatAssist System would be an appropriate therapy for a significant portion of patients admitted to hospitals due to acute liver failure. Based upon National Center for Health Statistics data, the Company estimates that there were approximately 350,000 hospitalizations due to liver failure in the United States in 1996, involving approximately 250,000 patients and 50,000 deaths. The Company estimates that of these 250,000 hospitalized patients, approximately 200,000 were AOC or liver cancer patients and over 40,000 of these patients died. The Company estimates that the size of the AOC and liver cancer patient population in Europe is similar to that of the United States. The PancreAssist System, which is currently in preclinical development, is an implantable, bioartificial pancreas incorporating porcine pancreatic islets and is designed to treat insulin-dependent diabetes. Based on the Company's preclinical testing, the Company filed an Investigational New Drug application ("IND") to initiate a Phase I/II clinical trial of a non-reseedable version of the PancreAssist System. Although the IND was allowed, prior to the treatment of any patients, the FDA placed the initiation of the trial on clinical hold pending the resolution of a device failure in preclinical testing. The Company has investigated the device failure, submitted its findings to the FDA and is in the process of evaluating its alternatives with the FDA. See "Risk Factors -- Delays and Uncertainties Relating to the PancreAssist System" and "Business -- Products in Development -- Additional Applications of the Company's Core Technologies -- The PancreAssist System." The Company expects that the PancreAssist System, if successfully developed, will initially be used as a substitute for pancreatic transplants in "brittle" diabetics (insulin-dependent diabetics with a history of severe metabolic complications and erratic response to conventional insulin therapies). The Company believes that a significant portion of brittle diabetics would benefit from the PancreAssist System. If the PancreAssist System proves to be a successful therapy for this indication, the Company believes that it also could be used for the treatment of other insulin-dependent diabetics. In addition to the HepatAssist and PancreAssist Systems, the Company is pursuing, independently and in collaboration with others, other research and development programs based on the Company's proprietary technologies. These programs include: (i) a bioartificial kidney system using porcine kidney cells; (ii) membrane-based immunoisolation devices to facilitate testing of cell/drug interactions in animal models; and (iii) an implantable device that uses biocompatible membranes and a proprietary enzymatic process to lower cholesterol levels. These projects are in various stages of early development, and the Company, depending on continued technological progress and commercial feasibility, may or may not seek to commercialize any of them. The Company's principal executive offices are located at One Ledgemont Center, 128 Spring Street, Lexington, Massachusetts 02173, and its telephone number is (617) 863-8720. Relationship with Grace The Company was incorporated in Delaware in 1996 and is currently a wholly owned subsidiary of Grace. From 1986 through 1996, the Company's business was operated as the biomedical division of Grace (the "Biomedical Division"). On December 31, 1996, Grace transferred to the Company, as a contribution to capital, the assets and liabilities of the Biomedical Division relating to the Company's business. Grace has provided substantially all of the Company's cash requirements since its inception, funding approximately $72 million of research and development costs and other expenses from 1986 through the first quarter of 1997. Grace has advised the Company that, following the consummation of this Offering, Grace does not intend to provide any further financial assistance or support to the Company. Grace currently owns, and upon the consummation of this Offering will own, all of the 4,600,000 outstanding shares of the Company's Class B Common Stock, par value $.001 per share (the "Class B Common Stock"), and no shares of the Company's Class A Common Stock, par value $.001 per share (the "Class A Common Stock"). Upon the consummation of this Offering, Grace's ownership of the Class B Common Stock will represent 63.8% of the outstanding Class A Common Stock and Class B Common Stock (collectively, the "Common Stock") on a combined basis (60.7% if the Underwriters' over-allotment option is exercised in full). Each share of Class A Common Stock entitles its holder to one vote, whereas each share of Class B Common Stock entitles its holder to 0.37 of a vote. Accordingly, the Class B Common Stock will represent 39.5% of the voting power of the outstanding Common Stock upon the consummation of this Offering (36.3% if the Underwriters' over-allotment option is exercised in full). As the holder of all of the outstanding Class B Common Stock, Grace will be entitled to elect all of the Class B Directors of the Company (the "Class B Directors"); the holders of the Class A Common Stock, voting as a separate class, will be entitled to elect all of the Class A Directors of the Company (the "Class A Directors"). As long as Grace holds a specified amount of the Class B Common Stock, a majority of the Class B Directors will be required to approve certain fundamental corporate changes and significant transactions. If Grace sells or otherwise transfers beneficial ownership of any shares of Class B Common Stock (other than to a wholly owned subsidiary of Grace), such shares will be automatically converted into shares of Class A Common Stock. See "Risk Factors -- Ownership by Grace; Restrictions on Certain Significant Transactions," "Relationship with Grace" and "Description of Capital Stock." THE OFFERING <TABLE> <S> <C> Common Stock Offered......................... 2,500,000 shares of Class A Common Stock Common Stock Outstanding after this Offering................................... 2,606,000 shares of Class A Common Stock(1)(2) 4,600,000 shares of Class B Common Stock ---------- 7,206,000 total shares of Common Stock(1)(2) ========== Use of Proceeds.............................. To fund (i) research and development; (ii) preclinical testing and clinical trials; (iii) the payment of $150,000 in connection with the settlement of certain litigation; (iv) the prepayment of $300,000 of royalties in connection with such settlement; and (v) working capital and general corporate expenses. See "Use of Proceeds." Proposed Nasdaq National Market Symbol....... CRCE </TABLE> - --------------- (1) Includes an aggregate of 106,000 shares of Class A Common Stock to be issued pursuant to restricted stock awards (the "Management Stock Awards") to be granted to Laszlo J. Eger, Dr. Barry A. Solomon, David A. Butler and Dr. Claudy J.P. Mullon (each a "Management Stockholder," and collectively, the "Management Stockholders"), effective upon the consummation of this Offering. See "Capitalization" and "Management -- Employee Benefit Plans." (2) Excludes an aggregate of 239,000 shares and 286,000 shares of Class A Common Stock issuable upon the exercise of stock options to be granted to the Management Stockholders and other employees of the Company, respectively, effective upon the consummation of this Offering. Also excludes an aggregate of 59,000 shares of Class A Common Stock issuable upon the exercise of stock options to be granted to certain of the Company's directors and to members of the Company's Scientific Advisory Board, effective upon the consummation of this Offering. The options to be granted to the Management Stockholders, directors and Scientific Advisory Board members will have a per share purchase price equal to the lower of the initial public offering price or $11.00. The options to be granted to the other employees of the Company will have a per share purchase price equal to the lower of the initial public offering price or $10.00. See "Capitalization" and "Management -- Employee Benefit Plans." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------------------ ----------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Operating costs and expenses: Research and development........ $ 4,999 $ 4,121 $ 4,312 $ 5,314 $ 7,125 $ 1,405 $ 1,730 General and administrative...... 1,060 838 1,207 922 1,394 206 540 Costs allocated by Grace(1)..... 2,462 2,289 2,593 2,541 2,663 671 681 ------- ------- ------- ------- -------- ------- ------- Net loss from operations.......... (8,521) (7,248) (8,112) (8,777) (11,182) (2,282) (2,951) ======= ======= ======= ======= ======== ======= ======= Net loss per share(2)............. $ (2.43) $ (.50) $ (0.64) Weighted average shares used in computing net loss per share(2)........................ 4,600 4,600 4,600 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ---------------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and equivalents............................................... $ -- $ 26,550 Working capital (deficit).......................................... (956) 26,044 Total assets....................................................... 1,589 27,858 Accumulated deficit................................................ (2,951) (2,951) Total stockholders' equity (deficit)............................... (25) 26,975 </TABLE> - --------------- (1) See Note 11 to the Financial Statements. (2) Computed on the basis described in Note 3 to the Financial Statements. (3) As adjusted to reflect (i) the sale of 2,500,000 shares of Class A Common Stock offered hereby and the receipt by the Company of the estimated net proceeds therefrom, at an assumed initial public offering price of $12.00 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company, (ii) the issuance of an aggregate of 106,000 shares of Class A Common Stock pursuant to the Management Stock Awards and (iii) the grant of options to purchase 35,000 shares of Class A Common Stock to members of the Company's Scientific Advisory Board, as discussed in Note 14 to the Financial Statements. See "Use of Proceeds," "Capitalization" and "Management -- Employee Benefit Plans." Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option; (ii) reflects the filing of the amendment and restatement of the Company's Certificate of Incorporation (as amended and restated, the "Restated Certificate") as described in Note 14 to the Financial Statements; (iii) reflects the amendment and restatement of the Company's By-laws (as amended and restated, the "By-laws"); and (iv) excludes an aggregate of 584,000 shares of Class A Common Stock issuable upon exercise of stock options to be granted effective upon the consummation of this Offering. In addition, unless otherwise indicated, all references in this Prospectus to the Company for the period prior to January 1, 1997 refer to the Biomedical Division. See "Underwriting" and "Management -- Employee Benefit Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034011_long_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034011_long_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d6794a66d1cbfbe2073505634e9e69ba61c1a64f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034011_long_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option or of outstanding options under the Company's 1997 Stock Incentive Plan. Unless the context otherwise requires, (i) the information contained in this Prospectus gives effect to the Reorganization described elsewhere herein, which will be consummated prior to the completion of this Offering, (ii) all references to the "Company" herein shall be deemed to include LBFC and its wholly-owned subsidiary after giving effect to the Reorganization, the operations of the broker-sourced mortgage lending division of Old Long Beach prior to the Reorganization and the prior operations of the broker-sourced mortgage lending division of Long Beach Bank, F.S.B., and (iii) all references to "Old Long Beach" herein shall be deemed to include prior to the Reorganization all of the operations of the Selling Stockholder (which included the operations of the Company) and after the Reorganization shall be deemed to include all continuing operations that are not being transferred to the Company. See "Reorganization." Certain statements contained in this Prospectus that are not related to historical results are forward-looking statements. These forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. THE COMPANY The Company is a specialty finance company engaged in the business of originating, purchasing and selling sub-prime residential mortgage loans secured by one-to-four family residences. The Company originates loans primarily through independent mortgage brokers (the "broker-sourced business"). Prior to the Reorganization, the Company's business has been conducted as a division of Old Long Beach. The Company's primary operating strategy is to generate positive cash flow by selling for cash, at a premium, substantially all originated and purchased loans to institutional purchasers several times a quarter. The Company does not currently, nor does it have current plans to, sell loans through securitizations and therefore retains no residual interests, or the related risks, in the loans sold (except risks associated with servicing rights, which the Company normally retains, and certain repurchase risks associated with representations and warranties). As a result, the Company has less risk than is typically inherent in a mortgage lender's business and has historically had a source of cash flow to fund lending and growth, reducing the need for other sources of financing. See "Business -- Financing and Sale of Loans." The sub-prime mortgage lending industry is subject to certain risks, including risks related to the significant growth in the number of sub-prime lenders in recent years (see "Risk Factors -- Risk of Competition"), risks related to certain potential new competitors (see "Risk Factors -- Risk of Competition from Government-Sponsored Entities"), and risks related to the industry's focus on credit impaired borrowers (see "Risk Factors -- Focus on Credit Impaired Borrowers May Result in Increased Delinquency Rates, Foreclosures and Losses"). Substantially all loans originated or purchased by the Company are secured by a first priority mortgage on the subject property. In 1996, less than .03% of the principal balance of the loans originated and purchased were secured by second priority mortgages. The Company's core borrower base consists of individuals who do not qualify for traditional "A" credit because their credit history, income or other factors cause them not to conform to standard agency lending criteria. Approximately 69% of the principal balance of the loans originated by the Company in 1996 were to borrowers with a Company risk classification of "A-" or "B+," while the remainder were to borrowers with a Company risk classification of "B," "B-," "C" or "C-." Approximately 2.31% of the total principal amount of loans originated or purchased by the Company in 1996 were to borrowers with a Company risk classification of "C-," which includes borrowers with numerous derogatory credit items up to and including a bankruptcy in the most recent twelve month period. See "Business -- Underwriting." The Company has relationships with approximately 7,500 independent approved mortgage brokers located in 43 states. During 1996, approximately 5,000 of these brokers submitted loan packages to the Company and the Company funded loans from approximately 2,800 brokers. The Company's large independent broker network provides comprehensive geographic coverage for the Company's products and reflects the Company's strategy of using a diverse group of small brokers to avoid becoming dependent on a few primary producers. During the year ended December 31, 1996, the Company's single largest producing independent broker was responsible for less than 1% of the principal balance of the Company's originations. The Company maintains a close working relationship with brokers through its team of 120 account executives located in 63 offices in 32 states. The Company believes that its primary strengths are (i) its established position in the sub-prime mortgage lending industry, (ii) the extensive experience of its management, as well as many members of its staff, in the sub-prime lending industry, (iii) its use of regional processing teams linked to the home office by a computer network to expedite loan origination and production, (iv) the thoroughness of the training received by its personnel, (v) its use of technology to efficiently maximize work flow and (vi) the efficiency of its operations as a result of its high volume of loans and consistency in applying underwriting standards. See "Business -- General." The Company began originating sub-prime mortgage loans in Southern California in 1988 as a division of Long Beach Bank, F.S.B. and started to expand its business outside of California on a limited basis in 1992. In 1994, the Company began to focus on expansion outside of California. To facilitate this expansion and to permit the Company to provide competitive products and pricing, in October 1994 Long Beach Bank, F.S.B. ceased operations and the Company commenced operations as a mortgage company. Since that time, the Company has experienced significant growth in loan originations and purchases, with approximately $1.1 billion of originations and purchases in 43 states during calendar 1996 compared to $592.5 million in 35 states during calendar 1995 and $565.5 million in 27 states during calendar 1994. Total originations and purchases were $300.7 million during the fourth quarter of 1996, which represents a $122.4 million increase from total originations and purchases during the fourth quarter of 1995. This growth in originations and purchases has resulted in the Company's earnings increasing to $9.4 million in 1996 compared to earnings of $5.8 million and $22,000 in 1995 and 1994, respectively. The Company sells substantially all of its originated and purchased loans several times a quarter to institutional purchasers for cash, historically at a premium over the principal balance of the loans. Prior to originating or purchasing loans, the Company obtains a purchase commitment from an institutional purchaser. The Company delivers loans and receives payments for the loans shortly after funding. This strategy, as opposed to securitizations, in which a residual interest in future payments on the loans is retained, provides certain benefits. The Company receives cash revenue, rather than recognizing non-cash revenue attributable to residual interests, as is the case in securitizations. The Company thereby avoids the risk present in securitizations of having to adjust revenue in future periods to reflect a lower realization on residual interests because actual prepayments or defaults exceeded levels assumed at the time of securitization. By selling its originated and purchased loans, the Company also reduces its exposure to default risk (other than certain first payment defaults) and the prepayment risk normally inherent in a mortgage lender's business. The Company may also be required to repurchase or substitute loans in the event of a breach of representations and warranties, including any fraud or any misrepresentation made during the mortgage loan origination process, and retains the risk of having to adjust noncash revenues attributable to the realization of the retained servicing rights. Management believes that the cash received in loan sales provides the Company greater flexibility and operating leverage than a traditional portfolio lender, which holds the loans it originates, by allowing the Company to generate income through interest on loans held for sale and gain on loans sold. Loan sales have been an important factor in generating the Company's historic earnings and creating consistent positive cash flow to fund operations. See "Business -- Financing and Sale of Loans." The Servicing Division of Old Long Beach (the "Sub-Servicer") serviced substantially all of the loans originated by the Company while it operated as a division of Old Long Beach. The Sub-Servicer and the Company are entering into a contract pursuant to which the Sub-Servicer will sub-service loans originated or purchased by the Company following the Reorganization. Sub-servicing activities include collecting and remitting loan payments, accounting for principal and interest, holding escrow or impound funds for payment of taxes and insurance, if applicable, making required inspections of the mortgaged property, contacting delinquent borrowers and supervising foreclosures and property dispositions. The Sub-Servicer has nine years of experience in the sub-prime mortgage loan servicing industry, with a servicing portfolio of approximately $3.5 billion of sub-prime mortgage loans at December 31, 1996. Since the servicing procedures of the Sub-Servicer were developed while the Company was part of Old Long Beach and are coordinated with the Company's origination practices, management believes that the Sub-Servicer will be able to provide faster and more effective servicing of the Company's loans than another independent servicer. See "Business -- Servicing." The Company actively originated loans during 1996 in 112 of the approximately 300 metropolitan statistical areas ("MSAs") in the United States having populations in excess of 100,000, as compared to loan originations in 54 of these MSAs during 1995. The Company seeks to expand its broker-sourced loan business through increased penetration in its existing markets and expansion into new geographic markets. In addition, although the Company currently primarily conducts a broker-sourced business, the Company intends to develop a direct-sourced loan origination business (i.e., where the lender deals directly with the borrower and does not involve an independent broker). Direct lending will provide the Company with an additional distribution channel for its products and the ability to retain the origination fees for the loans it funds. The Company plans to commence its direct-sourced lending operations in 1997 and estimates it will expend approximately $1.0 million in 1997 for this purpose. The Company's senior management is also experienced in direct-sourced loan originations as several of the senior executives were involved in creating the direct-sourced lending operations of Old Long Beach prior to the Reorganization. No assurance can be given that the Company will be able to commence direct-sourced loan origination operations as planned or that such operations will be successful. See "Business -- Loan Origination and Purchasing -- Direct-Sourced Loan Operations." To facilitate the public sale of Old Long Beach's broker-sourced business, Old Long Beach is reorganizing its business operations (the "Reorganization") by transferring to LBFC the assets and personnel related to Old Long Beach's broker-sourced mortgage lending and loan sales operations and approximately $40 million in cash in exchange for 25,000,000 shares of Common Stock, 21,750,000 of which are being sold pursuant to this Offering (25,000,000 if the Underwriters' over-allotment option is exercised in full). The Company intends to use the $40 million contributed to it from Old Long Beach for working capital purposes and to pay fees and expenses related to the Reorganization, estimated to be approximately $1.5 million. The costs of the Offering are being paid by Old Long Beach. The assets being transferred to LBFC do not include any funded loans or funded loan servicing rights. LBFC will have no interest in Old Long Beach's direct-sourced mortgage lending or servicing operations, which are being retained by Old Long Beach after the Reorganization. In the Reorganization, LBFC is acquiring the right to the "Long Beach Mortgage Company" name and the benefits related to the name, which will be used after the Reorganization by a wholly-owned subsidiary of LBFC ("New Long Beach") that will conduct the broker-sourced business. The Company is not assuming any of the liabilities of Old Long Beach arising from Old Long Beach's lending or loan servicing activities prior to the Reorganization other than certain liabilities relating to the assets or personnel being transferred. Old Long Beach and the Company will be free to compete against each other after the completion of this Offering. Old Long Beach and the Company are entering into an agreement not to solicit or hire each other's employees for a specified period following the Reorganization. See "Reorganization." The principal executive offices of the Company are located at 1100 Town & Country Road, Suite 900, Orange, California 92868, and its telephone number is (714) 541-5378. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Selling Stockholder(1)............................. 21,750,000 shares Common Stock to be Outstanding after the Offering(2)................................ 25,000,000 shares Nasdaq National Market symbol................ LBFC Risk Factors................................. See "Risk Factors" for a discussion of certain material factors that should be considered in connection with an investment in the Common Stock offered hereby. </TABLE> - --------------- (1) Prior to completion of this Offering, the Selling Stockholder (i.e., Old Long Beach), as the sole stockholder of LBFC, will own 25,000,000 shares of Common Stock. All of the 3,250,000 shares being retained by the Selling Stockholder are subject to the Underwriters' over-allotment option. If the over-allotment option is exercised in full, the Selling Stockholder will not own any shares of Common Stock. See "Beneficial Ownership of Securities and Selling Stockholder." (2) Excludes 3,000,000 shares of Common Stock reserved for issuance under the 1997 Stock Incentive Plan. In connection with the Offering, options are being granted at the public offering price to key officers and employees of the Company. See "Management -- 1997 Stock Incentive Plan." SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA AND RATIOS) The financial data set forth below should be read in conjunction with the Financial Statements of the Company and related Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operation" included elsewhere herein. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, --------------------------------------------------- PRO FORMA 1994 1995 1996 1996(1) ------- ------- ------- ------------ <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS: Revenues: Gain on sales of loans..................................... $21,668 $31,691 $50,699 $ 49,465 Loan servicing and other fees.............................. -- -- -- 1,529(2) Interest income............................................ 2,510 2,494 3,275 3,275 ------- ------- ------- ---------- Total revenues......................................... 24,178 34,185 53,974 54,269 Expenses: Compensation and employee benefits......................... 15,496 13,564 22,299 23,086 Rent and other occupancy costs............................. 2,565 3,258 4,188 4,188 Office supplies and courier service........................ 712 816 1,903 1,903 Depreciation............................................... 281 667 1,025 1,025 Legal and professional..................................... 1,443 1,082 1,828 1,828 Interest................................................... 1,814 2,312 2,814 3,140 Loan sub-servicing......................................... -- -- -- 1,990 Other...................................................... 1,831 2,525 3,945 3,945 ------- ------- ------- ---------- Total expenses......................................... 24,142 24,224 38,002 41,105 ------- ------- ------- ---------- Income before provision for income taxes..................... 36 9,961 15,972 13,164 Provision for income taxes................................... 14 4,169 6,580 5,424 ------- ------- ------- ---------- Net income................................................... $ 22 $ 5,792 $ 9,392 $ 7,740 ======= ======= ======= ========== Pro forma earnings per share(3).............................. $ .31 ========== Pro forma weighted average number of shares outstanding(3)... 25,000,000 ========== </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 --------------------------- ACTUAL PRO FORMA(1) ------- ------------- <S> <C> <C> STATEMENT OF FINANCIAL CONDITION DATA: Cash.............................................................................. $ -- $40,000 Loans held for sale............................................................... 49,580 -- Deferred income taxes............................................................. 2,120 36,000 Total assets...................................................................... 79,750 78,215 Warehouse financing facility...................................................... 72,829 -- Total liabilities................................................................. 78,613 2,256 Stockholders' equity.............................................................. 1,137 75,959 </TABLE> <TABLE> <CAPTION> AS OF OR FOR YEAR ENDED DECEMBER 31, -------------------------------------- 1994 1995 1996 -------- -------- ---------- <S> <C> <C> <C> OPERATING DATA: Loans originated and purchased.......................................... $565,547 $592,542 $1,058,122 Whole loan sales........................................................ 562,054 580,366 1,029,789 "A-" and "B+" loans as a percentage of total principal balance of loans(4).............................................................. 44.6% 55.0% 69.2% Average original loan principal balance................................. $ 116 $ 99 $ 105 31-60 day delinquencies as a percentage of total principal balance as of period end(5)......................................................... 0.8% 1.5% 1.6% 61-90 day delinquencies as a percentage of total principal balance as of period end(5)......................................................... 0.9 1.0 1.0 91 or more day delinquencies as a percentage of total principal balance as of period end(5)................................................... 3.9 4.5 4.5 Total delinquencies as a percentage of total principal balance as of period end(5)......................................................... 5.7 7.0 7.1 Total losses on loans as a percentage of average principal balance of loans serviced(5)..................................................... 1.5 1.4 1.3 FINANCIAL RATIOS(4): Weighted average interest rate on fixed rate loans...................... N/A 11.3% 10.5% Weighted average interest rate on adjustable rate loans................. 8.6% 10.4 9.6 Weighted average interest rate on fixed/adjustable loans................ 9.5 11.3 10.0 Weighted average initial combined loan-to-value ratio................... 69.1 72.2 75.0 </TABLE> - --------------- (1) Gives pro forma effect to the Reorganization as if it had occurred as of January 1, 1996 as to the Statement of Operations and December 31, 1996 as to the Statement of Financial Condition Data. The pro forma results of operations are not necessarily indicative of the future operations of the Company. See "Unaudited Pro Forma Consolidated Financial Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034139_cmp-media_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034139_cmp-media_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e41522ce285198c368b2dba70750bdcdd1a5881b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034139_cmp-media_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and the notes thereto appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus (i) gives effect to the exchange, to be effected prior to the consummation of the Offerings, of all outstanding shares of the Company's Class C Common Stock for shares of the Company's Class A Common Stock and shares of the Company's Class B Common Stock, (ii) gives effect to the amendment and restatement of the Company's certificate of incorporation and a 35.75-to-one stock split of the Company's outstanding Common Stock to be effected through a stock dividend prior to the consummation of the Offerings and (iii) assumes no exercise of the Underwriters' over-allotment options. See "Description of Capital Stock" and "Underwriting". THE COMPANY CMP is a leading publisher of magazines and newspapers about computers, electronics, information technology and the Internet (collectively, "technology"). Each of CMP's publications is designed for a distinct audience within one of three groups: the builders, the sellers or the users of technology. In terms of total advertising pages, the Company is one of the largest technology publishers in the United States, with a 1996 U.S. market share in excess of 20% according to Inquiry Management Systems ("IMS"), an independent ad-tracking firm. In 1996, many of CMP's publications were the leaders in their respective market niches and five of CMP's publications were among the ten fastest-growing technology publications in the United States, in terms of advertising pages according to IMS. The Company's revenues have nearly doubled since 1992, increasing to $418.1 million in 1996 from $218.2 million in 1992. Income from operations increased to $28.8 million in 1996 from $7.4 million in 1992. Of the three largest U.S. technology publishers, CMP is the only one which serves the broad spectrum of builders, sellers and users of technology and which is therefore able to offer technology advertisers access to customers in all three groups. The "builders" include manufacturers, engineers, designers and purchasers of electronic systems and components, including computers, telecommunications equipment and related products. The "sellers" include distributors, resellers and retailers of those products. The "users" include the end-users, in business and at home, of information systems, computer systems, personal computers, software, the Internet and related products and services. Most of CMP's magazines and newspapers are controlled-circulation, business-to-business trade publications which are distributed free of charge to qualified subscribers and which generate revenues predominantly from the sale of advertising space. In 1996, advertising revenues from the Company's controlled-circulation publications accounted for approximately 72% of total revenues. CMP also publishes paid-circulation magazines that generate revenue not only from advertising but also from subscriptions and newsstand sales. The Company has expanded its business internationally by acquiring an advertising sales representative organization that serves local technology publishers worldwide, by launching new wholly-owned and joint-venture editions of its U.S. publications designed for local audiences and by licensing its U.S. publications to local publishers outside the United States. CMP has also expanded onto the Internet by making its publications and other information services available through its World Wide Web sites. The technology sector of the U.S. publishing industry has experienced substantial growth as technology has become increasingly integrated into business and consumer products and the demand for technology information and analysis has increased. In 1996, the technology sector accounted for approximately 35% of advertising dollars spent in U.S. business-to-business publications according to Competitive Media Reporting, a media market-research service. The total number of advertising pages for technology products in U.S. technology and business publications was approximately 160,000 in 1996 according to IMS, and the Company estimates that total 1996 revenues from these advertising pages were between $1.5 billion and $1.7 billion. PUBLICATIONS AND SERVICES CMP serves the builders and sellers of technology through its "OEM" and "channel" publications, respectively, which include some of the Company's longest-established publications. The Company serves large business users of technology (including corporate, government and institutional users) through its "enterprise computing" publications, and it serves desktop business users and consumers through its "personal computing" publications, which include the Company's paid-circulation magazines. CMP's publications and the years in which they were launched are indicated below. BUILDERS. CMP publishes two controlled-circulation newspapers that address distinct audiences within the original equipment manufacturer ("OEM") sector of the technology industry: Electronic Buyers' News (1971) and Electronic Engineering Times (1972). Audiences for these publications include OEM management, engineers, designers and purchasers of electronic systems and components, including computers, telecommunications equipment, semiconductors, software, peripherals and related products. According to IMS, CMP held the largest market share in 1996 in the U.S. OEM publishing sector, accounting for approximately 41% of the total advertising pages in all U.S. technology publications serving this group of readers. SELLERS. CMP publishes three controlled-circulation publications that address distinct audiences within various technology distribution channels (collectively, the "channel"): Computer Reseller News (1982), VARBusiness (1987) and Computer Retail Week (1992). Audiences for these publications include distributors, value-added resellers ("VARs"), retailers, systems integrators, dealers, consultants, computer superstores, mass merchandisers, warehouse clubs, consumer electronics retailers and mail-order sellers. According to IMS, CMP held the largest market share in 1996 in the U.S. channel publishing sector, accounting for approximately 76% of the total advertising pages in all U.S. technology publications serving this group of readers. USERS. CMP publishes three controlled-circulation publications that address distinct audiences in business enterprises and other large organizations: CommunicationsWeek (1984), InformationWeek (1985) and Network Computing (1990). These audiences include information systems executives, network communications and departmental applications managers, Internet and intranet managers, and other purchasers and end-users of computers and information technology products. According to IMS, CMP held the second largest market share in 1996 in the U.S. enterprise computing publishing sector, accounting for approximately 27% of the total advertising pages in all U.S. technology publications serving this group of readers. CMP also publishes paid-circulation magazines that address the needs of personal computer users, such as technology professionals and users in large businesses, technology users in small and home offices, and individuals: WINDOWS Magazine (1992), HomePC (1994) and NetGuide Magazine (1994). According to IMS, CMP held the second largest market share in 1996 in the U.S. personal computing publishing sector, accounting for approximately 17% of the total advertising pages in all U.S. technology publications serving this group of readers. INTERNATIONAL. CMP publishes Informatiques Magazine (1994) in France and, through joint ventures, publishes Computer Reseller News (1995) and InformationWeek (1997) in Germany and InformationWeek (1997) in the U.K. The Company also licenses its editorial content to non-U.S. publishers and acts as advertising sales representative for a network of non-U.S. publications. INTERNET SERVICES. With the 1994 launch of TechWeb, CMP became the first major U.S. technology publisher to make all of its domestic print publications accessible through a single World Wide Web site. The Company has announced that in 1997 it will launch CMPnet, a World Wide Web site which will serve as a single point of access for all of CMP's Internet services. GROWTH STRATEGY CMP's objective is to continue to grow in revenues, profitability and market share as a leading publisher of magazines and newspapers serving the broad spectrum of builders, sellers and users of technology worldwide. The Company believes that its ability to achieve its objective will be enhanced by its strong relationships with advertisers, the broad market coverage of its publications, its reputation for high-quality editorial content and its experienced management team. To implement this objective, CMP has adopted the following strategies, which it may pursue through internal growth, selective acquisitions, joint ventures and licensing arrangements. BUILD UPON STRENGTH OF EXISTING PUBLICATIONS. CMP will seek to increase its overall market share of advertising pages by continuing to improve the editorial and circulation quality of its publications, thereby providing advertisers with increasingly effective access to their target audiences. The Company believes that, by publishing for audiences across the spectrum of builders, sellers and users of technology, it can offer advertisers a one-stop purchasing opportunity which capitalizes on their need to reach audiences in multiple markets. CMP also plans to continue selectively expanding the circulation of its publications, which it expects will lead to higher net average rates per page and therefore higher revenues and profits. In addition, in response to advances in technology and changes in technology markets, CMP will reposition existing publications from time to time in order to maximize their market opportunities, accelerate their growth and increase their profitability. INTRODUCE NEW PUBLICATIONS FOR EMERGING TARGET AUDIENCES. CMP will continue monitoring new developments and trends in technology markets to identify emerging audiences for technology-related information. When the Company perceives appropriate opportunities, it intends to launch publications with innovative positions attractive to both advertisers and readers. The Company has demonstrated an ability to identify new audiences and to reach the market with publications for such audiences before other major U.S. technology publishers. CMP believes that being the first-to-market provides a competitive advantage in establishing market-share leadership. EXPAND INTERNATIONALLY. CMP believes that the strength of its existing publications and its network of non-U.S. publications for which it provides advertising sales representation enable it to take advantage of the growth of technology markets internationally. The Company plans to expand its international business primarily by launching local versions of its strongest publications, either independently or in joint ventures with local publishers, in those countries that have the largest or fastest-growing technology markets. CMP also intends to expand its program of licensing its titles, designs and editorial content to local publishers. In addition, CMP plans to expand M&T International by increasing the number of publications it represents and opening additional overseas sales offices. EXPAND INTERNET SERVICES. The Company intends to continue using the Internet to complement and extend the reach of its existing print publications and to develop new online audiences for its advertisers. In addition to aggregating its Internet services into the single CMPnet site and adding new content and services, CMP will use a common CMPnet sales force, which CMP believes will be cost-efficient and effective for its advertisers. RECENT DEVELOPMENTS The Company estimates that revenues for the three months ended June 30, 1997 will be approximately $125.0 million, compared with $107.7 million for the same period in 1996. Income from operations for the three months ended June 30, 1997 is anticipated to be approximately $13.5 million, compared with $9.2 million for the corresponding period of the prior year. It is anticipated that this growth will be principally attributable to revenue increases for Computer Reseller News and InformationWeek. CMP has announced that it is centralizing the management of its enterprise computing and personal computing publications, a change the Company believes will better position it to offer advertisers a single point of access to the users of technology. The Company also announced that it will cease publishing NetGuide Magazine after its August 1997 issue and will integrate Internet- related content into WINDOWS Magazine and its NetGuide Internet service. CMP believes that the converging information needs of personal computer and Internet users eliminate the necessity for a stand-alone monthly magazine exclusively targeting the Internet user. In addition, CMP has announced that CommunicationsWeek will change its name to InternetWeek effective as of September 1, 1997, reflecting the impact of the Internet on network communications. InternetWeek will continue to address the information needs of network professionals and corporate managers, whose purchasing responsibilities are increasingly shifting to focus on products and applications based on Internet technologies. OWNERSHIP The Company was founded by Gerard G. Leeds and Lilo J. Leeds in 1971. Immediately after the Offerings (as defined herein), Gerard Leeds, Lilo Leeds and their children (collectively, the "Founding Family"), some of whom will continue as directors and executive officers of the Company, will beneficially own an aggregate of 17,047,050 shares of Class A Common Stock and Class B Common Stock having approximately 97% of the outstanding aggregate voting power of the Company's Common Stock. See "Risk Factors -- Concentration of Control; Anti-Takeover Effect of Certain Provisions" and "Description of Capital Stock". Upon the consummation of the Offerings, certain members of the Founding Family will make a gift from their personal holdings of approximately 200,000 shares of Class A Common Stock to substantially all of the Company's employees. See "Management -- Employee Share Grants". Following consummation of the Offerings, the executive officers and other employees of the Company will collectively own shares representing approximately 24% of the Company's Common Stock. The Company is a Delaware corporation, and its principal executive offices are located at 600 Community Drive, Manhasset, New York 11030. Its telephone number is (516) 562-5000. THE OFFERINGS <TABLE> <S> <C> Class A Common Stock offered:(1) The Company..................... 3,750,000 shares The Selling Stockholders........ 1,250,000 shares ------------ Total...................... 5,000,000 shares ============ Common Stock outstanding after the Offerings: Class A Common Stock............ 6,521,320 shares (2) Class B Common Stock............ 16,103,250 shares (3) ------------ Total...................... 22,624,570 shares (2) ============ Voting rights........................ The Class A Common Stock and Class B Common Stock vote as a single class on all matters requiring the approval of the Company's stockholders, except as otherwise required by law, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to ten votes. Use of proceeds...................... The Company will use the $61.4 million net proceeds it will receive from the Offerings to repay the outstanding balance under the Company's revolving credit agreement ($34.3 million as of March 31, 1997) and to pay $26.0 million of the S Corporation Distribution (as defined herein) to the Company's current stockholders, and the balance will be used for other general corporate purposes. See "Use of Proceeds". Proposed Nasdaq National Market symbol............................. CMPX </TABLE> - --------------- (1) The offering of 4,000,000 shares of Class A Common Stock initially being offered in the United States (the "U.S. Offering") and the offering of 1,000,000 shares of Class A Common Stock initially being offered outside the United States (the "International Offering") are collectively referred to as the "Offerings". (2) Excludes 419,705 shares of Class A Common Stock issuable upon exercise of outstanding options granted under the Company's Stock Incentive Plan and 712,855 shares of Class A Common Stock reserved for issuance and not yet issued under the Stock Incentive Plan, 1,500,000 shares reserved for issuance and not yet issued under the Company's Employee Stock Purchase Plan and 35,000 shares of Class A Common Stock reserved for issuance and not yet issued under the Company's Directors' Stock Compensation Plan. See "Management -- Stock Incentive Plan", "-- Employee Stock Purchase Plan" and "-- Director Compensation". Also excludes 2,642,640 shares of Class A Common Stock issuable upon the exercise of outstanding options held by certain members of the Company's senior management. See "Management -- Executive Compensation -- Option/SAR Grants in Last Fiscal Year".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034239_rc2-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034239_rc2-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b63941885b7f8679a8a8284e3b3ef4d72ecce203
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034239_rc2-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) appearing elsewhere in the Prospectus. Unless indicated otherwise, the information contained in this Prospectus (i) gives effect to the recapitalization consummated on April 30, 1996 in which the Company was formed as a holding company to acquire the RCI Group and the RCL Group (see "The Recapitalization"), (ii) assumes that the Underwriters' over-allotment option is not exercised, (iii) has been restated to give retroactive effect to a stock split of 7.885261 shares for each share of Common Stock and an amendment and restatement of the Company's Certificate of Incorporation and By-Laws effected or to be effected prior to consummation of the Offering, and (iv) gives effect to the conversion of all of the outstanding shares of the Company's Nonvoting Common Stock, par value $.01 per share, into an aggregate of 937,084 shares of Common Stock upon the completion of the Offering. Unless indicated otherwise, references to the "Company" or "Racing Champions" are to Racing Champions Corporation and its subsidiaries, including the operations of the RCI Group and the RCL Group prior to April 30, 1996. THE COMPANY Racing Champions is a leading producer and marketer of collectible scaled die cast vehicle replicas(1). The Company is best known for its extensive line of officially licensed, high quality collectible replicas of actual race cars and related vehicles from the five most popular U.S. professional racing series, including NASCAR. Since its inception in 1989, the Company has capitalized on the growing popularity of motor sports by offering an expanding line of high quality, affordable racing replicas targeted toward racing fans and adult collectors. The Company believes that it had the largest domestic market share in 1996 in the die cast racing replica category(1). Beginning in 1996, the Company successfully expanded into non-racing collectibles by introducing the Racing Champions Mint(TM) line of high quality die cast replicas of classic and late-model vehicles. The Company is continuing this expansion in 1997 by introducing an additional line of non-racing vehicle replicas and two new lines of collectible pewter figures. From 1990, the Company's first full year of operations, through 1996, the Company's net sales grew from approximately $5 million to $66 million. The Company intends to further its growth by (i) continuing to capitalize on the growing popularity of motor sports to expand its racing replica business, and (ii) leveraging its brand name, reputation with collectors, and established distribution and manufacturing relationships by developing new collectible products. The Company's strategy is to develop affordable, collectible replicas centered around themes for which significant enthusiast, hobbyist and collector interest exists. In order to produce authentic products and create interest and credibility with collectors and enthusiasts, the Company obtains official licenses which allow for the reproduction of distinguishing characteristics, trade names and trademarks. The Company enhances the collectibility of its products by carefully managing product quantities and staggering product release dates, continuously freshening its product offerings, producing special editions, utilizing distinctive packaging and adding other special features. In order to broaden the potential collector base for its products, the Company's replicas are affordably priced, typically under $30 at retail. Although the Company employs traditional collectible distribution channels such as collector and hobby shops, the Company principally distributes its products through mass merchants. The Company believes that its established shelf space at these mass merchants enables it to (i) reach more customers with greater frequency given the regular shopping patterns of its target market at mass merchants, and (ii) sell a higher volume of products resulting in substantial economies of scale. The resulting cost reductions make the Company's products more affordable to consumers and more profitable for itself as well as retailers. In addition, because of electronic links in place with its mass merchant customers, the Company is better able to monitor retail inventories and point of sale information and adjust production accordingly. Racing Replicas. The racing replica category is well suited to the Company's strategy because of (i) the popularity of major racing series such as NASCAR, one of the fastest growing spectator sports in the United States, (ii) the significant interest in collecting racing replicas among racing fans and adult die cast collectors and (iii) the wide variety of frequently changing vehicles to replicate. Racing Champions' largest product line is a comprehensive collection of scaled stock cars, trucks and team transporters replicating most of the vehicles competing in the current year's NASCAR Winston Cup Series, Busch Grand National Series and Truck Series by Craftsman. The Company also produces replicas from other popular racing series including National Hot Rod Association drag racing ("NHRA"), Championship Auto Racing Teams ("CART") and Indy Racing League ("IRL") Indy style racing, and World of Outlaws sprint car racing ("World of Outlaws"), as well as Honda and Kawasaki racing motorcycles. Racing Champions produced over 900 different styles of racing replicas in 1996. The Company's racing replicas range in size from 1:144 scale to 1:9 scale and retail at prices ranging from $1 to $30. In order to produce its wide variety of racing replicas, the Company has entered into over 450 different licensing agreements with racing teams, drivers and sponsors, vehicle manufacturers and major racing series sanctioning bodies. Because several aspects of a racing vehicle's outward appearance change frequently due to changes in sponsors, vehicle styling, graphics and drivers, many of the Company's replicas also change frequently, thereby enhancing their collectibility. The Company further enhances collectibility by releasing different monthly assortments of the various racing replicas, producing annual and special editions and adding special features such as serial numbers, vehicle display stands, die cast emblems and trading cards featuring the driver. Established secondary markets exist for many of the Company's products and the market values of the Company's products are regularly reported in a variety of die cast collector magazines. In many cases, the value of a Racing Champions product in the secondary markets exceeds the product's original retail price. Non-racing Vehicle Replicas. In addition to racing replicas, the Company has identified significant market opportunities for collectible non-racing die cast vehicles. During 1996, the Company introduced Racing Champions Mint, a line of high quality, collectible die cast vehicles replicating classic and late-model cars and trucks from the 1930's to the present. The Racing Champions Mint line features a series of limited production, serial numbered, highly detailed replicas produced in color schemes matching those used on the actual vehicle. This product line is sold through mass merchants at a retail price of approximately $5 for each 1:64 scale vehicle and in its first year of production generated sales for the Company of approximately $9.7 million. In early 1997, the Company complemented the Racing Champions Mint series with the Racing Champions Hot Rod Collection(TM), a new line of collectible die cast hot rod replicas which is supported by licensing and marketing arrangements with Petersen Publishing Company's Hot Rod Magazine. Collectible Pewter Figures. The Company is targeting comic book and sports enthusiasts and figure collectors with two new lines of collectible pewter figures which it began shipping in 1997. The first line is a series of pewter replicas of various comic book characters in action poses. Each figure is mounted on a die cast stand in front of an encased miniature reproduction of a comic book cover on which the character appeared ("Comic Book Champions"(TM)). The Company has obtained licenses from Marvel Characters, Inc. and DC Comics (a division of the Time Warner Entertainment Company L.P.), two of the leading publishers of comic books in the United States, which will allow the Company to replicate characters such as Superman(R), Batman(R) and Spiderman(R). The second line consists of pewter replicas of popular athletes. Each athlete is mounted on a die cast stand in front of an encased miniature reproduction of a Sports Illustrated magazine cover on which the athlete appeared ("Sports Champions"(TM)). In addition to a licensing arrangement with Sports Illustrated, the Company is negotiating licenses from the major sports leagues (including the National Football League, Major League Baseball, the National Hockey League and the National Basketball Association) and popular athletes (including Muhammad Ali, Frank Thomas, Ken Griffey, Jr., Joe Montana and Arnold Palmer). The Company has received commitments from its major customers to purchase both the Comic Book Champions and Sports Champions product lines. Product Distribution and Supply. Approximately 76% of the Company's 1996 net sales were made through mass merchants, including K-Mart, Target, Toys 'R' Us and Wal-Mart. Due to the success of its product offerings, the Company has been able to increase shelf space for its products at each of its major customers. The Company believes that its current shelf space and relationships with its mass merchant customers provide it with a significant competitive advantage in introducing new products and maintaining its leading share of the racing replica market. The Company has maintained its profit margins while selling through mass merchants by realizing economies of scale, diligently controlling its costs and offering its mass market customers the opportunity to earn an attractive mark-up on its products. Racing Champions also sells through wholesalers who, in turn, distribute to hobby and collector shops (approximately 15% of 1996 net sales). The Company's remaining 9% of 1996 net sales were made through companies which offered customized products for premium/promotional purposes. Virtually all of the Company's products are manufactured by six independently owned factories located in China. All but two of these factories are exclusively dedicated to manufacturing the Company's products and all are privately owned by independent Chinese entrepreneurs. The Company, through Racing Champions Limited, its Hong Kong subsidiary, manages all key aspects of its product manufacturing in China, including sourcing raw materials and packaging, performing engineering and graphic art functions, executing production schedules, providing on site quality control and safety testing and delivering shipments for export from Hong Kong to the United States. The Company believes its dedicated Chinese supplier base together with the local oversight and coordination provided by its Hong Kong subsidiary provide it with certain competitive advantages including a rapid product development capability as well as a flexible, reliable and high quality supply source. Formation. Racing Champions Corporation is a holding company which was formed in April 1996 by an investor group led by Willis Stein & Partners, L.P., a private investment fund, for the purpose of acquiring both Racing Champions, Inc., a privately held Illinois corporation formed in 1989 (together with an affiliated company, the "RCI Group"), and Racing Champions Limited, a privately held Hong Kong corporation formed simultaneously in 1989 (together with certain affiliated companies, the "RCL Group"). See "The Recapitalization." The RCI Group and the RCL Group, while under different ownership, effectively operated as one entity with the RCI Group managing the licensing, product development and sales operations, and the RCL Group managing the overseas manufacturing and shipping operations. The RCI Group was owned equally by Robert E. Dods and Boyd L. Meyer. The RCL Group was owned by Peter K.K. Chung. Messrs. Dods, Meyer and Chung continue to serve as senior executives of the Company and collectively will own approximately 30.3% of the outstanding Common Stock following the Offering. The Company's principal executive offices are located at 800 Roosevelt Road, Building C, Suite 320, Glen Ellyn, Illinois 60137 and its telephone number is (630) 790-3507. The Company maintains World Wide Web sites at www.collectchamps.com and www.racingchamps.com. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........... 5,000,000 shares Common Stock to be outstanding after the Offering.................................... 12,885,240 shares(2) Use of Proceeds............................... To repay subordinated debt owed to stockholders of the Company and bank borrowings, and to redeem all of the outstanding shares of the Company's Series A Preferred Stock and Series B Preferred Stock. See "Use of Proceeds." Nasdaq National Market symbol................. RACN </TABLE> - --------------- (1) Information about the market for scaled die cast vehicle replicas and the die cast racing replica category has been derived from information published by the NPD Group, Inc., an independent research firm which compiles data for its subscribers, together with the Company's internal research regarding the market. (2) Does not include 332,033 shares issuable upon exercise of options granted pursuant to the Company's 1996 Key Employees Stock Option Plan. In addition, it is anticipated that options to purchase up to 148,752 shares of Common Stock will be granted at the initial public offering price on or before the closing of the Offering under the Company's 1997 Stock Incentive Plan, including options to purchase up to 78,852 shares of Common Stock that will be accompanied by reload options. See "Management -- Executive Compensation -- 1996 Key Employees Stock Option Plan and "--Stock Incentive Plan." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> PRO FORMA THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ----------------------------------------------------- --------------------- 1993(1) 1994(1) 1995(1) 1996 PRO FORMA(2)(3) 1996 1997(2) -------- -------- -------- -------------------- ------- ----------- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: NET SALES: Company................... $ -- $ -- $ -- $ 49,385 $ -- $15,187 RCI Group................. 31,047 43,268 48,592 16,614 12,260 -- RCL Group................. 15,658 23,672 32,301 13,027 5,595 -- Intercompany and redundant sales.................. (15,658) (23,672) (32,301) (13,027) (5,595) -- -------- ------- ------- $ 65,999 $12,260 $15,187 ======== ======= ======= GROSS PROFIT: Company................... $ -- $ -- $ -- $ 27,839 $ -- $ 8,694 RCI Group................. 14,151 18,056 23,036 7,210 5,248 -- RCL Group................. 4,147 5,770 6,216 2,483 1,741 -- -------- ------- ------- $ 37,532 $ 6,989 $ 8,694 ======== ======= ======= OPERATING INCOME: Company................... $ -- $ -- $ -- $ 10,864 $ -- $ 2,969 RCI Group................. 6,141 8,565 9,724 108 1,767 -- RCL Group................. 1,544 2,321 2,751 506 (37) -- -------- ------- ------- $ 11,478 $ 1,730 $ 2,969 ======== ======= ======= NET INCOME(4): Company................... $ -- $ -- $ -- $ 4,373 $ -- $ 1,225 RCI Group................. 5,722 8,224 9,392 72 511 -- RCL Group................. 1,216 2,339 2,790 299 (44) -- -------- ------- ------- $ 4,744 $ 467 $ 1,225 ======== ======= ======= Net income per share...... $ 0.36 $ 0.03 $ 0.09 Weighted average shares outstanding............ 13,214 13,214 13,214 <CAPTION> MARCH 31, 1997 ---------------------- AS ACTUAL ADJUSTED(5) -------- ----------- <C> <C> BALANCE SHEET DATA: Working capital..................... $ (8,069) $ (269) Total assets........................ 102,595 102,595 Total debt.......................... 81,035 30,107 Total stockholders' equity.......... 11,741 62,669 </TABLE> - --------------- (1) The 1993, 1994 and 1995 amounts represent certain historical financial data of the RCI Group and RCL Group (converted from fiscal year end March 31 to December 31). (2) The pro forma financial data for the year ended December 31, 1996 gives effect to the Recapitalization, the Offering and the application of the estimated net proceeds from the Offering as if each had occurred on January 1, 1996. The pro forma financial data for the three months ended March 31, 1997 gives effect to the Offering and the application of the estimated net proceeds from the Offering as if it had occurred on January 1, 1997. (3) Pro forma statement of income data for the year ended December 31, 1996 include a nonrecurring incentive bonus expense of $2,389,000 incurred in connection with the Recapitalization and a purchase accounting inventory write-up adjustment of $1,367,000 as a result of the Recapitalization. Excluding the effects of the nonrecurring incentive bonus expense and the inventory write-up adjustment, the Company's pro forma gross profit, operating income, net income and net income per share for the year ended December 31, 1996 would have been: <TABLE> <CAPTION> PERCENT OF AMOUNT NET SALES ------ ---------- <S> <C> <C> Net sales................................................... $65,999 100.0% Gross profit................................................ 38,899 58.9 Operating income............................................ 15,234 23.1 Net income.................................................. 6,997 10.6 Net income per share........................................ $ 0.53 </TABLE> (4) Net income for the years ended 1993, 1994 and 1995 includes a provision for Hong Kong income taxes at an effective rate of 16.5% for certain entities, no provision for other entities structured as tax-free British Virgin Islands entities and no federal income tax provision for certain entities structured as S corporations. (5) The "As Adjusted" amounts give pro forma effect to (i) the issuance of 5,000,000 shares of Common Stock in the Offering at an assumed price of $13.00 per share, net of estimated underwriting discounts and commissions of $4,550,000 and estimated offering expenses of $750,000 and (ii) the repayment of $50,928,000 of indebtedness and the redemption of $8,772,000 of preferred stock, including accrued dividends.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034257_dsi-toys_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034257_dsi-toys_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a5dc7a4986cecb066f0991a69cec9689be7aa027
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034257_dsi-toys_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Except as otherwise indicated, the information contained in this Prospectus (i) assumes the Underwriters' over-allotment option will not be exercised and (ii) assumes an initial public offering price of $10.00 per share. Except as otherwise indicated, references to the "Company" refer to DSI Toys, Inc. and its wholly owned subsidiary, DSI (HK) Ltd. ("DSI(HK)"). Investors should carefully consider the information set forth under the heading "Risk Factors." The terms "fiscal year" and "fiscal" refer to the Company's fiscal year which is the year ending January 31 of the following calendar year mentioned (e.g., a reference to fiscal 1996 is a reference to the fiscal year ended January 31, 1997). THE COMPANY The Company designs, develops, markets and distributes high quality, value- priced toys and children's consumer electronics. The Company's core product categories are (i) juvenile audio products, including walkie-talkies, pre- school audio products, pre-teen audio products and musical toys; (ii) girls' toys, including dolls, play sets and accessories; and (iii) boys' toys, including radio control vehicles, action figures and western and military action toys. Founded in 1970, the Company historically was principally a supplier of non-proprietary toys to deep discount stores and regional drug store chains. With the addition of new senior management personnel in 1990, the Company began to market its expanding product line to major toy retailers by emphasizing innovative packaging and developing in-house brands. Further, in fiscal 1993, the Company began to emphasize the development and marketing of proprietary products, consisting of toys developed by the Company incorporating concepts licensed from outside inventors, products designed in-house, products for which the Company owns the mold and products incorporating well-known trademarks licensed to the Company. The Company introduced its first television-promoted proprietary product, the Rosie(R) doll, in fiscal 1995. Rosie(R) ranked as the number two selling doll, by dollar amount (and number three by unit), in the large doll category during calendar 1995, as measured by the Toy Retail Sales Tracking Service. Traditionally a supplier of juvenile audio products and boys' toys, the Company has diversified its product offerings over the last two fiscal years, primarily through its expansion into the girls' toys category with the introduction of the Rosie(R) doll in fiscal 1995 and the Pattie(TM) doll in fiscal 1996. For fiscal 1997, the Company has introduced new products in its three core categories, as well as a new children's action game, Hoppin' Poppin' Spaceballs(TM). The Company seeks to enhance its position as a leading supplier of high quality, value-priced toys and intends to continue developing proprietary products, primarily through pursuing opportunities to license toy concepts from outside inventors and to license recognized trademarks. The Company believes that it offers its customers many value-priced products, which the Company believes are lower-priced alternatives to comparable products sold by other toy companies. The Company believes that this strategy of offering lower priced products to its customers provides them with opportunities to realize higher margins on sales of the Company's products as compared to sales of products offered by other toy companies. Since fiscal 1993, the Company's net sales have grown from $36.7 million to $63.2 million (or 72%) for fiscal 1996, and net income has grown from $362,000 to $2.2 million (or 494%) during the same period. The Company believes that this growth is attributable to several factors, including its ability to identify new products with broad appeal and to rapidly develop and market these products. The Company believes that its use of innovative packaging and increased utilization of brand names have also contributed to its growth. The Company offers several licensed products under the Kawasaki(R) brand name, including a radio-controlled motorcycle, guitars, keyboards and a percussion instrument. The Company also has developed and currently is marketing products incorporating several in-house brand names, including Digi-Tech(TM) (walkie- talkies), LA Rock(R) (musical toys and audio products), American Frontier(TM) (western role play toys), Combat Force Rangers(TM) (military role play toys) and My Music Maker(R) (musical toys and pre-school audio products). The Company believes that its use of brand names to market its products has increased name recognition of its products and contributed to the Company's increase in net sales over the past four fiscal years. The Company believes that it is the leading supplier of walkie-talkies to the top five United States toy retailers. The Company sells primarily to retailers, including mass merchandising discounters such as Wal-Mart Stores, Inc., Kmart Corporation and Target Stores (a division of Dayton Hudson Corp.), specialty toy stores such as Toys "R" Us, Inc., Kay-Bee Toy & Hobby Shops, Inc. and F.A.O. Schwarz, and deep discount stores such as Family Dollar Stores, Inc., Consolidated Stores Corp. and Value City Department Stores, Inc. Wal-Mart (19.5%), Kmart (13.7%) and Toys "R" Us (12.0%) each accounted for more than 10% of the Company's net sales for fiscal 1996. Although the Company's sales have been made primarily to customers based in the United States, international net sales accounted for approximately 19% of the Company's net sales during fiscal 1996. Approximately 56% of the Company's net sales were made FOB Asia during fiscal 1996. Products sold FOB Asia are shipped directly to customers from the factory and are not carried by the Company in inventory, thereby improving working capital utilization. The Company also maintains an inventory of certain products in its Houston, Texas facility, principally to support sales by the Company's customers who offer such products on a year-round basis. In addition, the Company's Houston facility maintains inventory to support the Company's television-promoted proprietary products. The principal executive offices of the Company are located at 1100 West Sam Houston Parkway (North), Suite A, Houston, Texas 77043, and its telephone number is (713) 365-9900. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company................ 2,500,000 shares Common Stock Offered by the Selling Shareholder.... 500,000 shares (1) Common Stock to be Outstanding after the Offering.. 6,000,000 shares (2) Use of Proceeds.................................... For (i) repayment of approximately $19.5 million in debt of the Company, consisting of a senior term loan of approximately $4.8 million, a subordinated term loan of approximately $1.6 million, outstanding principal under a revolving line of credit of approximately $6.0 million, and indebtedness to the Estate of Mr. Moss of approximately $7.1 million, and (ii) $3.0 million for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol...................... DSIT </TABLE> - -------- (1) The Selling Shareholder is the Tommy Moss Living Trust, a trust formed by Tommy Moss, the founder and former sole shareholder of the Company. In December 1995, a recapitalization transaction occurred which resulted in the sale by Mr. Moss of approximately 77.7% of the then outstanding Common Stock. Mr. Moss died in November 1996. See "The Recapitalization" and "Principal and Selling Shareholders." (2) Excludes (i) 600,000 shares of Common Stock reserved for issuance under the Company's 1997 Stock Option Plan, of which options covering 90,000 shares will be outstanding after the Offering, and (ii) 638,888 shares of Common Stock issuable upon exercise of warrants to be outstanding after the Offering. If the Underwriters' over-allotment option is exercised in full, after the Offering there will be 6,169,000 shares of Common Stock outstanding and 488,888 shares issuable upon the exercise of outstanding warrants. See "Management--1997 Stock Option Plan," "Principal and Selling Shareholders," "Description of Capital Stock" and "Underwriting." The offering of the shares of Common Stock described herein is referred to as the "Offering." SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) <TABLE> <CAPTION> FISCAL YEAR --------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales............................. $36,576 $36,734 $45,219 $63,146 $63,219 Gross profit.......................... 7,484 6,612 11,605 19,718 21,196 Selling, general and administrative expenses............................. 4,524 5,680 7,910 14,625 15,569 Former sole shareholder bonus (1)..... 1,380 347 2,000 1,000 -- Operating income...................... 1,580 585 1,695 4,093 5,627 Interest expense...................... 226 147 333 701 2,600 Net income............................ 907 362 969 2,327 2,151 Earnings per share (2)................ $ 0.26 $ 0.10 $ 0.28 $ 0.66 $ 0.58 Weighted average shares outstanding (2).................................. 3,500 3,500 3,500 3,500 3,739 </TABLE> <TABLE> <CAPTION> END OF FISCAL YEAR -------------------------------------------------------- 1992 1993 1994 1995 1996 ------ ------ ------- -------- ------------------------ ACTUAL AS ADJUSTED(3) -------- -------------- <S> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital........ $2,093 $1,569 $ 2,121 $ 3,510 $ 2,621 $ 8,902 Total assets........... 8,349 7,460 10,389 17,390 16,304 22,254 Long-term debt (less current portion)(4)... -- -- 17 18,188 14,203 -- Shareholders' equity (deficit) (4)......... 3,817 4,179 5,147 (11,582) (9,422) 13,083 </TABLE> - -------- (1) Consists of bonus paid to the Company's former sole shareholder. Bonuses paid to other officers and employees are included in selling, general and administrative expenses. See "Management--Bonuses." (2) Earnings per share is calculated using the weighted average number of common and dilutive common equivalent shares outstanding during the period. (3) Adjusted to reflect the sale by the Company of 2,500,000 shares of Common Stock offered hereby and the anticipated use of net proceeds to the Company therefrom. See "Use of Proceeds" and "Capitalization." (4) For a description of the recapitalization transaction that occurred in December 1995, resulting in the incurrence of approximately $17.9 million of indebtedness and a shareholders' deficit at the end of fiscal 1995 and fiscal 1996, see "The Recapitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034258_noble_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034258_noble_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..823f0c625c201d47b90b01b8237cb74e5cf1c757
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034258_noble_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. As used in this Prospectus, unless the context otherwise requires, the 'Company' or 'Noble' refers to Noble International, Ltd. and its subsidiaries, after giving effect to the Utilase Acquisition and the Final DCT Acquisition, each of which Closing Acquisitions will be consummated concurrent with, and as a condition to, the consummation of the Offering. Except with respect to historical financial statements and unless the context indicates otherwise, the description of the Company as set forth in this Prospectus includes the operations of Prestolock International, Ltd. ('Prestolock'), Monroe Engineering Products, Inc. ('Monroe'), Cass River Coatings, Inc., dba Vassar Industries ('Vassar'), Skandy Corp. ('Skandy'), and Utilase Production Process, Inc. ('UPP'), each a wholly-owned subsidiary of the Company, as well as the operations of DCT Component Systems, Inc. ('DCT') and Utilase, Inc., dba Utilase Blank Welding Technologies ('Utilase'), each of which will become a wholly-owned subsidiary of the Company in connection with the Closing Acquisitions. Except as otherwise indicated herein, the information contained in this Prospectus, including per share data and information relating to the number of shares of Common Stock outstanding, gives retroactive effect to a 334.213-for-1 split of the Common Stock effected on September 11, 1997 and assumes no exercise of the Representatives' over-allotment option to purchase up to 495,000 additional shares of Common Stock. See 'Underwriting' and Note M of Notes to Consolidated Financial Statements. THE COMPANY Noble is a full service, independent supplier of automotive components, component assemblies and value-added services to the automotive industry. The Company's customers include original equipment manufacturers ('OEMs'), such as General Motors ('GM'), Chrysler Corporation ('Chrysler'), Ford Motor Company ('Ford') and Mitsubishi Motors Manufacturing of America ('Mitsubishi') and direct suppliers of OEMs ('Tier I' suppliers), such as Textron Automotive Company, GM/Delphi and United Technologies, Inc. The Company believes that it is one of the few suppliers to Tier I companies (a 'Tier II' supplier) to provide integrated manufacturing, design, planning, engineering and other value-added services. While the Company is predominately a Tier II supplier to the automotive industry, through its Utilase operations, the Company also operates as a Tier I supplier. The Company's objective is to become one of the premier full service Tier II suppliers to the automotive industry. The Company has experienced substantial growth as a result of both internal growth and acquisitions. For the year ended December 31, 1996, the Company had pro forma combined net sales of $48.5 million and pro forma combined net income of $1.1 million. For the nine months ended September 30, 1996 and 1997, the Company had pro forma combined net sales of approximately $34.9 million and $45.1 million, respectively, representing an increase of 29.2%, and pro forma combined net income of approximately $1.0 and $1.9 million, respectively, representing an increase of 92.0%. As a result of the mature and competitive nature of the automotive industry, the world's automakers are under intense pressure to cut costs and development times for new products. In order to accomplish this feat, automakers are increasingly relying on Tier I and Tier II suppliers with the capability to design, engineer and deliver entire vehicle modules, systems and solutions. Pricing pressure in the automotive supplier industry is intense because most automakers wield an extraordinary amount of leverage over their suppliers. However, management believes systems-oriented suppliers have the ability to reduce the cost of components, while maintaining or increasing margins, as they take control of the design and engineering function. The Company views the acquisition of automotive suppliers that operate in high growth niche markets, or that are strategic to the further integration of its operations, as a fundamental part of its growth strategy. This strategy is fueled by the consolidation presently occurring among the approximately 30,000 companies in the Tier II supplier base segment. Since its inception in 1993, the Company has successfully completed five acquisitions and, concurrent with the consummation of the Offering, will complete the two Closing Acquisitions. Thereafter, the Company intends to continue to seek acquisition opportunities which will strategically expand or enhance its current businesses and anticipates that any such acquisitions will be financed through bank debt, cash flow from operations and/or the issuance of debt or equity securities. However, while the Company regularly evaluates possible acquisition opportunities, as of the date of this Prospectus, it has no agreements, commitments or understandings and is not in negotiation with respect to any potential acquisition other than the Closing Acquisitions. In addition to the pursuit of strategic acquisitions, the Company's business strategy includes delivering integrated component systems, providing technological leadership and product production innovations, cross-selling to existing customers, and developing strategic alliances and joint ventures. The Company believes that by focusing on this strategy it can continue to capitalize on the increasing opportunities for growth within the automotive component supply industry. The Company's operations include: (i) laser welding of tailored blanks and laser welding and cutting of components; (ii) automotive manufacturing utilizing progressive die stampings; (iii) design, engineering and assembly of automotive glovebox latches and other automotive component systems; (iv) painting and coating of automotive components; (v) other value-added services, such as prototyping of automotive components and die design and construction; and (vi) assembly, machining and distribution of components used in machine tooling. As OEMs and Tier I suppliers continue to reduce their supplier base and demand improved quality and enhanced technology, management believes Noble's ability to offer these diverse, yet highly complementary, services will provide it with a competitive advantage. The Closing Acquisitions illustrate the benefits associated with the Company's successful implementation of its business strategy. The Utilase Acquisition will significantly impact the Company's operations, as Utilase is one of the dominant suppliers of laser welded tailored blanks to the automotive industry. The Company believes Utilase's proprietary technology and production processes permit it to produce laser welded blanks more quickly and with higher quality and tolerance levels than its competitors. Laser welding of blanks offers several significant advantages over other current welding technologies, including cost, weight and safety benefits. According to a 1995 study commissioned by the UltraLight Steel Auto Body Consortium, a worldwide industry association of steel producers, laser welded tailored blanks will play a significant role in car manufacturing in the next decade as the automotive industry is further challenged to produce lighter cars for better fuel economy, with enhanced safety features and lower manufacturing costs. The Final DCT Acquisition will provide the Company with additional value-added service operations as a result of DCT's progressive die stamping and stamped extrusion facilities and services. Progressive die stamping is a process in which steel is passed through a series of dies in a stamping press in order to form the steel into three-dimensional parts. Stamped extrusion is a process that involves the forcing of steel through progressive die openings in order to produce a product of uniform cross-sectional shape. In addition, the Utilase and Final DCT Acquisitions will, among other things, allow the Company to integrate the production laser welding operations of UPP, one of the Company's current subsidiaries, and the laser welded blanking operations of Utilase, with the progressive die stamping applications of DCT, to provide additional value-added products and integrated systems. The Company is a Michigan corporation and was incorporated on October 3, 1993. The Company maintains its principal executive office at 33 Bloomfield Hills Parkway, Suite 155, Bloomfield Hills, Michigan 48304, and its telephone number is (248) 433-3093. ACQUISITION BACKGROUND Pursuant to its strategic acquisition program, the Company has, since its formation in 1993, completed five acquisitions and the partial acquisition of DCT (such acquisitions, together with the Final DCT Acquisition and the Utilase Acquisition, collectively referred to herein as the 'Acquisitions'). These Acquisitions include: o PRESTOLOCK INTERNATIONAL, LTD.--The Company completed its first acquisition in February 1994 by acquiring, through its predecessor and now its wholly-owned subsidiary, Prestolock, the assets of Presto Lock, Inc. for a cash purchase price of $750,000 (the 'Prestolock Acquisition'). In July 1994, a portion of the assets acquired, which were not strategic to the Company's business plan, were resold by Prestolock for $500,000 in cash, plus a royalty receivable by Prestolock through December 31, 2000. The Prestolock Acquisition was financed through shareholder loans, all of which have subsequently been repaid. Prestolock designs, engineers and assembles automobile glovebox latches. Prestolock's engineers are included in the planning and design phase by both GM and Chrysler and remain included in the design of new body platforms under consideration by the OEMs and Tier I instrument panel suppliers. Prestolock had net sales of approximately $5.5 million and $5.0 million for the twelve months ended December 31, 1996 and the nine months ended September 30, 1997, respectively, representing 11.4% and 11.1%, respectively, of the Company's pro forma combined net sales for such periods. o VASSAR INDUSTRIES--In January 1996, the Company completed the acquisition of all of the outstanding capital stock of Vassar (the 'Vassar Acquisition'). The Vassar Acquisition purchase price consisted of a $200,000 stock purchase price, paid in cash, and consulting and non-compete fees aggregating $1.8 million, payable over seven years. Payments with respect to the Vassar Acquisition have been financed with a combination of bank debt and cash flow from operations. An aggregate of approximately $111,000 of the net proceeds from the Offering will be used to make final payments with respect to two of the six Vassar consulting and non-competition agreements. Vassar provides just-in-time painting, coating and assembly services to OEMs and Tier I suppliers on automotive components consigned to the Company. In addition, as defined by GM/Delphi, Vassar is a dedicated supplier providing painting services to GM/Delphi's Saginaw Steering Division. Vassar had net sales of approximately $5.5 million and $4.2 million for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively, representing 11.4% and 9.3%, respectively, of the Company's pro forma combined net sales for such periods. o MONROE ENGINEERING PRODUCTS, INC.--In January 1996, the Company also completed the acquisition of all of the outstanding capital stock of Monroe and certain real estate owned by an affiliate of Monroe (the 'Monroe Acquisition'). The Monroe Acquisition purchase price consisted of $6.4 million for the capital stock, payable in installments over 16 months, and $500,000 for the real estate, payable interest-only, on a monthly basis, until April 30, 1998 when the entire principal amount becomes due. Payments with respect to the Monroe Acquisition purchase price have been financed with a combination of bank debt and cash flow from operations. A total of $500,000 of the net proceeds of the Offering will be used to pay the final installment on the Monroe Acquisition stock purchase price. Monroe distributes tooling components, including adjustable handles, hand wheels, plastic knobs, levers, handles and hydraulic clamps, used in automotive and other manufacturing equipment. Monroe's products have international reputations for quality in the engineering community. Monroe had net sales of approximately $5.1 million and $4.0 million for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively, representing 10.5% and 8.9%, respectively, of the Company's pro forma combined net sales for such periods. o SKANDY CORP.--In January 1997, the Company acquired all of the outstanding capital stock of Skandy in exchange for 133,686 shares of the Company's Common Stock (the 'Skandy Acquisition'). Skandy is the sales and marketing subsidiary of Noble. Skandy's sales force consists of five full-time sales representatives each of whom has at least 20 years of industry experience. For the nine months ended September 30, 1997, Skandy had net sales of $0.6 million, representing 1.3% of the Company's pro forma combined net sales for such period. o UTILASE PRODUCTION PROCESS, INC.--In March 1997, the Company, through its wholly-owned subsidiary UPP, acquired certain assets of Utilase (the 'UPP Acquisition'). The UPP Acquisition purchase price was $850,000, evidenced by a promissory note, of which $750,000 was originally payable upon the earlier of the consummation of the Offering or July 31, 1997, and the balance was payable at the rate of $50,000 on each of February 28, 1998 and 1999. Subsequently, in August 1997, such terms were amended and the entire $850,000 will be paid upon the consummation, and out of the proceeds, of the Offering. UPP provides the Company with both laser production welding and laser cutting capabilities, which the Company provides to customers such as GM and Chrysler, as well as to non-automotive customers. For the period from March 1, 1997 through September 30, 1997, UPP had net sales of $0.8 million, representing 1.8% of the Company's pro forma combined net sales for the nine months ended September 30, 1997. o DCT COMPONENT SYSTEMS, INC.--In July 1996, the Company acquired newly issued shares representing a 37.5% minority interest in DCT (the 'Initial DCT Acquisition') and, effective April 7, 1997, it acquired an additional 7.5% interest in DCT from the former president of DCT for an aggregate price of $1.00. The Company intends to exercise its right to purchase the balance of DCT's outstanding capital stock from DCT's other shareholders in connection with the Closing Acquisitions for $1 million in cash, payable out of the net proceeds of the Offering. DCT provides progressive die stamping and operates one of only six stamping facilities approved by Chrysler to provide extrusion stampings. DCT had net sales of approximately $23.0 million and $18.5 million for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively. On a pro forma basis, DCT's net sales represent 47.4% and 41.1%, respectively, of the Company's pro forma combined net sales for such periods. o UTILASE, INC.--The Company will also acquire all of the outstanding shares of Utilase in connection with the Closing Acquisitions. The Utilase Acquisition purchase price is $8.2 million in cash, which will be paid from the proceeds of the Offering, and an aggregate of approximately $10.1 million in principal amount of promissory notes (the 'Utilase Notes'). In addition, as part of the Utilase Acquisition, the Company will pay $1.4 million out of the proceeds of the Offering to certain of Utilase's officers in exchange for their agreements not to compete with Utilase. Utilase was founded in 1986 to provide production and prototype laser processing services and produced its first prototype of a laser welded tailored blank in 1987. To date, Utilase has produced over 9 million laser welded blanks, making it one of the leaders in its field. Utilase had net sales of approximately $9.3 million for the year ended December 31, 1996 and net sales of approximately $12.3 million for the nine months ended September 30, 1997, including net sales attributable to the operations purchased by UPP (as discussed above) until such purchase in March 1997. On a pro forma basis, Utilase's net sales represent 19.2% and 27.3% of the Company's pro forma combined net sales for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively. THE OFFERING <TABLE> <S> <C> Common Stock offered...................... 3,300,000 shares Common Stock to be outstanding after the Offering (1)............................ 7,225,006 shares Use of Proceeds........................... The Company intends to use the net proceeds of the Offering for the reduction of financial institution debt, payments relating to the Utilase Acquisition, payments relating to the Final DCT Acquisition, payments relating to prior Acquisitions and equipment purchases. See 'Use of Proceeds.' Risk Factors.............................. The securities offered hereby involve a high degree of risk and immediate substantial dilution. See 'Risk Factors' and 'Dilution.' Proposed AMEX symbol...................... 'NIL' </TABLE> - ------------------ (1) Does not include 700,000 shares reserved for issuance upon the exercise of options available for future grant under Noble's 1997 Stock Option Plan (the 'Option Plan') and 330,000 shares of Common Stock reserved for issuance upon the exercise of the Representatives' Warrants. Also does not include an aggregate of 58,485 shares reserved for issuance in future periods in exchange for a covenant not to compete in connection with the Utilase Acquisition. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources,' 'Management--Stock Option Plan,' 'Certain Transactions--Other Matters' and 'Underwriting.' SUMMARY PRO FORMA COMBINED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following sets forth summary pro forma financial data for the Company as of September 30, 1997 and for the year ended December 31, 1996 and the nine months ended September 30, 1996 and 1997 and has been prepared to illustrate the effects of the Closing Acquisitions and the Offering as if all of such transactions had occurred as of January 1, 1996 with respect to the statement of operations information and as of September 30, 1997 with respect to the balance sheet information. The Closing Acquisitions are reflected using the purchase method of accounting for business combinations. The pro forma financial data is provided for comparative purposes only and does not purport to be indicative of the results that actually would have been obtained if these transactions had been effected on the dates indicated. The information presented below is qualified in its entirety by, and should be read in conjunction with, 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' 'Pro Forma Financial Data,' 'Selected Financial Data' and the financial statements and notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, ---------------------------- 1996 1996 1997 ------------ ---------- -------------- <S> <C> <C> <C> PRO FORMA COMBINED STATEMENTS OF OPERATIONS: Net sales............................................................ $ 48,480 $ 34,933 $ 45,145 Cost of sales........................................................ 36,837 26,282 32,794 ------------ ---------- -------------- Gross profit......................................................... 11,643 8,651 12,351 Selling, general, and administrative expense......................... 8,468 6,136 8,080 ------------ ---------- -------------- Operating profit..................................................... 3,175 2,515 4,271 Interest expense..................................................... 1,806 1,229 1,616 Sundry, net.......................................................... 369 250 291 ------------ ---------- -------------- Earnings before income taxes......................................... 1,738 1,536 2,946 Income tax expense................................................... 618 523 1,001 ------------ ---------- -------------- Net earnings......................................................... 1,120 1,013 1,945 Preferred stock dividends............................................ (93) (71) (135) ------------ ---------- -------------- Net earnings on common shares........................................ $ 1,027 $ 942 $ 1,810 ------------ ---------- -------------- ------------ ---------- -------------- Net earnings per common share........................................ $ .14 $ .14 $ .25 ------------ ---------- -------------- ------------ ---------- -------------- Weighted average common shares outstanding........................... 7,120,390 6,611,854 7,174,569 OTHER FINANCIAL INFORMATION: EBITDA(1)............................................................ $ 6,726 $ 5,115 $ 7,023 Ratio of EBITDA to interest expense.................................. 3.7x 4.2x 4.4x Cash flow from: Operating.......................................................... $ 2,386 $ 389 $ 285 Investing.......................................................... 1,518 (919) (5,256) Financing.......................................................... (2,424) 1,252 3,991 ------------ ---------- -------------- Net cash flow...................................................... $ 1,480 $ 722 $ (980) ------------ ---------- -------------- ------------ ---------- -------------- </TABLE> <TABLE> <CAPTION> PRO FORMA COMBINED BALANCE SHEET DATA: SEPTEMBER 30, 1997 ------------------ <S> <C> Total assets............................................................................... $ 65,839 Working capital............................................................................ 6,150 Total debt(2).............................................................................. 21,677 Shareholders' equity....................................................................... 31,519 </TABLE> (Footnotes on next page) (Footnotes from previous page) - ------------------ (1) EBITDA represents income before income taxes, plus interest expense and depreciation and amortization expense. EBITDA is not presented as, and should not be considered, an alternative measure of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. While commonly used, however, EBITDA is not identically calculated by companies presenting EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by the Company's competitors. (2) Includes $925,000 of redeemable preferred stock. SUMMARY HISTORICAL FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following sets forth summary historical financial data for the Company and its consolidated subsidiaries (Prestolock, Monroe and Vassar) as of December 31, 1996 and for each of the three fiscal years in the period ended December 31, 1996 and is derived from the audited financial statements included elsewhere herein. The summary financial data as of September 30, 1997 and for the nine months ended September 30, 1996 and 1997 sets forth summary historical financial data for the Company and its consolidated subsidiaries (which at September 30, 1997 also included Skandy and UPP) and is derived from the unaudited financial statements included elsewhere herein. The comparability of the historical consolidated financial data has been significantly impacted by the Company's acquisitions of Monroe and Vassar in 1996 and its acquisitions of Skandy and UPP in January and March 1997, respectively. The information presented below is qualified in its entirety by, and should be read in conjunction with, 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' 'Pro Forma Financial Data,' 'Selected Financial Data' and the financial statements and notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ------------------------ 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS: Net sales............................. $ 3,305 $ 4,442 $ 16,187 $ 12,125 $ 14,262 Cost of goods sold.................... 2,261 2,911 10,587 7,807 9,598 ---------- ---------- ---------- ---------- ---------- Gross profit.......................... 1,044 1,531 5,600 4,318 4,664 Selling, general and administrative expenses............................ 915 1,030 5,088 2,902 3,541 ---------- ---------- ---------- ---------- ---------- Operating profit...................... 129 501 512 1,416 1,123 Equity in loss of unconsolidated subsidiary.......................... -- -- 95 2 99 Interest income....................... -- -- (5) -- -- Interest expense...................... 24 24 555 350 654 Sundry, net........................... (1) (29) (64) (64) (120) ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes and minority interest............... 106 506 (69) 1,128 490 Minority interest..................... 38 67 -- -- -- Income tax expense.................... 8 30 7 384 207 ---------- ---------- ---------- ---------- ---------- Net earnings (loss) on common shares.. $ 60 $ 409 $ (76) $ 744 $ 283 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net earnings (loss) per common share(1)............................ $ .03 $ .10 $ (.02) $ .22 $ .06 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average common shares outstanding......................... 1,535,170 2,807,390 3,820,390 3,311,854 3,874,569 OTHER FINANCIAL INFORMATION: EBITDA(2)............................. $ 121 $ 566 $ 999 $ 1,823 $ 1,668 Ratio of EBITDA to interest expense............................. 5.0x 23.6x 1.8x 5.2x 2.6x Cash flow from: Operating........................... $ (214) $ 392 $ 913 $ 1,050 $ (1,298) Investing........................... (429) (203) 270 418 (623) Financing........................... 645 (191) (713) (1,013) 1,746 ---------- ---------- ---------- ---------- ---------- Net cash flow....................... $ 2 $ (2) $ 470 $ 455 $ (175) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Total assets............................................................... $11,533 $ 15,392 Working capital (deficiency)............................................... (817) 1,099 Total debt................................................................. 8,675 7,434 Shareholders' equity....................................................... 729 4,798 </TABLE> - ------------ (1) Net earnings (loss) per common share data for 1994 and 1995 include the pro forma tax effects attributable to Prestolock being taxed under Subchapter S of the Internal Revenue Code through December 31, 1995. Net earnings per common share for the nine months ended September 30, 1997 have been reduced to reflect $63,506 of preferred dividends. (2) EBITDA represents income before income taxes, plus interest expense and depreciation and amortization expense. EBITDA is not presented as, and should not be considered, an alternative measure of operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles), but is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. While commonly used, however, EBITDA is not identically calculated by companies presenting EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by the Company's competitors.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034331_colorbus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034331_colorbus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..753a67294b7820026c919c5a3683928ba20c9318
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034331_colorbus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes that the Underwriters' over-allotment options will not be exercised, (ii) assumes no exercise of outstanding options to purchase 113,878 shares of Common Stock as of February 15, 1997, and (iii) assumes the reincorporation of the Company in Delaware in March 1997. See "Management--1997 Stock Incentive Plan" and "Underwriting." THE COMPANY COLORBUS develops and markets network print servers which enable the printing of high resolution color images from various digital color copiers and large format printers (printers which produce output larger than 11" by 17"). The Company's principal product, the COLORBUS Cyclone Imaging System(R) ("Cyclone"), incorporates proprietary software which manages the simultaneous print requests of multiple users on a computer network, processes color images and outputs documents on multiple connected output devices. In cooperation with Xerox, the Company is nearing completion of a new network print server, the Network Server Plus 3.0 ("NS Plus 3.0"), which is designed to provide simultaneous support for the Xerox DocuTech Production Publisher 135, a high volume black and white production publishing system ("DocuTech 135"), and the Xerox DocuColor 40 Digital Color Production System ("DocuColor 40"). The NS Plus 3.0 will address the production publishing market and will enable the cost effective, high volume production of documents with integrated color and black and white pages. The Cyclone is designed for the rapidly growing market for high quality, on demand color printing (which includes graphic arts and professional color publishing, commercial and short run printing, prepress services, office printing and print-for-pay). The Company believes that a significant factor in the growth of the on demand color printing market has been the increased acceptance and use of digital color copiers connected to color print servers. Dataquest estimates that the domestic market for digital color laser copiers has grown at an annual rate of approximately 30% from 1993 to 1995. According to Dataquest, approximately 14,400 digital color laser copiers were sold in the United States in 1995. Dataquest forecasts that domestic sales of digital color laser copiers will increase approximately 21% annually to 37,000 units in 2000. In addition, the percentage of digital color laser copiers connected to print servers is continuing to increase. Dataquest estimates that approximately 58% of the digital color laser copiers sold in the United States in 1995 were connected to color print servers. The Company believes that the installed base of digital color laser copiers in international markets is larger than that in the United States, and that connectivity rates are generally lower in international markets than in the United States. The Cyclone enables users to print high resolution color images from digital color laser copiers manufactured by Canon, Kodak, RICOH, Savin, Sharp and Xerox, as well as large format printers from ENCAD, Hewlett-Packard, Raster Graphics and Xerox. The Cyclone incorporates an open, upgradeable, scaleable architecture which the Company believes (i) extends product life by reducing the risk of obsolescence, (ii) enables the cost effective and timely introduction of new software based features, functionality and applications, and (iii) provides users with the flexibility to change or add output devices without the need for a new print server. End users of the Cyclone include large and small businesses which operate in a variety of industries and include Daimler Benz AG, Ford Motor Company, Heineken N.V., Kinko's, Inc., Lucent Technologies, Inc., Microsoft Corporation, Time Warner, Inc. and The Walt Disney Company. The Company is currently developing a Windows NT color print server which management believes will be introduced in 1997. The Company believes that the NS Plus 3.0, which is scheduled to be introduced by Xerox in mid 1997, will provide a unique color solution for the high volume production publishing market. The NS Plus 3.0 will provide an integrated front end and network connection for new placements of the DocuTech 135 and the DocuColor 40, as well as for the existing worldwide installed base of more than 10,000 DocuTech 135 units. By providing simultaneous support for the DocuTech 135 and the DocuColor 40, the NS Plus 3.0 will enable users to control the production publishing process from the print server and facilitate the generation of integrated black and white and color documents. The Company sells the Cyclone primarily through Canon and Xerox branch sales offices or subsidiaries and office equipment distributors such as IKON Office Solutions and Danka Business Systems PLC. Pursuant to Xerox's distribution and development agreement with the Company, Xerox will sell the NS Plus 3.0 as a Xerox product. The Company intends to continue to expand and develop strategic relationships with key partners in its distribution channels to strengthen its presence in existing markets and to expand into new markets. COLORBUS operates in the United States and Canada, and operates in Europe through its wholly owned subsidiary, CDS International B.V. ("CDS"), which the Company acquired in December 1996. The Company's principal executive offices are located at 18261 McDurmott West, Irvine, California, 92614, and its telephone number is (714) 852-1850. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company............... shares Common Stock Offered by the Selling Stockholders.. shares Common Stock to be Outstanding after the Offering. shares(1) Use of Proceeds by the Company.................... For repayment of indebtedness, for general corporate and working capital purposes and for potential acquisitions of related technologies and businesses. Proposed Nasdaq National Market Symbol............ CBUS </TABLE> - -------- (1) Excludes 113,878 shares of Common Stock issuable upon exercise of outstanding options as of February 15, 1997 at a weighted average exercise price of $10.43 per share. See "Management--Other Stock Options." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, -------------------------------------- 1992 1993 1994 1995 1996 ------ ------ ------- ------- ------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net revenues............................ $2,129 $7,891 $26,959 $37,220 $42,264 Cost of revenues........................ 1,123 5,230 17,194 22,320 23,692 ------ ------ ------- ------- ------- Gross profit............................ 1,006 2,661 9,765 14,900 18,572 Operating expenses: Research and development.............. 204 379 894 1,495 2,006 Sales and marketing................... 614 1,546 5,298 9,731 11,907 General and administrative............ 239 616 1,861 2,412 2,918 Other costs and expenses.............. -- -- -- 181 397 ------ ------ ------- ------- ------- Total operating expenses................ 1,057 2,541 8,053 13,819 17,228 ------ ------ ------- ------- ------- Operating income (loss)................. (51) 120 1,712 1,081 1,344 Net income (loss)....................... $ (120) $ 123 $ 963 $ 537 $ 628 ====== ====== ======= ======= ======= Net income (loss) per share............. $ $ $ $ $ ====== ====== ======= ======= ======= Weighted average common and common equivalent shares...................... ====== ====== ======= ======= ======= </TABLE> <TABLE> <CAPTION> DECEMBER 31, 1996 ---------------------- ACTUAL AS ADJUSTED(1) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital.......................................... $ 2,461 $ Total assets............................................. 12,879 Long term obligations, excluding current portion......... 378 Stockholders' equity..................................... 3,931 </TABLE> - -------- (1) Adjusted to give effect to the sale of shares of Common Stock by the Company at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses and the application of the net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034754_whg_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034754_whg_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..270a79d94f37ab1cc580b3dd1c18b4766a8bdf2e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034754_whg_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements, including the notes thereto, set forth elsewhere in this Prospectus. Capitalized terms used but not defined in this Summary are defined elsewhere in this Prospectus. THE COMPANY The Company owns interests in three of the leading hotels and casinos in Puerto Rico -- the Condado Plaza Hotel & Casino (the 'Condado Plaza'), the El San Juan Hotel & Casino (the 'El San Juan') and the El Conquistador Resort & Country Club (the 'El Conquistador'). These three hotels are managed by Williams Hospitality Group Inc. ('WHGI'), which is 62% owned by the Company. In all, the Company owns interests in and manages 1,875 suites and hotel rooms, 39,300 square feet of casino floor space containing 120 gaming tables and 940 slot machines and approximately 146,000 square feet of convention and meeting space. These properties also include a total of 22 restaurants, 41 shops, one showroom, three health and fitness centers, 12 tennis courts, an 18-hole championship golf course, a marina and 25 cocktail and entertainment lounges. See the Consolidated Financial Statements of the Company, formerly Williams Hotel Corporation, and the financial statements of nonconsolidated affiliates included elsewhere herein. The Company's hotels are each focused on different market segments: the Condado Plaza primarily services the business traveler, the El San Juan caters to individual vacation travelers, as well as to small groups and conferences and corporate executives and the El Conquistador offers extensive group and conference facilities and also attracts the individual leisure traveler. In a survey of its readers conducted in 1996 by Conde Nast Traveler magazine, the El Conquistador was rated among the top 100 resorts in the world and both the El Conquistador and El San Juan were rated among the top 50 tropical resorts. The Company's casinos are among the largest and most successful in Puerto Rico. In fiscal 1996, the Condado Plaza casino achieved the highest table game play and the highest slot machine play in Puerto Rico while the El San Juan casino achieved the second highest table game play and the third highest slot machine play. The Company is a market share leader in Puerto Rico maintaining average occupancy at the same or higher levels than reported by its competitors. The Condado Plaza was recently awarded a 'Four Diamond' rating by the American Automobile Association for the ninth consecutive year. The Condado Plaza maintained an average occupancy during the fiscal year ended June 30, 1996 of 87.4% and an average room rate of $138.68. The El San Juan was recently awarded a 'Four Diamond' rating by the American Automobile Association for the tenth year in a row. The El San Juan maintained an average occupancy during the fiscal year ended June 30, 1996 of 82.3% and an average room rate of $185.30. The El Conquistador has received the prestigious Gold Key Award by Meetings and Conventions Magazine and the Paragon Award by Corporate Meetings and Incentives Magazine for excellence in meetings and conventions. It was awarded the American Automobile Association 'Four Diamond' rating for each of its three full years of operation. The Las Casitas at the El Conquistador was recently awarded a 'Five Diamond' rating by the American Automobile Association. During the fiscal year ended March 31, 1997, the resort's third full fiscal year of operations, the El Conquistador had an average occupancy of 71.9% and an average room rate of $202.86. The Company's business strategy is to maximize the economic potential of its existing properties while building on its hotel and casino expertise by seeking other opportunities to manage and own hotels and casinos in Puerto Rico, the Caribbean and elsewhere. The Company believes that its strengths make it an attractive candidate to other hotel and casino owners seeking third-party managers as well as an attractive joint venture partner for other hotel and casino developers and owners. The Company continues to explore potential opportunities but is not currently engaged in any negotiations, agreements or understandings with respect to any acquisition, management agreement or joint venture. The Company is constantly seeking new ways to reduce operating costs as well as upgrade or add amenities to its hotel and casino properties to enhance the overall experience of its guests. The lobby of the Condado Plaza was fully renovated during the current fiscal year and restaurants, a nightclub and shops were added. The El San Juan recently completed a major renovation and refurbishment which included all guest rooms, guest room corridors, an additional restaurant and public areas. The El Conquistador recently opened three new restaurants, a nightclub and nine new retail shops. The El Conquistador is currently negotiating to open a world class spa by the end of 1997. The Company's key strengths which have contributed to its success include: Marketing -- The Company has extensive experience in marketing to three distinct hotel guest types -- the corporate-executive traveler, the individual leisure traveler and the group and convention traveler. Through its 40 person U.S. mainland exclusive marketing service, numerous sales professionals at each property, general sales agents in South America and Europe as well as excellent strategic relationships with major airlines, cruise ship operators and travel industry partners, the Company is able to maintain its market share leadership in Puerto Rico. With this structure in place, the Company is equipped to market additional properties. Management -- The Company employs approximately 400 managers in its three hotels and casinos. These managers provide a pool of experienced talent to the Company for purposes of operating its existing properties as well as for future training and expansion. The Company has a proven track record of successful management of hotels and casinos due to long-term management philosophy and commitment to excellence and service. Centralized Reservations System -- The Company maintains a centralized reservation system staffed by trained personnel who handle over 500,000 telephone inquiries per year. This centralized system provides the Company the opportunity to cross-sell its properties depending on supply and demand, guest type and various other factors. Centralized Purchasing -- Through the centralized purchasing system established during fiscal 1996 for the three hotels and casinos it owns and manages, the Company is able to reduce operating costs and achieve certain economies of scale so that it can more effectively compete with larger hotel chains as well as provide its guests first-class amenities at lower incremental costs. The Company is the sole owner of the Condado Plaza. The El San Juan and WHGI are owned in part by the Company and in part by unaffiliated third parties (the 'Other Owners'). The Company was formed in 1983 and in that same year, together with the Other Owners, formed Posadas de Puerto Rico Associates, Incorporated ('PPRA') and WHGI for the purpose of acquiring and managing the hotel and casino property now known as the Condado Plaza. A year later, the Company, together with the Other Owners, caused the formation of Posadas de San Juan Associates for the purpose of acquiring and managing, through WHGI, the hotel and casino property now known as the El San Juan. Since 1993, the Company has increased its ownership interests in PPRA and WHGI and the Company currently owns 100% of PPRA, a 50% interest in the El San Juan and 62% of WHGI. In 1990 the Company, together with the Other Owners, caused the formation of WKA El Con Associates ('WKA') for the purpose of becoming a general and limited partner of El Conquistador Partnership L.P. El Conquistador Partnership L.P. was formed by WKA and Kumagai Caribbean, Inc. ('Kumagai'), a subsidiary of Kumagai Gumi Co., Ltd., a large Japanese construction company, for the purpose of acquiring and renovating the hotel and casino property now known as the El Conquistador. The Company's interest in WKA represents a 23.3% effective ownership interest in the El Conquistador. The El Conquistador is also managed by WHGI. See 'Relationship Between the Company and Its Subsidiaries and Affiliates.' Prior to April 21, 1997, the Company was a wholly-owned subsidiary of WMS Industries Inc., a Delaware corporation ('WMS'). Effective April 21, 1997 (the 'Distribution Date'), WMS distributed all of the outstanding shares of Common Stock to its stockholders as a tax free dividend on its common stock (the 'WMS Common Stock'). Such dividend and the transactions effected in connection therewith are referred to in this Prospectus as the 'Distribution.' As a result of the Distribution, the Company became an independent public company. The Company's principal executive offices are located at 6063 East Isla Verde Avenue, Carolina, Puerto Rico 00979; telephone: (787) 791-2222. CORPORATE STRUCTURE The organization structure of the significant entities comprising the Company is as follows: [GRAPH] THE NAI GROUP National Amusements, Inc., a Maryland corporation ('NAI'), and Sumner M. Redstone are the owners of all the Shares. The principal businesses of NAI are owning and operating movie theaters in the United States, United Kingdom and South America and holding common stock of Viacom Inc. Mr. Redstone, as trustee for various trusts, is the beneficial owner of 75% of the issued and outstanding shares of capital stock of NAI. Mr. Redstone's principal occupation is Chairman of the Board, President and Chief Executive Officer of NAI and Chairman of the Board and Chief Executive Officer of Viacom Inc. Mr. Redstone and NAI acquired the Shares on the Distribution Date as part of the Distribution. The NAI Group has advised the Company that it has no current plan or proposal to sell any of the Shares. See 'The NAI Group.' THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Selling Stockholders............................ 1,729,425 shares of Common Stock Common Stock Outstanding at June 13, 1997........................... 6,050,200 shares of Common Stock Purchase Price............................ To be determined at time of sale. Proceeds of the Offering.................. All of the proceeds from any sale of Common Stock covered by this Prospectus will be received by the NAI Group. The Company will not receive any of the proceeds. NYSE Symbol for the Common Stock.......... WHG The NAI Group............................. The shares of Common Stock covered by this Prospectus are owned by the NAI Group. </TABLE> SUMMARY FINANCIAL DATA The summary financial data set forth below for the fiscal years ended June 30, 1996, 1995, 1994, 1993 and 1992 have been derived from the audited consolidated financial statements of the Company (formerly Williams Hotel Corporation) for such periods. Williams Hotel Corporation owned 100% of the Company and was merged with and into the Company on April 8, 1997, with the Company as the surviving corporation. The summary financial data set forth below for the nine months ended March 31, 1997 and 1996 has been derived from the unaudited consolidated financial statements of the Company (formerly Williams Hotel Corporation) but, in the opinion of management, reflect all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the results for such periods. The unaudited pro forma balance sheet data as of March 31, 1997 and the unaudited pro forma statement of income data for the nine months ended March 31, 1997 and the year ended June 30, 1996 are derived from the Unaudited Pro Forma Condensed Consolidated Financial Statements included elsewhere herein. The data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements of the Company (formerly Williams Hotel Corporation) and related notes thereto, separate statements of nonconsolidated affiliates and other financial information included elsewhere herein. <TABLE> <CAPTION> NINE MONTHS ENDED MARCH 31, YEARS ENDED JUNE 30, --------------------------- --------------------------------------------------------- (UNAUDITED) 1996 SELECTED STATEMENT OF 1997 PRO FORMA INCOME DATA PRO FORMA 1997 1996 (UNAUDITED) 1996 1995 1994 1993 1992(1) --------- ------- ------- ------------ ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Revenues................. $ 51,646 $51,646 $52,306 $68,694 $68,694 $70,878 $75,480 $70,680 $62,352 --------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- ------- ------- ------- ------- ------- Operating income......... 12,520 13,217 11,091 12,194 13,558 7,624 13,892 14,162 6,909 Interest expense, net.... (846) (846) (1,448) (1,859) (1,859) (1,752) (3,551) (3,873) (4,074) Equity in income (loss) of nonconsolidated affiliates............. (2,395) (2,395) (3,915) (3,465) (3,465) (7,003) (3,534) (135) 2,992 --------- ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before tax provision and minority interests.............. 9,279 9,976 5,728 6,870 8,234 (1,131) 6,807 10,154 5,827 Credit (provision) for income taxes........... (3,684) (2,302) (710) (2,621) (1,645) 234 7 (1,050) (1,881) Minority interests in (income) loss.......... (2,822) (2,932) (2,779) (3,684) (3,636) (2,910) (4,597) (3,332) 1,383 Dividend on Condado Plaza Preferred Stock........ -- (246) (422) -- (516) (557) -- -- -- --------- ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss)........ $ 2,773 $ 4,496 $ 1,817 $ 565 $ 2,437 $(4,364) $ 2,217 $ 5,772 $ 5,329 --------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- ------- ------- ------- ------- ------- Pro forma net income (loss) reflecting income taxes on a separate return basis (unaudited) (2)........ $ 3,881 $ 451 $ 1,537 $(6,500) $ 1,257 $ 5,579 $ 2,407 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Pro forma net income per share of common stock.................. $ 0.46 $ 0.09 --------- ------- --------- ------- Pro forma shares outstanding (3)........ 6,050 6,050 --------- ------- --------- ------- </TABLE> <TABLE> <CAPTION> SELECTED BALANCE SHEET DATA MARCH 31, 1997 ----------------------- PRO FORMA HISTORICAL --------- ---------- (IN THOUSANDS) <S> <C> <C> Investments in, receivables and advances to nonconsolidated affiliates............. $ 28,801 $ 28,801 Property and equipment, net.................... 44,073 43,153 Total assets............. 113,176 109,846 Long-term debt, including current maturities..... 23,792 23,792 Minority interests....... 18,920 21,590 Shareholders' equity..... 52,503 41,996 </TABLE> - ------------ (1) 1992 includes the operations of WHGI on a consolidated basis for the period subsequent to the Company's April 30, 1992 purchase of an additional 5% interest in WHGI which increased the Company's ownership to 55%. Prior to April 30, 1992, the operations of WHGI were included in the consolidated financial statements by the equity method. (2) Pro forma net income (loss) reflecting income taxes on a separate return basis (unaudited) reflects the provision for income taxes without the tax benefits allocated to the Company from WMS primarily for utilization of partnership losses in the WMS consolidated Federal income tax return. (3) Pro forma net income per share of the Company was calculated using anticipated distribution of one share of Common Stock for every four of the 24,200,800 outstanding shares of WMS Common Stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034928_stream_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034928_stream_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d80b2901de62b04f17f8d5023c085b0e352607fd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034928_stream_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and the notes thereto appearing elsewhere in this Prospectus. THE COMPANY Stream is a leading worldwide provider of outsource technical support services. The Company provides support services via the telephone, e-mail and the Internet primarily to customers of leading software publishers, hardware manufacturers and online service providers. The Company's service agents answer questions, diagnose problems and resolve technical difficulties, ranging from simple error messages to wide area network failures. The Company employs more than 3,500 service agents, who resolve inquiries in 11 languages at nine call centers located in the U.S., France, the Netherlands and the U.K. By focusing on technical support, a more complex activity than traditional teleservices, Stream believes that it is able to differentiate itself from its competitors and provide its clients with high quality service and a cost-effective solution to their technical support needs. Stream's clients include software publishers such as Microsoft, Netscape and Symantec; hardware manufacturers such as Apple Computer and Hewlett-Packard; and online service providers such as CompuServe, The Microsoft Network and Sprint. The Company also provides support for companies in emerging market segments such as online financial services and interactive video services. In addition, the Company provides corporate help desk services to major corporations, including Norrell Services and Shell. The Company has recently begun to offer its services directly to end users in the consumer/SOHO market. Stream's corporate client base has grown from three clients in 1992 to 166 clients as of October 1, 1997, and the Company currently supports over 250 products for its top ten clients. The Company's commitment to quality service has been critical to its ability to establish and maintain client relationships. The Company has won numerous awards for its services, including Software Support Professionals Association STAR Awards for Software Technical Assistance for the last four years and EuroChannel's Innovator Award in 1996. The Company was also recently given special recognition by Microsoft for excellence in technical support as a Microsoft Authorized Support Center. The Company's ability to provide high quality service is enhanced by its advanced technologies and systems, including automatic call distributors, computer telephony integration, call tracking software and relational database information systems. In addition, Stream utilizes sophisticated in-house and client database technology to capture and utilize information gathered from the millions of support requests received annually. Because of the complex nature of its services, Stream believes a key component of its success is its ability to attract, retain and manage a well- trained work force. The Company employs experts in numerous products and platforms, ranging from advanced programming languages such as C++ and VisualBasic to common desktop applications. Growing product complexity, shorter product life cycles and an increasing number of products and multi-vendor computer and network configurations have increased the demand for technical support services. At the same time, software publishers, hardware manufacturers, online service providers and other organizations are finding it increasingly difficult and expensive to service all their needs in-house. Technical support is especially challenging to undertake as a non-core function because of the need for ongoing capital investment in specialized equipment, the attendant workforce management challenge and the inherent need for scale. As a result, companies are increasingly outsourcing these services to third-party providers as part of an overall effort to focus internal resources on core competencies, improve operating efficiencies and reduce costs. Dataquest estimates that outsource technical support services provided by third parties to software publishers, hardware manufacturers and online service providers totaled approximately $2 billion in 1996. In addition, corporations are increasingly seeking to outsource their internal help desk functions. The Gartner Group predicts that more than 40% of companies with internal help desks will outsource a portion of this function by 1998, compared to 15% in 1995. The Company believes it is well-positioned to capitalize on the accelerating trend toward outsourcing technical support services. Key elements of the Company's growth strategy include: (i) expanding relationships with existing clients as they develop new products and continue to outsource technical support activity, (ii) establishing new client relationships, especially in the online service provider and corporate help desk markets, (iii) capitalizing on the growth of technology-enabled products as companies increasingly incorporate technology into products and services and (iv) pursuing strategic alliances and acquisitions. THE REORGANIZATION The Company's outsource technical support business began in 1992 as a unit of Corporate Software Incorporated ("CSI"), which sold and licensed software products and services to major corporations ("Corporate Software & Technology" or the "Corporate Software & Technology Business"). CSI established its technical support business unit in response to demands from key clients that were increasingly seeking to outsource technical support. In December 1993, Software Holdings, Inc. ("SHI"), which was organized by members of management of CSI, certain affiliates of Bain Capital, Inc. ("Bain") and certain other investors, purchased CSI from its public stockholders. In 1995, CSI and the Global Software Services Division ("Modus Media International" or the "MMI Business") of R.R. Donnelley combined to form the Stream family of companies (the "CSI-MMI Merger"). Modus Media International is a leading provider of outsource manufacturing services to major software publishers and OEMs. Prior to the closing of this offering, the Company will complete a reorganization (the "Reorganization") pursuant to which (i) the Company and certain of its subsidiaries have contributed to two subsidiaries (the "Spin-Off Subsidiaries") the Corporate Software & Technology Business and MMI Business (the "Drop-Down") and (ii) the Company will distribute to the Company's stockholders all of the outstanding voting stock of the Spin-Off Subsidiaries owned by the Company (the "Spin-Off Distribution"). Accordingly, upon consummation of the Reorganization, the only business conducted by the Company will be the outsource technical support business. The consummation of the Reorganization is a condition to the closing of this offering. Purchasers of Common Stock in this offering will not receive any part of the Spin-Off Distribution. R.R. Donnelley and certain of its affiliates own approximately 87.4% of the outstanding Common Stock of the Company. Upon the closing of this offering, R.R. Donnelley and its affiliates will own approximately 49.3% of the outstanding Common Stock of the Company (43.2% if the Underwriters' over- allotment option is exercised in full). R.R. Donnelley has agreed that for a period of three years following the effective date of the Registration Statement relating to this offering it will not purchase any additional shares of Common Stock that would result in it and its affiliates owning 50% or more of the Company's outstanding Common Stock. See "Certain Transactions" and "The Reorganization." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................. 1,925,000 shares Common Stock offered by the Selling Stockholders.... 1,520,000 shares Common Stock to be outstanding after the offering... 8,413,961 shares (1) Use of proceeds..................................... Capital expenditures, working capital and general corporate purposes Proposed Nasdaq National Market symbol.............. STRM </TABLE> - -------- (1) Excludes options to purchase 330,496 shares of Common Stock outstanding as of October 1, 1997 at a weighted average exercise price of $39.22. Upon the effectiveness of this offering, the Company plans to reduce the exercise price of 152,319 of these options to a price equal to 100% of the initial public offering price. The Company plans upon the closing of this offering to grant options to employees for approximately 1,008,000 shares of Common Stock, vesting over four years, at an exercise price equal to the fair market value of the Common Stock on the closing date. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, ---------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------- ------- ------- -------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA (1): Revenues............... $2,842 $14,074 $37,388 $78,243 $155,498 $ 109,399 $ 139,308 Cost of services....... 1,560 9,905 22,891 57,338 117,309 83,580 99,476 Selling, general and administrative expenses.............. 872 3,661 10,646 23,994 39,110 27,649 34,583 Nonrecurring charges (2)................... -- -- -- -- 4,500 -- 2,000 Income (loss) from op- erations.............. 410 508 3,851 (3,089) (5,421) (1,830) 3,249 Income (loss) from operations excluding nonrecurring charges.. 410 508 3,851 (3,089) (921) (1,830) 5,249 Net income (loss)...... 227 284 2,127 (2,272) (4,685) (1,490) 1,342 Pro forma net income (loss) per common share (3)...... $ .04 $ .04 $ .33 $ (.35) $ (.72) $ (.23) $ .21 Pro forma weighted average common shares outstanding (3)....... 6,389 6,389 6,389 6,438 6,480 6,470 6,489 OPERATING DATA (AT PE- RIOD END): Call centers........... 1 5 6 10 11 11 9 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ----------------------- ACTUAL AS ADJUSTED (4) ------- --------------- <S> <C> <C> BALANCE SHEET DATA (1): Cash and cash equivalents.............................. $11,102 $ Working capital........................................ 22,388 Total assets........................................... 86,982 Long-term obligations, net of current portion.......... 3,615 Total stockholders' equity............................. 52,976 </TABLE> - -------- (1) Gives effect to the Reorganization. The historical consolidated financial data may not be indicative of the Company's future performance and do not necessarily reflect what the financial position and results of operations of the Company would have been had the Company operated as a separate, stand-alone entity during the periods covered. (2) During the fiscal year ended December 31, 1996, the Company recorded a pre- tax charge of $4.5 million associated with the consolidation of certain European facilities, recruitment of certain members of management and establishment of new compensation and benefit plans. During the nine months ended September 30, 1997, the Company recorded an additional charge of $2.0 million associated with the consolidation of certain European locations primarily for employee termination benefits. See Note 5 of Notes to Consolidated Financial Statements. (3) Gives effect to (i) the automatic conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock, (ii) the reclassification of all shares of Class A Common Stock and Class A-1 Common Stock as Common Stock and (iii) a one-for-12.35 reverse stock split of the Company's Common Stock, in each case prior to the closing of this offering. (4) Adjusted to give effect to the receipt and application by the Company of the estimated net proceeds to the Company from the sale of shares in this offering based upon an assumed initial public offering price of $ per share. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034937_auto_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034937_auto_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..453ee35a9ba534c3e765c5efabee3bc4c8374f5c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034937_auto_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Capitalized Terms at page 98 for the location herein of certain capitalized terms. OVERVIEW................... Certain motor vehicle dealers ("Dealers") in the World Omni Financial Corp. ("World Omni") network of dealers have assigned, and will assign, closed-end retail automobile and light duty truck leases to World Omni LT, an Alabama trust (the "Origination Trust"). The Origination Trust was created in 1993 to avoid the administrative difficulty and expense associated with retitling leased vehicles in the securitization of automobile and light duty truck leases. The Origination Trust has issued to Auto Lease Finance L.P. ("ALFI L.P.") an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated assets of the Origination Trust. ALFI L.P. will instruct the trustee of the Origination Trust to allocate a separate portfolio of leases and leased vehicles within the Origination Trust and create a special unit of beneficial interest (the "SUBI") which will represent the entire beneficial interest in such portfolio. Upon its creation, such portfolio will no longer be a part of the Origination Trust Assets represented by the UTI. ALFI L.P. will sell its interest in the SUBI to World Omni Lease Securitization L.P. (the "Transferor") and the Transferor will in turn contribute a 99.8% interest in the SUBI to the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"). In return, the Trust will issue certain securities, including the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes being offered hereby. The undivided equity interest in the Trust will be permanently retained by the Transferor. ALFI L.P. has caused and from time to time in the future may cause additional special units of beneficial interest similar to the SUBI ("Other SUBIs") to be created out of the UTI and sold to the Transferor or one or more other entities. The Trust and the Noteholders will have no interest in the UTI, any Other SUBI or any assets of the Origination Trust evidenced by the UTI or any Other SUBI. THE TRUST.................. The Trust will be formed pursuant to a securitization trust agreement dated as of , 1997 (the "Agreement"), between the Transferor, [ ] ("[ ]"), as owner trustee (in such capacity, the "Owner Trustee") and [ ], as indenture trustee (in such capacity, the "Indenture Trustee"). The property of the Trust will consist primarily of an undivided 99.8% interest (the "SUBI Interest") in the SUBI, which will evidence a beneficial interest in certain specified assets of the Origination Trust (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy), and monies on deposit in the Reserve Fund, the Residual Value Surplus Account and in certain other accounts established as described herein. The Origination Trust was formed by ALFI L.P., as grantor and initial beneficiary, and VT Inc., as trustee (the "Origination Trustee"). The sole general partner of ALFI L.P. is Auto Lease Finance, Inc., a Delaware corporation ("ALFI") which is a wholly owned, special purpose subsidiary of World Omni. ALFI may not transfer its general WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST WORLD OMNI LEASE SECURITIZATION L.P. AUTO LEASE FINANCE L.P. WORLD OMNI LT CROSS REFERENCE SHEET FURNISHED PURSUANT TO RULE 501(B) OF REGULATION S-K <TABLE> <CAPTION> ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS ---------------------------- --------------------------------- <C> <S> <C> 1. Forepart of Registration Statement and Outside Cover Page of Prospectus.................................................. Forepart of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges............................................... Summary; Risk Factors 4. Use of Proceeds............................................. Use of Proceeds 5. Determination of Offering Price............................. * 6. Dilution.................................................... * 7. Selling Security Holders.................................... * 8. Plan of Distribution........................................ Underwriting 9. Description of Securities to be Registered.................. Summary; The Trust and the SUBI; The Contracts; Maturity, Prepayment and Yield Considerations; Description of the Notes; Security for the Notes 10. Interests of Named Experts and Counsel...................... * 11. Information With Respect to the Registrant.................. The Trust and the SUBI; The Origination Trust; The Transferor 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................................. * </TABLE> - --------------- * Answer negative or item inapplicable. (Cover continued from previous page) The SUBI initially will evidence a beneficial interest in specified Origination Trust Assets, including certain lease contracts, the automobiles and light duty trucks relating to such lease contracts, certain monies due under or payable in respect of such lease contracts and leased vehicles on or after , 1997, payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other Origination Trust Assets, as more fully described under "The Trust and the SUBI -- The SUBI" (collectively, the "SUBI Assets"). From time to time until principal is first distributed to the Noteholders, as described below, principal collections on or in respect of the SUBI Assets will be reinvested in additional lease contracts assigned to the Origination Trust by dealers in the World Omni network of dealers, together with the automobiles and light duty trucks relating thereto, which at the time of reinvestment will become SUBI Assets. The SUBI will not evidence a direct interest in the SUBI Assets, nor will it represent a beneficial interest in all of the Origination Trust Assets. Payments made on or in respect of the Origination Trust Assets not represented by the SUBI will not be available to make payments on the Notes. For further information regarding the Trust, the SUBI and the Origination Trust, see "The Trust and the SUBI" and "The Origination Trust". The Notes will consist of four classes of senior notes (respectively, the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", and collectively, the "Notes") and one class of subordinated Notes (the "Class B Notes"). The Class A Notes will be the only Notes offered hereby. The initial principal amount of the Class B Notes will be $[ ], and the Class B Notes will be subordinated to the Class A Notes to the extent described herein. The Transferor will own the undivided equity interest in the Trust (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described herein. For further information regarding the Notes, see "Description of the Notes". In general, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made on the Class A-4 Notes until the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been paid in full. Interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes will accrue at the respective fixed per annum interest rates specified herein and will be distributed to holders of the Class A Notes on the twenty-fifth day of each month (or, if such day is not a Business Day, on the next succeeding Business Day), beginning , 1997 (each, a "Distribution Date"). Principal will be distributed to holders of the Notes to the extent described herein on each Distribution Date beginning in 1998, or, in certain limited circumstances, earlier, as more fully described herein. The Final Scheduled Distribution Date will occur in 200 . There currently is no secondary market for the Class A Notes and there is no assurance that one will develop. The Underwriters expect, but will not be obligated, to make a market in each Class of Class A Notes. There is no assurance that any such market will develop, or if one does develop, that it will continue. As more fully described under "Ratings of the Class A Notes", it is a condition of issuance that each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services rates each Class of Class A Notes in its highest rating category. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF ANY CLASS OF NOTES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". (Cover continued on next page) partnership interest in ALFI L.P. so long as any financings involving interests in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of ALFI L.P. is World Omni. VT Inc. is an Alabama corporation and a wholly owned, special purpose subsidiary of U.S. Bank National Association ("U.S. Bank") that was organized solely for the purpose of acting as Origination Trustee. VT Inc. is not affiliated with World Omni or any affiliate thereof. For further information regarding the Origination Trustee, see "The Origination Trust -- The Origination Trustee". The Origination Trust Assets consist of retail closed-end lease contracts assigned to the Origination Trust by Dealers, the automobiles and light duty trucks relating thereto and all proceeds thereof and payments made under certain insurance policies relating to such contracts, the related lessees or such leased vehicles, including the Residual Value Insurance Policy. The SUBI initially will evidence a beneficial interest in a specified portion of the Origination Trust Assets, including certain lease contracts (the "Initial Contracts") originated by Dealers located throughout the United States, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles"), certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after , 1997 (the "Initial Cutoff Date"), payments made under certain insurance policies (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) relating to the Initial Contracts, the related lessees and the Initial Leased Vehicles and certain related assets and rights (collectively, the "SUBI Assets"). For further information regarding the SUBI Assets, see "The Trust and the SUBI -- The SUBI". Prior to the time when principal is first distributed to Noteholders as described herein, payments made on or in respect of the SUBI Assets allocable to principal will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") originated and assigned to the Origination Trust by Dealers located throughout the United States and the automobiles and light duty trucks relating thereto (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles, together with certain related Origination Trust Assets, will become SUBI Assets. For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles" and "The Trust and the SUBI -- The SUBI". The Dealers comprising the sources for Contracts and Leased Vehicles are members of World Omni's network of dealers. These Dealers offer automobiles and light duty trucks for lease pursuant to World Omni-approved terms and documentation. For further information regarding World Omni's lease business, see "World Omni". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Origination Trust Assets other than the INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1997 PROSPECTUS $[ ] WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST $[ ] [ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-1 $[ ] [ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-2 $[ ] [ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-3 $[ ] [ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-4 WORLD OMNI LEASE SECURITIZATION L.P. (TRANSFEROR) WORLD OMNI FINANCIAL CORP. (SERVICER) The Automobile Lease Asset Backed Notes (the "Class A Notes") will be issued by the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"), a [Delaware business] trust formed pursuant to a Securitization Trust Agreement between World Omni Lease Securitization L.P. (the "Transferor"), [ ], as owner trustee (the "Owner Trustee") and [ ], as indenture trustee (the "Indenture Trustee"). The Notes will be issued pursuant to an Indenture between the Trust and the Indenture Trustee. The Class A Notes will be secured by the property of the Trust, which will consist of an undivided 99.8% interest in a Special Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence a beneficial interest in certain specified assets of World Omni LT, an Alabama trust (the "Origination Trust"), monies on deposit in certain accounts and other assets, as described more fully under "The Trust and the SUBI". The assets of the Origination Trust (the "Origination Trust Assets") will consist of retail closed-end lease contracts assigned to the Origination Trust by dealers in the World Omni Financial Corp. ("World Omni") network of dealers, the automobiles and light duty trucks relating thereto and payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other assets, as more fully described under "The Origination Trust -- Property of the Origination Trust". World Omni will service the lease contracts included in the Origination Trust Assets. (Cover continued on next page) --------------------- FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A NOTES, SEE "RISK FACTORS" ON PAGE 18 HEREIN. --------------------- THE CLASS A NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF WORLD OMNI LEASE SECURITIZATION L.P., AUTO LEASE FINANCE L.P., WORLD OMNI LT, WORLD OMNI FINANCIAL CORP. OR ANY OF THEIR RESPECTIVE AFFILIATES. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> ======================================================================================================================== UNDERWRITING DISCOUNTS AND PROCEEDS TO THE PRICE TO PUBLIC(1) COMMISSIONS(2) TRANSFEROR(1)(3) - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Per Class A-1 Note.......................................... % % % - ------------------------------------------------------------------------------------------------------------------------ Per Class A-2 Note.......................................... % % % - ------------------------------------------------------------------------------------------------------------------------ Per Class A-3 Note.......................................... % % % - ------------------------------------------------------------------------------------------------------------------------ Per Class A-4 Note.......................................... % % % - ------------------------------------------------------------------------------------------------------------------------ Total....................................................... $ $ $ ======================================================================================================================== </TABLE> (1) Plus accrued interest, if any, calculated at the related Note Rate from and including the date of initial issuance. (2) The Transferor and World Omni have agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933. See "Underwriting". (3) Before deducting expenses payable by the Transferor estimated to be $[ ]. --------------------- The Class A Notes are offered by the Underwriters, subject to prior sale, when, as and if issued to and accepted by the Underwriters, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Class A Notes in book-entry form will be made through the facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System, on or about , 1997, against payment in immediately available funds. --------------------- [UNDERWRITERS] THE DATE OF THIS PROSPECTUS IS , 1997. (Cover continued from previous page) AVAILABLE INFORMATION The Transferor, as originator of the Trust, has filed with the Securities and Exchange Commission (the "Commission") on behalf of the Trust a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement"), of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Class A Notes being offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which is available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048. Copies of such information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission at http://www.sec.gov. The Servicer, on behalf of the Trust, will also file or cause to be filed with the Commission such periodic reports as are required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. SUBI Assets. Payments made on or in respect of Origination Trust Assets other than the SUBI Assets will not be available to make payments on the Notes. The 0.2% interest in the SUBI not transferred to the Owner Trustee will be permanently retained by the Transferor (the "Retained SUBI Interest"). Accordingly, the Transferor will be entitled to receive 0.2% of all payments made on or in respect of the SUBI Assets and will share in 0.2% of all losses and liabilities incurred by the SUBI Assets. Any payments made in respect of the Retained SUBI Interest will not be available to make payments on the Notes. For further information regarding the SUBI, see "Summary -- Security for the Notes -- The SUBI", "The Trust and the SUBI -- The SUBI" and "The Origination Trust". THE TRANSFEROR............. The Transferor is a Delaware limited partnership, the sole general partner of which is World Omni Lease Securitization, Inc., a Delaware corporation ("WOLSI"), which is a wholly owned, special purpose subsidiary of World Omni. WOLSI may not transfer its general partnership interest in the Transferor so long as any financings involving interests formerly or partially held by it in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of the Transferor is World Omni. WORLD OMNI................. World Omni is a Florida corporation that is a wholly owned subsidiary of JM Family Enterprises, Inc., a Delaware corporation ("JMFE"). JMFE also wholly owns Southeast Toyota Distributors, Inc. ("SET"), which is the exclusive distributor of Toyota automobiles and light duty trucks in Florida, Alabama, Georgia, North Carolina and South Carolina (the "Five State Area"). As more fully described under "World Omni", World Omni provides consumer lease and installment contract financing to retail customers of, and floorplan and other dealer financing to, Dealers that are located throughout the United States. World Omni wholly owns both ALFI and WOLSI. Pursuant to an amended and restated servicing agreement dated as of July 1, 1994, as amended, to be supplemented by a servicing supplement dated as of , 1997 (collectively, the "Servicing Agreement"), each between World Omni and the Origination Trustee, World Omni will act as the initial servicer of the Origination Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). The Owner Trustee and the Indenture Trustee will be third party beneficiaries of the Servicing Agreement, as described under "Additional Document Provisions -- The Servicing Agreement -- Indenture Trustee and Owner Trustee as Third-Party Beneficiaries". SECURITIES OFFERED......... The Automobile Lease Asset Backed Notes (the "Notes") will consist of four classes of senior Notes (the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", respectively, and collectively, the "Class A Notes") and one class of subordinated notes (the "Class B Notes"). Generally, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made [OVERVIEW OF TRANSACTION CHART] on the Class A-4 Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been paid in full, in each case as more fully described under "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Amortization Period". The Class B Notes will be subordinated to the Class A Notes so that (i) interest payments generally will not be made in respect of the Class B Notes until interest in respect of the Class A Notes has been paid, (ii) principal payments generally will not be made in respect of the Class B Notes until the Class A-1, Class A-2 and Class A-3 Notes have been paid in full and (iii) if other sources available to make payments of principal and interest on the Class A-4 Notes are insufficient, amounts that otherwise would be paid in respect of the Class B Notes generally will be available for that purpose, as more fully described under "Description of the Notes -- Distributions on the Notes". The undivided equity interest in the Trust will be permanently retained by the Transferor (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". Only the Class A Notes are being offered hereby. The Class A Notes will be issued in book-entry form in minimum denominations of $1,000 and integral multiples thereof, as set forth under "Description of the Notes -- Book-Entry Registration" and "-- Definitive Notes". The Class B Notes will be sold in one or more private placements. Each Note will represent the right to receive monthly payments of interest at the related Note Rate and, to the extent described herein, monthly payments of principal during the Amortization Period. These payments will be funded from a portion of the payments received by the Trust on or in respect of the SUBI Interest (i.e., from a portion of 99.8% of the payments received on or in respect of the Contracts and the Leased Vehicles) and, in certain circumstances, from Excess Collections, monies on deposit in the Residual Value Surplus Account, the Servicing Fee (so long as World Omni is the Servicer), Transferor Amounts that otherwise would be distributable in respect of the Transferor Interest, Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy and monies on deposit in the Reserve Fund. On the date of initial issuance of the Notes (the "Closing Date"), the Trust will issue $[ ] aggregate principal amount of Class A-1 Notes (the "Initial Class A-1 Note Balance"), $[ ] aggregate principal amount of Class A-2 Notes (the "Initial Class A-2 Note Balance"), $[ ] aggregate principal amount of Class A-3 Notes (the "Initial Class A-3 Note Balance"), $[ ] aggregate principal amount of Class A-4 Notes (the "Initial Class A-4 Note Balance" and, together with the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance and the Initial Class A-3 Note Balance, the "Initial Class A Note Balance") and $[ ] aggregate principal amount of Class B Notes (the "Initial Class B Note Balance" and, together with the Initial Class A Note Balance, the "Initial Note Balance"). The aggregate principal amounts of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes and the Class B Notes will, except in certain circumstances described under "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles", remain fixed at their respective Initial Class Note Balances during the Revolving Period and, to the extent described herein, will decline thereafter during the Amortization Period as principal is paid on the Notes. The "Class Note Balance" of any Class of Notes on any day will equal the Initial Class Note Balance, reduced by the sum of all distributions made in respect of principal (including any reimbursements of Loss Amounts allocable to such Class and Note Principal Loss Amounts in respect of such Class) on or prior to such day on the related Class of Notes and those Note Principal Loss Amounts in respect of such Class, if any, which have not been reimbursed as described herein. The "Class A Note Balance" will mean the sum of the Class A-1, Class A-2, Class A-3 and Class A-4 Note Balances. The "Note Balance" with respect to the Notes will mean the sum of the Class A Note Balance and the Class B Note Balance. The amount of the Transferor Interest will initially equal $[ ] (which amount will equal [ ]% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date) and on any day will equal the difference between 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Notes -- The SUBI" and "Summary -- The Contracts", and the Note Balance. As more fully described under "Description of the Notes -- General", the Aggregate Net Investment Value can change daily. REGISTRATION OF THE NOTES.................... Each Class of Class A Notes initially will be represented by one or more notes registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). A person acquiring an interest in the Class A Notes (each, a "Note Owner") may elect to hold his or her interest through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. No Note Owner will be able to receive a definitive Note representing such person's interest, except in the limited circumstances described under "Description of the Notes -- Definitive Notes". Unless and until definitive Notes are issued, Note Owners will not be recognized as holders of record of Class A Notes and will be permitted to exercise the rights of such holders only indirectly through DTC. For further information regarding book-entry registration of the Class A Notes, see "Description of the Notes -- General" and "-- Book-Entry Registration". INTEREST................... On the twenty-fifth day of each month or, if such day is not a Business Day, on the next succeeding Business Day, beginning , 1997 (each, a "Distribution Date"), distributions in respect of the Class A Notes will be made to the holders of record of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes (respectively, the "Class A-1 Noteholders", the "Class A-2 Noteholders", the "Class A-3 Noteholders" and the "Class A-4 Noteholders", and collectively, the "Class A Noteholders") as of the day immediately preceding such Distribution Date or, if Definitive Notes are issued, the last day of the immediately preceding calendar month (each such date, a "Record Date"). On each Distribution Date, the Indenture Trustee will distribute interest for the related Interest Period to the Class A Noteholders, based on the related Class Note Balance as of the immediately preceding Distribution Date (after giving effect to reductions in such Class Note Balance as of such immediately preceding Distribution Date) or, in the case of the first Distribution Date, on the Initial Class Note Balance, in the case of (i) the Class A-1 Notes, at an annual percentage rate equal to [ ]% (the "Class A-1 Note Rate"), (ii) the Class A-2 Notes, at an annual percentage rate equal to [ ]% (the "Class A-2 Note Rate"), (iii) the Class A-3 Notes, at an annual percentage rate equal to [ ]% (the "Class A-3 Note Rate") and (iv) the Class A-4 Notes, at an annual percentage rate equal to [ ]% (the "Class A-4 Note Rate"). Interest in respect of the Class A Notes will accrue for the period from and including the Distribution Date in each month to but excluding the Distribution Date in the immediately succeeding month (or, in the case of the first Distribution Date, from and including , 1997) (each, an "Interest Period"). All such payments will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The final scheduled Distribution Date for the Notes (the "Final Scheduled Distribution Date") will be the 200 Distribution Date. A "Business Day" will be a day other than a Saturday or Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, Deerfield Beach, Florida, or Mobile, Alabama, are authorized or obligated by law, executive order or government decree to be closed. As described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", distributions in respect of interest on the Class B Notes will be subordinated to distributions in respect of interest on the Class A Notes under certain circumstances. THE REVOLVING PERIOD; SUBSEQUENT CONTRACTS AND SUBSEQUENT LEASED VEHICLES................. No principal will be payable on the Notes until the 1998 Distribution Date or, upon the occurrence of an Early Amortization Event, until the Distribution Date in the month immediately succeeding the month in which such Early Amortization Event occurs. From and including the Closing Date and ending on the day immediately preceding the commencement of the Amortization Period (i.e., the earlier of , 1998 or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and reimbursements of Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Class A-1, Class A-2, Class A-3, Class A-4 and Class B Note Balances at constant levels during the Revolving Period, except to the extent there are unreimbursed Note Principal Loss Amounts in respect of any such Class, in which case the Note Balance of the related Class of Notes will decrease until such time, if any, as such Note Principal Loss Amounts are reimbursed as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". The events that might lead to the termination of the Revolving Period prior to its scheduled termination date are described under "Description of the Notes -- Early Amortization Events". Prior to the twenty-fifth calendar day (i) in each month (beginning 1997) during the Revolving Period and (ii) if no Early Amortization Event has occurred, in the month in which the Amortization Date occurs, on one or more days selected by the Servicer (each, a "Transfer Date"), the Servicer will direct the Origination Trustee to reinvest Principal Collections and certain Loss Amounts that otherwise would be reimbursed to the Noteholders in certain lease contracts and the related leased vehicles of the Origination Trust that are not evidenced by the SUBI or any Other SUBI. Upon such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the twenty-fifth calendar day of any month (beginning 1997) during the Revolving Period the amount of Principal Collections and such otherwise reimbursable Loss Amounts as of the last day of the immediately preceding month that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles exceeds $1,000,000, an Early Amortization Event will occur, the Revolving Period will terminate as of such day and all unreinvested Principal Collections and all such Loss Amounts will be distributed as principal to Noteholders on the immediately succeeding Distribution Date. For further details concerning the application of Principal Collections and Loss Amounts, see "Summary -- Amortization Period; Principal Payments", "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts", "The Trust and the SUBI -- The SUBI" and "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Revolving Period". The Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Origination Trust's portfolio of lease contracts and related vehicles that are not allocated to (or reserved for allocation to) any Other SUBI, based on the same criteria as are applicable to the Initial Contracts and the other criteria described under "The Contracts -- Representations, Warranties and Covenants". The reinvestment of Principal Collections (and reimbursement of Loss Amounts) will be made in the available lease contracts with the earliest origination dates, except that certain lease contracts booked from 1997 through 1997 shall be reserved for allocation to the SUBI and will be used first, and if allocations are being made in respect of any one or more previous Other SUBIs at the same time out of the Origination Trust's general pool of unreserved lease contracts, reinvestment will be made first in respect of such previous Other SUBI(s). For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract (including any payment in respect of the related Leased Vehicle, but other than any payment as to which a Loss Amount has been realized and allocated during any prior Collection Period), discounted to the extent required below. A "Collection Period" will be each calendar month (or, with respect to the first Collection Period, the month[S]of [AND 1997]). For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than [ ]% (each, a "Discounted Contract") will be discounted at a rate of [ ]%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Noteholders. "Collections" with respect to any Collection Period will include all net collections collected or received in respect of the Contracts and Leased Vehicles during such Collection Period other than Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy, such as Monthly Payments (including amounts in the SUBI Collection Account that previously constituted Payments Ahead but which represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds (including amounts withdrawn from the Residual Value Surplus Account to offset certain Residual Value Losses in respect of Leased Vehicles relating to Matured Contracts and certain Matured Leased Vehicle Expenses, but not including any Residual Value Surplus deposited into the Residual Value Surplus Account in respect of such Collection Period), Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds and any Undistributed Transferor Excess Collections in respect of the immediately preceding Collection Period, less an amount equal to the sum of (i) Payments Ahead with respect to one or more future Collection Periods, (ii) amounts paid to the Servicer in respect of outstanding Advances and (iii) Additional Loss Amounts in respect of such Collection Period. In addition, if such Collection Period occurs during the Revolving Period, amounts otherwise payable to the Noteholders on the related Distribution Date as reimbursement of Loss Amounts allocable to the Investor Interest (as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest") will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. "Interest Collections" with respect to any Collection Period generally will equal the amount by which Collections exceed Principal Collections. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses. AMORTIZATION PERIOD; PRINCIPAL PAYMENTS....... The "Amortization Period" will commence on the earlier of 1998 (the "Amortization Date") or the day on which an Early Amortization Event occurs, and will end when each Class of Notes has been paid in full and all Note Principal Loss Amounts and Class B Note Principal Carryover Shortfalls, if any, have been repaid in full, together with accrued interest thereon, or when the Trust otherwise terminates. During the Amortization Period, Principal Collections and certain reimbursed Loss Amounts will no longer be reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. Instead, on each Distribution Date beginning with the Distribution Date in the month following the month in which the Amortization Period commences and ending on the Distribution Date on which the Class A-3 Notes have been paid in full, all Principal Collections for the related Collection Period that are allocable to the Notes will be distributed as principal payments first to the Class A-1 Noteholders until the Class A-1 Notes have been paid in full, second, to the Class A-2 Noteholders until the Class A-2 Notes have been paid in full, third, to the Class A-3 Noteholders until the Class A-3 Notes have been paid in full and thereafter the Class A Percentage and the Class B Percentage of any remaining such Principal Collections will be distributed as principal payments to the Class A-4 Noteholders and to the holders of record of the Class B Notes (the "Class B Noteholders" and, together with the Class A Noteholders, the "Noteholders"), respectively. On each Distribution Date after the Class A-3 Notes have been paid in full, the Class A Percentage and the Class B Percentage of Principal Collections for the related Collection Period allocable to the Investor Interest will be distributed to the Class A-4 Noteholders and the Class B Noteholders, respectively, until the related Class of Notes has been paid in full. Certain Loss Amounts incurred during the Amortization Period will be reimbursed to the Noteholders as described below. The "Class A Percentage" will mean the Class A Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time, and the "Class B Percentage" will mean the Class B Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time. The Class A Percentage and the Class B Percentage will not change after they are set. In no event will the principal distributed in respect of any Class of Notes exceed its Note Balance. In addition, under certain circumstances, (i) Class A Noteholders will be entitled to receive reimbursement of an allocable percentage of Loss Amounts as a distribution of principal from sources other than Principal Collections and (ii) principal allocable to the Class B Notes may instead be distributed in respect of Loss Amounts allocable to the Class A-4 Notes, Class A-4 Note Principal Loss Amounts and accrued and unpaid interest thereon, as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", "-- Application and Distributions of Principal" and "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts". See "Description of the Notes -- Early Amortization Events" for a description of the events that might lead to the commencement of the Amortization Period prior to the Amortization Date. During the Amortization Period, the amount of Principal Collections allocable to the Notes in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period allocable to the SUBI Interest multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Note Balance and the denominator of which is 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Notes -- The SUBI" and "Summary -- The Contracts", as of the last day of the last Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. See "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage" for a description of calculation of the Investor Percentage relating to Interest Collections and Loss Amounts. Allocations based upon the Principal Allocation for Principal Collections during the Amortization Period may result in distributions of principal with respect to a Collection Period during the Amortization Period to Noteholders in amounts that are greater relative to the declining balance of the Note Balance than would be the case if no fixed Investor Percentage were used to determine the percentage of Principal Collections distributed in respect of the Notes. Additionally, to the extent that on any Distribution Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period allocable to the SUBI Interest remains after required distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Reserve Fund Cash Requirement. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of [ ]%, (ii) 99.8% and (iii) the Aggregate Net Investment Value as of the last day of such Collection Period (the "Accelerated Principal Distribution Amount"), will be distributed as an additional payment of principal to the Noteholders in the same manner and priority as principal is distributed in respect of the Notes as described in the preceding paragraphs. See "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" and "Description of the Notes -- The Accounts -- The SUBI Collection Account -- Withdrawals from the SUBI Collection Account" for further information regarding the foregoing matters. OPTIONAL REDEMPTION........ The Notes will be subject to redemption if the Transferor exercises its option to purchase all of the assets of the Trust, which option may be exercised on any Distribution Date if, either before or after giving effect to any payment of principal required to be made on such Distribution Date, the Note Balance has been reduced to an amount less than or equal to 10% of the Initial Note Balance, at a purchase price determined as described under "Description of the Notes -- Termination of the Trust; Redemption of the Notes". SECURITY FOR THE NOTES..... The security for the Notes will consist primarily of the following: A. THE SUBI................ The SUBI will evidence a beneficial interest in the SUBI Assets. The Origination Trust was created pursuant to a trust agreement (the "Origination Trust Agreement"), among ALFI L.P., as grantor and initial beneficiary, the Origination Trustee and U.S. Bank, as trust agent (in such capacity, the "Trust Agent"). The SUBI Interest will be evidenced by a Certificate (the "SUBI Certificate") evidencing a 99.8% beneficial interest in the SUBI Assets that will be issued by the Origination Trust pursuant to a supplement to the Origination Trust Agreement dated as of , 1997 (the "SUBI Supplement" and, together with the Origination Trust Agreement, the "SUBI Trust Agreement"). The Indenture Trustee and the Owner Trustee will be third party beneficiaries of the SUBI Trust Agreement. The Transferor will permanently hold the Retained SUBI Interest, representing the 0.2% beneficial interest in the SUBI Assets not evidenced by the SUBI Certificate. The Origination Trust Assets evidenced by the SUBI will primarily include the Contracts and the Leased Vehicles. The SUBI will not evidence an interest in any Origination Trust Assets other than the SUBI Assets, and payments made on or in respect of all other Origination Trust Assets will not be available to make payments on the Notes. For more information regarding the SUBI, see "The Trust and the SUBI" and "The Origination Trust". B. THE RESIDUAL VALUE INSURANCE POLICY........ Automobile and light duty truck leasing companies such as World Omni sometimes obtain residual value insurance to minimize losses in respect of the residual values of leased vehicles. Although many forms of such insurance are available, in general, claims are made if the proceeds of the sale of a leased vehicle are less than its residual value established at the time of origination of the related closed-end lease contract. On the Closing Date, [ ] (the "RV Insurer") will issue an insurance policy (the "Residual Value Insurance Policy") to the Transferor (with the Origination Trustee, the Owner Trustee, the Indenture Trustee, the Servicer and ALFI L.P. also named as insureds), which will provide coverage for the Insured Residual Value Loss Amount for any Collection Period. The aggregate maximum amount payable under the Residual Value Insurance Policy with respect to any Leased Vehicle will be the lesser of $[ ] and its insured residual value, calculated as described under "Security for the Notes -- The Residual Value Insurance Policy". Additionally, the aggregate maximum amount payable under the Residual Value Insurance Policy will not exceed the aggregate insured residual values of all Leased Vehicles. Prior to each Distribution Date, the Servicer will make a claim for any Insured Residual Value Loss Amount under the Residual Value Insurance Policy. The proceeds of any such claim will be used to make the payments described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". For a fuller description of these mechanics, see "Security for the Notes -- The Residual Value Insurance Policy". The "Insured Residual Value Loss Amount" for any Collection Period will be the lesser of (i) the Investor Percentage of the Residual Value Loss Amount allocable to the SUBI Interest, and (ii) any shortfall in the amount required to make all payments (other than deposits into the Reserve Fund) required to be made on the related Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", after application of the Investor Percentage of Interest Collections allocable to the SUBI Interest and Transferor Amounts otherwise payable in respect of the Transferor Interest, as described below under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". C. THE RESERVE FUND........ The Trust will have the benefit of the Reserve Fund maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor (as holder of the Transferor Interest). The Reserve Fund is designed to provide additional funds for the benefit of the Noteholders in the event that on any Distribution Date Interest Collections allocable to the Investor Interest for the related Collection Period, plus Transferor Amounts otherwise distributable in respect of the Transferor Interest, plus any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy for the related Collection Period, are insufficient to pay, among other things, the sum of (i) accrued interest and any overdue interest (with interest thereon) at the applicable Note Rate on the Notes on such Distribution Date, (ii) any Loss Amount for such Collection Period allocable to the Investor Interest, calculated as described under "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage", and (iii) any unreimbursed Note Principal Loss Amounts, together with interest thereon at the applicable Note Rate. Monies on deposit in the Reserve Fund also will be available to Noteholders should Collections ultimately be insufficient to pay in full any Class of Notes. For further information regarding the Reserve Fund, see "Security for the Notes -- The Reserve Fund". The Reserve Fund will be created with an initial deposit by the Transferor of $[ ] (the "Initial Deposit") (which amount will equal [ ]% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). On each Distribution Date, the funds in the Reserve Fund will be supplemented by (i) certain Interest Collections, as more fully described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", (ii) income realized on the investment of amounts on deposit in the Reserve Fund and (iii) in certain circumstances, the deposit of monies in respect of the related Collection Period remaining in the Distribution Account after making all payments required to be made therefrom on such Distribution Date prior to such deposit, including monies that would otherwise be distributed or applied in respect of the Transferor Interest, until the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement then in effect, calculated as described under "Security for the Notes -- The Reserve Fund -- The Reserve Fund Cash Requirement". The Transferor may be required under certain circumstances to deposit funds into the Reserve Fund in an amount equal to certain Reserve Fund supplemental requirements. For a description of the circumstances under which the Transferor will be required to make such deposits, see "Security for the Notes -- The Reserve Fund". For further information regarding deposits into the Reserve Fund, see "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". After giving effect to all payments from the Reserve Fund on a Distribution Date, monies on deposit therein that are in excess of the Reserve Fund Cash Requirement generally will be paid to the Transferor, free and clear of any lien of the Trust. D. SUBORDINATION OF THE TRANSFEROR INTEREST..... The Transferor Interest will initially equal $[ ], and will represent the entire equity interest in the Trust. However, to provide additional credit enhancement for the Notes, on each Distribution Date, no payments will be made to the Transferor in respect of the Transferor Interest until all payments required to be made on such Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" have been made and the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement. For a description of certain payments made to the Transferor, see "Description of the Notes -- Certain Payments to the Transferor". THE CONTRACTS.............. The Contracts will consist of a pool of retail closed-end lease contracts originated by Dealers located throughout the United States, each of which will have an original term of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price), plus an implicit rate in each Lease calculated as an annual percentage rate (the "Lease Rate") on a constant yield basis. The Contracts will provide for equal monthly payments (the "Monthly Payments") such that at the end of the related Contract term such capitalized cost will have been amortized to an amount equal to the residual value of the related Leased Vehicle established at the time of origination of such Contract (the "Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of [ ] lease contracts. As of the Initial Cutoff Date, the Lease Rate of the Initial Contracts ranged from [ ]% to [ ]%, with a weighted average Lease Rate of [ ]%. The aggregate of the original principal balances of the Initial Contracts as of their respective dates of origination was $[ ]. As of the Initial Cutoff Date, the aggregate Outstanding Principal Balance of the Initial Contracts was $[ ], the aggregate Residual Value of the Initial Leased Vehicles was $[ ] and the Initial Contracts had a weighted average original term of [ ] months and a weighted average remaining term to scheduled maturity of [ ] months. See "The Contracts" for further information regarding the Initial Contracts. The Initial Contracts were, and the Subsequent Contracts will be, identified by the Servicer from the Origination Trust's portfolio of lease contracts originated by Dealers located throughout the United States that are not evidenced by (or reserved for allocation to) any Other SUBI, based upon the criteria specified in the SUBI Trust Agreement and described under "The Contracts -- Characteristics of the Contracts" and "-- Representations, Warranties and Covenants". The "Aggregate Net Investment Value" as of any day will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than two full Collection Periods (the "Matured Leased Vehicle Inventory") and (iii) during the Revolving Period, the amount of Principal Collections and Loss Amounts that otherwise would be reimbursed to the Noteholders, if any, that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The "Discounted Principal Balance" of (i) a Discounted Contract will equal its Outstanding Principal Balance, discounted by [ ]%, and (ii) all Contracts other than Discounted Contracts will equal their Outstanding Principal Balance. As of the Initial Cutoff Date, the aggregate Discounted Principal Balance of the Initial Contracts and the Aggregate Net Investment Value was $[ ]. THE LEASED VEHICLES........ The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will be either new vehicles, dealer demonstrator vehicles or manufacturers' program vehicles, as described under "The Contracts -- General". Manufacturers' program vehicles are vehicles which have been sold directly by manufacturers to rental car companies and returned to the manufacturer for resale. The certificates of title to the Initial Leased Vehicles have been, and the certificates of title to the Subsequent Leased Vehicles will be, registered at all times in the name of the Origination Trustee (in its capacity as trustee of the Origination Trust). Such certificates of title will not reflect the indirect interest of the Owner Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI or any security interest of the Indenture Trustee. Therefore, the Indenture Trustee will not have a perfected lien in the Leased Vehicles, although it will be deemed to have a perfected security interest in the SUBI Certificate and certain other assets. For further information regarding the titling of the Leased Vehicles and the interest of the Indenture Trustee therein, see "The Origination Trust -- Contract Origination; Titling of Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles -- Back-up Security Interests". THE ACCOUNTS............... The Indenture Trustee will maintain the SUBI Collection Account and the Residual Value Surplus Account for the benefit of the Noteholders. Within two Business Days of receipt, payments made on or in respect of the Contracts or the Leased Vehicles generally will be deposited by the Servicer into the SUBI Collection Account. Such payments will include, but will not be limited to, Monthly Payments made by lessees, Monthly Payments determined by the Servicer to be due in one or more future Collection Periods (each, a "Payment Ahead"), Prepayments, proceeds from the sale or other disposition of Leased Vehicles relating to Matured Contracts (including payments for excess mileage and excess wear and use, but excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) ("Matured Leased Vehicle Proceeds"), proceeds received in connection with the sale or other disposition of Leased Vehicles that have been repossessed ("Repossessed Vehicle Proceeds") and other amounts received in connection with the realization of the amounts due under any Contract (excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), either from amounts on deposit in the SUBI Collection Account or, to the extent described herein, the Residual Value Surplus Account, or as a deduction from Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds or other Liquidation Proceeds, as appropriate, deposited into the SUBI Collection Account. For further details regarding these deposits and reimbursements, see "Description of the Notes -- The Accounts -- The SUBI Collection Account" and "-- The Residual Value Surplus Account". On the Business Day immediately preceding each Distribution Date (each, a "Deposit Date"), the following amounts will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) Reallocation Payments by World Omni (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred and (iii) certain amounts in respect of the Residual Value of Leased Vehicles relating to Matured Contracts withdrawn from the Residual Value Surplus Account. Thereafter, 99.8% of Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, 99.8% of Principal Collections) on deposit in the SUBI Collection Account in respect of the related Collection Period will be allocable to the SUBI Interest and deposited into the Distribution Account maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor. Any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy will be deposited into the SUBI Collection Account (if it relates to the Revolving Period) or the Distribution Account (if it relates to the Amortization Period) within one Business Day of receipt by the Servicer. Any Required Amount will be withdrawn from the Reserve Fund and deposited into the Distribution Account on each Distribution Date. All payments to Noteholders will be made from the Distribution Account. The remaining 0.2% of Collections will be distributed on such Distribution Date to the Transferor in respect of the Retained SUBI Interest, which amounts in no event will be available to make payments on the Notes. Any funds remaining in the Distribution Account on a Distribution Date in respect of the related Collection Period following the payment of amounts required to be paid therefrom generally will be paid to the Transferor. For further information regarding these deposits and payments, see "Description of the Notes -- The Accounts -- The Distribution Account" and "-- The SUBI Collection Account". On each Deposit Date, if Matured Leased Vehicle Proceeds received during the related Collection Period with respect to Leased Vehicles relating to Matured Contracts that were sold or otherwise disposed of during such Collection Period, net of related Matured Leased Vehicle Expenses incurred during such Collection Period ("Net Matured Leased Vehicle Proceeds"), exceed the aggregate Residual Value of the related Leased Vehicles (the "Residual Value Surplus"), then such excess will be deposited into the Residual Value Surplus Account maintained with the Indenture Trustee for the benefit of the Noteholders. On each Deposit Date, funds on deposit in the Residual Value Surplus Account, if any, will be withdrawn and deposited into the SUBI Collection Account up to an amount equal to the sum of (a) the aggregate of the Residual Values of those Leased Vehicles that were a part of Matured Leased Vehicle Inventory but that had remained unsold and not otherwise disposed of for at least two full Collection Periods as of the last day of the most recent Collection Period, (b) the amount by which Net Matured Leased Vehicle Proceeds (after application of amounts withdrawn pursuant to the next sentence) for the related Collection Period are less than the aggregate of the Residual Values of all Leased Vehicles included in Matured Leased Vehicle Inventory that were sold or otherwise disposed of during such Collection Period and (c) any losses on Contracts terminated on or prior to their Maturity Dates during the related Collection Period by agreement between the Servicer and the lessee in connection with the payment of less than their respective Outstanding Principal Balances. Also on each Deposit Date, funds on deposit in the Residual Value Surplus Account will be withdrawn and paid to the Servicer in reimbursement for any Matured Leased Vehicle Expenses incurred during such Collection Period, but only to the extent that, after such reimbursement (but exclusive of any other reimbursement from any other source), Net Matured Leased Vehicle Proceeds would be no more than the aggregate of the Residual Values of all Leased Vehicles sold or otherwise disposed of during such Collection Period. For further information regarding the Residual Value Surplus Account, see "Description of the Notes -- The Accounts -- The Residual Value Surplus Account". ADVANCES................... On each Deposit Date the Servicer will be obligated to make, by deposit into the SUBI Collection Account, an advance equal to the aggregate Monthly Payments due but not received during the related Collection Period with respect to Contracts that are 31 days or more past due as of the end of such Collection Period, and the Servicer may (but shall not be required to) make such an advance with respect to Contracts that are one or more days, but less than 31 days, past due as of the end of such Collection Period (each, an "Advance"). The Servicer will not be required to make any Advance to the extent that it determines that such Advance may not be ultimately recoverable by the Servicer from Net Liquidation Proceeds or otherwise. For further information regarding Advances, see "Additional Document Provisions -- The Servicing Agreement -- Advances". SERVICING COMPENSATION..... The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets allocable to the SUBI Interest (the "Servicing Fee"), payable on each Distribution Date, equal to one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Distribution Date, one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees and other administrative fees or similar charges under the Contracts. For further information regarding Servicer compensation, see "Additional Document Provisions -- The Servicing Agreement -- Servicing Compensation". TAX STATUS................. Brown & Wood LLP, special federal income tax counsel to the Transferor, is of the opinion that the Class A Notes will be characterized as indebtedness for federal income tax purposes, as described under "Material Income Tax Considerations -- Federal Taxation". Each Class A Noteholder, by its acceptance of a Class A Note, and each Note Owner, by its acquisition of an interest in the Class A Notes, will agree to treat the Class A Notes as indebtedness for federal, state and local income tax purposes. Prospective investors are advised to consult their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of the Class A Notes, and the tax consequences arising under the laws of any state or other taxing jurisdiction. For further information regarding material federal income tax considerations with respect to the Class A Notes, see "Material Income Tax Considerations -- Federal Taxation". ERISA CONSIDERATIONS....... As more fully described under "ERISA Considerations", an employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the provisions of Section 4975 of the Internal Revenue Code of 1986, as amended, contemplating the purchase of Class A Notes should consult its counsel before making a purchase, and the fiduciary of such plan and such legal advisors should consider the application of the ERISA prohibited transaction exemption described herein. RATINGS.................... It is a condition of issuance of the Class A Notes that each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") rates each Class of Class A Notes in its highest rating category. The ratings of the Class A Notes should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold the related Class A Notes, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The ratings of the Class A Notes address the likelihood of the payment of principal of and interest on the Class A Notes pursuant to their terms. For further information concerning the ratings assigned to the Class A Notes, including the limitations of such ratings, see "Ratings of the Class A Notes".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034941_vestcom_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034941_vestcom_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6772e89bd8ab9d68c0b39ed9e2153f175f99d17a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034941_vestcom_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Concurrently with the consummation of the offering made hereby (the "Offering"), Vestcom plans to acquire, in separate transactions (collectively, the "Acquisitions," and with the Offering, the "Consolidation"), in exchange for consideration including shares of its Common Stock, seven companies which provide computer output and document management services (collectively, the "Founding Companies"). Unless otherwise indicated by the context, references herein to "Vestcom" mean Vestcom International, Inc. and to the "Company" mean Vestcom and the Founding Companies. Vestcom currently has no business operations other than activities relating to the Acquisitions. Unless otherwise indicated, all references to the business of the Company refer to the businesses of the Founding Companies as they are currently being conducted on an independent basis. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and pro forma financial information, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all financial information, share and per share data in this Prospectus (i) give effect to the Acquisitions, (ii) assume no exercise of the Underwriters' over-allotment option, (iii) assume no exercise of stock options to purchase shares of the Company's Common Stock which have been or will be granted prior to or immediately after the Offering under the Company's stock option plan and (iv) assume that the initial public offering price is $12.00 per share, the mid-point of the range set forth on the cover of this Prospectus. In addition, all earnings per share and pro forma book value per share calculations contained in this Prospectus assume that none of the 903,971 shares of Common Stock which may be issued pursuant to certain earn-out provisions contained in the acquisition agreements pertaining to four Founding Companies will have been issued. See "Certain Transactions -- Organization of the Company -- Acquisitions" and "-- Canadian Acquisition." THE COMPANY Vestcom was incorporated in September 1996 to create an international provider of computer output and document management services. The Company plans to achieve this goal by acquiring companies that provide similar and complementary services in the highly fragmented computer output and document management services industry. Upon the consummation of the Offering, Vestcom will concurrently acquire seven computer output and document management services companies servicing various markets in the Northeast, Midwest and Southeast regions of the U.S. and in the Province of Quebec, Canada. The Company intends to operate on a decentralized basis with each acquired company's local management continuing to exercise responsibility for customer relationships and day-to-day operating decisions. Each acquired company will be supported by marketing and product development programs, financial controls and operating systems provided by Vestcom. The seven Founding Companies provide a number of value-added services including (i) the production and distribution of time-sensitive computer-generated documents on paper, compact disc, microfiche, microfilm and labels, (ii) demand publishing, (iii) mailing services, (iv) marketing materials fulfillment and (v) forms management. Applications of Vestcom's services include printing and mailing of computer-generated brokerage statements, invoices, cellular telephone bills, management reports and supermarket point-of-purchase shelf labels. These services are primarily offered to large corporations on a repetitive (e.g., daily, weekly, monthly, quarterly) basis and typically result in a recurring source of revenue. The Company believes that the computer output and document management market that the Company services was over $20 billion in 1996. Industry sources have estimated that the North American market for outsourcing of the production and distribution of computer-generated documents was $5 billion in 1996 and will grow to approximately $14 billion by the year 2000. Vestcom further believes that over 5,000 companies currently are in the computer output and document management services industry with fewer than 150 companies having revenues in excess of $10 million. By consolidating several regional companies, the Company believes it will be positioned to gain a greater market share through the provision of cost-effective, technologically advanced computer output services in the U.S. and portions of Canada (and eventually on a broader international scale). The Company's strategy of becoming a leading international provider of computer output and document management services includes the following: - Provide a broad range of high quality computer output and document management services at competitive costs from multiple locations - Capitalize on cross-selling opportunities to expand the range of services provided to existing customers as well as to broaden the Company's customer base - Provide complete outsourcing solutions for customers by assuming most of the document output and distribution responsibilities previously performed by the customers' in-house operations - Operate with a decentralized management philosophy to provide personalized customer service and a motivating environment for employees - Achieve cost savings through consolidation and economies of scale by: (i) consolidating a number of administrative functions; (ii) combining the purchasing of such items as materials and supplies, equipment maintenance and employee benefits; (iii) reducing or eliminating redundant functions and facilities; and (iv) sharing production through a communications network to maximize equipment utilization and to speed delivery Vestcom intends to grow through the acquisition of companies with similar or complementary businesses in new geographic markets, by making tuck-in acquisitions within its existing markets, by cross-selling its various services among the clients of the Founding Companies and of other acquired companies and by acquiring the in-house computer output centers of targeted corporations. The Company believes that it will be an attractive acquiror of other computer output and document management services companies due to its strategy of retaining the management of acquired companies and offering members of such management the opportunity to become stockholders of Vestcom. The Company believes that the consolidation of computer output and document management services businesses will provide it with a significant competitive advantage over existing smaller competitors and will permit it to take advantage of the significant increase in outsourcing of computer output and document management services. As the Company increases its presence in certain geographic markets, it expects to be able to capitalize on its existing client relationships, technical expertise, additional operating efficiencies, enhanced marketing initiatives and national account programs. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 3,850,000 shares Common Stock to be outstanding after the Offering(1)................................ 7,826,447 shares Use of proceeds.............................. To pay the cash portion of the purchase price for the Founding Companies, to repay certain indebtedness of Vestcom and of the Founding Companies, to pay certain fees in connection with the Acquisitions and for general corporate purposes, which are expected to include future acquisitions. Nasdaq National Market Symbol................ VESC </TABLE> - --------------- (1) The number of shares to be outstanding on completion of the Offering excludes (x) up to an aggregate of 903,971 additional shares which may be issued in connection with the Acquisitions of four Founding Companies pursuant to certain earn-out provisions if specified revenue and earnings thresholds are achieved, (y) 577,500 shares issuable upon exercise of the Underwriters' over-allotment option and (z) 700,000 shares of Common Stock reserved for issuance under the Company's 1997 Equity Compensation Program (the "Stock Option Plan"). See "Certain Transactions -- Organization of the Company -- Acquisitions" and "-- Canadian Acquisition" and "Management -- Stock Option Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034956_eshare_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034956_eshare_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..926b6110976eb496c2cd6ae7171a7d72572dd1fc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034956_eshare_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Combined Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Melita International Corporation ("Melita" or the "Company") is a leading provider of customer contact and call management systems that enable businesses to automate call center activities and enhance their telephony-based customer interaction. The Company's principal product, PhoneFrame CS, is used by organizations to increase agent productivity, reduce the costs of call center operations and enhance revenue generation for a broad range of activities, including debt collection, telemarketing and customer service. PhoneFrame CS is an innovative, comprehensive call center solution based on client/server software that integrates with industry standard computing and telephony infrastructures. The Company's customers include leading organizations in industries such as banking, financial services, retail, communications and service bureaus, where businesses are engaged in frequent telephone contact with customers or prospects. In many industries, customer retention costs are significantly lower than the costs of customer acquisition. Consequently, many businesses have come to view long-term customer relationships as a key corporate asset and a source of competitive advantage. To build customer loyalty, organizations are leveraging available customer information by disseminating this information to employees responsible for customer interaction in order to enhance the quality of each customer contact. In addition, organizations recognize that telephony-based interaction has become an increasingly effective means of customer contact as telecommunications costs have decreased and enabling technologies such as computer/telephony integration ("CTI") have emerged to automate the customer interaction process. According to industry sources, the CTI, outbound call management and automatic call distribution market segments of the worldwide call center systems market aggregated $2.8 billion in 1996 and are expected to grow at a compound annual growth rate of 19.1% to $6.7 billion by 2001. The Company's primary target markets, CTI and outbound call management, were approximately $1.3 billion worldwide in 1996 and are together expected to grow at a compound annual growth rate of 27.6% to $4.4 billion by 2001. The Company provides comprehensive solutions to the call center industry based on a scaleable client/server software architecture capable of supporting installations with more than 500 simultaneous users on a single server. PhoneFrame CS provides comprehensive functionality and a user-friendly application development environment designed to provide increased agent productivity, lower telecommunication costs and low nuisance call rates. The Company's software allows call center system managers to control and monitor call center activity at a glance by providing call flow script creation and editing, call campaign configuration, resource definition and management, and system management and reporting capabilities. The Company's products also provide enhanced interaction with customers through front-end applications which utilize real-time access to information to guide call center agents through each step of the customer interaction process. The Company's call management solution leverages existing investments in call center, information and telephony systems. The Company currently has over 400 systems in operation worldwide. Selected customers include AirTouch Communications, Inc., BancOne Services Corporation, Barclays Bank PLC, Citicorp, Credicard SA Brazil, Dun & Bradstreet Corporation, Grupo Financiero Bancomer, S.A. de C.V., J.C. Penney Company, Inc., National Westminster Bank and Snyder Communications, Inc. The Company sells its products through a direct sales force in the United States, Canada and the United Kingdom. In 1996, the Company derived approximately 21.0% of its total revenues from sales outside the United States. International distribution is largely through direct sales and value-added resellers ("VARs"). --------------------- Melita International Corporation is a Georgia corporation organized in 1979. Unless the context otherwise requires, references in this Prospectus to "Melita" or the "Company" refer to Melita International Corporation and its combined affiliates, Melita Europe Limited and Inventions, Inc. The Company's principal executive offices are located at 5051 Peachtree Corners Circle, Norcross, Georgia 30092-2500, and its telephone number is (770) 239-4000. 4. Inside back page is captioned: "Melita's Command Post(TM) graphical desktop lets supervisors monitor call center activity at a glance." Graphics portray a screen generated by the Company's PhoneFrame(R) CS product. The screen is labeled "Production Monitoring." Features of the screen are highlighted by the following text: " - Call List Display Panel. Displays status of active calling lists. - The Tool Bar. Brings up different productivity views to monitor and control the activity of a call center. - Agent Status Legend. User defined legends to choose conditions or calling states. - ViewPort Display Area. Real time production monitoring of agent status using customized floor plans. - Trunk State Display Panel. Graphically depicts enabled and disabled trunk states." [ARTWORK/DIAGRAMS DEPICTED IN PROSPECTUS] 1. Inside front page is captioned: "Melita's Command Post(TM) graphical desktop lets supervisors monitor call center activity at a glance." Graphics portray a screen generated by the Company's PhoneFrame(R) CS product. The screen is labeled "Production Monitoring." Features of the screen are highlighted by the following text: " - Call List Display Panel. Displays status of active calling lists. - The Tool Bar. Brings up different productivity views to monitor and control the activity of a call center. - Agent Status Legend. User defined legends to choose conditions or calling states. - ViewPort Display Area. Real time production monitoring of agent status using customized floor plans. - Trunk State Display Panel. Graphically depicts enabled and disabled trunk states." 2. Inside front page gate-fold portrays the following: Center: Photograph of a Call Center agent and customers speaking over the telephone illustrating the Company's concept of "People To People Communication." Arrows to the top, left, bottom and right of the photograph point to additional diagrams. Top: Arrow extending from central photograph points to the word "Applications." Above and to the left of "Applications" is a list of the CTI applications: MPACT, PowerPACT and ActionPACT. Above and to the right of "Applications," the Company's Megellan application is listed. Right: Arrow extending from central photograph points to the words "System Management" which are superimposed over a picture of four overlapping screens generated by PhoneFrame CS Command Post Desktop. Bottom: Arrow extending from central photograph points to the text: "Applications and solutions for customer communications: - Comprehensive Call Center Solutions - Build and Improve Customer Relationships - Increase Agent Productivity - Reduce Operating Costs" Left: Arrow extending from central photograph points to the word "Technology." To the immediate left of "Technology" is a diagram of the Company's call center system. 3. Graphic on page 29 of the prospectus in the "Business" section is labeled "PhoneFrame CS Architecture." The center portion of the graphic depicts a bar labeled "Local Area Network." Below the Local Area Network bar are drawings representing a customer's host computing center, the Company's call processor, the Company's Universal Switch components, the customer's PBX/ACD and a "cloud" labeled "PSTN" (public switch telephone network). Each of these components are linked to the Local Area Network. The Universal Switch, PBX/ACD and PSTN are linked together. Above the Local Area Network bar are drawings representing the Company's Universal Workstations and corresponding telephone sets, the Company's Command Post Windows NT and the Company's Universal Server running on a RISC/6000 system with Sybase. The telephone sets are connected to the PBX/ACD with a dotted line. The Command Post and the Universal Server each are connected to the Local Area Network. 4. Inside back page graphics portray a screen generated by the Company's Magellan product. The screen is labeled "Magellan Application Interpreter." The text appearing above the picture of the screen is as follows: "Provides agent with information, not just data.... Magellan(TM) navigates multiple corporate data sources and presents needed information in a Single System Image View(TM). Solutions from basic "screen pops" to sophisticated customer interaction applications can be created and modified on-the-fly without programming. Magellan(TM) allows applications to be developed and deployed quickly, making agents more efficient by presenting them with the information needed to make timely and informed decisions." The image of the "Magellan Application Interpreter" screen is enhanced by text that highlights Magellan's features as follows: - Employs script windows to bring together text and real-time data from multiple resources. - Customer data may be entered with the click of a mouse. - Customizes on-line help functions. - Displays talk time with the call gauge. - Programmable action buttons for background applications. - Buttons may be customized to display specific actions and reactions. - Imports visual elements in graphic boxes. THE OFFERING Common Stock offered by the Company.... 3,500,000 shares Common Stock to be outstanding after the offering........................... 14,643,395 shares(1) Use of proceeds........................ For (i) repayment of notes payable to the Company's principal shareholder, (ii) payment of undistributed S corporation earnings and (iii) general corporate purposes and working capital. Proposed Nasdaq National Market symbol................................. MELI - --------------- (1) Includes 3,143,395 shares of Common Stock to be issued in connection with the combination (the "Combination") of the Company, Melita Europe Limited ("Melita Europe") and Inventions, Inc. ("Inventions") which will occur concurrently with the effective date of this offering. Excludes an aggregate of 1,600,000 shares of Common Stock reserved for issuance under the 1992 Stock Option Plan, the 1997 Stock Option Plan and the Stock Purchase Plan (as defined herein), of which 1,104,097 shares were subject to options outstanding as of the date of this Prospectus at a weighted average exercise price of $3.43 per share. See "Management -- Employee Benefit Plans" and Note 6 of the Notes to Combined Financial Statements. SUMMARY COMBINED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ----------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenues.................. $24,703 $24,668 $27,156 $35,282 $47,540 $11,021 $14,669 Gross margin.................... 16,059 16,563 17,592 21,270 29,183 7,133 8,092 Income from operations.......... 3,178 3,649 2,600 4,661 7,348 2,051 2,387 Pro forma net income (1)........ $ 2,157 $ 2,356 $ 1,508 $ 2,955 $ 4,782 $ 1,278 $ 1,425 Pro forma net income per common and common equivalent share... $ 0.39 $ 0.11 ======= ======= Pro forma weighted average common and common equivalent shares outstanding(2)......... 12,363 12,647 ======= ======= </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 --------------------------------------- PRO FORMA ACTUAL PRO FORMA(3) AS ADJUSTED(4) ------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit).................................. $(4,324) $(5,885) $ 25,365 Total assets............................................... 28,105 17,478 42,578 Long-term debt, net of current portion..................... -- -- -- Shareholders' equity (deficit)............................. (1,485) (3,046) 28,204 </TABLE> - --------------- (1) Upon the effective date of this offering, the Company will terminate its status as an S corporation. Thereafter, the Company will be subject to federal and state corporate income taxes. Pro forma net income is presented as if the Company had been subject to corporate income taxes for all periods presented. See "Termination of S Corporation Status and Related Distributions" and Notes 1 and 3 of the Notes to Combined Financial Statements. (2) See Note 1 of the Notes to Combined Financial Statements. (3) Pro forma to give effect to the following: (i) the issuance of 3,143,395 shares of Common Stock in connection with the Combination, which will occur concurrently with the effective date of this offering, (ii) the repayment at the closing of this offering of a note payable to the principal shareholder (the "1992 Note") with a principal balance of $2.4 million and notes payable (the "1997 Notes") of $12.9 million issued in February 1997 representing a portion of the undistributed S corporation earnings at December 31, 1996 (the "Note Repayment"), (iii) the interest accrual of $250,000 relating to the 1997 Notes (the "Interest Accrual"), (iv) the inclusion of current deferred tax assets of $1.1 million due to the termination of the S corporation status (the "Deferred Tax Adjustment") and (v) the payment subsequent to March 31, 1997 of a cash distribution representing estimated undistributed 1997 S corporation earnings of $2.5 million through March 31, 1997 (the "Distribution"). See "Termination of S Corporation Status and Related Distributions," "Use of Proceeds," "Capitalization," "Certain Transactions" and Notes 2, 3 and 8 of the Notes to Combined Financial Statements. (4) Pro forma as adjusted to give effect to the sale by the Company of the 3,500,000 shares of Common Stock offered hereby at an assumed initial public offering price of $10.00 per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001034981_gbb_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001034981_gbb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b10172a933a8b823a616ceeb26add08e4829e7d0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001034981_gbb_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial information appearing elsewhere in this Prospectus. Unless the context clearly suggests otherwise, references to the "Company" include Greater Bay Bancorp and its subsidiaries, collectively, and references to "Greater Bay" include the parent company only. In addition to the historical information contained herein, certain statements in this Prospectus constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995 (the "Reform Act") which involve risks and uncertainties. The Company's actual results may differ significantly from those discussed herein. Factors that might cause such a difference include, but are not limited to, those discussed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Prospectus. See "Risk Factors--Forward-Looking Statements." THE COMPANY Greater Bay is a bank holding company operating Cupertino National Bank & Trust ("CNB") and Mid-Peninsula Bank (separately, "MPB" and together with CNB, the "Banks") with seven regional offices in Cupertino, Palo Alto, San Mateo, San Carlos and San Jose, California. Greater Bay is the result of the merger (the "Merger"), effective November 27, 1996, of Cupertino National Bancorp ("Cupertino") and Mid-Peninsula Bancorp ("Mid-Peninsula"). At December 31, 1996, the Company had total assets of $622.0 million, total net loans of $441.6 million and total deposits of $559.3 million. The Company, through the Banks, provides a wide range of commercial banking services to small and medium-sized businesses, real estate developers and property managers, business executives, professionals and other individuals, primarily in the Santa Clara and San Mateo Counties of California. Services include personal and business checking and savings accounts, time deposits and individual retirement accounts, cash management, international trade services and accounting services and the making of commercial, consumer and real estate loans, which generally do not include long-term residential mortgage loans. Additionally, the Company offers several specialized services including a Small Business Administration ("SBA") Department which makes SBA guaranteed loans to assist smaller businesses, a venture lending division (the "Venture Lending Group") that services companies in their start-up and development phase and a trust department (the "Greater Bay Trust Company") that offers a full range of fee-based trust services directly to its clients. In order to meet the demands of the increasingly competitive banking and financial services industries, management has adopted a business philosophy referred to as the "Super Community Banking Philosophy." The Super Community Banking Philosophy is based on management's belief that banking customers value doing business with locally managed institutions that can provide a full service commercial banking relationship through an understanding of the customer's financial needs and the flexibility to customize products and services to meet those needs. Management further believes that banks are better able to build successful customer relationships by affiliating with a holding company that provides cost effective administrative support services while promoting bank autonomy and flexibility. To implement this philosophy, Greater Bay operates CNB and MPB as separate subsidiaries by retaining their independent names along with their individual Boards of Directors. Both MPB and CNB have established strong reputations and customer followings in their respective market areas through attention to client service and an understanding of client needs. In an effort to capitalize on the identities and reputations of the Banks, the Company will continue to market its services under the CNB and MPB names, primarily through each Bank's relationship managers. The primary focus for the Banks' relationship managers is to cultivate and nurture their client relationships. Relationship managers are assigned to each borrowing client to provide continuity in the relationship. This emphasis on personalized relationships requires that all of the relationship managers maintain close ties to the - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- communities in which they serve, so they are able to capitalize on their efforts through expanded business opportunities for the Banks. While client service decisions and day-to-day operations are maintained at the Banks, Greater Bay offers the advantages of affiliation with a multi-bank holding company by providing improved access to the capital markets and expanded client support services, such as business cash management, international trade services and accounting services. In addition, Greater Bay provides centralized administrative functions, including support in credit policy formulation and review, investment management, data processing, accounting and other specialized support functions, thereby allowing the Banks to focus on client service. The Company's business strategy is to focus on increasing its market share within the communities it serves through continued internal growth. As a result of the Merger, the Company has the opportunity to market the specialized products and services of the Venture Lending Group, the Greater Bay Trust Company and the SBA Department to a larger customer base. The Company believes that these products and services, available prior to the Merger only to customers of CNB, will be attractive to customers and contacts of MPB in the venture capital community and the high net worth customers of MPB. The Company believes that the infrastructure developed by Cupertino to support the Greater Bay Trust Company, the SBA Department and the Venture Lending Group will allow the Company to offer the products and services of these groups without significant additional overhead costs. The Company also will pursue opportunities to expand its market share through select acquisitions that management believes complement the Company's businesses. While management would prefer to make acquisitions which would expand its presence in its current market areas in Santa Clara and San Mateo Counties, it will also pursue opportunities to expand its market through acquisitions in other parts of the South, East, and North Bay Areas of San Francisco. The Company was incorporated in California in 1984 under the name San Mateo County Bancorp. See "Business--History." The Company's principal offices are located at 2860 West Bayshore Road, Palo Alto, California 94303 and its telephone number is (415) 813-8200. GBB CAPITAL GBB Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with the Delaware Secretary of State on March 3, 1997. GBB Capital's business and affairs are conducted by the Property Trustee, Delaware Trustee and three individual Administrative Trustees who are officers of the Company. GBB Capital exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures issued by Greater Bay, and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Trust Securities). Accordingly, the Junior Subordinated Debentures will be the sole assets of GBB Capital, and payments by Greater Bay under the Junior Subordinated Debentures and the Expense Agreement will be the sole revenues of GBB Capital. All of the Common Securities will be owned by Greater Bay. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of Greater Bay as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. See "Description of the Trust Preferred Securities--Subordination of Common Securities of GBB Capital Held by Greater Bay." Greater Bay will acquire Common Securities in an aggregate liquidation amount equal to 3.0% of the total capital of GBB Capital. GBB Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. GBB Capital's principal offices are located at 2860 West Bayshore Road, Palo Alto, California 94303 and its telephone number is (415) 813-8200. - - ------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- THE OFFERING <TABLE> <C> <S> Trust Preferred Securities issuer.......................... GBB Capital Securities offered............... 800,000 Trust Preferred Securities. The Trust Preferred Securities represent undivided beneficial interests in GBB Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. Distributions.................... The Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Trust Preferred Security, will be cumulative, will accrue from the date of issuance of the Trust Preferred Securities, and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on June 15, 1997 (subject to possible deferral as described below). The amount of each Distribution due with respect to the Trust Preferred Securities will include amounts accrued through the date the Distribution payment is due. See "Description of the Trust Preferred Securities--Distributions." Extension periods................ So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, Greater Bay will have the right, at any time, to defer payments of interest on the Junior Subordinated Debentures by extending the interest payment period thereon for a period not exceeding 20 consecutive quarters with respect to each deferral period (each an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. If interest payments are so deferred, Distributions on the Trust Preferred Securities will also be deferred and Greater Bay will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to Greater Bay's capital stock or debt securities that rank pari passu with or junior to the Junior Subordinated Debentures. During an Extension Period, Distributions will continue to accumulate with income thereon compounded quarterly. Because interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law, holders of the Trust Preferred Securities will be required to accrue income for United States federal income tax purposes. See "Description of Junior Subordinated Debentures--Option to Defer Interest Payment Period" and "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." Maturity......................... The Junior Subordinated Debentures will mature on , 2027 which date may be shortened (such date, as it may be shortened, the "Stated Maturity") to a date not earlier than , 2002 if certain conditions are met (including Greater Bay having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve). </TABLE> - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- <TABLE> <C> <S> Redemption....................... The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Junior Subordinated Debentures at their Stated Maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. Subject to Federal Reserve approval, if then required under applicable capital guidelines or policies of the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to maturity at the option of Greater Bay (i) on or after , 2002 in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), upon the occurrence and during the continuance of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Trust Preferred Securities--Redemption" and "Description of Junior Subordinated Debentures-- Redemption." Distribution of Junior Subordinated Debentures......... Greater Bay has the right at any time to terminate GBB Capital and cause the Junior Subordinated Debentures to be distributed to holders of Trust Preferred Securities in liquidation of GBB Capital, subject to Greater Bay having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of the Trust Preferred Securities--Distribution of Junior Subordinated Debentures." Guarantee........................ Taken together, Greater Bay's obligations under various documents described herein, including the Guarantee Agreement, provide a full guarantee of payments by GBB Capital of Distributions and other amounts due on the Trust Preferred Securities. Under the Guarantee Agreement, Greater Bay guarantees the payment of Distributions by GBB Capital and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of Senior and Subordinated Debt of Greater Bay, as defined herein) to the extent of funds held by GBB Capital. If GBB Capital has insufficient funds to pay Distributions on the Trust Preferred Securities (i.e., if Greater Bay has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Greater Bay to enforce payment of such Distributions to such holder. See "Description of Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of the Trust Preferred Securities," "Description of Junior Subordinated Debentures--Debenture Events of Default" and "Description of Guarantee." </TABLE> - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- <TABLE> <C> <S> Ranking.......................... The Trust Preferred Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities of GBB Capital held by Greater Bay, except as described under "Description of the Trust Preferred Securities--Subordination of Common Securities of GBB Capital Held by Greater Bay." The obligations of Greater Bay under the Guarantee, the Junior Subordinated Debentures and other documents described herein are unsecured and rank subordinate and junior in right of payment to all current and future Senior and Subordinated Debt, the amount of which is unlimited. At December 31, 1996, the aggregate outstanding Senior and Subordinated Debt of Greater Bay was approximately $3.0 million. In addition, because Greater Bay is a holding company, all obligations of Greater Bay relating to the securities described herein will be effectively subordinated to all existing and future liabilities of Greater Bay's subsidiaries, including the Banks. Greater Bay may cause additional Trust Preferred Securities to be issued by trusts similar to GBB Capital in the future, and there is no limit on the amount of such securities that may be issued. In this event, Greater Bay's obligations under the Junior Subordinated Debentures to be issued to such other trusts and Greater Bay's guarantees of the payments by such trusts will rank pari passu with Greater Bay's obligations under the Junior Subordinated Debentures and the Guarantee, respectively. Voting rights.................... The holders of the Trust Preferred Securities will generally have limited voting rights relating only to the modification of the Trust Preferred Securities, the dissolution, winding-up or termination of GBB Capital and certain other matters described herein. See "Description of the Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement." Proposed Nasdaq National Market symbol.......................... GBBKP Use of proceeds.................. The proceeds to GBB Capital from the sale of the Trust Preferred Securities offered hereby will be invested by GBB Capital in the Junior Subordinated Debentures of Greater Bay. Greater Bay intends to invest approximately $10.0 million of the net proceeds in the Banks to increase their capital levels to support future growth. Greater Bay intends to use the remaining net proceeds for general corporate purposes, which may include without limitation, funding additional investments in, or extensions of credit to, the Banks and possible future acquisitions. Greater Bay expects the Trust Preferred Securities to qualify as Tier 1 capital under the capital guidelines of the Federal Reserve. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035009_blazer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035009_blazer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..87c43b1d45b056be2a9b4c3c606fc7023cf6d0c5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035009_blazer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes the Underwriters' over-allotment option is not exercised and gives effect to a 1,440,000 for 1 split of the Common Stock effected in March 1997. All references to the "Company" herein refer to Blazer Energy Corp., its consolidated subsidiaries and its predecessors. Except as indicated otherwise, all reserve information set forth in this Prospectus is based upon the reserve reports of Netherland, Sewell & Associates, Inc. ("Netherland Sewell"). Certain oil and gas industry terms used in this Prospectus are defined herein in the "Glossary of Oil and Gas Terms." THE COMPANY Blazer Energy Corp. (formerly Ashland Exploration, Inc.) is an independent energy company engaged in the exploration for and the development, production, acquisition and marketing of natural gas and oil in the United States and in Nigeria. The Company is currently a wholly-owned subsidiary of Ashland Inc. ("Ashland"). The Company has been active in the natural gas and oil business in the United States for over 80 years and in Nigeria for over 20 years. In the United States, the Company's production is concentrated in the Appalachian Basin and in the Gulf of Mexico. Internationally, the Company operates both onshore and offshore Nigeria in the deltaic region of the Niger River. All of the Company's natural gas production comes from the United States, while substantially all of its crude oil production comes from Nigeria. The Company also owns mineral royalty interests in oil and gas properties throughout the United States. At September 30, 1996, the Company's net proved reserves were 770.6 Bcfe, which was comprised of 576.9 Bcf of gas and 32.3 MMBbls of oil. During the five fiscal years ended September 30, 1996, the Company increased its net proved reserves by 54%, from 499.1 Bcfe at September 30, 1991 to 770.6 Bcfe at September 30, 1996, through a successful exploration and development program and a series of strategic property acquisitions. The Company's average net natural gas production over the same period increased by 38%, from 78.3 MMcf per day in fiscal 1992 to 108.4 MMcf per day in fiscal 1996. For the quarter ended December 31, 1996, total average net natural gas and oil production was 214.8 MMcfe per day, consisting of 105.8 MMcf per day of natural gas and 18.2 MBbls of oil per day. The Company's average oil production decreased from 26.9 MBbls per day in fiscal 1992 to 18.1 MBbls per day in fiscal 1996 due to a period of relatively low capital investment by the Company in Nigeria in prior years. To reverse this trend, the Company began in fiscal 1995 to increase significantly its Nigerian capital expenditures for exploration and development. The SEC Present Value of the Company's proved reserves before U.S. income taxes was $350 million as of September 30, 1996. For the purpose of comparing the SEC Present Value of the Company's reserves with those of companies having a calendar year end, if the Company's SEC Present Value before U.S. income taxes were calculated using September 30, 1996 reserve quantities but using gas and oil prices in effect at December 31, 1996, such value would have been $889 million, although natural gas and oil prices are currently at levels more similar to September 30, 1996 prices. See "Business and Properties -- Reserves." The Company intends to continue its reserve and production growth in the Appalachian Basin and to accelerate such growth in the Gulf of Mexico and Nigeria. The Company spent approximately $87 million for exploration and development for the year ended September 30, 1996 and plans to spend approximately $112 million and $134 million during the 1997 and 1998 fiscal years, respectively. In December 1996, the Company significantly enhanced its existing Gulf of Mexico operations with the initiation of production from the Vermilion 410 field, from which the Company averaged net natural gas production of 29.4 MMcf per day for the month of February 1997. In Nigeria, the Company recently filed a development plan with respect to what it believes to be a commercial oilfield discovery called the Okwori South field, from which the Company expects to begin production in the second half of calendar 1998. The Company owns working interests in approximately 1,425 gross wells that qualify for unconventional fuel tax credits ("Section 29 tax credits") which have generated $59.8 million of tax credits for Ashland through September 30, 1996, including $10.5 million in fiscal 1996. The Company recently entered into a letter of intent under which it will monetize these tax credits to maximize their benefit to the Company (the "Section 29 Monetization"). Under the terms of the agreement, the Company will sell its properties that are eligible for Section 29 tax credits (the "Section 29 Tax Credit Properties") but continue to operate and be entitled to all of the cash flow from the properties until approximately 94% of the net present value of the reserves have been produced. The proposed transaction contemplates that the Company will receive a cash payment of $6.5 million at closing, plus additional quarterly payments through 2002 reflecting the value of the Section 29 tax credits generated from the properties, which payments are expected to be approximately $2.5 million per quarter in 1997, declining to approximately $2.0 million per quarter in 2002. In connection with the transaction, the buyer will apply for a ruling from the Internal Revenue Service with regard to certain aspects of the transaction. In the event a favorable ruling is not received on or before September 15, 1997, the buyer will have the right to rescind the transaction. Closing of the transaction, which is expected to occur in April 1997, is subject to contingencies, including completion of due diligence, receipt of certain consents and negotiation of definitive documents. See "Business and Properties -- Section 29 Tax Credits." COMPANY STRENGTHS STABILITY OF APPALACHIAN PRODUCTION. The Company has been a leading producer and operator in the Appalachian Basin for over 80 years. Over the past five fiscal years, the Company has drilled 493 net wells in Appalachia with a 99% success rate, and through its drilling and acquisition projects, has increased net proved reserves by 45% while extending the boundaries of productive areas. At September 30, 1996, the Company had net proved reserves of 541.0 Bcfe in Appalachia, of which 461.1 Bcfe, or 85%, were proved developed. The Company has an average working interest of 89% in approximately 1,050,000 gross acres in Appalachia. The Company's properties have extensive production histories, and the Company believes that such properties contain significant reserve and production enhancement opportunities. The Company plans to further exploit opportunities on its properties and has identified approximately 400 development well locations that it intends to pursue over the next five years. The Company's 1,200 mile gas gathering system in Appalachia is interconnected with various intrastate and interstate transmission lines, which gives the Company access to both local markets and major northeastern United States markets. The long-life, stable production and cash flow from the Company's properties in Appalachia help to offset the risks of and fund the Company's higher return opportunities in the Gulf of Mexico and Nigeria. OVER 20 YEARS OF SUCCESSFUL NIGERIAN OPERATIONS. The Company has been active in Nigeria since 1973, with oil production commencing in and continuing uninterrupted since 1975, notwithstanding periods of political instability in the region. The Company believes the stability of its operations during this period can be attributed to its long-standing relationship with the Nigerian National Petroleum Corporation (the "NNPC"), the Nigerian state-owned petroleum company, and the recognition by successive Nigerian administrations of the oil sector's importance to Nigeria's economy, which has been evidenced by Nigeria's continued administrative support and consistent economic policies that serve to preserve the petroleum industry. The Company believes it is one of only two foreign independent energy companies with production in Nigeria and one of several foreign operators in the country, which include subsidiaries or affiliates of Shell Oil Company ("Shell"), Chevron Corporation ("Chevron"), Mobil Corporation ("Mobil"), Texaco Inc. ("Texaco"), Elf Aquitaine ("Elf") and Agip SpA ("Agip"). In Nigeria, the Company operates under two production sharing contracts ("PSCs"), the first of which was originally signed in 1973 and the second of which was signed in 1992. The 1973 PSC, in which the Company owns a 100% working interest, pertains to oil prospecting licenses ("OPLs") 98 and 118, which together cover 177,000 acres. The Company commenced production under the 1973 PSC in 1975, had peak daily production of 46.5 MBbls of oil per day in November 1989 and has had cumulative production from the 1973 PSC acreage of approximately 161 MMBbls of oil through September 30, 1996. The 1992 PSC, which the Company operates with a 50% partner, Total Exploration Nigeria Ltd. ("Total"), pertains to OPLs 90 and 225, which together cover 450,000 gross acres and include the Okwori South field discovery. EXPERTISE IN DELTAIC ENVIRONMENTS. The Company has conducted significant exploration activities in the Mississippi River deltaic region since 1984 and in the Niger River deltaic region in Nigeria since 1973. These two environments have similar geologic characteristics, which gives the Company flexibility in the utilization of its geoscience staff. An important factor in successful exploration in these environments is the computer-aided interpretation of 3-D seismic surveys and the integration of such data with subsurface data. The Company has a staff of 13 geoscientists who are experienced at using such technology to evaluate opportunities in these deltaic environments. The Company's operating personnel have expertise in conventional, high angle and horizontal drilling and producing in these environments. The Company's recent discoveries of the Vermilion 410 field in the Gulf of Mexico and the Okwori South field in Nigeria were the result of the use of these technologies. The Company believes that its skills in geoscience evaluation and operations would be easily transferrable to deltaic areas in other West African countries. EFFICIENT OPERATOR. The Company operates approximately 93% of its production, which provides a significant advantage in controlling costs, allocating capital and timing the development and exploitation of its properties. The Company's personnel have considerable expertise in planning and conducting a variety of oil and gas operations, ranging from air drilling and stimulation in the tight formations in Appalachia to offshore projects with complex technical and logistical requirements. The Company's lease operating expenses in the U.S. averaged $0.47 per Mcfe for the fiscal year ended September 30, 1996 and $0.43 per Mcfe for the quarter ended December 31, 1996. The Company also believes it is a low-cost developer of reserves in Appalachia, and over the past three fiscal years has reduced its drilling cost per well in the region by approximately 28%. SUCCESSFUL ACQUISITION HISTORY. Since 1990, the Company has spent a total of approximately $172 million to acquire properties in Appalachia from Oxy U.S.A., Inc., UMC Petroleum Corp. and Waco Oil & Gas Co., Inc. The acreage acquired in these transactions is in close proximity to the Company's existing operations in Appalachia, allowing the Company to reduce expenses on a per Mcf basis through efficient consolidation. The Company has increased both reserves and production by drilling a total of 532 successful net wells on these acquired properties through December 31, 1996. The Company's selective acquisition strategy has made these acquisitions attractive rate of return ventures. BUSINESS STRATEGY The Company's strategy is to capitalize on its strengths to increase cash flow and shareholder value by increasing both its reserves and production through the development and exploration of existing properties and the acquisition of additional properties with development and exploration potential. The Company intends to implement this strategy as described below. ENHANCING APPALACHIAN POSITION. The Company is continuing to develop its large leasehold position in the Appalachian Basin, where it has approximately 900,000 net acres and 256 net proved undeveloped drilling locations at September 30, 1996. The Company expects to drill approximately 85 wells per year over each of the next two years, which are expected to require approximately $17 million per year in capital spending. The Company is also currently evaluating opportunities for infill drilling in the Appalachian Basin that could enhance both its reserves and production in the area. The long-life, stable reserves in Appalachia provide a source of cash for the Company to invest in higher return opportunities in the Gulf of Mexico and international locations. INCREASING EXPLORATION AND EXPLOITATION OF HIGH POTENTIAL AREAS. The Company intends to increase its level of exploration and exploitation drilling and currently has attractive leads and prospects on its existing acreage in the Gulf of Mexico and Nigeria. The Company evaluates almost all of its prospects with 3-D seismic data prior to drilling, which the Company believes enhances the potential for returns and lowers dry hole exposure. In the Gulf of Mexico, the Company has interests in 62 offshore blocks, or about 150,000 net acres, with an average working interest of 51%. The Company has an inventory of approximately 17 prospects in the Gulf of Mexico and plans to participate in eight wells in the 1997 fiscal year. The Company currently has rights to approximately 148 square miles of 3-D seismic data on 19 of its 62 offshore leases in the Gulf of Mexico and over 63,000 linear miles of 2-D seismic data in the Gulf of Mexico, primarily offshore Louisiana. Capital expenditures in the Gulf of Mexico for fiscal 1997 and 1998 are expected to be approximately $31 million and $36 million, respectively. In Nigeria, the Company has identified approximately 30 leads and prospects on the 177,000 acres covered by the 1973 PSC, in which it holds a 100% working interest. In the third calendar quarter of 1997, the Company expects to commence a new drilling program of at least six wells on OPL 98. Under the 1992 PSC, the Company has identified nine leads and prospects on the approximately 450,000 gross acres in OPLs 90/225. In OPL 90, a development plan has been filed with Nigerian authorities for the recently discovered Okwori South field, from which the Company expects to begin production in the second half of calendar 1998. The Company expects the Okwori South field to provide cash flow as well as tax advantages to help fund the exploration of the other prospects on the 1992 PSC acreage. The Company expects to begin additional exploratory drilling on OPLs 90/225 in 1998. On the 1973 PSC, approximately 67% of the acreage will be covered with new 3-D seismic data by May 1997, and this data should be processed and fully interpreted by September 1997. On the 1992 PSC, the Company has acquired and evaluated 3-D seismic data on approximately 34% of the acreage, including the Okwori South field. Capital expenditures in Nigeria for fiscal 1997 and 1998 are budgeted to be approximately $53 million and $67 million, respectively. EXPANDING FROM CORE HOLDINGS. The Company will seek new exploration opportunities outside its core holdings in areas where its competitive strengths can be applied. For example, the Company has recently acquired approximately 100,000 net acres of leasehold interests in Indiana and Kentucky in the New Albany Shale formation, where the Company believes it can benefit from the application of its Appalachian expertise in producing natural gas from tight formations. The Company will also seek to expand its holdings in the Gulf of Mexico through lease acquisitions and farm-ins, focusing primarily in the Louisiana offshore area in an effort to replicate its success at its Vermilion 410 field in building its Gulf of Mexico reserve base. The Company farmed in the Vermilion 410 block in order to drill its original prospect and subsequently leased five nearby blocks and farmed in two other adjacent blocks. As a result, the Company has compiled an eight block complex and has identified additional exploration prospects. Further, the Company believes that its expertise in Nigerian ventures can be successfully applied to other international regions. The Company has begun preliminary analysis of other West African countries known to have hydrocarbon resources. In international areas, the Company intends to manage the future risks of exploration by participating generally at interest levels of 20% to 50% in basins known to contain hydrocarbons that can be developed with conventional technology. PURSUING GROWTH THROUGH TARGETED ACQUISITIONS. The Company is continually evaluating opportunities to acquire producing properties that possess, among others, one or more of the following characteristics: (i) close proximity to the Company's existing operations, (ii) potential opportunities to increase reserves through drilling and additional recovery or enhancement techniques and (iii) potential opportunities to reduce production expenses through more efficient operations. The Company has benefited from the deemphasis of conventional domestic exploration and production operations by the major and large independent energy companies in favor of large capital intensive projects, which in turn has resulted in such oil companies offering for sale a number of attractive properties. Company personnel have substantial training, experience and in-depth knowledge of the Company's core areas, as well as established relationships with a number of major and large independent energy companies operating in the regions, which the Company believes will help it complete successful acquisitions. CONTROL BY ASHLAND; TRANSACTIONS RELATED TO THE OFFERING CONTROL BY ASHLAND. The Company is currently a wholly-owned subsidiary of Ashland. Ashland is a publicly-owned company engaged in petroleum refining and marketing, chemical distribution and manufacturing, coal production, highway construction and, through the Company, oil and gas exploration and production. Immediately after the Offering, Ashland will own 14,400,000 shares of Common Stock of the Company, which will represent approximately 82.3% of the Company's outstanding Common Stock (80.2% if the Underwriters' over-allotment option is exercised in full). As the owner of such shares, Ashland will control the Company's Board of Directors and be in a position to control all matters affecting the Company, including any determination with respect to acquisition or disposition of Company assets, future issuance of Common Stock or other securities of the Company, the Company's incurrence of debt, any dividends payable on Common Stock and any matters submitted to a vote of the Company's stockholders. PROPOSED SPIN OFF. Ashland has announced that after the Offering it intends to distribute pro rata to its common stockholders all of the shares of Common Stock of the Company it then owns by means of a tax-free distribution (the "Spin Off"). Ashland's final declaration of the Spin Off will not be made until certain conditions are satisfied, many of which are beyond the control of Ashland, including receipt by Ashland of a favorable ruling from the Internal Revenue Service as to the tax-free nature of the Spin Off and the absence of any future changes in market or economic conditions (including developments in the capital markets) or Ashland's or the Company's business or financial condition that causes Ashland's Board of Directors to conclude that the Spin Off is not in the best interests of Ashland's stockholders. As a result, no assurance can be given that the Spin Off will occur. Ashland intends to file its request for a ruling from the Internal Revenue Service as to the tax-free nature of the Spin Off and has advised the Company that it does not expect the Spin Off to occur prior to September 1997. If Ashland effects the Spin Off, it is possible that the increased number of shares of Common Stock of the Company available in the market may have an adverse effect on the market price of the Company's Common Stock. See "Risk Factors -- Intended Spin Off by Ashland" and "-- Control by Ashland and Potential Conflicts of Interest." For a description of Ashland's reasons for the Offering and the Spin Off, see "The Company." AGREEMENTS BETWEEN THE COMPANY AND ASHLAND. In anticipation of the Offering and in view of Ashland's intention to undertake the Spin Off, the Company and Ashland will enter into a number of agreements governing the future relationship between the parties, including a Tax Agreement, a Services Agreement, a Registration Rights Agreement and an Indemnification Agreement. The Tax Agreement will provide for certain indemnities with respect to representations made by the Company to the Internal Revenue Service to obtain a ruling on the tax-free nature of the Spin Off, as well as providing for the filing of tax returns and the allocation of taxes. The Services Agreement will specify the terms on which Ashland will continue to provide the Company with certain corporate and administrative services after the Spin Off. The Registration Rights Agreement will give Ashland certain rights to require the Company to effect registrations under the Securities Act of 1933, as amended (the "Securities Act"), of the Common Stock owned by Ashland and to bear the expenses of such registrations. The Indemnification Agreement will provide generally that the Company will indemnify Ashland for liabilities associated with its and its predecessors' operations and that Ashland will agree to indemnify the Company for liabilities relating to Ashland's operations and certain other matters. For a summary of the terms of these agreements, see "Relationship Between the Company and Ashland -- Contractual Arrangements." TRANSACTIONS AT CLOSING. Prior to consummation of this Offering, the Board of Directors of the Company declared a $195.4 million dividend payable to Ashland, as its current sole stockholder (the "Ashland Dividend"), of which $15.4 million was satisfied by elimination of the net intercompany receivable owed by Ashland to the Company as of January 31, 1997. The remaining $180.0 million portion of the Ashland Dividend is payable in cash upon consummation of the Offering and will be paid using all of the net proceeds of the Offering plus an amount to be borrowed under a revolving credit facility to be entered into immediately prior to the Offering (the "Credit Facility"). The net proceeds of the Offering are expected to be approximately $70.0 million after deducting the underwriting discount and other expenses (based on an assumed initial public offering price of $ per share), which would result in the Company borrowing an aggregate of $110.0 million under the Credit Facility to fund the remainder of the Ashland Dividend. See "Use of Proceeds." Ashland and the Company have agreed that the net cash flows generated by the Company after January 31, 1997 will be retained by the Company. THE OFFERING Common Stock offered........................ 3,100,000 shares Common Stock to be outstanding after the Offering.................................... 17,500,000 shares(1) Use of Proceeds............................. The net proceeds of the Offering will be used, together with an amount borrowed under the Credit Facility, to pay the $180.0 million cash portion of the previously declared $195.4 million Ashland Dividend. See "Use of Proceeds." Listing..................................... An application will be made to have the Common Stock approved for listing on the New York Stock Exchange (the "NYSE"). Proposed NYSE trading symbol.................................... " " - --------------- (1) Does not include an aggregate of approximately 875,000 shares of Common Stock subject to stock options to be granted to certain employees and directors upon completion of the Offering. See "Management -- Company Benefit Plans -- 1997 Stock Incentive Plan." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth summary historical and pro forma financial data for the Company as of and for the periods indicated. The summary historical financial data as of and for the years ended September 30, 1994, 1995 and 1996 have been derived from the audited consolidated financial statements of the Company. The summary historical financial data for the three months ended December 31, 1995 and 1996 have been derived from unaudited financial statements of the Company. The summary pro forma financial data set forth below give effect to (i) the Offering, (ii) the payment of the Ashland Dividend using the proceeds of the Offering, an amount borrowed under the Credit Facility and the elimination of an intercompany receivable, and (iii) the Section 29 Monetization, all as described in the Pro Forma Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus. The results for the three months ended December 31, 1996 are not necessarily indicative of the results which may be expected for any other period or for the full year. The following information should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto, the Pro Forma Consolidated Financial Statements of the Company and the Notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company currently contemplates that, after the Spin Off, it will change its fiscal year to a calendar year. <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, ------------------------------------------ ------------------------------- PRO FORMA PRO FORMA 1994 1995 1996 1996 1995 1996 1996 -------- -------- -------- --------- -------- -------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues................................ $196,300 $190,293 $230,932 $241,432 $ 54,044 $ 73,274 $ 75,774 Columbia Gas settlement(1)(3)........... -- -- 73,139 73,139 73,139 -- -- -------- -------- -------- -------- -------- -------- -------- Total revenues.................. 196,300 190,293 304,071 314,571 127,183 73,274 75,774 Operating expenses, including foreign production taxes...................... 106,524 106,223 148,077 148,077 34,208 35,120 35,120 NORM reclamation/litigation(2)(3)....... -- -- 3,049 3,049 -- 11,126 11,126 Depreciation, depletion and amortization.......................... 32,876 41,001(4) 30,978 32,878 7,983 7,933 8,408 General and administrative expenses..... 15,048 10,083 16,317 17,317 4,571 4,098 4,098 Exploration costs, including dry holes................................. 14,219 38,837 11,649 11,649 1,330 10,356 10,356 -------- -------- -------- -------- -------- -------- -------- Total costs and expenses........ 168,667 196,144 210,070 212,970 48,092 68,633 69,108 Operating income (loss)................. 27,633 (5,851) 94,001 101,601 79,091 4,641 6,666 Interest expense, net of interest income................................ 709 319 222 8,276 54 53 2,066 -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes....... 26,924 (6,170) 93,779 93,325 79,037 4,588 4,600 Income tax expense (benefit)............ (7,438) (16,089) 18,418 28,758 23,835 (1,720) 784 -------- -------- -------- -------- -------- -------- -------- Net income.............................. $ 34,362 $ 9,919 $ 75,361 $ 64,567 $ 55,202 $ 6,308 $ 3,816 ======== ======== ======== ======== ======== ======== ======== Net income per share of Common Stock.... $ 3.69 $ 0.22 ======== ======== Average shares outstanding.............. 17,500 17,500 OTHER FINANCIAL DATA: EBITDE(5)............................... $ 74,728 $ 73,987 $136,628 $146,128 $ 88,404 $ 22,930 $ 25,430 Net cash provided by (used for) operating activities.................. 110,292 59,029 112,909 29,026 (4,378) Capital expenditures.................... 55,917 157,927 93,648 9,524 25,414 BALANCE SHEET DATA (AT END OF PERIOD): Working capital......................... $129,472 $ 54,166 $ 85,579 $113,715 $ 37,808 $ 22,369 Oil and gas properties, net............. 306,418 375,364 420,359 374,539 426,604 419,629 Total assets............................ 492,506 483,778 595,151 528,676 533,211 511,272 Total long-term debt.................... -- -- -- -- -- 120,260 Stockholders' equity.................... 323,754 333,867 409,228 389,069 359,398 233,959 </TABLE> (See notes on following page) (1) In 1995 the Company entered into a settlement agreement with Columbia Gas Transmission Company ("Columbia Gas") to resolve claims involving natural gas sales contracts that were abrogated by Columbia Gas in its 1991 bankruptcy, pursuant to which the Company received a net payment of $73.1 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035118_centennial_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035118_centennial_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..022919eae5555ce4f87a7a35c0317eb8f5873f13
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035118_centennial_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Centennial HealthCare Corporation provides a broad range of long-term health care services to meet the medical needs of elderly and post-acute patients. The Company provides these services through geographically concentrated networks located in metropolitan and secondary markets throughout the United States. Centennial operates 84 owned, leased and managed skilled nursing facilities with 9,049 beds in 19 states, with its largest concentration of facilities in North Carolina, Indiana and Michigan. The Company provides basic and specialty health care services. Basic services include skilled nursing and support, housekeeping, laundry, dietary, recreational and social services. Specialty services include comprehensive rehabilitation therapy, respiratory therapy, ventilator care, infusion therapy, wound care, home health care and other subacute and specialty services. As components of its specialty services, Centennial provides rehabilitation therapy services on a contract basis to third-party and Company- operated skilled nursing facilities in 17 states pursuant to 70 contracts and, including recently completed acquisitions, provides in excess of 380,000 home health care visits annually. In recent years, the long-term care industry has experienced significant growth. Revenues in the long-term care industry have increased in the United States from approximately $18 billion in 1980 to approximately $80 billion in 1995. The number of patients in long-term care facilities is expected to grow to 2.1 million by the year 2025, a significant increase from the current level of 1.5 million. Industry growth has been driven primarily by the following factors: (i) aging of the population; (ii) cost-containment pressures that drive post-acute patients from acute care hospitals to lower-cost settings; (iii) advances in medical technology that enable sophisticated long-term care providers to care for higher-acuity patients; and (iv) demand for post-acute and specialty services in secondary markets. In addition, consolidation opportunities in the long-term care industry have enabled leading providers to build market share in order to compete more effectively. Ownership of long-term care facilities is highly fragmented, with approximately 70% of all facilities owned by independent providers or companies with less than 20 facilities. The increasing medical complexity of long-term care patients, cost-containment pressures and government regulation make it difficult for smaller providers without access to capital, sophisticated information systems and economies of scale to compete with larger regional and national providers. Long-term care facilities are increasingly becoming an integral part of community-based, vertically integrated health care delivery systems that are capable of providing a full range of traditional basic services and specialty services. Centennial's objective is to continue to enhance its market position as a provider of long-term basic and specialty services in selected metropolitan and secondary markets. The Company seeks to control significant components of the non-acute health care system in its markets, thereby diversifying its sources of revenue and positioning itself to respond to the requirements of a variety of payors. In addition, the Company seeks to increase the range of services it provides within its facilities and tailors its health care services to address the specific needs within each of its markets. To meet its objective, the Company is pursuing the following strategies: (i) achieve operating leverage through the continued development of regionally concentrated networks; (ii) implement market-specific business and network development plans in response to the diverse needs of the Company's metropolitan and secondary markets; (iii) continue to expand specialty services to enhance the Company's position as a broad-based provider of health care services; (iv) manage operations through sophisticated information systems that enhance efficiency; and (v) pursue strategic acquisitions of long-term care facilities and related service providers. Over the last three years, the Company has aggressively grown its operating base through both acquisitions and internal growth. Total revenues increased from $41.5 million for the fiscal year ended May 31, 1994 to $233.0 million for the fiscal year ended December 31, 1996, representing a compounded annual growth rate of 95.0%. Net income decreased from $5.4 million for the fiscal year ended May 31, 1994 to $2.8 million for the fiscal year ended December 31, 1996, representing a compounded annual rate of decrease of 22.5%. Licensed available beds increased from 3,470 to 8,113 during the same period, representing a compounded annual growth rate of 38.9%. The Company's revenue quality mix (Medicare, private pay, management fees and other) improved from 41.9% for the fiscal year ended December 31, 1995 to 57.2% for the fiscal year ended December 31, 1996, and the Company's revenues from specialty services increased from 14.4% for the fiscal year ended December 31, 1995 to 33.7% for the fiscal year ended December 31, 1996, reflecting the Company's focus on providing specialty services to higher-acuity patients. As part of its growth strategy, the Company regularly reviews possible acquisitions in the long-term care continuum. Effective December 31, 1995, the Company completed an important strategic acquisition by merging with Transitional Health Services, Inc. ("Transitional"), which operated 36 skilled nursing facilities with 3,776 beds in Arkansas, North Carolina, Indiana, Kentucky and Michigan and a contract rehabilitation therapy business (the "Transitional Merger"). Since the Transitional Merger, the Company has expanded its operations through the acquisition of a home health care provider (the "Home Health Acquisition"), the addition of 16 long-term facility management contracts and one management contract for a facility providing nursing home and long-term acute care hospital services, the acquisition of two facilities previously managed by the Company and the lease of a rural hospital with three home health care offices. As a result of the Home Health Acquisition, the Company has increased its home health care visits by over 340,000 annually. Centennial is currently pursuing three strategic transactions in its existing markets to: (i) acquire a rehabilitation therapy company (the "Therapy Acquisition"); (ii) lease an additional rural hospital (the "Hospital Acquisition"); and (iii) acquire a facility currently managed (the "Facility Transaction") (collectively, the "Potential Transactions"). The Company has entered into a non-binding letter of intent for the Therapy Acquisition, and that transaction remains subject to the negotiation of a definitive agreement and receipt of all necessary consents and approvals. The Company has negotiated the lease with respect to the Hospital Acquisition, but the lease remains subject to various governmental consents and approvals. The Company anticipates closing the Facility Transaction on or around July 31, 1997. The Potential Transactions, if consummated, will allow the Company to increase its range of services in two markets in which the Company already has a strong operating presence. Centennial was incorporated in the State of Georgia in 1989. Unless the context otherwise requires, all references in this Prospectus to Centennial or the Company include Centennial HealthCare Corporation and its subsidiaries. Centennial's principal executive office is located at 400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346, and its telephone number is (770) 698-9040.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035240_firstspart_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035240_firstspart_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a7fc357fa079bc81ea77290e278d5c66dfcd3705
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035240_firstspart_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) PRESENTED ELSEWHERE IN THIS PROSPECTUS. THE PURCHASE OF COMMON STOCK IS SUBJECT TO CERTAIN RISKS. SEE "RISK FACTORS." FIRSTSPARTAN FINANCIAL CORP. The Holding Company was organized on February 4, 1997 under Delaware law at the direction of the Association to acquire all of the capital stock that the Association will issue upon its conversion from the mutual to stock form of ownership. The Holding Company has only engaged in organizational activities to date. The Holding Company has received conditional OTS approval to become a savings and loan holding company through the acquisition of 100% of the capital stock of the Association. Immediately following the Conversion, the only significant assets of the Holding Company will be the outstanding capital stock of the Association, 50% of the net proceeds of the Offerings as permitted by the OTS to be retained by it and a note receivable from the ESOP evidencing a loan to enable the ESOP to purchase 8% of the Common Stock issued in the Conversion. Funds retained by the Holding Company will be used for general business activities. See "USE OF PROCEEDS." Upon Conversion, the Holding Company will be classified as a unitary savings and loan holding company subject to OTS regulation. See "REGULATION -- Savings and Loan Holding Company Regulations." The main office of the Holding Company is located at 380 E. Main Street, Spartanburg, South Carolina 29302 and its telephone number is (864) 582-2391. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG Chartered in 1935, the Association is a federal mutual savings and loan association headquartered in Spartanburg, South Carolina. As a result of the Conversion, the Association will convert to a federal capital stock savings and loan association and will become a wholly-owned subsidiary of the Holding Company. The Association is regulated by the OTS, its primary regulator, and by the FDIC, the insurer of its deposits. The Association's deposits have been federally-insured since 1935 and are currently insured by the FDIC under the SAIF. The Association has been a member of the Federal Home Loan Bank ("FHLB") System since 1935. At December 31, 1996, the Association had total assets of $375.5 million, total deposits of $324.0 million and total equity of $44.8 million on a consolidated basis. The Association is a community oriented financial institution whose primary business is attracting retail deposits from the general public and using these funds to originate primarily one- to- four family residential mortgage loans within its primary market area. The Association is an approved Federal Housing Administration ("FHA") and Veterans Administration ("VA") lender and participates in the Spartanburg Residential Development Program, an affordable housing program. The Association also actively originates construction loans and consumer loans. To a lesser extent, the Association originates land loans, commercial real estate loans and commercial business loans. The Association expects to hire an experienced commercial loan officer familiar with the Association's primary market area in an attempt to augment its commercial real estate and commercial business lending. At December 31, 1996, one- to- four family residential mortgage loans, consumer loans (including commercial business loans), construction loans, commercial real estate loans and land loans amounted to 77.3%, 11.5%, 9.2%, 1.3% and 0.7% of its total loan portfolio, respectively. Loans receivable, net, constituted 88.3% of total assets at December 31, 1996.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035351_gsb_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035351_gsb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c864f4ea2e745f9ba724a83f982c0604ddc15d91
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035351_gsb_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDED IN THIS PROSPECTUS. GSB Financial Corporation The Company is a Delaware corporation recently organized by the Bank to own all of the capital stock of the Bank to be issued in the Conversion. Immediately after the Conversion, the only significant assets of the Company will be (1) the capital stock of the Bank, (2) the loan that the Company intends to make to the ESOP and (3) the net proceeds from the sale of the Company's stock remaining after acquiring the capital stock of the Bank and funding the ESOP Loan. The net proceeds from the sale of the Common Stock in the Offerings are estimated to be from $13,679,000 to $18,685,000, subject to a possible increase to $21,564,000 in the event of an increase of up to 15% in the Common Stock to be issued in the Conversion. The Company will buy all the stock to be issued by the Bank in the Conversion for a price equal to 50% of the net proceeds. The remaining net proceeds will be retained by the Company and used for general corporate purposes. The portion of net proceeds received by the Bank from the Company will be added to the Bank's general funds which the Bank currently intends to utilize for general corporate purposes. See "Use of Proceeds." The business of the Company will initially consist of overseeing its investment in the Bank. See "Business of the Company," "Business of the Bank" and "Regulation--Holding Company Regulation." Goshen Savings Bank General. The Bank was originally founded in 1871 as a New York mutual savings bank. On March 18, 1997, the Bank became a federal mutual savings bank. The Bank is extensively regulated, supervised and examined by the OTS and the Federal Deposit Insurance Corporation ("FDIC"). The Bank has a main office in Goshen, New York, a nearby drive-up facility, and a branch in an elder care facility in Goshen which opened in March 1997. The Bank's market area consists of the village of Goshen and surrounding communities to a radius of 12 miles, including most of Orange County, New York. The Bank gathers deposits primarily from its market area and makes loans primarily to persons or businesses in its market area. See "Business of the Bank--Market Area" and "--Competition." Most of the Bank's loans are mortgage loans secured by one-to-four family owner-occupied residences in its market area. To a lesser extent, the Bank makes commercial mortgage loans, construction loans and consumer loans. The Bank also invests in U.S. Treasury and agency securities, corporate debt securities, mortgage-backed securities, certain mutual fund and equity securities, and other liquid assets. At December 31, 1996, the Bank had total assets of $97.0 million, of which $61.0 million were loans and $27.2 million were investment and mortgage-backed securities, total deposits of $82.6 million and total equity (retained earnings) of $12.1 million. At that same date, the Bank satisfied all capital requirements of the FDIC which then applied to it. The Bank's tangible, core and total risk-based capital ratios at such date, calculated in accordance with OTS regulations that have applied to it since it became a federal savings bank on March 18, 1997, were 12.30%, 12.30% and 21.85%, respectively. The Bank satisfied the capital ratio requirements to be classified as "well capitalized" by the OTS. See "Regulatory Capital Compliance," "Capitalization," "Pro Forma Data" and "Regulation--Regulation of Federal Savings Associations." The Bank's deposits are insured up to the maximum allowable amount by the Bank Insurance Fund (the "BIF") of the FDIC. The Bank's net income (loss) was $295,000 for the three months ended December 31, 1996 and was $558,000, ($462,000) and $311,000 for the 1996, 1995 and 1994 fiscal years, respectively. The Bank's net loss in fiscal 1995 resulted in part from a $279,000 provision for losses related to the failure of Nationar, then the Bank's principal correspondent bank, and a charge of $394,000 representing the cumulative after tax effect of an accounting change. See "Selected Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business of the Bank." Business Strategy. The Bank's principal business strategy has been to maintain its focus as a traditional local-oriented institution by concentrating its lending activities in one-to-four family residential mortgage loans, primarily first mortgage loans, but also including residential second mortgages and home equity line of credit loans. The Bank seeks to maintain a high level of credit quality with low delinquencies in order to minimize loan losses. See "Business of the Bank--Lending Activities" and "--Asset Quality." The Bank's non-loan investments are also concentrated in highly-rated debt securities. See "Business of the Bank--Investment Activities." The Conversion and the Sale of Company Stock The Bank's Board of Directors has adopted the Plan of Conversion which provides that the Bank will become a federal stock savings bank. All of the capital stock of the Bank issued in the Conversion will be acquired by the Company in exchange for 50% of the net proceeds from the sale of the Company's stock. The Conversion cannot be completed unless, among other things, it is approved by the Bank's members (depositors) at a special meeting (the "Special Meeting") to be held on ______________, 1997. See "The Conversion--General." The purpose of the Conversion is to increase the Bank's capital and so that it will be structured as a stock institution like commercial banks, most major business corporations and a growing number of savings institutions. The Conversion will enhance the Bank's ability to raise additional capital, expand its current operations, acquire other financial institutions or branch offices, and provide additional funds for home financing in its market area. The holding company form of organization in which the Company owns all the stock of the Bank provides additional flexibility to diversify through newly-formed subsidiaries or through acquisitions of or mergers with other financial institutions. There are no current arrangements, understandings or agreements regarding any such opportunities. See "The Conversion--Reasons for the Conversion." The holding company form of organization also provides certain protections against hostile takeovers. See "Risk Factors--Certain Anti-takeover Provisions." The Company's Common Stock will be offered in the Subscription Offering, in order of priority, to Eligible Account Holders, Employee Plans of the Bank or the Company, Supplemental Eligible Account Holders and Other Members. If the amount of Common Stock to be issued is increased as a result of an increase of up to 15% in the maximum of the Valuation Range, the ESOP will have a first priority right to purchase such additional shares. Subscription rights will expire at 12:00 noon, eastern time, on the Subscription Offering Expiration Date, unless extended by the Bank and the Company, with the approval of the OTS, if necessary. If available after the Subscription Offering, Common Stock is expected to be offered in a Public Offering. The Plan of Conversion also permits the Bank and the Company to sell any remaining Common Stock in a Community Offering with a preference to natural persons residing in Orange County, New York. See "The Conversion--Subscription Offering," "--Public Offering," and "--Community Offering." The Bank and the Company have retained Capital Resources as consultant and advisor in connection with the Offerings and to assist in soliciting subscriptions and purchase orders in the Offerings. The Bank and the Company will pay a fee to Capital Resources based on the aggregate purchase price of the Common Stock sold in the Offerings. Capital Resources is affiliated with Capital Resources Group, Inc. ("CRG"), which has prepared the appraisal of the estimated pro forma market value of the Common Stock to be issued in the Conversion (the "Appraisal"). See "The Conversion--Marketing Arrangements." Purchase Procedure In order to purchase Common Stock in the Subscription Offering, a purchaser must submit a fully completed stock order form, a signed certification form required by the OTS, and payment in full either by check, money order, bank draft, cash or an authorization to withdraw funds from an account at the Bank. Wire transfers will not be accepted. Orders in excess of $25,000 must be paid for by bank check, certified check or withdrawal authorization from an account with sufficient collected funds. The Company and the Bank are not obligated to accept or process orders which are submitted on facsimile or copied stock order forms. The Bank is prohibited from lending funds to any person or entity for the purpose of purchasing Common Stock in the Conversion. All persons with subscription rights must list all their accounts on the stock order form, giving all names on each account and the account numbers. Failure to do so may reduce the number of shares allocated to the subscriber if there is an oversubsription in any priority category. See "The Conversion--Purchasing Common Stock." Restrictions on Transfer of Subscription Rights Subscription rights may not be transferred and no agreement to transfer subscription rights will be valid. Each person exercising subscription rights must certify that any purchase of Common Stock will be solely for the purchaser's own account and that there is no agreement or understanding regarding the sale or transfer of any shares purchased as a result of the exercise of those rights. The Company and the Bank will pursue any and all legal and equitable remedies if they become aware of the transfer of subscription rights and will not honor orders known by them to involve the transfer of such rights. See "The Conversion--Restrictions on Transferability of Subscription Rights and Common Stock." Purchase Limitations The minimum purchase is 25 shares. The maximum purchase limit is $150,000, except that the ESOP will be permitted to purchase 8% of the shares of Common Stock issued in the Conversion. At any time during the Conversion, the Company and the Bank may increase the maximum purchase limitation, and increase the amount that may be subscribed for in the Offerings, to up to 5% of the shares offered. The Company may further increase the maximum purchase limit to 9.99% of the shares offered, but the amount by which each order exceeds 5% of the shares offered may not, in the aggregate, exceed 10% of the total shares offered. If the maximum purchase limit is increased, subscribers who submit orders for $150,000 of Common Stock will be resolicited and given an opportunity to increase their orders. See "The Conversion--Additional Purchase Restrictions." Stock Pricing and Number of Shares to be Issued The aggregate purchase price of the Common Stock to be issued in the Conversion will be based upon the Appraisal. CRG has advised the Bank that in its opinion, dated March 14, 1997, the aggregate estimated pro forma market value of such Common Stock, representing the estimated market value of such Common Stock upon consummation of the Conversion and after the receipt of the net proceeds by the Company, ranged from $14,450,000 to $19,550,000, with a midpoint of $17,000,000. See "The Conversion--Stock Pricing and Number of Shares to Be Issued." The Company has established a Purchase Price of $10.00 per share, and, therefore, the Company intends to sell between 1,445,000 and 1,955,000 shares of Common Stock in the Conversion, subject to a possible increase by up to 15% as described below. The Appraisal is not a recommendation of any kind as to the advisability of purchasing Common Stock nor can any assurance be given that purchasers of the Common Stock in the Conversion will be able to sell such shares at or above the Purchase Price. The actual number of shares of Common Stock to be issued in the Conversion will be determined by the Company and the Bank based upon an updated appraisal by CRG of the estimated pro forma market value of the Common Stock, giving effect to the Conversion, at the completion of the Offerings. If approved by the OTS, the Valuation Range may be increased or decreased to reflect market and economic conditions prior to the completion of the Conversion, and under such circumstances the Company may increase or decrease the number of shares of Common Stock to be issued in the Conversion. The maximum of the Valuation Range may be increased by up to 15% and the number of shares of Common Stock to be issued in the Conversion may be increased to 2,248,250 shares due to regulatory considerations, changes in the market and general financial and economic conditions. Subscribers will be resolicited and allowed to modify or cancel their subscriptions if the updated appraisal by CRG reflects an estimated pro forma market value of the Common Stock to be issued in the Conversion of more than $22,482,500 or less than $14,450,000. Subscribers will also be permitted to modify or cancel their subscriptions if the Conversion is not completed within 45 days after the Subscription Offering Expiration Date. See "Pro Forma Data," "Risk Factors--Possible Increase in the Valuation Range and Number of Shares to be Issued" and "The Conversion--Stock Pricing and Number of Shares to be Issued." Dividends Upon completion of the Conversion, the Board of Directors of the Company will have the authority to declare dividends on the Common Stock. The Board of Directors does not presently intend to declare dividends on the Common Stock but will consider doing so in the future. In the future, declarations of dividends, if any, by the Board of Directors will depend upon a number of factors, including the amount of the net proceeds from the Offerings retained by the Company, investment opportunities available to the Company or the Bank, capital requirements, regulatory limitations, the Company's and the Bank's financial condition and results of operations, tax considerations, general economic conditions, industry standards and other factors. The Company has committed to the OTS that it will not pay or undertake any action that will further the payment of a return of capital or other extraordinary dividend for one year after the consummation of the Conversion. As the principal asset of the Company, the Bank will provide the principal source of funds for payment of dividends by the Company. See "Dividend Policy." Benefits to Management and Directors The Board of Directors of the Company has adopted the ESOP and, following the Conversion, expects to adopt a stock option plan (the "Stock Option Plan") and a restricted stock award plan (the "Incentive Stock Award Plan" or "ISAP"). These plans are available to provide benefits to officers, employees and, except for the ESOP, to non-employee directors of the Bank and the Company. The ESOP is also expected to purchase 8% of the Common Stock issued in the Conversion. The Stock Option Plan will permit the issuance of options to purchase, in the aggregate, shares of Common Stock equal to 10% of the number of shares issued in the Conversion, and the ISAP will provide for the grant of restricted stock awards, in the aggregate, of up to 4% of the shares of stock issued in the Conversion. Stock Option Plan. If, as the Company intends, the Stock Option Plan is implemented within one year after the Conversion, it must be approved first by stockholders at a meeting to be held at least six months after the Conversion. OTS regulations provide that the Stock Option Plan may permit the grant of options to purchase, in the aggregate, a number of shares equal to not more than 10% of the Common Stock issued in the Conversion, with no more than 25% of such aggregate number of options to be awarded to any officer of the Bank and not more than 5% of such aggregate to be awarded to a non-employee director. It is expected that the exercise price of options granted under the Stock Option Plan will be equal to the fair market value of the Common Stock on the date the option is granted. Shares issued to satisfy the exercise of options under the Stock Option Plan may come from authorized but unissued shares or from shares repurchased by the Company. See "Risk Factors--Possible Dilution From Stock Options and the ISAP" and "Management of the Bank--Benefits--Stock Option Plan." Incentive Stock Award Plan. The ISAP is subject to the same approval requirements as the Stock Option Plan. If implemented, the ISAP is expected to be funded with Common Stock repurchased by the Company. Based upon the $10.00 Purchase Price, such repurchased shares would cost the Company from $578,000 to $899,300 at the minimum and 15% above the maximum of the Valuation Range. The ISAP is expected to provide for the award of shares of Common Stock to directors and officers which will vest 20% per year for five years after the date of the award. Under the anticipated terms of the ISAP, recipients will receive shares without any cost but cannot vote shares of stock awarded until the shares are vested. OTS regulations provide that the ISAP may permit the award of shares, in the aggregate, equal to not more than 4% of the Common Stock issued in the Conversion, with no more than 25% of such aggregate number of shares to be awarded to any officer of the Bank and not more than 5% of such aggregate to be awarded to a non-employee director. Based upon the $10.00 Purchase Price, the aggregate market value of the restricted stock intended to be awarded under the ISAP to Clifford E. Kelsey, Jr., President and Chief Executive Officer is from $144,500 to $224,825 and for the five non-employee directors as a group is from $144,500 to $224,825, based upon the minimum and 15% above the maximum of the Valuation Range, respectively. For financial reporting purposes, the Company will record compensation expense on account of the ISAP during periods in which awards vest in an amount equal to the fair market value of the stock on the date of vesting. If the fair market value on that date is greater than $10.00 per share, compensation expense will increase correspondingly. See "Management of the Bank--Benefits--Incentive Stock Award Plan." Employee Stock Ownership Plan. The ESOP intends to purchase up to 8% of the Common Stock issued in the Conversion and to finance its subscription with the ESOP Loan from the Company with a term of up to ten years at an interest rate of 7.75% per annum. The Bank intends to make contributions to the ESOP to pay principal and interest on the ESOP Loan. If shares are unavailable for purchase by the ESOP in the Subscription Offering, then the ESOP intends to purchase such shares in the open market after the Conversion. The Common Stock acquired by the ESOP will be allocated to eligible employees as the ESOP Loan is repaid. The ESOP provides for accelerated vesting in the event of a change of control. See "Management of the Bank--Benefits--Employee Stock Ownership Plan." Executive Officer Employment Contracts. The Bank and the Company have entered into employment contracts ("Employment Contracts") with four executive officers that will provide for, among other benefits, cash payments to them if their employment is terminated following a change of control of the Bank or the Company. Based on current compensation and benefit costs, cash payments to be made in the event of a change of control of the Bank or the Company pursuant to the terms of the Employment Contracts would be approximately $460,000 to Mr. Kelsey and $1,276,000 to the four executive officers as a group. However, the actual amount payable cannot be estimated at this time because it will be based on facts existing at the time of the change of control. See "Management of the Bank--Employment Contracts." The Bank and the Company also intend to enter into employee retention agreements ("Retention Agreements"), effective on the Conversion, with four other officers. Based on current compensation and benefits, cash payments to be made in the event of a change of control of the Bank or the Company would be approximately $533,000. However, the actual amount payable cannot be estimated at this time because it will be based on facts existing at the time of the change of control. See "Management of the Bank--Employee Retention Agreements." Subscriptions By Executive Officers and Directors. The Bank's executive officers and directors intend to purchase $576,450 of Common Stock in the Offerings, or from 3.99% to 2.56% of the Common Stock to be sold in the Conversion based on the minimum and 15% above the maximum of the Valuation Range, respectively. Subscriptions by executive officers will receive the same priority, based upon their status among the subscription priority categories, as all other depositors, except that, in the event of an oversubscription, their subscription rights based upon deposits made during the one year prior to December 31, 1995 will be subordinate to the subscription rights of other Eligible Account Holders. See "The Conversion-Participation by the Board and Senior Management."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035374_fox-hound_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035374_fox-hound_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c396d9a8b726c4dfa5428844b319bd5b4fa2597
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035374_fox-hound_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the historical and pro forma financial statements (including the notes thereto) appearing elsewhere in this Prospectus. This Prospectus contains certain forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors, including those set forth in "Risk Factors" and elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes (i) the completion of a 79-for-1 stock dividend prior to the date of this Prospectus and (ii) no exercise of the Underwriters' over-allotment option. THE COMPANY Total Entertainment Restaurant Corp. (the "Company") currently owns and operates 12 entertainment restaurant locations under the Fox & Hound ("Fox & Hound") and Bailey's Sports Grille ("Bailey's") brand names. The Company's entertainment restaurant locations combine a comfortable and inviting social gathering place, full menu and full service bar, state-of-the-art audio and video systems for sports entertainment, traditional games of skill such as pocket billiards and a late-night dining and entertainment alternative all in a single location. The Company's entertainment restaurant locations appeal to a broad range of guests who can participate in one or more aspects of the Company's total entertainment and restaurant experience. Fox & Hound and Bailey's encompass the Company's multi-dimensional concept and serve both larger urban and smaller regional markets. The first Bailey's was opened in Charlotte, North Carolina in 1989 and the first Fox & Hound was opened in Arlington, Texas in 1994. The Company currently owns and operates three Fox & Hounds and nine Bailey's in Arkansas, Indiana, North Carolina, South Carolina, Tennessee and Texas. The Company believes that its versatile entertainment restaurant concept will enable the Company to distinguish itself as the leader in this market segment. Management's strategy for attaining this leadership position is based on the following key elements: (i) provide guests with a wide variety of entertainment and dining options; (ii) leverage management's experience to secure favorable real estate sites, control costs and implement proven operating procedures; (iii) expand rapidly through selected geographic markets in the United States; (iv) utilize both the Fox & Hound and Bailey's brand names to target different market segments; and (v) provide high quality food and beverages, entertainment and customer service. The Company's management team has extensive experience in the restaurant business and has successfully developed and operated multi-unit concepts in a variety of geographic markets throughout the United States. The Company intends to open five entertainment restaurant locations in 1997 (one of which was opened in March 1997) and 20 locations in each of 1998 and 1999. Management expects that these future locations will range from 6,500 to 10,000 square feet. The Company is currently evaluating markets familiar to its management team and is actively negotiating additional leases at a number of sites. The Company expects to manage this growth by employing the services and infrastructure provided by Coulter Enterprises, Inc. to centralize its accounting and administrative controls. The Company, which was incorporated in Delaware in February 1997, was formed to acquire the Bailey's and Fox & Hound concept and their existing locations. The Company currently operates its Bailey's locations through its subsidiary Bailey's Sports Grille, Inc. and its Fox & Hound locations through separate subsidiary limited partnerships. The Company anticipates that future entertainment restaurant locations will be operated by separate subsidiary corporations in the states in which it will own and operate locations. The Company's principal executive offices are located at 300 Crescent Court, Building 300, Suite 850, Dallas, Texas 75201. The Company's telephone number is (214) 754-0414. THE OFFERING <TABLE> <S> <C> Common Stock offered hereby...................... 2,100,000 shares Common Stock to be outstanding after the Offering....................................... 10,100,000 shares(1) Use of Proceeds.................................. To finance the expansion and development of additional entertainment restaurant locations, to repay indebtedness and for general corporate purposes. See "Use of Proceeds." Risk Factors..................................... The purchase of the Common Stock offered hereby involves a high degree of risk including the Company's limited operating history, new management, small unit base, expansion strategy and future capital requirements. See "Risk Factors." Nasdaq National Market symbol.................... "TENT" </TABLE> - --------------- (1) Does not include (i) 1,500,000 shares reserved for issuance under the Company's 1997 Incentive and Nonqualified Stock Option Plan (the "1997 Plan"), of which options to purchase 800,348 shares will be granted on the date of this Prospectus and (ii) 150,000 shares reserved for issuance under the Company's 1997 Directors Stock Option Plan (the "Directors Plan"), of which options to purchase 50,000 shares will be granted on the date of this Prospectus. See "Management -- Stock Option Plans." SECTION 351 EXCHANGE On February 20, 1997, the Company effected an exchange (the "Exchange") of property under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"), with the stockholders of four corporations (the "Subsidiary Corporations") and certain limited partners of four Texas limited partnerships (the "Subsidiary Limited Partnerships"). Pursuant to the Exchange, the Company became the owner of the eight then-existing Bailey's locations and the three Fox & Hound locations. The Company issued 8,000,000 shares of its common stock, $0.01 par value (the "Common Stock"), in exchange for all of the outstanding stock of the Subsidiary Corporations and the outstanding limited partnership interests of the Subsidiary Limited Partnerships not owned by the Subsidiary Corporations. The Subsidiary Corporations and Subsidiary Limited Partnerships thereby became wholly-owned subsidiaries of the Company. All references to the Company in this Prospectus are to Total Entertainment Restaurant Corp., a Delaware corporation, and its subsidiaries, including the Subsidiary Limited Partnerships. See "Certain Transactions." SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA The following table sets forth certain historical financial and operating data for Bailey's Sports Grille, Inc. and the three Fox & Hound locations (the "Fox & Hound Entertainment and Restaurant Group"). The table also sets forth summary pro forma financial data for the Company as if the Exchange had occurred on January 1, 1996. The Company's pro forma statement of operations data for the twelve weeks ended March 19, 1996 and March 25, 1997 and the balance sheet data as of March 25, 1997 are unaudited and have been prepared by management solely to facilitate comparison and do not represent the actual results of operations for the periods presented. The pro forma financial data does not purport to be indicative of the results of operations to be expected in the future. The financial data below should be read in conjunction with all the historical and pro forma financial statements, including the notes thereto, and the information under "Selected Historical Financial Data," "Pro Forma Combined Condensed Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The pro forma information is not necessarily indicative of what the Company's results of operations would have been for the periods indicated. <TABLE> <CAPTION> HISTORICAL --------------------------------------------------------------------- FOX & HOUND ENTERTAINMENT AND THE COMPANY BAILEY'S SPORTS GRILLE, INC.(1) RESTAURANT GROUP PRO FORMA(2) ------------------------------------------ ------------------------ ------------------------------------- 12 WEEKS ENDED YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED --------------------- ------------------------------------------ ------------------------ DECEMBER 31, MARCH 19, MARCH 25, 1992 1993 1994 1995 1996 1994 1995 1996 1996 1996 1997 ------ ------ ------ ------ ------ ------ ------ ------ ------------- --------- --------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND NUMBER OF LOCATIONS) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales......... $1,069 $1,340 $2,928 $5,333 $9,312 $ 730 $2,618 $5,506 $14,818 $ 3,232 $ 4,084 Income (loss) from operations...... 234 290 316 726 1,709 (83) 109 420 1,905 516 495 Income (loss) before income taxes........... 204 274 250 602 1,502 (84) 96 364 1,271 387 304 Provision for income taxes(3)........ -- -- -- -- -- -- -- -- 476 145 114 Net income (loss).......... $ 204 $ 274 $ 250 $ 602 $1,502 $ (84) $ 96 $ 364 $ 795 $ 242 $ 190 Average shares outstanding..... 8,000,000 8,000,000 8,000,000 Net income per share(4)........ $ 0.10 $ 0.03 $ 0.02 OPERATING DATA: Annualized average weekly sales per location(5)..... $ 535 $ 670 $ 925 $1,123 $1,352 $1,165 $1,252 $1,801 $ 1,491 $ 1,556 $ 1,578 Number of locations at period end(6)... 2 2 4 6 8 2 3 3 11 9 12 Number of store operating weeks(7)........ 104 104 162 246 357 32 107 159 516 108 134 </TABLE> <TABLE> <CAPTION> THE COMPANY MARCH 25, 1997 ----------------------------- HISTORICAL AS ADJUSTED(8) ---------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................................................ $(10,130) $ 6,722 Total assets............................................................................. 14,189 20,205 Revolving note payable................................................................... 10,836 -- Stockholders' equity..................................................................... 1,620 18,472 </TABLE> - --------------- (1) Bailey's operates on a 52 or 53 week fiscal year ending on the last Tuesday in December. Bailey's 1996 fiscal year was comprised of 53 weeks. The Company will operate on a 52 or 53 week fiscal year ending on the last Tuesday in December. (2) The pro forma statement of operations data gives effect to the Exchange as if it occurred on January 1, 1996. See "Pro Forma Combined Condensed Financial Statements." (3) No income tax provision is presented for the historical results of Bailey's Sports Grille, Inc. or Fox & Hound Entertainment and Restaurant Group as the entities operated as either Subchapter S corporations or as partnerships and were not subject to income taxes at the entity level. (4) Gives effect to all shares of Common Stock outstanding immediately following the consummation of the Exchange and prior to the closing of this Offering as though they were outstanding since January 1, 1996. (5) Annualized average weekly sales per location are computed by dividing net sales for full weeks open during the period by the number of store operating weeks, and multiplying the result by fifty-two. (6) There were no locations closed during the periods presented. Therefore, the incremental change in the number of locations open at the end of each period represents the number of locations opened during such period. No new locations were opened during the twelve weeks ended March 19, 1996. One new location was opened during the twelve weeks ended March 25, 1997. (7) Store operating weeks represents the number of full weeks all locations were open during the period. (8) Adjusted to reflect the sale of the 2,100,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035442_iridium_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035442_iridium_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d87446b85fcac46efd2144692b11280968f88385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035442_iridium_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by reference to the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. See the Glossary included as Annex A hereto for the definitions of certain terms used in this Prospectus. On February 26, 1997, the Company effected a 100 for 1 stock split (the "Stock Split") of the Company's Class A Common Stock. On May 9, 1997, Iridium effected a 75 for 1 subdivision of its Class 1 Membership Interests whereby each existing Class 1 Interest was subdivided into 75 Class 1 Interests (the "Class 1 Interest Subdivision"). Unless otherwise indicated all information contained in this Prospectus reflects the Stock Split and the Class 1 Interest Subdivision and assumes that the over-allotment options granted to the Underwriters are not exercised. In this Prospectus, reference to "dollars" and "$" are United States dollars. THE COMPANY AND IRIDIUM Iridium LLC ("Iridium") is developing and commercializing a global mobile wireless communications system that will enable subscribers to send and receive telephone calls virtually anywhere in the world -- all with one phone, one phone number and one customer bill. The IRIDIUM communications system (the "IRIDIUM System") will combine the convenience of terrestrial wireless systems with the global reach of Iridium's satellite system. The IRIDIUM System encompasses four components: the "space segment," which will include the low earth orbit satellite constellation and the related control facilities; the ground stations or "gateways," which will link the satellites to terrestrial communications systems; the IRIDIUM subscriber equipment, which will provide mobile access to the satellite system and terrestrial wireless systems; and the terrestrial wireless interprotocol roaming infrastructure, which will facilitate roaming among the IRIDIUM satellite system and multiple terrestrial wireless systems that use different wireless protocols. Launch of the first five IRIDIUM satellites occurred on May 5, 1997, and Iridium expects to commence commercial operations in September 1998. The satellite constellation is being designed, assembled and delivered in orbit by Motorola, Inc. ("Motorola"), a leading international provider of wireless communications systems, phones and pagers, semiconductors and other electronic equipment. Motorola is also the principal investor in Iridium, having provided direct investments and guarantees totaling over $1.26 billion, and a conditional commitment to guarantee up to an additional $350 million of borrowings. Iridium's other strategic investors include leading wireless communications service providers from around the world, as well as experienced satellite manufacturers and experienced launch providers. Iridium World Communications Ltd., a Bermuda company (the "Company"), is the issuer of the Class A Common Stock offered hereby. Upon consummation of the Offerings and application of the net proceeds therefrom to purchase Class 1 Membership Interests in Iridium ("Class 1 Interests"), the Company will be admitted as a member of Iridium and is expected to own approximately 7.2% of the outstanding Class 1 Interests (approximately 8.2%, if the Underwriters' over-allotment options are exercised in full). See "Dilution." The shares of Class A Common Stock are equity securities of the Company and do not represent interests in Iridium. IRIDIUM SERVICES AND MARKET Global mobile satellite service ("MSS") systems such as the IRIDIUM System are designed to address two broad trends in the communications market: (i) the worldwide growth in the demand for portable wireless communications -- according to industry sources, the worldwide wireless communications market had approximately 135 million subscribers at year-end 1996 and is estimated to grow to over 400 million subscribers by year-end 2000; and (ii) the growing demand for communications services to and from areas where landline or terrestrial wireless service is not available or accessible. The IRIDIUM System architecture and IRIDIUM voice, data, facsimile and paging services ("IRIDIUM Services") are primarily designed to serve customers who place the greatest value on global mobile communications services. Iridium believes there is a significant market comprised of individuals and businesses who need global communications capability and are willing to pay for the convenience of a hand-held wireless phone or belt-worn pager. The availability of terrestrial wireless communications service is often constrained by the limited --------------------- CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF CLASS A COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." --------------------- FORWARD LOOKING INFORMATION Iridium is a development stage enterprise. Accordingly, all statements in this Prospectus that are not clearly historical in nature are forward looking. Examples of such forward looking statements include the statements concerning Iridium's operations, prospects, markets, size of addressable markets for mobile satellite services, technical capabilities, funding needs, financing sources, pricing, launch schedule, commercial operations schedule, the estimate of the last year in which Iridium will have negative cash flow and a net increase in year-end borrowings, and future regulatory approvals, as well as information concerning expected characteristics of competing systems and expected actions of third parties such as equipment suppliers, gateway operators, service providers and roaming partners. These forward looking statements are inherently predictive and speculative and no assurance can be given that any of such statements will prove to be correct. Actual results and developments may be materially different from those expressed or implied by such statements. See "Risk Factors" for a discussion of various factors which, among others, could result in any of such forward looking statements proving to be inaccurate. geographic coverage of terrestrial systems, the incompatibility of differing wireless protocols or the absence of roaming agreements among wireless operators. The combination of IRIDIUM Cellular Roaming Service ("ICRS"), IRIDIUM Satellite Services and IRIDIUM paging will extend wireless access globally and allow customers of Iridium to be reached by phone or pager, and to place phone calls from or to, virtually anywhere in the world with one phone and one phone number. ICRS is expected to enable customers to roam on an international basis among terrestrial wireless networks, including those using different protocols, that have roaming agreements with Iridium. IRIDIUM Satellite Services will extend voice services to the regions of the world not served by terrestrial systems. Iridium intends to offer global paging both in combination with IRIDIUM voice services and as a stand-alone service. Iridium believes that the signaling capabilities of the IRIDIUM System will enable Iridium to track the location of a voice customer effectively and with minimal customer cooperation, thereby allowing Iridium to direct pages and calls as customers travel globally. Iridium also expects to offer, commencing in 1999, a broad range of in-flight passenger communications services with participating airlines, including global incoming and outgoing voice, data and facsimile services. In addition, Iridium expects to market IRIDIUM Services to governmental, industrial and rural users of wireless communications systems. Iridium believes it will be the only wireless communications system in operation prior to 2000 that will be able to offer this array of global communications services. See "Risk Factors -- Consequences of Satellite Service Limitations on Customer Acceptance" and "-- Consequences of IRIDIUM Phone and Pager Characteristics on Customer Acceptance." To estimate potential demand for its services, Iridium has engaged in extensive market analysis, including primary market research which involved screening over 200,000 persons and interviewing more than 23,300 individuals from 42 countries and 3,000 corporations with remote operations. Based on this market analysis, Iridium has identified five target markets for IRIDIUM Services: traveling professionals; corporate/industrial; government; rural; and aeronautical. Iridium expects the traveling professional and corporate/industrial markets will provide most of the demand for IRIDIUM Services. Iridium believes that individuals in these markets are more likely to need and have the ability to afford hand-held, global mobile communications capability than, for example, individuals who live in remote areas outside existing distribution channels for wireless communications services. Iridium estimates that the addressable traveling professional market, which it defines as all employed adults living in urban areas who own a wireless phone and travel at least four times per year beyond the coverage of their current wireless phone, will include approximately 42 million individuals by 2002. The global corporate/industrial addressable market, which consists of companies with more than 1,000 employees in industries with operations that are likely to need mobile satellite services, is estimated by Iridium to include over 8,800 companies by 2002. Iridium believes that its unique service package is well tailored to meet the demands of, and will give Iridium an advantage over competing MSS systems in, these target markets. For a more detailed description of Iridium's target markets see "Business -- The IRIDIUM Market," and for a discussion of the forward looking nature of Iridium's estimates, and various of the factors which could cause actual addressable markets to differ materially from these estimates, see "Risk Factors -- Risk of Error in Forward Looking Statements." THE IRIDIUM SYSTEM The satellite constellation of the IRIDIUM System, which will consist of 66 operational satellites arranged in six polar orbital planes, is being assembled and delivered in orbit by Motorola pursuant to a fixed price contract, subject to certain adjustments. Motorola also will operate and maintain the satellite constellation for five years (extendible to seven years at Iridium's option) under a fixed price contract, subject to certain adjustments. Iridium believes the IRIDIUM System will have greater signal strength than other proposed MSS systems, thereby allowing it to better serve hand-held phones and providing a higher degree of in-building penetration for paging services. The IRIDIUM System utilizes adaptations of proven technologies, including GSM cellular call processing technology, intersatellite links, FDMA/TDMA radio transmission technology, a 2,400 bps vocoder and business support software. The IRIDIUM satellites will feature cross-link antennas allowing telephone calls and signaling information to be passed globally from satellite to satellite. These intersatellite links, which enable the satellites to function as switches in the sky, will allow the IRIDIUM System to (i) select the optimal space-to-ground path of each call, thereby enhancing system reliability and capacity while reducing the costs associated with the use of terrestrial phone systems, (ii) communicate with subscribers in all regions of the world (including mid-ocean and remote areas) regardless of their proximity to a gateway, (iii) provide full global coverage with a relatively small number of gateways, thereby lowering total ground segment build-out and operating costs and (iv) provide enhanced ability to track the location of a voice customer, allowing Iridium to direct calls and pages as customers travel globally. In addition, the communications, station keeping and control systems of the IRIDIUM satellites can be upgraded, maintained and reconfigured in orbit through the remote loading of software. Iridium believes that its primary technological challenge in implementing the IRIDIUM System is the integration of these proven technologies into a single system. Iridium expects to provide virtually global service initially through 11 gateways, although it will be able to provide full global service with fewer gateways. Each of these 11 gateways will be owned, operated and financed by one or more investors in Iridium or their affiliates. IRIDIUM subscriber equipment will support voice, data and paging services. Iridium expects that portable, hand-held IRIDIUM phones will be manufactured by at least two experienced suppliers, Motorola and Kyocera Corporation ("Kyocera"), both of which have hand-held IRIDIUM phones under development. The phones are expected to be available in satellite-only and "multi-mode" models. The multi-mode phone being developed by Motorola uses changeable terrestrial radio cassettes ("TRCs") which can be inserted into the phone. TRCs will be developed for most major terrestrial wireless protocols so that with a single multi-mode phone and the appropriate TRCs, a subscriber will be able to access the IRIDIUM System and most terrestrial wireless systems. Kyocera's multi-mode phone is expected to be configured as a satellite phone casing into which terrestrial wireless phones using different protocols can be inserted. The IRIDIUM belt-worn pager, to be manufactured by Motorola, will have the capability to receive alphanumeric messages virtually anywhere in the world. ICRS will support roaming among the two principal types of terrestrial wireless protocols -- IS-41 (AMPS, NAMPS and CDMA) and GSM (GSM900, DCS1900 and DCS1800). Roaming between these protocols requires cross protocol translation which will be accomplished for ICRS through the IRIDIUM Interoperability Unit ("IIU"), being developed under the direction of Motorola. The IIU will permit system management information, including customer authentication and location, to be relayed between systems that use different technologies. PRICING STRATEGY, DISTRIBUTION AND MARKETING Iridium intends to implement a pricing strategy for its voice services similar to the prevailing pricing structure for terrestrial wireless calls. Prices for terrestrial wireless calls generally reflect two components -- a charge based on the landline "dial-up" rate for a comparable call (primarily the long distance charges) and a mobility premium for the convenience of wireless service (including any roaming charges). Pricing for both IRIDIUM Satellite Services and ICRS is expected to be based on this structure. For international IRIDIUM Satellite Services calls, which Iridium expects will constitute the majority of calls over the IRIDIUM satellite system, the "dial-up" rate component will be designed to approximate the rates for comparable landline point-to-point international long distance calls. Iridium has analyzed and will continue to analyze published international direct dial rates around the world as well as published international calling card rates of many of the largest international telecommunications carriers in establishing the "dial-up" rate component. Iridium intends to set the global mobility premium with reference to the premium charged by other wireless services, including cross-protocol international terrestrial wireless roaming services and competing MSS systems. Iridium will set the wholesale prices for its services to allow for a suggested retail price that will approximate the "dial-up" plus mobility premium price. Iridium's wholesale price will be designed to compensate Iridium, as the network provider, and the originating and terminating gateways, as well as to cover the PSTN tail charges. The home gateway will mark up the wholesale price and the service provider will establish the final retail price. Iridium expects that for international wireless calls, Iridium's suggested retail prices will be competitive with other global MSS systems. In addition, from a regulatory approval perspective in markets where the monopoly telecommunications provider and the licensing authority are the same entity, a pricing strategy that takes into account the "dial-up" alternatives allows Iridium to respond to concerns that Iridium will capture the local monopoly provider's long-distance revenues by undercutting terrestrial "dial-up" rates. For ICRS pricing, the "dial up" rate component is primarily the long distance charge, if any, which will be passed through to the customer. The mobility premium will be set to compensate the parties involved, primarily the serving network for its airtime charges, the visited gateway for customer authentication and Iridium for protocol translation services. The retail price will include the markup of the home gateway and service provider. Iridium believes that its ICRS suggested retail prices will be comparable to prices charged by other cross-protocol roaming services. In addition to airtime charges, IRIDIUM subscribers will pay a monthly subscription fee in the same manner that terrestrial wireless customers pay monthly charges. Iridium will permit service providers that are wireless network operators to offer IRIDIUM Services as additional features to their existing wireless services, permitting their customers to remain customers of the wireless network and to roam onto the IRIDIUM System. These customers will pay a feature charge to Iridium for the roaming privilege that will be significantly below the IRIDIUM monthly subscription fee, but they will pay an additional roaming premium for calls made over the IRIDIUM System. Initially, Iridium paging subscribers will pay a fixed monthly subscription fee for unlimited paging. Iridium expects to implement per page pricing after commencement of commercial operations, with the cost per page based, in part, on the size of the geographic area covered by the page. The monthly paging subscription fees will be reduced for persons who are also subscribers to IRIDIUM voice services. Iridium's distribution strategy reflects its role as a wholesaler of IRIDIUM Services and is primarily designed to leverage off established retail distribution channels by using existing distributors of wireless services as IRIDIUM service providers and marketing IRIDIUM Services to their customers. Iridium will implement the distribution of IRIDIUM Services through its gateway operators, all of which have agreed to become or to engage IRIDIUM service providers within their exclusive gateway territories. IRIDIUM service providers will generally have primary responsibility for marketing IRIDIUM Services within their territories in accordance with marketing policies and programs established by Iridium. They will also be responsible for customer service, billing and collection. Iridium anticipates its gateway operators will generally seek to utilize more than one method of distribution in their markets. Iridium expects that its service providers also will include affinity partners (e.g., airlines, hotels and car rental companies). Iridium's marketing strategy is to position IRIDIUM as the premier brand in global wireless communications services. Iridium believes that its principal target markets -- traveling professional and corporate/industrial -- can be accessed through established marketing channels, which will permit more effective marketing compared to MSS systems targeting individuals in remote areas where marketing opportunities and distribution channels are limited. Iridium is coordinating with its gateway partners to determine the optimum allocation of marketing expenditures based on the market analysis that Iridium has conducted. Iridium plans to engage in direct marketing to certain markets, such as the utility, oil and gas, mining and maritime industries. Iridium believes that a coordinated and comprehensive global marketing strategy, supported by its market research, will promote a consistent message and permit Iridium to establish a global brand identity. IRIDIUM'S INVESTOR GROUP The IRIDIUM investor team includes enterprises from around the world with skills and experience in developing, manufacturing, licensing and distributing satellite and telecommunications products and services. Iridium's strategic investors have collectively invested, or committed to invest, approximately $3.34 billion in Iridium, including equity, debt, guarantees, conditional commitments to provide guarantees and a reserve capital call. These investments represent more than 77% of Iridium's projected total funding needs through the end of September 1998, the month Iridium expects to commence commercial operations, and approximately 67% of Iridium's projected total funding needs through December 31, 1999, the last year in which Iridium projects negative cash flow and a net increase in year-end borrowings. By partnering with strategic investors, Iridium benefits from the development, manufacturing and launch expertise of leading worldwide satellite development and launch organizations and from the wireless telecommunications distribution and regulatory expertise of leading telecommunications companies. The Iridium investor team includes leading telecommunications companies in North America (Motorola, Sprint and BCE Mobile Communications Inc.), Europe (STET and o.tel.o communications GmbH) and Asia (DDI in Japan, UCOM in Thailand and Korea Mobile Telecommunications). Iridium expects that these investors will use their wireless communications sales and services organizations to market IRIDIUM Services and equipment in their territories, which include their existing base of approximately 14 million wireless subscribers. In addition, because of the prominence of many of these investors, Iridium believes that their efforts to obtain necessary regulatory approvals have been, and will continue to be, of great importance. The investor team also includes organizations with significant satellite communications development, manufacturing and launch expertise including Raytheon, Lockheed Martin, Nuova Telespazio, Khrunichev and China Aerospace. Iridium expects subscriber equipment for use with the IRIDIUM System will be manufactured and sold by Motorola and Kyocera, two of the world's leading manufacturers of wireless phones. On May 30, 1997, South Pacific Iridium Holdings Limited ("SPI"), an indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation, purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant to the terms of its purchase agreement with Iridium, SPI exercised its right to defer payment of 60% of the total purchase price payable and is required to pay 10% of the total purchase price on or before November 15, 1997 and the remaining 50% on or before May 15, 1998. The total purchase price of such Class 1 Interests will increase to approximately $110 million in the event SPI elects in full its right to defer payment. All information in this Prospectus with respect to Class 1 Interests gives effect to the issuance of 7,500,000 Class 1 Interests to SPI. In connection with its investment in Iridium, SPI was allocated the South Pacific gateway service territory. PROGRESS TO DATE Iridium, Motorola and the various gateway owners have made substantial progress in the development and implementation of the IRIDIUM System and related activities and expect to commence global commercial service on schedule in September 1998. Satellite hardware development is substantially complete. By early May 1997, eight satellites had been produced, seven additional satellites had been assembled and were in testing and additional satellites were being produced at a rate of approximately five per month. The first five IRIDIUM satellites were launched on May 5, 1997. The initial satellite launch had been scheduled to occur in January 1997, but was postponed until May 1997 following the failure of a Delta II launch vehicle, the same type of launch vehicle McDonnell Douglas is using for Iridium satellite launches. Motorola has informed Iridium that it is in the process of reworking the original launch schedule with its launch service providers and currently believes that the new planned launch schedule should permit Iridium to meet its planned September 1998 commencement of commercial operations for the IRIDIUM System and that there will be no price adjustment under the Space System Contract, the Operations and Maintenance Contract or the Terrestrial Network Development Contract as a result of the initial launch delay. See "Risk Factors -- Potential for Delay and Cost Overruns -- Deployment of Satellites" and "-- Satellite Launch Risks -- Number of Launches; Compressed Launch Schedule." Motorola has completed construction of most of the terrestrial facilities necessary to command the in-space movements of the IRIDIUM System's satellites, including the Master Control Facility and the associated tracking, telemetry and command ("TT&C") facilities. The construction of the Iridium North America (Tempe, Arizona) and Nippon Iridium Corporation (Nagano, Japan) gateway facilities is substantially complete and the telecommunications equipment is being installed at both locations. Equipment procurement has commenced for seven other gateways pursuant to gateway equipment purchase agreements with Motorola. Motorola has produced a functional, unminiaturized prototype of the IRIDIUM phone, and Motorola has produced a functional prototype of the IRIDIUM belt-worn pager. Iridium has also made substantial progress in the development of its IRIDIUM business support systems, which will be used for the provision of its billing and customer support functions. See "Risk Factors" for a description of the risks that could impair the ability of Iridium to commence commercial operations on schedule in September 1998. Iridium has made significant progress to date in securing the worldwide regulatory approvals necessary to build and operate the IRIDIUM System. At the 1992 World Administrative Radiocommunications Conference ("WARC-92"), the International Telecommunications Union (the "ITU") allocated 16.5 MHz of spectrum in the 1610-1626.5 MHz band to MSS systems. The U.S. Federal Communications Commission (the "FCC") conditionally assigned the IRIDIUM System exclusive use of 5.15 MHz of the 16.5 MHz for use in the United States. The space segment of the IRIDIUM System has been licensed in the United States. Iridium believes that coordination through the ITU has been completed successfully between the IRIDIUM System and all existing or planned systems that have been identified under the ITU's coordination process. No other action is required from any other country to license the space segment. Three final and four experimental licenses to build and operate gateways have been received, including a final license with respect to the Iridium North America gateway in Tempe, Arizona. Each country in which Iridium intends to operate must authorize use of IRIDIUM subscriber equipment, including allocation of subscriber link frequencies. The FCC has issued a license covering IRIDIUM Satellite Services in the United States and six additional countries have granted conditional licenses for IRIDIUM Satellite Services in their respective countries. Iridium's gateway owners are dedicating substantial effort to obtaining licensing for IRIDIUM Satellite Services in the countries in their service territories with particular focus on obtaining licenses by the commencement of commercial operations in those countries which are expected to account for most of the demand for and usage of IRIDIUM Services. See "Risk Factors -- Risks Associated with Licensing and Spectrum Allocation -- Significant Regulatory Approvals Required for Operation of the IRIDIUM System," "-- Significant Remaining Regulatory Approvals" and "Regulation of Iridium" for a discussion of the conditions to these licenses and the additional regulatory approvals outside the United States that remain to be obtained. THE COMPANY The Company is organized to act as a member of Iridium and to have no other business. The Company will use the net proceeds from the Offerings to acquire Class 1 Interests. Upon consummation of the Offerings and application of the proceeds therefrom to purchase Class 1 Interests, the Company is expected to own approximately 7.2% of the outstanding Class 1 Interests (approximately 8.2% if the Underwriters' over-allotment options are exercised in full). See "Dilution" and "Governance of the Company and Relationship with Iridium." BUSINESS STRATEGY Iridium's strategy is to launch and operate the premier global mobile wireless network. The key components of this strategy are set forth below: Provide a unique service package to traveling professionals enabling them to be reached and make calls virtually anywhere in the world. IRIDIUM Satellite Services will complement terrestrial wireless services and provide the traveling professional with communications capability in areas where terrestrial wireless service is unavailable, inconvenient, of poor quality or unreliable. Iridium intends to offer ICRS and global paging as complements to IRIDIUM Satellite Services and as stand-alone services. Iridium believes that it will be the only wireless communications system in operation prior to 2000 that will be able to offer virtually global mobile voice and paging services, including: - Global coverage. An IRIDIUM subscriber will generally have worldwide wireless coverage wherever IRIDIUM Services are authorized, including mid-ocean and remote areas. The availability of the IRIDIUM Satellite Service will not be limited by the customer's proximity to a gateway. Iridium believes this feature will make its Satellite Services particularly well suited for aeronautical and shipping communications and for service in land areas where LEO MSS systems using "bent pipe" technology are not expected to have the more extensive gateway infrastructure needed by such systems to provide global coverage. - Convenient roaming onto terrestrial wireless networks. Iridium will offer subscribers a combination of IRIDIUM Satellite Services and ICRS. With the addition of ICRS, customers will be able to overcome (i) the incompatibility of differing wireless protocols and (ii) the service limitations of satellite-only voice services in buildings and urban canyons. Iridium expects to be able to deliver all of its voice services with one phone, one phone number and one customer bill. - Global paging with belt-worn pagers. The IRIDIUM belt-worn pager will have the capability of receiving alphanumeric messages of up to 63 characters and numeric messages of up to 20 digits virtually anywhere in the world. With Iridium's global paging, users of IRIDIUM Satellite Services or ICRS will generally be able to update their location on the IRIDIUM System by briefly turning on their phone, thereby allowing the IRIDIUM System to send a targeted page. Iridium believes that it will be the first company, and the only company prior to 2000, which will offer global paging to a belt-worn pager. - Greater signal strength. The IRIDIUM System is designed to provide greater signal strength than proposed competing MSS systems. Iridium believes this greater signal strength will allow it to better serve hand-held phones, and provide a higher degree of in-building signal penetration for pagers, than competing MSS systems. Be the first to market with a global wireless communications system. Iridium plans to capitalize on the substantial design, development, fabrication and testing efforts and financial investment to date of its strategic investors to bring IRIDIUM Services to market at the earliest practicable date, which is currently expected to be September 1998. Iridium believes that it will be the only wireless communications system in operation prior to 2000 that will be able to offer global mobile voice and paging services in each country in which IRIDIUM Services are authorized. Adapt proven technologies through an industrial team led by Motorola. The IRIDIUM System adapts proven technology, including GSM cellular call processing technology, intersatellite links, FDMA/TDMA radio transmission technology, a 2,400 bps vocoder and business support software. Iridium believes that the primary technological challenge is the integration of these proven technologies into a single system. Motorola, the principal investor in Iridium, is a leading international provider of wireless communications systems, cellular phones, pagers, semiconductors and other electronic equipment. The industrial team assembled by Motorola to build and deliver in orbit the IRIDIUM System consists of major companies experienced in aerospace and telecommunications, including Nuova Telespazio, Lockheed Martin, Raytheon, McDonnell Douglas, Khrunichev and China Aerospace. Capitalize on the strengths of its strategic investors. A number of Iridium's strategic investors provide telecommunications services in various parts of the world and have significant operating, regulatory and marketing experience in their service territories. Iridium expects that its investors with existing wireless communications sales and service organizations will use these organizations to market and distribute IRIDIUM Services and equipment to potential subscribers. Because of the prominence of many of these investors, Iridium believes that their efforts to obtain the necessary regulatory approvals have been, and will continue to be, of great importance. Utilize existing wireless distribution channels. Iridium's strategy is to target primarily traveling professionals, who are generally wireless phone users. Iridium's strategy is to provide customers with an enhancement to their existing terrestrial wireless service through existing marketing and distribution channels rather than to focus on individuals who have no or limited landline or wireless communications experience and live in areas where no marketing and distribution channels currently exist. SOURCES AND USES OF FUNDS BY IRIDIUM The following table describes the estimated sources and uses of funds by Iridium from its inception through the end of September 1998 (the month Iridium expects to commence commercial operations). Significant additional funds will be needed to cover Iridium's cash needs prior to its generation of positive cash flow from operations. The projection of total sources and total uses of funds is forward looking and could vary, perhaps substantially, from actual results, due to events outside Iridium's control, including unexpected costs and unforeseen delays. See "Risk Factors -- Risk of Error in Forward Looking Statements." PRE-OPERATIONAL PERIOD(1) (IN MILLIONS) <TABLE> <CAPTION> SOURCES OF FUNDS - ------------------------------------ <S> <C> Class 1 Interests(2)................ $1,728 Series A Class 2 Interests(3)....... 31 14 1/2% Senior Subordinated Notes due 2006(4)....................... 238 Guaranteed Bank Facility(5)......... 750 ------ Total.......................... 2,747 Estimated Net Proceeds to Iridium from the Offerings(6)............. 186 ------ Total after Offerings.......... 2,933 Reserve Capital Call(7)............. 243 Conditional Motorola Guarantee Commitment(8)..................... 350 Additional funding requirements(9)................... 835 ------ Total Pre-operational Sources...................... $4,361 ====== </TABLE> <TABLE> <CAPTION> USES OF FUNDS - ------------------------------------ <S> <C> Space System Contract(10)........... $3,450 Terrestrial Network Development Contract(11)...................... 179 Business support systems and other expenditures(12).................. 184 Net interest and financing costs(13)......................... 220 Net expenses and working capital(13)(14)................... 328 ------ Total Pre-operational net uses......................... $4,361 ====== </TABLE> - --------------- (1) Assumes that the IRIDIUM System will commence commercial operations in September 1998. Iridium anticipates total cash needs of $5.0 billion (net of assumed revenues following commencement of commercial operations) through year-end 1999, the last year in which Iridium projects negative cash flow and a net increase in year-end borrowings. Many factors, including Iridium's ability to generate significant revenues, could affect this estimate. See "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) Includes the investment of $100 million by South Pacific Iridium Holdings Limited ("SPI"), an indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation. On May 30, 1997, SPI purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant to the terms of its purchase agreement with Iridium, SPI exercised its right to defer payment of 60% of the total purchase price and is required to pay 10% of the total purchase price on or before November 15, 1997 and the remaining 50% on or before May 15, 1998. The aggregate purchase price of such Class 1 Interests will increase to approximately $110 million in the event SPI elects in full its right to defer payment. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) The Series A Class 2 Interests pay a 14 1/2% dividend which, at the option of Iridium, may be paid in-kind until 2001 and paid in cash thereafter. If all dividends permitted to be paid in-kind are paid in-kind, at the time when the Series A Class 2 Interests convert to a cash dividend, there will be 62,668 Series A Class 2 Interests outstanding convertible into 1,159,985 Class 1 Interests, subject to anti-dilution adjustments. (4) These Notes were issued with warrants to purchase 4,997,292 Class 1 Interests at a price of $.01 per Interest. (5) As of March 31, 1997, Iridium had drawn $665 million under a $750 million borrowing facility with a syndicate of banks (the "Guaranteed Bank Facility"). Borrowings under the Guaranteed Bank Facility are guaranteed by Motorola. The Guaranteed Bank Facility matures in August 1998. Iridium expects that it will be able to extend this facility through December 31, 2000. Motorola has conditionally committed to extend its guarantee to that date if the Guaranteed Bank Facility is so extended. In connection with its guarantee of the Guaranteed Bank Facility Motorola received a security interest in substantially all of Iridium's assets. Motorola's compensation for the $750 million guarantee is in the form of warrants to acquire additional Class 1 Interests at $.00013 per Class 1 Interest. The maximum number of warrants to be issued as compensation for the $750 million guarantee prior to the commencement of commercial operations would be warrants to purchase 11,250,000 Class 1 Interests (subject to anti-dilution adjustments). If the Guaranteed Bank Facility is extended beyond the commencement of commercial operations, the yearly warrant compensation proposed by Motorola would be warrants to purchase 900,000 Class 1 Interests at $.00013 per Class 1 Interest for each $100 million of guarantee commitments, beginning at the commencement of commercial operations (subject to anti-dilution adjustments). The Class 1 Interests acquired upon exercise of such warrants must be held for five years from the date of issuance of such Interests. See "Dilution." (6) Reflects the application of the estimated net proceeds of the Offerings to the purchase from Iridium of 10,000,000 Class 1 Interests at a price per Class 1 Interest equal to the net price per share of Class A Common Stock payable to the Company in the Offerings. Expenses of the Offerings, estimated to be $2,000,000, will be borne entirely by Iridium. See "Use of Proceeds." (7) Seventeen of Iridium's investors have made varying reserve capital call commitments to purchase an aggregate of 18,206,550 Class 1 Interests at $13.33 per Class 1 Interest for an aggregate purchase price of approximately $243 million (the "Reserve Capital Call"). Iridium is required to exercise the Reserve Capital Call under certain conditions, including in the event of a prospective funding shortfall. See "Description of Iridium LLC Limited Liability Company Agreement -- Capital Contributions; Reserve Capital Call." (8) Motorola has made a conditional commitment to guarantee up to an additional $350 million of borrowings under the Guaranteed Bank Facility, for which Motorola would be compensated with additional warrants to purchase Class 1 Interests at $.00013 per Class 1 Interest. The maximum number of warrants to be issued as compensation for the additional $350 million guarantee, if implemented, would be warrants to purchase 3,750,000 Class 1 Interests (subject to anti-dilution adjustments) prior to commencement of commercial operations. See "Dilution." If such additional borrowing under the Guaranteed Bank Facility is extended beyond its August 1998 maturity date, Motorola has proposed additional warrant compensation beginning at commencement of commercial operations as described in note (5) above. (9) Iridium currently expects to satisfy its additional funding requirements through the incurrence of debt. Iridium is seeking to obtain a senior bank facility in an amount of up to approximately $1.7 billion. In addition to or in lieu of such bank facility, additional financing may need to be obtained through the issuance of equity or debt securities in the public or private markets. Iridium expects that in connection with any issuance of debt securities in the public or private market, equity compensation in the form of warrants to purchase shares of Class A Common Stock likely will be required. Iridium also expects that other methods of debt financings are likely to require guarantees or other forms of credit support and that compensation, including equity (which may be in the form of warrants) likely will be required for such guarantees. There are currently no agreements with Motorola or Iridium's other investors or vendors to provide such credit support. It is possible that some portion of Iridium's additional funding requirements may be met through the issuance of additional equity. Although Iridium believes that it will be able to meet its additional funding requirements, there can be no assurance that such financing will be available on favorable terms, on a timely basis, or at all. Among other things, the availability of any financing is subject to market conditions at the time of any proposed financing. See "Risk Factors -- Significant Additional Funding Needs" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (10) As of March 31, 1997, Iridium had incurred $2,284 million of this amount. See "Risk Factors -- Potential for Delay and Cost Overruns," "-- Risks Associated with Principal Supply Contracts" and "-- Satellite Launch Risks -- Impact of Excusable Delays." (11) As of March 31, 1997, Iridium had incurred $64 million of this amount. See "Risk Factors -- Risks Associated with Principal Supply Contracts." (12) As of March 31, 1997, Iridium had incurred $28 million of this amount. See "Risk Factors -- Risks Associated with Principal Supply Contracts." (13) Based on assumed interest rates and borrowing levels. Actual interest and financing costs will depend upon applicable interest rates and the amount and timing of actual borrowings. (14) Comprised of operating expenses of $587 million and net of interest income of $13 million and working capital of $246 million. THE OFFERINGS Class A Common Stock offered by the Company: U.S. Offering..................... 8,000,000 shares International Offering............ 2,000,000 shares Total.......................... 10,000,000 shares Class A Common Stock of the Company to be outstanding immediately after the Offerings..................... 10,000,000 shares(1) Iridium Class 1 Interests to be outstanding immediately after the Offerings......................... 139,219,150 Interests(1)(2) Iridium Class 1 Interests to be owned by the Company immediately following the Offerings........... 10,000,000 Interests(1) Use of Proceeds..................... The estimated net proceeds of the Offerings, including the net proceeds from any exercise of the Underwriters' over-allotment options, will be used by the Company to purchase Class 1 Interests in Iridium pursuant to the terms of the 1997 Subscription Agreement described under "Governance of the Company and Relationship with Iridium -- 1997 Subscription Agreement." Iridium will use the proceeds from such sale of the Class 1 Interests primarily to make milestone payments under the Space System Contract and the Terrestrial Network Development Contract and to a lesser extent for other general corporate purposes related to the commercialization of the IRIDIUM System. See "Use of Proceeds." Voting Rights....................... All voting rights with respect to the affairs of the Company, except as otherwise required by law, are vested in the holders of the Class A Common Stock. See "Governance of the Company and Relationship with Iridium" and "Description of Capital Stock." Nasdaq NMS Symbol................... IRIDF - --------------- (1) Assumes the Underwriters' over-allotment options are not exercised. If the over-allotment options are exercised in full, there will be 11,500,000 shares of Class A Common Stock, and 140,719,150 Class 1 Interests, outstanding immediately following the Offerings of which the Company will own 11,500,000 Interests. Does not reflect the issuance of shares of the Company's non-voting Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), to be issued in connection with the Company's Global Ownership Program or the application of the proceeds therefrom to acquire Class 1 Interests. Upon satisfaction of certain conditions, the shares of Class B Common Stock may be exchanged for shares of Class A Common Stock. There are no shares of Class B Common Stock outstanding. See "Governance of the Company and Relationship with Iridium -- Global Ownership Program" and "Description of Capital Stock." (2) This amount does not give effect to the issuance of any Class 1 Interests pursuant to options, warrants or convertible interests or pursuant to the Reserve Capital Call. See "Dilution."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035507_800-jr_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035507_800-jr_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..022c9de4757d2b5e7afd51f567f71fb1c439e6ae
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035507_800-jr_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE PREDECESSOR COMBINED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS GIVES EFFECT TO THE REORGANIZATION OF THE COMPANY (THE "REORGANIZATION"), PURSUANT TO WHICH THE EXISTING STOCKHOLDERS (AS DEFINED) WILL CONTRIBUTE TO 800-JR CIGAR, INC. ("800-JR CIGAR") 100% OF THE OUTSTANDING CAPITAL STOCK OF EACH OF J.R. TOBACCO OF AMERICA, INC., CIGARS BY SANTA CLARA, N.A., INC., J.N.R. GROCERY CORP., J.R. TOBACCO NC, INC., J&R TOBACCO (NEW JERSEY) CORP., J.R. TOBACCO COMPANY OF MICHIGAN, INC., J.R.-46TH STREET, INC., J.R. TOBACCO OUTLET, INC., J.R. STATESVILLE, INC. AND J R CIGAR (DC), INC. (COLLECTIVELY, THE "CONSTITUENT ENTITIES") IN EXCHANGE FOR 9,300,000 SHARES OF COMMON STOCK OF 800-JR CIGAR. SEE "REORGANIZATION OF THE COMPANY" AND THE PREDECESSOR COMBINED FINANCIAL STATEMENTS AND NOTES THERETO. UNLESS THE CONTEXT OTHERWISE REQUIRES, (A) ALL REFERENCES HEREIN TO THE "COMPANY" REFER TO THE CONSTITUENT ENTITIES ON A COMBINED BASIS, (B) ALL REFERENCES HEREIN TO THE COMPANY'S OR 800-JR CIGAR'S ACTIVITIES, RESULTS OF OPERATIONS OR FINANCIAL CONDITION REFER TO THAT OF THE CONSTITUENT ENTITIES, TAKEN AS A WHOLE, AND (C) ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. THE COMPANY 800-JR CIGAR is the largest distributor and retailer of brand name premium cigars in the United States. The Company's primary products consist of premium cigars, mass market cigars and cigarettes which are distributed to retail and wholesale customers. The Company's highest gross margins are generated from the sale of premium cigars (imported, hand-made and hand-rolled cigars made with long filler and all natural tobacco leaf) and, as such, it has targeted premium cigars as its primary growth vehicle. The Company's premium cigars consist of approximately 150 brands, of which 43 are the Company's proprietary brands. Among the Company's proprietary products are nationally recognized brands such as Belinda-Registered Trademark-, Casa Blanca-Registered Trademark-, El Rey del Mundo-Registered Trademark-, 5 Star Seconds-Registered Trademark-, Jose Marti-TM-, J-R Alternative-Registered Trademark-, J-R Ultimate-Registered Trademark-, La Finca-Registered Trademark-, Rosa Cuba-TM- and Santa Clara-Registered Trademark-. The Company believes that its success is due, in part, to its ability to purchase in large quantities from a broad range of suppliers, thereby serving its retail and wholesale customers as the leading source for competitively priced, high-quality, nationally branded and proprietary brand premium cigars and other tobacco products. The Company is the largest customer for many of the world's leading cigar manufacturers, including Consolidated Cigar Holdings Inc., General Cigar Holdings, Inc., Swisher International Group, Inc. and Villazon & Company, Inc. The Company's strong relationship with these manufacturers allows for advantageous supplies of desirable brand name cigars and for significant purchasing power. The Company's net sales have increased at a compound annual growth rate of 37.1%, from $54.3 million in 1992 to $192.0 million in 1996. For the year ended December 31, 1996, sales of cigars and tobacco products, other than cigarettes, totaled $93.7 million, or 48.8% of net sales, and represented 77.6% of the Company's total gross profit. The cigarette products sold by the Company include all major brands produced by the leading U.S. cigarette manufacturers. Cigarette sales represented $78.4 million, or 40.8% of net sales, during the year ended December 31, 1996. The Company also offers a variety of discounted general merchandise, including fragrances and apparel, through its stores. During the year ended December 31, 1996, sales of such non-tobacco products totaled $19.9 million, or 10.4% of net sales. No assurance can be given, however, that the Company's growth in sales volume will continue. The Company markets tobacco products on a retail basis throughout the United States by direct mail and through six specialty cigar stores and two large discount outlet stores. Its mail order catalog provides one of the largest selections of high quality premium cigars at substantial savings, and management believes that its mail order sales are the largest among the world's catalog retailers of cigars. The Company's six specialty cigar stores feature a broad selection of premium cigars, and serve as destination stores for customers seeking high quality products at competitive prices. During 1996, the Company opened an 8,200 square foot, award-winning, upscale specialty cigar store in Whippany, New Jersey, which achieved over $6.6 million in sales in its first full year of operation. The Company intends to incorporate certain characteristics of the Whippany location in its expansion plans for existing store renovations and new store openings. The Company's two large discount outlet stores are located on major interstate highways in North Carolina, a "tobacco-friendly" state with lower tobacco excise taxes relative to other eastern states. The discount outlet stores capitalize upon the draw of tobacco products, particularly premium cigars and cigarettes, to market a variety of discounted general merchandise. The Company achieved $111.4 million in total retail sales for the year ended December 31, 1996, representing 58.0% of net sales. The Company's wholesale activities consist predominantly of catalog sales of premium cigars and sales of cigarettes through cash-and-carry operations which are located at the Company's two discount outlet stores. Added sales generated by the Company's wholesale operations enable the Company to earn significant discounts on large volume purchases of cigars and related products, and provide the Company with flexibility to determine the amount, timing and channel of distribution by which it will most profitably sell its tobacco products. The Company's wholesale customers include approximately 8,000 smoke shops, restaurants, taverns, liquor stores and other retail outlets and wholesale distributors throughout the United States. The Company achieved $80.6 million in wholesale sales for the year ended December 31, 1996, representing 42.0% of net sales. The Company believes that there is an increasing market for cigars generally and for premium cigars in particular. Unit sales of cigars increased from 3.4 billion units in 1993 to 4.5 billion units in 1996. Unit sales of premium cigars increased from 110.0 million units in 1993 to 274.3 million units in 1996, increasing at a compound annual growth rate of 35.6%. Unit sales of mass market large cigars increased from 2.1 billion units in 1993 to an estimated 2.9 billion units in 1996, increasing at a compound annual growth rate of 11.3%. Based upon industry sources, including the Cigar Association of America, the total market for cigars in the United States is estimated to have been approximately $1.25 billion in 1996. The Company's principal objective is to enhance its position as the leading distributor and retailer of a full line of premium and mass market large cigars. The principal elements of this business strategy include: (i) offering a broad product selection, (ii) providing value prices, (iii) leveraging long-standing relationships with manufacturers, (iv) building upon leading proprietary cigar brands, (v) leveraging multiple channels of distribution and (vi) emphasizing customer service. The Company's growth strategy is designed to capitalize on its competitive strengths and the recent growth in the cigar industry. Specifically, over the course of the next 18 months, the Company intends to increase penetration in its retail market by (i) expanding direct mail capabilities and increasing catalog circulation, (ii) relocating, redesigning and/or expanding existing specialty cigar stores and adding an additional store and (iii) opening a new discount outlet store and expanding retail selling space at existing discount outlet stores. Over the same period, the Company intends to increase penetration in its wholesale market by (i) expanding and strengthening distribution of its wholesale premium cigar catalog and (ii) adding an additional cigarette cash-and-carry operation within a new discount outlet store. Furthermore, the Company intends to increase dedicated sources of supply of imported premium cigars and increase its presence in mass market large cigars. The Company was incorporated on March 11, 1997 under the laws of the State of Delaware. The Company's principal executive offices are located at 301 Route 10 East, Whippany, New Jersey 07981, and its telephone number is (201) 884-9555. THE OFFERING <TABLE> <S> <C> Common Stock Offered hereby........ 3,000,000 shares Common Stock to be Outstanding after the Offering............... 12,300,000 shares(1) Use of Proceeds.................... To (i) finance development, construction, and related inventory costs of a new warehouse, new stores and store renovations, (ii) finance expansion of direct mail operations by upgrading the Company's information systems and graphics capability, (iii) repay long-term indebtedness, (iv) pay the current portion of the Distribution Notes (as defined herein) previously issued to the Existing Stockholders, plus interest related to the Distribution Notes, which notes represent estimated cumulative undistributed Subchapter S corporation ("S Corporation") earnings through the date of the Offering and (v) pay signing bonuses to an officer and to MC Management, Inc. ("MC Management") in connection with the execution of long-term service agreements. The balance, if any, will be used for working capital and general corporate purposes. See "Use of Proceeds," "Reorganization of the Company" and "Certain Related Transactions--Management Services." Nasdaq National Market Symbol...... "JRJR" </TABLE> - ------------------------ (1) Excludes 450,000 shares of Common Stock subject to the 30-day over-allotment option to be granted to the Underwriters. See "Management" and "Shares Eligible for Future Sale."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035672_vision_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035672_vision_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f371a64b2b9598914a41ce6c9fa25a2fa80a71a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035672_vision_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (the "Financial Statements") included elsewhere in this Prospectus. Prospective investors should consider carefully the information discussed under "Risk Factors." THE COMPANY The Company develops, markets, implements and supports software that enables the continuous availability of mission critical applications and data on midrange computer platforms. Continuous availability or High Systems Availability ("HSA") software substantially eliminates business interruptions caused by unscheduled downtime due to system failures, natural disasters and human error and scheduled downtime including systems maintenance and upgrades. HSA applications also substantially eliminate computer system unavailability and performance degradation caused by capacity constraints. The data protection and systems availability provided by HSA solutions are required to operate mission critical applications which manage core functions such as manufacturing, distribution, order processing, sales automation, customer satisfaction, reservations and finance. These mission critical applications require the availability of real-time data and systems 24 hours per day, seven days per week. This need is exacerbated by the increased use of the Internet to access mission critical applications. The consequences of business interruptions and system unavailability can be devastating and include lost transactions, data corruption, customer dissatisfaction and lost productivity from idled employees and production equipment. If business interruptions are long or frequent, they may result in significant losses and ultimately in business failure. For example, IBM's AS/400 Dynamics magazine estimates the average time to restore operations after a disaster is three to five days and that a typical retail brokerage would lose approximately $6 million per hour of system downtime. Because all computer systems eventually fail, and the timing and duration of such failures are unpredictable, effective HSA solutions must address all causes of system downtime and unavailability and require fault tolerance, disaster recovery, data protection, systems and data management, work-load distribution and scalability. The Company's comprehensive HSA solution, Vision Suite, which is currently available for IBM AS/400 computers, utilizes the Company's proprietary replication and data transportation technology to provide all of the required components of an effective HSA solution. Vision Suite enables continuous availability of midrange computer systems and protection of all data 24 hours per day, seven days per week. The Company's Vision Suite also serves as the foundation to the Company's Tiered Network Technology architecture which enables the clustering of AS/400s to deliver the scalability, availability and reliability of mainframe computers at a fraction of the cost. The Company has extended the utility of its core replication and data transportation technology to include Internet isolation and data protection, data transportation for data warehouses and single system data protection. In addition, the Company is currently developing its HSA software to accommodate the Windows NT and UNIX platforms. The Company's products and services are marketed and sold in the United States through the Company's direct sales force and a network of business partners and distributors, including IBM Corporation ("IBM"). The Company's international sales, which comprised 22.8% of total revenue in 1996, are facilitated through a network of business partners and distributors, which also includes IBM. The Company's customers cover a diverse group of industries and include major corporations such as The Upjohn Company, The Chase Manhattan Bank, N.A., IBM, United Parcel Service and Toyota Motor Sales, U.S.A. The Company was founded in December 1991 as a partnership and incorporated in California in December 1993 under the name Midrange Information Systems, Inc. The Company changed its name to Vision Solutions, Inc. in August 1996. The Company's headquarters and principal place of business is located at 2600 Michelson Drive, 11th Floor, Irvine, California 92612, and its telephone number is (714) 724-5455.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035678_rev_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035678_rev_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..29f5d1df2f5aaf12c0d89452a3585f0cf14efb63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035678_rev_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and the notes thereto contained elsewhere in this Prospectus. Unless otherwise indicated or unless the context otherwise requires, all references in this Prospectus to (i) the "Issuer" mean Revlon Worldwide (Parent) Corporation, (ii) the "Company" or "Revlon" mean Revlon Worldwide (Parent) Corporation and its subsidiaries and (iii) "Revlon, Inc." mean Revlon, Inc. and its subsidiaries. All market share and market position data in this Prospectus for the Company's brands and specific products is based upon retail dollar sales which are derived from A.C. Nielsen data. A.C. Nielsen measures retail sales volume of products sold in the United States self-select distribution channel, which is defined as the following channels of distribution: independent and chain drug stores, mass-volume retailers, supermarkets and combination supermarket/drug stores. Such data represents A.C. Nielsen's estimates based upon data gathered by A.C. Nielsen from market samples. Such data is therefore subject to some degree of variance. THE ISSUER The Issuer is a holding company whose only significant asset is all of the common stock, par value $1.00 per share, of Revlon Worldwide, a holding company that owns approximately 83.1% of the shares (representing approximately 97.4% of the voting power) of common stock of Revlon, Inc. As such, the Issuer's principal business operations are conducted by Revlon, Inc. and its subsidiaries. The Issuer is indirectly wholly owned by MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through Mafco Holdings Inc. ("Mafco Holdings" and, together with MacAndrews Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. See "Relationship with MacAndrews & Forbes" and "Ownership of Common Stock." Upon the Revlon Worldwide Notes Defeasance, Revlon Worldwide will be merged with and into the Issuer in the Revlon Worldwide Merger. THE COMPANY REVLON is one of the world's best known names in cosmetics and is a leading mass market cosmetics brand. The Company's vision is to provide glamour, excitement and innovation through quality products at affordable prices. To pursue this vision, the Company's management team combines the creativity of a cosmetics and fashion company with the marketing, sales and operating discipline of a consumer packaged goods company. The Company believes that its global brand name recognition, product quality and marketing experience have enabled it to create one of the strongest consumer brand franchises in the world, with products sold in approximately 175 countries and territories. The Company's products are marketed under such well-known brand names as REVLON, COLORSTAY, REVLON AGE DEFYING, ALMAY and ULTIMA II in cosmetics; MOON DROPS, ETERNA 27, REVLON RESULTS, ALMAY TIME-OFF, ULTIMA II, JEANNE GATINEAU and NATURAL HONEY in skin care; CHARLIE, FIRE & ICE, CIARA, CHERISH and JONTUE in fragrances; FLEX, OUTRAGEOUS, AQUAMARINE, MITCHUM, COLORSILK, JEAN NATE, BOZZANO and COLORAMA in personal care products; and ROUX FANCI-FULL, REALISTIC, CREME OF NATURE, FERMODYL, VOILA, COLOMER, CREATIVE NAIL DESIGN SYSTEMS and AMERICAN CREW in professional products. To further strengthen its consumer brand franchises, the Company markets each core brand with a distinct and uniform global image including packaging and advertising, while retaining the flexibility to tailor products to local and regional preferences. Revlon, Inc. was founded by Charles Revson, who revolutionized the cosmetics industry by introducing nail enamels matched to lipsticks in fashion colors 65 years ago. Today, the Company has leading market positions in many of its principal product categories in the United States self-select distribution channel, which the Company believes is the fastest-growing channel of distribution for cosmetics, skin care, fragrance and personal care products. The Company's leading market positions for its REVLON brand products include the number one positions in lip makeup and nail enamel (which the Company has occupied for the past 20 years), and for 1996 the number one and two selling brands of lip makeup. The Company's market share in lip makeup and nail enamel has increased from 24.3% and 21.2%, respectively, for 1992, to 32.6% and 24.7%, respectively, for 1996. The Company has the number two position in face makeup (including the number one and two selling brands of foundation), where its market share has increased from 10.8% for 1992 to 19.1% for 1996. Propelled by the success of its new product launches and share gains in its existing product lines, the Company has captured the number one position overall in color cosmetics (consisting of lip, eye and face makeup and nail enamel) in the United States self-select distribution channel, where its market share has increased from 14.7% for 1992 to 21.4% for 1996. The Company also has leading market positions in several product categories in certain markets outside of the United States, including in Brazil, Canada, South Africa and Australia. The Company believes that it is an industry leader in the development of innovative and technologically advanced consumer and professional products. In June 1994, the Company launched COLORSTAY lipcolor, which uses patented transfer-resistant technology that provides long wear. COLORSTAY lip makeup achieved a 14.5% market share in the United States self-select distribution channel for 1996, making it the number one selling lip makeup in that channel, with a market share of more than twice that of any competitor's brand. The success of COLORSTAY lip makeup boosted the Company's total lip makeup market share to more than twice the market share of the next largest competitor. To capitalize on the highly successful launch of COLORSTAY lipcolor, the Company introduced a collection of COLORSTAY cosmetics in 1995, including foundation, eye colors, eye liners and lip pencils, and COLORSTAY lashcolor mascara in 1996. COLORSTAY foundation, which was introduced late in the third quarter of 1995, was the number one selling foundation in the United States self-select distribution channel in 1996 and achieved a 9.3% market share for such period. The Company has also introduced the COLORSTAY collection in international markets, where it has increased the Company's color cosmetics sales in such markets. The Company has applied the proprietary transfer-resistant technology developed by the Company for COLORSTAY to the ALMAY AMAZING collection, which is part of the Company's line of hypo-allergenic, dermatologist-tested, fragrance-free cosmetics and skin care products. In April 1994, the Company introduced REVLON AGE DEFYING foundation, which uses proprietary technology designed to meet the needs of women in the over 35 age bracket. REVLON AGE DEFYING foundation was the number two selling foundation in the United States self-select distribution channel for 1996 and achieved an 8.2% market share for such period. The Company capitalized on this highly successful launch by introducing a collection of REVLON AGE DEFYING color cosmetics, including eye makeup, blush and pressed powder. In the fourth quarter of 1996, the Company introduced NEW COMPLEXION compact makeup. With the addition of NEW COMPLEXION compact makeup, NEW COMPLEXION foundations achieved a 6.8% market share in the United States self-select distribution channel for the fourth quarter of 1996, giving Revlon the number one, two and three selling brands of foundation for such period. In 1997, the Company intends to continue to introduce new products under its COLORSTAY and REVLON AGE DEFYING brands, including the relaunching in the first quarter of 1997 of COLORSTAY lipcolor with a new and improved formula that delivers moisture while retaining transfer resistance. In addition, the Company launched in the second quarter of 1997 ALMAY TIME-OFF REVITALIZER, a skin care product which uses a proprietary technology to visibly rejuvenate skin. In 1997, the Company also intends to introduce new products targeted to the "trend" consumer under its STREETWEAR brand to capitalize on the successful launch of its STREETWEAR nail enamel in 1996. In the United States and increasingly in international markets, the Company's products are sold principally in the expanding self-select distribution channel. The trend in the cosmetics, skin care and fragrance industry has been the shift of consumer purchases from the demonstrator-assisted channel to the self-select distribution channel. The Company believes that it is well-positioned to continue to take advantage of the shifting consumer shopping patterns in international markets towards the self-select distribution channel, particularly in Western Europe, Latin America and the Far East. The Company also is expanding its presence in the new and emerging markets of Eastern Europe, Russia, India, China, Thailand, Vietnam, South Korea and Africa. In the United States, the self-select distribution channel, in which consumers select their own purchases without the assistance of an in-store demonstrator, includes independent drug stores and chain drug stores (such as Walgreens, CVS Drug stores, Eckerd Drug stores and Revco), mass volume retailers (such as Wal-Mart, Target Stores and Kmart) and supermarkets and combination supermarket/ drug stores (such as Pathmark, Albertson's, Kroger's and Smith's). Internationally, the self-select distribution channel includes retailers such as Boots in the United Kingdom and Western Europe, and Shoppers Drug Mart in Canada. The foregoing retailers, among others, sell the Company's products. See "Business -- Overview." Business Strategy The Company's business strategy, which implements its vision and is intended to continue to improve operating performance, is to: o Strengthen and broaden its core brands through globalization of marketing and advertising, product development and manufacturing and through increasing its emphasis on advertising and promotion. o Lead the industry in the development and introduction of technologically advanced innovative products that set new trends. o Expand the Company's presence in all markets in which the Company competes and enter new and emerging markets. o Continue to reduce costs and improve operating efficiencies, customer service and product quality by reducing overhead, rationalizing factory operations, upgrading management information systems, globally sourcing raw materials and components and carefully managing working capital. o Continue to expand market share and product lines through possible strategic acquisitions or joint ventures. See "Business -- Business Strategy." As a result of the implementation of its strategy, the Company has achieved 14 consecutive quarters of increased net sales, operating income and EBITDA (as defined herein) compared with the corresponding quarter of the prior year. Net sales, operating income and EBITDA increased 6.1%, 4.9% and 10.6%, respectively, for the first quarter of 1997 over the comparable period in 1996, 11.8%, 36.6% and 26.3%, respectively, for 1996 over 1995 and 11.8%, 35.2% and 25.3%, respectively, for 1995 over 1994. Gross profit as a percentage of net sales was 66.3% for the first quarter of 1997 compared with 67.1% for the first quarter of 1996, 66.5% for 1996 compared with 66.3% for 1995 and 65.5% for 1994. In addition, the Company's net loss decreased from $191.7 million for 1994 to $139.3 million for 1995 and $86.6 million for 1996 (excluding in 1996 the $187.8 million gain from the Revlon IPO (as defined herein) and the $6.6 million extraordinary charge incurred in connection with the repayment of indebtedness with the proceeds therefrom) (the "Adjusted 1996 Net Loss") and decreased from an Adjusted 1996 Net Loss of $55.4 million in the first quarter of 1996 to $54.9 million in the first quarter of 1997 (excluding in 1997 the $43.8 million extraordinary charge incurred in connection with the repayment of the Revlon Worldwide Notes) (the "Adjusted 1997 Net Loss"). The Company has also reduced the relative amount of working capital necessary to support net sales. The ratio of average quarterly combined inventory and accounts receivable balances to net sales was 32.2% for the first quarter of 1997 compared with 33.1% for the comparable period in 1996, and 32.3% for 1996 compared with 33.2% for 1995 and 34.9% for 1994. The Company has increased its investment in advertising and consumer directed promotion while decreasing its selling, general and administrative ("SG&A") expenses as a percentage of net sales to 61.7% for the first quarter of 1997 compared with 63.6% for the comparable period in 1996, and 57.3% for 1996 compared with 58.8% for 1995 and 59.3% for 1994. Background On June 24, 1992, Revlon, Inc., through its wholly owned subsidiary Revlon Consumer Products Corporation ("Products Corporation"), succeeded to assets and liabilities of the cosmetics and skin care, fragrance and personal care products business of Revlon Holdings Inc. ("Holdings"). Holdings retained certain small brands that historically had not been profitable (the "Retained Brands") and certain other assets and liabilities. Unless the context otherwise requires, references to the Company or Revlon relating to dates or periods prior to the formation of Revlon, Inc. mean the cosmetics and skin care, fragrance and personal care products business of Holdings to which Revlon, Inc. has succeeded. On March 5, 1996, Revlon, Inc. completed an initial public offering (the "Revlon IPO") in which it issued and sold 8,625,000 shares of its Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), for $24.00 per share. Revlon, Inc. contributed the net proceeds of $187.8 million (net of underwriters' discount and related fees and expenses) to Products Corporation, which in turn used such funds to repay borrowings outstanding under its then existing credit agreement (the "1995 Credit Agreement") and to pay fees and expenses related to entering into a new credit agreement (the "1996 Credit Agreement"), which was subsequently repaid in May 1997 with borrowings under its existing credit agreement (the "Credit Agreement"). Additionally, the Company recognized a $187.8 million gain in connection with the Revlon IPO. The Company's principal executive offices are located at 625 Madison Avenue, New York, New York 10022, and its telephone number is (212) 527-4000. The Issuer was incorporated in Delaware in 1997. The following sets forth a summary organizational chart for the Company. ------------------------------------ Mafco Holdings Inc. ("Mafco Holdings") ------------------------------------ | 100% ------------------------------------ MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings") ------------------------------------ | 100% ------------------------------------ Revlon Holdings Inc. ("Holdings") ------------------------------------ | 100% ------------------------------------ Revlon Worldwide Holdings Inc. ("Worldwide Holdings") ------------------------------------ | 100% ------------------------------------ REVLON WORLDWIDE (PARENT) CORPORATION (THE "ISSUER") ------------------------------------ | 100% ------------------------------------ Revlon Worldwide Corporation ("Revlon Worldwide") ------------------------------------ | 83.1%* ------------------------------------ Revlon, Inc. ("Revlon, Inc.") ------------------------------------ | 100% ------------------------------------ Revlon Consumer Products Corporation (including operating subsidiaries) ("Products Corporation") ------------------------------------ - -------------- * Revlon Worldwide beneficially owns 11,250,000 shares of Class A Common Stock of Revlon, Inc. (representing 56.6% of the outstanding shares of Class A Common Stock) and all of the outstanding 31,250,000 shares of Class B Common Stock, par value $.01 per share (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock"), of Revlon, Inc., which together represent approximately 83.1% of the outstanding shares of Common Stock and approximately 97.4% of the combined voting power of the outstanding shares of Common Stock of Revlon, Inc. See "Ownership of Common Stock." THE TRANSACTIONS Prior to the Revlon Worldwide Merger, the Notes will be secured by a pledge of 47.1% of the shares of common stock of Revlon Worldwide. Concurrently with the closing of the Offering, the Issuer deposited in escrow the net proceeds of the Offering and certain other funds provided by MacAndrews & Forbes. On April 2, 1997, the Issuer contributed escrowed funds, together with Revlon Worldwide Notes that had been previously delivered to Revlon Worldwide for cancellation (collectively, the "Capital Contribution"), to Revlon Worldwide to finance the Revlon Worldwide Notes Defeasance. As a result of the Deposit being made on April 2, 1997, the Revlon Worldwide Notes Defeasance will be effective on August 4, 1997 so long as certain events of bankruptcy, insolvency or reorganization affecting Revlon Worldwide do not exist on such date. The Issuer has guaranteed on a non-recourse basis (the "Non-Recourse Guaranty") the obligations of Mafco Holdings under certain credit facilities. To secure its obligations under the Non-Recourse Guaranty, the Issuer has pledged the shares of common stock of Revlon Worldwide that are not pledged as security for the Notes. Borrowings under such credit facilities were used to finance a portion of the capital contribution made by MacAndrews & Forbes to the Issuer. See "Relationship with MacAndrews & Forbes -- Non-Recourse Guaranty." The Revlon Worldwide Notes Defeasance will constitute "covenant defeasance" for purposes of the Revlon Worldwide Notes Indenture. As a result, following the Revlon Worldwide Notes Defeasance, Revlon Worldwide may omit to comply with substantially all its covenants and other obligations, other than payment, under the Revlon Worldwide Notes Indenture. See "Description of Other Indebtedness -- Revlon Worldwide Notes." Following the Revlon Worldwide Notes Defeasance, Revlon Worldwide will be merged with and into the Issuer in the Revlon Worldwide Merger, and the Issuer will directly own all of the shares of Common Stock of Revlon, Inc. that are currently owned by Revlon Worldwide and pledged to secure the Revlon Worldwide Notes. Simultaneously with the Revlon Worldwide Merger, (i) the Notes will be secured by a pledge of all of the 11,250,000 shares of Class A Common Stock and 8,750,000 shares of Class B Common Stock, in each case, owned by Revlon Worldwide, representing in the aggregate approximately 39.1% of the outstanding shares of Common Stock of Revlon, Inc. and (ii) the Non-Recourse Guaranty will be secured by a pledge of the remaining shares of Class B Common Stock of Revlon, Inc., in each case, in substitution for the respective pledges of the Revlon Worldwide common stock. See "Risk Factors -- Security for Notes; Potential for Diminution." Following the Revlon Worldwide Notes Defeasance and in connection with the Revlon Worldwide Merger, the Issuer will assume the obligations of Revlon Worldwide, thereby becoming the primary obligor under the Revlon Worldwide Notes and the Revlon Worldwide Notes Indenture. See "Risk Factors -- Substantial Level of Indebtedness." THE EXCHANGE OFFER SECURITIES OFFERED ............ Up to $770,000,000 aggregate principal amount at maturity of Series B Senior Secured Discount Notes due 2001, which have been registered under the Securities Act. The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by September 29, 1997, interest will accrue on the Old Notes (in addition to the accrual of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on March 15 and September 15, commencing March 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the September 15 or March 15 immediately preceding such interest payment date. See "--Summary Description of the New Notes" and "Description of the Notes -- General." THE EXCHANGE OFFER ............ The New Notes are being offered in exchange for a like principal amount at maturity of Old Notes. The issuance of the New Notes is intended to satisfy obligations of the Issuer contained in the Registration Agreement. For procedures for tendering the Old Notes, see "The Exchange Offer -- Procedures for Tendering Old Notes." TENDERS; EXPIRATION DATE; WITHDRAWAL ................... The Exchange Offer will expire at 5:00 p.m., New York City time, on August 11, 1997, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See "The Exchange Offer --Terms of the Exchange Offer; Period for Tendering Old Notes" and "The Exchange Offer -- Withdrawal." CERTAIN CONDITIONS TO EXCHANGE OFFER ............... The Issuer shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer if at any time before the acceptance of the Old Notes for exchange or the exchange of the New Notes for such Old Notes certain events have occurred, which in the reasonable judgment of the Issuer, make it inadvisable to proceed with the Exchange Offer and/or with such acceptance for exchange or with such exchange. Such events include (i) any threatened, instituted or pending action seeking to restrain or prohibit the Exchange Offer, (ii) a general suspension of trading in securities on any national securities exchange or in the over-the-counter market, (iii) a general banking moratorium, (iv) the commencement of a war or armed hostilities involving the United States and (v) a material adverse change or development involving a prospective material adverse change in the Issuer's business, properties, assets, liabilities, financial condition, operations, results of operations or prospects that may affect the value of the Old Notes or the New Notes. In addition, the Issuer will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, at any such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." FEDERAL INCOME TAX CONSEQUENCES ................. Based upon the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Issuer, the exchange pursuant to the Exchange Offer should not result in gain or loss to the holders or the Issuer for federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations." USE OF PROCEEDS ............... There will be no proceeds to the Issuer from the exchange pursuant to the Exchange Offer. See "Use of Proceeds." EXCHANGE AGENT ................ The Bank of New York is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Old Notes and the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Issuer does not currently anticipate that it will register Old Notes under the Securities Act. See "Description of the Notes -- Registration Rights." Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Issuer believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. However, the Issuer does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any holder is an affiliate of the Issuer, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." In addition, to comply with the state securities laws, the New Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the New Notes to "qualified institutional buyers" (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under the state securities laws. The Issuer currently does not intend to register or qualify the sale of the New Notes in any state where an exemption from registration or qualification is required and not available. See "The Exchange Offer -- Consequences of Exchanging Old Notes" and "Description of the Notes -- Registration Rights." SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by September 29, 1997, interest will accrue on the Old Notes (in addition to the accrual of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on March 15 and September 15, commencing March 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the September 15 or March 15 immediately preceding such interest payment date. SECURITIES OFFERED ............ Up to $770,000,000 aggregate principal amount at maturity of Series B Senior Secured Discount Notes due 2001, which have been registered under the Securities Act. MATURITY DATE ................. March 15, 2001. YIELD TO MATURITY ............. 10 3/4% per annum (computed on a semiannual bond equivalent basis) calculated from March 5, 1997. ORIGINAL ISSUE DISCOUNT ....... The Old Notes were issued on March 5, 1997 at an issue price of $655.90 per $1,000 principal amount at maturity. Because the New Notes will be treated as a continuation of the Old Notes, which were issued at an original issue discount ("Original Issue Discount") for federal income tax purposes, the New Notes will have Original Issue Discount. Prospective holders of the New Notes should be aware that, although there will be no periodic payments of interest on the New Notes, accrued Original Issue Discount will be includable, periodically, in a holder's gross income for United States federal income tax purposes prior to redemption or other disposition of such holder's New Notes, whether or not such New Notes are ultimately redeemed, sold (to the Company or otherwise) or paid at maturity. The foregoing discussion of the federal income tax treatment applicable to the exchange of Old Notes for New Notes is based upon the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Issuer. See "Certain U.S. Federal Income Tax Considerations." OPTIONAL REDEMPTION ........... The Notes may be redeemed at the option of the Issuer in whole or from time to time in part at any time on and after March 15, 2000 at a redemption price equal to 102.6875% of the Accreted Value on the date of redemption. See "Description of the Notes -- Optional Redemption." CHANGE OF CONTROL ............. Upon a Change of Control the Issuer will have the option to redeem the Notes in whole at a redemption price equal to the Accreted Value on the date of redemption plus the Applicable Premium and, subject to certain conditions, each holder of the Notes will have the right to require the Issuer to repurchase all or a portion of such holder's Notes at a price equal to the Put Amount on the date of repurchase. There can be no assurance that the Issuer will have sufficient funds to repurchase the Notes upon a Change of Control. See "Description of the Notes -- Change of Control" and "Risk Factors -- Issuer's Ability to Pay Principal of Notes." COLLATERAL .................... Prior to the Revlon Worldwide Merger, the Notes will be secured by a pledge of 47.1% of the shares of common stock of Revlon Worldwide. Following the Revlon Worldwide Notes Defeasance, Revlon Worldwide will be merged with and into the Issuer and the Issuer will directly own all of the shares of common stock of Revlon, Inc. that are currently pledged to secure the Revlon Worldwide Notes. Simultaneously with the Revlon Worldwide Merger, the Notes will be secured by a pledge of all of the 11,250,000 shares of Class A Common Stock and 8,750,000 shares of Class B Common Stock, in each case, owned by Revlon Worldwide, representing in the aggregate approximately 39.1% of the outstanding shares of Common Stock of Revlon, Inc. No additional shares of Common Stock of Revlon, Inc. will be pledged by the Issuer as security for the Notes irrespective of the value of such Common Stock at any time. The Issuer may withdraw shares of Common Stock of Revlon, Inc. constituting Collateral (as defined herein), in whole or in part, by substituting therefor with the Trustee cash or U.S. Government Obligations that will be sufficient for the payment at maturity of the principal on the Notes, or the pro rata portion thereof, respectively. In addition, the pro rata portion of shares of Common Stock of Revlon, Inc. constituting Collateral may be released following the delivery of less than all the Notes for cancellation. There can be no assurance as to the value of the Collateral at any time or that the proceeds from the sale or sales of all such Collateral would be sufficient to satisfy the amounts due on the Notes, whether at maturity or otherwise. In addition, the ability of the Trustee or the holders of the Notes to realize upon the Collateral may be subject to certain limitations, and there can be no assurance that the Trustee or such holders would be able to sell the Collateral at the then current market price of Common Stock of Revlon, Inc., as sales of substantial amounts of Common Stock of Revlon, Inc. could adversely affect market prices. See "Description of the Notes -- Collateral." RANKING AND HOLDING COMPANY STRUCTURE .................... The Old Notes are, and the New Notes will be, senior secured obligations of the Issuer and will rank pari passu in right of payment with all future senior indebtedness of the Issuer, if any, and senior to all future subordinated indebtedness of the Issuer, if any. As of the date hereof, the Issuer has no subordinated indebtedness outstanding and there are no current firm arrangements by the Issuer to issue any significant amount of indebtedness that will be pari passu or subordinated in right of payment to the Notes. The only outstanding indebtedness of the Issuer (other than the Non-Recourse Guaranty) are the Notes, and all the Issuer's consolidated liabilities (other than the Notes and certain liabilities incurred in connection with the Offering) are liabilities of its subsidiaries. Following the Revlon Worldwide Merger, the Issuer will also be the primary obligor under the Revlon Worldwide Notes and the Revlon Worldwide Notes Indenture until the defeasance trust is paid out to holders of the Revlon Worldwide Notes at maturity. The Issuer is a holding company and therefore the Old Notes are, and the New Notes will be, effectively subordinated to all existing and future indebtedness and other liabilities of the Issuer's subsidiaries, including trade payables. As of March 31, 1997, after giving pro forma effect to the Revlon Worldwide Merger, the outstanding indebtedness and other liabilities of such subsidiaries, including trade payables and accrued expenses, would have been approximately $2,137.0 million. Prior to the Revlon Worldwide Merger, the Notes will also be effectively subordinated to the Revlon Worldwide Notes. See "Risk Factors -- Substantial Level of Indebtedness," "Risk Factors -- Holding Company Structure; Restrictions on Ability of Subsidiaries to Pay Dividends," "Risk Factors -- Issuer's Ability to Pay Principal of Notes," "Risk Factors -- Subordination to Subsidiary Liabilities" and "Description of the Notes." CERTAIN COVENANTS ............. The indenture governing the Notes (the "Indenture") requires the Issuer to hold at all times the Minimum Collateral Percentage (as defined herein) of Common Stock of Revlon, Inc. and to not be or become an investment company under the Investment Company Act of 1940, as amended. In addition, the Indenture contains covenants that, among other things, limit (i) the issuance of additional debt and redeemable stock by the Issuer, Revlon Worldwide, or Revlon, Inc. and the issuance of preferred stock by Revlon, Inc. or Revlon Worldwide, (ii) the issuance of debt and preferred stock by Products Corporation and its subsidiaries, (iii) the payment of dividends on capital stock of the Issuer and its subsidiaries and the redemption of capital stock of the Issuer, (iv) the sale of assets and subsidiary stock, (v) transactions with affiliates and (vi) consolidations, mergers and transfers of all or substantially all the Issuer's assets. The Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications. See "Description of the Notes -- Certain Covenants." USE OF PROCEEDS ............... The Issuer will not receive any proceeds from the Exchange Offer. The Issuer used the net proceeds of the Offering, which were approximately $490.4 million, together with a capital contribution from MacAndrews & Forbes, to make the Capital Contribution. Revlon Worldwide used the Capital Contribution to finance the Revlon Worldwide Notes Defeasance. See "Use of Proceeds." EXCHANGE OFFER; REGISTRATION RIGHTS ....................... Holders of New Notes are not entitled to any registration rights with respect to the New Notes. Pursuant to the Registration Agreement, the Issuer agreed to file, at its cost, a registration statement with respect to the Exchange Offer. The Registration Statement of which this Prospectus is a part constitutes the registration statement for the Exchange Offer. See "Description of the Notes -- Registration Rights."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035826_netbank_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035826_netbank_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..38db8861c0f19f4a297dc63d748db034cffd3898
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035826_netbank_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED IN THIS PROSPECTUS GIVES EFFECT TO THE 33.125-FOR-ONE STOCK SPLIT EFFECTED AS A STOCK DIVIDEND ON MARCH 17, 1997 AND ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. THE COMPANY Upon completion of the Offering, Net.B@nk, Inc. (the "Company") will own and operate the Atlanta Internet Bank (the "Bank"), which provides convenient, cost-effective and secure banking services to the growing number of consumers utilizing the Internet for commercial and financial services. Customers can access the Bank on a seven-day-a-week, 24-hour-a-day ("7x24") basis from any personal computer ("PC"), wherever located, by means of a secure Web browser or by ATM, telephone or U.S. mail. The Company has assembled a management team with experience in both banking and technology to implement its strategy to become a leading provider of financial services through the Internet. The Bank commenced operations in October 1996 as a service of Carolina First Bank ("CFB"), a Greenville, South Carolina-based bank. As of July 8, 1997, the Bank had 2,680 accounts and approximately $43.6 million in deposits. The Bank has operated under the trade name "Atlanta Internet Bank" pending regulatory approval of the transactions described in "The Reorganization." The Company's objective is to offer a broad range of banking and financial service products through the Internet and alternative delivery channels. Customer convenience and operating efficiency are two key components of the Company's strategy. The Bank does not incur the cost of supporting a branch system, which management believes will benefit customers through the Bank's ability to offer attractive deposit rates. Management believes the Bank's lower overhead, customer convenience and ability to provide a broad choice of products and services cost-effectively through alternative delivery systems give the Bank a competitive advantage over traditional banks and banks offering PC-based home banking. In the initial phase of the Company's operations, management concentrated its efforts on developing, testing and implementing an Internet banking platform. Once the platform structure was in place, management established deposit-oriented products that include electronic bill paying, interest checking and money market accounts and certificates of deposit. By the end of 1997, management intends to offer a broad array of consumer loan products, such as personal credit lines, mortgages, home equity and secured loans, credit cards and other fee generating products. Management also plans to continue to pursue other revenue generating opportunities through partnerships and strategic alliances where appropriate. Management intends to implement the following strategies in order to become a leading provider of financial services through the Internet. No assurance can be given, however, that the Company will be successful in implementing these strategies or in achieving its stated objectives. - LEVERAGE LOW COST STRUCTURE. The absence of a branch system and the Company's low cost per transaction enable it to offer attractive deposit rates without significantly impacting profitability. - OUTSOURCE OPERATIONAL FUNCTIONS. The Company has entered into agreements with companies that provide a variety of specialized services and technologies to the Bank. In each of these relationships, the Bank benefits from the service provider's expertise and economies of scale while retaining the flexibility to take advantage of changes in available technology without impacting customer service. - PROVIDE CONVENIENT, REAL-TIME TRANSACTIONS. Management believes the Bank provides its customers with a higher level of convenience than can be achieved in a traditional branch or through PC-based home banking. The Internet allows Bank customers to conduct banking activities on a real-time 7x24 basis from any PC, wherever located, using a secure Web browser. This technology gives Internet banking an advantage over PC-based home banking, which utilizes PC-based software, requires repeated downloading and backup and limits the user to a specific PC. - EMPLOY ADVANCED SECURITY. The Bank uses sophisticated technology to provide what management believes to be among the most advanced security measures currently available in the electronic banking industry. All banking transactions are encrypted and routed from the Internet server through a "firewall" that limits access to the Bank server. The Bank's systems automatically detect attempts by third parties to access other users' accounts and feature a high degree of physical security, secure modem access, service continuity and transaction monitoring. - OFFER A BROAD ARRAY OF PRODUCTS AND SERVICES. Management intends to attract customers to the Bank by offering a variety of traditional consumer loan and deposit products. Management intends to expand the Bank's product and service offerings to include asset management with money market sweeps, direct purchase capability with selected Internet "mall" venues and reloadable cash cards. The Bank will offer its products and services in accordance with applicable state consumer protection laws, but does not anticipate that state regulatory restrictions will hinder its ability to market its products and services through the Internet. - DEPLOY MULTI-FACETED MARKETING STRATEGY. The Company's target market includes on-line users, on-line shoppers and special niche customers. In addition to the Bank's on-line advertising relationships with AT&T Corp.'s WorldNet Service and Digital Cities, Inc., a subsidiary of America Online Incorporated ("Digital Cities/AOL"), several other marketing initiatives are being employed. These initiatives include an emphasis on marketing the Bank's products and services through alliances with selected professional organizations, colleges, alumni associations and consumer service providers and on targeted print advertising. - CROSS-SELL FINANCIAL SERVICES. Management intends to market loans, brokerage services and other income generating products to its depositors through various direct marketing techniques, such as bank e-mail, on-line advertising and telemarketing. Management believes that this strategy will enable the Bank to generate additional earning assets and fee income. Management further believes that selling multiple products will enhance customer loyalty and strengthen customer relationships with the Bank. The Internet is a global web of computer networks. Use of the Internet and the World Wide Web (the "Web") has grown rapidly during the 1990s and is expected to continue to grow. In addition, a fall 1995 Internet demographic study by Commerce Net/Nielsen Media Research revealed that in the U.S., nearly two-thirds of Web users have a college education, over 50% of Web users are 35 years of age or younger and 25% of Web users' households have annual incomes of over $80,000. Electronic banking encompasses both Internet banking, which can be conducted on a real-time basis from any PC, wherever located, using a secure Web browser, and PC-based home banking, which utilizes PC-based software. According to an August 1996 report by Forrester Research, Inc., the number of electronic banking households is expected to grow from 1.1 million in 1996 to 9.7 million in 2001. The report further indicates that the percentage of such households utilizing Internet banking is projected to rise to over 75% in 2001. Management believes this growth, combined with the demographic characteristics of Internet users and the relative flexibility and convenience of Internet banking, represents a market opportunity for the Company because it is one of the world's first providers of Internet banking services. The principal executive offices of the Company and the Bank are located at 7000 Peachtree Dunwoody Road, Building 10, Suite 300, Atlanta, Georgia 30328, and the telephone number is (770) 392-4990. The Bank can be reached on the Web at www.atlantabank.com.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035903_community_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035903_community_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a77acaae47ffc24282eb5aff9c4ee02444c2118e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035903_community_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary highlights selected information from this document and may not contain all the information that is important to you. To understand the Offerings fully, you should read carefully this entire document, including the consolidated financial statements and the notes to the consolidated financial statements of CF Mutual Holdings. References to the "Savings Bank" refer to Carrollton Federal Bank, FSB. References in this document to the "Company" refer to Community First Banking Company. Several abbreviated and defined terms appear in this document. To the extent the abbreviation or definition does not appear with the term, please refer to the Glossary that begins on page A-1 at the end of this document. THE COMPANY Community First Banking Company 110 Dixie Street Carrollton, Georgia 30117 (770) 834-7355 The Company is not an operating company and has not engaged in any significant business to date. It was formed in March 1997 as a Georgia stock corporation to be the holding company for Carrollton Federal Bank after the Conversion and Reorganization. See "Community First Banking Company." THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE SAVINGS BANK BELIEVE THAT IT IS IN THE BEST INTERESTS OF THE SAVINGS BANK, THE COMPANY AND THE COMPANY'S SHAREHOLDERS FOR THE COMPANY AND THE SAVINGS BANK TO REMAIN INDEPENDENT, WITH THE OBJECTIVE OF LONG-TERM ENHANCEMENT OF SHAREHOLDER VALUE. ACCORDINGLY, AN INVESTMENT IN THE COMMON STOCK OF THE COMPANY MAY NOT BE SUITABLE FOR INVESTORS WHO ARE SEEKING SHORT-TERM RETURNS THROUGH A SALE OF THE INSTITUTION. THE SAVINGS BANK Carrollton Federal Bank, FSB 110 Dixie Street Carrollton, Georgia 30117 (770) 834-7355 The Savings Bank is a federally chartered stock savings bank organized on August 1, 1994 and operates in Carrollton, Georgia and neighboring communities in western Georgia. Prior to that date, the predecessor of the Savings Bank had operated as a mutual savings bank since 1929. The Savings Bank conducts business through 12 branch offices in Carroll, Douglas, Coweta, Fayette, Haralson, Heard, Henry and Paulding Counties in Georgia. At December 31, 1996, the Savings <PAGE> Bank had $351 million of total assets, $325 million of total liabilities, including $308 million of deposits, and $26 million of equity or 7.4% of assets. See "Carrollton Federal Bank." THE MUTUAL HOLDING COMPANY CF Mutual Holdings 110 Dixie Street Carrollton, Georgia 30117 (770) 834-7355 The Mutual Holding Company is a federally chartered mutual holding company formed on August 1, 1994. The Mutual Holding Company was not formed to raise capital, but to provide a corporate structure that would facilitate entering new lines of business and possible acquisitions of other financial institutions. Its primary asset is 100 shares of Savings Bank Common Stock, which represents all of the outstanding shares of such stock. As part of the Conversion and Reorganization, the Mutual Holding Company will merge into the Savings Bank and the Mutual Holding Company will cease to exist. All of the assets of the Mutual Holding Company will pass to the Company by virtue of the Conversion and Reorganization. See "CF Mutual Holdings." INFORMATION RELATING TO VOTING AT THE MEMBERS' MEETING The Board of Directors of the Mutual Holding Company has fixed the close of business on [____________], 1997 AS THE RECORD DATE (THE "VOTING RECORD DATE") FOR THE DETERMINATION OF MEMBERS ENTITLED TO NOTICE OF AND TO VOTE AT THE MEMBERS' MEETING. ALL HOLDERS OF THE SAVINGS BANK'S DEPOSIT OR OTHER AUTHORIZED ACCOUNTS AND THE SAVINGS BANK'S BORROWERS AS OF JULY 19, 1990 WHOSE BORROWINGS REMAINED IN EXISTENCE AS OF ___________, 1997 ARE MEMBERS OF THE MUTUAL HOLDING COMPANY UNDER ITS CURRENT FEDERAL MUTUAL CHARTER. ALL MEMBERS OF RECORD AS OF THE CLOSE OF BUSINESS ON THE VOTING RECORD DATE WHO CONTINUE AS SUCH UNTIL THE DATE OF THE MEMBERS' MEETING WILL BE ENTITLED TO VOTE AT THE MEMBERS' MEETING OR ANY ADJOURNMENT THEREOF. Each depositor member will be entitled at the Members' Meeting to cast one vote for each $100, or fraction thereof, of the aggregate withdrawal value of all of his or her savings accounts in the Savings Bank as of the Voting Record Date. Borrower members will be entitled to one vote at the Members' Meeting in addition to any votes such borrower member may have as a result of being a depositor in the Savings Bank. No member may cast more than 1,000 votes. Approval of the Plan of Conversion to be presented at the Members' Meeting will require the affirmative vote of at least a majority of the total outstanding votes of the Mutual Holding Company's members eligible to be cast at the Members' Meeting. As of the Voting Record Date for the Members' Meeting, there were approximately [________] VOTES ELIGIBLE TO BE CAST, OF WHICH [________] VOTES CONSTITUTE A MAJORITY. -2- <PAGE> Members may vote at the Members' Meeting or any adjournment thereof in person or by proxy. All properly executed proxies received by the Mutual Holding Company will be voted in accordance with the instructions indicated thereon by the members giving such proxies. If no contrary instructions are given, such proxies will be voted in favor of the Plan of Conversion described herein. If any other matters are properly presented before the Members' Meeting and may properly be voted upon, the proxies will be voted on such matters by the proxy holders named therein as directed by the Board of Directors of the Mutual Holding Company. Valid, previously executed general proxies, which typically are obtained from members when they open their accounts at the Savings Bank, will not be used to vote for approval of the Plan of Conversion, even if the respective members do not execute another proxy or attend the Members' Meeting and vote in person. Any member giving a proxy will have the right to revoke his or her proxy at any time before it is voted by delivering written notice or a duly executed proxy bearing a later date to the Secretary of the Mutual Holding Company, provided that such written notice is received by the Secretary prior to the Members' Meeting or any adjournment thereof, or by attending the Members' Meeting and voting in person. FAILURE TO RETURN AN EXECUTED PROXY FOR THE MEMBERS' MEETING OR TO ATTEND THE MEMBERS' MEETING AND VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS VOTING AGAINST THE CONVERSION AND REORGANIZATION. Proxies may be solicited by officers, directors or other employees of the Mutual Holding Company and/or the Savings Bank, in person, by telephone or through other forms of communication. Such persons will be reimbursed by the Mutual Holding Company only for their expenses incurred in connection with such solicitation. The proxies solicited hereby will be used only at the Members' Meeting and at any adjournment thereof; they will not be used at any other meeting. PURPOSES OF THE CONVERSION AND REORGANIZATION The stock holding company form of organization has several advantages over the existing mutual holding company form. For example, as a stock holding company, the Company and the Savings Bank will be able to diversify their business activities and will have a larger capital base and greater access to capital markets. In addition, the Conversion and Reorganization will result in a public trading market for the Company's common stock. It will also be easier for the Company and the Savings Bank to acquire other financial institutions and attract and retain qualified management. See "The Conversion and Reorganization --Purposes of the Conversion and Reorganization." -3- <PAGE> DESCRIPTION OF THE CONVERSION AND REORGANIZATION Under the Plan of Conversion, (i) the Mutual Holding Company will convert to an interim federal stock savings bank ("Interim Mutual") and simultaneously will merge with and into the Savings Bank, (ii) the Mutual Holding Company will cease to exist and the 100 shares or 100% of the outstanding Savings Bank Common Stock held by the Mutual Holding Company will be cancelled, and (iii) a second interim savings bank ("Interim CFB") formed by the Company solely for such purpose will then merge with and into the Savings Bank. As a result of the merger of Interim CFB with and into the Savings Bank, the Savings Bank will become a wholly owned subsidiary of the Company operating under the name "Carrollton Federal Bank." See "The Conversion and Reorganization." EFFECT OF THE CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE SAVINGS BANK General. Each depositor in the Savings Bank has a pro rata ownership interest in the Mutual Holding Company's retained earnings based upon the balance in his or her deposit account. However, this ownership interest is tied to the depositor's account and has no tangible market value separate from the account. Any other depositor who opens a deposit account obtains a pro rata interest in the Mutual Holding Company's retained earnings without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all of his or her account balance but nothing for his or her ownership interest, which is lost to the extent that the balance in the account is reduced. Consequently, depositors normally do not have a way to realize the value of their ownership, which has realizable value only in the unlikely event that the Mutual Holding Company is liquidated. In such event, the depositors of record at that time, as owners, would share pro rata in any residual retained earnings after other claims are paid. Upon completion of the Conversion and Reorganization, permanent nonwithdrawable capital stock will be created to represent the ownership of the Company. The stock is separate and apart from deposit accounts and is not and cannot be insured by the FDIC. Transferable certificates will be issued to evidence ownership of the stock, which will enable the stock to be sold or traded, if a purchaser is available, with no effect on any account held in the Savings Bank. Under the Plan of Conversion, all of the capital stock of the Savings Bank will be acquired by the Company in exchange for a portion of the net proceeds from the sale of the Common Stock in the Conversion and Reorganization. The Common Stock will represent an ownership interest in the Company and will be issued upon completion of the Conversion and Reorganization to persons who elect to purchase the shares being offered. Continuity. During the Conversion and Reorganization process, the Saving Bank's normal business of accepting deposits and making loans will continue without interruption. The Savings Bank will continue to be subject to regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue without interruption. After the Conversion and Reorganization, the Savings -4- <PAGE> Bank will continue to provide services for depositors and borrowers under current policies and by its present management and staff. The Board of Directors serving the Mutual Holding Company at the time of the Conversion and Reorganization will serve as the Company's Board of Directors. All of the Saving Bank's directors and officers at the time of the Conversion and Reorganization will retain their positions after the Conversion and Reorganization. Voting Rights. Upon completion of the Conversion and Reorganization, depositor and borrower members as such will have no voting rights in the Company, the Mutual Holding Company or the Savings Bank. As a result, they will not be able to elect directors of any of these institutions or control their affairs. Currently, these rights are accorded to depositors and certain borrowers of the Savings Bank who are the members of the Mutual Holding Company. After the Conversion and Reorganization, only the shareholders of the Company will have voting rights, and the Company will own all of the stock of the Savings Bank. Each holder of Common Stock will be entitled to one vote per share on any matter to be considered by the shareholders of the Company, subject to the provisions of the Company's Articles of Incorporation. Deposit Accounts and Loans. SAVINGS BANK DEPOSIT ACCOUNTS, THE BALANCES OF INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE WILL NOT BE AFFECTED BY THE CONVERSION AND REORGANIZATION. FURTHERMORE, THE CONVERSION AND REORGANIZATION WILL NOT AFFECT THE LOAN ACCOUNTS, THE BALANCES OF THESE ACCOUNTS AND THE OBLIGATIONS OF THE BORROWERS UNDER THEIR INDIVIDUAL CONTRACTUAL ARRANGEMENTS WITH THE SAVINGS BANK. Tax Effects. The Company and the Savings Bank have received an opinion of counsel indicating that the Conversion and Reorganization will qualify as a tax-free reorganization for federal and Georgia income tax purposes. See "Risk Factors -- Possible Adverse Income Tax Consequences of Distribution of Subscription Rights" and "The Conversion and Reorganization -- Effects of the Conversion and Reorganization" and "-- Tax Aspects." Effect on Liquidation Rights. Were the Mutual Holding Company to liquidate, its creditors' claims would be paid first. Thereafter, if any assets remained, members of the Mutual Holding Company would receive such remaining assets, pro rata, based upon the deposit balances in their deposit accounts at the Savings Bank immediately prior to liquidation. In the unlikely event that the Savings Bank were to liquidate after the Conversion and Reorganization, all creditors' claims (including those of depositors, to the extent of their deposit balances) also would be paid first, followed by distribution of the "liquidation account" to certain depositors, with any assets remaining thereafter distributed to the Company as the holder of the Savings Bank's capital stock. Under OTS regulations, a merger, sale of bulk assets or similar transaction with another insured savings institution would not be considered a liquidation for this purpose, and in such a transaction, the surviving institution would be required to assume the liquidation account. See "The Conversion and Reorganization -- Liquidation Rights." -5- <PAGE> THE OFFERINGS Between 1,551,250 and 2,098,750 shares of Common Stock are being offered at $20 per share. As a result of changes in market and financial conditions prior to completion of the Conversion or to fill the order of the Company's ESOP and subject to OTS approval, the Company may increase the number of shares being offered to 2,413,562 without further notice to you. See "The Conversion and Reorganization -- The Offerings" and "-- Stock Pricing and Number of Shares to be Issued." STOCK PURCHASES The shares of Common Stock will be offered on the basis of priorities. Depositors and certain borrowers of the Savings Bank will receive subscription rights to purchase shares in the Subscription Offering. The shares will be offered first in the Subscription Offering and any remaining shares will be offered to the general public in a Community Offering and a Syndicated Community Offering. See "The Conversion and Reorganization -- The Offerings." PURCHASE LIMITATIONS The minimum purchase is 25 shares (or $500). The maximum purchase is 24,135 shares (or $482,700). For purposes of calculating your maximum purchase, your purchase will be grouped together with those of persons or entities who are your "associates" or with whom you are "acting in concert." Also, when more than one person or entity is an owner of a particular deposit account or obligor of a particular loan account, the orders of such persons and entities pursuant to subscription rights related to those accounts may not exceed $482,700 in the aggregate. See "The Conversion and Reorganization -- Purchase Limitations." PAYMENT FOR SUBSCRIPTIONS FOR COMMON STOCK If you subscribe for Common Stock in the Offerings, you may pay for the Common Stock in cash, by check or money order or by authorizing a withdrawal from your deposit account with the Savings Bank. You may not pay for your shares by wire transfer. Your payment will be deposited in a separate account at the Savings Bank and will earn interest at the Savings Bank's passbook rate of interest from the date the Savings Bank receives payment until the Conversion and Reorganization is completed or terminated. If you pay by authorization of withdrawal from a deposit account, the funds to be withdrawn will continue to accrue interest at the contractual rate, but will not be available to you until completion or termination of the Conversion and Reorganization. See "Conversion and Reorganization -- Procedure for Purchasing Shares in the Offering." -6- <PAGE> SUBSCRIPTION RIGHTS You may not transfer or agree to transfer your subscription rights under the Plan or the shares of Common Stock to be issued upon the exercise of your subscription rights. If you subscribe for Common Stock, you will be required to certify that your purchase of Common Stock is solely for your own account and that there is no agreement or understanding regarding the sale or transfer of the shares. A false certification on the subscription form may constitute a federal criminal offense. See "The Conversion and Reorganization --Restrictions on Transfer of Subscription Rights and Shares." SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE AND PERSONS FOUND TO BE ATTEMPTING TO TRANSFER SUBSCRIPTION RIGHTS WILL BE SUBJECT TO THE FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION. THE COMPANY AND THE SAVINGS BANK WILL REFER TO THE OFFICE OF THRIFT SUPERVISION ANY SITUATION THAT THEY BELIEVE MAY INVOLVE A TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS THAT THEY SUSPECT TO INVOLVE THE TRANSFER OF SUCH RIGHTS. IN ADDITION, REFERRALS WILL BE MADE TO THE OFFICE OF THE UNITED STATES ATTORNEY. THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE The offering range is based on an independent appraisal of the pro forma market value of the Common Stock by Ferguson & Company, an appraisal firm experienced in appraisals of savings institutions. Ferguson has estimated that in its opinion, as of February 27, 1997, the aggregate pro forma market value of the Company and the Savings Bank ranged between $31,025,000 and $41,975,000 (with a midpoint of $36,500,000). This range is called the "Valuation Price Range." The pro forma market value of the Company and the Savings Bank gives effect to the sale of shares in the Offerings. The appraisal was based in part upon the Savings Bank's financial condition and operations and the effect of the additional capital to be raised by the sale of Common Stock in the Offerings. The $20.00 price per share was determined by the Company's Board of Directors. The independent appraisal will be updated prior to the consummation of the Conversion. Subject to OTS approval, the Company may increase or decrease the Valuation Price Range to reflect changes in market and economic conditions or to fill the order of the ESOP before completion of the Conversion and Reorganization. This would result in an increase or decrease in the number of shares of Common Stock sold. The Company will not resolicit subscribers or permit them to modify or cancel their subscriptions unless the final appraised valuation is less than $31,025,000 or more than $48,271,250 (15% above the maximum of the Valuation Price Range). See "The Conversion and Reorganization -- Stock Pricing and Number of Shares to be Issued." -7- <PAGE> TERMINATION OF THE OFFERINGS The Subscription Offering will terminate at 12:00 noon, Eastern Time, on [JUNE 17], 1997 (THE "EXPIRATION DATE"), UNLESS IT IS EXTENDED FOR A PERIOD OF UP TO 45 DAYS OR, WITH OTS APPROVAL, FOR ADDITIONAL PERIODS NOT BEYOND [JUNE 16], 1999. THE COMMUNITY OFFERING AND/OR ANY SYNDICATED COMMUNITY OFFERING MAY TERMINATE AT ANY TIME AFTER SUCH OFFERINGS BEGIN BUT MUST BE COMPLETED ON OR BEFORE [AUGUST 1], 1997, UNLESS EXTENDED WITH OTS APPROVAL. ORDERS SUBMITTED ARE IRREVOCABLE UNTIL THE COMPLETION OF THE CONVERSION AND REORGANIZATION. HOWEVER, IF THE CONVERSION AND REORGANIZATION IS NOT COMPLETED ON OR BEFORE [AUGUST 1], 1997 OR EXTENDED BEYOND THAT DATE WITH OTS APPROVAL, THE COMPANY WILL PROMPTLY RETURN ALL FUNDS TO SUBSCRIBERS WITH INTEREST AND WILL CANCEL ALL WITHDRAWAL AUTHORIZATIONS. BENEFITS TO MANAGEMENT FROM THE OFFERINGS Full-time employees of the Savings Bank and the Company will participate in the Offerings through purchases of Common Stock by the Company's ESOP, which is a form of retirement plan. Following the completion of the Conversion and Reorganization, management intends to implement a stock award plan and a stock option plan. These plans will benefit directors and key employees. However, under OTS regulations, the stock award plan and stock option plan may not be adopted until after the Conversion and are subject to shareholder approval. Certain members of management also have employment agreements with the Savings Bank. See "Management of the Company -- Benefits" and "-- Employment Agreements" and "Risk Factors -- Possible Dilutive Effect of Issuance of Additional Shares." USE OF PROCEEDS RAISED FROM THE SALE OF COMMON STOCK The Company will contribute up to 50% of the net proceeds from the Offerings to the Savings Bank. The balance of the funds will be retained as the Company's initial capitalization, with a portion of those funds being loaned to the ESOP to fund its purchase of Common Stock in the Offerings. The Company may use the funds it retains to support future expansion of operations or diversification into other banking-related businesses and for other business or investment purposes, although management has no current plans regarding such activities. Subject to applicable limitations, the Company may also use available funds to repurchase shares of Common Stock and for the payment of dividends. Funds contributed to the Savings Bank will be invested initially in short-to intermediate-term United States government and agency securities. The Savings Bank will also use the proceeds to support its lending and investment activities and to enhance its ability to serve the borrowing and other financial needs of the communities it serves. See "Use of Proceeds." -8- <PAGE> DIVIDENDS The Company intends initially to pay quarterly cash dividends on the Common Stock at an annual rate of at least $0.60 per share (3% of the $20.00 per share purchase price) after the Conversion and Reorganization. However, the payment of dividends will be subject to the discretion of the Board of Directors and to the Company's earnings and financial condition. If the Company's Board of Directors determines in its discretion that the net income, capital and financial condition of the Company, the general economy or the best interests of the Company's shareholders do not support the payment of dividends, the Company may not pay dividends on the Common Stock. A primary source of income to the Company will be dividends periodically declared and paid by the Savings Bank on the Savings Bank common stock held by the Company. The declaration and payment of dividends by the Savings Bank are subject to the Savings Bank's earnings and financial condition, general economic conditions and federal restrictions. Accordingly, dividends may not be paid or, if paid, may be discontinued. See "Dividend Policy" and "Regulation." MARKET FOR THE COMMON STOCK The Company has applied to have the Common Stock listed on Nasdaq under the symbol "CFBC." No assurance can be given that an active and liquid trading market will develop or be maintained. Investors should have a long-term investment intent. Persons purchasing shares may not be able to sell their shares or at a price equal to or above $20.00. See "Market for Common Stock." IMPORTANT RISKS IN OWNING COMMON STOCK OF THE COMPANY Before you decide to purchase Common Stock in the Offerings, you should read the section of this document entitled "Risk Factors." -9- <PAGE> SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The following tables set forth certain selected consolidated financial and other data regarding the Mutual Holding Company and the Savings Bank. The data at December 31, 1996, 1995 and 1994, and for the years then ended, have been derived from audited consolidated financial statements of CF Mutual Holdings and subsidiaries, including the audited Consolidated Financial Statements and related Notes included elsewhere herein. The data at December 31, 1993 and 1992 and for the years then ended have been derived from audited financial statements of the Carrollton Federal Bank, FSB and subsidiary. <TABLE> <CAPTION> 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- Balance Sheet Data (Year End) (Dollars in thousands) <S> <C> <C> <C> <C> <C> Loans, gross 272,435 273,171 283,476 262,154 256,224 Earning assets 326,443 314,706 330,801 292,047 284,759 Assets 352,532 334,477 353,351 312,109 302,100 Deposits 307,756 289,288 289,328 269,624 270,050 Retained Earnings 25,278 25,030 22,083 19,700 17,261 Statement of Earnings Data Net interest income 13,409 13,217 13,224 13,418 11,694 Provision for loan losses 1,143 250 99 822 1,061 Noninterest income 3,244 3,118 2,137 2,003 1,864 Noninterest expense(3) 15,276 11,764 12,324 11,168 9,733 Deposit insurance premiums(3) 2,340 636 682 717 605 Net earnings 248 2,947 2,384 2,438 1,803 Asset Quality Ratios Non-performing assets to total assets(1) 1.82% 0.76% 1.16% 1.45% 1.43% Net charge-offs to average loans 0.31% 0.13% 0.14% 0.06% 0.19% Allowance for loan losses to total loans 0.95% 0.84% 0.84% 1.02% 0.79% [Allowance for loan losses to non- 40.50% 89.74% 58.50% 59.29% 46.77% performing assets(1)] Key Performance Ratios Return on average assets 0.07% 0.86% 0.72% 0.78% 0.59% Return on average capital 0.99% 12.51% 11.41% 13.19% 11.02% Net interest margin to earning assets 4.21% 4.07% 4.15% 3.97% 3.74% Average capital to average assets 7.32% 6.85% 6.28% 6.02% 5.38% Noninterest expense to average assets(3) 4.45% 3.42% 3.70% 3.64% 3.20% Noninterest expense to average assets(4) 3.95% 3.42% 3.70% 3.64% 3.20% Efficiency ratio(2)(3) 91.73% 72.01% 80.23% 72.42% 71.78% Efficiency ratio(2)(4) 81.39% 72.01% 80.23% 72.42% 71.78% Other Data Number of full service offices 12 7 8 8 8 </TABLE> _________________________ (1) Non-performing assets include nonaccrual loans and other real estate owned. (2) The efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income plus noninterest income. (3) Includes one-time SAIF assessment of $1,722,575 in 1996. (4) Excludes one-time SAIF assessment of $1,722,575 in 1996. RECENT DEVELOPMENTS The following summary of selected financial information and other data does not purport to be complete and is qualified in its entirety by reference to the detailed information and Financial Statements and accompanying Notes appearing elsewhere in this Prospectus. Selected financial information as of and for the three months ended March 31, 1997 and 1996 has been derived from unaudited financial information. In the opinion of the management of the Mutual Holding Company, such information reflects all adjustments (which consist only of normal, recurring adjustments) necessary for a fair presentation of the selected financial information and other data. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results which may be expected for any other period. <TABLE> <CAPTION> March 31, December 31, 1997 1996 --------- ------------ <S> <C> <C> (IN THOUSANDS) BALANCE SHEET DATA: Loans, gross $280,619 $272,435 Earning assets 341,194 326,443 Assets 365,509 352,532 Deposits 319,611 307,756 Retained Earnings 25,665 25,278 </TABLE> <TABLE> <CAPTION> As of and for the three months ended March 31, ------------------------- 1997 1996 ---------- ---------- <S> <C> <C> (IN THOUSANDS) OPERATING DATA: Net interest income $ 3,173 $ 2,821 Provision for loan losses 95 90 Noninterest income 721 735 Noninterest expense (3) 3,214 2,818 Deposit insurance premiums (3) 12 153 Net earnings 387 445 ASSET QUALITY RATIOS: Nonperforming assets to total assets (1) 1.68% 1.20% Net chargeoffs to average loans (4) 0.36% 0.15% Allowance for loan losses to total loans 0.87% 0.84% Allowance for loan losses to nonperforming assets 39.85% 56.64% KEY PERFORMANCE RATIOS: Return on average assets (4) 0.43% 0.53% Return on average stockholders' equity (4) 6.08% 7.09% Net interest margin (4) 3.80% 3.55% Average equity to average assets 7.09% 7.48% Noninterest expense to average assets (3)(4) 3.58% 3.36% Efficiency ratio (2)(3) 83.09% 79.36% OTHER DATA: Number of full service offices 12 8 </TABLE> (1) Nonperforming assets include nonaccrual loans and other real estate owned (2) The efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income plus noninterest income (3) Excludes one-time SAIF assessment (4) Annualized MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT DEVELOPMENTS COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND DECEMBER 31, 1996 Mutual Holding Company consolidated assets at March 31, 1997 grew approximately 3.7% to $366 million from $353 million at December 31, 1996. Total loans grew $8.2 million, or 3%, through March 31, 1997. This loan growth was primarily funded through an increase in deposits of approximately $12 million, or 3.9%, from $308 million at December 31, 1996 to $320 million at March 31, 1997. The Bank continued to substantially exceed all regulatory capital requirements at March 31, 1997. COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 Net earnings totaled approximately $387,000 through March 31, 1997 as compared to $445,000 for the three months ended March 31, 1996. Return on average assets and return on average equity for the three months ended March 31, 1997 were .43% and 6.08% on an annualized basis as compared to .53% and 7.09% for the three-month period ended March 31, 1996. The decreases over the prior year primarily are due to increased data processing fees related to the increased transaction account activity in 1997 as well as an increase in occupancy expenses due to the Company's opening of four Walmart branches during the last three quarters of 1996. Net interest income increased 12.7% to $3.2 million at March 31, 1997 as compared to $2.8 million through March 31, 1996. This increase was a result of the continuing change in the mix of the loan portfolio from adjustable rate mortgage loans into higher yielding commercial and consumer loans. The provision for loan losses was $95,000 and $90,000 for the quarters ended March 31, 1997 and 1996, respectively. Nonperforming assets decreased from $6.4 million at December 31, 1996 to $6.1 million at March 31, 1997. Net charge-offs totaled $248,000 through March 31, 1997 as compared to $99,000 through March 31, 1996. Noninterest income decreased slightly from $735,000 for the quarter ended March 31, 1996 to $721,000 for the quarter ended March 31, 1997. Noninterest expense increased 14.1% from $2.8 million for the three-month period ended March 31, 1996 to $3.2 million through March 31, 1997. This increase is primarily due to increases in salaries and employee benefits and occupancy expenses associated with the Company's opening of the four Walmart branches during the last three quarters of 1996. -10- <PAGE> RISK FACTORS The following factors, in addition to those discussed elsewhere in this Prospectus, should be carefully considered by investors in deciding whether to purchase the Common Stock offered hereby. Ability of Executive Officers and Directors to Control Corporate Action Directors and executive officers of the Company expect to purchase approximately 12.1% of the shares of Common Stock issued in the Offerings based upon the midpoint of the Valuation Price Range. See "Proposed Management Purchases." Directors, executive officers and employees are also expected to eventually control the voting of 4% of the shares of Common Stock issued through the MRP. In addition, 8% of the shares issued in the Offerings are expected to be acquired by the ESOP. Employees will vote the shares allocated to them under the ESOP. The ESOP trustees will vote unallocated shares and allocated shares for which no voting designation has been made. Accordingly, directors and executive officers as a group, together with the ESOP and the MRP, may have effective control over as much as 24.1%, at the midpoint of the Valuation Price Range, of the Common Stock issued and outstanding at the completion of the Conversion and Reorganization. In addition, following the Conversion and Reorganization, executive officers and directors are expected to be granted options under the Option Plan to purchase an amount of Common Stock equal to 10% of the shares of Common Stock issued in the Offerings. If all of the options were issued to directors and executive officers and exercised, and if the Company did not issue any additional shares of Common Stock, the shares held by directors and executive officers and their associates as a group, including (i) shares purchased outright in the Offerings, (ii) all shares issued by the MRP and ESOP and (iii) shares purchased pursuant to the exercise of stock options, would give such persons effective control over as much as 34.1%, at the midpoint of the Valuation Price Range, of the Common Stock issued and outstanding. Because the Company's Articles of Incorporation will require the affirmative vote of 80% of the outstanding shares entitled to vote in order to approve certain mergers, consolidations or other business combinations without the prior approval of two-thirds of the Company's directors, the officers and directors and their associates, as a group, could effectively block such transactions. See "Certain Restrictions on Acquisition of the Company-Mergers, Consolidations and Sales of Assets." Intent to Remain Independent; Unsuitability as Short-Term Investment The directors and executive officers of the Company and the Savings Bank believe that it is in the best interests of the Savings Bank, the Company and the Company's shareholders for the Company and the Savings Bank to remain independent, with the objective of long-term enhancement of shareholder value. Accordingly, an investment in the Common Stock of the Company may not be suitable for investors who are seeking short-term returns through a sale of the institution. Provisions Discouraging Transactions that Might Benefit Shareholders The Articles of Incorporation and Bylaws of the Company and the Savings Bank contain certain restrictions that are intended to discourage non-negotiated attempts to acquire control of the Company or Savings Bank. These provisions, among other things, (i) provide that the Board of Directors be divided into three classes, with the members of each class being elected for three-year terms and one class being elected annually; (ii) provide the authority to issue preferred stock with such terms as are determined by the Board of Directors; (iii) require a supermajority vote for certain mergers, acquisitions and similar transactions, as well as for the removal of a director without cause or a change in the number of directors; and (iv) state that the Company will be governed by the "business combination" and "fair price" provisions of the Georgia Business Corporation Act. The Company's Board of Directors believes that these provisions encourage potential acquirors to negotiate directly with the Board of Directors. However, these provisions may discourage an attempt to acquire control of the Company that a majority of the shareholders might deem to be in their best interests or in which they might receive a premium over the then market price of their shares. These provisions may also render difficult the removal of a -11- <PAGE> director and may deter or delay changes in control that have not received the requisite approval of the Company's Board of Directors. Other facts, such as voting control of directors and officers and agreements with employees, may also have an anti-takeover effect. See "- Voting Control of Officers and Directors" and "Certain Restrictions on Acquisition of the Company." Anticipated Low Return on Equity Following Conversion and Reorganization At December 31, 1996, the Savings Bank's ratio of capital to assets was 7.42%. On a pro forma basis at December 31, 1996, assuming the sale of 1,551,250, 1,825,000 and 2,098,750 shares of Common Stock in the Offerings at the minimum, midpoint and maximum of the Valuation Price Range, respectively, and the distribution of 50% of the net proceeds to the Savings Bank, the Savings Bank's ratio of capital to assets would have been 10.93%, 11.58%, and 12.22%, respectively. With its higher capital position as a result of the Conversion and Reorganization, it is doubtful that the Company will be able to quickly deploy the capital raised in the Offerings in loans and other assets in a manner consistent with its business plan and operating philosophies and in a manner which will generate earnings to support its high capital position. As a result, it is expected that the Company's return on equity initially will be below industry norms. Consequently, investors expecting a return on equity which will meet or exceed industry norms for the foreseeable future should carefully evaluate and consider the risk that such returns will not be achieved. Following the Conversion and Reorganization, management may consider plans to reduce capital if the opportunities to deploy it are not found. Such plans may include payment of cash dividends and repurchasing shares. Any such steps would be taken based on conditions as they exist following the Conversion and Reorganization, and in compliance with applicable regulations that limit the Company's ability to pay dividends and repurchase its stock. See "Use of Proceeds," "Dividend Policy" and "Regulation." Potential Adverse Effects of Changes in Interest Rates and the Current Interest Rate Environment Effect on Net Interest Income. The operations of the Savings Bank are substantially dependent on its net interest income, which is the difference between the interest income earned on its interest-earning assets and the interest expense paid on its interest-bearing liabilities. Like most savings institutions, the Savings Bank's earnings are affected by changes in market interest rates and other economic factors beyond its control. If an institution's interest-earning assets have longer effective maturities than its interest-bearing liabilities, the yield on the institution's interest-earning assets generally will adjust more slowly than the cost of its interest-bearing liabilities and, as a result, the institution's net interest income generally would be adversely affected by material and prolonged increases in interest rates and positively affected by comparable declines in interest rates. In recent years, the assets of many savings institutions, including the Savings Bank, have been negatively "gapped" -- which means that the dollar amount of interest-bearing liabilities which reprice within specific time periods, either through maturity or rate adjustment, exceeds the dollar amount of interest-earning assets which reprice within such time periods. As a result, the net interest income of these savings institutions, including the Savings Bank, would be expected to be negatively impacted by increases in interest rates. At December 31, 1996, the Mutual Holding Company's cumulative one year gap as a percentage of total interest-earning assets was negative 13.06%. The Mutual Holding Company computes its gap position using certain prepayment, deposit decay and other assumptions used by the OTS in making gap computations. The results of the gap computations could be substantially different if other assumptions were used. -12- <PAGE> The Savings Bank has actively sought to reduce the vulnerability of its operations to changes in interest rates through an analysis of its interest rate risk undertaken by measuring changes in the market value of its portfolio equity ("NPV") and annual net interest income ("NII") for instantaneous and sustained parallel shifts in market interest rates. These methods have enabled the Savings Bank to maintain its net interest income at a relatively constant level of $13.4 million in 1996 as compared to $13.2 million in each of 1995 and 1994. These strategies have also allowed improvement in the negative gap as a percentage of interest-earning assets from (53.18%) at December 31, 1994 to (13.06%) at December 31, 1996. Pursuant to such analysis, the Savings Bank determined that a theoretical 200 basis point increase in market interest rates as of December 31, 1996 would have resulted in a $2.8 million, or 8%, decrease in the Savings Bank's NPV and a decrease in NII of $672,000, or 9.3%, while a theoretical 200 basis point decrease in market interest rates would have resulted as of December 31, 1996 in a $301,000, or 1%, decrease in the Savings Bank's NPV and an increase in NII of $147,000, or 2%. Computations of an interest rate gap and computations of the prospective effects of hypothetical interest rate changes on NPV and NII are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay and should not be relied upon as indicative of actual results. Furthermore, the computations do not incorporate any actions management may undertake in response to changes in interest rates. Effect on Securities. In addition to affecting interest income and expenses, changes in interest rates also can affect the value of the Savings Bank's securities portfolio, which is comprised of fixed and adjustable-rate instruments. Generally, the value of fixed-rate instruments fluctuates inversely with changes in interest rates. The Savings Bank has sought to reduce the vulnerability to changes in interest rates by managing the nature and composition of its securities portfolio. As a consequence of the fluctuation in interest rates, the carrying value of the Savings Bank's held-to-maturity securities can differ from the market value of such securities. See "Business of Carrollton Federal Bank - Investment Securities." Prepayment Risk. Changes in interest rates also can affect the average life of loans and mortgage-backed securities. Historically low interest rates in recent periods have resulted in increased prepayments of loans and mortgage-backed securities, as borrowers refinanced to reduce borrowing costs. Under these circumstances, the Savings Bank is subject to reinvestment risk to the extent that it is not able to reinvest such prepayments at rates which are comparable to the rates on the maturing loans or securities. In periods of declining interest rates, reinvestment of these prepayment proceeds can result in a decrease in the weighted average yield of the loan portfolio. In periods of rising interest rates, the prepayment speed of loans will decrease (fewer refinances and payoffs), resulting in a lower volume of dollars to be reinvested by the bank into higher yielding loans and investments. This situation can also lead to a lower weighted average yield on the portfolio than can be realized in a more stable rate environment. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Jumbo Certificates. The inflows and outflows of deposits, which are the Savings Bank's primary source of funds for lending and other investment purposes, are significantly influenced by general interest rates and money market conditions. In order to maintain the Savings Bank's desired level of deposits, it must offer rates of interest and other terms that its customers judge to be competitive with those offered by other financial institutions and viable investment alternatives. While all deposits are more susceptible to outflow during periods of low market interest rates or when viable investment alternatives offer higher rates of return, depositors with larger account balances generally review more thoroughly the available options and are more likely to withdraw their funds as the gap between expected returns widens and the perceived risks remain relatively equal. As of December 31, 1996, the Savings Bank's total deposit liabilities included 204 certificates of deposit with principal amounts of $100,000 or more. These accounts amounted to $47.2 million -13- <PAGE> or 15.3% of the Savings Bank's total deposit liabilities as of that date. While the holders of these accounts are generally from the Savings Bank's market area and have had relatively large deposits with the Savings Bank for several years, a decision by a relatively small number of depositors to move their deposits to investment alternatives would result in a relatively large outflow of the Savings Bank's total deposits. Under such circumstances, in order to maintain the requisite level of funds for lending and other investment purposes, the Savings Bank would either increase its deposits by seeking funds outside its primary market area or by offering higher interest rates and more attractive account terms than its local competitors. The Savings Bank could also borrow funds from the Federal Home Loan Bank of Atlanta (the "FHLB") or other sources on a short- or long-term basis. The use of these alternative sources of funds may result in an increase in the Savings Bank's total cost of funds which would decrease its net income. Risk of Loan Losses from Non-Performing Assets At December 31, 1996, the Savings Bank's non-performing assets, which consist of non-accrual loans, accruing loans greater than 90 days delinquent and real estate acquired through foreclosure or by deed in lieu thereof, amounted to $6.4 million or 1.82% of the Savings Bank's total assets. This represents an increase of $3.9 million, or 152%, from non- performing assets at December 31, 1995. One large commercial relationship, totaling approximately $4.75 million or 1.35% of total assets, accounted for this increase. See "Business of Carrollton Federal Bank - Lending Activities - Non-Performing Assets". Risk of Loan Losses from Increasing Loan to Deposit Ratio The Savings Bank's loan to deposit ratio was 88% at December 31, 1996, as compared to 94% at December 31, 1995. The Savings Bank has significantly increased its consumer and commercial lending in recent years and intends to continue to increase the amounts of such loans in the near future as it continues its transition from a traditional thrift institution to a community retail bank. Such an increase entails additional loan loss and other risks relating to the higher proportion of loans issued by the Savings Bank. See "Business of Carrollton Federal Bank - Lending Activities." Risk of Loan Losses from Consumer Lending and Indirect Automobile Lending At December 31, 1996, approximately $6.7 million, or 2.5%, of the Savings Bank's loan portfolio consisted of indirect automobile loans originated by the Savings Bank through a network of automobile dealers in the Local Community. The Savings Bank initiated its indirect automobile lending program in 1996 and intends to increase such lending in the future. Originating indirect automobile loans is a relatively new business activity for the Savings Bank, and its ability to maintain or expand its indirect automobile lending business will depend upon the volume of sales of new and used automobiles and demand by consumers for financing in connection therewith. These factors are beyond the Savings Bank's control. While the Savings Bank attempts to employ prudent credit standards in originating indirect automobile loans, there is an inherent risk that a portion of these loans will default. In such instances, the repossessed automobile securing the loan may not be sufficient for repayment of the loan and the Savings Bank may not be able to collect the remaining deficiency. The Savings Bank does not have recourse to the automobile dealer in the event of a default of an indirect automobile loan. Loans secured by assets that depreciate rapidly, such as automobiles, are generally considered to entail greater risk than residential mortgage loans. There is one significant relationship of approximately $500,000 in the consumer portfolio that has defaulted. This customer has been a borrower from the Savings Bank since 1987. The loan is secured by real estate. No additional loss is anticipated due to this credit. At December 31, 1996, management was aware of no material problems associated with the indirect lending program. In light of these risks, the Savings Bank currently maintains allowances for loan losses with respect to its indirect automobile loans. There can be no assurance, however, that the allowance for loan losses will prove sufficient to cover actual losses on indirect automobile loans or other loans in the future. -14- <PAGE> Risk of Loan Losses from Commercial Lending As of December 31, 1996, the Savings Bank had $57.8 million in outstanding commercial loans, representing 21% of its net loan portfolio. At December 31, 1996, one significant commercial loan, totalling approximately $4.75 million, was in default. This loan is secured by commercial real estate. No significant loss is anticipated. Commercial loans, whether or not secured by real estate, generally entail significant additional risks as compared to one-to-four family residential mortgage lending and carry larger loan balances. The increased credit risk is a result of several factors, including the concentration of principal in a smaller number of loans and borrowers, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related property. If the cash flow from the property is reduced, the borrower's ability to repay the loan may be impaired. Loans secured by commercial real estate may also involve a greater degree of environmental risk. Potential Absence of Active, Liquid Market for Common Stock The Company and the Savings Bank have never issued capital stock, other than one share of Common Stock issued in connection with the incorporation of the Company, and the 100 shares of Savings Bank stock issued to the Mutual Holding Company in connection with the MHC Reorganization, which shares will be cancelled upon completion of the Conversion and Reorganization. Consequently, there is no existing market for the Common Stock. The Company has applied to have its Common Stock quoted on Nasdaq under the symbol "CFBC" upon completion of the Conversion and Reorganization and will seek to encourage and assist at least two market makers to make a market in its Common Stock. Trident has indicated that it intends to serve as one of the market makers. Making a market in securities involves maintaining bid and ask quotations and being able, as principal, to effect transactions in reasonable quantities at those quoted prices, subject to various laws and other regulatory requirements. The development of a public trading market depends upon the existence of willing buyers and sellers, the presence of which is not within the control of the Company, the Savings Bank, or any market maker. Accordingly, there can be no assurance that an active and liquid trading market for the Common Stock will develop or that purchasers in the Offering will be able to sell their shares at or above the Purchase Price. The absence of a liquid and active trading market, or the discontinuance thereof, may have an adverse effect on both the price and the liquidity of the Common Stock. See "Market for Common Stock." Possible Dilutive Effect of Issuance of Additional Shares Various possible and planned issuances of Common Stock could dilute the interests of prospective stockholders of the Company or existing stockholders of the Company following consummation of the Conversion and Reorganization, as noted below. The number of shares to be sold in the Conversion and Reorganization may be increased as a result of an increase in the Valuation Price Range of up to 15% to reflect changes in market and financial conditions prior to the completion of the Conversion and Reorganization or to allow the ESOP to purchase up to 8% of the shares offered in the Offerings. In the event that the Valuation Price Range is so increased, it is expected that the Company will issue up to 2,413,562 shares of Common Stock at the Purchase Price for an aggregate price of up to $48,271,250. An increase in the number of shares will decrease net income per share and equity per share on a pro forma basis and will increase the Company's consolidated equity and net income. See "Capitalization" and "Pro Forma Data." -15- <PAGE> The ESOP intends to purchase 8.0% of the Common Stock to be issued in the Offerings. In the event that there are insufficient shares available to fill the ESOP's order due to an oversubscription by Eligible Account Holders, the Company may issue authorized but unissued shares of Common Stock to the ESOP in an amount sufficient to fill the ESOP's order and/or the ESOP may purchase such shares in the open market. In the event that additional shares of Common Stock are issued to the ESOP to fill its order, stockholders would experience dilution of their ownership interests (by up to 7.4% at the maximum of the Valuation Price Range, assuming the ESOP purchased no shares in the Offerings) and pro forma per share equity and pro forma per share net income would decrease as a result of an increase in the number of outstanding shares of Common Stock. See "Management of the Company - Benefits - Employee Stock Ownership Plan" and "The Conversion and Reorganization - The Offerings - Subscription Offering" and "- Priority 2: ESOP." If the Recognition Plan is approved by stockholders at a special or annual meeting of the Company's stockholders not earlier than six months after the completion of the Conversion and Reorganization, an amount of Common Stock equal to 4.0% of the shares of Common Stock issued in the Offerings will be reserved under the Recognition Plan. Such shares of Common Stock may be acquired in the open market or from authorized but unissued shares of Common Stock. In the event that additional shares of Common Stock are issued to the Recognition Plan, shareholders would experience dilution of their ownership interests (by 3.8% at the maximum of the Valuation Price Range) and pro forma per share equity and pro forma per share net income would decrease as a result of an increase in the number of outstanding shares of Common Stock. See "Pro Forma Data" and "Management of the Company - Benefits - Management Recognition Plan and Trust." If the Company's Option Plan is approved by stockholders at a special or annual meeting of the Company's stockholders not earlier than six months after the completion of the Conversion and Reorganization, the Company will reserve for future issuance pursuant to such plan a number of authorized shares of Common Stock equal to an aggregate of 10% of the Common Stock issued in the Offerings (209,875 shares, based on the maximum of the Valuation Price Range). Alternatively, the Company could purchase shares in the open market to be distributed when options are exercised. If additional shares of Common Stock are issued, shareholders would experience dilution in their ownership interests (by 9.1% at the maximum of the Valuation Price Range) and, if all options were exercised at a Purchase Price of $20.00 per share, pro forma per share equity and pro forma per share net income would decrease as a result of the increase in the number of shares outstanding. See "Pro Forma Data" and "Management of the Company - Benefits - 1997 Stock Option Plan." Potential Adverse Impact of Changes in Regulation and Legislation The Savings Bank is subject to regulation by the OTS, as its chartering authority and by the Federal Deposit Insurance Corporation ("FDIC"), which regulates the Savings Bank and insures its deposits to the fullest extent provided by law. The Company is regulated by the OTS as a registered savings and loan holding company. The Savings Bank also is subject to certain regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and is a member of the FHLB of Atlanta, one of the 12 regional banks which comprise the FHLB System. Such supervision and regulation establish a comprehensive framework of activities in which an institution may engage, and are intended primarily for the protection of the SAIF and depositors. This regulatory structure also provides the OTS and the FDIC with significant discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the OTS or the FDIC or as a result of legislation subsequently enacted by the Congress of the United States, could have a substantial impact on the Savings Bank and its operations. See "Regulation." -16- <PAGE> Competition The Savings Bank faces significant competition both in making loans and in attracting deposits principally from national, regional and local commercial banks, savings banks, savings and loan associations, credit unions, broker-dealers, mortgage banking companies (including FNMA) and insurance companies. Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations and credit unions. The Savings Bank faces additional competition for deposits from short-term money market funds, other corporate and government securities funds and from other financial institutions such as brokerage firms and insurance companies. In addition, the Savings Bank may face additional competition from commercial banks headquartered outside of the State of Georgia as a result of the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which becomes fully effective on June 1, 1997. The "Georgia Interstate Banking Act," which became effective July 1, 1995, provides that (i) interstate acquisitions by institutions located in Georgia are permitted in states which also allow national interstate acquisitions, and (ii) interstate acquisitions of institutions located in Georgia are permitted by institutions located in states which also allow national interstate acquisitions; provided, however, that if the board of directors of a Georgia savings and loan institution adopts a resolution to except such thrift or holding company from being acquired pursuant to the provisions of the Georgia Interstate Banking Act and properly files a certified copy of such resolution with the Georgia Department, such savings and loan institution or holding company may not be acquired by an institution located outside of the State of Georgia. Possible Adverse Income Tax Consequences of the Distribution of Subscription Rights The Primary Parties have received an opinion of Ferguson that subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members have no ascertainable value. However, this opinion is not binding on the Internal Revenue Service ("IRS"). If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are deemed to have an ascertainable value, receipt of such rights likely would be taxable only to those Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise the subscription rights (either as capital gain or ordinary income) in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. See "The Conversion and Reorganization - Effects of the Conversion and Reorganization" and "- Tax Aspects." COMMUNITY FIRST BANKING COMPANY The Company was organized in March 1997 at the direction of the Board of Directors of the Savings Bank for the purpose of holding all of the capital stock of the Savings Bank and in order to facilitate the Conversion and Reorganization. The Company has applied for the approval of the OTS to become a savings institution holding company and as such will be subject to regulation by the OTS. After completion of the Conversion and Reorganization, the Company will conduct business initially as a unitary savings institution holding company. See "Regulation - The Company." Upon consummation of the Conversion and Reorganization, the Company will have no significant assets other than all of the outstanding shares of Savings Bank Common Stock, the note evidencing the Company's loan to the ESOP and the portion of the net proceeds from the Offerings retained by the Company, and the Company will have no significant liabilities. See "Use of Proceeds." Initially, the management of the Company and the Savings Bank will be substantially similar and the Company will neither own nor lease any property, but will instead use the premises, equipment and furniture -17- <PAGE> of the Savings Bank. At the present time, the Company does not intend to employ any persons other than officers who are also officers of the Savings Bank, and the Company will utilize the support staff of the Savings Bank from time to time. Additional employees will be hired as appropriate to the extent the Company expands or changes its business in the future. Management believes that the stock holding company structure will provide the Company with additional flexibility to diversify and expand, should it decide to do so, its business activities through existing or newly formed subsidiaries, or through acquisitions of or mergers with other financial institutions and financial services related companies. Although there are no current arrangements understandings or agreements regarding any such opportunities or transactions, the Company will be in a position after the Conversion and Reorganization, subject to regulatory limitations and the Company's financial position, to take advantage of any such acquisition and expansion opportunities that may arise. The initial activities of the Company are anticipated to be funded by the proceeds to be retained by the Company and earnings thereon, as well as dividends from the Savings Bank. See "Dividend Policy." The directors and executive officers of the Company believe that it is in the best interests of the Company and its shareholders for the Company to remain an independent company, and the Articles of Incorporation of the Company contain a number of provisions that may have an anti-takeover effect. See "Certain Restrictions on Acquisition of the Company." The Company's principal executive office is located at the home office of the Savings Bank at 110 Dixie Street, Carrollton, Georgia 30117, and its telephone number is (770) 834-7355. CARROLLTON FEDERAL BANK Carrollton Federal Bank, a federally chartered stock savings bank that was organized on August 1, 1994 as a subsidiary of the Mutual Holding Company, operates in Carrollton, Georgia and neighboring communities in western Georgia. Prior to that date, the Savings Bank's predecessor, the Mutual Bank, had operated since 1929. The Savings Bank operates 12 branch offices in Carroll, Douglas, Coweta, Fayette, Haralson, Heard, Henry and Paulding counties in Georgia (the "Primary Market Area"). The Savings Bank is primarily engaged in attracting deposits from the general public and using that and other available sources of funds to originate mortgage loans primarily located in the counties in which it has offices and to originate commercial and consumer and other secured and unsecured loans. At December 31, 1996, mortgage loans amounted to $147 million or 54% of the Savings Bank's total net loan portfolio; commercial loans amounted to $58 million or 21% of the Savings Bank's total net loan portfolio; and consumer and other installment loans had a total balance of $68 million or 25% of the Savings Bank's total net loan portfolio. The Savings Bank also has an investment portfolio consisting of U.S. Government and agency obligations, obligations of the State of Georgia and its political subdivisions and FHLB stock. As of December 31, 1996, the carrying value of securities that management has the intent and ability to hold until maturity was $7.8 million, the carrying value of securities that were available for sale was $33.9 million, and the carrying value of other investments, including FHLB stock, was $2.5 million. In addition, as of that same date, the Savings Bank's aggregate cash and interest-bearing deposits in other banks totaled $14.4 million and federal funds sold balances were $7.4 million. The Savings Bank is a community-oriented retail banking institution that emphasizes customer service and convenience. To enhance its earnings, the Savings Bank has adopted a business strategy -18- <PAGE> that emphasizes retail lending and deposit products and an increased emphasis on commercial and consumer lending. The Savings Bank is subject to regulation by the OTS and by the FDIC, which insures the Savings Bank's deposits up to applicable limits. The Mutual Holding Company and the Savings Bank have recently formed three operating units to engage in new businesses: CFB Securities, CFB Financial and CFB Insurance. CFB Securities offers traditional brokerage services and products such as mutual funds, stocks and bonds through an NASD member firm. CFB Financial services the loan needs of consumers traditionally associated with small loan companies. CFB Insurance has not commenced operations, but intends to offer various insurance products, including property and casualty insurance, to existing customers of the Savings Bank and to the general public. CF MUTUAL HOLDINGS CF Mutual Holdings is a federally chartered mutual holding company chartered on August 1, 1994 in connection with the MHC Reorganization. The Mutual Holding Company's primary asset is 100 shares of Savings Bank Common Stock, which represents 100% of the shares of Savings Bank Common Stock outstanding as of the date of this Prospectus. The Mutual Holding Company's other assets consist of a deposit account with the Savings Bank in the amount of $2,044 and a correspondent bank account and federal funds sold totalling $1,325,290. The Mutual Holding Company also holds 3,500 shares of West Georgia National Bank (WGNB) stock with a cost basis of $112,000 or $32 per share. This investment represents less than 1% of the outstanding common stock of WGNB and is carried at cost. As part of the MHC Reorganization, the Mutual Holding Company will convert to Interim Mutual and simultaneously merge into the Savings Bank, with the Savings Bank being the surviving entity. PROPOSED MANAGEMENT PURCHASES The following table sets forth, for each of the Company's directors and executive officers and for all of the directors and executive officers as a group, their proposed purchases of Common Stock, assuming sufficient shares are available to satisfy their subscriptions and in each case assuming that 1,825,000 shares of Common Stock are sold, which is the midpoint of the Valuation Price Range. <TABLE> <CAPTION> Percentage of Number of Common Stock Name Amount Shares to be Held ---- ------ --------- ------------- <S> <C> <C> <C> T. Aubrey Silvey $ 482,700 24,135 1.32% Gary M. Bullock 200,000 10,000 .55 Dean B. Talley 482,700 24,135 1.32 Anna L. Berry 150,000 7,500 .41 Michael P. Steed 482,700 24,135 1.32 Thomas S. Upchurch 375,000 18,750 1.03 Jerry L. Clayton 482,700 24,135 1.32 Gary D. Dorminey 482,700 24,135 1.32 T. E. Reeve, Jr. 482,700 24,135 1.32 D. Lane Poston 482,700 24,135 1.32 </TABLE> -19- <PAGE> <TABLE> <CAPTION> <S> <C> <C> <C> Anyce C. Fox 200,000 10,000 .55 C. Lynn Gable 100,000 5,000 .27 ---------- ------- ----- Total $4,403,900 220,195 12.07% ========== ======= ===== </TABLE> In addition, the ESOP intends to purchase 8.0% of the Common Stock issued in the Conversion for the benefit of officers and employees. Stock option and stock grants may also be granted in the future to directors, officers and employees upon the receipt of stockholder approval of the Company's proposed stock benefit plans. See "Management of the Company - Benefits" for a description of these plans. USE OF PROCEEDS Although the actual net proceeds from the sale of the Common Stock cannot be determined until the Offerings are completed, it is presently anticipated that the net proceeds from the sale of the Common Stock will be between $29.9 million and $40.7 million ($46.9 million assuming an increase in the Valuation Price Range by 15%). See "Pro Forma Data" as to the assumptions used to arrive at such amounts. While the amount of net proceeds received by the Savings Bank will further strengthen the Savings Bank's capital position, which already exceeds all regulatory requirements, it should be noted that the Savings Bank is not converting primarily to raise capital. After the Conversion and Reorganization, the Savings Bank's tangible capital ratio (at the midpoint of the Valuation Price Range) on a pro forma basis at December 31, 1996 is expected to be 11.02% (after receipt by the Savings Bank of 50% of the net Conversion proceeds). See "Regulatory Capital." As a result, the Savings Bank will continue to be a highly capitalized institution. The Savings Bank intends to continue after the Conversion and Reorganization with its strategy of emphasizing capital strength and continued growth in assets and earnings. It is expected that the Company's return on equity will initially be lower than historical levels as the Company and the Savings Bank deploy the proceeds from the Offerings. While the Board of Directors and management recognize this challenge will exist for the foreseeable future, the Company intends to manage capital through controlled growth, the payment of regular cash dividends and the possible payment of periodic special dividends. Management does not expect to pay any dividends that would be characterized as a tax-free return of capital. The Company may repurchase the Common Stock as market and regulatory limits permit. However, there can be no assurance that any dividends will be paid on the Common Stock or that the Company will repurchase any shares. See "Dividend Policy" and "Regulation." The Company will purchase all of the capital stock of the Savings Bank to be issued in the Conversion in exchange for up to 50% of the net Conversion proceeds, and the Company will retain the remaining 50% of the net proceeds or more, if permitted. The Company intends to use a portion of the net proceeds that it retains to make a loan directly to the ESOP to enable the ESOP to purchase up to 8.0% of the Common Stock. Based upon the issuance of 1,551,250 shares or 2,098,750 shares at the minimum and maximum of the Valuation Price Range, respectively, the loan to the ESOP would be $2.5 million and $3.4 million, respectively. See "Management of the Company -Benefits- Employee Stock Ownership Plan." The remaining net proceeds retained by the Company will be initially used to invest primarily in short-term investment securities and deposits in or loans to the Savings Bank. The portion of the net proceeds retained by the Company may ultimately be used to support the Savings Bank's lending activities, to support the future expansion -20- <PAGE> of operations through establishment of additional branch offices or other customer facilities, acquisitions of other financial institutions, expansion into other lending markets or diversification into other banking related businesses (although no such transactions are specifically being considered at this time), and for other business and investment purposes, including the payment of regular cash dividends and possible repurchases of the Common Stock and special dividends. Management of the Company may consider expanding or diversifying, should such opportunities become available. Funds contributed to the Savings Bank will be invested initially in short- to intermediate-term United States government and agency securities. The proceeds also will be used to support the Savings Bank's lending and investment activities and thereby enhance the Savings Bank's capabilities to serve the borrowing and other financial needs of the communities it serves. Neither the Savings Bank nor the Company has any specific plans, arrangements, or understandings regarding any acquisitions or diversification of activities at this time, nor have criteria been established to identify potential candidates for acquisition. Following the one-year anniversary of the completion of the Conversion (or sooner if permitted by the OTS), and based upon then existing facts and circumstances, the Company's Board of Directors may determine to repurchase shares of Common Stock, subject to any applicable statutory and regulatory requirements. Such facts and circumstances may include but are not limited to (i) market and economic factors such as the price at which the stock is trading in the market, the volume of trading, the attractiveness of other investment alternatives in terms of the rate of return and risk involved in the investment, the ability to increase the book value and/or earnings per share of the remaining outstanding shares, and an improvement in the Company's return on equity; (ii) the avoidance of dilution to stockholders by not having to issue additional shares to cover the exercise of stock options or to fund employee stock benefit plans; and (iii) any other circumstances in which repurchases would be in the best interests of the Company and its stockholders. Any stock repurchases will be subject to the determination of the Company's Board of Directors that both the Company and the Savings Bank will be capitalized in excess of all applicable regulatory requirements after any such repurchases and to receipt of necessary regulatory approvals or non-objections from the OTS. The payment of dividends or repurchase of stock, however, would be prohibited if equity would be reduced below the amount required for the liquidation account. See "Dividend Policy," "Regulation - Bank Regulation - Prompt Corrective Action -Capital Distributions," and "The Conversion and Reorganization - Certain Restrictions on Purchase or Transfer of Shares after the Conversion and Reorganization." The Company will be a unitary savings and loan holding company which, under existing laws, would generally not be restricted as to the types of business activities in which it may engage, provided that the Savings Bank continues to be a qualified thrift lender ("QTL"). See "Regulation - The Company" for a description of certain regulations applicable to the Company. Any portion of the net proceeds in excess of the amount retained by the Company will be added to the Savings Bank's general funds to be used for general corporate purposes, including increased lending activities and purchases of investment and mortgage-backed securities. The net proceeds may vary because total expenses of the Conversion and Reorganization may be more or less than those estimated. The net proceeds will also vary if the number of shares to be issued in the Offerings is adjusted to reflect a change in the estimated pro forma market value of the Savings Bank. Payments for shares made through withdrawals from existing deposit accounts at the Savings Bank will not result in the receipt of new funds for investment by the Savings Bank but will result in a reduction of the Savings Bank's interest expense and liabilities as funds are transferred from interest-bearing certificates or other deposit accounts. -21- <PAGE> DIVIDEND POLICY Upon completion of the Conversion and Reorganization, the Board of Directors of the Company will have the authority to declare dividends on the Common Stock, subject to statutory and regulatory requirements. The Board of Directors of the Company intends to adopt a policy of paying quarterly cash dividends on the Common Stock following consummation of the Conversion and Reorganization at an initial annual rate of not less than 3.0% of the $20.00 per share purchase price of the Common Stock ($0.60 per share) commencing with the first full quarter following consummation of the Conversion and Reorganization. Declarations of dividends by the Board of Directors will depend upon a number of factors including the amount of net proceeds from the Offerings retained by the Company, investment opportunities available to the Company or the Savings Bank, capital requirements, regulatory limitations, the Company's and the Savings Bank's financial condition and results of operations, tax considerations and general economic conditions. Consequently, there can be no assurance that dividends will in fact be paid on the Common Stock or that, if paid, such dividends will not be reduced or eliminated in future periods. Dividends from the Company will depend, in part, upon receipt of dividends from the Savings Bank, because the Company initially will have no source of income other than dividends from the Savings Bank, earnings from the investment of the portion of the net proceeds from the sale of Common Stock retained by the Company, and interest payments with respect to the Company's loan to the ESOP. A regulation of the OTS imposes limitations on "capital distributions" by savings institutions, including cash dividends, payments by a savings institution to repurchase or otherwise acquire its stock, payments to stockholders of another savings institution in a cash-out merger and other distributions charged against capital. The regulation establishes a three-tiered system, with the greatest flexibility being afforded to well-capitalized or Tier 1 savings institutions and the least flexibility being afforded to under- capitalized or Tier 3 savings institutions. As of December 31, 1996, the Savings Bank was a Tier I savings institution and is expected to continue to so qualify immediately following the consummation of the Conversion and Reorganization. See "Regulation -Bank Regulation - Prompt Corrective Action - Capital Distributions." Unlike the Savings Bank, the Company is not subject to the aforementioned regulatory restrictions on the payment of dividends to its stockholders, although the source of such dividends will be, in part, dependent upon dividends from the Savings Bank in addition to the net proceeds retained by the Company and earnings thereon. The Company is subject, however, to the requirements of Georgia law which state that a corporation may not pay dividends if, as a result of the dividend, the corporation would be unable to pay its debts as they come due in the ordinary course of business or its total assets would be less than the sum of its total liabilities plus liquidation preferences. MARKET FOR COMMON STOCK The Company has never issued capital stock and consequently there is no established market for its Common Stock. Therefore, there can be no assurance that an active and liquid trading market for the Common Stock will develop or if developed, will be maintained. The Company has applied to have the Common Stock quoted on Nasdaq under the symbol "CFBC." The Common Stock can be quoted on Nasdaq if, among other qualifications, the Company has at least 400 stockholders of record and two market makers. Trident has agreed to act as a market maker for the Common Stock following the Conversion and Reorganization. The Company believes that it will meet all of these qualifications. -22- <PAGE> The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within the control of the Company, the Savings Bank or any market maker. Since there can be no assurance that an active and liquid trading market for the Common Stock will develop or that, if developed, it will continue, investors in the Common Stock could have difficulty disposing of their shares and should not view the Common Stock as a short-term investment. The absence of an active and liquid trading market for the Common Stock could affect the price and liquidity of the Common Stock. -23- <PAGE> CAPITALIZATION The following table presents the consolidated historical capitalization of the Mutual Holding Company at December 31, 1996, and the pro forma consolidated capitalization of the Company after giving effect to the Conversion and Reorganization based upon the sale of the number of shares shown below and the other assumptions set forth under "Pro Forma Data." <TABLE> <CAPTION> The Company - Pro Forma Consolidated Capitalization Based Upon Sale at $20.00 Per Share ----------------------------------------------------------- The Mutual Holding Company 1,551,250 1,825,000 2,098,750 2,413,562 - Historical Shares Shares Shares Shares(1) Consolidated (Minimum of (Midpoint of (Maximum of (15% above Capitalization Range) Range) Range) Maximum of Range) ----------------------------------------------------------------------------- (In Thousands) <S> <C> <C> <C> <C> <C> Deposits(2) $ 307,756 $ 307,756 $ 307,756 $ 307,756 $ 307,756 Borrowings 18,295 18,295 18,295 18,295 18,295 ---------- ---------- ---------- ---------- ---------- Total deposits and borrowings $ 326,051 $ 326,051 $ 326,051 $ 326,051 $ 326,051 ========== ========== ========== ========== ========== Capital stock: Preferred stock, no par value per share: authorized 10,000,000 shares; assumed outstanding - none $ - $ - $ - $ - $ - Common Stock, $.01 par value per share, authorized - 10,000,000 shares; shares to be outstanding - as shown(3) - 16 18 21 24 Paid-in capital(3) - 29,892 35,282 40,671 46,868 Less: Common stock acquired by ESOP(4) - (2,482) (2,920) (3,358) (3,862) Common Stock attributable to MRP(5) - (1,241) (1,460) (1,679) (1,931) Retained earnings - substantially restricted(6) 25,278 25,278 25,278 25,278 25,278 Net unrealized loss on available for sale securities (20) (20) (20) (20) (20) ---------- ---------- ---------- ---------- ---------- Total capital(6) $ 25,258 $ 51,443 $ 56,178 $ 60,913 $ 66,357 ========== ========== ========== ========== ========== </TABLE> - ------------------ (1) As adjusted to give effect to an increase in the number of shares that could occur due to an increase in the Valuation Price Range of up to 15% to reflect changes in market and financial conditions prior to the completion of the Conversion and Reorganization or to fill the order of the ESOP. (2) Withdrawals from deposit accounts for the purchase of Common Stock have not been reflected. Any such withdrawals will reduce pro forma deposits by the amount thereof. (3) The sum of the par value and paid-in capital accounts equals the net proceeds from the Offerings. No effect has been given to the issuance of additional shares of Common Stock pursuant to the Company's proposed Option Plan. The Company intends to adopt the Option Plan and to submit it to stockholders at a special or annual meeting no earlier than six months after the completion of the Conversion and Reorganization. If the Option Plan is approved by stockholders, an amount equal to 10% of the shares of Common Stock will be reserved for issuance under the -24- <PAGE> plan. See "Pro Forma Data" and "Management of the Company -Benefits - 1997 Stock Option Plan." (4) Assumes that 8.0% of the Common Stock sold in the Offerings will be purchased by the ESOP. The Common Stock acquired by the ESOP is reflected as a reduction of equity. Assumes the funds used to acquire the ESOP shares will be borrowed from the Company. See Note 1 to the table set forth under "Pro Forma Data" and "Management of the Company- Employee Stock Ownership Plan." (5) Gives effect to the Recognition Plan, which is expected to be adopted by the Company following the Conversion and Reorganization and presented to stockholders for approval at a special or annual meeting of stockholders no earlier than six months following the Conversion and Reorganization. If the Recognition Plan is approved by stockholders, it is expected to issue a number of shares of Common Stock equal to 4.0% of the shares of Common Stock issued in the Offerings or 62,050, 73,000, 83,950 and 96,542 shares at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range. The table assumes that stockholder approval has been obtained and that shares purchased in the open market will be used to fund the awards. The Common Stock thus issued by the Recognition Plan is reflected as a reduction in equity. If the shares are purchased at prices higher or lower than the Purchase Price, such purchases would have a greater or lesser impact, respectively, on equity. If the Recognition Plan utilizes authorized but unissued shares from the Company, such issuance would dilute the voting interests of existing shareholders by approximately 3.8% if 2,098,750 shares are sold in the Offerings. See "Pro Forma Data" and "Management of the Company-Benefits - 1997 Management Recognition Plan and Trust." (6) The retained earnings of the Savings Bank will be substantially restricted after the Conversion and Reorganization. See "Dividend Policy" and "The Conversion and Reorganization - Liquidation Rights." -25- <PAGE> REGULATORY CAPITAL The following table presents the historical regulatory capital of the Savings Bank, assuming the merger of the Mutual Holding Company into the Savings Bank after its conversion to Interim Mutual at December 31, 1996, and the pro forma regulatory capital of the Savings Bank after giving effect to the Conversion and Reorganization, based upon the sale of the number of shares shown below and the other assumptions set forth under "Pro Forma Data." <TABLE> <CAPTION> Historical 1,551,250 Shares 1,825,000 Shares 2,098,750 Shares 2,413,562 Shares Regulatory Capital Sold at $20.00 Sold at $20.00 Sold at $20.00 Sold at $20.00 at December 31, Per Share Per Share Per Share Per Share 1996(1)(2) (min)(1)(2) (mid)(1)(2) (max)(1)(2) (max)(1)(2) ------------------------------------------------------------------------------------------------------ % of % of % of % of % of Amount Assets Amount Assets Amount Assets Amount Assets Amount Assets --------- -------- --------- --------- --------- -------- -------- -------- -------- -------- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> Capital under GAAP $25,258 7.16% $40,212 10.93% $42,908 11.58% $45,604 12.22% $48,704 12.94% ======= ===== ======= ===== ======= ===== ======= ===== ======= ===== Tangible capital $22,946 6.54% $37,900 10.36% $40,596 11.02% $43,292 11.67% $46,392 12.40% Tangible capital requirement 5,261 1.50% 5,485 1.50% 5,526 1.50% 5,566 1.50% 5,613 1.50% ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- Excess $17,685 5.04% $32,415 8.86% $35,070 9.52% $37,726 10.17% $40,779 10.90% ======= ===== ======= ===== ======= ===== ======= ===== ======= ===== Core capital $22,946 6.54% $37,900 10.36% $40,596 11.02% $43,292 11.67% $46,392 12.40% Core capital requirement(3) 10,522 3.00% 10,971 3.00% 11,052 3.00% 11,133 3.00% 11,226 3.00% ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- Excess $12,424 3.54% $26,929 7.36% $29,544 8.02% $32,159 8.67% $35,166 9.40% ======= ===== ======= ===== ======= ===== ======= ===== ======= ===== Total risk-based capital(4)(5) $24,976 10.56% $39,930 16.67% $42,626 17.76% $45,322 18.84% $48,422 20.08% Total risk-based capital requirement 18,920 8.00% 19,159 8.00% 19,202 8.00% 19,245 8.00% 19,295 8.00% ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- Excess $ 6,056 2.56% $20,771 8.67% $23,424 9.76% $26,077 10.84% $29,127 12.08% ======= ===== ======= ===== ======= ===== ======= ===== ======= ===== </TABLE> - ------------------- (1) Under OTS policy, net unrealized gains or losses on debt securities classified as available for sale are excluded for purposes of computing regulatory capital. (2) Tangible and core capital are computed as a percentage of adjusted total assets of $351 million prior to the consummation of the Offerings and $366 million, $368 million, $371 million and $374 million following the issuance of 1,551,250, 1,825,000, 2,098,750 and 2,413,562 shares in the Conversion and Reorganization, respectively. Risk-based capital is computed as a percentage of adjusted risk-weighted assets of $236 million prior to the consummation of the Offerings and $239 million, $240 million, $241 million and $241 million following the issuance of 1,551,250, 1,825,000, 2,098,750 and 2,413,562 shares in the Conversion and Reorganization, respectively. (3) Does not reflect, in the case of the core capital requirement, the 4.0% requirement to be met in order for an institution to be "adequately capitalized" under applicable laws and regulations. See "Regulation - The Savings Bank - Prompt Corrective Action." (4) The pro forma risked-based capital ratios (i) reflect the receipt by the Savings Bank of the assets held by the Mutual Holding Company and of 50% of the estimated net proceeds from the Offerings, (ii) assume the investment of the net remaining proceeds received by the Savings Bank in assets which have a risk- weight of 20% under applicable regulations, as if such net proceeds had been received and so applied at December 31, 1996. (5) Includes the $2.0 million general allowance for loan losses that was included in risk-based capital as of December 31, 1996. -26- <PAGE> PRO FORMA DATA The actual net proceeds from the sale of the Common Stock cannot be determined until the Conversion and Reorganization are completed. However, net proceeds are currently estimated to be between $29.9 million and $40.7 million (or $46.9 million in the event the Valuation Price Range is increased by 15%) based upon the following assumptions: (i) all shares of Common Stock will be sold in the Subscription Offering and Community Offering; (ii) 22.2%, 20.3%, 18.5% and 17.1% of the Common Stock sold in the Subscription Offering at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range will be sold to the ESOP, directors and executive officers and their associates; (iii) fees will be payable to Trident as set forth in "The Conversion and Reorganization -Marketing Arrangements;" and (iv) expenses, excluding the marketing fees paid to Trident, will approximate $699,000. Actual expenses may vary from those estimated, and the fees paid to Trident will vary from the amounts estimated if the amount of Common Stock sold in the different categories varies from the amounts assumed above. Pro forma net income and equity have been calculated for the year ended December 31, 1996 as if the Common Stock to be issued in the Offerings had been sold at the beginning of the period and the net proceeds had been invested at 5.5%, which represents the yield on one-year U.S. Government securities at December 31, 1996 (which, in light of changes in interest rates in recent periods, are deemed to more accurately reflect pro forma reinvestment rates than the arithmetic average method). The effect of withdrawals from deposit accounts for the purchase of Common Stock has not been reflected. An effective combined federal and state income tax rate of 38% has been assumed for the period, resulting in after-tax yield of 3.41% for the year ended December 31, 1996. Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the indicated number of shares of Common Stock, as adjusted to give effect to the shares purchased by the ESOP. See Note 4 to the tables below. No effect has been given in the pro forma equity calculations for the assumed earnings on the net proceeds. As discussed under "Use of Proceeds," the Company intends to contribute up to 50% of the net proceeds from the Offerings to the Savings Bank. The following pro forma information may not be representative of the financial effects of the foregoing transactions at the dates on which such transactions actually occur and should not be taken as indicative of future results of operations. Pro forma equity represents the difference between the stated amount of assets and liabilities of the Company computed in accordance with generally accepted accounting principles ("GAAP"). The pro forma stockholders' equity is not intended to represent the fair market value of the Common Stock and may be different than amounts that would be available for distribution to stockholders in the event of liquidation. No effect has been given in the tables to (i) the Company's results of operations after the Conversion and Reorganization or (ii) the market price of the Common Stock after the Conversion and Reorganization. The following tables summarize historical data of the Mutual Holding Company and consolidated pro forma data of the Company at or for the dates and periods indicated based on assumptions set forth above and in the tables and should not be used as a basis for projections of the market value of the Common Stock following the Conversion and Reorganization. -27- <PAGE> <TABLE> <CAPTION> At or For the Year Ended December 31, 1996 ------------------------------------------------------- 2,413,562 1,551,250 1,825,000 2,098,750 Shares Sold Shares Sold Shares Sold Shares Sold at $20.00 Per at $20.00 at $20.00 at $20.00 Share (15% Per Share Per Share Per Share above (Minimum of (Midpoint (Maximum of Maximum of Range) of Range) Range) Range)(7) ----------- ----------- ----------- ------------- (Dollars in Thousands, Except Per Share Amounts) <S> <C> <C> <C> <C> Gross proceeds $ 31,025 $ 36,500 $ 41,975 $ 48,271 Less offering expenses and commissions (1,117) (1,200) (1,283) (1,379) ---------- ---------- ---------- ---------- Estimated net Conversion proceeds 29,908 35,300 40,692 46,892 Less Common Stock acquired by ESOP(1) (2,482) (2,920) (3,358) (3,862) Less Common Stock attributable to MRP(2) (1,241) (1,460) (1,679) (1,931) ---------- ---------- ---------- ---------- Estimated proceeds available for investment(3) $ 26,185 $ 30,920 $ 35,655 $ 41,099 ========== ========== ========== ========== Net Earnings Historical $ 248 $ 248 $ 248 $ 248 Pro Forma adjustments: Net earnings from proceeds 893 1,054 1,216 1,401 ESOP(1) (220A) (259A) (297A) (342A) MRP(2) (154A) (181A) (208A) (239A) ---------- ---------- ---------- ---------- Pro forma net earnings $ 767 $ 862 $ 959 $ 1,068 ========== ========== ========== ========== Per share(4) Historical $ 0.17 $ 0.15 $ 0.13 $ 0.11 Pro Forma Adjustments: Net income from proceeds 0.62 0.62 0.62 0.62 ESOP(1) (0.15A) (0.15A) (0.15A) (0.15A) MRP(2) (0.11A) (0.11A) (0.11A) (0.11A) ---------- ---------- ---------- ---------- Pro Forma $ 0.53 $ 0.51 $ 0.49 $ 0.47 ========== ========== ========== ========== Number of shares used in calculating earnings per share 1,444,879 1,699,857 1,954,836 2,248,061 ========== ========== ========== ========== Stockholders' equity (book value)(9) Historical(5)(6) $ 25,258 $ 25,258 $ 25,258 $ 25,258 Estimated net Conversion proceeds 29,908 35,300 40,692 46,892 Less common stock acquired by/attributable to: ESOP(1) (2,482A) (2,920A) (3,358A) (3,862A) MRP(2) (1,241A) (1,460A) (1,679A) (1,931A) ---------- ---------- ---------- ---------- Pro Forma(6)(8) $ 51,443 $ 56,178 $ 60,913 $ 66,357 ========== ========== ========== ========== Per Share(4) Historical $ 16.28 $ 13.84 $ 12.03 $ 10.47 Estimated net Conversion proceeds 19.28 19.34 19.39 19.43 Less common stock acquired by/attributable to: ESOP(1) (1.60) (1.60) (1.60) (1.60) MRP(2) (0.80) (0.80) (0.80) (0.80) ---------- ---------- ---------- ---------- Pro Forma(6)(8) $ 33.16 $ 30.78 $ 29.02 $ 27.50 ========== ========== ========== ========== Pro forma price to book value(3)(5)(6)(8) 60.3% 65.0% 68.9% 72.7% ========== ========== ========== ========== Pro forma price to earnings (P/E ratio) 37.7 39.2 40.8 42.6 ========== ========== ========== ========== Number of shares used in calculating book value per share(4) 1,551,250 1,825,000 2,098,750 2,413,562 ========== ========== ========== ========== </TABLE> - ------------------------ (1) It is assumed that 8.0% of the shares of Common Stock issued in the Conversion and Reorganization will be purchased by the ESOP. For purposes of this table, the funds used to acquire such shares are assumed to have been borrowed by the ESOP from the Company. The Company intends to make annual contributions to the ESOP over a seven-year period in an amount at least equal to the principal and interest requirement (which interest rate shall be at the prime rate) of the debt. The pro forma net earnings assumes (i) that the ESOP expense for each respective period is equivalent to the principal payment for the respective period and was made at the end of each respective period; (ii) that 17,729, 20,857, 23,986 and 27,584 shares were committed to be released at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, -28- <PAGE> respectively; and (iii) only ESOP shares committed to be released during the respective period were considered outstanding for purposes of the net earnings per share calculations. (2) The adjustment is based upon the assumed share repurchases to fund awards under the Recognition Plan of 62,050, 73,000, 83,950 and 96,542 shares at the minimum, midpoint maximum and 15% above the maximum of the Valuation Price Range, assuming that: (i) stockholder approval of the Recognition Plan has been received; (ii) the shares were repurchased at the beginning of the period shown through open market purchases at the Purchase Price: (iii) the amortized expense for the year ended December 31, 1996 was 20% of the amount contributed; and (iv) the effective tax rate applicable to such employee compensation expense was 38%. If the Recognition Plan issues authorized but unissued shares instead of repurchasing shares, the voting interests of existing stockholders would be diluted by approximately 3.8% and pro forma net earnings per share for the year ended December 31, 1996 would be $0.53, $0.51, $0.50 and $0.48, and pro forma stockholders' equity per share at December 31, 1996 would be $32.66, $30.37, $28.68 and $27.21, in each case at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, respectively. See "Management of the Company - Benefits - Management Recognition Plan and Trust." (3) Estimated proceeds available for investment consist of the estimated net proceeds from the Offerings less (i) the proceeds attributable to the purchase by the ESOP and (ii) the value of the shares to be issued by the Recognition Plan, subject to shareholder approval, after the Conversion and Reorganization at an assumed purchase price of $20.00 per share. (4) Net earnings per share computations are determined by taking the number of shares assumed to be sold in the Conversion and Reorganization and subtracting the ESOP shares which have not been committed for release during the respective period. See Note 1 above. (5) Assumes the merger of the Mutual Holding Company after its conversion to Interim Mutual into the Savings Bank. (6) The retained earnings of the Savings Bank will be substantially restricted after the Conversion by virtue of the liquidation account to be established in connection with the Conversion and Reorganization. See "Dividend Policy" and "The Conversion and Reorganization - Liquidation Rights." (7) As adjusted to give effect to an increase in the number of shares which could occur due to an increase in the Valuation Price Range of up to 15% to reflect changes in market and financial conditions prior to the completion of the Conversion and Reorganization or to satisfy the subscription of the ESOP. (8) No effect has been given to the issuance of additional shares of Common Stock pursuant to the Option Plan. If the Option Plan is approved by stockholders, an amount equal to 10% of the Common Stock issued in the Conversion and Reorganization, or 155,125, 182,500, 209,875 and 241,356 shares at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, respectively, will be reserved for future issuance upon the exercise of options to be granted under the Option Plan. (9) Book value represents the excess of the assets of the Company over its liabilities stated in accordance with generally accepted accounting principals. This amount is not intended to represent fair market value or amounts, if any, that would be available for distribution to depositors in the unlikely event of liquidation. Book value does not take into account the effect of the liquidation account to be established in the Conversion and Reorganization or the effect of the recapture of the accumulated bad debt reserve in the event of a liquidation. -29- <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General As is the case with most savings institutions, the profitability of the Savings Bank depends primarily on its net interest income, which is the difference between interest and dividend income on interest-earning assets, principally loans and investment securities, and interest expense on interest-bearing deposits. The Savings Bank's net earnings also are dependent, to a lesser extent, on the level of provision for loan losses, its non-interest income and non-interest expenses, such as salaries and related benefits, occupancy and equipment, deposit insurance premiums, and miscellaneous other expenses, as well as provisions for federal and state income tax. The Savings Bank has historically operated as a traditional savings and loan, raising money by offering savings products of relatively short duration and lending this money for the purpose of home financing. As regulations affecting the savings and loan industry changed, the Savings Bank began offering primarily adjustable rate mortgages (ARM's) in 1981. Additional authority for checking accounts and consumer and commercial loans also allowed the Savings Bank to offer additional services to its traditional customer bases. The change from primarily mortgage loans in the 1980s to the current loan portfolio mix of approximately 54% mortgage and 46% consumer/commercial has allowed the Savings Bank to better manage its asset and liability maturities and increase its net interest margin. The institution's emphasis on shorter term consumer lending and prime rate based commercial lending, along with one-year ARMs tied to an index, has dramatically reduced the institution's interest rate risk. The change from a traditional thrift investing in mortgages to a financial institution offering a wider array of financial services has also been necessary to counteract increasing competition from government- sponsored entities for mortgage loans. The change from mortgage lender to a financial services provider has lessened the institution's exposure to any single economic cycle, while at the same time more closely tying the institution's products and services to the customer's financial needs. At December 31, 1996, approximately 31.6% of the Savings Bank's deposits were in the form of transaction accounts and 46% of its net loans are classified consumer or commercial, thus allowing a balanced source of funds and a balanced investment opportunity. Tradition and Market Share The Savings Bank has operated in its local community since 1929. Management estimates that the Savings Bank has a 30% market share in Carroll County, a 20% market share in each of Haralson and Heard Counties, and a one percent market share in each of Coweta, Douglas, Fayette, Henry and Paulding Counties. Interest Rate Risk The change from primarily providing traditional long-term fixed rate mortgages to primarily providing a variety of shorter term and interest- sensitive loan products has resulted in a significant reduction in the risk associated with vulnerability to changes in interest rates. -30- <PAGE> High Levels of Regulatory Capital and Moderate Growth The Savings Bank seeks to maintain capital levels that will permit it to be characterized as "well-capitalized" by regulatory standards in order to give it maximum flexibility in the changing regulatory environment and to respond to changes in the market and economic conditions. The Savings Bank has sought to strengthen its capital position through consistent earnings. At December 31, 1996, the Savings Bank's tangible, core and total risk-based capital ratios amounted to 6.9%, 6.9% and 10.9%, respectively, which exceeded the requirements for a well capitalized institution of 5%, 5% and 10%, respectively, by $6.1 million, $6.1 million and $2.0 million, respectively. As a result of the Conversion and Reorganization, assuming that 1,825,000 shares of Common Stock are sold in the Offerings, the Savings Bank's pro forma tangible, core and risk-based capital ratios at December 31, 1996 would be 11.02%, 11.02% and 17.76%, respectively. See "Regulatory Capital." Proactive Responses to Economic Changes Deregulation of financial service providers throughout the United States has necessitated the expansion of the Savings Bank's products and services from traditional mortgages to a full array of financial products and services. Management believes the Savings Bank has the largest deposit market share of any local institution in the Carroll County, Georgia area. Accordingly, it has been necessary for the Savings Bank to expand its service territory in order to attain necessary growth. These changes in product mix have created a need for more sophisticated technology and a more labor-intensive service delivery system. Additionally, the need for expansion to fuel growth has increased the cost of the delivery system. Now that its infrastructure has been expensed, management believes the Savings Bank is poised for asset growth without the necessity of corresponding expenses. While the Savings Bank has higher non-interest expense than traditional savings institutions, its noninterest expense ratio compares favorably with that of full service banking institutions. Asset Quality At December 31, 1996, the Savings Bank's non-performing assets, which consist of non-accrual loans, accruing loans greater than 90 days delinquent and real estate acquired through foreclosure or by deed in lieu thereof, amounted to $6.4 million or 1.82% of the Savings Bank's total assets. The ratio of non-performing assets to total assets at year end has averaged 1.2% over the last five years. See "Business of Carrollton Federal Bank - Lending Activities - Asset Quality" and "- Non-Performing Assets" for an explanation of the increase in non-performing assets. Asset/Liability Management The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread that can be sustained during fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest- earning assets and interest-bearing liabilities that either reprice or mature within a given period of time. The difference, or the interest rate repricing "gap", provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing within a given period exceeds the amount of interest rate sensitive liabilities maturing or repricing within such period, and is considered negative when the amount of interest rate sensitive liabilities maturing or repricing within a given -31- <PAGE> period exceeds the amount of interest rate sensitive assets maturing or repricing within such period. Generally, during a period of rising interest rates, a negative gap within shorter maturities would adversely affect net interest income, while a positive gap within shorter maturities would result in an increase in net interest income, and during a period of falling interest rates, a negative gap within shorter maturities would result in an increase in net interest income while a positive gap within shorter maturities would have the opposite effect. The lending activities of savings associations have historically emphasized long-term, fixed-rate loans secured by one-to-four family residences, and the primary source of funds of such institutions has been deposits. The deposit accounts of savings associations generally bear interest rates that reflect market rates and largely mature, or are subject to repricing, within a short period of time. This factor, in combination with substantial investments in long-term, fixed-rate loans, has historically caused the income earned by savings associations on their loan portfolios to adjust more slowly to changes in interest rates than their cost of funds. The Savings Bank originates consumer, commercial and traditional mortgage products in its primary service areas. Terms are limited primarily to five years or less with the emphasis being prime based commercial lending, consumer loans of five years or less and mortgage loans with terms not to exceed 30 years, repricing annually with the one-year treasury constant maturity. At December 31, 1996, the Savings Bank had $146.6 million in real estate mortgage loans, of which $88.1 million were one-year ARMs and $30.8 million were fixed rate loans. In addition, $68.0 million of consumer loans and $57.8 million of commercial loans were outstanding at December 31, 1996. Both consumer and commercial loans include some loans secured by real estate, such as consumer home equity loans and commercial real estate loans. As market demand for mortgage loans has declined and the Savings Bank has been unable to replace all of the amortized mortgage portfolio with consumer or commercial loans, excess funds have been placed in the investment portfolio with the emphasis being in U.S. government agency obligations, collateralized mortgage obligations, tax free municipal securities and preferred agency stocks. Management anticipates continuing its efforts to shorten asset term by offering a broad array of consumer loans primarily for area families and prime based commercial loans primarily for small to medium sized community businesses, as well as residential adjustable rate mortgages. In addition to shortening asset maturities, the Savings Bank has placed a significant emphasis on changing its mix of liabilities from almost entirely savings products to a larger number of transaction based accounts. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 1996 that are projected to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown that reprice or mature within a particular period were determined in accordance with the contractual terms of the assets or liability. Loans with adjustable rates are shown as being due at the end of the next upcoming adjustment period. Passbook accounts, money market deposit accounts and negotiable order of withdrawal or other transaction accounts are assumed to be subject to immediate repricing and depositor availability and have been placed in the shortest period. In making the gap computations, none of the assumptions sometimes made regarding prepayment rates and deposit decay rates have been used for any other interest- earning assets or interest-bearing liabilities. In addition, the table does not reflect scheduled principal payments that will be received throughout the 32 <PAGE> lives of the loans. The interest rate sensitivity of the Mutual Holding Company's assets and liabilities illustrated in the following table would vary substantially if different assumptions were used or if actual experience differs from that indicated by such assumptions. <TABLE> <CAPTION> Terms to Repricing at December 31, 1996 ----------------------------------------------------------------------- One Through Four Through Three Twelve One Through Over Months Months Five Years Five Years Total ------ ------ ----------- ---------- ----- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> Interest earning assets: Interest bearing deposits and federal funds sold $ 12,036 $ - $ - $ - $ 12,036 Investment securities 9,178 5,303 15,677 11,533 41,691 Other investments 2,000 - - 600 2,600 Loans (including mortgage loans held for sale) 72,166 109,427 66,317 22,207 270,117 Total interest earning assets 95,380 114,730 81,994 34,340 326,444 Interest-bearing liabilities: Interest-bearing demand and savings deposits 81,365 - - - 81,365 Time deposits 38,864 94,862 76,762 210,488 FHLB advances 10,000 - 3,007 3,288 16,295 Subordinated debentures - - 2,000 - 2,000 Total interest-bearing liabilities 130,229 94,862 81,769 3,288 310,148 Interest sensitivity gap per period (34,849) 19,868 225 31,062 16,296 Cumulative interest sensitivity gap (34,849) (14,981) (14,756) 16,296 Cumulative gap as a percentage of total interest-earning assets -36.54% -13.06% -18.00% 47.45% Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities 73.24% 93.34% 95.19% 105.25% </TABLE> Presented below, as of December 31, 1996, is an analysis of the Savings Bank's interest rate risk as measured by changes in net portfolio value ("NPV") and net interest income ("NII") for instantaneous and sustained parallel shifts in market interest rates. The NPV table also contains the change limits that the Board of Directors deems advisable in the event of various changes in interest rates. Such limits have been established with consideration of the impact of various rate changes and the Savings Bank's current capital position. 33 <PAGE> Net Portfolio Value - -------------------------------------------------------------------------------- Estimated Change in NPV as a Interest Rates Estimated Percentage Amount Board (basis points) NPV of Assets of Change Percent Limit - -------------- --------- ---------- ---------- ------- ----- (Dollars in Thousands) <TABLE> <S> <C> <C> <C> <C> <C> +400 $28,956 7.9% $(7,695) (21)% (75)% 300 31,592 8.6 (5,059) (14) (50) 200 33,896 9.3 (2,755) (8) (30) 100 35,639 9.7 (1,012) (3) (15) 0 36,651 10.0 - -100 36,757 10.0 106 0 (15) 200 36,350 9.9 (301) (1) (30) 300 36,628 10.0 (23) 0 (50) 400 37,824 10.3 1,173 3 (75) </TABLE> -34- <PAGE> Net Interest Income <TABLE> <CAPTION> Interest 12/31/96 +200 bp 12/31/96 -200 bp 12/31/96 12/31/96 Income Weighted Anticipated Weighted Anticipated Assets/Liabilities Weighted or Expense Average Interest Average Interest Repricing with Average Anticipated Rate Income Rate Income One Year Rate at 12/31/96 +200 bp or Expense -200 bp or Expense -------- ---- ----------- ------- ---------- ------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> Assets (Dollars in thousands) Cash $ 3,356 5.20% $ 174 7.20% 242 3.20% 107 Fed funds 7,360 5.20 383 7.20 530 3.20 236 Fixed rate investments/(1)/ 11,975 7.13 853 7.13 854 5.13 614 Lagging/(3)/ 66,200 7.50 4,965 9.50 6,289 5.50 3,641 Current/(3)/ 88,472 9.00 7,963 11.00 9,732 7.00 6,193 Colonial/(3)/ 815 8.00 65 10.00 81 6.00 49 Stock 4,506 7.50 338 9.50 428 5.50 248 Fixed Loans 25,571 9.90 2,532 11.90 3,043 7.90 2,020 --------- --------- ------- ------- $ 208,255 $ 17,273 21,199 13,107 Liabilities Variable rate deposits/(2)/ $ 86,137 2.67% 2,300 4.67% 4,023 1.00% 861 Fixed rate deposits 133,727 5.40 7,221 7.40 9,896 3.40 4,547 Advances 10,000 5.52 552 7.52 752 3.52 352 --------- --------- ------- ------- $ 229,864 10,073 14,671 5,760 Net Interest Income 7,200 6,528 7,347 Change in net interest income from rate shock (672) 147 - ------------------------------- </TABLE> /(1)/ Fixed rate investments include callable U.S. government agency obligations that will be called in a falling interest rate environment but will not increase in rate in a rising rate environment. /(2)/ A floor of 1.0% is assumed on variable rate deposits. /(3)/ Variable rate assets and liabilities will reprice up or down within contractual limits. -35- <PAGE> In May 1996, all regulatory agencies adopted risk-focused safety and soundness examination procedures that include interest rate risk (now referred to as "market risk") factors in the regulatory rating of the institution. Each financial institution is responsible for monitoring changes in net portfolio value of equity and net interest income from both parallel and non parallel shifts in the yield curve. The Savings Bank will be subject to these modified procedures in 1997. Changes in Financial Condition At December 31, 1996, the Mutual Holding Company's consolidated assets totalled $353 million, as compared to $334 million at December 31, 1995. Total deposits grew $19 million, or 6%, in 1996 as compared to 1995. This increase is primarily due to the Savings Bank's increased branch expansion and marketing efforts related thereto. The increase was funded primarily by increases in time deposits during 1996. Other liabilities and capital grew marginally in 1996. Total capital at December 31, 1996 was $25.3 million, as compared to $25.0 million at December 31, 1995. The Savings Bank opened four branch facilities within Wal*Mart discount stores during 1996. This expansion helped attract approximately $15 million in deposits during the year. Most of these deposits were invested in medium term U.S. agency and mortgage backed securities designated as available for sale to maintain liquidity. 36 <PAGE> Average Balances, Interest Rates and Yields. The following table presents for the periods indicated the total dollar amount of interest from average interest-earning assets and the resultant yield, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Dividends received are included as interest income. All average balances are based on month-end balances. Management believes that the use of average month balances is representative of its operations. <TABLE> <CAPTION> Year Ended December 31, ----------------------------------------------------------------------------- 1996 1995 ------------------------------------ ------------------------------------ Average Interest Average Interest Balances Income/Expense Yield/Rate Balances Income/Expense Yield/Rate -------- -------------- ---------- -------- -------------- ---------- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> Assets: Interest-earning assets: Interest earning deposits and fed funds sold $ 15,158 822 5.42% $ 7,993 473 5.92% Investment securities: Taxable 30,387 2,411 7.93 36,076 2,652 7.35 Nontaxable 1,236 127 10.28 0 0 0 Total investment securities 31,623 2,538 8.03 36,076 2,652 7.35 Loans (including loan fees)(1) 272,786 24,874 9.12 280,613 24,588 8.76 Total interest-earning assets 319,567 28,234 8.84 324,682 27,713 8.54 Allowance for loan losses (2,446) (2,341) Cash and due from banks 9,005 7,857 Premises and equipment 8,327 7,782 Other assets 9,322 5,649 -------- -------- Total assets $343,775 $343,629 ======== ======== Liabilities and capital: Interest bearing liabilities: Deposits: Demand $ 46,821 1,386 2.96% $ 47,566 1,366 2.87% Savings 32,991 889 2.69 33,280 828 2.49 Time 202,641 11,338 5.60 195,200 10,444 5.35 Other borrowings 18,650 1,169 6.27 30,555 1,858 6.08 Total interest bearing liabilities 301,103 14,782 4.91 306,601 14,496 4.73 Non-interest bearing demand deposits 15,635 11,104 Other liabilities 1,893 2,367 Capital 25,144 23,557 -------- -------- Total liabilities and capital $343,775 $343,629 ======== ======== <CAPTION> Year Ended December 31, ------------------------------------ 1994 ------------------------------------ Average Interest Balances Income/Expense Yield/Rate -------- -------------- ---------- (Dollars in Thousands) <S> <C> <C> <C> Assets: Interest-earning assets: Interest earning deposits and fed funds sold $ 11,110 406 3.65% Investment securities: Taxable 33,470 2,414 7.21 Nontaxable 0 0 0 Total investment securities 33,470 2,414 7.21 Loans (including loan fees)(1) 274,135 23,000 8.39 Total interest-earning assets 318,715 25,820 8.10 Allowance for loan losses (2,539) Cash and due from banks 9,121 Premises and equipment 7,625 Other assets 6,961 -------- Total assets $339,883 ======== Liabilities and capital: Interest bearing liabilities: Deposits: Demand $ 52,867 1,184 2.24% Savings 37,892 1,094 2.89 Time 188,343 8,652 4.59 Other borrowings 28,007 1,666 5.95 Total interest bearing liabilities 307,109 12,596 4.10 Non-interest bearing demand deposits 7,137 Other liabilities 4,386 Capital 21,251 -------- Total liabilities and capital $339,883 ======== </TABLE> -37- <PAGE> <TABLE> <CAPTION> Year Ended December 31, ----------------------------------------------------------------------------- 1996 1995 ------------------------------------ ------------------------------------ Average Interest Average Interest Balances Income/Expense Yield/Rate Balances Income/Expense Yield/Rate -------- -------------- ---------- -------- -------------- ---------- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> Excess of interest-bearing assets over interest-bearing liabilities $ 18,464 $ 18,081 Ratio of interest-bearing assets to interest-bearing liabilities 106.13% 105.90% Net interest income 13,452 13,217 Net interest rate spread 3.93% 3.81% Net interest margin (2) 4.21% 4.07% Tax equivalent adjustments Investment securities (43) 0 Net interest income 13,409 13,217 <CAPTION> Year Ended December 31, ------------------------------------ 1994 ------------------------------------ Average Interest Balances Income/Expense Yield/Rate -------- -------------- ---------- (Dollars in Thousands) <S> <C> <C> <C> Excess of interest-bearing assets over interest-bearing liabilities $ 11,606 Ratio of interest-bearing assets to interest-bearing liabilities 103.78% Net interest income 13,224 Net interest rate spread 4.00% Net interest margin (2) 4.15% Tax equivalent adjustments Investment securities 0 Net interest income 13,224 </TABLE> - ------------------------------- (1) Average balances include nonaccrual loans. (2) Calculated before provision for loan losses. -38- <PAGE> Rate/Volume Analysis The banking industry often utilizes two key ratios to measure relative profitability of net interest income. The net interest rate spread measures the difference between the average yield on earning assets and the average rate paid on interest bearing sources of funds. The interest rate spread eliminates the impact of noninterest bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is defined as net interest income as a percent of average total earning assets and takes into account the positive impact of investing noninterest bearing deposits. The net interest spread was 3.93% in 1996, 3.81% in 1995 and 4.00% in 1994, while the net interest margin was 4.21% in 1996, 4.07% in 1995 and 4.15% in 1994. The increase in the margin and spread during 1996 was primarily due to reinvestment of maturing mortgage loans into higher yielding commercial and consumer loans. The decreases in 1995 were a result of changes in the overall asset and liability mix. The table below shows the change in net interest income for the past two years due to changes in volume and rate, on a tax equivalent basis. <TABLE> <CAPTION> 1996 Compared to 1995 1995 Compared to 1994 --------------------- --------------------- Increase (decrease) Increase (decrease) due to changes in due to changes in ---------------------------- ------------------------------ Yield/ Net Yield/ Net Volume Rate Change Volume Rate Change ------ ------ ------ ------ ------ ------ <S> <C> <C> <C> <C> <C> <C> (In thousands) Interest income on: Interest earning deposits and federal funds sold $ 392 (43) 349 (136) 203 67 Investment securities: Taxable (439) 198 (241) 190 48 238 Nontaxable 127 - 127 - - - Loans (including loan fees) (697) 983 286 552 1,036 1,588 ----- --- --- --- ----- ----- Total interest-earning assets (617) 1,138 521 606 1,287 1,893 Interest expense on: Deposits: Demand (22) 42 20 (128) 310 182 Savings (7) 68 61 (125) (141) (266) Time 402 492 894 324 1,468 1,792 Other borrowings (745) 56 (689) 155 37 192 ----- -- ----- --- -- --- Total interest bearing liabilities $ (372) 658 286 226 1,674 1,900 -------- --- --- --- ----- ----- Net interest income (245) 480 235 380 (387) (7) ===== === === === ===== === </TABLE> -39- <PAGE> Results of Operations for the Years Ended December 31, 1996, 1995 and 1994 Net earnings totalled approximately $248,000 for 1996, a decrease of 92% from the $2.9 million earned in 1995. Return on average assets and return on average equity for the year ended December 31, 1996 were .07% and .99%, respectively, as compared to .86% and 12.5%, respectively, at December 31, 1995. These decreases are attributable to the $1.7 million increase in deposit insurance premiums during 1996, which was entirely due to the special one-time SAIF assessment of 65.7 cents per $100 of assessable SAIF deposits effective September 30, 1996. An $893,000 increase in the provision for loan losses during 1996 also contributed to the reduction in earnings in 1996, as well as additional expenses due to the opening of four new branch locations during 1996. See "Business of Carrollton Federal Bank - Allowance for Loan Losses." Net earnings of $2.9 million in 1995 represented a 24% increase over 1994 primarily due to increases in noninterest income. Net Interest Income Net interest income (the difference between interest earned on assets and the interest paid on deposits and liabilities) is the single largest component of the Savings Bank's operating income. The Savings Bank actively manages this income source to provide the largest possible amount of income while balancing interest rate, credit and liquidity risks. Net interest income, on a taxable equivalent basis, was $13.4 million in 1996, compared to $13.2 million in 1995 and 1994. The 2% increase in 1996 was the result of the reinvestment of maturing investments and mortgage loans into higher yielding investments and commercial and consumer loans, slightly offset by increases in the cost of funds that were primarily due to promotions offered as part of the opening of the four new branches in Wal*Mart stores during 1996. During 1995, increases in the volumes and rates of interest of earning assets were entirely offset by rate increases on interest bearing deposits and other liabilities. Total interest income increased 1.7% and 7.3% in 1996 and 1995, respectively. Provision for Loan Losses The Savings Bank's provision for loan losses was $1.1 million during 1996 as compared to $250,000 and $99,400 during 1995 and 1994, respectively. Provisions for loan losses are charged to earnings to bring the total loan loss allowance to a level deemed appropriate by management based on the volume and type of lending conducted by the Savings Bank and as required by the Savings Bank's loan loss methodology. The increase in the provision for loan losses over the last two years is primarily attributable to the increase in non-performing loans to $6.2 million at December 31, 1996 from $2.3 million at December 31, 1995, as well as the change in the mix of the loan portfolio from mortgage loans to commercial and consumer loans. Mortgage loans decreased approximately $28.4 million during 1996 while commercial and consumer loans increased by approximately $30 million. The increased inherent risk due to this shift in the loan portfolio was the primary reason for the increase in the provision for loan losses during 1996. See "Business of Carrollton Federal Bank - Allowance for Loan Losses." The Savings Bank's methodology for evaluating the adequacy of its allowance for loan losses conforms with generally accepted accounting principles and the Interagency Policy Statement on Allowance for Loan and Lease Losses. The Savings Bank considers collateral valuation, changes in the loan portfolio mix, the past three years' net charge-offs and other factors. The methodology also incorporates economic indicators such as growth in personal income and unemployment rates as well as other economic indicators affecting the Savings Bank's market area. -40- <PAGE> Noninterest Income Noninterest income consists primarily of revenues generated from service charges and fees on deposit accounts, and profits earned through sales of credit life insurance. In addition, gains or losses realized from the sale of investment portfolio securities are included in noninterest income. Total noninterest income for 1996 increased 4% or $126,000 above that for 1995. Noninterest income for 1995 showed an increase of 46% from 1994. The primary contributor to noninterest income growth in both 1996 and 1995 was the continued growth in service charges on deposits resulting from an increase in the number of transaction accounts. Approximately 37% of the 1995 increase is attributable to the increase in sales of securities available for sale, while the remaining increase was primarily due to higher service charge revenue. The growth in noninterest income was the result of management's continuing efforts to build stable sources of fee income, which includes service charges on deposits and loans and sales of credit life insurance. This growth is being accomplished through expansion of the Savings Bank's locations. Fee income from service charges on deposit accounts increased over 17% in 1996 following a 39% increase in 1995. Continued emphasis on low cost checking account services, appropriate pricing for transaction deposit accounts and fee collection practices for other deposit services contributed to the increased levels of income for both years. Increases during 1996 and 1995 were further influenced by the increase in transaction deposit accounts. Net gains on sales of investment securities were $178,000 and $367,000, respectively, during 1996 and 1995 as management liquidated certain investment securities to meet loan demand. Noninterest Expense Noninterest expense for 1996 increased 30% following a decrease of 5% in 1995. Salaries and employee benefits increased 21% during 1996 due primarily to employee additions resulting from the four new branches in Wal*Mart stores together with increases required to maintain continued growth. The decrease from 1994 to 1995 was the result of the reorganization of the loan administration and customer service function which resulted in staff reductions at the Savings Bank. Net occupancy expense increased $114,000 or 7.6% in 1996 following a 13.7% increase in 1995. The increases were due primarily to increased depreciation related to new banking facilities and costs to operate new branches. Deposit insurance premiums increased $1.7 million as a result of the September 30, 1996 SAIF assessment. As described earlier, a special one- time assessment of 65.7 cents per $100 of assessable deposits amounted to an additional deposit insurance premium of $1,723,000. Exclusive of the one-time assessment, deposit insurance premiums decreased 3% in 1996 as compared to 1995. Other operating expenses, including advertising, office supplies, and data processing increased 13.7 % compared to a 5.3% increase in 1995. Management continues to emphasize the importance of expense management and productivity throughout the Savings Bank in order to further decrease the cost of providing expanded banking services to a growing market base. Income Taxes An income tax benefit of $13,000 was recognized for the year ended December 31, 1996. The effective tax rate differed from the expected 34% federal rate applied to earnings before income taxes primarily due to tax exempt interest income. Income tax expense in 1995 and 1994 totalled $1,375,000 and $553,000, respectively, and represented an effective tax rate of 32% -41- <PAGE> and 18%, respectively. During 1996 and 1995, the effective tax rate differed from the expected 34% Federal rate primarily due to tax-exempt interest income. The effective rate in 1994 was further reduced by an adjustment to the valuation allowance for deferred tax amounts totalling $272,443. See Note (8) of the Notes to Consolidated Financial Statements. Liquidity and Capital Resources The Savings Bank is required under applicable federal regulations to maintain specified levels of "liquid" investments in qualifying types of United States Government, federal agency and other investments having maturities of five years or less. Current OTS regulations require that a savings association maintain liquid assets of not less than 5% of its average daily balance of net withdrawable deposit accounts and borrowings payable in one year or less, of which short-term liquid assets must consist of not less than 1%. Monetary penalties may be imposed for failure to meet applicable liquidity requirements. At December 31, 1996, the Savings Bank's liquidity, as measured for regulatory purposes, was 13.1% or $24.0 million in excess of the minimum OTS requirement. Cash was generated by the Savings Bank's operating activities during the years ended December 31, 1996, 1995 and 1994, primarily as a result of net income. The adjustments to reconcile net income to cash provided by operating activities during the periods presented consisted primarily of amortization of premiums and discounts, proceeds from the sale of loans, and increases or decreases in interest and dividends receivable, prepaid income taxes, accrued interest payable, and accrued expenses and other liabilities. The primary investing activity of the Savings Bank is lending, which is funded with cash provided by operations, as well as principal collections and maturities on securities, securities available for sale and mortgage-backed and related securities, and maturities of interest-bearing deposits in banks. For additional information about cash flows from the Savings Bank's operating, financing and investing activities, see the Consolidated Statements of Cash Flows included in the Consolidated Financial Statements. At December 31, 1996, the Savings Bank had outstanding $130,000 in commitments to originate loans, $16.0 million in undisbursed open end consumer equity lines and credit cards, $4.1 million in commercial lines of credit and $108,000 in commercial letters of credit. At the same date, the total amount of certificates of deposit which are scheduled to mature by December 31, 1997 was $134 million. The Savings Bank believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If the Savings Bank requires funds beyond its internal funding capabilities, advances from the FHLB of Atlanta are available as an additional source of funds. The Savings Bank is required to maintain specified amounts of capital pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") and regulations promulgated thereunder by the OTS. The capital standards generally require the maintenance of regulatory capital sufficient to meet a tangible capital requirement, a core capital requirement and a risk-based capital requirement. At December 31, 1996, the Savings Bank's tangible and core capital totalled $23.6 million, or 6.9% of adjusted total assets, which exceeded the respective minimum requirements at that date by approximately $18.3 million and $9.6 million, respectively, or 5.4% and 2.9% of total assets, respectively. The Savings Bank's risk-based capital totalled $25.6 million at December 31, 1996, or 10.9% of risk-weighted assets, which exceeded the current requirement of 8.0% by approximately $6.7 million, or 2.9% of risk-weighted assets. See "Regulation - The Savings Bank - Regulatory Capital Requirements." -42- <PAGE> Impact of New Accounting Standards During 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." This new standard will become effective for the Company during 1997 and will require the Company to disclose the fair value of employee stock options granted in 1997 and subsequent years. Management does not expect this new standard to have a material impact on future consolidated financial statements. During 1996, the Financial Accounting Standards Board issued SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This new standard will become effective for the Company January 1, 1997 and will require the Company to make certain disclosures regarding its servicing assets and liabilities. The standard may also affect the classification of certain servicing assets and liabilities. Management does not expect this standard to have a material impact on future consolidated financial statements. Impact of Inflation and Changing Prices The financial statements and related financial data presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Savings Bank's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institutions performance than does the effect of inflation. -43- <PAGE> BUSINESS OF CARROLLTON FEDERAL BANK General The Savings Bank is a federally chartered savings bank that was organized on August 1, 1994 as a subsidiary of the Mutual Holding Company. Prior to that date, the Savings Bank's predecessors had operated since 1929. At December 31, 1996, the Savings Bank had $351 million of total assets, $325 million of total liabilities, including $308 million of deposits, and $26 million of equity or 7.4% of assets. The Mutual Holding Company and the Savings Bank have recently formed three new operating units in an effort to broaden the services they offer to the community. The first such enterprise is CFB Securities, which offers traditional brokerage services and products such as mutual funds, stocks and bonds through an NASD member firm. The firm is a wholly owned subsidiary of the Mutual Holding Company formed in 1996 and is located in space immediately adjacent to the Savings Bank's main office lobby. CFB Securities has two full-time employees. The second unit is CFB Financial, an operating department of the Savings Bank. This department services the loan needs of consumers traditionally associated with small loan companies. The group operates from a branch located in Douglasville, Georgia, has a staff of three full- time employees and offers a wide range of small loans including loans made in conformity with the Georgia Industrial Loan Act. Management plans to open a second location in Villa Rica, Georgia in the future. The third unit, CFB Insurance, is a wholly owned subsidiary of the Mutual Hold Company. Formed on December 28, 1995, CFB Insurance has not begun operations, but management intends to use it as a means of offering various insurance products, including property and casualty insurance, to existing Savings Bank customers, as well as the general public. Market Area The Savings Bank maintains 12 branch offices in Carroll, Coweta, Douglas, Fayette, Haralson, Heard, Henry and Paulding counties within the State of Georgia. In 1996, the Savings Bank opened four branch offices in Wal*Mart discount stores in Coweta, Henry, Fayette and Paulding counties. During 1991, the Savings Bank opened a branch office in a Kroger grocery store in Carroll County and a branch office in a Bruno's grocery store in Carroll County. The Savings Bank's main office is located in Carrollton, Georgia, the county seat of Carroll County, Georgia. Carrollton is located in western Georgia, approximately 50 miles west of Atlanta, Georgia. Carroll County's population was 78,000 in 1996, an increase of 1.5% from 1995. Major area employers that have affected growth are Southwire, Sony, State University of West Georgia, Tanner Medical Center, Bremen-Bowdon Investment and Gold- Kist, which collectively employ an aggregate of approximately 6,500 persons. Based on information from the Carroll County Chamber of Commerce, other factors affecting growth in Carroll County include: (i) an expected population increase to 83,000 by 2000 and to 105,000 by 2010 due to migration and birth; (ii) the county's proximity to Atlanta, Georgia; (iii) commercial and industrial expansion that continue to fuel economic growth; and (iv) new student enrollment at the State University of West Georgia, which was recently granted university status. -44- <PAGE> Lending Activities As a federally chartered savings association, the Savings Bank has general authority to originate and purchase loans secured by real estate, secured or unsecured loans for commercial, corporate, business, or agricultural purposes, loans for personal, family, or household purposes, and may issue credit cards and extend credit in connection therewith. Notwithstanding its general lending authority, the Savings Bank may not make non-real estate commercial purpose loans that exceed 20% of its assets or non-real estate consumer purpose loans that exceed 35% of its assets. While not restricted by law, the Savings Bank limits its lending activities mainly to the counties in which it has offices. Since the enactment of FIRREA in 1989, a savings association generally may not make loans to one borrower and related entities in an amount which exceeds 15% of its unimpaired capital and surplus, although loans in an amount equal to an additional 10% of unimpaired capital and surplus may be made to a borrower if the loans are fully secured by readily marketable securities. See "Regulation - The Savings Bank." At December 31, 1996, the Savings Bank's loans-to-one borrower limit was $4.0 million and its five largest loans or groups of loans-to-one borrower, including related entities, were $3.46 million, $3.08 million, $2.74 million, $1.97 million and $1.96 million. One of these loans ($1.96 million) is secured by notes secured by residential real estate and by assignments of the related security instruments. The other loans are secured by commercial real estate. One relationship ($4.0 million) was not performing in accordance with its terms on December 31, 1996. See "- Non-Performing Assets." Loan Portfolio Composition. The following table sets forth the composition of the Savings Bank's loan portfolio by type of loan at the dates indicated. <TABLE> <CAPTION> December 31, ------------ 1996 1995 1994 1993 1992 Amount % Amount % Amount % Amount % Amount % -------- ---- -------- ---- -------- ---- -------- ---- -------- ---- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> Real estate mortgage loans $ 146,577 54% $ 175,039 64% $ 196,761 69% $ 195,682 75% $ 199,443 78% Real estate construction loans 34 * 2,348 1 1,451 1 866 * 1,632 * Commercial loans 57,786 21 43,944 16 38,755 14 27,759 11 24,684 10 Consumer(1) and other installment loans 68,038 25 51,840 18 46,509 16 37,846 14 30,465 12 --------- --- --------- --- --------- --- --------- --- --------- --- Total loans 272,435 100% 273,171 100% 283,476 100% 262,153 100% 256,224 100% ==== ==== ==== ==== ==== Less: Allowance for loan losses 2,601 2,291 2,392 2,686 2,027 --------- --------- --------- --------- --------- Loans, net $ 269,834 $ 270,880 $ 281,084 $ 259,467 $ 254,197 ========= ========= ========= ========= ========= </TABLE> - -------------- * Indicates less than one percent. (1) Includes home equity loans secured by residential real estate, as well as other consumer loans. Contractual Principal Repayments and Interest Rates. The following table sets forth certain information at December 31, 1996 regarding the dollar amount of loans maturing or repricing in the Savings Bank's portfolio based on the contractual terms to maturity, before giving effect to net items. Demand loans, loans having no stated schedule of repayments and no stated maturity or repricing and overdrafts are reported as due in one year. -45- <PAGE> <TABLE> <CAPTION> 1 year Less than through Over Loan Type 1 year 5 years 5 years Total ----------------------------------------------------- <S> <C> <C> <C> <C> Mortgage(1): Adjustable $ 83,593 $ 7,345 $ 0 $ 90,938 Fixed 2,341 8,726 44,572 55,639 Construction 34 0 0 34 Consumer 35,088 30,132 2,818 68,038 Commercial 38,512 14,657 4,617 57,786 -------- ------- ------- -------- Total $159,568 $60,860 $52,007 $272,435 ======== ======= ======= ======== </TABLE> ------------------ (1) Includes second mortgage loans on one-to-four family residential properties of $13,884. The following table sets forth, as of December 31, 1996, the dollar amount of all loans, before net items, maturing or repricing after one year from December 31, 1996 which have fixed interest rates or which have adjustable interest rates. <TABLE> <CAPTION> Adjustable Fixed Rates Rates Total ----------- ---------- ------- (In Thousands) <S> <C> <C> <C> Mortgage $ 53,298 $7,345 $ 60,643 Construction -- -- -- Consumer 32,950 -- 32,950 Commercial 17,824 1,450 19,274 -------- ------ -------- Total $104,072 $8,795 $112,867 ======== ====== ======== </TABLE> Scheduled contractual amortization of loans does not reflect the actual term of the Savings Banks loan portfolio. The average life of loans is substantially less than their contractual terms because of prepayments and due-on-sale clauses, which give the Savings Bank the right to declare a conventional loan immediately due and payable in the event, among other things, that the borrower sells the real property subject to the mortgage. -46- <PAGE> Originations, Purchases, Servicing and Sales of Loans. The lending activities of the Savings Bank are subject to written, non-discriminatory underwriting standards and loan origination procedures established by the Savings Bank's Board of Directors and management. Loan originations are obtained by a variety of sources including referrals from real estate brokers, developers, builders, existing customers, newspaper, radio, periodical advertising and walk-in customers. Loan applications are taken by lending personnel, and the loan processing department supervises the acquisition of credit reports, appraisals and other documentation involved with a loan. Real property valuations are generally prepared for the Savings Bank by a qualified independent appraiser selected from a list approved by the Savings Bank's Board of Directors. The Savings Bank generally relies on an attorney's opinion of title that each loan collateralized by real property has been properly secured and may obtain title insurance on such property. Hazard insurance is also required on all secured property and flood insurance is required if the property is within a designated flood plain. The Savings Bank's loan approval process is intended to assess the borrower's ability to repay the loan, the viability of the loan and the adequacy of the value of the property that will secure the loan. A loan application file is first reviewed by a loan officer of the Savings Bank and is submitted for approval to the Loan Committee if the loan does not meet certain criteria. The following table shows total loans originated, loan reductions and the net increase in Carrollton's loan portfolio during the periods indicated. -47- <PAGE> <TABLE> <CAPTION> Year Ended December 31, ---------------------------------- 1996 1995 1994 -------- -------- -------- (In Thousands) Loan Originations: <S> <C> <C> <C> Mortgage $ 25,629 $ 30,102 $ 41,124 Construction 9,031 6,097 5,741 Commercial 15,532 15,290 15,645 Consumer 43,356 29,575 33,166 -------- ------- -------- Total loans originated 93,548 81,064 95,676 Purchases: Loans purchased 0 652 18,470 -------- ------- -------- Total loans originated and purchased 93,548 81,716 114,146 Sales and loan principal repayments: Loans sold proceeds 10,882 6,605 13,239 Loan repayments 82,587 85,293 80,252 Total loans sold proceeds and loan principal repayments 93,469 91,898 93,491 ======== ======= ======== Loan originations (repayments), net 79 (10,182) 20,655 ======== ======= ======== Increase (decrease) due to other items, net (1,125) (22) 962 ======== ======= ======== Net increase (decrease) in net loan portfolio (1,046) (10,204) 21,617 ======== ======= ======== </TABLE> Real Estate Mortgage Loans. The Savings Bank originates real estate mortgage loans, primarily loans secured by first mortgage liens on one-to- four family residences. At December 31, 1996, $146.6 million or 54.7% of the Savings Bank's total net loan portfolio consisted of first mortgage real estate loans. As of such date the average balance of the Savings Bank's individual one-to-four family mortgage loans was $43,776. The loan-to-value ratio, maturity and other provisions of the loans made by the Savings Bank generally have reflected the policy of making less than the maximum loan permissible under applicable regulations, in accordance with sound lending practices, market conditions and underwriting standards established by the Savings Bank. While it has been the Savings Bank's practice in most cases to allow a loan-to-value ratio of no more than 85%, the Savings Bank's lending policy on one-to-four family residential mortgage loans generally limits the maximum loan-to-value ratio to 95% of the lesser of the appraised value or purchase price of the property. In cases where loan-to-value ratios exceed 85%, the Savings Bank generally requires private mortgage insurance. The loan-to-value ratio for loans originated for the Savings Bank's portfolio is based on appraised value. -48- <PAGE> The Savings Bank originates fixed rate mortgages with terms of up to 30 years. These loans are generally made in conformity with Federal National Mortgage Association ("FNMA") standards and are generally sold to FNMA with the Savings Bank retaining the servicing rights on these mortgages. From time to time, certain 15-year fixed rate mortgages will be retained in the Savings Bank's portfolio. At December 31, 1996, the Savings Bank was servicing $52.4 million in loans for FNMA. At December 31, 1996, the Savings Bank had $41.2 million in portfolio fixed rate mortgages. Since 1981, the Savings Bank has been offering adjustable-rate loans in order to decrease the vulnerability of its operations to changes in interest rates. The demand for adjustable-rate loans in the Savings Bank's primary market area has been a function of several factors, including the level of interest rates, the expectations of changes in the level of interest rates and the difference between the interest rates offered for fixed-rate loans and adjustable-rate loans. The relative amount of fixed- rate and adjustable-rate residential loans that can be originated at any time is largely determined by the demand for each in a competitive environment. As interest rates have fluctuated, the demand for fixed-rate and adjustable-rate loans has changed as the Savings Bank's customers have preferred adjustable rates in a high interest-rate environment and fixed- rate loans as interest rates decreased. In order to continue to increase and then to maintain a high percentage of adjustable-rate one-to-four family residential loans, the Savings Bank has offered various forms of adjustable-rate loans and in some cases has purchased adjustable-rate mortgage loans. As a result, at December 31, 1996, $107.4 million, or 73.5% of the one-to-four family residential loans in the Savings Bank's loan portfolio (before net items) consisted of adjustable-rate loans. The Savings Bank's one-to-four family residential adjustable-rate loans are fully amortizing loans with contractual maturities of up to 30 years. These loans adjust periodically in accordance with a designated index. The Savings Bank currently offers an adjustable-rate mortgage with a 2% limit on the rate adjustment per period and a 6% limit on the rate adjustment over the life of the loan. The Savings Bank's adjustable-rate loans are not convertible by their terms into fixed-rate loans, are assumable with the Savings Bank's approval, do not contain prepayment penalties and do not produce negative amortization. Due to the generally lower rates of interest prevailing in recent periods, the Savings Bank's ability to originate adjustable-rate loans has decreased as consumer preference for fixed-rate loans has increased. Adjustable-rate loans decrease the risks associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. The Savings Bank believes that these risks, which have not had a material adverse effect on the Savings Bank to date, generally are less than the risks associated with holding fixed-rate loans in an increasing interest rate environment. Commercial Loans. At December 31, 1996, $57.8 million, or 21% of the Savings Bank's total net loan portfolio, consisted of commercial loans. The vast majority of these loans were secured by existing commercial and multi-family residential real estate. The Savings Bank's commercial and multi-family real estate loans include primarily loans secured by small office buildings, family-owned business establishments and apartment buildings. The average amount of the Savings Bank's commercial and multi- family real estate loans was $107,000 at December 31, 1996 and the largest was $4.0 million. It is anticipated that commercial loans will continue to be a major component of the Savings Bank's loan portfolio. Originations of commercial loans amounted to 11.8%, 18.7% and 20.2% of the Savings Bank's total loan originations in fiscal 1996, 1995 and -49- <PAGE> 1994, respectively. The Savings Bank's commercial loans are rarely made with amortization periods greater than 20 years or interest rate adjustment periods in excess of five years. The Savings Bank requires certified appraisals on most real properties securing commercial loans. In some cases, an evaluation is deemed adequate. Appraisals are performed by an independent appraiser designated by the Savings Bank and are reviewed by management. In originating multi- family residential and commercial real estate loans, the Savings Bank considers the quality and location of the real estate, the credit of the borrower, cash flow of the project and the quality of management involved with the property. Corporate loans generally require the personal guaranty of the entity's controlling shareholders. Hazard insurance is required as well as flood insurance if the property is located in a designated flood zone. Subject to the restrictions contained in federal laws and regulations, the Savings Bank is also authorized to make secured and unsecured commercial business loans for general corporate and agricultural purposes, including issuing letters of credit. At December 31, 1996, $10.3 million, or 3.7%, of the Savings Bank's total net loan portfolio, consisted of commercial business loans, of which $9.7 million were secured by other than real estate. Commercial business loans accounted for 16.6% of the total loan originations during the year ended December 31, 1996. Commercial lending is generally considered to involve a higher degree of risk than one-to-four family residential lending. Such lending typically involves large loan balances concentrated in a single borrower or groups of related borrowers. The payment experience on loans secured by income-producing properties is typically dependent on the successful operation of the related real estate project or business and thus may be subject to a greater extent to adverse conditions in the real estate market or in the economy generally. In addition, commercial lending generally requires more complex underwriting and substantially greater oversight efforts compared to one-to-four family residential real estate lending. The Savings Bank generally attempts to mitigate the risks associated with commercial lending by, among other things, lending only in its Primary Market Area and metropolitan Atlanta and lending only to individuals who have an established relationship with the Savings Bank and/or who have substantial ties to the community. In general, collateral for commercial loans includes real estate and certain business assets including, but not limited to, equipment, inventory, furniture, fixtures and accounts receivable. Terms generally range from three to five years. If real estate is a substantial portion of the collateral, terms may be extended to 15 years. Commercial loans are made at both fixed and variable rates. The variable rates primarily adjust with changes in the prime rate as reported by the Wall Street Journal. Construction Loans. The Savings Bank makes construction loans to individuals for the construction of their residences and to developers for the construction of one-to-four family and multi-family residences. Construction lending is generally limited to the Savings Bank's Primary Market Area. At December 31, 1996, construction loans amounted to $34,000 or less than 1% of the Savings Bank's total net loan portfolio. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, owner-occupied real estate because of the uncertainties of construction, including possible delays in completing the structure, the possibility of costs exceeding the initial estimates and the need to obtain a tenant or purchaser if the property will not be owner occupied. In the event of a delay in the completion of the construction, the Savings Bank may grant an extension, but such extensions are generally conditioned upon the payment of interest in full for the initial term. Construction loans to individuals are separate from the permanent financing on the structure. However, a borrower only qualifies for a construction loan if he or she has obtained a commitment for a permanent loan at the end of the construction phase. The term of a construction loan to an individual generally does not exceed the greater of 180 days or the term of the permanent loan commitment. Interest rates on construction loans to individuals are based on current local economic conditions. The loan-to-value ratio on such loans must be 80% or less of the appraised value of the completed structure. -50- <PAGE> The majority of construction loans to developers are to selected local developers with whom the Savings Bank is familiar and are for the construction of single-family dwellings on a pre-sold or on a speculative basis. The Savings Bank limits the number of unsold houses which a developer may have under construction in a project. Construction loans to developers are generally made for a six-month term depending on the size and scope of the project. Payment of interest generally is required on at least a monthly basis, and the amount of a loan is generally based on the owner's equity in the property but may not exceed 80% of appraised value or contract price. Loan proceeds are disbursed in stages after inspection of the project indicates that such disbursements are for expenses which have already been incurred and which have added to the value of the project. Consumer Loans. Subject to the restrictions contained in federal laws and regulations, the Savings Bank also is authorized to make loans for a wide variety of personal or consumer purposes. The Savings Bank's consumer loans secured by automobiles totalled $26.4 million at December 31, 1996, while home equity loans totalled $13.9 million as of that date. Substantially all of the Savings Bank's consumer loan borrowers reside in its Primary Market Area. As of December 31, 1996, $68.0 million, or 25%, of the Savings Bank's total net loan portfolio consisted of consumer loans. In addition to traditional consumer loans, the Savings Bank initiated in 1996 a relationship with four new car dealerships within its Primary Market Area to provide "indirect" financing for customers of the dealerships. Management intends to increase such lending in the future. At December 31, 1996, $6.8 million of these loans had been originated. Of this amount, $97,000 in loans had defaulted and $190,000 in loans were 30 days or more delinquent. The Company does not deal in indirect sub-prime automobile paper. Home equity and second mortgage loans are also classified as consumer loans. These loans, which amounted to $13.9 million, or 5.2%, of the Savings Bank's total net loan portfolio at December 31, 1996, have variable rates of interest and maximum terms of 10 years with five-year advance periods. While these loans are secured by a second mortgage on the subject property, the borrower is not required to use the proceeds of the loan for property-related purposes. The Savings Bank only takes a second mortgage in those equity line loans in which it holds the outstanding first mortgage loan on the property or where it determines that the value of the underlying collateral is sufficient to provide adequate security for both the first and second mortgages. The Savings Bank generally applies a loan- to-value ratio of 85% or less, less the balance of the first mortgage loan. As of December 31, 1996, the Savings Bank's consumer loans also consisted of loans secured by accounts at the Savings Bank which amounted to $4.2 million or 1.6% of its total net loan portfolio. Such a loan is structured to have a term that ends on the same date as the maturity date of the certificate securing it or if secured by a passbook account has a six-month term with a hold on withdrawals that would result in the balance being lower than the loan balance. Typically these loans require semi- annual payments of interest only. Consumer loans generally involve more credit risk than mortgage loans because of the type and nature of the collateral. In addition, consumer lending collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In many cases, because of its mobile nature, collateral may not be readily available in the event of a default. In other cases, repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan balance because of improper repair and maintenance or depreciation of the underlying security. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. -51- <PAGE> Loan Origination and Other Fees. In addition to interest earned on loans, the Savings Bank receives loan origination fees or "points" for originating loans. Loan points are a percentage of the principal amount of the mortgage loan and are charged to the borrower in connection with the origination of the loan. In accordance with SFAS No. 91, which deals with the accounting for non-refundable fees and costs associated with originating or acquiring loans, the Savings Bank's loan origination fees and certain related direct loan origination costs are offset, and the resulting net amount is deferred and amortized as interest income over the contractual life of the related loans as an adjustment to the yield of such loans. At December 31, 1996, the Savings Bank had $433,000 of net loan fees which had been deferred and are being recognized as income over the estimated maturities of the related loans. See Note (1) of the Notes to the Consolidated Financial Statements. -52- <PAGE> Asset Quality Delinquent Loans. The following table sets forth information concerning delinquent loans at December 31, 1996 in dollar amount and as a percentage of the Savings Bank's total loan portfolio (before net items). The amounts presented represent the total outstanding principal balances of the related loans, rather than the actual payment amounts which are past due. <TABLE> <CAPTION> Mortgage Commercial Consumer Total ------------------- ------------------- ------------------- ------------------- Amount Percentage Amount Percentage Amount Percentage Amount Percentage ------ ----------- ------ ----------- ------ ----------- ------ ----------- <S> <C> <C> <C> <C> <C> <C> <C> <C> (Dollars in Thousands) Loans delinquent 90 days and over $943 0.37% $3,900 1.54% $1,296 0.51% $6,139 2.42% </TABLE> Loans delinquent more than 90 days totalled $2.3 million at December 31, 1995 and $3.2 million at December 31, 1994. The increase in 1996 was due to one large commercial relationship. -53- <PAGE> Non-Performing Assets. The Savings Bank has adopted a policy under which all loans are reviewed on a regular basis and are placed on a non-accrual status when, in the opinion of management, the collection of additional interest is deemed insufficient to warrant further accrual. Generally, the Savings Bank places all loans more than 90 days past due on non-accrual status. When a loan is placed on non-accruing status, total interest accrued to date and not collected is charged to earnings. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectibility of the loan. A loan is returned to accrual status when, in management's judgment, the borrower's ability to make periodic interest and principal payments is in accordance with the terms of the loan agreement. Real estate acquired by the Savings Bank by foreclosure is classified as real estate owned until such time as it is sold. When such property is acquired it is recorded at the lower of the recorded investment in the loan or fair value, less estimated costs of disposition. The recorded investment is the sum of the outstanding principal loan balance plus any accrued interest which has not been received and acquisition costs associated with the property. Any excess of the recorded investment in the loan over the fair value of the underlying property, less estimated costs of disposition, is charged to the allowance for loan losses at the time of the loan foreclosure. Costs relating to improvement of property incurred subsequent to the acquisition are capitalized, whereas costs relating to holding the property are expensed. Valuations are periodically performed by management and a provision for estimated losses on real estate owned is charged to earnings when losses are anticipated. As of December 31, 1996, the Savings Bank's total non-performing loans amounted to $6.2 million, or 2.31%, of total net loans, compared to $2.3 million, or 0.85% of total net loans, at December 31, 1995. The 1996 increase was due to one large commercial relationship totalling approximately $4.0 million or 1.4% of net loans. The following table sets forth the amounts and categories of the Savings Bank's non-performing assets at the dates indicated. The Savings Bank had no troubled debt restructuring during the periods shown on the table below. <TABLE> <CAPTION> December 31, ------------ 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> Non-accruing loans: Mortgage $ 943 $1,203 $1,411 $2,239 $1,354 Construction 0 0 0 0 0 Commercial 3,900 582 245 39 261 Consumer 1,400 515 1,465 1,451 1,391 Accruing loans greater than 90 days delinquent: Mortgage 0 0 0 0 0 Construction 0 0 0 0 0 Commercial 0 0 0 0 0 Consumer 0 0 0 0 0 ------ ------ ------ ------ ------ Total non-performing loans 6,243 2,300 3,121 3,729 3,006 </TABLE> -54- <PAGE> <TABLE> <S> <C> <C> <C> <C> <C> Real estate owned(1) 180 253 968 801 1,328 ------ ------ ------ ------ ------ Total non-performing assets 6,423 2,553 4,089 4,530 4,334 Total non-performing loans as a percentage of total net loans 2.31% 0.85% 1.11% 1.72% 1.44% Total non-performing assets as a percentage of total assets 1.82% 0.76% 1.16% 1.45% 1.43% - ---------------------------- </TABLE> (1) Consists of real estate acquired by foreclosure. Interest income foregone on non-accrual loans in 1996, 1995 and 1994 was $554,867, $122,336 and $114,829, respectively. Classified Assets. Federal regulations require that each insured savings association classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. A loss classified asset is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated "special mention" also must be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital. The Savings Bank's problem assets at December 31, 1996 consisted of $8.5 million of loans classified as substandard and $1.4 million of loans classified as doubtful or loss. As of December 31, 1996, total classified assets amounted to 2.8% of total assets. In addition, at December 31, 1996, the Savings Bank had $4.2 million of loans classified as special mention. -55- <PAGE> The following table sets forth the Savings Bank's problem assets at the dates indicated. <TABLE> <CAPTION> December 31, ------------ 1996 1995 1994 1993 1992 ----- ----- ----- ------ ------ (Dollars in Thousands) <S> <C> <C> <C> <C> <C> Classification: Substandard 8,529 6,128 5,308 9,038 10,467 Doubtful 1,431 1,126 1,421 1,308 1,986 Loss 0 55 5 669 5 Total classified assets 9,960 7,309 6,734 11,015 12,458 </TABLE> Allowance for Loan Losses. It is management's policy to maintain an allowance for estimated loan losses at a level which management considers adequate to absorb losses inherent in the loan portfolio at each reporting date. Management's estimation of this amount includes a review of all loans for which full collectibility is not reasonably assured and considers, among other factors, prior years' loss experience, distribution of portfolio loans by risk class and the estimated value of underlying collateral. Although management believes the current allowance for loan losses to be adequate, ultimate losses may vary from their estimates; however, estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in periods in which they become known. At December 31, 1996, the allowance for loan loss was increased due to one large commercial relationship and a change in the portfolio mix toward higher risk consumer and commercial loans. See "- Asset Quality - Non-Performing Assets." At December 31, 1996, the Savings Bank's allowance for loan losses was $2.6 million compared to $2.3 million at December 31, 1995. As of December 31, 1996, the Savings Bank's general valuation allowance totalled $2.0 million and specific reserves totalled $577,000. The following table sets forth the activity in the Savings Bank's allowance for loan losses during the periods indicated. <TABLE> <CAPTION> Year Ended December 31, ----------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (Dollars in thousands) <S> <C> <C> <C> <C> <C> Allowance at beginning of period $ 2,291 $ 2,392 $ 2,687 $ 2,027 $ 1,464 Provisions 1,143 250 99 822 1,061 Charge-offs Mortgage Loans 32 82 277 166 260 Commercial loans 117 59 0 0 117 Consumer loans 776 308 181 88 339 Total charge-offs 925 449 458 254 716 Recoveries Mortgage loans 25 8 40 66 71 Commercial loans 0 0 0 0 13 Consumer loans 67 90 24 25 134 Total Recoveries 92 98 64 91 218 Net charge-offs 833 351 394 163 498 </TABLE> -56- <PAGE> <TABLE> <S> <C> <C> <C> <C> <C> Allowance at end of period 2,601 2,291 2,392 2,686 2,027 Allowance for loan losses to total non-performing loans at end of period 41.66% 99.61% 76.64% 72.03% 67.43% Allowance for loan losses to average loans at end of period 0.95% 0.82% 0.88% 1.04% 0.78% Net charge-offs to average loans outstanding during the period 0.31% 0.13% 0.14% 0.06% 0.19% Average gross loans(1) $272,803 $278,323 $272,815 $259,189 $258,872 </TABLE> - ----------------------- (1) Beginning and ending annual period balances were used to calculate average gross loans. -57- <PAGE> The following table sets forth the composition of the allowance for loan losses by type of loan at the date indicated. The allowance is allocated to specific categories of loans for statistical purposes only and may be applied to loan losses in any loan category. <TABLE> <CAPTION> Year Ended December 31, -------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 --------------------- ---------------------- ---------------------- -------------------- --------------------- % of Loans % of Loans % of Loans % of Loans % of Loans in Each in Each in Each in Each in Each Category to Category to Category to Category to Category to Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans --------- ----------- ---------- ----------- ---------- ----------- -------- ----------- --------- ----------- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> Mortgage loans $ 441 54% $ 423 65% $ 222 70% $ 373 79% $ 224 82% Commercial 1,170 21 1,158 16 1,150 14 1,364 12 1,094 11 Consumer loans 996 25 710 19 1,020 11 949 9 709 7 ------ --- ------ --- ------ ------ ------ ------ ------ ------ Total allowance for loan losses 2,607 100% 2,291 100% 2,392 100% 2,686 100% 2,027 100% ====== ==== ====== ==== ====== ==== ====== ==== ====== ==== </TABLE> -58- <PAGE> Investment Securities The Company classifies its securities in one of three categories: trading, available for sale or held to maturity. There were no trading securities at December 31, 1996 and 1995. Securities held to maturity are those securities for which the Savings Bank has the ability and intent to hold to maturity. All other securities are classified as available for sale. Available for sale securities consist of investment securities not classified as trading securities or held to maturity securities and are recorded at fair value. Held to maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses, net of the related tax effect, on securities available for sale are excluded from earnings and are reported as a separate component of stockholders' equity until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from held to maturity to available for sale are recorded as a separate component of stockholders' equity. See Note (1) of the Notes to Consolidated Financial Statements. Federally chartered savings institutions such as the Savings Bank also have authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various Federal agencies and of state and municipal governments, certificates of deposit at federally insured banks and savings and loan associations, certain bankers' acceptances and Federal funds. Subject to various restrictions, federally chartered savings institutions may also invest a portion of their assets in commercial paper, corporate debt securities and mutual funds, the assets of which conform to the investments that federally chartered savings institutions are otherwise authorized to make directly. As of December 31, 1996, the Savings Bank had utilized this investment authority to invest in U.S. government and agency obligations, obligations of the State of Georgia and political subdivisions, domestic corporate obligations and mutual funds, equity securities including FHLB stock and FNMA stock. At December 31, 1996, approximately 11% of the Savings Bank's securities portfolio was comprised of mortgage-backed securities that are insured or guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC) or FNMA. Collateralized Mortgage Obligations (CMOs) not insured or guaranteed by FHLMC, FNMA or GNMA comprised 20% of the investment portfolio. U.S. government agency obligations comprised 51%, preferred stock of FNMA comprised 4%, FHLB stock comprised 5% and municipal securities comprised 5% of such portfolio at December 31, 1996. Other investments, primarily treasury securities, are also included. The Savings Bank's securities portfolio is managed in accordance with the Savings Bank's Investment Policy adopted by the Board of Directors and administered by the Asset/Liability Committee, which consists of an outside director, the President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Senior Vice President, Vice President- Commercial Lending and Assistant Controller of the Savings Bank. The policy lists specific areas of permissible investments consistent with the Savings Bank's investment strategy. Under the Savings Bank's policy, at the time of purchase of an investment or mortgage-backed security or CMO, management designates the security as either held for maturity or available for sale based on the Savings Bank's investment objectives, operational needs and intent. The Savings Bank maintains no trading account portfolio. Investment activities are monitored to ensure that they are consistent with established guidelines and objectives. The following table sets forth certain information regarding the classifications of Savings Bank's investment securities at December 31, 1996, 1995 and 1994. Securities classified as available -59- <PAGE> for sale are carried at their estimated fair value at December 31, 1996. There were no securities available for sale at December 31, 1995 or 1994. Securities held to maturity are carried at amortized cost at all respective dates. There were no trading securities at December 31, 1996, 1995 or 1994. Securities available for sale: <TABLE> <CAPTION> 1996 ---- <S> <C> <C> <C> U.S. Treasuries $ -- U.S. Government agencies 18,830 State, county and municipals 2,231 Mortgage-backed securities 12,866 ------- $33,927 ------- Securities held to maturity: 1996 1995 1994 ---- ---- ---- U.S. Treasuries $ 500 1,251 1,257 U.S. Government agencies 6,216 7,142 31,805 State, county and municipals 115 115 0 Mortgage-backed securities 933 1,870 12,204 ------- ------- ------- $ 7,764 $10,378 $45,266 ------- ------- ------- Total investment securities $41,691 $10,378 $45,266 ======= ======= ======= </TABLE> -60- <PAGE> The following table presents the expected maturity of the total investment securities portfolio by maturity date and average yields based upon amortized cost, (for all obligations on a fully taxable basis assuming a 34% tax rate) at December 31, 1996. It should be noted that the composition and maturity/repricing distribution of the investment portfolio is subject to change depending upon rate sensitivity, capital needs and liquidity needs. Expected Maturity of Investment Securities <TABLE> <CAPTION> After one After five Within one year but within five years but within ten years After ten years Amount Yield Amount Yield Amount Yield Amount Yield Totals ------ ----- ------ ----- ------ ----- ------ ----- ------ <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Securities held to maturity: U.S. Treasury Securities 500 5.60% - - - - - - 500 U.S. Government Agencies 582 7.22% 2,634 6.57% 3,000 7.39% - - 6,216 State, county and municipals - - 115 4.55% - - - - 115 Mortgage-backed securities 533 5.45% 239 6.05% 11 7.25% 150 7.21% 933 ----- ---- ----- ---- ------ ---- ------ ---- ------ 1,615 6.13% 2,988 6.46% 3,011 7.39% 150 7.21% 7,764 ===== ==== ===== ==== ====== ==== ====== ==== ====== Securities available for sale: U.S. Treasury Securities - - - - - - - - - U.S. Government Agencies - - 3,000 6.88% 11,849 8.93% 4,018 7.12% 18,867 State, county and municipals - - - - - - 2,199 7.27% 2,199 Mortgage-backed securities - - 2,038 6.75% 1,946 6.86% 8,908 7.18% 12,892 ----- ---- ----- ---- ------ ---- ------ ---- ------ 5,038 6.83% 13,795 8.64% 15,125 7.18% 33,958 ===== ==== ===== ==== ====== ==== ====== ==== ====== </TABLE> -61- <PAGE> Cash and Interest-Bearing Deposits in Other Banks The Savings Bank had cash on hand and cash due from and on deposit with other banks amounting to $14.4 million and $16.4 million at December 31, 1996 and December 31, 1995, respectively. Sources of Funds General. Deposits are the primary source of the Savings Bank's funds for lending and other investment purposes. In addition to deposits, the Savings Bank derives funds from loan principal repayments, principal, interest and dividend payments on investments and other sources. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds from other sources. They may also be used on a longer term basis for general business purposes. Deposits. The Savings Bank's deposits are attracted principally from within the Savings Bank's primary market area through the offering of a wide selection of deposit instruments, including NOW accounts, money market accounts, regular savings accounts, and term certificate accounts. Included among these deposit products are individual retirement account certificates of approximately $47 million at December 31, 1996. Deposit account terms vary, with the principal differences being the minimum balance required, the time periods the funds must remain on deposit and the interest rate. As of December 31, 1996, the 204 certificates of deposit with principal amounts of $100,000 or more totalled $47.2 million. Interest rates paid, maturity terms, service fees and withdrawal penalties are established by the Savings Bank on a periodic basis. Determination of rates and terms are predicated on funds acquisition and liquidity requirements, rates paid by competitors, growth goals and federal regulations. The Savings Bank does not advertise for deposits outside its local market area or utilize the services of deposit brokers. A listing on the Internet has been established primarily for people relocating to the Savings Bank's Primary Market Area. -62- <PAGE> The following table sets forth the dollar amount of deposits in the various types of deposit programs offered by the Savings Bank at the dates indicated. <TABLE> <CAPTION> December 31, 1996 1995 1994 ------------------------ ------------------------ ------------------------ Weighted Weighted Weighted Average Average Average Amount Interest Rate Amount Interest Rate Amount Interest Rate -------- -------------- -------- -------------- -------- -------------- (Dollars in Thousands) <S> <C> <C> <C> <C> <C> <C> Time deposits $210,488 5.6% $198,870 5.6% $188,735 4.7% Savings accounts 34,077 3.0 31,737 2.6 36,593 2.5 Transaction accounts NOW and money market accounts 47,288 2.6 46,626 2.5% 53,624 2.6 Non-interest bearing accounts 15,903 -- 12,055 -- 10,376 -- -------- -------- -------- Total transaction accounts 63,191 58,681 64,000 -------- -------- -------- Total deposits $307,756 $289,288 $289,328 ======== ======== ======== </TABLE> The following table sets forth the maturities of the Savings Bank's certificates of deposit having principal amounts of $100,000 or more at December 31, 1996. <TABLE> <CAPTION> Certificates of deposit maturing in: (In Thousands) ----------------------- <S> <C> Less than three months $ 8,011 Three to six months 6,866 Six to 12 months 11,680 Over 12 months 20,673 ------- Total certificates of deposit with balances of $100,000 or more 47,230 ======= </TABLE> The following table sets forth the amount and maturities of the Savings Bank's certificates of deposit at December 31, 1996. <TABLE> <CAPTION> 2001 and 1997 1998 1999 2000 thereafter ---- ---- ---- ---- ---------- Over One Year Over Two Over Three One Year Through Years Through Years Through Over Four Or less Two Years Three Years Four Years Years Totals --------- ------------- ------------- ------------- --------- ------ (In thousands) <S> <C> <C> <C> <C> <C> <C> 2.00% to 2.99% -- -- -- -- -- -- 3.00% to 3.99% 672 -- -- -- -- 672 4.00% to 5.99% 113,286 41,654 4,685 1,613 783 162,021 6.00% to 7.99% 19,741 12,747 7,000 3,573 4,193 47,254 8.00% to 9.99% 165 243 -- 133 -- 541 -------- ------- ------- ------ ------ -------- $133,864 $54,644 $11,685 $5,319 $4,976 $210,488 ======== ======= ======= ====== ====== ======== </TABLE> -63- <PAGE> Borrowings. The Savings Bank may obtain advances from the FHLB of Atlanta upon the security of its FHLB of Atlanta stock and certain of the Savings Bank's residential mortgage loans, provided certain standards related to creditworthiness have been met. Such advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. Such advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending. See "Regulation - The Savings Bank - Federal Home Loan Bank System." The Savings Bank had $16.3 million FHLB advances outstanding at December 31, 1996. Of the advances, $10 million were at an adjustable rate with a weighted average rate of 5.49%. The remaining $6.3 million fixed rate advances had a weighted average rate of 5.68%. The following table sets forth the maximum month-end balance and average balance of Carrollton's FHLB advances during the periods indicated. See also Note (6) to the Consolidated Financial Statements. <TABLE> <CAPTION> Year Ended December 31, ------------------------ 1996 1995 1994 ---- ---- ---- (Dollars in Thousands) <S> <C> <C> <C> Maximum balance $20,236 $40,277 $37,770 Average balance 16,514 28,257 28,163 Weighted average interest rate during year 5.56% 6.81% 6.50% Balance outstanding at year-end $16,295 $15,595 $37,770 Weighted average interest rate at year-end 5.90% 6.05% 5.86% </TABLE> The following table sets forth certain information as to Carrollton's long-term (terms to maturity in excess of 90 days) and short-term (terms to maturity of 90 days or less) FHLB advances at the dates indicated. <TABLE> <CAPTION> December 31, ------------ 1996 1995 1994 ---- ---- ---- (Dollars in Thousands) <S> <C> <C> <C> FHLB long-term advances $ 6,295 $7,095 $11,270 Weighted average interest rate 5.68% 5.64% 6.13% FHLB short-term advances $10,000 $8,500 $26,500 Weighted average interest rate 5.49% 7.78% 6.65% </TABLE> Employees. The Savings Bank had 162 full-time employees and 30 part- time employees at December 31, 1996. CFB Securities had two full-time and no part-time employees at December 31, 1996, while CFB Insurance had no employees as of that date. None of these employees is -64- <PAGE> represented by a collective bargaining agreement, and management believes that it enjoys good relations with its personnel. Properties. The following table sets forth certain information with respect to the Company's properties at December 31, 1996. <TABLE> <CAPTION> Leased/ Net Book Value Description/Address Owned of Property Deposits ------------------- ------- -------------- -------- <S> <C> <C> <C> (In Thousands) Main Office 110 Dixie St. Carrollton, GA Owned 2,743 159,346 640 W. Bankhead Hwy, Villa Rica, GA Owned 943 32,197 207 W. College St., Bowdon, GA Owned 303 32,453 501 Alabama Ave., Bremen, GA Leased 50,295 505 Bankhead Hwy., Carrollton, GA (Grocery Store Branch) Leased 4,787 1355 South Park St., Carrollton, Ga (Grocery Store Branch) Leased 4,427 9060 Hwy. 27, Franklin, GA Owned 276 10,120 2212 Atlanta Hwy, Hiram, GA (Wal*Mart Branch) Leased 5,019 5600 N. Henry Blvd. Suite A, Stockbridge, GA (Wal*Mart Branch) Leased 3,825 1025-A Bullsboro Dr., Newnan, GA (Wal*Mart Branch) Leased 2,243 125 Pavilion Parkway, Fayetteville, GA (Wal*Mart Branch) Leased 2,998 3218 Highway 5, Douglasville, GA Leased </TABLE> Legal Proceedings The Savings Bank is involved in routine legal proceedings occurring in the ordinary course of business which, in the aggregate, are believed by management to be immaterial to the financial condition of the Savings Bank. Competition The Savings Bank has operated in its local community since 1929. Management estimates that the Savings Bank has a 30% market share in Carroll County, a 20% market share in each of Haralson and Heard Counties, and a one percent market share in each of Coweta, Douglas, Fayette, Henry and Paulding Counties. The Savings Bank faces significant competition both in making loans and in attracting deposits principally from national, regional and local commercial banks, savings banks, savings and loan associations, credit unions, broker-dealers, mortgage banking companies (including FNMA) and insurance companies. Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations and credit unions. The Savings Bank faces additional competition for deposits from short-term money market funds, other corporate and government securities funds and from other financial institutions such as brokerage firms and insurance companies. In addition, the Savings Bank may face additional competition from commercial banks headquartered outside of the State of Georgia as a result of the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which becomes fully effective on June 1, 1997. The "Georgia Interstate Banking Act," which became effective July 1, 1995, provides that (i) interstate acquisitions by institutions located in Georgia are permitted in states which also allow national interstate acquisitions, and (ii) interstate acquisitions of institutions located in Georgia are permitted by institutions located in states which also allow national interstate acquisitions; provided, however, that if the board of directors of a Georgia savings and loan institution adopts a resolution to except such thrift or holding company from being acquired pursuant to the provisions of the Georgia Interstate Banking Act and properly files a certified copy of such resolution with the Georgia Department, such savings and loan institution or holding company may not be acquired by an institution located outside of the State of Georgia. -65- <PAGE> The Savings Bank experiences strong competition for real estate loans principally from other savings associations, commercial banks, and mortgage banking companies. The Savings Bank competes for loans principally through the interest rates and loan fees it charges and the efficiency and quality of services it provides borrowers. Competition may increase as a result of the continuing reduction of restrictions on the interstate operations of financial institutions. REGULATION Savings and loan holding companies and federal savings banks are extensively regulated under both Federal and state law. The following is a brief summary of certain statutes and rules and regulations that affect or will affect the Company and the Bank. This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and the Bank. Supervision, regulation and examination of the Company and the Bank by the regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. The terms savings association, federal savings bank and thrift are used interchangeably in this section. Savings and Loan Holding Company Regulation The Company will be a registered holding company under both the Savings and Loan Holding Company Act (the "SLHCA") set forth in Section 10 of the Home Owners Loan Act ("HOLA") and the Financial Institutions Code of Georgia ("FICG"). The Company will be regulated under such acts by the Office of Thrift Supervision (the "OTS") and by the Department of Banking and Finance (the "Georgia Department"), respectively. As a savings and loan holding company, the Company will be required to file with the OTS an annual report and such additional information as the OTS may require pursuant to the SLHCA. The OTS will also conduct examinations of the Company and each of its subsidiaries. Savings and loan holding companies and their subsidiaries are prohibited from engaging in any activity or rendering any services for or on behalf of their savings institution subsidiaries for the purpose or with the effect of evading any law or regulation applicable to the institution. This restriction is designed to prevent the use of holding company affiliates to evade requirements of the SLHCA that are designed to protect the holding company's savings institution subsidiaries. A unitary holding company, that is, a holding company that owns only one insured institution whose subsidiary institution satisfies the qualified thrift lender test (discussed below), is not restricted to any statutorily prescribed list of permissible activities, and the SLHCA and the FICG imposes no limits on direct or indirect non-savings institution subsidiary operations. The SLHCA and the FICG makes it unlawful for any savings and loan holding company, directly or indirectly, or through one or more subsidiaries or one or more transactions, to acquire control of another savings association or another savings and loan holding company without prior approval from the OTS and the Georgia Department, respectively. An acquisition by merger, consolidation or purchase of assets of such an institution or holding company or of substantially all of the assets of such an institution or holding company is also prohibited without prior OTS or Georgia Department approval. When considering an application for such an acquisition, the OTS and the Georgia Department take into consideration the financial and managerial resources and future prospects of the prospective acquiring company and the institution involved. This includes consideration of the competence, experience and integrity of the officers, directors and principal -66- <PAGE> shareholders of the acquiring company and savings institution. In addition, the OTS and the Georgia Department consider the effect of the acquisition on the institution, the insurance risk to the Savings Association Insurance Fund ("SAIF") and the convenience and needs of the community to be served. The OTS may not approve an acquisition that would result in the formation of certain types of interstate holding company networks. The OTS is precluded from approving an acquisition that would result in the formation of a multiple holding company controlling institutions in more than one state unless the acquiring company or one of its savings institution subsidiaries is authorized to acquire control of an institution or to operate an office in the additional state pursuant to a supervisory acquisition authorized under Section 13(k) of the Federal Deposit Insurance Act or unless the statutes of the state in which the institution to be acquired is located permits such an acquisition. Savings and loan holding companies are allowed to acquire or to retain as much as 5% of the voting shares of a savings institution or savings and loan holding company without regulatory approval. Bank Regulation General. The Savings Bank is a federal savings bank organized under the laws of the United States subject to examination by the OTS. The OTS regulates all areas of the Savings Bank's banking operations including reserves, loans, mergers, payment of dividends, interest rates, establishment of branches, and other aspects of operations. OTS regulations generally provide that federal savings banks must be examined no less frequently than every 12 months, unless the federal savings bank (i) has assets of less than $250 million; (ii) is well capitalized; (iii) was found to be well managed and its composite condition was found to be outstanding (or good, if the bank had total assets of not more than $100,000) during its last examination; (iv) is not subject to a formal enforcement proceeding or an order from the Federal Deposit Insurance Corporation ("FDIC") or another banking agency; and (v) has not undergone a change of control during the previous 12-month period. Federal savings banks must be examined no less frequently than every 18 months. The Savings Bank also is subject to assessments by the OTS to cover the costs of such examinations. The Savings Bank is also insured and regulated by the FDIC. The major functions of the FDIC with respect to insured federal savings banks include paying depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claims of depositors and preventing the continuance or development of unsound and unsafe banking practices. Subsidiary institutions of a savings and loan holding company, such as the Savings Bank, are subject to certain restrictions imposed by the Federal Reserve Act on any extension of credit to the holding company or any of its subsidiaries, on investment in the stock or other securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower. In addition, a holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit or provision of any property or services. Capital Requirements. OTS regulations require that federal savings banks maintain (i) "tangible capital" in an amount of not less than 1.5% of total assets, (ii) "core capital" in an amount not less than 3.0% of total assets, and (iii) a level of risk-based capital equal to 8% of risk- weighted assets. Under OTS regulations, the term "core capital" generally includes common stockholders' equity, noncumulative perpetual preferred stock and related surplus, and minority interests in the equity accounts of consolidated subsidiaries less unidentifiable intangible assets (other -67- <PAGE> than certain amounts of supervisory goodwill) and certain investments in certain subsidiaries plus 90% of the fair market value of readily marketable purchased mortgage servicing rights ("PMSRs") and purchased credit card relationships (subject to certain conditions). "Tangible capital" generally is defined as core capital minus intangible assets and investments in certain subsidiaries, except PMSRs. In determining total risk-weighted assets for purposes of the risk- based requirement, (i) each off-balance sheet asset must be converted to its on-balance sheet credit equivalent amount by multiplying the face amount of each such item by a credit conversion factor ranging from 0% to 100% (depending upon the nature of the asset), (ii) the credit equivalent amount of each off-balance sheet asset and each on-balance sheet asset must be multiplied by a risk factor ranging from 0% to 200% (again depending upon the nature of the asset) and (iii) the resulting amounts are added together and constitute total risk-weighted assets. "Total capital," for purposes of the risk-based capital requirement equals the sum of core capital plus supplementary capital (which, as defined, includes the sum of, among other items, perpetual preferred stock not counted as core capital, limited life preferred stock, subordinated debt, and general loan and lease loss allowances up to 1.25% of risk-weighted assets) less certain deductions. The amount of supplementary capital that may be counted towards satisfaction of the total capital requirement may not exceed 100% of core capital, and OTS regulations require the maintenance of a minimum ratio of core capital to total risk-weighted assets of 4%. OTS regulations have been amended to include an interest-rate risk component to the risk-based capital requirement. Under this regulation, an institution is considered to have excess interest rate-risk if, based upon a 200-basis point change in market interest rates, the market value of an institution's capital changes by more than 2%. This new requirement is not expected to have any material effect on the ability of the Savings Bank to meet the risk-based capital requirement. The OTS also revised its risk- based capital standards to ensure that its standards provide adequately for concentration of credit risk, risk from nontraditional activities and actual performance and expected risk of loss on multi-family mortgages. Capital requirements higher than the generally applicable minimum requirement may be established for a particular savings association if the OTS determines that the institution's capital was or may become inadequate in view of its particular circumstances. Additionally, the Georgia Department requires that savings and loan holding companies, such as the Company, must maintain a 5% Tier 1 leverage ratio on a consolidated basis. Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Act") imposes a regulatory matrix which requires the federal banking agencies, which include the OTS, the FDIC, the Office of the Comptroller of Currency (the "OCC"), and the Federal Reserve Board, to take prompt corrective action to deal with depository institutions that fail to meet their minimum capital requirements or are otherwise in a troubled condition. The prompt corrective action provisions require undercapitalized institutions to become subject to an increasingly stringent array of restrictions, requirements and prohibitions, as their capital levels deteriorate and supervisory problems mount. Should these corrective measures prove unsuccessful in recapitalizing the institution and correcting its problems, the FDIC Act mandates that the institution be placed in receivership. Pursuant to regulations promulgated under the FDIC Act, the corrective actions that the banking agencies either must or may take are tied primarily to an institution's capital levels. In -68- <PAGE> accordance with the framework adopted by the FDIC Act, the banking agencies have developed a classification system, pursuant to which all banks and thrifts will be placed into one of five categories: well-capitalized institutions, adequately capitalized institutions, undercapitalized institutions, significantly undercapitalized institutions and critically undercapitalized institutions. The capital thresholds established for each of the categories are as follows: <TABLE> <CAPTION> ================================================================================ Tier 1 Tier 1 Risk-Based Risk-Based Capital Category Capital Capital Capital Other - -------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Well-Capitalized 5% or more 10% or more 6% or more Not subject to a capital directive - -------------------------------------------------------------------------------- Adequately Capitalized 4% or more 8% or more 4% or more --- - -------------------------------------------------------------------------------- Undercapitalized less than less than 8% less than 4% --- 4% - -------------------------------------------------------------------------------- Significantly less than less than 6% less than 3% --- Undercapitalized 3% - -------------------------------------------------------------------------------- Critically Undercapitalized 2% or --- --- --- less tangible equity ================================================================================ </TABLE> The undercapitalized, significantly undercapitalized and critically undercapitalized categories overlap; therefore, a critically undercapitalized institution would also be an undercapitalized institution and a significantly undercapitalized institution. This overlap ensures that the remedies and restrictions prescribed for undercapitalized institutions will also apply to institutions in the lowest two categories. The down-grading of an institution's category is automatic in two situations: (i) whenever an otherwise well-capitalized institution is subject to any written capital order or directive, and (ii) where an undercapitalized institution fails to submit or implement a capital restoration plan or has its plan disapproved. The federal banking agencies may treat institutions in the well-capitalized, adequately capitalized and undercapitalized categories as if they were in the next lower capital level based on safety and soundness considerations relating to factors other than capital levels. The FDIC Act prohibits all insured institutions regardless of their level of capitalization from paying any dividend or making any other kind of capital distribution or paying any management fee to any controlling person if following the payment or distribution the institution would be undercapitalized. While the prompt corrective action provisions of the FDIC Act contain no requirements or restrictions aimed specifically at adequately capitalized institutions, other provisions of the FDIC Act and the agencies' regulations relating to deposit insurance assessments, brokered deposits and interbank liabilities treat adequately capitalized institutions less favorably than those that are well-capitalized. A depository institution that is not well capitalized is prohibited from accepting deposits through a deposit broker. However, an adequately capitalized institution can apply for a waiver to accept brokered deposits. Institutions that receive a waiver are subject to limits on the rates of interest they may pay on brokered deposits. -69- <PAGE> Capital Distributions. An OTS rule imposes limitations on all capital --------------------- distributions by savings associations (including dividends, stock repurchases and cash-out mergers). Under the current rule, a savings association is classified based on its level of regulatory capital both before and after giving effect to a proposed capital distribution. Under a proposed rule, the OTS would conform its three classifications to the five capital classifications set forth under the prompt corrective action regulations. Under the proposal, institutions that are at least adequately capitalized would still be required to provide prior notice. Well capitalized institutions could make capital distributions without prior regulatory approval in specified amounts in any calendar year. An institution that both before and after a proposed capital distribution has net capital equal to or in excess of its capital requirements may, subject to any otherwise applicable statutory or regulatory requirements or agreements entered into with the regulators, make capital distributions in any calendar year up to 100% of its net income to date during the calendar year plus the amount that would reduce by one-half its "surplus capital ratio" (i.e., the percentage by which the association's capital-to-assets ratio exceeds the ratio of its fully phased-in capital requirement to its assets) at the beginning of the calendar year. No regulatory approval of the capital distribution is required, but prior notice must be given to the OTS. An institution that either before or after a proposed capital distribution fails to meet its then applicable minimum capital requirement or that has been notified that it needs more than normal supervision may not make any capital distributions without the prior written approval of the OTS. In addition, the OTS may prohibit a proposed capital distribution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafe or unsound practice. Liquidity. Under applicable federal regulations, savings associations --------- are required to maintain an average daily balance of liquid assets (including cash, certain time deposits, certain bankers' acceptances, certain corporate debt securities and highly rated commercial paper, securities of certain mutual funds and specified United States government, state or federal agency obligations) equal to a monthly average of not less than a specified percentage of the average daily balance of the savings association's net withdrawable deposits plus short-term borrowings. Under HOLA, this liquidity requirement may be changed from time to time by the OTS to any amount within the range of 4% to 10% depending upon economic conditions and the deposit flows of member institutions, and currently is 5%. Savings institutions also are required to maintain an average daily balance of short-term liquid assets at a specified percentage (currently 1%) of the total of the average daily balance of its net withdrawable deposits and short-term borrowings. Equity Investments. The OTS has revised its risk-based capital regulation to modify the treatment of certain equity investments and to clarify the treatment of other equity investments. Equity investments that are permissible for both savings banks and national banks will no longer be deducted from savings associations' calculations of total capital over a five-year period. Instead, permissible equity investments will be placed in the 100% risk-weight category, mirroring the capital treatment prescribed for those investments when made by national banks under the regulations of the OCC. Equity investments held by savings associations that are not permissible for national banks must still be deducted from assets and total capital. -70- <PAGE> Qualified Thrift Lender Requirement. A federal savings bank is deemed to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift investments" equal or exceed 65% of its "portfolio assets" on a monthly average basis in nine out of every 12 months. Qualified thrift investments generally consist of (i) various housing related loans and investments (such as residential construction and mortgage loans, home improvement loans, mobile home loans, home equity loans and mortgage-backed securities), (ii) certain obligations of the FDIC and (iii) shares of stock issued by any FHLB, the FHLMC or the FNMA. In addition, the following assets may be categorized as qualified thrift investments in an amount not to exceed 20% in the aggregate of portfolio assets: (i) 50% of the dollar amount of residential mortgage loans originated and sold within 90 days of origination; (ii) investments in securities of a service corporation that derives at least 80% of its income from residential housing finance; (iii) 200% of loans and investments made to acquire, develop or construct starter homes or homes in credit needy areas (subject to certain conditions); (iv) loans for the purchase or construction of churches, schools, nursing homes and hospitals; and (v) consumer loans (in an amount up to 20% of portfolio assets). For purposes of the QTL test, the term "portfolio assets" means the savings institution's total assets minus goodwill and other intangible assets, the value of property used by the savings institution to conduct its business, and liquid assets held by the savings institution in an amount up to 20% of its total assets. OTS regulations provide that any savings association that fails to meet the definition of a QTL must either convert to a national bank charter or limit its future investments and activities (including branching and payments of dividends) to those permitted for both savings associations and national banks. Further, within one year of the loss of QTL status, a holding company of a savings association that does not convert to a bank charter must register as a bank holding company and will be subject to all statutes applicable to bank holding companies. In order to exercise the powers granted to federally chartered savings associations and maintain full access to FHLB advances, the Savings Bank must meet the definition of a QTL. Loans to One Borrower Limitations. HOLA generally requires savings associations to comply with the loans to one borrower limitations applicable to national banks. National banks generally may make loans to a single borrower in amounts up to 15% of their unimpaired capital and surplus, plus an additional 10% of capital and surplus for loans secured by readily marketable collateral. HOLA provides exceptions under which a savings association may make loans to one borrower in excess of the generally applicable national bank limits. A savings association may make loans to one borrower in excess of such limits under one of the following circumstances: (i) for any purpose, in any amount not to exceed $500,000; or (ii) to develop domestic residential housing units, in an amount not to exceed the lesser of $30 million or 30% of the savings association's unimpaired capital and unimpaired surplus, provided other conditions are satisfied. The Federal Institutions Reform, Recovery, and Enforcement Act of 1989 provided that a savings association could make loans to one borrower to finance the sale of real property acquired in satisfaction of debts previously contracted in good faith in amounts up to 50% of the savings association's unimpaired capital and unimpaired surplus. The OTS, however, has modified this standard by limiting loans to one borrower to finance the sale of real property acquired in satisfaction of debts to 15% of unimpaired capital and surplus. That rule provides, however, that purchase money mortgages received by a savings association to finance the sale of such real property do not constitute "loans" (provided no new funds are advanced and the savings association is not placed in a more detrimental position holding the note than holding the real estate) and, therefore, are not subject to the loans to one borrower limitations. -71- <PAGE> Commercial Real Property Loans. HOLA limits the aggregate amount of commercial real estate loans that a federal savings association may make to an amount not in excess of 400% of the savings association's capital. Community Reinvestment. Under the Community Reinvestment Act (the "CRA") and the implementing OTS regulations, federal savings banks have a continuing and affirmative obligation to help meet the credit needs of its local community, including low and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. The CRA requires the board of directors of financial institutions, such as the Savings Bank, to adopt a CRA statement for each assessment area that, among other things, describes its efforts to help meet community credit needs and the specific types of credit that the institution is willing to extend. The regulations promulgated pursuant to CRA contain three evaluation tests: (i) a lending test which will compare the institution's market share of loans in low- and moderate-income areas to its market share of loans in its entire service area and the percentage of a bank's outstanding loans to low- and moderate-income areas or individuals, (ii) a services test which will evaluate the provision of services that promote the availability of credit to low- and moderate-income areas, and (iii) an investment test, which will evaluate an institution's record of investments in organizations designed to foster community development, small- and minority-owned businesses and affordable housing lending, including state and local government housing or revenue bonds. Fair Lending. Congress and various federal agencies (including, in addition to the bank regulatory agencies, the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice) (collectively the "Federal Agencies") responsible for implementing the nation's fair lending laws have been increasingly concerned that prospective home buyers and other borrowers are experiencing discrimination in their efforts to obtain loans. In recent years, the Department of Justice has filed suit against financial institutions that it determined had discriminated, seeking fines and restitution for borrowers who allegedly suffered from discriminatory practices. Most, if not all, of these suits have been settled (some for substantial sums) without a full adjudication on the merits. On March 8, 1994, the Federal Agencies, in an effort to clarify what constitutes lending discrimination and to specify the factors the agencies will consider in determining if lending discrimination exists, announced a joint policy statement detailing specific discriminatory practices prohibited under the Equal Credit Opportunity Act and the Fair Housing Act. In the policy statement, three methods of proving lending discrimination were identified: (i) overt evidence of discrimination, when a lender blatantly discriminates on a prohibited basis, (ii) evidence of disparate treatment, when a lender treats applicants differently based on a prohibited factor even where there is no showing that the treatment was motivated by prejudice or a conscious intention to discriminate against a person, and (iii) evidence of disparate impact, when a lender applies a practice uniformly to all applicants, but the practice has a discriminatory effect, even where such practices are neutral on their face and are applied equally, unless the practice can be justified on the basis of business necessity. FDIC Insurance Assessments. Federal deposit insurance is required for all federally chartered savings associations. Deposits at the Savings Bank are insured to a maximum of $100,000 for each depositor by Savings Association Insurance Fund (the "SAIF"). As a SAIF-insured institution, the Bank is subject to regulation and supervision by the FDIC, to the extent deemed necessary by the FDIC to ensure the safety and soundness of the SAIF. The FDIC is entitled to have access to reports of examination of the Bank made by the OTS and all reports of condition filed by the Bank with the OTS. The FDIC also may require the Bank to file such additional reports as -72- <PAGE> it determines to be advisable for insurance purposes. Additionally, the FDIC may determine by regulation or order that any specific activity poses a serious threat to the SAIF and that no SAIF member may engage in the activity directly. Insurance premiums are paid in semiannual assessments. Under a risk- based assessment system, the FDIC is required to calculate a savings association's semiannual assessment based on (i) the probability that the insurance fund will incur a loss with respect to the institution (taking into account the institution's asset and liability concentration), (ii) the potential magnitude of any such loss, and (iii) the revenue and reserve needs of the insurance fund. The semiannual assessment imposed on the Savings Bank may be higher depending on the SAIF revenue and expense levels, and the risk classification applied to the Savings Bank. The deposit insurance assessment rate charged to each institution depends on the assessment risk classification assigned to each institution. Under the risk-classification system, each SAIF member is assigned to one of three capital groups: "well capitalized," "adequately capitalized," or "less than adequately capitalized," as such terms are defined under the OTS's prompt corrective action regulation (discussed above), except that "less than adequately capitalized" includes any institution that is not well capitalized or adequately capitalized. Within each capital group, institutions are assigned to one of three supervisory subgroups--"healthy" (institutions that are financially sound with only a few minor weaknesses), "supervisory concern" (institutions with weaknesses which, if not corrected could result in significant deterioration of the institution and increased risk to the SAIF) or "substantial supervisory concern" (institutions that pose a substantial probability of loss to the SAIF unless corrective action is taken). The FDIC will place each institution into one of nine assessment risk classifications based on the institution's capital group and supervisory subgroup classification. Until recently, SAIF premiums had been equivalent to deposit insurance premiums paid by banks on deposits to the Bank Insurance Fund ("BIF"). Deposit insurance premiums were set to facilitate each fund achieving its designated reserve ratios. As each fund achieves its designated reserve ratio, however, the FDIC has the authority to lower the premium assessments for that fund to a rate that would be sufficient to maintain the designated reserve ratio. In August 1995, the FDIC determined that the BIF had achieved its designated reserve ratio and approved lower BIF premium rates for deposit insurance by the BIF for all but the riskiest institutions. On November 14, 1995, the FDIC determined that BIF deposit insurance premiums for well capitalized banks would be further reduced to the then-statutory minimum of $2,000 per institution per year, effective January 1, 1996. Because the SAIF remained significantly below its designated reserve ratio, insurance premiums for assessable SAIF deposits were not reduced in either FDIC action. The current financial condition of the SAIF resulted in the adoption of the Deposit Insurance Funds Act of 1996 ("DIFA"), which was enacted on September 30, 1996 as part of the Omnibus Consolidated Appropriations Act. Under DIFA, a special one-time assessment of 65.7 cents per $100 of assessable SAIF deposits was collected on November 27, 1996 and applied retroactively to SAIF deposits as of March 31, 1995. DIFA provides that special assessments will be deductible under Section 162 of the Internal Revenue Code in the year in which the assessment is paid. After collection of the special assessment, it is expected that the SAIF would achieve its designated reserve ratio and SAIF premium rates would then become the same as BIF rates. DIFA further provides that BIF and SAIF are to be merged, creating the "Deposit Insurance Fund," on January 1, 1999, provided that bank and savings association charters are combined by that date. The Treasury Department is preparing a report to be submitted to Congress by March 31, 1997 on the development -73- <PAGE> of a common charter for all insured depository institutions. See "Supervision and Regulation -Elimination of Federal Savings Charter." DIFA further assesses premiums for Financing Corporation Bond debt service ("FICO"). Beginning January 1, 1997, FICO premiums for BIF and SAIF will be 1.3 and 6.4 basis points, respectively. Full pro rata sharing of FICO will begin no later than January 1, 2000. Effective January 1, 1997, SAIF members will have the same risk-based assessment schedule as BIF members, which is 0 to 27 cents per $100 of deposits. FICO assessments of 1.3 cents for BIF deposits and 6.4 cents per $100 of deposits for SAIF deposits will be added to the BIF-assessable base and SAIF assessable base, respectively, until December 31, 1999. Thereafter, approximately 2.4 cents per $100 of deposits would be added to each regular assessment for all insured depositors, thereby achieving full pro rata FICO sharing. The SAIF-assessable base previously was assessed at a rate of 23 to 31 basis points for the fourth quarter as part of the regular annual deposit insurance assessment. Following the enaction of DIFA, the special assessment was booked as an asset by the FDIC effective October 1, 1996, fully capitalizing SAIF as of that date. Consequently, the proposed regular assessment rate for SAIF-member savings associations has been lowered retroactively to 18 to 27 basis points effective October 1, 1996, which represents the amount necessary to cover FICO obligations. Until January 1, 1997, under the FDIC's interpretation of existing law, FICO payments can be met only from assessments on SAIF-member savings associations. Overpayment of fourth quarter assessments from such institutions, estimated at approximately 1.25 cents per $100 of deposits, will be refunded or credited, with interest, using regular quarterly payment procedures. The federal banking agencies are required to take action to prevent insured institutions from facilitating or encouraging the shifting of SAIF deposits to BIF deposits for purposes of evading the assessments imposed on SAIF-assessable deposits. Insurance of deposits may be terminated by the FDIC after notice and hearing, upon a finding by the FDIC that the savings association has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, rule, regulation, order or condition imposed by, or written agreement with, the FDIC. Additionally, if insurance termination proceedings are initiated against a savings association, the FDIC may temporarily suspend insurance on new deposits received by an institution under certain circumstances. Federal Home Loan Bank System. The FHLB System consists of 12 regional FHLBs, each subject to supervision and regulation by the Federal Housing Finance Board (the "FHFB"). The FHLBs provide a central credit facility for member savings associations. The maximum amount that the FHLB of Atlanta will advance fluctuates from time to time in accordance with changes in policies of the FHFB and the FHLB of Atlanta, and the maximum amount generally is reduced by borrowings from any other source. In addition, the amount of FHLB advances that a savings association may obtain will be restricted in the event the institution fails to constitute a QTL. -74- <PAGE> Federal Reserve System. The Federal Reserve Board has adopted regulations that require savings associations to maintain nonearning reserves against their transaction accounts (primarily NOW and regular checking accounts). These reserves may be used to satisfy liquidity requirements imposed by the OTS. Because required reserves must be maintained in the form of cash or a non-interest-bearing account at a Federal Reserve Bank, the effect of this reserve requirement is to reduce the amount of the Savings Bank's interest-earning assets. Savings institutions also have the authority to borrow from the Federal Reserve "discount window." Federal Reserve Board regulations, however, require savings associations to exhaust all FHLB sources before borrowing from a Federal Reserve bank. Transactions with Affiliates Restrictions. Transactions engaged in by a savings association or one of its subsidiaries with affiliates of the savings association generally are subject to the affiliate transaction restrictions contained in Sections 23A and 23B of the Federal Reserve Act in the same manner and to the same extent as such restrictions apply to transactions engaged in by a member bank or one of its subsidiaries with affiliates of the member bank. Section 23A of the Federal Reserve Act imposes both quantitative and qualitative restrictions on transactions engaged in by a member bank or one of its subsidiaries with an affiliate, while Section 23B of the Federal Reserve Act requires, among other things that all transactions with affiliates be on terms substantially the same, and at least as favorable to the member bank or its subsidiary, as the terms that would apply to, or would be offered in, a comparable transaction with an unaffiliated party. Exemptions from, and waivers of, the provisions of Sections 23A and 23B of the Federal Reserve Act may be granted only by the Federal Reserve Board. The HOLA and OTS regulations promulgated thereunder contain other restrictions on loans and extension of credit to affiliates, and the OTS is authorized to impose additional restrictions on transactions with affiliates if it determines such restrictions are necessary to ensure the safety and soundness of any savings association. Current OTS regulations are similar to Sections 23A and 23B of the Federal Reserve Act. Future Requirements. Statutes and regulations are regularly introduced which contain wide-ranging proposals for altering the structures, regulations and competitive relationships of financial institutions. It cannot be predicted whether or what form any proposed statute or regulation will be adopted or the extent to which the business of the Company and the Savings Bank may be affected by such statute or regulation. Elimination of Federal Savings Association Charter Legislation that would eliminate the federal savings association charter is under discussion. If such legislation is enacted, the Bank would be required to convert its federal savings bank charter to either a national bank charter or to a state depository institution charter. Pending legislation also may provide relief as to recapture of the bad debt deduction for federal tax purposes that otherwise would be applicable if the Savings Bank converted its charter, provided that the Savings Bank meets a proposed residential loan origination requirement. Various legislative proposals also may result in the restructuring of federal regulatory oversight, including, for example, consolidation of the OTS into another agency, or creation of a new Federal banking agency to replace the various such agencies which presently exist. The Savings Bank is unable to predict whether such legislation will be enacted or, if enacted, whether it will contain relief as to bad debt deductions previously taken. -75- <PAGE> TAXATION Federal Taxation General. The Company and the Savings Bank are subject to the generally applicable corporate tax provisions of the Code, and the Savings Bank is subject to certain additional provisions of the Code which apply to thrift and other types of financial institutions. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive discussion of the tax rules applicable to the Company and the Savings Bank. Tax Returns. The Savings Bank files a federal income tax return on the basis of a fiscal year ending on December 31. Consolidated returns have the effect of eliminating intercompany distributions, including dividends, from the computation of consolidated taxable income for the taxable year in which such distributions occur. However, based upon the best interests of the Company, the Savings Bank and its stockholders, and on other conditions, the Company may elect not to file consolidated returns. Bad Debt Reserves. Savings institutions such as the Savings Bank are subject to the taxing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for corporations, as modified by certain provisions specifically applicable to financial or thrift institutions. Income is reported using the accrual method of accounting. The maximum corporate federal income tax rate is 35%. For fiscal years beginning prior to December 31, 1995, thrift institutions that qualified under certain definitional tests and other conditions of the Code were permitted certain favorable provisions regarding their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans (generally loans secured by interests in real property improved or to be improved) under (i) a method based on a percentage of the institution's taxable income, as adjusted (the "percentage of taxable income method") or (ii) a method based on actual loss experience (the "experience method"). In 1996, the Code was amended to repeal the foregoing methods of establishing a bad debt reserve. Effective January 1, 1996, the Savings Bank now computes its bad debt reserves for tax purposes under the rules promulgated pursuant to Code Section 585, which applies to commercial banks. In the years prior to 1996, the Savings Bank obtained bad debt deductions approximating $5.8 million in excess of its financial statement allowance for loan losses for which no provision for federal income tax was made. These amounts were then subject to federal income tax in future years pursuant to the provisions of prior Code Section 593 if they were used for purposes other than to absorb bad debt losses. As of January 1, 1996, approximately $1.0 million of the excess reserve was no longer subject to recapture under any circumstances and approximately $4.8 million of the excess reserve was subject to recapture only if the Savings Bank ceased to operate as a bank pursuant to the provisions of Code Section 585. Minimum Tax. The Code imposes an alternative minimum tax at a rate of 20%. The alternative minimum tax generally applies to a base of regular taxable income plus certain tax preferences ("alternative minimum taxable income" or "AMTI") and is payable to the extent such AMTI is in excess of an exemption amount. The Code provides that an item of tax preference is the excess of the bad debt deduction allowable for a taxable year pursuant to the percentage of taxable income method over the amount allowable under the experience method. Other items of tax preference that constitute AMTI include (a) tax-exempt interest on newly issued (generally, issued -76- <PAGE> on or after August 8, 1986) private activity bonds other than certain qualified bonds and (b) 75% of the excess (if any) of (i) adjusted current earnings as defined in the Code, over (ii) AMTI (determined without regard to this preference and prior to reduction by net operating losses). Net Operating Loss Carryovers. A financial institution may carry back net operating losses ("NOLs") to the preceding three taxable years and forward to the succeeding 15 taxable years. This provision applies to losses incurred in taxable years beginning after 1986. The Savings Bank has no NOL carryforwards for federal income tax purposes. Capital Gains and Corporate Dividends-Received Deduction. Corporate net capital gains are taxed at a maximum rate of 35%. The corporate dividends-received deduction is 80% in the case of dividends received from corporations with which a corporate recipient does not file a consolidated tax return, and corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct only 70% of dividends received or accrued on their behalf. However, a corporation may deduct 100% of dividends from a member of the same affiliated group of corporations. Other Matters. Federal legislation is introduced from time to time that would limit the ability of individuals to deduct interest paid on mortgage loans. Individuals are currently not permitted to deduct interest on consumer loans. Significant increases in tax rates or further restrictions on the deductibility of mortgage interest could adversely affect the Savings Bank. The Savings Bank's federal income tax returns for the tax years ended December 31, 1996, 1995 and 1994 are open under the statute of limitations and are subject to review by the IRS. Georgia Taxation. The Company and the Savings Bank are both subject to Georgia corporate income tax and franchise tax to the extent they are engaged in business in the State of Georgia or have income that is generated in the State of Georgia. For Georgia income tax purposes, savings institutions are presently taxed at a rate equal to 6.0% of income, which is calculated based on federal taxable income, subject to certain adjustments. The State of Georgia also imposes franchise and privilege taxes on savings institutions, which in the case of the Savings Bank do not constitute significant tax items. -77- <PAGE> MANAGEMENT OF THE COMPANY Directors and Executive Officers The Board of Directors is divided into three classes, each of which contains approximately one-third of the Board. The Bylaws of the Company currently authorize nine directors. The directors shall be elected by the stockholders of the Company for staggered three-year terms, or until their successors are elected and qualified. One class of directors, consisting of Gary M. Bullock, Jerry L. Clayton and Dean B. Talley will have a term expiring at the Company's first annual meeting of stockholders; a second class of directors, consisting of Thomas E. Reeve, Jr., Michael P. Steed and Thomas S. Upchurch will have a term of office expiring at the second annual meeting; and a third class of directors, consisting of T. Aubrey Silvey, Gary D. Dorminey and Anna L. Berry, will have a term of office expiring at the third annual meeting. Their names and biographical information are set forth under "Management of the Savings Bank - Directors." The following individuals are executive officers of the Company and hold the offices set forth below opposite their names. Their biographical information is set forth under "Management of the Savings Bank - Directors" and "- Executive Officers Who Are Not Directors." Name Position(s) with the Company ---- ---------------------------- Gary D. Dorminey President and Chief Executive Officer D. Lane Poston Executive Vice President and Chief Operating Officer C. Lynn Gable Chief Financial Officer Anyce C. Fox Senior Vice President The executive officers of the Company are elected annually and hold office until their respective successors have been elected and qualified or until death, retirement, resignation or removal by the Board of Directors. Since the formation of the Company, none of the executive officers, directors or other personnel of the Company has received remuneration from the Company. In the event that any employee of the Savings Bank provides services to the Company, the Company has agreed to reimburse the Savings Bank for any costs related to such services. Information concerning the principal occupations and employment of the directors and officers of the Company during the past five years is set forth under "Management of the Savings Bank - Directors" and "- Executive Officers Who Are Not Directors." Directors and executive officers of the Company initially will not be compensated by the Company but will serve and be compensated by the Savings Bank. The Company does not currently nor does it plan to obtain "key person" insurance on any of its employees. See "Management of the Savings Bank - Executive Compensation." Board Meetings and Committees of the Board of Directors Regular meetings of the Board of Directors of the Company will be held on a quarterly basis, with special meetings being held from time to time as needed. Upon consummation of the Offerings, the Company will have an Executive Committee, Compensation Committee and Audit Committee. The Executive Committee will have the power and authority to act on behalf of the Board of Directors on important matters between scheduled director meetings unless specific Board action is required or unless otherwise restricted by the Company's Articles of Incorporation or Bylaws or by action of its Board of Directors. The Compensation Committee will establish and review executive -78- <PAGE> compensation and administer executive compensation programs. The Audit Committee will recommend to the Board of Directors the independent public accountants to be selected to audit the Company's annual financial statements and to approve any special assignments given to such accountants. The Audit Committee will also review the planned scope of the annual audit, any changes in accounting principles and the effectiveness and efficiency of the Company's internal accounting staff. The Compensation Committee and the Audit Committee will be composed solely of non-employee directors. Benefits 1997 Stock Option Plan. The Board of Directors of the Company intends to adopt the Option Plan and to submit the Option Plan to stockholders at a special or annual meeting of stockholders no earlier than six months after the completion of the Conversion and Reorganization. No options will be awarded under the Option Plan unless stockholder approval is obtained. The Company intends to reserve for future issuance pursuant to the Option Plan a number of authorized shares of Common Stock equal to 10% of the Common Stock issued in the Offerings (or 209,875 shares at the maximum of the Valuation Price Range). Shares issued pursuant to the Option Plan may be authorized but unissued shares or treasury shares repurchased by the Company, or both. The Option Plan will be designed to attract and retain qualified personnel in key positions, provide directors, officers and key employees with a proprietary interest in the Company as an incentive to contribute to the success of the Company and reward such persons for performance and the attainment of targeted goals. The Option Plan will provide for the grant of incentive stock options intended to comply with the requirements of Section 422 of the Code ("incentive stock options") and non-incentive or compensatory stock options (collectively "Awards"). Awards will be granted to directors and key employees of the Savings Bank and/or the Company and any subsidiaries, except that non-employee directors will not be eligible to receive incentive stock options. If shareholder approval is obtained, it is expected that options to acquire shares of Common Stock will be awarded to key employees of the Company or its subsidiaries and directors of the Company or the Savings Bank with an exercise price equal to the fair market value of the Common Stock on the date of the grant. If the Option Plan is submitted for shareholder approval within one year after the consummation of the Conversion and Reorganization, under current OTS regulations, unless the Regional Director of the OTS permits otherwise, no individual member of management may receive more than 25% of the options that may be issued and directors who are not employees may not receive more than 5% of such options individually and more than 30% of such options in the aggregate. No decision has yet been made as to anticipated grants to individuals under the Option Plan. The Option Plan will be administered and interpreted by a committee (the "Committee") of disinterested directors satisfying standards under both Rule 16b-3 under the Exchange Act and Section 162(m) of the Code. The Option Plan will have an indefinite term except that incentive stock options may not be granted more than ten years from its adoption by the Board of Directors. Under the Option Plan, the Committee will determine which directors, officers and key employees will be granted options, whether such options will be incentive or compensatory options, the number of shares subject to each option, the exercise price of each compensatory option, the forms of payment of the exercise price and when such options become exercisable. The per share exercise price of an incentive stock option shall at least equal the fair market value of a share of Common Stock on the date the option is granted. In the event of a merger, consolidation, extraordinary cash or stock dividend, reorganization or other change in corporate structure or tender offer, the number of shares -79- <PAGE> of Common Stock under the Option Plan, the number of shares to which any Award relates and the exercise price per share under any option shall be adjusted to reflect such event. Stock options shall become vested and exercisable in the manner specified by the Committee. However, current OTS regulations require that stock options granted pursuant to a plan approved by shareholders within one year of consummation of a mutual-to-stock conversion not vest at a rate in excess of 20% per year. Stock options are non-transferable except by will or the laws of descent and distribution. Pursuant to the Option Plan, compensatory stock options for 30% of the shares of Common Stock to be reserved for issuance pursuant to the Option Plan will be available for grants to non-employee directors of the Company and the Savings Bank upon approval of the Option Plan by shareholders. The exercise price for such options will be the fair market value of the Common Stock at the date of grant. Each stock option or portion thereof shall be exercisable at any time on or after it vests and is exercisable until ten years after its date of grant or three months after the date on which the optionee's employment terminates. An option will fully vest in the event of the optionee's death or disability. An option granted to directors will be exercisable until ten years after its date of grant. However, if an optionee dies while serving as a non- employee director or within three years following the termination of the optionee's service as a non-employee director as a result of retirement or resignation without having fully exercised his or her options, the optionee's executors, administrators, legatees or distributees of his or her estate shall have the right to exercise such options during the twelve-month period following such death, provided no option will be exercisable within six months after the date of grant or more than ten years from the date it was granted. Pursuant to the Option Plan, stock options for 70% of the shares of Common Stock to be reserved for issuance pursuant to the Option Plan will be available for grant to personnel of the Company and its subsidiaries other than outside directors of the Company and the Savings Bank. Upon receipt of shareholder approval of the Option Plan, the Company plans to grant compensatory stock options for shares of Common Stock to executive officers and other key personnel of the Company and its subsidiaries. The exercise price for such options will be the fair market value of the Common Stock at the date of grant. Grants will be made by the Committee primarily based on performance, although the Committee will be able to consider other factors determined to be relevant in its sole discretion. Under the terms of the Option Plan, no employee of the Company may be granted options for more than 100,000 shares of Common Stock in a given fiscal year. Each stock option or portion thereof shall be exercisable at any time on or after it vests and is exercisable until ten years after its date of grant or three months after the date on which the optionee's employment terminates. An option will fully vest in the event of the optionee's death or disability. Under current provisions of the Code, the federal income tax treatment of incentive stock options and compensatory stock options is different. As to incentive stock options, an optionee who meets certain holding period requirements will not recognize income at the time the option is granted or at the time the option is exercised (although a tax preference item subject to the alternative minimum tax may result upon exercise), and a federal income tax deduction generally will not be available to the Company at any time as a result of such grant or exercise. With respect to compensatory stock options, the difference between the fair market value on the date of exercise and the option exercise price generally will be treated as ordinary income upon exercise, and the Company will be entitled to a deduction in the amount of income so recognized by the optionee. Management Recognition Plan. The Board of Directors of the Company intends to adopt the Recognition Plan for directors and selected officers and employees and to submit such plan to 80 <PAGE> stockholders at a special or annual meeting of stockholders no earlier than six months after the completion of the Conversion and Reorganization. The objective of the Recognition Plan will be to enable the Company to provide directors, officers and employees of the Company and the Savings Bank with a proprietary interest in the Company as an incentive to contribute to its success. The Recognition Plan will be administered by the same committee that administers the Option Plan. A number of shares equal to 4.0% of the Common Stock (73,000 shares, based on the sale of 1,825,000 shares will be reserved under the Recognition Plan). Shares of Common Stock granted pursuant to the Recognition Plan generally will be in the form of restricted stock that vests over a period specified by the Committee and will be issued at no cost to the recipient. For accounting purposes, compensation expense in the amount of the fair market value of the Common Stock at the date of the grant to the recipient will be recognized pro rata over the number of years during which the shares vest. The shares, while restricted, may not be sold, pledged or otherwise disposed of. If a recipient terminates employment for reasons other than death or disability, the recipient will forfeit all rights to the shares under restriction. If the recipient's termination is caused by death or disability, all restrictions will expire and all allocated shares will become unrestricted. Common Stock required for distribution pursuant to the Recognition Plan will be issued from authorized but unissued shares or from treasury shares repurchased by the Company, or both. The Board of Directors of the Company may terminate the Recognition Plan at any time. Under current OTS regulations, if the Recognition Plan is submitted for shareholder approval within one year after the consummation of the Conversion and Reorganization, unless the Regional Director of the OTS permits otherwise, no individual member of management may receive more than 25% of the shares which may be issued pursuant to a stock plan and directors who are not employees may not receive more than 5% of such shares individually and more than 30% of such shares in the aggregate. If the Recognition Plan is submitted for shareholder approval within one year after the consummation of the Conversion and Reorganization, shares granted pursuant to the Recognition Plan will vest at the rate of 20% per year over the five years following the date of grant. Recipients of grants under the Recognition Plan will not be required to make any payment at the time of grant or when the underlying shares of Common Stock become vested. Upon receipt of stockholder approval of the Recognition Plan, the Company anticipates granting stock awards for shares of Common Stock to directors, executive officers and other key personnel. A total of 70% of the Common Stock to be issued pursuant to the Recognition Plan will be available for the award of shares of Common Stock to executive officers and key employees of the Savings Bank. It is currently anticipated that stock awards will be made to officers and key personnel by the committee primarily based on performance, although the committee will be able to consider other factors determined to be relevant in its sole discretion. In addition, pursuant to the Recognition Plan, 30% of the shares of Common Stock authorized to be awarded by the Recognition Plan will be available to be awarded to outside directors of the Company. It is currently anticipated that stock awards will be granted to each of the non- employee directors. All of the stock awards will be granted at no cost to the recipients. No decision has yet been made as to anticipated grants to individuals under the Recognition Plan. See "Risk Factors - Possible Dilutive Effect of Issuance of Additional Shares" and "Management of the Company - Benefits." 81 <PAGE> Employee Stock Ownership Plan The Company will establish an Employee Stock Ownership Plan for employees age 21 or older who have at least one year of credited service with the Savings Bank or any affiliate (including years of service with the mutual predecessor of the Savings Bank). The ESOP will be funded by the Company, the Savings Bank and any other adopting affiliate with contributions made in cash (which primarily will be invested in Common Stock) or Common Stock. Benefits may be paid either in shares of Common Stock or in cash. It is anticipated that the ESOP will borrow funds which are sufficient to purchase 8% of the Common Stock issued in the Offerings or 167,900 shares, based on the issuance of the maximum 2,098,750 shares in the Offerings. The ESOP plans to obtain a loan from the Company which will permit the ESOP to purchase such shares. The initial interest rate on the loan is expected to equal the prime rate, which is currently 8.25%. The Savings Bank will make scheduled discretionary cash contributions to the ESOP sufficient to amortize the principal and interest on the loan, which is anticipated to have a maturity of five years. The Savings Bank may, in any plan year, make additional discretionary contributions for the benefit of plan participants in either cash or shares of Common Stock, which may be acquired through the purchase of outstanding shares in the market or from individual stockholders, upon the original issuance of additional shares by the Company or upon the sale of Treasury shares by the Company. Such purchases, if made, would be funded through additional borrowings by the ESOP or additional contributions. The timing, amount and manner of future contributions to the ESOP will be affected by various factors, including prevailing regulatory policies, the requirements of applicable laws and regulations and market conditions. Shares purchased by the ESOP with the proceeds of the loan will be held in a loan suspense account and released on a pro rata basis as debt service payments are made. Discretionary contributions to the ESOP and shares released from the suspense account will be allocated among participants on the basis of compensation. A participant becomes vested in his or her ESOP account upon completing five years of service with the Savings Bank or any affiliate. Forfeitures will be reallocated among remaining participating employees. Benefits may be payable upon retirement or separation from service. The Savings Bank's contributions to the ESOP are not fixed, so benefits payable under the ESOP cannot be estimated. The Savings Bank will administer the ESOP and Lisa Lawson, Thomas E. Reeve, Jr. Steve McCord and Anna L. Berry will act as trustees of the related trust. Under the ESOP, the trustees must vote all allocated shares held in the ESOP in accordance with the instructions of the participating employees, and allocated shares for which employees do not give instructions will be voted generally by the ESOP trustees on any matter as to those shares for which instructions are given. Unallocated shares held in the ESOP will be voted generally by the ESOP trustees. The ESOP will be subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended, the Code and the regulations of the IRS and the Department of Labor promulgated thereunder. 82 <PAGE> MANAGEMENT OF THE SAVINGS BANK Directors The direction and control of the Savings Bank is vested in its Board of Directors. Pursuant to the Bylaws of the Savings Bank, its Board of Directors shall be divided into three classes which are as equal in size as is possible, and one of such classes shall be elected annually by the stockholders of the Savings Bank for three-year terms. The following table sets forth certain information with respect to the persons who currently serve as directors of the Savings Bank. There are no arrangements or understandings between the Savings Bank and any such person pursuant to which such person may be elected a director of the Savings Bank, and no such director is related to any other director or executive officer by blood, marriage or adoption. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Age as of Name and Position(s) December Principal Employment Director Term with the Savings Bank 31, 1996 for the Past Five Years Since Expires - -------------------------------------------------------------------------------- T. Aubrey Silvey 59 Chairman and Chief 1982 1997 Chairman of the Board Executive Officer of Aubrey Silvey Enterprises, an electrical substation contractor Gary D. Dorminey 50 Chief Executive 1990 1997 Chief Executive Officer, Officer, President President and Director and Director of the Savings Bank Anna L. Berry 47 Treasurer of 1996 1997 Director Southwire Company, a major manufacturer of wire products Gary M. Bullock 54 President and Chief 1988 1998 Vice Chairman of the Board Executive Officer of Carroll Electric Membership Corp. Jerry L. Clayton 54 Owner of Clayton 1992 1998 Director Pharmacy Thomas E. Reeve, Jr. 76 Retired Physician 1990 1999 Director Michael P. Steed 52 President and Owner 1990 1999 Director of the Steed Company, a manufacturer of fabric labels Dean B. Talley 54 Physician 1986 1998 Director Thomas S. Upchurch 57 President of Georgia 1991 1999 Director Partnership for Excellence in Education </TABLE> 83 <PAGE> Executive Officers Who Are Not Directors The following table sets forth certain information with respect to the persons who currently serve as executive officers of the Savings Bank and who initially will serve as executive officers of the Company and who are not, and will not be, directors. There are no arrangements or understandings between the Savings Bank and/or the Company and any such person pursuant to which such person was or will be elected an executive officer of the Savings Bank or the Company and no such officer is related to any director or other officer of the Savings Bank or the Company by blood, marriage or adoption. <TABLE> <CAPTION> Name and Position(s) with Age as of Principal Employment the Savings Bank December 31, 1996 for the Past Five Years - -------------------------------------------------------------------------------- <S> <C> <C> D. Lane Poston 47 Executive Vice President and Executive Vice President Chief Operating Officer of the and Chief Operating Savings Bank Officer C. Lynn Gable 44 Chief Financial Officer of the Chief Financial Officer Savings Bank since February 1997; prior thereto, President of Gable Financial Group, Inc. Anyce C. Fox 50 Senior Vice President of the Senior Vice President Savings Bank since 1990. </TABLE> Board Meetings and Committees of the Board of Directors Regular meetings of the Board of Directors of the Savings Bank are held on at least a monthly basis and special meetings of the Board of Directors of the Savings Bank are held from time to time as needed. There were 13 meetings of the Board of Directors of the Savings Bank held during the fiscal year ended on December 31, 1996. No director attended fewer than 75% of the total number of meetings of the Board of Directors of the Savings Bank held during fiscal 1996 and the total number of meetings held by all committees of the Board on which the director served during such year. The Board of Directors of the Savings Bank has established various committees, including an Executive Committee, a Compensation Committee and an Audit Committee. The Executive Committee generally has the power and authority to act on behalf of the Board of Directors on important matters between scheduled director meetings unless specific Board of Directors action is required or unless otherwise restricted by the Savings Bank's charter or bylaws or its Board of Directors. The Executive Committee currently is chaired by T. Aubrey Silvey, with Gary M. Bullock, Gary D. Dorminey and Michael P. Steed as members. The Executive Committee met 40 times during fiscal 1996. The Compensation Committee establishes and reviews executive compensation and administers executive compensation programs. Gary M. Bullock serves as Chairman of the Compensation Committee and Michael P. Steed and Thomas S. Upchurch serve as members. The Compensation Committee met four times during fiscal 1996. 84 <PAGE> The Audit Committee recommends to the Board of Directors the independent public accountants to be selected to audit the Savings Bank's annual financial statements and to approve any special assignments given to such accountants. The Audit Committee also reviews the planned scope of the annual audit, any changes in accounting principles and the effectiveness and efficiency of the Savings Bank's internal accounting staff. Thomas S. Upchurch serves as Chairman of the Audit Committee and Dean B. Talley, Thomas E. Reeve and Anna L. Berry serve as members. The Audit Committee met four times during fiscal 1996. Other Committees In addition to committees of the Board of Directors, the Savings Bank has also established an Asset/Liability Committee, Asset Review Committee, Marketing/Public Relations Committee, Loan Committee, C.R.A. Committee, 401(k) Administrative and Investment Committee and Commercial Loan Committee. These Committees are composed of directors, officers and key personnel of the Savings Bank. Executive Compensation The following table sets forth the compensation paid by the Savings Bank for services rendered in all capacities during the fiscal year ended December 31, 1996 to the Savings Bank's chief executive officer and all other executive officers whose total salary and bonus during such year exceeded $100,000. None of the named executive officers received or held any stock options in 1996. Summary Compensation Table <TABLE> <CAPTION> Other All Name and Principal Annual Long-Term Other Position Year Salary Bonus Compensation(1) Compensation Compensation <S> <C> <C> <C> <C> <C> <C> Gary D. Dorminey 1996 $139,000 $31,650 0 0 0 President and Chief 1995 129,250 42,342 0 0 0 Executive Officer 1994 117,500 24,675 0 0 0 D. Lane Poston 1996 105,000 24,182 0 0 0 Executive Vice 1995 99,500 24,875 0 0 0 President and Chief 1994 95,520 19,830 0 0 0 Operating Officer </TABLE> (1) Does not include amounts attributable to miscellaneous benefits received by executive officers, including automobiles owned by the Savings Bank. The costs to the Savings Bank of providing such benefits to any individual executive officer during any of the years reported did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for the individual. Board Fees Following the Conversion and Reorganization, the directors of the Company will not receive compensation solely for their services as directors of the Company. Each member of the Board of Directors of the Savings Bank is paid a fee of $575 per Board meeting attended, $750 per month for Executive Committee members other than the Chairman ($1,000 per month in the case of the Chairman of the committee) and $200 per meeting for all other committees. 85 <PAGE> Directors' Retirement Plan In December 1995, the Savings Bank initiated a defined contribution post-retirement benefit plan to provide retirement benefits to its directors and to provide death benefits for the designated beneficiary. In connection with the plan's establishment, the Savings Bank purchased a whole life insurance contract on the life of each director and entered into a split dollar arrangement with each director. The increase in cash surrender value of the contract, less the Bank's cost of funds, determines each director's annual benefit. In the event the insurance contract fails to produce positive returns, the Savings Bank has no separate obligation to contribute to the Plan. At December 31, 1996, the cash surrender value of the insurance contract was approximately $969,000. See Note (9) of Notes to Consolidated Financial Statements. Employment Agreements Mr. Dorminey currently has an employment agreement with the Savings Bank that provides him with (a) an annual salary that has been increased annually by the Board of Directors in accordance with the terms of the agreement to the salary shown in "--Executive Compensation--Summary Compensation Table;" (b) an incentive bonus determined each year by the Compensation Committee of the Board of Directors; (c) participation in employee benefit programs maintained for employees of the Savings Bank; (d) reimbursement of the dues and cost of club membership; and (e) use of an automobile. The agreement further provides that in the event of termination following a change in control of the Savings Bank, Mr. Dorminey shall be entitled to a payment equal to the greater of (i) the payments due under the remaining term of the agreement, or (ii) 2.99 times his average annual compensation over the five years preceding such termination. The Savings Bank and the Company (collectively, the "Employer") and Mr. Dorminey have agreed to terminate Mr. Dorminey's current employment agreement as of June 1, 1997 and to replace it with a new agreement with regard to Mr. Dorminey's continued service as President and Chief Executive Officer of the Company and the Savings Bank. During the term of this agreement, Mr. Dorminey will receive (a) an annual salary of $165,000, which is subject to discretionary annual increases by the Savings Bank's Board of Directors; (b) an incentive bonus determined each year by the Compensation Committee of the Savings Bank's Board of Directors based upon the achievement of certain performance criteria to be determined annually by the Board of Directors; (c) benefits under such other programs as are maintained for employees of the Savings Bank or the Company generally; (d) reimbursement for reasonable business expenses, club dues and business-related costs of club memberships; (e) use of an automobile; and (f) such other medical, dental and other healthcare benefits as are extended to other management personnel. The agreement has an initial term of three years and will automatically renew on each day after its effective date so that the term remains a three-year term. Automatic renewal may be terminated by either Mr. Dorminey or the Employer by giving written notice to the other party of such termination, in which event the term will end on the third anniversary of the thirtieth day following the date the written notice is received. If the agreement is terminated by the Employer for cause (as defined in the agreement) or by Mr. Dorminey without good reason (as defined in the agreement), Mr. Dorminey will receive only such salary and bonus amounts as are due and owed to him on the effective date of the termination. If he is terminated without cause or upon permanent disability, or if he terminates his employment with good reason, 60 days' prior written notice of intent to terminate is required and Mr. Dorminey will receive a termination payment equal to his Average Monthly Compensation (as defined below) for the remaining term of the agreement. Average Monthly Compensation means the quotient determined by dividing (a) the greater of (1) Mr. Dorminey's then current base salary, or (2) the average of his base salary and incentive bonus for the most recent three consecutive 12-month periods during which he was employed by the Employer immediately prior to the effective date of the termination that produced the highest average by (b) twelve (12). This payment may be reduced if necessary to comply with certain provisions of the Internal Revenue Code. In addition, Mr. Dorminey has agreed not to engage in the community banking business within a 20- mile radius of any office or facility of the Employer for a period of 36 months following his termination by the Employer for cause or by Mr. Dorminey for good reason or following a change in control of the Employer as defined in the agreement, and not to solicit the Employer's customers or employees within the same geographic area for the same period of time. Messrs. Poston and Gable and Ms. Fox have also entered into employment agreements with the Employer that contain essentially identical terms and conditions, except that the base salaries set forth in such agreements are $115,000, $90,000 and $65,600, respectively. Their employment agreements will become effective as of June 1, 1997. Retirement Plan The Savings Bank has a defined benefit pension plan ("Retirement Plan" ) for all employees who have attained the age of 21 years and have completed one year of service with the Savings Bank In general, the Retirement Plan provides for annual benefits payable monthly upon retirement at age 65 in an amount equal to approximately one percent of the "Average Compensation" of the employee (which is equal to the average of the compensation paid to him or her during the five successive calendar years within the final ten calendar years of service affording the highest average, excluding bonuses, overtime pay and other special compensation) for each year of service, not in excess of 40 years. Under the Retirement Plan, an employee's benefits are fully vested after five years of qualifying service. A year of service is any year in which an employee works a minimum of 1,000 hours. The Retirement Plan provides for an early retirement option with reduced benefits for participants who are 55. 86 <PAGE> The following table illustrates annual pension benefits for retirement at age 65 under various levels of compensation and years of service. The figures in the table assume that the Retirement Plan continues in its present form and that the participants elect a straight life annuity form of benefit. <TABLE> <CAPTION> Five Year Average 10 Years of 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of Compensation Service Service Service Service Service Service - ------------- ----------- ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> $ 40,000 $ 4,000 $ 6,000 $ 8,000 $10,000 $12,000 $14,000 50,000 5,000 7,500 10,000 12,500 15,000 17,500 60,000 6,000 9,000 12,000 15,000 18,000 21,000 70,000 7,000 10,500 14,000 17,500 21,000 24,500 80,000 8,000 12,000 16,000 20,000 24,000 28,000 90,000 9,000 13,500 18,000 22,500 27,000 31,500 100,000 10,000 15,000 20,000 25,000 30,000 35,000 110,000 11,000 16,500 22,000 27,500 33,000 38,500 120,000 12,000 18,000 24,000 30,000 36,000 42,000 130,000 13,000 19,500 26,000 32,500 39,000 45,500 140,000 14,000 21,000 28,000 35,000 42,000 49,000 150,000 15,000 22,500 30,000 37,500 45,000 52,500 160,000 16,000 24,000 32,000 40,000 48,000 56,000 </TABLE> The Savings Bank did not contribute to the Retirement Plan for fiscal 1996. At December 31, 1996, Mr. Dorminey had 8.67 years of credited service under the Retirement Plan and total accrued funds in the Retirement Plan of $6,721, and Mr. Poston had 5.58 years of credited service under the Retirement Plan and total accrued funds in the Retirement Plan of $5,289. The Savings Bank will continue to maintain the Retirement Plan following the Conversion and Reorganization. 401(k) Plan The Savings Bank maintains a 401(k) retirement savings plan (the "401(k) Plan") for employees who satisfy minimum age and service requirements and makes matching contributions to this plan equal to 50% of an eligible employee's salary deferrals (not in excess of 10% of his or her compensation). Under the 401(k) Plan, each employee may elect to reduce his or her current gross salary by up to 15% of his or her compensation, not to exceed certain limits specified in the Code, and have the amount of the reduction contributed to the 401(k) Plan. Upon termination of employment, a participant may elect to receive a lump sum distribution. Indebtedness of Management As a result of FIRREA's application of Section 22(h) of the Federal Reserve Act to savings institutions, any credit extended by a savings association, such as the Savings Bank to its executive officers, directors and, to the extent otherwise permitted, principal stockholder(s), or any related interest of the foregoing, must be (i) on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the savings association with non- affiliated parties and (ii) not involve more than the normal risk of repayment or present other unfavorable features. In the normal course of business, the Savings Bank makes loans to directors, -87- <PAGE> officers and employees on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with others. -88- <PAGE> THE CONVERSION AND REORGANIZATION The Boards of Directors of the Mutual Holding Company, the Savings Bank and the Company have approved the Plan of Conversion, as has the OTS, subject to approval by the Members of the Mutual Holding Company entitled to vote on the matter and the Mutual Holding Company, as the sole shareholder of the Savings Bank, and the satisfaction of certain other conditions. Such OTS approval, however, does not constitute a recommendation or endorsement of the Plan by such agency. General The Boards of Directors of the Mutual Holding Company and the Savings Bank unanimously adopted the Plan on February 11, 1997. The Plan has been approved by the OTS, subject to, among other things, approval of the Plan by the Members and by the Mutual Holding Company, as the sole stockholder of the Savings Bank. The Members Meeting and the Stockholders Meeting have been called for this purpose on _____________, 1997. The following is a brief summary of pertinent aspects of the Plan and the Conversion and Reorganization. The summary is qualified in its entirety by reference to the provisions of the Plan, which is available for inspection at the office of the Savings Bank and at the offices of the OTS. The Plan also is filed as an exhibit to the Registration Statement of which this Prospectus is a part, copies of which may be obtained from the SEC. See "Additional Information." Purposes of the Conversion and Reorganization The Mutual Holding Company, as a federally chartered mutual holding company, does not have stockholders and has no authority to issue capital stock. As a result of the Conversion and Reorganization, the Company will be structured in the form used by holding companies of commercial banks, most business entities and a growing number of savings institutions. The stock holding company form of organization will provide the Company with the ability to diversify the Company's and the Savings Bank's business activities through acquisition of or mergers with both stock savings institutions and commercial banks, as well as other companies. Although there are no current arrangements, understandings or agreements regarding any such opportunities, the Company will be in a position after the Conversion and Reorganization, subject to regulatory limitations and the Company's financial position, to take advantage of any such opportunities that may arise. Management believes it will be in the best interests of the Company, the Savings Bank and the Company's stockholders for the Company to remain an independent company. In their decision to pursue the Conversion and Reorganization, the Mutual Holding Company and the Savings Bank considered various regulatory uncertainties associated with the mutual holding company structure, including the ability to waive dividends in the future as well as the general uncertainty regarding a possible elimination of the federal savings bank charter. The Conversion and Reorganization also will be important to the future growth and performance of the holding company organization by providing a larger capital base to support the operations of the Savings Bank and Company and by enhancing their future access to capital markets, ability to diversify into other financial services related activities, and ability to provide additional services to the public. Although the Savings Bank currently has the ability to raise additional capital through the sale of additional shares of Savings Bank Common Stock, that ability is limited by the -89- <PAGE> mutual holding company structure which, among other things, requires that the Mutual Holding Company hold a majority of the outstanding shares of Savings Bank Common Stock. Therefore, only a minority could be sold to depositors and other members of the public. As a result, the Conversion and Reorganization also will likely result in a larger number of stockholders following the Conversion and Reorganization as compared to the number of outstanding stockholders of Savings Bank Common Stock that would be outstanding if the Savings Bank had determined to pursue a public offering of Savings Bank Common Stock within the mutual holding company structure. The larger number of stockholders will increase the likelihood of the development of an active and liquid trading market for the Common Stock. See "Market for Common Stock." In light of the foregoing, the Boards of Directors of the Savings Bank and the Mutual Holding Company believe that the Conversion and Reorganization is in the best interests of such companies and their respective stockholders and Members. Description of the Conversion and Reorganization On February 11, 1997, the Boards of Directors of the Savings Bank and the Mutual Holding Company adopted the Plan and in March 1997 the Savings Bank incorporated the Company under Georgia law as a first-tier wholly owned subsidiary of the Savings Bank. Pursuant to the Plan, (i) the Mutual Holding Company will convert to Interim Mutual and simultaneously will merge with and into the Savings Bank, pursuant to which the Mutual Holding Company will cease to exist and the shares of Savings Bank Common Stock held by the Mutual Holding Company will be cancelled, and (ii) Interim CFB will then merge with and into the Savings Bank. As a result of the merger of Interim CFB with and into the Savings Bank, the Savings Bank will become a wholly owned subsidiary of the Company operating under the name "Carrollton Federal Bank." -90- <PAGE> The following diagram outlines the current organizational structure and the parties ownership interests: ------------------------------------ CF Mutual Holdings ------------------------------------ | | 100% | ------------------------------------ Carrollton Federal Bank ------------------------------------ | | 100% | ------------------------------------ Community First Banking Company ------------------------------------ | | 100% | ------------------------------------ Interim CFB Savings Bank ------------------------------------ -91- <PAGE> The following diagram reflects the Conversion and Reorganization, including (i) the merger of the mutual Holding Company (following its conversion to Interim Mutual) with and into the Savings Bank, (ii) the merger of Interim CFB with and into the Savings Bank, and (iii) the offering of Common Stock. ------------------------------------ Purchasers of Common Stock ------------------------------------ | | 100% | ------------------------------------ Community First Banking Company ------------------------------------ | | 100% | ------------------------------------ Carrollton Federal Bank ------------------------------------ Pursuant to OTS regulations, consummation of the Conversion and Reorganization (including the offering of Common Stock in the Offerings, as described below) is conditioned upon the approval of the Plan by (1) the OTS, (2) at least a majority of the total number of votes eligible to be cast by members of the Mutual Holding Company at the Members' Meeting, and (3) holders of at least two-thirds of the shares of the outstanding Savings Bank Common Stock at the Stockholders' Meeting. The OTS has conditionally approved the Plan. One hundred percent of the Savings Bank's Common Stock is owned by the Mutual Holding Company and the Mutual Holding Company intends to vote its shares of Savings Bank Common Stock in favor of the Plan at the Stockholders' Meeting. Effects of the Conversion and Reorganization General. Prior to the Conversion and Reorganization, each depositor in the Savings Bank has both a deposit account in the institution and a pro rata ownership interest in the net worth of the Mutual Holding Company based upon the balance in his account, which interest may only be realized in the event of a liquidation of the Mutual Holding Company. However, this ownership interest is tied to the depositor's account and has no tangible market value separate from such deposit account. A depositor who reduces or closes his or her account receives a portion or all of the balance in the account but nothing for his or her ownership interest in the net worth of the Mutual Holding Company, which is lost to the extent that the balance in the account is reduced. Consequently, the depositors of the Savings Bank normally have no way to realize the value of their ownership interest in the Mutual Holding Company, which has realizable value only in the unlikely event that the Mutual Holding Company is liquidated. In such event, the depositors of -92- <PAGE> record at that time, as owners, would share pro rata in any residual surplus and reserves of the Mutual Holding Company after other claims are paid. Upon consummation of the Conversion and Reorganization, permanent nonwithdrawable capital stock will be created to represent the ownership of the net worth of the Company. The Common Stock of the Company is separate and apart from deposit accounts and cannot be and is not insured by the FDIC or any other governmental agency. Certificates are issued to evidence ownership of the permanent stock. The stock certificates are transferable, and therefore the stock may be sold or traded if a purchaser is available with no effect on any account the seller may hold in the Savings Bank. Continuity. While the Conversion and Reorganization is being accomplished, the normal business of the Savings Bank of accepting deposits and making loans will continue without interruption. The Savings Bank will continue to be subject to regulation by the OTS and the FDIC. After the Conversion and Reorganization, the Savings Bank will continue to provide services for depositors and borrowers under current policies by its present management and staff. The directors and officers of the Savings Bank at the time of the Conversion and Reorganization will continue to serve as directors and officers of the Savings Bank after the Conversion and Reorganization. The directors and officers of the Company consist of individuals currently serving as directors and officers of the Mutual Holding Company and the Savings Bank, and they generally will retain their positions in the Company after the Conversion and Reorganization. Effect on Deposit Accounts. Under the Plan, each depositor in the Savings Bank at the time of the Conversion and Reorganization will automatically continue as a depositor after the Conversion and Reorganization, and each such deposit account will remain the same with respect to deposit balance, interest rate and other terms, except to the extent that funds in the account are withdrawn to purchase Common Stock to be issued in the Offerings. Each such account will be insured by the FDIC to the same extent as before the Conversion and Reorganization. Depositors will continue to hold their existing certificates, passbooks and other evidences of their accounts. Effect on Loans. No loan outstanding from the Savings Bank will be affected by the Conversion and Reorganization, and the amount, interest rate, maturity and security for each loan will remain as they were contractually fixed prior to the Conversion and Reorganization. Effect on Voting Rights of Members. At present, all depositors of the Savings Bank and certain borrowers (those having borrowings as of July 19, 1990 that are still in existence) are members of, and have voting rights in, the Mutual Holding Company as to all matters requiring membership action. Upon completion of the Conversion and Reorganization, depositors and such borrowers will cease to be members and will no longer be entitled to vote at meetings of the Mutual Holding Company. Upon completion of the Conversion and Reorganization, all voting rights in the Savings Bank will be vested in the Company as the sole stockholder of the Savings Bank. Exclusive voting rights with respect to the Company will be vested in the holders of Common Stock. Depositors of the Savings Bank will not have voting rights in the Company after the Conversion and Reorganization, except to the extent that they become stockholders of the Company. Tax Effects. Consummation of the Conversion and Reorganization is conditioned on prior receipt by the Primary Parties of rulings or opinions with regard to federal and Georgia income taxation which indicate that the adoption and implementation of the Plan of Conversion set forth -93- <PAGE> herein will not be taxable for federal or Georgia income tax purposes to the Primary Parties or the Savings Bank's Eligible Account Holders, Supplemental Eligible Account Holders or Other Members, except as discussed below. See "- Tax Aspects" below. Effect on Liquidation Rights. Were the Mutual Holding Company to liquidate, all claims of the Mutual Holding Company's creditors would be paid first. Thereafter, if there were any assets remaining, members of the Mutual Holding Company would receive such remaining assets, pro rata, based upon the deposit balances in their deposit accounts at the Savings Bank immediately prior to liquidation. In the unlikely event that the Savings Bank were to liquidate after the Conversion and Reorganization, all claims of creditors (including those of depositors, to the extent of their deposit balances) also would be paid first, followed by distribution of the "liquidation account" to certain depositors (see "-Liquidation Rights" below), with any assets remaining thereafter distributed to the Company as the holder of the Savings Bank's capital stock. Pursuant to the rules and regulations of the OTS, a merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation for this purpose and, in such a transaction, the liquidation account would be required to be assumed by the surviving institution. The Offerings Subscription Offering. In accordance with the Plan of Conversion, rights to subscribe for the purchase of Common Stock have been granted under the Plan of Conversion to the following persons in the following order of descending priority: (1) Eligible Account Holders; (2) the ESOP; (3) Supplemental Eligible Account Holders; and (4) Other Members. All subscriptions received will be subject to the availability of Common Stock after satisfaction of all subscriptions of all persons having prior rights in the Subscription Offering and to the maximum and minimum purchase limitations set forth in the Plan of Conversion and as described below under "- Limitations on Common Stock Purchase." Pursuant to the Plan and OTS policy and regulations, subscription rights will be allocated based on a subscriber's account relationship with the Savings Bank. No person holding subscription rights may exceed any otherwise applicable purchase limitation by submitting multiple orders for Common Stock in the Offerings. Multiple orders are subject to adjustment on a pro rata basis and deposit balances will be divided equally among such orders in allocating shares in the event of an oversubscription. The beneficial owners of individual retirement accounts, Keogh savings accounts and similar retirement accounts shall receive the subscription rights with respect to those deposit accounts. Priority 1: Eligible Account Holders. Each Eligible Account Holder will receive, without payment therefor, first priority, nontransferable subscription rights to subscribe for in the Subscription Offering up to the greater of (i) $482,700 of Common Stock, (ii) one-tenth of one percent (.10%) of the total offering of shares of Common Stock in the Subscription Offering or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Eligible Account Holder's qualifying deposit and the denominator of which is the total amount of qualifying deposits of all Eligible Account Holders, in each case as of the close of business on December 31, 1995 (the "Eligibility Record Date"), subject to the overall purchase limitations. See "- Limitations on Common Stock Purchases." If there are not sufficient shares available to satisfy all subscriptions in this category, shares will first be allocated so as to permit each subscribing Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Thereafter, unallocated shares will be allocated to subscribing Eligible -94- <PAGE> Account Holders whose subscriptions remain unfilled in the proportion that the amounts of their respective eligible deposits bear to the total amount of eligible deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled, provided that no fractional shares shall be issued. If the amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Eligible Account Holders whose subscriptions are not fully satisfied on the same principle described above until all available shares have been allocated or subscriptions satisfied. The subscription rights of Eligible Account Holders who are also directors or executive officers of the Mutual Holding Company or the Savings Bank and their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to increased deposits in the year preceding December 31, 1995. Priority 2: ESOP. The ESOP will receive, without payment therefor, second priority, nontransferable subscription rights to purchase, in the aggregate, up to 10% of the Common Stock, including any increase in the number of shares of Common Stock after the date hereof as a result of an increase of up to 15% in the maximum of the Valuation Price Range. The ESOP intends to purchase 8.0% of the shares of Common Stock, or 167,900 shares based on the maximum of the Valuation Price Range. Subscriptions by the ESOP will not be aggregated with shares of Common Stock purchased directly by or which are otherwise attributable to any other participants in the Subscription and Community Offerings, including subscriptions of any of the Savings Bank's directors, officers, employees or associates thereof. See "Management of the Company - Benefits - Employee Stock Ownership Plan." In the event that the number of shares of Common Stock issued in the Conversion and Reorganization exceeds the number of shares that would be issued at the maximum of the Valuation Price Range (the "Maximum Shares"), the ESOP will have the first priority right to purchase any shares of Common Stock issued in excess of the Maximum Shares (up to an aggregate of 10% of the Common Stock issued in the Conversion, including any shares of Common Stock to be issued in the Conversion and Reorganization as a result of an increase in the Valuation Price Range after commencement of the Subscription Offering and prior to completion of the Conversion and Reorganization). In the event that there is an oversubscription for shares of Common Stock, and as a result, the ESOP is unable to purchase in the Conversion and Reorganization the amounts subscribed for (up to the 10% limitation described above), then, upon receipt of all necessary regulatory approvals, the Boards of Directors of the Company and the Savings Bank shall be authorized to (i) issue additional shares of Common Stock directly to the ESOP at the Purchase Price or (ii) approve the purchase by the ESOP in the open market after the Conversion and Reorganization, of such shares as are necessary for the ESOP to purchase the amounts subscribed for. In making such purchases, the ESOP would use funds contributed by the Company or the Savings Bank and/or borrowed from the Company or an independent financial institution. Purchases of additional shares of Common Stock from the Company would dilute the interest of other stockholders. See "- Limitations on Common Stock Purchases" and "Risk Factors - Possible Dilutive Effect of Issuance of Additional Shares." Priority 3: Supplemental Eligible Account Holders. Each Supplemental Eligible Account Holder will receive, without payment therefor, third priority, nontransferable subscription rights to subscribe for the Subscription Offering up to the greater of (i) $482,700 of Common Stock, (ii) one-tenth of one percent (.10%) of the total offering of shares of Common Stock in the Subscription Offering and (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Supplemental Eligible Account -95- <PAGE> Holder's qualifying deposit and the denominator of which is the total amount of qualifying deposits of all Supplemental Eligible Account Holders, in each case as of the close of business on [March 31], 1997 (the "Supplemental Eligibility Record Date"), subject to the overall purchase limitations. See "- Limitations on Common Stock Purchases." If there are not sufficient shares available to satisfy all subscriptions in this category, shares first will be allocated so as to permit each subscribing Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Thereafter, unallocated shares will be allocated to subscribing Supplemental Eligible Account Holders whose subscriptions remain unfilled in the proportion that the amounts of their respective eligible deposits bear to the total amount of eligible deposits of all such subscribing Supplemental Eligible Account Holders whose subscriptions remain unfilled, provided that no fractional shares shall be issued. If the amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Supplemental Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated or subscriptions satisfied. Priority 4: Other Members. To the extent that there are sufficient shares remaining after satisfaction of subscriptions by Eligible Account Holders, the ESOP and Supplemental Eligible Account Holders, each Other Member will receive, without payment therefor, fourth priority, nontransferable subscription rights to subscribe for Common Stock in the Subscription Offering up to the greater of (i) $482,700 of Common Stock, or (ii) one-tenth of one percent (.10%) of the total offering of shares of Common Stock in the Subscription Offering, subject to the overall purchase limitations. See "- Limitations on Common Stock Purchases." In the event the Other Members subscribe for a number of shares which, when added to the shares subscribed for by Eligible Account Holders, the ESOP and Supplemental Eligible Account Holders, is in excess of the total number of shares of Common Stock offered in the Subscription Offering, shares first will be allocated so as to permit each subscribing Other Member to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Thereafter, any remaining shares will be allocated among subscribing Other Members on a pro rata basis in the same proportion as each Other Member's subscription bears to the total subscriptions of all subscribing Other Members, provided that no fractional shares shall be issued. Expiration Date for the Subscription Offering. The Subscription Offering will expire at 12:00 noon, Eastern Time, on [June 17], 1997, unless extended by the Primary Parties for up to 45 days or, with the approval of the OTS, for additional periods by the Primary Parties. Such extension may not be beyond [June 16,] 1999. Subscription rights which have not been exercised prior to the Expiration Date will become void. The Primary Parties will not execute orders until at least the minimum number of shares of Common Stock (25 shares) have been subscribed for or otherwise sold. If all shares have not been subscribed for or sold within 45 days after the Expiration Date, unless such period is extended with the consent of the OTS, all funds delivered to the Savings Bank pursuant to the Subscription Offering will be returned promptly to the subscribers with interest and all withdrawal authorizations will be cancelled. If an extension beyond the 45-day period following the Expiration Date is granted, the Primary Parties will notify subscribers of the extension of time and of any rights of subscribers to modify or rescind their subscriptions. -96- <PAGE> Community Offering. To the extent that shares remain available for purchase after satisfaction of all subscriptions of Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders and Other Members, the Primary Parties have determined to offer shares pursuant to the Plan to certain members of the general public, with preference given to natural persons residing in the Local Community (such natural persons referred to as "Preferred Subscribers"). Such persons, together with associates of and persons acting in concert with such persons, may purchase up to $482,700 of Common Stock in the Community Offering. See "- Limitations on Common Stock Purchases." This amount may be increased at the sole discretion of the Primary Parties up to 5% of the total offering of shares in the Subscription Offering. The opportunity to subscribe for shares of Common Stock in the Community Offering category is subject to the right of the Primary Parties, in their sole discretion, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the completion of the Community Offering. If there are not sufficient shares available to fill the orders of Preferred Subscribers after completion of the Subscription and Community Offerings, such stock will be allocated first to each Preferred Subscriber whose order is accepted by the Primary Parties, in an amount equal to the lesser of 100 shares or the number of shares subscribed for by each such Preferred Subscriber, if possible. Thereafter, unallocated shares will be allocated among the Preferred Subscribers whose orders remain unsatisfied in the same proportion that the unfilled subscription of each (up to 2.0% of the total offering) bears to the total unfilled subscriptions of all Preferred Subscribers whose subscription remains unsatisfied. If there are any shares remaining, shares will be allocated to other members of the general public who subscribe in the Community Offering applying the same allocation described above for Preferred Subscribers. The Primary Parties may commence the Community Offering concurrently with, at any time during, or as soon as practicable after the end of the Subscription Offering. The Community Offering may terminate at any time after it is commenced, but must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Primary Parties with the consent of the OTS. Syndicated Community Offering. The Plan provides that, if feasible, all shares of Common Stock not purchased in the Subscription and Community Offerings, if any, may be offered for sale to the general public in a Syndicated Community Offering through a syndicate of registered broker- dealers to be formed or through an underwritten public offering. No person will be permitted to subscribe in the Syndicated Community Offering for more than $482,700 of Common Stock. The maximum amount of Common Stock that may be purchased in the aggregate in the Syndicated Community Offering by any person or entity, together with associates of and persons acting in concert with such person or entity, shall not exceed an aggregate purchase price of $482,700 of Common Stock. This amount may be increased to up to 5% of the total offering of shares in the Subscription Offering, provided that orders for Common Stock in the Syndicated Community Offering will first be filled to a maximum of $482,700 of the total number of shares of Common Stock sold in the Conversion. Thereafter, any remaining shares will be allocated on an equal number of shares basis per order until all orders have been filled. The Primary Parties have the right to reject orders in whole or part in their sole discretion in the Syndicated Community Offering. Neither Trident nor any registered broker-dealer shall have any obligation to take or purchase any shares of Common Stock in the Syndicated Community Offering; however, Trident has agreed to use its best efforts in the sale of shares in the Syndicated Community Offering. -97- <PAGE> In addition to the foregoing, if a syndicate of broker-dealers ("selected dealers") is formed to assist in the Syndicated Community Offering, during the Syndicated Community Offering, selected dealers may only solicit indications of interest from their customers to place orders with the Savings Bank as of a certain date (the "Order Date") for the purchase of shares of Common Stock. When and if Trident and the Savings Bank believe that enough indications and orders have been received in the Offerings to consummate the Conversion and Reorganization, Trident will request, as of the Order Date, selected dealers to submit orders to purchase shares for which they have received indications of interest from their customers. Selected dealers will send confirmations of the orders to such customers on the next business day after the Order Date. Selected dealers will debit the accounts of their customers on a date which will be three business days from the Order Date ("Debit Date"). Customers who authorize selected dealers to debit their brokerage accounts are required to have the funds for payment in their account on but not before the Debit Date. On the next business day following the Debit Date, selected dealers will remit funds to the account that the Savings Bank established for each selected dealer. After payment has been received by the Savings Bank from selected dealers, funds will earn interest at the Savings Bank's passbook savings rate until the consummation of the Conversion and Reorganization. In the event the Conversion and Reorganization are not consummated as described above, funds with interest will be returned promptly to the selected dealers, who, in turn, will promptly credit their customers' brokerage accounts. The Syndicated Community Offering will terminate no more than 45 days following the Expiration date, unless extended by the Primary Parties with the approval of the OTS. See "- Stock Pricing and Number of Shares to be Issued" below for a discussion of rights of subscribers, if any, in the event an extension is granted. Stock Pricing and Number of Shares to be Issued The Plan of Conversion requires that the purchase price of the Common Stock must be based on the appraised pro forma market value of the Company and the Savings Bank, as determined on the basis of an independent valuation. The Primary Parties have retained Ferguson to make such valuation. For its services in making such appraisal and for the preparation of a business plan, Ferguson will receive a maximum fee of $27,500 plus out of pocket expenses not to exceed $5,000. The Primary Parties have agreed to indemnify Ferguson and its employees and affiliates against certain losses (including any losses in connection with claims under the federal securities laws) arising out of its services as appraiser, except where Ferguson's liability results from its negligence or a failure to exercise due diligence or in circumstances in which it had knowledge of certain material facts. The Appraisal has been prepared by Ferguson in reliance upon the information contained in this Prospectus, including the Consolidated Financial Statements. Ferguson also considered the following factors, among others: the present and projected operating results and financial condition of the Primary Parties and the economic and demographic conditions in the Savings Bank's existing market area; certain historical, financial and other information relating to the Savings Bank; a comparative evaluation of the operating and financial statistics of the Savings Bank; a comparative evaluation of the operating and financial statistics of the Savings Bank with those of other similarly situated publicly traded companies located in Georgia and other regions of the United States; the aggregate size of the offering of the Common Stock; the impact of the Conversion and Reorganization on the Savings Bank's net worth and earnings potential; the proposed dividend policy of the Company and the Savings Bank; and the trading market for the securities of comparable companies and general conditions in the market for such securities. -98- <PAGE> On the basis of the foregoing, Ferguson has advised the Primary Parties that in its opinion, the estimated pro forma market value of the Savings Bank and the Company on a combined basis was $36,500,000 as of February 27, 1997. As a result, the Valuation Price Range, from 15% below such value to 15% above such value, is from a minimum of $31,025,000 to a maximum of $41,975,000. The Boards of Directors of the Primary Parties determined that the Common Stock would be sold at $20.00 per share, resulting in a range of 1,551,250 to 2,098,750 shares of Common Stock being offered. The Boards of Directors of the Primary Parties reviewed Ferguson's appraisal report, including the methodology and the assumptions used by Ferguson, and determined that the Valuation Price Range was reasonable and adequate. The Valuation Price Range may be amended with the approval of the OTS, if required, or if necessitated by subsequent developments in the financial condition of any of the Primary Parties or market conditions generally. In the event the Appraisal is updated and changed below $31,025,000 or above $48,271,250 (the maximum of the Valuation Price Range, as increased by 15%), such Appraisal will be filed with the SEC by post-effective amendment. Based upon current market and financial conditions and recent practices and policies of the OTS, in the event the Company receives orders for Common Stock in excess of $41,975,000 (the maximum of the Valuation Price Range), the Company may be required by the OTS to accept all such orders up to $48,271,250 (15% above the maximum of the Valuation Price Range). No assurances, however, can be made that the Company will receive orders for Common Stock in any amount or that, if such orders are received, all such orders will be accepted because the Company's final valuation and number of shares to be issued are subject to the receipt of an updated Appraisal from Ferguson and the approval of such updated Appraisal by the OTS. There is no obligation or understanding on the part of management to take and/or pay for any shares of Common Stock in order to complete the Offerings. Ferguson's valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of Common Stock. Ferguson did not independently verify the Consolidated Financial Statements and other information provided by the Savings Bank, the Company and the Mutual Holding Company, nor did Ferguson value independently the assets or liabilities of the Savings Bank, the Company or the Mutual Holding Company. The valuation considers the Savings Bank and the Mutual Holding Company as going concerns and should not be considered as an indication of the liquidation value of the Savings Bank and the Company. Moreover, because such valuation is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons purchasing Common Stock in the Conversion and Reorganization will thereafter be able to sell such shares at prices at or above the Purchase Price or in the range of the foregoing valuation of the pro forma market value thereof. No sale of shares of Common Stock may be consummated unless prior to such consummation Ferguson confirms that nothing of a material nature has occurred which, taking into account all relevant factors, would cause it to conclude that the Purchase Price is materially incompatible with the estimate of the pro forma market value of the Savings Bank and the Company upon consummation of the Conversion and Reorganization. If such is not the case, a new Valuation Price Range may be set and a new Subscription and Community Offering and/or Syndicated Community Offering may be held or such other action may be taken as the Primary Parties shall determine and the OTS may permit or require. Prior to the completion of the Conversion and Reorganization, the total number of shares of Common Stock to be issued in the Offerings may be increased or decreased to reflect changes in -99- <PAGE> market or financial conditions or to fill the order of the ESOP without a resolicitation of subscribers, provided that the product of the total number of shares times the Purchase Price is not below the minimum or more than 15% above the maximum of the Valuation Price Range (exclusive of a number of shares equal to up to an additional 8.0% of the Common Stock which may be issued to the ESOP out of authorized but unissued shares of Common Stock to the extent such shares are not purchased in the Offerings due to an oversubscription). In the event market or financial conditions change so as to cause the aggregate Purchase Price of the shares to be below the minimum of the Valuation Price Range or more than 15% above the maximum of such range (exclusive of additional shares that may be issued to the ESOP), purchasers will be resolicited (i.e., permitted to continue, modify or rescind their orders, in which case they will need to affirmatively reconfirm their subscriptions prior to the expiration of the resolicitation offering or their subscription funds will be promptly refunded with interest at the Savings Bank's passbook rate of interest). Any change in the Valuation Price Range must be approved by the OTS. An increase in the number of shares of Common Stock, either as a result of an increase in the appraisal of the estimated pro forma market value or due to the purchase by the ESOP of authorized but unissued shares (see "- the Offerings - Subscription Offering" and " - Priority 2: ESOP"), would decrease both a subscriber's ownership interest and the Company's pro forma net income and equity on a per share basis while increasing pro forma net income and equity on an aggregate basis. A decrease in the number of shares of Common Stock would increase both a subscriber's ownership interest and the Company's pro forma net income and equity on a per share basis while decreasing pro forma net income and equity on an aggregate basis. See "Risk Factors - Possible Dilutive Effect of Issuance of Additional Shares" and "Pro Forma Data." The appraisal report of Ferguson has been filed as an exhibit to the Registration Statement and Application for Conversion of which this Prospectus is a part and is available for inspection in the manner set forth under "Additional Information." Persons in Nonqualified States or Foreign Countries The Primary Parties will make reasonable efforts to comply with the securities laws of all states in the United States in which persons entitled to subscribe for stock pursuant to the Plan reside. However, the Primary Parties are not required to offer stock in the Subscription Offering to any person who resides in a foreign country or resides in a state of the United States with respect to which all of the following apply: (a) the number of persons otherwise eligible to subscribe for shares under the Plan who reside in such jurisdiction is small; (b) the granting of subscription rights or the offer or sale of shares of Common Stock to such persons would require any of the Primary Parties or their officers, directors or employees, under the laws of such jurisdiction, to register as a broker, dealer, salesman or selling agent or to register or otherwise qualify its securities for sale in such jurisdiction or to qualify as a foreign corporation or file a consent to service of process in such jurisdiction; and (c) such registration, qualification or filing in the judgment of the Primary Parties would be impracticable or unduly burdensome for reasons of costs or otherwise. Where the number of persons eligible to subscribe for shares in one state is small, the Primary Parties will base their decision as to whether or not to offer the Common Stock in such state on a number of factors, including but not limited to the size of accounts held by account holders in the state, the cost of registering or qualifying the shares or the need to register the Company, its officers, directors or employees as brokers, dealers or salesmen. -100- <PAGE> Limitations on Common Stock Purchases The Plan incudes the following limitations on the number of shares of Common Stock which may be purchased: (1) No less than 25 shares of Common Stock may be purchased, to the extent such shares are available; (2) The ESOP may purchase in the aggregate up to 10% of the shares of Common Stock to be issued in the Offerings, including any additional shares issued in the event of an increase in the Valuation Price Range, although at this time the ESOP intends to purchase only 8.0% of such shares; (3) The maximum amount of Common Stock subscribed for in all categories by any person or entity, together with associates of and persons acting in concert with such person or entity, shall not exceed $482,700. In addition, where more than one person or entity is an owner of a particular deposit account or an obligor of a particular loan account, the orders of such persons pursuant to subscription rights related to such joint accounts collectively may not exceed the maximum purchase limitation; and (4) No more than 28.5% of the total number of shares sold in the Offerings may be purchased by directors and certain specified officers of the Mutual Holding Company and the Savings Bank and their associates in the aggregate, excluding purchases by the ESOP. Subject to any required regulatory approval and the requirements of applicable laws and regulations, but without further approval of the Members or the Mutual Holding Company, as the sole stockholder of the Savings Bank, the overall purchase limitation may be increased up to a maximum of 5% of the total shares of Common Stock to be issued in the Conversion and Reorganization or decreased to not less than 1% of the total shares of Common Stock to be issued at the maximum of the Valuation Price Range, at the discretion of the Primary Parties. If the individual amount is decreased, subscribers' orders for the maximum amount will be adjusted without a resolicitation of such subscribers. In the event of an increase in the total number of shares of Common Stock offered in the Conversion due to an increase in the Valuation Price Range of up to 15% (the "Adjusted Maximum"), the additional shares will be allocated in the following order of priority in accordance with the Plan: (i) to fill the ESOP's subscription of 8.0% of the Adjusted Maximum number of shares; (ii) in the event that there is an oversubscription by Eligible Account Holders, to fill unfulfilled subscriptions of Eligible Account Holders, up to the Adjusted Maximum; (iii) in the event that there is an oversubscription by Supplemental Eligible Account Holders, to fill unfulfilled subscriptions of Supplemental Eligible Account Holders, up to the Adjusted Maximum; (iv) in the event that there is an oversubscription by Other Members, to fill unfulfilled subscriptions of Other Members, up to the Adjusted Maximum; (v) to fill unfulfilled subscriptions by Preferred Subscribers in the Community Offering to the extent possible, up to the Adjusted Maximum; and (vi) to fill unfulfilled subscriptions in the Community Offering other than from Preferred Subscribers, up to the Adjusted Maximum. -101- <PAGE> The term "associate" of a person is defined to mean (i) any corporation or other organization (other than the Primary Parties or a majority-owned subsidiary of the Company or the Savings Bank) of which such person is a director, officer or partner or is directly or indirectly the beneficial owner of 10% or more of any class of equity securities; (ii) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, provided, however, that such term shall not include any tax-qualified employee stock benefit plan of the Primary Parties in which such person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who either has the same home as such person or who is a director or officer of one of the Primary Parties or any of their subsidiaries. The term "resident" as used herein means any person who, on the date designated for that category of subscriber in the Plan, maintained a bona fide residence within the Local Community. To the extent the person is a corporation or other business entity, the principal place of business or headquarters must be within the Local Community. To the extent the person is a personal benefit plan, the circumstances of the beneficiary shall apply with respect to this definition. In the case of all other benefit plans, circumstances of the trustee shall be examined for purposes of this definition. The Savings Bank may utilize deposit or loan records or such other evidence provided to it to make a determination as to whether a person is a bona fide resident of the Local Community. Subscribers in the Community Offering who are natural persons also will have a purchase preference if they were residents of the Local Community. In all cases, however, such determination shall be in the sole discretion of the Savings Bank. The term "acting in concert" means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal, whether or not pursuant to an express agreement, with respect to the purchase, ownership, voting or sale of Common Stock; (ii) a combination or pooling of voting or other interests in the securities of the Company for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. The Company and the Savings Bank may presume that certain persons are acting in concert based upon, among other things, joint account relationships and the fact that such persons have filed joint Schedules 13D with the SEC with respect to other companies. Marketing Arrangements The Primary Parties have engaged Trident as a financial advisor and marketing agent in connection with the offering of the Common Stock, and Trident has agreed to use its best efforts to solicit subscriptions and purchase orders for shares of Common Stock in the Offerings. Trident is a member of the National Association of Securities Dealers, Inc. (the "NASD") and a broker-dealer which is registered with the SEC. Trident is headquartered in Raleigh, North Carolina, and its telephone number is (919) 781-8900. Trident will provide various services, including but not limited to (i) training and educating the Savings Bank's directors, officers and employees regarding the mechanics and regulatory requirements of the stock sales process: (2) providing its employees to staff the Stock Information Center to assist the Savings Bank's customers and internal stock purchasers and to keep records of orders for shares of Common Stock: (3) targeting the Company's sales efforts, including preparation of marketing materials: and (4) assisting in the solicitation of proxies of members for use at the Members' Meeting. Based upon negotiations between the Company and the Savings Bank and Trident concerning fee structure, Trident will receive a management fee of $40,000 and a fee equal to 1.65% of the aggregate dollar amount of capital stock sold by Trident in the Subscription and Community Offerings (excluding the amounts sold to the ESOP, to directors and executive officers of the Savings Bank and to associates of such directors and executive officers). In the event that a selected dealers agreement is entered into in connection with a Syndicated Community Offering, the Savings Bank will pay a fee -102- <PAGE> in an amount to be agreed upon jointly between Trident and the Savings Bank based on the aggregate Purchase Price of Common Stock sold by an NASD member firm pursuant to a selected dealers agreement. Fees to Trident and to any other broker dealer may be deemed to be underwriting fees, and Trident and such broker/dealers may be deemed to be underwriters. Trident will also be reimbursed for its reasonable out-of-pocket expenses including legal fees of which Trident has already received $10,000. No fees will be paid to Trident on subscriptions by any director or executive officer or associates of directors and executive officers or by the ESOP. The Primary Parties have agreed to indemnify Trident for reasonable costs and expenses in connection with certain claims or liabilities, including certain liabilities under the Securities Act for misrepresentations or certain untrue or alleged untrue statements of material fact or the omission or alleged omission of a material facts required to be stated or necessary to make not misleading certain statements contained in this Prospectus. Directors and executive officers of the Primary Parties may participate in the solicitation of offers to purchase Common Stock. Other employees of the Savings Bank may participate in the Offerings in ministerial capacities or providing clerical work in effecting a sales transaction. Such other employees have been instructed not to solicit offers to purchase Common Stock or provide advice regarding the purchase of Common Stock. Questions of prospective purchasers will be directed to executive officers or registered representatives. The Company will rely on Rule 3a4-1 under the Exchange Act, and sales of Common Stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate in the sale of Common Stock. No officer, director or employee of the Primary Parties will be compensated in connection with his or her solicitations or other participation in the Offerings by the payment of commissions or other remuneration based either directly or indirectly on transactions in the Common Stock. Procedure for Purchasing Shares in the Offerings To ensure that each purchaser receives a Prospectus at least 48 hours before the date the Offerings terminate in accordance with Rule 15c2-8 of the Exchange Act, no Prospectus will be mailed any later than five days prior to such date or hand delivered any later than two days prior to such date. Execution of the order form will confirm receipt or delivery of the Prospectus in accordance with Rule 15c2-8. Order forms will only be distributed with a Prospectus. To purchase shares in the Subscription Offering, an executed order form with the required payment for each share subscribed for, or with appropriate authorization for withdrawal from a deposit account at the Savings Bank (which may be given by completing the appropriate blanks in the order form), must be received by the Savings Bank at any of its offices by 12:00 noon, Eastern Time, on the Expiration Date, unless such date is extended. To purchase shares in the Community Offering, an executed order form with the required payment, or appropriate withdrawal authorization, must be received by the Savings Bank at any of its offices prior to the time the Community Offering terminates, which may be at any time after it begins. In addition, the Primary Parties will require a prospective purchaser to execute a certification in connection with any sale of Common Stock and will not accept order forms unless such a certification is executed. Order forms which (i) are not received by such time, (ii) are improperly completed or executed, (iii) are received without full payment (or appropriate withdrawal instructions), or (iv) are submitted by a person whose representations the Primary Parties believe to be false or who they otherwise believe, either alone, or acting in concert with others, is violating, evading or circumventing, or intends to violate, evade or circumvent, the terms and conditions of the Plan, are not required to be accepted. In addition, the Savings Bank will not accept photocopied or facsimiled order forms or order forms unaccompanied by an executed certification form. The Primary Parties have the right to waive or permit the correction of incomplete or improperly executed forms, but do not represent that they will do so. Once received, an executed order form may not be modified, amended or rescinded without the consent of the Primary Parties, unless the -103- <PAGE> Offerings have not been completed within 45 days after the end of the Subscription Offering unless such period has been extended with the consent of the OTS. In order to ensure that Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are properly identified as to their stock purchase priority, depositors as of the close of business on the Eligibility Record Date (December 31, 1995) or the Supplemental Eligibility Record Date (_______________) and depositors and borrowers as of the close of business on the Voting Record Date (______________, 19___) must list on the order form all accounts in which they have an interest, giving all names in each account and the account numbers. Payment for subscriptions may be made (i) in cash if delivered in person at any office of the Savings Bank, (ii) by check or money order or (iii) by authorization of withdrawal from deposit accounts maintained with the Savings Bank. The Primary Parties will not accept payment for shares of Common Stock by wired funds. Funds will be deposited in a segregated account at the Savings Bank and interest will be paid on funds made by cash, check or money order at the Savings Bank's passbook rate of interest from the date payment is received until completion or termination of the Conversion and Reorganization. If payment is made by authorization of withdrawal from deposit accounts, the funds authorized to be withdrawn from a deposit account will continue to accrue interest at the contractual rates until completion or termination of the Conversion and Reorganization, but a hold will be placed on such funds, thereby making them unavailable to the depositor until completion or termination of the Conversion and Reorganization. If a subscriber authorizes the Savings Bank to withdraw the aggregate amount of the purchase price from a deposit account, the Savings Bank will do so as of the effective date of the Conversion and Reorganization. The Savings Bank will waive any applicable penalties for early withdrawal from certificate accounts. If the remaining balance in a certificate account is reduced below the applicable minimum balance requirement at the time that the funds actually are transferred under the authorization, the certificate will be cancelled at the time of the withdrawal without penalty and the remaining balance will earn interest at the passbook rate. The ESOP will not be required to pay for the shares subscribed for at the time it subscribes, but rather may pay for such shares of Common Stock subscribed for by it at the Purchase Price upon consummation of the Offerings, provided that there is in force from the time of its subscription until such time, a loan commitment from an unrelated financial institution or the Company to lend to the ESOP, at such time, the aggregate Purchase Price of the shares for which it subscribed. Owners of self-directed Individual Retirement Accounts ("IRAs") may use the assets of such IRAs to purchase shares of Common Stock in the Offerings, provided that such IRAs are not maintained at the Savings Bank. Persons with IRAs maintained at the Savings Bank must have their accounts transferred to a broker to purchase shares of Common Stock in the Subscription and Community Offerings. In addition, ERISA provisions and IRS regulations require that officers, directors and 10% stockholders who use self-directed IRA funds to purchase shares of Common Stock in the Subscription and Community Offerings make such purchases for the exclusive benefit of the IRAs. Any parties wishing to use IRA funds for stock purchases must visit the Stock Information Center on or before _______________, 1997 so that the necessary forms may be forwarded for execution and returned prior to the Expiration Date. -104- <PAGE> Restrictions on Transfer of Subscription Rights and Shares Pursuant to the rules and regulations of the OTS, no person with subscription rights may transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Such rights may be exercised only by the person to whom they are granted and only for his or her account. Each person exercising such subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. Federal regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase such subscription rights or shares of Common Stock prior to the completion of the Conversion. The Primary Parties will pursue any and all legal and equitable remedies in the event they become aware of the transfer of subscription rights and will not honor orders known by them to involve the transfer of such rights. Liquidation Rights In the unlikely event of a complete liquidation of the Mutual Holding Company in its present mutual form, each depositor of the Savings Bank would receive his or her pro rata share of any assets of the Mutual Holding Company remaining after payment of claims of all creditors. Each depositor's pro rata share of such remaining assets would be in the same proportion as the value of his or her deposit account was to the total value of all deposit accounts in the Savings Bank at the time of liquidation. After the Conversion and Reorganization, each depositor, in the event of a complete liquidation of the Savings Bank, would have a claim as a creditor of the same general priority as the claims of all other general creditors of the Savings Bank. However, except as described below, his or her claim would be solely in the amount of the balance in his or her deposit account plus accrued interest. He or she would not have an interest in the value or assets of the Savings Bank or the Company above that amount. The Plan provides for the establishment, upon the completion of the Conversion and Reorganization, of a special "liquidation account" for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to the Savings Bank's net worth as reflected in its latest balance sheet contained in the final Prospectus utilized in the Offerings. Each Eligible Account Holder and Supplemental Eligible Account Holder, if he or she were to continue to maintain his or her deposit account at the Savings Bank, would be entitled, upon a complete liquidation of the Savings Bank after the Conversion and Reorganization, to an interest in the liquidation account prior to any payment to the Company as the sole stockholder of the Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial interest in such liquidation account for each deposit account, including passbook accounts, transaction accounts such as checking accounts, money market deposit accounts and certificates of deposit, held in the Savings Bank at the close of business on December 31, 1995 or _______________, as the case may be. Each Eligible Account Holder and Supplemental Eligible Account Holder will have a pro rata interest in the total liquidation account for each of his or her deposit accounts based on the proportion that the balance of each such deposit account on the December 31, 1995 Eligibility Record Date (or the _______________ Supplemental Eligibility Record Date, as the case may be) bore to the balance of all deposit accounts in the Savings Bank on such date. -105- <PAGE> If, however, on any annual closing date thereafter, the amount in any deposit account is less than the amount in such deposit account on December 31, 1995 or _______________, as the case may be, or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be distributed to the Company as the sole stockholder of the Savings Bank. Tax Aspects Consummation of the Conversion and Reorganization is expressly conditioned upon prior receipt of either a ruling from the IRS or an opinion of counsel with respect to applicable federal tax laws, and either a ruling from the State of Georgia or an opinion of counsel with respect to Georgia tax laws, concerning certain federal and State of Georgia income tax consequences. Prior to consummation of the Conversion and Reorganization, Powell, Goldstein, Frazer & Murphy LLP will issue an opinion to the Company, the Mutual Holding Company and the Savings Bank to the effect that, for federal and State of Georgia income tax purposes: 1. The merger of the Mutual Holding Company with and into the Savings Bank will qualify as a reorganization pursuant to Section 368(a)(1)(A) of the Code; 2. No gain or loss will be recognized by the Mutual Holding Company or the Savings Bank as a consequence of the merger (except for deferred gain or loss recognized pursuant to Section 1502 of the Code in the event that the Mutual Holding Company consolidated group is not considered to survive as a result of the Conversion and Reorganization and the resulting Company group does not elect to file a consolidated return for federal income tax purposes); 3. The merger of Interim CFB with and into the Savings Bank will be disregarded for federal income tax purposes and will be treated as the transfer of an amount of proceeds received in the Offerings by the Company to the Savings Bank in exchange for Savings Bank Common Stock; 4. No gain or loss will be recognized by the Savings Bank upon receipt of the contributed offering proceeds in exchange for Savings Bank Common Stock; and 5. No gain or loss will be recognized by the Company upon receipt of the offering proceeds in exchange for Company Common Stock. In the opinion of Ferguson, which opinion is not binding on the IRS, the subscription rights do not have any ascertainable value, based on the fact that such rights are acquired by the recipients without cost, are nontransferable and of short duration, and afford the recipients the right only to purchase the Common Stock at a price equal to its estimated fair market value. which will be the same price as the Purchase Price for the unsubscribed shares of Common Stock. If the subscription rights granted to eligible subscribers are deemed to have an ascertainable value, receipt of such rights likely would be taxable only to those eligible subscribers who exercise the subscription rights (either as a capital gain or ordinary income) in an amount equal to such value, and the Primary Parties could -106- <PAGE> recognize gain on such distribution. Eligible subscribers are encouraged to consult with their own tax advisor as to the tax consequences in the event that such subscription rights are deemed to have an ascertainable value. Unlike private rulings, an opinion is not binding on the IRS and the IRS could disagree with conclusions reached therein. In the event of such disagreement, there can be no assurance that the IRS would not prevail in a judicial or administrative proceeding. Delivery of Certificates Certificates representing Common Stock issued in connection with the Offerings will be mailed by the Company's transfer agent to the persons entitled thereto at the addresses of such persons appearing on the stock order form for Common Stock as soon as practicable following consummation of the Conversion and Reorganization. Any certificates returned as undeliverable will be held by the Company until claimed by persons legally entitled thereto or otherwise disposed of in accordance with applicable law. Until certificates for Common Stock are available and delivered to subscribers, subscribers may not be able to sell the shares of Common Stock for which they have subscribed, even though trading of Common Stock may be commenced. Required Approvals Various approvals of the OTS are required in order to consummate the Conversion and Reorganization. The OTS has approved the Plan of Conversion, subject to approval by the Mutual Holding Company's Members and the Mutual Holding Company as the Savings Bank's sole stockholder. In addition, consummation of the Conversion and Reorganization is subject to OTS approval of the Company's application to acquire all of the to-be- outstanding Savings Bank Common Stock and the applications with respect to the merger of the Mutual Holding Company (following its conversion to Interim Mutual) into the Savings Bank and the merger of Interim CFB into the Savings Bank, with the Savings Bank being the surviving entity in both mergers. Applications for these approvals have been filed and are currently pending. There can be no assurances that the requisite OTS approvals will be received in a timely manner, in which event the consummation of the Conversion and Reorganization may be delayed beyond the expiration of the Offerings. Pursuant to OTS regulations, the Plan of Conversion also must be approved by (1) at least a majority of the total number of votes eligible to be cast by Members of the Mutual Holding Company at the Members' Meeting, and (2) holders of at least two-thirds of the outstanding Savings Bank Common Stock at the Stockholders' Meeting. As of the date of this Prospectus, the Mutual Holding Company holds 100% of all outstanding stock of the Savings Bank Common Stock and intends to vote those shares at the Stockholders' Meeting to approve the Plan of Conversion. Certain Restrictions on Purchase or Transfer of Shares after the Conversion and Reorganization All shares of Common Stock purchased in connection with the Conversion and Reorganization by a director or certain specified officers of the Primary Parties identified in the Plan of Conversion will be subject to a restriction that the shares not be sold for a period of one year following the Conversion and Reorganization, except in the event of the death of such director or executive officer or pursuant to a merger or similar transaction approved by the OTS. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and appropriate stop-transfer instructions will be issued to the Company's transfer agent. Any shares of Common Stock issued -107- <PAGE> within this one-year period as a stock dividend, stock split or otherwise with respect to such restricted stock will be subject to the same restrictions. The directors and certain specified officers of the Company will also be subject to the insider trading rules promulgated pursuant to the Exchange Act. Purchases of Common Stock of the Company by directors, certain officers specified in the Plan of Conversion and their associates during the three-year period following completion of the Conversion and Reorganization may be made only through a broker or dealer registered with the SEC, except with the prior written approval of the OTS. This restriction does not apply, however, to negotiated transactions involving more than 1.0% of the Company's outstanding Common Stock or to the purchase of stock pursuant to any tax-qualified employee stock benefit plan, such as the ESOP, or by any non-tax-qualified employee stock benefit plan. Pursuant to OTS regulations, the Company will generally be prohibited from repurchasing any shares of Common Stock within one year following consummation of the Conversion and Reorganization. During the second and third years following consummation of the Conversion and Reorganization, the Company may not repurchase any shares of its Common Stock other than pursuant to (i) an offer to all stockholders on a pro rata basis which is approved by the OTS; (ii) the repurchase of qualifying shares of a director, if any; (iii) purchases in the open market by a tax-qualified or non-tax-qualified employee stock benefit plan in an amount reasonable and appropriate to fund the plan; or (iv) purchases that are part of an open- market program not involving more than 5% of its outstanding capital stock during a 12-month period, if the repurchases do not cause the Savings Bank to become undercapitalized and the Savings Bank provides to the Regional Director of the OTS no later than ten days prior to the commencement of a repurchase program written notice containing a full description of the program to be undertaken and such program is not disapproved by the Regional Director. However, the Regional Director has authority to permit repurchases during the first year following consummation of the Conversion and Reorganization and to permit repurchases in excess of 5% during the second and third years upon the establishment of exceptional circumstances (i.e., where such repurchases would be in the best interests of the institution and its stockholders). Amendment or Termination of the Plan If deemed necessary or desirable by the Board of Directors of the Primary Parties, the Plan may be amended at any time prior to the solicitation of proxies from members and stockholders to vote on the Plan and at any time thereafter with the concurrence of the OTS. Unless the OTS requires otherwise, any amendment to the Plan made after approval by the members and stockholders with OTS concurrence will not necessitate further approval by the members or stockholders. The Plan will terminate if the sale of all of the shares of Common Stock in the Offerings is not completed within 24 months after the date of shareholder approval of the Plan. Before the Plan is approved by the Mutual Holding Company or its members, whichever is earlier, the Plan may be terminated by the Boards of Directors of the Primary Parties without OTS approval. Thereafter, the respective Boards of Directors may terminate the Plan only with OTS approval. CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY Certain provisions of the Company's Articles of Incorporation and Bylaws which deal with matters of corporate governance and rights of shareholders might be deemed to have a potential anti-takeover effect. These provisions provide, among other things, (i) that the Board of Directors -108- <PAGE> of the Company shall be divided into three classes as nearly equal in number as possible and that the members of each class shall be elected for a term of three years, with one class being elected annually; (ii) the authority to issue shares of authorized but unissued Common Stock and Preferred Stock and to establish the terms of any one or more series of Preferred Stock, including voting rights; and (iii) that certain mergers, acquisitions and similar transactions involving the Company must be approved by 80% of the shareholder votes entitled to be cast unless two- thirds of the members of the Board of Directors approves the transaction; (iv) that 80% of the shareholder votes entitled to be cast will be required to remove a director without cause; (v) that 80% of the shareholder votes entitled to be cast will be required to change the number of directors unless two-thirds of the members of the Board of Directors approve the change; (vi) that the Board of Directors may consider factors other than price when evaluating an offer from another party to acquire the Company; and (vii) that 80% of the shareholder votes entitled to be cast will be required to amend the foregoing provisions of the Articles of Incorporation unless two-thirds of the members of the Board of Directors approve the amendment. In addition to the foregoing, and described below the Georgia Business Corporation Act (the "GBCA") generally restricts "business combinations" between the Company or a subsidiary and an "interested shareholder" within the five-year period after the person or entity becomes an interested shareholder. These provisions are described in more detail below. The foregoing provisions of the Articles of Incorporation and Bylaws of the Company and Georgia law could have the effect of discouraging an acquisition of the Company or stock purchases in furtherance of an acquisition, and could accordingly, under certain circumstances, discourage transactions which might otherwise have a favorable effect on the price of the Common Stock. In addition, the employment agreements between the Company and its executive officers provide for certain termination payments in the event of a change in control of the Company. See "Management of the Savings Bank- Consulting Arrangements and Employment Agreements." The foregoing provision may make it more costly for companies or persons to acquire control of the Company. The Board of Directors believes that the provisions described above are prudent and will reduce vulnerability to takeover attempts and certain other transactions that are not negotiated with and approved by the Board of Directors of the Company. The Board of Directors believes that these provisions are in the best interests of the Company and its future shareholders. In the Board of Directors' judgment, the Board of Directors is in the best position to determine the true value of the Company and to negotiate more effectively for what may be in the best interests of its shareholders. Accordingly, the Board of Directors believes that it is in the best interests of the Company and its future shareholders to encourage potential acquirors to negotiate directly with the Board of Directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts. It is also the Board of Directors' view that these provisions should not discourage persons from proposing a merger or other transaction at prices reflective of the true value of the Company and where the transaction is in the best interests of all shareholders. Board of Directors The Articles of Incorporation and Bylaws of the Company require that the Board of Directors be divided into three classes as nearly equal in number as possible and that the members of each class shall be elected for a term of three years and until their successors are elected and qualified, with one class being elected annually. The vote of the holders of at least 80% of the shares entitled -109- <PAGE> to vote is required to change the size of the Board of Directors unless two-thirds of the directors agree to the change. Under the Company's Bylaws, any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the remaining directors, and any director so chosen shall hold office for the remainder of the term to which the director has been elected and until his or her successor is elected and qualified. In addition, the Company's Bylaws provide that any director may be removed for cause by the holders of a majority of the outstanding voting shares of the Company, but may only be removed without cause by the holders of 80% of the outstanding voting shares of the Company. All of these provisions make it more difficult to force an immediate change in the composition of the Board and would therefore render more difficult an attempt to gain control of the Company. Limitations on Liability Section 14-2-202 of the GBCA currently provide that directors (but not officers) of corporations that have adopted a provision in their Articles of Incorporation eliminating their personal liability to the Corporation or its shareholders for monetary damages for breach of duty as a director will not be so liable, except (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) for the payment of certain unlawful dividends and the making of certain stock purchases or redemptions or (iv) for any transaction from which the director derived an improper personal benefit. This provision would absolve directors of personal liability for negligence in the performance of their duties, including gross negligence. It would not permit a director to be exculpated, however, for liability for actions involving conflicts of interest or breaches of the traditional "duty of loyalty" to the Company and its shareholders, and it would not affect the availability of injunctive or other equitable relief as a remedy. The Company's Articles of Incorporation eliminate the personal liability of the directors of the Company to the extent permitted by the GBCA, except that the Articles of Incorporation provide that liability of the Directors will be eliminated for the breach of any duty and have modified subsection (iv) of the GBCA provision described in the preceding paragraph to retain liability only for an improper "material tangible" personal benefit. Should any portion of the Articles of Incorporation be deemed to be unenforceable, the Articles of Incorporation provide that nothing shall limit the enforceability of any other portion of the Articles of Incorporation. Currently the scope of the provision in the Company's Articles of Incorporation limiting the personal liability of directors is uncertain because of the absence of judicial precedent interpreting similar provisions. In addition, the SEC takes the position that similar provisions added to other corporations' charters would not protect those corporations' directors from liability for violations of the federal securities laws. Federal banking regulators also may take the same position with respect to violations of federal banking laws and regulations. The provision limiting the personal liability of the Company's directors does not eliminate or alter the duty of the Company's directors: it merely limits personal liability for monetary damages to the maximum extent now or hereafter permitted by the GBCA. Moreover, it currently applies only to claims against a director arising out of his or her role as a director; it currently does not apply to claims arising out of his or her role as an officer (if he or she is also an officer) or arising out of any other capacity in which he or she serves because Section 14-2-202 of the GBCA does not authorize such a limitation of liability. -110- <PAGE> The provision in the Company's Articles of Incorporation which limits the personal liability of directors is designed to ensure that the ability of the Company's directors to exercise their best business judgment in managing the Company's affairs is not unreasonably impeded by exposure to the potentially high personal costs or other uncertainties of litigation. The nature of the tasks and responsibilities undertaken by directors of publicly-held corporations often require such persons to make difficult judgments of great importance which can expose such persons to personal liability, but from which they will acquire no personal benefit. In recent years, litigation against publicly held corporations and their directors and officers challenging good faith business judgments and involving no allegations of personal wrongdoing has become common. Such litigation regularly involves damage claims in huge amounts which bear no relationship to the amount of compensation received by the directors or officers, particularly in the case of directors who are not employees of the corporation. The expense of such litigation, whether it is well founded or not, can be enormous. The provision of the Articles of Incorporation relating to director liability is intended to reduce in appropriate cases, the risk incident to serving as a director and to enable the Company to elect and retain the persons most qualified to serve as directors. Mergers, Consolidations and Sales of Assets The Company's Articles of Incorporation require the approval of the holders of 80% of the outstanding stock of the Company entitled to vote thereon for mergers or consolidations, and for sales, leases or exchanges of all or substantially all of the Company's assets unless the transaction is approved by two-thirds of the members of the Boards of Directors. This provision could tend to make the acquisition of the Company more difficult to accomplish without the cooperation or favorable recommendation of the Company's Board of Directors. As holder of all of the outstanding Savings Bank Common Stock after consummation of the Conversion and Reorganization, the Company generally will be able to authorize a merger, consolidation or other business combination involving the Savings Bank without the approval of the shareholders of the Company. Business Combinations with Interested Shareholders Section 14-2-1132 of the GBCA imposes certain restrictions on business combinations between the Company and large shareholders. Specifically, the GBCA generally prohibits a "business combination" (as defined in the GBCA, generally including mergers, sales and leases of assets, issuances of securities and similar transactions) between the Company or a subsidiary and an "interested shareholder" (as defined in Section 14-2-1110 of the GBCA, generally the beneficial owner of 10% or more of the Common Stock) within five years after the person or entity becomes an interested shareholder, unless (i) prior to the person or entity becoming an interested shareholder, the business combination or the transaction pursuant to which such person or entity became an interested shareholder shall have been approved by the Company's Board of Directors, (ii) upon consummation of the transaction in which the interested shareholder became such, the interested shareholder holds at least 90% of the Common Stock (excluding "insider") shares held by persons who are both officers and directors and shares held by certain employee benefit plans), or (iii) after the shareholder becomes an interested shareholder, he or she acquires additional shares resulting in ownership of at least 90% of the outstanding Common Stock and obtains the approval of the holders of a majority of the remaining shares, excluding "insider" shares as described above. One of the effects of the Act may be to prevent highly leveraged takeovers, which depend upon obtaining access to the acquired corporation's assets to support or repay acquisition -111- <PAGE> indebtedness and certain coercive acquisition tactics. The Act may prevent any interested shareholder from taking advantage of its position as a substantial, if not controlling, shareholder and engaging in transactions with the Company that may not be fair to the Company's other shareholders or that may otherwise not be in the best interests of the Company, its shareholders and other constituencies. For similar reasons, however, these provisions may make more difficult or discourage an acquisition of the Company, or the acquisition of control of the Company by a principal shareholder, and thus the removal of incumbent management. In addition, to the extent that the Act discourages takeovers that would result in the change of the Company's management, such a change may be less likely to occur. Neither the Savings Bank's Charter and Bylaws nor federal laws and regulations contain a provision which restricts business combinations between the Savings Bank and interested shareholders in the manner set forth in the Act. Fair Price Provisions Under Sections 14-2-1111 and -1112 of the GBCA, business combinations with "interested shareholders" (as defined in Section 14-2-1110 of the GBCA and described in the preceding section of this Prospectus) must meet one of three criteria designed to protect minority shareholders: (i) the transaction must be unanimously approved by the "continuing directors" of the Company (generally directors who serve prior to the time the interested shareholder acquired 10% beneficial ownership of the Company and who are unaffiliated with the interested shareholder); (ii) the transaction must be approved by two-thirds of the continuing directors and a majority of shares held by shareholders other than the interested shareholder; or (iii) the terms of the transaction must meet specified fair pricing criteria and certain other tests that are intended to ensure that all shareholders receive a fair price and equivalent consideration for their shares regardless of when they sell their shares to an acquiring party. This provision is designed to protect shareholders against the inequities of certain tactics that have been used in hostile takeover attempts. For example, in "two-tier" transactions, the acquiring party usually tenders in cash at a substantial premium for a major stock interest in the target corporation. After acquiring this initial interest in the corporation, the acquiring party may acquire total ownership of the corporation by effecting a "freeze-out" merger that forces minority shareholders to receive cash or other consideration for their shares of the acquired corporation. As a result, minority shareholders who do not participate in the initial tender may receive a lower price or less desirable form of consideration than was received by shareholders that tendered. The "fair price" provisions of the GBCA are designed to discourage transactions of this kind and to encourage negotiated acquisitions in which all shareholders will be more likely to receive equal treatment. Dissenters' Rights of Appraisal After the Conversion and Reorganization, the rights of appraisal of dissenting shareholders of the Company will be governed by the GBCA. Pursuant thereto, a shareholder of a Georgia corporation generally, has the right to dissent from any merger or consolidation involving the corporation or the sale of all or substantially all of the corporation's assets, subject to specified procedural requirements. However, no such appraisal rights are available for the shares of any class or series of a corporation's capital stock if (i) as of the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of shareholders to act upon the agreement of merger or consolidation, such shares were either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by -112- <PAGE> the NASD or held of record by more than 2,000 shareholders, or (ii) the corporation is the surviving corporation of a merger and the merger did not require the approval of the corporation's shareholders, unless in either case, the holders of such stock are required by an agreement of merger or consolidation to accept for that stock something other than: (a) shares of stock of the corporation surviving or resulting from the merger or consolidation; (b) shares of stock of any other corporation that, at the effective date of the merger, will be listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the NASD or held of record by more than 2,000 shareholders; (c) cash in lieu of fractional shares of a corporation described in clause (a) or (b) above; or (d) any combination of the shares of stock and cash in lieu of fractional shares described in clauses (a) through (c) above. Amendment of Governing Instruments The Articles of Incorporation of the Company provide that any amendment of the provisions of the Articles of Incorporation or Bylaws: (i) requiring a classified board of directors; (ii) requiring a supermajority vote of the shareholders to change the number of directors of the Company, remove a director without cause or approve a merger or sale of the Company; (iii) eliminating the personal liability of directors; or (iv) allowing the Board to consider factors in addition to price when evaluating acquisition offers requires the affirmative vote of the holders of at least 80% of the issued and outstanding shares of Common Stock unless two-thirds of the Board of Directors approves the amendment. Regulatory Restrictions The Change in Bank Control Act provides that no person, acting directly or indirectly or through or in concert with one or more other persons, may acquire control of a savings institution unless the OTS has been given 60 days' prior written notice. The HOLA provides that no company may acquire "control" of a savings institution without the prior approval of the OTS. Any company that acquires such control becomes a savings institution holding company subject to registration, examination and regulation by the OTS. Pursuant to federal regulations, control of a savings institution is conclusively deemed to have been acquired by, among other things, the acquisition of more than 25% of any class of voting stock of the institution or the ability to control the election of a majority of the directors of an institution. Moreover, control is presumed to have been acquired, subject to rebuttal, upon the acquisition of more than 10% of any class of voting stock, or of more than 25% of any class of stock, of a savings institution where certain enumerated "control factors" are also present in the acquisition. The OTS may prohibit an acquisition if (i) it would result in a monopoly or substantially lessen competition, (ii) the financial condition of the acquiring person might jeopardize the financial stability of the institution, or (iii) the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or of the public to permit the acquisition of control by such person. The foregoing restrictions do not apply to the acquisition of a savings institution's capital stock by one or more tax- qualified employee stock benefit plans of the Company or the Savings Bank, provided that the plan or plans do not have beneficial ownership in the aggregate of more than 25% of any class of equity security of the savings institution. For three years following the Conversion and Reorganization, OTS regulations prohibit any person from acquiring, either directly or indirectly, or making an offer to acquire more than 10% of the stock of any converted savings institution, without the prior written approval of the OTS, except for (i) any offer with a view toward public resale made exclusively to the institution or to underwriters or a selling group acting on its behalf, (ii) offers that if consummated would not result -113- <PAGE> in the acquisition by such person during the preceding 12-month period of more than one percent of such stock, (iii) offers in the aggregate for up to 24.9% by the ESOP or other tax-qualified plans of the Company or the Savings Bank, and (iv) an offer to acquire or acquisition of beneficial ownership of more than 10% of the common stock of the savings institution by a corporation whose ownership is or will be substantially the same as the ownership of the savings institution, provided that the offer or acquisition is made more than one year following the date of completion of the conversion. Such prohibition also is applicable to the acquisition of the Common Stock. In the event that any person, directly or indirectly, violates this regulation, the securities beneficially owned by such person in excess of 10% shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to a vote of shareholders. The definition of beneficial ownership for this regulation extends to persons holding revocable or irrevocable proxies for an institution's stock under circumstances that give rise to a conclusive or rebuttable determination of control under OTS regulations. In addition to the foregoing, the Plan prohibits any person, prior to the completion of the Conversion and Reorganization, from offering, or making an announcement of an intent to make an offer, to purchase subscription rights or Common Stock. See "The Conversion and Reorganization - Restrictions on Transfer of Subscription Rights and Shares." Issuance of Capital Stock Pursuant to applicable laws and regulations, the Mutual Holding Company is required to own not less than a majority of the outstanding Savings Bank Common Stock. There will be no such restriction applicable to the Company following consummation of the Conversion and Reorganization. Neither the Charter of the Savings Bank nor the Articles of Incorporation of the Company contain a restriction on the issuance of shares of capital stock to directors, officers or controlling persons of the Company and the Savings Bank, respectively. Thus, stock-related compensation plans such as stock option plans could be adopted by the Company and the Savings Bank without shareholder approval and shares of Company capital stock and Savings Bank capital stock could be issued directly to directors, officers or controlling persons without shareholder approval. The Bylaws of the NASD, however, generally require corporations with securities which are quoted on the Nasdaq National Market to obtain shareholder approval of most stock compensation plans for directors, officers and key employees of the corporation. Moreover, although generally not required, shareholder approval of stock-related compensation plans may be sought in certain instances in order to qualify such plans for favorable federal income tax and securities law treatment under current laws and regulations. Neither the Articles of Incorporation nor Bylaws of the Company provide for pre-emptive rights to shareholders in connection with the issuance of capital stock. Voting Rights The Articles of Incorporation and Bylaws of the Company do not authorize cumulative voting in elections of directors. Elimination of cumulative voting will help to ensure continuity and stability of the Company's Board of Directors and the policies adopted by it by making it more difficult for the holders of a relatively small amount of the Savings Bank Common Stock to elect their nominees to the Board of Directors and possibly by delaying, deterring or discouraging proxy contests. The Articles of Incorporation of the Company do not specify or limit the circumstances under which separate class voting rights may be provided to a particular class or series of Preferred Stock. -114- <PAGE> DESCRIPTION OF CAPITAL STOCK OF THE COMPANY General The Company is authorized to issue 10,000,000 shares of Common Stock having a par value of $.01 per share and 10,000,000 shares of preferred stock with no par value (the "Preferred Stock"). The Company currently expects to issue up to a maximum of 2,098,750 shares of Common Stock and no shares of Preferred Stock in the Conversion and Reorganization. Each share of the Company's Common Stock will have the same relative rights as and will be identical in all respects with each other share of Common Stock. Upon payment of the Purchase Price for the Common Stock in accordance with the Plan of Conversion, all such stock will be duly authorized, fully paid and nonassessable. The Common Stock of the Company will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the FDIC. Common Stock Dividends. The Company can pay dividends if, as and when declared by its Board of Directors, subject to compliance with limitations which are imposed by law. See "Dividend Policy." The holders of Common Stock of the Company will be entitled to receive and share equally in such dividends as may be declared by the Board of Directors of the Company out of funds legally available therefor. If the Company issues Preferred Stock, the holders thereof may have a priority over the holders of the Common Stock with respect to dividends. Voting Rights. Upon completion of the Conversion and Reorganization, the holders of Common Stock of the Company will possess exclusive voting rights in the Company. They will elect the Company's Board of Directors and act on such other matters as are required to be presented to them under Georgia law or the Company's Articles of Incorporation or as are otherwise presented to them by the Board of Directors. Except as discussed in "Restrictions on Acquisition of the Company," each holder of Common Stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. If the Company issues Preferred Stock, holders of the Preferred Stock may also possess voting rights. Liquidation. In the event of any liquidation, dissolution or winding up of the Company, the holders of its Common Stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of the Company available for distribution. If Preferred Stock is issued, the holders thereof may have a priority over the holders of the Common Stock in the event of liquidation or dissolution. Preemptive Rights. Holders of the Common Stock of the Company will not be entitled to preemptive rights with respect to any shares which may be issued. The Common Stock is not subject to redemption. Preferred Stock None of the shares of the Company's authorized Preferred Stock will be issued in the Conversion and Reorganization. Such stock may be issued with such preferences and designations as the Board of Directors may from time to time determine. The Board of Directors can, without -115- <PAGE> stockholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights which could dilute the voting strength of the holders of the Common Stock and may assist management in impeding an unfriendly takeover or attempted change in control. EXPERTS The audited consolidated financial statements of the Mutual Holding Company at December 31, 1996 and 1995, and for each of the years in the three- year period ended December 31, 1996 included in this Prospectus and elsewhere in the registration statement on Form S-1 filed with the SEC and the Application for Conversion filed with the OTS, have been audited by Porter Keadle Moore LLP, independent public accountants, as indicated in their report with respect thereto, and are included in reliance upon the authority of said firm as experts in giving said reports. Ferguson has consented to the publication herein of the summary of its report to the Company and the Savings Bank setting forth its opinion as to the estimated pro forma market value of the Company and the Savings Bank to be outstanding upon completion of the Conversion and Reorganization and its opinion with respect to subscription rights. LEGAL MATTERS The legality of the Common Stock and the federal and Georgia income tax consequences of the Conversion and Reorganization will be passed upon for the Company, Mutual Holding Company and Carrollton by Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia. Certain legal matters will be passed upon for Trident by Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Greensboro, North Carolina. ADDITIONAL INFORMATION The Company has filed with the SEC a Registration Statement under the Securities Act with respect to the Common Stock offered hereby. As permitted by the rules and regulations of the SEC, this Prospectus does not contain all the information set forth in the Registration Statement. Such information can be examined without charge at the public reference facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can be obtained from the SEC at prescribed rates. In addition, the SEC maintains a World Wide Web site that contains reports, proxy statements, information statements and other information regarding registrants that file electronically with the SEC, including the Company. The address is (http://www.sec.gov.). The statements contained in this Prospectus as to the contents of any contract or other document filed as an exhibit to the Registration Statement are, of necessity, brief descriptions thereof and are not necessarily complete; each such statement is qualified by reference to such contract or document. The Mutual Holding Company has filed an Application for Conversion with the OTS with respect to the Conversion and Reorganization. This Prospectus omits certain information contained in that application. The application may be examined at the principal office of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the Southeast Regional Office of the OTS located at 1475 Peachtree Street, N.E., Atlanta, Georgia 30309. -116- <PAGE> In Connection with the Conversion and Reorganization, the Company will register its Common Stock with the SEC under Section 12(g) of the Exchange Act, and upon such registration, the Company and the holders of its stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting requirements and certain other requirements of the Exchange Act. Under the Plan, the Company has undertaken that it will not terminate such registration for a period of at least three years following the Conversion and Reorganization. A copy of the Articles of Incorporation and the Bylaws of the Company are available without charge from the Company. -117- <PAGE> GLOSSARY Appraisal Independent appraisal prepared by Ferguson & Company dated February 27, 1997 BIF Bank Insurance Fund of the FDIC Code Internal Revenue Code of 1986, as amended Common Stock The common stock, $0.01 par value per share, of Community First Banking Company Community Offering Offering for sale to certain members of the general public of any shares of Common Stock not subscribed for in the Subscription Offering, including the possible offering of Common Stock in a Syndicated Community Offering Company Community First Banking Company, a Georgia corporation Conversion and The conversion of CF Mutual Holdings to stock Reorganization form, the issuance of Carrollton Federal Bank, FSB's outstanding common stock to Community First Banking Company and Community First Banking Company's offer and sale of Common Stock in the Offerings Eligible Account Holders Deposit account holders of Carrollton Federal Bank, FSB with account balances of at least $50 as of the close of business on December 31, 1995 ESOP The Company's Employee Stock Ownership Plan Exchange Act Securities Exchange Act of 1934, as amended Expiration Date 12:00 noon, Eastern Time, on [JUNE 17,] 1997, unless extended FASB Financial Accounting Standards Board FDIC Federal Deposit Insurance Corporation Ferguson Ferguson & Company FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation -118- <PAGE> FNMA Federal National Mortgage Association IRA Individual retirement account or arrangement IRS Internal Revenue Service Local Community Carroll, Coweta, Douglas, Fayette, Haralson, Heard, Henry and Paulding counties within the State of Georgia Members Members of CF Mutual Holdings Members' Meeting Special meeting of members of CF Mutual Holdings called for the purpose of approving the Plan MRP, or Recognition Plan Plan pursuant to which a number of shares up to 4.0% of the Common Stock to be sold in the Offerings will be distributed to directors and selected employees Mutual Holding Company CF Mutual Holdings, a federally chartered mutual holding company NASD National Association of Securities Dealers, Inc. Nasdaq Nasdaq National Market System NII Net interest income NOW account Negotiable order of withdrawal account NPV Net portfolio value Offerings Subscription, Community and Syndicated Community Offerings, collectively Option Plan Stock option plan pursuant to which options to purchase a number of shares of Common Stock up to 10% of the shares to be sold in the Offerings will be issued to directors and selected employees Other Members Depositors of the Savings Bank as of the close of business on ___________, 19___ and borrowers of the Savings Bank as of July 19, 1990 whose borrowings were still in existence as of the close of business on ___________, 1997. Does not include Eligible Account Holders or Supplemental Account Holders. OTS Office of Thrift Supervision -119- <PAGE> Plan, or Plan of Plan between CF Mutual Holdings and Carrollton Conversion Federal Bank, FSB dated as of February 11, 1997, as amended, pursuant to which (i) CF Mutual Holdings will convert to an interim federal stock savings bank and simultaneously merge with and into the Savings Bank, (ii) a second interim savings bank formed by the Company solely for such purpose will then merge into the Savings Bank, (iii) the Savings Bank will issue all of its outstanding capital stock to the Company and become the wholly-owned subsidiary of the Company and (iv) the Company will offer shares of its Common Stock in the Offerings. Primary Parties Community First Banking Company, CF Mutual Holdings and Carrollton Federal Bank, FSB Prospectus This Prospectus and Proxy Statement Purchase Price The $20.00 per share purchase price of the Common Stock QTI Qualified thrift investment QTL Qualified thrift lender Retirement Plan Retirement Plan of Carrollton Federal Bank, FSB SAIF Savings Association Insurance Fund of the FDIC Savings Bank Carrollton Federal Bank, FSB Savings Bank Common Stock The common stock, $0.01 par value per share, of Carrollton Federal Bank, FSB SEC Securities and Exchange Commission Securities Act Securities Act of 1933, as amended SFAS Statement of Financial Accounting Standards adopted by FASB Subscription Offering Offering of non-transferable rights to subscribe for the Common Stock, in order of priority, to Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders and Other Members Supplemental Eligible Depositors, who are not Eligible Account Holders, Account Holders of Carrollton Federal Bank, FSB with account balances of at least $50 on [MARCH 31,] 1997 -120- <PAGE> Syndicated Community Offering of shares of Common Stock remaining after Offering the Subscription Offering and undertaken prior to the end and as part of the Community Offering, and which may, at our discretion be made to the general public on a best efforts basis by a selling group of broker-dealers Trident Trident Securities, Inc. Valuation Price Range Estimated pro forma market value of the Company and the Savings Bank ranging from $31,025,000 to $41,975,000, as it may be amended pursuant to the Plan Voting Record Date The close of business on _____________________, 1997, the date for determining members entitled to vote at the Members' Meeting -121- <PAGE> CF MUTUAL HOLDINGS INDEX TO FINANCIAL STATEMENTS PAGE ---- Independent Auditor's Report...................................... F-2 Financial Statements: Consolidated Balance Sheets as of December 31, 1996 and 1995...... F-3 Consolidated Statements of Earnings for the Years Ended December 31, 1996, 1995 and 1994................................ F-4 Consolidated Statements of Capital for the Years Ended December 31, 1996, 1995 and 1994................................ F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994................................ F-6 Notes to Consolidated Financial Statements........................ F-8 Financial statement schedules are omitted because they are not required or are not applicable, or the required information is shown in the financial statement or notes thereto. Financial statements of Community First Banking Company have not been provided because Community First Banking Company has not conducted any operations to date. <PAGE> [LOGO APPEARS HERE] REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors CF Mutual Holdings We have audited the accompanying consolidated balance sheets of CF Mutual Holdings and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, capital, and cash flows for each of the three years in the period ended December 31, 1996. The consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CF Mutual Holdings and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. PORTER KEADLE MOORE, LLP /s/ Peter Keadle Moore, LLP Successor to the practice of Evans, Porter, Bryan & Co. Atlanta, Georgia February 4, 1997, except for note 15, as to which the date is February 11, 1997 <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 <TABLE> <CAPTION> Assets ------ 1996 1995 ----------- ----------- <S> <C> <C> Cash and due from banks, including reserve requirements of $1,658,000 and $1,050,000 $ 11,061,383 6,947,747 Interest-bearing deposits in financial institutions 3,355,586 9,494,437 Federal funds sold 8,680,000 17,615,000 ----------- ----------- Cash and cash equivalents 23,096,969 34,057,184 Securities available for sale 33,927,243 - Securities held to maturity 7,764,058 10,377,578 Other investments 2,599,741 3,247,341 Mortgage loans held for sale 282,488 3,091,269 Loans, net 269,834,098 270,880,011 Premises and equipment, net 9,288,592 7,365,297 Accrued interest receivable 2,687,472 2,397,423 Other assets 3,050,849 3,061,143 ----------- ----------- $ 352,531,510 334,477,246 =========== =========== Liabilities and Capital ----------------------- Deposits: Noninterest-bearing demand $ 15,903,005 12,055,514 Interest-bearing demand 47,288,356 46,625,670 Savings 34,076,732 31,736,434 Time 163,257,956 155,228,432 Time, over $100,000 47,230,149 43,641,462 ----------- ----------- Total deposits 307,756,198 289,287,512 Federal Home Loan Bank advances 16,295,186 15,595,341 Subordinated debentures 2,000,000 2,000,000 Accrued interest payable and other liabilities 1,222,603 2,564,148 ----------- ----------- Total liabilities 327,273,987 309,447,001 Commitments Capital: Retained earnings 25,278,036 25,030,245 Net unrealized loss on securities available for sale, net of tax (20,513) - ----------- ----------- Total capital 25,257,523 25,030,245 ----------- ----------- $ 352,531,510 334,477,246 =========== =========== </TABLE> See accompanying notes to consolidated financial statements. -2- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 ----------- ---------- ---------- <S> <C> <C> <C> Interest income: Interest and fees on loans $ 24,874,119 24,587,915 23,000,495 Interest-bearing deposits and federal funds sold 822,139 473,124 406,144 Interest and dividends on investment securities: U.S. Treasury 43,805 56,716 60,930 U.S. Government agencies and mortgage-backed 2,132,908 2,326,932 2,155,765 State, county and municipals 83,541 - - Other 233,927 268,434 196,558 ---------- ---------- ---------- Total interest income 28,190,439 27,713,121 25,819,892 ---------- ---------- ---------- Interest expense: Interest on deposits: Demand 1,385,726 1,365,946 1,183,901 Savings 889,267 828,348 1,094,354 Time 11,337,831 10,443,910 8,651,930 ---------- ---------- ---------- 13,612,824 12,638,204 10,930,185 Interest on FHLB advances and subordinated debentures 1,168,634 1,857,531 1,666,171 ---------- ---------- ---------- Total interest expense 14,781,458 14,495,735 12,596,356 ---------- ---------- ---------- Net interest income 13,408,981 13,217,386 13,223,536 Provision for loan losses 1,142,987 250,000 99,400 ---------- ---------- ---------- Net interest income after provision for loan losses 12,265,994 12,967,386 13,124,136 ---------- ---------- ---------- Other income: Service charges on deposits 2,349,522 2,005,839 1,443,041 Gains on sales of securities available for sale 178,487 366,903 - Miscellaneous 716,379 745,755 693,621 ---------- ---------- ---------- Total other income 3,244,388 3,118,497 2,136,662 ---------- ---------- ---------- Other expenses: Salaries and employee benefits 6,453,278 5,346,917 6,255,624 Occupancy and equipment 1,607,963 1,493,728 1,313,795 Deposit insurance premiums 2,339,616 635,932 682,110 Other operating 4,875,135 4,287,652 4,072,090 ---------- ---------- ---------- Total other expenses 15,275,992 11,764,229 12,323,619 ---------- ---------- ---------- Earnings before income tax (benefit) expense 234,390 4,321,654 2,937,179 Income tax (benefit) expense (13,401) 1,374,627 553,488 ---------- ---------- ---------- Net earnings $ 247,791 2,947,027 2,383,691 ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements. -3- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> Net Unrealized Loss on Securities Retained Available for Sale, Earnings Net of Tax Total -------- ------------------- ----------- <S> <C> <C> <C> Balance, December 31, 1993 $ 19,699,527 - 19,699,527 Net earnings 2,383,691 - 2,383,691 ---------- ---------- ---------- Balance, December 31, 1994 22,083,218 - 22,083,218 Net earnings 2,947,027 - 2,947,027 ---------- ---------- ---------- Balance, December 31, 1995 25,030,245 - 25,030,245 Net earnings 247,791 - 247,791 Change in unrealized loss on securities available for sale, net of tax - (20,513) (20,513) ---------- ---------- ---------- Balance, December 31, 1996 $ 25,278,036 (20,513) 25,257,523 ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements. -4- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 ------------ ------------ ------------ <S> <C> <C> <C> Cash flows from operating activities: Net earnings $ 247,791 2,947,027 2,383,691 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, amortization and accretion 1,117,487 1,019,631 713,689 Provision for loan losses 1,142,987 250,000 99,400 FHLB stock dividend - - (39,700) Deferred income tax benefit (946,505) (244,431) (110,918) Gains on sales of securities available for sale (178,487) (366,903) - Gains on sales of premises and equipment, net (66,641) (403,674) (73,181) Change in: Mortgage loans held for sale 2,808,781 (3,091,269) 2,890,726 Accrued interest receivable (290,050) 74,144 (816,556) Other assets (87,809) (635,687) 62,808 Accrued interest payable (241,316) 214,526 244,020 Accrued expenses and other liabilities (143,158) 424,857 (770,982) ----------- ----------- ----------- Net cash provided by operating activities 3,363,080 188,221 4,582,997 ----------- ----------- ----------- Cash flows from investing activities: Net maturities of interest-bearing deposits - - 23,000 Proceeds from sales of securities available for sale 4,917,934 19,418,935 - Proceeds from sales of other investments 759,600 - - Proceeds from maturities of securities available for sale 239,984 - - Proceeds from maturities of securities held to maturity 2,664,499 15,969,894 3,234,583 Proceeds from maturities of other investments - 10,000,053 - Purchases of other investments (112,000) (10,056,194) - Purchases of securities available for sale (38,902,740) - - Purchases of securities held to maturity - (115,000) (37,602,333) Net change in loans (79,190) 10,181,757 (20,654,713) Proceeds from sales of real estate 80,220 461,746 119,132 Proceeds from sales of premises and equipment 301,607 1,328,519 103,894 Purchases of premises and equipment (3,361,740) (1,130,516) (1,982,085) Organization costs - - (212,319) Cash received in branch acquisition - - 18,949,593 ----------- ----------- ----------- Net cash provided (used) by investing activities (33,491,826) 46,059,194 (38,021,248) ----------- ----------- ----------- Cash flows from financing activities: Net change in demand and savings deposits 6,850,475 (10,175,766) 2,079,617 Net change in time deposits 11,618,211 10,135,548 (3,503,991) Proceeds from FHLB advances 10,000,000 5,000,000 26,500,000 Payments of FHLB advances (9,300,155) (27,175,156) (8,675,155) Proceeds from subordinated debentures - - 2,000,000 ----------- ----------- ----------- Net cash provided (used) by financing 19,168,531 (22,215,374) 18,400,471 activities ----------- ----------- Net change in cash and cash equivalents (10,960,215) 24,032,041 (15,037,780) Cash and cash equivalents at beginning of year 34,057,184 10,025,143 25,062,923 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 23,096,969 34,057,184 10,025,143 =========== =========== =========== </TABLE> -5- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 <TABLE> <CAPTION> 1996 1995 1994 ---------- ---------- ---------- <S> <C> <C> <C> Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 15,022,774 14,281,209 12,336,651 Income taxes $ 935,000 1,175,000 822,500 Supplemental schedule of noncash investing and financing activities: Real estate acquired through foreclosure $ 401,866 428,182 665,532 Loans to facilitate sales of real estate $ 419,750 608,769 429,792 Transfer of securities held to maturity to available for sale $ - 19,052,032 - </TABLE> In connection with the 1994 branch acquisition, assets were acquired and liabilities were assumed as follows: <TABLE> <S> <C> Fair value of assets acquired $(1,124,185) Liabilities assumed 21,186,730 Premium paid for core deposit intangible (1,112,952) ----------- Cash received in connection with branch acquisition $18,949,593 =========== </TABLE> See accompanying notes to consolidated financial statements. -6- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization ------------ Prior to August 1, 1994, CF Mutual Holdings (the "Company") conducted its activities pursuant to a federal mutual savings bank charter ("Mutual Bank") and Carroll Services and Development Corporation ("Service") operated as its wholly owned subsidiary. Effective August 1, 1994, the operations of the Mutual Bank were transferred to a federally chartered stock savings bank, Carrollton Federal Bank, FSB ("Bank"). Contemporaneously, Mutual Bank amended its mutual savings bank charter and by-laws to conform to the requirements applicable to a federally chartered mutual holding company and changed its name to CF Mutual Holdings. The August 1, 1994 reorganization transactions were accounted for in a manner similar to a pooling of interests. The Company has no capital stock. All holders of the savings, demand or other authorized accounts of the Bank are members of the Company ("Members"). With respect to all questions requiring action by the Members, each holder of an account at the Bank is permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of the Member's accounts. In addition, certain borrowers from the Mutual Bank as of July 19, 1990 are entitled to one vote during the period such borrowings are in existence. No Member has the right to cast more than one thousand votes. The Company may distribute its net earnings to account holders of the Bank on such a basis and in accordance with such terms and conditions as may from time to time be authorized by the Office of Thrift Supervision ("OTS"). All account holders are entitled to equal distribution of the assets of the Company, pro rata to the value of their accounts in the Bank, in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company. The Bank is primarily regulated by the OTS and the Federal Deposit Insurance Corporation and undergoes periodic examinations by these regulatory authorities. The Bank primarily provides a full range of customary banking services throughout Carroll, Coweta, Douglas, Fayette, Heard, Haralson, Paulding and Henry counties in Georgia. Service is primarily involved in the sale of real estate previously developed for sale. Basis of Presentation and Reclassification ------------------------------------------ The consolidated financial statements include the accounts of the Company, the Bank, Service, CFB Insurance, Inc. and CFB Securities, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation. The accounting principles followed by the Company and its subsidiaries, and the methods of applying these principles, conform with generally accepted accounting principles ("GAAP") and with general practices within the thrift industry. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from those estimates. Material estimates common to the thrift industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of real estate acquired in connection with or in lieu of foreclosure on loans, the valuation allowance for mortgage servicing rights and valuation allowances associated with the realization of deferred tax assets which are based on future taxable income. Cash and Cash Equivalents ------------------------- Cash equivalents include amounts due from banks, interest-bearing deposits in financial institutions and federal funds sold. Generally, federal funds are sold for one-day periods. -7- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Investment Securities --------------------- The Company classifies its securities in one of three categories: trading, available for sale, or held to maturity. There were no trading securities at December 31, 1996 and 1995. Securities held to maturity are those securities for which the Bank has the ability and intent to hold to maturity. All other securities are classified as available for sale. Available for sale securities consist of investment securities not classified as trading securities or held to maturity securities and are recorded at fair value. Held to maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses, net of the related tax effect, on securities available for sale are excluded from earnings and are reported as a separate component of stockholders' equity until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from held to maturity to available for sale are recorded as a separate component of stockholders' equity. A decline in the market value of any available for sale or held to maturity investment below cost that is deemed other than temporary is charged to earnings and establishes a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses are included in earnings and the cost of securities sold are derived using the specific identification method. Other Investments ----------------- Other investments include Federal Home Loan Bank ("FHLB") stock and other equity securities with no readily determinable fair value. An investment in FHLB stock is required by law for a federally insured savings bank. These investment securities are carried at cost and include stock dividends. Interest Rate Cap Agreement --------------------------- Interest rate cap agreements ("Caps"), which are principally used by the Company in the management of interest rate exposure, are accounted for on an accrual basis. Premiums paid for purchased Caps are being amortized to interest expense over the terms of the Caps. Unamortized premiums are included in other assets in the consolidated balance sheet. Amounts to be received under the Caps are accounted for on an accrual basis, and are recognized as a reduction of interest expense. Mortgage Loans Held for Sale ---------------------------- Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market value. The amount by which cost exceeds market value is accounted for as a valuation allowance. Changes, if any, in the valuation allowance are included in the determination of net earnings in the period in which the change occurs. Gains and losses from the sale of loans are determined using the specific identification method. Loans, Loan Fees and Interest Income ------------------------------------ Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding unpaid principal balances, net of the allowance for loan losses, deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in interest income using the level-yield method over the contractual lives of the loans, adjusted for estimated prepayments based on the Bank's historical prepayment experience. Commitment fees and costs relating to commitments whose likelihood of exercise is remote are recognized over the commitment period on a straight- line basis. If the commitment is subsequently exercised during the commitment period, the remaining unamortized commitment fee at the time of exercise is recognized over the life of the loan as an adjustment to the yield. Premiums and discounts on purchased loans are amortized over the remaining lives of the loans using the level-yield method. Fees arising from servicing loans for others are recognized as earned. -8- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Loans, Loan Fees and Interest Income, continued ----------------------------------------------- The Bank accounts for impaired loans in accordance with Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" amended for SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure." A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate or at the loan's observable market price, or the fair value of the collateral of the loan if the loan is collateral dependent. Interest income from impaired loans is recognized using a cash basis method of accounting during the time within that period in which the loans were impaired. Allowance for Loan Losses ------------------------- The allowance for loan losses is established through provisions for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collection of the principal is unlikely. The allowance is an amount which, in management's judgment, will be adequate to absorb losses on existing loans that may become uncollectible. The allowance is established through consideration of such factors as changes in the nature and volume of the portfolio, adequacy of collateral, delinquency trends, loan concentrations, specific problem loans, and economic conditions that may affect the borrower's ability to pay. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Real Estate ----------- Real estate acquired through foreclosure is carried at the lower of cost (defined as fair value at foreclosure) or fair value less estimated costs to dispose. Generally accepted accounting principles define fair value as the amount that is expected to be received in a current sale between a willing buyer and seller other than in a forced or liquidation sale. Fair values at foreclosure are based on appraisals. Losses arising from the acquisition of foreclosed properties are charged against the allowance for loan losses. Subsequent writedowns are provided by a charge to operations through the allowance for losses on other real estate in the period in which the need arises. Real estate held for sale is carried at the lower of cost or fair value less estimated selling costs. Interest and other carrying charges relating to properties under development are capitalized as construction costs during the construction period. Valuations are periodically performed by management, and provisions for losses through an allowance are established with a charge to operations if the carrying value of a property exceeds its estimated net realizable value. Premises and Equipment ---------------------- Premises and equipment are stated at cost less accumulated depreciation. Major additions and improvements are charged to the asset accounts while maintenance and repairs that do not improve or extend the useful lives of the assets are expensed currently. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in earnings for the period. Depreciation expense is computed using the straight-line method over the following estimated useful lives: Land improvements 15-40 years Buildings and improvements 15-40 years Furniture and equipment 5-10 years -9- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Mortgage Servicing Rights ------------------------- Effective January 1, 1996, the Bank adopted the provisions of SFAS No. 122 "Accounting for Mortgage Servicing Rights." SFAS No. 122 amends SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." SFAS No. 122 requires a mortgage banking enterprise to recognize as a separate asset, the rights to service mortgage loans regardless of whether the servicing rights are acquired through either purchase or origination. Prior to SFAS No. 122, SFAS No. 65 prohibited the capitalization of mortgage servicing rights except where the rights to service loans were acquired from another organization. Additionally, the new standard requires an impairment analysis of mortgage servicing rights regardless of whether purchased or originated. The Bank's mortgage servicing rights represent the unamortized cost of purchased and originated contractual rights to service mortgages for others in exchange for a servicing fee and ancillary loan administration income. Mortgage servicing rights are amortized over the period of estimated net servicing income and are periodically adjusted for actual and anticipated prepayments of the underlying mortgage loans. An impairment analysis is performed after stratifying the rights by interest rate. Impairment, defined as the excess of the asset's carrying value over its current fair value, is recognized through a valuation allowance. At December 31, 1996, no valuation allowances were required for the mortgage servicing rights. Core Deposit Intangible ----------------------- During 1994, the Bank entered into a Purchase and Assumption agreement with First Union National Bank of Georgia to acquire certain loans, deposits and other liabilities of a branch in Bremen, Georgia ("branch acquisition") for a net purchase price approximating $1,113,000. The purchased core deposit intangible is amortized using the straight-line method over the estimated average life of the deposit base acquired and is included as a component of other assets. Amortization expense approximated $74,000, $74,000 and $69,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Income Taxes ------------ Deferred tax assets and liabilities are recorded for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities results in deferred tax assets, the standard requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. A deferred tax liability is not recognized for portions of the allowance for loan losses for income tax purposes in excess of the financial statement balance, as described in note 8. Such a deferred tax liability will only be recognized when it becomes apparent that those temporary differences will reverse in the foreseeable future. -10- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (2) INVESTMENT SECURITIES Investment securities at December 31, 1996 and 1995 are summarized as follows: <TABLE> <CAPTION> December 31, 1996 --------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair SECURITIES AVAILABLE FOR SALE Cost Gains Losses Value ---- ----- ------ ----- <S> <C> <C> <C> <C> U.S. Government agencies $ 18,867,304 46,835 83,706 18,830,433 State, county and municipals 2,198,615 34,404 2,222 2,230,797 Mortgage-backed securities 12,892,403 24,853 51,243 12,866,013 ---------- ------- ------- ---------- $ 33,958,322 106,092 137,171 33,927,243 ========== ======= ======= ========== </TABLE> <TABLE> <CAPTION> December 31, 1996 --------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair SECURITIES HELD TO MATURITY Cost Gains Losses Value ---- ----- ------ ----- <S> <C> <C> <C> <C> U.S. Treasury securities $ 499,819 25 - 499,844 U.S. Government agencies 6,216,029 34,795 90,755 6,160,069 State, county and municipals 115,000 1,206 - 116,206 Mortgage-backed securities 933,210 1,845 12,631 922,424 ---------- ------- ------- ---------- $ 7,764,058 37,871 103,386 7,698,543 ========== ======= ======= ========== </TABLE> <TABLE> <CAPTION> December 31, 1995 -------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair SECURITIES HELD TO MATURITY Cost Gains Losses Value ---- ----- ------ ----- <S> <C> <C> <C> <C> U.S. Treasury securities $ 1,250,810 4,531 - 1,255,341 U.S. Government agencies 7,141,626 117,391 13,044 7,245,973 State, county and municipals 115,000 541 - 115,541 Mortgage-backed securities 1,870,142 5,277 16,093 1,859,326 ---------- ------- ------- ---------- $ 10,377,578 127,740 29,137 10,476,181 ========== ======= ======= ========== </TABLE> -11- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (2) INVESTMENT SECURITIES, CONTINUED Mortgage-backed securities are summarized by issuer at December 31, 1996 as follows: <TABLE> <CAPTION> Securities Available Securities Held for Sale to Maturity --------------------------- ------------------------ Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value --------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Federal National Mortgage Association $ 3,983,825 3,932,582 - - Government National Mortgage - - 156,129 153,705 Association Federal Home Loan Mortgage - - 778,081 768,719 Corporation Privately-issued collateralized mortgage obligations 8,908,578 8,933,431 - - ----------- ---------- --------- --------- $12,892,403 12,866,013 933,210 922,424 =========== ========== ========= ========= </TABLE> The amortized cost and estimated fair value of securities available for sale and securities held to maturity at December 31, 1996, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. <TABLE> <CAPTION> Securities Available Securities Held for Sale to Maturity --------------------------- ------------------------ Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value --------- ---------- ---------- ---------- <S> <C> <C> <C> <C> U.S. Treasury securities: Within 1 year $ - - 499,819 499,844 ========== ========== ========= ========= U.S. Government agencies: Within 1 year $ - - 581,727 585,437 1 to 5 years 2,999,824 3,014,464 2,634,302 2,660,813 5 to 10 years 11,849,330 11,839,589 3,000,000 2,913,819 More than 10 years 4,018,150 3,976,380 - - ---------- ---------- --------- --------- $ 18,867,304 18,830,433 6,216,029 6,160,069 ========== ========== ========= ========= State, county and municipals: 1 to 5 years $ - - 115,000 116,206 More than 10 years 2,198,615 2,230,797 - - ---------- ---------- --------- --------- $ 2,198,615 2,230,797 115,000 116,206 ========== ========== ========= ========= Total securities other than mortgage-backed: Within 1 year $ - - 1,081,546 1,085,281 1 to 5 years 2,999,824 3,014,464 2,749,302 2,777,019 5 to 10 years 11,849,330 11,839,589 3,000,000 2,913,819 More than 10 years 6,216,765 6,207,177 - - Mortgage-backed securities 12,892,403 12,866,013 933,210 922,424 ---------- ---------- --------- --------- $ 33,958,322 33,927,243 7,764,058 7,698,543 ========== ========== ========= ========= </TABLE> On December 14, 1995 the Bank used the one-time reassessment provisions of the "Special Report - A Guide to Implementation of SFAS No. 115 on Accounting for Certain Investments in Debt and Equity Securities" to transfer a portion of its held to maturity securities portfolio which had an amortized cost of $19,052,032 and a net unrealized gain of $366,903 to the available for sale category. The special report allowed the Company to reassess the appropriateness of its classifications of all investment securities prior to December 31, 1995 without calling into question the Company's intent to hold investment securities to maturity in the future. There were no sales of securities held to maturity during 1996, 1995 and 1994. Proceeds from sales of securities available for sale during 1996 and 1995 totalled $4,917,934 and $19,418,935. Gross gains of $178,487 and $366,903 were realized on those sales. Securities and interest-bearing deposits with a carrying value of approximately $2,517,000 and $3,626,000 at December 31, 1996 and 1995, respectively, were pledged to secure U.S. government and other public deposits. -12- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (3) LOANS Major classifications of loans at December 31, 1996 and 1995 are summarized as follows: <TABLE> <CAPTION> 1996 1995 ---- ---- <S> <C> <C> Real estate mortgage loans (1-4 family dwellings) $ 146,577,235 175,038,710 Real estate construction loans 33,681 2,348,532 Commercial loans 57,785,878 43,943,791 Consumer and other installment loans 68,038,424 51,839,952 ----------- ----------- Total loans 272,435,218 273,170,985 Less: Allowance for loan losses 2,601,120 2,290,974 ----------- ----------- Loans, net $ 269,834,098 270,880,011 =========== =========== </TABLE> The Bank concentrates its lending activities in the origination of permanent residential mortgage loans, commercial mortgage loans, commercial business loans, and consumer installment loans. The majority of the Bank's real estate loans are secured by real property located in Carroll County, Georgia and surrounding counties. The Bank has recognized impaired loans of approximately $5,680,000 and $1,918,000 at December 31, 1996 and 1995. The total allowance for loan losses related to these loans was $243,000 and $381,000 at December 31, 1996 and 1995, respectively. Interest income on impaired loans of approximately $68,000 and $100,000 was recognized for cash payments received in 1996 and 1995, respectively. Activity in the allowance for loan losses is summarized as follows for the years ended December 31, 1996, 1995 and 1994: <TABLE> <CAPTION> 1996 1995 1994 ---- ---- ---- <S> <C> <C> <C> Balance at beginning of year $ 2,290,974 2,391,920 2,686,508 Provisions charged to operations 1,142,987 250,000 99,400 Loans charged off (924,670) (448,484) (457,826) Recoveries on loans previously charged off 91,829 97,538 63,838 ----------- --------- --------- Balance at end of year $ 2,601,120 2,290,974 2,391,920 =========== ========= ========= </TABLE> Mortgage loans serviced for others are not included in the accompanying consolidated financial statements. Unpaid principal balances of these loans at December 31, 1996 and 1995 and 1994 approximate $53,061,000, $48,036,000 and $45,085,000, respectively. (4) PREMISES AND EQUIPMENT Premises and equipment at December 31, 1996 and 1995 are summarized as follows: <TABLE> <CAPTION> 1996 1995 ---- ---- <S> <C> <C> Land and land improvements $ 1,131,003 1,136,802 Buildings and improvements 5,581,884 5,031,011 Furniture and equipment 7,935,857 6,368,621 Construction in progress 114,720 275,784 ---------- ---------- 14,763,464 12,812,218 Less: Accumulated depreciation 5,474,872 5,446,921 ---------- ---------- $ 9,288,592 7,365,297 ========== ========== </TABLE> Depreciation expense approximated $1,203,000, $1,038,000 and $889,000 at December 31, 1996, 1995 and 1994, respectively. -13- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (5) TIME DEPOSITS At December 31, 1996, contractual maturities of time deposits are summarized as follows: <TABLE> <CAPTION> YEAR ENDING DECEMBER 31, ------------------------ <S> <C> 1997 $ 133,863,983 1998 54,643,630 1999 11,684,852 2000 5,319,281 2001 and thereafter 4,976,359 -------------- $ 210,488,105 ============== </TABLE> (6) FHLB ADVANCES The interest rates for FHLB advances at December 31, 1996 and 1995 ranged from 4.55% to 7.75%, respectively. FHLB advances are collateralized by FHLB stock and first mortgage loans. Advances from FHLB outstanding at December 31, 1996 mature as follows: <TABLE> <CAPTION> Year Amount ---- ------ <S> <C> 1997 $ 10,800,155 1998 2,550,155 1999 600,156 2000 600,156 2001 and Thereafter 1,744,564 ------------- $ 16,295,186 ============= </TABLE> (7) SUBORDINATED DEBENTURES During 1994, the Company issued Series A fixed rate subordinated debentures to various executive officers and members of the Board of Directors in an aggregate principal amount of $2,000,000. The subordinated debentures bear interest at a simple interest rate per annum of 7.25%, which is payable quarterly, and mature on September 30, 1999. The payment of the principal and interest is subordinate and junior in right of payment to the claims of creditors of the Company. The entire proceeds of the offering were used to increase the capitalization of the Bank. (8) INCOME TAXES The following is an analysis of the components of income tax expense for the years ended December 31, 1996, 1995 and 1994: <TABLE> <CAPTION> 1996 1995 1994 --------- ---------- --------- <S> <C> <C> <C> Current $ 933,104 1,619,058 664,406 Deferred (946,505) (477,858) 81,555 Utilization of state operating loss carryforwards - 233,427 79,970 Adjustment to valuation allowance - - (272,443) ----------- --------- -------- Income tax (benefit) expense $ (13,401) 1,374,627 553,488 =========== ========= ======== </TABLE> -14- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (8) INCOME TAXES, CONTINUED The differences between income tax (benefit)expense and the amount computed by applying the statutory federal income tax rate of 34% to earnings before taxes for the years ended December 31, 1996, 1995 and 1994 is as follows: <TABLE> <CAPTION> 1996 1995 1994 -------- --------- -------- <S> <C> <C> <C> Pretax income at statutory rate $ 79,693 1,469,362 998,641 Add (deduct): Tax-exempt interest income (91,076) (83,920) (61,445) Adjustment to valuation allowance - - (272,443) Other (2,018) (10,815) (111,265) -------- --------- -------- Income tax (benefit) expense $(13,401) 1,374,627 553,488 ======== ========= ======== Effective tax rate (6)% 32% 19% ======== ========= ======== </TABLE> The following summarizes the net deferred tax asset (liability). The net deferred tax asset (liability) is included as a component of other assets and accrued interest payable and other liabilities at December 31, 1996 and 1995, respectively. <TABLE> <CAPTION> 1996 1995 ---- ---- <S> <C> <C> Deferred tax assets: Allowance for loan losses $ 515,105 310,999 Allowance for real estate held for 123,689 100,913 development and sale Deferred compensation 76,968 57,158 Other 53,300 24,957 State tax credits 232,055 234,170 Unrealized loss on securities available for sale 10,568 - ---------- --------- Total gross deferred tax assets 1,011,685 728,197 Deferred tax liabilities: Net deferred loan fees 363,706 727,411 FHLB stock 226,697 515,041 Premises and equipment 335,224 330,762 Other 2,110 28,108 --------- --------- Total gross deferred tax liabilities 927,737 1,601,322 --------- --------- Net deferred tax asset (liability) $ 83,948 (873,125) ========== ========= </TABLE> The Internal Revenue Code ("IRC") was amended during 1996 and the IRC section 593 reserve method for loan losses for thrift institutions was repealed. Effective January 1, 1996, the Bank now computes its tax bad debt reserves under the rules of IRC section 585, which apply to commercial banks. In years prior to 1996, the Bank obtained tax bad debt deductions approximating $5.8 million in excess of its financial statement allowance for loan losses for which no provision for federal income tax was made. These amounts were then subject to federal income tax in future years pursuant to the prior IRC section 593 provisions if used for purposes other than to absorb bad debt losses. Effective January 1, 1996, approximately $1.0 million of the excess reserve is no longer subject to recapture under any circumstances and approximately $4.8 million of the excess reserve is subject to recapture only if the Bank ceases to qualify as a bank pursuant to the provisions of IRC section 585. -15- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (9) EMPLOYEE AND DIRECTOR BENEFIT PLANS All qualifying employees of the Bank are included in a qualified multiemployer noncontributory defined benefit pension plan sponsored by the Financial Institutions Retirement Fund. The Bank's policy is to fund pension costs accrued. No pension expense was incurred during 1996 or 1995. The Bank's pension expense for 1994 was approximately $104,000. At June 30, 1996, the date of the latest actuarial valuation, the market value of the plan's net assets exceeded the actuarially computed value of accumulated plan benefits. Additional information regarding the Bank's portion of plan benefits or net assets is not available. Effective January 1, 1993, the Bank established a retirement plan qualified pursuant to Internal Revenue Code section 401(k) ("Plan"). The Plan allows eligible employees to defer a portion of their income by making contributions into the Plan on a pretax basis. The Bank adopted a matching formula which vests based on length of service. The Bank matches 50% of employee contributions up to 6% of the employees' compensation. During the years ended December 31, 1996, 1995 and 1994, the Bank recognized $94,000, $92,000 and $84,000 in expense related to its obligations under the Plan. During December 1995, the Bank initiated a defined contribution postretirement benefit plan to provide retirement benefits to its Board of Directors and to provide death benefits for their designated beneficiaries. Under the plan, the Bank purchased split-dollar whole life insurance contracts on the lives of each Director. The increase in cash surrender value of the contracts, less the Bank's cost of funds, constitutes the Bank's contribution to the plan each year. In the event the insurance contracts fail to produce positive returns, the Bank has no obligation to contribute to the Plan. At December 31, 1996 and 1995, the cash surrender value of the insurance contracts was approximately $969,000 and $890,000 and is included as a component of other assets. Expenses incurred for benefits were approximately $14,000 during 1996. No expenses were incurred during 1995. (10) REGULATORY MATTERS The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier I capital (as defined) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined) and of Tangible capital to average assets. Management believes, as of December 31, 1996 and 1995, that the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 1996 and 1995, the most recent notification from the OTS categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk- based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution's category. -16- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (10) REGULATORY MATTERS, CONTINUED The Bank's actual capital amounts and ratios are presented below. Consolidated amounts do not materially differ from Bank-only capital amounts and ratios. <TABLE> <CAPTION> To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions ------------------ ------------------------- -------------------------- Amount Ratio Amount Ratio Amount Ratio ---------- ------ ----------------- ------ ----------------- ------- <S> <C> <C> <C> <C> <C> <C> AS OF DECEMBER 31, 1996: Total Capital (to Risk Weighted Assets) $ 25,612,075 10.9% 18,889,301 >8.0% 23,611,627 >10.0% - Tier 1 Capital (to Risk Weighted Assets) $ 23,587,913 10.0% 9,444,651 >4.0% 14,166,976 > 6.0% Tier 1 Capital - - (to Adjusted Assets) $ 23,587,913 6.9% 13,972,080 >4.0% 17,465,100 > 5.0% Tangible Capital (to Tangible Assets) $ 23,587,913 6.9% 5,239,530 >1.5% N/A N/A - AS OF DECEMBER 31, 1995: Total Capital (to Risk Weighted Assets) $ 26,914,471 12.2% 17,588,987 >8.0% 21,986,233 >10.0% - - Tier 1 Capital (to Risk Weighted Assets) $ 25,015,649 11.4% 8,794,493 >4.0% 13,191,740 > 6.0% - - Tier 1 Capital (to Adjusted Assets) $ 25,015,649 7.5% 13,335,941 >4.0% 16,669,926 > 5.0% - - Tangible Capital (to Tangible Assets) $ 25,015,649 7.5% 5,000,978 >1.5% N/A N/A </TABLE> The following is a reconciliation of equity capital under generally accepted accounting principles to regulatory capital at December 31, 1996: <TABLE> <CAPTION> Core/ Risk- Tangible Leverage Based Capital Capital Capital --------- -------- ------- <S> <C> <C> <C> Equity capital of the Bank $25,893,092 25,893,092 25,893,092 Nonincludable subsidiary--Service (312,371) (312,371) (312,371) Nonqualifying assets (1,992,808) (1,992,808) (1,992,808) General valuation allowances - - 2,024,162 ----------- ---------- ---------- Regulatory capital $23,587,913 23,587,913 25,612,075 =========== ========== ========== </TABLE> Thrift regulations limit the amount of dividends the Bank can pay to the Company without prior regulatory approval. These limitations are a function of excess regulatory capital and net earnings in the year the dividend is declared. In 1997, the Bank can pay dividends totalling approximately $3,661,000 plus net earnings during 1997. (11) COMMITMENTS The Bank leases certain banking facilities under operating lease arrangements expiring through 2012. Future minimum payments required for all operating leases with remaining terms in excess of one year are presented below: <TABLE> <CAPTION> Year Ending December 31, ------------------------ <S> <C> 1997 $ 243,839 1998 241,492 1999 223,172 2000 197,228 2001 147,729 Thereafter 773,855 --------- $ 1,827,315 ========= </TABLE> Total rent expense was approximately $229,000, $127,000 and $101,000 for the years ended December 31, 1996, 1995 and 1994. -17- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (11) COMMITMENTS, CONTINUED The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage its cost of funds. These financial instruments include commitments to extend credit, standby letters of credit and an interest rate cap agreement. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated statements of financial condition. The contract amounts of these instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. Commitments to originate first mortgage loans and to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. The Bank's loans are primarily collateralized by residential and other real properties, automobiles, savings deposits, accounts receivable, inventory and equipment located in Carroll County, Georgia and surrounding counties. Standby letters of credit are written conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. Most letters of credit extend for less than one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. All standby letters of credit are secured at December 31, 1996 and 1995. On July 20, 1995, the Company entered into a Cap to reduce the potential impact of increases in interest rates on its interest-bearing liabilities. The agreement entitles the Company to receive from a counterparty, on a quarterly basis, the amounts, if any, by which the 3-month LIBOR rate exceeds the Cap rate of 7% on a notional amount of $25,000,000. No amounts have been received by the Company through December 31, 1996. The Cap agreement expires on July 20, 1997. <TABLE> <CAPTION> 1996 1995 ---------- ---------- <S> <C> <C> Financial instruments whose contract amounts represent credit risk: Commitments to originate first mortgage loans $ 128,000 485,000 Commitments to extend credit $ 20,840,000 20,764,000 Standby letters of credit $ 108,000 71.000 Cap agreement $ 27,000 76,000 </TABLE> (12) MISCELLANEOUS OPERATING EXPENSES Components of other operating expenses in excess of 1% of interest and other income for the years ended December 31, 1996, 1995 and 1994 are as follows: <TABLE> <CAPTION> 1996 1995 1994 ------- ------- ------- <S> <C> <C> <C> Advertising $ 470,273 225,317 228,482 Data processing expense $ 648,853 506,908 455,108 Office supplies $ 329,246 213,787 235,714 </TABLE> -18- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (13) CF MUTUAL HOLDINGS (PARENT COMPANY ONLY) FINANCIAL INFORMATION Balance Sheets December 31, 1996 and 1995 Assets ------ <TABLE> <CAPTION> 1996 1995 ---- ---- Cash and cash equivalents $ 1,327,334 752,189 Investment in subsidiaries 25,873,579 26,350,395 Other assets 222,850 152,662 ---------- ---------- $ 27,423,763 27,255,246 ========== ========== Liabilities and Capital ----------------------- Subordinated debentures $ 2,000,000 2,000,000 Accounts payable and accrued expenses 166,240 225,001 ---------- ---------- Total liabilities 2,166,240 2,225,001 Capital 25,257,523 25,030,245 ---------- ---------- $ 27,423,763 27,255,246 ========== ========== Statements of Earnings For the Years Ended December 31, 1996, 1995 and 1994 1996 1995 1994 ---- ---- ---- <S> <C> <C> <C> Income: Dividend income from the Bank $ 814,000 752,000 82,700 Interest income 30,290 - - Other 2,240 - - ---------- ---------- --------- Total income 846,530 752,000 82,700 ---------- ---------- --------- Operating expenses: Interest expense 145,397 147,134 19,000 Other 54,801 50,791 17,765 ---------- ---------- --------- Total operating expenses 200,198 197,925 36,765 ---------- ---------- --------- Earnings before income tax benefit and equity in undistributed earnings of 646,332 554,075 45,935 subsidiaries Income tax benefit 58,762 67,440 12,500 ---------- ---------- --------- Earnings before equity in undistributed earnings of subsidiaries or dividends received in excess of earnings of subsidiaries 705,094 621,515 58,435 Dividends received in excess of (457,303) - - earnings of subsidiaries Equity in undistributed earnings of - 2,325,512 2,325,256 subsidiaries ---------- ---------- --------- Net earnings $ 247,791 2,947,027 2,383,691 ========== ========== ========= </TABLE> -19- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (13) CF MUTUAL HOLDINGS (PARENT COMPANY ONLY) FINANCIAL INFORMATION, CONTINUED Statements of Cash Flows For the Years Ended December 31, 1996, 1995 and 1994 <TABLE> <CAPTION> 1996 1995 1994 ------------ ----------- ----------- <S> <C> <C> <C> Cash flows from operating activities: Net earnings $ 247,791 2,947,027 2,383,691 Adjustments to reconcile net earnings to net cash provided by operating activities: Amortization 42,464 42,464 17,765 Dividends received in excess of earnings of subsidiaries 457,303 - - Equity in undistributed earnings of subsidiaries - (2,325,512) (2,325,256) Change in other assets and liabilities (172,413) (4,340) 228,769 ---------- ---------- ---------- Net cash provided by operating activities 575,145 659,639 304,969 ---------- ---------- ---------- Cash flows from investing activities: Purchase of capital stock of Bank upon reorganization - - (100) Contributions of capital to the Bank - - (2,000,000) Organization costs - - (212,319) ---------- ---------- --------- Net cash used in investing activities - - (2,212,419) ---------- ---------- ---------- Net cash provided by financing activities, consisting of - - 2,000,000 proceeds from subordinated debentures ---------- ---------- ---------- Net increase in cash 575,145 659,639 92,550 Cash at beginning of year 752,189 92,550 - ---------- ---------- ---------- Cash at end of year $1,327,334 752,189 92,550 ========== ========== ========== </TABLE> (14) FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company's financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company or its subsidiaries, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance. -20- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED Cash and Cash Equivalents ------------------------- For cash, due from banks, federal funds sold and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value. Securities Held to Maturity and Securities Available for Sale ------------------------------------------------------------- Fair values for securities held to maturity and securities available for sale are based on quoted market prices. Other investments ----------------- The carrying value of other investments approximates fair value. Loans and Mortgage Loans Held for Sale -------------------------------------- The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Deposits -------- The fair value of demand deposits, savings accounts, NOW accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. FHLB Advances ------------- The fair value of the FHLB fixed rate borrowings are estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements. Subordinated Debentures ----------------------- Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. Commitments to Originate First Mortgage Loans, Commitments to Extend -------------------------------------------------------------------- Credit and Standby Letters of Credit ------------------------------------ Because commitments to originate first mortgage loans, commitments to extend credit and standby letters of credit are made using variable rates, the contract value is a reasonable estimate of fair value. Limitations ----------- Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation, deferred income taxes, premises and equipment and purchased core deposit intangible. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. -21- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES Notes to Consolidated Financial Statements, continued (14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED The carrying amount and estimated fair values of the Company's financial instruments at December 31, 1996 and 1995 are as follows: <TABLE> <CAPTION> 1996 1995 ------------------------ ------------------------ Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Assets: Cash and cash equivalents $ 23,096,969 23,096,969 34,057,184 34,057,184 Securities available for sale 33,927,243 33,927,423 - - Securities held to maturity 7,764,058 7,698,543 10,377,578 10,476,181 Other investments 2,599,741 2,599,741 3,247,341 3,247,341 Loans, net 269,834,098 270,434,962 270,880,011 272,897,692 Mortgage loans held for sale 282,488 282,488 3,091,269 3,091,269 Liabilities: Deposits 307,756,198 308,234,690 289,287,512 288,616,298 FHLB advances 16,295,186 15,854,660 15,595,341 15,534,613 Subordinated debentures 2,000,000 1,947,000 2,000,000 1,910,000 Unrecognized financial instruments: Commitments to originate first mortgage loans 128,000 128,000 485,000 485,000 Commitments to extend credit 20,840,000 20,840,000 20,764,000 20,764,000 Standby letters of credit 108,000 108,000 71,000 71,000 </TABLE> (15) SUBSEQUENT EVENT On February 11, 1997, the Board of Directors of the Company adopted a Plan of Conversion and Reorganization pursuant to which the Company would be converted from a federally chartered mutual holding company to a federally chartered stock savings bank holding company. The Plan of Conversion is subject to approval of applicable regulatory authorities and by affirmative vote of the majority of the Company's Members. The conversion of the Company to a stock savings bank holding company will be accounted for at historical cost in a manner similar to a pooling of interests. The Company will form a new entity known as Community First Banking Company ("Community First"), which will become the holding company for the Bank upon consummation of the Conversion and Reorganization. Community First will in turn form a new wholly owned subsidiary known as Interim CFB Association ("Interim CFB"). The existing Company will convert to an interim federal savings bank and will simultaneously merge with and into the Bank, pursuant to which the Company will cease to exist and a "liquidation account" will be established by the Bank for the benefit of depositor members as of specified dates. Interim CFB will then merge with and into the Bank, pursuant to which the Bank will become a wholly owned subsidiary of Community First. -22- <PAGE> CF MUTUAL HOLDINGS AND SUBSIDIARIES Notes to Consolidated Financial Statements, continued (15) SUBSEQUENT EVENT, CONTINUED The Plan of Conversion provides for the establishment, upon the completion of the conversion, of a special "liquidation account" for the benefit of "Eligible Account Holders and Supplemental Eligible Account Holders" ("Holders") in an amount equal to the Company's retained earnings as of the date of its latest statement of financial condition contained in the final prospectus for the sale of the common stock. Each Holder, if he or she continues to maintain a deposit account at the Bank, would be entitled on a complete liquidation of the Company after conversion, to an interest in the liquidation account prior to any payment to stockholders of Community First. Each eligible account Holder would have an initial interest in such liquidation account for each deposit account held in the Company on the qualifying date, December 31, 1995. Each Supplemental Eligible Account Holder would have a similar interest at a separate qualifying date, which has not yet been determined. The interest as to each deposit account would be in the same proportion of the total liquidation account as the balance of the deposit account on the qualifying dates was to the aggregate balance in all the deposit accounts of Holders on such qualifying dates. However, if the amount in the deposit account on any annual closing date of the Company is less than the amount in such account on the respective qualifying dates, then the interest in this special liquidation account would be reduced from time to time by an amount proportionate to any such reduction, and the interest would cease to exist if such deposit account were closed. The interest in the special liquidation account will never be increased despite any increase in the related deposit account after the respective qualifying dates. Under the Plan of Conversion, up to 2,098,750 shares of the common stock of the Company will be offered for sale by Community First, subject to adjustment. As part of the Plan of Conversion, Community First will conduct a subscription offering of the common stock for holders of subscription rights in the following order of priority: (i) depositors of the Company as of December 31, 1995 with deposits of at least $50 (Eligible Account Holders); (ii) tax-qualified employee benefit plans of the Company (the Company currently plans to implement an ESOP); (iii) other depositors of the Company as of December 31, 1995 with deposits of at least $50 (Supplemental Eligible Account Holders); and (iv) depositors who are neither Eligible Account Holders nor Supplemental Eligible Account Holders and certain borrowers, subject to the provisions of the Plan. The Company may offer shares of common stock in a community offering to the general public in Georgia and other states with a preference to natural persons residing in Carroll, Coweta, Douglas, Fayette, Haralson, Heard, Paulding and Henry counties, Georgia, subject to the prior rights of holders of subscription rights. The Company has the right, in its sole discretion, to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. At December 31, 1996, no costs have been incurred related to the aforementioned Plan of Conversion. Upon consummation of the Plan of Conversion and related stock offering, any amounts incurred will be netted against the proceeds from the stock offering and result in a reduction of paid-in capital. Should the Plan of Conversion and stock offering not be consummated, such costs will be charged to expense in 1997. -23- <PAGE> - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- No dealer, salesman or any other person has been authorized to give any information or to make any representation other than as contained in this Prospectus in connection with the offering made hereby, and, if given or made, such other information or representation must not be relied upon as having been authorized by the Company, the Mutual Holding Company, the Savings Bank or Trident Securities, Inc. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Company or the Savings Bank since any of the dates as of which information is furnished herein or since the date hereof. ----------------- TABLE OF CONTENTS ----------------- Page ---- Summary..................................................................... Selected Consolidated Financial and Other Data.............................. Recent Developments......................................................... Management's Discussion and Analysis of Recent Developments................. Risk Factors................................................................ Community First Banking Company............................................. Carrollton Federal Bank..................................................... CF Mutual Holdings.......................................................... Proposed Management Purchases............................................... Use of Proceeds............................................................. Dividend Policy............................................................. Market for Common Stock..................................................... Capitalization.............................................................. Regulatory Capital.......................................................... Pro Forma Data.............................................................. Management's Discussion and Analysis of Financial........................... Condition and Results of Operations......................................... Business.................................................................... Taxation.................................................................... Regulation.................................................................. Management of the Company................................................... Management of the Savings Bank.............................................. The Conversion and Reorganization........................................... Certain Restrictions on Acquisition of the Company.............................................................. Description of Capital Stock................................................ Experts..................................................................... Legal Matters............................................................... Additional Information...................................................... Glossary.................................................................... Index to Consolidated Financial Statements.................................. Until ____________, 1997 or 25 days after commencement of the Syndicated Community Offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2,098,750 Shares (Estimated Maximum) COMMUNITY FIRST BANKING COMPANY (Proposed Holding Company for Carrollton Federal Bank, FSB) COMMON STOCK ---------- PROSPECTUS ---------- TRIDENT SECURITIES, INC. , 1997 -------- -- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- <PAGE> PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The following are the estimated expenses, other than underwriting discounts and commissions, to be borne by the Company in connection with the issuance and distribution of the Common Stock being registered. <TABLE> <S> <C> Securities and Exchange Commission Registration Fee $ 14,628 OTS filing fees 8,400 National Association of Securities Dealers, Inc. Filing Fee 5,328 Nasdaq Stock Market Listing Fee 17,068 Blue Sky Fees and Expenses 10,000 Legal Fees and Expenses 300,000 Accounting Fees and Expenses 60,000 Printing and Engraving Expenses 150,000 Marketing agent expenses 70,000 Appraiser's fees and expenses 32,500 Transfer Agent and Registrar Fee 3,000 Miscellaneous 28,076 ------- TOTAL $699,000 ======= </TABLE> Item 14. Indemnification of Directors and Officers. The Company's Bylaws contain certain indemnification provisions providing that directors, officers, and employees or agents of the Company will be indemnified against expenses actually and reasonably incurred by them if they are successful on the merits of a claim or proceeding. When a case or dispute is not ultimately determined on its merits (i.e., it is settled), the indemnification provisions provide that the Company will indemnify directors when they meet the applicable standard of conduct. The applicable standard of conduct is met if the director acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and with respect to an employee benefit plan, for a purpose the director believed in good faith to be in the interests of the participants and beneficiaries of the plan. The standard of conduct with respect to any criminal action or proceeding is met if the director had no reasonable cause to believe his or her conduct was unlawful. Whether the applicable standard of conduct has been met is determined by the Board of Directors, the shareholders or independent legal counsel in each specific case. The Company can also provide for greater indemnification than that set forth in the Bylaws if it chooses to do so, subject to approval by the Company's shareholders. The Company may not, however, indemnify a director for liability arising out of circumstances which constitute exceptions to limitation of a director's liability for monetary damages. See "--Limitation of Liability". II-1 <PAGE> The Company may purchase and maintain insurance on behalf of any director against any liability asserted against such person and incurred by him or her in any such capacity, whether or not the Company would have had the power to indemnify against such liability. In addition, Article 11 of the Company's Articles of Incorporation, subject to certain exceptions, eliminates the potential personal liability of a director for monetary damages to the Company and to the shareholders of the Company for breach of any duty as a director. There is no elimination of liability for (a) a breach of duty involving appropriation of a business opportunity of the Company, (b) an act or omission not in good faith or involving intentional misconduct or a knowing violation of law, (c) a transaction from which the director derives an improper material tangible personal benefit, or (d) as to any payment of a dividend or approval of a stock repurchase that is illegal under the Georgia Business Corporation Code. The Articles of Incorporation do not eliminate or limit the right of the Company or its shareholders to seek injunctive or other equitable relief not involving monetary damages. Item 15. Recent Sales of Unregistered Securities. The only securities to be sold by the Registrant prior to effectiveness of this registration statement will be of 10 shares of common stock to be issued to its sole shareholder, Carrollton Federal Bank, FSB, for $20.00 per share, which shares will be cancelled upon consummation of the Conversion and Reorganization. Because the shares will be sold to only one entity and were sold only to facilitate the organization of the Registrant, the sale will be exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof. Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits <TABLE> <CAPTION> Exhibit Number Description ------ ----------- <S> <C> 1.1 Form of Agency Agreement* 2.1 Plan of Conversion and Agreement and Plan of Reorganization, as amended* 3.1 Articles of Incorporation of the Registrant* 3.2 Bylaws of the Registrant* 4.1 Specimen Stock Certificate of the Registrant* 4.2 See Exhibits 3.1 and 3.2 for provisions of the Registrant's Articles of Incorporation and Bylaws governing the rights of holders of securities of the Registrant* 5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding the legality of the securities to be issued* </TABLE> II-2 <PAGE> <TABLE> <S> <C> 8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding income tax consequences* 10.1 Form of 1997 Stock Option Plan, assuming the Plan is submitted to the Company's shareholders for approval within 12 months after the Conversion* 10.2 Form of Management Recognition Plan, assuming the Plan is submitted to the Company's shareholders for approval within 12 months after the Conversion* 10.3 Form of Employee Stock Ownership Plan and Trust* 10.4 Form of Employee Stock Ownership Plan Trust Agreement* 10.5(a) Employment Agreement between Gary D. Dorminey and the Registrant dated September 1, 1994, with the first and second amendments thereto dated September 1, 1995 and September 1, 1996, respectively* 10.5(b) Form of Employment Agreement between Gary D. Dorminey, the Company and the Savings Bank dated as of June 1, 1997* 10.5(c) Form of Employment Agreement between D. Lane Poston, the Company and the Savings Bank dated as of June 1, 1997* 10.5(d) Form of Employment Agreement between C. Lynn Gable, the Company and the Savings Bank dated as of June 1, 1997* 10.5(e) Form of Employment Agreement between Anyce C. Fox, the Company and the Savings Bank dated as of June 1, 1997* 10.6 Retirement Plan* 10.7 401(k) Retirement Plan* 23.1 Consent of Porter Keadle Moore LLP 23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included in its opinions filed as Exhibits 5.1 and 8.1)* 23.3 Consent of Ferguson & Co. L.L.P.* 24.1 Power of Attorney (appears on the signature page to this Registration Statement)* 27.1 Financial Data Schedule (for SEC use only)* 99.1 Appraisal Report of Ferguson & Co. L.L.P.* 99.2 Stock Order Form (including form of proxy for solicitation of members of CF Mutual Holdings)* 99.3 Marketing Materials* </TABLE> II-3 <PAGE> (b) Financial Statement Schedules The financial statement schedules for which provision is made in the applicable accounting regulations of the Commission are either not required under the related instructions or are inapplicable and have therefore been omitted. Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any Prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. ---- ---- (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Offerings. The undersigned Registrant hereby undertakes to furnish stock certificates to or in accordance with the instructions of the respective purchasers of the Common Stock, so as to make delivery to each purchaser promptly following the closing under the Plan of Conversion. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 <PAGE> SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia on May 8, 1997. COMMUNITY FIRST BANKING COMPANY By: /s/ Gary D. Dorminey ----------------------------------------------- Gary D. Dorminey President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated. <TABLE> <CAPTION> Name Position Date ---- -------- ---- <S> <C> <C> * Chairman of the Board May 8, 1997 - ---------------------- --------------- T. Aubrey Silvey /s/ Gary D. Dorminey Chief Executive Officer, May 8, 1997 - ---------------------- President and Director --------------- Gary D. Dorminey (principal executive officer) </TABLE> [Signatures continued on following page] II-5 <PAGE> [Signatures continued from previous page] <TABLE> <CAPTION> Name Position Date ---- -------- ---- <S> <C> <C> * Vice Chairman of the Board May 8, 1997 - ---------------------- ------------- Gary M. Bullock * Director May 8, 1997 - ---------------------- ------------- Anna L. Berry * Director May 8, 1997 - ---------------------- ------------- Jerry L. Clayton * Director May 8, 1997 - ---------------------- ------------- Thomas E. Reeve, Jr. * Director May 8, 1997 - ---------------------- ------------- Michael P. Steed * Director May 8, 1997 - ---------------------- ------------- Dean B. Talley * Director May 8, 1997 - ---------------------- ------------- Thomas S. Upchurch * Chief Financial Officer May 8, 1997 - ----------------------- (principal financial and ------------- C. Lane Gable accounting officer) </TABLE> * By: /s/ Gary D. Dorminey -------------------- Gary D. Dorminey Attorney-in-Fact II-6 <PAGE> INDEX OF EXHIBITS Exhibit Sequential Number Description Page ------ ----------- ---- 1.1 Form of Agency Agreement* 2.1 Plan of Conversion and Agreement and Plan of Reorganization, as amended* 3.1 Articles of Incorporation of the Registrant* 3.2 Bylaws of the Registrant* 4.1 Specimen Stock Certificate of the Registrant* 4.2 See Exhibits 3.1 and 3.2 for provisions of the Registrant's Articles of Incorporation and Bylaws governing the rights of holders of securities of the Registrant* 5.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding the legality of the securities to be issued* 8.1 Opinion of Powell, Goldstein, Frazer & Murphy LLP regarding income tax consequences* 10.1 Form of 1997 Stock Option Plan, assuming the Plan is submitted to the Company's shareholders for approval within 12 months after the Conversion* 10.2 Form of Management Recognition Plan, assuming the Plan is submitted to the Company's shareholders for approval within 12 months after the Conversion* 10.3 Form of Employee Stock Ownership Plan and Trust* 10.4 Form of Employee Stock Ownership Plan Trust Agreement* 10.5(a) Employment Agreement between Gary D. Dorminey and the Registrant dated September 1, 1994, with the first and second amendments thereto dated September 1, 1995 and September 1, 1996, respectively* 10.5(b) Form of Employment Agreement between Gary D. Dorminey, the Company and the Savings Bank dated as of June 1, 1997* 10.5(c) Form of Employment Agreement between D. Lane Poston, the Company and the Savings Bank dated as of June 1, 1997* 10.5(d) Form of Employment Agreement between C. Lynn Gable, the Company and the Savings Bank dated as of June 1, 1997* 10.5(e) Form of Employment Agreement between Anyce C. Fox, the Company and the Savings Bank dated as of June 1, 1997* 10.6 Retirement Plan* 10.7 401(k) Retirement Plan* 23.1 Consent of Porter Keadle Moore LLP II-7 <PAGE> 23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (included in its opinions filed as Exhibits 5.1 and 8.1)* 23.3 Consent of Ferguson & Co. L.L.P.* 24.1 Power of Attorney (appears on the signature page to this Registration Statement)* 27.1 Financial Data Schedule (for SEC use only)* 99.1 Appraisal Report of Ferguson & Co. L.L.P.* 99.2 Stock Order Form (including form of proxy for solicitation of members of CF Mutual Holdings)* 99.3 Marketing Materials* II-8 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23.1 <SEQUENCE>2 <DESCRIPTION>CONSENT OF PORTER KEADLE MOORE LLP <TEXT> <PAGE> EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated February 4, 1997, except for note 15, as to which the date is February 11, 1997, accompanying the financial statements of CF Mutual Holdings and Subsidiaries contained in the Registration Statement on Form S-1 and the Prospectus. We consent to the use of the aforementioned report in the Registration Statement on Form S-1 and the Prospectus, and to the use of our name as it appears under the caption "Experts." PORTER KEADLE MOORE LLP Successor to the practice of Evans, Porter, Bryan & Co. Atlanta, Georgia May 8, 1997 </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035991_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035991_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c9b84d3f19506fdd57f3e9d935290945bb9558a8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035991_first_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete. It is qualified in its entirety by the detailed information and financial statements appearing elsewhere in this Prospectus. First Robinson Savings and Loan, F.A. First Robinson was originally chartered in 1883. First Robinson serves the financial needs of residents and businesses in its primary market area through its retail banking offices located in Crawford County, Illinois. Its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (the "FDIC"). At December 31, 1996, First Robinson had total assets of $67.5 million, deposits of $59.6 million, and retained earnings of $4.7 million. The Association met all of its regulatory capital requirements at that date. First Robinson has been, and intends to continue to be, a community-oriented, locally owned, financial institution offering financial services to residents and businesses of Crawford County, Illinois. The principal business of the Association has historically consisted of attracting deposits from the general public and investing those funds in primarily one- to four-family residential real estate loans and, to a lesser extent, consumer loans, commercial business and commercial real estate loans and multi-family and construction loans. The Association also invests in securities issued by the U.S. government and other liquid assets. The Association's business strategy is designed to maintain the Association's tangible capital in excess of regulatory requirements and limit, to the extent practicable, interest rate vulnerability. See generally, "Business of the Association." The information set forth above should be considered in light of the factors described under the caption "Risk Factors." For additional information regarding the implementation of the Association's business strategy, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset/Liability Management." The executive office of the Association is located at 501 East Main Street, Robinson, Illinois 62454. Its telephone number at that address is (618) 544-8621. First Robinson Financial Corporation The Holding Company was incorporated under the laws of the State of Delaware in March 1997, at the direction of the Board of Directors of the Association for the purpose of serving as a holding company of the Converted Association upon its conversion from mutual to stock form, and of the National Bank following the Bank Conversion. Prior to the Conversion, the Holding Company has not engaged and will not engage in any material operations. Upon consummation of the Stock Conversion, the Holding Company will have no significant assets other than the outstanding capital stock of the Converted Association (or, following the Bank Conversion, the National Bank), approximately 50% of the net proceeds from the Stock Conversion (less the amount to fund the Employee Stock Ownership Plan ("ESOP")) and a note evidencing its loan to the Association's ESOP. Upon consummation of the Bank Conversion, the Holding Company's principal business will be overseeing and directing the business of the National Bank and investing the net Stock Conversion proceeds retained by it. In connection with the Bank Conversion, the Holding Company will register with the Board of Governors of to the Election Deadline. Total funds redirected by each Participant into the Employer Stock Fund must represent whole share amounts (i.e., must be divisible by the $10.00 per share purchase price) and must be allocated in not less than 10% increments from Investment Options containing the Participant's Plan funds. When a Participant instructs the Trustee to redirect the funds in his or her existing Accounts into the Employer Stock Fund in order to purchase Holding Company Stock, the Trustee will liquidate funds from the appropriate Investment Option(s) and apply such redirected funds as requested, in order to effect the new allocation. For example, a Participant may fund an election to purchase 100 shares of Holding Company Stock by redirecting the aggregate purchase price of $1,000 for such shares from the following Investment Options (provided the necessary funds are available in such Investment Options): (i) 10% from the Twentieth Century Growth Fund, (ii) 30% from the Oppenheimer Global Fund A, and (iii) 60% from the Nationwide Money Market Fund. In such case, the Trustee would liquidate $100 of the Participant's funds from the Twentieth Century Growth Fund, $300 from funds in the Oppenheimer Fund and $600 from funds in the Twentieth Century Growth Fund to raise the $1,000 aggregate purchase price. If a Participant's instructions cannot be fulfilled because the Participant does not have the required funds in one or more of the Investment Options to purchase the shares of Holding Company Stock subscribed for, the Participant will be required to file a revised Election Form with the Plan Administrator by the Election Deadline. Once received in proper form, an executed Election Form may not be modified, amended or rescinded without the consent of First Robinson unless the Conversion has not been completed within 45 days after the end of the Subscription and Community Offering. Adjusting Your Investment Strategy. Until changed in accordance with the terms of the Plan, future allocations of a Participant's contributions would remain unaffected by the election to purchase Holding Company Stock through the Plan in the Conversion. A Participant may modify a prior investment allocation election or request the transfer of funds to another investment vehicle by filing a written notice with the Plan Administrator, with such modification or request taking effect on the sooner to occur of the next January 1 or July 1. However, modifications and fund transfers relating to the Employer Stock Fund are permitted only during an "Investment Change Period." An "Investment Change Period" opens at the beginning of the third day after the Holding Company issues a "Quarterly Earnings Release" and closes at the end of the twelfth business day after such release. The term "Quarterly Earnings Release" means any press release issued by the Holding Company for general distribution which announces, for the first time, the Holding Company's Results of operations for a particular fiscal quarter. First Robinson anticipates these opportunities will occur four times per year. First Robinson will attempt to notify Participants of the commencement of each Investment Change Period but will not assume responsibility for doing so. Valuation of Accounts. The net gain (or loss) of the Trust from investments (including interest payments, dividends, realized and unrealized gains and losses on securities, and any expenses paid from the Trust) are determined not less often than quarterly, and are allocated among the Accounts of Participants according to the balance of each such Acounts as of the end of each quarter. For purposes of such allocations, all assets of the Trust are valued at their fair market value pursuant to the method described in the Plan. ALPHABETICAL LISTING OF DEFINITIONS Plan Definition Section Reference (Page Number) 100% Limitation.................................................3.19(l) (3.09) Account............................................................1.14 (1.05) Accounting Date....................................................1.20 (1.05) Accrued Benefit....................................................1.15 (1.05) Actual Deferral Percentage ("ADP") Test..........................14.08 (14.06) Adoption Agreement.................................................1.04 (1.01) Advisory Committee.................................................1.06 (1.02) Annual Addition.................................................3.19(a) (3.07) Average Contribution Percentage Test.............................14.09 (14.07) Beneficiary........................................................1.11 (1.03) Break in Service for Eligibility Purposes..........................2.03 (2.01) Break in Service for Vesting Purposes..............................5.07 (5.03) Cash-out Distribution..............................................5.04 (5.01) Code...............................................................1.25 (1.06) Code ss.411(d)(6) Protected Benefits.............................13.02 (13.01) Compensation.......................................................1.12 (1.03) Compensation for Code ss.401(k) Purposes......................14.03(f) (14.02) Compensation for Code ss.415 Purposes...........................3.19(b) (3.07) Compensation for Top Heavy Purposes..........................1.33(B)(3) (1.10) Contract(s)...................................................11.03(c) (11.02) Custodian Designation.........................................10.03[B] (10.02) Deemed Cash-out Rule............................................5.04(C) (5.02) Deferral Contributions........................................14.03(g) (14.02) Deferral Contributions Account...................................14.06 (14.04) Defined Benefit Plan............................................3.19(i) (3.08) Defined Benefit Plan Fraction...................................3.19(j) (3.08) Defined Contribution Plan.......................................3.19(h) (3.08) Defined Contribution Plan Fraction..............................3.19(k) (3.09) Determination Date...........................................1.33(B)(7) (1.10) Disability.........................................................1.28 (1.07) Distribution Date..................................................6.01 (6.01) Distribution Restrictions.....................................14.03(m) (14.03) Earned Income......................................................1.13 (1.05) Effective Date.....................................................1.18 (1.05) Elective Deferrals............................................14.03(h) (14.02) Elective Transfer.............................................13.06(A) (13.02) Eligible Employee.............................................14.03(c) (14.02) Employee...........................................................1.07 (1.02) Employee Contributions........................................14.03(n) (14.03) Employer...........................................................1.01 (1.01) Employer Contribution Account....................................14.06 (14.04) [] (3) One Hour of Service. [] (c) Special requirements for non-401(k) portion of plan. (Make elections under (1) and under (2)) (1) The requirements of this Option (c) apply to participation in: (Choose at least one of (i) through (iii)) [] (i) The allocation of Employer nonelective contributions and Participant forfeitures. [] (ii) The allocation of Employer matching contributions (including forfeitures allocated as matching contributions). [] (iii) The allocation of Employer qualified nonelective contributions. (2) For participation in the allocations described in (1), the eligibility conditions are: (Choose at least one of (i) through (iv)) [] (i) (one or two) Year(s) of Service, without an intervening Break in Service (as described in Section 2.03(A) of the Plan) if the requirement is two Years of Service. [] (ii) months (not exceeding 24) following the Employee's Employment Commencement Date. [] (iii) One Hour of Service. [] (iv) Attainment of age (Specify age, not exceeding 21). Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose (d), (e) or (f)) [] (d) Semi-annual Entry Dates. The first day of the Plan Year and the first day of the seventh month of the Plan Year. [] (e) The first day of the Plan Year. [x] (f) (Specify entry dates) The first day of each month. Time of Participation. An Employee will become a Participant (and, if applicable, will participate in the allocations described in Option (c)(1)), unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on that date): (Choose (g), (h) or (i)) [x] (g) immediately following [] (h) immediately preceding [] (i) nearest the date the Employee completes the eligibility conditions described in Options (a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement Section 2.01. [Note: The Employer must coordinate the selection of (g), (h) or (i) with the "Plan Entry Date" selection in (d), (e) or (f). Unless otherwise excluded under Section 1.07, the Employee must become a Participant by the earlier of: (1) the first day of the Plan Year beginning after the date the Employee completes the age and service requirements of Code ss.410(a); or (2) 6 months after the date the Employee completes those requirements.] Conditions for allocation. With limited exceptions, to be entitled to an allocation of Employer contributions, you must complete 1,000 hours of service during the plan year. However, you do not have to be employed by the Employer on the last day of the plan year to be entitled to an allocation. The contribution allocations described in this Section (8) may vary for certain employees if the Plan is top heavy. Generally, the Plan is top heavy if more than 60% of the Plan's assets are allocated to the accounts of key employees (certain owners and officers). If the Plan is top heavy, any participant who is not a key employee and who is employed on the last day of the plan year, may not receive a contribution allocation which is less than a certain minimum. Usually that minimum is 3%, but if the contribution allocation for the plan year is less than 3% for all the key employees, the top heavy minimum is the smaller allocation rate. If you are a participant in the Plan, your allocation described in this Section (8) in most cases will be equal to or greater than the top heavy minimum contribution allocation. The Plan also may vary the definition of the top heavy minimum contribution to take into account another plan maintained by the Employer. The law limits the amount of "additions" (other than trust earnings) which the Plan may allocate to your account under the Plan. Your additions may never exceed 25% of your compensation for a particular plan year, but may be less if 25% of your compensation exceeds a dollar amount announced by the Internal Revenue Service each year. The Plan may need to reduce this limitation if you participate (or have participated) in any other plans maintained by the Employer. The discussion of Plan allocations in this Section (8) is subject to this limitation. (9) Employee Contributions. The Plan does not permit nor require you to make employee contributions to the trust fund. "Employee contributions" are contributions made by an employee for which the employee does not receive an income tax deduction. The only source of contributions under the Plan is the annual Employer contribution, including the "elective deferrals" made at your election under the 401(k) arrangement described in Section (8). "Elective deferrals" are not "employee contributions" for purposes of the Plan. Prior to your termination of employment with the Employer, you may not withdraw any portion of your Mandatory Contributions Account. (10) Vesting in Employer Contributions. Your interest in the contributions the Employer makes to the Plan for your benefit becomes 100% vested when you attain normal retirement age (as defined in Section (11)). Prior to normal retirement age, your interest in the contributions the employer makes on your behalf become vested in accordance with the following schedule: NON TOP HEAVY SCHEDULE Percent of Years of Service Nonforfeitable Interest ---------------- ----------------------- Less than 1 . . . . . . . . . . . 0% 1 . . . . . . . . . . . . . . . . 20% 2 . . . . . . . . . . . . . . . . 40% 3 . . . . . . . . . . . . . . . . 60% 4 . . . . . . . . . . . . . . . . 80% 5 or more . . . . . . . . . . . . 100% 15h Were any participant contributions transmitted to the plan more than 31 days after receipt or withholding by the employer? Yes > No > X 15i Were any loans by the plan or fixed income obligations due the plan classified as uncollectible or in default as of the close of the plan year? Yes > No > X 15j Has any plan fiduciary had a financial interest in excess of 10% in any party providing services to the plan or received anything of value from any such party? Yes > No > X 15k Did the plan at any time hold 20% or more of its assets in any single security, debt, mortgage, parcel of real estate, or partnership/joint venture interests? Yes > No > X 15l did the plan at any time engage in any transaction or series of related transactions involving 20% or more of the current value of plan assets? Yes > No > X 15m Were there any noncash contributions made to the plan the value of which was set without any appraisal by an independent third party? Yes > No > X 15n Were there any purchases of nonpublicly traded securities by the plan the value of which was set without an appraisal by an independent third party? Yes > No > X 15o Has the plan reduced or failed to provide any benefit when due under the plan because of insufficient assets? Yes > No > X 16a Is the plan covered under the Pension Benefit Guaranty Corporation termination insurance program? Yes > No > X Not Determined > 16b If line 16a is "Yes" or "Not Determined", enter the employer identification number and the plan number used to identify it. Employer Identification Number > Plan Number > the Federal Reserve System (the "FRB") as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"). First Robinson Savings Bank, National Association Upon consummation of the Bank Conversion, the National Bank will succeed to all of the assets and liabilities of the Converted Association (which, pursuant to the Stock Conversion will have succeeded to all of the assets and liabilities of the Association), and initially will continue to conduct business in substantially the same manner as the Association prior to the Conversion. Diversification of the National Bank's loan portfolio may also alter the risk profile of the National Bank. See "Risk Factors - Effect of the Conversion to a National Bank Charter on Operations." The deposits of the National Bank will continue to be insured by the SAIF of the FDIC, and, as such, the National Bank will continue to be subject to regulation and supervision by the FDIC. The National Bank will not be subject to OTS regulation and supervision; rather, the primary regulator of the National Bank will be the Office of the Comptroller of the Currency (the "OCC"). The National Bank will remain a member of the FHLB of Chicago. As a national bank, the National Bank will also be required to become a member of the FRB. The Conversion The Subscription and Community Offering is being made in connection with the Conversion of First Robinson from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association and the formation of First Robinson Financial Corporation as the holding company of the Association. Net Conversion proceeds will increase the capital of the Association and, consistent with regulatory restrictions, will support financial services to the customers and members of the community which it serves. See "Use of Proceeds." Upon consummation of the Stock Conversion, it is anticipated that the Converted Association will convert to a national bank. The Bank Conversion will be consummated as soon as possible thereafter; provided, however, that under the Plan, the Association's Board of Directors has the ability to elect, at any time, not to proceed with the Bank Conversion. Furthermore, there can be no assurance that the Association will obtain regulatory approval to consummate the Bank Conversion. It is presently the intent of the Association's Board of Directors to proceed with both the Stock Conversion and the Bank Conversion. See "Risk Factors - Potential Delay in Completion or Denial of Bank Conversion" and "The Conversion General." The Conversion is subject to certain conditions, including the prior approval of the Plan by the Association's members at a special meeting to be held on ________, 1997 (the "Special Meeting"). Approval of the Plan requires the affirmative vote of members of the Association holding not less than a majority of the total number of votes eligible to be cast at the Special Meeting. After the Stock Conversion, depositors and borrowers of the Association will have no voting rights in the Holding Company, unless they become stockholders. Eligible Account Holders and Supplemental Eligible Account Holders, however, will have certain liquidation rights in the Association. See "The Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of the Association - Liquidation Rights." When Holding Company Stock is purchased or sold, the cost or net proceeds are charged or credited to the Accounts of Participants affected by the purchase or sale. First Robinson expects to pay any brokerage commissions, transfer fees and other expenses incurred in the sale and purchase of Holding Company Stock for the Employer Stock Fund. A Participant's account will be adjusted to reflect changes in the value of shares of Holding Company Stock resulting from stock dividends, stock splits and similar changes. Financial Data Employer Contributions. For the Plan Year ended December 31, 1996, First Robinson made matching contributions totaling approximately $3,127.36. First Robinson made discretionary contributions to the Plan for the fiscal year ended December 31, 1996 of approximately $24,000. See generally "Employer's Contributions" in the Summary Plan Description attached hereto. Due to the additional expenses related to the establishment and operation of the ESOP and, if adopted, the RRP, First Robinson may determine to reduce its matching contribution under the Plan in the future. Performance of Holding Company Stock. As of the date of this Prospectus Supplement, no shares of Holding Company Stock have been issued or are outstanding and there is no established market for the Holding Company Stock. Accordingly, there is no record of the historical performance of the Holding Company Stock. Performance of Investment Options. The following table provides performance data with respect to the Investment Options available under the Plan, based on information provided to the Company by Nationwide Pension Sales ("Nationwide"). The information set forth below with respect to the Investment Options has been reproduced from materials supplied by Nationwide, First Robinson and the Holding Company take no responsibility for the accuracy of such information. Additional information regarding the Investment Options may be available from Nationwide or First Robinson. Participants should review any available additional information regarding these investments before making an investment decision under the Plan. Employer for Code ss.415 Purposes...............................3.19(c) (3.08) Employer for Top Heavy Purposes..............................1.33(B)(6) (1.10) Employment Commencement Date.......................................2.02 (2.01) ERISA..............................................................1.24 (1.06) Excess Aggregate Contributions...................................14.09 (14.07) Excess Amount...................................................3.19(d) (3.08) Excess Contributions.............................................14.08 (14.06) Exempt Participant.................................................8.01 (8.01) Forfeiture Break in Service........................................5.08 (5.03) Group Trust Fund.................................................10.16 (10.07) Hardship.....................................................6.01(A)(4) (6.02) Hardship for Code ss.401(k) Purposes.............................14.11 (14.10) Highly Compensated Employee........................................1.09 (1.02) Highly Compensated Group......................................14.03(d) (14.02) Hour of Service....................................................1.27 (1.06) Incidental Insurance Benefits....................................11.01 (11.01) Insurable Participant.........................................11.03(d) (11.02) Investment Manager..............................................9.04(i) (9.01) Issuing Insurance Company.....................................11.03(b) (11.02) Joint and Survivor Annuity......................................6.04(A) (6.06) Key Employee.................................................1.33(B)(1) (1.10) Leased Employees...................................................1.31 (1.08) Limitation Year.............................1.17 and 3.19(e) (1.05) and (3.08) Loan Policy.....................................................9.04(A) (9.02) Mandatory Contributions..........................................14.04 (14.03) Mandatory Contributions Account..................................14.04 (14.03) Master or Prototype Plan........................................3.19(f) (3.08) Matching Contributions........................................14.03(i) (14.02) Maximum Permissible Amount......................................3.19(g) (3.08) Minimum Distribution Incidental Benefit (MDIB)..................6.02(A) (6.03) Multiple Use Limitation..........................................14.10 (14.09) Named Fiduciary...............................................10.03[D] (10.04) Nonelective Contributions.....................................14.03(j) (14.03) Nonforfeitable.....................................................1.16 (1.05) Nonhighly Compensated Employee................................14.03(b) (14.02) Nonhighly Compensated Group...................................14.03(e) (14.02) Non-Key Employee.............................................1.33(B)(2) (1.10) Nontransferable Annuity............................................1.23 (1.05) Normal Retirement Age..............................................5.01 (5.01) Owner-Employee.....................................................1.08 (1.02) Paired Plans.......................................................1.34 (1.10) Participant........................................................1.10 (1.03) Participant Deductible Contributions...............................4.02 (4.01) Participant Forfeiture.............................................3.05 (3.03) Participant Loans.............................................10.03[E] (10.05) Participant Nondeductible Contributions............................4.01 (4.01) Permissive Aggregation Group.................................1.33(B)(5) (1.10) Plan...............................................................1.03 (1.01) Dual eligibility. The eligibility conditions of this Section 2.01 apply to: (Choose (j) or (k)) [x] (j) All Employees of the Employer, except: (Choose (1) or (2)) [x] (1) No exceptions. [] (2) Employees who are Participants in the Plan as of the Effective Date. [] (k) Solely to an Employee employed by the Employer after __________. If the Employee was employed by the Employer on or before the specified date, the Employee will become a Participant: (Choose (1), (2) or (3)) [] (1) On the latest of the Effective Date, his Employment Commencement Date or the date he attains age (not to exceed 21). [] (2) Under the eligibility conditions in effect under the Plan prior to the restated Effective Date. If the restated Plan required more than one Year of Service to participate, the eligibility condition under this Option (2) for participation in the Code ss.401(k) arrangement under this Plan is one Year of Service for Plan Years beginning after December 31, 1988. [For restated plans only] [] (3) (Specify) ____________________________________________. 2.02 YEAR OF SERVICE - PARTICIPATION. Hours of Service. An Employee must complete: (Choose (a) or (b)) [x] (a) 1,000 Hours of Service [] (b) Hours of Service during an eligibility computation period to receive credit for a Year of Service. [Note: The Hours of Service requirement may not exceed 1,000.] Eligibility computation period. After the initial eligibility computation period described in Section 2.02 of the Plan, the Plan measures the eligibility computation period as: (Choose (c) or (d)) [] (c) The 12 consecutive month period beginning with each anniversary of an Employee's Employment Commencement Date. [x] (d) The Plan Year, beginning with the Plan Year which includes the first anniversary of the Employee's Employment Commencement Date. 2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described in Section 2.03(B) of the Plan: (Choose (a) or (b)) [] (a) Does not apply to the Employer's Plan. [x] (b) Applies to the Employer's Plan. 2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b)) [x] (a) Does not permit an eligible Employee or a Participant to elect not to participate. TOP HEAVY SCHEDULE Percent of Years of Service Nonforfeitable Interest ---------------- ----------------------- Less than 1 . . . . . . . . . . . . 0% 1 . . . . . . . . . . . . . . . . 20% 2 . . . . . . . . . . . . . . . . 40% 3 . . . . . . . . . . . . . . . . 60% 4 . . . . . . . . . . . . . . . . 80% 5 or more . . . . . . . . . . . . 100% 100% vesting for Deferral Contributions Account. The vesting schedule does not apply to your Deferral Contributions Account described in Section (8). Instead, you are 100% vested at all times in your Deferral Contributions Account. Special vesting rule for death or disability. If you die or become disabled while still employed by the Employer, your entire Plan interest becomes 100% vested, even if you otherwise would have a vested interest less than 100%. Year of service. To determine your percentage under a vesting schedule, a year of service means a 12-month vesting service period in which you complete at least 1,000 hours of service. The Plan measures the vesting service period as the plan year. If you complete at least 1,000 hours of service during a plan year, you will receive credit for a year of service even though you are not employed by the Employer on the last day of that plan year. You will receive credit for years of service with the Employer prior to the time the Employer established the Plan and for years of service prior to the time you became a participant in the Plan. The Plan provides two methods of vesting forfeiture which may apply before a participant becomes 100% vested in his entire interest under the Plan. The primary method of vesting forfeiture is the "forfeiture break in service" rule. The secondary method of forfeiture is the "cash out" rule. Also see Section (15) relating to loss or denial of benefits. Forfeiture Break in Service Rule. Termination of employment alone will not result in forfeiture under the Plan unless you do not return to employment with the Employer before incurring a "forfeiture break in service." A "forfeiture break in service" is a period of 5 consecutive vesting service periods in which you do not work more than 500 hours in each vesting service period comprising the 5 year period. Example. Assume you are 60% vested in your account balance. After working 400 hours during a particular vesting service period, you terminate employment and perform no further service for the Employer during the next 4 vesting service periods. Under this example, you would have a "forfeiture break in service" during the fourth vesting service period following the vesting service period in which you terminated employment because you did not work more than 500 hours during each vesting service period of 5 consecutive vesting service periods. Consequently, you would forfeit the 40% non-vested portion of your account. If you had returned to employment with the Employer at any Subscription and Community Offering. The Holding Company is offering 747,500 shares of Common Stock, at a price of $10.00 per share, in the Subscription Offering. The shares of Common Stock to be issued in the Stock Conversion are being offered in the following order of priority: (1) Eligible Account Holders, (2) Tax Qualified Employee Plans; provided, however, that the Tax Qualified Employee Plans shall have first priority Subscription Rights to the extent that the total number of shares of Common Stock sold in the Stock Conversion exceeds the maximum of the Estimated Valuation Range, (3) Supplemental Eligible Account Holders, (4) Other Members, and (5) officers, directors and employees of the Association. The Holding Company may offer any shares of Common Stock not subscribed for in the Subscription Offering at the same price in the Community Offering to certain members of the general public. See "The Conversion - Offering of Holding Company Stock." The Holding Company has engaged Trident Securities as selling agent and to advise and consult with respect to the distribution of shares of Common Stock. The Plan places limitations on the number of shares which may be purchased in the Stock Conversion by various categories of persons. With the exception of the Tax Qualified Employee Plans, no Eligible Account Holder, Supplemental Eligible Account Holder, Other Member or director, officer or employee may purchase in the Stock Conversion more than $65,000 of the Common Stock, subject to adjustments in certain circumstances; and no person together with his associates or group of persons acting in concert (other than the Tax Qualified Employee Plans) may purchase more than $100,000 of the Common Stock offered in the Stock Conversion (as calculated without giving effect to any increase in the Estimated Valuation Range subsequent to the date hereof). Under certain circumstances, the maximum purchase limitation may be increased or decreased, consistent with OTS regulations, in the sole discretion of the Association and the Holding Company and without a resolicitation of subscribers. Further, to the extent that shares are available, each subscriber must subscribe for a minimum of 25 shares. See "The Conversion - Offering of Holding Company Common Stock." All Subscription Rights for Common Stock are non-transferable and will expire at _:__ p.m. Robinson, Illinois time on ________, 1997, unless the Subscription and Community Offering is extended by First Robinson and the Holding Company. The accompanying order form and certification, together with full payment for all shares of Common Stock for which subscription is made, or appropriate instructions authorizing withdrawal of such amount from one or more deposit accounts at First Robinson, must be received by the Holding Company prior to that time or any extension thereof. Under applicable federal regulations, all shares of Common Stock must be sold in the Stock Conversion within 45 days after the completion of the Subscription and Community Offering, unless extended with OTS approval. If the Stock Conversion is not approved by the members at the Special Meeting, no shares will be issued, the Stock Conversion will not take place, all subscription funds received will be returned promptly with interest at the Association's passbook rate, currently 3.0% per annum, and all withdrawal authorizations will be terminated. If the aggregate Purchase Price of the Common Stock actually sold in the Conversion is below $5,525,000 or above $8,596,250 (15% above the maximum of the Estimated Valuation Range), or if the Subscription and Community Offering is extended beyond _______, 1997, subscribers will be permitted to modify or cancel their subscriptions and to have their subscription funds returned promptly with interest. In the event of such an extension, each subscriber will be notified in writing of the time period within which the subscriber must notify the Association of his intention to maintain, modify or rescind his subscription. In the event the subscriber does not respond in any manner to the Association's notice, the funds submitted will be refunded to the subscriber with interest at 3.0% per annum, <TABLE> <CAPTION> Net Investment Performance ------------------------------------------------------------------- For Twelve-Month Period March 31, 1997 Ended March 31, Annualized ---------------------------------------- ----------------------- 1997 1996 1995 3 Years 5 Years ------------- ------------- ------------ ------------ --------- <S> <C> <C> <C> <C> <C> Nationwide Fund 20.69% 31.66% 10.2% 20.53% 14.38% Twentieth Century Growth Fund 10.30 16.66 4.8 10.51 7.41 Oppenheimer Global Fund A 16.85 20.01 1.4 12.43 12.55 Nationwide Money Market 4.96 5.36 4.5 4.93 4.06 </TABLE> Historical Gross Rates for the BEST OF AMERICA Group Pensions Series General Account Fixed Contract: <TABLE> <CAPTION> TIME OF DEPOSIT Q1, 1997 1996 1995 1994 -------- ---- ---- ---- <S> <C> <C> <C> <C> One Year Rate(1) 6.55% 6.98% 7.30% 7.41% <FN> (1) The above-mentioned rates are "gross" rates and do not reflect margins for administration or commissions. </FN> </TABLE> Each Participant should note that past performance is not necessarily an indicator of future results. Administration of the Plan Trustees. The trustees are appointed by the Board of Directors of First Robinson to serve at its pleasure (the "Trustees"). The current Trustees are Rick L. Catt, Clell T. Keller and Scott F. Pulliam. The Trustees receive and hold the contributions to the Plan in trust and distribute them to Participants and beneficiaries in accordance with the provisions of the Plan. The Trustees are responsible, following Participant direction, for effectuating the investment of the assets of the Trust in the Holding Company Stock and the other Investment Options. Plan Administrator. First Robinson is the Plan Administrator. First Robinson is responsible for administration of the Plan and is appointed by and serves at the pleasure of the Board of Directors of First Robinson. First Robinson may appoint individuals to assist in the administration of the Plan and in carrying out its responsibilities for interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, furnishing First Robinson with reports with respect to the administration of the Plan, receiving, reviewing and keeping on file reports of the financial condition of the Trust, and appointing or employing individuals to assist in the administration of the Plan. First Robinson has designated Rick L. Catt to assist it with the duties of Plan Administrator. First Robinson is responsible for maintenance of Plan records, preparation and filing of all returns and reports relating to the Plan which are required to be filed with the U.S. Plan Administrator.................................................1.05 (1.02) Plan Entry Date....................................................1.19 (1.05) Plan Year..........................................................1.17 (1.05) Policy........................................................11.03(a) (11.02) Predecessor Employer...............................................1.29 (1.07) Preretirement Survivor Annuity..................................6.04(B) (6.06) Qualified Domestic Relations Order.................................6.07 (6.09) Qualified Matching Contributions..............................14.03(k) (14.03) Qualified Nonelective Contributions...........................14.03(l) (14.03) Qualifying Employer Real Property.............................10.03[F] (10.05) Qualifying Employer Securities................................10.03[F] (10.05) Related Employers..................................................1.30 (1.07) Required Aggregation Group...................................1.33(B)(4) (1.10) Required Beginning Date.........................................6.01(B) (6.02) Rollover Contributions.............................................4.03 (4.01) Self-Employed Individual...........................................1.08 (1.02) Service............................................................1.26 (1.06) Term Life Insurance Contract.....................................11.03 (11.02) Top Heavy Minimum Allocation....................................3.04(B) (3.01) Top Heavy Ratio....................................................1.33 (1.09) Trust..............................................................1.21 (1.05) Trustee............................................................1.02 (1.01) Trustee Designation...........................................10.03[A] (10.01) Trust Fund.........................................................1.22 (1.05) Weighted Average Allocation Method...............................14.12 (14.11) Year of Service for Eligibility Purposes...........................2.02 (2.01) Year of Service for Vesting Purposes...............................5.06 (5.03) [] (b) Does permit an eligible Employee or a Participant to elect not to participate in accordance with Section 2.06 and with the following rules: (Complete (1), (2), (3) and (4)) (1) An election is effective for a Plan Year if filed no later than ________________________. (2) An election not to participate must be effective for at least _____ Plan Year(s). (3) Following a re-election to participate, the Employee or Participant: [] (i) May not again elect not to participate for any subsequent Plan Year. [] (ii) May again elect not to participate, but not earlier than the Plan Year following the Plan Year in which the re-election first was effective. (4) (Specify)______________________________________________ [Insert "N/A" if no other rules apply]. ARTICLE III EMPLOYER CONTRIBUTIONS AND FORFEITURES 3.01 AMOUNT. Part I. [Options (a) through (g)] Amount of Employer's contribution. The Employer's annual contribution to the Trust will equal the total amount of deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions, as determined under this Section 3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e)) [x] (a) Deferral contributions (Codess.401(k) arrangement). (Choose (1) or (2) or both) [x] (1) Salary reduction arrangement. The Employer must contribute the amount by which the Participants have reduced their Compensation for the Plan Year, pursuant to their salary reduction agreements on file with the Advisory Committee. A reference in the Plan to salary reduction contributions is a reference to these amounts. [] (2) Cash or deferred arrangement. The Employer will contribute on behalf of each Participant the portion of the Participant's proportionate share of the cash or deferred contribution which he has not elected to receive in cash. See Section 14.02 of the Plan. The Employer's cash or deferred contribution is the amount the Employer may from time to time deem advisable which the Employer designates as a cash or deferred contribution prior to making that contribution to the Trust. [x] (b) Matching contributions. The Employer will make matching contributions in accordance with the formula(s) elected in Part II of this Adoption Agreement Section 3.01. [] (c) Designated qualified nonelective contributions. The Employer, in its sole discretion, may contribute an amount which it designates as a qualified nonelective contribution. [x] (d) Nonelective contributions. (Choose any combination of (1) through (4)) [x] (1) Discretionary contribution. The amount (or additional amount) the Employer may from time to time deem advisable. time during the 5 consecutive vesting service periods and worked more than 500 hours during any vesting service period within that 5-year period, you would not incur a forfeiture under the "forfeiture break in service" rule. Cash Out Rule. The cash out rule applies if you terminate employment and receive a total distribution of the vested portion of your account balance before you incur a forfeiture break in service. For example, assume you terminated employment during a particular vesting service period after completing 800 hours of service. Assume further the total value of your account balance is $6,000 in which you have a 60% vested interest. Before you incur a forfeiture break in service, you receive a distribution of the $3,600 vested portion ($6,000 X 60%) of your account balance. Upon payment of the $3,600 vested portion of your account balance, you would forfeit the $2,400 nonvested portion. If you return to employment before you incur a "forfeiture break in service," you may have the Plan restore your "cash out" forfeiture by repaying the amount of the distribution you received attributable to Employer contributions. This repayment right applies only if you do not incur a "forfeiture break in service." You must make this repayment no later than the date 5 years after you return to employment with the Employer. Upon your reemployment with the Employer, you may request the Advisory Committee to provide you a full explanation of your rights regarding this repayment option. If the vested portion of your account balance does not exceed $3,500, the Plan will distribute that vested portion to you in a lump sum, without your consent. This involuntary cash-out distribution will result in the forfeiture of your nonvested account balance, in the same manner as an employee who voluntarily elects a cash-out distribution. Also, upon reemployment you would have the same repayment option as an employee who elected a cash-out distribution, if you return to employment before incurring a "forfeiture break in service." If you are 0% vested in your entire interest in the Plan, the Plan will treat you as having received a cash-out distribution of $0. This "distribution" results in a forfeiture of your entire Plan interest. Normally, this forfeiture occurs on the date you terminate employment with the Employer. However, if you are entitled to an allocation of Employer contributions for the plan year in which you terminate employment with the Employer, this forfeiture occurs as of the first day of the next plan year. If you return to employment before you incur a forfeiture break in service, the Plan will restore this forfeiture, as if you repaid a cash-out distribution. (11) Payment of Benefits After Termination of Employment. After you terminate employment with the Employer, the time at which the Plan will commence distribution to you and the form of that distribution depends on whether your vested account balance exceeds $3,500. If you receive a distribution from the Plan before you attain age 59-1/2, the law imposes a 10% penalty on the amount of the distribution you receive to the extent you must include the distribution in your gross income, unless you qualify for an exception from this penalty. You should consult a tax advisor regarding this 10% penalty. This summary makes references to your normal retirement age. Normal retirement age under this Plan is 65. If your vested account balance does not exceed $3,500, the Plan will distribute that portion to you, in a lump sum, as soon as is administratively feasible after you terminate employment with the Employer, or as soon as administratively practicable following that date. If you already have attained normal retirement age when you terminate employment, the Plan must make this distribution no later than the 60th day following the close of the plan year in which your employment terminates, even if the normal distribution date would occur later. The Plan does not permit you to receive the Association's current passbook rate, and/or the subscriber's withdrawal authorizations will be terminated. See "The Conversion - Offering of Holding Company Common Stock." Stock Pricing. The Purchase Price of the Common Stock in the Subscription and Community Offering is a uniform price for all subscribers, including members of the Board of Directors and management. The aggregate Purchase Price is based upon an independent appraisal, which was reviewed by the Board of Directors, of the aggregate pro forma market value of the Holding Company and the Association as converted. The aggregate pro forma market value was estimated by Ferguson & Company (the "Appraiser"), an experienced conversion appraisal firm independent of the Association, to range from $5,525,000 to $7,475,000 at March 4, 1997. Depending upon the final updated valuation, the number of shares to be issued is subject to a maximum of 859,625 shares (15% above the 747,500 maximum of the Estimated Valuation Range) and a minimum of 552,500 shares, based on a Purchase Price of $10.00. The Purchase Price of $10.00 was determined by discussion between the Holding Company and the Association and the Appraiser, taking into account, among other factors, (i) the requirement under OTS regulations that the Common Stock be offered in a manner that will achieve the widest distribution of the stock, and (ii) desired liquidity in the Common Stock subsequent to the Stock Conversion. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any kind as to the advisability of voting to approve the Conversion or purchasing shares of Common Stock. The appraisal considers First Robinson only as a going concern and should not be considered as any indication of the liquidation value of First Robinson. Moreover, the appraisal is necessarily based on many factors which change from time to time. There can be no assurance that persons who purchase shares in the Stock Conversion will be able to sell such shares at prices at or above the purchase price. See "The Conversion - Stock Pricing and Number of Shares to be Issued" for a description of the manner in which the Stock Conversion valuation was made and the limitations on its use. Non-transferability of Subscription Rights. Prior to the completion of the Stock Conversion, federal regulations prohibit any person from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the Subscription Rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Persons violating such prohibition may lose their right to purchase stock in the Stock Conversion and may be subject to sanctions by the OTS. Each person exercising Subscription Rights will be required to certify that a purchase of Common Stock is solely for the purchaser's own account and that there is no agreement or understanding regarding the sale or transfer of such shares. See "The Stock Conversion - Restrictions on Transferability." Purchases by Directors and Executive Officers The directors and executive officers of First Robinson intend to purchase for investment purposes and at the same price as shares sold to other investors in the Stock Conversion, approximately $735,000 of Common Stock (or 73,500 shares, or approximately 13.3%, 11.3%, 9.8% or 8.6%, respectively, of the shares to be issued in the Stock Conversion at the minimum, midpoint, maximum and 15% above the Estimated Valuation Range, respectively). There is no formal agreement among the officers and directors and their affiliates regarding their purchases of Common Stock. In addition, 8% of the shares issued in the Stock Conversion are expected to be purchased by the Association's ESOP. See "Management - Benefit Plans" and "The Stock Conversion - Participation by Management." Department of Labor and the IRS, and for all disclosures required to be made to Participants and beneficiaries under Sections 104 and 105 of ERISA. Reports to Plan Participants As of the end of each calendar quarter, the Plan Administrator will furnish to each Participant a statement showing (i) balances in the Participant's Accounts as of the end of that period, (ii) the amount of contributions and forfeitures allocated to his or her Accounts for that period, and (iii) the adjustments to his or her Accounts to reflect a respective share of dividends on Holding Company Stock, and other income, gains or losses, if any. Amendment and Termination It is the intention of First Robinson to continue the Plan indefinitely. Nevertheless, First Robinson may terminate the Plan at any time. If the Plan is terminated in whole or in part, then, regardless of other provisions in the Plan, each Participant affected by such termination shall become fully vested in all of his Accounts. First Robinson reserves the right to make from time to time any amendment or amendments to the Plan which do not cause any part of the Trust to be used for, or diverted to, any purpose other than the exclusive benefit of Participants or their beneficiaries; provided, however, that First Robinson may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA. Merger, Consolidation or Transfer In the event of the merger or consolidation of the Plan with another plan, or the transfer of the Trust assets to another plan, the Plan requires that each Participant would (if either the Plan or the other plan were then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then been terminated). Federal Tax Aspects of the Plan The Plan will be administered to comply in operation with the requirements of Section 401(a) of the Code and the requirements which are applicable to a qualified cash-or-deferred arrangement under Section 401(k) of the Code. Assuming that the Plan is administered in accordance with such Sections of the Code, participation in the Plan should have the following implications for federal income tax purposes: (a) Amounts contributed to Participants' Accounts, and the investment earnings on these Accounts, are not includable in Participants' federal taxable income until such contributions or earnings are actually distributed or withdrawn from the Plan. Special tax treatment may apply to the taxable portion of any distribution that includes Holding Company Stock or qualifies as a Lump Sum Distribution (as described below). [] (2) The amount (or additional amount) the Employer may from time to time deem advisable, separately determined for each of the following classifications of Participants: (Choose (i) or (ii)) [] (i) Nonhighly Compensated Employees and Highly Compensated Employees. [] (ii) (Specify classifications) . Under this Option (2), the Advisory Committee will allocate the amount contributed for each Participant classification in accordance with Part II of Adoption Agreement Section 3.04, as if the Participants in that classification were the only Participants in the Plan. [] (3) ___________% of the Compensation of all Participants under the Plan, determined for the Employer's taxable year for which it makes the contribution. [Note: The percentage selected may not exceed 15%.] [] (4) ________% of Net Profits but not more than $ ______________. [] (e) Frozen Plan. This Plan is a frozen Plan effective ____________. The Employer will not contribute to the Plan with respect to any period following the stated date. Net Profits. The Employer: (Choose (f) or (g)) [x] (f) Need not have Net Profits to make its annual contribution under this Plan. [] (g) Must have current or accumulated Net Profits exceeding $ to make the following _______________ contributions: (Choose at least one) [] (1) Cash or deferred contributions described in Option (a)(2). [] (2) Matching contributions described in Option (b), except: ____________. [] (3) Qualified nonelective contributions described in Option (c). [] (4) Nonelective contributions described in Option (d). The term "Net Profits" means the Employer's net income or profits for any taxable year determined by the Employer upon the basis of its books of account in accordance with generally accepted accounting practices consistently applied without any deductions for Federal and state taxes upon income or for contributions made by the Employer under this Plan or under any other employee benefit plan the Employer maintains. The term "Net Profits" specifically excludes ____________________________________________________________. [Note: Enter "N/A" if no exclusions apply.] If the Employer requires Net Profits for matching contributions and the Employer does not have sufficient Net Profits under Option (g), it will reduce the matching contribution under a fixed formula on a prorata basis for all Participants. A Participant's share of the reduced contribution will bear the same ratio as the matching contribution the Participant would have received if Net Profits were sufficient bears to the total matching contribution all Participants would have received if Net Profits were sufficient. If more than one member of a related group (as defined in Section 1.30) execute this Adoption Agreement, each participating member will determine Net Profits separately but will not apply this reduction unless, after combining the separately determined Net Profits, the aggregate Net Profits are insufficient to satisfy the matching contribution liability. "Net Profits" includes both current and accumulated Net Profits. distribution in any form other than a lump sum if your vested account balance does not exceed $3,500. If your vested account balance exceeds $3,500, the Plan will commence distribution to you at the time you elect to commence distribution. The Plan permits you to elect distribution: as of any distribution date following your termination of employment with the Employer. A "distribution date" under the Plan means first day of any month of a designated Plan Year, as elected by theParticipant, but not earlier than 30 days following separation from service. You may not actually receive distribution on the distribution date you elect. The Plan provides the Trustee an administratively reasonable time following a particular distribution date to make actual distribution to a participant. No later than 30 days prior to your earliest possible distribution date, the Advisory Committee will provide you a notice explaining your right to elect distribution from the Plan and the forms necessary to make your election. If you do not make a distribution election, the Plan will commence distribution to you on the 60th day following the close of the plan year in which the latest of three events occurs: (1) your attainment of normal retirement age; (2) your attainment of age 62; or (3) your termination of employment with the Employer. To determine whether your vested account balance exceeds $3,500, the Plan normally looks to the last valuation of your account prior to the scheduled distribution date. As a general rule, you may not receive distribution under the Plan earlier than the dates described in the preceding two paragraphs. However, in the event of hardship, you may request an earlier distribution. A hardship distribution must be on account of any of the following: (a) medical expenses; (b) the purchase (excluding mortgage payments) of the participant's principal residence; (c) post-secondary education tuition, for the next 12-month period, for the participant or for the participant's spouse, children or dependents; (d) to prevent the eviction of the participant from his principal residence; (e) funeral expenses of the participant's family member; or (f) the participant's disability. Furthermore, the amount of the hardship distribution may not exceed the amount necessary to satisfy the need. If you are partially-vested in your account balance, you may not receive a hardship distribution before you incur a forfeiture break in service unless the distribution will qualify as a cash-out distribution, as explained in Section (10). With limited exceptions, you may not commence distribution of your vested account balance later than April 1 of the calendar year following the calendar year in which you attain age 70-1/2, even if you have not terminated employment with the Employer. This required distribution date overrides any contrary distribution date described in this summary. If the Employer terminates the Plan before you receive complete distribution of your vested benefits, the Plan might make distribution to you before you otherwise would elect distribution. Upon Plan termination, if your vested account balance exceeds $3,500, you will receive an explanation of your distribution rights. For purposes of making a distribution of any portion of your vested account balance, the Plan refers to the latest valuation of your account balance. The Plan requires valuation of the trust fund, and adjustment of participant's accounts, as of the last day of each plan year. The Advisory Committee also may require a valuation on any other date. You will not receive any adjustment to your account balance for trust fund earnings after the latest valuation date. In general, the Plan allocates trust fund earnings, gains or losses for a valuation period on the basis of each participant's opening account Use of Proceeds The net proceeds from the sale of Common Stock in the Stock Conversion are estimated to be $5.1 million, $6.1 million, $7.1 million and $8.2 million, respectively, based on the minimum, midpoint, maximum and 15% above the maximum, of the Estimated Valuation Range. See "Pro Forma Data." The Holding Company will purchase all of the common stock of the Association to be issued upon Conversion in exchange for 50% of the net proceeds from the issuance of the Common Stock and will retain the remaining 50% of such net proceeds as its initial capitalization (less funds loaned to the ESOP sufficient to purchase up to 8% of shares sold in the Stock Conversion). Subject to regulatory approval, the Holding Company intends to lend a portion of the net proceeds to the ESOP to facilitate its purchase of up to 8% of the Common Stock sold in the Stock Conversion. The Association intends to make contributions to the ESOP in an amount to be determined by the Board of Directors, but not less than the amount needed to pay any currently maturing obligations under the loan made to the ESOP, subject to the Association's continuing compliance with its capital requirements. These contributions would be allocated among all eligible participants in proportion to their compensation. See "Management - Benefit Plans - Employee Stock Ownership Plan." The remaining net proceeds retained by the Holding Company will be invested primarily in short-term U.S. Government agency securities and other assets. Subject to compliance with federal regulations, such funds may also be used to repurchase the Common Stock or for any other lawful purpose. The net proceeds retained by the Association will become part of the Association's general funds and will be used to support its lending and investment activities. Dividends The Holding Company currently intends to pay an annual cash dividend on the Common Stock at a rate of approximately 3.0% of the Purchase Price of the Common Stock. Dividends, when and if paid, will be subject to determination and declaration by the Board of Directors in its discretion, which will take into account the Holding Company's consolidated financial condition and results of operations, tax considerations, industry standards, economic conditions, regulatory restrictions, general business practices and other factors. See "Dividends," "Regulation - Regulatory Capital Requirements" and "- Limitations on Dividends and Other Capital Distributions." The Holding Company currently has no intention to initiate, and will not initiate for a period of at least one year following completion of the Stock Conversion, any action which leads to a return of capital (as distinguished from a dividend) to stockholders of the Holding Company. Market For Common Stock The Holding Company has never issued capital stock to the public and, consequently, there is no existing market for the Common Stock. Although the Holding Company has received conditional approval to trade its Common Stock on the Nasdaq SmallCap Market under the symbol "____" there can be no assurance that the Holding Company will meet Nasdaq SmallCap Market listing requirements, which currently include a minimum of two market makers in the Common Stock. Trident Securities has indicated its intention to make a market in the Common Stock, and the Association anticipates that it will be able to secure at least one additional market maker for the Common Stock. (b) Income earned on assets by the Trust will not be taxable to the Trust. Lump Sum Distributions. A distribution from the Plan to a Participant or the beneficiary of a Participant will qualify as a Lump Sum Distribution if it is made: (i) within one taxable year to the Participant or beneficiary; (ii) on account of the Participant's death or separation from service, or after the Participant attains age 59-1/2; and (iii) consists of the balance to the credit of the Participant under this Plan and all other profit sharing plans, if any, maintained by First Robinson or the Holding Company. The portion of any Lump Sum Distribution that is required to be included in the Participant's or beneficiary's taxable income for federal income tax purposes (the "total taxable amount") consists of the entire amount of such Lump Sum Distribution made by the Participant to this Plan and the amount of after-tax contributions, if any, made by the Participant to any other profit sharing plans maintained by First Robinson which is included in such distribution. Averaging Rules. Except as described below with respect to distributions of Holding Company Stock, the portion of the total taxable amount of a Lump Sum Distribution that is attributable to participation after 1973 in this Plan or in any other profit-sharing plan maintained by First Robinson (the "ordinary income portion") will be taxable generally as ordinary income for federal income tax purposes. However, a Participant who has completed five years of participation in this Plan and each other profit-sharing plan making the Lump Sum Distribution prior to the taxable year in which the distribution is made, or a beneficiary who receives a Lump Sum Distribution on account of the Participant's death (regardless of the period of the Participant's participation in this Plan or any other profit-sharing plan maintained by the Employer), may elect to have the ordinary income portion of such Lump Sum Distribution taxed according to special averaging rules. The election of the special averaging rules must apply to all Lump Sum Distributions received by the Participant or beneficiary from this Plan and all other qualified plans during the taxable year. Furthermore, if a Lump Sum Distribution includes employer securities, the recipient is not currently taxable on the net unrealized appreciation of such securities at the time of the distribution, unless the recipient otherwise elects to pay the tax on the net unrealized appreciation at the time of the distribution. Rollover to Another Qualified Plan or to an IRA. A Participant may defer federal income taxation of all or any portion of the total taxable amount of a Lump Sum Distribution (including the proceeds from the sale of any Holding Company Stock included in the Lump Sum Distribution) to the extent that such amount, or a portion thereof, is contributed, within 60 days after the date of its receipt by the Participant, to another qualified plan or to an individual retirement account ("IRA"). The beneficiary of a Participant who is the Participant's surviving spouse also may defer federal income taxation of all or any portion of the total taxable amount of a Lump Sum Distribution to the extent that such amount, or a portion thereof, is contributed, within 60 days after the date of its receipt by the surviving spouse, to an IRA. If less than the total taxable amount of a Lump Sum Distribution is contributed to another qualified plan or to an IRA within the applicable 60-day period, the amount not so contributed must be included in the Participant's or beneficiary's taxable ordinary income for federal income tax purposes and will not be eligible for the special averaging rules or capital gain treatment. If all or any portion of the total taxable amount of a Lump Sum Distribution is contributed by a Participant or beneficiary to an IRA within Part II. [Options (h) through (j)] Matching contribution formula. [Note: If the Employer elected Option (b), complete Options (h), (i) and (j).] [x] (h) Amount of matching contributions. For each Plan Year, the Employer's matching contribution is: (Choose any combination of (1), (2), (3), (4) and (5)) [x] (1) An amount equal to 25% of each Participant's eligible contributions for the Plan Year. [] (2) An amount equal to % of each Participant's first tier of eligible contributions for the Plan Year, plus the following matching percentage(s) for the following subsequent tiers of eligible contributions for the Plan _______________________________________. [] (3) Discretionary formula. [] (i) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant's eligible contributions for the Plan Year. [] (ii) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of each tier of the Participant's eligible contributions for the Plan Year. [] (4) An amount equal to the following percentage of each Participant's eligible contributions for the Plan Year, based on the Participant's Years of Service: Number of Years of Service Matching Percentage -------------------------- ------------------- -- -- -- -- -- -- -- -- The Advisory Committee will apply this formula by determining Years of Service as follows: . [] (5) A Participant's matching contributions may not: (Choose (i) or (ii)) [] (i) Exceed _____________________. [] (ii) Be less than ______________________. Related Employers. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the related employers may elect different matching contribution formulas by attaching to the Adoption Agreement a separately completed copy of this Part II. Note: Separate matching contribution formulas create separate current benefit structures that must satisfy the minimum participation test of Code ss.401(a)(26).] [x] (i) Definition of eligible contributions. Subject to the requirements of Option (j), the term "eligible contributions" means: (Choose any combination of (1) through (3)) [x] (1) Salary reduction contributions. balance at the beginning of the valuation period, less any distributions and charges to each participant's account during the valuation period. Forms of Benefit Payment. If your vested account balance exceeds $3,500, the Plan permits you to elect distribution under any one of the following methods: (a) Lump sum. (b) Part lump sum and part installments, as described in (c). (c) Installment payments (annually, quarterly or monthly) over a specified period of time, not exceeding your life expectancy or the joint life expectancy of you and your designated beneficiary. Under an installment distribution, the Advisory Committee may direct to have the Plan segregate the amount owed to you in a separate account apart from other trust fund assets. Your separate account will continue to draw interest during the period the Plan is making retirement payments to you. If the Plan does not segregate the amount owed to you in a separate account, your retirement account will remain a part of the trust fund and continue to share in trust fund earnings, gains or losses. The benefit payment rules described in Sections (11) through (14) reflect the current Plan provisions. If an Employer amends its Plan to change benefit payment options, some options may continue for those participants or beneficiaries who have account balances at the time of the change. If an eliminated option continues to apply to you, the information you receive from the Advisory Committee at the time you are first eligible for distribution from the Plan will include an explanation of that option. (12) Payment of Benefits Prior to Termination of Employment. Distributions from your Employer Contributions Account and Matching Contributions Account. Prior to your termination of employment with the Employer, you may elect to withdraw all or any portion of your Employer Contributions Account and Matching Contributions Account: if you continue to work for the Employer after attaining age 59 1/2 and you are at least 100% vested in your account balance. if you incur a hardship. A hardship distribution must be on account of any of the following: (a) deductible medical expenses (or amounts necessary to obtain medical care) incurred by the participant, by the participant's spouse, or by any of the participant's dependents; (b) the purchase (excluding mortgage payments) of a principal residence for the participant; (c) the payment of post-secondary education tuition, for the next 12-month period, for the participant or for the participant's spouse, or for any of the participant's dependents; (d) to prevent the eviction of the participant from his principal residence or the foreclosure on the mortgage of the participant's principal residence. To qualify for this hardship distribution, the participant may not make elective deferrals or employee contributions to the Plan for the 12-month period following the date of his hardship distribution, the participant first must obtain all other available distributions and all nontaxable loans currently available under the Plan and The Nasdaq has proposed substantial changes to its listing requirements on the Nasdaq SmallCap Market which would, among other things, increase the minimum capitalization, stockholder and market maker requirements. If the proposed changes are approved by the SEC, the Holding Company's Common Stock would not qualify for listing on the Nasdaq SmallCap Market. In that event, the Holding Company's Common Stock would be traded on the "pink sheets" published by the National Quotations Bureau, Inc. There can be no assurance that an active or liquid trading market will develop, or that if a market develops, it will continue. A public market having the desirable characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of both willing buyers and sellers of the Common Stock at any given time, which is not within the control of the Holding Company or any market maker. Accordingly, there can be no assurance that purchasers will be able to sell their shares at or above the Purchase Price. See "Market for Common Stock." Benefits of Stock Conversion to Directors and Executive Officers Employee Stock Ownership Plan. The Board of Directors of the Association has adopted an ESOP, a tax-qualified employee benefit plan for officers and employees of the Holding Company and the Association. The ESOP intends to buy up to 8% of the Common Stock issued in the Stock Conversion (approximately 44,200 to 68,770 of the Common Stock based on the issuance of the minimum (552,500 shares) and 15% above the maximum (859,625 shares) of the Estimated Valuation range and the $10.00 per share Purchase Price). The ESOP will purchase the shares with funds borrowed from the Holding Company, and it is anticipated that the ESOP will repay the loans through periodic tax-deductible contributions from the Association over an estimated ten-year period. These contributions will increase the compensation expense of the Association. The Association's contributions to the ESOP will be allocated among participants on the basis of their compensation. See "Management - Benefit Plans - Employee Stock Ownership Plan" for a description of this plan. Other Stock Benefit Plans. In addition to the ESOP, in the future the Holding Company may consider the implementation of a stock option plan and recognition and retention plan ("RRP") for the benefit of selected directors, officers and employees of the Holding Company and the Association. Any such stock option plan or RRP will be implemented no earlier than one year after the date of the consummation of the Stock Conversion. If a determination is made to implement a stock option plan or RRP, it is anticipated that any such plans will be submitted to stockholders for their consideration at which time stockholders would be provided with detailed information regarding such plan. If such plans are approved, they may have a dilutive effect on the Holding Company's stockholders as well as effect the Holding Company's net income and stockholders' equity; although the actual effects cannot be determined until such plans are implemented. the applicable 60-day period, any subsequent distribution from the IRA will not be eligible for the special averaging rules or capital gain treatment. Additional Tax on Early Distributions. For taxable years beginning after December 31, 1986, a Participant who receives a distribution from the Plan prior to attaining age 55 will be subject to an additional income tax equal to 10% of the amount of the distribution. The 10% additional income tax will not apply, however, to the extent the distribution is rolled over into an IRA or another qualified plan or the distribution is (i) made to a beneficiary (or to the estate of a Participant) on or after the death of the Participant, (ii) attributable to the Participant's being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and his beneficiary, (iv) made to the Participant after separation from service under the Plan after attainment of age 55, (v) made to pay medical expenses to the extent deductible for federal income tax purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made to effect the distribution of excess contributions or excess deferrals. The foregoing is only a brief summary of certain federal income tax aspects of the Plan which are of general application under the Code and is not intended to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the Plan. Accordingly, each Participant may wish to consult a tax advisor concerning the Federal, state and local tax consequences of participating in and receiving distributions from the Plan. Participants subject to taxes imposed by state, local and other taxing authorities, including foreign governments, should also consult with their own attorneys or tax advisers regarding the tax consequences thereunder. Restrictions on Resale Any person receiving shares of Holding Company Stock under the Plan who is an "affiliate" of First Robinson or the Holding Company as the term "affiliate" is used in Rules 144 and 405 under the Securities Act of 1933 (e.g., directors, officers and substantial shareholders of the Holding Company and First Robinson) may re-offer or resell such shares only pursuant to a registration statement or, assuming the availability thereof, pursuant to Rule 144 or some other exemption of the registration requirements of the Securities Act of 1933. Any person who may be an "affiliate" of First Robinson or the Holding Company may wish to consult with counsel before transferring any Holding Company Stock owned by him or her. In addition, Participants are advised to consult with counsel as to the applicability of Section 16 of the Securities Exchange Act of 1934 which may restrict the sale of Holding Company Stock acquired under the Plan, or other sales of Holding Company Stock. [] (2) Cash or deferred contributions (including any part of the Participant's proportionate share of the cash or deferred contribution which the Employer defers without the Participant's election). [] (3) Participant mandatory contributions, as designated in Adoption Agreement Section 4.01. See Section 14.04 of the Plan. [x] (j) Amount of eligible contributions taken into account. When determining a Participant's eligible contributions taken into account under the matching contributions formula(s), the following rules apply: (Choose any combination of (1) through (4)) [] (1) The Advisory Committee will take into account all eligible contributions credited for the Plan Year. [x] (2) The Advisory Committee will disregard eligible contributions exceeding 4%. [] (3) The Advisory Committee will treat as the first tier of eligible contributions, an amount not exceeding: ___________________. The subsequent tiers of eligible contributions are: ______________. [] (4) (Specify) ______________________. Part III. [Options (k) and (l)]. Special rules for Code ss.401(k) Arrangement. (Choose (k) or (l), or both, as applicable) [x] (k) Salary Reduction Agreements. The following rules and restrictions apply to an Employee's salary reduction agreement: (Make a selection under (1), (2), (3) and (4)) (1) Limitation on amount. The Employee's salary reduction contributions: (Choose (i) or at least one of (ii) or (iii)) [x] (i) No maximum limitation other than as provided in the Plan. [] (ii) May not exceed ___ % of Compensation for the Plan Year, subject to the annual additions limitation described in Part 2 of Article III and the 402(g) limitation described in Section 14.07 of the Plan. [] (iii) Based on percentages of Compensation must equal at least __________________________. (2) An Employee may revoke, on a prospective basis, a salary reduction agreement: (Choose (i), (ii), (iii) or (iv)) [] (i) Once during any Plan Year but not later than ___________ of the Plan Year. [] (ii) As of any Plan Entry Date. [] (iii) As of the first day of any month. [x] (iv) (Specify, but must be at least once per Plan Year) At any time with written notice. all other qualified plans maintained by the Employer, and a special limitation may apply to the participant's elective deferrals in the following taxable year. The Advisory Committee will provide you a withdrawal election form. Other than the withdrawal right described in this Section (12) and the post-age 70-1/2 distribution requirement described in Section (11), the Plan does not permit you to receive payment of any portion of your account balance for any other reason, unless you terminate employment with the Employer. Distributions from your Deferral Contributions Account. Prior to your termination of employment with the Employer, you may elect to withdraw all or any portion of your Deferral Contributions Account: if you have attained age 59 1/2. if you incur a hardship. A hardship distribution is available only from your Deferral Contributions Account. A hardship distribution must be on account of any of the following: (a) deductible medical expenses incurred by the participant, by the participant's spouse, or by any of the participant's dependents; (b) the purchase (excluding mortgage payments) of a principal residence for the participant; (c) the payment of post-secondary education tuition, for the next 12-month period, for the participant or for the participant's spouse, or for any of the participant's dependents; (d) to prevent the eviction of the participant from his principal residence or the foreclosure on the mortgage of the participant's principal residence. To qualify for this hardship distribution, the participant may not make elective deferrals or employee contributions to the Plan for the 12-month period following the date of his hardship distribution, the participant first must obtain all other available distributions and all nontaxable loans currently available under the Plan and all other qualified plans maintained by the Employer, and a special limitation may apply to the participant's elective deferrals in the following taxable year. The Advisory Committee will provide you a withdrawal election form. Other than the withdrawal right described in this Section (12) and the post-age 70-1/2 distribution requirement described in Section (11), the Plan does not permit you to receive payment of any portion of your account balance for any other reason, unless you terminate employment with the Employer. (13) Disability Benefits. If you terminate employment because of disability, the Plan will pay your vested account balance to you in lump sum at the same time as it would pay your vested account balance for any other termination of employment. However, if your vested account balance exceeds $3,500, the disability distribution rules are subject to any election requirements described in Section (11). In general, disability under the Plan means because of a physical or mental disability you are unable to perform the duties of your customary position of employment for an indefinite period which, in the opinion of the Advisory Committee, will be of long continued duration. The Advisory Committee also considers you disabled if you terminate employment because of a permanent loss or loss of use of a member or function of your body or a permanent disfigurement. The Advisory Committee may require a physical examination in order to confirm the disability. Risk Factors See "Risk Factors" for information regarding interest rate risk exposure, effect of the conversion to a national bank charter on operations, potential delay in completion or denial of Bank Conversion, risks related to commercial business lending, geographical concentration of loans, ESOP compensation expense, regulatory oversight, absence of active market for common stock, takeover defensive provisions, voting control of shares by the Board, Management, Employees and Employee Plans, difficulty in fully leveraging capital and risk of delayed offering, which should be considered by prospective investors prior to investing in the Common Stock. LEGAL OPINIONS The validity of the issuance of the Holding Company Stock will be passed upon by Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., Washington, D.C. 20005, which firm acted as special counsel for the Holding Company and First Robinson in connection with First Robinson's Conversion. FINANCIAL STATEMENTS The financial statements and schedules of the Plan have been prepared by management in accordance with the applicable provisions of ERISA and are included in this Prospectus Supplement. (3) An Employee who revokes his salary reduction agreement may file a new salary reduction agreement with an effective date: (Choose (i), (ii), (iii) or (iv)) [] (i) No earlier than the first day of the next Plan Year. [x] (ii) As of any subsequent Plan Entry Date. [] (iii) As of the first day of any month subsequent to the month in which he revoked an Agreement. [] (iv) (Specify, but must be at least once per Plan Year following the Plan Year of revocation) _________________________. (4) A Participant may increase or may decrease, on a prospective basis, his salary reduction percentage or dollar amount: (Choose (i), (ii), (iii) or (iv)) [] (i) As of the beginning of each payroll period. [] (ii) As of the first day of each month. [] (iii) As of any Plan Entry Date. [x] (iv) (Specify, but must permit an increase or a decrease at least once per Plan Year) May decrease at anytime with wriiten notice and may increase at any Entry Date. [] (l) Cash or deferred contributions. For each Plan Year for which the Employer makes a designated cash or deferred contribution, a Participant may elect to receive directly in cash not more than the following portion (or, if less, the 402(g) limitation described in Section 14.07 of the Plan) of his proportionate share of that cash or deferred contribution: (Choose (1) or (2)) [] (1) All or any portion. [] (2)_______________________________ %. 3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions in accordance with Section 14.06 and the elections under this Adoption Agreement Section 3.04. Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose whichever elections are applicable to the Employer's Plan) [x] (a) Matching Contributions Account. The Advisory Committee will allocate matching contributions to a Participant's: (Choose (1) or (2); (3) is available only in addition to (1)) [x] (1) Regular Matching Contributions Account. [] (2) Qualified Matching Contributions Account. [] (3) Except, matching contributions under Option(s) of Adoption Agreement Section 3.01 are allocable to the Qualified Matching Contributions Account. [x] (b) Special Allocation Dates for Salary Reduction Contributions. The Advisory Committee will allocate salary reduction contributions as of the Accounting Date and as of the following additional allocation dates: Last day of each calendar month. (14) Payment of Benefits upon Death. If you die prior to receiving all of your benefits under the Plan, the Plan will pay the balance of your account to your beneficiary. If the Employer permits the Trustee to purchase life insurance on your life with a portion of your account balance, your account balance also will receive any life insurance proceeds payable by reason of your death. The Advisory Committee will provide you with an appropriate form for naming a beneficiary. If you are married, your spouse must consent to the designation of any nonspouse beneficiary. If your vested account balance payable to your designated beneficiary does not exceed $3,500, the Plan will pay the benefit, in a lump sum, to your designated beneficiary as soon as administratively practicable after your death. If your vested account balance payable to your designated beneficiary exceeds $3,500, the Plan will pay the benefit to your designated beneficiary, in the form and at the time elected by the beneficiary, unless, prior to your death, you specify the timing and form of the beneficiary's distribution. The benefit payment election generally must complete distribution of your account balance within five years of your death, unless distribution commences within one year of your death to your designated beneficiary or unless benefits had commenced prior to your death under the mandatory post-age 70-1/2 distribution requirements described in Section (11). (15) Disqualification of Participant Status - Loss or Denial of Benefits. There are no specific Plan provisions which disqualify you as a participant or which cause you to lose plan benefits, except as provided in Sections (7) and (10). However, if you become disabled and do not receive compensation from the Employer, you will not receive an allocation of the Employer's contribution to the Plan during the period of disability. In addition, if your Plan benefits become payable after termination of employment and the Advisory Committee is unable to locate you at your last address of record, you may forfeit your benefits under the Plan. Therefore, it is very important that you keep the Employer apprised of your mailing address even after you have terminated employment. Finally, if the Employer terminates the Plan, which it has the right to do, you would receive benefits under the Plan based on your account balance accumulated to the date of the termination of the Plan. Termination of the Plan could occur before you attain normal retirement age. If the Employer terminates the Plan, your account will become 100% vested, if not already 100% vested, unless you forfeited the nonvested portion prior to the termination date. The termination of the Plan does not permit you to receive a distribution from your Deferral Contributions Account unless: (1) you otherwise have the right to a distribution, as described in Sections (11) and (12); or (2) the Employer does not maintain a successor defined contribution plan. If you are able to receive a distribution only because the Employer does not maintain a successor defined contribution plan, you must agree to take that distribution as part of a lump sum payment of your entire account balance under the Plan. The Trustee will transfer to the successor defined contribution plan any portion of your interest the Plan is unable to distribute to you. The fact that the Employer has established this Plan does not confer any right to future employment with the Employer. Furthermore, you may not assign your interest in the Plan to another person or use your Plan interest as collateral for a loan from a commercial lender. (16) Claims Procedure. You need not file a formal claim with the Advisory Committee in order to receive your benefits under the Plan. When an event occurs which entitles you to a distribution of your benefits under the Plan, the Advisory Committee automatically will notify you regarding your distribution rights. However, if you disagree with the Advisory Committee's determination of the amount of your benefits under the Plan or with respect to any other decision the Advisory Committee SELECTED CONSOLIDATED FINANCIAL INFORMATION The following table sets forth selected consolidated financial data of the Association at and for the periods indicated. Financial data as of December 31, 1996, and for the two months ended December 31, 1996 and 1995, are unaudited. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. The results of operations and other data for the two months ended December 31, 1996 are not necessarily indicative of the results of operations for the fiscal year ending October 31, 1997. The consolidated financial data is derived in part from, and should be read in conjunction with, the Financial Statements and Notes thereto presented elsewhere in this Prospectus. <TABLE> <CAPTION> At October 31, December 31, --------------------------------------------------------- 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> <C> <C> Selected Financial Condition Data: Total assets............................................. $67,538 $63,869 $54,708 $43,824 $41,299 $43,944 Loans receivable, net.................................... 57,003 54,448 44,854 34,093 30,885 30,064 Mortgage-backed securities............................... 3,917 4,011 2,973 3,284 3,792 4,705 Interest bearing deposits................................ 2,048 868 2,472 2,602 2,575 3,917 Investment securities.................................... 671 714 1,213 1,221 1,448 2,502 Deposits................................................. 59,642 56,691 49,404 39,208 36,976 39,922 Total borrowings......................................... 2,500 1,500 --- --- --- --- Retained earnings - substantially restricted............. 4,746 4,658 4,536 4,111 3,747 3,301 </TABLE> <TABLE> <CAPTION> Two Months Ended December 31, Year Ended October 31, --------------------- ------------------------------------------------------ 1996 1995 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> <C> <C> <C> Selected Operations Data: Total interest income......................... $ 906 $ 737 $4,827 $ 3,755 $ 2,985 $ 3,160 $ 3,620 Total interest expense........................ (495) (410) (2,655) (1,971) (1,446) (1,563) (2,121) ------ ------- ------- ------- -------- ------- -------- Net interest income........................ 411 327 2,172 1,784 1,539 1,597 1,499 Provision for loan losses..................... (8) (4) (270) (9) (24) (33) (40) ------- ------- ------- -------- -------- -------- -------- Net interest income after provision for loan losses.................................. 403 323 1,902 1,775 1,515 1,564 1,459 Fees and service charges...................... 48 41 295 241 223 188 165 Gain (loss) on sales of loans, securities and fixed assets............................. --- --- 60 1 --- 2 --- Other non-interest income..................... 8 5 37 29 21 39 18 -------- -------- -------- -------- -------- -------- -------- Total non-interest income..................... 56 46 392 271 244 229 183 -------- ------- ------- ------- -------- -------- -------- Total non-interest expense.................... (338) (290) (2,120) (1,414) (1,176) (1,175) (1,175) ------ ------- ------- ------- ------- -------- -------- Income (loss) before taxes and extraordinary item........................... 121 79 174 632 583 618 467 Income tax provision.......................... (47) (31) (51) (233) (221) (219) (160) Extraordinary item............................ --- --- --- --- --- 48 --- -------- -------- --------- --------- -------- -------- --------- Net income.................................... $ 74 $ 48 $ 123 $ 399 $ 362 $ 447 $ 307 ======= ======= ======= ======= ======= ======= ======== </TABLE> [x] (c) Special Allocation Dates for Matching Contributions. The Advisory Committee will allocate matching contributions as of the Accounting Date and as of the following additional allocation dates: Last day of each calendar month. [x] (d) Designated Qualified Nonelective Contributions - Definition of Participant. For purposes of allocating the designated qualified nonelective contribution, "Participant" means: (Choose (1), (2) or (3)) [] (1) All Participants. [x] (2) Participants who are Nonhighly Compensated Employees for the Plan Year. [] (3) (Specify) . Part II. Method of Allocation - Nonelective Contribution. Subject to any restoration allocation required under Section 5.04, the Advisory Committee will allocate and credit each annual nonelective contribution (and Participant forfeitures treated as nonelective contributions) to the Employer Contributions Account of each Participant who satisfies the conditions of Section 3.06, in accordance with the allocation method selected under this Section 3.04. If the Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of Compensation allocated to all Participants, "Compensation" does not include any exclusions elected under Adoption Agreement Section 1.12 (other than the exclusion of elective contributions), and the Advisory Committee must take into account the Participant's Compensation for the entire Plan Year. (Choose an allocation method under (e), (f), (g) or (h); (i) is mandatory if the Employer elects (f), (g) or (h); (j) is optional in addition to any other election.) [x] (e) Nonintegrated Allocation Formula. (Choose (1) or (2)) [x] (1) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [] (2) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. For purposes of this Option (2), "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation will not exceed 3% of his Compensation for the Plan Year. [] (f) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). The Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. may make regarding your interest in the Plan, the Plan contains the appeal procedure you should follow. In brief, if the Advisory Committee of the Plan determines it should deny benefits to you, the Plan Administrator will give you written notice of the specific reasons for the denial. The notice will refer you to the pertinent provisions of the Plan supporting the Advisory Committee's decision. If you disagree with the Advisory Committee, you, or a duly authorized representative, must appeal the adverse determination in writing to the Advisory Committee within 75 days after the receipt of the notice of denial of benefits. If you fail to appeal a denial within the 75-day period, the Advisory Committee's determination will be final and binding. If you appeal to the Advisory Committee, you, or your duly authorized representative, must submit the issues and comments you feel are pertinent to permit the Advisory Committee to re-examine all facts and make a final determination with respect to the denial. The Advisory Committee, in most cases, will make a decision within 60 days of a request on appeal unless special circumstances would make the rendering of a decision within the 60-day period unfeasible. In any event, the Advisory Committee must render a decision within 120 days after its receipt of a request for review. The same procedures apply if, after your death, your beneficiary makes a claim for benefits under the Plan. (17) Retired Participant, Separated Participant with Vested Benefit, Beneficiary Receiving Benefits. If you are a retired participant or beneficiary receiving benefits, the benefits you presently are receiving will continue in the same amount and for the same period provided in the mode of settlement selected at retirement. If you are a separated participant with a vested benefit, you may obtain a statement of the dollar amount of your vested benefit upon request to the Plan Administrator. There is no Plan provision which reduces, changes, terminates, forfeits, or suspends the benefits of a retired participant, a beneficiary receiving benefits or a separated participant's vested benefit amount, except as provided in Section (15). (18) Participant's Rights under ERISA. As a participant in this Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan participants are entitled to: (a) Examine, without charge, at the Plan Administrator's office and at other specified locations (such as worksites), all Plan documents, including insurance contracts and copies of all documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports and plan descriptions. (b) Obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. The Plan Administrator may make a reasonable charge for the copies. (c) Receive a summary of the Plan's annual financial report. ERISA requires the Plan Administrator to furnish each participant with a copy of this summary annual report. (d) Obtain a statement telling you that you have a right to receive a retirement benefit at the normal retirement age under the Plan and what your benefit could be at normal retirement age if you stop working under the Plan now. If you do not have a right to a retirement benefit, the statement will advise you of the number of additional years you must work to receive a retirement benefit. You must request this statement in writing. The law does not require the Plan Administrator to give this statement more than once a year. The Plan must provide the statement free of charge. <TABLE> <CAPTION> Two Months Ended December 31, Year Ended October 31, ----------------- ---------------------------------------------- 1996 1995 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> Selected Financial Ratios and Other Data: Performance Ratios: Return on assets (ratio of net income to average total assets)(1)......................................... .68% .53% .21% .82% .86% .97% .72% Return on retained earnings (ratio of net income to average equity)(1)............................. 9.36 6.37 2.60 9.68 9.08 11.24 9.76 Interest rate spread information: Average during period.................................... 3.59 3.39 3.49 3.52 3.60 3.79 3.58 End of period............................................ 3.66 3.62 3.76 3.51 3.29 3.70 3.45 Net interest margin(2).................................... 3.96 3.78 3.86 3.90 3.88 4.09 3.73 Ratio of operating expense to average total assets........ 3.09 3.17 3.54 2.91 2.80 2.84 2.75 Ratio of average interest-earning assets to average interest-bearing liabilities............................ 107.81 108.40 108.01 108.83 107.78 107.84 103.20 Quality Ratios: Non-performing assets to total assets at end of period..... .48 .34 .61 .07 .07 .33 .37 Allowance for loan losses to non-performing loans.......... 958.14 153.70 430.21 2,125.00 2,215.00 3,670.00 1,640.91 Allowance for loan losses to loans receivable, net......... .72 .54 .76 .57 .84 1.19 1.20 Capital Ratios: Retained earnings to total assets at end of period......... 7.03 8.37 7.29 8.29 9.38 9.07 8.91 Average retained earnings to average assets................ 7.23 8.24 7.91 8.49 9.45 8.59 7.36 Other Data: Number of full-service offices............................. 3 3 3 3 1 1 1 Number of full-time employees.............................. 34 31 34 30 20 21 24 Number of deposit accounts................................. 7,692 6,134 7,279 5,885 5,284 5,006 5,169 Number of loan accounts.................................... 3,694 3,030 3,625 2,897 2,375 2,234 2,179 <FN> - ----------------- (1) Ratios for the two month periods have been annualized. (2) Net interest income divided by average interest-earning assets. </FN> </TABLE> [] (g) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). Solely for purposes of the allocation in this first paragraph, "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year: (Choose (1) or (2)) [] (1) No other Participant. [] (2) Any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation under this Option (g) will not exceed 3% of his Compensation for the Plan Year. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Excess Compensation, may not exceed the allocation percentage in the first paragraph. Finally, the Advisory Committee will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [] (h) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Compensation. Solely for purposes of this first tier allocation, a "Participant" means, in addition to any Participant who satisfies the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Excess Compensation. As a third tier allocation, the Advisory Committee will allocate the annual Employer contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option (i). The Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate this Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your Employer, your union or any other person may fire you or otherwise discriminate against you in any way to prevent you from obtaining a retirement benefit or from exercising your rights under ERISA. If your claim for a retirement benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the Plan review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive the materials within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest Area Office of the U.S. Labor-Management Services Administration, Department of Labor. (19) Federal Income Taxation of Benefits Paid. Existing Federal income tax laws do not require you to report as income the portion of the annual Employer contribution allocated to your account. However, when the Plan later distributes your account balance to you, such as upon your retirement, you must report as income the Plan distributions you receive. The Federal tax laws may permit you to report a Plan distribution under a special averaging provision. Also, it may be possible for you to defer Federal income taxation of a distribution by making a "rollover" contribution to your own rollover individual retirement account. Mandatory income tax withholding rules apply to some distributions you do not rollover directly to an individual retirement account or to another plan. At the time you receive a distribution, you also will receive a notice discussing withholding requirement and the options available to you. We emphasize you should consult your own tax adviser with respect to the proper method of reporting any distribution you receive from the Plan. (20) Participant Loans. This Plan does not make loans to participants and beneficiaries. (21) Participant Direction of Investment. The Plan permits every participant to direct the investment of his account balance under the plan. For this purpose, the Advisory Committee upon your request, will provide you a form for making your investment direction. The investment direction explains your investment direction options and explains the frequency with which you may change your investment direction. The Trustee will invest your account balance under the Plan in accordance with your written direction. To the extent you direct the investment of your account balance under the Plan, ERISA relieves the Trustee from liability for any loss resulting from your direction of investment. * * * * * * * * * * * * * * * RECENT FINANCIAL DATA The following table sets forth selected financial data of the Association at and for the periods indicated. Financial data as of March 31, 1997, and for the five months ended March 31, 1997 and 1996, are unaudited. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. The results of operations and other data for the five months ended March 31, 1997 are not necessarily indicative of the results of operations for the fiscal year ending October 31, 1997. At At March 31, December 31, 1997 1996 --------- ------------ (In Thousands) Selected Financial Condition Data: Total assets........................... $72,028 $67,538 Loans receivable, net.................. 60,025 57,003 Mortgage-backed securities ............ 3,554 3,917 Interest earning deposits.............. 3,798 2,048 Investment securities.................. 671 671 Deposits............................... 62,719 59,642 Total borrowings....................... 3,750 2,500 Retained earnings...................... 4,881 4,746 <TABLE> <CAPTION> Three Months Ended Five Months Ended March 31, March 31, ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- (In Thousands) Selected Operations Data: <S> <C> <C> <C> <C> Total interest income....................................... $1,399 $1,135 $2,305 $1,872 Total interest expense...................................... (770) (642) (1,265) (1,052) ------ ------ ------ ------ Net interest income...................................... 629 493 1,040 820 Provision for loan losses................................... (16) (46) (24) (50) ------ ------ ------ ------ Net interest income after provision for loan losses......... 613 447 1,016 770 Fees and service charges.................................... 94 71 142 112 Gain (loss) on sales of loans, securities and fixed assets.. (1) 45 (1) 45 Other non-interest income................................... 9 9 17 14 ------ ------ ------ ------ Total non-interest income................................... 102 125 158 171 Total non-interest expense.................................. (476) (426) (814) (716) ------ ------ ------ ------ Income (loss) before income taxes and extraordinary item.... 239 146 360 225 Income tax provision ....................................... (93) (57) (140) (88) Extraordinary item ......................................... -- -- -- -- ------ ------ ------ ------ Net income............................................... $ 146 $ 89 $ 220 $ 137 ====== ====== ====== ====== </TABLE> [] (i) Excess Compensation. For purposes of Option (f), (g) or (h), "Excess Compensation" means Compensation in excess of the following Integration Level: (Choose (1) or (2)) [] (1) _____% (not exceeding 100%) of the taxable wage base, as determined under Section 230 of the Social Security Act, in effect on the first day of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii)) [] (i) Rounded to _____________________ (but not exceeding the taxable wage base). [] (ii) But not greater than $_______________. [] (iii) Without any further adjustment or limitation. [] (2) $__________________ [Note: Not exceeding the taxable wage base for the Plan Year in which this Adoption Agreement first is effective.] Maximum Disparity Table. For purposes of Options (f), (g) and (h), the applicable percentage is: Integration Level (as percentage of taxable Applicable Percentages for Applicable Percentages wage base) Option (f) or Option (g) for Option (h) ---------- ------------------------ -------------- 100% 5.7% 2.7% More than 80% but less than 100% 5.4% 2.4% More than 20% (but not less than $10,001) and not more than 80% 4.3% 1.3% 20% (or $10,000, if greater) or less 5.7% 2.7% [] (j) Allocation offset. The Advisory Committee will reduce a Participant's allocation otherwise made under Part II of this Section 3.04 by the Participant's allocation under the following qualified plan(s) maintained by the Employer: __________________________________. The Advisory Committee will determine this allocation reduction: (Choose (1) or (2)) [] (1) By treating the term "nonelective contribution" as including all amounts paid or accrued by the Employer during the Plan Year to the qualified plan(s) referenced under this Option (j). If a Participant under this Plan also participates in that other plan, the Advisory Committee will treat the amount the Employer contributes for or during a Plan Year on behalf of a particular Participant under such other plan as an amount allocated under this Plan to that Participant's Account for that Plan Year. The Advisory Committee will make the computation of allocation required under the immediately preceding sentence before making any allocation of nonelective contributions under this Section 3.04. [] (2) In accordance with the formula provided in an addendum to this Adoption Agreement, numbered 3.04(j). <TABLE> <CAPTION> At and For the Three Months Ended Five Months Ended March 31, December 31, ------------------ ------------------ Selected Financial Ratios and Other Data: 1997 1996 1997 1996 - ---------------------------------------- -------- -------- -------- -------- <S> <C> <C> <C> <C> Performance Ratios: Return on assets (ratio of net income to average total assets)(1)............................... .86% .63% .77% .58% Return on retained earnings (ratio of net income to average equity)(1).................................... 12.12 7.72 10.95 7.13 Interest rate spread information: Average during period................................ 3.75 3.52 3.72 3.51 End of period........................................ 3.68 3.47 3.65 3.47 Net interest margin(2).................................. 3.91 3.93 3.88 3.92 Ratio of operating expense to average total assets...... 2.80 3.02 2.87 3.05 Ratio of average interest-earning assets to average interest-bearing liabilities................... 106.98 107.83 107.20 107.79 Quality Ratios: Non-performing assets to total assets at end of period.. .63 .32 .63 .32 Allowance for loan losses to non-performing loans....... 396.07 149.43 396.07 149.43 Allowance for loan losses to loans receivable, net...... .67 .55 .67 .55 Capital Ratios: Retained earnings to total assets at end of period...... 6.77 7.81 6.77 7.81 Average retained earnings to average assets............. 7.09 8.18 7.09 8.18 Other Data: Number of full-service offices.......................... 3 3 3 3 Number of full-time employees........................... 34 32 34 32 Number of deposit accounts.............................. 8,187 6,521 8,187 6,521 Number of loan accounts................................. 3,719 3,141 3,719 3,141 <FN> - ---------- (1) Ratios for the three and five month periods have been annualized. (2) Net interest income divided by average interest-earning assets. </FN> </TABLE> Top Heavy Minimum Allocation - Method of Compliance. If a Participant's allocation under this Section 3.04 is less than the top heavy minimum allocation to which he is entitled under Section 3.04(B): (Choose (k) or (l)) [x] (k) The Employer will make any necessary additional contribution to the Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan. [] (l) The Employer will satisfy the top heavy minimum allocation under the following plan(s) it maintains: _________________. However, the Employer will make any necessary additional contribution to satisfy the top heavy minimum allocation for an Employee covered only under this Plan and not under the other plan(s) designated in this Option (l). See Section 3.04(B)(7)(b) of the Plan. If the Employer maintains another plan, the Employer may provide in an addendum to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan necessary to satisfy the top heavy requirements under Code ss.416. Related employers. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the Advisory Committee must allocate all Employer nonelective contributions (and forfeitures treated as nonelective contributions) to each Participant in the Plan, in accordance with the elections in this Adoption Agreement Section 3.04: (Choose (m) or (n)) [] (m) Without regard to which contributing related group member employs the Participant. [x] (n) Only to the Participants directly employed by the contributing Employer. If a Participant receives Compensation from more than one contributing Employer, the Advisory Committee will determine the allocations under this Adoption Agreement Section 3.04 by prorating among the participating Employers the Participant's Compensation and, if applicable, the Participant's Integration Level under Option (i). 3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are optional in addition to (a) or (b)) [] (a) As an Employer nonelective contribution for the Plan Year in which the forfeiture occurs, as if the Participant forfeiture were an additional nonelective contribution for that Plan Year. [x] (b) To reduce the Employer matching contributions and nonelective contributions for the Plan Year: (Choose (1) or (2)) [] (1) in which the forfeiture occurs. [x] (2) immediately following the Plan Year in which the forfeiture occurs. [] (c) To the extent attributable to matching contributions: (Choose (1), (2) or (3)) [] (1) In the manner elected under Options (a) or (b). [] (2) First to reduce Employer matching contributions for the Plan Year: (Choose (i) or (ii)) [] (i) in which the forfeiture occurs, [] (ii) immediately following the Plan Year in which the forfeiture occurs, then as elected in Options (a) or (b). [] (3) As a discretionary matching contribution for the Plan Year in which the forfeiture occurs, in lieu of the manner elected under Options (a) or (b). MANAGEMENT'S DISCUSSION OF RECENT FINANCIAL DATA The Association's total assets increased by approximately $4.5 million or 6.6% from $67.5 million at December 31, 1996 to $72.0 million at March 31, 1997. The increase in total assets for the three months ended March 31, 1997 was primarily attributable to an increase of $1.7 million or 68.2% in cash and cash equivalents and a $3.0 million or 5.3% increase in loans receivable, net, which was partially offset by a $363,000 or 9.3% decrease in mortgage-backed securities. The increase in total assets was primarily funded by an increase in deposits of $3.1 million or 5.2% and an increase of $1.3 million or 50.0% in borrowed funds. Net worth increased by $135,000 or 2.8% to $4.9 million or 6.8% of total assets at March 31, 1997. At March 31, 1997, the Association exceeded all regulatory capital requirements, with tangible capital of $4.9 million (6.7% of adjusted total assets), core capital of $4.9 million (6.7% of adjusted total assets) and risk-based capital of $5.2 million (9.7% of risk-weighted assets). The Association reported net income of $146,000 and $220,000 during the three and five months ended March 31, 1997, respectively, as compared to $89,000 and $137,000 during the three and five months ended March 31, 1996. The $57,000 or 64.0% increase in net income during the three months ended March 31, 1997, as compared to the same period in the prior year, was primarily attributable to an increase of $166,000 or 37.1% in net interest income after provision for loan losses offset by a decrease of $23,000 or 18.4% in non-interest income, an increase of $50,000 or 11.7% in non-interest expense and an increase of $36,000 or 63.2% in provision for income tax. The Association reported a $83,000 or 60.6% increase in net income during the five months ended March 31, 1997, as compared to the same period in the prior year, was primarily attributable to an increase of $246,000 or 31.9% in net interest income after provision for loan losses offset by a decrease of $13,000 or 7.6% in non-interest income, an increase of $98,000 or 13.7% in non-interest expense and an increase of $52,000 or 59.1% in provision for income tax. Net interest income increased by $136,000 or 27.6% during the three months ended March 31, 1997, as compared to the same period in the prior year. The increase was caused by an increase of $264,000 or 23.3% in total interest income, which was partially offset by an increase of $128,000 or 19.9% in total interest expense. Net interest income increased by $220,000 or 26.8% during the five months ended March 31, 1997, as compared to the same period in the prior year. The increase in total net interest income during such period was attributable to an increase of $433,000 or 23.1% in total interest income which offset the $213,000 or 20.2% in total interest expense. During the three and five months ended March 31, 1997, the Association's net interest margin amounted to 3.91% and 3.88%, respectively, as compared to 3.93% and 3.92% during the same respective periods in the prior year. During the three and five months ended March 31, 1997, the Association recorded provision for loan losses of $16,000 and $24,000, respectively, as compared to $46,000 and $50,000 for the same respective periods the prior year. The Association recorded such provisions to adjust the Association's allowance for loan losses to a level deemed appropriate based on an assessment of the volume and lending presently being conducted by the Association, industry standards, past due loans, economic conditions in the Association's market area generally and other factors related to the collectibility of the Association's loan portfolio. The Association's non-performing assets as a percentage of total assets amounted to .64% at [] (d) First to reduce the Plan's ordinary and necessary administrative expenses for the Plan Year and then will allocate any remaining forfeitures in the manner described in Options (a), (b) or (c), whichever applies. If the Employer elects Option (c), the forfeitures used to reduce Plan expenses: (Choose (1) or (2)) [] (1) relate proportionately to forfeitures described in Option (c) and to forfeitures described in Options (a) or (b). [] (2) relate first to forfeitures described in Option . Allocation of forfeited excess aggregate contributions. The Advisory Committee will allocate any forfeited excess aggregate contributions (as described in Section 14.09): (Choose (e), (f) or (g)) [x] (e) To reduce Employer matching contributions for the Plan Year: (Choose (1) or (2)) [] (1) in which the forfeiture occurs. [x] (2) immediately following the Plan Year in which the forfeiture occurs. [] (f) As Employer discretionary matching contributions for the Plan Year in which forfeited, except the Advisory Committee will not allocate these forfeitures to the Highly Compensated Employees who incurred the forfeitures. [] (g) In accordance with Options (a) through (d), whichever applies, except the Advisory Committee will not allocate these forfeitures under Option (a) or under Option (c)(3) to the Highly Compensated Employees who incurred the forfeitures. 3.06 ACCRUAL OF BENEFIT. Compensation taken into account. For the Plan Year in which the Employee first becomes a Participant, the Advisory Committee will determine the allocation of any cash or deferred contribution, designated qualified nonelective contribution or nonelective contribution by taking into account: (Choose (a) or (b)) [x] (a) The Employee's Compensation for the entire Plan Year. [] (b) The Employee's Compensation for the portion of the Plan Year in which the Employee actually is a Participant in the Plan. March 31, 1997, as compared to .48% at December 31, 1996, and .61% at October 31, 1996. In addition, the Association's allowance for loan losses as a percentage of total non-performing loans amounted to 396.1% at March 31, 1997, as compared to 958.1% at December 31, 1996, and 430.2% at October 31, 1996. Total non-interest expense increased by $50,000 or 11.7% during the three months ended March 31, 1997, as compared to the same period in the prior year. This increase was due primarily from additional compensation and employee benefits and office occupancy expense from the branch facilities. Total non-interest expense increased by $98,000 or 13.7% during the five months ended March 31, 1997, as compared to the same period in the prior year, which increase was primarily due to additional compensation and employee benefits, office occupancy expense from the branch facilities, and the initiation of an internet service for customers. The Association recognized provision for income taxes of $93,000 and $140,000 for the three and five months ended March 31, 1997, respectively, as compared to $57,000 and $88,000 for the same period in the prior year. The effective tax rate during the three and five months ended March 31, 1997 was 38.9% and 38.9% (federal and state), respectively, as compared to 39.0% and 39.1% during the same respective periods in the prior year.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001035993_copelco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001035993_copelco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5af5b48405ef447936695009092f43ecb1bffbc7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001035993_copelco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. A listing of pages on which some of such terms are defined can be found in the "Index of Terms" herein. <TABLE> <S> <C> Issuer.............................. Copelco Capital Funding Corp. X (the "Issuer"), a Delaware corporation. The Issuer's offices are located at East Gate Center, 700 East Gate Drive, Mount Laurel, New Jersey 08054-5404 and its phone number is (609) 231-9600. The Issuer has been established as a bankruptcy remote entity, wholly-owned by Copelco Capital, Inc. ("Copelco Capital") and is intended to be a limited-purpose corporation. Accordingly, the Issuer's operations have been restricted so that (a) it does not engage in business with, or incur liabilities to, any other entity which may bring bankruptcy proceedings against the Issuer; and (b) the risk that it will be consolidated into the bankruptcy proceedings of any other entity is diminished. The Issuer will have no significant assets other than the Trust Fund (as described below). Securities Offered.................. $140,857,000 (approximate) aggregate principal amount of ____% Class A-1 Lease-Backed Notes, Series 1997-A, (the "Class A-1 Notes"), $53,048,000 (approximate) aggregate principal amount of ____% Class A-2 Lease-Backed Notes, Series 1997-A (the "Class A-2 Notes"), $211,334,000 (approximate) aggregate principal amount of ____% Class A-3 Lease-Backed Notes, Series 1997-A (the "Class A-3 Notes"), and $126,476,000 (approximate) aggregate principal amount of ____% Class A-4 Lease-Backed Notes, Series 1997-A (the "Class A-4 Notes"; together with the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes, the "Class A Notes") and $22,626,000 (approximate) aggregate principal amount of ____% Class B Lease-Backed Notes, Series 1997-A (the "Class B Notes"; together with the Class A Notes, the "Offered Notes"). The Class A-1 Notes will be an "eligible security" within the meaning of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended. In addition, the Issuer will be issuing, through a private placement, $11,314,085 (approximate) aggregate principal amount of ____% Class C Notes (the "Class C Notes"; together with the Offered Notes, the "Notes"). The Class B Notes will be subordinated to the Class A Notes to the extent provided in the Indenture as described herein. The Class C Notes will be subordinated to the Offered Notes to the extent provided in the Indenture as described herein. The Class C Notes are not offered hereby. The combined aggregate principal amount of the Class A Notes, the Class B Notes and the Class C Notes will comprise the initial principal amount (the "Initial Principal Amount") of the Notes. The aggregate principal amounts of the Class A Notes, the Class B Notes and the Class C Notes set forth herein are based upon the Discounted Present Value of the Leases (as defined herein) as of the close of business on May 3, 1997, 1997 (the "Cut-Off Date") calculated at the Statistical Discount Rate (defined herein). The Initial </TABLE> <TABLE> <S> <C> Principal Amount of the Notes will be calculated using the actual Discount Rate. Issuance Date....................... On or about _______, 1997. Denominations....................... The Offered Notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof, except that one Class A Note and Class B Note may be issued in another denomination. Interest Rate....................... ____% per annum on the Class A-1 Notes (the "Class A-1 Interest Rate"), ____% per annum on the Class A-2 Notes (the "Class A-2 Interest Rate"), ____% per annum on the Class A-3 Notes (the "Class A-3 Interest Rate"), ____% per annum on the Class A-4 Notes (the "Class A-4 Interest Rate"), ____% per annum on the Class B Notes (the "Class B Interest Rate") and ____% per annum on the Class C Notes (the "Class C Interest Rate"), calculated on the basis of a year of 360 days comprised of twelve 30-day months. With respect to any particular Class, the "Interest Rate" refers to the applicable rate indicated in the immediately preceding sentence. Initial Principal Amount.............................. $140,857,000 (approximate) for the Class A-1 Notes (the "Class A-1 Initial Principal Amount"), $53,048,000 (approximate) for the Class A-2 Notes (the "Class A-2 Initial Principal Amount"), $211,334,000 (approximate) for the Class A-3 Notes (the "Class A-3 Initial Principal Amount"), $126,476,000 (approximate) for the Class A-4 Notes (the "Class A-4 Initial Principal Amount", together with the Class A-1 Initial Principal Amount, Class A-2 Initial Principal Amount, and the Class A-3 Initial Principal Amount, the "Class A Initial Principal Amount"), $22,626,000 (approximate) for the Class B Notes (the "Class B Initial Principal Amount") and $11,314,085 (approximate) for the Class C Notes (the "Class C Initial Principal Amount"). See "Description of the Notes." Discounted Present Value of the Leases................. The Discounted Present Value of the Leases (the "Discounted Present Value of the Leases"), at any given time, shall equal the future remaining scheduled payments (not including delinquent amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges (defined below)) from the Leases (including Non-Performing Leases), discounted at a rate equal to ____% (the "Discount Rate"), which rate is equal to the sum of (a) the weighted average Interest Rate of the Class A Notes (utilizing the Class A-4 Interest Rate), the Class B Notes and the </TABLE> <TABLE> <S> <C> Class C Notes on the Issuance Date and (b) the Servicing Fee Rate of 0.75% per annum. The "Discounted Present Value of the Performing Leases" equals the Discounted Present Value of the Leases, reduced by all future remaining scheduled payments on the Non-Performing Leases (not including delinquent amounts or Excess Copy Charges), discounted at the Discount Rate. See "Description of the Notes--General." Each of the Indenture and the Sales and Servicing Agreement will provide that any calculation of future remaining scheduled payments made on a Determination Date or with respect to a Payment Date will be calculated after giving effect to any payments received prior to such date of calculation to the extent such payments relate to scheduled payments due and payable by the Lessees with respect to the related Due Period (defined herein) and all prior Due Periods. "Statistical Discounted Present Value of the Leases" means an amount equal to the future remaining scheduled payments (not including delinquent amounts or Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges) from the Leases as of the Cut-off Date, discounted at a rate equal to 7.50% (the "Statistical Discount Rate"). The Statistical Discounted Present Value of the Leases as of the Cut-Off Date is $565,655,085.59 and will not vary materially from the Discounted Present Value of the Leases as of the Cut-Off Date. See "The Series Pool--The Equipment." The aggregate Discounted Present Value of the Leases as of the Cut-Off Date, calculated at the Discount Rate is $___________. "Non-Performing Leases" are (a) Leases that have become more than [123] days delinquent or (b) Leases that have been accelerated by the Servicer or Leases that the Servicer has determined to be uncollectible in accordance with its customary practices. See "The Series Pool--The Leases." The Seller will represent in the Sales and Servicing Agreement that at the time of transfer of any Lease to the Issuer, such Lease was not a Non-Performing Lease. Expected Maturity; Stated Maturity..................... The expected maturity dates with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B Notes are the Payment Dates in May 1998, October 1998, May 2000, January 2002, and April 2002, respectively. The stated maturity date with respect to the Class A-1 Notes will be the Payment Date in July 1998 and with respect to all other Notes will be the Payment Date in April 2005. However, if all payments on the Leases are made as scheduled, final payment with respect to the Notes would occur prior to stated maturity. The Notes........................... The Notes will represent obligations solely of the Issuer and are secured by the Trust Fund. Seller and Servicer................. Copelco Capital, Inc., a Delaware corporation ("Copelco Capital", the "Seller," or in its capacity as servicer, the "Servicer"). Copelco Capital will enter into a sales and servicing agreement (the "Sales and Servicing Agreement") with the Issuer to sell and service the Leases included in the Series Pool (defined below) and make Servicer Advances (as defined herein). Concurrently with the sale of the Leases by Copelco Capital to the Issuer, Copelco Capital's interest in the Equipment (which is either an ownership interest or a security interest) will be transferred to the Issuer as a contribution of capital. Contemporaneously with the sale, the Issuer will transfer </TABLE> <TABLE> <S> <C> its interests in the Leases and Equipment to the Trustee in accordance with the provisions of the Indenture (as defined herein). Trust Fund.......................... The "Trust Fund" will consist of a pool (the "Series Pool") of healthcare, manufacturing and business equipment lease contracts (the "Lease Contracts"), including all payments due thereunder (the "Lease Receivables"; together with the Lease Contracts, the "Leases") and the interest in the related leased equipment (the "Equipment") transferred by Copelco Capital to the Issuer. In addition, the Trust Fund will include the funds on deposit in the Reserve Account, if any, and to the limited extent provided in the Indenture, amounts on deposit in the Residual Account, if any. Trustee............................. Manufacturers and Traders Trust Company (the "Trustee"). The Trustee's offices are located at One M&T Plaza, 7th Floor, Buffalo, New York 14203. Determination Date.................. The fifth day prior to each Payment Date (or the preceding business day, if such day is not a business day). On such date (each, a "Determination Date"), the Servicer will determine the amount of payments received on the Leases in respect of the immediately preceding calendar month (each such period, a "Due Period") which will be available for distribution on the Payment Date. See "Description of the Notes--Distributions on Notes." Payment Date........................ Payments on the Notes will be made on the twentieth day of each month (or if such day is not a business day, the next succeeding business day), commencing on July 21, 1997 (each, a "Payment Date"), to holders of record on the last day of the immediately preceding calendar month (each, a "Record Date"). See "Description of the Notes--Distributions on Notes." Interest Payments................... On each Payment Date, the interest due (the "Interest Payments") with respect to the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C Notes since the last Payment Date will be the interest that has accrued on such Notes since the last Payment Date, or in the case of the first Payment Date, since ______, 1997 (the "Issuance Date") at the applicable Interest Rate applied to the then unpaid principal amounts (the "Outstanding Principal Amounts") of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C Notes, respectively, after giving effect to payments of principal to the Class A Noteholders, the Class B Noteholders and the Class C Noteholders, respectively, on the preceding Payment Date. See "Description of the Notes--General" and "Distributions on Notes." Principal Payments.................. For each Payment Date, each of the Class A Noteholders, the Class B Noteholders and the Class C Noteholders will be entitled to receive payments of principal ("Principal Payments"), to the extent funds are available therefor, in the priorities set forth in the Indenture and described herein below and under "-Application of Payments" and "Description of the Notes-Distributions on Notes." </TABLE> <TABLE> <S> <C> On each Payment Date, to the extent funds are available therefor, the Principal Payment will be paid to the Noteholders in the following priority: (a) (i) to the Class A-1 Noteholders only, until the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the Class A Principal Payment, then (ii) to the Class A-2 Noteholders only, until the Outstanding Principal Amount on the Class A-2 Notes has been reduced to zero, the Class A Principal Payment, then (iii) to the Class A-3 Noteholders only, until the Outstanding Principal Amount on the Class A-3 Notes has been reduced to zero, the Class A Principal Payment, and finally, (iv) to the Class A-4 Noteholders, until the Outstanding Principal Amount on the Class A-4 Notes has been reduced to zero, the Class A Principal Payment, (b) to the Class B Noteholders, the Class B Principal Payment, (c) to the Class C Noteholders, the Class C Principal Payment, and (d) to the extent that the Class B Floor exceeds the Class B Target Investor Principal Amount and/or the Class C Floor exceeds the Class C Target Investor Principal Amount, Additional Principal (defined below) shall be distributed as a principal payment on the Class A Notes then receiving the Class A Principal Payment, until the Outstanding Principal Amount on all of Class A Notes has been reduced to zero, then to the Class B Notes, until the Outstanding Principal Amount of the Class B Notes has been reduced to zero, and finally, to the Class C Notes until the Outstanding Principal Amount of the Class C Notes has been reduced to zero. The "Class A Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, (i) on all Payment Dates prior to the July 1998 Payment Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal Amount on the Class A-1 Notes to zero and (2) the difference between (A) the Discounted Present Value of the Performing Leases as of the previous Determination Date and (B) the Discounted Present Value of the Performing Leases as of the related Determination Date, and (ii) on the July 1998 Payment Date, the entire Outstanding Principal Amount on the Class A-1 Notes and (b) after the Class A-1 Notes have been paid in full, the amount necessary to reduce the aggregate Outstanding Principal Amount on the Class A Notes to the Class A Target Investor Principal Amount (as defined below). The "Class B Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the Outstanding Principal Amount of the Class B Notes to the greater of the Class B Target Investor Principal Amount and the Class B Floor. The "Class C Principal Payment" shall equal (a) while the Class A-1 Notes are outstanding, zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the Outstanding Principal Amount of the Class Notes to the greater of the Class C Target Investor Principal Amount and the Class C Floor. "Additional Principal" with respect to each Payment Date is an amount equal to (a) the difference between (i) the Discounted Present Value of the Performing Leases as of the previous Determination Date and (ii) the Discounted Present Value of the Performing Leases as of the related Determination Date, less (b) the Class A Principal Payment, the Class B Principal Payment and the Class C Principal Payment to be paid on such Payment Date. The "Class A Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class A Percentage and (b) the Discounted Present Value of the Performing Leases as of the related Determination Date. The "Class B Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class B Percentage and (b) the Discounted Present Value of the Performing Leases as of the related Determination Date. </TABLE> <TABLE> <S> <C> The "Class C Target Investor Principal Amount" with respect to each Payment Date is an amount equal to the product of (a) the Class C Percentage and (b) the Discounted Present Value of the Performing Leases as of the related Determination Date. The "Class A Percentage" will be equal to 92.01%. The Class B Percentage will be equal to 5.33%. The "Class C Percentage" will be equal to 2.66% The "Class B Floor" with respect to each Payment Date means (a) 2.50% of the initial Discounted Present Value of the Leases as of the Cut-Off Date, plus (b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the sum, as of the related Determination Date, of the Outstanding Principal Amount on the Class C Notes and the amount on deposit in the Reserve Account after giving effect to withdrawals to be made on such Payment Date. The "Class C Floor" with respect to each Payment Date means (a) 1.00% of the initial Discounted Present Value of the Leases as of the Cut-Off Date, plus (b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the amount on deposit in the Reserve Account after giving effect to withdrawals to be made on such Payment Date; provided, however, that if the Outstanding Principal Amount on the Class B Notes is equal to the Class B Floor, on such Payment Date, the Class C Floor will equal the Outstanding Principal Amount on the Class C Notes utilized in the calculation of the Class B Floor for such Payment Date. The "Cumulative Loss Amount" with respect to each Payment Date is an amount equal to the excess, if any, of (a) the total of (i) the Outstanding Principal Amount of the Notes as of the immediately preceding Payment Date after giving effect to all payments made on such Payment Date, minus (ii) the lesser of (A) the Discounted Present Value of the Performing Leases as of the Determination Date relating to the immediately preceding Payment Date minus the Discounted Present Value of the Performing Leases as of the related Determination Date and (B) Available Funds remaining after the payment of amounts owing the Servicer and in respect of interest on the Notes on such Payment Date over (b) the Discounted Present Value of Performing Leases as of the related Determination Date. The Series Pool..................... The Series Pool will consist of the Leases as of the Cut-Off Date, plus any Substitute Leases (as defined herein) and any Additional Leases (as defined herein) excluding any Leases which have been replaced by one or more Additional Leases or Substitute Leases and, the interest of the Issuer in the related Equipment. See "The Series Pool" and "Certain Legal Matters Affecting a Lessee's Rights and Obligations." Copelco Capital will represent and warrant that, as of the Cut-Off Date, all Leases were current or less than 63 days delinquent and that, as of the initial Determination Date, the Lessees have made at least one lease payment. </TABLE> <TABLE> <S> <C> Equipment........................... The Equipment is comprised primarily of computer systems for healthcare professionals, medical diagnostic and examination equipment for radiology, nuclear medicine, ultrasound and laboratory analysis, industrial and business equipment such as machine tools, graphic arts equipment, computers for businesses and office products such as copiers, facsimile machines and electronics testing equipment. As of the Cut-Off Date, the Series Pool had approximately 60 equipment categories. Lessees............................. Primarily hospitals, non-hospital medical facilities, physicians, businesses and individual business owners (each, a "Lessee"; and collectively, the "Lessees"). As of the Cut-Off Date, the Collateral included 36,181 separate Leases and approximately 31,800 Lessees. As of the Cut-Off Date, Leases relating to Lessees in any one state did not account for more than 18.77% of the Statistical Discounted Present Value of the Leases. See "The Series Pool--The Leases." Certain Lease Terms................. The Leases are triple-net leases, requiring the Lessee to pay all taxes, maintenance and insurance associated with the Equipment. The Leases are non-cancelable by the Lessees. All payments under the Leases are absolute, unconditional obligations of the Lessees without right of offset for any reason. Each Lessee entered into its Lease for specified Equipment designated in schedules incorporated into the Lease. The schedules, among other things, establish the payments and the term of the Lease with respect to such Equipment. The Leases have remaining terms to maturity, calculated as of the Cut-Off Date, of between approximately 7 and 82 months and a weighted average term to stated maturity of 44.27 months. See "The Series Pool--The Leases." Additions, Substitutions and Adjustments..................... Although the Leases will be non-cancelable by the Lessees, Copelco Capital has, from time to time, permitted early termination by Lessees ("Early Lease Termination") or other modifications of the lease terms in certain circumstances more fully specified in the Sales and Servicing Agreement, including, without limitation, in connection with a full or partial buy-out or equipment upgrade. In the event of an Early Lease Termination which has been prepaid in full or in part, the Issuer will have the option to reinvest the proceeds of such Early Termination Lease in one or more Leases having similar </TABLE> <TABLE> <S> <C> characteristics for such terminated Lease (each, an "Additional Lease"). In addition, Copelco Capital will have the option to substitute one or more leases having similar characteristics (each, a "Substitute Lease") for (a) Non-Performing Leases, (b) Leases subject to repurchase as a result of a breach of representation and warranty (each a "Warranty Lease") and (c) Leases following a modification or adjustment to the terms of such Lease (each, an "Adjusted Lease"). The aggregate Discounted Present Value of the Non- Performing Leases for which Copelco Capital may substitute Substitute Leases is limited to an amount not in excess of 10% of the aggregate Discounted Present Value of the Leases as of the Cut- Off Date. The aggregate Discounted Present Value of Adjusted Leases and Warranty Leases for which Copelco Capital may substitute Substitute Leases is limited to an amount not in excess of 10% of the aggregate Discounted Present Value of the Leases as of the Cut-Off Date. The terms of a Lease may be modified or adjusted for administrative reasons or at the request of the lessee, vendor or lessor due to a variety of circumstances, including changes to the delivery date of equipment, the cost of equipment, the components of leased equipment or to correct information when a Lease is entered into Copelco Capital's system. Such modifications may result in adjustments to the lease commencement date, the monthly payment date, the amount of the monthly payment or the equipment subject to a Lease. Additional Leases and Substitute Leases will be originated using the same credit criteria as the initial Leases. To the extent material, information with respect to such Additional or Substitute Leases will be included in periodic reports filed with the Commission as are required under the exchange Act. In no event will the aggregate scheduled payments of the Leases, after the inclusion of the Substitute Leases and Additional Leases be materially less than the aggregate scheduled payments of the Leases prior to such substitution or reinvestment. In addition, after giving effect to such additions and substitutions, the aggregate Booked Residual Value of the Leases will not be materially less than the aggregate Booked Residual Value of the Leases immediately prior to such substitutions or additions. Additionally, either the final payment on such Substitute Lease or Additional Lease will be on or prior to __________ or, to the extent the final payment on such Lease is due subsequent to __________, only scheduled payments due on or prior to such date may be included in the Discounted Present Value of such Lease for the purpose of making any calculation under the Indenture. In the event that an Early Lease Termination is allowed by Copelco Capital and an Additional Lease is not provided, the amount prepaid will be equal to at least the Discounted Present Value of the terminated Lease, plus any delinquent payments. See "The Series Pool--The Leases." Payments on Leases.................. All payments on Leases will be made by the Lessees to the order of the Issuer to the address specified by the Servicer. The Servicer will deposit the proceeds of such payments to the Collection Account (as defined herein) within two Business Days of the receipt thereof. See "Description of the Notes--Collection Account." Advances by Servicer................ Prior to any Payment Date, the Servicer may, but will not be required to, advance (each, a "Servicer Advance") to the Trustee, an amount sufficient to cover delinquencies on Leases in the Trust Fund with respect to the prior Due Period. The Servicer will be reimbursed for Servicer Advances not recovered from late payments </TABLE> <TABLE> <S> <C> from Available Funds on the Payment Date following the date on which the Servicer determined such Lease to be a Non-Performing Lease. See "Description of the Notes--Advances by Servicer." Servicing Fee....................... A Servicing Fee (the "Servicing Fee"), will be paid monthly to the Servicer on each Payment Date from amounts in the Collection Account and will be calculated by multiplying one-twelfth of 0.75% times the lesser of (i) the Outstanding Principal Amount of the Notes or (ii) the Discounted Present Value of the Performing Leases, each at the Determination Date for such Payment Date before application of payments with respect thereto. The Servicing Fee will be paid to the Servicer for servicing the Series Pool and to pay certain administrative expenses in connection with the Notes, including Trustee fees and expenses. See "Copelco Capital's Underwriting and Servicing Practices." Use of Proceeds..................... The net proceeds from the sale of the Offered Notes will be used to purchase the Leases from Copelco Capital. In addition, the net proceeds from the private placement of the Class C Notes will be used for the same purpose. Copelco Capital will use such amounts to repay bank indebtedness and for general corporate purposes. The Indenture....................... The Notes are to be issued pursuant to, and are to be in such form, bear interest and be payable on such terms as are prescribed in an indenture (the "Indenture") to be executed between the Issuer and the Trustee. Available Funds..................... On each Payment Date, the Trustee will use such funds to make required payments of principal and interest to Noteholders. Funds received on or prior to the related Determination Date ("Available Funds") will be available for distribution by the Trustee on a Payment Date and will include: a) Lease Payments due during the prior Due Period (net of any Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges); b) Residual Realizations up to the Residual Amount Cap; c) recoveries from Non-Performing Leases to the extent Copelco Capital has not substituted Substitute Leases for such Non-Performing Leases (except to the extent required to reimburse unreimbursed Servicer Advances); d) late charges received on delinquent Lease payments not advanced by the Servicer; e) proceeds from repurchases by Copelco Capital of Leases as a result of breaches of representations and warranties to the extent Copelco Capital has not substituted Substitute Leases for such Leases; </TABLE> <TABLE> <S> <C> f) proceeds from investment of funds in the Collection Account, the Reserve Account and the Residual Account, if any; g) Casualty Payments (as defined herein); h) Servicer Advances; i) Termination Payments to the extent the Issuer does not reinvest such Termination Payments in Additional Leases; j) funds, if any, on deposit in the Reserve Account; and k) funds, if any, on deposit in the Residual Account to the limited extent provided in the Indenture. Application of Payments............................ Monthly distributions will be made by the Trustee from Available Funds in the following priority: a) to pay the Servicing Fee; b) to reimburse unreimbursed Servicer Advances in respect of a prior Payment Date; c) to make Interest Payments, owing on the Class A Notes concurrently to the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3 Noteholders and Class A-4 Noteholders; d) to make Interest Payments owing on the Class B Notes; e) to make Interest Payments owing on the Class C Notes; f) to make the Class A Principal Payment (i) to the Class A-1 Noteholders only, until the Outstanding Principal Amount on the Class A-1 Notes is reduced to zero, then (ii) to the Class A-2 Noteholders only, until the Outstanding Principal Amount on the Class A-2 Notes is reduced to zero, then (iii) to the Class A-3 Noteholders only, until the Outstanding Principal Amount on the Class A-3 Notes is reduced to zero and finally, (iv) to the Class A-4 Noteholders until the Outstanding Principal Amount on the Class A-4 Notes is reduced to zero; g) to make the Class B Principal Payment; h) to make the Class C Principal Payment; i) to pay the Additional Principal, if any, to the Class A Noteholders then receiving the Class A Principal Payment as provided in clause (f) above until the Outstanding Principal </TABLE> <TABLE> <S> <C> Amount on all of the Class A Notes has been reduced to zero, then to the Class B Noteholders until the Outstanding Principal Amount on the Class B Notes has been reduced to zero and thereafter to the Class C Noteholders until the Outstanding Principal Amount on the Class C Notes has been reduced to zero; j) to the Reserve Account, an amount equal to the excess of the Required Reserve Amount over the Available Reserve Amount; k) following a Residual Event (defined below), to the Residual Account an amount equal to Residual Realizations up to the Residual Amount Cap; and l) to the Issuer, the balance, if any. See "Description of the Notes-Distribution on Notes." Redemption.......................... The Issuer will have the option, subject to certain conditions, to redeem all, but not less than all, of the Notes and thereby cause early repayment of the Notes as of any Payment Date on which the Discounted Present Value of the Performing Leases is less than or equal to 10% of the Discounted Present Value of the Leases as of the Cut-Off Date (after giving effect to the payment of principal on such Payment Date). The Issuer will give notice of such redemption to each Noteholder and the Trustee at least 30 days before the Payment Date fixed for such prepayment. Upon deposit of funds necessary to effect such redemption, the Trustee shall pay the remaining unpaid principal amount on the Notes and all accrued and unpaid interest as of the Payment Date fixed for redemption. See "Description of the Notes--Redemption." Residual Realizations............... Following the Issuance Date, cash flows realized from the sale or re-lease of the Equipment following the scheduled expiration dates of the Leases, other than Equipment subject to Non- Performing Leases (the "Residual Realizations"), shall be deposited into the Collection Account for distribution until the aggregate Residual Realizations used (without duplication) to cover amounts owing the Noteholders and the Servicer, deposited into the Reserve Account, on deposit in the Residual Account, or withdrawn from the Residual Account as a result of an Available Funds Shortfall, equals $__________, which represents 8% of the Discounted Present Value of the Leases as of the Cut-Off Date (the "Residual Amount Cap"), and will provide additional credit support to the Notes. Actual Residual Realizations may be more or less than the residual value of the Equipment recorded on the books of the Issuer (the "Booked Residual Value"). Under certain limited circumstances more fully described in the Indenture (a "Residual Event"), the Residual Realizations not distributed to Noteholders, paid to the Servicer or deposited into the Reserve Account will be deposited in the Residual Account. As provided in the Indenture, funds on deposit in the Residual Account will be available to cover shortfalls in the amount available to pay the amounts owing the Servicer and to make interest and principal payments on the Notes. Following the termination of a Residual Event, amounts on deposit in the Residual Account will be deposited into the Reserve Account to the extent that the amount on deposit in the Reserve Account is less than the required Reserve Amount and thereafter will be disbursed to the Issuer. </TABLE> <TABLE> <S> <C> The aggregate Booked Residual Value of the Leases as of the Cut- Off Date equals $70,790,509.72. Subordination....................... The Class A Notes will be paid sequentially in accordance with the provisions of the Indenture and as described in clause (f) under "Application of Payments". The Class A Notes will be senior in right of payment to the Class B Notes and the Class B Notes will be senior in right to the Class C Notes to the extent described herein. See "Description of the Notes--Distributions on Notes." Reserve Account..................... The Noteholders will have the benefit of funds on deposit in an account (the "Reserve Account") to the extent that there is a shortfall in the amount available to pay amounts owing the Servicer and to make interest and principal payments on the Notes, on any Payment Date. The Reserve Account will be funded by an initial deposit of [__%] of the Discounted Present Value of the Leases as of the Cut-Off Date. Thereafter, to the extent provided in the Indenture, additional deposits will be made to the Reserve Account to the extent that the amount on deposit in the Reserve Account (the "Available Reserve Amount") is less than the Required Reserve Amount. The "Required Reserve Amount" equals the lesser of (a) ____% of the Discounted Present Value of the Performing Leases as of the Cut-Off Date and (b) the Outstanding Principal Amount of the Notes, (the "Required Reserve Amount"). Amounts on deposit in the Reserve Account in excess of the Required Reserve Amount will be disbursed to the Issuer in accordance with the provisions of the Indenture. Federal Income Tax Considerations...................... It is intended that the Class A Notes and the Class B Notes will be characterized as indebtedness of the Issuer for federal income tax purposes. If characterized as indebtedness, interest on such Notes will be taxable as ordinary income when received by a Noteholder on the cash method of accounting and when accrued by Noteholders on the accrual method of accounting. See "Material Federal Income Tax Considerations." ERISA Considerations...................... The Employee Retirement Income Security Act of 1974, as amended ("ERISA") places certain restrictions on those pension and other employee benefits plans to which it applies. Pursuant to regulations issued by the United States Department of Labor defining "plan assets", if the Notes are considered to be indebtedness without substantial equity features under local law, the assets of the Issuer will not be considered assets of any ERISA plan holding the Notes, thereby generally avoiding potential application of ERISA's prohibited transaction rules. However, in certain circumstances, the prohibited transaction rules may be applicable to the purchase of the Notes even if the Notes are not deemed to have </TABLE> <TABLE> <S> <C> substantial equity features. Certain exemptions from the prohibited transaction rules could be applicable, however, with respect to the acquisition and holding of the Notes. Accordingly, the Notes may be acquired by ERISA plans, subject to certain restrictions. Before purchasing any of the Notes, fiduciaries of such plans should determine whether an investment in the Notes is appropriate under ERISA. See "ERISA Considerations." Rating.............................. It is a condition to the issuance of the Offered Notes that the Class A-1 Notes be rated at least "A-1+", "D-1", "P-1" and "F-1+/AAA" and that the Class A-2, A-3 and A-4 Notes be rated at least "AAA", "AAA", "Aaa" and "AAA" and that the Class B Notes be rated at least "A", "A+", "A2" and "A+" by Standard & Poor's Ratings Group ("S&P"), Duff & Phelps Credit Ratings Co. ("DCR"), Moody's Investors Service, Inc. ("Moody's") and Fitch Investors Service, L.P. ("Fitch"), respectively (each a "Rating Agency"). The ratings assess the likelihood of timely payment of interest and the ultimate payment of principal to the Noteholders by the Stated Maturity date. There is no assurance that any rating will not be lowered or withdrawn if, in the judgement of any Rating Agency, circumstances in the future so warrant. See "Rating of the Notes." Material Risks...................... Certain material risks may be present in an investment in the Notes. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036075_new_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036075_new_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c0882d0b625ae010a39dc44d25402ea4fd502671
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036075_new_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option (see "Underwriting") and does not include (i) 2,000,000 shares reserved for issuance under the Company's 1995 Stock Option Plan (the "Stock Option Plan") as of the closing of the Offering, (ii) 127,500 shares subject to options granted or to be granted to two executive officers and one non-employee director of the Company outside the Stock Option Plan and (iii) 333,333 shares reserved for issuance pursuant to warrants granted or to be granted to Comerica Incorporated. Unless otherwise indicated, all references in this Prospectus to the "Company" or "New Century" are to New Century Financial Corporation and its subsidiary, New Century Mortgage Corporation. THE COMPANY New Century is a specialty finance company engaged in the business of originating, purchasing, selling and servicing subprime mortgage loans secured primarily by first mortgages on single family residences. See "Risk Factors-- Subprime Mortgage Banking Industry." The Company originates loans through independent loan brokers (the "Wholesale Division") and through direct solicitation of borrowers (the "Retail Division"). From the commencement of lending operations in February 1996 through March 31, 1997, the Company originated and purchased $607.5 million in mortgage loans. The Company's loan originations and purchases have grown from $4.3 million for the first quarter of 1996 to $250.6 million for the first quarter of 1997. The Company's principal strategy is to continue to increase loan originations through geographic expansion, high levels of service to brokers through its Wholesale Division and increased consumer marketing through its Retail Division. New Century has also implemented a loan sales strategy that includes both securitizations and whole loan sales in order to advance the Company's goal of enhancing profitability while managing cash flows. See "Business--General." The Company's borrowers generally have substantial equity in the property securing the loan, but are considered "subprime" borrowers because they have impaired or limited credit profiles or higher debt-to-income ratios than traditional mortgage lenders allow. See "Business--Underwriting." The Company's borrowers also include individuals who, due to self-employment or other circumstances, have difficulty verifying their income, and individuals who prefer the prompt and personalized service provided by the Company. These types of borrowers are generally willing to pay higher loan origination fees and interest rates than those charged by conventional lending sources. Because these borrowers typically use the proceeds of the Company's loans to consolidate and refinance debt and to finance home improvements, education and other consumer needs, the Company believes that its loan volume will be less dependent on general levels of interest rates or home sales and therefore less cyclical than conventional mortgage lending. Although the Company's underwriting guidelines include five levels of risk classification, approximately 54.1% of the principal balance of the loans originated and purchased by the Company in 1996 were to borrowers within the Company's two highest credit grades. See "Business--Loan Production by Borrower Risk Classification." One important consideration in underwriting subprime loans is the nature and value of the collateral securing the loans. The Company believes that the amount of equity present in the real estate securing its loans, together with the fact that approximately 88.2% of its loans originated and purchased in the first quarter of 1997 were secured by borrowers' primary residences, mitigates the risks inherent in subprime lending. The maximum loan- to-value ratio allowed for first mortgage borrowers in the Company's highest credit grade is 90% and second mortgages offered through the Company's recently formed alternative mortgage products division (the "Alternative Mortgage Products Division") include loans with loan-to-value ratios of up to 125% for borrowers with good credit histories. However, the average loan-to-value ratio on loans originated and purchased by the Company in 1996 was approximately 71.5%. Approximately 97.3% and 98.4% of the loans originated and purchased by the Company during 1996 and the first quarter of 1997, respectively, were secured by first mortgages, and the remainder of the loans the Company originated and purchased in such periods were secured by second mortgages. See "Business--General." The Wholesale Division originates loans through independent loan brokers and accounted for $159.1 million, or 63.5%, of the Company's loan production during the first quarter of 1997. As of May 31, 1997, the Wholesale Division originated loans through its three regional operating centers located in Southern California, Northern California and Chicago and through 23 additional sales offices located in 15 states. Because brokers conduct their own marketing and employ their own personnel to complete loan applications and maintain contact with borrowers, originating loans through the Wholesale Division allows the Company to increase its loan volume without incurring the higher marketing, labor and other overhead costs associated with increased retail originations. See "Business--Loan Originations and Purchases, --Geographic Distribution." The Company also purchases loans through its correspondent program (the "Correspondent Program") which operates as part of its Wholesale Division. Loans purchased through the Correspondent Program accounted for $17.1 million, or 6.8%, of the Company's loan production during the first quarter of 1997. See "Business--Correspondent Program." The Retail Division originates loans through the direct solicitation of borrowers and accounted for $74.4 million, or 29.7%, of the Company's loan production during the first quarter of 1997. As of May 31, 1997, the Retail Division originated loans through a network of 15 sales offices located in California and 25 sales offices located in 15 other states. By creating a direct relationship with the borrower, retail lending creates a more sustainable loan origination franchise and provides the Company with greater control over the lending process. The Company also receives the origination fees paid by the borrower on loans originated through the Retail Division, which offsets the higher costs of retail lending and may contribute to increased profitability and cash flow. See "Business--Loan Originations and Purchases, --Geographic Distribution." The Company's retail marketing includes high-volume targeted direct mail and more traditional marketing activities conducted by retail loan officers, who seek to identify potential borrowers through referral sources as well as individual sales efforts. See "Business-- Marketing." The Company's seven senior executives have substantial mortgage banking experience and have previously directed the national expansion of several conventional and subprime mortgage companies, and the Company's current underwriters have an average of 10 years of subprime mortgage lending experience. The Company believes that its experienced underwriting personnel have the ability to analyze the specific characteristics of each loan application and make appropriate credit judgments in conjunction with the Company's underwriting guidelines. Furthermore, all loan originations presently require two underwriting approvals. See "Business--Underwriting Standards." In addition to its thorough underwriting process, the Company maintains strong controls throughout the lending process, including subjecting all loans to a series of pre-funding and post-funding audits to verify the accuracy of the loan application data and to assure compliance with the Company's underwriting policies, procedures and guidelines. The Company believes that its underwriting and review processes provide the necessary support to continue the Company's rapid loan origination growth while maintaining loan quality. New Century sells its mortgage loans through securitizations as well as through bulk sales of whole loans to institutional purchasers. During 1996, the Company sold $298.7 million of loans through whole loan sales transactions at a weighted average sales price equal to 105.0% of the original principal balance of the loans sold. As of May 31, 1997, the Company has securitized $228.4 million of its mortgage loans through two securitization transactions. Each of these securitizations has been credit enhanced by an insurance policy provided through a monoline insurance company allowing the senior certificates in the related trusts to receive ratings of "AAA" from Standard & Poor's Ratings Services and "Aaa" from Moody's Investors Service, Inc. The Company intends to securitize a majority of its loans while continuing to sell a substantial portion of its loans through whole loan sale transactions. See "Business--Loan Sales and Securitizations." Until February 1997, the Company sold all of its loan production on a servicing-released basis. In connection with its first securitization in February 1997, the Company retained the servicing rights on the loans sold through the securitization. While retaining servicing rights as the master servicer on the securitized loans, the Company currently outsources its servicing operations to Advanta Mortgage Corp. USA ("Advanta"). As of March 31, 1997, the Company's servicing portfolio consisted of 3,110 loans with an aggregate principal balance of approximately $346.4 million, of which 2,255 loans with an aggregate principal balance of approximately $248.6 million were being serviced on an interim basis. The Company intends to develop its own servicing capability in the future in order to manage the servicing relationship with its borrowers and oversee the performance of its loans more directly. See "--Recent Developments" and "Business--Loan Servicing and Delinquencies." GROWTH AND OPERATING STRATEGIES Increasing Growth of Retail Production. The Company will emphasize the growth of retail loan production during 1997 through geographic expansion and increased consumer marketing efforts. The Company has opened 20 retail sales offices during the first five months of 1997 and intends to open 10 or more additional retail sales offices during the remainder of 1997. See "Business-- Geographic Distribution." The Company targets markets for expansion based on demographics and its ability to recruit sales office managers and other qualified personnel in that market. The Company's geographic expansion plans require additional capital and human resources and there can be no assurance the Company will successfully implement its expansion plans. See "Risk Factors--Ability to Sustain Growth and Rapid Geographic Expansion." The Company also intends to increase its consumer marketing, which includes the use of direct mail, a loans-by-mail program and more traditional marketing methods, such as referrals and individual loan officer sales efforts. The Company has increased the number of targeted direct mail pieces sent to retail borrowers from approximately 750,000 mailers in January 1997 to approximately 1.4 million mailers in May 1997 and intends to increase the number of targeted direct mail pieces to over 2 million per month by the end of 1997. See "Business--Growth and Operating Strategies." Continuing Growth of Wholesale Production. The Company will continue the growth of its Wholesale Division, primarily through geographic expansion and greater penetration in existing markets. The Company intends to continue its geographic expansion through the development of lending operations in the Southeast and Northeast regions of the country where the Company has had limited activity. See "Business--Geographic Distribution." In connection with its expansion, the Company plans to open 5 or more additional wholesale sales offices in markets surrounding the Company's existing and planned regional operations centers and to increase the total number of account executives from 42 as of May 31, 1997 to approximately 80 by the end of 1997. The Company's geographic expansion plans require additional capital and human resources and there can be no assurance the Company will successfully implement its expansion plans. See "Risk Factors--Ability to Sustain Growth and Rapid Geographic Expansion, --Growth and Operating Strategies." Enhancing Profitability while Managing Cash Flow. New Century has implemented a loan sales strategy that includes both securitizations and whole loan sales in order to advance the Company's goal of enhancing profits while managing cash flows. Loan sales through securitizations permit the Company to enhance operating profits and to benefit from future cash flows generated by the residual interests retained by the Company (the "residual interests"). Whole loan sale transactions enable the Company to generate current cash flow, protect against the potential volatility of the securitization market and reduce the risks inherent in retaining residual interests in securitizations. The Company continually evaluates different securitization and financing strategies which may improve its profitability and/or cash flow position. See "Business--Growth and Operating Strategies." Regionalizing Operations and Incentivizing Performance. New Century is implementing a strategy of regionalizing operations support, which will place Company decision makers closer to local brokers, enable the Company to refine its procedures to reflect local market practices and conditions and enable the Company to provide a higher level of service to brokers. The Company's compensation structure, which includes stock options and cash incentives based on both loan volume and loan quality for a large number of key employees, incentivizes its employees to achieve the Company's performance goals. The Company believes its compensation structure also enables it to attract and retain key employees. See "Business--Growth and Operating Strategies." Expanding Product Offerings. The Company frequently reviews its products and pricing for competitiveness and introduces new products to meet the needs of its borrowers, brokers and correspondents. The Company recently commenced loan originations through its Alternative Mortgage Products Division which offers loans to borrowers meeting conventional mortgage lending standards and offers a broad selection of second mortgage products, including loans with loan-to-value ratios of up to 125% for borrowers with good credit histories. The Company believes that these mortgage products will enable the Company to increase loan production from brokers and correspondents who have customers seeking such products and from borrowers identified through the Company's retail marketing whose needs are not satisfied by the mortgage products offered by the Retail Division. The Alternative Mortgage Products Division maintains separate underwriting and loan processing staffs and the Company expects that the mortgage loans originated through its Alternative Mortgage Products Division will be sold by the Company on a broker or correspondent basis, rather than through securitizations or servicing-retained sales. See "Business--Growth and Operating Strategies." The Company's headquarters are located at 18400 Von Karman, Suite 1000, Irvine, California 92612 and its telephone number is (714) 440-7030. RECENT DEVELOPMENTS Comerica Investment and Strategic Relationship. On May 30, 1997, the Company sold 545,000 shares of Common Stock of the Company to Comerica Incorporated ("Comerica") for $4,087,500. Comerica is a bank holding company which had assets of $34.9 billion at March 31, 1997 and the parent of Comerica Bank. In connection with the sale of stock to Comerica, the Company and Comerica have agreed to enter into certain arrangements concerning servicing and other strategic relationships. In order to increase the likelihood of success of such strategic relationships, the Company has issued warrants to purchase 100,000 shares of Common Stock to Comerica and has agreed to issue Comerica warrants to purchase an additional 233,333 shares of Common Stock. The issuance of the additional warrants is subject to the completion by Comerica of certain performance events related to the strategic relationships. All of the warrants are exercisable over five years at an exercise price equal to the initial public offering price of the Company's Common Stock, subject to vesting in equal installments on December 31, 1997, 1998 and 1999. Accelerated vesting will occur upon (i) certain changes in control of the Company, or (ii) the inclusion of the shares underlying the warrants in a registration statement, subject to certain limitations, upon exercise of Comerica's registration rights. Pursuant to one of the strategic relationships, Comerica has agreed to act as a sub-servicer for the Company, providing certain servicing functions with respect to the Company's mortgage loans. The functions to be performed by Comerica include payment processing, customer service, tax, insurance and investor reporting. Comerica is a FNMA and FHLMC approved servicer and as of March 31, 1997 serviced residential mortgage loans with a principal balance of $4.1 billion and also serviced consumer loans with a principal balance of $4.4 billion. In connection with these arrangements, the Company will pay Comerica one time set-up and removal fees for loans boarded on and removed from the Comerica servicing system and a fixed monthly fee for each loan with respect to which Comerica performs the specified subservicing functions. The Company will continue to act as master servicer with respect to its mortgage loans and intends to develop an in-house default management process, including collections, delinquency management, foreclosure and REO disposition services. The Company's senior management has substantial experience in building and overseeing servicing operations, including subprime mortgage loan default management, and plans to recruit additional personnel and install appropriate systems before commencing servicing operations under the Comerica agreement. This arrangement will allow the Company to utilize Comerica's existing servicing expertise with respect to certain standardized servicing functions, while allowing the Company to benefit from controlling the collections and default management process. The Company will obtain approval of any appropriate third parties, including rating agencies and monoline insurance companies, before utilizing the new servicing platform for any existing or future securitizations. It is anticipated that servicing operations under the Comerica agreement will begin by the end of 1997. Comerica and the Company have also agreed to create a process to develop leads for the Company's loan products through Comerica's existing bank and mortgage company branch network. In consideration for the services to be performed by Comerica with respect to such loans, the Company will pay Comerica a fee based on the principal balance of the loans funded by the Company. Comerica and the Company have also agreed to develop a process to identify prospective Company borrowers within Comerica's existing consumer loan portfolio and to develop a targeted list of such borrowers for the Company to direct mail or telemarket. In connection with this arrangement, the Company will pay Comerica a fee for the services performed by Comerica with respect to each loan funded by the Company which was identified through Comerica's consumer loan portfolio. May 1997 Securitization. In May 1997, the Company completed its second public securitization, involving approximately $129.3 million of loans. The May 1997 securitization was credit enhanced by an insurance policy provided through a monoline insurance company allowing the senior certificates in the related trust to receive ratings of "AAA" from Standard & Poor's Ratings Services and "Aaa" from Moody's Investors Service, Inc. Recent Loan Origination Volume. The Company originated and purchased $125.5 million in mortgage loans in the month of April 1997, including $34.2 million through the Retail Division, $79.3 million through the Wholesale Division and $12.0 million through the Correspondent Program. Total loan origination and purchase volume in April represented an increase of approximately 50% over average monthly volume during the first quarter of 1997. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company............. 2,900,000 shares Common Stock offered by the Selling Stockholder. 600,000 shares Common Stock outstanding after the Offering(1).. 13,892,373 shares Use of Proceeds................................. To fund future loan originations and purchases, to fund securitization transaction costs and for general corporate purposes. See "Use of Proceeds." Nasdaq Symbol................................... "NCEN" Risk Factors.................................... See "Risk Factors" for a description of material risks which should be considered carefully in evaluating an investment in the Common Stock offered by this Prospectus. </TABLE> - -------- (1) Excludes (i) 2,000,000 shares reserved for issuance under the Stock Option Plan as of the closing of the Offering, including options to acquire 1,267,520 shares which have been granted under the Stock Option Plan, and 441,500 shares which will be granted upon the closing of the Offering, (ii) options to acquire 127,500 shares which have been granted or will be granted to two executive officers and one non-employee director of the Company outside the Stock Option Plan and (iii) 333,333 shares reserved for issuance pursuant to warrants granted or to be granted to Comerica. SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> FOR THE PERIOD FROM INCEPTION (NOVEMBER 17, 1995) FOR THE QUARTER ENDED THROUGH FOR THE YEAR ENDED ----------------------------- DECEMBER 31, 1995 DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997 ------------------- ------------------ -------------- -------------- <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Gain on sale of loans.. $ -- $11,630 $ -- $10,012 Servicing income....... -- 29 -- 302 Interest income........ 14 2,846 39 2,271 ----- ------- ------ ------- Total revenues......... 14 14,505 39 12,585 Operating expenses...... 95 12,200 899 8,539 ----- ------- ------ ------- Earnings (loss) before income taxes (benefit).............. (81) 2,305 (860) 4,046 Income taxes (benefit).. 1 970 (362) 1,699 ===== ======= ====== ======= Net earnings (loss)..... $ (82) $ 1,335 $(498) $ 2,347 ===== ======= ====== ======= Pro forma primary earnings (loss) per share(4)............... $ 0.10 $(0.05) $ 0.19 Pro forma fully diluted earnings (loss) per share(4)............... $ 0.10 $(0.05) $ 0.19 </TABLE> <TABLE> <CAPTION> DECEMBER 31, MARCH 31, 1997 -------------- ----------------------- PRO FORMA 1995 1996 ACTUAL AS ADJUSTED(1) ------ ------- -------- -------------- <S> <C> <C> <C> <C> BALANCE SHEET DATA: Loans receivable held for sale, net..... $ -- $57,990 $113,162 $113,162 Residual interests in securitization.... -- -- 13,243 13,243 Total assets............................ 3,151 64,638 133,582 133,582 Borrowings under warehouse lines of credit................................. -- 41,702 65,803 37,178 Borrowings under aggregation lines of credit................................. -- 13,957 44,731 44,731 Residual financing ..................... -- -- 7,248 7,248 Other borrowings........................ -- 1,326 3,119 1,869 Total stockholders' equity.............. 3,068 4,403 6,750 36,625 </TABLE> <TABLE> <CAPTION> AS OF OR FOR THE PERIOD FROM INCEPTION AS OF OR FOR THE (NOVEMBER 17, 1995) AS OF OR QUARTER ENDED THROUGH FOR THE YEAR ENDED ----------------------------- DECEMBER 31, 1995 DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997 ----------------------- ------------------ -------------- -------------- <S> <C> <C> <C> <C> OPERATING STATISTICS: Loan origination and purchase activities: Wholesale originations.......... $ -- $287,992 $2,292 $159,075 Retail originations.... -- 66,487 2,001 74,384(2) Correspondent purchases............. -- 2,460 -- 17,111 ----- -------- ------ -------- Total loan originations and purchases(3)...... $ -- $356,939 $4,293 $250,570 Average principal balance per loan....... $ -- $ 106 $ 110 $ 108 Percent of loans secured by first mortgages..... -- 97.3% 96.5% 98.4% Weighted average initial loan-to-value ratio.... -- 71.5% 72.5% 70.9% Originations by product type(3): Adjustable-rate mortgages ("ARMs").... $ -- $264,510 $2,090 $187,987 Fixed rate mortgages... -- 92,429 2,203 62,583 Weighted average interest rates: Fixed-rate............. -- 10.4% 9.8% 9.9% ARMs................... -- 9.3% 9.0% 9.2% Margin-ARMs............ -- 7.0% 5.7% 7.0% Loan sales: Loans sold through whole loan transactions(3)....... $ -- $298,713 $ -- $ 95,716 Loans sold through securitizations....... -- -- -- 99,132 </TABLE> <TABLE> <CAPTION> AS OF OR FOR THE QUARTER ENDED -------------------------------------------------------------------------------- MARCH 31, 1996 JUNE 30, 1996 SEPTEMBER 30, 1996 DECEMBER 31, 1996 MARCH 31, 1997 -------------- ------------- ------------------ ----------------- -------------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Gain on sale of loans.. $ -- $ 830 $ 2,658 $ 8,142 $ 10,012 Servicing income....... -- -- 10 19 302 Interest income........ 39 248 560 1,999 2,271 ------ ------- -------- -------- -------- Total revenues......... 39 1,078 3,228 10,160 12,585 Operating expenses...... 899 1,620 2,721 6,960 8,539 ------ ------- -------- -------- -------- Earnings (loss) before income taxes (benefit).............. (860) (542) 507 3,200 4,046 Income taxes (benefit).. (362) (225) 213 1,344 1,699 ------ ------- -------- -------- -------- Net earnings (loss)..... $ (498) $ (317) $ 294 $ 1,856 $ 2,347 ====== ======= ======== ======== ======== Pro forma primary earnings (loss) per share(4)............... $(0.05) $ (0.03) $ 0.02 $ 0.16 $ 0.19 Pro forma fully diluted earnings (loss) per share(4)............... $(0.05) $ (0.03) $ 0.02 $ 0.16 $ 0.19 OPERATING STATISTICS: Loan origination and purchase activities: Wholesale originations.......... $2,292 $45,412 $104,392 $135,896 $159,075 Retail originations.... 2,001 7,120 18,956 38,410 74,384(2) Correspondent purchases............. -- -- -- 2,460 17,111 ------ ------- -------- -------- -------- Total loan originations and purchases(3)...... $4,293 $52,532 $123,348 $176,766 $250,570 Average principal balance per loan....... $ 110 $ 115 $ 103 $ 105 $ 108 Percent of loans secured by first mortgages..... 96.5% 97.4% 96.8% 97.7% 98.4% Weighted average initial loan-to-value ratio.... 72.5% 71.5% 71.9% 71.1% 70.9% Originations by product type(3): ARMs................... $2,090 $35,340 $ 93,473 $133,607 $187,987 Fixed-rate mortgages... $2,203 $17,192 $ 29,875 $ 43,159 62,583 Weighted average interest rates: Fixed-rate............. 9.8% 10.3% 10.6% 10.3% 9.9% ARMs................... 9.0% 9.4% 9.2% 9.4% 9.2% Margin-ARMs............ 5.7% 6.9% 6.9% 7.1% 7.0% Loan sales: Loans sold through whole loan transactions.......... $ -- $28,822 $ 79,419 $190,472 $ 95,716(5) Loans sold through securitizations....... $ -- $ -- $ -- $ -- $ 99,132 Staffing and offices: Total employees........ 53 105 178 333 462 Total wholesale account executives............ 4 16 25 34 46 Total retail loan officers.............. 6 20 24 58 105 Total regional operating centers..... 2 3 3 3 3 Total wholesale sales offices............... 1 1 5 12 18 Total retail sales offices............... 2 5 8 20 30 </TABLE> - -------- (1) Adjusted to reflect (i) the exercise of 304,501 warrants at an average price of $3.50 per share, (ii) the sale of 545,000 shares of Common Stock to Comerica at a price of $7.50 per share, less estimated expenses payable by the Company, and (iii) the sale of 2,900,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.50 per share (after deducting the underwriting discount and estimated expenses payable by the Company), and the application of the estimated net proceeds therefrom to reduce outstanding balances under the Company's warehouse facilities and repay approximately $1.25 million outstanding under the Company's revolving line of credit. Adjustments have not been made to reflect the impact should the Underwriters' over-allotment option be exercised. (2) Includes $634,000 of loans originated through the Alternative Mortgage Products Division. (3) Excludes non-refundable fees and direct costs associated with the origination or purchase of mortgage loans. (4) Pro forma earnings (loss) per share has been computed by dividing pro forma net earnings by the pro forma weighted average number of shares outstanding. The pro forma weighted average number of shares includes all options and warrants issued below the estimated initial public offering price within one year prior to the filing of the Registration Statement for the initial public offering and is calculated using the treasury stock method. Historical earnings per share is not presented because it is not indicative of the ongoing entity. (5) Includes $2.5 million of loans repurchased and resold by the Company in the first quarter of 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036188_qad-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036188_qad-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c0615caa3ece52c86bc5c5da2185b494a40c0fd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036188_qad-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE SPECIFICALLY NOTED HEREIN, ALL OF THE INFORMATION IN THIS PROSPECTUS (I) REFLECTS THE CONVERSION OF ALL OF THE COMPANY'S OUTSTANDING SHARES OF CLASS B COMMON STOCK INTO SHARES OF COMMON STOCK, WHICH WILL OCCUR AUTOMATICALLY UPON THE CLOSING OF THE OFFERING, (II) ASSUMES THE REINCORPORATION OF THE COMPANY IN DELAWARE TO BE EFFECTED PRIOR TO THE COMPLETION OF THE OFFERING, (III) REFLECTS THE 2-FOR-1 SPLIT OF ALL OF THE COMPANY'S OUTSTANDING SHARES OF COMMON STOCK TO BE EFFECTED PRIOR TO THE COMPLETION OF THE OFFERING AND (IV) ASSUMES THAT THE U.S. UNDERWRITERS' AND THE MANAGERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. ALL REFERENCES TO THE COMPANY OR QAD SHALL REFER TO QAD INC., A DELAWARE CORPORATION, AND SHALL INCLUDE ITS SUBSIDIARIES, EXCEPT AS OTHERWISE SPECIFICALLY NOTED HEREIN. THE COMPANY QAD is a provider of Enterprise Resource Planning ("ERP") software for multinational and other large manufacturing companies. The Company's software solutions are designed to facilitate global management of resources and information to allow manufacturers to reduce order fulfillment cycle times and inventories, improve operating efficiencies and measure critical company performance criteria against defined business plan objectives. The flexibility of the Company's products also helps manufacturers adapt to growth, organizational change, business process reengineering, supply chain management and other challenges. The Company's principal product, MFG/PRO software, is specifically designed for deployment at the plant or division level of global manufacturers in five targeted industry segments--electronics/industrial, food/beverage, consumer packaged goods, medical and automotive. MFG/PRO software provides multinational organizations with an integrated ERP solution that is based on an open, client/server architecture and includes manufacturing, distribution, financial and service/support management applications. Additionally, the Company is currently focused on extending its presence in multi-site manufacturing by developing a line of object-oriented, supply chain management solutions, named On/Q software. The Company's initial On/Q software product, Logistics, is designed to allow for consolidation of orders, contract management, shipping and logistics management. Logistics is currently in development and is expected to be commercially available in the second half of 1998. As of April 30, 1997, the Company had licensed MFG/PRO software at approximately 3,200 sites to approximately 1,880 customers in over 70 countries. The Company's customers include Cargill, Incorporated, Colgate-Palmolive Company, Johnson Controls, Inc., Johnson & Johnson, Lucent Technologies Inc., Philips Electronics N.V., St. Jude Medical, Inc., Unilever N.V. and United Technologies Automotive. The Company was founded in 1979 and was incorporated in California as qad.inc in 1986. In February 1997, the Company's name was changed to QAD Inc. The Company will be reincorporated in Delaware prior to completion of the Offering. The Company's executive offices are located at 6450 Via Real, Carpinteria, California 93013, and its telephone number is (805) 684-6614. THE OFFERING <TABLE> <S> <C> Common Stock offered: U.S. Offering...................... 4,600,000 shares International Offering............. 1,150,000 shares Total............................ 5,750,000 shares (1) Common Stock to be outstanding after the Offering.......................... 28,274,234 shares (1)(2) Use of proceeds........................ For repayment of indebtedness, to fund capital and other investments and for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol.......... QADI </TABLE> - ------------------------------ (1) Does not include 862,500 shares of Common Stock that are subject to an over-allotment option granted by the Company to the U.S. Underwriters and the Managers. (2) Excludes 1,061,000 shares of Common Stock issuable upon exercise of options outstanding at April 30, 1997 with exercise prices ranging from $0.12 to $13.00 per share and with a weighted average exercise price of $2.73 per share. See Note 10 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> QUARTER ENDED YEAR ENDED DECEMBER 31, YEAR ENDED APRIL 30, ------------------------------------------ JANUARY 31, -------------------- 1992 1993 1994 1995 1997(1) 1996 1997 --------- --------- --------- --------- ----------- --------- --------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenue............................ $ 28,074 $ 46,543 $ 66,360 $ 89,949 $ 126,444 $ 20,116 $ 32,073 Operating income (loss)............ 3,565 6,442 4,084 (2,646) 2,322 (10,200) 317 Net income (loss).................. 1,589 3,694 2,878 (686) 1,000 (7,317) 560 Net income (loss) per share (2)........................ $ 0.08 $ 0.18 $ 0.12 $ (0.03) $ 0.04 $ (0.33) $ 0.02 Shares used in computing income (loss) per share................. 20,788 20,788 23,887 21,889 23,534 22,167 24,015 </TABLE> <TABLE> <CAPTION> APRIL 30, 1997 ------------------------- AS ADJUSTED ACTUAL (3) --------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.............................................................. $ 1,306 $ 47,561 Working capital (deficit).............................................................. (12,216) 49,182 Total assets........................................................................... 81,193 129,448 Notes payable and current installments of long-term debt............................... 15,143 0 Long-term debt, less current installments.............................................. 4,320 0 Total stockholders' equity............................................................. 10,952 78,669 </TABLE> - ------------------------ (1) Effective February 1, 1996, the Company changed its financial reporting year end from December 31 to January 31. See Note 1 of Notes to Consolidated Financial Statements. (2) The basis for the determination of stock used in computing net income (loss) per share is described in Note 1 of Notes to Consolidated Financial Statements. (3) Adjusted to give effect to the sale of 5,750,000 shares of Common Stock offered by the Company in the Offering at an assumed initial public offering price of $13.00 per share after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company and the application of the estimated net proceeds therefrom, including the use of approximately $19.5 million to repay amounts owed under notes payable and long-term debt and $2.0 million to acquire an equity interest in a private technology development company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036261_excel_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036261_excel_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..258ea4a75630aea5a628d8592a7eabbbefe8bfab
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036261_excel_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. THE COMPANY Excel is a leading provider of open switching platforms for telecommunications networks worldwide. The Company develops, manufactures, markets and supports a family of open, programmable, carrier-class switches that addresses the complex enhanced services and wireless and wireline infrastructure needs of network providers. Excel's products offer network providers the flexibility to address multiple market applications and the scalability to deploy a variety of system capacities. The Company's programmable switching platforms enable network providers to deliver improved networking functionality at a lower cost than purchasing, upgrading or reprogramming traditional, closed, central office switches. The Company's products are currently deployed in telecommunications networks in approximately 50 countries throughout the world. Excel offers a family of programmable switching platforms that are designed with distributed architecture and open software to maximize performance and provide multiple levels of programmability and redundancy. Excel's open switching platforms integrate with a wide variety of host computer systems, operating systems and application development environments. The Company's product family scales from 512 to 30,720 ports. Using Excel's patented Programmable Protocol Language ("PPL"), application developers can customize the switching software to their unique requirements, allowing them to introduce new services and applications rapidly. As customer requirements evolve, the Excel platform can be upgraded without requiring extensive and complex programming changes to the underlying software. The Company sells to a variety of customers in the worldwide telecommunications market, including application developers, original equipment manufacturers ("OEMs") and systems integrators. These customers include Boston Technology, Inc., Brite Voice Systems, Inc., Ericsson Messaging Systems Inc., Glenayre Technologies, Inc., IEX Corporation, MCI Communications Corporation, Lucent Technologies Inc. (Octel Messaging Division), Phoenix Wireless Group, Inc., Priority Call Management, Inc., QUALCOMM Incorporated and WorldCom, Inc. Excel's customers integrate the Company's open, programmable switching platforms with their product offerings to address a variety of market applications for network providers, ranging from enhanced services such as voice messaging, one number services and prepaid debit cards, to wireless and wireline infrastructure services such as tandem switching, mobile switching centers and intelligent base station controllers. Network providers which have installed Excel's products include AT&T Corp., Ameritech Corporation, Bell Atlantic Corporation, BellSouth Corporation, British Telecommunications plc, GTE Corporation, MCI Communications Corporation, Nippon Telegraph and Telephone Corporation, Pacific Bell, Sprint Corporation, Telstra Corporation Ltd., Time Warner Inc. and WorldCom, Inc. THE OFFERING Common Stock offered............. 4,500,000 shares Common Stock to be outstanding after the offering.............. 32,589,600 shares(1) Use of proceeds.................. For general corporate purposes, including working capital, product development, capital expenditures and potential acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......................... XLSW SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED SIX MONTHS ENDED ------------------------------------------- ----------------- DECEMBER 31, ------------------------------ DECEMBER 28, JUNE 30, JUNE 28, 1992 1993 1994 1995 1996 1996 1997 ------ ------- ------- ------- ------------ -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS (UNAUDITED) OF INCOME DATA: Revenues................ $5,111 $10,033 $20,723 $36,161 $62,050 $27,890 $39,055 Income from operations.. 692 2,892 7,083 8,783 13,570 6,255 12,272 Net income.............. 469 1,396 4,190 5,411 7,901 3,687 7,420 Net income per share(2)............... $ .01 $ .04 $ .13 $ .16 $ .23 $ .11 $ .22 Weighted average common and common equivalent shares outstanding(2).. 31,519 31,954 32,431 32,913 33,787 33,672 34,012 </TABLE> <TABLE> <CAPTION> JUNE 28, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: (UNAUDITED) Working capital.......................................... $21,915 $100,630 Total assets............................................. 44,446 123,161 Long-term obligations, less current maturities........... 3,584 3,584 Total stockholders' equity............................... 27,541 106,256 </TABLE> - ------- (1) Based on shares of Common Stock outstanding as of June 28, 1997. Excludes (i) 10,808,640 shares of Common Stock issuable upon exercise of options outstanding as of June 28, 1997, of which options to purchase 6,515,940 shares were then exercisable, and (ii) 3,625,000 shares of Common Stock reserved for future issuance under the Company's stock plans. See "Management--Stock Plans" and Note 5 of Notes to Consolidated Financial Statements. (2) Computed on the basis described in Note 1 of Notes to Consolidated Financial Statements. (3) Adjusted to reflect the sale of the 4,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $19.00 per share, after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company, and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036283_pameco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036283_pameco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f9ef19bdf441e524cd4b3972c7635dbeb383f0c1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036283_pameco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, references herein to the "Company" or "Pameco" prior to the consummation of the Reincorporation Merger (as defined herein) mean Pameco Holdings, Inc., a Delaware corporation, and its subsidiaries, and references to the "Company" or "Pameco" after consummation of the Reincorporation Merger mean New Pameco Georgia Corporation, a Georgia corporation, and its subsidiary, whose name will be changed to Pameco Corporation upon consummation of the Reincorporation Merger. See "--Company History and Recent Acquisitions." All numbers of shares, per share amounts and related information in this Prospectus reflect a 1.25-for-one split of the Common Stock effected as part of the Reincorporation Merger, which will be effected prior to the Offering. See "Description of Capital Stock." References herein to fiscal year 1997 mean the fiscal year ended February 28, 1997 and to fiscal year 1996 mean the fiscal year ended February 29, 1996. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Pameco is one of the largest distributors of heating, ventilation and air conditioning ("HVAC") systems and equipment and refrigeration products in the United States, with predecessor corporations dating back to 1931. The Company stocks more than 65,000 stock keeping units ("SKUs") to service more than 45,000 customers through a national network of 294 branches in 44 states and Guam located in 76 of the top 100 standard metropolitan statistical areas ("SMSAs") in the country. The Company's products include a complete range of central air conditioners, heat pumps, furnaces and parts and supplies for the residential market, and condensing units, compressors, evaporators, valves, walk-in coolers and ice machines for the commercial market. In fiscal 1997, the Company's HVAC business generated approximately 57.0% of its revenues, while the refrigeration business generated the balance. In fiscal 1997, Pameco derived over 80.0% of its revenues from the repair and replacement market, which is higher margin and less cyclical than the new construction market due to end-users' needs for immediate service and expert technical advice. The new construction market generated the balance of Pameco's revenues. Management believes that Pameco is one of a small number of companies in the United States which offers a complete line of HVAC and refrigeration products on a significant scale on a nationwide basis. Pameco attributes its leadership position in the HVAC and refrigeration distribution industries primarily to its operating philosophy. The Company emphasizes personalized customer service and convenient "one-stop" shopping to meet each customer's total needs at the local and national level. The Company's technical service representatives, who provide customers with technical advice in diagnosing problems and recommending solutions, are an essential element of the Company's customer service. Pameco operates under a centralized management structure and offers substantial incentive compensation to its executive officers and division and branch managers. Additionally, the Company believes that its size, its financial resources and its position as a national distributor of HVAC and refrigeration products allow it to provide superior customer service by offering immediate access to a complete product line of equipment, parts and supplies through its 294 branches and six regional distribution centers. The Company's strategic objective is to continue to grow profitably in both existing and new markets through the acquisition of branches and the opening of new branches, as well as through increasing sales and profitability at existing branches. The Company began an active acquisition program in 1996 to capitalize on consolidation opportunities presented by the substantial size and highly fragmented ownership structure of the HVAC and refrigeration markets. Management believes Pameco is well-positioned to take advantage of this fragmentation given the Company's breadth of product offerings, its national presence and its proven ability to acquire and integrate new branches, as demonstrated by its recent acquisitions. The Company's acquisition strategy is to acquire profitable distribution businesses with well-developed market positions and desirable supplier franchises. The Company has focused and will continue to focus principally on acquisitions in geographic areas not currently served by the Company, with the goal of achieving greater geographic diversification and adding product lines, customers and employees ("associates"). Pameco will also pursue opportunities to strengthen its position in existing markets by acquiring new branches within existing geographic markets. For the fiscal year ended February 29, 1996, the Company's sales were $334.5 million compared to $378.7 million for the fiscal year ended February 28, 1997. Same store sales increased 8.0% during this period. On a pro forma basis, assuming the completion of the acquisition of 52 branches from Sid Harvey Industries, Inc. ("Sid Harvey") and six branches from Chase Supply Company of Chicago ("Chase") as of March 1, 1995, sales would have been $394.5 million and $421.0 million for fiscal years ended February 29, 1996 and February 28, 1997, respectively. Net income for the fiscal year ended February 29, 1996 was $5.5 million compared to $10.7 million for the fiscal year ended February 28, 1997. On a pro forma basis, assuming the completion of the Sid Harvey and Chase acquisitions as of March 1, 1995, net income would have been $5.4 million and $10.6 million for the fiscal years ended February 29, 1996 and February 28, 1997, respectively. THE INDUSTRY Based upon an industry report, management estimates that sales in the residential and light commercial heating and cooling equipment and commercial refrigeration markets (excluding product markets in which the Company does not compete) totaled approximately $8.1 billion and $2.8 billion, respectively, in 1996. The combined $10.9 billion industry includes equipment, parts and supplies distributed by wholesalers and by original equipment manufacturers' ("OEMs") captive distribution arms, but excludes HVAC systems sold for use in large commercial projects and refrigeration products sold in the residential market. Companies engaging in the HVAC and refrigeration repair and replacement markets sell their products primarily through local branches for their customers' convenience and timely access to products. Management estimates that there are 8,100 HVAC and refrigeration distributors in the United States operating from approximately 11,000 locations nationwide. Management believes that a significant percentage of these distributors are small, owner-operated businesses operating in single geographic areas and providing a more limited range of products and services. Based upon the industry report and the Company's fiscal 1997 revenues, management estimates that Pameco's cumulative U.S. market share in its industry sectors is between three and four percent and that no independent distributor has a significantly greater share of this combined market on a nationwide basis. Management believes that the fragmentation of its market stems from several factors. First, manufacturers have historically limited their distributors' distribution rights, including those granted to Pameco, to selected geographic areas. For example, until recently, no major HVAC or refrigeration product manufacturer had allowed Pameco to carry its product lines throughout the United States. Second, customers prefer doing business at branch locations within a 20-minute commute (five to 10 miles) of their job sites. This preference limits the geographic area that a particular branch can support. Finally, distributors typically do not stock all HVAC and refrigeration products at the branch level; instead, each maintains an inventory of the most frequently purchased SKUs. If a particular distributor (such as Pameco) does not stock an infrequently purchased item required immediately by a particular customer, that customer may conduct business with one of the distributor's competitors. See "--Distribution Centers and Branch Operations." Given the fragmentation of the market, management believes that the HVAC and refrigeration distribution industry is well-positioned for consolidation. In particular, management believes that many of the smaller distributors in its industry are finding it increasingly difficult to compete in the current market because they generally lack the financial resources of larger entities and thus are unable to offer broad product lines and multiple brands and may not possess sophisticated inventory management and control systems necessary to operate multiple branches effectively or the ability to invest significant resources in the information technology necessary to improve inventory flow. In addition to the trend toward consolidation, management believes other important trends within the industry include: (i) an increased presence of large customer buying groups, forcing a competitive bidding process, while creating opportunities to sell to new and large national accounts; (ii) the increased importance of immediate availability of products; (iii) the attempt by many of the smaller distributors to identify exit strategies for their business and (iv) the proliferation of products and parts. BUSINESS STRATEGY The Company has invested considerable time and resources building its national reputation and leveraging the goodwill of local branches that the Company has developed or acquired. The Company has recently hired a new Chief Executive Officer and four highly qualified senior managers in sales, operations, logistics and management information systems to assist in the implementation of the Company's operating strategy. The Company is pursuing the following strategy to enhance growth and increase profitability: Expansion by acquisition. The Company launched a targeted acquisition strategy in 1996 as a consolidator in the HVAC and refrigeration distribution industries. In the past 12 months, the Company has acquired 60 branches in 11 states, increasing its total number of branches by over 20.0%. Pameco is able to maximize its return on investment in new branches and obtain incremental revenues and operating income with minimal incremental administrative expenses, due to economies of scale made possible by the Company's prior investment in its sales, operations, logistics and management information systems infrastructure. Further, by geographically diversifying its sources of revenue management believes the Company is less susceptible to economic slowdowns or adverse weather conditions which may occur in particular regions of the country. Emphasis on "one-stop" shopping and immediate product and service availability. Management believes that Pameco provides added value to its customers by providing superior customer service and immediate access to a complete line of industry-recognized brand names and private label equipment, parts and supplies from numerous manufacturers through its branches and distribution centers. The Company stocks over 65,000 SKUs at its branches and distribution centers and offers customers access to over two million SKUs. In order to provide customers immediate access to products, the Company stocks inventory representing over 75.0% of its sales at its branches. Pameco believes its ability to provide immediate access to a wide range of products, particularly in the refrigeration business, where equipment repair is often time-sensitive, has helped the Company to establish a reputation as a "one- stop" shop for HVAC and refrigeration products. In addition, Pameco provides its customers with assistance in making intelligent purchases through the Company's well-trained technical service representatives and counter personnel. Management believes that its extensive product offerings and knowledgeable associates help maintain an extensive and loyal customer base. Pursue regional and national customers. The Company is focused on opportunities to serve existing and prospective customers on a multi-regional or national basis, which it believes represents a significant growth opportunity. In particular, the Company believes that its nationwide coverage and broad product lines enable it to provide multi-regional and national accounts with consistent service, greater purchasing leverage, improved inventory management and centralized billing. This strategy is designed to complement the Company's established relationships with its local and regional customers. Management believes the new ThermalZone(TM) private label line of HVAC equipment and parts, which Pameco introduced in September 1996 and which is currently available in 47 states, will further increase the Company's national account opportunities. The Company believes that a nationally available, standardized HVAC product line will provide large accounts with greater consistency in price, availability and quality because these accounts will be able to purchase one uniform product nationwide instead of purchasing a number of different product lines from different suppliers. Continued focus on higher margin repair and replacement market. The Company continues to focus on the higher margin repair and replacement market, from which Pameco derived over 80.0% of its revenues in fiscal 1997. The repair and replacement market has increased substantially over the past ten years as a result of the aging of the installed base of HVAC products, the introduction of new energy-efficient models and the upgrading of many existing buildings and homes to central heating and air-conditioning. This installed product base represents a significant market in terms of recurring revenues, as customers are continually replacing a percentage of the installed base of equipment each year. In the refrigeration market, by focusing sales on products used for repairs, which typically cannot be postponed, the Company's revenues tend to be less dependent upon national economic cycles. Operating improvements through supply chain and cost structure management. Pameco will continue to invest significant resources in its management information systems. Management believes these systems will allow the Company to achieve improvements in inventory control and cost management, and, together with supply chain software to be acquired later this year, will improve the Company's supply chain strategy, as decisions relating to purchasing, inventory management and logistics will be more effectively coordinated. All branches are equipped with computer systems that have the ability to monitor inventory levels to ensure timely inventory orders and to guard against unexpected stock shortages. Management believes that improved distribution practices should reduce the Company's cost per SKU handled and, over time, increase the Company's inventory turns and fill rate percentages. Margin enhancement focus. The Company is currently implementing several measures in an effort to enhance its margins and reduce transaction costs. These measures include system-related pricing enhancements, such as pricing discipline through the limitation of discounts at the point-of-sale, and improved performance from underperforming branches through internal benchmarking. Additionally, the Company believes it will realize efficiencies in cost control through the Company's management information system and logistics network, as well as through improved supply chain dynamics as described in the immediately preceding paragraph. COMPANY HISTORY AND RECENT ACQUISITIONS Pameco is a Georgia corporation which was formed in March 1997 and which will merge with Pameco Holdings, Inc., a Delaware corporation, and Pameco Corporation, a Delaware corporation, immediately prior to the Offering (the "Reincorporation Merger"). While predecessor corporations of the Company date back to 1931, Pameco was formed in the early 1980s, when the Hillman Company acquired a number of regional HVAC and refrigeration product distributors. During the early and mid 1990s, the Company's management focused on controlling costs and consolidating a decentralized business. In March 1996, in an effort to refocus the Company on sales growth, Pameco hired a new Chief Executive Officer with extensive experience in directing sales growth and acquisitions. The Company's current senior management team is focused on enhancing the financial performance of the Company, motivated in part by an equity-based incentive compensation system, and has made significant progress in realigning the structure and culture of the Company to accelerate growth. During the past year, the Company has successfully completed the acquisition of 60 branches in 11 states. In May 1996, Pameco purchased six branches and related assets from Chase. The Chase branches had revenues in excess of $9.0 million for all of fiscal 1996 and derived approximately 59.0% of their aggregate revenues in fiscal 1996 from the sale of refrigeration products, with the balance of revenues from the sale of HVAC products. This acquisition gave the Company a significant presence in the Chicago, Illinois and Gary, Indiana markets. In November 1996, the Company acquired 52 branches located in seven southeastern states from Sid Harvey. These branches had aggregate revenues in excess of $51.8 million for the year ended December 31, 1996 and derived significant revenues from the sale of both HVAC and refrigeration products. In March 1997, the Company purchased the HVAC operations and related assets of Bellows-Evans, Inc., a distributor of HVAC equipment in Birmingham, Alabama, a new market for the Company. The acquired business had revenues in excess of $3.0 million for the year ended May 31, 1996 and derived substantially all of its revenues from the sale of HVAC products. In April 1997, the Company purchased the HVAC operations and related assets of Trigg Supply, Inc., a distributor of HVAC products in Ft. Worth, Texas. The acquired business had revenues of approximately $1.3 million for the year ended December 31, 1996 and derived all of its revenues from the sale of HVAC products. The Company's executive offices are located at 1000 Center Place, Norcross, Georgia 30093, and its telephone number is (770) 798-0700. THE OFFERING Type of security offered.... Class A Common Stock Number of shares to be sold: <TABLE> <S> <C> By the Company................. 3,000,000 By the Selling Shareholders.... 578,644 </TABLE> Shares to be outstanding after the Offering(1)(2)... 8,052,747 shares of Common Stock, consisting of 4,068,901 shares of Class A Common Stock and 3,983,846 shares of Class B Common Stock. Use of proceeds............. To repay existing indebtedness and repurchase 206,847 shares of Common Stock from certain shareholders, including members of the Investor Group. See "Use of Proceeds." Voting rights............... The Class A Common Stock and the Class B Common Stock will vote as a single class with respect to all matters submitted to a vote of the shareholders, with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock entitled to ten votes, except that (i) the holders of the Class A Common Stock will be entitled to elect two directors and the holders of the Class B Common Stock will be entitled to elect all other directors; (ii) with respect to any "going private" transaction between the Company and a Principal Shareholder (as defined herein), each share of Class A Common Stock and Class B Common Stock will be entitled to one vote and (iii) each class will have such voting rights as otherwise provided by law. Each share of Class B Common Stock is convertible into one share of Class A Common Stock at the option of the holder thereof and is automatically convertible into one share of Class A Common Stock upon transfer to an unaffiliated party or upon the date when the number of outstanding shares of Class B Common Stock is less than ten percent of all outstanding Common Stock. Substantially all of the Class B Common Stock is owned by the Investor Group. Each class of Common Stock has identical rights, except with respect to voting and conversion privileges. See "Description of Capital Stock" and "Principal and Selling Shareholders." Proposed New York Stock Exchange symbol............ The Class A Common Stock has been approved for listing on the New York Stock Exchange subject to notice of issuance under the symbol "PCN." (1) Excludes (i) 206,847 shares to be repurchased with a portion of the net proceeds of the Offering; (ii) 958,092 shares of Class A Common Stock reserved for issuance under the Employee Stock Option Plans pursuant to which options to purchase 642,862 shares will be outstanding upon the closing of the Offering; (iii) 50,000 shares of Class A Common Stock reserved for issuance under the Non-Employee Directors Stock Option Plan pursuant to which options to purchase 37,500 shares will be outstanding upon the closing of the Offering and (iv) 9,375 shares of Class A Common Stock reserved for issuance under an option grant to one of the non- employee directors. See "Management--Stock Incentive Plans." (2) Excludes 62,500 shares of Class B Common Stock subject to an option held by Terfin International, Ltd. ("Terfin"). See "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036292_signature_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036292_signature_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9d2ce20b5116f69ad902822712b550dc64d0ab5d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036292_signature_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," "Business" and the Financial Statements and notes thereto, appearing elsewhere in this Prospectus. The statements which are not historical facts contained in this Prospectus are forward-looking statements that involve risks and uncertainties, including those described under "Risk Factors." Prospective purchasers of the securities offered by this Prospectus should carefully consider the "Risk Factors" section, as well as the other information and data included in this Prospectus, before making an investment in the securities offered hereby. THE COMPANY Signature designs, markets and distributes prescription eyeglass frames primarily under exclusive licenses for Laura Ashley Eyewear, Hart Schaffner & Marx Eyewear and Jean Nate Eyewear, as well as its own Camelot label. The Laura Ashley Eyewear collection is one of the leading women's brand-name collections in the United States. The Company attributes its success to its brand-name development process and frame designs. The Company's brand-name development process includes identifying a market niche, obtaining the rights to a carefully selected brand name, producing a comprehensive marketing plan, developing unique in-store displays, and creating innovative sales and merchandising programs for independent optical retailers and retail chains. Signature's in-house designers work with many respected frame manufacturers throughout the world to develop high-quality, creative designs which are consistent with each brand-name image. In June 1997, Signature acquired the exclusive license to design and market an Eddie Bauer Eyewear collection, which the Company plans to launch in the Spring of 1998. The Company pursued the Eddie Bauer brand name, which had not previously been licensed for prescription eyewear, for its widespread recognition, outdoor heritage, casual styling and reputation for value and quality. The Eddie Bauer Eyewear collection will offer men's and women's styles and will be positioned in the medium-price segment of the brand-name prescription eyewear market. In 1996, domestic retail sales of all eyewear products were $14.6 billion, and domestic retail sales of eyeglasses were $4.6 billion. Just over 60% of the nation's entire population, and more than 90% of people over the age of 45, needed corrective eyewear in 1996. The average age of the United States population is expected to increase over the next 25 years due to the aging of the "baby-boomers" who were born between 1946 and 1964. As more of the baby- boomers exceed age 45, the Company believes sales of corrective eyewear should increase. Signature produces "turnkey" marketing, merchandising and sales promotion programs to promote sales at each level in the distribution chain. For optical retailers, the Company develops unique in-store displays, such as its Laura Ashley Eyewear "store within a store" environments. For the sales representatives who call on retail accounts, whether they are employed by distributors or by Signature, the Company creates presentation materials, marketing bulletins, motivational audio and video tapes and other sales tools to facilitate professional presentations, and the Company offers attractive incentive awards for reaching targeted sales levels. For its distributors who sell to independent optical retailers, Signature provides its innovative loyalty programs. Under the loyalty programs, which generally last from six to ten months, each participating retailer agrees to purchase a specified quantity of frames of new styles released during the program period. Although a participating retailer may cancel at any time, historically most have completed the program and renewed their participation in ensuing years. These "automatic" sales programs have facilitated the widespread placement of new styles in optical retail stores, have increased the Company's leverage with its manufacturers due to the large size of the Company's orders, and have assisted its inventory planning. The Company's largest loyalty program is its Laura Ashley Loyal Partners program, which at April 30, 1997 had over 4,750 participating retailers in the United States (approximately 16% of all independent optical retailers in the United States) as well as over 800 international participants. The Company contracts with overseas factories to manufacture the frames it designs. Signature distributes its frames through distributors in the United States and through exclusive distributors in foreign countries. In addition, the Company sells directly through its own sales representatives to major retail chains, including LensCrafters, Pearle Vision and Eyecare Centers of America, and to independent optical retailers in California. The Company's principal product line is Laura Ashley Eyewear, which was launched in 1992. Signature designs frames and in-store displays which seek to capture the distinctive, feminine image associated with Laura Ashley clothing and home furnishings. Laura Ashley Eyewear styles are feminine and classic, and are positioned in the medium to mid-high price range to reach a broad segment of the women's eyewear market. The Company's net sales of Laura Ashley Eyewear have increased from $2.2 million in fiscal 1992 to $21.1 million in fiscal 1996. Capitalizing on Signature's customer relationships and the success of Laura Ashley Eyewear, the Company launched Jean Nate Eyewear in March 1996 and Hart Schaffner & Marx Eyewear in September 1996. Jean Nate Eyewear is targeted at women seeking to pay an affordable price for high-quality frames which offer unique designs, attention to detail and brand-name identification. Hart Schaffner & Marx Eyewear is a mid-high priced line targeted at men desiring quality, comfort and craftsmanship. The Company's growth strategy includes: (i) continuing to increase the market penetration of its existing lines of brand-name prescription eyewear; (ii) launching Eddie Bauer Eyewear in the Spring of 1998; (iii) acquiring additional exclusive brand-name licenses to market prescription eyeglass frames; (iv) developing new product lines, which may include expanding the marketing of its own Camelot collection; (v) expanding market penetration of its existing Laura Ashley Sunwear line and acquiring additional exclusive brand-name licenses for sunglass frames; and (vi) continuing to expand its international sales efforts. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 1,600,000 shares Common Stock offered by the Selling Shareholders................................ 200,000 shares Common Stock outstanding after the Offering.. 5,200,527 shares (1) Use of proceeds from sale of Common Stock by the Company................................. To retire existing bank debt; to launch Eddie Bauer Eyewear; and for working capital and general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol................ SEYE </TABLE> - -------- (1) Excludes 600,000 shares of Common Stock available for issuance pursuant to the Company's Stock Plan. See "Management--Stock Plan." Except as otherwise noted, all information in this Prospectus assumes no exercise of the Over-Allotment Option or the warrants (the "Representatives' Warrants") granted to the Representatives to purchase up to 180,000 shares of Common Stock at 120% of the initial public offering price, no grant of awards under the Company's 1997 Stock Plan (the "Stock Plan"), the adjustment in 1997 of the outstanding shares of Common Stock to give effect to a 3.175-for-1 stock split (the "Stock Split"), and the change of the status of the Company from an S corporation to a C corporation for income tax purposes. See "Underwriting," "Management--Stock Plan" and "Termination of S Corporation Status." SUMMARY FINANCIAL DATA Set forth below are summary data from the Company's statements of income and balance sheets. The following data should be read in conjunction with the Financial Statements and related notes and with "Management's Discussion and Analysis of Results of Operations and Financial Condition" appearing elsewhere in this Prospectus. <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ----------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------- ------- ------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Net sales............... $9,185 $13,858 $20,051 $23,571 $28,280 $13,052 $16,038 Gross profit............ 3,383 6,929 10,385 12,582 16,349 7,427 9,406 Total operating expenses............... 3,443 6,562 9,079 10,780 14,027(1) 6,033 7,508 Income (loss) from operations............. (60) 367 1,306 1,802 2,322 1,394 1,898 Net income (loss)....... (131) 137 1,107 1,635 2,012 1,233 1,706 Pro forma net income (2).................... 690 1,030 1,265 761 1,030 Pro forma net income per share (2).............. 0.36 0.22 0.29 Pro forma common shares outstanding............ 3,546,519 3,492,511 3,600,527 </TABLE> <TABLE> <CAPTION> AT OCTOBER 31, AT APRIL 30, 1997 ---------------------------------- ---------------------- 1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3) ------ ------ ------ ------ ------ ------- -------------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Current assets....... $3,261 $4,726 $4,676 $6,462 $8,989 $10,581 $19,137 Total assets......... 3,959 5,247 5,211 7,260 10,293 11,977 20,533 Current liabilities.. 3,151 3,792 3,490 4,602 7,207 9,280 4,105 Total liabilities.... 3,635 4,686 4,350 5,314 7,364 9,342 4,113 Stockholders' equity.............. 324 561 861 1,946 2,929 2,635 16,360 </TABLE> - -------- (1) Includes $300,000 in compensation expense recognized by the Company in connection with the issuance of 108,016 shares of Common Stock to an executive officer. (2) The pro forma presentation reflects a provision for income taxes as if the Company had always been a C corporation. (3) As adjusted to reflect (i) the conversion of the Company from an S corporation to a C corporation, (ii) the sale of 1,600,000 shares of Common Stock offered by the Company by this Prospectus at an assumed initial public offering price of $10.00 per share and the application of the net proceeds from the sale and (iii) payment of a $635,000 dividend before the closing of the Offering (the Company intends to pay additional dividends before the closing of the Offering in an amount equal to the net income of the Company from May 1, 1997 through the closing of the Offering). See "Termination of S Corporation Status."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036436_genesys_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036436_genesys_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dc41259eea3e2aa4f37a19c4f010a95f9a844ccb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036436_genesys_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial data appearing elsewhere in this Prospectus, including information under "Risk Factors". Except as set forth in the Consolidated Financial Statements and the Notes thereto, and unless otherwise indicated, all information contained in this Prospectus (i) reflects the conversion of all outstanding shares of Preferred Stock of the Company into shares of Common Stock of the Company on a one-to-one basis and (ii) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting". Unless otherwise referenced herein, references to Consolidated Financial Statements shall mean references to the Consolidated Financial Statements of Genesys Telecommunications Laboratories, Inc. and its subsidiaries. For the definition of certain terms used in this Prospectus, see the Glossary included herein. THE COMPANY Genesys Telecommunications Laboratories, Inc. ("Genesys" or the "Company") is a leading provider of enterprise-wide platform and applications software that enables organizations to integrate critical business information and computing resources with telephony and other telecommunications media. The Company's products allow an organization to optimally manage its customer interactions and employee communications to increase productivity, lower costs and achieve greater customer satisfaction and loyalty. In addition, the Company's products enable organizations to develop and offer new or enhanced revenue-generating products and services. Genesys believes that it is the first company to offer a suite of open, scaleable, enterprise-wide platform and applications software solutions to address the evolving needs of organizations for intelligent communications, a new market paradigm known as Enterprise Computer Telephony Integration ("ECTI"). The Company's platform and applications software products allow organizations to integrate disparate telecommunications media with heterogeneous computing environments. The Company's platform products integrate with most major telephone systems and interoperate across most major computing platforms, operating systems and databases, enabling organizations to manage their desktop and media resources throughout the enterprise. Together with the Company's platform software, Genesys offers a range of applications that provide advanced ECTI solutions, such as intelligent call routing, outbound/blended dialing and campaign management, real-time and historical management reporting and Web- based telephony fulfillment. The open, standards-based nature of the Company's platform products allows an organization to leverage its investments in existing telecommunications and computing infrastructure, software applications and employee training. The Company's products also support the integration of internally developed or commercially available business applications, such as help desk or sales force automation. In order to assist customers in realizing the maximum benefit from its solutions, the Company augments its products with a range of implementation, training and support services. The Company initially targeted formal call centers within key industries, such as telecommunications, financial services and technology, as the initial market for its products. More recently, Genesys has broadened its target markets to include network service providers ("NSPs"), which the Company believes, through the use of the Company's products in the NSPs' networks, may be able to offer a range of solutions for the informal call center, small office/home office ("SOHO") and, eventually, consumer markets. To date, the Company has licensed its products to more than 125 end-users worldwide, including: Ameritech, Bell South Communication Systems, BT, Charles Schwab & Co., Inc., Gateway 2000 Inc., MCI Telecommunications Corporation, NationsBanc Services, Inc., NB Tel, The SABRE Group, Sprint/United Management and The Student Loan Corporation. An organization's ability to manage the increasingly complex information requirements of customers and employees in a cost-effective manner is an important competitive advantage. Modern organizations communicate, both internally and externally, through a variety of different communications media, including telephony, voice mail, e-mail, the Internet/intranets and video. Traditionally, each of these media and its associated databases and information retrieval systems have been treated as a unique and separate environment within which specialized applications have been developed, resulting in the creation of "silos" of information that are not intelligently utilized across the enterprise. This lack of interoperability has prevented organizations from optimally managing customer interactions and employee communications and has, in turn, limited productivity, increased costs and restricted the ability of organizations to generate greater customer satisfaction and loyalty. To be most effective, organizations now need to make information available at any time it is needed, anywhere it may be located and in any way that it may be requested. The shortcomings in the traditional means of managing customer interactions and employee communications, in combination with general business trends (such as the increasingly global nature of business operations, the proliferation of distributed computing environments, the deregulation of major industries and the increase in merger and acquisition and partnering activity) have created what the Company believes to be a significant market opportunity for open, scaleable, standards-based ECTI solutions. The Company's objective is to be the leading provider worldwide of open, scaleable ECTI platform and applications software. In order to meet this goal, the Company's strategy is to establish the Genesys framework as an open, ECTI market standard, provide industry-leading, technologically advanced products, target strategic markets, develop and leverage strategic business relationships and penetrate the network services market. The Company's sales and marketing strategy is to target large organizations through its worldwide direct sales force and through a broad range of indirect channels, including telecommunications equipment vendors, systems integrators, VARs, ISVs and NSPs. THE OFFERING <TABLE> <C> <S> Common Stock to be offered by the Company.............. 2,000,000 shares Common Stock to be offered by the Selling Shareholders. 500,000 shares Common Stock to be outstanding after this offering..... 19,228,150 shares(1) Proposed Nasdaq National Market symbol................. GCTI Use of Proceeds........................................ Working capital and general corporate purposes </TABLE> - -------- (1) Based on the number of shares outstanding as of March 31, 1997. Excludes 6,335,811 shares of Common Stock issuable upon exercise of stock options and 494,629 shares of Common Stock issuable upon exercise of warrants to purchase Common Stock, which options and warrants were outstanding as of March 31, 1997. Assumes the exercise of a warrant to purchase 420,282 shares of Common Stock prior to the closing of the offering. Assumes no other exercise of stock options or warrants after March 31, 1997. See "Management--Stock Plans", "Description of Capital Stock--Warrants" and Notes 9 and 10 of Notes to Consolidated Financial Statements. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED JUNE 30, MARCH 31, ------------------------------ ------------------ 1993 1994 1995 1996 1996 1997 ----- ------ ------ ------- -------- -------- <S> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues: License................... $ -- $ 460 $3,077 $ 7,369 $ 4,429 $ 19,445 Service................... 956 1,272 1,403 1,950 1,187 2,546 ----- ------ ------ ------- -------- -------- Total revenues............ 956 1,732 4,480 9,319 5,616 21,991 Cost of revenues: License................... -- 23 123 308 183 926 Service................... 352 595 1,190 2,568 1,487 2,574 ----- ------ ------ ------- -------- -------- Total cost of revenues.... 352 618 1,313 2,876 1,670 3,500 ----- ------ ------ ------- -------- -------- Gross margin............... 604 1,114 3,167 6,443 3,946 18,491 Operating expenses: Research and development.. 357 578 959 3,673 2,475 5,995 Sales and marketing....... -- 162 705 3,030 1,731 9,303 General and administrative........... 503 534 1,343 2,979 2,296 2,538 ----- ------ ------ ------- -------- -------- Total operating expenses.. 860 1,274 3,007 9,682 6,502 17,836 ----- ------ ------ ------- -------- -------- Income (loss) from operations................ (256) (160) 160 (3,239) (2,556) 655 Interest and other income (expense), net............ (8) 23 (6) (88) (88) 168 ----- ------ ------ ------- -------- -------- Income before provision for income taxes.............. (264) (137) 154 (3,327) (2,644) 823 Provision for income taxes. -- -- -- -- -- 230 ----- ------ ------ ------- -------- -------- Net income (loss)(1)....... $(264) $ (137) $ 154 $(3,327) $ (2,644) $ 593 ===== ====== ====== ======= ======== ======== Pro forma net income (loss) per share(1).............. $ (0.18) $ (0.15) $ 0.03 ======= ======== ======== Pro forma weighted average common shares and equivalents............... 18,644 18,079 22,540 ======= ======== ======== </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ----------------------------- PRO PRO FORMA AS ACTUAL FORMA(2) ADJUSTED(3) ------- -------- ------------ <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents......................... $ 9,574 $12,074 $38,874 Working capital................................... 10,432 12,932 39,732 Total assets...................................... 31,015 33,515 60,315 Long-term obligations............................. 147 147 147 Total shareholders' equity........................ 18,239 20,739 47,539 </TABLE> - -------- (1) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method of calculation. (2) Pro forma as of March 31, 1997, to give effect to the exercise of an outstanding warrant to purchase 420,282 shares of Common Stock on a cash basis prior to the closing of this offering and the conversion of the Company's Preferred Stock into Common Stock. See Note 2 of Notes to Consolidated Financial Statements. (3) Pro forma as provided in footnote (2), and as adjusted to reflect the sale of 2,000,000 shares of Common Stock by the Company at an assumed initial public offering price of $15.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036629_biorelianc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036629_biorelianc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8de474d951c743232150ad651b12c0e643dac9e0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036629_biorelianc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all share and per share data in this Prospectus have been adjusted to reflect (i) a recapitalization effective prior to the Offering pursuant to which a reverse stock split was effected (the "Recapitalization") and (ii) the conversion upon the closing of the Offering of all outstanding shares of the Company's Convertible Preferred Stock into 4,778,072 shares of Common Stock (the "Automatic Conversion"). The information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. THE COMPANY BioReliance is a leading contract research organization ("CRO") providing nonclinical testing and contract manufacturing services for biologics to biotechnology and pharmaceutical companies worldwide. The Company, founded in 1947 as Microbiological Associates, Inc., believes that it is the largest provider of outsourcing services focused on the rapidly growing biologics sector of the pharmaceutical industry. In 1996, the Company provided services to over 600 clients, including 22 of the 25 largest pharmaceutical companies in the world as measured by revenue and 18 of the 25 largest public biopharmaceutical companies in the United States as measured by market capitalization. The Company's revenue has increased in each of the last four years, growing from $16.4 million in 1992 to $37.7 million in 1996. Revenue in 1996 included $1.8 million earned by BIOMEVA GmbH, a contract manufacturer of microbial products located in Heidelberg, Germany ("BIOMEVA"), subsequent to its acquisition on July 8, 1996. The Company believes, based on an industry report, that approximately $8 billion was spent on research and development for biotechnology products in the United States in 1996. BioReliance estimates that approximately $5 billion was spent specifically on development activities of the types conducted by CROs. Of this $5 billion potentially available to CROs, the Company estimates that approximately $1 billion actually was outsourced for development of biotechnology products. BioReliance believes that the need to outsource is greater among biotechnology companies and the biologics divisions of pharmaceutical companies than generally in the pharmaceutical industry. This need is due both to the sophistication of the technologies and skills required to test and manufacture biologics and to the complexity and relative newness of the regulatory environment. Every stage of the biologics development process is more challenging than that for chemical drugs. Biologics are larger molecules with significantly more complicated structures. The unpurified material used to produce a biologic is a highly complex mixture, and the active ingredient is present in a minute amount. In addition, the United States Food and Drug Administration ("FDA") and international authorities regulate biologics differently from traditional chemical drugs. Established biotechnology and pharmaceutical companies outsource to CROs to streamline product development and reduce time to market. Early stage companies outsource for the same reasons and also may lack the staff, expertise and financial resources to conduct many aspects of product development in-house. BioReliance's services and broad experience provide all of its clients with a variable cost alternative to the fixed costs associated with internal biologic development and manufacture. The Company provides two types of contract services, BioTesting Services and BioManufacturing Services, each of which spans the product cycle from early preclinical development through licensed production. BioTesting Services and BioManufacturing Services accounted for 86% and 14%, respectively, of the Company's revenue in 1996. On a pro forma basis, assuming that the acquisition of BIOMEVA occurred on January 1, 1996, BioTesting Services and BioManufacturing Services accounted for 83% and 17%, respectively, of the Company's revenue in 1996. BioReliance's extensive scientific and regulatory expertise have enabled it to establish a leading market position in biotesting. The Company provides three biotesting services: (i) BioSafety Testing, for assessing cell banks used to manufacture biologics, validating purification processes for clearance of adventitious agents such as viruses, and testing in-process and final products; (ii) BioAnalytical Services, for assessing the structure and stability of biologics; and (iii) preclinical BioTrials, for conducting both in vitro ("test tube") and short-term in vivo ("animal") studies. The Company is a leading provider of BioSafety Testing services and expects that growth will continue in this area, particularly for in-process and final product testing, as an increasing number of products reach later stage clinical trials and commercialization. The Company's BioAnalytical Services division was formed in 1995 in response to clients' expressed needs for development of analytical techniques to characterize products better in anticipation of new FDA regulations and guidelines published during 1996 that permit the development and manufacturing processes to be streamlined for certain specified biologics for which bioanalytical techniques have been developed, validated and accepted by the FDA ("well-characterized" biologics). The Company expects significant growth in the demand for BioAnalytical Services, and currently the Company is one of only a few CROs capable of providing these services. The Company's BioTrials division is engaged in a contract sponsored by the National Institute of Environmental Health Sciences ("NIEHS") designed to evaluate the feasibility of shortening the "in-life" portion of long-term carcinogenicity studies from two years to six months. The Company believes that by combining molecular detection assays with this approach, short-term molecular carcinogenicity studies could be designed to replace the need for long-term carcinogenicity studies in the future. This molecular approach could become an alternative to the over $1 billion annual market for long-term carcinogenicity studies due to its higher predictive value, lower cost and shorter duration. The Company has been providing biomanufacturing services in viral production since 1993 when it formed MAGENTA Corporation ("MAGENTA"). The rapid progress of gene therapy products into Phase I/II human clinical trials and the emergence of cancer oncolytics have fueled the significant growth of the Company's biomanufacturing revenue from 1993 to 1996. The Company entered into the biomanufacturing of microbial products with its acquisition of BIOMEVA in July 1996. As biologics currently in development move to later stage human clinical trials and eventually to commercialization, the Company expects increased demand for biomanufacturing services. BioReliance believes it is well positioned to benefit from the biologics CRO opportunity. The Company has a strong reputation for providing high quality biologics development services, and has a decades-long record of supporting successful regulatory submissions with hundreds of clients worldwide. It has introduced numerous innovations in biotesting and biomanufacturing under strict regulatory guidelines, earning a reputation for quality and dependability with both clients and regulatory authorities that cannot be duplicated with technical and financial resources alone. Unlike many of its competitors, the Company has an international presence, including European facilities for both BioTesting and BioManufacturing. BioReliance's strategy is to extend its leadership position in biologics development and manufacturing services on a worldwide basis. To accomplish this, the Company will continue to (i) focus its resources on providing needed services to the biologics sector, the most rapidly growing sector of the global pharmaceutical industry; (ii) provide a broad range of biologics development and manufacturing services to support the outsourcing needs of its clients; (iii) enhance its leadership position in biotesting services; (iv) expand its biomanufacturing capabilities; (v) maintain its leadership in regulatory expertise; and (vi) expand through selected acquisitions. THE OFFERING Common Stock offered by The Company.............. 2,102,014 shares The Selling Stockholder................ 297,986 shares Total................. 2,400,000 shares Common Stock to be outstanding after the Offering................. 7,267,242 shares(1) Use of Proceeds............ Capital expenditures, expansion of viral manufacturing capabilities, working capital and other general corporate purposes, including potential acquisitions Proposed Nasdaq National Market symbol............ BREL - --------------- (1) Based on 5,165,228 shares of Common Stock outstanding on June 30, 1997. Excludes 828,191 shares of Common Stock reserved for issuance upon the exercise of stock options outstanding on June 30, 1997, at a weighted average exercise price of $2.47 per share. SUMMARY CONSOLIDATED FINANCIAL DATA <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ----------------------------------------------------- -------------------- 1992 1993 1994 1995 1996(1) 1996 1997 ------- ------- ------- ------- ------- ------ ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenue......................... $16,422 $22,207 $28,094 $30,078 $37,682 $7,599 $11,781 Cost of sales................... 13,093 15,248 19,094 20,570 24,860 5,397 7,442 Selling, general and administrative expenses....... 4,577 4,704 5,947 7,071 7,852 1,764 2,635 Research and development expenses...................... 308 236 354 1,012 1,110 272 303 Nonrecurring charge............. -- -- -- -- 696(2) -- -- ------- ------- ------- ------- ------- ------ ------- Total expenses......... 17,978 20,188 25,395 28,653 34,518 7,433 10,380 ------- ------- ------- ------- ------- ------ ------- Income (loss) from operations... (1,556) 2,019 2,699 1,425(3) 3,164 166 1,401 Interest and other expenses, net........................... 398 297 439 524 816 158 200 ------- ------- ------- ------- ------- ------ ------- Income (loss) before income taxes......................... (1,954) 1,722 2,260 901 2,348 8 1,201 Benefit from (provision for) income taxes.................. -- (62) 2,192(4) (243) (846) (3) (511) ------- ------- ------- ------- ------- ------ ------- Net income (loss)............... (1,954) 1,660 4,452 658 1,502(5) 5 690 Preferred stock dividends(6).... (139) -- -- (139) -- (35) -- ------- ------- ------- ------- ------- ------ ------- Net income (loss) available to common stockholders........... $(2,093) $ 1,660 $ 4,452 $ 519 $ 1,502 $ (30) $ 690 ======= ======= ======= ======= ======= ====== ======= Net income (loss) per common and common equivalent share....... $ (5.35) $ 0.42 $ 0.86 $ 0.11 $ 0.26(5) $(0.07) $ 0.12 ======= ======= ======= ======= ======= ====== ======= Weighted average common and common equivalent shares outstanding(6)................ 391 3,981 5,200 4,767 5,802 412 5,875 ======= ======= ======= ======= ======= ====== ======= </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 ------------------------- ACTUAL AS ADJUSTED(7) ------- -------------- (IN THOUSANDS) <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents....................................................... $ 3,571 $ 27,784 Working capital................................................................. 4,146 28,359 Total assets.................................................................... 35,748 59,961 Long-term debt.................................................................. 6,702 6,702 Stockholders' equity............................................................ 14,459 38,672 </TABLE> - --------------- (1) In July 1996, the Company acquired all of the shares of common stock of BIOMEVA. The acquisition has been accounted for by the purchase method and, accordingly, BIOMEVA's results of operations have been included in the consolidated financial statements since the date of acquisition. See Note 2 of Notes to Consolidated Financial Statements. (2) Nonrecurring charge represents a charge of $0.7 million ($0.4 million after income taxes) in connection with the settlement of a dispute with a landlord relating to the termination of a lease. See Note 8 of Notes to Consolidated Financial Statements. (3) Income from operations includes the effect of $1.3 million of first-year expenses for BioAnalytical Services. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) The benefit from income taxes in 1994 includes the effect of a tax benefit of approximately $2.2 million, which primarily is attributable to a decrease in the valuation allowance for deferred tax assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (5) On a pro forma basis, assuming that the acquisition of BIOMEVA occurred on January 1, 1996, and excluding the effect of the nonrecurring charge, net income and net income per common and common equivalent share in 1996 would have been $1.8 million and $0.31, respectively. (6) In each period where the conversion of outstanding Convertible Preferred Stock would have been anti-dilutive, such stock has been excluded from the weighted average common and common equivalent shares outstanding and accumulated dividends on such stock have been deducted from net income for purposes of calculating net income (loss) per common and common share equivalent. (7) As adjusted to reflect the sale by the Company of 2,102,014 shares of Common Stock in the Offering at an assumed initial public offering price of $13.00 per share (the midpoint of the range set forth on the cover of this Prospectus) after deducting underwriting discounts and commissions and estimated expenses, and application of the estimated net proceeds thereof. Assumes the Underwriters' over-allotment option is not exercised. See "Underwriters."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036699_jazz_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036699_jazz_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..435f3d364725ab0168cef62c1ffb4795741b7b70
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036699_jazz_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THIS PROSPECTUS DOES NOT GIVE EFFECT TO (I) THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) THE REPRESENTATIVE'S WARRANTS, (III) UP TO 385,000 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF STOCK OPTIONS WHICH MAY BE GRANTED UNDER THE COMPANY'S 1997 LONG TERM INCENTIVE PLAN (THE "PLAN"), UNDER WHICH OPTIONS EXERCISABLE FOR AN AGGREGATE OF 161,000 SHARES OF COMMON STOCK HAVE BEEN GRANTED AND ARE CURRENTLY OUTSTANDING, AND (IV) 60,000 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF WARRANTS CURRENTLY OUTSTANDING. THIS PROSPECTUS GIVES RETROACTIVE EFFECT TO A RECAPITALIZATION (THE "RECAPITALIZATION") OF THE COMPANY EFFECTED ON MARCH 19, 1997. AS USED IN THIS PROSPECTUS, AND UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO THE COMPANY AND THE SUBSIDIARIES THEREOF. THE COMPANY The Company is engaged in the design, development, importation and wholesale distribution of cameras and other photographic products primarily in the United States. The Company's products, which have been designed to have pricing and features with mass consumer appeal, are marketed by the Company to (i) leading mass merchandisers, including Wal-Mart Stores ("Wal-Mart"), Sears, Roebuck & Co. ("Sears"), Hills' Department Stores ("Hill's") and Home Shopping Network ("HSN") and (ii) private label customers, such as Albertson's ("Albertson's"). The Company's current product offerings consist of (i) single use and promotionally priced reusable 35 millimeter format ("35mm") cameras marketed under the Company's JAZZ-TM- brand name and a number of private labels, (ii) higher priced multiple featured 35mm cameras marketed under the Bell + Howell-Registered Trademark- trademark pursuant to an exclusive agreement with Bell & Howell Company ("Bell & Howell") renewable through 2007, (iii) a newly-introduced family of cameras which utilizes the advanced photographic system format ("APS"), and (iv) photographic accessories, including vinyl and leather pouches and carrying cases, for its cameras marketed under the JAZZ-TM- brand name and a number of private labels. Each of the Company's products is manufactured by the Company's contract manufacturers in the People's Republic of China (the "PRC") and has been designed in accordance with Company specifications. The Company has experienced substantial growth since inception with revenues and net income (loss) increasing from $332,000 and ($260,000), respectively, for the period from June 21, 1995 (inception ) to December 31, 1995 to $7,619,000 and $667,000, respectively, for the six months ended December 31, 1996. The United States market for consumer photographic products currently is estimated by industry sources to be in excess of $12.5 billion. The single use camera segment of this market has grown at more than 15% per year in unit sales since introduction. The Company's products are designed specifically to target the single use segment, which includes newly introduced APS cameras and conventional 35mm cameras. Industry sources have estimated that the APS segment of such market will grow by 10% to 20% per year and will represent as much as 25% of the consumer photographic market by the year 2000. The Company believes that it is in an advantageous position to capitalize on the anticipated growth in its segment of the consumer photographic market for the following reasons: - SEASONED TEAM OF MARKETING PROFESSIONALS. The Company has a seasoned team of marketing professionals with substantial experience in the development and marketing of mass merchandised cameras at price points and with features that have effectively penetrated the consumer camera market; - STRATEGIC PARTNERSHIPS. The Company has developed a number of strategic partnerships with contract manufacturers which produce quality products in accordance with the Company's timing requirements and at competitive prices; and - RELATIONSHIPS WITH LARGE CUSTOMERS. The Company has developed relationships with large customers, which have significantly reduced the cost of maintaining inventory domestically for the United States market. The Company's business strategy is to continue to grow and capture a larger share of its targeted segment of the consumer photographic market by (i) increasing its marketing efforts in the United States and Canadian markets; and (ii) continuing to develop cameras and related products with mass consumer appeal. The Company was incorporated under the laws of the State of New Jersey on June 21, 1995. The Company's executive offices are located at 600 Blair Road, Carteret, New Jersey 07088 and its telephone number is (908) 499-7945. The founder and former Chief Executive Officer and a former Director of the Company, Jack C. Benun, has been permanently enjoined from serving as an officer or director of a public company. Mr. Benun currently serves as a consultant to the Company. It is anticipated that, at management's request, Mr. Benun will perform substantial services for the Company in the areas of product development and sales and marketing. See "Management". Mr. Benun is the founder, and until 1994 was the Chief Executive Officer of Concord Camera Corp. ("Concord"), a public company and a direct competitor of the Company. Mr. Benun was the subject of a proceeding commenced by the Securities and Exchange Commission (the "Commission") alleging among other things, that he had misappropriated funds from Concord. The proceeding was settled in 1994 by an order (the "Order") to which Mr. Benun consented without either admitting or denying the allegations in the Commission's complaint, under which Mr. Benun paid $150,000 (the alleged amount of the misappropriation) plus interest to Concord and $150,000 to the Commission as a penalty. Mr. Benun is currently engaged in litigation with Concord relating to the Commission's allegations. See "Management--Consultant's Regulatory History and Litigation With Concord Camera Corp." Mr. Benun is a member of the family which currently owns 99.5% of the outstanding shares of Common Stock prior to this Offering and will continue to own 68.5% of such stock on completion of this offering. See "Principal and Selling Shareholders." All of the Principal Shareholders have entered into a voting agreement with the Company which precludes them from voting their shares or Common Stock in opposition to the recommendation of the Board of Directors of the Company for election or removal of directors. See "Principal and Selling Shareholders--Voting Agreement." THE OFFERING <TABLE> <S> <C> Shares of Common Stock Offered hereby........ 1,000,000 shares Shares of Common Stock Outstanding prior to this Offering.............................. 2,210,000 shares Shares of Common Stock Outstanding following this Offering.............................. 3,210,000 shares Use of Proceeds.............................. To reduce dependence on short term financing of receivables and inventory, to repay certain short-term debt, and for general corporate and working capital purposes. Risk Factors and Dilution.................... The shares of Common Stock offered hereby involve a high degree of risk and immediate substantial dilution. See "Risk Factors" and "Dilution." Proposed Nasdaq [National] Market symbol..... JAZZ Proposed Pacific Stock Exchange symbol....... JAZ </TABLE> SUMMARY FINANCIAL INFORMATION The following selected statement of operations data for the period from June 21, 1995 (inception) through June 30, 1996 and the six month period ended December 31, 1996, and the selected historical balance sheet data at December 31, 1996, are derived from the Consolidated Financial Statements of the Company and Notes thereto included elsewhere, such consolidated financial statements herein were audited by Richard A. Eisner & Company, LLP, independent auditors for the Company. The selected statement of operations data for the six months ended December 31, 1995 is derived from the unaudited Consolidated Financial Statements of the Company, which have been prepared on a basis consistent with the audited Consolidated Financial Statements of the Company and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company's financial position and results of operations. The results of operations for any interim period are not necessarily indicative of results to be expected for the entire year. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and Notes thereto included elsewhere in this Prospectus. STATEMENT OF OPERATIONS DATA: <TABLE> <CAPTION> FROM JUNE 21,1995 SIX-MONTHS ENDED (INCEPTION) DECEMBER 31 THROUGH ------------------------ JUNE 30, 1996 1995 1996 ------------- ---------- ------------ <S> <C> <C> <C> Net sales............................................................... $ 1,166,000 $ 332,000 $ 7,619,000 Cost of goods sold...................................................... 976,000 315,000 5,835,000 ------------- ---------- ------------ Gross profit............................................................ 190,000 17,000 1,784,000 Operating expenses...................................................... 825,000 196,000 998,000 ------------- ---------- ------------ Operating income (loss)................................................. (635,000) (179,000) 786,000 Other expense, net...................................................... (164,000) (81,000) (61,000) ------------- ---------- ------------ Income (loss) before income taxes and minority interest................. (799,000) (260,000) 725,000 Provision for income taxes.............................................. -- -- 40,000 ------------- ---------- ------------ Income (loss) before minority interest.................................. (799,000) (260,000) 685,000 Minority interest....................................................... -- -- 18,000 ------------- ---------- ------------ Net income (loss)....................................................... (799,000) (260,000) 667,000 ------------- ---------- ------------ ------------- ---------- ------------ PRO FORMA SUPPLEMENTAL DATA: Net income (loss): 667,000 Pro forma executive compensation........................................ 190,000 ------------ Pro forma net income (1)................................................ 477,000 ------------ ------------ Net income (loss) per share of Common Stock and for the six months ended December 31, 1996 as adjusted to give effect to executive compensation on a pro forma basis.................................................. (0.34) (0.11) 0.20 Weighted average number of shares outstanding (2)....................... 2,349,000 2,349,000 2,349,000 </TABLE> - ------------------------ (1) The pro forma income statement data reflects an adjustment to the historical income statement data assuming the Company had paid compensation to its Chief Executive Officer during the six month period ended December 31, 1996. (2) Net income (loss) per share of Common Stock is based on the weighted average number of shares outstanding during each period, as modified in accordance with the rules of the Commission. Under these rules, the weighted average number of shares outstanding during each period includes the dilutive effect of options and warrants issued during the 12 month period preceding the date of the initial filing of the Registration Statement, of which this Prospectus forms a part, computed using the treasury stock method as if the shares issuable upon the exercise of such options and warrants were outstanding for all periods. BALANCE SHEET DATA: <TABLE> <CAPTION> DECEMBER 31, 1996 ------------------------------------------ <S> <C> <C> <C> PRO FORMA AS HISTORICAL PRO FORMA(1) ADJUSTED(1)(2) ---------- ------------ ---------------- Cash................................................................ $ 171,000 $ 686,000 $ 3,836,000 Working capital..................................................... 507,000 1,022,000 4,172,000 Total assets........................................................ 1,611,000 2,261,000 5,326,000 Notes payable, net of current portion............................... 20,000 524,000 20,000 Notes payable - stockholder and other related parties, net of current portion................................................... 709,000 709,000 709,000 Accumulated deficit................................................. (132,000) (132,000) (313,000) Shareholders' Equity (capital deficiency)........................... (82,000) 64,000 3,633,000 </TABLE> - ------------------------ (1) Gives effect to the sale in March 1997 of notes (the "Notes") issued in a private placement (the "Private Placement") in the aggregate principal amount of $600,000, repayable from the proceeds of this offering, and the allocation to capital of the portion of the proceeds of such sale ($96,000) attributable to the common stock purchase warrants issued to the purchasers of the Notes in the Private Placement. (2) Adjusted to give effect to the sale of the Shares at an assumed initial public offering price of $5.00 per Share, after the deduction of underwriting discounts and commissions and estimated offering expenses and giving effect to the anticipated application of the net proceeds of $3,750,000 of this offering as set forth in "Use of Proceeds." Deferred interest applicable to the Notes ($96,000) and the estimated expenses of the Private Placement ($85,000) will be charged to operations upon the repayment of the Notes from the proceeds of this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001036992_peapod-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001036992_peapod-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dac358720418eba87992585f41541656f242fa1e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001036992_peapod-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." In addition, except as otherwise noted, all information in this Prospectus gives effect to the Conversion (as defined below). The Company is a successor to a business originally founded in 1989 as a Delaware corporation and operated since 1992 through an Illinois limited partnership ("Peapod LP") . The original Delaware corporation ("Old Peapod" or the "General Partner") had served as the general partner of Peapod LP. In December 1996, the Company was incorporated in Delaware. In a conversion (the "Conversion") that was effected on May 31, 1997 (i) all of the equity interests in Peapod LP were transferred to the Company in exchange for 12,656,417 shares of Common Stock, (ii) Peapod LP was dissolved, (iii) all of the assets and liabilities of Peapod LP were transferred to the Company and (iv) outstanding options and warrants for equity interests in Peapod LP were converted into options and warrants for shares of Common Stock. The transfer of the assets and liabilities of Peapod LP to the Company will be recorded by the Company at the historical carrying values of Peapod LP. As used in this Prospectus, references to "Peapod" or the "Company" prior to the Conversion means Peapod LP and its predecessor, and thereafter, Peapod, Inc. THE COMPANY Peapod(R) is the leading interactive, online grocery shopping and delivery company and a provider of targeted media and research services. Founded in 1989, Peapod believes it is the only company currently providing an integrated, comprehensive service designed to address the distinct needs of online consumers, grocery retailers and consumer goods companies. By attracting loyal consumers through its compelling online shopping system and personalized service, Peapod opens a valuable new sales channel to its grocery retail partners and constructs a national online network designed to offer superior interactive media and research services to consumer goods companies. Peapod's proprietary technology, which has been developed and refined through the Company's operating experience, provides the Company a competitive advantage in serving the complex needs of consumers, retailers and consumer goods companies. For the consumer, Peapod provides "Smart Shopping for Busy People(R)" through a user-friendly, highly functional virtual supermarket and personalized shopping, delivery or pick-up, and customer services. With Peapod, members are able to avoid the hassles typically associated with grocery shopping and enjoy a more pleasant and productive shopping experience. Members can choose among a variety of shopping methods, access up-to-date product and pricing information and sort items in any product category by a wide variety of nutritional and other variables. For the retailer, Peapod provides its online sales channel, which is designed to enable the retailer to gain incremental revenues and profits by capturing an increased share of the grocery purchases of existing customers and by attracting new loyal customers. Peapod's systems link with those of the retailer, which allow it to create multiple, customized online stores that conform to local merchandising, pricing and promotional strategies. Peapod's systems and employees also provide constant feedback to retailers on out-of- stock inventory and the quality of perishable items. Moreover, Peapod's interactive marketing capabilities allow the retailer to experiment with creative merchandising and promotions and execute local marketing strategies. For the consumer goods company, Peapod provides a forum for targeted interactive advertising and promotion and extensive product research by linking together members from multiple markets into a national online network and collecting substantial data regarding members' attitudes, purchasing behavior and demographics. In addition, Peapod's growing membership base, of which approximately three-quarters are upper middle class consumers and approximately three-quarters are women, has an attractive demographic profile which is difficult to reach through other direct-response media channels. The Company's objective is to substantially expand its online grocery shopping channel in the United States and to be a preferred venue for national and local online marketing programs and research for consumers goods companies. The Company's growth strategies include the following: . Build Peapod Brand Identity and Awareness. The Company intends to build brand identity through the functionality, quality, convenience and value of the services it offers. Peapod also intends to aggressively market its services, through promotions and advertising, as a means to further establish brand name recognition. . Provide a Superior Member Experience. The Company is committed to providing its members with a superior experience in all aspects of its services. The Peapod solution provides members with user-friendly, highly-functional and cost-effective shopping tools, convenient delivery and pick-up services and a host of customer support and other services designed to ensure member satisfaction. . Expand Into New Geographic Markets and Further Penetrate Existing Markets. The Company plans to increase revenues and realize economies by aggressively expanding into new metropolitan markets and increasing penetration in existing markets. The Company believes that it can achieve competitive advantages in its various markets as the first mover to build a substantial online membership base and operating scale. . Build Interactive Marketing Services; Leverage Database. Peapod has pioneered, in partnership with consumer goods companies, innovative interactive marketing services consisting of advertising, promotion and market research services. Peapod intends to continue using the combination of its database and online shopping channel to create new services tailored to its interactive marketing clients. . Work with Retail Partners in Evolving Retail Model. Peapod has developed a range of technical, management and fulfillment services which can be adapted to meet a retail partner's needs and Peapod's marketing strategies. The Company has begun assisting its retail partners in expanding their role in the fulfillment of member orders. Peapod also is working closely with its retail partners in evolving the product distribution and order fulfillment model in order to reduce costs, improve quality and enhance scaleability. In addition, Peapod has initiated efforts to license its technology to retailers on an international basis and in select U.S. markets. . Leverage Peapod's Membership and Technology into Other Online Services. The Company recently entered into agreements with retailers to offer an online wine store and an online gift and specialty products center. Peapod intends to create additional online stores by establishing relationships with non- grocery retailers to offer services and products that appeal to Peapod's membership base. These offerings are expected to enhance Peapod's member data profiles and expand the interactive marketing services opportunities available to the Company. The Company further intends to make its broader "Smart Shopping For Busy People" service accessible on a national basis via the Internet. As of March 31, 1997, Peapod had 43,200 members, an increase of 246% since January 1996. Peapod currently offers its online grocery service in eight metropolitan markets (Chicago, San Francisco/San Jose, Columbus, Boston, Houston, Atlanta, Dallas and Austin), six of which have opened since September 1996. Most recently the Company opened in Atlanta in March 1997 and in Dallas and Austin in May 1997. As of March 31, 1997, Peapod's service areas encompassed approximately 5,057,000 households, or approximately 5% of U.S. households. The Company's current retail partners include three of the five largest national supermarket chains. Peapod commenced offering interactive marketing services in late 1995 and currently has agreements to provide interactive marketing services to a number of national consumer goods companies, including Anheuser-Busch, Incorporated, Bristol-Myers Squibb Company, Frito-Lay, Inc., The Gillette Company (USA) Inc., Helene Curtis, Inc., The J.M. Smucker Company, Kellogg Company, Kraft Foods, Inc., Nestle U.S.A., Inc., Novus Services, Inc. (Discover Card), Ore-Ida Foods, Inc., Ralston Purina Company and Tropicana Products, Inc. Customers for the Company's research products have included ConAgra, Inc., Johnson & Johnson, and Procter & Gamble Co. THE OFFERING <TABLE> <C> <S> Common Stock Offered by the Company.............................. 3,600,000 shares Common Stock to be Outstanding Immediately After the Offering(1). 16,271,517 shares Use of Proceeds.................................................. For expansion into new geographic markets and further penetration of existing markets, and for additional working capital and other gen- eral corporate purposes, including the develop- ment of new products and services. See "Use of Proceeds." Proposed Nasdaq National Market Symbol........................... PPOD </TABLE> - -------- (1) Excludes (i) 1,825,662 shares of Common Stock reserved for issuance upon the exercise of 1,760,946 outstanding options and 64,716 warrants, (ii) 810,000 shares of Common Stock reserved for issuance pursuant to stock options being granted as of the consummation of the Offering and (iii) 1,729,054 additional shares of Common Stock reserved for issuance under the Company's 1997 Long-Term Incentive Plan. See "Management--Stock Plans." Peapod, Inc. was incorporated in Delaware in December 1996 and is the successor to a business founded in 1989. Its principal place of business is located at 1033 University Place, Evanston, Illinois 60201, and its telephone number is (847) 492-8900. The Company's home page is located on the Internet's World Wide Web (the "Web") at http://www.peapod.com. SUMMARY FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ----------------------------------------------- ------------------- 1992(1) 1993 1994 1995 1996 1996 1997 ------- ------- ------- -------- ---------- ------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA:(2) Revenues:(3) Grocery sales, net of returns.............. $ 1,186 $ 2,893 $ 6,745 $ 12,731 $ 22,015 $ 4,984 $ 9,216 Interactive marketing services............. -- -- -- 163 1,069 194 425 Member and retailer services............. 307 812 1,601 3,049 6,088 1,156 3,063 ------- ------- ------- -------- ---------- ------- ---------- Total revenues........ 1,493 3,705 8,346 15,943 29,172 6,334 12,704 Groceries sold, net of returns................ (1,186) (2,893) (6,745) (12,731) (22,015) (4,984) (9,216) Other costs and expenses............... (1,335) (2,463) (5,918) (9,796) (17,187) (3,126) (6,555) ------- ------- ------- -------- ---------- ------- ---------- Operating loss.......... (1,028) (1,651) (4,317) (6,584) (10,030) (1,776) (3,067) Net loss................ (1,042) (1,676) (4,347) (6,592) (9,566) (1,777) (2,947) Pro forma net loss per share(4)............... $ (0.75) $ (0.23) Shares used to compute pro forma net loss per share(4)............... 12,788,250 12,788,250 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF MARCH 31, ------------------------------------------------------- --------------- 1992 1993 1994 1995 1996 1997 -------- ---------- ---------- ---------- ---------- --------------- <S> <C> <C> <C> <C> <C> <C> OPERATING DATA:(2) Markets(5).............. 1 2 2 2 4 6 Members(6).............. 1,200 3,000 7,900 12,500 33,300 43,200 Orders (for the period ended)................. 12,000(1) 28,600 70,300 124,100 201,100 84,800 Households in service area(7)................. 524,500 1,083,400 1,917,000 2,204,200 3,581,000 5,057,000 </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 ------------------------------------- ACTUAL(2) PRO FORMA(8) AS ADJUSTED(9) --------- ------------ -------------- <S> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents..... $ 9,343 $ 9,343 $55,015 Working capital............... 4,372 4,372 50,044 Total assets.................. 13,919 13,919 59,591 Long-term obligations......... 710 710 710 Total owners' equity.......... 6,034 6,034 51,706 </TABLE> - ------- (1) Peapod LP was formed on June 1, 1992 at which time substantially all of the assets, liabilities and operations of Old Peapod were transferred to Peapod LP. Prior to the transfer, the operations of the Company were conducted by Old Peapod, which subsequently served as the general partner of Peapod LP. In order to present comparative statement of operations data and orders for fiscal year 1992, the results of operations of Old Peapod from January 1, 1992 through May 31, 1992 have been combined with the results of operations of Peapod LP from June 1, 1992 through December 31, 1992. (2) Represents the financial and operating information of Peapod LP, the predecessor entity to the Company. Prior to the Conversion, the Company had not begun significant operations. Prior to the consummation of the Offering, the assets, liabilities and operations of Peapod LP were transferred to the Company. (3) Groceries sold, net of returns, represent the actual costs of groceries purchased and charged to members. Interactive marketing services include fees from advertising, promotions and research. Member and retailer services include fees from members and retail partners related to the Company's online services and grocery and delivery operations. (4) Reflects the Conversion and options and warrants assumed outstanding under Securities and Exchange Commission Staff Accounting Bulletin No. 83, as discussed in Note 5 of Notes to Financial Statements beginning on page F-6. (5) Represents the number of metropolitan markets served. (6) Represents the number of households and businesses subscribing to the Peapod services. (7) Represents the number of households in areas that can be served from Peapod's existing fulfillment centers (i.e., the facilities at which member orders are shopped and packed for delivery or pick-up). (8) Represents the pro forma balance sheet data assuming the Conversion occurred as of March 31, 1997. (9) Adjusted to give effect to the sale of 3,600,000 shares of Common Stock offered by the Company hereby as of March 31, 1997 at an assumed initial public offering price of $14.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037002_telescienc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037002_telescienc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5efd5a0a0cb9fda4f0eb047cf3b60569d2b59888
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037002_telescienc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR BUSINESS (AS DEFINED BELOW UNDER "THE COMPANY") AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS REFLECTS THE FOLLOWING: (I) A 34,769-FOR-ONE STOCK SPLIT (IN THE FORM OF A STOCK DIVIDEND) OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON STOCK") WHICH WILL BE EFFECTED PRIOR TO THE COMPLETION OF THE OFFERING AND (II) NO EXERCISE OF THE OVER-ALLOTMENT OPTIONS GRANTED TO THE U.S. UNDERWRITERS AND THE INTERNATIONAL MANAGERS (COLLECTIVELY, THE "UNDERWRITERS"). SEE "UNDERWRITING." AXIOM, AXIOM ABSOLUTE VALUE, MANIFEST, STERLING AND THE STERLING FAMILY OF MARKS ARE TRADEMARKS AND SERVICEMARKS OF THE COMPANY. AS USED IN THIS PROSPECTUS, THE TERM "FISCAL 1994" REFERS TO THE PREDECESSOR BUSINESS' FISCAL YEAR ENDED JUNE 30, 1994, AND THE TERMS "FISCAL 1995," "FISCAL 1996" AND "FISCAL 1997" REFER TO THE COMPANY'S FISCAL YEARS ENDED SEPTEMBER 30, 1995, SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1997, RESPECTIVELY. THE COMPANY The Company is a leader in providing comprehensive billing data collection solutions to providers of local, long-distance and other advanced telecommunications services. The Company's largest customers include Regional Bell Operating Companies ("RBOCs"), such as Ameritech Corporation, Southwestern Bell Telephone Company and U S West, Inc., and international providers of telecommunications services, such as Telecom Argentina. The Company develops, markets and supports integrated hardware and software systems that are able to collect and process an increasing volume of transaction information from a wide variety of wireline telecommunications switches and transmit this information to the customer's information management networks. The Company also is developing systems that process transaction information from wireless, asynchronous transfer mode ("ATM") and other specialized telecommunications switches. The Company's customers use this information to bill their subscribers, to implement customized marketing programs and to perform other data management functions. The Company also provides traffic management solutions to telecommunications companies such as TELESP, a Brazilian telecommunications service provider. The Company recently introduced its first applications software product, a fraud detection and management system. The Company provides installation, ongoing maintenance, support and training, as well as customized engineering services, related to the Company's systems. The telecommunications industry is currently experiencing rapid growth and change resulting from the combined effects of regulatory, competitive and technological developments. Regulatory changes, including the Telecommunications Act of 1996, have created competitive wholesale and retail telecommunications markets and have required RBOCs and other wholesalers to provide to retail resellers detailed call data that previously were not required to be captured. To comply with regulatory requirements and to be successful in increasingly competitive markets, telecommunications providers are being required to upgrade their existing data collection systems to new systems that can process large volumes of transaction information without compromising the integrity of the billing stream and can efficiently transmit the information for use by increasingly sophisticated and varied data management applications. The growing number and categories of telecommunications providers is creating a need for more sophisticated data management systems that utilize call data as part of marketing and other information management programs. Escalating competition has also created the need for systems that can provide real-time access to call data. The Company believes that it provides to large wireline customers the most advanced and reliable billing data collection systems and that it is the leader in designing these systems to meet the Automatic Message Accounting Data Networking System ("AMADNS") generic requirements established in 1994. A critical feature of the Company's systems is redundancy, permitting them to protect the integrity of call detail records ("CDRs") and provide "financial grade" reliability (greater than 99.999% system availability). The Company's products also are capable of delivering transaction information on a real-time basis. Reflecting the engineering expertise acquired through the Company's 30-year history, the Company's products offer a high degree of connectivity, permitting them to interface with switches from all major domestic and most international wireline switch manufacturers, including Northern Telecom Inc., Lucent Technologies Inc., Siemens AG, L.M. Ericsson Telephone Co. and NEC Corp. The Company's systems utilize an open systems architecture, permitting them to interface with other elements of the customer's data collection network and with virtually any billing processing or other information management application. The Company's systems also are scaleable, thereby allowing them to handle a large range of call volumes. The systems can be configured with proprietary software applications that provide a wide variety of preprocessing functions such as filtering (extracting data that meet preset criteria), distribution (directing predetermined data to certain specialized applications) and reformatting (rearranging input data into a user-defined output format). The Company is currently the leading supplier of billing data collection products to the RBOCs. Six of the seven RBOCs are current customers for the Company's products or services. The Company's aggregate revenues from sales to its three main RBOC customers increased from $10.2 million in fiscal 1994 to $13.1 million in fiscal 1995 and $20.9 million in fiscal 1996. During the 1980s, the Company was a primary supplier to Ameritech Corporation, U S West, Inc. and their predecessors, of SEBX Series products, the Company's prior generation of billing data collection systems. The Company introduced its next generation product, the Sterling Series, in late 1995 and has made initial sales of the Sterling Series products to these customers and to Southwestern Bell Telephone Company. The Company has sold over 200 units of Sterling Series products to date. The Company believes that these three customers have replaced in the aggregate less than 25% of their prior generation billing data collection systems, and that these customers will replace the balance of these systems, and purchase additional products and services from the Company, over the next three to five years. The Company also believes that there is a significant opportunity to sell Sterling Series products to other RBOCs and to other wireline customers worldwide. The Company sells its products to wireless telecommunications companies through a supply relationship with another company. The Company's objective is to leverage its position as the leading provider of comprehensive billing data collection systems to RBOCs to become the leading provider of those systems and related information management products and services to telecommunications and other information providers domestically and internationally. The Company's strategy to achieve this objective includes the following key elements: (i) expand relationships with wireline customers; (ii) continue to expand sales to new telecommunications markets; (iii) continue to develop marketing channels; (iv) expand international business; (v) expand product and service offerings; and (vi) retain technology leadership. THE OFFERING <TABLE> <S> <C> Common Stock offered......................... 2,600,000 shares Common Stock to be outstanding after the Offering............................... 6,076,900 shares Use of Proceeds.............................. To repay indebtedness from the Company's sole stockholder; for product development; to enhance international sales, marketing and support efforts; and for working capital and other general corporate purposes. Nasdaq National Market symbol................ AXIM </TABLE> SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) The following summary financial information should be read in conjunction with the Financial Statements of the Company and the Predecessor Business and Notes thereto, "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. <TABLE> <CAPTION> PREDECESSOR AXIOM INC. BUSINESS(1) --------------------------------------------------------- ----------- PERIOD FROM YEAR JULY 1, 1994 YEAR ENDED SIX MONTHS ENDED ENDED TO SEPTEMBER 30, MARCH 31, JUNE 30, SEPTEMBER 30, -------------------- -------------------- 1994 1994 1995 1996 1996 1997 ----------- ------------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Revenues: Unrelated third parties: Equipment.................................. $ 13,963 $ 4,242 $ 18,000 $ 23,358 $ 5,311 $ 8,847 Services................................... 6,266 1,364 5,766 7,739 3,053 3,203 ----------- ------------- --------- --------- --------- --------- 20,229 5,606 23,766 31,097 8,364 12,050 ----------- ------------- --------- --------- --------- --------- Related parties.............................. -- -- 1,802 2,867 2,416 -- ----------- ------------- --------- --------- --------- --------- 20,229 5,606 25,568 33,964 10,780 12,050 ----------- ------------- --------- --------- --------- --------- ----------- ------------- --------- --------- --------- --------- Charge for purchased research and development(2)............................... -- 6,700 -- -- -- -- Operating income (loss)........................ (3,009) (6,871) 551 2,085 (3,364) (3,997) Net income (loss).............................. (4,098) 58 2,501 (1,976) (2,462) Historical net income (loss) per common share........................................ $ (1.18) $ 0.02 $ 0.72 $ (0.57) $ (0.71) ------------- --------- --------- --------- --------- ------------- --------- --------- --------- --------- Shares used in computing historical net income (loss) per common share...................... 3,477 3,477 3,477 3,477 3,477 ------------- --------- --------- --------- --------- ------------- --------- --------- --------- --------- Supplemental pro forma net income (loss) per common share(3).............................. $ 0.55 $ (0.44) --------- --------- --------- --------- Shares used in computing supplemental pro forma net income (loss) per common share (3)....... 5,180 5,180 --------- --------- --------- --------- </TABLE> <TABLE> <CAPTION> AS OF AS OF MARCH 31, 1997 SEPTEMBER 30, --------------------------- 1996 ACTUAL AS ADJUSTED(5) -------------- ---------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents......................................................... $ 3,326 $ 1,279 $ 8,970 Total assets...................................................................... 30,336 24,607 31,210 Working capital, excluding obligations to parent and affiliates (4)............... 14,698 10,776 18,148 Obligations to parent and affiliates(4)........................................... 23,291 21,480 -- Long-term debt.................................................................... 147 -- -- Stockholder's equity (deficit)(4)................................................. (1,539) (4,001) 24,090 </TABLE> - ------------------------ (1) The statement of operations data presented for the Predecessor Business represents the information for the Wireline Division of TeleSciences, Inc. See Statement of Revenues and Certain Expenses for the Predecessor Business and Notes thereto. (2) Represents a one-time charge for purchased research and development which was incurred as a result of the acquisition of the Predecessor Business (as defined below under "The Company") by the Company on July 1, 1994. The acquisition was accounted for under the purchase method of accounting. See Notes 1 and 2 of Notes to Consolidated Financial Statements. (3) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the computation of supplemental pro forma net income (loss) per common share. (4) The Company's acquisition of the Predecessor Business and other financing requirements have been primarily funded from borrowings from Securicor rather than equity investment. These borrowings are classified as obligations to parent and affiliates. See "Use of Proceeds." (5) Adjusted to give effect to the sale by the Company of 2,600,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $12.00 per share and after deducting the estimated underwriting discount and offering expenses) and the application of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization." Also includes the effect of the May 1997 transfer of certain net assets at net book value to an affiliate of Securicor. See "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037047_waste_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037047_waste_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea5a9d1552688212b6e19bea83d7dc19cba3d8ff
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037047_waste_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS: (I) GIVES EFFECT TO THE 1-FOR-2.5 REVERSE STOCK SPLIT AND THE AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE THAT ALL SHARES OF COMMON STOCK HAVE VOTING RIGHTS, EACH TO BE EFFECTIVE PRIOR TO CONSUMMATION OF THIS OFFERING; AND (II) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING". EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE TERMS "WASTE INDUSTRIES" AND THE "COMPANY" REFER TO WASTE INDUSTRIES, INC. AND ITS SUBSIDIARIES. THE COMPANY Waste Industries is a regional solid waste services company providing solid waste collection, transfer, recycling, processing and disposal services to customers primarily in North Carolina and South Carolina and, to a limited extent, in Virginia. The Company believes that it controls an average of over 25% of the waste stream in the markets it serves and approximately 13% of the total waste stream in North Carolina and South Carolina, based on its estimates of landfill disposal tonnage in 1996. The Company's principal operations as of April 30, 1997 consisted of 19 branch collection operations, 11 transfer stations and four recycling processing facilities that serve approximately 150,000 municipal, residential, commercial and industrial locations. Collection operations include front-end and roll-off collection for commercial and industrial accounts and curbside collection for residential customers. Transfer stations are located strategically throughout the served market area to allow the Company to consolidate its waste stream to gain more favorable disposal rates. Recycling processing facilities receive almost all forms of recyclable materials from the Company's approximately 100 drop-off centers in 15 counties. Approximately 3% of the Company's waste stream is recycled, which accounted for approximately 2% of total revenues in 1996. In addition to these services, the Company provides certain ancillary services to customers to complement its primary operations, including the operation of approximately 100 convenience sites, originally developed by the Company to consolidate waste in rural areas. The Company has acquired 19 solid waste collection operations since 1990. The Company does not currently own or operate any landfills; however, future expansion may include the acquisition or development of one or more landfills either independently or in partnership with an experienced landfill operator. The Company's objective is to build the premier solid waste services company in the Southeastern U.S. by expanding its operations and capitalizing on its strong market presence. The Company's strategy for achieving this objective is: (i) to generate internal growth by adding customers and services to its existing operations; (ii) to acquire solid waste collection companies, customers and, under appropriate circumstances, landfills in existing and new areas of its target market; and (iii) to increase operating efficiencies and enhance profitability in its existing and acquired operations. From December 31, 1992 through December 31, 1996, Company revenues, operating income and income before income taxes have increased at compounded annual rates of 18.9%, 27.7% and 38.0%, respectively. The Company operates on a decentralized management basis, with each branch office having service and decision-making authority. This allows the Company the flexibility and speed to respond to customer needs, to capitalize on market opportunities and to identify potential acquisition targets. In addition, decentralization and a well-developed network of branch offices allow the Company to operate as a local service provider when negotiating contracts or developing new business. Branch offices utilize support services for critical operating functions and the branches are connected to a centralized management information system utilizing satellite technology. Members of the senior management team founded Waste Industries in 1970 and are recognized for their leadership roles throughout the solid waste management industry and its trade organizations. The Company's management team collectively has over 240 years of experience in the solid waste industry and over 140 years with the Company. The Company is a North Carolina corporation with its principal executive offices located at 3949 Browning Place, Raleigh, North Carolina 27609, and its telephone number at that location is (919) 782-0095. RECENT ACQUISITION DEVELOPMENTS On May 15, 1997, the Company purchased equipment and customer contracts related to the commercial, industrial and residential solid waste collection business of two subsidiaries of Waste Management, Inc. in and around Chattanooga, Tennessee. The purchase price for these assets was $11.2 million in cash. This acquisition enables the Company to expand its operations into Tennessee, Georgia and Alabama. On April 30, 1997, the Company purchased equipment and customer contracts related to the solid waste collection business of Browning-Ferris Industries of South Atlantic, Inc. ("BFISA") in and around Charleston, South Carolina. The purchase price for these assets was approximately $4.8 million. This acquisition enables the Company to expand its operations into a new South Carolina market. On March 21, 1997, the Company purchased equipment and customer contracts related to the residential solid waste collection business of BFISA in and around Raleigh and Durham, North Carolina. The purchase price for these assets was approximately $782,000. This "tuck-in" acquisition increases the Company's route density in Wake, Durham, Orange, Johnston, Franklin and Chatham counties. The Charleston and Chattanooga acquisitions are consistent with the Company's regional operating strategy. These acquisitions broaden the Company's base from which it can grow both internally and through additional acquisitions. The Company is also currently examining other opportunities to expand its presence in the Southeastern U.S. through acquisitions of solid waste services operations in Mississippi, North Carolina, South Carolina, Tennessee and Virginia. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............................... 1,605,200 shares Common Stock offered by the Selling Shareholders.................. 544,800 shares Common Stock to be outstanding after this offering................ 11,205,357 shares(1) Use of proceeds................................................... Repay revolving bank debt and for general corporate purposes, including possible acquisitions Nasdaq National Market Symbol..................................... WWIN </TABLE> - --------------- (1) Excludes 526,000 shares issuable upon the exercise of stock options outstanding as of March 31, 1997 at a weighted average exercise price of $5.10 per share. See "Management -- Executive Compensation; Stock Options". SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31,(1) MARCH 31, ----------------------------------------------------- ------------------ 1992 1993 1994 1995 1996 1996 1997 ------- ------- -------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Service revenues............................. $42,319 $49,467 $ 66,382 $82,163 $ 92,381 $20,486 $24,042 Equipment sales.............................. 4,672 3,825 1,852 1,974 1,671 400 351 ------- ------- -------- ------- -------- ------- ------- Total revenues............................... 46,991 53,292 68,234 84,137 94,052 20,886 24,393 Cost of service operations................... 23,770 27,869 37,398 50,254 59,340 13,125 14,838 Cost of equipment sales...................... 3,917 2,694 1,852 1,590 1,162 300 269 ------- ------- -------- ------- -------- ------- ------- Total cost of operations..................... 27,687 30,563 39,250 51,844 60,502 13,425 15,107 Selling, general and administrative.......... 10,563 12,102 15,143 15,467 16,329 3,606 4,588 Depreciation and amortization................ 5,450 6,150 7,615 8,217 8,471 1,982 2,319 ------- ------- -------- ------- -------- ------- ------- Operating income............................. 3,291 4,477 6,226 8,609 8,750 1,873 2,379 Interest expense............................. (1,536) (1,625) (1,920) (2,122) (2,395) (497) (610) Other income................................. 186 171 287 473 694 172 152 ------- ------- -------- ------- -------- ------- ------- Income before income taxes................... 1,941 3,023 4,593 6,960 7,049 1,548 1,921 Pro forma income taxes(2).................... 770 1,230 1,865 2,790 2,845 625 775 ------- ------- -------- ------- -------- ------- ------- Pro forma net income(2)...................... $ 1,171 $ 1,793 $ 2,728 $ 4,170 $ 4,204 $ 923 $ 1,146 ------- ------- -------- ------- -------- ------- ------- ------- ------- -------- ------- -------- ------- ------- Pro forma earnings per share(2)(3)........... $ 0.12 $ 0.19 $ 0.28 $ 0.43 $ 0.43 $ 0.10 $ 0.12 ------- ------- -------- ------- -------- ------- ------- ------- ------- -------- ------- -------- ------- ------- Weighted average shares outstanding.......... 9,579 9,566 9,596 9,599 9,821 9,605 9,821 OTHER OPERATING DATA: Net cash provided by operating activities.... $ 6,574 $ 8,845 $ 12,933 $15,787 $ 14,946 $ 4,428 $ 4,053 Net cash used in investing activities........ (9,519) (11,356) (11,436) (8,556) (14,794) (6,060) (6,155) Net cash provided by (used in) financing activities................................ 2,447 3,472 (1,445) (7,100) (420) 274 877 EBITDA(4).................................... $ 8,927 $10,798 $ 14,128 $17,299 $ 17,915 $ 4,027 $ 4,850 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ----------------------------------------- PRO FORMA ACTUAL PRO FORMA(5) AS ADJUSTED(6) ------- ------------ -------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents......................................................... $ 578 $ 578 $ 578 Working capital................................................................... 1,414 834 834 Total assets...................................................................... 60,661 61,561 61,561 Long-term debt, net of current maturities......................................... 34,853 34,853 18,135 Shareholders' equity.............................................................. 16,085 10,005 26,723 </TABLE> - --------------- (1) Effective April 1, 1996, Waste Industries completed a corporate reorganization in which Waste Enterprises, Inc., Waste Industries East, Inc., Waste Industries South, Inc., Waste Industries West, Inc., KABCO, Inc., Conway 378, Inc. and AmLease, Inc. were merged with and into Waste Industries. Simultaneously, certain real estate properties previously leased to Waste Industries by Property Management Group, a partnership of certain shareholders of Waste Industries, were transferred to Waste Industries. These transactions were accounted for at historical cost in a manner similar to that in pooling of interests accounting. Accordingly, Waste Industries' financial statements have been restated to include these accounts and transactions for all periods presented. (2) For each of the fiscal years presented, the Company was an S Corporation and, accordingly, was not subject to federal and certain state corporate income taxes. The pro forma information has been computed as if the Company were subject to federal and all applicable state corporate income taxes for each of the periods presented assuming the tax rate that would have applied had the Company been taxed as a C Corporation. See "Dividend Policy and Prior S Corporation Status" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". (FOOTNOTES CONTINUED ON NEXT PAGE.) (3) Supplementary net income per share, assuming that the net proceeds to the Company from this offering (based on the issuance by the Company of 1,602,500 shares of Common Stock at an assumed public offering price per share of $11.50) were used to repay all approximately $7.8 million of revolving bank debt outstanding as of January 1, 1996, was $0.40 and $0.11 for the year ended December 31, 1996 and for three months ended March 31, 1997, respectively. Such supplementary net income per share data assume the transaction occurred at the beginning of the respective period. Weighted average shares outstanding for purposes of this computation is 11,426,053. (4) EBITDA is defined as income before income taxes plus interest expense and depreciation and amortization. EBITDA should not be considered an alternative to (i) operating income or net income (as determined in accordance with generally accepted accounting principles ("GAAP")) as an indicator of the Company's operating performance or (ii) cash flows from operating activities (as determined in accordance with GAAP) as a measure of operating performance or liquidity. However, the Company has included EBITDA data (which are not a measure of financial performance under GAAP) because it understands that such data are commonly used by certain investors to evaluate a company's performance in the solid waste industry. Furthermore, the Company believes that EBITDA data are relevant to an understanding of the Company's performance because they reflect the Company's ability to generate cash flows sufficient to satisfy its debt service, capital expenditure and working capital requirements. The Company therefore interprets the trends that EBITDA depicts as one measure of the Company's operating performance. However, funds depicted by the EBITDA measure may not be available for debt service, capital expenditures or working capital due to legal or functional requirements to conserve funds or other commitments or uncertainties. EBITDA, as measured by the Company, might not be comparable to similarly titled measures reported by other companies. Therefore, in evaluating EBITDA data, investors should consider, among other factors: the non-GAAP nature of EBITDA data; actual cashflows; the actual availability of funds for debt service, capital expeditures and working capital; and the comparability of the Company's EBITDA data to similarly titled measures reported by other companies. (5) Gives effect to the recognition of deferred tax assets of $900,000 and the assumption by the Company of a net deferred tax liability of $4.6 million as a result of the Company terminating its S Corporation election on May 9, 1997 and the S Corporation Distribution of approximately $1.48 million. See "Dividend Policy and Prior S Corporation Status".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037115_orbit-fr_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037115_orbit-fr_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..270b8d078f9774a1f45a6ef56535d26e32d36d09
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037115_orbit-fr_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes an initial public offering price of $8.50 per share (the "Offering Price"), (ii) assumes that the Underwriters' over-allotment option is not exercised, (iii) reflects the establishment of the Company in December 1996 and the issuance of 4,000,000 shares of Common Stock to Orbit-Alchut Technologies, Ltd. ("Alchut"), the Company's sole stockholder prior to this offering, (iv) reflects the acquisition of Flam & Russell, Inc. ("Flam & Russell") on June 28, 1996 and (v) assumes the acquisition of Advanced Electromagnetics, Inc. ("AEMI") upon the completion of this offering. See "The Company." For explanations of certain technical terms used in this Prospectus, see "Glossary" on page 52. THE COMPANY ORBIT/FR, Inc. ("ORBIT/FR" or the "Company") develops, markets and supports sophisticated automated microwave test and measurement systems for the wireless communications, satellite, automotive and aerospace/defense industries. Products such as cellular phones, satellites, radio transmitters, global positioning system ("GPS") receivers and guided missiles depend on the reliable and efficient transmission and reception of microwave signals in order to communicate. By utilizing the Company's systems to measure the critical performance characteristics of microwave signals, wireless manufacturers and service providers within these industries can improve quality and time-to- market, lower the risk of failure and underperformance and reduce costs. Microwave test and measurement systems are used during all stages of a product's life cycle: product development, pre-production qualification, production testing and product maintenance. The need for microwave test and measurement systems and products expanded rapidly during the 1960's and 1970's in conjunction with the growth and increased sophistication of the aerospace/defense industry in the United States and Western Europe. In the last 20 years, the need for microwave test and measurement has expanded beyond aerospace/defense applications to all aspects of modern telecommunications, including personal wireless communications devices, satellite-based communications systems and "smart" automobiles. This expansion has occurred in conjunction with a growing desire among companies to focus on their core competencies and, accordingly, outsource many non-core functions such as the development and manufacture of microwave test and measurement systems. Since its founding, the Company has expanded from distributing individual microwave test and measurement components to providing a wide range of fully integrated microwave test and measurement solutions. Components of an ORBIT/FR automated microwave test and measurement system include proprietary software and hardware products, which can be combined into standard or customized configurations to meet a customer's specific needs. The Company believes that its innovative proprietary systems, experienced staff, reputation for quality and reliability, strong international presence and comprehensive customer service give it a competitive advantage that will enable it to remain a leading global supplier of microwave test and measurement systems to a growing number of companies within the wireless communications, satellite, automotive and aerospace/defense industries. The Company markets and sells its systems to customers in the United States and throughout the world. Within the Company's targeted industries, the Company's customers since January 1, 1994 have included manufacturers of wireless systems and products, such as Motorola, Nokia and Ericsson; manufacturers of systems and products that incorporate microwave technology, such as Lockheed Martin, Hughes Aircraft, BMW and Boeing; and telecommunications service providers that rely on microwave technology, such as AT&T, NTT and Korea Mobile Telecom. The Company's customers also include the United States government and several foreign governments. In 1996, none of the Company's customers accounted for more than 5% of the Company's total revenues. At March 31, 1997, the Company's backlog was approximately $8.5 million, compared to approximately $3.6 million at March 31, 1996. The Company's objective is to strengthen its leadership position in automated microwave test and measurement systems while developing products and systems for a broader range of microwave applications. The principal elements of the Company's strategy to reach its objective are: (i) offering comprehensive solutions to customers, (ii) maintaining its technological leadership, (iii) focusing on standard systems and proprietary off-the-shelf products, (iv) pursuing growth in international markets and (v) leveraging its technological expertise to expand into complementary markets. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......... 2,000,000 shares Common Stock to be outstanding after the of- fering..................................... 6,094,118 shares(1)(2) Use of proceeds............................. For payment of the cash portion of the purchase price of AEMI and for working capital and other general corporate purposes, including possible acquisitions. Nasdaq National Market symbol............... "ORFR" </TABLE> - -------- (1) Excludes 492,300 shares of Common Stock issuable upon exercise of stock options to be granted upon completion of this offering at an exercise price equal to the Offering Price pursuant to the Company's 1997 Equity Incentive Plan. See "Management--1997 Equity Incentive Plan" and "Shares Eligible for Future Sale." (2) Includes a maximum of 94,118 shares of Common Stock that will be issued contemporaneously with the completion of this offering in connection with the acquisition of AEMI. See "The Company."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037120_loomis_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037120_loomis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a51a12d2562c510c3b7e3b9c38b450ad635ce385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037120_loomis_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "Loomis" herein mean Loomis Holding Corporation prior to the consummation of the Transactions, (ii) references to "Loomis Armored" herein mean Loomis Armored Inc. prior to the consummation of the Transactions, (iii) references to "Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior to the consummation of the Transactions, and (iv) references to "Loomis, Fargo & Co." or the "Company" herein mean the combined entity, including Loomis, Loomis Armored and the assets transferred to the Company by Wells Fargo Armored pursuant to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Original Offering, the Transactions, borrowings under the New Credit Facility and the application of the proceeds therefrom. THE COMPANY Loomis, Fargo & Co., created through the combination of Loomis Armored and Wells Fargo Armored, is one of the largest armored transport companies in the United States. Loomis, Fargo & Co. operates over 150 branches, employs approximately 8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles nationwide to provide armored ground transport services, automated teller machine ("ATM") services, and cash vault and related services to financial institutions and commercial customers. Serving all 50 states and Puerto Rico, the Company is one of only two armored transport companies in the United States that provides these services on a national basis. Management believes that the combination of Loomis Armored and Wells Fargo Armored into a national service provider favorably positions the Company for additional revenue opportunities as large financial and retail institutions are increasingly seeking vendors capable of providing an array of services on a national basis. In addition, management believes the proliferation of ATMs and the trend of banks and other financial and retail institutions towards outsourcing cash vault and related services will contribute to the Company's growth prospects. For the twelve months ended December 31, 1996 and the three months ended March 31, 1997, the Company would have had pro forma revenues of $373.7 million and $95.2 million, respectively, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $31.4 million and $4.6 million, respectively. The Company is implementing the management principles and decentralized structure utilized by the Loomis Armored management team, which have proven to be highly effective in reducing employee turnover, increasing customer satisfaction and decreasing "cost of risk," which consists of the cost of cargo and casualty losses, related insurance costs and claims administration expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis Armored's total cost of risk decreased from 10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve months ended December 31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 7.5% over the same period. Management believes that by combining the business strategy and risk management skills of Loomis Armored with the larger customer base and leading ATM Services (as defined) position of Wells Fargo Armored, the Company will be well-positioned to capitalize on the numerous opportunities developing in the armored transport industry. The Company provides a wide range of services within the following categories: Traditional Armored Transport. The Company's armored fleet transports currency and other valuables in sealed packages between commercial enterprises and banks, between banks, and from the Federal Reserve Banks to commercial banks. The Company provides traditional armored transport services to numerous banks including Bank of America and Wells Fargo Bank as well as national and regional businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger. Traditional armored transport represented approximately 62.9% of the Company's revenues for the twelve months ended December 31, 1996, making it the largest component of the Company's business. ATM Services. The Company provides cash replenishment, deposit pick-up, and first-line maintenance services (collectively, "ATM Services") to over 28,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. The total number of ATM locations in the United States is expected to increase significantly over the next five years. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. Management believes these trends provide the Company with further opportunities to build upon its leading position in the ATM Services industry by offering broad geographic coverage as well as a high level of service. The Company's ATM customers include NationsBank, NCR Corporation and Electronic Data Systems Corporation. ATM Services represented approximately 29.9% of the Company's revenues for the twelve months ended December 31, 1996, and have increased at a compounded annual growth rate of approximately 12.3% over the three year period ended December 31, 1996. Cash Vault and Related Services. The Company provides a wide array of cash vault and related services ranging from passive, secured storage of valuables such as currency, securities and computer chips to active services such as deposit processing and consolidation, change order preparation, coin wrapping and storage and food stamp processing. In addition, the Company's cash vault capacity is a key element in supporting services to larger customers and ATM networks. Cash vault and related services represented approximately 7.2% of the Company's revenues for the twelve months ended December 31, 1996. The Company's principal executive offices are located at 2500 CityWest Blvd., Suite 900, Houston, Texas 77042, and its telephone number at such address is (713) 435-6700. INDUSTRY OVERVIEW Management estimates that the ten largest armored transport companies in the United States have aggregate annual revenues of approximately $1.0 billion. The ground transportation portion of the armored transport industry, currently the single largest sector, has historically maintained moderate growth. ATM services represent the most dynamic growth sector of the armored transport industry, with the total number of ATM locations served by the armored transport industry expected to increase significantly over the next five years. This expected growth results from a fundamental change in the retail delivery channel strategy of banks in the United States as traditional, full service bank branches are being replaced by ATMs, drive-through service centers and banks located in supermarkets and other nontraditional locations. In addition, while cash vault and related services currently represent a relatively small portion of the armored transport industry's revenues, this market is also expected to expand over the next several years as banks and other financial institutions continue the trend toward outsourcing such services. POST-COMBINATION STRATEGY Management believes that Loomis, Fargo & Co. has several distinct competitive strengths within the armored transport industry, including a strong national presence, the leading ATM Services operation, and a management team experienced in maximizing service value, reducing cost of risk and improving cash flow and profitability. The Company's business strategy is to capitalize on its competitive strengths by implementing the following initiatives: Promote the National Presence of Loomis, Fargo & Co. The Company provides its services to a much larger geographic area than either Loomis Armored or Wells Fargo Armored serviced on a stand-alone basis. With services in all 50 states and Puerto Rico, the Company is able to expand its business with national financial institutions and retail customers which require armored ground transport, ATM Services and/or cash vault and related services in numerous locations across the country. Management believes that the ability to provide nationwide service is becoming more important in the armored transport industry as banks are expanding geographically through the continuing consolidation of the banking industry and as other institutions are shifting toward centralized purchasing of goods and services. As one of only two armored transport providers in the United States with nationwide service, the Company is well-positioned to augment its base of customers requiring broad geographic coverage. The Company has dedicated a segment of its sales force to manage national account relationships. Focus on Growing ATM Services Market. The Company provides ATM Services to over 27,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. Both the number of ATM locations and the types of items being dispensed through ATMs, such as travelers checks, lottery tickets, coupons, postage stamps and other valuables, continue to grow. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. The Company uses its proprietary automated national dispatching system to coordinate customer requests, provide service data to customers and dispatch service technicians nationwide. To complement the national dispatching system, the Company has developed an automated network cash management system that optimizes ATM cash loads and provides ATM balance reporting. With its broad range of services and automated systems, the Company intends to build upon its leading position in the ATM Services market. Reduce Cost of Risk and Emphasize Risk Management Partnership with Customers. Management intends to improve cash flow and profitability not only by reducing the Company's overall cost of risk but also by using a risk management partnership approach with its customers as a means of differentiating the Company from its competitors. A comprehensive risk management program which emphasizes incident avoidance and loss minimization is being implemented throughout the Company's operations. The program focuses on (i) employee culture and attitude, (ii) selectivity in hiring, (iii) operating procedures designed to recognize and avoid potential danger or accidents, (iv) safety and security procedures, including training in the proper use of firearms and the operation of the Company's vehicles, (v) limits on the amounts of cash or other valuables contained in a branch or vehicle or under the control of an employee, (vi) utilization of three-person crews and surveillance or chase cars in high- risk areas, and (vii) an extensive security oversight program, including surveillance and evaluation by AMSEC, an independent, international security firm. This risk management program produced significant cost savings with respect to cargo loss and casualty liability claims for Loomis Armored over the five years prior to the consummation of the Transactions. To provide the quality of service necessary to enhance customer loyalty in support of this business strategy, the Company emphasizes an operating philosophy dedicated to: Attracting and Retaining Quality, Loyal Employees. Management believes that a loyal employee base directly contributes to reducing cost of risk and improving customer service and that the combination of selectivity in hiring, a commitment to employee training, responsibility and safety, and competitive wage and benefit packages will enable the Company to attract and retain quality, loyal employees. As a result of Loomis Armored's commitment to these principles, its employee turnover rate decreased from 41% for the twelve months ended December 31, 1992 to 29% for the twelve months ended December 31, 1996. Encouraging Employee Initiative. The Company operates so that many of the daily operational decisions such as local sales, routing, hiring, and fleet maintenance are made at the branch level while the Company's corporate and five regional management teams support the branches, particularly with respect to pricing and risk management. This delegation of responsibility is expected to improve efficiency and responsiveness to customer needs, while maintaining Company-wide security, safety and quality of revenue standards. Management believes that this structure, together with an incentive program that links a branch manager's compensation to branch profitability, gives branch managers and other employees a sense of empowerment and accountability. This structure was successfully implemented at Loomis Armored's operations and is currently being implemented at all of the Company's locations. CONSOLIDATION SAVINGS The Company has developed an integration plan focused on reducing corporate overhead and consolidating branches in overlapping service areas. The Company expects to achieve cost savings in consolidation through (i) adopting the most effective business practices of Loomis Armored and Wells Fargo Armored, (ii) consolidating corporate, regional and branch offices, and (iii) achieving routing and servicing efficiencies as well as reducing occupancy costs by combining operations in the areas where both Loomis Armored and Wells Fargo Armored previously operated. Management estimates that, upon successful completion of its consolidation plan over the 12-month period following the consummation of the Transactions, the Company will realize $7.5 million in cost savings on an annualized basis (approximately $3.4 million of which is related to headcount reduction and $3.7 million of which is related to the elimination of management fees) compared to the cost of operating Loomis Armored and Wells Fargo Armored as separate entities. There can be no assurance, however, that all of such savings will occur as planned. The Company's actual consolidation savings could differ materially from management's estimate. Factors that could cause or contribute to such differences include those discussed elsewhere in this Prospectus, including, but not limited to, risks and uncertainties relating to leverage, risks inherent in the armored transport industry, issues concerning integration of operations and the ability of the Company to attract and retain qualified employees. See "Risk Factors--Implementation of Post-Combination Strategy," "-- Employees" and "Pro Forma Combined Financial Information." THE TRANSACTIONS The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo Armored, the Company, Loomis, Loomis Armored and the Business Trust entered into the Contribution Agreement (as defined), pursuant to which, on January 24, 1997, the Business Trust contributed all of the issued and outstanding common stock of Loomis and Wells Fargo Armored contributed substantially all of its assets and certain liabilities to the Company in exchange for 51% and 49%, respectively, of the Common Stock and certain other consideration. See "The Transactions--The Business Combination." The Financing. The Transactions were financed through the establishment of the New Credit Facility and the issuance of the Old Notes. The following table illustrates the sources and uses of cash in connection with the Transactions. See "The Transactions--The Business Combination." The Transactions were consummated on January 24, 1997. <TABLE> <CAPTION> (IN MILLIONS) ------------- <S> <C> SOURCES OF CASH New Credit Facility (1)...................................... $ 73.3 10% Senior Subordinated Notes................................ 85.0 ------ Total sources of cash..................................... $158.3 ====== USES OF CASH Retirement of Loomis and Loomis Armored obligations: Existing indebtedness (2) (3).............................. $ 29.6 Accrued management fees (4)................................ 1.6 Casualty and employee claims (5)........................... 8.5 Payments to the Loomis Indemnity Trust....................... 4.7 Payments to Wells Fargo Armored and related entities (6)(7).. 106.6 Fees and expenses............................................ 5.3 Payment escrowed to retire Wells Fargo Armored IRB and accrued interest............................................ 1.1 Contribution to the Operating Subsidiary for working capital purposes.................................................... 0.9 ------ Total uses of cash........................................ $158.3 ====== </TABLE> - -------- (1) The New Credit Facility provides initially for aggregate borrowings of $115.0 million and matures in January 2002. As of March 31, 1997, approximately $11.7 million in letters of credit were outstanding under the New Credit Facility, leaving approximately $29.9 million in available borrowing capacity under the New Credit Facility. (2) Includes (i) $10.3 million of 14% senior subordinated notes that were scheduled to mature on September 30, 1999, including accrued interest, (ii) $9.2 million of a 9% junior subordinated note that was scheduled to mature on September 30, 1999, including accrued interest (iii) $3.3 million of a term loan that was scheduled to mature on September 30, 1999, including accrued interest, and (iv) $6.8 million in borrowings under Loomis Armored's credit facility. (3) $3.5 million of the borrowings by Loomis Armored under its credit facility were used to redeem the Loomis Preferred Stock (as defined) immediately prior to the Closing (as defined). See "The Transactions--The Business Combination." (4) Accrued management fees were paid at Closing to an affiliate of Loomis pursuant to a Financial Advisory Agreement (as defined). See "Certain Relationships and Related Transactions--Financial Advisory Agreement." (5) Represents a lump sum payment on behalf of the Business Trust to CIGNA Insurance Company and related entities pursuant to an Early Program Close- Out Agreement dated January 24, 1997, related to insuring and managing casualty and employee claims of Loomis incurred prior to the Closing (the "Early Program Close-Out Agreement"). See "The Transactions--The Business Combination" and "Pro Forma Combined Financial Information." (6) Includes approximately $1.4 million of reimbursement for fees and expenses related to the Transactions. (7) A portion of such consideration was paid at Closing by the Company to Borg- Warner and/or one or more of its wholly-owned subsidiaries to satisfy certain intercompany indebtedness of Wells Fargo Armored assumed by the Company. THE EXCHANGE OFFER The Exchange Offer applies to $85.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) interest on the New Notes shall accrue from the date of issuance of the Old Notes, and (ii) the New Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of New Notes." The Exchange Offer........ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $85.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company and the Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of the Company or any Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker- dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights The Old Notes were sold by the Company on January Agreement................ 24, 1997, in a private placement. In connection with the sale, the Company entered into a Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer-- Purpose and Effects." Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, July 22, 1997, or such later date and time to which it is extended. Withdrawal................ The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes............ Interest on each New Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Old Note for which the New Note is exchanged. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer--Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company and each of the Guarantors are required to use their reasonable best efforts to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes (and cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) the Company is not required to file an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or (ii) any holder of Old Notes is prohibited from participating in the Exchange Offer by applicable law or Commission policy, or such holder would be required to deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer and the prospectus contained in the Exchange Offer Registration Statement would not be appropriate or available for such resales, or such holder is a broker-dealer that holds Old Notes acquired directly from the Company or its affiliates. Acceptance of Old Notes and Delivery of New The Company will accept for exchange any and all Notes.................... Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax The exchange pursuant to the Exchange Offer should Considerations........... not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. TERMS OF NEW NOTES Securities Offered........ $85.0 million aggregate principal amount of 10% Senior Subordinated Notes due 2004. Issuer.................... Loomis, Fargo & Co. Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997. Maturity.................. January 15, 2004. Sinking Fund Provisions... None. Optional Redemption....... The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2001 at the Redemption Prices (as defined) set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. In addition, prior to January 15, 2000, the Company may on any one or more occasions redeem up to $25.0 million aggregate principal amount of the New Notes at a Redemption Price equal to 110% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net proceeds of one or more public offerings of Common Stock; provided that at least $60.0 million principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. See "Description of New Notes--Optional Redemption." Change of Control......... In the event of a Change of Control (as defined), the holders of the New Notes will have the right to require the Company to purchase their New Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking................... The New Notes will be general unsecured obligations of the Company, subordinate in right of payment to all existing and future Senior Debt of the Company, which will include all indebtedness incurred under the New Credit Facility. As of March 31, 1997, there was approximately $165.7 million of total debt of the Company and its subsidiaries, $73.5 million of which was Senior Debt, and there was not any indebtedness of the Company expressly subordinated to the Notes by its terms in right and priority of payment; in addition, there was approximately $29.9 million available to be drawn by the Company as secured Senior Debt under the New Credit Facility. See "Risk Factors--Subordination," "Capitalization" and "Description of New Notes-- Subordination." Subsidiary Guarantees..... The Company's payment obligations under the New Notes will be jointly and severally guaranteed by the Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future senior debt of each Guarantor, which include guarantees of all indebtedness incurred under the New Credit Facility. See "Description of New Notes--Subsidiary Guarantees." The indenture pursuant to which the New Notes will Certain Covenants......... be issued (the "Indenture") will contain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) create certain liens; (v) engage in certain sale and leaseback transactions; (vi) make certain asset dispositions; and (vii) merge or consolidate with, or transfer substantially all of their assets to, another person. See "Description of New Notes--Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037190_montgomery_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037190_montgomery_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c4379247a21000708d9e028820b8065c4e092f25
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037190_montgomery_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary is qualified in its entirety by the more detailed information regarding the Association and the Mutual Holding Company and the Consolidated Financial Statements of the Association and the Notes thereto appearing elsewhere in this Prospectus. Montgomery Financial Corporation Montgomery Financial Corporation is an Indiana corporation organized in April 1997 by the Association for the purpose of holding all of the capital stock of the Association and in order to facilitate the Conversion and Reorganization. Upon completion of the Conversion and Reorganization, the only significant assets of the Company will be all of the outstanding Association Common Stock, the note evidencing the Company's loan to the ESOP and the portion of the net proceeds from the Offerings retained by the Company. The business of the Company will initially consist of the business of the Association. See "Business of Montgomery" and "Regulation - The Company Regulation." Montgomery Savings, A Federal Association Montgomery Savings, A Federal Association, is a federally chartered stock savings association that was organized on August 11, 1995 as a subsidiary of the Mutual Holding Company. Prior to that date, Montgomery Savings Association, A Federal Association, in its mutual form (the "Mutual Association") had operated in the market area now served by the Association. In connection with the organization of the Mutual Holding Company (the "MHC Reorganization"), the Mutual Association transferred substantially all of its assets and liabilities to the Association in exchange for 600,000 shares of Association Common Stock and converted its charter to that of a federal mutual holding company known as Montgomery Mutual Holding Company. As part of the MHC Reorganization, the Association also sold an additional 250,000 shares of Association Common Stock to certain members of the general public. As of December 31, 1996, there were 850,000 shares of Association Common Stock issued and outstanding, 250,000 shares of which consisted of Public Association Shares. At December 31, 1996, the Association had $94.6 million of total assets, $85.5 million of total liabilities, including $72.3 million of deposits, and $9.1 million of stockholders' equity. The Association Common Stock is registered with the OTS under Section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Montgomery Mutual Holding Company Montgomery Mutual Holding Company is a federally chartered mutual holding company chartered on August 11, 1995 in connection with the MHC Reorganization. The Mutual Holding Company's primary asset is 600,000 shares of Association Common Stock, which represents 70.59% of the shares of Association Common Stock outstanding as of the date of this Prospectus. The Mutual Holding Company's only other assets consist of deposit accounts in the amount of $103,000 as of December 31, 1996 (which will become assets of the Association upon consummation of the Conversion and Reorganization). As part of the Conversion and Reorganization, the Mutual Holding Company will convert from mutual form to a federal interim stock savings institution and simultaneously merge with and into the Association, with the Association being the surviving entity. The Conversion and Reorganization Purposes of the Conversion and Reorganization. In their decision to pursue the Conversion and Reorganization, the Mutual Holding Company and the Association considered various regulatory uncertainties associated with the mutual holding company structure including the ability to waive dividends in the future as well as the general uncertainty regarding a possible elimination of the federal savings association charter. See "Risk Factors - Proposed Federal Legislation." In addition, the Mutual Holding Company and the Association considered the various advantages of a stock holding company form of organization including: (1) a stock holding company's ability to diversify the Company's and the Association's business activities which is expected to enhance the long-term value of the Company on a consolidated basis; (2) the larger capital base of a stock holding company; (3) the enhancement of the Company's future access to the capital markets; (4) the increase in the number of outstanding shares of publicly traded stock (which may increase the liquidity of the Common Stock); (5) a stock holding company's enhanced ability to repurchase shares of its common stock; and (6) the greater ability to acquire other financial institutions. For additional information see "The Conversion and Reorganization Purposes of the Conversion and Reorganization." Description of the Conversion and Reorganization. On December 26, 1996, the Boards of Directors of the Association and the Mutual Holding Company adopted the Plan, which was amended on March 31, 1997, and in April 1997 the Association incorporated the Company under Indiana law as a first-tier wholly owned subsidiary of the Association. Pursuant to the Plan, (i) the Mutual Holding Company will convert to an interim federal stock savings institution and simultaneously merge with and into the Association, pursuant to which the Mutual Holding Company will cease to exist and the 600,000 shares or 70.59% of the outstanding Association Common Stock held by the Mutual Holding Company will be cancelled, and (ii) an interim savings association ("Interim") to be formed as a wholly owned subsidiary of the Company solely for such purpose will then merge with and into the Association. As a result of the merger of the Interim with and into the Association, the Association will become a wholly owned subsidiary of the Company and the outstanding Public Association Shares, which amounted to 250,000 shares or 29.41% of the outstanding Association Common Stock at December 31, 1996, will be converted into the Exchange Shares pursuant to the Exchange Ratio, which will result in the holders of such shares owning in the aggregate approximately 28.21% of the Common Stock to be outstanding upon the completion of the Conversion and Reorganization (i.e., the Conversion Stock and the Exchange Shares) (which is approximately equal to the percentage of Association Common Stock owned by them in the aggregate immediately prior to consummation of the Conversion and Reorganization, adjusted downward pursuant to OTS policy in order to reflect the $300,000 of dividends declared by the Association and waived by the Mutual Holding Company), before giving effect to (a) the payment of cash in lieu of issuing fractional Exchange Shares, (b) any shares of Conversion Stock purchased by the Association's stockholders in the Offerings or the ESOP thereafter, and (c) any exercise of dissenters' rights. The following diagram outlines the current organizational structure of the Primary Parties' and their ownership interests: - --------------------------------- ------------------------------------- Montgomery Mutual Holders of Public Holding Company Association Shares - --------------------------------- ------------------------------------- 70.59% 29.41% --------------------------------------- Montgomery Savings, A Federal Association --------------------------------------- 100% --------------------------------------- Montgomery Financial Corporation --------------------------------------- 100% --------------------------------------- Interim (to be formed) --------------------------------------- The following diagram reflects the Conversion and Reorganization, including (i) the merger of the Mutual Holding Company (following its conversion into an interim federal stock savings institution) with and into the Association, (ii) the merger of Interim with and into the Association, pursuant to which the Public Association Shares will be converted into Exchange Shares, and (iii) the offering of Conversion Stock. The diagram assumes that there are no dissenters' rights exercised and no fractional shares and does not give effect to purchases of Conversion Stock by holders of Public Association Shares or the exercise of outstanding stock options. In addition to shares of Common Stock to be issued pursuant to the Exchange, the Company is offering shares of Conversion Stock in the Offerings as part of the Conversion and Reorganization. See "- The Offerings" below and "The Conversion and Reorganization - The Offerings." - --------------------------------- ------------------------------------- Purchasers of Holders of Public Conversion Stock Association Shares - --------------------------------- ------------------------------------- 71.79% 28.21% --------------------------------------- Montgomery Financial Corporation --------------------------------------- 100% --------------------------------------- Montgomery Savings, A Federal Association --------------------------------------- Pursuant to OTS regulations, consummation of the Conversion and Reorganization is conditioned upon the approval of the Plan by the OTS, as well as (1) the approval of the holders of at least a majority of the total number of votes eligible to be cast by the members of the Mutual Holding Company (which consist of depositors of the Association) ("Members") as of the close of business on _________ __, 1997 (the "Voting Record Date") at a special meeting of Members called for the purpose of submitting the Plan for approval (the "Members' Meeting"), and (2) the approval of the holders of at least two-thirds of the shares of the outstanding Association Common Stock held by the Mutual Holding Company and the Public Stockholders (collectively, the "Stockholders"), as of the Voting Record Date at a special meeting of Stockholders called for the purpose of considering the Plan (the "Stockholders' Meeting"). In addition, the Primary Parties have conditioned the consummation of the Conversion and Reorganization on the approval of the Plan by at least a majority of the votes cast, in person or by proxy, by the Public Stockholders at the Stockholders' Meeting. The Mutual Holding Company intends to vote its shares of Association Common Stock, which amount to 70.59% of the outstanding shares, in favor of the Plan at the Stockholders' Meeting. In addition, as of March 31, 1997, directors and executive officers of the Association as a group (8 persons) beneficially owned 28,700 shares (not including stock options) or 3.38% of the outstanding Association Common Stock, which shares can also be expected to be voted in favor of the Plan at the Stockholders' Meeting. The Offerings Pursuant to the Plan and in connection with the Conversion and Reorganization, the Company is offering up to 1,031,981 shares of Conversion Stock in the Offerings. Conversion Stock is first being offered in the Subscription Offering with nontransferable subscription rights being granted, in the following order of priority, to (i) depositors of the Association with account balances of $50.00 or more as of the close of business on September 30, 1995 ("Eligible Account Holders"); (ii) the ESOP; (iii) depositors of the Association with account balances of $50.00 or more as of the close of business on March 31, 1997 ("Supplemental Eligible Account Holders"); (iv) members of the Mutual Holding Company as of the Voting Record Date (other than Eligible Account Holders and Supplemental Eligible Account Holders) ("Other Members"); (v) directors, officers and employees of the Mutual Holding Company and the Association; and (vi) Public Stockholders. Subscription rights will expire if not exercised by Noon, Crawfordsville, Indiana time, on _________ __, 1997, unless extended. Subject to the prior rights of holders of subscription rights, Conversion Stock not subscribed for in the Subscription Offering is being offered in the Community Offering to certain members of the general public to whom a copy of this Prospectus is delivered, with preference given to natural persons residing in Montgomery, Fountain and Warren Counties, Indiana. It is anticipated that shares not subscribed for in the Subscription and Community Offerings may be offered to certain members of the general Public in a Syndicated Community Offering. The Primary Parties reserve the absolute right to reject or accept any orders in the Community Offering or the Syndicated Community Offering, in whole or in part, either at the time of receipt of an order or as soon as practicable following the Expiration Date. The closing of all shares sold in the Offerings will occur simultaneously, and all shares of Conversion Stock will be sold at a uniform price of $10.00 per share. The Primary Parties have retained Webb as consultant and advisor in connection with the Offerings and to assist in soliciting subscriptions in the Offerings on a best efforts basis. See "The Conversion and Reorganization - The Offerings - Subscription Offering," "- Community Offering," "- Syndicated Community Offering" and "- Marketing Arrangements." Purchase Limitations With the exception of the ESOP, which intends to purchase up to an aggregate of 8.0% of the number of shares of Common Stock to be outstanding upon completion of the Conversion and Reorganization, no Eligible Account Holder, Supplemental Eligible Account Holder, Other Member, director, officer or employee or Public Stockholder may purchase in their capacity as such in the Subscription Offering more than the number of shares of Conversion Stock that, when combined with Exchange Shares received, aggregate $200,000 of Common Stock; no person may purchase in each of the Community Offering and any Syndicated Community Offering more than the number of shares of Conversion Stock that when combined with Exchange Shares received aggregate $200,000 of Common Stock; and no person together with associates of or persons acting in concert with such person, may purchase in the Offerings more than the number of shares of Conversion Stock that when combined with Exchange Shares received by such person, together with associates of and persons acting in concert with such person, aggregate more than $200,000 of Common Stock. For purposes of the purchase limitations set forth in the Plan of Conversion, Exchange Shares will be valued at $10.00 per share which is the same price at which shares of Conversion Stock will be issued in the Offerings. At any time during the Offerings, and without further approval by the Members or the Stockholders, the Primary Parties may in their sole discretion decrease or increase any of the purchase limitations up to 5% of the Common Stock issued in the Conversion and Reorganization. Under certain circumstances, subscribers may be resolicited in the event of such an increase and given the opportunity to increase, decrease or rescind their orders. The minimum purchase is 25 shares. See "The Conversion and Reorganization - Limitations on Conversion Stock Purchases." In the event of an over subscription, shares will be allocated in accordance with the Plan, as described under "The Conversion and Reorganization - The Offerings - Subscription Offering" and "- Community Offering." Because the purchase limitations contained in the Plan of Conversion include Exchange Shares to be issued to Public Stockholders for their Public Association Shares, certain holders of Public Association Shares may be limited in their ability to purchase Conversion Stock in the Offerings. Stock Pricing, Exchange Ratio and Number of Shares to be Issued in the Conversion and Reorganization OTS regulations require the aggregate purchase price of the Conversion Stock to be consistent with the Appraisal of the Association and the Mutual Holding Company, which was $12,500,000 at the midpoint of the valuation range as of March 4, 1997. Because the holders of the Public Association Shares will continue to hold the same aggregate percentage ownership interest in the Company as they held in the Association adjusted downward pursuant to OTS policy in order to reflect the dividends declared by the Association and waived by the Mutual Holding Company (before giving effect to any shares of Common Stock purchased by the Association's stockholders in the Offerings or the ESOP thereafter, the payment of cash in lieu of issuing fractional Exchange Shares and any exercise of dissenters' rights), the Appraisal was multiplied by 71.79% (which represents the Mutual Holding Company's percentage interest in the Association adjusted upward from 70.59% so as to reflect the $300,000 of dividends declared by the Association and waived by the Mutual Holding Company) to determine the midpoint of the Offering Price Range, which is $8,973,750. In accordance with OTS regulations, the minimum and maximum of the Offering Price Range were set at 15% below and above the midpoint, respectively, resulting in an offering range of $7,627,690 to $10,319,810. The full text of the Appraisal describes the procedures followed, the assumptions made, limitations on the review undertaken and matters considered, which included the trading market for the Association Common Stock (see "Market for Common Stock") but was not dependent thereon. The Appraisal has been filed as an exhibit to the Registration Statement and Application for Conversion of which this Prospectus is a part, and is available in the manner set forth under "Additional Information." The Appraisal is not intended and should not be construed as a recommendation of any kind as to the advisability of purchasing such stock. All shares of Conversion Stock will be sold at the Purchase Price of $10.00 per share, which was established by the Boards of Directors of the Primary Parties. The actual number of shares to be issued in the Offerings will be determined by the Primary Parties based upon the final updated valuation of the estimated pro forma market value of the Conversion Stock at the completion of the Offerings. The number of shares of Conversion Stock to be issued is expected to range from a minimum of 762,769 shares to a maximum of 1,031,981 shares. Subject to approval of the OTS, the Offering Price Range may be increased or decreased to reflect market and economic conditions prior to the completion of the Offerings, and under such circumstances the Primary Parties may increase or decrease the number of shares of Conversion Stock. No resolicitation of subscribers will be made and subscribers will not be permitted to modify or cancel their subscriptions unless (i) the gross proceeds from the sale of the Conversion Stock are less than the minimum or more than 15% above the maximum of the current Offering Price Range (exclusive of a number of shares equal to up to an additional 8.0% of the Common Stock outstanding immediately upon completion of the Conversion and Reorganization which may be issued to the ESOP out of authorized but unissued shares of Common Stock to the extent such shares are not purchased in the Offerings due to an over subscription by Eligible Account Holders) or (ii) the Offerings are extended beyond _____ __, 1997. Any increase or decrease in the number of shares of Conversion Stock will result in a corresponding change in the number of Exchange Shares, so that upon consummation of the Conversion and Reorganization, the Conversion Stock and the Exchange Shares will represent approximately 71.79% and 28.21%, respectively, of the Company's total outstanding shares. Nevertheless, Exchange Shares may represent less than 28.21% of the Company's total outstanding shares if there are insufficient shares for the ESOP to purchase 8.0% of the Common Stock outstanding immediately upon completion of the Conversion and Reorganization and, consequently, the Company has to issue authorized but unissued shares to the ESOP in order to satisfy its order to purchase such amount of Conversion Stock in the Offerings. See "Pro Forma Data," "Risk Factors - Possible Dilutive Effect of Issuance of Additional Shares" and "The Conversion and Reorganization - Stock Pricing, Exchange Ratio and Number of Shares to be Issued." Based on the 250,000 Public Association Shares outstanding at December 31, 1996, and assuming a minimum of 762,769 and a maximum of 1,031,981 shares of Conversion Stock are issued in the Offerings, the Exchange Ratio is expected to range from approximately 1.20 Exchange Shares to 1.62 Exchange Shares for each Public Association Share outstanding immediately prior to the consummation of the Conversion and Reorganization. The Exchange Ratio will be affected if any stock options to purchase shares of Association Common Stock are exercised after December 31, 1996 and prior to consummation of the Conversion and Reorganization. If any of such stock options are outstanding immediately prior to consummation of the Conversion and Reorganization, they will be converted into options to purchase shares of Common Stock, with the number of shares subject to the option and the exercise price per share to be adjusted based upon the Exchange Ratio so that the aggregate exercise price remains unchanged, and with the duration of the option remaining unchanged. As of the date of this Prospectus, there were options to purchase 18,750 shares of Association Common Stock outstanding, all of which had an exercise price of $13 per share, and the Association has no plans to grant additional stock options prior to the consummation of the Conversion and Reorganization. The following table sets forth, based upon the minimum, midpoint, maximum and 15% above the maximum of the Offering Price Range, the following: (i) the total number of shares of Conversion Stock and Exchange Shares to be issued in the Conversion and Reorganization, (ii) the percentage of the total Common Stock represented by the Conversion Stock and the Exchange Shares, and (iii) the Exchange Ratio. The table assumes that no holder of Public Association Shares exercises dissenters' rights and that there is no cash paid in lieu of issuing fractional Exchange Shares. Total Conversion Stock to Exchange Shares to Shares Be Issued(1) Be Issued(1) of Common ------------------- ------------------ Stock to be Exchange Amount Percent Amount Percent Outstanding(1) Ratio(1) ------ ------- ------ ------- -------------- -------- Minimum ..... 762,769 71.79% 299,731 28.21% 1,062,500 1.20 Midpoint .... 897,375 71.79 352,625 28.21 1,250,000 1.41 Maximum ..... 1,031,981 71.79 405,519 28.21 1,437,500 1.62 15% above maximum ... 1,186,778 71.79 466,347 28.21 1,653,125 1.87 - ---------- (1) Assumes that outstanding options to purchase 18,750 shares of Association Common Stock at December 31, 1996 are not exercised prior to consummation of the Conversion and Reorganization. Assuming that all of such options are exercised prior to such consummation, the percentages represented by the Conversion Stock and the Exchange Shares would amount to 70.29% and 29.71%, respectively, and the Exchange Ratio would amount to 1.17, 1.38, 1.59, and 1.83, at the minimum, midpoint, maximum and 15% above the maximum of the Offering Price Range, respectively. Differences in Stockholder Rights The Company is an Indiana corporation subject to the provisions of the Indiana Business Corporation Law, and the Association is a federally chartered savings association subject to federal laws and regulations. Upon consummation of the Conversion and Reorganization, the Public Stockholders of the Association will become stockholders of the Company and their rights will be governed by the Company's Articles of Incorporation and Bylaws and Indiana law. The rights of stockholders of the Association are materially different in certain respects from the rights of stockholders of the Company. See "Comparison of Stockholders' Rights" and "Description of Capital Stock of the Company." Benefits of Conversion and Reorganization to Directors and Officers The Company intends to adopt certain stock benefit plans for the benefit of directors, officers and employees of the Company and the Association. The proposed benefit plans are as follows: (i) a 1997 Stock Option Plan, pursuant to which a number of authorized but unissued shares of Common Stock equal to 10% of the Conversion Stock to be sold in the Offerings (103,198 shares at the maximum of the Offering Price Range) may be reserved for issuance pursuant to stock options and stock appreciation rights to directors, officers and employees; and (ii) a 1997 Management Recognition Plan (the "1997 Recognition Plan"), which may purchase a number of shares of Common Stock, with funds contributed by the Company, either from the Company or in the open market equal to an amount which, when added to the number of shares of Common Stock held in the existing Management Recognition Plan, will equal 4.0% of the Common Stock outstanding immediately following the Conversion and Reorganization (57,500 shares at the maximum of the Offering Price Range) for distribution to directors, officers and employees (without any requirement of payment by the grantee). The Company has not determined when it will implement the 1997 Stock Option Plan and the 1997 Recognition Plan. If, however, it is implemented prior to one year following the consummation of the Conversion and Reorganization, the Company will submit such plans to stockholders for approval at an annual or special meeting at least six months following the consummation of the Conversion and the Reorganization. In such event, OTS regulations permit individual members of management to receive up to 25% of the shares reserved pursuant to any stock option or non-tax qualified stock benefit plan, and directors who are not employees to receive up to 5% of such stock (or stock options) reserved individually and up to 30% in the aggregate under any such plan. See "Management of the Association - Benefit Plans." In the event that the 1997 Recognition Plan purchases shares of Common Stock in the open market with funds contributed by the Company, the cost of such shares initially will be deducted from the stockholders' equity of the Company, but the number of outstanding shares of Common Stock will not increase and stockholders accordingly will not experience dilution of their ownership interest. In the event that the 1997 Recognition Plan purchases shares of Common Stock from the Company with funds contributed by the Company, total stockholders' equity would neither increase or decrease, but under such circumstances stockholders would experience dilution of their ownership interests (by approximately 3.36% at the maximum of the Offering Price Range) and per share stockholders' equity and per share net earnings would decrease as a result of an increase in the number of outstanding shares of Common Stock. In either case, the Company will incur operating expense and increases in stockholders' equity as the shares held by the 1997 Recognition Plan are granted and issued in accordance with the terms thereof. For a presentation of the effects of anticipated purchases of Common Stock by the 1997 Recognition Plan, see "Pro Forma Data." In addition, the Company has adopted an ESOP in connection with the Conversion and Reorganization, which intends to purchase 8.0% of the Common Stock to be outstanding upon completion of the Conversion and Reorganization (115,000 shares or $1,150,000 of Conversion Stock at the maximum of the Offering Price Range) with a loan funded by the Company. See "Use of Proceeds." In the event that there are insufficient shares available to fill the ESOP's order due to an over subscription by Eligible Account Holders, the Company may issue authorized but unissued shares of Common Stock to the ESOP in an amount sufficient to fill the ESOP's order, subject to approval of the OTS, and/or the ESOP may purchase such shares in the open market, if permitted. In the event that additional shares of Common Stock are issued to the ESOP to fill its order, stockholders would experience dilution of their ownership interests (by up to 7.41% at the maximum of the Offering Price Range, assuming the ESOP purchased no shares in the Offerings) and per share stockholders' equity and per share net earnings would decrease as a result of an increase in the number of outstanding shares of Common Stock. See "Management of the Bank - Stock Benefit Plans - Employee Stock Ownership Plan" and "Risk Factors - Possible Dilutive Effective of Issuance of Additional Shares." The foregoing plans are in addition to a Stock Option Plan, a Directors' Stock Option Plan and a Management Recognition Plan which were adopted by the Association in connection with the MHC Reorganization and subsequently approved by the stockholders of the Association. These plans will continue in existence after the Conversion and Reorganization as plans of the Company. In addition, pursuant to the terms of the 1995 Stock Incentive Plan and 1995 Directors' Stock Option Plan all outstanding stock options may be exercised in whole or in part immediately prior to consummation of the Conversion and Reorganization. See "Management of the Association Benefit Plans" and "The Conversion and Reorganization - Effects of the Conversion and Reorganization - Effect on Existing Compensation Plans." In addition to the foregoing plans, in connection with the Conversion and Reorganization, the Company and the Association may seek to enter into employment agreements with Earl F. Elliott, the current President and Chief Executive Officer of the Company and Chairman and Chief Executive Officer of the Association, and J. Lee Walden, the current Executive Vice President and Chief Financial Officer of the Company and President and Chief Financial Officer of the Association. If such employment agreements had been in effect as of December 31, 1996 and Messrs. Elliott and Walden were terminated as of such date in connection with a "change in control" of the Company, as defined in the agreements, Messrs. Elliott and Walden could be entitled to receive approximately $240,000 and $163,000 in severance pay, respectively. See "Management of the Association - Employment Agreements." Use of Proceeds Net proceeds from the sale of the Conversion Stock are estimated to be between $7.2 million and $9.8 million, depending on the number of shares sold and the expenses of the Conversion and Reorganization. See "Pro Forma Data." The Company plans to contribute to the Association 50% of the net proceeds from the Offerings and retain the remainder of the net proceeds. The Company intends to use a portion of the net proceeds retained by it to make a loan directly to the ESOP to enable the ESOP to purchase 8.0% of the Common Stock to be outstanding upon completion of the Conversion and Reorganization. The amount of the loan is expected to be between $.9 and $1.2 million at the minimum and maximum of the Offering Price Range, respectively. It is anticipated that the loan to the ESOP will have a term of not less than ten years and a fixed rate of interest at the prime rate as of the date of the loan. See "Management of the Association - Benefit Plans - Employee Stock Ownership Plan." The remaining net proceeds will be initially used to invest primarily in short-term interest-bearing deposits and marketable securities. Funds retained by the Company may be used to support the future expansion of operations or diversification into other banking-related businesses and for other business or investment purposes, including the acquisition of other financial institutions and/or branch offices, although there are no current plans, arrangements, understandings or agreements regarding such expansion, diversification or acquisitions. In addition, subject to applicable limitations, such funds also may be used in the future to repurchase shares of Common Stock although the Company currently has no intention of effecting any such transactions following consummation of the Conversion and Reorganization. See "The Conversion and Reorganization - Certain Restrictions on Purchases or Transfers of Shares after the Conversion and Reorganization." Funds contributed to the Association from the Company will be used for general business purposes. The proceeds will be used to support the Association's lending and investment activities and thereby enhance the Association's capabilities to serve the borrowing and other financial needs of the communities it serves. The Association plans to initially use the proceeds to invest primarily in short-term interest-bearing deposits and marketable securities. See "Use of Proceeds." Dividend Policy Following consummation of the Conversion and Reorganization the Board of Directors of the Company intends to declare cash dividends on the Common Stock at an initial quarterly rate equal to $0.10 per share divided by the final Exchange Ratio, commencing with the first full quarter following consummation of the Conversion and Reorganization. Based upon the Valuation Price Range, the Exchange Ratio is expected to be 1.1989, 1.4105, 1.6221 and 1.8654 at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, respectively, resulting in an initial quarterly dividend rate of $.083, $.071, $.062 and $.054 per share, respectively, following consummation of the Conversion and Reorganization. Declarations of dividends by the Company's Board of Directors will depend upon a number of factors, including the amount of the net proceeds from the Offerings retained by the Company, investment opportunities available to the Company or the Association, capital requirements, regulatory limitations, the Company's and the Association's financial condition and results of operations, tax considerations and general economic conditions. Consequently, there can be no assurance that dividends will in fact be paid on the Common Stock or that, if paid, such dividends will not be reduced or eliminated in future periods. The Association intends to continue to pay regular quarterly dividends through either the date of consummation of the Conversion and Reorganization (on a pro rata basis) or the end of the fiscal quarter during which the consummation of the Conversion and Reorganization occurs. See "Dividend Policy." Dissenters' Rights of Appraisal Holders of Association Common Stock are entitled to appraisal rights under Section 552.14 of the OTS' regulations as a result of the merger of the Mutual Holding Company (following its conversion to a federal interim stock savings institution) with and into the Association and the merger of the Association with and into Interim, with the Association to be the surviving entity in both mergers. Any such stockholder who wishes to exercise such appraisal rights should review carefully the discussion of such rights in the Association's proxy statement, including Appendix A thereto, because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under Section 552.14. Pursuant to the Plan of Conversion, consummation of the Conversion and the Reorganization is conditioned upon holders of less than 10% of the outstanding Association Common Stock exercising appraisal rights, which condition may, in the sole discretion of the Primary Parties, be waived. See "The Conversion and Reorganization - Dissenters' Rights of Appraisal." Prospectus Delivery and Procedure for Purchasing Shares To ensure that each purchaser receives a prospectus at least 48 hours prior to Expiration Date in accordance with Rule 15c2-8 under the Exchange Act, no prospectus will be mailed any later than five days prior to such date or hand delivered any later than two days prior to such date. Execution of the order form will receipt or delivery in accordance with Rule 15c2-8. Order forms will be distributed only with a prospectus. The Primary Parties will only accept for processing orders submitted on original order forms with an executed certification. Photocopies or facsimile copies of order forms or the form of certification will not be accepted. Payment by cash, check, money order, bank draft or debit authorization to an existing account at the Association must accompany the order form. No wire transfers will be accepted. See "The Conversion and Reorganization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037417_steel_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037417_steel_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a020e013173819439b7777c87b70ac3b801caf1e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037417_steel_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Unless otherwise indicated, all information set forth herein (i) assumes an initial public offering price of $5.25 per share, (ii) assumes no exercise of the Underwriters' Over-Allotment Option, and (iii) reflects a 2-for-1 split of Common Stock, effected on March 31, 1997, and an amendment to the Company's Certificate of Incorporation filed with the Secretary of State of Delaware on April 21, 1997, increasing the number of authorized shares of Common Stock and creating a new class of preferred stock. See "Description of Capital Stock." The Company SysComm International Corporation ("SysComm" or the "Company"), through its wholly owned subsidiary, Information Technology Services, Inc. ("InfoTech"), is a leading systems integrator and reseller of computer hardware, operating software and networking applications to Fortune 1000 companies. The Company provides its customers with cost efficient, comprehensive solutions that satisfy their information technology requirements. Since 1985, the Company's primary focus has been on the sale, integration and servicing of International Business Machine Corporation ("IBM") products including personal computers, mid-range systems based on the IBM RS/6000, servers, and the IBM AS/400. In addition, the Company integrates, resells and services products from manufacturers such as Hewlett Packard, Compaq, Apple, Microsoft, 3Com, Bay Networks and Novell. In March 1997, the Company commenced the assembly and sale of IBM PCs through IBM's Authorized Assembler Program (the "AAP") providing the Company with greater flexibility in meeting its customers' needs. The Company believes that this relationship with IBM will provide it with the opportunity to enhance its responsiveness to client specific requests and orders, and improve its operating efficiencies. A significant percentage of the Company's revenues are derived from sales to customers in the financial and investment communities. However, the Company's customer base also includes mid-size retailers, manufacturers, distributors, colleges, universities and state and local government agencies in the Northeastern United States. The Company's customers include: <TABLE> <S> <C> <C> Astra Pharmaceutical CPC International Merrill Lynch Boston College Deutsche Bank Northeastern University Boston Financial Group Fidelity Investments Oxford Healthcare Brown Brothers Harriman The Gillette Company Pepsico Cadbury-Motts GTE Services Corp. The Pershing Division of Carrier Corporation Harvard University Donaldson Lufkin & The Chase Manhattan Bank Healthsource Jenrette Citibank International Business Machines Smith Barney The City University of Corporation The Stop & Shop New York J.P. Morgan Companies </TABLE> The Company intends to pursue new business by focusing on the sale and integration of high-end systems in financial, commercial, governmental, healthcare and educational areas. To this end, the Company has the following growth strategies: (i) targeting vertical markets, (ii) offering a complete line of IBM products, including IBM mainframe systems, (iii) expanding its role as an IBM Premier Business Partner, (iv) enhancing competitiveness through the IBM PC Authorized Assembler Program, and (v) expanding into other geographic regions through selected acquisitions and strategic alliances. The Company currently has five operating locations: it operates a distribution center, a computer configuration, integration and PC assembly facility and technical support service center from its Hauppauge, New York headquarters and conducts its sales operations from its headquarters and offices located in New York City, New York, Waltham, Massachusetts, Marlton, New Jersey, and North Haven, Connecticut. The Company's principal executive offices are located at 275 Marcus Boulevard, Hauppauge, New York 11788 and its telephone number is (516) 273-3200. IBM, AS/400, RS/6000, PC Server System/390, OS/2, Netfinity, Eduquest, and Lotus Notes are registered trademarks of International Business Machines Corporation. All other products are trademarks of their respective companies. The Offering Common Stock Offered ... 1,500,000 shares Common Stock Outstanding Before Offering (1) ... 3,170,540 shares Common Stock Outstanding After Offering (1)............ 4,670,540 shares Use of Proceeds ......... The Company intends to use the net proceeds of the Offering (i) to establish and operate an IBM PC assembly facility under IBM's Authorized Assembler Program, including the lease or purchase of a building, (ii) to reduce the Company's interest bearing obligations to IBM Credit Corporation, (iii) for general corporate purposes including working capital, and (iv) for acquisitions. See "Use of Proceeds." Proposed NASDAQ National Market Symbol............................................................... Risk Factors ............ The Offering involves certain risks and immediate substantial dilution. See "Risk Factors" and "Dilution." - ------------ (1) Excludes 1,000,000 shares of Common Stock reserved for issuance under the Company's 1988 Stock Option Plan (of which 498,000 shares of Common Stock are issuable upon exercise of the stock options outstanding as of the date of this Prospectus) and 150,000 shares of Common Stock issuable upon exercise of the Representative's Warrants. See "Management -- Stock Option Plan" and "Underwriting." Summary Consolidated Financial Information The Summary Consolidated Financial Information set forth below was derived from the financial statements of the Company and should be read in conjunction with the financial statements and related notes thereto appearing elsewhere in this Prospectus and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> <CAPTION> Six Months Ended March 31, Year Ended September 30, (unaudited) ------------------------------------------------ ------------------------------ 1994(1) 1995 1996 1996 1997 -------------- -------------- -------------- -------------- ------------- <S> <C> <C> <C> <C> <C> Consolidated Statement of Operations Data: Net sales ........................... $ 45,459,575 $ 55,195,507 $ 98,446,698 $ 38,042,823 $39,158,875 Cost of sales ........................ 40,796,425 49,441,544 89,025,331 34,159,227 33,890,028 ------------ ------------ ------------ ------------ ------------ Gross profit ........................ 4,663,150 5,753,963 9,421,367 3,883,596 5,268,847 Selling and administrative expenses . 3,406,316 4,079,184 5,028,812 2,382,727 2,957,149 ------------ ------------ ------------ ------------ ------------ Income from operations ............... 1,256,834 1,674,779 4,392,555 1,500,869 2,311,698 Interest expense (net) ............ (713,778) (1,207,316) (1,390,867) (633,193) (551,907) Other income ........................ 39,630 37,126 63,151 7,964 57,324 Realized loss on available-for-sale securities ........................ 0 0 (1,406,250) 0 0 ------------ ------------ ------------ ------------ ------------ Income from continuing operations before income taxes ............... 582,686 504,589 1,658,589 875,640 1,817,115 Provision for income taxes ......... 242,889 223,769 735,886 371,000 766,800 ------------ ------------ ------------ ------------ ------------ Income from continuing operations . 339,797 280,820 922,703 504,640 1,050,315 Discontinued operations ............ 1,485,698 -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net income ........................... $ 1,825,495 $ 280,820 $ 922,703 $ 504,640 $ 1,050,315 ============ ============ ============ ============ ============ Per Share Data: Income from continuing operations ........................ $ .10 $ .08 $ .25 $ .14 $ .29 Income from discontinued operations ........................ $ .43 -- -- -- -- Weighted average number of shares outstanding ........................ 3,448,900 3,614,040 3,677,290 3,686,040 3,668,540 </TABLE> March 31, 1997 ------------------------------- (unaudited) Actual As Adjusted (2) ------------ ---------------- Consolidated Balance Sheet Data: Working capital .................. $4,217,120 $10,788,638 Total assets ..................... 24,543,969 24,543,969 Short term debt .................. 6,907,940 336,422 Long term debt .................. 85,156 85,156 Stockholders' equity ............ 5,048,992 11,620,510 - ------------ (1) Includes sales of the Company's subsidiary, Romel Technology, Inc. (d/b/a MSG) of $4,127,768, which was sold in November 1993. The loss from this subsidiary was de minimis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 11 to Consolidated Financial Statements. (2) As adjusted to give effect to the sale of 1,500,000 shares of Common Stock and the initial application of the net proceeds. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037453_stratesec_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037453_stratesec_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4ba5e24a40495ec498d36fdd9417d3afbb29512f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037453_stratesec_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Securacom is a single-source provider of comprehensive technology-based security solutions for medium and large commercial and government facilities in the United States and abroad. The Company offers a broad range of services, consisting of: (i) consulting and planning; (ii) engineering and design; (iii) systems integration; and (iv) maintenance and technical support. The solutions provided by the Company include integrated security systems comprised of a command center managing one or more subsystems and components, primarily access control systems, intrusion detection systems, closed circuit television systems, critical condition monitoring systems and fire detection systems. The Company is not aware of any other company providing this comprehensive range of services on a national basis. The Company serves more than 40 clients including airports, hospitals, prisons, corporations, utilities, universities and government facilities. These clients include Washington Dulles International Airport, Hewlett-Packard Company, EDS, United Airlines, Gillette Corporation, MCI Communications Corporation and New York City's World Trade Center. The Company believes that the multi-billion dollar market for technology-based security solutions is growing rapidly due to the following factors: (i) many existing security systems are becoming technologically obsolete and inadequate or consist of internally incompatible subsystems, creating a need for re-engineering, upgrading and integration; (ii) technological advancements provide the opportunity to increase the scope and cost-efficiency of many routine security tasks, such as the replacement of guards with electronic surveillance; (iii) the proliferation of computers and advanced communications systems has created a new and growing security need for clients to prevent the misuse of proprietary information and other intellectual property; and (iv) a number of highly publicized acts of terrorism have led to legislation and corporate policies regarding the increased need for physical safety. The security industry is highly fragmented and consists of a broad array of equipment manufacturers and distributors, consultants and engineers and systems integrators, each of which provides only a portion of the services required to deliver an integrated security solution. As a result, clients are frequently required to coordinate the planning, design and implementation of a project through multiple service providers and vendors. This approach causes client frustration with project delays, cost inefficiencies, lack of vendor accountability and incompatible subsystems. Securacom believes that as a single-source provider of security solutions it can expedite project completion and reduce its clients' manpower requirements and aggregate project costs. In addition, the Company has the flexibility to respond to each of its client's particular needs, whether the client requires only one of the services offered by the Company, various services on an ongoing basis, or a comprehensive turnkey security solution using all of the Company's areas of expertise and its national network of offices. Securacom's objective is to become the leading provider of comprehensive, high-value-added, technology-based security solutions for medium and large commercial and government facilities in the United States and abroad. The Company's strategy focuses on developing long-term client relationships. These relationships allow the Company to integrate itself into clients' decision-making processes by identifying solutions for new security systems upgrades and other ongoing security needs. Additional key elements of the Company's strategy include: (i) capitalizing on its position as a national single-source provider of security solutions; (ii) continuing to expand its client base in targeted industries; (iii) maintaining its high level of technological sophistication; (iv) enhancing its ability to pursue bidding opportunities on larger projects; and (v) continuing to focus on providing high-value-added services. The Company began operations in 1987 in association with a large privately held engineering firm. In 1992, the Company became independent from the engineering firm in conjunction with a capital infusion from a private investment group. At the same time, the Company hired new management with extensive experience Securacom, Incorporated is a fully integrated single source security company. The Company provides consulting and planning, engineering and design, systems integration, and maintenance and technical support services to commercial and government clients worldwide. Securacom's capabilities enable it to provide clients with single source turn-key solutions for medium and large scale complex security projects. Securacom has completed security projects for airports, corporations, utilities, prisons, universities, and federal, state and local governments. <TABLE> <S> <C> [Picture of New York City's [Picture of Tennessee Valley World Trade Center] Authority Facility] Federal, State and Local Utilities Government </TABLE> in the security industry. Since then, the Company has devoted a substantial amount of resources and capital to enhancing its technical capability and services offerings, hiring and training key personnel and expanding its client base. As part of this effort, the Company has opened four regional offices in the United States and one international office in Moscow, Russia. Securacom believes that it now has in place the infrastructure and capabilities to substantially increase revenues and profitability. As a result of these initiatives, revenues have grown from $2.4 million in 1994 to $3.2 million in 1995 and $5.8 million in 1996. The Company achieved its first two profitable quarters of operations during the six months ended June 30, 1997, with net income of $0.4 million on revenues of $7.2 million. The Company's headquarters are located at 50 Tice Boulevard, Woodcliff Lake, New Jersey 07675, and its telephone number is (201) 930-9500. RECENT DEVELOPMENTS During the first six months of 1997, the Company contracted to provide services to several new clients. The Company signed an agreement to provide a broad range of services in connection with the upgrading of Amtrak's access control systems at eight facilities in the northeast and California. Additionally, it contracted to prepare and completed a security master plan for Xerox Corporation's manufacturing and engineering facilities in Rochester, New York. The Company also finalized an agreement to provide a comprehensive access control system upgrade at the headquarters of Rostelecom, the primary Russian long distance telephone service provider. This project expands Securacom's Moscow client base which also includes Moscow Local Telephone System and US WEST. In April, the Company signed a joint venture agreement with Ahmad N. AlBinali & Sons Co., a large Saudi Arabian engineering and construction company, to develop and conduct business in the Kingdom of Saudi Arabia. <TABLE> <S> <C> [Picture of NationsBank [Picture of Processing Headquarters] Facility] Corporations Process and Manufacturing Facilities </TABLE> [Picture of Washington Dulles International Airport] Airports THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 1,400,000 shares Common Stock offered by the Selling Stockholder................................ 200,000 shares Common Stock outstanding after the Offering................................... 5,834,140 shares(1) Use of Proceeds to the Company............... To repay certain indebtedness, to expand and upgrade the Company's management information systems, to further develop and document the Company's command center integration software and for working capital and general corporate purposes. See "Use of Proceeds." Proposed American Stock Exchange symbol...... SFT </TABLE> - --------------- (1) Based upon the number of shares outstanding as of August 31, 1997. Does not include 1,557,962 shares issuable upon the exercise of warrants outstanding as of August 31, 1997, of which warrants to purchase 1,044,626 shares were exercisable as of that date. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------- ---------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------ <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Earned revenues................................... $ 2,395 $ 3,177 $ 5,824 $ 1,931 $7,240 Gross profit................................. 809 997 1,408 685 2,030 Selling, general and administrative expenses...... 2,670 2,871 3,701 1,941 1,381 Net income (loss)................................. (1,888) (1,768) (2,513) (1,331) 429 Net income (loss) per share....................... $ (0.54) $ (0.45) $ (0.58) $ (0.31) $ 0.09 Weighted average number of common shares outstanding..................................... 3,493 3,909 4,368 4,256 4,532 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------- AS ACTUAL ADJUSTED(1) ------- ------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................................... $ 125 $ 3,507 Working capital............................................................. 838 4,219 Total assets................................................................ 7,354 12,735 Long-term debt, less current maturities..................................... 3,410 210 Total stockholders' equity (deficiency)..................................... (1,105) 7,477 </TABLE> - --------------- (1) As adjusted to give effect to the sale of Common Stock in the Offering by the Company at an assumed offering price of $7.50 and the application of the net proceeds therefrom. Does not give effect to the potential issuance of 1,557,962 shares issuable upon the exercise of warrants outstanding as of August 31, 1997, of which warrants to purchase 1,044,626 shares were exercisable as of that date.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037900_stc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037900_stc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..96838754de8d080fe44113de4f8b4c1cd9a95a1b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037900_stc_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary should be read in conjunction with the more detailed information, financial statements and notes thereto appearing elsewhere in this Prospectus. For additional information relating to certain defined terms and financial reporting periods used herein, as well as the sources for the market and other industry data contained herein, see "Certain Definitions and Market and Industry Data." Unless the context otherwise requires, references herein to the New Notes following the consummation of the Exchange Offer assume that all outstanding Old Notes are tendered and exchanged for New Notes in the Exchange Offer. THE COMPANY The Company currently owns and operates four network-affiliated television broadcast stations located in four distinct and geographically diverse markets, ranging in size from the 62nd to the 139th largest DMAs in the United States. Three of the Stations are network affiliates of NBC (one of which is also a secondary affiliate of ABC) and one Station is a network affiliate of CBS. The Company was recently organized by management and Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") with the goal of becoming a leading owner and operator of network-affiliated television broadcast stations, serving select "middle-to-small markets" (i.e., those DMAs ranked from approximately 50 to 150 by Nielsen). Management believes that these markets provide greater opportunity for the Company to successfully apply its business strategy of increasing revenues while controlling operating costs and other expenses. Commercial stations in the Company's target markets generally face limited competition from other over-the-air broadcasters for audience, syndicated programming and advertising revenues. For the year ended December 31, 1996 (throughout which the Stations were operated by the Company's current management), the Stations' net revenues and broadcast cash flow increased 14.1% and 78.6%, respectively, from $32.9 million and $8.6 million, respectively, in 1995 to $37.6 million and $15.4 million, respectively, in 1996. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." In 1996, none of the Stations accounted for more than 30.0% of the Stations' aggregate net revenues. The Company is actively pursuing additional acquisitions of television broadcast stations in other middle-to-small markets that it believes will provide similar opportunities to increase broadcast cash flow. The four markets in which the Company currently operates offer geographic diversity that reduces the impact on the Company of changes in respective market economies and provide favorable competitive operating environments. Three of these markets range from the 62nd to the 70th largest markets in the United States based on reported market revenues. In the Wheeling, West Virginia-Steubenville, Ohio DMA, the Company's Station is one of only two commercial television broadcast stations and in the Flint-Saginaw-Bay City, Michigan and Rochester, New York DMAs, the Company's Stations are one of only four commercial television broadcast stations. In the six station Monterey-Salinas, California DMA, the Company's Station effectively has the only over-the-air VHF signal capable of reaching a majority of the households in this market due to the natural barrier formed by the mountains surrounding the Monterey Bay, which tends to interfere with the competing VHF station located in San Jose, California. The Company's Stations are the number one ranked station in the Monterey-Salinas and Wheeling-Steubenville DMAs and the number three ranked station in the Flint-Saginaw-Bay City and Rochester DMAs. The Company believes that the Stations are well positioned to achieve long-term growth in audience share and revenue share because of (i) the limited competition for viewers from other over-the-air television broadcasters in these markets, (ii) the strength of the Company's management and (iii) the Stations' favorable and/or improving rankings within their DMAs. In addition, management believes that the limited number of other television broadcast stations in these markets enables the Company to purchase syndicated programming at favorable rates. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED AUGUST 13, 1997 PROSPECTUS OFFER FOR ALL OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE 2007 IN EXCHANGE FOR 11% SENIOR SUBORDINATED NOTES DUE 2007 OF STC BROADCASTING, INC. STC Broadcasting, Inc. ("STC" or the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange $1,000 principal amount of registered 11% Senior Subordinated Notes due 2007 (the "New Notes") issued by the Company for each $1,000 principal amount of unregistered 11% Senior Subordinated Notes due 2007 (the "Old Notes") issued by the Company, of which an aggregate principal amount of $100,000,000 is outstanding. The Company will issue up to $100,000,000 aggregate principal amount of New Notes in the Exchange Offer. The form and terms of the New Notes are identical to the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and will not bear any legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Exchange Offer is being made in order to satisfy certain contractual obligations of the Company. See "The Exchange Offer" and "Description of New Notes." The New Notes and the Old Notes are sometimes collectively referred to herein as the "Notes." Interest on the New Notes will be payable semiannually on March 15 and September 15 of each year, commencing on September 15, 1997. The New Notes will mature on March 15, 2007. Except as described below, the Company may not redeem the New Notes prior to March 15, 2002. On and after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the redemption date. In addition, at any time and from time to time on or prior to March 15, 2000, the Company may, subject to certain requirements, redeem up to 25% of the aggregate principal amount of the New Notes with the net cash proceeds from one or more Public Equity Offerings (as defined) at a redemption price equal to 111% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date, provided that after any such redemption, at least 75% of the aggregate principal amount of the New Notes originally issued remain outstanding immediately after each such redemption. The New Notes will not be subject to any sinking fund requirements. Upon a Change of Control (as defined), (i) the Company will have the option, at any time on or prior to March 15, 2002, to redeem the New Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest plus the Applicable Premium (as defined) and (ii) if the New Notes are not redeemed or if such Change of Control occurs after March 15, 2002, the Company will be required to offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the repurchase date. See "Description of New Notes." The New Notes will be unsecured and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The New Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and will rank senior to all other subordinated indebtedness of the Company. The Indenture under which the New Notes will be issued (the "Indenture") will permit the Company and its Subsidiaries (as defined) to incur additional indebtedness, including Senior Indebtedness, subject to certain limitations. See "Description of Notes." The net proceeds from the sale of the Old Notes were used by the Company to repay outstanding indebtedness incurred in connection with the recent acquisition of certain commercial television broadcast station assets (the "Acquisition"). See "The Acquisition" and "Use of Proceeds." As of June 30, 1997, on a pro forma basis after giving effect to the Acquisition, the Original Offering (as defined) and the proposed acquisitions of WJAC (as defined) and ARTC (as defined), there would have been approximately $29.3 million of Senior Indebtedness outstanding, and the Company would have had no Senior Subordinated Indebtedness outstanding other than the New Notes and no indebtedness subordinated to the New Notes outstanding. See "Description of New Notes -- Ranking and Subordination." - -------------------------------------------------------------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES. - -------------------------------------------------------------------------------- The Company will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 1997, unless extended (as so extended, the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. Any broker-dealer that resells New Notes received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal accompanying this Prospectus (the "Letter of Transmittal") states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed, for a period of 90 days after the Expiration Date, to make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." No public market existed for the Old Notes before the Exchange Offer. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system, and no active public market for the New Notes is currently anticipated. The Company will pay all the expenses incident to the Exchange Offer. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1997. CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA As used in this Prospectus, unless the context otherwise requires, (i) the "Company" or "STC" refers to STC Broadcasting, Inc. and its subsidiaries; (ii) the "Stations" collectively refer to WEYI-TV, Saginaw, Michigan ("WEYI"), WROC-TV, Rochester, New York ("WROC"), KSBW-TV, Salinas, California ("KSBW"), and WTOV-TV, Steubenville, Ohio ("WTOV"); (iii) "Holdings" refers to Sunrise Television Corp., which owns all of the capital stock of the Company; and (iv) "SBP" refers to Smith Broadcasting Partners, L.P. and "SBG" refers to Smith Broadcasting Group, Inc., each an affiliate of Robert N. Smith. SBP and SBG had interests in the Stations prior to the Acquisition and continue to have interests through their indirect ownership in Holdings. In addition, as used in this Prospectus, references to the "Company" in the context of WTOV refers to the Company's 100% non-voting and 99% equity interest in Smith Acquisition Company ("SAC"), which owns and operates WTOV. See "The Acquisition." The terms "broadcast cash flow" and "operating cash flow" are referred to in various places in this Prospectus. "Broadcast cash flow" is defined as station operating income (loss) plus depreciation of property and equipment, amortization of intangible assets and amortization of program rights, minus payments on program rights. "Operating cash flow" is defined as station operating income (loss) plus depreciation of property and equipment, amortization of intangible assets and amortization of program rights, minus payments on program rights and corporate expenses. Although broadcast cash flow and operating cash flow are not measures of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that broadcast cash flow is useful to a prospective investor because it is a measure widely used in the broadcast industry to evaluate a television broadcast company's operating performance and that operating cash flow is useful to a prospective investor because it is widely used in the broadcast industry to evaluate a television broadcast company's ability to service debt. Neither broadcast cash flow nor operating cash flow should be considered in isolation or as a substitute for net income (loss), cash flows from operating activities and other income and cash flow statement data prepared in accordance with GAAP or as a measure of liquidity or profitability. These terms may not be comparable to other similarly titled items for other companies. Designated market area ("DMA") rankings are from Investing In Television, May 1997, BIA Publications, Inc. ("BIA"). There are 211 generally-recognized television "markets" or DMAs in the United States, which are ranked in size according to various factors based upon actual or potential audience. Unless otherwise indicated herein, (i) market revenue, market revenue share, projected advertising revenue growth and station revenue share data have been obtained from Investing in Television 1993, 1994, 1995 and 1996, BIA; (ii) television household data has been obtained from the Nielsen Station Index for November of the appropriate year as estimated by the A.C. Nielsen Company ("Nielsen"); (iii) audience share and audience rankings, except where specifically stated to the contrary, have been derived from Nielsen estimates (November of the appropriate year) of the percentage of persons in the DMA tuned into the relevant station from sign-on to sign-off (Sunday to Saturday, 6:00 a.m. to 2:00 a.m.); (iv) general market economic data has been obtained from BIA and the chambers of commerce in each Station's market; (v) the term "station" or "commercial station" means a television broadcast station and does not include public television stations, cable stations or networks (e.g., CNN, TBS or ESPN), or stations that do not meet the minimum Nielsen reporting standards (i.e., weekly cumulative audience share of at least 2.5% for Sunday to Saturday, 7:00 a.m. to 1:00 a.m.); and (vi) the term "independent" describes a commercial television station that is not affiliated with the ABC, CBS, NBC or Fox television networks. The year ended December 31, 1996, when used with reference to financial information of the Stations, refers to the period that the Stations were owned by Jupiter/Smith TV Holdings, L.P. ("Jupiter") and operated by SBP during 1996, which period began on January 3 with respect to WEYI, WROC and WTOV and January 17 with respect to KSBW. Management does not consider the results of operations of the Stations from January 1, 1996 to the dates the Stations were acquired to be significant to the combined results of operations of the Stations for the year ended December 31, 1996. The following table summarizes certain information regarding each Station and its respective DMA: <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1996 PRIMARY/ NUMBER OF ----------------------------- MARKET SECONDARY COMMERCIAL STATION STATION NET % OF STATION/CHANNEL: DMA REVENUE NETWORK TV STATIONS RANK IN AUDIENCE REVENUES(1) TOTAL NET DMA RANK RANK AFFILIATION IN DMA DMA SHARE (IN THOUSANDS) REVENUES ---------------- ---- ------- ----------- ----------- ------- -------- -------------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> WEYI/25: Flint-Saginaw-Bay City, MI.... 62 70 NBC 4 3 13% $ 8,061 21.5% WROC/8: Rochester, NY................. 74 62 CBS 4 3 18% $10,994 29.3% KSBW/8: Monterey-Salinas, CA.......... 122 69 NBC 6(2) 1 22% $10,486 27.9% WTOV/9: Wheeling, WV- Steubenville, OH.......................... 139 160 NBC/ABC 2 1 22% $ 8,018 21.3% </TABLE> - --------------- (1) Includes trade and barter revenues and net of agency and sales representative commissions. (2) The Company's Station effectively has the only over-the-air VHF signal capable of reaching a majority of the households in this market. In addition, of the six stations in this DMA, two are Spanish-language stations. See "Business -- The Stations -- KSBW: Monterey-Salinas, California." The Company was incorporated on November 1, 1996 and is a wholly-owned subsidiary of Holdings. The Company acquired the Stations on February 28, 1997 through the Acquisition. SBP, an affiliate of Robert N. Smith (the President of Holdings and the Chief Executive Officer and a Director of Holdings and the Company), had an ownership interest in and managed the Stations prior to the Acquisition. Mr. Smith is the majority owner of SBG, which is a partner in SBP. See "The Acquisition" and "Certain Transactions." BUSINESS STRATEGY The Company's business strategy is to acquire and operate television broadcast stations and maximize operating cash flow through both revenue growth and improved cost control. The Company believes that revenue growth and cost control may be achieved simultaneously, principally because many of the costs associated with operating a television station are fixed. The Company's management team has successfully implemented this strategy with other television broadcast stations as well as with the Stations. Key components of the Company's business strategy include: Controlling Costs. The Company seeks to selectively reduce costs at acquired stations without adversely affecting growth. Since management assumed operations of the Stations in January 1996, broadcast cash flow margins at the Stations increased from 26.2% for 1995 to 41.0% for 1996, in part due to an approximately $2.2 million reduction in station operating expenses. Broadcast cash flow margins at each of the Stations increased from 1995 to 1996, including significant improvements at WEYI (from 13.0% for 1995 to 45.5% for 1996) and WTOV (from 33.4% for 1995 to 49.0% for 1996). This financial success resulted in part from management's aggressive cost saving initiatives such as the elimination of unnecessary sales expenses. After acquiring a station, management implements a cost control strategy stressing the elimination of unnecessary costs, budgeting, accountability and disciplined credit and collection procedures. Management believes that it has created an operating structure that can profitably accommodate revenue growth. See "Certain Transactions." Intensifying Sales Efforts. The Company implements an aggressive approach to sales and marketing designed to increase market revenue share. Management believes that increases in revenue share are not necessarily dependent on increases in audience share. Since management assumed operations of the Stations in January 1996, net revenues of the Stations increased by 14.1% over 1995, due, in part, to newly implemented initiatives such as: (i) the restructuring and expansion of the local sales departments at three of the Stations (including the hiring of new sales management and experienced sales personnel with local market knowledge); (ii) the engagement of a new national sales representative firm for three of the Stations; (iii) the sponsorship and broadcasting of local events and activities, such as highly-rated high school football, offering local advertisers value-added community identity; and (iv) the institution of more efficient sales incentives. Building on Local News Franchises. The Company seeks to increase revenues by developing a highly-rated, well-differentiated local news product designed to build viewer loyalty and target specific demographic audiences that appeal to advertisers. Through the implementation of its strategy, management has succeeded in strengthening the top-rated local news positions of KSBW (four times the audience ratings of its nearest news competitor) and WTOV (winner of 10 Associated Press awards in Ohio and West Virginia) in their respective DMAs. At WROC and WEYI, the local news programming has been redirected through several initiatives including: (i) the hiring of a new news director at WROC with prior successful experience redirecting news operations (whose responsibilities also include overseeing the news programming at the other Stations); (ii) the hiring of new, experienced on-air talent (including new anchor teams); (iii) the creation of a new on-air appearance at WROC through improved set lighting, music, graphics and news room production equipment; (iv) the reprogramming of local newscasts to include more exclusive/investigative stories with greater audience appeal; and (v) the careful selection of top-rated syndicated programming that is broadcast just prior to and after the local news. Managing Program Selection. Each Station seeks to cost effectively purchase first-run and off-network syndicated programming to target specific demographic audiences. The Stations have been able to purchase syndicated programming at rates that management believes are attractive, in part because of the limited competition for such programming in the Stations' DMAs. WROC, WTOV and KSBW have contracts (expiring in 1999 and 2000) to air highly-rated programming, such as The Oprah Winfrey Show, Jeopardy and Wheel of Fortune. In September 1996, WEYI began airing programming such as Hard Copy and Entertainment Tonight, which had previously been broadcast by a local competitor. Additional highly-rated syndicated programming aired by the Stations includes Rosie O'Donnell on WROC (through September 1997), WTOV and KSBW (beginning in September 1997) and Seinfeld and Mad About You on WTOV. Positioning and Branding Stations. The Company seeks to increase revenues by developing and maintaining a unique, local "brand image" for each Station within its respective market with which viewers and advertisers can identify. This strategy integrates local news, programming, promotion and sales efforts for each Station based on its market's demographics, competition, dynamics and opportunities. By covering local events in more of the 12 Ohio Valley counties (including the Wheeling, West Virginia market) than its competitors, WTOV has been able to increase its profile with viewers and advertisers and differentiate itself from its local competitors. KSBW continues to reinforce its identity with viewers as the "Monterey-Salinas" television station with highly-recognized, established on-air talent, as well as comprehensive local news coverage and community involvement. WEYI has benefited from its network affiliation and positioned itself as mid-Michigan's NBC station. Pursuing Selective Acquisitions. The Company actively seeks to acquire underperforming television stations that management believes can benefit from its business strategy. Targeted stations generally have one or more of the following characteristics: (i) attractive acquisition terms, which may include station-for-station exchanges; (ii) opportunities to implement effective cost controls; (iii) opportunities for increased advertising revenue; (iv) opportunities for increased audience share through improved newscasts and programming; (v) limited competition from other television broadcasters; and (vi) market locations that possess attractive projected growth in advertising revenues. The Company generally targets network-affiliated stations, which typically have established audiences for their news, sports and entertainment programming, located in DMAs generally ranked from 50 to 150. Management believes that these stations can achieve operating margins comparable to larger market stations, yet may be purchased for lower multiples of cash flow. The Company believes that because of the limited competition from other television broadcast- ers in these middle-to-small markets, there is an opportunity for local stations to attract large local audience share and thus compete successfully for advertising revenues with alternative media, such as cable television, radio and newspapers. MANAGEMENT AND OWNERSHIP Management, together with Hicks Muse, organized the Company in order to pursue the business strategy described previously. Management and Hicks Muse have combined their efforts in the belief that the ability of the Company's management team to implement successfully its business strategy would be further enhanced by Hicks Muse's extensive experience in the capital markets as well as with other broadcasting ventures. The Company's management team, led by Robert N. Smith, President and Chief Executive Officer, has over 17 years of extensive and diverse experience in the television broadcast industry as well as experience in managing within the constraints of leveraged capital structures. Members of the Company's management team have worked together since 1986 and have successfully implemented an operating strategy similar to the Company's at other television stations. The Company's management team assumed the operations of and obtained an ownership interest in the Stations in January 1996 through their ownership of SBP. SBP is a partnership of which Robert N. Smith (through his majority ownership of SBG), Sandy DiPasquale, David A. Fitz and John M. Purcell are partners. During the year ended December 31, 1996, net revenues and broadcast cash flow of the Stations increased $4.7 million, or 14.1%, and $6.8 million, or 78.6%, respectively. The Company's senior executive officers and other Station general managers have invested approximately $1.9 million in the Company as part of the Acquisition. See "The Acquisition." Hicks Muse is a private investment firm with offices in Dallas, New York, St. Louis and Mexico City that specializes in leveraged acquisitions, recapitalizations and other principal investing activities. Hicks Muse (including its predecessor firm) has completed or has pending approximately 90 leveraged acquisitions having a combined transaction value of approximately $19 billion. All of the common stock of Holdings is owned by Sunrise Television Partners, L.P. (the "Partnership"), of which the ultimate managing general partner is Thomas O. Hicks, an affiliate of Hicks Muse. The Partnership, Hicks, Muse, Tate & Furst Equity Fund III, L.P. ("Fund III") and HM3 Coinvestors, L.P. ("HM3"), each an investment partnership controlled by Hicks Muse, invested approximately $75.0 million in the Company in connection with the Acquisition. Approximately $68.0 million was invested by Fund III and HM3, including their respective investments in the Partnership. See "The Acquisition" and "Certain Transactions." Hicks Muse has extensive experience using leveraged acquisition platforms in the radio broadcast and other industries. It is the founder of Chancellor Broadcasting Company ("Chancellor") and Capstar Broadcasting Partners, Inc. ("Capstar"), which have been active acquirors and successful operators of radio broadcast stations. Both Chancellor and Capstar employ acquisition and operating strategies similar to the strategy of the Company. When Hicks Muse formed Chancellor in 1994 and Capstar in 1996, neither company owned or operated any radio stations. On a pro forma basis assuming the consummation of certain pending transactions, Chancellor and Capstar would own and operate, or provide services to, approximately 103 and 120 radio stations, respectively. See "Risk Factors -- Potential Conflicts of Interest" and "Business -- Federal Regulation of Television Broadcasting -- Other Ownership Matters." RECENT DEVELOPMENT On May 8, 1997, the Company entered into an agreement and plan of merger (the "WJAC Merger Agreement") with WJAC, Incorporated ("WJAC"), pursuant to which WJAC will become a wholly owned subsidiary of the Company. WJAC, channel 6, is a VHF NBC-affiliated station serving the Johnstown/Altoona, Pennsylvania market, which is the 92nd largest DMA in the United States. The approximate purchase price will be $36.0 million including certain working capital, and the expected closing date will be early in the fourth quarter of 1997. The Company intends to finance this transaction with borrowings under the Revolving Credit Facility, cash on hand and additional equity financing. The WJAC Merger Agreement is subject to customary conditions and no assurances can be given as to whether, or on what terms, such transaction or such financings will be consummated by the Company. On July 8, 1997, the Company entered into a stock purchase agreement (the "ARTC Purchase Agreement") with Abilene Radio and Television Company ("ARTC"), pursuant to which the Company will acquire KRBC-TV ("KRBC") and KACB-TV ("KACB"). KRBC, channel 9, is a VHF NBC-affiliated station serving the Abilene, Texas market, which is the 160th largest DMA in the United States. KACB, channel 3, is a VHF NBC-affiliated station serving the San Angelo, Texas market, which is the 195th largest DMA in the United States. The approximate purchase price will be $12.0 million and the expected closing date will be the fourth quarter of 1997. The Company intends to finance this transaction with borrowings under the Revolving Credit Facility, cash on hand and additional equity financing. The ARTC Purchase Agreement is subject to customary conditions and no assurances can be given as to whether, or on what terms, such transaction or such financings will be consummated by the Company. The Company is in discussions with respect to other possible acquisitions of television broadcast stations, although no agreements have been reached. Consideration for such acquisitions would consist of available cash, plus the proceeds of future debt and/or equity financings. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." THE EXCHANGE OFFER The Exchange Offer......... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $100 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical in all material respects, except that the New Notes will be freely transferable by the holders thereof except as otherwise provided herein. See "Description of New Notes." Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, sold and otherwise transferred by any person receiving the New Notes, whether or not that person is the registered holder (other than any such holder or such other person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer -- Purpose and Effect." Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights Agreement................ The Old Notes were sold by the Company on March 25, 1997, in a private placement in reliance on Section 4(2) of the Securities Act and immediately resold by the initial purchasers thereof in reliance on Rule 144A under the Securities Act (the "Original Offering"). In connection with the Original Offering, the Company entered into an Exchange and Registration Rights Agreement with the initial purchasers of the Old Notes (the "Registration Rights Agreement") requiring the Company to make the Exchange Offer. See "The Exchange Offer -- Purpose and Effect." Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New York City time, , 1997, or such later date and time to which it is extended by the Company. Withdrawal................. The tender of the Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for ex- change for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes...... Interest on each New Note will accrue from the date of issuance of the Old Note for which the New Note is exchanged or from the date of the last periodic payment of interest on such Old Note, whichever is later. No additional interest will be paid on Old Notes tendered and accept for exchange. Conditions to the Exchange Offer.................... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes.................... Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. Persons holding the Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes if (i) because of any change in law or applicable interpretations of the staff of the Commission, the Company is not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 225 days of the Original Offering, (iii) any holder of Private Exchange Securities (as defined) requests within 60 days after the Exchange Offer, (iv) any applicable law or interpretations do not permit any holder of Old Notes to participate in the Exchange Offer, (v) any holder of Old Notes participates in the Exchange Offer and does not receive freely transferrable New Notes in exchange for Old Notes or (iv) the Company so elects. Acceptance of Old Notes and Delivery of New Notes.... The Company will accept for exchange any and all Old Notes which are properly tendered (and not withdrawn) in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Exchange Agent............. U.S. Trust Company of Texas, N.A., is serving as Exchange Agent (the "Exchange Agent") in connection with the Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering.... Old Notes that are not tendered or that are improperly tendered and not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. THE NEW NOTES Issuer..................... STC Broadcasting, Inc. Securities Offered......... $100,000,000 aggregate principal amount of 11% Senior Subordinated Notes due 2007 (the "New Notes"). Maturity................... March 15, 2007. Interest Payment Dates..... March 15 and September 15 of each year, commencing on September 15, 1997. Sinking Fund............... None. Optional Redemption........ Except as described below, the Company may not redeem the New Notes prior to March 15, 2002. On and after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the redemption date. In addition, at any time and from time to time on or prior to March 15, 2000, the Company may redeem up to 25% of the aggregate principal amount of the New Notes with the net cash proceeds of one or more Public Equity Offerings, at a redemption price equal to 111% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date; provided, however, that after any such redemption at least 75% of the aggregate principal amount of New Notes would remain outstanding immediately after each such redemption. See "Description of New Notes -- Optional Redemption." Change of Control.......... Upon the occurrence of a Change of Control, (i) the Company will have the option, at any time on or prior to March 15, 2002, to redeem the New Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest plus the Applicable Premium and (ii) if the Company does not so redeem the New Notes or if a Change of Control occurs after March 15, 2002, the Company will be required to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the repurchase date. See "Description of New Notes -- Change of Control." Ranking.................... The New Notes will be unsecured and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company, including indebtedness outstanding under the Credit Agreement. The New Notes will rank pari passu with any future Senior Subordinated Indebtedness of the Company and will rank senior to all other subordinated indebtedness of the Company. In addition, the New Notes will be effectively subordinated to all indebtedness of subsidiaries of the Company. As of June 30, 1997, on a pro forma basis after giving effect to the Acquisition, the Original Offering and the proposed acquisitions of WJAC and ARTC, there would have been approximately $29.3 million of Senior Indebtedness outstanding and the Company would have had no Senior Subordinated Indebtedness outstanding other than the New Notes and no indebtedness subordinated to the New Notes outstanding. See "Description of New Notes -- Ranking and Subordination." Restrictive Covenants...... The Indenture will limit, among other things, (i) the incurrence of additional indebtedness by the Company and its Subsidiaries, (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Subsidiaries, (iii) investments, (iv) the sale or swap of assets, (v) transactions with affiliates and (vi) consolidations, mergers and transfers of all or substantially all of the Company's assets. The Indenture also will prohibit certain restrictions on distributions from Subsidiaries. However, all of those limitations and prohibitions will be subject to a number of important qualifications and exceptions. See "Description of New Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037966_princeton_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037966_princeton_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..88ef5fcd9b91d21a818d49a1cf6c95bb6c68503c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037966_princeton_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, when used in this Prospectus, all references to the "Company" refer collectively to PSF Holdings, L.L.C. ("Holdings"), its wholly-owned subsidiary, Premium Standard Farms, Inc. ("PSF"), and PSF's wholly-owned subsidiary, Princeton Development Corp. ("Princeton"). Unless otherwise indicated, as it relates to the Company's operations, references herein to fiscal years or years and quarters are to the Company's fiscal year which, beginning with 1996, ends on the last Saturday in December and, prior to 1996, was December 31. The end of any such fiscal year of the Company, unless otherwise stated, shall be referred to herein as December 31. THE COMPANY The Company is a vertically integrated provider of pork and pork products to the wholesale and retail food markets in the United States and abroad. The Company believes that it is the largest vertically integrated pork producer in the Midwest and that it is one of the largest owners of sows in the United States. The Company utilizes modern, efficient building designs, sophisticated genetic methods, and strict control of animal health and diet to produce premium pork and pork products. As of March 31, 1997, the Company had approximately 89,000 sows in production operations located on over 37,000 acres in northwest Missouri and approximately 19,000 sows located on approximately 14,000 acres located in the Texas Panhandle area, with an aggregate capacity to produce approximately 1.9 million hogs annually. The Company's operations include hog production facilities, a pork processing facility capable of processing 7,000 hogs per day (on a single shift), feed mills, genetic improvement facilities, office and training facilities and additional production infrastructure. The Company's Milan, Missouri pork processing facility is among the most modern facilities of its kind, and is capable of processing all of the approximately 1.5 million hogs expected to be produced annually from the Company's Missouri operations. The Milan plant has the capacity to process approximately 2.6 million hogs annually on two shifts. The Company's products include fresh pork. The Company currently markets these products to a variety of wholesale and retail customers in the U.S. and abroad. The Company's fresh pork, which includes loins, tenderloins, hams, butts, picnics, bellies and other products are sold to supermarket chains, meat distributors, further processors, food service companies, and institutional food customers and the export market. The Company's operations also include the sale of live hogs, and the sale of processed pork products in the variety meat industry, the feed processing industry and the pet food industry. The Company's business strategy is to produce and market high quality pork and pork products in a cost-efficient manner by combining state-of-the-art hog production with strategically located modern pork processing facilities. The Company's highly automated processing operations have been designed to enable it to capitalize on the value of its hog supply by achieving benefits of vertical integration that generally are not available to its non-integrated competitors. For example, the integrated management of strategically located production and processing operations enables the Company to streamline logistics, transportation and production schedules to enhance asset utilization and reduce the Company's cost structure. Vertical integration also enables the Company to capture the incremental carcass value of its hogs rather than passing this value on to other processors. Founded in 1988, the Company expanded from 3,300 sows with the capacity to produce 73,600 hogs annually in 1990 to approximately 106,000 sows with the capacity to produce approximately 1.9 million hogs annually in 1996. During this period, the Company developed its entire Missouri operation, including its hog production facilities and the Milan, Missouri pork processing facility. In 1994, the Company began the development of a second pork production operation located in the Texas Panhandle (the "Texas Facilities"). The first phase in this expansion was the acquisition, in June 1994, of a 16,800 sow hog production operation from National Hog Farms of Texas Inc. ("Perico") and the High Plains Ranch, a 33,000 acre parcel of land near the Perico operations. The planned second phase of that expansion was to create a fully integrated production and processing operation in Texas through the construction of additional hog production facilities on the High Plains Ranch, a state-of-the-art processing plant (based on the Milan, Missouri facility), and the acquisition of an adjacent 7,000 acre ranch. The Company commenced the construction of additional hog production facilities on the High Plains Ranch and related infrastructure between June 1994 and May 1995. In May 1995, the Company indefinitely suspended expansion of the Texas Facilities. During 1995, the Company did not meet its operating plans as hog prices continued at historically low levels, feed costs increased, the deficiency of earnings to fixed charges increased, and the Company suspended construction of the Texas Facilities incurring substantial losses. As a result, the Company was unable to service certain of its debt obligations. As of June 30, 1996, the Company had $515 million of long-term debt and associated accrued interest outstanding. On July 2, 1996, the Company filed a pre-negotiated, consensual reorganization under Chapter 11 of the United States Bankruptcy Code (the "Reorganization") which was successfully completed on September 17, 1996 (the "Effective Date") and which enabled the Company to significantly improve its financial structure by restructuring its debt and converting a significant portion of its outstanding debt to equity. As of December 28, 1996, the Company had $153 million of long-term debt outstanding. The Company has initiated organizational and operational changes during and following the Reorganization which it believes, together with decreased debt service obligations and increased hog and pork prices, has resulted in the Company's improved performance since the Effective Date. The Company resumed work on the Texas Facilities in early 1997 through the planned investment of approximately $5 million in hog production facilities. Following the completion of such construction, the Company's Missouri and Texas operations will have approximately 110,000 sows in production operations. The Company intends to periodically evaluate the desirability of further expansion of its Texas operations based on the Company's production and processing needs, operating performance, capital requirements and growth strategy. PSF Finance L.P. ("Finance"), the predecessor to Holdings, was organized as a Delaware limited partnership. Premium Standard Farms, Inc. ("Farms"), the predecessor to PSF, was incorporated as a Missouri corporation and was consolidated as a unilaterally controlled special-purpose entity of Finance. Finance and Farms are sometimes collectively referred to herein as "Predecessor," and Holdings and PSF are sometimes collectively referred to herein as "Successor." The Successor commenced operations on September 17, 1996 by merging Finance into Holdings, which then transferred the net assets it received from Finance to PSF. Farms transferred all of its net assets to PSF in satisfaction of debt. The Predecessor was then dissolved and all Predecessor operations were continued by the Successor. References to the Company in this Prospectus for any period prior to the Reorganization (as defined) shall mean the Predecessor. Holdings is a limited liability company organized under the laws of the state of Delaware in 1996. PSF was incorporated in Delaware in 1996 and Princeton was incorporated in Delaware in 1992. The principal executive offices of each of Holdings, PSF and Princeton are located at 423 West 8th Street, Suite 200, Kansas City, Missouri 64105 and their telephone number is (816) 472-7675. THE OFFERINGS LLC Units offered by the Selling Securityholders....... 10,000,000 LLC Units LLC Units outstanding on the date of this Prospectus(1).... 10,000,000 LLC Units LLC Units issuable upon exercise of Warrants and to be resold by the Selling Securityholders............... 2,048,192 LLC Units Warrants offered by the Selling Securityholders....... 2,048,192 Warrants to acquire LLC Units Notes offered by the Selling Securityholders(2)............ $248,640,672 aggregate principal amount Use of Proceeds............... The Company will not receive any proceeds from the sale of Securities by the Selling Securityholders. Absence of Public Market...... There is currently no public market for the LLC Units or the Warrants and the Company does not presently intend to list any of the Securities on a stock exchange or quotation service. Bankers Trust Company currently makes a market in the Notes. However, Bankers Trust Company is not obligated to do so and any market-making activities with respect to the Notes may be discontinued at any time without notice. Accordingly, no assurance can be given as to the liquidity of the trading market for any of the Securities or that an active public market for the Notes will develop. See "Risk Factors -- Absence of Public Market." - ------------------------- (1) Does not include 620,000 LLC Units issuable upon the exercise of outstanding options. See "Management -- Executive Compensation" and "Management -- Management Option Plan." (2) Includes (i) $117,500,000 aggregate principal amount of Notes issued on the Effective Date, (ii) $6,390,699 aggregate principal amount of Secondary Notes (as defined) issued March 15, 1997 in payment of interest then due on the Notes, and (iii) $124,749,973 aggregate principal amount of Secondary Notes that may be issued after the date of this Prospectus in lieu of cash payments of interest on the Notes. THE NOTES Maturity Date................. September 17, 2003 Interest Payment Dates........ Interest on the Notes accrues from the date of issuance at 11% and is payable semi-annually on each March 15 and September 15, commencing March 15, 1997. Until the date the Term Loan (as defined) is paid in full whether upon maturity or by earlier prepayment ("the Term Loan Payout Date") or the maturity of any Note, at the option of PSF, interest is payable by the issuance of additional Notes (valued at 100% of the face amount thereof) in lieu of cash interest. After any such date, interest on the Notes is payable solely in cash. Optional Redemption........... The Notes are redeemable, in whole or in part, at the option of PSF during the twelve-month periods beginning on each September 1 for the years 1996 through 2001, at the redemption prices set forth herein plus accrued interest to the date of redemption. Change of Control............. In the event of a Change of Control (as defined), each holder of Notes will have the right, subject to the terms and conditions of the Indenture (as defined) for the Notes, to have all or any portion of such holder's Notes (equal to $1,000 or an integral multiple thereof) repurchased by PSF at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to a Change of Control. Offers to Purchase............ In the event of certain asset sales, to the extent that the proceeds thereof are not used to purchase certain lines of business or to repay the Term Loan (as defined) or the Second Priority Note Agreement (as defined), PSF will be required to offer to purchase the Notes at 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase with the net proceeds of such asset sales. But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to such an offer to purchase. Security...................... The Notes are guaranteed by Holdings and Princeton and are collaterally secured by a lien on substantially all of the assets of the Company. Ranking....................... The liens securing the Notes and the right of payment pursuant to the Notes are junior to the liens and right of payment under the Credit Agreement (as defined) and all indebtedness under the Second Priority Note Agreement. Restrictive Covenants......... The Indenture imposes certain limitations on the ability of the Company to, among other things, (i) incur additional indebtedness, (ii) pay dividends or make certain restricted payments or make certain investments, (iii) consummate certain asset sales, (iv) enter into certain transactions with affiliates, (v) incur certain liens, (vi) impose restrictions on the ability of a Subsidiary to issue capital stock, and (vii) impose restrictions on the Company from engaging in certain businesses. The restrictive covenants are subject to certain exceptions and qualifications. See "Description of the Notes -- Certain Covenants." THE WARRANTS Warrants...................... The Warrants entitle the holders thereof to purchase from Holdings an aggregate of 2,048,192 LLC Units of Holdings which represents 17% of the LLC Units on a fully diluted basis as of the date of this Prospectus. Exercise...................... Each Warrant entitles the holder thereof to purchase one LLC Unit of Holdings at an exercise price of $45.00 per LLC Unit. The Warrants are exercisable (i) in the case of a holder which is not a MS Member (as defined), at any time during the ten year period commencing on the original issue date and terminating on the first business day after the tenth anniversary of the original issue date (the "Termination Date") and (ii) in the case of a holder which is a MS Member, at any time during the period that commences on January 1, 2000 and that terminates on the Termination Date, subject to earlier exercise in certain circumstances, and in each case, subject to earlier cancellation under certain circumstances. The number of LLC Units of Holdings for which, and the price per LLC Unit at which, a Warrant is exercisable are subject to adjustment upon the occurrence of certain events as provided in the Warrant Agreement (as defined). See "Description of the Warrants." Expiration of Warrants........ The Warrants shall expire at the close of business on the Termination Date. THE LLC UNITS LLC Units..................... The LLC Units are divided into two classes, Class A Units and Class B Units. Class A Units and Class B Units are identical and entitle the holders thereof to the same rights and privileges, except that Class B Members of Holdings shall have no right, power or authority to participate in the management of Holdings in any manner, including without limitation, voting rights. Conversion of LLC Units....... Each Class B Unit transferred to a party other than a MS Member is convertible, at the election of such party, into one Class A Unit immediately following such transfer, and each Class A Unit transferred to a MS Member shall convert automatically, immediately following such transfer, into one Class B Unit, subject in each case to certain adjustments under certain circumstances in the number and kind of LLC Units. Repurchase of Units........... In the event of termination of employment of a holder of LLC Units who is an Employee Member (as defined) of the Company as a result of death or disability, Holdings is obligated to purchase such holder's LLC Units at fair value generally within 90 days after such termination. As of the date of this Prospectus, none of the outstanding LLC Units are held by Employee Members of the Company. In the event of termination of employment of such a holder other than as a result of death or disability, Holdings has the right for a period of six months following the last date on which such employee was a member of the board of directors or manager or an employee of the Company to repurchase the LLC Units held by such employee for fair value, or if such LLC Units have not vested, at such price specified in the agreement or plan pursuant to which such unvested LLC Units were acquired. See "Description of the Units -- Right to Repurchase Units." Restrictions on Transfer...... A holder of LLC Units who is a Member (as defined) of Holdings is subject to certain restrictions on transfer of such holder's LLC Units. Prior written notice of such transfer must be given to Holdings and certain other conditions must be met before such transfer is made. A transferee of LLC Units shall not be admitted as a Member of Holdings unless certain conditions, as set forth in the LLC Agreement, are met, and unless admitted as a Member (holding Class A Units), such transferee shall have no voting rights. Transfers which would cause Holdings to become a Foreign Business (as defined) are not permitted. See "Description of the Units -- Restrictions on Transfer."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037967_psf_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037967_psf_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..88ef5fcd9b91d21a818d49a1cf6c95bb6c68503c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037967_psf_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, when used in this Prospectus, all references to the "Company" refer collectively to PSF Holdings, L.L.C. ("Holdings"), its wholly-owned subsidiary, Premium Standard Farms, Inc. ("PSF"), and PSF's wholly-owned subsidiary, Princeton Development Corp. ("Princeton"). Unless otherwise indicated, as it relates to the Company's operations, references herein to fiscal years or years and quarters are to the Company's fiscal year which, beginning with 1996, ends on the last Saturday in December and, prior to 1996, was December 31. The end of any such fiscal year of the Company, unless otherwise stated, shall be referred to herein as December 31. THE COMPANY The Company is a vertically integrated provider of pork and pork products to the wholesale and retail food markets in the United States and abroad. The Company believes that it is the largest vertically integrated pork producer in the Midwest and that it is one of the largest owners of sows in the United States. The Company utilizes modern, efficient building designs, sophisticated genetic methods, and strict control of animal health and diet to produce premium pork and pork products. As of March 31, 1997, the Company had approximately 89,000 sows in production operations located on over 37,000 acres in northwest Missouri and approximately 19,000 sows located on approximately 14,000 acres located in the Texas Panhandle area, with an aggregate capacity to produce approximately 1.9 million hogs annually. The Company's operations include hog production facilities, a pork processing facility capable of processing 7,000 hogs per day (on a single shift), feed mills, genetic improvement facilities, office and training facilities and additional production infrastructure. The Company's Milan, Missouri pork processing facility is among the most modern facilities of its kind, and is capable of processing all of the approximately 1.5 million hogs expected to be produced annually from the Company's Missouri operations. The Milan plant has the capacity to process approximately 2.6 million hogs annually on two shifts. The Company's products include fresh pork. The Company currently markets these products to a variety of wholesale and retail customers in the U.S. and abroad. The Company's fresh pork, which includes loins, tenderloins, hams, butts, picnics, bellies and other products are sold to supermarket chains, meat distributors, further processors, food service companies, and institutional food customers and the export market. The Company's operations also include the sale of live hogs, and the sale of processed pork products in the variety meat industry, the feed processing industry and the pet food industry. The Company's business strategy is to produce and market high quality pork and pork products in a cost-efficient manner by combining state-of-the-art hog production with strategically located modern pork processing facilities. The Company's highly automated processing operations have been designed to enable it to capitalize on the value of its hog supply by achieving benefits of vertical integration that generally are not available to its non-integrated competitors. For example, the integrated management of strategically located production and processing operations enables the Company to streamline logistics, transportation and production schedules to enhance asset utilization and reduce the Company's cost structure. Vertical integration also enables the Company to capture the incremental carcass value of its hogs rather than passing this value on to other processors. Founded in 1988, the Company expanded from 3,300 sows with the capacity to produce 73,600 hogs annually in 1990 to approximately 106,000 sows with the capacity to produce approximately 1.9 million hogs annually in 1996. During this period, the Company developed its entire Missouri operation, including its hog production facilities and the Milan, Missouri pork processing facility. In 1994, the Company began the development of a second pork production operation located in the Texas Panhandle (the "Texas Facilities"). The first phase in this expansion was the acquisition, in June 1994, of a 16,800 sow hog production operation from National Hog Farms of Texas Inc. ("Perico") and the High Plains Ranch, a 33,000 acre parcel of land near the Perico operations. The planned second phase of that expansion was to create a fully integrated production and processing operation in Texas through the construction of additional hog production facilities on the High Plains Ranch, a state-of-the-art processing plant (based on the Milan, Missouri facility), and the acquisition of an adjacent 7,000 acre ranch. The Company commenced the construction of additional hog production facilities on the High Plains Ranch and related infrastructure between June 1994 and May 1995. In May 1995, the Company indefinitely suspended expansion of the Texas Facilities. During 1995, the Company did not meet its operating plans as hog prices continued at historically low levels, feed costs increased, the deficiency of earnings to fixed charges increased, and the Company suspended construction of the Texas Facilities incurring substantial losses. As a result, the Company was unable to service certain of its debt obligations. As of June 30, 1996, the Company had $515 million of long-term debt and associated accrued interest outstanding. On July 2, 1996, the Company filed a pre-negotiated, consensual reorganization under Chapter 11 of the United States Bankruptcy Code (the "Reorganization") which was successfully completed on September 17, 1996 (the "Effective Date") and which enabled the Company to significantly improve its financial structure by restructuring its debt and converting a significant portion of its outstanding debt to equity. As of December 28, 1996, the Company had $153 million of long-term debt outstanding. The Company has initiated organizational and operational changes during and following the Reorganization which it believes, together with decreased debt service obligations and increased hog and pork prices, has resulted in the Company's improved performance since the Effective Date. The Company resumed work on the Texas Facilities in early 1997 through the planned investment of approximately $5 million in hog production facilities. Following the completion of such construction, the Company's Missouri and Texas operations will have approximately 110,000 sows in production operations. The Company intends to periodically evaluate the desirability of further expansion of its Texas operations based on the Company's production and processing needs, operating performance, capital requirements and growth strategy. PSF Finance L.P. ("Finance"), the predecessor to Holdings, was organized as a Delaware limited partnership. Premium Standard Farms, Inc. ("Farms"), the predecessor to PSF, was incorporated as a Missouri corporation and was consolidated as a unilaterally controlled special-purpose entity of Finance. Finance and Farms are sometimes collectively referred to herein as "Predecessor," and Holdings and PSF are sometimes collectively referred to herein as "Successor." The Successor commenced operations on September 17, 1996 by merging Finance into Holdings, which then transferred the net assets it received from Finance to PSF. Farms transferred all of its net assets to PSF in satisfaction of debt. The Predecessor was then dissolved and all Predecessor operations were continued by the Successor. References to the Company in this Prospectus for any period prior to the Reorganization (as defined) shall mean the Predecessor. Holdings is a limited liability company organized under the laws of the state of Delaware in 1996. PSF was incorporated in Delaware in 1996 and Princeton was incorporated in Delaware in 1992. The principal executive offices of each of Holdings, PSF and Princeton are located at 423 West 8th Street, Suite 200, Kansas City, Missouri 64105 and their telephone number is (816) 472-7675. THE OFFERINGS LLC Units offered by the Selling Securityholders....... 10,000,000 LLC Units LLC Units outstanding on the date of this Prospectus(1).... 10,000,000 LLC Units LLC Units issuable upon exercise of Warrants and to be resold by the Selling Securityholders............... 2,048,192 LLC Units Warrants offered by the Selling Securityholders....... 2,048,192 Warrants to acquire LLC Units Notes offered by the Selling Securityholders(2)............ $248,640,672 aggregate principal amount Use of Proceeds............... The Company will not receive any proceeds from the sale of Securities by the Selling Securityholders. Absence of Public Market...... There is currently no public market for the LLC Units or the Warrants and the Company does not presently intend to list any of the Securities on a stock exchange or quotation service. Bankers Trust Company currently makes a market in the Notes. However, Bankers Trust Company is not obligated to do so and any market-making activities with respect to the Notes may be discontinued at any time without notice. Accordingly, no assurance can be given as to the liquidity of the trading market for any of the Securities or that an active public market for the Notes will develop. See "Risk Factors -- Absence of Public Market." - ------------------------- (1) Does not include 620,000 LLC Units issuable upon the exercise of outstanding options. See "Management -- Executive Compensation" and "Management -- Management Option Plan." (2) Includes (i) $117,500,000 aggregate principal amount of Notes issued on the Effective Date, (ii) $6,390,699 aggregate principal amount of Secondary Notes (as defined) issued March 15, 1997 in payment of interest then due on the Notes, and (iii) $124,749,973 aggregate principal amount of Secondary Notes that may be issued after the date of this Prospectus in lieu of cash payments of interest on the Notes. THE NOTES Maturity Date................. September 17, 2003 Interest Payment Dates........ Interest on the Notes accrues from the date of issuance at 11% and is payable semi-annually on each March 15 and September 15, commencing March 15, 1997. Until the date the Term Loan (as defined) is paid in full whether upon maturity or by earlier prepayment ("the Term Loan Payout Date") or the maturity of any Note, at the option of PSF, interest is payable by the issuance of additional Notes (valued at 100% of the face amount thereof) in lieu of cash interest. After any such date, interest on the Notes is payable solely in cash. Optional Redemption........... The Notes are redeemable, in whole or in part, at the option of PSF during the twelve-month periods beginning on each September 1 for the years 1996 through 2001, at the redemption prices set forth herein plus accrued interest to the date of redemption. Change of Control............. In the event of a Change of Control (as defined), each holder of Notes will have the right, subject to the terms and conditions of the Indenture (as defined) for the Notes, to have all or any portion of such holder's Notes (equal to $1,000 or an integral multiple thereof) repurchased by PSF at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to a Change of Control. Offers to Purchase............ In the event of certain asset sales, to the extent that the proceeds thereof are not used to purchase certain lines of business or to repay the Term Loan (as defined) or the Second Priority Note Agreement (as defined), PSF will be required to offer to purchase the Notes at 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase with the net proceeds of such asset sales. But see "Risk Factors -- Priority of Senior Indebtedness Over the Notes" for a description of potential default implications with respect to such an offer to purchase. Security...................... The Notes are guaranteed by Holdings and Princeton and are collaterally secured by a lien on substantially all of the assets of the Company. Ranking....................... The liens securing the Notes and the right of payment pursuant to the Notes are junior to the liens and right of payment under the Credit Agreement (as defined) and all indebtedness under the Second Priority Note Agreement. Restrictive Covenants......... The Indenture imposes certain limitations on the ability of the Company to, among other things, (i) incur additional indebtedness, (ii) pay dividends or make certain restricted payments or make certain investments, (iii) consummate certain asset sales, (iv) enter into certain transactions with affiliates, (v) incur certain liens, (vi) impose restrictions on the ability of a Subsidiary to issue capital stock, and (vii) impose restrictions on the Company from engaging in certain businesses. The restrictive covenants are subject to certain exceptions and qualifications. See "Description of the Notes -- Certain Covenants." THE WARRANTS Warrants...................... The Warrants entitle the holders thereof to purchase from Holdings an aggregate of 2,048,192 LLC Units of Holdings which represents 17% of the LLC Units on a fully diluted basis as of the date of this Prospectus. Exercise...................... Each Warrant entitles the holder thereof to purchase one LLC Unit of Holdings at an exercise price of $45.00 per LLC Unit. The Warrants are exercisable (i) in the case of a holder which is not a MS Member (as defined), at any time during the ten year period commencing on the original issue date and terminating on the first business day after the tenth anniversary of the original issue date (the "Termination Date") and (ii) in the case of a holder which is a MS Member, at any time during the period that commences on January 1, 2000 and that terminates on the Termination Date, subject to earlier exercise in certain circumstances, and in each case, subject to earlier cancellation under certain circumstances. The number of LLC Units of Holdings for which, and the price per LLC Unit at which, a Warrant is exercisable are subject to adjustment upon the occurrence of certain events as provided in the Warrant Agreement (as defined). See "Description of the Warrants." Expiration of Warrants........ The Warrants shall expire at the close of business on the Termination Date. THE LLC UNITS LLC Units..................... The LLC Units are divided into two classes, Class A Units and Class B Units. Class A Units and Class B Units are identical and entitle the holders thereof to the same rights and privileges, except that Class B Members of Holdings shall have no right, power or authority to participate in the management of Holdings in any manner, including without limitation, voting rights. Conversion of LLC Units....... Each Class B Unit transferred to a party other than a MS Member is convertible, at the election of such party, into one Class A Unit immediately following such transfer, and each Class A Unit transferred to a MS Member shall convert automatically, immediately following such transfer, into one Class B Unit, subject in each case to certain adjustments under certain circumstances in the number and kind of LLC Units. Repurchase of Units........... In the event of termination of employment of a holder of LLC Units who is an Employee Member (as defined) of the Company as a result of death or disability, Holdings is obligated to purchase such holder's LLC Units at fair value generally within 90 days after such termination. As of the date of this Prospectus, none of the outstanding LLC Units are held by Employee Members of the Company. In the event of termination of employment of such a holder other than as a result of death or disability, Holdings has the right for a period of six months following the last date on which such employee was a member of the board of directors or manager or an employee of the Company to repurchase the LLC Units held by such employee for fair value, or if such LLC Units have not vested, at such price specified in the agreement or plan pursuant to which such unvested LLC Units were acquired. See "Description of the Units -- Right to Repurchase Units." Restrictions on Transfer...... A holder of LLC Units who is a Member (as defined) of Holdings is subject to certain restrictions on transfer of such holder's LLC Units. Prior written notice of such transfer must be given to Holdings and certain other conditions must be met before such transfer is made. A transferee of LLC Units shall not be admitted as a Member of Holdings unless certain conditions, as set forth in the LLC Agreement, are met, and unless admitted as a Member (holding Class A Units), such transferee shall have no voting rights. Transfers which would cause Holdings to become a Foreign Business (as defined) are not permitted. See "Description of the Units -- Restrictions on Transfer."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001037975_priority_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001037975_priority_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a09d20dee0494c7b331467aec563d131ecf88d2c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001037975_priority_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and related notes thereto appearing elsewhere in this Prospectus. See "Risk Factors" for a discussion of certain factors to be considered by prospective investors. Priority Healthcare Corporation ("Priority" or the "Company") is a national distributor of specialty pharmaceuticals and related medical supplies to the alternate site healthcare market and is a provider of patient-specific, self- injectable biopharmaceuticals and disease treatment programs to individuals with chronic diseases. Through its Priority Healthcare Distribution division ("Priority Distribution"), the Company sells over 3,500 SKUs of specialty pharmaceuticals and medical supplies to outpatient renal care centers and office-based physicians in the oncology and infectious disease markets. With the recent acquisition of Grove Way Pharmacy, Priority Distribution has entered the vaccine market. Priority Distribution offers value-added services to meet the specific needs of these markets by shipping refrigerated pharmaceuticals overnight in special packaging to maintain appropriate temperatures, offering automated order entry services and offering customized distribution for group accounts. From distribution centers in Altamonte Springs, Florida and Santa Ana, California, Priority Distribution services over 2,000 customers in all 50 states and Puerto Rico, including approximately 550 office-based oncologists and 800 renal dialysis clinics. Through its Priority Pharmacy Services division ("Priority Pharmacy"), the Company fills individual patient prescriptions for self-injectable biopharmaceuticals for over 1,400 patients. These patient-specific prescriptions are filled at two licensed pharmacies in Altamonte Springs, Florida, where the Company reconstitutes in syringes the components of the biopharmaceuticals, according to manufacturer's instructions, and ships these products directly to the patient overnight in specialized packages. Priority Pharmacy also provides disease treatment programs for hepatitis, melanoma, cancer, human growth deficiency and the complications of HIV. Management believes that it is the only provider that offers this range of services on a nationwide basis. Priority sells the majority of its products and services into two large and growing markets--oncology and chronic renal dialysis. Frost & Sullivan estimated the U.S. market for oncology pharmaceuticals to be $4.1 billion in 1996 and projected it to grow at a compound annual rate of 13.2% from 1996 through 2003. The Company believes that the office-based segment of the oncology pharmaceutical market represents approximately 25% of such market and has been growing faster than the overall market. According to the Health Care Financing Administration, the number of patients who received renal dialysis treatments grew from approximately 157,000 in 1992 to approximately 200,000 in 1995, representing a compound annual growth rate of approximately 8%. The Company also sells products and services into the infectious disease market, principally for the treatment of hepatitis C. The National Institutes of Health estimates that approximately 30,000 new acute hepatitis C infections occur annually. Priority's net sales have increased from $79.6 million in 1993 to $158.2 million in 1996. In the same period, operating income has increased from $2.1 million in 1993 to $7.7 million in 1996. The Company's objective is to continue to grow rapidly and enhance its market position as a leading specialty distributor by capitalizing on its business strengths and pursuing the following strategy: (i) continue to focus on and further penetrate the alternate site market; (ii) enter new markets by distributing new product categories and patient-specific biopharmaceuticals; (iii) accelerate growth of its higher margin, patient-specific pharmacy business by leveraging relationships with existing distribution customers; (iv) maintain intense cost control while investing in infrastructure; and (v) pursue acquisitions to complement existing product offerings or further penetrate markets. RELATIONSHIP WITH BWI The Company is a wholly-owned subsidiary of BWI. Following this offering, BWI will beneficially own 10,214,286 shares of Class A Common Stock, representing 83.6% of the Common Stock (81.6% if the Underwriters' over-allotment option is exercised in full), and will have 93.9% of the voting power of the outstanding Common Stock (93.0% if the Underwriters' over-allotment option is exercised in full). As a result, BWI will be able to determine any corporate action requiring approval of holders of the Common Stock, including the election of the entire Board of Directors of the Company, without the approval of the other shareholders of the Company. BWI has advised the Company that, following this offering, BWI will evaluate whether to distribute its shares of Class A Common Stock to BWI shareholders. Unless and until such distribution is completed, BWI will retain control of the Company. Currently, three of the Company's directors are directors and executive officers of BWI. In connection with this offering, BWI and the Company have entered into a series of agreements, including a Revolving Credit Promissory Note, an Indemnification and Hold Harmless Agreement, a Tax Sharing Agreement and an Administrative Services Agreement, governing certain aspects of the relationship between the Company and BWI subsequent to this offering. See "Risk Factors," "Management," "Relationship with BWI" and "Principal Shareholder." THE OFFERING <TABLE> <C> <S> Class B Common Stock being offered.................. 2,000,000 shares(1) Class B Common Stock outstanding after the offering. 2,000,000 shares(1)(2) Class A Common Stock outstanding after the offering. 10,214,286 shares(3) Total Common Stock outstanding after the offering... 12,214,286 shares(1)(2) Use of proceeds..................................... To repay certain indebtedness to BWI and for working capital and general corporate purposes, including potential acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol....................... PHCC </TABLE> - -------- (1) Excludes up to 300,000 shares of Class B Common Stock that may be sold by the Company pursuant to the Underwriters' over-allotment option. See "Underwriting." (2) Excludes (i) 10,214,286 shares of Class B Common Stock issuable upon conversion of outstanding shares of Class A Common Stock and (ii) an aggregate of 1,275,000 shares of Class B Common Stock reserved for issuance upon the exercise of options granted or available for grant, or upon the issuance of restricted stock, pursuant to the Company's stock option plans, of which options to purchase 455,050 shares with an exercise price equal to the initial public offering price set forth on the cover page of this Prospectus have been granted. See "Management--Compensation of Directors" and "Executive Compensation--1997 Stock Option and Incentive Plan" and "Description of Capital Stock." (3) The Class A Common Stock is identical to the Class B Common Stock, except that the Class A Common Stock is entitled to three votes per share and the Class B Common Stock is entitled to one vote per share. The holders of the Class A Common Stock and the Class B Common Stock generally vote together as a single class on all matters submitted to a vote of the holders of Common Stock. The Class A Common Stock will automatically convert into Class B Common Stock on a share-for-share basis upon certain transfers following any distribution of such Class A Common Stock by BWI to its shareholders. See "Risk Factors--Relationship with and Benefits to BWI" and "Description of Capital Stock." SUMMARY CONSOLIDATED FINANCIAL DATA (1) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, -------------------------------------- ---------------------------- 1994 1995 1996 1996 1997 -------- -------- -------------------- ------- -------------------- PRO FORMA PRO FORMA ACTUAL ACTUAL ACTUAL (2) ACTUAL ACTUAL (2) -------- -------- -------- ----------- ------- -------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF EARNINGS DATA: Net sales.............. $107,449 $123,990 $158,247 $158,247 $65,348 $108,597 $108,597 Cost of products sold.. 100,254 111,448 141,074 141,074 57,947 97,449 97,449 Gross profit........... 7,195 12,542 17,173 17,173 7,401 11,148 11,148 Selling, general and administrative expense............... 4,394 7,836 8,443 8,923 4,009 4,960 5,200 Depreciation and amortization.......... 512 998 1,009 1,009 500 656 656 Earnings from operations............ 2,289 3,708 7,721 7,241 2,892 5,532 5,292 Interest expense, net.. 200 511 437 464 170 498 237 Earnings before income taxes.......... 2,089 3,197 7,284 6,777 2,722 5,034 5,055 Provision for income taxes................. 835 1,311 2,915 2,712 1,089 2,013 2,021 Net earnings........... 1,254 1,886 4,369 4,065 1,633 3,021 3,034 Pro forma earnings per share (2)(3)...... $0.38 $0.27 Pro forma weighted average shares outstanding (2)....... 10,740,465 11,152,346 <CAPTION> JUNE 30, 1997 -------------------- AS ADJUSTED ACTUAL (4) -------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital........................................................ $24,022 $49,272 Total assets........................................................... 68,118 79,583 Payable to parent...................................................... 13,785 -- Long-term debt......................................................... 6,365 6,365 Total liabilities...................................................... 41,697 27,912 Shareholders' equity................................................... 26,421 51,671 </TABLE> - -------- (1) During the periods presented, the Company made two acquisitions. See "The Company--Acquisition History." These acquisitions were accounted for under the purchase method of accounting and, accordingly, the results of operations of the acquired entities are included in the Company's financial statements from their respective dates of acquisition. As a result, period- to-period comparisons of financial position and results of operations are not necessarily meaningful. (2) Adjusted to give effect to the pro forma adjustments described under "Unaudited Pro Forma Consolidated Financial Data" commencing on page 18. (3) Historical earnings per share data are not meaningful as the Company's historical capital structure is not comparable to periods subsequent to this offering. (4) Adjusted to give effect to the sale of 2,000,000 shares of Class B Common Stock offered by the Company at an assumed offering price of $14.00 per share and the application of the net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038078_bridgestre_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038078_bridgestre_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b24eeaac00fb5da6fb0e89f79fce4ce5bbaa746b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038078_bridgestre_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and pro forma and historical financial statements, including the notes thereto, appearing elsewhere in this Prospectus. BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") was incorporated in 1996, and in January and March 1997 acquired by merger (the "Combination") five flexible accommodation service providers (the "Founding Companies"). See "Combination." Unless otherwise indicated, the information contained in this Prospectus (i) gives effect to the Combination and (ii) assumes that the Underwriters' over-allotment option will not be exercised. Investors should carefully consider the information set forth under the heading "Risk Factors." THE COMPANY BridgeStreet is a leading provider of flexible accommodation services in 16 metropolitan areas located in the Midwest and Mid-Atlantic regions of the United States. The Company offers high-quality, fully-furnished apartments, townhouses, condominiums and to a lesser extent, houses (collectively, "accommodations"), primarily for individuals traveling on business and company executives relocating to new communities who require lodging for one week to several months. Together with the specialized amenities offered by the Company, these accommodations are intended to provide guests with a "home away from home." As of June 30, 1997, BridgeStreet had more than 2,700 units under lease, and for the six months ended June 30, 1997, BridgeStreet's average occupancy rate was approximately 90%. As a provider of flexible accommodation services, BridgeStreet leases substantially all of its accommodations on a short-term basis from property managers, and then rents them to its clients. This enables the Company to (i) adjust the quantity, mix and location of its accommodations as client needs dictate and local economic conditions warrant, (ii) expand and enter new markets without the costs and lead times associated with investing in "bricks and mortar" and (iii) avoid the fixed costs associated with ownership or long-term leasing of real estate. The Company also leases the furniture for its accommodations on a short-term basis from furniture rental companies. These furniture leasing arrangements enable BridgeStreet to maintain well-appointed, modern and attractive accommodations, upgrade and replace furniture as needed, and satisfy specific furnishing requests. BridgeSteet's leasing strategy distinguishes it from fixed-location lodging providers, such as all-suite or extended-stay hotels, that own their lodging facilities and furnishings or lease them on a long-term basis. Traditionally, travelers on extended trips have stayed in hotels and motels. According to the American Hotel and Motel Association, in 1995, business travelers staying three or more nights represented approximately 37% of total domestic hotel stays during that year. The Company believes that business travelers on extended trips increasingly desire alternatives to conventional hotel and motel rooms, which typically lack the spaciousness and amenities of home. The Company believes that this has been an important factor in the recent growth in the extended-stay segment of the lodging industry. Participants in this segment include flexible accommodation service providers, all-suite hotels and extended-stay hotels. By providing flexible accommodation services, the Company can satisfy client requests for accommodations in a variety of locations and neighborhoods, as well as requests for accommodations of specific types and sizes. The substantial majority of the Company's accommodations are located within high-quality property complexes that typically feature, among other things, in-unit washers and dryers, dedicated parking and access to fitness facilities (including, in many cases, pools, saunas and tennis courts). In addition, at a guest's request, BridgeStreet can upgrade an accommodation by providing specialized amenities such as office furniture, fax machines and computers. The Company's accommodations generally are priced competitively with all-suite and upscale extended-stay hotel rooms even though, on average, the Company believes its accommodations are substantially larger. BridgeStreet was founded in August 1996, and in the first quarter of 1997 combined by merger five regional providers of flexible accommodation services. The Company has achieved significant growth in recent years. On a combined basis, units available for rent increased from 1,041 units on December 31, 1994 to 1,936 - -------------------------------------------------------------------------------- units on December 31, 1996, representing a compound annual growth rate of 36%. In addition, combined net revenues increased from $18.9 million in 1994 to $37.6 million in 1996, representing a compound annual growth rate of 41%. The Company plans to achieve its goal of becoming a leading national provider of flexible accommodation services by implementing an aggressive acquisition program and a national operating strategy designed to increase internal revenue growth, cost efficiencies and profitability. Key elements of the Company's business strategy include: Growth Through Acquisitions. The Company believes that the flexible accommodation services industry is highly fragmented, with over 400 geographically dispersed companies in the United States, few of which have more than a regional presence. BridgeStreet plans to take advantage of the fragmented nature of the industry by acquiring flexible accommodation service companies in major metropolitan areas frequented by business travelers. BridgeStreet intends to implement its business model at each acquired company as soon as practicable after the acquisition is completed. BridgeStreet's acquisition strategy is to: - Enter New Geographic Markets and Establish Nationwide Coverage. In each new market, the Company intends to target for acquisition one local or regional flexible accommodation services provider having the size and quality of operations suitable for serving as the Company's base for expansion in the market. Acquisitions in new markets will enable BridgeStreet to (i) gain local or regional market share rapidly, (ii) increase sales to existing clients by meeting their needs for accommodations in other regions, (iii) increase sales to the acquired company's clients by providing them with access to BridgeStreet's growing national network and (iv) establish the BridgeStreet brand name in new regions and enhance its nationwide recognition. The Company also may expand into new markets by establishing new operations. - Expand Within Existing Markets. Once the Company has established operations in a new region, it may seek to expand its market share by acquiring other flexible accommodation service providers within that region. The Company believes that it can achieve operating efficiencies by incorporating the businesses of smaller acquired companies into the Company's operations without any significant increase in infrastructure. On June 30, 1997, the Company acquired the assets of a flexible accommodation services provider in Memphis, Tennessee with 135 units under lease. National Operating Strategy. The Company has begun to implement a national operating strategy with the following components: - Maximize Sales to Existing and New Clients. The Company plans to maximize sales to existing corporate clients and to obtain new clients through a national sales and marketing program which highlights the Company's expanding national network. Many of the Company's clients are Fortune 1000 companies with significant, national employee lodging requirements. These corporate clients generally have numerous key decision makers (such as human resource directors, relocation managers or training directors) who both establish and administer company travel and accommodation policies. The Company plans to obtain a greater share of each client's lodging requirements by establishing relationships with additional key decision makers and emphasizing the Company's expanding national presence. - Achieve Cost Efficiencies. The Company believes it should be able to reduce total operating expenses of the Founding Companies and any additional acquired companies by consolidating certain functions (including sales, marketing and purchasing operations) performed separately by such companies. In addition, the Company believes that as a large, national flexible accommodation services company, it should be able to achieve lower costs (as a percentage of revenues) compared to those of the individual Founding Companies and other acquired companies in such areas as leasing accommodations and furniture, purchasing certain hard and soft goods, and obtaining financing arrangements, employee benefits and insurance. - Adopt Best Practices. The Company will continue reviewing its operations at the local and regional operating levels in order to identify "best practices" that can be implemented throughout its operations. Areas where "best practices" may be utilized include accommodation pricing, occupancy management - -------------------------------------------------------------------------------- and cash flow management. BridgeStreet believes the implementation of these practices will enable the Company to provide superior customer service and maximize sales opportunities. - Implement Management Information System. BridgeStreet intends to develop and implement a centrally-controlled, computerized management information system that will integrate the Company's customer contact, sales, marketing, finance, telephone, property management, internet access, lease management and reservation functions. BridgeStreet believes that the proposed system will enable it to deliver superior customer service, more efficiently manage its operations and achieve cost savings. The Company is a Delaware corporation. Its principal executive offices are located at 30670 Bainbridge Road, Solon, Ohio 44139 and its telephone number is (216) 248-3005. As used herein, unless the context otherwise requires, "BridgeStreet" or the "Company" refers to BridgeStreet Accommodations, Inc. and its wholly-owned subsidiaries. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 1,700,000 shares Common Stock offered by the Selling Stockholders............................... 915,000 shares Common Stock to be outstanding after the offering................................... 7,175,000 shares (1) Use of proceeds.............................. To repay certain indebtedness, including indebtedness of the Founding Companies assumed by the Company in connection with the Combination, the outstanding principal amount under the Company's revolving credit facility and certain advances made to the Company by an affiliated party, to implement an enhanced management information system and for general corporate purposes, including working capital and future acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... BEDS </TABLE> - --------------- (1) Excludes an aggregate of 1,100,000 shares of Common Stock reserved for issuance under the Company's 1997 Equity Incentive Plan and Stock Plan for Non-Employee Directors. Of this amount, 482,667 and 37,500 shares of Common Stock will be issuable upon exercise of outstanding options under the 1997 Equity Incentive Plan and Stock Plan for Non-Employee Directors, respectively. See "Management -- Director Compensation" and " -- Executive Compensation; Equity Incentive Plan." SUMMARY UNAUDITED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND FOOTNOTE DATA) The following summary unaudited financial data presents certain data of the Company, as adjusted (a) in the case of the Pro Forma Statement of Operations Data, for (i) the effects of the Combination on a historical basis, (ii) the effects of certain pro forma adjustments to the historical financial statements of the Founding Companies and (iii) the consummation of this offering, and (b) in the case of the As Adjusted Consolidated Balance Sheet Data, for the consummation of this offering. See the Company's Unaudited Pro Forma Combined Financial Statements and Consolidated Financial Statements and the notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> PRO FORMA PRO FORMA ACTUAL YEAR ENDED SIX MONTHS ENDED THREE MONTHS DECEMBER 31, JUNE 30, ENDED 1996(1) 1997(1)(2) JUNE 30, 1997 ------------ ---------------- ------------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues.......................................... $ 37,566 $ 22,924 $12,655 Operating income (3).............................. 1,797 15 1,124 Income before income taxes(4)..................... 1,790 107 1,113 Net income (loss)(5).............................. $ 878 $ (486) 613 ======= ======= ======== Net income (loss) per share....................... $ 0.12 $ (0.07) $ 0.11 ======= ======= ======== Weighted average shares outstanding............... 7,175,000 7,175,000 5,475,000 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------------- ACTUAL AS ADJUSTED(6) -------------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital............................................... $ 1,271 $ 8,575 Total assets.................................................. 28,930 35,209 Long-term debt, net of current maturities..................... 3,344 -- Total stockholders' equity.................................... 19,385 30,033 </TABLE> - --------------- (1) The Pro Forma Statement of Operations Data assumes that the Combination and this offering took place at the beginning of the period. This data is not necessarily indicative of the results the Company would have had if these events actually then occurred or of the Company's future results. The Pro Forma Statement of Operations Data for the year ended December 31, 1996 excludes (i) any adjustments for the compensation to be paid in 1997 for services to be rendered in 1997 by the Company's Chief Executive Officer and Chief Financial Officer pursuant to their employment agreements, and (ii) non-recurring, non-cash compensation expense recorded in the first quarter of 1997 in connection with the accelerated vesting of restricted stock. The Pro Forma Statement of Operations Data for the six months ended June 30, 1997 assumes the acquisition of Home Again occurred at the beginning of the period. See "Combination." The pro forma data is based on preliminary estimates, available information and certain assumptions that management deems appropriate, and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. (2) Includes non-recurring, non-cash compensation expense of $1,210,000 recorded in connection with the accelerated vesting of restricted stock. This represents a reduction of $0.17 per share in the Pro Forma Statement of Operations. (3) Reflects (i) for the year ended December 31, 1996, the reduction of $552,000 in salary and benefits to executives of the Founding Companies and the amortization of $490,000 of goodwill to be recorded as a result of the Combination, assuming a 35-year amortization period, and (ii) for the six months ended June 30, 1997, an increase of $30,000 in such salary and benefits and the amortization of $16,000 of goodwill in connection with the acquisition of Home Again. (4) Reflects an interest expense reduction of $158,000 for the year ended December 31, 1996 and $97,000 for the six months ended June 30, 1997 related to bank debt and notes payable to be repaid from the net proceeds of this offering. (5) Reflects an increase in the Company's historical provision for income taxes of $373,000 for the year ended December 31, 1996 to account for the Company's estimated consolidated effective tax rate subsequent to the Combination, after considering nondeductible goodwill amortization, and an increase of $75,000 in the historical provision for income taxes for the six months ended June 30, 1997 to account for the estimated consolidated 1997 effective tax rate, after considering nondeductible goodwill. (6) Reflects the issuance of 1,700,000 shares of Common Stock by the Company in this offering and the application of the net proceeds as described under "Use of Proceeds." SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS) The following table presents summary data for each of the Founding Companies (including their respective affiliates, if any) for the three most recent fiscal years. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ------------------------- 1994 1995 1996 ------ ------ ------- <S> <C> <C> <C> Temporary Corporate Housing Columbus, Inc. Revenues........................................................ $8,309 $9,754 $12,502 Operating income................................................ 206 336 1,087 Number of units leased at end of year........................... 510 539 624 Corporate Lodgings, Inc. Revenues........................................................ $4,069 $6,067 $ 8,820 Operating income................................................ 87 39 195 Number of units leased at end of year........................... 213 301 434 Exclusive Interim Properties, Ltd.(1) Revenues........................................................ $4,015 $5,521 $ 8,626 Operating income................................................ 104 300 213 Number of units leased at end of year(2)........................ 125 302 441 Home Again, Inc. Revenues........................................................ $ 532 $1,570 $ 4,035 Operating income................................................ 49 74 315 Number of units leased at end of year........................... 40 100 198 Temporary Housing Experts, Inc. Revenues........................................................ $2,000 $3,086 $ 3,583 Operating income (loss)......................................... 115 30 (73) Number of units leased at end of year........................... 153 214 239 </TABLE> - --------------- (1) Prior to the Combination, Exclusive Interim Properties, Ltd.'s fiscal year end was March 31. The 1994 and 1995 data presents data for that company's fiscal years ended March 31, 1995 and 1996, respectively. The 1996 data presents 12 months of data derived from the unaudited three-month period ended March 31, 1996 and the audited nine-month period ended December 31, 1996. (2) Includes 19 condominium units owned by Exclusive Interim Properties, Ltd. for all periods presented.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038183_continenta_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038183_continenta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b65ac9864c0a3a3ef2b1201ca3e7387c7fc331c4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038183_continenta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including notes thereto, appearing elsewhere in this Prospectus. Certain terms, including several technical terms commonly used in the oil and gas industry, are defined in the "Glossary." As used in this Prospectus, the terms "Company" and "CNG" refer, unless the context requires otherwise, to Continental Natural Gas, Inc., its subsidiaries (including limited liability companies), joint venture entities managed by the Company or its subsidiaries and their interests therein. Unless otherwise noted, all references in this Prospectus to the number of shares of Common Stock outstanding and to be offered in the Offering assume no exercise of the over-allotment option granted to the Underwriters in connection with the Offering and the conversion of all outstanding shares of Convertible Preferred Stock of the Company ("Convertible Preferred Stock") into Common Stock prior to the effectiveness of the Registration Statement of which this Prospectus is a part. All information in this Prospectus has been adjusted to reflect an approximate 136-for-1 stock split in July 1997. No information is given in this Prospectus regarding the Company's recent acquisitions of the Spearman gas processing plant and of the Laverne gas processing plant except in "-- Recent Developments" and in "Business -- Recent Developments." THE COMPANY The Company is an independent mid-stream energy company engaged in the purchasing, gathering, treating, processing and marketing of natural gas and natural gas liquids ("NGLs"). The Company owns and operates approximately 1,100 miles of natural gas gathering pipelines located in the Texas and Oklahoma panhandle region (the "Panhandle Area") with a total throughput capacity of 383 MMcf/d and two interconnected natural gas processing plants with a total NGL production capacity of 490 Mgal/d. CNG provides essential services to natural gas producers in the Panhandle Area by (i) connecting the producers' wells to the Company's gathering systems, (ii) treating the producers' natural gas to ensure that it meets pipeline specifications, (iii) transporting the natural gas from the wellhead to CNG's processing plants where NGLs are extracted from the natural gas stream and (iv) providing access for the natural gas and NGLs to various markets in the Midwestern, Mid-Continent, Rocky Mountain and southern Texas regions (the "CNG Market Area") of the United States. The April 1996 and January 1997, editions of "Hart's Report on Gas Customer Satisfaction" published by Hart Publications, Inc. reported that CNG was rated the most preferred natural gas purchaser in surveys of natural gas sellers. The Company markets the natural gas it gathers or processes ("on-system gas"), as well as natural gas it neither gathers nor processes ("off-system gas"), to utilities, end-users, other marketers and pipeline affiliates. From 1985 through 1990, CNG's activities were primarily limited to marketing off-system gas. Concurrent with the evolving deregulation of the natural gas industry, the Company began to acquire natural gas gathering systems and processing plants to complement its marketing business. Since 1990, the Company has completed approximately $64 million of acquisitions and system expansion projects. During March 1997, CNG's average gathering system throughput was 108 MMcf/d and average processing plant throughput was 135 MMcf/d. The Company's NGL production for March 1997, averaged 281 Mgal/d. Over the three years ended December 31, 1996, the Company's daily natural gas throughput has increased 92%. Primarily as a result of this growth, the Company's EBITDA (as defined in the Glossary) has increased to $9.5 million in 1996 from $1.7 million in 1994. For the three months ended March 31, 1997, the Company's EBITDA was $3.7 million. The Company's principal assets are located in the Panhandle Area, which is a major natural gas producing area with significant long-lived natural gas reserves. CNG's Beaver Plant and Beaver Gathering System were acquired in 1990 from El Paso Natural Gas Company and currently consist of approximately 300 miles of natural gas gathering pipelines, a 65 MMcf/d cryogenic processing plant and a 40 MMcf/d propane refrigeration plant yielding NGL production of 215 Mgal/d. The Beaver Plant is interconnected with the Company's Mocane Plant, which was acquired from affiliates of Conoco, Inc. and Chevron USA, Inc. in 1995. The Mocane Plant consists of two refrigerated lean oil absorption plants with a combined demonstrated capacity of 200 MMcf/d of natural gas and 280 Mgal/d of NGLs, approximately 140,000 barrels of underground NGL storage and a 6,700 barrel per day NGL fractionator. During the first half of 1996, the Company acquired approximately 800 miles of gas gathering assets located throughout the Texas panhandle in three separate transactions. These gathering assets (the "Texas Gathering Assets") were acquired for approximately $20.2 million from subsidiaries of Enron Corporation. BUSINESS STRATEGY The Company's business strategy is to achieve sustainable growth in cash flow and earnings by (i) acquiring and constructing natural gas gathering systems and processing plants with excess capacity which complement CNG's marketing operations, (ii) improving the profitability of the Company's existing systems and plants by increasing their utilization and efficiency and (iii) expanding its energy marketing services and sales volumes by offering natural gas producers and purchasers flexible contract terms, value-added services and other favorable arrangements. Expansion of Facilities. The Company seeks to acquire or make investments in projects that complement its existing systems or allow it to expand into new strategic areas and provide enhanced marketing opportunities. These investments typically include natural gas gathering, processing, treating or fractionation assets. Improving the Profitability of Existing Facilities. The Company seeks to maximize the profitability of its operations by (i) increasing natural gas throughput and processing levels, (ii) directing natural gas throughput to a particular Company-owned gas processing plant that maximizes product yields and/or margins, (iii) investing in assets that enhance product value and (iv) controlling operating and overhead expenses. Expanding Energy Marketing Services and Sales Volumes. CNG is a marketer of natural gas and NGLs. The Company plans to expand its energy marketing activities by continuing to offer creative, flexible contract terms that satisfy the objectives of producers at the wellhead and purchasers in the marketing of natural gas. The Company also seeks to increase its off-system marketing. In addition, the Company intends to expand into the sale of electric power to wholesale customers and industrial and commercial end-users. See "Business -- Business Strategy." RECENT DEVELOPMENTS In July 1997 the Company completed the acquisition of the Spearman gas processing plant (the "Spearman Plant") located in Ochitree County, Texas, for a purchase price of approximately $1.0 million. The Spearman Plant was shut-down in 1994 and has remained idle since that time. The current maximum throughput of the Spearman Plant is estimated to be approximately 50 MMcf/d utilizing a refrigerated lean-oil absorption process, producing approximately 86 Mgal/d of NGLs. The Company believes that it will be able to utilize the Spearman Plant for processing natural gas the Company gathers through its nearby Spearman gathering system which is part of the Texas Gathering Assets. In July 1997 the Company purchased from Conoco, Inc. ("Conoco") and its affiliate a 36% interest in the Laverne gas processing plant (the "Laverne Plant") located in Harper County, Oklahoma, for a purchase price of $2.9 million (the "Laverne Plant Acquisition"). Prior to the Laverne Plant Acquisition, the Company had acquired approximately 17% of the plant for $1.4 million and presently owns approximately 53% of the Laverne Plant. Concurrent with the Laverne Plant Acquisition, certain litigation between the Company and the Conoco affiliate was settled. See "Business -- Legal Proceedings." The Laverne Plant consists of a 200 MMcf/d cryogenic gas processing facility, complete with NGL fractionation capability and above-ground storage. The Laverne Plant straddles GPM Gas Corporation's Laverne natural gas gathering system. Natural gas production feeding the Laverne Plant originates from the Mocane-Laverne field. The plant is located approximately eight miles east of the Beaver Plant. Current natural gas throughput at the Laverne Plant is approximately 70 MMcf/d, yielding approximately 180 Mgal/d of NGLs. Due to the Laverne Plant's proximity to CNG's other assets and its substantial underutilized capacity, the Company believes that the Laverne Plant will enhance the Company's existing operations in the Panhandle Area. THE OFFERING Common Stock Offered by the Company....... 1,800,000 shares Common Stock Offered by Selling Shareholder............................... 300,000 shares ---------------- Total................................... 2,100,000 shares ================ Common Stock to be Outstanding after the Offering(1)............................... 6,000,000 shares Use of Proceeds........................... The net proceeds to the Company from the Offering will be used to repay outstanding bank borrowings, pay accrued dividends on the Convertible Preferred Stock and for other general corporate purposes. See "Use of Proceeds." The Company will not receive any of the proceeds from the sale of shares by the Selling Shareholder. Nasdaq National Market Symbol............. CNGL - --------------- (1) Excludes (i) 204,000 shares subject to outstanding options under the Company's 1996 Incentive Stock Option Plan (the "1996 Stock Plan") and (ii) 600,000 shares reserved for future issuance and issuable upon grant of options, stock appreciation rights and stock grants under the Company's 1997 Stock Plan (the "1997 Stock Plan"). SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA The following table presents summary financial and operating information. The financial data for the years ended December 31, 1994, 1995 and 1996 have been derived from the Company's Consolidated Financial Statements included herein which have been audited by Coopers & Lybrand L.L.P., independent accountants. The data for and at the end of the three month periods ended March 31, 1996 and 1997, have been derived from the unaudited Consolidated Financial Statements of the Company included elsewhere in this Prospectus and reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for fair presentation of the results for such periods. Results of operations for the three months ended March 31, 1997, are not necessarily indicative of the results to be achieved for the year ending December 31, 1997. The summary financial data should be read in conjunction with the Company's Financial Statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein. <TABLE> <CAPTION> THREE MONTHS FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------------------------ ------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT WHERE OTHERWISE INDICATED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues Natural gas sales............................ $124,981 $126,583 $100,477 $ 95,631 $208,779 $ 32,670 $ 78,788 Natural gas liquids sales.................... 10,102 23,177 19,572 24,804 34,757 6,195 8,881 Gathering fees............................... -- -- -- -- 1,995 -- 843 Other........................................ 1,239 1,308 260 763 1,130 455 15 -------- -------- -------- -------- -------- -------- -------- Total operating revenue...................... 136,322 151,068 120,309 121,198 246,661 39,320 88,527 Operating costs and expenses Cost of purchased natural gas................ 125,872 137,560 111,038 107,642 225,535 34,493 81,417 Operating expenses........................... 3,617 5,530 3,930 4,366 5,978 1,382 1,559 General and administrative................... 4,050 3,847 3,601 3,840 5,623 1,310 1,842 Depreciation, depletion and amortization..... 1,067 1,741 1,505 1,367 2,854 473 899 -------- -------- -------- -------- -------- -------- -------- Total operating costs and expenses........... 134,606 148,678 120,074 117,215 239,990 37,658 85,717 Operating income............................... 1,716 2,390 235 3,983 6,671 1,662 2,810 Other income (expense), net.................... (448) (1,028) 4,648 (1,047) (2,686) (264) (1,171) -------- -------- -------- -------- -------- -------- -------- Income before income taxes, extraordinary item and cumulative effect of accounting change..... 1,268 1,362 4,883 2,936 3,985 1,398 1,639 Income tax (expense) benefit..................... (47) (127) 2,174 3,635 (30) (652) -------- -------- -------- -------- -------- -------- -------- Income before extraordinary item and cumulative effect of accounting change.................... $ 1,268 $ 1,315 $ 4,756 $ 5,110 $ 7,620 $ 1,368 $ 987 ======== ======== ======== ======== ======== ======== ======== Net income....................................... $ 1,268 $ 1,695 $ 4,756 $ 5,110 $ 7,193 $ 1,368 $ 987 ======== ======== ======== ======== ======== ======== ======== Pro forma operating revenue...................... $246,058(1) $ 88,527(1) Pro forma income before extraordinary item....... $ 786(2) 8,277(1) 1,235(1) EARNINGS PER SHARE: Primary: Income before extraordinary item and cumulative effect of accounting change.................. $ .41 $ .40 $ 1.46 $ 1.59 $ 1.99 $ .37 $ .24 Net income..................................... .41 .52 1.46 1.59 1.87 .37 .24 Fully Diluted: Income before extraordinary item and cumulative effect of accounting change.................. .40 .40 1.45 1.59 1.71 .33 .22 Net income..................................... .40 .52 1.45 1.59 1.61 .33 .22 Pro forma income before extraordinary item: Primary........................................ .25(2) 1.47(1) .21(1) Fully diluted.................................. .25(2) 1.34(1) .20(1) Weighted average common shares outstanding: Primary........................................ 3,131 3,217 3,215 3,185 3,536 3,305 3,613 Fully diluted.................................. 3,135 3,232 3,242 3,186 4,466 4,155 4,393 OTHER DATA: Capital expenditures........................... $ 13,986 $ 2,267 $ 3,097 $ 12,311 $ 30,761 $ 10,418 $ 3,498 EBITDA(3)...................................... 2,782 4,132 1,739 5,350 9,525 2,135 3,709 Natural gas throughput gathered and/or processed (MMcf/d)........................... 60 93 95 125 182 121 213 NGLs production (Mgal/d)....................... 105 251 249 265 264 245 269 Average NGL price (per gallon)................. $ .27 $ .26 $ .22 $ .26 $ .36 $ .28 $ .37 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 -------------------------- ACTUAL AS ADJUSTED(4) -------- -------------- (UNAUDITED) (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital........................................... $ (2,773) $ (2,372) Property, plant and equipment (net)....................... 62,751 62,751 Total assets.............................................. 117,064 117,465 Long-term debt, excluding current portion................. 38,071 18,071 Total liabilities......................................... 93,924 73,924 Shareholders' equity...................................... 23,140 43,541 </TABLE> - --------------- (1) Excludes the results of operations related to the Company's interests in oil and gas properties which were sold to an affiliated company in 1996, and includes the effect of debt to be extinguished with proceeds from the sale of Common Stock pursuant to the Offering. (2) Includes a pro forma income tax provision for 1992 when the Company was an S-corporation and thus not subject to income taxes. (3) See definition in the "Glossary" section of this Prospectus. (4) Adjusted to give effect to the payment by the Company of $111,750 in cumulative unpaid dividends on the Convertible Preferred Stock subsequent to March 31, 1997, the sale by the Company of 1,800,000 shares of Common Stock in the Offering and the application of the net proceeds to the Offering. Estimated net proceeds of the Offering ($21.1 million) have been applied to liquidate long term debt ($20.0 million) and to pay the remaining cumulative unpaid dividend on the Convertible Preferred Stock ($587,250) with the balance increasing cash.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038237_jlm_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038237_jlm_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..161826d9234e2cfd61ce222c90fb3f11db46c1ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038237_jlm_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and related notes appearing elsewhere in this Prospectus. Unless otherwise indicated, all information presented in this Prospectus (i) assumes an offering price of $13.00 and (ii) assumes that the Underwriters' over-allotment option will not be exercised. Unless the context indicates otherwise, all references in this Prospectus to "JLM" or the "Company" include JLM Industries, Inc. and its consolidated subsidiaries and references to the "Selling Stockholder" shall mean John L. Macdonald. All references in this Prospectus to fiscal years are to the Company's fiscal years ended on December 31. THE COMPANY JLM is a leading marketer and distributor of certain commodity chemicals, principally acetone and phenol. The Company believes it is the second largest marketer of acetone and the fifth largest marketer of phenol in North America. JLM is also a global distributor of olefins, principally propylene, as well as a variety of other commodity and specialty chemicals. In order to provide stable and reliable sources of supply for its products, the Company (i) maintains long-established supplier relationships with several major chemical companies, (ii) manufactures phenol and acetone at its Blue Island Plant and (iii) sources acetone from its joint venture manufacturing operation. The Company's principal products are used in the production of adhesives, coatings, forest product resins, paints, pharmaceuticals, plastics, solvents and synthetic rubbers. The Company sells its products worldwide to over 600 customers, including Ashland Chemical, Inc., B.F. Goodrich Co., Borden, Inc., Hoechst Celanese Corporation, E.I. DuPont de Nemours and Company, Eli Lilly & Co., Georgia Pacific Corporation, ICI Acrylics Inc., Minnesota Mining and Manufacturing Company, Neste Resins Corporation, Rohm & Haas Company and Shell Chemicals Canada, Inc. In 1996, sales to these customers accounted for approximately 21.0% of the Company's revenues. No single customer accounted for more than 10% of the Company's revenues in 1996. Since its founding in 1986 as a distributor of excess co-product acetone, JLM has grown rapidly by expanding its product sourcing arrangements and product offerings, adding manufacturing capacity and providing superior customer service and consistent product quality and availability. From 1992 to 1996, JLM's EBITDA increased from $2.1 million to $13.5 million, a compound annual growth rate of approximately 59.6% (see Footnote 2 to the Summary Consolidated Financial Information.) In order to support its worldwide marketing and distribution capabilities, the Company continually seeks to acquire assets and establish relationships to provide a consistent and reliable source of products. The Company acquired a manufacturing facility in 1995 in Blue Island, Illinois (the "Blue Island Plant") that produces phenol and acetone. In addition, in 1987, JLM entered into a joint venture with General Electric Company and an affiliate of CITGO that manufactures phenol and acetone in Mt. Vernon, Indiana (the "Mt. Vernon Plant"). In connection with the joint venture, the Company entered into a long-term agreement to purchase all acetone produced at the Mt. Vernon Plant not used by GE Petrochemicals, Inc. In 1996, the Blue Island Plant and the Mt. Vernon Plant collectively supplied approximately 63.0% of the total acetone sold by JLM, and the Blue Island Plant supplied approximately 74.0% of the total phenol sold by JLM. In addition to its manufacturing facility and joint venture, JLM sources products through long-established supplier relationships with many of the leaders in the worldwide chemical industry including ARCO Chemical Company, Goodyear Tire & Rubber Co., Monsanto Company and Repsol, S.A. (Spain), one of the largest chemical companies in Spain. The Company also has an exclusive arrangement to distribute solvents in North America for Sasol Chemical Industries (PTY) Ltd., one of the largest chemical companies in South Africa, and recently entered into an agreement to become a U.S. distributor of styrene for GE Petrochemicals, Inc. To further enhance its product sourcing, marketing and distribution capabilities, the Company has acquired terminaling and storage facilities in Wilmington, North Carolina (the "JLM Terminal") and Bayport, Texas (the "OTC Terminal"). The JLM Terminal consists of 10 storage tanks with a total capacity of 15 million gallons and is capable of handling a broad range of products including acetone, methanol, ethanol and propanol. The OTC Terminal is a joint venture with an affiliate of Ultramar Diamond Shamrock that operates primarily as an export facility for propylene manufactured in the U.S. The OTC Terminal has an annual throughput capacity of approximately 900 million pounds and a total storage capacity of approximately 22 million pounds. These terminaling and storage facilities give the Company the ability to take immediate physical delivery of a substantial volume of product which is of value to the Company's suppliers and ensures that the Company will have product available for its customers. These facilities also give the Company the ability to offer chemical storage, terminaling and logistics services, and have allowed the Company to capitalize on a trend by many large chemical producers to outsource these operations. The Company believes its ability to multi-source products through its manufacturing facility, joint venture and supplier relationships, as well as its ownership of terminaling and storage facilities distinguish it from its competitors and enhance its ability to market significant volumes of products. Product sourcing and marketing efforts are handled principally by the Company's sales team of 33 full time employees. JLM maintains offices in the U.S., Canada, the Netherlands, Venezuela and Thailand and recently opened two affiliate offices in India and an office in Colombia. JLM has also established sales arrangements with companies in Spain, Italy, Brazil, Peru and Taiwan. In addition, the Company recently purchased a 25.0% interest in SK Chemicals Asia Pte. Ltd., a Singapore-based company ("SK Asia"), and has agreed to purchase a 12.7% interest in SK Chemical Trading Pte. Ltd., another Singapore-based company ("SK Trading"), both of which are participating in a Vietnamese joint venture that intends to construct a chemical plant in Vietnam that will produce dioctyl phthalate, a chemical used in the production of plastics such as polyvinyl chloride ("PVC"). The Vietnamese joint venture also intends to construct terminaling and storage facilities in Vietnam and Malaysia. See "Business Strategy." BUSINESS STRATEGY The Company's principal objective is to continue to expand the number of sources and breadth of its chemical products and the markets in which it distributes these products to enhance its position as a leading supplier in the worldwide chemical industry. JLM's continued growth is largely dependent on the successful implementation of its business strategy. There can be no assurance that the Company will be able to successfully implement its business strategy or that, if implemented, such strategy will be successful. See "Risk Factors." Key elements of the Company's business strategy include: - Expand Sources of Supply through Joint Ventures, Acquisitions and Strategic Relationships. The Company will continue to seek to identify and pursue domestic and international opportunities to expand its sources of supply for products in or consistent with its core business. These opportunities may include additional joint ventures, acquisitions and strategic relationships. Consistent with this strategy, the Company formed the Mt. Vernon joint venture with General Electric Company and an affiliate of CITGO in 1987, acquired the Blue Island Plant in 1995 and established a long-term supplier relationship with Sasol Chemical Industries (PTY), Ltd., a South African Company, in 1988. Certain phenol producers have recently announced their intentions to add approximately 3 billion pounds of annual production capacity starting in the year 2000. JLM currently is exploring opportunities to participate in certain of these expansions in order to secure additional sources of phenol and acetone. - Increase Sales of Existing Products; Add New Products. The Company will continue to develop its existing relationships and establish new relationships to increase the overall volume and types of products it distributes by (i) increasing the amount distributed by the Company of an existing supplier's output of a given chemical, (ii) distributing additional products for existing suppliers and (iii) adding new chemical producers to its supplier base. During 1996, the Company entered into agreements to distribute approximately 70 million additional pounds of chemicals for both existing and new suppliers in 1997, including ARCO Chemical Company, Goodyear Tire & Rubber Co. and Monsanto Company. In addition, the Company recently expanded the product line it distributes for Sasol Chemical Industries (PTY) Ltd. In 1997, the Company has entered into new agreements with CONDEA Vista Company to distribute butanol and with GE Petrochemicals, Inc. to become a distributor of styrene in the U.S. - Continue International Expansion. The Company currently has international operations in South America, Europe and Asia. JLM intends to continue to utilize its chemical market experience, distribution and logistics capabilities and industry relationships to increase its international presence, particularly in the growing chemical markets of Asia and South America. The Company recently opened two affiliate offices in India and one in Colombia. In addition, JLM recently purchased a minority interest in SK Asia and has agreed to purchase a minority interest in SK Trading, both of which are participating in a Vietnamese joint venture that intends to construct a dioctyl phthalate chemical plant in Vietnam and terminaling and storage facilities in Vietnam and Malaysia. The Company believes its indirect participation in the Vietnamese joint venture will provide it with increased access to the Asian market. - Continue to Provide Superior Customer Service. JLM believes that its continued success will be in large part due to its emphasis on providing superior customer service. The Company believes it is well positioned to take advantage of current trends within the chemical industry as chemical producers continue to outsource their terminaling and logistics operations and reduce the number of outside distributors used. The Company focuses on providing sourcing, inventory and logistics solutions for its customers and endeavors to provide both its customers and suppliers with a level of service that is unmatched in the industry. The Company was incorporated in 1986 as a Delaware corporation. Its principal executive offices are located at 8675 Hidden River Parkway, Tampa, Florida 33637, and its telephone number is (813) 632-3300. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................. 2,156,000 shares Common Stock offered by the Selling Stockholder..... 144,000 shares Common Stock to be outstanding after the Offering... 6,899,936 shares(1) Use of proceeds..................................... To repay approximately $17.0 million in long-term debt, to fund working capital and for general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............. "JLMI" </TABLE> - --------------- (1) Excludes 459,200 shares of Common Stock issuable upon the exercise of stock options or upon the vesting of shares of restricted stock which are to be granted effective upon completion of the offering. See "Management -- Equity Based Compensation Plans." SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ----------------------------------------------------- ------------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- --------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues........................ $199,751 $174,322 $218,570 $289,371 $ 236,521 $ 57,861 $ 80,518 Gross profit.................. 9,092 9,132 11,663 23,910 28,239 6,690 6,847 Operating income................ 1,764 1,956 2,383 8,734 11,001 2,675 2,929 Income from continuing operations before discontinued operations and extraordinary item.......................... $ 1,397 $ 1,157 $ 1,109 $ 3,629 $ 4,357 $ 322 $ 1,560 INCOME PER SHARE: Income from continuing operations before discontinued operations and extraordinary item.......................... $ 0.28 $ 0.23 $ 0.22 $ 0.72 $ 0.89 $ 0.06 $ 0.33 Discontinued operations......... (0.05) (0.06) (0.05) (0.09) (0.09) (0.02) (0.02) Extraordinary item.............. -- -- 0.03 -- -- -- -- -------- -------- -------- -------- --------- -------- --------- Net income per share............ $ 0.23 $ 0.17 $ 0.20 $ 0.63 $ 0.80 $ 0.04 $ 0.31 ======== ======== ======== ======== ========= ======== ========= Weighted average number of shares outstanding............ 5,011 5,011 5,011 5,011 4,878 5,011 4,744 Pro forma income per share from continuing operations before discontinued operations and extraordinary item(1)......... $ 0.85 $ 0.29 Pro forma shares outstanding(1)................ 6,284 6,150 OTHER FINANCIAL DATA: Depreciation and amortization expense....................... $ 322 $ 352 $ 572 $ 1,522 $ 2,524 $ 532 $ 678 EBITDA(2)....................... 2,086 2,308 2,955 10,256 13,525 3,207 3,607 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................... $ (825) $ 11,697 Total assets................................................ 108,745 117,199 Total debt.................................................. 38,602 22,562 Total stockholders' equity.................................. 14,736 40,021 </TABLE> - --------------- (1) The weighted average number of shares outstanding has been adjusted to include the number of shares (1,406,121) that the Company would need to issue at an assumed offering price per share of $13.00 (which results in assumed net proceeds per share of $12.09) to repay the indebtedness described in "Use of Proceeds." (2) EBITDA represents the operating income of the Company plus depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles ("GAAP") and may not be comparable to other similarly titled measures by other companies. EBITDA does not represent net income or cash flows from operations as defined by GAAP and does not necessarily indicate that cash flows will be sufficient to fund cash needs. As a result, EBITDA should not be considered an alternative to net income as an indicator of operating performance or to cash flows as a measure of liquidity. EBITDA is included in this Prospectus because it is a basis upon which the Company assesses its financial performance, and certain covenants in the Company's borrowing arrangements are tied to similar measures. Supplemental selected consolidated cash flow information is included below: <TABLE> <CAPTION> THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------- -------------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> Net cash provided by (used in): Operating activities........... $ (1,244) $ 3,487 $ 6,064 $ 2,746 $ 26 $ (3,565) $ (5,894) Investing activities........... (2,687) (3,229) (1,218) (4,661) (6,631) (1,480) (443) Financing activities........... 4,900 (2,086) 85 (469) 6,705 4,411 7,485 Capital expenditures............. 2,513 3,161 1,221 2,320 7,347 1,445 371 </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038239_wfs_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038239_wfs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0735aff4424815241919e701548251773befdce3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038239_wfs_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of certain capitalized terms. Trust...................... WFS Financial 1997-B Owner Trust (the "Trust"). Seller..................... WFS Financial Auto Loans, Inc. (the "Seller"), a wholly owned, limited-purpose operating subsidiary of WFS Financial Inc. The principal executive offices of the Seller are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. Prior to May 29, 1996, the Seller was known as Western Financial Auto Loans, Inc. See "The Seller." WFS........................ WFS Financial Inc ("WFS" or, in its capacity as Master Servicer, the "Master Servicer"), a majority owned, operating subsidiary of Western Financial Bank, F.S.B. (the "Bank"), a federally chartered savings association. The principal offices of WFS are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WFS." WII........................ WFS Investments, Inc. ("WII"), a California corporation and a wholly owned operating subsidiary of WFS. The principal office of WII is 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WII." Securities Offered......... The securities offered are as follows: A. General................. The WFS Financial 1997-B Owner Trust Auto Receivable Backed Notes (the "Notes") will represent obligations of the Trust secured by the assets of the Trust (other than the Certificate Distribution Account and the Certificate Policy). The WFS Financial 1997-B Owner Trust Auto Receivable Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") will represent fractional undivided interests in the Trust. The Trust will issue four Classes of Notes pursuant to an indenture to be dated as of June 1, 1997 (the "Indenture"), between the Trust and Bankers Trust Company, as trustee (the "Indenture Trustee"), as follows: (i) $73,000,000 aggregate principal amount of 5.73% Auto Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii) $245,000,000 aggregate principal amount of 6.05% Auto Receivable Backed Notes, Class A-2 (the "Class A-2 Notes"), (iii) $100,000,000 aggregate principal amount of 6.30% Auto Receivable Backed Notes, Class A-3 (the "Class A-3 Notes") and (iv) $113,000,000 aggregate principal amount of 6.40% Auto Receivable Backed Notes, Class A-4 (the "Class A-4 Notes"). Payments of principal and interest on the Notes will be made in accordance with the priorities set forth under "Certain Information Regarding the Securities -- Distributions on the Securities." The Trust will issue $59,000,000 aggregate principal amount of 6.55% Auto Receivable Backed Certificates (the "Certificates") pursuant to a trust agreement (the "Trust Agreement") to be dated as of the date of initial issuance of the Securities (the "Closing Date"), among the Seller, Financial Security Assurance Inc. ("Financial Security"), WII and Chase Manhattan Bank Delaware, as trustee (the "Owner Trustee" and, together with the Indenture Trustee, the "Trustees"). Payments in respect of the Certificates will be subordinated to payments on the Notes to the extent described herein. Each Class of Notes and the Certificates will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Definitive Securities will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities -- Book-Entry Registration" and "-- Definitive Securities." B. Property of the Trust... Each Note will represent an obligation of, and each Certificate will represent a fractional undivided interest in, the Trust. The property of the Trust will primarily include (i) a pool of retail installment sales contracts and installment loans (the "Contracts") secured by the new and used automobiles and light-duty trucks financed thereby (the "Financed Vehicles"); (ii) certain monies due under the Contracts on and after June 1, 1997 (the "Cut-Off Date"); (iii) security interests in the Financed Vehicles; (iv) a financial guaranty insurance policy (the "Note Policy") to be issued by Financial Security for the exclusive benefit of Noteholders, which will unconditionally and irrevocably guarantee payment of the Scheduled Payments on each Distribution Date; (v) a financial guaranty insurance policy (the "Certificate Policy" and, together with the Note Policy, the "Policies") to be issued by Financial Security for the exclusive benefit of Certificateholders, which will unconditionally and irrevocably guarantee payment of the Guaranteed Distributions on each Distribution Date; (vi) amounts on deposit in the Collection Account, the Note Distribution Account, the Certificate Distribution Account, the Spread Account and the Holding Account, including all Eligible Investments therein and all income from the investment of funds therein and all proceeds therefrom; (vii) proceeds from claims under certain insurance policies in respect of individual Financed Vehicles or obligors under the Contracts (the "Obligors"); and (viii) certain rights under the sale and servicing agreement to be dated as of June 1, 1997 (the "Sale and Servicing Agreement"), among the Trust, the Seller and the Master Servicer. Pursuant to the Indenture, the property of the Trust (other than the Certificate Distribution Account and the Certificate Policy) will be held by the Master Servicer for the benefit of the Indenture Trustee and Financial Security on behalf of the holders of the Notes. C. Distribution Dates...... Distributions of interest and principal on the Securities will be made on January 20, April 20, July 20 and October 20 of each year (or, if any such day is not a Business Day, on the next succeeding Business Day) (each, a "Distribution Date"), commencing October 20, 1997. Payments on the Securities on each Distribution Date will be paid to the holders of record of the related Securities on the Business Day immediately preceding such Distribution Date or, in the event that Definitive Securities are issued, as of the 15th day of the month immediately preceding the month in which such Distribution Date occurs (each, a "Record Date"). A "Business Day" will be any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Wilmington, Delaware, or Los Angeles, California are authorized or obligated by law, executive order or government decree to be closed. To the extent not previously paid prior to such dates, the outstanding principal amount of (i) the Class A-1 Notes will be payable on April 20, 1998 (the "Class A-1 Final Distribution Date"), (ii) the Class A-2 Notes will be payable on July 20, 2000 (the "Class A-2 Final Distribution Date"), (iii) the Class A-3 Notes will be payable on July 20, 2001 (the "Class A-3 Final Distribution Date") and (iv) the Class A-4 Notes will be payable on July 20, 2002 (the "Class A-4 Final Distribution Date" and, together with the Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date and the Class A-3 Final Distribution Date, the "Note Final Distribution Dates"). To the extent not previously paid in full prior to such date, the unpaid principal balance of the Certificates will be payable on October 20, 2004 (the "Certificate Final Distribution Date" and, together with the Note Final Distribution Dates, the "Final Distribution Dates"). Terms of the Notes......... The principal terms of the Notes will be as described below: A. Interest Rates.......... Interest will be borne on (i) the Class A-1 Notes at the rate of 5.73% per annum (the "Class A-1 Rate"), (ii) the Class A-2 Notes at the rate of 6.05% per annum (the "Class A-2 Rate"), (iii) the Class A-3 Notes at the rate of 6.30% per annum (the "Class A-3 Rate") and (iv) the Class A-4 Notes at the rate of 6.40% per annum (the "Class A-4 Rate" and, together with the Class A-1 Rate, the Class A-2 Rate and the Class A-3 Rate, the "Interest Rates"). B. Interest................ Interest on the outstanding principal amount of each Class of Notes will accrue at the related Interest Rate from and including the most recent Distribution Date on which interest has been paid (or from and including the Cut-Off Date with respect to the first Distribution Date) to but excluding the current Distribution Date (each, an "Interest Period"). Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days elapsed in an Interest Period and a 360-day year. Interest on the Class A-2, Class A-3 and Class A-4 Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Notes for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the related Interest Rate. See "The Notes -- Payments of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." C. Principal............... Principal of the Notes will be payable on each Distribution Date in an amount generally equal to the Note Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." The Note Principal Distributable Amount will include an amount equal to the Accelerated Principal Distributable Amount for such Distribution Date. On each Distribution Date, the Note Principal Distributable Amount will be applied in the following priority: first to reduce the principal amount of the Class A-1 Notes; second, after the principal amount of the Class A-1 Notes has been reduced to zero, to reduce the principal amount of the Class A-2 Notes; third, after the principal amount of the Class A-2 Notes has been reduced to zero, to reduce the principal amount of the Class A-3 Notes; and fourth, after the principal amount of the Class A-3 Notes has been reduced to zero, to reduce the principal amount of the Class A-4 Notes. Notwithstanding the foregoing, if the principal amount of a Class of Notes has not been paid in full prior to its Note Final Distribution Date, the Note Principal Distributable Amount for such Note Final Distribution Date will include an amount sufficient to reduce the unpaid principal amount of such Class of Notes to zero on such Note Final Distribution Date. See "The Notes -- Payments of Principal" and "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." D. Optional Redemption..... In the event of an Optional Purchase, each Class of outstanding Notes will be redeemed in whole, but not in part, at a redemption price equal to the unpaid principal amount of such Class of Notes plus accrued interest thereon at the related Interest Rate. See "The Notes -- Optional Redemption." E. Mandatory Redemption.... Under certain conditions, the Notes may be accelerated upon the occurrence of an Event of Default under the Indenture. So long as no Insurer Default shall have occurred and be continuing, under certain circumstances Financial Security will have the right (in addition to its obligation to make Scheduled Payments on the Notes in accordance with the terms of the Note Policy) but not the obligation, to elect to accelerate the principal of the Notes and to cause the Master Servicer or the Trustee to sell or otherwise liquidate the property of the Trust and to deliver the proceeds to the Indenture Trustee for distribution in accordance with the terms of the Indenture. See "The Notes -- Events of Default." Terms of the Certificates............... The principal terms of the Certificates will be as described below: A. Interest................ On each Distribution Date, the Owner Trustee or any paying agent as the Owner Trustee may designate from time to time (the "Paying Agent") will distribute pro rata to Certificateholders of record as of the related Record Date accrued interest at the rate of 6.55% per annum (the "Pass-Through Rate") on the Certificate Balance, as defined below, as of the immediately preceding Distribution Date (after giving effect to distributions of principal to be made on such immediately preceding Distribution Date) or, in the case of the first Distribution Date, the Original Certificate Balance. Interest in respect of a Distribution Date will accrue from and including the Cut-Off Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid, to but excluding the current Distribution Date. Interest on the Certificates for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the Pass-Through Rate. See "The Certificates -- Distributions of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." The "Certificate Balance" will equal $59,000,000 (the "Original Certificate Balance") on the Closing Date and on any date thereafter will equal the Original Certificate Balance reduced by all distributions of principal previously made in respect of the Certificates. Distributions on the Certificates will be subordinated to payments of interest and principal on the Notes as described under "The Certificates" and "Certain Information Regarding the Securities -- Distributions on the Securities." B. Principal............... No principal will be paid on the Certificates until the Distribution Date on which the principal amount of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes has been reduced to zero. On such Distribution Date and each Distribution Date thereafter, principal of the Certificates will be payable in an amount equal to the Certificate Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." On each Distribution Date on or after the Distribution Date on which the Class A-4 Notes have been paid in full, any Accelerated Principal Distributable Amount will be included in the Certificate Principal Distributable Amount. If not paid in full prior to the Certificate Final Distribution Date, the remaining Certificate Balance, if any, will be payable on that date. See "The Certificates -- Distributions of Principal." C. Optional Prepayment..... In the event of an Optional Purchase, the Certificates will be repaid in whole, but not in part, at a repayment price equal to the Certificate Balance plus accrued interest thereon at the Pass-Through Rate. See "The Certificates -- Optional Prepayment." Security for the Securities................. The principal security for the Securities will be as described below: A. The Contracts........... The Contracts will consist of retail installment sales contracts and installment loans, secured by liens on the Financed Vehicles, purchased from WFS by the Seller and from the Seller by the Trust, including the right to receive the payments thereunder on and after the Cut-Off Date. The Seller will be required to repurchase Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Securityholders, the Indenture Trustee, the Owner Trustee or Financial Security. The Contracts were purchased from new and used car dealers or originated directly from consumers by WFS. The Contracts were originated in California and 32 other states by new and used car dealers not affiliated with WFS, except for a limited number of Contracts originated directly from consumers by WFS. The Contracts will be selected by WFS from its portfolio of retail installment sales contracts and installment loans based upon the criteria to be specified in the Sale and Servicing Agreement. As of the Cut-Off Date, the Aggregate Scheduled Balance will be $590,000,000 (the "Cut-Off Date Aggregate Scheduled Balance") and the Contracts will have an expected weighted average annual percentage rate of approximately 15.33% and an expected weighted average remaining maturity of approximately 57 months. See "The Contracts Pool." Approximately 38.73% of the aggregate principal amount of the Contracts will be Rule of 78's Contracts and approximately 61.27% will be Simple Interest Contracts, based upon the anticipated Scheduled Balances of the Contracts as of the Cut-Off Date. All net collections received by the Master Servicer on or in respect of the Contracts, any Advances made by the Master Servicer and all amounts paid under the Policies will be deposited in or credited to the Collection Account or, in certain limited instances, the Holding Account. On each Distribution Date, the Indenture Trustee will distribute the amounts on deposit in the Collection Account with respect to such Distribution Date to the Note Distribution Account and, to the extent applicable, the Certificate Distribution Account. All payments to Noteholders will be made from the Note Distribution Account and to Certificateholders from the Certificate Distribution Account. See "Certain Information Regarding the Securities -- The Accounts and Eligible Investments" and "-- Distributions on the Securities." B. The Spread Account...... The Securityholders will be afforded certain limited protection, to the extent described herein, against losses in respect of the Contracts by the establishment of a segregated trust account in the name of the Indenture Trustee for the benefit of the Securityholders (the "Spread Account"). The Spread Account will be part of the Trust. The Spread Account will be created with an initial deposit by the Seller of $17,700,000 (the "Spread Account Initial Deposit"). The funds in the Spread Account will thereafter be supplemented on each Distribution Date by the deposit of any Excess Amounts (as defined below), until the cash on deposit in the Spread Account is at least equal to the Minimum Funded Amount and the sum of the Funded Amount and the Overcollateralization Amount is at least equal to the Specified Spread Account Balance. "Excess Amounts" in respect of a Distribution Date will be calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments" and will equal the funds on deposit in the Collection Account in respect of such Distribution Date, after giving effect to all distributions required to be made on such Distribution Date. The Specified Spread Account Balance, the Minimum Funded Amount and the Overcollateralization Amount will be calculated as described under "Certain Information Regarding the Securities -- Payment Priorities of the Notes and the Certificates; The Spread Account -- Calculation of Specified Spread Account Balance." On each Distribution Date, funds will be withdrawn from the Spread Account for distribution to Securityholders to cover any shortfalls in interest and principal required to be paid on the Securities (before giving effect to any claim under the Policies). If on the last day of any month (each, a "Calculation Day") or on any Distribution Date the Spread Account is fully funded, any excess cash on deposit therein will be released therefrom and upon such distribution Securityholders will have no further rights in, or claims to, such amounts. See "Certain Information Regarding the Securities -- Withdrawals from the Spread Account." C. The Policies............ On the Closing Date, Financial Security will issue the Note Policy to the Indenture Trustee and the Certificate Policy to the Owner Trustee pursuant to the insurance, indemnity and pledge agreement to be dated as of June 1, 1997 (the "Insurance Agreement"), among Financial Security, the Trust, the Seller, Bankers Trust Company as Collateral Agent for Financial Security, WII and WFS. Pursuant to the Note Policy, Financial Security will unconditionally and irrevocably guarantee to the Noteholders payment of the Scheduled Payments for each Distribution Date. Pursuant to the Certificate Policy, Financial Security will unconditionally and irrevocably guarantee to the Certificateholders payment of the Guaranteed Distributions for each Distribution Date. See "The Policies" and "Financial Security Assurance Inc." Optional Purchase.......... The Seller may, but will not be obligated to, purchase all of the Contracts in the Trust, and thereby cause early retirement of all outstanding Securities, on any Distribution Date as of which (i) the Aggregate Scheduled Balance is 10% or less of the Cut-Off Date Aggregate Scheduled Balance and (ii) the aggregate outstanding principal amount of the Securities is 5% or less of the initial aggregate amount of the Securities (an "Optional Purchase"). See "Certain Information Regarding the Securities -- Termination." The Master Servicer........ WFS, as Master Servicer, will be obligated pursuant to the Sale and Servicing Agreement, subject to the limitations set forth therein, to service the Contracts and to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by WFS are incorrect or if WFS, as Master Servicer, breaches certain of its servicing obligations under the Sale and Servicing Agreement, in either case in a manner that materially and adversely affects such Contracts. See "The Master Servicer." Ratings.................... It is a condition of issuance that the Class A-1 Notes be rated A-1+ by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the "Rating Agencies"), and the Class A-2, Class A-3 and Class A-4 Notes and the Certificates each be rated AAA by S&P and Aaa by Moody's. See "Ratings of the Securities." Tax Status................. In the opinion of special tax counsel to the Seller, for both federal and California income tax purposes, the Notes will be characterized as debt, and the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. Each Noteholder, by the acceptance of a Note, will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate, will agree to treat the Trust as a partnership in which the Certificateholders are partners for federal income tax purposes. See "Certain Federal Income Tax Consequences" and "Certain California Income Tax Consequences." ERISA Considerations....... Subject to the considerations discussed under "ERISA Considerations," the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Since the Certificates will be subordinated to the Notes to the extent described herein, employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations." Legal Investment........... The Class A-1 Notes have been structured to be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisors regarding the eligibility of the Class A-1 Notes under Rule 2a-7, the fund's investment policies and objectives and an investment in the Class A-1 Notes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038243_jlk_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038243_jlk_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e35147422f3f457e73e14fb552106be5fba44697
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038243_jlk_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. JLK Direct Distribution Inc., a recently formed wholly owned subsidiary of Kennametal Inc. ("Kennametal"), will own, operate and distribute the industrial supply products previously marketed, sold and distributed by Kennametal through its integrated industrial supply programs ("Full Service Supply Programs") and its wholly owned J&L America, Inc. subsidiary, which has and will continue to do business as "J&L Industrial Supply" (together, the "Industrial Supply Business"). Except as otherwise noted or unless the context otherwise requires, (i) the information in this Prospectus gives effect to the contribution (the "Contribution") to the Company of the Industrial Supply Business, (ii) the "Company" refers, with respect to any date prior to the effective date of the Contribution, to the Industrial Supply Business and, with respect to any date on or subsequent to the effective date of the Contribution, to JLK Direct Distribution Inc. and its subsidiaries, including J&L America, Inc., (iii) "Kennametal" refers to Kennametal and its subsidiaries other than the Company, J&L America, Inc. and Kennametal's Full Service Supply Programs, (iv) "fiscal" in connection with a year means the 12 months ended June 30 of the calendar year specified, (v) "active customers" refers to direct-marketing customers which have purchased products from the Company within the 12 months preceding the relevant period end and (vi) the information in this Prospectus assumes no exercise of the Underwriters' over- allotment option (if the Underwriters' over-allotment option is exercised, the Underwriters may purchase up to an additional 640,000 shares of Class A Common Stock from the Company and Kennametal's shares of Class B Common Stock will be correspondingly reduced at that time). This Prospectus contains certain forward-looking statements (as such term is defined in the Securities Act) concerning the Company's operations, performance and financial condition, including, in particular, the likelihood of the Company's success in developing and expanding its business. These statements are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those set forth in "Risk Factors." Forward-looking statements contained in this Prospectus are not subject to the "safe harbor" provisions for forward-looking statements contained in the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. THE COMPANY The Company is one of the largest suppliers of a broad range of metalworking consumables and related products to customers in the United States, offering a full line of cutting tools, carbide and other tool inserts, abrasives, drills, machine tool accessories, hand tools and other industrial supplies. To meet the varying supply needs of small, medium and large-sized customers, the Company offers: (i) a direct-marketing program, whereby the Company supplies predominantly small and medium-sized customers through catalog and showroom sales and (ii) integrated industrial supply programs, by which large industrial manufacturers engage the Company to carry out all aspects of complex metalworking supply processes, including needs assessment, cost analysis, procurement planning, supplier selection, "just-in-time" restocking of supplies and ongoing technical support. The Company also conducts its direct-marketing program for small and medium-sized customers in the United Kingdom. The Company estimates the size of the United States market for metalworking consumables and other related products in which the Company participates at approximately $50.0 billion. The Company believes it has and will continue to enjoy strong growth from two important trends now impacting the industrial supply industry. First, the industrial supply industry is experiencing consolidation of currently fragmented distribution channels, as customers seek and technology makes possible the convenience, cost savings and economies of scale associated with single sources of supplies. Second, to achieve even greater cost savings and efficiencies, manufacturers are outsourcing complex procurement and possession processes needed to supply metalworking products that are critical to their manufacturing operations. As a market leader with a broad range of products and services and proven capabilities, the Company is well-positioned to continue to take advantage of these industry trends. The direct-marketing program serves the needs of predominantly small and medium-sized metalworking customers by offering 100,000 stock keeping units ("SKUs") through the Company's 1,465 page master catalog, monthly promotional sales flyer (the "Advantage"), additional mailings and advertisements, telemarketing efforts, direct sales efforts and 24 showrooms. The Company offers customers the advantages of (i) a single source of supply for all metalworking consumables and related products, (ii) a tiered product offering (such as "good," "better" and "best"), (iii) same-day pick-up for the most popular products stocked at showrooms, (iv) same-day direct shipping and (v) a state-of-the-art order entry system that tracks product availability and pricing, provides technical product information and results in an order being completed in an average time of three minutes. In addition, the Company has a dedicated sales force based in each showroom that actively calls on targeted customers. Full Service Supply Programs allow customers to achieve substantial cost savings in metalworking consumables and overall manufacturing processes by outsourcing the entire process of acquiring and possessing metalworking and related products at manufacturing facilities. Customers, such as General Motors Corporation, Allied Signal and Emerson Electric, use Full Service Supply Programs at designated manufacturing facilities to (i) consolidate all of their metalworking consumables and related product purchases with one vendor, (ii) eliminate a significant portion of the administrative overhead burden associated with the internal purchasing function, (iii) ensure appropriate technical expertise in the selection and use of supplies for complex metalworking processes and (iv) minimize the level of investment in tooling inventory, thereby reducing inventory carrying costs. The Company's technical experts customize and manage a comprehensive computerized product identification, tracking and purchasing system that analyzes and optimizes supply usage, helps select appropriate products and allows for "just-in-time" replacement of inventory. To increase efficiency and maximize cost savings for its customers, the Company also provides ongoing application assistance in the usage of metalworking tools. The Company believes that its Full Service Supply Programs typically reduce customers' costs of acquiring, possessing and using metalworking products by approximately 5% to 20% per year. The Company has grown rapidly due to geographic expansion, expanded product offerings, increased direct mailings and an increased demand for both single-source supply and integrated industrial supply programs such as its Full Service Supply Programs. From fiscal 1993 through fiscal 1996, the Company's net sales increased from $109.4 million to $244.0 million, representing a compound annual growth rate ("CAGR") of 30.7%. Operating income during this period increased from $5.0 million to $24.9 million, representing a CAGR of 70.4%. During this same period, the Company's number of active direct-marketing customers increased from 47,000 to 71,000 and the number of such customers who purchased annually over $10,000 of products increased from 800 to 2,300. Specific drivers of growth include: - STRONG GROWTH IN EXISTING MARKETS. The Company has grown its net sales 84% from fiscal 1993 through fiscal 1996 in areas where it has had an existing showroom as of the beginning of fiscal 1993 or which have been served only through catalog sales. The Company did not add a showroom in these areas during that period. The primary source of this growth has been from areas where a showroom existed. In these areas, the Company gained marketshare through targeted marketing to existing and prospective customers. - PENETRATION OF NEW MARKETS. From fiscal 1993 through fiscal 1996, net sales have grown 233% in areas in which new showrooms have been added, with 12 new showrooms in the United States and one in the United Kingdom added during the period. Along with these showrooms, the Company uses a focused sales call process to build sales. - EXPANDED PRODUCT OFFERINGS. From the beginning of fiscal 1993 through fiscal 1996, the Company added over 600 pages, including 40,000 new SKUs and 165 product brand names and private labels, to its annual master catalog. - EXPANSION OF FULL SERVICE SUPPLY PROGRAMS. From the beginning of fiscal 1993 through fiscal 1996, the number of customers in Full Service Supply Programs increased from nine to 42, with site locations increasing from 32 to 86. The Company believes that a significant factor contributing to its growth has been its ability to identify itself as an affiliate of Kennametal, the largest North American provider of metalcutting tools and tooling systems. The Company also relies upon and markets its access to Kennametal's research and technical expertise in tooling products and supplies. See "Risk Factors--Control by Kennametal." The Company was incorporated in Pennsylvania on April 28, 1997 to be a holding company for the Industrial Supply Business. BUSINESS STRATEGY The Company's business strategy is to become the preferred supplier of metalworking consumables and related products to the metalworking industry by being a "one-stop shop" for metalworking products for small and medium-sized customers and by offering managed solutions for large customers. The Company believes its market-leadership position results from the successful implementation of its business strategy, the major elements of which include: - BREADTH OF METALWORKING PRODUCTS AND METALWORKING FOCUS. As its customers continue to consolidate their suppliers, the Company differentiates itself through its breadth of metalworking products and metalworking focus. The Company believes its ability to offer a broad spectrum of metalworking products and a tiered product selection alternative through which similar product offerings with varying degrees of name recognition, quality and price are categorized, such as "good," "better" and "best," has been an important component in expanding direct-marketing sales to small and medium-sized customers. The Company's metalworking focus also enables the Company to understand complex industrial metalworking processes so as to provide valuable technical advice that reduces costs to its Full Service Supply Program customers. - EXCEPTIONAL CUSTOMER SERVICE. The Company emphasizes exceptional customer service supported by sophisticated information systems and ongoing employee training. The Company's telemarketing representatives, utilizing sophisticated customer support software, inform catalog customers on a real-time basis of the Company's product availability and pricing, verify credit information, update customer information and provide technical product information in calls lasting on average only three minutes. For customers participating in its Full Service Supply Programs, the Company provides continuous improvement specialists to ensure quality service and low costs by assisting such customers in the acquisition, possession and use of metalworking consumables and related products. - RAPID FULFILLMENT AND JUST-IN-TIME PRODUCT DELIVERY. The Company believes that its ability to fulfill rapidly the orders of convenience-driven customers and manage complex procurement processes for large clients has been critical to its growth. The Company has developed highly efficient inventory management and order fulfillment systems that allow more than 99% of domestic orders received by 5:00 p.m. to be shipped on the same day and delivered by low-cost ground carriers. In addition, in its Full Service Supply Programs, the Company uses sophisticated systems that permit "just-in-time" purchasing and delivery of products resulting in low costs to its customers. - COMMITMENT TO TECHNOLOGICAL INNOVATION. The Company uses technology to benefit customers and to improve the Company's productivity and efficiency. The Company's sophisticated customer support software tracks all 100,000 SKUs, enabling its telemarketing representatives to inform catalog customers on a real-time basis of the Company's product availability and pricing, verify credit information, update customer information and provide technical product information. The software for Full Service Supply Programs allows the Company to manage and automate a large customer's entire processes related to the acquisition, possession and use of metalworking consumables and related products. GROWTH STRATEGY The Company's objective is to expand its leadership position as a preferred supplier to small, medium and large customers for metalworking consumables and related products. The major elements of the Company's growth strategy include: - INCREASED PENETRATION OF EXISTING MARKETS. The Company intends to increase sales to small and medium-sized consumers by (i) expanding targeted direct-mail and related campaigns, (ii) increasing the number of products, product lines, product brand names and private labels offered in its master catalog and (iii) focusing the Company's sales force on marketing to these consumers. The Company plans to build on its comprehensive marketing approach, which includes special showroom events and targeted direct-mail and ongoing product promotions. In markets in which the Company has had showrooms for at least three years, such as the Detroit metropolitan area, the Company intends to increase its market share by adding showrooms and expanding the services it offers to its customers. The Company also plans to build on its reputation with Full Service Supply Program customers to expand into other facilities of such customers, while seeking new customers. - FURTHER EXPANSION INTO NORTH AMERICAN MARKETS. To continue expanding its North American presence, the Company plans to increase distribution capacity and operational efficiency, add new showrooms and increase the customer base for its Full Service Supply Programs. The Company plans to construct a new midwest distribution center with a portion of the proceeds from the Offering. New showrooms have historically resulted in substantial growth in sales in the surrounding territory. For example, when the Company opened its showroom in Atlanta in September 1995, sales in that market increased by over 200% in the following nine months. The Company has showrooms in 19 of the top 50 industrial markets in the United States and intends to have showrooms in 40 of such 50 markets over the next several years. In connection with this expansion, the Company will continue to consider strategic acquisitions of metalworking distributors, such as its acquisition in April 1997 of the Strelinger Company ("Strelinger"), based in Troy, Michigan (the "Strelinger Acquisition"), and its acquisition in May 1997 of Mill & Abrasive Supply, Inc. ("M&A"), based in Roseville, Michigan (the "M&A Acquisition"). The Company intends to continue to leverage its relationship with Kennametal to market its Full Service Supply Programs to large industrial metalworking customers of Kennametal. The Company also intends to customize versions of its Full Service Supply Programs to meet the needs of medium-sized industrial facilities. The Company estimates that the market for Full Service Supply Programs consists of 12,000 to 15,000 industrial manufacturing facilities in the United States. - EXPANSION INTO INTERNATIONAL MARKETS. The Company believes that the consolidation and outsourcing trends which provide growth opportunities in the United States also offer comparable opportunities in international markets. The Company entered the United Kingdom market in fiscal 1995 with a 256-page catalog which included over 20,000 products. In April 1997, the Company released an 800-page catalog which includes over 60,000 products. The Company now has over 13,000 active customers in such market. Over the next five years, the Company anticipates launching additional direct-marketing efforts and opening showrooms in the United Kingdom, Germany and certain other European countries and is considering direct marketing in certain other countries. The Company is also planning to introduce its Full Service Supply Programs into international markets, such as the United Kingdom and Germany, by offering this service to foreign manufacturing facilities of the Company's domestic Full Service Supply Program customers and to Kennametal's foreign customers. The address of the Company's principal executive offices is State Route 981 South, P.O. Box 231, Latrobe, Pennsylvania 15650 and its telephone number is (412) 539-5000. THE OFFERING Class A Common Stock offered....................... 4,257,000 shares Common Stock outstanding after the Offering: Class A Common Stock(1)(2)................... 4,257,000 shares Class B Common Stock(1)...................... 20,897,000 shares Total Common Stock(2)...................... 25,154,000 shares Use of proceeds............... The net proceeds from the Offering, after deducting estimated underwriting discounts and expenses, are estimated to be approximately $66.1 million and will be used (i) to repay $20.0 million of indebtedness related to a dividend paid to Kennametal on April 28, 1997, (ii) to repay amounts due to Kennametal totaling approximately $19.0 million relating to acquisitions, income taxes and employee benefit obligations, (iii) to acquire or construct a new Midwest distribution center, (iv) to provide working capital for new showrooms and Full Service Supply Programs and (v) to fund acquisitions. See "Use of Proceeds." Voting rights................. The holders of Class A Common Stock generally have rights, including as to dividends, identical to those of holders of Class B Common Stock, except that holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to 10 votes per share. Holders of Class A Common Stock and Class B Common Stock generally vote together as a single class, except as otherwise required by Pennsylvania law. See "Description of Capital Stock--Common Stock--Voting Rights." Under certain circumstances, Class B Common Stock converts to Class A Common Stock. See "Description of Capital Stock--Common Stock--Conversion." New York Stock Exchange symbol........................ "JLK" - --------- (1) The shares of Class B Common Stock are convertible at any time into shares of Class A Common Stock. See "Description of Capital Stock--Common Stock--Conversion." (2) Does not include 450,000 shares of Class A Common Stock issuable upon exercise of stock options that will be granted to executive officers and directors of the Company upon consummation of the Offering. Such options will be subject to a one-year vesting period. See "Management--Executive Compensation" and "--JLK Direct Distribution Inc. 1997 Stock Option and Incentive Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038271_made2manag_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038271_made2manag_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c0810d0296f408f1e690cf881029c2ef1b4bf34f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038271_made2manag_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS," AND THE COMPANY'S FINANCIAL STATEMENTS AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Made2Manage Systems, Inc. (the "Company") develops, markets and supports fully integrated, Microsoft Windows-based business applications software for manufacturers. The Company's principal product, Made2Manage for Windows ("Made2Manage"), is an enterprise resource planning ("ERP") software application designed to meet the unique needs of small and midsize discrete manufacturers engaged in engineer-to-order, make-to-order, make-to-stock and mixed mode operations. Made2Manage is a comprehensive application suite designed to be the only business software these manufacturers need to effectively manage their entire organizations, and includes customer order management, manufacturing resource planning and scheduling, materials management, decision support and data warehousing, and finance and accounting. Since its introduction in late 1995, Made2Manage has been licensed by more than 500 manufacturers in North America, primarily in the United States. In addition, the Company continues to support more than 150 manufacturing sites using the DOS-and UNIX-based predecessors of Made2Manage. The Company strategically targets manufacturers with annual revenues of between $5 million and $50 million with a scalable product designed to support its customers' growth. Advanced Manufacturing Research, Inc. ("AMR"), an independent market research firm, has estimated that the ERP software market reached $7.2 billion in 1996 and projected that the market will grow at an average annual rate of over 34% for the next five years. While the largest share of the ERP software market in 1996 was attributable to applications aimed at large manufacturers, the Company believes that the small and midsize segment of the market is not only rapidly growing, but is also fragmented and underserved. In addition, Windows NT is emerging as the platform of choice among small and midsize manufacturing operations. Unlike many competing ERP software applications, Made2Manage is a native, 32-bit product that takes full advantage of the Microsoft Windows and Windows NT platforms. Furthermore, Made2Manage was designed specifically as an integrated business solution for small and midsize manufacturers, providing simplicity of operation, rapid implementation, ease of administration and low total cost of ownership. It is a fully integrated solution providing easy access to shared information from all functional areas of a manufacturing organization. Made2Manage improves information flow throughout a company and across the supply chain. This enables a manufacturer to better meet the needs of its customers and realize numerous competitive advantages, including the ability to customize production, shorten manufacturing cycles and improve customer service. The Company's objective is to be a leading provider of fully-integrated ERP software solutions for manufacturers in its target market. The Company's strategy for achieving this objective includes (i) maintaining its focus on the unique requirements of small and midsize manufacturers; (ii) expanding its distribution channels by increasing its direct sales and marketing force, strengthening its relationship with value added resellers ("VARS") and exploring international expansion opportunities; (iii) evaluating potential strategic acquisitions; (iv) capitalizing on Year 2000 replacement opportunities; (v) leveraging the scalable functionality and flexibility of its products to accommodate customer growth; and (vi) continuing to achieve high levels of customer satisfaction. The Company was incorporated under the laws of Indiana as Teksyn, Inc. in 1986 and changed its name to Made2Manage Systems, Inc. in 1995. The Company's principal executive offices are located at 9002 Purdue Road, Indianapolis, IN 46268, and its telephone number is (317) 875-9750. THE OFFERING <TABLE> <CAPTION> Shares offered by the Company................... 2,050,000 Shares <S> <C> Shares offered by the Selling Shareholders...... 200,000 Shares Common Stock to be outstanding after the 5,011,299 shares of Common Stock(1) offering...................................... Use of proceeds................................. For repayment of certain indebtedness, capital expenditures, and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol................... MTMS </TABLE> SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenue.................................................. $ 4,452 $ 5,935 $ 9,379 $ 6,138 $ 11,041 Operating income............................................... 546 447 700 374 573 Income tax provision (benefit)(2).............................. 5 6 (1,028) 17 197 Net income..................................................... 443 392 1,606 299 323 Pro forma net income per share(3).............................. .61 .15 Pro forma average number of shares(3).......................... 2,846 2,886 Supplemental pro forma net income per share(3)(4).............. .63 .13 Supplemental pro forma average number of shares(3)(4).......... 2,531 2,544 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------- ACTUAL AS ADJUSTED(5) --------- -------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.............................................................. $ 1,856 $ 17,998 Working capital........................................................................ 1,222 17,630 Total assets........................................................................... 8,566 24,708 Long-term obligations, less current portion............................................ 733 -- Total shareholders' equity............................................................. 2,485 19,626 </TABLE> - ------------------------------ (1) Based on shares outstanding at September 30, 1997, including conversion of 1,479,824 shares of convertible preferred stock ("Convertible Preferred Stock") convertible into the same number of shares of Common Stock, and including (i) 1,060,785 shares of Common Stock issuable upon the exercise of stock options outstanding as of September 30, 1997, of which 399,867 were exercisable as of that date, and (ii) 14,063 shares of Common Stock issuable upon the exercise and conversion of warrants outstanding as of September 30, 1997. See "Capitalization," "Management--Stock Option Plan" and Note 5 of Notes to Financial Statements. (2) Net income for the year ended December 31, 1996 includes an income tax benefit of $1.2 million or $.44 per share resulting from the reversal of a valuation allowance which had been established to offset future tax benefits of net operating loss carryforwards. The valuation allowance was reversed during 1996 based on management's analysis which considered the Company's profitable operating results and future outlook because of the market acceptance of its Windows product. As a result of this analysis, management determined it was more likely than not that the deferred income taxes at December 31, 1996 would be realized. For subsequent periods the Company has provided for income taxes utilizing federal and state statutory income tax rates. See Note 7 of Notes to Financial Statements. (3) Computed on the basis described in Note 1 of Notes to Financial Statements. (4) Supplemental pro forma net income per share has been determined in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). (5) Adjusted to reflect the exercise and conversion of outstanding warrants to purchase 14,063 shares of Common Stock and the sale of 2,050,000 Shares offered by the Company hereby (after deducting the estimated underwriting discounts and offering expenses payable by the Company), assuming an initial public offering price of $9.25 per share, and the receipt of net proceeds therefrom. ------------------------------ EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS, INCLUDING FINANCIAL INFORMATION, SHARE AND PER SHARE DATA: (I) REFLECTS THE AUTOMATIC CONVERSION OF ALL OF THE SHARES OF THE COMPANY'S OUTSTANDING CONVERTIBLE PREFERRED STOCK INTO SHARES OF COMMON STOCK ON A ONE-FOR-ONE BASIS UPON THE COMPLETION OF THIS OFFERING; (II) REFLECTS THE EXERCISE AND CONVERSION OF OUTSTANDING WARRANTS FOR 14,063 SHARES OF COMMON STOCK; AND (III) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION TO PURCHASE UP TO 337,500 SHARES OF COMMON STOCK. SEE "UNDERWRITING."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038361_onyx_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038361_onyx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7647f37e0ed3dc3e92e99a259f659d3c8a6c7f06
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038361_onyx_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in this Summary are defined elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of the definitions of certain capitalized terms. An investment in the Certificates involves various risks, and potential purchasers should carefully consider the matters discussed under "Risk Factors" herein in considering an investment in the Certificates. Issuer..................... Onyx Acceptance Grantor Trust 1997-2 (the "Trust"), to be formed by Onyx Acceptance Financial Corporation (the "Seller") pursuant to the Pooling and Servicing Agreement, to be dated as of June 1, 1997 (the "Agreement"), among the Seller, Onyx Acceptance Corporation (the "Servicer") and Bankers Trust Company (the "Trustee"). Securities Offered......... % Auto Loan Pass-Through Certificates (the "Certificates") representing fractional undivided interests in the Trust. The Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. See "The Certificates and the Agreement -- General." Initial Certificate Balance.................... $ . The initial principal balance of the Certificates is equal to the aggregate principal balance of the Contracts as of the Cut-Off Date calculated in accordance with the Rule of 78's or Simple Interest Method. The term "Cut-Off Date Scheduled Balance" means the principal balance of a Contract as of the Cut-Off Date. See "The Contracts." Seller..................... Onyx Acceptance Financial Corporation, a wholly owned limited purpose subsidiary of Onyx Acceptance Corporation ("Onyx"). The Seller's principal executive offices are located at 8001 Irvine Center Drive, 6th Floor, Irvine, California 92618 and its telephone number is (714) 753-1191. See "The Seller." All of the Contracts will have been purchased by the Seller from Onyx. Substantially all of the Contracts have been purchased by Onyx from new and used car Dealers unaffiliated with Onyx or the Seller, and a limited number of Contracts have been originated by Onyx itself. See "The Onyx Portfolio of Motor Vehicle Contracts." Servicer................... Onyx. The Servicer's principal executive offices are located at 8001 Irvine Center Drive, 5th Floor, Irvine California 92618 and its telephone number is (714) 450-5500. See "The Servicer." Trustee.................... Bankers Trust Company. Trust Property............. The Trust's assets (the "Trust Property") will include: (i) a pool of fixed rate motor vehicle retail installment sales contracts (the "Contracts") of which approximately % of the Aggregate Scheduled Balance as of the Cut-Off Date are Rule of 78's Contracts and approximately % of the Aggregate Scheduled Balance as of the Cut-Off Date are Simple Interest Contracts, and all of which were purchased from the Seller and secured by new and used automobiles and light-duty trucks (the "Financed Vehicles"), (ii) certain documents relating to the Contracts, (iii) certain monies due under such Contracts on or after the Cut-Off Date, (iv) security interests in the Financed Vehicles and the rights to receive proceeds from claims on certain insurance policies covering the Financed Vehicles or the individual obligors under each related Contract and the right to certain proceeds under the Blanket Insurance Policy, (v) all amounts on deposit in the Collection Account, including all Eligible Investments credited thereto (but excluding any investment income from Eligible Investments), (vi) the benefits of an irrevocable principal/interest surety bond (the "Surety Bond") issued by Capital Markets Assurance Corporation (the "Insurer"), (vii) the right of the Seller to cause Onyx to repurchase certain Contracts under certain circumstances, (viii) all right, title and interest of the Seller under the Yield Supplement Agreement, dated as of the Closing Date between the Seller and Onyx (the "Yield Supplement Agreement"), and (ix) all proceeds of the foregoing. See "The Trust." Pass-Through Rate.......... % per annum, payable monthly at one-twelfth the annual rate and calculated on the basis of a 360-day year of twelve 30-day months. Distribution Date.......... The 15th day of each month (or, if such day is not a Business Day, the next succeeding Business Day) commencing July 15, 1997 (each a "Distribution Date"). A "Business Day" is a day other than a Saturday, Sunday or other day on which commercial banks located in California or New York are authorized or obligated to be closed. Final Distribution Date.... December 15, 2003. Interest Distribution...... On each Distribution Date, monthly interest (the "Interest Distribution") in an amount equal to the product of one-twelfth of the Pass-Through Rate and the Pool Balance as of the end of the Collection Period preceding the related Collection Period will be distributed to the Certificateholders of record on a pro rata basis as of the related Record Date. The "Pool Balance" as of any date is the Aggregate Scheduled Balance of the Contracts as of such date, excluding those Contracts which as of such date have become Liquidated Contracts or have been repurchased by the Seller or purchased by the Servicer. Interest will be paid from collections received on the Contracts on deposit in the Collection Account or previously collected and available for distribution and from payments under the Yield Supplement Agreement. A "Collection Period" with respect to a Distribution Date will be the calendar month preceding the month in which such Distribution Date occurs; provided, that with respect to Liquidated Contracts (as defined below) the Collection Period will be the period from but excluding the sixth Business Day preceding the immediately preceding Distribution Date to and including the sixth Business Day preceding such Distribution Date. With respect to the first Distribution Date the "Collection Period" for Liquidated Contracts will be the period from and including the Cut-Off Date to and including the sixth Business Day preceding such first Distribution Date. See "The Certificates and the Agreement -- Distributions of Principal and Interest." Principal Distribution..... On each Distribution Date, Principal Distributions for the related Collection Period will be passed through to the Certificateholders. The "Principal Distribution" on any Distribution Date is the Aggregate Scheduled Balance Decline (as defined below) during the related Collection Period. The Principal Distribution on the Final Distribution Date will include the Aggregate Scheduled Balance of all Contracts that are outstanding at the end of the Collection Period immediately prior to the Final Distribution Date. The "Aggregate Scheduled Balance Decline" for any Distribution Date is the amount by which the Aggregate Scheduled Balance of the Contracts as of the beginning of the related Collection Period exceeds the Aggregate Scheduled Balance of such Contracts as of the end of the related Collection Period. The "Aggregate Scheduled Balance" of the Contracts is the sum of the Scheduled Balance of each Contract. The "Scheduled Balance" of a Rule of 78's Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of each scheduled payment of principal and interest due on such Contract (the "Monthly P&I") on or prior to the date of calculation that is allocated to principal under the Recomputed Actuarial Method. The Scheduled Balance of a Simple Interest Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of Monthly P&I on or prior to the date of calculation that is allocated to principal under the Simple Interest Method. The Scheduled Balance of any Contract that is a Liquidated Contract or that has been purchased by the Servicer or repurchased by the Seller will equal zero. A "Liquidated Contract" is a Contract that (a) is the subject of a Full Prepayment, (b) is a Defaulted Contract and with respect to which Liquidation Proceeds constituting, in the Servicer's reasonable judgment, the final amounts recoverable have been received, (c) is paid in full on or after its Maturity Date or (d) has been a Defaulted Contract for four or more Collection Periods and as to which Liquidation Proceeds constituting the final amounts recoverable have not been received; provided, however, that in any event a Contract that is delinquent in the amount of five monthly payments at the end of a Collection Period is a Liquidated Contract. A "Defaulted Contract" with respect to any Collection Period is a Contract (a) which is, at the end of such Collection Period, delinquent in the amount of two monthly payments or (b) with respect to which the related Financed Vehicle has been repossessed or repossession efforts have been commenced. See "The Contracts" and "The Certificates and the Agreement -- Distributions of Principal and Interest." Yield Supplement Agreement.................. Onyx will enter into the Yield Supplement Agreement with the Seller, which will assign its interest therein to the Trust. The Yield Supplement Agreement will provide for payment by Onyx into the Collection Account on or before five Business Days prior to each Distribution Date (the "Servicer Report Date") of the Yield Supplement Amount. The "Yield Supplement Amount," with respect to any Distribution Date for any Collection Period, is the sum of the following as calculated for each Contract: the amount (if positive), calculated by the Servicer, equal to one-twelfth of (i) interest on such Contract's Scheduled Balance as of the first day of the related Collection Period at a rate equal to % minus (ii) interest on such Contract at its Recomputed Yield on such Contract's Scheduled Balance as of the first day of the related Collection Period. The obligation of Onyx to pay the Yield Supplement Amount will be secured by funds on deposit in a segregated trust account to be maintained for the benefit of the Certificateholders and the Insurer (the "Yield Supplement Reserve Account"). The amount required to be deposited in the Yield Supplement Reserve Account will initially be equal to the maximum Yield Supplement Amount that may become owing under the Yield Supplement Agreement, assuming that payments on the Contracts are made on their scheduled Due Dates and that no prepayments are made. See "The Certificates and the Agreement -- Yield Supplement Agreement and Yield Supplement Reserve Account." Servicing Fee.............. The Servicer will be responsible for managing, administering, servicing, and making collections on the Contracts. Compensation to the Servicer will consist of a monthly fee (the "Servicing Fee"), payable from the Trust to the Servicer on each Distribution Date, in an amount equal to the product of one-twelfth of 1.00% per annum (the "Servicing Fee Rate") multiplied by the Pool Balance as of the end of the Collection Period preceding the related Collection Period. As additional compensation, the Servicer will be entitled to any late fees and other administrative fees and expenses or similar charges collected with respect to the Contracts. The Servicer or its designee will also receive as servicing compensation investment earnings on Eligible Investments and the amount, if any, by which the outstanding principal balance of a Rule of 78's Contract that is subject to a Full Prepayment exceeds the Scheduled Balance of such Contract. See "The Certificates and the Agreement -- Servicing Fee." Surety Bond................ On the Closing Date, the Insurer will issue a principal/interest surety bond (the "Surety Bond") to the Trustee pursuant to an Insurance and Reimbursement Agreement (the "Insurance Agreement"), dated as of June , 1997, among the Insurer, Onyx, the Seller and the Trustee. Pursuant to the Surety Bond, the Insurer will unconditionally and irrevocably guarantee payment of the Interest Distribution and Principal Distribution on each Distribution Date to the Trustee for the benefit of the Certificateholders. If on the Servicer Report Date with respect to any Distribution Date the amount on deposit and available in the Collection Account, after giving effect to all amounts deposited or payable from the Payahead Account, the Yield Supplement Reserve Account and/or pursuant to the Yield Supplement Agreement, is less than the sum of the Servicing Fee, the Principal Distribution and Interest Distribution for the related Distribution Date, the Trustee, by delivering a notice to the Insurer, shall demand payment under the Surety Bond in an amount equal to such deficiency. The Insurer shall pay or cause to be paid such amount to the Trustee for credit to the Collection Account and the Trustee shall withdraw from the Collection Account and shall pay such amount to the Certificateholders on the related Distribution Date. On the Final Distribution Date, to the extent the amount on deposit and available in the Collection Account is less than all remaining unpaid interest and principal on the Certificates, the Insurer shall pay or cause to be paid an amount equal to such shortfall. See "The Certificates and the Agreement -- The Surety Bond." Contracts.................. The Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date was $ . As of the Cut-Off Date the Contracts had a weighted average annual percentage rate of % and a weighted average remaining term of months. Approximately % of the Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date allocate interest and principal in accordance with the Rule of 78's (the "Rule of 78's Contracts"), and approximately % in accordance with the Simple Interest Method (the "Simple Interest Contracts"). Approximately % of the Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date were originated in California, % in Arizona, % in Washington and the balance in Florida, Nevada and Oregon. Substantially all of the Contracts were originated by automobile dealerships ("Dealers") and assigned to Onyx, and a limited number of Contracts were originated by Onyx itself. All the Contracts will have been purchased by the Seller from Onyx and by the Trust from the Seller. The Seller is required to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Certificateholders or the Insurer. All of the Contracts have been selected by Onyx from its portfolio of motor vehicle installment sales contracts based upon the criteria specified in the Agreement. All collections of Monthly P&I, all prepayments on the Contracts collected by the Servicer and all amounts paid under the Surety Bond will be deposited in or credited to the Collection Account. Partial prepayments of Monthly P&I ("Payaheads") on Rule of 78's Contracts will be transferred on the Servicer Report Date to the Payahead Account, to be applied against future scheduled payments of Monthly P&I. Partial and full prepayments on Simple Interest Contracts will be passed through to Certificateholders on the Distribution Date immediately following the Collection Period in which such prepayments are received. All payments to the Certificateholders will be made from the Collection Account and certain funds remaining in the Collection Account following distributions to Certificateholders and others will be paid to the Insurer to be promptly distributed in accordance with the terms of the Insurance Agreement. See "The Contracts" and "The Certificates and the Agreement -- Payahead Account." Optional Termination....... The Servicer may purchase all of the Contracts on any Distribution Date as of which the Pool Balance (after giving effect to the Principal Distribution on such Distribution Date) has declined to 10% or less of the Cut-Off Date Scheduled Balance for all of the Contracts (the "Original Pool Balance"), subject to certain provisions in the Agreement. See "The Certificates and the Agreement -- Repurchase of Contracts." Federal Income Tax Status..................... In the opinion of counsel to the Seller, the Trust will be treated for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Certificateholders must report their respective allocable shares of income earned on Trust assets and, subject to certain limitations applicable to individuals, estates and trusts, may deduct their respective allocable shares of reasonable servicing and other fees. See "Certain Federal Income Tax Consequences." ERISA Considerations....... The Certificates may be purchased by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") upon satisfaction of certain conditions described herein. See "ERISA Considerations." Rating..................... It is a condition of issuance of the Certificates that they be rated in the highest rating category by two nationally recognized rating agencies. This rating will be based primarily on the issuance of the Surety Bond by the Insurer. See "Risk Factors -- Rating." Registration of the Certificates............... The Certificates will initially be represented by certificates registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). No person acquiring an interest in a Certificate through the facilities of DTC (a "Certificate Owner") will be entitled to receive a Definitive Certificate representing such person's interest in the Trust, except in the event that Definitive Certificates are issued in certain limited circumstances. See "The Certificates and the Agreement."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038368_schuff_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038368_schuff_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..eb5ec6c12751a6e3b2cdac6bf6ab7ad1a3b4fddb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038368_schuff_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus: (i) gives effect to the redomestication merger of the Company's predecessor Arizona corporation with and into the Company and the exchange of 50,000 shares of Common Stock for each then issued and outstanding share of common stock of the predecessor corporation pursuant to such merger; (ii) gives effect to the revocation of the Company's subchapter S election immediately prior to the closing of this offering; and (iii) assumes no exercise of either the over-allotment option granted to the Underwriters or currently outstanding stock options granted by the Company. Except as otherwise specified, all references herein to the "Company" or "Schuff" include Schuff Steel Company, a Delaware corporation, its subsidiary, and its predecessor Arizona corporation. THE COMPANY Schuff Steel Company is a rapidly growing steel fabrication and erection firm that provides a fully integrated range of steel construction services. Schuff operates primarily in the southwestern United States with a concentration in Arizona, Nevada and southern California, and has recently expanded its operations into South America and Mexico. The Company is the largest steel fabrication and erection firm serving the Arizona industrial and commercial markets, a position it recently enhanced with the 1997 acquisition of B&K Steel Fabrications, Inc. ("B&K Steel"). The Company also believes that it is the leading steel fabricator and erector for the hotel and casino industry in Nevada. Engineering News Record ranked the Company as the second largest steel erection subcontractor in the United States based upon 1995 revenues and as the largest steel erection subcontractor in the United States based upon 1994 revenues. Schuff has achieved significant growth in revenues and pre-tax income over the past five years. Revenues have more than doubled from $47.0 million in 1992 to $103.9 million ($113.3 million giving pro forma effect to the 1997 B&K Steel acquisition) in 1996. During that same period, pre-tax income has grown at a compound annual growth rate of 101.5%, from $610,000 in 1992 to $10.1 million in 1996. The Company seeks to differentiate itself from its competitors by providing a fully integrated range of steel construction services, including engineering, detailing, fabrication and erection, and by providing a level of service and expertise necessary to accommodate large, fast track projects. The Company believes that there is an increasing trend in the industry to design and build projects according to accelerated time schedules. With many projects, only a portion of the detail design drawings are completed when construction begins. The remaining drawings are completed, with numerous design changes being implemented, throughout the construction process. The fast track, "design-as-you-go" nature of these projects creates a demand for integrated contractors that can (i) reduce the logistical and coordination problems inherent in using multiple subcontractors and (ii) more efficiently respond to rapid and multiple design changes while minimizing the project delays and cost overruns commonly associated with such changes. The complexity and size of these projects is particularly suited to contractors with extended financial and operational capabilities. The Company believes that it has gained a reputation in the industry as a reliable, fully integrated provider of engineering, detailing, fabrication and erection services with the ability to complete large, complex projects on a timely, cost efficient basis. The Company has provided its integrated fabrication and erection services to a wide variety of projects, including hotels and casinos, office complexes, hospitals, mining facilities, manufacturing plants, shopping malls, sports stadiums, large diameter water pipes, and other public works projects. Examples of major projects include: Bank One Ballpark, a baseball stadium featuring a fully retractable steel roof being constructed for Major League Baseball's Arizona Diamondbacks franchise; Agua Fria Siphon Project, an aqueduct system with over two miles of specially fabricated 21 foot diameter pipe; MGM Grand Hotel & Casino in Las Vegas, the world's largest hotel and casino; Intel Corp.'s Fab 12 Plant, one of the largest semiconductor manufacturing plants in the United States; and Bajo de la Alumbrera in Argentina, one of the largest copper mines in the world. The Company believes that the steel fabrication and erection industry is highly fragmented and that many of its competitors are small businesses that offer limited services or confine operations to local or regional markets. Given the trend toward the use of fully integrated contractors, the Company believes the industry may experience consolidation and that it is well positioned to take advantage of potential acquisition opportunities. BUSINESS STRATEGY The Company's objective is to achieve and maintain a leading market position in each of its geographic and specific product markets. The Company seeks to achieve this objective by pursuing the following business strategies: (i) promoting its ability to provide a fully integrated range of engineering, detailing, fabrication and erection services, which enables the Company to compete more effectively on large, complex, fast track, "design-as-you-go" projects; (ii) focusing its engineering, detailing, fabrication and erection expertise on distinct product segments requiring unique or innovative techniques, where the Company typically experiences less competition; (iii) diversifying its construction projects across a wide range of commercial, industrial and specialty projects; and (iv) offering in-house project management and engineering expertise not typically provided by steel fabricators or erectors, which facilitates the Company's ability to procure contracts for large, more complicated projects. GROWTH STRATEGY The Company seeks to achieve continued growth and diminish the impact of business and economic cycles by pursuing the following strategies: (i) promoting growth internally by adding sales and marketing personnel dedicated to fast growing markets, further developing its engineering and design capabilities and fabrication capacity, and continually updating its fabrication and detailing equipment and technologies; (ii) capitalizing on the highly fragmented nature of the steel fabrication and erection industry by pursuing selective acquisitions of companies that offer the Company increased plant facilities, opportunities to increase market share in selected geographic markets, penetration of new product market segments and access to domestic and international markets targeted by the Company for geographic expansion; (iii) pursuing additional project opportunities by continuing to diversify into new geographic and product markets, leveraging its existing relationships with key national and multi-national general contractors and other customers, and establishing new strategic alliances; and (iv) expanding its international operations by pursuing opportunities in South America, Mexico and Southeast Asia. The Company was incorporated in Arizona in 1976 and reincorporated under the laws of Delaware in 1997. The Company's principal executive offices are located at 420 South 19th Avenue, Phoenix, Arizona 85009, and its telephone number is (602) 252-7787. THE OFFERING <TABLE> <S> <C> Common Stock offered........................ 2,200,000 shares(1) Common Stock to be outstanding immediately after this offering....................... 7,200,000 shares(1) Use of proceeds............................. Purchase of specialized equipment, funding of the subchapter S distribution to the Company's present stockholders, and general corporate and working capital purposes. See "Use of Proceeds" and "S Corporation Distribution." Proposed Nasdaq National Market symbol...... "SHUF" </TABLE> - --------------- (1) Excludes 330,000 shares of Common Stock that may be sold by the Company upon exercise of the Underwriters' over-allotment option. Also excludes 345,500 shares of Common Stock issuable upon exercise of stock options outstanding under the Company's 1997 Stock Option Plan with an exercise price of $5.00 per share, and 22,500 shares of Common Stock issuable upon exercise of stock options to be granted to the Company's non-employee directors upon their appointment to the Board of Directors at the closing of this offering at an exercise price equal to the initial public offering price. See "Management,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038503_panda_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038503_panda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ab3185cb2fdf134752ba21859d8fe30e2c9e0c0e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038503_panda_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Issuer's and the Company's financial data, including the notes thereto, appearing elsewhere in this Prospectus. All references to the Company which pertain to events prior to March 7, 1997 relate solely to the business and operations of certain subsidiaries of Panda Energy International, Inc., which are now subsidiaries of the Company. See "Business of the Issuer, the Company, Panda International and Their Subsidiaries-The Issuer, the Company and Panda International." Investors should carefully consider the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Notes. For definitions of certain terms used herein, see the glossary included as Appendix A to this Prospectus, and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans on the Collateral Documents - Certain Definitions." The Issuer and the Company Panda Global Energy Company (the "Issuer") is a wholly-owned subsidiary of Panda Global Holdings, Inc. (the "Company"). The Issuer is a newly- formed corporation formed primarily for the purpose of issuing the Old Notes and the Exchange Notes, as well as other securities to finance additional Projects which may be developed or acquired by subsidiary entities of the Issuer. The Company is an independent power company principally engaged in the development, acquisition, ownership and operation of power generation facilities and activities related thereto ("Projects") in the United States and internationally. The Company's principal business strategy is to use its and its affiliates' experience to profitably develop, construct, finance and manage Projects to provide low-cost electricity and electric generating capacity particularly, in the case of international Projects, in areas of the world where demand for power exceeds supply by a significant factor. The Company believes there is and will continue to be significant demand for new generating capacity worldwide and that much of this new capacity will be provided by independent power developers such as the Company and its affiliates, due to their low costs and development capabilities. The Company's current portfolio of Projects is comprised of (i) 100% indirect ownership of a 180 megawatt ("MW") natural gas-fired, combined- cycle cogeneration facility located in Roanoke Rapids, North Carolina (the "Rosemary Facility") which commenced commercial operations in December 1990 and (ii) 100% indirect ownership of the lessee under a long-term leveraged lease of a 230 MW natural gas-fired, combined-cycle cogeneration facility located in Brandywine, Maryland, near Washington, D.C. (the "Brandywine Facility") which commenced commercial operations in October 1996. The Company indirectly owns an approximately 83% ownership interest in a 2x50 MW coal-fired cogeneration power plant together with a steam and hot water generation and distribution facility and other related facilities under construction in Luannan County, Tangshan Municipality, Hebei Province, People's Republic of China (collectively, the "Luannan Facility"). Preliminary construction work on the Luannan Facility commenced in December 1996, and full construction activity commenced upon the closing of the offering of the Old Notes on April 22, 1997 (the "Prior Offering"). The Company is also actively developing several other domestic and international Projects which may be added to its portfolio of Projects. See "Risk Factors - - Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes - - Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures." The Luannan Facility The Luannan Facility will be comprised of two coal-fired steam/electric generating units, each nominally rated at 50 MW but with nameplate capability of up to 60 MW gross output under full condensing conditions. Electric power generated by the Luannan Facility will be interconnected to the Beijing-Tianjin-Tangshan Regional Power Network (the "Jing-Jin-Tang Grid") serving the Beijing-Tianjin-Tangshan region, where the economy has witnessed significant growth in recent years. In addition, steam will be extracted from the steam turbines for distribution by pipeline to local commercial and industrial users and used for local heating. Coal will be delivered by truck to the Luannan Facility from nearby mines. All electrical output of the Luannan Facility will be sold pursuant to a 20-year power purchase agreement (the "Luannan Power Purchase Agreement") to North China Power Group Company ("North China Power Company"), the business arm of the North China Power Group ("North China Power"). Certain components of the power price are subject to contractual adjustment to reflect changes in coal costs, local inflation, U.S. inflation, and foreign exchange rate fluctuations. North China Power is one of the five interprovincial power groups in China and is subject to the supervision of the Ministry of Electric Power of the PRC (the "MOEP"). North China Power's service area includes Beijing and Tianjin, which are among the largest and most economically developed cities in China, as well as Hebei Province, Shanxi Province and western Inner Mongolia. The financial statements of North China Power included in its 1995 annual report (prepared in accordance with Chinese accounting principles) indicate total assets (excluding assets in Inner Mongolia) of RMB 70.0 billion ($8.4 billion) as of December 31, 1995, and revenue of approximately RMB 27.2 billion ($3.3 billion) (excluding revenue generated from Inner Mongolia) for 1995. North China Power also reported that it was ranked as one of the top three government- owned industrial enterprises (in terms of revenues) in China in 1995. Preliminary construction work on the Luannan Facility commenced in December 1996, and the Issuer and the Company believe that the commercial operation date of the Luannan Facility will occur by August 1999. The Luannan Facility is being constructed pursuant to a fixed-price, turnkey contract (the "Luannan EPC Contract") with Harbin Power Engineering Company Limited (the "Luannan EPC Contractor"). The Luannan EPC Contractor is a wholly-owned subsidiary of Harbin Power Equipment Company, Ltd. ("Harbin Power"), which, with its subsidiaries, is one of the largest manufacturers of power plant equipment in China and is listed on the Hong Kong Stock Exchange. The obligations of the Luannan EPC Contractor will be subject to a retainage of 10% of the Luannan EPC Contract price. Liquidated damages, if any, are payable under the Luannan EPC Contract up to a maximum of 35% of the Luannan EPC Contract price and are guaranteed by the Export-Import Bank of China ("CHEXIM") in this amount (the "CHEXIM Guarantee"). Senior unsecured debt of CHEXIM is rated A3 by Moody's Investors Service, Inc. ("Moody's"). Harbin Power has guaranteed the payment and performance obligations of the Luannan EPC Contractor (the "Luannan EPC Guarantee"). The Luannan EPC Contractor has significant experience, having constructed eight 50 MW cogeneration facilities in China of similar design to the Luannan Facility and numerous additional 50 MW non-cogeneration units. In 1995, the annual designed production capacity of the facilities constructed by the Luannan EPC Contractor and its affiliates was 3,000 MW of thermal power and 1,000 MW of hydro power. Operations and maintenance services for the Luannan Facility will be provided by Duke/Fluor Daniel International Services (the "Luannan O&M Contractor"). The Luannan O&M Contractor is actively engaged in the operation and maintenance of electric generation facilities throughout the world. The Issuer believes that the Luannan Facility will use approximately 450,000 metric tons of coal per year. The principal fuel supply for the Luannan Facility will come from the Qianjiaying Mine, which is owned and operated by Kailuan Coal Mining Administration ("Kailuan Coal"), a state- owned mining company, and is located 30 kilometers from the Luannan Facility. The Qianjiaying Mine produced approximately 3.67 million metric tons of coal in 1996. Kailuan Coal has contractually committed to supply up to 300,000 metric tons per year of coal from the Qianjiaying Mine to the Luannan Facility for ten years. The Luannan Facility has also entered into coal supply agreements with five other local coal mines (collectively with Kailuan Coal, the "Luannan Coal Suppliers") to secure up to an additional 310,000 metric tons per year of coal for ten years. The Luannan Coal Suppliers are all located within a 50 kilometer radius of the location of the Luannan Facility, thereby minimizing transportation costs. The coal will be transported by truck from the mines to the Luannan Facility. Transmission facilities will be constructed, owned and operated by North China Power Company and will connect the Luannan Facility with the Jing-Jin-Tang Grid (the "Luannan Transmission Facilities"). The Luannan Transmission Facilities will be comprised of three newly constructed substations, upgrades to an existing substation and switching station, and approximately 43 kilometers of new 110 kV transmission lines to interconnect the Luannan Facility to the Jing-Jin-Tang Grid. North China Power Company has guaranteed it will complete the construction of the Luannan Transmission Facilities to receive the total electrical output of the Luannan Facility within 18 months of receiving notice to proceed. Ownership and Financing The Luannan Facility will be owned and operated by four separate equity joint venture companies (each singularly, a "Joint Venture," and collectively, the "Joint Ventures"). The Company owns an approximately 83% indirect equity interest in each of the Joint Ventures; entities owned by Luannan County (the "County Partners") own an approximate 12% interest in each of the Joint Ventures with the remaining 5% being owned indirectly by the Company's strategic partners. The Company believes that all government approvals required to date to form the Joint Ventures and develop the Luannan Facility have been obtained based on the opinion of its Chinese counsel and advice from the Hebei Provincial Planning Commission, the Commission of Foreign Trade and Economic Cooperation of Hebei Province and the County Partners. The Luannan Engineering Report (as defined below) concludes that there is no reason to believe that other approvals required for construction of the Luannan Facility will not be granted. The Issuer and the Company believe the total cost of the Luannan Facility will be approximately $118.8 million, of which (i) $71.3 million has been funded from the proceeds of the offering of Old Notes consummated on April 22, 1997 (plus interest thereon and other income expected to be earned during construction) in the form of loans to the Joint Ventures (the "Shareholder Loans"), (ii) $41.8 million also has been funded from the proceeds of the offering of Old Notes consummated on April 22, 1997 (plus interest thereon and other income expected to be earned during construction) in the form of equity contributions to the Joint Ventures (the "JV Equity Contributions"), and (iii) $5.7 million has been funded by the County Partners in the form of equity contributions to the Joint Ventures from the same amounts paid to such partners by the Joint Ventures to acquire certain water and land use rights and water wells from them. The Old Notes were rated B2 by Moddy's and B by Duff & Phelps Credit Rating Co. ("Duff & Phelps"). There can be no assurance that these ratings will be maintained. The Rosemary Facility The Rosemary Facility is a 180 MW combined-cycle cogeneration facility located in Roanoke Rapids, North Carolina, which is indirectly wholly-owned by the Company. The Rosemary Facility, in operation since 1990, uses natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Rosemary Facility are sold to Virginia Electric and Power Company ("VEPCO") under a power purchase agreement with 18 years remaining. Steam and chilled water produced by the Rosemary Facility are sold to a textile mill adjacent to the Rosemary Facility under a contract with 18 years remaining. A partnership of wholly-owned subsidiaries of the Company which owns the Rosemary Facility (the "Rosemary Partnership") has entered into agreements with Natural Gas Clearinghouse for natural gas supply and fuel management services, with Transcontinental Gas Pipe Line Corporation, Texas Gas Transmission Corporation and CNG Transmission Corporation for firm and interruptible transportation of natural gas and with certain other parties to provide pipeline operation, gas balancing and interruptible transportation services. Panda Global Services, Inc., an indirect wholly- owned subsidiary of Panda Energy International, Inc. ("Panda International") provides operations and maintenance services to the Rosemary Facility. In July 1996, Panda-Rosemary Funding Corporation, a wholly-owned Delaware special purpose finance subsidiary of the Rosemary Partnership, consummated the offering and sale of $111.4 million in aggregate principal amount of its 8 5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds"). The Rosemary Bonds were rated Baa3 by Moody's and BBB- by Duff & Phelps. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and " Risk Factors-Financial Risks-Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures". The Brandywine Facility The Brandywine Facility is a 230 MW combined-cycle cogeneration facility located at Brandywine, Maryland, near Washington, D.C. The Brandywine Facility is leased by an indirect wholly-owned subsidiary of the Company pursuant to a lease which expires in December 2016 with General Electric Capital Corporation ("GE Capital"). The Brandywine Facility utilizes natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Brandywine Facility are sold to Potomac Electric Power Company pursuant to a power purchase agreement (the "Brandywine Power Purchase Agreement") which expires in October 2021. Thermal energy produced by the Brandywine Facility is sold to a distilled water production facility owned by an indirect wholly-owned subsidiary of the Company. The Brandywine Facility purchases firm and interruptible natural gas supplies from Cogen Development Company, which are transported to the Brandywine Facility on either a firm or interruptible basis through the interstate pipeline facilities of Columbia Gas Transmission Corporation and Cove Point LNG Limited Partnership and the local gas distribution facilities of Washington Gas Light Company. The Brandywine Facility has contracted with Ogden Brandywine Operations, Inc., a subsidiary of Ogden Corporation, to provide operations and maintenance services to the Brandywine Facility. See "Risk Factors-Financial Risks -Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and "Risk Factors-Financial Risks-Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures ". Panda Interfunding Corporation The Rosemary Facility and the Brandywine Facility are each indirectly owned by Panda Interfunding Corporation, a Delaware corporation ("PIC"), an indirect wholly-owned subsidiary of the Company. In July 1996, a wholly- owned subsidiary of PIC, Panda Funding Corporation ("PFC"), issued $105.5 million in bonds (the "Series A Bonds") which were rated Ba3 by Moody's and BB- by Duff & Phelps. The Series A Bonds are fully and unconditionally guaranteed by PIC. Additional Projects In the future, Panda International and its affiliates (including the Company) may develop additional Projects. Subject to certain conditions, Panda International and its affiliates (including the Company) will be required to transfer to PIC their interests in certain additional Projects, if any, for which a power purchase agreement is entered into prior to July 31, 2001 and which reach Financial Closing or achieve Commercial Operations (as such terms are defined in the PIC Additional Projects Contract) prior to July 31, 2006. Additional Projects, if any, which are not required to be transferred to PIC may, at the option of Panda International and its affiliates, be transferred to the Issuer or the Company, provided that, if additional indebtedness is to be incurred by the Issuer or the Company in connection with any such additional Project so transferred, certain conditions are satisfied. See "Risk Factors-Financial Risks - -Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes, and "Risk Factors-Financial Risks-Risk That Addition of Projects to PIC Project Portfolio Performance and Thereby Reduce Cash Flow From PIC to the Company". Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures; Collateral The Exchange Notes and the Exchange Notes Guarantee will be the exclusive obligations of the Issuer and the Company, respectively, and not of the Project Entities which own or operate the Rosemary Facility or the Brandywine Facility, the Joint Ventures or any other affiliate of the Issuer. The Project Entities and the Joint Ventures are highly leveraged and their debt agreements restrict their ability to pay dividends, make distributions or otherwise transfer funds, through intermediate entities, to the Company. The restrictions in such agreements generally require that, prior to the payment of dividends, distributions or other transfers, Project Entities and the Joint Ventures provide for the payment of other obligations, including operating expenses, debt service and the funding of reserves. The Project Entities and the Joint Ventures are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of the Exchange Notes. Thus, payments on the Exchange Notes are effectively subordinated to the payment of all obligations of the Project Entities and the Joint Ventures. In addition, the Company's right to receive any assets of the Project Entities or the Joint Ventures upon their liquidation or reorganization will be effectively subordinated to the claims of such Project Entities' or Joint Ventures' creditors (including trade creditors and holders of other debt issued by such Project Entity). As of June 30, 1997, the Project Entities had approximately $342.0 million of indebtedness and other liabilities (including payments on the long-term lease for the Brandywine Facility), which is effectively senior to obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes", "Description of Other Indebtedness-The Rosemary Bonds" and "Description of Other Indebtedness-The Brandywine Financing". Similarly, the Company is highly leveraged as a result of the issuance of the Series A Bonds by PFC (an indirect wholly-owned subsidiary of the Company), which are collateralized in part by all of the issued and outstanding shares of PIC (also an indirect wholly-owned subsidiary of the Company). The PFC Indenture restricts the ability of PIC to pay dividends, make distributions or otherwise transfer funds, through PEC, to the Company. PIC and PFC are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee payment of the Exchange Notes. Thus, payments on the Exchange Notes are also effectively subordinated to the payment of all obligations of PFC. In addition, the Company's right to receive any assets of PIC upon its liquidation or reorganization will be effectively subordinated to the claims of PFC's creditors (including holders of the Series A Bonds). As of June 30, 1997, PFC had approximately $109.7 million of indebtedness and other liabilities, which is effectively senior to the obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and "Description of Other Indebtedness-The PFC Bonds." The Exchange Notes and the Exchange Notes Guarantee will be the exclusive obligations of the Issuer and the Company, respectively, and not the Project Entities which own or operate the Rosemary Facility or the Brandywine Facility, the Joint Ventures or any other affiliate of the Issuer. The Project Entities and the Joint Ventures are highly leveraged and their debt agreements restrict their ability to pay dividends, make distributions or otherwise transfer funds, through intermediate entities, to the Company. The restrictions in such agreements generally require that, prior to the payment of dividends, distributions or other transfers, Project Entities and the Joint Ventures provide for the payment of other obligations, including operating expenses, debt service and the funding of reserves. The Project Entities and the Joint Ventures are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of the Exchange Notes. Thus, payments on the Exchange Notes are effectively subordinated to the payment of all obligations of the Project Entities and the Joint Ventures. In addition, the Company's right to receive any assets of the Project Entities or the Joint Ventures upon their liquidation or reorganization will be effectively subordinated to the claims of such Project Entities' or Joint Ventures' creditors (including trade creditors and holders of other debt issued by such Project Entity). As of June 30, 1997, the Project Entities had approximately $342.0 million of indebtedness and other liabilities (including payments on the long-term lease for the Brandywine Facility), which is effectively senior to obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes", "Description of Other Indebtedness-The Rosemary Bonds" and "Description of Other Indebtedness-The Brandywine Financing". The Exchange Notes are fully and unconditionally guaranteed by the Company ("Exchange Notes Guarantee"). The Exchange Notes Guarantee is secured by pledges, or grants of security interests (i) by Panda International of 100% of the Capital Stock of the Company; (ii) by the Company of 100% Capital Stock of PEC; and (iii) by the Company, of an in its interest in accounts, established in the Company's name with the Company Indenture Trustee, into which certain distributions related to the Luannan Facility are (or will be) deposited. The Exchange Notes are secured by pledges, or grants of security interests (i) by the Issuer of at least 90% of the Capital Stock of Pan-Sino; (ii) the Issuer Note issued by Pan-Western; (iii) in the event that Pan-Sino is merged into Pan-Western, the Issuer will pledge at least 99% of the Capital Stock of Pan-Western to the Exchange Notes Trustee; (iv) in the event that Pan-Sino is merged into the Issuer, the Issuer will assume Pan-Sino's obligations under the Pan-Sino Pledge Agreement; (v) by Pan-Western of the Luannan Facility Notes issued by the Joint Ventures; and (vi) by the Company of 100% of the Capital Stock of the Issuer. Individually, and in the aggregate, the pledges of the Capital Stock of each of the PEC, Pan-Sino and Pan-Western do not constitute a "substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated under the Securities Act) of the collateral securing the Exchange Notes and the Exchange Notes Guarantee. Separate financial statements of each of PEC, Pan- Sino and Pan-Western are not presented in this Prospectus because the Company and the Issuer believe that such disclosure is not material to a prospective purchaser of the Exchange Notes. Investors should consider carefully all the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Notes. The following chart details, in summary form, the corporate structure of Panda International and its subsidiaries. See Appendix G, "Ownership Structure of the Issuer, the Company, Panda International and Certain of Their Subsidiaries." [chart] Notes: Intermediate entities with no significant assets or liabilities have been excluded from the above chart except for the entity mentioned in note (1). (1) Panda Funding Corporation ("PFC"), a wholly-owned subsidiary of Panda Interfunding Corporation ("PIC"), is the issuer of the Series A Bonds. See "Description of Other Indebtedness - The PFC Bonds." PRIOR OFFERING On April 22, 1997 (the "Issue Date"), the Issuer issued $155,200,000 aggregate principal amount of its Old Notes in a private placement under Section 4(2) of the Securities Act and Rule 144A and Regulation S promulgated thereunder (the "Prior Offering"). The Old Notes were sold to Donaldson, Lufkin & Jenrette. (the "Initial Purchaser") pursuant to the Purchase Agreement and were placed by the Initial Purchaser with Qualified Institutional Buyers and institutional Accredited Investors (as defined in Section 501(a) (1), (2), (3) or (7) under the Securities Act). Pursuant to the Registration Rights Agreement entered into between the Company, the Issuer and the Initial Purchaser in connection with the Prior Offering, the Issuer and the Company agreed to file a shelf registration statement covering the Old Notes (a "Shelf Registration Statement") or to effect a registered exchange offer for the Old Notes pursuant to which the holders of the Old Notes would be offered the opportunity to exchange their Old Notes for registered Exchange Notes. The Registration Rights Agreement provides that if such an exchange offer registration statement (an "Exchange Offer Registration Statement") or a Shelf Registration Statement is not declared effective within 150 days after the Issue Date, the Issuer and the Company, jointly and severally, shall be liable to pay liquidated damages, during the first 90-day period commencing on the 151st day following the Issue Date in an amount equal to $.05 per week per $1,000 principal amount of Exchange Notes, with such amount increasing by an additional $.05 per week per $1,000 principal amount of Exchange Notes for each subsequent 90-day period, up to a maximum of $.50 per week per $1,000 principal amount of Old Notes. The Registration Statement with respect to the Exchange Offer was declared effective by the Commission on October 8, 1997, thereby avoiding the aforementioned Liquidated Damages. THE EXCHANGE OFFER The Issuer is making the following Exchange Offer to holders of all Old Notes presently outstanding: The Exchange Offer For each $1,000 principal amount of Old Notes tendered, a holder will be entitled to receive $1,000 principal amount of Exchange Notes. As of the date of this Prospectus, $155,200,000 principal amount of Old Notes is outstanding. The terms of the Exchange Notes are substantially identical to the terms of the Old Notes, except that the Exchange Notes (i) will have been registered under the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Old Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents - Old Notes Registration Rights." Expiration Date The Exchange Offer will expire at 5:00 p.m., New York City time, on October 8, 1997, unless extended in the Issuer's sole discretion. See "The Exchange Offer - Expiration Date; Extensions; Termination; Amendments." Withdrawal of Tenders Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable. See "The Exchange Offer - Withdrawal of Tenders." Interest on the Exchange Notes and Accrued Interest on the Old Notes The Exchange Notes will bear interest from the date of their issuance. Interest on the Old Notes accepted for exchange will accrue thereon to, but not including, the date of issuance of the Exchange Notes and will be paid together with the first interest payment on the Exchange Notes issued in exchange therefor. Conditions of the Exchange Offer The Exchange Offer is subject to certain customary conditions, which may be waived by the Issuer. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Old Notes may be tendered only in integral multiples of $1,000. See "The Exchange Offer - Conditions of the Exchange Offer." Procedures for Tendering Old Notes Each holder of Old Notes wishing to accept the Exchange Offer must, prior to the Expiration Date, either (i) complete and sign the Letter of Transmittal, in accordance with the instructions contained herein and therein, and deliver such Letter of Transmittal, together with any signature guarantees and any other documents required by the Letter of Transmittal, to the Exchange Agent at its address set forth on the back cover page of this Prospectus and the tendered Old Notes must either be (a) physically delivered to the Exchange Agent or (b) transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures set forth herein. By executing the Letter of Transmittal, each holder will represent that the Exchange Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes (whether or not such person is the registered holder of such Exchange Notes), that neither the holder of such Exchange Notes nor any such other person has an arrangement with any person to participate in the distribution (within the meaning of the Exchange Act) of such Exchange Notes and that neither the holder of such Exchange Notes or any such other person is an Affiliate of the Issuer or the Company, or if it is an Affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. See "The Exchange Offer - Procedures for Tendering." Special Procedures for Beneficial Owners Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "The Exchange Offer - Procedures for Tendering." Guaranteed Delivery Procedures Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer - Guaranteed Delivery Procedures." Acceptance of the Old Notes and Delivery of the Exchange Notes Upon satisfaction or waiver of the conditions of the Exchange Offer, the Issuer will accept for exchange any and all Old Notes which are properly tendered and not withdrawn prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer - Acceptance of Old Notes for Exchange; Delivery of Exchange Notes." Certain Federal Income Tax Considerations For discussion of certain federal income tax consequences of the exchange of the Old Notes, see "Certain Income Tax Considerations of the Exchange Offer." Effect on Holders who Retain Old Notes Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and benefits, and will be subject to all limitations applicable thereto, under the Exchange Notes Indenture. All Old Notes not exchanged in the Exchange Offer will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Exchange Notes Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors-Consequences of Failure to Exchange Old Notes." Rights of Dissenting Holders Holders of Old Notes do not have any appraisal rights. See "The Exchange Offer-Terms of the Exchange Offer." Exchange Agent Bankers Trust Company. See "The Exchange Offer-The Exchange Agent." Terms of the Exchange Notes The Exchange Offer applies to $155,200,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the terms of the Old Notes, except that the Exchange Notes (i) have been registered under the Securities Act, and therefore, will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Old Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "Exchange Offer - Termination of Certain Rights." The Exchange Notes will evidence the same debt as the Old Notes which they replace and will be issued under, and be entitled to the benefits of, the Exchange Notes Indenture. Issuer Panda Global Energy Company, a Cayman Islands company (the "Issuer"). Guarantor Panda Global Holdings, Inc., a Delaware corporation (the "Company"). Securities Offered $155,200,000 aggregate principal amount of 12 1/2% Registered Senior Secured Notes due 2004 (the "Exchange Notes"). Maturity Date April 15, 2004. Interest Rate Cash interest on the Exchange Notes will accrue at a rate of 12 1/2% per annum and will be payable semi-annually in arrears on each April 15 and October 15, commencing October 15, 1997. Repayment of Principal Commencing on October 15, 2000 and through the payment date of October 15, 2003, 15.4% of the aggregate outstanding principal amount of the Exchange Notes (assuming all outstanding Old Notes are tendered and accepted for exchange pursuant to the Exchange Offer) will be repaid semi-annually on the dates and in the amounts indicated in the table set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Ranking, Maturity, Interest and Principal of the Exchange Notes." Ranking The Exchange Notes will be senior obligations of the Issuer ranking senior in right of payment to all subordinated Indebtedness of the Issuer and pari passu with all other Senior Indebtedness of the Issuer. Exchange Notes The Exchange Notes will be secured by Collateral the Exchange Notes Collateral (herein so called). The Exchange Notes Collateral consists of pledges and a security interest in certain assets of the Issuer and its Subsidiaries, including, a pledge of (i) at least 90% of the Capital Stock of Pan-Sino, (ii) 99% of the Capital Stock of Pan- Western, (iii) the Issuer Note, (iv) the Luannan Facility Notes and the granting of a security interest in certain funds of the Issuer and its Subsidiaries maintained by the Exchange Notes Trustee, and (v) 100% of the Capital Stock of the Issuer. The Exchange Notes The Company, as primary obligor and Guarantee not merely as surety, will irrevocably, fully and unconditionally guarantee on a senior secured basis the performance and punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Issuer under the Exchange Notes Indenture and the Exchange Notes, whether for principal, premium, if any, and interest (including Liquidated Damages and Additional Amounts, if any), on the Exchange Notes, expenses, indemnification or otherwise. The Exchange Notes The Company's obligations under the Guarantee Collateral Exchange Notes Guarantee will be secured by the Exchange Notes Guarantee Collateral (herein so called). The Exchange Notes Guarantee Collateral consists of a pledge of 100% of the Capital Stock of the Company and of pledges and a security interest in certain assets of the Company and its Subsidiaries, including: (i) a pledge of 100% of the Capital Stock of PEC, which indirectly owns (a) 100% of the Rosemary Facility and (b) 100% of the lessee under a long-term leveraged lease of the Brandywine Facility, and (ii) the granting of a security interest in certain funds of the Company established and maintained by the Company Indenture Trustee. Optional Redemption The Exchange Notes will be redeemable at the option of the Issuer, in whole or in part, at any time on or after April 15, 2002, at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption." In addition, prior to April 15, 2000, the Issuer may redeem up to $51,733,000 of the originally issued principal amount of Existing Notes at the redemption price set forth under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption" with the Net Cash Proceeds of one or more Public Equity Offerings by the Company, Panda International or any direct or indirect parent of the Company; provided that (i) the proceeds of such offering used for the purposes of the optional redemption are contributed as equity to the Issuer and (ii) at least $103,467,000 of the aggregate outstanding principal amount of Existing Notes would remain outstanding immediately after giving effect to such redemption. Mandatory Redemption Upon the occurrence of certain events of loss or expropriation with respect to the Luannan Facility described below, the outstanding Existing Notes (together with, under certain limited circumstances, any additional Senior Indebtedness of the Issuer outstanding at the time) will be redeemed pro rata, at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption." Redemption at Option of Upon the occurrence of certain Holders Indentures Events of Default relating to Shareholder Loan events of default, or if the Luannan Facility Construction Cost is less than the Projected Luannan Facility Construction Cost by more than $1.0 million, the Issuer will be obligated to make an offer to redeem pro rata a portion of the outstanding Exchange Notes (assuming all outstanding Old Notes are tendered and accepted for exchange pursuant to the Exchange Offer) with certain amounts at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption," and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents -- Certain Covenants - Indentures Events of Default.." Change of Control Upon a Change of Control, holders of the Exchange Notes will have the right to require the Issuer to repurchase their Exchange Notes, in whole or in part, at the purchase price set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Change of Control." The Series A-1 Bonds, issued by Panda Funding Corporation, an indirect subsidiary of the Company, in the aggregate principal amount of $105,525,000, contain similar change of control provisions. In the event of an occurrence which triggers the change of control provisions in both the Series A-1 Bonds and the Exchange Notes, there is a substantial likelihood that the mandatory offer to repurchase obligations under each series of indebtedness could not be fulfilled simultaneously. Asset Sale Proceeds The Company and the Issuer will be obligated in certain circumstances, to use a portion of the net cash proceeds of certain sales or other dispositions of assets, to make offers to purchase Exchange Notes in the amounts and at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Certain Covenants-Disposition of Proceeds of Asset Sales." Principal Covenants The Indentures, with respect to the Company and its Subsidiaries, will contain certain restrictive covenants, including, without limitation, (i) limitations on investments, loans and advances, (ii) limitations on dividends and other payments, (iii) limitations on transactions with Affiliates, (iv) limitations on additional indebtedness, (v) limitations on liens, (vi) limitations on agreements restricting payments, (vii) limitations on capital expenditures, (viii) limitations on line of business and Permitted Projects and (ix) limitations on sale and leaseback transactions. In addition, the Indentures will limit the ability of Company and the Issuer to consolidate, merge or sell all or substantially all of their assets. Certain Accounts In accordance with the Exchange Notes Indenture, certain funds, including the Capitalized Interest Fund and the Debt Service Reserve Fund, will be established. The Issuer will have limited rights of withdrawal under the above funds in accordance with terms and conditions set forth in the Exchange Notes Indenture. Capitalized Interest Upon the Issue Date, the Issuer Fund deposited approximately $48.1 million into the Capitalized Interest Fund. Through the Capitalized Interest Expiration Date (October 15, 1999), interest payments on the Exchange Notes will be provided from the Capitalized Interest Fund. Debt Service Reserve Upon the Issue Date, the Issuer Fund deposited $9.7 million in the Debt Service Reserve Fund as a reserve for payments on the Exchange Notes. Transfer of Exchange Based upon their view of Notes interpretations provided to third parties by the staff of the Commission, the Issuer and the Company believe that the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company, or the Issuer, (ii) a broker-dealer who acquired Old Notes directly from the Issuer or (iii) a broker-dealer who acquired Old Notes as a result of market making or other trading activities) without registration under the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each broker-dealer who receives Exchange Notes for its own account pursuant to the Exchange Offer must notify the Company and the Issuer that it has acquired Exchange Notes for its own account (which notification must be made in the applicable location in the Letter of Transmittal that is delivered by such broker-dealer along with such broker- dealer's Old Notes to be exchanged pursuant to the Exchange Offer), and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired by such broker- dealer as a result of market making activities or other trading activities. The Company and the Issuer have agreed, for a period of 270 consecutive days after the consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker- dealer for use in connection with any such resale so long as they notify the Issuer and the Company in writing that they have acquired Exchange Notes for their own account (which notification must be made in the applicable location in the Letter of Transmittal that is deliverd by such broker-dealer along with such broker- dealer's Old Notes to be exchanged pursuant to the Exchange Offer). A broker-dealer that delivers such a prospectus to a purchaser in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification provisions). Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes and any other holder that cannot rely upon such interpretations, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the conditions thereto have been met. See "The Exchange Offer -Purpose and Effects of the Exchange Offer" and "Plan of Distribution" Registration Rights The Exchange Offer is intended to satisfy certain rights under the Registration Rights Agreement, which rights terminate upon the consummation of the Exchange Offer. Therefore, the holders of Exchange Notes are not entitled to any exchange or registration rights with respect to the Exchange Notes. In addition, such exchange and registration rights will terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer -Termination of Certain Rights" and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Old Notes Registration Rights." Use of Proceeds There will be no cash proceeds to the Issuer or the Company from the exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038504_panda_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038504_panda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ab3185cb2fdf134752ba21859d8fe30e2c9e0c0e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038504_panda_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Issuer's and the Company's financial data, including the notes thereto, appearing elsewhere in this Prospectus. All references to the Company which pertain to events prior to March 7, 1997 relate solely to the business and operations of certain subsidiaries of Panda Energy International, Inc., which are now subsidiaries of the Company. See "Business of the Issuer, the Company, Panda International and Their Subsidiaries-The Issuer, the Company and Panda International." Investors should carefully consider the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Notes. For definitions of certain terms used herein, see the glossary included as Appendix A to this Prospectus, and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans on the Collateral Documents - Certain Definitions." The Issuer and the Company Panda Global Energy Company (the "Issuer") is a wholly-owned subsidiary of Panda Global Holdings, Inc. (the "Company"). The Issuer is a newly- formed corporation formed primarily for the purpose of issuing the Old Notes and the Exchange Notes, as well as other securities to finance additional Projects which may be developed or acquired by subsidiary entities of the Issuer. The Company is an independent power company principally engaged in the development, acquisition, ownership and operation of power generation facilities and activities related thereto ("Projects") in the United States and internationally. The Company's principal business strategy is to use its and its affiliates' experience to profitably develop, construct, finance and manage Projects to provide low-cost electricity and electric generating capacity particularly, in the case of international Projects, in areas of the world where demand for power exceeds supply by a significant factor. The Company believes there is and will continue to be significant demand for new generating capacity worldwide and that much of this new capacity will be provided by independent power developers such as the Company and its affiliates, due to their low costs and development capabilities. The Company's current portfolio of Projects is comprised of (i) 100% indirect ownership of a 180 megawatt ("MW") natural gas-fired, combined- cycle cogeneration facility located in Roanoke Rapids, North Carolina (the "Rosemary Facility") which commenced commercial operations in December 1990 and (ii) 100% indirect ownership of the lessee under a long-term leveraged lease of a 230 MW natural gas-fired, combined-cycle cogeneration facility located in Brandywine, Maryland, near Washington, D.C. (the "Brandywine Facility") which commenced commercial operations in October 1996. The Company indirectly owns an approximately 83% ownership interest in a 2x50 MW coal-fired cogeneration power plant together with a steam and hot water generation and distribution facility and other related facilities under construction in Luannan County, Tangshan Municipality, Hebei Province, People's Republic of China (collectively, the "Luannan Facility"). Preliminary construction work on the Luannan Facility commenced in December 1996, and full construction activity commenced upon the closing of the offering of the Old Notes on April 22, 1997 (the "Prior Offering"). The Company is also actively developing several other domestic and international Projects which may be added to its portfolio of Projects. See "Risk Factors - - Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes - - Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures." The Luannan Facility The Luannan Facility will be comprised of two coal-fired steam/electric generating units, each nominally rated at 50 MW but with nameplate capability of up to 60 MW gross output under full condensing conditions. Electric power generated by the Luannan Facility will be interconnected to the Beijing-Tianjin-Tangshan Regional Power Network (the "Jing-Jin-Tang Grid") serving the Beijing-Tianjin-Tangshan region, where the economy has witnessed significant growth in recent years. In addition, steam will be extracted from the steam turbines for distribution by pipeline to local commercial and industrial users and used for local heating. Coal will be delivered by truck to the Luannan Facility from nearby mines. All electrical output of the Luannan Facility will be sold pursuant to a 20-year power purchase agreement (the "Luannan Power Purchase Agreement") to North China Power Group Company ("North China Power Company"), the business arm of the North China Power Group ("North China Power"). Certain components of the power price are subject to contractual adjustment to reflect changes in coal costs, local inflation, U.S. inflation, and foreign exchange rate fluctuations. North China Power is one of the five interprovincial power groups in China and is subject to the supervision of the Ministry of Electric Power of the PRC (the "MOEP"). North China Power's service area includes Beijing and Tianjin, which are among the largest and most economically developed cities in China, as well as Hebei Province, Shanxi Province and western Inner Mongolia. The financial statements of North China Power included in its 1995 annual report (prepared in accordance with Chinese accounting principles) indicate total assets (excluding assets in Inner Mongolia) of RMB 70.0 billion ($8.4 billion) as of December 31, 1995, and revenue of approximately RMB 27.2 billion ($3.3 billion) (excluding revenue generated from Inner Mongolia) for 1995. North China Power also reported that it was ranked as one of the top three government- owned industrial enterprises (in terms of revenues) in China in 1995. Preliminary construction work on the Luannan Facility commenced in December 1996, and the Issuer and the Company believe that the commercial operation date of the Luannan Facility will occur by August 1999. The Luannan Facility is being constructed pursuant to a fixed-price, turnkey contract (the "Luannan EPC Contract") with Harbin Power Engineering Company Limited (the "Luannan EPC Contractor"). The Luannan EPC Contractor is a wholly-owned subsidiary of Harbin Power Equipment Company, Ltd. ("Harbin Power"), which, with its subsidiaries, is one of the largest manufacturers of power plant equipment in China and is listed on the Hong Kong Stock Exchange. The obligations of the Luannan EPC Contractor will be subject to a retainage of 10% of the Luannan EPC Contract price. Liquidated damages, if any, are payable under the Luannan EPC Contract up to a maximum of 35% of the Luannan EPC Contract price and are guaranteed by the Export-Import Bank of China ("CHEXIM") in this amount (the "CHEXIM Guarantee"). Senior unsecured debt of CHEXIM is rated A3 by Moody's Investors Service, Inc. ("Moody's"). Harbin Power has guaranteed the payment and performance obligations of the Luannan EPC Contractor (the "Luannan EPC Guarantee"). The Luannan EPC Contractor has significant experience, having constructed eight 50 MW cogeneration facilities in China of similar design to the Luannan Facility and numerous additional 50 MW non-cogeneration units. In 1995, the annual designed production capacity of the facilities constructed by the Luannan EPC Contractor and its affiliates was 3,000 MW of thermal power and 1,000 MW of hydro power. Operations and maintenance services for the Luannan Facility will be provided by Duke/Fluor Daniel International Services (the "Luannan O&M Contractor"). The Luannan O&M Contractor is actively engaged in the operation and maintenance of electric generation facilities throughout the world. The Issuer believes that the Luannan Facility will use approximately 450,000 metric tons of coal per year. The principal fuel supply for the Luannan Facility will come from the Qianjiaying Mine, which is owned and operated by Kailuan Coal Mining Administration ("Kailuan Coal"), a state- owned mining company, and is located 30 kilometers from the Luannan Facility. The Qianjiaying Mine produced approximately 3.67 million metric tons of coal in 1996. Kailuan Coal has contractually committed to supply up to 300,000 metric tons per year of coal from the Qianjiaying Mine to the Luannan Facility for ten years. The Luannan Facility has also entered into coal supply agreements with five other local coal mines (collectively with Kailuan Coal, the "Luannan Coal Suppliers") to secure up to an additional 310,000 metric tons per year of coal for ten years. The Luannan Coal Suppliers are all located within a 50 kilometer radius of the location of the Luannan Facility, thereby minimizing transportation costs. The coal will be transported by truck from the mines to the Luannan Facility. Transmission facilities will be constructed, owned and operated by North China Power Company and will connect the Luannan Facility with the Jing-Jin-Tang Grid (the "Luannan Transmission Facilities"). The Luannan Transmission Facilities will be comprised of three newly constructed substations, upgrades to an existing substation and switching station, and approximately 43 kilometers of new 110 kV transmission lines to interconnect the Luannan Facility to the Jing-Jin-Tang Grid. North China Power Company has guaranteed it will complete the construction of the Luannan Transmission Facilities to receive the total electrical output of the Luannan Facility within 18 months of receiving notice to proceed. Ownership and Financing The Luannan Facility will be owned and operated by four separate equity joint venture companies (each singularly, a "Joint Venture," and collectively, the "Joint Ventures"). The Company owns an approximately 83% indirect equity interest in each of the Joint Ventures; entities owned by Luannan County (the "County Partners") own an approximate 12% interest in each of the Joint Ventures with the remaining 5% being owned indirectly by the Company's strategic partners. The Company believes that all government approvals required to date to form the Joint Ventures and develop the Luannan Facility have been obtained based on the opinion of its Chinese counsel and advice from the Hebei Provincial Planning Commission, the Commission of Foreign Trade and Economic Cooperation of Hebei Province and the County Partners. The Luannan Engineering Report (as defined below) concludes that there is no reason to believe that other approvals required for construction of the Luannan Facility will not be granted. The Issuer and the Company believe the total cost of the Luannan Facility will be approximately $118.8 million, of which (i) $71.3 million has been funded from the proceeds of the offering of Old Notes consummated on April 22, 1997 (plus interest thereon and other income expected to be earned during construction) in the form of loans to the Joint Ventures (the "Shareholder Loans"), (ii) $41.8 million also has been funded from the proceeds of the offering of Old Notes consummated on April 22, 1997 (plus interest thereon and other income expected to be earned during construction) in the form of equity contributions to the Joint Ventures (the "JV Equity Contributions"), and (iii) $5.7 million has been funded by the County Partners in the form of equity contributions to the Joint Ventures from the same amounts paid to such partners by the Joint Ventures to acquire certain water and land use rights and water wells from them. The Old Notes were rated B2 by Moddy's and B by Duff & Phelps Credit Rating Co. ("Duff & Phelps"). There can be no assurance that these ratings will be maintained. The Rosemary Facility The Rosemary Facility is a 180 MW combined-cycle cogeneration facility located in Roanoke Rapids, North Carolina, which is indirectly wholly-owned by the Company. The Rosemary Facility, in operation since 1990, uses natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Rosemary Facility are sold to Virginia Electric and Power Company ("VEPCO") under a power purchase agreement with 18 years remaining. Steam and chilled water produced by the Rosemary Facility are sold to a textile mill adjacent to the Rosemary Facility under a contract with 18 years remaining. A partnership of wholly-owned subsidiaries of the Company which owns the Rosemary Facility (the "Rosemary Partnership") has entered into agreements with Natural Gas Clearinghouse for natural gas supply and fuel management services, with Transcontinental Gas Pipe Line Corporation, Texas Gas Transmission Corporation and CNG Transmission Corporation for firm and interruptible transportation of natural gas and with certain other parties to provide pipeline operation, gas balancing and interruptible transportation services. Panda Global Services, Inc., an indirect wholly- owned subsidiary of Panda Energy International, Inc. ("Panda International") provides operations and maintenance services to the Rosemary Facility. In July 1996, Panda-Rosemary Funding Corporation, a wholly-owned Delaware special purpose finance subsidiary of the Rosemary Partnership, consummated the offering and sale of $111.4 million in aggregate principal amount of its 8 5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds"). The Rosemary Bonds were rated Baa3 by Moody's and BBB- by Duff & Phelps. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and " Risk Factors-Financial Risks-Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures". The Brandywine Facility The Brandywine Facility is a 230 MW combined-cycle cogeneration facility located at Brandywine, Maryland, near Washington, D.C. The Brandywine Facility is leased by an indirect wholly-owned subsidiary of the Company pursuant to a lease which expires in December 2016 with General Electric Capital Corporation ("GE Capital"). The Brandywine Facility utilizes natural gas as its primary fuel to produce electricity and thermal energy in the form of steam. The electric capacity of and electric energy produced by the Brandywine Facility are sold to Potomac Electric Power Company pursuant to a power purchase agreement (the "Brandywine Power Purchase Agreement") which expires in October 2021. Thermal energy produced by the Brandywine Facility is sold to a distilled water production facility owned by an indirect wholly-owned subsidiary of the Company. The Brandywine Facility purchases firm and interruptible natural gas supplies from Cogen Development Company, which are transported to the Brandywine Facility on either a firm or interruptible basis through the interstate pipeline facilities of Columbia Gas Transmission Corporation and Cove Point LNG Limited Partnership and the local gas distribution facilities of Washington Gas Light Company. The Brandywine Facility has contracted with Ogden Brandywine Operations, Inc., a subsidiary of Ogden Corporation, to provide operations and maintenance services to the Brandywine Facility. See "Risk Factors-Financial Risks -Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and "Risk Factors-Financial Risks-Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures ". Panda Interfunding Corporation The Rosemary Facility and the Brandywine Facility are each indirectly owned by Panda Interfunding Corporation, a Delaware corporation ("PIC"), an indirect wholly-owned subsidiary of the Company. In July 1996, a wholly- owned subsidiary of PIC, Panda Funding Corporation ("PFC"), issued $105.5 million in bonds (the "Series A Bonds") which were rated Ba3 by Moody's and BB- by Duff & Phelps. The Series A Bonds are fully and unconditionally guaranteed by PIC. Additional Projects In the future, Panda International and its affiliates (including the Company) may develop additional Projects. Subject to certain conditions, Panda International and its affiliates (including the Company) will be required to transfer to PIC their interests in certain additional Projects, if any, for which a power purchase agreement is entered into prior to July 31, 2001 and which reach Financial Closing or achieve Commercial Operations (as such terms are defined in the PIC Additional Projects Contract) prior to July 31, 2006. Additional Projects, if any, which are not required to be transferred to PIC may, at the option of Panda International and its affiliates, be transferred to the Issuer or the Company, provided that, if additional indebtedness is to be incurred by the Issuer or the Company in connection with any such additional Project so transferred, certain conditions are satisfied. See "Risk Factors-Financial Risks - -Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes, and "Risk Factors-Financial Risks-Risk That Addition of Projects to PIC Project Portfolio Performance and Thereby Reduce Cash Flow From PIC to the Company". Effective Subordination of Exchange Notes and Exchange Notes Guarantee to Obligations of Project Entities and Joint Ventures; Collateral The Exchange Notes and the Exchange Notes Guarantee will be the exclusive obligations of the Issuer and the Company, respectively, and not of the Project Entities which own or operate the Rosemary Facility or the Brandywine Facility, the Joint Ventures or any other affiliate of the Issuer. The Project Entities and the Joint Ventures are highly leveraged and their debt agreements restrict their ability to pay dividends, make distributions or otherwise transfer funds, through intermediate entities, to the Company. The restrictions in such agreements generally require that, prior to the payment of dividends, distributions or other transfers, Project Entities and the Joint Ventures provide for the payment of other obligations, including operating expenses, debt service and the funding of reserves. The Project Entities and the Joint Ventures are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of the Exchange Notes. Thus, payments on the Exchange Notes are effectively subordinated to the payment of all obligations of the Project Entities and the Joint Ventures. In addition, the Company's right to receive any assets of the Project Entities or the Joint Ventures upon their liquidation or reorganization will be effectively subordinated to the claims of such Project Entities' or Joint Ventures' creditors (including trade creditors and holders of other debt issued by such Project Entity). As of June 30, 1997, the Project Entities had approximately $342.0 million of indebtedness and other liabilities (including payments on the long-term lease for the Brandywine Facility), which is effectively senior to obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes", "Description of Other Indebtedness-The Rosemary Bonds" and "Description of Other Indebtedness-The Brandywine Financing". Similarly, the Company is highly leveraged as a result of the issuance of the Series A Bonds by PFC (an indirect wholly-owned subsidiary of the Company), which are collateralized in part by all of the issued and outstanding shares of PIC (also an indirect wholly-owned subsidiary of the Company). The PFC Indenture restricts the ability of PIC to pay dividends, make distributions or otherwise transfer funds, through PEC, to the Company. PIC and PFC are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee payment of the Exchange Notes. Thus, payments on the Exchange Notes are also effectively subordinated to the payment of all obligations of PFC. In addition, the Company's right to receive any assets of PIC upon its liquidation or reorganization will be effectively subordinated to the claims of PFC's creditors (including holders of the Series A Bonds). As of June 30, 1997, PFC had approximately $109.7 million of indebtedness and other liabilities, which is effectively senior to the obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes" and "Description of Other Indebtedness-The PFC Bonds." The Exchange Notes and the Exchange Notes Guarantee will be the exclusive obligations of the Issuer and the Company, respectively, and not the Project Entities which own or operate the Rosemary Facility or the Brandywine Facility, the Joint Ventures or any other affiliate of the Issuer. The Project Entities and the Joint Ventures are highly leveraged and their debt agreements restrict their ability to pay dividends, make distributions or otherwise transfer funds, through intermediate entities, to the Company. The restrictions in such agreements generally require that, prior to the payment of dividends, distributions or other transfers, Project Entities and the Joint Ventures provide for the payment of other obligations, including operating expenses, debt service and the funding of reserves. The Project Entities and the Joint Ventures are separate and distinct legal entities and have no obligation to pay any amounts due pursuant to the Exchange Notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of the Exchange Notes. Thus, payments on the Exchange Notes are effectively subordinated to the payment of all obligations of the Project Entities and the Joint Ventures. In addition, the Company's right to receive any assets of the Project Entities or the Joint Ventures upon their liquidation or reorganization will be effectively subordinated to the claims of such Project Entities' or Joint Ventures' creditors (including trade creditors and holders of other debt issued by such Project Entity). As of June 30, 1997, the Project Entities had approximately $342.0 million of indebtedness and other liabilities (including payments on the long-term lease for the Brandywine Facility), which is effectively senior to obligations of the Company under the Exchange Notes Guarantee. See "Risk Factors-Financial Risks-Issuance of Additional Indebtedness by Issuer, Company or Their Subsidiaries Could Reduce Cash Available to Make Payments on Exchange Notes", "Description of Other Indebtedness-The Rosemary Bonds" and "Description of Other Indebtedness-The Brandywine Financing". The Exchange Notes are fully and unconditionally guaranteed by the Company ("Exchange Notes Guarantee"). The Exchange Notes Guarantee is secured by pledges, or grants of security interests (i) by Panda International of 100% of the Capital Stock of the Company; (ii) by the Company of 100% Capital Stock of PEC; and (iii) by the Company, of an in its interest in accounts, established in the Company's name with the Company Indenture Trustee, into which certain distributions related to the Luannan Facility are (or will be) deposited. The Exchange Notes are secured by pledges, or grants of security interests (i) by the Issuer of at least 90% of the Capital Stock of Pan-Sino; (ii) the Issuer Note issued by Pan-Western; (iii) in the event that Pan-Sino is merged into Pan-Western, the Issuer will pledge at least 99% of the Capital Stock of Pan-Western to the Exchange Notes Trustee; (iv) in the event that Pan-Sino is merged into the Issuer, the Issuer will assume Pan-Sino's obligations under the Pan-Sino Pledge Agreement; (v) by Pan-Western of the Luannan Facility Notes issued by the Joint Ventures; and (vi) by the Company of 100% of the Capital Stock of the Issuer. Individually, and in the aggregate, the pledges of the Capital Stock of each of the PEC, Pan-Sino and Pan-Western do not constitute a "substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated under the Securities Act) of the collateral securing the Exchange Notes and the Exchange Notes Guarantee. Separate financial statements of each of PEC, Pan- Sino and Pan-Western are not presented in this Prospectus because the Company and the Issuer believe that such disclosure is not material to a prospective purchaser of the Exchange Notes. Investors should consider carefully all the information set forth under "Risk Factors" prior to making any decision to invest in the Exchange Notes. The following chart details, in summary form, the corporate structure of Panda International and its subsidiaries. See Appendix G, "Ownership Structure of the Issuer, the Company, Panda International and Certain of Their Subsidiaries." [chart] Notes: Intermediate entities with no significant assets or liabilities have been excluded from the above chart except for the entity mentioned in note (1). (1) Panda Funding Corporation ("PFC"), a wholly-owned subsidiary of Panda Interfunding Corporation ("PIC"), is the issuer of the Series A Bonds. See "Description of Other Indebtedness - The PFC Bonds." PRIOR OFFERING On April 22, 1997 (the "Issue Date"), the Issuer issued $155,200,000 aggregate principal amount of its Old Notes in a private placement under Section 4(2) of the Securities Act and Rule 144A and Regulation S promulgated thereunder (the "Prior Offering"). The Old Notes were sold to Donaldson, Lufkin & Jenrette. (the "Initial Purchaser") pursuant to the Purchase Agreement and were placed by the Initial Purchaser with Qualified Institutional Buyers and institutional Accredited Investors (as defined in Section 501(a) (1), (2), (3) or (7) under the Securities Act). Pursuant to the Registration Rights Agreement entered into between the Company, the Issuer and the Initial Purchaser in connection with the Prior Offering, the Issuer and the Company agreed to file a shelf registration statement covering the Old Notes (a "Shelf Registration Statement") or to effect a registered exchange offer for the Old Notes pursuant to which the holders of the Old Notes would be offered the opportunity to exchange their Old Notes for registered Exchange Notes. The Registration Rights Agreement provides that if such an exchange offer registration statement (an "Exchange Offer Registration Statement") or a Shelf Registration Statement is not declared effective within 150 days after the Issue Date, the Issuer and the Company, jointly and severally, shall be liable to pay liquidated damages, during the first 90-day period commencing on the 151st day following the Issue Date in an amount equal to $.05 per week per $1,000 principal amount of Exchange Notes, with such amount increasing by an additional $.05 per week per $1,000 principal amount of Exchange Notes for each subsequent 90-day period, up to a maximum of $.50 per week per $1,000 principal amount of Old Notes. The Registration Statement with respect to the Exchange Offer was declared effective by the Commission on October 8, 1997, thereby avoiding the aforementioned Liquidated Damages. THE EXCHANGE OFFER The Issuer is making the following Exchange Offer to holders of all Old Notes presently outstanding: The Exchange Offer For each $1,000 principal amount of Old Notes tendered, a holder will be entitled to receive $1,000 principal amount of Exchange Notes. As of the date of this Prospectus, $155,200,000 principal amount of Old Notes is outstanding. The terms of the Exchange Notes are substantially identical to the terms of the Old Notes, except that the Exchange Notes (i) will have been registered under the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Old Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer - Termination of Certain Rights" and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents - Old Notes Registration Rights." Expiration Date The Exchange Offer will expire at 5:00 p.m., New York City time, on October 8, 1997, unless extended in the Issuer's sole discretion. See "The Exchange Offer - Expiration Date; Extensions; Termination; Amendments." Withdrawal of Tenders Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable. See "The Exchange Offer - Withdrawal of Tenders." Interest on the Exchange Notes and Accrued Interest on the Old Notes The Exchange Notes will bear interest from the date of their issuance. Interest on the Old Notes accepted for exchange will accrue thereon to, but not including, the date of issuance of the Exchange Notes and will be paid together with the first interest payment on the Exchange Notes issued in exchange therefor. Conditions of the Exchange Offer The Exchange Offer is subject to certain customary conditions, which may be waived by the Issuer. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Old Notes may be tendered only in integral multiples of $1,000. See "The Exchange Offer - Conditions of the Exchange Offer." Procedures for Tendering Old Notes Each holder of Old Notes wishing to accept the Exchange Offer must, prior to the Expiration Date, either (i) complete and sign the Letter of Transmittal, in accordance with the instructions contained herein and therein, and deliver such Letter of Transmittal, together with any signature guarantees and any other documents required by the Letter of Transmittal, to the Exchange Agent at its address set forth on the back cover page of this Prospectus and the tendered Old Notes must either be (a) physically delivered to the Exchange Agent or (b) transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures set forth herein. By executing the Letter of Transmittal, each holder will represent that the Exchange Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes (whether or not such person is the registered holder of such Exchange Notes), that neither the holder of such Exchange Notes nor any such other person has an arrangement with any person to participate in the distribution (within the meaning of the Exchange Act) of such Exchange Notes and that neither the holder of such Exchange Notes or any such other person is an Affiliate of the Issuer or the Company, or if it is an Affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. See "The Exchange Offer - Procedures for Tendering." Special Procedures for Beneficial Owners Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "The Exchange Offer - Procedures for Tendering." Guaranteed Delivery Procedures Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer - Guaranteed Delivery Procedures." Acceptance of the Old Notes and Delivery of the Exchange Notes Upon satisfaction or waiver of the conditions of the Exchange Offer, the Issuer will accept for exchange any and all Old Notes which are properly tendered and not withdrawn prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer - Acceptance of Old Notes for Exchange; Delivery of Exchange Notes." Certain Federal Income Tax Considerations For discussion of certain federal income tax consequences of the exchange of the Old Notes, see "Certain Income Tax Considerations of the Exchange Offer." Effect on Holders who Retain Old Notes Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and benefits, and will be subject to all limitations applicable thereto, under the Exchange Notes Indenture. All Old Notes not exchanged in the Exchange Offer will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Exchange Notes Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors-Consequences of Failure to Exchange Old Notes." Rights of Dissenting Holders Holders of Old Notes do not have any appraisal rights. See "The Exchange Offer-Terms of the Exchange Offer." Exchange Agent Bankers Trust Company. See "The Exchange Offer-The Exchange Agent." Terms of the Exchange Notes The Exchange Offer applies to $155,200,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the terms of the Old Notes, except that the Exchange Notes (i) have been registered under the Securities Act, and therefore, will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Old Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. Such rights will also terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "Exchange Offer - Termination of Certain Rights." The Exchange Notes will evidence the same debt as the Old Notes which they replace and will be issued under, and be entitled to the benefits of, the Exchange Notes Indenture. Issuer Panda Global Energy Company, a Cayman Islands company (the "Issuer"). Guarantor Panda Global Holdings, Inc., a Delaware corporation (the "Company"). Securities Offered $155,200,000 aggregate principal amount of 12 1/2% Registered Senior Secured Notes due 2004 (the "Exchange Notes"). Maturity Date April 15, 2004. Interest Rate Cash interest on the Exchange Notes will accrue at a rate of 12 1/2% per annum and will be payable semi-annually in arrears on each April 15 and October 15, commencing October 15, 1997. Repayment of Principal Commencing on October 15, 2000 and through the payment date of October 15, 2003, 15.4% of the aggregate outstanding principal amount of the Exchange Notes (assuming all outstanding Old Notes are tendered and accepted for exchange pursuant to the Exchange Offer) will be repaid semi-annually on the dates and in the amounts indicated in the table set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Ranking, Maturity, Interest and Principal of the Exchange Notes." Ranking The Exchange Notes will be senior obligations of the Issuer ranking senior in right of payment to all subordinated Indebtedness of the Issuer and pari passu with all other Senior Indebtedness of the Issuer. Exchange Notes The Exchange Notes will be secured by Collateral the Exchange Notes Collateral (herein so called). The Exchange Notes Collateral consists of pledges and a security interest in certain assets of the Issuer and its Subsidiaries, including, a pledge of (i) at least 90% of the Capital Stock of Pan-Sino, (ii) 99% of the Capital Stock of Pan- Western, (iii) the Issuer Note, (iv) the Luannan Facility Notes and the granting of a security interest in certain funds of the Issuer and its Subsidiaries maintained by the Exchange Notes Trustee, and (v) 100% of the Capital Stock of the Issuer. The Exchange Notes The Company, as primary obligor and Guarantee not merely as surety, will irrevocably, fully and unconditionally guarantee on a senior secured basis the performance and punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Issuer under the Exchange Notes Indenture and the Exchange Notes, whether for principal, premium, if any, and interest (including Liquidated Damages and Additional Amounts, if any), on the Exchange Notes, expenses, indemnification or otherwise. The Exchange Notes The Company's obligations under the Guarantee Collateral Exchange Notes Guarantee will be secured by the Exchange Notes Guarantee Collateral (herein so called). The Exchange Notes Guarantee Collateral consists of a pledge of 100% of the Capital Stock of the Company and of pledges and a security interest in certain assets of the Company and its Subsidiaries, including: (i) a pledge of 100% of the Capital Stock of PEC, which indirectly owns (a) 100% of the Rosemary Facility and (b) 100% of the lessee under a long-term leveraged lease of the Brandywine Facility, and (ii) the granting of a security interest in certain funds of the Company established and maintained by the Company Indenture Trustee. Optional Redemption The Exchange Notes will be redeemable at the option of the Issuer, in whole or in part, at any time on or after April 15, 2002, at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption." In addition, prior to April 15, 2000, the Issuer may redeem up to $51,733,000 of the originally issued principal amount of Existing Notes at the redemption price set forth under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption" with the Net Cash Proceeds of one or more Public Equity Offerings by the Company, Panda International or any direct or indirect parent of the Company; provided that (i) the proceeds of such offering used for the purposes of the optional redemption are contributed as equity to the Issuer and (ii) at least $103,467,000 of the aggregate outstanding principal amount of Existing Notes would remain outstanding immediately after giving effect to such redemption. Mandatory Redemption Upon the occurrence of certain events of loss or expropriation with respect to the Luannan Facility described below, the outstanding Existing Notes (together with, under certain limited circumstances, any additional Senior Indebtedness of the Issuer outstanding at the time) will be redeemed pro rata, at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption." Redemption at Option of Upon the occurrence of certain Holders Indentures Events of Default relating to Shareholder Loan events of default, or if the Luannan Facility Construction Cost is less than the Projected Luannan Facility Construction Cost by more than $1.0 million, the Issuer will be obligated to make an offer to redeem pro rata a portion of the outstanding Exchange Notes (assuming all outstanding Old Notes are tendered and accepted for exchange pursuant to the Exchange Offer) with certain amounts at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Redemption," and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents -- Certain Covenants - Indentures Events of Default.." Change of Control Upon a Change of Control, holders of the Exchange Notes will have the right to require the Issuer to repurchase their Exchange Notes, in whole or in part, at the purchase price set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Change of Control." The Series A-1 Bonds, issued by Panda Funding Corporation, an indirect subsidiary of the Company, in the aggregate principal amount of $105,525,000, contain similar change of control provisions. In the event of an occurrence which triggers the change of control provisions in both the Series A-1 Bonds and the Exchange Notes, there is a substantial likelihood that the mandatory offer to repurchase obligations under each series of indebtedness could not be fulfilled simultaneously. Asset Sale Proceeds The Company and the Issuer will be obligated in certain circumstances, to use a portion of the net cash proceeds of certain sales or other dispositions of assets, to make offers to purchase Exchange Notes in the amounts and at the redemption prices set forth below under "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Certain Covenants-Disposition of Proceeds of Asset Sales." Principal Covenants The Indentures, with respect to the Company and its Subsidiaries, will contain certain restrictive covenants, including, without limitation, (i) limitations on investments, loans and advances, (ii) limitations on dividends and other payments, (iii) limitations on transactions with Affiliates, (iv) limitations on additional indebtedness, (v) limitations on liens, (vi) limitations on agreements restricting payments, (vii) limitations on capital expenditures, (viii) limitations on line of business and Permitted Projects and (ix) limitations on sale and leaseback transactions. In addition, the Indentures will limit the ability of Company and the Issuer to consolidate, merge or sell all or substantially all of their assets. Certain Accounts In accordance with the Exchange Notes Indenture, certain funds, including the Capitalized Interest Fund and the Debt Service Reserve Fund, will be established. The Issuer will have limited rights of withdrawal under the above funds in accordance with terms and conditions set forth in the Exchange Notes Indenture. Capitalized Interest Upon the Issue Date, the Issuer Fund deposited approximately $48.1 million into the Capitalized Interest Fund. Through the Capitalized Interest Expiration Date (October 15, 1999), interest payments on the Exchange Notes will be provided from the Capitalized Interest Fund. Debt Service Reserve Upon the Issue Date, the Issuer Fund deposited $9.7 million in the Debt Service Reserve Fund as a reserve for payments on the Exchange Notes. Transfer of Exchange Based upon their view of Notes interpretations provided to third parties by the staff of the Commission, the Issuer and the Company believe that the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company, or the Issuer, (ii) a broker-dealer who acquired Old Notes directly from the Issuer or (iii) a broker-dealer who acquired Old Notes as a result of market making or other trading activities) without registration under the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each broker-dealer who receives Exchange Notes for its own account pursuant to the Exchange Offer must notify the Company and the Issuer that it has acquired Exchange Notes for its own account (which notification must be made in the applicable location in the Letter of Transmittal that is delivered by such broker-dealer along with such broker- dealer's Old Notes to be exchanged pursuant to the Exchange Offer), and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired by such broker- dealer as a result of market making activities or other trading activities. The Company and the Issuer have agreed, for a period of 270 consecutive days after the consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker- dealer for use in connection with any such resale so long as they notify the Issuer and the Company in writing that they have acquired Exchange Notes for their own account (which notification must be made in the applicable location in the Letter of Transmittal that is deliverd by such broker-dealer along with such broker- dealer's Old Notes to be exchanged pursuant to the Exchange Offer). A broker-dealer that delivers such a prospectus to a purchaser in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification provisions). Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes and any other holder that cannot rely upon such interpretations, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the conditions thereto have been met. See "The Exchange Offer -Purpose and Effects of the Exchange Offer" and "Plan of Distribution" Registration Rights The Exchange Offer is intended to satisfy certain rights under the Registration Rights Agreement, which rights terminate upon the consummation of the Exchange Offer. Therefore, the holders of Exchange Notes are not entitled to any exchange or registration rights with respect to the Exchange Notes. In addition, such exchange and registration rights will terminate as to holders of Old Notes who are eligible to tender their Old Notes for exchange in the Exchange Offer and fail to do so. See "The Exchange Offer -Termination of Certain Rights" and "Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-Old Notes Registration Rights." Use of Proceeds There will be no cash proceeds to the Issuer or the Company from the exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038541_precision_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038541_precision_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b387837ccbf687932a0d4b34f11a131b77f348b2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038541_precision_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Simultaneously with, and as a condition to, the closing of the Offering, the Company will acquire, in a series of separate merger and exchange offer transactions, businesses engaged in (i) franchising and operating automobile repair and maintenance service centers ("Precision Tune Auto Care"), (ii) operating self-service and automated car wash centers ("Precision Auto Wash"), and (iii) franchising and operating fast oil change and lubrication service centers ("Precision Lube Express"), in exchange for shares of Common Stock (the "Combination"). Unless the context otherwise requires, all references herein to the "Company" or "Precision Auto Care" shall mean Precision Auto Care, Inc., a Virginia corporation, and the Constituent Companies (as defined herein), taken as a whole, and assume that the Combination has been consummated. See "The Combination." Unless otherwise indicated, the information in this Prospectus does not give effect to the Underwriters' over-allotment option. References to system wide retail sales for Precision Tune Auto Care and Precision Lube Express and information derived therefrom have been based upon information obtained from the Company's franchisees. THE COMPANY Precision Auto Care is an international provider of automotive maintenance services which are offered principally as franchise operations and will be marketed under the "Precision" brand. The Company's operations include: (i) Precision Tune Auto Care, an international franchisor of automotive service centers; (ii) Precision Auto Wash, an operator and franchisor of self-service and touchless automatic car wash centers; and (iii) Precision Lube Express, an operator and franchisor of modular fast oil change and lube centers. The Company's management team has developed a strategic plan to capitalize on the market opportunities currently presented to the Company. These opportunities include leveraging Precision Tune Auto Care's existing brand name recognition and current market position into a broader "Precision" brand which symbolizes a high-quality, convenient and high-value auto services provider. Other opportunities involve the cross-selling of each service offering to existing and potential franchisees in order to provide multiple services and one-stop shopping to its customers and consolidating the automotive maintenance service industry through strategic acquisitions. Prior to the consummation of the Offering and the Combination the Company has not conducted any operations, and none of the Constituent Companies have operated under the Precision Auto Wash or Precision Lube Express names. Precision Tune Auto Care is a leading franchisor of automotive service centers with 556 centers owned and operated by franchisees as of June 30, 1997. Total system wide retail sales were approximately $207 million for the fiscal year ended June 30, 1997. Precision Auto Wash operates 34 company-owned touchless automatic and self-service car wash centers and has developed a proprietary marketing and operating system which provides computerized central control of its car wash system. Precision Lube Express owns and franchises express automobile oil and lubrication centers predicated upon a modular, above-ground building configuration designed to minimize the up-front cost of construction and provide flexibility in site selection and relocation. As of June 30, 1997, there were 21 fast oil change and lubrication centers in operation. In support of its franchisees and retail services, the Company manufactures and sells car wash equipment, modular fast oil change and lube buildings and car wash chemicals. The Company also distributes automotive parts, equipment and supplies. After giving effect to the Offering and the acquisition of Worldwide Drying Systems, Inc. described herein, pro forma revenue, operating income and net income were $43.1 million, $4.6 million and $2.0 million for the year ended June 30, 1997, respectively. The domestic automotive service, car wash and fast oil change and lube sectors totaled approximately $100 billion in 1996, up from $95 billion in 1995 and there are approximately 200 million cars and light trucks in the United States. The Company expects that the market for the services it provides will continue to grow as more consumers seek to have services performed for them ("do-it-for-me") rather than performing those services themselves ("do-it-yourself"). The do-it-for-me segment of the total automotive service market increased from 67% to 72% from 1985 to 1995 while the do-it-yourself segment showed a corresponding decrease. In addition, the automotive service and car wash industries are highly fragmented. The Company believes that it will be uniquely positioned to consolidate these industries and grow its market share on a regional and national basis. The Company further believes that its vertically integrated manufacturing and distribution capabilities will allow the Company to consolidate these industries more quickly and cost effectively. The Company intends to maximize the profitability of individual centers through superior operating systems and procedures and the advantages associated with cross-promoting the three Precision-branded services. In addition, the Company intends to offer the Precision Auto Wash and Precision Lube Express franchise products to existing Precision Tune Auto Care franchisees and to other potential franchisees through Precision Tune Auto Care's franchise marketing organization. To facilitate franchise sales and increase Company revenue growth and profitability, the Company intends to develop a division of Company-owned centers, which individually may then be sold as a franchised operation through a "turnkey program." The Company also intends to continue to leverage its manufacturing and distribution capabilities, particularly as it strives to aggressively consolidate, directly or through franchising, the competing service providers in the automotive service industry. THE COMBINATION The Company was formed in April 1997 and will have conducted no business operations prior to the Combination. Prior to the Combination, the Company will not have operated under the Precision Auto Wash or Precision Lube Express names. Simultaneously with, and as a condition to, the closing of the Offering, the Company will consummate the Combination. The consideration to be paid by the Company in the Combination will consist of shares of Common Stock as set forth in the Plan of Reorganization and Agreement for Share Exchange Offers dated August 27, 1997 (the "Combination Agreement"), that the Company has entered into with WE JAC Corporation ("WE JAC"), Miracle Industries, Inc. ("Miracle Industries"), Lube Ventures, Inc. ("Lube Ventures"), Rocky Mountain Ventures, Inc. ("Rocky Mountain I"), Rocky Mountain Ventures II, Inc. ("Rocky Mountain II"), Prema Properties, Ltd. ("Prema Properties"), Miracle Partners, Inc. ("Miracle Partners"), Ralston Car Wash Ltd. ("Ralston Car Wash"), and KBG, LLC ("KBG"). WE JAC is a holding company that conducts its operations through Precision Tune Auto Care, Inc., a wholly-owned subsidiary. For purposes of this Prospectus, WE JAC, Miracle Industries, Lube Ventures, Rocky Mountain I, Rocky Mountain II, Prema Properties, Miracle Partners, Ralston Car Wash and KBG are hereinafter referred to individually as a "Constituent Company" and collectively as the "Constituent Companies." In addition, the financial statements of Miracle Industries, Lube Ventures and Prema Properties have been combined and are referred to as the "Ohio Group" for purposes of presenting the Selected Financial Data and the Management's Discussion and Analysis of Financial Condition and Results of Operations portions of this Prospectus. The Ohio Group has been presented in this format because Miracle Industries, Lube Ventures and Prema Properties are under common ownership, control and management. The financial statements of Rocky Mountain I, Rocky Mountain II, Ralston Car Wash and Miracle Partners have been combined and presented as "All Other Constituent Companies" for purposes of presenting the Selected Financial Data and Management's Discussion and Analysis of Financial Condition and Results of Operations because prior to the Combination each of these Constituent Companies has been operating independently from WE JAC and the Company believes that an independent presentation of information for the entities within that group would not be material to an investor's understanding of the Combination. The results of operations of KBG are not included in the Summary Financial Data, the Pro Forma Combined Financial Statements, Selected Financial Data, or Management's Discussion and Analysis of Financial Condition and Results of Operations portions of the Prospectus because that Constituent Company was formed for the purpose of conveying certain proprietary software and intellectual property and has never conducted any operations. The Combination Agreement provides for the allocation of the shares of Common Stock among the Constituent Companies and their owners. The aggregate consideration to be paid by the Company in the Combination will consist of approximately 2,780,695 shares of Common Stock (valued at $30.6 million, based upon an assumed initial Offering price of $11.00 per share). Approximately 1,061,806 shares of Common Stock (valued at $11.7 million, based upon an assumed initial Offering price of $11.00 per share) will be paid to persons who are owners of certain Constituent Companies, and who will be executive officers or directors of the Company immediately following the Combination. As a result of this payment of shares of Common Stock and shares such persons will be able to obtain upon the exercise of options which will be exercisable within 60 days of the Combination, such persons will beneficially own approximately 24.7% of the outstanding Common Stock immediately following the Offering after deducting the shares of Common Stock offered by the Selling Shareholders. The Combination Agreement also calls for the Company to use approximately $18.5 million of the net proceeds it realizes from the Offering to repay certain indebtedness of the Constituent Companies, a portion of which is guaranteed by certain officers and directors of the Company. See "Risk Factors -- Control by Management and Principal Shareholders," " -- Benefits to Management and Principal Shareholders," "The Combination," "Certain Transactions" and "Shares Eligible for Future Sale." The consummation of the Combination is contingent on the satisfaction of certain customary closing conditions. See "The Combination" for a more complete description of the Combination Agreement and related transactions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038594_tsw_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038594_tsw_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3e74086a52a4316e306280decfeb6d752a5d4d93
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038594_tsw_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND DOES NOT REFLECT THE EXERCISE OF ANY STOCK OPTIONS OR WARRANTS AFTER MARCH 31, 1997. THE COMPANY TSW International, Inc. ("TSW" or the "Company") is a leading provider of Asset Care-TM- solutions, which are used by large organizations to maintain their valuable physical assets on an enterprise-wide basis. The Company develops, markets and supports advanced Asset Care application software and provides related services that enable customers to plan, execute, monitor and improve asset maintenance processes. With the Company's products, customers are better able to increase equipment and production capacity, reduce operating costs and safeguard the workforce and the environment. The Company's sales and professional services functions are organized into vertical industry sectors to best match the Company's solution to its customers' business requirements. Typical licensees of the Company's software include discrete and process manufacturers, utilities, hospitals, mining companies, transportation authorities, educational systems, telecommunications providers and governmental institutions. The Company's client/server Asset Care solution, Enterprise MPAC ("EMPAC"), is a scalable software solution that enables organizations to implement "best practices" maintenance automation on an enterprise-wide basis. EMPAC allows TSW's customers to raise the level of computerized maintenance management from a simple record keeping system for preventive maintenance to a proactive knowledge control system that manages the complete asset life cycle. EMPAC manages physical assets in real time by interoperating with other business information systems from vendors such as Baan, Oracle, PeopleSoft and SAP, and by acquiring performance and maintenance-related data from plant floor systems. The Company's professional services organization, which is organized along vertical markets, applies the Company's software technology and industry expertise to specific customer needs. With vertical market input to product development and an industry focus in its implementation approach, the Company believes it can leverage its Asset Care products across several vertical markets. The Company's objective is to be the leading worldwide provider of advanced enterprise-wide Asset Care software, services and support. To that end, TSW employees with practical maintenance and operations experience work with customers to develop the functional content of TSW's Asset Care solution, while software engineers apply leading-edge technology in a common sense fashion. The Company also is leveraging its substantial installed customer base by providing a clearly defined migration path from its previous host-based systems to its EMPAC client/server software solution. Finally, the Company intends to build upon key customer relationships with opinion leaders in its various vertical markets to extend its presence domestically and abroad. As of March 31, 1997, TSW's solutions were licensed for use by 321 customers at 941 sites in 48 countries. The Company's customer base consists of large, asset-intensive organizations including The Tennessee Valley Authority (utilities), Phelps Dodge Corporation (mining), Aluminum Company of America (metals), James River Corporation (forest products), The Coca-Cola Company (consumer packaged goods) and Unocal Thailand (oil and gas). The Company was founded in 1976 and shipped its first major software product, MPAC, in 1980. Its principal executive offices are located at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339, and its telephone number is (770) 952-8444. As used herein, unless the context otherwise requires, the terms "TSW" and the "Company" include the consolidated subsidiaries of the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001038821_toyota_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001038821_toyota_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1797ba3b447d61fea07e7732cb1a78f361a5c34b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001038821_toyota_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF CAPITALIZED TERMS" BEGINNING ON PAGE 101 HEREOF. <TABLE> <S> <C> OVERVIEW.......................... Certain motor vehicle dealers ("Dealers") whose dealerships are located in California, Florida, Michigan, Pennsylvania and Ohio (the "Trust States") have assigned and will assign retail closed- end automobile and light duty truck leases to the Titling Trust pursuant to their dealer agreements with the Titling Trust. The Titling Trust was created in October 1996 to avoid the administrative difficulty and expense associated with retitling leased vehicles in connection with the securitization of automobile and light duty truck leases. The Titling Trust has issued to TMCC an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated Titling Trust Assets. SEE "The Trust and the SUBI--The Trust". TMCC has instructed the trustee of the Titling Trust to allocate a separate portfolio of leases and leased vehicles from and among the Titling Trust Assets represented by the UTI and create a special unit of beneficial interest (the "SUBI") which represents the entire beneficial interest in such portfolio. Titling Trust Assets allocated to the SUBI will no longer be represented by the UTI. TMCC will sell the SUBI to the Transferor and the Transferor will contribute substantially all of the SUBI (excluding the related rights to proceeds of the Residual Value Insurance Policy described herein) to the Trust. In return, the Trust will issue the Class A Certificates offered hereby and the Class B Certificates, and will create the Transferor Interest for the benefit of the Transferor. The "Transferor Interest" is the undivided interest in the Trust not evidenced by the Certificates and will be permanently retained by the Transferor. TMCC, from time to time in the future, may cause the Titling Trust to allocate additional separate portfolios of leases and leased vehicles and to create additional special units of beneficial interest similar to the SUBI relating to such portfolios ("Other SUBIs") which may be sold to the Transferor or one or more other entities. The Trust and the Certificateholders will have no interest in the UTI, any Other SUBI or any Titling Trust Assets evidenced by the UTI or any Other SUBI. THE TRUST......................... The Trust was formed pursuant to the Agreement dated as of September 1, 1997 between the Transferor and U.S. Bank National Association (formerly known as First Bank National Association, "U.S. Bank"), as Trustee. The property of the Trust consists primarily of the SUBI and monies on deposit in certain accounts established as described herein. THE TITLING TRUST................. The Titling Trust is a Delaware business trust formed pursuant to the Titling Trust Agreement. The primary business purpose of the Titling Trust is to take assignments of and serve as holder of </TABLE> (CONTINUED FROM FRONT COVER) From time to time until principal is first allocated or distributed to the holders of Certificates ("Certificateholders"), as described below, Principal Collections on or in respect of the SUBI Assets will be reinvested in additional lease contracts originated as described herein and assigned to the Titling Trust, together with the automobiles and light duty trucks relating thereto, which at the time of reinvestment will become SUBI Assets. The SUBI will not evidence a direct interest in the SUBI Assets, nor will it represent a beneficial interest in any of the Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of the Titling Trust Assets not represented by the SUBI will not be available to make payments on the Certificates. The Certificates will consist of three classes of senior certificates (respectively, the "Class A-1 Certificates", the "Class A-2 Certificates" and the "Class A-3 Certificates", and collectively, the "Class A Certificates") and one class of subordinated certificates (the "Class B Certificates"). The Class A Certificates are the only Certificates offered hereby. The Initial Certificate Balance of the Class B Certificates will be $73,850,000, and the Class B Certificates will be subordinated to the Class A Certificates to the extent described herein. The Class A-1, Class A-2, Class A-3 and Class B Certificates will initially evidence in the aggregate approximately 33%, 53%, 6% and 6% undivided interests in the Trust, respectively. The Transferor will own the undivided interest in the Trust not represented by the Certificates (the "Transferor Interest"). The initial balance of the Transferor Interest will be $24,631,519.20. SEE "Description of the Certificates". Interest on the Certificates will accrue at the respective per annum interest rates specified above and, except upon the occurrence of a Monthly Payment Event, if any, or in the case of a Class of Certificates that is not fully paid on its Targeted Maturity Date, will be distributed to holders thereof semiannually on March 25 and September 25 of each year (or, if such day is not a Business Day, on the next succeeding Business Day), commencing on March 25, 1998. The Targeted Maturity Date for the Class A-1 Certificates will be September 27, 1999, for the Class A-2 Certificates will be September 25, 2000, for the Class A-3 Certificates will be March 26, 2001 and for the Class B Certificates will be September 25, 2001. In general, the Certificates will be "sequential pay" certificates meaning that no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made on the Class B Certificates until the Class A-3 Certificates are paid in full. Except upon the occurrence of a Monthly Payment Event, principal in respect of a Class of Class A Certificates will not be distributed until its respective Targeted Maturity Date. Upon the occurrence of certain Monthly Payment Events, if any, or in the event the full amount of principal of any Class of Class A Certificates is not available on its Targeted Maturity Date, principal will be distributed to holders of the related Class of Class A Certificates to the extent and in the order of priority described herein on Certificate Payment Dates which will thereafter be monthly on each Monthly Allocation Date. A "Monthly Allocation Date" is the day on which Collections in respect of the Contracts and Leased Vehicles represented by the SUBI are allocated, and shall occur on the twenty-fifth day of each month (or, if such day is not a Business Day, on the next succeeding Business Day) commencing on September 25, 1997. Each Class of Certificates will also have a Stated Maturity Date on or before which payment in full is due. Certain persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A Certificates. Such transactions may include stabilizing and the purchase of Class A Certificates to cover syndicate short positions. For a description of these activities, see "Underwriting". The Stock Exchange of Hong Kong Limited and the Luxembourg Stock Exchange take no responsibility for the contents of this Prospectus, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of its contents. <TABLE> <S> <C> title to substantially all of the lease contracts and the related leased vehicles originated by the Dealers beginning on dates prior to the execution of the SUBI Supplement. Pursuant to the Servicing Agreement, TMCC will service the lease contracts included in the Titling Trust Assets, including the Contracts. SEE "Additional Document Provisions--The Trust Agreement" and "--The Servicing Agreement" and "Certain Legal Aspects of the Titling Trust--The Titling Trust". The Titling Trust is governed by an Amended and Restated Trust and Servicing Agreement (the "Titling Trust Agreement") among TMCC, as grantor, initial beneficiary and Servicer, TMTT, Inc., as trustee (the "Titling Trustee"), and U.S. Bank, as trust agent (the "Trust Agent"). TMTT, Inc. is a Delaware corporation and a wholly owned, special purpose subsidiary of U.S. Bank that was organized solely for the purpose of acting as Titling Trustee. TMTT, Inc. is not affiliated with TMCC or any affiliate thereof. SEE "The Titling Trust-- The Titling Trustee". TITLING TRUST ASSETS ALLOCATED AS SUBI ASSETS........ The Titling Trust Assets consist primarily of retail closed-end lease contracts and the automobiles and light duty trucks relating thereto. The SUBI will evidence a beneficial interest in a specified portion of the Titling Trust Assets allocated to the SUBI. Certain lease contracts (the "Initial Contracts") originated by the Dealers, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles") and certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after August 1, 1997 (the "Cutoff Date") will be allocated to the SUBI on the Closing Date. During the Revolving Period, payments made on or in respect of the SUBI Assets allocable to the Discounted Principal Balance thereof will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") assigned to the Titling Trust by Dealers and the related automobiles and light duty trucks (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, such Subsequent Contracts and Subsequent Leased Vehicles will be allocated to the SUBI and will no longer be UTI Assets. All such assets, together with certain other assets and rights, are the "SUBI Assets". SEE "Description of the Certificates--Allocations and Distributions on the Certificates--The Revolving Period" and "The Trust and the SUBI-- The SUBI". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of the Titling Trust Assets other than the SUBI Assets will not be available to make payments on the Certificates. </TABLE> The Transferor, having made all reasonable inquiries, confirms that this Prospectus is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed herein are honestly held and that there are no other facts the omission of which makes this Prospectus, including any information incorporated by reference herein, as a whole, or any of such information or the expression of any such opinions or intentions misleading. The Transferor accepts responsibility accordingly. UNTIL DECEMBER 10, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO HAS RECEIVED AN ELECTRONIC PROSPECTUS OR A REQUEST BY SUCH INVESTOR'S REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE TRANSFEROR OR THE UNDERWRITERS WILL PROMPTLY DELIVER, OR CAUSE TO BE DELIVERED, WITHOUT CHARGE, A PAPER COPY OF THE PROSPECTUS. <TABLE> <S> <C> THE TRANSFEROR.................... Toyota Leasing, Inc. is a California corporation which is a wholly owned, special purpose subsidiary of TMCC. SEE "The Transferor". TMCC.............................. TMCC is a California corporation that has 34 branches in various locations in the United States and one branch in the Commonwealth of Puerto Rico. TMCC's primary business is providing retail leasing, retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle and Toyota industrial equipment dealers and their customers in the United States (excluding Hawaii) and Puerto Rico. TMCC is a wholly owned subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS"), which is primarily engaged in the wholesale distribution of automobiles, light duty trucks, industrial equipment and related replacement parts and accessories throughout the United States (excluding Hawaii). TMS is a wholly-owned subsidiary of Toyota Motor North America, Inc. ("TMA"). Substantially all of TMS's products are either manufactured by its affiliates or are purchased from Toyota Motor Corporation ("TMC"), which wholly owns TMA, or affiliates of TMC. Pursuant to the Agreement and the Series 1997-A SUBI Servicing Supplement to the Titling Trust Agreement dated as of September 1, 1997, among TMCC, the Titling Trustee and the Transferor (the "Servicing Supplement" and, together with the Titling Trust Agreement, the "Servicing Agreement"), TMCC will act as the initial servicer of the Titling Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). Pursuant to the terms of the Servicing Agreement, the Trustee is a third party beneficiary thereof. SECURITIES OFFERED A. GENERAL........................ The Certificates will represent fractional undivided beneficial interests in the Trust. The Certificates will consist of three classes of senior certificates (the Class A-1, Class A-2 and Class A-3 Certificates) and one class of subordinated certificates (the Class B Certificates). Only the Class A Certificates are being offered hereby. Each Certificate will represent the right to receive semiannual payments of interest at the related Certificate Rate and, to the extent described herein, payments of principal during the Amortization Period. It is expected that repayment of principal on each Class of Certificates will be made on the related Targeted Maturity Date. Payments on the Certificates will be funded from payments received by the Trust on or in respect of the SUBI and, in certain circumstances, from monies on deposit in the Reserve Fund, from earnings in respect of monies, if any, on deposit in the Certificateholders' Account, and monies that otherwise would be distributable in respect of the Transferor Interest. Interests in </TABLE> AVAILABLE INFORMATION The Transferor, as originator of the Trust, and the Trust, as issuer of the Certificates, have filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement") of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Class A Certificates. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which is available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048. Copies of such information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies of the Registration Statement and all of the documents incorporated by reference herein (including the Titling Trust Agreement and the Agreement) may be obtained at no charge at the offices of Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg and at the offices of Merrill Lynch & Co. at Asia Pacific Financial, 3 Garden Road, Hong Kong. The Servicer, on behalf of the Trust, will also file or cause to be filed with the Commission such periodic reports as are required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. Electronic filings made through the Electronic Data Gathering Analysis and Retrieval System are publicly available through the Commission's Website at http://www.sec.gov. DOCUMENTS INCORPORATED BY REFERENCE Certain documents with respect to Toyota Motor Credit Corporation ("TMCC") are incorporated herein. The documents incorporated by reference herein relate solely to TMCC as a registrant on the Registration Statement on Form S-3 with respect to the TMCC Demand Notes. The Certificates will represent beneficial interests in the Trust and will not represent interests in or obligations of TMCC or any of its affiliates. TMCC is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports and other information with the Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office, Citibank Center, Suite 1800, 500 West Madison Street, Chicago, Illinois 60611-2511. In addition, certain of TMCC's securities are listed on the New York Stock Exchange and the aforementioned material may also be inspected at the offices of such exchange. TMCC's Annual Report on Form 10-K for the year ended September 30, 1996, and TMCC's Quarterly Reports on Form 10-Q for the quarters ended December 31, 1996, March 31, 1997, and June 30, 1997, have been filed with the Commission and are made a part of this Registration Statement. All reports filed by TMCC pursuant to Sections 13(a) or 15(d) of the Exchange Act subsequent to the date of the Registration Statement and prior to the termination of the offering of the Class A Certificates and all supplements to the Registration Statement filed from time to time shall be deemed to be incorporated by reference into the Registration Statement to be a part hereof from the date of filing such documents. Copies of the incorporated documents will be obtainable at no charge at the offices of Bankers Trust Company Luxembourg S.A., 14 Boulevard F. D. Roosevelt, L-2450, Luxembourg. Any statement contained herein or made a part hereof, or contained in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for the purposes of the Registration Statement to the extent that a statement contained <TABLE> <S> <C> the assets of the Trust will be allocated among the Class A-1 Certificateholders, the Class A-2 Certificateholders, the Class A-3 Certificateholders and the Class B Certificateholders (collectively, the "Investor Interest") and the Transferor Interest. In general, the Certificates will be "sequential pay" certificates, meaning that no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made on the Class B Certificates until the Class A-3 Certificates are paid in full. The Class B Certificates will be subordinated to the Class A Certificates to the extent described herein. SEE "Description of the Certificates--Allocations and Distributions on the Certificates". The Transferor Interest also will be subordinated to the Certificates, as described herein. Payments will be made to Certificateholders of record as of the day immediately preceding each relevant Certificate Payment Date or, if Definitive Certificates are issued, as of the last Business Day of the preceding month (each, a "Record Date"). A "Business Day" is a day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, or Los Angeles, California are authorized or obligated by law, regulation, executive order or decree to be closed; provided that, solely for purposes of identifying any Certificate Payment Date with respect to the making of payments on the Class A Certificates in Luxembourg or Hong Kong by a paying agent there located, "Business Day" shall also exclude any day on which banking institutions located in that jurisdiction are authorized by law, regulation, governmental order or decree to be closed, whether or not payments are made with respect to such Certificates in any other jurisdiction on such date, but such definition shall not be used for making any other calculation. On the date of initial issuance of the Certificates (the "Closing Date"), the Trust will issue $410,000,000 aggregate initial Certificate Balance of Class A-1 Certificates (the "Initial Class A-1 Certificate Balance"), $650,000,000 aggregate initial Certificate Balance of Class A-2 Certificates (the "Initial Class A-2 Certificate Balance"), $72,750,000 aggregate initial Certificate Balance of Class A-3 Certificates (the "Initial Class A-3 Certificate Balance" and, together with the Initial Class A-1 Certificate Balance and the Initial Class A-2 Certificate Balance, the "Initial Class A Certificate Balance") and $73,850,000 aggregate initial Certificate Balance of Class B Certificates (the "Initial Class B Certificate Balance" and, together with the Initial Class A Certificate Balance, the "Initial Certificate Balance"). Such Class Certificate Balances will remain fixed at the indicated Initial Certificate Balances during the Revolving Period and until the </TABLE> therein (or in any subsequently filed document which is also incorporated or deemed to be incorporated by reference herein) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement. REPORTS TO CERTIFICATEHOLDERS U.S. Bank National Association, as Trustee, will provide to Certificateholders (which shall be Cede & Co. as the nominee of DTC unless Definitive Certificates are issued under the limited circumstances described herein) unaudited monthly and annual reports concerning the Contracts and Leased Vehicles. For so long as the Class A Certificates are outstanding, each such report (including a statement of the Class Certificate Balance of each Class of Certificates) also shall be delivered to the Luxembourg Stock Exchange and The Stock Exchange of Hong Kong Limited on the same date such reports are to be delivered to Certificateholders. Copies of such reports may be obtained at no charge at the offices of Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg and at the offices of Merrill Lynch & Co. at Asia Pacific Financial, 3 Garden Road, Hong Kong. <TABLE> <S> <C> related Targeted Maturity Date, except that such Class Certificate Balances may decline in connection with the allocation of Loss Amounts thereto or, commencing upon the occurrence of a Monthly Payment Event, in connection with distributions thereto in respect of principal to the extent described herein. The "Class Certificate Balance" of any Class of Certificates on any day will equal the Initial Certificate Balance thereof, reduced by the sum of all distributions made in respect of principal of such Class (including any distributions in respect of Loss Amounts and Certificate Principal Loss Amounts allocable to such Class) on or prior to such day and any unreimbursed Certificate Principal Loss Amounts in respect of such Class (and in the case of the Class B Certificates, minus the aggregate amount of unreimbursed Class B Available Principal applied to cover interest shortfalls and reimburse Loss Amounts and Certificate Principal Loss Amounts allocated to the Class A Certificates), as described herein. The "Class A Certificate Balance" will mean the sum of the Class A-1, Class A-2 and Class A-3 Class Certificate Balances. The "Certificate Balance" with respect to the Certificates will mean the sum of the Class A Certificate Balance and the Class B Certificate Balance. The Transferor Interest will represent the interest in the Trust not represented by the Investor Interest. The Transferor Interest will initially equal $24,631,519.20 (2% of the Aggregate Net Investment Value as of the Cutoff Date) and on any day will equal the difference between the Aggregate Net Investment Value and the Adjusted Certificate Balance, calculated as described below. SEE "Summary--The SUBI--1. The Contracts". As more fully described herein, the Aggregate Net Investment Value can change daily and the Transferor Interest can decrease daily as the Aggregate Net Investment Value decreases. The Transferor Interest may increase on a Monthly Allocation Date as the Adjusted Certificate Balance declines. SEE "Description of the Certificates--General". B. DISTRIBUTIONS.................. INTEREST. Payments of interest on each Class of Certificates will be made, to the extent funds are allocated and are available therefor as described herein, (i) on each Monthly Allocation Date in March and September, commencing in March 1998, as well as on the Targeted Maturity Date for such Class and (ii) for any Class of Certificates not paid in full on the related Targeted Maturity Date, on any subsequent Certificate Payment Date until such Class is paid in full. In addition, after the occurrence of any Monthly Payment Event, payments of interest on each Class of Certificates will be made monthly, to the extent funds are allocated and are available therefor as described herein, on each Monthly Allocation Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). PRINCIPAL. Principal of each Class of Certificates will be payable in full on the related Targeted Maturity Date. If Principal Collections during the Collection Periods preceding such date (but </TABLE> OVERVIEW OF TRANSACTION [GRAPH] <TABLE> <S> <C> commencing after the end of the Revolving Period) that are allocable to such Class of Certificates, together with amounts allocated thereto from amounts on deposit in the Reserve Fund, through subordination or from any related Maturity Advance, are insufficient to make such payment in full, all such amounts available will be paid to the related Certificateholders on the related Targeted Maturity Date and, thereafter, payment of all Principal Collections in respect of the related Collection Period allocable to the Investor Interest will be paid on each related Certificate Payment Date on a monthly basis until such Class of Class A Certificates has been paid in full. In addition, after the occurrence of any Monthly Payment Event, payments of principal of the Certificates will be made monthly, sequentially as described herein to the extent funds are allocated and are available therefor as described herein, on each Certificate Payment Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). Each Monthly Allocation Date on which any such distribution of interest or principal is required to be made with respect to any Class of Certificates is a "Certificate Payment Date" with respect to such Class. The Targeted Maturity Date for each Class of Certificates is as follows: </TABLE> <TABLE> <CAPTION> CLASS TARGETED MATURITY DATE - ----------- ---------------------- <S> <C> Class A-1 September 27, 1999 Class A-2 September 25, 2000 Class A-3 March 26, 2001 Class B September 25, 2001 </TABLE> <TABLE> <S> <C> The Stated Maturity Date for each Class of Certificates (the date on which ultimate payment thereof in full is due) is April 26, 2004. C. INTEREST....................... Interest will accrue on the Certificates at the following rates (the "Certificate Rates"): (i) Class A-1 Certificates, 6.20% per annum (the "Class A-1 Rate"), (ii) Class A-2 Certificates, 6.35% per annum (the "Class A-2 Rate"), (iii) Class A-3 Certificates, 6.45% per annum (the "Class A-3 Rate") and (iv) Class B Certificates, 6.75% per annum (the "Class B Rate"). Interest will accrue on the Class Certificate Balance of each Class of Certificates and on Certificate Principal Loss Amounts allocated thereto at the applicable Certificate Rate during each Interest Period. The "Interest Period" with respect to each related Cer- tificate Payment Date for a Class of Certificates will be the period from and including the twenty-fifth day of the month of the preceding Certificate Payment Date, to but excluding the twenty-fifth day of the month of such current Certificate Payment Date. However, the first Interest Period for any Class of Certificates will be the period from and including the Closing Date, to but excluding the twenty-fifth day of the month of the related first Certificate Payment Date. Interest will be calculated </TABLE> <TABLE> <S> <C> on the basis of a 360-day year consisting of twelve 30-day months. Interest allocations and distributions on all Classes of Class A Certificates will have the same priority. Under certain circumstances, the amount available for interest allocations or distributions could be less than the amount of interest allocable to or distributable on the Class A Certificates on any Monthly Allocation Date, in which case each Class of Class A Certificates will be allocated or paid its ratable share (based upon the aggregate amount of interest due thereon) of the aggregate amount available to be allocated or paid in respect of interest on the Class A Certificates. D. PRINCIPAL, REVOLVING PERIOD AND AMORTIZATION PERIOD......... Unless a Monthly Payment Event has occurred, principal will be paid to the holders of each Class of Certificates on the related Targeted Maturity Date in an amount equal to the lesser of (i) the related Class Certificate Balance plus Certificate Principal Loss Amounts allocated thereto (I.E., such Class is paid in full), and (ii) the sum of (x) all amounts allocated for distributions in respect of principal of the Certificates then on deposit in the Certificateholders' Account and (y) any Maturity Advance. SEE "--Maturity Advances". To the extent that a Class is not paid in full on the related Targeted Maturity Date, distributions of principal in respect of the related Class of Certificates will be made on each Certificate Payment Date commencing in the month immediately following such Targeted Maturity Date, and shall continue on a monthly basis until such Class is paid in full. Interest at the related Certificate Rate will continue to accrue on the outstanding Certificate Balance of each Class of Certificates (and on unreimbursed Certificate Principal Loss Amounts allocated thereto) and will be distributable on each such Certificate Payment Date. SEE "--Interest". Failure to pay in full a Class of Certificates on its Targeted Maturity Date because Collections and other amounts allocable thereto are insufficient therefor will not constitute a Monthly Payment Event or an Event of Servicing Termination. However, failure by the Servicer to deliver required amounts to the Trustee on or within three Business Days of a relevant Certificate Payment Date, or failure to pay in full any Class of Certificates on or before its Stated Maturity Date, will constitute an Event of Servicing Termination. SEE "Additional Document Provisions-- The Servicing Agreement-- Events of Servicing Termination" and "--Rights Upon Event of Servicing Termination." THE REVOLVING PERIOD. No principal will be allocable or distributable on the Certificates until the Monthly Allocation Date (the "First Principal Monthly Allocation Date") in the month commencing after the earlier to occur of October 1, 1998 (the "Amortization Date") or an Early Amortization Event. From the </TABLE> <TABLE> <S> <C> Closing Date and through the Business Day preceding the commencement of the Amortization Period (I.E., the earlier of October 1, 1998, or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and amounts otherwise distributable to Certificateholders as reimbursements of Loss Amounts and Certificate Principal Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Certificate Balance at a constant level during the Revolving Period; provided that during the Revolving Period the Certificate Balance of a Class of Certificates will decrease to the extent Certificate Principal Loss Amounts are allocated thereto and not reimbursed. Early Amortization Events are described under "Description of the Certificates--Early Amortization Events". While any Early Amortization Event will terminate the Revolving Period, only certain Early Amortization Events (which are Monthly Payment Events) will cause monthly distributions in respect of principal to commence. During the Revolving Period, on one or more Business Days selected by the Servicer each month (each, a "Transfer Date"), the Servicer will direct the Titling Trustee to reinvest Principal Collections and certain reimbursed Loss Amounts in Subsequent Contracts and Subsequent Leased Vehicles. Upon such reinvestment, such Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the last Business Day of any month during the Revolving Period commencing in October 1997 the Servicer determines that the amount of Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts for the preceding Collection Period not reinvested in Subsequent Contracts and Subsequent Leased Vehicles as of the first day of such month exceeds $1,000,000, an Early Amortization Event will be deemed to have occurred, the Revolving Period will terminate as of such day and all Principal Collections and reimbursed Loss Amounts not reinvested as of such day will then be allocable or distributable to Certificateholders on the succeeding Monthly Allocation Date. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Revolving Period". During the Revolving Period, Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Titling Trust's portfolio of lease contracts and related vehicles not allocated to any Other SUBI, based on the criteria specified in the Titling Trust Agreement and Servicing Supplement as described under the "The Contracts--Representations, Warranties and Covenants". Reinvestment of Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts will be in the lease contracts having the earliest origination dates and the related vehicles and Titling Trust Assets (excluding those previously allocated to any Other SUBI). If any Other SUBI is created and allocations are being made in respect of such Other </TABLE> <TABLE> <S> <C> SUBI at the same time out of the Titling Trust's general pool of unallocated lease contracts, reinvestment in respect of the SUBI will be given priority. SEE "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract, discounted to the extent described below. With respect to any Monthly Allocation Date, the related "Collection Period" will be the preceding calendar month. For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than 9.75% per annum (each, a "Discounted Contract") will be discounted at a per annum rate of 9.75%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Certificateholders. With respect to any Collection Period, "Collections" will include all net collections received in respect of the Contracts and Leased Vehicles during such Collection Period, such as Monthly Payments (including previously collected Payments Ahead that represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds, Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds, less (i) amounts representing Payments Ahead with respect to future Collection Periods and (ii) Additional Loss Amounts in respect of such Collection Period. In addition, for each Collection Period during the Revolving Period, amounts otherwise allocable or distributable to the Certificateholders on the related Monthly Allocation Date as reimbursement of Loss Amounts or Certificate Principal Loss Amounts allocable to the Investor Interest will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles. SEE "Description of the Certif- icates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". With respect to any Collection Period "Interest Collections" generally will equal the amount by which Collections exceed Principal Collections. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses. AMORTIZATION PERIOD. The "Amortization Period" shall commence on the earlier of the Amortization Date or the day on which an Early Amortization Event occurs, and will end when (i) each Class of Certificates has been paid in full, or (ii) the Trust otherwise terminates. During the Amortization Period, Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts will no longer be reinvested in Subsequent Contracts and Subsequent Leased Vehicles. </TABLE> <TABLE> <S> <C> During the Amortization Period, the amount of Principal Collections allocable to the Investor Interest in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period alloca- ble to the SUBI multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Adjusted Certificate Balance and the denominator of which is the Aggregate Net Investment Value, calculated as of the last day of the Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. The "Adjusted Certificate Balance" for any Class of Certificates is the Initial Certificate Balance thereof reduced by the sum of all amounts deposited into the Certificateholders' Account in respect of principal on such Class plus the amount of all unreimbursed Loss Amounts and Certificate Principal Loss Amounts allocated thereto (and in the case of the Class B Certificates, minus the aggregate amount of unreimbursed Class B Available Principal applied to cover interest shortfalls and reimburse Loss Amounts and Certificate Principal Loss Amounts allocated to the Class A Certificates). SEE "Description of the Certificates--Calculation of Investor Percentage and Transferor Percentage." Following the occurrence of a Monthly Payment Event, if any, allocations based upon the Principal Allocation may result in allocations or distributions to Certificateholders of Principal Collections in amounts that are greater relative to the declining Certificate Balances than would be the case if no fixed Investor Percentage were used. To the extent that on any Monthly Allocation Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period remains after required allocations and distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Specified Reserve Fund Balance. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of 0.25% and (ii) the Aggregate Net Investment Value as of the last day of such Collection Period will constitute the "Accelerated Principal Distribution Amount". The Accelerated Principal Distribution Amount will be allocable or distributable to the Certificateholders (or for reimbursements of Maturity Advances) in addition to (and in the same manner and priority as) ordinary allocations and distributions of principal in respect of the Certificates. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" and "Assets of the Trust--The Accounts; Collections--The SUBI Collection Account" and "-- Certain Withdrawals from the SUBI Collection Account". </TABLE> <TABLE> <S> <C> The "Aggregate Net Investment Value" as of any date will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities and been terminated (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than three full Collection Periods (the "Matured Leased Vehicle Inventory") plus certain related charges and (iii) during the Revolving Period, the amount of unreinvested Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts. The "Discounted Principal Balance" for each Contract with a Lease Rate less than 9.75% will be its Outstanding Principal Balance discounted by 9.75% (each such Contract, a "Discounted Contract"), and for each Contract with a Lease Rate at least equal to 9.75% will be its Outstanding Principal Balance. As of the Cutoff Date, the Aggregate Net Investment Value equaled the aggregate Discounted Principal Balance of the Initial Contracts or $1,231,231,519.20. E. INVESTMENT OF COLLECTIONS PRIOR TO MONTHLY PAYMENT EVENT........ So long as a Monthly Payment Event has not occurred, and so long as the Certificates of any Class are outstanding, amounts allocated to interest on the Certificates during the Revolving Period, and amounts allocated to interest or principal in respect of the Certificates during the Amortization Period, in each case on Monthly Allocation Dates that are not relevant Certificate Payment Dates, will be deposited into the Certificateholders' Account and invested in Permitted Investments maturing prior to the succeeding relevant Certificate Payment Date or Targeted Maturity Date, as appropriate, and bearing rates of interest equal to the related Required Rates. Such Permitted Investments are expected to include one or more demand obligations issued by TMCC (each a "TMCC Demand Note"). SEE "Addi- tional Document Provisions--TMCC Demand Notes". From and after the occurrence of a Monthly Payment Event, payments of interest on, and payments of principal of each Class of Certificates in the sequential order described herein, will instead be made monthly on each subsequent relevant Certificate Payment Date. "Monthly Payment Events", the occurrence of which will terminate the investment of amounts held in the Certificateholders' Account and will cause payments of interest on and principal of the Certificates to be made monthly thereafter, will include (a) the occurrence of any of the Early Amortization Events described in clauses (ii) through (vi) and (viii) of the definition thereof or (b) the downgrade by Standard & Poor's of TMCC's short-term debt to a rating less than A-1+, or the downgrade by </TABLE> <TABLE> <S> <C> Moody's of TMCC's short term debt to a rating less than P-1 or TMCC's long term debt to a rating less than Aa3, unless within ten Business Days of such event alternative arrangements satisfactory to the Rating Agencies are made with respect to the investment of Collections to be invested. The Trustee is expected to exercise the demand feature of the TMCC Demand Notes only at the direction of the Certificateholders, although pursuant to the Indenture the Trustee may exercise such feature at any time after the occurrence of a Monthly Payment Event. The exercise of such feature by the Trustee will not of itself constitute a Monthly Payment Event. F. PRIORITY OF MONTHLY ALLOCATIONS AND DISTRIBUTIONS................ On each Monthly Allocation Date, the Trustee will make allocations, payments and distributions with respect to the related Collection Period in accordance with the priorities set forth herein. SEE "Description of the Certificates--Allocations and Distributions on the Certificates". G. OPTIONAL PURCHASE.............. The Transferor will have an option to purchase the SUBI Certificate on any Monthly Allocation Date on or after the Class A-3 Targeted Maturity Date if, either before or after giving effect to any payment of principal required to be made on the related Certificate Payment Date, the Adjusted Certificate Balance has been reduced to an amount less than or equal to $123,123,151.92 (10% of the Aggregate Net Investment Value as of the Cutoff Date) or amounts sufficient to effectively reduce the Certificate Balance to such amount have been deposited in the Collection Account on such date. Such a purchase would result in the retirement of the Certificates of each outstanding Class. SEE "Description of the Certificates--Termination of the Trust; Retirement of the Certificates". H. FORM, DENOMINATIONS AND REGISTRATION OF THE CLASS A CERTIFICATES............ Except under limited circumstances, the Class A Certificates will be available only in book-entry form in minimum denominations of $1,000. Persons acquiring beneficial ownership interests in the Class A Certificates ("Certificate Owners") will hold their Cer- tificates through The Depository Trust Company ("DTC"), in the United States, or Cedel Bank, societe anonyme ("Cedel Bank") or the Euroclear System ("Euroclear") in Europe or Asia. SEE "Description of the Certificates--Book-Entry Registration" and "ANNEX I: Global Clearance, Settlement and Tax Documentation Procedures". I. LISTING........................ Application has been made for listing of the Class A Certificates on the Luxembourg Stock Exchange and for listing of and permission to deal in the Class A Certificates on The Stock Exchange of Hong Kong Limited. The Trust has requested that such permission be made effective on September 25, 1997. THE SUBI.......................... The SUBI will be evidenced by a certificate (the "SUBI Certificate") evidencing a 100% beneficial interest in the SUBI Assets </TABLE> <TABLE> <S> <C> and will not evidence an interest in any Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of any other Titling Trust Assets (and proceeds of the Residual Value Insurance Policy) will not be available to make payments on the Certificates. The Titling Trust Assets evidenced by the SUBI will primarily include the Contracts and Leased Vehicles allocated to the SUBI. SEE "The Trust and the SUBI" and "The Titling Trust". 1. THE CONTRACTS................ The Contracts will consist of retail closed-end lease contracts originated by the Dealers in California, Florida, Michigan, Ohio and Pennsylvania (the "Trust States") having original terms of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price and may include certain origination fees), plus a lease charge which is based on an imputed interest rate (the "Lease Rate"). Each Contract will provide for equal monthly payments (each, a "Monthly Payment") that when allocated between principal and the lease charge at the Lease Rate on a constant yield basis, will be sufficient to amortize the capitalized cost over the term of the lease to an amount equal to the Residual Value. A Residual Value is established at the origination of a lease contract (based on documentation provided to the Dealers by TMCC) and represents the estimated wholesale market value at the end of the lease term, as such estimated value may be reduced in connection with payments received in respect of principal due during the period of any extension granted as described herein ("Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of 56,340 lease contracts. As of the Cutoff Date, the Initial Contracts had Lease Rates ranging from 0.254% to 13.653% and a weighted average Lease Rate of 7.655%. As of the Cutoff Date, the Initial Contracts had an aggregate Outstanding Principal Balance of $1,287,004,969.02, an Aggregate Net Investment Value of $1,231,231,519.20 (of which amount approximately 69.35% represented Residual Values), a weighted average original term of 39.8 months and a weighted average remaining term to scheduled maturity of 35.8 months. SEE "The Contracts". 2. THE LEASED VEHICLES.......... The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will include new vehicles, including dealer demonstrator vehicles driven fewer than 20,000 miles, or used vehicles up to four model years old at the time of origination of the related Contract, including certified used vehicles and vehicles previously sold under manufacturer's programs. Certified used vehicles are Toyota or Lexus vehicles that are </TABLE> <TABLE> <S> <C> purchased by dealers, reconditioned and certified to meet certain Toyota/Lexus required standards and sold or leased with an extended warranty from the manufacturer. Manufacturer's program vehicles are Toyota or Lexus vehicles that have been sold to rental car companies, repurchased by the manufacturer and subsequently purchased by the dealer to sell or lease as current year and one year old used vehicles with 20,000 miles or less. SEE "The Contracts--General". The certificates of title to the Initial Leased Vehicles are, and the certificates of title to all Leased Vehicles will be, registered at all times prior to liquidation in the name of the Titling Trust. The certificates of title will not reflect the indirect interest of the Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI. Therefore, if the Class A Certificates were recharacterized as secured loans, the Trustee would have a perfected security interest in the SUBI Certificate (excluding rights to proceeds of the Residual Value Insurance Policy retained by the Transferor), Contracts and Contract Rights but not in the Leased Vehicles. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations" and "--Back-up Security Interests". THE SUBI COLLECTION ACCOUNT; COLLECTIONS..................... The Titling Trustee will maintain the SUBI Collection Account for the benefit of the holders of interests in the SUBI. Except under certain limited circumstances, the Servicer will be permitted to deposit amounts collected in respect of payments made on or in respect of the Contracts or the Leased Vehicles during each Collection Period into the SUBI Collection Account on the Business Day preceding the related Monthly Allocation Date (the related "Deposit Date") rather than when received. Such payments will include, but will not be limited to, (i) Monthly Payments, not including Monthly Payments (or portions thereof) determined by the Servicer to be due in one or more future Collection Periods, (each, a "Payment Ahead") until the Collection Period during which such Payment Ahead is due, (ii) Prepayments, (iii) proceeds from the sale or other disposition of Leased Vehicles under Matured Contracts, including payments for excess mileage and excess wear and tear ("Matured Leased Vehicle Proceeds"), (iv) proceeds received in connection with the sale or other disposition of Leased Vehicles that have been repossessed ("Repossessed Vehicle Proceeds") and (v) other amounts received in connection with the realiza- tion of the amounts due under any Contract (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with </TABLE> <TABLE> <S> <C> Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), to be netted from proceeds or Collections in respect of such payments (including other Liquidation Proceeds), whether or not on deposit in the SUBI Collection Account. The Servicer also will be entitled to reimbursement of certain payments made and expenses and charges incurred by it in the ordinary course of servicing the Contracts (including payments it makes on behalf of the related lessees in connection with the payment of taxes, vehicle registration, clearance of parking tickets and similar items) from Collections with respect to the related Contracts, separate payment thereof by the related lessees or from amounts realized upon the final disposition of the related Leased Vehicle. To the extent such amounts are reimbursed prior to or at the final disposition of the related leased vehicle but remain unpaid by the related lessee, such unreimbursed amounts (together with any unpaid Monthly Payments under the related Contract) will be treated as Matured Leased Vehicle Expenses or Liquidation Expenses, as the case may be, and will therefore reduce Matured Leased Vehicle Proceeds or Liquidation Proceeds, as the case may be. On each Deposit Date, the following additional amounts also will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) any Maturity Advances by the Transferor and (iii) Reallocation Payments by TMCC (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred. In addition, to the extent set forth herein, amounts will be withdrawn from the Reserve Fund and deposited into the SUBI Collection Account on each Deposit Date to cover certain Loss Amounts or shortfalls in Collections. Thereafter, the Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, the Principal Collections) on deposit in the SUBI Col- lection Account in respect of the related Collection Period will be available for allocation or distribution of required amounts to Certificateholders and the Transferor. SEE "Assets of the Trust-- The Accounts; Collections--The SUBI Collection Account". The Certificateholders and the Transferor (as holder of the Transferor Interest) are entitled on any Monthly Allocation Date to be allocated or to receive Matured Leased Vehicle Proceeds up to, but not in excess of, the aggregate of the Residual Values of Leased Vehicles sold or otherwise disposed of from Matured Leased Vehicle Inventory during the related Collection Period. It is possible that in any Collection Period the Servicer could incur Matured Lease Vehicle Expenses that, if reimbursed from collections in respect of Matured Leased Vehicle Proceeds, would result in Net Matured Leased Vehicle Proceeds being less than the sum of the Residual Values of all </TABLE> <TABLE> <S> <C> Leased Vehicles so sold or otherwise disposed. Any such shortfall will result in the realization of Residual Value Loss Amounts. On each Deposit Date on which Matured Leased Vehicle Proceeds received during the related Collection Period net of related Matured Leased Vehicle Expenses incurred during such Collection Period ("Net Matured Leased Vehicle Proceeds") exceed the aggregate Residual Value of the related Leased Vehicles (the "Residual Value Surplus"), such excess will be released to the Transferor and neither the Trust nor the Certificateholders will have any further claim thereto or interest therein. THE RESERVE FUND.................. A Reserve Fund will be maintained with the Trustee for the benefit of the Certificateholders and the Transferor. The Reserve Fund is designed to provide additional funds for the benefit of the Certificateholders in the event that on any Monthly Allocation Date Interest and Principal Collections allo- cable to the Investor Interest for the related Collection Period are insufficient to allocate for or make distributions in respect of, among other things, (i) accrued interest, (ii) overdue interest (with interest thereon at the applicable Interest Rate, to the extent lawful) and (iii) Loss Amounts allocable to the Investor Interest and unreimbursed Certificate Principal Loss Amounts, together with interest thereon at the applicable Certificate Rate (the aggregate amount of such deficiency, the "Required Amount"). A portion of the amounts on deposit in the Reserve Fund (the Class B Interest Reserve Amount) will be available only to cover interest shortfalls with respect to the Class B Certificates, and will not be available to cover interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts allocated to the Class A Certificates. Monies on deposit in the Reserve Fund also will be available to Certificateholders should Collec- tions ultimately be insufficient to pay in full any Class of Certificates at the Stated Maturity Date. The Reserve Fund will not be an asset of the Trust. SEE "Assets of the Trust--The Accounts; Collections-- The Reserve Fund". The Reserve Fund will be created with an initial deposit (the "Initial Deposit") by the Transferor of $30,780,787.98 (2.50% of the Aggregate Net Investment Value as of the Cutoff Date). On each Monthly Allocation Date, the Reserve Fund will be supplemented by Interest Collections and Principal Collections that would otherwise be released to the Transferor after making all required allocations and distributions to Certificateholders, until the amount on deposit therein equals the applicable Specified Reserve Fund Balance. After giving effect to all payments from the Reserve Fund on a Monthly Allocation Date, monies on deposit therein in excess of the Specified Reserve Fund Balance will be paid to the Transferor, free and clear of any interest of the Trust. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions </TABLE> <TABLE> <S> <C> of Collections" and "Assets of the Trust--The Accounts; Collections--The Reserve Fund--The Specified Reserve Fund Balance". Under certain circumstances it is possible that, as of any Monthly Allocation Date, the amount of funds actually on deposit in the Reserve Fund could be less than the Specified Reserve Fund Balance. Moreover, pursuant to the Agreement, the Specified Reserve Fund Balance may, under certain circumstances, be reduced on one or more Monthly Allocation Dates to the extent approved by each Rating Agency. SUBORDINATION..................... The Class B Certificates will be subordinated to the Class A Certificates so that on any Certificate Payment Date (i) interest payments generally will not be made in respect of the Class B Certificates until interest on the Class Certificate Balance of each Class of Class A Certificates and on Certificate Principal Loss Amounts previously allocated thereto has been paid on such Certificate Payment Date and (ii) principal payments generally will not be made in respect of the Class B Certificates until all of the Class A Certificates have been paid in full. To provide additional credit enhancement for the Certificates, payments will not be made to the Transferor in respect of the Transferor Interest on any Monthly Allocation Date until all allocations or distributions required to be made with respect to the Certificates on such date have been made as described under "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" and the amount on deposit in the Reserve Fund on such Monthly Allocation Date equals the Specified Reserve Fund Balance. SEE "Description of the Certificates--Certain Payments to the Transferor". ADVANCES.......................... On each Deposit Date, the Servicer will be obligated to make an Advance with respect to each outstanding delinquent Contract and certain Contracts as to which payments have been deferred that have not been reallocated to the UTI with an accompanying Reallocation Payment as described herein, provided that the Servicer will not be required to make any Advance to the extent that it determines such Advance may not be ultimately recoverable from Net Liquidation Proceeds or otherwise. Each such Advance will be made by deposit into the SUBI Collection Account of an amount equal to the aggregate amount of Monthly Payments due but not received during the related Collection Period (each, an "Advance"). SEE "Additional Document Provisions--The Servicing Agreement--Collections" and "--Advances". MATURITY ADVANCES................. Pursuant to the Agreement, on the Targeted Maturity Date for any Class of Class A Certificates on which the aggregate of amounts available to be paid as principal thereof (including any amount of Interest Collections or net investment income applied to cover such shortfall on such date) are insufficient to pay in </TABLE> <TABLE> <S> <C> full the related Class of Certificates, the Transferor will have the option to make an advance (a "Maturity Advance") in any amount up to the amount of such shortfall. All such amounts advanced by the Transferor will be reimbursable to the Transferor from the Investor Percentage of Principal Collections on subsequent Monthly Allocation Dates as described herein. SERVICING COMPENSATION............ The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets (the "Servicing Fee"), payable on each Monthly Allocation Date, equal to one-twelfth of 1% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Monthly Allocation Date, as of the Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees, Deferral Fees and other administrative fees or similar charges under the Contracts. SEE "Additional Document Provisions--The Servicing Agreement--Servicing Compensation". TAX STATUS........................ Andrews & Kurth L.L.P., special federal income tax counsel to the Transferor, is of the opinion that the Class A Certificates will be characterized as indebtedness for federal income tax purposes. Each Class A Certificateholder, by its acceptance of a Class A Certificate, and each Certificate Owner by its acquisi- tion of an interest in the Class A Certificates, will agree to treat the Class A Certificates as indebtedness for federal, state and local income tax purposes. SEE "Material Federal Income Tax Considerations". ERISA CONSIDERATIONS.............. Subject to considerations described below, the Class A-1, Class A-2 and Class A-3 Certificates are eligible for purchase by employee benefit plan investors as of the Closing Date. Under a regulation issued by the Department of Labor, the Trust's assets would not be deemed "plan assets" of an employee benefit plan holding Class A Certificates if certain conditions are met, including that Certificates of each such Class must be held, upon completion of the public offering made hereby, by at least 100 investors who are independent of the Transferor and of one another and that such Certificates are registered under the Exchange Act. Although no assurances can be given, and no monitoring or other measures will be taken to ensure, that such condition will be met, the Underwriters expect that the Class A-1, Class A-2 and Class A-3 Certificates will be held by at least 100 independent investors at the conclusion of the offering. The Transferor anticipates that the other conditions of the regulation will be met. The Transferor has applied to the DOL for the Requested Exemption described herein pursuant to which the Class A-1, Class A-2 and Class A-3 Certificates would be eligible to be held by employee benefit plan investors meeting the conditions specified therein as of the effective date of the Requested Exemption. In the event the Requested Exemption is granted substantially in </TABLE> <TABLE> <S> <C> the form for which such application was made, the Transferor intends to deregister the Class A Certificates under the Exchange Act as soon as permitted by law. As a result, the Class A Certificates may no longer be eligible to be held by Benefit Plans that did not meet the eligibility criteria for the Requested Exemption, even if more than 100 other qualified investors continued to hold securities of each such Class. The Transferor anticipates that all of the conditions of the Requested Exemption that are within its control will be satisfied if and when the Requested Exemption is granted. Accordingly, Benefit Plans intending to purchase any Class A Certificates should confirm that they meet the conditions specified in the Requested Exemption. There can be no assurance that the Requested Exemption will be granted, or the date on which the Requested Exemption might be granted. If the Trust's assets were deemed to be "plan assets" of an employee benefit plan investor (e.g., if the 100 independent investor criterion is not satisfied and any of the conditions upon which the Requested Exemption is contingent are not satisfied), violations of the "prohibited transaction" rules of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), could result and generate excise tax and other liabilities under ERISA and section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), unless another statutory, regulatory or administrative exemption is available. It is uncertain whether existing exemptions from the "prohibited transaction" rules of ERISA would apply to all transactions involving the Trust's assets if such assets were treated for ERISA purposes as "plan assets" of employee benefit plan investors. SEE "ERISA Considerations". RATINGS........................... It is a condition of issuance that each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") rate each Class of Class A Certificates in its highest rating category. The ratings of the Class A Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold a security. The ratings of each Class of Class A Certificates address the likelihood of the payment of principal of and interest on such Certificates in accordance with their terms and may be subject to revision or withdrawal at any time by the assigning Rating Agency. SEE "Ratings of the Class A Certificates".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039111_livingston_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039111_livingston_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..802aba2879f1528d1999e57b262c5392426ccefa
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039111_livingston_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039139_orthallian_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039139_orthallian_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7674c25e2be7b5b31f04bc0d70824f958071cda
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039139_orthallian_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Simultaneously with and as a condition to the closing of the Offering, 55 separate orthodontic practices (collectively, the "Founding Practices") will transfer certain operating assets to OrthAlliance in exchange for cash and shares of Common Stock (in accordance with Staff Accounting Bulletin No. 48) and OrthAlliance will become a party to long-term management or consulting services agreements with the Founding Practices (the "Transfers"). The number of shares of Common Stock issued in connection with the Transfers will depend on the initial public offering price of the Common Stock. As a result of the merger of each of Premier Orthodontic Group, Inc. ("Premier") and US Orthodontic Care, Inc. ("USOC") with and into OrthAlliance, effective prior to the closing of the Offering (the "Merger"), OrthAlliance succeeds to the rights of Premier and USOC under agreements with the Founding Practices. See "Certain Transactions." The term "Allied Practice" includes each of the Founding Practices and any orthodontic practice with which the Company enters into long-term management or consulting services agreements in the future. Unless otherwise indicated by the context, references herein to practice management services, agreements or rights include consulting and other similar arrangements, which the Company has or will enter into with certain Allied Practices to comply with applicable regulations regarding practice management in certain states. As used herein, the term "Allied Orthodontists" refers to orthodontists affiliated with an Allied Practice. The Company has conducted no operations and generated no revenues to date. THE COMPANY OrthAlliance was recently organized to create a national provider of practice management services to orthodontic practices in the United States. The Company will manage the business aspects of the Allied Practices (subject to applicable state law), thereby allowing Allied Orthodontists to focus on delivering cost-effective, high quality patient care, and will provide capital for the development and growth of such practices. The Company will affiliate with Allied Practices pursuant to long-term management services agreements and will generate revenues by providing management, marketing and development services to Allied Practices. The Company intends to aggressively expand its network of Allied Practices by acquiring certain operating assets of and entering into long-term management services agreements with additional practices throughout the United States (herein sometimes referred to as the "affiliation" with other practices.) The Company has entered into definitive agreements, to be consummated simultaneously with the closing of this Offering, to acquire certain operating assets of, or the stock of entities holding certain operating assets of, and enter into long-term management services agreements with, each of the 55 Founding Practices, which include 82 orthodontists operating 147 offices located in 16 states. See "The Company" and "Business -- Agreements with Allied Practices and Allied Orthodontists." Management believes that the Founding Practices are leading practices in their markets, and the Founding Practices were selected based upon a variety of factors, including size, profitability, historical growth and reputation for high quality care, both among local consumers of orthodontic services and within the orthodontic services industry. The United States orthodontic industry is highly fragmented, with over 90% of the approximately 9,000 practicing orthodontists in the United States operating as sole practitioners. Management believes that less than 2% of the orthodontists currently practicing in the United States are affiliated with publicly held practice management companies. Management believes that the Company's operating strategy will enable Allied Practices to compete more effectively with and realize greater profitability than traditional orthodontic practices, thereby inducing additional orthodontists to affiliate with the Company. Key elements of the Company's operating strategy are: - Emphasizing quality patient care by (i) relieving the Allied Orthodontists from various time-consuming administrative responsibilities, (ii) affiliating with high quality practices conducted by orthodontists who have completed accredited graduate orthodontic training programs, and (iii) recommending practice standards, procedures and protocols under the direction of the Company's board of advisors, composed of the Allied Orthodontists in the Founding Practices; - Capitalizing on the best demonstrated practices of Allied Orthodontists through identification and promotion of successful practice-level strategies including, but not limited to, treatment, delivery of patient care, marketing, financing and cost control strategies; - Achieving operating efficiencies and economies of scale through (i) the implementation of national purchasing discounts for professional and clerical supplies and equipment, (ii) the reduction of certain expenses common to all Allied Practices, including, but not limited to, insurance and employee benefits, and (iii) work flow and patient flow enhancements and programs; and - Increasing market penetration and expansion through (i) local marketing programs, supported by demographic and economic analysis, and (ii) patient payment plans designed to enhance the affordability of orthodontic services. There can be no assurance that the Company will be able to implement successfully these operating strategies. Costs could increase if operating efficiencies and economies of scale are not realized; however, management believes that improved quality patient care and the use of best demonstrated practices which allow the Allied Orthodontists to increase the number of patients treated could result in higher patient revenue. The Company intends to implement a growth strategy focused on (i) affiliating with additional orthodontic practices that fit the OrthAlliance model of high quality and strong financial performance; (ii) expanding Allied Practices by providing capital, support and consultation for satellite office expansion; (iii) assisting the Allied Practices with their internal growth by increasing gross revenues through increased patient volume; and (iv) enhancing profitability through operational efficiencies. PENDING TRANSFERS The Company plans to use shares subject to its shelf registration statement filed with the Securities and Exchange Commission (the "Commission") relating to the separate offering of up to 2,500,000 shares of Common Stock (the "Shelf Registration") to acquire certain operating assets of, or the stock of entities holding certain operating assets of, additional orthodontic practices and enter into long-term management services agreements with such entities. The Company has entered into negotiations with four orthodontic practices with four orthodontists operating 12 offices in four states (collectively, the "Pending Transfers"). The aggregate consideration to be paid by the Company with respect to the Pending Transfers, if consummated, will be approximately $3.1 million, payable up to 20% in cash and the remainder with shares of Common Stock valued at either (i) the initial public offering price for Pending Transfers closed within seven days following the closing of the Offering, or (ii) the average closing price of the Common Stock as reported on the Nasdaq National Market for the five consecutive trading days ending two days prior to the closing date for Pending Transfers closed after such seventh trading day. Unlike the Founding Practices, which shall be accounted for in accordance with Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or Shareholders" ("SAB 48"), the Pending Transfers will be accounted for under the purchase method pursuant to Accounting Principles Board Opinion No. 16 "Business Combinations" ("APB 16") and will result in subsequent annual noncash amortization charges for intangible assets in the Company's statements of operations. Each of the Pending Transfers is subject to, among other conditions, execution of definitive agreements, the completion of the Offering, the effectiveness of the Shelf Registration and satisfactory due diligence review of each practice by the Company. THE OFFERING Common Stock offered by the Company.................. 2,600,000 shares Common Stock to be outstanding after the Offering................. 10,767,802 shares(1) Class B Common Stock to be outstanding after the Offering................. 250,000 shares Use of Proceeds............ To fund the cash portion of the consideration paid to the Founding Practices; to repay certain indebtedness; and for general corporate purposes, which are expected to include future acquisitions (including the Pending Transfers) and certain of the development costs of satellite offices. See "Use of Proceeds." Class B Common Stock....... In connection with the Merger, 250,000 shares of Class B Common Stock will be issued to the stockholders of USOC and Premier as part of the Merger consideration. The stockholders of USOC and Premier are responsible for the organization of the Company, and the Class B Common Stock was created to allow the stockholders of USOC and Premier to receive additional shares of Common Stock provided that the market price of the Common Stock appreciates to the various Conversion Prices described below. No other shares of Class B Common Stock will be authorized or issued. Holders of Class B Common Stock are entitled to one vote per share and such shares shall be voted with the Common Stock on all matters presented to the holders of Common Stock. The shares of Class B Common Stock are not transferable, except to the holder's spouse, parents, siblings, lineal descendants, a trust for the benefit of any such person or as determined by will or the laws of descent. See "Description of Capital Stock." Conversion of Class B Common Stock.............. At any time following 180 days from the date of this Prospectus, each share of Class B Common Stock shall automatically convert into Common Stock (i) at the ratio of eight shares of Common Stock for each share of Class B Common Stock upon the attainment of certain average closing price calculations for the Common Stock (the "Conversion Prices"), as determined on the Nasdaq National Market, other over-the-counter market or an exchange, as then applicable (the "Trading Market"), or (ii) if not converted pursuant to subparagraph (i), at the ratio of one share of Common Stock for each share of Class B Common Stock upon the sixth anniversary of the date of this Prospectus (the "Final Conversion Date"). The maximum number of shares of Common Stock that may be issued upon conversion of the Class B Common Stock is 2,000,000. The shares of Class B Common Stock convertible pursuant to subparagraph (i) above will convert in five increments of up to 50,000 shares of Class B Common Stock (20% of the total number of shares of Class B Common Stock issued) upon the attainment of each of the five specified Conversion Prices. At each automatic conversion, each holder of Class B Common Stock will be deemed to have converted a pro rata share of such Class B Common Stock then outstanding. The Conversion Prices shall be established at premiums to the initial public offering price. Each Conversion Price will be deemed to have been achieved at the end of the trading day on which the average closing price of the Common Stock for the preceding 20 consecutive trading days exceeds such Conversion Price. The closing prices will be those reported on the Trading Market. The initial Conversion Price is equal to 150% of the price to public in the Offering, and each of the subsequent Conversion Prices is equal to 120% of the preceding Conversion Price. Therefore, if the price to public in the Offering is the mid-point of the estimated initial public offering price range ($11.00), the five Conversion Prices at which up to 50,000 shares of the outstanding Class B Common Stock shall be automatically converted to Common Stock are $16.50, $19.80, $23.76, $28.51 and $34.21, respectively. If any Conversion Prices are attained within 180 days after the date of this Prospectus, the portion of shares of Class B Common Stock that would have otherwise converted, shall automatically convert into Common Stock on the 181st day after the date of this Prospectus. In the event that there are any shares of Class B Common Stock outstanding on the Final Conversion Date, all such shares shall automatically convert into an equal number of shares of Common Stock. The holders of the Class B Common Stock may convert each share of Class B Common Stock into one share of Common Stock at any time after 180 days from the date of this Prospectus but on or before the Final Conversion Date. Proposed Nasdaq National Market symbol............ ORAL - --------------- (1) Includes (i) 1,750,000 shares of Common Stock issued by OrthAlliance in connection with the Merger, and (ii) 6,417,802 shares of Common Stock to be issued in connection with the Transfers, but excludes 1,197,634 shares of Common Stock issuable pursuant to options granted for the purchase of Common Stock under the Company's stock option plans or issuable upon the exercise of outstanding warrants to purchase shares of Common Stock. The actual number of shares issued in connection with the Transfers will be determined by dividing $70.6 million by the initial public offering price. See "The Company," "Management -- Stock Plans," "Certain Transactions" and "Description of Capital Stock -- Warrants." The preceding summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes (i) the Underwriters' over-allotment option is not exercised, (ii) the consummation of the Merger and the Transfers and (iii) an initial offering price of $11.00 per share. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." Unless otherwise indicated, the industry information used in this Prospectus is derived from the 1995 Journal of Clinical Orthodontists Orthodontic Practice Study (the "JCO Study") and relates to 1994 unless otherwise indicated. Comparable information for 1995 and 1996 is not expected to be available until the release of the 1997 JCO Study in late 1997 or early 1998. The information compiled in the 1995 JCO Study relates to orthodontists who have completed accredited graduate orthodontic training programs and does not include general dentists who also perform certain orthodontic services. SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following information is derived from the audited and unaudited financial statements of OrthAlliance included elsewhere in this Prospectus. Except as indicated, this information does not reflect the effects of the Merger, the Transfers or the Offering. For certain information concerning the Transfers of the Founding Practices, see Note 5 of Notes to Financial Statements of the Company. <TABLE> <CAPTION> THE PERIOD FROM OCTOBER 21, 1996 TO SIX MONTHS DECEMBER 31, ENDED 1996 JUNE 30, 1997 ---------------- ------------- (UNAUDITED) <S> <C> <C> STATEMENT OF OPERATIONS DATA(1): Net revenue................................................. $ -- $ -- Total expenses(2)........................................... -- 4,090 Operating loss.............................................. -- 4,090 ---------- ------- Net loss.......................................... $ -- $ 4,090 ========== ======= Net loss per share................................ $ -- $ .37 ========== ======= Number of shares used in net loss per share calculation..... -- 11,068 ========== ======= </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------- HISTORICAL AS ADJUSTED(3) ---------- -------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................... $ -- $ 7,811 Working capital............................................. (900) 12,397 Total assets................................................ -- 18,619 Long-term debt.............................................. -- -- Stockholders' (deficit) equity.............................. (900) 15,459 </TABLE> - --------------- (1) OrthAlliance has conducted no significant operations to date and will not conduct significant operations until the Merger, the Transfers and the Offering are completed. The Company was incorporated on October 21, 1996. (2) Represents compensation expense related to the issuance of warrants and to consulting services. See Note 1 and Note 3 of Notes to Financial Statements of the Company. (3) As adjusted gives effect to the Merger, the Transfers and the sale of 2.6 million shares of Common Stock offered by the Company at an assumed initial public offering price of $11.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and Unaudited Pro Forma Combined Balance Sheet and the notes thereto.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039145_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039145_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..46cfb917636d4cae8e2d55ea0bd6432cbd6cd983
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039145_first_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO "FIRST TEAM" OR THE "COMPANY" ARE TO FIRST TEAM AUTOMOTIVE CORP. AND, UNLESS THE CONTEXT INDICATES OTHERWISE, ITS CONSOLIDATED SUBSIDIARIES AND THEIR RESPECTIVE PREDECESSORS, AND REFERENCES TO THE "OFFERING" MEAN THE OFFERING OF COMMON STOCK MADE HEREBY. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT (I) THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, (II) THE REORGANIZATION (AS DEFINED BELOW) HAS BEEN COMPLETED AND (III) THE COMPANY HAS CONSUMMATED THE ACQUISITION OF 100% OF THE EQUITY INTERESTS IN THREE ADDITIONAL DEALERSHIPS IN ORLANDO, BRADENTON AND PANAMA CITY, FLORIDA (THE "RECENT ACQUISITIONS"). SEE "CERTAIN TRANSACTIONS--REORGANIZATION" AND "RECENT ACQUISITIONS." THE REORGANIZATION AND THE RECENT ACQUISITIONS WILL BE CONSUMMATED ON OR BEFORE THE CLOSING OF THE OFFERING AND ARE CONDITIONS PRECEDENT TO THE CLOSING OF THE OFFERING. THE COMPANY First Team Automotive Corp. ("First Team" or the "Company") is a leading automotive retailer in the greater Orlando and Tallahassee, Florida markets. The Company owns and operates seven automobile dealerships in Orlando and three dealerships in Tallahassee and is acquiring three additional dealerships in Orlando, Bradenton and Panama City, Florida (the "Recent Acquisitions"). The Company sells new and used cars and trucks, offers related financing, insurance and extended service contracts, performs automotive maintenance, warranty, paint and repair services, and sells replacement parts. First Team, which had retail sales of approximately 11,400 new and 9,300 used vehicles in 1996, offers customers a broad range of new vehicle brands, including Ford, Chevrolet, Chrysler, Plymouth, Jeep, Eagle, Cadillac, Oldsmobile, Infiniti, Mitsubishi and Acura. In 1996, First Team ranked number one among new vehicle dealerships in retail unit sales of vehicles in both the Orlando and Tallahassee markets. The Company has also been awarded the exclusive Driver's Mart/trademark/ used vehicle superstore franchise for the greater Orlando market, and expects to open its first superstore in 1998. The Company was founded in 1974 by Don Mealey, its principal shareholder and chief executive officer. Mr. Mealey has over forty years of experience in the automotive retailing industry, and the First Team dealership general managers each have at least ten years of automotive retailing experience. Mr. Mealey and his management team have been recognized by various regional and national industry organizations for quality and performance and, in recognition of their standing in the industry, have served in the past five years on manufacturer dealer councils for Ford, Chevrolet, Infiniti, Mitsubishi and Acura. First Team's management also has substantial experience in managing, acquiring and integrating new vehicle dealerships and, during the last five years, the Company has acquired four dealerships and has been granted five new franchises by manufacturers. First Team has increased its sales over the past five years from $210.9 million in 1992 to $449.4 million in 1996, primarily as a result of acquisitions. After giving effect to the Reorganization and the Recent Acquisitions, the Company would have had $657.6 million in revenues in 1996 and retail unit sales of approximately 17,000 new vehicles and 13,000 used vehicles. The Company believes that, based on pro forma revenues, First Team would have ranked as one of the 25 largest dealership groups in the United States in 1996. First Team has developed and implemented several operating and growth strategies which it believes provide it significant competitive advantages, enable it to realize economies of scale and enhance its name recognition and reputation. First Team intends to continue to grow its operations by acquiring dealerships within and outside its current markets. The Company also expects to generate additional growth by opening Driver's Mart/trademark/ used vehicle superstores and expanding its higher-margin sales of collision repair services and wholesale parts. See "Risk Factors--Dependence on Acquisitions for Growth; Risks of Acquisitions." GROWTH STRATEGY /bullet/ ACQUIRE ADDITIONAL DEALERSHIPS. The Company plans to acquire additional dealerships in markets where the Company has or can achieve a significant market presence. /bullet/ ACQUISITIONS IN NEW MARKETS. First Team plans to expand into new geographic markets by acquiring dealerships that have an established market presence, initially in markets with favorable demographic trends in the Southeast and Mid-Atlantic states. The Company does not intend to enter a geographic market unless it believes it can achieve a significant market presence and realize economies of scale, such as advertising cost savings and improvements in marketing and inventory management. In addition, the Company expects to realize economies of scale from being one of the largest dealership groups in the country. Such benefits include lower borrowing costs due to additional leverage with lenders and cost savings from volume purchase contracts. /bullet/ IN-MARKET ACQUISITIONS. First Team also intends to acquire additional dealerships in the markets in which it operates when it believes that such acquisitions will produce additional operating efficiencies. In-market acquisitions will also increase the Company's market share, promote increased name recognition and provide the Company with better opportunities for repeat and referral business. /bullet/ DEVELOP DRIVER'S MART/trademark/ USED VEHICLE SUPERSTORES. First Team recently acquired an exclusive franchise to establish and operate Driver's Mart/trademark/ used vehicle superstores in the greater Orlando market. Each Driver's Mart/trademark/ superstore will offer a broad range of low-mileage, late-model used vehicles, in a buyer-friendly environment designed to promote customer satisfaction and loyalty. Driver's Mart/trademark/ features "no haggle" pricing, a comprehensive quality inspection and a three-day, 300 mile money-back guarantee on each vehicle sold. First Team intends to cross-market the used vehicle inventories of its Driver's Mart/trademark/ superstores and its Orlando dealerships in order to offer customers the widest selection of used vehicles. The Company intends to open its first Driver's Mart/trademark/ superstore in 1998 and, depending on the success of the first store, two additional superstore facilities by 2001. /bullet/ INCREASE SALES OF HIGHER-MARGIN PRODUCTS AND SERVICES. The Company intends to increase its sales of higher-margin products and services by expanding its collision repair and wholesale parts businesses, neither of which are directly related to the new vehicle cycle. /bullet/ COLLISION REPAIR CENTERS. In 1996, the Company began implementing its strategy to expand its collision repair business by adding two new collision repair facilities in Orlando. An additional facility will be added in Tallahassee in the last quarter of 1997, and the Recent Acquisitions will provide further capacity. The Company has expanded its collision repair facilities from approximately 25,000 square feet at year-end 1995 to approximately 51,000 square feet at year-end 1996. After the completion of the Recent Acquisitions and the new Tallahassee facility, the Company expects to have a total of approximately 139,000 square feet of collision repair facilities in operation by year-end 1997. The Company intends to use this increased capacity to generate additional revenues from its collision repair business to provide for a more stable revenue stream and higher operating margins. /bullet/ WHOLESALE PARTS. The Company intends to capitalize on its representation of numerous manufacturers in order to increase its sales of factory authorized parts to wholesale buyers such as independent mechanical and body repair garages and rental and commercial fleet operators. OPERATING STRATEGY /bullet/ OFFER A DIVERSE RANGE OF AUTOMOTIVE PRODUCTS AND SERVICES. First Team offers a broad range of automotive products and services, including a wide selection of new and used vehicles, vehicle financing and insurance programs, replacement parts and maintenance and repair services. Management believes that its brand and product diversity not only appeals to a wide variety of customers, but also minimizes the Company's dependence on any one manufacturer and reduces the Company's exposure to potential manufacturer supply problems and changes in consumer preferences. Moreover, the Company believes that it can enhance customer loyalty and retention by selling across dealerships as customer buying needs and preferences change over time. In 1996, the Company's new vehicle sales were comprised of 46.9% trucks and 53.1% cars, representing eleven domestic and foreign brands. After giving effect to the Reorganization and the Recent Acquisitions, the Company's new vehicle sales in 1996 would have been 53.5% trucks and 46.5% cars. /bullet/ ESTABLISH A SIGNIFICANT MARKET PRESENCE IN EACH MARKET. By establishing a significant presence in each market, the Company expects to achieve economies of scale in advertising, inventory management, management information systems and corporate overhead. After giving effect to the Reorganization and the Recent Acquisitions, First Team's 1996 market share among new vehicle dealers would have been approximately 13.6% in Orlando, 27.8% in Tallahassee, 21.8% in Panama City and 18.0% in Bradenton, in each case based on retail unit sales of new and used vehicles. /bullet/ MAINTAIN HIGH LEVELS OF CUSTOMER LOYALTY AND SATISFACTION. The Company emphasizes customer satisfaction throughout its organization and continually seeks to improve its reputation for quality and fairness, in order to secure long-term customer loyalty and ensure repeat and referral business. The Company continually pursues initiatives which enhance customer loyalty, such as linking incentive compensation programs to customer satisfaction index ("CSI") scores. /bullet/ EMPHASIZE SALES OF HIGHER-MARGIN USED VEHICLES. First Team has commenced marketing used vehicles on a consolidated basis in both Orlando and Tallahassee. Under the program, (i) each dealership has on-line access to the entire used vehicle inventory of the Company's other dealerships within the region, (ii) the used vehicle inventory in each market is advertised and marketed together as "Don Mealey's Auto Network" in Orlando and "CarTrust" in Tallahassee and (iii) the Company periodically coordinates off-site used vehicle sales events. The Company believes that this system increases used vehicle sales and facilitates the potential customer's search for, and purchase of, a vehicle since the customer needs only to visit one of the Company's dealerships within the region, read one of the Company's local advertisements or attend one of the Company's sales events to access the entire First Team used vehicle inventory in that region. Retail unit sales of used vehicles as a percent of total unit sales have increased from approximately 40% in 1992 to 45% in 1996. /bullet/ EMPLOY COMPUTER-BASED TECHNOLOGIES THROUGHOUT CORPORATE AND DEALERSHIP OPERATIONS. The Company believes that it has achieved operating efficiencies and cost savings by integrating computer-based systems into nearly all aspects of its operations. Through First Team's management information systems, senior management can access dealership data in "real time" to monitor financial performance and identify areas requiring management attention. The Company employs computer-based technology to consolidate its used vehicle advertising and marketing in each of its markets, and it plans to install software which will provide selected dealerships on-line access to a comprehensive list of available leases for various vehicles from lenders throughout the United States. /bullet/ ALIGN MANAGEMENT'S INTERESTS WITH STOCKHOLDERS THROUGH INCENTIVE-BASED PROGRAMS. First Team has historically offered its general managers an equity stake in the dealerships that they manage. After the Offering, the general managers, who have primary responsibility for decisions relating to inventory, advertising, pricing and personnel, will own an aggregate of % of the Company's outstanding Common Stock, and will hold options to purchase additional Common Stock. Each general manager also participates in the Company's incentive plans, which reward managers based on profitability of the managed dealership. /bullet/ DEVELOP AND RETAIN QUALIFIED MANAGEMENT. The Company continually seeks to develop and retain qualified personnel and promote talented employees to assume more responsible positions in the First Team organization. Excluding the three Recent Acquisitions, the Company's dealership managers have been employed by the Company for an average of approximately ten years and all but one of the dealership managers were promoted from within the First Team organization. RECENT ACQUISITIONS In April and June 1997, the Company signed definitive agreements to purchase three dealerships for an aggregate purchase price of approximately $32.0 million, including approximately $3.3 million to be paid in Common Stock. These acquisitions, which consist of Cook-Whitehead Ford in Panama City, Florida ("Whitehead Ford"), Bill Graham Ford in Bradenton, Florida ("Graham Ford"), and Royal Jeep-Eagle Chrysler-Plymouth in Orlando, Florida ("Royal"), had aggregate total revenues of approximately $219.3 million in 1996 and significantly enhance the Company's market presence in Florida. INDUSTRY DYNAMICS Automotive retailing, with approximately $640 billion in 1996 sales, is the largest consumer retail market in the United States, representing nearly eight percent of the domestic gross product. The industry today is highly fragmented, with the largest 100 dealer groups generating less than 10% of total sales revenues and controlling less than 5% of all new vehicle dealerships. The Company believes that significant consolidation is likely to occur over the next several years because of the current industry fragmentation, the increased capital requirements of dealerships, the limited number of viable exit strategies for dealership owners and the desire of certain automakers to strengthen their brand identity by consolidating their franchised dealerships. As a result, the Company believes that an opportunity exists for dealership groups with significant equity capital, and experience in identifying, acquiring and professionally managing dealerships, to acquire additional dealerships and capitalize on the changes occurring in the industry. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company ...... shares(1) Common Stock to be outstanding after the Offering ........................... shares(2) Use of proceeds ........................... The net proceeds of the Offering will be used to fund the Recent Acquisitions, including repaying indebtedness incurred by the Company in connection with the Recent Acquisitions, and repay a portion of the Company's floor plan indebtedness. See "Recent Acquisitions" and "Use of Proceeds." Listing ................................. The Company intends to apply for listing of the Common Stock on the New York Stock Exchange, under the symbol "FTA." </TABLE> - ---------------- (1) Up to an aggregate of additional shares may be sold by the Selling Stockholders pursuant to the Underwriters' over-allotment option. See "Principal Stockholders" and "Underwriting." (2) Excludes shares of Common Stock reserved for future issuance under the Company's stock option plan, including options to purchase shares of Common Stock that will be granted immediately before the completion of the Offering with an exercise price equal to the initial public offering price. See "Management--Stock Option Plan." SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA The following summary historical and pro forma combined financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Combined Financial Statements of the Company and the related notes, and "Pro Forma Combined Financial Data" included elsewhere in this Prospectus. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ----------------------------------------------- ACTUAL ----------------------------------------------- 1992 1993 1994(2) 1995 ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES SOLD DATA) <S> <C> <C> <C> <C> COMBINED STATEMENT OF OPERATIONS DATA: Revenues: Vehicle sales ........................... $181,853 $230,428 $318,838 $325,452 Parts, service and collision repair . 25,072 27,678 35,058 40,904 Other ................................. 3,977 7,137 8,154 7,546 --------- --------- --------- --------- Total ................................. 210,902 265,243 362,050 373,902 Cost of sales ........................... 183,606 230,794 316,642 324,753 --------- --------- --------- --------- Gross profit(4) ........................ 27,296 34,449 45,408 49,149 Selling, general and administrative ...... 23,159 28,445 37,262 40,125 Depreciation and amortization ............ 1,045 1,069 1,313 1,714 --------- --------- --------- --------- Operating income ........................ 3,092 4,935 6,833 7,310 Interest expense, net .................. 2,969 2,824 3,388 4,721 --------- --------- --------- --------- Income before income taxes and minority interest(4) .................. $ 123 $ 2,111 $ 3,445 $ 2,589 ========= ========= ========= ========= Provision for income taxes(5) .......................................................... Net income(5) ......................................................................... Net income per share(5) ................................................................ OTHER COMBINED OPERATING DATA: New vehicle units sold ............... 7,427 9,242 10,778 9,664 Used vehicle units sold--retail ...... 4,916 6,228 8,902 8,437 New vehicle revenues .................. $ 120,401 $ 149,497 $ 193,099 $ 185,676 Used vehicle revenues--retail ......... 46,163 61,443 99,036 108,104 Parts revenues ........................ 12,468 14,144 18,057 20,967 Service revenues ..................... 9,767 10,587 14,059 17,083 Gross profit margin (FIFO)(4) ...... 13.4% 13.6% 13.1% 13.4% <CAPTION> THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ----------------------- ------------------------------- PRO PRO ACTUAL FORMA(1) ACTUAL FORMA(1) ----------- ----------- --------------------- --------- 1996(3) 1996 1996 1997 1997 ----------- ----------- ---------- ---------- --------- (IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES SOLD DATA) <S> <C> <C> <C> <C> <C> COMBINED STATEMENT OF OPERATIONS DATA: Revenues: Vehicle sales ........................... $390,260 $572,825 $ 90,335 $ 98,353 $139,357 Parts, service and collision repair . 50,001 72,195 10,838 13,181 18,952 Other ................................. 9,170 12,613 1,555 2,131 2,946 -------- -------- -------- -------- -------- Total ................................. 449,431 657,633 102,728 113,665 161,255 Cost of sales ........................... 389,337 567,798 88,411 97,103 137,700 -------- -------- -------- -------- -------- Gross profit(4) ........................ 60,094 89,835 14,317 16,562 23,555 Selling, general and administrative ...... 47,378 68,543 11,264 12,895 17,847 Depreciation and amortization ............ 2,097 3,266 455 508 787 --------- -------- -------- -------- -------- Operating income ........................ 10,619 18,026 2,598 3,159 4,921 Interest expense, net .................. 5,375 5,976 1,166 1,426 1,524 -------- -------- -------- -------- -------- Income before income taxes and minority interest(4) .................. $ 5,244 $ 12,050 $ 1,432 $ 1,733 3,397 ======== ======== ======== ======== ======== Provision for income taxes(5) ...................... 4,740 1,325 -------- -------- Net income(5) ..................................... $ 7,310 $ 2,072 ======== ======== Net income per share(5) ............................ $ $ ======== ======== OTHER COMBINED OPERATING DATA: New vehicle units sold ............... 11,444 17,025 3,025 2,683 4,145 Used vehicle units sold--retail ...... 9,287 13,050 2,648 2,205 3,334 New vehicle revenues .................. $ 233,520 $ 348,520 $ 52,517 $ 58,771 $ 83,321 Used vehicle revenues--retail ......... 123,018 168,431 29,889 28,648 40,054 Parts revenues ........................ 25,550 38,015 5,535 6,865 10,201 Service revenues ..................... 20,710 27,641 4,510 5,269 7,111 Gross profit margin (FIFO)(4) ...... 13.3% 13.7% 14.0% 14.4% 14.6% </TABLE> <TABLE> <CAPTION> AS OF AS OF DECEMBER 31, 1996 MARCH 31, 199PRO -------------------- ------------ ---------- ACTUAL FORMA(1) ---------- ---------- (IN THOUSANDS) <S> <C> <C> <C> COMBINED BALANCE SHEET DATA: Total assets ............... $102,774 $99,358 $173,876 Long-term debt ............... 4,547 4,405 1,747 Total liabilities ............ 94,634 89,604 98,543 Minority interest ............ 3,651 4,148 -- Stockholders' equity(4) ...... 4,489 5,606 75,333 </TABLE> - ---------------- (1) Adjusted to give pro forma effect to (i) the Reorganization, (ii) the Company's conversion from the LIFO Method of inventory accounting to the FIFO Method of inventory accounting (in each case, as defined below), (iii) the Recent Acquisitions and (iv) the Offering. See "Pro Forma Combined Financial Data." (2) The results for the year ended December 31, 1994 include the results of Don Mealey Cadillac-Oldsmobile from June 2, 1994, the date of its acquisition, and the results of Tallahassee Chrysler-Plymouth from April 15, 1994, the date of its acquisition. (3) The results for the year ended December 31, 1996 include the results of Don Mealey's Seminole Ford from April 1, 1996, the date of its acquisition. (4) The Company currently utilizes the LIFO Method of inventory accounting. See Note 4 to the Company's Combined Financial Statements. The Company intends to file an election with the IRS to convert, effective upon the closing of the Offering, to the FIFO Method of inventory accounting for vehicles and parts and report its earnings for tax purposes in its financial statements on the industry standard FIFO Method. If the Company had previously utilized the FIFO Method, gross profit and income before income taxes and minority interest for the periods shown in the table, and stockholders' equity as of December 31, 1996 and March 31, 1997, would have been as follows: <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, -------------------------------------------------------------- ---------------------- 1992 1993 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- ---------- --------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> Gross profit ............... $28,192 $35,935 $47,255 $50,104 $59,927 $14,317 $16,497 Income before income taxes and minority interest ............ 1,019 3,597 5,291 3,544 5,077 1,432 1,668 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, 1996 MARCH 31, 1997 ------------------ ---------------- (IN THOUSANDS) <S> <C> <C> Stockholders' equity ...... $13,884 $14,936 </TABLE> (5) Historical amounts for provision for income taxes, net income and net income per share are not presented since the Company's income tax provision, minority interest and capital structure prior to the Reorganization and the Offering are not comparable with those that will exist subsequent to these events. Pro forma net income per share is based upon the assumption that shares of Common Stock are outstanding for each period. This amount represents the total number of shares to be issued in the Offering ( ), and the number of shares of Common Stock owned by the Company's stockholders immediately following the Reorganization and Recent Acquisitions ( ). See "Principal Stockholders" and Note 1 to the Company's Combined Financial Statements. THE REORGANIZATION The Company was recently incorporated in order to acquire the businesses of the automobile dealerships described herein (the "First Team Dealerships") which have been under the common control of Don Mealey and his family members, with certain minority interests. Prior to the closing of the Offering, the Company will effect a reorganization (the "Reorganization") pursuant to which: (i) the Company will acquire from the controlling and minority owners substantially all of the assets of the First Team Dealerships (the "Dealership Assets"), excluding the real property on which the dealerships' business is conducted (the "Real Property"); (ii) the Company will issue Common Stock in exchange for the Dealership Assets; (iii) the Real Property and related mortgage debt will be retained by or distributed to certain stockholders of the Company or their affiliates (the "Lessor Affiliates"); (iv) the Company will lease the Real Property from the Lessor Affiliates; and (v) the Company will sell or close one Infiniti dealership and two Kia dealerships, each of which have been unprofitable. See "Certain Transactions--Reorganization." Effective upon the closing of the Reorganization and the Offering, the Company will also convert from the last-in-first-out method ("LIFO Method") of inventory accounting to the industry standard first-in-first-out method ("FIFO Method") of inventory accounting (the "FIFO Conversion"). As a result of the Reorganization and the FIFO Conversion, the historical combined financial information included in this Prospectus is not necessarily indicative of the results of operations, financial position and cash flows of the Company in the future or that which would have resulted had the Reorganization and FIFO Conversion occurred during the periods presented in the Company's Consolidated Financial Statements. Upon the completion of the Reorganization, the Company and its subsidiaries, which have historically not been subject to income tax as a result of their status as "S" corporations or partnerships, will terminate their status as such and will thereafter be subject to federal and state income tax as "C" corporations. As a result of the change in tax status, the Company will be required to establish a deferred tax liability for the difference between the book and tax basis of its assets and liabilities, and record a provision for income taxes. As of March 31, 1997, the amount of deferred tax liability and related provision for income taxes that will result from the change in the entities' tax status and the conversion to the FIFO Method is approximately $2.7 million. This provision will be incurred as of the date of the closing of the Offering, which is anticipated to occur in August 1997, and therefore will be reflected as a charge to the Company's earnings for the third quarter of the 1997 fiscal year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039184_trailer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039184_trailer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6eb8e47ae7da886ffdbf33474901a2cb98814db1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039184_trailer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise specified, all information in this Prospectus assumes (i) a 15,700-for-one split of the shares of Common Stock, and (ii) no exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY Trailer Bridge, headquartered in Jacksonville, Florida, is an integrated trucking and marine freight carrier that provides truckload freight transportation primarily between the continental U.S. and Puerto Rico. Founded in 1991 by transportation pioneer Malcom P. McLean, the Company combines an efficient and dedicated motor carrier with a low cost barge and tug marine transportation system. Trailer Bridge is the only company serving markets governed by the Jones Act which exclusively operates marine vessels fully configured to carry 48' and 53' long, 102" wide, "high-cube" trailers. This configuration enables the Company to achieve equipment utilization rates and other operating efficiencies not readily available to traditional ocean carriers that primarily use smaller capacity equipment, such as 40' containers. The Company believes that as a result of these and other efficiencies, its total unit costs per mile are the lowest of any carrier operating between the continental U.S. and Puerto Rico. Trailer Bridge intends to achieve significant growth by providing the lowest cost freight transportation service to markets well suited to its high-cube integrated truckload and marine freight system. Based on volume and pricing data, the Company believes that there are a number of markets in which the Company's unique transportation system can provide superior full-load service at a significant cost advantage over existing modes of truckload and rail intermodal transportation. Trailer Bridge's differentiated service quickly gained the acceptance of U.S. to Puerto Rico shippers, leading to rapid growth and high equipment utilization. In 1993, the Company's first full year of operation, Trailer Bridge achieved a 93% outbound (continental U.S. to Puerto Rico) vessel utilization rate and captured 5% of the continental U.S. to Puerto Rico marine freight market. In response to the rapid market share gains experienced by Trailer Bridge, in 1996 the Company increased its vessel capacity by 56% by inserting midsections ("mid-bodies") into its two existing barges, increasing the capacity of each barge from 266 to 416 48' equivalent truckload units. These roll-on/roll-off barges are chartered from an affiliate. Trailer Bridge will increase its vessel capacity by an additional 56% in late 1997 and early 1998 when it takes delivery of two 408' long container carrying barges designed specifically for the Company's integrated truckload marine transportation system and bearing the Company's Triplestack Box Carrier(TM) trade name. The Triplestack Box Carriers(TM) will be versatile, low-draft vessels that have a capacity of 213 53' containers, stacked three-high on a single deck. Construction of these two vessels began in March 1997. Upon completion, the vessels will be deployed in the Company's existing Puerto Rico freight operation. Trailer Bridge also intends to contract for the construction of three additional Triplestack Box Carriers(TM) which it intends to deploy in coastwise service between New York and Florida. The Company plans to investigate other marine markets which are well suited for its unique, cost-efficient transportation service, such as from the continental U.S. to Hawaii or Alaska. Management believes that the Company's principal competitive strengths are: Significant Operating Cost Advantage. Trailer Bridge believes that it is the lowest cost provider of freight transportation between the continental U.S. and Puerto Rico. Lower overall operating costs are achieved through significantly higher equipment utilization and lower marine linehaul costs than those of traditional ocean carriers. The Company's inland trucking operation achieves higher equipment utilization and lower unit trucking costs by using 48' and 53' high-cube trailers. These trailers provide customers with over 50% more interior capacity than 40' marine containers but with similar inland trucking costs. The Company's marine system uses towed ocean-going barges instead of self-propelled container ships to deliver equivalent units of capacity at significantly lower capital and operating costs. Domestic Truckload Operations. The Company believes that it is the only carrier using its own fleet of tractors and high-cube dry van trailers to provide transportation services between interior points within the continental U.S. and Puerto Rico. By using high-cube equipment, the mainstay of the domestic truckload industry and a centralized dispatch system, the Company can more effectively compete for and obtain domestic non-Puerto Rico truckload freight while repositioning equipment for Puerto Rico shipments. As a result, the Company believes that it operates with lower empty miles and higher equipment utilization than its competitors in the Puerto Rico trade. Centralized Operation in Strategic Location. Trailer Bridge operates a centralized truckload operation from its headquarters in Jacksonville. Because approximately 70% of the Company's truckload freight is dispatched through Jacksonville on a regular schedule to meet weekly barge sailings to Puerto Rico, the Company is able to achieve purchasing, maintenance and other operating efficiencies and higher driver retention. Additionally, the Company's centralized Jacksonville headquarters is strategically located near key southern rail and highway endpoints which connect U.S. cities to Puerto Rico and other Caribbean points. Emphasis on U.S. Domestic Ocean Trade. The Company concentrates its marine operations in markets governed by the Jones Act. The Jones Act prevents foreign-built or foreign-crewed vessels from competing in ocean trade between ports in the U.S., including the non-contiguous areas of Puerto Rico, Alaska, Hawaii and Guam. Experienced Management Team. The Company's officers and directors have extensive experience in the transportation industry, including an average of over 15 years in the marine and trucking industries. All but one member of the Company's management team have been with the Company since its inception. The scope of management experience at Trailer Bridge is well balanced between both trucking and marine transportation. Trailer Bridge's strategy for continuing its profitable growth includes (i) increasing capacity in its Puerto Rico service by 56% with the addition of two new Triplestack Box Carriers(TM), (ii) initiating a new coastwise marine transportation service that will offer twice-weekly sailings from New York to Florida utilizing three additional Triplestack Box Carriers(TM) to be built in 1998, and (iii) initiating marine service to other Jones Act protected markets such as Hawaii and Alaska. Trailer Bridge was incorporated under the laws of Delaware in April 1991. The Company's headquarters is located at 9550 Regency Square Blvd, Jacksonville, Florida 32225, and its telephone number is (800) 554-1589. THE OFFERING Common Stock offered hereby................. 2,700,000 shares Common Stock to be outstanding after the offering.................................... 9,372,500 shares (1) Use of Proceeds............................. To purchase revenue equipment ($13.2 million), reduce indebtedness to an affiliate ($6.2 million), fund an S Corporation dividend to existing stockholders ($6.0 million), partially fund the acquisition of new vessels ($2.2 million) and increase working capital ($2.2 million). Dollar amounts are approximations. See "Use of Proceeds." Nasdaq National Market Symbol............... TRBR - --------------- (1) Excludes 785,000 shares of Common Stock reserved for issuance to employees under the Company's Incentive Stock Plan (of which options to purchase 471,000 shares at the initial public offering price have been granted). See "Management -- Incentive Stock Plan." SUMMARY FINANCIAL AND OPERATING DATA (In thousands, except per share amounts and operating data) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------------------------ ----------------- 1992 1993 1994 1995 1996(1) 1996(1) 1997 -------- ------- ------- ------- ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Operating revenues.................... $ 38,778 $67,613 $72,192 $62,531 $63,148 $14,568 $16,446 Operating income (loss)............... (9,309) 5,094 6,175 8,778 4,425 966 1,748 Nonoperating expense (net)............ (864) (944) (1,805) (1,314) (1,015) (256) (264) Income (loss) before provision and pro forma provision (benefit) for income taxes............................... (10,173) 4,150 4,370 7,464 3,410 710 1,484 Pro forma net income (loss)(2)........ (6,313) 2,526 2,343 4,360 2,073 443 909 Pro forma net income per common share(3)............................ $ .29 $ .13 Pro forma weighted average shares outstanding(3)...................... 7,173 7,173 Supplementary pro forma net income per common share(4)..................... $ .30 $ .12 OPERATING DATA: Operating ratio(5).................... 124.0% 92.5% 91.4% 86.0% 93.0% 93.4% 89.4% Vessel utilization outbound........... 60.1% 93.5% 90.9% 96.0% 88.4%(6) 96.3% 78.1%(6) Vessel utilization inbound............ 12.1% 36.6% 52.8% 51.6% 42.0%(6) 59.8% 33.6%(6) Overall vessel capacity utilization... 36.1% 65.0% 71.8% 73.8% 65.3%(6) 78.1% 55.8%(6) Tractor loaded mile percentage........ 77.3% 87.1% 86.2% 81.0% 81.5% 83.0% 80.5% Weighted average tractors............. 178 199 256 187 163 174 154 Weighted average trailers............. 923 1,629 1,605 1,458 1,762 1,400 1,983 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 PRO FORMA ----------------------- AS ACTUAL PRO FORMA(7) ADJUSTED(8) -------- ------------ ----------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................. $ (2,823) $(8,823)(9) $ 5,577 Net property and equipment................................ 14,349 14,349 27,549 Total assets.............................................. 26,440 26,440 44,362 Long-term debt, capital lease obligations and due to affiliate(10)........................................... 15,242 15,242 9,364 Stockholders' equity...................................... 6,314 314 29,464 </TABLE> - --------------- (1) During 1996, each of the Company's barge vessels was increased in size through a mid-body expansion program that resulted in a 56% increase in vessel capacity and was accomplished over a six-month period. From mid-February through mid-July 1996, only one of the Company's vessels was in service at a time. To maintain weekly service frequency, a smaller substitute vessel was utilized, resulting in both reduced revenue and additional costs. For these reasons, management believes that overall 1996 results are not indicative of the results that would have been expected had both of the Company's vessels remained in service throughout the year. (2) Since January 1, 1992, the Company has operated as an S Corporation under the Internal Revenue Code and the laws of the states that recognize S Corporation status. As a result, the Company's taxable earnings were taxed directly to the Company's then-existing stockholders. Pro forma net income assumes that the Company was subject to federal and state income taxes and was taxed as a C Corporation at the effective tax rates that would have applied for all periods. See Note 2 to the Financial Statements. With the closing of the offering, the Company will become subject to federal and state income taxes. The pro forma statement of operations data do not give effect to a non-cash charge (that would have been approximately $650,000 at March 31, 1997) in recognition of deferred income taxes that will result from the termination of the Company's S Corporation status upon effectiveness of the offering. (3) Pro forma net income per share reflects a 15,700-for-1 stock split that will become effective in connection with the offering and the issuance of 500,000 shares of Common Stock to fund the payment of a $6.0 million S Corporation dividend to existing stockholders with a portion of the net proceeds of the offering. (4) The Company expects to use a portion of the net proceeds from the offering to repay amounts due to affiliate. Supplementary pro forma net income per share reflects the interest savings and the issuance of approximately 652,000 shares of Common Stock to fund the repayment, assuming the issuance and repayment had occurred on January 1, 1996. (5) Operating expenses as a percentage of revenue. (6) From mid-February through mid-July 1996, only one of the Company's two vessels was in service at a time due to the Company's mid-body expansion program, and the Company operated during this period with a second, smaller substitute vessel. Vessel capacity outbound to Puerto Rico and inbound to the U.S. increased from 266 48' trailer equivalents at February 1, 1996 to 416 48' trailer equivalents at July 31, 1996. (7) Adjusted to reflect the $6.0 million S Corporation dividend to be paid to existing stockholders with a portion of the net proceeds of the offering. (8) Adjusted to reflect (i) the sale of 2,700,000 shares of Common Stock offered by the Company at an assumed price of $12.00 per share and the application of the estimated net proceeds therefrom as described under "Use of Proceeds," and (ii) a non-cash charge (that would have been approximately $650,000 at March 31, 1997) that will result from the termination of the Company's S Corporation status. See "S Corporation Status."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039206_wmf-group_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039206_wmf-group_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6e88c19b950ffacc75878cdf80208c44e127fac5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039206_wmf-group_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information and financial information appearing elsewhere in this Information Statement/Prospectus. Except as set forth in the financial statements or as otherwise noted herein, all information contained in this Information Statement/Prospectus gives effect to a 789.94 for one stock split of the Company Common Stock (as defined herein) which occurred on October 3, 1997. Unless the context requires otherwise, references to the "Company" refer to The WMF Group, Ltd. (formerly known as NHP Financial Services, Ltd.) and its subsidiaries. THE COMPANY The Company is one of the largest independent commercial mortgage bankers in the United States as measured by servicing portfolio size based on a 1996 survey (the "MBA Survey") published by the Mortgage Bankers Association of America (the "MBA") and the largest originator of multifamily and healthcare loans insured by the Federal Housing Administration (the "FHA") based on statistics provided by the U.S. Department of Housing and Urban Development. The Company originates, underwrites, structures, places, sells and services multifamily and commercial real estate loans. Through its relationships with government sponsored entities ("GSEs"), investment banks, life insurance companies, commercial banks and other investors, the Company provides and arranges financing to owners of multifamily and commercial real estate on a nationwide basis using both a retail and wholesale network. The Company generates revenues through origination fees, servicing fees, net interest income on loans held for sale and placement fees. As of June 1996, the Company was the tenth largest servicer of multifamily and commercial real estate loans in the country based on the 1996 MBA Survey. At the time of the survey, the Company serviced a portfolio of approximately $4.9 billion, and the average portfolio size for the top ten servicers was approximately $10.4 billion. In the year ended December 31, 1996 and the first half of 1997, the Company originated $1.1 billion and $622.4 million, respectively, of multifamily and commercial real estate mortgages. The Company believes that it is well positioned to compete effectively in the commercial real estate financing industry based on its capitalization, geographic scope and services provided. The commercial and multifamily mortgage banking industry is increasingly characterized by expensive technological demands, large and sophisticated infrastructure for real estate underwriting and risk evaluation, and the rapid emergence of the securitized market. These developments will, in the Company's judgment, lead to the creation of sophisticated and well-capitalized mortgage finance enterprises. The Company seeks to use its existing infrastructure and leverage its market position to increase market share of its established businesses and grow its non-multifamily commercial business. The Company seeks to increase reported earnings and cash flow through (i) acquisitions and internal growth, (ii) design and delivery of new mortgage products including bridge loan products and participating loan products, and (iii) expansion into related businesses such as due diligence services and issuance of commercial mortgage backed securities. At any given time, the Company may be in discussions with one or more potential acquisition targets in the multifamily and commercial mortgage businesses. The Company has entered into an agreement to purchase for $4 million all of the stock of the Robert C. Wilson Company, a Houston-based commercial mortgage banking company. Although the Company is currently engaged in serious negotiations with respect to certain other acquisitions, it currently has no other binding agreements pending with respect to acquisitions and has not entered into any letters of intent with respect to pending acquisitions. See "Business -- Strategic Objectives." There can be no assurance that such discussions will result in an acquisition or that future acquisitions, if completed, would be successful or that the Company will successfully develop any particular product or enter into any particular product line. As a result of acquisitions and internal growth, the Company has increased loan originations from approximately $240 million in 1992 to approximately $1.1 billion in 1996 for a compound annual growth rate of 46.9 percent, and its servicing portfolio has grown from approximately $3.0 billion to $6.2 billion for a compound annual growth rate of 20.0 percent. In 1996 alone, the Company increased its portfolio of serviced mortgages from $4.4 billion to $6.2 billion primarily as a result of the acquisitions of Proctor & Associates of Michigan, Inc. ("Proctor") and substantially all of the assets of American Capital Resource, Inc. ("ACR") (the acquisitions of Proctor and ACR are referred to herein as the "Proctor Acquisition" and the "ACR Acquisition," respectively.) In INFORMATION STATEMENT/PROSPECTUS WMF GROUP LOGO DISTRIBUTION OF UP TO 4,613,122 SHARES OF COMMON STOCK OF THE WMF GROUP, LTD. TO STOCKHOLDERS OF NHP INCORPORATED --------------------- This Information Statement/Prospectus is being furnished by NHP Incorporated, a Delaware corporation ("NHP"), in connection with the distribution (the "Share Distribution") by NHP to the holders of shares of NHP Common Stock, par value $.01 per share (the "NHP Common Stock"), of all of the issued and outstanding common stock, par value $.01 per share (the "Company Common Stock"), of The WMF Group, Ltd. (along with its subsidiaries the "Company") (formerly known as NHP Financial Services, Ltd. and WMF Holdings Ltd.), a Delaware corporation and a wholly-owned subsidiary of NHP. On May 9, 1997, NHP distributed to each holder of record of NHP Common Stock ("NHP Stockholders") on May 2, 1997, one right (a "Right") for each share of NHP Common Stock pursuant to a Rights Agreement, dated as of April 21, 1997 between NHP, the Company and The First National Bank of Boston (the "Rights Agreement"). Subject to certain conditions, each holder of Rights is entitled to one-third of a share of Company Common Stock for each Right at the earlier of (i) the effective time of the proposed Merger between NHP and a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO") and (ii) December 1, 1997 (such time being referred to as the "Maturity Time"). NHP does not expect certain conditions to the Share Distribution to be satisfied prior to the effective time of the Merger; and therefore expects that the Share Distribution will occur at the time of the Merger, which will be after December 1. NHP Stockholders will receive cash in respect of fractional shares of Company Common Stock that would otherwise be distributed at the rate of $9.15 per share of Company Common Stock. Upon completion of the Share Distribution, the Company will operate independently of NHP. This Information Statement/Prospectus also relates to the distribution of 420,615 shares of Company Common Stock that are expected to be received in the Share Distribution by Capricorn Investors, L.P. ("Capricorn") to the partners of Capricorn (the "Capricorn Distribution"). The Capricorn Distribution is expected to occur promptly after the Share Distribution. The NHP Stockholders will not be required to pay any consideration for the shares of Company Common Stock they receive in the Share Distribution. There is no current public trading market for the Company Common Stock and there is no guarantee that a public trading market will be sustained. WMF intends to seek approval for quotation of the shares of Company Common Stock on the Nasdaq Stock Market upon issuance, but there is no assurance that such approval will be obtained or that an active market will develop following the Share Distribution. IN REVIEWING THIS INFORMATION STATEMENT/PROSPECTUS, STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6. THIS INFORMATION STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS ABOUT BUSINESS STRATEGIES, MARKET POTENTIAL, FUTURE FINANCIAL PERFORMANCE AND OTHER MATTERS. SUCH STATEMENTS INVOLVE MANY RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH STATEMENTS, INCLUDING, WITHOUT LIMITATION, THOSE RISKS AND UNCERTAINTIES DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS IS NOVEMBER 3, 1997 April 1997 the Company acquired substantially all of the mortgage banking assets of Askew Investment Company (the "Askew Acquisition"), further increasing its mortgage servicing portfolio by approximately $425 million. The Company is a Delaware corporation formed in October 1992 to hold the operations of WMF Huntoon, Paige Associates Limited ("WMF Huntoon Paige") and Washington Mortgage Financial Group, Ltd. ("Washington Mortgage"), which are now wholly-owned subsidiaries of the Company. WMF Huntoon Paige has carried on the business of originating and servicing multifamily and healthcare mortgages insured by the FHA under various owners and under various names since 1979 and was acquired by Washington Mortgage in 1991. Washington Mortgage and entities it has acquired have carried on the business of originating and servicing multifamily and commercial mortgages under various owners and under various names since 1984. The Company was acquired by NHP Incorporated ("NHP") on April 1, 1996. The principal executive offices of the Company are located at 1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182, phone (703) 610-1400. See "The Business of the Company" for more information. THE DISTRIBUTION OF COMPANY COMMON STOCK DESCRIPTION OF THE DISTRIBUTION On May 9, 1997, NHP distributed to each holder of record of NHP Common Stock at the close of business on May 2, 1997, one right (a "Right") for each outstanding share of NHP Common Stock (the "Rights Distribution"). Each Right entitles the holder to receive from the Company, or any successor thereof, a distribution (the "Share Distribution" and, with the Rights Distribution, the "Distribution") of one-third of a share of Company Common Stock, subject to the terms of a Rights Agreement, dated as of April 21, 1997 (the "Rights Agreement") between NHP, the Company and The First National Bank of Boston, as Rights Agent. The Rights distributed on May 9, 1997 are evidenced by the certificates of NHP Common Stock then outstanding. NHP Common Stock issued after May 9, 1997 and prior to the Maturity Time (as defined below) will have a legend and reference to the Rights Agreement. Subject to certain conditions, the Rights will mature and NHP will distribute shares of Company Common Stock at the earlier of (i) the effective time of the Merger (as defined below) and (ii) December 1, 1997 (such time being referred to as the "Maturity Time"). NHP does not expect certain conditions to the Share Distribution to be satisfied prior to the effective time of the Merger, and therefore expects that the Share Distribution will occur at the time of the Merger, which will be after December 1. Pursuant to the Rights Agreement, NHP will distribute all of the issued and outstanding shares of the Company's Common Stock held by NHP to holders of Rights as governed by the Rights Agreement. NHP Stockholders will receive cash in respect of fractional shares of Company Common Stock that would otherwise be distributed at the rate of $9.15 per share of Company Common Stock. The NHP stockholders will not be required to pay any consideration for the shares of Company Common Stock they receive in the Share Distribution. See "The Distribution of Company Common Stock -- Description of the Distribution." REASONS FOR THE DISTRIBUTION Apartment Investment and Management Company ("AIMCO"), AIMCO/NHP Acquisition Corp., a wholly-owned subsidiary of AIMCO ("Merger Sub") and NHP have entered into an Agreement and Plan of Merger, dated as of April 21, 1997 (the "Merger Agreement"), pursuant to which Merger Sub will, subject to the terms and conditions provided in the Merger Agreement, merge with and into NHP (the "Merger"), thereby making NHP, as the surviving corporation, a wholly-owned subsidiary of AIMCO (the "Surviving Corporation"). In addition, AIMCO and one of its unconsolidated subsidiaries have purchased approximately 53.4 percent of the outstanding shares of NHP Common Stock pursuant to a stock purchase agreement (the "Stock Purchase Agreement") among AIMCO, Demeter Holdings Corporation ("Demeter") and Capricorn Investors, L.P. ("Capricorn"). AIMCO required that the Rights Distribution occur as a condition to the Merger and the purchase of shares of NHP Common Stock, and NHP believes that completion of the Merger while allowing current stockholders of NHP the opportunity to retain an interest in the business of the Company maximizes the value that stockholders of NHP will receive in connection with the Merger. In addition, even if NHP were not acquired by AIMCO, NHP believes that the Share Distribution, and the ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-1 (including exhibits, schedules and amendments thereto, the "Registration Statement") pursuant to the Securities Act of 1933, as amended (the "Securities Act") with respect to the Company Common Stock. This Information Statement/Prospectus, while forming a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. Reference is hereby made to the Registration Statement for further information with respect to the Company and the securities to be distributed to the NHP Stockholders in the Share Distribution. Statements contained herein concerning the provisions of documents filed as exhibits to the Registration Statement are necessarily summaries of such documents, and each such statement is qualified in its entirety by reference to the copy of the applicable document filed with the SEC. The Registration Statement is available for inspection and copying at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the Regional Offices of the SEC at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such information can be obtained by mail from the Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, or on the Internet at http://www.sec.gov. Following the Share Distribution, the Company will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, will file reports, proxy statements and other information with the SEC that will be available for inspection and copying at the SEC's public reference facilities referred to above. Copies of such material can be obtained by mail at prescribed rates by writing to the Public Reference Branch of the SEC at the address referred to above. In addition, it is expected that reports, proxy statements and other information concerning the Company will be available for inspection at the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. The Company intends to furnish its stockholders annual reports containing financial statements audited by its independent auditors. The Company does not intend to furnish its stockholders quarterly reports. Questions concerning the Share Distribution should be directed to Ann Torre Grant at (703) 394-2420. After the Share Distribution, holders of Company Common Stock having inquires related to their investment in the Company should contact Michael D. Ketcham at (703) 610-1400. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. ------------------------ UNTIL THE EXPIRATION OF THE TWENTY-FIFTH CALENDAR DAY FOLLOWING THE SHARE DISTRIBUTION (AS DEFINED HEREIN) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER AN INFORMATION STATEMENT/PROSPECTUS. Company's subsequent status as a public company, will allow investors to evaluate better the merits and outlook of the Company's business. The Share Distribution would also give NHP stockholders and other potential investors the flexibility to direct their investment to their specific area of interest, property management or financial services, or to continue to retain an interest in both areas. See "The Distribution of Company Common Stock -- Description of the Distribution." FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION NHP will recognize gain as a result of the Rights Distribution combined with the later maturity of the Rights. The amount of gain recognized by NHP will be the excess of the fair market value of the Company Common Stock over NHP's tax basis in the Company Common Stock. NHP's tax basis in the Company Common Stock as of December 31, 1996 was approximately $23,400,000, and is subject to further adjustment reflecting the Company's 1997 earnings and distributions. NHP expects to have regular federal income tax net operating losses available in a sufficient amount to offset the gain under the regular federal income tax, but does not expect to have sufficient alternative minimum tax net operating losses available to offset the gain under the federal alternative minimum tax. Although the matter is not free from doubt, the Rights Distribution should be treated for federal income tax purposes as a taxable distribution made on the date of the distribution of the Rights (the "Rights Distribution Date") to the NHP Stockholders of record on May 2, 1997. Assuming the Rights Distribution is treated as a taxable event on the Rights Distribution Date, such distribution will be a dividend to the extent of the current and accumulated earnings and profits of NHP. The amount of the distribution is the fair market value of the Company on the Rights Distribution Date. The portion of the Rights Distribution that will be treated as a dividend cannot be finally determined until the end of NHP's taxable year that includes the Rights Distribution. The portion of the Rights Distribution in excess of the amount treated as a dividend will be treated as a tax free return of basis to the extent of an NHP Stockholder's basis in NHP Common Stock, and as a capital gain to the extent such portion exceeds the NHP Stockholder's basis in NHP Common Stock. For a more complete discussion of certain federal income tax consequences of the Distribution, see "The Distribution of Company Common Stock -- Federal Income Tax Consequences of the Rights Distribution and the Maturity of the Rights." NHP Stockholders are urged to consult their own tax advisors. RELATIONSHIP BETWEEN NHP AND THE COMPANY AFTER THE SHARE DISTRIBUTION As a result of the Share Distribution, the Company will cease to be a subsidiary of or otherwise affiliated with NHP and will thereafter operate as an independent, publicly held company. However, as indicated under "Management," one director of NHP is a director of the Company and may continue in such dual capacity at least until the Merger if the Share Distribution occurs before the Merger. The Company and NHP will also enter into certain agreements providing for (a) the orderly separation of NHP and the Company and the making of the Share Distribution and (b) the allocation of certain tax and other liabilities. See "Arrangements Between NHP and the Company after the Share Distribution." THE CAPRICORN DISTRIBUTION This Information Statement/Prospectus also relates to the Capricorn Distribution, in which Capricorn will distribute all of the 420,615 shares of the Company Common Stock it is expected to receive in the Share Distribution to each of the partners of Capricorn in respect of their interest in Capricorn. Neither the Company nor Capricorn will receive any consideration in connection with the Capricorn Distribution. DIVIDEND POLICY The Company does not anticipate declaring and paying cash dividends on the Company Common Stock in the foreseeable future. The decision whether to apply any legally available funds to the payment of dividends on the Company Common Stock will be made by the Board of Directors of the Company (the "Company Board") from time to time in the exercise of its business judgment, taking into account the Company's financial condition, results of operations, existing and proposed commitments for use of the Company's funds and other relevant factors. See "Description of Company Capital Stock -- Common Stock." The Company's ability to pay dividends may be restricted from time to time by financial covenants in its credit agreements or in arrangements with or regulations of government sponsored entities. TABLE OF CONTENTS <TABLE> <CAPTION> PAGE ---- <S> <C> SUMMARY............................................................................... 1 The Company......................................................................... 1 The Distribution of Company Common Stock............................................ 2 Dividend Policy..................................................................... 3 Summary Risk Factors................................................................ 4 Summary Financial Information....................................................... 4 RISK FACTORS.......................................................................... 6 Absence of Prior Trading Market and Possible Volatility of Stock Price.............. 6 Need for Additional Capital......................................................... 6 Risks of Inability to Complete or Successfully Integrate Acquisitions or Enter into New Business Lines............................................................... 7 Relationship with NHP; Potential Conflicts of Interest.............................. 7 Control by Majority Stockholders.................................................... 8 Risk of Loss on Mortgage Loans Sold Under DUS Program............................... 8 Retained Risks of Mortgage Loans Sold............................................... 9 Risks of Loss from Changes in General Economic Conditions........................... 9 Possible Loss of Value from Impairment of Mortgage Servicing Rights................. 9 Risks of Loss of Certain Advanced Funds............................................. 10 Losses Upon Termination of Certain Servicing Contracts.............................. 10 Uncertainties Resulting from Government Regulation and Changes in Government Programs......................................................................... 10 Risks of Securitization............................................................. 11 Risks of Hedging Transactions....................................................... 11 Reliance on Key Personnel........................................................... 11 Dependance on Sales Staff........................................................... 12 Competition......................................................................... 12 No Anticipated Stockholder Distributions............................................ 12 Substantial Number of Shares Eligible for Future Sale............................... 12 Anti-Takeover Provisions............................................................ 12 THE DISTRIBUTION OF COMPANY COMMON STOCK.............................................. 14 Description of the Distribution..................................................... 14 Expenses of the Distribution........................................................ 15 Reasons for the Distribution........................................................ 15 Federal Income Tax Consequences of the Rights Distribution and the Maturity of the Rights........................................................................... 15 Effect on Outstanding NHP Options................................................... 17 Effect of the Share Distribution on Ownership of NHP and the Company................ 18 Restrictions on Transfer............................................................ 18 The Capricorn Distribution.......................................................... 18 ARRANGEMENTS BETWEEN NHP AND THE COMPANY AFTER THE SHARE DISTRIBUTION................. 19 CAPITALIZATION........................................................................ 20 SELECTED FINANCIAL DATA............................................................... 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION........................................................................... 23 Overview............................................................................ 23 Results of Operations -- Summary.................................................... 23 Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996........... 24 1996 Results of Operations Compared to 1995......................................... 26 1995 Results of Operations Compared to 1994......................................... 28 Liquidity and Capital Resources..................................................... 29 </TABLE> SUMMARY RISK FACTORS In reviewing this Information Statement/Prospectus, stockholders should carefully consider the matters described under the heading "Risk Factors" beginning on page 6, including, among others, (i) the risks associated with the absence of a prior trading market for shares of the Company Common Stock and the fact that there can be no assurance that an effective trading market will develop, (ii) the need of the Company for additional debt or equity capital to implement its strategy effectively, (iii) the risks inherent in a strategy of acquisitions including the fact that acquisitions may not be available or may not be successfully completed or integrated into the business of the Company, (iv) the fact that the Company will be effectively controlled by two stockholders, (v) the risks inherent in the mortgage banking business, such as the risk of losses on mortgages the Company retains in its portfolio or with respect to which it retains a portion of the risk and the risk of loss resulting from changes in interest rates and economic conditions in general, and (vi) the risks inherent in servicing mortgages, including the impairment of servicing rights and losses upon termination of contracts. SUMMARY FINANCIAL INFORMATION The following table sets forth selected financial and operating data of the Company as of and for each of the years in the four-year period ended December 31, 1995, as of and for the three-month period ended March 31, 1996, as of and for the nine-month period ended December 31, 1996 and as of and for the six- month periods ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited). The data for the three-month period ended March 31, 1996 and the nine-month period ended December 31, 1996 are presented separately as a result of the acquisition of the Company, which was formerly known as WMF Holdings Ltd., by NHP effective April 1, 1996 (the "Acquisition.") The table also sets forth pro forma income statement data for the year ended December 31, 1996 giving effect to the Acquisition as though it occurred January 1, 1996. The selected financial data of the Company as of and for each of the years in the four-year period ended December 31, 1995, as of and for the three-month period ended March 31, 1996, as of and for the nine-month period ended December 31, 1996 and as of and for the six month period ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) were derived from the Company's consolidated financial statements. The pro forma data (which are unaudited) are derived from the footnotes to the Company's consolidated financial statements contained elsewhere in this Information Statement/Prospectus. The pro forma results are not necessarily indicative of operating results that would have been achieved had the Acquisition actually occurred on January 1, 1996. Additionally, the pro forma operating results are not intended to be a projection of results of future operations. The selected financial and operating data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements, pro forma financial statements and related notes included elsewhere herein. For the purpose of comparing the six months ended June 30, 1997 to the six months ended June 30, 1996, the three months ended March 31, 1996 has been combined with the three months ended June 30, 1996. As a result of the Acquisition the six months ended June 30, 1997 includes $576,000 of additional amortization expense as compared to the six months ended June 30, 1996. For purposes of comparing the six months ended June 30, 1997 and 1996, no other income statement amounts have been impacted by the Acquisition. Additionally, the three months ended June 30, 1996 includes $576,000 of additional amortization expense compared to the three months ended March 31, 1996. <TABLE> <CAPTION> PAGE ---- <S> <C> Inflation........................................................................... 31 New Accounting Standards............................................................ 31 INDUSTRY OVERVIEW..................................................................... 33 BUSINESS.............................................................................. 34 Company Overview.................................................................... 34 Strategic Objectives................................................................ 34 Mortgage Origination................................................................ 36 Mortgage Underwriting............................................................... 38 Mortgage Servicing.................................................................. 39 Interest Rate Sensitivity........................................................... 40 Regulation.......................................................................... 41 Competition......................................................................... 42 Legal Proceedings................................................................... 42 Employees........................................................................... 42 Properties.......................................................................... 42 MANAGEMENT OF THE COMPANY............................................................. 43 Directors and Executive Officers.................................................... 43 Executive Compensation.............................................................. 45 Directors Compensation.............................................................. 46 Employment Contracts and Related Matters............................................ 47 Compensation Committee Interlocks and Insider Participation......................... 47 RELATED PARTY TRANSACTIONS............................................................ 48 PRINCIPAL STOCKHOLDERS OF THE COMPANY................................................. 49 DESCRIPTION OF THE COMPANY CAPITAL STOCK.............................................. 51 General............................................................................. 51 Common Stock........................................................................ 51 Preferred Stock..................................................................... 51 Director and Officer Liability...................................................... 51 Certain Provisions Affecting Stockholders........................................... 52 Transfer Agent & Registrar.......................................................... 52 INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 52 LEGAL MATTERS......................................................................... 52 </TABLE> SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THE COMPANY WMF HOLDINGS LTD. AND SUBSIDIARIES ---------------------------------------------------- ------------------------------------------------------------ 6 MONTHS 6 MONTHS 9 MONTHS 3 MONTHS ENDED ENDED PRO FORMA ENDED ENDED YEAR ENDED DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31, ------------------------------------------------ 1997 1996 1996(1) 1996 1996 1995 1994 1993 1992 ----------- ----------- ------------ ------------ ---------- ---------- ---------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA Revenues..... $ 16,540 $ 14,098 $ 30,301 $ 23,473 $ 6,828 $ 21,999 $ 17,061 $ 16,271 $ 10,655 Expenses..... 16,089 13,371 29,416 22,318 6,523 21,222 17,223 15,550 10,612 Net income (loss)...... 451 727 885 1,155 305 777 (162) 721 43 Net income (loss) per share (2)... .11 .17 0.21 0.27 0.07 0.16 (0.03) 0.12 0.01 Weighted average shares outstanding (2)......... 4,217,478 4,217,478 4,217,478 4,217,478 4,217,478 4,717,312 6,216,812 6,216,812 6,216,812 </TABLE> <TABLE> <CAPTION> DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, MARCH 31, ------------------------------------------------ 1997 1996 1996 1996 1995 1994 1993 1992 ----------- ----------- ------------ ---------- ---------- ---------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA Mortgage loans held for sale.... $ 21,646 $ 45,880 $ 40,263 $ 23,116 $ 32,462 $ 5,110 $ 44,738 $ 32,401 Servicing rights...... 22,921 21,961 22,460 8,477 8,466 8,100 7,150 8,319 Total assets...... 74,055 90,297 88,097 48,976 57,176 31,689 65,347 50,233 Total debt (3)......... 26,832 53,768 46,136 34,108 43,304 15,271 51,652 39,059 Shareholder's equity...... 22,979 21,752 22,528 4,324 4,018 6,241 6,403 5,682 OTHER DATA Cash Flows from: Operating activities (4)....... $ 3,001 $ 477 $ 11,520 $ 10,701 $ 819 $ 4,981 $ 1,244 $ (7,648) $ (21,866) Investing activities (4)....... (3,040) (6,238) (9,624) (9,276) (548) (2,343) (3,062) (1,737) (5,023) Financing activities (4)....... (268) 3,573 (292) (260) (32) (45) 2,664 11,071 26,880 EBITDA (5)... 4,450 4,085 8,256 6,502 1,754 4,743 2,497 3,481 1,829 </TABLE> - --------------- (1) Adjusted to reflect results of operations for the twelve months ended December 31, 1996, as if the acquisition had occurred January 1, 1996. Adjustments include all income amounts for the three months ended March 31, 1996 and additional amortization of $575,647. (2) Gives retroactive effect to a 789.94 per share stock split effective on October 3, 1997. (3) Includes $5,000,000 of notes to the Company's former shareholder as of March 31, 1996 and December 31, 1995, and $2,000,000 of notes to the Company's former shareholder as of December 31, 1994 and 1993 all of which were repaid in conjunction with the Acquisition. (4) Operating, investing and financing cash flow represents the amount of cash generated from operating, investing and financing activities, respectively, as determined using generally accepted accounting principles ("GAAP"). (5) EBITDA is a non-GAAP presentation of the Company's performance and consists of income from operations before non-warehouse interest expense, income taxes, depreciation and amortization. EBITDA is included because it is used in the industry as a measure of a company's operating performance and provides information in addition to that supplied by GAAP-based data regarding the ability of the Company's business to generate cash, but should not be construed as an alternative either (i) to income from operations (determined in accordance with GAAP) as a measure of profitability or (ii) to cash flows from operating activities (determined in accordance with GAAP). EBITDA does not take into account the Company's debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses and EBITDA as measured by the Company may not be comparable to EBITDA as measured by other companies.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039471_world_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039471_world_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f72924e3a4a53265bbe5ec0cb543df7bac0146e3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039471_world_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Capitalized Terms at page 97 for the location herein of certain capitalized terms. OVERVIEW................... Certain motor vehicle dealers ("Dealers") in the World Omni Financial Corp. ("World Omni") network of dealers have assigned, and will assign, closed-end retail automobile and light duty truck leases to World Omni LT, an Alabama trust (the "Origination Trust"). The Origination Trust was created in 1993 to avoid the administrative difficulty and expense associated with retitling leased vehicles in the securitization of automobile and light duty truck leases. The Origination Trust has issued to Auto Lease Finance L.P. ("ALFI L.P.") an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated assets of the Origination Trust. ALFI L.P. will instruct the trustee of the Origination Trust to allocate a separate portfolio of leases and leased vehicles within the Origination Trust and create a special unit of beneficial interest (the "SUBI") which will represent the entire beneficial interest in such portfolio. Upon its creation, such portfolio will no longer be a part of the Origination Trust Assets represented by the UTI. ALFI L.P. will sell its interest in the SUBI to World Omni Lease Securitization L.P. (the "Transferor") and the Transferor will in turn contribute a 99.8% interest in the SUBI to the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"). In return, the Trust will issue certain securities, including the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes being offered hereby. The undivided equity interest in the Trust will be permanently retained by the Transferor. ALFI L.P. has caused and from time to time in the future may cause additional special units of beneficial interest similar to the SUBI ("Other SUBIs") to be created out of the UTI and sold to the Transferor or one or more other entities. The Trust and the Noteholders will have no interest in the UTI, any Other SUBI or any assets of the Origination Trust evidenced by the UTI or any Other SUBI. THE TRUST.................. The Trust will be created pursuant to a securitization trust agreement dated as of October 1, 1997 (the "Agreement"), among the Transferor, PNC Bank, Delaware ("PNC Bank"), as owner trustee (in such capacity, the "Owner Trustee") and U.S. Bank National Association ("U.S. Bank"), as indenture trustee (in such capacity, the "Indenture Trustee"). The property of the Trust will consist primarily of an undivided 99.8% interest (the "SUBI Interest") in the SUBI, which will evidence a beneficial interest in certain specified assets of the Origination Trust (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy), and monies on deposit in the Reserve Fund and in certain other accounts established as described herein. The Origination Trust was formed by ALFI L.P., as grantor and initial beneficiary, and VT Inc., as trustee (the "Origination Trustee"). The sole general partner of ALFI L.P. is Auto Lease Finance, Inc., a Delaware corporation ("ALFI") which is a wholly owned, special purpose subsidiary of World Omni. ALFI may not transfer its general WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST WORLD OMNI LEASE SECURITIZATION L.P. AUTO LEASE FINANCE L.P. WORLD OMNI LT CROSS REFERENCE SHEET FURNISHED PURSUANT TO RULE 501(B) OF REGULATION S-K <TABLE> <CAPTION> ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS ---------------------------- --------------------------------- <C> <S> <C> 1. Forepart of Registration Statement and Outside Cover Page of Prospectus.................................................. Forepart of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges............................................... Summary; Risk Factors 4. Use of Proceeds............................................. Use of Proceeds 5. Determination of Offering Price............................. * 6. Dilution.................................................... * 7. Selling Security Holders.................................... * 8. Plan of Distribution........................................ Underwriting 9. Description of Securities to be Registered.................. Summary; The Trust and the SUBI; The Contracts; Maturity, Prepayment and Yield Considerations; Description of the Notes; Security for the Notes 10. Interests of Named Experts and Counsel...................... * 11. Information With Respect to the Registrant.................. The Trust and the SUBI; The Origination Trust; The Transferor 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................................. * </TABLE> - --------------- * Answer negative or item inapplicable. (Cover continued from previous page) The SUBI initially will evidence a beneficial interest in specified Origination Trust Assets, including certain lease contracts, the automobiles and light duty trucks relating to such lease contracts, certain monies due under or payable in respect of such lease contracts and leased vehicles on or after October 1, 1997, payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other Origination Trust Assets, as more fully described under "The Trust and the SUBI -- The SUBI" (collectively, the "SUBI Assets"). From time to time until principal is first distributed to the Noteholders, as described below, principal collections on or in respect of the SUBI Assets will be reinvested in additional lease contracts assigned to the Origination Trust by dealers in the World Omni network of dealers, together with the automobiles and light duty trucks relating thereto, which at the time of reinvestment will become SUBI Assets. The SUBI will not evidence a direct interest in the SUBI Assets, nor will it represent a beneficial interest in all of the Origination Trust Assets. Payments made on or in respect of the Origination Trust Assets not represented by the SUBI will not be available to make payments on the Notes. For further information regarding the Trust, the SUBI and the Origination Trust, see "The Trust and the SUBI" and "The Origination Trust". The Notes will consist of four classes of senior notes (respectively, the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", and collectively, the "Notes") and one class of subordinated Notes (the "Class B Notes"). The Class A Notes will be the only Notes offered hereby. The initial principal amount of the Class B Notes will be approximately $62,950,545, and the Class B Notes will be subordinated to the Class A Notes to the extent described herein. The Transferor will own the undivided equity interest in the Trust (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described herein. For further information regarding the Notes, see "Description of the Notes". In general, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made on the Class A-4 Notes until the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been paid in full. Interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes will accrue at the respective fixed per annum interest rates specified herein and will be distributed to holders of the Class A Notes on the twenty-fifth day of each month (or, if such day is not a Business Day, on the next succeeding Business Day), beginning November 25, 1997 (each, a "Distribution Date"). Principal will be distributed to holders of the Notes to the extent described herein on each Distribution Date beginning in December 1998, or, in certain limited circumstances, earlier, as more fully described herein. The final maturity date for each Class of Class A Notes will be the November 2003 Distribution Date. There currently is no secondary market for the Class A Notes and there is no assurance that one will develop. The Underwriters expect, but will not be obligated, to make a market in each Class of Class A Notes. There is no assurance that any such market will develop, or if one does develop, that it will continue. As more fully described under "Ratings of the Class A Notes", it is a condition of issuance that each of Moody's Investors Service, Inc., Standard & Poor's and Fitch Investors Service, L.P. rates each Class of Class A Notes in its highest rating category. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF ANY CLASS OF NOTES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". partnership interest in ALFI L.P. so long as any financings involving interests in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of ALFI L.P. is World Omni. VT Inc. is an Alabama corporation and a wholly owned, special purpose subsidiary of U.S. Bank that was organized solely for the purpose of acting as Origination Trustee. VT Inc. is not affiliated with World Omni or any affiliate thereof. For further information regarding the Origination Trustee, see "The Origination Trust -- The Origination Trustee". The Origination Trust Assets consist of retail closed-end lease contracts assigned to the Origination Trust by Dealers, the automobiles and light duty trucks relating thereto and all proceeds thereof and payments made under certain insurance policies relating to such contracts, the related lessees or such leased vehicles, including the Residual Value Insurance Policy. The SUBI initially will evidence a beneficial interest in a specified portion of the Origination Trust Assets, including certain lease contracts (the "Initial Contracts") originated by Dealers located throughout the United States, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles"), certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after October 1, 1997 (the "Initial Cutoff Date"), payments made under certain insurance policies (including Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) relating to the Initial Contracts, the related lessees and the Initial Leased Vehicles and certain related assets and rights (collectively, the "SUBI Assets"). For further information regarding the SUBI Assets, see "The Trust and the SUBI -- The SUBI". Prior to the time when principal is first distributed to Noteholders as described herein, payments made on or in respect of the SUBI Assets allocable to principal will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") originated and assigned to the Origination Trust by Dealers located throughout the United States and the automobiles and light duty trucks relating thereto (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles, together with certain related Origination Trust Assets, will become SUBI Assets. For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles" and "The Trust and the SUBI -- The SUBI". The Dealers comprising the sources for Contracts and Leased Vehicles are members of World Omni's network of dealers. These Dealers offer automobiles and light duty trucks for lease pursuant to World Omni-approved terms and documentation. For further information regarding World Omni's lease business, see "World Omni". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Origination Trust Assets other than the INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 23, 1997 $1,109,128,644 (Approximate) WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST $260,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-1 $220,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-2 $390,000,000 (Approximate) % Automobile Lease Asset Backed Notes, Class A-3 $239,128,644 (Approximate) % Automobile Lease Asset Backed Notes, Class A-4 WORLD OMNI LEASE SECURITIZATION L.P. (Transferor) WORLD OMNI FINANCIAL CORP. (Servicer) The Automobile Lease Asset Backed Notes (the "Class A Notes") will be issued by the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"), a Delaware business trust created pursuant to a Securitization Trust Agreement between World Omni Lease Securitization L.P. (the "Transferor"), PNC Bank, Delaware, as owner trustee (the "Owner Trustee") and U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"). The Class A Notes will be issued pursuant to an Indenture between the Trust and the Indenture Trustee. The Class A Notes will be secured by the property of the Trust, which will consist of an undivided 99.8% interest in a Special Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence a beneficial interest in certain specified assets of World Omni LT, an Alabama trust (the "Origination Trust"), monies on deposit in certain accounts and other assets, as described more fully under "The Trust and the SUBI". The assets of the Origination Trust (the "Origination Trust Assets") will consist of retail closed-end lease contracts assigned to the Origination Trust by dealers in the World Omni Financial Corp. ("World Omni") network of dealers, the automobiles and light duty trucks relating thereto and payments made under certain insurance policies relating to such lease contracts, the related lessees and such leased vehicles, including the Residual Value Insurance Policy, and certain other assets, as more fully described under "The Origination Trust -- Property of the Origination Trust". World Omni will service the lease contracts included in the Origination Trust Assets. (Cover continued on next page) ------------------ FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A NOTES, SEE "RISK FACTORS" ON PAGE 17 HEREIN. ------------------ THE CLASS A NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF WORLD OMNI LEASE SECURITIZATION L.P., AUTO LEASE FINANCE L.P., WORLD OMNI LT, WORLD OMNI FINANCIAL CORP. OR ANY OF THEIR RESPECTIVE AFFILIATES. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> UNDERWRITING DISCOUNTS AND PROCEEDS TO THE PRICE TO PUBLIC(1) COMMISSIONS(2) TRANSFEROR(1)(3) ------------------ -------------- ---------------- <S> <C> <C> <C> Per Class A-1 Note................................... % % % Per Class A-2 Note................................... % % % Per Class A-3 Note................................... % % % Per Class A-4 Note................................... % % % Total................................................ $ $ $ </TABLE> (1) Plus accrued interest, if any, calculated at the related Note Rate from and including the date of initial issuance. (2) The Transferor and World Omni have agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933. See "Underwriting". (3) Before deducting expenses payable by the Transferor estimated to be $1,050,000. ------------------ The Class A Notes are offered by the Underwriters, subject to prior sale, when, as and if issued to and accepted by the Underwriters, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Class A Notes in book-entry form will be made through the facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System, on or about , 1997, against payment in immediately available funds. CREDIT SUISSE FIRST BOSTON BANCAMERICA ROBERTSON STEPHENS MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY SECURITIES, INC. The date of this Prospectus is , 1997. AVAILABLE INFORMATION The Transferor, as originator of the Trust, has filed with the Securities and Exchange Commission (the "Commission") on behalf of the Trust a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement"), of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Class A Notes being offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which is available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048. Copies of such information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission at http://www.sec.gov. The Servicer, on behalf of the Trust, will also file or cause to be filed with the Commission such periodic reports as are required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. SUBI Assets. Payments made on or in respect of Origination Trust Assets other than the SUBI Assets will not be available to make payments on the Notes. The 0.2% interest in the SUBI not transferred to the Trust will be permanently retained by the Transferor (the "Retained SUBI Interest"). Accordingly, the Transferor will be entitled to receive 0.2% of all payments made on or in respect of the SUBI Assets and will share in 0.2% of all losses and liabilities incurred by the SUBI Assets. Any payments made in respect of the Retained SUBI Interest will not be available to make payments on the Notes. For further information regarding the SUBI, see "Summary -- Security for the Notes -- The SUBI", "The Trust and the SUBI -- The SUBI" and "The Origination Trust". THE TRANSFEROR............. The Transferor is a Delaware limited partnership, the sole general partner of which is World Omni Lease Securitization, Inc., a Delaware corporation ("WOLSI"), which is a wholly owned, special purpose subsidiary of World Omni. WOLSI may not transfer its general partnership interest in the Transferor so long as any financings involving interests formerly or partially held by it in the Origination Trust (including the transaction described herein) are outstanding. The sole limited partner of the Transferor is World Omni. WORLD OMNI................. World Omni is a Florida corporation that is a wholly owned subsidiary of JM Family Enterprises, Inc., a Delaware corporation ("JMFE"). JMFE also wholly owns Southeast Toyota Distributors, Inc. ("SET"), which is the exclusive distributor of Toyota automobiles and light duty trucks in Florida, Alabama, Georgia, North Carolina and South Carolina (the "Five State Area"). As more fully described under "World Omni", World Omni provides consumer lease and installment contract financing to retail customers of, and floorplan and other dealer financing to, Dealers that are located throughout the United States. World Omni wholly owns both ALFI and WOLSI. Pursuant to an amended and restated servicing agreement dated as of July 1, 1994, as amended, to be supplemented by a servicing supplement dated as of October 1, 1997 (collectively, the "Servicing Agreement"), each between World Omni and the Origination Trustee, World Omni will act as the initial servicer of the Origination Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). The Owner Trustee and the Indenture Trustee will be third party beneficiaries of the Servicing Agreement, as described under "Additional Document Provisions -- The Servicing Agreement -- Indenture Trustee and Owner Trustee as Third-Party Beneficiaries". SECURITIES OFFERED......... The Automobile Lease Asset Backed Notes (the "Notes") will consist of four classes of senior Notes (the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes", respectively, and collectively, the "Class A Notes") and one class of subordinated notes (the "Class B Notes"). Generally, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full, no principal payments will be made on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have been paid in full, and no principal payments will be made [OVERVIEW OF TRANSACTION CHART] on the Class A-4 Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been paid in full, in each case as more fully described under "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Amortization Period". The Class B Notes will be subordinated to the Class A Notes so that (i) interest payments generally will not be made in respect of the Class B Notes until interest in respect of the Class A Notes has been paid, (ii) principal payments generally will not be made in respect of the Class B Notes until the Class A-1, Class A-2 and Class A-3 Notes have been paid in full and (iii) if other sources available to make payments of principal and interest on the Class A-4 Notes are insufficient, amounts that otherwise would be paid in respect of the Class B Notes generally will be available for that purpose, as more fully described under "Description of the Notes -- Distributions on the Notes". The undivided equity interest in the Trust will be permanently retained by the Transferor (the "Transferor Interest"). The Transferor Interest will be subordinated to the Notes as described under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". Only the Class A Notes are being offered hereby. The Class A Notes will be issued in book-entry form in minimum denominations of $1,000 and integral multiples thereof, as set forth under "Description of the Notes -- Book-Entry Registration" and "-- Definitive Notes". The Class B Notes will be sold in one or more private placements. Each Note will represent the right to receive monthly payments of interest at the related Note Rate and, to the extent described herein, monthly payments of principal during the Amortization Period. These payments will be funded from a portion of the payments received by the Trust on or in respect of the SUBI Interest (i.e., from a portion of 99.8% of the payments received on or in respect of the Contracts and the Leased Vehicles) and, in certain circumstances, from Excess Collections, the Servicing Fee (so long as World Omni is the Servicer), Transferor Amounts that otherwise would be distributable in respect of the Transferor Interest, Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy and monies on deposit in the Reserve Fund. On the date of initial issuance of the Notes (the "Closing Date"), the Trust will issue approximately $260,000,000 aggregate principal amount of Class A-1 Notes (the "Initial Class A-1 Note Balance"), approximately $220,000,000 aggregate principal amount of Class A-2 Notes (the "Initial Class A-2 Note Balance"), approximately $390,000,000 aggregate principal amount of Class A-3 Notes (the "Initial Class A-3 Note Balance"), approximately $239,128,644 aggregate principal amount of Class A-4 Notes (the "Initial Class A-4 Note Balance" and, together with the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance and the Initial Class A-3 Note Balance, the "Initial Class A Note Balance") and approximately $62,950,545 aggregate principal amount of Class B Notes (the "Initial Class B Note Balance" and, together with the Initial Class A Note Balance, the "Initial Note Balance"). The aggregate principal amounts of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes and the Class B Notes will, except in certain circumstances described under "Summary -- The Revolving Period; Subsequent Contracts and Subsequent Leased Vehicles", remain fixed at their respective Initial Class Note Balances during the Revolving Period and, to the extent described herein, will decline thereafter during the Amortization Period as principal is paid on the Notes. The "Class Note Balance" of any Class of Notes on any day will equal the Initial Class Note Balance, reduced by the sum of all distributions made in respect of principal (including any reimbursements of Loss Amounts allocable to such Class and Note Principal Loss Amounts in respect of such Class) on or prior to such day on the related Class of Notes and those Note Principal Loss Amounts in respect of such Class, if any, which have not been reimbursed as described herein. The "Class A Note Balance" will mean the sum of the Class A-1, Class A-2, Class A-3 and Class A-4 Note Balances. The "Note Balance" with respect to the Notes will mean the sum of the Class A Note Balance and the Class B Note Balance. The amount of the Transferor Interest will initially equal approximately $26,978,805 (which amount will equal 2.25% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date) and on any day will equal the difference between 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- Security for the Notes -- The SUBI" and "Summary -- The Contracts", and the Note Balance. As more fully described under "Description of the Notes -- General", the Aggregate Net Investment Value can change daily. REGISTRATION OF THE NOTES.................... Each Class of Class A Notes initially will be represented by one or more notes registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). A person acquiring an interest in the Class A Notes (each, a "Note Owner") will hold his or her interest through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. No Note Owner will be able to receive a definitive Note representing such person's interest, except in the limited circumstances described under "Description of the Notes -- Definitive Notes". Unless and until definitive Notes are issued, Note Owners will not be recognized as holders of record of Class A Notes and will be permitted to exercise the rights of such holders only indirectly through DTC. For further information regarding book-entry registration of the Class A Notes, see "Description of the Notes -- General" and "-- Book-Entry Registration". INTEREST................... On the twenty-fifth day of each month or, if such day is not a Business Day, on the next succeeding Business Day, beginning November 25, 1997 (each, a "Distribution Date"), distributions in respect of the Class A Notes will be made to the holders of record of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes (respectively, the "Class A-1 Noteholders", the "Class A-2 Noteholders", the "Class A-3 Noteholders" and the "Class A-4 Noteholders", and collectively, the "Class A Noteholders") as of the day immediately preceding such Distribution Date or, if Definitive Notes are issued, the last day of the immediately preceding calendar month (each such date, a "Record Date"). On each Distribution Date, the Indenture Trustee will distribute interest for the related Interest Period to the Class A Noteholders, based on the related Class Note Balance as of the immediately preceding Distribution Date (after giving effect to reductions in such Class Note Balance as of such immediately preceding Distribution Date) or, in the case of the first Distribution Date, on the Initial Class Note Balance, in the case of (i) the Class A-1 Notes, at an annual percentage rate equal to % (the "Class A-1 Note Rate"), (ii) the Class A-2 Notes, at an annual percentage rate equal to % (the "Class A-2 Note Rate"), (iii) the Class A-3 Notes, at an annual percentage rate equal to % (the "Class A-3 Note Rate") and (iv) the Class A-4 Notes, at an annual percentage rate equal to % (the "Class A-4 Note Rate"). All such payments will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The final maturity date for each Class of Class A Notes (the "Stated Maturity Date") will be the November 2003 Distribution Date. A "Business Day" will be a day other than a Saturday or Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, Wilmington, Delaware, Deerfield Beach, Florida, or Mobile, Alabama, are authorized or obligated by law, executive order or government decree to be closed. As described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", distributions in respect of interest on the Class B Notes will be subordinated to distributions in respect of interest on the Class A Notes under certain circumstances. THE REVOLVING PERIOD; SUBSEQUENT CONTRACTS AND SUBSEQUENT LEASED VEHICLES................. No principal will be payable on the Notes until the December 1998 Distribution Date or, upon the occurrence of an Early Amortization Event, until the Distribution Date in the month immediately succeeding the month in which such Early Amortization Event occurs. From and including the Closing Date and ending on the day immediately preceding the commencement of the Amortization Period (i.e., the earlier of November 1, 1998 or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and reimbursements of Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Class A-1, Class A-2, Class A-3, Class A-4 and Class B Note Balances at constant levels during the Revolving Period, except to the extent there are unreimbursed Note Principal Loss Amounts in respect of any such Class, in which case the Note Balance of the related Class of Notes will decrease until such time, if any, as such Note Principal Loss Amounts are reimbursed as described under "Description of the Notes -- Distributions on the Notes -- Distribu- tions of Interest". The events that might lead to the termination of the Revolving Period prior to its scheduled termination date are described under "Description of the Notes -- Early Amortization Events". Prior to the twenty-fifth calendar day (i) in each month (beginning November 1997) during the Revolving Period and (ii) if no Early Amortization Event has occurred, in the month in which the Amortization Date occurs, on one or more days selected by the Servicer (each, a "Transfer Date"), the Servicer will direct the Origination Trustee to reinvest Principal Collections and certain Loss Amounts that otherwise would be reimbursed to the Noteholders in certain lease contracts and the related leased vehicles of the Origination Trust that are not evidenced by the SUBI or any Other SUBI. Upon such reinvestment, the related Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the twenty-fifth calendar day of any month (beginning November 1997) during the Revolving Period the amount of Principal Collections and such otherwise reimbursable Loss Amounts as of the last day of the immediately preceding month that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles exceeds $1,000,000, an Early Amortization Event will occur, the Revolving Period will terminate as of such day and all unreinvested Principal Collections and all such Loss Amounts will be distributed as principal to Noteholders on the immediately succeeding Distribution Date. For further details concerning the application of Principal Collections and Loss Amounts, see "Summary -- Amortization Period; Principal Payments", "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts", "The Trust and the SUBI -- The SUBI" and "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal -- Revolving Period". The Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Origination Trust's portfolio of lease contracts and related vehicles that are not allocated to (or reserved for allocation to) any Other SUBI, based on the same criteria as are applicable to the Initial Contracts and the other criteria described under "The Contracts -- Representations, Warranties and Covenants". If allocations are being made in respect of any one or more previous Other SUBI(s) at the same time out of the Origination Trust's general pool of unreserved lease contracts, reinvestment will be made first in respect of such previous Other SUBI(s). For further information regarding the Subsequent Contracts and Subsequent Leased Vehicles, see "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract (including any payment in respect of the related Leased Vehicle, but other than any payment as to which a Loss Amount has been realized and allocated during any prior Collection Period), discounted to the extent required below. A "Collection Period" will be each calendar month. For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than approximately 8.0% (each, a "Discounted Contract") will be discounted to present value at a rate of approximately 8.0%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Noteholders. "Collections" with respect to any Collection Period will include all net collections received on or in respect of the Contracts and Leased Vehicles during such Collection Period other than Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy, such as Monthly Payments (including amounts in the SUBI Collection Account that previously constituted Payments Ahead but which represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds, Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds and any Undistributed Transferor Excess Collections in respect of the immediately preceding Collection Period, less an amount equal to the sum of (i) Payments Ahead with respect to one or more future Collection Periods, (ii) amounts paid to the Servicer in respect of outstanding Advances, Matured Leased Vehicle Expenses, Repossessed Vehicle Expenses, other Liquidation Expenses and Insurance Expenses, (iii) late payment charges, payments of insurance premiums, excise taxes or similar items and (iv) Additional Loss Amounts in respect of such Collection Period. In addition, if such Collection Period occurs during the Revolving Period, amounts otherwise payable to the Noteholders on the related Distribution Date as reimbursement of Loss Amounts allocable to the Notes (as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest") will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. "Interest Collections" with respect to any Collection Period generally will equal the amount by which Collections exceed Principal Collections. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses. "Net Matured Leased Vehicle Proceeds" will be Matured Leased Vehicle Proceeds received during a Collection Period net of Matured Leased Vehicle Expenses incurred during such Collection Period. AMORTIZATION PERIOD; PRINCIPAL PAYMENTS....... The "Amortization Period" will commence on the earlier of November 1, 1998 (the "Amortization Date") or the day on which an Early Amortization Event occurs, and will end when each Class of Notes has been paid in full and all Note Principal Loss Amounts and Class B Note Principal Carryover Shortfalls, if any, have been repaid in full, together with accrued interest thereon, or when the Trust otherwise terminates. During the Amortization Period, Principal Collections and certain reimbursed Loss Amounts will no longer be reinvested in Subsequent Contracts and Subsequent Leased Vehicles as described above. Instead, on each Distribution Date beginning with the Distribution Date in the month following the month in which the Amortization Period commences and ending on the Distribution Date on which the Class A-3 Notes have been paid in full, all Principal Collections for the related Collection Period that are allocable to the Notes will be distributed as principal payments first to the Class A-1 Noteholders until the Class A-1 Notes have been paid in full, second, to the Class A-2 Noteholders until the Class A-2 Notes have been paid in full, third, to the Class A-3 Noteholders until the Class A-3 Notes have been paid in full and thereafter the Class A Percentage and the Class B Percentage of any remaining such Principal Collections will be distributed as principal payments to the Class A-4 Noteholders and to the holders of record of the Class B Notes (the "Class B Noteholders" and, together with the Class A Noteholders, the "Noteholders"), respectively. On each Distribution Date after the Class A-3 Notes have been paid in full, the Class A Percentage and the Class B Percentage of Principal Collections for the related Collection Period allocable to the Notes will be distributed to the Class A-4 Noteholders and the Class B Noteholders, respectively, until the related Class of Notes has been paid in full. Certain Loss Amounts incurred during the Amortization Period will be reimbursed to the Noteholders as described below. The "Class A Percentage" will mean the Class A Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time, and the "Class B Percentage" will mean the Class B Note Balance immediately after the Class A-3 Notes have been paid in full, as a percentage of the Note Balance at such time. The Class A Percentage and the Class B Percentage will not change after they are set. In no event will the principal distributed in respect of any Class of Notes exceed its Note Balance. In addition, under certain circumstances, (i) Class A Noteholders will be entitled to receive reimbursement of an allocable percentage of Loss Amounts as a distribution of principal from sources other than Principal Collections and (ii) principal allocable to the Class B Notes may instead be distributed in respect of Loss Amounts allocable to the Class A-4 Notes, Class A-4 Note Principal Loss Amounts and accrued and unpaid interest thereon, as described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", "Description of the Notes -- Distributions on the Notes -- Application and Distributions of Principal" and "Risk Factors -- Risk of Absence of Funds for Reimbursement of Loss Amounts". See "Description of the Notes -- Early Amortization Events" for a description of the events that might lead to the commencement of the Amortization Period prior to the Amortization Date. During the Amortization Period, the amount of Principal Collections allocable to the Notes in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period allocable to the SUBI Interest multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Note Balance and the denominator of which is 99.8% of the Aggregate Net Investment Value, calculated as described under "Summary -- The Contracts", as of the last day of the last Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. See "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage" for a description of calculation of the Investor Percentage relating to Interest Collections and Loss Amounts. Allocations based upon the Principal Allocation for Principal Collections during the Amortization Period may result in distributions of principal with respect to a Collection Period during the Amortization Period to Noteholders in amounts that are greater relative to the declining balance of the Note Balance than would be the case if no fixed Investor Percentage were used to determine the percentage of Principal Collections distributed in respect of the Notes. Additionally, to the extent that on any Distribution Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period allocable to the SUBI Interest remains after required distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Reserve Fund Cash Requirement. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of 0.25%, (ii) 99.8% and (iii) the Aggregate Net Investment Value as of the last day of such Collection Period (the "Accelerated Principal Distribution Amount"), will be distributed as an additional payment of principal to the Noteholders in the same manner and priority as principal is distributed in respect of the Notes as described in the preceding paragraphs. See "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" and "Description of the Notes -- The Accounts -- The SUBI Collection Account -- Withdrawals from the SUBI Collection Account" for further information regarding the foregoing matters. OPTIONAL REDEMPTION........ The Notes will be subject to redemption if the Transferor exercises its option to purchase all of the assets of the Trust, which option may be exercised on any Distribution Date if, either before or after giving effect to any payment of principal required to be made on such Distribution Date, the Note Balance has been reduced to an amount less than or equal to 10% of the Initial Note Balance, at a purchase price determined as described under "Description of the Notes -- Termination of the Trust; Redemption of the Notes". SECURITY FOR THE NOTES..... The security for the Notes will consist primarily of the following: A. THE SUBI................ The SUBI will evidence a beneficial interest in the SUBI Assets. The Origination Trust was created pursuant to a trust agreement (the "Origination Trust Agreement"), among ALFI L.P., as grantor and initial beneficiary, the Origination Trustee and U.S. Bank, as trust agent (in such capacity, the "Trust Agent"). The SUBI Interest will be evidenced by a Certificate (the "SUBI Certificate") evidencing a 99.8% beneficial interest in the SUBI Assets that will be issued by the Origination Trust pursuant to a supplement to the Origination Trust Agreement dated as of October 1, 1997 (the "SUBI Supplement" and, together with the Origination Trust Agreement, the "SUBI Trust Agreement"). The Indenture Trustee and the Owner Trustee will be third party beneficiaries of the SUBI Trust Agreement. The Transferor will permanently hold the Retained SUBI Interest, representing the 0.2% beneficial interest in the SUBI Assets not evidenced by the SUBI Certificate. The Origination Trust Assets evidenced by the SUBI will primarily include the Contracts and the Leased Vehicles. The SUBI will not evidence an interest in any Origination Trust Assets other than the SUBI Assets, and payments made on or in respect of all other Origination Trust Assets will not be available to make payments on the Notes. For more information regarding the SUBI, see "The Trust and the SUBI" and "The Origination Trust". B. THE RESIDUAL VALUE INSURANCE POLICY........ Automobile and light duty truck leasing companies such as World Omni sometimes obtain residual value insurance to minimize losses in respect of the residual values of leased vehicles. Although many forms of such insurance are available, in general, claims are made if the proceeds of the sale of a leased vehicle are less than its residual value established at the time of origination of the related closed-end lease contract. On the Closing Date, American International Specialty Lines Insurance Company ("AISLIC" or the "RV Insurer") an indirect subsidiary of American International Group, Inc. ("AIG"), will issue an insurance policy (the "Residual Value Insurance Policy") to the Transferor (with the Origination Trustee, the Owner Trustee, the Indenture Trustee and ALFI L.P. also named as insureds), which will provide coverage for the Insured Residual Value Loss Amount for any Collection Period. The aggregate maximum amount payable under the Residual Value Insurance Policy with respect to any Leased Vehicle will be the lesser of $60,000 and its insured residual value, calculated as described under "Security for the Notes -- The Residual Value Insurance Policy". Additionally, the aggregate maximum amount payable under the Residual Value Insurance Policy will not exceed the aggregate insured residual values of all Leased Vehicles. Prior to each Distribution Date, the Servicer will make a claim for any Insured Residual Value Loss Amount under the Residual Value Insurance Policy. The proceeds of any such claim will be used to make the payments described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". For a fuller description of these mechanics, see "Security for the Notes -- The Residual Value Insurance Policy". The "Insured Residual Value Loss Amount" for any Collection Period will be the lesser of (i) the Investor Percentage of the Residual Value Loss Amount allocable to the SUBI Interest, and (ii) any shortfall in the amount required to make all payments (other than deposits into the Reserve Fund) required to be made on the related Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", after application of the Investor Percentage of Interest Collections allocable to the SUBI Interest and Transferor Amounts otherwise payable in respect of the Transferor Interest, as described below under "Summary -- Security for the Notes -- Subordination of the Transferor Interest". C. THE RESERVE FUND........ The Trust will have the benefit of the Reserve Fund maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor (as holder of the Transferor Interest). The Reserve Fund is designed to provide additional funds for the benefit of the Noteholders in the event that on any Distribution Date Interest Collections allocable to the Notes for the related Collection Period, plus Transferor Amounts otherwise distributable in respect of the Transferor Interest, plus any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy for the related Collection Period, are insufficient to pay, among other things, the sum of (i) accrued interest and any overdue interest (with interest thereon) at the applicable Note Rate on the Notes on such Distribution Date, (ii) any Loss Amount for such Collection Period allocable to the Notes, calculated as described under "Description of the Notes -- Calculation of Investor Percentage and Transferor Percentage", and (iii) any unreimbursed Note Principal Loss Amounts, together with interest thereon at the applicable Note Rate. Monies on deposit in the Reserve Fund also will be available to Noteholders should Collections ultimately be insufficient to pay in full any Class of Notes. For further information regarding the Reserve Fund, see "Security for the Notes -- The Reserve Fund". The Reserve Fund will be created with an initial deposit by the Transferor of approximately $11,990,580 (the "Initial Deposit") (which amount will equal 1.0% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). On each Distribution Date, the funds in the Reserve Fund will be supplemented by (i) certain Interest Collections, as more fully described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest", (ii) income realized on the investment of amounts on deposit in the Reserve Fund and (iii) in certain circumstances, the deposit of monies in respect of the related Collection Period remaining in the Distribution Account after making all payments required to be made therefrom on such Distribution Date prior to such deposit, including monies that would otherwise be distributed or applied in respect of the Transferor Interest, until the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement then in effect, calculated as described under "Security for the Notes -- The Reserve Fund -- The Reserve Fund Cash Requirement". The Transferor may be required under certain circumstances to deposit funds into the Reserve Fund in an amount equal to certain Reserve Fund supplemental requirements. For a description of the circumstances under which the Transferor will be required to make such deposits, see "Security for the Notes -- The Reserve Fund". For further information regarding deposits into the Reserve Fund, see "Description of the Notes -- Distributions on the Notes -- Distributions of Interest". After giving effect to all payments from the Reserve Fund on a Distribution Date, monies on deposit therein that are in excess of the Reserve Fund Cash Requirement generally will be paid to the Transferor, free and clear of any lien of the Trust. D. SUBORDINATION OF THE TRANSFEROR INTEREST..... The Transferor Interest will initially equal approximately $26,978,805, and will represent the entire equity interest in the Trust. However, to provide additional credit enhancement for the Notes, on each Distribution Date, no payments will be made to the Transferor in respect of the Transferor Interest until all payments required to be made on such Distribution Date that are described under "Description of the Notes -- Distributions on the Notes -- Distributions of Interest" have been made and the amount on deposit in the Reserve Fund equals the Reserve Fund Cash Requirement. For a description of certain payments made to the Transferor, see "Description of the Notes -- Certain Payments to the Transferor". THE CONTRACTS.............. The Contracts will consist of a pool of retail closed-end lease contracts originated by Dealers located throughout the United States, each of which will have an original term of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price), plus an implicit rate in each Lease calculated as an annual percentage rate (the "Lease Rate") on a constant yield basis. The Contracts will provide for equal monthly payments (the "Monthly Payments") such that at the end of the related Contract term such capitalized cost will have been amortized to an amount equal to the residual value of the related Leased Vehicle established at the time of origination of such Contract (the "Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of 49,166 lease contracts. As of the Initial Cutoff Date, the Lease Rate of the Initial Contracts ranged from 3.08% to 12.94%, with a weighted average Lease Rate of approximately 8.80%. The aggregate of the original principal balances of the Initial Contracts as of their respective dates of origination was approximately $1,266,000,709. As of the Initial Cutoff Date, the aggregate Outstanding Principal Balance of the Initial Contracts was approximately $1,205,609,324, the aggregate Residual Value of the Initial Leased Vehicles was approximately $833,211,953 and the Initial Contracts had a weighted average original term of approximately 40.96 months and a weighted average remaining term to scheduled maturity of approximately 34.47 months. See "The Contracts" for further information regarding the Initial Contracts. The Initial Contracts were, and the Subsequent Contracts will be, identified by the Servicer from the Origination Trust's portfolio of lease contracts originated by Dealers located throughout the United States that are not evidenced by (or reserved for allocation to) any Other SUBI, based upon the criteria specified in the SUBI Trust Agreement and described under "The Contracts -- Characteristics of the Contracts" and "-- Representations, Warranties and Covenants". The "Aggregate Net Investment Value" as of any day will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than two full Collection Periods (the "Matured Leased Vehicle Inventory") and (iii) during the Revolving Period, the amount of Principal Collections and Loss Amounts that otherwise would be reimbursed to the Noteholders, if any, that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The "Discounted Principal Balance" of (i) a Discounted Contract will equal the present value of all remaining Monthly Payments on such Contract and the Residual Value of the related Leased Vehicle, calculated using a discount rate of approximately 8%, and (ii) all Contracts other than Discounted Contracts will equal their Outstanding Principal Balance. As of the Initial Cutoff Date, the aggregate Discounted Principal Balance of the Initial Contracts and the Aggregate Net Investment Value was approximately $1,201,460,915. THE LEASED VEHICLES........ The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will be either new vehicles, dealer demonstrator vehicles or manufacturers' program vehicles, as described under "The Contracts -- General". Manufacturers' program vehicles are vehicles which have been sold directly by manufacturers to rental car companies and returned to the manufacturer for resale. The certificates of title to the Initial Leased Vehicles have been, and the certificates of title to the Subsequent Leased Vehicles will be, registered at all times in the name of the Origination Trustee (in its capacity as trustee of the Origination Trust). Such certificates of title will not reflect the indirect interest of the Owner Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI or any security interest of the Indenture Trustee. Therefore, the Indenture Trustee will not have a perfected lien in the Leased Vehicles, although it will be deemed to have a perfected security interest in the SUBI Certificate and certain other assets. For further information regarding the titling of the Leased Vehicles and the interest of the Indenture Trustee therein, see "The Origination Trust -- Contract Origination; Titling of Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles -- Back-up Security Interests". THE ACCOUNTS............... The Indenture Trustee will maintain the SUBI Collection Account for the benefit of the Noteholders. Within two Business Days of receipt, payments made on or in respect of the Contracts or the Leased Vehicles generally will be deposited by the Servicer into the SUBI Collection Account. Such payments will include, but will not be limited to, Monthly Payments made by lessees, Monthly Payments determined by the Servicer to be due in one or more future Collection Periods (each, a "Payment Ahead"), Prepayments, proceeds from the sale or other disposition of Leased Vehicles relating to Matured Contracts (including payments for excess mileage and excess wear and use, but excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) ("Matured Leased Vehi- cle Proceeds"), proceeds received in connection with the sale or other disposition of Leased Vehicles that have been repossessed ("Repossessed Vehicle Proceeds") and other amounts received in connection with the realization of the amounts due under any Contract (excluding Insured Residual Value Loss Amounts paid under the Residual Value Insurance Policy) (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), either from amounts on deposit in the SUBI Collection Account or as a deduction from Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds or other Liquidation Proceeds, as appropriate, deposited into the SUBI Collection Account. For further details regarding these deposits and reimbursements, see "Description of the Notes -- The Accounts -- The SUBI Collection Account". On the Business Day immediately preceding each Distribution Date (each, a "Deposit Date"), the following amounts will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) Reallocation Payments by World Omni (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred. Thereafter, 99.8% of Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, 99.8% of Principal Collections) on deposit in the SUBI Collection Account in respect of the related Collection Period will be allocable to the SUBI Interest and deposited into the Distribution Account maintained with the Indenture Trustee for the benefit of the Noteholders and the Transferor. Any Insured Residual Value Loss Amount paid under the Residual Value Insurance Policy will be deposited into the SUBI Collection Account (if it relates to the Revolving Period) or the Distribution Account (if it relates to the Amortization Period) within one Business Day of receipt by the Servicer. Any Required Amount will be withdrawn from the Reserve Fund and deposited into the Distribution Account on each Distribution Date. All payments to Noteholders will be made from the Distribution Account. The remaining 0.2% of Collections will be distributed on such Distribution Date to the Transferor in respect of the Retained SUBI Interest, which amounts in no event will be available to make payments on the Notes. Any funds remaining in the Distribution Account on a Distribution Date in respect of the related Collection Period following the payment of amounts required to be paid therefrom generally will be paid to the Transferor. For further information regarding these deposits and payments, see "Description of the Notes -- The Accounts -- The Distribution Account" and "-- The SUBI Collection Account". ADVANCES................... On each Deposit Date the Servicer will be obligated to make, by deposit into the SUBI Collection Account, an advance equal to the aggregate Monthly Payments due but not received during the related Collection Period with respect to Contracts that are 31 days or more past due as of the end of such Collection Period, and the Servicer may (but shall not be required to) make such an advance with respect to Contracts that are one or more days, but less than 31 days, past due as of the end of such Collection Period (each, an "Advance"). The Servicer will not be required to make any Advance to the extent that it determines that such Advance may not be ultimately recoverable by the Servicer from Net Liquidation Proceeds or otherwise. For further information regarding Advances, see "Additional Document Provisions -- The Servicing Agreement -- Advances". SERVICING COMPENSATION..... The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets allocable to the SUBI Interest (the "Servicing Fee"), payable on each Distribution Date, equal to one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Distribution Date, one-twelfth of 1% of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees and other administrative fees or similar charges under the Contracts. For further information regarding Servicer compensation, see "Additional Document Provisions -- The Servicing Agreement -- Servicing Compensation". TAX STATUS................. Cadwalader, Wickersham & Taft, special federal income tax counsel to the Transferor, is of the opinion that the Class A Notes will be characterized as indebtedness for federal income tax purposes, as described under "Material Income Tax Considerations -- Federal Taxation". Each Class A Noteholder, by its acceptance of a Class A Note, and each Note Owner, by its acquisition of an interest in the Class A Notes, will agree to treat the Class A Notes as indebtedness for federal, state and local income tax purposes. Prospective investors are advised to consult their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of the Class A Notes, and the tax consequences arising under the laws of any state or other taxing jurisdiction. For further information regarding material federal income tax considerations with respect to the Class A Notes, see "Material Income Tax Considerations -- Federal Taxation". ERISA CONSIDERATIONS....... As more fully described under "ERISA Considerations", an employee benefit plan subject to the requirements of the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the provisions of Section 4975 of the Internal Revenue Code of 1986, as amended, contemplating the purchase of Class A Notes should consult its counsel before making a purchase, and the fiduciary of such plan and such legal advisors should consider the matters discussed herein. RATINGS.................... It is a condition of issuance of the Class A Notes that each of Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's ("Standard & Poor's") and Fitch Investors Service, L.P. ("Fitch" and, together with Moody's and Standard & Poor's, the "Rating Agencies") rates each Class of Class A Notes in its highest rating category. The ratings of the Class A Notes should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold the related Class A Notes, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The ratings of the Class A Notes address the likelihood of the payment of principal of and interest on the Class A Notes pursuant to their terms. For further information concerning the ratings assigned to the Class A Notes, including the limitations of such ratings, see "Ratings of the Class A Notes".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039690_encompass_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039690_encompass_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c8a924a6830edc98a96e85264a6d718a415a4905
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039690_encompass_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The Company has acquired 11 companies (the "Pre-Offering Companies") and has entered into definitive agreements to acquire an additional 13 companies (the "Offering Acquisition Companies" and together with the Pre-Offering Companies, the "GroupMAC Companies") upon the closing of the Offering. The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the financial statements, including the related notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, (i) the "Company" or "GroupMAC" refers to Group Maintenance America Corp. and the GroupMAC Companies, as well as to the business and operations of their predecessors, (ii) the information in this Prospectus assumes that the Underwriters' over-allotment option has not been exercised and the Offering price is $14.00 per share and (iii) all information in this Prospectus relating to the number of shares of Common Stock and per share amounts reflects the 1-for-2.5 reverse stock split effected prior to the date of this Prospectus. References to fiscal year financial information of the Company refer to the fiscal year ended February 28 or 29 of the relevant year or the respective fiscal year ends of the individual GroupMAC Companies, and references to pro forma financial information of the Company or combined financial information of any group of the GroupMAC Companies refer to a year ending December 31 of the relevant year. After completion of the Offering, the Company's fiscal year will be the calendar year. THE COMPANY The Company was founded in 1996 to create the leading nationwide provider of heating, ventilation and air conditioning ("HVAC"), plumbing and electrical services to residential and commercial customers. Since inception, the Company has acquired 11 companies (the "Pre-Offering Companies") totaling $138.8 million in combined 1996 revenues and has definitive agreements to acquire an additional 13 companies (the "Offering Acquisition Companies") upon the closing of the Offering. After the Offering, the Company believes it will be one of the largest diversified providers of HVAC, plumbing and electrical services in the United States with operations in 37 cities in 21 states. The market for these diversified services is approximately $100 billion. The Company's pro forma 1996 revenues and income from operations were $307.5 million and $20.8 million, respectively, and combined historical revenues of the GroupMAC Companies grew at an annual rate of 14.3% from 1994 through 1996. The Company offers a comprehensive range of services to residential and commercial customers in both the new installation and the maintenance, repair and replacement segments of the HVAC, plumbing and electrical service industries. The Company's services include installing and maintaining, repairing and replacing central air conditioning systems, furnaces, heat pumps and plumbing and electrical systems. Approximately 74%, 23% and 3% of the Company's pro forma 1996 revenues were derived from HVAC, plumbing and electrical and other services, respectively. Approximately 59% of pro forma 1996 revenues were derived from residential services and 41% from commercial services, while 54% of pro forma 1996 revenues were from the new installation segment and 46% were from maintenance, repair and replacement services. Through Callahan Roach and United Service Alliance, L.C. ("USA"), the Company also provides consulting services and sells products to over 1,300 independent HVAC and plumbing service companies. The Company believes that its broad service offerings and geographic diversity provide several advantages, including the ability to offer its customers a single source for a range of services, to consolidate purchasing power with vendors, to capture business from customers that operate on a regional and national basis, to mitigate the effects of seasonality and to balance local or regional economic cycles. The Company believes that it can maximize its long-term growth and profitability by participating in both the new installation and the maintenance, repair and replacement segments of the HVAC, plumbing and electrical service industries. The new installation business is generally characterized by higher volume sales to homebuilders, commercial developers and other large customers. The maintenance, repair and replacement business generally produces higher margins from services provided to a broader customer base. The Company intends to focus on growing its maintenance, repair and replacement business, to capitalize on the higher margins and the more predictable nature of revenues associated with this segment and to target a revenue mix of approximately 60% maintenance, repair and replacement and 40% new installation over time. The Company derives considerable profits and strategic value from its new installation business, as this segment generates a database of potential customers for maintenance, repair and replacement services. The higher volumes associated with consolidating a number of new installation firms provide purchasing economies of scale that increase the competitiveness of both the new installation and the maintenance, repair and replacement segments. The Company believes that growth through acquisition is important and that profits can be maximized through the efficient integration of acquired companies. In order to provide the Company with integration, internal training and management development capabilities, the Company acquired two leading national HVAC consulting organizations, Callahan Roach and USA, in July 1997. Callahan Roach serves HVAC and plumbing service companies across the United States in such areas as advertising, marketing, business valuation, pricing strategies, management information systems, acquisition planning and integration and general consulting. Callahan Roach maintains relationships with over 1,200 HVAC and plumbing service companies, principally in the residential market. The Company estimates that aggregate revenues for these Callahan Roach customers are in excess of $2 billion annually. USA provides training and other products and services to 105 independent commercial HVAC service companies across the United States. The Company estimates that aggregate revenues for these USA customers are in excess of $1 billion annually. Of the 24 GroupMAC Companies, 12 were clients of Callahan Roach and/or USA prior to their acquisition. The Company intends to utilize these complementary customer bases to advance its national marketing strategies and believes that these companies will be a source of future acquisition prospects. Available industry data indicate that the Company's markets are large and fragmented. The HVAC service market is estimated to be approximately $65 billion in annual revenue, with over 40,000 service providers. Approximately $26 billion of the total is represented by the residential market, with the commercial market representing the balance. The plumbing service market is estimated to be $19 billion and the electrical service market is estimated to be $16 billion. The plumbing and electrical service markets each have over 30,000 participants. The vast majority of participants in the HVAC, plumbing and electrical service industries are small, owner-operated businesses with limited financial resources and limited access to capital for expansion. The Company believes there is a significant opportunity for a well-capitalized, nationwide provider of these services to consolidate a large number of independent companies. The Company is implementing operating and acquisition strategies to maintain and expand its position as a leading national provider of comprehensive HVAC, plumbing and electrical services to the residential and commercial markets. Key elements of the Company's operating strategy are to: . achieve operating efficiencies through volume purchasing, the implementation of "best practices" and the development of strong internal training capabilities; . operate on a decentralized basis to allow entrepreneurial management to continue to capitalize on local market knowledge and existing customer relationships; . attract, develop and retain high quality technicians to assure superior customer service; and . establish national market coverage to provide full service to regional and national accounts. Key elements of the Company's acquisition strategy are to: . acquire companies across multiple market segments to provide a balanced mix of revenues and foster internal growth through cross-selling of services; . expand geographically by acquiring core businesses in new markets and "tucking in" smaller companies; . utilize Common Stock to retain and provide incentives to the management and employees of acquired companies; and . leverage its industry reputation and relationships to make future acquisitions. The Company is a Texas corporation with its principal executive offices located at 8 Greenway Plaza, Suite 1500, Houston, Texas 77046, and its telephone number is (713) 860-0100. THE OFFERING <TABLE> <C> <S> Common Stock Offered.................................. 7,500,000 Shares Common Stock to be Outstanding after the Offering (1). 19,962,527 Shares Use of Proceeds....................................... To redeem or repay outstanding warrants, preferred stock and indebtedness used to acquire the Pre-Offering Companies, to fund the cash portion of the consideration for the Offering Acquisition Companies, to repay indebtedness of the Offering Acquisition Companies and for other general corporate purposes including working capital and future acquisitions. See "Use of Proceeds." NYSE Symbol........................................... MAK </TABLE> - -------- (1) Includes 2,976,130 shares to be issued in connection with the acquisition of the Offering Acquisition Companies and Callahan Roach concurrently with the Offering and as acquisition consideration adjustments, but excludes 609,461 shares of Common Stock issuable upon exercise of outstanding stock options and warrants issued in connection with certain acquisitions, 378,800 shares of Common Stock issuable upon exercise of outstanding stock options held by employees and a former executive officer of the Company and 1,899,581 shares available for issuance under options to be granted upon consummation of the Offering. See "Management--Option Grants" and "--Stock Awards Plan." RECENT DEVELOPMENTS The historical condensed results of operations for the seven months ended September 30, 1997 reflect the acquisitions of the Pre-Offering Companies from the respective dates of acquisition as discussed elsewhere in this Prospectus. The unaudited historical information includes all adjustments management deems necessary to fairly present the results of operations in accordance with generally accepted accounting principles. The condensed pro forma financial data for the nine months ended September 30, 1996 and 1997 reflect the acquisitions of the Pre-Offering Companies and Offering Acquisition Companies as if they had occurred at January 1, 1996. The condensed pro forma financial data have been prepared on the same basis outlined in the Unaudited Pro Forma Combined Financial Statements and the notes thereto included elsewhere herein. The data presented below should be read in conjunction with the Summary Historical and Pro Forma Financial Information, Selected Historical and Pro Forma Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, the Financial Statements and the related notes thereto and the Unaudited Pro Forma Combined Financial Statements and the notes thereto included elsewhere herein. <TABLE> <CAPTION> HISTORICAL PRO FORMA AS SEVEN MONTHS ADJUSTED NINE ENDED SEPTEMBER MONTHS ENDED 30,(1) SEPTEMBER 30,(3) --------------- ----------------- 1996 1997(2) 1996 1997 ------- ------- -------- -------- (UNAUDITED--IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues.................................... $48,826 $70,468 $232,695 $244,321 Gross Profit................................ 13,434 19,491 53,059 57,281 Selling, General and Administrative Expenses(4)................................ 10,003 12,153 36,934 38,782 Compensation Expense from Reverse Acquisition(5)............................. -- 6,978 -- -- Corporate Overhead(6)....................... -- 2,486 -- 2,836 Goodwill Amortization(7).................... -- 204 1,419 1,419 ------- ------- -------- -------- Income (Loss) from Operations............... 3,431 (2,330) 14,706 14,244 Other Income (Expense), Net(8).............. 40 (868) 376 902 ------- ------- -------- -------- Income (Loss) Before Income Tax Provision... 3,471 (3,198) 15,082 15,146 Income Tax Provision(9)..................... 1,396 1,602 6,594 6,627 ------- ------- -------- -------- Net Income (Loss)........................... $ 2,075 $(4,800) $ 8,488 $ 8,519 ======= ======= ======== ======== Net Income Per Share........................ $ 0.42 $ 0.42 ======== ======== Weighted Average Shares Outstanding(10)..... 20,162 20,162 ======== ======== </TABLE> - -------- (1) Concurrent with the Offering, the Company intends to change its fiscal year end from February 28 to December 31. (2) The Company's acquisitions of the Pre-Offering Companies and Group Maintenance America Corp. have been accounted for as purchases and, accordingly, the operations of these acquired businesses are included in the financial data from the effective date of their respective acquisition. (3) Pro Forma financial data give effect to the completed and pending acquisitions that are described in Unaudited Pro Forma Combined Financial Statements, as if they had all occurred at January 1, 1996. Such results are not necessarily indicative of the results the Company would have obtained had these events actually occurred on January 1, 1996. (4) Includes a decrease of $6.6 million and $7.3 million for the Pro Forma As Adjusted nine months ended September 30, 1996 and 1997, respectively, for pro forma reductions in salaries, bonuses and benefits to former owners of the GroupMAC Companies to which they have agreed prospectively. (5) Represents a non-recurring, non-cash compensation expense related to the reverse acquisition of GroupMAC Parent during the seven months ended September 30, 1997, which is excluded in the Pro Forma As Adjusted nine months ended September 30, 1997. (6) Represents expenses for the formation and build-up of corporate management and infrastructure. (7) Consists of amortization recorded or to be recorded, as a result of the acquisition of GroupMAC Companies, over a 40-year period and computed on the basis described in the Notes to the Unaudited Pro Forma Combined Financial Statements. (8) Includes the elimination of historical interest expense related to the Original Credit Agreement and the assumed debt of the GroupMAC Companies resulting from the payoff of such debt with a portion of the proceeds of the Offering. Offsetting this reduction is interest expense related to the notes issued to fund the S Corporation Distributions discussed in the Notes to Unaudited Pro Forma Combined Financial Statements. (9) Includes the incremental provision for federal and state income taxes relating to the compensation differential and all other pro forma adjustments, as well as income taxes on S Corporation earnings and the historical tax provisions of the GroupMAC Companies. (10) Computed on the basis described in Note 4 of Notes to Unaudited Pro Forma Combined Financial Statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039721_lfc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039721_lfc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a51a12d2562c510c3b7e3b9c38b450ad635ce385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039721_lfc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "Loomis" herein mean Loomis Holding Corporation prior to the consummation of the Transactions, (ii) references to "Loomis Armored" herein mean Loomis Armored Inc. prior to the consummation of the Transactions, (iii) references to "Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior to the consummation of the Transactions, and (iv) references to "Loomis, Fargo & Co." or the "Company" herein mean the combined entity, including Loomis, Loomis Armored and the assets transferred to the Company by Wells Fargo Armored pursuant to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Original Offering, the Transactions, borrowings under the New Credit Facility and the application of the proceeds therefrom. THE COMPANY Loomis, Fargo & Co., created through the combination of Loomis Armored and Wells Fargo Armored, is one of the largest armored transport companies in the United States. Loomis, Fargo & Co. operates over 150 branches, employs approximately 8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles nationwide to provide armored ground transport services, automated teller machine ("ATM") services, and cash vault and related services to financial institutions and commercial customers. Serving all 50 states and Puerto Rico, the Company is one of only two armored transport companies in the United States that provides these services on a national basis. Management believes that the combination of Loomis Armored and Wells Fargo Armored into a national service provider favorably positions the Company for additional revenue opportunities as large financial and retail institutions are increasingly seeking vendors capable of providing an array of services on a national basis. In addition, management believes the proliferation of ATMs and the trend of banks and other financial and retail institutions towards outsourcing cash vault and related services will contribute to the Company's growth prospects. For the twelve months ended December 31, 1996 and the three months ended March 31, 1997, the Company would have had pro forma revenues of $373.7 million and $95.2 million, respectively, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $31.4 million and $4.6 million, respectively. The Company is implementing the management principles and decentralized structure utilized by the Loomis Armored management team, which have proven to be highly effective in reducing employee turnover, increasing customer satisfaction and decreasing "cost of risk," which consists of the cost of cargo and casualty losses, related insurance costs and claims administration expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis Armored's total cost of risk decreased from 10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve months ended December 31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 7.5% over the same period. Management believes that by combining the business strategy and risk management skills of Loomis Armored with the larger customer base and leading ATM Services (as defined) position of Wells Fargo Armored, the Company will be well-positioned to capitalize on the numerous opportunities developing in the armored transport industry. The Company provides a wide range of services within the following categories: Traditional Armored Transport. The Company's armored fleet transports currency and other valuables in sealed packages between commercial enterprises and banks, between banks, and from the Federal Reserve Banks to commercial banks. The Company provides traditional armored transport services to numerous banks including Bank of America and Wells Fargo Bank as well as national and regional businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger. Traditional armored transport represented approximately 62.9% of the Company's revenues for the twelve months ended December 31, 1996, making it the largest component of the Company's business. ATM Services. The Company provides cash replenishment, deposit pick-up, and first-line maintenance services (collectively, "ATM Services") to over 28,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. The total number of ATM locations in the United States is expected to increase significantly over the next five years. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. Management believes these trends provide the Company with further opportunities to build upon its leading position in the ATM Services industry by offering broad geographic coverage as well as a high level of service. The Company's ATM customers include NationsBank, NCR Corporation and Electronic Data Systems Corporation. ATM Services represented approximately 29.9% of the Company's revenues for the twelve months ended December 31, 1996, and have increased at a compounded annual growth rate of approximately 12.3% over the three year period ended December 31, 1996. Cash Vault and Related Services. The Company provides a wide array of cash vault and related services ranging from passive, secured storage of valuables such as currency, securities and computer chips to active services such as deposit processing and consolidation, change order preparation, coin wrapping and storage and food stamp processing. In addition, the Company's cash vault capacity is a key element in supporting services to larger customers and ATM networks. Cash vault and related services represented approximately 7.2% of the Company's revenues for the twelve months ended December 31, 1996. The Company's principal executive offices are located at 2500 CityWest Blvd., Suite 900, Houston, Texas 77042, and its telephone number at such address is (713) 435-6700. INDUSTRY OVERVIEW Management estimates that the ten largest armored transport companies in the United States have aggregate annual revenues of approximately $1.0 billion. The ground transportation portion of the armored transport industry, currently the single largest sector, has historically maintained moderate growth. ATM services represent the most dynamic growth sector of the armored transport industry, with the total number of ATM locations served by the armored transport industry expected to increase significantly over the next five years. This expected growth results from a fundamental change in the retail delivery channel strategy of banks in the United States as traditional, full service bank branches are being replaced by ATMs, drive-through service centers and banks located in supermarkets and other nontraditional locations. In addition, while cash vault and related services currently represent a relatively small portion of the armored transport industry's revenues, this market is also expected to expand over the next several years as banks and other financial institutions continue the trend toward outsourcing such services. POST-COMBINATION STRATEGY Management believes that Loomis, Fargo & Co. has several distinct competitive strengths within the armored transport industry, including a strong national presence, the leading ATM Services operation, and a management team experienced in maximizing service value, reducing cost of risk and improving cash flow and profitability. The Company's business strategy is to capitalize on its competitive strengths by implementing the following initiatives: Promote the National Presence of Loomis, Fargo & Co. The Company provides its services to a much larger geographic area than either Loomis Armored or Wells Fargo Armored serviced on a stand-alone basis. With services in all 50 states and Puerto Rico, the Company is able to expand its business with national financial institutions and retail customers which require armored ground transport, ATM Services and/or cash vault and related services in numerous locations across the country. Management believes that the ability to provide nationwide service is becoming more important in the armored transport industry as banks are expanding geographically through the continuing consolidation of the banking industry and as other institutions are shifting toward centralized purchasing of goods and services. As one of only two armored transport providers in the United States with nationwide service, the Company is well-positioned to augment its base of customers requiring broad geographic coverage. The Company has dedicated a segment of its sales force to manage national account relationships. Focus on Growing ATM Services Market. The Company provides ATM Services to over 27,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. Both the number of ATM locations and the types of items being dispensed through ATMs, such as travelers checks, lottery tickets, coupons, postage stamps and other valuables, continue to grow. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. The Company uses its proprietary automated national dispatching system to coordinate customer requests, provide service data to customers and dispatch service technicians nationwide. To complement the national dispatching system, the Company has developed an automated network cash management system that optimizes ATM cash loads and provides ATM balance reporting. With its broad range of services and automated systems, the Company intends to build upon its leading position in the ATM Services market. Reduce Cost of Risk and Emphasize Risk Management Partnership with Customers. Management intends to improve cash flow and profitability not only by reducing the Company's overall cost of risk but also by using a risk management partnership approach with its customers as a means of differentiating the Company from its competitors. A comprehensive risk management program which emphasizes incident avoidance and loss minimization is being implemented throughout the Company's operations. The program focuses on (i) employee culture and attitude, (ii) selectivity in hiring, (iii) operating procedures designed to recognize and avoid potential danger or accidents, (iv) safety and security procedures, including training in the proper use of firearms and the operation of the Company's vehicles, (v) limits on the amounts of cash or other valuables contained in a branch or vehicle or under the control of an employee, (vi) utilization of three-person crews and surveillance or chase cars in high- risk areas, and (vii) an extensive security oversight program, including surveillance and evaluation by AMSEC, an independent, international security firm. This risk management program produced significant cost savings with respect to cargo loss and casualty liability claims for Loomis Armored over the five years prior to the consummation of the Transactions. To provide the quality of service necessary to enhance customer loyalty in support of this business strategy, the Company emphasizes an operating philosophy dedicated to: Attracting and Retaining Quality, Loyal Employees. Management believes that a loyal employee base directly contributes to reducing cost of risk and improving customer service and that the combination of selectivity in hiring, a commitment to employee training, responsibility and safety, and competitive wage and benefit packages will enable the Company to attract and retain quality, loyal employees. As a result of Loomis Armored's commitment to these principles, its employee turnover rate decreased from 41% for the twelve months ended December 31, 1992 to 29% for the twelve months ended December 31, 1996. Encouraging Employee Initiative. The Company operates so that many of the daily operational decisions such as local sales, routing, hiring, and fleet maintenance are made at the branch level while the Company's corporate and five regional management teams support the branches, particularly with respect to pricing and risk management. This delegation of responsibility is expected to improve efficiency and responsiveness to customer needs, while maintaining Company-wide security, safety and quality of revenue standards. Management believes that this structure, together with an incentive program that links a branch manager's compensation to branch profitability, gives branch managers and other employees a sense of empowerment and accountability. This structure was successfully implemented at Loomis Armored's operations and is currently being implemented at all of the Company's locations. CONSOLIDATION SAVINGS The Company has developed an integration plan focused on reducing corporate overhead and consolidating branches in overlapping service areas. The Company expects to achieve cost savings in consolidation through (i) adopting the most effective business practices of Loomis Armored and Wells Fargo Armored, (ii) consolidating corporate, regional and branch offices, and (iii) achieving routing and servicing efficiencies as well as reducing occupancy costs by combining operations in the areas where both Loomis Armored and Wells Fargo Armored previously operated. Management estimates that, upon successful completion of its consolidation plan over the 12-month period following the consummation of the Transactions, the Company will realize $7.5 million in cost savings on an annualized basis (approximately $3.4 million of which is related to headcount reduction and $3.7 million of which is related to the elimination of management fees) compared to the cost of operating Loomis Armored and Wells Fargo Armored as separate entities. There can be no assurance, however, that all of such savings will occur as planned. The Company's actual consolidation savings could differ materially from management's estimate. Factors that could cause or contribute to such differences include those discussed elsewhere in this Prospectus, including, but not limited to, risks and uncertainties relating to leverage, risks inherent in the armored transport industry, issues concerning integration of operations and the ability of the Company to attract and retain qualified employees. See "Risk Factors--Implementation of Post-Combination Strategy," "-- Employees" and "Pro Forma Combined Financial Information." THE TRANSACTIONS The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo Armored, the Company, Loomis, Loomis Armored and the Business Trust entered into the Contribution Agreement (as defined), pursuant to which, on January 24, 1997, the Business Trust contributed all of the issued and outstanding common stock of Loomis and Wells Fargo Armored contributed substantially all of its assets and certain liabilities to the Company in exchange for 51% and 49%, respectively, of the Common Stock and certain other consideration. See "The Transactions--The Business Combination." The Financing. The Transactions were financed through the establishment of the New Credit Facility and the issuance of the Old Notes. The following table illustrates the sources and uses of cash in connection with the Transactions. See "The Transactions--The Business Combination." The Transactions were consummated on January 24, 1997. <TABLE> <CAPTION> (IN MILLIONS) ------------- <S> <C> SOURCES OF CASH New Credit Facility (1)...................................... $ 73.3 10% Senior Subordinated Notes................................ 85.0 ------ Total sources of cash..................................... $158.3 ====== USES OF CASH Retirement of Loomis and Loomis Armored obligations: Existing indebtedness (2) (3).............................. $ 29.6 Accrued management fees (4)................................ 1.6 Casualty and employee claims (5)........................... 8.5 Payments to the Loomis Indemnity Trust....................... 4.7 Payments to Wells Fargo Armored and related entities (6)(7).. 106.6 Fees and expenses............................................ 5.3 Payment escrowed to retire Wells Fargo Armored IRB and accrued interest............................................ 1.1 Contribution to the Operating Subsidiary for working capital purposes.................................................... 0.9 ------ Total uses of cash........................................ $158.3 ====== </TABLE> - -------- (1) The New Credit Facility provides initially for aggregate borrowings of $115.0 million and matures in January 2002. As of March 31, 1997, approximately $11.7 million in letters of credit were outstanding under the New Credit Facility, leaving approximately $29.9 million in available borrowing capacity under the New Credit Facility. (2) Includes (i) $10.3 million of 14% senior subordinated notes that were scheduled to mature on September 30, 1999, including accrued interest, (ii) $9.2 million of a 9% junior subordinated note that was scheduled to mature on September 30, 1999, including accrued interest (iii) $3.3 million of a term loan that was scheduled to mature on September 30, 1999, including accrued interest, and (iv) $6.8 million in borrowings under Loomis Armored's credit facility. (3) $3.5 million of the borrowings by Loomis Armored under its credit facility were used to redeem the Loomis Preferred Stock (as defined) immediately prior to the Closing (as defined). See "The Transactions--The Business Combination." (4) Accrued management fees were paid at Closing to an affiliate of Loomis pursuant to a Financial Advisory Agreement (as defined). See "Certain Relationships and Related Transactions--Financial Advisory Agreement." (5) Represents a lump sum payment on behalf of the Business Trust to CIGNA Insurance Company and related entities pursuant to an Early Program Close- Out Agreement dated January 24, 1997, related to insuring and managing casualty and employee claims of Loomis incurred prior to the Closing (the "Early Program Close-Out Agreement"). See "The Transactions--The Business Combination" and "Pro Forma Combined Financial Information." (6) Includes approximately $1.4 million of reimbursement for fees and expenses related to the Transactions. (7) A portion of such consideration was paid at Closing by the Company to Borg- Warner and/or one or more of its wholly-owned subsidiaries to satisfy certain intercompany indebtedness of Wells Fargo Armored assumed by the Company. THE EXCHANGE OFFER The Exchange Offer applies to $85.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) interest on the New Notes shall accrue from the date of issuance of the Old Notes, and (ii) the New Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of New Notes." The Exchange Offer........ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $85.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company and the Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of the Company or any Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker- dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights The Old Notes were sold by the Company on January Agreement................ 24, 1997, in a private placement. In connection with the sale, the Company entered into a Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer-- Purpose and Effects." Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, July 22, 1997, or such later date and time to which it is extended. Withdrawal................ The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes............ Interest on each New Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Old Note for which the New Note is exchanged. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer--Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company and each of the Guarantors are required to use their reasonable best efforts to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes (and cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) the Company is not required to file an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or (ii) any holder of Old Notes is prohibited from participating in the Exchange Offer by applicable law or Commission policy, or such holder would be required to deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer and the prospectus contained in the Exchange Offer Registration Statement would not be appropriate or available for such resales, or such holder is a broker-dealer that holds Old Notes acquired directly from the Company or its affiliates. Acceptance of Old Notes and Delivery of New The Company will accept for exchange any and all Notes.................... Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax The exchange pursuant to the Exchange Offer should Considerations........... not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. TERMS OF NEW NOTES Securities Offered........ $85.0 million aggregate principal amount of 10% Senior Subordinated Notes due 2004. Issuer.................... Loomis, Fargo & Co. Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997. Maturity.................. January 15, 2004. Sinking Fund Provisions... None. Optional Redemption....... The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2001 at the Redemption Prices (as defined) set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. In addition, prior to January 15, 2000, the Company may on any one or more occasions redeem up to $25.0 million aggregate principal amount of the New Notes at a Redemption Price equal to 110% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net proceeds of one or more public offerings of Common Stock; provided that at least $60.0 million principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. See "Description of New Notes--Optional Redemption." Change of Control......... In the event of a Change of Control (as defined), the holders of the New Notes will have the right to require the Company to purchase their New Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking................... The New Notes will be general unsecured obligations of the Company, subordinate in right of payment to all existing and future Senior Debt of the Company, which will include all indebtedness incurred under the New Credit Facility. As of March 31, 1997, there was approximately $165.7 million of total debt of the Company and its subsidiaries, $73.5 million of which was Senior Debt, and there was not any indebtedness of the Company expressly subordinated to the Notes by its terms in right and priority of payment; in addition, there was approximately $29.9 million available to be drawn by the Company as secured Senior Debt under the New Credit Facility. See "Risk Factors--Subordination," "Capitalization" and "Description of New Notes-- Subordination." Subsidiary Guarantees..... The Company's payment obligations under the New Notes will be jointly and severally guaranteed by the Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future senior debt of each Guarantor, which include guarantees of all indebtedness incurred under the New Credit Facility. See "Description of New Notes--Subsidiary Guarantees." The indenture pursuant to which the New Notes will Certain Covenants......... be issued (the "Indenture") will contain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) create certain liens; (v) engage in certain sale and leaseback transactions; (vi) make certain asset dispositions; and (vii) merge or consolidate with, or transfer substantially all of their assets to, another person. See "Description of New Notes--Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039727_loomis_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039727_loomis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a51a12d2562c510c3b7e3b9c38b450ad635ce385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039727_loomis_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "Loomis" herein mean Loomis Holding Corporation prior to the consummation of the Transactions, (ii) references to "Loomis Armored" herein mean Loomis Armored Inc. prior to the consummation of the Transactions, (iii) references to "Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior to the consummation of the Transactions, and (iv) references to "Loomis, Fargo & Co." or the "Company" herein mean the combined entity, including Loomis, Loomis Armored and the assets transferred to the Company by Wells Fargo Armored pursuant to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Original Offering, the Transactions, borrowings under the New Credit Facility and the application of the proceeds therefrom. THE COMPANY Loomis, Fargo & Co., created through the combination of Loomis Armored and Wells Fargo Armored, is one of the largest armored transport companies in the United States. Loomis, Fargo & Co. operates over 150 branches, employs approximately 8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles nationwide to provide armored ground transport services, automated teller machine ("ATM") services, and cash vault and related services to financial institutions and commercial customers. Serving all 50 states and Puerto Rico, the Company is one of only two armored transport companies in the United States that provides these services on a national basis. Management believes that the combination of Loomis Armored and Wells Fargo Armored into a national service provider favorably positions the Company for additional revenue opportunities as large financial and retail institutions are increasingly seeking vendors capable of providing an array of services on a national basis. In addition, management believes the proliferation of ATMs and the trend of banks and other financial and retail institutions towards outsourcing cash vault and related services will contribute to the Company's growth prospects. For the twelve months ended December 31, 1996 and the three months ended March 31, 1997, the Company would have had pro forma revenues of $373.7 million and $95.2 million, respectively, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $31.4 million and $4.6 million, respectively. The Company is implementing the management principles and decentralized structure utilized by the Loomis Armored management team, which have proven to be highly effective in reducing employee turnover, increasing customer satisfaction and decreasing "cost of risk," which consists of the cost of cargo and casualty losses, related insurance costs and claims administration expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis Armored's total cost of risk decreased from 10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve months ended December 31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 7.5% over the same period. Management believes that by combining the business strategy and risk management skills of Loomis Armored with the larger customer base and leading ATM Services (as defined) position of Wells Fargo Armored, the Company will be well-positioned to capitalize on the numerous opportunities developing in the armored transport industry. The Company provides a wide range of services within the following categories: Traditional Armored Transport. The Company's armored fleet transports currency and other valuables in sealed packages between commercial enterprises and banks, between banks, and from the Federal Reserve Banks to commercial banks. The Company provides traditional armored transport services to numerous banks including Bank of America and Wells Fargo Bank as well as national and regional businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger. Traditional armored transport represented approximately 62.9% of the Company's revenues for the twelve months ended December 31, 1996, making it the largest component of the Company's business. ATM Services. The Company provides cash replenishment, deposit pick-up, and first-line maintenance services (collectively, "ATM Services") to over 28,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. The total number of ATM locations in the United States is expected to increase significantly over the next five years. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. Management believes these trends provide the Company with further opportunities to build upon its leading position in the ATM Services industry by offering broad geographic coverage as well as a high level of service. The Company's ATM customers include NationsBank, NCR Corporation and Electronic Data Systems Corporation. ATM Services represented approximately 29.9% of the Company's revenues for the twelve months ended December 31, 1996, and have increased at a compounded annual growth rate of approximately 12.3% over the three year period ended December 31, 1996. Cash Vault and Related Services. The Company provides a wide array of cash vault and related services ranging from passive, secured storage of valuables such as currency, securities and computer chips to active services such as deposit processing and consolidation, change order preparation, coin wrapping and storage and food stamp processing. In addition, the Company's cash vault capacity is a key element in supporting services to larger customers and ATM networks. Cash vault and related services represented approximately 7.2% of the Company's revenues for the twelve months ended December 31, 1996. The Company's principal executive offices are located at 2500 CityWest Blvd., Suite 900, Houston, Texas 77042, and its telephone number at such address is (713) 435-6700. INDUSTRY OVERVIEW Management estimates that the ten largest armored transport companies in the United States have aggregate annual revenues of approximately $1.0 billion. The ground transportation portion of the armored transport industry, currently the single largest sector, has historically maintained moderate growth. ATM services represent the most dynamic growth sector of the armored transport industry, with the total number of ATM locations served by the armored transport industry expected to increase significantly over the next five years. This expected growth results from a fundamental change in the retail delivery channel strategy of banks in the United States as traditional, full service bank branches are being replaced by ATMs, drive-through service centers and banks located in supermarkets and other nontraditional locations. In addition, while cash vault and related services currently represent a relatively small portion of the armored transport industry's revenues, this market is also expected to expand over the next several years as banks and other financial institutions continue the trend toward outsourcing such services. POST-COMBINATION STRATEGY Management believes that Loomis, Fargo & Co. has several distinct competitive strengths within the armored transport industry, including a strong national presence, the leading ATM Services operation, and a management team experienced in maximizing service value, reducing cost of risk and improving cash flow and profitability. The Company's business strategy is to capitalize on its competitive strengths by implementing the following initiatives: Promote the National Presence of Loomis, Fargo & Co. The Company provides its services to a much larger geographic area than either Loomis Armored or Wells Fargo Armored serviced on a stand-alone basis. With services in all 50 states and Puerto Rico, the Company is able to expand its business with national financial institutions and retail customers which require armored ground transport, ATM Services and/or cash vault and related services in numerous locations across the country. Management believes that the ability to provide nationwide service is becoming more important in the armored transport industry as banks are expanding geographically through the continuing consolidation of the banking industry and as other institutions are shifting toward centralized purchasing of goods and services. As one of only two armored transport providers in the United States with nationwide service, the Company is well-positioned to augment its base of customers requiring broad geographic coverage. The Company has dedicated a segment of its sales force to manage national account relationships. Focus on Growing ATM Services Market. The Company provides ATM Services to over 27,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. Both the number of ATM locations and the types of items being dispensed through ATMs, such as travelers checks, lottery tickets, coupons, postage stamps and other valuables, continue to grow. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. The Company uses its proprietary automated national dispatching system to coordinate customer requests, provide service data to customers and dispatch service technicians nationwide. To complement the national dispatching system, the Company has developed an automated network cash management system that optimizes ATM cash loads and provides ATM balance reporting. With its broad range of services and automated systems, the Company intends to build upon its leading position in the ATM Services market. Reduce Cost of Risk and Emphasize Risk Management Partnership with Customers. Management intends to improve cash flow and profitability not only by reducing the Company's overall cost of risk but also by using a risk management partnership approach with its customers as a means of differentiating the Company from its competitors. A comprehensive risk management program which emphasizes incident avoidance and loss minimization is being implemented throughout the Company's operations. The program focuses on (i) employee culture and attitude, (ii) selectivity in hiring, (iii) operating procedures designed to recognize and avoid potential danger or accidents, (iv) safety and security procedures, including training in the proper use of firearms and the operation of the Company's vehicles, (v) limits on the amounts of cash or other valuables contained in a branch or vehicle or under the control of an employee, (vi) utilization of three-person crews and surveillance or chase cars in high- risk areas, and (vii) an extensive security oversight program, including surveillance and evaluation by AMSEC, an independent, international security firm. This risk management program produced significant cost savings with respect to cargo loss and casualty liability claims for Loomis Armored over the five years prior to the consummation of the Transactions. To provide the quality of service necessary to enhance customer loyalty in support of this business strategy, the Company emphasizes an operating philosophy dedicated to: Attracting and Retaining Quality, Loyal Employees. Management believes that a loyal employee base directly contributes to reducing cost of risk and improving customer service and that the combination of selectivity in hiring, a commitment to employee training, responsibility and safety, and competitive wage and benefit packages will enable the Company to attract and retain quality, loyal employees. As a result of Loomis Armored's commitment to these principles, its employee turnover rate decreased from 41% for the twelve months ended December 31, 1992 to 29% for the twelve months ended December 31, 1996. Encouraging Employee Initiative. The Company operates so that many of the daily operational decisions such as local sales, routing, hiring, and fleet maintenance are made at the branch level while the Company's corporate and five regional management teams support the branches, particularly with respect to pricing and risk management. This delegation of responsibility is expected to improve efficiency and responsiveness to customer needs, while maintaining Company-wide security, safety and quality of revenue standards. Management believes that this structure, together with an incentive program that links a branch manager's compensation to branch profitability, gives branch managers and other employees a sense of empowerment and accountability. This structure was successfully implemented at Loomis Armored's operations and is currently being implemented at all of the Company's locations. CONSOLIDATION SAVINGS The Company has developed an integration plan focused on reducing corporate overhead and consolidating branches in overlapping service areas. The Company expects to achieve cost savings in consolidation through (i) adopting the most effective business practices of Loomis Armored and Wells Fargo Armored, (ii) consolidating corporate, regional and branch offices, and (iii) achieving routing and servicing efficiencies as well as reducing occupancy costs by combining operations in the areas where both Loomis Armored and Wells Fargo Armored previously operated. Management estimates that, upon successful completion of its consolidation plan over the 12-month period following the consummation of the Transactions, the Company will realize $7.5 million in cost savings on an annualized basis (approximately $3.4 million of which is related to headcount reduction and $3.7 million of which is related to the elimination of management fees) compared to the cost of operating Loomis Armored and Wells Fargo Armored as separate entities. There can be no assurance, however, that all of such savings will occur as planned. The Company's actual consolidation savings could differ materially from management's estimate. Factors that could cause or contribute to such differences include those discussed elsewhere in this Prospectus, including, but not limited to, risks and uncertainties relating to leverage, risks inherent in the armored transport industry, issues concerning integration of operations and the ability of the Company to attract and retain qualified employees. See "Risk Factors--Implementation of Post-Combination Strategy," "-- Employees" and "Pro Forma Combined Financial Information." THE TRANSACTIONS The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo Armored, the Company, Loomis, Loomis Armored and the Business Trust entered into the Contribution Agreement (as defined), pursuant to which, on January 24, 1997, the Business Trust contributed all of the issued and outstanding common stock of Loomis and Wells Fargo Armored contributed substantially all of its assets and certain liabilities to the Company in exchange for 51% and 49%, respectively, of the Common Stock and certain other consideration. See "The Transactions--The Business Combination." The Financing. The Transactions were financed through the establishment of the New Credit Facility and the issuance of the Old Notes. The following table illustrates the sources and uses of cash in connection with the Transactions. See "The Transactions--The Business Combination." The Transactions were consummated on January 24, 1997. <TABLE> <CAPTION> (IN MILLIONS) ------------- <S> <C> SOURCES OF CASH New Credit Facility (1)...................................... $ 73.3 10% Senior Subordinated Notes................................ 85.0 ------ Total sources of cash..................................... $158.3 ====== USES OF CASH Retirement of Loomis and Loomis Armored obligations: Existing indebtedness (2) (3).............................. $ 29.6 Accrued management fees (4)................................ 1.6 Casualty and employee claims (5)........................... 8.5 Payments to the Loomis Indemnity Trust....................... 4.7 Payments to Wells Fargo Armored and related entities (6)(7).. 106.6 Fees and expenses............................................ 5.3 Payment escrowed to retire Wells Fargo Armored IRB and accrued interest............................................ 1.1 Contribution to the Operating Subsidiary for working capital purposes.................................................... 0.9 ------ Total uses of cash........................................ $158.3 ====== </TABLE> - -------- (1) The New Credit Facility provides initially for aggregate borrowings of $115.0 million and matures in January 2002. As of March 31, 1997, approximately $11.7 million in letters of credit were outstanding under the New Credit Facility, leaving approximately $29.9 million in available borrowing capacity under the New Credit Facility. (2) Includes (i) $10.3 million of 14% senior subordinated notes that were scheduled to mature on September 30, 1999, including accrued interest, (ii) $9.2 million of a 9% junior subordinated note that was scheduled to mature on September 30, 1999, including accrued interest (iii) $3.3 million of a term loan that was scheduled to mature on September 30, 1999, including accrued interest, and (iv) $6.8 million in borrowings under Loomis Armored's credit facility. (3) $3.5 million of the borrowings by Loomis Armored under its credit facility were used to redeem the Loomis Preferred Stock (as defined) immediately prior to the Closing (as defined). See "The Transactions--The Business Combination." (4) Accrued management fees were paid at Closing to an affiliate of Loomis pursuant to a Financial Advisory Agreement (as defined). See "Certain Relationships and Related Transactions--Financial Advisory Agreement." (5) Represents a lump sum payment on behalf of the Business Trust to CIGNA Insurance Company and related entities pursuant to an Early Program Close- Out Agreement dated January 24, 1997, related to insuring and managing casualty and employee claims of Loomis incurred prior to the Closing (the "Early Program Close-Out Agreement"). See "The Transactions--The Business Combination" and "Pro Forma Combined Financial Information." (6) Includes approximately $1.4 million of reimbursement for fees and expenses related to the Transactions. (7) A portion of such consideration was paid at Closing by the Company to Borg- Warner and/or one or more of its wholly-owned subsidiaries to satisfy certain intercompany indebtedness of Wells Fargo Armored assumed by the Company. THE EXCHANGE OFFER The Exchange Offer applies to $85.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) interest on the New Notes shall accrue from the date of issuance of the Old Notes, and (ii) the New Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of New Notes." The Exchange Offer........ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $85.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company and the Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of the Company or any Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker- dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights The Old Notes were sold by the Company on January Agreement................ 24, 1997, in a private placement. In connection with the sale, the Company entered into a Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer-- Purpose and Effects." Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, July 22, 1997, or such later date and time to which it is extended. Withdrawal................ The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes............ Interest on each New Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Old Note for which the New Note is exchanged. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer--Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company and each of the Guarantors are required to use their reasonable best efforts to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes (and cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) the Company is not required to file an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or (ii) any holder of Old Notes is prohibited from participating in the Exchange Offer by applicable law or Commission policy, or such holder would be required to deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer and the prospectus contained in the Exchange Offer Registration Statement would not be appropriate or available for such resales, or such holder is a broker-dealer that holds Old Notes acquired directly from the Company or its affiliates. Acceptance of Old Notes and Delivery of New The Company will accept for exchange any and all Notes.................... Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax The exchange pursuant to the Exchange Offer should Considerations........... not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. TERMS OF NEW NOTES Securities Offered........ $85.0 million aggregate principal amount of 10% Senior Subordinated Notes due 2004. Issuer.................... Loomis, Fargo & Co. Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997. Maturity.................. January 15, 2004. Sinking Fund Provisions... None. Optional Redemption....... The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2001 at the Redemption Prices (as defined) set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. In addition, prior to January 15, 2000, the Company may on any one or more occasions redeem up to $25.0 million aggregate principal amount of the New Notes at a Redemption Price equal to 110% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net proceeds of one or more public offerings of Common Stock; provided that at least $60.0 million principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. See "Description of New Notes--Optional Redemption." Change of Control......... In the event of a Change of Control (as defined), the holders of the New Notes will have the right to require the Company to purchase their New Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking................... The New Notes will be general unsecured obligations of the Company, subordinate in right of payment to all existing and future Senior Debt of the Company, which will include all indebtedness incurred under the New Credit Facility. As of March 31, 1997, there was approximately $165.7 million of total debt of the Company and its subsidiaries, $73.5 million of which was Senior Debt, and there was not any indebtedness of the Company expressly subordinated to the Notes by its terms in right and priority of payment; in addition, there was approximately $29.9 million available to be drawn by the Company as secured Senior Debt under the New Credit Facility. See "Risk Factors--Subordination," "Capitalization" and "Description of New Notes-- Subordination." Subsidiary Guarantees..... The Company's payment obligations under the New Notes will be jointly and severally guaranteed by the Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future senior debt of each Guarantor, which include guarantees of all indebtedness incurred under the New Credit Facility. See "Description of New Notes--Subsidiary Guarantees." The indenture pursuant to which the New Notes will Certain Covenants......... be issued (the "Indenture") will contain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) create certain liens; (v) engage in certain sale and leaseback transactions; (vi) make certain asset dispositions; and (vii) merge or consolidate with, or transfer substantially all of their assets to, another person. See "Description of New Notes--Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039728_loomis_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039728_loomis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a51a12d2562c510c3b7e3b9c38b450ad635ce385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039728_loomis_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "Loomis" herein mean Loomis Holding Corporation prior to the consummation of the Transactions, (ii) references to "Loomis Armored" herein mean Loomis Armored Inc. prior to the consummation of the Transactions, (iii) references to "Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior to the consummation of the Transactions, and (iv) references to "Loomis, Fargo & Co." or the "Company" herein mean the combined entity, including Loomis, Loomis Armored and the assets transferred to the Company by Wells Fargo Armored pursuant to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Original Offering, the Transactions, borrowings under the New Credit Facility and the application of the proceeds therefrom. THE COMPANY Loomis, Fargo & Co., created through the combination of Loomis Armored and Wells Fargo Armored, is one of the largest armored transport companies in the United States. Loomis, Fargo & Co. operates over 150 branches, employs approximately 8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles nationwide to provide armored ground transport services, automated teller machine ("ATM") services, and cash vault and related services to financial institutions and commercial customers. Serving all 50 states and Puerto Rico, the Company is one of only two armored transport companies in the United States that provides these services on a national basis. Management believes that the combination of Loomis Armored and Wells Fargo Armored into a national service provider favorably positions the Company for additional revenue opportunities as large financial and retail institutions are increasingly seeking vendors capable of providing an array of services on a national basis. In addition, management believes the proliferation of ATMs and the trend of banks and other financial and retail institutions towards outsourcing cash vault and related services will contribute to the Company's growth prospects. For the twelve months ended December 31, 1996 and the three months ended March 31, 1997, the Company would have had pro forma revenues of $373.7 million and $95.2 million, respectively, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $31.4 million and $4.6 million, respectively. The Company is implementing the management principles and decentralized structure utilized by the Loomis Armored management team, which have proven to be highly effective in reducing employee turnover, increasing customer satisfaction and decreasing "cost of risk," which consists of the cost of cargo and casualty losses, related insurance costs and claims administration expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis Armored's total cost of risk decreased from 10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve months ended December 31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 7.5% over the same period. Management believes that by combining the business strategy and risk management skills of Loomis Armored with the larger customer base and leading ATM Services (as defined) position of Wells Fargo Armored, the Company will be well-positioned to capitalize on the numerous opportunities developing in the armored transport industry. The Company provides a wide range of services within the following categories: Traditional Armored Transport. The Company's armored fleet transports currency and other valuables in sealed packages between commercial enterprises and banks, between banks, and from the Federal Reserve Banks to commercial banks. The Company provides traditional armored transport services to numerous banks including Bank of America and Wells Fargo Bank as well as national and regional businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger. Traditional armored transport represented approximately 62.9% of the Company's revenues for the twelve months ended December 31, 1996, making it the largest component of the Company's business. ATM Services. The Company provides cash replenishment, deposit pick-up, and first-line maintenance services (collectively, "ATM Services") to over 28,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. The total number of ATM locations in the United States is expected to increase significantly over the next five years. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. Management believes these trends provide the Company with further opportunities to build upon its leading position in the ATM Services industry by offering broad geographic coverage as well as a high level of service. The Company's ATM customers include NationsBank, NCR Corporation and Electronic Data Systems Corporation. ATM Services represented approximately 29.9% of the Company's revenues for the twelve months ended December 31, 1996, and have increased at a compounded annual growth rate of approximately 12.3% over the three year period ended December 31, 1996. Cash Vault and Related Services. The Company provides a wide array of cash vault and related services ranging from passive, secured storage of valuables such as currency, securities and computer chips to active services such as deposit processing and consolidation, change order preparation, coin wrapping and storage and food stamp processing. In addition, the Company's cash vault capacity is a key element in supporting services to larger customers and ATM networks. Cash vault and related services represented approximately 7.2% of the Company's revenues for the twelve months ended December 31, 1996. The Company's principal executive offices are located at 2500 CityWest Blvd., Suite 900, Houston, Texas 77042, and its telephone number at such address is (713) 435-6700. INDUSTRY OVERVIEW Management estimates that the ten largest armored transport companies in the United States have aggregate annual revenues of approximately $1.0 billion. The ground transportation portion of the armored transport industry, currently the single largest sector, has historically maintained moderate growth. ATM services represent the most dynamic growth sector of the armored transport industry, with the total number of ATM locations served by the armored transport industry expected to increase significantly over the next five years. This expected growth results from a fundamental change in the retail delivery channel strategy of banks in the United States as traditional, full service bank branches are being replaced by ATMs, drive-through service centers and banks located in supermarkets and other nontraditional locations. In addition, while cash vault and related services currently represent a relatively small portion of the armored transport industry's revenues, this market is also expected to expand over the next several years as banks and other financial institutions continue the trend toward outsourcing such services. POST-COMBINATION STRATEGY Management believes that Loomis, Fargo & Co. has several distinct competitive strengths within the armored transport industry, including a strong national presence, the leading ATM Services operation, and a management team experienced in maximizing service value, reducing cost of risk and improving cash flow and profitability. The Company's business strategy is to capitalize on its competitive strengths by implementing the following initiatives: Promote the National Presence of Loomis, Fargo & Co. The Company provides its services to a much larger geographic area than either Loomis Armored or Wells Fargo Armored serviced on a stand-alone basis. With services in all 50 states and Puerto Rico, the Company is able to expand its business with national financial institutions and retail customers which require armored ground transport, ATM Services and/or cash vault and related services in numerous locations across the country. Management believes that the ability to provide nationwide service is becoming more important in the armored transport industry as banks are expanding geographically through the continuing consolidation of the banking industry and as other institutions are shifting toward centralized purchasing of goods and services. As one of only two armored transport providers in the United States with nationwide service, the Company is well-positioned to augment its base of customers requiring broad geographic coverage. The Company has dedicated a segment of its sales force to manage national account relationships. Focus on Growing ATM Services Market. The Company provides ATM Services to over 27,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. Both the number of ATM locations and the types of items being dispensed through ATMs, such as travelers checks, lottery tickets, coupons, postage stamps and other valuables, continue to grow. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. The Company uses its proprietary automated national dispatching system to coordinate customer requests, provide service data to customers and dispatch service technicians nationwide. To complement the national dispatching system, the Company has developed an automated network cash management system that optimizes ATM cash loads and provides ATM balance reporting. With its broad range of services and automated systems, the Company intends to build upon its leading position in the ATM Services market. Reduce Cost of Risk and Emphasize Risk Management Partnership with Customers. Management intends to improve cash flow and profitability not only by reducing the Company's overall cost of risk but also by using a risk management partnership approach with its customers as a means of differentiating the Company from its competitors. A comprehensive risk management program which emphasizes incident avoidance and loss minimization is being implemented throughout the Company's operations. The program focuses on (i) employee culture and attitude, (ii) selectivity in hiring, (iii) operating procedures designed to recognize and avoid potential danger or accidents, (iv) safety and security procedures, including training in the proper use of firearms and the operation of the Company's vehicles, (v) limits on the amounts of cash or other valuables contained in a branch or vehicle or under the control of an employee, (vi) utilization of three-person crews and surveillance or chase cars in high- risk areas, and (vii) an extensive security oversight program, including surveillance and evaluation by AMSEC, an independent, international security firm. This risk management program produced significant cost savings with respect to cargo loss and casualty liability claims for Loomis Armored over the five years prior to the consummation of the Transactions. To provide the quality of service necessary to enhance customer loyalty in support of this business strategy, the Company emphasizes an operating philosophy dedicated to: Attracting and Retaining Quality, Loyal Employees. Management believes that a loyal employee base directly contributes to reducing cost of risk and improving customer service and that the combination of selectivity in hiring, a commitment to employee training, responsibility and safety, and competitive wage and benefit packages will enable the Company to attract and retain quality, loyal employees. As a result of Loomis Armored's commitment to these principles, its employee turnover rate decreased from 41% for the twelve months ended December 31, 1992 to 29% for the twelve months ended December 31, 1996. Encouraging Employee Initiative. The Company operates so that many of the daily operational decisions such as local sales, routing, hiring, and fleet maintenance are made at the branch level while the Company's corporate and five regional management teams support the branches, particularly with respect to pricing and risk management. This delegation of responsibility is expected to improve efficiency and responsiveness to customer needs, while maintaining Company-wide security, safety and quality of revenue standards. Management believes that this structure, together with an incentive program that links a branch manager's compensation to branch profitability, gives branch managers and other employees a sense of empowerment and accountability. This structure was successfully implemented at Loomis Armored's operations and is currently being implemented at all of the Company's locations. CONSOLIDATION SAVINGS The Company has developed an integration plan focused on reducing corporate overhead and consolidating branches in overlapping service areas. The Company expects to achieve cost savings in consolidation through (i) adopting the most effective business practices of Loomis Armored and Wells Fargo Armored, (ii) consolidating corporate, regional and branch offices, and (iii) achieving routing and servicing efficiencies as well as reducing occupancy costs by combining operations in the areas where both Loomis Armored and Wells Fargo Armored previously operated. Management estimates that, upon successful completion of its consolidation plan over the 12-month period following the consummation of the Transactions, the Company will realize $7.5 million in cost savings on an annualized basis (approximately $3.4 million of which is related to headcount reduction and $3.7 million of which is related to the elimination of management fees) compared to the cost of operating Loomis Armored and Wells Fargo Armored as separate entities. There can be no assurance, however, that all of such savings will occur as planned. The Company's actual consolidation savings could differ materially from management's estimate. Factors that could cause or contribute to such differences include those discussed elsewhere in this Prospectus, including, but not limited to, risks and uncertainties relating to leverage, risks inherent in the armored transport industry, issues concerning integration of operations and the ability of the Company to attract and retain qualified employees. See "Risk Factors--Implementation of Post-Combination Strategy," "-- Employees" and "Pro Forma Combined Financial Information." THE TRANSACTIONS The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo Armored, the Company, Loomis, Loomis Armored and the Business Trust entered into the Contribution Agreement (as defined), pursuant to which, on January 24, 1997, the Business Trust contributed all of the issued and outstanding common stock of Loomis and Wells Fargo Armored contributed substantially all of its assets and certain liabilities to the Company in exchange for 51% and 49%, respectively, of the Common Stock and certain other consideration. See "The Transactions--The Business Combination." The Financing. The Transactions were financed through the establishment of the New Credit Facility and the issuance of the Old Notes. The following table illustrates the sources and uses of cash in connection with the Transactions. See "The Transactions--The Business Combination." The Transactions were consummated on January 24, 1997. <TABLE> <CAPTION> (IN MILLIONS) ------------- <S> <C> SOURCES OF CASH New Credit Facility (1)...................................... $ 73.3 10% Senior Subordinated Notes................................ 85.0 ------ Total sources of cash..................................... $158.3 ====== USES OF CASH Retirement of Loomis and Loomis Armored obligations: Existing indebtedness (2) (3).............................. $ 29.6 Accrued management fees (4)................................ 1.6 Casualty and employee claims (5)........................... 8.5 Payments to the Loomis Indemnity Trust....................... 4.7 Payments to Wells Fargo Armored and related entities (6)(7).. 106.6 Fees and expenses............................................ 5.3 Payment escrowed to retire Wells Fargo Armored IRB and accrued interest............................................ 1.1 Contribution to the Operating Subsidiary for working capital purposes.................................................... 0.9 ------ Total uses of cash........................................ $158.3 ====== </TABLE> - -------- (1) The New Credit Facility provides initially for aggregate borrowings of $115.0 million and matures in January 2002. As of March 31, 1997, approximately $11.7 million in letters of credit were outstanding under the New Credit Facility, leaving approximately $29.9 million in available borrowing capacity under the New Credit Facility. (2) Includes (i) $10.3 million of 14% senior subordinated notes that were scheduled to mature on September 30, 1999, including accrued interest, (ii) $9.2 million of a 9% junior subordinated note that was scheduled to mature on September 30, 1999, including accrued interest (iii) $3.3 million of a term loan that was scheduled to mature on September 30, 1999, including accrued interest, and (iv) $6.8 million in borrowings under Loomis Armored's credit facility. (3) $3.5 million of the borrowings by Loomis Armored under its credit facility were used to redeem the Loomis Preferred Stock (as defined) immediately prior to the Closing (as defined). See "The Transactions--The Business Combination." (4) Accrued management fees were paid at Closing to an affiliate of Loomis pursuant to a Financial Advisory Agreement (as defined). See "Certain Relationships and Related Transactions--Financial Advisory Agreement." (5) Represents a lump sum payment on behalf of the Business Trust to CIGNA Insurance Company and related entities pursuant to an Early Program Close- Out Agreement dated January 24, 1997, related to insuring and managing casualty and employee claims of Loomis incurred prior to the Closing (the "Early Program Close-Out Agreement"). See "The Transactions--The Business Combination" and "Pro Forma Combined Financial Information." (6) Includes approximately $1.4 million of reimbursement for fees and expenses related to the Transactions. (7) A portion of such consideration was paid at Closing by the Company to Borg- Warner and/or one or more of its wholly-owned subsidiaries to satisfy certain intercompany indebtedness of Wells Fargo Armored assumed by the Company. THE EXCHANGE OFFER The Exchange Offer applies to $85.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) interest on the New Notes shall accrue from the date of issuance of the Old Notes, and (ii) the New Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of New Notes." The Exchange Offer........ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $85.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company and the Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of the Company or any Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker- dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights The Old Notes were sold by the Company on January Agreement................ 24, 1997, in a private placement. In connection with the sale, the Company entered into a Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer-- Purpose and Effects." Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, July 22, 1997, or such later date and time to which it is extended. Withdrawal................ The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes............ Interest on each New Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Old Note for which the New Note is exchanged. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer--Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company and each of the Guarantors are required to use their reasonable best efforts to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes (and cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) the Company is not required to file an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or (ii) any holder of Old Notes is prohibited from participating in the Exchange Offer by applicable law or Commission policy, or such holder would be required to deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer and the prospectus contained in the Exchange Offer Registration Statement would not be appropriate or available for such resales, or such holder is a broker-dealer that holds Old Notes acquired directly from the Company or its affiliates. Acceptance of Old Notes and Delivery of New The Company will accept for exchange any and all Notes.................... Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax The exchange pursuant to the Exchange Offer should Considerations........... not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. TERMS OF NEW NOTES Securities Offered........ $85.0 million aggregate principal amount of 10% Senior Subordinated Notes due 2004. Issuer.................... Loomis, Fargo & Co. Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997. Maturity.................. January 15, 2004. Sinking Fund Provisions... None. Optional Redemption....... The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2001 at the Redemption Prices (as defined) set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. In addition, prior to January 15, 2000, the Company may on any one or more occasions redeem up to $25.0 million aggregate principal amount of the New Notes at a Redemption Price equal to 110% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net proceeds of one or more public offerings of Common Stock; provided that at least $60.0 million principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. See "Description of New Notes--Optional Redemption." Change of Control......... In the event of a Change of Control (as defined), the holders of the New Notes will have the right to require the Company to purchase their New Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking................... The New Notes will be general unsecured obligations of the Company, subordinate in right of payment to all existing and future Senior Debt of the Company, which will include all indebtedness incurred under the New Credit Facility. As of March 31, 1997, there was approximately $165.7 million of total debt of the Company and its subsidiaries, $73.5 million of which was Senior Debt, and there was not any indebtedness of the Company expressly subordinated to the Notes by its terms in right and priority of payment; in addition, there was approximately $29.9 million available to be drawn by the Company as secured Senior Debt under the New Credit Facility. See "Risk Factors--Subordination," "Capitalization" and "Description of New Notes-- Subordination." Subsidiary Guarantees..... The Company's payment obligations under the New Notes will be jointly and severally guaranteed by the Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future senior debt of each Guarantor, which include guarantees of all indebtedness incurred under the New Credit Facility. See "Description of New Notes--Subsidiary Guarantees." The indenture pursuant to which the New Notes will Certain Covenants......... be issued (the "Indenture") will contain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) create certain liens; (v) engage in certain sale and leaseback transactions; (vi) make certain asset dispositions; and (vii) merge or consolidate with, or transfer substantially all of their assets to, another person. See "Description of New Notes--Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039747_honda_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039747_honda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..becf595440ab3dd5e5c782fd6d9ab7f69c03b6c7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039747_honda_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto elsewhere in this Prospectus. See the Index of Principal Terms for the location herein of certain capitalized terms. <TABLE> <S> <C> Trust............... Honda Auto Receivables 1997-1 Owner Trust (the "Trust"). Seller.............. American Honda Receivables Corp. (the "Seller"), a wholly owned, limited purpose subsidiary of American Honda Finance Corporation. Servicer............ American Honda Finance Corporation ("AHFC" or, in its capacity as Servicer, the "Servicer"), a wholly owned subsidiary of American Honda Motor Co., Inc. ("AHMC"). AHMC is the exclusive distributor of Honda and Acura automobiles, Odyssey minivans, Honda motorcycles, sport utility vehicles and light-duty trucks and Honda power equipment, parts and accessories in the United States and is a wholly owned subsidiary of Honda Motor Co., Ltd., a Japanese corporation. Owner Trustee....... (the "Owner Trustee"). Indenture Trustee... (the "Indenture Trustee" and, together with the Owner Trustee, the "Trustees"). Securities The Trust will issue three Classes of Notes pursuant to an Offered............ indenture to be dated as of 1, 1997 (the "Indenture"), between the Trust and the Indenture Trustee, as follows: (i) $ aggregate principal amount of % Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii) $ aggregate principal amount of % Asset Backed Notes, Class A-2 (the "Class A-2 Notes") and (iii) $ aggregate principal amount of % Asset Backed Notes, Class A-3 (the "Class A-3 Notes" and, together with the Class A-1 Notes and the Class A-2 Notes, the "Notes"). Payments of principal and interest on the Notes will be made in accordance with the priorities set forth under "Certain Information Regarding the Securities -- Distributions on the Securities". The Notes will be secured by the assets of the Trust (other than the Certificate Distribution Account) pursuant to the Indenture. The Trust will issue $ aggregate principal amount of % Asset Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") pursuant to a trust agreement to be dated as of 1, 1997 (the "Trust Agreement"), between the Seller and the Owner Trustee. The Certificates will represent fractional undivided interests in the Trust. Payments in respect of the Certificates will be subordinated to payments on the Notes to the extent described herein. Each Class of Notes and the Certificates will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Definitive Securities will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities -- Book-Entry Registration" and "-- Definitive Securi- ties". </TABLE> <TABLE> <S> <C> The Receivables..... On the date of initial issuance of the Securities (the "Closing Date"), pursuant to a sale and servicing agreement dated as of 1, 1997 (the "Sale and Servicing Agreement"), among the Trust, the Seller and the Servicer, the Trust will purchase from the Seller a pool of retail installment sale contracts (the "Receivables") secured by the new or used Honda and Acura automobiles, Odyssey minivans, Honda sport utility vehicles and light-duty trucks financed thereby (the "Financed Vehicles"). The Receivables will be selected by AHFC from its portfolio of retail motor vehicle installment sale contracts based upon the criteria to be specified in the Sale and Servicing Agreement and described herein. As of 1, 1997 (the "Cutoff Date"), the Receivables had an aggregate unpaid principal balance of $ (the "Cutoff Date Pool Balance"). Based on Cutoff Date Pool Balance, the Receivables had a weighted average annual percentage rate (the "APR") of approximately %, a weighted average original maturity of approximately months and a weighted average remaining maturity of approximately months. Distribution Distributions of interest and principal on the Securities Dates.............. will be made on the day of each month or, if any such day is not a Business Day, on the next succeeding Business Day (each, a "Distribution Date"), commencing , 1997. Payments on the Securities on each Distribution Date will be paid to the holders of record of the related Securities on the Business Day immediately preceding such Distribution Date or, in the event that Definitive Securities are issued, as of the last day of the month immediately preceding the month in which such Distribu- tion Date occurs (each, a "Record Date"). A "Business Day" will be any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Wilmington, Delaware or Los Angeles, California are authorized or obligated by law, executive order or government decree to be closed. To the extent not previously paid prior to such dates, the outstanding principal amount of (i) the Class A-1 Notes will be payable on the Distribution Date (the "Class A-1 Final Distribution Date"), (ii) the Class A-2 Notes will be payable on the Distribution Date (the "Class A-2 Final Distribution Date"), (iii) the Class A-3 Notes will be payable on the Distribution Date (the "Class A-3 Final Distribution Date" and, together with the Class A-1 Final Distribution Date and the Class A-2 Final Distribution Date, the "Note Final Distribution Dates"). To the extent not previously paid in full prior to such date, the unpaid principal balance of the Certificates will be payable on the Distribution Date (the "Certificate Final Distribution Date" and, together with the Note Final Distribution Dates, the "Final Distribution Dates"). Terms of the The principal terms of the Notes will be as described Notes.............. below: A. Interest Rates... Interest will be borne on (i) the Class A-1 Notes at the rate of % per annum (the "Class A-1 Rate"), (ii) the Class A-2 Notes at the rate of % per annum (the "Class A-2 Rate") and (iii) the Class A-3 Notes at the rate of % per annum (the "Class A-3 Rate" and, together </TABLE> <TABLE> <S> <C> with the Class A-1 Rate and the Class A-2 Rate, the "Interest Rates"). Interest on the Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. B. Interest......... Interest on the outstanding principal amount of each Class of Notes will accrue at the related Interest Rate from and including the most recent Distribution Date on which interest has been paid (or from and including the Closing Date with respect to the first Distribution Date) to but excluding the current Distribution Date (each, an "Interest Period"). Interest on the Notes for any Distribution Date due but not paid on such Distribution Date will be due on the immediately succeeding Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the related Interest Rate. See "Description of the Notes -- Payments of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities". C. Principal........ Principal of the Notes will be payable on each Distribution Date in an amount generally equal to the Note Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments". No principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full or on the Class A-3 Notes until the Class A-1 and Class A-2 Notes have been paid in full. Notwithstanding the foregoing, if the principal amount of a Class of Notes has not been paid in full prior to its Note Final Distribution Date, the Note Principal Distributable Amount for such Note Final Distribution Date will include an amount sufficient to reduce the unpaid principal amount of such Class of Notes to zero on such Note Final Distribution Date. See "Description of the Notes -- Payments of Principal" and "Certain Information Regarding the Securities -- Distributions on the Securi- ties -- Deposits to the Distribution Accounts; Priority of Payments". D. Optional In the event of an Optional Purchase, each Class of Redemption......... outstanding Notes will be redeemed in whole, but not in part, at a redemption price equal to the unpaid principal amount of such Class of Notes plus accrued interest thereon at the related Interest Rate. See "Description of the Notes -- Optional Redemption". Terms of the The principal terms of the Certificates will be as Certificates....... described below: A. Interest......... On each Distribution Date, the Owner Trustee or any Paying Agent will distribute pro rata to Certificateholders of record as of the related Record Date accrued interest at the rate of % per annum (the "Pass-Through Rate") on the Certificate Balance as of the immediately preceding Distribution Date (after giving effect to distributions of principal to be made on such immediately preceding Distribution Date) or, in the case of the first Distribution Date, the Original Certificate Balance. Interest in respect of a Distribution Date will accrue from and including the Closing Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid, to but excluding the current Distribution Date. </TABLE> <TABLE> <S> <C> Interest on the Certificates for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the Pass-Through Rate. See "Description of the Certif- icates -- Distributions of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities". The "Certificate Balance" will initially equal $ (the "Original Certificate Balance") and on any Distribution Date will equal the Original Certificate Balance reduced by all distributions of principal previously made in respect of the Certificates. Distributions on the Certificates will be subordinated to payments of interest and principal on the Notes as described under "Description of the Certificates" and "Certain Information Regarding the Securities -- Distributions on the Securities". B. Principal........ No principal will be paid on the Certificates until the Distribution Date on which the principal amount of the Class A-1, Class A-2 and Class A-3 Notes has been reduced to zero. On such Distribution Date and each Distribution Date thereafter, principal of the Certificates will be payable in an amount equal to the Certificate Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments". If not paid in full prior to the Certificate Final Distribution Date, the remaining Certificate Balance, if any, will be payable on that date. See "Description of the Certificates -- Distributions of Principal". C. Optional In the event of an Optional Purchase, the Certificates Prepayment......... will be prepaid in whole, but not in part, at a repayment price equal to the Certificate Balance plus accrued interest thereon at the Pass-Through Rate. See "Description of the Certificates -- Optional Prepayment". The Reserve Fund.... The holders of the Notes and the Certificates (respectively, the "Noteholders" and the "Certificateholders", and collectively, the "Securi- tyholders") will be afforded certain limited protection, to the extent described herein, against losses in respect of the Receivables by the establishment of a segregated trust account in the name of the Indenture Trustee for the benefit of the Securityholders (the "Reserve Fund"). The Reserve Fund will be funded by the Seller on the Closing Date in an amount equal to $ (the "Reserve Fund Initial Deposit"). Thereafter, all Excess Amounts will be deposited from time to time in the Reserve Fund to the extent necessary to maintain the amount on deposit in the Reserve Fund at the Specified Reserve Fund Balance. The Specified Reserve Fund Balance for the first Distribution Date will be $ and on any Distribution Date thereafter will be calculated as described under "Certain Information Regarding the Securi- ties -- The Reserve Fund -- Calculation of Specified Reserve Fund </TABLE> <TABLE> <S> <C> Balance". On each Distribution Date, funds will be withdrawn from the Reserve Fund for distribution to Securityholders to cover any shortfalls in interest and principal required to be paid on the Securities. On each Distribution Date, after giving effect to all distributions made on such Distribution Date, any amounts in the Reserve Fund in excess of the Specified Reserve Fund Balance will be distributed to the Seller, and upon such distribution the Certificateholders will have no further rights in, or claims to, such amounts. Advances............ On the Business Day immediately preceding each Distribution Date (each, a "Deposit Date"), the Servicer will advance to the Trust, in respect of each (i) Precomputed Receivable, that portion, if any, of the related Scheduled Payment that was not timely made (each, a "Precomputed Advance") and (ii) Simple Interest Receivable, an amount equal to the product of the principal balance of such Receivable as of the first day of the related Collection Period and one-twelfth of its APR, minus the amount of interest actually received on such Receivable during such Collection Period (each, a "Simple Interest Advance" and, together with Precomputed Advances, the "Advances"). If such calculation in respect of a Simple Interest Receivable results in a negative number, an amount equal to such negative number shall be paid to the Servicer out of interest collections in respect of the Receivables during the related Collection Period in reimbursement of outstanding Simple Interest Advances. The Servicer will be required to make an Advance only to the extent that it determines such Advance will be recoverable from future payments and collections on or in respect of such Receivable. Upon the determination by the Servicer that such reimbursement is unlikely, the Servicer will be entitled to recover Advances from payments and collections on or in respect of other Receivables. See "Certain Information Regarding the Securities -- Advances". A "Collection Period" with respect to any Distribution Date will be the calendar month immediately preceding the month in which such Distribution Date occurs. Servicing Fee....... The Servicer will receive a monthly fee, payable on each Distribution Date (the "Servicing Fee"), equal to one-twelfth of the product of 1.00% (the "Servicing Fee Rate") and the Pool Balance as of the first day of the related Collection Period. The Servicer will be entitled to receive additional servicing compensation in the form of investment earnings on the amounts on deposit in the Trust Accounts plus any late fees, prepayment charges and other administrative fees and expenses or similar charges received by the Servicer during such Collection Period. See "Certain Information Regarding the Securities -- Servicing Compensation". Optional Purchase... The Seller or the Servicer, or any successor to the Servicer, may purchase all the Receivables remaining in the Trust on the Distribution Date following the last day of any Collection Period as of which the aggregate unpaid principal balance of the Receivables is 10% or less of </TABLE> <TABLE> <S> <C> the Cutoff Date Pool Balance, at a purchase price determined as described under "Certain Information Regarding the Securities -- Termination". The exercise of such purchase option is referred to herein as an "Optional Purchase". Ratings............. It is a condition to the issuance of the Securities that the Class A-1 Notes be rated by Moody's Investors Service, Inc. ("Moody's") and by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's, the "Rating Agencies"), and that the Class A-2 and Class A-3 Notes and the Certificates each be rated by Moody's and by Standard & Poor's. See "Ratings of the Securities". Tax Status.......... In the opinion of counsel to the Seller, for both federal and California income tax purposes, the Notes will be characterized as debt, and the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. Each Noteholder, by the acceptance of a Note (or a beneficial interest therein), will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate (or a beneficial interest therein), will agree to treat the Trust as a partnership in which the Certificateholders are partners for federal income tax purposes. See "Certain Federal Income Tax Consequences" and "Certain California Income Tax Consequences". ERISA Subject to the considerations discussed under "ERISA Considerations..... Considerations", the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Because the Certificates will be subordinated to the Notes to the extent described herein, employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001039780_friede_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001039780_friede_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0fee6874e468509f5cbabb2e6f3531a8e366c3a8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001039780_friede_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) included elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus assumes that the Underwriters' over-allotment option with respect to the sale of Common Stock will not be exercised. Except as otherwise specified, (a) all references to the Company include Friede Goldman International Inc. and, unless the context otherwise requires, its wholly-owned subsidiaries, HAM Marine, Inc. ("HAM Marine") and Friede & Goldman, Ltd. ("Friede & Goldman"), and (b) all references to the activities of Friede & Goldman prior to December 2, 1996 relate to the activities of the predecessor company with respect to which the Company acquired certain of its assets and business on such date (the "Friede Acquisition") and all references to Friede & Goldman refer to the assets and business of such predecessor company acquired by the Company. See "The Company--Corporate Restructuring." THE COMPANY Friede Goldman International Inc. is a leading provider of conversion, retrofit and repair services for offshore drilling rigs, including jackups, submersibles, semisubmersibles and drillships, and has entered the emerging market for conversion of offshore drilling units and tankers into deepwater floating production, storage and offloading vessels ("FPSOs"). In the last seven years, the Company has completed 47 offshore drilling rig conversion or retrofit projects. The Company, through its acquisition of Friede & Goldman in December 1996, is also one of the world's largest designers of offshore drilling rigs. The Company offers its customers a full range of design, engineering, construction, conversion, retrofit and repair services for offshore drilling rigs, including construction of new-build offshore drilling rigs. The Company's customers consist primarily of drilling contractors that drill offshore exploratory and development wells for oil and gas companies throughout the world, particularly in the Gulf of Mexico, the North Sea and areas offshore of West Africa and South America. The Company currently operates a 32-acre shipyard that is strategically located in Pascagoula, Mississippi with direct access to the Gulf of Mexico. The shipyard has the capacity to provide conversion, retrofit and repair services on six offshore drilling rigs simultaneously. Due to increased demand for its services, the Company has increased its backlog from $15.4 million at March 31, 1996 to $66.9 million at March 31, 1997. To accommodate this increased demand, the Company has recently leased additional dock space and fabrication buildings adjacent to its existing shipyard in Pascagoula, Mississippi and has increased its workforce from approximately 300 employees at December 1, 1996 to approximately 800 employees at March 31, 1997. The Company plans to commence construction in the second quarter of 1997 of a new state-of-the-art shipyard on a 85-acre site located approximately six miles from the existing shipyard. The new shipyard has been designed specifically to promote the most timely and efficient construction of new offshore drilling rigs, and could also be used for conversion, retrofit and repair services. The Company believes that the expected efficiencies of its new shipyard, together with the Company's offshore drilling rig design capabilities, its established relationships with drilling contractor customers and its extensive construction experience, will provide the Company with competitive advantages in the developing market for new construction of offshore drilling rigs. OFFSHORE DRILLING INDUSTRY The level of worldwide offshore drilling activity has increased substantially over the last two years, resulting in an increase in worldwide utilization for marketed offshore drilling rigs to 99% in May 1997. Dayrates worldwide for cantilever jackups capable of drilling in water depths of 300 or more feet have increased from a weighted average of $36,600 in May 1996 to a weighted average of $61,100 in May 1997, with a recently reported high of $116,000. Similarly, dayrates worldwide for third and fourth generations of semisubmersibles have increased from a weighted average of $83,500 in May 1996 to a weighted average of $118,200 in May 1997, with a recently reported high of $175,000. In addition, oil and gas operators have recently begun to enter into multi-year contracts with drilling contractors for offshore drilling rigs due to the tightness of supply for available units. In deepwater areas where larger and more technically advanced drilling rigs are needed, increased drilling activity has also increased demand for retrofitting offshore drilling rigs to enhance their technical capabilities and improved pricing levels for such services. In addition, increased drilling activity in and around more mature fields in shallower waters has contributed to the increase in demand for conversion, retrofit and repair services for jackups and other offshore drilling rigs. The Company believes that these positive trends will continue due to (i) the increasing percentage of worldwide oil supply being produced from offshore areas, (ii) the increases in capital expenditure budgets of oil and gas companies for offshore drilling activity, (iii) technological advancements that have increased drilling success rates and (iv) the increased focus on deepwater exploration and production projects, particularly in the Gulf of Mexico. The Company believes that the current supply of offshore drilling rigs worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there has been a decrease in the total number of offshore drilling rigs worldwide from 809 to 639 rigs. The Company believes that, of the 366 jackups currently marketed worldwide, only 47 are capable of drilling in water depths greater than 300 feet and, of the 139 semisubmersibles currently marketed worldwide, only 25 are capable of drilling in water depths greater than 3,000 feet. In addition, substantially all of the current fleet of offshore drilling rigs were built more than ten years ago, and many of these rigs need to be converted or modified in order to continue to operate economically or to meet the requirements for deepwater drilling. COMPANY OPERATIONS The Company's operations currently consist primarily of conversion, retrofit and repair services for offshore drilling rigs and the development of designs for new offshore drilling rigs. The Company plans to construct a new shipyard designed to build new offshore drilling rigs, which shipyard could also be used for conversion, retrofit and repair services. CONVERSION, RETROFIT AND REPAIR SERVICES. The Company's conversion and retrofit projects primarily include the conversion of jackup drilling rigs from a slot design to a cantilever design, the lengthening of legs on jackup rigs, the conversion of submersible rigs into semisubmersible rigs and the retrofit of early generation semisubmersible rigs to provide the enhanced capabilities associated with later generation semisubmersibles. These conversion and retrofit projects are designed to improve the operating efficiency of a drilling rig or provide increased technical capabilities, such as the ability to operate in deeper water. The Company also has been involved in the conversion of offshore drilling units and tankers to production units, including FPSOs and mobile offshore production units ("MOPUs"). In addition, the Company provides a broad range of structural rig repairs, including the replacement of legs on jackup rigs, the repair of pontoons on semisubmersible rigs and the repair of deck structures on offshore drilling rigs and production platforms. OFFSHORE DRILLING RIG AND FPSO DESIGN. In December 1996, the Company acquired Friede & Goldman, a company that designs mobile offshore drilling and production units, including jackups, semisubmersibles, drillships and FPSOs, and provides design and engineering services with respect to conversion and retrofit projects. Friede & Goldman has more than 50 years of experience in premier offshore rig design, beginning with the design of the first semisubmersibles to operate in the Gulf of Mexico. The Company's designs include the Friede & Goldman L-780 jackup design and Pacesetter and Trendsetter semisubmersible designs. Approximately 10% of jackup rigs and approximately 30% of semisubmersible rigs currently operating worldwide were designed by Friede & Goldman. The Company has recently designed a new jackup for use in water depths of approximately 400 feet that the Company believes would provide increased operational efficiencies over currently available designs, at a cost to construct that would be similar to the last generation of jackups. The Company has also developed a series of FPSOs suitable for operations worldwide and is currently in the process of developing new designs for a semisubmersible drilling rig for use in deepwater environments. CONSTRUCTION OF NEW OFFSHORE DRILLING RIGS AND FPSOS. Since the early 1980's and until recently, there has not been any significant construction of new- build offshore drilling rigs. The Company has recently completed a survey of its customers that has indicated a substantial interest in new rig construction. In addition, as of May 1997, 15 new offshore drilling rigs were being constructed worldwide, consisting of six jackups, six semisubmersibles and three drillships. Management of the Company attributes this increased demand for new-build offshore drilling rigs to (i) the recent increases in offshore drilling rig dayrates, (ii) the recent increases in offshore drilling rig utilization and (iii) the recent willingness of oil and gas companies to enter into longer-term contracts with drilling contractors. Due to capacity constraints of the Company's existing shipyard, the Company has not been able to participate in the developing market for new offshore drilling rig construction. In order to participate in this market, the Company plans to commence construction in the second quarter of 1997 of a state-of-the- art shipyard scheduled to be operational by early 1998 and completed later that year at a total cost of approximately $29 million. The new shipyard has been designed specifically for the construction of new offshore drilling rigs and FPSOs, and it will have the capacity to perform various stages of construction and outfitting activities on up to four drilling rigs or FPSOs simultaneously. In addition, the Company may use its shipyard facilities, or establish a separate manufacturing facility, to construct and assemble various components of Friede & Goldman designed jackups that it would sell as kits that could be used in the construction of new-build jackups either at the Company's shipyards or at other shipyards. These kits would consist of such manufactured components, including Friede & Goldman's patented rack chock leg fixation system, and a Friede & Goldman jackup design. In addition to new offshore drilling rig construction, 13 new FPSOs were under construction worldwide in early 1997, and management of the Company anticipates that there will be an increase in the demand for new construction of FPSOs for use in deepwater areas where there is not sufficient pipeline infrastructure to adequately transport oil and gas production onshore. FPSOs have only recently been constructed, typically through the conversion of a crude oil tanker or a semisubmersible rig. The Company believes that demand for FPSOs will increase as deepwater drilling activity increases, and that newly constructed FPSOs will be more cost-effective than conversions of existing crude oil tankers or semisubmersible rigs. BUSINESS STRATEGY The Company's business strategy is to be a leading participant in the developing market for new offshore drilling rig and FPSO construction and to enhance its position as a leader in the conversion, retrofit and repair of offshore drilling rigs and production units. The key elements of the Company's business strategy are as follows: MAINTAIN FOCUS ON RIG CONVERSION, RETROFIT AND REPAIR SERVICES. Due to increased demand for offshore drilling rigs with enhanced technical capabilities, the demand for the Company's conversion, retrofit and repair services has increased significantly during the past 12 months. As a result, the Company's backlog has increased from $15.4 million at March 31, 1996 to $66.9 million at March 31, 1997. PURSUE NEW OFFSHORE DRILLING RIG AND FPSO CONSTRUCTION. The Company believes that a market for construction of new offshore drilling rigs and FPSOs is developing. The Company intends to pursue opportunities to construct new offshore drilling rigs and FPSOs by capitalizing on its existing relationships with drilling contractors, its expertise and reputation for design of new offshore drilling rigs, its reputation for high quality and reliability and the state-of-the-art construction capabilities of its new shipyard. In particular, the Company intends to pursue the construction of offshore drilling rigs utilizing new Friede & Goldman designs, including its design for a JU 2000 jackup rig capable of drilling in water depths of approximately 400 feet. CAPITALIZE ON FRIEDE & GOLDMAN DESIGN CAPABILITIES. The Company intends to emphasize its research and development efforts with respect to new designs for offshore drilling rigs and floating production units. The Company believes that its ability to provide its customers new designs for offshore drilling rigs and production units will provide it with a competitive advantage in the developing market for construction of new offshore drilling rigs and FPSOs. PROVIDE INTEGRATED SERVICES. The Company offers its customers a full range of design, engineering, construction, conversion, retrofit and repair services for offshore drilling rigs, including construction of new-build drilling rigs. The Company believes that its full range of services will enable it to achieve vertical integration with respect to new-build offshore drilling rigs through the ability to provide state-of-the-art designs, the ability to provide engineering expertise and the capability to build drilling rigs at the Company's facilities. PURSUE STRATEGIC ACQUISITIONS AND JOINT VENTURES. The Company is actively pursuing prospects to broaden its international exposure and expand its capabilities to convert, retrofit and repair offshore drilling rigs, as well as fabricate certain components of new offshore drilling rigs, through acquisitions, joint ventures or subcontracting arrangements with one or more shipyards in the U.S. or in foreign countries. THE OFFERING (1) <TABLE> <C> <S> Common Stock offered by the Company. 2,650,000 shares Common Stock offered by the Selling Stockholders............... 2,015,000 shares Total Common Stock offered......... 4,665,000 shares Common Stock to be outstanding after the Offering................. 11,850,000 shares Use of proceeds..................... To fund a portion of the Company's anticipated capital requirements over the next 12 to 18 months, including capital expenditures to construct and equip a new shipyard, capital expenditures to improve the productive capacity and efficiency of the existing shipyard, research and development costs relating to the design of new offshore drilling rigs and floating production units, working capital requirements and other general corporate purposes. See "Use of Proceeds." NASDAQ National Market Symbol....... FGII </TABLE> - -------- (1) Excludes the shares subject to the Underwriters' over-allotment option as well as options to purchase 138,410 shares which are currently outstanding and options to purchase 346,500 shares which are expected to be granted upon consummation of this Offering. See "Management--Equity Incentive Plan." SUMMARY FINANCIAL DATA The following table sets forth summary historical financial data as of the dates and for the periods indicated. The historical financial data for the year ended July 31, 1992 and for each of the years ended December 31, 1994, 1995 and 1996 are derived from the audited financial statements of the predecessors of the Company (the "Predecessors"). The historical financial data for the year ended December 31, 1993, for the three months ended March 31, 1996 and 1997 and as of March 31, 1997 are derived from unaudited financial statements of the Predecessors. The unaudited financial statements of the Predecessors for the three months ended March 31, 1996 and 1997 and as of March 31, 1997 reflect, in the opinion of the Company's management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its financial condition and results of operations for such periods. The following table also sets forth pro forma statement of operations data of the Company for the year ended December 31, 1996 that give pro forma effect to certain transactions, including the Friede Acquisition and the issuance of Common Stock of the Company in exchange for all of the outstanding common stock of the Predecessors (the "Reorganization"). The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the historical financial statements of the Predecessors and the related notes thereto, the historical financial statements of the predecessor company to Friede & Goldman and the related notes thereto, the historical balance sheet of the Company and the related notes thereto and the pro forma statement of operations of the Company and the related notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, YEAR -------------------------------------------- THREE MONTHS ENDED PRO ENDED MARCH 31, JULY 31, FORMA ---------------- 1992(1) 1993(1) 1994 1995 1996 1996(2) 1996 1997 -------- ------- ------- ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenue................. $22,703 $10,355 $23,891 $19,865 $21,759 $25,533 $ 2,965 $18,655 Cost of revenue......... 18,186 6,770 18,063 13,510 15,769 18,663 2,426 12,800 ------- ------- ------- ------- ------- ------- ------- ------- Gross profit........... 4,517 3,585 5,828 6,355 5,990 6,870 539 5,855 Selling, general and administrative expenses(3)............ 1,961 1,699 2,203 3,862 6,673 7,318 942 2,622 ------- ------- ------- ------- ------- ------- ------- ------- Operating income (loss)................ 2,556 1,886 3,625 2,494 (684) (448) (404) 3,232 Net interest expense.... (265) (135) (346) (197) (448) (538) (83) (120) Gain on asset sales(4).. 3 11 808 1,869 349 349 230 1,379 Litigation settlement(5).......... -- -- -- 750 3,467 3,467 3,467 -- Other................... 84 55 23 6 104 104 (27) 66 ------- ------- ------- ------- ------- ------- ------- ------- Net income............. $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 2,788 $ 2,934 $ 3,183 $ 4,558 ======= ======= ======= ======= ======= ======= ======= ======= UNAUDITED PRO FORMA DATA: Net income as reported above.................. $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 2,788 $ 2,934 $ 3,183 $ 4,558 Pro forma provision for income taxes(6)........ (880) (672) (1,521) (1,821) (1,032) (1,090) (1,178) (1,685) ------- ------- ------- ------- ------- ------- ------- ------- Pro forma net income... $ 1,498 $ 1,145 $ 2,589 $ 3,100 $ 1,756 $ 1,844 $ 2,005 $ 2,873 ======= ======= ======= ======= ======= ======= ======= ======= Pro forma net income per share(7)............... $ 0.18 $ 0.19 $ 0.30 Common and equivalent shares outstanding..... 9,668 9,668 9,454 STATEMENT OF CASH FLOWS DATA: Cash provided by operating activities... $ 2,542 $ 3,062 $ 3,094 $ 269 $ 4,875 $ 1,092 $ 5,352 Cash provided by (used in) investing activities............. (644) (1,143) 410 (2,410) (3,866) (2,228) (777) Cash provided by (used in) financing activities............. (2,033) (1,704) (3,123) 2,581 (706) 879 (3,989) OTHER FINANCIAL DATA: Depreciation and amortization........... $ 426 $ 339 $ 347 $ 425 $ 696 $ 896 $ 174 $ 215 Capital expenditures.... 144 1,167 1,150 2,670 2,357 2,502 1,596 1,358 EBITDA(8)............... 2,982 2,225 4,054 2,919 1,092 2,066 (230) 3,922 </TABLE> <TABLE> <CAPTION> AS OF MARCH 31, 1997 -------------------------- PRO FORMA AS HISTORICAL ADJUSTED(9)(10) ---------- --------------- BALANCE SHEET DATA: (IN THOUSANDS) <S> <C> <C> Working capital...................................... $ 2,387 $30,911 Net property, plant and equipment.................... 6,043 6,043 Total assets......................................... 31,456 54,694 Long-term debt....................................... 1,979 1,979 Stockholders' equity................................. 8,717 36,441 </TABLE> - -------- (1) Prior to December 31, 1992, the Company utilized a July 31 fiscal year end. Beginning in 1993, the Company adopted a calendar year as its fiscal year. Contract revenues for the five-month period ended December 31, 1992 were approximately $2.6 million. Other statement of operations data for the five-month period ended December 31, 1992 have not been presented because the amounts were not material. (2) The pro forma statement of operations data for the year ended December 31, 1996 give pro forma effect to (i) the Friede Acquisition as if it had occurred as of the beginning of the period presented and (ii) the Reorganization. (3) Included in selling, general and administrative expenses are bonuses paid to three executive officers and stockholders of HAM Marine (the "Stockholder Employees") of approximately $0.2 million, $1.2 million and $2.1 million for the years ended December 31, 1994, 1995 and 1996, respectively, which were intended primarily to provide a means by which the Stockholder Employees could meet the individual income tax obligations arising from the pass through of the Company's taxable income to the Stockholder Employees due to the status of the Predecessors as S Corporations in 1996 and prior periods. See Note 6 below. Cash compensation paid to the Stockholder Employees during the year ended December 31, 1996 exceeded the amount of compensation levels set forth in the employment contracts entered into between the Company and the Stockholder Employees in May 1997 by approximately $1.9 million. Also included in selling, general and administrative expenses for the year ended December 31, 1996, and the three months ended March 31, 1997, is non-cash compensation expense of $1,080,000 and $475,000, respectively, related to stock issued to employees. Such amounts are based on an estimated initial public offering price of the Company's Common Stock, less a 10% discount. See Note 2 of Notes to the historical financial statements of the Predecessors included elsewhere in this Prospectus. (4) The gain on asset sales in 1994 and 1996 resulted primarily from the sale of assets not used in the Company's operations. The gain on asset sales in 1995 resulted from the sale of assets acquired from an affiliated entity. Gain on asset sales for the three months ended March 31, 1997 includes approximately $0.9 million related to the distribution of real estate held for investment and an airplane to the stockholders of one of the Predecessors. The assets were not used directly in the Company's operations. See Notes 7 and 14 of Notes to the historical financial statements of the Predecessors included elsewhere in this Prospectus. (5) The litigation settlement in 1995 represents the amount received as a result of a claim by the Company against a general contractor for which the Company served as a subcontractor. The litigation settlement in 1996 represents the amount received by the Company as a result of a claim against a customer. See Note 13 of Notes to the historical financial statements of the Predecessors included elsewhere in this Prospectus. (6) The pro forma provision for income taxes gives pro forma effect to the application of federal and state income taxes to the Company as if it were a C Corporation for tax purposes. For all periods presented herein, the Company and the Predecessors have operated as S Corporations for federal and state income tax purposes. Prior to the consummation of the Offering, the stockholders of the Company and the Predecessors will have terminated the S Corporation status of such entities. As a result, the Company will become subject to corporate level income taxation following such termination. See "The Company--Corporate Restructuring," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 1 and 2 of Notes to the historical financial statements of the Predecessors included elsewhere in this Prospectus. (7) Pro forma net income per share is based on the number of shares of Common Stock to be outstanding immediately after the Reorganization (9,200,000) as if such shares had been outstanding throughout each period presented, as increased for each period to reflect sufficient additional shares required to be sold for such period to pay the pro forma distribution payable to stockholders in excess of historical net income for such period. The number of such additional shares is based on the assumed initial public offering price of $15.00 per share, net of offering expenses. See "The Company-- Corporate Restructuring." (8) EBITDA represents operating income plus depreciation, amortization and non- cash compensation expense related to the issuance of stock and stock options to employees. EBITDA is not a measure of cash flow, operating results or liquidity as determined by generally accepted accounting principles. The Company has included information concerning EBITDA as supplemental disclosure because management believes that EBITDA is commonly accepted as providing useful information regarding a company's historical ability to incur and service debt. Management of the Company believes that factors which should be considered by investors in evaluating EBITDA include, but are not limited to, trends in EBITDA as compared to cash flow from operations, debt service requirements, and capital expenditures. Management of the Company believes that the trends depicted by the Company's historical EBITDA reflect historical fluctuations in the Company's business and the recent increase in the level of the Company's activities. EBITDA as defined and measured by the Company may not be comparable to similarly titled measures of other companies. Further EBITDA should not be considered in isolation or as an alternative to, or more meaningful than, net income or cash flow provided by operations as determined in accordance with generally accepted accounting principles as an indicator of the Company's profitability or liquidity. (9) The pro forma balance sheet data of the Company as of March 31, 1997 give pro forma effect to (i) the distribution of cash to the stockholders of one of the Predecessors prior to the closing of the Offering in an amount equal to the estimated federal and state income taxes payable by such stockholders on the undistributed earnings of such Predecessor through the closing of the Offering, (ii) the distribution of marketable securities and the assumption by such stockholders of the margin account indebtedness associated with such marketable securities, (iii) borrowings of $4.5 million under the Company's revolving credit facility to fund a portion of the cash distribution to such stockholders, (iv) the recording of a deferred tax liability as a result of the termination of the status of the Predecessors as S Corporations prior to the closing of the Offering and (v) the Reorganization, in each case as if such event had occurred as of March 31, 1997. See "The Company--Corporate Restructuring" and "Capitalization." (10) Assumes the public offering of 2,650,000 shares of Common Stock by the Company at an assumed price of $15.00 per share resulting in net proceeds of $36.5 million (after deducting the underwriting discount and expenses of the Offering estimated at $3.3 million) and the application thereof as described herein. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040332_outdoor_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040332_outdoor_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7cfd1ed194f3a996c5a2065bbea818d2e8337b75
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040332_outdoor_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, references to "OCI" or the "Company" mean Outdoor Communications, Inc. (formerly known as OCI Holdings Corp.) together with all of its direct and indirect subsidiaries and businesses; "OCI North" refers to the Company's subsidiary, OCI (N) Corp; "OCI South" refers to the Company's subsidiary, OCI (S) Corp; and "Predecessors" refers to each of OCI North and OCI South. Unless otherwise indicated, references to financial or operating results of the Company occurring in any fiscal year are to the twelve months ended on June 30 of such indicated fiscal year. Unless otherwise indicated, references to financial or operating results of OCI South occurring prior to June 30, 1997 reflect the consolidated results of the Company's Mass Communications Corp. ("MCC") subsidiary and OCI (S) Corp. prior to the merger of MCC with and into the Company, which merger was effective as of June 30, 1997. The information in this Prospectus assumes the exchange (the "Exchange") of the Company's Series A 10% Subordinated Notes ("Series A Notes") and Series B 10% Subordinated Notes ("Series B Notes") for shares of Series A Preferred Stock, $.01 par value per share ("Series A Preferred Stock"), of the Company or Series A Preferred Membership Interests ("Series A Preferred Interests") of the Company's subsidiary OCIH LLC ("OCIH"). The pro forma financial information in this Prospectus reflects only the acquisitions of Georgia Outdoor, Alabama Outdoor, Skoglund and Outdoor West (each, as defined below, and collectively, the "Significant Acquisitions") and excludes other individually insignificant operations acquired by the Company since its formation. THE COMPANY OCI is a leading provider of outdoor advertising services, operating approximately 13,500 advertising displays in 12 midwestern and southeastern states. The Company focuses on small- to medium-sized markets with populations ranging from 15,000 to 150,000, and is the largest outdoor advertising company in most of the markets in which it operates. Management believes that operating in small- to medium-sized markets provides certain advantages over operating in large markets, including lower and more stable lease costs, greater new build opportunities and more attractive acquisition opportunities. Outdoor advertising offers repetitive impact and relatively low cost-per- thousand impressions compared to alternative media, including television, radio, newspapers, magazines and direct mail marketing. The outdoor advertising industry in the United States has experienced increased advertiser interest and revenue growth during the 1990s. According to recent estimates by the Outdoor Advertising Association of America (the "OAAA"), the trade association for the outdoor advertising industry, outdoor advertising generated total revenues of approximately $2.0 billion in 1996, or approximately 1.1% of total advertising expenditures in the United States. While the industry has experienced some consolidation within the past few years, the OAAA estimates that there are still approximately 600 companies in the outdoor advertising industry operating approximately 396,000 billboard displays. The Company expects the trend of consolidation in the outdoor advertising industry to continue. The Company's objective is to be a leading provider of outdoor advertising services in small- to medium-sized markets across the United States. To achieve this objective, the Company plans both to increase its penetration in its existing markets and expand into attractive new markets. The Company has historically implemented, and intends to continue to pursue, the following operating strategy: Pursue Strategic Acquisitions. The Company seeks to continue its growth by pursuing an aggressive acquisition strategy emphasizing both in-market and new market acquisitions. The Company believes it has attractive in-market acquisition opportunities which will serve to increase market penetration and enhance local market operating efficiencies. In most instances, in- market acquisitions involve the purchase of display faces only and require no incremental personnel. The Company also intends to pursue new market acquisitions that are either within its existing regions or in new regions where attractive growth and consolidation opportunities exist. Leverage Operational Structure. The Company's operational structure provides significant operating leverage to support increased penetration of existing markets and new market expansion. The Company's operations are comprised of 10 divisions, each with its own headquarters to service its display structures and customers. OCI has centralized management operations in Traverse City, Michigan and Corinth, Mississippi to provide administrative oversight of the divisions through centralized purchasing, a detailed budgeting process, management information systems and strict cost controls. With this infrastructure in place, the Company can generate revenues from newly acquired or constructed display faces at attractive incremental margins. Focus on Local Advertisers. The Company seeks to continue its local advertiser focus, which management believes provides the Company with a diverse and stable advertiser base, fewer sales subject to agency commissions and greater rate integrity. Local advertising constituted over 84% of the Company's gross revenues for the nine months ended March 31, 1997, which is higher than the industry average of 70% as estimated by the OAAA. The Company believes that the diversity of its local customer base insulates it from dependence on any one customer or industry. During the nine months ended March 31, 1997, no single customer represented more than 3.0% of the Company's gross revenues. Emphasize Twelve-Month Advertising Contracts. The Company seeks to maximize occupancy levels and sales force and production efficiency by focusing on twelve-month advertising contracts. The Company believes that these long- term contracts enhance occupancy levels at stable advertising rates, generate higher renewal rates, increase the predictability of revenues and allow its sales personnel time to devote greater attention to servicing their accounts. Capitalize on Experienced Management Team. The Company believes that one of the keys to continuing its growth is its experienced management team. The Company's three-person senior management team has over 70 years of combined experience in the outdoor advertising industry which provides the Company with the market knowledge and local relationships necessary to identify and evaluate acquisition candidates. Management's local relationships also provide OCI with the ability to identify and obtain municipal approval for new build opportunities. On April 3, 1996, the Company's current structure emerged with its acquisitions and consolidation of OCI North and OCI South. OCI South was founded in 1972 by John C Stanley IV and A.B. Isbell upon their acquisition of outdoor advertising assets in the region around Memphis, Tennessee. Through dedication to customer service and product quality and the consummation of numerous acquisitions, OCI South grew to operate more than 2,600 display faces in six states by April 1996. In 1989, OCI North was formed by Messrs. Stanley and Isbell to complete the acquisition of Dingeman Advertising, Inc., an outdoor advertising company based in Traverse City, Michigan. Through additional acquisitions and new construction, OCI North grew to operate more than 2,800 display faces in three states by April 1996. The Company believes that the success of its management team in developing and expanding its operations has made OCI a significant competitor in the outdoor advertising industry. See "Certain Relationships and Related Transactions--The Formation Transactions." The Company is a Delaware corporation whose executive offices are located at 512 Taylor Street, Corinth, Mississippi, 38834. The Company's telephone number is (601) 286-3334. RECENT ACQUISITIONS Since its formation, the Company has pursued an aggressive acquisition strategy, completing 15 acquisitions of outdoor advertising companies (collectively, the "Acquired Companies") over a 15-month period. None of such acquisitions involved sellers affiliated with the Company. The Company's acquisition integration approach is different for new market and in-market acquisitions. In new market acquisitions, the Company generally eliminates administrative and accounting positions, maintains a sales and production capability and institutes the Company's operating philosophy, systems and controls. In-market acquisitions typically involve the purchase of display faces only, resulting in the elimination of all personnel and related costs. The following summarizes the Significant Acquisitions, which are included in the summary pro forma financial information included herein: The Outdoor West Acquisition. On March 31, 1997, OCI acquired substantially all of the assets of Outdoor West, Inc. of Tennessee ("Outdoor West") for a cash purchase price of $11.8 million. As a result of this acquisition, the Company acquired approximately 960 display faces in Tennessee and a right of first refusal to purchase Outdoor West, Inc. of Georgia, an affiliate of Outdoor West. The Skoglund Acquisition. On October 31, 1996, OCI completed the acquisition of substantially all of the assets of Skoglund Communications, Inc. and Skoglund Communications of St. Cloud, Inc. (together, "Skoglund") for a cash purchase price of $21.2 million. As a result of the acquisition of Skoglund, the Company acquired approximately 1,500 display faces in Minnesota and Wisconsin. The Alabama Outdoor Acquisition. On April 30, 1996, OCI acquired approximately 2,900 display faces across North and Central Alabama through its purchase of substantially all of the assets of AOA Acquisition, L.L.C. ("Alabama Outdoor") for a cash purchase price of $34.1 million. The Georgia Outdoor Acquisition. On April 3, 1996, OCI completed the acquisition of substantially all of the assets of Georgia Outdoor Advertising Company ("Georgia Outdoor") for a cash purchase price of $11.6 million. As a result of this transaction, the Company acquired approximately 800 display faces in Georgia and South Carolina in the vicinity of Athens, Georgia. In addition to the Significant Acquisitions, since September 1996 the Company has completed 11 individually insignificant in-market acquisitions for an aggregate purchase price of approximately $17.8 million. The pro forma financial information in this Prospectus does not fully reflect the effect of these acquisitions, as the results of these operations are only included from the date of acquisition. The Company does not currently have any written or oral agreement to consummate any other material acquisition. FINANCING PLAN To provide greater flexibility in pursuing its growth strategy, concurrently with the Offering the Company intends to enter into a new $150.0 million senior credit facility (the "New Credit Facility"). In addition, the holders of the Company's Series A Notes and Series B Notes will exchange such notes for shares of Series A Preferred Stock of the Company or Series A Preferred Interests of OCIH effective upon the closing of the Offering. The Offering is conditioned upon the closing of the New Credit Facility and the Exchange. The Series A Preferred Stock and Series A Preferred Interests will not be registered under the state or federal securities laws. The Offering, the New Credit Facility and the Exchange are referred to in this Prospectus as the "Financing Plan." THE OFFERING Issuer ..................... Outdoor Communications, Inc. Securities Offered ......... $100,000,000 aggregate principal amount of % Senior Subordinated Notes due 2007. Maturity ................... , 2007. Interest Payment Dates ..... and of each year, commencing on , 1998. Mandatory Redemption ....... None. Optional Redemption ........ Except as described below, the Company may not redeem the Notes prior to , 2002. On or after such date, the Company may redeem the Notes, in whole or in part from time to time, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to , 2000, the Company may, at its option, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Proceeds of one or more Public Equity Offerings by the Company, at a redemption price equal to % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes--Optional Redemption." Change of Control .......... Upon the occurrence of a Change of Control, the Company will, subject to certain conditions, be required to make an offer to purchase all of the Notes at 101% of principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that the Company will have the financial resources necessary to repurchase the Notes following a Change of Control. These provisions would not necessarily afford protection in the event a highly leveraged transaction that does not result in a Change of Control. See "Risk Factors--Change of Control" and "Description of Notes--Repurchase at the Option of Holders--Change of Control." Guarantees ................. The Company's obligations under the Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by all of the Company's subsidiaries (collectively, the "Guarantors"). The Guarantees will be subordinated to Guarantor Senior Indebtedness (as defined) to the same extent and in the same manner as the Notes are subordinated to all Senior Indebtedness of the Company. See "Description of Notes--Guarantees." Ranking .................... The Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company and will rank pari passu in right of payment with all other senior subordinated indebtedness of the Company. The Guarantees will be general, unsecured obligations of the Guarantors, subordinated in right of payment to all existing and future Guarantor Senior Indebtedness. While the Notes and the Guarantees are senior subordinated obligations, after giving effect to the Offering, there will be no indebtedness that is subordinated in right of payment to the Notes, and the Company and the Guarantors have no present plans to issue any indebtedness that is subordinated to the Notes and the Guarantees. As such, the Notes and the Guarantees will be subordinate to all of the indebtedness of the Company and the Guarantors expected to be outstanding immediately following the Offering. See "Risk Factors--Subordination of Notes and Guarantees." As of March 31, 1997, after giving effect to the Offering and the application of the proceeds therefrom, the Company would have had outstanding $26.5 million of indebtedness ranking senior in right of payment to the Notes and the Guarantees and the ability to borrow up to an additional $123.5 million under the New Credit Facility, which additional borrowings would be senior to the Notes. The Company and the Guarantors do not have any present plans to issue any indebtedness that would be senior to the Notes and the Guarantees. See "Description of Notes--Ranking." Certain Covenants .......... The indenture governing the Notes (the "Indenture") will contain covenants relating to, among other things, the following matters: (i) incurrence of additional Indebtedness (as defined) by the Company and its subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its subsidiaries and the redemption of certain subordinated obligations of the Company and its subsidiaries; (iii) certain sales of assets; (iv) mergers, consolidations and transfer of assets; and (v) transactions with affiliates. See "Description of Notes--Certain Covenants." Use of Proceeds ............ The net proceeds of the Offering (after deduction of underwriting discounts and estimated offering expenses) are expected to be approximately $96.0 million. The net proceeds from the Offering, together with borrowings under the New Credit Facility of approximately $20.6 million, will be used to repay $115.7 million of indebtedness outstanding under the existing senior credit facility. The balance of the net proceeds will be used for working capital and general corporate purposes. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040333_lfc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040333_lfc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a51a12d2562c510c3b7e3b9c38b450ad635ce385
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040333_lfc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, and the related notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, (i) references to "Loomis" herein mean Loomis Holding Corporation prior to the consummation of the Transactions, (ii) references to "Loomis Armored" herein mean Loomis Armored Inc. prior to the consummation of the Transactions, (iii) references to "Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior to the consummation of the Transactions, and (iv) references to "Loomis, Fargo & Co." or the "Company" herein mean the combined entity, including Loomis, Loomis Armored and the assets transferred to the Company by Wells Fargo Armored pursuant to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Original Offering, the Transactions, borrowings under the New Credit Facility and the application of the proceeds therefrom. THE COMPANY Loomis, Fargo & Co., created through the combination of Loomis Armored and Wells Fargo Armored, is one of the largest armored transport companies in the United States. Loomis, Fargo & Co. operates over 150 branches, employs approximately 8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles nationwide to provide armored ground transport services, automated teller machine ("ATM") services, and cash vault and related services to financial institutions and commercial customers. Serving all 50 states and Puerto Rico, the Company is one of only two armored transport companies in the United States that provides these services on a national basis. Management believes that the combination of Loomis Armored and Wells Fargo Armored into a national service provider favorably positions the Company for additional revenue opportunities as large financial and retail institutions are increasingly seeking vendors capable of providing an array of services on a national basis. In addition, management believes the proliferation of ATMs and the trend of banks and other financial and retail institutions towards outsourcing cash vault and related services will contribute to the Company's growth prospects. For the twelve months ended December 31, 1996 and the three months ended March 31, 1997, the Company would have had pro forma revenues of $373.7 million and $95.2 million, respectively, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $31.4 million and $4.6 million, respectively. The Company is implementing the management principles and decentralized structure utilized by the Loomis Armored management team, which have proven to be highly effective in reducing employee turnover, increasing customer satisfaction and decreasing "cost of risk," which consists of the cost of cargo and casualty losses, related insurance costs and claims administration expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis Armored's total cost of risk decreased from 10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve months ended December 31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 7.5% over the same period. Management believes that by combining the business strategy and risk management skills of Loomis Armored with the larger customer base and leading ATM Services (as defined) position of Wells Fargo Armored, the Company will be well-positioned to capitalize on the numerous opportunities developing in the armored transport industry. The Company provides a wide range of services within the following categories: Traditional Armored Transport. The Company's armored fleet transports currency and other valuables in sealed packages between commercial enterprises and banks, between banks, and from the Federal Reserve Banks to commercial banks. The Company provides traditional armored transport services to numerous banks including Bank of America and Wells Fargo Bank as well as national and regional businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger. Traditional armored transport represented approximately 62.9% of the Company's revenues for the twelve months ended December 31, 1996, making it the largest component of the Company's business. ATM Services. The Company provides cash replenishment, deposit pick-up, and first-line maintenance services (collectively, "ATM Services") to over 28,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. The total number of ATM locations in the United States is expected to increase significantly over the next five years. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. Management believes these trends provide the Company with further opportunities to build upon its leading position in the ATM Services industry by offering broad geographic coverage as well as a high level of service. The Company's ATM customers include NationsBank, NCR Corporation and Electronic Data Systems Corporation. ATM Services represented approximately 29.9% of the Company's revenues for the twelve months ended December 31, 1996, and have increased at a compounded annual growth rate of approximately 12.3% over the three year period ended December 31, 1996. Cash Vault and Related Services. The Company provides a wide array of cash vault and related services ranging from passive, secured storage of valuables such as currency, securities and computer chips to active services such as deposit processing and consolidation, change order preparation, coin wrapping and storage and food stamp processing. In addition, the Company's cash vault capacity is a key element in supporting services to larger customers and ATM networks. Cash vault and related services represented approximately 7.2% of the Company's revenues for the twelve months ended December 31, 1996. The Company's principal executive offices are located at 2500 CityWest Blvd., Suite 900, Houston, Texas 77042, and its telephone number at such address is (713) 435-6700. INDUSTRY OVERVIEW Management estimates that the ten largest armored transport companies in the United States have aggregate annual revenues of approximately $1.0 billion. The ground transportation portion of the armored transport industry, currently the single largest sector, has historically maintained moderate growth. ATM services represent the most dynamic growth sector of the armored transport industry, with the total number of ATM locations served by the armored transport industry expected to increase significantly over the next five years. This expected growth results from a fundamental change in the retail delivery channel strategy of banks in the United States as traditional, full service bank branches are being replaced by ATMs, drive-through service centers and banks located in supermarkets and other nontraditional locations. In addition, while cash vault and related services currently represent a relatively small portion of the armored transport industry's revenues, this market is also expected to expand over the next several years as banks and other financial institutions continue the trend toward outsourcing such services. POST-COMBINATION STRATEGY Management believes that Loomis, Fargo & Co. has several distinct competitive strengths within the armored transport industry, including a strong national presence, the leading ATM Services operation, and a management team experienced in maximizing service value, reducing cost of risk and improving cash flow and profitability. The Company's business strategy is to capitalize on its competitive strengths by implementing the following initiatives: Promote the National Presence of Loomis, Fargo & Co. The Company provides its services to a much larger geographic area than either Loomis Armored or Wells Fargo Armored serviced on a stand-alone basis. With services in all 50 states and Puerto Rico, the Company is able to expand its business with national financial institutions and retail customers which require armored ground transport, ATM Services and/or cash vault and related services in numerous locations across the country. Management believes that the ability to provide nationwide service is becoming more important in the armored transport industry as banks are expanding geographically through the continuing consolidation of the banking industry and as other institutions are shifting toward centralized purchasing of goods and services. As one of only two armored transport providers in the United States with nationwide service, the Company is well-positioned to augment its base of customers requiring broad geographic coverage. The Company has dedicated a segment of its sales force to manage national account relationships. Focus on Growing ATM Services Market. The Company provides ATM Services to over 27,000 ATM locations nationwide, making it the leading provider of ATM Services in the United States. Both the number of ATM locations and the types of items being dispensed through ATMs, such as travelers checks, lottery tickets, coupons, postage stamps and other valuables, continue to grow. Additionally, many ATM owners have begun outsourcing the servicing and maintenance of ATM locations formerly serviced and maintained internally. The Company uses its proprietary automated national dispatching system to coordinate customer requests, provide service data to customers and dispatch service technicians nationwide. To complement the national dispatching system, the Company has developed an automated network cash management system that optimizes ATM cash loads and provides ATM balance reporting. With its broad range of services and automated systems, the Company intends to build upon its leading position in the ATM Services market. Reduce Cost of Risk and Emphasize Risk Management Partnership with Customers. Management intends to improve cash flow and profitability not only by reducing the Company's overall cost of risk but also by using a risk management partnership approach with its customers as a means of differentiating the Company from its competitors. A comprehensive risk management program which emphasizes incident avoidance and loss minimization is being implemented throughout the Company's operations. The program focuses on (i) employee culture and attitude, (ii) selectivity in hiring, (iii) operating procedures designed to recognize and avoid potential danger or accidents, (iv) safety and security procedures, including training in the proper use of firearms and the operation of the Company's vehicles, (v) limits on the amounts of cash or other valuables contained in a branch or vehicle or under the control of an employee, (vi) utilization of three-person crews and surveillance or chase cars in high- risk areas, and (vii) an extensive security oversight program, including surveillance and evaluation by AMSEC, an independent, international security firm. This risk management program produced significant cost savings with respect to cargo loss and casualty liability claims for Loomis Armored over the five years prior to the consummation of the Transactions. To provide the quality of service necessary to enhance customer loyalty in support of this business strategy, the Company emphasizes an operating philosophy dedicated to: Attracting and Retaining Quality, Loyal Employees. Management believes that a loyal employee base directly contributes to reducing cost of risk and improving customer service and that the combination of selectivity in hiring, a commitment to employee training, responsibility and safety, and competitive wage and benefit packages will enable the Company to attract and retain quality, loyal employees. As a result of Loomis Armored's commitment to these principles, its employee turnover rate decreased from 41% for the twelve months ended December 31, 1992 to 29% for the twelve months ended December 31, 1996. Encouraging Employee Initiative. The Company operates so that many of the daily operational decisions such as local sales, routing, hiring, and fleet maintenance are made at the branch level while the Company's corporate and five regional management teams support the branches, particularly with respect to pricing and risk management. This delegation of responsibility is expected to improve efficiency and responsiveness to customer needs, while maintaining Company-wide security, safety and quality of revenue standards. Management believes that this structure, together with an incentive program that links a branch manager's compensation to branch profitability, gives branch managers and other employees a sense of empowerment and accountability. This structure was successfully implemented at Loomis Armored's operations and is currently being implemented at all of the Company's locations. CONSOLIDATION SAVINGS The Company has developed an integration plan focused on reducing corporate overhead and consolidating branches in overlapping service areas. The Company expects to achieve cost savings in consolidation through (i) adopting the most effective business practices of Loomis Armored and Wells Fargo Armored, (ii) consolidating corporate, regional and branch offices, and (iii) achieving routing and servicing efficiencies as well as reducing occupancy costs by combining operations in the areas where both Loomis Armored and Wells Fargo Armored previously operated. Management estimates that, upon successful completion of its consolidation plan over the 12-month period following the consummation of the Transactions, the Company will realize $7.5 million in cost savings on an annualized basis (approximately $3.4 million of which is related to headcount reduction and $3.7 million of which is related to the elimination of management fees) compared to the cost of operating Loomis Armored and Wells Fargo Armored as separate entities. There can be no assurance, however, that all of such savings will occur as planned. The Company's actual consolidation savings could differ materially from management's estimate. Factors that could cause or contribute to such differences include those discussed elsewhere in this Prospectus, including, but not limited to, risks and uncertainties relating to leverage, risks inherent in the armored transport industry, issues concerning integration of operations and the ability of the Company to attract and retain qualified employees. See "Risk Factors--Implementation of Post-Combination Strategy," "-- Employees" and "Pro Forma Combined Financial Information." THE TRANSACTIONS The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo Armored, the Company, Loomis, Loomis Armored and the Business Trust entered into the Contribution Agreement (as defined), pursuant to which, on January 24, 1997, the Business Trust contributed all of the issued and outstanding common stock of Loomis and Wells Fargo Armored contributed substantially all of its assets and certain liabilities to the Company in exchange for 51% and 49%, respectively, of the Common Stock and certain other consideration. See "The Transactions--The Business Combination." The Financing. The Transactions were financed through the establishment of the New Credit Facility and the issuance of the Old Notes. The following table illustrates the sources and uses of cash in connection with the Transactions. See "The Transactions--The Business Combination." The Transactions were consummated on January 24, 1997. <TABLE> <CAPTION> (IN MILLIONS) ------------- <S> <C> SOURCES OF CASH New Credit Facility (1)...................................... $ 73.3 10% Senior Subordinated Notes................................ 85.0 ------ Total sources of cash..................................... $158.3 ====== USES OF CASH Retirement of Loomis and Loomis Armored obligations: Existing indebtedness (2) (3).............................. $ 29.6 Accrued management fees (4)................................ 1.6 Casualty and employee claims (5)........................... 8.5 Payments to the Loomis Indemnity Trust....................... 4.7 Payments to Wells Fargo Armored and related entities (6)(7).. 106.6 Fees and expenses............................................ 5.3 Payment escrowed to retire Wells Fargo Armored IRB and accrued interest............................................ 1.1 Contribution to the Operating Subsidiary for working capital purposes.................................................... 0.9 ------ Total uses of cash........................................ $158.3 ====== </TABLE> - -------- (1) The New Credit Facility provides initially for aggregate borrowings of $115.0 million and matures in January 2002. As of March 31, 1997, approximately $11.7 million in letters of credit were outstanding under the New Credit Facility, leaving approximately $29.9 million in available borrowing capacity under the New Credit Facility. (2) Includes (i) $10.3 million of 14% senior subordinated notes that were scheduled to mature on September 30, 1999, including accrued interest, (ii) $9.2 million of a 9% junior subordinated note that was scheduled to mature on September 30, 1999, including accrued interest (iii) $3.3 million of a term loan that was scheduled to mature on September 30, 1999, including accrued interest, and (iv) $6.8 million in borrowings under Loomis Armored's credit facility. (3) $3.5 million of the borrowings by Loomis Armored under its credit facility were used to redeem the Loomis Preferred Stock (as defined) immediately prior to the Closing (as defined). See "The Transactions--The Business Combination." (4) Accrued management fees were paid at Closing to an affiliate of Loomis pursuant to a Financial Advisory Agreement (as defined). See "Certain Relationships and Related Transactions--Financial Advisory Agreement." (5) Represents a lump sum payment on behalf of the Business Trust to CIGNA Insurance Company and related entities pursuant to an Early Program Close- Out Agreement dated January 24, 1997, related to insuring and managing casualty and employee claims of Loomis incurred prior to the Closing (the "Early Program Close-Out Agreement"). See "The Transactions--The Business Combination" and "Pro Forma Combined Financial Information." (6) Includes approximately $1.4 million of reimbursement for fees and expenses related to the Transactions. (7) A portion of such consideration was paid at Closing by the Company to Borg- Warner and/or one or more of its wholly-owned subsidiaries to satisfy certain intercompany indebtedness of Wells Fargo Armored assumed by the Company. THE EXCHANGE OFFER The Exchange Offer applies to $85.0 million aggregate principal amount of the Old Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) interest on the New Notes shall accrue from the date of issuance of the Old Notes, and (ii) the New Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture pursuant to which the Old Notes were issued. The Old Notes and the New Notes are sometimes referred to collectively herein as the "Notes." See "Description of New Notes." The Exchange Offer........ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $85.0 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company and the Guarantors believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of the Company or any Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer--Purpose and Effect." Each broker- dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights The Old Notes were sold by the Company on January Agreement................ 24, 1997, in a private placement. In connection with the sale, the Company entered into a Registration Rights Agreement with the purchasers (the "Registration Rights Agreement") providing for the Exchange Offer. See "The Exchange Offer-- Purpose and Effects." Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York City time, July 22, 1997, or such later date and time to which it is extended. Withdrawal................ The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes............ Interest on each New Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Old Note for which the New Note is exchanged. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer--Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company and each of the Guarantors are required to use their reasonable best efforts to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes (and cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) the Company is not required to file an Exchange Offer Registration Statement (as defined in the Registration Rights Agreement) or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or (ii) any holder of Old Notes is prohibited from participating in the Exchange Offer by applicable law or Commission policy, or such holder would be required to deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer and the prospectus contained in the Exchange Offer Registration Statement would not be appropriate or available for such resales, or such holder is a broker-dealer that holds Old Notes acquired directly from the Company or its affiliates. Acceptance of Old Notes and Delivery of New The Company will accept for exchange any and all Notes.................... Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in connection with the Exchange Offer. Federal Income Tax The exchange pursuant to the Exchange Offer should Considerations........... not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. TERMS OF NEW NOTES Securities Offered........ $85.0 million aggregate principal amount of 10% Senior Subordinated Notes due 2004. Issuer.................... Loomis, Fargo & Co. Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997. Maturity.................. January 15, 2004. Sinking Fund Provisions... None. Optional Redemption....... The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2001 at the Redemption Prices (as defined) set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. In addition, prior to January 15, 2000, the Company may on any one or more occasions redeem up to $25.0 million aggregate principal amount of the New Notes at a Redemption Price equal to 110% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net proceeds of one or more public offerings of Common Stock; provided that at least $60.0 million principal amount of the Notes remains outstanding immediately after the occurrence of such redemption. See "Description of New Notes--Optional Redemption." Change of Control......... In the event of a Change of Control (as defined), the holders of the New Notes will have the right to require the Company to purchase their New Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking................... The New Notes will be general unsecured obligations of the Company, subordinate in right of payment to all existing and future Senior Debt of the Company, which will include all indebtedness incurred under the New Credit Facility. As of March 31, 1997, there was approximately $165.7 million of total debt of the Company and its subsidiaries, $73.5 million of which was Senior Debt, and there was not any indebtedness of the Company expressly subordinated to the Notes by its terms in right and priority of payment; in addition, there was approximately $29.9 million available to be drawn by the Company as secured Senior Debt under the New Credit Facility. See "Risk Factors--Subordination," "Capitalization" and "Description of New Notes-- Subordination." Subsidiary Guarantees..... The Company's payment obligations under the New Notes will be jointly and severally guaranteed by the Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future senior debt of each Guarantor, which include guarantees of all indebtedness incurred under the New Credit Facility. See "Description of New Notes--Subsidiary Guarantees." The indenture pursuant to which the New Notes will Certain Covenants......... be issued (the "Indenture") will contain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) create certain liens; (v) engage in certain sale and leaseback transactions; (vi) make certain asset dispositions; and (vii) merge or consolidate with, or transfer substantially all of their assets to, another person. See "Description of New Notes--Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040353_fine-air_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040353_fine-air_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dd73a58832bd1db21127c8e7c63d5d28a076b04a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040353_fine-air_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND COMBINED FINANCIAL STATEMENTS OF THE COMPANY AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT (I) THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (II) THE COMPANY'S SHAREHOLDERS HAVE CONTRIBUTED TO THE COMPANY ALL OF THE OUTSTANDING CAPITAL STOCK OF AGRO AIR ASSOCIATES, INC. ("AGRO AIR"). SEE "CERTAIN TRANSACTIONS." THE COMPANY The Company is a leading provider of air cargo services between the United States and South and Central America and the Caribbean. Since 1994, the Company has been the largest international air cargo carrier serving Miami International Airport ("MIA"), based on tons of cargo transported to and from that airport. MIA is the largest international cargo airport in the United States and the third largest international cargo airport in the world. The Company's services include: (i) integrated air and truck cargo transportation and other logistics services ("scheduled cargo services"); (ii) long- and short-term ACMI (aircraft, crew, maintenance and insurance) services and AD HOC charters ("ACMI services"); and (iii) third party aircraft and engine maintenance, repairs and overhauls, training and other services. The Company's scheduled cargo services provide seamless transportation through its MIA hub linking North America, Europe, Asia and the Pacific Rim with 29 South and Central America and Caribbean cities. The Company's customers include international and domestic freight forwarders, integrated carriers, passenger and cargo airlines, major shippers and the United States Postal Service. The Company's revenues have grown, principally as a result of the expansion of its scheduled cargo services, from $29.0 million in 1993 to $94.2 million in 1996, a compound annual rate of 48.1%. Principally as a result of increased revenues from scheduled cargo services, the Company's revenues increased 23.5% from 1995 to 1996 and 17.6% from 1994 to 1995. According to published industry sources, the worldwide air freight market had revenues of $64 billion in 1995 and has grown at a 9.1% compound annual rate since 1985 (measured in revenue ton kilometers). The United States/Latin America air freight market is forecasted, by published industry sources, to be the fifth fastest growing air freight market in the world from 1995 to 2005, with an average annual growth rate of approximately 7.1%, as measured in tons. MIA is the largest air gateway to South and Central America and the Caribbean, with more than 80 pure-cargo flights to the region per day. MIA is the primary transshipment point for goods moving by air between North America and South and Central America, representing 72% of total tonnage in 1995. MIA's air trade with South America tripled from $3.1 billion in 1990 to $10.9 billion in 1996. The Company markets its scheduled cargo services through a sales network consisting of eight domestic sales offices serving 55 major U.S. cities, five international sales offices serving over 29 cities in Europe, Canada, Asia and the Pacific Rim and 27 sales offices in South and Central America and the Caribbean. The Company receives cargo at its MIA hub and its foreign operations stations (i) through its domestic and international sales network, (ii) from other airlines pursuant to interline agreements and (iii) directly from freight forwarders and other shippers. See "Business--Customers." The Company utilizes its own fleet of 15 DC-8 aircraft and the services of other airlines through interline and other contractual relationships to provide reliable air cargo service between MIA and South and Central America and the Caribbean. The Company has interline relationships with over 50 airlines, including Air France, China Air, Continental Airlines, Iberia, Korean Air and Virgin Atlantic. The Company's scheduled cargo services transported 32,000 tons of freight in 1994 and 75,000 tons of freight in 1996, a compound annual increase of 53%. The Company plans to expand its scheduled cargo services by acquiring up to four widebody aircraft, which includes an L-1011 aircraft the Company began leasing in June 1997, and as many as three additional DC-8s by the end of 1998. The Company's customers utilize the Company's ACMI services to obtain lift capacity without acquiring their own aircraft. Under a typical ACMI contract, the Company supplies an aircraft, crew, maintenance and insurance, either on a regularly scheduled or AD HOC basis, while the customer bears all other aircraft operating expenses, including fuel, landing and parking fees and ground and cargo handling expenses. The Company's ACMI customers also bear the risk of utilizing the cargo capacity of the Company's aircraft. By offering ACMI services in addition to scheduled cargo services, the Company is able to schedule its fleet to satisfy demand on its own routes while improving utilization and generating additional revenue from ACMI services. The Company's FAA-approved repair stations perform a full range of maintenance, repair and overhaul services for DC-8 aircraft and Pratt & Whitney JT3D-3B aircraft engines. The Company also operates professional pilot and mechanic training schools. The Company's recent move into a new hangar and maintenance facility at MIA enables the Company to expand its third party repair and maintenance services while performing all necessary repairs and maintenance on its own aircraft. The Company began actively marketing its third party repair and maintenance capabilities in 1996 and intends to seek certification to provide similar services for other types of aircraft, including the widebody aircraft the Company intends to acquire with a portion of the net proceeds of this offering. As a result, management expects that the Company's revenues from these services will increase in the future. COMPETITIVE STRENGTHS: ESTABLISHED MARKET POSITION. Since 1994, the Company has transported more international air cargo to and from MIA, the principal air gateway for South and Central America and the Caribbean, than any other carrier. The Company believes that regulatory and other restrictions imposed by U.S. and foreign governmental authorities would make it difficult for a new airline entrant to obtain the necessary operating authority and route rights to duplicate the Company's business. Management also believes that the scarcity of available facilities at MIA will inhibit potential competitors seeking to duplicate the Company's operations. LOW AIRCRAFT AND OPERATING COST STRUCTURE. The Company maintains a low cost structure through: opportunistic acquisition of used aircraft, engines and spare parts; elimination of duplicative costs by centralizing its flight and maintenance operations in Miami; "in-sourcing" activities such as training, aircraft and engine repairs and maintenance; and using its own ground and cargo handling personnel and equipment. The Company's uniform aircraft fleet has allowed it to standardize its spare part inventories, maintenance and training operations, thereby increasing operating efficiencies and improving the reliability of the Company's air cargo services. ASSET OWNERSHIP. The Company has made a substantial investment to acquire the assets necessary to support its operations, including 15 DC-8 aircraft, 20 used spare aircraft engines, an extensive inventory of spare parts and aircraft components, maintenance and engine repair equipment and substantially all of the equipment and vehicles for its aircraft ground and cargo handling requirements. See "Business--Aircraft Fleet." Management believes that the value of the Company's operating assets is substantially in excess of their book value, and following the Company's use of a portion of the net proceeds of this offering to retire long-term debt, it will have no debt service associated with these assets. The Company has also made a substantial commitment of capital and resources to obtain required governmental authorizations, develop its sales and marketing network and build the infrastructure necessary to support its scheduled cargo and ACMI services. EXPERIENCED MANAGEMENT TEAM. The Company is led by an experienced management team, headed by Messrs. Frank and Barry Fine, who together have over 50 years of experience in the air cargo industry and whose knowledge of the South and Central American and Caribbean business environment has been a key element of the Company's success. The other key members of the Company's management team, including those responsible for the Company's flight operations, maintenance and repair facilities, as well as marketing and sales activities, each have over 20 years of industry experience, including experience in the Company's markets. DIVERSITY OF CUSTOMER BASE. The Company offers a wide range of air cargo services to a diverse customer base that includes international and domestic freight forwarders, integrated carriers, passenger and cargo airlines, major shippers and the United States Postal Service. The Company provides scheduled cargo services to over 1,200 customers, none of which accounted for more than 5% of the Company's total revenues in 1996. Because the Company is able to provide its customers a broad range of services tailored to their particular needs, management believes that the Company is well positioned to benefit from the expected growth in demand for air freight transportation between the United States and South and Central America and the Caribbean. See "Industry Overview." GROWTH STRATEGY: INCREASE LIFT CAPACITY. The Company intends to increase the number of markets it can serve and its capacity in existing markets by adding up to four widebody aircraft and as many as three additional DC-8s by the end of 1998. In June 1997, the Company began leasing an L-1011 aircraft which the Company has an option to acquire at any time prior to December 1997. Widebody aircraft have longer range and significantly larger volume capacity than DC-8s and will permit the Company to extend its route structure to serve the southernmost countries of South America and to more economically serve high cargo volume routes on which the Company currently operates multiple daily flights. DC-8s that are utilized on these routes will be redeployed to increase capacity to existing markets and to develop service to new destinations that are more efficiently served with narrowbody aircraft. In addition, to capture a greater share of air cargo traffic between Europe to South and Central America and the Caribbean, the Company will consider utilizing its widebody aircraft to directly serve a limited number of European destinations that can support the volume necessary to economically operate trans-Atlantic service. EXPAND SALES NETWORK AND TRANSPORTATION LOGISTICS SERVICES. The Company plans to expand its domestic and international sales network by opening new domestic sales offices, adding sales personnel, increasing the number of general sales agents who market the Company's services domestically and internationally and expanding the Company's interline relationships. The Company also plans to increase the scope of its transportation logistics services, particularly in South and Central America and the Caribbean, where other airlines and freight forwarders play a much smaller role in arranging for these services. EXPAND ACMI SERVICES. Management believes that the Company's acquisition of widebody aircraft will enable it to market its ACMI services to a broader range of customers, including those who require the longer range and/or larger volume capacity of these aircraft. The Company also plans to utilize its existing and any newly acquired DC-8s to increase its ACMI capabilities. The Company was incorporated in Florida in 1989. Agro Air, a Florida corporation incorporated in 1982, owns 15 DC-8 aircraft that are leased primarily to the Company and provides airframe and engine maintenance, repair and overhaul services to the Company and third parties. Agro Air is wholly-owned by the Company's current shareholders and will become a wholly-owned subsidiary of the Company upon completion of this offering. See "Certain Transactions" and Note 14 of Notes to the Company's Combined Financial Statements. Unless the context otherwise requires, references in this Prospectus to the "Company" refer to the combined operations of the Company and Agro Air. The Company's principal executive offices are located at 2261 N.W. 67th Avenue, Building 700, Miami, Florida, 33122 and its telephone number is (305) 871-6606. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company ........................ 7,400,000 shares Common Stock offered by the Selling Shareholders ......... 1,100,000 shares Common Stock to be outstanding after the offering(1) ...... 21,410,714 shares Use of proceeds .......................................... To acquire additional aircraft, hushkit the Company's existing aircraft, repay debt and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol ..................... BIGF </TABLE> - ---------------- (1) Includes 10,714 shares of Common Stock to be issued to an executive officer of the Company simultaneously with this offering pursuant to the Company's Incentive Compensation Plan (the "Incentive Plan"), assuming an initial public offering price of $14.00 per share. Excludes (i) an additional 1,239,286 shares of Common Stock reserved for issuance pursuant to the Incentive Plan and (ii) 250,000 shares of Common Stock reserved for purchase under the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"). Simultaneously with this offering, the Company intends to grant to certain officers and other key employees options to purchase an aggregate of 485,700 shares of Common Stock, exercisable at the initial public offering price. See "Management--Employment Agreements" and "--Stock Plans." SUMMARY COMBINED FINANCIAL AND OPERATING DATA(1) (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 1992 1993 1994 1995 1996 STATEMENT OF OPERATIONS DATA: ---------- ------------ ---------------- ------------ ------------------ <S> <C> <C> <C> <C> <C> Revenues: Scheduled cargo services ............... $ -- $ -- $ 19,941 $ 40,124 $ 54,775 ACMI services ........................... 22,266 29,025 44,420 35,340 35,520 Repairs, training and other ............ -- -- 492 885 3,953 Total revenues ........................ 22,266 29,025 64,853 76,349 94,248 Operating income ........................ 3,596 3,889 12,139 11,703 13,208 Net income ................................. 5,473 3,128 14,198(2) 11,038 13,028 Pro forma net income(3) .................. 3,414 1,951 8,794 6,818 8,058 Pro forma net income per share(3) ......... $ 0.16 $0.09 $ 0.41 $0.32 $ 0.36 Pro forma weighted average shares outstanding ........................ 21,411 21,411 21,411 21,411 22,509(4) OPERATING DATA: Destinations served (end of period) ...... -- -- 9 21 27 Tons of freight transported-- scheduled cargo services ............... -- -- 32,072 64,906 75,923 ACMI block hours flown .................. 9,566 12,943 15,280 12,068 12,289 Aircraft in service (end of period) ...... 8 13 13 14 15 <CAPTION> THREE MONTHS ENDED MARCH 31, ----------------------------- 1996 1997 STATEMENT OF OPERATIONS DATA: ---------- ------------------ <S> <C> <C> Revenues: Scheduled cargo services ............... $ 11,693 $ 16,174 ACMI services ........................... 5,430 9,126 Repairs, training and other ............ 1,796 626 Total revenues ........................ 18,919 25,926 Operating income ........................ 1,305 3,349 Net income ................................. 1,465 3,170 Pro forma net income(3) .................. 914 1,977 Pro forma net income per share(3) ......... $ 0.04 $ 0.09 Pro forma weighted average shares outstanding ........................ 21,411 22,509(4) OPERATING DATA: Destinations served (end of period) ...... 27 29 Tons of freight transported-- scheduled cargo services ............... 18,360 19,404 ACMI block hours flown .................. 2,146 3,050 Aircraft in service (end of period) ...... 14 15 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ---------------------------------------------- PRO FORMA ACTUAL PRO FORMA (5) AS ADJUSTED (6) BALANCE SHEET DATA: --------- --------------- ---------------- <S> <C> <C> <C> Cash and cash equivalents ...... $ 4,831 $ -- $ 85,967 Working capital ............... 16,162 (7,849) 79,546 Total assets .................. 65,341 60,999 149,966 Total debt ..................... 9,581 29,250 19,669 Stockholders' equity ......... 47,793 14,450 109,998 </TABLE> - ---------------- (1) Presents the combined financial and operating data of the Company and Agro Air, each of which are under the control of common shareholders (Frank and Barry Fine). See Note 1 of Notes to the Company's Combined Financial Statements. (2) Net income for 1994 includes a $2.2 million gain on insurance settlement, representing the excess of insurance proceeds over the net book value of an aircraft that sustained significant damage. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." (3) For each of the periods presented, the Company and Agro Air (collectively, the "S Companies") were S corporations and, accordingly, were not subject to federal and certain state corporate income taxes. The pro forma information has been computed as if the S Companies were subject to federal and all applicable state corporate income taxes for each of the periods presented, assuming that a 37.6% tax rate would have been applied had the S Companies been treated as C corporations. See "Dividend Policy and Prior S Corporation Status," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "Certain Transactions." (4) Includes that number of shares of Common Stock which, had they been issued (at an assumed initial public offering price of $14.00 per share less underwriting discounts and commissions), would have generated cash sufficient to fund the portion of the S Corporation Distributions in excess of the Company's pro forma net income for the twelve-months ended March 31, 1997. See Note 14 of Notes to the Company's Combined Financial Statements. (5) Pro forma to give effect to the (i) cash payment of approximately $4.8 million and issuance by the S Companies of approximately $19.7 million promissory notes (the "S Corporation Notes") to their existing shareholders (collectively, the "S Corporation Distributions") and (ii) establishment of a $8.8 million net deferred tax liability, in each case, calculated as if the S Companies had converted to C corporations as of March 31, 1997. The actual amount of the S Corporation Distributions will depend upon the S Companies' earnings from April 1, 1997 to the conversion date, and the cash portion of the S Corporation Distributions will depend upon the amount of cash available for distribution. See "Dividend Policy and Prior S Corporation Status."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040355_ocwen_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040355_ocwen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9c8e93e035ea3382309f7b5320dbd746dbd32480
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040355_ocwen_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, RISK FACTORS AND FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF OUTSTANDING EMPLOYEE STOCK OPTIONS TO PURCHASE AN AGGREGATE OF 689,477 SHARES OF COMMON STOCK AS OF MARCH 31, 1997. THE COMPANY GENERAL The Company is a specialty financial services company which is engaged, on a nationwide basis, primarily in the business of acquiring, servicing and resolving non-performing and underperforming single and multi-family residential and commercial real estate loans and in selected mortgage lending activities involving servicing-intensive loan products. Since commencing its loan resolution activities in mid-1991, the Company has acquired over $3.81 billion gross principal amount of distressed loans and currently ranks (based on 1996 loan acquisition volume) as the largest purchaser of domestic distressed residential and commercial real estate loan portfolios in the United States. During the past year, the Company also has begun servicing distressed mortgage loans for others on a fee basis. The Company believes that it is currently the leading servicer of distressed mortgage loans in the United States with a servicing portfolio of 38,670 loans aggregating approximately $2.59 billion in gross principal amount at March 31, 1997 (including loans serviced for the Company's joint ventures). The Company's operations are based on the intensive use of technology and proprietary information systems to acquire, manage and resolve distressed assets and other servicing-intensive mortgage products on the most efficient basis possible. The Company began its focus in this area in the early 1990s through the acquisition and resolution of loan portfolios of troubled financial institutions. The Company believes that its specialized focus and investment in technology infrastructure has enabled it to become one of the most efficient servicers of distressed mortgage assets in the industry. Currently, the Company is one of only five special servicers of commercial mortgage loans to have received a rating of "strong" from Standard & Poor's Ratings Services ("Standard & Poor's"). In addition, the Company is rated a Tier 1 servicer and as a preferred servicer for high-risk mortgages by the Federal Home Loan Mortgage Corporation ("FHLMC"), the highest rating categories. The Company's business is conducted primarily through its wholly-owned subsidiary, Ocwen Federal Bank FSB (the "Bank"), which operates through a single branch. Through the Bank the Company is able to access a diversified base of funding sources and maintain high levels of available liquidity. The Company's primary funding comes from brokered certificates of deposit obtained through national and regional investment banking firms and, to a lesser extent, from direct solicitations by the Company, as well as from Federal Home Loan Bank ("FHLB") advances, reverse repurchase agreements and asset securitizations (which have totaled over $1 billion since 1993). The Company believes that these non-branch dependent funding sources provide it with effective asset/liability management tools and have an effective cost that is more attractive than deposits obtained through a branch network after the general and administrative costs associated with operating a branch network are taken into account. RECENT OPERATING RESULTS As the Company's specialized businesses have grown in recent years, its profitability has increased substantially. The Company's core earnings (representing income from continuing operations exclusive of the one-time assessment to recapitalize the Savings Association Insurance Fund ("SAIF") in 1996 and gains from the sale of branch offices in 1995 and 1994, net of related income taxes and profit sharing expense) increased from $24.0 million in 1994 to $54.1 million in 1996 and to $17.0 million in the first quarter of 1997. During this period, the Company's return on average assets increased from 1.40% to 2.61% and its return on average equity increased from 20.06% to 32.05% (in each case based on core earnings). The Company's specialized focus, its emphasis on technology and automated systems and the economies of scale it has been able to achieve also have enabled it to operate at a high level of efficiency: the Company's efficiency ratio based on core earnings improved from 64.1% in 1994 to 41.3% and 42.8% during 1996 and the first quarter of 1997, respectively. At March 31, 1997, the Company had total assets of $2.65 billion, total deposits of $2.11 billion and stockholders' equity of $225.2 million. STRATEGY The Company believes that the current trend toward the sale or outsourcing of servicing by financial institutions and government agencies of non-performing and underperforming loans will continue to grow, particularly in the event that credit quality for some product lines (such as sub-prime mortgage loans) deteriorates, and that the Company will be uniquely positioned to take advantage of this growth. The Company's strategy also focuses on leveraging its technology infrastructure and core expertise to expand its activities into related business lines both for itself and on a fee basis for others. Pursuant to this strategy, the Company has, among other things, recently formed a new corporation, Ocwen Asset Investment Corp. ("OAIC"), which is managed by Ocwen Capital Corporation ("OCC"), a newly-formed, wholly-owned subsidiary of the Company, and which elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. In May 1997, OAIC successfully completed an initial public offering of its common stock, which resulted in estimated net proceeds of $283.8 million (inclusive of the amount contributed by the Company for its shares). Currently, the Company owns approximately 9.8% of the outstanding common stock of OAIC and has a warrant to purchase an additional 10% of OAIC's common stock. BUSINESS ACTIVITIES The Company considers itself to be involved in a single business segment of providing financial services and conducts a wide variety of business within this segment. The Company's primary business activities currently consist of discounted loan acquisition and resolution, multi-family residential and commercial real estate lending, sub-prime single-family residential real estate lending and special servicing of mortgage loans for others. DISCOUNTED LOAN ACQUISITION AND RESOLUTION. The Company has established a core expertise in the acquisition and resolution of non-performing or underperforming single-family residential, multi-family residential and commercial real estate loans, which generally are purchased at a discount to both the unpaid principal amount of the loan and the estimated value of the security property ("discounted loans"). The Company acquires discounted loans from a wide variety of sources in the private sector and governmental agencies such as the U.S. Department of Housing and Urban Development ("HUD") and, to a lesser extent, the Federal Deposit Insurance Corporation ("FDIC"). The Company believes that its experience in the acquisition and resolution of discounted loans, its investment in a state-of-the-art computer infrastructure and related technology which is utilized in this business and its national reputation and nationwide presence in this area make it one of the leaders in this relatively new and evolving business. Between commencing these activities in mid-1991 and March 31, 1997, the Company has acquired over $3.81 billion of gross principal amount of discounted loans. In addition, in 1996, BCBF, L.L.C. ("LLC"), a joint venture which is 50% owned by the Company, acquired discounted single-family residential loans having an aggregate unpaid principal balance of $741.2 million from the Federal Housing Administration ("FHA"), a division of HUD. At March 31, 1997, the Company's discounted loan acquisition and resolution activities were comprised of its discounted loan portfolio, which amounted to $1.28 billion (net of $264.6 million of unaccreted discount and a $16.8 million allowance for loan losses), $96.4 million of real estate owned related to discounted loans and a $32.3 million net investment in LLC, which in the aggregate amounted to $1.41 billion or 53.2% of the Company's total assets. MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LENDING. The Company's lending activities emphasize loans secured by multi-family residential and commercial real estate located nationwide. Recently, the Company transferred the operations associated with its large multi-family residential and commercial real estate lending activities (which generally involve loans with balances in excess of $3.0 million) from the Bank to OCC. In conducting multi-family residential and commercial real estate lending activities, the Company generally seeks to emphasize types of loans and/or lending in geographic areas which, for various reasons, may not be currently emphasized by other lenders and which thus offer attractive returns to the Company relative to other investments. The loans currently emphasized by the Company include loans secured by existing hotels and office buildings, as well as loans for the construction and rehabilitation of hotels and multi-family residential properties. At March 31, 1997, the Company's multi-family residential and commercial real estate loans aggregated $347.1 million, net, or 13.1% of the Company's total assets. The Company also utilizes its multi-family residential lending and other expertise to make investments in low-income housing tax credit partnerships which own projects which have been allocated tax credits under the Internal Revenue Code of 1986, as amended (the "Code"). Such investments amounted to $99.9 million or 3.8% of the Company's total assets at March 31, 1997. SUBPRIME SINGLE-FAMILY RESIDENTIAL LENDING. During 1995, the Company established a program which focuses on the origination or purchase on a nationwide basis of single-family residential loans made to borrowers who have substantial equity in the properties which secure the loans but who, because of prior credit problems, the absence of a credit history or other factors, are unable or unwilling to qualify as borrowers under federal agency guidelines ("sub-prime loans"). The Company utilizes the expertise, technology and other resources which it has developed in connection with the acquisition and resolution of discounted loans in conducting these activities, and believes that the higher risk of default generally associated with these loans, as compared to loans which conform to the requirements established by federal agencies in order to acquire loans, is more than offset by the higher yields on these loans and the higher amount of equity which the borrowers have in the properties which secure these loans. Between commencing these activities in late 1994 and March 31, 1997, the Company purchased or originated an aggregate of $598.8 million of sub-prime single-family residential loans. Recently, the Company consolidated its sub-prime single-family residential lending operations within Ocwen Financial Services, Inc. ("OFS"), a newly-formed, 80% owned subsidiary of the Company which acquired substantially all of the assets of Admiral Home Loan ("Admiral"), the Company's primary correspondent mortgage banking firm for sub-prime single-family residential loans, in a transaction which closed on May 1, 1997. See "Business-- Subsidiaries." OFS currently maintains 17 loan production offices in six states and plans on opening an additional 10 such offices in 1997. The Company classifies its sub-prime single-family residential loans as available for sale because, subject to market conditions, it generally intends to sell such loans or to securitize such loans and sell substantially all of the securities backed by such loans. The Company realized gains of $2.7 million and $7.8 million from the sale of sub-prime single-family residential loans or securities resulting from the securitization of such loans during the three months ended March 31, 1997 and the year ended December 31, 1996, respectively. At March 31, 1997, the Company's sub-prime single-family residential loans amounted to $76.1 million or 2.9% of the Company's total assets. SPECIAL SERVICING OF MORTGAGE LOANS FOR OTHERS. The Company has developed a program to provide loan servicing, including asset management and resolution services, to third party owners of non-performing, underperforming and subprime assets. The amount of loans serviced by the Company for others increased from $361.6 million at December 31, 1995 to $1.92 billion at December 31, 1996 and to $2.59 billion at March 31, 1997. These increases have resulted in servicing fees and other charges, which consist primarily of loan servicing and related fees, increasing from $2.9 million during 1995 to $4.7 million during 1996 and to $5.2 million during the three months ended March 31, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Non-interest Income" and "Business--Loan Servicing Activities." RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered carefully by prospective purchasers of the Capital Securities. THE CAPITAL SECURITIES OFFERING <TABLE> <S> <C> The Trust.................... Ocwen Capital Trust I, a Delaware statutory business trust. The sole assets of the Trust will be the Junior Subordinated Debentures. Securities Offered........... % Capital Securities evidencing undivided beneficial ownership interests in the assets of the Trust. The holders thereof will be entitled to a preference in certain circumstances with respect to Distributions and amounts payable on redemption or liquidation over the Common Securities. Distributions................ Holders of the Capital Securities will be entitled to receive cumulative cash distributions at an annual rate of % of the liquidation amount of $1,000 per Capital Security, accruing from the date of original issuance and payable semi-annually in arrears on and of each year commencing on , 1997. The distribution rate and the distribution and other payment dates for the Capital Securities will correspond to the interest rate and interest and other payment dates on the Junior Subordinated Debentures. See "Description of Capital Securities." Junior Subordinated Debentures................. The Trust will invest the proceeds from the issuance of the Capital Securities and Common Securities in an equivalent amount of % Junior Subordinated Debentures of the Company. The Junior Subordinated Debentures will mature on , 2027. The Junior Subordinated Debentures will rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. In addition, the Company's obligations under the Junior Subordinated Debentures will be structurally subordinated to all existing and future liabilities and obligations of its subsidiaries. See "Risk Factors--Ranking of Subordinate Obligations Under the Guarantee and the Junior Subordinated Debentures," "Risk Factors--Limited Sources for Payments on Junior Subordinated Debentures and Non-Banking Activities" and "Description of Junior Subordinated Debentures--Subordination." Guarantee.................... Payment of distributions out of moneys held by the Trust, and payments on liquidation of the Trust or the redemption of Capital Securities, are guaranteed by the Company to the extent the Trust has funds available therefor. If the Company does not make principal or interest payments on the Junior Subordinated Debentures, the Trust will not have sufficient funds to make Distributions (as defined herein) on the Capital Securities, in which event the Guarantee shall not apply to such Distributions until the Trust has sufficient funds available therefor. The Company's obligations under the Guarantee, taken together with its obligations under the Junior Subordinated Debentures and the Indenture, including its obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Capital Securities), constitute a full and unconditional guarantee of all of the Trust's obligations under the Capital Securities. See "Description of Guarantee" and "Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee." The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior Indebtedness of the Company. See "Risk Factors-- Ranking of Subordinated Obligations Under the Guarantee and the Junior Subordinated Debentures" and "Description of Guarantee." </TABLE> <TABLE> <S> <C> Right to Defer Interest...... The Company has the right to defer payment of interest on the Junior Subordinated Debentures by extending the interest payment period on the Junior Subordinated Debentures, from time to time, for up to 10 consecutive semi-annual periods. There could be multiple Extension Periods of varying lengths throughout the term of the Junior Subordinated Debentures. If interest payments on the Junior Subordinated Debentures are so deferred, distributions on the Capital Securities will also be deferred for an equivalent period and the Company may not, and may not permit any subsidiary of the Company to, (i) declare or pay any dividends or distribu- tions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, the Company's capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank PARI PASSU with or junior to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks PARI PASSU with or junior to the Junior Subordinated Debentures (other than (a) dividends or distributions in common stock of the Company, (b) payments under the Guarantee, (c) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (d) as a result of reclassification of the Company's capital stock into one or more other classes or series of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock, (e) the purchase of fractional interests in the shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged and (f) purchases of common stock related to the issuance of common stock or rights under any of the Company's benefit plans or any of the Company's dividend reinvestment plans). During an Extension Period, interest on the Junior Subordinated Debentures will continue to accrue (and the amount of Distributions to which holders of the Capital Securities are entitled will accumulate) at the rate of % per annum, compounded semi-annually. During an Extension Period, holders of Capital Securities will be required to include the stated interest on their pro rata share of the Junior Subordinated Debentures in their gross income as original issue discount ("OID") even though the cash payments attributable thereto have not been made. See "Description of Junior Subordinated Debentures--Option to Extend Interest Payment Period" and "Certain United States Federal Income Tax Consequences--Original Issue Discount." Redemption................... The Junior Subordinated Debentures are redeemable by the Company in whole or in part on or after , 2007, or at any time, in whole but not in part, upon the occurrence of a Special Event, in either case, subject to the receipt of any necessary prior regulatory approval. If the Junior Subordinated Debentures are redeemed, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures so redeemed. The Trust Securities will be redeemed upon maturity of the Junior Subordinated </TABLE> <TABLE> <S> <C> Debentures. See "Description of Capital Securities--Redemption--Mandatory Redemption" and "--Special Event Redemption or Distribution of Junior Subordinated Debentures." Liquidation of the Trust..... Upon the occurrence and continuation of a Special Event, the Company will have the right, subject to the receipt of any necessary prior regulatory approval, to dissolve the Trust and, after satisfaction of claims of creditors of the Trust, if any, as required by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of the Capital Securities and the Common Securities in liquidation of the Trust. If the Junior Subordinated Debentures are distributed to the holders of Capital Securities upon the liquidation of the Trust, the Company will use its best efforts to list the Junior Subordinated Debentures on such stock exchanges, if any, on which the Capital Securities are then listed. See "Description of Capital Securities--Redemption-- Special Event Redemption or Distribution of Junior Subordinated Debentures." In the event of the liquidation of the Trust, after satisfaction of the claims of creditors of the Trust, if any, as provided by applicable law, the holders of the Capital Securities will be entitled to receive a liquidation amount of $1,000 per Capital Security plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in Junior Subordinated Debentures as described above. If such Liquidation Distribution (as defined herein) can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Capital Securities shall be paid on a pro rata basis. The holder(s) of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securi- ties, except that if an Indenture Event of Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities. See "Description of Capital Securities--Liquidation Distribution Upon Dissolution." Use of Proceeds.............. The proceeds to the Trust from the offering of the Capital Securities will be $125 million. All of the proceeds from the sale of the Capital Securities and the Common Securities will be invested by the Trust in the Junior Subordinated Debentures. The estimated net proceeds received by the Company from the Capital Securities Offering of approximately $ , as well as the estimated $ of net proceeds from the Common Stock Offer- ing ($ if the Common Stock Underwriters' over-allotment options are exercised in full), will be used by the Company primarily to fund discounted loan acquisition and other lending and investment activities which are currently conducted by the Company through non-banking subsidiaries of the Company and the Bank and to develop related businesses. In addition, a portion of the net proceeds from the Offerings also could be used to acquire other businesses, including other financial institutions, mortgage banking companies, particularly those which are engaged in sub-prime single-family residential lending activities, and companies which have software or other technology which would enhance the Company's ability to conduct loan servicing and other activities. Although the Company evaluates potential acquisition opportunities from time to time, currently there are no agreements, arrangements or understandings with regard to any such transaction. See "Use of Proceeds." </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040389_oci-n-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040389_oci-n-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7cfd1ed194f3a996c5a2065bbea818d2e8337b75
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040389_oci-n-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, references to "OCI" or the "Company" mean Outdoor Communications, Inc. (formerly known as OCI Holdings Corp.) together with all of its direct and indirect subsidiaries and businesses; "OCI North" refers to the Company's subsidiary, OCI (N) Corp; "OCI South" refers to the Company's subsidiary, OCI (S) Corp; and "Predecessors" refers to each of OCI North and OCI South. Unless otherwise indicated, references to financial or operating results of the Company occurring in any fiscal year are to the twelve months ended on June 30 of such indicated fiscal year. Unless otherwise indicated, references to financial or operating results of OCI South occurring prior to June 30, 1997 reflect the consolidated results of the Company's Mass Communications Corp. ("MCC") subsidiary and OCI (S) Corp. prior to the merger of MCC with and into the Company, which merger was effective as of June 30, 1997. The information in this Prospectus assumes the exchange (the "Exchange") of the Company's Series A 10% Subordinated Notes ("Series A Notes") and Series B 10% Subordinated Notes ("Series B Notes") for shares of Series A Preferred Stock, $.01 par value per share ("Series A Preferred Stock"), of the Company or Series A Preferred Membership Interests ("Series A Preferred Interests") of the Company's subsidiary OCIH LLC ("OCIH"). The pro forma financial information in this Prospectus reflects only the acquisitions of Georgia Outdoor, Alabama Outdoor, Skoglund and Outdoor West (each, as defined below, and collectively, the "Significant Acquisitions") and excludes other individually insignificant operations acquired by the Company since its formation. THE COMPANY OCI is a leading provider of outdoor advertising services, operating approximately 13,500 advertising displays in 12 midwestern and southeastern states. The Company focuses on small- to medium-sized markets with populations ranging from 15,000 to 150,000, and is the largest outdoor advertising company in most of the markets in which it operates. Management believes that operating in small- to medium-sized markets provides certain advantages over operating in large markets, including lower and more stable lease costs, greater new build opportunities and more attractive acquisition opportunities. Outdoor advertising offers repetitive impact and relatively low cost-per- thousand impressions compared to alternative media, including television, radio, newspapers, magazines and direct mail marketing. The outdoor advertising industry in the United States has experienced increased advertiser interest and revenue growth during the 1990s. According to recent estimates by the Outdoor Advertising Association of America (the "OAAA"), the trade association for the outdoor advertising industry, outdoor advertising generated total revenues of approximately $2.0 billion in 1996, or approximately 1.1% of total advertising expenditures in the United States. While the industry has experienced some consolidation within the past few years, the OAAA estimates that there are still approximately 600 companies in the outdoor advertising industry operating approximately 396,000 billboard displays. The Company expects the trend of consolidation in the outdoor advertising industry to continue. The Company's objective is to be a leading provider of outdoor advertising services in small- to medium-sized markets across the United States. To achieve this objective, the Company plans both to increase its penetration in its existing markets and expand into attractive new markets. The Company has historically implemented, and intends to continue to pursue, the following operating strategy: Pursue Strategic Acquisitions. The Company seeks to continue its growth by pursuing an aggressive acquisition strategy emphasizing both in-market and new market acquisitions. The Company believes it has attractive in-market acquisition opportunities which will serve to increase market penetration and enhance local market operating efficiencies. In most instances, in- market acquisitions involve the purchase of display faces only and require no incremental personnel. The Company also intends to pursue new market acquisitions that are either within its existing regions or in new regions where attractive growth and consolidation opportunities exist. Leverage Operational Structure. The Company's operational structure provides significant operating leverage to support increased penetration of existing markets and new market expansion. The Company's operations are comprised of 10 divisions, each with its own headquarters to service its display structures and customers. OCI has centralized management operations in Traverse City, Michigan and Corinth, Mississippi to provide administrative oversight of the divisions through centralized purchasing, a detailed budgeting process, management information systems and strict cost controls. With this infrastructure in place, the Company can generate revenues from newly acquired or constructed display faces at attractive incremental margins. Focus on Local Advertisers. The Company seeks to continue its local advertiser focus, which management believes provides the Company with a diverse and stable advertiser base, fewer sales subject to agency commissions and greater rate integrity. Local advertising constituted over 84% of the Company's gross revenues for the nine months ended March 31, 1997, which is higher than the industry average of 70% as estimated by the OAAA. The Company believes that the diversity of its local customer base insulates it from dependence on any one customer or industry. During the nine months ended March 31, 1997, no single customer represented more than 3.0% of the Company's gross revenues. Emphasize Twelve-Month Advertising Contracts. The Company seeks to maximize occupancy levels and sales force and production efficiency by focusing on twelve-month advertising contracts. The Company believes that these long- term contracts enhance occupancy levels at stable advertising rates, generate higher renewal rates, increase the predictability of revenues and allow its sales personnel time to devote greater attention to servicing their accounts. Capitalize on Experienced Management Team. The Company believes that one of the keys to continuing its growth is its experienced management team. The Company's three-person senior management team has over 70 years of combined experience in the outdoor advertising industry which provides the Company with the market knowledge and local relationships necessary to identify and evaluate acquisition candidates. Management's local relationships also provide OCI with the ability to identify and obtain municipal approval for new build opportunities. On April 3, 1996, the Company's current structure emerged with its acquisitions and consolidation of OCI North and OCI South. OCI South was founded in 1972 by John C Stanley IV and A.B. Isbell upon their acquisition of outdoor advertising assets in the region around Memphis, Tennessee. Through dedication to customer service and product quality and the consummation of numerous acquisitions, OCI South grew to operate more than 2,600 display faces in six states by April 1996. In 1989, OCI North was formed by Messrs. Stanley and Isbell to complete the acquisition of Dingeman Advertising, Inc., an outdoor advertising company based in Traverse City, Michigan. Through additional acquisitions and new construction, OCI North grew to operate more than 2,800 display faces in three states by April 1996. The Company believes that the success of its management team in developing and expanding its operations has made OCI a significant competitor in the outdoor advertising industry. See "Certain Relationships and Related Transactions--The Formation Transactions." The Company is a Delaware corporation whose executive offices are located at 512 Taylor Street, Corinth, Mississippi, 38834. The Company's telephone number is (601) 286-3334. RECENT ACQUISITIONS Since its formation, the Company has pursued an aggressive acquisition strategy, completing 15 acquisitions of outdoor advertising companies (collectively, the "Acquired Companies") over a 15-month period. None of such acquisitions involved sellers affiliated with the Company. The Company's acquisition integration approach is different for new market and in-market acquisitions. In new market acquisitions, the Company generally eliminates administrative and accounting positions, maintains a sales and production capability and institutes the Company's operating philosophy, systems and controls. In-market acquisitions typically involve the purchase of display faces only, resulting in the elimination of all personnel and related costs. The following summarizes the Significant Acquisitions, which are included in the summary pro forma financial information included herein: The Outdoor West Acquisition. On March 31, 1997, OCI acquired substantially all of the assets of Outdoor West, Inc. of Tennessee ("Outdoor West") for a cash purchase price of $11.8 million. As a result of this acquisition, the Company acquired approximately 960 display faces in Tennessee and a right of first refusal to purchase Outdoor West, Inc. of Georgia, an affiliate of Outdoor West. The Skoglund Acquisition. On October 31, 1996, OCI completed the acquisition of substantially all of the assets of Skoglund Communications, Inc. and Skoglund Communications of St. Cloud, Inc. (together, "Skoglund") for a cash purchase price of $21.2 million. As a result of the acquisition of Skoglund, the Company acquired approximately 1,500 display faces in Minnesota and Wisconsin. The Alabama Outdoor Acquisition. On April 30, 1996, OCI acquired approximately 2,900 display faces across North and Central Alabama through its purchase of substantially all of the assets of AOA Acquisition, L.L.C. ("Alabama Outdoor") for a cash purchase price of $34.1 million. The Georgia Outdoor Acquisition. On April 3, 1996, OCI completed the acquisition of substantially all of the assets of Georgia Outdoor Advertising Company ("Georgia Outdoor") for a cash purchase price of $11.6 million. As a result of this transaction, the Company acquired approximately 800 display faces in Georgia and South Carolina in the vicinity of Athens, Georgia. In addition to the Significant Acquisitions, since September 1996 the Company has completed 11 individually insignificant in-market acquisitions for an aggregate purchase price of approximately $17.8 million. The pro forma financial information in this Prospectus does not fully reflect the effect of these acquisitions, as the results of these operations are only included from the date of acquisition. The Company does not currently have any written or oral agreement to consummate any other material acquisition. FINANCING PLAN To provide greater flexibility in pursuing its growth strategy, concurrently with the Offering the Company intends to enter into a new $150.0 million senior credit facility (the "New Credit Facility"). In addition, the holders of the Company's Series A Notes and Series B Notes will exchange such notes for shares of Series A Preferred Stock of the Company or Series A Preferred Interests of OCIH effective upon the closing of the Offering. The Offering is conditioned upon the closing of the New Credit Facility and the Exchange. The Series A Preferred Stock and Series A Preferred Interests will not be registered under the state or federal securities laws. The Offering, the New Credit Facility and the Exchange are referred to in this Prospectus as the "Financing Plan." THE OFFERING Issuer ..................... Outdoor Communications, Inc. Securities Offered ......... $100,000,000 aggregate principal amount of % Senior Subordinated Notes due 2007. Maturity ................... , 2007. Interest Payment Dates ..... and of each year, commencing on , 1998. Mandatory Redemption ....... None. Optional Redemption ........ Except as described below, the Company may not redeem the Notes prior to , 2002. On or after such date, the Company may redeem the Notes, in whole or in part from time to time, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to , 2000, the Company may, at its option, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Proceeds of one or more Public Equity Offerings by the Company, at a redemption price equal to % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes--Optional Redemption." Change of Control .......... Upon the occurrence of a Change of Control, the Company will, subject to certain conditions, be required to make an offer to purchase all of the Notes at 101% of principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that the Company will have the financial resources necessary to repurchase the Notes following a Change of Control. These provisions would not necessarily afford protection in the event a highly leveraged transaction that does not result in a Change of Control. See "Risk Factors--Change of Control" and "Description of Notes--Repurchase at the Option of Holders--Change of Control." Guarantees ................. The Company's obligations under the Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by all of the Company's subsidiaries (collectively, the "Guarantors"). The Guarantees will be subordinated to Guarantor Senior Indebtedness (as defined) to the same extent and in the same manner as the Notes are subordinated to all Senior Indebtedness of the Company. See "Description of Notes--Guarantees." Ranking .................... The Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company and will rank pari passu in right of payment with all other senior subordinated indebtedness of the Company. The Guarantees will be general, unsecured obligations of the Guarantors, subordinated in right of payment to all existing and future Guarantor Senior Indebtedness. While the Notes and the Guarantees are senior subordinated obligations, after giving effect to the Offering, there will be no indebtedness that is subordinated in right of payment to the Notes, and the Company and the Guarantors have no present plans to issue any indebtedness that is subordinated to the Notes and the Guarantees. As such, the Notes and the Guarantees will be subordinate to all of the indebtedness of the Company and the Guarantors expected to be outstanding immediately following the Offering. See "Risk Factors--Subordination of Notes and Guarantees." As of March 31, 1997, after giving effect to the Offering and the application of the proceeds therefrom, the Company would have had outstanding $26.5 million of indebtedness ranking senior in right of payment to the Notes and the Guarantees and the ability to borrow up to an additional $123.5 million under the New Credit Facility, which additional borrowings would be senior to the Notes. The Company and the Guarantors do not have any present plans to issue any indebtedness that would be senior to the Notes and the Guarantees. See "Description of Notes--Ranking." Certain Covenants .......... The indenture governing the Notes (the "Indenture") will contain covenants relating to, among other things, the following matters: (i) incurrence of additional Indebtedness (as defined) by the Company and its subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its subsidiaries and the redemption of certain subordinated obligations of the Company and its subsidiaries; (iii) certain sales of assets; (iv) mergers, consolidations and transfer of assets; and (v) transactions with affiliates. See "Description of Notes--Certain Covenants." Use of Proceeds ............ The net proceeds of the Offering (after deduction of underwriting discounts and estimated offering expenses) are expected to be approximately $96.0 million. The net proceeds from the Offering, together with borrowings under the New Credit Facility of approximately $20.6 million, will be used to repay $115.7 million of indebtedness outstanding under the existing senior credit facility. The balance of the net proceeds will be used for working capital and general corporate purposes. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040478_power_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040478_power_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1069cab033b6ba7aa26cd6c5f1f2575d3a181f9e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040478_power_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes: (i) the conversion, upon completion of the Offering, of 5,000,000 shares of outstanding Series A Preferred Stock and 4,100,000 shares of outstanding Series B Preferred Stock into Common Stock and (ii) that the Underwriters' over-allotment option will not be exercised. See "Description of Capital Stock," "Underwriting" and Note 7 to Notes to Consolidated Financial Statements. In this Prospectus, unless the context requires otherwise, "Power Computing" and the "Company" refer to Power Computing Corporation, a Delaware corporation, and its subsidiaries. THE COMPANY Power Computing is a leading direct marketer of personal computers. To date, the Company has developed, manufactured, sold and supported a broad line of custom-configured Macintosh-compatible desktop computer systems which employ modular designs based, to the extent possible, on Wintel industry standard components. The Company intends to expand its leading position in the Macintosh-compatible market and to promote the growth of the Macintosh platform by offering new Macintosh-compatible desktop computer systems that are price/performance leaders. The Company is also planning to broaden its product portfolio to include Wintel desktop and portable computer systems, as well as Microsoft Windows NT based server products that will jointly support Macintosh and Wintel connectivity. The Company promotes its products through a targeted marketing strategy and an integrated media approach, which includes marketing its products directly to customers through its website, placing advertisements in computer trade magazines (generally in premium spots such as the inside front cover), direct mailings and Company catalogs. Direct marketing of PCs is currently growing at a rate of approximately 25% per year, and it is estimated that 27% of all PCs sold in the United States were distributed directly in calendar year 1996. The Company sells its products directly to customers over the Internet through its innovative online store, over the telephone and to larger accounts through its growing direct field sales force. The Company believes that its direct marketing strategy provides competitive advantages by allowing it to rapidly and efficiently develop, manufacture and deliver innovative products at competitive prices, to better understand and respond to customer demand for computer products and services and to effectively generate customer loyalty and brand name recognition. While the Company intends to capitalize on these competitive advantages through its continued direct marketing of Macintosh-compatible products, the Company is also now developing selected Wintel computer systems, which it plans to begin manufacturing, marketing and selling during the first half of fiscal 1998. The Company believes its direct marketing expertise, combined with its continued use of Wintel industry standard components, will facilitate its entry into certain Wintel market segments where graphics and multimedia capabilities are particularly important. Upon its entrance into the Wintel market, the Company will be the first company to manufacture and directly market both Macintosh and Wintel products. As a result, the Company's customers that use both systems will be able to purchase products from a single source that can service and support both platforms. The Company's objective is to strengthen its position as a leading direct marketer of PCs by offering a portfolio of innovative personal computing products that are price/performance leaders. To accomplish this objective, Power Computing intends to (i) leverage its direct marketing expertise and continue to capitalize on the advantages achieved by its direct marketing of Macintosh-compatible computer systems, (ii) continue to offer innovative Macintosh technology to its customers at competitive prices, (iii) identify and target certain market segments through its direct marketing strategy, (iv) introduce selected Wintel desktop and portable computer systems, (v) provide outstanding customer order, service and support programs to its customers and (vi) expand internationally and increase its international sales. In December 1994, Power Computing became the first company to receive a license from Apple for the proprietary Mac OS and Macintosh system architecture. The Company continually strives to develop a broad range of systems that incorporate innovative technological features and functions, and its award winning products have been widely recognized by leading industry journals such as Macworld, MacUser and MacWEEK. The Company was incorporated in Delaware in November 1993. The Company's principal executive offices are located at 2400 South IH-35, Round Rock, Texas 78681, and its telephone number is (512) 388-6868. THE OFFERING Common Stock Offered Hereby............... 3,000,000 shares Common Stock to be Outstanding after the Offering.................................. 17,719,113 shares(1)(2) Use of Proceeds........................... To reduce borrowings under its credit facility, to fund the Company's initial development, manufacture and marketing of its Wintel computer systems, and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market Symbol.... PWRC - --------------- (1) Based on shares outstanding as of March 31, 1997. Excludes, as of March 31, 1997, (i) 4,555,285 shares of Common Stock issuable upon exercise of outstanding stock options, under the Company's 1994 Stock Option Plan with a weighted average exercise price of $4.79 per share, (ii) 100,000 shares of Series B Preferred Stock issuable upon exercise of an outstanding warrant with an exercise price of $5.00 per share and (iii) 112,500 shares of Common Stock issuable upon exercise of an outstanding warrant with an exercise price of $0.10 per share. See "Management -- Incentive Stock Plans" and "Description of Capital Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040525_compass_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040525_compass_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..563d68deea9e56f37de486fe52b275a837ee0111
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040525_compass_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including information under "Risk Factors." The shares of Common Stock offered hereby involve a high degree of risk and investors should carefully consider information set forth in "Risk Factors." Unless otherwise indicated, all information in this Prospectus (i) gives effect to a 4-for-1 stock split to be consummated prior to the effectiveness of this offering, and (ii) assumes that the Underwriters' over-allotment option as described in "Underwriting" is not exercised. As used in this Prospectus, (i) unless the context otherwise requires, the term "Company" refers to Compass Plastics & Technologies, Inc. and its wholly-owned subsidiary, and (ii) the term "year" or "fiscal year" refers to the Company's fiscal year ending on the last Sunday of the 52 consecutive weeks ending in October, and the fiscal year ended October 27, 1996 includes the operations of the Company and its predecessor, AB Plastics. See "Selected Financial Data." The Company Compass Plastics & Technologies, Inc., through its wholly-owned subsidiary, AB Plastics Corporation ("AB Plastics"), is a leading contract manufacturer and assembler of custom injection-molded plastic components in the western United States. The Company manufactures the plastic exteriors of computer monitors, televisions, electronic music keyboards and other consumer electronics equipment. In addition to injection-molded components, the Company offers a broad range of "value-added" services, including painting, decorating and assembly. A significant percentage of the Company's components are manufactured using gas-assist molding technology which reduces material usage and permits the molding of lighter and stronger parts. The Company believes its technical and manufacturing capabilities to produce large injection-molded plastic components on both a "just-in-time" basis and in production volumes with low reject rates provide a significant competitive advantage. The Company charges its customers a fixed price for each component or part it manufactures, which components may consist of single or multiple parts. Negotiated prices include the cost of thermoplastic resins, packaging, other materials and parts, labor and overhead. Although thermoplastic resins have historically accounted for at least 80% of its raw materials costs, the Company does not believe that its results of operations are subject to the risk of fluctuations in resin prices, since the Company's arrangements with most of its customers provide that price changes in such resins are passed through to the customer by changes in the component prices charged by the Company. The Company's two major original equipment manufacturer ("OEM") customers are Sony Corporation ("Sony"), through its computer monitor and television manufacturing divisions, and Matsushita Electronic Corporation of America ("Matsushita"), through its Panasonic and Quasar brands. Sales to these customers represented approximately 66.5% and 18.0%, respectively, of the Company's total sales for the fiscal year ended October 27, 1996. Of sales to Sony, computer monitor components accounted for approximately 39.1% and television components accounted for approximately 27.4% of the Company's total sales during the fiscal year ended October 27, 1996. The Company has been an uninterrupted supplier of custom injection-molded components to Sony since 1972, to Matsushita since 1983 and to virtually all of its other customers for at least seven years. To improve its ability to support major customers, in addition to its current manufacturing facility in Gardena, California (approximately 15 miles south of Los Angeles), the Company is currently completing a new "build-to-suit" manufacturing facility in Tijuana, Mexico. This new facility has been logistically located near many of its customers' manufacturing plants in Mexico and is expected to add significant manufacturing capacity by September 1997. Management believes that this facility will enable the Company to capitalize on demand from new and existing customers which have relocated their manufacturing operations from the Far East and the United States to Mexico in recent years due to lower labor and transportation costs. Closer proximity to its major customers will allow the Company to be more efficient in delivering 15 to 20 daily truckloads of components to its customers' production facilities and eliminate time-consuming border crossings. Injection-molded plastic components are used in a wide variety of industries, including automotive, telecommunications, computer, consumer electronics, medical and packaging. Based on information provided in Plastic News, a leading industry publication, sales of the top 100 North American plastic injection molders were approximately $11.3 billion in 1994, $12.5 billion in 1995 and $14.4 billion in 1996, reflecting a 12.9% industry-wide average annual growth rate. The Company was ranked by 1996 sales as the 96th largest custom plastic injection molder in North America, the 9th largest plastic injection molder in the western United States (comprised of the states of California, Arizona, Oregon and Washington), and one of the three largest custom plastic injection molders in Southern California. According to Stanford Resources' Monitrak Quarterly Report, United States sales of computer monitors, the Company's major market, rose to approximately 21.7 million units in 1996, from sales of approximately 13.4 million units in 1994. The Company's goal is to be a dominant supplier of injection-molded plastic components to the increasing number of computer monitor and television OEM plants located in Southern California and Tijuana, Mexico. Management believes that the commencement of digital broadcasting in the television industry in the United States, starting in 1998, will create a demand for new high-definition television sets ("HDTV") and flat panel displays as consumers replace obsolete television sets unable to receive digital broadcasting with HDTV quality. According to the Consumer Electronics Manufacturers Association, at least 20 million television sets have been sold each year since 1991 and 380 million television sets have been sold since 1974 in the United States. The key elements of the Company's growth strategy include the following: o Continue to expand computer monitor and television component business -- through the continuation of the overall growth of the Company's computer monitor sales to Sony, which have grown from $2.9 million in fiscal 1994 to $15.4 million in fiscal 1996, expansions into new products such as Sony's personal computer, known as "Vaio," and by targeting sales to other computer monitor and television OEMs doing business in Tijuana, Mexico; o Acquire complementary businesses -- which the Company believes will diversify its customer base, technical capabilities and geographic areas served; o Capitalize on customer demand in Tijuana market -- by completing the construction of its manufacturing facility in Tijuana, Mexico to increase manufacturing capacity by 50% and to be located near existing and potential customers; o Pursue long-term relationships with new customers -- that require responsive manufacturing services in the computer, television and consumer electronics industries; and o Continue commitment to quality and service -- by continuing to achieve the highest levels of quality control through continuous improvement of its engineering and manufacturing capabilities. The Company was incorporated under the laws of the State of Delaware in May 1996 under the name AB Plastics Holding Corporation. In June 1997, the Company changed its name to Compass Plastics & Technologies, Inc. The Company's principal executive offices are located at 15730 South Figueroa Street, Gardena, California 90248, and its telephone number is (213) 770-8771. For a description of the background of the Company, see "The Company." The Offering Common Stock offered by the Company ...................... 1,200,000 shares of Common Stock Common Stock offered by the Selling Stockholders ......... 133,333 shares of Common Stock Common Stock outstanding after the offering ................. 4,760,000 shares of Common Stock(1)(2) Use of Proceeds ............... The Company intends to use the net proceeds of this offering to repay approximately $4.0 million of outstanding indebtedness under its subordinated loan agreement with Sirrom Investments, Inc. ("Sirrom"). The remaining net proceeds of approximately $5.0 million will be used to complete the construction of the warehouse and distribution center at the Company's Gardena, California facility (approximately $1.6 million) and equip its newly-constructed Tijuana, Mexico manufacturing facility (approximately $3.4 million). Pending such uses, the Company intends to temporarily reduce approximately $5.0 million in borrowings expected to be outstanding under the Company's maximum $10.0 million revolving line of credit facility with The Sumitomo Bank of California ("Sumitomo"). See "Use of Proceeds." Nasdaq National Market Symbol ................ CPTI - ------------ (1) Gives effect to the exercise of outstanding stock options and warrants to purchase an aggregate of 1,560,000 shares of Common Stock, of which stock options and warrants to purchase 760,000 shares of Common Stock are exercisable at $1.00 per share and a warrant to purchase 800,000 shares of Common Stock is exercisable at a total exercise price of $2,000, which will be effective on the date of this Prospectus. Stock options and warrants issued to certain executive officers of the Company and AB Plastics to purchase an aggregate of 646,932 shares of Common Stock will be exercised by such officers by delivering to the Company $646,932 principal amount of promissory notes (of which $600,808 principal amount of such notes delivered by the Chairman of the Board and the President of the Company will be without recourse to such persons), representing the amount of the aggregate exercise price applicable to their respective stock options and warrants. See "Certain Transactions." (2) Does not include (i) 133,333 shares of Common Stock issuable upon exercise of the Representatives' Warrants, (ii) 440,000 shares of Common Stock reserved for issuance upon exercise of outstanding options with an exercise price of $1.00 per share under the Company's 1996 Stock Option Plan and (iii) 222,222 shares of Common Stock reserved for issuance upon exercise of outstanding options with an exercise price equal to the initial public offering price per share, and 577,778 shares of Common Stock reserved for issuance upon exercise of options reserved for future grant, under the Company's 1997 Stock Option Plan. See "Management -- Employment Agreements," "-- Stock Option Plans," "Certain Transactions" and "Underwriting." <TABLE> <CAPTION> April 27, 1997 ---------------------------- Actual As Adjusted (8) --------- ---------------- <S> <C> <C> Balance Sheet Data: Cash ........................... $ 803 $ 2,659 Working capital .................. 3,019 4,375 Total assets ..................... 19,470 21,485 Total current liabilities ......... 5,670 5,670 Total long-term liabilities ...... 9,656 2,506 Stockholders' equity ............ 4,143 13,309 </TABLE> - ------------ (1) In September 1996, a corporate affiliate of Michael A. Gibbs, President of the Company, and Private Equity Partners, L.L.C. ("PEP"), an affiliate of Geoffrey J.F. Gorman, Chairman of the Board of the Company, formed the Company and sponsored the acquisition of all of the outstanding capital stock of AB Plastics (prior to the acquisition, the "Predecessor"). The acquisition and its related financing resulted in higher interest expense and a different capital structure. Due to such differences, net income per share is not provided for periods prior to the 52 weeks ended October 27, 1996 (pro forma). See "The Company" and Note 1 of Notes to Financial Statements. (2) Gives effect to the acquisition of AB Plastics, assuming such transaction had occured as of October 30, 1995. See "Pro Forma Statements of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040527_fidelity_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040527_fidelity_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01747c8104eb52f657a3b84582ad6c81d47d6c0a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040527_fidelity_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references herein to the 'Company' or 'Delta' refer to Delta Financial Corporation and its wholly-owned subsidiaries. All financial information gives pro forma effect to the termination in October 1996 of the S corporation status of Delta Funding Corporation, a wholly-owned subsidiary, and the transactions described in 'Selected Consolidated Financial Data' and the related notes thereto and in 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Termination of S Corporation Status and Income Taxes.' THE COMPANY Delta is a specialty consumer finance company that has engaged in originating, acquiring, selling and servicing home equity loans since 1982. Throughout its 15 years of operating history, Delta has focused on lending to individuals who generally have impaired or limited credit profiles or higher debt to income ratios and typically have substantial equity in their homes. Management believes that these borrowers have been largely unsatisfied by the more traditional sources of mortgage credit which underwrite loans to conventional guidelines established by the Federal National Mortgage Association ('FNMA') and the Federal Home Loan Mortgage Corporation ('FHLMC'). The Company makes loans to these borrowers for such purposes as debt consolidation, home improvement, mortgage refinancing or education, and these loans are primarily secured by first mortgages on one- to four-family residential properties. Through its wholly-owned subsidiary, Delta Funding Corporation, the Company originates home equity loans indirectly through licensed brokers and other real estate professionals who submit loan applications on behalf of the borrower ('Brokered Loans') and also purchases loans from mortgage bankers and smaller financial institutions that satisfy Delta's underwriting guidelines ('Correspondent Loans'). Delta Funding Corporation currently originates and purchases the majority of its loans in 21 states, through its network of approximately 1,000 brokers and correspondents. The Company believes that it has a competitive advantage in serving brokers and correspondents in the non-conforming home equity market that stems from its substantial experience in this sector and its emphasis on providing quality service that is prompt, responsive and consistent. The 19 members of Delta Funding Corporation's senior management have an average of over 13 years of non-conforming mortgage loan experience. Management believes this industry-specific experience, coupled with the systems and programs it has developed over the past 15 years, enable the Company to provide quality services that include preliminary approval of most Brokered Loans and certain Correspondent Loans within one day, consistent application of its underwriting guidelines and funding or purchasing of loans within 14 to 21 days of preliminary approval. In addition, the Company seeks to establish and maintain productive relationships with its network of brokers and correspondents by servicing each one with a business development representative, a team of experienced underwriters and, in the case of Brokered Loans, a team of loan officers and processors assigned to specific brokers to process all applications submitted by such brokers. The Company currently originates and purchases the majority of its loans through the Company's main office in Woodbury, New York, its full service office in Atlanta, Georgia, its full processing offices in St. Louis, Missouri, Chicago, Illinois and Warwick, Rhode Island and from seven business development offices located in Michigan (2), New Jersey, Ohio (2), Pennsylvania and Virginia. The Company historically made loans primarily in New York, New Jersey and Pennsylvania. Commencing in 1995, the Company implemented a program to expand its geographic presence into the New England, Mid-Atlantic, Midwest and Southeast regions. As a consequence of its expansion into new markets, as well as its further penetration of existing markets, the Company increased its loan production substantially in 1995 and 1996. Total loan originations and purchases increased $168.1 million, or 140%, from $119.7 million in 1994 to $287.8 million in 1995, and increased $371.0 million, or 129%, in 1996 to $658.8 million. In February 1997, in an effort to broaden its origination sources and to expand its geographic presence in the Company's new markets, the Company acquired two related retail originators of home equity loans, Fidelity Mortgage, Inc., based in Cincinnati, Ohio, and Fidelity Mortgage (Florida), Inc., based in West Palm Beach, Florida (together, 'Fidelity Mortgage'). The Company acquired Fidelity Mortgage with the expectation that the acquisition would result in beneficial synergies, with Fidelity Mortgage providing a dedicated source of mortgage loans for Delta Funding Corporation's securitization pools and for its servicing arm, and Delta Financial Corporation providing capital to Fidelity Mortgage for the expansion of its retail network. Fidelity Mortgage develops retail loan leads primarily through its telemarketing system and its network of nine retail offices located in Florida (2), Georgia, Indiana, Ohio (4) and North Carolina. Four of these offices were opened in the second quarter of 1997, and the Company intends to expand the Fidelity Mortgage network further. The Company has been profitable in each of its 15 years of operation. The Company's results of operations have improved significantly in recent periods as a result of increased loan production and improved operating efficiencies. Total revenues increased $37.4 million, or 103%, to $73.5 million in 1996 from $36.1 million in 1995, and pro forma income before extraordinary item increased 630% to $19.1 million in 1996 from $2.6 million in 1995. During 1995 compared to 1994, the Company's total revenues increased 66% from $21.8 million to $36.1 million and pro forma income increased 128% from $1.1 million to $2.6 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' The Company generates earnings and cash flow primarily through the origination, purchase, securitization and servicing of home equity loans. In a securitization, the Company sells the loans that it originates or purchases to a trust for cash and records certain assets and income based upon (a) the difference between all principal and interest received from the mortgage loans sold and (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on the loans (the 'Excess Servicing') and (b) the difference between the contractual and estimated ancillary servicing revenue with respect to the loans and the estimated cost to service them ('Mortgage Servicing Rights'). At the time of the securitization, the Company estimates these amounts based upon a declining principal balance of the underlying loans, which has been calculated by using an estimated prepayment rate, and capitalizes these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded on the Company's balance sheet as interest-only and residual certificates and capitalized Mortgage Servicing Rights, respectively, and are aggregated and reported on the income statement as net gain on sale of mortgage loans, after being reduced (increased) by (i) loan acquisition premiums paid to correspondents and brokers, (ii) costs of securitization and (iii) any hedge losses (gains). The Company typically begins to receive Excess Servicing cash flow eight to twelve months from the date of securitization, although this time period may be shorter or longer depending upon the structure and performance of the securitization. Prior to such time, a reserve provision is created within the securitization trust which uses Excess Servicing cash flows to retire a portion of the securitization bond debt until the spread between the outstanding principal balance of the mortgage loans in the securitization trust and the securitization bond debt equals 2-3% of the initial securitization principal balance (hereinafter, the 'overcollateralization limit'). Once this overcollateralization limit is met, excess cash flows are distributed to Delta. The Company begins to receive contractual mortgage servicing cash flows in the month following the securitization. Since 1991, Delta has sold approximately $1.7 billion of its mortgage loans through 15 real estate mortgage investment conduit ('REMIC') securitizations. Each of these securitizations has been credit-enhanced by an insurance policy provided through a monoline insurance company to receive ratings of 'Aaa' from Moody's Investors Service, Inc. ('Moody's') and 'AAA' from Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ('Standard & Poor's'). The Company sells loans through securitizations and, from time to time, on a whole loan basis, to enhance its operating leverage and liquidity, to minimize financing costs and to reduce its exposure to fluctuations in interest rates. In addition to the excess cash flow from securitizations and proceeds from whole loan sales, the Company earns the net interest spread on loans held for sale, origination fees on its Brokered Loans and retail loans (which are included in other income) and servicing fees of between 0.50% and 0.65% per annum of the outstanding balance of the loans it services. Since its inception, the Company has serviced substantially all of the loans it has originated and purchased, including all of those that it has subsequently sold through securitizations. Management believes that servicing this loan portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. As of March 31, 1997, Delta had a servicing portfolio of $1.1 billion of loans. See 'Business--Loans.' The Company's business objective is to increase profitably the volume of its loan originations and purchases and the size of its servicing portfolio by implementing the following strategies: Continuing to Provide Quality Service. The Company believes its commitment to service provides it with a competitive advantage in establishing and maintaining productive broker and correspondent relationships. The Company's loan officers and underwriters endeavor to respond promptly and consistently on every loan submission. In addition, through its business development representatives, Delta regularly communicates with brokers and correspondents in order to better understand and respond to their needs. Maintaining Underwriting Standards. The Company believes the depth and experience of its underwriting staff, coupled with the consistent application of its underwriting procedures and criteria, provide the infrastructure needed to manage and sustain the Company's recent growth, while maintaining the quality of loans originated or purchased. The depth and experience in the Company's underwriting department provide two significant competitive advantages. First, they help to ensure that the Company's underwriting standards and subjective judgments required in the non-conforming market are consistently applied, thus enabling the Company to effectively implement a risk-based pricing strategy. Second, they provide the opportunity to expand underwriting activities beyond the Company's headquarters while maintaining consistent underwriting standards. Further Penetrating Existing and Recently Entered Markets and Expanding into New Markets. The Company intends to continue to increase the volume of its loan originations and purchases through a three-pronged strategy that includes greater originations and purchases from its existing brokers and correspondents, establishment of new broker and correspondent relationships in both existing and recently-entered markets and expansion into new markets. Expanding its Retail Origination Capabilities. The Company intends to devote management and capital resources to expanding its retail network in order to continue to broaden its origination capabilities and strengthen its geographic presence. Since the acquisition of Fidelity Mortgage and its five retail offices, the Company has opened additional Fidelity Mortgage branch offices in Atlanta, Georgia, Fort Lauderdale, Florida, Charlotte, North Carolina and Cleveland, Ohio. Expanding Through Acquisitions. Management believes acquisitions can be a means of cost effectively increasing or diversifying the Company's loan production capabilities. The Company continually considers acquisition candidates which operate in geographic or product areas that complement the Company's existing business. Leveraging its Information and Processing Technologies. In recent years, the Company has made significant capital investments to upgrade and expand its information and processing technologies. These investments have included the acquisition and implementation of a new servicing system and have enabled the Company to achieve operating efficiencies and cost savings. The Company's recent and anticipated geographic expansion and growth in originations and servicing portfolio were considered when these systems were designed, and management believes its strategic plans can be met by leveraging its existing systems without substantial additional investment in the near future. See 'Business--Business Strategy.' All of the Company's operations are conducted through its wholly-owned subsidiaries, Delta Funding Corporation, DF Special Holdings Corporation, Fidelity Mortgage, Inc. and Fidelity Mortgage (Florida), Inc. In November 1996, Delta completed the initial public offering of its common stock which trades on the New York Stock Exchange under the symbol 'DFC.' The principal executive offices of the Company are located at 1000 Woodbury Road, Suite 200, Woodbury, New York 11797, and its telephone number is (516) 364-8500. RECENT DEVELOPMENTS On June 18, 1997, Delta Funding Corporation entered into a $100 million syndicated credit agreement (the 'Credit Agreement') with a group of banks for which the First National Bank of Chicago ('First Chicago') acts as agent. The Credit Agreement will be used primarily to finance mortgage loans held for sale and to fund advances to securitization trusts by Delta Funding Corporation. The Credit Agreement provides for a $100 million secured revolving credit facility with various borrowing base sublimits, including, but not limited to, a $15 million secured recoverable servicing advance sublimit. Delta Funding Corporation's obligations under the Credit Facility are guaranteed by the Company. Advances under the Credit Facility are secured by a first priority lien on warehouse collateral and receivables created from recoverable servicing advances. In connection with the Credit Agreement, Delta Funding Corporation has agreed to certain standard affirmative covenants, including corporate existence, maintenance of its properties and insurance coverage, prompt payment of taxes and other claims and maintenance of a standard accounting system. Delta Funding Corporation also made certain negative covenants which, among other things: (i) specify maximum leverage ratios, (ii) limit its ability to incur additional indebtedness, (iii) require a minimum net worth, (iv) limit its ability to pledge, mortgage or encumber its assets and (v) limit its ability to merge with another entity or dispose of more than a specified percentage of its total assets. THE OFFERING <TABLE> <S> <C> Securities Offered........................ $150,000,000 aggregate principal amount of % Senior Notes due 2004. Maturity Date............................. July , 2004. Interest Payment Dates.................... Each , and , commencing , 1997. Guarantees................................ The obligations of the Company under the Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the existing and future Subsidiaries of the Company, other than Subsidiaries designated as 'Unrestricted Subsidiaries' in accordance with the Indenture. See 'Description of the Notes--Guarantees.' Optional Redemption....................... On or after July , 2001, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. See 'Description of the Notes--Optional Redemption.' Change of Control......................... Upon a Change of Control (as defined), each Holder of the Notes may require the Company to repurchase the Notes held by such Holder at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. See 'Description of the Notes--Repurchase at the Option of Holders--Change of Control.' Asset Sales............................... The Indenture relating to the Notes (the 'Indenture') requires that the proceeds of certain Asset Sales (as defined) be applied as specified in the Indenture or be used to repurchase the Notes, at the option of the Holder thereof, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. Ranking................................... The Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future unsecured unsubordinated Indebtedness of the Company and senior in right of payment to all existing and future subordinated Indebtedness of the Company. The Subsidiary Guarantee of each of the Subsidiary Guarantors will rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes and Subsidiary Guarantees will be effectively subordinated to all existing and future secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the value of the collateral securing such indebtedness). As of March 31, 1997, after giving pro forma effect to the Offering, the Company and the Subsidiary Guarantors had approximately $3.3 million of secured Indebtedness outstanding. </TABLE> <TABLE> <S> <C> Certain Covenants......................... The Indenture will contain certain covenants, including, but not limited to, covenants with limitations on the following matters: (i) restricted payments; (ii) incurrence of additional indebtedness; (iii) issuance of preferred stock; (iv) incurrence of additional liens; (v) dividends and other payment restrictions affecting subsidiaries; (vi) restrictions on distributions from subsidiaries; (vii) merger, consolidation or sale of assets; (viii) transactions with affiliates; and (ix) lines of business. However, all these limitations are subject to a number of important exceptions and qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds........................... The net proceeds will be used (i) to pay off all residual financing agreements (approximately $57.5 million at March 31, 1997), (ii) to repay amounts outstanding under certain of the Company's warehouse lines of credit (lines of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans) (approximately $51.8 million as of March 31, 1997), (iii) to fund future loan originations and purchases, (iv) to support securitization transactions, (v) to fund expansion of Fidelity Mortgage's retail network and (vi) for general corporate purposes, including to fund acquisitions. See 'Use of Proceeds' and 'Underwriting.' </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040528_fidelity_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040528_fidelity_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01747c8104eb52f657a3b84582ad6c81d47d6c0a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040528_fidelity_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references herein to the 'Company' or 'Delta' refer to Delta Financial Corporation and its wholly-owned subsidiaries. All financial information gives pro forma effect to the termination in October 1996 of the S corporation status of Delta Funding Corporation, a wholly-owned subsidiary, and the transactions described in 'Selected Consolidated Financial Data' and the related notes thereto and in 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Termination of S Corporation Status and Income Taxes.' THE COMPANY Delta is a specialty consumer finance company that has engaged in originating, acquiring, selling and servicing home equity loans since 1982. Throughout its 15 years of operating history, Delta has focused on lending to individuals who generally have impaired or limited credit profiles or higher debt to income ratios and typically have substantial equity in their homes. Management believes that these borrowers have been largely unsatisfied by the more traditional sources of mortgage credit which underwrite loans to conventional guidelines established by the Federal National Mortgage Association ('FNMA') and the Federal Home Loan Mortgage Corporation ('FHLMC'). The Company makes loans to these borrowers for such purposes as debt consolidation, home improvement, mortgage refinancing or education, and these loans are primarily secured by first mortgages on one- to four-family residential properties. Through its wholly-owned subsidiary, Delta Funding Corporation, the Company originates home equity loans indirectly through licensed brokers and other real estate professionals who submit loan applications on behalf of the borrower ('Brokered Loans') and also purchases loans from mortgage bankers and smaller financial institutions that satisfy Delta's underwriting guidelines ('Correspondent Loans'). Delta Funding Corporation currently originates and purchases the majority of its loans in 21 states, through its network of approximately 1,000 brokers and correspondents. The Company believes that it has a competitive advantage in serving brokers and correspondents in the non-conforming home equity market that stems from its substantial experience in this sector and its emphasis on providing quality service that is prompt, responsive and consistent. The 19 members of Delta Funding Corporation's senior management have an average of over 13 years of non-conforming mortgage loan experience. Management believes this industry-specific experience, coupled with the systems and programs it has developed over the past 15 years, enable the Company to provide quality services that include preliminary approval of most Brokered Loans and certain Correspondent Loans within one day, consistent application of its underwriting guidelines and funding or purchasing of loans within 14 to 21 days of preliminary approval. In addition, the Company seeks to establish and maintain productive relationships with its network of brokers and correspondents by servicing each one with a business development representative, a team of experienced underwriters and, in the case of Brokered Loans, a team of loan officers and processors assigned to specific brokers to process all applications submitted by such brokers. The Company currently originates and purchases the majority of its loans through the Company's main office in Woodbury, New York, its full service office in Atlanta, Georgia, its full processing offices in St. Louis, Missouri, Chicago, Illinois and Warwick, Rhode Island and from seven business development offices located in Michigan (2), New Jersey, Ohio (2), Pennsylvania and Virginia. The Company historically made loans primarily in New York, New Jersey and Pennsylvania. Commencing in 1995, the Company implemented a program to expand its geographic presence into the New England, Mid-Atlantic, Midwest and Southeast regions. As a consequence of its expansion into new markets, as well as its further penetration of existing markets, the Company increased its loan production substantially in 1995 and 1996. Total loan originations and purchases increased $168.1 million, or 140%, from $119.7 million in 1994 to $287.8 million in 1995, and increased $371.0 million, or 129%, in 1996 to $658.8 million. In February 1997, in an effort to broaden its origination sources and to expand its geographic presence in the Company's new markets, the Company acquired two related retail originators of home equity loans, Fidelity Mortgage, Inc., based in Cincinnati, Ohio, and Fidelity Mortgage (Florida), Inc., based in West Palm Beach, Florida (together, 'Fidelity Mortgage'). The Company acquired Fidelity Mortgage with the expectation that the acquisition would result in beneficial synergies, with Fidelity Mortgage providing a dedicated source of mortgage loans for Delta Funding Corporation's securitization pools and for its servicing arm, and Delta Financial Corporation providing capital to Fidelity Mortgage for the expansion of its retail network. Fidelity Mortgage develops retail loan leads primarily through its telemarketing system and its network of nine retail offices located in Florida (2), Georgia, Indiana, Ohio (4) and North Carolina. Four of these offices were opened in the second quarter of 1997, and the Company intends to expand the Fidelity Mortgage network further. The Company has been profitable in each of its 15 years of operation. The Company's results of operations have improved significantly in recent periods as a result of increased loan production and improved operating efficiencies. Total revenues increased $37.4 million, or 103%, to $73.5 million in 1996 from $36.1 million in 1995, and pro forma income before extraordinary item increased 630% to $19.1 million in 1996 from $2.6 million in 1995. During 1995 compared to 1994, the Company's total revenues increased 66% from $21.8 million to $36.1 million and pro forma income increased 128% from $1.1 million to $2.6 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' The Company generates earnings and cash flow primarily through the origination, purchase, securitization and servicing of home equity loans. In a securitization, the Company sells the loans that it originates or purchases to a trust for cash and records certain assets and income based upon (a) the difference between all principal and interest received from the mortgage loans sold and (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on the loans (the 'Excess Servicing') and (b) the difference between the contractual and estimated ancillary servicing revenue with respect to the loans and the estimated cost to service them ('Mortgage Servicing Rights'). At the time of the securitization, the Company estimates these amounts based upon a declining principal balance of the underlying loans, which has been calculated by using an estimated prepayment rate, and capitalizes these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded on the Company's balance sheet as interest-only and residual certificates and capitalized Mortgage Servicing Rights, respectively, and are aggregated and reported on the income statement as net gain on sale of mortgage loans, after being reduced (increased) by (i) loan acquisition premiums paid to correspondents and brokers, (ii) costs of securitization and (iii) any hedge losses (gains). The Company typically begins to receive Excess Servicing cash flow eight to twelve months from the date of securitization, although this time period may be shorter or longer depending upon the structure and performance of the securitization. Prior to such time, a reserve provision is created within the securitization trust which uses Excess Servicing cash flows to retire a portion of the securitization bond debt until the spread between the outstanding principal balance of the mortgage loans in the securitization trust and the securitization bond debt equals 2-3% of the initial securitization principal balance (hereinafter, the 'overcollateralization limit'). Once this overcollateralization limit is met, excess cash flows are distributed to Delta. The Company begins to receive contractual mortgage servicing cash flows in the month following the securitization. Since 1991, Delta has sold approximately $1.7 billion of its mortgage loans through 15 real estate mortgage investment conduit ('REMIC') securitizations. Each of these securitizations has been credit-enhanced by an insurance policy provided through a monoline insurance company to receive ratings of 'Aaa' from Moody's Investors Service, Inc. ('Moody's') and 'AAA' from Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ('Standard & Poor's'). The Company sells loans through securitizations and, from time to time, on a whole loan basis, to enhance its operating leverage and liquidity, to minimize financing costs and to reduce its exposure to fluctuations in interest rates. In addition to the excess cash flow from securitizations and proceeds from whole loan sales, the Company earns the net interest spread on loans held for sale, origination fees on its Brokered Loans and retail loans (which are included in other income) and servicing fees of between 0.50% and 0.65% per annum of the outstanding balance of the loans it services. Since its inception, the Company has serviced substantially all of the loans it has originated and purchased, including all of those that it has subsequently sold through securitizations. Management believes that servicing this loan portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. As of March 31, 1997, Delta had a servicing portfolio of $1.1 billion of loans. See 'Business--Loans.' The Company's business objective is to increase profitably the volume of its loan originations and purchases and the size of its servicing portfolio by implementing the following strategies: Continuing to Provide Quality Service. The Company believes its commitment to service provides it with a competitive advantage in establishing and maintaining productive broker and correspondent relationships. The Company's loan officers and underwriters endeavor to respond promptly and consistently on every loan submission. In addition, through its business development representatives, Delta regularly communicates with brokers and correspondents in order to better understand and respond to their needs. Maintaining Underwriting Standards. The Company believes the depth and experience of its underwriting staff, coupled with the consistent application of its underwriting procedures and criteria, provide the infrastructure needed to manage and sustain the Company's recent growth, while maintaining the quality of loans originated or purchased. The depth and experience in the Company's underwriting department provide two significant competitive advantages. First, they help to ensure that the Company's underwriting standards and subjective judgments required in the non-conforming market are consistently applied, thus enabling the Company to effectively implement a risk-based pricing strategy. Second, they provide the opportunity to expand underwriting activities beyond the Company's headquarters while maintaining consistent underwriting standards. Further Penetrating Existing and Recently Entered Markets and Expanding into New Markets. The Company intends to continue to increase the volume of its loan originations and purchases through a three-pronged strategy that includes greater originations and purchases from its existing brokers and correspondents, establishment of new broker and correspondent relationships in both existing and recently-entered markets and expansion into new markets. Expanding its Retail Origination Capabilities. The Company intends to devote management and capital resources to expanding its retail network in order to continue to broaden its origination capabilities and strengthen its geographic presence. Since the acquisition of Fidelity Mortgage and its five retail offices, the Company has opened additional Fidelity Mortgage branch offices in Atlanta, Georgia, Fort Lauderdale, Florida, Charlotte, North Carolina and Cleveland, Ohio. Expanding Through Acquisitions. Management believes acquisitions can be a means of cost effectively increasing or diversifying the Company's loan production capabilities. The Company continually considers acquisition candidates which operate in geographic or product areas that complement the Company's existing business. Leveraging its Information and Processing Technologies. In recent years, the Company has made significant capital investments to upgrade and expand its information and processing technologies. These investments have included the acquisition and implementation of a new servicing system and have enabled the Company to achieve operating efficiencies and cost savings. The Company's recent and anticipated geographic expansion and growth in originations and servicing portfolio were considered when these systems were designed, and management believes its strategic plans can be met by leveraging its existing systems without substantial additional investment in the near future. See 'Business--Business Strategy.' All of the Company's operations are conducted through its wholly-owned subsidiaries, Delta Funding Corporation, DF Special Holdings Corporation, Fidelity Mortgage, Inc. and Fidelity Mortgage (Florida), Inc. In November 1996, Delta completed the initial public offering of its common stock which trades on the New York Stock Exchange under the symbol 'DFC.' The principal executive offices of the Company are located at 1000 Woodbury Road, Suite 200, Woodbury, New York 11797, and its telephone number is (516) 364-8500. RECENT DEVELOPMENTS On June 18, 1997, Delta Funding Corporation entered into a $100 million syndicated credit agreement (the 'Credit Agreement') with a group of banks for which the First National Bank of Chicago ('First Chicago') acts as agent. The Credit Agreement will be used primarily to finance mortgage loans held for sale and to fund advances to securitization trusts by Delta Funding Corporation. The Credit Agreement provides for a $100 million secured revolving credit facility with various borrowing base sublimits, including, but not limited to, a $15 million secured recoverable servicing advance sublimit. Delta Funding Corporation's obligations under the Credit Facility are guaranteed by the Company. Advances under the Credit Facility are secured by a first priority lien on warehouse collateral and receivables created from recoverable servicing advances. In connection with the Credit Agreement, Delta Funding Corporation has agreed to certain standard affirmative covenants, including corporate existence, maintenance of its properties and insurance coverage, prompt payment of taxes and other claims and maintenance of a standard accounting system. Delta Funding Corporation also made certain negative covenants which, among other things: (i) specify maximum leverage ratios, (ii) limit its ability to incur additional indebtedness, (iii) require a minimum net worth, (iv) limit its ability to pledge, mortgage or encumber its assets and (v) limit its ability to merge with another entity or dispose of more than a specified percentage of its total assets. THE OFFERING <TABLE> <S> <C> Securities Offered........................ $150,000,000 aggregate principal amount of % Senior Notes due 2004. Maturity Date............................. July , 2004. Interest Payment Dates.................... Each , and , commencing , 1997. Guarantees................................ The obligations of the Company under the Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the existing and future Subsidiaries of the Company, other than Subsidiaries designated as 'Unrestricted Subsidiaries' in accordance with the Indenture. See 'Description of the Notes--Guarantees.' Optional Redemption....................... On or after July , 2001, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. See 'Description of the Notes--Optional Redemption.' Change of Control......................... Upon a Change of Control (as defined), each Holder of the Notes may require the Company to repurchase the Notes held by such Holder at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. See 'Description of the Notes--Repurchase at the Option of Holders--Change of Control.' Asset Sales............................... The Indenture relating to the Notes (the 'Indenture') requires that the proceeds of certain Asset Sales (as defined) be applied as specified in the Indenture or be used to repurchase the Notes, at the option of the Holder thereof, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. Ranking................................... The Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future unsecured unsubordinated Indebtedness of the Company and senior in right of payment to all existing and future subordinated Indebtedness of the Company. The Subsidiary Guarantee of each of the Subsidiary Guarantors will rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes and Subsidiary Guarantees will be effectively subordinated to all existing and future secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the value of the collateral securing such indebtedness). As of March 31, 1997, after giving pro forma effect to the Offering, the Company and the Subsidiary Guarantors had approximately $3.3 million of secured Indebtedness outstanding. </TABLE> <TABLE> <S> <C> Certain Covenants......................... The Indenture will contain certain covenants, including, but not limited to, covenants with limitations on the following matters: (i) restricted payments; (ii) incurrence of additional indebtedness; (iii) issuance of preferred stock; (iv) incurrence of additional liens; (v) dividends and other payment restrictions affecting subsidiaries; (vi) restrictions on distributions from subsidiaries; (vii) merger, consolidation or sale of assets; (viii) transactions with affiliates; and (ix) lines of business. However, all these limitations are subject to a number of important exceptions and qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds........................... The net proceeds will be used (i) to pay off all residual financing agreements (approximately $57.5 million at March 31, 1997), (ii) to repay amounts outstanding under certain of the Company's warehouse lines of credit (lines of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans) (approximately $51.8 million as of March 31, 1997), (iii) to fund future loan originations and purchases, (iv) to support securitization transactions, (v) to fund expansion of Fidelity Mortgage's retail network and (vi) for general corporate purposes, including to fund acquisitions. See 'Use of Proceeds' and 'Underwriting.' </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040529_df_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040529_df_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01747c8104eb52f657a3b84582ad6c81d47d6c0a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040529_df_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references herein to the 'Company' or 'Delta' refer to Delta Financial Corporation and its wholly-owned subsidiaries. All financial information gives pro forma effect to the termination in October 1996 of the S corporation status of Delta Funding Corporation, a wholly-owned subsidiary, and the transactions described in 'Selected Consolidated Financial Data' and the related notes thereto and in 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Termination of S Corporation Status and Income Taxes.' THE COMPANY Delta is a specialty consumer finance company that has engaged in originating, acquiring, selling and servicing home equity loans since 1982. Throughout its 15 years of operating history, Delta has focused on lending to individuals who generally have impaired or limited credit profiles or higher debt to income ratios and typically have substantial equity in their homes. Management believes that these borrowers have been largely unsatisfied by the more traditional sources of mortgage credit which underwrite loans to conventional guidelines established by the Federal National Mortgage Association ('FNMA') and the Federal Home Loan Mortgage Corporation ('FHLMC'). The Company makes loans to these borrowers for such purposes as debt consolidation, home improvement, mortgage refinancing or education, and these loans are primarily secured by first mortgages on one- to four-family residential properties. Through its wholly-owned subsidiary, Delta Funding Corporation, the Company originates home equity loans indirectly through licensed brokers and other real estate professionals who submit loan applications on behalf of the borrower ('Brokered Loans') and also purchases loans from mortgage bankers and smaller financial institutions that satisfy Delta's underwriting guidelines ('Correspondent Loans'). Delta Funding Corporation currently originates and purchases the majority of its loans in 21 states, through its network of approximately 1,000 brokers and correspondents. The Company believes that it has a competitive advantage in serving brokers and correspondents in the non-conforming home equity market that stems from its substantial experience in this sector and its emphasis on providing quality service that is prompt, responsive and consistent. The 19 members of Delta Funding Corporation's senior management have an average of over 13 years of non-conforming mortgage loan experience. Management believes this industry-specific experience, coupled with the systems and programs it has developed over the past 15 years, enable the Company to provide quality services that include preliminary approval of most Brokered Loans and certain Correspondent Loans within one day, consistent application of its underwriting guidelines and funding or purchasing of loans within 14 to 21 days of preliminary approval. In addition, the Company seeks to establish and maintain productive relationships with its network of brokers and correspondents by servicing each one with a business development representative, a team of experienced underwriters and, in the case of Brokered Loans, a team of loan officers and processors assigned to specific brokers to process all applications submitted by such brokers. The Company currently originates and purchases the majority of its loans through the Company's main office in Woodbury, New York, its full service office in Atlanta, Georgia, its full processing offices in St. Louis, Missouri, Chicago, Illinois and Warwick, Rhode Island and from seven business development offices located in Michigan (2), New Jersey, Ohio (2), Pennsylvania and Virginia. The Company historically made loans primarily in New York, New Jersey and Pennsylvania. Commencing in 1995, the Company implemented a program to expand its geographic presence into the New England, Mid-Atlantic, Midwest and Southeast regions. As a consequence of its expansion into new markets, as well as its further penetration of existing markets, the Company increased its loan production substantially in 1995 and 1996. Total loan originations and purchases increased $168.1 million, or 140%, from $119.7 million in 1994 to $287.8 million in 1995, and increased $371.0 million, or 129%, in 1996 to $658.8 million. In February 1997, in an effort to broaden its origination sources and to expand its geographic presence in the Company's new markets, the Company acquired two related retail originators of home equity loans, Fidelity Mortgage, Inc., based in Cincinnati, Ohio, and Fidelity Mortgage (Florida), Inc., based in West Palm Beach, Florida (together, 'Fidelity Mortgage'). The Company acquired Fidelity Mortgage with the expectation that the acquisition would result in beneficial synergies, with Fidelity Mortgage providing a dedicated source of mortgage loans for Delta Funding Corporation's securitization pools and for its servicing arm, and Delta Financial Corporation providing capital to Fidelity Mortgage for the expansion of its retail network. Fidelity Mortgage develops retail loan leads primarily through its telemarketing system and its network of nine retail offices located in Florida (2), Georgia, Indiana, Ohio (4) and North Carolina. Four of these offices were opened in the second quarter of 1997, and the Company intends to expand the Fidelity Mortgage network further. The Company has been profitable in each of its 15 years of operation. The Company's results of operations have improved significantly in recent periods as a result of increased loan production and improved operating efficiencies. Total revenues increased $37.4 million, or 103%, to $73.5 million in 1996 from $36.1 million in 1995, and pro forma income before extraordinary item increased 630% to $19.1 million in 1996 from $2.6 million in 1995. During 1995 compared to 1994, the Company's total revenues increased 66% from $21.8 million to $36.1 million and pro forma income increased 128% from $1.1 million to $2.6 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' The Company generates earnings and cash flow primarily through the origination, purchase, securitization and servicing of home equity loans. In a securitization, the Company sells the loans that it originates or purchases to a trust for cash and records certain assets and income based upon (a) the difference between all principal and interest received from the mortgage loans sold and (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on the loans (the 'Excess Servicing') and (b) the difference between the contractual and estimated ancillary servicing revenue with respect to the loans and the estimated cost to service them ('Mortgage Servicing Rights'). At the time of the securitization, the Company estimates these amounts based upon a declining principal balance of the underlying loans, which has been calculated by using an estimated prepayment rate, and capitalizes these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded on the Company's balance sheet as interest-only and residual certificates and capitalized Mortgage Servicing Rights, respectively, and are aggregated and reported on the income statement as net gain on sale of mortgage loans, after being reduced (increased) by (i) loan acquisition premiums paid to correspondents and brokers, (ii) costs of securitization and (iii) any hedge losses (gains). The Company typically begins to receive Excess Servicing cash flow eight to twelve months from the date of securitization, although this time period may be shorter or longer depending upon the structure and performance of the securitization. Prior to such time, a reserve provision is created within the securitization trust which uses Excess Servicing cash flows to retire a portion of the securitization bond debt until the spread between the outstanding principal balance of the mortgage loans in the securitization trust and the securitization bond debt equals 2-3% of the initial securitization principal balance (hereinafter, the 'overcollateralization limit'). Once this overcollateralization limit is met, excess cash flows are distributed to Delta. The Company begins to receive contractual mortgage servicing cash flows in the month following the securitization. Since 1991, Delta has sold approximately $1.7 billion of its mortgage loans through 15 real estate mortgage investment conduit ('REMIC') securitizations. Each of these securitizations has been credit-enhanced by an insurance policy provided through a monoline insurance company to receive ratings of 'Aaa' from Moody's Investors Service, Inc. ('Moody's') and 'AAA' from Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. ('Standard & Poor's'). The Company sells loans through securitizations and, from time to time, on a whole loan basis, to enhance its operating leverage and liquidity, to minimize financing costs and to reduce its exposure to fluctuations in interest rates. In addition to the excess cash flow from securitizations and proceeds from whole loan sales, the Company earns the net interest spread on loans held for sale, origination fees on its Brokered Loans and retail loans (which are included in other income) and servicing fees of between 0.50% and 0.65% per annum of the outstanding balance of the loans it services. Since its inception, the Company has serviced substantially all of the loans it has originated and purchased, including all of those that it has subsequently sold through securitizations. Management believes that servicing this loan portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. As of March 31, 1997, Delta had a servicing portfolio of $1.1 billion of loans. See 'Business--Loans.' The Company's business objective is to increase profitably the volume of its loan originations and purchases and the size of its servicing portfolio by implementing the following strategies: Continuing to Provide Quality Service. The Company believes its commitment to service provides it with a competitive advantage in establishing and maintaining productive broker and correspondent relationships. The Company's loan officers and underwriters endeavor to respond promptly and consistently on every loan submission. In addition, through its business development representatives, Delta regularly communicates with brokers and correspondents in order to better understand and respond to their needs. Maintaining Underwriting Standards. The Company believes the depth and experience of its underwriting staff, coupled with the consistent application of its underwriting procedures and criteria, provide the infrastructure needed to manage and sustain the Company's recent growth, while maintaining the quality of loans originated or purchased. The depth and experience in the Company's underwriting department provide two significant competitive advantages. First, they help to ensure that the Company's underwriting standards and subjective judgments required in the non-conforming market are consistently applied, thus enabling the Company to effectively implement a risk-based pricing strategy. Second, they provide the opportunity to expand underwriting activities beyond the Company's headquarters while maintaining consistent underwriting standards. Further Penetrating Existing and Recently Entered Markets and Expanding into New Markets. The Company intends to continue to increase the volume of its loan originations and purchases through a three-pronged strategy that includes greater originations and purchases from its existing brokers and correspondents, establishment of new broker and correspondent relationships in both existing and recently-entered markets and expansion into new markets. Expanding its Retail Origination Capabilities. The Company intends to devote management and capital resources to expanding its retail network in order to continue to broaden its origination capabilities and strengthen its geographic presence. Since the acquisition of Fidelity Mortgage and its five retail offices, the Company has opened additional Fidelity Mortgage branch offices in Atlanta, Georgia, Fort Lauderdale, Florida, Charlotte, North Carolina and Cleveland, Ohio. Expanding Through Acquisitions. Management believes acquisitions can be a means of cost effectively increasing or diversifying the Company's loan production capabilities. The Company continually considers acquisition candidates which operate in geographic or product areas that complement the Company's existing business. Leveraging its Information and Processing Technologies. In recent years, the Company has made significant capital investments to upgrade and expand its information and processing technologies. These investments have included the acquisition and implementation of a new servicing system and have enabled the Company to achieve operating efficiencies and cost savings. The Company's recent and anticipated geographic expansion and growth in originations and servicing portfolio were considered when these systems were designed, and management believes its strategic plans can be met by leveraging its existing systems without substantial additional investment in the near future. See 'Business--Business Strategy.' All of the Company's operations are conducted through its wholly-owned subsidiaries, Delta Funding Corporation, DF Special Holdings Corporation, Fidelity Mortgage, Inc. and Fidelity Mortgage (Florida), Inc. In November 1996, Delta completed the initial public offering of its common stock which trades on the New York Stock Exchange under the symbol 'DFC.' The principal executive offices of the Company are located at 1000 Woodbury Road, Suite 200, Woodbury, New York 11797, and its telephone number is (516) 364-8500. RECENT DEVELOPMENTS On June 18, 1997, Delta Funding Corporation entered into a $100 million syndicated credit agreement (the 'Credit Agreement') with a group of banks for which the First National Bank of Chicago ('First Chicago') acts as agent. The Credit Agreement will be used primarily to finance mortgage loans held for sale and to fund advances to securitization trusts by Delta Funding Corporation. The Credit Agreement provides for a $100 million secured revolving credit facility with various borrowing base sublimits, including, but not limited to, a $15 million secured recoverable servicing advance sublimit. Delta Funding Corporation's obligations under the Credit Facility are guaranteed by the Company. Advances under the Credit Facility are secured by a first priority lien on warehouse collateral and receivables created from recoverable servicing advances. In connection with the Credit Agreement, Delta Funding Corporation has agreed to certain standard affirmative covenants, including corporate existence, maintenance of its properties and insurance coverage, prompt payment of taxes and other claims and maintenance of a standard accounting system. Delta Funding Corporation also made certain negative covenants which, among other things: (i) specify maximum leverage ratios, (ii) limit its ability to incur additional indebtedness, (iii) require a minimum net worth, (iv) limit its ability to pledge, mortgage or encumber its assets and (v) limit its ability to merge with another entity or dispose of more than a specified percentage of its total assets. THE OFFERING <TABLE> <S> <C> Securities Offered........................ $150,000,000 aggregate principal amount of % Senior Notes due 2004. Maturity Date............................. July , 2004. Interest Payment Dates.................... Each , and , commencing , 1997. Guarantees................................ The obligations of the Company under the Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the existing and future Subsidiaries of the Company, other than Subsidiaries designated as 'Unrestricted Subsidiaries' in accordance with the Indenture. See 'Description of the Notes--Guarantees.' Optional Redemption....................... On or after July , 2001, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. See 'Description of the Notes--Optional Redemption.' Change of Control......................... Upon a Change of Control (as defined), each Holder of the Notes may require the Company to repurchase the Notes held by such Holder at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. See 'Description of the Notes--Repurchase at the Option of Holders--Change of Control.' Asset Sales............................... The Indenture relating to the Notes (the 'Indenture') requires that the proceeds of certain Asset Sales (as defined) be applied as specified in the Indenture or be used to repurchase the Notes, at the option of the Holder thereof, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. Ranking................................... The Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with all existing and future unsecured unsubordinated Indebtedness of the Company and senior in right of payment to all existing and future subordinated Indebtedness of the Company. The Subsidiary Guarantee of each of the Subsidiary Guarantors will rank pari passu in right of payment with all existing and future unsubordinated Indebtedness of such Subsidiary Guarantor and senior in right of payment to all existing and future subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes and Subsidiary Guarantees will be effectively subordinated to all existing and future secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the value of the collateral securing such indebtedness). As of March 31, 1997, after giving pro forma effect to the Offering, the Company and the Subsidiary Guarantors had approximately $3.3 million of secured Indebtedness outstanding. </TABLE> <TABLE> <S> <C> Certain Covenants......................... The Indenture will contain certain covenants, including, but not limited to, covenants with limitations on the following matters: (i) restricted payments; (ii) incurrence of additional indebtedness; (iii) issuance of preferred stock; (iv) incurrence of additional liens; (v) dividends and other payment restrictions affecting subsidiaries; (vi) restrictions on distributions from subsidiaries; (vii) merger, consolidation or sale of assets; (viii) transactions with affiliates; and (ix) lines of business. However, all these limitations are subject to a number of important exceptions and qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds........................... The net proceeds will be used (i) to pay off all residual financing agreements (approximately $57.5 million at March 31, 1997), (ii) to repay amounts outstanding under certain of the Company's warehouse lines of credit (lines of credit used to finance, and secured by, a portion of the Company's inventory of mortgage loans) (approximately $51.8 million as of March 31, 1997), (iii) to fund future loan originations and purchases, (iv) to support securitization transactions, (v) to fund expansion of Fidelity Mortgage's retail network and (vi) for general corporate purposes, including to fund acquisitions. See 'Use of Proceeds' and 'Underwriting.' </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040596_choicepoin_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040596_choicepoin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a3a175f6a721c0e6d5f19109bf5c9d204553cac1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040596_choicepoin_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary highlights selected information from this document but does not contain all details concerning ChoicePoint or the Spinoff, including information that may be important to you. To better understand ChoicePoint and the Spinoff, you should carefully read this entire document. References in this document to "we," "our," "ChoicePoint" or "the Company" mean ChoicePoint Inc., its subsidiaries and divisions after the Spinoff and the Insurance Services Group of Equifax prior to the Spinoff. References in this document to "Equifax" mean Equifax Inc. and its subsidiaries and divisions. INTRODUCTION The Spinoff is the result of a process in which the Equifax Board of Directors and the executives and employees of Equifax and ChoicePoint undertook to separate Equifax and ChoicePoint into two publicly traded companies. The separation was prompted by recognition that the strategies of the two companies have become increasingly different in response to new market trends and opportunities. The separation of the two companies will create direct investment opportunities in a leading provider of information to the financial services industry and a leading provider of information to the insurance industry. The Equifax Board of Directors believes that this action is in the best long-term interests of Equifax shareholders and should further the growth of and increase the business opportunities available to both Equifax and ChoicePoint. To provide you with a better understanding of ChoicePoint and the Spinoff, we have highlighted information in this Summary that provides a general description of the business and management of ChoicePoint and explains the Spinoff process. We also have included cross-references in the Summary to other portions of the document to help you find more detailed information about ChoicePoint and the Spinoff. We encourage you to read the entire document for a better understanding of both ChoicePoint and the Spinoff. CHOICEPOINT INC. STRATEGIC FOCUS ChoicePoint believes that new and increasingly complex risks are confronting organizations and individuals, and that timely and quality information is a critical component of effective risk assessment and management. ChoicePoint's mission is to assist its clients in using information to enhance their risk management decision processes. The Company intends to be the leading provider of risk management and fraud prevention information and related technology solutions to a broad range of industries worldwide. BUSINESS Based on market share, ChoicePoint is a leading provider of risk management and fraud prevention information and related technology solutions to the insurance industry. The Company also offers risk management and fraud prevention solutions to organizations in other industries. ChoicePoint currently has three core capabilities: (i) data warehousing; (ii) data access and analytics; and (iii) related professional services. These capabilities currently are delivered by the Company through three service groups: Property and Casualty Insurance Services; Life and Health Insurance Services; and Business and Government Services. ChoicePoint provides most major domestic insurance companies with automated and traditional underwriting and claim information services to assist those companies in assessing the insurability of individuals and property and the validity of insurance claims. The Company provides background investigations, performs paramedical exams, furnishes access to motor vehicle reports, maintains a database of claims histories and provides claims verification and investigative services to both the property and casualty and the life and health insurance markets. ChoicePoint also offers pre-employment background investigations, pre-employment and regulatory compliance drug testing services and public record information to other corporate and government organizations, as well as the aforementioned insurance markets. See "BUSINESS." PROSPECTUS 14,800,000 SHARES CHOICEPOINT INC. COMMON STOCK (PAR VALUE $.10 PER SHARE) (CHOICEPOINT LOGO) --------------------- This Prospectus is being furnished in connection with the distribution by Equifax Inc., a Georgia corporation, of one share of Common Stock, par value $.10 per share, of its wholly-owned subsidiary, ChoicePoint Inc., a Georgia corporation, for each ten shares of Equifax Common Stock, par value $1.25 per share, held by Equifax shareholders of record on the Record Date of July 24, 1997. The distribution by Equifax of shares of ChoicePoint Common Stock to Equifax shareholders is referred to in this Prospectus as the Spinoff. The Spinoff, and certain related transactions, will be accomplished as follows: (i) Pursuant to a Distribution Agreement by and between Equifax and ChoicePoint: (a) Equifax will contribute to ChoicePoint all of the issued and outstanding capital stock of the wholly-owned Equifax subsidiaries that comprise the Insurance Services Group operations of Equifax, which include Osborn Laboratories Inc. ("Osborn Labs"), Equifax Services Inc. ("Equifax Services") and Equifax Government and Special Systems, Inc. ("Government and Special Systems") in exchange for a number of shares of ChoicePoint Common Stock that, when combined with the shares of ChoicePoint Common Stock already owned by Equifax, will equal the number of shares of Equifax Common Stock issued and outstanding on the Record Date of the Spinoff divided by ten (excluding those shares held by certain grantor trusts of Equifax, which will not receive ChoicePoint Common Stock in the Spinoff); (b) Equifax will transfer to ChoicePoint substantially all of the assets and liabilities of the insurance services division of Equifax's United Kingdom operations; and (c) immediately following the transactions described in (a) and (b) above, ChoicePoint will transfer all of the issued and outstanding shares of capital stock of Osborn Labs and Government and Special Systems to Equifax Services; (ii) Equifax will deliver all of the outstanding shares of ChoicePoint Common Stock to SunTrust Bank, Atlanta, which will serve as the Distribution Agent for the Spinoff, for distribution of one share of ChoicePoint Common Stock for each ten shares of Equifax Common Stock held by Equifax record shareholders on July 24, 1997 (except for certain grantor trusts of Equifax, which will not receive ChoicePoint Common Stock pursuant to the Spinoff); and (iii) The Distribution Agent will aggregate all fractional shares of ChoicePoint Common Stock that would otherwise be distributed to Equifax shareholders and sell them in an orderly manner in the open market at prevailing market prices after regular trading in ChoicePoint Common Stock has started. After completion of such sales, the Distribution Agent will distribute a pro rata portion of the proceeds from such sales, based upon the average gross selling price of all such ChoicePoint Common Stock, to each Equifax shareholder who would otherwise have received a fractional share of ChoicePoint Common Stock. The Spinoff will result in 100% of the outstanding shares of ChoicePoint Common Stock being distributed to Equifax shareholders. Equifax shareholders do not have to pay for shares of ChoicePoint Common Stock they will receive in the Spinoff, nor do they have to surrender or exchange shares of Equifax Common Stock in order to receive shares of ChoicePoint Common Stock. The number of shares of Equifax Common Stock held by Equifax shareholders will not change as a result of the Spinoff. The Distribution Agent will, as applicable, credit the brokerage accounts of, or mail ChoicePoint Common Stock certificates to, Equifax shareholders in August 1997. See "THE SPINOFF." A public trading market for ChoicePoint Common Stock does not currently exist, although a "when-issued" trading market is expected to develop on or about the Record Date. Shares of ChoicePoint Common Stock have been approved for listing, subject to official notice of issuance, on the New York Stock Exchange ("NYSE") under the symbol CPS. SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE DISTRIBUTION OF CHOICEPOINT COMMON STOCK. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. The date of this Prospectus is July 18, 1997. GROWTH STRATEGIES Management of ChoicePoint intends to pursue the following growth strategies: (i) diversify ChoicePoint's customer base across non-insurance markets; (ii) acquire or establish strategic alliances with organizations that provide new data, markets and technology; (iii) enhance technological capabilities by improving current systems and developing new solutions; and (iv) increase awareness of risk and fraud issues to expand new market and business opportunities. In furtherance of its strategy of growth by acquisition, the Company has entered into an agreement in principle to purchase all of the capital stock of Kroll Holdings, Inc., a privately-held investigative services firm. The acquisition is expected to be completed shortly after the date of the Spinoff. See "BUSINESS -- Strategic Acquisitions." FINANCIAL HIGHLIGHTS For the six months ended June 30, 1997, ChoicePoint generated operating revenue, net of motor vehicle records registry revenue, of approximately $211.5 million, an increase of 21%, from approximately $174.1 million for the six months ended June 30, 1996. For the six months ended June 30, 1997, ChoicePoint generated operating income of approximately $27.8 million, an increase of 29%, from approximately $21.6 million for the six months ended June 30, 1996. For the six months ended June 30, 1997, ChoicePoint generated net income of approximately $12.8 million, an increase of 23%, from approximately $10.4 million for the six months ended June 30, 1996. For the quarter ended June 30, 1997, ChoicePoint generated operating revenue, net of motor vehicle records registry revenue, of approximately $108.6 million, an increase of 21%, from approximately $90.0 million for the quarter ended June 30, 1996. For the quarter ended June 30, 1997, ChoicePoint generated operating income of approximately $15.6 million, an increase of 25%, from approximately $12.5 million for the quarter ended June 30, 1996. For the quarter ended June 30, 1997, ChoicePoint generated net income of approximately $7.3 million, an increase of 18%, from approximately $6.2 million for the quarter ended June 30, 1996. For the fiscal year ended December 31, 1996, ChoicePoint generated operating revenue, net of motor vehicle records registry revenue, of approximately $366.5 million, an increase of 37% from approximately $268.1 million in 1993, when the Company's current senior management was installed. ChoicePoint generated operating income of approximately $47.6 million in 1996, fourteen times the Company's 1993 operating income of approximately $3.4 million. ChoicePoint generated net income of approximately $23.3 million in 1996, nineteen times the Company's 1993 net income of approximately $1.2 million. See "SELECTED FINANCIAL DATA." ChoicePoint's principal executive offices are located at 1000 Alderman Drive, Alpharetta, Georgia 30005, and its telephone number is (770) 752-6000. QUESTIONS AND ANSWERS ABOUT THE SPINOFF HOW WILL I BENEFIT FROM THE DIRECT INVESTMENT IN TWO MARKET LEADERS. The SPINOFF? Spinoff will give you a direct investment in two market leaders. Based on market share, Equifax is a leading provider of information services and products to the financial services industry, including consumer credit information and transaction processing. Based on market share, ChoicePoint is a leading provider of risk management and fraud prevention information and related technology solutions to the insurance industry, providing underwriting and claims management information to property and casualty and life and health insurance companies. The Company also offers public record information services, employee risk management services, and specialized investigation services to businesses and governments to help them manage risk. See "BUSINESS." FOCUSED PERFORMANCE. Equifax believes that the Spinoff will enhance the ability of the financial markets to evaluate the individual operations of Equifax and ChoicePoint. This should enable the markets to measure the performance of the business of each company against companies in the same or similar businesses. Management of each company will be able to focus its efforts and financial resources on its core business. Each company will be able to pursue growth opportunities independently. Moreover, separate incentive compensation plans for key employees of Equifax and ChoicePoint will provide incentives that are more directly related to the performance of the individual companies. See "THE SPINOFF -- Background and Reasons for the Spinoff." DIRECT ACCESS TO CAPITAL. The Spinoff will give each company direct access to capital markets and the ability to issue stock to finance expansion and growth opportunities. WHY IS EQUIFAX SEPARATING DIVERGENT STRATEGIC DIRECTIONS. The Equifax Board INTO TWO PUBLICLY TRADED of Directors determined that the Spinoff is in the COMPANIES AT THIS TIME? best interests of Equifax shareholders because the strategies of Equifax and ChoicePoint have become increasingly different. Equifax is focusing on providing decision support information to the financial services industry, including the provision of consumer and commercial credit information, payment services and analytics and consulting services. ChoicePoint is focusing on expanding the scope of its risk management and fraud prevention information and related technology solutions to a broader range of industries and markets worldwide. The Equifax Board of Directors believes that the public perceives that credit reporting services offered by Equifax and the more privacy sensitive services offered by ChoicePoint should not be available from a single provider. Moreover, as independent organizations, each company will be able to more effectively pursue growth opportunities. See "THE SPINOFF -- Background and Reasons for the Spinoff." WHAT DO I HAVE TO DO TO NOTHING. No proxy or vote is necessary for the PARTICIPATE IN THE Spinoff. If you own Equifax Common Stock at the SPINOFF? close of business on the Record Date of July 24, 1997, shares of ChoicePoint Common Stock will be credited to your brokerage account or certificates representing shares of ChoicePoint Common Stock will be mailed to you in August 1997. You do not need to mail in Equifax Common Stock certificates to receive ChoicePoint Common Stock certificates. You will not receive new Equifax Common Stock certificates as a result of the Spinoff, nor will the Spinoff change the number of shares of Equifax Common Stock that you own. See "THE SPINOFF -- Manner of Effecting the Spinoff." WHEN DOES CHOICEPOINT JULY 31, 1997. At the Effective Time, which will BECOME INDEPENDENT FOR be at 5:00 p.m. Atlanta time on July 31, 1997, all ACCOUNTING PURPOSES? of the stock, assets and liabilities of the Insurance Services Group of Equifax will be transferred by Equifax to its wholly-owned subsidiary, ChoicePoint. The Spinoff will actually be complete, however, when Equifax distributes all of the shares of ChoicePoint Common Stock to its Record Date shareholders on the Mail Date on or about August 7, 1997. Regardless of when shares of ChoicePoint Common Stock are distributed, ChoicePoint and its new public shareholders will be the sole beneficiaries of the operation of the Insurance Services Group after the Effective Time. WHAT IS THE DISTRIBUTION ONE-FOR-TEN. You will receive one share of RATIO? ChoicePoint Common Stock in the Spinoff for every ten shares of Equifax Common Stock you own on the Record Date. You will receive cash for any fractional shares of ChoicePoint Common Stock. See "THE SPINOFF -- Manner of Effecting the Spinoff" and " -- No Issuance of Fractional Shares." Example: If you own 105 shares of Equifax Common Stock at the close of business on the Record Date, you will receive ten shares of ChoicePoint Common Stock in certificate form or credited to your brokerage account and a check for the value of .5 shares of ChoicePoint Common Stock. You will continue to own 105 shares of Equifax Common Stock. WILL MY DIVIDENDS CHANGE? EQUIFAX CURRENTLY EXPECTS TO CONTINUE PAYING ITS REGULAR QUARTERLY DIVIDEND OF $.0875 PER SHARE OF EQUIFAX COMMON STOCK FOR THE FORESEEABLE FUTURE. ChoicePoint does not anticipate paying any cash dividends on its Common Stock in the near future. The dividend policies of Equifax and ChoicePoint are, however, subject to change. The Boards of Directors of the respective companies are responsible for deciding if a dividend will be paid and the amount of any dividend. See "DIVIDEND POLICY." WILL CHOICEPOINT'S SHARES YES. ChoicePoint Common Stock will be listed on BE LISTED ON A STOCK the New York Stock Exchange under the symbol CPS, EXCHANGE? and regular trading will begin on or about the Mail Date. Equifax Common Stock will continue to be listed on the New York Stock Exchange under the symbol EFX. See "THE SPINOFF -- Listing and Trading of ChoicePoint Common Stock." WILL SHARES TRADE ANY MOST LIKELY, DURING PART OF JULY AND AUGUST DIFFERENTLY AS A RESULT 1997. A regular public market for ChoicePoint OF THE SPINOFF? Common Stock will not exist prior to the Mail Date. We expect, however, that "when-issued" trading for ChoicePoint Common Stock will develop on or about the Record Date and continue through the Mail Date. When-issued trading means that shares can be traded prior to the time certificates are actually available or issued and reflects the assumed value of a security after it has been issued (e.g., the assumed value of ChoicePoint Common Stock after the Spinoff). When-issued trading would occur to develop an orderly market and trading price for ChoicePoint Common Stock after the Spinoff. If when-issued trading develops, you may buy and sell shares of ChoicePoint Common Stock before the Mail Date. None of these trades, however, would settle until after the Mail Date, after regular trading in ChoicePoint has begun. If the Spinoff does not occur, all when-issued trading would be null and void. If and as long as when-issued trading in ChoicePoint Common Stock occurs, the symbol on the New York Stock Exchange will be CPSwi. We expect that Equifax Common Stock will continue to trade on a regular basis through the Mail Date, but any shares of Equifax Common Stock sold between the Record Date and the Mail Date will have a due bill attached representing ChoicePoint Common Stock to be distributed in the Spinoff. In addition, Equifax Common Stock may also trade on a when-issued basis, reflecting an assumed post-Spinoff value for Equifax Common Stock. If and as long as when-issued trading in Equifax Common Stock occurs, the symbol on the New York Stock Exchange will be EFXwi. See "THE SPINOFF -- Listing and Trading of ChoicePoint Common Stock." WILL THE SPINOFF AFFECT THE PROBABLY. After the Spinoff, the trading price of TRADING PRICE OF MY Equifax Common Stock will likely be lower than the EQUIFAX COMMON STOCK? trading price immediately prior to the Spinoff. Moreover, until the market has evaluated the operations of Equifax without ChoicePoint's operations, the trading price of Equifax Common Stock may fluctuate significantly. The combined trading prices of Equifax Common Stock and ChoicePoint Common Stock after the Spinoff may not equal the trading price of Equifax Common Stock prior to the Spinoff. See "THE SPINOFF -- Listing and Trading of ChoicePoint Common Stock." WHAT WILL HAPPEN TO SHARES THEY WILL BE TREATED THE SAME AS ALL OTHER SHARES OWNED THROUGH THE EQUIFAX OF EQUIFAX COMMON STOCK. You will continue to own DIRECT SHARE PURCHASE the Equifax Common Stock that you owned through the PROGRAM? Equifax Direct Share Purchase Program prior to the Spinoff. In the Spinoff, you will receive one share of ChoicePoint Common Stock in certificate form or credited to your brokerage account for every ten shares of Equifax Common Stock that you owned on the Record Date through the Equifax Direct Share Purchase Program. You will receive a check for the cash equivalent of any fractional shares. WHAT WILL HAPPEN TO GENERALLY, CHOICEPOINT EMPLOYEES WILL RETAIN THEIR EXISTING OPTIONS TO VESTED OPTIONS TO PURCHASE EQUIFAX COMMON STOCK. PURCHASE EQUIFAX Although they will forfeit unvested Equifax stock COMMON STOCK? options, they will receive options to purchase ChoicePoint Common Stock, adjusted to preserve the value of the forfeited Equifax stock options. Certain senior officers of ChoicePoint may choose either to retain vested Equifax stock options or have their vested Equifax stock options replaced with ChoicePoint stock options. See "MANAGEMENT -- Compensation and Benefit Plans." IS THE SPINOFF TAXABLE FOR GENERALLY, NO. The Internal Revenue Service has FEDERAL INCOME TAX ruled that the Spinoff will be tax-free to Equifax PURPOSES? shareholders for United States federal income tax purposes, except for cash received for fractional shares. You may have to pay tax on a limited amount of capital gain arising from any cash received in lieu of a fractional share of ChoicePoint Common Stock. Soon after the Spinoff, Equifax will send a letter to its Record Date shareholders that will explain how they should allocate tax basis between Equifax Common Stock and ChoicePoint Common Stock. See "THE SPINOFF -- Federal Income Tax Consequences of the Spinoff." WHAT ARE THE RISKS INVOLVED ChoicePoint will be subject to risks related to, IN OWNING CHOICEPOINT among other things, no operating history as an COMMON STOCK? independent company, dependence on data sources, dependence on key personnel, inability to find suitable acquisition targets or to complete acquisitions, and absence of Equifax funding. See "RISK FACTORS." WILL EQUIFAX AND EQUIFAX WILL NO LONGER OWN ANY CHOICEPOINT COMMON CHOICEPOINT BE RELATED STOCK AFTER THE SPINOFF. Equifax and ChoicePoint IN ANY WAY AFTER THE will, however, have two common Board members, SPINOFF? including a common Chairman of the Board for a transitional period. Equifax and ChoicePoint have also entered into various agreements to define their continuing business relationships. See "ARRANGEMENTS BETWEEN EQUIFAX AND CHOICEPOINT RELATING TO THE SPINOFF." WHAT WE HAVE ALREADY ACCOMPLISHED TO PREPARE FOR THE SPINOFF SELECTED BOARD MEMBERS Equifax, as the current sole shareholder of ChoicePoint, has identified eight persons to serve on the ChoicePoint Board of Directors and will elect such persons at or prior to the Mail Date. C. B. Rogers, Jr. will serve as the Chairman of the Board of Directors of both Equifax and ChoicePoint for a transitional period after the Spinoff. Although five of the new ChoicePoint Board members, including Mr. Rogers, are currently members of the Equifax Board, three of those persons will resign from the Equifax Board prior to the Spinoff. ChoicePoint and Equifax will therefore have two common Board members, including a common Chairman of the Board, for a transitional period. See "MANAGEMENT -- Directors and Executive Officers." APPOINTED SENIOR MANAGEMENT The Equifax Board of Directors has appointed Derek V. Smith as President and Chief Executive Officer of ChoicePoint. Mr. Smith has been employed by Equifax for more than 16 years, most recently as Executive Vice President and Group Executive for the Insurance Services Group. Mr. Smith and his management team are credited with the turnaround of the Insurance Services Group of Equifax, which will be ChoicePoint after the Spinoff. Mr. Smith's prior Equifax positions include Senior Vice President and Chief Financial Officer, as well as Corporate Vice President and Treasurer. Mr. Smith is supported by a senior management group with extensive executive experience, including officers and senior executives previously responsible for Equifax's Insurance Services Group. See "MANAGEMENT." ARRANGED $250 MILLION ChoicePoint has obtained a commitment for a $250 CREDIT FACILITY million five-year unsecured revolving Credit Facility. Concurrently with the Spinoff, ChoicePoint expects to use borrowings under the Credit Facility to repay the net intercompany debt owed to Equifax at the Effective Time, to repay $29.0 million of Equifax debt to be assumed by ChoicePoint, and to purchase approximately $6.5 million of ChoicePoint Common Stock in the open market after the Mail Date for two grantor trusts. Intercompany debt as of March 31, 1997 was approximately $92.6 million. The amount of intercompany debt owed at the Effective Time will be reduced by a $13.0 million obligation assumed by ChoicePoint with respect to certain ChoicePoint employees. Based upon the relative financial conditions of Equifax and ChoicePoint and discussions with and the advice of its investment advisors, Credit Suisse First Boston Corporation and The Robinson-Humphrey Company, Inc., Equifax determined that $29.0 million would be an appropriate allocation to ChoicePoint of the existing Equifax debt. The cash distribution will be used by Equifax to repay Equifax debt. See "CAPITALIZATION." REQUESTED INTERNAL REVENUE Equifax has received a tax ruling from the Internal SERVICE TAX RULING Revenue Service concerning the federal income tax consequences of the Spinoff to Equifax and its shareholders. See "THE SPINOFF -- Federal Income Tax Consequences of the Spinoff." KEY TERMS AND DEFINITIONS OF THE SPINOFF TRANSACTION NO SHAREHOLDER ACTION No action is required by Equifax shareholders to REQUIRED receive ChoicePoint Common Stock in the Spinoff. You do not need to surrender Equifax Common Stock to receive ChoicePoint Common Stock in the Spinoff. The number of shares of Equifax Common Stock you own will not change as a result of the Spinoff. RECORD DATE You must own Equifax Common Stock as of the close of business on the Record Date of July 24, 1997 to receive ChoicePoint Common Stock in the Spinoff. EFFECTIVE TIME The transfer by Equifax of the stock, assets and liabilities of its Insurance Services Group to ChoicePoint, its wholly-owned subsidiary, will be effective as of 5:00 p.m. Atlanta time on July 31, 1997. MAIL DATE The Distribution Agent will credit the brokerage accounts of Equifax shareholders or mail ChoicePoint Common Stock certificates to Equifax shareholders on or about August 7, 1997. DISTRIBUTION RATIO You will receive one share of ChoicePoint Common Stock for every ten shares of Equifax Common Stock you own as of the close of business on the Record Date. SHARES TO BE DISTRIBUTED All of the ChoicePoint Common Stock owned by Equifax will be distributed in the Spinoff. As a result of the Spinoff, approximately 14,700,000 shares of ChoicePoint Common Stock are expected to be outstanding. NO FRACTIONAL SHARES WILL Fractional shares of ChoicePoint Common Stock will BE ISSUED not be distributed. Instead, they will be aggregated and sold in the public market by the Distribution Agent, and the aggregate cash proceeds will be distributed to shareholders otherwise entitled to fractional shares. If you would otherwise be entitled to a fractional share, you will receive a check or a credit to your brokerage account in an amount equal to the value of the fractional share as soon as practicable after the Spinoff. See "THE SPINOFF -- No Issuance of Fractional Shares." SPINOFF The Spinoff is the series of transactions whereby Equifax will transfer the stock, assets and liabilities of its Insurance Services Group to its wholly-owned subsidiary ChoicePoint and distribute all the shares of ChoicePoint Common Stock to its Record Date shareholders. WHO CAN ASSIST IN ANSWERING YOUR QUESTIONS? Before the Spinoff, shareholders of Equifax with inquiries relating to the Spinoff may contact: Equifax Investor Relations Department P.O. Box 4081 Atlanta, GA 30302 Telephone: (404)885-8304 After the Spinoff, shareholders of ChoicePoint with inquiries relating to their investment in ChoicePoint Common Stock may contact: ChoicePoint Investor Relations Department 1000 Alderman Drive Alpharetta, GA 30005 Telephone: (770) 752-4050 The Distribution Agent responsible for the distribution of ChoicePoint Common Stock in the Spinoff and acting as transfer agent and registrar for ChoicePoint Common Stock after the Spinoff is: SunTrust Bank, Atlanta P.O. Box 4625 Atlanta, Georgia 30302 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data of ChoicePoint highlights selected historical and pro forma financial data and should be read in conjunction with the Consolidated Financial Statements and the unaudited pro forma consolidated financial data included elsewhere in this document. The historical financial information presents information for ChoicePoint for the periods in which it operated as the Insurance Services Group of Equifax. The pro forma data has been derived from the unaudited pro forma consolidated statement of income for the quarter ended March 31, 1997 and the year ended December 31, 1996 and the unaudited pro forma consolidated balance sheet as of March 31, 1997, which present the consolidated results of operations and financial position of ChoicePoint assuming that the transactions contemplated by both the Spinoff and ChoicePoint's acquisition of a 70% interest in CDB Infotek had been completed as of the beginning of 1996 and as of March 31, 1997, respectively. Neither the historical financial information nor the pro forma financial data presented below is necessarily indicative of the results of operations or financial position that ChoicePoint would have reported if it had operated as an independent company during the periods presented, nor is it indicative of ChoicePoint's future performance as an independent company. For management's explanation of the following results of operations and financial condition, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040734_citizens_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040734_citizens_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2ff18fa3dc9fba00434c9e4b38b49771edd11a6c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040734_citizens_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary...................................................... 5 Selected Consolidated Financial Data of Citizens Savings Bank of Frankfort and Subsidiary.................... 7 Recent Developments of Citizens Savings Bank of Frankfort............... 10 Risk Factors............................................................ 13 Proposed Purchases by Directors and Executive Officers.................. 16 Citizens Bancorp........................................................ 16 Citizens Savings Bank of Frankfort...................................... 16 Market Area............................................................. 17 Use of Proceeds......................................................... 17 Dividends............................................................... 18 Market for the Common Stock............................................. 18 Competition............................................................. 19 Capitalization.......................................................... 19 Pro Forma Data.......................................................... 21 The Conversion.......................................................... 25 Management's Discussion and Analysis of Financial Condition and Results of Operations of Citizens Savings Bank of Frankfort................................... 36 Business of Citizens.................................................... 47 Management of Citizens Bancorp.......................................... 63 Management of Citizens Savings Bank of Frankfort........................ 63 Executive Compensation and Related Transactions of Citizens............ 64 Regulation.............................................................. 69 Taxation................................................................ 75 Restrictions on Acquisition of the Holding Company...................... 76 Description of Capital Stock............................................ 80 Transfer Agent.......................................................... 81 Registration Requirements............................................... 81 Legal and Tax Matters................................................... 82 Experts................................................................. 82 Additional Information.................................................. 82 Index to Consolidated Financial Statements.............................. F-1 Glossary................................................................ G-1 This document contains forward-looking statements which involve risks and uncertainties. Citizens Bancorp's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" beginning on page 13 of this Prospectus. Please see the Glossary beginning on page G-1 for the meaning of capitalized terms that are used in this Prospectus. <PAGE> QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING Q: What is the purpose of the offering? A: The offering means that you will have the chance to become a shareholder of our newly formed holding company, Citizens Bancorp, which will allow you to share in our future as an indirect owner of a federal stock savings bank. The stock offering will increase our capital and the amount of funds available to us for lending and investment activities. This will give us greater flexibility to diversify operations and expand into other geographic markets if we choose to do so. As a stock savings association operating through a holding company structure, we will have the ability to plan and develop long-term growth and improve our future access to the capital markets. If our earnings are sufficient in the future, you might also receive dividends and benefit from the long-term appreciation of our stock price. Q: How do I purchase the stock? A: You must complete and return the Stock Order Form to us together with your payment, on or before September 4, 1997. Q: How much stock may I purchase? A: The minimum purchase is 25 shares (or $250). The maximum purchase in the Subscription Offering is 10,000 shares (or $100,000) for each deposit account, subject to an overall maximum of 30,000 shares. The maximum number of shares which may be purchased in the Community Offering by any person is 10,000 shares (subject to an overall limit of 30,000 shares counting the shares purchased in the Subscription Offering). For purposes of these limitations, joint account holders may not collectively exceed the 10,000 and 30,000 share limits. In certain instances, your purchase may be grouped together with purchases by other persons who are associated with you. We may decrease or increase the maximum purchase limitation without notifying you. If the offering is oversubscribed, shares will be allocated based upon a formula. Q: What happens if there are not enough shares to fill all orders? A: You might not receive any or all of the shares you want to purchase. If there is an oversubscription, the stock will be offered on a priority basis to the following persons: o Persons who had a deposit account with us on December 31, 1995. (Citizens Bancorp's employee stock ownership plan will have priority over such persons if more than 920,000 shares are sold, to the extent of any shares sold over 920,000 and up to the number of shares subscribed for by such plan.) Any remaining shares will be offered to: o The employee stock ownership plan of Citizens Bancorp. Any remaining shares will be offered to: o Persons who had a deposit account with us on June 30, 1997. Any remaining shares will be offered to: o Other depositors of ours, as of July 25, 1997. If the above persons do not subscribe for all of the shares, the remaining shares will be offered to certain members of the general public with preference given to people who live in Clinton County, Indiana. Q: What particular factors should I consider when deciding whether or not to buy the stock? A: Because of the small size of the offering, there likely will not be an active market for the shares, which may make it difficult to resell any shares you may own. Also, before you decide to purchase stock, you should read the Risk Factors section on pages 13-15 of this document. Q: As a depositor of Citizens Savings Bank of Frankfort, what will happen if I do not purchase any stock? A: You presently have voting rights while we are in the mutual form; however, once we convert to the stock form you will lose your voting rights unless you purchase stock. Even if you do purchase stock, your voting rights will depend on the amount of stock that you own and not on your deposit account at Citizens. You are not required to purchase stock. Your deposit account, certificate accounts and any loans you may have with us will not be affected by the Conversion. <PAGE> Q: Who can help answer any other questions I may have about the stock offering? A: In order to make an informed investment decision, you should read this entire document. This section highlights selected information and may not contain all of the information that is important to you. In addition, you should contact: Stock Information Center Citizens Savings Bank of Frankfort P.O. Box 635 Frankfort, Indiana 46041 (765) 659-5708 <PAGE> SUMMARY This summary highlights selected information from this document and may not contain all the information that is important to you. To understand the stock offering fully, you should read carefully this entire document, including the consolidated financial statements and the notes to the consolidated financial statements of Citizens Savings Bank of Frankfort. References in this document to "we", "us", "our" and "Citizens" refer to Citizens Savings Bank of Frankfort. In certain instances where appropriate, "us" or "our" refers collectively to Citizens Bancorp and Citizens Savings Bank of Frankfort. References in this document to "the Holding Company" refer to Citizens Bancorp. The Companies Citizens Bancorp P.O. Box 635 Frankfort, Indiana 46041 (765) 654-8533 Citizens Bancorp is not an operating company and has not engaged in any significant business to date. It was formed in June, 1997, as an Indiana corporation to be the holding company for Citizens Savings Bank of Frankfort. The holding company structure will provide greater flexibility in terms of operations, expansion and diversification. See page 16. Citizens Savings Bank of Frankfort P.O. Box 635 Frankfort, Indiana 46041 (765) 654-8533 We are a community- and customer-oriented federal mutual savings bank. We provide financial services to individuals, families and small business. Historically, we have emphasized residential mortgage lending, primarily one- to four-family mortgage loans. We have a subsidiary engaged in real estate development activities. On March 31, 1997, we had total assets of $45.2 million, deposits of $37.3 million, and retained income of $5.6 million. See pages 16 to 17. The Stock Offering Citizens Bancorp is offering for sale between 680,000 and 920,000 shares of its Common Stock at $10 per share. This offering may be increased to 1,058,000 shares without further notice to you if market or financial conditions change prior to the completion of this stock offering or if additional shares of stock are needed to fill the order of our employee stock ownership plan. Stock Purchases Citizens Bancorp will offer shares of its Common Stock to our depositors who held deposit accounts as of certain dates. The shares will be offered first in a Subscription Offering and any remaining shares may be offered in a Community Offering. See pages 27 to 31. Subscription Rights You may not sell or assign your subscription rights. Any transfer of subscription rights is prohibited by law. All persons exercising their subscription rights will be required to certify that they are purchasing shares solely for their own account and that they have no agreement or understanding regarding the sale or transfer of shares. The Offering Range and Determination of the Price Per Share The offering range is based on an independent appraisal of the pro forma market value of the Common Stock by Keller & Company, Inc., an appraisal firm experienced in appraisals of savings associations. Keller & Company, Inc. has estimated that, in its opinion, as of May 22, 1997 the aggregate pro forma market value of the Common Stock ranged between $6.8 million and $9.2 million (with a mid-point of $8 million). The pro forma market value of the shares is our market value after taking into account the sale of shares in this offering. <PAGE> The appraisal was based in part upon our financial condition and operations and the effect of the additional capital raised by the sale of Common Stock in this offering. The $10.00 price per share was determined by our board of directors and is the price most commonly used in stock offerings involving conversions of mutual savings associations. The independent appraisal will be updated prior to the completion of the Conversion. If the pro forma market value of the Common Stock changes to either below $6.8 million or above $10.58 million, we will notify you and provide you with the opportunity to modify or cancel your order. See pages 34 to 35. Termination of the Offering The Subscription Offering will terminate at 12:00 noon, Frankfort time, on September 4, 1997. The Community Offering, if any, may terminate at any time without notice but no later than October 19, 1997, without approval by the OTS. Benefits to Management from the Offering Our full-time employees will participate in our employee stock ownership plan, which is a form of retirement plan that will purchase shares of Citizens Bancorp's Common Stock. We also intend to implement a management recognition and retention plan and a stock option plan following completion of the Conversion, which will benefit our officers and directors. If we adopt the management recognition and retention plan, our executive officers and directors will be awarded shares of Common Stock without paying cash for the shares. However, the recognition and retention plan and stock option plan may not be adopted until at least six months after the Conversion and are subject to shareholder approval and compliance with OTS regulations. See pages 67 to 69. Use of the Proceeds Raised from the Sale of Common Stock Citizens Bancorp intends to use a portion of the proceeds from the stock offering to make a loan to our employee stock ownership plan to fund its purchase of 8% of the Common Stock issued in the Conversion. Citizens Bancorp will use 50% of the proceeds that remain after it makes this loan and after it pays expenses incurred in connection with the Conversion to purchase all of the capital stock to be issued by Citizens Savings Bank of Frankfort. Citizens Bancorp will retain the balance of the proceeds as a possible source of funds for the payment of dividends to shareholders or to repurchase shares of Common Stock in the future and for other general corporate purposes. See pages 17 to 18. Dividends Management of Citizens Bancorp has not yet made a decision regarding the payment of dividends. Citizens Bancorp will consider a policy of paying cash dividends on its Common Stock following the Conversion. See page 18. Market for the Common Stock Citizens Bancorp intends to list the Common Stock over-the-counter through the OTC "Electronic Bulletin Board." Since the size of the offering is relatively small, it is unlikely that an active and liquid trading market for the shares will develop and be maintained. Investors should have a long-term investment intent. If you purchase shares, you may not be able to sell them when you want to at a price that is equal to or more than the price you paid. See pages 18 to 19. Important Risks in Owning the Holding Company's Common Stock Before you decide to purchase stock in the offering, you should read the Risk Factors section on pages 13 to 15 of this document. <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040968_laser_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040968_laser_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..900951a9d33f19369fd7b63c087fa450b2db653d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040968_laser_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and notes thereto contained elsewhere in this Prospectus. Unless the context otherwise requires, all references in this Prospectus to (i) the 'Issuer' mean CLN Holdings Inc. (formerly known as Coleman Escrow Corp.), (ii) the 'Company' or 'Coleman' mean The Coleman Company, Inc. and its subsidiaries, (iii) 'Coleman Holdings' mean Coleman Holdings Inc., formerly a wholly owned subsidiary of the Issuer that was merged with and into the Issuer on July 15, 1997, and (iv) 'Coleman Worldwide' mean Coleman Worldwide Corporation. All share information and percentages with respect to Coleman Common Stock are based on the number of shares outstanding as of August 4, 1997. THE ISSUER The Issuer is a holding company whose only significant asset is all of the common stock, par value $1.00 per share, of Coleman Worldwide. Coleman Worldwide was formed in March 1993 in connection with the offering of $575 million aggregate principal amount at maturity of LYONs. Coleman Worldwide also holds 44,067,520 shares of the Coleman Common Stock, which represent approximately 82.6% of the outstanding Coleman Common Stock. As such, the Issuer's principal business operations are conducted by Coleman and its subsidiaries, and the Issuer has no operations of its own. The Issuer is a direct wholly owned subsidiary of Coleman (Parent) Holdings Inc. and an indirect wholly owned subsidiary of MacAndrews & Forbes Holdings Inc. ('MacAndrews Holdings'), a corporation wholly owned through Mafco Holdings Inc. ('Mafco' and, together with MacAndrews Holdings, 'MacAndrews & Forbes') by Ronald O. Perelman. See 'Relationship with MacAndrews & Forbes and Related Transactions' and 'Ownership of Common Stock.' Following the LYONs Retirement, the Issuer expects to be merged with and into Coleman Worldwide in the Coleman Worldwide Merger, with Coleman Worldwide being the surviving corporation and changing its name to 'CLN Holdings Inc.' THE COMPANY Coleman believes that it is a leading manufacturer and marketer of consumer products for outdoor recreation and home hardware use on a global basis. The Company's products have been sold domestically and internationally under the Coleman brand name since the 1920s. The Company believes its strong market position is attributable primarily to its well-recognized trademarks, particularly the Coleman brand name, broad product line, product quality and innovation, and marketing, distribution and manufacturing expertise. The Company has two primary classes of products, outdoor recreation and hardware. The Company's principal outdoor recreation products include a comprehensive line of lanterns and stoves, fuel-related products such as disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags, backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture, portable electric lights, spas, camping accessories and other products. The Company's principal hardware products include portable generators, portable and stationary air compressors, and safety and security products such as smoke alarms, carbon monoxide detectors and thermostats. The Company's products, which are mostly used for outdoor recreation, home improvement projects, and emergency preparedness, are distributed predominantly through mass merchandisers, home centers and other retail outlets. The Company has made several acquisitions in recent years designed to expand its product lines. In 1996, the Company acquired the French company Application des Gaz ('Camping Gaz'), which the Company believes is a leader in the European camping equipment market and also acquired the assets of Seatt Corporation ('Seatt'), a leading designer, manufacturer and distributor of smoke alarms, thermostats and carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of Fort Smith, Inc. ('Sierra'), a manufacturer of portable outdoor and recreational folding furniture and accessories and substantially all of the assets of Active Technologies, Inc. ('ATI'), a manufacturer of technologically advanced lightweight generators and battery charging equipment. In 1994, the Company acquired substantially all of the assets of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc. (together, 'Eastpak'), a leading designer, manufacturer and distributor of branded daypacks, sports bags and related products and substantially all of the assets of Sanborn Manufacturing Company ('Sanborn'), a manufacturer of a broad line of portable and stationary air compressors. The Company also restructured certain operations. In 1994, the Company restructured its German manufacturing operations (the 'German Restructuring'), including selling its plastic cooler business located in Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in 1994. BUSINESS STRATEGY AND RESTRUCTURING The Company's business strategy is to build upon its reputation as a leading manufacturer and marketer of high quality brand name consumer products for outdoor recreation and home hardware use by (i) focusing on quality and service, (ii) continuing to introduce new products, (iii) developing the Company's existing brands, (iv) expanding the Company's international presence, (v) continuing to develop its human resources, including developing and building its team of experienced managers and increasing management's focus on profitability and cash flows and (vi) further improving the quality and efficiency of its business processes to reduce administrative costs and improve profitability and competitiveness. As part of its strategy to improve profitability, the Company has developed a restructuring program including plans to (i) close its executive offices in Golden, Colorado, with most of its administrative functions relocating to its Wichita, Kansas facility, (ii) reduce its work force by approximately 10% or 700 employees, (iii) close or relocate several of its factories, (iv) close its Geneva, Switzerland international headquarters, (v) rationalize its product lines, including a significant reduction in SKUs, and (vi) exit its pressure washer business. In addition, the Company continues to evaluate the various components of its business operations and may, as a result of those ongoing evaluations, decide to sell certain businesses or assets if suitable opportunities arise. Several of the initiatives involved in the Company's restructuring plan, including closing and relocating certain administrative and manufacturing facilities, were substantially completed as of June 30, 1997. The remaining initiatives are expected to be substantially completed within one year. The Company recorded restructuring and other charges of approximately $22.6 million and related tax benefits of approximately $8.6 million during the six months ended June 30, 1997. There can be no assurance that restructuring and other charges will not be recorded in subsequent periods. See 'Management's Discussion of Financial Condition and Results of Operations--Liquidity and Capital Resources.' BACKGROUND Coleman was formed in December 1991 to succeed to the assets and liabilities of the outdoor products business of New Coleman Holdings Inc. ('Holdings'), an indirect parent of the Issuer. Holdings (then named The Coleman Company, Inc.) was acquired in 1989 by MacAndrews & Forbes (the 'Acquisition'). In March 1992, the Company completed an initial public offering of the Coleman Common Stock (the 'IPO'). Coleman Worldwide's ownership interest in the Company was approximately 82.6% at August 4, 1997. In 1993, Coleman Worldwide issued $575.0 million principal amount at maturity of LYONs in an underwritten public offering. The net proceeds from the issuance of the LYONs of approximately $133.1 million were distributed by Coleman Worldwide to its then direct and indirect parent companies, of which $110.0 million was used to repay indebtedness incurred in connection with the Acquisition. See 'Description of Other Indebtedness--Coleman Worldwide--The LYONs.' In connection with the offering of the LYONs, the ownership interest of MacAndrews & Forbes in the Company was transferred to Coleman Worldwide. Each LYON ($1,000 principal amount at maturity) is exchangeable at the option of the holder at any time for 15.706 shares of Coleman Common Stock, subject to Coleman Worldwide's right to elect to pay cash equal to the then market value of such shares in lieu, in whole or in part, of delivering such shares of Coleman Common Stock. The LYONs are currently secured by a pledge of 7,834,208 shares (representing approximately 14.7% of shares outstanding) of Coleman Common Stock. As a result of the LYONs Exchange Offer, 8,560,602 shares of Coleman Common Stock were released from the pledge to secure the LYONs and were then pledged to secure the Notes. Also in 1993, Coleman Holdings, the then parent of Coleman Worldwide, issued approximately $281.3 million principal amount at maturity of Coleman Holdings Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The net proceeds from the issuance of the Coleman Holdings Notes of approximately $162.3 million were distributed to MacAndrews & Forbes and were not available to Coleman Holdings or its subsidiaries. A portion of such proceeds were used by MacAndrews & Forbes to repay indebtedness, and the balance of such proceeds were used for general corporate purposes. In connection with the offering of the Coleman Holdings Notes, all of the outstanding capital stock of Coleman Worldwide was transferred by Holdings to Coleman Holdings. Prior to the Coleman Holdings Merger, the Coleman Holdings Notes were secured by a pledge of all the common stock of Coleman Worldwide and guaranteed on a non-recourse basis by Coleman Worldwide (the 'Old Coleman Worldwide Non-Recourse Guaranty'). The Old Coleman Worldwide Non-Recourse Guaranty was secured by a pledge of 26,000,000 shares of Coleman Common Stock. Following consummation of the Coleman Holdings Notes Redemption on July 15, 1997, (i) all of the shares of Coleman Worldwide common stock pledged to secure the Coleman Holdings Notes were released from such pledge and were then pledged to secure the Notes and (ii) the 26,000,000 shares of Coleman Common Stock pledged to secure the Coleman Holdings Notes were released from such pledge and were then pledged to secure the Old Coleman Worldwide Non-Recourse Guaranty of the Notes. The Issuer was incorporated in Delaware in May 1997. The Issuer's principal executive offices are located at 5900 North Andrews Avenue, Suite 700A, Fort Lauderdale, Florida 33309 and its telephone number is (954) 772-0550. OWNERSHIP OF THE ISSUER AND THE COMPANY The following chart illustrates a simplified ownership structure of the Issuer and the Company: <TABLE> <S> <C> <C> -------------------------------------- Ronald O. Perelman -------------------------------------- | 100% | -------------------------------------- Mafco Holdings Inc. ('Mafco') -------------------------------------- | 100% | -------------------------------------- MacAndrews & Forbes Holdings Inc. ('MacAndrews Holdings') -------------------------------------- | 100% | -------------------------------------- New Coleman Holdings Inc. ('Holdings') -------------------------------------- | 100% | -------------------------------------- Coleman (Parent) Holdings Inc. -------------------------------------- | 100% | -------------------------------------- CLN HOLDINGS INC. (THE 'ISSUER') -------------------------------------- | 100% | - ---------------------------- -------------------------------------- Public Holders of Coleman Worldwide Corporation Coleman Common Stock ('Coleman Worldwide') - ---------------------------- -------------------------------------- | | 17.4% 82.6% | | | -------------------------------------- | The Coleman Company, Inc. |------------ ('Coleman' or the 'Company') -------------------------------------- </TABLE> THE TRANSACTIONS The Old Notes are, and the New Notes will be, secured by a pledge of all of the shares of common stock of Coleman Worldwide and guaranteed pursuant to the Coleman Worldwide Non-Recourse Guaranty, which Coleman Worldwide Non-Recourse Guaranty is currently secured by a pledge of 36,233,312 shares of Coleman Common Stock. Concurrently with the closing of the Offering, the Issuer deposited the Escrowed Funds, consisting of the net proceeds of the Offering of approximately $455.3 million, with the Escrow Agent, of which approximately $449.5 million has been released to the Issuer and used to finance the LYONs Exchange Offer (other than redemption fees and expenses) and the Coleman Holdings Notes Redemption. The Escrow Agent will release the remaining Escrowed Funds (approximately $9.2 million at September 5, 1997) to the Issuer from time to time upon the satisfaction of certain conditions, including presentation of an Officer's Certificate certifying that, among other things (a) (i) the conditions to the optional redemption by Coleman Worldwide contained in the indenture governing the LYONs (the 'LYONs Indenture') to be complied with on May 27, 1998 (other than payment) have been satisfied or waived, (ii) the conditions to any exchange of LYONs from time to time by the holders thereof and the election by Coleman Worldwide to deliver cash in lieu of shares of Coleman Common Stock that are contained in the LYONs Indenture (other than payment) have been satisfied or waived or (iii) the conditions to certain other payments that may be required to be made by Coleman Worldwide pursuant to the terms of the LYONs Indenture have been satisfied or waived and (b) following the release, such Escrowed Funds, subject to certain limited exceptions, will be contributed to Coleman Worldwide and used to fund the completion of the LYONs Retirement or such other payments, as the case may be. See 'Description of the Notes--Escrow of Proceeds.' Notwithstanding the foregoing, there will be no release of Escrowed Funds to the Issuer after the occurrence of certain events of bankruptcy, insolvency or reorganization of Coleman Worldwide or Coleman (the 'Triggering Events'). If a Triggering Event occurs, the Issuer will be required to use any remaining Escrowed Funds to redeem the Notes, on a pro rata basis, at a redemption price equal to the Accreted Value plus accrued interest (if any) on the Mandatory Redemption Date (as defined herein). See 'Description of the Notes-- Mandatory Redemption.' The Issuer has contributed an aggregate of approximately $450.5 million to Coleman Holdings and Coleman Worldwide to finance the Coleman Holdings Notes Redemption and the LYONs Exchange Offer (including redemption fees and expenses), of which $449.5 million consisted of Escrowed Funds, and will make additional contributions of the Escrowed Funds from time to time to Coleman Worldwide to finance the completion of the LYONs Retirement (collectively, the 'Capital Contributions'). On July 15, 1997, Coleman Holdings redeemed the Coleman Holdings Notes and satisfied and discharged all of its obligations under the indenture governing the Coleman Holdings Notes (the 'Coleman Holdings Notes Indenture'). As a result of the Coleman Holdings Merger, the Issuer directly owns all the shares of capital stock of Coleman Worldwide. In connection with the Coleman Holdings Merger, the pledge of the Coleman Holdings capital stock to secure the Notes was terminated. The LYONs Retirement is expected to be completed on or prior to May 27, 1998. In connection with the LYONs Retirement, on May 23, 1997, Coleman Worldwide commenced an offer to pay cash in the amount of $343.61 per $1,000 principal amount at maturity upon exchange of any and all outstanding LYONs. Holders of $545,053,000 aggregate principal amount at maturity of LYONs accepted Coleman Worldwide's offer to exchange such LYONs for cash. As a result, $16,500,000 aggregate principal amount at maturity of LYONs remained outstanding as of June 30, 1997, which LYONs are convertible into 259,149 shares of Coleman Common Stock (representing approximately 0.5% of shares outstanding). The Issuer intends to cause Coleman Worldwide to redeem any outstanding LYONs at a redemption price of $343.61 per $1,000 principal amount at maturity on May 27, 1998, which is the first time that Coleman Worldwide has the right to do so under the LYONs Indenture. There can be no assurance that the LYONs Retirement will be consummated on or before May 27, 1998. In addition, there can be no assurance that the Escrowed Funds will be sufficient to consummate the LYONs Retirement. See 'Risk Factors--Subordination to Subsidiary Liabilities.' Following the completion of the LYONs Retirement, the Issuer expects to be merged with and into Coleman Worldwide in the Coleman Worldwide Merger, with Coleman Worldwide, as the surviving corporation, assuming all of the Issuer's obligations under the Indenture and the Notes and changing its name to 'CLN Holdings Inc.' The Coleman Worldwide Non-Recourse Guaranty and the pledge of the Coleman Worldwide capital stock will terminate upon the Coleman Worldwide Merger. Following the completion of the LYONs Retirement, all obligations of Coleman Worldwide under the LYONs Indenture, will be satisfied and discharged. In addition to the 36,233,312 shares of Coleman Common Stock currently pledged, simultaneously with the release of additional Escrowed Funds from time to time in connection with the LYONs Retirement, the Coleman Worldwide Non-Recourse Guaranty will be secured by the shares of Coleman Common Stock for which such exchanged LYONs are exchangeable that are released from the pledge to secure any exchanged LYONs. Upon completion of the LYONs Retirement and the Coleman Worldwide Merger, the Notes will be secured by a pledge of 44,067,520 shares of Coleman Common Stock (consisting of the 36,233,312 shares currently pledged to secure the Old Notes and the 7,834,208 shares of Coleman Common Stock currently pledged to secure the LYONs), less any Delivered Shares. THE EXCHANGE OFFER <TABLE> <S> <C> Securities Offered.................... Up to $600,475,000 aggregate principal amount at maturity of Senior Secured First Priority Discount Exchange Notes due 2001 and $131,560,000 aggregate principal amount at maturity of Senior Secured Second Priority Discount Exchange Notes due 2001, in each case, which have been registered under the Securities Act. The terms of the New First Priority Notes and the New Second Priority Notes are identical in all material respects to the Old First Priority Notes and the Old Second Priority Notes, respectively, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by November 17, 1997, interest will accrue on the Old Notes (in addition to the accretion of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on May 15 and November 15, commencing May 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the November 15 or May 15 immediately preceding such interest payment date. The Exchange Offer.................... The New First Priority Notes and the New Second Priority Notes are being offered in exchange for a like principal amount at maturity of Old First Priority Notes and Old Second Priority Notes, respectively. The issuance of the New Notes is intended to satisfy obligations of the Issuer contained in the Registration Agreement. For procedures for tendering, see 'The Exchange Offer--Procedures for Tendering Old Notes.' Tenders; Expiration Date; Withdrawal.......................... The Exchange Offer will expire at 5:00 p.m., New York City time, on November 6, 1997, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See 'The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes' and 'The Exchange Offer-- Withdrawal.' Certain Conditions to Exchange Offer............................... The Issuer shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer if at any time before the acceptance of the Old Notes for exchange or the exchange of the New Notes for such Old Notes certain events have occurred, which in the reasonable judgment of the Issuer, make it inadvisable to proceed </TABLE> <TABLE> <S> <C> with the Exchange Offer and/or with such acceptance for exchange or with such exchange. Such events include (i) any threatened, instituted or pending action seeking to restrain or prohibit the Exchange Offer, (ii) a general suspension of trading in securities on any national securities exchange or in the over-the-counter market, (iii) a general banking moratorium, (iv) the commencement of a war or armed hostilities involving the United States and (v) a material adverse change or development involving a prospective material adverse change in the Issuer's business, properties, assets, liabilities, financial condition, operations, results of operations or prospects that may affect the value of the Old Notes or the New Notes. In addition, the Issuer will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, at any such time any stop order shall be threatened or in effect with respect to the Registration Statement of which the Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939. See 'The Exchange Offer-- Certain Conditions to the Exchange Offer.' Federal Income Tax Consequences........................ The exchange pursuant to the Exchange Offer should not result in gain or loss to the holders or the Issuer for federal income tax purposes. See 'Certain U.S. Federal Income Tax Considerations.' Use of Proceeds....................... There will be no proceeds to the Issuer from the exchange pursuant to the Exchange Offer. See 'Use of Proceeds.' Exchange Agent........................ First Trust National Association is serving as exchange agent (the 'Exchange Agent') in connection with the Exchange Offer. </TABLE> CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Old Notes and the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Issuer does not currently anticipate that it will register Old Notes under the Securities Act. See 'Description of the Notes--Registration Rights.' Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Issuer believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an 'affiliate' of the Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. However, the Issuer does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any holder is an affiliate of the Issuer, is engaged or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See 'Plan of Distribution.' In addition, to comply with the state securities laws, the New Notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The offer and sale of the New Notes to 'qualified institutional buyers' (as such term is defined under Rule 144A of the Securities Act) is generally exempt from registration or qualification under the state securities laws. The Issuer currently does not intend to register or qualify the sale of the New Notes in any state where an exemption from registration or qualification is required and not available. See 'The Exchange Offer--Consequences of Exchanging Old Notes' and 'Description of the Notes--Registration Rights.' SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New First Priority Notes and the New Second Priority Notes are identical in all material respects to the Old First Priority Notes and the Old Second Priority Notes, respectively, except for certain transfer restrictions and registration rights relating to the Old Notes and except that, if the Exchange Offer is not consummated by November 17, 1997, interest will accrue on the Old Notes (in addition to the accretion of Original Issue Discount) from and including such date until but excluding the date of consummation of the Exchange Offer payable in cash semiannually in arrears on May 15 and November 15, commencing May 15, 1998, at a rate per annum equal to .50% of the Accreted Value of the Old Notes as of the November 15 or May 15 immediately preceding such interest payment date. <TABLE> <S> <C> Securities Offered.................... Up to $600,475,000 principal amount at maturity of Senior Secured First Priority Discount Exchange Notes due 2001 (the 'New First Priority Notes') and up to $131,560,000 principal amount at maturity of Senior Secured Second Priority Discount Exchange Notes due 2001 (the 'New Second Priority Notes'). Maturity Date......................... May 15, 2001. Yield to Maturity..................... 11 1/8% and 12 7/8% per annum with respect to the New First Priority Notes and the New Second Priority Notes, respectively (computed on a semiannual bond equivalent basis), calculated from May 20, 1997. Original Issue Discount............... The Old First Priority Notes were issued at an issue price of $649.49 per $1,000 aggregate principal amount at maturity, and the Old Second Priority Notes were issued at an issue price of $608.12 per $1,000 aggregate principal amount at maturity. Because the New Notes will be treated as a continuation of the Old Notes, which were issued at an original issue discount ('Original Issue Discount') for federal income tax purposes, the New Notes will have Original Issue Discount. Prospective holders of the New Notes should be aware that although there will be no periodic payments of interest on the New Notes, accrued Original Issue Discount will be includable, periodically, in a holder's gross income for United States federal income tax purposes prior to redemption or other disposition of such holder's New Notes, whether or not such New Notes are ultimately </TABLE> <TABLE> <S> <C> redeemed, sold (to the Issuer or otherwise) or paid at maturity. See 'Certain U.S. Federal Tax Considerations.' Optional Redemption................... The Notes may be redeemed at the option of the Issuer in whole or from time to time in part at any time on and after May 15, 2000 at the redemption prices set forth herein on the date of redemption. Notwithstanding the foregoing, the Issuer will have the option to redeem the Notes at any time in whole at a redemption price equal to the Accreted Value on the date of redemption plus the Applicable Premium. See 'Description of the Notes--Optional Redemption.' Change of Control..................... Upon a Change of Control, each holder of the Notes will have the right to require the Issuer to repurchase all or a portion of such holder's Notes at a price equal to the Put Amount on the date of repurchase. Escrow of Proceeds of Offering........ Concurrently with the closing of the Offering, the net proceeds of the Offering were deposited with the Escrow Agent and held in escrow. Approximately $449.5 million of such Escrowed Funds have been released to the Issuer and used to finance the LYONs Exchange Offer (other than redemption fees and expenses) and the Coleman Holdings Notes Redemption. The remaining Escrowed Funds are temporarily invested in Treasury Securities and other Permitted Investments. The Escrow Agent will release the remaining Escrowed Funds to the Issuer from time to time as necessary to finance the completion of the LYONs Retirement, subject to satisfaction of certain conditions and subject to certain limited exceptions. Notwithstanding the foregoing, there will be no release of Escrowed Funds to the Issuer upon the occurrence of a Triggering Event. See 'Description of the Notes--Escrow of Proceeds.' Mandatory Redemption.................. The Notes are subject to mandatory redemption upon the occurrence of a Triggering Event at a time when any Escrowed Funds are remaining. If a Triggering Event occurs, the Issuer will be required to use any such remaining Escrowed Funds to redeem the Notes, on a pro rata basis, at a redemption price equal to the Accreted Value plus accrued interest (if any) on the Mandatory Redemption Date. See 'Description of the Notes--Mandatory Redemption.' Collateral............................ Prior to the Coleman Worldwide Merger, the Old Notes are, and the New Notes will be, secured by a pledge of all of the shares of capital stock of Coleman Worldwide and guaranteed pursuant to the Coleman Worldwide Non-Recourse Guaranty, which Coleman Worldwide Non-Recourse Guaranty is currently secured by a pledge of the 36,233,312 shares of Coleman Common Stock owned by Coleman Worldwide. In addition to such shares, simultaneously with the release of Escrowed Funds from time to time in connection with the LYONs Retirement, the Coleman Worldwide Non-Recourse Guaranty will be secured by the shares of Coleman Common Stock for which such exchanged LYONs are exchangeable that are released from the pledge to secure any exchanged LYONs. Upon completion of the LYONs Retirement, the Notes will be secured by a pledge of 44,067,520 shares of Coleman Common Stock (consisting of the 36,233,312 shares currently pledged to secure the Old Notes and the 7,834,208 shares of Coleman Common Stock currently pledged to secure the LYONs), less any Delivered Shares. The First Priority Notes will rank senior in right of payment </TABLE> <TABLE> <S> <C> to the Second Priority Notes with respect to any collateral securing the Notes and the Coleman Worldwide Non-Recourse Guaranty. See 'Risk Factors--Control by Holders of First Priority Notes.' No additional shares of Coleman Common Stock will be pledged by the Issuer as security for the Notes irrespective of the value of Coleman Common Stock at any time. See 'Risk Factors--Security for the Notes; Potential for Diminution' and 'Description of the Notes-- Security.' The Issuer may withdraw the collateral consisting of shares of Coleman Common Stock, in whole or in part, by substituting therefor with the Trustee cash or U.S. Government Obligations (as defined herein) that will be sufficient for the payment at maturity of principal and interest (if any) on the Notes, or the pro rata portion thereof, respectively. In addition, the pro rata portion of collateral consisting of Coleman Common Stock may be released following a redemption, in part, of the Notes or a repurchase, in part, of the Notes after a Change of Control or the delivery of less than all the Notes for cancellation. See 'Description of the Notes--Security.' Ranking and Holding Company Structure........................... The Old Notes are, and the New Notes will be, senior secured obligations of the Issuer and will rank pari passu in right of payment with all future senior indebtedness of the Issuer, if any, and senior to all future subordinated indebtedness of the Issuer, if any. The only outstanding indebtedness of the Issuer is the Notes, and all the Issuer's consolidated liabilities (other than the Notes and certain liabilities incurred in connection with the Offering) are liabilities of its subsidiaries. The Issuer is a holding company and therefore the Old Notes are, and the New Notes will be, effectively subordinated to all existing and future indebtedness and other liabilities of the Issuer's subsidiaries, including trade payables. As of June 30, 1997, after giving pro forma effect to the Coleman Holdings Notes Redemption, the Coleman Holdings Merger and the completion of the LYONs Retirement, the outstanding indebtedness and other liabilities of such subsidiaries would have been approximately $923.5 million. Prior to the LYONs Retirement, the Notes will also be effectively subordinated to the LYONs. See 'Risk Factors-- Holding Company Structure,' '--Indebtedness and Ability to Repay the Notes,' '--Subordination to Subsidiary Liabilities' and 'Description of the Notes.' Certain Covenants..................... The indenture governing the Notes (the 'Indenture') requires the LYONs Retirement to be consummated no later than June 10, 1998, provided that no Triggering Event shall have occurred. The Indenture also requires the Issuer, prior to the Coleman Worldwide Merger, to hold, directly or indirectly, all of the capital stock of Coleman Worldwide. The Issuer is also required to hold, directly or indirectly, a majority of the voting power of the voting stock of Coleman at all times, unless and until the Issuer exercises its right to substitute U.S. Government Obligations for all of the pledged collateral. The Indenture also contains certain covenants that, among other things, generally prohibit the incurrence of additional debt by the Issuer and the issuance of additional debt or preferred stock by Coleman Worldwide, and limit (i) the incurrence of additional debt and the issuance of preferred stock by Coleman, (ii) the payment of </TABLE> <TABLE> <S> <C> dividends on the capital stock of the Issuer and its subsidiaries and the redemption or repurchase of the capital stock of the Issuer, (iii) the sale of assets and subsidiary stock, (iv) transactions with affiliates, (v) the creation of liens on the assets of the Issuer and Coleman Worldwide and (vi) consolidations, mergers and transfers of all or substantially all of the Issuer's assets. The foregoing limitations and prohibitions, however, are subject to a number of qualifications. See 'Description of the Notes--Certain Covenants.' Use of Proceeds....................... The Issuer will not receive any proceeds from the Exchange Offer. Of the approximately $455.3 million of net proceeds from the Offering, the Issuer used approximately $187.3 million to finance a portion of the $188.3 million capital contribution made to Coleman Worldwide to fund the LYONs Exchange Offer (including redemption fees and expenses) and approximately $262.2 million to make a capital contribution to Coleman Holdings to fund the Coleman Holdings Notes Redemption. The Issuer will use the remainder of the net proceeds of the Offering to make capital contributions to Coleman Worldwide to fund the completion of the LYONs Retirement. Pending such use, the remainder of the Escrowed Funds are being held in escrow and invested in Treasury Securities and other Permitted Investments. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001040969_corporatef_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001040969_corporatef_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..277ca202af4b316a9c7e2231f075254e0b6554e2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001040969_corporatef_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus (i) gives effect to a 0.65-for-1 stock split of the Company's Common Stock to be effected immediately prior to the Offering, (ii) gives effect to the conversion of all of the Company's outstanding Series A Preferred Stock into 1,169,935 shares of Common Stock in connection with the Offering, and (iii) assumes no exercise of the Underwriters' over-allotment option. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those occurring elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Company" in this Prospectus shall include CorporateFamily Solutions, Inc. and its subsidiaries. All references to years contained in this Prospectus relate to the Company's fiscal years. THE COMPANY CorporateFamily Solutions, Inc. is a leading national provider of a broad range of management and consulting services for employers seeking to create a "family friendly" work environment by providing their employees with workplace child care, education and other family support programs. The Company manages employer-sponsored Family Centers, built and equipped by an employer at or near its offices, providing high quality services such as early childhood education, child care, back-up child care, kindergartens, get-well care, summer camps, and parent support services. The Company currently manages 87 Family Centers for 65 corporate clients in 27 states and has 17 centers under development, including centers for nine new corporate clients. Eleven of the Company's corporate clients operate multiple Family Centers. In addition, the Company provides work/life consulting services to help employers realize the benefits of work and family programs and policies and to align work/life concerns of working families with business strategies of employers. Consulting services provided by the Company include feasibility studies, work/life strategic planning, return on investment analyses and development of work/life programs and policies. Work/life services include those services and programs that an employer may offer to employees to help employees better manage the demands of the workplace and home. During 1996, the Company provided consulting services to 25 corporate clients. The Company's clients include many of America's best known corporations, such as AlliedSignal Inc., Barnett Banks, Inc., The Boeing Company, Campbell Soup Company, The Chase Manhattan Corporation, Citicorp, Columbia/HCA Healthcare Corporation, Eli Lilly and Company, J.C. Penney Company, Inc., Johnson & Johnson, Marriott International, Inc., MBNA Corporation, Merck & Co., Inc., NationsBank Corporation, Owens Corning, S.C. Johnson & Son, Inc., and USAA. The Company believes it is positioned to take advantage of two related trends in corporate America: (i) the changing profile of the work force with an increased number of dual income households and working parents and (ii) the recognition by employers that responding to family needs of employees is an essential strategy to attract, retain and motivate their employees. The resulting demand for work and family services also reflects an increasing awareness by employers that helping employees balance work and family responsibilities and creating a work environment that facilitates that balance will increase productivity on the job. In response to these trends, the Company seeks to establish management and consulting relationships with major employers interested in providing a broad range of high quality work and family services to meet the needs of their employees. The Company's growth strategy is to develop new corporate clients, expand existing client relationships, develop new services and products and pursue strategic acquisitions. Since January 1, 1993, the Company has increased the number of corporate clients from 21 to 65, including 34 of the 1996 "Fortune 500" largest corporations in America, and has increased the number of Family Centers from 24 to 87. Revenue has correspondingly increased from $17.0 million in 1993 to $62.9 million in 1996, and operating income increased from a loss of $1.1 million in 1993 to a profit of $1.9 million in 1996. A significant portion of this growth was attributable to the Company's acquisition in October, 1995 of Resources for Child Care Management, Inc. ("RCCM"), an operator of 21 employer-sponsored child care centers (nine of which were operated for Fortune 500 corporations). The Company expanded its consulting services during the second half of 1996 and believes that such services enhance relationships with existing clients and will provide opportunities for developing new relationships with other employers. The Company has pilot programs for new services under development or evaluation, including the management of employer-sponsored elementary schools, tutoring and other education services, elder care, and the distribution of educational books, toys, games and software for family members of all ages. The Company was founded in 1987 to address a growing demand for high quality, employer-sponsored child care and has evolved to provide a broad range of work and family services for employers and their employees. The Company was founded by Marguerite Sallee, President and Chief Executive Officer; Lamar Alexander, former Secretary of Education and former Governor of Tennessee; Honey Alexander, former Vice Chairman of the Corporation for Public Broadcasting; Bob Keeshan, better known as television's "Captain Kangaroo;" and Brad Martin, Chairman and Chief Executive Officer of Proffitt's, Inc., a retail department store chain. The Company's executive offices are located at 209 Tenth Avenue South, Suite 300, Nashville, Tennessee, and its telephone number is (615) 256-9915. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......................... 1,350,000 shares Common Stock offered by the Selling Shareholders............ 1,000,000 shares Common Stock to be outstanding after the Offering........... 4,416,848 shares(1) Use of proceeds............................................. Repayment of indebtedness, working capital, and for general corporate purposes, including possible acquisitions. Proposed Nasdaq National Market symbol...................... CFAM </TABLE> - --------------- (1) Excludes (i) 1,546,421 shares of Common Stock, with a weighted average exercise price per share of $7.26, reserved for issuance upon the exercise of stock options granted pursuant to the Company's stock option plans; (ii) 26,000 shares of Common Stock reserved for issuance upon exercise of outstanding warrants to purchase Common Stock at an exercise price of $6.15; (iii) 475,000 shares of Common Stock reserved for future grant under the Company's stock option plans; and (iv) 100,000 shares of Common Stock reserved for issuance pursuant to the Company's employee stock purchase plan. Using the modified treasury stock method, the outstanding options and warrants represent 689,051 shares of Common Stock equivalents, assuming an offering price of $9.00 per share. See "Management -- Compensation Pursuant to Plans" and "Description of Capital Stock -- Warrants." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA) <TABLE> <CAPTION> YEAR ENDED(1) SIX MONTHS ENDED ------------------------------------------ ---------------------- DECEMBER 30, DECEMBER 29, DECEMBER 27, JUNE 28, JUNE 27, 1994 1995 1996 1996 1997 ------------ ------------ ------------ -------- ----------- (UNAUDITED) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenue................................. $ 24,513 $ 36,920 $ 62,926 $ 30,079 $36,381 Operating expenses...................... 21,092 32,708 55,589 26,479 32,028 Selling, general and administrative expenses.............................. 2,958 3,525 4,659 2,363 2,785 Depreciation and amortization........... 387 520 758 381 397 ------------ ------------ ------------ -------- ----------- Operating income........................ 76 167 1,920 856 1,171 Interest expense, net................... 50 86 343 194 125 ------------ ------------ ------------ -------- ----------- Income before income taxes.............. 26 81 1,577 662 1,046 Income tax expense (benefit)............ -- (460) (1,159) 26 500 ------------ ------------ ------------ -------- ----------- Net income.............................. $ 26 $ 541 $ 2,736 $ 636 $ 546 ========== ========== ========== ======= ========= Net income per share(2)(3).............. $ 0.01 $ 0.19 $ 0.75 $ 0.20 $ 0.17 ========== ========== ========== ======= ========= Weighted average number of common and common equivalent shares outstanding(2)........................ 2,702 3,398 4,102 4,082 4,072 SELECTED OPERATING DATA (AT END OF PERIOD)(1): Family Center clients(4)................ 41 58 65 59 65 Family Centers(5)....................... 48 75 85 81 87 Program capacity(6)..................... 5,295 9,113 10,702 10,178 11,278 </TABLE> <TABLE> <CAPTION> JUNE 27, 1997 ------------------------ ACTUAL AS ADJUSTED(7) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital....................................................... $ 2,531 $ 10,082 Total assets.......................................................... 19,391 26,031 Long-term debt, including current maturities.......................... 3,960 -- Shareholders' equity.................................................. 7,672 18,272 </TABLE> - --------------- (1) The Company's fiscal year ends on the Friday closest to December 31. In October 1995, the Company acquired all of the outstanding capital stock of RCCM, an operator of 21 employer-sponsored child care centers. The transaction was accounted for as a purchase, and consideration paid consisted of $3.4 million in cash and 324,995 shares of Common Stock. (2) Net income per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the year, which includes additional dilution related to conversion of outstanding preferred stock, stock options and warrants as computed under the modified treasury stock method. The additional dilution related to stock options granted within the last twelve months has been computed using the treasury stock method and has been included in common equivalent shares outstanding for all periods presented. See the Company's consolidated financial statements and note 8 thereto. (3) Supplemental pro forma net income per share of $0.71 for the year ending December 27, 1996 and $0.17 for the six months ended June 27, 1997 was computed by adjusting the historical net income per share as reflected above for the reduction in interest expense and after giving effect to the estimated number of shares that would be required to be sold (at an assumed initial public offering price of $9.00 per share) to repay $4.4 million and $4.0 million in debt at December 27, 1996 and June 27, 1997, respectively. (4) A Family Center client is defined as an entity that as of the applicable date was under contract with the Company for the management of one or more open and operating Family Centers. (5) Family Centers are defined as the facilities which the Company is engaged to manage and operate on behalf of its Family Center clients. (6) Program capacity is defined as the maximum aggregate number of individuals that the Company will enroll in the services and programs at its Family Centers to be in compliance with National Association for the Education of Young Children ("NAEYC") standards. As of each of the respective dates, the state licensed capacity was 6,361, 10,487, 12,440, 11,902 and 13,122 individuals, respectively. (7) Adjusted to give effect to the sale of the 1,350,000 shares of Common Stock offered by the Company hereby, at an assumed initial public offering price of $9.00 per share, and the application of the estimated net proceeds therefrom as described in "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041022_mcraes-of_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041022_mcraes-of_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041022_mcraes-of_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041023_mcraes_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041023_mcraes_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52b2d76e9180802b529094383ba6fcf3f7a9516e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041023_mcraes_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, "Company" means Proffitt's, Inc. and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers," "Parisian" and "Herberger's" refer to the Company's five department store chains, and the existing and predecessor entities that conduct or conducted business under such names. Reference in this Prospectus to the Company's fiscal year means the fiscal year ended on the Saturday nearest January 31 of the following calendar year (e.g., "fiscal 1995" means the fiscal year ended February 3, 1996). Unless the context otherwise requires, references in this Prospectus to "pro forma" financial information reflect the acquisition by the Company of Parisian as if the acquisition had occurred on February 4, 1996. Historical financial information presented in this Prospectus includes the results of Parisian from and after October 11, 1996, the date of its acquisition by the Company. THE EXCHANGE OFFER The Exchange Offer......... The Exchange Offer consists of this Prospectus and the related Letter of Transmittal, and is being made solely to eligible holders of Series A Notes. Upon the terms and subject to the conditions of the Exchange Offer, the Company is offering eligible holders of Series A Notes the opportunity to exchange its Series A Notes that have not been registered under the Securities Act for the Exchange Notes that have been registered under the Securities Act. Exchange Offer Expiration Date..................... The Exchange Offer expires at 5:00 P.M., Eastern Time on August 7, 1997 unless extended by the Company in its sole discretion. Exchange Notes Offered..... The Exchange Notes consist of $125,000,000 aggregate principal amount of 8 1/8% Senior Notes due 2004, Series B. Procedures for Tendering Series A Notes........... Brokers, dealers, commercial banks, trust companies and other nominees who hold Series A Notes through DTC (as defined herein) may effect tenders by book-entry transfer in accordance with DTC's Automated Tender Offer Program ("ATOP"). Holders of such Series A Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Series A Notes. In order for Series A Notes to be tendered by a means other than by book-entry transfer, a Letter of Transmittal must be completed and signed in accordance with the instructions contained herein. The Letter of Transmittal and any other documents required by the Letter of Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand delivery or overnight carrier, and either such Series A Notes must be delivered to the Exchange Agent or specified procedures for guaranteed delivery must be complied with. See "The Exchange Offer -- Procedures for Tendering." Letters of Transmittal and certificates representing Series A Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." THE NOTES Maturity Date of the Notes...................... May 15, 2004. Interest Payment Dates..... May 15 and November 15 of each year, commencing November 15, 1997. Limited Nature of Guarantees................. The Notes are fully and unconditionally guaranteed on a senior basis by the Subsidiary Guarantors. Under certain circumstances, future subsidiaries (other than Accounts Receivables Subsidiaries and Foreign Subsidiaries) of the Company may be requested to guarantee the Notes. In addition, the Guarantees are subject to release under certain circumstances. See "Description of the Notes -- Exchange Note Guarantees" and "Description of the Exchange Notes -- Limitations on Guarantees by Restricted Subsidiaries." Ranking.................... The Notes rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Guarantees rank pari passu in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Guarantees will be effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness. As of May 3, 1997, on a pro forma basis after giving effect to the issuance of the Notes and the application of the net proceeds therefrom, the Company and the Subsidiary Guarantors would have had an aggregate of approximately $521.2 million of indebtedness outstanding, of which approximately $295.3 million would have been senior indebtedness and approximately $60.3 million would have been secured indebtedness. See "Description of the Exchange Notes." Change of Control.......... Following the occurrence of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to purchase all outstanding Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Certain Covenants.......... The Indenture under which the Notes are issued contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness, (ii) certain restricted payments, (iii) certain asset sales, (iv) transactions with affiliates, (v) consolidations, mergers and dispositions of assets on a consolidated basis, and (vi) the Company's restricted subsidiaries from guaranteeing certain other indebtedness of the Company unless such restricted subsidiaries also guarantee the Notes. The Indenture also prohibits certain restrictions on distributions from restricted subsidiaries of the Company. These covenants are subject to important exceptions and qualifications. The Indenture provides that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes -- Certain Covenants." Use of Proceeds............ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the Series A Notes are being used to repay certain outstanding mortgage and other indebtedness of the Company, to reduce certain borrowings under the Credit Facility and for general corporate purposes. See "Use of Proceeds." Shelf Registration Statement................ If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Notes (as defined herein) notifies the Company within 20 business days of the commencement of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and holds Series A Notes acquired directly from the Company or an affiliate of the Company, the Company will be required to provide the Shelf Registration Statement to cover resales of the Notes by such holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay Additional Interest (as defined herein) to the holders of Notes under certain circumstances. See "The Exchange Offer." Absence of an Established Trading Market for the Notes.................... The Series A Notes are new securities that were issued on May 21, 1997 (the "Issue Date" or "Closing Date"). There is currently no established trading market for the Notes or the Exchange Notes. Although Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") have informed the Company that they currently intend to make a market in the Series A Notes and, upon issuance, the Exchange Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. To the extent Series A Notes are exchanged in this Exchange Offer, the liquidity of the market for the remaining Series A Notes may be reduced. The Series A Notes have been designated eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through Nasdaq. See "Risk Factors -- Absence of a Public Market." THE COMPANY The Company is a leading regional department store chain operating 175 stores in 24 states, primarily in the Southeast and Midwest. The Company operates its stores under five chain names: Proffitt's (19 stores), McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores). Each chain operates primarily as a leading branded traditional department store in its communities, with Parisian serving as a better branded specialty department store. Most of the stores are located in premier regional malls in the respective trade areas served. The Company's stores offer a wide selection of fashion apparel, accessories, cosmetics and decorative home furnishings, featuring assortments of premier brands, private brands and specialty merchandise. Each of the Company's chains operates with its own merchandising, marketing and store operations team in order to tailor regional assortments to the local customer. At the same time, the Company coordinates merchandising among the chains and consolidates administrative and support functions to realize scale economies, to promote a competitive cost structure and to increase margins. Under the leadership of R. Brad Martin and an experienced senior management team, the Company has executed a disciplined acquisition strategy and strategic approach to new store openings, growing from 11 stores and net sales of $94.8 million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis. Members of the Company's senior management have substantial investments in the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately 4.7% of the Company's Common Stock and all directors and executive officers of the Company as a group beneficially owned approximately 13.2% of the Company's Common Stock. The Company was incorporated under the laws of the State of Tennessee in 1919. The principal executive offices of the Company are located at 3455 Highway 80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400. BUSINESS STRENGTHS The Company believes that it is well-positioned to build upon its historical success by capitalizing on its competitive strengths, including the following: Strong Regional Focus. The Company places a high priority on being a market leader in each of the markets in which it operates. In smaller communities, the Company's stores are frequently the only branded name department store catering to middle and upper income customers and offering an array of brands that frequently are not otherwise available to shoppers in such markets. In most larger metropolitan markets, the Company seeks to maximize its market share by operating multiple stores in prime locations. While the Company has grown through the acquisition of regional chains, its philosophy has been to (i) maintain existing trade names and retain merchandising and store personnel and (ii) utilize previously developed regional expertise and knowledge of the local customer base by allowing each chain to tailor merchandise assortments to the local customer. The Company believes that the increased sales and gross margins resulting from a coordinated but decentralized merchandising effort outweigh any incremental operating cost savings associated with a completely centralized strategy. Scale Economies. With pro forma sales of approximately $2.3 billion in fiscal 1996, the Company realizes scale economies in purchasing and distribution, administrative areas such as accounting, proprietary credit card administration, management information systems, and other infrastructure-related areas. Although the Company's chains control regional merchandising, the Proffitt's Merchandising Group coordinates merchandising, planning and execution, visual presentation, marketing and advertising activities among the chains. The Proffitt's Merchandising Group manages strategic relationships with the Company's top vendors to ensure that each chain is afforded the purchasing leverage of the Company as a whole. In addition to seeking economies of scale in purchasing, the Proffitt's Merchandising Group will continue to capitalize on corporate level marketing synergies, such as the coordination of media buying and direct mail programs, the establishment of preferred advertising rates, and the production of store catalogs. Proven Track Record of Integrating Acquisitions. In recent years, the Company has grown primarily through the acquisition of strong, regional department store chains at valuations believed to be attractive by management. The following table sets forth certain information concerning the Company's significant acquisitions: <TABLE> <CAPTION> TRANSACTION VALUE(A) EQUITY AS A % AS A MULTIPLE OF: DATE OF NUMBER TRANSACTION OF TRANSACTION ---------------------------- COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B) - ---------------- ----------- --------- ----------- -------------- ------------ ------------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> McRae's, Inc.................... March 31, 1994 28 $264.8 5% 0.6x 5.3x Younkers, Inc................... February 3, 1996 51 321.6 79 0.5 6.5 Parisian, Inc................... October 11, 1996 38 375.0 28 0.5 8.7 G.R. Herberger's, Inc........... February 1, 1997 39 176.9 88 0.5 7.4 </TABLE> - --------------- (a) Transaction value is the total consideration paid in the form of: (i) cash; (ii) notes; (iii) equity (valued as of the announcement date for pooling-of-interest transactions and in accordance with generally accepted accounting principles for purchase accounting transactions); and (iv) assumed long-term debt, net of cash, as of the end of the last full fiscal quarter prior to the acquisition date. (b) LTM Sales and LTM EBITDA of the acquired company represent data for the twelve months ending on the last day of the last full fiscal quarter prior to the acquisition date. Additionally, EBITDA for Herberger's is adjusted for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma Financial and Operating Data" for the definition of EBITDA. The Company employs a "best practices" approach to integrating acquired companies. Best practices is a process whereby each acquired chain's operating procedures and policies are reviewed to determine those practices which the Company believes will increase synergies while minimizing business interruptions. The Company believes the implementation of best practices throughout the Company's chains has resulted in improved comparable store sales and increased operating margins through better and more consistent inventory control and pricing, and other operating efficiencies. Strong Financial Position. The Company has been able to realize significant growth while maintaining moderate leverage. Since February 1996, the acquisitions of Younkers, Herberger's and Parisian have resulted in an increase in net sales of approximately $1.6 billion, while senior debt as a percentage of total capitalization decreased slightly. In addition to conservative balance sheet management, the Company's strong cash flow generation has allowed it to fund all capital expenditures, incremental working capital requirements and fixed charges with internally generated cash flow. On a pro forma basis, the Company's ratio of EBITDA to interest expense in fiscal 1996 would have been 3.7x. The Company's strong financial performance has provided it with significant financial flexibility, including the ability to use its publicly-traded common stock as consideration for selected acquisitions. Geographic and Demographic Diversity. The Company operates 175 stores in 24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and Kalispell, Montana. The Company believes that its geographic diversity and the demographic breadth of its target customer groups may to some extent serve to insulate the Company from sales and earnings volatility typically associated with poor weather conditions, or changes in local or regional economic conditions. Attractive Real Estate. The Company believes that its stores are primarily located in premier malls in the markets in which the Company operates. As is consistent with national trends, the Company further believes that construction of new malls in many of its markets is likely to be limited. The Company anticipates that the attractiveness of its existing locations, combined with limited new mall development, may contribute to improved comparable store sales. BUSINESS STRATEGY The Company's business objective is to maximize profitability and shareholder value by (i) expanding its core business through comparable store sales growth, new store openings and margin expansion, and (ii) monitoring acquisition opportunities while maintaining a strong capital structure. Comparable Store Sales Growth. The Company expects that comparable store sales will benefit from a number of merchandising initiatives including (i) implementing best practices, (ii) expanding sales of key brands, and (iii) increasing sales of the Company's private brands. As part of best practices, the Company benchmarks sales of product categories and brand assortments for each store and identifies and targets opportunities to strengthen such sales by altering the merchandise mix. The Company has successfully used this strategy by applying the long history of strength in the cosmetics business of McRae's and Proffitt's stores to increase the penetration and profitability of Younkers stores' cosmetics business. The Company believes that it will be able to further utilize this strategy to increase sales in the Younkers shoe business, increase McRae's women's apparel sales and introduce home goods into select Parisian stores. The Company believes that comparable store sales will also benefit from expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The Company's large scale and proven track record with these vendors has enabled the Company to introduce certain of these brands into acquired stores which, prior to combining with the Company, did not have access to these vendors. For instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select Herberger's stores. Additionally, the Company plans to increase sales of its private brand offerings within the apparel and housewares categories from 6% of total net sales to 12% to 15% over the next two to three years. For example, the Company has recently developed its own line of men's dress shirts and accessories, under the brand name RBM. The RBM collection is designed to fill a niche for quality men's furnishings at moderate prices. New Store Openings. The Company plans to open 15 to 20 new stores across all chains over the next three years and to make selective real estate acquisitions in existing or new markets. The Company targets premier mall locations principally based on favorable demographic profiles and trends, as well as the compatibility and traffic draws of other tenants. High quality real estate is a primary criterion for all new stores. In addition, the Company plans to selectively remodel or expand certain existing stores. Margin Expansion. The Company has implemented the following strategies to increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on purchasing economies of scale; (iii) extending key brands into certain acquired stores; (iv) shifting the merchandise mix toward higher margin products; (v) increasing private brand penetration; (vi) consolidating administrative and support areas and eliminating redundant expenses; and (vii) realizing efficiencies related to the re-engineering of certain operating activities. The Company intends to further increase gross margins by increasing sales of its private brand products, which typically generate higher margins and enhance customer loyalty. Operating margins are also expected to benefit from sales productivity enhancements across the Company's chains and from the integration cost savings programs developed by management in conjunction with the Younkers, Parisian, and Herberger's acquisitions. These programs reduced operating expenses by a total of $6 million in fiscal 1996 (consistent with the Company's announced target) and are expected to produce annualized expense savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on an independent basis). Monitor Acquisition Opportunities. The Company has an established record of successfully acquiring and integrating regional department store chains. The Company believes that its philosophy of retaining the local identity and merchandising organization of acquired companies makes the Company an attractive acquirer for regional department store companies. The Company's criteria in evaluating strategic opportunities include (i) strong market presence; (ii) prime real estate locations; (iii) similar merchandising strategies targeted toward middle to upper income consumers; (iv) geographic proximity to the Company's core markets; (v) compatible corporate culture; and (vi) favorable demographics in the regions served. Although the Company currently has no agreements, arrangements or understandings with respect to future acquisitions, the Company expects the department store industry will continue to consolidate, and the Company will regularly evaluate possible acquisition opportunities as they arise. Maintain Strong Capital Structure. The Company intends to maintain a strong balance sheet to support its growth objectives. The fulfillment of this objective has been facilitated by strong cash flows and the Company's issuance of its Common Stock as all or part of the consideration used in its recent acquisitions. The Company believes that, absent any additional acquisitions, future cash flows from operations (with seasonal needs supplemented by borrowings under its Credit Facility) will be sufficient to service debt and lease payments, and to fund capital expenditures and working capital requirements. RECENT DEVELOPMENTS Strengthening and Retaining Management. In recent months, the Company has acted to strengthen and retain its senior management in light of its recent growth and strategic objectives. In April 1997, the Board of Directors of the Company authorized a new five-year employment agreement with R. Brad Martin, its Chairman and Chief Executive Officer since 1989. Among other recent appointments, the Company also named Douglas E. Coltharp as Executive Vice President and Chief Financial Officer, William D. Cappiello as President and Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief Executive Officer of Herberger's, Mark Shulman as President and Chief Executive Officer of Younkers, Toni E. Browning as President and Chief Executive Officer of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and Accounting. Implementation of Capital Structure Improvements. The Company is in the process of implementing a number of capital structure improvements to position it for future growth. The issuance of the Notes is part of a plan to improve the Company's capital structure by (i) reducing the amount of the Company's secured indebtedness; (ii) reducing the amount of the Company's indebtedness that bears interest at a floating rate; and (iii) extending the average life of the Company's indebtedness. On June 26, 1997, the Company amended and restated its existing credit facility (as amended and restated, the "Credit Facility") to, among other things, (a) increase the revolving Credit Facility from $275 million to $400 million, (b) extend the maturity from October 11, 1999 to June 26, 2002, (c) make provision for, upon any senior indebtedness of Proffitt's being rated investment grade, the elimination of the inventory borrowing base limitation on borrowings under the Credit Facility, (d) reduce the financial performance benchmarks at which more favorable pricing options are made available to the Company, and (e) lessen in varying degrees the scope of the affirmative and negative covenants applicable to the Company and its subsidiaries. The Company may use the proceeds of borrowings under the Credit Facility to refinance certain existing indebtedness, to finance capital expenditures, for general corporate purposes and to finance certain acquisitions. Furthermore, the Company is pursuing a restructuring of one of its existing accounts receivable financing arrangements covering receivables generated by all the stores, except Younkers, in an effort to extend the term of a portion of such arrangements from one year to three to five years through the sale of investment grade term asset-backed securities. The Company anticipates that such transaction may be completed during or shortly after the Exchange Offer. There is no assurance, however, that such transaction will be completed as presently contemplated. See "Receivables Securitization Facilities."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041075_edutrek_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041075_edutrek_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4eabefcdaac401965ae0a56d4adae2ba0d8c02a8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041075_edutrek_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the term "Company" includes EduTrek International, Inc. and the Predecessor (as defined in "Acquisitions"), together with its subsidiaries. The offering of shares of the Class A Common Stock of the Company is referred to herein as the "Offering." Unless otherwise indicated, all information included in this Prospectus reflects a 7-for-1 split of the Company's Common Stock effected as of June 17, 1997 and assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Principal and Selling Shareholders." THE COMPANY EduTrek International, Inc. (the "Company") intends to become a leading provider of career-oriented, internationally focused higher education designed to prepare students to compete in the global marketplace. The Company operates The American College ("The American College" or the "College"), an international postsecondary educational institution with campuses in Atlanta, Los Angeles, London and Dubai, United Arab Emirates serving approximately 2,800 students from the U.S. and over 100 other countries. The American College's curriculum includes such academic disciplines as international business, multimedia communications and international design. To respond to the increasingly technology-intensive workplace, The American College intends to expand its curriculum to include academic programs in the field of information technology management. The American College's Fall term enrollment has increased from 2,200 students in 1994 to 2,822 students in 1996, and its net revenues have increased from approximately $23.7 million for the fiscal year ended May 31, 1995 to approximately $29.8 million on a pro forma basis for the fiscal year ended May 31, 1997. See "-- Summary Consolidated Financial Data." Originally established as a two-year institution, The American College has grown into a diversified institution awarding associate's and bachelor's degrees as well as a master of business administration ("MBA") degree in international business. Of its fiscal 1997 graduates, 8.6% graduated with an associate's degree, 89.3% graduated with a bachelor's degree and 2.1% graduated with a master's degree. In 1987, The American College became the first for-profit four-year university to be accredited by the Commission of Colleges of the Southern Association of Colleges and Schools ("SACS"), one of six regional accrediting agencies recognized by the U.S. Department of Education. The American College offers an authentic international educational environment with over half of its students being non-U.S. students. Through its Study Abroad Program (the "SAP program"), The American College provides nearly 500 students from U.S. universities the opportunity to earn academic credit toward a degree from their home university by studying international business, liberal arts and applied art at one of The American College's international campuses. The Company, through EduTrek Systems, Inc. ("EduTrek Systems"), also licenses from third parties, acquires, develops and implements corporate education programs. The Company believes that the demand for postsecondary career-oriented education will increase over the next several years as a result of certain demographic, economic and social trends. The United States Department of Education (the "U.S. Department of Education") estimates that the number of new high school graduates is expected to increase by approximately 20% from 2.5 million graduates in 1994 to 3.0 million graduates in 2005. In addition, the U.S. Department of Education expects significant growth to result from increased enrollment of students over the age of 24 seeking to enhance their skills or retrain for new technologies. Two significant segments in the U.S. postsecondary education market are international students enrolling in U.S. institutions and U.S. students studying abroad. According to the Institute of International Education, international student enrollment at U.S. colleges and universities reached a record high of over 450,000 for the 1995-1996 academic year. In addition, the number of U.S. students studying abroad has risen from approximately 48,000 in the 1985-1986 academic year to approximately 84,000 in the 1994-1995 academic year. The key elements of the Company's growth strategy are to (i) enhance growth at existing campuses through an integrated marketing program, increased student retention and job placement assistance and competitive financing programs; (ii) expand education program offerings, including information technology management and corporate education; and (iii) capitalize on The American College's international educational capabilities by aggressive international student recruiting and growth in its SAP program. The Company's principal executive offices are located at 3340 Peachtree Road, Suite 2000, Atlanta, Georgia 30326, and its telephone number is (404) 812-8200. LICENSE AGREEMENT On July 26, 1997, the Company and its subsidiary, American European Corporation ("American European"), entered into a License Agreement (the "License Agreement") with ITI Learning Systems, Inc. ("ITI") pursuant to which ITI has licensed its Applied Information Technology ("AIT") program to the Company for use in the State of Georgia, including The American College's campus in Atlanta. The AIT program is an intensive nine month post-graduate program in applied information technology designed to train and certify students in the growing field of information technology management. The License Agreement expires on July 31, 2007 and is renewable for one ten-year term. The License Agreement requires the Company to implement the AIT program in the Atlanta campus by November 3, 1997, unless a later date is mutually agreed upon. Under the License Agreement, the Company will pay ITI a one-time initial licensing fee and royalties of a percentage of gross revenues derived from The American College's operation of the AIT program. Under the terms of the License Agreement, the Company is required, among other things, to (i) pay ITI royalties based on the higher of actual tuition levels charged students enrolled in the AIT program or minimum tuition levels specified in the License Agreement, (ii) expend a percentage of revenues derived from the operation of the AIT program to advertise and promote the AIT program, (iii) purchase from ITI certain courseware, equipment and other materials, and (iv) make such capital investments or expenditures as may be necessary to upgrade the AIT program. The License Agreement further grants the Company the right to implement the AIT program in the cities of Los Angeles, London and Dubai upon payment of an additional license fee and the execution of an additional license agreement substantially in the form of the License Agreement for each additional territory. The Company intends to enter into license agreements for such territories over the next two years. ITI also has agreed that until July 26, 1998, it will negotiate exclusively with the Company for additional license agreements for the territories of the States of California (in addition to Los Angeles), Florida, Texas and Virginia, the District of Columbia and the United Arab Emirates (in addition to Dubai) and has granted the Company a right of first refusal in the event that ITI receives an offer to license its AIT program in any of such territories during the 24-month period beginning on July 26, 1998. The Company anticipates that the investment and start-up costs of approximately $2.0 million per campus associated with the implementation of the AIT program will be funded primarily from working capital and a credit facility currently being negotiated with NationsBank, N.A. The Company has received a commitment from NationsBank, N.A. to provide, subsequent to the completion of the Offering, (i) a $10.5 million line of credit to finance the build-out and start-up costs associated with the implementation of the AIT program at the College's Atlanta, Los Angeles and London campuses as well as the cost of relocation (including leasehold improvements) of the College's Los Angeles campus (the "$10.5 Million Line of Credit") and (ii) a $2.0 million working capital facility which is intended to replace the Company's current revolving loan (the "Revolving Loan") with NationsBank, N.A. The Company expects that cash flow will repay such investment and start-up costs over a period of approximately two years. See "Business -- Applied Information Technology Program" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." RISK FACTORS An investment in the Class A Common Stock offered hereby involves a high degree of risk. See "Risk Factors." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.................. 2,342,890 shares of Class A Common Stock Common Stock offered by the Selling Shareholder...... 257,110 shares of Class A Common Stock Common Stock to be outstanding after the Offering........................................... 3,265,000 shares of Class A Common Stock(1) 6,335,000 shares of Class B Common Stock Use of proceeds by the Company....................... To repay certain indebtedness of the Company. See "Use of Proceeds." Proposed Nasdaq National Market symbol............... "EDUT" </TABLE> - --------------- (1) Excludes (i) 829,388 shares of Class A Common Stock reserved for issuance under the Company's 1997 Incentive Plan, of which 414,757 shares were subject to outstanding stock options as of August 22, 1997 and (ii) 622,041 shares of Class A Common Stock issuable upon the exercise of stock purchase warrants. See "Use of Proceeds," "Management -- 1997 Incentive Plan," "Principal and Selling Shareholders," and "Description of Capital Stock -- Warrants to Purchase Class A Common Stock." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE, PERCENTAGE AND ENROLLMENT DATA) The following table sets forth certain consolidated financial and other operating data for the Company and the Predecessor. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company's Consolidated Financial Statements and Notes thereto, the Predecessor's Consolidated Financial Statements and Notes thereto, and other financial information included elsewhere herein. <TABLE> <CAPTION> THE PREDECESSOR(1)(2) THE COMPANY(1) --------------------------------------------- --------------------------- FISCAL YEAR ENDED PERIOD FROM MAY 31, 1997 FISCAL YEAR ENDED MAY 31, JUNE 1, 1996 --------------------------- --------------------------- THROUGH PRO FORMA 1994 1995 1996 OCTOBER 8, 1996 ACTUAL(2) AS ADJUSTED(3) ------- ------- ------- --------------- ---------- -------------- <S> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA:(4) Net revenues...................................... $20,654 $23,696 $26,493 $ 6,189 $ 23,590 $ 29,779 Cost of education and facilities.................. 8,611 10,051 11,144 3,256 9,014 12,270 Selling and promotional expenses.................. 3,165 3,083 3,614 1,335 2,428 3,763 General and administrative expenses............... 6,264 6,115 6,677 2,739 5,468 8,357 Rents paid to majority shareholder................ 146 145 150 49 0 0 Amortization of goodwill.......................... 0 0 0 0 696 1,040 ------- ------- ------- ------- ---------- ----------- Income (loss) from campus operations.............. 2,468 4,302 4,908 (1,190) 5,984 4,349 Income (loss) from management agreement........... 0 0 127 (21) 479 458 ------- ------- ------- ------- ---------- ----------- Income (loss) from operations..................... 2,468 4,302 5,035 (1,211) 6,463 4,807 Interest expense.................................. 440 607 730 258 2,499 468 Interest income -- shareholder notes.............. 183 153 361 98 0 0 Other income -- net............................... 483 25 72 66 19 85 ------- ------- ------- ------- ---------- ----------- Income (loss) before income taxes................. 2,694 3,873 4,738 (1,305) 3,983 4,324 Provision for income taxes(5)..................... 148 124 107 0 1,981 1,980 ------- ------- ------- ------- ---------- ----------- Net income (loss)................................. $ 2,546 $ 3,749 $ 4,631 $(1,305) $ 2,002 $ 2,344 ======= ======= ======= ======= ========== =========== Net income per share(6)........................... $ 0.24 ========== Weighted average shares outstanding............... 8,271,008 ========== Pro forma net income per share.................... $ 0.22 =========== Pro forma weighted average shares outstanding(7).................................. 10,613,898 =========== PRO FORMA DATA: Income before income taxes, as reported........... $ 2,694 $ 3,873 $ 4,738 $(1,305) Pro forma provision for income taxes(5)........... 1,051 1,510 1,848 509 ------- ------- ------- ------- Pro forma net income.............................. $ 1,643 $ 2,363 $ 2,890 $ (796) ======= ======= ======= ======= SELECTED OPERATING DATA: EBITDA(8)......................................... $ 3,695 $ 5,445 $ 6,135 $ (820) $ 8,236 $ 7,199 EBITDA margin..................................... 17.9% 23.0% 23.2% (13.2)% 34.9% 24.2% Net cash provided by (used in) operating activities...................................... 4,375 5,522 5,798 1,413 1,356 Net cash provided by (used in) investing activities...................................... 725 (1,507) (2,662) (288) (31,428) Net cash provided by (used in) financing activities...................................... (5,030) (3,916) (3,442) (1,196) (30,780) The American College Fall term enrollment(9)...... 2,000 2,200 2,441 2,822 2,822 </TABLE> <TABLE> <CAPTION> AT MAY 31, 1997 --------------------------- ACTUAL AS ADJUSTED(10) -------- --------------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $ (9,716) $(7,505) Total assets................................................ 47,671 46,440 Long-term debt, including current portion................... 30,075 2,606 Shareholders' equity........................................ 7,877 34,750 </TABLE> See accompanying notes on following page. (1) The Company was organized on July 1, 1996 for the purpose of acquiring the Predecessor. On October 8, 1996, the Company acquired the Predecessor and EduTrek Systems. See "Acquisitions." (2) Because the Company did not acquire the Predecessor until October 8, 1996, the financial information with respect to the Company for the period from July 1, 1996 through October 8, 1996 does not include the Predecessor. EduTrek Systems is included in the financial information of the Company in a manner similar to a pooling of interests because the Company and EduTrek Systems were under common control. Financial information for EduTrek Systems is not included in the Summary Consolidated Financial Data prior to July 1, 1996 because, since its formation in 1992, EduTrek Systems has not generated revenues and in the years ended December 31, 1992, 1993, 1994 and 1995 and for the period ended October 8, 1996, EduTrek Systems incurred losses of $321,000, $90,911, $312,954, $584,627 and $819,430, respectively. Such amounts are not considered to be relevant to the Company and the Predecessor because, in prior years, EduTrek Systems had no revenues and existed solely to provide a corporate structure through which its controlling shareholder could pursue a variety of opportunities and activities. (3) Assumes that the Company was formed on June 1, 1996 and gives effect to the acquisitions of the Predecessor and EduTrek Systems as if such acquisitions had occurred on June 1, 1996. See "Acquisitions." As adjusted to (i) give effect to the sale of 2,342,890 shares of Class A Common Stock offered by the Company hereby and (ii) the application of the estimated net proceeds therefrom as if such application had occurred on June 1, 1996. See "Pro Forma Consolidated Financial Data." (4) The Company's results of operations are affected by The American College's level of enrollment which ranges from the highest level during the Fall term (October-December) to the lowest level during the Summer terms (June-September). See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Seasonality." (5) As a result of its election to be treated as an S Corporation for income tax purposes, the Predecessor has not been subject to federal and most state income taxes. Accordingly, the historical provision for income taxes includes income taxes only for those jurisdictions that do not recognize S Corporation status. The pro forma provision for income taxes (computed under the provisions of Statement of Financial Accounting Standards No. 109) reflects provisions that would have been recorded had the Predecessor been a C Corporation for income tax purposes during the periods shown using an estimated income tax rate of 40%. Prior to this Offering, distributions in the form of cash dividends were made principally to assist the shareholders with their income tax obligations arising from the Predecessor's S Corporation status. Such distributions amounted to $4,068,962, $3,800,000, $4,500,000 and $1,889,694 for the fiscal years ended May 31, 1994, 1995 and 1996 and for the period from June 1, 1996 through October 8, 1996, respectively. (6) Net income per share information for the Predecessor is not presented as the amounts are not considered meaningful due to the minimal number of outstanding shares and the S Corporation election of the Predecessor. Net income per share of the Company is based upon net income divided by the weighted average number of shares for the period. All stock options and stock purchase warrants outstanding are assumed to be exercised as of the beginning of the period. (7) Pro forma weighted average shares outstanding includes 665,000 shares of Class A Common Stock and 6,335,000 shares of Class B Common Stock issued and outstanding as of May 31, 1997, as adjusted for the 2,342,890 shares of Class A Common Stock offered hereby and all outstanding warrants and options (1,271,008) to purchase Class A Common Stock. The number of shares outstanding from the assumed exercise of all stock options and warrants is measured under the treasury stock method. (8) EBITDA represents income from operations plus depreciation and amortization. While EBITDA data should not be construed as a substitute for income from operations, net income, or cash flows from operations, in accordance with generally accepted accounting principles, in analyzing the Company's and the Predecessor's operating performance, financial position and cash flows, the Company has included EBITDA data (which is not a measure of financial performance under generally accepted accounting principles) because it understands that such data are commonly used by certain investors to evaluate a company's performance in the postsecondary education industry. (9) Represents enrollment data as measured on the first day of each Fall term. (10) As adjusted to give effect to the sale of 2,342,890 shares of Class A Common Stock offered by the Company hereby, the exercise of a warrant to purchase 257,110 shares of Class A Common Stock and the application of the estimated net proceeds therefrom as if such application had occurred on May 31, 1997. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041077_t-w_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041077_t-w_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2d6334ee8e2e6fe383d7764c58b8b05b50d286f4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041077_t-w_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Prospective purchasers of shares of Common Stock offered hereby should carefully consider the factors set forth under "Risk Factors." Unless otherwise specified, the information in this Prospectus assumes that the Underwriters do not exercise the overallotment option described herein under "Underwriting." Unless the context otherwise requires, (i) the information set forth in this Prospectus gives effect to the proposed transactions described herein under "The Restructuring" (the "Restructuring"), and (ii) the terms "Company" and "T&W" mean T&W Financial Corporation, its predecessors and its affiliates after giving effect to such transactions. THE COMPANY T&W Financial Corporation is a specialized commercial finance company that provides equipment financing, principally in the form of leases, to small and medium-sized businesses. The Company originates leases through direct relationships with selected leading equipment manufacturers, distributors and industry cooperatives ("Equipment Providers") that generally offer the Company's leasing services as a preferred method of financing equipment sales. The Company also originates leases through referrals from financial institutions and other lessors. The Company is a "credit lender" and, as such, its underwriting policies and procedures focus on the creditworthiness of the lessee rather than the value of the equipment financed. The Company concentrates on "prime credits," which it defines as lessees that have been under the same ownership for at least 10 years and have a record of meeting their financial obligations. T&W has been continuously engaged in the leasing business since 1976, and as of June 30, 1997, the Company's portfolio of leases serviced totaled $174.7 million and included over 7,200 leases. The Company focuses on financing equipment with a purchase price of less than $250,000 ("small ticket" equipment leases) in various industries, including fast food franchises, independent grocery stores, funeral homes, hospitality, liquid waste disposal and horticulture. As of June 30, 1997, these six industries accounted for approximately 46.2% of the Company's portfolio of leases serviced. The Company finds these industries attractive because lessees in these industries generally have credit characteristics favored by the Company and the equipment financed is generally not subject to obsolescence within the lease term. By utilizing dedicated marketing teams to service and expand its penetration within a particular industry, the Company is able to develop long-term relationships with Equipment Providers, which generates a continuing source of new lease originations. The Company maintains a diversified portfolio in order to minimize its credit exposure to any single industry or individual lessee. As of June 30, 1997, no single industry accounted for more than 12.2% of the Company's portfolio of leases serviced and no single lessee accounted for more than 3% of its portfolio of leases serviced. The average annualized yield on the Company's portfolio of leases serviced for the six months ended June 30, 1997 was 12.7%. For leases originated in the first six months of 1997, the average contractual yield was 12.4%, the average term was 44 months and the average equipment cost was $38,700. In recent years, the Company has achieved strong growth in lease originations and net income. The Company's lease originations increased from $9.8 million for 1992 to $80.6 million for 1996; lease originations increased from $31.4 million for the six months ended June 30, 1996, to $50.3 million for the comparable period for 1997. The Company's net income increased from $1.2 million for 1992 to $5.8 million for 1996; net income increased from $2.4 million for the six months ended June 30, 1996, to $3.2 million for the comparable period for 1997. The Company's pro forma net income (after giving effect to the Restructuring) was $3.2 million for 1996 and $1.7 million for the six months ended June 30, 1997. See "The Restructuring." A key element of the Company's growth has been its access to funding, principally through securitizations. Through June 30, 1997, the Company has raised $196.9 million through securitizations. Prior to 1997, the Company's securitizations were recorded as financings for financial reporting purposes. Beginning in 1997, the Company's securitizations qualified as sales for financial reporting purposes, in accordance with the new accounting standard for the transfer of financial assets (Statement of Financial Accounting Standard ("SFAS") No. 125). Leasing represents a large and growing source of financing for businesses. According to the Equipment Leasing Association of America (the "ELA"), the financing of capital equipment by businesses through leasing increased from approximately $122 billion in 1992 to approximately $169 billion in 1996. The Company believes that "small ticket" equipment leasing is one of the most rapidly growing segments of the industry primarily due to: (i) the increasing acceptance of leasing by small and medium-sized businesses as a means of financing the acquisition of capital equipment; (ii) the consolidation of the banking industry, which has led to diminished service to small and medium-sized businesses; and (iii) the recognition by small and medium-sized businesses that specialized commercial finance companies such as T&W can provide faster and more direct service than traditional financial institutions. The Company attributes its strong financial performance to adherence to a consistent operating strategy. The Company's operating strategy is to: (i) provide on-going, high quality service and support to Equipment Providers and lessees; (ii) maintain strong credit quality; (iii) access low-cost funding through securitizations; and (iv) maintain efficient operations and relatively low overhead costs. The Company believes that its operating strategy provides multiple opportunities for continued growth. The Company's growth strategy is to: (i) finance additional types of equipment in industries it currently serves; (ii) develop strategic alliances with leading Equipment Providers to finance a higher share of their equipment sales; (iii) continue expansion within its existing industries throughout the United States and Canada; (iv) generate additional equipment and non-equipment financing from its existing lessees and from referral sources; (v) pursue selected acquisitions of other companies or portfolios to expand in existing and enter into new industries; and (vi) develop relationships in new industries. As part of its expansion strategy, in June 1997, the Company acquired the assets of Commercial Capital Corporation ("Commercial Capital"), a specialized commercial lease finance company located near Kansas City, Missouri and is in the process of negotiating a portfolio acquisition. See "Business -- Recent Acquisition" and "-- Potential Future Acquisition." After the Restructuring, T&W Financial Corporation will become the manager of, and will own an 85% membership interest in, T&W Financial Services Company L.L.C., a recently formed Washington limited liability company (the "LLC"). The remaining 15% membership interest in the LLC will be owned by a limited liability company owned by the senior management of the Company. The LLC will conduct all of the Company's leasing business. As a result of the Restructuring, the Company will become subject to income taxes. See "Summary Combined Financial and Operating Data," "The Restructuring" and "Certain Transactions -- T&W Funding Company VI, LLC." The principal executive office of the Company is located at 6416 Pacific Highway East, Tacoma, Washington, 98424, and its telephone number is (253) 922-5164. RECENT DEVELOPMENTS QUARTER ENDED SEPTEMBER 30, 1997 The Company's lease originations increased from $28.3 million for the three months ended September 30, 1996 to $46.1 million for the comparable period for 1997, resulting in total lease originations for the nine months ended September 30, 1997 of $96.4 million. The Company's net income increased from $1.5 million for the three months ended September 30, 1996 to $3.6 million for the comparable period for 1997, resulting in net income of $6.8 million for the nine months ended September 30, 1997. Pro forma net income (after giving effect to the Restructuring) for the three months ended September 30, 1997 was $2.0 million, resulting in pro forma net income for the nine months ended September 30, 1997 of $3.7 million. Pro forma net income per share (after giving effect to the Restructuring) for the three months ended September 30, 1997 was $0.34, resulting in pro forma net income per share for the nine months ended September 30, 1997 of $0.64. See "The Restructuring." Delinquencies as a percentage of the Company's portfolio of leases serviced (greater than 30 days) were 8.7% as of September 30, 1997 and annualized charge-offs were 0.17% for the nine months ended September 30, 1997. As of September 30, 1997, the Company's portfolio of leases serviced totaled $216.9 million and the average annualized yield on the Company's portfolio of leases serviced for the nine months ended September 30, 1997 was 12.6%. The Company closed an additional securitization on September 30, 1997, bringing the total amount raised through securitizations to $243.3 million. Delinquencies increased significantly from June 30, 1997 primarily due to two factors. First, an Equipment Provider from which the Company had outstanding leases due as of September 30, 1997 totaling $2.5 million and which also acts as servicer with respect to $2.2 million of the Company's outstanding leases to funeral home operators, sought protection under Chapter 11 of the United States Bankruptcy Code. In connection with such bankruptcy, payments to the Company under such lease and servicing arrangements have ceased. The Company intends to proceed against the Equipment Provider and certain guarantors, and to foreclose on the related collateral. Second, the lessee on a lease of $2.1 million in mining equipment became delinquent. The Company currently does not anticipate incurring any material charge-offs in connection with the increased delinquencies at September 30, 1997. See "Risk Factors -- Dependence on Creditworthiness of Lessees and Portfolio Performance" and "-- Relationships with Equipment Providers." POTENTIAL FUTURE ACQUISITION The Company is negotiating the acquisition of a portfolio of (i) loans financing equipment used in the funeral home industry, and (ii) secured inventory loans to dealers for such equipment. Based upon asset balances at June 30, 1997, the Company anticipates that the purchase price for such portfolio would be approximately $60 million. The final purchase price will be calculated based upon actual asset balances on the closing date, which is anticipated to occur prior to the end of 1997. The Company has not completed a due diligence review of the portfolio, and no definitive agreement has been entered into. There can be no assurance that the Company will enter into a definitive agreement for this acquisition or that, if any agreement is entered into, the acquisition will be consummated. In the event the acquisition is consummated, there can be no assurance that such acquisition will have a beneficial effect on the operation or prospects of the Company. The closing of any such acquisition will be conditioned, among other things, on the Company's entry into an employment agreement with a key manager of the acquired portfolio. The Company anticipates funding the acquisition, if consummated, primarily through securitization of most of the acquired assets, supplemented by approximately $1.0 million of the net proceeds from the Offering and other internally generated funds. See "Risk Factors -- Acquisition Risks," "Business -- Growth Strategy -- Relationships in New Industries," "Business -- Marketing -- Selected Industries" and "Use of Proceeds." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company......... 2,200,000 shares Common Stock offered by the Selling Shareholders.............................. 360,000 shares(1) Common Stock outstanding after the Offering.................................. 8,000,000 shares(2) Use of proceeds............................. For the repayment of certain bank and affiliate lines of credit, for acquisitions and for general corporate purposes, including working capital to fund expansion of its leasing business. See "Use of Proceeds." Nasdaq symbol............................... "TWFC" </TABLE> - --------------- (1) The Selling Shareholders intend to use substantially all of their proceeds to repay certain obligations to the Company. See "Certain Transactions -- Certain Relationships Terminating at Closing." (2) Excludes 1,000,000 shares of Common Stock reserved for issuance upon exercise of options under the Company's 1997 Stock Option Plan; 100,000 shares of Common Stock reserved for issuance under the Company's 1997 Employee Stock Purchase Plan; 10,000 shares of Common Stock reserved for issuance pursuant to the Company's 1997 Director Stock Grant Plan; and 13,700 shares of Common Stock to be awarded to employees of the Company following the Offering. No options or shares of Common Stock are currently outstanding under such plans but the Company has the obligation to grant options at the initial public offering price for 22,000 shares of Common Stock to each of James R. Neese and Larry E. Rice as a result of the Commercial Capital acquisition. See "Business -- Recent Acquisition" and "Management -- Benefit Plans." SUMMARY COMBINED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997(1) ------ ------ ------ ------- ------- ------ ------- <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Revenues: Lease contract revenue........... $3,162 $4,286 $7,132 $10,621 $16,834 $6,944 $7,298 Gain on sale of leases........... -- -- -- -- -- -- 3,448(2) Fee income....................... 976 567 607 1,364 2,067 1,099 134 Servicing and other income....... 344 256 292 555 595 517 738 ------ ------ ------ ------ ------ ------ ------ Total revenues........... 4,482 5,109 8,031 12,540 19,496 8,560 11,618 ------ ------ ------ ------ ------ ------ ------ Expenses: Interest expense................. 1,490 1,577 2,589 4,513 6,434 2,911 3,726 Compensation and related expenses...................... 814 948 1,484 1,796 2,859 1,305 1,986 Amortization of initial direct costs......................... 337 640 848 1,302 1,893 854 1,222 Provision for credit losses...... 107 172 223 621 1,137 345 402 Other general and administrative expenses...................... 507 627 601 807 1,345 757 1,073 ------ ------ ------ ------ ------ ------ ------ Total expenses........... 3,255 3,964 5,745 9,039 13,668 6,172 8,409 ------ ------ ------ ------ ------ ------ ------ Net income......................... $1,227 $1,145 $2,286 $3,501 $5,828 $2,388 $3,209 ====== ====== ====== ====== ====== ====== ====== PRO FORMA AMOUNTS(3): Income before minority interest and income taxes.............. $5,828 $3,209 Minority interest................ (874) (481) ------ ------ Income before income taxes....... 4,954 2,728 Provision for income taxes....... (1,783) (982) ------ ------ Net income....................... $3,171 $1,746 ====== ====== Net income per share............. $0.55 $0.30 Weighted average number of shares of Common Stock and Common Stock equivalent shares outstanding................... 5,800 5,800 </TABLE> - --------------- (1) Includes operating results relating to Commercial Capital for the period since its acquisition on June 2, 1997. See "Business -- Recent Acquisition." (2) Beginning in 1997, the Company's securitizations qualified as sales for financial reporting purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." (3) Pro forma operating results reflect adjustments to historical results as of the beginning of the periods presented for (a) the inclusion of a 15% minority interest in the LLC in connection with the Restructuring and (b) income taxes as if the Company had been treated as a taxable entity rather than an affiliated group of pass-through entities. See "The Restructuring" and Notes to the T&W Financial Corporation and Affiliates Financial Statements. SUMMARY COMBINED FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS) <TABLE> <CAPTION> DECEMBER 31, JUNE 30, 1997(1) ------------------------------- ------------------------- 1994 1995 1996 ACTUAL PRO FORMA(2) ------- ------- ------- -------- ------------ <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents..................... $4,145 $4,323 $8,064 $8,861 $8,861 Net investment in leases...................... 56,060 90,359 135,087 103,890 103,890 Total assets.................................. 61,242 96,051 144,437 124,180 124,180 Notes payable -- recourse..................... 11,481 8,833 32,272 17,659 17,659 Notes payable -- non-recourse................. 36,014 67,686 89,975 80,804 80,804 Total liabilities............................. 53,775 86,501 134,140 112,016 115,516 Shareholders' equity.......................... 7,467 9,550 10,297 12,164 Pro forma deferred income tax liability....... 3,500 Pro forma minority interest................... 1,825 Pro forma shareholders' equity................ 6,839 </TABLE> <TABLE> <CAPTION> AT OR FOR THE SIX AT OR FOR THE YEAR MONTHS ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> OPERATING DATA: Lease financing receivables originated: Number of contracts.... 711 993 1,488 1,370 3,630 2,609 1,301 Lease originations(3)...... $9,833 $21,703 $34,290 $55,348 $80,638 $31,370 $50,338 Leases serviced: Number of contracts.... 1,610 2,554 3,517 4,086 6,983 6,349 7,255 Portfolio of leases serviced(4).......... $21,649 $38,436 $61,797 $97,772 $148,086 $119,156 $174,729 Average portfolio yield(5)............. 19.8% 16.3% 16.1% 14.7% 15.2% 14.2% 12.7%(6) Credit quality statistics: Delinquencies as a percentage of portfolio of leases serviced 31-60 days........... 4.40% 2.50% 2.52% 1.50% 2.89% 2.48% 1.19% 61-90 days........... 1.40% 0.31% 0.42% 0.86% 1.38% 0.71% 1.24% 91-120 days.......... 0.47% 0.10% 0.15% 0.78% 0.32% 0.63% 0.98% Over 120 days........ -- 0.99% 0.90% -- 1.04% 0.60% 0.96% ------- ------- ------- ------- -------- -------- -------- Total........... 6.27% 3.90% 3.99% 3.14% 5.63% 4.42% 4.37% Net charge-offs(7)..... 0.36% 0.09% 0.02% 0.39% 0.64% 0.09% 0.27% </TABLE> - --------------- (1) Includes assets and liabilities of Commercial Capital. (2) Pro forma balance sheet data reflects adjustments to historical amounts for (a) the inclusion of a 15% minority interest in the LLC in connection with the Restructuring, and (b) estimated deferred income tax liabilities as if the Company had been treated as a taxable entity rather than an affiliated group of pass-through entities. See "The Restructuring" and Notes to the T&W Financial Corporation and Affiliates Financial Statements. (3) Represents the equipment cost (or the acquisition cost in the case of Commercial Capital) for leases originated during the period. (4) Represents the aggregate of minimum lease payments, excluding residual values, under all leases serviced by the Company and either held as direct financing leases or sold. (5) Represents the average yield recognized during the period for the portfolio of leases serviced. Amounts for interim periods are annualized. (6) Represents the average annualized yield recognized during the period for the portfolio of leases serviced, determined on a basis as if all securitizations in 1997 had been recorded as financing transactions. Yield does not give effect to revenues or leases attributable to Commercial Capital. During the six months ended June 30, 1997, the Company's average annualized portfolio yield declined. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations -- Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041085_hedstrom_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041085_hedstrom_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041085_hedstrom_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041122_oregon_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041122_oregon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..68652f04a5e7200b80224fe83f7142e3a5613e75
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041122_oregon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) PRESENTED ELSEWHERE IN THIS PROSPECTUS. THE PURCHASE OF COMMON STOCK IS SUBJECT TO CERTAIN RISKS. SEE "RISK FACTORS." OREGON TRAIL FINANCIAL CORP. The Holding Company was organized on June 9, 1997 under Oregon law at the direction of the Savings Bank to acquire all of the capital stock that the Savings Bank will issue upon its conversion from the mutual to stock form of ownership. The Holding Company has engaged only in organizational activities to date. The Holding Company has applied for OTS approval to become a savings and loan holding company through the acquisition of 100% of the capital stock of the Savings Bank. Immediately following the Conversion, the only significant assets of the Holding Company will be the outstanding capital stock of the Savings Bank, 50% of the net investable proceeds of the Offerings (see table under "PRO FORMA DATA") as permitted by the OTS to be retained by it, and a note receivable from the ESOP evidencing a loan to enable the ESOP to purchase 8% of the Common Stock issued in the Conversion. Funds retained by the Holding Company will be used for general business activities. See "USE OF PROCEEDS." Upon Conversion, the Holding Company will be classified as a unitary savings and loan holding company subject to OTS regulation. See "REGULATION -- Savings and Loan Holding Company Regulations." The main office of the Holding Company is located at 2055 First Street, Baker City, Oregon 97814 and its telephone number is (541) 523-6327. PIONEER BANK, A FEDERAL SAVINGS BANK Chartered in 1901, the Savings Bank is a federal mutual savings bank headquartered in Baker City, Oregon. As a result of the Conversion, the Savings Bank will convert to a federal capital stock savings bank and will become a wholly-owned subsidiary of the Holding Company. The Savings Bank is regulated by the OTS, its primary regulator, and by the FDIC, the insurer of its deposits. The Savings Bank's deposits have been federally-insured since 1934 and are currently insured by the FDIC under the SAIF. The Savings Bank has been a member of the Federal Home Loan Bank ("FHLB") System since 1934. At March 31, 1997, the Savings Bank had total assets of $204.2 million, total deposits of $179.2 million and total equity of $21.0 million on a consolidated basis. The Savings Bank is a community oriented financial institution whose principal business is attracting retail deposits from the general public and using these funds to originate one- to- four family residential mortgage loans and consumer loans within its primary market area. At March 31, 1997, one- to- four family loans totalled $101.8 million, or 72.0%, of total loans receivable. The Savings Bank has also been active in the origination of home equity and second mortgage loans and at March 31, 1997, such loans were $17.5 million, or 12.4%, of total loans receivable. As a result of a perceived local demand for non-mortgage lending products, management's concern as to the Savings Bank's level of interest rate risk and a perception of minimal anticipated growth in residential loan demand within the Savings Bank's market primary area resulting from strong competition primarily from mortgage brokers and larger financial institutions (See "RISK FACTORS -- Competition"), the Savings Bank began supplementing its traditional lending activities in 1996 with the development of commercial business loans, agricultural loans and the purchase of dealer-originated automobile contracts. The Savings Bank has hired experienced commercial lending officers familiar with the Savings Bank's primary market area in an attempt to develop commercial business and agricultural lending and to expand the purchase of dealer-originated automobile contracts to include the purchase of dealer-originated contracts secured by recreational vehicles, trailers, motorcycles
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041179_passport_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041179_passport_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8bb43ce158b06bf7906e4e7119b180a8657555a8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041179_passport_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, THE "COMPANY" REFERS TO I.C. ISAACS & COMPANY, INC. (FORMERLY I.G. DESIGN, INC.) AND ITS PREDECESSORS, SUBSIDIARIES AND AFFILIATED COMPANIES, INCLUDING I.C. ISAACS & COMPANY L.P. SEE "COMPANY ORGANIZATION." UNLESS OTHERWISE NOTED, ALL COMMON STOCK SHARE AMOUNTS, PER SHARE DATA AND OTHER INFORMATION SET FORTH IN THIS PROSPECTUS (I) HAVE BEEN ADJUSTED TO REFLECT A 246.9898-FOR-1 STOCK SPLIT, WHICH WILL BE EFFECTED PRIOR TO CONSUMMATION OF THE OFFERING AND OTHERWISE GIVE EFFECT TO THE REORGANIZATION (AS DEFINED IN "COMPANY ORGANIZATION") AND (II) ASSUME THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION HAS NOT BEEN EXERCISED. THE COMPANY I.C. Isaacs & Company, Inc. is a rapidly growing designer, manufacturer and marketer of branded sportswear. Founded in 1913, the Company has assembled a portfolio of brands that addresses distinct fashion segments resulting in a diverse customer base. The Company offers full lines of sportswear for young men, women and boys under the BOSS brand in the United States and Puerto Rico and sportswear for men and women under the Beverly Hills Polo Club brand in the United States, Puerto Rico and Europe. Beginning in 1998, the Company will also offer a collection of men's sportswear under the Girbaud brand in the United States and Puerto Rico. Through a focused strategy of providing fashionable, branded merchandise at value prices, the Company has emerged as a significant fashion source for youthful and contemporary consumers who purchase sportswear and outerwear through specialty and department stores. The Company also offers women's sportswear under various other Company-owned brand names as well as under third-party private labels. Net sales of the Company grew from $85.3 million in 1994 to $118.7 million in 1996, and operating income grew from $4.7 million in 1994 to $9.3 million in 1996. In the first nine months of 1997, net sales and operating income totaled $127.2 million and $15.0 million, respectively, as compared to $86.7 million and $8.0 million, respectively, in the first nine months of 1996. The Company manufactures and markets certain sportswear under the BOSS brand for sale at specified price points in the United States and Puerto Rico subject to a concurrent use agreement. The Company has positioned the BOSS line to appeal to consumers who desire a fresh, urban, fashion-forward look. Through creative and innovative marketing, the Company has created powerful brand appeal for the BOSS line and has become an active influence in young men's fashion. The BOSS collection has been expanded from an initial line of denim products to a full array of sportswear consisting of jeans, tee shirts, sweatshirts, shorts, knit and woven shirts and outerwear, many of which are characterized by innovative design, creative graphics and bold uses of color. The Company also markets a juniors' sportswear line under the BOSS brand for young women, which includes a full selection of denim products and active sportswear. The Company's net sales of BOSS sportswear increased at an annual growth rate of 37.1% in 1994, 10.8% in 1995 and 39.3% in 1996. In 1996, net sales of BOSS sportswear accounted for 72.6% of the Company's net sales. The Company manufactures and markets certain sportswear under the Beverly Hills Polo Club brand in the United States, Puerto Rico and Europe under an exclusive license. The Company targets men and women who desire updated traditional sportswear at competitive prices. To reach a broader demographic customer base, the Beverly Hills Polo Club collection combines contemporary design details and innovative fabrics with classic American sportswear styling. The Beverly Hills Polo Club collection consists primarily of cotton clothing, including jeans, pants, shorts, knit and woven shirts and outerwear targeting the active, image-conscious consumer. The Company's Beverly Hills Polo Club line was introduced in the spring of 1994. The Company's net sales of Beverly Hills Polo Club sportswear increased at an annual growth rate of 83.5% in 1995 and 102.3% in 1996. In 1996, net sales of Beverly Hills Polo Club sportswear accounted for 12.0% of the Company's net sales. In November 1997, the Company acquired an exclusive license to manufacture and market certain men's sportswear under the Girbaud brand in the United States and Puerto Rico. The Girbaud brand is an internationally recognized designer sportswear label with a distinct European influence. By targeting men who desire contemporary, international fashion, the Girbaud brand will enable the Company to address another consumer segment within its branded product portfolio. The Company intends to reposition the Girbaud line with a broader assortment of products, styles and fabrications reflecting a contemporary European look. The Company plans to introduce the fall men's collection in early 1998. In the late 1980's, management made a decision to change the Company's marketing focus from a manufacturing-driven to a brand-driven strategy. As a result, the Company believes it has developed distinct competitive strengths that position it for continued success. See "Business--Competitive Strengths." The Company's key competitive strengths include: - EMPHASIS ON BRAND IDENTITY. The Company believes that brand identity, as well as the image and lifestyle that a brand conveys, are important factors that influence retail purchasing decisions. The BOSS, Beverly Hills Polo Club and Girbaud lines have strong brand identities and enable the Company to offer a broad continuum of designs and products well recognized by fashion-conscious consumers. - COMBINATION OF FASHION AND VALUE. Through its manufacturing, sourcing and merchandising expertise, the Company achieves a distinct combination of fashion and value. The Company provides its customers with fashionable, brand name sportswear which typically sells at retail prices below those of many well known designer brands. - CREATIVE AND INNOVATIVE MARKETING. Through a coordinated merchandising, advertising and marketing strategy, the Company has built strong name recognition and brand image for its BOSS and Beverly Hills Polo Club products. The Company targets youthful and contemporary consumers who are influenced by fashion, music and sports by utilizing a variety of advertising media, including television, print, outdoor signage and professional sports sponsorships. - FLEXIBLE MANUFACTURING AND SOURCING. The Company believes that its ability to source products from its United States facilities and third party foreign and domestic manufacturers enhances the Company's production flexibility and capacity while enabling it to control more efficiently the delivery, quality and pricing of its products. Currently, the Company utilizes approximately 50 factories in more than 10 countries including China, Hong Kong, Korea, Mexico, the Philippines, Taiwan, Thailand and the United States. The Company does not have long-term contracts with any manufacturers and most of the Company's manufacturers supply the Company on a non-exclusive basis pursuant to purchase orders. The Company's growth strategy includes continued capitalization on its competitive strengths and the implementation of specific strategies for continued expansion. See "Business--Growth Strategy." The Company's principal growth strategies are as follows: - BROADEN PRODUCT OFFERINGS. The Company believes it can effectively broaden its product offerings through the expansion of products offered under existing brands as well as the possible addition of new brands. Expansion within the BOSS product line is expected to be driven by tops and outerwear as well as the development of the boys', youth and juniors' lines. In addition, the Company recently added polo shirts and swimwear under the BOSS brand. Similarly, the Beverly Hills Polo Club brand includes a number of product lines that are in the early stages of market penetration, such as outerwear, and a number of potential product line expansions, such as men's dress shirts. To further develop the Beverly Hills Polo Club brand, product offerings within the women's line are being expanded, and the Company is reorganizing and increasing its women's sales force. The recent addition of the Girbaud brand adds a European-influenced designer sportswear brand to the Company's sportswear lines. - ENHANCE MARKETING PROGRAMS. While the Company believes that its current marketing strategy is one of its primary competitive strengths, the Company intends to continue its efforts to increase net sales by enhancing consumer recognition of its brand names and images through expanded marketing efforts. These efforts will include increased television, print, outdoor and point-of-sale advertising, as well as an expanded "Shop-in-Shop" program at the retail level. - EXPAND CHANNELS OF DISTRIBUTION. As demand for its sportswear increases, the Company believes that it can continue to expand and penetrate various channels of distribution. In recent years, the Company has expanded its distribution channels beyond specialty stores and specialty store chains with its BOSS label to begin significant distribution to department store customers. The Beverly Hills Polo Club brand has not penetrated the department store channel to the same extent as the BOSS brand, and the expanded distribution of Beverly Hills Polo Club products is a primary growth focus of the Company. The Company intends to market the Girbaud brand to specialty stores, specialty store chains and department stores. - INCREASE EUROPEAN PRESENCE FOR BEVERLY HILLS POLO CLUB. The Company believes that it is well positioned to capitalize on the acceptance of the Beverly Hills Polo Club brand name by continuing to expand its European sportswear distribution. The classic American sportswear look conveyed by the Beverly Hills Polo Club line is popular with European youth, and the Company is expanding its wholesale and retail channels of distribution in Europe to meet this increasing demand. The Company currently has distributors in nine countries in Europe and has three franchise stores in Spain. S CORPORATION DISTRIBUTION AND RECENT DEVELOPMENTS Since January 1, 1993, the Company has elected to be treated for federal and state income tax purposes as an S corporation under Subchapter S of the Internal Revenue Code of 1986, as amended, and under comparable state laws. One day prior to the consummation of the transactions related to the Offering, the Company's S corporation status will be terminated. On such date, the Company will declare a dividend distribution to the stockholders of record of the Company, including certain officers and directors of the Company, in an aggregate amount of approximately $20.0 million, representing all earned but undistributed S corporation earnings of the Company. On and after such date, the Company will no longer be treated as an S corporation and, accordingly, will be fully subject to federal and state income taxes. Purchasers of shares of Common Stock in the Offering will not receive any portion of the S Corporation Distribution (as hereinafter defined). See "Company Organization--Prior S Corporation Status." The Company's right to use the BOSS brand name and image in the manufacture and sale of apparel is dependent on third party concurrent use and license agreements. Pursuant to a recent settlement of litigation (the "Settlement") among the Company, Hugo Boss AG ("Hugo Boss"), Brookhurst, Inc. ("Brookhurst"), Ambra Inc., a wholly-owned subsidiary of Hugo Boss ("Ambra"), and others, the Company acquired certain domestic and foreign trademark common law and registration rights to the BOSS brand name and image previously owned by Brookhurst, the Company's former licensor. Neither Hugo Boss nor Ambra is affiliated with Brookhurst or the Company. The Company conveyed the foreign rights to the BOSS brand name and image to Ambra and received a license to continue to manufacture apparel in certain foreign countries using the BOSS brand name and image for sale in the United States and Puerto Rico. The Company retained ownership of domestic rights to the BOSS brand name and image subject to certain restrictions contained in a concurrent use agreement with Hugo Boss. As a result of the Settlement, the Company's rights to manufacture and market BOSS sportswear were expanded to allow broader product offerings and significant Company control over styling, advertising and distribution. The Company does not anticipate that the Settlement will have a material effect on the Company's financial condition or results of operations. See "Business--Licenses and Other Rights Agreements--BOSS Trademark Rights; and --Litigation." The Company's principal executive offices are located at 3840 Bank Street, Baltimore, Maryland 21224-2522 (telephone number (410) 342-8200) and 350 Fifth Avenue, Suite 1029, New York, New York 10118 (telephone number (212) 563-2720). THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company hereby......... 3,800,000 shares Common Stock to be outstanding after the Offering 7,800,000 shares (1).............................................. Use of Proceeds.................................... The estimated net proceeds of the Offering of approximately $45.4 million will be used (i) to repay approximately $20.0 million of the Company's outstanding debt under the Company's credit facilities, (ii) to pay the Initial S Corporation Distribution (as hereinafter defined) of approximately $18.5 million and the Subsequent S Corporation Distribution (as hereinafter defined) estimated to be $0.9 million and (iii) for general corporate and working capital purposes. See "Use of Proceeds." Nasdaq National Market Symbol...................... Application has been made for quotation of the Common Stock on the Nasdaq National Market under the symbol "ISAC." </TABLE> - ------------------------ (1) Excludes 500,000 shares of Common Stock reserved for issuance under the Company's 1997 Omnibus Stock Plan. See "Management--1997 Omnibus Stock Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041276_preferred_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041276_preferred_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..099863f7db33b5f82f16ccfded56734dd9d8c71d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041276_preferred_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information (including "Risk Factors" and the financial statements and notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, all information included in this Prospectus has been adjusted to reflect the 6,000 for one stock split of the Common Stock effected in June, 1997 and assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting." THE COMPANY OVERVIEW Preferred Credit Corporation is a specialized consumer finance company primarily engaged in the origination, purchase, sale and securitization of non- traditional consumer loans. The Company's principal loan product ("core loans") consists of second mortgage loans to qualified individuals who generally have above average to superior credit and satisfy the Company's underwriting criteria based on income, credit scores and other factors, but who have limited access to traditional mortgage-related financing generally because of a lack of equity in their homes. The Company originates and acquires its core loans on a nationwide basis through three different production channels including retail offices, wholesale brokers and correspondent lenders. For the year ended December 31, 1996 and the three months ended March 31, 1997, 14.5% and 19.1%, respectively, of the Company's core loan production was originated through its retail/consumer direct loan channel, 72.8% and 38.2%, respectively, was originated through wholesale brokers and 12.7% and 42.7%, respectively, was acquired from correspondent lenders, not including a one-time bulk purchase of $136.0 million in 1996. During 1996 and the first three months of 1997, the Company originated or acquired loans in 43 states with only one state, California, accounting for more than 5% of the Company's total production. For the three months ended March 31, 1997, California accounted for 37.0% of all core loans originated or purchased by the Company, as compared to 65.4% for the year ended December 31, 1996. From 1994 to 1996, the Company's annual loan production volume increased from $16.5 million to $596.9 million (including $496.3 million of core loans during 1996). For the three months ended March 31, 1997, the Company originated or acquired $250.8 million of core loans and brokered a nominal amount of non-core loans. Based upon available industry data, the Company believes it is one of the largest companies in the United States specializing in the origination and purchase of loans similar to the Company's core loans. The Company sells substantially all of its core loans in securitization transactions and, to a lesser extent, on a whole loan basis. Since it commenced its securitization program in June 1996, the Company has sold a total of $487.3 million of core loans in securitization transactions, $256.7 million during 1996 and $230.6 million during the three months ended March 31, 1997, recognizing a weighted average gain of 5.5% and 8.3%, respectively, on such sales. The Company's overall business strategy is to continue its recent growth and solidify its position as a leading consumer finance lender within its niche market. The Company intends to achieve this objective by increasing the volume of core loans originated and purchased, and continuing to seek ways to improve customer service, risk management and cash flow. The Company's business strategy focuses on expanding its core loan production on a nationwide basis, primarily through expansion of its retail production offices and also through increasing loan production through existing and new wholesale brokers and correspondent lenders. As a key element of its business strategy, the Company intends to leverage its increased loan production and increase profitability and cash flow through a combination of regular sales of loans on a whole loan basis and the securitization of a substantial portion of core loans on a quarterly basis. In addition, in order to support the anticipated increases in loan production levels without degradation of underwriting standards and to increase operating efficiencies by permitting wholesale brokers to make online underwriting decisions, the Company has undertaken a program to enhance and further automate its underwriting systems by the end of 1997. PRODUCT FOCUS The Company's core loans are typically closed-end (usually 15 year), fixed- rate, fully-amortizing loans secured by a second lien on the borrower's primary residence, and are typically used by consumers to pay-off credit card and other unsecured indebtedness. The Company believes that its core loan product represents an attractive alternative to other financial products because it may allow borrowers to consolidate outstanding indebtedness into a single loan having a longer repayment term and possibly a lower interest rate than other forms of unsecured consumer debt, and affords borrowers the opportunity to lower their overall monthly debt payments. In addition, the potential for tax deductibility of interest payments on the core loan product offers a benefit for many borrowers. The Company also originates a small volume of traditional single family residential mortgage loans, substantially all of which are sold in the secondary market through programs sponsored by the Federal Home Loan Mortgage Corporation ("Freddie Mac"), Federal National Mortgage Association ("Fannie Mae") and others, or are brokered to other lenders. UNDERWRITING STANDARDS AND BORROWER PROFILE Because of the limited equity value of the collateral underlying the Company's core loans, and the Company's typical position as a junior lien holder on that collateral, the Company relies principally on the borrower's creditworthiness and ability to repay the loan in making its underwriting decisions. The Company reviews the borrower's income relative to the amount of the loan and other existing debt in evaluating the repayment ability of the borrower. In order to evaluate the creditworthiness of potential borrowers, the Company uses its own computer-assisted underwriting system. This system is based in part on the borrower's "FICO" credit score, which is a credit evaluation score methodology developed by Fair, Isaac & Company ("Fair Isaac"), and in part on the Company's evaluation of the borrower's employment history, earnings stability, credit history, length of home ownership, stability in the community and other traditional underwriting criteria. During 1996 and for the three months ended March 31, 1997, loans securitized by the Company had a weighted average FICO score of approximately 670 to 680, which is generally classified by Fannie Mae and Freddie Mac as loans that have acceptable credit risks. DISTRIBUTION CHANNELS The Company began opening retail production offices in 1995 and, as of May 31, 1997, had 12 retail production offices in seven states (California, Arizona, Colorado, Florida, Nevada, New Mexico and Oregon). The Company plans to open additional offices at the rate of approximately three each quarter during the remainder of 1997. The Company believes that the retail consumer/direct channel is the Company's most profitable production channel and is subject to less competitive pricing pressures than either the wholesale or correspondent channel. As of May 31, 1997, the Company's broker network included approximately 900 independent mortgage brokers located in 42 states and its correspondent network included approximately 160 approved correspondent lenders located in 27 states. The Company intends to continue to increase its loan production from correspondent lenders and wholesale brokers by adding new correspondents and brokers, by offering them a relatively new product to diversify their existing product lines and by increasing the efficiency and production of the correspondents and brokers that are a part of the Company's existing network. The Company believes that its network of production channels, emphasis on retail production and geographic diversity of loan production provides it with a competitive advantage for increasing production of its core loans. INFORMATION SYSTEMS The Company is developing a fully-integrated proprietary loan processing system to monitor its underwriting process on a real-time basis to insure consistent application of its underwriting procedures prior to funding. The Company believes this enables it to process an increasingly greater number of loans without degradation of its underwriting standards. In addition, the Company has recently made a significant investment in its information systems for its main office which are intended to enable it effectively to monitor, audit and perform quality control review on loans. The Company continuously reviews its technologies needs, and seeks to add additional applications as its growth and operations require. MANAGEMENT The Company has an experienced senior management team with an aggregate of over 60 years in the lending business. The Company's management team is particularly experienced in Fannie Mae and Freddie Mac eligibility requirements, which are significantly focused on an evaluation of the creditworthiness of borrowers and their ability to repay. In addition, the Company's underwriting managers have an average of 16 years experience in the consumer finance business and its branch managers have an average of 10 years experience in the consumer finance business. COMPANY EVOLUTION Since commencing operations in 1989 as a mortgage broker (which were expanded to include mortgage banking in 1994), the Company has focused on lending to creditworthy borrowers. Until 1995, the Company primarily originated loans meeting the underwriting guidelines of Freddie Mac and Fannie Mae. In late 1994, management believed that market conditions (primarily increasing competition and higher interest rates) were reducing the profitability for originators and purchasers of Freddie Mac and Fannie Mae eligible loans. As a result, commencing in late 1994, the Company decided to expand its loan products to include core loans. The Company believed that core loans offered a greater profit margin than non-core loans and, due to the similar credit characteristics and underwriting approach between core loans and the non-core loans originated by the Company prior to 1995, permitted the Company to utilize its existing expertise and personnel to expand its operations. The increasing consumer demand for the Company's core loan product has substantially increased the Company's operating revenues and profitability. From 1994 to 1996, the Company's annual revenues increased from $867,000 to $27.2 million, and its net earnings increased from $81,000 (or $48,000 on a pro forma basis adjusted for taxes) to $7.1 million. For the three months ended March 31, 1997, the Company recognized total revenues of $23.2 million and net income of $9.7 million.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041380_viasystems_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041380_viasystems_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4b58d1e9285a0ab0d788278a86b604044a85de24
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041380_viasystems_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, references herein to the New Notes following the consummation of the Exchange Offer assume that all outstanding Old Notes are tendered and exchanged for New Notes pursuant to the Exchange Offer. THE COMPANY GENERAL Management believes that the Company is the second largest manufacturer and marketer of printed circuit boards ("PCBs"), and one of the largest manufacturers and marketers of backpanel assemblies ("backpanels"), in the world. PCBs are the basic platforms used to interconnect microprocessors, integrated circuits and other components essential to the functioning of virtually all electronic systems, ranging from sophisticated computers and industrial products to basic household appliances. Backpanels are used in electronic systems to distribute and ground power, to connect PCBs, power supplies and other elements, and to relay information into and out of electronic systems. The Company currently has 16 manufacturing facilities, strategically located in North America, Europe, and South Africa. The Company's principal executive offices are located at 101 South Hanley Road, Suite 400, St. Louis, Missouri 63105 and its telephone number is (314) 727-2087. OWNERSHIP AND MANAGEMENT Hicks Must, Tate & Furst, Incorporated ("Hicks Muse") and Mills & Partners, Inc. ("Mills & Partners") formed Viasystems Group in August 1996 to make strategic acquisitions of PCB manufacturers and backpanel assemblers and to integrate those acquisitions into a global enterprise that is the preferred manufacturer and marketer of complex PCBs and backpanels. Hicks Muse is a private investment firm with offices in Dallas, New York, St. Louis and Mexico City that specializes in leveraged acquisitions, recapitalizations and other principal investing activities. With respect to the Company, Hicks Muse is combining its financial expertise with the operating management experience of Mills & Partners. Organized in 1985 by James N. Mills, Mills & Partners consists of a group of senior operating executives who manage a portfolio of companies in a variety of industries. Mills & Partners and Hicks Muse have established an exclusive relationship to pursue leveraged acquisitions of diversified commercial and industrial companies that Mills & Partners will manage. RECENT HISTORY In October 1996, Viasystems Group completed the acquisition of Circo Craft, a rigid PCB manufacturer located in Canada, for a cash purchase price of approximately $129.9 million. In connection with that transaction, Hicks Muse and certain affiliates invested approximately $68.0 million in the common stock of Viasystems Group. In December 1996, Viasystems Technologies, a wholly owned subsidiary of Viasystems Group, acquired substantially all the assets of the Interconnection Technologies Unit of the Microelectronics Group (the "Lucent Division") of Lucent Technologies, a rigid PCB manufacturer and backpanel assembler located in the United States, for cash consideration of approximately $170.0 million, plus the issuance of $30.0 million of preferred stock to Lucent Technologies. In connection with that transaction, Hicks Muse and its affiliates invested approximately $7.1 million of additional equity in Viasystems Group, consisting entirely of preferred stock. In addition, simultaneously with the acquisition of the Lucent Division, Hicks Muse and certain affiliates exchanged approximately $38.0 million of the Viasystems Group common stock previously issued to them for $38.0 million of VIASYSTEMS, INC. CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-1 <TABLE> <CAPTION> FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS -------------------------------- ---------------------- <C> <S> <C> 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus............................ Cover Page of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus................... Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges.... Summary; Summary -- The Company; Risk Factors; Selected Financial Data 4. Use of Proceeds......................... Use of Proceeds 5. Determination of Offering Price......... Not Applicable 6. Dilution................................ Not Applicable 7. Selling Security Holders................ Not Applicable 8. Plan of Distribution.................... Front Cover Page of Prospectus; Summary; The Exchange Offer and Plan of Distribution 9. Description of Securities to be Registered............................ Description of the New Notes 10. Interests of Named Experts and Counsel.. Not Applicable 11. Information with Respect to the Registrant............................ Cover Page of Registration Statement; Certain Definitions, Industry Data and Financial Information; Exchange Rates; Summary; Risk Factors; Capitalization; Selected Financial Data; Management's Discussion and Analysis of Results of Operations and Financial Condition; Business; Management; Security Ownership of Certain Beneficial Owners; Certain Transactions; Description of Senior Credit Facilities; The Exchange Offer; Description of the New Notes; Legal Matters and Experts 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........................... Not Applicable </TABLE> CERTAIN DEFINITIONS AND INDUSTRY DATA As used in this Prospectus, unless the context requires otherwise, (i) "Viasystems Group" means Viasystems Group, Inc., which became the Company's corporate parent in April 1997; (ii) "Circo Craft" means Circo Craft Co. Inc. and its subsidiary, which Viasystems Group acquired in October 1996 and contributed to the Company in April 1997; (iii) "Viasystems Technologies" means Viasystems Technologies Corp. (which acquired substantially all of the assets of the Interconnection Technologies Unit of the Microelectronics Group of Lucent Technologies Inc. in December 1996), which Viasystems Group contributed to the Company in April 1997; (iv) "Forward Group" means Forward Group PLC and its subsidiaries, which Viasystems Group acquired and contributed to the Company in April 1997; (v) "Chips" means Interconnection Systems (Holdings) Limited ("ISL") and its subsidiaries, which were acquired by Chips Holdings, Inc. in April 1997 and acquired by the Company concurrently with the consummation of the Original Offering; and (vi) the "Company" means Viasystems, Inc., a wholly-owned subsidiary of Viasystems Group, and the businesses formerly conducted by Circo Craft, Viasystems Technologies, Forward Group, Chips and any of their predecessors. Each of Viasystems Group, Circo Craft, Viasystems Technologies, Forward Group, and Chips are predecessors to Viasystems, Inc. The Company relies on and refers to information it has received from various industry analysts regarding the markets for its principal products, printed circuit boards ("PCBs") and backpanel assemblies ("backpanels"). Such information was available from a consistent source only for the United States and European PCB markets and the North American and European backpanel markets. Viasystems Group's preferred stock. The combination of Circo Craft and the former Lucent Division created one of the largest independent manufacturers of PCBs and backpanels in North America. In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid PCB manufacturer located in the United Kingdom, for a purchase price of approximately $236.3 million (including the issuance of loan notes in the principal amount of approximately $23.9 million to certain former shareholders of the Forward Group (the "Forward Group Loan Notes")), which was funded with $216.0 million of borrowings under a tender facility (the "Tender Facility") and the proceeds from the issuance to Hicks Muse of $40.0 million of the preferred stock of the acquiring entity. Subsequently, Viasystems Group acquired Forward Group for cost, consisting of the assumption of the Tender Facility and the Forward Group Loan Notes. In consideration for Hicks Muse's transfer of Forward Group to Viasystems Group, Viasystems Group issued to Hicks Muse and certain of its affiliates $40.0 million of Viasystems Group's preferred stock. Concurrently with that transaction, Viasystems Group organized the Company as its direct subsidiary and contributed to it the capital stock of Circo Craft, Viasystems Technologies and Forward Group. The Company applied the proceeds from a subordinated credit facility (the "Subordinated Credit Facility") to repay the Tender Facility and to repay $20.0 million of existing indebtedness. In April 1997, an affiliate of Hicks Muse ("Chips Holdings") acquired Interconnection Systems (Holdings) Limited, a rigid PCB manufacturer located in the United Kingdom (the "Chips Acquisition"). In connection with that transaction, Hicks Muse and its affiliates invested $140.0 million in the equity capital of Chips Holdings. Concurrently with the consummation of the Original Offering, Viasystems Group acquired Chips Holdings (the "Chips Merger") in consideration for the issuance to Hicks Muse and certain affiliates of Viasystems Group common stock valued at $140.0 million. In connection with the Chips Merger, Viasystems Group assumed approximately $437.5 million of loan notes incurred to finance the Chips Acquisition (the "Chips Loan Notes" and, together with the Forward Group Loan Notes, the "Loan Notes"). Concurrently with the consummation of the Chips Merger, Hicks Muse and its affiliates exchanged the $85.0 million liquidation preference of Viasystem Group's preferred stock owned by them for an equivalent amount of Viasystem Group's common stock. See "Security Ownership of Certain Beneficial Owners" and "Certain Transactions." Following the Chips Merger, the Chips operating subsidiaries became indirect wholly-owned subsidiaries of the Company. To facilitate the Chips Merger, the Company negotiated an amendment to its existing credit agreement (the "Senior Credit Facilities"). See "Capitalization" and "Description of Senior Credit Facilities." The Circo Craft acquisition, the Lucent Division acquisition, the Forward Group acquisition, and the Chips Merger are collectively referred to as the "Transactions." The foregoing transactions, excluding the acquisitions of Circo Craft and the Lucent Division (both of which occurred in 1996), are collectively referred to as the "1997 Transactions." INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1997 <TABLE> <S> <C> <C> OFFER TO EXCHANGE ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 FOR 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 VIASYSTEMS, INC. VIASYSTEMS, INC. [LOGO] </TABLE> Viasystems, Inc., a Delaware corporation (the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the letter of transmittal accompanying this Prospectus (the "Letter of Transmittal," which together constitute the "Exchange Offer"), to exchange $1,000 principal amount of 9 3/4% Senior Subordinated Notes due 2007 (the "New Notes") issued by the Company for each $1,000 principal amount of 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes") issued by the Company, of which an aggregate principal amount of $400.0 million is outstanding. The form and terms of the New Notes are identical to the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and will not bear any legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The Exchange Offer is being made in order to satisfy certain contractual obligations of the Company. See "The Exchange Offer" and "Description of New Notes." The New Notes and the Old Notes are sometimes collectively referred to herein as the "Notes". - -------------------------------------------------------------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES. - -------------------------------------------------------------------------------- Interest on the New Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 1997. The New Notes will mature on June 1, 2007. Except as described below, the Company may not redeem the New Notes prior to June 1, 2002. On and after such date, the Company may redeem the New Notes, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time prior to June 1, 2000, the Company may, subject to certain requirements, redeem up to $140.0 million of the aggregate principal amount of the New Notes with the net cash proceeds received from one or more Equity Offerings (as defined), so long as a Public Market (as defined) exists at the time of such redemption, at a redemption price equal to 109.75% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least $200.0 million of the aggregate principal amount of New Notes remains outstanding immediately after each such redemption. The New Notes will not be subject to any sinking fund requirements. Upon the occurrence of a Change of Control (as defined), (i) the Company will have the option, at any time on or prior to June 1, 2002, to redeem the New Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined), together with accrued and unpaid interest, if any, to the date of redemption, and (ii) if the Company does not so redeem the New Notes or if such Change of Control occurs after June 1, 2002, the Company will be required to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of New Notes." The New Notes will be unsecured and will be subordinated to all existing and future Senior Indebtedness (as defined) of the Company. The New Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and will rank senior to all Subordinated Indebtedness (as defined) of the Company. The Indenture under which the New Notes will be issued (the "Indenture") will permit the Company and its Restricted Subsidiaries (as defined) to incur additional indebtedness, including Senior Indebtedness, subject to certain limitations. See "Description of New Notes." As of June 30, 1997, the aggregate principal amount of the Company's outstanding Senior Indebtedness was approximately $484.8 million (excluding unused commitments) and the Company had no Senior Subordinated Indebtedness, other than the New Notes, and no Subordinated Indebtedness outstanding. See "Description of New Notes -- Ranking and Subordination." At June 30, 1997, the New Notes effectively ranked junior to approximately $680.7 million of accrued liabilities and obligations of the Company's consolidated subsidiaries, including borrowings under and guarantees in respect of the Senior Credit Facilities. See "Description of New Notes -- Ranking and Subordination." - -------------------------------------------------------------------------------- The Company will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 1997, unless extended (as so extended, such time and date being the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer." Each broker-dealer that receives New Notes for its own account in exchange for Old Notes pursuant to the Exchange Offer, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed, for a period of 90 days after the Expiration Date, to make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." No public market existed for the Old Notes before the Exchange Offer. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system, and no active public market for the New Notes is currently anticipated. The Company will pay all the expenses incident to the Exchange Offer. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1997. THE EXCHANGE OFFER The Exchange Offer......... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $400 million aggregate principal amount are outstanding. The terms of the New Notes and the Old Notes are substantially identical in all material respects, except that the New Notes will be freely transferable by the holders thereof except as otherwise provided herein. See "Description of New Notes." Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, sold and otherwise transferred by any registered person receiving the New Notes, whether or not that person is the registered holder (other than any such holder or such other person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or a broker dealer who purchases such New Notes directly from the Company to resell pursuant to Rule 144A or any other available exception under the Securities Act or a person participating in the distribution of the New Notes), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Notes. See "The Exchange Offer -- Purpose and Effect." Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where those Old Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of these New Notes. See "Plan of Distribution." Registration Rights Agreement................ The Old Notes were sold by the Company on June 6, 1997, in a private placement in reliance on Section 4(2) of the Securities Act and immediately resold by the initial purchasers thereof in reliance on Rule 144A under the Securities Act (the "Original Offering"). In connection with the sale, the Company entered into an Exchange and Registration Rights Agreement with the initial purchasers of the Old Notes (the "Registration Rights Agreement") requiring the Company to make the Exchange Offer. The Registration Rights Agreement further provides that the Company must use its reasonable best efforts to (i) cause the Registration Statement with respect to the Exchange Offer to be declared effective on or before November 13, 1997 and (ii) consummate the Exchange Offer on or before December 13, 1997. See "The Exchange Offer -- Purpose and Effect." Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New York City time, , 1997, or such later date and time to which it is extended by the Company. Withdrawal................. The tender of the Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Interest on the New Notes and Old Notes...... Interest on each New Note will accrue from the date of issuance of the Old Note for which the New Note is exchanged or from the date of the last periodic payment of interest on such Old Note, whichever is later. No additional interest will be paid on Old Notes tendered and accept for exchange. Conditions to the Exchange Offer.................... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to Exchange Offer." Procedures for Tendering Old Notes.................. Each holder of the Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or the copy, together with the Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. Persons holding the Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered holder of the Old Notes, (ii) neither the holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes, (iii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company. Pursuant to the Registration Rights Agreement, the Company is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes if (i) because of any change in law or applicable interpretations thereof by the staff of the Commission, the Company determines that it is not permitted to effect the Exchange Offer as contemplated hereby, (ii) validly tendered Old Notes are not exchanged for New Notes by December 13, 1997, (iii) any holder of Private Exchange Securities (as defined) so requests within 60 days of the Exchange Offer, (iv) any applicable law or interpretations do not permit any holder of Old Notes to participate in the Exchange Offer or (v) any holder of Old Notes that participates in the Exchange Offer does not receive freely transferable New Notes in exchange for tendered securities. Acceptance of Old Notes and Delivery of New Notes.... The Company will accept for exchange any and all Old Notes which are properly tendered (and not withdrawn) in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Exchange Agent............. The Bank of New York is serving as Exchange Agent (the "Exchange Agent") in connection with the Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." Effect of Not Tendering.... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligation to provide for the registration under the Securities Act of such Old Notes. THE NEW NOTES Issuer..................... Viasystems, Inc. Securities Offered......... $400,000,000 aggregate principal amount of 9 3/4% Senior Subordinated Notes due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... Interest on the New Notes will be payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 1997. Sinking Fund............... None. Optional Redemption........ Except as described below, the Company may not redeem the New Notes prior to June 1, 2002. On and after such date, the Company may redeem the New Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to June 1, 2000, the Company may redeem up to $140.0 million of the aggregate principal amount of the New Notes with the net cash proceeds of one or more Equity Offerings, so long as a Public Market exists at the time of redemption, at a redemption price equal to 109.75% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least $200.0 million of the aggregate principal amount of the New Notes remains outstanding after each such redemption. See "Description of New Notes -- Optional Redemption." Change of Control.......... Upon the occurrence of a Change of Control, (i) the Company will have the option, at any time on or prior to June 1, 2002, to redeem the New Notes in whole but not in part at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, plus accrued and unpaid interest, if any, to the date of redemption, and (ii) if the Company does not so redeem the New Notes or if such Change of Control occurs after June 1, 2002, the Company will be required to make an offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. See "Description of New Notes -- Change of Control." Ranking.................... The New Notes will be unsecured and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company. The New Notes will rank pari passu with any future Senior Subordinated Indebtedness of the Company and will rank senior to all Subordinated Indebtedness of the Company. As of June 30, 1997, the aggregate principal amount of the Company's outstanding Senior Indebtedness was approximately $484.8 million (excluding unused commitments) and the Company had no Senior Subordinated Indebtedness, other than the Old Notes, and no Subordinated Indebtedness outstanding. As of June 30, 1997, the Old Notes ranked junior to approximately $680.7 million of accrued liabilities and obligations of the Company's consolidated subsidiaries, including borrowings under and guarantees in respect of the Senior Credit Facilities. See "Description of New Notes -- Ranking and Subordination." Restrictive Covenants...... The Indenture limits, among other things: (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain subordinated obligations of the Company and its Restricted Subsidiaries; (iii) investments; (iv) sale of assets and Restricted Subsidiary stock; (v) transactions with affiliates; and (vi) consolidations, mergers and transfers of all or substantially all of the Company's assets. The Indenture also prohibits certain restrictions on distributions from Restricted Subsidiaries; however, all of these limitations and prohibitions are subject to a number of important qualifications and exceptions. See "Description of New Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041454_upc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041454_upc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f0b9d8d376a275328834f4fb6ff99c2729e04f5d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041454_upc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified by, and should be read in conjunction with, the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus (i) reflects the completion of the Reorganization (as defined in "The Reorganization") as of June 22, 1997, whereby @Entertainment, Inc. ("@Entertainment") became the new parent holding company of Poland Communications, Inc. ("PCI"), which through its subsidiaries conducts the Company's existing cable television and programming businesses, and of At Entertainment Limited ("@EL"), a new company formed to develop the Company's digital satellite direct-to-home business, (ii) gives effect to the capital stock adjustment which occurred as part of the Reorganization, whereby each outstanding share of common stock of PCI was exchanged for 1,000 shares of Common Stock of @Entertainment (the "Capital Adjustment"), (iii) assumes no exercise of the Underwriters' over-allotment options, and (iv) gives effect to the automatic conversion, upon the closing of the Offerings, of 2,500 shares of Series B Preferred Stock, par value $.01 per share, of @Entertainment (the "Series B Preferred Stock") into 4,862,000 shares of Common Stock. See "The Reorganization" and "Description of Capital Stock". As used in this Prospectus, references to "@Entertainment" mean @Entertainment, Inc. and to the "Company" mean @Entertainment and its consolidated subsidiaries, including PCI, @EL and two 49% owned subsidiaries, Poltelkab Sp. z o.o. ("Poltelkab") and Polska Telewizja Kablowa-Ryntronik S.A. ("PTK-Ryntronik"). @Entertainment prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") in U.S. Dollars. For the convenience of the reader, amounts in this Prospectus are expressed principally in U.S. Dollars. Data regarding the Company's cable television subscribers are at May 31, 1997 and include approximately 98,000 cable television subscribers and approximately 163,000 homes passed attributable to cable systems acquired by the Company after May 31, 1997, unless otherwise noted. Certain terms used in this Prospectus are defined in the Glossary included herein as Annex A. THE COMPANY GENERAL The Company operates the largest multichannel pay television business in Poland. Through the Company's cable television networks, the most extensive in Poland, the Company serves the largest base of subscribers of any cable operator in Poland, totaling approximately 688,000 subscribers at May 31, 1997 (of whom approximately 79% subscribe to the Company's package with the largest number of channels (the "Basic Tier")). The Company believes that it has established a favorable reputation in the Polish market for providing modern, reliable technology, a broad selection of quality programming and professional customer service. The Company intends to expand its distribution capacity in Poland through the expansion of its cable television business and the development of a complementary digital satellite direct-to-home ("D-DTH") broadcasting service. The Company currently creates, produces, develops and acquires programming, including programming for its two proprietary Polish-language channels, for distribution across its cable networks. The Company intends to expand these activities to develop a branded digital encrypted platform of proprietary Polish-language programming (the "Programming Platform") under the brand name @TV. This Programming Platform will be distributed on a subscription basis across the Company's cable television and D-DTH systems and sold on a wholesale basis to other cable networks in Poland. Since it began the construction of its first cable network in Gdansk in 1990, the Company has grown aggressively through acquisitions (generally of smaller, poorly capitalized cable operators) and through the build-out of its own cable networks. Over the last three years, the Company has experienced average annual growth of approximately 60% in revenue, 130% in EBITDA (as defined in "Summary Consolidated Financial Data") and 96% in cable television subscribers. The Company believes that EBITDA and related measures of cash flow from operating activities serve as important financial indicators in measuring and comparing the operating performance of cable television compa- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED JULY 29, 1997 9,500,000 SHARES @ENTERTAINMENT, INC. [ENTERTAINMENT LOGO] COMMON STOCK (PAR VALUE $.01 PER SHARE) --------------------- Of the 9,500,000 shares of Common Stock offered, 6,175,000 shares of Common Stock are being offered hereby in the United States and 3,325,000 shares of Common Stock are being offered in a concurrent International Offering outside the United States (of which are being sold to Handlowy Investments S.ar.l.). The initial public offering price and the aggregate underwriting discount per share of Common Stock are identical for both Offerings. See "Underwriting". All the shares of Common Stock offered hereby are being sold by @Entertainment, Inc. Prior to the Offerings, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price of the Common Stock will be between $18.50 and $22.00 per share. For factors to be considered in determining the initial public offering price, see "Underwriting". Application has been made for quotation of the Common Stock on the Nasdaq National Market under the symbol "ATEN". SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- <TABLE> <CAPTION> PROCEEDS TO INITIAL PUBLIC UNDERWRITING @ENTERTAINMENT, OFFERING PRICE DISCOUNT(2) INC. (1)(3) ------------------------------------------------------ <S> <C> <C> <C> Per Share of Common Stock............... $ $ $ Total (4)............................... $ $ $ </TABLE> - --------------- (1) @Entertainment, Inc. has entered into an Advisory Services Agreement with Handlowy Investments S.ar.l., pursuant to which @Entertainment, Inc. has agreed to pay Handlowy Investments S.ar.l. a fee of $750,000 for certain financial and banking advisory services to be rendered by Handlowy Investments S.ar.l. or its affiliates to @Entertainment, Inc. See "Underwriting." (2) @Entertainment, Inc. has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (3) Before deducting estimated expenses of approximately $1.5 million payable by @Entertainment, Inc. (4) @Entertainment, Inc. has granted the U.S. Underwriters an option for 30 days to purchase up to an additional 926,250 shares of Common Stock at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. Additionally, @Entertainment, Inc. has granted the International Underwriters a similar option with respect to an additional 498,750 shares as part of the concurrent International Offering. If such options are exercised in full, the total initial public offering price, underwriting discount and proceeds to @Entertainment, Inc. will be $ , $ and $ , respectively. See "Underwriting". --------------------- The shares of Common Stock offered hereby are offered severally by the U.S. Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York on or about , 1997, against payment therefor in immediately available funds. GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. --------------------- The date of this Prospectus is July , 1997. nies. EBITDA is not intended to represent cash flow from operations under U.S. GAAP and should not be considered as an alternative to net income (loss) as an indicator of the Company's operating performance or to cash flows from operations as a measure of liquidity. The Company incurred operating losses of $4.6 million and $1.2 million in 1992 and 1993, respectively. The Company generated operating income of $0.4 million and $3.5 million in 1994 and 1995, respectively, but had operating losses of $1.3 million and $1.0 million for 1996 and the first three months of 1997, respectively. Net losses were $4.5 million, $2.3 million, $2.4 million, $1.3 million and $6.6 million in 1992, 1993, 1994, 1995 and 1996, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". The Company is developing its business in the following three areas. CABLE TELEVISION. With over 1,292,000 homes passed and approximately 688,000 cable television subscribers at May 31, 1997, the Company estimates it has approximately twice as many subscribers as the next two largest cable operators in Poland combined. The Company believes that additional cable television subscriber growth can be achieved through a combination of acquisitions, increased penetration and new network build-out. All of the Company's cable television subscribers are located in eight regional clusters encompassing eight of the ten largest cities in Poland, including those cities which the Company believes provide the most favorable demographics for cable television in the country. The Company has invested more than $85 million to construct fibre-optic cable networks, which it believes are among the most technologically-advanced in Poland and are comparable to modern cable networks in the United States. The networks constructed by the Company provide excess channel capacity and are designed to maximize reliability. It is the Company's policy to upgrade substandard networks that it has acquired as rapidly as practicable. DIGITAL SATELLITE DIRECT-TO-HOME BROADCASTING. The Company intends to expand its distribution capacity by developing a complementary satellite D-DTH broadcasting service for Poland under the brand name @TV. The Company expects to launch its D-DTH service in the first half of 1998 with an initial package of approximately 14 basic Polish-language channels and one optional premium Polish- language movie channel. It believes @TV will be the first Polish-language D-DTH service available to the Polish market. The Company has entered into contracts to lease three transponders on the Astra 1E and 1F satellites which would provide the capacity to transmit up to 21 channels. The Company will initially transmit via satellite uplink to the Polish market from a location in the United Kingdom. The Company has applied for and has been granted a license for the first of its proposed D-DTH broadcast channels from the Independent Television Commission ("ITC") in the United Kingdom and intends to apply for additional licenses for each of its channels broadcast from the United Kingdom, to the extent such a license has not been obtained by the program provider of the channel. The Company is currently studying the feasibility of locating its uplink and production facilities in Poland and of applying for the Polish broadcasting licenses necessary to engage in such activities. The Company is currently negotiating agreements with Philips Business Electronics B.V. ("Philips"), which are expected to be concluded shortly, for the supply of an end-to-end package of products and services which will be distributed, installed and serviced through over 1,000 Philips authorized electronics retailers across Poland. The Company intends to use a portion of the net proceeds from the Offerings to acquire from Philips approximately 500,000 D-DTH reception systems ("D-DTH Reception Systems") consisting of a digital integrated receiver decoder ("IRD"), a smartcard-based proprietary conditional access system based on Philips' CryptoWorks(R) technology and a satellite dish and related equipment (which together form the outdoor unit or "ODU"). The Company intends to distribute the D-DTH Reception Systems at a significantly subsidized cost to initial subscribers in Poland (the "Initial Subscribers") to the Company's D-DTH service. See "-- Financing Growth; Substantial Leverage". The Company expects that its D-DTH business will incur substantial operating losses for its first several years of operation while it is developed and expanded. Although certain of the Company's executives have experience in the analog satellite direct-to-home ("A-DTH") market in Poland, the Company will have no experience delivering D-DTH services prior to the launch of its D-DTH pilot project expected in the beginning of 1998 and of its full service expected in the first half of 1998. In addition, under the Company's current plans, certain critical components and services used in the Com- [MAP OF POLAND] ------------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". ------------------------ NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY @ENTERTAINMENT, INC. OR BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON STOCK"), OF @ENTERTAINMENT, INC., OR POSSESSION OR DISTRIBUTION OF A PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE ADVISED BY @ENTERTAINMENT, INC. AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO, THE OFFERINGS AND DISTRIBUTION OF THIS PROSPECTUS. pany's D-DTH satellite transmission system, including the IRDs, the CryptoWorks(R) proprietary conditional access system and associated smartcards and the ODU, as well as retail, installation and support services, will be provided exclusively by Philips. Although the Company is currently negotiating agreements with Philips for the provision of products and services, there can be no guarantee that the Company will be successful in negotiating such agreements with Philips on mutually acceptable terms, if at all. See "Risk Factors -- Risks Related to the Company -- Limited D-DTH Experience and Uncertainties Associated with the D-DTH Market" and "-- Dependence on Philips as Principal Supplier". PROGRAMMING. The Company currently creates, produces, develops and acquires programming, including programming for its two proprietary Polish-language channels, for distribution across its cable networks. ProCable Sp. z o.o. ("ProCable"), a 33%-owned subsidiary, was formed to develop proprietary programming and currently broadcasts two self-branded Polish-language channels across the Company's cable networks. The Company has also set up a wholly-owned subsidiary, Mozaic Entertainment, Inc. ("Mozaic"), to develop proprietary programming, either directly or through joint ventures. Through a joint venture, Mozaic currently produces Atomic TV, a Polish-language music channel. In addition to ProCable, Mozaic and its existing joint ventures, the Company intends to form a variety of joint ventures or subsidiaries to own and develop proprietary Polish-language programming for its Programming Platform. Towards this end, the Company is currently negotiating with a number of Polish and international programming providers to form joint ventures which will be responsible for the creation of thematic programs and channels, such as action and adventure, science fiction, sports and family entertainment channels. The Company intends to either have equity ownership in, and/or exclusive agreements with a number of such programming providers, thus allowing it to create an attractive branded package of proprietary high-quality programming designed specifically for the Polish market. To date, the Company has concluded letters of intent regarding the World Shopping Network, Knowledge TV, BET on Jazz and Twoj Styl, a Polish lifestyle magazine. The Company is also negotiating a partnership with Telewizja Polska S.A. ("TVP"), the Polish state-owned broadcaster, which is subject to certain Polish regulatory and other approvals, to transmit TVP's popular channels on the Company's Programming Platform and provide the Company with exclusive pay television access to TVP's extensive Polish-language television library. There can be no assurances that the Company can enter into agreements on satisfactory terms with TVP or any of these program providers. The Company intends not only to distribute its Programming Platform on a subscription basis across its own cable television and D-DTH systems, but also to sell the Programming Platform on a wholesale basis to other cable networks in Poland. STRATEGY AND OPERATING STRENGTHS The Company's principal objective is to enhance its position as the leading provider of multichannel pay television in Poland by capitalizing on the favorable market opportunities that it believes exist in Poland for high quality Polish-language programming carried over sophisticated cable television and D-DTH systems. The Company's business strategy is designed to increase its market share and subscriber base, maximize revenue per subscriber and minimize churn by emphasizing branding, advanced and expanded distribution technology, superior Polish-language programming and customer service. The Company believes that it is well-positioned to execute its business strategy in the Polish multichannel pay television market based on the following operating strengths. LEADING MARKET POSITION. The Company is currently the largest cable television operator in Poland, and estimates that it has approximately twice as many subscribers as the next two largest operators in Poland combined. Upon completion of the Acquisitions described herein (see "-- Acquisitions"), the Company estimates that it will have approximately 708,000 cable television subscribers, representing approximately 28% of all cable television subscribers in Poland and approximately 47% of all cable television subscribers in Poland to systems offering approximately 20 or more channels. The Company believes that it is well-positioned to grow its cable television business, as it estimates that at May 31, 1997, approximately 8.8 million Polish homes remained unpassed by cable television networks and, of the approximately 3.5 million homes passed by cable in Poland, it estimates approximately 29% were not cable subscribers. Many cable subscribers in Poland are served by small, often poorly capitalized, cable operators, which generally feature poor quality and limited channel offerings, but at low rates and with relatively high penetration. The Company believes that there are opportunities for large, professional companies, such as the Company, to acquire at attractive prices or displace these smaller cable operators in Poland, due to the burden on such operators of attempting to comply with recently enacted regulations that, among other things, set minimum technical standards for television networks, and the frequent lack of exclusivity of cable operators' agreements with co-operative housing authorities ("co-op authorities"), which facilitates overbuilding of smaller, poor quality cable operators. The Company's D-DTH strategy is to distribute at a significantly subsidized cost D-DTH Reception Systems to the approximately 500,000 Initial Subscribers, which is designed to achieve rapid and high penetration of the Polish market. The Company believes that it will be the first Polish-language D-DTH service available to the Polish market which, when combined with the continued expansion of its cable television and programming businesses, will enhance the Company's position as the leading provider of multichannel pay television in Poland. PROPRIETARY POLISH-LANGUAGE PROGRAMMING. The Company believes that there is significant unsatisfied demand in its market for a variety of high-quality Polish-language programming. The Company intends to develop its Programming Platform for distribution across its cable television and D-DTH systems, as well as for sale on a wholesale basis to other cable networks in Poland. The Company intends to expand its current proprietary Polish-language programming for its Programming Platform by establishing equity ownership in, and/or exclusive programming arrangements with, a wide variety of channels designed to provide the Polish market with an offering of first-run films, live local sports and multiple thematic channels in Polish, which the Company believes will be attractive to its customer base and advertisers. ADVANCED DISTRIBUTION TECHNOLOGY. The Company's cable television networks (other than those it has acquired and is in the process of rebuilding to its standards) have bandwidths of at least 550MHz and, in most cases, have the capacity to be cost-effectively reconfigured to provide additional services such as voice and data transmission. The Company's cable television networks constructed by it also provide excess channel capacity. The Company expects that its D-DTH service will be among the first digital television platforms launched in Europe, and the Company believes it will be the first Polish-language D-DTH service available to the Polish market. The Company is currently negotiating with Philips for an end-to-end package of products and services, which the Company expects will enable it to provide a wide range of sophisticated services to its D-DTH customers. ABILITY TO REALIZE OPERATING EFFICIENCIES AND ADDITIONAL REVENUE SOURCES. The Company believes it can achieve substantial operating efficiencies and higher margins through centralized billing systems and other subscriber management functions, as well as through the sale of its Programming Platform to other cable television networks in Poland. Continued expansion of the Company's subscriber base should provide increasing economies of scale by, among other things, permitting the Company to spread its fixed costs over an increasing subscriber base. In addition, the Company believes that there are opportunities to develop a variety of new value-added services, including (i) new television services, such as premium channels, additional advertising and pay-per-view ("PPV"), (ii) new network services, such as internet access and voice telephony, and (iii) ancillary services, such as database marketing, branded financial services and a subscriber magazine. HIGH PENETRATION AND LOW CHURN. The Company is currently achieving premise penetration of approximately 53% of homes passed. In certain areas where the Company has operated its networks for an extended period of time, such as portions of the Gdansk regional cluster, the penetration rate is approximately 63%. The Company believes that it can improve its penetration by expanding its current program offering, which includes only ten Polish-language channels not available on terrestrial frequencies, through the addition of its Programming Platform. In addition, the Company has experienced annual churn of less than 10% historically. Churn rates for 1994, 1995 and 1996 were 9.1%, 9.2% and 7.8%, respectively. The Company expects, however, that it may experience increases in its churn rate above historical levels during the implementation across its cable networks of its new pricing strategy, designed to maximize revenue per subscriber and achieve real profit margin increases in U.S. Dollar terms, which commenced in January 1997. ATTRACTIVE OPERATING AND REGULATORY ENVIRONMENT. Poland is the fifth-largest television market in Europe, with approximately 12.3 million television homes at May 31, 1997 as estimated by the Company. Levels of television viewing in Poland are among the highest in Europe, at an average of 279 minutes per day (over 4 1/2 hours) in 1995. The Company estimates that there are approximately 1.6 million satellite homes (able to currently receive largely unencrypted anolog foreign-language programming) and nearly 2.5 million cable television subscribers in Poland. Current law does not permit the Polish authorities to regulate cable television or DTH rates, and Poland is a party to the 1989 Council of Europe's Convention on Transfrontier Television (the "Convention"), which requires the Polish authorities to guarantee freedom of reception and retransmission of program services which meet the requirements of the Convention. EXPERIENCED AND MOTIVATED MANAGEMENT. The Company has established a management team of senior executives who have significant experience in the cable television and DTH businesses, and are familiar with the Polish television market, business practices, language and customs. The team is led by Robert E. Fowler, III, Chief Executive Officer of @Entertainment, who has significant cable, programming and broadcasting experience, having managed operations in Poland and the United States, and George Z. Makowski, Chief Operating Officer-Cable Television of PCI, who has significant cable and telecommunications experience, having managed operations in Poland and Western Europe. The management team also includes several key local executives and managers who have significant experience in the Polish television market. The Company's D-DTH business will be managed by David Warner, Chief Operating Officer-DTH of @EL, who has significant experience in A-DTH services for Poland and other countries in Europe. Mr. Warner will lead a team of local managers experienced in the Polish A-DTH market. The Company believes that many of the policies and procedures developed for its cable business will be applicable to its D-DTH business, and that this management team will contribute local expertise which the Company believes will be essential in expanding its cable television and programming businesses and developing its D-DTH broadcasting business. The Company has established management and employee stock option plans which it believes will improve its ability to retain its qualified management and employees. ACQUISITIONS Since March 31, 1997, the Company has completed the acquisition of all or a substantial portion of the capital stock or assets of three cable television systems in Poland, and intends to acquire a fourth such system, as well as a 50% equity interest in a Polish publishing company with which it intends to develop programming and ancillary services (the "Acquisitions"). The aggregate consideration paid or to be paid by the Company in connection with the Acquisitions (including amounts for stockholder loans) is expected to be approximately $35.0 million. The three cable systems already acquired in the Acquisitions serve approximately 113,000 subscribers and pass approximately 189,000 homes, while the cable system expected to be acquired serves approximately 20,500 subscribers, representing all of the homes passed by that system. The consummation of the Acquisitions has or will result in the expansion of the Company's cable operations within its existing regional clusters and the establishment of one new regional cluster. PCI has or intends to use a portion of the net proceeds of the offering of its 9 7/8% Senior Notes Due 2003 (the "Old Notes") in October 1996 to consummate the Acquisitions. The Company has obtained the approval of the Polish Office for Protection of Competition and Consumers (the "Anti-Monopoly Office") for the Acquisitions which have been consummated, and the Company intends to apply for approval of the remaining Acquisitions. The Company believes that it will be required to obtain the Anti-Monopoly Office's approval for certain future acquisitions as well. The Company continually evaluates acquisition candidates and expects that it will continue to acquire attractive cable television operators and programmers. There can be no assurance as to the timing of the closing of the Acquisitions that are currently pending or as to whether or on what terms the pending Acquisitions will actually be consummated. See "Business -- Cable -- Acquisitions". FINANCING GROWTH; SUBSTANTIAL LEVERAGE Cable television operators typically experience losses and negative cash flow in their initial years of operation due to large capital investments required for the construction or acquisition of their cable networks and the administrative costs incurred in connection with commencing operations. The Company currently expects to finance the initial roll-out cost of its D-DTH business primarily with the net proceeds from the Offerings. However, ongoing development and expansion of the D-DTH business and the development and expansion of its Programming Platform will require significant additional financing, and such businesses are expected to incur operating losses and negative cash flow for the first several years of operations. The Company expects that an aggregate of approximately $315 million in 1997 and 1998 will be required to fund (i) the commencement and development of its D-DTH business, which will include capital expenditures and expenditures for operating expenses, working capital and other general corporate purposes (approximately $200 million, including up to approximately $190 million to subsidize the cost of the D-DTH Reception Systems to the Initial Subscribers in an amount of up to approximately $380 per subscriber), (ii) the expansion of its programming business (approximately $25 million), (iii) the consummation of the Acquisitions and future acquisitions (approximately $60 million) and (iv) the building out and rebuilding of its cable television networks (approximately $30 million). The Company believes that, in addition to the net proceeds from the Offerings, remaining funds from the offering of the Notes and cash from operations, it will need additional funding of approximately $100 million to fulfill its current business development plans through the end of 1998. The Company expects that it will also require additional external funding for its business development plans in years subsequent to 1998 if the Company continues to subsidize the cost to subscribers of the D-DTH Reception Systems and to refinance all or a portion of the Notes (as hereinafter defined) at maturity. There can be no assurance that the Company will be able to borrow funds under any credit facilities or that suitable debt or equity financing will be available to the Company or, if available, that the terms thereof will be attractive to the Company. However, the pace and amount of the Company's expenditures for its business development plans are largely discretionary. To the extent that the Company is unable to raise additional financing, it intends to concentrate its available funds on, in order of priority, the development of its D-DTH business and its Programming Platform, build out of its cable networks and acquisition of additional cable systems. See "Risk Factors -- Risks Related to the Company -- Need for Additional Financing" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". The Company has incurred substantial indebtedness. On October 31, 1996, PCI, a subsidiary of @Entertainment, issued $130 million aggregate principal amount of its Old Notes. At March 31, 1997, the Company had approximately $129.5 million aggregate principal amount of indebtedness outstanding. The Company expects to seek additional debt financing in the next 12 to 18 months to finance the development of its new D-DTH business, potential acquisitions and the expansion of its cable and programming businesses. The Company anticipates that, in light of the amount of its existing indebtedness and the expected incurrence of additional indebtedness to finance the development of its new D-DTH business, potential acquisitions and the expansion of its cable and programming businesses, it will continue to have substantial leverage for the foreseeable future. REGULATION The operation of the Company's cable television and D-DTH businesses is highly regulated and dependent upon obtaining and maintaining required approvals and licenses. In Poland, the operation of these businesses is regulated by various governmental bodies, which apply a permitting system for cable television operators and limitations on foreign ownership. In addition, the Company's D-DTH broadcasting service will be regulated by the U.K. authorities as a satellite television service and will be required to obtain a license for each of its channels broadcast from the United Kingdom, to the extent such a license has not been obtained by the program provider of that channel. See "Risk Factors -- Risks Related to Regulation" and "Regulation". HISTORY; PRINCIPAL STOCKHOLDERS; REORGANIZATION The Company was founded in 1990 by David T. Chase, a Polish-born investor who has successfully operated a variety of businesses, including cable television and broadcasting interests in the United States, since leaving Poland in 1946. Since it began the construction of its first cable network in Gdansk in 1990, the Company has grown aggressively through acquisitions (approximately 40 acquisitions since 1992, generally of smaller, poorly capitalized cable operators) and through the build-out of its own cable networks. The Company's total number of cable television subscribers has grown from approximately 43,000 at December 31, 1992 to approximately 688,000 at May 31, 1997. Approximately 50% of this increase has been achieved through the build-out of the Company's existing cable networks. In March 1996, ECO Holdings III Limited Partnership ("ECO"), of which the general partner is an entity controlled by Advent International Corporation ("Advent"), acquired an interest in the Company. At March 31, 1997, Mr. Chase and certain members of his family and family trusts (the "Chase Family", and together with ECO, the "Principal Stockholders") and ECO had invested approximately $86 million in PCI. In October 1996, PCI issued $130 million aggregate principal amounts of Old Notes to fund its continued expansion program and had approximately $84 million in cash and investment securities at March 31, 1997. The Chase Family provided the Company with significant management resources and technical support in the early stages of its operations, and the Principal Stockholders provide the Company with ongoing access to their extensive television and media expertise. Mr. Chase is the chairman of @Entertainment. See "Management". In June 1997, the Company effected the Reorganization to facilitate the development of its D-DTH business and the expansion of its cable television and programming businesses. @Entertainment is a Delaware corporation formed in June 1997 as the new parent company of PCI and @EL. PCI, a New York corporation established in November 1989, conducts, through its subsidiaries, the Company's existing cable television and programming businesses. @EL, a corporation incorporated under the laws of England and Wales in June 1997, will develop the Company's D-DTH business. As a result of the Reorganization, @Entertainment owns 100% of the outstanding shares of voting stock of PCI and @EL, which are the principal assets of @Entertainment. See "The Reorganization". After giving effect to the Reorganization but prior to completion of the Offerings, the Chase Family and ECO own approximately 42% and 39%, respectively, of the outstanding voting stock of @Entertainment. Upon completion of the Offerings, the Chase Family and ECO will beneficially own approximately 28% and 26%, respectively, of the outstanding shares of Common Stock of @Entertainment. As a result, the Principal Stockholders, acting together, will be able to elect all of @Entertainment's directors and otherwise control the Company's operations. See "Risk Factors -- Risks Related to the Company -- Control by Existing Stockholders; Potential Anti-Takeover Provisions" and "Principal Stockholders". @Entertainment's principal executive office is located at One Commercial Plaza, Hartford Connecticut 06103-3585 and its telephone number is (860) 549-1674. CORPORATE ORGANIZATIONAL STRUCTURE The chart on the following page outlines the current organizational structure and minority ownership interest structure of the Company, after giving effect to the Reorganization and the Acquisitions (other than the pending Acquisition): [CHART DEPICTING OWNERSHIP PERCENTAGES] [Chart shows @Entertainment, Inc. ("@Entertainment") owns 100% of At Entertainment Limited ("@EL") and Poland Communications, Inc. ("PCI'). PCI owns 92.3% (see note (a)) of Poland Cablevision (Netherlands) B.V., 49.0% of Poltelkab Sp. z o.o. ("Poltelkab") (see note (f)), 48.7% of Polska Telewizja Kablowa-Ryntronik S.A. ("PTK-Ryntronik") (see note (d)), 100.0% of Mozaic Entertainment Inc. ("Mozaic") (see note (b)), 33.0% of ProCable Sp. z o.o. ("ProCable") (see note (b) and (g)), 49.0% of TV KABEL Sp. z o.o. ("TV KABEL") (see note (k)), 49.0% of Polska Telewizja Kablowa -- Szczecin Sp. z o.o. ("PTK-Szczecin"), 40.0% of Telkat Sp. z o.o. ("Telkat"), and 48.9% of Gosat- Service Sp. z o.o. ("GOSAT") (see note (n)). PCBV owns 100.0% of Polska Telewizja Kablowa S.A. ("PTK, S.A.") (see note (c)), 100.0% of Polska Telewizja Kablowa-Warszawa S.A. ("PTK-Warsaw") (see note (e)), 100.0% of Polska Telewizja Kablowa-Krakow S.A. ("PTK-Krakow") (see note (e)) and 46.8% of PTK-Ryntronik (see note (d)).] [Poltelkab owns 100% of Polska Telewizja Kablowa-Lublin S.A. ("PTK-Lublin"), 100.0% of TV-SAT Ursus Sp. z o.o., 2.0% of TV KABEL, 51.0% of PTK-Szczecin, 60% of Telkat and 11.7% of GOSAT. PTK-Szczecin owns 1.4% of Szczecinska TK Sp. z o.o. (see note (l)) and 50.0% of Otwocka TK Sp. z o.o. (see note (m)) PTK-Warsaw owns 100.0% of ETV Sp. z o.o. ("ETV"). PTK-Ryntronik owns 75.1% of Opolskie TT S.A. (see note (h)), 100% of KOLOR-SAT Sp. z o.o. ("Kolor-Sat"), and 100% of Czestochowska TK Sp. z o.o. Mozaic owns 100% of Mozaic Entertainment Sp. z o.o. and 45.0% of Ground Zero Media Sp. z o.o. ("GZM") (see note (i)). ProCable owns 22.0% of Polskie Media S.A. ("Polskie Media") (see note (j)).] - --------------- (a) The minority shareholders of PCBV have a claim against 7.7% of the profits and equity of PCI's subsidiaries that compete with PCBV and PCI has agreed to share the profits of such subsidiaries with the minority PCBV shareholders on a pro rata basis. In addition, PCI has made an offer to buy the outstanding shares of PCBV held by the minority PCBV shareholders. See "Certain Relationships and Related Transactions -- PCBV Shareholders' Agreement". Reece Communications Inc. owns 6.0%, Rutler-Dunn Communications, Inc. owns 1.0%, Frank N. Cooper owns 0.4%, and Poland Cablevision U.S.A. Inc. owns 0.3% of the shares of PCBV. (b) Represents companies that are not subject to the restrictive covenants in the Indenture. (c) Currently, PCBV owns 97.9% of the shares of PTK, S.A. PCI has entered into an agreement to purchase the remaining shares of PTK, S.A. held by Poltelkab. (d) Currently PCBV owns 46.8% and Poltelkab owns 4.5% of the shares of PTK-Ryntronik and PCBV holds convertible debt that, if converted, would bring its total ownership of PTK-Ryntronik to approximately 72% as of December 31, 1996. The Company has signed agreements to purchase the remaining shares of capital stock of PTK-Ryntronik which sale agreements are subject to certain conditions. See "Certain Relationships and Related Transactions -- Ryntronik". (e) PTK-Krakow has transferred, and PTK-Warsaw intends to transfer, their cable television assets to PTK, S.A. (f) Andrzej Muras owns 14.0%, Leszek Ekiert owns 10.0%, Ryszard Pospeszynski owns 10.0%, Marek Sowa owns 8.5%, and Waclaw Czepinski owns 8.5% of the shares of Poltelkab. (g) Jacek Skurtys owns 47.0% and Fundacja Przyjaciele Szpitala Dzieciecego przy Litewskiej owns 20.0% of the shares of ProCable. (h) Ryszard Baginski owns 20.0% of the preferred shares A and 504 individuals (subscribers) each own one common share B of Opolskie Towarzystwo Telewizyjno Telegraficzne S.A. (i) Polygram International Holdings B.V. owns 21.0%, Planet 24 Productions Limited owns 14.0%, Stephen R. Groth owns 7.0%, Marc A. Bushala owns 6.0%, and Todd Stump owns 7.0% of the shares of GZM. (j) Wincenty Zeszuta owns 0.3%, "El Trade" Sp. z o.o. owns 0.3%, "Ambresa" Sp. z o.o. owns 5.3%, Zdzislaw Bialy owns 40.3%, and founding shareholders (including Iwona Buchner, Henryk Chodysz, Januariusz Goscimski, Lech Jaworowicz, Leonard Prasniewski, Janusz Wojcik, and Tadeusz Przezdziecki) own 31.8% of the shares of Polskie Media. (k) Miroslaw Knocinski owns 49.0% of the shares of TV Kabel. (l) SM "Srodmiescie" owns 37.4% and SM "Dab" owns 61.2% of the shares of Szczecinska Telewizja Kablowa Sp. z o.o. (m) Otwocka Spoldzielnia Mieszkaniowa owns 50.0% of the shares of Otwocka TK Sp. z o.o. (n) Stanislaw Pracajffio owns 14.9%, Henryk Szuber owns 0.9%, Zdzisffiaw Boguszynski owns 1.1%, Leszek Brzozowski owns 3.4%, Witold Fiaffikowski owns 3.9% and Ryszard Wojtaszek owns 15.3% of the shares of GOSAT. THE OFFERINGS <TABLE> <S> <C> U.S. Offering................................ 6,175,000 shares International Offering....................... 3,325,000 shares Total...................................... 9,500,000 shares Common Stock to be outstanding after the Offerings (1).............................. 33,310,000 shares </TABLE> Use of Proceeds..................... Assuming an offering price of $20.25 per share (the midpoint of the estimated range specified on the cover page of the Prospectus), the net proceeds of the Offerings are expected to be approximately $177.4 million. The Company plans to use $60.0 million to purchase all of the PCI Series A Preferred Stock and Series C Preferred Stock held by certain of the Principal Stockholders and approximately $1.23 million for the payment of bonuses to certain executives of the Company. The Company intends to use substantially all of the remaining net proceeds to finance the commencement and development of its D-DTH business. Any remaining net proceeds will be used for general corporate purposes, including, without limitation, development of its cable television and programming businesses and future acquisitions. See "Risk Factors -- Risks Related to the Offerings -- Benefits of the Offerings to Insiders", "Use of Proceeds", "Business -- Strategy and Operating Strengths", "Business -- D-DTH -- D-DTH Operating Strategy" and "Certain Relationships and Related Transactions". Proposed Trading Symbol............. Application has been made for quotation of the Common Stock on the Nasdaq National Market under the symbol "ATEN". The 6,175,000 shares of Common Stock initially being offered in the United States (the "U.S. Offering") and the 3,325,000 shares of Common Stock concurrently being offered outside the United States (the "International Offering") collectively are referred to in this Prospectus as the "Offerings". - ---------------- (1) Does not include 2,436,000 shares of Common Stock reserved for issuance in connection with options granted to certain employees of the Company. See "Executive Compensation".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041540_execustay_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041540_execustay_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e0f4d3c52dd337b21560857014797a6ea5b91993
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041540_execustay_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Investors should carefully consider the risk factors related to the purchase of the Common Stock. See "Risk Factors." Unless otherwise indicated, the information in this Prospectus (i) gives effect to the June 4, 1997 recapitalization whereby the Company acquired all of the shares of its operating subsidiaries in exchange for all of the outstanding shares of the Common Stock of the Company (the "Recapitalization") and (ii) assumes that the Underwriters' over-allotment option will not be exercised. THE COMPANY ExecuStay is a leading provider of interim housing for corporate clients and professionals. Through its ten regional offices, ExecuStay provides fully furnished high-quality apartments for stays of 30 days or more, offering a choice of locations, types of accommodation and accessories. ExecuStay residents enjoy home-like accommodations that are furnished according to their needs and preferences and generally priced comparably or more affordably than traditional full service hotels or all-suite hotels. The number of apartments occupied by ExecuStay residents has grown from approximately 190 at December 31, 1994 to approximately 1,800 at June 30, 1997, with an average rental period in the first half of 1997 of more than three months. The Company currently leases apartments in over 35 states. The Company believes that demand for interim housing services has been driven by continued growth in management and professional employment, the increasing importance to American business of flexibility and outsourcing and the impact of a more mobile and transitory population. The Company's customers include Fortune 500 companies, federal and state governmental agencies, small businesses and individuals. Corporate clients generally use interim housing to meet seasonal, temporary or startup needs and to accommodate employees who have been relocated or are on temporary assignment. The Company owns no residential housing; instead, housing occupied by ExecuStay residents is leased to the Company (as tenant) from a variety of unaffiliated property owners and managers. When responding to inquiries from prospective ExecuStay residents, the Company is not limited to any particular pool of apartment units and therefore is able to select suitable accommodations from any apartment property in the desired location, affording greater flexibility in accommodating the preferences of its customers. The Company generally has been able to enter into leases with property owners that match each resident's desired length of stay and, as a result, the units leased to the Company were vacant less than 2% of the time in the first half of 1997. Virtually all ExecuStay accommodations are apartments, although the Company occasionally provides housing at townhomes or single-family homes. The Company generally can locate and furnish a residence within 24 hours of a request and usually can arrange the length of each lease to fit the customer's needs. The Company furnishes residences, from its own warehouse or through unaffiliated rental companies, to each customer's taste with furniture, linens, electronics and housewares, along with art work and decorative accessories. Residential office furniture, fax machines, additional phone lines, computer equipment, exercise equipment and maid service can also be provided upon request. ExecuStay can locate accommodations for families with young children, infants or pets. Amenities vary by location but often include a swimming pool, hot tub, sauna, fitness center, tennis courts and clubhouse. All expenses relating to each residence, including rent, local and long-distance telephone service, cable television, utilities and trash removal, are billed to and paid by ExecuStay, which then bills each customer monthly in a single invoice. ExecuStay has established marketing, sales and service offices in the Atlanta, Charlotte, Ft. Lauderdale, Los Angeles, Orlando, Philadelphia, Raleigh, Richmond, San Francisco and Washington metropolitan areas. ExecuStay provides housewares (non-furniture accessories) both to its residents and to others from its warehouses in the Los Angeles, Ft. Lauderdale, Charlotte and Washington locations. The ownership of housewares inventory allows the Company to offer personalized accessories packages and enables it to monitor and control product quality and consistency. In addition to housewares rental, the Washington warehouse also provides furniture for ExecuStay residents in the Mid-Atlantic area and rents residential and commercial furniture to customers other than ExecuStay residents. In areas other than the Mid-Atlantic region, the Company uses unaffiliated furniture rental companies to provide furniture to ExecuStay residents. EXPANSION STRATEGY The Company is pursuing an expansion strategy designed to enhance its national presence and brand name recognition in the interim housing industry. The Company believes that, as it strengthens its presence in new and existing markets, the Company's services will become increasingly attractive to national corporate clients that need employee accommodations throughout the country. The key components of the Company's expansion strategy are as follows: Acquisitions. The interim housing industry is highly fragmented and includes a large number of single-city and regional businesses, which the Company believes creates significant consolidation opportunities. The primary focus of the Company's expansion strategy will be the selective acquisition of smaller local and regional interim housing service providers that operate in markets where the Company does not yet have a presence or where the Company has identified significant growth opportunities. On April 1, 1997, the Company began implementing its acquisition strategy by purchasing for $850,000 certain assets and all existing customer leases of an Orlando interim housing business that had 1996 revenue of approximately $1.7 million. On June 1, 1997, the Company purchased for $1.9 million an interim housing business in San Francisco, which had 1996 revenue of approximately $9.0 million, from a local property developer and obtained the exclusive right to provide interim housing services at 15 properties owned by the developer. The Company borrowed approximately $2.9 million to finance these two acquisitions, which loans are expected to be repaid with a portion of the net proceeds of this offering. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Recent Expansion." Internal Expansion. The Company intends to open additional regional offices in strategically identified geographic locations where it currently does not conduct business and where it has been unable to identify attractive acquisition candidates. In June 1997, ExecuStay established a regional office in Atlanta and has hired an office manager with existing relationships with interim housing customers and suppliers in that market. The Company recently signed an agreement with a national apartment property owner and manager to operate an interim housing program at 22 properties in Phoenix. The Company intends to begin operations in Phoenix within the next few months. ------------------ The Company commenced operations in 1986. ExecuStay Corporation was incorporated in Maryland on June 4, 1997 to acquire and hold all of the outstanding shares of its operating subsidiaries. References to the "Company" or "ExecuStay" in this Prospectus include ExecuStay Corporation and its subsidiaries. The Company's headquarters are located at 7595 Rickenbacker Drive, Gaithersburg, Maryland 20879, and its telephone number is 301-948-4888. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,650,000 shares Common Stock to be outstanding after the offering (1)............................... 6,400,000 shares Use of proceeds.............................. Payment of S corporation and other distributions to current stockholders, repayment of debt, funding of possible future acquisitions and for working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol................ "EXEC" </TABLE> - --------------- (1) Excludes 700,000 shares of Common Stock reserved for issuance under the Company's recently adopted stock option plan, of which options to purchase 173,650 shares will be granted immediately upon the effectiveness of this offering at an exercise price equal to the initial public offering price per share. See "Management -- Stock Plan." SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------- ------- ------- ------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total revenue......................... $7,436 $8,722 $13,773 $17,208 $29,645 $11,858 $20,436 Total operating costs and expenses.... 6,536 7,810 12,248 15,092 26,679 10,939 18,593 ------ ------ ------- ------- ------- ------- ------- Earnings from operations.............. 900 912 1,525 2,116 2,966 919 1,843 Interest expense...................... 113 68 195 240 308 133 209 ------ ------ ------- ------- ------- ------- ------- Net income............................ $ 787 $ 844 $ 1,330 $ 1,876 $ 2,658 $ 786 $ 1,634 ====== ====== ======= ======= ======= ======= ======= PRO FORMA DATA (1): Net income............................ $ 1,595 $ 981 ======= ======= Net income per common share........... $ 0.40 $ 0.25 ======= ======= Weighted average common shares outstanding (2)..................... 3,965 3,965 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 -------------------------- PRO FORMA ACTUAL AS ADJUSTED (3) ------- --------------- <S> <C> <C> (IN THOUSANDS) BALANCE SHEET DATA: Cash........................................................................... $ 7 $13,500 Property on or held for lease, net............................................. 4,221 4,221 Total assets................................................................... 14,950 28,443 Total bank debt................................................................ 7,552 -- Due to stockholders............................................................ 1,102 -- Total stockholders' equity..................................................... 2,230 24,192 </TABLE> - --------------- (1) For all periods presented, the Company elected to be treated as an S corporation and was not subject to federal and certain state income taxes. The Pro Forma Data reflect federal and state income taxes based on applicable tax rates as if the Company had not elected S corporation status for the periods indicated. See Note M to the Consolidated Financial Statements. (2) The pro forma weighted average common shares outstanding is based on: (i) the weighted average shares outstanding during the period; and (ii) the assumed sale of a sufficient number of shares of Common Stock necessary to provide funds to make a distribution of all undistributed S corporation earnings at June 30, 1997 in excess of earnings for the twelve-month period then ended and to make the distribution of $1.1 million declared on June 13, 1997. See "Termination of S Corporation Status and Related Distributions" and "Dividend Policy."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041651_asia_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041651_asia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a8a200f5abf43ee532f19a9abe9bb9f809604c8b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041651_asia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary is qualified in its entirety by the more detailed information and financial statements and the notes to the financial statements appearing elsewhere in this Prospectus. The Company General Asia Electronics Holding Co. Inc. (the "Company") is a British Virgin Islands company, incorporated in January 1996, that develops and manufactures deflection yokes for sale to manufacturers of color television sets and computer monitors. Deflection yokes are electronic devices attached to color picture tubes ("CPTs") in television sets and color display tubes ("CDTs") in computer monitors. Deflection yokes use electro-magnetic forces to aim (i.e., deflect) red, green and blue light beams at the screen in the front of the CPT or CDT. When the light beams converge, various levels of intensity within each beam create a picture on the screen, which varies in movement, color and shape according to the video signal. In addition to aiming light beams, deflection yokes ensure that the red, green and blue light beams converge at each point on the screen simultaneously, thereby causing clarity and focus. The Company believes it is one of the largest independent manufacturers of deflection yokes in the world. All the Company's sales are to original equipment manufacturers ("OEMs"), which integrate the Company's deflection yokes into finished goods or remarket them to other OEMs. The Company's customers include Daewoo Corporation and its affiliates ("Daewoo"), Sanyo Electric Co., Ltd. and its affiliates ("Sanyo"), Kanematsu USA, Inc., Sharp-roxy Electronics Corporation, PT. Tosummit Electronic Devices, Toshiba Corporation ("Toshiba"), India Samtel Color Limited and IRICO Group ("IRICO"). The Company, with its predecessors, has experienced substantial growth, both in unit sales and net sales. On a pro forma consolidated basis, the number of deflection yokes sold by the Company and its predecessors has increased from approximately 1.6 million units in 1994 to approximately 3.0 million units in 1995 to approximately 5.6 million units in 1996, and net sales have increased from approximately $8.3 million in 1994 to approximately $16.5 million in 1995 to approximately $27.4 million in 1996. This represents a compounded annual growth rate in excess of 80.0% both in unit sales and in net sales. Such strong growth has continued into the first half of 1997, with unit sales of approximately 3.0 million units for the six months ended June 30, 1997, compared to approximately 2.0 million units for the six months ended June 30, 1996, and net sales of approximately $18.6 million for the six months ended June 30, 1997, compared to approximately $10.5 million for the six months ended June 30, 1996. The Company believes such growth is a result of its ability to manufacture high quality products on a cost competitive basis and the trend of OEMs to outsource labor-intensive components of their manufacturing operations. Industry Demand for deflection yokes is directly linked to the demand for cathode ray tubes ("CRTs"), which are used in both television sets (CPTs) and computer monitors (CDTs). According to a recent report by a specialty glass manufacturer (the "Report"), the market for television sets is projected to grow at a compounded annual rate of 7.1% through the year 2000 and the market for computer monitors is projected to grow at a compounded annual rate of 19.3% through the year 2000. According to the Report, the People's Republic of China's ("China") share of world CPT and CDT production is projected to increase from 16.1 million units in 1996 to 39.9 million units in 2000, which represents a compounded annual growth rate of approximately 26%. See "Business--Industry Overview" with respect to the Report. If the Company retains its current presence in China as a manufacturer of deflection yokes, it would expect to participate in China's overall growth in deflection yoke production. China emerged in the world electronics industry in the 1980s, especially for products for which the manufacturing process is labor intensive and not readily subject to automation. Although most major television manufacturers, such as Daewoo, Toshiba, Matsushita Electric Industrial Corp. ("Matsushita"), Sony Corporation ("Sony"), Sanyo, Philips Electronics N.V. ("Philips"), Sharp Corp. ("Sharp") and Samsung Group ("Samsung"), continue to manufacture deflection yokes to some extent, the Company believes there is a trend among OEMs to outsource the more labor-intensive segments of their manufacturing operations such as deflection yoke production. The Company believes the relatively low labor cost in China and the difficulty of automating significant portions of the manufacturing process for deflection yokes afford the Company an advantage in being able to capture additional market share in the deflection yoke industry. The Company believes that Murata Manufacturing Co. Ltd. ("Murata"), a Japanese corporation engaged primarily in the business of manufacturing ceramic capacitors and other electronic components with fiscal 1997 revenues of $2.4 billion, has been the largest manufacturer in the world of deflection yokes for sale to unaffiliated third parties, producing approximately 10 million units per year. In April 1997, Murata announced it was selling its deflection yoke manufacturing facility in Mexico to Totoku Electric Co., Ltd. ("Totoku"), a Japanese electronics company that manufactures CRTs. The Company believes Murata intends to exit the deflection yoke business. The Company believes Murata's deflection yoke business represents approximately 3% of Murata's annual revenues (or approximately $85 million). Strategy The Company's goal is to use its manufacturing expertise and low manufacturing costs to become the largest independent manufacturer of deflection yokes in the world. To accomplish this goal, the Company's strategy is to: [bullet] Expand its production capacity to meet existing and expected demand. The Company is expanding its production capacity and intends to use approximately $15.5 million of the net proceeds of this Offering to expand capacity further. With the additional production capacity, the Company will be able to satisfy the projected growth in demand for deflection yokes, both for television sets and computer monitors. The Company is expanding production capacity to accommodate its recent and anticipated growth. In that connection, the Company had backlog at June 30, 1997 of approximately $35.0 million, compared to backlog at June 30, 1996 of approximately $20.0 million. The Company's planned expansion will result in total production capacity of approximately 12.8 million units, compared to total production capacity of approximately 6.1 million units at the end of 1996. [bullet] Focus production expansion on higher margin products, such as deflection yokes for larger screen televisions. The Company currently manufactures deflection yokes for 14", 20" and 25" CPT models. The Company's planned expansion will be aimed at manufacturing the higher margin products, including deflection yokes for larger screen televisions and for CDTs. Gross profit margins for deflection yokes for 14" and 20" CPT models generally average between 10-15%, while gross profit margins for deflection yokes for 21" (wide), 25" and 29" CPT models generally average between 30-45%. [bullet] Expand penetration of CDT market. The Company recently entered the market for deflection yokes for computer monitors ("CDTs"), and in 1996 produced approximately 93,000 units. Deflection yokes for CDTs are more advanced than deflection yokes for CPTs in the level of design complexity and engineering specifications of each customer, due to the higher resolution of the display device. The Company's planned expansion will result in a total annual production capacity of approximately 2.2 million deflection yokes for CDTs. The Company expects that margins for CDT products will be comparable to those of the higher margin CPT products. [bullet] Expand customer relationships. The Company plans to increase its sales of deflection yokes by actively marketing its products to OEMs with a view to adding new customers and developing additional business from existing customers. The Company believes its commitment to quality, service and competitive prices will enable it to continue to forge strong customer relationships. The Company plans to utilize its strong supplier relationship with Daewoo to build other strategic supplier relationships. Recently, the Company has added such customers as LG Shuguang Electronics Co. Ltd. ("LG Shuguang"), Fujian Hitachi Television Co., Ltd. ("Fujian Hitachi") and Foshan Thompson Color Picture Tube Company ("Foshan Thompson"). [bullet] Expand product development. The Company intends to develop other deflection yoke technologies and to consider opportunities for the development or acquisition of other products the Company determines it can manufacture and sell in a cost-effective manner by leveraging its manufacturing expertise and capacity. History The Company was incorporated in the British Virgin Islands in January 1996. In December 1996, the Company acquired 80% of the equity of each of Xianyang Yongxin Electronics Co., Ltd. ("Yongxin") and Xianyang Daming Electronics Co., Ltd. ("Daming"), which were established in February 1993 and October 1992, respectively. Yongxin and Daming previously were members of Xianyang & Pianzhuan Group Corporation, which is wholly owned by a state-owned asset management council ("Pianzhuan Group"). Pianzhuan Group provides, at cost, certain administrative and other management services to the Company, as well as to approximately 20 other companies, including a number of Chinese-foreign joint ventures. Du Qingsong ("Mr. Du"), the Company's Chairman and Chief Executive Officer, also is the Chairman of Pianzhuan Group. The Company has agreed to acquire 70% of the equity of Yantai Daewoo Electronics Components Co., Ltd. ("Yantai") and 90% of the equity of Dnon Tech Special Electro Technique Co., Ltd. ("Dnon Tech"), each a Chinese-foreign joint venture incorporated in China in 1993. Yantai, like Yongxin and Daming, develops and manufactures deflection yokes. Dnon Tech manufactures, primarily for Yongxin, Daming and Yantai, high quality enameled copper wire, which is the principal raw material used in deflection yokes. The Company's operating headquarters is located at 70 West Weiyang Road, Xianyang, Shaanxi Province, People's Republic of China; its telephone number at that address is (+86) (910) 332-0891. The Company's principal executive office is located at c/o Harney, Westwood & Riegels, Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands; its telephone number at that address is (809) 494-2233. This Offering <TABLE> <S> <C> Common Stock offered ........................ 4,000,000 shares Common Stock outstanding: Before this Offering(1) ..................... 4,850,000 shares After this Offering(1)(2) .................. 8,850,000 shares Risk Factors ................................. The shares of Common Stock offered hereby involve a high degree of risk. Before investing in the Common Stock offered hereby, prospective investors should carefully consider the risks relating to China; the Company's dependence on major customers; dependence on key personnel; and the other risks described in "Risk Factors." See "Risk Factors." Use of Proceeds .............................. To expand manufacturing facilities; to acquire Yantai and Dnon Tech; to expand research and product development activities; to develop the Company's own sales, marketing and administrative capabilities; and for general corporate purposes and working capital. See "Use of Proceeds." NASDAQ National Market Symbol ............... AEHCF </TABLE> - -------------- (1) Does not include 300,000 shares of Common Stock reserved for issuance under the Company's 1997 Employee Stock Option Plan. (2) Does not include 330,000 shares of Common Stock reserved for issuance upon exercise of the Representatives' Options, or 70,000 shares of Common Stock reserved for issuance upon exercise of the Advisor Options. Summary Unaudited Pro Forma Consolidated Financial Data The following summary unaudited pro forma consolidated statement of income and balance sheet data represent a consolidation of the statement of income and balance sheet data of the Company and its subsidiaries for the periods and at the dates indicated and assume that the Company had acquired Yongxin and Daming (subsidiaries acquired in December 1996), as well as Yantai and Dnon Tech (which are to be acquired contemporaneously with the closing of this Offering), on January 1, 1996. The data do not purport to be indicative of the results that would have been achieved, if the acquisitions of Yongxin, Daming, Yantai and Dnon Tech had actually been consummated on January 1, 1996, or of the results that may be achieved in the future. The data should be read in conjunction with "Unaudited Pro Forma Consolidated Financial Information," "Selected Consolidated Financial Data of the Company," "Selected Combined Financial Data of Yongxin and Daming," "Selected Combined Financial Data of Yantai and Dnon Tech," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the notes to the financial statements included elsewhere in this Prospectus. Unaudited Pro Forma Consolidated Statement of Income Data: <TABLE> <CAPTION> Year Ended Six Months Ended December 31, 1996 June 30, ------------------------ ------------------------------------------------ 1996 1997 ------------------------ ----------------------- (Amounts in thousands, except per share data) (Unaudited) RMB US$ RMB US$ RMB US$ <S> <C> <C> <C> <C> <C> <C> Net sales ............ 226,612 27,336 87,400 10,543 154,043 18,582 Gross profit ......... 58,710 7,082 18,620 2,246 46,194 5,572 Operating income ...... 50,705 6,116 15,090 1,820 40,482 4,883 Net income ............ 35,176 4,243 10,197 1,229 26,891 3,244 Pro forma net income per common share ......... 6.18 $0.75 1.79 $0.22 4.72 $0.57 Pro forma weighted average number of common shares outstanding(1) ....... 5,693,000 5,693,000 5,693,000 5,693,000 5,693,000 5,693,000 </TABLE> Unaudited Pro Forma Consolidated Balance Sheet Data: <TABLE> <CAPTION> As of June 30, 1997 ------------------------------------ (Amounts in thousands) (Unaudited) Pro Forma Pro Forma Consolidated As Consolidated Adjusted(2) -------------- ------------------- RMB RMB US$ <S> <C> <C> <C> Working capital(3) ........... 21,402 237,771 28,682 Total assets ................. 155,932 372,301 44,910 Short-term bank loans ........ 19,686 19,686 2,375 Total liabilities(4) ......... 68,418 68,418 8,253 Investors' equity ............ 43,840 260,209 31,389 </TABLE> - -------------- (1) The weighted average number of shares outstanding has been adjusted for the issuance in this Offering of 843,000 shares for the year ended December 31, 1996 and the six months ended June 30, 1996 and 1997, which represents the number of shares at an assumed initial public offering price of $7.50 per share that would be required to generate the net proceeds of $5,500,000 to be used for the acquisitions of Yantai and Dnon Tech. (2) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $7.50 per share and the receipt and application of the net proceeds therefrom, including the consummation of the Acquisitions. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001041891_beringer_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001041891_beringer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..571911b1d20623ff5987f8f5ac6438a7ad32f973
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001041891_beringer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. Except as set forth in the Consolidated Financial Statements and Notes thereto or as otherwise specified herein, all information in this Prospectus assumes no exercise of the Underwriters' over- allotment options and reflects (1) a two-for-one stock split of the Class A and Class B Common Stock and change in the par value of the Company's Class A and Class B Common Stock from $.0001 per share to $.01 per share effected on October 2, 1997, (2) the exercise of all outstanding warrants for Class B Common Stock on or prior to the closing of this offering and (3) the redemption of all of the Company's outstanding shares of Series A Non-Voting Pay-in-Kind Preferred Stock (the "Series A Preferred Stock") and prepayment of its 12 1/2% Senior Subordinated Notes Due January 10, 2006 (the "Subordinated Notes") upon the closing of this offering. See "Description of Capital Stock" and "Underwriting". Unless otherwise specified or the context requires otherwise, the terms "Beringer" and the "Company" mean Beringer Wine Estates Holdings, Inc. and each of its consolidated subsidiaries, and all references in this Prospectus to 750ml premium wine sold in U.S. food stores refer to sales of domestic wine only. The term "premium wine" as used herein refers to wine which retails for $3.00 or more per 750 milliliter ("ml") bottle or the equivalent price for differently sized bottles. In addition, statements in this Prospectus relating to the differential between 1.5 liter ("L") and 750ml sales are management estimates based on U.S. food store data compiled by Information Resources Inc. ("IRI"). IRI does not guarantee the accuracy or completeness of data compiled by it. THE COMPANY Beringer is a leading producer of premium California varietal table wines, marketed under the Beringer, Meridian Vineyards, Chateau St. Jean, Napa Ridge, Chateau Souverain and Stags' Leap brand names. With this portfolio of brands, the Company has captured the number one share of 750ml premium wines sold in U.S. food stores for each of the last four years, and in fiscal 1997 had a 14.3% volume share of this market. The Company believes it is well positioned across its entire portfolio, with a top five market share for nine of the eleven largest selling varietals in U.S. food stores. In one key varietal category, White Zinfandel, Beringer holds a commanding 37.9% dollar share of these 750ml wines sold in U.S. food stores, while selling at an approximate 15% price premium over the second leading White Zinfandel brand. Beringer White Zinfandel also generates the largest dollar sales of any wine stock keeping unit ("SKU") sold in U.S. food stores. Beringer focuses exclusively on the premium wine market and believes that its wines are widely recognized for their quality. In 1990, Beringer Private Reserve Cabernet Sauvignon was named "Wine of the Year" by Wine Spectator magazine. In 1996, Beringer Private Reserve Chardonnay received the same honor. This same magazine named eight of the Company's wines to its list of "Top 100" wines of the world in 1996, a record number for a wine company. In addition, in June 1997, Beringer was named "The Best Overall Winery in America" in a poll of over 11,000 wine consumers by Wine Spectator magazine. Beringer believes that its rigorous attention to quality, the strength of its brand portfolio and its pursuit of strategic acquisitions have enabled the Company to grow its net revenues at a compound annual rate of 14.1%, from $159.2 million in fiscal 1993 to $269.4 million in fiscal 1997. Over the same period, net income grew at a compound annual rate of 27.3%, from $7.7 million to $20.1 million, excluding purchase accounting adjustments related to the acquisition of the Company and Chateau St. Jean and Stags' Leap wineries. The Company attributes its leadership position in the rapidly growing premium wine market to its (1) high quality wines which compete in every price segment of the premium wine market, (2) focus on consumer marketing, (3) control in crop year 1996 over approximately 23.4% of its overall grape requirements (and approximately 48% of its grape requirements excluding White Zinfandel requirements) and (4) professional management team with an average of 19 years of industry experience. Beringer was founded in 1876 and is the oldest continuously operating winery in Napa Valley. Through a series of vineyard acquisitions over the last ten years, management has assembled extensive strategic acreage positions in the prime growing regions of Napa, Sonoma, Lake, Santa Barbara and San Luis Obispo Counties. The Company believes that its ownership of these vineyards enables it to control a source of high quality premium wine grapes at an attractive cost. For example, in 1996, the average cost per ton of producing Chardonnay grapes on the Company's Santa Barbara vineyards was $825, compared to a weighted average price paid for Santa Barbara Chardonnay grapes of $1,450. Over the past twenty years there has been a shift in consumer preferences in the U.S. from generic or "jug" wines to high quality, premium varietal wines. The Company estimates that shipments of premium 750ml varietal wines have grown from 3.4% of total case volume of California table wines in 1980 to over 25% of total case volume in 1996. Because premium wines sell at higher price points than jug wines, the Company estimates that this 25% volume share represents approximately $2.2 billion, or 51% of total dollar sales of California wines sold at wholesale. Over this period, the compound annual growth of premium varietal case volume was approximately 15.2% and annual dollar sales growth was approximately 18.6%. The Company believes that this major shift in consumer preferences has occurred due to (1) the maturing "baby-boomer" generation entering its prime wine consumption period, (2) a growing consumer interest in premium wines in general, (3) a growing interest in and sophistication about food which lends itself to expanded consumption of premium wines and (4) the improving quality and reputation of California premium wines. Throughout this shift in consumer preferences, Beringer has utilized sophisticated consumer marketing to build substantial brand loyalty and significant market share in the rapidly expanding premium wine market. The Company believes that during the 1990s this marketing and brand building expertise has helped the Company expand existing brands and launch new brands. For example, Beringer White Zinfandel's dollar share has grown from 25.5% of 750ml White Zinfandel sales in U.S. food stores in 1991 to 37.9% in 1996. In fiscal 1997, Beringer White Zinfandel's sales in U.S. food stores were 26% greater than the number two wine SKU. Meridian Vineyards, a brand launched by the Company in 1990, now has the number two market share for all Chardonnay brands retailing for over $8 per bottle, with growth in case volume of 48% from fiscal 1996 to fiscal 1997. The Company expects further growth in Meridian Vineyards sales through Merlot and Cabernet Sauvignon brand extensions, as well as additional growth in Chardonnay sales. STRATEGY Beringer's objective is to strengthen its leadership position in the premium wine market and thereby increase its revenues and profits. The Company's strategy for achieving this objective has the following key elements: . Management of a Multi-Brand Portfolio . Focus on High Quality Across All Brands . Control of Premium Grape Supplies and Vineyards . Pursuit of Strategic Acquisitions . Emphasis on Consumer Marketing . Commitment of Professional and Experienced Management Team See "Business--Strategy". THE OFFERINGS <TABLE> <C> <S> Class B Common Stock Offered: United States Offering............. 3,400,000 shares International Offering............. 850,000 shares Company Offering(1)................ 600,000 shares Total............................ 4,850,000 shares Common Stock to be Outstanding after the Offering: Class A Common Stock............... 1,416,962 shares Class B Common Stock............... 16,668,946 shares(2) Total............................ 18,085,908 shares Voting Rights: Class A Common Stock............... Twenty votes per share Class B Common Stock............... One vote per share Use of Proceeds..................... Redemption of all outstanding shares of Series A Preferred Stock, prepayment of the Subordinated Notes, partial prepayment of line of credit and long-term senior debt, working capital and general corporate purposes. See "Use of Proceeds".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042100_newcom-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042100_newcom-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3e29677bfa139814ed0921e983849324e3e2f711
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042100_newcom-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Warrants, the Underwriters' Over-allotment Option or the Representative's Option, (ii) does not include a total of 1,000,000 shares of Common Stock (giving effect to the Stock Split described below) reserved for issuance upon exercise of options either outstanding or available for grant under the Company's 1997 Stock Incentive Plan (the "Stock Plan"), and (iii) has been adjusted to reflect a recapitalization of the Company (the "Recapitalization") to take effect immediately prior to the closing date of the Offering (the "Closing Date") pursuant to which (x) a stock split of the outstanding shares of Common Stock and shares subject to the Stock Plan (the "Stock Split") will be effected as a result of which the outstanding shares of Common Stock of the Company immediately prior to the Closing Date will be 8,000,000 (for purposes of this Prospectus, assuming an Offering Price of $9.00 per Unit, such Stock Split is 7,555.556-for-1.0), (y) the Certificate of Incorporation of the Company will be amended (the "Certificate Amendment") to increase the number of authorized shares of Common Stock to 50,000,000 and to create and authorize 5,000,000 shares of Preferred Stock, and (z) Aura will convert (the "Conversion") $4.0 million in intercompany debt from NewCom into that number of shares of Common Stock equal to $4.0 million divided by the Offering Price (for purposes of this Prospectus, assuming an Offering Price of $9.00 per Unit, Aura will receive 444,444 shares of Common Stock in the Conversion). See "Description of Securities" and "Underwriting." A glossary of certain capitalized terms used in this Prospectus begins on page 70. THE COMPANY NewCom, Inc. ("NewCom" or the "Company") designs, manufactures and markets high performance computer communication and multimedia products for the personal computer ("PC") market. NewCom's communication products include a line of high speed external and internal data/fax and voice modems, which link PCs through the worldwide web and through direct connections over telephone lines, and NewCom's WebPal, an Internet appliance enabling users to access the worldwide web and perform Internet-specific tasks through their existing television screens. NewCom's multimedia product line includes a broad range of add-in subsystems, upgrade kits and Internet access kits that incorporate CD- ROM drives, speakers, sound cards, modems, microphones and other telephony and sound solutions. The Company's multimedia products are targeted both to users that desire to convert their PCs into multimedia systems and to users desiring to upgrade their current multimedia systems with faster CD-ROM drives, higher quality sound and increased functionality. The Company believes that demand for PC communication and multimedia products is driven by a variety of factors including (i) the growing installed base of PCs, particularly those sold into the consumer and small office/home office ("SOHO") markets, (ii) continuing advances in technology leading to faster modems and CD-ROM drives and expanded multimedia functionality and (iii) the rapid growth of Internet content, bandwidth-intensive interactive software, on- line services and emerging PC applications such as digital video capture and playback, video conferencing, telephony, paperless faxing, advanced desktop publishing, voicemail, high resolution three-dimensional ("3D") games, and interactive movies and other entertainment media, which increasingly demonstrates to consumers the need for PC communications and multimedia products. NewCom had gross revenues of $73.1 million and $16.1 million, and net revenues of $50.6 million and $15.4 million, during its fiscal year ended February 28, 1997 ("Fiscal 1997") and the three months ended May 31, 1997 (the "first quarter of Fiscal 1998"), respectively. The Company's sales channels include a broad network of national and regional independent distributors and leading retail and mass merchant chains and catalogues and, to a lesser extent, original equipment manufacturers and value added resellers ("OEMs/VARs"). NewCom's distributor customers, which accounted for 57% of the Company's gross revenues and 47% of net revenues during Fiscal 1997, include Dinorall Corporation (dba Dinexim Corp.), MicroInformatica Corporation and Southern Electronic Distributors, Inc. The Company's retail and mass merchant customers, which accounted for 36% of gross revenues and 46% of net revenues during the same period, include Circuit City Stores, Inc., Best Buy Company, Inc. and Fry's Electronics. NewCom does not employ an internal research and development staff. Rather, the Company strives to identify key emerging technologies in the PC communication and multimedia industries and to innovatively combine these technologies into its products using manufacturing techniques that enable the Company to rapidly bring to market high-quality products at competitive prices. New products currently being designed by NewCom and anticipated to be introduced within the next year include a line of Integrated Services Digital Network ("ISDN") modems, a 33,600 bps modem with video conferencing capability, and multimedia kits featuring Digital Video Disc-Read Only Memory ("DVD-ROM"), Compact Disk Recordable ("CDR"), and CDR MPEG (video encoding and decoding) drives, as well as a 3D graphics card and a deluxe version of the WebPal Internet appliance. Using integral compression, NewCom's ISDN modems are being designed to support data rates of up to 512 Kbps. Moreover, unlike most ISDN modems available today, NewCom's ISDN modems are being designed to function as both ISDN and standard POTS modems, making it possible for users who have upgraded their PCs to remain compatible with those who have not. In addition, the Company is exploring opportunities to design new families of communications and multimedia products utilizing emerging technologies in the industry such as cable modem and Asymmetric Digital Subscriber Line ("ADSL") modem technology. The Company was incorporated under the laws of Delaware in June 1994. The Company's executive offices are located at 31166 Via Colinas, Westlake Village, California 91362 and its telephone number is (818) 597-3200. The NewCom logo is a trademark of the Company. NEWCOM(R) is a registered trademark of the Company. NavPal, NetTalk, NetFax, NewPal, NewTalk and WebPal are trademarks of the Company for which trademark applications are pending. This Prospectus includes product names, trade names and marks of companies other than the Company. All other company or product names are trademarks, registered trademarks, trade names or marks of their respective owners and are not the property of the Company. THE OFFERING <TABLE> <S> <C> Securities Offered................ 2,000,000 Units(1) Common Stock Outstanding prior to 8,000,000 Shares the Offering..................... Common Stock to be Outstanding 10,000,000 Shares(2) after the Offering............... Use of Proceeds................... Proceeds from sale of the Units will be used for the acquisition of products and product components, repayment of existing commercial indebtedness, marketing and sales and working capital and other general corporate purposes. The Company will not receive the proceeds (if any) from the sale of Common Shares underlying any Units sold upon exercise of the Underwriters' Over- allotment Option. See "Use of Proceeds." Risk Factors...................... The Securities offered hereby involve a high degree of risk and immediate substantial dilution. See "Risk Factors" and "Dilution." Proposed Nasdaq National Market Common Shares--"NWCM" symbols.......................... Warrants--"NWCMW" </TABLE> - -------- (1) Until completion of the Offering, the Units may only be purchased on the basis of one Common Share and one Warrant per Unit. Upon completion of the Offering, the Common Shares and the Warrants will be immediately detachable and separately transferable. Each Warrant entitles the holder to purchase one Common Share at a price per share equal to 150% of the Offering Price until that date which is five years from the date of this Prospectus. The Warrants are redeemable at the option of the Company, at $.05 per Warrant, at any time after the first anniversary of the date of this Prospectus, or such earlier date as may be consented to in writing by the Representative, upon 30 days prior written notice, if the closing price of the Common Shares, as reported by the principal exchange on which the Common Shares are quoted, equals or exceeds 200% of the Offering Price for 20 consecutive trading days within the 30 day period preceding the date of the notice of redemption and at such time as there is a current effective registration statement covering the Common Shares underlying the Warrants. Upon 30 days written notice to all holders of the Warrants, the Company shall have the right to reduce the exercise price and/or extend the term of the Warrants. See "Description of Securities." (2) Excludes (i) 2,000,000 shares of Common Stock reserved for issuance upon exercise of the Warrants, (ii) 300,000 shares of Common Stock included in the Underwriters' Over-allotment Option, (iii) 300,000 shares of Common Stock issuable upon exercise of the Warrants included in the Underwriters' Over-allotment Option, (iv) 200,000 shares of Common Stock issuable upon exercise of the Representative's Option, (v) 200,000 shares of Common Stock issuable upon exercise of the Warrants included in the Representative's Option, and (vi) 546,690 shares of Common Stock issuable upon the exercise of options outstanding as of June 30, 1997. See "Description of Securities," "Underwriting" and "Management--Stock Incentive Plan." SUMMARY FINANCIAL INFORMATION <TABLE> <CAPTION> NINE MONTHS THREE MONTHS ENDED ENDED YEAR ENDED MAY 31, FEBRUARY 28, YEAR ENDED FEBRUARY 28, --------------------------- 1995 FEBRUARY 29, 1996 1997 1996 1997 ------------ ----------------- ------------ ------------ -------------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Gross revenues.......... $2,128,361 $33,312,587 $73,120,781 $7,465,720 $16,081,392 Net revenues............ 2,103,438 31,197,429 50,631,690 7,441,383 15,429,677 Gross profit............ 43,893 1,066,184 17,012,606 2,586,871 5,031,794 Income (loss) from oper- ations................. (383,927) (3,905,880) 5,163,947 955,173 2,296,067 Net income (loss)....... (380,217) (5,185,331) 3,337,271 614,412 1,066,482 Net income (loss) per share(1)............... $(.05) $(.69) $.44 $.08 $.14 Number of shares used in computing per share amounts(1)............. 7,555,556 7,555,556 7,555,556 7,555,556 7,555,556 Pro forma net income per share(2)............... $.42 $.13 Number of shares used in computing pro forma net income per share(2).... 8,000,000 8,000,000 <CAPTION> MAY 31, 1997 ---------------------------------------- PRO FORMA FEBRUARY 28, 1997 ACTUAL PRO FORMA(2) AS ADJUSTED(3) ----------------- ------------ ------------ -------------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Total current assets................. $44,329,127 $52,476,020 $52,476,020 $64,626,020 Working capital...................... 21,916,553 31,565,837 31,565,837 47,215,837 Total assets......................... 47,435,171 55,272,094 55,272,094 67,422,094 Total current liabilities............ 22,412,574 20,910,183 20,910,183 17,410,183 Due to Aura(4)....................... 17,249,874 25,522,706 21,522,706 21,522,706 Stockholders' equity................. 7,772,723 8,839,205 12,839,205 28,489,205 </TABLE> - -------- (1) See Note 1 of Notes to Financial Statements for information regarding calculation of net income (loss) per share. (2) Gives effect to the Conversion. Assuming the Conversion was effected June 1, 1996, pro forma net income would be approximately $3,981,000 or $.50 per share, for the twelve months ended May 31, 1997. (3) Adjusted to reflect the sale by the Company of 2,000,000 Units offered hereby at an assumed Offering Price of $9.00 per Unit and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042138_crescendo_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042138_crescendo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fc3c5f2a106f536ba137d8e6da44a19f4b49d256
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042138_crescendo_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS OR THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS, INCLUDING IN THE GLOSSARY BEGINNING ON PAGE 14. Some of the statements made in this Prospectus and the accompanying letter to stockholders and debenture holders are forward-looking in nature, including, but not limited to, Crescendo's and ALZA's product development activities and plans, particularly with respect to the Identified Products (as defined in the Glossary), costs of product development, plans concerning the potential commercialization of products, and other statements that are not historical facts. The occurrence of the events described and the achievement of the intended results are subject to the future occurrence of many events, some or all of which are not predictable or within Crescendo's control; therefore, actual results may differ materially from those anticipated in any forward- looking statements. Many risks and uncertainties are inherent in the pharmaceutical industry; others are more specific to Crescendo's business or that of ALZA. These risks include the risks associated with technology and product development, clinical development, attempts to obtain regulatory clearance to market products and medical acceptance of products, changes in the health care marketplace, patent and intellectual property matters, regulatory and manufacturing issues, the ability to commercialize products effectively, and risks associated with competition from other companies. Many of the risks are described in "Risk Factors" beginning on page 16 and/or in documents filed by ALZA under the Exchange Act. Distributing Company...... ALZA Corporation, a Delaware corporation, is a leader in the development and commercialization of innovative pharmaceutical products using advanced drug delivery technologies to add medical and economic value to drug therapies. Distributed Company....... Crescendo Pharmaceuticals Corporation, a Delaware corporation, is a company recently formed by ALZA for the purpose of selecting and developing human pharmaceutical products, and commercializing such products, most likely through licensing to ALZA. The Distribution.......... Each Holder will receive one Crescendo Share for every 20 shares of ALZA Common Stock held on the Record Date, one Crescendo Share for every 36 shares of ALZA Common Stock into which such Holder's 5% Debentures held on the Record Date are convertible and one Crescendo Share for every 37 shares of ALZA Common Stock into which such Holder's 5 1/4% Debentures held on the Record Date are convertible. A total of approximately 4,963,615 Crescendo Shares are expected to be distributed, assuming 85,338,538 shares of ALZA Common Stock (the number of shares outstanding on September 3, 1997) are outstanding on the Record Date, without regard to cash to be distributed in lieu of fractional shares. No Holder will be required to pay any cash or other consideration for the Crescendo Shares received in the Distribution, nor will any action be required to be taken by any Holder in order to receive Crescendo Shares. Crescendo Shares.......... All of the shares of callable Class A Common Stock of Crescendo ("Crescendo Shares"), whether distributed by ALZA in the Distribution or later issued by Crescendo, will be subject to the Purchase Option. See "The Agreements and the Purchase Option--Purchase Option" and "Description of Crescendo Capital Stock." Record Date; Distribution Date...................... The Record Date for the Distribution will be the close of business on September 18, 1997. Distribution of the Crescendo Shares is expected to take place on or about September 30, 1997, subject to certain conditions specified in the Distribution Agreement. Trading Market............ Application has been made for quotation of the Crescendo Shares on the Nasdaq National Market under the symbol "CNDO." Contribution by ALZA...... Prior to the Distribution, ALZA will contribute $300 million in cash to Crescendo, thereby reducing the amount of ALZA's cash, cash equivalents and short-term and long-term investments by that amount. At the time of the Distribution, ALZA's stockholders' equity will be reduced by the same amount. Immediately after the Distribution, Crescendo will have no other assets. Crescendo Products and Identified Products....... Crescendo Products generally are expected to combine ALZA's proprietary controlled drug delivery technologies with therapeutic agents that are off- patent, will be off-patent by the time of commercialization of the Crescendo Product, or are (or will be) available for license from third parties. In addition, Crescendo may fund the development of products licensed from third parties that complement ALZA's product pipeline or otherwise may provide a significant commercialization opportunity for the targeted sales force of ALZA Pharmaceuticals, ALZA's sales and marketing division. It is anticipated that, after the closing of ALZA's purchase of the outstanding shares of Therapeutic Discovery Corporation ("TDC"), which is expected to occur on September 29, 1997 or as soon thereafter as practicable, Crescendo will continue the development of seven selected products (the "Identified Products") currently under development by ALZA. If Crescendo were to fund the continued development of the Identified Products through U.S. Food and Drug Administration ("FDA") review for marketing clearance (in the case of the first five products listed below) and through "proof of principle" studies (in the case of the last two products listed below), the funding of these activities would require a majority of the Available Funds. The Identified Products are: . OROS(R) oxybutynin, a once-daily dosage form of oxybutynin for the treatment of urge urinary incontinence, currently in Phase III clinical trials. . DUROS(TM) leuprolide, an osmotically-driven implantable product designed to administer leuprolide continuously for up to 12 months for the palliative treatment of prostate cancer, currently in Phase I/II clinical trials. . OROS(R) methylphenidate, a once-daily treatment for Attention Deficit Disorder/Attention Deficit Hyperactivity Disorder, as to which preparations for Phase II clinical trials are underway. . IUTS progesterone, an intrauterine system for the delivery of progesterone as adjunctive therapy to estrogen replacement therapy in post-menopausal women, currently in Phase III clinical trials. . D-TRANS(TM) testosterone matrix, a transdermal testosterone product designed to provide testosterone replacement therapy to hypogonadal males through a small, thin transdermal patch which can be worn on the arm or torso, currently in Phase I/II clinical trials. The product is a follow-on to ALZA's Testoderm(R) product line, which currently includes two marketed products (Testoderm(R) and Testoderm(R) with Adhesive, both designed for scrotal placement) and a third product, non-scrotal Testoderm(R), for which a New Drug Application ("NDA") is on file with the FDA. . E-TRANS(TM) LHRH, an electrotransport product designed to provide an alternative to injection therapy for the treatment of infertility, currently in preclinical development. . E-TRANS(TM) (skin interface technology) insulin, an electrotransport product designed to treat diabetes by delivering insulin without injection. The product, currently in preclinical development, utilizes ALZA's E-TRANS(TM) technology in combination with ALZA's new skin interface technology to increase drug transport through the skin. Pursuant to the Development Agreement, Crescendo will fund the development of the Identified Products from the date TDC ceased funding (August 25, 1997) through October 31, 1997. Continuation of the development of any Identified Product after October 31, 1997 will depend upon whether ALZA proposes and Crescendo's independent Board of Directors accepts additional work plans and cost estimates for such Identified Product. See "The Agreements and the Purchase Option-- Development Agreement." Crescendo Board of Directors................. Crescendo currently has three directors, each of whom is an employee of ALZA. It is anticipated that shortly after the Distribution, Dr. Gary Neil, who has served as a director and the President and Chief Executive Officer of TDC, will be named a director and the President and Chief Executive Officer of Crescendo and Crescendo's current directors will resign. It is expected that Dr. Neil will appoint additional directors of Crescendo, none of whom will be an employee of ALZA. No Fractional Shares...... No fractional Crescendo Shares will be distributed. Fractional Crescendo Shares will be aggregated and sold as whole Crescendo Shares by Crescendo's transfer agent and distribution agent for the Distribution, Boston EquiServe, L.P. (the "Distribution Agent"), to provide cash to Holders in lieu of such fractional Crescendo Shares. Participation by Debenture Holders......... Pursuant to the terms of the respective indentures governing the 5% Debentures and 5 1/4% Debentures, ALZA's Board of Directors may determine, in its discretion, to permit the Debenture Holders to participate in the Distribution on a basis determined by ALZA's Board of Directors to be fair and appropriate; otherwise, an adjustment must be made in the conversion price of the Debentures as a result of the Distribution. ALZA's Board of Directors has determined that it is in the best interests of ALZA and its stockholders to include the Debenture Holders in the Distribution and that the basis on which the Debenture Holders are participating in the Distribution is fair and appropriate in light of the basis on which Holders of ALZA Common Stock are participating. Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has rendered an opinion dated September 4, 1997 to the ALZA Board of Directors in connection with such determination. Of the total number of Crescendo Shares to be distributed, approximately 86% will be distributed to Holders of ALZA Common Stock, 7.3% to the Holders of 5% Debentures and 6.7% to the Holders of 5 1/4% Debentures, without regard to fractional shares. Reasons for the Distribution.............. In 1993, ALZA determined to pursue a business of commercialization of products by ALZA, in addition to its business of developing products for commercialization by client companies that make payments to ALZA based on sales of the resulting products. To that end, ALZA formed ALZA Pharmaceuticals, its sales and marketing division, to commercialize products, and formed TDC to develop products for commercialization by ALZA Pharmaceuticals. During the past four years, ALZA has made significant progress in the establishment and expansion of its product commercialization business. ALZA's growing product commercialization business offers the potential rewards inherent in the direct commercialization of pharmaceutical products; however, the development of products for commercialization by ALZA requires the investment by ALZA of substantial resources in product selection and development, including clinical evaluation and regulatory activities. When ALZA develops products for commercialization by ALZA, ALZA must bear most or all of the risk and expenses of product development and has the opportunity to retain all or most of any gross margin resulting from sales of the product. Therefore, the risk/reward profile is significantly different from that of ALZA's traditional client- sponsored/royalty-based business, in which ALZA's clients bear most of the expenses and risks associated with product development and commercialization activities, and make payments to ALZA based on their sales of the products developed jointly with ALZA. Such payments to ALZA generally represent a relatively small portion of the total gross margin. ALZA believes that the formation of Crescendo to fund the development of products for commercialization by ALZA, and the arrangements between ALZA and Crescendo, will provide ALZA with the opportunity to continue to pursue and expand, more quickly than would otherwise be possible, its product commercialization business. ALZA believes that the arrangements with Crescendo will significantly benefit ALZA security holders by: . continuing to separate the risks associated with developing products for commercialization by ALZA from ALZA's traditional focus on developing products for marketing by client companies; . allowing individual security holders of ALZA to increase or decrease their level of participation in the business of developing products for commercialization by ALZA by varying their level of investment in Crescendo; . obtaining for ALZA the exclusive right to commercialize any successfully developed Crescendo Product, assuming ALZA's exercise of the License Option with respect to such product or exercise of the Purchase Option, thereby making it possible for ALZA to capture a potentially greater return on the products developed with Crescendo than would otherwise be possible from products developed for commercialization by client companies; and . allowing ALZA's near-term financial results to continue to reflect principally its traditional client-sponsored business, by providing ALZA with research and development revenues from Crescendo to reimburse ALZA for Development Costs incurred by ALZA. Development Agreement..... Crescendo and ALZA have entered into the Development Agreement for the selection and development of human pharmaceutical products. Substantially all of the Available Funds will be used under the Development Agreement for such purposes. Products recommended by ALZA and accepted by Crescendo for development will become Crescendo Products. Upon the closing of ALZA's purchase of the outstanding shares of TDC, the Identified Products will become Crescendo Products. Unless Crescendo agrees otherwise, all Crescendo Products will be owned by Crescendo or, in the case of a product or a therapeutic agent licensed from a third party, exclusively licensed to Crescendo, in each case subject to the License Option. A portion of the Available Funds is expected to be used to identify potential new products for possible development by Crescendo under the Development Agreement. Crescendo may also use Available Funds under the Development Agreement to perform Technical Evaluations of product opportunities involving proprietary therapeutic agents of third parties which may be available for licensing or other collaborative arrangements. Products evaluated under this process, other than those which become Crescendo Products, will be Technical Evaluation Products. ALZA will make payments to Crescendo based on sales of Technical Evaluation Products, as described below. Crescendo is required to spend all of the Available Funds under the Development Agreement. Crescendo is expected to utilize substantially all of the Available Funds to reimburse ALZA for its Development Costs. Development Costs will be determined on the same basis as charged by ALZA to its pharmaceutical company clients, and reimbursement will be recognized by ALZA as research and development revenue. Under the Development Agreement, Crescendo also may use Available Funds for licensing technology, products or therapeutic agents from third parties and for the development of Crescendo Products with third parties; provided, however, that ALZA's consent will be required if such activities involve ALZA Technology or could affect ALZA's rights under the ALZA/Crescendo Agreements. Subject to the foregoing, the amount and nature of work to be performed by third parties will be determined by Crescendo. It is not anticipated that Crescendo will undertake research and development without contracting with a third party, as Crescendo is not expected to have the staffing or facilities to do so. The Development Agreement provides that Crescendo will fund the development of the Identified Products from the date on which TDC ceased funding the development of the Identified Products through October 31, 1997. The Development Costs are expected to total between $14 million and $18 million for all of the Identified Products for such period. If Crescendo were to fund the development of each of the Identified Products as described under "Business of Crescendo --The Identified Products," a majority of Available Funds would be used for such activities. It is anticipated that Crescendo will spend the Available Funds under the Development Agreement over a period of approximately three to four years. There are no restrictions on Crescendo's use of funds other than Available Funds to conduct its business as it determines, subject to the terms of Crescendo's Restated Certificate of Incorporation and the ALZA/Crescendo Agreements. All technology developed or otherwise obtained pursuant to the Development Agreement ("Developed Technology") will be owned by ALZA, subject to Crescendo's right to use Developed Technology in Crescendo Products. ALZA will pay Crescendo royalties with respect to products, other than Crescendo Products, that use any patented Developed Technology, as described below. The Development Agreement will terminate upon the exercise or expiration of the Purchase Option, which will expire shortly after the expenditure by Crescendo of substantially all Available Funds. However, ALZA's obligation under the Development Agreement to make payments to Crescendo with respect to Developed Technology Products and Technical Evaluation Products will continue if the Purchase Option expires unexercised. See "The Agreements and the Purchase Option--Development Agreement." Technology License Agreement................. Pursuant to the Technology License Agreement, ALZA has granted to Crescendo a worldwide license to use ALZA Technology solely to select and develop Crescendo Products and to conduct related activities, and to commercialize such products. In exchange for the license to use existing ALZA Technology relating to the Identified Products, Crescendo will pay a fee (the "Technology Fee") to ALZA. The Technology Fee will be payable monthly over a period of three years and will be $1 million per month for the 12 months following the later of (i) the date of the Distribution or (ii) the date of the closing of ALZA's purchase of the outstanding shares of TDC, $667,000 per month for the following 12 months and $333,000 per month for the following 12 months; provided that the Technology Fee will no longer be payable at such time as fewer than two of the Identified Products are being developed by Crescendo and/or have been licensed by ALZA pursuant to ALZA's exercise of the License Option. License Option............ Crescendo has granted ALZA an option to acquire a license to each Crescendo Product (the "License Option"). The License Option for any Crescendo Product is exercisable on a country-by-country basis at any time until (i) with respect to the United States, 30 days after clearance by the FDA to market such Crescendo Product in the United States and (ii) with respect to any other country, 90 days after the earlier of (a) clearance by the appropriate regulatory agency to market the Crescendo Product in such country and (b) clearance by the FDA to market the Crescendo Product in the United States. The License Option will expire, to the extent not previously exercised, 30 days after the expiration of the Purchase Option. If and to the extent the License Option is exercised as to any Crescendo Product (a "Licensed Product"), ALZA will acquire a perpetual, exclusive license (with the right to sublicense) to develop, make, have made and use the Licensed Product and to sell and have sold the Licensed Product in the country or countries as to which the License Option is exercised, subject to the obligation to make Product Payments. Product Payments.......... ALZA will make Product Payments to Crescendo with respect to each Licensed Product equal to 1% of Net Sales (as defined in the Glossary) of the Licensed Product, plus an additional 0.1% of such Net Sales for each full $1 million of Development Costs of the Licensed Product that have been paid by Crescendo. Because the marketing expenses associated with newly introduced products during the first few years after launch are generally significantly higher than those for established products, the Product Payments described above will not exceed 2.5% of global Net Sales, on a quarterly basis, for the first four calendar quarters during which the Licensed Product is commercially sold in the first Major Market Country, and 3% of Net Sales, on a quarterly basis, for the following eight calendar quarters. Subject to ALZA's Product Payment buy-out option described below, Product Payments will be payable, with respect to all countries for which the License Option has been exercised, until 15 years after the first commercial sale of the Licensed Product in the first Major Market Country in which such product is commercially sold. To the extent ALZA does not exercise the License Option with respect to any Crescendo Product, Crescendo will retain the rights to develop and commercialize such Crescendo Product. Developed Technology Royalties................. ALZA will pay Crescendo Developed Technology Royalties, on a country-by-country basis, equal to 1% of Net Sales in the relevant country of any product (i) covered at the time of sale in a country by one or more unexpired patents issued in such country that are included in Developed Technology and (ii) with respect to which ALZA receives any consideration (a "Developed Technology Product"). Developed Technology Royalties will be payable with respect to a Developed Technology Product in any country until expiration of the last to expire of the relevant patent or patents. Technical Evaluation Product Payments.......... ALZA will make Technical Evaluation Product Payments to Crescendo equal to 1% of worldwide Net Sales of each Technical Evaluation Product. Technical Evaluation Product Payments will be payable until seven years after such Technical Evaluation Product is commercially sold in the first Major Market Country, subject to ALZA's payment buy-out option. A product may be both a Technical Evaluation Product and a Developed Technology Product; however, in such a case the payment due for any period for such product will be limited to 1% of Net Sales. Payment Buy-Out Options... ALZA has the option to buy out Crescendo's right to receive Product Payments for any Licensed Product, Developed Technology Royalties for any Developed Technology Product, and Technical Evaluation Product Payments for any Technical Evaluation Product, in each case, on a country-by-country or global basis. A country-by-country buy-out option may be exercised for any Licensed Product, Developed Technology Product or Technical Evaluation Product in any country at any time after the end of the twelfth calendar quarter during which the product was commercially sold in such country. The buy-out price will be 15 times the payments made by or due from ALZA to Crescendo with respect to sales of such product in such country for the four calendar quarters immediately preceding the quarter in which the buy-out option is exercised (plus, in the case of a Licensed Product, 15 times such additional Product Payments as would have been made for such period but for the 2.5% and 3% limits described above). The global buy-out option may be exercised for any Licensed Product, Developed Technology Product or Technical Evaluation Product at any time after the end of the twelfth calendar quarter during which the product was commercially sold in either the United States or two other Major Market Countries. The global buy-out price will be (i) 20 times (a) the payments made by or due from ALZA to Crescendo for the relevant product, plus (b) such payments as would have been made by or due from ALZA to Crescendo if ALZA had not exercised any country- specific buy-out option with respect to such product, plus (c) such additional Product Payments, in the case of a Licensed Product, as would have been made but for the 2.5% and 3% limits described above, in each case for the four calendar quarters immediately preceding the quarter in which the global buy-out option is exercised, less (ii) any amounts previously paid to exercise any country- specific buy-out option with respect to such product. The global buy-out option with respect to any Licensed Product may be exercised only with respect to countries as to which ALZA has exercised the License Option. Purchase Option........... Pursuant to Crescendo's Restated Certificate of Incorporation, ALZA has the right to purchase all (but not less than all) of the outstanding Crescendo Shares (the "Purchase Option"). The Purchase Option will be exercisable by written notice to Crescendo at any time after the Distribution until January 31, 2002, provided that such date will be extended for successive six month periods if, as of any July 31 or January 31 beginning with July 31, 2001, Crescendo has not paid (or accrued expenses for) at least 95% of all Available Funds pursuant to the Development Agreement. In any event, the Purchase Option will terminate on the 60th day after Crescendo provides ALZA with a statement that, as of the end of any calendar month, there are less than $2.5 million of Available Funds remaining, accompanied by a report of Crescendo's independent auditors. If the Purchase Option is exercised, the exercise price (the "Purchase Option Exercise Price") will be the greatest of: (a)(i) 25 times the actual worldwide payments made by or due from ALZA to Crescendo with respect to all Licensed Products, Developed Technology Products and Technical Evaluation Products (and, in addition, such payments as would have been made by or due from ALZA to Crescendo if ALZA had not previously exercised its payment buy-out option with respect to any product) for the four calendar quarters immediately preceding the quarter in which the Purchase Option is exercised (provided, however, that for any product which has not been commercially sold during each of such four calendar quarters, the portion of the Purchase Option Exercise Price for such product will be 100 times the average of the quarterly payments made by or due from ALZA to Crescendo for each of such calendar quarters during which such product was commercially sold) less (ii) any amounts previously paid to exercise any payment buy-out option for any product; (b) the fair market value of one million shares of ALZA Common Stock; (c) $325 million less all amounts paid by or due from Crescendo under the Development Agreement to the date the Purchase Option is exercised; and (d) $100 million. In each case, the amount payable as the Purchase Option Exercise Price will be reduced to the extent, if any, that Crescendo's liabilities at the time of exercise (other than liabilities under the Development Agreement, the Services Agreement and the Technology License Agreement) exceed Crescendo's cash and cash equivalents, and short- term and long-term investments (excluding the amount of Available Funds remaining at such time). ALZA may pay the Purchase Option Exercise Price in cash, in ALZA Common Stock or in any combination of cash and ALZA Common Stock. Under Crescendo's Restated Certificate of Incorporation, Crescendo is prohibited from taking or permitting any action inconsistent with, or which would in any way alter, ALZA's rights under the Purchase Option. In addition, until the expiration of the Purchase Option, Crescendo may not, without the consent of ALZA as the sole holder of the Crescendo Class B Common Stock, merge, liquidate, sell any substantial assets, or amend its Restated Certificate of Incorporation to alter the Purchase Option, Crescendo's authorized capitalization, or certain of the provisions of the Restated Certificate of Incorporation governing Crescendo's Board of Directors. Federal Income Tax Considerations............ It is expected that the Distribution will be taxable to each Holder in the amount of the fair market value of the Crescendo Shares distributed to such Holder. In early 1998, each recipient of distributed Crescendo Shares will receive an IRS Form 1099-DIV and/or an IRS Form 1099-INT reflecting the fair market value of the Crescendo Shares distributed; the recipient's basis (for income tax purposes) in the distributed Crescendo Shares will be such fair market value. If ALZA were to exercise the Purchase Option, a Holder would have a taxable gain or loss equal to the difference between the value of the consideration received from ALZA in such exercise and the Holder's basis in the Crescendo Shares, unless ALZA were to exercise the Purchase Option solely for shares of ALZA Common Stock and certain other conditions were satisfied, in which case receipt of the ALZA Common Stock should be tax-free to the Holder under current federal income tax laws. The Distribution, any subsequent sale of Crescendo Shares, and the exercise or expiration of the Purchase Option may have other federal income tax consequences to Holders. See "Federal Income Tax Considerations." HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS. Risk Factors.............. Ownership of Crescendo Shares involves a high degree of investment risk. The risk factors listed below should be considered carefully in evaluating the ownership of Crescendo Shares. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042248_firstpak_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042248_firstpak_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d33dae57e30816a8c78ebdc52122ce163299126c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042248_firstpak_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY CONCURRENTLY WITH THE CONSUMMATION OF THE OFFERING MADE BY THIS PROSPECTUS (THE "OFFERING"), FIRSTPAK, INC. WILL ACQUIRE, IN SEPARATE TRANSACTIONS (THE "ACQUISITIONS"), ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF WISCONSIN LABEL CORPORATION ("WISCONSIN LABEL"), ST. LOUIS LITHOGRAPHING COMPANY ("ST. LOUIS LITHO"), CALOPTICAL HOLDING CORPORATION ("CALOPTICAL") AND BLAKE PRINTING AND PUBLISHING, INC. ("BLAKE PRINTING," AND, TOGETHER WITH WISCONSIN LABEL, ST. LOUIS LITHO AND CALOPTICAL, THE "OPERATING SUBSIDIARIES") FOR AN AGGREGATE OF 6,072,012 SHARES OF COMMON STOCK, 220,000 SHARES OF SERIES A PREFERRED STOCK, PAR VALUE $0.001 PER SHARE (THE "SERIES A PREFERRED STOCK"), AND OPTIONS TO PURCHASE 909,193 SHARES OF COMMON STOCK OF FIRSTPAK, INC. TO BE ISSUED TO THE STOCKHOLDERS OF THE OPERATING SUBSIDIARIES (THE "SELLERS") IN A STOCK-FOR-STOCK EXCHANGE PURSUANT TO MERGER AGREEMENTS DATED JULY 17, 1997. SEE "FORMATION OF THE COMPANY - THE ACQUISITIONS" AND "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS - THE ACQUISITIONS." UNLESS OTHERWISE INDICATED, ALL REFERENCES HEREIN TO THE "COMPANY" OR "FIRSTPAK" MEAN FIRSTPAK, INC. AND THE OPERATING SUBSIDIARIES ASSUMING EFFECTIVENESS OF THE ACQUISITIONS, AND REFERENCES HEREIN TO "FIRSTPAK, INC." SHALL MEAN FIRSTPAK, INC. PRIOR TO THE EFFECTIVENESS OF THE ACQUISITIONS. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION SET FORTH HEREIN (i) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE ACQUISITIONS, (ii) REFLECTS THE REINCORPORATION OF FIRSTPAK, INC. IN DELAWARE WHICH WILL OCCUR PRIOR TO CONSUMMATION OF THE OFFERING, (iii) ASSUMES AN INITIAL PUBLIC OFFERING PRICE OF $14 PER SHARE, THE MIDPOINT OF THE ASSUMED INITIAL PUBLIC OFFERING PRICES SET FORTH ON THE COVER OF THIS PROSPECTUS, AND (iv) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY FirstPak, Inc. was formed in February 1996 to create a premier consolidator and operator of labeling and packaging companies. Through its four Operating Subsidiaries, the Company manufactures and sells a wide array of packaging products, including pressure sensitive labels for the consumer products, food packaging and direct mail industries, glue-applied labels for the liquor, wine, candy and cigar industries, and specialty rigid packaging for the eyewear industry. In addition, the Company provides commercial printing services, foil-stamping for the trading card industry, promotional packaging and materials, and certain flexible packaging solutions. The Company has more than 1,200 employees and services more than 4,500 customers in a variety of industries nationwide. For the year ended December 31, 1996, the Company's sales and operating income (on a pro forma basis) were $142.8 million and $7.5 million, respectively. The segments of the packaging industry in the United States in which the Company competes and intends to compete are large and highly fragmented. These segments consist of more than 4,000 label producers, specialty rigid packaging manufacturers and flexible packaging manufacturers with estimated combined sales exceeding $20 billion in 1996. These segments consist primarily of independently-owned companies with estimated average annual revenues of less than $25 million. The Company believes increasing demand for higher value-added packaging, the consumer products industry's focus on limiting the number of packaging suppliers and the costs associated with maintaining technologically advanced packaging facilities are factors contributing to the consolidation within the packaging industry. Labels and packaging function as the primary point-of-sale promotional vehicle for many consumer products, and accordingly, manufacturers and other producers are placing greater emphasis on value-added labels and packaging in order to more effectively market their products. In addition, current demographic trends, such as smaller households and an increasing number of women in the workplace, are causing changes in consumer buying habits which in turn are resulting in a demand for different sizes and types of labels, as well as packaging with more convenient features. The Company also believes that the recent focus in numerous industries on improved efficiency is causing many customers to seek to reduce their number of label and packaging suppliers to a select few that can offer both higher quality and a more complete line of value-added products and services. The growing need for more specialized packaging solutions, along with frequent advances in packaging technology, is placing increased demands on smaller packaging companies which do not have the resources or the geographic scope to address the needs of a growing number of packaging customers. As a result, the Company believes that the segments of the packaging industry in which the Company competes will continue to consolidate. The Company intends to take advantage of the consolidation trend currently underway in the packaging industry by aggressively pursuing strategic acquisitions of packaging businesses that complement the product offerings and customer base of the Operating Subsidiaries. By integrating acquisitions into its existing operations and developing the cross-selling capabilities among its constituent businesses, the Company believes that it will be able to provide clients with a more comprehensive line of products and services. The Company plans to conduct its operations with a decentralized management approach through which individual management teams will be responsible for the businesses of each of the Operating Subsidiaries. In addition, a Company-wide team of senior management will provide the Operating Subsidiaries with strategic oversight and guidance with respect to acquisitions, financing, marketing and operations. Through this management structure, the Company believes each of the Operating Subsidiaries will be able to continue to provide high quality service to local customers as well as access to the capabilities of a large, diversified packaging firm. The mailing address of the Company is 114 Sansome Street, Suite 1000, San Francisco, California 94104-3821. STRATEGY The Company's goal is to become a premier consolidator and operator of label and packaging companies. The main elements of the Company's strategy include the following: PURSUE STRATEGIC ACQUISITIONS The Company intends to supplement internal growth through aggressive pursuit of acquisitions to expand the Company's capacity and customer base, add new products and services and extend its market reach. The Company's chief executive officer, as well as other members of senior management, have significant experience in effecting strategic acquisitions and integrating acquired businesses. Although there are no formal agreements or letters of intent to purchase any additional businesses at this time, the Company has evaluated numerous potential acquisition candidates in the label and packaging segments. In particular, management has evaluated companies that produce product identification labels, flexible packaging and specialty rigid packaging for a broad range of industries including consumer products, food, wine, liquor, cosmetics and pharmaceuticals. Management believes the acquisition of such companies will allow it to broaden its product portfolio and provide customers with a more complete set of packaging solutions. The Company believes that it can successfully integrate newly acquired operations in order to leverage more effectively the sales, marketing and distribution capabilities of the Operating Subsidiaries and operations that may be acquired in the future. The Company has received a commitment letter from The Chase Manhattan Bank ("Chase") pursuant to which Chase has agreed, subject to consummation of the Acquisitions and the Offering and to certain other closing conditions, to provide the Company with a senior revolving credit facility (the "Facility") in the amount of $80.0 million. Up to $60.0 million of the Facility may be used for acquisitions by the Company. See "Management's Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results of Operations - Liquidity and Capital Resources." CREATE A SINGLE SOURCE FOR VALUE-ADDED PACKAGING AND LABELS The Company intends to offer its customers a single source for their value-added packaging and label requirements. Management believes the cross-selling potential of each of the Operating Subsidiaries, as well as of operations that may be acquired in the future, will allow the Company to offer a comprehensive range of products and services. In particular, the Company's goal is to develop long-term relationships with customers who seek to consolidate sources of packaging products and services as a means of achieving higher quality label and packaging products at more competitive prices. As part of its strategy, the Company will seek to craft value-added packaging solutions which address the changing dynamics of the packaging industry. For instance, management believes that the use of pressure sensitive labels in the wine and beer industries will increase as production and application technologies become more cost effective. By offering a comprehensive line of packaging products, the Company will benefit from this and other changes in the mix of packaging solutions. INCREASE OPERATING EFFICIENCIES The Company believes that it will be able to increase operating efficiency and achieve certain synergies among its constituent businesses. In particular, through the implementation of its acquisition strategy, the Company believes there will be substantial opportunity to increase and optimize plant efficiencies. The Company also believes that it can reduce costs by purchasing certain raw materials such as inks and paper on a larger scale. The Company also plans to centralize the purchasing of medical and general liability insurance, the banking relationships of its Operating Subsidiaries and future acquired operations as well as the administration of various employee benefit programs in order to effect general, administrative and interest savings. In addition, the Company believes that its multiple-plant capacity will enable it to attract new customers. INVEST IN NEW TECHNOLOGIES TO INCREASE OPERATING RESPONSIVENESS The market for label and packaging products is becoming increasingly specialized as a result of the trends currently underway in the packaging industry. In response to these trends, packaging customers have begun to frequently redesign the packaging of their products by upgrading the quality and complexity of the components or the design of the packaging application. Management believes that investments in new packaging and labeling technologies will allow the Company to provide packaging products with features that add value to the package which will allow it to service its customer base more effectively. Pursuant to this strategy, the Company is a participant in the Digital Label Alliance, an industry consortium formed to develop and commercialize digital press technology for the label industry. THE OPERATING SUBSIDIARIES The Company is being formed through the acquisition of four Operating Subsidiaries that, on the basis of combined sales, had an average annual compound growth rate of 17.6% for the three years ended December 31, 1996. WISCONSIN LABEL. In 1996, according to industry sources, Wisconsin Label was the fifteenth largest U.S. producer, based on revenues, of pressure sensitive labels and materials for use in a variety of consumer products, food packaging, direct mail and industrial applications. Wisconsin Label's products include premium packaging, promotional packaging and materials, folded cartons and custom material constructions, coupons, mailers and product catalogs. Founded in 1966 and headquartered in Algoma, Wisconsin, Wisconsin Label's customers include Sara Lee Corporation, Dittler Brothers Incorporated ("Dittler Brothers") and Federal Express Corporation (through Graphic Systems, Incorporated). For the year ended December 31, 1996, Wisconsin Label had sales of $93.9 million, which represented 65.8% of the pro forma sales of the Company. ST. LOUIS LITHO. St. Louis Litho specializes in the production of high quality, foil-laminated and metallized labels and wraps for use in the liquor, candy, cigar and trading card industries. St. Louis Litho was operated as a subsidiary of Pet Incorporated ("Pet") and its successor company Grand Metropolitan, plc ("Grand Metropolitan") until it was sold in a management buyout in May 1996. Founded in 1921 and headquartered in St. Louis, Missouri, customers of St. Louis Litho include Barton Incorporated, Heaven Hill Distilleries Inc. and Russel Stover Candies, Inc. For the year ended December 31, 1996, St. Louis Litho had sales of $20.3 million, which represented 14.2% of the pro forma sales of the Company. CALOPTICAL. The Company believes that CalOptical is the leading provider of specialized rigid eyewear packaging in the United States based on revenues, with a product line consisting of decorative and highly functional eyeglass and sunglass cases and accessories. CalOptical is the parent of California Optical Leather, Inc. ("COL"), which was founded in 1935. CalOptical is headquartered in San Leandro, California, and its customers include LensCrafters, Inc., Wal-Mart Stores, Inc. and Eye Care Centers of America, Inc. For the year ended December 31, 1996, CalOptical had sales of $15.7 million, which represented 11.3% of the pro forma sales of the Company. BLAKE PRINTING. The Company believes that Blake Printing is a leading provider of value-added labels to the domestic wine industry, based on revenues. Through its Poor Richard's Press division, Blake Printing also provides commercial printing and publishing services to small companies and public sector enterprises in the central coast region of California. Founded in 1949 and headquartered in San Luis Obispo, California, Blake Printing's customers include Sebastiani Vineyards, Inc., The Wine Group, Inc. and The Robert Mondavi Corporation. For the year ended December 31, 1996, Blake Printing had sales of $12.4 million, which represented 8.7% of the pro forma sales of the Company. THE OFFERING <TABLE> <S> <C> COMMON STOCK OFFERED: By the Company......................... 3,928,571 shares By the Selling Stockholders............ 301,712 shares Total Offering (1)..................... 4,230,283 shares COMMON STOCK OUTSTANDING AFTER THE OFFERING (1)(2)..................................... 11,111,250 shares USE OF PROCEEDS BY THE COMPANY.............. Principally to repay substantially all of the approximately $44.3 million (as of June 30, 1997) of indebtedness (including accrued interest and certain prepayment fees) of the Operating Subsidiaries incurred prior to the Acquisitions (including approximately $4.6 million of indebtedness held by a holder of more than five percent of the Common Stock assuming consummation of the Acquisitions). See "Use of Proceeds." RISK FACTORS................................ For a discussion of certain considerations relevant to an investment in the Common Stock, see "Risk Factors." DIVIDEND POLICY............................. The Company anticipates that it will not pay dividends on the Common Stock for the foreseeable future. See "Dividend Policy." PROPOSED NASDAQ NATIONAL MARKET SYMBOL...... "FPAK" </TABLE> - ------------------------ (1) Assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." (2) As of June 30, 1997. Includes the 1,110,667 shares of Common Stock of FirstPak, Inc. outstanding prior to the Acquisitions and the 6,072,012 shares of Common Stock to be issued to the Sellers in connection with the Acquisitions. Excludes (a) 50,000 shares of Common Stock issuable upon exercise of options granted to an officer of FirstPak, Inc. at an exercise price of $5.35 per share, (b) 522,143 shares of Common Stock issuable pursuant to the Company's 1997 Stock Plan (the "1997 Stock Plan") upon exercise of options to be granted to certain directors, officers, employees and consultants of the Company at a weighted average exercise price of $7.39 per share concurrently with the consummation of this Offering and (c) an additional 1,477,857 shares of Common Stock reserved for issuance pursuant to the 1997 Stock Plan, of which options to purchase 342,857 shares of Common Stock at an exercise price equal to the initial public offering price will be issued to certain officers and employees of the Operating Subsidiaries concurrently with the consummation of the Offering. Also excludes options to purchase an aggregate of 909,193 shares of Common Stock at a weighted average exercise price of $2.27 per share to be granted to or exchanged with certain Sellers in connection with the Acquisitions or exchanged for outstanding options to purchase Common Stock of the Operating Subsidiaries. See "Formation of the Company - The Acquisitions," "Certain Relationships and Related Party Transactions - The Acquisitions" and "Management 1997 Stock Plan." SUMMARY PRO FORMA COMBINED FINANCIAL DATA The following table presents summary pro forma combined financial data of the Company as of the dates and for the periods indicated, giving effect to (i) the consummation of the Acquisitions and (ii) the consummation of the Offering and the application of the net proceeds therefrom. Upon consummation of the Acquisitions, the former stockholders of Wisconsin Label will own, as a group, approximately 48.6% of the Company's Common Stock and control approximately 50.2% of the Company's voting interests. As such Common Stock ownership and voting interests will exceed (i) the separate Company ownership and voting interests of the former stockholder groups for St. Louis Litho, CalOptical, or Blake Printing, and (ii) the FirstPak stockholders' carryover ownership and voting interests just prior to the consummation of the Acquisitions, the Acquisitions will be accounted for as a "reverse acquisition" using the purchase method of accounting, with Wisconsin Label treated as the acquirer for accounting purposes. As a result, the Company's consolidated financial statements for periods prior to the consummation of the Acquisitions prepared for comparative purposes subsequent to the consummation of Acquisitions will be the historical consolidated financial statements of Wisconsin Label with certain amounts within "Stockholders' Equity" restated to reflect the impact of FirstPak's acquisition of Wisconsin Label. The summary pro forma data are not necessarily indicative of operating results or financial position that would have been achieved had the events described above been consummated and should not be construed as representative of future operating results or financial position. The summary pro forma combined financial data should be read in conjunction with the Pro Forma Combined Financial Statements and the notes thereto included elsewhere in this Prospectus and with "Formation of the Company - - The Acquisitions," "Management's Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results of Operations" and "Certain Relationships and Related Party Transactions - The Acquisitions." <TABLE> <CAPTION> --------------------------------- YEAR ENDED DECEMBER SIX MONTHS ENDED 31, JUNE 30, IN THOUSANDS, EXCEPT PER SHARE DATA 1996 1996 1997 ----------- --------- --------- <S> <C> <C> <C> PRO FORMA COMBINED STATEMENTS OF INCOME DATA (1): Sales........................................................ $ 142,784 $ 72,620 $ 74,300 Cost of sales................................................ 104,663 53,120 54,122 ----------- --------- --------- Gross profit................................................. 38,121 19,500 20,178 Operating expenses........................................... 30,620 15,156 16,205 ----------- --------- --------- Operating income............................................. 7,501 4,344 3,973 Interest income.............................................. 258 139 36 Interest expense............................................. (271) (136) (136) Other income (expense) net................................... 547 200 639 ----------- --------- --------- Income before income taxes and minority interest............. 8,035 4,547 4,512 Provision for income taxes................................... 3,485 1,996 1,800 ----------- --------- --------- Income before minority interest.............................. 4,550 2,551 2,712 Minority interest............................................ (92) (58) (43) ----------- --------- --------- Net income................................................... $ 4,458 $ 2,493 $ 2,669 ----------- --------- --------- ----------- --------- --------- Pro forma net income per share............................... $ 0.37 $ 0.21 $ 0.22 ----------- --------- --------- ----------- --------- --------- Shares used in computing pro forma net income per share (2)......................................................... 12,150 12,150 12,150 OTHER DATA: Pro forma combined cash flows provided by (used in): Operating activities..................................... $ 7,603 $ 4,102 $ 4,505 Investing activities..................................... (4,955) (3,824) (3,684) Financing activities..................................... (198) -- (291) Pro forma combined EBITDA (3)................................ 13,014 7,091 7,580 </TABLE> <TABLE> <CAPTION> --------------- AT JUNE 30, IN THOUSANDS 1997 --------------- <S> <C> PRO FORMA COMBINED BALANCE SHEET DATA (1): Cash and cash equivalents.................................................. $ 2,902 Working capital............................................................ 26,087 Goodwill................................................................... 30,798 Total assets............................................................... 114,284 Long-term debt and capital lease obligations, excluding current maturities................................................................ 55 Redeemable preferred stock................................................. 9,440 Stockholders' equity....................................................... 87,521 </TABLE> - ------------------------ (1) Assumes that the consummation of the Acquisitions and the Offering had occurred as of January 1, 1996, in the case of the pro forma combined statements of income data and other data, and as of June 30, 1997, in the case of the pro forma combined balance sheet data. The pro forma combined financial data are based upon preliminary estimates, available information and certain assumptions that management deems appropriate. The pro forma combined financial data presented herein are not necessarily indicative of the results the Company would have obtained had such events occurred at the beginning of the period or of the future results of the Company. The pro forma combined financial data should be read in conjunction with the other financial data and notes thereto included elsewhere in this Prospectus. See "Formation of the Company - The Acquisitions" and "Certain Relationships and Related Party Transactions - The Acquisitions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042422_hedstrom_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042422_hedstrom_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042422_hedstrom_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042423_amav_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042423_amav_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042423_amav_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042426_ero_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042426_ero_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042426_ero_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042427_ero_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042427_ero_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e9b19659b9777c3de531199962937ea11a675f73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042427_ero_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. As used in this Prospectus, unless otherwise indicated or unless the context otherwise requires, references herein to (i) the "Transactions" refer collectively to the Acquisition (as defined) and the Financings (as defined), (ii) "Holdings" refer to Hedstrom Holdings, Inc. and, where appropriate, its subsidiaries, (iii) "Hedstrom" refer to Hedstrom Corporation and, where appropriate, its subsidiaries, (iv) "ERO" refer to ERO, Inc. and, where appropriate, its subsidiaries, and (v) the "Company" refer to Hedstrom and its subsidiaries and ERO and its subsidiaries on a combined basis after completion of the Transactions, including the businesses conducted by Hedstrom and ERO prior to the Transactions. Unless otherwise specified, all financial, statistical and other data regarding the Company contained herein is presented on a pro forma basis after giving effect to the Transactions. Market and market share data used throughout this Prospectus are estimates provided by the management of the Company. Such estimates are based on management's internal research and experience in the Company's markets. Such estimates, while believed by management to be accurate, have not been verified by any independent source. THE COMPANY The Company (consisting of the businesses of Hedstrom and ERO) is a leading North American manufacturer and marketer of well-established children's leisure and activity products. The Company's diversified product lines are in such "evergreen" product categories as outdoor gym sets, wood gym kits and slides, spring horses, playballs, arts and crafts kits, game tables, and licensed indoor sleeping bags, play tents and wall decorations. The Company considers such product categories to be "evergreen" in nature because each is characterized by proven longevity, demonstrated market demand and consistent sales over time. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes that in the U.S. markets for nine of its ten principal product categories, it enjoys the competitive advantage of being the market share leader, the low-cost producer or both. For the twelve-month period ended December 31, 1996, approximately half of the Company's pro forma net sales were derived from product categories for which the Company believes it has a market share of approximately 75% or greater. As a result of the Company's leading market shares, the Company enjoys favorable relationships with its customers and suppliers and with licensors of popular characters that decorate certain of the Company's products. The Company believes its focus on evergreen product categories in which it has competitive advantages provides consistent sales and cash flows. The Company's products are sold primarily through national retailers, mass merchants, home improvement centers, sporting goods stores, drug store chains and supermarkets. COMPETITIVE STRENGTHS The Company believes that the following characteristics contribute to the Company's position as a leading manufacturer and marketer of children's leisure and activity products: - Leading Share in Selected Niche Markets. The Company believes its outdoor gym sets, spring horses, playballs, ball pits and licensed sleeping bags and play tents each command market shares of approximately 75% or greater. Sales from these product categories accounted for approximately half of the Company's pro forma net sales for the twelve-month period ended December 31, 1996. In addition, the Company believes it is one of the leading suppliers in the U.S. markets for wood gym kits and slides, children's arts and crafts kits, game tables and wall decorations. The Company believes its position as a market share leader in selected niche markets (i) provides the Company with certain advantages over existing competitors and prospective entrants in such markets, (ii) creates the strong relationships with retailers that are critical to securing and maintaining valuable retail shelf space for existing and new products and (iii) provides a platform for introducing new products. - Stable and Established Product Categories. Substantially all of the Company's products are in evergreen categories within the children's leisure and activity products industry. For example, the Company believes products such as outdoor gym sets and playballs have been marketed and sold in the United States for over 30 years. The Company believes its diverse portfolio of evergreen products will contribute to stable revenues and cash flows, providing resources for the Company to implement its business strategies. See "-- Business Strategy." - Low-Cost Manufacturing Capabilities. The Company believes that it is the low-cost manufacturer in the markets for each major product category which the Company manufactures internally. The Company believes its leading market share in such niche markets as outdoor gym sets, spring horses, playballs and ball pits provides it with a significant cost advantage relative to smaller competitors in such markets due to the Company's greater sales volume and resultant operating leverage and efficiencies. With respect to the Company's children's arts and crafts kits and game tables, the Company is able to realize cost advantages from the low labor rates, low overhead and extensive vertical integration of its Canadian manufacturing facility. The Company believes its position as a low-cost manufacturer will enable it to (i) maintain operating profit margins, (ii) respond to competitive pressures through flexibility in pricing strategies, (iii) realize sales growth by offering superior quality products at competitive prices and (iv) expand its existing product lines and enter new product categories. BUSINESS STRATEGY The Company's strategy is to enhance its operating margins and strengthen its position as a leading manufacturer and marketer of children's leisure and activity products. The Company plans to improve its profitability by rationalizing its cost structure and utilizing the Company's excess capacity at certain of its facilities through, among other things, pursuing counter-seasonal sales opportunities. Furthermore, the Company has identified several opportunities for revenue growth, including enhancing existing products, introducing complementary products, focusing its licensed products on traditional characters and pursuing international sales opportunities. - Achieve Cost Savings. Management believes it will realize annual cost savings in excess of $6 million as a result of cost saving initiatives implemented or being implemented as a result of the Acquisition, such as rationalizing sales, marketing and general administrative functions, consolidating purchases of raw materials and eliminating less profitable product lines. Independent of the Acquisition, the Company expects to realize in excess of $9 million of permanent cost savings in 1997 and thereafter as a result of cost reduction programs implemented at Hedstrom in the second half of 1996. See "-- Hedstrom 1996 Cost Reduction Plan," "Unaudited Pro Forma Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Hedstrom and Holdings." - Utilize Excess Capacity. The Company produces its outdoor gym sets, wood gym kits and slides at its facility in Bedford, Pennsylvania, primarily in the period from December through April. During the balance of the year, the Bedford facility remains relatively inactive. The Company believes it can enhance sales and profitability by identifying products that it can manufacture during the May through November period, either for itself or for original equipment manufacturers ("OEMs"). The Company has already identified several products that it will begin producing in the second half of 1997. In addition, management is pursuing opportunities to increase the utilization of its low-cost plastic molding operations at its Ashland, Ohio facility, which already supplies a variety of components to OEMs of industrial and consumer products. - Enhance Existing Products and Develop Complementary Products. The Company has maintained sales growth and its leading market shares by continuously enhancing its principal products and designing and developing complementary products and accessories. Management believes that by pursuing this strategy it can continue growth within its core product lines with minimal economic risk. In addition, the Company will evaluate opportunities to expand its product lines, increase its market shares and acquire complementary products through strategic acquisitions. - Focus Licensed Products on Traditional Characters. The Company believes that it can differentiate certain of its products and stimulate sales more effectively and inexpensively through the licensing of recognized traditional characters rather than the development and promotion of its own brand names. For the Company's products lines that feature licensed characters, such as sleeping bags, play tents and wall decorations, the Company intends to emphasize traditionally popular characters such as the classic Disney and Looney Tunes(TM) characters, although the Company will also complement such characters by obtaining licenses for event-driven characters. The Company estimates that products featuring licensed traditional characters (including products featuring the 101 Dalmatians characters, which experienced increased sales in 1996 as a result of the release of a new version of the 101 Dalmatians movie) accounted for approximately 14% of the Company's pro forma net sales for the twelve-month period ended December 31, 1996, while products based on licensed event-driven characters also accounted for approximately 14% of the Company's pro forma net sales for such period. - Pursue International Sales Opportunities. To date, the Company has not focused a significant amount of resources toward the development of an international customer base. For the twelve-month period ended December 31, 1996, the Company's pro forma net sales outside the United States and Canada totaled less than 4% of the Company's total pro forma net sales. The Company believes there are significant sales opportunities for the Company's products in Europe and Latin America, particularly its children's arts and crafts kits, outdoor gym sets, playballs and ball pits. ACQUISITION RATIONALE Hedstrom and ERO are leading manufacturers and marketers of children's leisure and activity products. Hedstrom's principal products include outdoor gym sets, wood gym kits and slides, spring horses, playballs and ball pits. ERO's principal products include children's arts and crafts kits, game tables and licensed indoor sleeping bags, play tents and wall decorations. The acquisition of ERO by Hedstrom created one of the largest North American manufacturers and marketers of children's evergreen leisure and activity products and provides Hedstrom with (i) a more diverse portfolio of products, (ii) significant growth potential through ERO's Amav division ("Amav"), (iii) decreased seasonality as a result of more balanced sales throughout the year, (iv) significant cost savings and operating efficiencies and (v) additional advantages resulting from increased scale. - Product Diversity in Well-Established Markets. The combination of Hedstrom and ERO significantly reduces the Company's dependence on any particular product line while expanding the Company's overall presence in children's evergreen leisure and activity product categories. With the combination of Hedstrom and ERO, the Company has ten principal product categories, with its largest product line (outdoor gym sets) accounting for approximately 20% of the Company's pro forma net sales for the twelve-month period ending December 31, 1996. - Growth Potential at Amav. In October 1995, ERO established its Amav division through the acquisition of Amav Industries, Ltd., a Canadian-based manufacturer of children's arts and crafts kits and game tables. Amav has grown rapidly over the four-year period ended December 31, 1996, with sales increasing at a compound annual rate in excess of 40% over such period. Management attributes Amav's success to its strategy of targeting large, established product lines in which it can apply its design, engineering and manufacturing expertise to produce a high-quality product at a lower cost than its competitors. Management believes Amav's low-cost manufacturing, design and engineering capabilities will enable the Company to continue to increase sales of its existing products lines as well as to add complementary product lines. - Reduced Seasonality. The combination of Hedstrom and ERO significantly reduces the effect of seasonality on the Company's business. The peak selling season for Hedstrom's products is the first half of the calendar year whereas the peak selling season for ERO's products is the second half of the calendar year. As a result of the Acquisition, the Company's sales throughout the year will be relatively balanced. Pro forma net sales for the Company for each calendar quarter during the twelve months ended December 31, 1996 were 24.6%, 26.5%, 22.8% and 26.1%, respectively, of total pro forma net sales for such twelve-month period. Balanced sales throughout the year will reduce seasonal fluctuations in working capital and will enable the Company to generate more consistent cash flow. - Cost Savings. As discussed under "-- Business Strategy," management believes that the cost saving initiatives which have been or which are being implemented as a result of the combination of Hedstrom and ERO will allow the Company to realize cost savings in excess of $6 million per year. - Additional Advantages Resulting from Increased Scale. With over $280 million in pro forma net sales for the twelve-month period ending December 31, 1996, management believes the Company will have significantly more clout with retailers, suppliers and licensors than either Hedstrom or ERO individually. In addition, management anticipates that the Company's size also will enable it to pursue international sales opportunities more effectively. HEDSTROM 1996 COST REDUCTION PLAN From fiscal 1992 through fiscal 1995, Hedstrom's operating income increased at a compound annual rate of approximately 33.5%. In fiscal 1996, Hedstrom's operating income declined 52% relative to fiscal 1995. In addition, from fiscal 1992 through fiscal 1995, Hedstrom's EBITDA increased at a compound annual rate of approximately 25%. In fiscal 1996, Hedstrom's EBITDA declined modestly. In order to improve Hedstrom's profitability in 1997 and thereafter, management implemented a plan in the second half of 1996 (the "1996 Cost Reduction Plan") to reduce costs by over $9 million in 1997 and thereafter as compared with fiscal 1996 levels. Important elements of the plan include: - Implementing Just-in-Time Manufacturing. In late 1996, Hedstrom restructured certain of its manufacturing operations to increase its daily production capacity of outdoor gym sets. This restructuring has enabled Hedstrom to manufacture outdoor gym sets to specific customer orders rather than producing outdoor gym sets in anticipation of customer orders, which Hedstrom had done in the past because of capacity constraints. In fiscal 1996, prior to implementing this restructuring, Hedstrom experienced a significant and unexpected change in its sales mix of outdoor gym sets, requiring Hedstrom to use third party warehouses to store many of the outdoor gym sets it had produced in anticipation of customer demand. As a result, Hedstrom incurred approximately $2.1 million of higher warehouse and material handling costs. Through the first six months of 1997, Hedstrom has successfully manufactured outdoor gym sets on a just-in-time basis, resulting in significantly lower warehouse and material handling expense as compared to the same period in 1996. The implementation of just-in-time manufacturing of outdoor gym sets has enabled Hedstrom to carry a lower level of outdoor gym set inventory and, as a result, to eliminate the need for utilizing third party warehouses for outdoor gym sets. Management believes the Company will save approximately $2.1 million of warehouse and material handling expense in 1997 and thereafter as a result of implementing just-in-time manufacturing of outdoor gym sets. - Improved Manufacturing Procedures. In an effort to streamline outdoor gym set production and improve manufacturing efficiencies, in 1996 Hedstrom (i) reduced its number of outdoor gym set product offerings, (ii) redesigned certain outdoor gym set components to reduce the cost of such components and (iii) further standardized many of the components among its various outdoor gym set product offerings. Management believes these actions will improve profitability by approximately $2.0 million in 1997 and thereafter over fiscal 1996 levels. - In-sourcing Certain Plastic Components. Hedstrom periodically evaluates the economics of producing internally certain plastic components used in the production and assembly of its outdoor gym sets versus purchasing such components externally. In 1996, Hedstrom invested approximately $3.0 million in new plastic blow-molding equipment to manufacture many of the plastic slides that it had previously purchased from third-party vendors. Management estimates that producing these slides internally is currently providing annual cost savings of approximately $1.5 million as compared to fiscal 1996 levels. - Discontinuation of Trial Advertising Campaign. Hedstrom historically has advertised its products in cooperation with its retail customers, principally through print media such as newspaper circulars and free-standing inserts sponsored by its customers. In fiscal 1996, Hedstrom initiated, on a trial basis, its own multi-media advertising program designed to increase consumer awareness of the Hedstrom brand over time. The total cost for this advertising program was approximately $1.5 million. After careful review, management determined that this trial advertising campaign would not provide an acceptable return on investment and elected to discontinue it. Therefore, such costs will not be incurred in 1997 and thereafter. - Restructure Promotional Programs. Consistent with industry practice, Hedstrom provides retailers with certain promotional allowances, a portion of which typically is fixed in nature and a portion of which is based on the volume of customer purchases of Hedstrom products. In late 1996, Hedstrom reduced the fixed component of certain of its promotional allowances and restructured its promotional programs with several customers by raising the required volumes necessary to achieve certain promotional discounts. Management believes these initiatives will improve profitability in 1997 and thereafter by approximately $1.4 million over fiscal 1996 levels. - Personnel Reductions. Hedstrom reduced its number of full-time employees by approximately 30 people in a variety of departments in the second half of 1996. Management believes that such personnel reductions will result in savings of approximately $0.7 million in 1997 and thereafter over fiscal 1996 levels. The implementation of the 1996 Cost Reduction Plan has resulted in marked improvement in Hedstrom's profitability in 1997 and management expects that such initiatives will continue to contribute to enhanced profitability during the remainder of 1997. For the six months ended June 30, 1997, which includes the results of ERO for the month of June 1997, Hedstrom recorded net sales and operating income of $104.1 million and $14.2 million, respectively, as compared with net sales and operating income for the comparable period in 1996 of $96.1 million and $8.1 million, respectively. Operating income as a percentage of net sales increased to 14% for the six-month period ended June 30, 1997 from 8% for the comparable period in 1996. The enhanced profitability of Hedstrom has resulted in EBITDA of $17.0 million for the six months ended June 30, 1997, as compared with EBITDA for the comparable period in 1996 of $10.4 million. EBITDA as a percentage of net sales increased to 16% for the six months ended June 30, 1997 from 11% for the comparable period in 1996. Management believes the results of operations of ERO for the period from June 1, 1997 through June 11, 1997, prior to the Merger (as defined), are not significant to Holdings results of operations for the six-months ended June 30, 1997. After giving pro forma effect to the Transactions, the Company's pro forma net sales and operating income for the twelve-month period ended December 31, 1996 would have been $283.3 million and $24.2 million, respectively. Also, after giving pro forma effect to the Transactions, pro forma EBITDA for the twelve-month period ended December 31, 1996 would have been $38.7 million. Assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma net sales and operating income would have been $283.3 million and $30.0 million, respectively. Also, assuming the Transactions occurred and assuming implementation of the 1996 Cost Reduction Plan at the beginning of the twelve-month period ended December 31, 1996, pro forma EBITDA, would have been $44.5 million. THE TRANSACTIONS On April 10, 1997, Hedstrom and HC Acquisition Corp., a wholly owned subsidiary of Hedstrom ("Acquisition Co."), entered into an Agreement and Plan of Merger with ERO (the "Merger Agreement") to acquire ERO for a total enterprise value of approximately $200 million. Pursuant to the Merger Agreement, Acquisition Co. commenced a tender offer for all of the outstanding shares of the common stock of ERO at a purchase price of $11.25 per share (the "Tender Offer"). The Tender Offer was consummated on June 12, 1997. On that date, subsequent to the consummation of the Tender Offer, (i) Acquisition Co. was merged with and into ERO (the "Merger") with ERO surviving the Merger as a wholly owned subsidiary of Hedstrom, (ii) certain of ERO's outstanding indebtedness was refinanced by Hedstrom (the "ERO Refinancing") and (iii) Hedstrom refinanced (the "Hedstrom Refinancing") its then existing revolving credit facility (the "Old Revolving Credit Facility") and term loan facility (the "Old Term Loan Facility"). The Tender Offer, the Merger, the ERO Refinancing and the Hedstrom Refinancing are collectively referred to herein as the "Acquisition". Holdings and Hedstrom required approximately $301.1 million in cash to consummate the Acquisition, including approximately (i) $122.6 million paid in connection with the Tender Offer and the Merger, (ii) $82.6 million paid in connection with the ERO Refinancing, (iii) $74.9 million paid in connection with the Hedstrom Refinancing and (iv) $21.0 million incurred in respect of fees and expenses. The funds required to consummate the Acquisition were provided by (i) $75.0 million of term loans (the "Tranche A Term Loans") under a new six-year senior secured term loan facility (the "Tranche A Term Loan Facility"), (ii) $35.0 million of term loans (the "Tranche B Term Loans" and, together with the Tranche A Term Loans, the "Term Loans") under a new eight-year senior secured term loan facility (the "Tranche B Term Loan Facility" and, together with the Tranche A Term Loan Facility, the "Term Loan Facilities"), (iii) $16.1 million of borrowings under a new $70.0 million senior secured revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facilities, the "Senior Credit Facilities"), (iv) $110.0 million of gross proceeds from the offering (the "Original Senior Subordinated Notes Offering") by Hedstrom of the Old Senior Subordinated Notes, (v) $25.0 million of gross proceeds from the offering (the "Units Offering" and, together with the Original Senior Subordinated Notes Offering, the "Original Offerings") by Holdings of 44,612 units (the "Units") consisting of the Old Discount Notes and 2,705,896 shares (the "Shares") of Common Stock, $.01 par value per share, of Holdings ("Holdings Common Stock") and (vi) $40.0 million of gross proceeds from the private placement (the "Equity Private Placement" and, together with the Original Offerings and the borrowings under the Senior Credit Facilities, the "Financings") of 31,520,000 shares of Non-Voting Common Stock, $.01 par value per share, of Holdings ("Holdings Non-Voting Common Stock") and 480,000 shares of Holdings Common Stock. The following table sets forth the sources and uses of funds in connection with the Transactions. <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Revolving Credit Facility........ $ 16.1 Tranche A Term Loans............. 75.0 Tranche B Term Loans............. 35.0 Original Senior Subordinated Notes Offering................. 110.0 Units Offering................... 25.0 Equity Private Placement......... 40.0 ------ Total Sources............... $301.1 ====== </TABLE> <TABLE> <CAPTION> SOURCES OF FUNDS AMOUNT ---------------- ------ (IN MILLIONS) <S> <C> Tender Offer/Merger.............. $122.6 ERO Refinancing(a)............... 82.6 Hedstrom Refinancing(a).......... 74.9 Fees and expenses(b)............. 21.0 ------ Total Uses.................. $301.1 ====== </TABLE> - --------------- (a) Includes accrued interest expense. (b) Fees and expenses include Initial Purchasers' discount, bank fees, financial advisory fees, legal and accounting fees, printing costs and other expenses related to the Transactions. ORGANIZATIONAL CHART The following chart depicts (i) the summary organizational structure of Holdings and the Company and its material subsidiaries after consummation of the Transactions and (ii) the sources of financing for the Transactions. [Flow-Chart] DESCRIPTION OF ORGANIZATIONAL CHART (FOR EDGAR PURPOSES ONLY) The chart provided in the prospectus is a vertical flow-chart. The first (i.e., the top box of the flow chart) represents Holdings. It indicates that Holdings received $25 million pursuant to the Units Offering and $40 million pursuant to the Equity Private Placement. The second box in the flow chart represents Hedstrom, and show that Hedstrom is a direct, wholly owned subsidiary of Holdings. It also indicates that Hedstrom received (i) $16.1 million pursuant to borrowings under the Revolving Credit Facility(1), (ii) $75.0 million pursuant to the Tranche A Term Loans, (iii) $35.0 million pursuant to the Tranche B Term Loans and (iv) $110.0 million pursuant to the Original Senior Subordinated Notes Offering. The third box of the flow chart represents ERO and shows that ERO is a direct, wholly owned subsidiary of Hedstrom. The fourth and final box of the flow chart represents all of the operating subsidiaries of ERO and shows that such operating subsidiaries are direct or indirect wholly owned subsidiaries of ERO. - --------------- (1) The Revolving Credit Facility provides for borrowings of up to $70 million (subject to certain borrowing base requirements). See "Description of the Senior Credit Facilities." MANAGEMENT AND OWNERSHIP The principal shareholders of Holdings are Hicks, Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II"), an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and certain members of Hedstrom's senior management. Hicks Muse is a private investment firm based in Dallas, New York, St. Louis and Mexico City that specializes in acquisitions, recapitalizations and other principal investing activities. Since Hicks Muse's inception in 1989, the firm has completed or has pending over 70 transactions having a combined transaction value of approximately $19 billion. Hedstrom's senior management team, led by Arnold E. Ditri, its President and Chief Executive Officer, has extensive and diverse experience in managing consumer and industrial products companies, especially within the confines of a leveraged capital structure. In October 1995, HM Fund II, together with certain other investors (the "HM Group"), acquired an 82% common equity interest in Holdings in a transaction that was accounted for as a recapitalization (the "1995 Recapitalization"). The total enterprise value of Hedstrom at the time of the 1995 Recapitalization, including the assumption and refinancing of certain indebtedness, was approximately $75 million. The HM Group paid approximately $27 million for its common equity interest, which, together with Hedstrom senior management's 18% retained common equity ownership, implied a total equity value of Holdings at that time of approximately $33 million. Pursuant to the Equity Private Placement, HM Fund II and certain affiliates thereof purchased an additional $40 million of Holdings' common equity. RECENT DEVELOPMENTS On October 29, 1997, Hedstrom entered into an Asset Purchase Agreement with RDM Sports Group, Inc. and Sports Group, Inc. (neither of which is affiliated with Hedstrom), pursuant to which Hedstrom has agreed to purchase certain inventory, equipment and intellectual property of Sports Group, Inc. for $10,000,000 in cash on the terms and subject to the conditions set forth in such agreement. RDM Sports Group, Inc., Sports Group, Inc. and certain of their affiliates are debtors and debtors-in-possession in cases pending in the United States Bankruptcy Court for the Northern District of Georgia under Chapter 11 of Title 11 of the United States Code Sections 101 et seq., Case Nos. 97-12788 through 97-12796. Subject to required bankruptcy court approval, Hedstrom anticipates that the purchase will be consummated early in December 1997. Hedstrom also is presently in discussions with another unaffiliated party with respect to the proposed purchase by Hedstrom of certain portions of that party's inventory, equipment and intellectual property for approximately $14,250,000 in cash subject to the terms and conditions of a definitive asset purchase agreement. There can be no assurance, however, that an agreement will be reached. In connection with these proposed asset acquisitions (the "Proposed Asset Acquisitions"), Hedstrom contemplates that the Credit Agreement (as defined) will be amended to permit the acquisitions and to provide for an additional $10,000,000 of Tranche B Term Loans, in which case the amortization payments with respect to the existing Tranche B Term Loans will be increased pro rata. It is contemplated that the balance of the funds required to consummate the Proposed Asset Acquisitions will be obtained through a draw under the Revolving Credit Facility. THE EXCHANGE OFFERS THE SENIOR SUBORDINATED NOTES EXCHANGE OFFER: The Senior Subordinated Notes Exchange Offer applies to $110.0 million aggregate principal amount of the Old Senior Subordinated Notes. The form and terms of the New Senior Subordinated Notes will be the same as the form and terms of the Old Senior Subordinated Notes except that (i) interest on the New Senior Subordinated Notes will accrue from the date of issuance of the Old Senior Subordinated Notes, and (ii) the New Senior Subordinated Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Senior Subordinated Notes will evidence the same debt as the Old Senior Subordinated Notes and will be entitled to the benefits of the Senior Subordinated Notes Indenture (as defined) pursuant to which the Old Senior Subordinated Notes were issued. The Old Senior Subordinated Notes and the New Senior Subordinated Notes are sometimes referred to collectively herein as the "Senior Subordinated Notes." See "Description of New Senior Subordinated Notes." The Senior Subordinated Notes Exchange Offer....... $1,000 principal amount of New Senior Subordinated Notes in exchange for each $1,000 principal amount of Old Senior Subordinated Notes. As of the date hereof, Old Senior Subordinated Notes representing $110.0 million aggregate principal amount are outstanding. The terms of the New Senior Subordinated Notes and the Old Senior Subordinated Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Hedstrom, Holdings and the Subsidiary Guarantors, Hedstrom, Holdings and the Subsidiary Guarantors believe that New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer in exchange for Old Senior Subordinated Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Senior Subordinated Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Hedstrom, Holdings or any Subsidiary Guarantors within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Senior Subordinated Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Senior Subordinated Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Senior Subordinated Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes, where those Old Senior Subordinated Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Senior Subordinated Notes were sold by Hedstrom on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into a Registration Rights Agreement with the initial purchasers (the "Initial Purchasers") of the Old Notes (the "Registration Rights Agreement") providing for, among other things, the Senior Subordinated Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Senior Subordinated Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Senior Subordinated Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Senior Subordinated Notes Exchange Offer. Interest on the New Senior Subordinated Notes and Old Senior Subordinated Notes.................... Interest on each New Senior Subordinated Note will accrue from the date of issuance of the Old Senior Subordinated Note for which such New Senior Subordinated Note is exchanged. Conditions to the Senior Subordinated Notes Exchange Offer........... The Senior Subordinated Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Senior Subordinated Notes.................... Each holder of Old Senior Subordinated Notes wishing to accept the Senior Subordinated Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Senior Subordinated Notes Exchange Offer (the "Senior Subordinated Notes Letter of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Senior Subordinated Notes Letter of Transmittal, or the copy, together with the Old Senior Subordinated Notes and any other required documentation, to the Senior Subordinated Notes Exchange Agent (as defined) at the address set forth in the Senior Subordinated Notes Letter of Transmittal. Persons holding Old Senior Subordinated Notes through the Depository Trust Company ("DTC") and wishing to accept the Senior Subordinated Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Senior Subordinated Notes Letter of Transmittal. By executing or agreeing to be bound by the Senior Subordinated Notes Letter of Transmittal, each holder will represent to Hedstrom that, among other things, (i) the New Senior Subordinated Notes acquired pursuant to the Senior Subordinated Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Senior Subordinated Notes, whether or not such person is the holder of the Old Senior Subordinated Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Senior Subordinated Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Hedstrom, Holdings or any Subsidiary Guarantor, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Senior Subordinated Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Senior Subordinated Notes for its own account in exchange for Old Senior Subordinated Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Subordinated Notes. See "The Exchange Offers -- Procedures for Tendering." Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Hedstrom and Holdings are required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Senior Subordinated Notes (and use their reasonable best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Hedstrom is not permitted to effect the Senior Subordinated Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Senior Subordinated Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Senior Subordinated Notes, (iii) any Initial Purchaser so requests with respect to Old Senior Subordinated Notes not eligible to be exchanged for New Senior Subordinated Notes in the Senior Subordinated Notes Exchange Offer and held by it following consummation of the Senior Subordinated Notes Exchange Offer, or (iv) any holder of Old Senior Subordinated Notes (other than a broker-dealer electing to exchange Old Notes, acquired for its own account as a result of market-making activities or other trading activities, for New Notes (an "Exchanging Dealer")) is not eligible to participate in the Senior Subordinated Notes Exchange Offer or, in the case of any holder of Old Senior Subordinated Notes (other than an Exchanging Dealer) that participates in the Senior Subordinated Notes Exchange Offer, such holder does not receive freely tradeable New Senior Subordinated Notes upon consummation of the Senior Subordinated Notes Exchange Offer. Acceptance of Old Senior Subordinated Notes and Delivery of New Senior Subordinated Notes....... Hedstrom will accept for exchange any and all Old Senior Subordinated Notes which are properly tendered in the Senior Subordinated Notes Exchange Offer prior to the Expiration Date. The New Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offers." Senior Subordinated Notes Exchange Agent........... IBJ Schroder Bank & Trust Company is serving as Exchange Agent (the "Senior Subordinated Notes Exchange Agent") in connection with the Senior Subordinated Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Senior Subordinated Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Senior Subordinated Notes that are not tendered or that are tendered but not accepted will, following the completion of the Senior Subordinated Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. THE DISCOUNT NOTES EXCHANGE OFFER: The Discount Notes Exchange Offer applies to $44,612,000 aggregate principal amount at maturity of the Old Discount Notes. The form and terms of the New Discount Notes will be the same as the form and terms of the Old Discount Notes except that (i) the Accreted Value (as defined) of the New Discount Notes will be calculated from the date of issuance of the Old Discount Notes, and (ii) the New Discount Notes are being registered under the Securities Act and, therefore, will not bear legends restricting their transfer. The New Discount Notes will evidence the same debt as the Old Discount Notes and will be entitled to the benefits of the Discount Notes Indenture (as defined) pursuant to which the Old Discount Notes were issued. The Old Discount Notes and the New Discount Notes are sometimes referred to collectively herein as the "Discount Notes." See "Description of New Discount Notes." The Discount Notes Exchange Offer.................... $1,000 principal amount at maturity of New Discount Notes in exchange for each $1,000 principal amount at maturity of Old Discount Notes. As of the date hereof, Old Discount Notes representing $44,612,000 aggregate principal amount at maturity are outstanding. The terms of the New Discount Notes and the Old Discount Notes are substantially identical. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to Holdings, Holdings believes that New Discount Notes issued pursuant to the Discount Notes Exchange Offer in exchange for Old Discount Notes may be offered for resale, resold and otherwise transferred by any person receiving the New Discount Notes, whether or not that person is the holder (other than any such holder or such other person that is an "affiliate" of Holdings within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that (i) the New Discount Notes are acquired in the ordinary course of business of that holder or such other person, (ii) neither the holder nor such other person is engaging in or intends to engage in a distribution of the New Discount Notes, and (iii) neither the holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the New Discount Notes. See "The Exchange Offers -- Purpose and Effect." Each broker-dealer that receives New Discount Notes for its own account in exchange for Old Discount Notes, where those Old Discount Notes were acquired by the broker-dealer as a result of its market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Discount Notes. See "Plan of Distribution." Registration Rights Agreement.................. The Old Discount Notes were sold by Holdings on June 12, 1997, in a private placement. In connection with the sale, Hedstrom and Holdings entered into the Registration Rights Agreement providing for, among other things, the Discount Notes Exchange Offer. See "The Exchange Offers -- Purpose and Effect." Expiration Date............ The Discount Notes Exchange Offer will expire at 5:00 p.m., New York City time, on December 4, 1997, or such later date and time to which it is extended. Withdrawal................. The tender of Old Discount Notes pursuant to the Discount Notes Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Discount Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Discount Notes Exchange Offer. Accreted Value of the New Discount Notes and Old Discount Notes........... The Accreted Value of each New Discount Note will be calculated from the date of issuance of the Old Discount Note for which such New Discount Note is exchanged. Conditions to the Discount Notes Exchange Offer....... The Discount Notes Exchange Offer is subject to certain customary conditions, certain of which may be waived by Hedstrom. See "The Exchange Offers -- Certain Conditions to the Exchange Offers." Procedures for Tendering Old Discount Notes......... Each holder of Old Discount Notes wishing to accept the Discount Notes Exchange Offer must complete, sign and date the accompanying letter of transmittal relating to the Discount Notes Exchange Offer (the "Discount Notes Letter of Transmittal"; the Discount Notes Letter of Transmittal and the Senior Subordinated Notes Letter of Transmittal are sometimes referred to herein individually as a "Letter of Transmittal" and collectively as the "Letters of Transmittal"), or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Discount Notes Letter of Transmittal, or the copy, together with the Old Discount Notes and any other required documentation, to the Discount Notes Exchange Agent (as defined) at the address set forth in the Discount Notes Letter of Transmittal. Persons holding Old Discount Notes through the Depository Trust Company ("DTC") and wishing to accept the Discount Notes Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering Participant will agree to be bound by the Discount Notes Letter of Transmittal. By executing or agreeing to be bound by the Discount Notes Letter of Transmittal, each holder will represent to Holdings that, among other things, (i) the New Discount Notes acquired pursuant to the Discount Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Discount Notes, whether or not such person is the holder of the Old Discount Notes, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Discount Notes within the meaning of the Securities Act, (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of Holdings, or if it is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such holder or other person is not a broker-dealer, neither the holder nor any such other person is engaged in or intends to engage in the distribution of such New Discount Notes, and (v) if such holder or other person is a broker-dealer, that it will receive New Discount Notes for its own account in exchange for Old Discount Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such new Discount Notes. Shelf Registration Requirement................ Pursuant to the Registration Rights Agreement, Holdings is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Discount Notes (and use its best efforts to cause such shelf registration statement to be declared effective by the Commission and keep it continuously effective, supplemented and amended for prescribed periods) if (i) Holdings is not permitted to effect the Discount Notes Exchange Offer because of any change in law or in applicable interpretations thereof by the staff of the Commission, (ii) the Discount Notes Exchange Offer is not consummated within 180 days of the date of issuance of the Old Discount Notes, (iii) any Initial Purchaser so requests with respect to Old Discount Notes not eligible to be exchanged for new Discount Notes in the Discount Notes Exchange Offer and held by it following consummation of the Discount Notes Exchange Offer, or (iv) any holder of Old Discount Notes (other than an Exchanging Dealer) is not eligible to participate in the Discount Notes Exchange Offer or, in the case of any holder of Old Discount Notes (other than an Exchanging Dealer) that participates in the Discount Notes Exchange Offer, such holder does not receive freely tradeable New Discount Notes upon consummation of the Discount Notes Exchange Offer. Acceptance of Old Discount Notes and Delivery of New Discount Notes........... Holdings will accept for exchange any and all Old Discount Notes which are properly tendered in the Discount Notes Exchange Offer prior to the Expiration Date. The New Discount Notes issued pursuant to the Discount Notes Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offers -- Terms of the Exchange Offer." Discount Notes Exchange Agent...................... United States Trust Company of New York is serving as Exchange Agent (the "Discount Notes Exchange Agent"; the Senior Subordinated Notes Exchange Agent and the Discount Notes Exchange Agent are sometimes referred to herein individually as an "Exchange Agent" and collectively as the "Exchange Agents") in connection with the Discount Notes Exchange Offer. Federal Income Tax Considerations........... The exchange pursuant to the Discount Notes Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations of the Exchange Offers." Effect of Not Tendering.... Old Discount Notes that are not tendered or that are tendered but not accepted will, following the completion of the Discount Notes Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. TERMS OF THE NEW NOTES NEW SENIOR SUBORDINATED NOTES: Issuer..................... Hedstrom Corporation. Securities Offered......... $110.0 million aggregate principal amount of 10% Senior Subordinated Notes Due 2007. Maturity................... June 1, 2007. Interest Payment Dates..... June 1 and December 1 of each year, commencing December 1, 1997. Optional Redemption........ The New Senior Subordinated Notes will not be redeemable at the option of Hedstrom prior to June 1, 2002, except (i) that until June 1, 2000, Hedstrom may redeem, at its option, in the aggregate up to $44,000,000 principal amount of the Senior Subordinated Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings (as defined) if at least $66,000,000 principal amount of the Senior Subordinated Notes remains outstanding after any such redemption and (ii) upon a Change of Control (as defined), as described below. On or after June 1, 2002, the New Senior Subordinated Notes may be redeemed at the option of Hedstrom, in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Senior Subordinated Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Hedstrom will have the option, at any time on or prior to June 1, 2002, to redeem the New Senior Subordinated Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined) and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Hedstrom does not redeem the New Senior Subordinated Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Senior Subordinated Notes may require Hedstrom to repurchase all or any portion of such holder's New Senior Subordinated Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Hedstrom will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Senior Subordinated Notes -- Optional Redemption" and "-- Change of Control." Ranking and Guaranties..... The New Senior Subordinated Notes will be unsecured senior subordinated obligations of Hedstrom and will be unconditionally guaranteed (jointly and severally) on a senior basis by Holdings (the "Holdings Guaranty") and on a senior subordinated basis (the "Subsidiary Guaranties" and, together with the Holdings Guaranty, the "Guaranties") by each domestic subsidiary of Hedstrom (the "Subsidiary Guarantors"). The New Senior Subordinated Notes will be subordinated in right of payment to all Senior Indebtedness (as defined) of Hedstrom and will rank pari passu in right of payment with all Senior Subordinated Indebtedness (as defined) of Hedstrom. The Holdings Guaranty will be an unsecured senior obligation of Holdings and will rank pari passu in right of payment with all Holdings Senior Indebtedness (as defined). Each Subsidiary Guaranty will be subordinated in right of payment to all Subsidiary Guarantor Senior Indebtedness (as defined) of the relevant Subsidiary Guarantor and will rank pari passu in right of payment with all Subsidiary Guarantor Senior Subordinated Indebtedness (as defined) of the relevant Subsidiary Guarantor. As of June 30, 1997, Senior Indebtedness of Hedstrom, Holdings Senior Indebtedness and Subsidiary Guarantor Senior Indebtedness were approximately $117.7 million, $244.3 million and $112.7 million, respectively, and Senior Subordinated Indebtedness of Hedstrom and Subsidiary Guarantor Senior Subordinated Indebtedness were approximately $110.0 million and $110.0 million, respectively. See "Description of New Senior Subordinated Notes -- Guaranties" and "-- Ranking and Subordination." Restrictive Covenants...... The Senior Subordinated Notes Indenture contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Hedstrom and its Restricted Subsidiaries (as defined), (ii) the payment of dividends and other restricted payments by Hedstrom and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of New Senior Subordinated Notes -- Certain Covenants." Use of Proceeds............ There will be no cash proceeds to Hedstrom from the exchange of New Senior Subordinated Notes for Old Senior Subordinated Notes pursuant to the Senior Subordinated Notes Exchange Offer. The net proceeds from the Original Senior Subordinated Notes Offering were used, together with proceeds from the other Financings, to effect the Acquisition. NEW DISCOUNT NOTES: Issuer..................... Hedstrom Holdings, Inc. Securities Offered......... $44,612,000 aggregate principal amount at maturity of 12% Senior Discount Notes Due 2009. Maturity................... June 1, 2009. Yield and Interest......... The Old Discount Notes were issued at a substantial discount from the principal amount at maturity of such notes. Principal on each New Discount Note will accrete from the date of issuance of the Old Discount Notes to a principal amount of $1,000 on June 1, 2002, representing a yield to maturity of 12% (based on the issue price of a Unit and computed on a semi-annual bond equivalent basis). Except as described herein, no cash interest will accrue on the New Discount Notes prior to June 1, 2002. Thereafter, cash interest will accrue at a rate of 12% per annum, and cash interest will be payable on June 1 and December 1 of each year, commencing December 1, 2002. There can be no assurance that Holdings will have adequate cash available at the time of any scheduled cash interest payments. Original Issue Discount.... For U.S. federal income tax purposes, the New Discount Notes will bear original issue discount ("OID") and each holder of a New Discount Note will be required to include such OID in gross income for U.S. federal income tax purposes, on a constant yield to maturity basis, in advance of the receipt of the cash payments to which such income is attributable. See "Certain United States Federal Income Tax Considerations with Respect to the New Notes." Optional Redemption........ The New Discount Notes will not be redeemable at the option of Holdings prior to June 1, 2002, except (i) that until June 1, 2000, Holdings may redeem, at its option, in the aggregate up to 40% of the Accreted Value of the Discount Notes at the redemption price set forth herein with the net proceeds of one or more Equity Offerings if at least $26,767,200 principal amount at maturity of the Discount Notes remains outstanding after any such redemption and (ii) upon a Change of Control, as described below. On or after June 1, 2002, the New Discount Notes may be redeemed at the option of Holdings, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the New Discount Notes -- Optional Redemption." Change of Control.......... Upon a Change of Control, (i) Holdings will have the option, at any time on or prior to June 1, 2002, to redeem the New Discount Notes, in whole but not in part, at a redemption price equal to 100% of the Accreted Value thereof plus the Applicable Premium and accrued and unpaid interest, if any, to the date of redemption, and (ii) if Holdings does not redeem the New Discount Notes pursuant to clause (i) above or if such Change of Control occurs after June 1, 2002, each holder of New Discount Notes may require Holdings to repurchase all or any portion of such holder's New Discount Notes at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that Holdings will be able to raise sufficient funds to meet this repurchase obligation should it arise. See "Description of the New Discount Notes -- Optional Redemption" and "-- Change of Control." Ranking.................... The New Discount Notes will be unsecured senior obligations of Holdings and will rank pari passu in right of payment with all Senior Indebtedness of Holdings, including the Holdings Guaranty and Holdings' guarantee of the Senior Credit Facilities. Except for the 1995 Recapitalization Notes (as defined) in an aggregate principal amount of $2.5 million, Holdings has not issued, and does not have any arrangement to issue, any indebtedness that would be subordinated to the New Discount Notes. Holdings is a holding company with no operations of its own and whose primary asset is the capital stock of Hedstrom, all of which is pledged to secure Holdings' guarantee of the Senior Credit Facilities. As a result of the holding company structure, the holders of the New Discount Notes will effectively rank junior in right of payment to all creditors of Hedstrom and its subsidiaries, including the lenders under the Senior Credit Facilities, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1997, the New Discount Notes were effectively subordinated to approximately $282.4 million of aggregate liabilities (including trade payables) of Hedstrom and its subsidiaries. Restrictive Covenants...... The Discount Notes Indenture (as defined) contains certain covenants that, among other things, limit (i) the incurrence of additional Indebtedness by Holdings and its Restricted Subsidiaries, (ii) the payment of dividends and other restricted payments by Holdings and its Restricted Subsidiaries, (iii) restrictions on distributions from Restricted Subsidiaries, (iv) asset sales, (v) transactions with affiliates, (vi) sales or issuances of Restricted Subsidiary capital stock and (vii) mergers and consolidations. All of these limitations and prohibitions, however, are subject to a number of important qualifications and exceptions. See "Description of the New Discount Notes -- Certain Covenants."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042534_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042534_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b8b418366fd0ea4c3dc2feab81487d93150f2992
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042534_first_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the detailed information and financial statements appearing elsewhere herein. First SecurityFed Financial, Inc. The Holding Company, First SecurityFed Financial, Inc., was recently formed by First Security under the laws of Delaware for the purpose of becoming a savings and loan holding company which will own all of the outstanding capital stock that First Security will issue in connection with the Conversion. Immediately following the Conversion, the only significant assets of the Holding Company will be the capital stock of First Security, a note evidencing the Holding Company's loan to the Employee Stock Ownership Plan (the "ESOP") and up to approximately 50% of the net proceeds from the Offering, less the amount of the ESOP loan. See "Use of Proceeds." Upon completion of the Conversion, the Holding Company's business initially will consist only of the business of First Security. See "First SecurityFed Financial, Inc." First Security General. First Security is a federally chartered mutual savings bank headquartered in Chicago, Illinois. While the Bank was originally chartered in 1928, the modern chapter of the Bank did not begin until 1964 when the prior board of directors resigned and President Kulas and eleven other community leaders assumed director positions. At that time, the Bank had less than $300,000 of assets and did not have federal deposit insurance. By the end of 1966, the assets of the Bank more than tripled and the Bank's board of directors, by pledging their own deposits to an agency of the federal government, had secured federal deposit insurance. Since that time, First Security has grown steadily by focusing on the needs of its customers, many of whom are persons of Ukrainian, Polish, Eastern European and Latin American descent, and by remaining extremely active in community affairs within its principal market areas. First Security currently serves the financial needs of communities in its market area through its main office located at 936 North Western Avenue, Chicago, Illinois 60622-4695 and from branch offices located in Chicago, Illinois, Philadelphia, Pennsylvania and Rolling Meadows, Illinois. Its deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation ("FDIC"). At April 30, 1997, First Security had total assets of $260.0 million, deposits of $219.0 million and equity of $30.0 million (or 11.54% of total assets). First Security has been, and intends to continue to remain, an independent, community oriented, financial institution. First Security's business involves attracting deposits from the general public and using such deposits, together with other funds, to originate primarily one- to four-family residential mortgages and, to a lesser extent, commercial real estate, multi-family, consumer and other loans primarily in its market area. At April 30, 1997, $137.5 million, or 81.32%, of the Bank's total loan portfolio consisted of one- to four-family residential mortgage loans. The Bank also invests in mortgage-backed and other securities and other permissible investments. See "Business Investment Activities - Securities" and "- Mortgage-Backed and Related Securities." Financial and operational highlights of the Bank include the following: Profitability. First Security historically has been very profitable. During each of the fiscal years ended December 31, 1992 through December 31, 1995, the Bank reported net income of between $3.0 million and $3.4 million. During the same periods the Bank's return on average assets ("ROAA") ranged from 1.76% to 1.34%, while its return on average equity ("ROAE") ranged from 17.12% to 11.64%. For the year ended December 31, 1996, First Security reported net income of $452,000, which equated to an ROAA of 0.18% and an ROAE of 1.50%. The decline in profitability for 1996 was primarily attributable to a mandatory $1.3 million one time assessment to recapitalize the Savings Association Insurance Fund and a $2.5 million contribution to the Foundation. For the year ended December 31, 1996, net income would have been $2.7 million without the one-time SAIF assessment and the contribution to the Foundation. ROAA would have been 1.08% and ROAE would have been 8.88%. See "Risk Factors - Stock Contribution to Charitable Foundation." For the four months ended April 30, 1997, the Bank recorded net income of $761,000, resulting in an annualized ROAA and ROAE of 0.88% and 7.65%, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Capital Strength. As a result of its historic profitability and commitment to maintaining a high level of capital, First Security has been able to maintain a strong equity to assets ratio. For each of the fiscal years ended from December 31, 1993 through December 31, 1996, the Bank's equity to assets ratio exceeded 11%. At April 30, 1997, the Bank had total equity of $30.0 million, or 11.54% of total assets, which substantially exceeded all of the applicable regulatory capital requirements with tangible, core and risk-based capital ratios of 11.4%, 11.4% and 24.4%, respectively. Assuming on a pro forma basis that $48.5 million, the midpoint of the Estimated Valuation Range, of shares were sold in the Conversion and approximately 50% of the net proceeds were contributed by the Holding Company to the Bank, as of April 30, 1997, the Bank's capital would have been $46.8 million (16.9% of assets). See "Pro Forma Regulatory Capital Analysis." Asset Quality. One of the principal aims of First Security's operating strategy is to maintain a high level of asset quality. The Board has sought to achieve this goal by emphasizing the origination of one- to four-family residential mortgage loans in the Bank's market area and by investing in government-backed or investment grade mortgage-backed and other securities. The Bank's ratio of non-performing assets to total assets was 0.87% at April 30, 1997. At that date, First Security had no real estate owned. Core Deposits. The Bank historically has been successful at attracting and retaining "core" deposits, which consist primarily of passbook, NOW and money market accounts. The Bank continues to utilize customer service, marketing initiatives and community outreach programs in order to maintain and expand its deposit base. At April 30, 1997, $90.8 million, or 41.4% of the Bank's total deposits consisted of passbook, NOW and money market accounts. These accounts generally carry lower interest rates and are believed by the Board to be more resistant to interest rate changes than certificate accounts. Niche Strategy. First Security has long been extremely active in community affairs within its urban market areas which are home to many persons of Ukrainian, Polish, Eastern European and, more recently, Latin American descent. Although the Bank historically has focused its operations on the Chicago market, the Bank purchased in 1994 from the Resolution Trust Corporation the deposits and many of the loans of Ukrainian Savings and Loan Association, a Philadelphia, Pennsylvania based thrift located in a community with an ethnic composition similar to that of the Bank's Chicago urban market areas. As a result of the Bank's marketing efforts and community involvement, the deposits of its Philadelphia branch have increased from approximately $22.3 million at June 24, 1994 to approximately $50.0 million at April 30, 1997. The Board believes that additional opportunities for future expansion may exist in other metropolitan areas, including areas with demographics similar to those of the Bank's Chicago and Philadelphia markets. However, there can be no assurance that the Bank will be able to identify any such additional opportunities, or successfully conclude a transaction to take advantage of them. Strong Community Orientation. The Board of Directors strongly believes that the Bank's success is closely tied to its focus on the financial and other needs of its community members, many of whom are of Ukrainian, Polish, Eastern European or, to a lesser extent, Latin American descent. In an attempt to better serve its customers, all of the Bank's directors and employees are fluent in at least one language in addition to English. In addition, the Bank encourages its employees to be active in the community, and substantially all of the Bank's employees and its directors and senior officers are active in local charitable community service organizations. Finally, the Bank itself has been highly active in community affairs as demonstrated by the formation and funding of a charitable foundation. See "Stock Contribution to Charitable Foundation." The Board strongly believes that the Bank can maintain the community orientation which has been so important to its operations only by remaining independent. The Board believes that the Bank is well positioned to maintain independent, community oriented operations into the next century and beyond. Stock Contribution to Charitable Foundation As a reflection of the Bank's long-standing commitment to the local community, in 1996, the Bank established The Heritage Foundation of First Security Federal Savings Bank, Inc. a private charitable foundation under the Illinois General Not-For-Profit Corporation Act, (the "Foundation"). The Foundation was established as a means of supporting the needs of the local community while simultaneously increasing the visibility and reputation of the Bank. The Foundation was initially funded by the Bank through several cash contributions aggregating $2.5 million, all of which were accrued by the Bank during the fourth quarter of 1996. In addition, under the Plan and subject to member approval, the Holding Company will contribute to the Foundation 250,000 shares of its Common Stock (the "Stock Contribution"). The Stock Contribution will be either in the form of a direct contribution or a sale of the shares for their aggregate par value ($2,500). The Holding Company believes that the Stock Contribution will be fully tax-deductible for both federal and state income tax purposes. Finally, the Company may make additional contributions to the Foundation in the future, although the Company has no current plans regarding timing or amount of such future contributions, if any. See "Risk Factors -- Risks Associated with the Stock Contribution to a Charitable Foundation." The Holding Company and the Bank believe that the funding of the Foundation with Common Stock of the Holding Company is a means of reinforcing the bond among the Bank and the communities in which the Bank operates, thereby enabling such communities to share in the potential growth and success of the Holding Company over the long-term. Although the Stock Contribution will result in a reduction in the Holding Company's conversion appraisal (but not in its pro forma capital per share or earnings per share), the Board believes that the Stock Contribution will enhance the long term value of the Bank by increasing customer loyalty as well as the size of its customer base. The Board believes that customer loyalty and community support are critical for the success of community oriented institutions such as the Bank. The Board believes that the Stock Contribution will facilitate the support of charitable activities even during periods when the Holding Company may not be in a position to support such activities. (Similarly, the Stock Contribution could enable the Foundation to offset the impact of variations in contribution levels from the Holding Company by accumulating funds during periods of relatively large contributions and disbursing such funds during periods of relatively small contributions.) In addition, the Board believes that the Stock Contribution will have a highly beneficial public relations impact. Finally, the Board believes that the Stock Contribution will facilitate the participation of non-Holding Company personnel in charitable activities. The Board believes that the Foundation and the making of the Stock Contribution on the terms described herein represents an opportunity to make a significant charitable contribution which will benefit the Holding Company and the Bank at a time when they have adequate capital, are not yet subject to possible earnings pressure resulting from the Holding Company's status as a public company and there is a need for charitable funding in the Bank's market area. The Foundation has been established to qualify as a private foundation under the Internal Revenue Code of 1986, as amended (the "Code"). As a private foundation, the Foundation is required to distribute annually in grants or donations at least 5% of its net investment assets. The Foundation is dedicated to the promotion of charitable purposes within the communities in which the Bank operates, including, but not limited to, providing grants or donations to community groups, cultural activities, youth and elder care and other types of organizations or projects. While the Foundation is authorized to engage directly in charitable activities, in order to limit overhead costs, it is currently anticipated that the Foundation's primary activity will consist of making grants to other charitable organizations. The authority for the affairs of the Foundation is vested in the Board of Trustees of the Foundation which is currently comprised of Chairman Nadzikewycz, President Kulas and Director Gawryk, each of whom is also currently a member of the Bank's Board of Directors. In accordance with the OTS rules regarding conflicts of interests, such persons excused themselves from the Bank Board's vote on the Stock Contribution. Under the terms of the Foundation's articles of incorporation, new trustees may be selected only by the Foundation's Board of Trustees. The Board of Trustees may be expanded following the Conversion to include additional Bank directors and other community members as trustees; but it is currently anticipated that at least a majority of the Foundation's Board of Trustees will consist of persons who are then-current or former directors of the Bank. The Foundation's articles of incorporation provide that the earnings of the Foundation shall not result in any private benefit for its members, trustees or officers. In addition, it is anticipated that the Foundation will adopt a conflicts of interest policy to protect against inappropriate benefits for trustees or officers of the Foundation and any related parties. While these provisions would not prohibit the payment of reasonable compensation for services rendered, the members of the Board of Trustees do not currently receive fees for service on the Board. The Trustees of the Foundation are responsible for establishing and carrying out the policies of the Foundation with respect to grants or donations by the Foundation, consistent with the purposes for which the Foundation was established. The Trustees of the Foundation are also responsible for directing the activities of the Foundation, including the management of the shares of Common Stock held by the Foundation; provided, however, that the voting of any such shares will be subject to applicable OTS policy regarding foundations. Under the terms of the OTS letter approval of the conversion application, when matters are presented for a stockholder vote, the shares of Common Stock held by the Foundation must be voted in the same ratio as all other shares of the Common Stock. Under such circumstances, the Board and management of the Holding Company would derive no additional voting control from such shares. However, in the event that the OTS were to waive this voting restriction, the Foundation's Board of Trustees would exercise voting control over such shares. Since the Foundation's Board of Trustees currently consists of three Holding Company directors, in the event that the OTS were to waive this restriction, the number of shares over which the Board of Directors of the Holding Company is deemed to exercise voting control could increase. However, as of the date hereof, the Company has no intentions to seek such a waiver. It is currently anticipated that the Foundation will adopt a policy addressing affiliated transactions between the Foundation and the Holding Company or the Bank. Any transactions between the Foundation and the Bank will comply with applicable provisions of Sections 23A and 23B of the Federal Reserve Act, as amended, as well as with the OTS conflicts of interests regulations. Additionally, the Holding Company (but not the Bank) may provide office space and administrative support to the Foundation without charge provided that such actions comply with the applicable conflicts of interests restrictions. Under applicable IRS regulations, the Foundation will be authorized to purchase shares of the Holding Company's Common Stock in the open market, subject to certain restrictions. However, it is not currently anticipated that the Foundation will purchase any such shares. The OTS has informed the Holding Company that any such purchases of Common Stock in the open market by the Foundation would be considered to be purchases by the Holding Company for the purpose of the OTS limitations on post-conversion stock repurchases. See "Use of Proceeds." If approved by members, the Stock Contribution will be made within twelve months following the completion of the Conversion. However, as discussed below, the Holding Company will recognize the expense related to the Stock Contribution in the quarter in which the Conversion is completed. Once made, the Stock Contribution will not be recoverable by the Holding Company or the Bank. The Foundation may receive working capital from any dividends that may be paid on the Holding Company's Common Stock in the future and, subject to applicable federal and state laws, from loans collateralized by the Common Stock or from the proceeds of the sale of any of the Common Stock in the open market from time to time as may be permitted to provide the Foundation with additional liquidity. One of the conditions imposed on the Stock Contribution by the Holding Company is that the amount of Common Stock that may be sold by the Foundation in any one year shall not exceed 5% of the average market value of the assets held by the Foundation, except where the Board of Trustees of the Foundation, by three-fourths vote, determines that the failure to sell an amount of Common Stock greater than such amount would result in a long-term reduction in the value of the Foundation's assets and as such would jeopardize the Foundation's capacity to carry out its charitable purposes. The Stock Contribution is also subject to certain conditions imposed by the OTS in connection with its approval of the Conversion. See "The Conversion -- Stock Contribution to the Charitable Foundation." and "-- Regulatory Conditions Imposed on the Foundation." Assuming the sale of shares at the maximum of the Estimated Valuation Range, the Company will have 5,822,000 shares issued and outstanding, of which the Foundation will own 250,000 shares or 4.3%. Due to the additional issuance of shares of Common Stock to the Foundation, persons purchasing shares in the Conversion will have their ownership and voting interests in the Company diluted. See "Pro Forma Data." If the Stock Contribution is approved by the Bank's members, the Holding Company will recognize a $2.5 million expense (offset in part by a corresponding tax benefit), during the quarter in which the Conversion is completed, which is expected to be the fourth quarter of fiscal 1997. Such expense will likely eliminate earnings in the quarter in which it is recognized and have a material adverse impact on the Holding Company's earnings for fiscal year 1997. Assuming a contribution valued at $2.5 million, the Holding Company estimates a net tax-effected expense of $1.5 million. If the Stock Contribution had been expensed during the four month period ended April 30, 1997, the Bank would have reported a net loss of $739,000 for the four months ended April 30, 1997 rather than net income of $761,000. For further discussion of the Foundation and its impact on purchasers of Common Stock in the Conversion, see "Risk Factors Stock Contribution to a Charitable Foundation" and "Pro Forma Data." Because the Stock Contribution will result in dilution, it will reduce the estimated pro forma market value of the stock to be sold by approximately $4.6 million at the midpoint of the Estimated Valuation Range. As a result, the pro forma capital of the Holding Company will be $3.0 million lower at the midpoint of the Estimated Valuation Range than it would have been without the Stock Contribution. However, because of the lower number of shares which are being offered (as a result of the lower appraisal), per share capital and earnings are expected to be approximately the same. See "Comparison of Valuation and Pro Forma Information With No Stock Contribution." As a result of the $4.6 million reduction in the estimated pro forma market value of the stock to be sold caused by the Stock Contribution, the amount of shares expected to be purchased by directors and executive officers, assuming the sale of the midpoint number of shares, increased from 4.0% to 4.3% of the shares sold. See "The Conversion--Participation by the Board and Executive Officers." However, it should also be noted that their stock incentive awards, which are calculated as a percentage of the conversion shares, will be reduced by the reduction in the estimated pro forma market value of the stock to be sold caused by the Stock Contribution. The Stock Contribution is subject to the approval of a majority of the total outstanding votes of the Bank's members eligible to be cast at the Special Meeting. The Stock Contribution will be considered as a separate matter from the vote to approve the Plan of Conversion. If the Bank's members approve the Plan of Conversion, but not the Stock Contribution, the Bank intends to complete the Conversion without the Stock Contribution. Failure to approve the Stock Contribution may materially increase the aggregate pro forma market value of the Common Stock being offered since the Estimated Valuation Range, as set forth herein, takes into account the after-tax impact of the Stock Contribution. If the pro forma market value of the shares of the Common Stock to be sold without the Stock Contribution is either greater than $64.1 million or less than $41.2 million or if the OTS otherwise requires a resolicitation of subscribers, the Bank will establish a new Estimated Valuation Range and commence a resolicitation of subscribers (i.e., subscribers will be permitted to continue or modify their orders, in which case they will need to affirmatively reconfirm their subscriptions prior to the expiration of the resolicitation offering or their subscription funds will be promptly refunded with interest.) Any change in the Estimated Valuation Range must be approved by the OTS. See "Pro Forma Data," "Comparison of Valuation and Pro Forma Information With No Stock Contribution," and "The Conversion--Stock Contribution to the Charitable Foundation" and "The Conversion--Stock Pricing." The Conversion The Offering is being made in connection with the conversion of First Security from a federally chartered mutual savings bank to a federally chartered stock savings bank and the formation of First SecurityFed Financial, Inc. as the holding company of First Security. The Conversion is subject to certain conditions, including the prior approval of the Plan by the Bank's members at a Special Meeting to be held on ______ __, 1997. After the Conversion, the Bank's current voting members (who include certain deposit account holders and borrowers) will have no voting rights in First Security and will have no voting rights in the Holding Company unless they become Holding Company stockholders. Eligible Account Holders and Supplemental Eligible Account Holders, however, will have certain liquidation rights in the Bank. See "The Conversion Effects of Conversion to Stock Form on Depositors and Borrowers of the Bank - Liquidation Rights." By converting to the stock form of organization, the Bank will be structured in the form used by all commercial banks, most major business corporations and an increasing number of savings institutions. The Conversion will also increase the equity capital of the Bank. See "The Conversion -- Business Purposes." The Offering. The shares of Common Stock to be issued in the Conversion are being offered at a Purchase Price of $10.00 per share in the Subscription Offering pursuant to nontransferable Subscription Rights in the following order of priority: (i) Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on December 31, 1995); (ii) Tax-Qualified Employee Plans; provided, however, that the Tax Qualified Employee Plans shall have first priority Subscription Rights to the extent that the total number of shares of Common Stock sold in the Conversion exceeds the maximum of the Estimated Valuation Range; (iii) Supplemental Eligible Account Holders (i.e., depositors whose accounts in the Bank totaled $50.00 or more on ________ __, ____); (iv) Other Members (i.e., depositors as of ________ __, ____ and certain borrowers of the Bank as of ________ __, ____ and _______ __, ____); and (v) employees, officers and directors of the Bank. Subscription Rights received in any of the foregoing categories will be subordinated to the Subscription Rights received by those in a prior category. Subscription Rights will expire if not exercised by noon, Chicago, Illinois time, on ______ _, ____, unless extended (the "Expiration Date"). Subject to the prior rights of holders of Subscription Rights and market conditions at or near the completion of the Subscription Offering, any shares of Common Stock not subscribed for in the Subscription Offering may be offered at the same price in a Public Offering and/or Direct Community Offering through FBR to selected persons to whom this prospectus is delivered. To order Common Stock in connection with the Public Offering and/or Direct Community Offering, if any, an executed Order Form and full payment at $10.00 per share in the form of a check, bank draft or money order must be received by FBR prior to the termination of such offerings. The date by which orders must be received in the Public Offering and/or Direct Community Offering, if any, will be set by the Holding Company at the time of such offering provided that if the Offering is extended beyond _____ _, 1997, each subscriber will have the right to modify or rescind his or her subscription. The Holding Company and the Bank reserve the absolute right to accept or reject any orders in the Public Offering and Direct Community Offering, in whole or in part. If necessary, shares of Common Stock may also be offered in connection with the Public Offering for sale on a best-efforts basis by selected dealers managed by FBR. See "The Conversion -- Public Offering and Direct Community Offering." The Bank and the Holding Company have engaged FBR to consult with and advise the Holding Company and the Bank with respect to the Offering, and FBR has agreed to solicit subscriptions and purchase orders for shares of Common Stock in the Offering. Neither FBR nor any selected broker-dealers will have any obligation to purchase shares of Common Stock in the Offering. FBR will receive for its services a marketing fee of 1.0% of the total dollar amount of Common Stock sold in the Conversion (excluding purchases by directors, officers, employees and members of their immediate families, the Foundation and the employee benefit plans of the Holding Company and the Bank, and shares sold by selected broker-dealers). To the extent selected broker-dealers are utilized in connection with the sale of shares in the Public Offering, the selected dealers will receive a fee of up to 4.5% and FBR will receive a fee of 1.0% of the aggregate Purchase Price for all shares of Common Stock sold through such broker-dealers. FBR will also receive reimbursement for certain expenses incurred in connection with the Offering. The Holding Company has agreed to indemnify FBR against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended ("Securities Act"). See "The Conversion - Marketing Arrangements." The Bank has established a Stock Center, which will be managed by FBR, to coordinate the Offering, and answer questions about the Offering received by telephone. All subscribers will be instructed to mail payment to the Stock Center or deliver payment directly to one of the Bank's offices. In addition, representatives of FBR will be available to answer questions at the Bank's Philadelphia, Pennsylvania office. Payment for shares of Common Stock may be made by cash (if delivered in person), check or money order or by authorization of withdrawal from deposit accounts maintained with the Bank. Such funds will not be available for withdrawal and will not be released until the Conversion is completed or terminated. See "The Conversion - Method of Payment for Subscriptions." Purchase Limitations. The Plan of Conversion places limitations on the number of shares which may be purchased in the Conversion by various categories of persons. With the exception of the Tax-Qualified Employee Plans, no Eligible Account Holder, Supplemental Eligible Account Holder, Other Member or director, officer or employee may purchase in their capacity as such in the Subscription Offering more than $250,000 of Common Stock; no person, together with associates of and persons acting in concert with such person, may purchase more than $250,000 of Common Stock in the Public Offering; and no person or group of persons acting in concert (other than the Tax-Qualified Employee Plans) may purchase more than $750,000 of Common Stock in the Conversion. The minimum purchase limitation is 25 shares of Common Stock. These purchase limits may be increased or decreased consistent with the Office of Thrift Supervision ("OTS") regulations at the sole discretion of the Holding Company and the Bank. See "The Conversion - Offering of Holding Company Common Stock." Restrictions on Transfer of Subscription Rights. Prior to the completion of the Conversion, no person may transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Persons found to be selling or otherwise transferring their right to purchase stock in the Subscription Offering or purchasing Common Stock on behalf of another person will be subject to forfeiture of such rights and possible federal penalties and sanctions. See "The Conversion -- Restrictions on Transfer of Subscription Rights and Shares." Stock Pricing and Number of Shares of Common Stock to be Issued in the Conversion. The Purchase Price of the Common Stock is $10.00 per share and is the same for all purchasers. The aggregate pro forma market value of the Holding Company and First Security, as converted, was estimated by FinPro, which is experienced in appraising converting thrift institutions, to be the Estimated Valuation Range. The Board of Directors has reviewed the Estimated Valuation Range as stated in the appraisal and compared it with recent stock trading prices as well as recent pro forma market value estimates for other financial institutions. The Board of Directors has also reviewed the appraisal report, including the assumptions and methodology utilized therein, and determined that it was not unreasonable. Depending on market and financial conditions at the time of the completion of the Offering, the total number of shares of Common Stock to be issued in the Conversion may be increased or decreased significantly from the 5,572,000 shares offered hereby and the Purchase Price may be decreased. However, subscribers will be permitted to modify or rescind their subscriptions if the product of the total number of shares to be sold multiplied by the price per share is less than $41.2 million or more than $64.1 million. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any kind as to the advisability of voting to approve the Conversion or of purchasing shares of Common Stock. The appraisal considers First Security and the Holding Company only as going concerns and should not be considered as any indication of the liquidation value of First Security or the Holding Company. Moreover, the appraisal is necessarily based on many factors which change from time to time. There can be no assurance that persons who purchase shares in the Offering will be able to sell such shares at prices at or above the Purchase Price. See "Pro Forma Data" and "The Conversion - Stock Pricing and Number of Shares to be Issued" for a description of the manner in which such valuation was made and the limitations on its use. Purchases by Directors and Executive Officers The directors and executive officers of First Security intend to purchase, for investment purposes and at the same price as the shares are sold to other investors in the Conversion, approximately $2.1 million of Common Stock, or 5.1%, 4.3% or 3.8% of the shares to be sold in the Conversion at the minimum, midpoint and maximum of the Estimated Valuation Range, respectively. In addition, an amount of shares equal to an aggregate of 8% of the shares to be issued in the Conversion, including the shares to be issued pursuant to the Stock Contribution, is anticipated to be purchased by the ESOP. See "The Conversion -- Participation by the Board and Executive Officers." Potential Benefits of Conversion to Directors and Executive Officers Employee Stock Ownership Plan. The Board of Directors of the Bank has adopted an ESOP, a tax-qualified employee benefit plan for officers and employees of the Holding Company and the Bank. All employees of the Bank are eligible to participate in the ESOP after they attain age 21 and complete one year of service. The Bank's contribution to the ESOP is allocated among participants on the basis of their relative compensation. Each participant's account will be credited with cash and shares of Holding Company Common Stock based upon compensation earned during the year with respect to which the contribution is made. The ESOP intends to buy up to 8% of the Common Stock sold in the Conversion (approximately $3.3 million to $4.5 million of the Common Stock based on the issuance of the minimum and the maximum of the Estimated Valuation Range and the $10.00 per share Purchase Price). The ESOP will purchase the shares with funds borrowed from the Holding Company, and it is anticipated that the ESOP will repay the loans through periodic tax-deductible contributions from the Bank over a ten-year period. These contributions will increase the compensation expense of the Bank. See "Management - Benefit Plans - Employee Stock Ownership Plan" for a description of this plan. Stock Option and Incentive Plan and Recognition and Retention Plan. The Board of Directors of the Holding Company intends to adopt a Stock Option and Incentive Plan (the "Stock Option Plan") and a Recognition and Retention Plan ("RRP") to become effective upon ratification by stockholders following the Conversion. Certain of the directors and executive officers of the Holding Company and the Bank will receive awards under these plans. It is currently anticipated that an amount of shares equal to 10% and 4% of the shares sold in the Conversion, including the shares to be issued pursuant to the Stock Contribution, will be reserved for issuance under the Stock Option Plan and RRP, respectively. Depending upon market conditions in the future, the Holding Company may purchase shares in the open market to fund these plans. See "Management - Benefit Plans" for a description of these plans. Under the proposed Stock Option Plan, it is presently intended that the directors and executive officers be granted options to purchase, in addition to the shares to be issued in the Conversion, an amount of shares equal to 8.4% of the shares issued in the Conversion, including the shares to be issued pursuant to the Stock Contribution, (or 345,912 and 468,048 shares, respectively, of Common Stock based on the minimum and maximum of the Estimated Valuation Range) at an exercise price equal to the market value per share of the Common Stock on the date of grant. Such options will be awarded at no cost to the recipients and pose no financial risk to the recipients until exercised. It is presently anticipated that Julian Kulas, President and Chief Executive Officer, will receive an option to purchase an amount of shares equal to 2.5% of the shares issued in the Conversion (or 102,950 and 139,300 shares, assuming the minimum and maximum of the Estimated Valuation Range, respectively). See "Management Benefit Plans - Stock Option and Incentive Plan." The award and exercise of options pursuant to the Stock Option Plan will not result in any expense to the Holding Company; however, when the options are exercised, the interests of existing stockholders will likely be diluted. It is also intended that directors and executive officers be granted under the RRP (without any requirement of payment by the grantee) an amount of shares of restricted stock awards equal to 3.4% of the shares sold in the Conversion (or 140,012 and 189,448 shares, respectively, based on the minimum and maximum of the Estimated Valuation Range), which will vest over five years commencing one year from stockholder ratification and which will have a total value of $1.4 million and $1.9 million based on the Purchase Price of $10.00 per share at the minimum and maximum of the Estimated Valuation Range, respectively. It is presently anticipated that President Kulas will receive a restricted stock award equal to 1.0% of the shares issued in the Conversion, including the shares to be issued pursuant to the Stock Contribution, (or 41,180 and 55,720 shares, assuming the minimum and maximum of the Estimated Valuation Range). The restricted stock award to President Kulas would have an aggregate value ranging from $411,800 to $557,200 (at the minimum and maximum of the Estimated Valuation Range) based upon the original Purchase Price of $10.00 per share. See "Risk Factors - Takeover Defensive Provisions" and "Management - Benefit Plans - Recognition and Retention Plan." Following stockholder ratification of the RRP, the RRP will be funded either with shares purchased in the open market or with authorized but unissued shares. Based upon the Purchase Price of $10.00 per share, the amount required to fund the full number of shares available for grant under the RRP through open-market purchases would range from approximately $1.6 million (based upon the sale of shares at the minimum of the Estimated Valuation Range) to approximately $2.2 million (based upon the sale of shares at the maximum of the Estimated Valuation Range). In the event that the per share price of the Common Stock increases above the $10.00 per share Purchase Price following completion of the Offering, the amount necessary to fund the RRP would also increase. The expense related to the cost of the RRP will be recognized over the five-year vesting period of the awards made pursuant to such plan. The use of authorized but unissued shares to fund the RRP would dilute the interests of stockholders who purchase Common Stock in the Conversion. See "Management - Benefit Plans - Recognition and Retention Plan." The Holding Company intends to submit the RRP and the Stock Option Plan to stockholders for ratification following completion of the Offering, but in no event prior to six months following the completion of the Conversion. These plans will only be effective if ratified by the stockholders. In the event the Stock Option Plan and the RRP are not ratified by stockholders, management may consider the adoption of alternate incentive plans, although no such plans are currently contemplated. While the Bank believes that the RRP and the Stock Option Plan will provide important incentives for the performance and retention of management, the Bank has no reason to believe that the failure to obtain shareholder ratification of such plans would result in the departure of any members of senior management. Employment and Severance Agreements. The Bank intends to enter into an employment agreement with President Kulas. It is anticipated that the agreement will provide for a salary equal to his current salary, will have an initial term of three years, subject to annual extension for an additional year following the Bank's annual performance review and will become effective upon the completion of the Conversion. Under certain circumstances including a change in control, as defined in the employment agreement, Mr. Kulas will be entitled to a severance payment in lieu of salary equal to a multiple of his base amount of compensation, as defined. See "Management - Executive Compensation." The Bank also intends to enter into change in control severance agreements with four other executive officers. Such agreements will have initial terms of 24 months and become effective upon completion of the Conversion. In the event a covered officer is terminated following a "change in control" (as defined in the agreements), such officer will be entitled to a severance payment of 200% of their then current compensation. See "Management - Executive Compensation - Employment Agreements and Severance Agreements" for the definition of "change in control" and a more detailed description of these agreements. Use of Proceeds The net proceeds from the sale of Common Stock in the Conversion (estimated at $40.3 million, $47.5 million, $54.7 million and $63.0 million based on sales at the minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation Range, respectively) will substantially increase the capital of First Security. See "Pro Forma Data." The Holding Company will utilize approximately 50% of the net proceeds from the issuance of the Common Stock to purchase all of the common stock of First Security to be issued upon Conversion and will retain approximately 50% of the net proceeds. The proceeds retained by the Holding Company will be invested initially in short-term investments similar to those currently in the Bank's portfolio. Such proceeds will subsequently be invested in mortgage-backed securities and investment securities and will be available for general corporate purposes, including the possible repurchase of shares of the Common Stock, as permitted by the OTS. The Holding Company currently has no specific plan to make any such repurchases of any of its Common Stock. In addition, the Holding Company intends to provide the funding for the ESOP loan. Based upon the initial Purchase Price of $10.00 per share, the dollar amount of the ESOP loan would range from $3.3 million (based upon the sale of shares at the minimum of the Estimated Valuation Range) to $4.5 million (based upon the sale of shares at the maximum of the Estimated Valuation Range). It is anticipated that the ESOP will repay the loan through periodic tax-deductible contributions from the Bank over a ten-year period. The interest rate to be charged by the Holding Company on the ESOP loan will be based upon the Internal Revenue Service ("IRS") prescribed applicable federal rate at the time of origination. Finally, the Holding Company currently intends to use a portion of the proceeds to fund a Recognition and Retention Plan ("RRP"), subject to stockholder ratification. Compensation expense related to the RRP will be recognized as share awards vest. See "Pro Forma Data." Following stockholder ratification of the RRP, the RRP may be funded either with shares purchased in the open market or with authorized but unissued shares. Based upon the Purchase Price of $10.00 per share, the amount required to fund the RRP through open-market purchases would range from approximately $1.6 million (based upon the sale of shares at the minimum of the Estimated Valuation Range) to approximately $2.2 million (based upon the sale of shares at the maximum of the Estimated Valuation Range). In the event that the per share price of the Common Stock increases above the $10.00 per share Purchase Price following completion of the Offering, the amount necessary to fund the RRP would also increase. The use of authorized but unissued shares to fund the RRP could dilute the interests of stockholders who purchase Common Stock in the Conversion. See "Management Benefit Plans - Recognition and Retention Plan." The net proceeds received by First Security will become part of First Security's general funds for use in its business and will be used to support the Bank's existing operations, subject to applicable regulatory restrictions. Immediately upon the completion of the Conversion, it is anticipated that the Bank will invest such proceeds into short-term assets. Subsequently, the Bank intends to redirect the net proceeds to the origination of residential loans and, to a lesser extent, multi-family and commercial real estate and consumer loans, subject to market conditions. In addition, a portion of the proceeds may be used for the creation of one or more de novo branch offices within the greater Chicago or Philadelphia areas, although the Bank has no specific plans regarding any new branch offices at this time. Finally, such proceeds will be available for the acquisition of deposits or assets or both from other institutions, although no such acquisitions are contemplated at this time. See "Use of Proceeds" for additional information on the utilization of the offering proceeds as well as OTS restrictions on repurchases of the Holding Company's stock. Dividends The Holding Company currently has no plans to pay dividends. However, the Holding Company's Board of Directors may consider a policy of paying dividends in the future. The declaration and payment of dividends are subject to, among other things, the Holding Company's financial condition and results of operations, First Security's compliance with its regulatory capital requirements, including the fully phased-in capital requirements, tax considerations, industry standards, economic conditions, regulatory restrictions, general business practices and other factors. There can be no assurance as to whether or when the Holding Company will pay a dividend. See "Dividends." Market for Common Stock The Holding Company has applied to have the Common Stock traded on the Nasdaq Stock Market under the symbol "____." In order to be traded on the Nasdaq Stock Market, there must be at least three market makers for the Common Stock. FBR has indicated its intention to make a market in the Holding Company's Common Stock following completion of the Conversion, depending upon the volume of trading activity in the Common Stock and subject to compliance with applicable laws and other regulatory requirements. Additional market markers have not yet been secured by the Holding Company. The Holding Company anticipates that it will be able to secure the additional market makers necessary to enable the Common Stock to be traded on the Nasdaq Stock Market. A public market having the desirable characteristics of depth, liquidity and orderliness, however, depends upon the presence in the marketplace of both willing buyers and sellers of the Common Stock at any given time, which is not within the control of the Holding Company, First Security or any market maker. Further, no assurance can be given that an investor will be able to resell the Common Stock at or above the Purchase Price after the Conversion. See "Market for Common Stock" and "The Conversion - Stock Pricing and Number of Shares to be Issued." Risk Factors See "Risk Factors" for information regarding certain factors which should be considered by prospective investors, including interest rate risk exposure, risks associated with a contribution to a charitable foundation, competition, takeover defensive provisions contained in the Holding Company's certificate of incorporation and bylaws, post-conversion overhead expenses, regulatory oversight, the risk of a delayed offering, the absence of an active market for the Common Stock and the possible consequences of amendment of the Plan of Conversion. SELECTED FINANCIAL INFORMATION Set forth below are selected financial and other data of the Bank. The financial data is derived in part from, and should be read in conjunction with the Consolidated Financial Statements and Notes of the Bank presented elsewhere in this Prospectus. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial condition and results of operations of First Security as of April 30, 1997 and for the four month periods ended April 30, 1997 and 1996. Interim results at and for the four months ended April 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. <TABLE> <CAPTION> At December 31, -------------------------------------------------------------------- At April 30, 1997 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> <C> <C> Selected Financial Condition Data: Total assets ............................. $260,002 $258,115 $251,922 $227,922 $189,846 $177,443 Cash and cash equivalents ................ 7,104 7,300 19,173 6,800 11,365 8,667 Loans receivable, net(1) ................. 165,914 163,348 144,566 136,207 105,946 97,968 Mortgage-backed securities(2): Held-to-maturity ....................... 22,389 24,109 25,120 42,621 45,445 37,911 Available-for-sale ..................... 18,616 19,727 20,044 -- -- -- Securities(2) Held-to-maturity ....................... 28,259 25,779 20,566 17,926 20,804 27,693 Available-for-sale ..................... 8,919 8,997 13,743 15,662 -- -- Deposits ................................. 218,987 219,505 209,387 195,875 161,715 154,559 Total borrowings ......................... 7,500 4,000 10,000 3,000 1,000 1,000 Total equity ............................. 29,950 29,261 29,038 25,555 22,395 19,214 </TABLE> <TABLE> <CAPTION> Four Months Year Ended Ended April 30, December 31, ---------------- -------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- (In Thousands) <S> <C> <C> <C> <C> <C> <C> <C> Selected Operations Data: Total interest income ..................................... $ 6,495 $ 6,124 $19,006 $17,650 $15,710 $13,995 $14,764 Total interest expense .................................... 3,220 3,163 9,494 8,727 6,584 6,068 7,308 ------- ------- ------- ------- ------- ------- ------- Net interest income ..................................... 3,275 2,961 9,512 8,923 9,126 7,927 7,456 Provision for loan losses ................................. 574 42 706 136 182 249 184 ------- ------- ------- ------- ------- ------- ------- Net interest income after provision for loan losses ....... 2,701 2,919 8,806 8,787 8,944 7,678 7,272 ------- ------- ------- ------- ------- ------- ------- Fees and service charges .................................. 116 121 362 378 326 281 229 Gain on sales of securities ............................... -- -- 55 24 5 32 28 Other non-interest income ................................. 81 73 328 454 246 286 171 ------- ------- ------- ------- ------- ------- ------- Total non-interest income ................................. 197 194 745 856 577 599 428 Total non-interest expense ................................ 1,657 1,520 8,693(3) 4,690 4,271 3,457 3,173 ------- ------- ------- ------- ------- ------- ------- Income before taxes ....................................... 1,241 1,593 858 4,953 5,250 4,820 4,527 Income tax provision ...................................... 480 603 406 1,760 1,825 1,644 1,496 ------- ------- ------- ------- ------- ------- ------- Net income ................................................ $ 761 $ 990 $ 452 $ 3,193 $ 3,425 $ 3,176 $ 3,031 ======= ======= ======= ======= ======= ======= ======= - ------------- <FN> (1) The allowance for loan losses at April 30, 1997, December 31, 1996, 1995, 1994, 1993 and 1992 was $1,666,000, $1,520,000, $885,000, $792,000, $608,000 and $360,000, respectively. (2) The Bank adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective as of January 1, 1994. Prior to the adoption of SFAS No. 115, marketable equity securities were carried at the lower of amortized cost or market value and the remaining securities were carried at amortized cost , as adjusted for amortization of premiums and accretion of discounts over the remaining terms of the securities from the dates of purchase. (3) Includes $1.3 million SAIF special assessment and $2.5 million cash contribution to the Foundation. </FN> </TABLE> <TABLE> <CAPTION> Four Months Year Ended Ended April 30, December 31, ---------------- ------------------------------------------------ 1997(1) 1996(1) 1996 1995 1994 1993 1992 ------- ------- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> Selected Financial Ratios and Other Data: Performance Ratios: Return on assets (ratio of net income to average total assets) .......................................... 0.88% 1.19% 0.18%(2) 1.34% 1.62% 1.74% 1.76% Return on equity (ratio of net income to average equity) 7.65 10.07 1.50 (2) 11.64 14.23 15.21 17.12 Interest rate spread information: Average during period .............................. 3.45 3.37 3.51 3.61 4.28 4.22 4.16 Net interest margin(3) ............................. 3.96 3.81 3.98 4.00 4.60 4.56 4.54 Ratio of operating expense to average total assets ...... 1.92 1.83 3.45 (2) 1.97 2.03 1.89 1.84 Efficiency Ratio(4) ..................................... 0.48 0.48 0.85 (2) 0.48 0.44 0.41 0.40 Ratio of average interest-earning assets to average interest-bearing liabilities ....................... 112.96 110.69 111.81 109.93 109.51 109.55 108.56 Quality Ratios: Non-performing assets to total assets at end of period .. 0.87 1.18 1.44 1.11 0.72 1.05 1.32 Allowance for loan losses to non-performing loans at end of period ................................... 73.78 33.46 41.30 38.73 55.58 32.02 16.57 Allowance for loan losses to gross loans receivable at end of period ................................... 0.98 0.52 0.91 0.60 0.57 0.56 0.36 Capital Ratios: Equity to total assets at end of period(5) .............. 11.63 11.52 11.42 11.52 11.33 11.80 10.83 Average equity to average assets ........................ 11.50 11.84 11.97 11.55 11.42 11.42 10.27 - ------------ (1) Ratios for the four-month periods have been annualized. (2) Excluding the $1.3 million SAIF special assessment and the $2.5 million cash contribution to the Foundation, net of tax, the return on assets, return on equity and ratio of operating expense to average total assets would have been 1.10%, 9.19% and 1.94%, respectively. The efficiency ratio would have been 0.48. (3) Net interest income divided by average interest-earning assets. (4) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income. (5) Ratio is exclusive of unrealized gain (loss) on securities available-for-sale. </TABLE> RECENT FINANCIAL DATA The selected financial and other data of the Bank set forth below at and for the two and six months ended June 30, 1997 were derived from unaudited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial condition and results of operations for the unaudited periods presented have been included. The information presented below is qualified in its entirety by the detailed information and financial statements included elsewhere in this Prospectus and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and the audited Financial Statements of the Bank and Notes thereto included elsewhere in this Prospectus. At June 30, At April 30, 1997 1997 ---- ---- Selected Financial Condition Data: (In Thousands) - ---------------------------------- Total assets ................ $261,294 $260,002 Cash and cash equivalents ... 3,304 7,104 Loans receivable, net ....... 172,627 165,914 Securities available-for-sale 27,382 27,535 Securities held-to-maturity . 49,651 50,648 Deposits .................... 219,996 218,987 Total Borrowings ............ 7,500 7,500 Total Equity ................ 30,555 29,950 <TABLE> <CAPTION> Two Months Ended Six Months Ended June 30, June 30, ----------------------- ------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Selected Operations Data: (In Thousands) - ------------------------- <S> <C> <C> <C> <C> Interest income ........................................ $3,213 $3,275 $9,708 $9,399 Interest expense ....................................... 1,669 1,558 4,889 4,721 ------ ------ ------ ------ Net interest income before provision for loan losses ........................... 1,544 1,717 4,819 4,678 Provision for loan losses .............................. 41 41 615 83 ------ ------ ------ ------ Net interest income after provision for loan losses ........................... 1,503 1,676 4,204 4,595 Fees and service charges ............................... 64 62 180 183 Other non-interest income .............................. 34 38 115 111 Non-interest expense ................................... 824 856 2,481 2,376 ------ ------ ------ ------ Income before taxes .................................... 777 920 2,018 2,513 Income taxes ........................................... 270 343 750 946 ------ ------ ------ ------ Net income ........................................... $ 507 $ 577 $1,268 $1,567 ====== ====== ====== ====== </TABLE> <TABLE> <CAPTION> At or for the At or for the Two Months Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ 1997 1996 1997 1996 ------ ------ ------ ----- Selected Financial Ratios and Other Data: - ----------------------------------------- <S> <C> <C> <C> <C> Performance Ratios: Return on average assets(1) .................................. 1.16 1.38 0.97 1.25 Return on average equity(1) .................................. 10.04 11.43 8.46 10.53 Average equity to average assets ............................. 11.60 12.09 11.53 11.91 Equity to total assets at end of period ...................... 11.69 12.03 11.69 12.03 Average interest rate spread(1) .............................. 3.18 3.89 3.37 3.56 Net interest margin(1)(2) .................................... 3.69 4.34 3.87 4.00 Average interest-earning assets to average interest-bearing liabilities ........................ 112.78 111.52 112.86 110.83 Non-interest expense to average assets(1) .................... 1.89 2.05 1.91 1.90 Efficiency ratio(3) .......................................... 0.50 0.47 0.49 0.48 Asset Quality Ratios: - --------------------- Allowance for loan losses as a percent of gross loans receivable ..................................... 0.97 0.60 0.97 0.60 Allowance for loan losses as a percent of non-performing loans ....................................... 87.20 25.33 87.20 25.33 </TABLE> - ------------ (1) Ratios for the two and six month periods have been annualized. (2) Net income divided by average interest-earning assets. (3) The efficiency ratio represents non-interest expense as a percent of net interest income and non-interest income. Comparison of Financial Condition at June 30, 1997 and April 30, 1997 Total assets at June 30, 1997 were $261.3 million compared to $260.0 million at April 30, 1997, an increase of $1.3 million, or 0.5%. The increase in total assets was due primarily to increases in loans receivable due to strong loan demand, funded by a slight increase in deposits and advance payments by borrowers for taxes and insurance, as well as a decrease in cash and cash equivalents. Total liabilities at June 30, 1997 were $230.7 million compared to $230.1 million at April 30, 1997, an increase of $645,000, or 0.3%. The increase is primarily due to a $1.0 million increase in deposits combined with a $774,000 increase in advance payments by borrowers for taxes and insurance, partially offset by a $450,000 decrease in accrued interest payable as a result of interest payments at quarter end. Total equity at June 30, 1997 was $30.6 million compared to $30.0 million at April 30, 1997, an increase of $605,000, or 2.0% as a result of $507,000 net income for the period combined with a change in unrealized loss on securities available-for-sale from $276,000 at April 30, 1997 to $177,000 at June 30, 1997. At June 30, 1997, tangible, core and risk-based capital were $30.1 million, or 11.4%, $30.1 million, or 11.4% and $31.7 million, or 24.5%, respectively, which exceeded the requirements of 1.5%, 3.0% and 8.0%, respectively. In addition, leveraged capital (Tier I capital to risk-weighted assets) was $30.1 million, or 23.3% which exceeded the requirement of 4.0%. Comparison of Operating Results for the Two Months Ended June 30, 1997 and June 30, 1996 General. Net income for the two months ended June 30, 1997 was $507,000, a decrease of $70,000, from net earnings of $577,000 for the two months ended June 30, 1996. The decrease was primarily due to a decrease of $173,000 in net interest income as a result of increased cost of funds, partially offset by a decrease in noninterest expense of $32,000 and a decrease in income taxes of $73,000. Interest Income. Interest income for the two months ended June 30, 1997 was $3.2 million compared to $3.3 million for the two months ended June 30, 1996, a decrease of $62,000, or 1.9%. The decrease resulted primarily from a decrease in the average yield on interest-earning assets from 8.28% for the two months ended June 30, 1996 to 7.68% for the two months ended June 30, 1997. This was partially offset by an increase in the average balance of interest-earning assets from $237.2 million for the two months ended June 30, 1996 to $250.9 million for the two months ended June 30, 1997. The average balance of loans receivable increased from $149.8 million for the two months ended June 30, 1996 to $170.0 million for the two months ended June 30, 1997. The increase in the average balance of loans receivable was a result of increased demand in the Bank's market area. The decrease in the average yield on interest-earning assets was primarily reflective of the decrease in the average yield on loans from 8.59% for the two months ended June 30, 1996 to 8.17% for the two months ended June 30, 1997. This decrease was a result of repayments of higher rate loans and the origination of lower yielding loans due to the current rate environment. Interest Expense. Interest expense was $1.7 million for the two months ended June 30, 1997 compared to $1.6 million for the two months ended June 30 1996, an increase of $111,000, or 7.1%. The increase was a result of the increase in the average balance of interest-bearing liabilities combined with an increase in the average cost of funds for the periods. The average balance of interest-bearing liabilities increased from $212.7 for the two months ended June 30, 1996 to $222.5 million for the two months ended June 30, 1997. The average cost of funds increased from 4.40% for the two months ended June 30, 1996 to 4.50% for the two months ended June 30, 1997. The increase in the average cost of funds was a result of the increases in the average balances being primarily in certificates of deposit and FHLB advances which are at higher rates than the core deposits. The increase in certificates of deposit was a result of increased market demand. Net Interest Income. Net interest income was $1.5 million for the two months ended June 30, 1997, a decrease of $173,000, or 10.1% from net interest income of $1.7 million for the two months ended June 30, 1996. The decrease was primarily a result of a decrease in the net interest margin from 4.34% for the two months ended June 30, 1996 to 3.69% for the two months ended June 30, 1997. In addition, the net interest spread decreased from 3.89% for the two months ended June 30, 1996 to 3.18% for the two months ended June 30, 1997. Both decreases were a result of an increase in the average cost of interest-bearing liabilities and a decrease in the average yield of interest-earning assets. Provision for Loan Losses. The Bank recorded a $41,000 provision for loan losses for the two months ended June 30, 1997 and June 30, 1996. At June 30, 1997, the allowance for loan losses totaled $1.7 million, or .97% of total loans and 87.0% of total non-performing loans. The amount of the provision and allowance for estimated losses on loans is influenced by current economic conditions, actual loss experience, industry trends and other factors, such as adverse economic conditions, including real estate values, in the Bank's market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for estimated losses on loans. Such agencies may require the Bank to provide additions to the allowance based upon judgments which differ from those of management. Although management uses the best information available and maintains the Bank's allowance for losses at a level it believes adequate to provide for losses, future adjustments to the allowance may be necessary due to economic, operating, regulatory and other conditions that may be beyond the Bank's control. Noninterest Income. Noninterest income for the two months ended June 30, 1997 was $98,000 compared to $100,000 for the two months ended June 30, 1996, a decrease of $2,000, or 2.0%. Noninterest Expense. Noninterest expense was $824,000 for the two months ended June 30, 1997 compared to $856,000 for the two months ended June 30, 1996, a decrease of $32,000, or 3.7%. The decrease was primarily a result of a decrease in Federal insurance premiums of $56,000 as a result of a decrease in rates due to the recapitalization of SAIF during 1996, combined with a decrease in compensation and benefits of $99,000 primarily due to an employer profit sharing contribution made in April 1997 of $105,000 compared to the contribution being made in June of the prior year. These decreases were partially offset by an increase in REO expense of $113,000. Income Tax Expense. The provision for income taxes totaled $270,000 for the two months ended June 30, 1997 compared to $343,000 for the two months ended June 30, 1996. The decrease was primarily due to a decrease in income before income taxes of $143,000. Comparison of Operating Results for the Six Months Ended June 30, 1997 and June 30, 1996 General. Net income for the six months ended June 30, 1997 was $1.3 million compared to net income of $1.6 million for the six months ended June 30, 1996, a decrease of $299,000, or 19.1%. The decrease was primarily a result of a provision for loan losses of $615,000 for the six months ended June 30, 1997 compared to $83,000 for the six months ended June 30, 1996, combined with an increase of $105,000 in noninterest expense. These increases were partially offset by an increase of $141,000 in net interest income and a decrease of $196,000 in income tax expense. The increase in the provision for loan losses was a result of the Bennett Funding loans secured by leases as further discussed herein. Interest Income. Interest income for the six months ended June 30, 1997 was $9.7 million compared to $9.4 million for the six months ended June 30, 1996, an increase of $309,000, or 3.3%. The increase resulted from an increase in the average balance of interest-earning assets from $233.9 million for the six months ended June 30, 1996 to $249.1 million for the six months ended June 30, 1997, partially offset by a decrease in the average yield on interest-earning assets. The average balance of loans receivable increased by $19.2 million. The average yield on interest-earning assets decreased from 8.04% for the six months ended June 30, 1996 to 7.80% for the six months ended June 30, 1997. The decrease was primarily a result of decreased yields on the loan portfolio due to the repayment of older higher yielding loans and the origination of lower yielding loans as a result of the current rate environment. Interest Expense. Interest expense for the six months ended June 30, 1997 was $4.9 million compared to $4.7 million for the six months ended June 30, 1996, an increase of $168,000, or 3.6%. The increase in interest expense is primarily the result of an increase in the average balance of interest-bearing liabilities from $211.0 million for the six months ended June 30, 1996 to $220.7 million for the six months ended June 30, 1997 as a result of increased deposits. This increase was partially offset by a decrease in the average cost of funds from 4.47% for the six months ended June 30, 1996 to 4.43% for the six months ended June 30, 1997. The decrease was primarily in certificates of deposit. Net Interest Income. Net interest income of $4.8 million for the six months ended June 30, 1997 represented an increase of $141,000 from the $4.7 million reported for the six months ended June 30, 1996. There was a decrease in the net interest spread from 3.56% for the six months ended June 30, 1996 to 3.37% for the six months ended June 30, 1997. The decrease in the net interest rate spread was a result of the average yield of interest-earning assets decreasing at a more rapid rate than the average cost of interest-bearing liabilities. However, the ratio of average interest-earning assets to average interest-bearing liabilities increased from 110.83% for the six months ended June 30, 1996 to 112.86% for the six months ended June 30, 1997, and the net interest margin decreased slightly from 4.00% to 3.87% for the same period. Provision for Loan Losses. The Bank's provision for loan losses for the six months ended June 30, 1997 was $615,000 compared to $83,000 for the six months ended June 30, 1996. The increase in the provision for loan losses was primarily related to various loans to The Bennett Funding Group, Inc. (Bennett Funding) which were secured by leases. Bennett Funding filed bankruptcy during 1996. The Bank had loans receivable from Bennett Funding of $839,000 at June 30, 1997. As of June 30, 1996, management had not determined whether the leases securing the loans on their books were legally secured, or whether they were fraudulent. No additional provision was made at that time as management continued its investigation and awaited rulings from the bankruptcy court. The Bank received a settlement offer in February 1997. As a result of the proposed settlement, the Bank charged off $432,000 of the Bennett Funding loans, leaving $839,000 of loans on the books. As part of the settlement, the Bank was to receive a cash payment of $529,000. The remaining $310,000 was to be collected through future payments from the lessees. Subsequent to June 30, 1997, the Bank received $713,481 from the trustee as part of the settlement. However, at this time management is unsure as to the full collectibility of the remaining payment stream. In addition, the Bank has experienced significant loan growth during 1997. Gross loans increased $21.7 million, or 14.08% from 1996. Management increases the allowance for loan losses for loan growth based on a statistical percentage developed considering past loss experience and other factors discussed below. The allowance for loan losses represented .97% and .60% of gross loans receivable at June 30, 1997 and 1996, respectively. The amount of the provision and allowance for estimated losses on loans is influenced by current economic conditions, actual loss experience, industry trends and other factors, such as adverse economic conditions, including real estate values, in the Bank's market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for estimated losses on loans. Such agencies may require the Bank to provide additions to the allowance based upon judgments which differ from those of management. Although management uses the best information available and maintains the Bank's allowance for losses at a level it believes adequate to provide for losses, future adjustments to the allowance may be necessary due to economic, operating, regulatory and other conditions that may be beyond the Bank's control. Noninterest Income. Noninterest income for the six months ended June 30, 1997 was $295,000 compared to $294,000 for the six months ended June 30, 1996, representing fairly stable service charges and other noninterest income. Noninterest Expense. Noninterest expense was $2.5 million for the six months ended June 30, 1997 compared to $2.4 million for the six months ended June 30, 1996, an increase of $105,000, or 4.4%. The increase was primarily due to an increase in REO expense of $145,000, combined with an increase in data processing expense of $13,000, occupancy and equipment expense of $10,000 and various other items. These items were partially offset by a decrease in FDIC insurance premiums of $195,000 due to a reduction in rates. Income Taxes. The provision for income taxes was $750,000 for the six months ended June 30, 1997 compared to $946,000 for the six months ended June 30, 1996. The decrease was primarily due to a decrease in pretax income of $495,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042730_london_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042730_london_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bc7127b76298877ff44fb2c6c8e2da71764665f2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042730_london_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed financial and other information contained elsewhere in this Prospectus. THE COMPANY The Company owns all of the outstanding shares of London Electricity, one of the twelve regional electricity companies ("RECs") in England and Wales. London Electricity is the Company's sole significant asset. All of the Company's outstanding shares are owned indirectly by Entergy Corporation ("Entergy", and, together with its subsidiaries, the "Entergy Company system"), a US holding company engaged in regulated electric power activities in the US and competitive electric power and energy activities internationally and throughout the US. Entergy, through the Company, gained effective control of London Electricity in February 1997. LONDON ELECTRICITY London Electricity's principal businesses are the distribution and supply of electricity to approximately 2 million customers in the London metropolitan area. London Electricity's franchise area has a resident population of approximately 4 million and covers approximately 257 square miles (the "Franchise Area"). The Franchise Area generally consists of the metropolitan London area and includes commercial, domestic and industrial customers. The operations of London Electricity are regulated under its Public Electricity Supply ("PES") license. London Electricity's primary business is its distribution business, which in Pro Forma Fiscal Year 1997 (as defined herein) produced operating income of (Pounds)92 million ($148 million). Substantially all of the distribution business is a regulated monopoly. London Electricity's supply business in Pro Forma Fiscal Year 1997 generated (Pounds)6 million ($10 million) in operating income. Together these businesses produced substantially all of London Electricity's operating income of (Pounds)112 million ($181 million) in Pro Forma Fiscal Year 1997. London Electricity owns, manages and operates the electricity distribution network within its Franchise Area. The primary activity of the distribution business is the receipt of electricity from the national grid transmission system (the "Grid") and its distribution to end users connected to London Electricity's power lines. Virtually all electricity supplied (whether by London Electricity's supply business or by any other suppliers) to consumers within London Electricity's Franchise Area is transported through London Electricity's distribution network. London Electricity's supply business consists of selling electricity to end users, purchasing such electricity and arranging for its distribution to those end users. London Electricity has an exclusive right to supply electricity to customers in its Franchise Area who have demand of not more than 100 kW. This exclusive right will continue until April 1, 1998, when the supply market for these customers will become competitive over a six month phase-in period. The supply business to consumers with demand of 100 kW and above, both inside and outside of London Electricity's Franchise Area, is already open to competition. London Electricity, through subsidiaries, also conducts ancillary business activities, including the ownership and operation of private distribution networks, power generation and retail gas supply. ENTERGY LONDON CAPITAL Entergy London Capital is a newly formed special purpose limited partnership formed under the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"). The Company is the sole general partner (the "General Partner") in Entergy London Capital. Upon issuance of the Preferred Securities, which securities represent limited partner interests in Entergy London Capital, the registered holders thereof will become limited partners in Entergy London Capital. The General Partner has agreed to contribute capital to the extent required to maintain its capital at 1% of all capital of Entergy London Capital. All of Entergy London Capital's business and affairs will be conducted by the General Partner. Entergy London Capital was formed for the sole purpose of issuing limited partner interests in the form of the Preferred Securities and investing the proceeds thereof and the capital contributed by the General Partner in the Perpetual Junior Subordinated Debentures. THE OFFERING As used herein, (i) the term "Indenture" means the Indenture for Unsecured Subordinated Debt Securities relating to Preferred Securities, as the same may be amended and supplemented from time to time, between the Company and The Bank of New York, as Debenture Trustee (the "Debenture Trustee"), pursuant to which the Perpetual Junior Subordinated Debentures will be issued, and (ii) the term "Partnership Agreement" means the Amended and Restated Limited Partnership Agreement, among the Company, as General Partner, and the holders, from time to time, of the Preferred Securities. Each of the other capitalized terms used in this Prospectus and not otherwise defined has the meaning set forth in the Indenture or the Partnership Agreement, as the case may be. Securities Offered.................. % Cumulative Quarterly Income Preferred Securities, Series A (QUIPSSM)* (liquidation preference $25 per preferred security). Offering Price...................... $25 per Preferred Security. Distribution Dates.................. March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1997. Deferral of Interest Payments....... The Company has the right to defer indefinitely the payment of interest on the Perpetual Junior Subordinated Debentures at any time or from time to time. If interest payments on the Perpetual Junior Subordinated Debentures are so deferred, Distributions on the Preferred Securities will also be deferred. See "Description of the Perpetual Junior Subordinated Debentures--Option to Defer Payment of Interest". No Stated Maturity.................. The Perpetual Junior Subordinated Debentures will not have a stated maturity. - -------- * QUIPS is a servicemark of Goldman, Sachs & Co. Ranking............................. The limited partner interests represented by the Preferred Securities will have a preference with respect to cash distributions and amounts payable on dissolution, redemption or otherwise over the General Partner's interest in Entergy London Capital. The Company's obligations under the Perpetual Junior Subordinated Debentures and the Guarantee will constitute unsecured obligations of the Company and will be subordinate and junior in right of payment to all Senior Debt of the Company to the extent and in the manner set forth in the Indenture. See "Description of the Perpetual Junior Subordinated Debentures--Subordination" and "Description of the Guarantee". Redemption.......................... The Preferred Securities will be subject to mandatory redemption, in whole or in part, upon redemption of the Perpetual Junior Subordinated Debentures in an amount equal to the amount of Perpetual Junior Subordinated Debentures being redeemed at the Redemption Price. The Perpetual Junior Subordinated Debentures are redeemable at the option of the Company (i) on or after November , 2002, in whole at any time or in part from time to time, (ii) at any time, in whole (but not in part), upon the occurrence and continuation of a Special Event, or (iii) at any time, in whole (but not in part), in the event that the Company has or will become obligated to pay Additional Amounts, in each case at the Debentures Redemption Price. See "Description of the Preferred Securities--Redemptions--Mandatory Redemption", "--Optional Redemption of Perpetual Junior Subordinated Debentures" and "--Special Event Redemption or Distribution of Perpetual Junior Subordinated Debentures". Distribution of Perpetual Junior Subordinated Debentures............ The Company will have the right at any time, whether or not a Special Event has occurred, to dissolve Entergy London Capital and, after satisfaction of liabilities to creditors, if any, of Entergy London Capital, cause the Perpetual Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of Entergy London Capital. See "Description of the Preferred Securities--Redemptions--Special Event Redemption or Distribution of Perpetual Junior Subordinated Debentures". Withholding Tax..................... Payments in respect of the Perpetual Junior Subordinated Debentures and, therefore, the Preferred Securities will be made free and clear of any present or future UK withholding and other deductions existing in the UK, except as set forth under "Description of the Perpetual Junior Subordinated Debentures--Additional Amounts". Subject to certain exceptions, the Company will pay such additional amounts (the "Additional Amounts") as will result in receipt by the holder of the Perpetual Junior Subordinated Debentures and, therefore, the holders of the Preferred Securities of such amounts as would have been received by it had no such withholding or deduction been required. See "Description of the Perpetual Junior Subordinated Debentures--Additional Amounts". Listing............................. Application will be made to list the Preferred Securities on the NYSE and has been made to list the Perpetual Junior Subordinated Debentures on the Luxembourg Stock Exchange. If the Perpetual Junior Subordinated Debentures are distributed to the holders of the Preferred Securities upon the liquidation of Entergy London Capital, the Company will use its best efforts to also list the Perpetual Junior Subordinated Debentures on the NYSE, or such other stock exchanges or other organizations, if any, on which the Preferred Securities are then listed. Use of Proceeds..................... The proceeds to Entergy London Capital from the sale of the Preferred Securities will be invested by Entergy London Capital in the Perpetual Junior Subordinated Debentures to be issued by the Company to Entergy London Capital. The Company intends to use the net proceeds from such investment to repay a portion of indebtedness incurred in connection with the acquisition of London Electricity. See "Use of Proceeds" and "Capitalization". Governing Law....................... The Partnership Agreement and the Preferred Securities will be governed by, and construed in accordance with, the laws of the State of Delaware. The Guarantee, the Indenture and the Perpetual Junior Subordinated Debentures will be governed by, and construed in accordance with, the laws of the State of New York. SUMMARY FINANCIAL INFORMATION The following tables set forth summary consolidated financial data for Entergy London Investments plc (the "Successor Company" or the "Company") and London Electricity (the "Predecessor Company"). For a description of the financial statements and records from which the following financial data have been derived, see "Selected Financial Data". This information should be read in conjunction with "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto of the Successor Company and the Predecessor Company included elsewhere in this Prospectus. All references to a fiscal year mean a year ended March 31. The unaudited pro forma condensed consolidated income statement and other data presented below for fiscal year 1997 reflect the acquisition by the Company of London Electricity as if it had occurred as of April 1, 1996 ("Pro Forma Fiscal Year 1997"). Such unaudited pro forma condensed consolidated income statement and other data have been prepared by the Successor Company based upon assumptions deemed proper by it and reflect a preliminary allocation of the purchase price paid for the Predecessor Company. The unaudited pro forma condensed consolidated income statement and other data presented herein are shown for illustrative purposes only and are not necessarily indicative of the future results of operations of the Successor Company or of the results of operations of the Successor Company that would have actually occurred had the transaction occurred as of April 1, 1996. This information should be read in conjunction with the unaudited pro forma condensed consolidated statement of income and notes thereto of the Successor Company included elsewhere in this Prospectus. PREDECESSOR COMPANY UK GAAP (1) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Turnover.............. (Pounds)1,367 (Pounds)1,309 (Pounds) 1,209 (Pounds)1,188 Operating costs....... ( 1,215) (1,137) (1,046) (1,115) ------------- ------------- -------------- ------------- Operating profit...... 152 172 163 73 Exceptional item(2)... (20) -- (10) 66 Other income(3)....... 18 20 21 142 Interest, net......... (4) (5) (1) (5) Tax on profit......... (38) (45) (23) (89) ------------- ------------- -------------- ------------- Profit for financial period............... (Pounds)108 (Pounds)142 (Pounds)150 (Pounds)187 ============= ============= ============== ============= <CAPTION> MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds)709 (Pounds)769 (Pounds)823 (Pounds)794 Current assets........ 291 453 338 455 Creditors: Amounts falling due within one year............. (263) (265) (343) (485) ------------- ------------- -------------- ------------- Total assets less current liabilities.. 737 957 818 764 Creditors: Amounts falling due in more than one year............. (73) (190) (115) (211) Provisions for liabilities and charges.............. (42) (50) (45) (53) ------------- ------------- -------------- ------------- Total shareholders' funds................ (Pounds)622 (Pounds)717 (Pounds)658 (Pounds)500 ============= ============= ============== ============= <CAPTION> YEAR ENDED MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds)157 (Pounds)205 (Pounds)187 (Pounds)293 EBITDA(5)............. 189 240 225 334 Cash flow from operations(6)........ 251 299 155 103 Ratio of earnings to fixed charges(7)..... 11 10 12 15 </TABLE> PREDECESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> PERIOD FROM YEAR ENDED MARCH 31, APRIL 1, 1996 TO -------------------- JANUARY 31, 1995 1996 1997(8) ------------- --------------------- ---------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Operating revenues.... (Pounds)1,209 (Pounds)1,188 (Pounds)1,116 Operating income...... 166 102 107 National Grid transaction.......... -- 450 -- Interest expense, net. (1) (5) (17) Other, net............ 22 22 4 Provision for income taxes................ (57) (110) (32) ------------- ------------- ------------- Income before extraordinary item... 130 459 62 Extraordinary item.... (9) -- -- ------------- ------------- ------------- Net income............ (Pounds) 121 (Pounds) 459 (Pounds) 62 ============= ============= ============= <CAPTION> MARCH 31, 1996 --------------------- (AMOUNTS IN MILLIONS) <S> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds) 784 Total assets.......... 1,349 Total stockholder's equity............... 448 Long-term debt........ 198 Short-term debt....... 96 <CAPTION> PERIOD FROM YEAR ENDED MARCH 31, APRIL 1, 1996 TO -------------------- JANUARY 31, 1995 1996 1997(8) ------------- --------------------- ---------------- (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds) 201 (Pounds) 586 (Pounds) 120 EBITDA(5)............. 241 628 159 Cash flow from operations........... 123 191 102 Ratio of earnings to fixed charges(7)..... 12.1 30.0 4.3 </TABLE> BUSINESS SEGMENTS PREDECESSOR COMPANY UK GAAP(1) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ---------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- ------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> TURNOVER: Electricity distribution......... (Pounds) 361 (Pounds) 367 (Pounds) 379 (Pounds) 357 Electricity supply.... 1,266 1,228 1,114 1,189 National Grid transaction.......... -- -- -- (91) Other................. 86 51 44 59 Intra-business(9)..... (346) (337) (328) (326) ------------- ------------- ------------- ------------- Total............... (Pounds)1,367 (Pounds)1,309 (Pounds)1,209 (Pounds)1,188 ============= ============= ============= ============= OPERATING PROFIT (LOSS): Electricity distribution......... (Pounds) 152 (Pounds) 154 (Pounds) 136 (Pounds) 148 Electricity supply.... 7 6 14 9 National Grid transaction.......... -- -- -- (97) Other................. (7) 12 13 15 Intra-business(9)..... -- -- -- (2) ------------- ------------- ------------- ------------- Total............... (Pounds) 152 (Pounds) 172 (Pounds) 163 (Pounds) 73 ============= ============= ============= ============= </TABLE> BUSINESS SEGMENTS PREDECESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> PERIOD FROM APRIL 1, 1996 YEAR ENDED MARCH 31, TO ---------------------------- JANUARY 31, 1995 1996 1997 ------------- ------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> OPERATING REVENUE: Electricity distribution......... (Pounds) 379 (Pounds) 357 (Pounds) 275 Electricity supply............... 1,114 1,098 1,051 Other............................ 44 59 68 Intra-business(9)................ (328) (326) (278) ------------- ------------- ------------- Total.......................... (Pounds)1,209 (Pounds)1,188 (Pounds)1,116 ============= ============= ============= OPERATING INCOME: Electricity distribution......... (Pounds) 141 (Pounds) 158 (Pounds) 101 Electricity supply............... 11 (70) (1) Other............................ 14 16 7 Intra-business(9)................ -- (2) -- ------------- ------------- ------------- Total.......................... (Pounds) 166 (Pounds) 102 (Pounds) 107 ============= ============= ============= </TABLE> SUCCESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> SIX MONTHS ENDED PRO FORMA ----------------------------------- PERIOD FROM INCEPTION FISCAL YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, (OCTOBER 9, 1996) TO MARCH 31, 1997 1996 1997(12) MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------- --------------------- ----------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) ------------- ------- ------------- ------ ------------- ------------ ------ (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Operating revenues.... (Pounds) 234 $ 377 (Pounds)1,350 $2,176 (Pounds) 617 (Pounds) 548 $ 883 Operating income...... 32 52 112 181 76 61 98 Other income (expense): Interest expense, net................ (13) (21) (93) (150) (8) (55) (88) Other, net.......... (6) (10) 5 8 3 2 3 Windfall profits tax................ -- -- -- -- -- (140) (226) (Provision) benefit for income taxes..... (5) (8) (8) (13) (19) 36 58 ------------- ------- ------------- ------ ------------- ------------ ------ Net income (loss)..... (Pounds) 8 $ 13 (Pounds) 16 $ 26 (Pounds) 52 (Pounds) (96) $ (155) ============= ======= ============= ====== ============= ============ ====== <CAPTION> SEPTEMBER 30, 1997 MARCH 31, 1997 (UNAUDITED)(12) ---------------------- --------------------------- (Pounds) $(11) (Pounds) $(11) ------------- ------- ------------- ------------ (AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds)1,347 $ 2,171 (Pounds)1,358 $ 2,189 Total assets.......... 2,669 4,301 2,646 4,264 Total stockholder's equity............... 248 400 152 245 Long-term debt........ 1,143 1,842 1,228 1,979 Short-term debt....... 162 261 72 116 <CAPTION> SIX MONTHS ENDED PRO FORMA ----------------------------------- PERIOD FROM INCEPTION FISCAL YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, (OCTOBER 9, 1996) TO MARCH 31, 1997 1996 1997(12) MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------- --------------------- ----------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) ------------- ------- ------------- ------ ------------- ------------ ------ (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> <C> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds) 34 $ 55 (Pounds) 135 $ 218 (Pounds) 87 (Pounds) (77) $ (124) EBITDA(5)............. 42 68 215 347 110 (38) (61) Ratio of earnings to fixed charges(7)(14). 1.6 1.6 1.2 1.2 5.2 -- -- Cash flow from operations........... 64 103 122 40 64 Cash provided by (used in) investing activities........... (1,203) (1,939) (48) (12) (20) Cash provided by (used in) financing activities........... 1,165 1,877 (38) (5) (8) </TABLE> BUSINESS SEGMENTS SUCCESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> SIX MONTHS ENDED -------------------------------- PERIOD FROM INCEPTION PRO FORMA FISCAL YEAR SEPTEMBER 30, SEPTEMBER 30, OCTOBER 9, 1996 ENDED MARCH 31, 1997 1996 1997 TO MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------------------------------------------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) -------------- ----------------------- ---------------------- ----------- ----- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING REVENUE: Electricity distribution......... (Pounds) 61 $ 98 (Pounds) 336 $ 541 (Pounds)155 (Pounds)151 $ 243 Electricity supply.... 213 343 1,265 2,039 574 501 807 Other................. 11 18 78 126 48 34 55 Intra-business(9)..... (51) (82) (329) (530) (160) (138) (222) -------------- ------- -------------- ------- ----------- ----------- ----- Total............... (Pounds) 234 $ 377 (Pounds) 1,350 $ 2,176 (Pounds)617 (Pounds)548 $ 883 ============== ======= ============== ======= =========== =========== ===== OPERATING INCOME: Electricity distribution......... (Pounds) 18 $ 30 (Pounds) 92 $ 148 (Pounds) 65 (Pounds) 44 $ 71 Electricity supply.... 7 11 6 10 3 5 8 Other................. 7 11 14 23 8 12 19 -------------- ------- -------------- ------- ----------- ----------- ----- Total............... (Pounds) 32 $ 52 (Pounds) 112 $ 181 (Pounds) 76 (Pounds) 61 $ 98 ============== ======= ============== ======= =========== =========== ===== <CAPTION> MARCH 31, 1997 ------------------------- (Pounds) $(11) -------------- --------- (AMOUNTS IN MILLIONS) <S> <C> <C> ASSETS(15): Electricity distribution......... (Pounds) 1,766 $ 2,846 Electricity supply.... 544 877 Other................. 359 578 -------------- ------- Total............... (Pounds)2,669 $ 4,301 ============== ======= </TABLE> - ------- (1) The financial data for the Predecessor Company were derived from financial statements for the Predecessor Company prepared in accordance with UK GAAP and US GAAP. The principal differences between the Predecessor Company's US GAAP and UK GAAP financial statements relate to the treatment of goodwill, pension costs and deferred taxes and the timing of recognition of restructuring charges and dividend accruals. (2) Exceptional items recorded in 1993, 1995 and 1996 were caused primarily by the following: 1993--Withdrawal from the electrical products retailing business (write-down of fixed asset and stock values, and provisions for losses and further costs expected until completely closed) 1995--Restructuring charges recorded for the regulated electricity business 1996--London Electricity's distribution of its ownership interest in The National Grid Group plc ("NGG") to its shareholders and related transactions (3) Other income in 1996 includes (Pounds)144 million of income from London Electricity's investment in NGG. (4) EBIT equals income from continuing operations before the sum of interest expense and income taxes. This information is provided for informational purposes only and such measure should not be construed as an alternative to operating income (as determined in accordance with US GAAP) as an indicator of operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) as a measure of liquidity. EBIT is a widely accepted financial indicator of a company's ability to incur and service debt. However, this measure of EBIT may not be comparable to similar measures presented by other companies. (5) EBITDA equals income from continuing operations before the sum of interest expense, income taxes, depreciation and amortization. This information is provided for informational purposes only and such measure should not be construed as an alternative to operating income (as determined in accordance with US GAAP) as an indicator of operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) as a measure of liquidity. EBITDA is a widely accepted financial indicator of a company's ability to incur and service debt. However, this measure of EBITDA may not be comparable to similar measures presented by other companies. (6) Cash flow from operations increased in fiscal year 1994 primarily as a result of customers who paid bills in advance in order to avoid paying value added taxes which were introduced by the British government. (7) The ratio of earnings to fixed charges is computed as the sum of pretax income from continuing operations plus fixed charges divided by fixed charges. Fixed charges consist of interest expense and the estimated interest portion of rent expense. (8) In February 1997, the Successor Company obtained effective control of the Predecessor Company pursuant to the Successor Company's offer to acquire the Predecessor Company. (9) Intra-business eliminations consist primarily of intra-business transactions between the distribution business and the supply business and intercompany transactions between ancillary support businesses. Pursuant to the UK regulatory framework, London Electricity's distribution of electricity to its supply customers within its own Franchise Area is billed to London Electricity's supply business, which in turn incorporates the distribution charge into the bill sent to the final end user. (10) Pro Forma Fiscal Year 1997 financial information gives effect to the acquisition of the Predecessor Company by the Successor Company as if it had occurred on April 1, 1996. See Unaudited Condensed Consolidated Statement of Operations included elsewhere in this Prospectus. (11) Solely for the convenience of the reader, pounds sterling amounts have been translated into US dollars at the Noon Buying Rate on September 30, 1997 of $1.6117=(Pounds)1.00. (12) Includes effect of windfall profits tax provision of (Pounds)140 million and the effect of the reduction in the UK statutory income tax rate from 33% to 31%. (13) The results of operations for the six months ended September 30, 1996 represent the historical amounts of the Predecessor Company. Such results do not include the effects of acquisition adjustments. (14) Earnings for the six months ended September 30, 1997 were insufficient to cover fixed charges by (Pounds)132 million ($213 million). (15) Includes distribution license, net of amortization, and prepaid pension costs of (Pounds)830 million and (Pounds)145 million, respectively, at March 31, 1997 and (Pounds)812 million and (Pounds)146 million, respectively, at September 30, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042783_dot-hill_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042783_dot-hill_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..93fd72f79eba7bbd0941b756a93ad8efe2bbbab8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042783_dot-hill_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Certain statements contained in this "Prospectus Summary" and in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," including statements regarding the anticipated development and expansion of the Company's business, the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the future operating performance of the Company and the products it expects to offer and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information, financial statements, including the notes thereto, and pro forma financial information appearing elsewhere in this Prospectus. Prospective investors should carefully consider the information set forth under "Risk Factors." Unless otherwise stated, or unless the context otherwise requires, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. All share totals stated herein reflect a 3.3-for-1 stock split which will occur in connection with the Offering. See "Glossary" for the Company's definitions of certain terms and acronyms used herein. THE COMPANY Box Hill designs, manufactures, markets and supports high-performance data storage systems for the Open Systems computing environment. The Company's storage solutions encompass a broad range of scalable products and services targeting high-end customers who demand high performance, high availability and the highest level of customer and technical support. The Company has a history of providing storage solutions that meet these requirements by combining extensive design and implementation experience with leading edge technologies. The Company was among the first to develop and successfully commercialize a hot-swappable SCSI Disk Array storage system and a Redundant Array of Inexpensive/Independent Disks ("RAID") storage system for UNIX. In addition, the Company recently introduced the Fibre Box(R), one of the first Fibre Channel storage systems, and is finalizing the development of its X/ORaid(TM) Module, which takes advantage of the new RAID capabilities that are currently being embedded in Fibre Channel drives. Box Hill is also a leader in providing comprehensive "best of breed" backup solutions to the Open Systems marketplace. Demand for the Company's products is fueled by the rapid proliferation of new data-intensive applications, such as video, the Internet, intranets, multimedia, data warehousing and data mining, as well as the migration of mission-critical applications off mainframe computers. These products are targeted to the high end of the Open Systems market, which is characterized by large capacity UNIX and Windows NT servers operating in multi-platform environments, generally running mission-critical applications. International Data Corporation ("IDC"), an independent market research firm, estimates that the worldwide market for RAID storage systems in UNIX environments will grow at a compounded annual growth rate of 19.3%, increasing from $6.3 billion in 1996 to $12.9 billion in 2000. In addition, IDC estimates that the worldwide market for RAID storage systems in Windows NT environments will grow at a compounded annual growth rate of 34.1%, increasing from $1.3 billion in 1996 to $4.3 billion in 2000. The Open Systems market's current storage options include Disk Arrays, RAID storage systems and tape backup systems, each of which are generally attached to hosts by the Small Computer Systems Interface ("SCSI"). Fibre Channel, an emerging high-speed serial interface that has recently become commercially available, enables the transfer of data between computers and peripherals at substantially increased rates, over greatly increased cabling lengths and among a greater number of host/device connections. Fibre Channel also enables industry standard RAID functionality to be efficiently embedded in Fibre Channel disk drives, thereby eliminating the necessity for traditional RAID approaches that include CPU-intensive software RAID or an additional hardware RAID controller. In addition, the Company envisions the development of storage area networks ("SAN"s), enabled principally by Fibre Channel and "clustering" software, such as Microsoft's "Wolfpack," that will add networking capabilities to storage devices. The Company's family of products and services is intended to provide high-end users in the Open Systems market with the following benefits: (i) faster response times, greater capacities, higher availability of data and minimum system downtime; (ii) reliable, high quality, well-integrated backup systems designed to satisfy customers' individual needs; (iii) all-encompassing solutions, including design consulting, installation, integration, training and comprehensive, 24-hour, post-sales service and technical support, as well as software-based management tools; (iv) systems specifically designed to be compatible with a variety of UNIX and Windows NT platforms; and (v) scalable systems designed to satisfy the changing information technology needs of customers. The Company employs a direct marketing strategy targeted at data-intensive industries, which to date primarily include financial services, telecommunications, health care, government/defense and academia. Some of the Company's customers include Merrill Lynch, Smith Barney, AT&T, Bell Atlantic, Lucent Technologies, Bristol-Meyers Squibb, Hoffmann-LaRoche, Lockheed Martin, NASA, Columbia University and Rutgers University. Box Hill's objective is to continue its growth and enhance its position as a leading independent provider of storage solutions to the Open Systems marketplace. To achieve this objective, the Company plans to build upon its record of successfully introducing and commercializing new products and technologies that address the evolving data storage needs of its high-end customer base. Key elements of this strategy are to maintain technological leadership and innovation, focus on high-end markets in target industries, expand geographically, focus on direct sales to end users and develop relationships with OEM customers. The Company was incorporated in New York in April 1988. Its executive offices are located at 161 Avenue of the Americas, New York, NY 10013 and its telephone number is (212) 989-4455. THE OFFERING <TABLE> <S> <C> Common Stock Offered: By the Company...................................... 3,150,000 shares By the Selling Shareholders......................... 2,350,000 shares Total....................................... 5,500,000 shares Common Stock Outstanding After the Offering(1)........ 13,050,000 shares Use of Proceeds....................................... The net proceeds to the Company from the Offering will be used principally to fund the Company's growth and expansion plans, increase working capital and for other general corporate purposes. In addition, a portion of the net proceeds will be used to distribute to the current shareholders the previously taxed, but undistributed, S Corporation earnings, which, as of June 30, 1997, were approximately $10,500,000. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042814_omega_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042814_omega_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a81c6c0da2ffeff276fe36aecdc8fca01cec310d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042814_omega_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS SUGGESTED BY THE FORWARD-LOOKING STATEMENTS AND FROM THE RESULTS HISTORICALLY EXPERIENCED. FACTORS THAT MAY CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Omega Research is a leading provider of real-time investment analysis software for the Microsoft Windows operating system. The Company's principal products are TRADESTATION, OPTIONSTATION and SUPERCHARTS. With the 1991 release of its flagship product, TRADESTATION, Omega Research pioneered the concept of utilizing the power of the personal computer to enable investors to historically test the profitability of their own investment and trading strategies and then computer-automate those strategies to generate real-time buy and sell signals. OPTIONSTATION enables investors who are not options experts or mathematicians to benefit from advanced stock, index and futures options trading strategies, and SUPERCHARTS provides investors with state-of-the-art technical analysis capabilities. The Company designs its products as PLATFORM APPLICATIONS: unique software applications that also serve as platforms for independent third-party solutions. Over 150 independent developers have developed software products for the Omega Research Platform. In the last 25 years there has been unprecedented growth in the financial markets as increasing amounts of capital have been actively invested in an effort to generate superior returns. As investment and trading activity have increased, investors are seeking to make use of the increased amounts of financial market data available to support their investment decisions. While the data have been available for some time, typically only large institutional investors were able to manipulate, organize and analyze such data through the use of mainframe or minicomputer-based software applications. With the advanced processing capabilities of today's personal computers, both individual and institutional investors are demanding powerful investment analysis software to improve their investment decision-making. The Omega Research solution addresses this demand through superior investment analysis products, an industry-leading, open and extendible software platform, comprehensive support for a wide variety of financial instruments and markets, and, through the Company's proprietary EASYLANGUAGE technology, the ability to design and historically test investment strategies without having computer programming experience. Omega Research's objective is to be the leading worldwide provider of real-time investment analysis software to both individual and institutional investors. The Company's product strategy is to expand the Omega Research Platform by enhancing and developing its own suites of integrated, complementary products, and by facilitating the development of additional compatible third-party products and services. The Company's marketing strategy is to continue to penetrate the expanding individual investor market, increase its focus on institutional investors and expand its international distribution. The Company will also seek to strengthen and expand its relationships with data vendors and to leverage its installed base of customers by marketing to its customer base product upgrades and existing and new complementary products. As of June 30, 1997 the Company had licensed its products to over 30,000 investors worldwide. The Company markets its products to individual investors primarily through its dedicated, professional, team-oriented telesales force. As a result of its strategic relationship with Dow Jones Markets, Inc., the Company's products are marketed to institutional investors. Dow Jones Markets offers the Company's TRADESTATION product as DOW JONES TRADESTATION under an agreement that extends until 2002 and includes minimum annual royalty payments to the Company which escalate each year of the agreement. In 1997, the Company entered into an additional agreement to permit Dow Jones Markets to offer the Company's SUPERCHARTS product as DOW JONES SUPERCHARTS. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company ..................... 2,600,000 shares Common Stock offered by the Selling Shareholders ...... 1,100,000 shares Common Stock to be outstanding after the Offering ...... 22,080,000 shares(1) Use of Proceeds ....................................... To repay a short-term bank loan to be used to fund payment of a distribution of accumulated S corporation earnings to the Company's current shareholders; working capital and other general corporate purposes. See "Use of Proceeds." Nasdaq National Market symbol ........................... OMGA </TABLE> SUMMARY FINANCIAL DATA (In thousands, except per share data) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- --------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Licensing fees ........................... $3,040 $5,593 $7,853 $7,913 $13,943 $6,322 $12,092 Other revenues ........................... -- -- 707 1,502 3,877 1,787 2,527 ------- ------- ------- ------- -------- ------- ------- Total revenues ........................... 3,040 5,593 8,560 9,415 17,820 8,109 14,619 Income from operations .................. 1,035 2,407 3,727 3,288 7,022 3,250 5,379 Net income(2) .............................. 1,060 2,438 3,745 3,312 7,082 3,259 5,397 Pro forma net income(2) .................. 641 1,475 2,266 2,004 4,285 1,972 3,265 Pro forma net income per share(2)(3) ...... $ 0.21 $ 0.15 Pro forma weighted average number of shares outstanding(3) ........................... 20,541 21,186 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 --------------------------------------- PRO PRO FORMA ACTUAL FORMA(4) AS ADJUSTED(5) -------- ---------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents ............ $ 264 $ 264 $15,590 Working capital (deficit) ............ 6,828 (2,794) 23,154 Total assets ........................ 9,257 12,081 27,407 Short-term obligations ............... -- 10,622 -- Shareholders' equity (deficit) ...... 7,807 (1,815) 24,133 <FN> - ------------- (1) Based on shares outstanding as of August 25, 1997. Excludes (i) 910,750 shares of Common Stock issuable upon exercise of stock options granted under the Omega Research, Inc. Amended and Restated 1996 Incentive Stock Plan (the "Incentive Stock Plan") as of August 25, 1997, with a weighted average exercise price of $2.04 per share; (ii) 2,089,250 additional shares of Common Stock reserved for future issuance under the Incentive Stock Plan (including up to 150,000 shares which the Company intends to issue to certain persons (other than executive officers) on or prior to the date of this Prospectus, of which approximately 100,000 shares will be issued at an exercise price equal to the initial public offering price); (iii) 175,000 shares of Common Stock reserved for issuance under the Omega Research, Inc. 1997 Nonemployee Director Stock Option Plan (the "Director Stock Plan"); and (iv) 500,000 shares of Common Stock reserved for issuance under the Omega Research, Inc. 1997 Employee Stock Purchase Plan (the "Purchase Plan"). See "Management--Other Compensation Arrangements" and Note 4 of Notes to Financial Statements. (2) The statement of income data reflects a pro forma provision for income taxes as if the Company had been a C corporation subject to federal and state corporate income taxes for all periods. See "Distribution of S Corporation Earnings" and Note 1 of Notes to Financial Statements. (3) Pro forma weighted average number of shares outstanding includes 321,000 and 966,000 shares for the year ended December 31, 1996 and the six-month period ended June 30, 1997, respectively, at an assumed initial public offering price of $11.00 per share, the proceeds of which would fund undistributed S corporation earnings. See "Distribution of S Corporation Earnings" and Note 1 of Notes to Financial Statements. (4) Reflects the effect of the dividend to current shareholders and other pro forma adjustments described in "Distribution of S Corporation Earnings" and Note 7 of Notes to Financial Statements. (5) Adjusted to give effect to the sale of the Common Stock offered by the Company hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042822_integrated_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042822_integrated_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a9aa6d787e5b4aab2076bb6865ec5aeb550919d7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042822_integrated_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UPON CONSUMMATION OF THIS OFFERING, INTEGRATED PHYSICIAN SYSTEMS, INC. (THE "COMPANY") WILL ACQUIRE CERTAIN ASSETS, AND ASSUME CERTAIN LIABILITIES, ASSOCIATED WITH 12 MEDICAL PRACTICES (THE "INITIAL AFFILIATED PRACTICES") AND WILL ENTER INTO MANAGEMENT SERVICES AGREEMENTS WITH EACH SUCH MEDICAL PRACTICE. THE COMPANY WILL ALSO ACQUIRE 100% OF THE CAPITAL STOCK OF A MEDICAL BILLING COMPANY, MEDICAL BILLING AND MANAGEMENT SYSTEMS, INC., UPON CONSUMMATION OF THIS OFFERING (COLLECTIVELY, THE "ACQUISITIONS"). AS USED HEREIN, "COMPANY" REFERS TO INTEGRATED PHYSICIAN SYSTEMS, INC. AND ITS SUBSIDIARIES AND "AFFILIATED PRACTICES" REFERS TO THE INITIAL AFFILIATED PRACTICES AND ANY PHYSICIAN PRACTICES WITH WHICH THE COMPANY MAY ENTER INTO SIMILAR RELATIONSHIPS IN THE FUTURE. ALL REFERENCES TO "NETWORK BILLING SYSTEMS, INC." OR "NBS" HEREIN REFERS TO MEDICAL BILLING AND MANAGEMENT SERVICES, INC., WHICH THE COMPANY WILL RENAME UPON CONSUMMATION OF THIS OFFERING. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO (I) THE EXERCISE OF THE REPRESENTATIVES' WARRANTS; (II) THE EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION; (III) THE EXERCISE OF THE WARRANTS; AND (IV) THE ISSUANCE OF UP TO 300,000 SHARES OF COMMON STOCK UPON THE EXERCISE OF OPTIONS WHICH MAY BE GRANTED UNDER THE COMPANY'S 1996 STOCK OPTION PLAN (THE "PLAN"). THE INFORMATION IN THIS PROSPECTUS RELATING TO SHARES OF COMMON STOCK AND PER SHARE AMOUNTS GIVES EFFECT TO THE ISSUANCE OF AN AGGREGATE OF 481,067 SHARES OF COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE ACQUISITIONS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Integrated Physician Systems, Inc. (the "Company") is a newly established physician practice management organization ("PPMO") which is developing an integrated health care delivery network in selected geographic areas through affiliation with physician practices. Upon the closing of this Offering, the operations of the Company will consist of (i) management of the Initial Affiliated Practices, consisting of 12 medical practices located in New Jersey, (ii) Professional Medical Images Ltd. ("PMI"), a wholly-owned subsidiary of the Company which is engaged in the management of one independent practice association ("IPA") which is currently affiliated with approximately 225 physicians in the State of New Jersey, and (iii) Network Billings Systems, Inc. ("NBS"), which is engaged in the development and management of physician fee billing, electronic medical records, and utilization information systems for medical practices. NBS currently manages patient and third party billing services for 25 medical practices unaffiliated with the Company in Pennsylvania. The Company's objective is to develop and manage an integrated health care delivery network comprised of physician practices that provide high quality, cost-effective care. The Company has focused, and intends, at least initially, to continue to focus, its primary affiliation efforts on physician practices located in New Jersey, New York, and Pennsylvania. The Company targets physicians who are committed to the delivery of high quality, cost-effective care and have a reputation with their patients, peers, and payors for providing quality medical services and that have the capacity to increase profitability through improved performance on existing patient bases. When affiliating with a physician practice, the Company will typically purchase the practice's non-real estate operating assets and enter into a long-term practice management services agreement ("PMSA") with the practice in exchange for a combination of Common Stock, cash, notes, other securities of the Company, and/or the assumption of liabilities. Pursuant to the PMSA, the Company will be responsible for providing the Affiliated Practice with necessary office facilities, medical equipment, supplies, and medical staff such as nurses, physician assistants and clerks, and will plan and manage the activities of the Affiliated Practice in all respects other than the provision of medical services. The Affiliated Practice will be responsible solely for the rendering of medical services. The health care delivery system in the United States has been undergoing substantial change, largely in response to concerns over the quality and escalating cost of health care. National expenditures for health care grew from $250 billion in 1980 to an estimated $1 trillion in 1995. Of the total estimated 1995 expenditures, physicians received approximately $200 billion for their own services and controlled an additional $600 billion through the referral of patients for additional care and services provided by others. Concerns over the accelerating cost of health care have resulted in the increasing prominence of managed care. The Company believes that traditional physician practices are at a competitive disadvantage in a managed care environment because they typically have high operating costs, have little purchasing power with suppliers, and must spread overhead over a relatively small revenue base. In addition, these physician practices often have insufficient capital to acquire equipment to incorporate new technologies and often lack the sophisticated systems necessary to contract effectively with managed care entities. Physician practices are increasingly turning to organizations such as the Company to provide the professional management expertise and capital required to compete in the managed care environment and otherwise to assist them with the increasingly complex management of physician practices. The Company believes that this has resulted in a need for management organizations committed to preserving the professional autonomy of physician practices and whose economic incentives are aligned with those of physicians. The Company's operating strategy includes the following: (i) targeting for affiliation high quality and productive physician practices which are committed to expanding and providing cost-effective care; (ii) integrating physician practices into Company-coordinated strategic business units ("SBUs") to provide physician and medical support services within specific geographic regions; (iii) contracting with state and local governments to provide medical services for elderly and indigent populations; (iv) enhancing the ability of the Affiliated Practices to focus on clinical practice issues by relieving them of most administrative functions; (v) implementing and utilizing sophisticated information systems to manage patient care and control costs; (vi) coordinating purchases of supplies, equipment, and services in order to realize economies of scale; (vii) developing and enhancing IPA services and contracts; (viii) positioning the Company to maximize managed care contract opportunities; and (ix) developing ancillary services and broadening the specialties of the Company's health care delivery network. The Company was incorporated under the laws of the State of Delaware on April 25, 1995. The Company's principal offices are located at 2644 Bristol Road, Warrington, Pennsylvania 18976, and its telephone number is (215) 343-1942. THE OFFERING <TABLE> <S> <C> SECURITIES OFFERED Debentures................................... $25,000,000 aggregate principal amount of [6 1/2% to 8%] Convertible Subordinated Debentures due , 2004 (the "Debentures") Common Stock................................. 2,000,000 shares Warrants..................................... 2,000,000 Warrants DEBENTURE TERMS Interest Payment Dates....................... Each and , commencing , 1998 Maturity Date................................ , 2004 Conversion................................... The Debentures are convertible into shares of Common Stock at any time prior to maturity, unless previously redeemed, at a conversion price of $ per share [120% to 130% of the initial public offering price of the Common Stock], subject to adjustment in certain events. Redemption at Option of Company.............. The Debentures are not redeemable prior to , 2000. Thereafter, the Debentures are redeemable, in whole or in part, from time to time, at the option of the Company at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, provided that the Debentures may not be redeemed prior to maturity unless the closing sale price of the Common Stock for 20 consecutive trading days prior to the date of notice of such redemption has equaled or exceeded $ , [150% of the initial public offering price of the Common Stock], subject to adjustment in certain events. See "Description of Debentures-- Optional Redemption." Redemption at Option of Holders.............. In the event that a Repurchase Event (as defined) occurs, subject to certain conditions, each holder of a Debenture shall have the right, at the holder's option, to require the Company to purchase all or any part of such holder's Debentures at 100% of the principal amount thereof plus accrued and unpaid interest through the date of redemption. Sinking Fund................................. If a sinking fund is established for any indebtedness ranking junior to, or pari passu with, the Debentures and which has a maturity or weighted average time to maturity which is on or prior to , 2004, the Debentures will be entitled to an annual sinking fund beginning in the Company's next fiscal year calculated to retire that amount of </TABLE> <TABLE> <S> <C> Debentures equal to the lesser of (i) the same percentage of outstanding Debentures prior to maturity as the percentage of the principal amount of such other indebtedness to be retired prior to maturity on the same payment schedule as such other indebtedness or (ii) such amount of Debentures necessary to result in the Debentures having the same weighted average time to maturity as the other indebtedness. Subordination................................ The Debentures are subordinated in right of payment to all present and future Senior Indebtedness (as defined) of the Company. The Indenture will not restrict the incurrence of additional Senior Indebtedness by the Company or any indebtedness by any Subsidiary. See "Description of Debentures." WARRANT TERMS................................ Each Warrant entitles the registered holder thereof to purchase, at any time commencing on , 1997 [the date of this Prospectus] and terminating on , 2002 [five years after the date of this Prospectus], one share of Common Stock at a price of $ per share [140% of the initial public offering price per share of Common Stock], subject to adjustment in certain circumstances. Commencing , 1999 [18 months after the date of this Prospectus], the Company may redeem the Warrants, in whole but not in part, at $.10 per Warrant on 30-days prior written notice to the warrantholders, provided that the average closing sale price of the Common Stock, as reported on AMEX, equals or exceeds $ per share [210% of the initial public offering price per share of Common Stock] for any 20 trading days within a period of 30 consecutive trading days ending on the fifth trading day prior to the date of the notice of redemption. See "Description of Securities." SECURITIES OUTSTANDING PRIOR TO THE OFFERING Debentures................................... None Common Stock................................. 2,183,067 shares (1) Warrants..................................... None SECURITIES OUTSTANDING IMMEDIATELY FOLLOWING THE OFFERING Debentures................................... $25,000,000 aggregate principal amount Common Stock................................. 4,183,067 shares (1) Warrants..................................... 2,000,000 </TABLE> <TABLE> <S> <C> USE OF PROCEEDS.............................. Payments due upon consummation of the Acquisitions; funds available for future acquisitions of additional physician practices and/or other medical entities; hardware, software, and installation cost of an information system; repayment of certain indebtedness; and general corporate and working capital purposes. RISK FACTORS................................. The purchase of the Securities offered hereby is speculative and involves substantial risk. Prospective investors should carefully review and consider the information set forth under "Risk Factors" and "Dilution." PROPOSED AMEX TRADING SYMBOLS: Debentures................................... "IPH.C" Common Stock................................. "IPH" Warrants..................................... "IPH.W" </TABLE> - ------------------------ (1) Gives effect to the contribution, on October 21, 1997, of 1,356,000 shares of Common Stock to the Company by certain stockholders (the "Recapitalization"). Such shares were simultaneously retired by the Company. SUMMARY FINANCIAL INFORMATION STATEMENT OF OPERATIONS DATA: <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, INCEPTION --------------------------------------------- (APRIL 25, YEAR ENDED 1995) DECEMBER 31, 1996 1996 1997 THROUGH --------------------- --------------------- ---------------------- DECEMBER PRO PRO PRO 31, 1995 ACTUAL FORMA(1) ACTUAL FORMA(1) ACTUAL FORMA(1) ----------- --------- ---------- --------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> Revenue: Medical service revenue........ -- -- $17,130,000 -- $8,754,000 -- $7,962,000 Management fees................ -- -- -- -- -- 111,000 111,000 Medical billing and service -- 576,000 fees........................... -- 1,398,000 -- -- 1,101,000 Other revenue.................. -- -- 38,000 -- 48,000 -- 63,000 ---------- ---------- ---------- Total revenue................ -- -- 18,566,000 -- 9,378,000 111,000 9,237,000 Costs and expenses:.............. -- Salaries and wages............. -- -- 13,294,000 -- 6,624,000 51,000 5,184,000 Medical supplies and -- 205,000 expenses....................... -- 426,000 -- -- 239,000 General and administrative -- 2,608,000 expenses....................... 4,000 4,174,000 2,000 78,000 3,390,000 Depreciation and 1,000 620,000 amortization................... 2,000 1,239,000 1,000 1,000 620,000 Interest expense............... -- -- 2,020,000 -- 1,010,000 135,000 1,010,000 ----------- --------- ---------- --------- ---------- ---------- ---------- Total costs and expenses..... 1,000 6,000 21,153,000 3,000 11,067,000 265,000 10,443,000 Loss before income taxes......... (1,000) ( 6,000) (2,587,000 ( 3,000) (1,689,000) ( 154,000) (1,206,000) Provision for income taxes....... -- -- -- -- -- -- -- ----------- --------- ---------- --------- ---------- ---------- ---------- Net loss......................... $ (1,000) $( 6,000) $(2,587,000 $( 3,000) $(1,689,000) $( 154,000) $(1,206,000) ----------- --------- ---------- --------- ---------- ---------- ---------- ----------- --------- ---------- --------- ---------- ---------- ---------- Pro forma net loss per $(0.41) share(2)......................... $ (0.62) $ (0.29) ---------- ---------- ---------- ---------- ---------- ---------- Pro forma weighted average 4,183,067 number of shares outstanding(2)................... 4,183,067 4,183,067 ---------- ---------- ---------- ---------- ---------- ---------- </TABLE> BALANCE SHEET DATA: <TABLE> <CAPTION> DECEMBER 31, JUNE 30, 1997 -------------------- ------------------------ <S> <C> <C> <C> <C> PRO FORMA, AS 1995 1996 ACTUAL ADJUSTED(1)(3) --------- --------- --------- ------------- Working capital (deficiency)...................................... $ (74,000) $(149,000) $(329,000) $27,249,000 Total assets...................................................... 73,000 296,000 545,000 41,933,000 Total liabilities................................................. 74,000 179,000 431,000 25,686,000 Stockholders' equity (deficit).................................... (1,000) 117,000 114,000 16,247,000 </TABLE> - ------------------------ (1) The pro forma statement of operations data for the fiscal year ended December 31, 1996 and for the six months ended June 30, 1996 and 1997 is presented as if the Acquisitions and the PMI acquisition had occurred on January 1, 1996. The pro forma balance sheet data for June 30, 1997 is presented as if the Acquisitions had occurred on June 30, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operation" and Notes to Unaudited Pro Forma Financial Statements. (2) See Note HH to the Unaudited Pro Forma Statement of Operations Adjustments. (3) Gives effect on a pro forma basis to (i) the issuance after June 30, 1997 of an aggregate principal amount of $125,000 Series A 10% Senior Notes (the "Senior Notes") and 16,667 shares of Common Stock as part of a bridge financing of the Company (the "Bridge Financing"), and (ii) the Recapitalization, and as adjusted to reflect the sale of the Debentures, the Common Stock, and the Warrants offered hereby, assuming an initial public offering price of 100%, $7.50 per share, and $.10 per Warrant, respectively, and the initial application of the net proceeds therefrom. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001042825_power-one_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001042825_power-one_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae1f580bbc07a2b171f9b959d8a7eb7c72b4cd26
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001042825_power-one_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (I) THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED (II) THE COMPANY'S RECAPITALIZATION, AS SET FORTH UNDER "RECAPITALIZATION," HAS BEEN COMPLETED AND (III) THE INITIAL PUBLIC OFFERING PRICE WILL BE $12.00 PER SHARE OF THE COMMON STOCK OF THE COMPANY, THE MIDPOINT OF THE OFFERING PRICE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE COMPANY OR POWER-ONE REFER COLLECTIVELY TO POWER-ONE, INC., ITS WHOLLY-OWNED SUBSIDIARIES POWER-ELECTRONICS, INC. ("P-E") AND PODER UNO DE MEXICO, S.A. DE C.V. ("PODER UNO"), AND THE COMPANY'S PREDECESSORS. INVESTORS SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." Power-One is a leading designer and manufacturer of power supplies for electronic equipment manufacturers in the United States. The Company manufactures a broad line of more than 700 high-quality brand name products that it sells to both distributors and OEMs who place a premium on quality, reliability and service. The Company's products are sold to an installed base of more than 10,000 end-users in the communications, automatic test equipment, medical equipment, industrial and other electronic equipment industries. Power-One's customers include OEMs which are industry leaders such as Cisco Systems, General Electric, Hewlett-Packard, Siemens, Teradyne and Texas Instruments. The Company is also a leading provider of power supplies to electronic distribution customers in the U.S., including Capstone (Arrow), Kent Electronics and Pioneer Standard Electronics. Power supplies perform many essential functions relating to the supply, regulation and distribution of electrical power within electronic equipment. Virtually every electronic device that plugs into an AC wall socket requires some type of AC/DC power supply. The Company's power supplies encompass both standard and modified standard products, as well as a unique modular high-power product line. Standard power supplies are not typically industry-wide standards; rather, they are power supplies that a company manufactures as its standard catalog products that can be used for many different applications. Unlike some technology products, power supplies, whether standard, modified standard or custom, can be difficult to match exactly or replace with products manufactured by another supplier without considerable investment. Modified standard products are the Company's standard products that have been slightly altered to meet a customer's needs. Power-One's unique modular designs have allowed it to create more than 1,400 configurations of high-power supplies with custom-like features that meet its customers' diverse requirements. In contrast to custom products, Power-One's standard and modular designs reduce time-to-market and minimize costs for new product introductions. According to Micro-Tech Consultants, the worldwide market for switching power supplies in 1995 (the latest year for which information is available) was estimated to be over $15.0 billion, with the U.S. accounting for approximately $6.0 billion. The U.S. switching power supply industry grew at a compound annual rate of 11.6% from 1993 to 1995, and is anticipated to grow at a compound annual rate of 10.1% from 1995 to 2000. Switching power supplies accounted for approximately 74% of the Company's 1996 net sales; linear power supplies accounted for the remainder. The Company is benefiting from the proliferation of electronic products and services, from the increasing demand for electronic equipment and from the shorter product life cycles brought about by today's changing technology. Power-One's net sales increased to $74.2 million in 1996 from $47.0 million in 1992. For this same period, income from operations increased to $8.0 million from $2.0 million. OEMs increasingly must meet shorter time-to-market demands and greater performance pressures if they are to compete successfully. In an effort to do so, OEMs are moving toward flexible, scaleable, low-cost sub-systems and components that facilitate their goals of rapid and cost-effective product development and introduction. These increasing performance demands on OEMs translate into several significant trends in the power supply industry, including (i) consolidation of supplier base; (ii) shift in customer preference from custom to standard and modified standard products; and (iii) increased outsourcing by captive power supply manufacturers. Power-One's business strategy is to power its customers' technologies by offering one of the broadest ranges of standard and modified standard power supplies available from any manufacturer. Power-One's broad line of standard, modified standard and unique modular products permit the Company to capitalize on its customers' desire to reduce their supplier base to include only vendors that can meet diverse product and service requirements. Moreover, this strategic approach allows the Company to quickly and reliably meet its customers' power supply demands in less time, and generally at a lower cost, than manufacturers who provide custom products. This, in turn, allows the Company's customers to get their new products to market more rapidly. Key elements of the Company's strategy are to (i) further expand its standard product line; (ii) target its primary market of small and medium-volume purchasers; (iii) expand relationships with key OEMs; (iv) leverage relationships with distributors; and (v) pursue external growth opportunities. The Company was incorporated in Delaware in January 1996. The principal executive offices of the Company are located at 740 Calle Plano, Camarillo, California 93012, and its telephone number is (805) 987-8741. THE OFFERING <TABLE> <S> <C> Common Stock offered........................................ 5,000,000 shares Common Stock to be outstanding after the Offering(1)(2)..... 16,490,653 shares Use of proceeds............................................. Repay all bank indebtedness, payment of amounts owed to certain officers and general corporate purposes, including possible acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol...................... PWER </TABLE> - ------------------------------ (1) Excludes 499,750 shares of Common Stock subject to outstanding stock options at a weighted average exercise price of $1.05 per share, 180,000 shares subject to options to be granted to Non-Employee Directors at the initial public offering price upon effectiveness of the Company's Registration Statement (the "Registration Statement") and 320,250 additional shares of Common Stock reserved for issuance under the Company's 1996 Stock Incentive Plan. See "Management--Executive Compensation" and "--Stock Option Plan." (2) Excludes an additional 392 shares per day from June 30, 1997 to the date of the consummation of the Offering as a result of the accrual of dividends on the Company's Redeemable Preferred Stock and the accrual of interest on certain amounts owed to executive officers, all of which will be exchanged for Common Stock. See "Recapitalization." SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following summary financial data are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements, the notes thereto and other financial and statistical information included elsewhere in this Prospectus. <TABLE> <CAPTION> PREDECESSOR COMPANY(1)(2) COMPANY(1) ---------------------------------------------- -------------------------------------------------- NINE MONTHS THREE MONTHS SIX MONTHS ENDED YEAR ENDED DECEMBER 31, ENDED ENDED YEAR ENDED JUNE 30, ------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -------------------- 1992 1993 1994 1995 1995 1996 1996 1997 --------- --------- --------- ------------- ------------- ------------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales............. $ 46,997 $ 50,846 $ 55,702 $ 52,732 $ 20,670 $ 74,210 $ 40,743 $ 40,173 Gross profit.......... 15,406 16,768 19,951 21,207 6,322 28,905 16,034 15,825 Income from operations.......... 2,012 2,553 5,159 7,863 903 8,002 4,692 5,395 Pro forma net income(3)........... 1,345 2,034 3,359 4,635 (38) 2,869 2,048 2,568 --------- --------- --------- ------------- ------------- ------------- --------- --------- --------- --------- --------- ------------- ------------- ------------- --------- --------- Pro forma net income per share(4)........ $ 0.24 $ 0.22 ------------- --------- ------------- --------- Pro forma weighted average shares outstanding(4)...... 11,875 11,947 SELECTED OPERATING DATA: Gross margin.......... 32.8% 33.0% 35.8% 40.2% 30.6% 39.0% 39.4% 39.4% EBITDA(5)............. $ 2,830 $ 3,368 $ 5,957 $ 8,564 $ 1,718 $ 12,215 $ 6,582 $ 7,455 Cash flows from: Operating activities........ 2,755 1,738 4,049 6,420 (2,152) 4,249 1,943 1,682 Investing activities........ (359) (785) (1,663) (1,945) (49,840) (3,457) (2,080) (940) Financing activites......... (1,107) (476) (620) (688) 55,743 (2,859) 106 (374) </TABLE> <TABLE> <CAPTION> AT JUNE 30, 1997 ------------------------------------------- PRO FORMA AS ACTUAL PRO FORMA(4) ADJUSTED(4)(6) --------- ------------- ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital...................................................... $ 11,343 $ 11,343 $ 36,428 Total assets......................................................... 76,939 76,939 87,924 Total debt........................................................... 45,237 44,480 662 Redeemable preferred stock........................................... 17,122 232 -- Total stockholders' equity........................................... 2,852 20,499 75,534 </TABLE> - ------------------------------ (1) The Company's and the Predecessor Company's fiscal year is the 52- or 53-week period ending on the Sunday nearest to December 31, and its fiscal quarters are the 13- or 14-week periods ending on the Sunday nearest to March 31, June 30, September 30 and December 31. For clarity of presentation throughout this Prospectus, the Company has described year-ends presented as if the year ended on December 31 and quarter-ends presented as if the quarters ended on March 31, June 30, September 30 and December 31. As such, the years ended December 31, 1993 through 1996 represent 52-week years, while the year ended December 31, 1992 represents a 53-week year. (2) Effective September 27, 1995, the Company acquired substantially all of the assets and liabilities of Power-One, Inc., a California corporation, and the outstanding capital stock of P-E and Poder Uno (collectively, the "Predecessor Company"). For financial reporting purposes, this acquisition has been treated as if it were effective on October 1, 1995, the beginning of the Company's fourth quarter. See Note 1 of Notes to Consolidated Financial Statements. (3) Pro forma information reflects the provision for U.S. federal and state income taxes as if the Company and the Predecessor Company had been subject to federal and state income taxation as a C corporation, prior to January 29, 1996, the date the Company converted from a limited liability company to a C corporation. Prior to January 29, 1996, net income of the Company and the Predecessor Company flowed through to their stockholders/members. For presentation purposes, federal and state income taxes have not been provided on earnings of P-E as there is no intention to remit these earnings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Certain Income Tax Matters." (4) Gives effect to the exchange of (i) 14,950,848 shares of the Redeemable Preferred Stock of the Company and accrued dividends thereon with a liquidation value of $17,131,180, and (ii) $756,648 owed to the executive officers, all at an assumed public offering price of $12.00 per share, the midpoint of the offering price range set forth on the cover page of this Prospectus, into 1,490,653 shares of Common Stock which is intended to occur upon the closing of the Offering. Pursuant to applicable rules, pro forma net income per share and weighted average shares outstanding information is presented only for the most recent fiscal year and interim period. See Note 2 of Notes to Consolidated Financial Statements. (5) EBITDA, which the Company calculates as income from operations before depreciation, amortization and compensation charges for stock option plans, is a supplemental financial measurement used by the Company in the evaluation of its business and by many analysts in the Company's industry. However, EBITDA should only be read in conjunction with all of the Company's financial data summarized above and its financial statements prepared in accordance with generally accepted accounting principles appearing elsewhere herein, and should not be construed as an alternative either to income from operations (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (6) Adjusted to reflect the sale of the 5,000,000 shares of Common Stock offered hereby at $12.00 per share, the midpoint of the offering price range set forth on the cover page of this Prospectus, and the application of the estimated net proceeds therefrom. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043119_transcoast_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043119_transcoast_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5985cef4c5aac309d9d1f4885575b0ee03bd21fc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043119_transcoast_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Concurrently with and as a condition to the closing of the Offering, TransCoastal Marine Services, Inc., a recently organized Delaware corporation, will acquire, in separate transactions (collectively, the "Acquisitions"), in exchange for cash and shares of its Common Stock, four privately owned marine construction businesses (each a "Founding Company") and certain real properties used in the businesses of the Founding Companies. Unless otherwise indicated by the context, references herein to (i) "TCMS" mean TransCoastal Marine Services, Inc. (and its predecessor), prior to consummation of the Acquisitions, and (ii) the "Company" mean TCMS, pro forma to give effect to the Acquisitions. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated by the context, all share, per share and financial information set forth herein (i) has been adjusted to give effect to the Acquisitions (except that no effect is given to the post-closing adjustments to the acquisition consideration provided for in the acquisition agreements relating to two of the Acquisitions, which the Company currently estimates will result in increases to the acquisition consideration that will not exceed $0.5 million in the aggregate); (ii) assumes an initial public offering price of $15.00 per share (the midpoint of the estimated initial public offering price range); (iii) assumes that the Underwriters' over-allotment option will not be exercised; and (iv) gives effect to a stock split of the outstanding shares of Common Stock effected in August 1997. The number of shares of Common Stock to be issued in each Acquisition will depend on the initial public offering price of the Common Stock. Accordingly, the disclosures herein relating to the shares of Common Stock to be issued in connection with the Acquisitions are estimated, based on an assumed initial public offering price of $15.00 per share. THE COMPANY GENERAL TCMS was organized in April 1996 to become a fully integrated marine construction company focusing on the transition zone (marsh, swamp and coastal regions out to water depths of 20 feet) and shallow water (water depths of 20 to 200 feet) regions along the U.S. Gulf Coast. The Company's goal is to become a leader in the consolidation of these fragmented segments of the marine construction industry through an aggressive acquisition program. TCMS has entered into definitive agreements to acquire the Founding Companies concurrently with the closing of the Offering. As a result of the Acquisitions, the Company believes it will be the largest provider of transition zone marine construction services along the U.S. Gulf Coast, as well as a significant provider of shallow water construction services. The Company's primary services include pipeline installation and repair, hydrostatic testing and commissioning of pipelines and fabrication and refurbishment of components for offshore platforms and drilling rigs. Although TCMS has recently been formed and has no operating history, the Founding Companies have been in business an average of 47 years and have substantial experience in operating in difficult transition zone and shallow water environments. Marine construction activities in the transition zone require substantial expertise and customized equipment, as compared to open water operations, due to the unique physical characteristics often involved, including unstable marshbeds and obstructions such as trees, submerged stumps and a substantial infrastructure of existing pipelines. The Company believes it will benefit from the expertise developed by the management and personnel of the Founding Companies in operating in transition zone and shallow water environments and its ability to design and manufacture its own specialized equipment for these operations. Following the Acquisitions, the Company will provide marine construction and related services from five port facilities strategically located along the U.S. Gulf Coast from Orange, Texas to Mobile, Alabama. The Company believes this geographic coverage will create marketing advantages and operating efficiencies for the Founding Companies by improving their access to projects in this region and providing the ability to offer a broader range of services to their existing customer bases. The Company believes these advantages will result in higher utilization of its assets. The Company also believes it will be able to use its fabrication operations to reduce its equipment maintenance costs and related vessel downtime and eliminate subcontracting of certain services (including hydrostatic testing and pipeline burial) on many of its pipeline installation and repair projects. OPERATIONS Pipeline Installation and Repair. The efficient development of an offshore oil and gas field frequently involves the addition or extension of an infrastructure of gathering lines and trunklines (large diameter pipelines). The Company's pipeline installation operations are focused on the transition zone and shallow water regions along the U.S. Gulf Coast, where the Company believes it is the only company providing pipeline installation and repair services from water depths of 200 feet through the transition zone and to onshore gathering and processing facilities. The Company's fleet includes (i) 15 spud barges and ancillary equipment, operated in water depths of up to 20 feet, and (ii) two anchor barges and three multipurpose vessels (used in both pipeline installation and repair and hydrostatic testing, commissioning and related operations), primarily operated in water depths beyond 20 feet. The Company also owns specialized equipment for offshore pipeline jetting (a specialized pipeline burying technique) and testing services, marine dredging and trench digging. The Company generated revenue of approximately $53.5 million and $45.9 million from its pipeline installation and repair services during the twelve months ended December 31, 1996 and the six months ended June 30, 1997, respectively. Hydrostatic Testing and Commissioning. The Company performs onshore and offshore hydrostatic testing and commissioning of pipelines for oil and gas producers and pipeline construction companies along the U.S. Gulf Coast and in certain international markets. During hydrostatic testing, water is pumped into a newly installed or existing pipeline to increase the internal pressure beyond the designed capacity of the pipeline in order to test its structural integrity. Pipeline commissioning involves final preparation of a completed and successfully tested pipeline for operation in accordance with applicable regulatory standards. In connection with its hydrostatic testing and commissioning services, the Company also performs pipeline cleaning, drying and dehydration services. The Company generated revenue of approximately $7.6 million and $4.4 million from its hydrostatic testing and commissioning and related services during the twelve months ended December 31, 1996 and the six months ended June 30, 1997, respectively. Offshore Fabrication. The Company fabricates and refurbishes (i) structural components of fixed platforms for use in the offshore development and production of oil and gas and (ii) structural components, primarily deck structures, for offshore drilling rigs and barge drilling rigs. The Company also manufactures amphibious undercarriages for marine construction equipment used in transition zone waters. The Company generated revenue of approximately $11.8 million and $5.8 million from its offshore fabrication services during the twelve months ended December 31, 1996 and the six months ended June 30, 1997, respectively. INDUSTRY OVERVIEW The market for offshore pipeline installation and related services along the U.S. Gulf Coast is primarily dependent on the levels of oil and gas exploration, development and production activities and pipeline capacity utilization in the Gulf of Mexico. The Company believes recent increases in oil and gas production in the Gulf of Mexico have significantly reduced available pipeline capacity to transport the hydrocarbons to onshore gathering, transmission and processing facilities. In a report published in January 1997, the Minerals Management Service of the U.S. Department of the Interior (the "MMS") projected an increase in Gulf of Mexico oil production of up to 76% from 1,097 Mbpd (thousand barrels per day) in 1996 to 1,932 Mbpd by 2000, and an increase in natural gas production of up to 25% from 13.8 Bcfd (billion cubic feet per day) in 1996 to 17.2 Bcfd by 2000, assuming increased use of new technologies, such as 3-D seismic and horizontal drilling techniques, would offset declines in production from currently producing fields. This outlook is supported by recent increases in offshore leases awarded by the Department of the Interior in its semi-annual Outer Continental Shelf ("OCS") lease auctions. The number of offshore leases awarded to operators increased from 202 in 1992, covering approximately 1.0 million acres, to 1,508 in 1996, covering approximately 8.0 million acres. The MMS anticipates that a substantial portion of the increased oil and gas production in the Gulf of Mexico will come from deep water projects. The Company believes the continued development of deep water (depths of 200 feet to 1,000 feet) and very deep water (depths of 1,000 feet and deeper) oil and gas fields will require construction of new pipelines and tie-ins to existing pipeline systems in the transition zone and shallow water regions along the U.S. Gulf Coast to transport future hydrocarbon production to shore. The Company also expects increases in demand for its services resulting from new pipeline construction needed to support incremental development activity within these transition zone and shallow water regions, as well as the repair service requirements of the existing pipeline infrastructure. According to a June 1997 report by Offshore Data Services, Inc., there were 255 pipeline construction projects in the design or planning phase in the Gulf of Mexico, including 165 in water depths of less than 150 feet. BUSINESS STRATEGY The Company's business strategy emphasizes growth through continued consolidation of the transition zone and shallow water segments of the marine construction industry and internal development. Key elements of the Company's business strategy include: Maintaining Focus on Transition Zone and Shallow Water Market Segments. The Company intends to maintain its focus on the U.S. Gulf Coast transition zone and shallow water markets because of its strong competitive position and substantial expertise in these markets and the positive outlook for new oil and gas exploration and development activity in the Gulf of Mexico. The Company anticipates substantial growth in these markets as new pipelines are added to gather and transport the higher levels of production expected to result from increased exploration and development activity in the Gulf of Mexico. Capitalizing on Combined Capabilities of the Founding Companies. The Company believes that, as a result of the consolidation of the Founding Companies, it is the only company providing pipeline installation and repair services from water depths of 200 feet through the transition zone and to onshore gathering, transmission and processing facilities along the U.S. Gulf Coast. The Company's competitors in the pipeline installation and repair services market currently provide services either in the transition zone or shallow water regions, but not both. This market segmentation often requires customers to separate an installation or repair project into different components and award it to multiple contractors or award the project to a single contractor and rely on that contractor's ability to coordinate with subcontractors to complete the balance of the project. Expanding through Acquisitions. The Company intends to increase its market presence by acquiring additional businesses and assets. The Company believes the highly fragmented nature of the industry presents a substantial consolidation opportunity for a well-capitalized competitor with a strong market presence. Pursuing International Expansion Opportunities. The Company also intends to expand internationally by capitalizing on its relationships with hydrostatic testing customers in international markets and domestic customers with international operations and the experience of its management in developing business and conducting operations in international markets. The Company intends to target areas for international expansion with geographic conditions similar to those along the U.S. Gulf Coast, such as Venezuela and offshore West Africa. Improving Operating Margins. The Company believes the combination of the Founding Companies will provide significant opportunities to improve operating margins and increase profitability. The Company believes it will be able to achieve operating efficiencies and cost savings by consolidating overlapping facilities and administrative functions and by implementing a comprehensive marketing effort emphasizing its abilities as an integrated provider of pipeline installation and repair and related services in the transition zone and shallow water market segments. SUMMARY OF THE ACQUISITIONS TCMS has entered into definitive agreements to acquire the Founding Companies concurrently with and as a condition to the closing of the Offering. The consideration TCMS will pay to acquire the Founding Companies and certain related real estate consists of (i) approximately $85.7 million in cash, (ii) $3.0 million in 8.0% notes payable over a ten-year term ending in 2007 and (iii) 2,570,933 shares of Common Stock, and the Company will also assume up to $11.5 million of indebtedness of the Founding Companies. Two of the Acquisitions are subject to post-closing adjustments, based on a multiple of estimated earnings before interest, taxes, depreciation and amortization ("EBITDA") and payable in a combination of cash and shares of Common Stock. Based on a preliminary determination, the Company currently estimates that such post-closing adjustments will not exceed $0.5 million. See "Certain Transactions -- Acquisitions of the Founding Companies." THE OFFERING <TABLE> <S> <C> Common Stock offered by TCMS................. 5,000,000 shares Common Stock outstanding after the Offering(1)................................ 8,826,933 shares Use of Proceeds.............................. The net proceeds from the Offering will be used, together with $35.0 million of initial borrowings under a new credit agreement (the "Credit Agreement"), to pay the cash portion of the aggregate purchase price for the Acquisitions, to repay indebtedness of TCMS and the Founding Companies and to pay certain costs related to the Offering and the Acquisitions. Additional borrowings under the Credit Agreement will be available for other general corporate purposes, which may include future acquisitions. See "Use of Proceeds." Nasdaq National Market symbol................ TCMS </TABLE> - --------------- (1) The number of shares to be outstanding when the Offering closes will consist of (i) an aggregate of 1,256,000 shares issued to founders of TCMS and certain of its executive officers and consultants, (ii) 2,570,933 shares to be issued as consideration in the Acquisitions and (iii) the 5,000,000 shares being offered hereby. Such share number does not include (i) approximately 526,000 shares subject to options anticipated to be outstanding under TCMS' 1997 Stock Option Plan (the "1997 Stock Option Plan") on the date the Offering closes, (ii) an aggregate of 50,000 shares issuable pursuant to a warrant (the "MG Warrant") issued by TCMS to McFarland, Grossman & Company, Inc. ("MGCO"), a financial advisory firm that assisted the Company in connection with the Acquisitions and in arranging the Credit Agreement, or (iii) an aggregate of 175,000 shares issuable pursuant to a warrant (the "Lender Warrant") to be issued by TCMS to Joint Energy Development Investments, Limited Partnership, an affiliate of Enron Capital & Trade Resources Corp. (the "Lender"), in connection with the Credit Agreement. The number of shares to be outstanding on closing of the Offering will decrease if the initial public offering price is higher, and will increase if the initial public offering price is lower, than $15.00 per share. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Combined Liquidity and Capital Resources,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043309_alphastar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043309_alphastar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6105f75b3d527667dc654a00041ba5f90a91e12e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043309_alphastar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements (and the related notes thereto) included elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the term "Company" includes Stirling Cooke Brown Holdings Limited and all of its subsidiaries as they have existed from time to time during the periods covered by this Prospectus, on a consolidated basis. In January 1996, the Company acquired Realm Investments Ltd. ("RIL"), an affiliated Bermuda-based holding company with subsidiaries engaged in managing general underwriting, managing general agency, reinsurance, captive management and insurance brokering activities. This transaction was structured as a share for share exchange and was accounted for as a purchase (the "Acquisition"). Unless otherwise indicated, all financial statements used in this Prospectus have been prepared in accordance with United States generally accepted accounting principles and all dollar references are to U.S. dollars, which are the Company's functional currency. Except as otherwise indicated, all information in this Prospectus has been adjusted to give effect to a four for one split of the Ordinary Shares which occurred effective June 30, 1997, and assumes no exercise of the Underwriters' over-allotment option. See "Glossary of Selected Insurance Terms" for definitions of certain terms used in this Prospectus; such terms are printed in boldface the first time they appear in the text below. An investment in the Ordinary Shares offered hereby involves significant risks. See "Risk Factors". THE COMPANY Stirling Cooke Brown Holdings Limited is a Bermuda holding company which, through its subsidiaries, provides risk management services and products predominantly to U.S. based small and mid-sized businesses seeking cost- effective alternatives to traditional WORKERS' COMPENSATION insurance. In addition, the Company arranges REINSURANCE for its products as well as for those offered by independent U.S. based insurance carriers active in the workers' compensation, occupational accident and health insurance markets. The Company believes that its integrated approach, experienced personnel and market position provide the Company with the ability to offer innovative cost- effective alternatives to traditional workers' compensation coverage in a variety of market conditions. The Company provides most of its services and products to, and derives a significant portion of its risk management and brokerage fees from, the workers' compensation insurance market. Workers' compensation is an attractive market for the structuring of ALTERNATIVE MARKET insurance coverage given the relatively frequent yet predictable nature of claims, as well as the need to control costs arising from medical expenses, litigation and other economic factors. Alternative insurance products typically involve financial participation by the insured in some or all of the risk, as compared to traditional insurance products which shift all, or a substantial portion, of the insured's risk to the insurer. Alternative solutions to traditional workers' compensation are designed to reduce insurance costs by allowing the insured to retain a level of risk consistent with the predictable portion of the loss experience. The Company believes that alternative market workers' compensation products comprised at least $16.4 billion in 1996, or approximately 39% of the estimated $42.4 billion total market for workers' compensation insurance in the U.S. that year. In recent years, the Company has applied its integrated risk transfer approach to the development of insurance programs for other SPECIALTY CASUALTY LINES. The Company has historically experienced strong growth in revenues and earnings despite the current prolonged SOFT INSURANCE MARKET. The expansion of the Company's risk management services and products, including the Acquisition, has led to an increase in the Company's net income from $2.1 million in 1993 to $9.9 million in 1996. The Company's revenues are predominantly fee based, as the Company earns risk management fees for providing services and products to insureds, insurers and reinsurers. In 1996, 72.2% of the Company's total revenues were derived from risk management fees including agency and brokerage fees and commissions, underwriting management and administration fees and fees from other non-risk bearing activities. Immediately after the Acquisition in January 1996, certain investment funds affiliated with The Goldman Sachs Group, L.P. (collectively, the "GS Funds") made an equity investment in the Company. Consistent with the Company's strategy of providing services and products at multiple stages in the risk transfer process, the Company used the proceeds from this investment to acquire and provide additional capital for Realm National Insurance Company ("Realm"), a New York domiciled insurance company, in September 1996. The acquisition of Realm had an insignificant impact on the Company's net income for 1996 and for the first nine months of 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". The Company is in the process of integrating Realm's insurance underwriting capabilities with the Company's risk management services and will seek to earn additional income through a combination of policy issuance fees and NET PREMIUMS EARNED while retaining a minimum amount of risk. The net proceeds received by the Company from the offering of the Ordinary Shares pursuant to this Prospectus (the "Offering") will be used primarily to provide additional capital to Realm, allowing the Company to expand its underwriting activities. See "The Company" and "Use of Proceeds". BUSINESS STRATEGY The Company believes that growth potential exists in its markets which will provide opportunities to increase fee-based revenues, net premiums earned and net investment income. To capitalize on these opportunities, the Company has established the following strategic priorities which the Company believes will allow it to maintain and enhance its position as a provider of alternatives to traditional workers' compensation insurance: . Increase market penetration and extend agency network. The Company, through its MANAGING GENERAL AGENCY network, typically receives net fee income from the insurance carrier of between 13% and 17% of the insured's gross premium on the underlying policy for providing underwriting services, POLICY ADMINISTRATION and PREMIUM ACCOUNTING, and CLAIMS ADJUSTING and administrative services. The Company intends to increase the market penetration of its existing agency network by concentrating its marketing efforts on the most productive agents and by continuing to use agency incentive and promotional programs to encourage increased levels of new business development. In addition, the Company intends to continue to increase the number of INDEPENDENT PRODUCING AGENTS distributing the Company's services and products. . Expand current insurance operations. The Company currently uses independent primary insurance carriers in connection with most of its existing workers' compensation business, and expects these arrangements to continue for much of this existing business. However, through Realm, the Company intends to act as an issuing carrier for a portion of its new business opportunities and receive a combination of policy issuance fees (typically 7% of the insured's gross premiums) and/or net premiums earned. The Company is in the process of increasing Realm's capital base and expanding the number of states in which Realm is licensed. . Expand product offerings through existing distribution network. The Company seeks to expand its product offerings by developing services and products that meet the financial and risk management objectives of its clients. For example, in response to rising workers' compensation costs, the Company was one of the pioneers in the development of alternative NON-SUBSCRIBER PROGRAMS, which the Company began to market and sell in Texas in the early 1990s. The Company intends to continue to develop new services and products to be marketed through its agency distribution network. . Expand and develop program business. The Company structures and markets comprehensive programs to transfer risk from an insured to insurers and ultimately to reinsurers in the workers' compensation market as well as for other specialty casualty lines. These programs enable the Company to provide a range of risk management services and products for retail agents, while also maximizing the Company's revenues at each stage of the risk transfer process. The Company intends to utilize its existing reinsurance business relationships to expand the number of programs it offers and also intends to increase the sale of insurance policies issued under existing programs through its agency network. The Company expects the growth of its PROGRAM BUSINESS to increase total revenues as well as increase the revenues generated from specialty casualty lines. . Increase reinsurance brokering revenues. The Company's REINSURANCE BROKERING subsidiaries arrange the reinsurance programs associated with the Company's products, and also arrange reinsurance programs for numerous other U.S. and European insurance companies. The Company expects that Realm's expansion will generate additional business for the Company's reinsurance brokering operations. . Selectively pursue acquisitions. The Company is continuously looking to expand its business by selectively acquiring general agencies and books of insurance business. Given the Company's ability to earn fees throughout the risk transfer process, the Company believes the selective acquisition of general agencies and books of insurance business can generate significant additional profits relative to the costs of such acquisitions. Because the Company has already developed the infrastructure necessary to implement these strategies, the Company believes that its objectives can be achieved with minimal additional costs. In connection with the Offering, the Company will raise additional capital required to facilitate the planned expansion of Realm's business. THE OFFERING <TABLE> <S> <C> <C> Ordinary Shares offered by the Company......... 1,375,000 Ordinary Shares Ordinary Shares offered by the Selling Shareholders.................................. 1,600,000 Ordinary Shares --------- Total...................................... 2,975,000 Ordinary Shares ========= Ordinary Shares to be outstanding immediately after the Offering............................ 9,863,372 Ordinary Shares </TABLE> Dividend Policy....... After the Offering, the Company currently intends to declare quarterly dividends on the Ordinary Shares and expects that the first quarterly dividend payment will be $0.03 per Ordinary Share (a rate of $0.12 annually) and will be declared and paid in the first quarter of 1998. The declaration and payment of future dividends is at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, capital requirements, the general financial condition of the Company, general business conditions and other factors. The Company, as a holding company, is dependent on the payment of dividends from its operating subsidiaries. Certain of the Company's insurance subsidiaries are subject to regulations and may be subject to certain taxes that could limit the amount of or restrict the payment of dividends to the Company. See "Risk Factors--Potential Impact of Holding Company Structure on Dividends", "Dividend Policy", "Business-- Regulation", "Certain Tax Considerations", and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources". Use of Proceeds....... The proceeds to the Company from the sale of Ordinary Shares by the Company are expected to be approximately $24.5 million (net of underwriting discounts and estimated expenses payable by the Company). The Company currently intends to use approximately $20.0 million of the net proceeds from the sale of shares by the Company to periodically provide additional capital to the Company's wholly-owned insurance subsidiary, Realm. As Realm's business expands, it will require the additional funds to meet regulatory capital requirements. Any remaining funds will be used for general corporate purposes, which could include acquisitions of general insurance agencies and books of insurance business. Pending investment of the net proceeds in Realm, the Company will invest such net proceeds in short-term investments. The Company will not receive any proceeds from the sale of shares by the Selling Shareholders. See "Principal and Selling Shareholders" and "Use of Proceeds". Listing............... Application has been made to have the Ordinary Shares quoted on the Nasdaq National Market under the symbol "SCBHF". See "Market for the Ordinary Shares".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043339_meadowcraf_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043339_meadowcraf_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..477116261bc15944fcc9a45c27abbe1922d41d4b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043339_meadowcraf_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and related notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, (i) all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised; (ii) all references to the assumed initial public offering price of $14.00 per share of Common Stock are based on the midpoint of the range set forth on the cover page of this Prospectus; (iii) references to "Fiscal 1991," "Fiscal 1992," "Fiscal 1993," "Fiscal 1994," "Fiscal 1995," and "Fiscal 1996" refer to the Company's fiscal year ending on the Sunday closest to April 30 of that year, references to "Fiscal 1997" refer to the Company's fiscal year ended May 3, 1997, and references to "Fiscal 1998" refer to the Company's fiscal year ending July 31, 1998; and (iv) "Seasonal" year refers to the 12-month period ending July 31 of the particular year and represents the fiscal year to which the Company plans to change upon consummation of the Offering. THE COMPANY Meadowcraft is one of the leading domestic producers of casual outdoor furniture and is the largest manufacturer of outdoor wrought iron furniture in the United States. The Company designs, manufactures and distributes a variety of wrought iron consumer products, including outdoor and indoor furniture and accessories, outdoor cushions and umbrellas, and garden products, which it markets to mass merchandisers and specialty stores primarily in the United States. The Company believes that it has established a reputation as an innovator in the design, manufacturing, distribution and marketing of moderately priced, quality wrought iron furniture. Meadowcraft's net sales have grown from $50.5 million in Fiscal 1991 to $141.9 million in Fiscal 1997, while pro forma net income has increased from $1.2 million to $15.9 million over the same period. For Seasonal 1997, Meadowcraft had net sales of $145.1 million and pro forma net income of $16.7 million. The Company offers consumers a wide variety of products across different price points in three markets: the outdoor mass market under the Plantation Patterns brand name; the outdoor specialty market under the Meadowcraft, Arlington House and Salterini brand names; and the indoor specialty and mass markets under the Interior Images by Salterini and Home Collection from Plantation Patterns brand names, respectively. For Fiscal 1997, outdoor mass market sales accounted for approximately 75.1% of the Company's gross sales, while outdoor specialty market sales represented approximately 16.9% of gross sales and indoor specialty and mass market sales constituted approximately 4.2% of gross sales. Meadowcraft attributes its strong market position in the casual outdoor furniture industry to the following competitive strengths: - Meadowcraft's ability to produce quality wrought iron furniture and accessories with traditional, "high-end" design features, broad consumer appeal, and high value-to-price characteristics. - Meadowcraft's ability to ship large quantities of products on a reliable and timely basis due to its advanced manufacturing and distribution facilities and computerized inventory tracking and shipping systems. - Meadowcraft's excellent relationships with its mass market retail customers and its extensive network of specialty retail customers. - Meadowcraft's senior managers with their extensive experience in the casual furniture and other manufacturing industries. Meadowcraft's objective is to continue to grow sales, earnings and market share of the casual outdoor and indoor furniture markets by: - Introducing new products and expanding offerings in its existing product lines with the same quality and customer value as its existing products. - Increasing its manufacturing and product distribution capacity to meet the demands of new and existing customers in new geographic regions, as well as to enhance the Company's ability to provide products to all customers on a timely and reliable basis. - Heightening brand name awareness and increasing consumer demand for the Company's products through expanded product offerings and national marketing and advertising campaigns, such as the Paul Harvey national radio show. The Company was incorporated under the laws of Delaware in 1985 as Sam Blount Company, Inc. and changed its name to Meadowcraft, Inc. in July 1994. The Company's principal executive and administrative offices are located at 1401 Meadowcraft Road, Birmingham, Alabama 35215, and the Company's telephone number is (205) 853-2220. OWNERSHIP Upon consummation of the Offering, the existing stockholders of the Company and members of their immediate family will own an aggregate of approximately 85.2% of the outstanding Common Stock (approximately 83.2% if the Underwriters' over-allotment option is exercised in full), with Samuel R. Blount, Chairman of the Board of Directors, and his immediate family owning an aggregate of approximately 76.1% of the outstanding Common Stock (approximately 74.3% if the Underwriters' over-allotment option is exercised in full). See "Principal Stockholders." THE OFFERING Common Stock offered by the Company........................... 3,125,000 shares Common Stock to be outstanding after the Offering(1)................... 19,125,000 shares Use of Proceeds..................... The Company will use the net proceeds from the Offering to pay approximately $32.7 million of the S Corporation Distribution (as defined herein) to the Company's existing stockholders, and the balance will be used to finance capital expenditures. See "Use of Proceeds." NYSE symbol......................... MWI - --------------- (1) Excludes 1,000,000 shares of Common Stock reserved for issuance and not yet issued under the Company's 1997 Stock Option Plan (the "Plan"). See "Management -- 1997 Stock Option Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043431_best_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043431_best_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea625291478732872ad153380835d8980f245fc1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043431_best_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." THE COMPANY The Company is a leading provider of asset, human resources and payroll management software solutions for middle market businesses. The Company's feature-rich, cost-effective solutions are easy to implement and enhance productivity by automating management, compliance and reporting functions in areas of specialized expertise that entail complex and frequently changing laws and regulations. The Company's solutions have been designed to complement core accounting systems and are scaleable from stand-alone desktop applications running on personal computers to multi-user work group and client/server programs designed for use on personal computer local area networks. As of June 30, 1997, the Company had over 40,000 licensed customer locations, representing approximately 115,000 licensed seats. In order to improve efficiencies and control costs, middle market businesses are increasingly seeking to automate their asset, human resources and payroll functions. The Company's suite of software solutions is tailored to meet the needs of middle market businesses and is designed to increase efficiency by automating and streamlining the complex processes associated with these functions. The Company's solutions, which integrate with many core accounting systems, include its FAS asset management and Abra human resources and payroll management product lines. The Company's products perform a variety of functions, including sophisticated depreciation calculations, payroll processing, employee tracking, employee cost and productivity analyses and tax report and tax form generation. The Company believes that its solutions provide significant cost savings opportunities for its customers through improved productivity and control. The Company currently derives substantially all of its revenue from its FAS asset management and Abra human resources and payroll management products lines and related services and from royalty payments under a certain exclusive license. In each of fiscal 1995, 1996 and 1997, total revenue attributable to such sources amounted to approximately $26.2 million, $30.8 million and $38.4 million, respectively. In the three months ended June 30, 1997, total revenue attributable to such products and related services and license fees amounted to approximately $10.6 million. As part of the revenues derived from its FAS asset management and Abra human resources and payroll management product lines, the Company derives significant recurring revenue from maintenance and support agreements and other services. In fiscal 1997, approximately 85% of the Company's customers purchased maintenance and support agreements in connection with their initial license of the Company's products. The Company achieved renewal rates of existing maintenance and support agreements of approximately 80% during the same period. Revenue from services, including maintenance and support agreements, training and consulting services, accounted for approximately 49% of the Company's total revenue in fiscal 1997. The Company expects to continue to derive a significant portion of its revenue from services. The Company employs a multi-channel sales and marketing strategy, which includes its network of value-added resellers, accounting firms and consultants, as well as a direct-response telesales operation, strategic marketing alliances and its direct sales organization. Numerous accounting firms, including four of the Big Six, use the Company's solutions internally and the Company regularly receives customer referrals from offices of the Big Six and other accounting firms. The Company also has formal and informal marketing alliances with approximately 20 core accounting and other industry-specific software vendors, including Great Plains Software, Inc., Platinum Software Corporation, Scala North America, Inc. and State of the Art, Inc. The Company believes this diversity of sales and marketing channels permits it to distribute its products in the most efficient and effective manner, while reducing reliance on any one channel. The Company's strategy is to extend its leadership position in the asset, human resources and payroll management software solutions market and to develop other specialized and complementary solutions in order to provide its customers with an integrated suite of products. The Company believes that its large existing customer base represents a significant potential market for such products. The Company also intends to continue to make its solutions available on a variety of platforms, including client/server architecture, in order to meet its customers' evolving technological needs. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company................... 2,750,000 shares Common Stock offered by the Selling Shareholders...... 1,400,000 shares(1) Common Stock to be outstanding after the offering..... 10,896,688 shares(1)(2)(3) Use of Proceeds....................................... Working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol................ BEST </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS YEAR ENDED MARCH 31, ENDED JUNE 30, --------------------------- ----------------- 1995 1996 1997 1996 1997 ------- ------- ------- ------ ------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenue(4)................................. $35,023 $39,229 $39,484 $9,499 $10,646 Gross margin..................................... 26,860 29,422 31,558 7,408 8,805 Operating income................................. 2,338 1,997 5,560 114 867 Net income....................................... $ 3,515 $ 3,527 $ 4,436 $ 80 $ 349 Pro forma net income per share(5)................ $ 0.45 $ 0.04 Pro forma weighted average shares outstanding(5)................................ 9,808 9,883 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------------------------------- ACTUAL PRO FORMA(3) AS ADJUSTED(6) ------- ------------ -------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents.............................. $ 7,429 $ 7,605 $ 40,153 Working capital (deficit).............................. (7,743) (7,567) 24,981 Total assets........................................... 16,815 16,991 49,539 Deferred maintenance and service revenue............... 13,632 13,632 13,632 Redeemable convertible preferred stock................. 500 -- -- Redeemable common stock warrants....................... 792 -- -- Total shareholders' equity (deficit)................... (7,361) (5,893) 26,655 </TABLE> - --------------- (1) Includes 86,660 shares to be issued upon the Warrant Exercise (as defined below), which will be sold by a Selling Shareholder in this offering. Excludes an additional 47,546 shares to be issued upon the exercise of the underlying warrant if the Underwriters' over-allotment option is exercised in full. (2) Excludes 1,294,733 shares of Common Stock issuable pursuant to options and warrants (after giving effect to the Warrant Exercise) outstanding at June 30, 1997, at a weighted average exercise price of $2.52 per share, approximately 200,000 shares of Common Stock to be issuable pursuant to options currently expected to be granted immediately after the effectiveness of this offering at an exercise price equal to the initial public offering price in this offering and 1,700,000 additional shares of Common Stock reserved for issuance under the Company's stock plans. See "Management -- Stock Plans" and "Description of Capital Stock -- Warrants." (3) Gives effect to the Warrant Exercise, the Preferred Stock Conversion (as defined below) and the Put Elimination (as defined below). (4) Total revenue in fiscal 1995, 1996 and 1997 includes revenue derived from certain product lines no longer offered by the Company. Currently, the Company derives substantially all of its revenue from its FAS and Abra product lines and from royalty payments under a certain exclusive license agreement (collectively, the "Ongoing Business"). In each of fiscal 1995, 1996 and 1997, total revenue attributable to the Ongoing Business amounted to approximately $26.2 million, $30.8 million and $38.4 million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043436_wfs_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043436_wfs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f5653e8b3ad2fd7b9c61433c16bb446a91958ef8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043436_wfs_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of certain capitalized terms. Trust...................... WFS Financial 1997-C Owner Trust (the "Trust"). Seller..................... WFS Financial Auto Loans, Inc. (the "Seller"), a wholly owned, limited-purpose operating subsidiary of WFS Financial Inc. The principal executive offices of the Seller are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. Prior to May 29, 1996, the Seller was known as Western Financial Auto Loans, Inc. See "The Seller." WFS........................ WFS Financial Inc ("WFS" or, in its capacity as Master Servicer, the "Master Servicer"), a majority owned, operating subsidiary of Western Financial Bank, F.S.B. (the "Bank"), a federally chartered savings association. The principal offices of WFS are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WFS." WII........................ WFS Investments, Inc. ("WII"), a California corporation and a wholly owned operating subsidiary of WFS. The principal office of WII is 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WII." Securities Offered......... The securities offered are as follows: A. General................. The WFS Financial 1997-C Owner Trust Auto Receivable Backed Notes (the "Notes") will represent obligations of the Trust secured by the assets of the Trust (other than the Certificate Distribution Account and the Certificate Policy). The WFS Financial 1997-C Owner Trust Auto Receivable Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") will represent fractional undivided interests in the Trust. The Trust will issue four Classes of Notes pursuant to an indenture to be dated as of September 1, 1997 (the "Indenture"), between the Trust and Bankers Trust Company, as trustee (the "Indenture Trustee"), as follows: (i) $126,000,000 aggregate principal amount of 5.71% Auto Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii) $130,000,000 aggregate principal amount of 5.95% Auto Receivable Backed Notes, Class A-2 (the "Class A-2 Notes"), (iii) $220,000,000 aggregate principal amount of 6.10% Auto Receivable Backed Notes, Class A-3 (the "Class A-3 Notes") and (iv) $64,000,000 aggregate principal amount of 6.15% Auto Receivable Backed Notes, Class A-4 (the "Class A-4 Notes"). Payments of principal and interest on the Notes will be made in accordance with the priorities set forth under "Certain Information Regarding the Securities -- Distributions on the Securities." The Trust will issue $60,000,000 aggregate principal amount of 6.30% Auto Receivable Backed Certificates (the "Certificates") pursuant to a trust agreement (the "Trust Agreement") to be dated as of the date of initial issuance of the Securities (the "Closing Date"), among the Seller, Financial Security Assurance Inc. ("Financial Security"), WII and Chase Manhattan Bank Delaware, as trustee (the "Owner Trustee" and, together with the Indenture Trustee, the "Trustees"). Payments in respect of the Certificates will be subordinated to payments on the Notes to the extent described herein. Each Class of Notes and the Certificates will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Definitive Securities will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities -- Book-Entry Registration" and "-- Definitive Securities." B. Property of the Trust... Each Note will represent an obligation of, and each Certificate will represent a fractional undivided interest in, the Trust. The property of the Trust will primarily include (i) a pool of retail installment sales contracts and installment loans (the "Contracts") secured by the new and used automobiles and light-duty trucks financed thereby (the "Financed Vehicles"); (ii) certain monies due under the Contracts on and after September 8, 1997 (the "Cut-Off Date"); (iii) security interests in the Financed Vehicles; (iv) a financial guaranty insurance policy (the "Note Policy") to be issued by Financial Security for the exclusive benefit of Noteholders, which will unconditionally and irrevocably guarantee payment of the Scheduled Payments on each Distribution Date; (v) a financial guaranty insurance policy (the "Certificate Policy" and, together with the Note Policy, the "Policies") to be issued by Financial Security for the exclusive benefit of Certificateholders, which will unconditionally and irrevocably guarantee payment of the Guaranteed Distributions on each Distribution Date; (vi) amounts on deposit in the Collection Account, the Note Distribution Account, the Certificate Distribution Account, the Spread Account and the Holding Account, including all Eligible Investments therein and all income from the investment of funds therein and all proceeds therefrom; (vii) proceeds from claims under certain insurance policies in respect of individual Financed Vehicles or obligors under the Contracts (the "Obligors"); and (viii) certain rights under the sale and servicing agreement to be dated as of September 1, 1997 (the "Sale and Servicing Agreement"), among the Trust, the Seller and the Master Servicer. Pursuant to the Indenture, the property of the Trust (other than the Certificate Distribution Account and the Certificate Policy) will be held by the Master Servicer for the benefit of the Indenture Trustee and Financial Security on behalf of the holders of the Notes. C. Distribution Dates...... Distributions of interest and principal on the Securities will be made on March 20, June 20, September 20 and December 20 of each year (or, if any such day is not a Business Day, on the next succeeding Business Day) (each, a "Distribution Date"), commencing December 20, 1997. Payments on the Securities on each Distribution Date will be paid to the holders of record of the related Securities on the Business Day immediately preceding such Distribution Date or, in the event that Definitive Securities are issued, as of the 15th day of the month immediately preceding the month in which such Distribution Date occurs (each, a "Record Date"). A "Business Day" will be any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Wilmington, Delaware, or Los Angeles, California are authorized or obligated by law, executive order or government decree to be closed. To the extent not previously paid prior to such dates, the outstanding principal amount of (i) the Class A-1 Notes will be payable on September 20, 1998 (the "Class A-1 Final Distribution Date"), (ii) the Class A-2 Notes will be payable on June 20, 2000 (the "Class A-2 Final Distribution Date"), (iii) the Class A-3 Notes will be payable on March 20, 2002 (the "Class A-3 Final Distribution Date") and (iv) the Class A-4 Notes will be payable on September 20, 2002 (the "Class A-4 Final Distribution Date" and, together with the Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date and the Class A-3 Final Distribution Date, the "Note Final Distribution Dates"). To the extent not previously paid in full prior to such date, the unpaid principal balance of the Certificates will be payable on March 20, 2005 (the "Certificate Final Distribution Date" and, together with the Note Final Distribution Dates, the "Final Distribution Dates"). Terms of the Notes......... The principal terms of the Notes will be as described below: A. Interest Rates.......... Interest will be borne on (i) the Class A-1 Notes at the rate of 5.71 % per annum (the "Class A-1 Rate"), (ii) the Class A-2 Notes at the rate of 5.95% per annum (the "Class A-2 Rate"), (iii) the Class A-3 Notes at the rate of 6.10% per annum (the "Class A-3 Rate") and (iv) the Class A-4 Notes at the rate of 6.15% per annum (the "Class A-4 Rate" and, together with the Class A-1 Rate, the Class A-2 Rate and the Class A-3 Rate, the "Interest Rates"). B. Interest................ Interest on the outstanding principal amount of each Class of Notes will accrue at the related Interest Rate from and including the most recent Distribution Date on which interest has been paid (or from and including the Cut-Off Date with respect to the first Distribution Date) to but excluding the current Distribution Date (each, an "Interest Period"). Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days elapsed in an Interest Period and a 360-day year. Interest on the Class A-2, Class A-3 and Class A-4 Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Notes for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the related Interest Rate. See "The Notes -- Payments of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." C. Principal............... Principal of the Notes will be payable on each Distribution Date in an amount generally equal to the Note Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." The Note Principal Distributable Amount will include an amount equal to the Accelerated Principal Distributable Amount for such Distribution Date. On each Distribution Date, the Note Principal Distributable Amount will be applied in the following priority: first to reduce the principal amount of the Class A-1 Notes; second, after the principal amount of the Class A-1 Notes has been reduced to zero, to reduce the principal amount of the Class A-2 Notes; third, after the principal amount of the Class A-2 Notes has been reduced to zero, to reduce the principal amount of the Class A-3 Notes; and fourth, after the principal amount of the Class A-3 Notes has been reduced to zero, to reduce the principal amount of the Class A-4 Notes. Notwithstanding the foregoing, if the principal amount of a Class of Notes has not been paid in full prior to its Note Final Distribution Date, the Note Principal Distributable Amount for such Note Final Distribution Date will include an amount sufficient to reduce the unpaid principal amount of such Class of Notes to zero on such Note Final Distribution Date. See "The Notes -- Payments of Principal" and "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." D. Optional Redemption..... In the event of an Optional Purchase, each Class of outstanding Notes will be redeemed in whole, but not in part, at a redemption price equal to the unpaid principal amount of such Class of Notes plus accrued interest thereon at the related Interest Rate. See "The Notes -- Optional Redemption." E. Mandatory Redemption.... Under certain conditions, the Notes may be accelerated upon the occurrence of an Event of Default under the Indenture. So long as no Insurer Default shall have occurred and be continuing, under certain circumstances Financial Security will have the right (in addition to its obligation to make Scheduled Payments on the Notes in accordance with the terms of the Note Policy) but not the obligation, to elect to accelerate the principal of the Notes and to cause the Master Servicer or the Trustee to sell or otherwise liquidate the property of the Trust and to deliver the proceeds to the Indenture Trustee for distribution in accordance with the terms of the Indenture. See "The Notes -- Events of Default." Terms of the Certificates............... The principal terms of the Certificates will be as described below: A. Interest................ On each Distribution Date, the Owner Trustee or any paying agent as the Owner Trustee may designate from time to time (the "Paying Agent") will distribute pro rata to Certificateholders of record as of the related Record Date accrued interest at the rate of 6.30% per annum (the "Pass-Through Rate") on the Certificate Balance, as defined below, as of the immediately preceding Distribution Date (after giving effect to distributions of principal to be made on such immediately preceding Distribution Date) or, in the case of the first Distribution Date, the Original Certificate Balance. Interest in respect of a Distribution Date will accrue from and including the Cut-Off Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid, to but excluding the current Distribution Date. Interest on the Certificates for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the Pass-Through Rate. See "The Certificates -- Distributions of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." The "Certificate Balance" will equal $60,000,000 (the "Original Certificate Balance") on the Closing Date and on any date thereafter will equal the Original Certificate Balance reduced by all distributions of principal previously made in respect of the Certificates. Distributions on the Certificates will be subordinated to payments of interest and principal on the Notes as described under "The Certificates" and "Certain Information Regarding the Securities -- Distributions on the Securities." B. Principal............... No principal will be paid on the Certificates until the Distribution Date on which the principal amount of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes has been reduced to zero. On such Distribution Date and each Distribution Date thereafter, principal of the Certificates will be payable in an amount equal to the Certificate Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." On each Distribution Date on or after the Distribution Date on which the Class A-4 Notes have been paid in full, any Accelerated Principal Distributable Amount will be included in the Certificate Principal Distributable Amount. If not paid in full prior to the Certificate Final Distribution Date, the remaining Certificate Balance, if any, will be payable on that date. See "The Certificates -- Distributions of Principal." C. Optional Prepayment..... In the event of an Optional Purchase, the Certificates will be repaid in whole, but not in part, at a repayment price equal to the Certificate Balance plus accrued interest thereon at the Pass-Through Rate. See "The Certificates -- Optional Prepayment." Security for the Securities................. The principal security for the Securities will be as described below: A. The Contracts........... The Contracts will consist of retail installment sales contracts and installment loans, secured by liens on the Financed Vehicles, purchased from WFS by the Seller and from the Seller by the Trust, including the right to receive the payments thereunder on and after the Cut-Off Date. The Seller will be required to repurchase Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Securityholders, the Indenture Trustee, the Owner Trustee or Financial Security. The Contracts were purchased from new and used car dealers or originated directly from consumers by WFS. The Contracts were originated in California and 35 other states by new and used car dealers not affiliated with WFS, except for a limited number of Contracts originated directly from consumers by WFS. The Contracts will be selected by WFS from its portfolio of retail installment sales contracts and installment loans based upon the criteria to be specified in the Sale and Servicing Agreement. As of the Cut-Off Date, the Aggregate Scheduled Balance will be $600,000,000 (the "Cut-Off Date Aggregate Scheduled Balance") and the Contracts will have an expected weighted average annual percentage rate of approximately 15.36% and an expected weighted average remaining maturity of approximately 57 months. See "The Contracts Pool." Approximately 35.62% of the aggregate principal amount of the Contracts will be Rule of 78's Contracts and approximately 64.38% will be Simple Interest Contracts, based upon the anticipated Scheduled Balances of the Contracts as of the Cut-Off Date. All net collections received by the Master Servicer on or in respect of the Contracts, any Advances made by the Master Servicer and all amounts paid under the Policies will be deposited in or credited to the Collection Account or, in certain limited instances, the Holding Account. On each Distribution Date, the Indenture Trustee will distribute the amounts on deposit in the Collection Account with respect to such Distribution Date to the Note Distribution Account and, to the extent applicable, the Certificate Distribution Account. All payments to Noteholders will be made from the Note Distribution Account and to Certificateholders from the Certificate Distribution Account. See "Certain Information Regarding the Securities -- The Accounts and Eligible Investments" and "-- Distributions on the Securities." B. The Spread Account...... The Securityholders will be afforded certain limited protection, to the extent described herein, against losses in respect of the Contracts by the establishment of a segregated trust account in the name of the Indenture Trustee for the benefit of the Securityholders (the "Spread Account"). The Spread Account will be part of the Trust. The Spread Account will be created with an initial deposit by the Seller of $18,000,000 (the "Spread Account Initial Deposit"). The funds in the Spread Account will thereafter be supplemented on each Distribution Date by the deposit of any Excess Amounts (as defined below), until the cash on deposit in the Spread Account is at least equal to the Minimum Funded Amount and the sum of the Funded Amount and the Overcollateralization Amount is at least equal to the Specified Spread Account Balance. "Excess Amounts" in respect of a Distribution Date will be calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments" and will equal the funds on deposit in the Collection Account in respect of such Distribution Date, after giving effect to all distributions required to be made on such Distribution Date. The Specified Spread Account Balance, the Minimum Funded Amount and the Overcollateralization Amount will be calculated as described under "Certain Information Regarding the Securities -- Payment Priorities of the Notes and the Certificates; The Spread Account -- Calculation of Specified Spread Account Balance." On each Distribution Date, funds will be withdrawn from the Spread Account for distribution to Securityholders to cover any shortfalls in interest and principal required to be paid on the Securities (before giving effect to any claim under the Policies). If on the last day of any month (each, a "Calculation Day") or on any Distribution Date the Spread Account is fully funded, any excess cash on deposit therein will be released therefrom and upon such distribution Securityholders will have no further rights in, or claims to, such amounts. See "Certain Information Regarding the Securities -- Withdrawals from the Spread Account." C. The Policies............ On the Closing Date, Financial Security will issue the Note Policy to the Indenture Trustee and the Certificate Policy to the Owner Trustee pursuant to the insurance, indemnity and pledge agreement to be dated as of September 1, 1997 (the "Insurance Agreement"), among Financial Security, the Trust, the Seller, Bankers Trust Company as Collateral Agent for Financial Security, WII and WFS. Pursuant to the Note Policy, Financial Security will unconditionally and irrevocably guarantee to the Noteholders payment of the Scheduled Payments for each Distribution Date. Pursuant to the Certificate Policy, Financial Security will unconditionally and irrevocably guarantee to the Certificateholders payment of the Guaranteed Distributions for each Distribution Date. See "The Policies" and "Financial Security Assurance Inc." Optional Purchase.......... The Seller may, but will not be obligated to, purchase all of the Contracts in the Trust, and thereby cause early retirement of all outstanding Securities, on any Distribution Date as of which (i) the Aggregate Scheduled Balance is 10% or less of the Cut-Off Date Aggregate Scheduled Balance and (ii) the aggregate outstanding principal amount of the Securities is 5% or less of the initial aggregate amount of the Securities (an "Optional Purchase"). See "Certain Information Regarding the Securities -- Termination." The Master Servicer........ WFS, as Master Servicer, will be obligated pursuant to the Sale and Servicing Agreement, subject to the limitations set forth therein, to service the Contracts and to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by WFS are incorrect or if WFS, as Master Servicer, breaches certain of its servicing obligations under the Sale and Servicing Agreement, in either case in a manner that materially and adversely affects such Contracts. See "The Master Servicer." Ratings.................... It is a condition of issuance that the Class A-1 Notes be rated A-1+ by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the "Rating Agencies"), and the Class A-2, Class A-3 and Class A-4 Notes and the Certificates each be rated AAA by S&P and Aaa by Moody's. See "Ratings of the Securities." Tax Status................. In the opinion of special tax counsel to the Seller, for both federal and California income tax purposes, the Notes will be characterized as debt, and the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. Each Noteholder, by the acceptance of a Note, will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate, will agree to treat the Trust as a partnership in which the Certificateholders are partners for federal income tax purposes. See "Certain Federal Income Tax Consequences" and "Certain California Income Tax Consequences." ERISA Considerations....... Subject to the considerations discussed under "ERISA Considerations," the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Since the Certificates will be subordinated to the Notes to the extent described herein, employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations." Legal Investment........... The Class A-1 Notes have been structured to be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisors regarding the eligibility of the Class A-1 Notes under Rule 2a-7, the fund's investment policies and objectives and an investment in the Class A-1 Notes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043438_u-s-a_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043438_u-s-a_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..11982bc3268529cdbb01be48de662b3448d5ccfc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043438_u-s-a_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Simultaneously with the consummation of its initial public offering (the "IPO") on October 16, 1997, U.S.A. Floral Products, Inc. acquired, in separate transactions (the "Mergers"), a number of floral products businesses (collectively, the "Founding Companies"). See "Formation of the Company." Unless otherwise indicated, all references to the "Company" include the Founding Companies after the effectiveness of the Mergers, and references to "USA Floral" mean U.S.A. Floral Products, Inc. prior to the effectiveness of the Mergers. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all share, per share and financial information set forth herein has been adjusted to give effect to the Mergers and the IPO. THE COMPANY USA Floral was founded in April 1997 to create a national consolidator and operator of floral products distribution businesses. The Company commenced operations on October 16, 1997, the date of the consummation of the IPO and the Mergers. The Company engages primarily in the wholesale distribution of perishable floral products (including fresh cut flowers, greens and potted plants) and floral-related hardgoods (including vases and glassware, foam for flower arranging, tools and other supplies). The Company also imports cut flowers from growers in foreign countries, provides pre-packaged floral bouquets and arrangements to retail florists and mass-market retailers and engages in brokerage services for wholesalers of both foreign and domestic cut flowers. The Company believes, based upon the experience of management of USA Floral and the Founding Companies, that it is one of the largest integrated distributors of floral products in the United States. The Company has approximately 945 employees and serves thousands of customers nationwide from 32 facilities in 17 states. For the year ended December 31, 1996, the Company had pro forma combined revenues of $175.5 million, pro forma combined operating income of $4.8 million and pro forma combined net income of $2.6 million. The floriculture industry, which includes cultivators, distributors and sellers of floral products, extends from growers, who produce perishable floral products, through importers, brokers, shippers and wholesalers who distribute and market fresh cut flowers and greens, potted plants and floral-related hardgoods, to retail florists and mass market distributors, who sell floral products to consumers. The distribution channel in the floriculture industry is highly fragmented and consists mainly of small, family-owned firms that operate from a single location or from a small number of outlets in a single region. While floral products have historically been sold at retail through a large number of traditional florists, who continue to serve the majority of consumers, the Company believes, based upon the experience of management of USA Floral and the Founding Companies, that changes in consumer buying habits are causing more consumers to seek floral products from mass market retailers such as supermarkets, discount retailers and chain stores. The Company believes that sales in the retail segment of the floriculture industry totaled approximately $15.0 billion in 1996, and that approximately 45% of retail sales are generated by mass market retailers. Management believes that the growing consumer preference for more convenient floral products retailers, together with the potential efficiencies to be achieved from operating floral products businesses on a large scale, have well positioned the floriculture industry for consolidation and provide an attractive opportunity for the Company to build an integrated, nationwide floral products distributor that can serve the growing mass market while continuing to meet the needs of the traditional florists for high quality products and services. See "Business--Industry Overview." STRATEGY The Company's goal is to become the leading consolidator and operator of floral products distribution businesses. Key elements of the Company's strategy include the following: Pursue Strategic Acquisitions. The Company intends to capitalize upon consolidation opportunities in the U.S. floral products industry by pursuing selective acquisitions in the distribution segment of the industry. To build upon and enhance its nationwide presence, the Company will focus upon opportunities that complement and complete its floral products offerings and in new geographic markets with above-average population growth and floral products consumption. The Company intends to implement an aggressive acquisition program utilizing a "hub and spoke" strategy for expansion into its targeted markets. As part of this strategy, the Company plans to make acquisitions of established, high-quality local companies in targeted geographic areas, which can then serve as"hubs" for the acquisition of smaller, synergistic "spokes" in that locality or in surrounding markets. The Company believes that it can successfully integrate the operations of acquired spokes into its hubs, in order to leverage more effectively its sales, marketing and distribution capabilities. Robert J. Poirier, the Company's co-founder, Chairman of the Board, President and Chief Executive Officer, has over 22 years of experience in the floral products industry, and has extensive relationships with wholesalers, importers, brokers and bouquet manufacturers. Mr. Poirier's industry knowledge is complemented by the acquisition expertise of Jonathan J. Ledecky, the Company's co-founder and Non-Executive Chairman of the Board. Mr. Ledecky is the founder and Chairman of the Board of U.S. Office Products Company, a publicly-held supplier of a broad range of office products and business services that has been built primarily through the acquisition and integration of over 190 companies since its inception in October 1994, and is the founder, Chairman and Chief Executive Officer of Consolidation Capital Corporation, a company founded in February 1997 to build consolidated enterprises with national market reach through the acquisition and integration of businesses in fragmented industries. Operate with Decentralized Management. The Company plans to conduct its operations with a decentralized management approach through which individual management teams will be responsible for the day-to-day operations of the Founding Companies as well as for helping to identify additional acquisition candidates in their respective locales. At the same time, a company-wide team of senior management will provide the Founding Companies with strategic oversight and guidance with respect to acquisitions, financing, marketing and operations. As part of this strategy, the Company intends to foster a culture of cooperation and teamwork that emphasizes dissemination of "best practices" among its local management teams. The Company believes that stock ownership and incentive compensation will help to keep the objectives of local management aligned with those of the Company, and that a decentralized management approach will result in better customer service by allowing local management the flexibility to implement policies and make decisions based on the needs of local customers. Achieve Operating Efficiencies. The Company believes that it will be able to increase operating efficiency and achieve certain synergies among its constituent businesses. In particular, with larger operational scale, the Company believes that it can increase distribution efficiencies by utilizing shipping and delivery capacity more efficiently. The Company will also seek to combine certain administrative functions, such as accounting and finance, insurance, employee benefits, strategic marketing and legal support, at the corporate level, and to institute a Company-wide management information system. The Company believes that increased scale and administrative integration will enable it not only to operate more efficiently, but also to obtain more favorable discounts and rebates on floral products hardgoods and, to a lesser extent, realize savings on transportation and handling costs of fresh flowers. Introduce New Products and Services. The Company believes that over time it will be able to develop and market high value-added products and services, such as "branded" flowers and bouquets specifically identified with quality and consistency. By utilizing its contacts with growers and leveraging its distribution efficiencies, the Company believes that it can establish specifications for fresh flowers and control product quality at each step in the distribution process, thereby building a brand identification that will command a premium price. The Company also intends to service retailers by providing pre-packaged fresh flowers and arrangements during periods of peak demand, as well as to market floral products through corporate account relationships and other means. See "Business--Strategy." THE FOUNDING COMPANIES USA Floral acquired the Founding Companies contemporaneously with the consummation of the IPO, in part through the application of a portion of the proceeds therefrom. USA Floral has conducted operations since October 16, 1997. The Roy Houff Company ("Houff "). Founded in 1977, Houff is a wholesale distributor of perishable floral products and floral-related hardgoods, operating from seven locations in Illinois, Virginia and Arizona. Houff purchases floral products from importers, brokers and shippers and sells them to approximately 3,000 customers, including retail florists and mass market retailers. Houff has approximately 270 employees. Houff's annual revenues in 1996 were approximately $39.1 million. CFX, Inc. ("CFX"). Founded in 1974, CFX is an importer and distributor of perishable floral products located in Miami, Florida. CFX imports flowers from approximately 40 farms located primarily in Colombia and Ecuador, and distributes them throughout the United States to approximately 400 wholesale distributors as well as directly to mass market retailers. CFX has approximately 110 employees. CFX's annual revenues in 1996 were approximately $35.7 million. Bay State Florist Supply, Inc. ("Bay State"). Founded in 1952, Bay State is a wholesale distributor of perishable floral products and floral-related hardgoods, operating from six locations in Massachusetts, New York, New Hampshire, Connecticut and Rhode Island. Bay State purchases floral products from domestic growers, importers, brokers and shippers and sells them to approximately 3,000 customers, including retail florists and mass market retailers. Bay State has approximately 190 employees. Bay State's annual revenues in 1996 were approximately $30.6 million. Flower Trading Corporation ("Flower Trading"). Founded in 1977, Flower Trading is an importer and distributor of perishable floral products, located in Miami, Florida. Flower Trading imports flowers from farms located primarily in Colombia, Ecuador, Guatemala and Peru and distributes them throughout the United States to approximately 350 wholesale distributors. Flower Trading has approximately 45 employees. Flower Trading's annual revenues in 1996 were approximately $20.3 million. United Wholesale Florists, Inc. and United Wholesale Florists of America, Inc. ("United Wholesale"). Founded in 1947, United Wholesale is a wholesale distributor of perishable floral products and floral-related hardgoods, operating from 13 locations in Arkansas, Alabama, Mississippi, Oklahoma, Tennessee and Texas. United Wholesale purchases floral products from domestic growers, importers, brokers and shippers and sells them to approximately 3,000 customers, including retail florists and mass marketers. United Wholesale has approximately 175 employees. United Wholesale's revenues for the fiscal year ended June 30, 1997 were approximately $19.7 million. American Florist Supply, Inc. ("American Florist"). Founded in 1994, American Florist is a wholesale distributor of perishable floral products and floral- related hardgoods, located in Woburn, Massachusetts. American Florist purchases floral products from foreign and domestic growers, brokers and importers and sells them to approximately 450 customers, including retail florists and mass market retailers in Maine, Massachusetts, Vermont and New Hampshire. American Florist also provides pre-packaged fresh cut floral bouquets to retail florists and mass-market retailers. American Florist has approximately 70 employees. American Florist's annual revenues in 1996 were approximately $11.7 million. Monterey Bay Bouquet, Inc. and Bay Area Bouquets, Inc. ("Monterey Bay"). Founded in 1993, Monterey Bay, located in Watsonville, California, is a manufacturer of fresh cut flower bouquets, consisting primarily of specialty California-grown flowers. Monterey Bay purchases flowers from 12 importers and nearly 150 domestic growers and distributes them to a supermarket and a discount retailer, each of which has numerous locations throughout the western United States. Monterey Bay has approximately 65 employees. Monterey Bay's annual revenues in 1996 were approximately $9.5 million. Alpine Gem Flower Shippers, Inc. ("Alpine Gem"). Founded in 1978, Alpine Gem is a broker of perishable floral products, operating from one location in Montana and one in California. Alpine Gem purchases flowers from approximately 250 growers, principally located in the United States, and sells flowers on consignment for approximately 18 growers. Alpine Gem distributes flowers to nearly 750 customers, primarily wholesalers, located throughout the U.S. Alpine Gem has approximately 20 employees. Alpine Gem's annual revenues in 1996 were approximately $9.3 million.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043446_prime_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043446_prime_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..20c50208374f19bf9fef092bbe0c6fc0f9412818
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043446_prime_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not purport to be complete, and is qualified in its entirety by reference to the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, all share and per share information has been adjusted to give effect to a 30 for 1 common stock split effected in the form of a stock dividend issued to shareholders of record as of July 17, 1997. Unless otherwise indicated, all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. THE COMPANY Prime Bancshares, Inc. (the "Company") is a bank holding company headquartered in Houston, Texas. The Company derives substantially all of its revenue and income from the operation of its wholly-owned bank subsidiary, Prime Bank (the "Bank"), a Texas state bank with 19 full-service banking locations, 11 of which are located in the greater Houston metropolitan area. The Bank also has six offices located in southeast Texas, one office (and two loan production offices) located in San Antonio and one office located in Brenham. The Bank was chartered in 1958. The Company was formed as a holding company for the Bank in 1984. The Company has made a profit in each year of its existence, and the Company has had six consecutive years of increased net earnings. As of June 30, 1997, the Company had assets of $948.0 million, gross loans of $383.7 million, total deposits of $878.7 million and total shareholders' equity of $65.3 million. Based on total assets as of June 30, 1997, the Company is the second largest independent bank holding company headquartered in the Houston metropolitan area. In 1988, the Company began to expand beyond its Channelview, Texas origins and diversify its market area. A severe downturn in the Texas economy in the mid to late 1980s caused a record number of bank and savings and loan failures, which made deposits available for assumption through competitive bid processes. The Company's strong capital base and historical profitability enabled it to successfully bid for and acquire the deposits and certain assets of seven failed financial institutions from 1988 to 1991. In 1994, the Company acquired nine new locations (five of which were subsequently sold) through the acquisition of deposits and certain assets related to branches of a large federal savings bank. In 1997, the Company acquired deposits and certain assets related to three commercial bank branches and acquired by merger Houston-based First Northwestern Bank, N.A. In addition to adding market diversity, these acquisitions allowed the Company to enhance its core deposit base and increase its total assets from $81.2 million at December 31, 1987 to $948.0 million at June 30, 1997. The Company's business continues to reflect the Company's successful community banking origins by providing a broad line of financial products and services to small and medium-sized businesses and consumers. The Company believes that its "super community" brand of banking, which allows for flexible, responsive decision making at each branch in its network and focuses on long-standing relationships with its customers and personalized service, is an important factor in the success and growth of the Company. While the Company will continue to seek opportunities to expand its deposit franchise, its strategic focus has shifted toward increasing its loan to deposit ratio and further enhancing its profitability. The Company has expanded its lending activities to include products which provide growth and profitability such as (i) mortgage loans and indirect loans and (ii) increased commercial loans. Each of the following lines of business was started several years ago and has developed into a fast growing and profitable component of the Company's operations: - Mortgage Banking. The Company uses its existing branch network to offer a complete line of single family residential mortgage products. The Company generally retains mortgage loans with shorter terms or variable rates and sells into the secondary market longer term fixed rate loans. During the six months ended June 30, 1997, the Company originated $20.0 million of mortgage loans. - Indirect Lending. In 1993, the Company initiated a program of purchasing indirect loans, which are installment loans primarily originated by automobile dealers for the purpose of financing consumer purchases. The Company purchases almost exclusively "A"-rated loans from a select list of local auto dealers and others after performing its own analysis of the loan package. The Company's total amount of indirect loans at June 30, 1997 was $96.8 million. The Company's delinquency ratio with respect to indirect loans for the six months ended June 30, 1997 was .69%. - Commercial Banking. In 1993, the Company established a separate commercial lending unit as an outgrowth of the Company's historical practice of making loans to small and medium-sized businesses from its various locations. The unit is staffed with experienced commercial lenders who generate commercial loans primarily in the greater Houston and San Antonio markets. The commercial loan customers generally have between $5.0 and $50.0 million in annual sales and the average loan is approximately $300,000. The Company's overall business strategy is to (i) continue to service its small to medium-sized owner-operated businesses and consumer customers by providing individualized, responsive, quality service through its supercommunity banking network, (ii) continue to increase its loan to deposit ratio and thereby enrich its earning asset mix, and (iii) augment its existing market share by looking for additional expansion opportunities in growth areas, particularly in the Houston and San Antonio markets. THE OFFERING Common Stock offered by the Company.................. 400,000 shares Common Stock offered by the Selling Shareholders..... 1,769,310 shares Common Stock to be outstanding after the Offering................. 9,239,020 shares(1) Use of Proceeds............ The estimated net proceeds of the Offering (approximately $5.9 million) will be used to redeem shares of the Company's Series A Preferred Stock. Risk Factors............... See "Risk Factors" and "Dilution" for a discussion of certain factors that should be considered by each prospective investor. Nasdaq/National Market Symbol................... "PBTX" - --------------- (1) Excludes 600,000 shares of Common Stock reserved for issuance upon the exercise of options heretofore granted under the Company's stock option plans. See "Management -- Stock Option Plans." As of the date of this Prospectus, the Company had outstanding 8,839,020 shares of Common Stock. See "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043903_ocih-llc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043903_ocih-llc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7cfd1ed194f3a996c5a2065bbea818d2e8337b75
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043903_ocih-llc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, references to "OCI" or the "Company" mean Outdoor Communications, Inc. (formerly known as OCI Holdings Corp.) together with all of its direct and indirect subsidiaries and businesses; "OCI North" refers to the Company's subsidiary, OCI (N) Corp; "OCI South" refers to the Company's subsidiary, OCI (S) Corp; and "Predecessors" refers to each of OCI North and OCI South. Unless otherwise indicated, references to financial or operating results of the Company occurring in any fiscal year are to the twelve months ended on June 30 of such indicated fiscal year. Unless otherwise indicated, references to financial or operating results of OCI South occurring prior to June 30, 1997 reflect the consolidated results of the Company's Mass Communications Corp. ("MCC") subsidiary and OCI (S) Corp. prior to the merger of MCC with and into the Company, which merger was effective as of June 30, 1997. The information in this Prospectus assumes the exchange (the "Exchange") of the Company's Series A 10% Subordinated Notes ("Series A Notes") and Series B 10% Subordinated Notes ("Series B Notes") for shares of Series A Preferred Stock, $.01 par value per share ("Series A Preferred Stock"), of the Company or Series A Preferred Membership Interests ("Series A Preferred Interests") of the Company's subsidiary OCIH LLC ("OCIH"). The pro forma financial information in this Prospectus reflects only the acquisitions of Georgia Outdoor, Alabama Outdoor, Skoglund and Outdoor West (each, as defined below, and collectively, the "Significant Acquisitions") and excludes other individually insignificant operations acquired by the Company since its formation. THE COMPANY OCI is a leading provider of outdoor advertising services, operating approximately 13,500 advertising displays in 12 midwestern and southeastern states. The Company focuses on small- to medium-sized markets with populations ranging from 15,000 to 150,000, and is the largest outdoor advertising company in most of the markets in which it operates. Management believes that operating in small- to medium-sized markets provides certain advantages over operating in large markets, including lower and more stable lease costs, greater new build opportunities and more attractive acquisition opportunities. Outdoor advertising offers repetitive impact and relatively low cost-per- thousand impressions compared to alternative media, including television, radio, newspapers, magazines and direct mail marketing. The outdoor advertising industry in the United States has experienced increased advertiser interest and revenue growth during the 1990s. According to recent estimates by the Outdoor Advertising Association of America (the "OAAA"), the trade association for the outdoor advertising industry, outdoor advertising generated total revenues of approximately $2.0 billion in 1996, or approximately 1.1% of total advertising expenditures in the United States. While the industry has experienced some consolidation within the past few years, the OAAA estimates that there are still approximately 600 companies in the outdoor advertising industry operating approximately 396,000 billboard displays. The Company expects the trend of consolidation in the outdoor advertising industry to continue. The Company's objective is to be a leading provider of outdoor advertising services in small- to medium-sized markets across the United States. To achieve this objective, the Company plans both to increase its penetration in its existing markets and expand into attractive new markets. The Company has historically implemented, and intends to continue to pursue, the following operating strategy: Pursue Strategic Acquisitions. The Company seeks to continue its growth by pursuing an aggressive acquisition strategy emphasizing both in-market and new market acquisitions. The Company believes it has attractive in-market acquisition opportunities which will serve to increase market penetration and enhance local market operating efficiencies. In most instances, in- market acquisitions involve the purchase of display faces only and require no incremental personnel. The Company also intends to pursue new market acquisitions that are either within its existing regions or in new regions where attractive growth and consolidation opportunities exist. Leverage Operational Structure. The Company's operational structure provides significant operating leverage to support increased penetration of existing markets and new market expansion. The Company's operations are comprised of 10 divisions, each with its own headquarters to service its display structures and customers. OCI has centralized management operations in Traverse City, Michigan and Corinth, Mississippi to provide administrative oversight of the divisions through centralized purchasing, a detailed budgeting process, management information systems and strict cost controls. With this infrastructure in place, the Company can generate revenues from newly acquired or constructed display faces at attractive incremental margins. Focus on Local Advertisers. The Company seeks to continue its local advertiser focus, which management believes provides the Company with a diverse and stable advertiser base, fewer sales subject to agency commissions and greater rate integrity. Local advertising constituted over 84% of the Company's gross revenues for the nine months ended March 31, 1997, which is higher than the industry average of 70% as estimated by the OAAA. The Company believes that the diversity of its local customer base insulates it from dependence on any one customer or industry. During the nine months ended March 31, 1997, no single customer represented more than 3.0% of the Company's gross revenues. Emphasize Twelve-Month Advertising Contracts. The Company seeks to maximize occupancy levels and sales force and production efficiency by focusing on twelve-month advertising contracts. The Company believes that these long- term contracts enhance occupancy levels at stable advertising rates, generate higher renewal rates, increase the predictability of revenues and allow its sales personnel time to devote greater attention to servicing their accounts. Capitalize on Experienced Management Team. The Company believes that one of the keys to continuing its growth is its experienced management team. The Company's three-person senior management team has over 70 years of combined experience in the outdoor advertising industry which provides the Company with the market knowledge and local relationships necessary to identify and evaluate acquisition candidates. Management's local relationships also provide OCI with the ability to identify and obtain municipal approval for new build opportunities. On April 3, 1996, the Company's current structure emerged with its acquisitions and consolidation of OCI North and OCI South. OCI South was founded in 1972 by John C Stanley IV and A.B. Isbell upon their acquisition of outdoor advertising assets in the region around Memphis, Tennessee. Through dedication to customer service and product quality and the consummation of numerous acquisitions, OCI South grew to operate more than 2,600 display faces in six states by April 1996. In 1989, OCI North was formed by Messrs. Stanley and Isbell to complete the acquisition of Dingeman Advertising, Inc., an outdoor advertising company based in Traverse City, Michigan. Through additional acquisitions and new construction, OCI North grew to operate more than 2,800 display faces in three states by April 1996. The Company believes that the success of its management team in developing and expanding its operations has made OCI a significant competitor in the outdoor advertising industry. See "Certain Relationships and Related Transactions--The Formation Transactions." The Company is a Delaware corporation whose executive offices are located at 512 Taylor Street, Corinth, Mississippi, 38834. The Company's telephone number is (601) 286-3334. RECENT ACQUISITIONS Since its formation, the Company has pursued an aggressive acquisition strategy, completing 15 acquisitions of outdoor advertising companies (collectively, the "Acquired Companies") over a 15-month period. None of such acquisitions involved sellers affiliated with the Company. The Company's acquisition integration approach is different for new market and in-market acquisitions. In new market acquisitions, the Company generally eliminates administrative and accounting positions, maintains a sales and production capability and institutes the Company's operating philosophy, systems and controls. In-market acquisitions typically involve the purchase of display faces only, resulting in the elimination of all personnel and related costs. The following summarizes the Significant Acquisitions, which are included in the summary pro forma financial information included herein: The Outdoor West Acquisition. On March 31, 1997, OCI acquired substantially all of the assets of Outdoor West, Inc. of Tennessee ("Outdoor West") for a cash purchase price of $11.8 million. As a result of this acquisition, the Company acquired approximately 960 display faces in Tennessee and a right of first refusal to purchase Outdoor West, Inc. of Georgia, an affiliate of Outdoor West. The Skoglund Acquisition. On October 31, 1996, OCI completed the acquisition of substantially all of the assets of Skoglund Communications, Inc. and Skoglund Communications of St. Cloud, Inc. (together, "Skoglund") for a cash purchase price of $21.2 million. As a result of the acquisition of Skoglund, the Company acquired approximately 1,500 display faces in Minnesota and Wisconsin. The Alabama Outdoor Acquisition. On April 30, 1996, OCI acquired approximately 2,900 display faces across North and Central Alabama through its purchase of substantially all of the assets of AOA Acquisition, L.L.C. ("Alabama Outdoor") for a cash purchase price of $34.1 million. The Georgia Outdoor Acquisition. On April 3, 1996, OCI completed the acquisition of substantially all of the assets of Georgia Outdoor Advertising Company ("Georgia Outdoor") for a cash purchase price of $11.6 million. As a result of this transaction, the Company acquired approximately 800 display faces in Georgia and South Carolina in the vicinity of Athens, Georgia. In addition to the Significant Acquisitions, since September 1996 the Company has completed 11 individually insignificant in-market acquisitions for an aggregate purchase price of approximately $17.8 million. The pro forma financial information in this Prospectus does not fully reflect the effect of these acquisitions, as the results of these operations are only included from the date of acquisition. The Company does not currently have any written or oral agreement to consummate any other material acquisition. FINANCING PLAN To provide greater flexibility in pursuing its growth strategy, concurrently with the Offering the Company intends to enter into a new $150.0 million senior credit facility (the "New Credit Facility"). In addition, the holders of the Company's Series A Notes and Series B Notes will exchange such notes for shares of Series A Preferred Stock of the Company or Series A Preferred Interests of OCIH effective upon the closing of the Offering. The Offering is conditioned upon the closing of the New Credit Facility and the Exchange. The Series A Preferred Stock and Series A Preferred Interests will not be registered under the state or federal securities laws. The Offering, the New Credit Facility and the Exchange are referred to in this Prospectus as the "Financing Plan." THE OFFERING Issuer ..................... Outdoor Communications, Inc. Securities Offered ......... $100,000,000 aggregate principal amount of % Senior Subordinated Notes due 2007. Maturity ................... , 2007. Interest Payment Dates ..... and of each year, commencing on , 1998. Mandatory Redemption ....... None. Optional Redemption ........ Except as described below, the Company may not redeem the Notes prior to , 2002. On or after such date, the Company may redeem the Notes, in whole or in part from time to time, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to , 2000, the Company may, at its option, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Proceeds of one or more Public Equity Offerings by the Company, at a redemption price equal to % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes--Optional Redemption." Change of Control .......... Upon the occurrence of a Change of Control, the Company will, subject to certain conditions, be required to make an offer to purchase all of the Notes at 101% of principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that the Company will have the financial resources necessary to repurchase the Notes following a Change of Control. These provisions would not necessarily afford protection in the event a highly leveraged transaction that does not result in a Change of Control. See "Risk Factors--Change of Control" and "Description of Notes--Repurchase at the Option of Holders--Change of Control." Guarantees ................. The Company's obligations under the Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by all of the Company's subsidiaries (collectively, the "Guarantors"). The Guarantees will be subordinated to Guarantor Senior Indebtedness (as defined) to the same extent and in the same manner as the Notes are subordinated to all Senior Indebtedness of the Company. See "Description of Notes--Guarantees." Ranking .................... The Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company and will rank pari passu in right of payment with all other senior subordinated indebtedness of the Company. The Guarantees will be general, unsecured obligations of the Guarantors, subordinated in right of payment to all existing and future Guarantor Senior Indebtedness. While the Notes and the Guarantees are senior subordinated obligations, after giving effect to the Offering, there will be no indebtedness that is subordinated in right of payment to the Notes, and the Company and the Guarantors have no present plans to issue any indebtedness that is subordinated to the Notes and the Guarantees. As such, the Notes and the Guarantees will be subordinate to all of the indebtedness of the Company and the Guarantors expected to be outstanding immediately following the Offering. See "Risk Factors--Subordination of Notes and Guarantees." As of March 31, 1997, after giving effect to the Offering and the application of the proceeds therefrom, the Company would have had outstanding $26.5 million of indebtedness ranking senior in right of payment to the Notes and the Guarantees and the ability to borrow up to an additional $123.5 million under the New Credit Facility, which additional borrowings would be senior to the Notes. The Company and the Guarantors do not have any present plans to issue any indebtedness that would be senior to the Notes and the Guarantees. See "Description of Notes--Ranking." Certain Covenants .......... The indenture governing the Notes (the "Indenture") will contain covenants relating to, among other things, the following matters: (i) incurrence of additional Indebtedness (as defined) by the Company and its subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its subsidiaries and the redemption of certain subordinated obligations of the Company and its subsidiaries; (iii) certain sales of assets; (iv) mergers, consolidations and transfer of assets; and (v) transactions with affiliates. See "Description of Notes--Certain Covenants." Use of Proceeds ............ The net proceeds of the Offering (after deduction of underwriting discounts and estimated offering expenses) are expected to be approximately $96.0 million. The net proceeds from the Offering, together with borrowings under the New Credit Facility of approximately $20.6 million, will be used to repay $115.7 million of indebtedness outstanding under the existing senior credit facility. The balance of the net proceeds will be used for working capital and general corporate purposes. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043914_ore_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043914_ore_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..df0b858cd103e87382bb6a5e398c821dbabf72d7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043914_ore_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY GENE LOGIC INC. ("Gene Logic" or the "Company") uses a proprietary system, based on analysis of gene expression and gene regulation, designed to accelerate the discovery of drug targets and drug leads. The Company's objective is to provide its pharmaceutical company partners with novel drug targets, drug leads and a suite of genomic database products to reduce the time, cost and risk associated with drug discovery. The Company believes that by building its portfolio of partnerships it will generate current revenues and establish a long-term economic interest in the product pipelines of multiple partners through milestone and royalty payments. Gene Logic has established major strategic alliances with Procter & Gamble Pharmaceuticals, Inc. ("Procter & Gamble") and Japan Tobacco Inc. ("Japan Tobacco"). The core of Gene Logic's ACCELERATED DRUG DISCOVERY system is its proprietary READS (Restriction Enzyme Analysis of Differentially-expressed Sequences) technology for analyzing patterns of gene expression. Gene Logic uses READS in its drug target and drug lead discovery programs and to generate genomic data for its database products. DRUG TARGET DISCOVERY. Gene Logic identifies and analyzes disease-associated genes and their functional pathways to determine which genes might encode useful drug targets and prioritizes targets for drug screening. Using READS, Gene Logic generates a gene expression profile, or Molecular Topography, representing a quantitative snapshot of the levels of expression of essentially all the genes expressed in a tissue sample. The Company compares normal and diseased tissues through a series of Molecular Topography snapshots, a "molecular movie," to identify the changes in gene expression that occur as the disease develops and progresses and to determine which genes are associated with the disease. In addition, using its MuST (Multiplex Selection of Transcription Factors) technology, Gene Logic characterizes the regions of the genes that regulate their expression. This allows the Company to identify genes which share common regulatory mechanisms with disease-associated genes and are therefore in the same functional pathways. Gene Logic has received notices of allowance for patent applications covering the key aspects of the READS and MuST technologies from the United States Patent and Trademark Office. DRUG LEAD DISCOVERY. Gene Logic is developing a proprietary, reusable Flow-thru Chip for high-throughput analysis of changes in the expression of known genes. The Company believes the Flow-thru Chip will enable the development of high-throughput screening assays to evaluate the effects of compounds on the expression of disease-associated genes identified by READS. For a given disease, the Company will design a customized Flow-thru Chip incorporating probes specific for these genes and use the chip to test the effects of compounds on cells. Compounds that have the desired effect on expression of the relevant genes may be evaluated as drug leads. Gene Logic believes this technology represents a new approach to drug discovery and has the potential to accelerate substantially the identification of drug leads. GENOMIC DATABASES. Gene Logic is developing a suite of genomic database products to accelerate the process of target identification and prioritization, the discovery of lead compounds and the preclinical and clinical development of drugs. The Company plans to market its genomic database products, either in a single package or as separate modules, to multiple pharmaceutical company customers. The Company's database products are: (i) the GENE EXPRESS NORMAL database, a reference set of gene expression profiles in a wide variety of normal tissues; (ii) the rare EST (rEST) database containing sequences for rarely-expressed genes that are not available through public sources; (iii) The Annotated Genome (TAG) database which assigns human genes to functional pathways based on their patterns of expression and regulation; (iv) the Pharmacology EXPRESS database to predict efficacy of lead compounds at the preclinical drug development stage; and (v) the Toxicology EXPRESS database for screening of lead compounds for common classes of toxicological effects. The Company has designed and is continuing to develop a bioinformatics system to manage and analyze the information it generates. The system integrates Gene Logic's genomic data content with other proprietary or public genomic databases, protein databases and the chemical, screening and assay databases used by the Company's strategic partners. Gene Logic's business strategy is to (i) establish strategic alliances with pharmaceutical companies for drug target and drug lead discovery programs in specific disease areas, (ii) establish independent discovery programs and license resulting drug targets and drug leads to pharmaceutical companies for further development and commercialization, (iii) market its suite of genomic database products under non-exclusive license to multiple pharmaceutical company customers, and (iv) retain significant rights to new product opportunities, including diagnostic products, therapeutic proteins, gene therapy products and products in the fields of differential diagnosis, molecular staging of disease and pharmacogenomic profiling. The Company expects to receive a diversified stream of technology license fees, research funding, milestone payments and royalty or profit-sharing income from its strategic alliance partners and licensees. Gene Logic has established discovery programs in the fields of heart failure, renal disease, certain diseases of the central nervous system, osteoporosis and prostate cancer. The Company has collaborations with academic institutions and commercial organizations for access to relevant normal and diseased human tissues and cell types and animal disease models in these areas. To date, Gene Logic has partnered two of its discovery programs with pharmaceutical companies. In May 1997, the Company entered into a 4 1/2-year strategic alliance with Procter & Gamble for drug target discovery in heart failure. In September 1997, the Company and Japan Tobacco entered into a five-year strategic alliance for drug target and drug lead discovery in renal disease. Through both alliances, Gene Logic will receive committed technology access fees and research funding. In each case, the Company's partner has the right to expand the alliance to include discovery programs in two additional disease indications upon terms, including committed payments, identical to those covering the initial program. Gene Logic will also be entitled to receive additional payments for the achievement of specified target discovery, product development and associated regulatory milestones and royalties on worldwide net sales of all products that may result from each alliance. As part of its alliance, Japan Tobacco has agreed to purchase $3.0 million of Common Stock in the Company in a private placement concurrent with this offering at a price per share equal to the price per share at which Common Stock is sold in this offering. The Company also granted Japan Tobacco a non-exclusive license to the GENE EXPRESS NORMAL database, and Gene Logic intends to use its Flow-thru Chip technology for drug screening. Japan Tobacco is obligated to pay Gene Logic chip design fees and screening fees for use of the Flow-thru Chip and an accelerated schedule of milestone and royalty payments on any resulting products. The Company has retained certain rights to diagnostic products and certain classes of therapeutics under these alliances. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company............ 3,000,000 shares Common Stock Outstanding after the Offering.... 13,382,377 shares (1) Use of Proceeds................................ For research and development, capital expenditures, working capital and general corporate purposes, including possible acquisitions of complementary technologies, products or businesses. See "Use of Proceeds." Proposed Nasdaq National Market Symbol......... GLGC </TABLE> SUMMARY FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> YEAR ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, -------------------- ---------------------- 1995 1996 1996 1997 --------- --------- ----------- --------- <S> <C> <C> <C> <C> (UNAUDITED) STATEMENT OF OPERATIONS DATA: Revenues......................................................... $ -- $ -- $ -- $ 774 Operating expenses: Research and development...................................... 486 1,741 982 3,338 General and administrative.................................... 258 1,345 791 2,443 --------- --------- ----------- --------- Total operating expenses........................................ 744 3,086 1,773 5,781 Interest income, net............................................ -- 221 111 355 Income tax expense.............................................. -- -- -- 100 --------- --------- ----------- --------- Net loss........................................................ $ (744) $ (2,865) $ (1,662) $ (4,752) --------- --------- ----------- --------- --------- --------- ----------- --------- Pro forma net loss per share (2)................................ $ (0.31) $ (0.46) --------- --------- --------- --------- Shares used in computing pro forma net loss per share (2)........................................ 9,198 10,269 </TABLE> - ------------------------ (1) Based on shares outstanding as of September 30, 1997. Includes (i) the sale of 272,727 shares of Common Stock to Japan Tobacco at a price equal to the assumed initial public offering price of $11.00 per share and (ii) 9,281,185 shares of Preferred Stock which will convert to Common Stock concurrent with the initial public offering. Excludes (i) 2,424,381 shares of Common Stock issuable upon exercise of outstanding stock options as of September 30, 1997 at a weighted average exercise price of $1.05 per share, and (ii) 162,576 shares of Common Stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $3.10 per share. Also excludes 56,000 shares of Common Stock issuable upon exercise of stock options granted after September 30, 1997 with an exercise price of $3.50 per share. See "Business--Strategic Alliances," "Management--Equity Incentive Plans" and "Description of Capital Stock--Warrants." (2) See Note 1 of Notes to Financial Statements for a description of the computation of pro forma net loss per share. <TABLE> <CAPTION> SEPTEMBER 30, 1997 -------------------------- ACTUAL AS ADJUSTED (1) --------- --------------- <S> <C> <C> BALANCE SHEET DATA: Cash and marketable securities............................................. $ 22,143 $ 55,233 Working capital........................................................... 18,776 51,866 Total assets.............................................................. 27,621 60,711 Total mandatorily redeemable convertible preferred stock.................. 30,508 -- Total stockholders' equity................................................ (9,614) 53,984 </TABLE> - ---------------- (1) As adjusted to give effect to the conversion of all outstanding shares of Preferred Stock into 9,281,185 shares of Common Stock upon the closing of this offering and the sale by the Company of 3,000,000 shares of Common Stock offered hereby at an assumed initial public offering of $11.00 per share and 272,727 shares of Common Stock to Japan Tobacco at a price equal to the assumed initial public offering price per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Business--Strategic Alliances." ---------------- EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON STOCK UPON THE COMPLETION OF THIS OFFERING AND (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "CAPITALIZATION" AND "UNDERWRITING."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001043915_logility_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001043915_logility_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1f1e2f8be42c6bd9a72fdf7d80e3ea4c7a5dcff9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001043915_logility_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Combined Financial Statements and the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted herein, all information in this Prospectus (i) reflects a 11,300-for-1 split of the shares of Common Stock effected in August 1997 and (ii) assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." THE COMPANY Logility, Inc. ("Logility" or the "Company") develops, markets and supports software applications that optimize the operating efficiencies of manufacturers, suppliers, distributors, retailers and other organizations along the "value chain." The value chain refers to the complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver products to the customer. The Company's solution, Logility Value Chain Solutions, consists of an integrated software suite that provides advanced collaborative planning and integrated logistics capabilities that are designed to reduce inventory costs, improve forecast accuracy, decrease order cycle times, optimize production scheduling, streamline logistics operations, reduce transportation costs and improve customer service. The Company markets its solution world-wide, primarily to large enterprises that require a comprehensive planning and execution solution. Sales are made through a dedicated sales force and through relationships with third-party vendors and service providers. Enterprises are under increasing pressure to better manage the value chain as they seek to improve manufacturing efficiency and logistics operations, while maintaining flexibility and responsiveness to changing market conditions and customer demands. To manage and facilitate enhanced collaboration among the various participants in the value chain, organizations are increasingly deploying value chain management software solutions to address their planning and execution requirements. Industry sources estimate that the supply chain planning and execution software market was $246 million in 1996, and is projected to grow at a compound annual growth rate of 48% to more than $1.7 billion by 2001. The warehouse management systems software market was approximately $104 million in 1996, and is projected to grow at a compound annual growth rate of 41% to $586 million by 2001. Logility Value Chain Solutions is designed to be an end-to-end solution that synchronizes demand opportunities with supply constraints and logistics operations, and consists of two solution groups, Logility Planning Solutions and Logility Execution Solutions. Logility Planning Solutions enables users to analyze information to more effectively manage demand and respond to changing market conditions, while optimizing the use of production and distribution assets. Logility Execution Solutions is designed to enable users to effectively and efficiently manage the flow of products through distribution centers and warehouses and ensure that those products are delivered to the right location using the optimal transportation alternatives available. Logility Value Chain Solutions is highly modular, allowing for rapid deployment. In addition, the software is scaleable to meet the management requirements of complex processes involving tens of thousands of products across multiple sites. The Company believes that it is a technology leader in the field of value chain management software solutions and intends to continue to provide innovative, advanced solutions to the marketplace. The Company believes that it was one of the earliest providers of planning software solutions on a client- server platform, one of the first on Windows NT and the first to introduce a collaborative planning software solution that operates over the Internet. The Company intends to leverage its installed base of customers to broaden the utilization of its solution suite, and to sell newly developed modules that complement the functionality of its existing product line. The Company has a number of recent marketing or product relationships with leading Enterprise Resource Planning ("ERP") vendors and systems integrators, including CAPS Logistics, Oracle, PeopleSoft, Ross Systems and SAP. The Company intends to utilize these and future relationships with other service providers, software vendors and systems consulting organizations, and to leverage its relationship with its parent, American Software, Inc. ("American Software"), to enhance its indirect distribution channels. The Company has licensed one or more modules of Logility Value Chain Solutions to more than 200 companies worldwide, including Eastman Chemical, FINA, Heineken USA, Newell, Pharmacia & Upjohn, Pfizer International, Reynolds Metals, Sony Electronics and VF Corporation. The Company sells its products through direct and indirect channels in the United States and Canada and primarily through indirect channels outside North America. The Company derived approximately 12% of its revenues in fiscal year ended April 30, 1997 from international sales. The Company is currently a wholly-owned subsidiary of American Software. References herein to the Company include, as required by the context, the business of the Company as conducted by American Software and certain of its other subsidiaries prior to the transfer of that business to the Company. References herein to American Software include, as required by the context, American Software and certain of its subsidiaries. The Company was incorporated in Georgia on July 25, 1996. Its principal executive offices are located at 470 East Paces Ferry Road, N.E., Atlanta, Georgia 30305, and its telephone number is (404) 261-9777. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company. 2,200,000 shares Common Stock to be outstanding after the offering....................... 13,500,000 shares(1) Use of proceeds..................... For (i) research and development, (ii) sales and marketing, (iii) working capital and other general corporate purposes and (iv) possible acquisitions. Nasdaq National Market symbol ...... LGTY </TABLE> - -------- (1) Based on the number of shares of Common Stock outstanding as of the date of this Prospectus. Excludes an aggregate of 295,000 shares of Common Stock reserved for future option grants under the Company's 1997 Stock Plan. See "Management--1997 Stock Plan." SUMMARY COMBINED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> THREE MONTHS ENDED JULY YEARS ENDED APRIL 30, 31, ------------------------- -------------- 1995 1996 1997 1996 1997 ------- ------- ------- ------ ------ <S> <C> <C> <C> <C> <C> COMBINED STATEMENT OF OPERATIONS DATA: Revenues............................ $10,210 $16,633 $21,824 $4,792 $7,748 Cost of revenues.................... 3,838 6,023 7,158 1,564 2,279 ------- ------- ------- ------ ------ Gross margin........................ 6,372 10,610 14,666 3,228 5,469 ------- ------- ------- ------ ------ Operating income (loss)............. (3,246) (2,874) (1,954) (497) 224 Net income (loss)................... $(3,246) $(2,874) $(1,954) $ (497) $ 224 ======= ======= ======= ====== ====== Pro forma net income (loss) per common share (1)................... $ (0.17) $ 0.02 ======= ====== Pro forma weighted-average common shares outstanding (1)............. 11,300 11,300 </TABLE> <TABLE> <CAPTION> JULY 31, 1997 ---------------------- ACTUAL AS ADJUSTED(2) ------- -------------- <S> <C> <C> COMBINED BALANCE SHEET DATA: Cash and cash equivalents............................... $ 400 $24,102 Working capital......................................... 644 24,346 Total assets............................................ 16,651 40,353 Total stockholder's equity.............................. 6,661 30,363 </TABLE> - -------- (1) Computed on the basis described in Note 1 of Notes to Combined Financial Statements. (2) Gives effect to the sale of the 2,200,000 shares of Common Stock offered hereby and the application of the net proceeds therefrom. FORWARD-LOOKING STATEMENTS Information contained in this Prospectus includes "forward-looking statements" that are based largely on the Company's current expectations and are subject to a number of risks and uncertainties. The Company faces many risks and uncertainties, including without limitation those described in this Prospectus under the caption "Risk Factors." Because of these risks and uncertainties, the Company's actual results may differ materially from any results presented in or implied by the forward-looking statements included in this Prospectus. ---------------- Logility, Logility Execution Solutions, Logility Planning Solutions, Logility Value Chain Solutions, Demand Chain Voyager, Supply Chain Voyager and WarehousePRO are trademarks of the Company. This Prospectus also contains trademarks and trade names of companies other than the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044010_toymax_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044010_toymax_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3264431a4a8aad2b72613227364b13d044048a15
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044010_toymax_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITER'S OVERALLOTMENT OPTION AND (II) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE REORGANIZATION DESCRIBED UNDER "THE REORGANIZATION" AND A STOCK SPLIT OF 16.67 SHARES OF COMMON STOCK FOR EACH OUTSTANDING SHARE OF COMMON STOCK EFFECTED IMMEDIATELY PRIOR TO THE DATE OF THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERMS "COMPANY" AND TOYMAX REFER TO THE TOYMAX GROUP (AS DEFINED HEREIN) AS OF DATES AND PERIODS PRIOR TO THE CLOSING OF THE REORGANIZATION AND, THEREAFTER, COLLECTIVELY, TOYMAX INTERNATIONAL, INC. AND ITS SUBSIDIARIES. AS USED HEREIN, THE TERM "FISCAL" OR "FISCAL YEAR" REFERS TO THE COMPANY'S FISCAL YEAR ENDED OR ENDING MARCH 31. THE COMPANY The Company creates, designs and develops innovative toys, which it markets and sells in the U.S. and throughout the world. The Company has focused on developing and marketing children's activity toys, including Creepy Crawlers-Registered Trademark-, Metal Molder-Registered Trademark- and Magic Maker-Registered Trademark-, girls' toys, such as Talking Tina-Registered Trademark-, and action toys, such as Laser Challenge-TM-, one of FAMILY FUN magazine's Toys of the Year in 1996 and currently among the leading selling toys in the U.S. Management believes that major strengths of the Company include creativity in the development of new toys, such as Metal Molder, which was named one of the top children's vacation products of 1997 by DR. TOY, and the redevelopment and reintroduction of successful toy lines from the past, such as Creepy Crawlers, which was named one of the top toys of 1996 by SESAME STREET MAGAZINE. Toymax was founded in 1990 by four experienced toy industry executives: David Chu, the Company's Chairman, Steven Lebensfeld, its President, Harvey Goldberg, its Executive Vice President, and Kenneth Price, its Senior Vice President of Sales and Marketing. Since the early 1980s these executives have worked together in managing or founding toy companies or in customer-supplier relationships. Each individual brings particular strengths to the management team: Mr. Chu in manufacturing, Mr. Lebensfeld in product development, and Messrs. Goldberg and Price in sales and marketing. In addition, these executives have built a team of knowledgeable, highly skilled management and employees whose collective toy industry experience enhances the Company's ability to effectively execute its business plan. Toymax conducts its sales activities through its wholly-owned subsidiaries, Toymax Inc. and Toymax (H.K.) Limited ("Toymax HK"). Following the closing of the Offering, sales previously conducted through Toymax HK will be conducted through Toymax (Bermuda) Limited. U.S. domestic sales, conducted by Toymax Inc., consist of sales of the Company's promotional product lines to U.S. customers pursuant to customer purchase orders ("U.S. Domestic Sales"). Customers purchasing products on this basis include Toys "R" Us, Kay-Bee Toys, F.A.O. Schwarz, Wal-Mart, Kmart and Target. Sales conducted by Toymax HK ("Toymax HK Sales") consist of sales on an FOB Hong Kong basis which are generally based on letters of credit and which include sales of lower priced basic products to U.S. and international retailers, including Toys "R" Us International, Lojas Americanas (Brazil) and Blokker (Holland) and sales of the Company's promotional product lines to approximately 40 international distributors (including Mattel Inc. and Hasbro Inc.). The Company's products are sold in over 50 countries around the world. In fiscal 1997, U.S. Domestic Sales constituted 70.9% of net sales, with the balance being Toymax HK Sales. The Company has generated net profits in four out of the last five fiscal years. For the fiscal year ended March 31, 1997, Toymax had net sales of $54.7 million and a net income of $3.3 million. In fiscal 1996, the Company experienced a net loss of $9.8 million. This was due principally to the cancellation of orders and the failure by retailers to place re-orders during the 1995 holiday season. As a result, the Company had to sell the excess inventory at discounted prices which impacted both gross sales and net profits. In order to lessen its exposure to any similar industry and retailer developments in the future, in calendar 1996, the Company improved its operations by: (i) limiting purchasing commitments on new products to foster increased product sell-through rates at the retail level and to reduce inventory risks, (ii) enhancing its inventory management system, with improved electronic data interchange tracking and sales analysis with major retail customers, and (iii) expanding its product concept preview process with selected retailers and distributors. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations." The Company uses a variety of methods to market its existing and new products, such as demonstrating its products at international toy shows to many of its current and prospective customers. In addition, the Company is able to reach its primary audience of children on a large scale in an efficient manner through television advertising. The Company also relies on public relations, promotional programs and such traditional methods as in-store demonstrations and couponing to support its sales and marketing efforts. Toymax currently contracts for all of its manufacturing requirements. Tai Nam Industrial Company Limited ("Tai Nam"), based in Hong Kong, serves as the Company's purchasing agent and, through an affiliated company, Jauntiway Investments Limited ("Jauntiway"), manufactures a majority of the Company's products. Jauntiway is an OEM toy manufacturer with two manufacturing facilities in southern China, including an ISO 9002 factory. Tai Nam and Jauntiway are owned by David Chu, the Chairman and a principal stockholder of the Company. The Company believes that these relationships give it several competitive advantages, such as better quality control on merchandise, greater operating and financial flexibility, and improved reliability and scheduling. The Company's objective is to increase sales and improve profitability by implementing the following elements of its growth strategy: EXTEND PRODUCT LINES OF EXISTING CORE BRANDS. The Company intends to capitalize on the success of its existing core brands by building a pipeline of complementary products and accessories. Product line extensions under the Company's brands are intended to provide greater sales and stability. For example, during 1997, the Company introduced the girl's version of Metal Molder, called Precious Metals-TM-, and added new products to its Creepy Crawlers product line. In addition, the Company capitalized on the success of its Laser Challenge brand with the introduction of a number of accessories, games and products which enhance the play experience. EXPAND INTO NEW CORE PRODUCT CATEGORIES. The Company intends to expand into new core product categories through (i) the creation of new toys by its product development team, (ii) the acquisition of rights to toys developed by independent designers, (iii) the acquisition of businesses or product lines with proven products or concepts, and (iv) the re-design and re-introduction of old "classic" toy products in recognition of cyclical patterns in the toy industry. For example, the Company entered the action toy category in 1996 with Laser Challenge and recently formed Craft Expressions, Inc. to enter the adult craft market. During the past three fiscal years, 82.7% of the Company's net sales have been generated from internally developed toys. In addition, senior management has been in the toy business for over two decades and has developed a large network of free-lance toy inventors and other independent designers from which to acquire the rights to market toys developed by these designers. Finally, the Company intends to pursue acquisitions of toy companies and product lines which either complement or enhance the Company's current products or allow the Company to expand into new market segments. EXPAND INTO TRADITIONAL SPRING TOYS. The Company recognizes the importance of decreasing its reliance on sales made in the third and fourth quarters of the calendar year by expanding into product categories with traditionally strong sales in the first half of the calendar year. In the first two calendar quarters of 1997, the Company had net sales of $22.8 million as compared to net sales of approximately $10.1 million for the same period in 1996, primarily as a result of the introduction of Laser Challenge. The Company plans to evaluate opportunities for new products, particularly in the categories of action toys and water toys. DEVELOP AND PENETRATE NEW MARKETS. The Company intends to expand the market for its existing and new toys by increasing its penetration of international markets and targeting the broadening demographics of toy consumers. The Company believes that as the global economy continues to expand, significant growth opportunities exist internationally, especially in Europe, South America and Southeast Asia. The Company intends to capitalize on management's experience, its established sales and distribution network and its relationships with foreign distributors and retailers to further expand its international sales. By marketing products globally, the Company can offer a greater diversity of products and potentially extend product life cycles. In addition, due to the advent of video and computer games, the demographics of toy consumers have changed. The ages of consumers of traditional toy products has decreased, while the market for toys incorporating sophisticated technology has extended beyond the traditional age groups of toy consumers. The Company intends to capitalize on the success of Laser Challenge and Metal Molder to produce products which appeal to the broader demographic for such toys. CONTINUE TO LICENSE RECOGNIZED BRAND NAMES AND CHARACTERS. The Company intends to continue to license recognized brand names to enhance sales of its product lines. Currently, the Company markets products pursuant to licensing agreements with companies such as Disney Enterprises, Inc., Universal Studios Licensing, Inc. and the Chevrolet Motor Division of General Motors. The Company intends to continue to seek appropriate licenses for its existing product lines as well as licenses which will allow the Company to expand into new product categories. The Company's principal offices are located at 125 East Bethpage Road, Plainview, New York 11803. The Company's telephone number is (516) 391-9898. In addition, the Company maintains a worldwide web site (http://www.laserchallenge.com) on the Internet. Information contained on the Company's web site is not a part of this prospectus and must not be relied upon in evaluating the Company, its products or business or an investment in the Common Stock offered hereby.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044066_jevic_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044066_jevic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1b81e54ecf66d19eeba08d6763dd8a43f5ad0830
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044066_jevic_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus gives retroactive effect to (i) the reclassification of the Company's capital stock into series designated "Common Stock" and "Class A Common Stock" (collectively, the "Common Equity") and (ii) a 34,291-for-one split of the shares of Common Stock and assumes no exercise of the Underwriters' over-allotment option. References in this Prospectus to "Jevic" or the "Company" refer to Jevic Transportation, Inc. THE COMPANY Jevic is a motor carrier that combines the high revenue yield characteristics of a typical less-than-truckload ("LTL") carrier with the operating flexibility and low fixed costs of a truckload carrier. Jevic utilizes a simplified in-route delivery system in which over 70% of the Company's shipments are delivered to their destinations directly from line-haul trailers, eliminating the need for an expensive network of labor-intensive breakbulk terminals, which most LTL carriers use to distribute shipments. Jevic's revenue per terminal for 1996 was approximately $31.0 million. The Company serves shippers throughout the eastern half of the United States and in selected markets in the remainder of the continental United States and Canada through its origination facilities located in the metropolitan areas of Atlanta, Boston, Charlotte, Chicago, Houston and Philadelphia. From 1992 to 1996, the Company's operating revenues and operating income grew at compound annual rates of 26.6% and 29.2%, respectively. Jevic began operations as a motor carrier in 1983, soon after deregulation of the trucking industry. Regulation had caused trucking industry participants to develop as either truckload carriers or as terminal-based LTL carriers. Following deregulation, most carriers continue to focus their operations and price their services as either truckload carriers or LTL carriers. Traditional truckload and LTL carriers can efficiently handle freight that is compatible with their respective operating systems but typically do not have the flexibility to accommodate a wide range of shipment size, length of haul and delivery options. Jevic developed its Breakbulk-Free(Registered) operating system to provide the capabilities of both truckload and LTL service without the inherent infrastructure requirements and operational limitations of truckload and LTL carriers. Jevic's Breakbulk-Free system utilizes a simplified network of terminals, which serve as regional origination points for initial consolidation of freight on a trailer. The Company strategically combines smaller shipments (typically handled by LTL carriers) with larger shipments (typically handled by truckload carriers) in a sequence which permits direct unloading at each shipment's destination, with no need to rehandle individual shipments at one or more breakbulk terminals. Typical LTL carriers have to reload shipments into local trucks for final delivery, whereas, in most cases, Jevic's operating system avoids further rehandling at the destination facility. This generally results in less damage to freight and faster transit times for less than full truckload shipments. Jevic's flexible operating system minimizes rehandling of freight and provides a broad range of transportation services. MARKETING STRATEGY Jevic targets prospective customers whose logistics needs are not being met, develops solutions for those needs and offers a broad range of transportation services. o Offer Logistics-Based Solutions. The Company utilizes a consultative approach to develop customized logistics-based solutions to meet its customers' transportation and distribution needs. The Company's customer-focused approach helps expand its customer base and forge long-term customer relationships. o Offer a Broad Range of Differentiated Services. By creating a "one-stop-shop" and offering a broad range of transportation services, the Company seeks to become its customers' core carrier. Jevic offers its customers a wide range of shipment size, length of haul and delivery options as well as heated service. By increasing the number of shipments from existing customers, the Company achieves operating efficiencies through higher pick-up and lane density, improved terminal utilization and reduced administrative duplication. o Focus on Customer Selectivity. The Company targets customers based on disciplined sales criteria designed to identify shippers whose service requirements drive the carrier selection process. This approach has generated significant incremental business in service-sensitive industries, such as the chemical industry, which accounted for approximately 45% of the Company's operating revenues from its top 200 customers in the first half of 1997. o Solicit Optimal Mix of Shipment Sizes. Jevic selectively solicits business from its customers in order to load trailers strategically by integrating larger shipments with smaller shipments and thereby optimizes revenue yields and asset utilization. OPERATING STRATEGY Jevic seeks to maximize its results of operations by providing flexible and timely service. o Utilize Breakbulk-Free System. Jevic sequences multiple deliveries from a single trailer, eliminating the need for a network of breakbulk terminals and, in most cases, destination terminals, at which typical LTL carriers unload and reload shipments for final delivery. As a result, the Company reduces transit times and freight damage while avoiding the infrastructure and labor costs associated with a large breakbulk terminal network. o Utilize Technology to Improve Productivity and Customer Service. The Company utilizes technology to improve its customer service and to increase productivity. The Company's tractors are equipped with state-of-the-art QUALCOMM OmniTRACS satellite tracking units to provide real-time customer information and increase fleet utilization. Jevic uses its EDI system to improve customer communications and reduce administrative costs. o Increase Utilization of Owner-Operator Drivers. Jevic has recently expanded its driver force to include owner-operators in order to reduce capital expenditure requirements, improve return on equity, reduce direct exposure to fuel price fluctuations and provide access to an additional pool of drivers. o Maintain a Positive Workforce Environment. Through stringent driver selection criteria, a favorable wage and benefit structure and a positive working environment, the Company minimizes driver turnover, maintains a high level of employee satisfaction and motivates employees to provide high quality service. The Company's annual driver turnover rate was 20.1% in 1996. None of Jevic's employees, including drivers, is represented by a collective bargaining unit. GROWTH STRATEGY The Company seeks sustainable growth by increasing the amount of business generated by existing customers, acquiring new customers within existing regions and expanding into new regions. In response to customer demand, Jevic initiates service to a new region by introducing high-yield inbound LTL service to its existing customer base, delivering in-route from line-haul trailers, consistent with the Company's operating strategy. Until a sufficient volume of inbound business is generated, the Company avoids the up-front capital costs of building or purchasing a new facility by soliciting lower-yielding truckload shipments for the backhaul to return the equipment to one of the Company's existing facilities. This results in increased asset utilization and reduced empty miles. Once the Company opens a new facility, it serves as a consolidation point for a wide range of higher yielding shipments originating in the region, replacing the lower yielding truckload shipments. The Company most recently employed these techniques in opening its Houston facility in June 1997. By providing a broad range of services, Jevic has the ability to build volume rapidly in targeted geographic areas. The Company's growth plans include constructing new, substantially larger facilities in metropolitan Boston and Chicago, adding selected regional facilities in new regions and adding new points served in route when supported by customer demand. Jevic also intends to selectively pursue acquisitions of companies that are complementary with the Company's operations. The Company was incorporated in New Jersey in 1981. Jevic's headquarters are located at 600 Creek Road, P.O. Box 5157, Delanco, New Jersey 08075, and its telephone number is (609) 461-7111. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 3,800,000 shares Common Equity to be outstanding after this offering: Common Stock............................... 4,348,656 shares (1) Class A Common Stock....................... 6,309,544 shares Total................................... 10,658,200 shares (1) Use of proceeds.............................. To reduce indebtedness, purchase and expand regional facilities and fund a distribution to certain current shareholders and for the purchase of revenue equipment. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... JEVC </TABLE> - ------------------ (1) Excludes approximately 1,285,820 shares of Common Stock issuable upon the exercise of options which will be outstanding upon completion of this offering and an aggregate of approximately 1,200,000 shares of Common Stock reserved for issuance under the Company's employee benefit plans. See "Management - Executive Incentive Plans" and Note 9 of "Notes to Financial Statements." SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND CERTAIN OPERATING DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- -------- -------- -------- ------- --------- <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Operating revenues............... $60,296 $90,161 $119,299 $125,973 $154,799 $73,568 $90,417 Operating income................. 3,370 4,024 11,737 6,050 9,390 2,166 6,109 Net income (1)................... 2,104 2,833 10,412 4,239 6,195 748 4,355 Pro forma data (1): Net income..................... 3,849 481 2,647 Net income per share........... $ 0.49 $ 0.06 $ 0.34 Shares used in computing net income per share............. 7,843 7,843 7,843 Supplemental pro forma net income per share (2)......... $ 0.46 $ 0.07 $ 0.32 OPERATING DATA: Total shipments (000s)........... 155 269 370 453 586 284 329 Total miles (000s)............... 38,842 57,924 65,855 65,599 75,795 36,288 42,873 Average operating revenue: Per mile....................... $ 1.55 $ 1.56 $ 1.81 $ 1.92 $ 2.04 $ 2.03 $ 2.11 Per tractor per week........... $ 3,084 $ 3,085 $ 3,553 $ 3,539 $ 3,764 $ 3,705 $ 3,772 Number of tractors at end of period: Company........................ 450 626 685 740 776 777 853 Owner-Operator................. -- -- -- -- 63 15 105 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------------------------------- PRO FORMA ACTUAL PRO FORMA (3) AS ADJUSTED (4) ------- ------------- --------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital (deficit)................................... $(3,342) $(13,728) $ 23,256 Property and equipment, net................................. 67,426 68,726 68,726 Total assets................................................ 96,047 94,961 112,322 Long-term debt, less current maturities..................... 36,910 36,910 28,752 Shareholders' equity........................................ 27,228 8,528 53,670 </TABLE> - ------------------ (1) For all periods presented, the Company was an S Corporation and, accordingly, was not subject to corporate income taxes, except for certain states during certain periods. Pro forma data assumes (a) the Company's purchase of its Charlotte facility from certain of its current shareholders (the "Charlotte Purchase") occurred on January 1, 1996 which would have resulted in additional annual depreciation and interest expense of $70,000 and $190,000, respectively, and a reduction in annual rent expense of $260,000 and (b) the Company had been subject to corporate income taxes for all periods presented, based on the tax laws in effect during the periods. Pro forma net income per share includes that number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to fund a distribution of $10.0 million (the "Distribution") to shareholders as of August 11, 1997 immediately prior to the offering. See "Prior S Corporation Status" and Note 2 of "Notes to Financial Statements." (2) Supplemental pro forma net income per share is calculated by dividing pro forma net income (adjusted for the pro forma reduction in interest expense that specifically corresponds to the repaid indebtedness discussed in (a) and (b) below) by the number of shares used in (1) above plus the estimated number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to (a) repay bank mortgage indebtedness of $2.0 million in connection with the Charlotte Purchase and (b) repay approximately $18.2 million of other indebtedness. See "Use of Proceeds" and "Certain Transactions." (3) Gives pro forma effect to (a) the Charlotte Purchase, which results in a $1.3 million increase in property and equipment, a $2.0 million increase in short-term indebtedness and a $700,000 deemed distribution to shareholders, (b) the payment of the Distribution with $4.0 million of cash and bank borrowings of $6.0 million and (c) the termination of the Company's S Corporation status resulting in a non-cash charge estimated at $8.0 million in recognition of an increase in the Company's net deferred tax liability, as if such termination had occurred on June 30, 1997. (4) Adjusted to give effect to (a) the pro forma adjustments described in (3) above, and (b) the sale by the Company of the 3,800,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $13 per share) and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." See "Prior S Corporation Status" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044167_cntv_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044167_cntv_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dc6a6e7997ab784119eb907eb070abd2abc3930c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044167_cntv_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus (i) assumes no exercise of (a) the Underwriters' over-allotment option; (b) the Warrants; (c) the Unit Purchase Option; or (d) options granted or available for grant under the Company's stock option plan; and (ii) gives effect to (a) a stock split effected in May 1997; (b) the reincorporation of the Company by merger under the laws of the State of Delaware and a recapitalization effected in June 1997; (c) a .83333325-for-one reverse stock split effected in October 1997; and (d) the Acquisitions. See "The Acquisitions and Recapitalization," "Capitalization," and "Management - Stock Option Plan." The Company The Company is engaged in the manufacture, configuration, distribution and servicing of computers and computer peripherals, hardware and software. The operations of the Company are conducted through its Graphics Division and its Technology Division. The Graphics Division currently consists of five regional distributors which specialize in marketing, sales, support and wholesale distribution of high-end computer graphics technologies (i.e. peripherals, software, subsystems and consumable products) to value-added resellers ("VARs"), dealers and systems integrators in the digital prepress, presentation graphics, professional color desktop publishing, large format display graphics, digital imaging, electronic drawing management ("EDMS"), computer-aided design ("CAD") and other emerging computer graphics technologies markets. Among the products the Graphics Division distributes and sells are color scanners, color digital film recorders, digital cameras, color laser printers, color-calibrated monitors, audio-visual presentation systems, raster image processors ("RIPs"), ink jet printers, plotters, pre-press software, image setters, color proofers and mass storage devices. With the exception of Southern California, Arizona, New Mexico and New England, the Graphics Division gives computer graphics manufacturers a national distribution presence with the benefits of local, technical sales and support through facilities located in Chicago, Baltimore, Oakland, Atlanta and Houston. The Graphics Division was established as a result of the Company's recent acquisition of five operating companies. See "The Acquisitions and Recapitalization" below. The establishment of this division reflects the Company's overall business strategy to become a nationally-recognized, vertically-integrated provider of computer products and services. The activities of the Technology Division consist primarily of the configuration, design and assembly of custom designed network and internet servers and workstations in the form of personal computers ("PCs") under the Crescent Computer brand and the resale of Digital Equipment Corporation ("DEC") equipment to the nationwide DEC-installed customer base. The Crescent Computer is a PC which can be assembled in a number of different configurations using standard component parts. Customization enables the Company to accommodate customer computer needs with respect to storage capacity, speed, price, applications, size, configuration and a range of other considerations that can be accommodated in whole or in part by the selection of appropriate components. The Company also provides services to its customers, including system architecture design, customization, hardware consulting and continuing support and assistance in the maintenance and operations of Company purchased products. Crescent Computers are currently being used to operate non-sterile heart catheterization diagnostic equipment, as voice mail/auto attendant controllers, in informational kiosks and in other process-control applications. The Company will seek to expand its operations through internal growth of both of its operating divisions. Additionally, the Company will seek to increase the customer base of the Technology Division by increased marketing of its products utilizing the marketing and distribution structure established by the Graphics Division. Further, the Company intends to expand the Graphics Division's national marketing network. The Company also intends to continue to expand its operations through the acquisition of complementary businesses. The Company will focus its acquisition activities on profitable technology companies that can be consolidated into the Company's existing divisional structure, increase divisional revenues, expand the geographic - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- and technical scope of the Company's operations, and offer a greater range of products and services to existing and potential customers. Although the Company continually explores acquisition possibilities and has targeted a number of computer graphics distributors, including New England Computer Graphics ("NECG") in Westford, Massachusetts, it is not currently involved in any active discussions or negotiations with respect to any potential acquisitions. There can be no assurance that the Company's acquisition program will be successful, that the NECG or any other acquisition will be successfully completed, that any entities acquired will be successfully integrated into the Company or will result in significant additional revenues or profits to the Company. The Company was incorporated in the State of Georgia in February 1993 under the name Crescent Computers, Inc. ("Crescent") and was the successor to Crescent Computer Services which was founded in 1988. Crescent acquired a controlling interest in Prisym Technologies, Inc., a Georgia corporation ("Prisym"), upon the inception of such company in December 1994. In June 1997, the Company completed the acquisition of all of the outstanding capital stock of each of G&R Marketing, Inc., an Illinois corporation ("G&R"), Microsouth, Inc., a Georgia corporation ("Microsouth"), tekgraf, inc., a Texas corporation ("tekgraf Texas"), Computer Graphics Distributing Company, a Maryland corporation ("CGD"), Intelligent Products Marketing, Inc. ("IPM") and IG Distribution, Inc. ("IG"), each a California corporation and together doing business as Intelligent Graphics Distribution ("IGD"). See "The Acquisitions and Recapitalization" below. Subsequent to the Acquisitions (as defined below), the Company reincorporated by merger under the laws of the State of Delaware into a wholly-owned Delaware subsidiary (the "Merger") thereby changing its name to Tekgraf, Inc. The Company's executive offices are located at 2979 Pacific Drive, Norcross, Georgia, 30071 and its telephone number is (770) 441-1107. Unless otherwise indicated, all references herein to the Company include Crescent, Prisym, G&R, Microsouth, tekgraf Texas, CGD and IGD. The Acquisitions and Recapitalization In June 1997, Crescent completed the acquisition (the "Acquisitions") of the outstanding capital stock of G&R, Microsouth, tekgraf Texas, CGD, IPM and IG (collectively, the "Subsidiaries" and each a "Subsidiary") in exchange for the issuance of an aggregate of 2,192,000 shares of its Class B Common Stock (giving effect to the Merger and a 400-for-one stock split and recapitalization effected in June 1993 and a .83333325-for-one reverse stock split effected in October 1997 (collectively, the "Recapitalization")). See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Transactions - The Acquisitions." The Acquisitions are being accounted for under the purchase method of accounting. See "Unaudited Pro Forma Combined Financial Statements." - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Offering Securities Offered........................... 2,100,000 Units, each Unit consisting of one share of Class A Common Stock and one Warrant. Each Warrant entitles the holder to purchase one share of Class A Common Stock at an exercise price of $8.40, subject to adjustment, at any time through the fifth anniversary of the date of this Prospectus. The Warrants are subject to redemption in certain circumstances. Holders of Class A Common Stock are entitled to one vote per share on all matters while holders of Class B Common Stock are entitled to five votes per share. See "Description of Securities." Common Stock Outstanding Before Offering (1): Class A Common Stock..................... 0 shares Class B Common Stock..................... 3,333,333 shares (2) --------- Total ................................. 3,333,333 shares (2) ========= Common Stock Outstanding After Offering (1): Class A Common Stock..................... 2,100,000 shares (3) Class B Common Stock..................... 3,333,333 shares (2) --------- Total ................................. 5,433,333 shares (2)(3) ========= Use of Proceeds.............................. For repayment of bank and other debt; purchase price adjustments in connection with the Acquisitions; future acquisitions; consolidation expenses; sales and marketing; and for working capital. See "Use of Proceeds." Nasdaq Symbols............................... Class A Common Stock-- TKGFA Warrants--TKGFW Risk Factors................................. The securities being sold in the Offering involve a high degree of risk and immediate substantial dilution. See "Risk Factors" and "Dilution." - ---------- (1) For a description of the Class A Common Stock and Class B Common Stock (collectively, the "Common Stock"), see "Description of Securities - Common Stock." (2) Includes an aggregate of 166,667 shares of Class B Common Stock (the "Escrow Shares") which have been deposited into escrow by the holders thereof. The Escrow Shares are subject to cancellation and will be contributed to the capital of the Company if the Company does not attain certain earnings levels or the market price of the Company's Class A Common Stock does not achieve certain levels. If such earnings or market price levels are met, the Company will record a substantial non-cash charge to earnings, for financial reporting purposes, as compensation expense relating to the value of the Escrow Shares released to Company officers, directors and employees. See "Risk Factors - Charge to Income in the Event of Release of Escrow Shares and Escrow Options," "Capitalization" and "Principal Stockholders." Also includes an aggregate of 1,333,333 shares of Class B Common Stock (the "Indemnification Shares") which were deposited in escrow by the holders thereof to cover potential claims for indemnification by the Company under the stock purchase agreements entered into in connection with the Acquisitions. See "Certain Transactions - The Acquisitions." (3) Excludes (i) up to 630,000 shares of Class A Common Stock issuable upon exercise of the Underwriters' over-allotment option and the Warrants included in such option; (ii) 2,100,000 shares of Class A Common Stock issuable upon exercise of the Warrants included in the Units offered hereby; (iii) 420,000 shares of Class A Common Stock issuable upon exercise of the Unit Purchase Option and the Warrants included in such option; and (iv) 300,000 shares of Class A Common Stock reserved for issuance under the Company's 1997 Stock Option Plan. See "Management - Stock Option Plan," "Certain Transactions" and "Description of Securities." - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Summary Selected Pro Forma Combined Financial Data Effective June 2, 1997, Crescent acquired all of the outstanding common stock of the Subsidiaries. The following summary unaudited pro forma combined financial data presents certain actual, pro forma and as adjusted data for the combined Company. As set forth in the footnotes to the following table, the pro forma data gives effect to adjustments which are reflective of the combined entity going forward. All amounts are presented in thousands except share and per share data. <TABLE> <CAPTION> Six Months Ended Year Ended June 30, December 31, -------------------------- 1996 1996 1997 ------------ -------- -------- <S> <C> <C> <C> Combined Pro Forma Statement of Income Data(1): Net sales(2)................................................. $ 68,902 $33,928 $ 34,684 Cost of goods sold(3)........................................ 57,643 28,217 28,582 Gross profit................................................. 11,259 5,710 6,103 Selling, general and administrative(4).................... 7,500 4,141 4,166 Depreciation.............................................. 162 98 95 Amortization(5)..................................... 401 200 200 Operating income............................................. 3,197 1,271 1,641 Other income(6)........................................... 116 98 57 Interest expense(7)....................................... 431 193 171 Income before taxes, minority interest and extraordinary gain.................................... 2,883 1,176 1,527 Provision for income taxes(8)................................ 1,281 537 674 Income before minority interest and extraordinary gain....... 1,603 639 853 Minority interest............................... -- 25 15 Income before extraordinary gain........................ 1,603 614 839 Pro forma income per share before extraordinary gain - primary and fully diluted.......................... $ .51 $ .19 $ .26 ============ ========= ======== Estimated pro forma weighted average shares outstanding - primary and fully diluted (9)............... 3,166,666 3,166,666 3,166,666 ============ ========= ========= </TABLE> At June 30, 1997 -------------------------- Actual As Adjusted(10) Balance Sheet Data: Working capital ....................... $2,512 $14,495 Total assets .......................... 23,587 29,638 Total debt ............................ 5,984 -- Stockholders' equity .................. 9,163 20,877 - ---------- (1) See "Unaudited Pro Forma Combined Financial Statements" for the year ended December 31, 1996, the six months ended June 30, 1996 and the six months ended June 30, 1997. (2) Adjusted to reflect the Acquisitions and the elimination of revenue related to affiliated entities of the Subsidiaries not acquired by the Company. (3) Adjusted to reflect the Acquisitions and the elimination of expenses of affiliated entities of the Subsidiaries not acquired by the Company. (4) Adjusted to reflect the Acquisitions and the reductions in compensation levels that certain former stockholders of the Subsidiaries and officers of the Company have contractually agreed to receive from the Company subsequent to the Acquisitions. (5) Adjusted to reflect the amortization of the estimated goodwill recorded in connection with the Acquisitions. (6) Adjusted to reflect the elimination of expenses between IPM and IG. (7) Adjusted for the elimination of pro rata interest expense on capital to be contributed by the pre-Acquisition stockholders of the Company. (8) Gives effect to the estimated provision to reflect federal and state income taxes as if all of the Subsidiaries had been C Corporations and the incremental provision for the pro forma adjustments. (9) Gives effect to the Acquisitions and subsequent Recapitalization. Weighted average shares outstanding excludes the Escrow Shares. (10) Adjusted to reflect (i) the sale of 2,100,000 Units offered hereby; (ii) the repayment, upon completion of the Offering, of bank debt ($2,598,650 at June 30, 1997); (iii) the repayment, upon completion of the Offering, of outstanding indebtedness to current and former stockholders (an aggregate of $2,299,000 at June 30, 1997); (iv) the contribution to capital, upon completion of the Offering, of an aggregate of $990,000 by the pre-Acquisition stockholders; and (v) the payment and collection, after the Offering, of estimated purchase price adjustments relating to the Acquisitions. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Transactions." - --------------------------------------------------------------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044198_entergy_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044198_entergy_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bc7127b76298877ff44fb2c6c8e2da71764665f2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044198_entergy_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed financial and other information contained elsewhere in this Prospectus. THE COMPANY The Company owns all of the outstanding shares of London Electricity, one of the twelve regional electricity companies ("RECs") in England and Wales. London Electricity is the Company's sole significant asset. All of the Company's outstanding shares are owned indirectly by Entergy Corporation ("Entergy", and, together with its subsidiaries, the "Entergy Company system"), a US holding company engaged in regulated electric power activities in the US and competitive electric power and energy activities internationally and throughout the US. Entergy, through the Company, gained effective control of London Electricity in February 1997. LONDON ELECTRICITY London Electricity's principal businesses are the distribution and supply of electricity to approximately 2 million customers in the London metropolitan area. London Electricity's franchise area has a resident population of approximately 4 million and covers approximately 257 square miles (the "Franchise Area"). The Franchise Area generally consists of the metropolitan London area and includes commercial, domestic and industrial customers. The operations of London Electricity are regulated under its Public Electricity Supply ("PES") license. London Electricity's primary business is its distribution business, which in Pro Forma Fiscal Year 1997 (as defined herein) produced operating income of (Pounds)92 million ($148 million). Substantially all of the distribution business is a regulated monopoly. London Electricity's supply business in Pro Forma Fiscal Year 1997 generated (Pounds)6 million ($10 million) in operating income. Together these businesses produced substantially all of London Electricity's operating income of (Pounds)112 million ($181 million) in Pro Forma Fiscal Year 1997. London Electricity owns, manages and operates the electricity distribution network within its Franchise Area. The primary activity of the distribution business is the receipt of electricity from the national grid transmission system (the "Grid") and its distribution to end users connected to London Electricity's power lines. Virtually all electricity supplied (whether by London Electricity's supply business or by any other suppliers) to consumers within London Electricity's Franchise Area is transported through London Electricity's distribution network. London Electricity's supply business consists of selling electricity to end users, purchasing such electricity and arranging for its distribution to those end users. London Electricity has an exclusive right to supply electricity to customers in its Franchise Area who have demand of not more than 100 kW. This exclusive right will continue until April 1, 1998, when the supply market for these customers will become competitive over a six month phase-in period. The supply business to consumers with demand of 100 kW and above, both inside and outside of London Electricity's Franchise Area, is already open to competition. London Electricity, through subsidiaries, also conducts ancillary business activities, including the ownership and operation of private distribution networks, power generation and retail gas supply. ENTERGY LONDON CAPITAL Entergy London Capital is a newly formed special purpose limited partnership formed under the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"). The Company is the sole general partner (the "General Partner") in Entergy London Capital. Upon issuance of the Preferred Securities, which securities represent limited partner interests in Entergy London Capital, the registered holders thereof will become limited partners in Entergy London Capital. The General Partner has agreed to contribute capital to the extent required to maintain its capital at 1% of all capital of Entergy London Capital. All of Entergy London Capital's business and affairs will be conducted by the General Partner. Entergy London Capital was formed for the sole purpose of issuing limited partner interests in the form of the Preferred Securities and investing the proceeds thereof and the capital contributed by the General Partner in the Perpetual Junior Subordinated Debentures. THE OFFERING As used herein, (i) the term "Indenture" means the Indenture for Unsecured Subordinated Debt Securities relating to Preferred Securities, as the same may be amended and supplemented from time to time, between the Company and The Bank of New York, as Debenture Trustee (the "Debenture Trustee"), pursuant to which the Perpetual Junior Subordinated Debentures will be issued, and (ii) the term "Partnership Agreement" means the Amended and Restated Limited Partnership Agreement, among the Company, as General Partner, and the holders, from time to time, of the Preferred Securities. Each of the other capitalized terms used in this Prospectus and not otherwise defined has the meaning set forth in the Indenture or the Partnership Agreement, as the case may be. Securities Offered.................. % Cumulative Quarterly Income Preferred Securities, Series A (QUIPSSM)* (liquidation preference $25 per preferred security). Offering Price...................... $25 per Preferred Security. Distribution Dates.................. March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1997. Deferral of Interest Payments....... The Company has the right to defer indefinitely the payment of interest on the Perpetual Junior Subordinated Debentures at any time or from time to time. If interest payments on the Perpetual Junior Subordinated Debentures are so deferred, Distributions on the Preferred Securities will also be deferred. See "Description of the Perpetual Junior Subordinated Debentures--Option to Defer Payment of Interest". No Stated Maturity.................. The Perpetual Junior Subordinated Debentures will not have a stated maturity. - -------- * QUIPS is a servicemark of Goldman, Sachs & Co. Ranking............................. The limited partner interests represented by the Preferred Securities will have a preference with respect to cash distributions and amounts payable on dissolution, redemption or otherwise over the General Partner's interest in Entergy London Capital. The Company's obligations under the Perpetual Junior Subordinated Debentures and the Guarantee will constitute unsecured obligations of the Company and will be subordinate and junior in right of payment to all Senior Debt of the Company to the extent and in the manner set forth in the Indenture. See "Description of the Perpetual Junior Subordinated Debentures--Subordination" and "Description of the Guarantee". Redemption.......................... The Preferred Securities will be subject to mandatory redemption, in whole or in part, upon redemption of the Perpetual Junior Subordinated Debentures in an amount equal to the amount of Perpetual Junior Subordinated Debentures being redeemed at the Redemption Price. The Perpetual Junior Subordinated Debentures are redeemable at the option of the Company (i) on or after November , 2002, in whole at any time or in part from time to time, (ii) at any time, in whole (but not in part), upon the occurrence and continuation of a Special Event, or (iii) at any time, in whole (but not in part), in the event that the Company has or will become obligated to pay Additional Amounts, in each case at the Debentures Redemption Price. See "Description of the Preferred Securities--Redemptions--Mandatory Redemption", "--Optional Redemption of Perpetual Junior Subordinated Debentures" and "--Special Event Redemption or Distribution of Perpetual Junior Subordinated Debentures". Distribution of Perpetual Junior Subordinated Debentures............ The Company will have the right at any time, whether or not a Special Event has occurred, to dissolve Entergy London Capital and, after satisfaction of liabilities to creditors, if any, of Entergy London Capital, cause the Perpetual Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of Entergy London Capital. See "Description of the Preferred Securities--Redemptions--Special Event Redemption or Distribution of Perpetual Junior Subordinated Debentures". Withholding Tax..................... Payments in respect of the Perpetual Junior Subordinated Debentures and, therefore, the Preferred Securities will be made free and clear of any present or future UK withholding and other deductions existing in the UK, except as set forth under "Description of the Perpetual Junior Subordinated Debentures--Additional Amounts". Subject to certain exceptions, the Company will pay such additional amounts (the "Additional Amounts") as will result in receipt by the holder of the Perpetual Junior Subordinated Debentures and, therefore, the holders of the Preferred Securities of such amounts as would have been received by it had no such withholding or deduction been required. See "Description of the Perpetual Junior Subordinated Debentures--Additional Amounts". Listing............................. Application will be made to list the Preferred Securities on the NYSE and has been made to list the Perpetual Junior Subordinated Debentures on the Luxembourg Stock Exchange. If the Perpetual Junior Subordinated Debentures are distributed to the holders of the Preferred Securities upon the liquidation of Entergy London Capital, the Company will use its best efforts to also list the Perpetual Junior Subordinated Debentures on the NYSE, or such other stock exchanges or other organizations, if any, on which the Preferred Securities are then listed. Use of Proceeds..................... The proceeds to Entergy London Capital from the sale of the Preferred Securities will be invested by Entergy London Capital in the Perpetual Junior Subordinated Debentures to be issued by the Company to Entergy London Capital. The Company intends to use the net proceeds from such investment to repay a portion of indebtedness incurred in connection with the acquisition of London Electricity. See "Use of Proceeds" and "Capitalization". Governing Law....................... The Partnership Agreement and the Preferred Securities will be governed by, and construed in accordance with, the laws of the State of Delaware. The Guarantee, the Indenture and the Perpetual Junior Subordinated Debentures will be governed by, and construed in accordance with, the laws of the State of New York. SUMMARY FINANCIAL INFORMATION The following tables set forth summary consolidated financial data for Entergy London Investments plc (the "Successor Company" or the "Company") and London Electricity (the "Predecessor Company"). For a description of the financial statements and records from which the following financial data have been derived, see "Selected Financial Data". This information should be read in conjunction with "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto of the Successor Company and the Predecessor Company included elsewhere in this Prospectus. All references to a fiscal year mean a year ended March 31. The unaudited pro forma condensed consolidated income statement and other data presented below for fiscal year 1997 reflect the acquisition by the Company of London Electricity as if it had occurred as of April 1, 1996 ("Pro Forma Fiscal Year 1997"). Such unaudited pro forma condensed consolidated income statement and other data have been prepared by the Successor Company based upon assumptions deemed proper by it and reflect a preliminary allocation of the purchase price paid for the Predecessor Company. The unaudited pro forma condensed consolidated income statement and other data presented herein are shown for illustrative purposes only and are not necessarily indicative of the future results of operations of the Successor Company or of the results of operations of the Successor Company that would have actually occurred had the transaction occurred as of April 1, 1996. This information should be read in conjunction with the unaudited pro forma condensed consolidated statement of income and notes thereto of the Successor Company included elsewhere in this Prospectus. PREDECESSOR COMPANY UK GAAP (1) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Turnover.............. (Pounds)1,367 (Pounds)1,309 (Pounds) 1,209 (Pounds)1,188 Operating costs....... ( 1,215) (1,137) (1,046) (1,115) ------------- ------------- -------------- ------------- Operating profit...... 152 172 163 73 Exceptional item(2)... (20) -- (10) 66 Other income(3)....... 18 20 21 142 Interest, net......... (4) (5) (1) (5) Tax on profit......... (38) (45) (23) (89) ------------- ------------- -------------- ------------- Profit for financial period............... (Pounds)108 (Pounds)142 (Pounds)150 (Pounds)187 ============= ============= ============== ============= <CAPTION> MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds)709 (Pounds)769 (Pounds)823 (Pounds)794 Current assets........ 291 453 338 455 Creditors: Amounts falling due within one year............. (263) (265) (343) (485) ------------- ------------- -------------- ------------- Total assets less current liabilities.. 737 957 818 764 Creditors: Amounts falling due in more than one year............. (73) (190) (115) (211) Provisions for liabilities and charges.............. (42) (50) (45) (53) ------------- ------------- -------------- ------------- Total shareholders' funds................ (Pounds)622 (Pounds)717 (Pounds)658 (Pounds)500 ============= ============= ============== ============= <CAPTION> YEAR ENDED MARCH 31, ----------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- -------------- ------------- (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds)157 (Pounds)205 (Pounds)187 (Pounds)293 EBITDA(5)............. 189 240 225 334 Cash flow from operations(6)........ 251 299 155 103 Ratio of earnings to fixed charges(7)..... 11 10 12 15 </TABLE> PREDECESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> PERIOD FROM YEAR ENDED MARCH 31, APRIL 1, 1996 TO -------------------- JANUARY 31, 1995 1996 1997(8) ------------- --------------------- ---------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Operating revenues.... (Pounds)1,209 (Pounds)1,188 (Pounds)1,116 Operating income...... 166 102 107 National Grid transaction.......... -- 450 -- Interest expense, net. (1) (5) (17) Other, net............ 22 22 4 Provision for income taxes................ (57) (110) (32) ------------- ------------- ------------- Income before extraordinary item... 130 459 62 Extraordinary item.... (9) -- -- ------------- ------------- ------------- Net income............ (Pounds) 121 (Pounds) 459 (Pounds) 62 ============= ============= ============= <CAPTION> MARCH 31, 1996 --------------------- (AMOUNTS IN MILLIONS) <S> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds) 784 Total assets.......... 1,349 Total stockholder's equity............... 448 Long-term debt........ 198 Short-term debt....... 96 <CAPTION> PERIOD FROM YEAR ENDED MARCH 31, APRIL 1, 1996 TO -------------------- JANUARY 31, 1995 1996 1997(8) ------------- --------------------- ---------------- (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds) 201 (Pounds) 586 (Pounds) 120 EBITDA(5)............. 241 628 159 Cash flow from operations........... 123 191 102 Ratio of earnings to fixed charges(7)..... 12.1 30.0 4.3 </TABLE> BUSINESS SEGMENTS PREDECESSOR COMPANY UK GAAP(1) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ---------------------------------------------------------- 1993 1994 1995 1996 ------------- ------------- ------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> TURNOVER: Electricity distribution......... (Pounds) 361 (Pounds) 367 (Pounds) 379 (Pounds) 357 Electricity supply.... 1,266 1,228 1,114 1,189 National Grid transaction.......... -- -- -- (91) Other................. 86 51 44 59 Intra-business(9)..... (346) (337) (328) (326) ------------- ------------- ------------- ------------- Total............... (Pounds)1,367 (Pounds)1,309 (Pounds)1,209 (Pounds)1,188 ============= ============= ============= ============= OPERATING PROFIT (LOSS): Electricity distribution......... (Pounds) 152 (Pounds) 154 (Pounds) 136 (Pounds) 148 Electricity supply.... 7 6 14 9 National Grid transaction.......... -- -- -- (97) Other................. (7) 12 13 15 Intra-business(9)..... -- -- -- (2) ------------- ------------- ------------- ------------- Total............... (Pounds) 152 (Pounds) 172 (Pounds) 163 (Pounds) 73 ============= ============= ============= ============= </TABLE> BUSINESS SEGMENTS PREDECESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> PERIOD FROM APRIL 1, 1996 YEAR ENDED MARCH 31, TO ---------------------------- JANUARY 31, 1995 1996 1997 ------------- ------------- ------------- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> OPERATING REVENUE: Electricity distribution......... (Pounds) 379 (Pounds) 357 (Pounds) 275 Electricity supply............... 1,114 1,098 1,051 Other............................ 44 59 68 Intra-business(9)................ (328) (326) (278) ------------- ------------- ------------- Total.......................... (Pounds)1,209 (Pounds)1,188 (Pounds)1,116 ============= ============= ============= OPERATING INCOME: Electricity distribution......... (Pounds) 141 (Pounds) 158 (Pounds) 101 Electricity supply............... 11 (70) (1) Other............................ 14 16 7 Intra-business(9)................ -- (2) -- ------------- ------------- ------------- Total.......................... (Pounds) 166 (Pounds) 102 (Pounds) 107 ============= ============= ============= </TABLE> SUCCESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> SIX MONTHS ENDED PRO FORMA ----------------------------------- PERIOD FROM INCEPTION FISCAL YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, (OCTOBER 9, 1996) TO MARCH 31, 1997 1996 1997(12) MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------- --------------------- ----------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) ------------- ------- ------------- ------ ------------- ------------ ------ (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED INCOME STATEMENT DATA: Operating revenues.... (Pounds) 234 $ 377 (Pounds)1,350 $2,176 (Pounds) 617 (Pounds) 548 $ 883 Operating income...... 32 52 112 181 76 61 98 Other income (expense): Interest expense, net................ (13) (21) (93) (150) (8) (55) (88) Other, net.......... (6) (10) 5 8 3 2 3 Windfall profits tax................ -- -- -- -- -- (140) (226) (Provision) benefit for income taxes..... (5) (8) (8) (13) (19) 36 58 ------------- ------- ------------- ------ ------------- ------------ ------ Net income (loss)..... (Pounds) 8 $ 13 (Pounds) 16 $ 26 (Pounds) 52 (Pounds) (96) $ (155) ============= ======= ============= ====== ============= ============ ====== <CAPTION> SEPTEMBER 30, 1997 MARCH 31, 1997 (UNAUDITED)(12) ---------------------- --------------------------- (Pounds) $(11) (Pounds) $(11) ------------- ------- ------------- ------------ (AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Fixed assets, net..... (Pounds)1,347 $ 2,171 (Pounds)1,358 $ 2,189 Total assets.......... 2,669 4,301 2,646 4,264 Total stockholder's equity............... 248 400 152 245 Long-term debt........ 1,143 1,842 1,228 1,979 Short-term debt....... 162 261 72 116 <CAPTION> SIX MONTHS ENDED PRO FORMA ----------------------------------- PERIOD FROM INCEPTION FISCAL YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, (OCTOBER 9, 1996) TO MARCH 31, 1997 1996 1997(12) MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------- --------------------- ----------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) ------------- ------- ------------- ------ ------------- ------------ ------ (AMOUNTS IN MILLIONS, EXCEPT RATIOS) <S> <C> <C> <C> <C> <C> <C> <C> OTHER CONSOLIDATED DATA: EBIT(4)............... (Pounds) 34 $ 55 (Pounds) 135 $ 218 (Pounds) 87 (Pounds) (77) $ (124) EBITDA(5)............. 42 68 215 347 110 (38) (61) Ratio of earnings to fixed charges(7)(14). 1.6 1.6 1.2 1.2 5.2 -- -- Cash flow from operations........... 64 103 122 40 64 Cash provided by (used in) investing activities........... (1,203) (1,939) (48) (12) (20) Cash provided by (used in) financing activities........... 1,165 1,877 (38) (5) (8) </TABLE> BUSINESS SEGMENTS SUCCESSOR COMPANY US GAAP(1) <TABLE> <CAPTION> SIX MONTHS ENDED -------------------------------- PERIOD FROM INCEPTION PRO FORMA FISCAL YEAR SEPTEMBER 30, SEPTEMBER 30, OCTOBER 9, 1996 ENDED MARCH 31, 1997 1996 1997 TO MARCH 31, 1997(8) (UNAUDITED)(10) (UNAUDITED) ---------------------------------------------------------------------------------- (Pounds) $(11) (Pounds) $(11) (Pounds)(13) (Pounds) $(11) -------------- ----------------------- ---------------------- ----------- ----- (AMOUNTS IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING REVENUE: Electricity distribution......... (Pounds) 61 $ 98 (Pounds) 336 $ 541 (Pounds)155 (Pounds)151 $ 243 Electricity supply.... 213 343 1,265 2,039 574 501 807 Other................. 11 18 78 126 48 34 55 Intra-business(9)..... (51) (82) (329) (530) (160) (138) (222) -------------- ------- -------------- ------- ----------- ----------- ----- Total............... (Pounds) 234 $ 377 (Pounds) 1,350 $ 2,176 (Pounds)617 (Pounds)548 $ 883 ============== ======= ============== ======= =========== =========== ===== OPERATING INCOME: Electricity distribution......... (Pounds) 18 $ 30 (Pounds) 92 $ 148 (Pounds) 65 (Pounds) 44 $ 71 Electricity supply.... 7 11 6 10 3 5 8 Other................. 7 11 14 23 8 12 19 -------------- ------- -------------- ------- ----------- ----------- ----- Total............... (Pounds) 32 $ 52 (Pounds) 112 $ 181 (Pounds) 76 (Pounds) 61 $ 98 ============== ======= ============== ======= =========== =========== ===== <CAPTION> MARCH 31, 1997 ------------------------- (Pounds) $(11) -------------- --------- (AMOUNTS IN MILLIONS) <S> <C> <C> ASSETS(15): Electricity distribution......... (Pounds) 1,766 $ 2,846 Electricity supply.... 544 877 Other................. 359 578 -------------- ------- Total............... (Pounds)2,669 $ 4,301 ============== ======= </TABLE> - ------- (1) The financial data for the Predecessor Company were derived from financial statements for the Predecessor Company prepared in accordance with UK GAAP and US GAAP. The principal differences between the Predecessor Company's US GAAP and UK GAAP financial statements relate to the treatment of goodwill, pension costs and deferred taxes and the timing of recognition of restructuring charges and dividend accruals. (2) Exceptional items recorded in 1993, 1995 and 1996 were caused primarily by the following: 1993--Withdrawal from the electrical products retailing business (write-down of fixed asset and stock values, and provisions for losses and further costs expected until completely closed) 1995--Restructuring charges recorded for the regulated electricity business 1996--London Electricity's distribution of its ownership interest in The National Grid Group plc ("NGG") to its shareholders and related transactions (3) Other income in 1996 includes (Pounds)144 million of income from London Electricity's investment in NGG. (4) EBIT equals income from continuing operations before the sum of interest expense and income taxes. This information is provided for informational purposes only and such measure should not be construed as an alternative to operating income (as determined in accordance with US GAAP) as an indicator of operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) as a measure of liquidity. EBIT is a widely accepted financial indicator of a company's ability to incur and service debt. However, this measure of EBIT may not be comparable to similar measures presented by other companies. (5) EBITDA equals income from continuing operations before the sum of interest expense, income taxes, depreciation and amortization. This information is provided for informational purposes only and such measure should not be construed as an alternative to operating income (as determined in accordance with US GAAP) as an indicator of operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) as a measure of liquidity. EBITDA is a widely accepted financial indicator of a company's ability to incur and service debt. However, this measure of EBITDA may not be comparable to similar measures presented by other companies. (6) Cash flow from operations increased in fiscal year 1994 primarily as a result of customers who paid bills in advance in order to avoid paying value added taxes which were introduced by the British government. (7) The ratio of earnings to fixed charges is computed as the sum of pretax income from continuing operations plus fixed charges divided by fixed charges. Fixed charges consist of interest expense and the estimated interest portion of rent expense. (8) In February 1997, the Successor Company obtained effective control of the Predecessor Company pursuant to the Successor Company's offer to acquire the Predecessor Company. (9) Intra-business eliminations consist primarily of intra-business transactions between the distribution business and the supply business and intercompany transactions between ancillary support businesses. Pursuant to the UK regulatory framework, London Electricity's distribution of electricity to its supply customers within its own Franchise Area is billed to London Electricity's supply business, which in turn incorporates the distribution charge into the bill sent to the final end user. (10) Pro Forma Fiscal Year 1997 financial information gives effect to the acquisition of the Predecessor Company by the Successor Company as if it had occurred on April 1, 1996. See Unaudited Condensed Consolidated Statement of Operations included elsewhere in this Prospectus. (11) Solely for the convenience of the reader, pounds sterling amounts have been translated into US dollars at the Noon Buying Rate on September 30, 1997 of $1.6117=(Pounds)1.00. (12) Includes effect of windfall profits tax provision of (Pounds)140 million and the effect of the reduction in the UK statutory income tax rate from 33% to 31%. (13) The results of operations for the six months ended September 30, 1996 represent the historical amounts of the Predecessor Company. Such results do not include the effects of acquisition adjustments. (14) Earnings for the six months ended September 30, 1997 were insufficient to cover fixed charges by (Pounds)132 million ($213 million). (15) Includes distribution license, net of amortization, and prepaid pension costs of (Pounds)830 million and (Pounds)145 million, respectively, at March 31, 1997 and (Pounds)812 million and (Pounds)146 million, respectively, at September 30, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044269_archibald_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044269_archibald_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cf3cba73ff4c7e0ebd2f1faf84513f7f77e3d200
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044269_archibald_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS OF THE COMPANY, AND THE RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. IN AUGUST 1995, THE COMPANY CHANGED ITS FISCAL YEAR END FROM AUGUST 31 TO THE LAST SATURDAY IN AUGUST. UNLESS OTHERWISE INDICATED, ALL REFERENCES TO THE "COMPANY" OR "ARCHIBALD" REFER TO ARCHIBALD CANDY CORPORATION AND ALL REFERENCES TO "HOLDINGS" REFER TO FANNIE MAY HOLDINGS, INC. THE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF HOLDINGS. "EBITDA" HAS THE MEANING SET FORTH IN FOOTNOTE 6 ON PAGE 9 HEREOF AND "SAME STORE SALES" HAS THE MEANING SET FORTH IN FOOTNOTE 7 ON PAGE 9 HEREOF. THE COMPANY The Company is a manufacturer and retailer of quality boxed chocolates and other confectionery items. Founded in 1921, the Company sells its popular Fannie May and Fanny Farmer candies in 330 Company-operated stores and approximately 6,000 third-party retail outlets as well as through quantity order, mail order and fundraising programs primarily in the Midwestern and Eastern United States. Management believes that the Company's products are widely recognized for their quality, freshness and value and that the Fannie May and Fanny Farmer brand names are among the strongest in the confectionery industry and offer significant opportunities for growth. See "Business -- Marketing and Sales" and "Selected Historical Financial Data." In late fiscal 1994, the Company installed its current management team with the immediate goal of integrating the Fanny Farmer brand name and stores, which were acquired in fiscal 1992, into the Company's existing Fannie May operations. Since the arrival of the current management team, EBITDA (as defined) has increased from $8.7 million in fiscal 1994 to $15.2 million for fiscal 1996. Management believes that the integration of Fannie May and Fanny Farmer has been principally completed, and, more recently, has turned its focus to growing sales and earnings by building on the Fannie May and Fanny Farmer brand names, increasing points of availability for the Company's branded products and pursuing certain initiatives designed to maintain and strengthen operating margins. See "Selected Historical Financial Data." THE INDUSTRY The domestic candy industry is characterized by moderate long-term growth in consumer demand and the existence of strong national and regional brands. According to a report prepared by the National Confectioners Association, the per capita consumption of candy in the United States increased from approximately 18 pounds in 1987 to over 23 pounds in 1995 and total U.S. retail candy sales grew to approximately $21 billion in 1996. Total sales in the boxed chocolate market were approximately $1.2 billion in 1995. Management believes that the boxed chocolate market can be divided into premium, mid-priced and low-priced segments. The Company competes primarily in the mid-priced segment in which products generally retail for between $10.00 and $18.00 and are commonly purchased for gift-giving occasions. Competition within this price tier is regional. See "Business -- The Industry." BUSINESS STRATEGY The Company's business strategy is to leverage the highly-regarded Fannie May and Fanny Farmer brand names, principally by strengthening and expanding its multi-channeled distribution network. To further this strategy, the Company has sought to (i) build on recent improvements in Company-operated store performance as measured by same store sales and overall profitability, (ii) increase product availability nationwide among third-party retailers by expanding existing and establishing new distribution channels and (iii) grow non-retail sales through enhanced product merchandising and database management. In addition, the Company plans to continue to strengthen operating margins through a variety of merchandising, production and logistical initiatives. See "Business -- Business Strategy." There will be no cash proceeds to the Company from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer (which shall not include the expenses of any holder in connection with resales of the New Notes). Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is subject to certain customary conditions. If the Company terminates the Exchange Offer and does not accept for exchange any Old Notes, the Company will promptly return the Old Notes to the holders thereof. The Company can, in its sole discretion, extend the Exchange Offer indefinitely, subject to the Company's obligation to pay liquidated damages as described in "Old Notes Registration Rights; Liquidated Damages" if the Exchange Offer is not consummated by December 14, 1997 and, under certain circumstances, file a shelf registration statement with respect to the Old Notes. See "The Exchange Offer." Old Notes initially purchased by qualified institutional buyers were initially represented by a single, global Note in registered form, registered in the name of a nominee of The Depository Trust Company ("DTC"), as depository. The New Notes exchanged for Old Notes represented by the global Note will be represented by one or more global New Notes in registered form, registered in the name of the nominee of DTC. See "Description of New Notes -- Book-Entry, Delivery and Form." New Notes issued to non-qualified institutional buyers in exchange for Old Notes held by such investors will be issued only in certificated, fully registered, definitive form. Except as described herein, New Notes in definitive certificated form will not be issued in exchange for the global New Note(s) or interests therein. The Old Notes and the New Notes constitute new issues of securities with no established public trading market. Any Old Notes not tendered and accepted in the Exchange Offer will remain outstanding. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered, Old Notes could be adversely affected. Following consummation of the Exchange Offer, the holders of any remaining Old Notes will continue to be subject to the existing restrictions on transfer thereof and the Company will have no further obligation to such holders to provide for the registration under the Securities Act of the Old Notes except under certain limited circumstances. See "Risk Factors -- Consequences of Exchange and Failure to Exchange Old Notes" and "Old Notes Registration Rights; Liquidated Damages." No assurance can be given as to the liquidity of the trading market for either the Old Notes or the New Notes. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, unless extended (the "Expiration Date"). The date of acceptance for exchange of the Old Notes (the "Exchange Date") will be the first business day following the Expiration Date, upon surrender of the Old Notes. Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date; otherwise such tenders are irrevocable. CONTINUE IMPROVEMENT IN COMPANY-OPERATED RETAIL PERFORMANCE. The Company has 330 Fannie May and Fanny Farmer retail stores in 20 states. These Company-operated stores represent a mature, highly efficient and profitable distribution channel. The Company's retail store strategy is focused on (i) continuing to improve same store sales by enhancing merchandising, customer service, and product selection and (ii) reducing store operating costs, primarily by selectively closing unprofitable Fanny Farmer stores. Management believes that it has been successful in the execution of this strategy. For the period from fiscal 1994 through fiscal 1996, same store sales have increased each year at an average annual rate in excess of 2.6%, and store operating costs have decreased by $3.4 million. See "Selected Historical Financial Data" and "Business -- Marketing and Sales." INCREASE PRODUCT AVAILABILITY THROUGH THIRD-PARTY RETAIL PROGRAMS. The Company's several third-party retail programs are designed to make its Fannie May and Fanny Farmer brands more readily available to customers in new and existing markets. Management has implemented a two-tiered distribution and pricing strategy to capitalize on the Company's strong brand names. Management's strategy is to position the Company's third-party retail programs under the Fannie May brand at a higher retail price point for the specialty retail market while offering the Fanny Farmer brand at a lower retail price point more appropriate for the mass market. The Fannie May third-party retail programs (i) service approximately 1,200 grocery, drug and variety stores in the greater Chicago metropolitan area, on a year-round basis, and (ii) target department stores, specialty shops and card and gift stores nationwide, during the Christmas, Valentine's Day and Easter seasons. The Fanny Farmer third-party retail program sells to the mass market through approximately 5,000 grocery stores, drug stores and mass merchandisers nationwide, during the peak holiday seasons. Management believes that the Fannie May and Fanny Farmer third-party retail programs provide the Company with significant potential for future sales growth by strategically increasing points of availability and brand awareness, especially during key selling periods, without significant capital expenditure. As a result of this strategy, the Company has increased sales through third-party retail programs from $13.0 million in fiscal 1994 to $14.9 million in fiscal 1996. See "Selected Historical Financial Data" and "Business -- Marketing and Sales." GROW NON-RETAIL SALES. The Company has developed several non-retail sales channels for its Fannie May and Fanny Farmer brands, including its (i) quantity order program, through which the Company markets its products to 43,000 organizations for corporate gift giving or member purchases, (ii) mail order program, which has a national circulation of over 2.1 million catalogs annually and a database of 345,000 customers, and (iii) fundraising program, in which product is sold to schools and non-profit organizations nationwide for resale to their supporters. Management believes that these channels provide potential future sales growth without the overhead traditionally associated with maintaining a retail store presence. The Company has increased sales through non-retail sales channels from $11.3 million in fiscal 1994 to $13.5 million in fiscal 1996. See "Selected Historical Financial Data" and "Business -- Marketing and Sales." STRENGTHEN OPERATING MARGINS. Since 1994, the Company's new management team has implemented a coordinated pricing and merchandising strategy to increase the average dollar value of retail consumer transactions which, in conjunction with more efficient operations and lower overhead costs, has resulted in improved margins. From fiscal 1994 to fiscal 1996, the Company's gross margin improved from 62.5% to 65.1%. During this period, management also reduced selling, general and administrative expenses by $3.3 million, and raised EBITDA margins from 7.5% to 13.0%. Management's strategy is to continue to strengthen operating margins primarily by (i) pursuing innovative merchandising and packaging strategies, (ii) reducing production costs through process and productivity improvements and (iii) containing fulfillment and distribution costs while improving service to Company-operated stores, third-party retailers and consumers. See "Selected Historical Financial Data." AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement") under the Securities Act with respect to the New Notes being offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the New Notes, reference is hereby made to the Registration Statement. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete and, where such contract or other document is an exhibit to the Registration Statement, each such statement is qualified in all respects by the provisions in such exhibit, to which reference is hereby made. The Company is not currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon the effectiveness of the Registration Statement or, if earlier, the Shelf Registration Statement (as defined), the Company will become subject to the informational requirements of the Exchange Act and, in accordance therewith, will file all reports and other information required by the Commission. The Registration Statement as well as periodic reports, proxy statements and other information filed by the Company with the Commission may be inspected at the public reference facilities maintained by the Commission at Room 1025, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. In addition, registration statements and certain other documents filed with the Commission through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are publicly available through the Commission's site on the Internet's World Wide Web, located at HTTP://WWW.SEC.GOV. The Registration Statement, including all exhibits thereto and amendments thereof, has been filed with the Commission through EDGAR. Copies of the Registration Statement, periodic reports, proxy statements and other information also can be obtained from the Company upon request. Any such request should be addressed to the Company's principal office at 1137 West Jackson Boulevard, Chicago, Illinois 60607; Attention: Secretary (telephone number (312) 243-2700). MANAGEMENT The Company believes that the depth, experience and ability of its management team have led to the successful execution of its current business strategy. The Company's executive officers and key managers, led by Ted A. Shepherd, President and Chief Operating Officer, average over 17 years of industry experience. Mr. Shepherd, who joined the Company in late fiscal 1994, and the rest of the current management team have been chiefly responsible for the development of the Company's business strategy and improved operating results as reflected in the increase in EBITDA from $8.7 million in fiscal 1994 to $15.2 million for fiscal 1996. See "Selected Historical Financial Data." The stockholders of Holdings include affiliates of The Jordan Company ("TJC"), a private merchant banking firm that has completed over 60 transactions and currently has a portfolio of investments representing over $2.5 billion in sales. Affiliates of TJC (the "TJC Investors") hold a majority of the voting common stock of Holdings and maintain majority representation on the Boards of Directors of the Company and Holdings. The other principal stockholders of Holdings are funds affiliated with TCW Capital, an investment management firm. Such funds (the "TCW Investors") control the remaining positions on the Boards of Directors of the Company and Holdings. See "Principal Stockholders," "Capitalization of Holdings," "Risk Factors -- Control by Principal Stockholders; Potential Conflicts of Interest" and "Risk Factors -- Capitalization of Holdings." The Company's principal executive offices are located at 1137 West Jackson Boulevard, Chicago, Illinois 60607, and its telephone number is (312) 243-2700. The Company was incorporated in Illinois on May 31, 1922. THE EXCHANGE OFFER <TABLE> <S> <C> THE EXCHANGE OFFER.................... The Company is offering to exchange up to $100,000,000 aggregate principal amount of its new 10 1/4% Senior Secured Notes due 2004 (the "New Notes") for up to $100,000,000 aggregate principal amount of its outstanding 10 1/4% Senior Secured Notes due 2004 (the "Old Notes") that were issued and sold in a transaction exempt from registration under the Securities Act. The Old Notes were initially offered and sold by the Company to Jefferies & Company, Inc. and First Chicago Capital Markets, Inc., as the initial purchasers of the Old Notes (the "Initial Purchasers") pursuant to a purchase agreement dated as of June 27, 1997 between the Company and the Initial Purchasers (the "Purchase Agreement"). The Initial Purchasers subsequently placed the Old Notes with certain institutional and accredited investors at a price of 100% of the principal amount thereof. The form and terms of the New Notes are substantially identical (including principal amount, interest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the New Notes (i) are freely transferable by holders thereof except as provided herein (see "The Exchange Offer -- Terms of the Exchange" and "-- Terms and Conditions of the Letter of Transmittal") and (ii) are not entitled to certain registration rights and certain liquidated damage provisions that are applicable to the Old Notes under a registration rights agreement dated as of July 2, 1997 (the "Registration Rights Agreement") between the Company and the Initial Purchasers. New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold or otherwise transferred by any holder thereof (other than any holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market making or other trading activities) without </TABLE> <TABLE> <S> <C> further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of such New Notes. See "The Exchange Offer -- Terms of the Exchange." MINIMUM CONDITION..................... The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. EXPIRATION DATE....................... The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, unless extended. EXCHANGE DATE......................... The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. PROCEDURES FOR TENDERING OLD NOTES.... See "The Exchange Offer -- Procedures for Tendering Old Notes." CONDITIONS TO THE EXCHANGE OFFER...... The obligation of the Company to consummate the Exchange Offer is subject to certain customary conditions, including the absence of (i) threatened or pending proceedings seeking to restrain the Exchange Offer or resulting in a material delay to the Exchange Offer; (ii) any statute, rule, regulation, order or injunction that in the reasonable judgment of the Company might directly or indirectly restrain or prohibit the making or consummation of the Exchange Offer; and (iii) a material adverse change in the business, condition, operations or prospects of the Company. The Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes, if at any time before the acceptance of such Old Notes for exchange or the exchange of New Notes for such Old Notes, any of the foregoing events occurs which, in the reasonable judgment of the Company, make it inadvisable to proceed with the Exchange Offer and/or with such acceptance for exchange or with such exchange. See "The Exchange Offer -- Conditions to the Exchange Offer." WITHDRAWAL RIGHTS..................... Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for any reason will be returned without expense to the tendering holders thereof as promptly as practicable after the expiration or termination of the Exchange Offer. ACCEPTANCE OF OLD NOTES AND DELIVERY The Company will accept for exchange any and all Old Notes OF NEW NOTES........................ which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly after acceptance of the Old Notes. See "The Exchange Offer-- Acceptance of Old Notes for Exchange; Delivery of New Notes." FEDERAL INCOME TAX CONSEQUENCES....... The exchange of Old Notes for New Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss as a result of such exchange. See "Certain United States Federal Income Tax Consequences." </TABLE> <TABLE> <S> <C> USE OF PROCEEDS....................... There will be no cash proceeds to the Company resulting from the Exchange Offer. See "Use of Proceeds." EFFECT ON HOLDERS OF OLD NOTES........ As a result of the making of this Exchange Offer, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Liquidated Damages." Holders of Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors -- Consequences of Exchange and Failure to Exchange Old Notes." </TABLE> TERMS OF THE NEW NOTES The form and terms of the New Notes are substantially identical to the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of New Notes." <TABLE> <S> <C> SECURITIES OFFERED................ $100,000,000 aggregate principal amount of 10 1/4% Senior Secured Notes due 2004. MATURITY DATE..................... July 1, 2004. INTEREST RATE AND PAYMENT DATES... The Notes will bear interest at a rate of 10 1/4% per annum. Interest on the Notes will be payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 1998. GUARANTEES........................ The Notes will be unconditionally guaranteed by each future Restricted Subsidiary of the Company, if any (collectively, the "Guarantors"). SECURITY.......................... The Notes will be secured by (i) security interests in certain of the Company's equipment, fixtures and general intangibles, including trademarks, and mortgages on certain of the Company's owned real property, and proceeds of the foregoing, and (ii) a security interest in and a pledge of all of the capital stock of the Company's future Restricted Subsidiaries, if any. The Notes will not be secured by certain other assets of the Company, such as the Company's accounts receivable, raw materials and finished goods inventories and the Company's owned store locations, and the proceeds therefrom. See "Description of New Notes -- Collateral." </TABLE> <TABLE> <S> <C> RANKING........................... The Notes will be senior secured obligations of the Company and rank senior in right of payment to all subordinated indebtedness of the Company, and PARI PASSU in right of payment with all senior indebtedness of the Company. The lenders under the New Credit Facility, however, will have claims with respect to the Company's accounts receivable, raw materials and finished goods inventories and certain of the Company's owned store locations, and the proceeds therefrom constituting collateral for such indebtedness that are effectively senior in right of payment to the claims of the holders of the Notes with respect to such assets. The Company has not issued, and does not have any current firm arrangements to issue, any significant indebtedness to which the Notes would be senior in right of payment. As of August 2, 1997, the Company did not have, and as of the date hereof, the Company does not have, any indebtedness outstanding (excluding trade payables and other accrued liabilities, which as of August 2, 1997 were equal to approximately $8.6 million) other than the Notes and capital lease obligations. The indenture (the "Indenture") dated July 2, 1997 between the Company and the Trustee (as defined) under which the Notes will be issued limits, among other things, the incurrence of indebtedness or the existence of liens on the assets of the Company subject to certain exceptions. Other than the New Credit Facility, the Company has no current or pending arrangements or agreements to incur any additional significant indebtedness (excluding trade payables) to which the Notes would be subordinate or rank pari passu in right of payment. See "Description of New Credit Facility" and "Description of New Notes -- Collateral." OPTIONAL REDEMPTION............... The Notes will be redeemable at the option of the Company, in whole or in part, on or after July 1, 2001, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. Notwithstanding the foregoing, at any time or from time to time prior to July 1, 2000, the Company may redeem up to $33.0 million of the original aggregate principal amount of the Notes at the redemption price of 110.250% of the principal amount thereof, plus accrued and unpaid interest, if any, through the date of redemption with the net cash proceeds of one or more Public Equity Offerings; provided that at least $67.0 million aggregate principal amount of the Notes remains outstanding immediately thereafter. See "Description of New Notes -- Redemption." MANDATORY REDEMPTION.............. None. CHANGE OF CONTROL................. Upon a Change of Control, the Company will be required to offer to repurchase all of the outstanding Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Risk Factors -- Control and Capitalization of Holdings" and "-- Inability to Purchase Notes Upon a Change of Control." </TABLE> <TABLE> <S> <C> CERTAIN COVENANTS................. The Indenture contains certain covenants that limit the ability of the Company and its Restricted Subsidiaries, if any, to (i) incur additional indebtedness, (ii) make restricted payments, (iii) issue and sell capital stock of subsidiaries, (iv) enter into certain transactions with affiliates, (v) create certain liens, (vi) sell certain assets and (vii) merge, consolidate or sell substantially all of the Company's assets. See "Description of New Notes -- Certain Covenants" and "Risk Factors -- Restrictive Covenants; Term of New Credit Facility; Need for Seasonal Financing."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044278_friendlys_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044278_friendlys_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..862cdc642bd1630eee613d22d6951e487f5faa33
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044278_friendlys_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, (I) REFERENCES TO "FRIENDLY'S" OR THE "COMPANY" REFER TO FRIENDLY ICE CREAM CORPORATION, ITS PREDECESSORS AND ITS CONSOLIDATED SUBSIDIARIES, (II) AS USED HEREIN, "NORTHEAST" REFERS TO THE COMPANY'S CORE MARKETS WHICH INCLUDE CONNECTICUT, MAINE, MASSACHUSETTS, NEW HAMPSHIRE, NEW JERSEY, NEW YORK, PENNSYLVANIA, RHODE ISLAND AND VERMONT, (III) THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE COMMON STOCK OFFERING AND (IV) THIS PROSPECTUS GIVES EFFECT TO THE 924-FOR-1 STOCK SPLIT WHICH WILL OCCUR PRIOR TO THE COMMON STOCK OFFERING. THE COMPANY'S FISCAL YEARS ENDED DECEMBER 27, 1992, JANUARY 2, 1994, JANUARY 1, 1995, DECEMBER 31, 1995 AND DECEMBER 29, 1996 ARE REFERRED TO HEREIN AS 1992, 1993, 1994, 1995 AND 1996, RESPECTIVELY. THE COMPANY Friendly's is the leading full-service restaurant operator and has a leading position in premium frozen dessert sales in the Northeast. The Company owns and operates 662 and franchises 34 full-service restaurants and manufactures a complete line of packaged frozen desserts distributed through more than 5,000 supermarkets and other retail locations in 15 states. Friendly's offers its customers a unique dining experience by serving a variety of high-quality, reasonably-priced breakfast, lunch and dinner items, as well as its signature frozen desserts, in a fun and casual neighborhood setting. For the twelve-month period ended September 28, 1997, Friendly's generated $667.0 million in total revenues and $74.9 million in EBITDA (as defined herein) and incurred $44.0 million of interest expense. During the same period, management estimates that over $230 million of total revenues were from the sale of approximately 21 million gallons of frozen desserts. Friendly's restaurants target families with children and adults who desire a reasonably-priced meal in a full-service setting. The Company's menu offers a broad selection of freshly-prepared foods which appeal to customers throughout all day-parts. Breakfast items include specialty omelettes and breakfast combinations featuring eggs, pancakes and bacon or sausage. Lunch and dinner items include a new line of wrap sandwiches, entree salads, soups, super-melts, specialty burgers and new stir-fry, chicken, pot pie, tenderloin steak and seafood entrees. Friendly's is also recognized for its extensive line of ice cream shoppe treats, including proprietary products such as the Fribble-Registered Trademark-, Candy Shoppe-Registered Trademark- Sundaes and the Wattamelon Roll-Registered Trademark-. The Company believes that one of its key strengths is the strong consumer awareness of the Friendly's brand name, particularly as it relates to the Company's signature frozen desserts. This strength and the Company's vertically-integrated operations provide several competitive advantages, including the ability to (i) utilize its broad, high-quality menu to attract customer traffic across multiple day-parts, particularly the afternoon and evening snack periods, (ii) generate incremental revenues through strong restaurant and retail market penetration, (iii) promote menu enhancements and extensions in combination with its unique frozen desserts and (iv) control quality and maintain operational flexibility through all stages of the production process. Friendly's, founded in 1935, was publicly held from 1968 until January 1979, at which time it was acquired by Hershey Foods Corporation ("Hershey"). While owned by Hershey, the Company increased the total number of restaurants from 601 to 849 yet devoted insufficient resources to product development and capital improvements. In 1988, The Restaurant Company ("TRC"), an investor group led by Donald Smith, the Company's current Chairman, Chief Executive Officer and President, acquired Friendly's from Hershey (the "TRC Acquisition"). The high leverage associated with the TRC Acquisition and the Old Credit Facility (as defined herein) severely impacted the liquidity and profitability of the Company and, therefore, limited the scope and implementation of certain of the Company's business and growth strategies. The Company has reported net losses and had earnings that were insufficient to cover fixed charges for each fiscal year since the TRC Acquisition except for the nine months ended September 28, 1997. As a result of subsequent restructurings, and upon completion of the Recapitalization and the Related Transactions (as defined herein) approximately 16.8% and 9.8% of the Common Stock will be owned by the Company's employees and lenders under the Old Credit Facility, respectively. See "Risk Factors," "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Despite the Company's capital constraints, management implemented a number of initiatives to restore and improve operational and financial efficiencies. From the date of the TRC Acquisition through 1994, the Company (i) implemented a major revitalization of its restaurants, (ii) repositioned the Friendly's concept from a sandwich and ice cream shoppe to a full-service, family-oriented restaurant with broader menu and day-part appeal, (iii) elevated customer service levels by recruiting more qualified managers and expanding the Company's training program, (iv) disposed of 123 under-performing restaurants and (v) capitalized upon the Company's strong brand name recognition by initiating the sale of Friendly's unique line of packaged frozen desserts through retail locations. Beginning in 1994, the Company began implementing several growth initiatives including (i) testing and implementing a program to expand the Company's domestic distribution network by selling frozen desserts and other menu items through non-traditional locations, (ii) distributing frozen desserts internationally by introducing dipping stores in South Korea and the United Kingdom and (iii) implementing a franchising strategy to extend profitably the Friendly's brand without the substantial capital required to build new restaurants. As part of this strategy, on July 14, 1997 the Company entered into the DavCo Agreement. See "--Recent Developments." Implementation of these initiatives since the TRC Acquisition has resulted in substantial improvements in revenues and EBITDA. Despite the closing of 152 restaurants (net of restaurants opened) since the beginning of 1989 and periods of economic softness in the Northeast, the Company's restaurant revenues have increased 7.5% from $557.3 million in 1989 to $599.3 million in the twelve months ended September 28, 1997, while average revenue per restaurant has increased 29.8% from $665,000 to $863,000 during the same period. Retail, institutional and other revenues and franchise revenues have also increased from $1.4 million in 1989 to $67.7 million in the twelve months ended September 28, 1997. In addition, EBITDA has increased 58.0% from $47.4 million in 1989 to $74.9 million in the twelve-month period ended September 28, 1997, while operating income has increased from $4.1 million to $42.0 million over the same period. Friendly's intends to utilize the increased liquidity and operating and financial flexibility resulting from consummation of the Recapitalization in order to continue to grow the Company's revenues and earnings by implementing the following key business strategies: (i) continuously upgrade the menu and introduce new products, (ii) revitalize and re-image existing Friendly's restaurants, (iii) construct new restaurants, (iv) enhance the Friendly's dining experience, (v) expand the restaurant base through high-quality franchisees, (vi) increase market share through additional retail accounts and restaurant locations, (vii) introduce modified formats of the Friendly's concept into non-traditional locations and (viii) extend the Friendly's brand into international markets. COMPETITIVE STRENGTHS THE COMPANY BELIEVES THAT, IN THE NORTHEAST, ITS LEADING POSITION IN FULL-SERVICE RESTAURANT AND PREMIUM FROZEN DESSERT SALES IS ATTRIBUTABLE TO THE FOLLOWING COMPETITIVE STRENGTHS: STRONG BRAND NAME RECOGNITION. During the past 60 years, management believes the Friendly's brand name has become synonymous with high-quality food and innovative frozen desserts. The Company believes that the brand name awareness created by its premium frozen dessert heritage drives customer traffic, particularly during the afternoon and evening snack periods, promotes menu enhancement and extension and generates incremental revenues from the Company's retail and non-traditional distribution channels. The Company's independent surveys indicate that, in the Northeast, over 90% of all households recognize the Friendly's brand and that over 30% of these households visit a Friendly's restaurant every three months. SIGNATURE FROZEN DESSERTS. Friendly's produces an innovative line of high-quality freshly-scooped and packaged frozen desserts, which have been cited by customers as a key reason for choosing Friendly's. Accordingly, approximately 50% of all visits to a Friendly's restaurant include a frozen dessert purchase. Freshly-scooped specialties served in Friendly's restaurants include the Jim Dandy and Oreo-Registered Trademark- Brownie sundaes, and the Fribble-Registered Trademark-, the Company's signature thick shake. Packaged goods available for purchase in both restaurant and retail locations include traditional and low-fat ice cream, yogurt and sorbets in half gallons, pints and cups and a wide variety of ice cream cakes, pies and rolls such as the Jubilee Roll-Registered Trademark- and Wattamelon Roll-Registered Trademark-. In addition, the Company licenses from Hershey the rights to feature in its signature desserts certain candy brands such as Almond Joy-Registered Trademark-, Mr. Goodbar-Registered Trademark-, Reeses Pieces-Registered Trademark-, Reeses-Registered Trademark- Peanut Butter Cups and York-Registered Trademark- Peppermint Patties. BROAD, HIGH-QUALITY MENU. The Company has successfully capitalized on Friendly's reputation for high-quality, wholesome foods including the well-known $2.22 Breakfast, Big Beef-Registered Trademark- Hamburger, Fishamajig-Registered Trademark- Sandwich and Clamboat-Registered Trademark- Platter by extending these offerings into a broader product line including freshly-prepared omelettes, SuperMelt-TM- Sandwiches, Colossal Sirloin Burgers-TM-, tenderloin steaks and stir-fry entrees. Reflecting this increased menu variety, food products now account for over 70% of restaurant revenues, and guest check averages have increased significantly over the last five years. Friendly's also has an extensive Kid's Menu which encourages family dining due to the significant appeal to children of the Friendly's concept. MULTIPLE DAY-PART APPEAL. Due to the appeal of Friendly's frozen desserts, the Company generates approximately 35% of its restaurant revenues during the afternoon and evening snack periods (2:00 p.m. to 5:00 p.m. and 8:00 p.m. to closing), providing Friendly's with the highest share of snack day-part sales in the Northeast. Accordingly, the Company endeavors to maximize revenue across multiple day-parts by linking sales of its high-margin frozen desserts with its lunch and dinner entrees. The Company generates approximately 12%, 24% and 29% of restaurant revenues from breakfast, lunch and dinner, respectively. STRONG RESTAURANT AND RETAIL MARKET PENETRATION. The Company has the highest market share among full-service restaurants and a leading position in premium frozen dessert sales in the Northeast. The Company's strong restaurant and retail market penetration provides incremental revenues and cash flow, as multiple levels of visibility and availability provide cross promotion opportunities and enhance consumer awareness and trial of the Company's unique products while effectively targeting consumers for both planned and impulse purchases. For example, the new Colossal Sirloin Burger-TM- was introduced with a new 79 CENTS Caramel Fudge Blast-TM- Sundae during the spring of 1997. In addition to promoting sales of this new entree, this strategy increased consumer awareness and trial of the new sundae combination, which in turn supported the introduction of Caramel Fudge Nut Blast-TM- Sundae half gallons into restaurants and retail locations. VERTICALLY-INTEGRATED OPERATIONS. Friendly's vertically-integrated operations are designed to deliver the highest quality food and frozen desserts to its customers and to allow the Company to adapt to evolving customer tastes and preferences. The Company formulates new products and upgrades existing food and frozen desserts through its research and development group and controls all stages in the production of its frozen desserts through its two manufacturing facilities. In addition, the Company controls cost and product quality and efficiently manages inventory levels from point of purchase through restaurant delivery utilizing its three distribution facilities and fleet of 56 tractors and 81 trailers. Furthermore, Friendly's maximizes its purchasing power when sourcing materials and services for its restaurant and retail operations through its integrated purchasing department. MANAGEMENT EXPERIENCE AND EMPLOYEE RETENTION. The Company has a talented senior management team with extensive restaurant industry experience and an average tenure with the Company of 17 years. In addition, the Company minimizes turnover of both managers and line personnel through extensive employee training and retention programs. In 1996, the Company's turnover among its restaurant salaried management was approximately 24%, which was significantly lower than the industry average. BUSINESS STRATEGIES FRIENDLY'S OBJECTIVE IS TO CAPITALIZE ON ITS COMPETITIVE STRENGTHS TO GROW ITS RESTAURANT AND RETAIL OPERATIONS BY IMPLEMENTING THE FOLLOWING KEY BUSINESS STRATEGIES: UPGRADE MENU AND SELECTIVELY INTRODUCE NEW PRODUCTS. Friendly's strategy is to increase consumer awareness and restaurant patronage by continuously upgrading its menu and introducing new products. As part of this strategy, Friendly's dedicated research and development group regularly formulates proprietary new menu items and frozen desserts to capitalize on the evolving tastes and preferences of its customers. In the fall of 1996, the Company introduced a new dinner line which includes a high-quality steak entree, home-style chicken dinners, pot pies and stir-frys, as well as several premium frozen desserts including the new Oreo-Registered Trademark- Brownie Sundae. Largely as a result of new premium items, guest check averages have increased 7.4% during the first nine months of 1997 as compared to the same period of 1996. REVITALIZE AND RE-IMAGE RESTAURANTS. Friendly's seeks to continue to grow restaurant revenues and cash flow through the ongoing revitalization and re-imaging of existing restaurants and to increase total restaurant revenues through the addition of new restaurants. The Company has revitalized approximately 633 restaurants since the beginning of 1989, increasing average restaurant revenues from $665,000 in 1989 to $863,000 in the twelve months ended September 28, 1997. Further, the Company has initiated its FOCUS 2000 program which includes an advanced re-imaging of restaurants and the installation of custom designed restaurant automation systems in a majority of its restaurants. In addition, as part of its ongoing capital spending program, the Company plans to refurbish substantially all of its restaurants every five to six years to further enhance customer appeal. The Company also expects to increase market share through the opening of four new Company-owned restaurants in 1997 (two of which have opened to date) and 10 new restaurants in 1998. ENHANCE THE FRIENDLY'S DINING EXPERIENCE. In addition to menu upgrades and restaurant re-imaging, the FOCUS 2000 program includes initiatives to improve food presentation and customer service. The Company believes that implementation of this program will create a consistent, enhanced Friendly's restaurant brand image. This strategy recognizes that food quality, dining atmosphere and attentive service all contribute to customer satisfaction. The Company maintains a consistently high standard of food preparation and customer service through stringent operational controls and intensive employee training. To help guarantee that employees perform in this manner, Friendly's maintains a dedicated training and development center where managers are thoroughly trained in customer service. EXPAND RESTAURANT BASE AND MARKET PENETRATION THROUGH HIGH-QUALITY FRANCHISEES. Friendly's is implementing a franchising strategy to further develop the Friendly's brand and grow both revenue and cash flow without the substantial capital required to build new restaurants. This strategy seeks to (i) expand its restaurant presence in under-penetrated markets, (ii) accelerate restaurant growth in new markets, (iii) increase marketing and distribution efficiencies and (iv) preempt the Company's competition from acquiring certain prime real estate sites. Friendly's will receive a royalty based on total franchisee revenues and revenues and earnings from the sale of its frozen desserts and other products to franchisees. INCREASE MARKET SHARE OF PREMIUM FROZEN DESSERTS. Capitalizing on its position as a recognized leader in premium frozen desserts, Friendly's seeks to increase its market share. The Company expects to build market share by expanding distribution beyond its 696 Company-owned and franchised restaurants and its more than 5,000 retail locations by (i) adding new locations, (ii) increasing shelf space in current locations through new product introductions and more prominent freezer displays and (iii) increasing consumer and trade merchandising. INTRODUCE MODIFIED FORMATS INTO NON-TRADITIONAL LOCATIONS. In order to capitalize on both planned and impulse purchases, the Company is leveraging the Friendly's brand name and enhancing consumer awareness by introducing modified formats of the Friendly's concept into non-traditional locations. These modified formats include (i) Friendly's Cafe, a quick service concept offering frozen desserts and a limited menu, (ii) Friendly's branded ice cream shoppes offering freshly-scooped and packaged frozen desserts and (iii) Friendly's branded display cases and novelty carts with packaged single-serve frozen desserts. The first Friendly's Cafe opened in October 1997. The Company supplies frozen desserts to non-traditional locations such as colleges and universities, sports facilities, amusement parks, secondary school systems and business cafeterias directly or through selected vendors pursuant to multi-year license agreements. EXTEND THE FRIENDLY'S BRAND INTERNATIONALLY. The Company's long-term international growth strategy is to utilize local partners and establish master franchise or licensee agreements to extend the brand internationally and to achieve profitable growth while minimizing capital investment. Currently, the Company's Friendly's International, Inc. subsidiary ("FII") participates in a licensing agreement with a South Korean enterprise to develop Friendly's "Great American" ice cream shoppes in that country. As of September 28, 1997, the licensee and its sublicensees were operating 18 ice cream shoppes, and the Company expects such parties to operate 28 ice cream shoppes by the end of 1997. FII also sells the Company's frozen desserts in several chain restaurants, theaters and food courts in the United Kingdom. The Company selects its international markets based on the high quality of the Company's frozen desserts relative to locally-produced frozen desserts and the propensity of consumers in these regions to purchase American-branded products. The principal executive offices of the Company are located at 1855 Boston Road, Wilbraham, Massachusetts 01095, and the telephone number is (413) 543-2400. RECENT DEVELOPMENTS On July 14, 1997, the Company entered into a long-term agreement granting DavCo Restaurants, Inc. ("DavCo"), a franchisor of more than 230 Wendy's restaurants, exclusive rights to operate, manage and develop Friendly's full-service restaurants in the franchising region of Maryland, Delaware, the District of Columbia and northern Virginia (the "DavCo Agreement"). Pursuant to the DavCo Agreement, DavCo has purchased certain assets and rights in 34 existing Friendly's restaurants in this franchising region, has committed to open an additional 74 restaurants over the next six years and, subject to the fulfillment of certain conditions, has further agreed to open 26 additional restaurants, for a total of 100 new restaurants in this franchising region over the next ten years. DavCo will also manage under contract 14 other Friendly's locations in this franchising region with an option to acquire these restaurants in the future. Friendly's received approximately $8.2 million in cash for the sale of certain non-real property assets and in payment of franchise and development fees, and receives (i) a royalty based on franchised restaurant revenues and (ii) revenues and earnings from the sale to DavCo of Friendly's frozen desserts and other products. DavCo is required to purchase from Friendly's all of the frozen desserts to be sold in these restaurants. See "Business--Restaurant Operations--Franchising Program." THE RECAPITALIZATION The Offerings are part of a series of related transactions to refinance all of the indebtedness under the Company's existing credit facilities (the "Old Credit Facility") and thereby lengthen the average maturity of the Company's outstanding indebtedness, reduce interest expense and increase liquidity and operating and financial flexibility. Concurrent with, and contingent upon, the consummation of the Offerings, the Company expects to enter into a new senior secured credit facility consisting of (i) a $105 million term loan facility (the "Term Loan Facility"), (ii) a $55 million revolving credit facility (the "Revolving Credit Facility") and (iii) a $15 million letter of credit facility (the "Letter of Credit Facility" and, together with the Term Loan Facility and the Revolving Credit Facility, the "New Credit Facility"). The Offerings, the New Credit Facility and the application of the estimated net proceeds therefrom are hereinafter referred to as the "Recapitalization." In addition, subsequent to September 28, 1997, the Company (i) has paid $9.6 million of interest on the Old Credit Facility, (ii) will record $1.9 million of net income related to deferred interest no longer payable under the Old Credit Facility, (iii) will record $5.8 million of non-cash stock compensation expense, net of taxes, arising out of the issuance of certain shares of Common Stock to management and the vesting of certain shares of restricted stock previously issued to management, (iv) will write-off $319,000 of deferred financing and debt restructuring costs, net of taxes, related to the Old Credit Facility and (v) will apply $10.0 million of previously restricted cash to be received from Restaurant Insurance Corporation, its insurance subsidiary ("RIC"), in exchange for a letter of credit, toward amounts outstanding under the Old Credit Facility (collectively, the "Related Transactions"). Upon completion of the Recapitalization, Friendly's total available borrowings under the New Credit Facility are expected to be $55.0 million, excluding $2.1 million of letter of credit availability (compared to $27.0 million as of September 28, 1997 under the Old Credit Facility, excluding $2.1 million of letter of credit availability), which borrowings may be used, with certain limitations, for capital spending and general corporate purposes. After giving effect to the Recapitalization and the Related Transactions, the aggregate pro forma net decrease in interest expense would have been $15.3 million for 1996 and $11.4 million for the nine-month period ended September 28, 1997. See "Selected Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of New Credit Facility." The following table sets forth the estimated sources and uses of funds in connection with the Recapitalization after giving effect to the Related Transactions: <TABLE> <CAPTION> AT CLOSING --------------------- <S> <C> (DOLLARS IN THOUSANDS) SOURCES OF FUNDS: Term Loan Facility (a)................................................. $ 105,000 Senior Note Offering (b)............................................... 175,000 Common Stock Offering (c).............................................. 100,000 -------- Total Sources...................................................... $ 380,000 -------- -------- USES OF FUNDS: Working capital........................................................ $ 4,732 Retirement of Old Credit Facility (d).................................. 348,042 Retirement of capital leases........................................... 7,976 Estimated fees and expenses (e)........................................ 19,250 -------- Total Uses......................................................... $ 380,000 -------- -------- </TABLE> - ---------------------------------- (a) Represents borrowing in full under the Term Loan Facility. As part of the Recapitalization, the Company will have a $55,000 Revolving Credit Facility which is expected to be undrawn at closing and $2,093 available under the Letter of Credit Facility. These facilities are expected to be drawn in part, from time to time, to finance the Company's working capital and other general corporate requirements. (b) Represents gross proceeds from the Senior Note Offering. (c) Represents gross proceeds from the sale of 5,000,000 shares of Common Stock at an assumed initial public offering price of $20.00 per share. (d) Represents the balance of all amounts expected to be outstanding under the Old Credit Facility ($358,042 as of September 28, 1997) after giving effect to the application of $10,000 of previously restricted cash and investments of RIC which is expected to be released to the Company in exchange for a $12,907 letter of credit, with the $2,907 of additional released cash and investments increasing the Company's cash balance. (e) Includes estimated underwriting discounts and commissions and other fees and expenses relating to the Offerings and the New Credit Facility of which $8,427 relates to the Common Stock Offering and $10,823 relates to the Senior Note Offering and the New Credit Facility. See "Underwriting." THE SENIOR NOTE OFFERING <TABLE> <S> <C> Issuer....................... Friendly Ice Cream Corporation. Securities Offered........... $175,000,000 aggregate principal amount of % Senior Notes due 2007 (the "Senior Notes"). Maturity Date................ , 2007. Interest Payment Dates....... and of each year, commencing , 1998. Optional Redemption.......... The Senior Notes will be redeemable, in whole or in part, at the option of the Company, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or prior to , 2000, the Company may redeem, at any time and from time to time, up to $60 million of the aggregate principal amount of the Senior Notes at a redemption price of % of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption, with the net cash proceeds from one or more Qualified Equity Offerings (as defined herein); PROVIDED, HOWEVER, that at least $115 million of the aggregate principal amount of the Senior Notes remains outstanding following each such redemption. Subsidiary Guarantees........ The Senior Notes will be fully and unconditionally guaranteed (the "Subsidiary Guarantees"), on an unsecured, senior basis, by Friendly's Restaurants Franchise, Inc., the Company's franchise subsidiary, and will also be guaranteed by each new subsidiary (other than Unrestricted Subsidiaries and Foreign Subsidiaries (as defined herein)) created or acquired after the issue date of the Senior Notes (collectively, the "Subsidiary Guarantors"). See "Description of Senior Notes--Guarantees." Ranking...................... The Senior Notes will be unsecured, senior obligations of the Company, will rank PARI PASSU in right of payment with all existing and future senior indebtedness of the Company and will rank senior in right of payment to all existing and future subordinated indebtedness of the Company. The Senior Notes will be effectively subordinated to all existing and certain future secured indebtedness of the Company, including indebtedness under the New Credit Facility, to the extent of the value of the assets securing such secured indebtedness. The Senior Notes will be structurally subordinated to all existing and future indebtedness of any subsidiary of the Company that is not a Subsidiary Guarantor. As of September 28, 1997, on a pro forma basis after giving effect to the Recapitalization and the Related Transactions, the Company would have had a total of $293.0 million of long-term debt and capital lease obligations outstanding, $115.1 million of which would have been secured and none of which would have been subordinated. The Subsidiary Guarantees will be unsecured, senior obligations of the Subsidiary Guarantors. As of September 28, 1997, on a pro forma basis after giving effect to the Recapitalization and the Related Transactions, non-guarantor subsidiaries of the Company would have had no long-term debt or capital lease obligations outstanding. See "Description of Senior Notes--Ranking." </TABLE> <TABLE> <S> <C> Change of Control............ Upon the occurrence of a Change of Control (as defined herein), each holder of Senior Notes may require the Company to repurchase any or all outstanding Senior Notes owned by such holder at a repurchase price of 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of repurchase. See "Description of Senior Notes--Change of Control." Restrictive Covenants........ The Indenture under which the Senior Notes will be issued will contain certain covenants pertaining to the Company and its Restricted Subsidiaries (as defined herein), including but not limited to covenants with respect to the following matters: (i) limitations on indebtedness and preferred stock, (ii) limitations on restricted payments such as dividends, repurchases of the Company's or subsidiaries' stock, repurchases of subordinated obligations, and investments, (iii) limitations on restrictions on distributions from Restricted Subsidiaries, (iv) limitations on sales of assets and of subsidiary stock, (v) limitations on transactions with affiliates, (vi) limitations on liens, (vii) limitations on sales of subsidiary capital stock and (viii) limitations on mergers, consolidations and transfers of all or substantially all assets. However, all of these covenants are subject to a number of important qualifications and exceptions. Each of Friendly's International, Inc. and its United Kingdom subsidiaries will be an Unrestricted Subsidiary on the Issue Date (as defined herein). See "Description of Senior Notes--Certain Covenants." Concurrent Common Stock Offering................... Concurrent with the Senior Note Offering, the Company is offering to the public 5,000,000 shares of Common Stock at an estimated initial public offering price of between $19.00 and $21.00 per share. Consummation of each of the Senior Note Offering and the Common Stock Offering is contingent upon consummation of the other. Use of Proceeds.............. The Company intends to use up to approximately $356.0 million of the net proceeds from the Offerings and borrowings under the New Credit Facility to refinance indebtedness and thereby lengthen the average maturity of the Company's outstanding indebtedness, reduce interest expense and increase liquidity and operating and financial flexibility. See "Use of Proceeds." Risk Factors................. Prospective purchasers of the Senior Notes offered hereby should carefully consider the information set forth under the caption "Risk Factors" and all other information set forth in this Prospectus before making any investment in the Senior Notes. As set forth more fully in "Risk Factors," the risk factors associated with such an investment include, among others, those relating to the Company's (i) substantial leverage and stockholders' deficit, (ii) history of losses, resulting in its inability to cover fixed charges since the TRC Acquisition, (iii) implementation of new business concepts and strategies, (iv) development of a franchising program beyond the DavCo Agreement, (v) expansion of its international operations in existing and new markets, (vi) geographic concentration in the Northeast, and (vii) highly competitive business environment, as well as factors relating to restrictions imposed under the New Credit Facility, factors affecting the food service industry generally and circumstances potentially impacting the trading markets for, or value of, the Senior Notes offered hereby. </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR (A) ---------------------------- ------------------------------------------------ SEPTEMBER 29, SEPTEMBER 28, 1992 1993 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RESTAURANTS) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Restaurant................................. $542,859 $580,161 $589,383 $593,570 $596,675 $ 452,373 $ 455,026 Retail, institutional and other............ 20,346 30,472 41,631 55,579 54,132 39,446 49,173 Franchise.................................. -- -- -- -- -- -- 3,834 -------- -------- -------- -------- -------- ------------- ------------- Total revenues............................... 563,205 610,633 631,014 649,149 650,807 491,819 508,033 -------- -------- -------- -------- -------- ------------- ------------- Non-cash write-downs (b)..................... -- 25,552 -- 7,352 227 -- 607 Depreciation and amortization................ 35,734 35,535 32,069 33,343 32,979 25,127 24,226 Operating income............................. 25,509 8,116 36,870 16,670 30,501 22,848 34,299 Interest expense, net (c).................... 37,630 38,786 45,467 41,904 44,141 33,084 32,972 Cumulative effect of changes in accounting principles, net of income taxes (d)........ -- (42,248) -- -- -- -- 2,236 Net income (loss)............................ $(13,321) $(61,448) $ (3,936) $(58,653) $ (7,772) $ (5,794 ) $ 2,363 -------- -------- -------- -------- -------- ------------- ------------- -------- -------- -------- -------- -------- ------------- ------------- OTHER DATA: EBITDA (e)................................... $ 61,243 $ 69,203 $ 68,939 $ 57,365 $ 63,707 $ 47,975 $ 59,132 Net cash provided by operating activities.... 34,047 42,877 38,381 27,790 26,163 23,637 29,224 Capital expenditures: Cash....................................... 33,577 37,361 29,507 19,092 24,217 18,547 14,656 Non-cash (f)............................... 3,121 7,129 7,767 3,305 5,951 3,570 2,227 -------- -------- -------- -------- -------- ------------- ------------- Total capital expenditures................. $ 36,698 $ 44,490 $ 37,274 $ 22,397 $ 30,168 $ 22,117 $ 16,883 Ratio of earnings to fixed charges (g)....... -- -- -- -- -- -- 1.0 x PRO FORMA DATA: EBITDA (e)(h)................................ $ 64,653 $ 48,685 $ 59,132 Interest expense, net (c)(i)................. 28,804 21,580 21,617 Net income (j)............................... 1,835 1,412 9,062 Net income per share......................... $ 0.26 $ 0.20 $ 1.27 Weighted average shares outstanding (k)...... 7,125 7,125 7,125 Ratio of EBITDA to interest expense, net..... 2.2x 2.3 x 2.7 x Ratio of earnings to fixed charges (g)....... 1.1x 1.1 x 1.4 x Ratio of total long-term debt to EBITDA (e) (l).................................... -- -- 3.8 x RESTAURANT OPERATING DATA: Number of restaurants (end of period) (m).... 764 757 750 735 707 710 662 Average revenue per restaurant (n)........... $ 708 $ 750 $ 783 $ 797 $ 828 -- $ 863 Increase in comparable restaurant revenues (o)........................................ 6.0% 5.4% 3.4% 0.9% 1.8% 0.3% 3.1% </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 28, 1997 --------------------------- <S> <C> <C> ACTUAL AS ADJUSTED -------------- ----------- <CAPTION> (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital (deficit)....................................................................... $ (17,895) $ (10,949)(p) Total assets.................................................................................... 362,914 358,348(q) Total long-term debt and capital lease obligations, excluding current maturities................ 371,296 288,585(r) Total stockholders' equity (deficit)............................................................ $ (170,684) $ (73,471)(s) </TABLE> (a) All fiscal years presented include 52 weeks of operations except 1993 which includes 53 weeks of operations. (b) Includes non-cash write-downs of approximately $16,337 in 1993 related to a trademark license agreement as a result of new product development and the replacement of certain trademarked menu items and $3,346 in 1995 related to a postponed debt restructuring. All other non-cash write-downs relate to property and equipment disposed of in the normal course of the Company's operations. See Notes 3, 5 and 6 of Notes to Consolidated Financial Statements. (c) Interest expense, net is net of capitalized interest of $128, $156, $176, $62, $49, $44 and $27 and interest income of $222, $240, $187, $390, $318, $273 and $239 for 1992, 1993, 1994, 1995, 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. (d) Includes non-cash items, net of related income taxes, as a result of adoption of accounting pronouncements related to income taxes of $30,968, post-retirement benefits other than pensions of $4,140 and post-employment benefits of $7,140 in 1993 and pensions of $2,236 in 1997. (e) EBITDA represents consolidated Net income (loss) before (i) Cumulative effect of changes in accounting principles, net of income taxes, (ii) (Provision for) benefit from income taxes, (iii) Equity in net loss of joint venture, (iv) Interest expense, net, (v) Depreciation and amortization and (vi) Non-cash write-downs and all other non-cash items, plus cash distributions from unconsolidated subsidiaries, each determined in accordance with generally accepted accounting principles ("GAAP"). The Company has included information concerning EBITDA in this Prospectus because it believes that such information is used by certain investors as one measure of an issuer's historical ability to service debt. EBITDA should not be considered as an alternative to, or more meaningful than, earnings from operations or other traditional indications of an issuer's operating performance. (f) Non-cash capital expenditures represent the cost of assets acquired through the incurrence of capital lease obligations. (g) The Ratio of earnings to fixed charges is computed by dividing (i) income before interest expense, income taxes and other fixed charges by (ii) fixed charges, including interest expense, amortization of debt issuance costs and the portion of rent expense which represents interest (assumed to be one-third). For 1992, 1993, 1994, 1995, 1996 and the nine months ended September 29, 1996 earnings were insufficient to cover fixed charges by $12,249, $30,826, $8,773, $25,296, $13,689 and $10,280, respectively. (h) Represents historical EBITDA adjusted to give effect to the benefit from the change in accounting for pensions related to determining the return-on-asset component of annual pension expense of $946 in 1996 and $710 for the nine months ended September 29, 1996. See Note 10 of Notes to Consolidated Financial Statements. (i) Represents historical interest expense adjusted to give effect to the Recapitalization. Borrowings under the New Credit Facility will bear interest at a floating rate equal to LIBOR plus 2.25% or the Alternative Base Rate (as defined in the New Credit Facility) plus 0.75% per annum for drawings under the Revolving Credit Facility and the Letter of Credit Facility, 0.50% per annum for amounts undrawn under the Revolving Credit Facility, 2.25% per annum for amounts issued but undrawn under the Letter of Credit Facility and a weighted average floating rate equal to LIBOR plus 2.46% or the Alternative Base Rate plus 0.96% for the Term Loan Facility. The following table represents changes to Interest expense, net on a pro forma basis, resulting from the Recapitalization and the Related Transactions: <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR ---------------------------------------- 1996 SEPTEMBER 29, 1996 SEPTEMBER 28, 1997 ------------------- ------------------- ------------------- (IN THOUSANDS) <S> <C> <C> <C> Elimination of interest on Old Credit Facility......... $ (41,827) $ (31,337) $ (31,434) Reduction of interest on capital lease obligations..... (774) (580) (580) Interest on Revolving Credit Facility.................. 779 624 732 Interest on Letter of Credit Facility.................. 268 134 134 Interest on Term Loan Facility......................... 8,279 6,202 6,340 Interest on Senior Notes............................... 17,938 13,453 13,453 -------- -------- -------- Decrease in Interest expense, net.................... $ (15,337) $ (11,504) $ (11,355) -------- -------- -------- -------- -------- -------- </TABLE> In calculating pro forma Interest expense, net, the assumed rates on the Revolving Credit Facility, Letter of Credit Facility, Term Loan Facility and Senior Notes were 7.67%, 2.25%, 7.88%, and 10.25% for 1996, respectively, 7.66%, 2.25%, 7.87% and 10.25% for the nine months ended September 29, 1996, respectively and 7.84%, 2.25%, 8.09% and 10.25% for the nine months ended September 28, 1997, respectively. (j) Represents historical net income adjusted to give effect to (i) the reduction in interest expense, net of income taxes, of $9,049, $6,788 and $6,699 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively, as a result of the Recapitalization and the Related Transactions, and (ii) the benefit, net of income taxes, related to the change in accounting for pensions described in (h) above of $558, $418 and $0 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. (k) Represents historical weighted average shares outstanding adjusted to give effect to the issuance of 27 shares upon consummation of the Recapitalization under the Management Stock Plan (as defined herein) and the return of 375 net shares to the Company in connection with the Recapitalization. Actual weighted average shares outstanding were 2,414, 2,394 and 2,473 for 1996, the nine months ended September 29, 1996 and the nine months ended September 28, 1997, respectively. See "Ownership of Common Stock" and Note 17 of Notes to Consolidated Financial Statements. (l) For purposes of this ratio, EBITDA represents historical EBITDA for the twelve months ended September 28, 1997 adjusted by $236 to give effect to the benefit related to the change in accounting for pensions described in (h) above. (m) The number at September 28, 1997 reflects the acquisition by DavCo of 34 restaurants pursuant to the DavCo Agreement. See "Recent Developments."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044440_lets-talk_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044440_lets-talk_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6530d498c0188ce991106d6f2e88f949a459fd87
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044440_lets-talk_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the underwriters' over-allotment option has not been exercised, and reflects a 3.289-for-one stock split effected on October 20, 1997. Fiscal year references are to the respective fiscal year ended July 31. References to Pro Forma Financial Information are to the information set forth herein under "Unaudited Pro Forma Financial Data," giving effect to the acquisition by the Company of Telephone Warehouse, Inc. and National Cellular, Incorporated (collectively, "Telephone Warehouse") as if such acquisition (the "Telephone Warehouse Acquisition") took place as of the beginning of the periods presented. Unless otherwise indicated, cellular and PCS industry statistics are obtained from the Cellular Telecommunications Industry Association ("CTIA") and Paul Kagan Associates, Inc. and paging industry statistics are obtained from The Strategis Group. THE COMPANY Let's Talk Cellular & Wireless, Inc. (together with its subsidiaries, the "Company") is the largest independent specialty retailer of cellular and wireless products, services and accessories in the United States, with 102 stores located in 12 states, the District of Columbia and Puerto Rico as of September 30, 1997. The Company's stores, located predominantly in regional shopping malls, seek to offer one-stop shopping for consumers to purchase cellular, personal communication system ("PCS"), paging, internet, satellite, and other wireless products and services and related accessories. The Company is also a leading wholesaler of cellular and wireless products and accessories to more than 1,000 accounts, consisting primarily of distributors, carriers and smaller independent retailers. The Company's business strategy is to offer the most extensive assortment of wireless products and services at everyday low prices supported by knowledgeable customer service, through conveniently located and attractively designed stores. The Company believes that this strategy provides it with a competitive advantage by combining the extensive product selection, competitive prices and operating efficiencies typical of a "big box" retailer with the superior customer service and upscale shopping experience characteristic of a specialty retailer. The Company offers wireless products from well-known, name-brand suppliers such as AT&T, Ericsson, Motorola, Nokia and Sony. The Company's stores typically sell up to 40 different makes and models of cellular and PCS phones and pagers and over 1,000 stock keeping units ("SKUs") of wireless products and accessories, such as batteries, home and car chargers, vehicle adapter kits and cases. The Company supports its broad product offering with knowledgeable and personalized customer service focused on educating the consumer and identifying the most appropriate products and services for each consumer's individual needs. The Company offers everyday low prices that are competitive with other retailers and supports this policy with price guarantee, upgrade and trade-in programs. The Company believes that its store level economics compare favorably to other retailing sectors. The Company has developed both kiosk and in-line mall stores, which average approximately 150 and 800 square feet in size, respectively. In fiscal 1997, comparable stores (stores owned and operated by the Company for at least 12 full months) generated average annual sales of approximately $500,000 (excluding two stores that generate substantially higher sales than other stores). In fiscal 1997, per store capital expenditures and initial inventory for new kiosks and in-line stores averaged approximately $66,000 and $141,000, respectively. Although sales per square foot vary by format, the Company's stores had average sales per square foot of approximately $1,000 in fiscal 1997. The Company's revenues are generated principally from four sources: retail sales, activation commissions paid by cellular carriers, residual payments and wholesale sales. Retail sales involve the sale of cellular, PCS and wireless products, such as phones, pagers and related accessories in the Company's retail outlets. Activation commissions are payments the Company receives from the applicable cellular carrier when a customer initially subscribes for the cellular carrier's services. The amount of the activation commission paid by cellular carriers is based upon various service plans offered by the carriers. Residual payments are monthly payments ("residual income") made by certain cellular carriers and pager customers. Cellular residual payments are based upon a percentage (usually 4-6%) of the customers' monthly service charges. Pager residual payments are received for the pager airtime that the Company buys wholesale from paging carriers and then resells to individuals and small businesses. Wholesale sales involve the sale of wholesale cellular and wireless products. Management believes the wholesale business, which was acquired as part of the Telephone Warehouse Acquisition, provides the Company with greater purchasing power and additional distribution capabilities that complement the Company's retail operations. The Company earns a profit on the cellular and PCS phones it retails as the purchase price and/or activation commission exceeds the cost of the products sold. The Company has recently made a strategic decision to accept increased activation commissions from carriers in certain markets, in lieu of monthly residual payments, to optimize cash flow and to facilitate the Company's growth strategy. INDUSTRY DYNAMICS The wireless communications industry has grown substantially in recent years. Cellular telephone service has been one of the fastest growing markets within the industry. Since the inception of the cellular phone industry in 1983, the number of U.S. cellular subscribers has grown to approximately 44 million by year end 1996, having grown at an annual compound rate of 41% during the previous five years. It is estimated that as of December 1996, this subscriber base reflected an average market penetration of only 16.6%, based on the U.S. population. In 1996, PCS wireless services were introduced in selected regions of the U.S., which resulted in approximately 300,000 subscribers by year end. Paul Kagan Associates, Inc. projects that by the year 2000 the number of cellular and PCS subscribers in the U.S. will reach approximately 89 million. According to CTIA, approximately $24 billion was spent on cellular service in 1996. The paging market has also grown significantly. The number of U.S. pagers in service has grown to approximately 42 million by year end 1996, having grown at an annual compound rate of approximately 29% during the previous five years. It is estimated that as of December 1996, this subscriber base reflected an average market penetration of only 16%, based on the U.S. population. The Strategis Group projects that by the year 2000 the number of U.S. pagers in service will reach over 60 million. The Company believes that the U.S. market for wireless communications products and services will continue to expand due to advances in system technology and equipment, the emergence of new wireless technologies, such as PCS, lower equipment prices and service charges and increased consumer acceptance. The Company believes that a shift is occurring in the distribution of cellular and wireless services, products and accessories in the United States. For many years cellular and wireless products and services were distributed to consumers directly through telemarketing, direct mail, direct sales forces and, to a lesser extent, carrier-owned retail outlets. As wireless services and products have become more affordable, the market has expanded significantly and shifted to a broader consumer base, which purchases for, among other reasons, convenience and security purposes. In order to better access such a broad consumer base, management believes carriers will seek multiple points of retail distribution including established independent specialty retailers such as the Company, their own retail outlets and "big box" electronics retailers. COMPETITIVE POSITIONING The Company believes that it has certain competitive advantages over other retailers in satisfying consumers' changing needs and preferences. Compared to "big box" retailers, the Company believes that its stores are more conveniently located in regional shopping malls and typically have more selling space devoted to wireless products. In addition, the Company believes that because it exclusively focuses on wireless products, it is able to provide more specialized and faster customer service than "big box" retailers. With the technological advancements and continuous introductions of new products and service options in the wireless industry, consumers demand increasingly higher levels of service and support, access to a more extensive product selection and greater education regarding all wireless products, including cellular, PCS, paging and internet products. Compared to carrier-owned stores, the Company has the advantage of typically being able to offer wireless services from multiple carriers in any given area whereas carrier-owned stores almost always offer only their own wireless service. As a result, the Company is able to offer a larger number of service options, including PCS from up to five carriers as well as paging services. Other advantages include the Company's expertise in retailing communications products and services to consumers and its ability to serve as a one-source retail distribution system for a wide variety of cellular and wireless services. GROWTH STRATEGY The Company believes that the combination of its broad product offering, highly visible and convenient store locations, excellent customer service and everyday low pricing strategy positions it well for future growth. Key elements of the Company's growth strategy are outlined below: - New Store Expansion. The Company plans to open 65 to 75 new stores in fiscal 1998 and 80 to 100 new stores in fiscal 1999, in both new and existing markets, of which approximately 40% are expected to be kiosks and 60% are expected to be in-line stores. The Company believes that this expansion rate, which is dependent upon a number of factors, is achievable given the Company's existing infrastructure, the ease with which it can replicate its store model and its successful opening of 45 new stores in fiscal 1997. As of September 30, 1997, the Company had 4 store locations under construction and had signed leases or reached an agreement in principle for an additional 24 store locations. The Company's stores are located in only 76 of the more than 1,000 regional malls in the continental U.S. The Company intends to focus initially on the largest and fastest growing wireless markets in the U.S., based on industry statistics, by targeting additional mall locations and supplementing its penetration in existing markets with power strip locations. Management believes that the flexibility of the Company's kiosk and in-line store formats permits the Company to take advantage of the best available locations across a broad range of market areas. - Pursue Selective Acquisitions. The Company intends to continue to increase the number of its stores through selective acquisitions of other specialty retailers of cellular and wireless products in addition to those stores opened by the Company. The Company believes that the independent retail market for cellular and wireless products is highly fragmented and consists of numerous independent specialty retailers in each major metropolitan area. Through selective acquisitions, the Company seeks to obtain immediate access to desirable markets and locations, qualified sales personnel and, in some cases, an existing subscriber base. The Company believes it can successfully apply its operating strategy and leverage its existing infrastructure and financial controls with such acquisitions. Recent acquisitions completed by the Company include (i) Peachtree Mobility, one of AirTouch Cellular's largest agents in Atlanta, acquired in August 1996 and (ii) Telephone Warehouse, one of the largest AT&T agents in the southwestern U.S., acquired in June 1997. In addition, the Company has entered into definitive agreements for the acquisition of (i) Cellular USA, Inc. ("Cellular USA"), one of AT&T's largest agents in Las Vegas, which operates six retail stores (the "Cellular USA Acquisition"), and (ii) Cellular Unlimited Corp. ("Cellular Unlimited"), one of Cellular One's largest agents in upstate New York, which operates 15 retail stores (the "Cellular Unlimited Acquisition"). See "Recent Acquisitions." As part of the Company's growth strategy, management regularly reviews acquisition prospects that would augment or complement the Company's existing operations. - Increase Comparable Store Sales. The Company seeks to increase comparable store sales by capitalizing on the changing industry dynamics that are driving the growth in cellular and wireless usage and pursuing repeat business from its existing customers for new products, product upgrades and additional accessories. As the Company's stores increase penetration into new and existing markets, the Company expects to obtain greater brand name recognition through broader advertising, increased repeat and referral business and corporate sales. - Capitalize on Operating Leverage. The Company continues to invest in infrastructure, including a management team and information systems, to manage its rapidly growing chain of stores. These infrastructure investments could result in a material reduction in income from operations in the first half of fiscal 1998 compared with pro forma income from operations for the corresponding period in fiscal 1997. As the Company continues to expand internally and through acquisitions, it expects to leverage these investments and improve margins through economies of scale. In addition, the Company believes its acquisition of Telephone Warehouse will provide additional purchasing power as the wholesale operations of Telephone Warehouse have historically been able to source inventory at lower prices because of volume discounts. HISTORY Let's Talk Cellular & Wireless was founded by the Company's Chief Executive Officer, Nick Molina, and Chairman, Brett Beveridge. Originally, the founders sold cellular products and services at major public events until opening their first store in 1989. During the first three years of operations the Company opened three stores. By early 1995, the Company had grown to 14 stores primarily in the southeastern United States. In June 1996, the Company, then operating 25 stores (one of which subsequently closed), received growth capital from HIG Investment Group, L.P. and its affiliates ("HIG") and accelerated its store expansion. See "Certain Transactions." From June 1996 through September 30, 1997, the Company opened 54 stores and acquired 24 stores, and as of September 30, 1997, the Company operated a total of 102 stores. The Company had total net revenues of $74.4 million on a pro forma basis for the fiscal year ended July 31, 1997. RECENT ACQUISITIONS Cellular Unlimited Acquisition. On October 31, 1997, the Company entered into a binding agreement for the acquisition of substantially all of the assets of Cellular Unlimited, one of Cellular One's largest agents in upstate New York, which operates 15 retail stores. The Company expects to close the acquisition concurrently with the consummation of the offering. For the twelve months ended July 31, 1997, Cellular Unlimited had total net revenues of approximately $6.4 million. The agreement provides for a cash purchase price of $2.1 million and up to $225,000 in certain contingent payments in each of the six-month periods ending July 31, 1998, January 31, 1999 and July 31, 1999. The Company intends to change the store names to "Let's Talk Cellular & Wireless," increase in-stock merchandise availability and integrate the accounting, sales and administrative functions into the Company's corporate offices. Cellular USA Acquisition. On October 28, 1997, the Company entered into a binding agreement for the acquisition of all of the outstanding capital stock of Cellular USA, one of AT&T's largest agents in Las Vegas, which operates six retail stores. The Company expects to close the acquisition concurrently with the consummation of the offering. For the twelve months ended July 31, 1997, Cellular USA had total net revenues of approximately $3.0 million. The agreement provides for a cash purchase price of $1,625,000 and certain contingent payments of up to an aggregate of $175,000 in 1998 and 1999. The Company intends to change the store names to "Let's Talk Cellular & Wireless," increase in-stock merchandise availability and integrate the accounting, sales and administrative functions into the Company's corporate offices. Telephone Warehouse Acquisition. In June 1997, the Company acquired Telephone Warehouse in exchange for 1,817,468 shares of the Company's Common Stock and the assumption of $13.1 million of indebtedness. Telephone Warehouse is one of the largest AT&T agents in the southwestern United States and operates 19 specialty cellular and wireless retail stores in Texas, Missouri and Kansas. It also wholesales cellular and wireless products to over 1,000 regional and local retailers, distributors and carriers. See "Certain Transactions." For the twelve months ended December 31, 1996 and for the four months ended April 30, 1997, Telephone Warehouse had total net revenues of approximately $49.6 million and $14.5 million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding the historical results of operations of Telephone Warehouse. The Company's principal purpose in acquiring Telephone Warehouse was to obtain immediate access to desirable markets, such as Dallas, San Antonio and Kansas City, and locations and to qualified sales personnel and an existing subscriber base. The Company intends to apply its operating strategy to Telephone Warehouse, leverage Telephone Warehouse's existing infrastructure and grow Telephone Warehouse's retail operations. In addition, the Company has the opportunity to leverage the expertise of and benefit from Telephone Warehouse's significant pager business. Management believes that the wholesale business, which was acquired as part of the Telephone Warehouse Acquisition, provides the Company with greater purchasing power and additional distribution capabilities. Peachtree Mobility. In August 1996, the Company acquired Peachtree Mobility, one of AirTouch Cellular's largest agents in Atlanta, which operates five retail stores (the "Peachtree Acquisition"). Since the date of the acquisition, the Company has changed the store names to "Let's Talk Cellular & Wireless," increased in-stock merchandise availability and integrated the accounting, sales and administrative functions into the Company's corporate offices. The Company has also added three additional stores in the Atlanta market. The Company's executive offices are located at 800 Brickell Avenue, Suite 400, Miami, Florida 33131, and its telephone number is (305) 358-8255. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.................. 2,000,000 shares Common Stock offered by the Selling Shareholders..... 337,245 shares Common Stock to be outstanding after the offering.... 8,199,762 shares(1) Use of proceeds...................................... To repay the Company's outstanding bank indebtedness and certain shareholder loans, and, with the remaining net proceeds, to finance the Company's expansion, including the Cellular USA Acquisition and the Cellular Unlimited Acquisition, the opening of new stores and other possible acquisitions and for other general corporate purposes. Nasdaq National Market symbol........................ "LTCW" </TABLE> - --------------- (1) Does not include 447,606 shares of Common Stock issuable upon the exercise of outstanding stock options, at a weighted average exercise price of $15.28 per share. SUMMARY FINANCIAL DATA The following table presents (i) summary historical consolidated financial data of the Company as of the dates and for the periods indicated and (ii) summary unaudited pro forma financial data of the Company as of the dates and for the periods indicated giving effect to the events described in the "Unaudited Pro Forma Financial Data" included elsewhere herein as though they had occurred on the dates indicated therein. The summary unaudited pro forma financial data are not necessarily indicative of operating results or the financial condition that would have been achieved had these events been consummated on the date indicated and should not be construed as representative of future operating results or financial condition. The summary historical consolidated and unaudited pro forma financial data should be read in conjunction with the financial statements and related notes thereto of the Company and Telephone Warehouse and with the "Unaudited Pro Forma Financial Data" and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. <TABLE> <CAPTION> FISCAL YEAR ENDED JULY 31, -------------------------------------------------------------- PRO FORMA(1) 1994 1995 1996 1997 1997 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net revenues: Retail sales......................... $ 3,572 $ 6,120 $ 8,152 $ 13,230 $ 19,239 Activation commissions............... 461 1,651 4,366 12,575 19,194 Residual income...................... 228 533 1,075 1,948 10,135 Wholesale sales...................... -- -- -- 2,309 25,838 --------- --------- --------- --------- --------- Total net revenues................. $ 4,261 $ 8,304 $ 13,593 $ 30,062 $ 74,406 Gross profit........................... $ 2,133 $ 4,044 $ 7,084 $ 15,239 $ 29,993 Selling, general and administrative expenses............................. 1,918 3,896 6,601 13,993 23,547 Former shareholder compensation expense.............................. -- -- -- 80 100 Depreciation and amortization.......... 43 100 225 451 640 Amortization of intangibles............ -- -- -- 418 2,176 --------- --------- --------- --------- --------- Income from operations................. $ 172 $ 48 $ 258 $ 297 $ 3,530 Income (loss) before provision for income taxes......................... $ 159 $ 8 $ 105 $ (43) $ 3,428 Income tax provision................... 70 -- 39 3 1,470 --------- --------- --------- --------- --------- Net income (loss)...................... $ 89 $ 8 $ 66 $ (46) $ 1,958 ========= ========= ========= ========= ========= Net income (loss) per share applicable to common shareholders............... $ .01 $ -- $ .01 $ (.07)(2)(3) $ .23(3) ========= ========= ========= ========= ========= Weighted average shares outstanding.... 6,199,762 6,199,762 6,199,762 6,199,762 8,199,762 ========= ========= ========= ========= ========= SELECTED OPERATING DATA: EBITDA(4).............................. $ 215 $ 148 $ 492 $ 1,203 $ 6,405 ========= ========= ========= ========= ========= Net cash provided by (used in) operating activities................. $ 17 $ 92 $ 252 $ (472) ========= ========= ========= ========= Net cash used in investing activities........................... $ 182 $ 809 $ 2,530 $ 1,666 ========= ========= ========= ========= Net cash provided by financing activities........................... $ 148 $ 895 $ 3,393 $ 1,860 ========= ========= ========= ========= Stores open at end of period(5): Kiosk................................ 5 13 14 35 35 In-line.............................. 3 9 11 58 58 --------- --------- --------- --------- --------- Total............................. 8 22 25 93 93 Percentage change in comparable store sales(6)............................. (2.2)% 10.5% 11.5% 5.4% Average comparable store sales(7)...... $ 442,000 $ 450,000 $ 462,000 $ 500,000 Number of activations during period.... 1,661 5,205 14,803 43,360 Total gross square feet at end of period............................... 2,447 7,006 9,529 96,093 </TABLE> Footnotes on following page <TABLE> <CAPTION> AS OF JULY 31, 1997 ------------------------- ACTUAL AS ADJUSTED(8) ------- -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $ 1,613 $ 9,976 Total assets................................................ 34,538 39,748 Long-term debt.............................................. 14,383 2,033 Shareholders' equity........................................ 6,610 26,152 </TABLE> - --------------- (1) In June 1997 the Company acquired Telephone Warehouse in exchange for 1,817,468 shares of Common Stock and the assumption of Telephone Warehouse's outstanding indebtedness. The unaudited pro forma financial data set forth herein reflect (i) the combined operations of the Company and Telephone Warehouse and (ii) the sale of the shares of Common Stock offered by the Company hereby and the application of the estimated net proceeds therefrom as set forth in "Use of Proceeds," as if such transactions had taken place as of the beginning of the periods presented. For information regarding the pro forma adjustments made to the Company's historical financial data, see "Unaudited Pro Forma Financial Data." (2) The fair value of the Common Stock distributed to the holder of the Company's Series A Preferred Stock in order to induce the conversion of the Series A Preferred Stock to Common Stock of $320,000 is deducted from net loss for purposes of calculating net loss per share applicable to common shareholders for fiscal 1997. (3) Accretion to redemption value of the Series A Preferred Stock of $62,640, has been deducted from net income (loss) for purposes of calculating net income (loss) per share applicable to common shareholders. See "Unaudited Pro Forma Financial Data." (4) EBITDA is defined as net income (loss) plus (i) provision for income taxes, (ii) gross interest expense and (iii) depreciation and amortization. EBITDA is presented not as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles ("GAAP")), but because it is a widely accepted supplemental financial measure, and management believes it provides relevant and useful information. The Company's calculation of EBITDA may not be comparable to similarly titled measures reported by other companies since all companies do not calculate this non-GAAP measure in the same fashion. The Company's EBITDA calculation is not intended to represent cash provided by (used in) operating activities, since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent the net increase in cash, since it does not include cash provided by (used in) investing and financing activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (5) Pro forma information does not include six stores to be acquired pursuant to the Cellular USA Acquisition and 15 stores to be acquired pursuant to the Cellular Unlimited Acquisition. (6) A store becomes comparable after it has been owned and operated by the Company for at least 12 full months. Comparable store sales are comprised of retail sales and activation income at the Company's retail stores, but do not include residual income. (7) Represents the average retail sales and activation income on a store by store basis only for stores owned and operated by the Company for at least 12 full months as of period end (excluding two stores that generate substantially higher sales than other stores). Therefore, period to period figures may not be comparable. (8) Adjusted to give effect to (i) the sale of the shares of Common Stock offered by the Company and the application of the estimated net proceeds therefrom as set forth in "Use of Proceeds" as if such transactions had occurred at July 31, 1997, and (ii) a non-recurring charge of approximately $738,000, net of tax, related to the write-off of deferred financing costs in connection with the repayment of bank indebtedness with a portion of the proceeds of this offering. See "Capitalization" and "Pro Forma Condensed Consolidated Balance Sheet."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044512_dentalco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044512_dentalco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1b5428aea9e510a91aece68d0751035f00b0098f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044512_dentalco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY MORE DETAILED INFORMATION, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS INDICATED OTHERWISE, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THE COMPANY DentalCo is a leading provider of dental practice management services to multi-disciplinary dental practices in targeted markets in the United States. At August 31, 1997, the Company had 496 dental chairs under management at 45 Dental Sites in Georgia, Maryland, Pennsylvania, North Carolina, Virginia, Michigan, Indiana and Colorado. The Company's 109 Affiliated Dentists, of whom 88 provide general dentistry services and 21 provide specialty services, treated an aggregate of approximately 230,000 active patients during the 18 months ended June 30, 1997. In addition, the Company provides non-clinical, technical and administrative services to the Management Practices, which provide dental services at 14 Dental Sites with 167 dental chairs under management. The dental care services industry, which is highly fragmented, consisted of approximately 151,000 practicing dentists in 1995, 87% of whom practiced either alone or with one other dentist. In response to market trends, general and specialty dental practices increasingly have formed larger group practices. Traditionally, payments for dental care services have not been covered by insurers and consequently have been paid for by patients on a fee-for-service basis. Increasingly, employers are responding to the desire of employees for enhanced benefits by providing access to third-party payment arrangements, including indemnity insurance, preferred provider organizations ("PPOs") and capitated managed dental care plans to finance the purchase of dental care services. The Health Care Financing Administration estimates that expenditures for dental care services were approximately $45.8 billion in 1995 and will exceed $59.1 billion by 2000. The Company believes that the growth in demand for dental care services results primarily from: (i) the aging of the population, a large portion of which have retained their teeth leading to an increased need for dental care services, including high margin specialty services; (ii) increased demand for cosmetic procedures, including orthodontic care; (iii) increased availability and use of dental insurance; and (iv) the growth of managed care organizations that offer dental coverage to their members. The Company's objective is to become the leading multi-disciplinary dental practice management services provider. To achieve this objective, DentalCo's strategy is to: (i) expand in existing markets through the acquisition of, or affiliation with, general dentistry practices; (ii) increase revenue per dental chair by integrating specialists into a network of clustered multi-disciplinary dental sites, providing comprehensive patient care; (iii) enter new markets through the acquisition of practices or affiliation with dentists; (iv) attract and retain qualified dentists and hygienists; (v) attract a broader patient base through increased contracting with PPO and capitated plans; and (vi) continue to implement its integrated management information systems to enhance the Company's ability to improve performance, efficiently schedule patient visits and contract with managed care organizations. The Company has designed an operating model with the objective of maximizing gross revenue through increased dental chair utilization by capturing payments for the provision of both general and specialty dental care services. The Company accomplishes this through clustering dental sites in a market and integrating specialists into the cluster. As of June 30, 1997, specialty care accounted for approximately 35% of the Company's gross revenue, which the Company believes is in excess of the national average, reflecting the Company's ability to diagnose and treat, within its clusters, patients requiring specialty dental services. Clustering also facilitates the Company's ability to negotiate PPO and capitated contracts on behalf of the Affiliated Practices. Newly acquired or built sites typically require 18 to 24 months to fully implement the operating model and successfully increase dental chair utilization. The Company believes that the implementation of its operating model at the Affiliated Practices will generate increased dental chair utilization. Services provided by the Dental Sites include general dentistry (examinations, cleanings, filling cavities, bonding and fitting crowns and bridges) as well as specialty services. Each cluster has or will have available to it upon implementation of the Company's operating model, a periodontist, prosthodontist, orthodontist, oral surgeon, pedodontist and endodontist, each of which may rotate among the facilities that comprise a given cluster. The Company believes it is the largest provider of multi-disciplinary dental practice management services in Georgia, Maryland and North Carolina as well as the metropolitan area of Philadelphia, Pennsylvania. Since April 1996, the Company has built five new and expanded four existing, Dental Sites adding an aggregate of 66 dental chairs under management. The Company has also acquired or affiliated with ten dental practices in eight states adding 34 Dental Sites, 380 dental chairs under management and 81 Affiliated Dentists. This expansion has increased the patient base and geographic presence of the Affiliated Practices, increased the Company's market presence and substantially increased its gross revenue. The pro forma gross revenue of the Company for the year ended December 31, 1996 and the six months ended June 30, 1997 were $58.1 million and $30.2 million, respectively, compared to actual gross revenue of $12.5 million and $23.0 million for the same periods, respectively. THE OFFERING <TABLE> <S> <C> Common Stock Offered.......... shares Common Stock to be Outstanding After this Offering......... shares (1) Use of Proceeds............... Repay $15.1 million of outstanding indebtedness, including $1.1 million of related fees and expenses; repay the loan of a Management Practice to an unaffiliated third party in the amount of $1.6 million; redeem $9.4 million of Class D Redeemable Stock, including accrued dividends; and for financing future acquisitions, working capital and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol............... DNTL </TABLE> - ------------------------ (1) The number of shares of Common Stock outstanding after this Offering and the information set forth in this Prospectus, unless otherwise indicated: (i) reflects a for stock split effected prior to the consummation of this Offering; (ii) assumes the conversion immediately prior to the consummation of this Offering of the Company's 8% Class A Cumulative Convertible Preferred Stock, par value $.0001 per share (the "Class A Preferred Stock"), Class B Convertible Preferred Stock, par value $.0001 per share (the "Class B Preferred Stock"), 8% Class C Cumulative Convertible Preferred Stock, par value $.0001 per share (the "Class C Preferred Stock"), and 9% Class D Convertible Preferred Stock, par value $.0001 per share (the "Class D Convertible Stock") into an aggregate of 6,109,920 shares of Common Stock; (iii) assumes the redemption immediately prior to the consummation of this Offering of the Company's 9% Class D Cumulative Redeemable Preferred Stock (the "Class D Redeemable Stock", and together with the Class D Convertible Stock, the "Class D Preferred Stock") for $9,332,500 plus accrued but unpaid dividends through the date of redemption; (iv) includes (a) shares of Common Stock issuable upon mandatory conversion of a convertible promissory note having a conversion price equal to the initial public offering price and an aggregate principal balance of $1.0 million which was issued to Wake Forest University (the "Bowman Gray Note") in connection with the acquisition of certain of the assets of the Bowman Gray School of Medicine of Wake Forest University ("Bowman Gray") and (b) 41,667 shares of Common Stock issuable upon consummation of this Offering to Raymond G. Makowske, D.D.S. ("Makowske"); and (v) excludes (a) 302,214 shares of Common Stock reserved for issuance under the Company's 1995 Equity Participation Plan (the "1995 Plan"), of which options to purchase 302,214 shares of Common Stock have been granted and options to purchase 61,037 shares of Common Stock were exercisable at June 30, 1997; (b) 1,000,000 shares of Common Stock reserved for issuance under the Company's 1997 Omnibus Stock Plan (the "1997 Plan" and collectively with the 1995 Plan, the "Stock Option Plans"), of which options to purchase 60,000 shares of Common Stock at the initial public offering price will be granted to non-affiliated directors of the Company upon consummation of this Offering; and (c) shares of Common Stock reserved for issuance pursuant to (1) options to purchase 400,587 shares of Common Stock granted to Carl Sardegna, the Company's President, all of which were exercisable at June 30, 1997, (2) options to purchase 25,000 shares of Common Stock granted to certain persons in connection with the acquisition of the stock of The Dental Center, Inc. and The Dental Center Adult, Inc. (collectively, "Indiana Dental"), none of which were exercisable at June 30, 1997; (3) shares of Common Stock, issuable upon consummation of this Offering, in connection with the right to provide administrative services to V. Dale McElwee, D.D.S. & Associates, P.C. ("McElwee"), a Management Practice; and (4) an option to purchase 30,000 shares of Common Stock granted to Barbara J. Piatt, the Company's Chief Financial Officer, none of which were exercisable at June 30, 1997. See "Management--Employee Benefit Plans," "Certain Transactions" and "Description of Capital Stock." SUMMARY FINANCIAL DATA <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ---------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> PRO FORMA AS ADJUSTED 1992 1993 1994 1995 1996 1996(1) -------- -------- -------- -------- ------- --------- <CAPTION> (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <S> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Gross revenue: Patient fees of Affiliated Practices... $ 7,826 $ 8,039 $ 7,661 $ 8,086 $10,300 $ 42,061 Capitation............................. 1,018 882 1,113 1,635 2,086 15,359 Management fees........................ -- -- -- -- 70 635 -------- -------- -------- -------- ------- --------- Total.............................. 8,844 8,921 8,774 9,721 12,456 58,055 Net revenue.............................. 5,877 6,173 5,072 5,943 7,578 37,124 Operating income (loss).................. (321) (211) 143 389 (1,556) (706) Earnings (loss) before income taxes...... (173) (134) 180 414 (1,508) (606) Earnings (loss) before extraordinary item(3)................................ (170) (60) 47 259 (1,146) (514) Earnings (loss) before extraordinary item applicable to common stock(3).......... (170) (60) 47 259 (1,146) (514) Earnings (loss) before extraordinary item per common share(4).................... (.11) (.04) .02 .06 (.19) Weighted average common shares outstanding(5)......................... 1,553 1,553 2,174 4,623 6,137 OPERATING DATA (AT END OF PERIOD): Number of dental sites................... 9 9 9 8 13 44 Number of dental chairs under management(6).......................... 82 82 78 73 125 488 Gross revenue per chair(7)............... $108,000 $109,000 $112,000 $133,000 $99,000 $118,000 Percentage of gross revenue derived from specialty services..................... 42% 40% 41% 33% 33% 30% <CAPTION> SIX MONTHS ENDED JUNE 30, --------------------------- <S> <C> <C> <C> PRO FORMA AS ADJUSTED 1996 1997 1997(2) ------- ------- --------- <S> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Gross revenue: Patient fees of Affiliated Practices... $ 4,918 $16,265 $21,304 Capitation............................. 888 5,776 7,678 Management fees........................ -- 914 1,240 ------- ------- --------- Total.............................. 5,806 22,955 30,222 Net revenue.............................. 3,581 15,917 20,743 Operating income (loss).................. (453) (680) 163 Earnings (loss) before income taxes...... (434) (1,436) 398 Earnings (loss) before extraordinary item(3)................................ (359) (1,304) 357 Earnings (loss) before extraordinary item applicable to common stock(3).......... (359) (2,567) 357 Earnings (loss) before extraordinary item per common share(4).................... (.06) (.26) Weighted average common shares outstanding(5)......................... 5,669 9,760 OPERATING DATA (AT END OF PERIOD): Number of dental sites................... 9 44 45 Number of dental chairs under management(6).......................... 100 476 493 Gross revenue per chair(7)............... $58,000 $46,000 $59,000 Percentage of gross revenue derived from specialty services..................... 34% 35% 35% </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ------------------------------------- <S> <C> <C> <C> PRO FORMA PRO AS ACTUAL FORMA(8) ADJUSTED(9) --------- ----------- ------------- <CAPTION> (IN THOUSANDS) <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents....................................................... $ 2,163 $ 8,021 $ 28,744 Working capital................................................................. (3,968) 6,018 28,261 Total assets.................................................................... 53,091 60,632 80,544 Total debt...................................................................... 19,126 15,189 1,185 Class D Redeemable Stock........................................................ 4,135 9,393 -- Redeemable common stock......................................................... -- 1,000 -- Stockholders' equity............................................................ 22,295 27,515 71,824 </TABLE> - ------------------------ (1) Gives pro forma effect to (i) the acquisition of substantially all of the assets of Sanjiv Bhatia, D.D.S. ("Bhatia"), Donald K. Cunningham, D.D.S., P.C. ("Cunningham"), and Offerdahl & Associates, P.C. ("Offerdahl" and collectively, the "1996 Acquisitions"); (ii) the acquisition of the stock of Indiana Dental and Willis V. Kittleman, Jr., D.D.S., P.C. ("Kittleman"), the merger with Nanston, Inc. ("Nanston"), the acquisition of certain of the assets of Bowman Gray, and the acquisition of substantially all of the assets of Modern Dental Concepts, Inc. ("Modern"), BelAir Beltway Dental Associates ("BelAir") and Marvin Becker D.D.S. ("Becker") (collectively, the "1997 Acquisitions" and together with the 1996 Acquisitions, the "Acquisitions"); (iii) this Offering and the application of the net proceeds therefrom as described under "Use of Proceeds;" (iv) conversion of Class D Convertible Stock into 2,415,556 shares of Common Stock; and (v) issuance of shares of Common Stock upon mandatory conversion of the Bowman Gray Note, as if each had occurred on January 1, 1996. See "Unaudited Pro Forma Consolidated Financial Data." (2) Gives pro forma effect to (i) the 1997 Acquisitions; (ii) this Offering and the application of the net proceeds therefrom as described under "Use of Proceeds;" (iii) conversion of Class D Convertible Stock into 2,415,556 shares of Common Stock; and (iv) issuance of shares of Common Stock upon mandatory conversion of the Bowman Gray Note, as if each had occurred on January 1, 1997. See "Unaudited Pro Forma Consolidated Financial Data." (3) Before loss on extinguishment of debt of $1,295, net of related income taxes of $270, resulting from repayment of debt with a portion of the net proceeds from this Offering. See "Use of Proceeds." (4) After deducting loss on extinguishment of debt, pro forma as adjusted earnings per share would be $ and $ in 1996 and the six months ended June 30, 1997, respectively. (5) Assumes conversion of 40,154 shares of Class A Preferred Stock and 47,068 shares of Class B Preferred Stock into 1,325,082 and 1,553,244 shares of Common Stock, respectively, in 1995, 1996, and 1997, on an actual and a pro forma basis; conversion of (FOOTNOTES CONTINUED ON NEXT PAGE) 816,038 shares of Class C Preferred Stock into 816,038 shares of Common Stock in 1996 and 1997, on an actual and a pro forma basis; and conversion of 93,325 shares of Class D Convertible Stock into 2,415,556 shares of Common Stock in 1996 and 1997 on a pro forma basis. See "Unaudited Pro Forma Consolidated Financial Data," "Certain Transactions" and "Description of Capital Stock." (6) Dental chairs under management means the dental chairs owned and managed by the Affiliated Practices. (7) Gross revenue per chair is defined as the sum of revenues from patient fees of Affiliated Practices and capitation divided by the number of dental chairs under management at the end of the period presented. (8) Gives pro forma effect to the acquisition of Bowman Gray and the issuance of $10.5 million of Class D Preferred Stock in July 1997 as if each occurred at June 30, 1997. See "Capitalization" and "Unaudited Pro Forma Consolidated Financial Data." (9) As adjusted for (i) conversion of the Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and Class D Preferred Stock; (ii) this Offering and the application of the estimated net proceeds therefrom; (iii) issuance of shares of Common Stock upon conversion of the Bowman Gray Note; and (iv) recognition of loss on extinguishment of debt of $1,295 net of related income taxes of $270, resulting from repayment of debt with a portion of the net proceeds from this Offering. See "Use of Proceeds,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044660_mmc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044660_mmc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5b75b41d944c931dba007ca4e071c2ec5337d651
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044660_mmc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by more detailed information and the Financial Statements and notes thereto appearing elsewhere in this Prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044864_thermo_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044864_thermo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cebd413c0214dab57ba5d6973a568da3d7ac2f3c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044864_thermo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus (i) assumes that the Underwriters' over-allotment option will not be exercised, (ii) reflects a 4,845-for-one stock split of the Common Stock effected on August 27, 1997, in the form of a stock dividend and an approximate 7-for-5 stock split of the Common Stock effected on November 14, 1997, in the form of a stock dividend and (iii) does not reflect an expected stock split of the Common Stock in the form of a stock dividend of approximately 150,000 shares of Common Stock to be effected prior to the consummation of this offering in order to preserve a Distribution (as defined below) ratio of 14 shares of the Company's Common Stock for each 100 shares of common stock of Thermo Optek Corporation held by shareholders of Thermo Optek Corporation. See "The Distribution." THE COMPANY Thermo Vision Corporation ("Vision" or the "Company") designs, manufactures, and markets a diverse array of photonics products, including optical components, imaging sensors and systems, lasers, optically based instruments, optoelectronics, and fiber optics. Vision sells photonics products in multiple markets across a number of industries for research, testing, detecting, and manufacturing applications. Vision's products range from optical filters used in blood glucose monitoring, to charge-injection devices ("CIDs") used in optical spectroscopy, to specialty light sources used for quality assurance in semiconductor photolithography. Many of Vision's customers are manufacturers that incorporate Vision's products into medical and dental diagnostic instruments, analytical instruments, equipment for semiconductor manufacturing, and X-ray screening devices. Vision estimates that the current worldwide market for photonics products of all types is approximately $15.5 billion. Photonics technologies involve the creation and manipulation of light and other forms of radiant or electromagnetic energy. Photonics technologies use light to detect, transmit, store, and process information and to generate energy, as well as to capture and display images. Because photons are massless, travel at the speed of light, and do not generate heat in travel, photonics technologies potentially offer many advantages over electronics technologies, including greater speed and miniaturization. Photonics technologies have many familiar applications, including supermarket scanners, compact discs, laser printers, and telecommunications, which use fiber optic technology extensively. Photonics technologies also play a central role in machine vision, semiconductor photolithography, electronic imaging, and phototherapeutics. There are three key elements in Vision's business strategy. First, in order to expand the markets that it addresses, Vision creates new products and applications by building on its core photonics technologies. For example, under an exclusive supply arrangement with a customer, Vision has recently designed and developed a sensor based on Vision's CID technology for use in the customer's dental X-ray imaging system. Second, Vision focuses its marketing efforts on reaching technical users of photonics products so that Vision's products will be incorporated into prototypes, ultimately resulting in new supply relationships as the customers' products are commercialized. Vision uses product catalogues, such as the well-known catalogues of Vision's Oriel subsidiary, that provide detailed technical information in addition to product specifications and highlights in order to maintain visibility with customers on a cost-effective basis. In addition, Vision's subsidiaries and divisions maintain networks of dealers and distributors both in the United States and in over 35 foreign countries. Third, Vision continually monitors the photonics industry to identify businesses with complementary products and technologies as acquisition candidates. The photonics industry is highly fragmented, with numerous competitors. Vision believes it is often more cost effective to target an attractive market segment through the acquisition of established, smaller, focused providers that enjoy favorable reputations and have developed technological expertise than to enter the segment through internal product development. Since February 1996, Vision has acquired four businesses from unrelated third parties that currently comprise the bulk of its operations. Vision offers products in all six segments of the photonics market. Vision's principal product offerings in these segments are: - Optical Components -- Light sources, optical filters, optical crystals, and precision mechanical positioning devices used to create and manipulate light. - Imaging Sensors and Systems -- CID digital sensors and cameras used to absorb photons and convert them into electrical charges that comprise an image. - Lasers -- Pulsed nitrogen and carbon dioxide ("CO(2)") lasers used as light sources. - Optically Based Instruments -- Modular spectrophotometers for physics research, mercury analyzers for environmental testing, and fluorescence-lifetime measurement instruments for biological research. - Optoelectronics -- Silicon photodiode detectors for light sensing. - Fiber Optics -- Specialized fiber optic cables for remote sensing. Vision develops and manufactures most of the products that it sells, although it also distributes photonics products manufactured by third parties. The Company was incorporated in Delaware in November 1995 as a wholly owned subsidiary of Optek. The Company initially was comprised of two businesses: CID Technologies Inc., a manufacturer of CIDs used for imaging sensors and video cameras ("CIDTEC"); and Scientific Measurement Systems Inc., a producer of low-cost optically based components, instruments, and accessories, which now conducts business under the name "Thermo Vision Colorado." The Company subsequently acquired four additional businesses from unrelated third parties. In February 1996, the Company acquired Oriel Instruments Corporation, a manufacturer and distributor of photonics components and instruments ("Oriel"), and the assets of Corion Corporation, a manufacturer of commercial optical filters (the Company's Corion division being referred to herein as "Corion"). In February 1997, the Company acquired Laser Science, Inc., a manufacturer of gas lasers ("LSI"). In July 1997, the Company acquired the assets of Centronic, Inc. ("Centronic"), a manufacturer of silicon photodiodes, through the Company's Centro Vision, Inc. ("Centro Vision") subsidiary. In addition, in August 1997, the Company's wholly owned subsidiary Hilger Crystals Limited ("Hilger") purchased the crystal-materials business of Hilger Analytical Limited ("Hilger Analytical"), a wholly owned subsidiary of Optek and manufacturer of crystals used for X-ray scintillation and infrared spectroscopy. From the time of the Company's incorporation in November 1995, the crystal-materials business of Hilger Analytical has been under the Company's management. The principal executive office of the Company is located at 8E Forge Parkway, Franklin, Massachusetts 02038, and its telephone number is (508) 553-1689. As used herein, "Vision" and the "Company" mean Thermo Vision Corporation and its subsidiaries, unless the context otherwise requires. THE OFFERING Common Stock Offered by the Company............................. 1,075,000 shares Common Stock to be Outstanding after the Offering(1)..................... 7,858,783 shares AMEX Symbol......................... VIZ Use of Proceeds..................... General corporate purposes, including possible acquisitions and research and development funding. - --------- (1) Based on the number of shares of Common Stock outstanding on November 14, 1997. Does not include an aggregate of 725,000 shares of Common Stock reserved for issuance under the Company's stock-based compensation plans. Prior to the consummation of this offering, it is anticipated that options covering up to 350,000 shares of Common Stock will be granted pursuant to the Company's Equity Incentive Plan at exercise prices equal to the fair market value of the Common Stock on the respective dates of grant. See "Capitalization," "Management -- Compensation of Executive Officers," and "-- Vision Stock Option Grants." Also excludes approximately 150,000 shares of Common Stock to be issued as a stock dividend prior to the consummation of this offering. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <TABLE> <CAPTION> NINE MONTHS ENDED (1)(2) FISCAL YEAR(1) ----------------------------- PRO FORMA ------------------------------------------------------- SEPTEMBER 28, SEPTEMBER 27, COMBINED 1992(2)(3) 1993(2)(3)(4) 1994(3) 1995 1996(5) 1996(5) 1997(6) 1996(7) ---------- ------------- ------- ------ ------- ------------- ------------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues.................... $ 755 $ 2,397 $4,242 $6,026 $30,434 $22,369 $28,445 $33,940 Gross Profit................ 377 903 1,231 2,544 13,368 9,705 12,654 14,312 Operating Income (Loss)..... (69) 239 261 282 2,467 1,839 3,110 831 Net Income (Loss)........... (71) 66 146 147 1,418 1,049 1,702 338 Earnings (Loss) per Share(8).................. (.01) .01 .02 .02 .21 .15 .25 .05 Weighted Average Shares(8)................. 6,784 6,784 6,784 6,784 6,784 6,784 6,784 6,784 </TABLE> <TABLE> <CAPTION> SEPTEMBER 27, 1997(2)(6) --------------------------- AS ACTUAL ADJUSTED(9) ------------- ----------- <S> <C> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working Capital.................................................................................... $10,461 $18,544 Total Assets....................................................................................... 38,698 46,781 Long-term Obligations.............................................................................. 7,747 7,747 Shareholder's Investment........................................................................... 23,379 31,462 </TABLE> - --------------- (1) All periods presented include the results of Thermo Vision Colorado. (2) Derived from unaudited financial statements. (3) Includes a pro rata share of equity in the losses of CIDTEC through the date of the acquisition of its assets by Thermo Instrument in October 1994 and the consolidated results of CIDTEC since October 1994. (4) Includes the results of Hilger since its acquisition by Thermo Instrument in July 1993. (5) Includes the results of Oriel and Corion since their acquisition by the Company in February 1996. (6) Includes the results of LSI since its acquisition by the Company in February 1997. (7) The pro forma combined statement of income data was derived from the pro forma combined condensed statements of income included elsewhere in this Prospectus. The pro forma combined statement of income data sets forth the results of operations for the 1996 fiscal year as if the acquisitions of Oriel and Corion had occurred on January 1, 1996. (8) Pursuant to Securities and Exchange Commission requirements, earnings per share have been presented for all periods. Weighted average shares for such periods represent the 6,783,783 shares issued to Optek in connection with the initial capitalization of the Company. (9) Adjusted to reflect the sale by the Company of 1,075,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.00 per share, after deducting the estimated underwriting discount and offering expenses payable by the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044865_agritope_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044865_agritope_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7ad7bc314deb05b898e2a24b328c56c4eba3cfa7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044865_agritope_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary highlights certain information contained elsewhere in this Information Statement/Prospectus. To better understand the Distribution and Agritope, you should read this entire document, including the section "Risk Factors" beginning on page 9. Capitalized terms used but not defined in this summary have the meanings given elsewhere in this Information Statement/Prospectus. THE DISTRIBUTION <TABLE> <S> <C> DISTRIBUTING CORPORATION AND BUSINESS ....................... Epitope, Inc., an Oregon corporation. Epitope uses biotech- nology to develop and market medical diagnostic products. DISTRIBUTED CORPORATION AND BUSINESS..................................................... Agritope, Inc., a Delaware corporation, currently a wholly owned subsidiary of Epitope. Agritope is a biotechnology company specializing in the development of new fruit and vegetable plant varieties for sale to the fresh produce industry. Agritope is also the majority owner of Vinifera, which management believes offers one of the most technically advanced grapevine plant propagation and disease screening and elimination programs available to the wine and table grape production industry. See "Summary--Agritope" and "Description of Business." FINANCING OF AGRITOPE ....................................... In order to finance the operations of Agritope after the Distribution, Agritope has entered into agreements for the sale of 1,343,704 shares of Agritope Common at a price of $7 per share in the Regulation S Sale for an aggregate price of $9.4 million. Agritope expects to receive proceeds of the Regulation S Sale immediately following the Distribution. The Epitope Board believes that the funds raised in the Regulation S Sale are sufficient to finance the operations of Agritope as a separate business for a period of not less than two years following the Distribution, although no assurance to that effect can be given. See "Risk Factors--Need for Additional Funds." In connection with a research and development collaboration, Agritope and Vilmorin, an affiliate of Groupe Limagrain, have entered into an agreement for the sale under Regulation S of 214,285 shares of Series A Convertible Preferred at a price of $7 per share for an aggregate purchase price of $1.5 million. Agritope could not operate as an independent entity without the financing to be raised in the Regulation S Sale. See "Regulation S Sale" and "Sale of Series A Convertible Preferred." DISTRIBUTION RATIO........................................... Each Epitope shareholder will receive one share of Agritope Common for every five shares of Epitope Stock held as of the Record Date. - 2 - <PAGE> RECORD DATE.................................................. Close of business on December ---, 1997. DISTRIBUTION DATE............................................ December 30, 1997. DISTRIBUTION AGENT........................................... ChaseMellon Shareholder Services, L.L.C. MAILING OF STOCK CERTIFICATES ............................... Certificates representing shares of Agritope Common issued in the Distribution will be mailed as soon as practicable after the Distribution Date. SHARES TO BE DISTRIBUTED..................................... An aggregate of approximately 2.7 million shares of Agritope Common will be issued in the Distribution. Following the Distribution, the Regulation S Sale and the Preferred Stock Sale, approximately 4.2 million shares of Agritope voting stock will be outstanding, and shares distributed to Epitope shareholders in the Distribution will represent between 53 and 63 percent of Agritope voting stock outstanding, depending on the extent to which the Series A Option is exercised. FRACTIONAL SHARE INTERESTS................................... Fractional shares of Agritope Common will not be issued in the Distribution. If the number of shares of Agritope Common to be issued to any record holder of Epitope Stock includes a fraction of a share, Epitope will pay an amount in cash for the fractional share. See "The Distribution--Manner of Effecting the Distribution." TRADING MARKET............................................... Agritope has applied to include Agritope Common for quotation on The Nasdaq SmallCap Market under the symbol "AGTO." There is currently no public market for Agritope Common. There can be no assurance that an active trading market in shares of Agritope Common will develop after the Distribution. See "The Distribution--Trading of Agritope Common" and "Risk Factors--No Assurance as to Market Performance of Agritope Common." PRIMARY PURPOSES OF THE DISTRIBUTION......................... The primary purpose of the Distribution is to enable Agritope to raise immediately needed working capital through the sale of its own equity securities. The Distribution also is intended to permit Epitope and Agritope each to (i) adopt strategies and pursue objectives appropriate to its specific business; (ii) enable management to concentrate attention and financial resources on its core business; (iii) make acquisitions and enter into transactions with strategic partners by issuing its own equity securities; (iv) implement incentive compensation arrangements that are more directly based on results of operations of its separate business; and (v) be recognized and evaluated by the financial community as a separate and distinct business. See "The Distribution--Reasons for the Distribution." - 3 - <PAGE> TAX CONSEQUENCES............................................. Epitope has received an opinion of counsel that the Distribution will be treated as a tax free transaction to Epitope's shareholders, with the exception of shareholders who received their shares of Epitope Stock as compensation, who are not U.S. citizens or residents, or who are otherwise subject to special tax treatment. Epitope has not applied, and does not intend to apply, for a ruling from the Internal Revenue Service to that effect. See "The Distribution--Certain Federal Income Tax Consequences." RELATIONSHIP WITH EPITOPE AFTER THE DISTRIBUTION ...................................... Following the Distribution, Epitope will not own any shares of Agritope's capital stock, and Epitope and Agritope will be operated as independent public companies. Epitope will not make financing of any kind available to Agritope after the Distribution. Epitope and Agritope will, however, continue to have a relationship as a result of agreements they have entered into in connection with the Distribution, which include a Separation Agreement, an Employee Benefits Agreement, a Tax Allocation Agreement and a Transition Services and Facilities Agreement (the "Transition Services Agreement"). In addition, two individuals will continue to serve as directors of both Agritope and Epitope after the Distribution. Except as set forth in the agreements listed above or as otherwise described in this Information Statement/Prospectus, Epitope and Agritope will cease to have any material relationship with each other following the Distribution. See "Relationship Between Agritope and Epitope After the Distribution" and "Management--Directors and Executive Officers." CERTAIN ANTI-TAKEOVER CONSIDERATIONS............................................... Certain provisions of Agritope's Certificate of Incorporation and Bylaws and of Delaware law could make it more difficult for a party to acquire, or discourage a party from attempting to acquire, control of Agritope without approval of the Agritope board of directors (the "Agritope Board"). Agritope has adopted a Stockholder Rights Plan (the "Rights Agreement") designed to protect Agritope and its stockholders from inequitable offers to acquire Agritope. In addition, Agritope's Certificate of Incorporation and Bylaws contain certain provisions designed to deter changes in the composition of the Agritope Board, and to allow the Agritope Board to issue Agritope Preferred and Agritope Common without stockholder approval. Each of these provisions may discourage tender offers or other bids for Agritope Common. See "Risk Factors--Anti-takeover Considerations" and "Description of Agritope Capital Stock." - 4 - <PAGE> DIVIDEND POLICY ............................................. Agritope does not anticipate paying dividends in the foreseeable future. REGULATION S SALE ........................................... Agritope has entered into agreements for the sale of 1,343,704 shares of Agritope Common in the Regulation S Sale at a price of $7 per share for an aggregate price of $9.4 million, expected to be received immediately following the Distribution. Subscribers in the Regulation S Sale have deposited the purchase price for their shares of Agritope Common in an escrow account pending the completion of the Distribution and the closing of the Regulation S Sale. Shares sold in the Regulation S Sale will represent between 27 percent and 32 percent of the Agritope voting stock outstanding following the Distribution, depending upon the extent to which the Series A Option is exercised. See "Regulation S Sale." SALE OF SERIES A CONVERTIBLE PREFERRED....................... Agritope has designated 1 million shares of Agritope Preferred as Series A Convertible Preferred. In connection with a research and development collaboration, Agritope and Vilmorin have entered into an agreement for the sale under Regulation S of 214,285 shares of Series A Convertible Preferred at a price of $7 per share for an aggregate purchase price of $1.5 million. See "Risk Factors--Dependence on Strategic Partners," "Sale of Series A Convertible Preferred," and "Description of Business--Agritope Biotechnology Program--Vegetable and Flower Crops." Agritope expects to receive the proceeds from the Preferred Stock Sale three business days following the Distribution Date. In addition, Agritope has granted Vilmorin the Series A Option, exercisable by Vilmorin or its designees and expiring January 15, 1998, to purchase up to 785,715 additional shares of Series A Convertible Preferred at a price of $7 per share. Vilmorin will own 5 percent of the outstanding Agritope voting stock following the closing of the Preferred Stock Sale and will own 19.9 percent of the outstanding Agritope voting stock if it exercises the Series A Option in full. Series A Convertible Preferred has preemptive rights and the right to elect a director, but otherwise has rights substantially equivalent to Agritope Common and is convertible at any time into shares of Agritope Common on a share-for-share basis, subject to adjustment upon the occurrence of certain events. Holders of Series A Convertible Preferred will vote on an "as converted" basis with holders of Agritope Common. See "Description of Agritope Capital Stock--Agritope Series A Convertible Preferred." </TABLE> - 5 - <PAGE> AGRITOPE Agritope is a biotechnology company specializing in the development of new fruit and vegetable plant varieties for sale to the fresh produce industry. The Company is utilizing its patented ethylene control technology to develop a wide variety of fruits and vegetables that are resistant to the decaying effects of ethylene. The Company also recently acquired certain rights to certain proprietary genes from the Salk Institute for Biological Studies (the "Salk Genes"). Agritope believes that the Salk Genes may have the potential to confer disease resistance, enhance crop yield, control flowering and enhance gene expression in plants. Agritope has an option to obtain a worldwide license to use the Salk Genes in a wide range of fruit and vegetable species. The Company consists of two units: Agritope Research and Development and Vinifera. Agritope Research and Development provides biotechnology and product development capabilities to strategic partners and provides disease screening and elimination programs to its Vinifera subsidiary. Through Vinifera, Agritope offers what management believes to be one of the most technically advanced grapevine plant propagation and disease screening and elimination programs available to the wine and table grape production industry. Because Agritope has not achieved commercialization of any of its products, the majority of its revenues, to date, have resulted from operations of Vinifera. Agritope has had a history of significant operating losses. Its accumulated deficit was $41.2 million as of September 30, 1997. Agritope was formed under Oregon law in 1987. On December 3, 1997, Agritope was reincorporated under Delaware law by means of a merger of the Oregon corporation into Agritope, Inc., a newly formed Delaware corporation, with the Delaware corporation as the surviving entity. Agritope's principal offices are located at 8505 S.W. Creekside Place, Beaverton, Oregon 97008. Its telephone number is (503) 641-6115. SUMMARY OF RISK FACTORS The following is a summary of certain of the risk factors that Epitope shareholders who will receive Agritope Common in the Distribution should carefully consider, together with other information presented elsewhere in this Information Statement/Prospectus. See "Risk Factors." No Operating History as an Independent Company. Since 1987, Agritope has operated as a wholly owned subsidiary of Epitope. Therefore, it does not have a recent operating history as an independent company. After December 1, 1997, Epitope will not provide any additional operating capital to Agritope, other than advances to be repaid by Agritope when the Distribution is completed, and will provide only the limited administrative and other support provided for in the Transition Services Agreement. Agritope is required to repay any amounts advanced by Epitope to Agritope between December 1, 1997, and the Distribution. History of Losses; Uncertainty of Future Profitability. Agritope has experienced significant operating losses since inception and, as of September 30, 1997, had an accumulated deficit of approximately $41.2 million. Agritope may continue to experience significant operating losses as it continues its research and development programs. Agritope's ability to increase revenues and achieve profitability and positive cash flows from operations will depend in part on successful completion of the development and commercialization of its genetically engineered products, as to which there can be no assurance. Agritope has not at this time achieved commercialization of any of its products. - 6 - <PAGE> Need for Additional Funds. The Distribution was conditioned upon a determination by the Epitope Board that funds from the Regulation S Sale to be completed immediately following the Distribution will be sufficient to finance the operations of Agritope as a separate business for at least two years. There can be no assurance that the determination of Agritope's anticipated cash requirements will prove to be accurate. The Company's actual capital requirements will depend on numerous factors, many of which are difficult to predict. The majority of Agritope's financial requirements to date have been met by Epitope. Agritope had an accumulated intercompany balance due to Epitope of approximately $49.0 million as of December 1, 1997, substantially all of which will be canceled as part of the Distribution. Epitope will not provide additional financial support following the Distribution, other than advances to be reimbursed by Agritope when the Distribution is completed. Agritope is required to repay any amounts advanced by Epitope to Agritope between December 1, 1997 and the Distribution. Agritope may seek or be required to raise substantial additional funds through public or private financings, collaborative relationships or other arrangements. There can be no assurance that financing will be available on satisfactory terms, if at all. Additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve significant interest expense and restrictive covenants. Dependence on Strategic Partners. Agritope relies on strategic partners for access to proprietary plant varieties. In addition, Agritope does not have or plan to have the capability to grow and distribute genetically engineered products in commercial quantities. Agritope expects some or all of the development, manufacturing and marketing of certain of its products to be performed or paid for by other parties, primarily agricultural companies, through license agreements, joint ventures or other arrangements. There can be no assurance that Agritope will be able to maintain its current strategic relationships or establish additional relationships or that such relationships will be successful. Uncertainties Relating to Patents and Proprietary Information. Agritope has obtained certain patents, has licensed rights under other patents, and has filed a number of patent applications. Agritope anticipates filing patent applications for protection of future products and technology. There can be no assurance that patents applied for will be obtained, that existing patents to which Agritope has rights will not be challenged, or that the issuance of a patent will give Agritope any material advantage over its competitors in connection with any of its products. Competitors may be able to produce products competing with a patented Agritope product without infringing on Agritope's patent rights. Dependence on Key Personnel. Agritope depends to a large extent on the abilities and continued participation of its principal executive officers and scientific personnel. The loss of key personnel could have a material adverse effect on Agritope's business and results of operations. Technological Change and Competition. A number of companies are engaged in research related to plant biotechnology, including other companies that rely on the use of recombinant DNA as a principal scientific strategy. Technological advances by others could render Agritope's technologies less competitive or obsolete. Competition in the fresh produce market is intense and is expected to increase as additional companies introduce products with longer shelf life and improved quality. There can be no assurance that such competition will not have an adverse effect on Agritope's business and results of operations. Limited Marketability of Agritope Common. Agritope has applied to have Agritope Common approved for quotation on The Nasdaq SmallCap Market, beginning on or after the Record Date. Prior to the Distribution, there has been no public market for Agritope Common. There can be no assurance that an active trading market will develop upon completion of the Distribution or, if it does develop, that the market will be sustained. The relatively small number of publicly traded shares of Agritope Common may result in a market in such shares that lacks liquidity. Also, the market price of Agritope Common could be vulnerable to significant fluctuations in response to variations in actual and anticipated operating results, lack of liquidity, failure by the Company to achieve its growth plans and other events affecting the Company, its competitors or its industry sector. The market for securities of small market capitalization companies has been highly volatile in recent years, often as a result of factors unrelated to their operations. - 7 - <PAGE> SUMMARY FINANCIAL DATA (In thousands, except per share data) The following table presents summary financial data of Agritope and its subsidiaries. The balance sheet data at September 30, 1997, and 1996 and the operating results data for the years ended September 30, 1997, 1996, and 1995 have been derived from audited consolidated financial statements and notes thereto included in this Information Statement/Prospectus. This information should be read in conjunction with Agritope's consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations." <TABLE> YEAR ENDED SEPTEMBER 30 1997 1996 1995(1) CONSOLIDATED OPERATING RESULTS (2) <S> <C> <C> <C> Revenues......................................... $ 1,551 $ 585 $2,110 Operating costs and expenses..................... 6,089 2,821 9,920 Other expense, net............................... (4,153)(3) (265) (235) Net loss......................................... (8,691) (2,501) (8,045) Pro forma net loss per share (4)................. (3.23) ( .93) (2.99) Pro forma shares used in per share calculations (4)..................... 2,691 2,691 2,691 SEPTEMBER 30 1997 1996 As adjusted (5) pro forma Actual (unaudited) CONSOLIDATED BALANCE SHEET Working capital (deficiency)..................... $11,740 $ 1,659 $(3,163) Total assets..................................... 17,366 7,285 5,670 Long-term debt................................... 15 15 - Convertible notes, due 1997...................... - - 3,620 Accumulated deficit.............................. (41,168) (41,168) (32,478) Shareholder's equity............................. 14,844 4,763 1,008 </TABLE> (1) Data for 1995 includes revenues of $2.0 million and operating losses of $3.8 million, attributable to business units which were divested. See Note 3 to consolidated financial statements. (2) For additional pro forma financial information relating to Vinifera's operating results during the period it was divested, see Selected Financial Data. See also Note 3 to consolidated financial statements. (3) Includes non-cash charges of $2.3 million, reflecting the permanent impairment in the value of Agritope's investment in affiliated companies, and $1.2 million for the conversion of Agritope convertible notes into Epitope Stock at a reduced price. See Notes 3 and 5 to consolidated financial statements. (4) Net loss per share is presented on a pro forma basis assuming that the Distribution of Agritope Common pursuant to the Agritope spin-off had occurred on October 1, 1994. Pro forma calculations exclude shares to be issued in the Regulation S Sale, the Preferred Stock Sale, and upon the exercise of the Series A Option. See Note 11 to Consolidated Financial Statements. - 8 - <PAGE> (5) The capitalization of Agritope as adjusted reflects the effects of the Regulation S Sale of 1,343,704 shares of Agritope Common and the sale of 214,285 shares of Series A Convertible Preferred for aggregate proceeds of $10.9 million, less issuance costs of $825,000. - 9 - <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044914_dental_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044914_dental_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fbdebb87a9ff85ec60fe7414b3a62556c1ac54ea
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044914_dental_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING NOTES THERETO (THE "CONSOLIDATED FINANCIAL STATEMENTS"), APPEARING ELSEWHERE IN THIS PROSPECTUS. DENTAL CARE ALLIANCE, INC. AND ITS SUBSIDIARIES (THE "COMPANY") PROVIDES MANAGEMENT SERVICES TO DENTAL PRACTICES ("MANAGED DENTAL CENTERS") BY ENTERING INTO ADMINISTRATIVE SERVICES AGREEMENTS (THE "MANAGEMENT AGREEMENTS") WITH INDIVIDUAL DENTAL PROFESSIONAL CORPORATIONS OR PROFESSIONAL ASSOCIATIONS (THE "PAS"). IN ADDITION, THE COMPANY PROVIDES LICENSING SERVICES TO MANAGED DENTAL CENTERS AND CERTAIN NON-MANAGED PRACTICES (THE "LICENSED DENTAL CENTERS" AND TOGETHER WITH THE MANAGED DENTAL CENTERS, THE "DENTAL CENTERS"). THE GENERAL DENTAL AND SPECIALTY DENTAL PRACTITIONERS (SUCH AS ORTHODONTISTS, PERIODONTISTS AND ORAL SURGEONS) WORKING AT THE MANAGED DENTAL CENTERS ("AFFILIATED DENTISTS") ARE EMPLOYED BY OR CONTRACT WITH THE PAS, WHICH ARE NOT OWNED BY THE COMPANY. THE COMPANY DOES NOT EMPLOY AFFILIATED DENTISTS NOR DOES IT CONTROL THE PRACTICE OF DENTISTRY. IMMEDIATELY PRIOR TO CONSUMMATION OF THIS OFFERING, CERTAIN ASSETS AND LIABILITIES OF DENTAL CARE ALLIANCE, INC., WILL BE CONTRIBUTED TO TWO WHOLLY-OWNED SUBSIDIARIES TO BE NAMED DENTAL CARE ALLIANCE OF FLORIDA, INC. AND DENTAL CARE ALLIANCE OF MICHIGAN, INC. WHICH WILL BE FORMED IMMEDIATELY PRIOR TO THE CONSUMMATION OF THIS OFFERING (THE "CONTRIBUTION"). IN ADDITION, UNLESS OTHERWISE INDICATED, INFORMATION SET FORTH IN THIS PROSPECTUS (I) ASSUMES THE CONSUMMATION OF THE CONTRIBUTION, (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (III) GIVES EFFECT TO A 81.54-FOR-1 STOCK SPLIT EFFECTED IN OCTOBER 1997 (THE "STOCK SPLIT") AND (IV) HAS BEEN ADJUSTED TO REFLECT THE MANDATORY CONVERSION OF ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES A PREFERRED STOCK INTO 654,359 SHARES OF COMMON STOCK (POST-STOCK SPLIT), UPON CONSUMMATION OF THE OFFERING. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." THE COMPANY Dental Care Alliance, Inc. is a dental practice management company providing management and licensing services to dental practices in Florida and Michigan. The Company seeks to develop a significant market presence in each of its markets by entering into Management Agreements with established dental practices and by increasing revenues and operating income at the Managed Dental Centers. The Company provides management and licensing services to 20 Managed Dental Centers, 15 of which are located in Florida and five of which are located in Michigan. Additionally, the Company provides only licensing services to three Licensed Dental Centers in Florida. The Company's management services include personnel, operational and financial services and its licensing services include marketing, advertising and purchasing services. The dental services industry in the United States is highly fragmented. According to the American Dental Association ("ADA"), in 1994 dental services in the United States were provided by approximately 153,000 dentists, 87.7% of whom practiced alone or with one other dentist. These solo practitioners and small group practices have traditionally managed all aspects of their dental practices, including the administrative, purchasing, accounting, marketing, recruiting and business development functions. The Company believes that recent trends in dental service reimbursement, including the increased activity of third-party payors, are driving dentists to form larger groups or contract with dental practice management companies. As demand for dental services has increased, employers have sought to provide dental benefits to employees at moderate incremental cost. These employers have begun contracting with third-party payors who have added cost-effective dental benefit programs to the services they provide. The programs offered include various forms of dental care reimbursement, including traditional indemnity insurance, preferred provider plans and capitated managed care plans. The increased number and activity of third-party payors, particularly in the area of managed care, has contributed to the complexity of managing dental practices. In addition, the growing presence of third-party payors has put increasing pressure on dental providers to contain costs. Due to the high fixed costs inherent in the practice of dentistry, such cost containment pressures will likely place solo practitioners and small group practices at a significant disadvantage to larger group practices and practice management companies which can spread their fixed costs over a larger base of dentists and have greater negotiating leverage with health maintenance organizations ("HMOs"). The Company believes it is well-positioned to capitalize on the recent trends driving dental provider consolidation. Dr. Steven R. Matzkin, the Company's Chairman of the Board, President and Chief Executive Officer, has invested over 13 years developing a flexible and analytically driven management approach. This management approach is flexible in that it can be applied to a wide variety of dental practices, including urban, suburban, start-up, mature, fee-for-service and managed care practices and addresses particular inefficiencies at each Managed Dental Center. The Company's management approach is analytically driven in that it compares certain financial and operational data for each Managed Dental Center with targeted parameters to quickly evaluate areas for improvement. The Company uses this management approach to design and implement an integrated marketing, staffing and scheduling program to address the specific needs of each of its Managed Dental Centers. These programs are designed to: (i) focus the Affiliated Dentists and hygienists on the provision of high quality dental care; (ii) maximize revenue per Managed Dental Center through the implementation of marketing, case presentation, public relations and patient-calling programs; (iii) increase market share by recruiting local dental specialists (such as orthodontists, periodontists and oral surgeons) to be employed at the Managed Dental Centers, thereby increasing total revenue per Managed Dental Center and precluding the need to refer certain types of dental procedures to third parties outside of the Company's network; and (iv) increase the capacity for patient flow through incremental efficiencies, training, and if necessary, facility expansion. The Company also uses its management approach to customize an external expansion strategy to the characteristics of each existing and targeted new market. The Company's objective is to become a leading dental practice management company in each of its target markets. To achieve this objective the Company seeks to grow rapidly through a combination of internal growth and external expansion. The key elements of its internal growth strategy are to: (i) increase revenues and operating income at Managed Dental Centers primarily through the implementation of customized marketing and productivity improvement programs and the integration of specialty service providers into its network, (ii) facilitate long-term patient relationships by stressing professionalism and the provision of high quality care and (iii) recommend adjustments to the third-party payor mix at each Managed Dental Center to maximize productivity and respond to local market conditions. The key elements of its external expansion strategy are to: (i) identify potential Managed Dental Centers which have the necessary characteristics to excel in their specific local market, (ii) increase market share in current markets by entering into Management Agreements with additional high quality dental practices and (iii) expand into new markets by entering into Management Agreements with well-established practices that can serve as platforms for further expansion. RECENT DEVELOPMENTS In April 1997 the Company purchased the non-dental assets of, and entered into a Management Agreement with respect to, a dental practice in Tampa, Florida. This practice employs one dentist and two dental hygienists, and reported revenue for the fiscal year ended December 31, 1996 of approximately $950,000. In July 1997, the Company entered into a Management Agreement with respect to four dental practices located in the Detroit, Michigan area. These practices employ six dentists and two dental hygienists and reported aggregate revenue for the fiscal year ended December 31, 1996 of approximately $3.4 million. In July 1997, the Company also entered into a Management Agreement with respect to a dental practice in Flint, Michigan. This practice employs seven dentists and 14 dental hygienists, and reported revenue for the fiscal year ended December 31, 1996 of approximately $4.0 million. In August 1997, the Company purchased the non-dental assets of, and entered into a Management Agreement with respect to, a dental practice located in Tallahassee, Florida. This practice employs one dentist and two dental hygienists and reported revenue for the fiscal year ended December 31, 1996 of approximately $900,000. In September 1997, the Company purchased the non-dental assets of, and entered into a Management Agreement with respect to, a dental practice in St. Petersburg, Florida. This practice employs one dentist and one dental hygienist and reported revenue for the fiscal year ended December 31, 1996 of approximately $400,000. The Company intends for the Detroit area, Flint and Tallahassee dental practices to be platform practices for further expansion in their respective markets. In addition, the owners of certain PAs with which the Company has Management Agreements have executed non-binding letters of intent to acquire ten dental practices employing 50 dentists, many of whom are part-time, and 23 dental hygienists, which practices reported aggregate revenue for their respective last full fiscal years of approximately $10.0 million. If such transactions are consummated, the acquiring PAs are expected to enter into Management Agreements with the Company. There can be no assurance that any such transactions will be consummated, that the Company will enter into Management Agreements with respect to such practices or that any such practices will be integrated successfully into the Company's network. See "Risk Factors--Risks Associated with Expansion Strategy," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Transactions." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company ...... 2,000,000 shares Common Stock to be outstanding after the Offering ........................ 6,897,700 shares(1) Use of proceeds ........................... To acquire the non-dental assets of additional dental practices, to provide working capital and for general corporate purposes. The Company may use a portion of the proceeds to purchase businesses complimentary to the business of the Company and to lend money to PAs to finance the purchase of assets of additional dental practices. The Company cannot presently determine the allocation of proceeds among the above listed uses of proceeds. The Company will determine such allocation based upon its future business needs. See "Use of Proceeds," "The Company," "Risk Factors--Broad Discretion of Management in Applying Proceeds of Offering" and "Certain Transactions." Nasdaq National Market symbol ............ DENT </TABLE> - ---------------- (1) Does not include (i) an aggregate of 250,000 shares of Common Stock reserved for issuance under the Company's Omnibus Executive Incentive Compensation Plan (the "Omnibus Plan"), of which options for approximately 66,000 shares will be granted upon consummation of this Offering at a per share exercise price equal to the public offering price per share, (ii) an aggregate of 425,000 shares of Common Stock reserved for issuance under the Company's 1997 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), of which options to purchase approximately 135,000 shares will be granted upon consummation of the Offering at a per share exercise price equal to the public offering price per share, (iii) 53,001 shares of Common Stock to be reserved for issuance (assuming an initial public offering price of $12.00 per share) pursuant to warrants to be issued upon consummation of the Offering at a weighted average exercise price equal to $1.74 per share, (iv) 49,576 shares of Common Stock reserved for issuance pursuant to outstanding options to purchase Common Stock at a weighted average exercise price of $1.53 per share and (v) options to purchase 17,771 shares (assuming an initial public offering price of $12.00 per share) at the initial public offering price. See "Management--Omnibus Executive Incentive Compensation Plan", "--Non Qualified Stock Option Plan" and "Description of Capital Stock--Warrants and Options to Purchase Common Stock." SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------- ----------------------------- 1994 1995 1996 1996 1997 ------------ ------------- ------------- ------------- --------------- (UNAUDITED) <S> <C> <C> <C> <C> <C> INCOME STATEMENT DATA (1): Management fees .................................... $ 673,304 $ 513,705 $1,289,828 $ 405,072 $2,471,759 Consulting and licensing fees ........................ 42,763 262,769 347,600 138,812 161,885 ---------- ---------- ---------- ---------- ---------- Total revenues .................................... 716,067 776,474 1,637,428 543,884 2,633,644 ---------- ---------- ---------- ---------- ---------- Managed dental center expenses: Staff salaries and benefits ........................ -- -- 223,657 -- 601,383 Dental supplies .................................... -- -- 79,448 -- 213,334 Laboratory fees .................................... 98,222 373,010 Marketing .......................................... -- -- 38,128 -- 176,627 Occupancy .......................................... -- -- 106,501 -- 333,085 Other ............................................. -- -- 57,182 -- 326,494 ---------- ---------- ---------- ---------- ---------- Total managed dental center expenses ............ -- -- 603,138 -- 2,023,933 ---------- ---------- ---------- ---------- ---------- 716,067 776,474 1,034,290 543,884 609,711 Salaries and benefits .............................. 408,716 400,669 521,683 261,642 373,016 General and administrative ........................... 204,901 234,577 260,558 118,476 135,970 Advisory services(2) ................................. -- 127,768 -- -- -- Depreciation and amortization ........................ 15,150 22,106 27,654 10,254 41,578 ---------- ---------- ---------- ---------- ---------- Operating income (loss) ........................... 87,300 (8,646) 224,395 153,512 59,147 Interest income (expense), net ..................... 22,584 6,494 20,781 (5,058) 36,464 ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes and minority interest .............................. 109,884 (2,152) 245,176 148,454 95,611 Provision for income taxes ........................... 19,919 -- 35,500 -- 36,000 Minority interest .................................... 2,440 8,654 7,674 3,537 -- ---------- ---------- ---------- ---------- ---------- Net income (loss) ................................. 87,525 (10,806) 202,002 144,917 59,611 Adjustment to redemption value of common and preferred securities ........................ 39,951 85,709 (191,237) -- (10,500) Cumulative preferred stock dividend ............... -- -- (6,485) -- (60,000) ---------- ---------- ---------- ---------- ---------- Net income (loss) applicable to common stock . $ 127,476 $ 74,903 $ 4,280 $ 144,917 $ (10,889) ========== ========== ========== ========== ========== Unaudited pro forma data(3): Income (loss) before income taxes and minority interest .............................. $ 109,884 $ (2,152) $ 245,176 $ 148,454 $ 95,611 Pro forma provision for income taxes ............... 42,000 -- 94,000 57,000 36,000 Minority interest in consolidated subsidiaries . 1,507 5,343 4,739 2,184 -- ---------- ---------- ---------- ---------- ---------- Pro forma net income (loss) ........................ $ 66,377 $ (7,495) $ 146,437 $ 89,270 $ 59,611 ========== ========== ========== ========== ========== Pro forma net income per common share ............... $ .03 $ .01 ========== ========== Weighted average common shares outstanding ......... 4,773,071 4,773,071 ========== ========== MANAGED DENTAL CENTER DATA: Number of Managed Dental Centers(4) ............... 7 9 12 13 13 Net patient revenue at Managed Dental Centers(5) ................................. $3,703,430 $4,515,019 $5,576,059 $2,669,892 $3,529,242 Number of Affiliated Dentists(6) ..................... 10 12 17 17 18 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 -------------------------------- PRO FORMA ACTUAL AS ADJUSTED (7) ------------ ----------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Working capital .................................... $ 851,382 $22,071,382 Total assets ....................................... 3,370,468 24,590,468 Long-term debt, including current maturities ...... 190,553 190,553 Redeemable common and preferred securities ......... 1,664,299 -- Stockholders' equity .............................. 641,516 23,525,815 </TABLE> - ---------------- (1) Effective October 1996, the Company revised the terms of all of its 12 then existing Management Agreements such that the Company is responsible for the payment of all non-professional expenses of the Managed Dental Centers. Ten Management Agreements were also revised to base the Company's management fee from a percentage of net profits at each PA to a percentage of net patient revenues from each PA. Accordingly, prior to these revisions to such 12 Management Agreements, all non-professional expenses of the Managed Dental Centers and related revenues were reflected in each PA's financial statements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (2) Represents non-cash charges for warrants issued in consideration for certain financial advisory services. (3) Pro forma adjusted to reflect a 38% income tax rate as if the Company was taxed as a C Corporation prior to October 25, 1996, when the Company was reorganized from Limited Liability Corporation status to C Corporation status. See Notes 2 and 7 of Notes to Consolidated Financial Statements. (4) Presented as of the end of the period. (5) Net patient revenue is the total amount of revenue recorded by the PAs during the period. Revenue is included from and after the date on which the relevant PA executed a Management Agreement with the Company. (6) Presented as of the end of the period. Affiliated Dentists include both full-time and part-time Affiliated Dentists but exclude Dental Directors. See "Business--Dental Directors." (7) Adjusted to give pro forma effect to the conversion of mandatorily redeemable preferred stock to Common Stock and to the termination of put rights associated with certain Common Stock, and adjusted for the sale of 2,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $12.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044979_iri_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044979_iri_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0e46ddb6373e9a11260c8e83e401ffdb0f371b3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044979_iri_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, references in this Prospectus to the "Company" refer to IRI International Corporation together with its subsidiaries and its predecessors, including its Bowen Tools Division ("Bowen"), its IRI Division ("IRI") and its wholly-owned subsidiary, Cardwell International, Ltd. ("Cardwell"). Except as otherwise specified herein, the information in this Prospectus (i) gives effect to the merger (the "Merger") of IRI International Corporation into its parent, Energy Services International Ltd., prior to the consummation of the Offering and the corresponding increase in the number of outstanding shares of common stock of the Company from 163,600 to 30,000,000 and (ii) assumes that the Underwriters' Over-Allotment Options will not be exercised. This Prospectus contains certain forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY The Company is one of the world's largest manufacturers of land-based drilling and well-servicing rigs and rig component parts for use in the global oil and gas industry and is principally engaged in the design, manufacture, service, sale and rental of onshore and offshore oilfield equipment for the domestic and international markets. Through its IRI and Cardwell operations, the Company designs and produces rigs to meet the special requirements of its global clientele for service in remote areas and harsh climatic conditions. Through its Bowen Tools Division, the Company is a leading manufacturer of downhole fishing and drilling tools and offers a complete line of oilfield power equipment, including top drives, power swivels, wireline pressure control equipment and coiled tubing systems, which complement the Company's drilling and well- servicing rigs. The Company also manufactures and maintains a significant inventory of replacement parts for rigs produced by the Company and by others, enabling it to meet the needs of its customers on a timely basis. As a result of its diverse product lines and the availability, on a sale or rental basis, of the products of the Bowen Tools Division, the Company is able to satisfy a wide range of its customers' special requirements. Through its Specialty Steel Division, the Company produces premium alloy steel for commercial and military use and for use in manufacturing oilfield equipment products. The Company markets its oilfield equipment primarily through its own sales force and through designated agents and distributors in every major oil and gas producing region in the world. The Company supplements its marketing efforts by maintaining 27 domestic sales, parts and service centers in areas of significant drilling and production operations and 7 international parts and service centers. The Company's network of service centers in the United States provides its customers with refurbishment or repair services as well as ready access to replacement parts for equipment in the field. The Company's worldwide sales and marketing activities are closely coordinated with and supported by a staff of more than 70 engineers and design technicians, resulting in a competitive advantage for the Company to provide its customers with products meeting customized design specifications for drilling and well-servicing rigs and associated equipment. The Company has combined the global recognition of its strong brand names, the extensive background and experience of its management team in international markets and its commitment to technological excellence and high quality products to achieve significant growth in a favorable industry climate. As of June 30, 1997, the Company's backlog was $76.7 million. See "Business -- Drilling and Well-Servicing Rigs -- Backlog." In the fiscal year ended March 31, 1996, the nine month period ended December 31, 1996 and the nine month period ended September 30, 1997, the Company's revenues were $52.5 million, $62.3 million and $112.1 million, respectively. Operating income for the same periods was $7.6 million, $9.1 million and $9.4 million, respectively. Giving pro forma effect to the Acquisitions (as defined below) as if they had been completed as of January 1, 1996, revenues for the year ended December 31, 1996 and the nine month period ended September 30, 1997 would have been $188.4 million and $134.5 million, respectively. Pro forma operating income for the same periods would have been $17.6 million and $10.4 million, respectively. The Company, together with its predecessors, traces its history in the oilfield equipment industry for nearly 100 years. The Company was formed in 1985 through the combination of Ingersoll-Rand Oilfield [PHOTOGRAPH OF COMPANY'S PRODUCT TRADENAMES\TRADEMARKS.] [SCHEMATIC DRAWING OF A DRILLING RIG, COMPONENTS AND FISHING TOOL PRODUCTS.] [PHOTOGRAPHS OF COMPANY PRODUCTS.] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." Products Company and the Ideco Division of Dresser Industries, Inc. and was acquired by an affiliate of the Company's current stockholders in 1994. The Company acquired the business and operations of Bowen (the "Bowen Acquisition") on March 31, 1997 and Cardwell (the "Cardwell Acquisition") on April 17, 1997 (together, the "Acquisitions"). See "-- Recent Developments." BUSINESS STRATEGY The Company's business strategy is to continue its significant expansion and growth as a leader in the design, manufacture, service, sale and rental of oilfield equipment products by: Leveraging Strong Brand Names and Leading Market Shares. The Company manufactures its drilling rigs and well-servicing rigs and component parts under internationally recognized brand names which include IDECO(R), FRANKS(R), CARDWELL(TM), and IRI(TM). The Company manufactures fishing and drilling tools, top drives, power swivels and coiled tubing systems under the BOWEN(R) brand name. The Company believes the leading share of well-servicing rigs currently operating domestically were manufactured by it, together with its predecessors. In addition, the Company estimates that rigs manufactured by it, together with its predecessors, comprise a significant portion of the worldwide fleet of well-servicing rigs manufactured in North America. BOWEN(R) fishing tools, considered the industry standard since they were first introduced by S.R. Bowen in 1930, are estimated by the Company to maintain the leading share of the worldwide market for such products. Under the BOWEN(R) brand name, the Company is among the market leaders in power swivels, drilling tools and wireline equipment. The Company believes it will benefit significantly from increased demand for oilfield equipment and products as customers seek to obtain new equipment or replace existing equipment with similarly branded products. Building on Manufacturing, Engineering and Design Capabilities. The Company manufactures a substantial portion of the equipment and components for its rigs, as contrasted with most of its competitors, which primarily assemble components manufactured by third parties. The Company's integrated design, engineering and manufacturing process is central to the production of its high quality products and enables the Company to provide its customers with products meeting customized design specifications. The Company employs more than 70 people on its engineering and design staff and maintains a research and development program to develop creative solutions for its customers. Recent innovations include light-weight mobile drilling rigs, disc brake systems for drawworks, portable top drives, coiled tubing drilling structures and the V/S 110/130 power swivel. The Company believes its manufacturing, engineering and design capabilities give it a strategic competitive advantage. Capitalizing on Strategic Acquisitions. The Company expects to evaluate and, where feasible, make strategic acquisitions that (i) strengthen the Company's market shares for existing products, (ii) diversify the Company's product lines in key business segments or (iii) increase the Company's geographic diversity. The Company believes that strategic acquisitions should also enhance profitability by leveraging the Company's existing products, engineering and design capabilities, sales force or network of parts and service centers. The Company believes the recent Bowen Acquisition and Cardwell Acquisition were consistent with these criteria, and the Company will seek to capitalize on similar opportunities when available. Emphasizing Recurring Revenue Businesses. The Company intends to focus on its recurring revenue businesses to mitigate the effects of potential fluctuations in the worldwide demand for rigs. The Company's replacement parts business takes advantage of the increased demand for parts required by the aging worldwide rig fleet, which was generally constructed prior to 1982. The Company is well positioned to provide replacement parts as a result of the large number of operating rigs manufactured under the Company's brand names and the preference of equipment owners to obtain replacement parts fabricated by the original manufacturer. The Company's rental tool business takes advantage of the increased number of customers who prefer to rent or lease equipment on a temporary basis. Increasing Efficiency and Cost Containment. The Company is in the process of implementing MRP II, a fully integrated business planning and control system supported by Baan and Symix software packages designed to increase productivity and enhance the Company's ability to coordinate design engineering, raw material orders and deliveries and manufacturing schedules. The Company expects the new system to increase its ability to process large orders simultaneously and reduce working capital requirements by shortening cycle times. The MRP II system should enable the Company to improve its profit margins and respond more effectively to the current strong demand for oilfield equipment products and services. RECENT DEVELOPMENTS On March 31, 1997, the Company acquired substantially all of the assets and business of Bowen from Air Liquide America Corporation ("Air Liquide") and established its Bowen Tools Division. Management believes that the acquisition of Bowen significantly facilitates its acquisition strategy by diversifying into key product lines that are complementary to the Company's existing product lines. The Bowen Acquisition brings to the Company an additional brand name long recognized in the oilfield equipment industry as being associated with innovative products. BOWEN(R) tools have significant, and in the case of fishing tools and power-swivels, dominant, market shares. The Company's Bowen Tools Division will continue to market its products under the BOWEN(R) brand name. On April 17, 1997, the Company acquired all of the outstanding capital stock of Cardwell. Cardwell designs and manufactures a full line of land-based drilling and well-servicing rigs and related components. Management believes that the acquisition of Cardwell furthers its acquisition strategy by strengthening its overall market share in the land-based drilling and well-servicing rig market. Land-based well-servicing rigs manufactured under the Company's brand names together with those manufactured by Cardwell accounted for a majority of the number of 1996 sales of such products worldwide. In addition to the IDECO(R), FRANKS(R) and IRI(TM) brand names, the Company will continue to market land-based drilling and well-servicing rigs under the CARDWELL(TM) brand name. The Acquisitions were financed with the proceeds of a $65.0 million Term Loan (as defined below), of which $64.0 million remained outstanding as of September 30, 1997, and $31.0 million principal amount of the Company's Senior Notes (as defined below), all of which remained outstanding as of September 30, 1997. See "Use of Proceeds." THE OFFERING <TABLE> <S> <C> Common Stock Offered by: The Company............................. 9,000,000 shares The Selling Stockholders................ 3,000,000 shares Total Shares............................... 12,000,000 shares Common Stock to be Outstanding after the Offering................................... 39,000,000 shares(1) Use of Proceeds.............................. The net proceeds of the Offering received by the Company will be used to repay in full the indebtedness incurred in connection with the Acquisitions and for general corporate purposes. See "Use of Proceeds." New York Stock Exchange Symbol............... "IIR" </TABLE> - --------------- (1) Excludes Common Stock issuable upon exercise of options to purchase Common Stock granted under the Incentive Plan (as defined below). See "Management - Stock Options."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001044993_healthworl_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001044993_healthworl_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fd272f54af4899efa603c36f0701c3fc02e4e28c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001044993_healthworl_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY On November 12, 1997, Healthworld Corporation acquired (the 'Consolidation'), in exchange for shares of its Common Stock, all of the issued and outstanding common stock of each of (i) Girgenti, Hughes, Butler & McDowell, Inc. ('GH') and its affiliated entities, consisting of Medical Education Technologies, Inc., Syberactive, Inc., Brand Research Corporation, Black Cat Graphics, Inc. and GHBM, Inc. (together with GH, 'GHB&M'), each of which is under common control and management, and (ii) Milton Marketing Group Limited and its subsidiaries ('Milton'). Unless otherwise indicated, all references herein to the 'Company' include GHB&M and Milton and give effect to the Consolidation and all references herein to 'Healthworld' refer to Healthworld Corporation prior to the consummation of the Consolidation. The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and financial statements and the related notes appearing elsewhere in this Prospectus. Unless otherwise indicated, all share, per share and financial information set forth herein assume no exercise of the Underwriters' over-allotment option. THE COMPANY Healthworld is an international marketing and communications services company specializing in health care. Healthworld acquired GHB&M and Milton on November 12, 1997 and conducts all of its operations in the United States through GHB&M and all of its operations in the United Kingdom through Milton, which have been operating in the marketing and communications industry since April 1986 and August 1978, respectively. See 'The Consolidation.' The Company provides many of the world's largest pharmaceutical and other health care companies with a comprehensive range of integrated strategic marketing services designed to accelerate the market acceptance of new products and to sustain marketability throughout their life-cycles. The Company's services include advertising and promotion, contract sales, consulting, publishing, medical education, public relations, interactive multimedia, database marketing and marketing research services. The Company offers its clients global reach and expertise through its operations in the United States and the United Kingdom, and through Healthworld B.V., a world-wide network of licensed independent marketing and communications agencies located in 13 other countries, in which GHB&M and Milton are founding licensees. The Company believes that its understanding of the scientific and medical issues relating to its clients' products and its in-depth knowledge of the health care industry and regulatory environment are competitive advantages and are critical for developing the most effective marketing and communications campaigns and strategies. The Company relies on its creative talent and utilizes new media and technologies to continually develop better ways to effectively promote its clients' products. GHB&M, which has consistently been recognized in the industry as one of the top health care communications agencies, was named 'Agency of the Year' in 1993 and 1996 by Med Ad News, a leading medical advertising and communications trade publication, based on a number of criteria, including creative marketing ability and account wins and losses, and was a finalist for such award in 1992 and 1994. GHB&M was also named 'Most Creative Agency' by Med Ad News in 1995 based on a poll of the presidents of the top 50 communications agencies. The Company believes that GHB&M was one of the first companies to develop a direct-to-consumer marketing ('DTC') campaign for a prescription drug, and that it is an industry leader in the development of DTC campaigns based on the number of DTC assignments it has performed. The Company also believes that Milton is an industry leader in the development of marketing strategies and campaigns for 'switching' a drug from prescription to over-the-counter status, based on the number of switching assignments it has performed. Pharmaceutical and other health care companies have been increasing their spending on marketing and communications services and, in response to cost-containment pressures, are increasingly outsourcing certain labor intensive, high cost services, including marketing and sales and research functions. According to industry sources, worldwide spending by pharmaceutical and biotechnology companies on promotional marketing and contract sales is estimated to reach $5.9 billion in 1997. The Company believes that these spending levels will continue to increase as companies seek to recoup the high costs of product development, maximize sales, develop brand loyalty and achieve a high market share in the shortest possible time period due to a limited patent life on new products. In addition, cost constraints imposed as a result of health care reform and the emergence of managed care have forced pharmaceutical and other health care companies to spend more on marketing and communications services to educate the market as to cost-effectiveness as well as the safety and efficacy of their products. Furthermore, the use of DTC to promote prescription drugs has grown rapidly and is expected to continue to grow in the future. In 1996, the first year in which more money was spent on DTC than on advertising to physicians, industry sources report that pharmaceutical companies spent approximately $600 million on DTC, which is twice as much as was spent in 1995 and almost 10 times more than in 1991, and that figures for the first few months of 1997 suggest that the total may double again and exceed $1.0 billion for the year. In fiscal 1994, 1995, 1996 and the fiscal nine months ended September 30, 1996 and 1997, the Company's revenues from DTC represented 18%, 21%, 20%, 18% and 15%, respectively, of the Company's pro forma combined revenues. The Company's contract sales teams form a network of trained professionals that provides clients with substantial flexibility in selecting the extent and costs of promoting products as well as such clients' level of involvement in managing the sales effort. The Company believes that the speed of recruitment, quality of training and management of sales representatives, supported by advanced information technology, are key to providing clients with a sales force tailored to meet their geographic and scheduling needs. Currently, the Company's contract sales organization operates in the United Kingdom and provides its services primarily to consumer products companies, utilities and other non-health care related companies. The Company began providing contract sales services to pharmaceutical and other health care companies in the United Kingdom in May 1997, and as of September 30, 1997 revenues generated from such clients were not significant. The Company intends to expand its contract sales organization into the United States in the second quarter of 1998 and believes that such expansion will enable it to complement its existing communications services with a flexible sales force designed to augment its clients' sales activities. The Company's strategy is to capitalize on continued growth in marketing and communications spending by pharmaceutical and other health care companies by (i) maintaining and enhancing its creative excellence and technical expertise, (ii) offering its clients a comprehensive range of integrated services, (iii) continuing to specialize in health care marketing and communications services, (iv) increasing its contract sales services, and (v) further expanding globally. The Company intends to implement its strategy through internal development and potential acquisitions. Healthworld was incorporated in Delaware in September 1996 and conducted no operations prior to the consummation of the Consolidation on November 12, 1997. The Company's principal executive offices are located at 100 Avenue of the Americas, New York, New York 10013. The Company's telephone number is (212) 966-7640. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,100,000 shares Common Stock to be outstanding immediately after the Offering......................... 7,100,000 shares(1)(2) Use of Proceeds.............................. For (i) start-up and other funding costs relating to the expansion of the Company's contract sales operations into the United States, (ii) capital expenditures associated with the expansion of the Company's New York facility, (iii) the repayment of a $456,000 loan, and (iv) working capital and general corporate purposes, including potential acquisitions. See 'Use of Proceeds.' Nasdaq National Market Symbol................ HWLD </TABLE> - ------------------ (1) Includes 5,000,000 shares of Common Stock issued in connection with the Consolidation. (2) Excludes 710,000 shares of Common Stock reserved for issuance upon the exercise of stock options which may be granted under the Company's 1997 Stock Option Plan (the 'Stock Option Plan'), none of which have been granted to date. As of the date of this Prospectus, the Company will grant options under the Stock Option Plan to purchase up to an aggregate of 539,500 shares of Common Stock, at an exercise price per share equal to the initial public offering price. See 'Management--Stock Option Plan.' SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION The following summary pro forma combined financial information gives effect to the Consolidation, among other events, as more fully described in 'The Consolidation,' and should be read in conjunction with the Company's unaudited Pro Forma Combining Financial Statements and notes thereto, the Combined Financial Statements of GHB&M and notes thereto, the Consolidated Financial Statements of Milton and notes thereto and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' contained elsewhere in this Prospectus. The Consolidation will be accounted for as a pooling of interests. Such financial data covers periods when GHB&M and Milton were not under common control or management and may not be indicative of results that would have been reported had the Consolidation and the other pro forma adjustments occurred nor may it be indicative of the Company's future financial position or operating results. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, (1) SEPTEMBER 30, (2) ----------------------------- ------------------ 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues................................................... $13,081 $16,767 $24,209 $17,359 $23,186 Operating expenses: Salaries and related costs............................... 7,890 9,857 15,733 11,889 16,042 Other operating expenses................................. 3,727 4,469 5,274 3,729 4,358 ------- ------- ------- ------- ------- 11,617 14,326 21,007 15,618 20,400 ------- ------- ------- ------- ------- Income from operations..................................... 1,464 2,441 3,202 1,741 2,786 Income before provision for income taxes................... 1,450 2,439 3,133 1,726 2,794 Net income(3).............................................. $ 837 $ 1,401 $ 1,828 $ 1,003 $ 1,612 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Earnings per share......................................... $ 0.17 $ 0.28 $ 0.37 $ 0.20 $ 0.32 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Shares used in computing earnings per share................ 5,000 5,000 5,000 5,000 5,000 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------- PRO FORMA PRO FORMA AS ADJUSTED(4) --------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital....................................................................... $ 594 $ 15,588 Total assets.......................................................................... 22,677 37,215 Long-term debt, including current portion............................................. 1,275 819 Stockholders' equity.................................................................. 6,597 21,591 </TABLE> - ------------------ (1) Includes financial data for GHB&M based on a December 31 fiscal year end and for Milton based on a November 30 fiscal year end. (2) Includes financial data for GHB&M for the nine month period ended September 30 and for Milton for the nine month period ended August 31. (3) As a result of the consummation of the Consolidation on November 12, 1997, the status of the companies comprising GHB&M as 'S Corporations' under Subchapter S of the Internal Revenue Code of 1986, as amended (the 'Code'), terminated. The pro forma provision for income taxes reflects a provision for federal income taxes as if each of such entities were a 'C Corporation' rather than an 'S Corporation' for such periods. See 'The Consolidation.' (4) Gives effect to the Offering at an assumed initial public offering price of $8.75 per share and the application of the estimated net proceeds therefrom, including the repayment of a $456,000 loan. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045014_gametech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045014_gametech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f4806005cc9c7c38cc6bd647303e3694bffd207
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045014_gametech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS (I) DOES NOT GIVE EFFECT TO THE EXERCISE BY THE UNDERWRITERS OF THEIR OPTION TO PURCHASE UP TO 556,500 ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS, IF ANY, AND (II) ASSUMES AN INITIAL PUBLIC OFFERING PRICE OF $12.00 PER SHARE OF COMMON STOCK, THE MIDPOINT OF THE OFFERING PRICE RANGE SET FORTH ON THE COVER OF THIS PROSPECTUS. THE COMPANY GameTech is a leading designer, developer and marketer of interactive electronic bingo systems. The Company currently markets a fixed-base system with light-pen-activated monitors and a portable, hand-held system which can be played anywhere within a bingo hall. Both bingo systems display the electronic bingo card images purchased by a player for each bingo game. The Company's electronic bingo units enable players to play substantially more bingo than they can play on paper cards, leading to a greater spend per player and higher profit per bingo session for the bingo hall operator. GameTech installs the electronic bingo systems at no cost to the operator in exchange for a percentage of the sales generated by each unit. The Company typically enters into one to three year contracts pursuant to which the Company receives up to 30% of the revenues generated by GameTech units or to a lesser extent, charges fixed rates per bingo session. Management believes that because a significant majority of players who use GameTech's electronic bingo units also purchase paper cards, the use of GameTech's electronic bingo units generates incremental revenues and profits for bingo hall operators. The Company was founded in 1994 by executives previously involved in the bingo, slot machine, lottery and high technology software and hardware industries to pursue their belief that an advanced, interactive, electronic bingo system would be well received by both bingo hall operators and players. The Company has grown rapidly, and management believes that the Company has a competitive advantage resulting from the experience of its management, its quality electronic bingo systems and its reputation for superior customer service and support. The Company's growth has been accelerated by a successful expansion into Texas which began in August 1996; for the nine months ended July 31, 1997, the Texas market accounted for approximately 45% of the Company's revenues. For the fiscal year ended October 31, 1996, the Company's revenues increased approximately 60% to $5.4 million from $3.4 million in the prior year. For the nine months ended July 31, 1997, the Company's revenues increased more than 150% to $8.9 million from $3.5 million for the same period in the prior year. During the same period, net income increased more than 400% to $2.2 million from $422,000. GameTech had more than 3,900 fixed-base units and 2,000 hand-held units operating in 123 Indian and charity bingo halls at July 31, 1997. Following its development of a new generation of hand-held units introduced in April 1997, GameTech has been increasing its penetration of existing markets. During August and September, GameTech added an additional 1,800 hand-held units and 271 fixed-base units, bringing its installed base to approximately 8,000 units. Management estimates that approximately 5% of the current player spend on bingo in the United States is attributable to electronic bingo, which management believes presents the Company with significant additional growth opportunities. Bingo is one of the oldest and most popular forms of wagering and entertainment, with an estimated domestic annual player spend of more than $5 billion, based upon INTERNATIONAL GAMING & WAGERING BUSINESS MAGAZINE'S annual report dated August 1, 1997. Bingo is easy to understand, a pleasant social activity and a reasonably priced source of entertainment. As compared to lotteries, where prizes increase with the number of tickets sold, a bingo game is more like a raffle, with prizes predetermined before players buy their bingo cards. Because prize amounts are fixed regardless of the number of paper bingo cards and electronic bingo card images played, bingo operators' profits increase nearly dollar-for-dollar from sales of additional paper bingo cards and electronic bingo card images. Electronic bingo systems like GameTech's allow players to play more bingo per game than they can by hand, which provides bingo hall operators with the potential to increase profits commensurately. Nonprofit organizations sponsor bingo games for fund raising purposes, while Indian tribes, casinos and government-sponsored entities operate bingo games for profit. Bingo is a legal enterprise in 46 states (the exceptions are Arkansas, Hawaii, Tennessee and Utah) and the District of Columbia. Electronic bingo systems are currently permitted for charitable organizations in 26 states, and the Company has units in operation in charitable bingo halls in five of those states. Under the Indian Gaming Regulatory Act ("IGRA"), in the 46 states where bingo is legal, electronic bingo may be played on tribal Indian lands. Bingo is currently played on tribal Indian lands in 28 states, and the Company has units in operation in Indian bingo halls in seven of those states. STRATEGY The Company's strategic objective is to increase revenues and earnings by capitalizing on the increasing acceptance of electronic bingo and to become the leading provider of electronic bingo units. To reach this objective, the Company intends to: MAINTAIN SUPERIOR CUSTOMER SERVICE. GameTech believes that its dedication to providing superior customer service and support fosters customer loyalty and cultivates long-term customer relationships. Approximately half of GameTech's employees are field technicians on call 24 hours a day to support customers and respond immediately to servicing calls. Management believes that its dedication to superior customer service has contributed to the rapid acceptance of GameTech's products and the Company's ability to attract and retain customers for the long-term. INCREASE PENETRATION WITH EXISTING CUSTOMERS. The Company closely tracks the utilization of its units to maximize revenues. As bingo player acceptance of electronic bingo units increases and utilization rates grow, management installs additional electronic bingo units at its customers' bingo halls. At approximately 80% of the bingo halls where GameTech units have been in operation for more than six months, the number of units has been increased since the initial installation. EXPAND CUSTOMER BASE IN EXISTING MARKETS. Management estimates that approximately 5% of the more than $5 billion domestic bingo spend is currently played on electronic bingo units. In the states in which the Company has units installed in charitable bingo halls and for which data is available, GameTech units are used by an average of approximately 8% of the charitable halls located in those states. This low penetration level illustrates GameTech's opportunity to increase its base of customers in its existing markets. EXPAND INTO NEW MARKETS DOMESTICALLY. GameTech has charitable bingo hall customers in only five of the 26 states which currently allow charitable organizations to conduct electronic bingo, and is actively pursuing entry into seven additional states. In addition, GameTech has Indian bingo hall customers in only seven of the 28 states where bingo is currently played on Indian lands and is actively pursuing Indian bingo hall customers in seven additional states. As part of its strategy to help expand the charity electronic bingo market, the Company is pursuing changes to legislation in several states to permit electronic bingo. In addition, the Company intends to initiate route operations to serve bingo halls which otherwise would be uneconomical to serve. The route operations would move the Company's hand-held units between various charity bingo halls on days that the respective halls hold bingo sessions. EXPAND INTERNATIONALLY. GameTech is in the process of adding salespeople and distributors to expand into Canada, which management estimates has an annual bingo spend of approximately $2 billion. GameTech is also actively evaluating opportunities to expand into other countries. LAUNCH THE SATELLITE BINGO NETWORK. GameTech is a 50% owner of The Satellite Bingo Network, LLC ("TSBN"), which is anticipated to be launched in early 1998. TSBN is developing a network to link via satellite participating players from different Indian bingo halls into one large bingo game, which will allow TSBN to offer bigger prizes than those generally offered by a single bingo hall. Initially, TSBN intends to include 15 Indian bingo halls, with a goal of including more than 25 Indian bingo halls after the first 12 months of operation. DEVELOP NEW APPLICATIONS. GameTech maintains an ongoing product development program focused on enhancing its existing products and developing new products and applications for its technology. In January 1996, GameTech introduced its first hand-held unit, followed by an improved version in April 1997. In July 1996, the Company introduced its GameTech Gold fixed-base system, which incorporates picture-in-picture technology that allows bingo players to watch television while playing bingo. Other opportunities under development include progressive bingo games and parimutuel bingo games (during non-session hours), which are anticipated to generate additional revenue for Indian bingo hall operators by linking fixed-base units nationwide into a single high-stakes bingo game. DEVELOP STRATEGIC ALLIANCES/ACQUIRE COMPLEMENTARY COMPANIES. The Company selectively reviews opportunities to grow through the establishment of strategic alliances and acquisitions which could extend its presence into new geographic markets, expand its client base, add new products and/or provide operating synergies. The Company has had preliminary discussions from time to time with the shareholders of The Satellite Bingo Network, Inc. ("Satellite Bingo"), a Canadian company which owns and licenses a satellite bingo game operating system and is the parent of GameTech's TSBN joint venture partner, regarding the possible acquisition of Satellite Bingo or of Satellite Bingo's ownership interest in TSBN. Discussions are not currently active and no assurance can be made that discussions will resume or that a definitive agreement will be reached. The Company also intends to pursue joint operating agreements or joint ventures for additional bingo opportunities, including, in particular, all-electronic bingo halls. The Company is a Delaware corporation with its executive offices at 2209 W. 1st Street, Suite 113-114, Tempe, Arizona 85281, and its telephone number is (602) 804-1101. THE OFFERING <TABLE> <S> <C> <C> <C> Common Stock Offered: By the Company................................ 3,270,000 shares By the Selling Stockholders................... 440,000 shares --------- Total....................................... 3,710,000 shares --------- --------- Common Stock outstanding after this 9,595,713 shares offering(a)(b).................................. Use of Proceeds................................. The net proceeds to the Company from this offering will be used to fund the Company's growth plans, to repay substantially all of its outstanding indebtedness (approximately $4.3 million at July 31, 1997, excluding debt to be converted into Common Stock upon completion of this offering) and for other general corporate purposes. A portion of the proceeds may also be used in connection with any opportunities to acquire or invest in complementary businesses, products or technologies. See "Use of Proceeds." Nasdaq National Market symbol................... "GMTC" </TABLE> - ------------------------ (a) Excludes options to purchase 1,619,050 shares of Common Stock outstanding as of July 31, 1997, of which 1,032,750 options are currently exercisable. (b) Assumes (i) the conversion by certain officers of convertible subordinated debt (including accrued interest) of $1,475,888 at July 31, 1997 into 1,475,888 shares of Common Stock, and (ii) the conversion into 400,000 shares of Common Stock of 400,000 shares of the Company's Series A Preferred Stock (the "Series A Preferred") sold in a private placement on September 2, 1997 (the "Private Placement"), all of which will occur prior to completion of this offering. See "Certain Relationships and Related Party Transactions," "Description of Capital Stock," "Underwriting," and Note 6 of Notes to Financial Statements included elsewhere herein. SUMMARY FINANCIAL DATA <TABLE> <CAPTION> NINE MONTHS YEARS ENDED OCTOBER 31, ENDED JULY 31, ------------------------------- -------------------- 1994(A) 1995 1996 1996 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues......................................................... $ 599 $ 3,350 $ 5,364 $ 3,545 $ 8,892 Gross profit..................................................... 346 2,638 3,749 2,398 6,647 Income (loss) from operations.................................... (117) 1,064 1,639 916 3,932 Income (loss) before provision for income taxes.................. (175) 870 1,364 715 3,571 Net income (loss)................................................ (175) 592 805 422 2,155 Fully diluted net income (loss) per share(b)..................... $ (0.13) $ 0.10 $ 0.11 $ 0.06 $ 0.32 Shares used in the calculation of fully diluted net income (loss) per share(b) (000s)............................................ 2,283 7,115 7,889 7,806 7,091 Supplementary fully diluted net income per share(b).............. $ 0.12 $ 0.32 SELECTED OTHER DATA: Fixed-base units in operation (end of period).................... 545 1,250 2,644 1,704 3,944 Hand-held units in operation (end of period)..................... -- -- 710 790 2,003 Number of customer locations (end of period)..................... 14 30 70 42 123 Capital expenditures............................................. $ 462 $ 1,251 $ 2,966 $ 2,030 $ 3,580 Depreciation and amortization.................................... 63 282 599 396 979 </TABLE> <TABLE> <CAPTION> JULY 31, 1997 ------------------------ PRO FORMA AS ACTUAL ADJUSTED(C) (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................................................ $ 215 $ 34,446 Working capital (deficit)................................................................ (596) 35,981 Total assets............................................................................. 9,922 44,154 Total debt............................................................................... 5,823 -- Total stockholders' equity............................................................... 3,267 43,322 </TABLE> - ------------------------ (a) Represents the period from inception (April 18, 1994) through October 31, 1994. Operations commenced June 1, 1994. (b) See Note 1 of Notes to Financial Statements included elsewhere herein for information concerning the computation of fully diluted and supplementary fully diluted net income (loss) per share. (c) Adjusted to reflect the sale by the Company of 3,270,000 shares of Common Stock in this offering and the application of the estimated net proceeds therefrom, including the application of $4.3 million of the proceeds for repayment of indebtedness of the Company. See "Use of Proceeds" and "Capitalization." Assumes (i) the conversion by certain officers of convertible subordinated debt (including accrued interest) of $1,475,888 at July 31, 1997 into 1,475,888 shares of Common Stock, and (ii) the sale of 400,000 shares of Series A Preferred sold in a private placement on September 2, 1997 and the conversion thereof into 400,000 shares of Common Stock, all of which will occur prior to completion of this offering. See "Certain Relationships and Related Party Transactions," "Description of Capital Stock," "Underwriting," and Note 6 of Notes to Financial Statements included elsewhere herein.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045035_kofax_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045035_kofax_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0c61db498915e03530ac4613ec8c6cb5bb25638
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045035_kofax_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors," and Consolidated Financial Statements and Notes thereto, appearing elsewhere in this prospectus. THE COMPANY Kofax develops and markets hardware and software products for the imaging and document management market. The Company has increased its revenues every year since its founding in 1985 and believes that it is the leader in the image processing accelerator market it has historically served. The Company also believes that new products it has recently introduced, as well as products it plans to introduce in the next year, will significantly expand the size of the Company's addressable market. Document imaging systems improve efficiencies in paper intensive industries by converting paper documents into electronic images (a process called "capture") and managing the routing and storage of the document images. Examples of the beneficial use of document imaging include expediting loan application and insurance claim processing and speeding the processing of new drug applications to the FDA. According to International Data Corporation, software revenue for the imaging, workflow and document management industry was approximately $2.3 billion in 1996 and is projected to grow approximately 30% annually over the next four years. Kofax currently has two product lines -- component application software and scanner enhancement products, the latter of which consists primarily of image processing accelerators. The Company believes that both product lines are well positioned to take advantage of several major trends in the imaging and document management market. - - APPLICATION SOFTWARE. The imaging and document management market is transitioning from "closed" monolithic systems supplied by turnkey vendors to a market where VARs and system integrators integrate a set of software components from different vendors into complete solutions. Anticipating this trend, Kofax began developing its Ascent family of component software in early 1993. The first Ascent product, Ascent Capture, was designed to reduce the cost of scanning and indexing by using automated recognition techniques. In 1996, the Company introduced Ascent Storage, an application for managing image repositories on optical jukeboxes. These applications can be combined with software components from other vendors, such as document management software from Documentum, Inc., to form complete solutions. Revenue from Ascent products was $0.2 million in fiscal 1995, $2.1 million in fiscal 1996, and $5.2 million in fiscal 1997. The Company expects Ascent software to continue to grow as a share of revenue. - - IMAGE PROCESSING ACCELERATORS. As the speed and sophistication of imaging systems have increased, so too have the demands on image processing. To meet this demand, Kofax continues to advance its market-leading family of hardware accelerators and software development tools that enable PCs to control high-speed scanners and perform complex image enhancement and recognition functions. Kofax expects that image processing accelerators will continue to account for a majority of its revenue over the next several years. Kofax's primary growth strategy is to expand its addressable markets by developing new products that leverage its core image processing technologies. To further this strategy, Kofax has recently introduced, and plans to introduce over the next 12 months, new products in each of its product lines. In late 1996, in response to the growth of the Internet and emerging collaborative applications, Kofax introduced a network scan server called NetScan that connects popular office scanners directly to a network and allows them to be shared among multiple users. Products currently in development include a new version of Ascent Capture that will allow the Company to address the substantial market for forms processing; a new version of Ascent Storage that requires no programming to implement and can be used with any standard Windows application; a SCSI version of the Company's accelerator boards that will address the growing SCSI scanner market; and the Company's first scanner-resident accelerator product, which will provide scanner manufacturers with a low-cost image processing board that provides enhanced functionality. Kofax sells its products through a network of over 50 technically skilled, independent distributors specializing in sales of document imaging products. This channel is supported by a 56 person sales, marketing, and technical support organization that targets VARs, system integrators, OEMs, and large end users to supplement the selling efforts of the Company's distributors.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045275_delphi_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045275_delphi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..52e9412eb49b8e10189df707f417d8294082f4e1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045275_delphi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, included elsewhere in this Prospectus. See "Glossary of Selected Insurance and Reinsurance Terms" for definitions of certain terms used in this Prospectus. Unless the context otherwise requires, references herein to the "Company" give effect to the formation of, and include, its wholly-owned subsidiary, Oracle Reinsurance Company Ltd., a Bermuda company ("Oracle Re"). THE COMPANY Following the completion of the Rights Offering, the Company, a newly-formed Bermuda insurance holding company, will provide, through its wholly-owned subsidiary, Oracle Re, excess of loss and quota share reinsurance primarily for group employee benefit insurance products, including group long-term disability and excess workers' compensation insurance, offered by Reliance Standard Life Insurance Company ("RSL") and Safety National Casualty Corporation ("Safety National"), insurance affiliates of Delphi. The Company will also seek to expand its customer base and to develop additional products and services. The Company has been organized to take advantage of reinsurance and alternative risk market opportunities that it believes exist in the Bermuda market. The Company, through its wholly-owned subsidiary, Oracle Re, also intends to provide risk financing products to clients seeking an alternative to traditional commercial insurance for certain risk exposures. These risk financing products include a retention by the client of a significant amount of its loss exposure, the transfer of more unpredictable layers of loss to insurers and a greater involvement by the client in risk management and loss prevention and loss control. Oracle Re will offer these products in the so-called "alternative market," which has developed in response to the volatility in cost and availability of traditional commercial insurance coverage. The Company intends to provide risk financing products through a facility frequently referred to as a "rent-a-captive," which is designed to provide insureds with certain of the benefits available through captive insurance companies without the administrative costs and capital commitment necessary to establish and operate their own captive insurance company. Oracle Re will offer its rent-a-captive facility to clients of Safety National to manage their workers' compensation expenses and may thereafter offer these services to additional clients and other insurance exposures. Regulatory Status of Oracle Re In September 1997, the Bermuda Registrar of Companies (Insurance Division) and the Insurers Admissions Committee of Bermuda reviewed Oracle Re's application for licensing as a Class 3 and long-term insurance company. During such reviews, the application was approved and, upon the due capitalization of Oracle Re of a minimum of $1.0 million dollars, which is to occur upon the consummation of the Rights Offering, together with the filing of certain prescribed forms and the payment of certain fees, Oracle Re will be issued a registration certificate under the Insurance Act 1978 as a Class 3 and long-term Bermuda exempted insurer. Accordingly, although Oracle Re has been incorporated under the laws of Bermuda, it is not currently licensed to underwrite, although it has received all required permissions to do so subject to its capitalization. The Rights Offering is conditioned upon the purchase of at least 599,500 Common Shares upon the exercise of Rights and, in such event, the Company will receive net proceeds of approximately $14.6 million from the sale of such number of shares and the sale of 900,500 Standby Commitment Shares. Oracle Re will commence underwriting business immediately upon being licensed to do so which the Company anticipates will be the date upon which this Rights Offering is completed and the proceeds therefrom are contributed by the Company to Oracle Re. Relationship with Delphi Financial Group, Inc. Delphi is an insurance holding company engaged through RSL and Safety National in offering a diverse portfolio of group employee benefit insurance products, including life, short-term and long-term disability, excess workers' compensation, special accident and dental insurance. RSL also offers asset accumulation INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED DECEMBER 24, 1997 PROSPECTUS DELPHI INTERNATIONAL LTD. 2,200,000 SHARES OF COMMON STOCK (AND RIGHTS TO ACQUIRE UP TO 2,050,000 SHARES OF COMMON STOCK) Delphi International Ltd., a Bermuda corporation (the "Company"), is granting at no cost to holders of the outstanding Class A Common Stock, par value $.01 per share ("Delphi Class A Common Stock"), of Delphi Financial Group, Inc., a Delaware corporation ("Delphi"), to holders of the outstanding Class B Common Stock, par value $.01 per share, of Delphi ("Delphi Class B Common Stock" and, together with the Delphi Class A Common Stock, the "Delphi Common Stock"), and to holders of options to purchase Delphi Common Stock, of record at the close of business on the date of this Prospectus (the "Record Date"), non-transferable rights (collectively, the "Rights") to purchase up to an aggregate of 2,050,000 Common Shares, par value $.01 per share, of the Company ("Common Shares"). The Amended and Restated Bye-Laws (the "Bye-Laws") of the Company contain certain provisions that limit the voting rights that may be exercised by certain holders of Common Shares. The Bye-Laws provide that each holder of Common Shares is entitled to one vote per share on all matters submitted to a vote of shareholders, except that if, and so long as, the Controlled Shares (as defined) of any person constitute 9.5% or more of the issued and outstanding Common Shares, the voting rights with respect to the Common Shares owned by such person shall be limited, in the aggregate, to a voting power of 9.5%, pursuant to a formula specified in the Bye-Laws. Subject to the voting limitation set forth in the preceding sentence, each Common Share will also entitle the holder thereof to one vote per share on all matters required to be submitted to the shareholders of the Company's wholly-owned subsidiary, Oracle Reinsurance Company Ltd., a Bermuda company ("Oracle Re"). See "Description of Capital Stock -- Common Shares -- Limitation on Voting Rights" and "-- Voting Rights in Oracle Re." Each record holder of Delphi Common Stock and options to purchase Delphi Common Stock will receive one Right for every ten shares of Delphi Common Stock and options to purchase Delphi Common Stock on an aggregate basis owned on the Record Date. Each Right will entitle the holder to purchase one Common Share at a purchase price of ten U.S. dollars and twenty-five cents ($10.25) per share (the "Exercise Price"). The exercise period for the Rights will expire at 5:00 p.m., New York City time, on , 1998, unless extended by the Company (the "Expiration Date"). Once made, subscriptions are irrevocable, and no alternative, conditional or contingent rights will be accepted by the Company. The Rights Offering is conditioned upon the purchase of at least 599,500 Common Shares upon the exercise of Rights. In the event that such number of shares is not subscribed for pursuant to the Rights, the Rights Agent (as defined below) will promptly return, without interest, all funds received in payment of the Exercise Price. See "The Rights Offering -- Conditions to the Rights Offering." The Company and certain of its officers and directors, certain officers, directors and employees of Delphi and Rosenkranz & Company, a principal shareholder of Delphi (collectively, the "Standby Purchasers") have entered into an agreement (the "Standby Agreement") pursuant to which the Standby Purchasers have agreed to purchase, and the Company has agreed to sell 900,500 Common Shares (the "Standby Commitment Shares") on the Expiration Date at the Exercise Price. The obligations of the Standby Purchasers and the Company under the Standby Agreement are conditioned on the purchase of at least 599,500 Common Shares upon the exercise of the Rights. In addition, the number of Standby Commitment Shares will be reduced on a share by share basis (but not below 150,000 Common Shares) to the extent that more than 1,149,500 Common Shares are purchased upon the exercise of Rights. To the extent that this reduction results in less than 900,500 Common Shares being purchased by the Standby Purchasers, 150,000 Common Shares ("Minimum Standby Commitment Shares") will be purchased by certain of the Standby Purchasers ("Minimum Standby Purchasers") and any remaining Common Shares will be purchased by the other Standby Purchasers, pro-rata to their commitments. Delphi will finance 50% of the purchases made by substantially all of the Minimum Standby Purchasers of Common Shares represented by their Rights and their Standby Commitment Shares, which will total 273,486 Common Shares if such Minimum Standby Purchasers exercise all of their Rights and purchase all of their Standby Commitment Shares. All of such Common Shares will be pledged to Delphi and Delphi will obtain a security interest in such shares. See "The Rights Offering -- Standby Agreement" and "Certain Relationships and Related Transactions -- Standby Agreement." The offering of Common Shares pursuant to the Rights and the offering of Common Shares pursuant to the Standby Agreement are collectively referred to in this Prospectus as the "Rights Offering." The Standby Commitment Shares are included in the total number of Common Shares registered pursuant to the registration statement of which this prospectus forms a part. Following completion of the Rights Offering, assuming full exercise by all holders of Rights and without giving effect to the issuance of any Common Shares pursuant to the Standby Agreement, the Standby Purchasers will beneficially own, in the aggregate, approximately 38.3% of the Common Shares. In the event that Common Shares are issued to the Standby Purchasers pursuant to the Standby Agreement, the percentage of Common Shares to be held following completion of the Rights Offering by persons who are not affiliated with the Standby Purchasers may be very small. The Standby Purchasers may be deemed to be statutory underwriters and in the event that they seek to sell Common Shares purchased pursuant to the Standby Agreement, such resales may be required to be made pursuant to a resale prospectus included in a registration statement declared effective by the Securities and Exchange Commission prior to such resale. The Company and the Standby Purchasers have not entered into any agreement which would require the Company to file a registration statement covering such resales. The Company has filed with the Securities and Exchange Commission a Registration Statement pursuant to the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Rights offered hereby and the Common Shares issuable upon the exercise thereof. Prior to the Rights Offering, there has been no public market for the Common Shares or the Rights. See "The Rights Offering -- Background" for factors considered by the Company in determining the Exercise Price. Although the Company has applied for quotation of the Common Shares on the Nasdaq SmallCap Market ("Nasdaq") under the symbol "DLTD" the Common Shares have not been approved for quotation by Nasdaq and there can be no assurance that the Common Shares will be accepted for quotation by Nasdaq. In the event that the Common Shares are not approved for quotation on Nasdaq, the Company anticipates that the Common Shares will be quoted on the National Association of Securities Dealers, Inc.'s "Electronic Bulletin Board" under the symbol "DLTD." See "Risk Factors -- No Assurance of Quotation of Common Shares on Nasdaq" and "-- Risks of Quotation on NASD's 'Electronic Bulletin Board' ." There can, however, be no assurance that an active trading market in the Common Shares will develop or be sustained. The Rights are non-transferrable by the holders thereof and no public market for the Rights will develop. ------------------------ AN INVESTMENT IN THE COMMON SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT IN THE COMMON SHARES. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> ==================================================================================================================== EXERCISE AND PROCEEDS TO THE OFFERING PRICE COMPANY(1) - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Per Common Share...................................................... $10.25 $10.25 - -------------------------------------------------------------------------------------------------------------------- Total................................................................. $21,012,500 $21,012,500 ==================================================================================================================== </TABLE> (1) Before deduction of expenses estimated to be $750,000. The date of this Prospectus is , 1997. ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS The Company is organized pursuant to the laws of Bermuda. In addition, certain of the directors, officers and controlling persons of the Company, as well as certain of the experts named herein, reside outside the United States, and all or a substantial portion of their assets, and all of the assets of the Company, are or may be located in jurisdictions outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon such persons who reside outside the United States or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the U.S. federal securities laws. The Company has been informed by its Bermuda counsel, Conyers Dill & Pearman, that the United States and Bermuda do not currently have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would, therefore, not be automatically enforceable in Bermuda. The Company has also been advised by Conyers Dill & Pearman that a final and conclusive judgment obtained in federal or state courts in the United States under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the Supreme Court of Bermuda under the common law doctrine of obligation. Such an action should be successful upon proof that the sum of money is due and payable, and without having to prove the facts supporting the underlying judgment, as long as (i) the court that gave the judgment was competent to hear the action in accordance with private international law principles as applied by the courts in Bermuda and (ii) the judgment is not contrary to public policy in Bermuda, was not obtained by fraud or in proceedings contrary to natural justice of Bermuda and is not based on an error in Bermuda law. A Bermuda court may impose civil liability on the Company or its directors or officers in a suit brought in the Supreme Court of Bermuda against the Company or such persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding such violation would constitute or give rise to a cause of action under Bermuda law. The Company has irrevocably appointed the Service of Process Department at CT Corporation System, 1633 Broadway, New York, New York 10019, as its agent to receive service of process with respect to actions against it arising out of or in connection with violations of the U.S. federal securities laws in any federal or state court in the United States relating to the transactions covered by this Prospectus. products, primarily annuities, to individuals and groups. Delphi is publicly traded on the New York Stock Exchange and as of September 30, 1997, had approximately $3.1 billion in total assets and a market capitalization of approximately $800.0 million. RSL and Safety National have agreed, subject to the completion of the Rights Offering, to participate in various reinsurance arrangements with Oracle Re and to cede to Oracle Re portions of their existing portfolios of employee benefits product insurance relating to their group employee benefit products, for an aggregate premium of approximately $116.0 million. Oracle Re is also currently in negotiations with RSL and Safety National with respect to the ceding of certain prospective risks by such companies to Oracle Re with aggregate annual premiums expected to range from $5.0 million to $10.0 million. RSL is engaged in the sale of life, accident and health insurance products targeted principally to the group employee benefits market. RSL insures groups ranging from ten to more than 1,000 individuals, although the typical size of the insured groups is between 100 to 300 individuals. In underwriting its group employee benefit products, RSL tends to avoid concentrations of business in any particular industry segment or geographic area. RSL is rated "A- (Excellent)" by A.M. Best Company ("A.M. Best"), an independent insurance industry rating organization, and its claims-paying ability is rated "A (Good Financial Security)" by Standard & Poor's Corporation ("Standard & Poor's"). Safety National is an insurance specialist providing excess workers' compensation and insurance products to the self-insured market. Safety National, founded in 1942, is licensed in all 50 states and is one of the oldest continuous writers of excess workers' compensation insurance in the United States. Safety National's excess workers' compensation products provide coverage to employers and groups who self-insure their workers' compensation risks. The coverage underwritten by Safety National applies to losses in excess of the applicable self-insured retentions or deductibles of employers and groups whose workers' compensation claims are generally handled by third-party administrators and is principally targeted to mid-size companies and association groups, particularly small municipalities, hospitals and schools. These target markets tend to be less prone to catastrophic workers' compensation exposures and are less price sensitive than larger account business. Safety National is rated "A (Excellent)" by A.M. Best and its claims-paying ability is rated "A (Good Financial Security)" by Standard & Poor's. Delphi and its affiliates are expected to enter into various agreements with the Company and Oracle Re which will cover, among other things, investment advisory services for Oracle Re, reinsurance arrangements with Oracle Re and the purchase of a $30.0 million note (the "Note") from the Company upon completion of the Rights Offering. Neither Delphi, RSL nor Safety National has any obligation to provide capital or financial support to the Company or Oracle Re except for the obligations pursuant to the Note. See "Management's Discussion and Analysis of Financial Condition and Plan of Operation" and "Certain Relationships and Related Transactions." Business Strategy The Company's objective is to provide reinsurance, through its wholly-owned subsidiary, Oracle Re, initially to RSL and Safety National, and later to other primary issuers, and alternative risk market products and services. The Company intends to pursue the following business strategies: - focus primarily on reinsurance for group employee benefit insurance products, including group long-term disability and excess workers' compensation insurance; - utilize a rent-a-captive facility to fund captive client's risks; - focus on sound underwriting specifying an adequate premium for a given exposure commensurate with the amount of capital which Oracle Re estimates is being placed at risk; - focus on a long-term investment horizon and seek above-average returns through reinvestment of funds held for reserves; - develop a reputation as a financially-secure reinsurer and manage prudently Oracle Re's risk exposure in relation to its capital base; and - focus on generating consistent profits from fees received for the various services provided to clients in connection with Oracle Re's rent-a-captive facility. Oracle Re's rent-a-captive program will allow clients to participate in a significant portion of their own loss exposure without the administrative costs and capital commitment necessary to establish and operate their own captive insurance company. A portion of the underwriting profit and investment income produced by the client's rent-a-captive business will be returned to the client, creating a direct incentive for the client to engage in loss prevention and loss control and to reduce the overall cost of financing its loss exposures. The Company's business strategy with respect to the rent-a-captive products is to design reinsurance programs and to use the rent-a-captive facility to fund captive clients' risks. These programs will be underwritten with the goal of achieving an underwriting profit. Oracle Re typically will receive investment, management and other fees for its captive insurance products and services, but may also retain a degree of underwriting risk. While Oracle Re's initial focus will be on workers' compensation products and services, the Company's strategy anticipates that over time a more complete line of general insurance products and services will be made available. The Company will incur certain costs associated with implementing its business strategy. The Company anticipates that a significant portion of these costs will consist of loss and loss adjustment expenses on its insurance business. The Company will also incur ongoing operating expenses, including U.S. federal excise taxes, profit sharing commissions, and general and administrative costs, including costs incurred with respect to its letters of credit facility, interest expense and salaries. Oracle Re's investment strategy will focus on the management of its asset and liability durations. Since Oracle Re's initial reinsurance transactions will involve liabilities with long-term durations, Oracle Re will be able to invest its assets in long-term duration investments. Oracle Re's investment objective is to maximize returns while focusing on the preservation of capital, diversification of risk and liquidity of investments. Oracle Re's assets will be allocated among a number of investment managers with expertise in utilizing different investment strategies. These broad strategies include, among others, diversified hedging, hedged equity, common stock/specialized trading, short selling, risk arbitrage, distressed securities, futures and commodities and foreign securities investing. The managers primarily invest the assets in a variety of marketable securities and other liquid assets. Oracle Re will invest through the investment vehicles of the managers (generally in the form of a corporation or partnership) or through managed accounts. Oracle Re will be able to redeem its investment from substantially all the investment vehicles on at least an annual basis with many of the managers providing quarterly or more frequent liquidity. Oracle Re's multi-manager, multi-strategy approach is designed to produce capital appreciation with reduced volatility. ------------------------ The Company was formed on September 2, 1997 under the laws of Bermuda. The Company's principal executive offices are located at Chevron House, Church Street, Hamilton, Bermuda, and its telephone number is (441) 295-3688. THE OFFERING Terms of Offering.......... Holders of record at the close of business on the Record Date of the outstanding Delphi Common Stock and options to purchase Delphi Common Stock will receive one Right for every ten such shares and options, on an aggregate basis. Each Right will entitle the holder to purchase one Common Share at a purchase price of $10.25 per share. Holders of Rights will have the opportunity to acquire approximately 2,050,000 Common Shares. Exercise Price............. $10.25 per Common Share Expiration Date............ , 1998 at 5:00 p.m., New York City time Rights..................... Rights will be evidenced by non-transferable certificates that will be exercisable by the holder until the Expiration Date, at which time unexercised rights will become null and void. Conditions to the Rights Offering................. The Rights Offering is conditioned upon the purchase of at least 599,500 Common Shares upon the exercise of Rights. In the event that such number of shares is not subscribed for pursuant to the Rights, the Rights Agent will promptly return, without interest, all funds received in payment of the Exercise Price. See "The Rights Offering -- Conditions to the Rights Offering." Standby Agreement.......... The Company and the Standby Purchasers have entered into the Standby Agreement pursuant to which the Standby Purchasers have agreed to purchase, and the Company has agreed to sell 900,500 Common Shares (the "Standby Commitment Shares") on the Expiration Date at the Exercise Price. The obligations of the Standby Purchasers and the Company under the Standby Agreement are conditioned on the purchase of at least 599,500 Common Shares upon the exercise of the Rights. In addition, the number of Standby Commitment Shares will be reduced on a share by share basis (but not below 150,000 Common Shares) to the extent that more than 1,149,500 Common Shares are purchased upon the exercise of Rights. To the extent that this reduction results in less than 900,500 Common Shares being purchased by the Standby Purchasers, 150,000 Common Shares (the "Minimum Standby Commitment Shares") will be purchased by certain of the Standby Purchasers (the "Minimum Standby Purchasers") and any remaining Common Shares will be purchased by the other Standby Purchasers, pro-rata to their commitments. Delphi will finance 50% of the purchases made by substantially all of the Minimum Standby Purchasers of Common Shares represented by their Rights and their Standby Commitment Shares, which will total 273,486 Common Shares if such Minimum Standby Purchasers exercise all of their Rights and purchase all of their Standby Commitment Shares. All of such Common Shares will be pledged to Delphi and Delphi will obtain a security interest in such shares. See "The Rights Offering -- Standby Agreement" and "Certain Relationships and Related Transactions -- Standby Agreement." The Company has entered into the Standby Agreement to provide additional assurance that, if the minimum required 599,500 Common Shares underlying Rights are sold, the Company would, with the sale of the Standby Commitment Shares, sell at least 1,500,000 Common Shares. Following completion of the Rights Offering, (a) assuming that all of the Rights issued in the Rights Offering are exercised by the holders thereof, an additional 150,000 Common Shares are issued to the Standby Purchasers (the "Additional Shares") and 2,200,000 Common Shares are outstanding following the completion of the Rights Offering, the Standby Purchasers will beneficially own, in the aggregate, approximately 42.5% of the Common Shares of the Company and (b) assuming that 900,500 Standby Commitment Shares are issued to the Standby Purchasers, 1,149,500 Common Shares are issued upon exercise of Rights by the holders thereof and 2,050,000 Common Shares are outstanding following completion of the Rights Offering, the Standby Purchasers will beneficially own, in the aggregate, approximately 82.3% of the Common Shares of the Company. See "The Rights Offering -- Standby Agreement" and "Certain Relationships and Related Transactions -- Standby Agreement." Delphi has agreed to provide five year loans to Messrs. Elenowitz and Smith, directors of the Company, for 50% of the cost of their purchases of Common Shares and to provide certain other Minimum Standby Purchasers with similar loans of up to $356,111 in the aggregate to purchase the Common Shares represented by their Rights and their Minimum Standby Commitment Shares and up to a further $132,738 to the extent that additional portions of their Standby Commitments are utilized. The maximum amount that Delphi will lend to Messrs. Elenowitz and Smith is $781,296 and $131,472, respectively, and the maximum amount that Delphi will lend to the other Minimum Standby Purchasers as a group is $488,848. As a result, the maximum amount that Delphi will lend to the Minimum Standby Purchasers is $1,401,616. Interest on such loans will be paid at the interest rate charged Delphi by its commercial banking group (currently LIBOR plus 0.45%) and payments of interest and principal will be deferred until maturity. All of the Common Shares purchased by such Minimum Standby Purchasers shall be pledged to Delphi to secure the loan to each such Minimum Standby Purchaser and Delphi will have recourse only against such Common Shares. As a result of the loans and if such Minimum Standby Purchasers exercise all of their Rights and purchase all of their Standby Commitment Shares, 273,486 Common Shares will be pledged to Delphi and Delphi will obtain a security interest in such shares. The Company believes these Minimum Standby Purchasers have the ability to repay these loans. Delphi will not, however, assume ownership of the Common Shares as a result of such pledge. To secure repayment obligations, Delphi may cause these Minimum Standby Purchasers to sell the Common Shares purchased pursuant to such financing and to remit the proceeds to Delphi in full satisfaction of the loan. Any sales of Common Shares will be made pursuant to a registration statement declared effective by the Securities and Exchange Commission or pursuant to an exemption from registration. See "The Rights Offering -- Standby Agreement" and "Certain Relationships and Related Transactions -- Standby Agreement." Maximum Number of Common Shares to be outstanding after the Rights Offering(1).............. 2,200,000 shares Voting Rights.............. The Company. The Bye-Laws contain certain provisions that limit the voting rights that may be exercised by certain holders of Common Shares. The Bye-Laws provide that each holder of Common Shares is entitled to one vote per share on all matters submitted to a vote of shareholders, except that if, and so long as, the Controlled Shares (as defined) of any person constitute 9.5% or more of the issued and outstanding Common Shares, the voting rights with respect to the Controlled Shares owned by such person shall be limited, in the aggregate, to a voting power of 9.5%, pursuant to a formula specified in the Bye-Laws. Oracle Re. Subject to the voting limitation set forth above, each Common Share will also entitle the holder thereof to one vote per share on all matters required to be submitted to a vote of the shareholders of Oracle Re. Use of Proceeds............ The minimum and maximum net proceeds from the Offering are estimated to be approximately $14.7 million and $21.9 million, respec- tively. The Company intends to contribute such net proceeds to the capital of Oracle Re to be used to support its insurance operations, including increasing its statutory capital to support its underwriting capacity and the Company will also use the proceeds for working capital and general corporate purposes. See "Use of Proceeds." Risk Factors............... Prospective investors in the Common Shares offered hereby should consider carefully the matters set forth in "Risk Factors," as well as the other information set forth in this Prospectus. Proposed Nasdaq or NASD "Electronic Bulletin Board" Symbol............ DLTD(2) - --------------- (1) Includes 2,050,000 Common Shares which may be issued upon exercise of the Rights and 150,000 Minimum Standby Commitment Shares. Gives effect to the redemption upon the completion of the Rights Offering of the outstanding 1,200,000 Common Shares. See "Capitalization." (2) See "Risk Factors -- No Assurance of Quotation of Common Shares on Nasdaq,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045421_onyx_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045421_onyx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b474996f4819cd5014f23a4de6320f58f3bd31e0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045421_onyx_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in this Summary are defined elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of the definitions of certain capitalized terms. An investment in the Certificates involves various risks, and potential purchasers should carefully consider the matters discussed under "Risk Factors" herein in considering an investment in the Certificates. Issuer..................... Onyx Acceptance Grantor Trust 1997-3 (the "Trust"), to be formed by Onyx Acceptance Financial Corporation (the "Seller") pursuant to the Pooling and Servicing Agreement, to be dated as of September 1, 1997 (the "Agreement"), among the Seller, Onyx Acceptance Corporation (the "Servicer") and Bankers Trust Company (the "Trustee"). Securities Offered......... % Auto Loan Pass-Through Certificates (the "Certificates") representing fractional undivided interests in the Trust. The Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. See "The Certificates and the Agreement -- General." Initial Certificate Balance.................... The initial principal balance of the Certificates is equal to the aggregate principal balance of the Contracts as of the Cut-Off Date calculated in accordance with the Rule of 78's or Simple Interest Method. The term "Cut-Off Date Scheduled Balance" means the principal balance of a Contract as of the Cut-Off Date. See "The Contracts." Seller..................... Onyx Acceptance Financial Corporation, a wholly-owned, limited purpose subsidiary of Onyx Acceptance Corporation ("Onyx"). The Seller's principal executive offices are located at 8001 Irvine Center Drive, 6th Floor, Irvine, California 92618 and its telephone number is (714) 753-1191. See "The Seller." All of the Contracts will have been purchased by the Seller from Onyx. Substantially all of the Contracts have been purchased by Onyx from new and used car Dealers unaffiliated with Onyx or the Seller, and a limited number of Contracts have been originated by Onyx itself. See "The Onyx Portfolio of Motor Vehicle Contracts." Servicer................... Onyx. The Servicer's principal executive offices are located at 8001 Irvine Center Drive, 5th Floor, Irvine California 92618 and its telephone number is (714) 450-5500. See "The Servicer." Trustee.................... Bankers Trust Company. Trust Property............. The Trust's assets (the "Trust Property") will include: (i) a pool of fixed rate motor vehicle retail installment sales contracts (the "Contracts") of which approximately 48.20% of the Aggregate Scheduled Balance as of the Cut-Off Date are Rule of 78's Contracts and approximately 51.80% of the Aggregate Scheduled Balance as of the Cut-Off Date are Simple Interest Contracts, and all of which were purchased from the Seller and secured by new and used automobiles and light-duty trucks (the "Financed Vehicles"), (ii) certain documents relating to the Contracts, (iii) certain monies due under such Contracts on or after the Cut-Off Date, (iv) security interests in the Financed Vehicles and the rights to receive proceeds from claims on certain insurance policies covering the Financed Vehicles or the individual obligors under each related Contract and the right to certain proceeds under the Blanket Insurance Policy, (v) all amounts on deposit in the Collection Account, including all Eligible Investments credited thereto (but excluding any investment income from Eligible Investments), (vi) the benefits of an irrevocable principal/interest surety bond (the "Surety Bond") issued by Capital Markets Assurance Corporation (the "Insurer"), (vii) the right of the Seller to cause Onyx to repurchase certain Contracts under certain circumstances, and (viii) all proceeds of the foregoing. See "The Trust." Pass-Through Rate.......... % per annum, payable monthly at one-twelfth the annual rate and calculated on the basis of a 360-day year of twelve 30-day months. Distribution Date.......... The 15th day of each month (or, if such day is not a Business Day, the next succeeding Business Day) commencing October 15, 1997 (each a "Distribution Date"). A "Business Day" is a day other than a Saturday, Sunday or other day on which commercial banks located in California or New York are authorized or obligated to be closed. Final Distribution Date.... January 15, 2004. Interest Distribution...... On each Distribution Date, monthly interest (the "Interest Distribution") in an amount equal to the product of one-twelfth of the Pass-Through Rate and the Pool Balance as of the end of the Collection Period preceding the related Collection Period will be distributed to the Certificateholders of record on a pro rata basis as of the related Record Date. The "Pool Balance" as of any date is the Aggregate Scheduled Balance of the Contracts as of such date, excluding those Contracts which as of such date have become Liquidated Contracts or have been repurchased by the Seller or purchased by the Servicer. Interest will be paid from collections received on the Contracts on deposit in the Collection Account or previously collected and available for distribution. A "Collection Period" with respect to a Distribution Date will be the calendar month preceding the month in which such Distribution Date occurs; provided, that with respect to Liquidated Contracts (as defined below) the Collection Period will be the period from but excluding the sixth Business Day preceding the immediately preceding Distribution Date to and including the sixth Business Day preceding such Distribution Date. With respect to the first Distribution Date the "Collection Period" for Liquidated Contracts will be the period from and including the Cut-Off Date to and including the sixth Business Day preceding such first Distribution Date. See "The Certificates and the Agreement -- Distributions of Principal and Interest." Principal Distribution..... On each Distribution Date, the Principal Distribution for the related Collection Period will be passed through to the Certificateholders. The "Principal Distribution" on any Distribution Date is the Aggregate Scheduled Balance Decline (as defined below) during the related Collection Period. The Principal Distribution on the Final Distribution Date will include the Aggregate Scheduled Balance of all Contracts that are outstanding at the end of the Collection Period immediately prior to the Final Distribution Date. The "Aggregate Scheduled Balance Decline" for any Distribution Date is the amount by which the Aggregate Scheduled Balance of the Contracts as of the beginning of the related Collection Period exceeds the Aggregate Scheduled Balance of such Contracts as of the end of the related Collection Period. The "Aggregate Scheduled Balance" of the Contracts is the sum of the Scheduled Balance of each Contract. The "Scheduled Balance" of a Rule of 78's Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of each scheduled payment of principal and interest due on such Contract (the "Monthly P&I") on or prior to the date of calculation that is allocated to principal under the Recomputed Actuarial Method. The Scheduled Balance of a Simple Interest Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of Monthly P&I on or prior to the date of calculation that is allocated to principal under the Simple Interest Method. The Scheduled Balance of any Contract that is a Liquidated Contract or that has been purchased by the Servicer or repurchased by the Seller will equal zero. A "Liquidated Contract" is a Contract that (a) is the subject of a Full Prepayment, (b) is a Defaulted Contract and with respect to which Liquidation Proceeds constituting, in the Servicer's reasonable judgment, the final amounts recoverable have been received, (c) is paid in full on or after its Maturity Date or (d) has been a Defaulted Contract for four or more Collection Periods and as to which Liquidation Proceeds constituting the final amounts recoverable have not been received; provided, however, that in any event a Contract that is delinquent in the amount of five monthly payments at the end of a Collection Period is a Liquidated Contract. A "Defaulted Contract" with respect to any Collection Period is a Contract (a) which is, at the end of such Collection Period, delinquent in the amount of two monthly payments or (b) with respect to which the related Financed Vehicle has been repossessed or repossession efforts have been commenced. See "The Contracts" and "The Certificates and the Agreement -- Distributions of Principal and Interest." Servicing Fee.............. The Servicer will be responsible for managing, administering, servicing, and making collections on the Contracts. Compensation to the Servicer will consist of a monthly fee (the "Servicing Fee"), payable from the Trust to the Servicer on each Distribution Date, in an amount equal to the product of one-twelfth of 1.00% per annum (the "Servicing Fee Rate") multiplied by the Pool Balance as of the end of the Collection Period preceding the related Collection Period. As additional compensation, the Servicer will be entitled to any late fees and other administrative fees and expenses or similar charges collected with respect to the Contracts. The Servicer or its designee will also receive as servicing compensation investment earnings on Eligible Investments and the amount, if any, by which the outstanding principal balance of a Rule of 78's Contract that is subject to a Full Prepayment exceeds the Scheduled Balance of such Contract. See "The Certificates and the Agreement -- Servicing Fee." Surety Bond................ On the Closing Date, the Insurer will issue a principal/interest surety bond (the "Surety Bond") to the Trustee pursuant to an Insurance and Reimbursement Agreement (the "Insurance Agreement"), dated as of September , 1997, by and among the Insurer, Onyx, the Seller and the Trustee. Pursuant to the Surety Bond, the Insurer will unconditionally and irrevocably guarantee payment of the Interest Distribution and Principal Distribution on each Distribution Date to the Trustee for the benefit of the Certificateholders. If on the Servicer Report Date with respect to any Distribution Date the amount on deposit and available in the Collection Account, after giving effect to all amounts deposited or payable from the Payahead Account, is less than the sum of the Servicing Fee, the Principal Distribution and Interest Distribution for the related Distribution Date, the Trustee, by delivering a notice to the Insurer, shall demand payment under the Surety Bond in an amount equal to such deficiency. The Insurer shall pay or cause to be paid such amount to the Trustee for credit to the Collection Account and the Trustee shall withdraw from the Collection Account and shall pay such amount to the Certificateholders on the related Distribution Date. On the Final Distribution Date, to the extent the amount on deposit and available in the Collection Account is less than all remaining unpaid interest and principal on the Certificates, the Insurer shall pay or cause to be paid an amount equal to such shortfall. See "The Certificates and the Agreement -- The Surety Bond." Contracts.................. The Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date was $149,600,000. As of the Cut-Off Date the Contracts had a weighted average annual percentage rate of 14.77% and a weighted average remaining term of 56.0 months. Approximately 48.20% of the Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date allocate interest and principal in accordance with the Rule of 78's (the "Rule of 78's Contracts"), and approximately 51.80% in accordance with the Simple Interest Method (the "Simple Interest Contracts"). Approximately 62.61% of the Aggregate Scheduled Balance of the Contracts as of the Cut-Off Date were originated in California, 8.71% in Arizona, 8.67% in Washington and the balance in Florida, Nevada, Oregon, Illinois, Indiana, Idaho and New Jersey. Substantially all of the Contracts were originated by automobile dealerships ("Dealers") and assigned to Onyx, and a limited number of Contracts were originated by Onyx itself. All the Contracts will have been purchased by the Seller from Onyx and by the Trust from the Seller. The Seller is required to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Certificateholders or the Insurer. All of the Contracts have been selected by Onyx from its portfolio of motor vehicle installment sales contracts based upon the criteria specified in the Agreement. All collections of Monthly P&I, all prepayments on the Contracts collected by the Servicer and all amounts paid under the Surety Bond will be deposited in or credited to the Collection Account. Partial prepayments of Monthly P&I ("Payaheads") on Rule of 78's Contracts will be transferred on the Servicer Report Date to the Payahead Account, to be applied against future scheduled payments of Monthly P&I. Partial and full prepayments on Simple Interest Contracts will be passed through to Certificateholders on the Distribution Date immediately following the Collection Period in which such prepayments are received. All payments to the Certificateholders will be made from the Collection Account and certain funds remaining in the Collection Account following distributions to Certificateholders and others will be paid to the Insurer to be promptly distributed in accordance with the terms of the Insurance Agreement. See "The Contracts" and "The Certificates and the Agreement -- Payahead Account." Optional Termination....... The Servicer may purchase all of the Contracts on any Distribution Date as of which the Pool Balance (after giving effect to the Principal Distribution on such Distribution Date) has declined to 10% or less of the Cut-Off Date Scheduled Balance for all of the Contracts (the "Original Pool Balance"), subject to certain provisions in the Agreement. See "The Certificates and the Agreement -- Repurchase of Contracts." Federal Income Tax Status..................... In the opinion of counsel to the Seller, the Trust will be treated for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Certificateholders must report their respective allocable shares of income earned on Trust assets and, subject to certain limitations applicable to individuals, estates and trusts, may deduct their respective allocable shares of reasonable servicing and other fees. See "Certain Federal Income Tax Consequences." ERISA Considerations....... The Certificates may be purchased by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") upon satisfaction of certain conditions described herein. See "ERISA Considerations." Rating..................... It is a condition of issuance of the Certificates that they be rated in the highest rating category by two nationally recognized rating agencies. This rating will be based primarily on the issuance of the Surety Bond by the Insurer. See "Risk Factors -- Rating." Registration of the Certificates............... The Certificates will initially be represented by certificates registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). No person acquiring an interest in a Certificate through the facilities of DTC (a "Certificate Owner") will be entitled to receive a Definitive Certificate representing such person's interest in the Trust, except in the event that Definitive Certificates are issued in certain limited circumstances. See "The Certificates and the Agreement."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045536_novacare_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045536_novacare_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..90eb5c74eb0ffe6593b10d94889566de6b27406f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045536_novacare_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, information in this Prospectus assumes no exercise of the Underwriters' option to purchase from the Company up to 675,000 additional shares of the Company's common stock (the "Common Stock") to cover over-allotments, if any. This Prospectus contains forward-looking statements that are based on management's estimates, assumptions and projections. Important factors that could cause results to differ materially from those expected by management include the inability of the Company to carry out its growth strategy and the other factors discussed under "Risk Factors." Prospective investors should carefully consider the information set forth under "Risk Factors." THE COMPANY NovaCare Employee Services, Inc. (the "Company") is one of the largest (measured by revenues and number of worksite employees) professional employer organizations ("PEO"s) in the United States. The Company is an employee services company which provides small to medium-sized businesses with comprehensive, fully integrated outsourcing solutions to human resource issues, including payroll management, risk management, benefits administration, unemployment services and human resource consulting services. The Company believes its services enable small and medium-sized businesses to cost-effectively manage and enhance the employment relationship by: (i) controlling the risks and costs associated with workers' compensation, workplace safety and employee-related litigation; (ii) providing employees with high quality health care coverage and related benefits; (iii) managing the increasingly complex legal and regulatory environment affecting employment; and (iv) achieving scale advantages typically available to larger organizations. As of June 30, 1997, the Company served 1,742 clients and had 35,028 employees ("worksite employees") at over 3,000 worksites in 45 states, principally in 10 different industries. The Company was established in September 1996 by the Parent and began operations in October 1996 with the acquisition of Resource One, Inc. ("Resource One"), a PEO. Three additional PEO acquisitions were completed in February 1997. The Company's total remaining contingent and non-contingent obligations in connection with these acquisitions, if target levels are met but not exceeded, are approximately $22.2 million in cash and 466,063 shares of Common Stock. See Note 3 of Notes to the Company's Consolidated Financial Statements. On July 1, 1997, the Company acquired NovaPro, the rehabilitation temporary staffing business of the Parent. For the year ended June 30, 1997, the Company had pro forma revenues of over $878 million. See "Pro Forma Financial Information." The National Association of Professional Employer Organizations ("NAPEO") estimates the PEO industry has approximately $18 billion in annual revenues with an historical growth rate over the last five years of approximately 30% per year. The Company has had a relatively short operating history and has only managed the acquired companies for a short period of time. Accordingly, the Company does not have a meaningful historical growth rate and there can be no assurance that the Company's growth rate will equal or exceed that of the PEO industry. According to the U.S. Small Business Administration, there are nearly six million businesses in the United States with under 100 employees, employing over 52 million persons and with approximately $1.1 trillion in aggregate annual payroll. NAPEO estimates that the PEO industry has less than three million worksite employees. The Company believes, therefore, approximately 49 million of these employees are currently unserved by the PEO industry. The PEO industry is highly fragmented. NAPEO data suggest that there are at least 2,400 PEOs currently in operation and that the ten largest PEOs account for less than 10% of existing revenues in the industry. The Company believes that significant consolidation opportunities exist within the PEO industry due to increasing regulatory complexity and capital requirements associated with developing larger service delivery infrastructures, more diversified services and more sophisticated management information systems. The Company's objective is to be the brand, service and performance leader in the PEO industry by focusing on caring service, operational excellence and growth. In addition to emphasizing cost-effectiveness and providing a breadth of services, the Company creates relationships with both its clients and worksite employees by contractually assuming certain administrative and financial employer responsibilities with respect to worksite employees in a "co-employment" relationship. By focusing on employee services, the Company believes that it helps create a more profitable, more productive and more satisfying relationship between clients and employees. After the Offering, the Parent will own approximately 77.2% of the outstanding Common Stock of the Company. In addition, the Company, under a five-year evergreen contract, co-employs most of the Parent's employees (amounting to 15,072 employees at June 30, 1997) for which the Parent pays the Company fees equaling approximately 117% of the wages of such co-employees. Under a management services agreement, the Parent provides information systems and regulatory, legal, accounting and other management services to the Company at the Parent's cost. Under a loan agreement, the Company has borrowed approximately $28.4 million from the Parent, of which $23.7 million will be repaid from the proceeds of the Offering. In addition to its interest in the Company, the Parent is in the business of providing medical rehabilitation services. The Company's operating and growth strategies are intended to leverage the capabilities and expertise of the Parent. Through its relationship with the Parent, the Company has access to: a large, stable and growing employee base; sophisticated infrastructure resulting from investments made by the Parent in human resource management and information technology; management control systems; and workers' compensation risk management experience. In addition to leveraging its relationship with the Parent, the Company plans to grow and operate its business by: (i) increasing its sales force and marketing efforts; (ii) implementing its sophisticated business model; (iii) focusing on geographic expansion; (iv) targeting high potential industries; and (v) acquiring PEOs and other employee service providers and entering into strategic alliances. The Company is a Delaware corporation with executive offices at 2621 Van Buren Avenue, Norristown, PA 19403, and its telephone number at that address is (610) 650-4700. The Company transacts business directly and through its subsidiaries. Unless the context otherwise requires, all references in this Prospectus to the Company include its subsidiaries. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company(1)...................... 4,500,000 shares Common Stock outstanding after the Offering(1)(2)........... 25,143,187 shares Use of proceeds............................................. To repay certain indebtedness Nasdaq National Market symbol............................... NCES </TABLE> - --------------- (1) Does not include up to 675,000 shares of Common Stock that may be sold pursuant to the Underwriters' over-allotment option. (2) Based on the 18,630,000 shares of Common Stock outstanding as of June 30, 1997, adjusted for (i) 1,200,000 shares issued to acquire the assets and liabilities of NovaPro effective July 1, 1997 (see Note 13 of Notes to the Company's Consolidated Financial Statements); (ii) 4,500,000 shares to be issued in connection with the Offering; and (iii) the conversion upon the Offering of 813,187 shares of mandatorily redeemable Common Stock (temporary equity) to 813,187 shares of Common Stock (permanent equity) (see Note 10 of Notes to the Company's Consolidated Financial Statements). Does not include 625,000 shares of Common Stock reserved for issuance under the Company's Stock Option Plan. See "Management -- Executive Compensation -- Stock Option Plan" and Note 11 of Notes to the Company's Consolidated Financial Statements. SUMMARY FINANCIAL AND STATISTICAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA) <TABLE> <CAPTION> HISTORICAL PRO FORMA AS ------------------- ADJUSTED(2) PERIOD FROM ------------- OCTOBER 1, 1996 YEAR ENDED TO JUNE 30, 1997(1) JUNE 30, 1997 ------------------- ------------- <S> <C> <C> OPERATING RESULTS: Revenues(3).............................................. $ 394,193 $ 878,097 Direct Costs: Salaries, wages and employment taxes of worksite employees........................................... 357,238 790,769 Health care, workers' compensation, state unemployment taxes and other..................................... 24,717 62,825 --------- --------- Gross profit........................................ 12,238 24,503 Selling, general and administrative expenses............. 8,273 21,295 Amortization of excess cost of net assets acquired....... 1,034 2,268 --------- --------- Income from operations.............................. 2,931 940 Interest expense, net.................................... (697) (327) --------- --------- Income before income taxes.......................... 2,234 613 Income taxes............................................. 1,542 1,244 --------- --------- Net income (loss)................................... $ 692 $ (631) ========= ========= Net (loss) attributable to common stock............. $ (341) ========= Net (loss) per share..................................... $ (.02) ========= Pro forma net income (loss) per share.................... $ .03 $ (.03) ========= ========= Weighted average number of shares outstanding............ 20,574 25,074 ========= ========= STATISTICAL DATA: EBITDA (in thousands)(4)................................. $ 4,217 $ 3,927 Number of clients at period end.......................... 1,742 1,742 Worksite employees paid at period end: Third parties......................................... 18,634 19,956 Related party......................................... 16,394 15,072 --------- --------- Total............................................ 35,028 35,028 ========= ========= Weighted average worksite employees paid during the period: Third parties......................................... 11,764 18,123 Related party......................................... 15,879 14,428 Weighted average................................. 18,582 32,551 Gross profit per weighted average worksite employee (in whole $'s): Third parties......................................... $ 665 $ 731 Related party......................................... 650 780 Weighted average................................. $ 659 $ 753 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------------------------------- PRO FORMA ACTUAL PRO FORMA(5) AS ADJUSTED(5)(6) ------- ------------ ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Current assets.................................. $39,879 $ 41,669 $ 41,669 Total assets.................................... 95,998 98,330 97,753 Current liabilities(7).......................... 88,721 91,178 49,971 Financing arrangements(7)....................... 1,366 1,366 1,366 Mandatorily redeemable common stock............. 2,731 2,731 -- Shareholders' equity............................ 301 176 43,537 </TABLE> SUMMARY QUARTERLY FINANCIAL AND STATISTICAL DATA (IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA) (UNAUDITED) <TABLE> <CAPTION> PRO FORMA AS ADJUSTED(2) FOR THE QUARTER ENDED --------------------------------------------------- SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, 1996 1996 1997 1997 ------------- ------------ --------- -------- <S> <C> <C> <C> <C> OPERATING RESULTS: Revenues(3)...................................................... $ 202,285 $219,367 $223,333 $233,112 Direct Costs: Salaries, wages and employment taxes of worksite employees..... 183,678 199,071 200,951 207,069 Health care, workers' compensation, state unemployment taxes and other.................................................... 13,813 14,875 15,507 18,630 --------- -------- -------- -------- Gross profit.............................................. 4,794 5,421 6,875 7,413 Selling, general and administrative expenses..................... 4,956 6,088 5,184 5,067 Amortization of excess cost of net assets acquired............... 529 556 616 567 --------- -------- -------- -------- (Loss) income from operations............................. (691) (1,223) 1,075 1,779 Interest (expense) income, net................................... (85) (111) (41) (89) --------- -------- -------- -------- (Loss) income before income taxes......................... (776) (1,334) 1,034 1,690 Income taxes..................................................... 45 37 298 865 --------- -------- -------- -------- Net (loss) income......................................... $ (821) $ (1,371) $ 736 $ 825 ========= ======== ======== ======== Pro forma net (loss) income per share............................ $ (.03) $ (.06) $ .03 $ .03 ========= ======== ======== ======== STATISTICAL DATA: EBITDA (in thousands)(4)......................................... $ (53) $ (418) $ 1,810 $ 2,482 Number of clients at period end.................................. 1,437 1,499 1,531 1,742 Worksite employees paid at period end: Third parties.................................................. 17,080 17,750 18,088 19,956 Related party.................................................. 13,340 14,049 14,557 15,072 --------- -------- -------- -------- Total..................................................... 30,420 31,799 32,645 35,028 ========= ======== ======== ======== Weighted average worksite employees paid during the period: Third parties.................................................. 16,685 17,415 17,919 19,022 Related party.................................................. 13,562 13,695 14,303 14,815 Weighted average.......................................... 30,247 31,110 32,222 33,837 Gross profit per weighted average worksite employee per quarter (in whole $'s): Third parties.................................................. $ 159 $ 164 $ 212 $ 208 Related party.................................................. 158 187 216 234 Weighted average.......................................... $ 159 $ 174 $ 213 $ 219 </TABLE> - --------------- (1) The Company commenced operations effective October 1, 1996, concurrent with the acquisition of Resource One, which was accounted for as a purchase. The computation of weighted average number of shares outstanding is consistent with the computation of weighted average number of shares outstanding for historical and pro forma net income per share described in Note 1 of Notes to the Company's Consolidated Financial Statements. (2) Adjusted on a pro forma basis to give effect to the acquisitions of Resource One, Inc., Employee Services of America, Inc., The TPI Group, Ltd., Prostaff Human Resources, Inc., NovaPro and the Company's contract with the Parent (the "NovaCare Contract") (see Note 2 of Notes to the Company's Consolidated Financial Statements) as if they occurred on July 1, 1996. NovaPro, formerly a business of the Parent, was acquired from the Parent effective July 1, 1997. The application of a portion of the net proceeds of the Offering is assumed to pay certain debt which reduces pro forma as adjusted interest expense. Additionally, the pro forma adjusted worksite employee statistical data reflect 1,322 worksite employees which became third party employees upon the consummation of the NovaPro acquisition. The as adjusted pro forma statement of operations does not purport to represent what the Company's actual results of operations would have been if such acquisitions, the NovaCare Contract and the Offering had occurred on July 1, 1996, or to project the Company's results of operations for any future period. See the Consolidated Pro Forma Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. The computation of weighted average numbers of shares outstanding is consistent with the computation of weighted average number of shares outstanding for supplemental pro forma net income per share described in Note 1 of Notes to the Company's Consolidated Financial Statements. (3) Revenues include all amounts billed to clients for gross salaries and wages, related employment taxes and health care and workers' compensation coverage of worksite employees. (4) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. However, EBITDA should not be considered in isolation or as a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Also, the EBITDA definition used herein may not be comparable to similarly titled measures reported by other companies. (5) Adjusted on a pro forma basis to include the assets and liabilities of NovaPro as of June 30, 1997. See the Consolidated Pro Forma Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. (6) Adjusted to give effect to the conversion of mandatorily redeemable Common Stock into stockholders' equity and the Offering and the application of the estimated net proceeds therefrom, as if each of the foregoing had occurred as of June 30, 1997. See "Use of Proceeds" and the Consolidated Pro Forma Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. (7) The current portion of financing arrangements amounting to $298 is included in current liabilities.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045549_holts_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045549_holts_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0eafc1c9e5f6d3331ded4b87b46ccebefa6f7599
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045549_holts_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus and information under "Risk Factors." All information in this Prospectus gives effect to the reorganization of the Company (the "Reorganization"), pursuant to which the Company merged newly formed wholly-owned subsidiaries with Ashton Distributors, Inc. and Holt's Cigar Company, Inc. in exchange for shares of the Common Stock. See "Reorganization of the Company" and Combined Financial Statements and notes thereto. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised and all references in this Prospectus to the "Company" mean Holt's Cigar Holdings, Inc. and its subsidiaries. All references to a "Fiscal" year refer to the fiscal year ended March 31 of such year. THE COMPANY The Company is a leading distributor and retailer of brand name premium cigars. The Company is the exclusive wholesale distributor of Ashton premium cigars and Ashton cigar-related accessories, a proprietary brand owned by the Company. The Company believes that Ashton premium cigars are nationally recognized as among the top brands due to their flavor, consistency and quality of construction. Cigar Aficionado magazine has rated the Ashton brand as "very good to excellent" in each category evaluated by the publication. The Company's retail operations, which consist of a mail order catalog and the Company's Philadelphia, Pennsylvania retail store, sell over 170 brands of premium cigars as well as cigar-related accessories and other tobacco products. In Fiscal 1997 and the six months ended September 30, 1997, the Company had net sales of $17.3 million and $13.4 million, respectively, of which sales of premium cigars represented approximately 86.3% and 91.7%, respectively. The Company believes that the strength of the Ashton brand and the Company's distribution capabilities, combined with increasing demand for premium cigars, will enable the Company to continue to realize significant future growth. The cigar market is divided into three principal categories: premium cigars, mass market cigars and little cigars. The Company's primary product is premium cigars, which are generally imported, hand-made or hand-rolled cigars made with long filler, 100% natural tobacco leaf and which generally sell at retail prices above $1.00 per cigar. According to the Cigar Association of America, sales of all categories of cigars totalled 4.6 billion units, or $1.6 billion, in 1996, and grew from 1993 to 1996 at a compound annual growth rate ("CAGR") of 10.3% on a unit basis and 30.2% on a dollar basis. Unit sales of premium cigars, which had remained essentially flat between 1981 and 1993, increased at a CAGR of 36.9%, on a unit basis, from 1993 to 1996. The Cigar Association of America reports that premium cigar imports for the six month period ended June 30, 1997 have increased approximately 95.0% compared to cigar imports for the same period in 1996. The Company believes that the increase in demand for premium cigars is a result of several factors, including: (i) increased visibility of cigar smoking; (ii) increased interest in luxury goods; (iii) the expansion of the cigar smoking customer base; and (iv) an increase in the number of venues that cater to cigar smoking customers. Due to the increased demand for premium cigars, the industry continues to experience shortages in supply and increasing prices. The Company believes that its success is due, in part, to the popularity of the Company's Ashton brand, which was introduced in 1986. All Ashton cigars, as well as a portion of the Company's Holt's brand premium cigars, are manufactured for the Company by Fuente Cigar Ltd. ("Fuente Cigar"), a Dominican Republic based manufacturer of premium cigars. Cigars made by Fuente Cigar enjoy a worldwide reputation for the finest tobaccos, expert blends, consistency and quality of construction. The Company believes that its relationship with Fuente Cigar will enable the Company to continue to grow its Ashton brand as well as to introduce new brands to be manufactured for the Company by Fuente Cigar. Two of the executive officers of Fuente Cigar, Carlos A. Fuente, Sr. and Carlos P. Fuente, Jr., are directors of the Company and a related Fuente family partnership will own approximately 24.4% of the shares of Common Stock outstanding upon completion of the Offering. Fuente Cigar has shown its commitment to the Company through agreements which provide for: (i) the exclusive manufacture by Fuente Cigar of Ashton brand premium cigars; (ii) the sale to the Company of at least 5.0 million premium cigars per year for a minimum of ten years; and (iii) the exclusive wholesale distribution by the Company of up to three new premium cigar brands to be developed by Fuente Cigar and the Company. In Fiscal 1996, Fiscal 1997 and the six months ended September 30, 1997, the Company purchased, on a dollar basis, approximately 39.2%, 47.0% and 58.1%, respectively, of its premium cigars from Fuente Cigar. The Company's principal objective is to enhance its position as a leading distributor and retailer of premium cigars. The principal elements of the Company's business strategy include: (i) strengthening the Ashton brand primarily by increasing the volume of Ashton cigars supplied to the Company; (ii) a continued focus on providing a broad range of premium cigar offerings from a variety of leading manufacturers; (iii) building upon its relationship with Fuente Cigar; (iv) using multiple distribution channels to reach a broader customer base; and (v) a commitment to customer service and satisfaction. The Company's growth strategy is designed to capitalize on its competitive strengths and the significant growth trends in the premium cigar market by: (i) introducing new premium cigar brands owned or exclusively distributed by the Company; (ii) increasing the wholesale distribution of the Company's Ashton brand premium cigars; (iii) expanding distribution of the Company's catalog and the size of the Company's proprietary mailing list; and (iv) opening or acquiring a limited number of retail stores in select markets. The Company was incorporated on June 18, 1993 under the laws of the State of Delaware. The Company's executive offices are located at 12270 Townsend Road, Philadelphia, Pennsylvania 19154, and its telephone number is (215) 676-8778. The Company's web site can be accessed at http://www.holts.com. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company......................... 1,750,000 shares Common Stock to be Outstanding after the Offering(1)(2)..... 5,770,000 shares Use of Proceeds............................................. To (i) repay outstanding indebtedness, a portion of which was incurred to fund a Subchapter S distribution to Robert G. Levin; (ii) establish new retail stores; (iii) expand inventories of premium cigars; (iv) expand the Company's mail order business; (v) introduce new premium cigar brands; (vi) upgrade the Company's management information and accounting systems; and (vii) use for general corporate purposes, including working capital. See "Use of Proceeds." Proposed Nasdaq National Market Symbol...................... HOLT </TABLE> - ------------------ (1) Excludes options to purchase an aggregate of 300,000 shares of Common Stock authorized under the 1997 Employee Stock Option Plan (the "Employee Stock Plan"), of which options to purchase 169,500 shares of Common Stock have been granted at the initial public offering price per share, and an aggregate of 180,000 shares of Common Stock authorized under the Non-Management Directors Stock Option Plan (the "Director Stock Plan"), of which options to purchase 60,000 shares of Common Stock have been granted at the initial public offering price per share. See "Management -- Stock Options." (2) The Company also has issued options to purchase an aggregate of 482,400 shares of Common Stock at a price of $.50 per share, which options were granted in January 1996. At the time these options were granted, Robert G. Levin, the Company's Chairman of the Board, Chief Executive Officer and President, and the other shareholder of the Company agreed that these options would only dilute Mr. Levin's ownership interest. Accordingly, Mr. Levin has agreed to contribute to the capital of the Company one share of Common Stock for each share purchased pursuant to these options. See "Management -- Stock Plans."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045560_enherent_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045560_enherent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d3d997671e5b7ceea4df10370823efc7204355bf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045560_enherent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this Prospectus, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in "Risk Factors." The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus assumes that the Underwriters' over-allotment option is not exercised and gives effect to the acquisition of Computer Management Resources, Inc. ("CMR") on July 1, 1997. Unless otherwise indicated, the terms "Company" and "PRT" refer collectively to PRT Group Inc. and its subsidiaries. THE COMPANY PRT was founded in 1989 to provide information technology ("IT") solutions and services internationally, primarily to Fortune 500-sized companies. PRT provides a number of services including Strategic Consulting, Project Solutions and Staff Augmentation. PRT offers full life cycle solutions, beginning with the understanding of the client's business issues and continuing through: (i) problem analysis, (ii) solution architecture and design, (iii) coding, (iv) testing and (v) ongoing maintenance. This life cycle approach, supported by strict software engineering principles embodied in the Company's Process Asset Library ("PAL") software development framework, a knowledge bank of processes, methodologies, tools and reusable work product developed by PRT, as well as an internal, independent software quality assurance function allows the Company to provide high-quality, effective IT solutions. Strategic Consulting services include management consulting, strategic IT planning, emerging technology research, knowledge transfer and "Quality Journey" strategies and implementations, in which PRT helps clients develop internal software development quality control mechanisms, processes and organizational units. Project Solutions services consist of: (i) full life cycle software development, (ii) hardware and software platform migrations, in which a client's information systems are moved from obsolete or legacy hardware or software systems to more efficient and powerful new systems, (iii) maintenance outsourcing, (iv) Year 2000 and other mass change renovation and (v) testing services for both mainframe and client/server environments. Staff Augmentation offers team or individual staffing for a full spectrum of IT services, ranging from traditional systems analysis through testing to high value-added IT consulting and project management. PRT offers its services to clients at their site or off-site. The Company has offices in Connecticut, Illinois, New Jersey, New York and Virginia. In addition, the Company has Software Development Centers ("SDCs") in Barbados, West Indies, and the Hartford, Connecticut area and a recruitment center in Mumbai, formerly Bombay, India. The Company anticipates opening a third SDC in Chennai, formerly Madras, India in 1998. SDCs are the key sites where PRT's Project Solutions are designed, engineered, constructed, tested and supported in accordance with the PAL software development framework. Each SDC has a number of project teams dedicated to clients and separate quality assurance groups to ensure high-quality, cost-effective solutions. The SDCs have common infrastructure, organizational units and human resource practices that allow projects and personnel to be shifted among the SDCs to maximize utilization rates while meeting client requirements. PRT focuses its marketing efforts on large businesses, primarily Fortune 500-sized companies, with significant IT budgets and recurring software development and maintenance needs. PRT's client base includes companies primarily in the financial services, consumer products, communications and healthcare industries. The Company's five largest clients in the first nine months of 1997, in alphabetical order, were Chase Manhattan Bank, N.A., J.P. Morgan & Co. Inc., Mitsubishi International Corp., Philip Morris Companies Inc. and The Prudential Insurance Company of America. Faced with an increased strategic reliance on IT, escalating costs of maintaining in-house IT departments, a shortage of skilled IT personnel and an inability to effectively handle mass change issues, such as the Year 2000 problem, organizations are increasingly outsourcing IT functions to third-party vendors. The Company believes that the following key industry trends will continue to have a major influence on the worldwide IT services market: (i) shortage of IT professionals, (ii) mass change problems, (iii) offshore software development and (iv) software development challenges. The PRT Global Solution enables the Company's clients to outsource a broad range of business and technology needs. PRT's international fulfillment capacity offers a high quality strategic alternative to traditional onsite consulting. The Company reliably and predictably provides flexible technical solutions to a wide range of issues encountered by Fortune 500-sized companies. In this highly competitive and rapidly changing business environment, the Company offers a cost-effective, reliable solution. The following are key attributes of PRT's global solution: (i) emphasis on recruitment and training of IT professionals, (ii) expansion of strategic solutions offerings, (iii) replication of Sofware Development Centers and (iv) utilization of a disciplined software engineering approach based on the Company's PAL framework. PRT has established four primary growth strategies in order to expand revenues and enhance profitability. These growth strategies include: (i) expanding client relationships, (ii) building and expanding SDCs, (iii) capitalizing on investments in infrastructure and personnel and (iv) continuing to pursue strategic acquisitions. The Company's sales have increased to $23.8 million in 1996 from $5.3 million in 1992 representing a compound annual growth rate ("CAGR") of approximately 45%. For the nine-month periods ended September 30, 1997 and September 30, 1996, the Company's revenues were $40.0 million and $16.0 million, respectively, representing an increase of approximately 150%. During the same time periods, the Company's gross margin improved to approximately 30% from approximately 25%. THE OFFERING Common Stock offered by the Company ......... 3,850,000 shares Common Stock offered by the Selling Stockholders ................................ 750,000 shares ---------- Total....................................... 4,600,000 shares Common Stock to be outstanding after the Offering(1) ................................. 18,115,473 shares Non-Voting Common Stock to be outstanding after the Offering(2)........................ 46,500 shares ---------- Total(1).................................... 18,161,973 shares ---------- Use of proceeds............................... Expansion of existing operations, including the Company's SDCs, development of new service capabilities, payment of cumulative 4% dividends on the Company's Convertible Preferred Stock and distributions on the Company's Unit Warrants (as defined herein) and general corporate purposes, including working capital and possible acquisitions of related businesses. Proposed Nasdaq National Market Symbol ....... PRTG - ------------ (1) Does not include 1,416,400 shares of Common Stock issuable upon exercise of outstanding options as of September 30, 1997. See "Management--Stock Option Plan." (2) Each share of Non-Voting Common Stock, par value $.001 per share (the "Non-Voting Common Stock"), is convertible at any time at the option of the holder into one share of Common Stock. See "Description of Capital Stock--Common Stock and Non-Voting Common Stock." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following Summary Financial Data is qualified in its entirety by reference to the Company's financial statements included elsewhere in this Prospectus. <TABLE> <CAPTION> FOR THE NINE MONTHS ENDED YEARS ENDED DECEMBER 31 SEPTEMBER 30 -------------------------------------------------------- ----------------------------------- PRO FORMA PRO FORMA 1992 1993 1994 1995 1996 1996(1) 1996 1997 1997 (1) ---- ---- ---- ---- ---- ------- ---- ---- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues $5,323 $8,181 $13,876 $20,346 $23,801 $31,304 $16,031 $40,034 $44,299 Gross profit 1,210 1,839 3,025 4,752 5,836 7,857 3,938 12,159 13,239 Income (loss) from operations 180 309 453 642 (3,399) (3,526) (1,670) (1,573) (2,072) Net income (loss) $ 105 $ 172 $ 251 $ 115 $(3,269) $(3,583) $(1,804) $(1,658) $(2,136) ====== ====== ======= ======= ======= ======= ======= ======= ======= Net income (loss) per share (2): $ 0.01 $ 0.01 $ 0.02 $ 0.01 $ (0.27) $ (0.29) $ (0.14) $ (1.44) $ (1.47) ====== ====== ======= ======= ======= ======= ======= ======= ======= As adjusted net loss per share (2) $ (0.12) $ (0.15) Weighted average common and common equivalent shares: 12,878,037 12,878,037 12,699,704 12,628,037 12,692,888 12,802,901 12,628,036 14,040,562 14,113,904 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 PRO FORMA HISTORICAL AS ADJUSTED (3) ---------- --------------- (In thousands) <S> <C> <C> BALANCE SHEET DATA: Cash $ 3,714 $ 48,961 Working capital 3,629 52,154 Total assets 34,706 79,808 Total debt (4) 9,602 6,077 Stockholders' equity (deficit) (21,658) 63,951 </TABLE> - ------------ (1) Gives effect to the CMR acquisition as if it occurred at the beginning of the respective period. (2) Computed on the basis described in Note 2 to the Consolidated Financial Statements. (3) Pro forma as adjusted to give effect to: (i) the conversion of the Convertible Preferred Stock (as defined herein) into 2,759,610 shares of Common Stock, (ii) the issuance of an aggregate of 936,365 shares of Common Stock and Non-Voting Common Stock in connection with the exercise of the JPMVC PRT Warrants (as defined herein), (iii) the reclassification of the 119,181 shares of Common Stock issued in connection with the CMR acquisition which were subject to redemption and (iv) the issuance and sale of 3,850,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13.00 per share, and the application of the estimated net proceeds therefrom, as described in "Use of Proceeds." (4) Includes both the current and long-term portion of capital lease obligations, borrowing under PRT's line of credit, note issued in the CMR acquisition and advances payable to a client. See "Certain Transactions--Certain Financing Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045639_u-s_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045639_u-s_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bd6cf4857c0d7dde8c47ee9447accfa095e5c8ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045639_u-s_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' option to purchase up to 375,000 shares of Common Stock that may be sold by the Company to cover over-allotments, if any, and (ii) is adjusted to reflect the 64-for-1 stock dividend with respect to the Common Stock effected in September 1997. Pursuant to amendments to the preferred stock designations adopted in September 1997, the Series A Cumulative Preferred Stock (the "Series A Preferred Stock") and the Series C Cumulative Preferred Stock (the "Series C Preferred Stock") of the Company provide for conversion by the holder of the face amount (including accrued but unpaid dividends) into Common Stock at the price at which the Common Stock is offered to the public. The number of shares referred to in this Prospectus as issuable upon conversion of all of the Series A Preferred Stock and the Series C Preferred Stock assumes a public offering price of $10.00 per share. At an offering price of $10.00 per share, 1,685,333 and 796,871 shares, respectively, of Common Stock will be issuable upon conversion of the Series A Preferred Stock and the Series C Preferred Stock in connection with this offering. The following summary is qualified in its entirety by the more detailed information, financial statements, and related notes included elsewhere in this Prospectus. Prior to January 31, 1996, the Company's fiscal year ended on March 31. The Company has changed its fiscal year end to January 31. References herein to "fiscal 1992", "fiscal 1993" and "fiscal 1994" refer to the Company's fiscal years ended March 31, 1993, 1994 and 1995, respectively. Similarly, references to "fiscal 1995" and "fiscal 1996" refer to the ten months ended January 31, 1996, and the fiscal year ended January 31, 1997, respectively. The differences in period durations must be considered in making period-to-period comparisons. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company U.S. Vision is a retailer of optical products and services primarily through licensed retail optical departments located in national and regional department stores. U.S. Vision's retail optical departments are generally full-service retail vision care stores that offer an extensive selection of designer brands and private label prescription eyewear, contact lenses, sunglasses and accessories with an on-premises, independent optometrist who performs complete eye examinations and prescribes eyeglasses and contact lenses. As of July 31, 1997, the Company operated 558 locations in 48 states, consisting of 495 licensed retail optical departments and 63 freestanding stores. The Company currently operates 368 J.C. Penney Company, Inc. ("J.C. Penney") retail optical departments and is J.C. Penney's primary optical licensee. In addition, the Company operates 57 Sears Roebuck and Co. ("Sears") retail optical departments and 70 retail optical departments in regional department stores such as Federated (Rich's, Burdines and Lazarus), May (Kaufmann's, Famous Barr and L.S. Ayres), Marshall Fields and Carson Pirie Scott, among others. The Company's freestanding stores are generally located in malls and shopping centers. In each of the last six quarters, the Company has experienced strong growth in revenue in existing stores. Comparable store sales for the year ended January 31, 1997 increased by 8.3% when compared to sales for the same stores for the year ended January 31, 1996. Comparable store sales for the six months ended July 31, 1997, increased by 6.4% when compared to the sales for the same stores for the six months ended July 31, 1996. For the six months ended July 31, 1997, the Company's operating income increased by 14.1% over the comparable prior year period from $3.6 million to $4.1 million. According to a report published by the Jobson Optical Group, U.S. retail optical sales grew at a 4.9% compound annual growth rate from $11.5 billion in 1991 to $14.6 billion in 1996. This same industry source projects that total nationwide optical revenues in 1997 will reach $15.4 billion. The Company's management believes that the factors contributing to the steady growth in the U.S. retail optical industry include: (i) the aging of the U.S. population; (ii) an increase in penetration of managed vision care; (iii) increased emphasis on fashion and brand names in prescription eyewear; and (iv) continuing advancements in product technology. According to the Jobson Optical Group, approximately 162.4 million people, or 61% of the total U.S. population, required some form of vision correction in 1996. Competitive Positioning The Company's objective is to be the leading operator of retail optical departments in host store environments. Management believes the Company has several competitive advantages over other optical retailers that will allow it to achieve its business objective. See "Business -- Competitive Positioning." Strong Position with Leading Host Stores. Management believes that the Company's relationships with its host stores provide several competitive advantages such as: (i) low operating expenses; (ii) low initial capital investment; (iii) loyal host store customer base; (iv) established host store advertising and marketing programs; (v) one-stop shopping convenience; and (vi) access to the host store's private label credit card. Emphasis on Managed Vision Care. The Company is a participating provider in Vision One, a national vision care program, which offers comprehensive eyewear benefits to over 40 million covered lives through a network of over 2,000 optical locations. The Company currently generates approximately 27% of its revenues from its participation in vision benefit programs. Enhanced Merchandise Selection. The Company offers an extensive selection of designer and private label branded eyewear which allows it to tailor its merchandise selection to meet the needs of host store customers. The Company also offers branded eyeglass lenses, as well as contact lenses, sunglasses and accessories. Centralized Laboratory Operation. Management believes that the Company's central facility provides it with several operating efficiencies including the ability to: (i) utilize its labor force more efficiently; (ii) monitor and control the quality of production and finished products; (iii) reduce inventory levels; and (iv) provide greater flexibility in developing and adopting new product technologies. Vertical Integration. Through its subsidiary, Styl-Rite Optical Mfg. Co., Inc. ("Styl-Rite"), the Company designs and manufactures plastic frames and sources and imports metal frames for sale primarily in its own stores, as well as to third parties. Growth Strategy From fiscal 1993 to fiscal 1995, the Company's existing management team designed and implemented a repositioning plan to emphasize retail optical departments within host stores, close unprof- itable freestanding stores and consolidate its laboratory operations. Also in fiscal 1996, the Company began establishing infrastructure and systems designed to support future growth by: (i) extending its licensing agreement with J.C. Penney through 2003; (ii) extending its Vision One agreement through 2002; and (iii) designing and beginning the implementation of an integrated management information system. The Company's growth strategy is to capitalize on these initiatives by opening new retail optical departments within existing and new host stores and exploring new retail and medical host environments. See "Business -- Growth Strategy." Open New Retail Optical Departments in Existing Host Stores. The Company expects to open approximately 35 new retail optical departments in fiscal 1997 (28 of which have been opened to date) and expects to open approximately 40 new retail optical departments in fiscal 1998. The majority of these retail optical departments are expected to be located in J.C. Penney stores. The other new stores are expected to be opened in host stores with which the Company has existing relationships such as Sears, Marshall Fields and Lazarus. See "Business - Competition." Pursue Relationships with New Host Department Stores. Management believes that future growth opportunities exist in many department stores for its retail optical departments and is pursuing relationships with a number of department store chains with which it does not currently have an existing relationship. See "Business - Competition." Explore New Retail Environments. The Company is exploring opportunities to expand its operations to include optical departments in other non-mall retail environments. Evaluate Acquisition Opportunities. According to the Jobson Optical Group, the retail optical industry is highly fragmented, with the top ten retail optical chains accounting for only 18% of total optical industry sales in 1996. Retail chains accounted for 35% of all eyewear sales in 1996, while independent retailers accounted for 63%. Management believes the Company is well positioned to take advantage of the consolidation currently taking place in the optical retailing sector. Although the Company has no definitive agreements or letters of intent with regard to acquisitions at this time, it intends to selectively evaluate opportunities to acquire retail optical stores in the future. The Offering Common Stock being offered ............. 2,500,000 shares(1) Common Stock to be outstanding after the offering .............................. 7,485,743 shares(1)(2) Use of proceeds ........................ To repay outstanding indebtedness and for working capital and general corporate purposes, including store openings and remodelings. See "Use of Proceeds." Nasdaq National Market symbol .............................. USVI - ------------ (1) Does not include up to 375,000 shares of Common Stock that may be sold by the Company, pursuant to the Underwriters' over-allotment option. See "Underwriting." (2) Based on the number of shares of Common Stock outstanding as of August 31, 1997. The number of shares of Common Stock to be issued upon the conversion of the Series A Preferred Stock and the Series C Preferred Stock is subject to adjustment based on the public offering price of the Common Stock. Includes the conversion of all shares of the Series A Preferred Stock and the Series C Preferred Stock into 1,685,333 and 796,871 shares, respectively, of Common Stock (assuming a public offering price of $10.00 per share) issuable upon the conversion of the face amount, including accrued but unpaid dividends, of such securities in connection with this offering. The actual public offering price, however, will determine how many shares of Common Stock are issued upon conversion of the Series A Preferred Stock and the Series C Preferred Stock. If the offering price is $9.00 per share, 1,872,592 and 885,412 shares, respectively, of Common Stock will be issuable upon conversion of Series A Preferred Stock and the Series C Preferred Stock. If the offering price is $11.00 per share, 1,532,121 and 724,428 shares, respectively, of Common Stock will be issuable upon conversion of the Series A Preferred Stock and the Series C Preferred Stock. See "Description of Capital Stock -- Conversion Rights of Series A Preferred and Series C Preferred." Excludes 736,190 shares of Common Stock issuable upon the exercise of options outstanding as of July 31, 1997. See "Management -- Stock Option Plan." - ------------ (1) The difference in duration of this period must be considered in making period-to-period comparisons. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045727_triad_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045727_triad_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..efb4bea78023baa19af0aba5aeaf8fa2bd349dd4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045727_triad_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY CONCURRENTLY WITH THE CLOSING OF THE OFFERING MADE HEREBY (THIS "OFFERING"), TRIAD PLANS TO ACQUIRE, IN SEPARATE TRANSACTIONS (COLLECTIVELY, THE "ACQUISITIONS"), IN EXCHANGE FOR CONSIDERATION INCLUDING SHARES OF ITS COMMON STOCK, 11 CONTRACT SALES AND DISTRIBUTION COMPANIES (COLLECTIVELY, THE "FOUNDING COMPANIES"). SEE "THE COMPANY." UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (I) "TRIAD" MEAN TRIAD MEDICAL INC., (II) THE "COMPANY" MEAN TRIAD AND THE FOUNDING COMPANIES, AFTER GIVING EFFECT TO THE ACQUISITIONS, AND (III) "FISCAL 1994," "FISCAL 1995" AND "FISCAL 1996" MEAN, RESPECTIVELY, THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 WITH RESPECT TO TRIAD AND SIX FOUNDING COMPANIES, THE FISCAL YEARS ENDED JUNE 30, 1994, 1995 AND 1996 WITH RESPECT TO TWO FOUNDING COMPANIES, THE FISCAL YEARS ENDED MARCH 31, 1994, 1995 AND 1996, MAY 31, 1994, 1995 AND 1996 AND OCTOBER 31, 1994, 1995 AND 1996 WITH RESPECT TO THREE FOUNDING COMPANIES, RESPECTIVELY. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO THE ACQUISITIONS, (II) ASSUMES THE UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT OPTION AND (III) GIVES EFFECT TO A SPLIT OF THE COMMON STOCK IN CONNECTION WITH THIS OFFERING. BUSINESS The Company was formed to create a national leader in the contract sales and distribution of specialty medical products designed for the hospital and alternate-site health care markets (including sub-acute care facilities, home care companies and specialty physician groups). The Company contracts with specialty medical product manufacturers to provide outsourcing of the sales, marketing, distribution and customer service functions for all or certain of their product lines, thereby eliminating the manufacturers' need to develop and maintain their own sales force or rely on a number of independent local and regional distributors to achieve national coverage. The Company provides a broad range of specialty medical products across the full continuum of patient care, including products used in the surgical, anesthesiology / pain management, critical care, cardiovascular / vascular and infusion therapy markets. It represents over 180 manufacturers and sells products in all 50 states. According to the Health Industry Distributor Association, the medical instrument and supply industry (excluding pharmaceuticals) in the United States represented an estimated annual market in excess of $30 billion in 1996, of which the hospital and the alternate-site markets represented approximately $16 billion and $14 billion, respectively. The Company estimates that there are over 1,200 companies engaged in the contract sales and distribution of specialty medical products in the United States, most of which are small businesses serving local or regional markets and providing representation for a limited number of manufacturers and product lines. The Company believes that contract sales and distribution companies provide manufacturers with the ability to outsource certain sales and distribution functions and afford them access to an experienced sales force with established sales channels. Despite the advantages provided by contract sales and distribution companies, the fragmented network of such companies is generally not capable of serving multiple manufacturers on a national basis or satisfying the centralized buying needs of national group purchasing organizations ("GPOs") and regional integrated delivery networks ("IDNs"). The Company believes that the emergence of a contract sales and distribution company capable of selling, distributing and servicing a broad array of specialty medical products nationwide would meet the evolving needs of both manufacturers and health care providers. The sale and distribution of specialty medical products require a focused selling effort by representatives capable of marketing the products' clinical features and benefits to physicians and other health care professionals and demonstrating the economic benefits associated with these products to purchasing departments and operating management of health care providers. To satisfy the sales and related needs of its represented manufacturers, the Company has over 140 sales representatives, who average in excess of 15 years' medical product sales experience. Through this sales staff and other support staff the Company employs at its 21 sales and distribution facilities located throughout the United States, the Company provides its represented manufacturers and customers with a variety of value-added services designed to facilitate access to the marketplace and product procurement on a time-efficient and cost-effective basis. These services include product introduction and support, education and training, equipment maintenance and repair, manufacturer warranty support and product usage reporting. The Company's objective is to become the leading national contract sales and distribution organization focused on specialty medical products. To achieve this objective, the Company intends to implement an aggressive acquisition program targeting leading local and regional contract sales and distribution businesses in order to expand its product representation. The Company also will seek to achieve certain operating efficiencies and cost savings by reducing facilities, centralizing certain administrative functions and implementing a "best practices" operating strategy throughout the Company. Centralizing these functions will enable the local and regional offices to concentrate their efforts on sales, customer service, inventory management and distribution. A key component of the Company's business strategy is to accelerate internal growth in its existing businesses and subsequently acquired businesses by (i) leveraging its established manufacturer and customer bases, (ii) cross-selling products between the alternate-site and the hospital markets, (iii) implementing a "best practices" sales and marketing strategy, (iv) adding qualified sales representatives and (v) generating ancillary service revenues. For a discussion regarding certain risks associated with the implementation of the Company's acquisition and business strategies, see "Risk Factors" including " -- Dependence on Acquisitions for Growth," " -- Need for Additional Financing" and " -- Risks Related to Internal Growth and Profitability Strategy." THIS OFFERING Common Stock offered by TRIAD........ 4,000,000 shares Common Stock to be outstanding after this Offering(1)............. 9,094,973 shares Use of Proceeds...................... To pay the cash portion of the purchase price for the Founding Companies and to repay certain indebtedness of the Founding Companies. See "Use of Proceeds." Nasdaq National Market symbol........ TRMD - ------------ (1) The number of shares estimated to be outstanding on completion of this Offering consists of (i) 997,758 shares issued to the organizers and management of TRIAD, (ii) 100,000 shares issued in a private placement that closed on September 8, 1997 (the "Private Placement"), (iii) 3,997,215 shares to be issued as consideration in the Acquisitions and (iv) the 4,000,000 shares being offered hereby. Such share number does not include (i) an aggregate of 972,987 shares subject to options granted (or to be granted prior to the closing of this Offering) under TRIAD's 1997 Incentive Plan (the "Incentive Plan"), 831,200 of which have an exercise price equal to the initial public offering price per share and 141,787 of which will have a weighted average exercise price per share of $5.85, (ii) a warrant to purchase up to 100,000 shares (the "Equus Warrant") issued by TRIAD to Equus II Incorporated ("Equus II") in connection with TRIAD's start-up funding and (iii) a warrant to purchase up to 25,000 shares (the "PENMAN Warrant") issued by TRIAD to PENMAN Private Equity and Mezzanine Fund, L.P. ("PENMAN") in connection with assisting TRIAD in the acquisition of one of the Founding Companies. Each of the Equus Warrant and the PENMAN Warrant has a purchase price per share equal to the initial public offering price. See "Management -- Option Grants" and "Certain Transactions -- Organization of TRIAD."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045944_coddle_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045944_coddle_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7209d66d79369dfa68effc4dada11ea3a95f7b15
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045944_coddle_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and financial statements appearing elsewhere herein. Certain terms used in this summary are defined elsewhere herein. Coddle Creek Financial Corp. The Company is a North Carolina corporation recently organized by the Board of Directors of the Bank to acquire all of the capital stock that the Bank will issue upon its conversion from the mutual to stock form of ownership. The conversion of the Bank to stock form, the issuance of the Bank's capital stock to the Company, and the offer and sale of the Common Stock of the Company are referred to in this Prospectus as the "Conversion." The Company has not yet engaged in any business. Upon completion of the Conversion, its business will initially consist solely of owning the Bank, investing the proceeds of the Conversion that are retained by the Company and holding the indebtedness to be outstanding from the ESOP. The Company has received the approval of the Administrator and the Board of Governors of the Federal Reserve System (the "Federal Reserve") to acquire the Bank. The executive office of the Company is located at 347 North Main Street, Mooresville, North Carolina, and its telephone number is (704) 664- 4888. Mooresville Savings Bank, SSB The Bank is a North Carolina-chartered mutual savings bank headquartered in Mooresville, North Carolina and has been in operation since 1937. The Bank has been a member of the Federal Home Loan Bank ("FHLB") system, and its deposits have been federally insured since 1947. The Bank's deposits are now insured by the Savings Association Insurance Fund (the "SAIF") of the FDIC to the maximum amount permitted by law. The Bank conducts business through three full service offices in Mooresville, Cornelius and Huntersville, North Carolina. The Bank's primary market area consists of the communities within an approximately 15-mile radius of its Mooresville office, which includes portions of Iredell, Mecklenburg, Lincoln, Catawba, Rowan and Cabarrus counties in North Carolina. At June 30, 1997, the Bank had total assets of $114.2 million, net loans of $100.5 million, deposits of $95.9 million and retained earnings of $14.7 million. The Bank is primarily engaged in the business of attracting deposits from the general public and using such deposits to make mortgage loans secured by one-to-four family residential real estate located in the Bank's primary market area. The Bank also makes equity line of credit loans, commercial loans, construction loans, loans secured by deposit accounts, and various types of secured and unsecured consumer loans. The Bank is a portfolio lender in that it does not originate its fixed or adjustable rate loans for sale in the secondary market. See "BUSINESS OF THE BANK." The Bank has been and intends to continue to be a community-oriented financial institution offering a variety of financial services to meet the needs of the communities it serves. 5 <PAGE> Highlights of the Bank's operations include: . Profitability. For the six months ended June 30, 1997 and for the fiscal years ended December 31, 1996 and 1995 and the nine months ended December 31, 1994, the Bank had net income of $287,000, $721,000, $780,000 and $675,000, respectively, and a return on average assets of .51%, .66%, .75% and .68%, respectively. Future profitability of the Bank will be affected by changes in market interest rates and other factors. See "RISK FACTORS." . Capital Position. As of June 30, 1997, the Bank's ratios of Tier I capital to total assets and total capital to risk-weighted assets were 12.85% and 25.06%, respectively, which substantially exceeded the FDIC's requirements. On such date, the Bank's ratio of net worth to total assets, calculated under the Administrator's regulations, was 13.39%, which substantially exceeded the North Carolina requirement. See "SUPERVISION AND REGULATION -- Regulation of the Bank -- Capital Requirements Applicable to the Bank." . Emphasis on One-to-Four Family Residential Lending. Historically, the Bank has been predominantly a one- to-four family residential lender. As of June 30, 1997, 82.07% of the Bank's loan portfolio, before net items, was composed of permanent one-to-four family residential loans and 11.19% of its loan portfolio, before net items, was composed of construction and equity line loans. . Asset Quality. On June 30, 1997 and December 31, 1996, the Bank's ratio of nonperforming assets to total assets was .96% and 1.11%, respectively, which is higher than national and regional peer group levels. See "BUSINESS OF THE BANK -- Lending Activities -- Nonperforming Assets and Asset Classification." . Interest Rate Risk. The Bank has a significant amount of interest rate risk. As of June 30, 1997, the Bank's one-year interest sensitivity gap was a negative 28.18% of total interest-earning assets, and its three year cumulative interest sensitivity gap was a negative 42.60%. Other modeling used by the Bank indicates that, as of June 30, 1997, its net portfolio value (present values of cash flows from assets, liabilities and off-balance sheet items) could decrease by 22.85% in the event of an instantaneous and permanent 200 basis point increase in market interest rates and could increase by 9.77% in the event of a 200 basis point decrease in market interest rates. Such modeling also indicates that, as of June 30, 1997, such a 200 basis point increase in market interest rates would result in a 7.00% decrease in net interest income and that a 200 basis point decrease in such rates would result in a 7.97% increase in net interest income. See "RISK FACTORS -- Potential Impact of Changes in Interest Rates" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --Asset/Liability Management." . Unpredictability of Earnings. The earnings of financial institutions can be significantly impacted by changes in interest income and by the 6 <PAGE> interest sensitivity of its assets and liabilities. As is described above, the Bank's asset/liability structure presents a significant amount of interest rate risk, and the Bank's earnings have been slightly reduced during periods of increasing interest rates and are likely to be significantly and negatively impacted if interest rates increase. The Bank has not established a consistent source of noninterest income to stabilize its net income. As a result, the Bank's earnings are significantly tied to market interest rates and are, therefore, not highly predictable. . Nonconforming Loans. The Bank originates loans with the intention that they will not be sold in the secondary market. As of June 30, 1997, the Bank had $25.8 million in adjustable rate nonconforming mortgage loans and $60.2 million in fixed rate nonconforming mortgage loans. Although management believes that many of such loans could be saleable to investors, some of such loans could be sold only after incurring certain costs and/or discounting the purchase price; as a result, the Bank's loan portfolio may be less liquid. See "RISK FACTORS -- Risk Associated with Nonconforming Loans" and "BUSINESS OF THE BANK -- Lending Activities -- Origination and Sale of Loans." . Management Experience. The Bank's six current directors have an average tenure of 18 years on the Bank's Board. In addition, the Bank's three executive officers have 70 years of combined service with the Bank. Turnover is low with other staff members as well, with such persons having an average of ten years tenure with the Bank. Management is actively involved in community activities and has important business ties in the Bank's primary market area. The Conversion The Bank was organized and has operated as a traditional savings institution. It recognizes that the banking and financial services industries are in the process of fundamental changes, reflecting changes in the local, national and international economies, technological changes and changes in state and federal laws. As a result, for several years the Bank has been studying the environment in which it operates and its strategic options. As a result of its study of its strategic options, the Bank adopted the Plan, which provides for conversion of the bank from a North Carolina-chartered mutual savings bank to a North Carolina-chartered stock savings bank. The Bank believes that converting the bank from the mutual to stock form and organizing the Company will provide increased flexibility for the Bank and the Company to react to changes in their operating environment. Consummation of the Conversion is contingent upon receipt of the approvals of the Administrator and the Federal Reserve which are necessary for the Company to acquire the Bank and the approvals of the FDIC and the Administrator which are necessary for the Bank to convert from mutual to stock form. The Administrator has conditionally approved the Conversion and the Company's acquisition application, subject to approval by the Bank's members and satisfaction of certain other conditions. The Federal Reserve has conditionally approved the Company's acquisition application, subject to the satisfaction of certain conditions. The FDIC has issued a notice of non-objection with respect 7 <PAGE> to the Conversion, subject to certain conditions. See "THE CONVERSION -- General." If the Conversion is not approved by the Bank's members, the Bank will remain a North Carolina-chartered mutual savings bank, all subscription funds will be returned, and all deposit withdrawal authorizations will be canceled. Assuming the consummation of the Conversion, the Company and the Bank intend to pursue a business strategy to remain an independent financial institution with the goal of enhancing shareholder value over the long term. Neither the Company nor the Bank has any existing plan to consider any business combination, and neither company has any agreement or understanding with respect to any possible business combination. The Offerings Pursuant to the Plan, between 433,500 shares and 674,475 shares of Common Stock are being offered by the Company at the price of $50.00 per share in the Subscription Offering to the following persons in the following order of priority: (i) the Bank's depositors as of December 31, 1995 who had aggregate deposits at the close of business on such date of at least $50 ("Eligible Account Holders"); (ii) the Bank's Employee Stock Ownership Plan (the "ESOP"); (iii) the Bank's depositors as of September 30, 1997 (the "Supplemental Eligibility Record Date"), who had aggregate deposits at the close of business on such date of at least $50 ("Supplemental Eligible Account Holders"); (iv) the Bank's depositor and borrower members as of November 5, 1997, who are not Eligible Account Holders or Supplemental Eligible Account Holders ("Other Members"); and (v) directors, officers and employees of the Bank who are not Eligible Account Holders, Supplemental Eligible Account Holders or Other Members. Beneficial owners of individual retirement accounts ("IRAs"), Keogh savings accounts and other similar retirement accounts have been deemed to be holders of such accounts for purposes of the exercise of Subscription Rights. See "THE CONVERSION -- Subscription Offering." Shares of Common Stock not subscribed for in the Subscription Offering will be offered in a Community Offering to members of the general public, with priority given to natural persons or trusts of natural persons who are residents of the Local Community, including IRAs, Keogh accounts and similar retirement accounts established for the benefit of natural persons who are residents of the Local Community. The Company and the Bank have the absolute right to reject orders in the Community Offering in whole or in part. See "THE CONVERSION -- Community Offering." If there is a Community Offering, it is anticipated that all shares of Common Stock not purchased in the Community Offering will be offered for sale by the Company to the general public in the Syndicated Community Offering. See "THE CONVERSION -- Syndicated Community Offering." The Subscription Offering and Subscription Rights in the Subscription Offering expire at the Expiration Time, which is 12:00 Noon., Eastern Time, on December _____, 1997, unless extended. The Community Offering, if any, may commence at any time after the commencement of the Subscription Offering and may terminate at the Expiration Time or at any time thereafter, but not later than __________, 199__, unless extended with the approval of the Administrator. 8 <PAGE> Stock Purchase Limitations The maximum aggregate number of shares of Common Stock for which any (i) person or entity (other than the ESOP), (ii) persons or entities exercising Subscription Rights through a single account or (iii) persons "acting in concert" (as defined in the Plan), may subscribe in the Offerings is 6,000 shares. In addition, no person or entity, or group of persons or entities acting in concert, together with any "associate" (as defined in the Plan), may subscribe for more than 12,000 shares of Common Stock sold in the Conversion. However, the Bank's Board of Directors has the right, at any time prior to completion of the Conversion, to decrease the maximum purchase limitations to an amount not less than 1% of the shares issued in the Conversion or increase such maximum purchase limitations to an amount up to 5% of the shares issued in the Conversion. The ESOP may purchase up to 8% of the shares of Common Stock issued in the Conversion (between 34,680 and 53,958 shares assuming the issuance of between 433,500 and 674,475 shares). If because there is an oversubscription or for any other reason the ESOP is unable to purchase in the aggregate up to 8% of the shares of Common Stock issued in the Conversion, it is expected that the ESOP will purchase shares of Common Stock in the open market so that after such purchases a number of shares of Common Stock up to 8% of the number of shares issued in the Conversion will have been acquired by the ESOP. See "RISK FACTORS -- Cost of ESOP." No person or entity may subscribe for less than ten shares of Common Stock, or an aggregate dollar amount of less than $500. Subscription Rights; Purchase of Shares Subscription Rights are exercisable and purchases may be made in the Offerings only by returning the original of the stock order form and form of certification accompanying this Prospectus (the "Stock Order Forms") properly completed with full payment for the aggregate dollar amount of Common Stock desired. Stock Order Forms and required payments for purchases in the Subscription Offering must be received prior to the deadlines designated for the Subscription and Community Offerings. Payment may be made in cash, by check, bank draft, negotiable order of withdrawal or money order, or by authorization of withdrawal from certain deposit accounts maintained with the Bank. Persons wishing to use their Bank IRA's to purchase shares of Common Stock must visit the Stock Information Center on or before December _____, 1997 in order for the necessary paperwork for such purchases to be completed and executed prior to the Expiration Time. See "THE CONVERSION -- Exercise of Subscription Rights and Purchases in the Community Offering." Non-transferability of Subscription Rights The Subscription Rights granted under the Plan are non-transferable. Subscription Rights may be exercised only by the person to whom they are issued and only for his or her own account. Persons exercising Subscription Rights are required to certify that they are purchasing shares for their own accounts within the purchase limitations set forth in the Plan and that they have no agreement or understanding for the sale or transfer of such shares. See "THE CONVERSION -- Certain Restrictions on Transfer of Subscription Rights; False or Misleading Order Forms." Appraisal The Plan requires that the aggregate purchase price of the Common Stock be based upon an independent valuation of the estimated aggregate pro forma market value of the Company and the Bank. JMP Financial, Inc., of Grosse 9 <PAGE> Pointe Park, Michigan ("JMP Financial"), an independent financial consulting firm, has advised the Bank and the Company that in its opinion, at October 17, 1997, the Valuation Range of the aggregate estimated pro forma market value of the Company and the Bank was from $21,675,000 to $29,325,000. The appraisal will be reviewed and, if appropriate, revised by JMP Financial upon conclusion of the Offerings. The appraisal by JMP Financial is not intended and should not be construed as a recommendation of any kind as to the advisability of purchasing the Common Stock. See "MARKET FOR COMMON STOCK," "PRO FORMA DATA" and "THE CONVERSION --Purchase Price of Common Stock and Number of Shares Offered." Stock Pricing and Number of Shares to be Offered The purchase price of the Common Stock offered in the Subscription Offering and the price at which the Common Stock is sold in the Community and Syndicated Community Offerings, if any, will be $50.00 per share. The aggregate dollar amount of Common Stock that may be sold in the Conversion will be determined by the Board of Directors of the Bank and the Company based upon the independent appraisal of the pro forma market value of the Company and the Bank prepared by JMP Financial. Depending on market and financial conditions following commencement of the Subscription Offering, the number of shares offered and sold in the Conversion may be increased or decreased. With the consent of the Administrator and the FDIC and in order to reflect changes in market and financial conditions following commencement of the Subscription Offering, the aggregate purchase price of the shares of Common Stock issued in the Conversion may be increased, without any solicitation of subscriptions or right to cancel, rescind or change subscription orders, to up to 15% above the maximum of the Valuation Range. However, the aggregate dollar amount of Common Stock that may be sold in the Conversion will not be more than $33,723,750 or less than $21,675,000 without a resolicitation of subscribers. Any change in the total dollar amount of the Offerings outside of the current Valuation Range will be subject to the receipt of an updated appraisal confirming such valuation and regulatory approvals. See "THE CONVERSION -- Purchase Price of Common Stock and Number of Shares Offered." Use of Proceeds The net proceeds from the sale of the Common Stock in the Conversion, including shares purchased by the ESOP with funds loaned by the Company, are estimated to be between $18,258,820 and $24,825,580, depending upon the actual expenses of the Conversion and other factors. See "PRO FORMA DATA." The Company intends to use a portion of the net proceeds of the Offerings (estimated between $1,734,000 and $2,697,900 assuming the ESOP's purchase of between 34,680 and 53,958 shares at $50.00 per share) to fund the loan made to the ESOP to purchase shares of Common Stock in the Conversion. After deducting the amount of such loan from the proceeds, the Company is expected to retain approximately 50% of the remaining net proceeds from the issuance of the Common Stock. The Company will initially invest these proceeds primarily in interest-earning deposits, U.S. government, federal agency and other marketable securities and mortgage-backed securities. See "USE OF PROCEEDS." The remainder of the net proceeds from the sale of the Common Stock will be paid by the Company to the Bank in exchange for all of the capital stock of the 10 <PAGE> Bank. The net proceeds paid to the Bank will become part of the Bank's general funds, and will initially be invested in mortgage and other loans, and investments consisting primarily of U.S. government and federal agency obligations, interest-earning deposits and other marketable securities in accordance with the Bank's lending and investment policies. Net proceeds will also be used for other general corporate purposes. The Bank and the Company may consider opening one or more branch offices in its primary market area and other nearby communities, and such proceeds could be used for such purposes. However, the Company and the Bank have no current plans to open any additional office. The Company and the Bank have no present intention to file consolidated tax returns which will preserve for the Company the ability to use a portion of the proceeds to make a return of capital in the future. However, the Company has not made any decision to pay such a return of capital. The Company and the Bank have agreed to notify the FDIC before making a return of capital during the first three years following the Conversion. See "DIVIDEND POLICY." At any time following Company stockholder approval of the Bank's Management Recognition Plan Trust (the "MRP Trust"), the MRP Trust may acquire a number of shares of Common Stock equal to 4% of the number of shares issued in the Conversion. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan." Whether such shares are purchased, and the timing of such purchases, will depend on market and other conditions and the alternative uses of capital available to the Company. Such shares may either be acquired in the open market or acquired through the Company's issuance of authorized but unissued shares. In the event shares are acquired in the open market, the funds for such purchase may be provided by the Bank from the proceeds of the Conversion. It is estimated that between 17,340 and 23,460 shares will be acquired by the MRP Trust, assuming the issuance of between 433,500 and 586,500 shares in the Conversion. If all such shares were acquired by the MRP Trust in the open market, and if such shares were acquired at a price of $50.00 per share, the Bank would contribute between $867,000 and $1,173,000, respectively, to the MRP Trust for this purpose. Additional shares would be acquired if the number of shares issued in the Conversion exceeds 586,500, and the price per share paid by the MRP Trust could be more or less than $50.00 per share, either of which would change the total contribution to the MRP Trust. See "RISK FACTORS -- Cost and Possible Dilutive Effect of the MRP Trust and Stock Option Plan" and "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan." No awards will be made under the MRP until the MRP is approved by the Company's stockholders. 11 <PAGE> Dividends Following the Conversion, the Company currently expects to pay quarterly cash dividends on the Common Stock. Annual dividends are expected to be approximately $1.00 per share. In addition, the Company may determine from time to time that it is prudent to pay special cash dividends. Payment of dividends will be subject to determination and declaration by the Company's Board of Directors. The Board of Directors will periodically review its dividend policy in view of the operating results and financial condition of the Company and the Bank, net worth and capital requirements, regulatory restrictions, tax consequences, industry standards, and general economic conditions, and it will authorize cash dividends to be paid if it deems such payment appropriate and in compliance with applicable law. There can be no assurance that dividends will in fact be paid on the Common Stock or that, if paid, such dividends will not be reduced or eliminated in future periods. Also, there are certain regulatory limits on the Company's ability to pay dividends and the Bank's ability to pay dividends to the Company. See "DIVIDEND POLICY" and "SUPERVISION AND REGULATION -- Regulation of the Bank --Restrictions on Dividends and Other Capital Distributions." In addition, see "TAXATION" for a discussion of federal income tax provisions that may limit the ability of the Bank to pay dividends to the Company without incurring a recapture tax. Market for Common Stock The Company, as a newly organized company, has never issued capital stock, and consequently, there is no market for the Common Stock at this time. Trident Securities is expected to make a market in the Common Stock, by developing and maintaining historical stock trading records, soliciting potential buyers and sellers of shares and attempting to match buy and sell orders. In connection with its market making activities, Trident may buy or sell shares from time to time for its own account. However, Trident securities will not be subject to any obligation with respect to such efforts. It is anticipated that the Common Stock will be traded on the over-the-counter market with quotations available through the OTC Electronic Bulletin Board. A public market having the desirable characteristics of depth, liquidity and orderliness will depend upon the presence in the market place of both willing buyers and willing sellers at any given time. No assurance can be given that an active trading market will develop and be maintained. See "MARKET FOR COMMON STOCK." Management The directors and executive officers of the Company and of the Bank and their associates currently anticipate subscribing for Common Stock in the aggregate amount of $2,600,000, or 52,000 shares. As a result, such persons anticipate subscribing for 12.00% to 8.87% of the shares of Common Stock issued in the Conversion based upon the minimum and maximum of the Valuation Range, respectively. See "ANTICIPATED STOCK PURCHASES BY MANAGEMENT." In addition, it is expected that the ESOP will subscribe for 8% of the shares of Common Stock issued in the Conversion (between 34,680 and 53,958 shares, assuming the issuance of between 433,500 and 674,475 shares). See "MANAGEMENT OF THE BANK -- Employee Stock Ownership Plan." It is expected that directors and certain employees of the Company and the Bank will also receive restricted stock grants under the MRP for a number of shares of Common Stock equal to 4% of the number of shares issued in the Conversion and will receive options under the Stock Option Plan to purchase a number of shares of Common Stock equal to 10% of the number of shares issued in the Conversion, if such plans are approved by the stockholders of the Company at a meeting of 12 <PAGE> stockholders following the Conversion. See "-- Benefits to Directors and Officers" and "MANAGEMENT OF THE BANK" -- Proposed Management Recognition Plan" and "-- Proposed Stock Option Plan." If (i) the Stock Option Plan is approved by the stockholders of the Company within one year after the Conversion and all of the stock options which could be granted to directors and executive officers under the Stock Option Plan are granted and exercised and all option shares are acquired in the open market, (ii) the MRP is approved by the stockholders of the Company within one year after the Conversion, all of the MRP shares which could be granted to directors and executive officers are granted and issued and all such shares are acquired in the open market, (iii) the ESOP acquires 8% of the shares issued in the Conversion and none of such shares are allocated, and (iv) the Company did not issue any additional shares of its Common Stock, the shares held by directors and executive officers and their associates as a group, including (a) shares purchased outright in the Conversion, (b) shares purchased by the ESOP, (c) shares purchased pursuant to the Stock Option Plan and (d) shares granted under the MRP, would give such persons effective control over as much as 31.34% or 28.21%, at the minimum and maximum of the Valuation Range, respectively, of the Common Stock issued and outstanding. Benefits to Directors In connection with the Conversion, certain benefits and Executive Officers will be provided to directors, officers and employees of the Bank. Employment Agreements. In connection with the Conversion, the Bank expects to enter into employment agreements with George W. Brawley, Jr., President and Chief Executive Officer, Dale W. Brawley, Executive Vice President and Treasurer, and Billy R. Williams, Secretary and Controller. The employment agreements provide for initial annual salaries of $139,200, $84,000 and $56,400 for Mr. G. Brawley, Mr. D. Brawley and Mr. Williams, respectively. See "MANAGEMENT OF THE BANK -- Employment Agreements." Mr. G. Brawley, Mr. D. Brawley and Mr. Williams, along with all other employees, are also eligible to receive holiday bonuses as declared by the Bank's Board of Directors. During the fiscal year ended December 31, 1996, the Bank's employees received holiday bonuses based on a percentage basis, depending on the employee's salary. See "MANAGEMENT OF THE BANK -- Bonus Compensation." Severance Plan. In connection with the Conversion, the Bank plans to adopt a Severance Plan for the benefit of its employees, including officers who at the time of a "change of control" (as defined in the Severance Plan), have a remaining term under their employment agreement of two years or less. The Severance Plan provides that in the event there is a change in control and (i) the employment of any full time employee of the Bank is terminated in connection with, or within 24 months after the change in control, other than for cause, or (ii) an employee terminates his or her employment following a decrease in the level of such employee's annual base salary rate or a transfer of such employee to a location more than 40 miles distant from the employee's primary work station within 24 months after a change in control, the employee shall be entitled to a severance benefit equal to the greater of (a) an amount equal to two weeks' salary at the employee's existing salary rate multiplied times the employee's years of service or (b) the amount of one month's salary at the employee's salary rate at the time of termination, subject to a maximum payment equal to one half of the employee's annual salary. See "MANAGEMENT OF THE BANK -- Severance Plan." ESOP. In connection with the Conversion, the Bank has established the ESOP. As part of the Conversion, the ESOP intends to borrow funds from the Company and to use such funds to purchase 8% of the shares of Common Stock to be issued in the Conversion, estimated to be between 34,680 and 53,958 shares, assuming the issuance of between 433,500 and 674,475 shares. See "MANAGEMENT OF THE BANK -- Employee Stock Ownership Plan." MRP. Pursuant to the MRP, which is expected to be adopted by the Boards of Directors of the Company and the Bank, directors and certain employees of the Bank could receive restricted stock grants of a number of shares of Common Stock equal to 4% of the shares issued in the Conversion (between 17,340 and 23,460 shares, assuming the issuance of between 13 <PAGE> 433,500 and 586,500 shares). Assuming that the shares issued pursuant to the MRP had a value of $50.00 per share, such shares would have a value of between $867,000 and $1,173,000. Recipients of restricted stock under the MRP will not have to pay for their restricted shares. Under applicable regulations, if the proposed MRP is submitted to and approved by the stockholders of the Company within one year after consummation of the Conversion, (i) no employee of the Bank (including Mr. G. Brawley, Mr. D. Brawley and Mr. Williams) could receive more than 25% of the shares issued under the MRP, or 5,865 shares, assuming the issuance of 586,500 shares in the Conversion, (ii) the five non-employee directors of the Bank could receive restricted stock grants for an aggregate of not more than 25% of the shares issued under the MRP, or 5,865 shares, assuming the issuance of 586,500 shares in the Conversion and (iii) none of the five non-employee directors of the Bank could receive individually more than 5% of the shares issued under the MRP, or 1,173 shares, assuming the issuance of 586,500 shares in the Conversion. Assuming the MRP shares had a value of $50.00 per share, 5,865 shares would have a value of $293,250 and 1,173 shares would have a value of $58,650. If the MRP is submitted to and approved by the Company's stockholders more than one year after consummation of the Conversion, the regulatory percentage limitations set forth above would not apply. The MRP will only be implemented if approved by the stockholders of the Company at a meeting of stockholders to be held no sooner than six months following the Conversion. See "MANAGEMENT OF THE BANK --Proposed Management Recognition Plan." Stock Options. Pursuant to the Stock Option Plan which is expected to be adopted by the Boards of Directors of the Company and the Bank, directors and certain employees of the Bank could receive options to purchase a number of shares of Common Stock equal to 10% of the shares issued in the Conversion (between 43,350 and 58,650 shares, assuming the issuance of between 433,500 and 586,500 shares). Under applicable regulations, if the proposed Stock Option Plan is submitted to and approved by the stockholders of the Company within one year after consummation of the Conversion, (i) no employee of the Bank (including Mr. G. Brawley, Mr. D. Brawley and Mr. Williams) could receive more than 25% of the options issued under the Stock Option Plan, or options to purchase 14,663 shares, assuming the issuance of 586,500 shares in the Conversion, (ii) the five non- employee directors of the Bank could not receive in the aggregate more than 25% of the options issued under the Stock Option Plan, or options to purchase 14,663 shares, assuming the issuance of 586,500 shares in the Conversion, and (iii) none of the five non-employee directors of the Bank could receive individually more than 5% of the options issued under the Stock Option Plan, or options to purchase 2,933 shares, assuming the issuance of 586,500 shares in the Conversion. If the Stock Option Plan is submitted to and approved by the Company's stockholders more than one year after consummation of the Conversion, the regulatory percentage limitations set forth above would not apply. 14 <PAGE> The Stock Option Plan will only be implemented if approved by the stockholders of the Company at a meeting of stockholders to be held no sooner than six months following the Conversion. The exercise price of the options will be the fair market value of the Common Stock at the time the options are granted (which will be after the Stock Option Plan is approved by the Company's stockholders), and the options will have terms of ten years or less. Recipients of options under the Stock Option Plan will not have to pay for the options issued to them. See "MANAGEMENT OF THE BANK -- Proposed Stock Option Plan." 15 <PAGE> Income Tax Consequences of Subscription Rights If the Subscription Rights granted in connection with the Conversion were deemed to have an ascertainable value, receipt of such rights would be taxable to recipients who exercise such Subscription Rights, either as ordinary income or capital gain, in an amount not in excess of such value. Whether such Subscription Rights are considered to have any ascertainable value is an inherently factual determination. The Bank has received an opinion from JMP Financial stating that the Subscription Rights do not have any ascertainable value. The opinion of JMP Financial is not binding on the Internal Revenue Service ("IRS"). See "THE CONVERSION -- Income Tax Consequences." Anti-Takeover Provisions The Articles of Incorporation and Bylaws of the Company and the Bank contain certain restrictions that are intended to discourage non-negotiated attempts to acquire control of the Company or the Bank. The Board of Directors of the Company believes that these provisions encourage potential acquirors to negotiate directly with the Board of Directors. However, these provisions may discourage an attempt to acquire control of the Company which stockholders might deem to be in their best interests or in which they might receive a premium over the then market price of their shares. These provisions may also render the removal of a director or the entire Board of Directors of the Company more difficult and may deter or delay changes in control which have not received the requisite approval of the Company's Board of Directors. Other factors, such as voting control of directors and officers and agreements with employees, may also have an anti-takeover effect. See "RISK FACTORS --Anti- Takeover Considerations" and "ANTI-TAKEOVER PROVISIONS AFFECTING THE COMPANY AND THE BANK." Risk Factors Special attention should be given to the "RISK FACTORS" section of this Prospectus, which discusses the possible effects of changes in interest rates on the Bank and the thrift industry in general, anticipated low return on equity following the Conversion, the limited market for the Common Stock, the cost of the ESOP, the cost and possible dilutive effect of the MRP and stock option plan, potential financial institution regulation and legislation, competition, the risk associated with the Bank's nonconforming loans, the concentration of large residential mortgage loans in the Lake Norman area, certain anti-takeover considerations, and certain other matters that potential purchasers should consider before deciding whether to subscribe for the Common Stock offered hereby. 16 <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001045996_vitas_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001045996_vitas_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..de0a8d07f1922ad7ab79ec66b486989301cbdac7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001045996_vitas_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY, AND THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO A FISCAL YEAR REFER TO THE 12-MONTH PERIOD ENDED SEPTEMBER 30 OF THAT YEAR. EXCEPT AS OTHERWISE INDICATED HEREIN, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND HAS BEEN ADJUSTED TO GIVE EFFECT TO A 1-FOR-2.7273 REVERSE STOCK SPLIT TO BE EFFECTIVE UPON CONSUMMATION OF THIS OFFERING. THE COMPANY GENERAL Vitas is the largest provider of hospice services in the United States. Hospice services emphasize palliative medical care and related services that focus primarily on improving the quality of life of terminally ill patients and their families, as opposed to attempting to "cure" the underlying or end-stage disease. Vitas provided hospice care to more than 31,000 patients in fiscal 1996, which the Company believes is more than four times the number of patients served by the next largest U.S. hospice provider. Such care is provided in the patient's home, which could be a residence or a long-term care or assisted living facility, or in an inpatient facility, and is generally reimbursed by third-party payors on a fixed "per diem" basis. The Company's hospice operations, which were among the first in the U.S., were co-founded by the Company's current Chairman of the Board and Chief Executive Officer, who has been instrumental in the development of the legislative and clinical framework for hospice care in the U.S. The Company provides a comprehensive range of palliative services through 21 programs in 27 locations and believes it is the largest or second largest provider of hospice services in substantially all of its service areas within Florida, Texas, California, Illinois, Ohio, Pennsylvania and Wisconsin. For the nine months ended June 30, 1997, the Company served an average daily census of approximately 4,500 patients with an average length of stay of approximately 66 days. The Company expects to grow through a combination of: (i) acquisitions which will allow it to benefit from the opportunities for consolidation available in the fragmented hospice industry and (ii) greater demand for hospice services to the extent that such services become increasingly accepted as a means of caring for terminally ill patients and based on an increasingly aging population in the U.S. Since fiscal 1992, the Company's net revenue has increased from approximately $102 million to approximately $214 million in fiscal 1996. THE HOSPICE INDUSTRY The hospice movement in the U.S. began in the mid-1970s to provide terminally ill patients and their families with an alternative to hospital-based, cure-oriented care. Hospice services focus on improving the quality of life for patients and their families, such as the reduction of pain, uncomfortable symptoms, the physical and psychological stress of the terminal disease and bereavement care for the families. Care is coordinated through a team of nurses, physicians, home health aides, clergy, social workers, counselors and community volunteers, which assesses and coordinates the clinical and psychological needs of the patient and family. By providing an interdisciplinary approach to managing a terminal illness, a hospice patient avoids having to receive independent medical services from a number of providers, which may have little or no effective coordination among them. This often results in a lack of clear accountability for clinical outcomes and the cost of services provided. Various studies have indicated that hospice care is cost-effective when compared to end-of-life curative options, largely because it reduces the number of patient days in an acute care setting. According to the National Hospice Organization ("NHO"), approximately 450,000 patients in the U.S. received hospice care in 1996, compared to approximately 210,000 patients in 1990. <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - --------------- ------------------------------------------------------------------------------------------------- <C> <S> 10.32 Form of 1992 MEIP Stock Option Agreement. 10.33 1994 Management Equity Incentive Plan ("1994 MEIP"), adopted January 25, 1994. 10.34 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Performance Vesting). 10.35 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Time Vesting). *10.36 Form of Special Severance Agreement used by Vitas for certain officers and directors, including Hugh A. Westbrook, J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A. Sterling and David A. Wester. *10.37 Form of Indemnification Agreement used by Vitas for officers and directors, including Hugh A. Westbrook, Esther T. Colliflower., J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A. Sterling, David A. Wester, Bruce F. Wesson, Patrick T. Hackett, Timothy O'Toole, Donald Gaetz and William Ferretti. 10.38 Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement, dated as of February 17, 1995, between Vitas and NationsBank of Florida, National Association ("NationsBank"). 10.39 Amended and Restated Revolving Credit Note, dated February 17, 1995, by Vitas to the order of NationsBank. 10.40 Term Note, dated February 17, 1995, by Vitas to the order of NationsBank. 10.41 Amended and Restated LC Account Agreement, dated as of February 17, 1995, between Vitas and NationsBank. 10.42 Amendment No. 1 to Amended and Restated Revolving Credit and Reimbursement Agreement between Vitas and NationsBank, dated as of June 30, 1995. 10.43 Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement between Vitas and NationsBank, dated as of March 28, 1996. 10.44 Amendment No. 3 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement by and between Vitas and NationsBank, dated September 30, 1996. 10.45 Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and Related Documents between Vitas and NationsBank, dated as of November 1, 1996. 10.46 Amendment No. 5 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and Related Documents between Vitas and NationsBank, dated as of February 15, 1997. 10.47 Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and Related Documents between Vitas and NationsBank, dated as of March 24, 1997. 10.48 Amendment No. 7 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and Related Documents between Vitas and NationsBank, dated as of September 1, 1997. 10.49 Amended and Restated Pledge and Security Agreement, dated February 17, 1995, between Vitas, as Borrower, and NationsBank. </TABLE> Reimbursement for hospice care was added as a Medicare benefit in 1982. As approximately 72% of all deaths in the U.S. are among people older than 65 years of age, Medicare is the payor of the vast majority of end-of-life health care, including hospice care. Hospice care became an optional state Medicaid benefit in 1986 and is currently covered by Medicaid in at least 41 states, including all of the states in which Vitas operates, and by most private insurance plans. Reimbursement by Medicare and Medicaid collectively represented approximately 94% of the Company's net revenue in fiscal 1996. According to statistics developed by the Congressional Budget Office (the "CBO"), Medicare reimbursement for hospice services grew from approximately $318 million in 1990 to approximately $1.9 billion in 1995, and is expected to grow to approximately $4.7 billion by 2000. BUSINESS STRATEGY The Company's business strategy is based on leveraging its operating model, which is designed to provide quality hospice care at the local program level supported by centralized corporate services, including financial management, clinical operations and information and telecommunications systems. Key elements of the Company's business strategy include: (i) acquisitions of hospice operations in the Company's existing markets and in new service areas; (ii) growth in utilization in the Company's existing service areas through the continued education of healthcare providers and patients designed to increase the awareness and acceptance of hospice services; and (iii) development of business arrangements with managed care organizations and other healthcare providers which desire to provide a full continuum of care for their patients. The hospice industry in the U.S. is highly fragmented, and Vitas believes that significant opportunities exist for future consolidation. Based on industry data, the Company estimates there are approximately 3,000 hospice programs in the U.S., more than 70% of which are not-for-profit or government sponsored, and which have, on average, a daily census of between 40 and 45 patients. In light of the capital requirements and competitive pressures facing many hospice providers in the current healthcare environment, the Company believes that many providers of hospice care will find it attractive to combine their operations with other providers that have greater access to capital to better fulfill their mission to provide optimal end-of-life care in their communities. The Company believes that its history of having completed such transactions and its operating model, which is designed to take advantage of the economies of scale from such acquisitions, should enable it to realize opportunities for acquisitions that may be presented in the future. Since February 1995, the Company has completed three acquisitions (two involving not-for-profit operations) which have expanded its operations into new markets in California and Central Florida and expanded its presence in Ohio. The Company believes that it has significant competitive advantages relative to other independent hospice providers and integrated healthcare service providers with hospice operations, including its: - size and position of market leadership; - unique focus and experience in providing hospice services; - centralized operating model designed to realize efficiencies from local and national economies of scale; - proprietary, enterprise-wide information and telecommunications systems, which provide integrated and comprehensive information on a real-time basis, including significant patient care, billing, payroll and other financial information; and - team of professionals dedicated to educating and communicating with healthcare professionals and patients about choices in end-of-life care and creating awareness of Vitas services. <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - --------------- ------------------------------------------------------------------------------------------------- <C> <S> 10.50 Pledge and Security Agreement between Vitas Healthcare Corporation of California ("Vitas-California") and NationsBank, dated February 17, 1995. 10.51 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Florida ("Vitas-Florida") and NationsBank, dated February 17, 1995. 10.52 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Ohio ("Vitas-Ohio") and NationsBank, dated February 17, 1995. 10.53 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Pennsylvania ("Vitas-Pennsylvania") and NationsBank, dated February 17, 1995. *10.54 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Central Florida ("Vitas-Central Florida") and NationsBank. 10.55 Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-California. 10.56 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-Florida. 10.57 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-Ohio. 10.58 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-Pennsylvania. *10.59 Guaranty and Suretyship Agreement by Vitas-Central Florida. 10.60 Amended and Restated Guaranty and Contingent Purchase Agreement, dated as of February 17, 1995, between Vitas and NationsBank related to a term loan to Vitas Employee Stock Ownership Trust. 10.61 Warrant Agreement between NationsBank and Vitas, dated as of July 18, 1997. 10.62 Warrant Certificate issued by Vitas to NationsBank, dated July 18, 1997. 10.63 Letter Agreement between NationsBank and Vitas, dated July 18, 1997, relating to a warrant to purchase shares of Vitas Common Stock. 10.64 Warrant Agreement, dated as of September 1, 1997, between Vitas and NationsBank. 10.65 Warrant Certificate issued by Vitas to NationsBank, dated September 1, 1997 *10.66 Asset Purchase Agreement, dated as of December 27, 1994, among Vitas, Vitas-California, CHC and its Affiliated Partnerships, Connie A. Black and Dennis Rezendez. *10.67 Promissory Note (Note A), dated February 17, 1995, made by Vitas-California payable to the order of CHC. *10.68 Order of U.S. Bankruptcy Court for the District of Arizona, dated June 16, 1997, authorizing Modification of Promissory Note A made by and between Thomas E. Arnold, Jr., as Chapter 11 Trustee for the bankruptcy estate of Wilcare Corporation, Vitas-California, and Vitas. *10.69 Modification of Promissory Note A, dated June 16, 1997, made by and between Thomas E. Arnold, Jr., as Chapter 11 Trustee for the bankruptcy estate of Wilcare Corporation, Vitas-California, and Vitas. </TABLE> OTHER DEVELOPMENTS Over the past several years, the Company's operations have undergone significant changes which have negatively affected its financial performance but which, management believes, have resulted in an improved business model and positioned the Company for future growth and profitability. Prior to fiscal 1995, the Company had attempted to diversify its operations to include non-hospice services, such as chronic disease management, through the development of large multi-functional service teams at the local program level with regional support capabilities. Developing this infrastructure to support diversification significantly increased the Company's operating expenses and affected the results of its acquired operations in California and certain DE NOVO hospice programs which were not fully incorporated into the Company's existing support operations. Beginning in fiscal 1995, the Company initiated a series of restructuring efforts (collectively, the "Restructuring") designed to return its emphasis to expanding its hospice operations and to create a more efficient operating model that emphasized a uniform structure in each of the Company's local hospice programs supported by centralized corporate functions. The Restructuring involved three key initiatives, which have been adopted and implemented in various stages since fiscal 1995 and have included: (i) the reorganization of senior management and other personnel; (ii) the reduction of the size of the local programs' patient care teams within a new structure designed to provide exclusively hospice care; and (iii) the elimination of various corporate, regional and local personnel positions no longer deemed necessary to manage the Company's operations. The Company's current operating model emphasizes the delivery of hospice services through a standardized hospice program structure supported by centralized services provided from the Company's corporate office located in Miami, Florida. The Company believes that this operating model provides significant opportunities for the Company to expand through acquisitions and to recognize operating and cost improvements in these acquired operations. In June 1996, the Company entered into a merger agreement with Apria Healthcare Group Inc. "Apria", which was terminated in November 1996 (the "Proposed Merger Transaction"). During this period, the Company experienced significant disruptions as a result of the anticipated combination of the operations of Vitas and Apria, particularly with respect to changes in the Company's admissions and education activities. In addition, the Proposed Merger Transaction caused a delay in the implementation of certain of the Company's Restructuring efforts. Although certain aspects of the Restructuring have not yet been fully implemented, the Company believes it has adequate reserves for all anticipated restructuring activities. The Restructuring and the Proposed Merger Transaction contributed significantly to the Company's losses in fiscal 1995 and fiscal 1996 and the nine months ended June 30, 1997. However, the Company has been profitable in the two most recent quarters of fiscal 1997. <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - --------------- ------------------------------------------------------------------------------------------------- <C> <S> *10.70 Promissory Note (Note B), dated February 17, 1995, made by Vitas-California payable to the order of CHC. *10.71 Subordination Agreement-A, dated as of February 17, 1995, among Community Hospice Care, Inc. ("CHC"), certain partnerships identified therein ("CHC Affiliated Partnerships"), and NationsBank, including Acknowledgment and Agreement, dated February 17, 1995, by Vitas, Vitas-California and Wilcare Corporation and Vernon R. Will. *10.72 Letter Agreement, dated May 21, 1997, between Vitas, Vitas-California, Wilcare Corporation and NationsBank modifying Subordination Agreement-A . *10.73 Subordination Agreement-B, dated as of February 17, 1995, among CHC, the CHC Affiliated Partnerships and NationsBank, including Acknowledgment and Agreement, dated February 17, 1995, by Vitas, Vitas-California and Connie A. Black. *10.74 Guaranty, dated as of February 17, 1995, made by Vitas in favor of CHC and the CHC Affiliated Partnerships. *10.75 Noncompetition Agreement, dated February 17, 1995, among CHC and CHC Affiliated Partnerships, Vitas, Vitas-California, Connie A. Black and Dennis Rezendez. *10.76 Asset Purchase Agreement, dated as of July 20, 1995, among Vitas, Vitas-Ohio, and Hospice of the Miami Valley, Inc. ("HMV"). *10.77 Amendment to Asset Purchase Agreement, dated as of November 2, 1995, among Vitas, Vitas-Ohio and HMV. *10.78 Asset Purchase Agreement dated as of June 12, 1996, between Vitas, Vitas--Central Florida, Hospice of Central Florida, Inc. ("HCF") and Hospice of Central Florida Foundation, Inc. *10.79 Lease and sublease for Beverly Manor of Riverside, dated as of July 1, 1993, among Dart-L ("Dart-L"), Jacob Friedman ("Friedman") and Community Hospice Care-InLand Cities ("CHC--Inland Cities"). *10.80 Assignment and Assumption of Lease, Consent and Estoppel Agreement, dated as of February 14, 1995, among Consolidated Industries, Inc. ("Consolidated"), Beverly Health and Rehabilitation Services, Inc. ("Beverly Health"), CHC-Inland cities, Vitas-California and Vitas. *10.81 First Amendment to Lease, dated as of February 14, 1995, among Dart-L, Jacob Friedman, Consolidated, Beverly Health, Vitas-California and Vitas. *10.82 Lease Agreement, dated as of August 21, 1989, between Florida East Coast Properties, Inc., ("Florida East") and HCI. *10.83 First Amendment to Lease, dated August 21, 1989, between Florida East and HCI. *10.84 Second Amendment to Lease, dated July 10, 1991, between Northwestern Capital Corporation ("Northwestern"), as successor to Florida East, and HCI. *10.85 Third Amendment to Lease, dated April 1, 1994, between Northwestern and Vitas. *10.86 Business Lease, dated as of August 23, 1995, between Vitas-Florida and Sunbeam Properties, Inc., together with Guaranty, dated as of September 5, 1995, by Vitas for the benefit of Sunbeam Properties, Inc. </TABLE> THE OFFERING In connection with the Offering, the following events are expected to occur: (i) the redemption of 270,000 shares of the 9.0% Cumulative Nonconvertible Preferred Stock of the Company (the "9% Preferred Stock") held by a subsidiary of Chemed Corporation (such subsidiary, together with Chemed Corporation, "Chemed"), including the payment of all accrued but unpaid dividends and an early redemption premium, using a portion of the net proceeds of the Offering; (ii) the conversion of 262,500 shares of Series B Convertible Preferred Stock of the Company (the "Series B Preferred Stock"), held by an investor group including Warburg, Pincus Investors, L.P. and Galen Partners II, L.P. and certain of its affiliates, into 2,026,293 shares of Common Stock upon completion of the Offering; (iii) the issuance of 246,634 shares of Common Stock pursuant to a warrant held by Chemed for an aggregate exercise price of $3.0 million, or $12.16 per share, and the expiration of the remaining portion of such warrant upon the closing of this Offering; (iv) the repurchase in full of a second warrant originally issued to Chemed to purchase 522,289 shares at a per share purchase price equal to the excess of the public offering price over $12.19, or an aggregate of $1.5 million based on an assumed public offering price of $15.00 per share, using a portion of the net proceeds of the Offering; and (v) the issuance of 107,036 shares of Common Stock pursuant to a warrant originally issued to NationsBank, N.A. (the "Bank") on July 18, 1997 (the "First Bank Warrant") at an exercise price of $0.03 per share. <TABLE> <S> <C> Common Stock offered by the Company.......... 3,800,000 shares Common Stock to be outstanding after the Offering................................... 7,832,769 shares (1) Use of Proceeds.............................. To redeem certain outstanding Preferred Stock; to repurchase a warrant to purchase Common Stock; to repay certain indebtedness; and for general corporate purposes, including possible acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market Symbol....... VTAS </TABLE> - ------------------------ (1) Does not include (i) 1,817,098 shares of Common Stock issuable upon the exercise of stock options (with an average exercise price of $10.62 per share) granted under the Company's Management Equity Incentive Plans as well as pursuant to certain non-plan stock option grants, of which 1,695,755 are now or will become exercisable within 60 days after the date of this Prospectus, (ii) 148,032 shares of Common Stock eligible for future grant under the Company's Management Equity Incentive Plans, (iii) up to an additional 35,679 shares of Common Stock at an exercise price of $0.03 per share that may be issued pursuant to the First Bank Warrant if this Offering is not completed by November 29, 1997, and (iv) up to 570,000 shares of Common Stock that may be sold by the Company pursuant to the Underwriters' over-allotment option. See "Management--Management Equity Incentive Plans" and "--Non-Plan Stock Option Grants," "Capitalization," "Description of Capital Stock--Common Stock Purchase Warrant" and "Shares Eligible for Future Sale." SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary financial and other data of the Company. The Summary Consolidated Financial Data set forth below for the fiscal years 1992 through 1996 are derived from Consolidated Financial Statements of the Company, including related notes thereto, certain of which are contained elsewhere in this Prospectus. The summary financial data as of June 30, 1997 and for the nine month periods ended June 30, 1996 and 1997 are derived from unaudited financial statements. The unaudited financial statements include, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the nine months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the entire year. The information presented below is qualified in its entirety by, and should be read in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company, and notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS YEAR ENDED SEPTEMBER 30, ENDED JUNE 30, ----------------------------------------------------- -------------------- 1992(1) 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenue..................................... $ 101,737 $ 128,405 $ 148,535 $ 193,275 $ 213,856 $ 161,657 $ 150,323 Operating expenses: Hospice program expenses...................... 80,135 93,833 110,251 155,570 175,495 131,319 121,604 Central support services...................... 15,507 22,304 22,036 25,241 23,790 17,290 16,120 Provision for bad debts....................... 1,316 3,283 3,973 6,828 7,958 4,035 3,283 Depreciation.................................. 1,018 1,794 2,931 4,197 5,438 3,993 4,308 Amortization of goodwill...................... 952 717 654 1,089 1,527 1,123 1,248 Nonrecurring charges (2)...................... -- 6,708 798 -- -- -- -- Restructuring costs (3)....................... -- -- -- 2,020 2,345 -- 3,480 --------- --------- --------- --------- --------- --------- --------- Total operating expenses........................ 98,928 128,639 140,643 194,945 216,553 157,760 150,043 --------- --------- --------- --------- --------- --------- --------- Income (loss) from operations................... 2,809 (234) 7,892 (1,670) (2,697) 3,897 280 Gain on terminated merger (4)................... -- -- -- -- -- -- 1,600 Gain on sale of assets.......................... -- -- -- -- -- -- 484 Interest and other income....................... 90 97 715 329 279 222 364 Interest expense................................ -- -- (316) (3,092) (4,674) (3,391) (3,652) --------- --------- --------- --------- --------- --------- --------- Income (loss) before income taxes and other items......................................... 2,899 (137) 8,291 (4,433) (7,092) 728 (924) Provision (benefit) for income taxes............ 992 46 3,150 (1,588) -- 248 -- --------- --------- --------- --------- --------- --------- --------- Income (loss) before other items................ 1,907 (183) 5,141 (2,845) (7,092) 480 (924) Cumulative effect of change in accounting principle for income taxes.................... -- 259 -- -- -- -- -- --------- --------- --------- --------- --------- --------- --------- Net income (loss)............................... $ 1,907 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Pro forma net income (loss) (5)................. $ 1,662 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net income (loss) attributable to common stockholders.................................. $ 544 ($ 3,038) $ 543 ($ 7,443) ($ 11,690) ($ 2,968) ($ 4,372) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Supplemental net loss attributable to common stockholders (6).............................. ($ 9,590) ($ 1,393) ($ 2,797) --------- --------- --------- --------- --------- --------- Supplemental net loss per common share (7)...... ($ 2.56) ($ 0.37) ($ 0.74) --------- --------- --------- --------- --------- --------- OTHER DATA: Admissions (8).................................. 13,780 15,808 17,727 23,512 26,256 19,888 19,487 Average length of stay (9)...................... 56.7 58.8 64.9 64.9 72.5 73.1 66.4 Average daily census (10)....................... 2,402 2,967 3,499 4,488 4,902 4,925 4,507 Adjusted EBITDA (11)............................ $ 4,779 $ 8,985 $ 12,275 $ 5,636 $ 6,613 $ 9,013 $ 9,318 Adjusted EBITDA as a % of net revenue........... 4.7% 7.0% 8.3% 2.9% 3.1% 5.6% 6.2% </TABLE> (CONTINUED ON NEXT PAGE) <TABLE> <CAPTION> JUNE 30, 1997 -------------------------- ACTUAL AS ADJUSTED(12) --------- --------------- <S> <C> <C> (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash, cash equivalents and investments.................................................. $ 9,225 $ 15,025 Working capital (deficit)............................................................... (15,653) (1,265) Total assets............................................................................ 85,859 91,659 Total long-term debt.................................................................... 31,227 22,105 Total redeemable preferred stock........................................................ 62,117 -- Stockholders' equity (deficit).......................................................... (50,244) 35,383 </TABLE> - ------------------------ (1) Selected consolidated financial information for the fiscal year ended September 30, 1992 has been adjusted to combine the operations of Vitas Healthcare Corporation of Florida, a wholly owned subsidiary of the Company ("Vitas-Florida"), with those of the Company for the period through December 16, 1991. The Company's purchase of the outstanding stock of Vitas-Florida on December 17, 1991 was accounted for as if a pooling of interests had occurred since the Company was affiliated with Vitas-Florida through common ownership. (2) In fiscal 1993, nonrecurring charges of $6.7 million related to the acceleration of performance bonus arrangements and vesting of non-qualified stock options. In fiscal 1994, nonrecurring charges of $0.8 million related to expenses incurred in connection with a proposed public offering of the Company's Common Stock that was not pursued due to market conditions. (3) Represents restructuring costs principally to establish severance reserves. (4) Includes a $4.0 million settlement relating to the Proposed Merger Transaction, less $2.4 million of terminated merger costs. (5) Through December 16, 1991, Vitas-Florida was an S Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Pro forma net income for the fiscal year ended September 30, 1992 represents net income after deducting the income tax expense that would have been recorded had Vitas-Florida not been exempt from taxation under the S Corporation election. (6) Gives effect to the elimination of the dividends which would have been payable under the mandatory redemption features of the Series B Preferred Stock. (7) Computed assuming the Series B Preferred Stock is converted into 2,026,293 shares of Common Stock and, pursuant to the Securities and Commission's (the "Commission's") Staff Accounting Bulletins ("SABs"), includes all Common Stock and Common Stock equivalents issued within the 12 months immediately preceding the Offering as if they were outstanding for all periods presented. (8) Admissions is defined as the number of patients admitted into the Company's programs during the period. (9) Average length of stay represents the sum of days of care of patients who have been discharged during the period divided by the total number of patients discharged in such period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (10) Average daily census is defined as the sum of the days of care of patients who have been under the Company's care during the period divided by the number of days in such period. (11) Adjusted EBITDA is defined as income before interest and other income, interest expense, taxes, depreciation and amortization, and excludes the $6.7 million and $0.8 million of nonrecurring charges in fiscal 1993 and fiscal 1994; the $2.0 million, $2.3 million and the $3.5 million in restructuring costs in fiscal 1995, fiscal 1996 and the nine months ended June 30, 1997; and the $1.6 million gain on terminated merger and the $0.5 million gain on the sale of assets in the nine months ended June 30, 1997. (12) The as adjusted data give effect to net proceeds of $52.0 million from the issuance and the sale of Common Stock in this Offering, the receipt of $3.0 million from the issuance and sale of 246,634 shares of Common Stock upon exercise of a warrant and the application of the net proceeds therefrom; also gives effect to the exercise of the First Bank Warrant and the conversion of the Series B Preferred Stock into Common Stock upon consummation of the Offering. SUMMARY QUARTERLY CONSOLIDATED FINANCIAL DATA The following table presents the consolidated operating results and other operating data of the Company for each of the seven quarters in the period ended June 30, 1997. The information presented is unaudited. In the opinion of the Company's management, all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. For further information, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company, and notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> THREE MONTHS ENDED ---------------------------------------------------------------------------------- DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, 1995 1996 1996 1996 1996 1997 1997 ---------- ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> (DOLLARS IN THOUSANDS) OPERATING DATA: Net revenue........................... $ 54,516 $ 54,564 $ 52,577 $ 52,199 $ 51,492 $ 48,838 $ 49,993 Operating expenses: Hospice program expenses............ 44,017 44,111 43,191 44,176 42,473 39,960 39,171 Central support services............ 5,913 5,812 5,565 6,500 5,504 5,051 5,565 Provision for bad debts............. 1,453 1,250 1,332 3,923 1,360 1,004 919 Depreciation........................ 1,243 1,355 1,395 1,445 1,462 1,415 1,431 Amortization of goodwill............ 368 377 378 404 425 412 411 Restructuring costs (1)............. -- -- -- 2,345 3,480 -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total operating expenses.............. 52,994 52,905 51,861 58,793 54,704 47,842 47,497 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from operations......... 1,522 1,659 716 (6,594) (3,212) 996 2,496 Gain on terminated merger (2)......... -- -- -- -- 1,600 -- -- Gain on sale of assets................ -- -- -- -- 484 -- -- Interest and other income............. 94 73 48 64 89 107 168 Interest expense...................... (1,181) (1,142) (1,061) (1,290) (1,089) (1,074) (1,489) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes..... 435 590 (297) (7,820) (2,128) 29 1,175 Provision (benefit) for income taxes.. 148 201 (101) (248) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss)..................... $ 287 $ 389 ($ 196) ($ 7,572) ($ 2,128) $ 29 $ 1,175 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- OTHER DATA: Admissions (3)........................ 6,392 7,012 6,484 6,368 6,448 6,740 6,299 Average length of stay (4)............ 76.3 67.7 75.4 70.6 73.4 62.0 63.3 Average daily census (5).............. 4,982 4,938 4,854 4,837 4,685 4,384 4,448 Adjusted EBITDA (6)................... $ 3,133 $ 3,391 $ 2,489 ($ 2,400) $ 2,155 $ 2,823 $ 4,338 Adjusted EBITDA as a % of net revenue............................. 5.7% 6.2% 4.7% (4.6%) 4.2% 5.8% 8.7% </TABLE> - ------------------------ (1) Represents restructuring costs principally to establish severance reserves. (2) Includes a $4.0 million settlement relating to the Proposed Merger Transaction, less $2.4 million of terminated merger costs. (3) Admissions is defined as the number of patients admitted into the Company's programs during the period. (4) Average length of stay represents the sum of days of care of patients who have been discharged during the period divided by the total number of patients discharged in such period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046007_credential_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046007_credential_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e7f682c7c504cbd2b0a9b0ea9199596b1a8cd078
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046007_credential_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Financial Statements and related notes appearing elsewhere in this Prospectus. Except as set forth in the Financial Statements and notes thereto or as otherwise specified herein, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, and (ii) reflects a 214.4517-for-1 split of the Common Stock effected prior to the commencement of this offering. See "Description of Capital Stock" and "Underwriting." Investors should carefully consider the information set forth under the heading "Risk Factors." This Prospectus contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed under the heading "Risk Factors" below, as well as those discussed elsewhere in this Prospectus. THE COMPANY Credentials Services International, Inc. is a leading direct marketer of credit information and monitoring membership programs to consumers. The Company believes that it provides value-added programs that enable consumers to monitor the accuracy of their personal credit data that is collected and held by credit reporting bureaus. This information allows consumers to respond on an informed basis to credit decisions made by providers of credit such as mortgage lenders, consumer finance companies, auto loan providers, credit card providers, banks and other lending institutions. Through its relationship with Experian Inc., one of the three major credit reporting bureaus, the Company provides this information to its members in a readily understandable, readable format and offers members notification of significant events, such as credit inquiries and the entry of negative credit data in the member's credit file, which might affect their ability to obtain credit. The Company markets its membership programs to consumers using direct marketing techniques, consisting of direct mail and telemarketing campaigns conducted through endorsed co-marketing relationships with major credit card issuers that have a large customer base, such as banks, retailers and oil companies. Through its co-marketing relationships, the Company markets its programs to the credit card customer bases of nationally-known organizations such as The Chase Manhattan Bank USA, N.A., Bank One, N.A. and its affiliates (including the recently merged First USA Bank credit card customer base), PNC National Bank, N.A., Service Merchandise and Sun Company, Inc. (Sunoco). During the fiscal year ended September 26, 1997, the Company increased the number of its co-marketers to 29 from 13 at September 27, 1996. During this period, the Company's membership base increased to approximately 1.4 million members from approximately 828,000 members. The Company entered into a new co-marketing agreement with the credit card division of Citibank, N.A. in October 1997 and commenced initial direct marketing activities to Citibank's credit card holders in November 1997. See "Risk Factors -- Dependence on Co-Marketers; Co-Marketer Concentration." The consumer credit information and monitoring business conducted by the Company was started in 1986 by a division of TRW, Inc. In October 1994, the Company purchased certain assets of the business from TRW, Inc. In September 1996, TRW, Inc., sold its credit bureau and credit reporting business, and that business was subsequently renamed Experian Inc. At the time of the Company's asset acquisition in 1994, it entered into a ten-year contract with TRW, Inc. pursuant to which the Company has access to Experian Inc.'s credit reports and daily access to the national Experian Inc. credit file. The Company's information systems are integrated with Experian Inc.'s database and systems, enabling the Company to automatically notify a member when an inquiry is made into the member's personal credit file. The Company believes that it is the only company which currently offers this unique feature to consumers and that this feature constitutes a substantial competitive advantage with respect to developing co-marketing relationships and building its membership base. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED DECEMBER 17, 1997 5,500,000 SHARES LOGO COMMON STOCK ------------------------ Of the 5,500,000 shares of Common Stock offered hereby, 1,050,000 shares are being offered by Credentials Services International, Inc. (the "Company") and 4,450,000 shares are being offered by certain stockholders of the Company (the "Selling Stockholders"). See "Principal and Selling Stockholders." The Company will not receive any proceeds from the sale of shares by the Selling Stockholders. After giving effect to the offering of the Common Stock hereby, CSI Investment Partners II, L.P., one of the Selling Stockholders, will own approximately 35.4% of the Company's outstanding Common Stock, assuming no exercise of the Underwriter's over-allotment option described below. See "Risk Factors -- Control by Affiliates." Prior to this offering, there has been no public market for the Common Stock of the Company. It is currently anticipated that the initial public offering price per share of the Common Stock will be between $14.00 and $16.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock has been approved for quotation on the Nasdaq National Market under the trading symbol "CRSR." THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> ================================================================================================================ Underwriting Proceeds to Price to Discounts and Proceeds to Selling Public Commissions(1) Company(2) Stockholders - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Per Share....................... $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- Total........................... $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- Total Assuming Full Exercise of Over-Allotment Option(3)...... $ $ $ $ ================================================================================================================ </TABLE> (1) See "Underwriting." (2) Before deducting expenses estimated at $1.3 million, which are payable by the Company. (3) Assuming exercise in full of the 30-day option granted by the Selling Stockholders to the Underwriters to purchase up to 825,000 additional shares, on the same terms, solely to cover over-allotments. See "Underwriting." ------------------------ The shares of Common Stock are offered by the Underwriters, subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to their right to reject orders in whole or in part. It is expected that delivery of the Common Stock will be made in New York City on or about , 1997. ------------------------ PAINEWEBBER INCORPORATED HAMBRECHT & QUIST ------------------------ THE DATE OF THIS PROSPECTUS IS , 1997. The Company seeks to become the leading provider of credit information and monitoring programs to consumers and to continue to build its membership base with its core programs and the introduction of new programs. The key elements of the Company's strategy are as follows: Grow and Maintain Membership Base By Offering Premium Quality Programs. The Company's objective is to build and maintain its membership base by continuing to provide its core value-added consumer credit programs which the Company believes are superior to the programs offered by its competitors. Expand Distribution Channels. The Company intends to expand its network of co-marketing relationships to include additional major banks, retailers and oil companies, as well as to aggressively develop innovative new distribution channels. Potential co-marketing partners may include mortgage servicing companies, insurance companies and utility companies, such as regional telephone companies. The Company also believes the World Wide Web may become a viable distribution channel for its membership programs and is exploring that potential distribution opportunity. Develop New Programs. The Company intends to continue to develop and market new programs to current and new members. The Company has test marketed and is continuing to develop a program targeted to small businesses which would provide those businesses with credit information and monitoring services to enable them to better evaluate and monitor their own credit as well as the credit of other businesses, particularly their vendors, suppliers and customers. In addition, the Company is presently test marketing a number of other consumer-oriented membership programs. Provide Superior Levels of Customer Service. The Company is committed to maintaining what it believes is a superior level of customer service, as reflected by membership renewal rates and satisfaction among members and co-marketers. Develop and Use State-of-the-Art Technical Solutions. The Company intends to continue developing and using advanced technological methods to solicit new members, collect and market credit data and provide membership services. The Company was incorporated in Delaware in 1993 and commenced operations in October 1994. The Company's executive offices are located at 333 City Boulevard West, 10th Floor, Orange, California 92868, and its telephone number is (714) 704-6400. The Company also maintains a World Wide Web site on the Internet at http://www.credentials-net.com. Inside front cover: Credential Services International's Value-Added Business Model [Graphic depiction of Credentials Services International's Value-Added Business Model: Membership fees flow from members to the Company; superior credit information and monitoring programs flow from the Company to members; fee-based revenue flows from the Company to the credit bureau; integration of information systems flows from the credit bureau to the Company; commission revenue and customer loyalty flow from the Company to the co-marketer; and brand name endorsement and customer lists flow from the co-marketer to the Company.] [Logo of Credentials Services International, Inc.] Credentials(R) is a trademark of Credentials Services International, Inc. This prospectus includes trademarks and tradenames of other companies. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, THE PURCHASE OF THE COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company.......... 1,050,000 shares Common Stock Offered by the Selling Stockholders............................... 4,450,000 shares Common Stock to be Outstanding after the Offering................................... 10,666,667 shares(1) Use of Proceeds.............................. The net proceeds to the Company from the offering are estimated to be approximately $13.3 million. The Company intends to apply the net proceeds of the offering to repay certain outstanding indebtedness in the aggregate principal amount of approximately $12.9 million, plus accrued interest. The balance of the net proceeds of the offering, if any, will be used for general corporate purposes. The Company will not receive any proceeds from the sale of shares by the Selling Stockholders. See "Use of Proceeds." Proposed Nasdaq National Market Symbol....... CRSR </TABLE> - --------------- (1) Based upon the number of shares of Common Stock outstanding at November 21, 1997. See "Capitalization" and "Principal and Selling Stockholders." Excludes 655,000 shares of Common Stock issuable upon exercise of options that the Company intends to grant under the Company's 1997 Stock Option Plan immediately prior to the commencement of this offering at an exercise price equal to the initial public offering price per share of the Common Stock being offered hereby. See "Management -- Stock Option Plan." SUMMARY FINANCIAL INFORMATION The following summary financial information for each of the three fiscal years in the period ended September 26, 1997 and at September 26, 1997 has been derived from the financial statements of the Company that have been audited by Coopers & Lybrand L.L.P., independent auditors, and included herein. The summary financial information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and Notes included elsewhere in this Prospectus. <TABLE> <CAPTION> FISCAL YEARS ENDED SEPTEMBER(1) -------------------------------------- 1995 1996 1997 ---------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF MEMBERS) <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................................................... $ 12,540 $ 24,556 $ 38,039 Operating income (loss).................................... (4,544) (21,262) 2,855 Interest expense........................................... 1,239 1,185 1,455 Income (loss) before provision for income taxes and extraordinary item....................................... (5,783) (22,447) 1,400 Income (loss) before extraordinary item.................... $ (5,783) $ (22,447) $ 1,339 Income (loss) per share before extraordinary item.......... $ (0.60) $ (2.33) $ 0.14 Weighted average common and common equivalent shares outstanding.............................................. 9,616,667 9,616,667 9,616,667 OTHER DATA: Total members at end of period............................. 613,000 828,000 1,385,000 </TABLE> <TABLE> <CAPTION> SEPTEMBER 26, 1997 ------------------------------ ACTUAL AS ADJUSTED(2) ----------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents.......................................... $ 413 $ 562 Total assets....................................................... 41,412 40,608 Total liabilities.................................................. 61,194 48,168 Total stockholders' deficit........................................ (19,782) (7,560) </TABLE> - --------------- (1) The Company's fiscal year ends on the last Friday of September of each year. The Company's quarterly periods are each comprised of 13 weeks and end on the last Friday of each quarterly period. The first month of each quarter is comprised of five weeks, and each of the two remaining months of the quarter is comprised of four weeks. (2) Adjusted to reflect (i) the sale by the Company of the 1,050,000 shares of Common Stock offered hereby at an assumed initial public offering price of $15.00 per share; and (ii) the application of the estimated net proceeds from the sale of the shares of Common Stock by the Company. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046032_imagemax_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046032_imagemax_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7ce5354599431536a338aa7ac0f275a798fb6949
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046032_imagemax_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Simultaneously with and as a condition to the closing of the Offering made by this Prospectus, the Company will acquire 14 document management service companies or substantially all of their assets (collectively, the "Founding Companies"), representing 11 ownership groups, in separate transactions (the "Acquisitions") in exchange for shares of its Common Stock, the assumption of certain indebtedness and cash. Unless otherwise indicated, all references to "ImageMax" shall mean ImageMax, Inc. prior to the effectiveness of the Acquisitions and references herein to the "Company" shall include the Founding Companies. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all share, per share and financial information set forth herein: (i) gives effect to a .846154-for-one split of the outstanding shares of Common Stock prior to the consummation of the Offering; (ii) gives effect to the Acquisitions and the conversion of all outstanding shares of Series A Convertible Preferred Stock ("Series A Preferred Stock") into Common Stock simultaneously with the closing of the Offering; and (iii) assumes no exercise of the Underwriters' over-allotment option. See "The Company" and "Underwriting." THE COMPANY ImageMax was founded in November 1996 to become a leading national, single-source provider of integrated document management solutions. Prior to the Offering, ImageMax has not conducted any operations. ImageMax has entered into agreements to acquire the Founding Companies simultaneously with and as a condition to the consummation of the Offering. The Founding Companies, which have been in business an average of over 20 years, have operations in 13 states, employ over 950 people and provided services and products to over 5,000 clients in the last year from 18 locations. The Company's pro forma combined revenues for the twelve-month period ended December 31, 1996 were $43.3 million. Combined operating loss and combined net loss for the twelve-month period ended December 31, 1996 were $353,000 and $500,000, respectively, on a pro forma, as adjusted basis. Pro forma combined revenues for the nine months ended September 30, 1997 were $36.5 million, an increase of 12.6% over the comparable 1996 period. Including a non-recurring, non-cash special compensation charge of $2.5 million, combined operating loss and combined net loss for the nine months ended September 30, 1997 were $176,000 and $1.3 million, respectively, on a pro forma, as adjusted basis. The Company has initially targeted a broad variety of services and products, as well as technical and vertical market expertise, in order to create a platform from which it can become a leading national, single-source provider for clients with intensive document management needs. The Company's services include document management consulting and systems integration, media conversion (consisting of digital imaging and micrographics), data indexing and offshore data entry, information storage and retrieval, and document management systems maintenance. The Company's products include proprietary, open-architecture digital imaging and indexing software as well as document management systems and supplies. The Company provides these services and products individually or in combination to provide solutions to a wide range of clients' document management needs. The Company's service and product offering mix is designed to take advantage of the Company's substantial technical and systems experience in the area of digital document management as well as product and vertical market knowledge of the Founding Companies' managers, who have an average of 14 years industry experience. The Company's diversified client base operates primarily in document-intensive industries such as health care, financial services and engineering. Key clients include Abbott Laboratories, Novartis AG, First Union National Bank, Nordstrom Credit, Inc., The Boeing Company, General Electric Company, Avis Rent a Car, Inc. and Waste Management, Inc. Based on information made publicly available by the Association for Information and Image Management International ("AIIM"), the Company believes that the U.S. market for document management services and products was over $6.5 billion in 1996. The Company believes that this market has been growing at an annual rate of approximately 11% since 1994. The Company further believes that there is a substantial unvended component of the service market not accounted for in the AIIM data because most document management services for large organizations are currently performed in-house. The document management industry is also highly fragmented. The Company estimates that there are over 2,000 companies engaged in a wide variety of business-to-business document management services and product sales and that a substantial majority of these companies are small businesses selling to a single geographic market, offering a limited range of services or selling to a limited number of client market segments. The Company believes that it will continue to benefit from key factors driving the growth of the document management industry, including: (i) continued advances in digital technology which have dramatically reduced the cost of imaging, storing, indexing, and retrieving documents electronically while improving users' ability to manage documents more efficiently; (ii) growth in document management needs of organizations desiring to better manage information in order to improve productivity, competitiveness and client service; and (iii) the increasing willingness of organizations to outsource their document management services in order to allow them to focus on their core competencies and revenue generating activities, reduce fixed costs, benefit from the expertise and economies of scale of outside providers and gain access to new technologies without the risk and expense of near-term obsolescence. The Company intends to implement its business strategy focused on the following key elements: o Become a single source provider of in-house or outsourced document management solutions by further developing consultative relationships with clients to assess their document management needs and to recommend and provide cost-effective combinations of services and products. The Company will customize packages of services and products for specific vertical markets and will expand national account coverage to service clients who seek to benefit from working with a single vendor. o Capitalize on business integration by creating a single nation-wide brand name, integrating the Company's information and communications systems and consolidating the Company's planning, acquisition support and administration under the direction of its experienced executive management team to enable business unit management to devote increased resources to business generation and client service. The Company intends to establish company-wide technology centers that will focus on software product development, enhancement of systems integration expertise and new product development such as data warehousing services and inter/intranet document management solutions. o Increase sales and marketing efforts, including hiring additional salespeople at the Founding Companies, expanding a national account sales force, emphasizing sales training in digital document management applications, cross-selling additional services and products, capitalizing on the Company's present vertical market expertise and extending successful existing marketing programs that utilize direct marketing, telemarketing, seminar selling and internet marketing. o Aggressively pursue acquisitions to enhance its position as a provider of complete document management solutions by expanding geographic coverage and market share, expanding service and product capabilities, obtaining key human resources and technical expertise and generating critical mass and economies of scale nationally and in regional markets. The Company will position itself to be a preferred acquirer of other companies in the highly fragmented document management industry as a result of the Company's capabilities, management personnel, solutions orientation and integration strategy. Additionally, the Company's relationships with over 100 independent document management service providers through its software licensing and data entry service activities provide the Company with a valuable source of potential future acquisitions. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company........... 3,100,000 shares Common Stock to be Outstanding after the 5,438,727 shares(1) Offering.................................... Use of Proceeds............................... To fund the Acquisitions and for general cor- porate purposes, including future acquisi- tions. See "Use of Proceeds" and "Certain Transactions." Nasdaq National Market Symbol................. IMAG </TABLE> - ------------------ (1) Includes 1,184,468 shares of Common Stock to be issued in connection with the Acquisitions (based on an assumed initial public offering price of $13.00 per share). Excludes (i) 367,500 shares of Common Stock which will be issuable upon the exercise of stock options to be granted in connection with the Offering at an exercise price per share equal to the initial public offering price, (ii) 232,500 shares of Common Stock available for future grants under the Company's 1997 Incentive Plan and (iii) 250,000 shares available for future issuances under the Company's Employee Stock Purchase Plan. See "Management - Stock Incentive Plans." See "Risk Factors" for a discussion of certain factors that should be considered by prospective purchasers of the shares of Common Stock offered hereby. SUMMARY PRO FORMA COMBINED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ImageMax will acquire the Founding Companies simultaneously with and as a condition to consummation of the Offering. For financial statement presentation purposes, ImageMax has been identified as the "accounting acquirer." The following table presents certain summary unaudited combined historical financial data of ImageMax and the Founding Companies, adjusted to give effect to (i) the consummation of the Acquisitions, (ii) certain pro forma adjustments to the historical financial statements described below and (iii) the consummation of the Offering and the application of the estimated net proceeds therefrom. See "Selected Financial Data," the Unaudited Pro Forma Combined Financial Statements, including the notes thereto, and the historical financial statements for ImageMax and the Founding Companies, including the notes thereto, appearing elsewhere in this Prospectus. <TABLE> <CAPTION> PRO FORMA COMBINED, AS ADJUSTED ------------------------------------------- NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, ------------------------- 1996 1996 1997 ------------ --------- ---------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA:(1) Revenues.................................................. $ 43,256 $ 32,402 $ 36,473 Gross profit(2)........................................... 12,613 9,506 12,194 Selling, general and administrative expenses(3)........... 11,198 8,326 8,218 Executive compensation(4)................................. 610 458 458 Special compensation charge(5)............................ -- -- 2,494 Founding Companies' transaction costs(6).................. -- -- 332 Amortization of intangible assets(7)...................... 1,158 868 868 Operating loss............................................ (353) (146) (176) Interest income (expense), net(8)......................... 37 10 (5) Loss before income taxes.................................. (316) (136) (181) Net loss(8)(9)............................................ $ (500) $ (314) $ (1,321) Net loss per share........................................ $ (.10) $ (.06) $ (.26) Shares used in computing pro forma net loss per share(10)............................................... 4,985,956 4,985,956 4,985,956 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 --------------------------------- PRO FORMA PRO FORMA COMBINED, COMBINED(11) AS ADJUSTED(12) ------------ --------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents................................. $ 2,881 $ 5,783 Working capital (deficit)................................. (26,322)(13) 8,546 Total assets.............................................. 50,924 51,839 Long-term debt, less current portion...................... 1,098 -- Shareholders' equity...................................... 10,530 44,509 </TABLE> - ------------------ (1) The pro forma combined, as adjusted, statement of operations data assume that the Acquisitions and the Offering were consummated on January 1, 1996 and are not necessarily indicative of the results the Company would have obtained had these events actually then occurred or of the Company's future results. (2) Includes a pro forma adjustment to increase cost of revenues to reflect the Company's new operating leases on facilities at certain Founding Companies (the "Rent Differential"). See Unaudited Pro Forma Combined Financial Statements. (3) Reflects a pro forma reduction in compensation to the owners of the Founding Companies to which they have agreed prospectively (the "Compensation Differential"). Selling, general and administrative expenses include compensation costs associated with positions eliminated or which will be eliminated in connection with the Acquisitions, including the retirement of four senior Founding Companies' executives and other identified head-count reductions totalling approximately $650,000, $500,000 and $300,000 for the year ended December 31, 1996 and the nine months ended September 30, 1996 and 1997, respectively. (4) Includes compensation of $610,000 annually based upon employment agreements with the Company's executive management (see "Management - Employment Agreements"). (5) Represents a non-recurring, non-cash special compensation charge equivalent to $0.50 per share recorded in the nine months ended September 30, 1997. See Note 3 to ImageMax Financial Statements. (6) Reflects non-recurring transaction costs incurred by the Founding Companies in connection with the Acquisitions. (7) Represents amortization of $30.4 million of goodwill to be recorded as a result of the Acquisitions over an estimated life of principally 30 years and amortization of acquired developed technology of $0.8 million over an estimated life of seven years. Excludes a charge of $4.0 million for acquired in-process research and development and a $0.5 million non-recurring charge related to a fee payable in the fourth quarter upon the closing of the Offering. See "Certain Transactions" and Unaudited Pro Forma Combined Financial Statements. (8) Includes a pro forma adjustment to reflect the elimination of interest expense resulting from the repayment of debt paid from the net proceeds of the Offering. See "Use of Proceeds." If the effect of the Offering were excluded, pro forma interest expense, net would be $866,000, $643,000 and $611,000 for the year ended December 31, 1996 and the nine months ended September 30, 1996 and 1997, respectively. Pro forma net loss would be $1,049,000, $711,000 and $1,689,000 and the pro forma net loss per share would be $0.24, $0.16 and $0.39, respectively, for the above periods. See "Pro Forma Combined Financial Statements." (9) Reflects an estimated corporate income tax rate of 39.3% before considering the non-deductibility of approximately $790,000 of annual amortization of intangible assets and the $2.5 million special compensation charge. (10) Represents (i) 710,770 shares of Common Stock issued and outstanding at September 30, 1997, (ii) 1,184,468 shares to be issued in the Acquisitions (based on an assumed initial public offering price of $13.00 per share), (iii) 443,489 shares to be issued upon the conversion of all shares of Series A Preferred Stock outstanding at September 30, 1997 upon the consummation of the Offering, and (iv) 2,647,229 of the 3,100,000 shares being sold in the Offering (at an assumed initial public offering price of $13.00 per share) necessary to pay the cash portion of the consideration for the Acquisitions, Founding Companies' indebtedness as described in "Use of Proceeds" and expenses of the Acquisitions and the Offering. (11) The pro forma combined balance sheet data assume that the Acquisitions were consummated on September 30, 1997. (12) Adjusted for the sale of the 3,100,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." (13) Includes $25.4 million payable to the owners of the Founding Companies, representing the cash portion of the consideration for the Acquisitions, which is to be paid from the net proceeds of the Offering. SUMMARY FINANCIAL DATA FOR INDIVIDUAL FOUNDING COMPANIES (IN THOUSANDS) The following table presents summary statement of operations data for the Founding Companies (see "The Company" for complete names of each Founding Company) for the year ended December 31, 1996 and for the nine months ended September 30, 1996 and 1997. Operating income (loss) has not been adjusted for any pro forma adjustments or to take into account increased costs associated with being a public company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Introduction." Adjusted pro forma operating income (loss) includes operating income adjusted for the Compensation Differential and the Rent Differential and excludes pro forma and historical amortization of intangible assets, costs associated with being a public company and the Company's executive management compensation. Adjusted pro forma operating income (loss) includes compensation costs eliminated or which will be eliminated in connection with the Acquisitions and non-recurring transaction costs incurred by the Founding Companies in connection with the Acquisitions (see Notes (3) and (5) to Summary Pro Forma Combined Financial Data). See Unaudited Pro Forma Combined Financial Statements. <TABLE> <CAPTION> NINE MONTHS YEAR ENDED ENDED SEPTEMBER 30,(2) DECEMBER 31, --------------------- 1996(1) 1996 1997 ------------ ------ ------ <S> <C> <C> <C> AMMCORP: Revenues.................................................. $5,573 $4,081 $4,079 Gross profit.............................................. 1,746 1,153 1,340 Operating income.......................................... 119 18 60 Adjusted pro forma operating income....................... 528 287 330 CodaLex Group: Revenues.................................................. $4,057 $2,984 $3,756 Gross profit.............................................. 962 793 1,078 Operating income (loss)................................... (122) 99 346 Adjusted pro forma operating income (loss)................ (159) 68 342 DataLink: Revenues.................................................. $3,151 $2,506 $2,564 Gross profit.............................................. 567 517 647 Operating income.......................................... 100 190 242 Adjusted pro forma operating income....................... 103 180 274 DocuTech: Revenues.................................................. $2,322 $1,774 $2,169 Gross profit.............................................. 1,206 910 1,302 Operating income.......................................... 459 345 643 Adjusted pro forma operating income....................... 420 329 562 I(2) Solutions: Revenues.................................................. $3,959 $3,137 $3,330 Gross profit.............................................. 1,550 1,272 1,471 Operating income (loss)................................... (123) 187 267 Adjusted pro forma operating income....................... 263 260 315 IMS: Revenues.................................................. $2,292 $1,768 $1,996 Gross profit.............................................. 386 299 835 Operating income (loss)................................... (218) (196) 399 Adjusted pro forma operating income (loss)................ (227) (204) 391 IDS: Revenues.................................................. $1,431 $ 941 $2,340 Gross profit.............................................. 399 233 874 Operating income (loss)................................... (119) (93) 212 Adjusted pro forma operating income (loss)................ (41) (27) 640 </TABLE> <TABLE> <CAPTION> NINE MONTHS YEAR ENDED ENDED SEPTEMBER 30,(2) DECEMBER 31, ------------------ 1996(1) 1996 1997 ------------ ------ ------ <S> <C> <C> <C> OMI: Revenues.................................................. $3,666 $2,784 $3,111 Gross profit.............................................. 815 752 869 Operating income.......................................... 140 234 248 Adjusted pro forma operating income....................... 178 220 247 Spaulding: Revenues.................................................. $8,693 $6,526 $6,705 Gross profit.............................................. 2,876 2,123 2,140 Operating income (loss)................................... (141) (270) 165 Adjusted pro forma operating income (loss)................ (322) (414) 124 TIMCO: Revenues.................................................. $4,991 $3,609 $3,318 Gross profit.............................................. 1,639 1,165 1,159 Operating income.......................................... 416 251 315 Adjusted pro forma operating income....................... 521 338 466 TPS: Revenues.................................................. $3,215 $2,363 $3,203 Gross profit.............................................. 846 574 776 Operating income.......................................... 94 88 116 Adjusted pro forma operating income....................... 174 143 183 </TABLE> - ------------------ (1) Consists of operating results for the year ended December 31, 1996, except that I(2) Solutions' operating results are for the year ended October 31, 1996. (2) Consists of operating results for the nine months ended September 30, 1996 and 1997, except that I(2) Solutions' operating results are for the nine months ended July 31, 1996 and 1997. FOUNDING COMPANIES COMBINED RESULTS OF OPERATIONS The combined results of operations of the Founding Companies for the periods presented as fiscal years 1992, 1993, 1994, 1995, and 1996 and the nine months ended September 30, 1996 and 1997 do not represent combined results of operations presented in accordance with generally accepted accounting principles, but are only a summation of the total revenues, cost of revenues, and SG&A expenses (including historical intangible amortization) of the individual Founding Companies on an historical basis. The combined results also exclude the effect of pro forma adjustments and, therefore, may not be indicative of the Company's post-combination results of operations for a number of reasons, including the following: (i) the Founding Companies were not under common control or management during the periods presented; (ii) the Founding Companies had different fiscal year ends for the periods presented; (iii) the Founding Companies used different tax structures ("S Corporations" or "C Corporations") during the periods presented; (iv) the Company will incur incremental costs related to its new corporate management and the costs of being a public company; (v) the Company will use the purchase method of accounting to record the Acquisitions, resulting in the recording and amortization of goodwill; and (vi) the combined data do not reflect the Compensation Differential, the Rent Differential or the potential benefits and cost savings the Company expects to realize once ImageMax and the Founding Companies begin operating as a combined entity. The following table sets forth the combined results of operations of the Founding Companies on an historical basis: <TABLE> <CAPTION> NINE MONTHS ENDED FISCAL YEAR(1) SEPTEMBER 30,(2) ----------------------------------------------- ----------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ------- ------- (IN THOUSANDS) (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> Revenues.............................. $34,874 $37,978 $41,037 $39,482 $46,501 $32,402 $36,473 Cost of Revenues...................... 23,203 25,197 29,574 27,647 32,167 22,611 23,982 ------- ------- ------- ------- ------- ------- ------- Gross profit........................ 11,671 12,781 11,463 11,835 14,334 9,791 12,491 Selling, general and administrative expenses............................ 10,204 11,597 11,181 11,346 12,797 8,938 9,508 ------- ------- ------- ------- ------- ------- ------- Operating income.................... 1,467 1,184 282 489 1,537 853 2,983 Interest expense...................... 605 423 729 862 1,039 708 725 ------- ------- ------- ------- ------- ------- ------- Income (loss) before taxes............ 862 761 (447) (373) 498 145 2,258 Pro forma provision (benefit) for income taxes (3).................... 339 299 (176) (147) 196 57 887 ------- ------- ------- ------- ------- ------- ------- Pro forma net income (loss)........... $ 523 $ 462 $ (271) $ (226) $ 302 $ 88 $ 1,371 ======= ======= ======= ======= ======= ======= ======= </TABLE> - ------------------ (1) The years presented are as follows: AMMCORP -- fiscal years ended July 31, 1993, 1994, 1995, 1996 and 1997; IDS -- fiscal years ended August 31, 1993, 1994, 1995, 1996 and 1997; Laser Graphics, I2 Solutions and OMI -- fiscal years ended October 31, 1992, 1993, 1994, 1995 and 1996; IMS -- fiscal years ended November 30, 1992, 1993, 1994, 1995 and 1996; TIMCO, DataLink and DocuTech -- fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996; TPS -- fiscal years ended March 31, 1993, 1994, 1995, 1996 and 1997; CodaLex and Spaulding -- fiscal years ended June 30, 1993, 1994, 1995, 1996 and 1997. (2) Except for I2 Solutions for which the periods presented are for the nine months ended July 31, 1996 and 1997. (3) Several of the Founding Companies operated as "S corporations." This adjustment reflects a pro forma adjustment for income taxes which would have been recorded if all of the Founding Companies were "C corporations" for the periods presented. ImageMax was incorporated in Pennsylvania in November 1996. The Company's executive offices are located at Two Bala Plaza, Suite 300, Bala Cynwyd, Pennsylvania 19004-1573, and its telephone number is (610) 660-7754.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046183_union_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046183_union_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e00256df78f2bbdb48723b1e91d0e4d147469a3d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046183_union_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary highlights selected information from this document and may not contain all the information that is important to you. To understand the stock offering fully, you should read carefully this entire document, including the consolidated financial statements and the notes to the consolidated financial statements of Union Federal Savings and Loan Association. References in this document to "we", "us", "our" and "Union Federal" refer to Union Federal Savings and Loan Association. In certain instances where appropriate, "us" or "our" refers collectively to Union Community Bancorp and Union Federal Savings and Loan Association. References in this document to "the Holding Company" refer to Union Community Bancorp. The Companies Union Community Bancorp 221 E. Main Street Crawfordsville, Indiana 47933 (765) 362-2400 Union Community Bancorp is not an operating company and has not engaged in any significant business to date. It was formed in September, 1997, as an Indiana corporation to be the holding company for Union Federal Savings and Loan Association. The holding company structure will provide greater flexibility in terms of operations, expansion and diversification. See page 16. Union Federal Savings and Loan Association 221 E. Main Street Crawfordsville, Indiana 47933 (765) 362-2400 We are a community- and customer-oriented federal mutual savings and loan association. We provide financial services to individuals, families and small business. Historically, we have emphasized residential mortgage lending, primarily one- to four-family mortgage loans. On June 30, 1997, we had total assets of $84.3 million, deposits of $62.1 million, and retained earnings of $14.5 million. See page 17. The Stock Offering Union Community Bancorp is offering for sale between 1,955,000 and 2,645,000 shares of its Common Stock at $10 per share. This offering may be increased to 3,041,750 shares without further notice to you if market or financial conditions change prior to the completion of this stock offering or if additional shares of stock are needed to fill the order of our employee stock ownership plan. Stock Purchases Union Community Bancorp will offer shares of its Common Stock to our depositors who held deposit accounts as of certain dates and to our borrowers with outstanding loans as of certain dates. The shares will be offered first in a Subscription Offering and any remaining shares may be offered in a Community Offering to members of the general public with preference given to residents of Montgomery County. See pages 29 to 32. We have engaged Trident Securities, Inc. to assist in the marketing of the Common Stock. Prohibition on Transfer of Subscription Rights You may not sell or assign your subscription rights. Any transfer of subscription rights is prohibited by law. If you exercise your subscription rights, you will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding regarding the sale or transfer of shares. We intend to pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights and will not honor orders known by us to involve the transfer of such rights. In addition, persons who violate the purchase limitations may be subject to sanctions and penalties imposed by the Office of Thrift Supervision. The Offering Range and Determination of the Price Per Share The offering range is based on an independent appraisal of the pro forma market value of the Common Stock by RP Financial, LC., an appraisal firm experienced in appraisals of savings associations. RP Financial, LC. has estimated that, in its opinion, as of August 22, 1997, and as updated as of October 17, 1997, the aggregate pro forma market value of the Common Stock ranged between $19,550,000 and $26,450,000 (with a mid-point of $23,000,000). The pro forma market value of the shares is our market value after taking into account the sale of shares in this offering. The appraisal was based in part upon our financial condition and operations and the effect of the additional capital raised by the sale of Common Stock in this offering. The $10.00 price per share was determined by our board of directors and is the price most commonly used in stock offerings involving conversions of mutual savings associations. If the pro forma market value of the Common Stock changes to either below $19,550,000 or above $30,417,500, we will notify you and provide you with the opportunity to modify or cancel your order. See pages 35 to 36. <PAGE> Termination of the Offering The Subscription Offering will terminate at 12:00 noon, Crawfordsville time, on December 10, 1997. The Community Offering, if any, may terminate at any time without notice but no later than January 24, 1998, without approval by the OTS. Benefits to Management from the Offering Our full-time employees will participate in our employee stock ownership plan, which is a form of retirement plan that will purchase shares of Union Community Bancorp's Common Stock. We also intend to implement a management recognition and retention plan and a stock option plan following completion of the Conversion, which will benefit our officers and directors. If we adopt the management recognition and retention plan, our executive officers and directors will be awarded shares of Common Stock at no cost to them. However, the management recognition and retention plan and stock option plan may not be adopted until at least six months after the Conversion and are subject to shareholder approval and compliance with OTS regulations. We also have entered into a three-year employment contract with Joseph E. Timmons, our President and Chief Executive Officer, in connection with the Conversion. See pages 68 to 72. Use of the Proceeds Raised from the Sale of Common Stock Union Community Bancorp intends to use a portion of the proceeds from the stock offering to make a loan to our employee stock ownership plan to fund its purchase of 8% of the Common Stock issued in the Conversion, up to a maximum of 184,000 shares. Union Community Bancorp will use 50% of the proceeds that remain after it pays expenses incurred in connection with the Conversion to purchase all of the capital stock to be issued by Union Federal Savings and Loan Association. Union Community Bancorp will retain the balance of the proceeds as a possible source of funds for the payment of dividends to shareholders, to repurchase shares of Common Stock in the future, to acquire one or more other financial institutions or for other general corporate purposes. On a short-term basis, the Holding Company may invest the net proceeds it retains in short-term investments. The Holding Company has no present plans to acquire another financial institution. See pages 17 to 18. Dividends Management of Union Community Bancorp expects initially to pay quarterly cash dividends on the shares of Common Stock at an annual rate of 3% ($0.30 per share based on the $10.00 per share offering price) commencing after the quarter ended March 31, 1998. See pages 18 to 19. Market for the Common Stock Union Community Bancorp has received conditional approval to have its Common Stock quoted on the National Association of Security Dealers Automated Quotation National Market System under the symbol "UCBC." Even though we expect that the shares of Common Stock will be sold on the Nasdaq National Market System, it is unlikely that an active and liquid trading market for the shares will develop and be maintained. Investors should have a long-term investment intent. If you purchase shares, you may not be able to sell them when you want to at a price that is equal to or more than the price you paid. See page 19. Important Risks in Owning the Holding Company's Common Stock Before you decide to purchase stock in the offering, you should read the Risk Factors section on pages 13 to 16 of this document. <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046209_warwick_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046209_warwick_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0aba32ae1970191e6cc60cc62c2a589c24c26a8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046209_warwick_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY This summary is qualified in its entirety by the more detailed information and Financial Statements of the Bank and Notes thereto included elsewhere in this Prospectus. WARWICK COMMUNITY BANCORP, INC. The Company is a Delaware corporation recently organized by the Bank for the purpose of acquiring all of the capital stock of the Bank to be issued in the Conversion. The Company will purchase all of the capital stock of the Bank to be issued in the Conversion in exchange for 50% of the net proceeds from the Offerings, with the remaining net proceeds to be retained by the Company. Funds retained by the Company will be used for general business activities. Immediately following the Conversion, the only significant assets of the Company will be the capital stock of the Bank, the loan that the Company intends to make to the ESOP to enable the ESOP to purchase up to 8% of the Common Stock to be issued in the Conversion, including shares issued to the Foundation, and the net conversion proceeds retained by the Company. The net proceeds from the Offerings are expected to be invested initially in federal funds, government and federal agency mortgage-backed securities, other debt securities, high-grade short-term marketable securities, equity securities, deposits of or loans to the Bank or a combination thereof. See "Use of Proceeds." The principal business of the Company will initially consist of managing its investment in the Bank. See "Business of the Company," "Business of the Bank" and "Regulation and Supervision -- Holding Company Regulation." The Company's office is located at the main office of the Bank at 18 Oakland Avenue, Warwick, New York 10990-0591. The Company's telephone number is (914) 986-2206. THE WARWICK SAVINGS BANK General The Bank was founded in 1875 as a New York mutual savings bank. The Bank is subject to extensive regulation, supervision and examination by the NYSBD, its primary regulator, and the FDIC, which insures its deposits. The Bank has been, and intends to continue to be, a community-oriented savings institution offering a variety of financial services to meet the needs of the communities it serves. The Bank maintains its headquarters in the village of Warwick in Orange County, New York and operates three additional branch offices located in the village of Monroe, the town of Woodbury and the city of Middletown, Orange County, New York. The Bank's primary deposit gathering areas are currently concentrated in proximity to its full service banking offices. The Bank's current primary lending market includes Orange County, New York and surrounding New York counties. The Bank has recently obtained a license from the State of New Jersey Department of Banking and Insurance to form a mortgage banking subsidiary, WSB Mortgage Company of New Jersey, Inc. ("WSB Mortgage"), through which the Bank intends to establish a mortgage banking operation in, and expand its commercial lending into, northeastern New Jersey. See "Business of the Bank -- Market Area" and "-- Competition." The Bank's principal business has been and continues to be attracting retail deposits from the general public in the area surrounding its four branches and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four-family residential mortgage loans, mortgage-backed securities, commercial business and commercial real estate loans and various debt and equity securities. The Bank's residential lending activities are conducted through its team of commissioned loan originators, who regularly call upon realtors, builders and others in the real estate business to solicit mortgage loan applications. In the normal course of business, the Bank uses off-balance sheet financial instruments, including put options purchased and forward commitments to sell mortgage loans, primarily as part of mortgage banking hedging strategies. When effectively used, these instruments are designed to moderate the impact on earnings as interest rates move up or down. Additionally, the Bank originates home equity loans (Good Neighbor Home Loans) and lines of credit, consumer loans, student loans and its own credit card loans. The Bank's revenues are derived principally from the interest on its mortgages, securities, commercial and consumer loans and, to a lesser degree, from its mortgage banking activities, loan and securities sales, servicing fee income and income derived from investment products offered by its wholly owned subsidiary, WSB Financial Services, Inc. ("WSB Financial"). The Bank's primary sources of funds are deposits, borrowings, principal and interest payments on loans and securities and proceeds from the sale of loans and securities. At August 31, 1997, the Bank had total assets of $290.9 million, of which $154.7 million was comprised of mortgage and other loans and $116.3 million was comprised of securities. At such date, total deposits were $221.7 million, borrowings were $31.3 million and net worth was $29.2 million. At that same date, the Bank's leverage and total risk-based capital ratios were 9.81% and 20.12%, respectively, which exceeded all applicable regulatory capital requirements. Additionally, the Bank's regulatory capital was in excess of the amount necessary to be considered "well-capitalized" under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). See "Regulatory Capital Compliance," "Capitalization," "Pro Forma Data" and "Regulation and Supervision -- New York Banking Regulation." The Bank's deposits are insured up to the maximum allowable amount by the Bank Insurance Fund ("BIF") of the FDIC. The Bank's net income was $2.87 million, $1.47 million and $504,000 for the fiscal years ended May 31, 1997, 1996 and 1995, respectively, and $538,000 and $848,000 for the three months ended August 31, 1997 and 1996, respectively. See "Selected Financial and Other Data of the Bank," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business of the Bank." The Bank is a member of the Federal Home Loan Bank of New York ("FHLBNY"), which is one of the 12 regional banks which comprise the Federal Home Loan Bank ("FHLB") system. Business Strategy The Bank has historically employed an operating strategy that emphasizes the origination of one- to four-family residential mortgage loans in its market area, with both fixed and adjustable rates, and, to an increasing degree over the past 10 years, its commercial lending business, with mostly prime-rate based loans secured by real estate located mainly in Orange County, New York. Due in part to this strategy, the Bank historically has had profitable operations, resulting in a strong regulatory capital position. The Bank's goal of maintaining this position has led to an overall strategy of managed growth in both deposits and assets. The major elements of the Bank's operating strategy are to: (i) grow and diversify the Bank's loan portfolio by continuing to originate owner-occupied residential mortgage, commercial business and commercial real estate, construction and consumer loans in its market area (see "Risk Factors -- Residential and Non-Residential Lending Risks" for a discussion of the greater degree of credit risk associated with these types of loans); (ii) complement the Bank's mortgage lending activities by investing in mortgage-backed and other securities; (iii) maintain the Bank's relatively low cost of funds; and (iv) manage the Bank's level of interest rate risk. From time to time, the Bank employs a leveraging strategy, whereby borrowings are used to fund specific investments. This form of leveraging allows for a reasonable net margin of return. The Bank also seeks to attract and retain customers by providing a high level of personal service to its retail and business customers through extended office hours, low turnover of employees and prompt, flexible and personalized production of a variety of loan products. In addition, it is a goal of the Bank to increase its market share in the communities it serves through the acquisition or establishment of branch offices and, if appropriate, the acquisition of smaller financial institutions. Additionally, it is a goal of the Bank to penetrate new markets. For this reason, the Bank has recently obtained a license from the State of New Jersey Department of Banking and Insurance to establish a mortgage banking operation in, and expand its commercial lending into, that state through WSB Mortgage. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Management Strategy" and "Business of the Bank." In making loans, the Bank considers both the estimated value of the collateral securing the loans and the creditworthiness of its prospective borrowers and seeks to minimize risk of loss through its underwriting standards. As a result of this strategy, historically, the Bank has had only minimal loss experience in its lending operations. The Bank's ratio of non-performing loans to total loans at year-end ranged from 0.78% to 2.42% during the five-year period ended May 31, 1997 and was 0.94% at August 31, 1997. The Bank's ratio of allowance for loan losses to non-performing loans was 93.44% at August 31, 1997. See "Selected Financial and Other Data of the Bank" and "Business of the Bank -- Asset Quality." The Bank's interest expense consists of the interest paid on savings deposits and borrowed money. The Bank's savings deposits are derived principally from its primary market area. The Bank's strategy has been to maintain a high level of stable savings deposits by providing quality service to its customers without significantly increasing its cost of funds. The Bank's low-cost deposit base, consisting of passbook accounts, demand accounts, money market accounts, NOW accounts and interest-on-checking demand accounts, totaled $146.0 million, or 65.8% of total deposits, and had a weighted average effective rate of 2.89% at August 31, 1997. The Bank has not used, and does not intend to use, brokered deposits as a source of funds. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Business of the Bank -- Sources of Funds." THE WARWICK SAVINGS FOUNDATION In furtherance of the Bank's commitment to its local community, the Plan of Conversion provides for the establishment of a charitable foundation in connection with the Conversion, which will be incorporated under Delaware law as a non-stock corporation. The Foundation will be funded with shares of Common Stock contributed by the Company, as further described below. The Company and the Bank believe that the funding of the Foundation with Common Stock of the Company is a means of enhancing the common bond between the Bank and its community and thereby enables the Bank's community to share in the potential growth and success of the Company. While the Bank has made charitable contributions in the past, the Bank has not previously formed a charitable foundation nor has it made contributions to charitable organizations of the magnitude of the contribution that will be made to the Foundation in the Conversion. By further enhancing the Bank's visibility and reputation in its local community, the Bank believes that the Foundation will enhance the long-term value of the Bank's community banking franchise. See "The Conversion -- Establishment of The Warwick Savings Foundation -- Structure of the Foundation." The authority for the affairs of the Foundation, including the management of the Common Stock held by the Foundation, will be vested in the Foundation's Board of Directors. A majority of the Board of Directors of the Foundation will consist of individuals who are officers or directors of the Bank, and the remaining members of the Foundation's Board of Directors will consist of certain members of the Bank's community. However, establishment of the Foundation is subject to certain conditions, including a requirement that the Common Stock of the Company held by the Foundation be voted in the same ratio as all other shares of the Company's Common Stock on all proposals considered by shareholders of the Company. See "The Conversion -- Establishment of The Warwick Savings Foundation -- Regulatory Conditions Imposed on the Foundation." Upon the establishment of the Foundation, the directors of the Foundation will establish the Foundation's policies with respect to grants or donations by the Foundation, consistent with the purposes for which the Foundation was established. The Company proposes to fund the Foundation by contributing to the Foundation immediately following the Conversion a number of shares of authorized but unissued Common Stock equal to 3% of the Common Stock sold in the Offerings, or 123,675, 145,500 and 167,325 shares at the minimum, midpoint and maximum of the Estimated Price Range, respectively. Such contribution, once made, will not be recoverable by the Company or the Bank. Assuming the sale of shares at the maximum of the Estimated Price Range, the Company will have 5,744,825 shares issued and outstanding, of which the Foundation will own 167,325 shares, or 2.9%. DUE TO THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK TO THE FOUNDATION, PERSONS PURCHASING SHARES IN THE CONVERSION WILL HAVE THEIR OWNERSHIP AND VOTING INTERESTS IN THE COMPANY DILUTED BY 2.9%. SEE "PRO FORMA DATA." As a result of the establishment of the Foundation, the Company will recognize an expense of the full amount of the contribution, offset, in part, by a corresponding tax benefit, during the quarter in which the contribution is made, which is expected to be the third quarter of the fiscal year ending May 31, 1998. Such expense will reduce earnings and will have a material impact on the Company's earnings for such quarter and for the fiscal year in which such quarter falls. Assuming a contribution of $1.7 million in Common Stock at such time, based on the maximum of the Estimated Price Range, the Company estimates a net tax effected expense of $1.0 million, based upon a 40% tax rate and without regard to the annual deduction limitation of 10% of the Company's taxable income. If the Foundation had been established in the fiscal year ended May 31, 1997, the Bank would have recorded net income of $1.9 million, rather than recording net income of $2.9 million, for the fiscal year ended May 31, 1997, based on the same tax assumptions. In addition to the contribution of Common Stock by the Company to the Foundation, the Bank expects to continue making ordinary charitable contributions within its local community in the future. The Bank does not anticipate making future charitable contributions to the Foundation during the first five years following the initial contribution to the Foundation. For further discussion of the Foundation and its impact on purchasers in the Conversion, see "Risk Factors -- Establishment of Charitable Foundation." The establishment of the Foundation in connection with the Conversion, and the Superintendent's approval and the FDIC's non-objection to the Plan of Conversion, may be subject to potential challenges which could result in delays in the Conversion. See "Risk Factors -- Establishment of Charitable Foundation." THE CONVERSION AND THE SUBSCRIPTION AND COMMUNITY OFFERINGS On July 10, 1997, the Board of Trustees of the Bank adopted the Plan of Conversion (which was amended as of August 19, 1997 and October 21, 1997) pursuant to which the Bank is converting from a New York mutual savings bank to a New York stock savings bank, and all of the outstanding capital stock of the Bank will be acquired by the Company in exchange for 50% of the net proceeds from the Offerings. The Conversion and the Offerings are subject to the Superintendent's approval, which was received on , 1997, the FDIC's non-objection, which was received on , 1997, and approval of the Bank's depositors at a special meeting to be held on December , 1997. See "The Conversion -- General." The Bank is converting to increase its capital and to structure itself in a form used by many commercial banks and other business entities and a growing number of savings institutions. The Conversion will enhance the Bank's ability to access capital markets, expand its current operations, acquire other financial institutions or branch offices, provide affordable home financing opportunities to the communities it serves and diversify into other financial services to the extent allowable by applicable law and regulation. The holding company form of organization will provide the Bank with additional flexibility to diversify its business activities through newly-formed subsidiaries or through acquisitions of or mergers with both mutual and stock institutions, as well as other companies. Although there are no current arrangements, understandings or agreements, written or oral, regarding any such opportunities, the Company will be in a position after the Conversion, subject to regulatory limitations and the Company's financial position, to take advantage of any such opportunities that may arise. See "The Conversion -- Purposes of Conversion." The holding company form of organization also provides certain anti-takeover protections. See "Risk Factors -- Certain Anti-Takeover Provisions." The Common Stock will be offered in the Subscription Offering and, upon completion of the Subscription Offering and subject to other limitations described herein, to the extent shares are available, in the Community Offering to certain members of the general public to whom a copy of this Prospectus is delivered. To the extent that shares are available after the expiration of the Community Offering, such shares may be offered in the Syndicated Community Offering. See "The Conversion -- Syndicated Community Offering." Common Stock offered in the Subscription Offering will be offered in the following order of priority: (1) to depositors whose deposits in qualifying accounts in the Bank totaled $100 or more on June 30, 1996 ("Eligible Account Holders"); (2) to the Company's and the Bank's tax-qualified employee stock benefit plans ("Employee Plans"), including the ESOP; (3) to depositors whose deposits in qualifying accounts in the Bank totaled $100 or more on September 30, 1997, other than (i) those depositors who would otherwise qualify as Eligible Account Holders or (ii) trustees or executive officers of the Bank or their Associates (as defined herein, see "The Conversion -- Limitations on Common Stock Purchases") ("Supplemental Eligible Account Holders"); and (4) to depositors of the Bank as of October 31, 1997, the voting record date ("Voting Record Date") for the special meeting of depositors to vote on the Conversion, other than those depositors who would otherwise qualify as Eligible Account Holders or Supplemental Eligible Account Holders ("Other Depositors"). Subscription rights will expire if not exercised by, and the Subscription Offering will terminate at, , Eastern Time, on the Expiration Date, unless extended by the Bank and the Company, for an initial period of up to 45 days and with the approval of the Superintendent and the FDIC, if necessary, for additional periods of no more than 60 days each. Subject to the prior rights of holders of subscription rights, Common Stock not subscribed for in the Subscription Offering will be offered in the Community Offering to certain members of the general public upon the completion of the Subscription Offering. The Community Offering, if any, shall commence upon the completion of the Subscription Offering and shall terminate 7 days after the close of the Subscription Offering unless extended by the Bank and the Company, with the approval of the Superintendent and the FDIC, if necessary. The Company and the Bank reserve the absolute right to reject or accept any orders in the Community Offering, in whole or in part, either at the time of receipt of an order or as soon as practicable following the expiration of the Community Offering. However, no such rejection will be in contravention of any applicable law or regulation. The Bank and the Company have retained Sandler O'Neill as consultant and advisor in connection with the Offerings and to assist in soliciting subscriptions and purchase orders in the Offerings. The Bank and the Company will pay a fee to Sandler O'Neill, which will be based on the aggregate Purchase Price of the Common Stock sold in the Offerings. Neither Sandler O'Neill nor any registered broker-dealer shall have any obligation to take or purchase any shares of Common Stock in the Offerings. See "The Conversion -- Marketing and Underwriting Arrangements." PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES OF COMMON STOCK To ensure that each purchaser receives a Prospectus at least 48 hours prior to the Expiration Date (or the expiration of the Community Offering, as the case may be) in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended ("Exchange Act"), no prospectus will be mailed any later than five days prior to any such date or hand delivered any later than two days prior to any such date. Execution of the stock order form will confirm receipt of delivery in accordance with Rule 15c2-8. Each stock order form distributed will be accompanied by a prospectus and certification form. The Company and the Bank are not obligated to accept or process orders that are submitted on facsimiled or copied stock order forms. Stock order forms unaccompanied by an executed original certification form will not be accepted. Payment by check, money order, bank draft, cash or debit authorization to an existing account at the Bank must accompany the stock order form and certification form. No wire transfers will be accepted. The Bank is prohibited from lending funds to any person or entity for the purpose of purchasing shares of Common Stock in the Conversion. See "The Conversion -- Procedure for Purchasing Shares in Subscription and Community Offerings." In order to ensure that Eligible Account Holders, Supplemental Eligible Account Holders and Other Depositors are properly identified as to their stock purchase priorities, depositors as of the Eligibility Record Date (June 30, 1996), the Supplemental Eligibility Record Date (September 30, 1997) and the Voting Record Date (October 31, 1997) must list all accounts on the stock order form, giving all names on each account and the account numbers. Failure to list all such account numbers may result in the inability of the Company and the Bank to fill all or part of a subscription order. See "The Conversion -- Procedure for Purchasing Shares in Subscription and Community Offerings." RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES OF COMMON STOCK Prior to the completion of the Conversion, no person may transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the Plan or the shares of Common Stock to be issued upon their exercise. Each person exercising subscription rights will be required to certify that any purchase of Common Stock will be solely for the purchaser's own account and that there is no agreement or understanding regarding the sale or transfer of any shares purchased as a result of the exercise. The Company and the Bank will pursue any and all legal and equitable remedies in the event they become aware of the transfer of subscription rights and will not honor orders known by them to involve the transfer of such rights. See "The Conversion -- Restrictions on Transfer of Subscription Rights and Shares of Common Stock." PURCHASE LIMITATIONS The minimum purchase in the Offerings is 25 shares. Pursuant to the subscription rights granted under the Plan, the ESOP intends to subscribe for 8% of the shares of Common Stock to be issued in the Conversion, including shares issued to the Foundation. No Eligible Account Holder, Supplemental Eligible Account Holder or Other Depositor, in their capacity as such, may subscribe in the Subscription Offering for more than $150,000 of the Common Stock offered; no person, together with associates of or persons acting in concert with such person, may purchase in the Community Offering and the Syndicated Community Offering in the aggregate more than $150,000 of the Common Stock offered in the Conversion; and, except for the Employee Plans, no person, together with associates of or persons acting in concert with such person, may purchase more than the overall maximum purchase limitation of 1% of the total number of shares of Common Stock offered for sale in the Offerings. At any time during the Conversion and without further approval of the Bank's depositors, the Company and the Bank may, in their sole discretion, increase the overall maximum purchase limitation and increase the amount that may be subscribed for in the Offerings to up to 5% of the shares offered for sale in the Conversion. It is currently anticipated that the overall maximum purchase limitation may be increased if, after the Subscription and Community Offerings, the Company has not received subscriptions for an aggregate amount equal to at least the minimum of the Estimated Price Range. Prior to consummation of the Conversion, if such amount is increased, subscribers for the maximum amount will be, and certain other large subscribers in the sole discretion of the Bank may be, given the opportunity to increase their subscriptions up to the then applicable limit. See "The Conversion -- Limitations on Common Stock Purchases" and "The Conversion -- Community Offering." In the event of an increase in the total number of shares to up to 15% above the maximum, the additional shares will be distributed and allocated to fill unfilled orders in the Subscription Offering and Community Offering, if any, without any resolicitation of subscribers, as described in "The Conversion -- Subscription Offering and Subscription Rights" and "-- Limitations on Common Stock Purchases." STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION State and federal regulations require that the aggregate purchase price of the Common Stock to be issued in the Conversion be consistent with an independent appraisal of the estimated pro forma market value of the Common Stock following the Conversion. FinPro, Inc. ("FinPro"), an independent appraiser, has advised the Bank that in its opinion, dated as of September 18, 1997 and updated as of October 17, 1997, the aggregate estimated pro forma market value of the Common Stock ranged from $41,225,000 to $55,775,000, with a midpoint of $48,500,000. See "The Conversion -- Stock Pricing." FinPro's appraisal report is included as an exhibit to the Company's Registration Statement ("Registration Statement") filed with the Securities and Exchange Commission ("SEC" or "Commission"), of which this Prospectus is a part. See "Additional Information." Based upon FinPro's appraisal, the Board of Trustees of the Bank has established the Estimated Price Range of $41,225,000 to $55,775,000, assuming the issuance of between 4,122,500 and 5,577,500 shares of Common Stock at the Purchase Price of $10.00 per share. THE APPRAISAL OF THE COMMON STOCK IS NOT INTENDED TO BE AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SUCH SHARES, NOR CAN ANY ASSURANCE BE GIVEN THAT PURCHASERS OF THE COMMON STOCK IN THE CONVERSION WILL BE ABLE TO SELL SUCH SHARES AFTER THE COMPLETION OF THE CONVERSION AT OR ABOVE THE PURCHASE PRICE. All shares of Common Stock issued in the Conversion will be sold at the Purchase Price. The actual number of shares to be issued in the Conversion will be determined by the Company and the Bank based upon FinPro's final updated valuation of the estimated pro forma market value of the Common Stock, giving effect to the Conversion, at the completion of the Offerings. The number of shares to be issued is expected to range from a minimum of 4,122,500 shares to a maximum of 5,577,500 shares. Subject to approval of the Superintendent, the Estimated Price Range may be increased or decreased to reflect market and economic conditions prior to the completion of the Conversion, and, under such circumstances, the Company may increase or decrease the number of shares of Common Stock to be issued in the Conversion. The maximum of the Estimated Price Range may be increased by up to 15% and the number of shares of Common Stock to be issued in the Conversion may be increased to 6,414,125 shares due to regulatory considerations, changes in the market and general financial and economic conditions. No resolicitation of subscribers will be made, and subscribers will not be permitted to modify or cancel their subscriptions unless the gross proceeds from the sale of the Common Stock are less than the minimum or more than 15% above the maximum of the current Estimated Price Range. See "Pro Forma Data," "Risk Factors -- Possible Increase in Estimated Price Range and Number of Shares Issued" and "The Conversion -- Stock Pricing" and "-- Number of Shares to be Issued." The Company will issue an amount of Common Stock to the Foundation from authorized but unissued shares equal to 3% of Common Stock sold in the Conversion (or 123,675 to 167,325 shares based on the minimum and maximum of the Estimated Price Range, respectively) immediately following completion of the Conversion. As a result, the Company will have a total of 5,744,825 shares of Common Stock outstanding (based on the issuance of 5,577,500 shares of Common Stock being offered for sale), which will have the effect of diluting the ownership and voting interests of persons purchasing shares in the Conversion by 2.9%, since a greater number of shares will be outstanding upon completion of the Conversion. See "Pro Forma Data" and "Risk Factors -- Establishment of Charitable Foundation." USE OF PROCEEDS Net proceeds from the sale of the Common Stock (after the expenses of the Conversion are deducted) are estimated to be between $39.4 million and $53.7 million, with a midpoint of $46.6 million, depending on the number of shares sold and the expenses of the Conversion. In the event that the Estimated Price Range is increased by 15%, the net proceeds from the sale of the Common Stock (after the expenses of the Conversion are deducted) are estimated to be $62.0 million. See "Pro Forma Data." The Company will use the net proceeds from the sale of the Common Stock as follows: 1. The Company will purchase all of the capital stock of the Bank to be issued in the Conversion in exchange for 50% of the net proceeds of the Offerings. 2. The remaining net proceeds will be retained by the Company. Net proceeds to be retained by the Company after the purchase of the capital stock of the Bank are estimated to be between $19.7 million and $26.9 million, with a midpoint of $23.3 million. In the event that the Estimated Price Range is increased by 15%, the net proceeds retained by the Company are estimated to be $31.0 million. Such net proceeds will be used for general business activities. The net proceeds retained by the Company will be invested primarily in federal funds, government and federal agency mortgage-backed securities, other debt securities, high-grade short-term marketable securities, equity securities, deposits of or loans to the Bank, or a combination thereof. 3. The Company intends to use a portion of the retained net proceeds to make a loan directly to the ESOP to enable the ESOP to purchase 8% of the shares to be issued in the Conversion, including shares issued to the Foundation. The amount of the loan to the ESOP is estimated to be between $3.4 million and $4.6 million (or $5.3 million if the Estimated Price Range is increased by 15%), if the shares are acquired at the Purchase Price, to be repaid over a period of up to 10 years at an interest rate of 8%. See "Management of the Bank -- Benefits -- Employee Stock Ownership Plan and Trust." Upon completion of the Conversion, the Board of Directors of the Company will have the authority to adopt stock repurchase plans, subject to statutory and regulatory restrictions and other requirements. In the event the Company determines to repurchase stock, of which there can be no assurance, such repurchases will be made at market prices, which could be in excess of the Purchase Price in the Conversion. Any stock repurchases will be subject to the determination of the Company's Board of Directors that both the Company and the Bank will be capitalized in excess of all applicable regulatory requirements after any such repurchases and that such capital will be adequate, taking into account, among other things, the level of non-performing and other risk assets, the Company's and the Bank's current and projected results of operations and asset/liability structure, the economic environment and tax and other considerations. The portion of the net proceeds received by the Bank from the Company's purchase of the Bank's capital stock, estimated to be between $19.7 million at the minimum of the Estimated Price Range and $26.9 million at the maximum of the Estimated Price Range, will be added to the Bank's general funds to be used for general corporate purposes, including: investment in one- to four-family residential mortgage loans and other loans; investment in federal funds, short-term, investment-grade marketable securities and mortgage-backed securities; and funding the purchase of stock to be awarded under the Company's Recognition and Retention Plan ("RRP"), which the Company and the Bank intend to adopt subsequent to the Conversion, to the extent that such plan is not funded with authorized but unissued Common Stock of the Company. The net proceeds may also be used to purchase or lease additional branch or office facilities inside or outside of Orange County, New York. See "Use of Proceeds." DIVIDENDS The Board of Directors of the Company intends to consider a policy of paying cash dividends on the Common Stock in the future. However, no decision has been made as to the amount or timing of such dividends, if any. Declarations of dividends by the Board of Directors will depend upon a number of factors, including the amount of the net proceeds from the Offerings retained by the Company, investment opportunities available to the Company or the Bank, capital requirements, regulatory limitations, the Company's and the Bank's financial condition and results of operations, tax considerations and general economic conditions. See "Dividend Policy." BENEFITS TO MANAGEMENT AND DIRECTORS The Board of Trustees of the Bank received information about various types of benefit plans typically utilized by public companies in general and converting thrift institutions in particular. After reviewing the anticipated costs of establishing a customary program of benefits and the anticipated benefits to the Company, the Board of Trustees determined that the benefit plans to be adopted by the Company and the Bank and described herein helped significantly by providing a means to retain and attract executives of the caliber needed to run a successful public company, to maintain their attention and loyalty in change of control situations and to align their interests with those of the Company's shareholders. Finally, the Board of Trustees concluded that the cost of establishing and maintaining these benefit plans would be justified by these benefits to the Company. Stock Option Plan. Following the Conversion, the Company intends to adopt a stock option plan ("Stock Option Plan"). If implemented within one year following the Conversion, the adoption of the Stock Option Plan will be subject to shareholder approval obtained at a meeting of shareholders to be held no earlier than six months after the completion of the Conversion. Assuming such implementation, an amount of shares of Common Stock equal to 10% of the Common Stock to be issued in the Conversion, including shares issued to the Foundation (424,617 shares and 574,482 shares at the minimum and maximum of the Estimated Price Range, respectively), is expected to be reserved for issuance under the Stock Option Plan. Upon exercise of options, shares will be acquired either from treasury shares acquired through open market purchases, subject to the Superintendent's approval, if necessary, or from authorized but unissued Common Stock. See "Risk Factors -- Possible Dilutive Effect of Stock Options and Recognition and Retention Plan." No determinations have been made by the Company as to the specific terms of the Stock Option Plan or the amount of awards to be made thereunder. New York Banking Board ("NYBB") regulations provide that no individual employee may receive more than 25% of the options granted, and that non-employee directors may not receive more than 5% individually or 30% in the aggregate of the options granted, under option plans implemented within one year following the Conversion. See "Management of the Bank -- Benefits -- Stock Option Plan." Recognition and Retention Plan. Following the Conversion, the Company also intends to adopt the RRP for the benefit of officers, employees and non-employee directors of the Company and the Bank. If implemented within one year following the Conversion, the adoption of the RRP will be subject to shareholder approval obtained at a meeting of shareholders to be held no earlier than six months after the completion of the Conversion. Assuming such implementation, the Bank expects to contribute funds to the RRP to enable its related trust to acquire, in the aggregate, up to 4% of the shares of Common Stock to be issued in the Conversion, including shares issued to the Foundation (169,847 shares and 229,793 shares at the minimum and maximum of the Estimated Price Range, respectively). These shares will be acquired either through open market purchases, subject to the Superintendent's approval, if necessary, or from authorized but unissued Common Stock and will be awarded at no cost to the recipient of awards under the RRP. See "Risk Factors -- Possible Dilutive Effect of Stock Options and Recognition and Retention Plan." No determinations have been made by the Company as to the specific terms of the RRP or the amount of awards to be made thereunder. NYBB regulations provide that no individual employee may receive more than 25% of the shares of any plan, and that non-employee directors may not receive more than 5% of the shares individually or 30% in the aggregate, in the case of plans implemented within one year following the Conversion. Under the anticipated terms of the RRP, recipients would receive shares without any cost and would vote any shares allocated to them, and an independent trustee would vote unallocated shares in the same proportion as the instructions it receives from recipients with respect to allocated shares which have not been vested and distributed. See "Management of the Bank -- Benefits -- Recognition and Retention Plan." ESOP. The Bank and the Company have established the ESOP for the benefit of eligible employees, including officers. The ESOP intends to subscribe for up to 8% of the Common Stock to be issued in the Conversion, including shares issued to the Foundation, and to finance its subscription with funds anticipated to be borrowed from the Company for a period of up to 10 years at an interest rate of 8% per annum. The Bank and the Company intend to make cash contributions to the ESOP as required for debt service. The Common Stock acquired by the ESOP will initially be held in a suspense account and will be allocated to eligible employees as the loan is repaid. See "Management of the Bank -- Benefits -- Employee Stock Ownership Plan and Trust." 401(k) Plan. The Bank has amended The Warwick Savings Bank 401(k) Savings Plan ("401(k) Plan"), in connection with the Conversion to provide that the Bank's matching contributions will be invested in an investment fund consisting primarily of Common Stock. In addition, participating employees may elect to invest all or a portion of their remaining account balances in such investment fund or the other investment funds provided under the 401(k) Plan. Common Stock held by the 401(k) Plan may be newly issued or treasury shares acquired from the Company or outstanding shares purchased in the open market or in private transactions. See "Management of the Bank -- Benefits -- 401(k) Plan." Employment Agreements and Retention Agreements. The Company intends to enter into employment agreements ("Employment Agreements"), effective as of the Conversion, with four senior officers of the Bank that will provide for, among other things, certain cash payments to be made, and certain benefits to be continued, in the event of their termination of employment in certain circumstances and upon a change of control of the Bank or the Company. The provisions of these agreements may have the effect of increasing the cost of acquiring the Company, thereby discouraging future attempts to take over the Company or the Bank. Based on current compensation and benefit costs, cash payments to be made in the event of a change of control of the Bank or the Company pursuant to the terms of the Employment Agreements would be approximately $3,474,000, of which approximately $1,677,000 would be payable to Mr. Dempsey, $795,000 would be payable to Mr. Gentile, $572,000 would be payable to Mr. Budich and $430,000 would be payable to Ms. Sobotor-Littell. However, the actual amount to be paid under the Employment Agreements in the event of a change of control of the Bank or the Company cannot be estimated at this time because the actual amount is based on the compensation and benefit costs applicable to these individuals and other factors existing at the time of the change of control, which cannot be determined at this time. Such figures do not include any estimate as to amounts that may be payable on account of the Stock Option Plan or RRP because no options or shares have been allocated under such plans. See "Management of the Bank -- Employment Agreements." The Bank also intends to enter into employee retention agreements ("Retention Agreements"), effective as of the Conversion, with four other key employees of the Bank. Based on current compensation and benefit costs applicable to the four key employees expected to be covered by the Retention Agreements, certain cash payments to be made, and certain benefits to be continued, in the event of a change of control of the Bank or the Company would be approximately $580,000. However, the actual amount to be paid under the Retention Agreements in the event of a change of control of the Bank or the Company cannot be estimated at this time because the actual amount is based on the compensation and benefit costs applicable to such key employees and other factors existing at the time of the change of control, which cannot be determined at this time. Such figures do not include any estimate as to amounts that may be payable on account of the Stock Option Plan or RRP because no options or shares have been allocated under such plans. See "Management of the Bank -- Employee Retention Agreements." Other Change of Control Provisions. Certain anticipated provisions of the Stock Option Plan and the RRP (which the Company intends to adopt and which will become effective prior to the first anniversary of the Conversion only upon shareholder approval obtained at a meeting of shareholders to be held no earlier than six months after completion of the Conversion) provide for cash payments and/or accelerated vesting in the event of a change of control of the Company or the Bank. The ESOP also provides for accelerated vesting in the event of a change of control. These provisions may also have the effect of increasing the cost of acquiring the Company. In addition, the existence of these provisions could result in shareholders receiving less for their shares of Common Stock than might otherwise be available in the event of an acquisition of the Company. See "Restrictions on Acquisition of the Company and the Bank -- Anti-Takeover Effects of the Company's Certificate of Incorporation and By-Laws and Management Remuneration Plans Adopted in the Conversion," "Management of the Bank -- Benefits -- Employee Stock Ownership Plan and Trust," "-- Benefits -- Stock Option Plan," and "-- Benefits -- Recognition and Retention Plan." Subscriptions by Executive Officers and Trustees. The Bank's executive officers and trustees and their Associates (as defined herein under "The Conversion -- Limitations on Common Stock Purchases") propose to purchase Common Stock in the Offerings in an aggregate amount equal to $2,280,000 or 5.53% (based on the minimum of the Estimated Price Range) or $2,280,000 or 4.09% (based on the maximum of the Estimated Price Range) of the shares to be sold in the Offerings. If the trustees emeritus of the Bank are included, the foregoing amounts and percentages are $2,380,000 and 5.77%, and $2,380,000 and 4.27%, respectively. See "Management of the Bank -- Subscriptions by Executive Officers and Trustees."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046284_big-city_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046284_big-city_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d803d1ca4ad73a193e995680f8ff211f6ea35c89
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046284_big-city_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY AND SHOULD BE READ IN CONJUNCTION WITH THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, AND OTHER DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION INCLUDED IN THIS PROSPECTUS (I) ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED, (II) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE EQUITY CONTRIBUTION AND THE RECLASSIFICATION (EACH AS DEFINED HEREIN) AND (III) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE CHANGE BY THE COMPANY OF ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO DECEMBER 31 EFFECTIVE AS OF THE CONSUMMATION OF THE OFFERING. FOR A DEFINITION AND EXPLANATION OF INDUSTRY TERMS AND THE SOURCE OF MARKET DATA CITED HEREIN, SEE "MARKET DATA AND CERTAIN DEFINITIONS" ON PAGE 72. THE COMPANY Big City Radio, Inc. (the "Company") was formed in 1994 to acquire radio broadcast properties in or adjacent to major metropolitan markets and utilize innovative engineering techniques and low-cost, ratings-driven operating strategies to develop these properties into successful metropolitan radio stations. In order to accomplish this objective, the Company applies a variety of innovative broadcast engineering techniques to the radio broadcast properties it acquires, including Synchronized Total Market Coverage ("STMC"). STMC consists of acquiring two or more stations which broadcast on the same frequency and simulcasting their signals to achieve broad coverage of a targeted metropolitan market. In addition to STMC, the Company intends to employ other broadcast engineering techniques to enter major metropolitan markets at attractive valuations. These engineering techniques include acquiring suburban radio stations and moving the station's broadcast antenna closer to the metropolitan market ("move-ins") and acquiring high-power stations adjacent to major metropolitan markets and focusing such stations' broadcast signal into the metropolitan area. The Company's acquisition/engineering strategies enable it to provide near seamless coverage of major metropolitan markets at a significantly lower acquisition cost than typically required to acquire a major market Class B station. The Company currently owns and operates STMC station combinations in New York, Los Angeles and Chicago, the three largest radio markets in the United States in terms of aggregate advertising revenues. The Company is controlled by Stuart Subotnick, a general partner of Metromedia Company who will own, subsequent to the Offering, approximately 62% of the Common Stock, representing 94% of the voting power of the Common Stock (without giving effect to the exercise of any options to acquire shares of Class A Common Stock). The Company's first targeted market was Los Angeles where the Company operates a three station combination, which broadcasts as Y-107 ("Y-107 LA"), featuring a modern rock format on the 107.1-FM frequency. Y-107 LA currently covers approximately 75% of the Arbitron diaries in the Los Angeles Arbitron Metro Survey Area ("MSA") and will increase its coverage to over 90% as a result of an increase in its transmission power pursuant to the FCC Power Increase (as defined herein), which the Company plans to implement in the fourth quarter of 1997. The Company has demonstrated the success of its strategy in Los Angeles where Y-107 LA has consistently ranked as one of the top 5 most listened-to modern rock radio stations in America over the past year, and has achieved a significant share of 1.3% in the 12+ category as of the summer 1997 Arbitron book. The Company has successfully translated its strong listenership into significant revenues as exemplified by the increase in its power ratio (defined as a station's share of the aggregate radio market revenues divided by its Arbitron listenership share) from 0.5 in the six month period ended December 1996 to 1.4 in the six month period ended June 1997. The Company's three Los Angeles stations (the "Los Angeles Stations") were acquired in May 1996 for a combined purchase price significantly lower than the reported purchase prices of Class B stations in the Los Angeles MSA, as evidenced by transactions consummated since the deregulation initiated by the passage of the Telecom Act in 1996 (as defined herein). See "--Business Strategy" below. The Company recently completed the acquisitions of three stations in the New York MSA, which collectively broadcast as Y-107 ("Y-107 NY") on the 107.1-FM frequency. Y-107 NY commenced operations in January 1997 as the only country music station covering the New York City market. Y-107 NY earned a 1.1% share in the 12+category as of the summer 1997 Arbitron book. Y-107 NY currently covers approximately 75% of the Arbitron diaries in the New York MSA and will increase its coverage to approximately 90% as a result of an increase in its transmission power pursuant to the FCC Power Increase, which the Company plans to implement by the end of the first quarter of 1998 pending receipt of approval from the Federal Communications Commission (the "FCC"). See "Risk Factors--Regulatory Matters and Dependence on Licenses." The Company's three New York stations (the "New York Stations") were acquired by the Company for a combined purchase price significantly lower than the reported purchase prices of Class B stations in the New York MSA, as evidenced by transactions consummated since the passage of the Telecom Act. See "--Business Strategy" below. In August 1997, the Company acquired two radio stations in the Chicago MSA (the "Chicago Stations"). The acquisition of the Chicago Stations secures the Company's presence in the top three radio markets in the United States, as measured in terms of aggregate advertising revenues. The Chicago Stations will broadcast on the 103.1-FM frequency. The Chicago Stations were acquired for a combined purchase price which is significantly less than the reported purchase prices of Class B stations in the Chicago MSA, as evidenced by transactions consummated since the passage of the Telecom Act. See "-- Business Strategy" below. The Chicago Stations currently cover approximately 70% of the Arbitron diaries in the Chicago MSA and will increase their coverage to approximately 90% as a result of the planned increase in their transmission power pursuant to the FCC Power Increase and other technical improvements, which the Company plans to implement in the second quarter of 1998 pending receipt of FCC approval. See "Risk Factors--Regulatory Matters and Dependence on Licenses." The Company has selected an adult contemporary format for the Chicago Stations and expects to formally begin broadcasting as a single station during the first quarter of 1998. BUSINESS STRATEGY The Company's objective is to achieve a significant presence in selected top 20 radio markets by acquiring radio broadcast properties in or adjacent to major metropolitan markets and utilizing innovative engineering techniques and low-cost, ratings-driven operating strategies to develop these properties into successful metropolitan radio stations. The following are the key elements of the Company's business strategy: ENTER TOP-20 MARKETS WITH LOW CAPITAL INVESTMENT The Company intends to utilize STMC and other innovative acquisition and engineering strategies to gain low-cost entry into major metropolitan radio markets and achieve market coverage, which the Company believes is equivalent to the market coverage of Class B metropolitan stations. - LOW ACQUISITION COST. Industry research indicates that the prices of Class B radio stations in major MSAs have increased significantly since the passage of the Telecom Act. The Company has created radio stations with an Arbitron market coverage that the Company believes is equivalent to the Arbitron market coverage of Class B radio stations in the three largest radio markets, for a substantially lower capital investment. For example, in the Los Angeles MSA, prices have ranged from $113.0 million to $312.0 million while the Company has created for $26.8 million a Los Angeles station which, following the FCC Power Increase, will have an Arbitron market coverage that the Company believes is equivalent to the Arbitron market coverage of Class B radio stations in the Los Angeles MSA. Similarly, in the New York MSA where prices have ranged from $83.5 million to $286.0 million, the Company has created for $19.5 million a New York station which, following the FCC Power Increase, will have an Arbitron market coverage that the Company believes is equivalent to the Arbitron market coverage of Class B radio stations in the New York MSA. In the Chicago MSA, prices have ranged from $22.0 million to $225.0 million while the Company has created for $10.6 million a Chicago station which, following the FCC Power Increase and other technical improvements, will have an Arbitron market coverage that the Company believes is equivalent to the Arbitron market coverage of Class B radio stations in the Chicago MSA. Based on the range of purchase prices in recently consummated transactions as specified above, achieving entry into the top three radio markets would have required an aggregate investment of between $218.5 million and $823.0 million, while the Company has entered these three markets with an aggregate investment of approximately $56.9 million. All of the foregoing information regarding price ranges of Class B stations has been derived from published industry reports of sales of Class B radio stations in the MSAs where the Company operates. The Company continues to explore similar opportunities in other attractive top 20 markets and believes that there is potential to achieve low-cost entry by using methods such as STMC, "move-ins" and acquisitions of high power stations adjacent to major metropolitan markets. - EFFECTIVE COVERAGE OF ARBITRON RATED METROPOLITAN MARKETS. The Company's objective is to achieve coverage in excess of 90% of the Arbitron diaries in its targeted MSAs, which the Company believes is equivalent to the coverage typically provided by Class B radio stations in major metropolitan markets. Class B radio stations are defined by the FCC as those facilities whose signal is predicted to cover a regional urban area. Accordingly, the Company bases its acquisition strategy primarily on the location of Arbitron diaries. Furthermore, to enhance the Arbitron diary coverage of a station, once acquired, the Company's experienced staff tailors an engineering solution to optimize the Arbitron diary coverage of each station. Equivalent Arbitron diary coverage is determined by comparing the coverage of the Company's targeted STMC stations and typical Class B radio stations located in the same MSAs. This comparison considers the actual received signal strength of the selected station(s) and the actual number of Arbitron diaries covered that are predicted to receive a listenable signal. The coverage of any one station compared to another station within any MSA will vary due to locations of the transmitter, generally most Class B radio stations within a targeted MSA will cover between 90% and 100% of the Arbitron diaries. See "Risk Factors--Risks Associated with the Company's Strategy." MAXIMIZE STATION PERFORMANCE The Company seeks to maximize the operating performance of its stations by employing a ratings-driven, cash flow-focused operating strategy. - MAXIMIZE STATION REVENUE. Based on an extensive market research study, the Company carefully selects the format of the station to maximize penetration of audience share and advertising revenues in that market. For example, the Company believes that its carefully selected modern rock format in Los Angeles and unique country music format in New York City provide it with a competitive advantage and enhanced listenership in the respective markets. The Company believes that its strong listenership has translated into significant revenue as exemplified by the increase in its power ratio from 0.5 in the six month period ended December 1996 to 1.4 in the six month period ended June 1997 in the Los Angeles market. - MAXIMIZE BROADCAST CASH FLOW. Another key aspect of the Company's operating strategy will be to maximize its broadcast cash flow by controlling its operating costs. The Company has not historically, and does not intend at present, to expend the significant costs associated with hiring highly compensated on-air personalities. The Company maintains operating costs at a relatively low level and focuses on core programming content to achieve high ratings. GENERAL HISTORY AND DEVELOPMENT The Company was formed by its chairman, Stuart Subotnick and its president and chief executive officer, Michael Kakoyiannis. Mr. Subotnick contributes his financial, strategic and operational expertise gained through the development and operation of the numerous media and communications businesses that he and longtime partner John Kluge have controlled through Metromedia Company and its predecessor. Michael Kakoyiannis, the Company's president and chief executive officer, has been involved in the radio broadcasting industry for over 25 years in various functions including sales, marketing and general management. In addition to Mr. Subotnick and Mr. Kakoyiannis, the Company has numerous experienced radio executives involved in all aspects of its operations, including engineering, sales, marketing, programming and finance. The Company believes that its quality management team will be instrumental in successfully implementing its business strategy. EQUITY CONTRIBUTION, RECLASSIFICATION AND OTHER INFORMATION Immediately prior to the consummation of the Offering, Stuart and Anita Subotnick (the "Principal Stockholders") will either contribute the entire amount of certain outstanding stockholders' loans made to the Company to the Company's capital or contribute cash in an amount sufficient to repay a portion of the outstanding stockholders' loans made to the Company and will contribute the remaining balance of such loans to the Company's capital (all such outstanding stockholders' loans aggregated $13.2 million at September 30, 1997) (the "Equity Contribution"). Simultaneously with the Equity Contribution, each share of the Company's Common Stock, par value $.01 per share (the "Old Common Stock") outstanding or to be issued upon exercise of options granted under the 1997 Incentive Stock Plan (as defined herein), will be reclassified into 7,610 shares of Class A Common Stock and the Principal Stockholders will exchange each share of Class A Common Stock held by them for one share of Class B Common Stock (the foregoing reclassification and exchange is hereinafter referred to as the "Reclassification"). In addition, the Company will convert from an S-Corporation to a C-Corporation and will change its fiscal year-end from September 30 to December 31 in connection with the Offering. The principal executive offices of the Company are located at 11 Skyline Drive, Hawthorne, New York, New York 10532 and its telephone number is (914) 592-1071.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046327_realnetwor_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046327_realnetwor_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..573db6db50167cdf20a8f59e56b52c68d7347976
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046327_realnetwor_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." Unless otherwise indicated, all information in this Prospectus (i) assumes that the Underwriters' over-allotment option will not be exercised; (ii) reflects an amendment to the Company's Amended and Restated Articles of Incorporation (the "Articles") to change the Company's authorized capital stock to common stock (the "Common Stock"), nonvoting special common stock (the "Special Common Stock") and preferred stock effective on the closing of the offering; (iii) reflects the conversion of each outstanding share of the Company's Series A Common Stock, Series B Common Stock, Series C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock into one share of Common Stock effective on closing of the offering; (iv) reflects the conversion of each outstanding share of the Company's Series E Preferred Stock into one share of Special Common Stock effective on closing of the offering; and (v) assumes the issuance of 964,303 shares of Common Stock, reflecting exercise of outstanding warrants at a weighted average exercise price of $7.21 per share, on closing of the offering, except as noted hereinafter. See "Description of Capital Stock." THE COMPANY RealNetworks, Inc. is a leading provider of branded software products and services that enable the delivery of streaming media content over the Internet and intranets. Streaming technology enables the transmission and playback of continuous "streams" of multimedia content, such as audio and video, over the Internet and intranets and represents a significant advancement over earlier technologies. The Company's products and services include its RealSystem, a streaming media solution that includes RealAudio and RealVideo technology, an electronic commerce Web site designed to promote the proliferation of streaming media products and a network of advertising-supported content aggregation Web sites. The Company believes that the emergence of rich multimedia capabilities, such as streaming audio and video, has significantly enhanced the effectiveness of the Web as a global mass communications medium. These enhanced multimedia capabilities, combined with the unique interactive properties of the Internet, are attracting a large and expanding audience, a growing number of advertisers and an increasing breadth and depth of content and online commercial applications. As the Web continues to evolve as a mass communications medium, the Company believes that certain types of content currently delivered through traditional media, such as radio and television, increasingly will be delivered over the Internet. The Company believes that streaming media technology is essential to this evolution because it provides a more compelling user experience, allowing the Internet to compete more effectively with traditional media for audience share. From its inception, the Company has strategically chosen to offer its RealPlayer software to individual users free of charge to promote the widespread adoption of its client software and to speed the acceptance of Internet multimedia. The Company believes that more than 28 million copies of its RealPlayer software have been downloaded electronically. Over 200,000 copies of its premium client product, RealPlayer Plus, have been sold electronically in the product's first year of distribution. In addition, the Company believes that more than 100,000 hours per week of live audio and video content are broadcast over the Web using RealAudio and RealVideo technology, and that more than 150,000 Web pages use the Company's software. As a result of these activities and the Company's aggressive promotional programs, the Company believes that its "Real" brand has become one of the most widely recognized brands on the Internet. The Company's customers, including ABC Radio Net, Bloomberg L.P., The Boeing Company, Dow Jones & Company, Inc., NBC Desktop, The News Corporation Limited, Starwave Corporation and 3Com Corporation, use its software products and services to deliver a broad range of streaming audio and video news, sports, entertainment and corporate information over the Internet and intranets. The Company's objective is to be the leading streaming media company, providing software and services that enable the delivery of a broad range of multimedia content over the Internet and intranets, thereby facilitating the evolution of the Internet into a mass communications and commerce medium. The key elements of this strategy include the extension of the Company's technology leadership, a continued focus on product ubiquity and brand leadership, the continued development of its electronic commerce and content aggregation businesses, a focus on providing cross-platform product solutions that operate in a wide variety of bandwidth environments, and the strengthening and expansion of strategic relationships. The Company was incorporated in Washington in February 1994, and therefore has a limited operating history. Unless the context otherwise requires, the term "Company" or "RealNetworks" refers to RealNetworks, Inc. and its subsidiaries: RealNetworks, SARL, RealNetworks, Limited and RealNetworks Kabushiki Kaisha. Prior to September 26, 1997, the Company's name was "Progressive Networks, Inc." The Company's principal executive offices are located at 1111 Third Avenue, Suite 2900, Seattle, Washington 98101, and its telephone number is (206) 674-2700. Information contained on the Company's Web sites will not be deemed to be part of this Prospectus. RealSystem(TM), RealAudio(R), RealVideo(R), RealPlayer(TM), RealPlayer Plus(TM), RealPublisher(TM), RealServer(TM), RealEncoder(TM), Basic Server(TM), RealNetworks(TM), Real(TM), the Real logo, RealStore(TM), Film.com(TM), Daily Briefing(TM) and Timecast(TM) are registered and unregistered trademarks, service marks and trade names of the Company. This Prospectus also includes trademarks, service marks and trade names other than those identified in this paragraph, all of which are the property of their respective holders. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company........... 3,000,000 shares Common stock to be outstanding after the offering: Common Stock................................ 27,688,155 shares(1) Special Common Stock........................ 3,338,374 shares(1) Use of proceeds............................... Working capital requirements and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol........ "RNWK" </TABLE> - --------------- (1) Excludes (i) 6,840,714 shares of Common Stock issuable at a weighted average exercise price of $2.35 per share upon exercise of stock options outstanding at November 14, 1997, (ii) 3,949,842 shares of Common Stock reserved for future issuance under the Company's stock option plans and (iii) 1,000,000 shares of Common Stock reserved for issuance under the 1998 Employee Stock Purchase Plan. See "Management -- Benefit Plans." Also excludes up to 3,709,305 shares of Special Common Stock issuable on exercise of a warrant to purchase Series E Preferred Stock at an exercise price of $13.48 per share (the "Series E Warrant") that terminates on the closing of the offering. See "Description of Capital Stock." SUMMARY CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this Prospectus. The summary consolidated financial data for the period from February 9, 1994 (inception) to December 31, 1994, for the years ended December 31, 1995 and 1996, and for the nine months ended September 30, 1997, and as of December 31, 1996 and September 30, 1997, are derived from the Consolidated Financial Statements of the Company audited by KPMG Peat Marwick LLP, independent accountants. The summary consolidated financial data for the nine months ended September 30, 1996 are derived from unaudited consolidated financial statements prepared by the Company on a basis consistent with the Company's audited Consolidated Financial Statements and, in the opinion of management, include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods. Operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 1997. <TABLE> <CAPTION> PERIOD FROM FEBRUARY 9, 1994 YEAR ENDED NINE MONTHS ENDED (INCEPTION) TO DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------- ------------------- 1994 1995 1996 1996 1997 ---------------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Total net revenues................... $ -- $ 1,812 $14,012 $ 8,274 $22,417 Total cost of revenues............... -- 62 2,185 969 4,609 Gross profit......................... -- 1,750 11,827 7,305 17,808 Operating loss....................... (545) (1,595) (4,016) (2,475) (9,759) Net loss............................. (545) (1,501) (3,789) (2,315) (8,575) Pro forma net loss per share(1)...... $ (0.14) $ (0.32) Shares used to compute pro forma net 27,779 28,315 loss per share(1).................. </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 DECEMBER 31, -------------------------- 1996 ACTUAL AS ADJUSTED(2) ------------ ------- -------------- (IN THOUSANDS) <S> <C> <C> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments..... $ 19,595 $67,648 $107,134 Working capital....................................... 16,893 50,762 90,248 Total assets.......................................... 26,468 84,372 123,858 Redeemable, convertible preferred stock............... 23,153 49,278 -- Shareholders' equity (deficit)........................ (3,320) (8,089) 80,675 </TABLE> - --------------- (1) For an explanation of pro forma net loss per share and the number of shares used to compute pro forma net loss per share, see Note 1 of Notes to Consolidated Financial Statements. (2) As adjusted to give effect to the (i) conversion of all outstanding shares of Series A Common Stock, Series B Common Stock, Series C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock into Common Stock and Series E Preferred Stock into Special Common Stock, in each case on closing of the offering; (ii) sale by the Company of the 3,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $12.00 per share; (iii) application of the estimated net proceeds of the offering; and (iv) issuance of 998,058 shares of Common Stock upon exercise of outstanding warrants at an average exercise price of $6.97 per share (for an aggregate of $6,956,000). Excludes up to 3,709,305 shares of Special Common Stock (representing additional cash and shareholders' equity of up to $50,001,431) issuable on exercise of the Series E Warrant. See "Use of Proceeds,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046406_bay_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046406_bay_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..da8b83a049e84567fe7c26247b023daff0414d2c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046406_bay_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITER'S OVER-ALLOTMENT OPTION IS NOT EXERCISED. INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "WILL," "SHOULD," "PROJECTED," "CONTEMPLATED" OR "ANTICIPATES" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS COVERED BY THE FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THE FACTORS DESCRIBED HEREIN, INCLUDING THOSE FACTORS DESCRIBED IN "RISK FACTORS" AND OTHER FACTORS BEYOND THE COMPANY'S CONTROL COULD CAUSE ACTUAL EXPERIENCE TO VARY MATERIALLY FROM THE FUTURE RESULTS COVERED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY Bay Bancshares, Inc. (the "Company") is a bank holding company headquartered in La Porte, Texas, which is located in eastern Harris County, the county that comprises most of the greater Houston metropolitan area. The Company currently has seven full-service locations and three loan production offices ("LPOs"). The acquisitions of Texas Bank, Baytown, Texas ("Texas Bank"), Texas National Bank of Baytown ("TNB"), and First Bank of Deer Park ("First Bank") (collectively, the "Acquisitions") will give the Company two branch locations in Baytown, one in Deer Park and one in Mont Belvieu. At June 30, 1997, the Company had total assets of $185.1 million, total loans of $115.2 million, total deposits of $169.9 million and total stockholders' equity of $13.8 million. Assuming the successful completion of the Acquisitions and the Offering as of June 30, 1997, total assets, total loans, total deposits and total stockholders' equity on a proforma basis would have been approximately $272.6 million, $153.4 million, $246.9 million and $21.9 million, respectively. The Company's strategic goal is to be the premier provider of financial services to small and medium-sized businesses and individuals in the eastern portion of the greater Houston metropolitan area. There is, however, no guarantee that the Company will achieve its strategic goal or any estimate of when such goal will be achieved. Management believes that its strategic goal can be achieved and maintained through the following: - Superior Customer Service--Through technology and a focus on prompt, personal service, the Company has successfully competed with much larger institutions. For example, the Company has enhanced its relationship banking capabilities by marketing individually to the top 15% of its customer base. The top 5% of the Company's customers are provided with a pass key which enables them to enter the Bank through a private entrance before and after normal banking hours and are assigned a specific Bank officer to service their banking needs. The Company has made significant investments in technology which management believes will allow it to compete with any super-regional or national banking organization with respect to communications and electronic convenience to the customer. - Motivated Employees--The Company continually trains its employees in the areas of successful sales and service, long-term customer relationships, teller excellence, business development and consumer lending. As part of this process, virtually every employee is placed on incentive and merit standards which award compensation based on the achievement of sales goals and other business development-related goals. - A Full Range of Products--The Company offers a wide variety of lending products including term loans, lines of credit and fixed asset loans to small and medium-sized businesses, and offers its consumer customers a full range of products, including automobile loans, home improvement loans and personal loans. In addition, the Company has established "niche" products such as loans guaranteed by the United States Small Business Administration ("SBA"), commercial loans to owner-operated manufacturing and petrochemical service businesses, "indirect" installment lending and factoring. To compliment its traditional banking products, the Company endeavors to be a full financial services organization and has developed additional financial services such as brokerage services and annuity vehicles and is in the process of forming an independent insurance agency offering a full line of commercial and consumer insurance products. - Enhanced Delivery System--The Company plans to enhance its existing delivery system by expanding its branch network, either by acquisitions or de novo branches, in the eastern portion of the Houston metropolitan area, and through the establishment of additional LPOs outside of this area in order to market the Company's niche products. In addition to these strategic advantages, management believes the following financial initiatives will help the Company increase profitability and maximize stockholder value: - Changing Loan Mix--In 1988, the Company initiated a program of purchasing indirect loans, which are installment loans originated by automobile dealers for the purpose of financing consumer purchases. The Company purchases almost exclusively "A"-rated loans. There is no objective standard for "A"-rated loans, but such loans are viewed by management as the most creditworthy types of loans, in that they possess low loan to value ratios and are made to stable borrowers with well established, good credit histories. Management believes that the program has been successful both from the standpoint of growth and credit quality. However, because of increasing competition and accompanying pressure on net interest margins in the indirect market, management has broadened its focus to expand its other niche lending products, including SBA guaranteed credits via the Company's three LPOs, commercial lending to local manufacturing and petrochemical service companies and accounts receivable factoring. These are generally higher yielding products which management views as having strong growth potential in the Company's market area. If the Company is successful in growing these niche products, its net interest margin should be positively affected. - Increasing Fee Income Sources--To supplement the noninterest income produced from its niche lending and deposit products, the Company is developing other sources of fee income. The Company currently has 12 Class 1 licensed insurance agents and four licensed brokers assisting customers with fixed rate brokerage and annuity products. By the end of 1998, management expects to have licensed agents offering alternative investments at each branch location. The Bank has filed an application for a license to operate a full service insurance agency from its Mont Belvieu location and has received approval from the Office of the Comptroller of the Currency ("OCC") to form an operating subsidiary to house the insurance agency. The Bank expects to receive approval of its application for a license to operate a full service insurance agency from Mont Belvieu in the fourth quarter of 1997. The Company is also currently negotiating to purchase an insurance agency which has operated with a historic record of profitability. The Company has reached a verbal agreement to acquire the insurance agency, but an agreement has not yet been reduced to writing, and there is no assurance that such an acquisition will be consummated. If the Company is successful in its plan to acquire the insurance agency, it is expected that such acquisition will occur in the second quarter of 1998. The revenues and earnings of the insurance agency are not expected to materially affect the revenues and earnings of the Company. - Improved Efficiency--Management believes that the Acquisitions will create economies of scale and help to improve the Company's efficiency ratio. Significant cost savings opportunities exist, including headcount reductions, cuts in director fees and reduced administrative expenses. Although conversion of the acquired banks' data processing operations onto the Company's proprietary system will result in significant initial costs, management believes that substantial cost savings will be achieved on an ongoing basis. - Core Deposit Base--The Company has a relatively low cost funding base made up primarily of core deposits along with a relationship driven public deposit network. At June 30, 1997, the Company's weighted average cost of deposits was 3.24%, a slight decrease from the year end figure of 3.32% and down significantly from the December 31, 1995 level of 3.55%. This low cost of funds has allowed the Company to price its loan products competitively while still maintaining an attractive net interest margin. There is no assurance that the foregoing financial initiatives will be realized or any estimate of when they will be achieved. THE ACQUISITIONS The Acquisitions will increase the Company's assets from $185.1 million to $272.6 million as of June 30, 1997 on a proforma basis. In addition to the immediate increase in asset size and the potential for improved future profitability, the Acquisitions will allow the Company to expand its market area into what it believes are desirable banking locations. Through the Acquisitions, the Company will increase the number of its locations from seven to 11. The resulting market area of the Company will extend from Seabrook, Texas in eastern Harris County to Cleveland, Texas in western Liberty County. This expansion will increase the geographic diversity of the Company's loan portfolio, which is expected to decrease the Company's overall lending risks. See "The Acquisitions--Texas Bank" "--Texas National Bank of Baytown" and "--First Bank of Deer Park." The Acquisitions are expected to be completed in the fourth quarter of 1997. The acquisition of Texas Bank is expected to occur simultaneously with the closing of the Offering, and the acquisitions of TNB and First Bank are expected to occur on or about November 21, 1997. The closing of the acquisition of Texas Bank is a condition to the closing of the Offering. Texas Bank's main office is in Baytown, and it has a branch in Mont Belvieu. The acquisition of Texas Bank will give the Company a presence in Baytown and will allow it to expand its existing operations in the Mont Belvieu area. Baytown is a community of over 60,000 people located on the Houston Ship Channel in eastern Harris County. Baytown is home to a number of petrochemical plants and refineries. Texas Bank is located on the north end of a north-south corridor that is the center of Baytown's residential and business growth. Texas Bank is the only commercial bank located on the northern end of the city. Due to a lack of commercial bank competition, management believes that Baytown is under-banked. In addition to the Baytown presence, the acquisition of Texas Bank will give the Company an additional facility in Mont Belvieu. The Mont Belvieu location will serve as the basis for the Company's expansion into the sale of insurance products. At June 30, 1997, Texas Bank had assets of approximately $41.5 million and deposits of $37.7 million. TNB, which is also located in Baytown, will, when combined with Texas Bank, broaden the Company's expansion into the Baytown market. TNB is located on the south end of the north-south corridor on which Texas Bank is located. The acquisition of TNB will enhance the Company's presence in the Baytown market and provide a link to LaPorte, located to the south of Baytown. The TNB location will give the Company access to industrial and blue collar neighborhoods as well as the industrial, petrochemical and services areas of Baytown. TNB had assets of $14.1 million and deposits of $12.4 million at June 30, 1997. First Bank is located in Deer Park, Texas. The acquisition of First Bank will provide the Company its first presence in Deer Park, a community of 27,000 people located on the south side of the Houston Ship Channel. The Deer Park economy is closely linked to the petrochemical industry. First Bank is the only community bank in Deer Park. The positive name recognition of both First Bank and the Bank should allow the Company to acquire a larger market share in Deer Park and capture some of the growth that the area is experiencing. A director of the Bank who previously served as chairman of the Deer Park branch of one of the large national banking organizations is expected to be instrumental in expanding the Company's business in this market. At June 30, 1997, First Bank had assets of $32.9 million and deposits of $26.8 million. Management of the Company believes that the Acquisitions present an excellent opportunity for increased earnings and diversification of loan mix. TNB and First Bank have traditionally maintained low loan to deposit ratios. The Company believes that it can increase the amount of loans originated from these locations by enhancing marketing efforts, expanding loan products and utilizing the Company's approach to sales and service. Management of the Company also believes that the opportunity exists for significant cost savings from the Acquisitions, including data processing consolidations and other operational efficiencies. The table below presents certain unaudited condensed and consolidated historical financial and operating data for the Company and certain unaudited pro forma condensed financial and operating data for the Company after giving effect to (i) the Offering, (ii) the Acquisitions as if they had each occurred as of June 30, 1997 and (iii) the pro forma adjustments described in the Notes to the Unaudited Pro Forma Condensed Financial Statements of the Company which appear elsewhere in this Prospectus. The amount of pro forma combined net earnings for the six-month period ended June 30, 1997, shown below reflects adjustments which give effect to factors attributable to the Offering and the Acquisitions. The pro forma net earnings assume that the Acquisitions and the Offering were consummated at January 1, 1997. The pro forma financial information should be read in conjunction with the financial statements and footnotes thereto appearing elsewhere in this Prospectus. The pro forma condensed balance sheet information and net earnings are not necessarily indicative of the combined financial position at consummation of the Acquisitions or the results of operations following consummation of the Acquisitions and the Offering. <TABLE> <CAPTION> AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 ------------------------ PRO FORMA ACTUAL COMBINED ----------- ----------- (DOLLARS IN THOUSANDS) <S> <C> <C> Assets.................................................................................. $ 185,139 $ 272,638 Loans, net of unearned discount......................................................... 115,222 153,421 Deposits................................................................................ 169,874 246,867 Stockholders' equity.................................................................... 13,782 21,882 Net earnings............................................................................ 855 1,172 Leverage ratio.......................................................................... 7.25% 5.77% Tier 1 risk-based capital ratio......................................................... 10.16 8.99 Total risk-based capital ratio.......................................................... 11.24 10.16 </TABLE> THE OFFERING <TABLE> <S> <C> Securities offered by the Company......................... 600,000 shares of Common Stock Common Stock to be outstanding after the Offering.............. 1,958,907 shares(1) Use of Proceeds................... A portion of the estimated net proceeds of this Offering (approximately $8.1 million assuming an offering price of $15.00 per share, the mid-point of the estimated offering range) will be used to fund the $5.5 million purchase price for the acquisition of Texas Bank. The remaining $2.6 million in net proceeds will be used to fund a portion of the $10,370,000 aggregate purchase price for the acquisitions of TNB and First Bank. The $7,770,000 balance of the purchase price for the acquisitions of TNB and First Bank will be funded through a dividend from the Bank to the Company. See "Use of Proceeds." Risk Factors...................... See "Risk Factors" and "Dilution" for a discussion of certain factors that should be considered by each prospective investor. Nasdaq/National Market Symbol..... "BAYB" </TABLE> - ------------------------ (1) Excludes 33,300 options outstanding under the Company's stock option plans and 66,630 shares of phantom stock which may be issued in the form of shares of Common Stock under the Company's Phantom Stock Plan ("Phantom Plan"). See "Management--Stock Option and Incentive Plans." As of the date of this Prospectus, the Company had outstanding 1,358,907 shares of Common Stock. See "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046594_denali-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046594_denali-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cad92e221dadf0bf035b7bdcf6a7133f8e4b36ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046594_denali-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including Notes thereto, appearing elsewhere in this Prospectus. References to pro forma financial information should be read in conjunction with the Pro Forma Condensed Consolidated Financial Statements included elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. As used in this Prospectus, all references to the "Company" or to "Denali" refer to Denali Incorporated, its predecessors and subsidiaries. THE COMPANY Denali Incorporated is a rapidly growing provider of products and services for handling critical fluids, which are fluids that are economically valuable or potentially hazardous to the environment. The Company believes that it is a leading manufacturer of fiberglass composite underground storage tanks ("USTs"), steel rectangular aboveground storage tanks ("ASTs") and engineered fiberglass reinforced composites for handling corrosive fluids. Critical fluids handling products and services are used in a wide variety of applications, including in retail petroleum marketing and in petroleum, chemical, pulp and paper, electric power and other industrial process plants. BACKGROUND The Company was formed in 1994 to acquire the fiberglass composite UST business of Owens Corning. Initially, the Company focused its efforts on improving profitability, improving responsiveness to customers and developing new products. The Company's management also realized that the critical fluids handling industry was highly fragmented and that there would be significant opportunities to consolidate the industry. In October 1995, the Company acquired Hoover Containment, Inc. ("Hoover"), a manufacturer of steel rectangular ASTs, and, in February 1997, the Company acquired Ershigs, Inc. ("Ershigs"), a manufacturer of engineered fiberglass reinforced plastic ("FRP") products for handling corrosive fluids. In October 1997, the Company acquired GL&V LaValley Construction, Inc. ("LaValley"), another manufacturer of engineered FRP products, and SEFCO, Inc. ("SEFCO"), a fabricator of engineered field-erected steel tanks. Prior to forming the Company, the Company's Chairman and Chief Executive Officer, Stephen T. Harcrow, was President of EnviroTech, a business unit of Baker Hughes Incorporated, from 1988 to 1993. EnviroTech was a manufacturer of equipment for process industries. During Mr. Harcrow's tenure as President, EnviroTech grew through the acquisition of manufacturers of fluid separation, pumping and measurement products, with annual revenues increasing from approximately $365 million up to $680 million. Since the Company's formation, five other former employees of EnviroTech have joined the Company as executive officers. PRODUCTS AND SERVICES Containment Products. The Company's Containment Products Group specializes in the manufacture of fiberglass composite USTs and steel rectangular ASTs. The Company's fiberglass composite USTs, manhole products and oil/water separators are marketed under the Fluid Containment tradename and its steel rectangular ASTs are marketed under the Hoover and LubeCube(R) tradenames. Engineered Products. The Company's Engineered Products Group specializes in providing custom engineered FRP products and engineered metal products for the pulp and paper, power, chemical, water and wastewater and other process industries. The Company markets its engineered FRP products under the Ershigs tradename and believes that it is a leading domestic provider of engineered FRP products for corrosion resistant applications. SEFCO is an integrated manufacturer of engineered field-erected steel tanks and accessories for use in the water and wastewater, agrochemical and petroleum industries. This group focuses its operations on complex projects, where custom engineering and special manufacturing expertise are critical. BUSINESS STRATEGY The Company's objective is to become the leading provider of a broad range of products and services for handling critical fluids through strategic acquisitions and internal growth. The Company believes that the fragmented nature of the critical fluids handling industry, which is comprised of many companies with limited product ranges or serving limited geographic areas, will provide continued acquisition and internal growth opportunities. The Company also believes that these opportunities provide the Company with the ability to offer a comprehensive range of specialized solutions for meeting its customers' critical fluids handling needs. Acquisition Strategy. Since its founding in 1994, the Company has completed five acquisitions. The Company's net sales have grown from approximately $17.8 million for fiscal 1995 (a 28-week period ended July 1, 1995) to $71.1 million for fiscal 1997. Pro forma net sales for fiscal 1997 were approximately $104.9 million, including approximately $17.9 million with respect to the recent acquisitions of SEFCO and LaValley. Net loss for fiscal 1995 was $43,000 and increased to net income of $317,000 for fiscal 1997 and was $595,000 for pro forma first quarter fiscal 1998, excluding a $2.3 million non-recurring compensation charge. In addition, EBITDA (as defined in "Summary Consolidated Financial Data") increased from $981,000 for fiscal 1995 to approximately $3.9 million for fiscal 1997 and was $2.3 million for pro forma first quarter fiscal 1998. Key elements of the Company's acquisition strategy include: - Develop a Comprehensive Range of Products and Services. The Company's existing products offer a variety of containment and engineered materials solutions for handling critical fluids. The Company intends to broaden its product lines to introduce additional critical fluid separation and measurement products. The Company believes that the ability to offer a comprehensive range of critical fluids handling products and services will be a competitive advantage. - Expand Within Existing Markets. The Company intends to expand its product offerings within the geographic markets it currently serves. For example, the SEFCO acquisition is expected to expand the Company's engineered product capabilities into the field fabrication of tanks. - Penetrate New Geographic Markets, Including International Markets. The Company believes that it can expand its operations that are regional in nature throughout the United States and internationally. For example, the acquisition of LaValley is expected to strengthen the Company's market position in the Gulf Coast region for the Company's engineered products. In addition, the Company intends to pursue license agreements for the international manufacture of certain products. Internal Growth Strategy. The Company is also focused on expanding the scope and profitability of each of the businesses it acquires. Key elements of this growth strategy are: - Promote Internal Growth through a Decentralized Structure. The Company employs a decentralized management and operational structure to capitalize on market knowledge, product expertise, name recognition and customer relationships. - Reduce Product and Administrative Costs. The Company's consolidation effort has led to raw materials purchasing economies, manufacturing efficiencies, increased sales coverage and product transportation cost reductions. In addition, the Company has improved operating margins by consolidating administrative functions such as finance, insurance and employee benefits. - Develop New Products. The Company utilizes the technological expertise, market knowledge and customer relationships of the businesses it acquires to develop new products. For example, as a result of the Company's development efforts, sales of oil/water separators and FRP manhole products have increased from approximately $500,000 for fiscal 1995 to more than $2.3 million for fiscal 1997. - Utilize Available Manufacturing Capacity. The Company also believes new products, acquired businesses and growth of current product net sales will increase manufacturing and facility utilization, contributing to further increases in profitability. The Company's principal offices are located at 1360 Post Oak Boulevard, Suite 2470, Houston, Texas 77056, and its telephone number is (713) 627-0933. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company(1)....... 2,100,000 shares Common Stock to be outstanding after the Offering(1)(2)............................. 4,284,910 shares Use of proceeds.............................. To repay outstanding indebtedness, to redeem shares of preferred stock and to provide working capital. See "Use of Proceeds." Nasdaq National Market symbol................ DNLI </TABLE> - --------------- (1) Does not include up to 315,000 shares of Common Stock which may be sold by the Company on the exercise of the over-allotment option granted to the Underwriters. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046704_household_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046704_household_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..64ca77005eaed33bdda5d5097a08d8088683b4a4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046704_household_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary of certain pertinent information is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Reference is made to the Index of Defined Terms for the location of the definitions of certain capitalized terms. ISSUER........................... The Household Consumer Loan Trust 1997-2 (the "Issuer"), a Delaware business trust to be formed by the Seller and the Owner Trustee pursuant to the Trust Agreement (the "Trust Agreement"). SECURITIES ISSUED BY THE ISSUER........................... The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class B Notes and the Certificates. The Notes will be issued pursuant to the Indenture and will be secured by the Trust Assets (as defined below). Pursuant to the terms of the Indenture, the Class B Notes will be subordinate to the Class A Notes, the Class A-3 Notes will be subordinate to the Class A-2 and Class A-1 Notes and the Class A-2 Notes will be subordinate to the Class A-1 Notes. The Certificates will be issued by the Issuer pursuant to the Trust Agreement. The Certificates will be subordinate to the Notes pursuant to the terms of the Indenture. The Notes represent obligations solely of the Issuer and do not represent interests in or obligations of the Seller, the Servicer, the Deposit Trustee, the Owner Trustee, the Indenture Trustee or any affiliate thereof, except to the extent described herein. None of the Notes, the Series 1997-2 Participation or the Credit Lines are insured or guaranteed by any governmental agency or instrumentality. Only the Class A Notes are offered hereby. A. THE CLASS A-1 NOTES......... $912,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-1 Notes"). THE CLASS A-2 NOTES......... $48,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-2 Notes"). THE CLASS A-3 NOTES......... $90,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class A-3 Notes"). Collectively, the Class A-1 Notes, Class A-2 Notes and the Class A-3 Notes are referred to herein as the "Class A Notes". The Class A Notes will be issued pursuant to the Indenture (the "Indenture") between the Issuer and The Bank of New York, as indenture trustee (the "Indenture Trustee"). B. THE CLASS B NOTES........... $57,000,000 Consumer Loan Asset Backed Notes, Series 1997-2 (the "Class B Notes"). The Class B Notes will be issued pursuant to the Indenture and are not offered hereby. C. THE CERTIFICATES............ $42,000,000 Consumer Loan Asset Backed Certificates, Series 1997-2 (the "Certificates"). The Certificates will be issued pursuant to the Trust Agreement and are not offered hereby. The Certificates will represent fractional undivided beneficial interests in the Issuer. TRUST ASSETS..................... The "Trust Assets" include (i) a participation interest (the "Series 1997-2 Participation") in (x) the Receivables arising under the Credit Lines and the proceeds thereof, and (y) the preferred stock of the Seller held by the Deposit Trustee (the "Preferred Stock") and (ii) monies on deposit in certain accounts of the Issuer for the benefit of Securityholders. In addition to the Trust Assets, as described herein, payments to Noteholders will be supported by the Overcollateralization Amount, the subordination of certain classes of Notes to other classes of Notes and by the subordination of the Certificates to the Notes. See "Description of the Deposit Trust" herein for a description of the Preferred Stock of the Seller held by the Deposit Trust. SELLER........................... Household Consumer Loan Corporation is a corporation organized under the laws of the State of Nevada and is a wholly-owned special purpose subsidiary of Household Finance Corporation ("HFC"). The Seller purchases Receivables from the Subservicers (as defined below). The Seller then sells the Receivables and all rights with respect thereto to the Deposit Trust. See "Description of the Deposit Trust -- Assignment of Receivables" herein. DEPOSIT TRUST.................... Household Consumer Loan Deposit Trust I (the "Deposit Trust") is a common law trust. Texas Commerce Bank National Association acts as trustee for the Deposit Trust. The Deposit Trust previously issued participation interests in the pool of Receivables in connection with the issuance of other series of asset-backed securities. It is expected that the Deposit Trust will issue additional participation interests from time to time (each participation interest, a "Series Participation Interest"). Each Series Participation Interest will be issued in connection with the issuance of a series of securities (each, a "Series"). See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. A participation interest was also issued to the Seller (the "Seller's Interest") which at any point in time represents the entire undivided beneficial interest in the Deposit Trust not represented by the outstanding Series Participation Interests. The Series 1997-2 Participation will be the only Series Participation Interest held by the Issuer. SERVICER......................... HFC, a subsidiary of Household International, Inc., is the servicer of the Credit Lines pursuant to the Pooling and Servicing Agreement dated as of September 1, 1995 (the "Pooling and Servicing Agreement") among the Seller, the Deposit Trustee and the Servicer. Each Credit Line is subserviced by the appropriate Subservicer (as defined below) on behalf of HFC as Servicer. SUBSERVICERS..................... Household Realty Corporation, Household Finance Corporation of California, Household Finance Corporation II, Household Finance Corporation III, Household Finance Industrial Loan Company, Household Finance Realty Corporation of New York, Household Financial Center Inc., Household Finance Corporation of Alabama, Household Finance Corporation of Nevada, Household Finance Realty Corporation of Nevada, Household Industrial Loan Company of Kentucky, Household Finance Industrial Loan Company of Iowa, Household Finance Consumer Discount Company, Household Industrial Finance Company and Mortgage One Corporation (collectively, the "Subservicers" and each individually, a "Subservicer"), are wholly-owned subsidiaries of HFC, licensed to make and service consumer loans in the states in which the Credit Lines were originated. The Subservicers originated the Credit Lines or purchased them from third parties. ADMINISTRATOR.................... HFC is the Administrator pursuant to an Administration Agreement to be dated as of November 1, 1997 (the "Administration Agreement") among HFC, the Seller, the Issuer and the Owner Trustee. Pursuant to the Administration Agreement, HFC will perform certain duties of the Issuer, the Owner Trustee and the Seller under the Indenture and the Trust Agreement. See "Description of the Securities -- Administration Agreement" herein. THE CREDIT LINES................. The Credit Lines which generate the Receivables held by the Deposit Trust consist of a portion of the total pool of revolving consumer credit lines originated or purchased by the Subservicers (and any other consumer lending affiliates of HFC that become Subservicers) from time to time (the "Portfolio"). The Credit Lines are designated to the Deposit Trust and are required to satisfy the criteria set forth in the Pooling and Servicing Agreement for Eligible Credit Lines (as defined herein). The Receivables arising under each Credit Line, whether existing on the applicable Cut-Off Date (as defined herein) for such Receivables or thereafter generated have been or will be sold by the Subservicers to the Seller, which has sold or will sell such Receivables to the Deposit Trust. The Credit Lines are not being sold or transferred to the Seller or to the Deposit Trust and will continue to be held and administered by the Subservicers. See "Risk Factors -- Change in Loan Terms and Finance Charges", "Description of the Deposit Trust -- Assignment of Receivables", "Description of the Receivables Purchase Agreement -- Sale of Receivables" herein. The Seller entered into a receivables purchase agreement dated as of September 1, 1995 (the "Initial Cut-Off Date"), with certain of the Subservicers and as of August 1, 1997 entered into an amendment to such agreement pursuant to which an additional wholly-owned subsidiary of HFC may sell Receivables to the Seller (as amended, the "Receivables Purchase Agreement"). The Seller may enter into further amendments or other similar agreements with affiliates of HFC from time to time. On September 28, 1995 (the "Initial Issuance Date"), pursuant to the Receivables Purchase Agreement, Subservicers sold to the Seller all of their respective rights, title and interest in the Receivables existing under the Credit Lines designated to the Deposit Trust as of the Initial Cut-Off Date (the "Initial Credit Lines", and such Receivables outstanding under the Initial Credit Lines as of the Initial Cut-Off Date, the "Initial Receivables"). Each Subservicer has sold and will continue to sell to the Seller all of its right, title and interest in new Principal Receivables and Finance Charge and Administrative Receivables arising under the Initial Credit Lines from time to time. Pursuant to the Pooling and Servicing Agreement, all Receivables which arise under the Credit Lines will be purchased by the Seller from the Subservicers and will be sold to the Deposit Trust. Subject to certain limitations and conditions, the Seller expects to continue to add Receivables to the Deposit Trust from time to time. To do so, the Seller may designate additional Credit Lines, the Receivables of which will be purchased from a Subservicer and assigned by the Seller to the Deposit Trust. Such additional Credit Lines may include New Credit Lines and Additional Credit Lines (each, as defined herein). Since the Initial Cut-Off Date, the Seller has conveyed to the Deposit Trust the Receivables arising in certain Additional Credit Lines in accordance with the provisions of the Pooling and Servicing Agreement. All Receivables arising under Credit Lines designated to the Deposit Trust, whether existing at the time such Credit Lines are designated, or subsequently generated, will be conveyed to the Deposit Trust. The Seller will also have the right, in certain circumstances, to remove certain Credit Lines and the Receivables arising thereunder from the Deposit Trust, in which case, no further interest in Receivables arising under such Credit Lines will be transferred to the Deposit Trust (the "Removed Credit Lines"). See "Description of the Deposit Trust -- Additions of Credit Lines" and "-- Removal of Deposit Trust Assets". THE RECEIVABLES.................. The Receivables include (a) all periodic finance charges, and other amounts as described in the Series 1997-2 Supplement (as defined herein) (as increased by any Principal Discount) (the "Finance Charge Receivables"), (b) all administrative fees and late charges and all other fees or charges billed to obligors on the Credit Lines (the "Administrative Receivables" and together with the Finance Charge Receivables, the "Finance Charge and Administrative Receivables") and (c) all amounts owed by obligors under the Credit Line Agreements (as defined herein) and other amounts in respect of principal as described in the Series 1997-2 Supplement (as decreased by any Principal Discount) (the "Principal Receivables"). Recoveries (as defined below) attributed to Defaulted Credit Lines (as defined below) will be treated as collections of Finance Charge Receivables. Finance Charge and Administrative Receivables and Principal Receivables will be allocated to the Series 1997-2 Participation in accordance with the applicable Allocation Percentage (as defined herein) for the related Collection Period. Finance charges are assessed on Principal Receivables and on certain of the Finance Charge Receivables at rates determined by the Subservicers with respect to the respective Credit Lines generated by each such party. As of the close of business on September 30, 1997 (the "Series 1997-2 Cut-Off Date"), the interest rates on the Receivables ranged from 0.00% to 36.00% with a weighted average interest rate (by principal balance) of 19.46%. As of the Series 1997-2 Cut-Off Date, the average principal balance of the Credit Lines designated to the Deposit Trust was $6,131.23. Pursuant to the option to discount receivables contained in the Pooling and Servicing Agreement (see "Description of the Deposit Trust -- Discount Option"), the Seller has the option to designate or redesignate a fixed percentage of each Principal Receivable assigned to the Deposit Trust as a finance charge receivable (the "Principal Discount"). As of the date of this Prospectus, the Seller has not elected to exercise such option with respect to the Receivables; however, it may do so at any time in the future. In the event of such election, such percentage designated by the Seller is the "Discount Percentage." The Discount Percentage may be designated by the Seller at any time, and once designated, may be increased, decreased or withdrawn by the Seller. The Principal Discount may apply to Principal Receivables assigned to the Deposit Trust prior to, on or after the date the Seller makes such designation or redesignation. When the Discount Option has been elected, the Discount Percentage of Principal Receivables will instead be treated as Finance Charge and Administrative Receivables, and the Discount Percentage of all collections of Receivables that would otherwise be Principal Receivables will be applied as collections of Finance Charge and Administrative Receivables. The applicable Allocation Percentage of such discounted amount treated as Finance Charge and Administrative Receivables will be available to make distributions of the Participation Pass-Through Rate and Defaulted Amounts allocated to the Series 1997-2 Participation. See "Risk Factors -- Discounted Principal Receivables" herein. If such election is made, as described in this Prospectus, all references herein to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust to refer to such Receivables, or collections with respect thereto, as defined above, after application of the Principal Discount. In such event, references in this Prospectus to Principal Receivables or Finance Charge Receivables, or collections with respect thereto, are deemed in the case of Receivables assigned to the Deposit Trust prior to such election to refer to such Receivables, or collections with respect thereto, without application of a Discount Percentage. All historical and current data herein regarding credit lines and receivables is presented without adjustment for a Principal Discount. The amount of Receivables will fluctuate from day to day as new Receivables are generated and sold by the Subservicers to the Seller and then by the Seller to the Deposit Trust, and as existing Receivables are collected, charged-off as uncollectible or otherwise adjusted. The amount represented by the Series 1997-2 Participation will not increase as a result of additional Principal Receivables being generated under any designated Credit Line ("Additional Balances"). Additional Balances and Receivables attributable to Aggregate Additional Credit Lines exceeding the amount of reinvested collections for the Series 1997-2 Participation and all other Series Participation Interests will be reflected in the principal balance of the Seller's Interest. However, the principal balance of the Series 1997-2 Participation will be adjusted to reflect payments made on the Series 1997-2 Participation. The aggregate amount of Receivables in the Deposit Trust on the Series 1997-2 Cut-Off Date was $4,278,341,258.64 of which $4,127,807,129.41 were Principal Receivables and $150,534,129.23 were Finance Charge and Administrative Receivables. With respect to any date, the "Pool Balance" will be equal to the aggregate of the Principal Balances of all Credit Lines as of such date. The "Principal Balance" of a Credit Line on any day is equal to its principal balance on the date the Credit Line is designated to the Deposit Trust (each such date, a "Cut-Off Date"), plus (i) any Additional Balance in respect of such Credit Line, minus (ii) all Principal Collections credited against the Principal Balance prior to such day, minus (iii) all related Defaulted Amounts, and plus or minus (iv) any correcting adjustments. Notwithstanding the above, the Principal Balance of Receivables for a Defaulted Credit Line shall be zero. With respect to any Distribution Date, a "Defaulted Credit Line" is a defaulted Credit Line as to which the Servicer has charged off all of the related Principal Balance during the related Collection Period. A "Defaulted Amount" is the amount equal to the Principal Balance of a Defaulted Credit Line that the Servicer has charged off on its servicing records in such Collection Period. SERIES 1997-2 PARTICIPATION...... Pursuant to the Series 1997-2 Supplement, the Seller will convey the Series 1997-2 Participation to the Issuer. The Series 1997-2 Participation shall initially be $1,200,000,000 (the "Initial Series 1997-2 Participation Invested Amount"). Thereafter, the "Series 1997-2 Participation Invested Amount" with respect to any date will be an amount equal to the Initial Series 1997-2 Participation Invested Amount minus the sum of the Series 1997-2 Participation Principal Distribution Amount (as defined herein) paid for all Distribution Dates and the Defaulted Amounts allocated to the Series 1997-2 Participation during the related and all prior Collection Periods that have not been included in the Series 1997-2 Participation Principal Distribution Amount on the current or any prior Distribution Date. The Series 1997-2 Participation will be entitled to receive a percentage of the Interest Collections (which shall include Recoveries), Principal Collections or Net Principal Collections (as defined below) and Defaulted Amounts received or incurred during each Collection Period. With respect to any Collection Period prior to the occurrence of an Amortization Event, Interest Collections and Defaulted Amounts allocated to the Series 1997-2 Participation will be based upon the Floating Allocation Percentage. With respect to any Collection Period during an Early Amortization Period, Interest Collections will be allocated to the Series 1997-2 Participation based upon the Fixed Allocation Percentage. However, Defaulted Amounts allocated to the Series 1997-2 Participation with respect to any Collection Period after an Amortization Event shall continue to be made based upon the Floating Allocation Percentage. Interest Collections with respect to any Collection Period will be distributable to the Issuer as holder of the Series 1997-2 Participation as described under "Remittance on the Series 1997-2 Participation." Allocated Interest Collections not so distributed will be distributable to the Seller. With respect to any Collection Period prior to the Accelerated Amortization Date or the commencement of an Early Amortization Period, Principal Collections will be allocated to the Series 1997-2 Participation based upon the greater of: (i) the Floating Allocation Percentage of Net Principal Collections (as defined below) or (ii) the Minimum Principal Amount. With respect to any Collection Period after the Accelerated Amortization Date or during the Early Amortization Period, the Series 1997-2 Participation will be entitled to Principal Collections based upon the Fixed Allocation Percentage. For any Distribution Date, the Fixed Allocation Percentage applicable to Principal Collections may be different than the Fixed Allocation Percentage applicable to Interest Collections if an Amortization Event occurs after the Accelerated Amortization Date. "Net Principal Collections" will equal the excess, if any, of Principal Collections for the related Collection Period, minus Additional Balances sold to the Deposit Trust during any Collection Period. If there is no excess, Net Principal Collections will equal zero. The Floating Allocation Percentage and the Fixed Allocation Percentage are defined herein under "Description of the Deposit Trust -- Allocations and Collections". The Minimum Principal Amount is defined herein under "Description of the Deposit Trust -- Distributions on the Series 1997-2 Participation". COLLECTIONS...................... All collections on the Receivables will be allocated by the Servicer as payments on Credit Lines in accordance with the terms of the Credit Line Agreements. See "Description of the Deposit Trust -- Allocations and Collections" herein. As to any Payment Date, "Interest Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Finance Charge and Administrative Receivables, including Recoveries and (ii) the interest portion of the Transfer Price (as defined herein) received in the event the Series 1997-2 Participation is reassigned to the Seller, reduced, if HFC is no longer the Servicer, by the Servicing Fee for such Collection Period. As to any Payment Date, "Principal Collections" will be equal to the sum of (i) the amounts collected during the related Collection Period in respect of Principal Receivables (other than the principal portion of any Recoveries), and (ii) the principal portion of the price received for any repurchased Receivable and the Transfer Price. As to any Payment Date, the "Collection Period" is the calendar month preceding the month of such Payment Date. On the Business Day prior to each Payment Date, the Servicer will deposit the remittances to be made on the Series 1997-2 Participation for such Payment Date into an account (the "Collection Account") established and maintained by the Deposit Trustee under the Pooling and Servicing Agreement. ACCELERATED AMORTIZATION DATE.... The "Accelerated Amortization Date" is October 31, 2002. EARLY AMORTIZATION PERIOD........ An Early Amortization Period will begin with the first day of the Collection Period in which an Amortization Event has occurred and will continue until the unpaid principal balance of the Series 1997-2 Participation is zero. "Amortization Events" will include, but are not limited to: (a) failure of the Seller to observe certain covenants; (b) certain breaches of representations and warranties; (c) the occurrence of certain events of bankruptcy, insolvency or receivership related to the Seller or the Servicer; (d) the Deposit Trust or the Issuer becomes an investment company under the Investment Company Act of 1940; (e) a Servicer Default occurs under the Pooling and Servicing Agreement; (f) the percentage (averaged over any three consecutive months) obtained by dividing i) the Overcollateralization Amount by ii) the outstanding unpaid principal balance of the Series 1997-2 Participation, is reduced below 4.25%; and (g) the portion of the Seller's Trust Amount owned by Household Consumer Loan Corporation is reduced below 1.01% of the aggregate invested amounts or certificate principal balances, as specified in each Series Supplement to the Pooling and Servicing Agreement for all outstanding Series Participation Interests. See "Description of the Securities -- Early Amortization Period." REMITTANCE ON THE SERIES 1997-2 PARTICIPATION.................. On each Distribution Date the Deposit Trust will make the following remittances to the Indenture Trustee in respect of collections during the preceding Collection Period: INTEREST.................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer from the applicable Allocation Percentage of Interest Collections for the preceding Collection Period equal to the amount accrued at the Participation Pass-Through Rate on the unpaid principal balance of the Series 1997-2 Participation. The "Participation Pass-Through Rate" for each Distribution Date is a per annum rate equal to Prime Rate (as defined herein), less 1.50%, subject to a minimum rate equal to a per annum rate which will result in an amount sufficient to pay the full amount of interest due on the Notes and to make a full distribution on the Certificates at the Certificate Rate, plus one-twelfth of the Series 1997-2 Participation Invested Amount, multiplied for each Distribution Date occurring prior to December 1998, by 1.50%, and for each Distribution Date occurring in December 1998 or thereafter, by 0.25% (the "Series 1997-2 Participation Interest Distribution Amount"). PRINCIPAL................... An amount will be remitted to the Indenture Trustee on behalf of the Issuer equal to the sum of the applicable Allocation Percentage of Principal Collections, or during any Collection Period prior to the Accelerated Amortization Date or commencement of an Early Amortization Period, equal to the sum of (a) the greater of: (i) the Floating Allocation Percentage of Net Principal Collections or (ii) the Minimum Principal Amount, as defined herein, and (b) to the extent of the applicable Allocation Percentage of Interest Collections remaining after providing for the distribution of the Participation Pass-Through Rate on the Series 1997-2 Participation, Defaulted Amounts and the amount of any Defaulted Amounts previously allocated to the Series 1997-2 Participation that have not been included in the Series 1997-2 Principal Distribution Amount on any prior Distribution Date (the "Series 1997-2 Participation Principal Distribution Amount"). SECURITIES INTEREST.............. Interest on each class of Notes will be payable monthly on the fifteenth day of each month or, if such day is not a Business Day (as defined herein), on the next succeeding Business Day (each, a "Payment Date"), commencing in December 1997, in an amount equal to interest accrued during the related Interest Period (as defined below) at the applicable Note Rate on the Security Balance for the related class of Notes. The applicable "Note Rate" for an Interest Period will be the per annum rate equal to the sum of (a) the London interbank offered rate for one-month United States dollar deposits ("LIBOR"), determined as specified herein, as of the second LIBOR Business Day (as defined herein) prior to the first day of such Interest Period (or as of two LIBOR Business Days prior to the Closing Date, in the case of the first Interest Period) and (b) 0. % per annum with respect to the Class A-1 Notes, 0. % per annum with respect to the Class A-2 Notes, 0. % per annum with respect to the Class A-3 Notes and a rate specified in the Indenture not to exceed % per annum in respect of the Class B Notes. The Note Rate for each class is subject to a maximum rate as described under "Description of the Securities -- Distributions on the Securities" herein. Interest on the Notes in respect of any Payment Date will accrue from (and including) the preceding Payment Date (or in the case of the first Payment Date, from the date of the initial issuance of the Notes (the "Closing Date")) through (and including) the day preceding such Payment Date (each such period, an "Interest Period") on the basis of a 360-day year and the actual number of days in such Interest Period. See "Description of the Securities -- Distributions on the Securities". Interest for any Payment Date due but not paid on such Payment Date shall bear interest, to the extent permitted by applicable law, at the related Note Rate until paid. Failure to pay interest in full on any Payment Date after expiration of the applicable grace period is an Event of Default under the Indenture. Distributions on Certificates will be payable monthly on each Payment Date, commencing in December 1997, at the Certificate Rate on the Security Balance of the Certificates for the related Interest Period. The "Certificate Rate" will generally equal the sum of (a) LIBOR (calculated in the manner described above for the Class A and Class B Notes for such Interest Period) and (b) the rate specified in the Trust Agreement not to exceed % per annum, subject to certain limitations as described herein under "Description of the Securities -- Distributions on the Securities." The Certificate Rate will accrue on any amounts distributable in payment of the Certificate Rate, but not paid on any monthly Payment Date. SECURITIES PRINCIPAL............. On each Payment Date, to the extent funds are available therefor, other than the Payment Date in November 2007 (the "Final Payment Date"), principal payments will be due and payable on the Notes and distributions will be due on the Certificates in respective amounts described below under "Allocation of Remittances on the Series 1997-2 Participation". On the Final Payment Date, principal will be due and payable on the Notes in an amount equal to the Security Balance thereof on such Payment Date. In addition, on any Payment Date, to the extent of funds available therefor, Noteholders will also be entitled to receive principal payments in respect of the Accelerated Principal Payment Amount as described in this Prospectus Summary under "Allocation of Remittances on the Series 1997-2 Participation". In no event will principal payments on the Notes on any Payment Date exceed the Security Balance thereof on such date. ALLOCATION OF REMITTANCES ON THE SERIES 1997-2 PARTICIPATION...... The majority of the defined terms used in this Allocation of Remittances on the Series 1997-2 Participation are defined beginning on page 64 under "Description of the Securities -- Distributions on the Securities -- Allocations of Remittances on the Series 1997-2 Participation". Except as provided below, on each Payment Date other than a Payment Date occurring after an Event of Default, remittances on the Series 1997-2 Participation will be allocated in the following order of priority: (i) sequentially, as payment for the amount of interest due on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class B Notes; (ii) except as otherwise specified below, to the Certificates on behalf of the Issuer, as payment of the amount distributable in respect of the Certificate Rate on the Security Balance of the Certificates and previously unpaid; (iii) sequentially, up to the Optimum Monthly Principal: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes; (iv) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Targeted Balance, to the extent the Adjusted Security Balance of the Certificates is not reduced below $14,000,000; (v) to the Seller, in reduction of the Overcollateralization Amount, up to the remaining Optimum Monthly Principal provided the Overcollateralization Amount is not less than $17,000,000; (vi) as principal on the Notes, sequentially, up to the Accelerated Principal Payment Amount for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals the Class A-1 Targeted Principal Balance, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals the Class A-2 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-2 Notes is not reduced below the Minimum Security Balance for the Class A-2 Notes, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals the Class A-3 Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class A-3 Notes is not reduced below the Minimum Security Balance for the Class A-3 Notes, (d) to the Class B Notes until the Security Balance of the Class B Notes equals the Class B Targeted Principal Balance, to the extent the Adjusted Security Balance of the Class B Notes is not reduced below the Minimum Security Balance for the Class B Notes, (e) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (f) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (g) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (h) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (vii) as principal on the Notes, sequentially, up to the remaining Optimum Monthly Principal for such Payment Date: (a) to the Class A-1 Notes until the Security Balance of the Class A-1 Notes equals zero, (b) to the Class A-2 Notes until the Security Balance of the Class A-2 Notes equals zero, (c) to the Class A-3 Notes until the Security Balance of the Class A-3 Notes equals zero, and (d) to the Class B Notes until the Security Balance of the Class B Notes equals zero; (viii) to the Certificates, up to the remaining Optimum Monthly Principal until the Security Balance of the Certificates equals the Certificate Minimum Balance, or if the Series 1997-2 Participation Invested Amount is zero, then to the Certificates until the Security Balance of the Certificates equals zero; (ix) to the Seller in reduction of the Overcollateralization Amount to an amount not less than zero, the remaining Optimum Monthly Principal; and (x) any remaining amounts to the Seller. In the event (a) immediately prior to a Distribution Date the Series 1997-2 Participation Invested Amount is less than the aggregate Security Balance of the Class A and Class B Notes immediately prior to the related Payment Date, or (b) the remittances on the Series 1997-2 Participation for a Payment Date is less than the aggregate amount to be paid pursuant to clauses (i) and (ii) above, the amount to be paid pursuant to clause (ii) above will be paid only after payments are made on the Notes pursuant to clause (iii). OVERCOLLATERALIZATION AMOUNT..... As of the Closing Date, the Overcollateralization Amount is equal to $51,000,000 (the "Initial Overcollateralization Amount") or 4.25% (the "Initial Overcollateralization Percentage") of the Initial Series 1997-2 Participation Invested Amount. For each Payment Date, the "Overcollateralization Amount" equals the amount by which the Series 1997-2 Participation Invested Amount exceeds the aggregate Security Balance of the Series 1997-2 Securities, in each case after giving effect to distributions on such Payment Date. For each Payment Date, the "Accelerated Principal Payment Amount" is equal to the lesser of (i) the amount by which the remittance on the Series 1997-2 Participation exceeds the sum of (a) the amount to be distributed on the Notes with respect to interest and the Certificates with respect to the Certificate Rate on such Payment Date and (b) the Optimum Monthly Principal for such Payment Date and (ii) one-twelfth of the Series 1997-2 Participation Invested Amount, multiplied for each Payment Date occurring prior to December 1998, by 1.50%, and for each Payment Date occurring in December 1998 or thereafter, by 0.25%. The distribution of Accelerated Principal Payment Amounts, if any, to Noteholders will increase the Overcollateralization Amount. The Overcollateralization Amount will be available to absorb any Defaulted Amounts that are allocated to Noteholders and not covered by distributions on the Series 1997-2 Securities. See "Description of the Securities -- Distributions on the Securities -- Overcollateralization Amount" herein. ISSUANCE OF ADDITIONAL SERIES.... Five Series were previously issued through the sale of Series Participation Interests in the Receivables of the Deposit Trust. See "Annex II: Prior Issuance of Series Participation Interests" for a summary of the Series Participation Interests previously issued by the Deposit Trust. Additional Series are expected to be issued from time to time through the sale of additional Series Participation Interests to new issuers. It is anticipated that the securities of other Series will have expected final payment dates, rapid amortization dates, amortization periods, non-amortization periods, accelerated amortization periods and periods during which the principal amount of such securities is accumulated in a principal funding account or paid to holders of such securities which differ from those for the Series 1997-2 Securities. Accordingly, each Series may have entirely different methods for calculating the amount and timing of principal and interest distributions to securityholders and Series Enhancements (as defined below) and may utilize other methods for determining the portion of collections allocable to such securityholders and Series Enhancements. See "Deposit Trust Risk Factors." "Series Enhancement" means any letter of credit, surety bond, subordinated interest in the trust assets, collateral invested amount, collateral account, spread account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement or other similar arrangement for the benefit of holders of interests in a Series. DENOMINATIONS.................... The Notes will be issued in the aggregate principal amounts set forth on the cover page hereof, in fully registered denominations of $100,000 and integral multiples of $1,000 in excess thereof. REGISTRATION OF NOTES............ The Notes will initially be issued in book-entry form. Persons acquiring beneficial ownership interests in the Notes ("Note Owners") may elect to hold their Notes through DTC, in the United States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and counterparties holding directly or indirectly through Cedel or Euroclear, on the other, will be effected in DTC through Citibank, N.A. or The Chase Manhattan Bank, the relevant depositaries (collectively, the "Depositaries") of Cedel or Euroclear, respectively, and each a participating member of DTC. So long as the Notes are in book-entry form, such Notes will be evidenced by one or more Notes registered in the name of CEDE & Co., the nominee of DTC. The interests of the Note Owners will be represented by book-entries on the records of DTC and participating members thereof. Notes will be available in definitive form only under the limited circumstances described herein. All references in this Prospectus to "Holders" or "Noteholders" shall be deemed, unless the context clearly requires otherwise, to refer to CEDE & Co., as nominee of DTC. See "Risk Factors" and "Description of the Securities -- Registration of Notes" herein. RECORD DATE...................... The last day preceding a Payment Date, or if the Notes are no longer book-entry securities, the last day of a month preceding a Payment Date. SERVICING........................ The Servicer will be responsible for servicing and managing the Credit Lines and making collections on the Receivables. Each Credit Line will be subserviced by the appropriate Subservicer on behalf of HFC, as Servicer. The Servicer will cause Interest Collections and Principal Collections to be deposited into the Collection Account, except as described herein. On the fifth Business Day prior to any Payment Date (the "Determination Date"), the Servicer will calculate, and instruct the Deposit Trust, the Issuer and the Indenture Trustee regarding the amounts to be paid to the Noteholders with respect to the related Collection Period. See "Description of the Securities -- Distributions on the Securities." As long as HFC is the Servicer it will receive, or be entitled to retain on behalf of itself and the Subservicers, a portion of the Interest Collections remaining after distribution of the Series 1997-2 Participation Interest Distribution Amount and the Series 1997-2 Participation Principal Distribution Amount a monthly servicing fee (the "Servicing Fee") attributable to the Series 1997-2 Participation in the amount of 2.00% per annum of the Series 1997-2 Participation Invested Amount as of the end of the related Collection Period. See "Description of the Deposit Trust -- Servicing Compensation and Payment of Expenses." In certain limited circumstances, the Servicer may resign or be removed under the Pooling and Servicing Agreement, in which event either the Deposit Trustee or, so long as it meets certain eligibility standards as set forth in the Pooling and Servicing Agreement, a third-party servicer will be appointed as a successor Servicer. In such event, the Servicing Fee will be paid to the successor Servicer from Interest Collections prior to any distributions on the Series 1997-2 Participation. See "Description of the Deposit Trust -- Certain Matters Regarding the Servicer and the Seller." If the Servicer fails to comply with certain representations, warranties or covenants with respect to any Credit Line and such noncompliance is not cured within a specified period and has a material adverse effect on the Noteholders, or if certain events of insolvency occur with respect to the Servicer, the Deposit Trustee may appoint a successor Servicer. See "Description of the Deposit Trust -- Assignment of Receivables." FINAL PAYMENT OF PRINCIPAL; TERMINATION...................... The Notes will mature on the earlier of the date the Notes are paid in full or on the Payment Date occurring in November 2007. In addition, the Issuer of the Notes will pay the Notes in full upon the exercise by the Seller of its option to purchase the Series 1997-2 Participation after the aggregate Security Balance of the Series 1997-2 Securities is reduced to an amount less than or equal to $114,900,000 (10% of the initial aggregate Security Balance of the Series 1997-2 Securities). See "Description of the Securities -- Maturity."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046924_cfac_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046924_cfac_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3f5d9644b1977e2e4a0fa07d4361e8c7256a4de3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046924_cfac_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. For purposes of this Prospectus, unless otherwise indicated or the context otherwise requires, (i) the "Company" refers to Central Financial Acceptance Corporation, its predecessors and its wholly-owned subsidiaries, collectively, (ii) "Central" refers to the parent company only and (iii) the information herein (a) assumes that the Company has been in existence and the Reorganization (as defined below) was consummated concurrently with the 1991 Acquisition (as defined below) and (b) assumes no exercise of the Underwriters' over-allotment option. THE COMPANY The Company is a specialized consumer finance company that primarily serves the financing needs of the rapidly growing low income Hispanic population, a market the Company believes is underserved. The Company (i) provides small, unsecured personal loans to the Company's customers; (ii) purchases and services consumer finance receivables generated by the Company's customers for purchases of high quality, brand name consumer products, appliances and furniture sold by Banner's Central Electric, Inc. ("Banner"), an affiliate of the Company, and by independent retailers; (iii) sells airline tickets and originates and services travel-related finance receivables; and (iv) provides insurance products and insurance premium financing to its customers. The Company has catered to the low income Hispanic population during its 40 years of operation by locating its facilities primarily in Hispanic communities, advertising in Spanish, and employing Spanish as the primary language at its locations. While the Company operates primarily in the greater Los Angeles area and faces substantial competition with respect to its lines of business, the Company's objective is to become the leading provider of consumer credit and other financial services to the low income Hispanic population in urban areas within California and elsewhere in the United States. The Company's customers are typically between the ages of 21 and 45, earn less than $25,000 per year, have little or no savings, and have limited or short-term employment histories. In addition, the Company's customers typically have no or limited prior credit histories and are generally unable to secure credit from traditional lending sources. The Company bases its credit decisions on its assessment of a customer's ability to repay the obligation. In making a credit decision, in addition to the size of the obligation, the Company generally considers a customer's income level, type and length of employment, stability of residence, personal references, and prior credit history with the Company. The Company also obtains a credit bureau report and rating, if available, and seeks to confirm other credit-related information. The Company, however, is more susceptible to the risk that its customers will not satisfy their repayment obligations than are less specialized consumer finance companies or consumer finance companies that have more stringent underwriting criteria. See "Risk Factors -- Credit Risk Associated with Customers; Lack of Collateral" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Trends -- Credit Quality" and "-- Delinquency Experience and Allowance for Credit Losses." Since 1950, Hispanics have been the fastest growing minority group in the United States, increasing from 4.0 million in 1950 to approximately 27.0 million in 1996, a compound annual growth rate of 4.3%. According to the 1996 U.S. Bureau of the Census Current Population Report (the "1996 Report"), this trend is expected to continue. The 1996 Report projects that the Hispanic population will total 36.0 million by 2005. California is home to the largest Hispanic population in the United States, and it is estimated that this population will grow from 9.4 million in 1995 to 13.0 million by 2005, at which time Hispanics will comprise approximately 34% of California's total population. Recognizing these demographic trends, management's strategy has been to identify new financial products and services that it believes could be introduced successfully to the low income Hispanic population in urban areas within California and to increase the number of locations through which it can distribute its products and services. From 1991, when the Company was acquired by its current management (the "1991 Acquisition"), until the Company's initial public offering in June 1996, the Company grew primarily as a result of the introduction of such financial products and services and increased pricing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Trends -- Analysis of Changes in Net Interest Income." The Company's most significant growth has occurred as a result of the introduction of unsecured small loans in the fourth quarter of 1992, a product which the Company believes offers significant continued growth potential. In 1995, the Company began offering company-financed sales of airline tickets and in 1996, the Company began selling automobile insurance and offering insurance premium financing and expanded its independent retail financing business. In 1997, the Company introduced a new financial product involving the issuance of a card, called an "Efectiva Card", which provides customers of the Company with the ability to access their established lines of credit with the Company by withdrawing cash from the Company's cash dispensing machines. As of the date hereof, the Company has installed a proprietary, non-networked, closed system of 20 such cash dispensing machines, of which 18 are in locations owned or leased by the Company or Banner and 2 of which are in locations owned or leased by unaffiliated parties. To continue its growth, in 1996 the Company began to expand its distribution network through acquisitions of businesses primarily serving the Hispanic community. The Company also intends to develop new financial products and services internally that the Company believes will complement or expand its current financial products and services, or seek to acquire existing businesses that offer such products and services. The Company also intends to expand its consumer finance business for independent retailers. Prior to May 1996, the Company offered its products and services through 12 locations, 11 of which were in the greater Los Angeles area. From May 1996 to year end 1996, the Company acquired the business of, and assumed the leasehold interests to, 80 travel locations. In July 1996, the Company acquired the business of, and assumed the leasehold interests in, 10 auto insurance locations in the greater Los Angeles area. Although such transactions were not material from a financial point of view, the Company believes that such businesses provide the Company with growth opportunities while adding additional locations through which it can offer its financial products and services. As a result of internal expansions, acquisitions and consolidation of certain of its operations, at June 30, 1997, the Company operated through 77 locations of which 54 are located in Southern California, 17 are located in Northern California, and 6 are located outside of California. At June 30, 1997, the Company's gross receivables portfolio was approximately $133.0 million, consisting of $54.8 million in the portfolio of loan contracts (the "Small Loan Portfolio"), $48.6 million in the portfolio of consumer product contracts from sales by Banner (the "Consumer Product Portfolio"), $7.7 million in the portfolio of consumer finance contracts from sales by independent retailers (the "Independent Retail Finance Portfolio"), $5.6 million in the portfolio of travel finance contracts (the "Travel Finance Portfolio"), $7.3 million in the portfolio of insurance premium finance contracts (the "Premium Finance Portfolio") and $9.0 million in the portfolio of automobile finance contracts (the "Automobile Finance Portfolio"). At June 30, 1997, the range of average net contract balances in each of the portfolios was between approximately $386 and $648, except for the Automobile Finance Portfolio, where the average net contract balance was approximately $5,500. The Company's principal executive offices are located at 5480 Ferguson Drive, Commerce, California, 90022, and its telephone number is (213) 720-8600. CFAC CAPITAL CFAC Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with the Delaware Secretary of State on September 26, 1997. CFAC Capital's business and affairs are conducted by the Property Trustee, Delaware Trustee and three individual Administrative Trustees who are officers of the Company. CFAC Capital exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures issued by Central, and (iii) engaging in only those other activities necessary, advisable or incidental thereto. The Junior Subordinated Debentures will be the sole assets of CFAC Capital, and payments by Central under the Junior Subordinated Debentures and the Expense Agreement will be the sole revenues of CFAC Capital. All of the Common Securities will be owned by Central. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of Central as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. See "Description of the Trust Preferred Securities -- Subordination of Common Securities of CFAC Capital Held by Central." Central will acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of CFAC Capital. CFAC Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. CFAC Capital's principal offices are located at 5480 East Ferguson Drive, Commerce, California 90022 and its telephone number is (213) 720-8600. THE OFFERING Trust Preferred Securities issuer................... CFAC Capital Securities offered......... 2,100,000 Trust Preferred Securities having a Liquidation Amount of $25 per Trust Preferred Security. The Trust Preferred Securities represent preferred undivided beneficial interests in CFAC Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. CFAC Capital has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an additional 315,000 Trust Preferred Securities at the initial offering price, solely to cover over-allotments, if any. Distributions.............. The Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Trust Preferred Security, will be cumulative, will accrue from the date of issuance of the Trust Preferred Securities, and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on December 15, 1997 (subject to possible deferral as described below). The amount of each Distribution due with respect to the Trust Preferred Securities will include amounts accrued through the date the Distribution payment is due. See "Description of the Trust Preferred Securities." Extension periods.......... So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, Central will have the right, at any time, to defer payments of interest on the Junior Subordinated Debentures by extending the interest payment period thereon for a period not exceeding 20 consecutive quarters with respect to each deferral period (each an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. If interest payments are so deferred, Distributions on the Trust Preferred Securities will also be deferred and Central will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to Central's capital stock or debt securities that rank pari passu with or junior to the Junior Subordinated Debentures. During an Extension Period, Central would have the ability to continue to make payments on Senior and Subordinated Debt. During an Extension Period, Distributions will continue to accumulate with interest thereon compounded quarterly. Because interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law, holders of the Trust Preferred Securities will be required to accrue income for United States federal income tax purposes. See "Description of Junior Subordinated Debentures -- Option to Defer Interest Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income and Original Issue Discount." Maturity................... The Junior Subordinated Debentures will mature on , 2027, which date may be shortened (such date, as it may be shortened, the "Stated Maturity") to a date not earlier than , 2002, subject to redemption on earlier dates as described below. Redemption................. The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Junior Subordinated Debentures at their Stated Maturity or their earlier redemption at a redemption price equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. Subject to restrictions contained in any Senior and Subordinated Debt and regulatory approval, if then required under applicable regulatory policies, the Junior Subordinated Debentures are redeemable prior to maturity at the option of Central (i) on or after , 2002 in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 90 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Trust Preferred Securities -- Redemption" and "Description of Junior Subordinated Debentures -- Redemption." Distribution of Junior Subordinated Debentures............... Central has the right at any time to dissolve CFAC Capital, after satisfaction of creditors of CFAC Capital as required by applicable law, and cause the Junior Subordinated Debentures to be distributed to holders of Trust Preferred Securities in liquidation of CFAC Capital, subject to Central having received prior approval of the primary federal regulator of Central to do so if then required under applicable capital guidelines or policies of such primary regulator. See "Description of the Trust Preferred Securities -- Distribution of Junior Subordinated Debentures." Guarantee.................. Taken together, Central's obligations under various documents described herein, including the Guarantee Agreement, provide a full, irrevocable and unconditional guarantee of payments by CFAC Capital of Distributions and other amounts due on the Trust Preferred Securities. Under the Guarantee Agreement, Central guarantees the payment of Distributions by CFAC Capital and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of Senior and Subordinated Debt of Central, as defined herein) to the extent of funds held by CFAC Capital. If CFAC Capital has insufficient funds to pay Distributions on the Trust Preferred Securities (i.e., if Central has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Central to enforce payment of such Distributions to such holder. See "Description of Junior Subordinated Debentures -- Enforcement of Certain Rights by Holders of the Trust Preferred Securities," "Description of Junior Subordinated Debentures -- Debenture Events of Default" and "Description of Guarantee." Ranking.................... The Trust Preferred Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities of CFAC Capital held by Central, except as described under "Description of the Trust Preferred Securities -- Subordination of Common Securities of CFAC Capital Held by Central." The obligations of Central under the Guarantee, the Junior Subordinated Debentures and other documents described herein are unsecured and rank subordinate and junior in right of payment to all current and future Senior and Subordinated Debt, the amount of which is unlimited. Central has a revolving loan agreement with several banks and Wells Fargo Bank, N.A., as agent (the "Line of Credit") that provides for borrowings by Central of up to $100 million, subject to an allowable borrowing base. Borrowings under the Line of Credit are guaranteed by all of the significant domestic subsidiaries of the Company and are secured by substantially all of the assets, including the receivables, of the Company and a pledge by Central of the stock of all of its significant subsidiaries. All borrowings under the Line of Credit are Senior and Subordinated Debt. At June 30, 1997, Central had approximately $66.7 million aggregate principal amount outstanding under the Line of Credit, including letters of credit. As of June 30, 1997, on a pro forma basis after giving effect to the offering and application of the net proceeds therefrom to temporarily reduce the balance outstanding under the Line of Credit, Central would have approximately $16.6 million in Senior and Subordinated Debt outstanding. As a result of the funds which would be made available to the Company upon completion of this offering, the Company does not anticipate that it will have an immediate need for a $100.0 million credit facility. Concurrent with the consummation of this offering, there will be a reduction in the maximum amount committed by the lenders to be available for borrowing under the Line of Credit from $100.0 million to between $30.0 million to $43.0 million. Concurrent with the consummation of the offering and such reduction in the maximum amount available for borrowing under the Line of Credit, Wells Fargo Bank, N.A. will be paid off in full and Union Bank of California, N.A. may be paid off in full and, to the extent paid off, will no longer participate as a lender under the Line of Credit. Both Wells Fargo Bank, N.A. and Union Bank of California, N.A. either directly or through an affiliate, have an indirect ownership interest in Central. If the offering is not consummated, the Line of Credit will remain in place with all of the current lenders. Since the Line of Credit requires Central to pay the lenders fees for the unused portion available under the Line of Credit, the reduction in the lenders' commitment will reduce the amount of fees payable by Central. In addition, because Central is a holding company, substantially all of Central's assets consist of the capital stock of its subsidiaries. All obligations of Central relating to the securities described herein will be effectively subordinated to all existing and future liabilities of Central's subsidiaries. Central may cause additional Trust Preferred Securities to be issued by trusts similar to CFAC Capital in the future, and there is no limit on the amount of such securities that may be issued. In this event, Central's obligations under the Junior Subordinated Debentures to be issued to such other trusts and Central's guarantees of the payments by such trusts will rank pari passu with Central's obligations under the Junior Subordinated Debentures and the Guarantee, respectively. See "Description of Junior Subordinated Debentures -- Subordination" and "Description of Guarantee -- Status of Guarantee." Voting rights.............. The holders of the Trust Preferred Securities will generally have limited voting rights relating only to the modification of the Trust Preferred Securities, the dissolution, winding-up or termination of CFAC Capital and certain other matters described herein. See "Description of the Trust Preferred Securities -- Voting Rights; Amendment of the Trust Agreement." ERISA considerations....... Prospective purchasers must carefully consider the information set forth under "ERISA Considerations." Nasdaq National Market symbol................... The Trust Preferred Securities have been approved for listing on the Nasdaq National Market, subject to official notice of issuance, under the symbol CFACP. Use of proceeds............ The proceeds to CFAC Capital from the sale of the Trust Preferred Securities offered hereby will be invested by CFAC Capital in the Junior Subordinated Debentures of Central. Central intends to use the proceeds to temporarily reduce the balance outstanding under the Line of Credit. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001046936_hunter_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001046936_hunter_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..65dba295f2f88b6547e8d64f40920fd91df2ce81
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001046936_hunter_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO. EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) GIVES EFFECT TO A 26-FOR-1 SPLIT OF THE SHARES OF COMMON STOCK TO BE EFFECTED PRIOR TO CONSUMMATION OF THIS OFFERING. SEE "UNDERWRITING" AND "DESCRIPTION OF CAPITAL STOCK." THE COMPANY The Hunter Group, Inc. ("Hunter" or the "Company") provides management consulting, systems implementation and education services to organizations seeking to deploy enterprise software applications, including enterprise resource planning ("ERP") software applications. The Company's core expertise is in providing implementation services for the human resources, financial and distribution software applications developed by PeopleSoft Inc. ("PeopleSoft") and other third-party ERP software vendors. The Company has provided implementation services for PeopleSoft's human resources applications since 1989 and for its financial and distribution applications since 1993. The Company's expanded management consulting practice and its new education services practice, together with its core ERP implementation services practice, provide a comprehensive Concept-to-Completion-TM- solution. The Company recently formed relationships with J.D. Edwards & Company ("J.D. Edwards") and Lawson Software ("Lawson"), two rapidly growing ERP software application vendors, to provide the Concept-to-Completion-TM- suite of services for their software applications. Intense global competition is driving organizations to reengineer business processes, information systems and job functions to reduce costs, improve operating efficiencies and enhance their quality of products and services. Rapid advances in technology have enhanced the ability of organizations to further strengthen their competitiveness through the implementation of distributed computing platforms and software solutions. As an integral part of adopting client/server architectures, many companies are replacing their legacy and generally disparate software applications with fully integrated, packaged, enterprise software applications, including ERP applications. In general, organizations' internal information technology ("IT") departments lack the resources and business expertise to implement complex ERP applications. As a result, many organizations utilize third-party IT service providers to perform the IT services related to implementing and supporting ERP applications. According to industry sources, the global demand for ERP-related consulting services was estimated to be $11 billion in 1996 and is expected to grow to $18 billion by 1998. The goal of the Company's Concept-to-Completion-TM- approach is to provide services that improve the productivity of a client's technology investment by leveraging the client-specific knowledge gained throughout the process, which includes strategic planning, process improvement, change management, vendor selection, implementation, end-user training and post-implementation support. The Company staffs engagements with project teams consisting of consultants with strong technical competency and consultants with functional expertise and applies methodologies that have been refined through hundreds of client engagements. The Company's flexible and highly developed implementation methodologies are designed to provide high quality services resulting in measurable operational improvements to clients. The Company intends to continue to drive its revenue growth by expanding its product line expertise and vertical market focus, expanding its strategic relationships with software application vendors, leveraging its established base of more than 1,000 clients and expanding its global presence. The Company has expanded its relationships with additional ERP software vendors in an effort to serve a broader client base and to penetrate additional segments of the ERP market, including manufacturing. The Company provides its services to clients in a diverse array of industries. These clients include Commonwealth of Virginia, Duke Energy, El Paso Natural Gas Corporation, First Chicago NBD Corporation, Genuine Parts Company, Glaxo Wellcome, Inc., Host Marriott Corporation, Sonoco, Warner-Lambert Company and Western Digital Corporation, among others. The Company was incorporated in Maryland in 1983. Its principal executive offices are located at 100 East Pratt Street, Suite 1600, Baltimore, Maryland 21202, and its telephone number is (410) 576-1515. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,300,000 shares Common Stock offered by the Selling Stockholder........................ 1,800,000 shares Common Stock to be outstanding after this offering................................... 10,100,000 shares(l) Use of proceeds.............................. For (i) repayment of approximately $5.0 million of the Company's outstanding borrowings under its revolving credit facility and (ii) for working capital and other general corporate purposes, including expansion into new business lines and acquisitions of complementary businesses. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... HNTR </TABLE> - ------------------------ (1) Excludes 1,535,066 shares issuable upon exercise of stock options outstanding on June 30, 1997, at a weighted average exercise price of $2.11 per share. See "Capitalization" and "Management-- Employee Benefit Plans." SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------- -------------------- <S> <C> <C> <C> <C> <C> <C> <C> 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- STATEMENT OF OPERATIONS DATA: Fee revenue............................ $ 4,216 $ 5,654 $ 10,712 $ 19,554 $ 39,215 $ 14,646 $ 26,927 Gross margin........................... 2,849 3,523 6,783 10,055 18,035 5,422 11,758 Operating income (loss)................ (123) 1,034 1,990 (475) 1,398 (2,671) (1,119) Net income (loss)...................... (158) 592 1,173 (399) 443 (1,743) (807) Net income (loss) per share (1)........ $ (0.02) $ 0.07 $ 0.14 $ (0.05) $ 0.05 $ (0.22) $ (0.10) Weighted average shares outstanding (1).................................. 7,800 8,126 8,255 7,800 8,849 7,800 7,800 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------- <S> <C> <C> AS ACTUAL ADJUSTED(2) --------- ----------- BALANCE SHEET DATA: Cash...................................................................................... $ 531 Working capital........................................................................... (791) Total assets.............................................................................. 17,285 Total debt................................................................................ 4,277 Stockholders' equity...................................................................... $ 438 </TABLE> - ------------------------ (1) See Note 1 of the Consolidated Financial Statements. (2) As adjusted to give effect to the sale of the 2,300,000 shares of Common Stock offered hereby by the Company at an assumed public offering price of $ per share and application of the net proceeds therefrom as described in "Use of Proceeds." FORWARD-LOOKING STATEMENTS Certain statements contained in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this Prospectus, including, without limitation, statements regarding the Company's intention to expand its application expertise and penetrate additional markets, develop its relationship with PeopleSoft, and enhance its middle market focus, and the Company's intentions with regard to capital expenditures and other statements herein regarding matters that are not historical facts, are forward-looking statements. Such forward-looking statements include risks and uncertainties; consequently, actual results may differ materially from those expressed or implied thereby. Factors that could cause actual results to differ materially include, without limitation, those discussed under "Risk Factors." These forward-looking statements speak only as of the date of this Prospectus. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. ------------------------ The Hunter Group, Inc. has applied to register "The Hunter Group, Inc." as a trademark of the Company. The Company uses the phrases, "Concept-to-Completion-TM-," "Delivering Solutions for Global Information Management-TM-," "Interactive Design/Prototyping-TM-" and the names of certain of the Company's methodologies to identify its services. All other trademarks or service marks appearing in this Prospectus are trademarks or registered service marks of the companies that utilize them.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047019_xplor_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047019_xplor_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..febf4f9c88e8913a2ef2db153505bc2b4fb44c6a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047019_xplor_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) gives effect to the combination (the "Combination Transaction") in September 1997 of Araxas Energy Corporation ("Araxas"), South Coast Exploration Company ("South Coast"), SOCO Exploration, L.P. ("SOCO") and Interactive Exploration Solutions, Inc. ("INEXS" and, together with South Coast and SOCO, the "South Coast Companies"), (ii) assumes that the Underwriters' over-allotment option will not be exercised and (iii) has been adjusted to reflect the 23.2-for-one split of the Common Stock effected in November 1997. Unless otherwise indicated by the context, references herein to the "Company" or "XPLOR" are to XPLOR Energy, Inc., a Delaware corporation, and its corporate and partnership subsidiaries and predecessors, and information with respect to the reserves and operating history of the Company includes the combined reserves and operating history of Araxas and the South Coast Companies. Certain terms used herein relating to the oil and gas industry are defined in the Glossary of Certain Industry Terms included elsewhere in this Prospectus. THE COMPANY XPLOR is an independent energy company engaged in the exploration for and development of oil and gas reserves, primarily in the Louisiana and Texas Gulf Coast region. The Company focuses on growth through drilling, combining sophisticated technologies such as 3-D seismic data and interactive computer analytical techniques with an experienced technical staff and management. XPLOR applies a disciplined exploration methodology consisting of traditional subsurface geology followed by acquisition and analysis of specifically targeted 3-D seismic data, integrated with sound engineering and economic principles. This methodology is designed to use 3-D seismic data cost- effectively to confirm rather than to generate prospects. XPLOR was formed through the strategic combination of Araxas and the South Coast Companies in the Combination Transaction. Management believes that the Combination Transaction will enhance the Company's ability to increase its reserves, production and cash flow per share by combining the complementary strengths of Araxas's operating expertise, the South Coast Companies' geophysical expertise and the two companies' portfolios of exploration prospects concentrated in the Gulf Coast region. Between December 31, 1994 and September 30, 1997, the Company increased its net proved reserves from approximately 8 Bcfe to approximately 58 Bcfe. Average net production increased from 260 Mcfe per day for the year ended December 31, 1994 to approximately 9,700 Mcfe per day for the nine months ended September 30, 1997. Drilling new wells and interpreting 3-D seismic and other data over existing fields have together generated approximately 60% of the increase in the Company's estimated proved reserves from December 31, 1994 to September 30, 1997. The Company drilled 48 gross wells during that time, consisting of 29 exploratory wells, of which 15 were commercially productive, and 19 development wells, of which 17 were commercially productive. The Company also has added reserves through acquisitions, which accounted for the balance of the reserve increase from December 31, 1994 to September 30, 1997. During this period, the Company completed major acquisitions of substantial working interests in the Adams-Baggett field in Crockett County, Texas and the Main Pass 35 field in the shallow state waters of Louisiana. The Company's reserve growth has been achieved at an average finding cost of $0.73 per Mcfe and an average acquisition cost of $0.70 per Mcfe. Although the Company expects that its future reserve and production growth will result primarily from its drilling program, the Company will consider acquisitions with significant growth potential. The Company has acquired over 700 square miles of 3-D seismic data and has leased or optioned acreage in 17 project areas. As of September 30, 1997, XPLOR had an inventory of 98 exploration and development prospects within these project areas scheduled to be drilled over the next two years. Prior to the Offering, capital constraints limited the Company's ability to drill its prospect inventory. At the closing of this Offering, however, the Company expects to have $20.0 million available for borrowing under its revolving credit facility, in addition to its cash flow from operations and the unused net proceeds from the Offering, available for its drilling program. XPLOR has budgeted total capital expenditures of approximately $44 million for the period from October 1, 1997 through the end of 1998, which includes funds for drilling approximately 80% of its currently identified exploration and development prospects. The Company believes that its current prospect inventory includes both moderate potential, lower risk prospects and higher potential, higher risk prospects that, if successful, may result in significant increases in proved reserves. STRENGTHS XPLOR believes it has the following strengths that are integral to its overall growth strategy: Experienced Technical Team The Company has assembled a technical team that has extensive experience in applying sophisticated exploration techniques and that it believes has the capacity to adapt to rapidly changing technological demands. The Company employs 11 geoscientists, consisting of four geologists and seven geophysicists, all of whom have 15 to 25 years of experience in exploring for oil and gas. The Company also has an experienced group of engineers who participate in the evaluation of the Company's potential projects and manage the Company's drilling and production operations. Advanced Technology The Company's experienced technical team applies advanced technology in oil and gas exploration and has access to the latest enhancements in such technology. The Company provides its technical team with a sophisticated in-house computer- based work environment, which enables the team to evaluate and integrate data efficiently. XPLOR has 10 networked workstations running the latest 3-D design, modeling, interpretation, mapping, processing and visualization software applications. INEXS, the Company's geophysical consulting subsidiary, is an integral part of the Company's technology base and gives the Company access to the latest advances in geoscientific technologies. INEXS has specialized in 3-D seismic interpretation and project management services since 1990 and has interpreted over 180 3-D seismic surveys for over 133 companies, including major integrated, foreign national and independent oil and gas companies. As a result of this high level of activity, INEXS has formed working relationships with a number of technology providers. Consequently, INEXS has participated in the design and testing of new applications, providing the Company with access to emerging technologies prior to their availability for general use. Existing Prospect Inventory and Proved Reserves As of September 30, 1997, XPLOR had an inventory of 98 exploration and development prospects scheduled to be drilled within the next two years. The Company has leased or optioned acreage for all 98 prospects. Of these prospects, 70 are exploratory and 28 are development. The Company also has identified additional exploratory prospects in various stages of evaluation, planning and implementation. The Company had total proved reserves of approximately 58 Bcfe at September 30, 1997, of which approximately 29 Bcfe were proved developed. For the nine months ended September 30, 1997, net production averaged approximately 9,700 Mcfe per day. Experienced Management XPLOR's executive management has experience in both traditional exploratory and operational areas and in the application of the latest technological advances. The Company's executive management has an average of over 20 years of industry experience in engineering, geology, geophysics and finance, primarily with major integrated and large independent oil and gas companies. The Company has established both short-term and long-term incentive plans for management designed to align compensation with the interests of stockholders. BUSINESS STRATEGY XPLOR intends to increase its oil and gas reserves, production and cash flow per share by emphasizing the following: Growth Through Exploration and Development The Company believes that its future growth in reserves, production and cash flow per share will result principally from a combination of exploratory and development drilling on the Company's inventory of prospects. The Company follows a disciplined methodology for the evaluation of its prospects, consisting of four phases: (i) identification of prospects in prolific trends with a high density of potential reservoirs and traps; (ii) data acquisition and quality control; (iii) data integration and interdisciplinary review; and (iv) final decision-making based upon a thorough analysis of economic and technical information. Prospect Generation XPLOR seeks to generate internally the majority of the prospects in which it participates. This focus on internal prospect generation enables the Company to control the entire process, from idea formulation to management of prospective risk and drilling decisions. The Company focuses on defining prospects that have multiple objectives based on subsurface geology before acquiring 3-D seismic data. The Company's inventory of prospects has also enabled the Company to trade for additional desirable prospects held by other oil and gas companies. In addition, third-party evaluations performed by INEXS provide the Company with opportunities to participate in exploratory prospects with industry partners. Balanced Drilling Program The Company engages in an active drilling program and attempts to maintain a balanced portfolio of exploratory and development prospects. The Company's exploratory prospect portfolio consists of both moderate potential, lower risk prospects and higher potential, higher risk prospects that, if successful, may result in significant increases in proved reserves. The Company considers balancing the relationship between risk and reward in its exploration program an important component of its business strategy. Geographic Focus XPLOR's operating activities are focused onshore and in state waters along the Gulf Coast, primarily in Louisiana and Texas, where the Company has substantial technical experience and expertise. Given the region's prolific production history, the existing infrastructure, existing technical database and the opportunities that have been created by advances in seismic and drilling technology, the Company believes that the Gulf Coast represents one of the most attractive exploration regions in North America. From January 1, 1994 to September 30, 1997, the Company drilled 42 wells along the Gulf Coast and acquired a database of geological and engineering data and approximately 400 square miles of 3-D seismic data in the region. THE COMBINATION TRANSACTION All of the operations of the Company were previously conducted through Araxas and the South Coast Companies, the interests of which were acquired, directly or indirectly, by the Company in the Combination Transaction. An aggregate of 4,709,413 shares of Common Stock and $3.0 million aggregate principal amount of the Company's notes (the "Combination Notes") were issued in exchange for such acquired interests. As a result of the Combination Transaction, Araxas and the South Coast Companies became wholly owned subsidiaries of XPLOR. See "The Combination Transaction." THE OFFERING COMMON STOCK OFFERED BY THE COMPANY(1)........................ 4,300,000 shares COMMON STOCK OUTSTANDING AFTER THE OFFERING(1)(2).................... 9,009,413 shares USE OF PROCEEDS.................... The Company intends to use approximately $45.2 million of the net proceeds to repay outstanding indebtedness of the Company. The remainder of the net proceeds, along with borrowings under the Company's revolving credit facility, will be used for general corporate purposes, including funding the Company's exploration and development activities. See "Use of Proceeds." DIVIDEND POLICY.................... The Company does not intend to declare or pay dividends on the Common Stock in the foreseeable future. See "Dividend Policy." LISTING............................ The Common Stock has been approved for quotation on the Nasdaq National Market. PROPOSED NASDAQ NATIONAL MARKET SYMBOL............................ XPLR - -------- (1) Assumes the Underwriters' over-allotment option for up to 545,000 shares of Common Stock granted by the Company and up to 100,000 shares of Common Stock granted by the Selling Stockholder is not exercised. See "Underwriting."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047021_teligent_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047021_teligent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..98dd8e08c902c1df61ac2c80fa03671237595fe0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047021_teligent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified by, and should be read in conjunction with, the more detailed information and the financial statements of the Company and notes thereto contained elsewhere in this Prospectus (the 'Financial Statements'). Unless otherwise indicated, the information in this Prospectus assumes (i) consummation of the Strategic Equity Investment; (ii) consummation of the Reorganization; and (iii) no exercise by the Underwriters of their over-allotment options. See 'Certain Transactions.' Unless otherwise indicated, references in this Prospectus to 'Teligent' or the 'Company' mean, at all times prior to the consummation of the Reorganization, Teligent, L.L.C., and, at all times thereafter, Teligent, Inc. Capitalized terms used in this Prospectus, which are not otherwise defined herein, have the respective meanings ascribed to them in the Glossary included as Annex A hereto. THE COMPANY Teligent intends to be a premier provider of high quality, low cost voice, data and video telecommunications services primarily to small and medium-sized businesses through its own fixed local wireless point-to-multipoint broadband networks and leased long distance facilities. Teligent anticipates offering an integrated package of services including local and long distance telephone services, high speed data connectivity, Internet access and videoconferencing. Teligent holds 24 GHz fixed wireless licenses in 74 of the most populous U.S. metropolitan market areas, covering over 50% of the nation's business telephone lines and a population of approximately 130 million. The Company intends to offer its integrated package of services in at least 10 market areas by the end of 1998 and 30 by the end of 1999, and subsequently in all of its 74 currently licensed market areas. The Company currently provides commercial Internet access through a fixed wireless point-to-point broadband system in 31 market areas and has deployed a point-to-multipoint system in Richardson, TX on a trial basis. Teligent was founded in 1996 as a joint venture between a subsidiary of The Associated Group, Inc. ('Associated') and an affiliate of Telcom Ventures, L.L.C. ('Telcom Ventures'), both of which have extensive experience in pioneering wireless telecommunications businesses. The Company's Chairman and Chief Executive Officer is Alex J. Mandl, formerly President and Chief Operating Officer of AT&T Corporation. On September 30, 1997, Nippon Telegraph and Telephone Corporation ('NTT'), the world's largest telecommunications carrier, agreed to make the Strategic Equity Investment of $100 million in the Company. On November 13, 1997, at a first closing, NTT, through its indirect wholly owned subsidiary NTTA&T Investment Inc. ('NTTA&T'), invested $40 million of the total $100 million Strategic Equity Investment. Prior to such first closing of the Strategic Equity Investment, the original members of Teligent, L.L.C. made additional cash contributions to Teligent, L.L.C. in the aggregate amount of $60 million. In addition, prior to such first closing of the Strategic Equity Investment, Associated agreed to make the ACLA Contribution, and, in consideration of such agreement, received a 1% increase in its member interest in Teligent, L.L.C. Completion of the ACLA Contribution is subject only to receipt of certain routine state regulatory approvals and is not a condition to consummation of the Offerings. Teligent believes that it is well positioned to capture revenues in the estimated $110 billion business telecommunications market. The Company intends to focus particularly on the estimated $47 billion business local exchange market, which is currently one of the most profitable segments in the telecommunications industry. Local exchange services have historically been provided by regional monopolies known as incumbent local exchange carriers ('ILECs') that have typically utilized copper wire-based 'legacy' networks. The ILECs' legacy networks, faced with increasing demand from businesses for cost-effective capacity to support bandwidth-intensive applications such as Internet access, have created a 'last mile bottleneck' in the local loop between the customer premise and the ILEC network switch. In addition, Teligent's market research indicates that the ILECs have been unable to satisfy customer demands for cost-effective, flexible and responsive service and that a significant portion of Teligent's target customer base is currently dissatisfied with its ILEC service. The potential revenue opportunity in this market, coupled with changes in the regulatory environment designed to enable facilities-based competition, has created opportunities for competitive local exchange carriers ('CLECs'). The Company intends to alleviate this last mile local bottleneck and gain market share by deploying technologically advanced, high bandwidth digital wireless technology complemented by superior customer service and competitive pricing. Teligent expects to provide local coverage throughout its market areas with lower capital requirements than either fiber-based or point-to-point wireless CLECs, enabling it to offer its services to a broader customer base more quickly and at a lower cost. Wireless point-to-multipoint broadband networks allow transmissions between multiple customer antennas and a single base station antenna, thereby allowing Teligent to share the same spectrum among its customers and reducing its capital expenditures. The Company believes that a significant portion of small and medium-sized businesses are located in buildings that are not economically attractive to fiber-based providers. Teligent's capital expenditures will be largely incremental or success-based, thereby minimizing the risk of deploying network equipment not associated with revenues. TELIGENT'S COMPETITIVE ADVANTAGES Teligent believes that a number of factors will provide it with significant competitive advantages in offering telecommunications services, including lower network cost, success-based capital expenditures, speed to market, high bandwidth capacity and flexibility, high quality service and network control, flexible information systems and experienced management and sponsors. Lower Network Cost. Teligent expects that its incremental capital required for launching service in a market and for connecting each customer will be lower than that of its competitors. Unlike copper- and fiber-based systems that require installation and maintenance of a significant amount of wire and cable, the Company's system will have no physical wires to install and maintain between the customer's radio equipment and the base station. As a result, Teligent expects to enjoy a lower network cost structure than these systems. The majority of Teligent's capital expenditures will consist of electronics, which tend to decline in cost through time as economies of scale are achieved. Teligent expects to benefit from its radio frequency band (24 GHz), which allows communication with customer premise equipment at a greater distance than higher frequency bands. In addition, point-to-multipoint networks provide more efficient equipment utilization than the point-to-point systems currently used by other fixed wireless providers, as transmissions from multiple customer antennas can be concentrated at a single base station. The Company expects that its average coverage radius of a base station will be approximately three miles (five kilometers), depending on local conditions. Teligent also believes that its anticipated lower cost structure should allow it to economically access smaller buildings and more customers than fiber-based systems, and enjoy more pricing flexibility than copper-based systems. Success-Based Capital. Teligent's network is designed to be not only lower cost, but also lower risk, due to the significant variable component of the Company's planned capital expenditures. Teligent expects to minimize the deployment of network equipment not associated with revenues since (i) a significant portion of its planned capital expenditures will be the purchase and installation of customer premise equipment and switch electronics, which are generally deployed only when customers are acquired, (ii) Teligent's system does not need to cover an entire market prior to initiating service in that market and (iii) Teligent's equipment can be rapidly redeployed to meet changing customer requirements. Speed to Market. Teligent believes that its license coverage and network characteristics will allow it to (i) enter a significant number of markets and (ii) maximize coverage within each market area, in each case more quickly than other new entrants. In entering numerous markets, Teligent will benefit from its existing licenses in 74 market areas covering over 700 municipalities in the United States. By utilizing its own facilities, Teligent expects to be able to provide last mile services to customers within three to five days after obtaining building access. Teligent believes that speed to market will allow it to establish a sustainable customer base, develop brand recognition and gain market share. High Bandwidth Capacity and Flexibility. Teligent's high capacity local network will be designed to alleviate the last mile bottleneck and accommodate the increasing demand for bandwidth-intensive applications. This network, which includes 320-400 MHz of spectrum in 27 of the 35 most populous market areas in the United States, and at least 80 MHz of spectrum in 47 other major market areas, is expected to provide customers with two-way data transfer rates of up to 40 Mbps, which is significantly more than the 1.5 Mbps capacity currently available on conventional T-1 lines. A single Teligent base station is designed to provide 200 T-1 lines, the equivalent of 4,800 dedicated telephone lines. The Company believes that in the future, radio equipment vendors will make available radio/antenna units with even greater capacity. High Quality Service and Network Control. Teligent plans to engineer its network architecture to provide a minimum of 99.99% availability, a quality level comparable to fiber-based networks. Teligent also intends to provide high quality and value-added customer care service including integrated billing (consolidating multiple services into one statement), customized pricing and cross-marketing of services. The Company believes that its ability to provide last mile local loop service through its own networks will enhance its ability to ensure high quality service by minimizing its reliance on the ILEC for service deployment, maintenance and equipment upgrades. The Company believes that this ability will represent an additional advantage relative to fiber-based CLECs which frequently resell the last mile local loop from the ILEC. Flexible Information Systems. Teligent is designing, acquiring and integrating advanced flexible information systems to support billing, customer care, provisioning and maintenance operations. These information systems will be based on current technologies and platforms to meet current and anticipated customer demands, including service bundling, integrated billing and flexible pricing. Teligent expects that its information systems will give it the capability to adapt quickly and flexibly to changing market conditions and new customer requirements. The Company believes that legacy systems have historically constrained the industry's ability to provide customized offerings and new service features to customers on a timely basis. Experienced Management and Sponsors. Teligent's management team, led by Alex J. Mandl, formerly President and Chief Operating Officer of AT&T Corporation ('AT&T'), has significant senior management experience at leading telecommunications companies including MCI Communications Corporation, PCS PrimeCo, L.P., MFS Communications Company, Inc. and UUNET Technologies, Inc. as well as other competitive providers and start-up businesses. This includes extensive experience in the operational, technical, sales, marketing, financial and regulatory areas. Teligent believes that its senior management team has been and will be critical in attracting high quality managers, salespeople and engineers needed to execute its business plan. See 'Management.' Teligent's sponsors, Associated and Telcom Ventures, both have extensive experience in pioneering wireless telecommunications businesses. NTT, the world's largest telecommunications carrier, has extensive local telecommunications and wireless network experience and, through a subsidiary, has entered into a technical services agreement with Teligent to assist Teligent in designing and managing its network and deploying advanced services. BUSINESS STRATEGY Teligent's goal is to be a premier facilities-based provider of voice, data, video and Internet services to small and medium-sized businesses. The Company intends to leverage its ability to provide cost-effective, high bandwidth connectivity in order to offer an integrated package of local and long distance telephone service, high-speed data connectivity, Internet access and videoconferencing. The Company is implementing the following initiatives to achieve this objective: Target Small and Medium-Sized Businesses. Teligent plans to focus its primary marketing efforts on small and medium-sized businesses with 5 to 350 telephone lines. The Company expects to attract these customers through both a direct sales effort and indirect sales channels by offering (i) an integrated package of telecommunications services, (ii) competitive pricing, (iii) high quality and responsive customer service and (iv) high bandwidth services which may be difficult to obtain from other telecommunications providers. Teligent also intends to selectively pursue sales opportunities with larger businesses when its value proposition and its service offerings are competitively advantaged. End User Focus. Teligent intends to approach its target market by offering services directly to end users, as opposed to positioning itself as a 'carrier's carrier' offering wholesale network capacity. By deriving the majority of its revenues from providing local switched voice and data communications services directly to end user customers, Teligent believes that it will (i) establish a sustainable and broad base of its own customers, thereby minimizing the risk of generating substantial revenues from a limited number of sources, (ii) maximize revenues and profitability by accessing the higher priced retail market and (iii) achieve competitive differentiation based on high quality service that is responsive to the customer. Develop Brand Awareness. Teligent will seek to position itself as a high quality service provider by offering network reliability complemented by quality customer support. The Company is designing its marketing campaign to reflect these objectives and intends to build its reputation by (i) working closely with its customers to develop services tailored to their particular needs and (ii) targeting advertising and promotion efforts in its coverage areas, gradually expanding to mass media with market-wide and potentially nationwide coverage. The Company also believes that its speed to market advantage will assist its branding campaign, by enabling it to be one of the first widely available facilities-based competitors in a market. Achieve Market Share Via Competitive Pricing. As a new market entrant, Teligent's strategy will be to price its services competitively to gain market share early. For switched voice services and other services already provided by the ILEC, the Company expects to price at a discount. For certain data and bandwidth-intensive services that may not be provided by competitors or for which there may exist an underserved market demand, the Company may be able to price its services at a premium. The Company anticipates that some ILECs may reduce their prices as increased competition begins to erode their market share. The Company believes that it will be able to remain competitive if market prices decline because of its lower expected network cost. The Company also expects to price its bundled long distance service at a discount to market prices as a further incentive to attract potential customers and to broaden its revenue base. Rapid Deployment. Teligent intends to take advantage of its network flexibility and lower incremental capital requirements in order to quickly roll-out and penetrate its market areas. Teligent believes that this rapid deployment should allow it to become one of the first significant facilities-based competitors in many parts of its market areas. The Company believes that this rapid deployment should enable it to establish a level of market penetration which will further enhance the Company's relative cost advantage, attract additional customers and further enhance its brand reputation. Exploit Future Growth Opportunities. Teligent intends to continue building on the capabilities of its networks to expand its target market and service offerings. Such expansion may include targeting residential customers in multiple dwelling units as well as international opportunities, either through joint ventures or by direct entry. COMMERCIAL ROLL-OUT Teligent is preparing to offer an integrated package of services including local and long distance telephone services, high speed data connectivity, Internet access and videoconferencing. Teligent is licensed by the FCC to operate point-to-point and point-to-multipoint 24 GHz fixed wireless local systems in 74 market areas, covering over 700 municipalities in the United States, which licenses include 320-400 MHz of spectrum in 27 of the 35 most populous market areas in the United States, and at least 80 MHz of spectrum in 47 other major market areas. See 'Risk Factors--Relocation of Licenses to 24 GHz; Pending FCC Petitions' and 'Regulation.' The Company intends to deploy its 24 GHz fixed wireless point-to-multipoint broadband networks to provide last mile connectivity in these licensed market areas. These networks may also include point-to-point links and resold local loops where economically attractive or strategically desirable. The Company has deployed a point-to- multipoint system in Richardson, TX on a trial basis. The Company plans to begin Phase I Deployment efforts in Dallas, TX, Los Angeles, CA and Washington, DC during the fourth quarter of 1997. The objectives of Phase I Deployment will involve the deployment and testing of equipment from multiple network equipment providers, including Northern Telecom, Inc. ('Nortel'), Lucent Technologies, Inc. ('Lucent'), P-Com Inc. ('P-Com'), Netro Corporation ('Netro') and Broadband Networks Inc. ('BNI'). At the same time, the Company will continue to be engaged in acquiring building access rights, obtaining interconnection agreements, deploying switches, commencing marketing activities and making other operational arrangements for commencing commercial service in other markets. Phase I Deployment is currently targeted for completion late in the second quarter of 1998. Following Phase I Deployment, Teligent plans to begin rolling-out its integrated package of services. The Company intends to offer such commercial service in at least 10 market areas by the end of 1998 and 30 by the end of 1999, and subsequently in all of its 74 currently licensed market areas. The Company's ability to provide commercial service on a widespread basis and to generate positive operating cash flow will depend on its ability to, among other things, (i) develop its operational and support systems, (ii) acquire building access for its operations, (iii) obtain state authorizations to operate as a CLEC and an IXC in its market areas and any other required local authorizations, (iv) commercialize its 24 GHz point-to-multipoint technology on a market-by- market basis, (v) attract and retain an adequate customer base, (vi) raise additional capital, (vii) attract personnel and (viii) enter into and implement interconnection agreements with ILECs. Teligent intends to prioritize markets for roll-out based on a variety of factors including (i) market size, demographics and topography, (ii) expected market competition and pricing, (iii) proximity to other markets and (iv) local regulatory environment. Teligent has the ability to source key network components from a number of equipment vendors. Unlike many cellular and PCS networks, fixed local wireless networks can be constructed using equipment from different manufacturers utilizing different technologies because customers do not roam between base stations. Teligent believes that the flexibility provided by vendor diversity will assist in ensuring an adequate and prompt supply of equipment at attractive prices. The Company has entered into a letter of intent with Nortel, which outlines the principal terms and conditions for the purchase of certain telecommunications equipment, software and services. See 'Description of Certain Indebtedness--Vendor Financing.' CERTAIN TRANSACTIONS The Reorganization. The Company is currently a wholly owned subsidiary of Teligent, L.L.C. and was organized in September 1997 for the purpose of succeeding to the business of Teligent, L.L.C. Immediately prior, and as a condition, to the consummation of the Notes Offering and the Equity Offerings (the 'Offerings'), Teligent, L.L.C. will merge with and into the Company, with the Company surviving the merger. The Company has not conducted, and prior to the Reorganization will not conduct, any business other than in connection with the Offerings and the other transactions described herein. As a result of the Reorganization, all Teligent, L.L.C. member interests will be converted into and become shares of Common Stock of the Company, as follows: (i) the interest of Microwave Services, Inc., a wholly owned subsidiary of Associated ('MSI'), will be converted into Series B-1 Common Stock; (ii) the interest of Telcom-DTS Investors, L.L.C., an affiliate of Telcom Ventures (the 'Telcom Stockholder') which holds the member interest previously held by Digital Services Corporation ('DSC'), also an affiliate of Telcom Ventures, will be converted into Series B-2 Common Stock; (iii) the interest of NTTA&T, which has acquired a member interest in Teligent, L.L.C. pursuant to the NTT Purchase Agreement (see 'The Strategic Equity Investment' below), will be converted into Series B-3 Common Stock; and (iv) the interest of the FirstMark Sole Stockholder (see 'The FirstMark Acquisition' below) will be converted into Class A Common Stock. In each case, the number of shares of Common Stock to be received by each member of Teligent, L.L.C. pursuant to the Reorganization will be proportionate to such member's percentage interest in Teligent, L.L.C. immediately prior to the Reorganization. The Company will receive no additional consideration in connection with such conversion of member interests into shares of Common Stock pursuant to the Reorganization. See 'Certain Transactions--The Reorganization,' 'Description of Capital Stock' and 'Security Ownership of Certain Beneficial Owners and Management.' In connection with the Reorganization, the stockholders of the Company immediately after the consummation of the Reorganization, other than the FirstMark Sole Stockholder, will enter into a Stockholders Agreement which will provide for the continuation of certain rights and obligations of the parties thereto with respect to their ownership interest in, and the governance of, the Company, as were applicable under the Amended and Restated Limited Liability Company Agreement of Teligent, L.L.C. which was entered into at the First Closing pursuant to the NTT Purchase Agreement. See 'The Strategic Equity Investment' below and 'Certain Relationships and Related Transactions--Stockholders Agreement.' The Additional Sponsor Equity Contributions. Prior to the First Closing under the NTT Purchase Agreement (see 'The Strategic Equity Investment' immediately below), the original members of Teligent, L.L.C. made additional cash capital contributions to Teligent, L.L.C. in the aggregate amount of $60 million (the 'Additional Sponsor Cash Contributions'). In addition, prior to such First Closing, Associated agreed to contribute to Teligent Associated Communications of Los Angeles ('ACLA'), a wireless competitive access provider (the 'ACLA Contribution' and, together with the Additional Sponsor Cash Contributions, the 'Additional Sponsor Equity Contributions') and, in consideration of such agreement, received a 1% increase in its member interest in Teligent, L.L.C. Completion of the ACLA Contribution is subject only to receipt of certain routine state regulatory approvals and is not a condition to cosummation of the Offerings. Neither the original members of Teligent, L.L.C. nor Associated will, as a result of the Additional Sponsor Equity Contributions, receive any equity securities of the Company in addition to the number of shares of Common Stock received by them pursuant to the Reorganization, which, as noted immediately above under 'The Reorganization,' will reflect the percentage interest of each such member in Teligent, L.L.C. immediately prior to the Reorganization. The Strategic Equity Investment. The Company and NTT entered into a Securities Purchase Agreement on September 30, 1997 (the 'NTT Purchase Agreement'), providing for NTT to make the Strategic Equity Investment. The NTT Purchase Agreement provides for the Strategic Equity Investment to close in two stages. At the first closing which occured on November 13, 1997 (the 'First Closing'), NTT, through NTTA&T, purchased for $40 million a 5% member interest in Teligent, L.L.C. (calculated as of the date of the NTT Purchase Agreement after giving pro forma effect to the consummation of the FirstMark Acquisition (as defined below) and the Additional Sponsor Equity Contributions, but before giving effect to the consummation of the Equity Offerings and the conversion of existing equity incentive awards into stock options in connection with the Reorganization). At the second closing (the 'Second Closing'), NTT, through NTTA&T, will purchase for $60 million a 7.5% equity interest in the Company (calculated as of the date of the NTT Purchase Agreement after giving pro forma effect to the consummation of the FirstMark Acquisition and the Additional Sponsor Equity Contributions, but before giving effect to the consummation of the Equity Offerings and the conversion of existing equity incentive awards into stock options in connection with the Reorganization). Consummation of the Strategic Equity Investment is subject to the satisfaction or waiver of certain conditions, including, in the case of the Second Closing, the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the 'HSR Act'), which termination has occurred. The Second Closing is expected to occur immediately prior to the consummation of the Offerings. Consummation of the Offerings is conditioned on the completion of the Second Closing. See 'Certain Transactions--The Strategic Equity Investment.' Following the consummation of the Equity Offerings, a subsidiary of Associated, an affiliate of Telcom Ventures and NTTA&T will own 41.4%, 33.2%, and 11.2%, respectively, of the Company's outstanding Common Stock. The FirstMark Acquisition. In October 1997, pursuant to a Stock Contribution Agreement dated as of March 10, 1997 (the 'FirstMark Agreement') among Teligent, L.L.C., FirstMark Communications, Inc. ('FirstMark') and the sole stockholder of FirstMark (the 'FirstMark Sole Stockholder'), the Company acquired all of the outstanding stock of FirstMark for an aggregate purchase price of approximately $10.5 million in cash and a 5% member interest in Teligent, L.L.C. (before giving effect to the Strategic Equity Investment) (the 'FirstMark Acquisition'). FirstMark holds licenses for fixed wireless channels in the 24 GHz band (which were relocated from the 18 GHz band) in the Los Angeles and San Francisco, CA and New York, NY markets. These licenses have been granted by the FCC and, except for the New York license recently granted by the FCC for 80 MHz of additional spectrum covering a population of approximately 9.4 million (approximately 7% of the total population covered by the Company's licenses), such grants are no longer subject to any petitions, challenges or administrative or judicial review. The Company's licenses are the subject of other proceedings pending before the FCC. See 'Risk Factors--Relocation of Licenses to 24 GHz; Pending FCC Petitions' and 'Regulation--Relocation of Licenses to 24 GHz.' Vendor Financing. The Company has entered into a commitment letter with Nortel setting forth the anticipated terms and conditions under which Nortel will provide loans in an aggregate amount of up to $780.0 million which will be used to finance the purchase of certain telecommunications equipment, software and services pursuant to the definitive agreement contemplated by the Equipment Purchase Letter of Intent (as defined) and to provide working capital (the 'Vendor Financing'). The obligation of Nortel to provide the Vendor Financing is subject to numerous conditions, including the negotiation, execution and delivery of definitive documentation relating to the Vendor Financing. There can be no assurance that the parties will be able to reach agreement on the terms of such definitive documentation. See 'Description of Certain Indebtedness--Vendor Financing.' Notes Offering. Concurrent with the Equity Offerings, the Company is offering $300.0 million principal amount of its 11 1/2% Senior Notes due 2007 in the Notes Offering by a separate prospectus. The net proceeds to the Company in the Notes Offering are estimated to be $288.0 million (after deducting underwriting discounts and estimated offering expenses). Upon the closing of the Notes Offering, the Company will use approximately $94.0 million of the net proceeds of the Notes Offering to purchase certain securities issued or guaranteed by the United States (the 'Pledged Securities') (in such amount as will be sufficient to provide for payment in full of the first six interest payments on the Notes) that will be pledged as security for repayment of the Notes. The precise amount of the Pledged Securities will depend upon interest rates at the closing of the Notes Offering. FINANCING PLAN The development of the Company's business and deployment of its services and systems will require significant capital to fund capital expenditures, working capital, debt service and operating losses. The Company's principal capital expenditure requirements involve the purchase and installation of customer premise equipment, base stations, network switches and switch electronics and network operations center expenditures. The Company intends to offer its integrated package of services in at least 10 market areas by the end of 1998 and 30 by the end of 1999, and subsequently in all of its 74 currently licensed market areas. See '--Commercial Roll-Out.' The Company currently forecasts that its capital requirements (including capital expenditures, working capital, debt service and operating losses) from March 5, 1996 (inception) through December 2000 will be approximately $1 billion. Based on the Company's current business plan through December 2000, cash required for capital expenditures is estimated to be approximately $530 million, cash required to fund operating losses is estimated to be approximately $350 million and cash interest and financing fees are estimated to be approximately $140 million. See 'Use of Proceeds.' Actual capital requirements may vary based upon the timing and success of the Company's roll-out. If demand for the Company's services is lower than expected, the Company expects to be able to reduce demand-driven capital expenditures such as customer premise equipment and switch electronics. Based on the Company's current business plan, the Company estimates that the net proceeds of the Offerings, the Additional Sponsor Cash Contributions, the Strategic Equity Investment and anticipated Vendor Financing will be sufficient to satisfy its capital requirements through December 2000. The Company expects that its capital requirements after December 2000 will require it to obtain additional financing, which may include commercial bank borrowings, additional vendor financing or the sale or issuance of equity and debt securities either through one or more offerings or to one or more strategic investors. There can be no assurance that the Company will be successful in raising sufficient additional capital at all or on terms acceptable to the Company. See 'Risk Factors--Significant Capital Requirements.' Because the Company's cost of rolling-out its networks and operating its business, as well as the Company's revenues, will depend on a variety of factors (including the ability of the Company to meet its roll-out schedules, the ability of the Company to negotiate favorable prices for purchases of equipment, the number of customers and the services for which they subscribe, the nature and penetration of new services that may be offered by the Company, regulatory changes and changes in technology), actual costs and revenues will vary from expected amounts, possibly to a material degree, and such variations are likely to affect the Company's future capital requirements. Accordingly, there can be no assurance that the Company's actual capital requirements will not exceed the anticipated amounts described above. Further, the exact amount of the Company's future capital requirements will depend upon many factors, including the cost of the development of its networks in each of its markets, the extent of competition and pricing of telecommunications services in its markets and the acceptance of the Company's services. COMPANY HISTORY AND SPONSORSHIP The Company was founded in March 1996 as a joint venture by MSI, a wholly owned subsidiary of Associated, and DSC, an affiliate of Telcom Ventures. MSI and DSC began the process of applying for fixed wireless licenses in 1993 prior to the FCC's implementation of spectrum auctions. These licenses have been granted by the FCC and, except for the New York and Boston licenses described below, such grants are no longer subject to any petitions, challenges or administrative or judicial review. The Company's licenses are the subject of other proceedings pending before the FCC. See 'Risk Factors--Relocation to 24 GHz; Pending FCC Petitions' and 'Regulation--Federal Regulation--Teledesic.' On October 29, 1997, the Company was granted 24 GHz licenses in Boston, MA and New York, NY pursuant to certain applications previously filed by MSI with the FCC. These Boston and New York licenses were for 320 MHz and 240 MHz, respectively, and cover a population of approximately 12.6 million (approximately 10% of the total population covered by the Company's 24 GHz licenses). The grant of such licenses may, for limited time periods, be subject to petitions for reconsideration. The Company has other licenses for 80 MHz of spectrum in each of New York and Boston, the grants of which are not subject to petitions for reconsideration. In September 1996, Alex J. Mandl, formerly President and Chief Operating Officer of AT&T joined the Company as Chairman of the Board and Chief Executive Officer. MSI and DSC transferred their fixed wireless licenses to Teligent in November 1997. The licenses contributed by MSI, including the New York and Boston licenses described immediately above, cover a population of approximately 91.9 million, which is approximately 71% of the population covered by all of the Company's 24 GHz licenses. The licenses contributed by DSC cover a population of approximately 83.3 million, which is approximately 64% of the population covered by all of the Company's 24 GHz licenses. Most of the licenses contributed by MSI and DSC are for the same markets, but there are some differences in the markets for which each company contributed 24 GHz licenses. Accordingly, the aggregate population covered by the licenses contributed by the two companies is approximately 95.3 million, or approximately 73.3% of the total population covered by all of the Company's 24 GHz licenses. Associated is a publicly traded company principally engaged in the ownership and operation of communications assets and businesses, which have historically included cellular, cable television and radio broadcasting. In December 1994, Associated was spun off from Associated Communications Corporation and Associated Communications Corporation was acquired immediately thereafter by SBC Communications, Inc. for approximately $700 million. The management of Associated Communications Corporation remained as the management of Associated, and Associated retained a variety of communications assets and businesses, including the fixed wireless licenses subsequently contributed to the Company. Associated's other businesses include TruePosition, Inc., a provider of wireless location services. Telcom Ventures is a privately held company owned by the family of Dr. Rajendra Singh, an investor in wireless technologies and network design, and investment partnerships formed by The Carlyle Group, a Washington, DC private investment firm. Telcom Ventures is engaged in investing in international wireless opportunities and developing, building and deploying emerging wireless technologies. The principal place of business of Teligent is 8065 Leesburg Pike, Vienna, VA 22182 and its telephone number is (703) 762-5100. PRO FORMA CAPITALIZATION The following table sets forth (i) the capitalization of the Company as of September 30, 1997 on an actual basis, (ii) pro forma adjustments resulting from: (a) the FirstMark Acquisition, (b) the assignment of certain licenses held by certain of the Company's members or affiliates to the Company, the grant of which may be subject to petitions for reconsideration for limited periods (see 'Certain Transactions--The FirstMark Acquisition' and 'Company History and Sponsorship'), (c) the grant by the FCC of certain other applications to provide 24 GHz wireless services in Boston, MA and New York, NY ((a), (b) and (c) collectively, the 'License Transactions'), and (d) the Additional Sponsor Equity Contributions, the Strategic Equity Investment and the Reorganization (collectively, the 'Transactions'), (iii) pro forma adjustments resulting from the Offerings and the application of the net proceeds therefrom as described under 'Use of Proceeds' and (iv) the capitalization of the Company as of September 30, 1997 on a pro forma basis as adjusted to give effect to the Transactions and the Offerings and the application of the net proceeds therefrom as described under 'Use of Proceeds,' in each case as if the same occurred on September 30, 1997. This table should be read in conjunction with 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and the Financial Statements contained elsewhere in this Prospectus. <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 ------------------------------------------------------------------ ADJUSTMENTS FOR ADJUSTMENTS FOR THE THE AS ACTUAL TRANSACTIONS(1) OFFERINGS(2) ADJUSTED(3) --------- ------------------- --------------- ----------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> Cash and cash equivalents.......................... $ 5,808 $ 119,619 $ 301,250 $ 426,677 --------- ------------------- --------------- ----------- --------- ------------------- --------------- ----------- Restricted cash(4)................................. $ -- $ -- $ 94,000 $ 94,000 --------- ------------------- --------------- ----------- --------- ------------------- --------------- ----------- Debt............................................... Revolving line of credit(5)...................... $ 38,500 $ (38,500) $ -- $ -- Senior Notes..................................... -- -- 300,000 300,000 --------- ------------------- --------------- ----------- Total debt......................................... 38,500 (38,500) 300,000 300,000 Stockholders' equity Common Stock..................................... -- 463 55 518 Additional paid-in capital(6).................... 24,058 266,094(7) 107,195 397,347 Deficit accumulated during the development stage............................. (92,458) (11,509)(7) -- (103,967) --------- ------------------- --------------- ----------- Subtotal......................................... (68,400) 255,048 107,250 293,898 Notes receivable from Executive(6)............... (11,750) -- -- (11,750) --------- ------------------- --------------- ----------- Total stockholders' equity......................... (80,150) 255,048 107,250 282,148 --------- ------------------- --------------- ----------- Total capitalization............................... $ (41,650) $ 216,548 $ 407,250 $ 582,148 --------- ------------------- --------------- ----------- --------- ------------------- --------------- ----------- </TABLE> - ------------------------ (1) Reflects pro forma adjustments to give effect to the Transactions, net of transaction fees (including pro forma adjustments for Company Appreciation Rights ('CARs') and Long-Term Incentive Compensation Plan Appreciation Units ('Appreciation Units')), and the application of a portion of the Additional Sponsor Cash Contributions to repay indebtedness outstanding under the Revolving Credit Agreement, as described under 'Use of Proceeds.' (2) Reflects pro forma adjustments to give effect to the Offerings, net of transaction fees, and the application of a portion of the net proceeds therefrom to purchase the Pledged Securities, as described under 'Use of Proceeds.' (3) As adjusted on a pro forma basis to give effect to the Transactions and the Offerings, net of transaction fees, and the application of a portion of the Additional Sponsor Cash Contributions to repay indebtedness outstanding under the Revolving Credit Agreement and a portion of the net proceeds of the Offerings to purchase the Pledged Securities, as described under 'Use of Proceeds.' (4) The adjustment to restricted cash to give effect to the Offerings consists of the Pledged Securities in an amount sufficient to provide for payment in full of the interest due on the Notes through December 1, 2000. (5) Borrowings under the Revolving Credit Agreement amounted to $38.5 million at September 30, 1997. In November 1997, the Company repaid the outstanding balance under the Revolving Credit Agreement, with a portion of the Additional Sponsor Cash Contributions, as described under 'Use of Proceeds.' (6) Additional paid-in capital on an actual basis as of September 30, 1997 consists of $9.1 million in member cash contributions to Teligent, L.L.C. and $15.0 million reflecting the loans from MSI and DSC to Mr. Mandl, classified as additional paid-in capital for presentation purposes. The adjustment to additional paid-in capital and Common Stock to give effect to the Transactions and the Equity Offerings reflects the following additional amounts: $31.5 million reflecting the FirstMark Acquisition, $61.6 million reflecting the Additional Sponsor Equity Contributions, $8.2 million reflecting the assignment of certain licenses held by certain of the Company's members or affiliates to the Company, $66.2 million relating to the conversion of CARs and Appreciation Units into stock options, $100.0 million reflecting the Strategic Equity Investment and $118.3 million of gross proceeds from the Equity Offerings, less estimated aggregate transaction fees with respect to the Equity Offerings and Strategic Equity Investment of $12.0 million and $518,000 allocated to Common Stock. In addition to receiving approximately $10.5 million in cash, the FirstMark Sole Stockholder received a 5% member interest (calculated as of the date of the definitive agreements) in Teligent, L.L.C. upon the closing of the FirstMark Acquisition. As a result of the Reorganization, the FirstMark Sole Stockholder will receive 1,831,410 shares of Teligent, Inc. Class A Common Stock. The value of such shares is approximately $39.4 million based on the initial public offering price of $21.50 per share. The FirstMark acquisition has been accounted for using the purchase method in accordance with Accounting Principles Board Opinion No. 16, 'Accounting for Business Combinations.' See 'Security Ownership of Certain Beneficial Owners and Management.' (7) Assuming the conversion of CARs and Appreciation Units to stock options on September 30, 1997, as described, and based on the assumptions set forth, under "Management" and "Conversion of CARs and Appreciation Units into Stock Options," the vested portion of the adjusted compensation expense of $66.2 million resulting from the Transactions is a component of the $266.1 million adjustment to additional paid-in capital. As a result, the current and long-term Accrued CARs and Appreciation Units liabilities have been adjusted to $-0- with the remaining $11.5 million reflected as an adjustment to deficit accumulated during the development stage. Therefore, the difference between the intrinsic value of the stock options of $171.3 million and the compensation expense through September 30, 1997 of $66.2 million will be expensed over the remaining vesting period of the options through 2002. SUMMARY FINANCIAL DATA The following summary financial data as of and for the period from March 5, 1996 (date of inception) to December 31, 1996 are derived from and are qualified by reference to the Financial Statements contained elsewhere in this Prospectus. The financial statements for the period from March 5, 1996 (date of inception) to December 31, 1996 have been audited by Ernst & Young LLP, independent certified public accountants. The following summary financial data as of and for the nine months ended September 30, 1997, as of and for the period March 5, 1996 (date of inception) to September 30, 1996, and as of and for the period March 5, 1996 (date of inception) to September 30, 1997, have been derived from the unaudited financial statements of the Company which, in the opinion of management, have been prepared on the same basis as the audited financial statements and include all adjustments, which consist only of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for such periods. Operating results for the nine months ended September 30, 1997, for the period March 5, 1996 (date of inception) to September 30, 1996, and for the period March 5, 1996 (date of inception) to September 30, 1997 are not necessarily indicative of the results that may be expected for the full year, although the Company will continue to be a development stage company and anticipates a net loss for the year. Historical per share data for earnings and dividends have not been presented as the Company was not publicly-held during the periods presented below. The following financial data should be read in conjunction with 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and the Financial Statements contained elsewhere in this Prospectus. <TABLE> <CAPTION> MARCH 5, 1996 MARCH 5, 1996 MARCH 5, 1996 (DATE OF INCEPTION) TO NINE MONTHS ENDED (DATE OF INCEPTION) TO (DATE OF INCEPTION) TO DECEMBER 31, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 ---------------------- ------------------ ---------------------- ---------------------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues................................ $ 1,386 $ 2,914 $ 816 $ 4,300 Costs and expenses: Cost of wireless communications services............................ 1,625 2,875 374 4,500 Sales, general and administrative..... 9,582 25,551 5,230 35,133 CARs and Appreciation Units(1)........ 2,778 51,935 -- 54,713 Depreciation and amortization......... 164 306 61 470 -------- -------- -------- -------- Total costs and expenses............ 14,149 80,667 5,665 94,816 -------- -------- -------- -------- Operating loss.......................... (12,763) (77,753) (4,849) (90,516) Interest expense and loan fees, net..... (870) (1,072) -- (1,942) -------- -------- -------- -------- Net loss(1)............................. $(13,633) $(78,825) $ (4,849) $(92,458) -------- -------- -------- -------- -------- -------- -------- -------- <CAPTION> DECEMBER 31, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ---------------------- ------------------ ---------------------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> BALANCE SHEET DATA: Cash.................................... $ 1,303 $ 5,808 $ 309 Property and equipment, net............. 3,545 6,956 2,340 Total assets............................ 5,145 24,318 3,075 Working capital (deficit)............... (6,930) (51,309) (2,651) Revolving line of credit -- total indebtedness.......................... 2,000 38,500 -- Accrued CARs and Appreciation Units Liability............................. 2,778 54,713 -- Members' deficit: Capital contributions................. 24,058 24,058 19,288 Deficit accumulated during the development stage................... (13,633) (92,458) (4,849) -------- -------- -------- Subtotal.............................. 10,425 (68,400) 14,439 Notes receivable from Executive....... (14,000) (11,750) (14,750) -------- -------- -------- Total members' deficit.............. $ (3,575) $(80,150) $ (311) -------- -------- -------- -------- -------- -------- <CAPTION> MARCH 5, 1996 MARCH 5, 1996 MARCH 5, 1996 (DATE OF INCEPTION) TO NINE MONTHS ENDED (DATE OF INCEPTION) TO (DATE OF INCEPTION) TO DECEMBER 31, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 ---------------------- ------------------ ---------------------- ---------------------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> OTHER DATA: Modified EBITDA(2)...................... $ (8,821) $(23,262) $ (4,788) $(32,083) Cash used in operating activities....... (6,047) (22,508) (1,578) (28,554) Cash used in investing activities....... (3,709) (9,487) (2,401) (13,196) Cash provided by financing activities... 11,058 36,500 4,288 47,558 Ratio of earnings to fixed charges(3)... -- -- -- -- </TABLE> - ------------------ (1) The net loss for the period March 5, 1996 (date of inception) to December 31, 1996, the nine months ended September 30, 1997, and for the period March 5, 1996 (date of inception) to September 30, 1997 includes non-cash CARs and Appreciation Units expense of $2,778,000, $51,935,000, and $54,713,000, respectively. Such expense is required under generally accepted accounting principles due to the variable nature of the underlying employee compensation plan and may not reflect the actual amount of compensation due at vesting due to changes in the fair market value of Teligent, actual employee vesting, and dilution. If compensation expense was not recognized relating to CARs and Appreciation Units, the net loss for the period March 5, 1996 (date of inception) to December 31, 1996, the nine months ended September 30, 1997, and the period March 5, 1996 (date of inception) to September 30, 1997 would have been $10,855,000, $26,890,000 and $37,745,000, respectively. (2) Modified EBITDA consists of operating loss expense and amortization of notes receivable from Executive before depreciation and amortization, interest expense and loan fees (net) and CARs and Appreciation Units expense. (Footnotes continued on next page) (Footnotes continued from previous page) EBITDA consisting of operating loss before depreciation and amortization, interest expense, and loan fees, net, is a measure commonly used in the telecommunications industry and is presented to assist in understanding the Company's operating results. Additionally, certain covenants contained in the Indenture will be calculated based on EBITDA. Although EBITDA should not be construed as a substitute for operating income determined in accordance with generally accepted accounting principles, it is included herein to provide additional information with respect to the ability of the Company to meet future debt service, capital expenditures and working capital requirements. See the Financial Statements contained elsewhere in this Prospectus. (3) The ratio of earnings to fixed charges is computed by dividing pretax income from operations before fixed charges (other than capitalized interest) by fixed charges. Fixed charges consist of interest charges and amortization of debt expense and discount or premium related to indebtedness, whether expensed or capitalized, and that portion of rental expense the Company believes to be representative of interest. For the period March 5, 1996 (date of inception) to December 31, 1996, the nine months ended September 30, 1997, for the period March 5, 1996 (date of inception) to September 30, 1996, and the period March 5, 1996 (date of inception) to September 30, 1997, earnings were insufficient to cover fixed charges by $13.5 million, $77.4 million, $4.9 million, and $90.9 million, respectively. After giving pro forma effect to the Transactions and the Offerings as if they occurred at the beginning of the period presented, the deficiency of earnings to fixed charges would have been $16.5 million for the period March 5, 1996 (date of inception) to December 31, 1996, and $75.6 million for the nine months ended September 30, 1997. THE EQUITY OFFERINGS <TABLE> <S> <C> Class A Common Stock offered by the Company............................ 5,500,000 shares U.S. Offering........................ 4,400,000 shares International Offering............... 1,100,000 shares Common Stock to be outstanding after the Equity Offerings(1)............ 7,331,410 shares of Class A Common Stock 44,426,299 shares of Class B Common Stock 51,757,709 shares of Common Stock Voting rights........................ The rights of holders of shares of Common Stock are substantially identical, except that until the number of shares held by holders of the respective series of Class B Common Stock fall below certain thresholds, such holders will have the right to elect directors to the Company's Board of Directors as follows: a majority of the directors will be elected by the holders of the Series B-1 Common Stock, one director will be elected by the holders of the Series B-2 Common Stock and one director will be elected by the holders of the Series B-3 Common Stock. See 'Description of Capital Stock.' All of the Series B-1 Common Stock will be owned by a wholly-owned subsidiary of Associated. See 'Risk Factors--Control by Principal Stockholder.' Use of proceeds...................... The net proceeds to Teligent from the Equity Offerings are estimated to be approximately $109.0 million, ($125.6 million if the Underwriters' over- allotment options are exercised in full), and the net proceeds to Teligent from the Notes Offering are estimated to be approximately $288.0 million, in each case after deducting underwriting discounts and estimated offering expenses. Upon the closing of the Notes Offering, the Company will use approximately $94.0 million of the net proceeds of the Notes Offering to purchase Pledged Securities (in such amount as will be sufficient to provide for payment in full of the first six interest payments due on the Notes) that will be pledged as security for repayment of the Notes. The precise amount of the Pledged Securities to be acquired will depend upon interest rates prevailing at the closing of the Notes Offering. In November 1997, the Company used $43.0 million of the Additional Sponsor Cash Contributions to repay all outstanding amounts under the Revolving Credit Agreement. Upon such repayment, the Revolving Credit Agreement was terminated. The Company intends to use the balance of the net proceeds of the Offerings and the Additional Sponsor Cash Contributions, together with the Strategic Equity Investment, for the development of the Company's business and the deployment of its services and systems in multiple markets and the general development and growth of its telecommunications operations, including (i) the development of operating and management systems, (ii) capital expenditures and (iii) other operating expenses including the hiring of sales, marketing, engineering and customer service personnel. See 'Use of Proceeds.' Based on the Company's current business plan for the period of November 1997 through December 2000, cash required for capital expenditures is estimated to be approximately $530 million, cash required to fund operating losses is estimated to be approximately $350 million and cash interest and financing fees are estimated to be approximately $140 million. See 'Use of Proceeds.' Nasdaq National Market symbol........ 'TGNT' </TABLE> - ------------------------ (1) Does not include approximately 12,481,000 shares of Class A Common Stock subject to stock options which will be held by directors, officers and other employees of the Company as a result of the conversion of existing equity incentive awards into stock options in connection with the Reorganization assuming an initial public offering price and a Conversion Trading Price (as defined under 'Management--Conversion of CARs and Appreciation Units into Stock Options') of $21.50 per share. Based on such assumptions, such stock options will have a weighted average exercise price of $9.64 per share. For a description of the weighted average exercise prices of such stock options, see 'Management--Conversion of CARs and Appreciation Units into Stock Options' and '--1997 Stock Incentive Plan.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047073_motor_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047073_motor_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1934abe316191aad8d2da28c541b1479af788644
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047073_motor_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. See "Risk Factors" for a discussion of certain factors to be considered by prospective investors. Unless otherwise indicated in this Prospectus, (i) all information assumes that the Underwriters' over-allotment option is not exercised, (ii) all references to the "Company" in this Prospectus refer to Motor Cargo Industries, Inc., a Utah corporation, and its subsidiaries and (iii) all financial information includes the historical operations of Ute Trucking and Leasing, LLC, a Utah limited liability company formerly owned by certain shareholders of the Company. See "History of the Company." THE COMPANY Motor Cargo Industries, Inc. (the "Company") is a less-than-truckload ("LTL") carrier which provides transportation and logistics services to shippers primarily within the western region of the United States. The Company transports general commodities, including consumer goods, packaged foodstuffs, electronics, computer equipment, apparel, hardware, industrial goods and auto parts for major shippers such as Starbucks Coffee Company, 3M Corporation, Steelcase, Pepperidge Farm, Sony Music, Eli Lilly, General Motors and Square D Corp. No one customer accounts for over 5% of the Company's total revenues. The Company offers a broad range of services, including expedited scheduling and full temperature-controlled service. The Company's management believes that by focusing on the high service segment of the LTL industry the Company can continue its profitable growth within the western region of the United States, which is one of the fastest growing regions of the United States. The Company's management believes that the Company's rigorous focus on cost controls, its largely nonunion work force (over 95% of its employees are nonunion) and its focus on the western region give the Company a competitive advantage with respect to the larger, national LTL carriers that compete with the Company within the western region. The Company has 22 service centers strategically located in each major population center in the western region. The Company uses a single service center, rather than multiple satellite terminals, in each of the major cities it serves in order to reduce intermediate handling. The Company also utilizes 20 independent agents in smaller markets, enabling the Company to offer shippers extensive coverage throughout the region. Approximately 58% of the Company's shipments are currently delivered overnight and over 90% of all shipments are delivered within two days. Instead of utilizing a "hub and spoke" system, which is typically used by large, national LTL carriers, the Company emphasizes "direct loading" of freight between service centers with no intermediate handling on most shipments. Hub and spoke systems generally require shipments to be loaded and unloaded several times at a number of service centers and breakbulk facilities prior to delivery. Direct loading allows shipments to be transported directly from the originating service center to the destination service center without intermediate handling. Direct loading reduces the Company's costs because it requires less loading and unloading of freight and requires fewer terminals and breakbulk operations. The Company's growth strategy includes the following key elements: - Increase Market Share Within Core Service Region. The Company believes that its core western regional market has the potential for significant profitable revenue growth. In addition, the Company believes it is in a position to increase its market share within its core service region. In the second half of 1995 the Company initiated a significant expansion of its terminal network in order to increase coverage within its core service region. The Company is now focused on improving route, lane and service center densities within its core service region through aggressive sales and marketing efforts and expanded service offerings. The Company expanded its sales force significantly during 1996 and intends to further expand its sales force in 1998 and 1999. The Company anticipates that it will continue to increase the capacity of its terminal network by adding capacity to existing service centers and establishing new service centers incrementally as needed, with particular emphasis in the Pacific northwest. - Expand into Additional Major Markets. The Company's strategic growth plan calls for establishing market and operational presence in several major business economic areas ("BEAs") within the midwest and southeast regions of the United States during the next three years. Unlike more traditional inter-regional expansion models, the Company intends only to solicit tonnage from these markets moving west into its core service region. The Company intends to utilize third-party truckload carriers to transport freight from these markets to its core service region. The Company anticipates that this strategy of selling into the region will improve lane, route and service center densities in its core service region without requiring the Company to incur the costs associated with building an inter-regional terminal network. The Company intends to enter into interline partnerships to provide immediate revenue and offset start-up costs associated with certain BEA expansions. The Company commenced operations at its first BEA expansion facility in Dallas in October 1997. Additional BEAs under consideration for 1998 and 1999 include major distribution centers such as Atlanta, Chicago, Cleveland, Houston, Indianapolis, Memphis, Minneapolis and St. Louis. - Expand the Market Presence of MCDS. The Company believes that many companies are increasingly focused on outsourcing certain non-core functions and are engaging third-party logistics companies to provide distribution management services. Through its subsidiary, MC Distribution Services, Inc. ("MCDS"), the Company provides customized logistics, warehousing and distribution management services. MCDS targets customers with distribution requirements that are time-sensitive and require a significant amount of transportation. MCDS currently provides "just-in-time" delivery services for two major specialty retailers. Although MCDS has the ability to provide services for large projects, MCDS targets smaller and mid-sized projects which do not meet the minimum revenue requirements of many of its larger competitors. By focusing on capabilities which are complementary to the Company's services, and leveraging the Company's existing customer base, the Company believes that MCDS provides a significant opportunity for future revenue and earnings growth. - Emphasize Low-cost Operations. By focusing on the western region, the Company believes it will be able to improve lane, route and service center densities, allowing the Company to better leverage the fixed costs of its terminal network. In addition, the Company believes that its largely nonunion work force gives it a competitive advantage over larger unionized carriers that operate within the Company's core service region. The Company also believes it is among the leading carriers in the country in adopting technology-based solutions for analyzing the profitability of shipments and reducing costs. As a result, the Company recently eliminated certain business and tonnage that did not meet the Company's margin requirements. Management believes that this account rationalization process was responsible for improved profit margins during the first nine months of 1997. The Company intends to continually analyze the profitability of each customer, lane and service center. The Company was incorporated in Utah in 1996. The Company's wholly-owned operating subsidiary, Motor Cargo, a Utah corporation ("Motor Cargo"), is the surviving corporation resulting from the merger of certain trucking companies in 1973. The Company's principal executive offices are located at 845 West Center Street, North Salt Lake, Utah 84054, and its telephone number is (801) 292-1111. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............................ 1,150,000 Shares Common Stock offered by the Selling Shareholders....................... 1,080,000 Shares Common Stock to be outstanding after this Offering...................... 6,990,000 Shares(1) Use of proceeds...................... To reduce indebtedness and purchase revenue equipment and for working capital. See "Use of Proceeds." Proposed Nasdaq National Market Symbol............................. "CRGO" </TABLE> - --------------- (1) Includes 20,000 shares to be issued upon completion of the Offering pursuant to a restricted stock agreement between the Company and Louis V. Holdener. Excludes 500,000 shares of Common Stock reserved for issuance upon exercise of options which may be granted under the Company's 1997 Stock Option Plan. It is anticipated that options for up to 229,500 shares will be granted under the Company's 1997 Stock Option Plan simultaneously with the completion of this Offering with an exercise price equal to the initial public offering price for the Common Stock. See "Management -- 1997 Stock Option Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047098_mpw_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047098_mpw_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..eefb75533f1f6a95396a6ddff951bc579f82bb6a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047098_mpw_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. Except where the context otherwise requires, references to the terms "MPW" and the "Company" refer to MPW Industrial Services Group, Inc. and its subsidiaries. References to fiscal years are references to the twelve-month period ending on June 30 of the stated year. THE COMPANY MPW Industrial Services Group, Inc. is a leading provider of industrial cleaning and facilities support services in the Midwest and Southeast focused on technology-based industrial services, including industrial air filtration services, industrial container cleaning, industrial process water purification and other specialized services. In fiscal 1997, the Company provided services to more than 500 customers. The Company serves customers in a broad range of industries including automotive, electric power, chemical, pulp and paper, steel, transportation, aerospace and other heavy manufacturing. The Company's services typically are performed within large industrial facilities and require the use of Company-owned equipment and specially trained personnel. See "Business -- Safety, Training and Quality Assurance." The Company believes that its services are generally recurring in nature and are essential to manufacturing efficiency and safety at its customers' facilities. The Company has over 25 years of experience and currently has more than 1,300 employees, a network of 31 offices and over 1,000 pieces of operating equipment. See "Business -- Equipment." The Company was founded in 1972 by Monte R. Black, Chairman and Chief Executive Officer, as a local power washing business. Upon completion of the Offering, Mr. Black will own beneficially, directly or indirectly, 61.7% of the outstanding Common Stock. Since its founding, the Company has grown primarily by broadening its customer base, expanding the scope of services it offers and increasing the number of locations from which it provides services. These remain the principal elements of the Company's strategy for generating internal revenue growth in the future. In recent years, the Company has expanded from its historical strength in industrial cleaning and facility support services into other industrial services including air filtration, container cleaning and process water purification. MPW believes that diversification into other in-plant and related services provides opportunities to expand the Company's presence within the facilities in which it already operates. MPW believes it can also generate internal growth by gaining access to other facilities owned and operated by its existing customers. An independent market research firm, Farkas Berkowitz & Company, has provided materials to the Company that indicate the industrial cleaning and maintenance market is estimated to be in excess of $12 billion in annual revenues, and is estimated to exceed 9,500 firms. The Company believes the industry has begun a period of consolidation as firms combine to improve personnel and equipment utilization, increase market share, reduce cost of capital and acquire additional service lines useful to their customers. The industrial services industry has benefitted from a trend toward outsourcing among industrial concerns as a means of reducing costs and enhancing operational efficiency. With outsourcing, companies contract with reliable suppliers for the performance of certain non-core functions, allowing them to focus on core business activities. Outsourcing allows companies to convert fixed costs to variable costs, streamline their organizations and shift the cost of specialized equipment to service providers like MPW. In recent years, the Company added several key members to its management team and developed a strategy to more aggressively pursue acquisitions and internal growth initiatives, as well as to implement systems, controls and other infrastructure necessary to support future growth. In April 1996, the Company expanded into the complementary business of industrial air filtration services through the acquisition of Weston Engineering ("Weston"), with revenues of $8.6 million for the twelve-month period ended June 30, 1996. In October 1997, the Company acquired ESI International ("ESI"), another industrial air filtration services business, with revenues of $6.7 million for the twelve-month period ended June 30, 1997. The Company's principal executive offices are located at 9711 Lancaster Road, S.E., Hebron, Ohio 43025 and its telephone number is (614) 927-8790. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 3,750,000 shares Common Stock to be outstanding after the Offering................................... 10,046,000 shares (1) Use of Proceeds.............................. To repay the outstanding principal amount of the promissory notes (the "AAA Notes") issued in connection with a dividend of undistributed S Corporation earnings (the "Distribution"), to repay indebtedness and for general corporate purposes. See "Use of Proceeds" and "Prior S Corporation Status." Proposed Nasdaq National Market symbol....... MPWG </TABLE> - --------------- (1) Includes 96,000 shares issued in connection with the acquisition of ESI in October 1997. Excludes 1,204,000 shares of Common Stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $3.94 per share. See "Executive Compensation -- Stock Option Plans." Also excludes 67,800 shares of Common Stock to be issued in connection with the Company's repurchase of certain minority stock ownership interests. See "Certain Related Party and Other Transactions." The business of the Company operates primarily through its wholly-owned subsidiary, MPW Industrial Services, Inc. ("Industrial"), which, prior to the Offering, was an S Corporation for tax purposes. Prior to the Offering, (i) the shareholders of Industrial contributed their shares of Industrial to the Company, and (ii) the Company effected a 4-to-1 stock split. As a result of these transactions, Industrial's S Corporation status was terminated and the shareholders of Industrial owned all of the outstanding Common Stock of MPW. Unless otherwise indicated, the information in this Prospectus assumes the consummation of the above transactions. This Prospectus contains certain forward-looking statements that are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, the Company's management. The Company's future results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. See "Risk Factors" for a discussion of factors that could cause or contribute to such material differences. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> HISTORICAL PRO FORMA (1) --------------------------------------------------------- ---------------------------- THREE MONTHS THREE MONTHS ENDED YEAR ENDED YEAR ENDED JUNE 30, SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------------------------- ----------------- JUNE 30, ----------------- 1994 1995 1996 1997 1996 1997 1997 1996 1997 ------- ------- ------- ------- ------- ------- -------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues.............................. $49,172 $56,305 $58,430 $72,908 $19,422 $21,865 $72,908 $19,422 $21,865 Costs and expenses: Cost of services.................... 31,759 37,768 37,543 48,460 12,641 14,380 48,460 12,641 14,380 Selling, general and administrative expenses.......................... 9,265 10,208 11,009 13,603 3,205 3,545 14,311 3,382 3,587 Depreciation and amortization (2)... 4,589 4,356 4,933 3,655 935 866 3,042 750 841 Deferred stock option compensation (3)............................... -- -- -- 2,764 2,189 160 2,764 2,189 160 Non-recurring item (4).............. 1,011 -- -- -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total costs and expenses............ 46,624 52,332 53,485 68,482 18,970 18,951 68,577 18,962 18,968 ------- ------- ------- ------- ------- ------- ------- ------- ------- Income from operations................ 2,548 3,973 4,945 4,426 452 2,914 4,331 460 2,897 Interest expense, net................. 274 104 541 974 214 335 -- -- -- Minority earnings..................... -- -- 172 207 125 99 -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- Income from continuing operations before income taxes................. 2,274 3,869 4,232 3,245 113 2,480 4,331 460 2,897 Provision for income taxes (5)........ 134 331 360 1,085 44 149 1,732 184 1,159 ------- ------- ------- ------- ------- ------- ------- ------- ------- Income from continuing operations..... 2,140 3,538 3,872 2,160 69 2,331 2,599 276 1,738 Discontinued operations, net of income taxes............................... 268 367 163 -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net income............................ $ 2,408 $ 3,905 $ 4,035 $ 2,160 $ 69 $ 2,331 $ 2,599 276 $ 1,738 ======= ======= ======= ======= ======= ======= ======= ======= ======= Earnings per common share............. $ 0.24 $ 0.03 $ 0.16 ======= ======= ======= Weighted average common shares outstanding......................... 10,738 10,738 10,738 </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------- PRO FORMA ACTUAL AS ADJUSTED (6) ------- --------------- <S> <C> <C> BALANCE SHEET DATA: Working capital........................................................................... $ 9,234 $15,992 Net property and equipment................................................................ 23,119 17,406 Total assets.............................................................................. 46,438 47,884 Total debt and capital leases, including current maturities............................... 15,089 -- Total shareholders' equity................................................................ 17,688 37,625 </TABLE> - --------------- (1) The pro forma statement of income data give effect to the following adjustments as if the transactions had been completed as of the beginning of the periods indicated: (i) the adjustments to historical lease costs for certain facilities leased by the Company from related parties and the recharacterization of such leases from capital to operating; (ii) the reduction of interest expense related to existing debt obligations to be repaid from the net proceeds from the Offering; (iii) the elimination of minority earnings as a result of the Company's purchase of certain minority stock ownership interests; and (iv) the recording of federal and state income taxes as if all operations of the Company had been taxed as a C Corporation. The pro forma weighted average common shares outstanding has been increased by the 3,741,794 shares of the Offering, the net proceeds of which will fund the Distribution and the retirement of existing debt obligations, and the Company's issuance of 67,800 shares of Common Stock in exchange for certain minority stock ownership interests. See "Selected Unaudited Condensed Pro Forma Financial Data" and related Notes thereto, included elsewhere in this Prospectus. The Company expects that its quarter ended December 31, 1997 will be affected by two non-recurring adjustments. The Company will incur a non-cash expense of approximately $2.6 million, net of tax, associated with the elimination of repurchase obligations contained in certain of its stock option plans. Also, in connection with the termination of S Corporation status, the Company will record a non-cash benefit from net deferred tax assets of approximately $3.3 million. These adjustments have not been reflected in the pro forma statement of income data. (2) Effective July 1, 1996, the Company changed its useful life assumptions for certain categories of property and equipment, resulting in a $1,620,000 reduction in depreciation and amortization expense in fiscal 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview" and Note 3 to the Consolidated Financial Statements. (3) Represents compensation expense related to the Company's obligation, under certain conditions, to repurchase securities issued under certain of the Company's stock option plans. Such repurchase obligation terminates effective with the Offering. (4) Represents charges related principally to the termination of certain workers' compensation insurance with the State of Ohio's Bureau of Workers' Compensation by the Company. This change occurred effective October 1, 1993 whereby the Company restructured its primary workers' compensation insurance program with respect to the State of Ohio. (5) Certain of the Company's subsidiaries were historically taxed as C Corporations and appropriate provisions for federal and state income taxes were recorded. (6) Adjusted to reflect the following as if they had occurred on September 30, 1997: (i) the Distribution and a related sale of certain assets; (ii) the recognition of net deferred tax assets resulting from the termination of S Corporation status; (iii) the elimination of deferred stock option compensation related to certain of the Company's stock option plans; (iv) the issuance of Common Stock in connection with the Company's purchase of certain minority stock ownership interests; (v) the elimination of capital lease liability as a result of restructuring certain lease agreements with related parties; and (vi) the sale of 3,750,000 shares of Common Stock hereby offered by the Company and the application of the net proceeds therefrom.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047118_informatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047118_informatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..401a5817ff70150e13e2ec7ad0010c7025d51629
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047118_informatio_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Information Advantage, Inc. (the "Company") develops, markets and supports enterprise scalable on-line analytical processing ("OLAP") software that is designed to allow a large number of users to access and analyze large amounts of data to make quicker and more informed business decisions. The Company's server-based solution, DecisionSuite, provides powerful, robust and flexible analysis processing capabilities that transform raw data into meaningful information from a wide range of desktop and Internet platforms. Through the use of an advanced architecture, the Company designed DecisionSuite to accommodate terabytes of data and thousands of active users, although to date, only a limited number of customers have deployed DecisionSuite in such environments. DecisionSuite enables organizations to push effective decision making to all levels of users thereby creating an "intelligent enterprise," one capable of quickly identifying and reacting to market opportunities. DecisionSuite supports many popular UNIX operating systems and employs relational database technology, allowing it to access most popular databases, data warehouses and data marts. In order to compete effectively in today's global environment, businesses must quickly identify and respond to changing market conditions and are, therefore, dependent upon their ability to rapidly collect, organize, access and analyze large amounts of data. Organizations are now collecting not only internal financial and operational data, but are also collecting large amounts of historical data on their customers, suppliers and other external sources. At the same time, to more quickly react to changing business conditions, many organizations have been flattening their organizational structures and empowering employees at all levels to make decisions, creating a need by more people to access the vast amounts of business data collected each day and to perform complex computational analysis on this data. To meet these challenges, organizations have implemented a number of technology solutions, including data warehouses and data marts, query and reporting tools and OLAP applications. According to IDC, an independent industry analyst, the information access segment of the data warehousing market alone is estimated to be growing from $664 million in 1996 to $1.4 billion in 2000. Although many of today's query and reporting tools, desktop OLAP solutions and non-relational server-based OLAP solutions successfully address some of the market requirements, these technologies fall short of effectively delivering enterprise scalable OLAP capabilities. The Company's relational server-based OLAP solution, DecisionSuite, supports large data sets, thousands of active users, and simple as well as complex analysis. Moreover, DecisionSuite is designed for efficient and cost effective deployment and maintenance, and compliance with industry standards, thereby enabling integration with hardware and software from a variety of vendors. Substantially all of the Company's revenues are derived from sales of DecisionSuite and related services. The Company licenses DecisionSuite to customers primarily in targeted industries such as retail, consumer packaged goods, financial services, insurance, telecommunications and healthcare. The Company sells its products primarily through direct sales. The Company has direct sales offices in twelve states, Canada, the United Kingdom and Germany, and has established strategic relationships in South Africa, the Netherlands and Japan. The Company also utilizes strategic partners to sell its products, including solution development partners, such as IBM and DynaMark, sales affiliates, such as EDS and Cambridge Technology Group, and marketing partners, such as HP and Sun. The Company was formed in 1992 and, accordingly, has a limited operating history and capitalization. To complement its advanced product offerings, the Company offers worldwide training, consulting and support services to its customers directly through its customer services group and indirectly through its solution development partners and sales affiliates. The Company's training and consulting services consist of technical support, education, implementation, prototyping workshops and other advanced services. The Company also provides its customers with an extensive array of ongoing support services, including software updates, documentation updates, telephone support and product maintenance. THE OFFERING <TABLE> <CAPTION> Common Stock Offered by the Company.......... 3,334,000 shares <S> <C> Common Stock to be Outstanding after the Offering............................... 14,989,359 shares(1) Use of Proceeds.............................. For repayment of certain indebtedness, general corporate purposes (primarily working capital and, to a lesser extent, expansion of the Company's sales, marketing and customer support infrastructure), and potential acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol................ IACO </TABLE> SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) <TABLE> <CAPTION> PERIOD FROM NINE MONTHS APRIL 14, 1992 ENDED (INCEPTION) TO YEARS ENDED JANUARY 31, OCTOBER 31, JANUARY 31, ------------------------------------------ -------------------- 1993 1994 1995 1996 1997 1996 1997 --------------- --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenues........................... $ 1,751 $ 4,348 $ 3,817 $ 5,642 $ 11,746 $ 8,414 $ 17,501 Loss from operations............... (2,326) (1,147) (4,312) (3,795) (8,380) (4,980) (5,867) Net loss........................... (2,377) (1,201) (4,395) (3,789) (8,476) (5,020) (5,956) Pro forma net loss per share (2)... $ (0.83) $ (0.51) Shares used in computing pro forma net loss per share (2)........... 10,208 11,622 </TABLE> <TABLE> <CAPTION> OCTOBER 31, 1997 --------------------------------------- AS ACTUAL PRO FORMA(3) ADJUSTED(4) --------- ------------- ------------- <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital........................................................ $ (615) $ (615) $ 20,601 Total assets........................................................... 12,965 12,965 31,915 Total liabilities...................................................... 12,238 12,238 9,088 Convertible redeemable preferred stock................................. 24,410 -- -- Stockholders' equity (deficit)......................................... (23,683) 727 22,827 </TABLE> - ---------------- (1) Based on the number of shares outstanding as of October 31, 1997. Excludes (i) 2,257,113 shares subject to outstanding options as of October 31, 1997 at a weighted average exercise price of approximately $1.55 per share, (ii) warrants to purchase 143,419 shares of Common Stock at a weighted average exercise price of $2.91 per share, and (iii) 1,307,871 shares reserved for issuance under the Company's stock plans. See "Management--1997 Equity Incentive Plan," "--1997 Employee Stock Purchase Plan" and Notes 8 and 9 of Notes to Consolidated Financial Statements. (2) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used in computing pro forma net loss per share. (3) Reflects the conversion of outstanding Preferred Stock into Common Stock and the exercise of warrants to purchase 491,599 shares of Common Stock upon completion of the offering. (4) Adjusted to reflect the sale of shares of Common Stock by the Company at an assumed initial public offering price of $7.50 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047175_donlar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047175_donlar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..53d2897ba6f3b221bcd7542d000d76be6479eeae
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047175_donlar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary information is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The terms "Donlar" and "Company" when used herein includes Donlar Corporation and its 90% owned subsidiary, Donlar Pharmaceutical Corporation. Each prospective investor should read this Prospectus in its entirety. Unless otherwise indicated, the information contained in this Prospectus: (a) assumes no exercise of the Underwriters' overallotment option; (b) does not give effect to the Common Stock issuable upon (i) exercise of the warrants to purchase the Company's Common Stock outstanding on the date of this Prospectus (except for the warrants specifically described below) and (ii) exercise of the options granted or which may be granted under the Company's stock option plans or stock based incentive plan; and (c) assumes that the following transactions (collectively, the "Offering Related Transactions") are completed prior to or concurrent with the consummation of the Offering: (1) a 1 for reverse split of the Company's Common Stock, (2) the conversion of all shares of the Company's Series A Preferred Stock into the Company's Common Stock at a conversion ratio of 1 to 1, (3) the retirement of all shares of all other series of the Company's preferred stock, (4) the exercise of all warrants for the purchase of Common Stock that, by their terms, are required to be exercised or forfeited upon the occurrence of a public offering, and (5) the exchange of convertible debt and related rights for the payment of cash and issuance of the senior notes and shares of Common Stock agreed to as part of the 1997 Agreement (as defined in "Certain Transactions"), all as more fully described herein. Unless otherwise indicated, capitalized terms used in this summary have the respective meanings ascribed to them elsewhere in this Prospectus. THE COMPANY Donlar is the world leader in the development and marketing of a new family of environmentally friendly and biodegradable specialty polymers, known as thermal polyaspartates ("TPA"). TPA is non-hazardous, non-toxic and hypo-allergenic and has a potentially wide range of applications in agricultural, industrial and consumer markets. Utilizing its proprietary technology, the Company develops and markets new agricultural products that significantly increase the effectiveness of fertilizers and is developing a similar class of products designed to enhance the efficiency of pesticides. In each case, TPA is not absorbed by the plant. In addition, the Company develops products that management believes provide environmentally superior alternatives to certain existing specialty chemicals used in many consumer and industrial applications. Through extensive research and development, the Company has assembled a patent portfolio of over 30 issued patents worldwide that protect the Company's cost efficient production technology, the resulting products and their methods of use. In addition, the Company has entered into strategic alliances and joint development agreements with several companies, including BASF, FMC Corporation and National Starch and Chemical Company, to increase its penetration of both the agricultural and specialty chemicals markets. Management believes that the combination of the Company's commercialization experience with TPA and its portfolio of patents provides a significant competitive advantage in pursuing identified market opportunities. The unique aspect of the Company's technology is that TPA can be used effectively in a wide range of applications and is environmentally friendly. This versatility results from TPA's characteristics as a highly active molecule with strong affinity for surfaces, together with a high capacity for holding onto water. As a result of their negative electrostatic charge, TPA products attract or repel particles or surfaces. These key properties make TPA ideal for attracting and collecting nutrients (crop nutrition), concentrating herbicides and insecticides (crop protection), controlling mineral scale (water treatment), inhibiting corrosion (oil field chemicals), acting as a moisture retention agent (superabsorbents), acting as a moisturizer for hair and skin (personal care), preventing dirt particles from reattaching to textile surfaces (laundry detergents) and potentially neutralizing major basic proteins in the human body (allergy relief). While there are well-established products that currently perform these functions in non-agricultural applications, TPA products are readily biodegradable and in many cases provide the same or higher levels of performance than those products. The Company knows of no existing technology that provides benefits comparable to those of the Company's products in agricultural applications. The Company's commercialization efforts have focused on its crop nutrition products. To support these efforts, the Company has conducted or commissioned numerous studies and trials on winter wheat over the last three years. These studies have confirmed the efficacy of the Company's AmiSorb(R) brand products. Studies over the last two years on corn and cotton have produced similar results. The purpose of these trials was to assess the efficacy of AmiSorb(R) products under various agronomic conditions. Some of the variables that impact the results of these studies and trials include: usage rate, fertility level, soil type, hybrid type, irrigation vs. non-irrigation and method of application. Results provide the Company with important information enabling it to refine the optimum product usage rate and mode of application. During the most recent growing season, farm field trials on winter wheat were conducted at 56 different locations in 11 states using AmiSorb(R) products. The use of AmiSorb(R) products at the currently recommended rate and application method resulted in increased yields of up to 26 bushels per acre, with an average increase of 8 bushels per acre, or approximately 18%. Initial farm field trials on corn were conducted in 1996 at 61 different locations in 10 states. Results for the trials demonstrated yield increases from the use of AmiSorb(R) products of up to 60 bushels per acre, with an average increase of 12 bushels per acre, or approximately 7%. Results of the 1997 corn season are not available yet, but early assessments indicate yield increases equal to or in excess of the prior year's results. Initial field trials on cotton were also conducted in 1996 at 11 different locations in 4 states and demonstrated yield increases of up to 690 pounds of lint per acre, an average of 368 pounds of lint per acre, or approximately 40%. Results for the 1997 cotton season are not available yet, but early evaluation indicates yield increases similar to those obtained in 1996. All average increases referred to in this paragraph were calculated on a per location basis comparing land plots treated with AmiSorb(R) products to control land plots. In addition to its performance characteristics, the value of TPA technology in agricultural applications resides in its environmental friendliness and biodegradability. The use of TPA in these applications is expected to reduce specific environmental concerns, including fertilizer leaching and run-off and accumulation of pesticide residues. It has been demonstrated that TPA is an effective and environmentally safe replacement for certain specialty chemical compounds, including polyacrylates, in many performance chemicals applications. Since polyacrylates and many other specialty chemicals are not biodegradable, TPA is an attractive alternative, particularly when used in environmentally sensitive areas. Management estimates that the world market for polyacrylates for which TPA appears to be a viable substitute is approximately $2.2 billion annually. In 1996, the United States Environmental Protection Agency ("EPA") awarded the Company the first Presidential Green Chemistry Challenge Award in the small business category for its role in the development, production and application of TPA as a new and environmentally friendly polymer. Management believes that the Company's development to date provides it with a number of unique competitive advantages: - COMMERCIALLY VIABLE PRODUCTS. The Company has successfully developed and commercialized products for agricultural and industrial applications. The efficacy of these products has been established in both laboratory and field tests. In addition, the Company's strategic alliances and joint development agreements enhance its ability to increase its penetration of both the agricultural and specialty chemicals markets. - ENVIRONMENTALLY FRIENDLY PRODUCTS AND TECHNOLOGY. The Company's products are non-hazardous, non-toxic, hypo-allergenic and readily biodegradable, and the TPA manufacturing process produces no harmful or hazardous waste or emissions. In addition, TPA products are not absorbed by the plants. - SIGNIFICANT BARRIERS TO ENTRY. Management believes that its extensive patent portfolio, which covers its proven, cost efficient manufacturing process, as well as its proprietary technology platform, provide significant barriers to entry to its potential competitors. - EXPERIENCED MANAGEMENT TEAM. The Company's management team has an average of over 25 years experience in the development and marketing of specialty chemical and agricultural products. The Company was incorporated in Illinois on January 8, 1990. The Company's principal executive offices are located at 6502 South Archer Avenue, Bedford Park, Illinois 60501, and its phone number is (708) 563-9200. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............. shares Common Stock to be outstanding after the Offering(1)................................... shares Use of Proceeds................................. The net proceeds from the Offering will be used as follows: (i) $12 million to fund the cash portion of the 1997 Agreement described under "Certain Transactions;" (ii) approximately $25 million to fund the construction of an L-aspartic acid manufacturing facility; and (iii) the remainder of approximately $ million for the build-up of the Company's sales and distribution network and various working capital purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......... DNLR </TABLE> - ------------------------------ (1) Excludes (a) shares of Common Stock issuable upon exercise of warrants to purchase Common Stock outstanding on the date hereof, but not required to be exercised or forfeited upon the occurrence of a public offering, (b) shares of Common Stock issuable upon exercise of options granted under the Company's stock option plans and (c) additional shares of Common Stock reserved for issuance under the Company's stock option plans and stock based incentive plan; and assumes the completion, prior to or concurrent with the consummation of the Offering, of all of the Offering Related Transactions. See "Management -- Long-Term Incentive Plans" and "Recent Transactions." SUMMARY FINANCIAL DATA The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and notes thereto appearing elsewhere in this Prospectus. <TABLE> <CAPTION> SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, -------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales.................. $ -- $ -- $ 10 $ 23 $ 2,142 $ 575 $ 1,387 Gross profit............... -- -- 2 3 75 (111) 240 Loss from operations....... (555) (864) (1,424) (2,025) (10,606) (2,917) (4,356) Net loss................... (617) (931) (1,522) (1,781) (12,844) (4,161) (6,925) Net loss per common share................... $ () $ () ======== ======= Pro forma net loss......... $( 7,044)(1) $(4,225)(2) ======== ======= Pro forma net loss per common share(3)......... $ ()(1) $ ()(2) ======== ======= Pro forma weighted average common shares outstanding(4):......... ======== ======= </TABLE> <TABLE> <CAPTION> AS OF JUNE 30, 1997 ------------------------ PRO FORMA ACTUAL AS ADJUSTED(5) (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash, cash equivalents and short-term investments......... $ 7,578 $ Working capital........................................... 11,334 Total assets.............................................. 26,955 Total long-term liabilities............................... 27,686 Shareholders' equity (deficit)............................ (2,860) </TABLE> - ------------------------------ (1) Pro forma net loss for the year ended December 31, 1996 excludes $5.8 million of non-recurring charges, consisting of the following: (i) $942,000 representing the fair value of warrants issued to providers of bridge loan financing; (ii) $655,000 for the amortization of debt discount and deferred financing costs incurred in connection with the 1996 Financing; (iii) $350,000 for imputed interest on the royalty obligation incurred in connection with the 1996 Financing; and (iv) $3.9 million for warrants to purchase 712,299 shares of Series A Preferred Stock, with an exercise price of $0.07 per share, that were issued to a provider of research and development services. See "Certain Transactions." (2) Pro forma net loss for the six-month period ended June 30, 1997 excludes $2.7 million of non-recurring charges, consisting of the following: (i) $1.2 million for inducement warrants and preferred stock issued to holders of convertible notes; (ii) $983,000 for the amortization of debt discount and deferred financing costs incurred in connection with the 1996 Financing; and (iii) $551,000 for imputed interest on the royalty obligation incurred in connection with the 1996 Financing. See "Certain Transactions." (3) Pro forma net loss per common share is computed based upon (i) pro forma net loss as described in Notes (1) and (2) and (ii) pro forma weighted average common shares as described in Note 4. (4) Includes the weighted average number of common and common stock equivalents as further adjusted to reflect all shares of Common Stock issuable in connection with the Offering Related Transactions, but does not include the Common Stock offered hereby. See "Recent Transactions" and "Certain Transactions."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047208_world_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047208_world_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047208_world_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047212_powrbilt_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047212_powrbilt_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047212_powrbilt_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047222_marine_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047222_marine_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047222_marine_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047226_power_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047226_power_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047226_power_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047229_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047229_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047229_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047233_franklin_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047233_franklin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047233_franklin_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047236_power_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047236_power_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047236_power_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047241_mca-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047241_mca-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047241_mca-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047245_r-l-tool_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047245_r-l-tool_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047245_r-l-tool_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047246_a-b-cores_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047246_a-b-cores_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047246_a-b-cores_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047247_dalex-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047247_dalex-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047247_dalex-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047248_a-b_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047248_a-b_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047248_a-b_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047257_reman_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047257_reman_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047257_reman_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047268_delco_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047268_delco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047268_delco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047378_howmet_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047378_howmet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae90c88424c5c04bfb6d3551f74ddcb950dbf6ef
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047378_howmet_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto included elsewhere in this Prospectus. For purposes of this Prospectus, unless otherwise indicated or the context otherwise requires, references to the "Company" refer to Howmet International Inc. and its consolidated subsidiaries, and references to "Howmet" refer to the Company's indirect wholly-owned subsidiary, Howmet Corporation, and its consolidated subsidiaries after giving effect to the Acquisition (as defined below), including the Cercast Group ("Cercast"). Certain capitalized terms used in this summary are defined elsewhere in this Prospectus. THE COMPANY The Company is the largest manufacturer in the world of investment cast turbine engine components for the jet aircraft and industrial gas power generation markets. The Company uses investment casting techniques to produce high-performance and high-reliability superalloy and titanium components to the exacting specifications of the major aerospace and industrial gas turbine ("IGT") engine manufacturers. The Company is also the world's largest producer of aluminum investment castings, which it produces principally for the commercial aerospace and defense electronics industries. The Company believes that its leading market position is based on its ability to provide complex and technologically advanced products which meet its customers' most demanding requirements, and that its strong leadership in proprietary technology, its integrated manufacturing capabilities and its substantial commitment to research and development provide the Company with competitive advantages in developing and producing such products. Customers in both the aerospace and IGT markets continually seek improvements in turbine engine operating efficiencies through increased turbine operating temperatures and other performance enhancements, requiring the development of stronger, more heat-resistant and more corrosion-resistant engine components. The Company has been at the forefront in the development and commercialization of numerous technological breakthroughs in the investment casting industry, including improved metallurgical structures and casting technologies. The Company produces the technologically advanced directional solidification and single crystal airfoils now required for advanced, higher efficiency engines, and it plans to continue developing higher value, technologically advanced products, which typically carry higher margins. The Company is also focused on using investment casting to develop alternative products to those currently being forged, fabricated or assembled. The Company believes such products represent a significant growth opportunity. Howmet, the Company's principal operating subsidiary, was founded in 1926 and was acquired by the Company, a joint venture formed by Thiokol Corporation (together with its subsidiaries, "Thiokol") and The Carlyle Group (collectively with its affiliates, "Carlyle"), on December 13, 1995 (the "Acquisition") from Pechiney International S.A., a French corporation ("Pechiney International"). The Company produces superalloy and titanium investment castings for the aerospace and IGT industries as well as aluminum investment castings for the aerospace and defense electronic industries, as described below: Aerospace Castings. Aerospace casting revenues were approximately $576 million in 1996, or 52% of the Company's total revenues. The Company's aerospace products consist principally of airfoils (both moving blades and stationary vanes) used in the hot gas path of aircraft turbine engines, the area of these engines with the most severe operating conditions. The Company estimates that it has approximately a 56% worldwide market share for aerospace turbine airfoils, and believes it manufactures airfoils for every major jet aircraft turbine engine program currently in production or under development by its major customers, primarily for commercial applications. The Company's aerospace airfoil business is approximately equally divided between parts for new engines and airfoil replacement parts. The Company also produces large structural cast components for engine and airframe manufacturers. The Company's major aerospace casting customers are the world's largest jet aircraft engine manufacturers, including General Electric Aircraft Engines ("GEAE"), Pratt & Whitney Aircraft division of United Technologies Corporation ("PWA"), AlliedSignal, Inc. ("AlliedSignal"), Rolls Royce plc ("Rolls Royce") and SNECMA, S.A. ("SNECMA"). Demand for the Company's products is affected by trends in the commercial aviation market, which are currently favorable. Worldwide output of large commercial aviation engines increased 13% from 1995 to 1996 and is expected to continue to increase with the expected increase in aircraft deliveries. Scheduled aircraft deliveries give some indication of engine and component requirements, although the deliveries of engine components precede actual aircraft deliveries by approximately nine months. Approximately 495 large aircraft (over 50 passengers) were delivered in 1996, and scheduled deliveries (according to "The Airline Monitor," July 1997) are projected to be approximately 715 units in 1997 and 905 units in 1998, although such deliveries may be subject to deferral or cancellation. Spare part sales for engines in service are also increasing as a result of the higher number of aircraft in service and increased flight hours, among other factors. Industrial Gas Turbine Castings. The Company's IGT casting revenues were approximately $370 million in 1996, or 33% of its total revenues. The Company is the largest producer in the world of airfoils for industrial gas turbine engines, with an estimated 75% worldwide market share. These engines are primarily used in utility power generation, as well as in mechanical drive applications for oil and gas processing and off-shore drilling. The IGT airfoil products manufactured by the Company have performance and reliability requirements similar to those produced for the aerospace market, but the products generally are significantly larger in size. The Company believes that it is currently the only manufacturer in volume production of technologically advanced directional solidification and single crystal airfoils for the IGT market. The Company's major IGT customers are the largest IGT engine manufacturers, including General Electric Power Systems ("GEPS"), European Gas Turbine ("EGT"), Asea Brown Boveri AG ("ABB"), Siemens AG ("Siemens") and Westinghouse Electric Corporation ("Westinghouse"). Growth in demand for efficient, lower cost electrical generation facilities with shorter construction lead times has resulted in IGT engines now accounting for approximately 25% of new electric utility generating capacity ordered worldwide. Management believes that continued growth in global electric power demand provides continued opportunity for the Company's IGT castings through demand for new engines and for replacement part sales as the installed base of IGT engines ages. Sales of spare parts currently represent approximately 38% of total IGT revenues, but are expected to increase as the installed base of IGT castings grows and ages. Aluminum Castings. The Company, through its Cercast subsidiaries, is the largest producer in the world of aluminum investment castings, which are produced principally for the commercial aerospace and defense electronics industries. During 1996, Cercast had revenues of $85 million, which represented approximately 8% of the Company's total revenues. Cercast is pursuing a strategy designed to increase its exposure to commercial aerospace and other commercial markets, which together now account for more than half of Cercast's revenues. As a result of its proprietary technology, Cercast's aluminum investment castings have been able to penetrate component markets for structural airframes and engines, displacing parts traditionally made by other processes, such as forging, fabrication, welding and assembly. Management expects that this trend, in addition to the favorable outlook for the commercial aerospace industry in general, will increase Cercast's business in this area. Sale of Refurbishment Business. In order to focus its efforts on its core casting business, in September 1997, the Company sold its aircraft engine component refurbishment business (other than its coating operations), which accounted for approximately 6% of its 1996 sales. COMPANY STRATEGY The Company intends to aggressively pursue a strategy designed to achieve future growth in revenues and profits. Key elements of the Company's strategy are as follows: Enhance Worldwide Market Leadership Position. The Company estimates that it has an approximate 56% market share for aerospace turbine airfoils, and believes it manufactures airfoils for every major jet aircraft turbine engine program currently in production or under development by its major customers. The Company also believes that it has an approximate 75% market share of IGT cast airfoils. The Company seeks to enhance its worldwide leadership positions through its technological leadership, integrated manufacturing capabilities and established relationships with every major jet aircraft and IGT engine manufacturer. The Company's substantial commitment to research and development provides it with a competitive advantage in developing the capabilities to manufacture the most complex parts as well as in developing new products, alloys and processes. In addition, the Company has the capability to develop and manufacture alloys and tooling, and finish, machine and coat cast parts. The Company is taking steps to expand its coating and machining operations to supply the aerospace and IGT markets with a full line of machined and coated products. The Company believes this vertically integrated manufacturing capability also enhances its ability to develop proprietary technology and bring to market technologically advanced products quickly while achieving a greater degree of quality control over its manufacturing processes. The Company's leading position provides significant opportunity to supply products for new engines as well as ongoing demand for replacement parts and to participate with its customers in cooperative research and development projects. Leverage Technological Capabilities. The Company has been at the forefront in the development and commercialization of numerous technological breakthroughs in the investment casting industry. As a result of its technological leadership, the Company has been able to produce the most technologically advanced, highest quality products, which typically command higher margins and result in strong financial performance and market position. The Company's strategy is to continue its focus on developing more complex airfoils, which can withstand even greater material stress and higher temperature environments, thereby enabling its customers, most of whom are original equipment manufacturers ("OEMs"), to design more efficient engines. The Company intends to pursue this strategy in various ways, including by continuing to work closely with customers to improve its directional solidification and single crystal investment casting production techniques and by developing new applications for those techniques. Emphasize Growth through New Casting Applications and Technological Innovations. The Company believes it has significant opportunities for growth by developing new products and new applications which offer its customers greater performance and significant cost savings. These opportunities include (1) developing cast products that are alternatives to forged, fabricated and assembled products, (2) developing superior new casting processes, and (3) using new materials. Target applications for alternative cast products include a broad array of titanium and aluminum airframe structural components that reduce the number of parts and fasteners used and reduce machining requirements. In developing new casting processes, the Company similarly seeks to reduce the number of parts used and the amount of machining. An example of such a new casting process is the Spraycast-X(R) technology, which the Company is developing and commercializing in a joint venture with a subsidiary of United Technologies Corporation. By this process, products such as cases and rings can be manufactured at substantially lower cost. An example of a new material being developed by the Company is titanium aluminides. Several jet aircraft engine manufacturers are currently testing titanium aluminide airfoils, which reduce the weight of selected airfoil components by approximately 50%, thereby increasing efficiency. The Company believes such products represent a significant growth opportunity for the Company. Continue Cost Reductions and Productivity Improvements. Since 1992 the Company has significantly reduced costs and improved productivity and delivery and cycle times. On-time deliveries have increased from 68% in 1992 to 88% in 1996 and cycle times (measured by work-in-process inventory days) have fallen from 44 days in 1992 to 19 days in 1996, in each case despite the fact that the complexity and volume of the Company's products have increased significantly during the same period. As a result of these programs, the Company has significantly improved its financial performance, and management believes further improvements can be achieved. The Company employs specific programs designed to achieve these improvements, including synchronous manufacturing, kaizen events (in which solutions to specific operational problems are achieved by teams of workers in concentrated time periods), quick shop intelligence (daily meetings of plant staff in which product-specific manufacturing issues are reviewed and solved), and standardization of manufacturing and business processes throughout the Company's facilities worldwide, specialization by plants in the production of certain families of castings and inter-facility manufacturing and technical support, including the sharing of best practices, under a "One Howmet" concept. Provide the Highest Level of Customer Service. The Company seeks to provide the highest possible level of customer service, including techniques for achieving measurable improvement in customer satisfaction. For example, the Company's marked improvement in delivery and cycle times referred to above has enabled the Company to meet customer demands for "just in time" delivery. In addition, the Company keeps its own engineers on-site at customer locations to facilitate the integration of the Company's components into the OEMs' final products and to work closely with OEMs as they develop new products. For example, the Company has worked with GEAE over the last five years in the development of the GE90 aircraft engine and is under contract to supply airfoils for the GE90. In the IGT market, the Company has been selected by ABB, Siemens and GEPS to help these customers develop airfoil components for their existing and new generation IGT engines. THE OFFERING <TABLE> <S> <C> Common Stock Offered(1)(2): United States Offering..... 12,000,000 shares International Offering..... 3,000,000 shares Total Offering........... 15,000,000 shares Total Common Stock Outstanding................. 100,000,000 shares Dividend Policy.............. The Company does not expect to pay cash dividends on the Common Stock in the foreseeable future. In addition, certain of the Company's debt instruments prohibit or restrict the Company from paying dividends. See "Dividend Policy." Proposed New York Stock Exchange Symbol............. HWM </TABLE> - -------- (1) All of the shares offered hereby are being offered by the Selling Shareholder. (2) Excludes up to 2,250,000 shares subject to an overallotment option granted by the Selling Shareholder to the U.S. Underwriters. See "Underwriters." CERTAIN TRANSACTIONS IN CONNECTION WITH THE OFFERING Background. The Company was formed in October 1995 by Carlyle and Thiokol to acquire Howmet from Pechiney International. Carlyle and Thiokol currently own 51% and 49%, respectively, of the Common Stock. Carlyle is a Washington D.C.-based private merchant bank founded in 1987. Carlyle and its affiliates currently manage private investment funds with equity capital in excess of $1.5 billion. Thiokol, a New York Stock Exchange-listed company, is a leader in the development and production of high-technology solid rocket motors for aerospace, defense and commercial applications and is a major manufacturer of precision fastening systems for aerospace and industrial markets worldwide. The Sale. The Selling Shareholder has agreed to sell to Thiokol, simultaneously with the closing of the Offering, 11,000,000 shares of Common Stock, representing 11% of the outstanding Common Stock (the "Sale"), and to grant Thiokol an option (the "First Thiokol Option") to purchase from the Selling Shareholder up to an additional 4,000,000 shares of Common Stock, representing 4% of the outstanding Common Stock. The First Thiokol Option will be exercisable only on the first business day following the earlier of the date Carlyle notifies Thiokol of the intention of the U.S. Underwriters to exercise the U.S. Underwriters' overallotment option or the 30th day following the Offering. Thiokol has indicated to the Selling Shareholder that it intends to exercise the First Thiokol Option to the extent of 2,000,000 shares. See "Certain Transactions in Connection with the Offering." The Sale and any exercise of the First Thiokol Option will be at the initial public offering price per share less underwriting discounts and commissions. Certain Other Agreements Between Thiokol, Carlyle and the Company. Thiokol has agreed with the Company that, without the prior consent of the Carlyle representative (if any) on the Company's Board of Directors and a majority (but not less than two) of the non-employee directors of the Company who are not directors or employees of Thiokol or Carlyle, neither Thiokol nor any of its affiliates may acquire any Publicly Held Shares (as defined below) if, after such acquisition, the number of Publicly Held Shares then outstanding would be less than 14% of the total number of shares outstanding, other than (x) pursuant to a tender offer to acquire all of the outstanding shares of Common Stock not then beneficially owned by Thiokol, or (y) pursuant to a merger or other business combination in which all holders of Publicly Held Shares are treated equally. "Publicly Held Shares" means the outstanding shares of Common Stock other than shares held by Thiokol, Carlyle or their respective affiliates. Pursuant to an Amended and Restated Shareholders Agreement (the "Shareholders Agreement") among Carlyle, Thiokol and the Company to be entered into in connection with the Offering, (1) for so long as Carlyle continues to own not less than 5% of the outstanding Common Stock, the Company has agreed to nominate, and Thiokol has agreed to vote its shares of Common Stock in favor of, one designee of Carlyle to the Company's Board of Directors, (2) Carlyle has agreed with Thiokol that Carlyle will not dispose of any of its shares of Common Stock until the earlier of the second anniversary of the closing of the Offering or the occurrence of a change of control of Thiokol, (3) during the two-year period starting on the second anniversary of the closing of the Offering (the "Option Period"), Thiokol will have an option (the "Second Thiokol Option") to acquire Carlyle's shares of Common Stock (all, or in increments of 25%) and a right of first refusal to acquire any shares Carlyle proposes to sell, in each case at market price and (4) Thiokol has agreed that, in the event Thiokol disposes of any of its shares of Common Stock to an unaffiliated third party (other than pursuant to an effective registration statement or under Rule 144) prior to the fourth anniversary of the closing of the Offering, Carlyle will have the right to participate in such sale with respect to a proportionate number of its shares on the same terms. The Company has granted Carlyle certain registration rights (exercisable between the second and the fifth anniversaries of the closing of the Offering) for Carlyle's remaining shares of Common Stock and has granted Thiokol certain preemptive rights. See "Risk Factors--Control by and Relationship with Thiokol," "Relationship with Thiokol," "Arrangements between the Company, Carlyle and Thiokol" and "Underwriters." RELATIONSHIP WITH THIOKOL Immediately prior to the Offering, Thiokol and Carlyle will be the only stockholders of the Company. Upon completion of the Offering, the Sale and Thiokol's intended purchase of 2,000,000 shares under the First Thiokol Option, Thiokol will beneficially own 62% of the outstanding Common Stock and will own all of the outstanding non-voting 9% Series A Cumulative Preferred Stock of the Company ("Series A Preferred Stock"), and Carlyle will beneficially own between 20.75% and 23% of the outstanding Common Stock, depending upon the extent to which the U.S. Underwriters elect to exercise their overallotment option. In addition, during the two year period following the second anniversary of the closing of the Offering, Thiokol will have the ability to increase its ownership stake up to approximately 85% (assuming no exercise of the U.S. Underwriters' overallotment option) by exercising the Second Thiokol Option, which gives Thiokol the right to purchase up to all of the shares of Common Stock retained by Carlyle. Accordingly, subject to Carlyle's right under the Shareholders Agreement to designate one director, Thiokol will be able to control the election of the Company's Board of Directors and exercise a controlling influence over the business and affairs of the Company and will be able to do so as long as it continues to own more than 50% of the Common Stock. Thiokol has advised the Company that it views the Company as an important strategic investment and core long-term holding. In connection with the Second Thiokol Option and through other means (subject to the limitations described herein), Thiokol will consider increasing its ownership stake over time. Nevertheless, Thiokol retains its full range of alternatives with respect to its ownership position including maintaining its current level of ownership, further increasing its ownership position (subject to the limitations described herein) or selling or monetizing its position. In connection with the Offering and Sale, the Company and Thiokol will enter into certain intercompany agreements and the Company's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation") will also include certain provisions relating to the Company's relationship with Thiokol following the Offering. In addition, the Company's Board of Directors will have a Committee of Independent Directors, composed of non-employee directors of the Company who are not employees or directors of Carlyle or Thiokol, which will be responsible after the Offering for approving the terms of all material agreements and transactions, and any material amendments to such agreements, between the Company and Thiokol. See "Management--Board of Directors and Executive Officers--Committees," "Relationship with Thiokol," "Arrangements between the Company, Carlyle and Thiokol" and "Description of Capital Stock--Certain Certificate of Incorporation and By-Law Provisions." SUMMARY HISTORICAL FINANCIAL AND OTHER DATA The combined operations of Howmet and Cercast prior to the consummation of the Acquisition are referred to as "Howmet Predecessor Company Combined" and the consolidated operations of the Company and its subsidiaries after the consummation of the Acquisition are referred to as "Howmet International Inc. Consolidated." The following table sets forth summary historical combined balance sheet data of Howmet Predecessor Company Combined as of December 31, 1992, which are unaudited, and summary historical combined financial data of Howmet Predecessor Company Combined for each of the three years in the period ended December 31, 1994, which have been derived from the Howmet Predecessor Company Combined financial statements audited by Price Waterhouse LLP, independent accountants. The summary financial data for the periods from January 1, 1995 to December 13, 1995 and December 14, 1995 to December 31, 1995 have been derived from the Howmet Predecessor Company Combined and the Howmet International Inc. Consolidated financial statements, respectively, audited by Ernst & Young LLP, independent auditors. The summary financial data as of December 31, 1995 and December 31, 1996 and for the year ended December 31, 1996 have been derived from the Howmet International Inc. Consolidated financial statements audited by Ernst & Young LLP, independent auditors. The summary financial data as of September 28, 1997 and for the thirty-nine weeks ended September 29, 1996 and September 28, 1997 have been derived from unaudited interim consolidated condensed financial statements which, in the opinion of management, reflect all material adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and the results of operations for these periods. The unaudited financial data set forth below are not necessarily indicative of the results that may be achieved in the future. The unaudited pro forma financial data set forth in the notes below are not necessarily indicative of the results of operations or related effects on financial position that may be achieved in the future. The following financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements of the Company, together with the related notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> HOWMET PREDECESSOR COMPANY HOWMET INTERNATIONAL INC. COMBINED CONSOLIDATED --------------------------------------- ----------------------------------------------------- YEAR ENDED PERIOD FROM PERIOD FROM THIRTY-NINE DECEMBER 31, JANUARY 1, DECEMBER 14, WEEKS ENDED ---------------------- 1995 TO 1995 TO YEAR ENDED --------------------------- DECEMBER 13, DECEMBER 31, DECEMBER 31, SEPTEMBER 29, SEPTEMBER 28, 1992 1993 1994 1995 1995 1996 1996 1997 ------ ------ ------ ------------ ------------ ------------ ------------- ------------- (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) <S> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENTS OF OPERATIONS DATA: Net sales............... $920.2 $832.7 $858.3 $894.1 $ 51.4 $1,106.8 $823.4 $952.0 Cost of sales........... 688.0 603.4 647.3 681.4 38.0 803.6 600.7 661.6 Selling, general and administrative expense................ 116.1 104.5 90.9 105.0 4.6 117.3 84.5 106.6 Depreciation and amortization expense... 30.7 31.0 33.1 32.6 2.8 59.7 45.0 44.7 Research and development expense................ 24.3 23.3 19.2 25.0 1.4 24.2 18.4 16.1 Restructuring expense (credit)............... 58.9 -- 2.5 (1.6) -- -- -- -- Goodwill writeoff....... -- -- 47.4 -- -- -- -- -- ------ ------ ------ ------ -------- -------- ------ ------ Earnings from operations............. 2.2 70.5 17.9 51.7 4.6 102.0 74.8 123.0 Interest income (expense) net-- affiliates............. 4.4 4.4 8.6 6.5 -- -- -- -- Interest income (expense) net--third parties (a)............ (2.2) (4.0) (3.4) (2.4) (3.1) (40.2) (31.7) (25.1) Other--net.............. 0.5 (0.1) (0.1) (5.8) (1.0) (5.9) (5.9) (2.1) ------ ------ ------ ------ -------- -------- ------ ------ Income before income taxes.................. 4.9 70.8 23.0 50.0 0.5 55.9 37.2 95.8 Income taxes............ 3.3 27.8 46.0 23.7 0.5 30.3 21.4 36.5 ------ ------ ------ ------ -------- -------- ------ ------ Income (loss) before cumulative effect of change in accounting (b)(c)...... 1.6 43.0 (23.0) 26.3 -- 25.6 15.8 59.3 Payment-in-kind dividends on redeemable preferred stock........ -- -- -- -- 0.2 4.7 3.5 3.8 -------- -------- ------ ------ Net income (loss) applicable to common shares (a)(c).......... -- -- -- -- $ (0.2) $ 20.9 $ 12.3 $ 55.5 ======== ======== ====== ====== Net income per common share (a)(c)(d)........ -- -- -- -- $ -- $ .21 $ .12 $ .56 ======== ======== ====== ====== BALANCE SHEET DATA (end of period) (e): Cash and cash equivalents............ $ 7.8 $ 6.4 $ 5.0 -- $ 9.6 $ 23.4 -- $ 9.1 Non-cash working capital................ 110.2 67.7 26.4 -- 39.0 43.9 -- 15.2 Total assets, excluding Restricted Trust (a)... 594.7 579.6 509.9 -- 1,127.8 1,052.5 -- 969.0 Restricted Trust (f).... -- -- -- -- 716.4 716.4 -- 727.1 Long-term debt, including current maturities, excluding Pechiney Notes(a)...... 66.3 44.5 42.1 -- 488.6 350.7 -- 190.5 Pechiney Notes (f)...... -- -- -- -- 716.4 716.4 -- 727.1 Redeemable preferred stock.................. -- -- -- -- 50.2 54.9 -- 58.7 Stockholders' equity(a).............. 291.9 239.1 166.3 -- 196.9 218.8 -- 266.4 OTHER DATA (e): EBITDA (g).............. 33.4 101.4 50.9 (h) 78.5 6.3 156.8 114.5 165.8 Net cash provided (used) by operating activities............. 138.8 95.4 91.4 35.2 (12.7) 184.5 142.6 126.1 Net cash provided (used) by investing activities............. (31.4) (31.7) (33.4) (43.8) (740.2) (29.8) (14.4) 23.1 Net cash provided (used) by financing activities............. (4.5) (8.5) 4.5 (20.0) 762.4 (140.9) (117.0) (161.7) Capital expenditures.... 28.9 33.1 38.0 41.2 1.6 33.7 18.0 32.4 Number of employees (end of period)............. 10,076 8,990 8,702 -- 9,577 10,035 -- 10,277 </TABLE> See notes on following pages - -------- (a) On November 21, 1997, the Company announced that Howmet intends to make a tender offer to repurchase all of the outstanding 10% senior subordinated notes due 2003 (the "Senior Subordinated Notes"). Such tender offer is conditioned upon completion of the New Credit Facility (as defined herein), and, if fully subscribed, will be funded with approximately $140 million of borrowings under the New Credit Facility. The Company expects the initial interest rate under the New Credit Facility to be the Eurodollar rate plus 25 basis points. Completion of the New Credit Facility and of the tender offer is expected to result in after tax interest expense savings (exclusive of amortization of debt issuance costs) of approximately $3.0 million annually. The tender offer is expected to be completed by December 31, 1997, and will result in a one-time extraordinary after tax charge to earnings preliminarily estimated to be $12 million to $13 million (assuming the tender offer is fully subscribed) in the fourth quarter, including the write-off of unamortized debt issuance costs. If the refinancing of the Senior Subordinated Notes had been completed on September 28, 1997, the effect on the Company's financial position would have been as follows (unaudited): a net increase in long-term debt of $15 million, and reductions in other assets of $6.8 million, income taxes payable of approximately $8.8 million, and stockholders' equity of approximately $13 million. If the refinancing of the Senior Subordinated Notes had been completed as of January 1, 1996, for 1996 interest expense would have been reduced by approximately $7.8 million (including amortization of $2.8 million of debt issuance costs), net income applicable to common shares would have been approximately $25.6 million and net income per common share would have been approximately $.26. If the refinancing of the Senior Subordinated Notes had been completed as of January 1, 1997, for the thirty-nine weeks ended September 28, 1997, interest expense would have been reduced by approximately $10.2 million (including amortization of $6.4 million of debt issuance costs), net income applicable to common shares would have been approximately $61.6 million and net income per common share would have been approximately $.62. See "Management's Discussion and Analysis of Financial Results of Operations--General--Fourth Quarter 1997 Results of Operations." (b) In 1993, a $49.3 million charge (net of tax benefits of $31.5 million) was recorded as a cumulative effect of a change in accounting. Effective January 1, 1993, Howmet Predecessor Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" which requires that the estimated future cost of providing postretirement benefits such as health care be recognized as an expense when employees render services instead of when the benefits are paid. If SFAS No. 106 had been in effect for 1992, net income would have been reduced by approximately $2.0 million. (c) In connection with its stock appreciation rights ("SARs") plan, the Company recorded after-tax expense of $4.0 million in the year ended December 31, 1996 and $1.0 million and $12.6 million in the thirty-nine week periods ended September 29, 1996 and September 28, 1997, respectively. If the Offering is consummated, the Company's 1997 fourth quarter charge related to its SARs plan will be based upon the lower of the initial public offering price per share and the Company's stock price on December 31, 1997. Based upon an assumed initial public offering price of $15 per share, the maximum after-tax charge would be $6.2 million, or $.06 per share. See "Management--Stock Appreciation Rights; 1997 Stock Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047385_spectra_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047385_spectra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e39915f77696a63e9f4b8d78017986bf8bd96dc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047385_spectra_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information including "Risk Factors" and Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. The shares of Common Stock offered hereby involve a high degree of risk. This Prospectus contains, in addition to historical information, forward looking statements that involve certain risks and uncertainties. The Company's actual results may differ substantially from the results discussed in the forward looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Company" mean Spectra-Physics Lasers, Inc. and its subsidiaries, after giving effect to the Reorganization described under "Certain Relationships and Transactions -- Relationship with Spectra-Physics AB." For an explanation of certain terms used in this Prospectus, refer to the Glossary at page G-1. THE COMPANY The Company is a leader in the design, development, manufacture and distribution of lasers and laser systems for a broad range of markets. The Company has been a pioneer in the laser industry and has developed a proprietary and patented portfolio of laser, optic and related manufacturing technologies. The Company offers two broad product lines: high power semiconductor-based lasers and laser-based systems, and conventional lasers and laser-related products. The Company's high power semiconductor-based products range from semiconductor lasers, the basic engine, through semiconductor laser pumped lasers to end user systems. Through technological innovation, the Company is leading the transition to high power semiconductor-based lasers from conventional lasers such as gas, liquid and lamp pumped lasers. The Company has been at the forefront of high power semiconductor-based laser technology for the last 14 years and is leveraging its technical strengths to develop high power semiconductor-based lasers, which are more efficient, reliable, cost-effective and compact than existing lasers. These lasers are enabling many new applications and replacing conventional lasers in existing applications in industrial, OEM and research and development markets. According to Strategies Unlimited, a market research firm, the use of high power semiconductor-based lasers is expected to increase approximately 30% to 40% annually over the next several years. The Company is also a leading supplier of conventional lasers and laser-related products to industrial and research and development customers. These lasers, while based upon older technology, have unique performance characteristics that make them the only current solution for certain demanding technical applications. According to Laser Focus World, the market for conventional lasers is expected to grow from $1.1 billion in 1996 to $1.3 billion in 1997. The Company's conventional products include ultrafast systems, amplifier systems, optical parametric oscillators, air and water cooled ion lasers, high energy flash lamp pumped YAG lasers, optics and optical systems. The Company's strong market position and technology leadership in these conventional laser applications enhance its opportunity to expand its high growth semiconductor-based laser business by generating funds, capitalizing on strong customer relationships and leveraging its technological expertise. The Company works closely with its customers to develop its products and is focused on providing innovative solutions to customer needs. To control critical aspects of product quality, significantly improve time-to-market, reduce costs and identify new applications, the Company has vertically integrated into strategic technologies. The Company sells its products to a wide range of customers for use in a variety of applications such as commercial printing, materials processing, medical, research and development, optical data storage and semiconductor manufacturing, inspection and repair. The Company's customers include 3D Systems, Becton Dickinson, DaiNippon Screen, Electro-Scientific Industries, Haemonetics, IBM, KLA/Tencor, Komag, Presstek, Rofin-Sinar, Seagate and Western Digital. The Company believes that it is uniquely positioned to capitalize on the significant market opportunities for high power semiconductor-based lasers and end-user systems. Key elements of the Company's strategy include: (i) capitalizing on its leadership in semiconductor-based laser technology; (ii) developing new applications and markets; (iii) introducing systems products; (iv) continuing support of conventional laser technology; and (v) leveraging the benefits of vertical integration. The Company's principal executive offices are located at 1335 Terra Bella Avenue, Building 7, Mountain View, California 94043, and its telephone number is (650) 961-2550. RELATIONSHIP WITH SPECTRA-PHYSICS AB The Company is currently a wholly-owned indirect subsidiary of Spectra-Physics AB, a multinational corporation based in Sweden, which is listed for trading on the Stockholm Stock Exchange. Upon completion of the offering, Spectra-Physics AB will own beneficially approximately 82.4% of the Company's outstanding Common Stock (approximately 80.6% if the Underwriters' over-allotment option is exercised in full). See "Principal Stockholder." Prior to the Reorganization described below, the Company, Opto Power Corporation ("Opto Power") and Spectra-Physics Laser Data Systems, Inc. ("Laser Data"), together with various foreign subsidiaries of Spectra-Physics AB that conducted sales and technical support operations on their behalf, were operated as a functional group called the Lasers and Optics Group (collectively, the "Lasers and Optics Group"). In preparation for the offering, the Lasers and Optics Group was reorganized (the "Reorganization") in October 1997 so that the assets and liabilities (including contractual rights and obligations) of the Lasers and Optics Group are now held directly or indirectly by the Company. In connection with the Reorganization, the Company has entered into or will enter into certain agreements with Spectra-Physics AB or its subsidiaries relating to certain aspects of the ongoing relationships between them, such as administrative support services and distribution, facilities leasing, trademark and patent license arrangements. Prior to the closing of the offering, the Company will also enter into a registration rights agreement with Spectra-Physics Holdings USA, Inc. ("Spectra-Physics USA"), a wholly-owned subsidiary of Spectra-Physics AB. See "Certain Relationships and Transactions -- Relationship with Spectra-Physics AB" and "Certain Relationships and Transactions -- Post-Reorganization Agreements." THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......... 2,400,000 shares Common Stock to be outstanding after the offering(1)................................ 15,770,948 shares Use of Proceeds.............................. For general corporate purposes, including working capital and capital expenditures. See "Use of Proceeds." Proposed Nasdaq National Market Symbol....... "SPLI" </TABLE> - --------------- (1) Excludes 2,158,645 shares of Common Stock issuable upon exercise of stock options to be granted by the Company at the time of the offering at an exercise price equal to the initial public offering price pursuant to the 1997 Spectra-Physics Lasers, Inc. Stock Option Plan (the "1997 Plan"), and includes 370,948 shares of Common Stock (assuming an initial public offering price of $11.00 per share) to be issued pursuant to the Company's Option Cancellation and Restricted Stock Plan Agreements (the "Restricted Stock Plan Agreements") upon completion of the offering. See "Management -- 1997 Spectra-Physics Lasers, Inc. Stock Option Plan" and "Management -- Restricted Stock Plan." ------------------------ Except as otherwise indicated, all information contained in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) gives effect to the issuance of 370,948 shares of Common Stock (assuming an initial public offering price of $11.00 per share) pursuant to the Restricted Stock Plan Agreements as partial consideration for the cancellation of certain Opto Power stock options and (iii) gives effect to the recapitalization of each share of the Company's previously issued common stock into 130,000 shares of Common Stock. ------------------------ FC bar and Millennia are registered trademarks of the Company. SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,(1) ---------------------------------------------------------------- ------------------------------------------------ 1992 1993 1994 1995 1996 1996 1996 1996 1997 1997 ------- ------- ------- -------- -------- ------------ ------- ------------ -------- ------------ ACTUAL PRO FORMA(2) ACTUAL PRO FORMA(2) ACTUAL PRO FORMA(2) -------- ------------ ------- ------------ -------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales... $80,163 $88,997 $95,123 $112,527 $135,434 $135,434 $90,415 $ 90,415 $113,061 $113,061 Gross margin.... 27,874 27,997 32,641 39,487 47,114 47,114 30,831 30,831 41,883 41,883 Operating income (loss).... (4,568) (10,697) 41 1,843 (772) (772) (3,257) (3,257) (8,686) (8,686) Net income (loss)(3)... (7,864) (13,098) (5,201) (2,019) (4,248) 1,126 (5,382) (1,442) 30,232 32,633 Pro forma net income (loss) per share(3)... $ (0.33) $ 0.09 $ 2.33 $ 2.51 Shares used in computing pro forma net income (loss) per share(4)... 13,000 13,000 13,000 13,000 OTHER DATA: Operating income (loss) before infrequent or unusual items(5)... $(4,568) $(9,555) $ 41 $ 3,706 $ 6,143 $ 6,143 $ 1,505 $ 1,505 $ 7,471 $ 7,471 </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997(1) ------------------------------------------------- --------------------------------------- 1992 1993 1994 1995 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(6) ------- ------- ------- -------- -------- ------- ------------ -------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital..................... $25,858 $26,977 $26,452 $ 30,273 $ 27,531 $29,471 $ 46,139 $ 69,042 Total assets........................ 69,038 66,307 65,915 80,691 86,848 103,934 108,576 131,479 Long term obligations............... 43,920 57,852 58,775 69,067 71,584 73,289 1,665 1,665 Parent equity (deficit)............. 5,424 (10,823) (14,348) (16,480) (21,223) (18,741) 71,446 94,349 </TABLE> - --------------- (1) The Company's fiscal year ends on December 31. The Company's fiscal quarters end on the Friday closest to the end of the calendar month. For presentation purposes, the financial information reflects the calendar month end date. (2) The pro forma data gives effect to the: (a) conversion to equity of amounts due by the Company to Spectra-Physics AB and affiliates for loans, advances and accrued interest; (b) removal of interest expense related to such loans and advances; (c) contribution to equity of the Company by Spectra-Physics AB and affiliates in October 1997 of certain net assets related to foreign holding companies of Spectra-Physics AB and cash to settle certain net liabilities of the holding companies; (d) cancellation of certain employee stock options for cash and equity and the contribution to equity by Spectra-Physics AB and affiliates of the cash used for such cancellation; and (e) related impact of income taxes. (3) Net income for the nine months ended September 30, 1997 includes $17,010,000 of net proceeds from a legal settlement and $23,272,000 from the recognition of income tax benefits. (4) See Note 2 of the Notes to the Consolidated Financial Statements for an explanation of shares used in computing pro forma net income (loss) per share (5) Other data is presented as supplemental information and should not be construed as a substitute, or better, indicator of, results of operations than operating income (loss) or net income (loss) determined in accordance with generally accepted accounting principles. This data represents historical operating income (loss) adjusted for the following: (a) restructuring expenses of $1,142,000 in 1993; (b) legal expenses associated with a lawsuit which was settled in the second quarter of 1997 of $863,000 in 1995 and $1,915,000 in 1996 and $1,012,000 and $1,657,000 in the nine months ended September 30, 1996 and 1997, respectively; and (c) compensation expense associated with stock options of $1,000,000 in 1995 and $5,000,000 in 1996 and $3,750,000 and $14,500,000 in the nine months ended September 30, 1996 and 1997, respectively. As a result of the legal settlement, the Company received net proceeds of $17,010,000 that was included in other income in the nine months ended September 30, 1997. In October 1997, the stock options were canceled for a combination of cash and the Company's future obligation to issue capital stock of the Company upon completion of the offering. As a result of the agreement to cancel the stock options for a combination of cash and capital stock of the Company, the Company reversed approximately $1.4 million of excess accrued expenses in the fourth quarter of 1997. While such legal and compensation expenses are not expected to be incurred in the future, there can be no assurance that similar items might not occur. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047535_nabco-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047535_nabco-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..783c547a40c6fb2e7971796654aa457364fc7ecc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047535_nabco-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. The disclosure contained throughout this Prospectus which is identified as being presented on a pro forma ("pro forma") basis has been prepared as if the following transactions (the "Transactions") occurred (a) for purposes of statement of operations and cash flow data at the beginning of the period being presented (August 1, 1996 or 1997) and (b) for purposes of balance sheet data, on October 31, 1997 (except for (i) below, which is included in the historical balance sheet data): (i) the acquisition by the Company of World Wide Automotive, Inc. ("World Wide") on May 8, 1997, (ii) the acquisition by the Company of Ballantrae Corporation ("Ballantrae") for which the Company has entered into an Agreement and Plan of Merger dated October 30, 1997, (iii) the completion of both Offerings, (iv) the payment in full by the Company of the 10 1/2% Senior Note due July 31, 2003 to World Subordinated Debt Partners, L.P., (v) the payment in full by the Company of the 11.50% Subordinated Notes due July 31, 2004 to General Motors Corporation, (vi) the exchange of the 11% Junior Subordinated Notes due July 31, 2004 (the "Junior Subordinated Notes") for approximately 1.8 million shares of Class A Common Stock, (vii) the exchange, in accordance with their terms, of the outstanding shares of 8% preferred stock of Delco Remy America, Inc. ("DRA") to an 8% subordinated debenture of DRA, (viii) a stock dividend to existing holders of Common Stock resulting in a 16.8-for-one increase in the outstanding shares of Common Stock (the "Stock Split"), (ix) the payment in full by the Company of subordinated notes payable to certain former stockholders of A&B Group and certain current and former stockholders of Power Investments (as defined) and (x) the amendment of the Senior Credit Facility (as defined) in connection with the consummation of the Offerings. Unless otherwise indicated, the information contained in this Prospectus assumes no exercise of the over-allotment option in connection with the Equity Offering. For purposes of this Prospectus, the "Company" shall refer to Delco Remy International, Inc. ("DRI") and all of its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY GENERAL The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components for automobiles and light trucks, medium and heavy duty trucks and other heavy duty vehicles. The Company's products include starter motors ("starters"), alternators, engines, transmissions, traction control systems and fuel systems. The Company serves the aftermarket and the original equipment manufacturer ("OEM") market, principally in North America as well as in Europe, Latin America and Asia- Pacific. Net sales, EBITDA (as defined), Adjusted EBITDA (as defined) and net loss for fiscal year 1997 were $689.8 million, $50.4 million, $87.3 million and $14.3 million, respectively. Excluding restructuring charges, net income for fiscal year 1997 would have been $10.5 million. For the same period, the aftermarket accounted for approximately 45.2% of the Company's net sales and 62.8% of Adjusted EBITDA, with the OEM market accounting for the balance. The Company believes that it is the largest manufacturer and remanufacturer in North America of (i) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (ii) starters and alternators for medium and heavy duty vehicles. The Company's products are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. Major customers include General Motors ("GM"), General Motors Service Parts Operations ("GM SPO"), Navistar, Caterpillar, Freightliner, PACCAR, Auto Zone, Cummins, Western Auto, Ford, Detroit Diesel, Volvo Trucks, Mack, Pep Boys, Advance Auto and O'Reilly Automotive. The Company sells its products principally under the "Delco Remy" brand name and other major brand names worldwide. In connection with the GM Acquisition (as defined), the Company obtained perpetual rights to the "Delco Remy" brand name, which was first used in 1918. The Company also received the right to use "Delco Remy" as a corporate name until 2004 and the "Remy" name in perpetuity. In addition, GM entered into a long-term contract to purchase from the Company substantially all of its North American requirements for automotive starters until 2004 and its U.S. and Canadian requirements for heavy duty starters and alternators until 2000. GM also entered into a distribution agreement to sell the Company's aftermarket products through the GM SPO distribution system, the term of which extends until 2009 for automotive products and until 1998 for heavy duty products. See "Risk Factors--Dependence on General Motors" and "Business--Customers." Citicorp Venture Capital Ltd. ("CVC") and Harold K. Sperlich, former president of Chrysler Corporation, together with a subsidiary of MascoTech Inc. ("MascoTech") and certain senior management of the former Delco Remy Division of GM (the "Former GM Division"), formed the Company for the purpose of acquiring the assets of the automotive starter and the heavy duty starter and alternator businesses of the Former GM Division (the "GM Acquisition"). Upon consummation of the Offerings and the other Transactions, CVC, management of the Company and other existing stockholders of the Company will beneficially own approximately 82.1% of the Company's outstanding Common Stock (73.8% of the voting power), and will be able to control the Company and elect its Board of Directors. See "Management," "Dilution" and "Certain Transactions." The Original Investors (as defined) in the Company have received a substantial realized and unrealized return on their investment in the Company. The following table summarizes the historical investments of CVC, MascoTech and Messrs. Gerrity, Sperlich and Snyder (the "Original Investors") in the Company and Ballantrae since July 29, 1994 and the total return, including unrealized return, on such investments as of an assumed closing date for the Offerings of December 22, 1997 (in thousands). <TABLE> <CAPTION> MASCO CVC TECH GERRITY SPERLICH SNYDER TOTAL -------- ------- ------- -------- ------ -------- <S> <C> <C> <C> <C> <C> <C> Total invested in the Com- pany and Ballantrae........ $ 24,082 $ 4,200 $1,270 $ 100 $ 50 $ 29,702 Total cash received and value of shares of Common Stock held(a).............. $171,325 $42,220 $8,156 $13,960 $7,856 $243,517 </TABLE> - -------- (a) Assumes an initial public offering price of $15.00 per share. For additional details regarding such investment and return, see "Certain Transactions." Since the GM Acquisition, the Company has completed five strategic acquisitions, substantially increasing the Company's aftermarket operations, and entered into two international joint ventures. The Company is also in the process of completing the strategic acquisition of Ballantrae, which will expand the Company's drivetrain product position. Through Ballantrae's wholly owned subsidiary, Tractech Inc. ("Tractech"), the Company will offer high quality traction control systems to heavy duty OEMs and the aftermarket. These acquisitions and joint ventures have broadened the Company's product line, expanded its remanufacturing capability, extended its participation in international markets and increased its penetration of the retail automotive parts channel. As a result of these acquisitions and joint ventures and the Company's focus on increasing its participation in the aftermarket, the Company's reliance on GM has declined since the Company's formation. Net sales to customers other than GM increased from 41.0% in fiscal year 1995 to 56.3% in fiscal year 1997. The Company's expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of the Company's products are used. Additionally, the Company's aftermarket business benefits from the design, manufacturing and technological expertise of the Company's OEM operations. This OEM expertise provides the Company with advantages over many of its aftermarket competitors. The Company believes that its participation in both OEM and aftermarket businesses and its diversified customer base reduce its exposure to the cyclicality of the automotive industry. The Company's growth strategy is designed to capitalize on its position as a consolidator in the large and highly fragmented remanufacturing aftermarket. GROWTH STRATEGY The Company plans to continue to increase revenues and profitability of its aftermarket and OEM businesses through a strategy of internal growth and growth through acquisitions. Key elements of the Company's growth strategy include: INCREASING AFTERMARKET PRESENCE Strengthening Customer Relationships. The Company intends to increase its sales to new and existing customers by capitalizing on its balanced coverage of the key channels of aftermarket distribution and its competitive strengths as an OEM supplier. The Company plans to strengthen its customer relationships by (i) continuing to expand its product offerings, (ii) capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are customers of the Company, (iii) meeting the increasing demands of OEMs and their dealer networks for high quality remanufactured units, which enable them to reduce warranty and extended service costs, and (iv) growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs, due to longer warranty and service programs and growing vehicle complexity. Additionally, with the recent acquisition of World Wide, the Company expanded its product line and now offers a full line of starters and alternators for domestic and import vehicles. The acquisition also has improved the Company's distribution capabilities, which now include a nationwide overnight delivery service. Consolidating the Fragmented Aftermarket. The portion of the aftermarket in which the Company participates is large and highly fragmented, with most participants being small, regional companies offering relatively narrow product lines. Although the Company believes that it is the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America, its sales of these products account for less than 12% of this market. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to rationalize their supplier base. With its OEM capabilities, remanufacturing expertise, full product line, greater access to "cores" and ability to capitalize on economies of scale, the Company is well positioned to benefit from the consolidation of the aftermarket. EXPANDING GLOBALLY The Company is expanding its international operations in order to (i) benefit from the trend toward international standardization of automotive and heavy duty vehicle platforms and (ii) participate in rapidly growing foreign markets. The Company has recently been awarded new business by GM, Volkswagen, Mercedes Benz, Ford and Caterpillar in Brazil; Opel in Europe; Daewoo Motors in India (in connection with the Company's pending strategic alliance in India); and Mercedes Benz, Volvo Trucks, John Deere and Dina in Mexico. The Company intends to supply its existing OEM customers on a global basis as they expand their operations and require local supply of component parts that meet their demands for quality, technology, delivery and service. The Company believes that its global expansion will enable it to gain new international OEM customers who will also require local production of high quality products. In addition, the expansion of the Company's OEM business into international markets has provided the Company with the infrastructure necessary to develop an aftermarket presence in these countries. The Company has established manufacturing operations and strategic ventures in Hungary, Korea and Mexico, and plans to complete a strategic alliance in India and a joint venture in Brazil in fiscal year 1998. The acquisition of Ballantrae will provide the Company with a European manufacturing plant which has been in operation since 1983. Aided by this facility, Ballantrae has developed strong relationships with European customers for traction control systems, especially in the market for construction equipment. INTRODUCING TECHNOLOGICALLY ADVANCED NEW PRODUCTS As a Tier 1 OEM supplier, the Company continues to provide technologically advanced products by regularly updating and enhancing its product line. Since the GM Acquisition, the Company has (i) completed the introduction of a new family of gear reduction starters that will replace all straight drive starters in GM vehicles by the end of the 1998 model year and (ii) introduced several longer-life heavy duty alternators. The Company is also developing a small gear reduction starter specifically designed for application on world car platforms. These new products underscore the Company's commitment to developing state-of- the-art products that address the higher output, lower weight and increased durability requirements of OEM customers. OPERATING STRATEGY The Company's operating strategy is designed to improve manufacturing efficiency, reduce costs and increase productivity while continuing to achieve the highest levels of product quality. Key elements of this operating strategy include: "FOCUS" FACTORIES TO DRIVE MANUFACTURING EXCELLENCE The Company is shifting its OEM production from old, vertically-integrated manufacturing plants to new, smaller and more efficient "focus" factories. The Company's focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. The Company has successfully launched three new focus factories since 1996. When the currently planned shift to focus factories is completed, the Company plans to occupy six focus factories and expects to have reduced its floor space for OEM production by more than 70%. The Company believes that the benefits of the focus factories include reduced overhead costs, enhanced productivity, increased product quality and lower inventories. PRODUCTIVITY IMPROVEMENTS In conjunction with its emphasis on focus factories, the Company continues to work with its local union representatives to establish best-in-class work practices, such as reducing the number of job classifications per focus factory and implementing team-based manufacturing processes. Since the GM Acquisition, employee productivity has increased by 33%. The Company's labor contract with the UAW (as defined) contains provisions that are expected to permit the Company to continue to achieve productivity improvements in the existing and new focus factories. The increased productivity achieved since the GM Acquisition is due primarily to continuous improvement initiatives and the significant number of employees who have exercised their contract rights to return ("flowback") to GM or to retire. PRODUCT QUALITY AND CONTINUOUS IMPROVEMENT In July 1997, the Company received one of the prestigious Supplier of the Year awards from GM, an award given to fewer than 1% of all GM suppliers. The Company's commitment to product quality and continuous improvement is further evidenced by the QS9000 certification received by nine of its manufacturing and remanufacturing facilities in 1997. The Company expects that the remainder of its manufacturing and remanufacturing facilities will receive QS9000 certification by the end of fiscal year 1998. In addition, the Company's powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating, and the Company is a Ford Authorized Remanufacturer ("Ford FAR") in five of the seven Canadian provinces. Global purchasing has further enhanced the Company's continuous improvement efforts. The Company is utilizing its international ventures to develop new, lower cost sources of materials and is consolidating its vendor base to fewer, more competitive suppliers. RECENT DEVELOPMENTS On October 30, 1997, the Company entered into a definitive agreement to acquire Ballantrae for $52.8 million (including assumed debt and the estimated working capital adjustment and fees and expenses of Ballantrae). Ballantrae operates through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty OEMs and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. In fiscal year 1997, Tractech accounted for approximately 70% of Ballantrae's $37.6 million of net sales. The Company's acquisition of Ballantrae strengthens the Company's overall market position by (i) adding traction control systems to the Company's range of drivetrain products, (ii) increasing sales to existing heavy duty OEM customers and (iii) expanding the Company's customer base. The acquisition is expected to be completed at or prior to the consummation of the Offerings. The terms of the Ballantrae Acquisition Agreement were not negotiated on an arm's-length basis. The Company believes, however, that the terms of such agreement are fair to the Company and its subsidiaries from a financial standpoint. See "Risk Factors--Acquisition of Ballantrae; Conflicts of Interest," "Company History," "Business--Acquisition of Ballantrae" and "Certain Transactions." OTHER INFORMATION For purposes of the financial information set forth in this Prospectus, (i) EBITDA represents the sum of income from continuing operations before interest expense, income taxes, preferred dividend requirement of subsidiary and minority interest in income of subsidiaries, plus depreciation and amortization; (ii) Adjusted EBITDA represents EBITDA plus restructuring charges and non-cash post-retirement benefits other than pensions less the gain on sale of building; and (iii) unless otherwise indicated, all references to years are to the twelve months ended July 31, the Company's fiscal year end. The Company's world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana, 46013, and its telephone number is (765) 778-6499. THE OFFERING Notes Offered....................... $130,000,000 principal amount of % Senior Notes Due 2007. Maturity ........................... , 2007. Interest Payment Dates.............. and , commencing , 1998. Subsidiary Guaranties............... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future Domestic Restricted Subsidiaries. Optional Redemption................. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after , 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to , 2000, the Company may use the proceeds of one or more Public Equity Offerings to redeem up to 40% of the original principal amount of the Notes at a redemption price of % of the original aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than 50% of the original aggregate principal amount of the Notes remains outstanding following any such redemption. See "Description of Notes-- Optional Redemption." Sinking Fund........................ None. Change of Control................... Upon a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or a portion of such holders' Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company will have the financial resources or be permitted under the terms of its other indebtedness to repurchase the Notes. See "Description of Notes--Change of Control." Ranking............................. The Notes and the Subsidiary Guaranties will be general unsecured obligations of the Company and the Subsidiary Guarantors and will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and the Subsidiary Guarantors and senior in right of payment to all existing and future Subordinated Obligations of the Company and the Subsidiary Guarantors. The Notes and the Subsidiary Guaranties will be effectively subordinated to all existing and future Secured Indebtedness of the Company and the Subsidiary Guarantors (to the extent of the assets securing such Indebtedness) and to any liabilities or preferred stock of Subsidiaries (as defined) other than Subsidiary Guarantors. The Senior Credit Facility will be secured by substantially all the U.S. assets of the Company. As of October 31, 1997, after giving pro forma effect to the Offerings and the other Transactions, (i) Senior Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $65.9 million (excluding the Notes, the Subsidiary Guaranties and unused commitments and outstanding letters of credit), (ii) Subordinated Obligations of the Company and the Subsidiary Guarantors would have been approximately $140.8 million (substantially all of which mature before the Notes), (iii) Secured Indebtedness of the Company and the Subsidiary Guarantors would have been approximately $47.5 million (excluding unused commitments and outstanding letters of credit under the Senior Credit Facility) and (iv) all liabilities and preferred stock of the Company's Subsidiaries (excluding the Subsidiary Guarantors) would have been approximately $29.4 million. Although the Indenture contains limitations on the amount of additional Indebtedness (as defined) that the Company and its Restricted Subsidiaries may Incur (as defined), under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Secured Indebtedness or Indebtedness of Subsidiaries other than Subsidiary Guarantors. See "Description of Notes." Certain Covenants................... The Indenture for the Notes will contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness, (b) the payment of dividends and other distributions with respect to the Capital Stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of Capital Stock and Subordinated Obligations of the Company and its Restricted Subsidiaries, (c) the Incurrence of certain Liens, (d) the issuance or sale of Restricted Subsidiary stock, (e) the sale of assets of the Company or its Restricted Subsidiaries, (f) transactions with Affiliates and (g) certain consolidations, mergers and transfers of assets. All of these limitations are subject to a number of important qualifications. See "Description of Notes--Certain Covenants" and "-- Certain Definitions." Concurrent Offerings................ Concurrently with the Notes Offering, the Company is offering 4,000,000 shares of Class A Common Stock (without giving effect to the over-allotment option). The Notes Offering and the Equity Offering are each contingent upon the consummation of the other. See "Use of Proceeds" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds of the Offerings (estimated to be approximately $180.1 million) will be used primarily to repay outstanding indebtedness. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047706_wentworth_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047706_wentworth_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6ab3ac097223ee0e03eadfc876cf501d75a9a03e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047706_wentworth_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Combined Financial Statements of the J.G. Wentworth Affiliated Companies and the Notes thereto appearing elsewhere in this Prospectus. Except as otherwise indicated, all information in this Prospectus gives effect to the following transactions which will occur on or before completion of the Offering (collectively, the "Reorganization") pursuant to which: (i) the limited partners of J.G. Wentworth MFC Associates, L.P., a Delaware limited partnership ("MFC"), and J.G. Wentworth S.S.C. Limited Partnership, a Delaware limited partnership ("SSC" and, collectively with MFC, the "Partnerships"), will contribute all of their limited partnership interests in the Partnerships to the Company; (ii) the shareholders of J.G. Wentworth Funding Corp., a Pennsylvania corporation ("MFC Funding"), and J.G. Wentworth Structured Settlement Funding Corporation, a Delaware corporation ("SSC Funding"), the respective general partners of the Partnerships (collectively, the "General Partners"), will contribute all of the capital stock of the General Partners to the Company; and (iii) the shareholders of J.G. Wentworth Management Company, Inc., a Pennsylvania corporation ("JGW"), and SSC Management Company, Inc., a Pennsylvania corporation ("SSC Management" and, together with JGW, the Partnerships and the General Partners and their respective subsidiaries, the "J.G. Wentworth Affiliated Companies"), will contribute all of the capital stock of JGW to the Company; each in exchange for the issuance by the Company of shares of Common Stock. See "The Reorganization and Change in Tax Status" and the Combined Financial Statements of the J.G. Wentworth Affiliated Companies and the Notes thereto. Unless the context otherwise requires, (a) all references herein to the "Company" refer to the J.G. Wentworth Affiliated Companies on a combined basis, (b) all references herein to the Company's activities, financial condition or results of operations refer to those of the J.G. Wentworth Affiliated Companies, taken as a whole and (c) all information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. THE COMPANY The Company is a specialty finance company that originates, securitizes and services rights to receive payments from structured settlements and other deferred payment obligations. Deferred payment obligations are contractual arrangements under which one party has agreed to make fixed, scheduled payments to another party over time to satisfy an obligation that would otherwise be paid in an up-front, lump sum. The Company specializes in transactions involving two types of deferred payment obligations: (i) structured settlements arising from personal injury litigation as to which highly-rated insurance companies are the obligor, and, to a lesser extent, (ii) other deferred payment obligations, such as claims arising from personal injury litigation and state-operated lotteries, as to which governmental or quasi-governmental entities are the obligor. According to Structured Settlements and Periodic Payment Judgments by Daniel Hindert et al. (1986, 1997), in excess of $40 billion of annuity premiums paid to third parties to fund structured settlements were generated from 1980 to 1995 and approximately $4 billion in new structured settlements are generated each year in the United States. Structured settlements continue to be an attractive option for claimants and insurance companies because structured settlements: (i) offer favorable tax treatment; (ii) permit payment flexibility and incorporation of investment management features; and (iii) lower the cost of compensating victims and thereby help foster timely settlement of litigation. From the claimants' point of view, however, structured settlements have a significant weakness, inflexibility. When claimants' financial needs change, the fixed payment schedule of a structured settlement may no longer satisfy these needs. The Company's funding programs offer those claimants the ability to convert their rights to future payments into cash that they can use for such purposes as paying medical or tuition expenses, purchasing or improving a home, starting a business or repaying debt. The Company has achieved significant growth in the number and maturity value of receivables originated since commencing operations. As used in this Prospectus, "origination" of structured settlement receivables refers to the Company's purchase of the rights to receive payments from a claimant, not the origination of the underlying deferred payment obligation itself. From inception to September 30, 1997, the Company has originated 15,698 deferred payment obligation receivables with an aggregate maturity value of $437.3 million. Maturity value equals the sum of all future payments to be received under a deferred payment obligation. The Company has generally purchased receivables at a significant discount from maturity value. The difference between the amount paid by the Company and the maturity value of the receivables is accrued as income over the life of the receivable. The annualized weighted average yield of the Company's portfolio was 21.4% for the nine months ended September 30, 1997. The Company's revenues have increased significantly as the Company's originations volume and portfolio have grown and the Company has employed securitizations to fund its operations. Revenues increased from $249,000 in 1992 to $11.8 million in 1996 and to $31.7 million in the nine months ended September 30, 1997. The Company completed its first securitization in June 1997, a $70.8 million transaction which it believes was the first investment-grade rated securitization of structured settlement receivables. The Company sold, through a special purpose entity, $59.5 million of senior pass-through certificates rated "A2" by Moody's Investors Service, Inc. ("Moody's") and "A" by Duff & Phelps Credit Rating Co. ("Duff & Phelps"). The Company retained $11.3 million in face value of unrated subordinated certificates and recorded a Gain on Sale (as defined herein) of $11.3 million for the six months ended June 30, 1997. The Company completed a securitization transaction in which it sold $31.0 million of receivables in September 1997 and $41.0 million of receivables in October 1997, and recorded a Gain on Sale of $6.8 million and $8.0 million, respectively. Structured settlement receivables and other deferred payment obligations differ from other regularly securitized financial assets, such as consumer credit cards and mortgage loans, in that (i) prepayment risk is minimal because the timing of scheduled payments is fixed and (ii) credit risks are low because obligors are typically insurance companies that have received a credit rating of "A" or better from A.M. Best or are governmental entities. From inception through December 31, 1996, the Company had not charged-off any receivables. For the nine months ended September 30, 1997, the Company recorded a net charge-off of 0.8% of the Company's average owned portfolio. Although the Company believes that it acquires valid ownership of the claimants' rights to receive payments under their settlement contracts, structured settlement contracts themselves cannot be assigned. Accordingly, issues surrounding the assignability of structured settlements could pose material risks to the Company's business. See "Risk Factors -- Risks Associated with Structured Settlements." The Company generally does not utilize brokers to originate structured settlements and other deferred payment receivables and its policies prohibit the "cold calling" of prospective customers. Instead, the Company utilizes a nationwide television advertising campaign to identify hard-to-find claimants who want to sell their payment rights to the Company. Using a 21,520-square-foot call center, the Company's originations staff responds to claimant inquiries, attempts to quantify an individual claimant's financial needs and endeavors to structure the funding transaction to meet those needs. The Company's policies prohibit the origination of receivables from minors and incompetent persons. The Company's growth strategy is to increase its originations of deferred payment receivables and profitability by further enhancing its position as the leading originator of the rights to receive payments from structured settlements and other deferred payment obligations. To achieve its goals for profitable growth, the Company intends to continue to: (i) increase retail originations through its nationwide targeted television advertising campaign; (ii) provide quality customer service by continuing to qualify and structure transactions based on the needs of the claimant through the Company's trained marketing, underwriting and servicing personnel; (iii) maintain stringent underwriting standards to minimize the risks of claimant fraud; (iv) market to referral sources such as attorneys and bankruptcy and estate trustees; (v) obtain institutional financing and complete regular securitizations of its receivables; (vi) maintain its state-of-the-art information management systems; (vii) apply its originations strategy to the market for seller-financed mortgages; and (viii) expand into new deferred payment market niches through internal growth and possible acquisitions. J.G. Wentworth & Company, Inc. was formed in October 1997 in connection with the Reorganization as a successor to the businesses of the J.G. Wentworth Affiliated Companies. See "The Reorganization and Change in Tax Status." JGW was formed by James D. Delaney and Gary Veloric in 1991 as a merchant bank specializing in transactions in the healthcare industry. In 1992, the Company entered the business of purchasing the deferred settlement obligations of the New Jersey Full Insurance Joint Underwriting Association ("JUA"), and its successor, the New Jersey Market Transition Facility ("MTF"). As the Company's success in the JUA/MTF market established its reputation as a creative funding source, it began to search for other opportunities to purchase income streams that, while secure and predictable, did not meet the requirements for more traditional means of financing. After evaluating a number of market possibilities, the Company decided in 1995 to enter the secondary market for structured settlements. By using the capabilities and systems it developed for the JUA/MTF business, the Company emerged as a market leader in the business of purchasing structured settlements. In May 1995, ING (U.S.) Capital Corporation (together with its affiliates, "ING") extended a credit facility to the Company to fund its originations of other deferred payment obligations. In August 1995, the Company and ING expanded their relationship to include funding the acquisition of structured settlement receivables, at which time ING became a limited partner in SSC. In October 1997, the Company hired six individuals with experience in brokering seller-financed mortgages and established a subsidiary through which it initially will purchase seller-financed mortgages. The Company's principal executive office is located at The Graham Building, 15th and Ranstead Streets, 10th Floor, Philadelphia, PA 19102, and its telephone number is (215) 567-7660. THE OFFERING Common Stock Offered by the Company.......................... 4,000,000 shares Common Stock Offered by the Selling Stockholders..................... 1,286,738 shares (1) Common Stock to be Outstanding after the Offering............... 16,466,667 shares (2) Use of Proceeds.................... To pay a cash tax distribution to certain of the Company's stockholders, to pay a termination fee to ING and to pay down outstanding amounts on the Credit Facilities (as defined herein). See "The Reorganization and Change in Tax Status" and "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047749_lecg-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047749_lecg-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..df1de50a5d5b290a44c0ad227a3f9a9b415f1afd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047749_lecg-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. The shares of Common Stock offered hereby include a high degree of risk. Prospective investors should carefully consider the information set forth under the heading "Risk Factors." THE COMPANY LECG, Inc. ("LECG" or the "Company") is an economic consulting services firm that provides sophisticated economic and financial analysis, expert testimony, litigation support and strategic management consulting to a broad range of public and private enterprises. The Company's areas of expertise include antitrust, industry deregulation, damages analyses, economic and financial modeling, intellectual property valuation, environmental economics and public policy. Services are provided by renowned academics, recognized industry leaders and former high-level government officials ("Experts") who are supported by a highly educated professional staff, most of whom have Ph.D.s or advanced degrees in economics, finance or related disciplines ("Professional Staff"). The Experts include those who provide services to the Company on an exclusive basis ("Principals") and on a non-exclusive basis ("Affiliates"). The role of the Professional Staff is critical as it enables the Experts to leverage their expertise allowing the Company to deliver high quality work product to its clients. The Company believes that its structure enables its Experts to provide sophisticated economic consulting services efficiently and effectively to clients throughout the world. In 1996 alone, the Company performed over 500 assignments for more than 300 clients in eight countries. The Company provides its clients with insightful and original studies that are authored, articulated and ultimately defended by independent, leading Experts, and which are capable of commanding the attention of regulators, legislators, judges and juries. The studies and related testimony incorporate in-depth economic analysis on complex issues, such as the competitive effects of mergers and acquisitions, restructuring of regulated industries, auction design and implementation, the efficiency properties of complex contracts, the impact of regulatory structures on technological innovation, the causes of financial misfortunes and the cost of environmental damages. The Company is retained by public and private companies, government agencies, national and state governments and by major law firms on behalf of their clients. The Company has provided consulting services to a diverse client base including (i) leading corporations, such as Abbott Laboratories, Chevron Corp., Dow Chemical Co., Intel Corporation, Southern Pacific and Time Warner, Inc., (ii) large telecommunication and utility companies, such as Ameritech, Bell Atlantic Corp., New England Power Co., Northern States Power Co., Pacific Gas and Electric Co. and Potomac Electric Power Co., (iii) leading financial services firms such as Bankers Trust New York Corp., Kemper Financial Services, Inc. and Transamerica Life Insurance and Annuity Co., (iv) United States government and regulatory agencies, such as the Department of Justice, the Department of Labor, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Trade Commission and the Resolution Trust Corporation and (v) national governments and government agencies, such as the governments of Argentina, Colombia, El Salvador, Guatemala, Japan, New Zealand and South Korea. The Company's Principals include faculty and former faculty from leading universities including Brigham Young University, Cambridge University, Harvard University, the London Business School, New York University, Northwestern University, Princeton University, Stanford University, Tel Aviv University, Texas A&M University, the University of California at Berkeley, the University of California at Davis, the University of California at Los Angeles, the University of Chicago, the University of Illinois, the University of Maryland, the University of Pennsylvania, the University of Southern California, the University of Toronto, the University of Virginia, Vanderbilt University and Yale University. The Experts' relationships with credentialed, internationally renowned scholars enables the Company to serve as a "switchboard" to access talent in the world's great universities. The Company believes that the business environment is favorable to the continued application of economic analysis to complex business and policy problems. The Company believes that there are additional growth opportunities through (i) increasing engagements performed by the Company's current Experts, (ii) attracting additional Experts, (iii) expanding geographically in the United States and abroad and (iv) acquiring economic consulting organizations on a selective basis. Since its inception in 1988, the Company has expanded its operations from one office in Berkeley/Emeryville, California to an aggregate of eleven offices in Washington, D.C.; New York, New York; Evanston, Illinois; Salt Lake City, Utah; College Station, Texas; Sacramento, California; Toronto, Canada; Wellington, New Zealand; London, England; and Brussels, Belgium. Prior to this offering, the Company was known as The Law and Economics Consulting Group, Inc. The Company changed its name in October of 1997. The Company's executive offices are located at 2000 Powell Street, Emeryville, California 94608 and its telephone number is (510) 653-9800. THE OFFERING <TABLE> <C> <S> Common Stock offered by the Company................ 3,400,000 shares Common Stock offered by the Selling Shareholders... 1,600,000 shares Common Stock to be outstanding after the offering.. 13,400,000 shares Use of proceeds.................................... For general corporate purposes, including working capital and capital expenditures, and for payment of undistributed S Corporation earnings. See "Use of Proceeds." New York Stock Exchange Symbol..................... "XPT" </TABLE> SUMMARY FINANCIAL DATA <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 (UNAUDITED) (UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF INCOME DATA: Revenues............... $14,858 $ 20,317 $ 24,548 $ 24,835 $ 31,392 $ 22,731 $ 31,994 Cost of services....... 10,281 13,614 16,772 16,465 20,881 15,262 20,352 ------- -------- -------- -------- -------- -------- -------- Gross profit........... 4,577 6,703 7,776 8,370 10,511 7,469 11,642 General and administra- tive.................. 2,138 3,537 3,639 4,048 5,258 3,554 5,834 Other expense (in- come)................. 0 0 0 0 0 0 (852) ------- -------- -------- -------- -------- -------- -------- Income before income taxes ................ 2,439 3,166 4,137 4,322 5,253 3,915 6,660 Income taxes........... 113 183 90 83 189 139 271 ------- -------- -------- -------- -------- -------- -------- Net income(1)(3)....... $ 2,326 $ 2,983 $ 4,047 $ 4,239 $ 5,064 $ 3,776 $ 6,389 ======= ======== ======== ======== ======== ======== ======== Pro forma net in- come(2)............... $ 3,099 $ 3,929 Pro forma net income per share(2).......... $ 0.31 $ 0.39 Weighted average shares outstanding(4)........ 10,049 10,189 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 ------------------------------------ ACTUAL PRO FORMA(5) PRO FORMA (UNAUDITED) AS ADJUSTED (6) (IN THOUSANDS) <S> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash...................................... $ 1,299 $ 1,299 $38,443 Working capital........................... 5,468 732 37,876 Total assets.............................. 20,478 20,478 57,622 Total liabilities......................... 11,882 16,618 16,618 Total shareholders' equity................ 8,596 3,860 41,004 </TABLE> - -------------------- (1) The Company is currently taxed under subchapter S of the Internal Revenue Code. As an S Corporation, the Company is not subject to federal and some state income taxes. (2) The pro forma consolidated statement of income data for the year ended December 31, 1996 and the nine months ended September 30, 1997 has been computed by adjusting the Company's net income, as reported, to record income tax expense assuming an effective tax rate of 41% that would have been recorded had the Company been a C Corporation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 2 and 10 of Notes to Consolidated Financial Statements. (3) Included in income before taxes for the nine months ended September 30, 1997 is other income of $851,862 ($817,778 net of estimated income taxes of $34,084) resulting from the expiration of an option to purchase the assets of the Company by an unrelated third party. This income is not expected to be recurring. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 10 and 11 of Notes to Consolidated Financial Statements. If this non-recurring item had not occurred, pro forma net income and pro forma net income per share would be $3,426,669 and $0.34, respectively. (4) See Note 10 of Notes to Consolidated Financial Statements for a description of the computation of the number of shares used in per share calculations and net income per share. (5) Pro forma balance sheet data has been adjusted to reflect (i) an estimated deferred tax liability of $2,554,000 as of September 30, 1997 which would exist if the Company were treated as a C Corporation and (ii) an estimated distribution payable of approximately $3,512,000, of which $1,330,000 will be used to reduce notes receivable from shareholders based upon actual cash basis earnings through September 30, 1997 which the Company intends to distribute. The estimated deferred tax liability will change and may increase based upon changes between cash and accrual basis income. The estimated distribution payable will change and will significantly increase based upon actual cash basis earnings between September 30, 1997 and the date of this Prospectus. See "Use of Proceeds," "S Corporation Termination" and Notes 2 and 10 of Notes to Consolidated Financial Statements. (6) Adjusted to reflect (i) the sale of 3,400,000 shares of Common Stock offered by the Company hereby (at an assumed initial public offering price of $12 per share and after deducting the underwriting discount and estimated offering expenses payable by the Company) and the application of the estimated net proceeds therefrom and (ii) the pro forma balance sheet adjustments discussed in (4) above. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047761_fib_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047761_fib_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5e093afb64af8c87f12f05ed9503ce11e27f06e2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047761_fib_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT CLEARLY SUGGESTS OTHERWISE, REFERENCES TO "FIRST INTERSTATE" OR THE "COMPANY" INCLUDE FIRST INTERSTATE BANCSYSTEM, INC. AND ITS SUBSIDIARIES. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS REGARDING THE COMMON STOCK OF THE COMPANY GIVES RETROACTIVE EFFECT TO A 4-FOR-1 STOCK SPLIT IN OCTOBER 1997. THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" RELATING TO FUTURE EVENTS OR THE FUTURE PERFORMANCE OF THE COMPANY. THESE STATEMENTS INVOLVE VARIOUS RISKS AND UNCERTAINTIES. PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER SIGNIFICANTLY FROM SUCH PREDICTIONS. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS PROSPECTUS, INCLUDING THE MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS," WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY First Interstate is a bank holding company headquartered in Billings, Montana which operates 31 banking offices in 23 communities throughout Montana and Wyoming through its banking subsidiaries. At June 30, 1997, the Company had assets of $2.1 billion, deposits of $1.7 billion and total stockholders' equity of $153.9 million, making it the largest independent banking organization headquartered in Montana or Wyoming. First Interstate has three bank subsidiaries: First Interstate Bank in Montana ("FIB Montana"), First Interstate Bank in Wyoming ("FIB Wyoming") and First Interstate Bank, fsb in Hamilton, Montana ("First Interstate, fsb") (collectively, the "Banks" and individually a "Bank"). FIB Montana, a Montana chartered bank organized in 1916, has 20 banking offices in 14 Montana communities, including Billings, Bozeman, Colstrip, Cut Bank, Eureka, Evergreen, Gardiner, Great Falls, Hardin, Kalispell, Livingston, Miles City, Missoula and Whitefish. FIB Wyoming, a Wyoming chartered bank organized in 1893, has ten banking offices in eight Wyoming communities, including Buffalo, Casper, Gillette, Greybull, Lander, Laramie, Riverton and Sheridan. First Interstate, fsb, a federally chartered savings bank, was opened as a de novo savings bank in December 1996, and currently has one banking office in Hamilton, Montana. The Company, through the Banks, delivers a comprehensive range of consumer and commercial banking services to individual and business customers. These services include personal and business checking and savings accounts, time deposits, individual retirement accounts, cash management, trust services and commercial, consumer, real estate, agricultural and other loans. Additionally, the Company operates a substantial data processing division that performs data processing services for the Banks and 35 non-affiliated financial institutions in Montana, Wyoming and Idaho. The Company also supports over 540 ATM locations in 12 states, principally Montana, Wyoming, Idaho, Colorado and North Dakota. The banking industry is presently undergoing change with respect to regulatory matters, consolidation, changing consumer needs and economic and market conditions. The Company believes that it can best address this changing environment through its corporate "Strategic Vision." Through the Strategic Vision, the Company emphasizes providing its customers full service commercial banking at the local level using a personalized service approach, while serving and strengthening the communities in which the Banks are located through community service activities. The Company grants significant autonomy and flexibility to the Banks in delivering and pricing products at the local level in response to market considerations and customer needs. This flexibility and autonomy enables the Banks to remain competitive and enhances the relationships between the Banks and the customers they serve. The Company also emphasizes accountability, however, by establishing performance and incentive standards for the Banks which are tied to net income at the individual branch level. The Company believes that this combination of autonomy and accountability allows the Banks to provide a high level of personalized service to customers while remaining attentive to financial performance. The Company's growth strategy includes growing internally and expanding into new and complementary markets when appropriate opportunities arise. The Company's internal growth strategy is to attract and retain customers by providing personalized "high touch" service, increasing its offering of products and services and cross-selling existing products and services. The Company believes its ability to offer a complete package of consumer and commercial banking products and services enhances First Interstate's image as a "one-stop" banking organization. The Company has also grown in recent years by selectively acquiring banks in additional markets in Montana and Wyoming. Since September 1996, the Company has acquired Mountain Bank of Whitefish ("FIB Whitefish"), consisting of two branch locations, and two banks, consisting of six Montana and Wyoming branch locations, previously operated by First Interstate Bancorp (the "FIB Banks"). The Company is pursuing regulatory approval to open several new branch offices in Montana and Wyoming. The Company believes that it will continue to expand its presence in the Montana and Wyoming markets. The Company was incorporated in Montana in 1971. The Company maintains its principal executive offices at 401 North 31st Street, Billings, Montana 59101 and its telephone number is (406) 255-5300. FIB CAPITAL TRUST FIB Capital is a statutory business trust formed under Delaware law pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with the Delaware Secretary of State on October 1, 1997. FIB Capital's business and affairs are conducted by the Property Trustee, the Delaware Trustee and two individual Administrative Trustees who are officers of the Company. FIB Capital exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures issued by First Interstate and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Trust Securities). Accordingly, the Junior Subordinated Debentures will be the sole assets of FIB Capital and payments by First Interstate under the Junior Subordinated Debentures and the Expense Agreement will be the sole revenues of FIB Capital. All of the Common Securities will be owned by First Interstate. The Common Securities will rank PARI PASSU and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement resulting from an event of default under the Indenture, the rights of First Interstate as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. See "Description of the Trust Preferred Securities--Subordination of Common Securities of FIB Capital Held by First Interstate." First Interstate will acquire Common Securities in an aggregate liquidation amount equal to 3.0% of the total capital of FIB Capital. FIB Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. FIB Capital's principal offices are located at 401 North 31st Street, Billings, Montana 59101 and its telephone number is (406) 255-5300. THE OFFERING <TABLE> <S> <C> Issuer of Trust Preferred Securities...................... FIB Capital Securities offered................ 1,600,000 Trust Preferred Securities. The Trust Preferred Securities represent undivided beneficial interests in FIB Capital's assets, which will consist solely of the Junior Subordinated Debentures and payments thereunder. Distributions..................... The Distributions payable on each Trust Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Trust Preferred Security, will be cumulative, will accrue from the date of issuance of the Trust Preferred Securities, and will be payable quarterly in arrears on the last day of March, June, September and December of each year, commencing on December 31, 1997 (subject to possible deferral as described below). The amount of each Distribution due with respect to the Trust Preferred Securities will include amounts accrued to, but excluding, the date the Distribution payment is due. See "Description of the Trust Preferred Securities-- Distributions." Extension periods................. So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, First Interstate will have the right, at any time, to defer payments of interest on the Junior Subordinated Debentures by extending the interest payment period thereon for an Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. If interest payments are so deferred, Distributions on the Trust Preferred Securities will also be deferred and First Interstate will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to First Interstate's capital stock or debt securities that rank PARI PASSU with or junior to the Junior Subordinated Debentures. During an Extension Period, Distributions will continue to accumulate with interest thereon compounded quarterly. Because interest would continue to accrue and compound on the Junior Subordinated Debentures, to the extent permitted by applicable law, holders of the Trust Preferred Securities will be required to accrue income for United States federal income tax purposes. See "Description of Junior Subordinated Debentures--Option to Defer Interest Payment Period" and "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." Maturity.......................... The Junior Subordinated Debentures will mature on , 2027, which date may be shortened to a date not earlier than , 2002 if certain conditions are met (including First Interstate having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve). Redemption........................ The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Junior Subordinated </TABLE> <TABLE> <S> <C> Debentures at the Stated Maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus accumulated and unpaid Distributions thereon to the date of redemption. Subject to Federal Reserve approval, if then required under applicable capital guidelines or policies of the Federal Reserve, the Junior Subordinated Debentures are redeemable prior to maturity at the option of First Interstate (i) on or after , 2002 in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), upon the occurrence and during the continuance of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Trust Preferred Securities-- Redemption" and "Description of Junior Subordinated Debentures--Redemption." Distribution of Junior Subordinated Debentures......... First Interstate has the right at any time to terminate FIB Capital and cause the Junior Subordinated Debentures to be distributed to holders of Trust Preferred Securities in liquidation of FIB Capital, subject to First Interstate having received prior approval of the Federal Reserve to do so if then required under applicable capital guidelines or policies of the Federal Reserve. See "Description of the Trust Preferred Securities--Distribution of Junior Subordinated Debentures." Guarantee......................... Taken together, First Interstate's obligations under various documents described herein, including the Guarantee Agreement, provide a full guarantee of payments by FIB Capital of Distributions and other amounts due on the Trust Preferred Securities. Under the Guarantee Agreement, First Interstate guarantees the payment of Distributions by FIB Capital and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of Senior and Subordinated Debt) to the extent of funds held by FIB Capital. If FIB Capital has insufficient funds to pay Distributions on the Trust Preferred Securities (i.e., if First Interstate has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against First Interstate to enforce payment of such Distributions to such holder. See "Description of Junior Subordinated Debentures-- Enforcement of Certain Rights by Holders of Trust Preferred Securities," "Description of Junior Subordinated Debentures-- Events of Default and Description of Guarantee." Ranking........................... The Trust Preferred Securities will rank PARI PASSU, and payments thereon will be made pro rata, with the Common </TABLE> <TABLE> <S> <C> Securities of FIB Capital held by First Interstate, except as described under "Description of Trust Preferred Securities-- Subordination of Common Securities of FIB Capital held by First Interstate." The obligations of First Interstate under the Guarantee, the Junior Subordinated Debentures and other documents described herein are unsecured and rank subordinate and junior in right of payment to all current and future Senior and Subordinated Debt, the amount of which is unlimited. At June 30, 1997, the aggregate outstanding Senior and Subordinated Debt of First Interstate was approximately $52.0 million. In addition, because First Interstate is a holding company, all obligations of First Interstate relating to the securities described herein will be effectively subordinated to all existing and future liabilities of the Banks. First Interstate may cause additional trust preferred securities to be issued by trusts similar to FIB Capital in the future, and there is no limit on the amount of such securities that may be issued. In this event, First Interstate's obligations under the Junior Subordinated Debentures to be issued to such other trusts and First Interstate's guarantees of the payments by such trusts will rank PARI PASSU with First Interstate's obligations under the Junior Subordinated Debentures and the Guarantee, respectively. Voting rights..................... The holders of Trust Preferred Securities will generally have limited voting rights relating only to the modification of the Trust Preferred Securities, the dissolution, winding-up or termination of FIB Capital and certain other matters described herein. See "Description of Trust Preferred Securities--Voting Rights; Amendment of the Trust Agreement." Use of proceeds................... All of the proceeds from the sale of Trust Preferred Securities will be invested by FIB Capital in the Junior Subordinated Debentures. First Interstate intends to use $20.0 million of the proceeds to redeem the outstanding shares of the Company's noncumulative perpetual preferred stock, subject to regulatory approval. The Company intends to use the remaining proceeds to reduce indebtedness outstanding under the Company's revolving term loan. First Interstate expects the Trust Preferred Securities to qualify as Tier 1 capital under the capital guidelines of the Federal Reserve. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047775_wfs_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047775_wfs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1bc8627a5653f5e8f3a67f632a06cb82bbdda41a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047775_wfs_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of certain capitalized terms. Trust...................... WFS Financial 1997-D Owner Trust (the "Trust"). Seller..................... WFS Financial Auto Loans, Inc. (the "Seller"), a wholly owned, limited-purpose operating subsidiary of WFS Financial Inc. The principal executive offices of the Seller are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. Prior to May 29, 1996, the Seller was known as Western Financial Auto Loans, Inc. See "The Seller." WFS........................ WFS Financial Inc ("WFS" or, in its capacity as Master Servicer, the "Master Servicer"), a majority owned, operating subsidiary of Western Financial Bank, (the "Bank"), a federally chartered savings association. The principal offices of WFS are located at 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WFS." WII........................ WFS Investments, Inc. ("WII"), a California corporation and a wholly owned operating subsidiary of WFS. The principal office of WII is 23 Pasteur Road, Irvine, California 92618 and its telephone number is (714) 727-1000. See "WII." Securities Offered......... The securities offered are as follows: A. General................. The WFS Financial 1997-D Owner Trust Auto Receivable Backed Notes (the "Notes") will represent obligations of the Trust secured by the assets of the Trust (other than the Certificate Distribution Account and the Certificate Policy). The WFS Financial 1997-D Owner Trust Auto Receivable Backed Certificates (the "Certificates" and, together with the Notes, the "Securities") will represent fractional undivided interests in the Trust. The Trust will issue four Classes of Notes pursuant to an indenture to be dated as of December 1, 1997 (the "Indenture"), between the Trust and Bankers Trust Company, as trustee (the "Indenture Trustee"), as follows: (i) $105,000,000 aggregate principal amount of 5.91% Auto Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii) $110,000,000 aggregate principal amount of 6.20% Auto Receivable Backed Notes, Class A-2 (the "Class A-2 Notes"), (iii) $140,000,000 aggregate principal amount of 6.25% Auto Receivable Backed Notes, Class A-3 (the "Class A-3 Notes") and (iv) $90,000,000 aggregate principal amount of 6.25% Auto Receivable Backed Notes, Class A-4 (the "Class A-4 Notes"). Payments of principal and interest on the Notes will be made in accordance with the priorities set forth under "Certain Information Regarding the Securities -- Distributions on the Securities." The Trust will issue $55,000,000 aggregate principal amount of 6.40% Auto Receivable Backed Certificates (the "Certificates") pursuant to a trust agreement (the "Trust Agreement") to be dated as of the date of initial issuance of the Securities (the "Closing Date"), among the Seller, Financial Security Assurance Inc. ("Financial Security"), WII and Chase Manhattan Bank Delaware, as trustee (the "Owner Trustee" and, together with the Indenture Trustee, the "Trustees"). Payments in respect of the Certificates will be subordinated to payments on the Notes to the extent described herein. Each Class of Notes and the Certificates will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Definitive Securities will be issued only under the limited circumstances described herein. See "Certain Information Regarding the Securities -- Book-Entry Registration" and "-- Definitive Securities." B. Property of the Trust... Each Note will represent an obligation of, and each Certificate will represent a fractional undivided interest in, the Trust. The property of the Trust will primarily include (i) a pool of retail installment sales contracts and installment loans (the "Contracts") secured by the new and used automobiles and light-duty trucks financed thereby (the "Financed Vehicles"); (ii) certain monies due under the Contracts on and after December 1, 1997 (the "Cut-Off Date"); (iii) security interests in the Financed Vehicles; (iv) a financial guaranty insurance policy (the "Note Policy") to be issued by Financial Security for the exclusive benefit of Noteholders, which will unconditionally and irrevocably guarantee payment of the Scheduled Payments on each Distribution Date; (v) a financial guaranty insurance policy (the "Certificate Policy" and, together with the Note Policy, the "Policies") to be issued by Financial Security for the exclusive benefit of Certificateholders, which will unconditionally and irrevocably guarantee payment of the Guaranteed Distributions on each Distribution Date; (vi) amounts on deposit in the Collection Account, the Note Distribution Account, the Certificate Distribution Account, the Spread Account and the Holding Account, including all Eligible Investments therein and all income from the investment of funds therein and all proceeds therefrom; (vii) proceeds from claims under certain insurance policies in respect of individual Financed Vehicles or obligors under the Contracts (the "Obligors"); and (viii) certain rights under the sale and servicing agreement to be dated as of December 1, 1997 (the "Sale and Servicing Agreement"), among the Trust, the Seller and the Master Servicer. Pursuant to the Indenture, the property of the Trust (other than the Certificate Distribution Account and the Certificate Policy) will be held by the Master Servicer for the benefit of the Indenture Trustee and Financial Security on behalf of the holders of the Notes. C. Distribution Dates...... Distributions of interest and principal on the Securities will be made on March 20, June 20, September 20 and December 20 of each year (or, if any such day is not a Business Day, on the next succeeding Business Day) (each, a "Distribution Date"), commencing March 20, 1998. Payments on the Securities on each Distribution Date will be paid to the holders of record of the related Securities on the Business Day immediately preceding such Distribution Date or, in the event that Definitive Securities are issued, as of the 15th day of the month immediately preceding the month in which such Distribution Date occurs (each, a "Record Date"). A "Business Day" will be any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Wilmington, Delaware, or Los Angeles, California are authorized or obligated by law, executive order or government decree to be closed. To the extent not previously paid prior to such dates, the outstanding principal amount of (i) the Class A-1 Notes will be payable on December 20, 1998 (the "Class A-1 Final Distribution Date"), (ii) the Class A-2 Notes will be payable on September 20, 2000 (the "Class A-2 Final Distribution Date"), (iii) the Class A-3 Notes will be payable on March 20, 2002 (the "Class A-3 Final Distribution Date") and (iv) the Class A-4 Notes will be payable on March 20, 2003 (the "Class A-4 Final Distribution Date" and, together with the Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date and the Class A-3 Final Distribution Date, the "Note Final Distribution Dates"). To the extent not previously paid in full prior to such date, the unpaid principal balance of the Certificates will be payable on June 20, 2005 (the "Certificate Final Distribution Date" and, together with the Note Final Distribution Dates, the "Final Distribution Dates"). Terms of the Notes......... The principal terms of the Notes will be as described below: A. Interest Rates.......... Interest will be borne on (i) the Class A-1 Notes at the rate of 5.91% per annum (the "Class A-1 Rate"), (ii) the Class A-2 Notes at the rate of 6.20% per annum (the "Class A-2 Rate"), (iii) the Class A-3 Notes at the rate of 6.25% per annum (the "Class A-3 Rate") and (iv) the Class A-4 Notes at the rate of 6.25% per annum (the "Class A-4 Rate" and, together with the Class A-1 Rate, the Class A-2 Rate and the Class A-3 Rate, the "Interest Rates"). B. Interest................ Interest on the outstanding principal amount of each Class of Notes will accrue at the related Interest Rate from and including the most recent Distribution Date on which interest has been paid (or from and including the Cut-Off Date with respect to the first Distribution Date) to but excluding the current Distribution Date (each, an "Interest Period"). Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days elapsed in an Interest Period and a 360-day year. Interest on the Class A-2, Class A-3 and Class A-4 Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Notes for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the related Interest Rate. See "The Notes -- Payments of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." C. Principal............... Principal of the Notes will be payable on each Distribution Date in an amount generally equal to the Note Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." The Note Principal Distributable Amount will include an amount equal to the Accelerated Principal Distributable Amount for such Distribution Date. On each Distribution Date, the Note Principal Distributable Amount will be applied in the following priority: first to reduce the principal amount of the Class A-1 Notes; second, after the principal amount of the Class A-1 Notes has been reduced to zero, to reduce the principal amount of the Class A-2 Notes; third, after the principal amount of the Class A-2 Notes has been reduced to zero, to reduce the principal amount of the Class A-3 Notes; and fourth, after the principal amount of the Class A-3 Notes has been reduced to zero, to reduce the principal amount of the Class A-4 Notes. Notwithstanding the foregoing, if the principal amount of a Class of Notes has not been paid in full prior to its Note Final Distribution Date, the Note Principal Distributable Amount for such Note Final Distribution Date will include an amount sufficient to reduce the unpaid principal amount of such Class of Notes to zero on such Note Final Distribution Date. See "The Notes -- Payments of Principal" and "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." D. Optional Redemption..... In the event of an Optional Purchase, each Class of outstanding Notes will be redeemed in whole, but not in part, at a redemption price equal to the unpaid principal amount of such Class of Notes plus accrued interest thereon at the related Interest Rate. See "The Notes -- Optional Redemption." E. Mandatory Redemption.... Under certain conditions, the Notes may be accelerated upon the occurrence of an Event of Default under the Indenture. So long as no Insurer Default shall have occurred and be continuing, under certain circumstances Financial Security will have the right (in addition to its obligation to make Scheduled Payments on the Notes in accordance with the terms of the Note Policy) but not the obligation, to elect to accelerate the principal of the Notes and to cause the Master Servicer or the Trustee to sell or otherwise liquidate the property of the Trust and to deliver the proceeds to the Indenture Trustee for distribution in accordance with the terms of the Indenture. See "The Notes -- Events of Default." Terms of the Certificates............... The principal terms of the Certificates will be as described below: A. Interest................ On each Distribution Date, the Owner Trustee or any paying agent as the Owner Trustee may designate from time to time (the "Paying Agent") will distribute pro rata to Certificateholders of record as of the related Record Date accrued interest at the rate of 6.40% per annum (the "Pass-Through Rate") on the Certificate Balance, as defined below, as of the immediately preceding Distribution Date (after giving effect to distributions of principal to be made on such immediately preceding Distribution Date) or, in the case of the first Distribution Date, the Original Certificate Balance. Interest in respect of a Distribution Date will accrue from and including the Cut-Off Date (in the case of the first Distribution Date), or from and including the most recent Distribution Date on which interest has been paid, to but excluding the current Distribution Date. Interest on the Certificates for any Distribution Date due but not paid on such Distribution Date will be due on the next Distribution Date, together with, to the extent permitted by applicable law, interest on such shortfall at the Pass-Through Rate. See "The Certificates -- Distributions of Interest" and "Certain Information Regarding the Securities -- Distributions on the Securities." The "Certificate Balance" will equal $55,000,000 (the "Original Certificate Balance") on the Closing Date and on any date thereafter will equal the Original Certificate Balance reduced by all distributions of principal previously made in respect of the Certificates. Distributions on the Certificates will be subordinated to payments of interest and principal on the Notes as described under "The Certificates" and "Certain Information Regarding the Securities -- Distributions on the Securities." B. Principal............... No principal will be paid on the Certificates until the Distribution Date on which the principal amount of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes has been reduced to zero. On such Distribution Date and each Distribution Date thereafter, principal of the Certificates will be payable in an amount equal to the Certificate Principal Distributable Amount for such Distribution Date, calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments." On each Distribution Date on or after the Distribution Date on which the Class A-4 Notes have been paid in full, any Accelerated Principal Distributable Amount will be included in the Certificate Principal Distributable Amount. If not paid in full prior to the Certificate Final Distribution Date, the remaining Certificate Balance, if any, will be payable on that date. See "The Certificates -- Distributions of Principal." C. Optional Prepayment..... In the event of an Optional Purchase, the Certificates will be repaid in whole, but not in part, at a repayment price equal to the Certificate Balance plus accrued interest thereon at the Pass-Through Rate. See "The Certificates -- Optional Prepayment." Security for the Securities................. The principal security for the Securities will be as described below: A. The Contracts........... The Contracts will consist of retail installment sales contracts and installment loans, secured by liens on the Financed Vehicles, purchased from WFS by the Seller and from the Seller by the Trust, including the right to receive the payments thereunder on and after the Cut-Off Date. The Seller will be required to repurchase Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Securityholders, the Indenture Trustee, the Owner Trustee or Financial Security. The Contracts were purchased from new and used car dealers or originated directly from consumers by WFS. The Contracts were originated in California and 36 other states by new and used car dealers not affiliated with WFS, except for a limited number of Contracts originated directly from consumers by WFS. The Contracts will be selected by WFS from its portfolio of retail installment sales contracts and installment loans based upon the criteria to be specified in the Sale and Servicing Agreement. As of the Cut-Off Date, the Aggregate Scheduled Balance will be $500,000,000 (the "Cut-Off Date Aggregate Scheduled Balance") and the Contracts will have an expected weighted average annual percentage rate of approximately 15.43% and an expected weighted average remaining maturity of approximately 57 months. See "The Contracts Pool." Approximately 33.32% of the aggregate principal amount of the Contracts will be Rule of 78's Contracts and approximately 66.68% will be Simple Interest Contracts, based upon the anticipated Scheduled Balances of the Contracts as of the Cut-Off Date. All net collections received by the Master Servicer on or in respect of the Contracts, any Advances made by the Master Servicer and all amounts paid under the Policies will be deposited in or credited to the Collection Account or, in certain limited instances, the Holding Account. On each Distribution Date, the Indenture Trustee will distribute the amounts on deposit in the Collection Account with respect to such Distribution Date to the Note Distribution Account and, to the extent applicable, the Certificate Distribution Account. All payments to Noteholders will be made from the Note Distribution Account and to Certificateholders from the Certificate Distribution Account. See "Certain Information Regarding the Securities -- The Accounts and Eligible Investments" and "-- Distributions on the Securities." B. The Spread Account...... The Securityholders will be afforded certain limited protection, to the extent described herein, against losses in respect of the Contracts by the establishment of a segregated trust account in the name of the Indenture Trustee for the benefit of the Securityholders (the "Spread Account"). The Spread Account will be part of the Trust. The Spread Account will be created with an initial deposit by the Seller of $15,000,000 (the "Spread Account Initial Deposit"). The funds in the Spread Account will thereafter be supplemented on each Distribution Date by the deposit of any Excess Amounts (as defined below), until the cash on deposit in the Spread Account is at least equal to the Minimum Funded Amount and the sum of the Funded Amount and the Overcollateralization Amount is at least equal to the Specified Spread Account Balance. "Excess Amounts" in respect of a Distribution Date will be calculated as described under "Certain Information Regarding the Securities -- Distributions on the Securities -- Deposits to the Distribution Accounts; Priority of Payments" and will equal the funds on deposit in the Collection Account in respect of such Distribution Date, after giving effect to all distributions required to be made on such Distribution Date. The Specified Spread Account Balance, the Minimum Funded Amount and the Overcollateralization Amount will be calculated as described under "Certain Information Regarding the Securities -- Payment Priorities of the Notes and the Certificates; The Spread Account -- Calculation of Specified Spread Account Balance." On each Distribution Date, funds will be withdrawn from the Spread Account for distribution to Securityholders to cover any shortfalls in interest and principal required to be paid on the Securities (before giving effect to any claim under the Policies). If on the last day of any month (each, a "Calculation Day") or on any Distribution Date the Spread Account is fully funded, any excess cash on deposit therein will be released therefrom and upon such distribution Securityholders will have no further rights in, or claims to, such amounts. See "Certain Information Regarding the Securities -- Withdrawals from the Spread Account." C. The Policies............ On the Closing Date, Financial Security will issue the Note Policy to the Indenture Trustee and the Certificate Policy to the Owner Trustee pursuant to the insurance, indemnity and pledge agreement to be dated as of December 1, 1997 (the "Insurance Agreement"), among Financial Security, the Trust, the Seller, Bankers Trust Company as Collateral Agent for Financial Security, WII and WFS. Pursuant to the Note Policy, Financial Security will unconditionally and irrevocably guarantee to the Noteholders payment of the Scheduled Payments for each Distribution Date. Pursuant to the Certificate Policy, Financial Security will unconditionally and irrevocably guarantee to the Certificateholders payment of the Guaranteed Distributions for each Distribution Date. See "The Policies" and "Financial Security Assurance Inc." Optional Purchase.......... The Seller may, but will not be obligated to, purchase all of the Contracts in the Trust, and thereby cause early retirement of all outstanding Securities, on any Distribution Date as of which (i) the Aggregate Scheduled Balance is 10% or less of the Cut-Off Date Aggregate Scheduled Balance and (ii) the aggregate outstanding principal amount of the Securities is 5% or less of the initial aggregate amount of the Securities (an "Optional Purchase"). See "Certain Information Regarding the Securities -- Termination." The Master Servicer........ WFS, as Master Servicer, will be obligated pursuant to the Sale and Servicing Agreement, subject to the limitations set forth therein, to service the Contracts and to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by WFS are incorrect or if WFS, as Master Servicer, breaches certain of its servicing obligations under the Sale and Servicing Agreement, in either case in a manner that materially and adversely affects such Contracts. See "The Master Servicer." Ratings.................... It is a condition of issuance that the Class A-1 Notes be rated A-1+ by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the "Rating Agencies"), and the Class A-2, Class A-3 and Class A-4 Notes and the Certificates each be rated AAA by S&P and Aaa by Moody's. See "Ratings of the Securities." Tax Status................. In the opinion of special tax counsel to the Seller, for both federal and California income tax purposes, the Notes will be characterized as debt, and the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. Each Noteholder, by the acceptance of a Note, will agree to treat the Notes as indebtedness, and each Certificateholder, by the acceptance of a Certificate, will agree to treat the Trust as a partnership in which the Certificateholders are partners for federal income tax purposes. See "Certain Federal Income Tax Consequences" and "Certain California Income Tax Consequences." ERISA Considerations....... Subject to the considerations discussed under "ERISA Considerations," the Notes will be eligible for purchase by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Since the Certificates will be subordinated to the Notes to the extent described herein, employee benefit plans subject to ERISA will not be eligible to purchase the Certificates. Any benefit plan fiduciary considering purchase of the Securities should, among other things, consult with its counsel in determining whether all required conditions have been satisfied. See "ERISA Considerations." Legal Investment........... The Class A-1 Notes have been structured to be eligible securities for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisors regarding the eligibility of the Class A-1 Notes under Rule 2a-7, the fund's investment policies and objectives and an investment in the Class A-1 Notes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047837_argo-tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047837_argo-tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2811b46d31fbc1eccb5e1620d28dae7a2322837c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047837_argo-tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, unless the context otherwise indicates, references to "Carter" refer to the J.C. Carter Company, Inc., after the completion of the Acquisition and references to the "Company" refer to Argo-Tech Corporation ("Argo-Tech") and its wholly owned subsidiaries (the "Subsidiaries"), including, for periods after the consummation of the Acquisition, Carter. As used in this Prospectus, "large commercial aircraft" refers to jet aircraft manufactured outside of the former Soviet bloc, seating 100 or more passengers, "large commercial aircraft engines" refers to commercial jet engines manufactured outside of the former Soviet bloc, having 10,000 pounds of thrust or more, and "airframes" refers to jet airframes manufactured outside of the former Soviet bloc. THE COMPANY OVERVIEW The Company is a leading designer, manufacturer and servicer of high performance fuel flow devices for the aerospace industry. The Company provides a broad range of products and services to substantially all commercial and domestic military engine and airframe manufacturers, to airlines worldwide and to the U.S. and certain foreign militaries. The Company is the world's leading supplier of main engine fuel pumps to the commercial aircraft industry and is a leading supplier of airframe products and aerial refueling systems. Main engine fuel pumps are precision mechanical pumps, mounted to the engine, that maintain the flow of fuel to the engine at a precise rate and pressure. Airframe products include fuel pumps and airframe accessories, which are used to transfer fuel to the engine systems and to shift and control fuel between tanks in order to maintain aircraft balance. Aerial refueling systems permit military aerial tankers to refuel fighter, bomber and other military aircraft while in flight. The Company is also a leading manufacturer of components for ground fueling systems and estimates that one or more of its fueling hydrants, couplers and nozzles are installed in approximately 65% of airports worldwide. Ground fueling systems transfer fuel from fueling trucks and underground tanks to the underwing fuel receptacle of the aircraft. Sales to original equipment manufacturers ("OEMs") provide the Company with a platform for its substantial aftermarket business, which accounts for the major component of its net revenues. The Company's aftermarket business provides repair and overhaul services and distributes spare parts to commercial and military customers worldwide. As of December 31, 1996, the Company's main engine fuel pumps were used in approximately 8,200, or two-thirds, of the large commercial aircraft in service throughout the world. In addition, during 1996, the Company received orders for approximately 75% of all new main engine fuel pumps ordered by large commercial aircraft engine manufacturers worldwide. The Company is the sole source supplier of main engine fuel pumps for all CFM56 series engines, which were selected for installation on approximately 61% of all large commercial aircraft ordered in 1996. This engine powers the Airbus Industries ("Airbus") A-319, A-320, A-321 and A-340 and The Boeing Company ("Boeing") 737 aircraft. The Company is also the sole source supplier of main engine fuel pumps for all engines used on the Boeing 777 aircraft. Complementing its position as a leading supplier of main engine fuel pumps, the Company estimates that one or more of its airframe fuel pumps or accessories are installed on over 80% of all large commercial and U.S. designed military aircraft currently in use. Aerial refueling components manufactured by the Company are installed on every U.S. designed military aircraft equipped with aerial refueling capabilities. In addition, ground fueling components manufactured by the Company have been selected for use in all nine of the major commercial airports constructed in the past ten years, including the recently completed Denver International Airport and the Hong Kong International Airport, which is currently under construction. The Company also produces and services industrial liquefied natural gas ("LNG") pumps and operates a materials laboratory and a business park in Cleveland, Ohio, where the Company maintains its headquarters and primary production facilities. Since prior to 1992, until the acquisition of Carter, the Company was primarily a manufacturer of main engine fuel pumps. In September, 1997, the Company expanded its product lines through the acquisition of the outstanding capital stock of Carter, a California corporation, for $107 million in cash. Carter's product lines include airframe pumps and accessories, military aerial refueling systems and other fuel system components such as valves and ground fueling components, as well as the production and service of LNG pumps. Pro forma for the Acquisition, for the twelve month period ended August 2, 1997, the Company generated net revenues, income from operations and Adjusted EBITDA (as defined) of $156.2 million, $33.0 million and $49.9 million, respectively. For the same period, on a pro forma basis, aerospace products and aftermarket sales accounted for approximately 85% and 49% of the Company's net revenues, respectively. COMPETITIVE STRENGTHS The Company believes it has a strong competitive position as a result of the following factors: - Strong Industry Position and Large Existing Installed Base. The Company has the largest installed base of large commercial main engine fuel pumps (approximately 30,000) in the aerospace industry. The Company also has an installed base of over 215,000 military engine and airframe pumps and accessories; 145,000 other engine pumps and airframe accessories, including fuel gear motors and small main engine fuel pumps for helicopters, turboprop and business aircraft; and 5,800 aerial refueling components. This extensive installed base provides the Company with significant opportunities for aftermarket sales of spare parts and repair and overhaul services. Manufacturers of aerospace parts and components are required to obtain airworthiness certification by the Federal Aviation Administration ("FAA") in the case of products used on commercial aircraft, by the United States Department of Defense (the "U.S. Department of Defense") in the case of products used on U.S. military aircraft, or by similar agencies in most foreign countries. Such regulatory restrictions, which limit the access of other manufacturers to the aftermarket, contribute to significantly higher margins on commercial spare parts and overhaul services. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry. The Company maintains its technological leadership by operating state-of-the-art facilities and employing over 110 engineers. The Company also staffs an on-site design engineer at two of its major OEM customers. These on-site engineers, in combination with its engineering and design staffs, assist the Company in the development of innovative products which address the needs and requirements of its customers and enhance its ability to gain early entrant advantages. As a result of this technological leadership, the Company's main engine fuel pumps have been selected for 22 of the 33 large commercial aircraft engine programs put into production over the last 20 years. For example, the Company is the only manufacturer to win a new production contract for main engine fuel pumps from Rolls-Royce, PLC. ("Rolls-Royce") since 1988 and from General Electric Company ("GE") since 1989. In addition, with the aid of its aftermarket customers, the Company recently replaced the incumbent main engine fuel pump supplier on both the GE CF34-8C (Bombardier Canadair Aerospace ("Canadair") RJ700) and the Rolls-Royce RB211-535 (Boeing 757) engine programs, despite the industry norm against such replacements. Management also believes that its experience with engine systems for use on airframes ranging from the Cessna Aircraft Company ("Cessna") Citation to the Boeing 777, is a competitive advantage that enhances the Company's ability to effectively meet the technical requirements of all new engine system designs. - Strong Relationship with Customers. The Company has developed strong relationships with its OEM customers (including GE, Pratt and Whitney ("Pratt & Whitney") and Rolls-Royce), airline customers (including American Airlines, Lufthansa, Japan Air Lines and United Airlines) and freight carrier customers (including Federal Express and United Parcel Service). Specifically, the Company has been a major supplier of main engine fuel pumps to Pratt & Whitney for over 40 years, and has maintained a relationship with United Airlines since 1962. Management believes that the Company's reputation for quality and service in the aftermarket has further solidified its strong relationships with its airline and freight carrier customers. In addition to purchasing parts and services in the aftermarket, these customers are also influential in the engine OEM's supplier selection process, enhancing the Company's ability to secure positions on new engine platforms. Management believes that Argo-Tech's relationships with its OEM customers will enhance Carter's ability to sell products to existing Argo-Tech customers. For example, management expects to introduce Carter's cross-feed and shut-off valves to Argo-Tech's existing OEM engine customers such as GE, Pratt & Whitney and Rolls-Royce. The Company believes similar opportunities exist to increase sales of Argo-Tech products to Carter's customers. For example, management expects to introduce Argo-Tech airframe pumps to Carter's business and regional jet OEM customers such as Canadair, Cessna, Gulfstream Aerospace Corp. ("Gulfstream") and Lear Corp. ("Lear"). - Strong Core Competencies. The Company has developed strong core competencies that management believes will enable it to improve its position as a leading aerospace component supplier and provide opportunities for growth outside its current product lines. These core competencies include: (i) operational skills for low volume manufacturing of high precision fluid flow devices, (ii) the capability to rapidly design unique solutions to difficult fluid flow problems, (iii) skill and experience in meeting the demanding specifications of aerospace customers, the FAA, the U.S. Department of Defense and other regulatory bodies, and (iv) skill and experience in the design of integrated fuel systems and subsystems. These core competencies have enabled the Company to become the sole source supplier for a substantial number of aerospace programs. Management also believes that these core competencies will allow the Company to develop additional fuel system and other high precision products for use throughout the aerospace industry. - Experienced Management Team. Argo-Tech's Chairman and CEO, Michael Lipscomb, and five other members of senior management, have been with Argo-Tech or its predecessor since 1980. Under Mr. Lipscomb's leadership, Argo-Tech has reduced inventory levels, improved quality and on-time performance and reduced manufacturing lead times, all of which have contributed to significant increases in gross margins, which have grown from 28.5% for fiscal 1992 to 42.6% for the nine months ended August 2, 1997. BUSINESS STRATEGY The Company's strategy is to maintain its leadership position and to grow through the expansion of its product lines and the pursuit of strategic acquisitions. This strategy includes the following key components: - Expansion of Product Lines. The Company plans to apply its core competencies in the aerospace business and to take advantage of its strong reputation and relationships with its customers to expand into specific industrial markets. The Company has utilized its expertise in main engine fuel pump technology to develop industrial engine power generation applications, and plans to capitalize on Carter's expertise in other industrial applications. The Company's strong relationships with GE, Pratt & Whitney and Rolls-Royce have already led to development and production contracts for industrial products such as lube and scavenge pumps and fluid flow dividers. In addition, the high quality and reliability of the Company's main engine fuel pumps have prompted several customers to use the Company's components on certain of their industrial turbine engines. For example, Company-designed and manufactured components are or will be installed on Westinghouse Electric Corp. ("Westinghouse"), Pratt & Whitney, GE and Rolls-Royce land based power generation applications. The Company anticipates further developing this business by introducing Carter's products to these customers. - Aerospace Growth through Acquisitions. The Company plans to pursue strategic acquisitions in the aerospace and industrial fluid flow device industries in order to capitalize on the trend for development of airframe and engine fluid flow systems that will result in increased reliance on integrated systems providers. For example, the Acquisition expands the Company's product lines to include aerial refueling components, aerospace valves and other fuel transfer control components and enhances its base from which to design, manufacture and deliver a broader range of fuel transfer systems and components. While the Company is currently evaluating, and will continue to evaluate other acquisition opportunities, there are no pending agreements or understandings regarding acquisitions. - Enhancement of Operating Efficiencies. Management constantly reviews the Company's operations for opportunities to further reduce costs and increase manufacturing efficiencies through improved utilization of production facilities, continual rationalization of the vendor base and more efficient human resource allocation. Continued enhancements of operating efficiencies include the transfer of production between facilities to absorb fixed overhead, the installation of integrated computer systems at its Costa Mesa facility (the "Costa Mesa Facility"), strengthening of the certified operator and vendor programs and the reassignment of some engineering resources to the development of new products and technologies. - Ground Fueling Growth. The Company intends to devote significant resources to the enhancement of sales, marketing and development of ground fueling products. The Company has recently developed digital pressure control valves that incorporate a microprocessor to enhance fuel flow control and accurately measure the pressure in an aircraft's fuel tank during fueling, allowing for reduced fueling time. Although these products have been available for less than a year, the Company has already supplied over 35 systems to various locations around the world, including the Middle East and Latin America. In addition, the Company has identified three new potential product applications for its ground fueling technology: railroad fluid transfers, fueling of off-road construction and mining equipment and liquefied natural gas ("LNG") nozzles and receptacles used on alternative fuel vehicles. Management believes that these potential product applications could significantly increase the Company's ground fueling sales. ARGO-TECH HISTORY AND OWNERSHIP Argo-Tech, a Delaware corporation, was formed in 1986 to acquire the Power Accessories Division of TRW Inc. (the "TRW Transaction"). The Company and its predecessors have more than 50 years' experience in the aerospace industry. In 1990, the Company underwent a corporate restructuring and disposed of substantially all of its operations except for its aircraft accessories business and became a wholly owned subsidiary of AT Holdings Corporation ("AT Holdings" or "Parent"). AT Holdings was formed in 1990 to purchase the Company and does not have any other assets or operations not related to the Company. The new owners of AT Holdings Corporation after the restructuring included, among others, (i) Vestar Capital Partners ("Vestar"), a private investment firm, (ii) Masashi Yamada, a private investor, and (iii) a group of 29 executives led by the Company's current President and CEO, Michael Lipscomb. In 1994, with the participation of all of the Company's salaried employees, the ESOP (as defined) was formed and acquired 30% of the common stock ("Parent Stock") of AT Holdings, including the Parent Stock previously owned by Vestar. Currently, management and the ESOP own 36% of the outstanding Parent Stock. Mr. Yamada holds approximately 49% of the outstanding Parent Stock through AT Holdings, LLC ("AT LLC"), a domestic limited liability company under his control, and an additional 6% through YC International, Inc. ("YCI"), a U.S. subsidiary of Yamada Corporation, which is a Japanese trading company controlled by Mr. Yamada. THE TRANSACTIONS With the consummation of the Offering, the Company (i) consummated the Acquisition for a cash purchase price of $107.0 million (subject to certain post-closing adjustments), (ii) amended and restated the New Credit Facility (as defined) to allow for, among other things, the Acquisition and the issuance of the Original Notes (the "Amended Credit Facility"), (iii) borrowed the delayed draw acquisition loans under the Amended Credit Facility in an aggregate principal amount equal to $15.0 million (the "Delayed Draw Acquisition Loans") and (iv) repaid $46.7 million of subordinated indebtedness (including accrued interest) owed to affiliates (the "Existing Notes"). The Offering, the Acquisition, the execution of the Amended Credit Facility, the borrowings under Delayed Draw Acquisition Loans and the repayment of the Existing Notes are collectively referred to herein as the "Transactions." See "Description of the Amended Credit Facility." The table below illustrates the Company's corporate structure as of the closing of the Acquisition: AT Holdings | Argo-Tech Corporation | --------------------------------------------------------------------- | | | | | | AT Argo-Tech Argo-Tech Argo-Tech J.C. Carter AT Export Corporation Corporation Corporation Company, Inc.* Insurance (HBP)* (OEM)* (Aftermarket)* *Subsidiary Guarantor All corporations shown are wholly owned by their respective parent. AT Export and AT Insurance are not guarantors of the Notes; both have inconsequential assets, liabilities and equity, and their only operations are the result of intercompany activity which is immediately dividended back to the Company. The Notes are not collateralized by the capital stock of each of the Subsidiary Guarantors nor of the Parent. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER.... The Original Notes were sold, in a transaction exempt from the registration requirements of the Securities Act, by the Company on September 26, 1997 to Chase Securities Inc. (the "Initial Purchaser"). In connection therewith, the Company executed and delivered, for the benefit of the holders of the Original Notes, an Exchange and Registration Rights Agreement dated September 26, 1997 (the "Exchange and Registration Rights Agreement") which is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part, providing for, among other things, the Exchange Offer so that the Exchange Notes will be freely transferable by the holders thereof without registration or any prospectus delivery requirements under the Securities Act, except that a "dealer" or any of its "affiliates," as such terms are defined under the Securities Act, who exchanges Original Notes held for its own account will be required to deliver copies of this Prospectus in connection with any resale of the Exchange Notes issued in exchange for such Original Notes. See "The Exchange Offer -- Purposes and Effects of the Exchange Offer" and "Plan of Distribution." THE EXCHANGE OFFER............... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Original Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. There is $140,000,000 aggregate principal amount of Original Notes outstanding. The Original Notes and the Exchange Notes are collectively referred to herein as the "Notes." The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity date) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that (i) the Exchange Notes are freely transferable by holders thereof (other than as provided herein) and are not subject to any covenant restricting transfer absent registration under the Securities Act and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. See "The Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or (ii) a person that is an affiliate (as defined in Rule 405 under the Securities Act) of the Company), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The Company has not sought, and does not currently intend to seek a no- action letter. There can be no assurance that the staff of the Securities and Exchange Commission would make a similar determination with respect to the Exchange Offer. Each broker-dealer that receives the Exchange Notes for its own account in exchange for the Original Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. REGISTRATION RIGHTS AGREEMENT.... The Original Notes were sold by the Company on September 26, 1997 to the Initial Purchaser pursuant to a Securities Purchase Agreement dated as of September 23, 1997 by and between the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial Purchaser entered into the Exchange and Registration Rights Agreement which grants the holders of the Original Notes certain exchange and registration rights. See "The Exchange Offer -- Termination of Certain Rights." This Exchange Offer is intended to satisfy such rights, which terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes are not entitled to any exchange of registration rights with respect to the Exchange Notes. EXPIRATION DATE.................. The Exchange Offer will expire at 5:00 p.m., New York City time, on [the 21st business day following the Exchange Offer], 1997, unless the Exchange Offer is extended (for a maximum of an additional 20 business days) by the Company in its reasonable discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. ACCRUED INTEREST ON THE EXCHANGE NOTES AND ORIGINAL NOTES....... Interest on the Exchange Notes will accrue from (A) the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor, or (B) if no interest has been paid on the Notes, from September 26, 1997. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. CONDITIONS TO THE EXCHANGE OFFER................. The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. PROCEDURES FOR TENDERING ORIGINAL NOTES................. Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Original Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. Original Notes may be physically delivered, but physical delivery is not required if a confirmation of a book-entry of such Original Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depository") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker or dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS.............. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES... Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the "Exchange Offer -- Guaranteed Delivery Procedures." ACCEPTANCE OF THE ORIGINAL NOTES AND DELIVERY OF THE EXCHANGE NOTES.......................... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Original Notes which are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." WITHDRAWAL RIGHTS................ Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." EXCHANGE AGENT................... Harris Trust and Savings Bank is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." EFFECT ON HOLDERS OF THE ORIGINAL NOTES............. As a result of the making of, and upon acceptance for exchange of all validly tendered Original Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled one of the covenants contained in the Exchange and Registration Rights Agreement and, accordingly, no liquidated damages will become payable in respect of the Original Notes pursuant to the applica- ble terms of the Exchange and Registration Rights Agreement. Holders of the Original Notes who do not tender their Original Notes will be entitled to all the rights and limitations applicable thereto under the Indenture between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), relating to the Original Notes and the Exchange Notes, except for any rights under the Indenture or the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Original Notes pursuant to, the Exchange Offer. All untendered Original Notes will continue to be subject to the restrictions on transfer provided for in the Original Notes and in the Indenture. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Original Notes could be adversely affected. USE OF PROCEEDS.................. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. THE NOTES THE EXCHANGE NOTES............... The Exchange Offer applies to $140,000,000 aggregate principal amount of the Original Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Original Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. See "Description of Notes" for further information and for definitions of certain capitalized terms used below. ISSUER........................... Argo-Tech Corporation INTEREST RATE.................... The Notes will bear interest at a rate of 8 5/8% per annum. MATURITY DATE.................... October 1, 2007. INTEREST PAYMENT DATES........... April 1 and October 1 of each year, commencing on April 1, 1998. SINKING FUND..................... None. OPTIONAL REDEMPTION.............. Except as described below, the Company may not redeem the Notes prior to October 1, 2002. On or after such date, the Company may redeem the Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to October 1, 2000, the Company may, subject to certain requirements, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Cash Proceeds (as defined) of one or more Public Equity Offerings by the Company or Parent, at a price equal to 108.625% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL................ Upon the occurrence of a Change of Control (as defined), each holder will have the right to require the Company to make an offer to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes -- Change of Control." SUBSIDIARY GUARANTEES............ The Notes are fully, unconditionally, jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured, senior subordinated basis by Argo-Tech Corporation (HBP), Argo-Tech Corporation (OEM), Argo-Tech Corporation (Aftermarket), Carter and all future domestic Restricted Subsidiaries (as defined) that incur Indebtedness (as defined) and all future Subsidiary Guarantors, subject to certain fraudulent conveyance limitations as described herein. The Subsidiary Guarantors have also guaranteed the Amended Credit Facility. In addition, the Amended Credit Facility is guaranteed by Parent and is secured by pledges of all of the capital stock of the Company and the Subsidiary Guarantors and security interests in substantially all other tangible and intangible assets of the Company and the Subsidiary Guarantors. See "Description of Notes -- Subsidiary Guarantees." RANKING.......................... The Notes are unsecured and subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The Company may incur additional Senior Indebtedness if it meets certain financial ratio tests set forth in the Indenture. Except for such financial ratio tests, there are no restrictions on the Company's ability to incur additional debt or total debt that ranks senior to or pari passu with the Notes. The Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and rank senior to all subordinated indebtedness of the Company. The Subsidiary Guarantees are unsecured, senior subordinated obligations of the Subsidiary Guarantors, subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors. As of August 2, 1997, after giving effect to the Transactions, the Offering, and the application of the net proceeds therefrom, (i) the outstanding Senior Indebtedness of the Company would have been $110.0 million (exclusive of unused commitments), all of which would have been Secured Indebtedness, (ii) the Company would have had no Senior Subordinated Indebtedness outstanding other than the Notes and no Indebtedness that is subordinate or junior in right of repayment to the Notes, (iii) the outstanding Senior Indebtedness of the Subsidiary Guarantors, consisting entirely of Guarantees of the Amended Credit Facility, would have been $110.0 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no outstanding Senior Subordinated Indebtedness other than the Subsidiary Guarantees and no Indebtedness that is subordinate or junior in right of payment to the Subsidiary Guarantees. RESTRICTIVE COVENANTS............ The Indenture limits (i) the incurrence of additional Indebtedness by the Company and its Restricted Subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations (as defined) of the Company and its Restricted Subsidiaries; (iii) certain other restricted payments, including without limitation, investments; (iv) sales of assets and Restricted Subsidiary stock; (v) certain transactions with affiliates; (vi) the sale or issuance of capital stock of its Restricted Subsidiaries; (vii) the creation of liens; (viii) the lines of business in which the Company and its Restricted Subsidiaries may operate; (ix) consolidations, mergers and transfers of all or substantially all of the Company's assets; and (x) sale and leaseback transactions. The Indenture will also prohibit certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exemptions. See "Description of Notes -- Certain Covenants" and "-- Merger and Consolidation." ASSET SALE PROCEEDS.............. The Company will be obligated in certain instances to make offers to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of Notes -- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001047846_spectratek_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001047846_spectratek_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..537e274153e8cb37a1cf880e4253e8bcab0736f2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001047846_spectratek_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) assumes no exercise of options to purchase 91,500 shares of Common Stock outstanding as of December 1, 1997, (iii) gives effect to a 300-for-1 stock split of the Common Stock effected in June 1997, (iv) gives effect to the 1.85-for-1 stock split to be effected in December 1997, and (v) gives effect to the reincorporation of the Company in the State of Delaware to occur in December 1997. THE COMPANY Spectratek Technologies, Inc. is a leading manufacturer of microreplicated holographic films that are used in a wide range of value added applications in consumer products, packaging materials and industrial products. Using its proprietary technologies, the Company records coherent light onto continuous rolls of polymer film. This process adds unique optical characteristics to the film, creating color, motion and the appearance of depth in natural light. The Company's films are used in consumer applications including stickers, magazines, glitter and cosmetics; in packaging applications and labels for toys, food, beverages, computer games and displays; and in industrial applications such as paint, fabrics and flooring and architectural materials. The Company has refined its proprietary technologies to create virtually seamless holographic patterns which the Company believes offer superior brightness, clarity and consistency when compared with competing holographic films. The Company's holographic films have been incorporated into products marketed by numerous companies in a broad range of industries, including Coors Bottling Company, Kraft General Foods, Mattel, Inc. and PPG Industries, Inc. All of the Company's films utilize holographic technology. Holograms are visual recordings of light wave patterns in a compacted form that enable three dimensional information to be condensed onto a flat surface. Microscopic grooves and bumps on the surface of film facilitate the dispersion of white light into its component spectral colors to create the holographic effect. By arranging areas of different grating angles and groove spacing, holographic images or patterns are created that, when viewed from different angles, reveal features (color and depth) of the hologram that are not otherwise visible in a conventionally printed image. A key step in the manufacture of holographic films is the microreplication process, which involves the transfer of a master holographic image or pattern onto the surface of thin film. The Company has developed proprietary remastering methodologies that enable the Company to enhance and refine the shape, size and position of the grooves and bumps on the existing custom holographic master. The specific pattern of grooves and bumps determines the effect created by the interaction of light with the thin films. By adjusting the depth and spacing of the grooves (as many as 44,000 lines per linear inch) and bumps (often only .25 micron deep), the Company is able to increase the brightness and clarity of the hologram. The Company is not aware of any competitor who is able to modify or enhance an existing master. In addition, the elimination of virtually all seams and breaks within most of the Company's patterns make the Company's products more attractive and economical for its customers. The Company currently manufactures and markets 14 custom stock patterns, which are typically sold in finished rolls of film in widths of 24 or 40 inches, or as glitter or geometric pigment (precision cut particles of the Company's films). These stock patterns are generally forwarded to converters, cutters or finishers who create the final product for end users. The Company is currently constructing a new microreplication machine to manufacture film in widths of 55 inches, which should enable the Company to meet demand in new markets requiring wider films. During 1996, the Company manufactured and sold more than 80 million square feet of holographic thin films. The Company sells microreplicated holographic films as well as converted products which incorporate the Company's holographic films. Converted products include film that is permanently laminated to paper or board stock or pressure sensitive backing, that is coated or tinted, or that is cut into particles ranging from 1/16 inch to 1/500 inch. The Company does not engage in such conversion processes internally, but rather contracts with a number of third party vendors to perform these processes. Such vendors also act as value added resellers who add conversion steps to these films and sell the converted products directly. The Company believes that significant growth opportunities exist for holographic films in the markets for both rigid and flexible packaging materials and for industrial applications due to the visual appeal, impact and uniqueness of holographic films. According to the Flexible Packaging Association, the size of the flexible packaging (bags and pouches) market is estimated to reach $16.4 billion in 1997. Packages utilizing holographic materials currently represent a very small share of the packaging materials market due to their higher cost when compared with traditional packaging materials. The Company's new microreplication machine should enable it to produce films 55 inches wide in order to better address the requirements of the packaging industry. The Company is also taking steps to expand the industrial applications for its products, particularly by marketing the Company's geometric pigment for use in paints and coatings in the automobile paint markets. In July 1997, PPG Industries, Inc. launched its Prizmatique(TM) automobile paint line, featuring the Company's geometric pigment, for use in the automobile refinishing market. In addition, BASF and Englehard are each beta testing the Company's geometric pigment for use in their line paint products for automobile manufacturers. In addition, Vegla, a large European glass manufacturer, is marketing the Company's holographic films for use in residential and commercial decorative glass applications. The Company's objective is to leverage its proprietary microreplication technologies to expand its product offerings in existing markets, maximize economies of scale, and develop new markets for its holographic films. The Company was incorporated in California in October 1980 as Spectratek, changed its name to Spectratek Technologies, Inc. in June 1997, and was reincorporated in Delaware in December 1997. The Company's executive offices are located at 5405 Jandy Place, Los Angeles, California 90066, and its telephone number at that location is (310) 822-2400. THE OFFERING <TABLE> <S> <C> Common Stock Offered By the Company.......................... 1,600,000 shares By the Selling Stockholders............. 600,000 shares Total.............................. 2,200,000 shares Common Stock to be outstanding after the Offering................................... 7,172,264 shares(1) Use of Proceeds.............................. The Company intends to use the net proceeds from the Offering to purchase additional capital equipment (primarily for the Company's laser laboratory and mastering facility), to repay indebtedness, including indebtedness incurred in connection with the S Corporation Distribution (as defined herein) and under the Company's bank line of credit, to fund the relocation of the Company's manufacturing facilities to its new facility, to expand the Company's marketing capabilities, to upgrade the Company's information systems and for general corporate purposes (including working capital requirements). See "Use of Proceeds." Proposed Nasdaq National Market symbol....... SPTK </TABLE> - --------------- (1) Excludes 560,550 shares of Common Stock reserved for issuance under the Company's 1997 Stock Incentive Plan (the "1997 Plan"). As of December 1, 1997, options to purchase 169,275 shares of Common Stock were outstanding under the 1997 Plan at a weighted average exercise price of $9.04 per share. See "Management -- 1997 Stock Incentive Plan" and Note 10 of Notes to Financial Statements. SUMMARY FINANCIAL INFORMATION The following summary financial information for the Company is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Financial Statements and Notes thereto included elsewhere in this Prospectus. <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales................................. $ 4,536 $ 7,387 $ 9,052 $ 10,320 $ 12,003 $ 8,457 $ 11,857 Gross profit.............................. 1,458 4,485 3,809 4,747 4,889 3,444 5,213 Income from operations ................... 72 2,720 1,702 2,396 2,243 1,702 2,819 Income before provision for income taxes................................... 74 2,725 1,804 2,395 2,145 1,669 2,782 Provision for income taxes................ 30 701 791 1,021 851 662 673(1) Net income................................ $ 44 $ 2,024 $ 1,013 $ 1,374 $ 1,294 $ 1,007 $ 2,109 Net income per common and common equivalent share........................ $ 0.01 $ 0.36 $ 0.18 $ 0.24 $ 0.23 $ 0.18 Weighted average common and common equivalent shares(2).................... 5,630,194 5,630,194 5,630,194 5,630,194 5,634,285 5,629,660 Pro forma provision for income taxes(3)... $ 1,405 Pro forma net income(3)................... $ 1,377 Pro forma net income per share(3)......... $ 0.23 Pro forma weighted average common and common equivalent shares(2)(4) 5,962,800 </TABLE> <TABLE> <CAPTION> AT SEPTEMBER 30, 1997 -------------------------------------------- PRO PRO FORMA ACTUAL FORMA(5) AS ADJUSTED(5)(6) ------- -------- ----------------- <S> <C> <C> <C> BALANCE SHEET DATA: Working capital........................................................ $ 6,200 $ 5,559 $21,227 Total assets........................................................... 10,186 10,634 25,502 Notes payable.......................................................... 800 800 -- Retained earnings...................................................... 8,281 3,949 3,949 Stockholders' equity................................................... 8,351 7,619 23,287 </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------------------------------- --------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING AND OTHER DATA: Capital expenditures...................... $ 171 $ 167 $ 404 $ 634 $ 103 $ 92 $ 334 Research and development.................. 238 397 576 571 504 379 193 Depreciation and amortization............. 79 214 107 165 310 232 313 EBITDA(7)................................. 158 2,971 1,945 2,628 2,612 2,017 3,174 Cash flow provided by (used in): Operating activities.................... (424) 464 164 (5) 1,346 1,037 1,477 Investing activities.................... (171) (167) (404) (634) (103) (92) (334) Financing activities.................... 391 10 (9) 661 (879) (732) (567) </TABLE> - --------------- (1) The Company has been taxed as an S Corporation for federal and state income tax purposes since January 1, 1997. Provision for income taxes for the nine months ended September 30, 1997 consists primarily of net deferred tax assets which were written-off in January 1997 upon the Company's election to be taxed as an S Corporation. In October 1997, the Company made a distribution (the "S Corporation Distribution") to its existing stockholders consisting of promissory notes (the "Stockholder Notes") in an aggregate principal amount equal to the undistributed retained earnings of the Company from January 1, 1997 through the termination of the Company's S Corporation status, to occur on or immediately prior to the consummation of the Offering (the "Termination Date"), which amount is estimated to be approximately $3.6 million at the Termination Date. Other than the S Corporation Distribution, the Company has never declared or paid cash dividends on its Common Stock. (footnotes continued on next page) (2) See Note 2 of Notes to Financial Statements. (3) Pro forma provision for income taxes, pro forma net income and pro forma net income per share reflect the pro forma effect of income taxes as if the Company had been taxed as a C Corporation for the nine months ended September 30, 1997. Upon consummation of the Offering, the Company will be subject to federal and state income taxes. See "Prior S Corporation Status." (4) Also assumes as outstanding during each of the periods presented, 327,273 shares of the Common Stock offered by the Company in this Offering, which represent the approximate number of shares deemed to be sold by the Company to fund the repayment of the Stockholder Notes. See "Prior S Corporation Status," "Use of Proceeds" and Note 2 of Notes to Financial Statements. (5) Presented to give pro forma effect to (i) the S Corporation Distribution, and (ii) the termination of the Company's S Corporation status. (6) As adjusted to give effect to the sale by the Company and the Selling Stockholders of 2,200,000 shares of Common Stock at an assumed initial public offering price of $11 per share and the application of the estimated net proceeds therefrom (including the repayment of indebtedness incurred under the Company's bank line of credit and the Stockholder Notes). See "Prior S Corporation Status" and "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001048423_onyx_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001048423_onyx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..655a386ead7888cb926076f218f3a5542f0b83bc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001048423_onyx_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in this Summary are defined elsewhere in this Prospectus. See the Index of Principal Definitions for the location herein of the definitions of certain capitalized terms. An investment in the Certificates involves various risks, and potential purchasers should carefully consider the matters discussed under "Risk Factors" herein in considering an investment in the Certificates. Issuer..................... Onyx Acceptance Grantor Trust 1997-4 (the "Trust"), to be formed by Onyx Acceptance Financial Corporation (the "Seller") pursuant to the Pooling and Servicing Agreement, to be dated as of December 1, 1997 (the "Agreement"), among the Seller, Onyx Acceptance Corporation (the "Servicer") and Bankers Trust Company (the "Trustee"). Securities Offered......... % Auto Loan Pass-Through Certificates (the "Certificates") representing fractional undivided interests in the Trust. The Certificates will be offered for purchase in denominations of $1,000 and integral multiples thereof. See "The Certificates and the Agreement -- General." Initial Certificate Balance.................... The initial principal balance of the Certificates is equal to the aggregate principal balance of the Initial Contracts as of the Cut-Off Date, calculated in accordance with the Rule of 78's or Simple Interest Method, plus the Prefunded Amount. The term "Cut-Off Date Scheduled Balance" means, with respect to each Initial Contract, the principal balance thereof as of the Cut-Off Date and, with respect to each Subsequent Contract, means the principal balance thereof as of the related Subsequent Transfer Date, in each case calculated in accordance with the Rule of 78's or Simple Interest Method. See "The Contracts." Seller..................... Onyx Acceptance Financial Corporation, a wholly-owned, limited purpose subsidiary of Onyx Acceptance Corporation ("Onyx"). The Seller's principal executive offices are located at 8001 Irvine Center Drive, 6th Floor, Irvine, California 92618 and its telephone number is (714) 753-1191. See "The Seller." All of the Contracts will have been purchased by the Seller from Onyx. Substantially all of the Contracts have been purchased by Onyx from new and used car Dealers unaffiliated with Onyx or the Seller, and a limited number of Contracts have been originated by Onyx itself. See "The Onyx Portfolio of Motor Vehicle Contracts." Servicer................... Onyx. The Servicer's principal executive offices are located at 8001 Irvine Center Drive, 5th Floor, Irvine California 92618 and its telephone number is (714) 450-5500. See "The Servicer." Trustee.................... Bankers Trust Company. Trust Property............. The Trust's assets (the "Trust Property") will include: (i) a pool of fixed rate motor vehicle retail installment sales contracts (the "Initial Contracts") of which approximately 42.39% of the Aggregate Scheduled Balance as of the Cut-Off Date are Rule of 78's Contracts and approximately 57.61% of the Aggregate Scheduled Balance as of the Cut-Off Date are Simple Interest Contracts, and all of which were purchased from the Seller and secured by new and used automobiles and light-duty trucks (the "Initial Financed Vehicles"), (ii) certain documents relating to the Initial Contracts, (iii) certain monies due under the Initial Contracts on or after the Cut-Off Date, (iv) security interests in the Initial Financed Vehicles and the rights to receive proceeds from claims on certain insurance policies covering the Initial Financed Vehicles or the individual obligors under each related Initial Contract and the right to certain proceeds under the Blanket Insurance Policy, (v) all amounts on deposit in the Collection Account, including all Eligible Investments credited thereto (but excluding any investment income from Eligible Investments), (vi) the benefits of an irrevocable principal/interest surety bond (the "Surety Bond") issued by Capital Markets Assurance Corporation (the "Insurer"), (vii) the right of the Seller to cause Onyx to repurchase certain Contracts under certain circumstances, (viii) all right, title and interest of the Seller under the Capitalized Interest Agreement, dated as of December 1, 1997, between the Seller and Onyx (the "Capitalized Interest Agreement"), (ix) funds on deposit in a trust account established for the benefit of the Certificateholders (the "Prefunding Account") and (x) all proceeds of the foregoing. From time to time during the Funding Period, and as frequently as each Business Day (each such day a "Subsequent Transfer Date"), the Trust will purchase from the Seller with monies on deposit in the Prefunding Account, additional Rule of 78's and Simple Interest Method contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") secured by new and used automobile and light-duty trucks (the "Subsequent Financed Vehicles" and, together with the Initial Financed Vehicles, the "Financed Vehicles"). As of each such Subsequent Transfer Date, the Trust Property will include the Subsequent Contracts delivered to the Trustee on such Subsequent Transfer Date, certain documents relating to the Subsequent Contracts, certain monies due under the Subsequent Contracts after the related Subsequent Transfer Dates, security interests in the Subsequent Financed Vehicles and the right to receive proceeds from claims under certain insurance policies in respect of individual Subsequent Financed Vehicles or the related obligors, and all proceeds of the foregoing. See "The Trust." Pass-Through Rate.......... % per annum, payable monthly at one-twelfth the annual rate and calculated on the basis of a 360-day year of twelve 30-day months. Distribution Date.......... The 15th day of each month (or, if such day is not a Business Day, the next succeeding Business Day) commencing January 15, 1998 (each a "Distribution Date"). A "Business Day" is a day other than a Saturday, Sunday or other day on which commercial banks located in California or New York are authorized or obligated to be closed. Final Distribution Date.... July 15, 2004. Interest Distribution...... On each Distribution Date, monthly interest (the "Interest Distribution") in an amount equal to the product of one-twelfth of the Pass-Through Rate and the Pool Balance as of the end of the Collection Period preceding the related Collection Period will be distributed to the Certificateholders of record on a pro rata basis as of the related Record Date. The amount of interest payable on the Certificates on the first Distribution Date will be per $1,000.00 dollars. The "Pool Balance" as of any date is the Aggregate Scheduled Balance of the Contracts as of such date, excluding those Contracts which as of such date have become Liquidated Contracts or have been repurchased by the Seller or purchased by the Servicer, plus the amount, if any, remaining on deposit in the Prefunding Account on such date (excluding any investment earnings thereon). Interest will be paid (i) to the extent of the portion of the Pool Balance represented by Contracts, from collections received on the Contracts on deposit in the Collection Account or previously collected and available for distribution, and (ii) to the extent of the portion of the Pool Balance represented by the Prefunded Amount from investment earnings thereon, and from payments under the Capitalized Interest Agreement. A "Collection Period" with respect to a Distribution Date will be the calendar month preceding the month in which such Distribution Date occurs; provided, that with respect to Liquidated Contracts (as defined below) the Collection Period will be the period from but excluding the sixth Business Day preceding the immediately preceding Distribution Date to and including the sixth Business Day preceding such Distribution Date. With respect to the first Distribution Date the "Collection Period" for Liquidated Contracts will be the period from and including the Cut-Off Date to and including the sixth Business Day preceding such first Distribution Date. See "The Certificates and the Agreement -- Distributions of Principal and Interest." Principal Distribution..... On each Distribution Date, the Principal Distribution for the related Collection Period will be passed through to the Certificateholders. The "Principal Distribution" on any Distribution Date is the Aggregate Scheduled Balance Decline (as defined below) during the related Collection Period and, with respect to the Distribution Date immediately following the end of the Funding Period, any portion of the Prefunded Amount remaining on deposit in the Prefunding Account. The Principal Distribution on the Final Distribution Date will include the Aggregate Scheduled Balance of all Contracts that are outstanding at the end of the Collection Period immediately prior to the Final Distribution Date. The "Aggregate Scheduled Balance Decline" for any Distribution Date is the sum of (x) the amount by which the Aggregate Scheduled Balance of the Contracts as of the beginning of the related Collection Period exceeds the Aggregate Scheduled Balance of such Contracts as of the end of the related Collection Period (excluding any Subsequent Contracts added during the related Collection Period) and (y) the amount by which the Aggregate Scheduled Balance of the Subsequent Contracts (determined as of each related Subsequent Transfer Date) transferred to the Trust during the related Collection Period exceeds the Aggregate Scheduled Balance of such Subsequent Contracts as of the end of the related Collection Period. The "Aggregate Scheduled Balance" of the Contracts is the sum of the Scheduled Balance of each Contract. The "Scheduled Balance" of a Rule of 78's Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of each scheduled payment of principal and interest due on such Contract (the "Monthly P&I") on or prior to the date of calculation that is allocated to principal under the Recomputed Actuarial Method. The Scheduled Balance of a Simple Interest Contract at any date is equal to the Cut-Off Date Scheduled Balance of such Contract reduced by the portion of Monthly P&I on or prior to the date of calculation that is allocated to principal under the Simple Interest Method. The Scheduled Balance of any Contract that is a Liquidated Contract or that has been purchased by the Servicer or repurchased by the Seller will equal zero. A "Liquidated Contract" is a Contract that (a) is the subject of a Full Prepayment, (b) is a Defaulted Contract and with respect to which Liquidation Proceeds constituting, in the Servicer's reasonable judgment, the final amounts recoverable have been received, (c) is paid in full on or after its Maturity Date or (d) has been a Defaulted Contract for four or more Collection Periods and as to which Liquidation Proceeds constituting the final amounts recoverable have not been received; provided, however, that in any event a Contract that is delinquent in the amount of five monthly payments at the end of a Collection Period is a Liquidated Contract. A "Defaulted Contract" with respect to any Collection Period is a Contract (a) which is, at the end of such Collection Period, delinquent in the amount of two monthly payments or (b) with respect to which the related Financed Vehicle has been repossessed or repossession efforts have been commenced. See "The Contracts" and "The Certificates and the Agreement -- Distributions of Principal and Interest." The Prefunding Account..... The Prefunding Account will be maintained in the name of the Trustee for the benefit of the Certificateholders and is designed solely to hold funds to be applied by the Trustee during the Funding Period (as defined herein) to pay to the Seller the purchase price for Subsequent Contracts. Monies on deposit in the Prefunding Account will not be available to cover losses on or otherwise make any payments with respect to the portion of the Certificate Balance represented by Contracts. Interest on the portion of the Certificate Balance represented by the Prefunded Amount will be payable from earnings received by the Trustee during the related Collection Period from investment of the Prefunded Amount on deposit in the Prefunding Account and from payments made under the Capitalized Interest Agreement, and will not be payable from collections on the Contracts. The Prefunding Account will be created with an initial deposit by the Seller of $10,085,832.00 (the "Prefunded Amount"). The "Funding Period" will be the period from the date the Certificates are issued (the "Closing Date") until the earliest to occur of (i) the date on which the remaining Prefunded Amount is less than $20,000, (ii) the date on which an Event of Default occurs or (iii) the close of business on March , 1998. During the Funding Period, on one or more Subsequent Transfer Dates (as defined herein), the Prefunded Amount will be applied to purchase Subsequent Contracts from the Seller. The Seller expects that the Prefunded Amount will be reduced to less than $20,000 by the scheduled end of the Funding Period, although no assurances can be given in this regard. Any portion of the Prefunded Amount remaining on deposit in the Prefunding Account at the end of the Funding Period will be payable as principal to Certificateholders on the immediately following Distribution Date. See "The Certificates and the Agreement -- General" and "The Certificates and the Agreement -- The Prefunding Account; Mandatory Partial Prepayment of the Certificates." Mandatory Partial Prepayment................. The Certificates will be prepaid in part on the Distribution Date immediately succeeding the date on which the Funding Period ends in the event that any portion of the Prefunded Amount remains on deposit in the Prefunding Account after giving effect to the sale to the Trust of all Subsequent Contracts sold to the Trust during the Funding Period, including any such acquisition and conveyance on the date on which the Funding Period ends (a "Mandatory Partial Prepayment"). The amount to be distributed to Certificateholders in connection with any Mandatory Partial Prepayment will equal the remaining Prefunded Amount. See "The Certificates and the Agreement -- The Prefunding Account; Mandatory Partial Prepayment of the Certificates." Capitalized Interest Agreement.................. Onyx will enter into the Capitalized Interest Agreement with the Seller, and the Seller will assign its interest therein to the Trust. The purpose of the Capitalized Interest Agreement is to cover the shortfall between interest distributable on the portion of the Certificate Balance represented by the Prefunded Amount and interest which will be earned by the Trust on the Prefunded Amount prior to the time it is used to purchase Subsequent Contracts. The Capitalized Interest Agreement will be in effect from the Closing Date until April 15, 1998, which is the Distribution Date following the end of the Funding Period. The Capitalized Interest Agreement will provide for payment of the Capitalized Interest Amount on or before five business days prior to each Distribution Date, ending with the Distribution Date on April 15, 1998. The "Capitalized Interest Amount," with respect to any Collection Period is an amount equal to (a) one month's interest on the Prefunded Amount on deposit in the Prefunding Account as of the first day of such Collection Period at the Pass-Through Rate plus (b) 1/12 of the premium for the Surety Bond on the Prefunded Amount minus (c) the earnings received by the Trustee during the related Collection Period from investment of the Prefunded Amount on deposit in the Prefunding Account. The obligation of Onyx to pay the Capitalized Interest Amount will be secured by funds on deposit in a segregated trust account to be maintained for the benefit of the Certificateholders and the Insurer (the "Capitalized Interest Account"). The amount required to be deposited in the Capitalized Interest Account will initially be equal to the maximum Capitalized Interest Amount that may become owing under the Capitalized Interest Agreement assuming that with respect to the Prefunded Amount during the Funding Period, a certain rate of interest (set forth in the Agreement) is earned and no Subsequent Contracts are purchased. On each Subsequent Closing Date, certain amounts shall be released to Onyx from the Capitalized Interest Account with respect to Subsequent Contracts acquired by the Trust on each Subsequent Transfer Date since the preceding Subsequent Closing Date, or the Closing Date, as the case may be. See "The Certificates and the Agreement -- Capitalized Interest Agreement and Capitalized Interest Account." Servicing Fee.............. The Servicer will be responsible for managing, administering, servicing, and making collections on the Contracts. Compensation to the Servicer will consist of a monthly fee, payable from the Trust to the Servicer on each Distribution Date, in an amount equal to the product of one-twelfth of 1.00% per annum (the "Servicing Fee Rate") multiplied by the Pool Balance (excluding the Prefunded Amount) as of the end of the Collection Period preceding the related Collection Period. As additional compensation, the Servicer will be entitled to any late fees and other administrative fees and expenses or similar charges collected with respect to the Contracts. The Servicer or its designee will also receive as servicing compensation investment earnings on Eligible Investments (other than earnings on amounts on deposit in the Prefunding Account) and the amount, if any, by which the outstanding principal balance of a Rule of 78's Contract that is subject to a Full Prepayment exceeds the Scheduled Balance of such Contract (the "Servicing Fee"). See "The Certificates and the Agreement -- Servicing Fee." Surety Bond................ On the Closing Date, the Insurer will issue a principal/interest surety bond (the "Surety Bond") to the Trustee pursuant to an Insurance and Reimbursement Agreement (the "Insurance Agreement"), dated as of December , 1997, by and among the Insurer, Onyx, the Seller and the Trustee. Pursuant to the Surety Bond, the Insurer will unconditionally and irrevocably guarantee payment of the Interest Distribution and Principal Distribution on each Distribution Date to the Trustee for the benefit of the Certificateholders. If on the Servicer Report Date with respect to any Distribution Date the amount on deposit and available in the Collection Account, after giving effect to all amounts deposited or payable from the Payahead Account, the Prefunding Account and/or pursuant to the Capitalized Interest Agreement (including from the Capitalized Interest Account) is less than the sum of the Servicing Fee, the Principal Distribution and Interest Distribution for the related Distribution Date, the Trustee, by delivering a notice to the Insurer, shall demand payment under the Surety Bond in an amount equal to such deficiency. The Insurer shall pay or cause to be paid such amount to the Trustee for credit to the Collection Account and the Trustee shall withdraw from the Collection Account and shall pay such amount to the Certificateholders on the related Distribution Date. On the Final Distribution Date, to the extent the amount on deposit and available in the Collection Account is less than all remaining unpaid interest and principal on the Certificates, the Insurer shall pay or cause to be paid an amount equal to such shortfall. See "The Certificates and the Agreement -- The Surety Bond." Contracts.................. The Aggregate Scheduled Balance of the Initial Contracts as of the Cut-Off Date was $155,914,168. As of the Cut-Off Date the Initial Contracts had a weighted average annual percentage rate of 14.70% and a weighted average remaining term of 56.4 months. Approximately 42.39% of the Aggregate Scheduled Balance of the Initial Contracts as of the Cut-Off Date allocate interest and principal in accordance with the Rule of 78's (the "Rule of 78's Contracts"), and approximately 57.61% in accordance with the Simple Interest Method (the "Simple Interest Contracts"). Approximately 60.37% of the Aggregate Scheduled Balance of the Initial Contracts as of the Cut-Off Date were originated in California, 8.51% in Arizona, 7.87% in Illinois, 7.04% in Florida, 6.60% in Washington and 5.21% in Nevada. No other state represents more than 5.0% of the Initial Contracts. Substantially all of the Contracts (including the Subsequent Contracts) will have been originated by automobile dealerships ("Dealers") and assigned to Onyx, and a limited number of Contracts will have been originated by Onyx itself. All the Contracts will have been purchased by the Seller from Onyx and by the Trust from the Seller. The Seller is required to repurchase certain of the Contracts under certain circumstances if certain representations and warranties made by the Seller are incorrect in a manner that materially and adversely affects the Certificateholders or the Insurer. All of the Contracts will have been selected by Onyx from its portfolio of motor vehicle installment sales contracts based upon the criteria specified in the Agreement. No later than the second Business Day following the Business Day on which Onyx originates or acquires a Motor Vehicle Contract during the Funding Period, pursuant to the Purchase Agreement, Onyx will be obligated to sell, and the Seller will be obligated to purchase, those Motor Vehicle Contracts that meet the eligibility requirements at a purchase price equal to the aggregate principal amount thereof. Pursuant to the Agreement and subject to the satisfaction of certain conditions described herein, the Seller will sell Subsequent Contracts to the Trust on each Subsequent Transfer Date. Payment for each such Subsequent Contract sold to the Trust shall be made by release to the Seller from the Prefunding Account of an amount equal to the amount paid by the Seller to Onyx for such Subsequent Contract. The aggregate principal balance of the Subsequent Contracts to be conveyed to the Trust during the Funding Period will not exceed $10,085,832.00, which is equal to the Prefunded Amount. On the Business Day preceding the first Distribution Date and on the Business Day preceding each Distribution Date immediately following a Subsequent Transfer Date, (each such date a "Subsequent Closing Date") UCC financing statements with respect to all Subsequent Contracts sold to the Trust since the preceding Subsequent Closing Date (or the Closing Date, in the case of the first Subsequent Closing Date) will be filed and all legal opinions, officers' certificates and other legal documentation with respect to the sale of such Subsequent Contracts to the Trust will be executed and delivered. All collections of Monthly P&I, all prepayments on the Contracts collected by the Servicer and all amounts paid under the Surety Bond will be deposited in or credited to the Collection Account. Partial prepayments of Monthly P&I ("Payaheads") on Rule of 78's Contracts will be transferred on the Servicer Report Date to the Payahead Account, to be applied against future scheduled payments of Monthly P&I. Partial and full prepayments on Simple Interest Contracts will be passed through to Certificateholders on the Distribution Date immediately following the Collection Period in which such prepayments are received. All payments to the Certificateholders will be made from the Collection Account and certain funds remaining in the Collection Account following distributions to Certificateholders and others will be paid to the Insurer to be promptly distributed in accordance with the terms of the Insurance Agreement. See "The Contracts" and "The Certificates and the Agreement -- Payahead Account." Optional Termination....... The Servicer may purchase all of the Contracts on any Distribution Date as of which the Pool Balance (after giving effect to the Principal Distribution on such Distribution Date) has declined to 10% or less of the Cut-Off Date Scheduled Balance for all of the Initial Contracts plus the Prefunded Amount (the "Original Pool Balance"), subject to certain provisions in the Agreement. See "The Certificates and the Agreement -- Repurchase of Contracts." Federal Income Tax Status..................... In the opinion of counsel to the Seller, the Trust will be treated for Federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Certificateholders must report their respective allocable shares of income earned on Trust assets and, subject to certain limitations applicable to individuals, estates and trusts, may deduct their respective allocable shares of reasonable servicing and other fees. See "Certain Federal Income Tax Consequences." ERISA Considerations....... The Certificates may be purchased by employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") upon satisfaction of certain conditions described herein. See "ERISA Considerations." Rating..................... It is a condition of issuance of the Certificates that they be rated in the highest rating category by two nationally recognized rating agencies. This rating will be based primarily on the issuance of the Surety Bond by the Insurer. See "Risk Factors -- Rating." Registration of the Certificates............... The Certificates will initially be represented by certificates registered in the name of Cede & Co. ("Cede"), as the nominee of The Depository Trust Company ("DTC"). No person acquiring an interest in a Certificate through the facilities of DTC (a "Certificate Owner") will be entitled to receive a Definitive Certificate representing such person's interest in the Trust, except in the event that Definitive Certificates are issued in certain limited circumstances. See "The Certificates and the Agreement."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001048750_friedman_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001048750_friedman_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..86232dd6b2e416168f67c86ab39daefdbb230b87
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001048750_friedman_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. The terms "FBR" and the "Company," as used herein, refer to Friedman, Billings, Ramsey Group, Inc. and its predecessors and its consolidated subsidiaries, unless the context otherwise requires. THE COMPANY FBR is a full service investment banking firm focused on investment banking, research, institutional brokerage and asset management. FBR's strategy since inception has been to target specific industry sectors where it believes it can develop a unique research perspective. The Company then uses its research perspective together with its capital markets expertise to provide value for its clients. Using this approach, FBR has achieved a 50% compounded annualized growth rate in revenues since its inception in 1989 through November 30, 1997. FBR believes the success of its strategy is further demonstrated by its increasing market presence and the after-market performance of the companies for which it has acted as lead or co-manager. Year to date as of November 30, 1997, FBR was ranked sixth in terms of lead managed U.S. issuer initial public offering ("IPO") dollar volume, and for the period from January 1, 1996 through November 30, 1997 was ranked #1 in after-market performance among lead managers with at least ten lead managed IPOs, according to CommScan EQUIDESK. CommScan EQUIDESK defines "after-market performance" as the percentage change in the price of a share of stock from the price on the pricing date to the price of its last trade on the date of measurement, adjusted for splits. FBR was founded in 1989 with the philosophy that an employee-friendly corporate culture would enhance performance results. FBR strives to maintain excellent employee relations through policies designed to create an enjoyable work environment for all employees such as flexible dress code, vacation policy and maternity leave. Other non-traditional benefits at FBR include corporate retreats, corporate gym and employee directed Company charitable donations. In addition, the Company has emphasized training and promoting its employees from within. The Company believes that as a result of this culture, FBR has averaged less than 3% turnover among exempt professional employees per year since inception. Low turnover has enhanced the Company's growth and efficiency. Over the past 15 years, capital markets have evolved in depth and complexity, thereby radically altering the needs of both the companies accessing those markets and investors. The Company believes that in recent years, an increase in non-traditional issuers accompanied by significant inflows of cash into mutual funds and other managed funds has led to greater demand by both issuers and investors for focused advisory, capital markets, and capital management products and services. The Company seeks to identify rapidly changing industries and those that are not fully understood or appropriately valued by the market. Once an industry is identified, the Company employs substantial effort to develop a thorough understanding of the fundamentals and opportunities of that industry. The Company employs a team approach in which all of its professionals contribute to and communicate the Company's expertise in an industry. For each industry on which the Company is focused, the Company offers significant underwriting capabilities and brokerage services as well as advisory services in mergers, acquisitions and strategic partnerships. In addition, FBR's asset management activities include hedge funds and public mutual funds as well as private equity investments and mezzanine finance in such industries. FBR believes its strategy and culture has enabled and will enable it to succeed in this changing marketplace. Since commencing its investment banking activities in 1992, FBR has never failed to complete a capital raising transaction it has brought to the public market as lead underwriter. Since its inception through November 30, 1997, FBR has completed $11.4 billion in capital raising transactions and $3.3 billion in merger and acquisition advisory transactions, which span a wide range of geographic regions and security types and a growing variety of industry sectors. FBR has also applied its research focus and team-based approach to its asset management activities. The flagship FBR hedge fund, FBR Ashton, Limited Partnership, has provided annualized internal rates of return since inception in March 1992 of 41.8% gross and 34.1% net to its limited partners through November 30, 1997. FBR's three public mutual funds have provided total net return for the eleven months ended November 30, 1997 of 38.6%, 47.0% and 42.8%. The amount of assets under management has grown from $119.3 million at the beginning of 1996 to $444.9 million as of November 30, 1997, representing 373% growth. FBR's revenues grew from $57.2 million for the year ended December 31, 1995, to $109.9 million for the year ended December 31, 1996, representing an increase of 92%, and from $84.8 million for the eleven months ended November 30, 1996, to $217.2 million for the eleven months ended November 30, 1997, representing an increase of 156%. FBR believes that its revenue growth, as well as the superior performance of its capital transactions and managed products, are the result of the Company's focus and dedication to developing research, capital markets and asset management expertise within a growing number of strategic industry sectors. FBR believes that its ability to combine superior industry knowledge with its capital markets expertise has made FBR a leading provider of investment banking, brokerage and asset management services and the largest independent investment bank in the rapidly growing Washington, D.C. metropolitan area. FBR maintains executive offices in the Washington, D.C. area at Potomac Tower, 1001 Nineteenth Street North, Arlington, VA 22209; the telephone number is (703) 312-9500. The Company also maintains offices in Irvine, California; Boston, Massachusetts; and London, England. FBR's home page is located on the world wide web at http://www.fbr.com. Information contained on the Company's home page shall not be deemed to be a part of this Prospectus. STRATEGIC RELATIONSHIP WITH PNC BANK CORP. To further enhance its market position, FBR has formed a strategic business relationship with PNC Bank Corp., a diversified financial services company headquartered in Pittsburgh ("PNC"), pursuant to which PNC has agreed to acquire 4.9% of the shares of Common Stock issued and outstanding after the Offering (including any shares which may be issued pursuant to the Underwriters' Over-allotment Option), and FBR and PNC have agreed to work together on an arms-length basis to refer potential business to each other. FBR will be the exclusive independent broker-dealer to which PNC refers underwriting and high-yield business that is not conducted by PNC and PNC will work with FBR to provide enhanced derivatives, asset securitization, bridge lending and other bank debt financing products to FBR's client base. Without giving effect to exercise of the Over-allotment Option, PNC will acquire 2,451,421 shares of Class A Common Stock, all of which shares will be acquired from the Selling Shareholders at a price equal to the initial public offering price less a 4% discount (the "PNC Transaction"). See "Business -- Strategic Business Relationship with PNC Bank Corp." RECENT DEVELOPMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) For the eleven months ended November 30, 1996 and November 30, 1997, the Company's unaudited results of operations were: <TABLE> <CAPTION> ELEVEN MONTHS ENDED NOVEMBER 30, -------------------------------- (UNAUDITED) ----------------------------------- 1996 1997 ---------------- ---------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA(1) REVENUES: Investment banking................... $ 43,013 $136,867 Corporate finance fees............... 5,439 42,321 Principal transactions............... 22,773 16,015 Agency commissions................... 6,791 11,081 Asset management fees................ 3,872(2) 6,610(2) Interest and dividends............... 2,945 4,266 --------------- ---------------- Total revenues..................... 84,833 217,160 EXPENSES: Compensation and benefits............ 43,500 137,495 Brokerage and clearance.............. 3,092 4,366 Occupancy and equipment.............. 1,466 2,406 Communications....................... 985 1,991 Interest............................. 2,372 3,341 Other................................ 9,440 24,215 --------------- ---------------- Total expenses..................... 60,855 173,814 --------------- ---------------- NET INCOME BEFORE TAXES................ 23,978 43,346 Pro forma tax provision.............. 9,808 17,834 --------------- ---------------- Pro forma net income................. $ 14,170 $ 25,512 =============== ================ Pro forma earnings per share......... $ 0.34 $ 0.61 =============== ================ TOTAL SHAREHOLDERS' EQUITY............. $ 47,249 $ 77,646 =============== ================ </TABLE> (1) The information included in this table does not give effect to the S Corporation Distribution. See "Certain Transactions Occurring Prior to the Offering--S Corporation Distribution and Termination of S Corporation Status." (2) Does not include performance fees of approximately $10.0 million as of November 30, 1997 which would be payable at December 31, 1997. Performance fees derived from the Company's asset management services are due and payable upon an anniversary date as defined by the relevant partnership agreements and management agreements. Generally, these anniversary dates coincide with calendar year end. Any performance fees calculated as of any date prior to the anniversary date are subject to adjustment based on future performance of the assets under management through the anniversary date. The Company does not consider the earnings process complete until the anniversary date and accordingly, does not record the related revenue until such time. The Company currently contemplates seeking amendment of certain of these partnership agreements to provide for quarterly recognition of certain of these fees. At current performance levels, these fees would result in a $4.5 million pre-tax contribution. The results for the eleven-month period ended November 30, 1997 are unaudited interim results and are not necessarily indicative of the results to be expected for the entire year ending December 31, 1997, or any future interim or annual period. SUPPLEMENTAL CONDENSED FINANCIAL INFORMATION The following table adjusts the Company's historical consolidated statement of operations data for the eleven months ended November 30, 1997 to reflect revisions to the Company's compensation arrangements that will take effect on January 1, 1998 so long as the Offering has become effective by such date. Under the cash bonus component of the Company's recently adopted 1997 Stock and Annual Incentive Plan (the "New Plan"), the Named Executive Officers' (as defined herein) incentive compensation will be based on net income before taxes, rather than on gross revenues from certain of the Company's business lines which was the basis for computing their previous incentive compensation. In particular, cash bonus payments will be made from a pool equal to up to thirty percent of FBR's adjusted pre-tax net income (before annual cash bonus payments under the New Plan). The pool will be reduced to the extent the aggregate compensation and benefits expense for the year (including annual cash bonus payments under the New Plan) would exceed fifty-five percent of revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Expenses." The financial information in the following table assumes that the New Plan was in effect for the eleven months ended November 30, 1997. <TABLE> <CAPTION> FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997 ------------- (UNAUDITED) <S> <C> TOTAL REVENUES................................................... $217,160 EXPENSES: Compensation and benefits (adjusted; see introductory narrative above)........................................................ 119,438 Other expenses................................................. 36,319 -------- Total expenses............................................... 155,757 -------- NET INCOME BEFORE TAXES:......................................... 61,403 Adjusted tax provision......................................... (25,263) -------- Adjusted net income............................................ 36,140 ======== Adjusted earnings per share.................................... $ 0.86 ======== </TABLE> THE OFFERING Class A Common Stock offered by the Company..... 10,000,000 shares Class A Common Stock offered by the Selling Shareholders............... 1,000,000 shares (1) Class A Common Stock to be outstanding after the Offering................... 13,451,421 shares (1), (2), (3) Class B Common Stock to be outstanding after the Offering................... 36,577,579 shares (3) Total Common Stock to be outstanding after the Offering................... 50,029,000 shares (3) Use of Proceeds............. General corporate purposes. The Company will not receive any of the proceeds from the sale of shares by the Selling Shareholders. See "Use of Proceeds." NYSE Symbol................. "FBG" - -------------------- (1) Without giving effect to exercise of the Over-allotment Option, 3,451,421 shares of Class B Common Stock will be converted into Class A Common Stock upon their sale by the Selling Shareholders in the Offering and the PNC Transaction. Of these shares, 1,000,000 will be sold in the Offering and 2,451,421 will be sold to PNC in the PNC Transaction. (2) Excludes 5,000,000 shares of Class A Common Stock reserved for issuance under the Company's stock plans. The Company anticipates granting stock options with respect to substantially all of such shares at an exercise price equal to the initial public offering price at a time substantially contemporaneous with the closing of the Offering. See "Management--1997 Stock and Annual Incentive Plan." (3) If the Over-allotment Option is exercised, 15,174,921 shares of Class A Common Stock will be sold in the Offering and the PNC Transaction, and will be outstanding after the Offering. 11,500,000 of such shares will be issued by the Company. 3,674,921 Class B Common Stock shares will be converted into Class A Common Stock shares upon their sale by the Selling Shareholders in the Offering and the PNC Transaction, of which 1,150,000 shares of Class A Common Stock will be sold in the Offering and 2,524,921 shares of Class A Common Stock will be sold to PNC in the PNC Transaction. Giving effect to exercise of the Over-allotment Option, 36,354,079 shares of Class B Common Stock and a total of 51,529,000 shares of Common Stock will be outstanding after the Offering. SUMMARY CONSOLIDATED FINANCIAL INFORMATION(1) (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30, -------------------- YEAR ENDED DECEMBER 31, ACTUAL ----------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- -------- -------- -------- -------- ----------- -------- (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA REVENUES(2) Investment banking....... $ 1,771 $ 35,232 $ 30,579 $ 16,075 $ 55,159 $ 25,615 $ 67,091 Corporate finance fees... 50 75 14,427 7,224 10,361 4,370 38,618 Principal transactions... 17,202 19,417 9,903 20,078 25,466 18,157 11,994 Agency commissions....... 2,268 2,908 1,935 4,483 7,555 5,060 7,898 Asset management fees (3)..................... 116 1,164 444 6,747 7,808 2,635 6,256 Interest and dividends... 315 456 1,713 2,558 3,554 2,382 3,061 ------- -------- -------- -------- -------- -------- -------- Total revenues........... 21,722 59,252 59,001 57,165 109,903 58,219 134,918 EXPENSES Compensation and benefits (4)..................... 11,824 24,269 23,456 27,623 55,004 28,604 85,138 Brokerage and clearance.. 1,186 1,025 1,474 2,350 3,484 2,314 3,138 Occupancy and equipment.. 406 554 944 1,187 1,683 1,103 1,934 Communications........... 284 354 764 823 1,109 799 1,536 Interest................. 73 316 1,773 1,523 2,665 2,039 2,301 Other (5)................ 1,077 3,353 13,049 8,362 14,620 6,584 17,041 ------- -------- -------- -------- -------- -------- -------- Total expenses........... 14,850 29,871 41,460 41,868 78,565 41,443 111,088 INCOME BEFORE PRO-RATA SUBCHAPTER "S" CORPORATION STOCKHOLDER COMPENSATION............. 6,872 29,381 17,541 15,297 31,338 16,776 23,830 Pro-rata subchapter S corporation stockholder compensation (6)........ 7,147 29,919 19,355 5,858 6,500 -- -- ------- -------- -------- -------- -------- -------- -------- Net Income (loss)......... $ (275) $ (538) $ (1,814) $ 9,439 $ 24,838 $ 16,776 $ 23,830 ======= ======== ======== ======== ======== ======== ======== PRO FORMA STATEMENTS OF OPERATIONS DATA (UNAUDITED)(7) Net income (loss), as reported................ $ (275) $ (538) $ (1,814) $ 9,439 $ 24,838 $ 16,776 $ 23,830 Pro-rata S corporation compensation............ 7,147 29,919 19,355 5,858 6,500 -- -- Pro forma tax provision.. (2,833) (12,064) (7,347) (5,683) (12,628) (6,862) (9,782) Other pro forma adjustment.............. -- -- -- -- (1,416) -- (1,416) ------- -------- -------- -------- -------- -------- -------- Pro forma net income..... $ 4,039 $ 17,317 $ 10,194 $ 9,614 $ 17,294 $ 9,914 $ 12,632 ======= ======== ======== ======== ======== ======== ======== Pro forma earnings per share................... $ 0.11 $ 0.45 $ 0.26 $ 0.24 $ 0.42 $ 0.24 $ 0.30 ======= ======== ======== ======== ======== ======== ======== Weighted average shares outstanding (8)......... 37,817 38,365 39,014 39,373 41,536 41,515 41,912 OPERATING DATA (UNAUDITED) Total employees (9)...... 41 65 92 112 175 158 230 Revenue per average employee (in thousands). $564 $1,118 $752 $560 $766 $575 $888 Annualized return on average equity.......... 353% 461% 144% 82% 87% 69% 59% Compensation and benefits expense as a percentage of revenues............. 54.4% 41.0% 39.8% 48.3% 50.0% 49.1% 63.1% Income before pro rata subchapter S corporation stockholder distributions as a percentage of revenues (4)..................... 31.6% 49.6% 29.7% 26.8% 28.5% 28.8% 17.7% </TABLE> <TABLE> <CAPTION> SEPTEMBER 30, 1997 ------------------------ ACTUAL AS ADJUSTED(10) -------- --------------- (UNAUDITED) <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA Total assets................. $119,215 $295,915 Total liabilities............ 61,097 115,097 Total Shareholders' equity... 58,118 179,403 Book value per common share outstanding................. $ 1.45 $ 3.59 </TABLE> - -------------------- (1) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the basis of presentation. (2) For a description of the items comprising each line item under Revenues see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Revenues."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001048752_triumph_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001048752_triumph_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8aa8d2b51190daa6886a53a49089ed377d8f43a7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001048752_triumph_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised and gives effect to a 2.96-for-1 reverse stock split to be effected immediately prior to the Offering. As used herein, unless the context otherwise requires, (i) the "Company" means Triumph Fuels Corporation and its wholly-owned subsidiaries and (ii) reference to a fiscal year of the Company shall mean the year in which the Company's fiscal year ends (e.g., Fiscal 1997 ended February 28, 1997). Except as indicated otherwise, information presented on a pro forma basis gives effect to (i) the conversion of all of the Company's Series A Convertible Preferred Stock (the "Series A Preferred") into 1,013,514 shares of Common Stock (ii) the Colorado Stores, Moffitt and Winnco acquisitions (each as defined herein), and (iii) the Offering and the application of the net proceeds therefrom. THE COMPANY The Company is engaged in the wholesale distribution and marketing of refined petroleum products including gasoline, diesel fuel and lubricants. Petroleum distributors transport refined petroleum products from the source of manufacture to the end-user. The Company has an active customer base of over 2,000 accounts, including retail gasoline stations and commercial businesses in the construction, manufacturing, mining and marine, road and rail transportation industries. The Company's objective is to become a leading consolidator in the independent wholesale distribution segment of the petroleum industry. The independent petroleum distribution industry is highly fragmented and regional in nature. According to Petroleum Marketers Association of America ("PMAA"), there are over 10,000 independent petroleum distributors in the United States which distribute approximately 35% of all refined petroleum products sold in the United States. Due to these industry characteristics, as well as the absence of other significant industry consolidators, the owners of independent petroleum businesses, a majority of which are relatively small owner-operators, have limited alternatives to sell their operations. The Company believes these factors create an opportunity for it to enter and consolidate additional market areas. CONSOLIDATION STRATEGY The Company utilizes a "hub and spoke" consolidation strategy for expansion within a regional market area. The Company targets regional areas where it believes it can acquire a significant share of the petroleum distribution market. Once an initial distribution operation is acquired (a "hub"), the Company incorporates the acquired business' administration and accounting functions into the Company's centralized corporate system allowing local management to concentrate on sales and marketing. The Company then attempts to increase its market position by acquiring additional businesses or "spokes" in the regional area. This strategy allows the Company to take advantage of administrative, volume purchasing and fleet utilization synergies. Since 1994, the Company has completed seven acquisitions, five of which have been acquisitions of petroleum distributors. In addition, the Company has three pending acquisitions of petroleum distributors that are expected to be completed on or before consummation of the Offering. Upon completion of these Pending Acquisitions (as defined), the Company will have established hubs in Houston, Texas; Grand Junction and Denver, Colorado; Salt Lake City, Utah; and Oklahoma City, Oklahoma and spokes in Canon City, Colorado Springs, Gunnison, Montrose, and Pueblo, Colorado and Delta and Ogden, Utah. The Company intends to use the proceeds from the Offering to accelerate its consolidation strategy. The Company has experienced significant growth in net sales and EBITDA (as defined) as a result of its consolidation strategy and increased demand for its services. On a pro forma basis, for the six months ended August 31, 1997, the Company generated $140.1 million in net sales and $2.7 million in EBITDA representing a 97.1% and 16.3% increase, respectively, from its historical results for the six months ended August 31, 1996. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED ________________, 1997 1,600,000 Shares TRIUMPH FUELS CORPORATION Common Stock All of the shares of Common Stock offered hereby are being sold by Triumph Fuels Corporation (the "Company"). Prior to the Offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $9.00 and $11.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Company intends to qualify the Common Stock for quotation on the Nasdaq National Market under the symbol "___." FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING ON PAGE 5 HEREOF. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------------------- UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS (1) COMPANY (2) - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Per Share . . . . . . . . . . . . . . . $ $ $ - ---------------------------------------------------------------------------------------------------------------- Total (3) . . . . . . . . . . . . . . . $ $ $ - ---------------------------------------------------------------------------------------------------------------- </TABLE> (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. Does not reflect additional compensation to the Representative in the form of (i) a non-accountable expense allowance of the lesser of 1% of the gross proceeds to the Company and $150,000 and (ii) warrants to purchase an aggregate of 120,000 shares of Common Stock at 120% of the Price to Public for one year beginning one year after the effective date of the Registration Statement of which this Prospectus is a part. For additional information with respect to the arrangements between the Company and the Representative, see "Underwriting." (2) Before deducting offering expenses payable by the Company, estimated to be approximately $730,000. (3) The Company has granted to the Underwriters a 30-day option to purchase up to 240,000 additional shares of Common Stock solely to cover over-allotments, if any, on the same terms and conditions as the shares offered hereby. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $_____, $_____ and $_____, respectively. See "Underwriting." -------------------- The shares of Common Stock are offered by the several Underwriters named herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of such shares will be made at the offices of Gaines, Berland Inc., New York, New York on or about _____________, 1997. -------------------- GAINES, BERLAND INC. The date of this Prospectus is __________, 1997 PENDING ACQUISITIONS The Company has letters of intent for three acquisitions (the "Pending Acquisitions"), each of which will expand the Company's distribution business in targeted market areas. These acquisitions are expected to close on or before consummation of the Offering. o Winnco, Inc. and W.W. Transports, Inc. The Company has signed a letter of intent to acquire Winnco, Inc. and W.W. Transports, Inc. (collectively "Winnco"), for a purchase price of approximately $5.7 million. Winnco is an independent petroleum distributor with operations in Oklahoma City, Oklahoma. The Winnco acquisition will create a hub for the Company in Oklahoma City. o Salt Lake City Pending Acquisition. The Company signed a letter of intent to acquire an independent petroleum distributor with operations in Salt Lake City, Utah for a purchase price of approximately $2.5 million. This acquisition will create a spoke to the Company's existing hub in Salt Lake City. o Western Colorado Pending Acquisition. The Company signed a letter of intent to acquire an independent petroleum distributor and gasoline retail site owner based in western Colorado for a purchase price of approximately $1.55 million. Through this acquisition, the Company will create a spoke to its existing hub in Grand Junction, Colorado, as well as add one retail site. Completion of the Pending Acquisitions is subject to further negotiations, execution of definitive agreements, satisfactory due diligence, approval by the Company's Board of Directors and the satisfaction of customary closing conditions. There can be no assurance that any of the Pending Acquisitions will be consummated. OTHER OPERATIONS The Company also operates a fractionator gas plant and two gasoline blending facilities located in Colorado, and owns or operates 19 gasoline retail sites located in Colorado and Utah. Petroleum supply operations and gasoline retail sites represented approximately 18.2% and 10.5% of the Company's pro forma net sales for the six months ended August 31, 1997, respectively. The Company believes that its supply operations and retail sites are complementary to its core distribution business. The Company's principal executive offices are located at 1493 Highway 6 & 50, Fruita, Colorado 81521, and its telephone number is (970) 858-0300. THE OFFERING <TABLE> <S> <C> <C> Common Stock Offered by the Company . . . . . 1,600,000 shares Common Stock to be Outstanding after the Offering . . . . . . . . . . . . . . . . 3,289,189 shares (1) Use of Proceeds . . . . . . . . . . . . . . . To complete the Pending Acquisitions, to repay in full the Subordinated Debt (as defined herein) and for general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market Symbol. . . . "__________" </TABLE> - ------------------- (1) Excludes (i) 244,932 shares of Common Stock issuable upon the exercise of outstanding stock options, (ii) [Map to be inserted which will detail the geographic locations of the Company's operations] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 119,595 shares of Common Stock issuable upon the exercise of certain warrants and (iii) 120,000 shares of Common Stock issuable upon the exercise of the Representative's Warrant. See "Management --Benefit Plans", "Certain Transactions," and "Underwriting." RISK FACTORS See "Risk Factors" for a discussion of certain considerations relevant to an investment in the Common Stock. SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following summary of historical consolidated financial data at August 31, 1997 and for each of the three years ended February 28, 1997 and for the six months ended August 31, 1996 and 1997 have been derived from and should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. The summary consolidated financial data for the six months ended August 31, 1996 and 1997 are unaudited, but have been prepared on the same basis as the audited Consolidated Financial Statements and, in the opinion of management, contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information set forth herein. Results for such interim periods are not necessarily representative of the results for the full year. The following summary pro forma combined financial data gives effect to the acquisition of Moffitt Oil Company, Inc. ("Moffitt") and eight gasoline retail stores from Diamond Shamrock Refining and Marketing, Inc., a subsidiary of Ultramar Diamond Shamrock Corporation (the "Colorado Stores Acquisition") completed during Fiscal 1998, the acquisition of Winnco to be completed on or prior to the consummation of the Offering and the financings required to fund such acquisitions. The pro forma combined statements of operations for Fiscal 1997 and for the six months ended August 31, 1997 assume all transactions were completed as of March 1, 1996 and March 1, 1997, respectively. The summary pro forma balance sheet data assumes that the Winnco transaction and the Offering were completed as of August 31, 1997. The pro forma information below should be read in conjunction with "Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements of the Company, Moffitt, Winnco, and the Colorado Stores including the notes thereto, included elsewhere in this Prospectus. <TABLE> <CAPTION> FISCAL YEAR ENDED SIX MONTHS ENDED AUGUST 31, ---------------------------------------------------- -------------------------------- PRO FORMA FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, PRO FORMA 1995 1996 1997 1997(2) 1996 1997 1997 (2) -------- -------- -------- ------- ------- ------- ------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Net sales . . . . . . . . . . . . $ 93,639 $102,126 $ 135,464 $ 267,312 $71,145 $ 103,708 $ 140,079 Cost of sales . . . . . . . . . . 86,604 93,144 123,821 244,247 64,440 93,442 127,738 -------- -------- ---------- --------- ------ --------- ---------- Gross profit . . . . . . . . . . . 7,035 8,982 11,643 23,065 6,705 10,266 12,341 Selling, general and administrative expenses . . . . . . . . . . . 5,396 7,433 9,359 18,023 4,434 7,936 9,680 Depreciation and amortization . . . 457 694 871 3,785 444 1,448 1,916 -------- -------- ---------- --------- ------ --------- ---------- Operating income . . . . . . . . . 1,182 855 1,413 1,257 1,827 882 745 Other non-operating income (expense): Interest expense, net . . . . . (99) (611) (874) (3,046) (421) (1,348) (1,472) Gain (loss) on sale of assets . 21 (8) (2) -- 4 -- -- Other income (expense) . . . . . (55) 65 138 201 50 49 43 -------- -------- ---------- --------- ------ --------- ---------- Income (loss) before income taxes. 1,049 301 675 (1,588) 1,460 (417) (684) Income tax (expense) benefit . . . (387) (44) (257) 1,039 (569) 154 250 -------- -------- ---------- --------- ------ --------- ---------- Net income (loss) . . . . . . . . . $ 662 $ 257 $ 418 $ (549) $ 891 $ (263) $ (434) ======== ======== ========== ========= ====== ========= ========== Net income (loss) per share . . . . $ 0.22 $ (0.29) $ (0.14) $ (0.23) ========== ========= ======== ========= Weighted average shares outstanding . . . . . . . . . . 1,903 1,903 1,903 1,903 OTHER FINANCIAL DATA: EBITDA (1) . . . . . . . . . . . . $ 1,605 $ 1,606 $ 2,423 $ 5,243 $2,325 $ 2,379 $ 2,704 </TABLE> <TABLE> <CAPTION> AT AUGUST 31, 1997 ------------------ HISTORICAL PRO FORMA(2) ---------- ------------- (UNAUDITED) <S> <C> <C> BALANCE SHEET DATA: Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,870) $ 2,615 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,755 74,453 Long-term debt, net of current maturities . . . . . . . . . . . . . . . 26,849 24,349 Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . 4,519 18,519 </TABLE> - ----------------- (1) EBITDA is earnings before income taxes, interest, depreciation and amortization. EBITDA is a financial measure commonly used in the Company's industry and should not be considered in isolation or as a substitute for net income, cash flow provided from operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (2) Pro forma to reflect the conversion of all the outstanding shares of Series A Preferred Stock into 1,013,514 shares of Common Stock, the Diamond Shamrock, Moffitt and Winnco acquisitions and the receipt by the Company of the estimated net proceeds from the issuance of 1.6 million shares of Common Stock and the application of such proceeds. See "Capitalization" and "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001049108_dollar_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001049108_dollar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..799b6b7382c80b6d01a57d3f11f6138013621dd9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001049108_dollar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this Prospectus. It is not complete and may not contain all of the information that you should consider before investing in the common stock. You should read the entire Prospectus carefully, including the "Risk Factors" section and the financial statements and the notes to those statements. THE COMPANY Dollar Thrifty Group's two vehicle rental companies, Dollar and Thrifty, operate separate daily vehicle rental businesses. They also license independent franchisees to rent vehicles under their brands. As of September 30, 1997, the Dollar and Thrifty systems had 872 locations in the United States and Canada, of which 161 were company-owned stores and 711 were operated by franchisees. Dollar and Thrifty also have franchisees outside the United States and Canada. Revenues from franchisees outside the United States and Canada have not been material to the Group's results of operations. The Group offers value-priced rental vehicles under the Dollar and Thrifty brands. The Group's brands appeal to leisure customers, including tourists, and to small businesses and independent business travelers. While the two companies have similar customers, they have different approaches to the vehicle rental market. In the United States, Dollar derives a majority of its revenues from company-owned stores located at major airports, and it derives substantial revenues from foreign tour and leisure rentals. Thrifty derives its revenues primarily from franchising fees and services, including vehicle leasing. Thrifty's franchisees operate in both the local and airport markets. STRATEGY The Company's main objectives are to increase revenues and improve profitability by strengthening its value-priced brands. The key elements of this strategy are: CAPITALIZE ON CHANGING INDUSTRY DYNAMICS As a result of recent ownership changes in the domestic vehicle rental industry, many of the major companies in the industry are now publicly held and only Dollar and Thrifty remain wholly owned by a domestic automotive manufacturer. These ownership changes may lead to higher average rental rates as a result of increased industry focus on profitability and shareholder returns, rather than on transaction volume and market share. The Group would benefit from higher rental rates, particularly in markets where it has a strong position. BUILD ON THE COMPANY'S NICHES IN THE VEHICLE RENTAL MARKET Value-Priced Brands The Dollar and Thrifty brands are identified with the Group's strategy of offering value-priced rental vehicles that are comparable to those offered by the Group's principal competitors. Dollar and Thrifty service a wide variety of leisure and discretionary customers from airport, near airport and local market locations. Dollar's Leisure Market Position Dollar intends to build on its strong position in the leisure rental market. The Company plans to expand Dollar's international tour business because the Company believes that the trend over the past five years of increasing numbers of overseas tourists visiting the United States will continue. Thrifty's Local Market Position Thrifty plans to increase its local presence through growth in the operations of existing franchisees and addition of new franchisees. The local market has grown faster than the airport market and generally has had less pricing pressure. Management believes that the local market, where competition is based on location, service and customer relationships, is well-suited to Thrifty's franchise strategy, which emphasizes local ownership and operation. CAPITALIZE ON OPPORTUNITIES FOR OPERATING EFFICIENCIES Dollar and Thrifty operate as separate companies and serve the vehicle rental market in different ways. The Company believes that as an independent company it can improve efficiency and reduce costs by taking advantage of its joint ownership of Dollar and Thrifty. INVEST IN STRATEGIC INFORMATION AND RESERVATION SYSTEMS Since the beginning of 1995, the Group has made capital investments and other expenditures totalling $22.8 million for reservation, tour and other information systems. It plans to make capital expenditures of approximately $10 million in these systems during 1998. Dollar plans to invest in systems to improve operational control, fleet utilization, rental rates and customer service. Thrifty plans to invest in systems to support its franchisees' operations by offering uniform automated systems and customer service programs. EXPAND INTERNATIONAL OPERATIONS Dollar plans to use commercial arrangements with a foreign independent vehicle rental company to expand use of its brands abroad and as a means of promoting additional rentals from in-bound travelers. Dollar has recently entered into an agreement with Europcar International, S.A., an independent European vehicle rental company. The agreement provides that each company will accept rental reservations in its geographical area made through the other. In addition, Dollar and Thrifty may license foreign vehicle rental companies as master franchisees for specific countries or regions. Thrifty may also offer vehicle leasing and other services to its international franchisees. DEVELOP OPPORTUNITIES FOR BUSINESS EXPANSION INTO RELATED AREAS The Company believes that its experience in fleet leasing and management, used car disposal and franchising provides it with opportunities for expansion. These opportunities include leasing vehicles to small companies and individuals, entering into joint ventures or other arrangements with publicly held new car dealer groups, used car superstores and auto auctions and using Dollar Thrifty Group's existing telecommunications capacity to provide telemarketing services. Management believes the Company will be better able to pursue these opportunities when it is an independent company. FINANCING PLAN The Company is implementing a financing plan, which includes the sale of shares by the Company in the Offering. The Financing Plan has the following elements: NEW FLEET FINANCING - A $900 million series of medium term notes, secured by vehicles and related assets. The New Medium Term Notes, which will be issued under the Group's existing asset backed note program, will almost entirely replace the Company's existing vehicle financing arrangements with Chrysler Financial Corporation and finance fleet growth. - A commercial paper program of up to $615 million, secured by vehicles and related assets. The Commercial Paper Program, which will be part of the Group's existing asset backed note program, will be used to finance fleet growth and to refinance existing fleet debt. A $545 million Liquidity Facility will support the Commercial Paper Program. - Credit support from Chrysler, in the form of a letter of credit facility which declines over a period not exceeding five years. Chrysler will provide the letter of credit facility under the Chrysler Credit Support Agreement. The letter of credit facility will provide additional security for the New Medium Term Notes and the Commercial Paper Program. SALE OF SHARES BY THE COMPANY - The Company's sale of 2,500,000 shares covered by this Prospectus and the use of the proceeds to provide collateral for fleet financing. If the U.S. Underwriters and the Managers of the international portion of the Offering exercise their option to purchase additional shares from the Company in connection with the Offering to cover over-allotments, the Company would use the additional net proceeds for general corporate purposes. Those purposes include providing collateral for the Group's vehicle fleet financings that could reduce or possibly eliminate Chrysler's credit support. REVOLVING CREDIT FACILITY - A $215 million senior secured revolving credit facility. Up to $190 million under the Revolving Credit Facility may be used to issue letters of credit to support fleet debt and other obligations. Up to $70 million will be available for working capital borrowings and to replace existing working capital debt ($22.3 million as of September 30, 1997). The Group may not have more than $215 million of combined borrowings and letters of credit outstanding under the Revolving Credit Facility. The Company expects that the New Medium Term Notes will be issued and the Revolving Credit Facility and the Chrysler Credit Support Agreement will be in effect when the Offering is completed. The Company expects that the Commercial Paper Program and the Liquidity Facility will be in place in the first quarter of 1998. The Company has obtained from Credit Suisse First Boston (and its affiliates) and The Chase Manhattan Bank underwritten financing commitments, subject to customary conditions, relating to the Revolving Credit Facility and the Liquidity Facility. The completion of the Offering is contingent upon the issuance of the New Medium Term Notes and the implementation of the Chrysler Credit Support Agreement and the Revolving Credit Facility. THE OFFERING COMMON STOCK OFFERED(A): <TABLE> <S> <C> OFFERED BY CHRYSLER...................................................... 20,000,000 shares OFFERED BY THE COMPANY................................................... 2,500,000 shares ------------------ TOTAL............................................................... 22,500,000 shares U.S. OFFERING............................................................ 19,125,000 shares INTERNATIONAL OFFERING................................................... 3,375,000 shares ------------------ TOTAL............................................................... 22,500,000 shares SHARES TO BE OUTSTANDING AFTER THE OFFERING(A)(B).......................... 22,500,000 shares </TABLE> - ------------------------- (a) Excludes 3,375,000 shares issuable upon exercise of the over-allotment option. The over-allotment option is described in "Underwriting." (b) Excludes 2,250,000 shares (plus up to an additional 337,500 shares if the over-allotment option is exercised) reserved for issuance under the Company's long-term incentive plan. See "Management -- Executive Compensation -- Long-Term Incentive Plan." VOTING RIGHTS................. Holders of common stock will have one vote per share. DIVIDEND POLICY............... The Company does not plan to pay cash dividends in the near term. Moreover, its debt instruments restrict the payment of cash dividends. USE OF PROCEEDS............... - The Company estimates that it will receive net proceeds from the Offering of approximately $45.9 million. It expects to use the net proceeds to provide collateral for fleet financing as part of the Financing Plan. - The Company estimates that it will receive additional net proceeds of up to $65.4 million if the U.S. Underwriters and the Managers exercise their over-allotment option. The Company would use the additional proceeds for general corporate purposes. Those purposes include providing collateral for the Group's vehicle fleet financings that could reduce or possibly eliminate Chrysler's credit support. - The Company will not receive any of the proceeds from Chrysler's sale of shares in the Offering. RISK FACTORS.................. For a discussion of certain risks you should consider before investing in the common stock, see "Risk Factors." NEW YORK STOCK EXCHANGE SYMBOL........................ DTG SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA DOLLAR THRIFTY GROUP DATA The following summary consolidated Dollar Thrifty Group financial and operating data as of and for the years ended December 31, 1996, 1995 and 1994 are derived from the Group's audited consolidated financial statements and the related notes thereto included in this Prospectus. The following summary consolidated Group financial and operating data as of and for the nine months ended September 30, 1997 and 1996 are unaudited. In the opinion of management, the unaudited data have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation. Results for interim periods are not indicative of results for a full year. SEPARATE DOLLAR AND THRIFTY DATA The following summary consolidated Dollar and Thrifty financial and operating data are derived from their separate respective unaudited consolidated financial information. In the opinion of management, this information has been prepared on the same basis as the Group's audited consolidated financial statements and includes all adjustments necessary for fair presentation. Results for interim periods are not indicative of results for a full year. EBITDA AND ADJUSTED EBITDA EBITDA consists of earnings (loss) before income taxes plus all net interest expense and all depreciation and amortization expense. Adjusted EBITDA consists of earnings (loss) before income taxes plus net interest expense that does not relate to vehicles and depreciation and amortization expense that does not relate to vehicles. The Company does not include EBITDA and Adjusted EBITDA as, nor should they be considered as, alternative measures of operating results or cash flows from operating activities (as determined in accordance with generally accepted accounting principles). Instead, the Company includes them because they are widely used financial measures of the potential capacity of a company to incur and service debt. The presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA OF DOLLAR THRIFTY GROUP <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS (IN THOUSANDS): Revenues: Vehicle rentals.......................... $ 413,424 $ 372,508 $ 495,598 $ 382,234 $ 481,954 Vehicle leasing.......................... 172,999 177,836 150,179 116,392 124,783 Fees and services........................ 58,966 49,382 50,475 39,969 39,018 Other.................................... 8,614 9,653 9,342 7,630 7,127 ---------- ---------- ---------- ---------- ---------- Total revenues....................... 654,003 609,379 705,594 546,225 652,882 Costs and expenses: Direct vehicle and operating............. 234,370 190,577 245,895 187,462 219,058 Vehicle depreciation, net................ 210,975 196,367 213,143 161,440 207,452 Selling, general and administrative...... 143,155 123,439 138,363 103,161 111,554 Interest expense, net.................... 83,526 78,817 72,868 55,190 65,756 Amortization of cost in excess of net assets acquired........................ 11,517 10,456 8,169 6,742 4,504 Restructuring charge reversal -- Snappy................................. (7,000) -- -- -- -- Loss on sale of Snappy................... 40,893 -- -- -- -- Intangible asset impairment losses....... -- -- 157,758 155,000 -- ---------- ---------- ---------- ---------- ---------- Total costs and expenses............. 717,436 599,656 836,196 668,995 608,324 ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes........ (63,433) 9,723 (130,602) (122,770) 44,558 Income tax expense (benefit)............... (12,755) 9,753 16,682 18,589 20,338 ---------- ---------- ---------- ---------- ---------- Net earnings (loss)(a)..................... $ (50,678) $ (30) $ (147,284) $ (141,359) $ 24,220 ========== ========== ========== ========== ========== </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, -------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA (IN THOUSANDS): Revenue-earning vehicles, net.............. $ 991,276 $ 958,799 $1,120,346 $1,225,478 $1,500,864 Total assets............................... 1,585,651 1,657,823 1,647,951 1,684,341 1,978,980 Total debt................................. 1,047,065 1,128,811 1,241,558 1,291,914 1,542,742 Stockholder's equity....................... 331,159 331,189 183,883 189,702 207,986 </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> OPERATING DATA (IN THOUSANDS): EBITDA(a).................................. $ 253,184 $ 304,399 $ 174,697 $ 108,442 $ 330,555 Adjusted EBITDA(a)......................... (37,836) 27,211 (110,074) (106,953) 57,966 Net cash provided by operating activities............................... 291,651 173,163 301,911 231,577 229,878 COMPANY-OWNED STORES DATA (U.S. AND CANADA)(B): Average number of vehicles operated........ 40,083 36,246 45,037 45,695 55,103 Number of rental transactions.............. 2,230,076 2,196,611 2,817,269 2,137,301 2,554,969 Average revenue per transaction............ $ 161 $ 170 $ 176 $ 179 $ 189 Monthly average revenue per vehicle........ $ 748 $ 856 $ 917 $ 929 $ 972 VEHICLE LEASING DATA (U.S. AND CANADA)(B): Average number of vehicles leased.......... 41,072 34,373 30,583 31,434 33,158 Average monthly lease revenue per unit..... $ 349 $ 400 $ 409 $ 411 $ 418 </TABLE> - ------------------------- (a) Management believes it is important to note that net earnings, EBITDA and Adjusted EBITDA for the year ended December 31, 1996 and the nine months ended September 30, 1996 include intangible asset impairment losses of $157,758,000 and $155,000,000, respectively, related to Chrysler's decision in 1996 to dispose of Thrifty as a non-core asset ($155,000,000) and an impairment loss related to Thrifty Canada, Ltd. ($2,758,000). (b) Excludes 1994 data for Snappy Car Rental, Inc., which was sold in September 1994. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA OF DOLLAR <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ------------------------ 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS (IN THOUSANDS): Revenues: Vehicle rentals.......................... $ 299,563 $ 311,267 $ 435,074 $ 334,393 $ 431,645 Vehicle leasing.......................... 57,018 47,321 38,195 29,728 26,465 Fees and services........................ 27,709 20,068 22,718 18,374 17,798 Other.................................... 2,949 3,278 3,183 2,794 1,649 ---------- ---------- ---------- ---------- ---------- Total revenues....................... 387,239 381,934 499,170 385,289 477,557 Costs and expenses: Direct vehicle and operating............. 180,415 157,519 212,658 160,236 190,732 Vehicle depreciation, net................ 111,508 103,384 130,516 97,376 126,727 Selling, general and administrative...... 81,236 70,099 87,739 66,739 75,364 Interest expense, net.................... 49,413 42,860 45,129 33,702 42,395 Amortization of cost in excess of net assets acquired........................ 4,800 4,556 4,696 3,531 3,723 ---------- ---------- ---------- ---------- ---------- Total costs and expenses............. 427,372 378,418 480,738 361,584 438,941 ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes........ (40,133) 3,516 18,432 23,705 38,616 Income tax expense (benefit)............... (13,295) 3,399 9,108 11,828 17,369 ---------- ---------- ---------- ---------- ---------- Net earnings (loss)........................ $ (26,838) $ 117 $ 9,324 $ 11,877 $ 21,247 ========== ========== ========== ========== ========== </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, -------------------------------------- ------------------------ 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA (IN THOUSANDS): Revenue-earning vehicles, net.............. $ 513,164 $ 571,610 $ 690,069 $ 739,086 $ 934,186 Total assets............................... 775,666 836,135 989,669 988,491 1,241,697 Total debt................................. 562,673 621,782 713,715 758,911 954,488 Stockholder's equity....................... 70,542 70,659 102,383 82,535 123,630 </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ------------------------ 1994 1995 1996 1996 1997 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> OPERATING DATA (IN THOUSANDS): EBITDA..................................... $ 131,901 $ 159,981 $ 205,079 $ 162,869 $ 216,548 Adjusted EBITDA............................ (22,042) 16,047 30,117 32,392 47,688 Net cash provided by operating activities............................... 161,998 112,718 196,491 131,327 137,901 COMPANY-OWNED STORES DATA (U.S.): Average number of vehicles operated........ 33,366 29,855 38,952 39,352 48,682 Number of rental transactions.............. 1,801,583 1,777,630 2,409,821 1,821,238 2,229,328 Average revenue per transaction............ $ 166 $ 175 $ 181 $ 184 $ 194 Monthly average revenue per vehicle........ $ 748 $ 869 $ 931 $ 944 $ 985 VEHICLE LEASING DATA (U.S.): Average number of vehicles leased.......... 14,130 10,823 7,801 8,140 6,774 Average monthly lease revenue per unit..... $ 336 $ 364 $ 408 $ 406 $ 434 </TABLE> SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA OF THRIFTY <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------- --------------------- 1994 1995 1996 1996 1997 -------- -------- --------- --------- -------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS (IN THOUSANDS): Revenues: Vehicle rentals................................. $ 60,388 $ 61,241 $ 60,524 $ 47,841 $ 50,309 Vehicle leasing................................. 114,951 117,769 111,969 86,649 98,318 Fees and services............................... 29,548 28,950 27,730 21,569 21,215 Other........................................... 6,522 4,768 4,714 3,768 4,595 -------- -------- --------- --------- -------- Total revenues.............................. 211,409 212,728 204,937 159,827 174,437 Costs and expenses: Direct vehicle and operating.................... 29,335 32,270 33,242 27,204 28,317 Vehicle depreciation, net....................... 87,739 85,287 82,592 64,064 80,724 Selling, general and administrative............. 51,530 52,102 50,260 37,245 37,917 Interest expense, net........................... 29,609 30,754 26,449 20,517 22,392 Amortization of cost in excess of net assets acquired...................................... 5,900 5,900 3,473 3,211 781 Intangible asset impairment losses.............. -- -- 157,758 155,000 -- -------- -------- --------- --------- -------- Total costs and expenses.................... 204,113 206,313 353,774 307,241 170,131 -------- -------- --------- --------- -------- Earnings (loss) before income taxes............... 7,296 6,415 (148,837) (147,414) 4,306 Income tax expense................................ 6,102 6,387 7,338 6,401 3,058 -------- -------- --------- --------- -------- Net earnings (loss)(a)............................ $ 1,194 $ 28 $(156,175) $(153,815) $ 1,248 ========= ========= ========= ========= ========= </TABLE> <TABLE> <CAPTION> AS OF DECEMBER 31, AS OF SEPTEMBER 30, --------------------------------- --------------------- 1994 1995 1996 1996 1997 -------- -------- --------- --------- -------- <S> <C> <C> <C> <C> <C> BALANCE SHEET DATA (IN THOUSANDS): Revenue-earning vehicles, net..................... $425,345 $382,137 $ 430,277 $ 486,392 $566,678 Total assets...................................... 772,075 837,317 676,370 704,333 732,017 Total debt........................................ 447,273 520,142 527,843 548,513 587,711 Stockholder's equity.............................. 257,670 257,756 96,159 103,815 97,288 </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------- --------------------- 1994 1995 1996 1996 1997 -------- -------- --------- --------- -------- <S> <C> <C> <C> <C> <C> OPERATING DATA (IN THOUSANDS): EBITDA(a)......................................... $133,431 $130,385 $ (33,491) $ (57,499) $110,323 Adjusted EBITDA(a)................................ 13,034 8,662 (143,252) (142,404) 6,595 Net cash provided by operating activities......... 113,518 62,053 108,052 90,057 81,647 COMPANY-OWNED STORES DATA (U.S. AND CANADA): Average number of vehicles operated............... 6,717 6,391 6,085 6,343 6,421 Number of rental transactions..................... 428,493 418,981 407,448 316,063 325,641 Average revenue per transaction................... $ 141 $ 146 $ 149 $ 151 $ 155 Monthly average revenue per vehicle............... $ 749 $ 799 $ 829 $ 838 $ 871 VEHICLE LEASING DATA (U.S. AND CANADA): Average number of vehicles leased................. 26,942 23,550 22,782 23,294 26,384 Average monthly lease revenue per unit............ $ 356 $ 417 $ 409 $ 413 $ 414 </TABLE> - ------------------------- (a) Management believes it is important to note that net earnings, EBITDA and Adjusted EBITDA for the year ended December 31, 1996 and the nine months ended September 30, 1996 include intangible asset impairment losses of $157,758,000 and $155,000,000, respectively, related to Chrysler's decision in 1996 to dispose of Thrifty as a non-core asset ($155,000,000) and an impairment loss related to Thrifty Canada, Ltd. ($2,758,000). CONTINUING RELATIONSHIP WITH CHRYSLER The Company is currently a wholly owned subsidiary of Chrysler. After the Offering, Chrysler will own no shares in the Company. Chrysler will, however, have certain continuing financial and commercial arrangements with Dollar Thrifty Group. VEHICLE SUPPLY Chrysler will continue to provide vehicles to Dollar and Thrifty under vehicle supply agreements extending through July 2001. The principal terms of those agreements were established for the 1997 model year and will continue for the duration of the agreements. The Dollar Thrifty Group was Chrysler's largest customer for the 1997 model year. Under its residual value program, Chrysler guarantees the aggregate resale value of specified vehicles purchased from it. Chrysler has the sole discretion to set the specific terms and conditions of its residual value program for a model year. It has agreed in the vehicle supply agreements, however, to offer programs to Dollar and Thrifty that, taken as a whole, are competitive with a residual value program Ford Motor Company or General Motors Corporation is then making generally available to domestic vehicle rental companies. Chrysler has also agreed to make various promotional payments during the term of the vehicle supply agreements. Dollar and Thrifty are required during this period to advertise Chrysler vehicles exclusively. See "Business -- Fleet Acquisition and Management -- Vehicle Supply." CREDIT SUPPORT As part of the Financing Plan, Chrysler will provide credit support for the Group's fleet financing in the form of a letter of credit facility. The credit support will start at $50 million, but will be reduced to the extent the Company receives more than $10 million in net proceeds from the exercise of the over-allotment option. If those proceeds are $60 million or more, Chrysler's credit support would be eliminated. The amount of any Chrysler credit support in effect after the over-allotment option has been exercised or has expired unexercised is referred to as the "Initial Support Amount." The Initial Support Amount will decline annually, beginning September 30, 1999, by the greater of 20% of the Initial Support Amount and 50% of the Group's excess cash flow. The Company may need to replace reductions in the Initial Support Amount with cash from operations or with borrowings or letters of credit under the Revolving Credit Facility. The Company has agreed to nominate a person designated by Chrysler as a director of the Company so long as Chrysler is providing any credit support to the Group. In addition, as part of the Financing Plan, Chrysler Financial Corporation, Chrysler's finance subsidiary, will receive repayment from the Group of vehicle debt in the amount of approximately $827 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- Financing Plan." INSURANCE AND OTHER MATTERS Chrysler Insurance Corporation, a Chrysler subsidiary, provides automobile liability insurance to the Group above self-insured retentions and quota share retentions. Those retentions are secured by surety bonds that are guaranteed by Chrysler. Chrysler Insurance Corporation also provides other surety bonds, guaranteed by Chrysler, to secure various obligations of the Group, including obligations under airport concession agreements. As part of the Financing Plan, these surety bonds and Chrysler guarantees will be replaced by new bonds or letters of credit issued by third parties unaffiliated with Chrysler. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources -- Financing Plan." Chrysler and the Company have entered into a tax sharing agreement relating to periods during which members of the Group were subsidiaries of Chrysler. Various intercompany accounts between Chrysler and the Group also will be settled upon completion of the Offering. See "Unaudited Pro Forma Consolidated Financial Statements." For additional information about the Group's relationship with Chrysler, see "Risk Factors -- Dependence on Chrysler" and "Continuing Relationship with Chrysler."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001049462_porex-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001049462_porex-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d210e455457f913c129876b191b46315ebfd1c60
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001049462_porex-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. References in this Prospectus to "Porex" or the "Company" are to Porex Corporation and, unless the context indicates otherwise, its consolidated subsidiaries and their respective predecessors. Unless otherwise indicated, references herein to fiscal years and quarters are to the Company's fiscal year, which ends on June 30 of each year, and the related fiscal quarters. For example, "Fiscal 1997" refers to the Company's fiscal year ended June 30, 1997. Unless otherwise indicated, all information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. For a discussion of certain factors that should be considered by prospective investors, see "Risk Factors." THE COMPANY Porex is a leading developer, manufacturer and distributor of porous plastic products and has a 35-year history of innovation and market leadership in the field of porous plastics. The Company's porous and solid plastic components and products are used in a wide range of healthcare, consumer and industrial applications, primarily to filter, wick, diffuse, drain, vent or control the flow of fluids or gases. For the healthcare industry, Porex designs and manufactures various components that are incorporated in the products of other healthcare manufacturers. In addition, the Company produces its own line of pipette tips, blood serum filters, surgical implants and plastic pharmaceutical vials. In the consumer products market, Porex designs and manufactures porous plastic components for use by other manufacturers in a variety of home and office products and appliances, such as writing pen tips, or "nibs," used in marking and highlighting pens, home water filters and deodorant and fragrance applicators. Porex also manufactures a wide range of custom porous plastic components for industrial applications, including automobile battery vents, wastewater treatment filters and silencers to reduce sound levels of compressed air. The Company has a diverse customer base of over 600 customers, including numerous Fortune 500 companies. In Fiscal 1997, net sales and net income of the Company were $52.9 million and $8.1 million, respectively. Healthcare, consumer and industrial applications comprised approximately 51%, 28% and 21%, respectively, of total net sales. Porex has established a leading reputation in the porous plastics industry for developing innovative manufacturing technology and providing solutions to complex customer requirements. Porex has also developed significant expertise in combining porous plastic components with injection molded solid plastic products, which has broadened its range of product offerings. Porex believes its competitive strengths include technological leadership in the design and manufacture of porous plastic products; efficient manufacturing operations based on proprietary, technologically advanced equipment; and an ability to collaborate with customers to solve complex design and performance requirements. In addition, Porex has a technically skilled sales and marketing force and experienced management. Porex's objective is to increase sales and net income by leveraging its competitive strengths and broadening its product offerings. To achieve this objective, the Company intends to (i) continue internal development of new products and technologies, (ii) acquire businesses with products and technologies that complement the Company's current product offerings and (iii) pursue growth opportunities in international markets. Over the last three fiscal years, the Company's net sales and net income have grown at a compounded annual rate of 16.9% and 56.6%, respectively. The Company is a newly formed holding company incorporated in November 1997. In connection with its formation, the Company issued 15,000,000 shares of Common Stock to Synetic in exchange for all of the outstanding capital stock of Porex Technologies Corp. ("PTC"). As a result, the Company owns all the outstanding capital stock of PTC, through which the Company conducts its business operations. The Company's principal offices are located at 500 Bohannon Road, Fairburn, Georgia 30213 and its telephone number is (770) 964- 2503. Prior to the offering, the Company has been a wholly owned subsidiary of Synetic, a publicly traded corporation engaged in the healthcare communications business. Upon completion of the offering, Synetic will own approximately 86% of the outstanding Common Stock (84% assuming the Underwriters' over-allotment options are exercised in full). For a discussion of various intercompany arrangements and agreements with Synetic, see "Risk Factors--Substantial Control by Synetic" and "Transactions and Relationship with Principal Stockholder." THE OFFERING Common Stock offered by the Company....................... 2,500,000 shares(1) Common Stock to be outstanding 17,500,000 shares(2) after the offering........... Use of proceeds.................... The net proceeds received by the Company from the offering will be used for general corporate purposes, which may include acquisitions. See "Use of Proceeds." Nasdaq National Market symbol...... Application has been made for quotation of the Common Stock on the Nasdaq National Market under the symbol "PORX." - -------- (1) Up to an aggregate of 375,000 additional shares may be sold by the Company pursuant to the Underwriters' over-allotment options. See "Underwriting." (2) Does not include shares of Common Stock reserved for future issuance under the Company's stock option plans. See "Management--Compensation Pursuant to Plans and Arrangements of the Company--Class A Option Plan." SUMMARY FINANCIAL INFORMATION The following summary consolidated financial information data should be read in conjunction with "Management's Discussion and Analysis of Financial Conditions and Results of Operations," the Company's Consolidated Financial Statements and notes thereto and other financial information included elsewhere in this Prospectus. <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED JUNE 30, SEPTEMBER 30, --------------------------------------- ---------------------- 1993 1994 1995 1996 1997(1) 1996 1997(1) ------- ------- ------- ------- ------- ------- -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales............. $30,130 $33,093 $39,180 $45,129 $52,885 $11,185 $14,833 Operating income...... 4,321 3,040 6,241 9,309 12,153 2,297 3,328 Net income............ 2,721 1,952 3,775 6,051 8,112 1,617 2,068 Net income per share(2)............. .18 .13 .25 .40 .54 .11 .14 <CAPTION> YEAR ENDED JUNE 30, SEPTEMBER 30, 1997 --------------------------------------- ---------------------- 1993 1994 1995 1996 1997(1) ACTUAL AS ADJUSTED(3) ------- ------- ------- ------- ------- ------- -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE SHEET DATA: Working capital....... $10,090 $10,915 $12,595 $18,393 $11,947 $13,580 $48,455 Total assets.......... 30,127 32,372 37,526 46,486 57,584 58,716 93,591 Long-term debt, less current portion...... 558 216 -- -- -- -- -- Stockholder's equity.. 25,225 27,485 31,540 37,366 45,082 46,903 81,778 </TABLE> - -------- (1) The financial information for Fiscal 1997 and the first quarter of Fiscal 1998 reflects the Company's acquisition in February 1997 of Interflo Technologies, Inc. ("Interflo"), a privately held corporation that manufactures porous plastic components and products used in various applications. See "Pro Forma Financial Information" and Note 2 to the Company's Consolidated Financial Statements. (2) Based on 15,000,000 shares of Common Stock outstanding. (3) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock offered hereby, after deducting underwriting discount and estimated offering expenses payable by the Company, at an assumed initial offering price of $15.50 per share and the application of the net proceeds therefrom as set forth in "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001049624_esg-re-ltd_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001049624_esg-re-ltd_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3713158ad1f51910e308dab8af08f5c17b66f293
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001049624_esg-re-ltd_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this Prospectus. The sale of Common Shares, Class A Warrants and Class B Warrants by ESG Re Limited (the "Company" or "ESG") to certain affiliates (such affiliates of Head & Company L.L.C. are referred to herein as "HMI") of Head & Company L.L.C. ("Head Company") and certain pension plan trusts and other entities created by affiliates of HMI (together with HMI, the "Head Group") and to a limited number of other investors (together with the Head Group, the "Direct Purchasers"), is referred to herein as the "Direct Sales." All financial statements presented in this Prospectus have been prepared in accordance with U.S. GAAP. Unless the context otherwise requires, references herein to the "Company" or "ESG" include the Company's subsidiaries (through which the Company will operate all of its businesses upon completion of the Offerings). All references to the Company prior to the Offerings are to the Company's subsidiary, European Specialty Group Holding AG, and its subsidiaries (collectively, "ES Management"). Insurance terms defined in "Glossary of Selected Insurance Terms" are printed in boldface type the first time they appear in this Prospectus. Except where otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option is not exercised. THE COMPANY ESG Re Limited was formed on August 21, 1997 to provide accident, health, life and special risk REINSURANCE ("personal and special risk reinsurance") to insurers and selected reinsurers on a worldwide basis. The Company intends to become a leading specialist reinsurer writing for its own account with a priority of UNDERWRITING PROFITABILITY. Since 1994, the Company, through its subsidiary, ES Management, has provided UNDERWRITING management services by operating as a personal and special risk reinsurance underwriter on behalf of certain reinsurers. ES Management has performed the principal underwriting functions normally handled by a reinsurer, including risk analysis, pricing, contract structuring, claims management and LOSS RESERVE estimation on behalf of certain companies (its "reinsurance partners") participating in reinsurance pools arranged by ES Management, or has been retained under FACULTATIVE or treaty arrangements outside of the pools. Under the pool arrangements, the reinsurance partners each assume a contractually fixed share of the risk underwritten by ES Management, which does not assume risk for its own account. The share of risk underwritten by each reinsurance partner has been negotiated by ES Management and its reinsurance partners based on estimates of market capacity, the relative amount of capacity that each such reinsurance partner has been willing to make available and ES Management's strategic considerations. The pool business reflects the Company's personal and special risk focus. See "The Company--Lines of Business." The pool contracts limit the business ES Management is permitted to write to personal and special risk business. The management and business origination fees paid to ES Management by its reinsurance partners have been established by agreement between ES Management and such partners and range up to 9.5% of the premiums that are paid to the reinsurance partners by CEDING CLIENTS in consideration for ES Management's management services, with the remainder of the premiums retained by its reinsurance partners in consideration for assuming the reinsurance risk. In addition, ES Management's agreements with its partners entitle it to receive negotiated profit commissions, which depend on the pools' loss ratios. ES Management's relationship with ceding clients approximates the relationship between an insurer and a reinsurer except that ES Management uses its pool underwriting authority to accept risk on behalf of other reinsurers rather than on its own behalf. In essence, ES Management serves as the agent for its reinsurance partners. ES Management's reinsurance partners have included Swiss Re Life & Health/The Mercantile and General Life Reinsurance Company Limited, Manulife Reinsurance, AXA RE VIE and Skandia International Insurance Corporation. Following the Offerings, the Company will discontinue its management services business and become a reinsurer of risks for its own account. The Company believes that the skills which have allowed it to develop a successful management business are the same skills required to operate a successful reinsurance company and that, following its transition, its underwriting activities and its relationships with ceding clients will remain largely unchanged. THE BUSINESS The Company believes that its reinsurance management subsidiary, ES Management, distinguishes itself and strengthens its client relationships by offering "intelligent reinsurance" products and services that help its ceding clients to better manage their risks. These include software solutions to particular underwriting problems (including software developed by reinsurance and health care professionals to predict future severity of medical conditions based on current diagnoses), actuarial support, product design, and, in the field of medical expense reinsurance, loss prevention and disease management. In order to maximize the quality of the information related to the risks that it underwrites, the Company maintains close relationships with its ceding clients and professional reinsurance BROKERS. In 1996, gross premiums written by ES Management on behalf of its reinsurance partners totaled $63.9 million. ES Management expects that its GROSS PREMIUMS WRITTEN on behalf of its reinsurance partners for the year ending December 31, 1997, will be approximately $100 million. ES Management's principal lines of business as a percentage of gross premiums written on behalf of its reinsurance partners were as follows for the year ended December 31, 1996: <TABLE> <CAPTION> 1996 GROSS PREMIUMS WRITTEN <S> <C> Medical Expense................................................. 39% Personal Accident and Disability................................ 35 Credit/Life..................................................... 16 Special Risk.................................................... 10 --- 100% === </TABLE> In the years ended December 31, 1994, 1995 and 1996, ES Management's revenues were $3.3 million, $4.5 million and $4.1 million, respectively. ES Management's revenues in these years derived primarily from management fees, except for the year ended December 31, 1996, in which $398,000 in profit commissions were recognized as a result of favorable loss developments with respect to earlier underwriting years. ES Management's business can be characterized as short-TAIL. Approximately 85% of its business has a typical RUN-OFF pattern of less than 24 months and 13% has a slightly longer run-off pattern of up to 60 months. The remaining 2% of ES Management's business is long-tail. Of ES Management's business, 88% is written on a proportional basis, as quota share reinsurance, and 12% is written on a non-proportional basis, as specific EXCESS OF LOSS REINSURANCE. ES Management underwrites risks emanating from more than 49 countries and maintains operations in its key markets. Approximately 69% of ES Management's gross premiums written in 1996 originated in Europe. In addition to ES Management's offices in Hamburg, London, Hong Kong and Moscow, the Company has offices in Bermuda and Ireland, and has formed a strategic alliance with an independent broker in Miami with respect to Latin American business. This international network of offices enables ES Management to be close to its customers and the risks underwritten, in line with the operating principle of "think globally--act locally." ESG is seeking a selective North American presence in the health care field and, to this end, has opened an office and hired additional personnel in Toronto. POOL UNDERWRITING RESULTS ES Management's underwriting approach is analytical and proactive, taking into consideration trends and developments that affect loss development, rather than focusing on pricing techniques based on loss history alone. ES Management's business underwritten on behalf of its reinsurance partners is derived from (i) pool business, where ES Management is authorized to underwrite reinsurance coverage on behalf of, and bind, reinsurance partners in specified lines of business; (ii) facultative business, where ES Management separately negotiates coverage on a risk-by-risk basis between CEDENTS and reinsurance companies; and (iii) other business, where ES Management arranges coverage outside of pools because of coverage or risk restrictions contained in the pool agreements. In 1996, pool business amounted to $53.2 million (or 83.3% of total gross premiums written), facultative business amounted to $5.7 million (or 8.9% of total gross premiums written) and other business amounted to $5.0 million (or 7.8% of total gross premiums written). As reflected in the following table, ES Management has achieved underwriting profitability and steady growth in the business it managed for each of the 1994, 1995 and 1996 UNDERWRITING YEARS: <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, ---------------------------- 1994 1995 1996 (U.S. DOLLARS IN MILLIONS, EXCEPT RATIO DATA) <S> <C> <C> <C> Gross premiums written....................... $ 36.5 $ 58.3 $ 63.9 NET PREMIUMS WRITTEN (2)..................... 35.6 57.6 62.7 Net losses and loss adjustment expenses (3).. 18.1 25.4 34.7 Net losses and loss adjustment expenses as a percentage of net premiums written.......... 51.0% 44.1% 55.3% Commissions and expenses (4)................. $ 11.5 $ 22.5 $ 18.1 Commissions and expenses as a percentage of net premiums written........................ 32.2% 39.1% 28.9% </TABLE> - -------------------- (1) All figures show the business as underwritten by ES Management on behalf of its reinsurance partners and do not represent premiums received by, or revenues of, ES Management, which are determined under the terms of ES Management's arrangements with its reinsurance partners. (2) Net premiums written represent gross premiums written reduced by the cost of excess of loss reinsurance coverage. (3) Net losses and loss adjustment expenses include claims costs and reserves, and represent the actual or anticipated final close-out ratio reduced by any amounts recovered under excess of loss reinsurance coverage. Claims costs include actual claims expenditures and loss adjustment costs. Net losses do not include costs for internal claims supervision and auditing charges, if applicable, for ES Management and corresponding items for the pool or open market reinsurers. (4) Commissions and expenses include all original commissions, overriders, reinsurance brokerage fees and other fees, taxes and general loss prevention charges. Commissions and expenses do not include (i) ES Management's general expenses for managing and administering its business, (ii) the expenses incurred by reinsurance partners for their internal administration functions, such as accounting, auditing and investment management and (iii) expenses allocated to cover the reinsurer's utilization of capital and surplus. ES Management's total operating expenses for the years ended December 31, 1994, 1995 and 1996 were $3.1 million, $3.8 million and $3.6 million, respectively. FINANCIAL TRANSITION Subsequent to the Offerings, ESG will assume for its own account risks that its subsidiary, ES Management, previously underwrote on behalf of its reinsurance partners. After completion of the Offerings, the Company will exercise a contractual right provided for in its current pool agreements to underwrite for its own account a 30% share, retroactive to January 1, 1997, of the 1997 business it currently manages for its reinsurance partners in its reinsurance pools. ESG's assumption of 30% of the current pool business will be through retrocession from its reinsurance partners, proportional to such partners' share of the pool. After completion of the Offerings, ESG will no longer perform any management functions on behalf of third parties except in connection with the runoff of the reinsurance pools. Beginning in 1998, ESG will write reinsurance on its own behalf, retaining not less than 70% of the total book of business, including renewals. ESG believes this transition will not have a significant negative impact on its relationship with its reinsurance partners or ceding clients since the Company will continue to provide identical underwriting capabilities and related services. The Company will not be required to compensate either its ceding clients or its reinsurance partners by reason of the Company's current contractual arrangements. The Company intends to form strategic alliances with other reinsurers (some of which may be current reinsurance partners), which will assume up to 30% of the business that will be underwritten by ESG as lead reinsurer. Since ES Management's business is characterized by high renewal ratios and the Company's reinsurance subsidiaries will offer a strong financial position, the Company is confident that it will retain all or a substantial part of this business. From 1994 to 1995, 90% of ES Management's business with ceding clients was renewed and from 1995 to 1996, 79% was renewed. The Company will not act as an agent on behalf of its reinsurance partners and will not receive management and profit commissions from them. As ES Management has handled all of the functions usually administered by a professional reinsurer, other than investment management, the Company believes that its established infrastructure is sufficiently developed to meet the demands of ESG's new role and its anticipated growth. The Company has entered into an Investment Advisory Agreement (as defined herein) with Head Asset Management (as defined herein) for the provision of investment advisory services. See "The Company--Investments." In the future, the Company may add additional personnel to meet its anticipated growth. Because the Company previously acted only as a management company through ES Management, its initial capital will be unencumbered by issues of LOSS RESERVE adequacy, unrealized losses in its investment portfolio and uncollectible reinsurance. As a management company, ES Management's revenues were previously comprised of underwriting management fees and profit commissions based on the underwriting results of the reinsurance pools. As a reinsurer, the Company's revenues will include premiums written for its own account as well as income derived from its investment portfolio. The Company will seek an early rating from a major rating agency. In addition, the Company will enter into co-reinsurance agreements and licensing and fronting arrangements, as necessary, allowing the Company to share underwriting knowledge of, and to gain access to, markets in which it currently is not doing business. Under such arrangements, ESG would be able to accept risks in the name of the other reinsurers, and those reinsurers would be obligated to cede to ESG a portion of the business underwritten by ESG on their behalf. MARKET GROWTH ESG believes that its reinsurance markets are currently experiencing significant growth as a result of: (i) the worldwide trend of transferring social security and national health responsibilities to the private sector, particularly in Western Europe; (ii) increasing insurance demand accompanying economic growth in emerging markets in Eastern Europe, Asia and Latin America; (iii) the deregulation of certain European markets as a consequence of new trade directives from the European Union, enabling the introduction of new products; (iv) increasing individual MORBIDITY and decreasing MORTALITY within large demographic segments of the population; and (v) increased capacity requirements for the insurance of major global sports and entertainment events. GROWTH STRATEGY The Company believes that it is well positioned to benefit from these market growth developments because of ES Management's reputation as a lead underwriter in negotiating on behalf of the pools, its risk-oriented approach and its far- ranging and well-established relationship network. While continuing ES Management's strategy of placing primary emphasis on underwriting profitability rather than market share, the Company's goal is to underwrite gross premiums written exceeding $190 million in 1998 and $300 million in 1999. There can be no assurance that this goal will be achieved. See "Risk Factors--Forward-Looking Statements." The Company intends to achieve this growth objective through the following strategic initiatives: PRODUCTS AND SERVICES Management believes that its ES Management subsidiary is recognized by its customers as a provider of intelligent reinsurance through innovative reinsurance products and services. ESG intends to maintain its competitive position by developing reinsurance products and services that are tailored to the needs of particular markets and working closely with primary insurers and insureds to implement loss control techniques. The Company intends to (i) introduce and implement managed care techniques in Germany, Spain, Italy and other European markets where these techniques have been underutilized; (ii) create private medical care and insurance products for emerging markets within Eastern Europe, Latin America and Asia; (iii) expand occupational injury and health reinsurance programs in Scandinavia; and (iv) continue to structure innovative special risk reinsurance programs for major sporting events and performances such as World Cup Soccer, European Soccer Championships and the "Three Tenors" concerts. Consistent with ES Management's practice and experience, ESG will offer reinsurance of health risks in conjunction with loss-reducing products and services. The Company expects that its ceding clients will assist with the use and implementation of such products and services because of their favorable impact on claims expenses. In support of its loss prevention programs, the Company intends to assume responsibility for claims assistance services that were previously provided by third parties. Assistance services include such functions as 24-hour emergency evacuation and repatriation, medical treatment referrals and supporting clinical services. In addition, the Company will use the ESIMS software system developed by ES Management to assist ceding companies with portfolio and claims handling. NEW BUSINESSES AND MARKETS The Company plans to enter the North American market, where business agreements with one of ES Management's reinsurance partners previously prevented ES Management from competing. Ms. Renate M. Nellich, Chief Executive Officer of European Specialty (North America) Limited ("ES North America") and her team have had considerable experience in the North American health business and will pursue opportunities in these markets. See "Management." In addition, access to specialized U.S. claims service providers and the consummation of additional strategic alliances will enable the Company to import managed care techniques that have proven successful in the United States to Europe and other areas where they are currently underutilized by health care providers. STANDING AS A SPECIALIST LEAD REINSURER The Company believes that its specialist reputation and substantial capitalization will qualify it to be included on the security lists of major reinsurance brokers and ceding clients and, as a result, will be presented with lead and participation risk opportunities not previously available to it as a reinsurance management company. Management expects that ES Management's profitable underwriting history on behalf of reinsurance partners will give ESG opportunities to participate in additional reciprocal reinsurance programs with its current reinsurance partners as well as with new reinsurers in strategic alliances. ES Management has generally incurred losses as an underwriting management company as a result of the expense of initial system development and, in 1996, charges relating to the Company's reorganization to become a reinsurer. See "Management's Discussion Analysis of Financial Condition and Results of Operations." The Company believes that its losses as a reinsurance management company are not indicative of its future performance as a reinsurer and will not adversely affect the Company's ability to attract ceding clients. FOCUS ON HIGH GROWTH MARKETS ES Management focuses its health insurance underwriting activities on markets with high growth potential in developing areas such as Latin America, the Commonwealth of Independent States ("CIS"), Eastern Europe and Asia, and the Company intends to continue this emphasis after completion of the Offerings. The Company will also target selected developed markets for the introduction of innovative products. In Germany, for example, the public health sector is undergoing rapid changes, attributable in part to health reform legislation recently enacted by the German parliament, that the Company believes will lead to greater demand for health reinsurance. CAPITALIZING ON EXPERIENCE OF MANAGEMENT The Company's Managing Director and Chief Executive Officer, Mr. Wolfgang M. Wand, has extensive experience in the personal and health insurance areas and has been in the insurance business for over 20 years. He formed a specialized health care insurance group in 1983 that was acquired by Winterthur Insurance Group in 1993. Mr. Steven H. Debrovner, Chief Operating Officer, was the European Accident and Health Manager of AFIA, which was subsequently acquired by CIGNA, where he assumed global marketing responsibility for all non-life business at CIGNA Worldwide headquarters. With more than 30 years of underwriting experience, Mr. Debrovner is considered within the reinsurance industry to be one of the leading personal accident underwriters. The Company's Chief Financial Officer, Mr. Gerhard Jurk, was Chief Executive Officer of a Winterthur Group insurance subsidiary and Chief Internal Auditor for Transatlantic Insurance Group. Mr. Jurk has worked in the insurance industry for more than 25 years and is an accountant certified by the German government. Dr. Jean-Claude Mayor, a member of the Supervisory Board of ESG Germany (as defined herein), was formerly a member of the executive board of Swiss Re Group, responsible for the worldwide life and disability business, and has established life reinsurance programs in many international markets. Ms. Renate M. Nellich, Chief Executive Officer of ES North America, heads ESG's Toronto-based operations. Ms. Nellich previously served as Chief Operating Officer of North American life and health operations for Swiss Re Life & Health/The Mercantile and General Life Reinsurance Company Limited. Ms. Nellich has more than 25 years of experience in the North American life and health insurance industry. The Company believes that the experience of its management in the insurance and financial markets positions it to take advantage of reinsurance opportunities and to maintain and attract additional experienced underwriting, marketing and administrative personnel. ORGANIZATION The Company currently operates its reinsurance management business through ES Management, which consists of ESG Germany and its subsidiaries in their capacity as reinsurance management companies. The Company believes it will benefit from the market presence and efficiency of its operation in Germany and the favorable regulatory and fiscal environments of its locations in Bermuda and Ireland, where the Company expects a substantial portion of its business to be written. The Company's non-North American business will be generated primarily on behalf of European Specialty Reinsurance (Ireland) Limited ("ES Ireland"), and a substantial portion of its business will be ceded to European Specialty Reinsurance (Bermuda) Limited ("ES Bermuda"), with profits accruing primarily in Bermuda and Ireland. Canadian business will be generated on behalf of ES Ireland, while the remainder of the Company's North American business written will be generated on behalf of ES Bermuda. The Company expects to be subject to no taxation in Bermuda and a maximum corporate tax rate of 10% on its trading profits in Ireland. The Company's European business will be generated primarily on behalf of ES Germany and ES Ireland. See "Certain Tax Considerations--Taxation of the Company and its Subsidiaries." European Specialty Group (United Kingdom) Limited ("ESG UK") will fulfill certain administrative and other functions on behalf of its wholly-owned subsidiaries in the United Kingdom, Canada and Germany. The chart below depicts the organization of ESG and its subsidiaries after completion of the Formation (as defined herein). Each of the companies specifically named below, except ESG Germany, has been formed for the purpose of effectuating the Company's transition to a reinsurer for its own account and has no current operations. [CHART APPEARS HERE] The Company's principal offices are located at Skandia International House, 16 Church Street, Hamilton, HM 11 Bermuda, and its telephone number is (441) 295-2185. THE OFFERINGS <TABLE> <S> <C> Common Shares offered in the Offerings U.S. Offering.................... shares International Offering........... shares ----------- Total.......................... 9,000,000 shares ================ Direct Sales (1): The Head Group................... 574,867 shares Other Direct Purchasers.......... 2,098,932 shares ---------------- Total.......................... 2,673,799 shares ================ Common Shares outstanding after giving effect to the Formation (as defined herein), Direct Sales, and the Offerings..................... 12,573,799 shares (1)(2) Proposed Nasdaq National Market symbol............................ ESREF Use of Proceeds.................... Proceeds from the Direct Sales are estimated to be $50.0 million and net proceeds from the Offerings are estimated to be $168.3 million. Approximately $5.6 million of net proceeds from the Offerings will be used for the payment of certain expenses and fees related to the Direct Sales and the Offerings. The remainder of net proceeds from the Offerings together with the proceeds from the Direct Sales will be contributed to the Company's operating subsidiaries to establish a capital base to be used to support the underwriting of reinsurance or will be held by the Company for general corporate purposes. Dividend Policy.................... The Board of Directors intends to declare quarterly cash dividends of $0.075 per share beginning in the first quarter of 1998. The declaration and payment of dividends to holders of Common Shares will be at the discretion of the Board of Directors. See "Dividend Policy." </TABLE> - -------------------- (1) Does not include (i) 1,247,284 Common Shares reserved for issuance upon the exercise of Class A Warrants purchased by the Direct Purchasers and (ii) 1,247,284 Common Shares reserved for issuance upon the exercise of Class B Warrants (if certain performance criteria are satisfied) purchased by the Head Group, which will be received upon completion of the Direct Sales and the Offerings. See "Direct Sales" and "Description of Capital Stock-- Warrants." (2) Does not include 12,000 Ordinary Shares that will be repurchased by the Company and retired simultaneously upon completion of the Formation. SPONSOR The Company's sponsor is Head & Company L.L.C. ("Head Company"). As sponsor, Head Company has provided support and assistance in the planning, structuring and formation of the Company and capital raising in both the Direct Sales and Offerings, in the belief that both the capital markets and the insurance markets will view favorably a well-capitalized, knowledgeable, personal and special risk reinsurer that enjoys strong sponsorship. Head Company is an investment banking firm formed in 1987 to specialize in the insurance industry. The primary activity of Head Company is the management of its investment affiliates dedicated to making equity investments in insurance and reinsurance companies and companies providing services to the insurance industry. Head Company has a proven investment track record, extensive contacts throughout the insurance industry and an established reputation in the investment community. Affiliates of Head Company made capital investments in the Direct Sales. Following the completion of the Offerings, the Head Group will hold 4.6% of the outstanding Common Shares (if, immediately following the completion of the Offerings, the Head Group were to exercise in full its Class A Warrants and no other Class A Warrants were exercised, the Head Group would hold 21.7% of the then outstanding Common Shares). See "Principal Shareholders". John C Head III, Chairman of the Board of Directors, is a Managing Member of Head Company and is deemed to beneficially own such shares. Head Asset Management L.L.C. ("Head Asset Management"), an affiliate of Head Company, is party to an Investment Advisory Agreement (as defined herein) with the Company for the provision of certain investment advisory services. See "The Company--Investments". FORMATION AND DIRECT SALES The Company was formed on August 21, 1997 under the laws of Bermuda. On December 2, 1997, the current shareholders of European Specialty Group Holding AG ("ESG Germany") exchanged all of their interests in ESG Germany for 900,000 Common Shares (the "Formation"). ESG Germany thereby became an indirect, wholly-owned subsidiary of the Company. As adjusted to give effect to the Direct Sales and the Offerings, such Common Shares will represent 7.2% of the aggregate outstanding Common Shares. Following the Formation, on December 3, 1997, the Direct Purchasers purchased from the Company Common Shares, Class A Warrants and Class B Warrants. See "Direct Sales." SUMMARY FINANCIAL INFORMATION The following table sets forth the summary consolidated financial data for European Specialty Group Holding AG and Subsidiaries or, prior to 1996, European Specialty Group GmbH and Subsidiaries, for the periods and as of the dates indicated. The financial statements included herein represent the financial performance and results of the Company's prior operations as a reinsurance management company and do not reflect the financial performance and results of the Company as a reinsurer for its own account. The consolidated statement of income data for the years ended December 31, 1994, 1995 and 1996, and the consolidated balance sheet data as of December 31, 1995, and 1996, have been derived from the Company's audited consolidated financial statements. The consolidated statement of income data for the years ended December 31, 1992, and 1993, and the periods ended June 30, 1996 and 1997, and the consolidated balance sheet data as of December 31, 1992, 1993 and 1994, and as of June 30, 1996 and 1997, have been derived from the Company's unaudited consolidated financial statements and, in the opinion of management, reflect all adjustments necessary for a fair presentation of the results of operations and financial condition. The data should be read in conjunction with the Company's Consolidated Financial Statements, related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information appearing elsewhere herein. For information on underwriting results, see "The Company--Underwriting Results" and "--Lines of Business."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050582_erols_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050582_erols_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2d4f76fd082cd272a7941728ebff4da6d01cccf3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050582_erols_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information, including the financial statements and the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information set forth in this Prospectus gives retroactive effect to (i) the consummation of a 2.3583672-for-1 reverse split of the Common Stock effected on December 5, 1997 and (ii) the elimination of the Company's class of non-voting common stock effected on December 5, 1997, and assumes no exercise of the Underwriters' over-allotment option or of any outstanding options exercisable for Common Stock. For definitions of certain technical and other terms used herein, see "Glossary." The Company Erols is a rapidly growing Internet service provider ("ISP") offering an attractive combination of low priced and high quality Internet access in targeted markets located throughout the densely populated corridor stretching from Massachusetts to Virginia. The Company's goal is to become the premier ISP serving residential subscribers, small and medium-sized businesses and small office/home office ("SOHO") customers in each of its targeted markets. The Company believes that there is a growing demand for high quality Internet access, fueled by heightened consumer awareness, expanding access to modem- equipped computers and increasingly widespread Internet use. According to a study by International Data Corporation ("IDC"), at the end of 1996 approximately 13 million households, or 13% of all U.S. households, were online. By the end of 2001, according to this study, almost 40 million households, or 38% of all U.S. households, are expected to be online--an increase of over 200%. Consistent with this anticipated surge in demand, the Company believes that a key to its future success is its continued ability to expand its base of subscribers while retaining existing ones. Since the inception of ISP operations on August 1, 1995, the Company has become the largest regional ISP in the United States and the eighth largest ISP nationwide, with approximately 272,000 subscribers as of October 31, 1997, a 101% increase from approximately 135,000 subscribers as of December 31, 1996. As of October 31, 1997, the Company's monthly churn rate was approximately 2%, which, the Company believes, is substantially below the prevailing industry average. The Company selects its geographic markets based on a number of demographic and economic characteristics, such as the prevalence of computer and modem ownership and current Internet use. Current markets include New York City, Philadelphia, Washington, DC and Boston--the four East Coast markets with the highest density of residential computer ownership and four of the seven highest density residential computer markets nationwide. The Company intends to penetrate further the residential dial-access segment of the ISP market in its existing service areas and enter additional high density urban and suburban markets where demographic or economic attributes suggest a high concentration of potential Internet users. The Company currently operates 56 physical points of presence ("POPs") throughout its geographic markets and, therefore, exercises substantial control over both the quality of its service and its network costs. The Company also currently utilizes 28 "Virtual POPs," which permit subscribers located adjacent to, but outside of the local calling areas of, physical POPs to dial into the Erols network on a local basis through arrangements with local exchange carriers ("LECs"). Because of its regional focus, the Company is positioned to utilize its fixed network infrastructure effectively and to achieve substantial economies of scale. The Company focuses its marketing efforts on a geographic basis, making efficient use of its marketing resources to build brand identification and utilizing its existing subscriber base as a source of referrals. The Company's primary direct marketing efforts employ a combination of television, radio, the World Wide Web and print advertising, which is focused on its geographic markets and on the most desirable populations within those markets. In order to design and implement effective marketing programs and efficiently allocate resources among media and markets, the Company monitors the reaction to, and effectiveness of, its advertising programs on an ongoing basis. A key element of the Company's strategy is its pricing structure, which offers subscribers competitive fixed pricing for unlimited, high quality Internet access on a month-to-month basis and pursuant to one-, two- and three- year prepaid service agreements. Erols currently offers four pricing plans, at prices ranging from $19.95 per month for month-to-month access to as low as $10.95 per month for a prepaid three-year plan. The Company targets its pricing below its major national competitors, but does not believe that it is necessary to offer the lowest prices in each market, in light of the quality of its network, as well as its growing brand identification and subscriber loyalty. In conjunction with its pricing packages, the Company offers a full money-back guarantee upon cancellation, pro-rated over the unused duration of the service term. The Company recently has begun to focus on, and intends to intensify its efforts to penetrate, the market segment composed of small and medium-sized businesses and SOHO users which, the Company believes, represents a natural complement to the Company's existing residential subscriber base. A study by IDC indicates that, nationwide, the market of small and medium-sized businesses currently is comprised of approximately 7.2 million businesses, of which 20% have Internet access. IDC also projects that the number of businesses in this market will increase at an annual rate of 2.2% into the next century and that the percentage of such companies with Internet access will rise to 52% by the year 2000. Presently, the Company's subscriber base consists primarily of residential users whose peak usage occurs during the evenings and weekends. By attracting business customers who utilize network facilities during normal business hours, when the Erols network otherwise is significantly underutilized (as much as 70% idle), the Company aims to achieve optimal network utilization and to generate substantial additional revenues from its targeted business customers at modest incremental cost. The Company's network infrastructure currently supports modems with dial- access speeds of up to 56 Kbps. The Company provides new dial-access subscribers with its easy-to-install proprietary access software package, which incorporates a telephone dialer, an e-mail platform, a Web browser (either Netscape Communication Corporation's ("Netscape") Navigator (a registered trademark of Netscape) or Microsoft Corp.'s ("Microsoft") Microsoft(R) Internet Explorer) and SurfWatch(TM) software for parental control over Internet content access. This software package permits simplified access to the Internet through a "point and click" graphical user interface ("GUI"). After installation, the subscriber has a direct connection to the Internet using Point-to-Point Protocol ("PPP") and access to all of the Internet's resources, including e-mail, the World Wide Web, Usenet News service and Internet Relay Chat. The Company's access software automatically displays the Erols World Wide Web site each time a subscriber logs on, providing the Company with the opportunity to communicate with its subscribers at the start of each session. The Company maintains "24 x 7" subscriber and technical support 365 days a year. The Company provides high quality Internet access services to its business customers, utilizing high-speed access via ISDN, frame relay, fractional T-1, T- 1 and T-3 circuits. It also offers a broad range of Internet-based services, including (i) Global Trader(SM), the Company's turn-key e-commerce solution for small businesses; (ii) Internet security services, including security consulting and virtual private networks; and (iii) Web hosting, design and development services. The Company believes that its ability to provide consistently high quality Internet access is key to its future success and devotes substantial resources to ensuring the reliability of its network and the quality of its services. In a comparison of ISPs performed by Inverse Network Technology, Inc. ("Inverse"), for the seven month period from May 1997 to November 1997, the Company's service ranked above the industry average on seven of the eight criteria compared, including rates of call failures. ---------------------- The Company's principal executive offices are located at 7921 Woodruff Court, Springfield, Virginia 22151, and its telephone number is (703) 321-8000. The Company's address on the World Wide Web is http://www.erols.com. Information posted on the Company's Web site does not constitute a portion of this Prospectus. The Offering <TABLE> <S> <C> Common Stock Offered by the Company........2,500,000 shares Common Stock Offered by the Selling Stockholder..............................417,000 shares Common Stock to be Outstanding after the Offering.............................8,336,779 shares (1) Use of Proceeds............................For repayment of accounts payable and bank debt; expansion and enhancement of network infrastructure; increased marketing efforts; and working capital and general corporate purposes. The Company will not receive any of the proceeds from the sale of Shares by the Selling Stockholder. Proposed Nasdaq National Market Symbol.....EROL Risk Factors...............................An investment in the Shares involves a high degree of risk. See "Risk Factors" beginning on page 7 of this Prospectus. </TABLE> - ------------------- (1) Excludes (i) 1,067,550 shares of Common Stock underlying stock options outstanding as of the date of this Prospectus; (ii) 83,670 additional shares reserved for issuance pursuant to the Company's stock option plan; and (iii) 437,550 shares reserved for issuance upon exercise of the Underwriters' over-allotment option. Summary Financial Data (Dollar amounts and share data in thousands, except per share data) <TABLE> <CAPTION> Period from August 1, 1995 Nine Months Ended (inception) to Year Ended September 30, December 31, December 31, ----------------------------- 1995 1996 1996 1997 ------------------ --------------- -------------- --------------- (unaudited) <S> <C> <C> <C> <C> Statement of Operations Data: Net revenues............................. $ 126 $ 10,949 $ 5,972 $ 24,410 Costs and expenses: Cost of revenues.................... 63 6,002 3,529 10,745 Operations and customer support..... 125 6,227 3,876 7,098 Sales and marketing................. 188 9,476 5,524 15,507 General and administrative.......... 91 2,092 1,377 2,992 Depreciation and amortization....... 17 2,014 1,053 4,360 --------- --------- --------- ------- Total costs and expenses................. 484 25,811 15,359 40,702 --------- --------- --------- -------- Loss from operations..................... (358) (14,862) (9,387) (16,292) Other expense, net....................... (660) (1,779) (900) (155) --------- --------- --------- --------- Net loss................................. $ (1,018) $(16,641) $(10,287) $(16,447) ========= ========= ========= ========= Net loss per share (1)................... $ (0.49) $ (6.86) $ (4.99) $ (2.52) ========= ========= ========= ========= Weighted average shares outstanding (1).. 2,063 2,427 2,063 6,518 Other Operating Data: Number of subscribers--end of period..... 6,344 135,378 95,866 263,418 Number of POPs--end of period............ 2 67 36 84 EBITDA(2)................................ $ (342) $(12,848) $ (8,334) $(11,932) Capital expenditures..................... $ 417 $ 10,174 $ 9,183 $ 9,966 <CAPTION> As of December 31, As of September 30, 1997 -------------------------------------- ------------------------------ As 1995 1996 Actual Adjusted(3) ---------------- ----------- ------------ ------------- (unaudited) <S> <C> <C> <C> <C> Balance Sheet Data: Working capital deficit (4).............. $ (1,350) $ (21,687) $ (38,712) $ (11,437) Property and equipment, net.............. 400 10,499 16,075 16,075 Total assets............................. 415 14,559 18,813 41,588 Current portion of unearned revenues (5). 743 12,917 23,677 23,677 Long-term portion of unearned revenues(6) -- 3,441 7,887 7,887 Total liabilities........................ 1,433 29,450 49,100 44,600 Accumulated deficit...................... (1,018) (17,659) (34,106) (34,106) Total stockholders' deficit.............. (1,018) (14,891) (30,286) (3,011) </TABLE> - ------- (1) Computed on the basis described in Note 2 of the Company's financial statements appearing elsewhere in this Prospectus. (2) EBITDA represents net earnings (loss) before net interest expense, other expense, income taxes, and depreciation and amortization. EBITDA is a financial measure commonly used in the telecommunications industry. It is presented to enhance an understanding of the Company's operating results and is not intended to represent, and should not be considered more meaningful than, or an alternative to, net earnings (loss), cash flow or other measures of performance determined in accordance with generally accepted accounting principles. (3) Gives effect to the sale by the Company of 2,500,000 Shares and the initial application of the estimated net proceeds therefrom (assuming an initial public offering price of $12.00 per share). (4) Includes the current portion of unearned revenues attributable to the prepayment of long-term subscriptions. (5) Represents the current portion of unearned revenues attributable to the prepayment of long-term subscriptions. (6) Represents the long-term portion of unearned revenues attributable to the prepayment of long-term subscriptions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050666_northwest_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050666_northwest_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ca7a260b91fe6df064345faf0c8ab1c1fe3bb756
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050666_northwest_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified by, the more detailed information set forth in this Prospectus, which should be read in its entirety. The Company Northwest Pacifica, Inc. is a development-stage corporation incorporated in Oregon in January 1997 and reincorporated in Delaware in December, 1997. The Company's principal place of business is located in Clackamas, Oregon. Business The Company has limited business operations, limited assets and revenues. The Company is a regionally-focused network and Internet service provider ("NSP"). The Company (i) provides client companies with network design and consulting for intranet systems (ii) offers individual and intranet access to the Internet through dial-up and dedicated connections (iii) offers value-added Internet services and (iv) intends to operate a cybercafe that showcases the latest in business communications technology. The Company offers for sale to clients and others the computer hardware necessary to support the services offered by the Company. SEE "DESCRIPTION OF BUSINESS --Plan of Operation." The Company offers its services to small and mid-size companies located in urban areas in the Pacific Northwest, primarily Seattle, Washington, Portland, Oregon, and Boise, Idaho. Transfer Agent The Company will initially act as transfer agent for the Shares. SEE "DESCRIPTION OF SECURITIES--Transfer Agent and Registrar." Selling Securityholders' Securities The Selling Securityholders' Securities consist of (i) 500,000 Distribution Units registered hereby and owned by a certain Selling Security- holder for distribution to its shareholders, each Distribution Unit consisting of one Distribution Share and Distribution Warrants to purchase two shares of Common Stock, (ii) 1,000,000 shares of Common Stock under- lying such Distribution Warrants and (iii) 470,400 shares of Common Stock to be offered for sale by Selling Securityholders subject to certain limitations. SEE "SELLING SECURITYHOLDERS." The Common Stock offered for sale by the Selling Securityholders' constitute an aggregate of 24% of the issued and outstanding Common Stock of the Company as of the date hereof. Trading Market The Company intends to apply for admission to quotation of its Common Stock on the NASD OTC Bulletin Board and intends to apply for listing on the Nasdaq SmallCap Market when, and if, it qualifies therefor. There can be no assurance that the Company will qualify for such quotation or that its Common Stock will be so listed. SEE "RISK FACTORS--Absence of Trading Markets" and "DESCRIPTION OF SECURITIES--Admission to Quotation on Nasdaq SmallCap Market or the NASD OTC Bulletin Board".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050670_argo-tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050670_argo-tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2811b46d31fbc1eccb5e1620d28dae7a2322837c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050670_argo-tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, unless the context otherwise indicates, references to "Carter" refer to the J.C. Carter Company, Inc., after the completion of the Acquisition and references to the "Company" refer to Argo-Tech Corporation ("Argo-Tech") and its wholly owned subsidiaries (the "Subsidiaries"), including, for periods after the consummation of the Acquisition, Carter. As used in this Prospectus, "large commercial aircraft" refers to jet aircraft manufactured outside of the former Soviet bloc, seating 100 or more passengers, "large commercial aircraft engines" refers to commercial jet engines manufactured outside of the former Soviet bloc, having 10,000 pounds of thrust or more, and "airframes" refers to jet airframes manufactured outside of the former Soviet bloc. THE COMPANY OVERVIEW The Company is a leading designer, manufacturer and servicer of high performance fuel flow devices for the aerospace industry. The Company provides a broad range of products and services to substantially all commercial and domestic military engine and airframe manufacturers, to airlines worldwide and to the U.S. and certain foreign militaries. The Company is the world's leading supplier of main engine fuel pumps to the commercial aircraft industry and is a leading supplier of airframe products and aerial refueling systems. Main engine fuel pumps are precision mechanical pumps, mounted to the engine, that maintain the flow of fuel to the engine at a precise rate and pressure. Airframe products include fuel pumps and airframe accessories, which are used to transfer fuel to the engine systems and to shift and control fuel between tanks in order to maintain aircraft balance. Aerial refueling systems permit military aerial tankers to refuel fighter, bomber and other military aircraft while in flight. The Company is also a leading manufacturer of components for ground fueling systems and estimates that one or more of its fueling hydrants, couplers and nozzles are installed in approximately 65% of airports worldwide. Ground fueling systems transfer fuel from fueling trucks and underground tanks to the underwing fuel receptacle of the aircraft. Sales to original equipment manufacturers ("OEMs") provide the Company with a platform for its substantial aftermarket business, which accounts for the major component of its net revenues. The Company's aftermarket business provides repair and overhaul services and distributes spare parts to commercial and military customers worldwide. As of December 31, 1996, the Company's main engine fuel pumps were used in approximately 8,200, or two-thirds, of the large commercial aircraft in service throughout the world. In addition, during 1996, the Company received orders for approximately 75% of all new main engine fuel pumps ordered by large commercial aircraft engine manufacturers worldwide. The Company is the sole source supplier of main engine fuel pumps for all CFM56 series engines, which were selected for installation on approximately 61% of all large commercial aircraft ordered in 1996. This engine powers the Airbus Industries ("Airbus") A-319, A-320, A-321 and A-340 and The Boeing Company ("Boeing") 737 aircraft. The Company is also the sole source supplier of main engine fuel pumps for all engines used on the Boeing 777 aircraft. Complementing its position as a leading supplier of main engine fuel pumps, the Company estimates that one or more of its airframe fuel pumps or accessories are installed on over 80% of all large commercial and U.S. designed military aircraft currently in use. Aerial refueling components manufactured by the Company are installed on every U.S. designed military aircraft equipped with aerial refueling capabilities. In addition, ground fueling components manufactured by the Company have been selected for use in all nine of the major commercial airports constructed in the past ten years, including the recently completed Denver International Airport and the Hong Kong International Airport, which is currently under construction. The Company also produces and services industrial liquefied natural gas ("LNG") pumps and operates a materials laboratory and a business park in Cleveland, Ohio, where the Company maintains its headquarters and primary production facilities. Since prior to 1992, until the acquisition of Carter, the Company was primarily a manufacturer of main engine fuel pumps. In September, 1997, the Company expanded its product lines through the acquisition of the outstanding capital stock of Carter, a California corporation, for $107 million in cash. Carter's product lines include airframe pumps and accessories, military aerial refueling systems and other fuel system components such as valves and ground fueling components, as well as the production and service of LNG pumps. Pro forma for the Acquisition, for the twelve month period ended August 2, 1997, the Company generated net revenues, income from operations and Adjusted EBITDA (as defined) of $156.2 million, $33.0 million and $49.9 million, respectively. For the same period, on a pro forma basis, aerospace products and aftermarket sales accounted for approximately 85% and 49% of the Company's net revenues, respectively. COMPETITIVE STRENGTHS The Company believes it has a strong competitive position as a result of the following factors: - Strong Industry Position and Large Existing Installed Base. The Company has the largest installed base of large commercial main engine fuel pumps (approximately 30,000) in the aerospace industry. The Company also has an installed base of over 215,000 military engine and airframe pumps and accessories; 145,000 other engine pumps and airframe accessories, including fuel gear motors and small main engine fuel pumps for helicopters, turboprop and business aircraft; and 5,800 aerial refueling components. This extensive installed base provides the Company with significant opportunities for aftermarket sales of spare parts and repair and overhaul services. Manufacturers of aerospace parts and components are required to obtain airworthiness certification by the Federal Aviation Administration ("FAA") in the case of products used on commercial aircraft, by the United States Department of Defense (the "U.S. Department of Defense") in the case of products used on U.S. military aircraft, or by similar agencies in most foreign countries. Such regulatory restrictions, which limit the access of other manufacturers to the aftermarket, contribute to significantly higher margins on commercial spare parts and overhaul services. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry. The Company maintains its technological leadership by operating state-of-the-art facilities and employing over 110 engineers. The Company also staffs an on-site design engineer at two of its major OEM customers. These on-site engineers, in combination with its engineering and design staffs, assist the Company in the development of innovative products which address the needs and requirements of its customers and enhance its ability to gain early entrant advantages. As a result of this technological leadership, the Company's main engine fuel pumps have been selected for 22 of the 33 large commercial aircraft engine programs put into production over the last 20 years. For example, the Company is the only manufacturer to win a new production contract for main engine fuel pumps from Rolls-Royce, PLC. ("Rolls-Royce") since 1988 and from General Electric Company ("GE") since 1989. In addition, with the aid of its aftermarket customers, the Company recently replaced the incumbent main engine fuel pump supplier on both the GE CF34-8C (Bombardier Canadair Aerospace ("Canadair") RJ700) and the Rolls-Royce RB211-535 (Boeing 757) engine programs, despite the industry norm against such replacements. Management also believes that its experience with engine systems for use on airframes ranging from the Cessna Aircraft Company ("Cessna") Citation to the Boeing 777, is a competitive advantage that enhances the Company's ability to effectively meet the technical requirements of all new engine system designs. - Strong Relationship with Customers. The Company has developed strong relationships with its OEM customers (including GE, Pratt and Whitney ("Pratt & Whitney") and Rolls-Royce), airline customers (including American Airlines, Lufthansa, Japan Air Lines and United Airlines) and freight carrier customers (including Federal Express and United Parcel Service). Specifically, the Company has been a major supplier of main engine fuel pumps to Pratt & Whitney for over 40 years, and has maintained a relationship with United Airlines since 1962. Management believes that the Company's reputation for quality and service in the aftermarket has further solidified its strong relationships with its airline and freight carrier customers. In addition to purchasing parts and services in the aftermarket, these customers are also influential in the engine OEM's supplier selection process, enhancing the Company's ability to secure positions on new engine platforms. Management believes that Argo-Tech's relationships with its OEM customers will enhance Carter's ability to sell products to existing Argo-Tech customers. For example, management expects to introduce Carter's cross-feed and shut-off valves to Argo-Tech's existing OEM engine customers such as GE, Pratt & Whitney and Rolls-Royce. The Company believes similar opportunities exist to increase sales of Argo-Tech products to Carter's customers. For example, management expects to introduce Argo-Tech airframe pumps to Carter's business and regional jet OEM customers such as Canadair, Cessna, Gulfstream Aerospace Corp. ("Gulfstream") and Lear Corp. ("Lear"). - Strong Core Competencies. The Company has developed strong core competencies that management believes will enable it to improve its position as a leading aerospace component supplier and provide opportunities for growth outside its current product lines. These core competencies include: (i) operational skills for low volume manufacturing of high precision fluid flow devices, (ii) the capability to rapidly design unique solutions to difficult fluid flow problems, (iii) skill and experience in meeting the demanding specifications of aerospace customers, the FAA, the U.S. Department of Defense and other regulatory bodies, and (iv) skill and experience in the design of integrated fuel systems and subsystems. These core competencies have enabled the Company to become the sole source supplier for a substantial number of aerospace programs. Management also believes that these core competencies will allow the Company to develop additional fuel system and other high precision products for use throughout the aerospace industry. - Experienced Management Team. Argo-Tech's Chairman and CEO, Michael Lipscomb, and five other members of senior management, have been with Argo-Tech or its predecessor since 1980. Under Mr. Lipscomb's leadership, Argo-Tech has reduced inventory levels, improved quality and on-time performance and reduced manufacturing lead times, all of which have contributed to significant increases in gross margins, which have grown from 28.5% for fiscal 1992 to 42.6% for the nine months ended August 2, 1997. BUSINESS STRATEGY The Company's strategy is to maintain its leadership position and to grow through the expansion of its product lines and the pursuit of strategic acquisitions. This strategy includes the following key components: - Expansion of Product Lines. The Company plans to apply its core competencies in the aerospace business and to take advantage of its strong reputation and relationships with its customers to expand into specific industrial markets. The Company has utilized its expertise in main engine fuel pump technology to develop industrial engine power generation applications, and plans to capitalize on Carter's expertise in other industrial applications. The Company's strong relationships with GE, Pratt & Whitney and Rolls-Royce have already led to development and production contracts for industrial products such as lube and scavenge pumps and fluid flow dividers. In addition, the high quality and reliability of the Company's main engine fuel pumps have prompted several customers to use the Company's components on certain of their industrial turbine engines. For example, Company-designed and manufactured components are or will be installed on Westinghouse Electric Corp. ("Westinghouse"), Pratt & Whitney, GE and Rolls-Royce land based power generation applications. The Company anticipates further developing this business by introducing Carter's products to these customers. - Aerospace Growth through Acquisitions. The Company plans to pursue strategic acquisitions in the aerospace and industrial fluid flow device industries in order to capitalize on the trend for development of airframe and engine fluid flow systems that will result in increased reliance on integrated systems providers. For example, the Acquisition expands the Company's product lines to include aerial refueling components, aerospace valves and other fuel transfer control components and enhances its base from which to design, manufacture and deliver a broader range of fuel transfer systems and components. While the Company is currently evaluating, and will continue to evaluate other acquisition opportunities, there are no pending agreements or understandings regarding acquisitions. - Enhancement of Operating Efficiencies. Management constantly reviews the Company's operations for opportunities to further reduce costs and increase manufacturing efficiencies through improved utilization of production facilities, continual rationalization of the vendor base and more efficient human resource allocation. Continued enhancements of operating efficiencies include the transfer of production between facilities to absorb fixed overhead, the installation of integrated computer systems at its Costa Mesa facility (the "Costa Mesa Facility"), strengthening of the certified operator and vendor programs and the reassignment of some engineering resources to the development of new products and technologies. - Ground Fueling Growth. The Company intends to devote significant resources to the enhancement of sales, marketing and development of ground fueling products. The Company has recently developed digital pressure control valves that incorporate a microprocessor to enhance fuel flow control and accurately measure the pressure in an aircraft's fuel tank during fueling, allowing for reduced fueling time. Although these products have been available for less than a year, the Company has already supplied over 35 systems to various locations around the world, including the Middle East and Latin America. In addition, the Company has identified three new potential product applications for its ground fueling technology: railroad fluid transfers, fueling of off-road construction and mining equipment and liquefied natural gas ("LNG") nozzles and receptacles used on alternative fuel vehicles. Management believes that these potential product applications could significantly increase the Company's ground fueling sales. ARGO-TECH HISTORY AND OWNERSHIP Argo-Tech, a Delaware corporation, was formed in 1986 to acquire the Power Accessories Division of TRW Inc. (the "TRW Transaction"). The Company and its predecessors have more than 50 years' experience in the aerospace industry. In 1990, the Company underwent a corporate restructuring and disposed of substantially all of its operations except for its aircraft accessories business and became a wholly owned subsidiary of AT Holdings Corporation ("AT Holdings" or "Parent"). AT Holdings was formed in 1990 to purchase the Company and does not have any other assets or operations not related to the Company. The new owners of AT Holdings Corporation after the restructuring included, among others, (i) Vestar Capital Partners ("Vestar"), a private investment firm, (ii) Masashi Yamada, a private investor, and (iii) a group of 29 executives led by the Company's current President and CEO, Michael Lipscomb. In 1994, with the participation of all of the Company's salaried employees, the ESOP (as defined) was formed and acquired 30% of the common stock ("Parent Stock") of AT Holdings, including the Parent Stock previously owned by Vestar. Currently, management and the ESOP own 36% of the outstanding Parent Stock. Mr. Yamada holds approximately 49% of the outstanding Parent Stock through AT Holdings, LLC ("AT LLC"), a domestic limited liability company under his control, and an additional 6% through YC International, Inc. ("YCI"), a U.S. subsidiary of Yamada Corporation, which is a Japanese trading company controlled by Mr. Yamada. THE TRANSACTIONS With the consummation of the Offering, the Company (i) consummated the Acquisition for a cash purchase price of $107.0 million (subject to certain post-closing adjustments), (ii) amended and restated the New Credit Facility (as defined) to allow for, among other things, the Acquisition and the issuance of the Original Notes (the "Amended Credit Facility"), (iii) borrowed the delayed draw acquisition loans under the Amended Credit Facility in an aggregate principal amount equal to $15.0 million (the "Delayed Draw Acquisition Loans") and (iv) repaid $46.7 million of subordinated indebtedness (including accrued interest) owed to affiliates (the "Existing Notes"). The Offering, the Acquisition, the execution of the Amended Credit Facility, the borrowings under Delayed Draw Acquisition Loans and the repayment of the Existing Notes are collectively referred to herein as the "Transactions." See "Description of the Amended Credit Facility." The table below illustrates the Company's corporate structure as of the closing of the Acquisition: AT Holdings | Argo-Tech Corporation | --------------------------------------------------------------------- | | | | | | AT Argo-Tech Argo-Tech Argo-Tech J.C. Carter AT Export Corporation Corporation Corporation Company, Inc.* Insurance (HBP)* (OEM)* (Aftermarket)* *Subsidiary Guarantor All corporations shown are wholly owned by their respective parent. AT Export and AT Insurance are not guarantors of the Notes; both have inconsequential assets, liabilities and equity, and their only operations are the result of intercompany activity which is immediately dividended back to the Company. The Notes are not collateralized by the capital stock of each of the Subsidiary Guarantors nor of the Parent. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER.... The Original Notes were sold, in a transaction exempt from the registration requirements of the Securities Act, by the Company on September 26, 1997 to Chase Securities Inc. (the "Initial Purchaser"). In connection therewith, the Company executed and delivered, for the benefit of the holders of the Original Notes, an Exchange and Registration Rights Agreement dated September 26, 1997 (the "Exchange and Registration Rights Agreement") which is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part, providing for, among other things, the Exchange Offer so that the Exchange Notes will be freely transferable by the holders thereof without registration or any prospectus delivery requirements under the Securities Act, except that a "dealer" or any of its "affiliates," as such terms are defined under the Securities Act, who exchanges Original Notes held for its own account will be required to deliver copies of this Prospectus in connection with any resale of the Exchange Notes issued in exchange for such Original Notes. See "The Exchange Offer -- Purposes and Effects of the Exchange Offer" and "Plan of Distribution." THE EXCHANGE OFFER............... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Original Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. There is $140,000,000 aggregate principal amount of Original Notes outstanding. The Original Notes and the Exchange Notes are collectively referred to herein as the "Notes." The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity date) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that (i) the Exchange Notes are freely transferable by holders thereof (other than as provided herein) and are not subject to any covenant restricting transfer absent registration under the Securities Act and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. See "The Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or (ii) a person that is an affiliate (as defined in Rule 405 under the Securities Act) of the Company), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The Company has not sought, and does not currently intend to seek a no- action letter. There can be no assurance that the staff of the Securities and Exchange Commission would make a similar determination with respect to the Exchange Offer. Each broker-dealer that receives the Exchange Notes for its own account in exchange for the Original Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. REGISTRATION RIGHTS AGREEMENT.... The Original Notes were sold by the Company on September 26, 1997 to the Initial Purchaser pursuant to a Securities Purchase Agreement dated as of September 23, 1997 by and between the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial Purchaser entered into the Exchange and Registration Rights Agreement which grants the holders of the Original Notes certain exchange and registration rights. See "The Exchange Offer -- Termination of Certain Rights." This Exchange Offer is intended to satisfy such rights, which terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes are not entitled to any exchange of registration rights with respect to the Exchange Notes. EXPIRATION DATE.................. The Exchange Offer will expire at 5:00 p.m., New York City time, on [the 21st business day following the Exchange Offer], 1997, unless the Exchange Offer is extended (for a maximum of an additional 20 business days) by the Company in its reasonable discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. ACCRUED INTEREST ON THE EXCHANGE NOTES AND ORIGINAL NOTES....... Interest on the Exchange Notes will accrue from (A) the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor, or (B) if no interest has been paid on the Notes, from September 26, 1997. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. CONDITIONS TO THE EXCHANGE OFFER................. The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. PROCEDURES FOR TENDERING ORIGINAL NOTES................. Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Original Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. Original Notes may be physically delivered, but physical delivery is not required if a confirmation of a book-entry of such Original Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depository") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker or dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS.............. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES... Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the "Exchange Offer -- Guaranteed Delivery Procedures." ACCEPTANCE OF THE ORIGINAL NOTES AND DELIVERY OF THE EXCHANGE NOTES.......................... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Original Notes which are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." WITHDRAWAL RIGHTS................ Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." EXCHANGE AGENT................... Harris Trust and Savings Bank is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." EFFECT ON HOLDERS OF THE ORIGINAL NOTES............. As a result of the making of, and upon acceptance for exchange of all validly tendered Original Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled one of the covenants contained in the Exchange and Registration Rights Agreement and, accordingly, no liquidated damages will become payable in respect of the Original Notes pursuant to the applica- ble terms of the Exchange and Registration Rights Agreement. Holders of the Original Notes who do not tender their Original Notes will be entitled to all the rights and limitations applicable thereto under the Indenture between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), relating to the Original Notes and the Exchange Notes, except for any rights under the Indenture or the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Original Notes pursuant to, the Exchange Offer. All untendered Original Notes will continue to be subject to the restrictions on transfer provided for in the Original Notes and in the Indenture. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Original Notes could be adversely affected. USE OF PROCEEDS.................. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. THE NOTES THE EXCHANGE NOTES............... The Exchange Offer applies to $140,000,000 aggregate principal amount of the Original Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Original Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. See "Description of Notes" for further information and for definitions of certain capitalized terms used below. ISSUER........................... Argo-Tech Corporation INTEREST RATE.................... The Notes will bear interest at a rate of 8 5/8% per annum. MATURITY DATE.................... October 1, 2007. INTEREST PAYMENT DATES........... April 1 and October 1 of each year, commencing on April 1, 1998. SINKING FUND..................... None. OPTIONAL REDEMPTION.............. Except as described below, the Company may not redeem the Notes prior to October 1, 2002. On or after such date, the Company may redeem the Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to October 1, 2000, the Company may, subject to certain requirements, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Cash Proceeds (as defined) of one or more Public Equity Offerings by the Company or Parent, at a price equal to 108.625% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL................ Upon the occurrence of a Change of Control (as defined), each holder will have the right to require the Company to make an offer to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes -- Change of Control." SUBSIDIARY GUARANTEES............ The Notes are fully, unconditionally, jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured, senior subordinated basis by Argo-Tech Corporation (HBP), Argo-Tech Corporation (OEM), Argo-Tech Corporation (Aftermarket), Carter and all future domestic Restricted Subsidiaries (as defined) that incur Indebtedness (as defined) and all future Subsidiary Guarantors, subject to certain fraudulent conveyance limitations as described herein. The Subsidiary Guarantors have also guaranteed the Amended Credit Facility. In addition, the Amended Credit Facility is guaranteed by Parent and is secured by pledges of all of the capital stock of the Company and the Subsidiary Guarantors and security interests in substantially all other tangible and intangible assets of the Company and the Subsidiary Guarantors. See "Description of Notes -- Subsidiary Guarantees." RANKING.......................... The Notes are unsecured and subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The Company may incur additional Senior Indebtedness if it meets certain financial ratio tests set forth in the Indenture. Except for such financial ratio tests, there are no restrictions on the Company's ability to incur additional debt or total debt that ranks senior to or pari passu with the Notes. The Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and rank senior to all subordinated indebtedness of the Company. The Subsidiary Guarantees are unsecured, senior subordinated obligations of the Subsidiary Guarantors, subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors. As of August 2, 1997, after giving effect to the Transactions, the Offering, and the application of the net proceeds therefrom, (i) the outstanding Senior Indebtedness of the Company would have been $110.0 million (exclusive of unused commitments), all of which would have been Secured Indebtedness, (ii) the Company would have had no Senior Subordinated Indebtedness outstanding other than the Notes and no Indebtedness that is subordinate or junior in right of repayment to the Notes, (iii) the outstanding Senior Indebtedness of the Subsidiary Guarantors, consisting entirely of Guarantees of the Amended Credit Facility, would have been $110.0 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no outstanding Senior Subordinated Indebtedness other than the Subsidiary Guarantees and no Indebtedness that is subordinate or junior in right of payment to the Subsidiary Guarantees. RESTRICTIVE COVENANTS............ The Indenture limits (i) the incurrence of additional Indebtedness by the Company and its Restricted Subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations (as defined) of the Company and its Restricted Subsidiaries; (iii) certain other restricted payments, including without limitation, investments; (iv) sales of assets and Restricted Subsidiary stock; (v) certain transactions with affiliates; (vi) the sale or issuance of capital stock of its Restricted Subsidiaries; (vii) the creation of liens; (viii) the lines of business in which the Company and its Restricted Subsidiaries may operate; (ix) consolidations, mergers and transfers of all or substantially all of the Company's assets; and (x) sale and leaseback transactions. The Indenture will also prohibit certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exemptions. See "Description of Notes -- Certain Covenants" and "-- Merger and Consolidation." ASSET SALE PROCEEDS.............. The Company will be obligated in certain instances to make offers to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of Notes -- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050684_argo-tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050684_argo-tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2811b46d31fbc1eccb5e1620d28dae7a2322837c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050684_argo-tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, unless the context otherwise indicates, references to "Carter" refer to the J.C. Carter Company, Inc., after the completion of the Acquisition and references to the "Company" refer to Argo-Tech Corporation ("Argo-Tech") and its wholly owned subsidiaries (the "Subsidiaries"), including, for periods after the consummation of the Acquisition, Carter. As used in this Prospectus, "large commercial aircraft" refers to jet aircraft manufactured outside of the former Soviet bloc, seating 100 or more passengers, "large commercial aircraft engines" refers to commercial jet engines manufactured outside of the former Soviet bloc, having 10,000 pounds of thrust or more, and "airframes" refers to jet airframes manufactured outside of the former Soviet bloc. THE COMPANY OVERVIEW The Company is a leading designer, manufacturer and servicer of high performance fuel flow devices for the aerospace industry. The Company provides a broad range of products and services to substantially all commercial and domestic military engine and airframe manufacturers, to airlines worldwide and to the U.S. and certain foreign militaries. The Company is the world's leading supplier of main engine fuel pumps to the commercial aircraft industry and is a leading supplier of airframe products and aerial refueling systems. Main engine fuel pumps are precision mechanical pumps, mounted to the engine, that maintain the flow of fuel to the engine at a precise rate and pressure. Airframe products include fuel pumps and airframe accessories, which are used to transfer fuel to the engine systems and to shift and control fuel between tanks in order to maintain aircraft balance. Aerial refueling systems permit military aerial tankers to refuel fighter, bomber and other military aircraft while in flight. The Company is also a leading manufacturer of components for ground fueling systems and estimates that one or more of its fueling hydrants, couplers and nozzles are installed in approximately 65% of airports worldwide. Ground fueling systems transfer fuel from fueling trucks and underground tanks to the underwing fuel receptacle of the aircraft. Sales to original equipment manufacturers ("OEMs") provide the Company with a platform for its substantial aftermarket business, which accounts for the major component of its net revenues. The Company's aftermarket business provides repair and overhaul services and distributes spare parts to commercial and military customers worldwide. As of December 31, 1996, the Company's main engine fuel pumps were used in approximately 8,200, or two-thirds, of the large commercial aircraft in service throughout the world. In addition, during 1996, the Company received orders for approximately 75% of all new main engine fuel pumps ordered by large commercial aircraft engine manufacturers worldwide. The Company is the sole source supplier of main engine fuel pumps for all CFM56 series engines, which were selected for installation on approximately 61% of all large commercial aircraft ordered in 1996. This engine powers the Airbus Industries ("Airbus") A-319, A-320, A-321 and A-340 and The Boeing Company ("Boeing") 737 aircraft. The Company is also the sole source supplier of main engine fuel pumps for all engines used on the Boeing 777 aircraft. Complementing its position as a leading supplier of main engine fuel pumps, the Company estimates that one or more of its airframe fuel pumps or accessories are installed on over 80% of all large commercial and U.S. designed military aircraft currently in use. Aerial refueling components manufactured by the Company are installed on every U.S. designed military aircraft equipped with aerial refueling capabilities. In addition, ground fueling components manufactured by the Company have been selected for use in all nine of the major commercial airports constructed in the past ten years, including the recently completed Denver International Airport and the Hong Kong International Airport, which is currently under construction. The Company also produces and services industrial liquefied natural gas ("LNG") pumps and operates a materials laboratory and a business park in Cleveland, Ohio, where the Company maintains its headquarters and primary production facilities. Since prior to 1992, until the acquisition of Carter, the Company was primarily a manufacturer of main engine fuel pumps. In September, 1997, the Company expanded its product lines through the acquisition of the outstanding capital stock of Carter, a California corporation, for $107 million in cash. Carter's product lines include airframe pumps and accessories, military aerial refueling systems and other fuel system components such as valves and ground fueling components, as well as the production and service of LNG pumps. Pro forma for the Acquisition, for the twelve month period ended August 2, 1997, the Company generated net revenues, income from operations and Adjusted EBITDA (as defined) of $156.2 million, $33.0 million and $49.9 million, respectively. For the same period, on a pro forma basis, aerospace products and aftermarket sales accounted for approximately 85% and 49% of the Company's net revenues, respectively. COMPETITIVE STRENGTHS The Company believes it has a strong competitive position as a result of the following factors: - Strong Industry Position and Large Existing Installed Base. The Company has the largest installed base of large commercial main engine fuel pumps (approximately 30,000) in the aerospace industry. The Company also has an installed base of over 215,000 military engine and airframe pumps and accessories; 145,000 other engine pumps and airframe accessories, including fuel gear motors and small main engine fuel pumps for helicopters, turboprop and business aircraft; and 5,800 aerial refueling components. This extensive installed base provides the Company with significant opportunities for aftermarket sales of spare parts and repair and overhaul services. Manufacturers of aerospace parts and components are required to obtain airworthiness certification by the Federal Aviation Administration ("FAA") in the case of products used on commercial aircraft, by the United States Department of Defense (the "U.S. Department of Defense") in the case of products used on U.S. military aircraft, or by similar agencies in most foreign countries. Such regulatory restrictions, which limit the access of other manufacturers to the aftermarket, contribute to significantly higher margins on commercial spare parts and overhaul services. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry. The Company maintains its technological leadership by operating state-of-the-art facilities and employing over 110 engineers. The Company also staffs an on-site design engineer at two of its major OEM customers. These on-site engineers, in combination with its engineering and design staffs, assist the Company in the development of innovative products which address the needs and requirements of its customers and enhance its ability to gain early entrant advantages. As a result of this technological leadership, the Company's main engine fuel pumps have been selected for 22 of the 33 large commercial aircraft engine programs put into production over the last 20 years. For example, the Company is the only manufacturer to win a new production contract for main engine fuel pumps from Rolls-Royce, PLC. ("Rolls-Royce") since 1988 and from General Electric Company ("GE") since 1989. In addition, with the aid of its aftermarket customers, the Company recently replaced the incumbent main engine fuel pump supplier on both the GE CF34-8C (Bombardier Canadair Aerospace ("Canadair") RJ700) and the Rolls-Royce RB211-535 (Boeing 757) engine programs, despite the industry norm against such replacements. Management also believes that its experience with engine systems for use on airframes ranging from the Cessna Aircraft Company ("Cessna") Citation to the Boeing 777, is a competitive advantage that enhances the Company's ability to effectively meet the technical requirements of all new engine system designs. - Strong Relationship with Customers. The Company has developed strong relationships with its OEM customers (including GE, Pratt and Whitney ("Pratt & Whitney") and Rolls-Royce), airline customers (including American Airlines, Lufthansa, Japan Air Lines and United Airlines) and freight carrier customers (including Federal Express and United Parcel Service). Specifically, the Company has been a major supplier of main engine fuel pumps to Pratt & Whitney for over 40 years, and has maintained a relationship with United Airlines since 1962. Management believes that the Company's reputation for quality and service in the aftermarket has further solidified its strong relationships with its airline and freight carrier customers. In addition to purchasing parts and services in the aftermarket, these customers are also influential in the engine OEM's supplier selection process, enhancing the Company's ability to secure positions on new engine platforms. Management believes that Argo-Tech's relationships with its OEM customers will enhance Carter's ability to sell products to existing Argo-Tech customers. For example, management expects to introduce Carter's cross-feed and shut-off valves to Argo-Tech's existing OEM engine customers such as GE, Pratt & Whitney and Rolls-Royce. The Company believes similar opportunities exist to increase sales of Argo-Tech products to Carter's customers. For example, management expects to introduce Argo-Tech airframe pumps to Carter's business and regional jet OEM customers such as Canadair, Cessna, Gulfstream Aerospace Corp. ("Gulfstream") and Lear Corp. ("Lear"). - Strong Core Competencies. The Company has developed strong core competencies that management believes will enable it to improve its position as a leading aerospace component supplier and provide opportunities for growth outside its current product lines. These core competencies include: (i) operational skills for low volume manufacturing of high precision fluid flow devices, (ii) the capability to rapidly design unique solutions to difficult fluid flow problems, (iii) skill and experience in meeting the demanding specifications of aerospace customers, the FAA, the U.S. Department of Defense and other regulatory bodies, and (iv) skill and experience in the design of integrated fuel systems and subsystems. These core competencies have enabled the Company to become the sole source supplier for a substantial number of aerospace programs. Management also believes that these core competencies will allow the Company to develop additional fuel system and other high precision products for use throughout the aerospace industry. - Experienced Management Team. Argo-Tech's Chairman and CEO, Michael Lipscomb, and five other members of senior management, have been with Argo-Tech or its predecessor since 1980. Under Mr. Lipscomb's leadership, Argo-Tech has reduced inventory levels, improved quality and on-time performance and reduced manufacturing lead times, all of which have contributed to significant increases in gross margins, which have grown from 28.5% for fiscal 1992 to 42.6% for the nine months ended August 2, 1997. BUSINESS STRATEGY The Company's strategy is to maintain its leadership position and to grow through the expansion of its product lines and the pursuit of strategic acquisitions. This strategy includes the following key components: - Expansion of Product Lines. The Company plans to apply its core competencies in the aerospace business and to take advantage of its strong reputation and relationships with its customers to expand into specific industrial markets. The Company has utilized its expertise in main engine fuel pump technology to develop industrial engine power generation applications, and plans to capitalize on Carter's expertise in other industrial applications. The Company's strong relationships with GE, Pratt & Whitney and Rolls-Royce have already led to development and production contracts for industrial products such as lube and scavenge pumps and fluid flow dividers. In addition, the high quality and reliability of the Company's main engine fuel pumps have prompted several customers to use the Company's components on certain of their industrial turbine engines. For example, Company-designed and manufactured components are or will be installed on Westinghouse Electric Corp. ("Westinghouse"), Pratt & Whitney, GE and Rolls-Royce land based power generation applications. The Company anticipates further developing this business by introducing Carter's products to these customers. - Aerospace Growth through Acquisitions. The Company plans to pursue strategic acquisitions in the aerospace and industrial fluid flow device industries in order to capitalize on the trend for development of airframe and engine fluid flow systems that will result in increased reliance on integrated systems providers. For example, the Acquisition expands the Company's product lines to include aerial refueling components, aerospace valves and other fuel transfer control components and enhances its base from which to design, manufacture and deliver a broader range of fuel transfer systems and components. While the Company is currently evaluating, and will continue to evaluate other acquisition opportunities, there are no pending agreements or understandings regarding acquisitions. - Enhancement of Operating Efficiencies. Management constantly reviews the Company's operations for opportunities to further reduce costs and increase manufacturing efficiencies through improved utilization of production facilities, continual rationalization of the vendor base and more efficient human resource allocation. Continued enhancements of operating efficiencies include the transfer of production between facilities to absorb fixed overhead, the installation of integrated computer systems at its Costa Mesa facility (the "Costa Mesa Facility"), strengthening of the certified operator and vendor programs and the reassignment of some engineering resources to the development of new products and technologies. - Ground Fueling Growth. The Company intends to devote significant resources to the enhancement of sales, marketing and development of ground fueling products. The Company has recently developed digital pressure control valves that incorporate a microprocessor to enhance fuel flow control and accurately measure the pressure in an aircraft's fuel tank during fueling, allowing for reduced fueling time. Although these products have been available for less than a year, the Company has already supplied over 35 systems to various locations around the world, including the Middle East and Latin America. In addition, the Company has identified three new potential product applications for its ground fueling technology: railroad fluid transfers, fueling of off-road construction and mining equipment and liquefied natural gas ("LNG") nozzles and receptacles used on alternative fuel vehicles. Management believes that these potential product applications could significantly increase the Company's ground fueling sales. ARGO-TECH HISTORY AND OWNERSHIP Argo-Tech, a Delaware corporation, was formed in 1986 to acquire the Power Accessories Division of TRW Inc. (the "TRW Transaction"). The Company and its predecessors have more than 50 years' experience in the aerospace industry. In 1990, the Company underwent a corporate restructuring and disposed of substantially all of its operations except for its aircraft accessories business and became a wholly owned subsidiary of AT Holdings Corporation ("AT Holdings" or "Parent"). AT Holdings was formed in 1990 to purchase the Company and does not have any other assets or operations not related to the Company. The new owners of AT Holdings Corporation after the restructuring included, among others, (i) Vestar Capital Partners ("Vestar"), a private investment firm, (ii) Masashi Yamada, a private investor, and (iii) a group of 29 executives led by the Company's current President and CEO, Michael Lipscomb. In 1994, with the participation of all of the Company's salaried employees, the ESOP (as defined) was formed and acquired 30% of the common stock ("Parent Stock") of AT Holdings, including the Parent Stock previously owned by Vestar. Currently, management and the ESOP own 36% of the outstanding Parent Stock. Mr. Yamada holds approximately 49% of the outstanding Parent Stock through AT Holdings, LLC ("AT LLC"), a domestic limited liability company under his control, and an additional 6% through YC International, Inc. ("YCI"), a U.S. subsidiary of Yamada Corporation, which is a Japanese trading company controlled by Mr. Yamada. THE TRANSACTIONS With the consummation of the Offering, the Company (i) consummated the Acquisition for a cash purchase price of $107.0 million (subject to certain post-closing adjustments), (ii) amended and restated the New Credit Facility (as defined) to allow for, among other things, the Acquisition and the issuance of the Original Notes (the "Amended Credit Facility"), (iii) borrowed the delayed draw acquisition loans under the Amended Credit Facility in an aggregate principal amount equal to $15.0 million (the "Delayed Draw Acquisition Loans") and (iv) repaid $46.7 million of subordinated indebtedness (including accrued interest) owed to affiliates (the "Existing Notes"). The Offering, the Acquisition, the execution of the Amended Credit Facility, the borrowings under Delayed Draw Acquisition Loans and the repayment of the Existing Notes are collectively referred to herein as the "Transactions." See "Description of the Amended Credit Facility." The table below illustrates the Company's corporate structure as of the closing of the Acquisition: AT Holdings | Argo-Tech Corporation | --------------------------------------------------------------------- | | | | | | AT Argo-Tech Argo-Tech Argo-Tech J.C. Carter AT Export Corporation Corporation Corporation Company, Inc.* Insurance (HBP)* (OEM)* (Aftermarket)* *Subsidiary Guarantor All corporations shown are wholly owned by their respective parent. AT Export and AT Insurance are not guarantors of the Notes; both have inconsequential assets, liabilities and equity, and their only operations are the result of intercompany activity which is immediately dividended back to the Company. The Notes are not collateralized by the capital stock of each of the Subsidiary Guarantors nor of the Parent. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER.... The Original Notes were sold, in a transaction exempt from the registration requirements of the Securities Act, by the Company on September 26, 1997 to Chase Securities Inc. (the "Initial Purchaser"). In connection therewith, the Company executed and delivered, for the benefit of the holders of the Original Notes, an Exchange and Registration Rights Agreement dated September 26, 1997 (the "Exchange and Registration Rights Agreement") which is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part, providing for, among other things, the Exchange Offer so that the Exchange Notes will be freely transferable by the holders thereof without registration or any prospectus delivery requirements under the Securities Act, except that a "dealer" or any of its "affiliates," as such terms are defined under the Securities Act, who exchanges Original Notes held for its own account will be required to deliver copies of this Prospectus in connection with any resale of the Exchange Notes issued in exchange for such Original Notes. See "The Exchange Offer -- Purposes and Effects of the Exchange Offer" and "Plan of Distribution." THE EXCHANGE OFFER............... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Original Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. There is $140,000,000 aggregate principal amount of Original Notes outstanding. The Original Notes and the Exchange Notes are collectively referred to herein as the "Notes." The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity date) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that (i) the Exchange Notes are freely transferable by holders thereof (other than as provided herein) and are not subject to any covenant restricting transfer absent registration under the Securities Act and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. See "The Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or (ii) a person that is an affiliate (as defined in Rule 405 under the Securities Act) of the Company), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The Company has not sought, and does not currently intend to seek a no- action letter. There can be no assurance that the staff of the Securities and Exchange Commission would make a similar determination with respect to the Exchange Offer. Each broker-dealer that receives the Exchange Notes for its own account in exchange for the Original Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. REGISTRATION RIGHTS AGREEMENT.... The Original Notes were sold by the Company on September 26, 1997 to the Initial Purchaser pursuant to a Securities Purchase Agreement dated as of September 23, 1997 by and between the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial Purchaser entered into the Exchange and Registration Rights Agreement which grants the holders of the Original Notes certain exchange and registration rights. See "The Exchange Offer -- Termination of Certain Rights." This Exchange Offer is intended to satisfy such rights, which terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes are not entitled to any exchange of registration rights with respect to the Exchange Notes. EXPIRATION DATE.................. The Exchange Offer will expire at 5:00 p.m., New York City time, on [the 21st business day following the Exchange Offer], 1997, unless the Exchange Offer is extended (for a maximum of an additional 20 business days) by the Company in its reasonable discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. ACCRUED INTEREST ON THE EXCHANGE NOTES AND ORIGINAL NOTES....... Interest on the Exchange Notes will accrue from (A) the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor, or (B) if no interest has been paid on the Notes, from September 26, 1997. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. CONDITIONS TO THE EXCHANGE OFFER................. The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. PROCEDURES FOR TENDERING ORIGINAL NOTES................. Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Original Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. Original Notes may be physically delivered, but physical delivery is not required if a confirmation of a book-entry of such Original Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depository") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker or dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS.............. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES... Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the "Exchange Offer -- Guaranteed Delivery Procedures." ACCEPTANCE OF THE ORIGINAL NOTES AND DELIVERY OF THE EXCHANGE NOTES.......................... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Original Notes which are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." WITHDRAWAL RIGHTS................ Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." EXCHANGE AGENT................... Harris Trust and Savings Bank is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." EFFECT ON HOLDERS OF THE ORIGINAL NOTES............. As a result of the making of, and upon acceptance for exchange of all validly tendered Original Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled one of the covenants contained in the Exchange and Registration Rights Agreement and, accordingly, no liquidated damages will become payable in respect of the Original Notes pursuant to the applica- ble terms of the Exchange and Registration Rights Agreement. Holders of the Original Notes who do not tender their Original Notes will be entitled to all the rights and limitations applicable thereto under the Indenture between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), relating to the Original Notes and the Exchange Notes, except for any rights under the Indenture or the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Original Notes pursuant to, the Exchange Offer. All untendered Original Notes will continue to be subject to the restrictions on transfer provided for in the Original Notes and in the Indenture. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Original Notes could be adversely affected. USE OF PROCEEDS.................. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. THE NOTES THE EXCHANGE NOTES............... The Exchange Offer applies to $140,000,000 aggregate principal amount of the Original Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Original Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. See "Description of Notes" for further information and for definitions of certain capitalized terms used below. ISSUER........................... Argo-Tech Corporation INTEREST RATE.................... The Notes will bear interest at a rate of 8 5/8% per annum. MATURITY DATE.................... October 1, 2007. INTEREST PAYMENT DATES........... April 1 and October 1 of each year, commencing on April 1, 1998. SINKING FUND..................... None. OPTIONAL REDEMPTION.............. Except as described below, the Company may not redeem the Notes prior to October 1, 2002. On or after such date, the Company may redeem the Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to October 1, 2000, the Company may, subject to certain requirements, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Cash Proceeds (as defined) of one or more Public Equity Offerings by the Company or Parent, at a price equal to 108.625% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL................ Upon the occurrence of a Change of Control (as defined), each holder will have the right to require the Company to make an offer to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes -- Change of Control." SUBSIDIARY GUARANTEES............ The Notes are fully, unconditionally, jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured, senior subordinated basis by Argo-Tech Corporation (HBP), Argo-Tech Corporation (OEM), Argo-Tech Corporation (Aftermarket), Carter and all future domestic Restricted Subsidiaries (as defined) that incur Indebtedness (as defined) and all future Subsidiary Guarantors, subject to certain fraudulent conveyance limitations as described herein. The Subsidiary Guarantors have also guaranteed the Amended Credit Facility. In addition, the Amended Credit Facility is guaranteed by Parent and is secured by pledges of all of the capital stock of the Company and the Subsidiary Guarantors and security interests in substantially all other tangible and intangible assets of the Company and the Subsidiary Guarantors. See "Description of Notes -- Subsidiary Guarantees." RANKING.......................... The Notes are unsecured and subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The Company may incur additional Senior Indebtedness if it meets certain financial ratio tests set forth in the Indenture. Except for such financial ratio tests, there are no restrictions on the Company's ability to incur additional debt or total debt that ranks senior to or pari passu with the Notes. The Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and rank senior to all subordinated indebtedness of the Company. The Subsidiary Guarantees are unsecured, senior subordinated obligations of the Subsidiary Guarantors, subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors. As of August 2, 1997, after giving effect to the Transactions, the Offering, and the application of the net proceeds therefrom, (i) the outstanding Senior Indebtedness of the Company would have been $110.0 million (exclusive of unused commitments), all of which would have been Secured Indebtedness, (ii) the Company would have had no Senior Subordinated Indebtedness outstanding other than the Notes and no Indebtedness that is subordinate or junior in right of repayment to the Notes, (iii) the outstanding Senior Indebtedness of the Subsidiary Guarantors, consisting entirely of Guarantees of the Amended Credit Facility, would have been $110.0 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no outstanding Senior Subordinated Indebtedness other than the Subsidiary Guarantees and no Indebtedness that is subordinate or junior in right of payment to the Subsidiary Guarantees. RESTRICTIVE COVENANTS............ The Indenture limits (i) the incurrence of additional Indebtedness by the Company and its Restricted Subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations (as defined) of the Company and its Restricted Subsidiaries; (iii) certain other restricted payments, including without limitation, investments; (iv) sales of assets and Restricted Subsidiary stock; (v) certain transactions with affiliates; (vi) the sale or issuance of capital stock of its Restricted Subsidiaries; (vii) the creation of liens; (viii) the lines of business in which the Company and its Restricted Subsidiaries may operate; (ix) consolidations, mergers and transfers of all or substantially all of the Company's assets; and (x) sale and leaseback transactions. The Indenture will also prohibit certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exemptions. See "Description of Notes -- Certain Covenants" and "-- Merger and Consolidation." ASSET SALE PROCEEDS.............. The Company will be obligated in certain instances to make offers to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of Notes -- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050685_argo-tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050685_argo-tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2811b46d31fbc1eccb5e1620d28dae7a2322837c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050685_argo-tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, unless the context otherwise indicates, references to "Carter" refer to the J.C. Carter Company, Inc., after the completion of the Acquisition and references to the "Company" refer to Argo-Tech Corporation ("Argo-Tech") and its wholly owned subsidiaries (the "Subsidiaries"), including, for periods after the consummation of the Acquisition, Carter. As used in this Prospectus, "large commercial aircraft" refers to jet aircraft manufactured outside of the former Soviet bloc, seating 100 or more passengers, "large commercial aircraft engines" refers to commercial jet engines manufactured outside of the former Soviet bloc, having 10,000 pounds of thrust or more, and "airframes" refers to jet airframes manufactured outside of the former Soviet bloc. THE COMPANY OVERVIEW The Company is a leading designer, manufacturer and servicer of high performance fuel flow devices for the aerospace industry. The Company provides a broad range of products and services to substantially all commercial and domestic military engine and airframe manufacturers, to airlines worldwide and to the U.S. and certain foreign militaries. The Company is the world's leading supplier of main engine fuel pumps to the commercial aircraft industry and is a leading supplier of airframe products and aerial refueling systems. Main engine fuel pumps are precision mechanical pumps, mounted to the engine, that maintain the flow of fuel to the engine at a precise rate and pressure. Airframe products include fuel pumps and airframe accessories, which are used to transfer fuel to the engine systems and to shift and control fuel between tanks in order to maintain aircraft balance. Aerial refueling systems permit military aerial tankers to refuel fighter, bomber and other military aircraft while in flight. The Company is also a leading manufacturer of components for ground fueling systems and estimates that one or more of its fueling hydrants, couplers and nozzles are installed in approximately 65% of airports worldwide. Ground fueling systems transfer fuel from fueling trucks and underground tanks to the underwing fuel receptacle of the aircraft. Sales to original equipment manufacturers ("OEMs") provide the Company with a platform for its substantial aftermarket business, which accounts for the major component of its net revenues. The Company's aftermarket business provides repair and overhaul services and distributes spare parts to commercial and military customers worldwide. As of December 31, 1996, the Company's main engine fuel pumps were used in approximately 8,200, or two-thirds, of the large commercial aircraft in service throughout the world. In addition, during 1996, the Company received orders for approximately 75% of all new main engine fuel pumps ordered by large commercial aircraft engine manufacturers worldwide. The Company is the sole source supplier of main engine fuel pumps for all CFM56 series engines, which were selected for installation on approximately 61% of all large commercial aircraft ordered in 1996. This engine powers the Airbus Industries ("Airbus") A-319, A-320, A-321 and A-340 and The Boeing Company ("Boeing") 737 aircraft. The Company is also the sole source supplier of main engine fuel pumps for all engines used on the Boeing 777 aircraft. Complementing its position as a leading supplier of main engine fuel pumps, the Company estimates that one or more of its airframe fuel pumps or accessories are installed on over 80% of all large commercial and U.S. designed military aircraft currently in use. Aerial refueling components manufactured by the Company are installed on every U.S. designed military aircraft equipped with aerial refueling capabilities. In addition, ground fueling components manufactured by the Company have been selected for use in all nine of the major commercial airports constructed in the past ten years, including the recently completed Denver International Airport and the Hong Kong International Airport, which is currently under construction. The Company also produces and services industrial liquefied natural gas ("LNG") pumps and operates a materials laboratory and a business park in Cleveland, Ohio, where the Company maintains its headquarters and primary production facilities. Since prior to 1992, until the acquisition of Carter, the Company was primarily a manufacturer of main engine fuel pumps. In September, 1997, the Company expanded its product lines through the acquisition of the outstanding capital stock of Carter, a California corporation, for $107 million in cash. Carter's product lines include airframe pumps and accessories, military aerial refueling systems and other fuel system components such as valves and ground fueling components, as well as the production and service of LNG pumps. Pro forma for the Acquisition, for the twelve month period ended August 2, 1997, the Company generated net revenues, income from operations and Adjusted EBITDA (as defined) of $156.2 million, $33.0 million and $49.9 million, respectively. For the same period, on a pro forma basis, aerospace products and aftermarket sales accounted for approximately 85% and 49% of the Company's net revenues, respectively. COMPETITIVE STRENGTHS The Company believes it has a strong competitive position as a result of the following factors: - Strong Industry Position and Large Existing Installed Base. The Company has the largest installed base of large commercial main engine fuel pumps (approximately 30,000) in the aerospace industry. The Company also has an installed base of over 215,000 military engine and airframe pumps and accessories; 145,000 other engine pumps and airframe accessories, including fuel gear motors and small main engine fuel pumps for helicopters, turboprop and business aircraft; and 5,800 aerial refueling components. This extensive installed base provides the Company with significant opportunities for aftermarket sales of spare parts and repair and overhaul services. Manufacturers of aerospace parts and components are required to obtain airworthiness certification by the Federal Aviation Administration ("FAA") in the case of products used on commercial aircraft, by the United States Department of Defense (the "U.S. Department of Defense") in the case of products used on U.S. military aircraft, or by similar agencies in most foreign countries. Such regulatory restrictions, which limit the access of other manufacturers to the aftermarket, contribute to significantly higher margins on commercial spare parts and overhaul services. - Technological Leadership/New Product Development. Management believes that the Company is a technological leader in its industry. The Company maintains its technological leadership by operating state-of-the-art facilities and employing over 110 engineers. The Company also staffs an on-site design engineer at two of its major OEM customers. These on-site engineers, in combination with its engineering and design staffs, assist the Company in the development of innovative products which address the needs and requirements of its customers and enhance its ability to gain early entrant advantages. As a result of this technological leadership, the Company's main engine fuel pumps have been selected for 22 of the 33 large commercial aircraft engine programs put into production over the last 20 years. For example, the Company is the only manufacturer to win a new production contract for main engine fuel pumps from Rolls-Royce, PLC. ("Rolls-Royce") since 1988 and from General Electric Company ("GE") since 1989. In addition, with the aid of its aftermarket customers, the Company recently replaced the incumbent main engine fuel pump supplier on both the GE CF34-8C (Bombardier Canadair Aerospace ("Canadair") RJ700) and the Rolls-Royce RB211-535 (Boeing 757) engine programs, despite the industry norm against such replacements. Management also believes that its experience with engine systems for use on airframes ranging from the Cessna Aircraft Company ("Cessna") Citation to the Boeing 777, is a competitive advantage that enhances the Company's ability to effectively meet the technical requirements of all new engine system designs. - Strong Relationship with Customers. The Company has developed strong relationships with its OEM customers (including GE, Pratt and Whitney ("Pratt & Whitney") and Rolls-Royce), airline customers (including American Airlines, Lufthansa, Japan Air Lines and United Airlines) and freight carrier customers (including Federal Express and United Parcel Service). Specifically, the Company has been a major supplier of main engine fuel pumps to Pratt & Whitney for over 40 years, and has maintained a relationship with United Airlines since 1962. Management believes that the Company's reputation for quality and service in the aftermarket has further solidified its strong relationships with its airline and freight carrier customers. In addition to purchasing parts and services in the aftermarket, these customers are also influential in the engine OEM's supplier selection process, enhancing the Company's ability to secure positions on new engine platforms. Management believes that Argo-Tech's relationships with its OEM customers will enhance Carter's ability to sell products to existing Argo-Tech customers. For example, management expects to introduce Carter's cross-feed and shut-off valves to Argo-Tech's existing OEM engine customers such as GE, Pratt & Whitney and Rolls-Royce. The Company believes similar opportunities exist to increase sales of Argo-Tech products to Carter's customers. For example, management expects to introduce Argo-Tech airframe pumps to Carter's business and regional jet OEM customers such as Canadair, Cessna, Gulfstream Aerospace Corp. ("Gulfstream") and Lear Corp. ("Lear"). - Strong Core Competencies. The Company has developed strong core competencies that management believes will enable it to improve its position as a leading aerospace component supplier and provide opportunities for growth outside its current product lines. These core competencies include: (i) operational skills for low volume manufacturing of high precision fluid flow devices, (ii) the capability to rapidly design unique solutions to difficult fluid flow problems, (iii) skill and experience in meeting the demanding specifications of aerospace customers, the FAA, the U.S. Department of Defense and other regulatory bodies, and (iv) skill and experience in the design of integrated fuel systems and subsystems. These core competencies have enabled the Company to become the sole source supplier for a substantial number of aerospace programs. Management also believes that these core competencies will allow the Company to develop additional fuel system and other high precision products for use throughout the aerospace industry. - Experienced Management Team. Argo-Tech's Chairman and CEO, Michael Lipscomb, and five other members of senior management, have been with Argo-Tech or its predecessor since 1980. Under Mr. Lipscomb's leadership, Argo-Tech has reduced inventory levels, improved quality and on-time performance and reduced manufacturing lead times, all of which have contributed to significant increases in gross margins, which have grown from 28.5% for fiscal 1992 to 42.6% for the nine months ended August 2, 1997. BUSINESS STRATEGY The Company's strategy is to maintain its leadership position and to grow through the expansion of its product lines and the pursuit of strategic acquisitions. This strategy includes the following key components: - Expansion of Product Lines. The Company plans to apply its core competencies in the aerospace business and to take advantage of its strong reputation and relationships with its customers to expand into specific industrial markets. The Company has utilized its expertise in main engine fuel pump technology to develop industrial engine power generation applications, and plans to capitalize on Carter's expertise in other industrial applications. The Company's strong relationships with GE, Pratt & Whitney and Rolls-Royce have already led to development and production contracts for industrial products such as lube and scavenge pumps and fluid flow dividers. In addition, the high quality and reliability of the Company's main engine fuel pumps have prompted several customers to use the Company's components on certain of their industrial turbine engines. For example, Company-designed and manufactured components are or will be installed on Westinghouse Electric Corp. ("Westinghouse"), Pratt & Whitney, GE and Rolls-Royce land based power generation applications. The Company anticipates further developing this business by introducing Carter's products to these customers. - Aerospace Growth through Acquisitions. The Company plans to pursue strategic acquisitions in the aerospace and industrial fluid flow device industries in order to capitalize on the trend for development of airframe and engine fluid flow systems that will result in increased reliance on integrated systems providers. For example, the Acquisition expands the Company's product lines to include aerial refueling components, aerospace valves and other fuel transfer control components and enhances its base from which to design, manufacture and deliver a broader range of fuel transfer systems and components. While the Company is currently evaluating, and will continue to evaluate other acquisition opportunities, there are no pending agreements or understandings regarding acquisitions. - Enhancement of Operating Efficiencies. Management constantly reviews the Company's operations for opportunities to further reduce costs and increase manufacturing efficiencies through improved utilization of production facilities, continual rationalization of the vendor base and more efficient human resource allocation. Continued enhancements of operating efficiencies include the transfer of production between facilities to absorb fixed overhead, the installation of integrated computer systems at its Costa Mesa facility (the "Costa Mesa Facility"), strengthening of the certified operator and vendor programs and the reassignment of some engineering resources to the development of new products and technologies. - Ground Fueling Growth. The Company intends to devote significant resources to the enhancement of sales, marketing and development of ground fueling products. The Company has recently developed digital pressure control valves that incorporate a microprocessor to enhance fuel flow control and accurately measure the pressure in an aircraft's fuel tank during fueling, allowing for reduced fueling time. Although these products have been available for less than a year, the Company has already supplied over 35 systems to various locations around the world, including the Middle East and Latin America. In addition, the Company has identified three new potential product applications for its ground fueling technology: railroad fluid transfers, fueling of off-road construction and mining equipment and liquefied natural gas ("LNG") nozzles and receptacles used on alternative fuel vehicles. Management believes that these potential product applications could significantly increase the Company's ground fueling sales. ARGO-TECH HISTORY AND OWNERSHIP Argo-Tech, a Delaware corporation, was formed in 1986 to acquire the Power Accessories Division of TRW Inc. (the "TRW Transaction"). The Company and its predecessors have more than 50 years' experience in the aerospace industry. In 1990, the Company underwent a corporate restructuring and disposed of substantially all of its operations except for its aircraft accessories business and became a wholly owned subsidiary of AT Holdings Corporation ("AT Holdings" or "Parent"). AT Holdings was formed in 1990 to purchase the Company and does not have any other assets or operations not related to the Company. The new owners of AT Holdings Corporation after the restructuring included, among others, (i) Vestar Capital Partners ("Vestar"), a private investment firm, (ii) Masashi Yamada, a private investor, and (iii) a group of 29 executives led by the Company's current President and CEO, Michael Lipscomb. In 1994, with the participation of all of the Company's salaried employees, the ESOP (as defined) was formed and acquired 30% of the common stock ("Parent Stock") of AT Holdings, including the Parent Stock previously owned by Vestar. Currently, management and the ESOP own 36% of the outstanding Parent Stock. Mr. Yamada holds approximately 49% of the outstanding Parent Stock through AT Holdings, LLC ("AT LLC"), a domestic limited liability company under his control, and an additional 6% through YC International, Inc. ("YCI"), a U.S. subsidiary of Yamada Corporation, which is a Japanese trading company controlled by Mr. Yamada. THE TRANSACTIONS With the consummation of the Offering, the Company (i) consummated the Acquisition for a cash purchase price of $107.0 million (subject to certain post-closing adjustments), (ii) amended and restated the New Credit Facility (as defined) to allow for, among other things, the Acquisition and the issuance of the Original Notes (the "Amended Credit Facility"), (iii) borrowed the delayed draw acquisition loans under the Amended Credit Facility in an aggregate principal amount equal to $15.0 million (the "Delayed Draw Acquisition Loans") and (iv) repaid $46.7 million of subordinated indebtedness (including accrued interest) owed to affiliates (the "Existing Notes"). The Offering, the Acquisition, the execution of the Amended Credit Facility, the borrowings under Delayed Draw Acquisition Loans and the repayment of the Existing Notes are collectively referred to herein as the "Transactions." See "Description of the Amended Credit Facility." The table below illustrates the Company's corporate structure as of the closing of the Acquisition: AT Holdings | Argo-Tech Corporation | --------------------------------------------------------------------- | | | | | | AT Argo-Tech Argo-Tech Argo-Tech J.C. Carter AT Export Corporation Corporation Corporation Company, Inc.* Insurance (HBP)* (OEM)* (Aftermarket)* *Subsidiary Guarantor All corporations shown are wholly owned by their respective parent. AT Export and AT Insurance are not guarantors of the Notes; both have inconsequential assets, liabilities and equity, and their only operations are the result of intercompany activity which is immediately dividended back to the Company. The Notes are not collateralized by the capital stock of each of the Subsidiary Guarantors nor of the Parent. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER.... The Original Notes were sold, in a transaction exempt from the registration requirements of the Securities Act, by the Company on September 26, 1997 to Chase Securities Inc. (the "Initial Purchaser"). In connection therewith, the Company executed and delivered, for the benefit of the holders of the Original Notes, an Exchange and Registration Rights Agreement dated September 26, 1997 (the "Exchange and Registration Rights Agreement") which is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus is a part, providing for, among other things, the Exchange Offer so that the Exchange Notes will be freely transferable by the holders thereof without registration or any prospectus delivery requirements under the Securities Act, except that a "dealer" or any of its "affiliates," as such terms are defined under the Securities Act, who exchanges Original Notes held for its own account will be required to deliver copies of this Prospectus in connection with any resale of the Exchange Notes issued in exchange for such Original Notes. See "The Exchange Offer -- Purposes and Effects of the Exchange Offer" and "Plan of Distribution." THE EXCHANGE OFFER............... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Original Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. There is $140,000,000 aggregate principal amount of Original Notes outstanding. The Original Notes and the Exchange Notes are collectively referred to herein as the "Notes." The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity date) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that (i) the Exchange Notes are freely transferable by holders thereof (other than as provided herein) and are not subject to any covenant restricting transfer absent registration under the Securities Act and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. See "The Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or (ii) a person that is an affiliate (as defined in Rule 405 under the Securities Act) of the Company), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The Company has not sought, and does not currently intend to seek a no- action letter. There can be no assurance that the staff of the Securities and Exchange Commission would make a similar determination with respect to the Exchange Offer. Each broker-dealer that receives the Exchange Notes for its own account in exchange for the Original Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. REGISTRATION RIGHTS AGREEMENT.... The Original Notes were sold by the Company on September 26, 1997 to the Initial Purchaser pursuant to a Securities Purchase Agreement dated as of September 23, 1997 by and between the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial Purchaser entered into the Exchange and Registration Rights Agreement which grants the holders of the Original Notes certain exchange and registration rights. See "The Exchange Offer -- Termination of Certain Rights." This Exchange Offer is intended to satisfy such rights, which terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes are not entitled to any exchange of registration rights with respect to the Exchange Notes. EXPIRATION DATE.................. The Exchange Offer will expire at 5:00 p.m., New York City time, on [the 21st business day following the Exchange Offer], 1997, unless the Exchange Offer is extended (for a maximum of an additional 20 business days) by the Company in its reasonable discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. ACCRUED INTEREST ON THE EXCHANGE NOTES AND ORIGINAL NOTES....... Interest on the Exchange Notes will accrue from (A) the last interest payment date on which interest was paid on the Original Notes surrendered in exchange therefor, or (B) if no interest has been paid on the Notes, from September 26, 1997. Holders whose Original Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Original Notes. CONDITIONS TO THE EXCHANGE OFFER................. The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. PROCEDURES FOR TENDERING ORIGINAL NOTES................. Each holder of Original Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Original Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. Original Notes may be physically delivered, but physical delivery is not required if a confirmation of a book-entry of such Original Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depository") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker or dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS.............. Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES... Holders of Original Notes who wish to tender their Original Notes and whose Original Notes are not immediately available or who cannot deliver their Original Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the "Exchange Offer -- Guaranteed Delivery Procedures." ACCEPTANCE OF THE ORIGINAL NOTES AND DELIVERY OF THE EXCHANGE NOTES.......................... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Original Notes which are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." WITHDRAWAL RIGHTS................ Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." EXCHANGE AGENT................... Harris Trust and Savings Bank is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." EFFECT ON HOLDERS OF THE ORIGINAL NOTES............. As a result of the making of, and upon acceptance for exchange of all validly tendered Original Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled one of the covenants contained in the Exchange and Registration Rights Agreement and, accordingly, no liquidated damages will become payable in respect of the Original Notes pursuant to the applica- ble terms of the Exchange and Registration Rights Agreement. Holders of the Original Notes who do not tender their Original Notes will be entitled to all the rights and limitations applicable thereto under the Indenture between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), relating to the Original Notes and the Exchange Notes, except for any rights under the Indenture or the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Original Notes pursuant to, the Exchange Offer. All untendered Original Notes will continue to be subject to the restrictions on transfer provided for in the Original Notes and in the Indenture. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Original Notes could be adversely affected. USE OF PROCEEDS.................. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. THE NOTES THE EXCHANGE NOTES............... The Exchange Offer applies to $140,000,000 aggregate principal amount of the Original Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Original Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting their transfer pursuant to the Securities Act, and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Original Notes under the Exchange and Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Original Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. See "Description of Notes" for further information and for definitions of certain capitalized terms used below. ISSUER........................... Argo-Tech Corporation INTEREST RATE.................... The Notes will bear interest at a rate of 8 5/8% per annum. MATURITY DATE.................... October 1, 2007. INTEREST PAYMENT DATES........... April 1 and October 1 of each year, commencing on April 1, 1998. SINKING FUND..................... None. OPTIONAL REDEMPTION.............. Except as described below, the Company may not redeem the Notes prior to October 1, 2002. On or after such date, the Company may redeem the Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to October 1, 2000, the Company may, subject to certain requirements, redeem up to 33 1/3% of the original aggregate principal amount of the Notes with the Net Cash Proceeds (as defined) of one or more Public Equity Offerings by the Company or Parent, at a price equal to 108.625% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 66 2/3% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL................ Upon the occurrence of a Change of Control (as defined), each holder will have the right to require the Company to make an offer to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes -- Change of Control." SUBSIDIARY GUARANTEES............ The Notes are fully, unconditionally, jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured, senior subordinated basis by Argo-Tech Corporation (HBP), Argo-Tech Corporation (OEM), Argo-Tech Corporation (Aftermarket), Carter and all future domestic Restricted Subsidiaries (as defined) that incur Indebtedness (as defined) and all future Subsidiary Guarantors, subject to certain fraudulent conveyance limitations as described herein. The Subsidiary Guarantors have also guaranteed the Amended Credit Facility. In addition, the Amended Credit Facility is guaranteed by Parent and is secured by pledges of all of the capital stock of the Company and the Subsidiary Guarantors and security interests in substantially all other tangible and intangible assets of the Company and the Subsidiary Guarantors. See "Description of Notes -- Subsidiary Guarantees." RANKING.......................... The Notes are unsecured and subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Company. The Company may incur additional Senior Indebtedness if it meets certain financial ratio tests set forth in the Indenture. Except for such financial ratio tests, there are no restrictions on the Company's ability to incur additional debt or total debt that ranks senior to or pari passu with the Notes. The Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and rank senior to all subordinated indebtedness of the Company. The Subsidiary Guarantees are unsecured, senior subordinated obligations of the Subsidiary Guarantors, subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors. As of August 2, 1997, after giving effect to the Transactions, the Offering, and the application of the net proceeds therefrom, (i) the outstanding Senior Indebtedness of the Company would have been $110.0 million (exclusive of unused commitments), all of which would have been Secured Indebtedness, (ii) the Company would have had no Senior Subordinated Indebtedness outstanding other than the Notes and no Indebtedness that is subordinate or junior in right of repayment to the Notes, (iii) the outstanding Senior Indebtedness of the Subsidiary Guarantors, consisting entirely of Guarantees of the Amended Credit Facility, would have been $110.0 million, all of which would have been Secured Indebtedness, and (iv) the Subsidiary Guarantors would have had no outstanding Senior Subordinated Indebtedness other than the Subsidiary Guarantees and no Indebtedness that is subordinate or junior in right of payment to the Subsidiary Guarantees. RESTRICTIVE COVENANTS............ The Indenture limits (i) the incurrence of additional Indebtedness by the Company and its Restricted Subsidiaries; (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations (as defined) of the Company and its Restricted Subsidiaries; (iii) certain other restricted payments, including without limitation, investments; (iv) sales of assets and Restricted Subsidiary stock; (v) certain transactions with affiliates; (vi) the sale or issuance of capital stock of its Restricted Subsidiaries; (vii) the creation of liens; (viii) the lines of business in which the Company and its Restricted Subsidiaries may operate; (ix) consolidations, mergers and transfers of all or substantially all of the Company's assets; and (x) sale and leaseback transactions. The Indenture will also prohibit certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exemptions. See "Description of Notes -- Certain Covenants" and "-- Merger and Consolidation." ASSET SALE PROCEEDS.............. The Company will be obligated in certain instances to make offers to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of Notes -- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050793_life_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050793_life_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2431e1c0cc198af9c514c97f336aa1e3d829399c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050793_life_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED ALL REFERENCES TO THE COMPANY SHALL BE DEEMED TO INCLUDE THE COMPANY AND ITS SUBSIDIARIES. THIS PROSPECTUS CONTAINS CERTAIN STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED OR IMPLIED IN THE FORWARD- LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS RELATED TO THE CAPITAL SECURITIES," "RISK FACTORS RELATED TO THE COMPANY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED UPON ASSUMPTIONS AS TO FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE. LIFE FINANCIAL CORPORATION The Company is a Delaware chartered savings and loan holding company headquartered in Riverside, California. The Company became the parent company of Life Bank (formerly Life Savings Bank, Federal Savings Bank) (the "Bank") pursuant to the holding company reorganization of the Bank (the "Reorganization") undertaken in connection with the Company's initial public offering of its Common Stock (the "IPO"). The Company completed the IPO on June 30, 1997. Together with shares issued subsequent to that date pursuant to the exercise of the underwriter's overallotment option, the Company issued a total of 3,335,000 shares of Common Stock in the IPO at a price of $11.00 per share. Net proceeds from the IPO amounted to $32.5 million. The Company originates, purchases, sell, securitizes and services primarily non-conventional mortgage loans principally secured by first and second mortgages on one- to four-family residences. The Company makes Liberator Series loans, which are for the purchase or refinance of residential real property by borrowers who generally would not qualify for Fannie Mae ("FNMA") or Freddie Mac ("FHLMC") loans ("sub-prime borrowers"), and Portfolio Series loans, which are debt consolidation loans for borrowers whose credit history qualifies them for FNMA and FHLMC loans ("Agency-Qualified Borrowers") with loan-to-value ratios of up to 135%. The Company has recently increased the permitted loan-to- value ratio on Portfolio Series loans to 135% from 125%. While the Company is currently emphasizing the origination of Portfolio Series loans, it intends to market both products as demand permits. Liberator Series and Portfolio Series loans are the Company's "core products." In addition, to a much lesser extent, the Company originates multi-family residential and commercial loans. The Company conducts its business from six locations: the Company's corporate headquarters and Western regional lending center in Riverside, California, two additional regional lending centers, one in Jacksonville, Florida and one in the Denver, Colorado metropolitan area, the national servicing center located in Riverside, California, and two bank branch offices in San Bernardino and Riverside, California. In addition, the Company has recently opened two low cost retail lending offices, and has entered into leases for an additional four retail lending offices to be opened by the end of 1997. In addition, the Company intends to open two retail lending offices in the first quarter of 1998. With the exception of one planned office expected to be opened in Northern California, the Company's two current and five of the six planned retail lending offices will be located in Southern California. See "Recent Developments." At September 30, 1997, the Company had total assets of $294.1 million, total deposits of $159.8 million and stockholders' equity of $49.5 million. During the nine months ended September 30, 1997, the Company originated or purchased, through a network of approved correspondents and independent mortgage brokers (the "Originators"), $433.4 million of non-conventional mortgage products, and sold or securitized $277.1 million Each Capital Security is convertible in the manner described herein at the option of the holder thereof, at any time prior to the earlier of (i) 5:00 p.m. (Pacific time) on the Business Day (as defined herein) immediately preceding the date of repayment of such Capital Security, whether at maturity or upon redemption, and (ii) 5:00 p.m. (Pacific time) on the Conversion Termination Date (as defined herein), if any, into shares of the Company's common stock, par value $.01 per share (the "Common Stock") at a conversion rate of shares of Common Stock for each Capital Security (equivalent to a conversion price of $ per share of Common Stock), subject to adjustment in certain circumstances. See "Description of Capital Securities--Conversion Rights." The Common Stock is quoted on the Nasdaq under the symbol "LFCO." On December , 1997, the last reported sale price of the Common Stock was $ . per share. The Company has applied to have the Capital Securities approved for quotation on the Nasdaq, subject to official notice of issuance, under the symbol "LFCOP." See "Underwriting." The Capital Securities are being offered hereby in a public offering (the "Offering") by the Underwriter. See "Underwriting." Except as described herein, the Capital Securities to be issued in the Offering will be represented by global Capital Securities in fully registered form, deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company ("DTC"). Beneficial interests in such Capital Securities will be shown on, and transfers thereof will be effected through, records maintained by DTC and its participants. All Capital Securities will be offered at the "Offering Price," equal to the liquidation amount of $ per Capital Security (the "Liquidation Amount"). See "Underwriting." Holders of the Capital Securities will be entitled to receive cumulative cash distributions, accumulating from the original date of issuance of the Capital Securities (the "Issue Date") and payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing March 15, 1998, at the annual rate of . % of the Liquidation Amount of $ . per Capital Security ("Distributions"). So long as no Debenture Event of Default (as defined herein) has occurred and is continuing, the Company will have the right to defer payments of interest on the Junior Subordinated Debentures at any time and from time to time for a period not exceeding 20 consecutive quarters with respect to each deferral period (each, an "Extension Period"), provided that no Extension Period may end on a day other than an Interest Payment Date (as defined herein) or extend beyond the Stated Maturity Date. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may elect to begin a new Extension Period, subject to the requirements set forth herein. If and for so long as interest payments on the Junior Subordinated Debentures are so deferred, Distributions on the Trust Securities also will be deferred and the Company will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to the Company's capital stock or to make any payment with respect to debt securities of the Company that rank pari passu with or junior to the Junior Subordinated Debentures. During an Extension Period, interest on the Junior Subordinated Debentures will continue to accrue (and the amount of Distributions to which holders of the Trust Securities are entitled will continue to accumulate) at the rate of . % per annum, compounded quarterly (to the extent permitted by applicable law), and holders of Trust Securities will be required to accrue interest income for United States federal income tax purposes prior to receipt of cash payments attributable to such interest income. See "Description of Junior Convertible Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain Federal Income Tax Considerations--Interest, Original Issue Discount, Premium and Market Discount." The Company will, through the Guarantee, the Common Guarantee, the Declaration, the Junior Subordinated Debentures and the Indenture (each as defined herein), taken together, fully, irrevocably and unconditionally guarantee on a subordinated basis all of the Trust's obligations under the Trust Securities. See "Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee--Full and Unconditional Guarantee." The Guarantee and the Common Guarantee will guarantee payments of distributions and payments on liquidation or redemption of the Trust Securities, but in each case only to the extent that the Trust holds funds on hand legally available therefor and has failed to make such payments, as described herein. of such products. The Bank's deposits are insured up to the maximum allowable amount by the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"). The Company's headquarters are located at 10540 Magnolia Avenue, Suite B, Riverside, California 92505, and its telephone number at that location is (909) 637-4000. During the early 1990's, as a result of reduced employment levels and corporate relocations in Southern California and the general weakness of the national economy, the Company's market area experienced a weakening of real estate values and a reduction in home sales and construction. When confronted with increased competition and nominal growth during this same period, the Company's results of operations were adversely impacted and the Company began to experience increases in total non-performing loans held for investment. In response, in 1994, the Company retained new management experienced in sub-prime lending to redirect its business focus, revise its underwriting policies and procedures and enhance its related servicing capabilities. A plan was developed pursuant to which the Company reorganized its lending operations from that of a thrift emphasizing traditional mortgage banking and portfolio lending to that of a diversified financial services operation focusing on the origination for sale or securitization, with servicing retained, of various loan products to include Liberator Series loans, Portfolio Series loans, and, to a much lesser extent, commercial and multi-family real estate loans. The Company also adopted revised underwriting policies and instituted more aggressive procedures for resolving problem loans and for reducing the level of non-performing assets. As a result of these steps, the Company improved its profitability. As part of the Company's strategic plan, the Company developed an internal structure of operating divisions within the Bank, each with distinct objectives and management focus. The five divisions include (i) the Financial Services Division which emphasizes the wholesale origination of the Company's core products; (ii) the Income Capital Services Division which originates and sells commercial and multi-family mortgage loans; (iii) the Retail Loan Division which concentrates on offering loan products directly to the public primarily in the Bank's primary market area; (iv) the Asset Management Division which services loans and REO for both the Company and for Loan Purchasers; and (v) the Banking Division which offers depository services to the public. In 1994, the Company began to implement its plan which resulted in: . An increase in total purchases and originations of loans by 171.5% from $82.0 million for the year ended December 31, 1993 to $222.6 million for the year ended December 31, 1996. For the nine month period ended September 30, 1997, loans originated and purchased totalled $433.4 million. . An increase in loan sales and securitizations by 191.0% from $71.0 million for the year ended December 31, 1993 to $206.6 million for the year ended December 31, 1996. For the nine month period ended September 30, 1997, loan sales and securitizations totalled $277.1 million. . An increase in net income of 1,518.3% from $93,000 for the year ended December 31, 1993, to $1.5 million for the year ended December 31, 1996. For the nine month period ended September 30, 1997, net income was $7.7 million. . An increase in net gains from mortgage financing operations by 663.6% from $1.1 million for the year ended December 31, 1993, to $8.4 million for the year ended December 31, 1996. For the nine month period ended September 30, 1997, net gains from mortgage financing operations totalled $17.4 million. . An increase in deposits from $72.0 million at December 31, 1993 to $85.7 million at December 31, 1996. Deposits increased further to $159.8 million at September 30, 1997. The Bank also obtained warehouse lines of credit with two national investment banking firms aggregating $250.0 million, of which $54.6 million has been drawn upon at September 30, 1997. In addition, the Company obtained a line of credit in the amount of $40.0 million secured by residual assets created by the Company's securitization activities. See "Recent Developments." . An increase in stockholders' equity from $4.4 million at December 31, 1993 to $9.3 million at December 31, 1996, due to an increase in retained earnings and to the proceeds from the issuance of See "Description of the Guarantee." If the Company fails to make a required payment on the Junior Subordinated Debentures, the Trust will not have sufficient funds to make the related payments, including distributions, on the Trust Securities. The Guarantee and the Common Guarantee will not cover any such payment when the Trust does not have sufficient funds on hand legally available therefor. In such event, a holder of Capital Securities may institute a legal proceeding directly against the Company to enforce payment to such holder of accrued but unpaid interest on the Junior Subordinated Debentures with a principal amount equal to the Liquidation Amount of the Capital Securities held by such holder. See "Description of Junior Convertible Subordinated Debentures--Enforcement of Certain Rights by Holders of Capital Securities." The obligations of the Company under the Junior Subordinated Debentures, the Guarantee and the Common Guarantee will be unsecured and subordinate and rank junior in right of payment to all Senior Indebtedness (as defined herein) of the Company to the extent and in the manner set forth in the Indenture and the Guarantees. See "Description of Junior Convertible Subordinated Debentures--Subordination." The Trust Securities will be subject to mandatory redemption in a Like Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity Date upon repayment of the Junior Subordinated Debentures at a redemption price equal to the principal amount of, plus accrued and unpaid interest on, the Junior Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not in part, at any time, contemporaneously with the optional prepayment of all of the Junior Subordinated Debentures, upon the occurrence and continuation of a Special Event (as defined herein), at a redemption price equal to the Special Event Prepayment Price (as defined herein) (the "Special Event Redemption Price"), and (iii) in whole or in part, on or after , (the "Initial Optional Prepayment Date"), contemporaneously with the optional prepayment by the Company of all or a part of the Junior Subordinated Debentures, at a redemption price equal to the Optional Prepayment Price (as defined herein) (the "Optional Redemption Price"). Any of the Maturity Redemption Price, the Special Event Redemption Price and the Optional Redemption Price may be referred to herein as the "Redemption Price." See "Description of Capital Securities--Redemption." The Junior Subordinated Debentures will be prepayable prior to the Stated Maturity Date at the option of the Company (i) on or after the Initial Optional Prepayment Date, in whole or in part, at a prepayment price (the "Optional Prepayment Price") equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of prepayment, or (ii) at any time, in whole but not in part, upon the occurrence and continuation of a Special Event, at a prepayment price (the "Special Event Prepayment Price") equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of prepayment. Either of the Optional Prepayment Price or the Special Event Prepayment Price may be referred to herein as the "Prepayment Price." See "Description of Junior Convertible Subordinated Debentures--Optional Prepayment" and "--Special Event Prepayment." In addition to the rights of the Company to redeem the Capital Securities under the circumstances described in this Prospectus, the Company also will have the right to terminate the convertibility of the Capital Securities into Common Stock as described in this paragraph. If for at least 20 trading days within any period of 30 consecutive trading days ending on or after , , including the last trading day of such period, the Closing Price (as defined herein) of the Common Stock exceeds % of the then applicable Conversion Price of the Capital Securities, the Company may, at its option, terminate the right to convert the Junior Subordinated Debentures into Common Stock, in which case the right to convert the Capital Securities into Common Stock will likewise terminate. To exercise this conversion termination option, the Company must cause the Trust to issue a press release announcing the date upon which conversion rights will expire (the "Conversion Termination Date"), prior to the opening of business on the second trading day after a period in which the condition in the preceding sentence has been met, but in no event may such press release be issued prior to , . Notice of termination of conversion rights will be given by first-class mail to the holders of the Capital Securities not more than four business days after the Trust issues the press release. The Conversion Termination Date shall be a Business Day not less than 30 and not more than 60 days following the date of the press release. See "Description of Capital Securities--Conversion Rights." Bank common stock in a private placement during 1996 totaling $3.5 million. Stockholders' equity increased further to $49.5 million at September 30, 1997, due to an increase in retained earnings and to the net proceeds from the issuance of Common Stock in the IPO totaling $32.5 million during 1997. The Bank also issued $10.0 million of subordinated debentures (the "Debentures") during 1997 to increase its risk based capital. COMPETITIVE STRENGTHS Management believes that it enjoys a competitive advantage when compared to most other finance companies competing in its product areas as a result of the following factors: Expertise of Management. The change in direction of the Company's business focus commenced with the hiring in 1994 of Daniel L. Perl, currently the Company's and the Bank's President and Chief Executive Officer. Mr. Perl has more than twenty years of experience in the financial services industry, including the areas of sub-prime lending, commercial real estate lending, mortgage banking and investment banking. Additional management expertise includes: . Mr. Bruce Mills has more than 15 years in banking and regulatory experience including service at the Federal Home Loan Bank, the predecessor of the OTS and ten years as chief financial officer of the Bank. . Ms. Mary Darter has more than 13 years of lending experience including sub-prime, bulk acquisition and warehouse lending. She joined the Bank in March of 1994 having previously worked with Mr. Perl from 1988 to 1991. . Mr. Joseph R. L. Passerino has been in the financial services industry for more than 20 years. His areas of expertise have included conventional and sub-prime residential loans as well as commercial lending. Mr. Passerino previously worked with Mr. Perl from 1985 to 1988. . Mr. Stephen Sandoval has more than 24 years of extensive experience in the servicing and collection of mortgage and consumer loans with a primary focus on loss mitigation including workout alternatives, bankruptcy and foreclosure processing in addition to traditional day to day loan servicing functions. . Mr. Robert K. Riley joined the Company's Board of Directors after the IPO. Mr. Riley is the co-founder and Chief Executive Officer of Millenium Asset Management, L.L.C., a registered investment advisory firm. From 1992 to 1996, Mr. Riley worked for the Millenium Group, a consulting firm focused on designing asset securitization systems and developing risk management programs for European banks. The Board has implemented competitive management incentives to attract and retain qualified executives. See "The Board of Directors and Management of the Bank--Benefits--Cash Bonus Plan" and "--Stock Option Plans." Efficiency of Operations. Management believes that the efficiency of its operations allows the Company to offer to its Originators very competitively priced products. Management believes that this competitive pricing will increase the volume of loans originated. The efficiency of the Company's operations results from: . Providing Originators with clear, concise and consistent underwriting standards; . Well defined core products; . Low cost, strategically located loan facilities; . Rapid turnaround time on loan applications; . Limited number of strong and productive relationships with Originators; and . Originations of loans at low premiums or at a discount from par. Internal Controls. Management believes that the significant internal controls that have been established help preserve and assure the overall quality of loans originated by the Company. These internal controls include: . Dual signatures on all loan originations; The Company, as the holder of the outstanding Common Securities, will have the right at any time to dissolve the Trust and after satisfaction of or provision for liabilities to creditors of the Trust as required by applicable law, cause a Like Amount of the Junior Subordinated Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust, subject to the Company having received an opinion of counsel to the effect that such distribution will not be a taxable event to holders of the Capital Securities. No application has been made to have the Junior Subordinated Debentures approved for listing on the Nasdaq or on an exchange. However, under the terms of the Indenture, the Company must use its best efforts to have the Junior Subordinated Debentures listed on the Nasdaq or on an exchange at the time that they are distributed to the holders of the Trust Securities. See "Risk Factors Related to the Capital Securities--Absence of Public Market and Transfer Restrictions." Unless the Junior Subordinated Debentures are distributed to the holders of the Trust Securities, in the event of a liquidation of the Trust as described herein, after satisfaction of or provision for liabilities to creditors of the Trust as required by applicable law, the holders of the Capital Securities generally will be entitled to receive a Liquidation Amount of $ . per Capital Security plus accumulated and unpaid Distributions thereon to the date of payment. See "Description of Capital Securities--Liquidation of the Trust and Distribution of Junior Subordinated Debentures" and "Certain Federal Income Tax Considerations--Receipt of Junior Subordinated Debentures Upon Liquidation of the Trust" and "--Sale or Redemption of Capital Securities." As used herein, (i) the "Indenture" means the Indenture, to be dated on or prior to the Issue Date, as amended and supplemented from time to time, between the Company and State Street Bank and Trust Company ("State Street"), as trustee (the "Debenture Trustee"), relating to the Junior Subordinated Debentures, (ii) the "Declaration" means the Amended and Restated Declaration of Trust relating to the Trust, to be dated on or prior to the Issue Date, among the Company, as Sponsor, State Street, as Property Trustee (the "Property Trustee"), Delaware Trust Capital Management, Inc. ("Delaware Trust"), as Delaware Trustee (the "Delaware Trustee" and, collectively with the Property Trustee, the "Issuer Trustees"), the Administrators named therein (the "Administrators") and the holders from time to time of the Trust Securities, (iii) the "Guarantee" means the Guarantee Agreement relating to the Capital Securities, to be dated on or prior to the Issue Date, between the Company and State Street, as trustee (the "Guarantee Trustee") and (iv) the "Common Guarantee" means the Guarantee Agreement relating to the Common Securities by the Company, to be dated on or prior to the Issue Date. ---------------- CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CAPITAL SECURITIES AND THE COMPANY'S COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS AND PURCHASES, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." . Unanimous approval by two persons, including a member of senior management, of any exceptions to the Company's underwriting policies; . Exceptions to the Company's underwriting policies are kept to a minimum; . A limited number of appraisers approved by the Company's senior management perform or review appraisals on all loans originated or purchased by the Company; . For all loans on first payment default or 60 days overdue, a quality control review is completed by the quality control department; . Internal quality-control underwriting review of not less than 10.0% of all Liberator Series loans and 5.0% of all Portfolio Series loans originated, post-funding; and . Regularly-scheduled underwriting and delinquency meetings are held to review and update procedures and controls. Flexible Funding Sources and Structure. The Company has multiple sources of liquidity. As a federally-chartered savings bank, the Bank has additional funding avenues at a lower cost than its non-regulated finance company competitors. This advantage is derived from the Bank's ability to: . Access a long-term stable unsecured funding base through the Bank's deposits which are insured by the FDIC; . Increase its deposit base through competitive pricing and possible branch acquisitions or acquisitions of other depository institutions; and . Access funding through the Federal Home Loan Bank of San Francisco ("FHLB"). In addition, both the Bank and the Company have access to lines of credit from major financial institutions. The Bank has two warehouse lines of credit available in the aggregate amount of $250.0 million to fund loan originations, of which $54.6 million has been drawn upon at September 30, 1997, and is in the process of negotiating a third warehouse line of credit in the amount of $250.0 million. The Company has a line of credit in the amount of $40.0 million secured by residual assets created by the Company's securitizations. See "-- Recent Developments." Diversification Opportunities. The Company is a unitary savings and loan holding company which generally is not restricted in the types of business activities which it may conduct provided that the Bank continues to be a qualified thrift lender ("QTL"). See "Regulation--Federal Savings Institution Regulation--QTL Test." The Reorganization provided the Company with: . The opportunity to expand its current product line and enter into possible new product areas; . Broader investment opportunities than the Bank; and . Alternative access, if necessary, to the capital markets. GROWTH AND OPERATING STRATEGIES Management believes that, as a result of its competitive strengths, the Bank and the Company will be able to implement the following growth and operating strategies: . Expanding Core Products Through a National Originator Network. The Company will continue to emphasize and to expand the origination of its core products, Liberator Series loans and Portfolio Series loans, for sale through securitizations and in the secondary market. Continued growth in the origination of core products will result primarily from geographic expansion and greater penetration in existing markets. In particular, since the beginning of 1997, the Company has widely advertised its no income, no asset ("NINA") loan product, which is a limited documentation, lower loan-to-value loan program within the Liberator Series. NINA loans constituted $29.2 million of the $152.9 million of Liberator Series loans originated during the nine months ended September 30, 1997. In order to improve its ability to service its expanding network of Originators, the Company has established strategically located, low cost regional lending centers in Riverside, California, Jacksonville, Florida and in the Denver, Colorado metropolitan area. The Company intends to open three additional regional lending centers to better serve its Originators over the next nine months. These regional lending centers are likely to be strategically located in Northern California and in the Northeast and Midwest sectors of the United States. . Expanding Retail Lending Production. The Company's retail lending operations currently focuses on retail loans located in the Company's primary market area of Southern California. The retail lending offices will focus on the origination of Liberator Series and Portfolio Series loans. In addition, the retail lending offices will originate non-core product loans to Agency-Qualified Borrowers. Non-core product loans originated by the retail lending offices will be sold to Loan Purchasers. The Company intends to gradually and selectively expand its retail lending operations. As part of this process, the Company has opened two low cost retail offices and has entered into leases for an additional four retail offices to be opened by the end of 1997. In addition, the Company intends to open two retail lending offices in January of 1998. With the exception of one planned office expected to be opened in Northern California, the Company's two existing and five of the six planned retail lending offices will be located in Southern California. In addition, the Company intends to further expand by opening additional retail offices outside of Southern California. The Company believes that expanding its retail lending operations will reduce the possibility that its borrowers will refinance their loans with other lenders. . Expanding Multi-Family and Commercial Lending. In continuing with its tradition as a niche market lender and in an effort to diversify product offerings, the Company has begun to focus its efforts on the origination and purchase of multi-family and commercial real estate loans in the range of $50,000 to $1.5 million both in its primary market area and throughout the United States through a selected group of originators. The Company is currently purchasing such loans at a discount and, although there can be no assurances, expects to be able to continue to purchase such loans at a discount or low premium. The Company employs underwriters who specialize in commercial and multi-family real estate lending and utilizes a select group of appraisers experienced in these products. In addition, two members of senior management have considerable expertise in multi-family and commercial real estate lending. The Company was primarily limited in its ability to originate multi-family and commercial real estate loans by its level of available capital. The Company is gradually expanding such originations as its available capital has increased. For the nine months ended September 30, 1997, the Company originated $25.1 million of multi-family and commercial loans, as compared to $7.1 million for the nine months ended September 30, 1996. The Company believes that it has the infrastructure in place to accommodate this expansion. All multi-family and commercial real estate loans are originated for sale in the secondary market and are currently being sold as whole loans. In the future, they may also be sold through securitizations. . Consistently Refining Operating Procedures. The Company intends to maintain loan quality by continuing to refine its underwriting criteria. Regularly-scheduled meetings of the Company's underwriting personnel are held in part to discuss operational issues as well as refinements to the Company's underwriting policies. In addition, the Company conducts regular loan delinquency meetings to discuss problem areas in the Company's servicing portfolio in order to reduce the likelihood of the recurrence of such problems in future loans. As necessary, the Company adds personnel to its loan processing staff and continues to utilize advancements in computer technology to provide prompt turnaround on loans, efficient underwriting procedures and accurate credit verification. In addition, the Company has a quality control department that is dedicated to maintaining quality control, reviews loan files to assure that each complies with the Company's underwriting policies, reviews all loans upon first payment default and loans sixty days delinquent, provides feedback and training to the underwriters to minimize future defaults and delinquencies, and investigates all fraudulent loans. . Enhancing Servicing Capabilities. As the Bank has transitioned from a traditional thrift to a diversified financial services operation, it has expanded its servicing department from a total of four persons at December 31, 1994 to 20 persons at September 30, 1997. The head of the servicing department has 24 years of experience in loan servicing and collections including responsibility for a $10.0 billion portfolio of approximately 255,000 loans and a staff of 70 people. In anticipation of its future servicing needs, the Company has dedicated substantial space in its current Riverside facility to house loan servicing operations. The Company is in the process of implementing a power dialing system in its servicing facility and intends to implement computer imaging in the future. . Diversifying Funding Sources. In addition to its traditional thrift funding sources of deposits and loans from the FHLB, the Company has diversified its funding sources in recent periods. During the nine months ended September 30, 1997, net cash received from the Company's securitizations and sales provided a significant source of funding to the Company, aggregating $277.6 million for that period. The Bank has two warehouse lines of credit available in the aggregate amount of $250.0 million to fund loan originations, of which $54.6 million has been drawn upon at September 30, 1997, and is in the process of negotiating a third warehouse line of credit in the amount of $250.0 million. The Company has a line of credit in the amount of $40.0 million secured by residual assets created by the Company's securitizations. CORPORATE STRUCTURE The Company and the Bank consummated the Reorganization in June of 1997 whereby the Bank became a wholly-owned subsidiary of the Company. Management believes that the holding company form of organization provides the Company with more flexibility and a greater ability to compete with other financial services companies in the market place. In addition, due to regulatory capital limitations, the Bank is limited in the amount of investments in residuals and restricted cash resulting from securitizations that it can retain. The Company is not subject to such limitations, and thus will reduce the restrictions on the Bank's regulatory capital by acquiring and holding the residuals upon completion of a securitization. RECENT DEVELOPMENTS Recent Loan Origination Volume. The Company originated and purchased approximately $132.0 million in mortgage loans during the two months ended November 30, 1997, exclusive of loans acquired in a bulk purchase discussed below, see "--Bulk Purchases," as compared to $194.4 million of mortgage loans originated and purchased during the three months ended September 30, 1997. Of the loans originated during this period, $34.2 million were Liberator Series (full documentation) loans, $12.9 million were Liberator Series (NINA) loans, $75.9 million were Portfolio Series loans and $9.0 million were multi-family and commercial real estate loans. Bulk Purchases. During the two months ended November 30, 1997, the Company purchased $91.1 million of loans in a bulk purchase. The loans are high loan- to-value ratio loans similar in terms to the Company's Portfolio Series loans. These loans were originated by approximately 100 correspondents of the seller. The Company had previously purchased loans from approximately 30 of such entities and consequently the Company had reviewed their underwriting guidelines, in the manner specified under "Business--Core Lending Products-- Underwriting." With respect to the approximately 70 other entities, the Company performed a limited review of their underwriting guidelines. The Company reviewed a significant sample of the acquired loans, with an emphasis on loans originated by those entities with whom the Company had no prior relationship, to determine, among other things, whether they complied with the Company's underwriting standards, and, based on such review, the Company believes that the acquired loans conform in all material respects with the Company's underwriting guidelines. The purchase is subject to standard loan repurchase or substitution obligations on the part of the seller, and the Company additionally has the right to enforce such repurchase or substitution obligations against the initial originators of the loans. The Company intends to include the $91.1 million of bulk purchase loans in the securitization discussed below. Recent Securitization Activities. The Company is in the process of issuing $250.0 million in home loan asset-backed notes through a securitization. The notes will be backed by Portfolio Series loans. The initial funding will be approximately $190.0 million. The Company expects to complete this securitization by December 31, 1997. Lines of Credit. As a means of increasing its access to borrowed funds, the Bank is currently in the process of negotiating an additional $250.0 million warehouse line of credit with a national investment banking firm. The warehouse line of credit is expected to be secured by loans originated and purchased by the Company. The Company has recently entered into a $40.0 million line of credit with a national investment banking firm secured by residuals generated by the Company's securitization activities. Management anticipates that such lines of credit will provide the Company with the ability to increase its loan production activities, as well as providing the Company with the ability to borrow against the residuals; however, one of the lines of credit is still being negotiated, and there can be no assurances that a definitive agreement will be reached, or if an agreement is reached, that it will conform to the terms outlined above. Low Cost Retail Offices. As part of the Company's efforts to expand its retail lending operations, the Company recently opened two low cost retail lending offices, and has entered into leases for an additional four retail lending offices to be opened by the end of 1997. In addition, the Company intends to open two retail lending offices in the first quarter of 1998. With the exception of one planned office expected to be opened in Northern California, the Company's two current and five of the six planned retail lending offices will be located in Southern California. LIFE FINANCIAL CAPITAL TRUST The Trust is a statutory business trust created under Delaware law pursuant to (i) a declaration of trust, executed by the Company, as Sponsor, State Street, as Property Trustee, Delaware Trust Capital Management (Delaware), as Delaware Trustee and an executive officer of the Company, as Initial Trustee, and (ii) the filing of a certificate of trust with the Delaware Secretary of State on December 2, 1997. The Trust's affairs will be conducted by the Property Trustee and the Delaware Trustee, and by the Administrators who are employees or officers of or affiliated with the Company. The Trust exists for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using the proceeds from the sale of the Trust Securities to acquire the Junior Subordinated Debentures, and (iii) engaging in only those other activities necessary, advisable or incidental thereto (such as registering the transfer of the Capital Securities). Accordingly, the Junior Subordinated Debentures will be the sole assets of the Trust, and payments under the Junior Subordinated Debentures will be the sole revenue of the Trust. All of the Common Securities will be owned by the Company. THE CAPITAL SECURITIES Securities Offered............. Up to % Capital Securities (Liquidation Amount $ per Capital Security), which rep- resent preferred undivided beneficial inter- ests in the assets of the Trust. The Junior Subordinated Debentures held by the Trust will mature on , 2027. All Capital Securities are being offered hereby to the public in the Offering by the Underwriter. Offering Price................. $ per Capital Security. Distribution Dates............. March 15, June 15, September 15 and December 15 of each year, commencing March 15, 1998. Extension Periods.............. So long as no Debenture Event of Default has occurred and is continuing, Distributions on Capital Securities may be deferred for the duration of any Extension Period elected by theCompany with respect to the pay- ment of interest on the Junior Subordinated Debentures. No Extension Period will exceed 20 consecutive quarters or extend beyond the Stated Maturity Date. See "Description of Ju- nior Convertible Subordinated Debentures--Op- tion to Extend Interest Payment Date" and "Certain Federal Income Tax Considerations-- Interest, Original Issue Discount, Premium and Market Discount." Ranking........................ The Capital Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities except as described under "Description of Capital Securities--Sub- ordination of Common Securities." The Junior Subordinated Debentures will rank pari passu with all other junior subordinated debentures issued by the Company ("Other Debentures"), which will be issued and sold (if at all) to other trusts established by the Company (if any), in each case similar to the Trust ("Other Trusts"), and will be unsecured and subordinate and rank junior in right of pay- ment to all Senior Indebtedness of the Company to the extent and in the manner set forth in the Indenture. See "Description of Junior Con- vertible Subordinated Debentures." There are currently no other securities that would con- stitute Other Debentures. The Guarantee will constitute an unsecured obligation of the Com- pany and will be subordinate and rank junior in right of payment to all Senior Indebtedness of the Company to the extent and in the manner set forth in the Guarantee Agreement. In addi- tion, because the Company is a holding compa- ny, the Company's obligations under the Junior Subordinated Debentures and the Guarantee ef- fectively will be subordinated to all existing and future liabilities, including indebted- ness, of the Company's subsidiaries, including the Bank's deposit liabilities. See "Descrip- tion of the Guarantee" and "Risk Factors Re- lated to the Capital Securities--Ranking of Subordinate Obligations Under the Guarantee and Junior Subordinated Debentures." Conversion into Common Stock... Each Capital Security is convertible at the option of the holder thereof, at any time prior to the earlier of (i) 5:00 p.m. Pacific time) on the Business Day immediately preced- ing the date of repayment of such Capital Se- curity, whether at maturity or upon redemp- tion, and (ii) 5:00 p.m. (Pacific time) on the Conversion Termination Date (if any) into shares of Common Stock at a conversion rate of shares of Common Stock of the Company for each Capital Security (equivalent to a conver- sion price of $ per share of Common Stock) (the "Conversion Price"). On December , 1997, the last reported sales price of the Common Stock on the Nasdaq was $ per share. In connection with any conversion of a Capital Security, the Conversion Agent (as defined herein) will exchange such Capital Security for the appropriate principal amount of Junior Subordinated Debentures held by the Trust and immediately convert such Junior Subordinated Debentures into shares of Common Stock. No fractional shares of Common Stock will be is- sued as a result of conversion, but in lieu thereof such fractional interest will be paid by the Company in cash. See""Description of Capital Securities--Conversion Rights." Hold- ers of Capital Securities at 5:00 p.m. (Pa- cific time) on a Distribution Record Date (as defined herein) will be entitled toreceive the Distribution payable upon such Capital Securi- ties on the corresponding Distribution Date notwithstanding the conversion of such Capital Securities following such Distribution Record Date but on or prior to such Distribution Date. Termination of Conversion Rights........................ In addition to the rights of the Company to redeem the Capital Securities under the cir- cumstances described in this Prospectus, the Company also will have the right to terminate the convertibility of the Capital Securities into Common Stock as described in this para- graph. If for at least 20 trading days within any period of 30 consecutive trading days end- ing on or after , , including the last trading day of such period, the Closing Price of the Common Stock exceeds % of the then ap- plicable Conversion Price of the Capital Secu- rities, the Company may, at its option, termi- nate the right to convert the Junior Subordi- nated Debentures into Common Stock, in which case the right to convert the Capital Securi- ties into Common Stock will likewise termi- nate. To exercise this conversion termination option, the Company must cause the Trust to issue a press release announcing the Conver- sion Termination Date, prior to the opening of business on the second trading day after a pe- riod in which the condition in the preceding sentence has been met, but in no event may such press release be issued prior to , . Notice of termination of conversion rights will be given by first-class mail to the hold- ers of the Capital Securities not more than four Business Days after the Trust issues the press release. The Conversion Termination Date shall be a Business Day not less than 30 and not more than 60 days following the date of the press release described above. See "De- scription of Capital Securities--Conversion Rights." Redemption..................... The Trust Securities will be subject to manda- tory redemption in a Like Amount, (i) in whole but not in part, on the Stated Maturity Date upon repayment of the Junior Subordinated Debentures, (ii) in whole but not in part, at any time, contemporaneously with the optional prepayment of all of the Junior Subordinated Debentures by the Company upon the occurrence and continuation of a Special Event and (iii) in whole or in part, on or af- ter the Initial Optional Prepayment Date, con- temporaneously with the optional prepayment by the Company of all or a part of the Junior Subordinated Debentures, in each case at the applicable Redemption Price. See "Description of CapitalSecurities--Redemption." ERISA Considerations........... Prospective purchasers should consider the re- strictions on purchase set forth under "ERISA Considerations." Absence of Market for the Capital Securities............ The Capital Securities will be a new issue of securities for which there currently is no market. Although the Company has applied to have the Capital Securities approved for quo- tation on the Nasdaq, there can be no assur- ance that such application will be approved, that an active trading market for the Capital Securities will develop or, if one does develop, that it will be maintained. Accord- ingly, there can be no assurance as to the de- velopment or liquidity of any market for the Capital Securities. USE OF PROCEEDS All of the proceeds to the Trust from the sale of the Trust Securities will be invested by the Trust in the Junior Subordinated Debentures. The net proceeds from the sale of the Junior Subordinated Debentures will be available to the Company for general corporate purposes, which may include, but not be limited to, the refinancing or prepayment of existing debt obligations, which may be of shorter maturity or higher coupon rate; the downstreaming of capital to the Bank, and the financing of future residuals resulting from securitizations; the acquisition of loan portfolios from other depository institutions or finance companies; and possible acquisitions of depository institutions or branches of depository institutions. The Company has not entered into any arrangement, agreement or understanding with respect to future acquisitions and there can be no assurances that it will do so in the future. No determination has been made as to the amount of proceeds, if any, that will be allocated to any of the above-mentioned potential uses. Initially, the net proceeds may be used to make short-term investments. Under current policy, the Office of Thrift Supervision (the "OTS") does not impose any capital adequacy requirements on the Company, but does impose such capital adequacy requirements on the Bank. To the extent the Company contributes a portion of the net proceeds received from the sale of the Capital Securities to the Bank, such proceeds would qualify as Tier 1 capital at the Bank level under the current capital adequacy guidelines of the OTS. See "Use of Proceeds." RISK FACTORS Prospective investors should carefully consider the matters set forth under "Risk Factors Related to the Capital Securities" and "Risk Factors Related to the Company." SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The selected consolidated financial and other data of the Company at or for the years ended December 31, 1996, 1995, 1994, 1993 and 1992 and at or for the nine months ended September 30, 1997 and 1996, set forth below is derived in part from, and should be read in conjunction with, the Financial Statements of the Company and Notes thereto as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 presented elsewhere in this Prospectus. Financial information at September 30, 1997, and for the nine month periods ended September 30, 1997 and 1996 is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) which are necessary to present fairly the results for such interim periods. Interim results at and for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. The Company and the Bank did not pay any cash dividends in any of the periods set forth. <TABLE> <CAPTION> AT AT DECEMBER 31, SEPTEMBER 30, ------------------------------------------------- 1997 1996 1995 1994 1993 1992 ------------- --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) <S> <C> <C> <C> <C> <C> <C> SELECTED BALANCE SHEET DATA: Total assets............ $ 294,102 $ 104,010 $ 74,136 $ 71,402 $ 78,256 $ 78,788 Securities held-to- maturity and FHLB stock.................. 8,065 8,837 2,700 2,860 3,883 4,829 Loans held for sale..... 191,555 31,018 21,688 17,070 2,348 4,499 Loans held for investment............. 33,992 38,520 42,870 47,939 64,820 61,182 Allowance for estimated loan losses............ 1,859 1,625 1,177 832 436 308 Residual asset at fair value.................. 24,533 5,700 -- -- -- -- Mortgage servicing rights................. 5,713 2,645 683 -- -- -- Deposit accounts........ 159,840 85,711 67,535 65,689 72,008 71,719 Borrowings.............. 71,523 -- -- 1,250 1,200 2,000 Stockholders' equity.... 49,477 9,273 4,268 3,748 4,419 4,326 Book value per share(1)............... $ 7.56 $ 2.89 $ 2.29 $ 2.01 $ 2.37 $ 2.55 Shares outstanding(1)... 6,546,716 3,211,716 1,866,216 1,866,216 1,866,216 1,696,410 </TABLE> <TABLE> <CAPTION> FOR THE NINE MONTHS ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31, ------------------- -------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> SELECTED OPERATING DATA: Interest income......... $ 12,152 $ 4,922 $ 6,929 $ 5,825 $ 4,824 $ 5,445 $ 6,143 Interest expense........ 7,101 2,699 3,766 3,448 2,721 3,045 3,687 --------- --------- --------- --------- --------- --------- --------- Net interest income.... 5,051 2,223 3,163 2,377 2,103 2,400 2,456 Provision for estimated loan losses............ 900 359 963 1,194 1,306 404 129 --------- --------- --------- --------- --------- --------- --------- Net interest income after provision for estimated loan losses................ 4,151 1,864 2,200 1,183 797 1,996 2,327 Net gains from mortgage financing operations... 17,413 3,759 8,352 3,575 1,428 1,144 1,380 Other non-interest income................. 772 505 760 445 260 253 352 Non-interest expense: Compensation and benefits.............. 5,534 3,206 5,233 2,544 1,575 1,403 1,426 Net loss on foreclosed real estate........... 94 171 158 53 280 228 78 SAIF special assessment............ -- 448 448 -- -- -- -- Other expense.......... 3,522 1,993 2,842 1,792 1,601 1,562 2,045 --------- --------- --------- --------- --------- --------- --------- Total non-interest expense............... 9,150 5,818 8,681 4,389 3,456 3,193 3,549 --------- --------- --------- --------- --------- --------- --------- Income (loss) before income tax provision (benefit).............. 13,186 310 2,631 814 (971) 200 510 Income tax provision (benefit).............. 5,491 142 1,126 294 (300) 107 148 --------- --------- --------- --------- --------- --------- --------- Net income (loss)....... $ 7,695 $ 168 $ 1,505 $ 520 $ (671) $ 93 $ 362 ========= ========= ========= ========= ========= ========= ========= Earnings (loss) per share(2)............... $ 1.70 $ 0.08 $ 0.63 $ 0.28 $ (0.36) $ 0.05 $ 0.22 ========= ========= ========= ========= ========= ========= ========= Weighted average shares outstanding(2)......... 4,522,251 2,090,466 2,370,779 1,866,216 1,866,216 1,823,765 1,644,886 ========= ========= ========= ========= ========= ========= ========= </TABLE> (continued on following page) <TABLE> <CAPTION> AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31, ------------------ ---------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 -------- -------- -------- -------- ------- ------- ------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> <C> SELECTED FINANCIAL RATIOS AND OTHER DATA(3): PERFORMANCE RATIOS: Return on average assets................ 5.07% 0.27% 1.74% 0.69% (0.89)% 0.12% 0.46% Return on average equity................ 44.25 4.30 24.99 13.64 (17.01) 2.11 8.92 Average equity to average assets........ 11.46 6.28 6.98 5.04 5.22 5.51 5.17 Equity to total assets at end of period...... 16.82 9.40 8.92 5.76 5.25 5.65 5.49 Average interest rate spread(4)............. 3.16 3.72 3.76 3.09 2.79 3.02 3.04 Net interest margin(5)............. 3.76 3.86 3.94 3.25 2.88 3.14 4.29 Average interest- earning assets to average interest- bearing liabilities... 111.35 102.96 103.90 103.50 102.27 103.08 103.64 Efficiency Ratio(6).... 38.97 87.05 69.43 67.78 83.78 78.09 82.88 Ratio of Earnings to Fixed Charges: Excluding interest on deposits.............. 7.82 1.88 6.53 3.05 (2.11) 1.54 2.67 Including interest on deposits.............. 2.79 1.11 1.66 1.23 0.66 1.06 1.13 LOAN ORIGINATIONS AND PURCHASES.............. $433,408 $148,389 $222,553 $134,772 $72,815 $82,015 $90,870 BANK REGULATORY CAPITAL RATIOS(7): Tangible capital....... 6.19% 9.40% 8.90% 5.68% 5.25% 5.65% 5.49% Core capital........... 6.19 9.40 8.90 5.68 5.25 5.65 5.49 Risk-based capital..... 13.49 16.06 9.43 10.17 10.00 10.87 10.56 ASSET QUALITY RATIOS: Non-performing assets as a percent of total assets(8)............. 1.38% 3.36% 2.86% 3.00% 3.42% 5.05% 4.15% Allowance for estimated loan losses as a percent of non- performing loans...... 60.49 55.66 67.26 84.25 44.04 20.02 16.29 </TABLE> - -------- (1) Book value per share is based upon the shares outstanding at the end of each period, adjusted for a 100% stock dividend which occurred during 1996. Book value per share is then adjusted for the exchange of three shares of Company Common Stock for one share of Bank common stock in the Reorganization. (2) Earnings per share is based upon the weighted average shares outstanding during the period, adjusted for a 100% stock dividend which occurred during 1996. Earnings per share is then adjusted for the exchange of three shares of Company Common Stock for one share of Bank common stock in the Reorganization. (3) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios. With the exception of end of period ratios, all ratios are based on average daily or average month-end balances during the indicated periods. (4) The average interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (5) The net interest margin represents net interest income as a percent of average interest-earning assets. (6) The efficiency ratio represents noninterest expense less (gain) loss on foreclosed real estate divided by noninterest income plus net interest income before provision for estimated loan losses. (7) For definitions and further information relating to the Bank's regulatory capital requirements, see "Regulation--Federal Savings Institution Regulation--Capital Requirements." (8) Non-performing assets consist of non-performing loans and REO. See "Business--Lending Overview--Non-Accrual and Past-Due Loans" and "--REO." QUARTERLY OPERATING AND OTHER DATA Financial information of the Company at September 30, June 30, and March 31, 1997 and December 31 and September 30, 1996 and for the quarters ended September 30, June 30, and March 31, 1997, and December 31 and September 30, 1996 is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting of only normal recurring adjustments) which are necessary to present fairly the results of such interim periods. Interim results at or for the quarters ended September 30, June 30, and March 31, 1997 are not necessarily indicative of the results for the year ending December 31, 1997. <TABLE> <CAPTION> AT OR FOR THE QUARTER ENDED ------------------------------------------------------------ SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, 1997 1997 1997 1996 1996 ------------- -------- --------- ------------ ------------- (DOLLARS IN THOUSANDS) <S> <C> <C> <C> <C> <C> SELECTED OPERATING DATA: Interest income......... $ 5,697 $ 4,151 $ 2,304 $ 2,007 $ 1,569 Interest expense........ 3,080 2,460 1,561 1,067 844 -------- -------- ------- ------- ------- Net interest income... 2,617 1,691 743 940 725 Provision for estimated loan losses............ 400 -- 500 604 251 -------- -------- ------- ------- ------- Net interest income after provision for estimated loan losses............... 2,217 1,691 243 336 474 Net gains from mortgage financing operations... 8,344 3,192 5,877 4,593 1,599 Other non-interest income................. 358 206 208 256 192 Non-interest expense: Compensation and benefits............. 2,477 1,475 1,582 2,026 1,056 Net loss (gain) on foreclosed real estate............... 25 6 63 (13) 71 SAIF Special Assessment........... -- -- -- -- 448 Other expense......... 1,677 998 847 851 671 -------- -------- ------- ------- ------- Total non-interest expense............ 4,179 2,479 2,492 2,864 2,246 -------- -------- ------- ------- ------- Income before income tax provision.............. 6,740 2,610 3,836 2,321 19 Income tax provision.... 2,809 1,088 1,594 984 17 -------- -------- ------- ------- ------- Net income.............. $ 3,931 $ 1,522 $ 2,242 $ 1,337 $ 2 ======== ======== ======= ======= ======= Earnings per share(1)... $ 0.57 $ 0.47 $ 0.70 $ 0.42 $ 0.00 ======== ======== ======= ======= ======= SELECTED FINANCIAL RATIOS AND OTHER DATA(2): PERFORMANCE RATIOS: Return on average assets............... 5.41% 3.45% 6.32% 5.56% 0.01% Return on average equity............... 33.32 48.91 90.48 61.35 0.12 Average equity to average assets....... 16.24 7.05 6.99 8.77 8.42 Equity to total assets at end of period..... 16.82 21.38 7.30 8.92 9.40 Average interest rate spread(3)............ 3.15 3.97 2.32 4.09 3.93 Net interest margin(4)............ 4.27 4.08 2.44 4.22 3.95 Average interest- earning assets to average interest- bearing liabilities.. 122.31 101.78 102.43 104.64 103.25 Efficiency Ratio(5)... 36.70 48.59 35.57 49.70 86.45 LOAN ORIGINATIONS AND PURCHASES.............. $194,447 $152,230 $86,731 $74,164 $44,536 BANK REGULATORY CAPITAL RATIOS(6): Tangible capital...... 6.19% 7.47% 7.19% 8.90% 9.40% Core capital.......... 6.19 7.47 7.19 8.90 9.40 Risk-based capital.... 13.49 18.61 10.51 9.43 16.06 ASSET QUALITY RATIOS: Non-performing assets as a percent of total assets(7)............ 1.38 1.86 1.85 2.86 3.36 Allowance for estimated loan losses as a percent of non-performing loans................ 60.49 63.29 103.62 67.26 55.66 </TABLE> (footnotes on following page) - -------- (1) Earnings per share is based on the weighted average shares outstanding during the period, adjusted for a 100% stock dividend which occurred during 1996. Earnings per share is then adjusted for the exchange of three shares of Company Common Stock for one share of Bank common stock in the Reorganization. (2) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios. With the exception of end of period ratios, all ratios are based on average closing or average month-end balances during the indicated periods and are annualized where appropriate. (3) The average interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (4) The net interest margin represents net interest income as a percent of average interest-earning assets. (5) The efficiency ratio represents noninterest expense less (gain) loss on foreclosed real estate divided by noninterest income plus net interest income before provision for estimated loan losses. (6) For definitions and further information relating to the Bank's regulatory capital requirements, see "Regulation--Federal Savings Institution Regulation--Capital Requirements." (7) Non-performing assets consist of non-performing loans and REO. See "Business--Lending Overview--Non-Accrual and Past-Due Loans" and "--REO."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001050843_northwood_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001050843_northwood_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae647c0820cbfb17b6e1e6fde9e22cb6a8515764
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001050843_northwood_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the information and financial statements appearing elsewhere in this Prospectus. The Company Northwood Realty Co. is a registered fictitious name of Northwood Services, Inc., a corporation founded in 1982 under the laws of Pennsylvania. Northwood operates as a large real estate brokerage in Southwestern Pennsylvania, primarily around the city of Pittsburgh. It serves Allegheny County and seven surrounding counties. The Company maintains its principal administrative office at 4100 Route 8, Allison Park, Pennsylvania 15101-3060. Northwood has thirty-five offices and 700 sales associates plus another 100 persons employed in various management and administrative functions. Use of Proceeds The Company intends to use the proceeds of this offering (net of underwriting commissions and offering expenses), assuming the maximum shares are sold at the price set by the Company of $6.00 per share in the amounts and priorities as follows: Maximum ------- Expansion of working capital and general corporate purposes $4,475,000 Repayment of Notes $ 625,000 Totals $5,100,000 (See "The Company" and "Use of Proceeds") Risk Factors The Company at various times since its inception in 1982 has incurred substantial operating losses in spite of substantial gross revenues and only in 1996 did it have an operating profit on approximately $15 million in revenues. (See "Financial Statements" and "Selected Financial Data".) It has and will continue to encounter substantial competition. (See "Risk Factors".) Purchasers of the shares offered hereby will sustain substantial dilution. (See "Dilution"). The Offering The Company proposes to offer 1,000,000 shares at the offering price of $6.00 per share as determined by the Company. (See "Plan of Distribution" for information concerning the offering price.) Certain Selling Shareholders have registered 300,000 shares for possible sale concurrent with this offering. Net Proceeds to the Company (1) Maximum $5,100,000 Common stock outstanding as of September 30, 1997 prior to offering 3,000,000 shares Common stock outstanding after offering (2) Maximum 4,000,000 shares Percentage of stock to be owned by Present Shareholders after offering (2)(3)(4)- 75% (1) Assumes the shares are sold at $6.00 per share, after payment of the commission to the Selected Dealers of 10% of the proceeds and the deduction of the offering costs of $250,000. (2) Does not include up to 200,000 shares subject to an incentive stock plan which may be offered to certain members of the Company's management and for agents of the company, and up to 100,000 shares underlying the Selected Dealers' Warrants. (3) Based upon 4,000,000 shares to be issued and outstanding after the sale of the maximum number of shares. (4) These percentages assume that existing shareholders purchase no shares offered hereby. As of September 30, 1997, the Company had thirteen record shareholders including nominees. An anticipated low trading volume of the Company's shares would make share price susceptible to substantial price swings should volume of any significant size and frequency occur in buying or selling of the Company's shares. Summary Financial Information The following summary financial information should be read in conjunction with the financial statements of the Company and related notes included elsewhere in this Prospectus. 12/31/1996 12/31/1995 ----------------------------------- Total Assets 3,652,319 3,679,854 Total Current Liabilities $ 2,674,337 $ 2,907,759 Long-term debt (net of current portion 1,307,546 1,132,583 ------------- ------------- Total 3,981,883 4,040,342 Stockholders' Equity (Deficiency) Capital stock - (no par value, 100,000,000 shares issued, 886,100 shares outstanding, 128,900 shares held as treasury stock, no cost) 25,100 25,100 Retained earnings (deficit) (327,064) (357,988) =================================== Less: Treasury stock - 9,500 shares, at cost (27,600) (27,600) ------------- ------------- (329,564) (360,488) ------------- ------------- $ 3,652,319 $ 3,679,854 ============= ============= Revenues Net commissions earned from real estate transactions $ 15,735,755 $ 13,861,509 Less commissions paid (8,433,981) (7,361,537) ------------- ------------- 7,301,774 6,499,972 Tuition income 137,965 120,871 Consulting fees 109,775 94,158 Insurance commissions 24,961 22,804 ------------- ------------- 7,574,475 6,737,805 Operating Expenses 7,486,539 6,753,364 ------------- ------------- Income (loss) from 87,936 (15,559) operations Other Income (Expense) Rental income 20,000 20,000 Other income 79,217 30,144 Interest expense (232,639) (290,604) Loss on investments (30,000) Reduction in listing rights amortization 103,505 ------------- (29,917) (270,460) ------------- ------------- Income (loss) before income taxes and extraordinary item 58,019 (286,019) Financial information for the year ended December 31, 1996 is compared to the year ended December 31, 1995. The following unaudited supplementary data presents net income per share for the fiscal year ended December 31, 1996 and the nine months ended September 30, 1997 as adjusted to give effect to the proposed sale of common stock as if it had occurred on December 31, 1995, for the 1996 fiscal year, or January 1, 1997, for the nine months ended September 30, 1997. The calculations assume a sale price of $6.00 per share if the offering of shares (1,000,000) is sold and net proceeds were used to retire indebtedness outstanding of $1,350,000 as of January 1, of the pro forma year. Dec. 31, 1996 Sept. 30, 1997 ------------- -------------- Net income before income taxes as reported 58,019 523,851 Adjustment to reduce interest expense 232,639 181,122 --------- --------- Net income as adjusted 290,658 704,973 Weighted average common shares outstanding 3,000,000 3,000,000 Adjustment for the proposed sale of 1 million shares 1,000,000 1,000,000 Number of common shares assumed to be outstanding, as adjusted 4,000,000 4,000,000 Income per common shares, as reported $ .019 $ .17 Income per common shares, as adjusted $ .072 .176 The following unaudited supplementary data presents comparative summary financial information for the nine months ended September 30, 1997 and 1996: Period January 1 to Sept. 30 1997 1996 - -------------------------------------------------------------------------------- Net sales and other income 6,591,275 6,157,517 Operating income 642,714 739,306 Net income (loss) before taxes 523,851 571,124 Net income (loss) per common share $.178 $.164 Adjusted Balance Sheet Data Actual As Adjusted for Nine months ended September 30, 1997 - -------------------------------------------------------------------------------- Current assets 3,325,188 7,800,188 Total assets 4,932,367 9,407,367 Liabilities: Current liabilities 3,625,313 3,000,313 Long-term debt 1,316,400 1,316,400 ----------------------------------------- Total Liabilities 4,941,713 4,316,400 Stockholders' equity (9,346) 5,090,654 ========================================= (1) Gives effect to the sale of the offering of 1,000,000 shares offered hereby at the offering price of $6.00 per share and the receipt and application of the net proceeds of the offering by the Company without giving effect to the exercise, if any, of the Selected Dealers' Warrants for up to 100,000 shares or presently exercisable outstanding Options held by officers, directors agents and employees of the Company for up to 200,000 shares. (See "Use of Proceeds"). COMPANY Previous History - ---------------- a) Northwood Realty was founded in 1956 by Vincent Werder who died shortly thereafter. It was a proprietorship at that time and the assets of that very small company, operating literally in one room with eight desks, were purchased by J. Harold (Hal) Autenreith, Jr. in 1958. Northwood continued as a sole proprietorship for the next twenty-four years, growing in the process to about eight offices with 300 agents. In 1983 Northwood became the exclusive franchisee of Better Homes and Gardens Real Estate Service in the Pittsburgh Area. The Better Homes & Gardens Real Estate Service is a division of Meredith Corporation, a fortune 500 company based in Des Moines, Iowa. Among many other things Meredith is the publisher of Better Homes and Gardens magazine - a name known by most of adult Americans, which is a "Brand name." The "mega-brand" identity of Better Homes and Gardens is of significant value to the Company. As of early 1997, there are 810 member firms of Better Homes and Gardens with more than 1,576 offices and approximately 25,020 sales associates. The real estate industry nationally went through a severe depression in 1980-1982 which was acutely felt in Pittsburgh, PA. At that time another large brokerage operation, the Wunderly- Weston Agency, covered approximately the same territory. Harold M. "Buck" Weston and his son Tex Weston were the principals of Wunderly-Weston. Along with everyone else, they were experiencing extreme financial difficulties and the company was, in fact, going through bankruptcy. Northwood and Wunderly-Weston agreed upon a business combination and Northwood Services, Inc., operating as Northwood Realty Company, was formed as a corporation in September, 1982. Buck Weston, Tex Weston and Hal Autenreith became directors and employees of the new corporation. Since the primary asset of any real estate brokerage operation is the agents licensed with it, ownership of the new corporation was structured according to the percentage of agents that each company brought to the new corporation. Under its new structure, Northwood continued to grow during the 1980s with the addition of more offices, agents and employees. The company has grown almost every year since its inception through addition of agents and offices. By internal means and through the acquisition of several small real estate companies over the years, including 5 during the past 18 months, Northwood now operates thirty-five offices with 710 agents and an administrative, managerial and secretarial staff of 100. Of the 100,000 large brokerage operations in the United States, Northwood is ranked approximately number 65, in terms of transaction units closed annually, placing it in the upper one tenth of 1 percent, according to various publications including the National Association of Realtors and "Real Trends" Publications. (b) BUSINESS OF ISSUER General Information - ------------------- The Marketplace In the Western Pennsylvania marketplace, four dominant brokerage operations have evolved among about 350 competitors. These large companies are Northwood, Prudential Preferred, Howard Hanna Company and Coldwell Banker. Prudential Preferred is a locally owned franchisee of Prudential Insurance Company. Howard Hanna, too, is locally owned but operates without a national franchise. Coldwell Banker has a few single-office franchises in the area, but the majority of their presence in the Pittsburgh marketplace is a nationally owned operation. The four large brokers, collectively, have approximately 50% of the market share, in units, and about 60% in dollar volume. They are of relatively equal size and several can claim to be "number one" depending on how and what is measured and the time period involved. Overall, Hanna is somewhat larger than the rest with approximately 15% market share in units and about 20% in dollar volume. The other three are roughly equal to each other, Northwood having come up from the smallest of the three while Coldwell Banker and Prudential have both declined substantially. Again, these positions are dependent on what data is measured and in what time frame. Currently, Northwood has approximately 10% of the total marketplace, in terms of dollar volume, 12% in terms of units sold and 14% in terms of total agents in the marketplace. The southwestern Pennsylvania real estate market has had moderate growth since it emerged from the devastating depression in 1980-82. The region has not experienced the large upswings and downfalls that have occurred in other parts of the United States, most notably in New England and in California. Growth has occurred slowly, but nevertheless continuously, with every single year being better than the one before. The average sale price in the area is about $119,000 compared to a national average of $127,000. In excess of sixty percent of all sales are made through cooperation of a listing broker and a separate selling broker. Almost every active broker in the area is a member of West Pennsylvania Multi-List which was started in 1980 by five or six of the largest brokers with the object of reducing the cost and simplifying the process of co-brokerage in residential real estate. Three of those founding brokers were Northwood, Wunderly-Weston and Benson Realty. The principals of those three companies continue as management employees of Northwood up to this moment. Buck Weston and Hal Autenreith were on the initial board of directors for the multi-list and continue in that capacity, being the only two persons of the original seven who are still directors. Hal Autenreith served as president of the second and third years of the Western Pennsylvania Multi-List. Buck Weston is the current treasurer and has maintained that office since the multi-list was founded. Northwood's strategic plan is to become the dominant real estate company in the Pittsburgh marketplace. The number of major competitors may be reduced from five within a very short period of time, due to mergers, and Northwood's plans are to be one of the survivors. Of the 550 or so real estate companies in the Pittsburgh Market, they can all be generally classified into one of three categories: a) small "mom and pop" organizations with fewer than 10 agents; b) mid-sized with 10 to 50 agents; or c) the large brokers with several hundred agents. The five large brokers produce over 50% of the business and their combined share continues to grow a little every year as the smaller brokers are no longer able to compete. For the most part, there is no longevity to their operations and when the owner/broker of such a small brokerage gets out of the business, that is the end of the company, as they themselves are the major asset. The few "midsize" companies that have tried to grow, seem to be doing too little too late. They are at a nearly insurmountable competitive disadvantage against the large brokers. This mid size broker is sometimes a candidate for merger or acquisition. The small and mid-size companies will probably linger on for a long time, surviving on the personal influence of the owner/broker. It is with the five large brokers that the greatest struggle and therefore the greatest opportunity lies. The company plans to move from a number three position with 11% market share to the number one market position with 25% or better market share, through acquisitions of smaller and mid-size companies, however, if a large company is presented as an opportunity, Northwood wants to have the capital position to acquire such a company. Management believes that the company which is able to maintain its operations while at the same time being able to assimilate other companies as they become available holds an advantage. It is a delicate balancing act to merge any two large operations, but one that Northwood is willing to attempt. Northwood intends to grow to the largest competitor with a 25% or greater market share as a result of the mergers, acquisitions and internal growth. Plan of Operation - ----------------- Management and Operations Hal Autenreith serves as Co-president of the Northwood Realty Co. and Buck Weston serves as board chairman, treasurer and broker of record. (Brokerage operations in most states, and specifically in Pennsylvania, require a designated broker of record.) For operations purposes, Northwood is structured into five residential regions, each overseen by a regional manager. The company is operated in a relatively decentralized manner with the top decisions being made by a nine member Executive Committee which meets almost weekly. The committee consists of Hal Autenreith, Buck Weston, Tex Weston, Wendy West, who is the daughter of Hal Autenreith, and the regional managers. The executive committee generally supports the recommendations of the regional managers, as well as the office managers under them, and in fact encourages then to make their own decisions. Represented on the executive committee is almost 150 years of experience: Hal Autenreith has been in the business for about 40 years. Buck and Tex Weston have been in Real Estate for 45 and 26 years, respectively. Both Carol Palomera, East Regional Manager and Ron Maszak, Regional Manager for the North and West have been active in the business for 25 years. The South Regional Manager, Jack Benson, has 33 years of experience. Gloria Schucolsky, with 24 years in the business, is Director of Mergers and Acquisitions and Region 5 manager. Wendy West has been in real estate or a related business for 14 years experience in various capacities including mortgage finance, data management, and as Vice President of Marketing. In addition to the 35 sales offices, Northwood has seven support departments consisting of Accounting, Relocation, Marketing, Education, two Training departments and Technical Support and new construction and Elegant Homes departments. Department heads and regional managers report to Hal Autenreith. For the last three years Hal Autenreith and Tex Weston have informally operated as co-presidents although Tex has spent time in another related business. Each of Northwood's 700 sales executive, operating as independent contractors, is supported by an office coordinator and a manager. The entrepreneurial, results oriented philosophy is reflected in the fact that virtually all personnel are compensated, at least in part, by production achievement. The quality and depth of the Company's sales management is the finest in the area. Many managers have held positions at the local and state real estate associations over the years. Managers meet twice monthly on a company-wide basis, twice on a regional basis and conduct one or more meetings within their own office each month. Northwood has an existing infrastructure that is experienced in this marketplace. Management, departmental and ancillary services are designed to support a company 2 or 3 times present size. The experience, depth and breadth of the management team is equal to that of the nearest competitor. Northwood has 45 managers and department heads with another 60 persons in support staff. The executive committee alone has over 150 years of combined experience in the business. Northwood belongs to a national organization of 51 of the largest United States real estate brokers, the Realty Alliance. The purpose of this organization is to share ideas and information with others who have somewhat similar problems, opportunities and perspectives. The actual membership must be in the name of one individual. For Northwood it has been, until just recently, Buck Weston, who was one of the founders 26 years ago. Tex Weston has assumed that membership as of September 1996. Northwood is also a member of "Pacesetters", an organization comprised of the largest brokerage operations in the Better Homes and Gardens network. Northwood also operates a real estate school as a wholly owned subsidiary. Brokerage Operations for Northwood The Company's mission is to continuously improve the quality of life of all the stakeholders of Northwood Realty. Most of the assets of any real estate broker are intangible: the recruited and trained agents, the commissions pending from unclosed business and the unsold listings. The real estate industry has always been marked by a very high turnover of agents. For Northwood specifically, this means that 20% to 30% of all agents that are licensed at the beginning of the year will not be active in December. Recruiting, therefore, is of utmost priority to any successful real estate operation. Northwood maintains a very aggressive recruiting program and, for the past three or four years, has been successful in hiring almost 30% of all agents new to the marketplace. Extensive, in-house training is provided for the newly hired associates as well as for experienced agents. Indeed, Northwood enjoys the reputation in its marketplace as the company with the finest training program. Real Estate sales agents at Northwood operate as independent contractors, not employees and are paid entirely on commissions. This is the common practice in most of the industry, although some brokerages in some areas operate with agents as employees. The real estate brokerage business in most of the country, and particularly in Pennsylvania, is very seasonal. In terms of originations, December is normally the low point of the year with business peaking in March, April and May. Closings and collection of commissions lag two months behind. For the past ten years, Pittsburgh National Bank and Iron and Glass Bank have provided Northwood with seasonal loans to accommodate the financial swings in the business, with that loan amount being $450,000 in 1996. In every year, the seasonal loan has been paid off well before December 31st. All real estate brokers are subject to lawsuits for claims which are not covered by ordinary liability insurance. These claims generally come under the heading of what is called Errors and Omissions. Northwood internally operates an Errors and Omissions Plan to minimize and offset legal expenses but carries no formal Errors and Omissions Insurance. It is administered through the collection of yearly and transactional sums from the agents. The plan covers all external costs but it does not necessarily cover the internal costs of the managerial and administrative time which are difficult to ascertain. The largest claim ever paid out was $60,000. Most claims, however, are relatively minor, involving leaky basements, structural defects or similar type issues and generally amount to settlements of several thousand dollars or less. Real estate agents, referred to as sales executives at Northwood, operate as independent contractors and are paid entirely on commissions. This is common practice throughout most of the industry, although some brokerages in some areas operate with agents as employees. Northwood sales executives are paid on the traditional split, with a portion of the commission going to the agent and a portion going to the company. Northwood has a sliding commission plan that is very competitive in the marketplace, with new agents beginning at 50/50 and experienced producers earning as much as 80%. Another compensation alternative is the "100 Percent" concept as practiced by ReMax. Under such a setup, the agent receives all of the listing and sales commission. The broker does not share in the commission but, instead, receives monthly and/or annual fees from the sales agent. Northwood actually has a "100 percent style" commission plan available for any agent that is interested, but to date, no one has elected to go on it. The "100 percent concept" can be characterized as only moderately successful in Pittsburgh with less than five percent of all agents in the Multi-List affiliated with ReMax. OTHER COMPANY DEPARTMENTS Accounting - ---------- Sandy Dunmire, manager of the accounting department, is only the second individual to hold that position in the history of the company. She trained in the department for 8 years under her predecessor who retired 3 years ago, Sandy, with a staff of 5 manages the commissions, payroll, accounts payable and monthly reporting. All of these features are implemented with a Unix- based custom software accounting system. The system is both powerful and flexible for the Company's unique and changing needs. Marketing/Advertising - --------------------- The Marketing Department is under the direction of Marnie Lutz and the department serves a both agent and corporate needs. Supplies, printing, graphic designing, bulk mail, newspaper and television advertising are all managed from a separate facility located 1/2 mile from the corporate headquarters. All corporate events such as the Company Convention, Awards Celebration and Company Picnic are coordinated by a staff of nine part time and full time people. Marnie has been the Marketing Coordinator for three years, making use of her background in advertising and newspaper sales. In the Spring of 1997, a new marketing campaign called "A Sellers Assurance Program" designed to get a home sold ASAP was introduced. The ASAP program ties many of Northwood's marketing tools together under one banner. In addition to creative programs directed at the public, Northwood has many internal contests and bonuses for listings, sales, and other real estate related activities for both sales and management staff. Northwood has been the recipient of several BH&G Awards for creative and successful marketing ideas. Relocation - ---------- Cindy DeVos, a former active Northwood agent, has a been heading up the Relocation Division for two years. With a staff of four, Relocation coordinates ingoing and outgoing referrals, generates corporate transferee business and manages the inventory of "corporate-owned" properties. Relocation services are a mandatory part of full-service real estate service, but dynamic occurrences in the industry have made it increasingly more difficult to run the department as a profitable operating center. Corporations and referral networks are demanding larger fees from the business they control. In light of diminishing returns form traditional relocation business, Northwood is pursuing alternative aspects of this facet of the business. Northwood Family Relocation division is just beginning to offer complete Relocation management services including transportation of household goods, home sale closing and equity advances. A corporate caller, hired specifically to develop this business, is receiving very positive response form the executives of local corporations. In conjunction with the Relocation management services, the Company uses a new networking system whereby leads that are generated by sales agents can receive the professional assistance of the Relocation staff in procuring their corporate business. Recruiting/Retention - -------------------- With the understanding that sales agents are the primary asset of a real estate company and the acceptance of the turnover rate, Northwood views recruiting as a business priority. Northwood maintains a very aggressive recruiting program. Ed Schmidt is the manager of the Airport office and as a Director of Recruiting. The Company has 4 full-time recruiters who are compensated on results. The Company constantly monitors share of active agents in the marketplace as a whole, and regionally. The Company also measures the share of new agents getting into the market. For the past three years, Northwood has been successful in hiring 23% of all newly licensed agents. Competition for new as well as experienced agents is high. Many different programs including mailing, seminars, career advertising and personal networking are in place to attract the right type of agent. Many of the recruiting strategies that Northwood has developed over the years are now copied by competitors, so it is a constant task to find new, getter and more creative ways to, not only recruit new persons to the business, but to retain agents. For 8 years, one of the most successful recruiting programs is a "company trip" that existing agents can win if they refer an agent who joins Northwood and achieves a minimum level of production. In 1998, the Company expects to take a group of almost 200 to Cancun for 5 days (about 130 of which are at company expense). Even though the expense of such a trip is great, it has proven to be a cost effective means of recruiting. AGENT TRAINING PROGRAM The Company became an industry leader in designing and implementing human resource programs to develop top producing real estate agents. Training - -------- Quickstart, Northwood's program of fundamental skills for new agents, has been developed and refined over the past 12 years. The schedule is broken into modules that allow students to enter almost at any time. Quickstart provides a thorough orientation to the culture and practices of Northwood as well as a practical working base of how to get started in a productive real estate career. Jan Brown, Director of Training and Education, administers Quickstart and teaches many of the modules along with other instructors from within the company. Several times a year, The Company offers eight week sessions of "Eagle" training to help experienced agents increase their productivity. This program is run by Bob Rebman who draws from 12 years of sales, management and training experiences. In the field and in the classroom, the Company attempts to teach an agent everything he or she needs to know about selling real estate from the ground up. Pacific Institute is a three day experience to teach an agent to become a high performance sales person. It was created by Lou Tice and the Pacific Institute and is presented in Pittsburgh by Northwood Realty Co./Better Homes and Gardens. It is designed to uncover and release the untapped potential in each agent. It covers all aspects of personal and interpersonal life - family, professional, social, spiritual and emotional. Training in Excellence is a comprehensive training system designed to help a new sales associate become productive in a relatively short period of time and continually develop the expertise of the experienced sales associate. The program is based on a conviction that success in sales results not only from building a knowledge base through teaching and self-study, but also from the continual development and reinforcement of the appropriate skills and attitude through field training, coaching and counseling on the part of management. Numerous Agent support programs are provided by Northwood Realty Co./Better Homes and Gardens to obtain new agents and retain existing agents. Leads Management - ---------------- Less than a year in existence, the Lead Management Department, internally known as Delta, handles the day-to-day administration of the Internet site and the buyers line system and the resultant leads that are generated from Buyers Line. Wendy West manages this division with a staff of two. The professionally designed and maintained Internet site provides a complete menu of real estate information for both Buyers and Sellers as well as searching capabilities for all Northwood listings. The Company benefits from a link with BH&G's national site and are registered with 24 major Internet search engines. Like the World Wide Web, the Buyers Line provides 24-hour-a-day, 7-day-a-week advertising for all of Northwood's listings. By dialing a dedicated phone number and entering a five digit code that appears on all advertising, prospective Buyers are able to obtain instant details of specific properties, run a search by price and area and hear additional information about financing and other real estate related topics. Northwood's Buyers line is the only one of it's kind in the market. Although the Company has had Buyers line for 4 years, the true value is just now becoming evident with the recent approval of Caller ID in Pennsylvania. Caller ID allows the Company to capture the names and numbers of the public who call the Buyers Line. No other single source of marketing has provided as many quality leads. Over 700 leads are retrieved from the system and distributed to sales executives each week. In addition to the obvious value in generating business, it is a superb recruiting and retention tool. Northwood is the only real estate company in its marketplace that is able to provide the quantity and quality of leads to its sales executives. The Company sees this system, although it is still evolving, as an important aspect of future business. Elegant Homes - ------------- Elegant Homes is also a newly created division that was started by Gloria Schucolsky in April of 1996. Gloria continues to oversee the division with the help of a part-time assistant. Established to procure a larger share of the higher priced listings, the Division provides training for a selective group of qualified agents who are able to offer the Exclusive Gold Key Marketing Plan for listings over $300,000. Principal products or services and their markets. ------------------------------------------------- Real estate brokerage services for selling and purchasing real property in the Pittsburgh, Pennsylvania greater metropolitan area are offered to the general public. Distribution methods of the products or services. ------------------------------------------------- The Company has 35 offices and 710 agents to offer real estate brokerage services to the public. Status of any publicly announced new product or service. -------------------------------------------------------- Not applicable. Competition, business conditions and the small business issuer's competitive position in the industry and methods of competition. Registrant is a major participant among the firms which engage in the same line of business (real estate brokerage) which Registrant has chosen as its principal area of business concentration in Western Pennsylvania in the Pittsburgh area. Many of Registrant's competitors may have greater financial and personnel resources and technical expertise than the Registrant. The combined management experience of Registrant's officers and directors total over 150 years. Registrant has encountered, and will continue to encounter, substantial competition from Registrant's competitors. Sources and availability of raw materials and the names of principal --------------------------------------------------------------------------- suppliers. - ---------- Not Applicable. Dependence on one or a few major customers. Registrant is dependent on general public, and not on only a few major customers. Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration. The Company has trademarked the name Northwood Realty, and is reliant upon its license of the name Better Homes and Gardens under its franchise agreement. Need for any government approval of principal products or services. The Company has real estate licenses as necessary and appropriate in Pennsylvania, and in local jurisdictions. Effect of existing or probable governmental regulations on the business. Registrant intends to concentrate its immediate efforts in real estate brokerage. The effect of governmental regulations on its business should not cause Registrant to incur any delays in continuing operations, however changes in regulations may require adjustments at expense to the Company. Research and development activities. Registrant does not intend to engage in any research and development activities. Costs and effects of compliance with environmental laws. -------------------------------------------------------- None. Number of total employees and number of full-time employees. Registrant employs about 100 full time staff persons in its various offices including the executive offices in Allison Park, Pennsylvania. The Company has 710 licensed real estate agents all of whom are independent contractors but are not considered employees. They may work full time or part time. Real Property - ------------- None. Legal Proceedings - ----------------- The Company, in normal course of business, is engaged in lawsuits, as a plaintiff or defendant involving minor matters as commission disputes, employment, contract disputes on closings and other matters related to its real estate brokerage business. None of the lawsuits presently pending would have a material impact upon the Company. Submission of Matters to a Vote of Security Holders - --------------------------------------------------- Shareholders approved and made effective a 3.3856 for 1 forward split in September, 1997.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CIK0001051192_rb_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CIK0001051192_rb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..de0a01b90e7ffbfa5b9ff3a73a5366e33752e13d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CIK0001051192_rb_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN TERMS RELATING TO THE OIL AND GAS BUSINESS ARE DEFINED IN THE "GLOSSARY OF TERMS" SECTION OF THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, REFERENCES TO "RAM ENERGY" ARE TO RAM ENERGY, INC. AND ITS SUBSIDIARIES, AS THE CONTEXT REQUIRES, AND REFERENCES TO THE "COMPANY" ARE TO THE COMBINED OPERATIONS OF RAM ENERGY AND, UNTIL NOVEMBER 30, 1996, THE PARTNERSHIP (AS DEFINED HEREIN). UNLESS OTHERWISE INDICATED, ALL FINANCIAL AND QUANTITATIVE INFORMATION PROVIDED IN THIS PROSPECTUS ON A "PRO FORMA" BASIS GIVES EFFECT, ON THE DATE AND FOR THE PERIODS INDICATED, TO THE COMPLETION OF THE OFFERINGS AND THE APPLICATION OF THE NET PROCEEDS THEREFROM, THE COMPLETION OF THE PARTNERSHIP ACQUISITION, THE COMPLETION OF THE CARLTON ACQUISITION (AS DEFINED HEREIN) AND THE CONSUMMATION OF CERTAIN OTHER ACQUISITIONS AND DISPOSITIONS. UNLESS THE CONTEXT INDICATES OTHERWISE, THE DISCUSSION IN THIS PROSPECTUS REFLECTS A 27,000-FOR-ONE STOCK SPLIT TO BE EFFECTED IN DECEMBER 1997 AND ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE EQUITY OFFERING IS NOT EXERCISED. THE COMPANY RAM Energy is an independent oil and gas company engaged in the acquisition, development and production of oil and gas properties primarily in the mid-continent region of Oklahoma and the Texas panhandle (the "Mid-Continent Area") and in the Permian Basin of West Texas and eastern New Mexico (the "Permian Basin"). At November 30, 1997, the Company's estimated net proved reserves, on a pro forma basis, were 114.3 Bcf of natural gas and 4.3 MMBbls of oil, or 140.1 Bcfe, with a PV-10 Value of approximately $150 million and a reserve life of approximately 12 years. As of such date, on a pro forma basis, the Company operated 725 wells representing approximately 64% of its PV-10 Value, a 165-mile oil and gas gathering system and a saltwater disposal operation. The Company has grown principally through producing property acquisitions, acquiring approximately $190 million of oil and gas properties since inception, including the Carlton Acquisition. From 1989 to November 1996, the Company primarily developed and operated oil and gas properties owned jointly by RAM Energy and an institutional limited partnership (the "Partnership") managed by RAM Energy. During that eight-year period, the Company drilled 245 oil and gas wells with a 96% success rate. The Partnership distributed a substantial portion of the net cash flows from these properties to its partners and the Company did not invest significantly in its asset base. Management believes that the Partnership's business strategy allowed the Company's properties to remain under-developed and that these properties contain significant potential for the addition of reserves and production through accelerated development and exploration activities. In November 1996, RAM Energy acquired the limited partner's interest in the Partnership (the "Partnership Acquisition"). As a result of the Partnership Acquisition and the Carlton Acquisition, the Company is pursuing a more aggressive growth strategy. The Company has identified a substantial inventory of over 200 development and exploitation opportunities on its existing properties and on the properties included in the Carlton Acquisition. These projects generally involve moderate drilling and completion costs, as they are located primarily in intermediate depth, normally pressured reservoirs. The Company has budgeted capital spending of $20.3 million in 1998 for development projects and certain exploration activities. The Company also intends to continue to pursue attractive oil and gas acquisition opportunities. THE CARLTON ACQUISITION On December 16, 1997, the Company entered into a definitive agreement to purchase Carlton Resources Corporation ("Carlton") for $43.0 million (the "Carlton Acquisition"). Carlton is engaged in the exploration, development and production of oil and gas properties in the Mid-Continent Area and, to a lesser extent, in the Permian Basin and other oil and gas producing regions. At November 30, 1997, Carlton's estimated net proved reserves were 36.8 Bcfe. Carlton also owns and operates a 165-mile oil and gas gathering system and a saltwater disposal operation in north central Oklahoma (the "Carmen System"). The Carmen System purchases, transports and markets oil and gas production and disposes of produced water from properties owned by Carlton and other oil and gas companies. The Company believes the Carlton Acquisition provides the opportunity to improve cash flow from additional development and exploration activities, gathering and sale of oil and gas production and reduction of operating and administrative costs. STRATEGY The Company's primary goal is to maximize shareholder value by increasing reserves, production and operating cash flow through the acquisition and aggressive development of oil and gas properties. Key elements of the Company's growth strategy include the following: DEVELOP AND EXPLOIT EXISTING OIL AND GAS PROPERTIES. The Company has identified over 200 infill drilling, recompletion, enhanced recovery and workover opportunities on its properties, and plans to pursue these relatively lower-risk development activities, as well as selective exploration activities. The Company has budgeted capital spending of $20.3 million in 1998 to complete approximately 75 planned development and exploration projects, as compared to expenditures of $5.4 million to complete 28 development projects in 1997. COMPLETE SELECTIVE OIL AND GAS ACQUISITIONS. The Company seeks to acquire producing oil and gas properties that provide opportunities for reserve additions and increased cash flow through operating improvements, production enhancement and additional development and exploratory drilling. The Company believes these criteria are met in regions that are characterized by long histories of production and multiple producing oil and gas horizons, such as the Mid-Continent Area and the Permian Basin. As part of its growth strategy, the Company intends to evaluate acquisitions in other regions where it can add properties and personnel to establish concentrated operations and economies of scale. MAINTAIN AND EXPAND CORE AREAS. Over 90% of the Company's pro forma PV-10 Value as of November 30, 1997 is concentrated in the Mid-Continent Area and the Permian Basin. The Company believes that its geographic concentration and region-specific geological, engineering and production experience provide it with focused, efficient operations. The Company will continue to evaluate and pursue acquisitions and drilling opportunities in its core areas and will evaluate acquisitions that could establish additional core areas. REDUCE COSTS THROUGH OPERATING CONTROL. The Company seeks to operate a substantial number of its producing properties and, as of November 30, 1997, operated 64% of its pro forma PV-10 Value. As a result of the Carlton Acquisition, the Company will also operate an oil and gas gathering system and a saltwater disposal operation. The Company believes that operating a high percentage of its producing properties and drilling prospects within its core areas provides it with substantial control of the timing, level and incurrence of operating and drilling expenditures. THE DEBT OFFERING <TABLE> <S> <C> NOTES OFFERED..................... $100,000,000 aggregate principal amount of % Senior Notes due 2008. ISSUER............................ RAM Energy, Inc. MATURITY DATE..................... , 2008. INTEREST RATE AND PAYMENT DATES... The Notes will bear interest at a rate of % per annum. Interest on the Notes will accrue from the date of issuance thereof and will be payable semi-annually in cash in arrears on and of each year commencing , 1998. RANKING........................... The Notes will be senior unsecured obligations of RAM Energy, Inc., ranking PARI PASSU in right of payment with all existing and future senior Indebtedness of RAM Energy, Inc. and senior to all existing and future Subordinated Indebtedness of RAM Energy, Inc. The Notes and the Subsidiary Guarantees (as defined herein) will be effectively subordinated to secured Indebtedness of RAM Energy, Inc. and the Subsidiary Guarantors, including any Indebtedness under the Credit Facility (as defined herein), which is secured by liens on certain assets of the Company. At November 30, 1997, on a pro forma basis, RAM Energy, Inc. would have had $0.2 million of outstanding senior Indebtedness other than the Notes. Subject to certain limitations, RAM Energy, Inc. and the Subsidiary Guarantors may incur additional secured and unsecured Indebtedness in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." SUBSIDIARY GUARANTEES............. The Notes will be unconditionally guaranteed on a senior unsecured basis by the existing and future Subsidiary Guarantors. Each Subsidiary Guarantee will rank PARI PASSU in right of payment to all existing and future senior Indebtedness of the Subsidiary Guarantors and senior to all existing and future Subordinated Indebtedness of the Subsidiary Guarantors. OPTIONAL REDEMPTION............... The Notes will be redeemable at the option of RAM Energy, Inc., in whole or in part, at any time on or after , 2003, at the redemption prices set forth herein, together with accrued and unpaid interest to the date of redemption. In the event RAM Energy, Inc. consummates a Public Equity Offering on or prior to , 2001, RAM Energy, Inc. has the option to use all or a portion of the proceeds from such offering to redeem up to $ million aggregate principal amount of the Notes at a redemption price equal to % of the principal amount thereof, together with accrued and unpaid interest to the date of redemption, provided that at least $ million aggregate principal amount of the Notes remains outstanding after such redemption. </TABLE> <TABLE> <S> <C> CHANGE OF CONTROL................. Upon the occurrence of a Change of Control, RAM Energy, Inc. will be required to offer to repurchase the Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest to the date of repurchase. CERTAIN COVENANTS................. The indenture under which the Notes will be issued (the "Indenture") will contain certain covenants including, but not limited to, covenants that limit (i) incurrence of additional indebtedness and issuances of disqualified capital stock, (ii) restricted payments, (iii) dividends and other payments affecting subsidiaries, (iv) transactions with affiliates, (v) asset sales, (vi) liens, (vii) lines of business and (viii) merger, sale or consolidation. The Indenture will also contain covenants regarding the designation of Unrestricted Subsidiaries (as defined herein), ownership of Subsidiary Guarantors and issuance of reports. EQUITY OFFERING................... Concurrently with the Debt Offering, RAM Energy, Inc. is offering 2,300,000 shares (2,780,000 shares if the underwriters' over-allotment option is fully exercised), and certain Selling Stockholders are offering 900,000 shares, of Common Stock for sale to the public. RAM Energy, Inc. will not receive any proceeds from the sale of the Common Stock by the Selling Stockholders in the Equity Offering. The closings of the Debt Offering and the Equity Offering are each conditioned upon the simultaneous closing of the other and upon the simultaneous closing of the Carlton Acquisition. USE OF PROCEEDS................... RAM Energy, Inc. plans to use the net proceeds from the Offerings primarily to (i) repay indebtedness outstanding under the Credit Facility, (ii) acquire the stock and repay certain indebtedness of Carlton in connection with the Carlton Acquisition and (iii) provide additional working capital for general corporate purposes, including the acquisition and development of oil and gas properties. See "Use of Proceeds." </TABLE> For a more detailed discussion of the terms of the Notes, see "Description of Notes." RISK FACTORS For a discussion of certain factors that should be considered by prospective purchasers in evaluating an investment in the Notes, see "Risk Factors." SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following summary historical and pro forma financial data were derived from the financial statements of the Company and the Partnership, including the notes thereto (the "Financial Statements"), as well as the selected historical and pro forma financial and operating information included elsewhere in this Prospectus. The pro forma financial data are based on the assumptions and adjustments described in the pro forma combined financial information and do not purport to present the results of operations and financial position of the Company and the Partnership as if the Offerings and the application of the net proceeds therefrom, the Partnership Acquisition, the Carlton Acquisition and certain other acquisitions and dispositions had actually occurred on such dates, nor are they necessarily indicative of the results of operations that may be achieved in the future. The information set forth below should be read in conjunction with "Selected Historical and Pro Forma Financial Information and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements included elsewhere herein. <TABLE> <CAPTION> PARTNERSHIP COMPANY ----------------------------------- ---------------------- YEAR ENDED ELEVEN YEAR ENDED PARTNERSHIP COMPANY ----------- --------- NINE MONTHS DECEMBER 31, ENDED SEPTEMBER 30, DECEMBER 31, MONTHS ENDED ---------------------- ---------------------- -------------------- NOVEMBER 30, PRO FORMA 1994 1995 1996(1) 1996 1996(2) 1996 1997 --------- --------- ------------- --------- ----------- ----------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Operating revenues: Oil and gas.......................... $ 24,481 $ 21,802 $ 23,456 $ 3,275 $ 31,900 $ 18,744 $ 16,819 Gathering system..................... -- -- -- -- 14,688 -- -- Management fees(3)................... -- -- -- 1,482 22 -- -- Operator overhead fees(3)............ -- -- -- 1,343 -- -- -- Consulting fees(3)................... -- -- -- 153 -- -- -- Other................................ 60 139 7 568 1,356 -- 85 --------- --------- ------------- --------- ----------- ----------- --------- Total operating revenues........... 24,541 21,941 23,463 6,820 47,966 18,744 16,905 Operating expenses: Oil and gas production............... 9,839 9,902 7,609 827 10,856 6,153 4,795 Cost of oil and gas purchased........ -- -- -- -- 6,657 -- -- Gathering system..................... -- -- -- -- 1,177 -- -- Depreciation and amortization........ 11,608 9,808 5,114 990 11,954 4,160 5,268 Writedown of oil and gas properties and equipment...................... 8,700 -- -- -- -- -- -- Management fees(3)................... 1,555 1,606 1,482 -- -- 1,210 -- Operator overhead fees(3)............ 1,746 1,686 1,343 -- -- 1,108 -- General and administrative........... 676 502 378 4,164 3,872 240 3,325 --------- --------- ------------- --------- ----------- ----------- --------- Total operating expenses........... 34,124 23,504 15,926 5,981 34,516 12,872 13,389 --------- --------- ------------- --------- ----------- ----------- --------- Operating income (loss)................ (9,583) (1,563) 7,537 839 13,450 5,872 3,516 Other income (expense): Interest expense..................... (587) (809) (564) (542) (10,600) (484) (3,787) Interest income...................... 41 59 114 29 536 91 43 Equity in income of the Partnership........................ -- -- -- 71 71 -- -- Minority interest in the Partnership........................ -- -- -- 10 10 -- (15) --------- --------- ------------- --------- ----------- ----------- --------- Income (loss) before income taxes...... (10,129) (2,313) 7,087 408 3,467 5,480 (243) Income tax provision (benefit)......... -- -- -- -- 1,317 -- -- --------- --------- ------------- --------- ----------- ----------- --------- Net income (loss)...................... $ (10,129) $ (2,313) $ 7,087 $ 408 $ 2,150 $ 5,480 $ (243) --------- --------- ------------- --------- ----------- ----------- --------- --------- --------- ------------- --------- ----------- ----------- --------- Net income (loss) per common share..... $ 0.43 ----------- ----------- Weighted average common shares outstanding (in thousands)........... 5,027 ----------- ----------- OTHER FINANCIAL DATA: Cash flow from operations(4)........... $ 10,178 $ 7,495 $ 12,201 $ 1,451 $ 14,157 $ 9,640 $ 5,120 EBITDA(5).............................. 10,766 8,304 12,765 1,940 26,021 10,124 8,812 Capital expenditures................... 4,325 5,380 3,310 250 -- 1,950 14,692 Ratio of: EBITDA to interest expense........... 2.5x Long-term debt to EBITDA(6).......... Net debt to EBITDA(6)................ <CAPTION> PRO FORMA 1997(2) ----------- <S> <C> INCOME STATEMENT DATA: Operating revenues: Oil and gas.......................... $ 21,352 Gathering system..................... 7,468 Management fees(3)................... 8 Operator overhead fees(3)............ -- Consulting fees(3)................... -- Other................................ 268 ----------- Total operating revenues........... 29,096 Operating expenses: Oil and gas production............... 7,226 Cost of oil and gas purchased........ 4,785 Gathering system..................... 569 Depreciation and amortization........ 7,750 Writedown of oil and gas properties and equipment...................... -- Management fees(3)................... Operator overhead fees(3)............ -- General and administrative........... 2,806 ----------- Total operating expenses........... 23,136 ----------- Operating income (loss)................ 5,960 Other income (expense): Interest expense..................... (7,951) Interest income...................... 89 Equity in income of the Partnership........................ -- Minority interest in the Partnership........................ (15) ----------- Income (loss) before income taxes...... (1,917) Income tax provision (benefit)......... (728) ----------- Net income (loss)...................... $ (1,189) ----------- ----------- Net income (loss) per common share..... $ (0.24) ----------- ----------- Weighted average common shares outstanding (in thousands)........... 5,027 ----------- ----------- OTHER FINANCIAL DATA: Cash flow from operations(4)........... $ 6,656 EBITDA(5).............................. 13,784 Capital expenditures................... -- Ratio of: EBITDA to interest expense........... 1.7x Long-term debt to EBITDA(6).......... 5.5x Net debt to EBITDA(6)................ 4.6x </TABLE> <TABLE> <CAPTION> COMPANY ------------------------- AT SEPTEMBER 30, 1997 ------------------------- ACTUAL AS ADJUSTED(7) --------- -------------- (DOLLARS IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents............................................................. $ 2,031 $ 16,293 Net property and equipment............................................................ 60,100 124,576 Total assets.......................................................................... 70,344 155,238 Long-term debt, including current portion............................................. 62,215 100,215 Stockholders' equity (deficit)(8)..................................................... (1,563) 20,967 </TABLE> - ------------------------------ (1) Partnership operations were effectively terminated on a stand-alone basis on November 30, 1996 upon consummation of the Partnership Acquisition. (2) Pro forma to reflect the Offerings and the application of the net proceeds therefrom, the Partnership Acquisition, the Carlton Acquisition and certain other acquisitions and dispositions as if they had occurred on January 1, 1996. (3) Management fees and operator overhead fees were charged to the Partnership by RAM Energy for all periods to and including the eleven months ended November 30, 1996. (4) Calculated before changes in operating assets and liabilities. (5) EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization and writedown of oil and gas properties and equipment. EBITDA is not a measure of cash flow as determined by generally accepted accounting principles ("GAAP"). EBITDA should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with GAAP or as an indicator of a company's operating performance or liquidity. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as historic costs of depreciable assets, none of which are components of EBITDA. The Company's computation of EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that EBITDA is a widely followed measure of operating performance and may also be used by investors to measure the Company's ability to meet future debt service requirements, if any. (6) The ratio of long-term debt to EBITDA is computed on the basis of annualized EBITDA for periods shorter than one year. The ratio of net debt to EBITDA is the ratio of long-term debt, including the current portion thereof, less cash and cash equivalents, to EBITDA, annualized for periods shorter than one year. (7) Pro forma to reflect the Offerings and the application of the net proceeds therefrom and the Carlton Acquisition as if they had occurred on September 30, 1997. (8) Before giving effect to the redemption of all outstanding shares (77,714 shares) of RAM Energy, Inc.'s Series A Preferred Stock at a redemption price of $10.00 per share and the redemption of all outstanding shares (69,652 shares) of its Series B Preferred Stock at a redemption price of $10.00 per share. See "Management -- Certain Transactions." SUMMARY HISTORICAL AND PRO FORMA RESERVE AND OPERATING DATA The following tables set forth summary information with respect to the estimated proved oil and gas reserves and certain operating data of the Company and the Partnership at or for the periods shown and on a pro forma basis. See "Risk Factors," "Selected Historical and Pro Forma Financial Information and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Reserve Engineers" and the Financial Statements included elsewhere in this Prospectus. <TABLE> <CAPTION> PARTNERSHIP COMPANY COMPANY -------------------- ----------- ---------------------- NOVEMBER 30, DECEMBER 31, ---------------------- --------------------------------- PRO FORMA RESERVE DATA: 1994 1995 1996 1997 1997(1) --------- --------- ----------- --------- ----------- <S> <C> <C> <C> <C> <C> Proved reserves: Natural gas (MMcf)................................................. 75,435 68,920 82,885 83,006 114,323 Oil and condensate (MBbls)......................................... 3,770 3,333 4,282 3,376 4,295 Total (MMcfe)...................................................... 98,055 88,918 108,577 103,263 140,092 Proved developed reserves: Natural gas (MMcf)................................................. 56,792 51,664 62,319 58,717 78,399 Oil and condensate (MBbls)......................................... 2,797 2,714 3,511 2,569 3,182 Total (MMcfe)...................................................... 73,574 67,948 83,385 74,128 97,492 PV-10 Value (in thousands)(2)........................................ $ 56,480 $ 63,913 $ 160,930 $ 116,186 $ 150,403 </TABLE> - ------------------------------ (1) Pro forma to reflect the Carlton Acquisition as if it had occurred on November 30, 1997. (2) PV-10 Value represents the present value of estimated future net revenues before income tax discounted at 10%, using prices in effect at the end of the respective periods presented and including the effects of hedging activities. In accordance with applicable requirements of the Securities and Exchange Commission (the "Commission"), estimates of the Company's proved reserves and future net revenues are made using oil and gas sales prices estimated to be in effect as of the date of such reserve estimates and are held constant throughout the life of the properties (except to the extent a contract specifically provides for escalation). The average prices used in calculating PV-10 Value as of November 30, 1997 were $3.00 per Mcf of natural gas and $17.99 per Bbl of oil, compared to weighted average prices used as of December 31, 1996 of $3.78 per Mcf of natural gas and $23.88 per Bbl of oil. The average prices used in calculating the pro forma PV-10 Value as of November 30, 1997 were $3.01 per Mcf of natural gas and $17.81 per Bbl of oil. <TABLE> <CAPTION> PARTNERSHIP COMPANY ------------- PARTNERSHIP ---------------------------- ----------------------------------------------- NINE MONTHS YEAR ENDED ENDED YEAR ENDED DECEMBER 31, ELEVEN MONTHS DECEMBER 31, SEPTEMBER 30, ENDED NOVEMBER ---------------------------- ------------- ---------------------------- 30, PRO FORMA OPERATING DATA: 1994 1995 1996(1) 1996 1996(2) 1996 ------------- ------------- ----------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> <C> <C> Production volumes: Natural gas (MMcf)............ 9,403 9,700 7,594 692 10,626 5,933 Oil and condensate (MBbls).... 534 463 387 38 487 313 Total (MMcfe)................. 12,607 12,478 9,916 920 13,547 7,811 Average realized prices(3): Natural gas (per Mcf)......... $ 1.71 $ 1.44 $ 2.04 $ 3.44 $ 2.07 $ 2.13 Oil and condensate (per Bbl).. 15.75 16.86 20.59 23.49 20.35 19.52 Per Mcfe...................... 1.94 1.75 2.37 3.56 2.36 2.40 Expenses (per Mcfe): Lease operating (including production taxes)........... 0.78 0.79 0.77 0.90 0.80 0.79 Depreciation and amortization................ 0.92 0.79 0.52 1.08 0.88 0.53 General and administrative(4)........... 0.32 0.30 0.32 1.29 0.29 0.33 <CAPTION> COMPANY ---------------------------- PRO FORMA OPERATING DATA: 1997 1997(2) ------------- ------------- <S> <C> <C> Production volumes: Natural gas (MMcf)............ 5,245 6,710 Oil and condensate (MBbls).... 236 306 Total (MMcfe)................. 6,661 8,544 Average realized prices(3): Natural gas (per Mcf)......... $ 2.32 $ 2.31 Oil and condensate (per Bbl).. 19.71 19.12 Per Mcfe...................... 2.53 2.50 Expenses (per Mcfe): Lease operating (including production taxes)........... 0.72 0.85 Depreciation and amortization................ 0.79 0.91 General and administrative(4)........... 0.50 0.33 </TABLE> - ------------------------------ (1) Partnership operations were effectively terminated on a stand-alone basis on November 30, 1996 upon consummation of the Partnership Acquisition. (2) Pro forma to reflect the Offerings and the application of the net proceeds therefrom, the Partnership Acquisition, the Carlton Acquisition and certain other acquisitions and dispositions as if they had occurred on January 1, 1996. (3) Reflects the actual realized prices received by the Company, including the results of the Company's hedging activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CLWT_euro-tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CLWT_euro-tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b93c4ba2095a73b236c17f0485507c1bcc139e3a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CLWT_euro-tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including financial statements and notes thereto appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Except as otherwise indicated herein, the information contained in this Prospectus gives no effect to the exercise of (i) the Overallotment Option, (ii) the Underwriter's Warrants, (iii) Warrants offered hereby or issued to private investors, or (iv) options granted under the Company's stock option plan and other options which may be granted by the Company. THE COMPANY Euro Tech Holdings Company Limited, a British Virgin Islands company, will acquire upon the closing of this Offering all of the issued and outstanding capital stock of Euro Tech (Far East) Ltd. ("Far East"), a Hong Kong corporation (the "Acquisition") and Far East will become a wholly owned subsidiary of the Company. Unless the context otherwise requires, or it is otherwise stated, all references to the "Company" include Far East, giving effect to the Acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Transactions." The Company is a distributor, in Hong Kong and the People's Republic of China (the "PRC" or "China"), of process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems used in the treatment, analysis and testing of water and waste water. The Company distributes products to approximately 400 regular customers including sub-distributors located in Hong Kong, the PRC and Macau including the Hong Kong Environmental Protection Department, the Beijing Hydrology station, China Light & Power Co., Ltd., Hong Kong Electric Co., Ltd., and the Kowloon-Canton Railway Corporation. Far East was established in 1971 as a subsidiary of a United Kingdom publicly traded company to market and distribute its parent's industrial control equipment in Hong Kong and Southeast Asia and expanded its activities into the PRC in 1973. In the early 1980's, Far East began the distribution of high technology equipment manufactured in the United States, Europe and Japan into the PRC, in addition to its distribution activities on behalf of its parent. In 1988, the activities of the parent and Far East were separated into Far East and another entity. During Far East's fiscal years ended October 31, 1991 ("Fiscal 1991"), October 31, 1992 ("Fiscal 1992") and December 31, 1993 ("Fiscal 1993"), Far East experienced a gradual increase in sales revenues. During its fiscal years ended December 31, 1994 ("Fiscal 1994") and 1995 ("Fiscal 1995"), Far East's sales revenues remained substantially unchanged. The Company believes that Far East's lack of sales growth during Fiscal 1994 and Fiscal 1995 resulted from the PRC's economic austerity measures undertaken to dampen the rate of inflation in the PRC. As a result of these measures, cost became an overriding issue with many of Far East's PRC customers and, in response, Far East reduced its sales prices and, therefore, its profit margins to remain competitive with PRC manufacturers even though the products distributed by Far East were believed by it to be of better quality. During the six month period ended June 30, 1996 ("Six Months 1996"), Far East also began streamlining its operations and focusing its efforts on its current product lines by disposing of three of its subsidiaries, which had not been successful. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Principal Shareholders" and "Certain Transactions." The Company believes that because of the increased expansion of industry and general business growth in the PRC during the last five years there is a strong and increasing demand for the products distributed by it in the PRC. The Company further believes that in years to come the need for the products distributed by it will grow as a result of governmental regulations of environmental pollution and based upon demands of the PRC's population for a healthy and safer environment including cleaner water. The Company distributes products manufactured by a substantial number of American, European and Japanese corporations, including Wallace & Tiernan, Pacific Pty. Ltd. ("Wallace"), Hach Company ("Hach"), Hioki E.E. Corporation ("Hioki") and Finnigan Corporation ("Finnigan"), which are the Company's largest suppliers, with purchases from them accounting for approximately 11%, 7%, 7% and 4%, SUBJECT TO COMPLETION, DATED MARCH 11, 1997 EURO TECH HOLDINGS COMPANY LIMITED 600,000 SHARES OF COMMON STOCK AND 600,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS Euro Tech Holdings Company Limited, a British Virgin Island company (the "Company") hereby offers 600,000 shares of common stock, $.01 par value (the "Common Stock" or "Common Share(s)") of the Company and 600,000 Redeemable Common Stock Purchase Warrants (the "Public Warrants"). The Common Stock and the Public Warrants offered hereby (sometimes hereinafter collectively referred to as the "Securities") will be separately tradeable immediately upon issuance and may be purchased separately. Investors will not be required to purchase shares of Common Stock and Public Warrants together or in any particular ratio. Each Public Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $5.50 (the "Exercise Price"), subject to adjustment, commencing one year after the date of this Prospectus (the "Effective Date") until the close of business on the sixth year after the Effective Date, provided however that prior to the second year after the Effective Date, the Public Warrants will be exercisable only if May Davis Group, Inc. (the "Underwriter") has consented in writing to all of the Public Warrants being exercisable. The Public Warrants are redeemable, in whole or in part, by the Company at a price of $.10 per Public Warrant, at any time that they are exercisable, and prior to their expiration, provided that (i) prior written notice of not less than thirty days is given to the Warrantholders, (ii) the average closing bid price of the Company's Common Stock for the twenty consecutive trading days immediately prior to the date on which the notice of redemption is given, shall have exceeded $8.50 per share, and (iii) Warrantholders shall have exercise rights until the close of business the day preceding the date fixed for redemption if the Public Warrants are then exercisable. Prior to this offering (the "Offering" or the "Public Offering"), there has been no public market for the Company's Common Stock and Public Warrants, and there can be no assurance that such a public market will develop or be sustained after the completion of the Offering. The Offering price of the Common Stock and the exercise price and other terms of the Public Warrants were established by negotiations between the Company and the Underwriter and do not bear any direct relationship to the Company's assets, book value, results of operations or any other criteria of value. The Company has applied for the listing of the Common Stock and Public Warrants on the NASDAQ Small Cap Market ("NASDAQ") under the symbols "CLWTF" and "CLWWF", respectively. The closing of the Public Offering is subject to the simultaneous acquisition by the Company of Euro Tech (Far East) Ltd.. Simultaneously, with the Public Offering, certain selling securityholders (the "Selling Securityholders") are offering for resale 930,000 Warrants purchased by such Selling Securityholders as private investors in a recent private placement of said securities (the "Private Warrants") and 930,000 shares of the Company's Common Stock underlying the Private Warrants. To permit such resale, the Company has included said Private Warrants and the shares of the Company's Common Stock underlying said Private Warrants in the Registration Statement of which this Prospectus forms a part and are to be offered by the Selling Securityholders by a separate prospectus also included therein. The Underwriter has no agreements or understandings with any of the Selling Securityholders with respect to the release of the securities prior to 12 months from the date of this prospectus. The Selling Securityholders have entered into an unconditional twelve month lock-up agreement pursuant to which they cannot sell the Private Warrants or the shares of Common Stock underlying said warrants. The NASD has rendered an opinion only with regard to the underwriting terms and arrangements in connection with the primary offering by the Company of 600,000 shares of Common Stock and 600,000 Public Warrants. Therefore no NASD member may participate in the offering of the 930,000 Private Warrants or the 930,000 shares of Common Stock issuable on the exercise of the Private Warrants to be made by the Selling Securityholders without submitting the terms and arrangements to the NASD for review and approval. See "Underwriting." The resale of the securities of the Selling Securityholders are subject to Prospectus delivery and other requirements of the Security Act of 1933 as amended. Sales of such securities or the potential of such sales at any time may have an adverse effect on the market prices of the securities offered hereby. See "Concurrent Registration of Securities." The terms of the Private Warrants are identical to the Public Warrants, and the Private Warrants and the Public Warrants are hereinafter collectively referred to as the "Warrants." THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS," COMMENCING ON PAGE 9 AND "DILUTION." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- <TABLE> <S> <C> <C> <C> - -------------------------------------------------------------------------------- UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1) COMPANY(2) - ---------------------------------------------------------------------------------------------------------- Per Share.................................. $5.00 $.50 $4.50 - ---------------------------------------------------------------------------------------------------------- Per Warrant................................ $.15 $.015 $.135 - ---------------------------------------------------------------------------------------------------------- Total(3)................................... $3,090,000.00 $309,000.00 $2,781,000.00 ========================================================================================================== </TABLE> (footnotes on following page) ------------------------------------------- MAY DAVIS GROUP, INC. ------------------------------------------- The date of this Prospectus is , 1997. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. respectively, of the Company's sales during its fiscal year ended December 31, 1995 ("Fiscal 1995") and 9%, 10%, 10% and 23%, respectively, of the Company's sales during the first six months of the Company's fiscal year ended December 31, 1996 ("Six Months 1996"). Products distributed by the Company include, advanced water treatment and testing equipment (including chlorination equipment) laboratory instruments, test kits and related supplies such as spectrometers, colorimeters, chemical reagent dispensers, analyzers, turbidimeters and pH controllers. The Company also distributes general testing and telecommunications testing equipment, cardiac catheterization systems, defribrillators, indoor pay telephones, and digital and analogue recorders. See "Business." The Company distributes products through its headquarters located in Hong Kong and its regional sales offices located in Beijing, Shanghai and Guangzhou and through non-exclusive arrangements with independent sub-distributors. During Fiscal 1995 and Six Months 1996, no single customer accounted for more than 5% of the Company's sales and each of its nine sub-distributors accounted for less than 2% of the Company's sales during Fiscal 1995 and Six Months 1996. See "Business." The Company intends to use a substantial portion of the net proceeds of the Public Offering to establish an operation to assemble products of the kind now distributed by the Company, initially certain water related testing, monitoring and treatment equipment, and if successful in assembling such products, to expand its product assembly operations to other products of the kind now distributed by the Company, pursuant to an agreement to be entered into with a PRC based entity, such as the Shanghai Thermometric Instrument Plant ("STIP"), and to expand its marketing efforts by, among other things, opening additional regional sales offices in the PRC. The Company believes that by assembling products that it distributes, gross profits margins, revenues and net income will increase. Similarly, the Company believes that by expanding its regional sales efforts in the PRC, revenues and net income will be enhanced. See "Use of Proceeds." The Company has recently reached a preliminary agreement with STIP pursuant to which STIP will provide space and technical expertise necessary to enable the Company to assemble in the PRC such products. It is presently contemplated that the Company will import components, assemble the components into finished product and then distribute the products through the Company's distribution network. There can be no assurance that the Company will successfully complete an agreement with STIP or any other similar entity or that the Company's expansion efforts will be successful. See "Business." During the Company's Fiscal 1995 and Six Months 1996, the Company had sales of approximately $13,667,000 and $6,973,000, respectively, and net income of approximately $79,000 and $232,000, respectively. There can be no assurance that the recent levels of the Company's revenues or net income will continue to be achieved in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of the Company and Far East and the notes thereto. The Company maintains an executive office at 18/F Gee Chang Hong Centre, 65 Wong Chuk Hang Road, Hong Kong, and its telephone number at that address is 011-852-2814-0311. The Company's registered office in the British Virgin Islands is located at TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands, and its telephone number is (809) 494-5296. [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS] respectively, of the Company's sales during its fiscal year ended December 31, 1995 ("Fiscal 1995") and 9%, 10%, 10% and 23%, respectively, of the Company's sales during the first six months of the Company's fiscal year ended December 31, 1996 ("Six Months 1996"). Products distributed by the Company include, advanced water treatment and testing equipment (including chlorination equipment) laboratory instruments, test kits and related supplies such as spectrometers, colorimeters, chemical reagent dispensers, analyzers, turbidimeters and pH controllers. The Company also distributes general testing and telecommunications testing equipment, cardiac catheterization systems, defribrillators, indoor pay telephones, and digital and analogue recorders. See "Business." The Company distributes products through its headquarters located in Hong Kong and its regional sales offices located in Beijing, Shanghai and Guangzhou and through non-exclusive arrangements with independent sub-distributors. During Fiscal 1995 and Six Months 1996, no single customer accounted for more than 5% of the Company's sales and each of its nine sub-distributors accounted for less than 2% of the Company's sales during Fiscal 1995 and Six Months 1996. See "Business." The Company intends to use a substantial portion of the net proceeds of the Public Offering to establish an operation to assemble products of the kind now distributed by the Company, initially certain water related testing, monitoring and treatment equipment, and if successful in assembling such products, to expand its product assembly operations to other products of the kind now distributed by the Company, pursuant to an agreement to be entered into with a PRC based entity, such as the Shanghai Thermometric Instrument Plant ("STIP"), and to expand its marketing efforts by, among other things, opening additional regional sales offices in the PRC. The Company believes that by assembling products that it distributes, gross profits margins, revenues and net income will increase. Similarly, the Company believes that by expanding its regional sales efforts in the PRC, revenues and net income will be enhanced. See "Use of Proceeds." The Company has recently reached a preliminary agreement with STIP pursuant to which STIP will provide space and technical expertise necessary to enable the Company to assemble in the PRC such products. It is presently contemplated that the Company will import components, assemble the components into finished product and then distribute the products through the Company's distribution network. There can be no assurance that the Company will successfully complete an agreement with STIP or any other similar entity or that the Company's expansion efforts will be successful. See "Business."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/CNLHN_connecticu_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/CNLHN_connecticu_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7a7b61ff71debd91b91afb50724989837299b0e9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/CNLHN_connecticu_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following material is qualified in its entirety by, and should be considered in conjunction with, the detailed information and financial statements appearing elsewhere in this Prospectus. The Company The Company, a Connecticut corporation organized in 1907, is a wholly-owned subsidiary of NU. The Company is the largest electric utility in Connecticut and is engaged principally in the production, purchase, transmission, distribution and sale of electricity at retail for residential, commercial, industrial and municipal purposes to approximately 1.1 million customers in 149 cities and towns in Connecticut. The Exchange Offer Old Bonds............... The Old Bonds were sold by the Company to the Initial Purchasers on June 26, 1997 (the Issue Date) pursuant to an exemption from or in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. The Initial Purchasers resold the Old Bonds to "qualified institutional buyers," as defined in Rule 144A under the Securities Act. The Registration Statement of which this Prospectus is a part relates only to the registration of the New Bonds in exchange for the Old Bonds. Registration Rights..... The Company and the Initial Purchasers entered into a Registration Rights Agreement, dated as of June 19, 1997 (Registration Rights Agreement), which grants the holders of the Old Bonds certain exchange and registration rights. The New Bonds are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement. The Exchange Offer...... Up to $200,000,000 aggregate principal amount of the New Bonds are being offered in exchange for a like principal amount of the Old Bonds. No accrued interest will be paid on the Old Bonds upon the exchange thereof, but interest will accrue on the New Bonds from June 1, 1997. Holders of the Old Bonds to whom this Exchange Offer is made have special rights under the Registration Rights Agreement that will terminate upon the consummation of the Exchange Offer. For procedures for tendering the Old Bonds, see "The Exchange Offer." Based on interpretations by the staff of the Commission set forth in certain no-action letters issued by the Commission to third parties, the Company believes that New Bonds issued pursuant to the Exchange Offer in exchange for Old Bonds may be offered for resale, resold and otherwise offered by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and (except as set forth below) the prospectus delivery provisions of the Securities Act, provided that such New Bonds are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Bonds. Both (i) Broker-dealers and (ii) holders of Old Bonds who are considering tendering Old Bonds in order to participate in the distribution of the New Bonds should see "Risk Factors--Consequences of Failure to Exchange,""The Exchange Offer--Purpose and Effect of the Exchange Offer" and "--Resales of the New Bonds" and "Plan of Distribution" for information concerning certain requirements that may apply to their activities. New Bonds............... The New Bonds are identical in all material respects to the Old Bonds, except for the elimination of certain transfer restrictions, registration rights and interest rate provisions. The New Bonds will be represented by a global security registered in the name of The Depository Trust Company (DTC) or its nominee. Book- entry interests in the global security will be shown on, and transfers thereof will be effected only through, records maintained by DTC or its nominee. Conditions of the Exchange Offer......... The Exchange Offer is not conditioned upon any minimum principal amount of Old Bonds being tendered for exchange except that Old Bonds may be tendered only in integral multiples of US$1,000 principal amount. Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Bonds in exchange for, any Old Bonds and may terminate or amend the Exchange Offer, at any time prior to the consummation of the Exchange Offer if: (i) the Exchange Offer would violate applicable law or any applicable interpretation of the staff of the Commission, (ii) an action or proceeding is instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Company to proceed with the Exchange Offer or a material adverse development has occurred in any existing action or proceeding with respect to the Company, or (iii) all governmental approvals which the Company deems necessary for the consummation of the Exchange Offer have not been obtained. See "The Exchange Offer-- Certain Conditions to the Exchange Offer." Tenders; Expiration Date; Withdrawal....... The Exchange Offer will expire at 5:00 p.m., New York City time, on September 30, 1997, or such later date and time to which it is extended (as so extended, the Expiration Date). The tender of Old Bonds pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Bonds not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after expiration or termination of the Exchange Offer. Procedures for Tendering Old Bonds.............. Each holder of Old Bonds desiring to accept the Exchange Offer must complete and sign the Letter of Transmittal in accordance with the instructions contained herein and therein, and mail or deliver the Letter of Transmittal, together with the Old Bonds and any other required documents to the Exchange Agent (as defined herein) at the address set forth herein and in the Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the New Bonds acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Bonds, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such New Bonds and that neither the holder nor any such other person is an "affiliate" of the Company, as defined under Rule 405 of the Securities Act. Consequences of Failure to Exchange............ Holders of Old Bonds eligible to participate who do not exchange their Old Bonds for New Bonds pursuant to the Exchange Offer will not have any further registration rights and such Old Bonds will continue to be subject to the restrictions on transfer as set forth in the legend thereon as a consequence of the issuance of the Old Bonds pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Bonds under the Securities Act. Accordingly, the market for such Old Bonds could be highly illiquid. See "Risk Factors-Consequences of Failure to Exchange." Guaranteed Delivery Procedures............. Holders of Old Bonds who wish to tender their Old Bonds and (i) whose Old Bonds are not immediately available or (ii) who cannot deliver their Old Bonds, the Letter of Transmittal and any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfers) prior to 5:00 p.m., New York City time, on the Expiration Date, must tender their Old Bonds according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures." Acceptance of Old Bonds and Delivery of New Bonds.................. Subject to the satisfaction or waiver of all conditions of the Exchange Offer, the Company will accept for exchange any and all Old Bonds that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Bonds issued pursuant to the Exchange Offer will be delivered in exchange for the applicable Old Bonds accepted in the Exchange Offer promptly following the Expiration Date. See "The Exchange Offer--Acceptance of Old Bonds for Exchange; Delivery of New Bonds." Federal Income Tax Consequences........... The exchange pursuant to the Exchange Offer will not result in any income, gain or loss to the holders of the Bonds or the Company for federal income tax purposes. See "Certain Federal Income Tax Considerations." Use of Proceeds......... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent.......... Bankers Trust Company has agreed to act as Exchange Agent for the Exchange Offer. Summary Description of the New Bonds Interest Rate........... 7 3/4% per annum. Interest Payment Dates.. June 1 and December 1, commencing December 1, 1997 Maturity................ June 1, 2002. Security................ The New Bonds will be secured by the Indenture (as defined herein), which constitutes a first mortgage lien (subject to liens permitted by the Indenture, including liens and encumbrances existing at the time of acquisition by the Company) on substantially all of the Company's physical property and franchises, including the Company's generating stations (but not including the Company's interest in the plants of the four regional nuclear generating companies described herein) and its transmission and distribution facilities. Optional Redemption..... The New Bonds will be redeemable at any time on not less than 30 days notice by the Company, in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount thereof, and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, plus accrued interest to the date of redemption, if any. See "Description of the New Bonds--Redemption Provisions." Sinking Fund Redemption. There will be no sinking fund requirements. Form and Denomination... The New Bonds will be issued in fully registered form without coupons in denominations of US$1,000 and integral multiples thereof. The New Bonds will be represented by a single permanent Global Security, registered in the name of Cede & Co., as nominee of DTC. See "Book-Entry; Delivery and Form." Use of Proceeds......... The Company will receive no cash proceeds from the issuance of the New Bonds. The net proceeds from the sale of the Old Bonds were or will be used for the repayment of the Company's short term debt incurred for general working capital purposes, including costs associated with the current outages at Millstone. For additional information regarding the New Bonds, see "Description of the New Bonds." Risk Factors See "Risk Factors" beginning on page 13 for a discussion of certain risks that should be considered by holders of Old Bonds in evaluating whether to tender the Old Bonds. Summary Consolidated Financial Data (thousands, except percentages and ratios) <TABLE> <CAPTION> 12 Months Ended June 30, 1997 Year Ended December 31, -------------- ---------------------------------- (unaudited) 1996 1995 1994 ---------- ---------- ---------- <S> <C> <C> <C> <C> Income Summary: Operating Revenues.............. $2,394,854 $2,397,460 $2,387,069 $2,328,052 Operating (Loss) Income......... (55,840) 29,773 324,026 286,948 Net (Loss) Income.............. (172,908) (80,237) 205,216 198,288 Total Assets (end of period).. $6,399,072 $6,244,036 $6,045,631 $6,217,457 </TABLE> <TABLE> <CAPTION> As of June 30, 1997 ---------------------------------------------- (unaudited) As % of Adjusted Actual Adjusted (a) Capitalization ---------- ------------ -------------- <S> <C> <C> <C> Capitalization Summary: Long-Term Debt (including current maturities)............................. $2,044,077 $2,044,077 57.66% Preferred Stock Subject to Mandatory Redemption.............................. 155,000 155,000 4.37% Preferred Stock Not Subject to Mandatory Redemption.................... 116,200 116,200 3.28% Common Stockholder's Equity.............. 1,230,014 1,230,014 34.69% ========== ============ ============== Total Capitalization $3,545,291 $3,545,291 100.00% ========== ============ =============== </TABLE> <TABLE> <CAPTION> 12 Months Ended June 30, 1997 Year Ended December 31, --------------- ------------------------------------------------------------ (unaudited) 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Ratio of Earnings to Fixed Charges (c)........................... (0.67)(b) 0.30(b) 3.64 3.65 2.71 2.96 </TABLE> (a) Because the New Bonds will be exchanged for issued and outstanding Old Bonds, the New Bonds will not increase the amount of the Company's outstanding total long-term debt. (b) For the twelve-month periods ended December 31, 1996 and June 30, 1997, the ratio of earnings to fixed charges reflects the effects of additional costs, including replacement power costs, associated with the outages at the three Millstone units. For such periods, earnings were inadequate to cover fixed charges; the additional earnings required to bring the ratio of earnings to fixed charges to 1.0 for such periods would have been $102,872,000 and $256,769,000, respectively. See "Risk Factors."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/EGHT_8x8-inc-de_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/EGHT_8x8-inc-de_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7ff17674951de47e299a26fbc8a28af2892c6e6a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/EGHT_8x8-inc-de_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including "Risk Factors" and Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. The discussion in this Prospectus contains forward-looking statements. The outcome of the events described in such forward-looking statements is subject to risks and uncertainties. The Company's actual results may differ materially from those discussed in such forward-looking statements. Factors that may cause or contribute to such differences include those discussed in sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this Prospectus. THE COMPANY 8x8, Inc. ("8x8" or the "Company") designs, develops and markets highly integrated, proprietary video compression semiconductors and associated software to original equipment manufacturers ("OEMs") of corporate video conferencing systems. To address new opportunities, the Company is leveraging its strengths in semiconductor design and related software to develop and market video conferencing systems for the consumer market. The Company began shipping the VC100 (or "ViaTV"), the first product in its planned family of VideoCommunicators, to the United States consumer market in February 1997. The VC100 connects to a television set and a standard touch-tone telephone adding video to an otherwise normal telephone call, without the need for a personal computer ("PC"). The Company has sold a limited number of VC100s in several foreign countries and is pursuing regulatory approvals which will permit the sale of the VC100 in additional foreign countries. There can be no assurance, however, that the Company will receive any such foreign regulatory approvals in a timely manner, if at all. See "Risk Factors -- Compliance with Regulations and Industry Standards." The Company's video compression semiconductors combine, on a single chip, a reduced instruction set computer ("RISC") microprocessor, a digital signal processor ("DSP"), specialized video processing circuitry, static random access memory ("RAM") and proprietary software to perform the real time compression and decompression ("codec") of video and audio information and establish and maintain network connections in a manner consistent with international standards for video telephony. These semiconductors are designed to provide video conferencing over a broad range of network types including POTS, integrated services digital networks ("ISDN"), local area networks ("LAN") and asymmetric digital subscriber lines ("ADSL"). Customers for the Company's video compression semiconductors include PictureTel, Siemens, Sony, VideoServer, VCON and Vtel. The Company's VideoCommunicators are based on its proprietary semiconductor, software and systems technology. The VC100 is designed to be compliant with the H.324 international standard for video telephony over standard analog telephone lines (commonly known as plain old telephone service, or "POTS") and to be compatible with PC and non-PC based systems that adhere to the H.324 standard. The VC100 is designed to communicate with full duplex audio and video rates of up to 15 frames per second. In addition, the Company is currently demonstrating prototypes of two additional VideoCommunicators : a version of its VC100 that permits internet browsing and the VC200, which is a non-PC based POTS video phone and internet browser with a built-in liquid crystal display. The Company sells its VideoCommunicators through a direct marketing effort utilizing a combination of advertising, toll-free telemarketing and direct mail supported by co-marketing relationships with third parties such as EFA, GTE and Hewlett-Packard. The Company also recently began marketing its VideoCommunicators through retail channels such as Comexpo, Fry's Electronics, J&R Computer World and Staples and catalogs such as Hello Direct and MicroWarehouse. In addition, Hammacher Schlemmer and Sharper Image have agreed to include the VC100 in their catalogs in July 1997. See "Business -- Products" and "Business -- Licensing and Development Arrangements" for a discussion of the development status of the VC100, the version of the VC100 with internet browsing capability, the VC200 and the successor products to the Company's video compression semiconductors and certain related licensing and development arrangements (including arrangements pursuant to which U.S. Robotics Access Corporation ("USR") and Kyushu Matsushita Electric Co., Ltd. ("KME") have licensed all or substantially all of the Company's technology underlying its VideoCommunicators). Although the Company has received certain revenues from licensing and development arrangements in the past, there can be no assurance that the Company will receive any revenues from such arrangements in the future. In addition, KME, Leadtek, Truedox, USR and other licensees or purchasers of the Company's technology, video compression semicon- ductors, software or board designs are using or may use such technology or components to manufacture and sell products that compete with the Company's VideoCommunicators. The proliferation of video conferencing products is dependent on several factors including network bandwidth, advanced compression technologies and the acceptance of video telephony standards. Increases in available bandwidth improve the data carrying capacity of networks, while improvements in compression technologies utilize a given bandwidth more efficiently. Finally, video telephony standards are key to widespread adoption as they are designed to permit the interoperability between systems offered by different vendors. As a result of recent technological advances and the adoption of the H.324 standard for video telephony over POTS, consumer video phones are being developed by a number of suppliers. These products are being introduced in a variety of product configurations and physical forms (i.e., "form factors"), including those based on telephones and televisions and those based on the PC. An increasing number of PCs are being shipped with pre-installed H.324 compliant software. Significant sales of such H.324 products, if achieved, should increase the usefulness and demand for additional H.324 compliant video phones by providing potential video phone purchasers with other parties to call. C-Phone and Leadtek recently began shipping to consumer electronics stores products that are directly competitive with the Company's VC100. Leadtek is currently both a licensee of certain of the Company's technology and a purchaser of the Company's video compression semiconductors. The Company expects that others will introduce products that compete with the Company's VideoCommunicators in the future. During fiscal years 1993 through 1995, the Company's revenues were derived primarily from the sale of math co-processors. However, the Company's revenues from math co-processors subsequently declined and revenues from the Company's sale of video compression semiconductors increased, comprising the majority of the Company's total revenues during fiscal 1997. In the past, the Company has also derived revenues from certain licensing transactions. Nonetheless, there can be no assurance that the Company will receive revenues from the licensing of its technology in the future. See "Business -- Licensing and Development Arrangements." Because the Company's video compression semiconductor business has not provided, and is not expected to provide, sufficient revenues to profitably operate the Company, the Company believes that its future profitability will be largely dependent on the success of its VideoCommunicator business. As a result, the Company believes that its historical operating results will not be comparable to, and should not be relied upon as an indication of, future operating results. The Company was incorporated in February 1987 in California under the name Integrated Information Technology, Inc. In April 1996, the Company changed its name to 8x8, Inc. and in December 1996 reincorporated in Delaware. The Company's executive offices are located at 2445 Mission College Boulevard, Santa Clara, CA 95054, and its telephone number is (408) 727-1885. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company............. 3,600,000 shares Common Stock to be outstanding after the 14,316,659 shares(1) Offering...................................... Use of Proceeds................................. For general corporate purposes including working capital. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......... EGHT </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> YEAR ENDED MARCH 31, ------------------------------------------------ 1993 1994 1995 1996 1997 ------- ------- ------- ------- -------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenues.......................................... $31,082 $34,401 $19,929 $28,774 $ 19,146 Gross profit............................................ 16,945 14,932 8,025 12,106 7,116 Income (loss) from operations........................... (1,473) 243 (6,527) (4,149) (13,551) Net loss................................................ (841) (348) (5,881) (3,217) (13,613) Pro forma net loss per share............................ $ (1.14) Shares used in pro forma per share calculations......... 11,943 </TABLE> <TABLE> <CAPTION> MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED(2) ------- -------------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Working capital..................................................................... $ 4,654 $ 26,790 Total assets........................................................................ 12,727 34,863 Total liabilities................................................................... 6,686 6,686 Stockholders' equity................................................................ 6,041 28,177 </TABLE> - --------------- (1) Excludes, as of March 31, 1997, (i) an aggregate of 2,291,150 shares of Common Stock issuable on the exercise of outstanding options granted under the Company's 1992 Stock Option Plan and 1996 Stock Plan and (ii) an aggregate of 1,102,656 shares of Common Stock reserved for issuance under the Company's 1992 Stock Option Plan, 1996 Stock Plan, 1996 Director Option Plan and 1996 Employee Stock Purchase Plan. See "Management -- Compensation Plans" and Note 6 of Notes to Consolidated Financial Statements. (2) Adjusted to reflect the sale of 3,600,000 shares of Common Stock by the Company at an assumed public offering price of $7.00 per share after deducting estimated underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/GEOS_geospace_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/GEOS_geospace_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..53a26b3bd4597111a8e042a7adcd5cba79d23585
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/GEOS_geospace_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus gives effect to a 4,000-for-one exchange of the Common Stock (the "Stock Split"), effected September 30, 1997 in contemplation of the Offering. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Unless the context indicates otherwise, all references to the "Company" or "OYO Geospace" refer to OYO Geospace Corporation, a Delaware corporation, and its subsidiaries and predecessor entities. Certain seismic and technical terms used in this Prospectus are defined in the "Glossary" appearing elsewhere herein. THE COMPANY GENERAL OYO Geospace Corporation designs and manufactures instruments and equipment used in the acquisition and processing of seismic data. The Company has been in the seismic instrument and equipment business since 1980, and markets its products primarily to the oil and gas industry worldwide. The Company's product lines currently include geophones and hydrophones, seismic leader wire, geophone string connectors, thermal imaging products and small data acquisition systems targeted at niche markets. The Company's products are compatible with most major seismic data acquisition systems currently in use, and sales result primarily from seismic contractors purchasing the Company's products as peripheral components of new data acquisition systems or to replace or upgrade peripheral components of data acquisition systems already in use. The Company believes that its products are among the most technologically advanced instruments and equipment available for seismic data acquisition. The Company has recently introduced a line of high resolution, wide format thermal plotters for use in the commercial graphics industry. This product line is an outgrowth of its seismic thermal imaging product line. In addition, OYO Geospace plans to expand its product lines with the commencement of seismic telemetric cable manufacturing in fiscal 1998. The Company has begun producing and testing seismic telemetric cable, and these products are in the final stages of development. The Company also plans to expand its product lines further through research and development and through selective acquisitions, focusing in the areas of (i) seismic instruments and equipment used in time lapse 3-D seismic data acquisition (the acquisition of 3-D seismic data repeated in the same area over time in order to track fluid movement in a reservoir), (ii) three-axis seismic data acquisition (the acquisition of seismic data on three axes to determine rock properties and fluid types) and (iii) borehole seismology (the process of generating and/or recording seismic waves in existing well bores). PRODUCTS The Company designs, manufactures and markets geophones and hydrophones. Geophones are seismic sensor devices that detect energy from the earth's subsurface. The Company's GS-20DX geophone, which the Company still manufactures and sells, historically was the Company's standard geophone. Since 1992, the Company has introduced the more advanced GS-30CT and GS-32CT geophones, which provide greater geophone-to-geophone uniformity, lower signal distortion and substantially tighter tolerances on key geophone parameters. This improved signal quality allows customers to take full advantage of the capabilities of 24-bit 3-D seismic data acquisition systems. Hydrophones are seismic sensors that respond to changes in pressure associated with a seismic signal and are used to acquire seismic data in water. The Company manufactures a line of hydrophones for use primarily in swamps, rivers, bays and transition zones. The Company also designs and manufactures multi-strand seismic leader wire (composed of up to four wire strands) used to construct geophone and hydrophone strings and designs, manufactures and markets geophone and hydrophone string connectors used to connect geophone or hydrophone strings to a seismic data collection unit. In addition, the Company designs, manufactures and markets two lines of seismic products based on thermal imaging technology: (i) a line of digital field monitors, sometimes referred to in the seismic industry as "field cameras," which are used to display seismic data during the recording process to assure quality control, and (ii) a line of seismic plotters employed in connection with seismic data processing. The Company believes that it is the leading manufacturer of thermal plotters for the seismic industry. As an outgrowth of its seismic thermal imaging product line, the Company has developed wide format 400 dots-per-inch ("dpi") and 600 dpi thermal plotters for use in the commercial graphics industry. Such commercial graphics applications include the newsprint, screen print and corrugated print industries. The Company believes that it is the only manufacturer of wide format 600 dpi thermal plotters for use in commercial graphics applications. SEISMIC INDUSTRY OVERVIEW Seismic data is the principal source of information used by geoscientists to map potential or existing oil and gas bearing formations and the geologic structures that surround them. Seismic data is used primarily in connection with the exploration, development and production of oil and gas. The process of seismic data acquisition is conducted in several stages. First, an energy source imparts seismic waves into the earth, reflections of which are received and measured by geophones and hydrophones. Electrical signals generated by the geophones and hydrophones are then transmitted through leader wire, geophone and hydrophone string connectors and telemetric cable to data collection units, which store information for processing and analysis. The Company believes that several important trends have impacted the seismic industry in recent years and will have positive effects on the Company's business. First, the outsourcing of seismic instrument and equipment manufacturing operations by large geophysical contractors has substantially increased the Company's universe of potential customers. Second, one of the primary advancements in the 3-D seismic data acquisition process has been the trend toward larger and higher resolution surveys, requiring higher channel counts and resulting in the use of more geophones, hydrophones, leader wire, connectors and telemetric cable. Third, the increased size and expense of seismic surveys has caused a continuing consolidation of geophysical contractors resulting in a number of larger, better capitalized contractors that utilize greater quantities of sophisticated seismic instruments and equipment. Finally, declining computing equipment costs are making 3-D seismic technology available to a larger number of independent oil and gas companies, improving demand for 3-D seismic surveys and seismic instruments and equipment. NEW SENIOR MANAGEMENT To position OYO Geospace for increased growth, the Company recently hired a new senior management team headed by Gary D. Owens, Chairman of the Board, President and Chief Executive Officer. Prior to joining OYO Geospace in August 1997, Mr. Owens served in various positions with Input/Output, Inc. ("Input/Output"), a leading manufacturer of seismic data acquisition systems and related equipment, from 1977 to May 1997, most recently as President and Chief Executive Officer. Other recent additions to the Company's senior management team include Michael J. Sheen, Vice President and Chief Technical Officer, and Thomas T. McEntire, Chief Financial Officer. Mr. Sheen served in various positions at Input/Output from 1977 to June 1997, most recently as Senior Vice President and Chief Technical Officer. Mr. McEntire served in senior financial positions for APS Holding Corporation, a nationwide distributor of automotive parts and accessories, from 1990 to September 1997, most recently as Financial Controller. BUSINESS STRATEGY The Company's new senior management team has developed a business strategy designed to accelerate the Company's rate of growth. Pursuant to this strategy, the Company will seek to: - Significantly Expand Manufacturing Capacity of Existing Products -- The Company plans to commence a 45,000 square foot expansion of one of the Company's Houston-based manufacturing facilities in the first quarter of fiscal 1998. Planned for completion in the third quarter of fiscal 1998, the expansion will significantly increase the Company's geophone, hydrophone and multi-strand leader wire manufacturing capacity. - Expand Product Lines -- In fiscal 1998, the Company intends to construct or lease additional facilities to diversify its manufacturing capability to include five-strand leader wire and telemetric cable used in the land and marine seismic data acquisition markets. - Increase Research and Development Investment -- During fiscal years 1995 through 1997, the Company's research and development investment averaged $2.1 million per annum or 6.1% of revenues. Management intends to increase such expenditures gradually in future periods, with an emphasis on the development of new technologies to serve the rapidly emerging markets for time lapse 3-D seismic data acquisition, three-axis seismic data acquisition and borehole seismology surveys. - Continue to Develop Non-Seismic Markets for the Company's Technologies -- OYO Geospace has committed significant resources to adapt the Company's thermal imaging products for use in commercial graphics applications. Management believes that the development of additional non-seismic applications for its technologies will diversify the Company's revenue base and expose the Company to larger markets. - Selectively Pursue Niche Acquisitions -- Management intends to supplement the Company's internal growth through the acquisition of manufacturers of seismic-related products. While the seismic equipment industry has undergone consolidation in recent years, the industry continues to be populated by numerous niche manufacturers, certain of which may become available for acquisition by the Company. However, OYO Geospace is not presently in discussions with any potential acquisition candidates, and no assurances can be made that any acquisitions will be available to the Company on attractive terms. THE PARENT COMPANY The Company currently is a wholly-owned indirect subsidiary of OYO Corporation, a Japanese public company ("OYO Japan") established in 1957 and engaged in the business of providing geo-engineering and consulting services primarily for geological analysis of the earth's subsurface for construction projects. The Company has historically benefited from its relationship with OYO Japan through financial support, a favorable supply contract and shared technological resources. The Company expects the supply contract and, to the extent relevant, shared technology with OYO Japan to continue upon consummation of the Offering; however, the Company anticipates that it will not rely on OYO Japan for financial support. Upon completion of the Offering, OYO Japan will own indirectly approximately 59% of the outstanding Common Stock through its wholly-owned subsidiary, OYO U.S.A. The Company's principal executive offices are located at 7334 North Gessner Road, Houston, Texas 77040, and its telephone number is (713) 939-9700. THE OFFERING Common Stock offered by the Company............................. 1,000,000 shares Common Stock offered by Selling Stockholder(1).................... 1,000,000 shares Common Stock to be outstanding after the Offering(2)..................... 5,068,000 shares Use of proceeds..................... To expand the Company's existing manufacturing facilities, construct, lease or purchase additional facilities to expand product lines, repay certain short-term indebtedness and for general corporate purposes. See "Use of Proceeds." Nasdaq National Market Symbol....... OYOG - --------------- (1) The Company will not receive any proceeds from the sale of Common Stock by OYO U.S.A. See "Selling Stockholder." (2) Includes an aggregate of 68,000 shares of restricted stock to be granted to certain key employees in connection with the Offering pursuant to the Company's 1997 Key Employee Stock Option Plan. Does not include an aggregate of 432,000 additional shares reserved for issuance pursuant to that plan and the Company's 1997 Non-Employee Director Plan, of which options to purchase an aggregate of 187,000 shares are to be issued at the closing of the Offering. See "Management -- Key Employee Stock Option Plan." SUMMARY FINANCIAL DATA <TABLE> <CAPTION> YEAR ENDED SEPTEMBER 30, ----------------------------------- 1995 1996 1997 --------- --------- --------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Sales....................................................... $ 32,615 $ 30,878 $ 41,049 Cost of sales............................................... 18,909 17,278 24,239 --------- --------- --------- Gross profit................................................ 13,706 13,600 16,810 Operating expenses: Selling, general and administrative....................... 5,854 6,729 8,084 Research and development.................................. 1,988 1,959 2,392 Bad debt expense (recovery)(1)............................ 1,013 2,860 (4,228) --------- --------- --------- Total operating expenses.................................... 8,855 11,548 6,248 --------- --------- --------- Net income from operations.................................. 4,851 2,052 10,562 Other income (expense), net................................. (931) (466) 63 --------- --------- --------- Income before income taxes.................................. 3,920 1,586 10,625 Provision for income taxes.................................. 1,579 577 4,003 --------- --------- --------- Net income.................................................. $ 2,341 $ 1,009 $ 6,622 ========= ========= ========= Net income per share........................................ $ .59 $ .25 $ 1.66 ========= ========= ========= Weighted average shares outstanding as restated for stock split..................................................... 4,000,000 4,000,000 4,000,000 CASH FLOW DATA: Net cash provided by operating activities................... $ 809 $ 485 $ 9,998 Net cash used in investing activities....................... (1,066) (1,944) (5,602) Net cash provided by (used in) financing activities......... 332 1,211 (2,671) OTHER FINANCIAL DATA: Depreciation and amortization............................... $ 891 $ 1,025 $ 1,470 EBITDA(2)................................................... 5,263 3,013 12,701 Capital expenditures........................................ 1,391 2,063 6,396 </TABLE> <TABLE> <CAPTION> AS OF SEPTEMBER 30, 1997 ---------------------------- HISTORICAL AS ADJUSTED(3) ---------- -------------- (IN THOUSANDS) <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $16,140 $27,980 Total assets................................................ 35,078 45,418 Short-term debt............................................. 1,500 -- Stockholders' equity........................................ 25,100 36,940 </TABLE> - --------------- (1) Includes $2.8 million in the year ended September 30, 1996, reflecting a provision for loss on notes receivable from Grant Geophysical, Inc. ("Grant"), thereby reducing the carrying balance of such notes to zero. The total amount of indebtedness on such notes as of September 26, 1997, including accrued interest, was $6.8 million. On September 26, 1997, the Company received $6.2 million in conjunction with such notes and related interest income, resulting in a recovery, net of $1.0 million in purchase credit concessions, of $5.2 million (including interest of $0.8 million). See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Note 4 to the Notes to the Consolidated Financial Statements contained elsewhere in this Prospectus. (2) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure of cash flow as determined by generally accepted accounting principles ("GAAP"). EBITDA should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with GAAP or as an indicator of the Company's operating performance or liquidity. Certain items excluded from EBITDA are significant components in understanding and assessing the Company's financial performance, such as a Company's cost of capital and tax structure, as well as historic costs of depreciable assets, none of which are components of EBITDA. The Company's computation of EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that EBITDA is a measure of operating performance followed by securities analysts and may also be used by investors to measure the Company's ability to meet future debt service requirements, if any. Management believes EBITDA provides useful supplemental information about the Company's operations because it provides a measure of a company's ability to service any debt incurred. (3) As adjusted to reflect the Offering and the application of the net proceeds therefrom (based on an assumed initial public offering price of $13 per share).
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/GIFI_gulf_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/GIFI_gulf_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f96595b19e983f379880c0648553f60c84a36a15
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/GIFI_gulf_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto included elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Certain technical terms are defined in the "Glossary of Certain Technical Terms" appearing immediately before the Index to Financial Statements. As used herein, unless the context requires otherwise, the "Company" refers to Gulf Island Fabrication, Inc., its predecessor and subsidiaries, including Dolphin Services, Inc. and related companies ("Dolphin Services") which were acquired by the Company in January 1997. All references to the number of outstanding shares of Common Stock of the Company and per share amounts have been adjusted for a two-for-one stock split effectuated as a stock dividend that became effective on October 28, 1997. THE COMPANY Gulf Island Fabrication, Inc. is a leading fabricator of offshore drilling and production platforms and other specialized structures used in the development and production of offshore oil and gas reserves. Structures and equipment fabricated by the Company include jackets and deck sections of fixed production platforms, hull and deck sections of floating production platforms (such as tension leg platforms), piles, wellhead protectors, subsea templates and various production, compressor and utility modules. The Company believes it is one of only three domestic companies capable of fabricating fixed offshore production platforms, including jackets, for installation in water depths greater than 300 feet. The Company's focus on controlling costs and providing high quality, reliable products and services has enabled it to be profitable for each year since 1988. Demand for the Company's products and services is primarily a function of the level of offshore oil and gas activity in the Gulf of Mexico and, to a lesser extent, offshore areas in West Africa and Latin America. Over the past five years, improvements in seismic and drilling technology, production techniques and oil and gas prices have resulted in an increased number of acreage blocks leased by oil companies in the Gulf of Mexico, more intensive drilling activity in shallow water areas, and increased exploration of deepwater areas of the Gulf of Mexico. The number of 5,000 acre blocks leased by oil companies in the Gulf of Mexico from the Mineral Management Service (the "MMS") has increased from 204 in 1992 to 1,808 in 1997, a number of which are pending final MMS approval. The number of active drilling rigs in the Gulf of Mexico has increased from less than 60 in May 1992 to approximately 170 at the end of October 1997. The Company believes that the number of blocks leased and the number of active drilling rigs are leading indicators of demand for the Company's products, with fabrication activity trailing leasing and drilling activity by one to three years. As a result, demand for the Company's products has improved during the last two years. Revenue in 1996 increased 24% to $79.0 million, earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 172% to $9.3 million and net income increased 360% to $7.3 million, in each case as compared to 1995. For the nine months ended September 30, 1997, which includes the consolidated results of operations of Dolphin Services, revenue increased 68.2% to $101.6 million, while EBITDA increased 157% to $17.1 million, and net income increased 80.4% to $9.4 million, in each case as compared to the corresponding nine-month period in 1996. See "Selected Financial and Operating Data--Footnote 7" for a further explanation of EBITDA. The Company's backlog at December 31, 1996 was $87.1 million as compared to $22.0 million at the end of 1995. At September 30, 1997, the Company's backlog was $92.8 million. The Company was founded in 1985 by a group of investors, including the Selling Shareholders, and began operations at its main fabrication yard on the Houma Navigation Canal in southern Louisiana, approximately 30 miles from the Gulf of Mexico. On January 2, 1997, the Company acquired Dolphin Services, a company that performs offshore and inshore fabrication and construction services (the "Dolphin Acquisition"). The Company completed the initial public offering of its Common Stock in April 1997 (the "Initial Public Offering"). The Company's facilities are located on 597 acres, of which 250 acres are currently developed for fabrication activities with 347 acres available for expansion. These facilities allow the Company to build jackets for fixed production platforms for use in water depths up to 800 feet and deck sections for fixed or floating production platforms for use in unlimited water depths. In addition, the Company is able to build certain hull sections of tension leg platforms, typically for use in water depths greater than 1,000 feet. GROWTH STRATEGY The Company's growth strategy is to capitalize on the positive trends and opportunities in the offshore fabrication and construction industry. Key elements of this strategy are to: . INCREASE PRODUCTION CAPACITY. In order to capitalize on the increased demand for its fabrication services, the Company is taking actions to increase the production capacity of its fabrication yards by (i) purchasing additional equipment, (ii) expanding and upgrading its existing buildings and equipment and (iii) increasing the size and capability of its workforce. In 1996, the Company spent approximately $5.8 million to purchase equipment and modify its fabrication yards in order to increase capacity and improve productivity. The Company has spent $12.8 million through September 30, 1997, and anticipates spending an additional $19.0 million through the remainder of 1997 and 1998, for additional capital improvements to its fabrication yards. During 1997, the Company increased its workforce by 524 employees to 1,050 at September 28, 1997, including approximately 350 employees added as a result of the Dolphin Acquisition, and has recently expanded programs to attract additional workers. . MAINTAIN A LOW COST STRUCTURE. The Company believes it is a low-cost fabricator of offshore structures due to its state-of-the-art production techniques, skilled and motivated workforce, efficient management and low overhead costs. The Company plans to continue to emphasize cost savings through, among other things, the addition of labor-saving equipment, while providing high quality products and reliable services to its customers. . ACQUIRE RELATED BUSINESSES. Dolphin Services, which the Company acquired for approximately $5.9 million, generated $26.8 million in revenue, $2.6 million in EBITDA and $1.4 million in net income for the year ended December 31, 1996. See "Selected Financial and Operating Data--Footnote 7" for a further explanation of EBITDA. The Dolphin Acquisition significantly increased the Company's revenue, cash flow and number of employees and broadened the Company's product and service offerings. Management believes that there are additional opportunities to acquire companies that have related or complementary products or services to those currently provided by the Company. The Company is free of debt, and management believes that its capital structure will enable it to pursue such opportunities as they arise. . PURSUE ADDITIONAL INTERNATIONAL OPPORTUNITIES. There are significant opportunities to supply platforms outside of the Gulf of Mexico. From January 1, 1992 through December 31, 1996, approximately 25% of the Company's revenue was derived from the fabrication of structures installed outside of the Gulf of Mexico, including offshore West Africa and Latin America. Many of the Company's customers who operate in the Gulf of Mexico also have extensive operations in international areas. Management believes that its established relationships with such customers, combined with its certification as an ISO 9002 fabricator, will continue to facilitate the Company's development of its international presence. The Company believes that some companies will continue to utilize U.S. fabricators to build platforms for use in foreign markets despite additional transportation costs because of the higher quality and lower costs available from U.S. fabricators. In the future, the Company may pursue joint venture relationships or other cooperative arrangements in order to increase its participation in such projects. The Company is incorporated under the laws of the State of Louisiana and its principal executive offices are located at 583 Thompson Road, Houma, Louisiana 70363, its telephone number is (504) 872-2100, and its mailing address is P.O. Box 310, Houma, Louisiana 70361-0310. RECENT DEVELOPMENTS The Company has recently entered into an agreement to acquire Southport, Inc., a corporation headquartered in Harvey, Louisiana ("Southport") which specializes in the fabrication of living quarters for offshore platforms, for $6 million in cash, payable at the closing of the acquisition, plus contingency payments of up to an additional $5 million payable out of Southport's net income over a four-year period ending December 31, 2001. The Company anticipates that substantially all of the initial and deferred portions of the acquisition price will be paid with available working capital. Completion of the transaction is subject to various conditions including the satisfactory completion of due diligence by the Company, and no assurance can be given that the acquisition will be successfully completed. Southport's revenue and net income were $17.8 million and $0.6 million, respectively, for the year ended December 31, 1996, and $14.4 million and $1.1 million, respectively, for the nine months ended September 30, 1997. Due to a $1.1 million net operating loss carry forward, Southport is expected to incur a very low effective tax rate for 1997. Southport had approximately 180 employees at September 30, 1997. THE OFFERING Common Stock offered by Selling Shareholders........................ 2,000,000 shares Common Stock to be outstanding after the Offering.................. 11,600,000 shares(1) Use of proceeds..................... The Company will not receive any of the proceeds from the sale of Common Stock by the Selling Shareholders. See "Principal and Selling Shareholders." Nasdaq National Market symbol....... GIFI - -------- (1) Excludes 392,000 shares issuable upon exercise of outstanding options. See "Management--Compensation Pursuant to Plans--Long-Term Incentive Plan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/HFWA_heritage_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/HFWA_heritage_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ddaf26f6e1cac45f9d1a4d795565a58f65a3438c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/HFWA_heritage_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The information set forth below should be read in conjunction with and is qualified in its entirety by, the more detailed information and Consolidated Financial Statements (including the Notes thereto) presented elsewhere in this Prospectus. The purchase of Common Stock is subject to certain risks. This Prospectus contains certain forward-looking statements within the meaning of the federal securities laws. Actual results and timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. HERITAGE FINANCIAL CORPORATION The Company is a Washington corporation organized in August 1997 at the direction of the Bank to hold all of the capital stock of the Bank upon consummation of the Conversion. The Company has not engaged in any significant business to date. Upon completion of the Conversion, the Company will be regulated by the Federal Reserve. The Company has filed an application with the Federal Reserve Bank of San Francisco to become a bank holding company and for approval to acquire the Bank. Immediately following the Conversion, the only significant assets of the Company will be the capital stock of the Bank, a portion of the net proceeds of the Offerings and a note receivable from the ESOP evidencing a loan from the Company to fund the purchase of Conversion Stock by the Bank's ESOP. See "Use of Proceeds." Management believes that the holding company structure and proceeds of the Offerings can facilitate possible future acquisitions of other financial institutions, such as commercial banks or savings institutions, or branches of other financial institutions and thereby further expansion in existing and new market areas. The holding company structure will also provide increased flexibility to the Company to diversify into a variety of banking-related activities and to repurchase its stock. There are no present plans, arrangements, agreements, or understandings, written or oral, regarding any such acquisitions, activities or repurchases. The main office of the Company is located at 201 5th Avenue S.W., Olympia, Washington 98501 and its telephone number is (360) 943-1500. HERITAGE BANK The Bank was established in 1927 and has maintained its headquarters in Olympia, Thurston County, Washington (the state capital) continuously since that date and currently serves Thurston, Pierce and Mason Counties in the South Puget Sound region of Washington as its primary market area. In 1992, the Bank converted from a federally chartered mutual savings bank to a state chartered mutual savings bank. In connection with the organization of the Mutual Holding Company in 1994 (the "MHC Reorganization"), the Bank merged into an interim institution formed as a subsidiary of the Mutual Holding Company, thereby becoming a stock savings bank and a subsidiary of the Mutual Holding Company. The Bank sold approximately 33.3% of its shares of common stock to the general public and to an ESOP in connection with the MHC Reorganization. The MHC was issued the remaining 66.7%. Stock options exercised by Minority Stockholders have increased total outstanding shares to 1,809,616 at June 30, 1997. The Bank is regulated by the Division as its primary state regulator and by the FDIC as its primary federal regulator. The Bank's deposits have been federally insured since 1935 by the FDIC (under the Savings Association Insurance Fund ("SAIF")) and its predecessor, the Federal Savings and Loan Insurance Corporation. The Bank has been a member of the Federal Home Loan Bank ("FHLB") System since 1932. At June 30, 1997, the Bank had total assets of $242.2 million, total deposits of $209.8 million and stockholders' equity of $27.7 million, or 11.44% of total assets, on a consolidated basis. The Bank traditionally has offered a variety of savings products and originated one- to four-family mortgage loans (principally for sale in the secondary market) and, to a lesser extent, multifamily, commercial real estate and construction loans. Beginning in fiscal 1994, the Bank began to implement a growth strategy which is intended to broaden its products and services from traditional thrift products and services to those more closely related to commercial banking. That strategy entails: . Geographic and Product Expansion . Loan Portfolio Diversification . Development of Relationship Banking . Maintenance of Asset Quality The Bank's strategy to date has resulted in the following changes in the Bank's operations. Geographic and Product Expansion. Since the end of fiscal 1994, the Bank has doubled its number of offices, to ten full service locations. New branches were opened in the West Olympia and Indian Summer areas of Thurston County in fiscal 1995, and an office was opened in Lakewood, Pierce County, in fiscal 1996. In October 1996, an office was established in Tacoma, Pierce County, and the tenth office was opened, in downtown Tacoma, in the spring of 1997. During the last four years, the Bank has constructed new buildings in Lacey, Thurston County, and Shelton, Mason County, to replace existing branch buildings and to better serve customers in these markets. The Bank has installed Automated Teller Machines at six of its offices. The Bank intends to continue its growth strategy on a basis it considers prudent. The number and timing of future branch openings will depend on various factors, including maintaining an infrastructure to accommodate growth, targeting promising market areas, and, in the case of acquisitions of financial institutions or branches, identifying favorable opportunities. Concurrent with geographic expansion, the Bank has (i) developed business checking accounts and commercial lending products and other services for businesses and high net worth individuals; (ii) introduced Visa debit and credit cards; (iii) installed an automated voice response system for customer account inquiries and (iv) developed products to assist realtors and potential borrowers to obtain information about loan programs and qualifications. To accommodate new products and to improve internal operating and reporting, the Bank converted to a new data processing system with a data service bureau and installed a personal computer network. Loan Portfolio Diversification. Since initiating its expansion activities, total loans increased to $208.2 million at June 30, 1997 from $130.4 million at June 30, 1993. During this period, the Bank targeted growth in commercial loans, taking advantage of market opportunities and the higher interest rates and shorter terms of such loans relative to residential mortgage loans. As a result, commercial loans increased to $39.4 million, or 18.95% of total loans, from $1.2 million, or 0.92% of total loans, at June 30, 1993. One- to four- family residential loans increased in amounts outstanding but decreased to 49.68% from 56.29% of total loans, and multifamily and commercial real estate loans similarly increased in amounts outstanding while decreasing to 24.60% from 30.97% of total loans during that period. Most of the Bank's commercial business loans are collateralized by real estate, but repayment is expected from a source other than operation or sale of the real estate. See "Business of the Bank--Lending Activities." Development of Relationship Banking. In fiscal 1994, the Bank initiated efforts to develop a business banking department under the direction of a senior officer with commercial banking experience in Thurston County. The new department concentrated its efforts on development of expanded lending and deposit relationships with existing and new customers of the Bank in Thurston and Mason counties. In June 1996, the Bank hired a former south Puget Sound Regional Manager for a large commercial bank. The management addition was made for the purpose of enhancing the Bank's relationship banking capacity and to establish a commercial banking presence in Pierce County. Since that time, the Bank has also hired six additional lending officers who have experience lending to small businesses and individuals in the Pierce County market. While the banking market is very competitive, recent mergers of regional commercial banks with significant presence in the Bank's principal market areas have, in management's view, provided a greater opportunity for community banks to fill a personal service niche which the Bank believes has been created by the mergers. Management believes that the Bank can develop a larger market share in the Pierce County market, while continuing to expand in the Thurston and Mason County markets, by delivering efficient and personalized banking service and developing relationships with small businesses and high net worth individuals who are seeking a relationship with a responsive, service oriented provider of financial services and products. Maintenance of Asset Quality. While pursuing its growth strategy, the Bank will continue its policy of seeking to employ consistent underwriting and loan monitoring procedures, in order to maintain asset quality. The Bank's loan portfolio grew 59.6% between June 30, 1993 and June 30, 1997. Nonperforming loans remained less than $436,000 during the four year period, as did total nonperforming assets. At June 30, 1997, nonperforming loans constituted 0.06% of the Bank's total loans and the allowance for loan losses to nonperforming loans was 2069.17%. See "Business of the Bank--Delinquencies and Nonperforming Assets." The Bank conducts business from its main office located at 201 5th Avenue S.W., Olympia, Washington 98501 and its nine branch offices located in Thurston, Pierce and Mason Counties of Washington. The Bank's telephone number is (360) 943-1500. THE MUTUAL HOLDING COMPANY The MHC is a Washington chartered mutual holding company which was incorporated in January 1994, in connection with the MHC Reorganization. The Mutual Holding Company's only significant assets are approximately 66.31% of the outstanding shares of Bank Common Stock and $120,000 in cash. Subsequent to the MHC Reorganization, the Mutual Holding Company has engaged in no significant activity other than holding the Bank Common Stock. Accordingly, the information set forth in this Prospectus includes the Mutual Holding Company but relates primarily to the Bank and its subsidiary. The Consolidated Financial Statements reflect only the financial condition and results of operations of the Bank and its subsidiaries. THE CONVERSION AND THE OFFERINGS On July 1, 1997, the Boards of Directors of the Bank and the Mutual Holding Company adopted the Plan, which was subsequently amended. In August 1997 the Bank incorporated the Company under Washington law as a wholly-owned subsidiary of the Bank. Pursuant to the Plan, (i) the Mutual Holding Company will convert from the mutual to stock form of organization and simultaneously merge into the Bank, with the Bank being the surviving institution, and the shares of Bank Common Stock currently held by the Mutual Holding Company will be canceled and (ii) the Bank will then merge with an interim bank ("Interim"), with the Bank being the surviving institution and becoming a wholly-owned subsidiary of the Company. Consummation of the Conversion is conditioned upon: (i) approval of the Plan by the Division; (ii) the nonobjection of the FDIC; (iii) approval by the Federal Reserve of the Company's acquisition of the Bank; (iv) approval of the Plan by at least a majority of the total number of votes eligible to be cast by members of the Mutual Holding Company; (v) approval of the Plan by a majority of the votes cast by the Minority Stockholders; and (vi) successful completion of the Offerings. Special Meetings of Members of the Mutual Holding Company and stockholders of the Bank, called for the purpose of submitting the Plan for approval, will be held on , 1997 (the "Special Meetings"). It is possible that there could be a significant delay in the completion of the Conversion as a result of, among other things, delays in receiving approval by the Division or the Federal Reserve, or a notice of nonobjection to the Conversion from the FDIC, or by difficulty in completing the Offerings due to market conditions. See "Risk Factors--Risk of Delayed Offering." The Board of Directors of the Bank believes that the Conversion offers a number of advantages which will be important to the future growth and performance of the Bank. The Conversion is intended to: (i) provide substantially increased capital to expand the operations of the Bank; (ii) improve future access to capital markets; (iii) enhance the Company's and the Bank's ability to expand directly or through mergers and acquisitions and to diversify operations into new business activities (although there are no specific agreements, arrangements or understandings, written or oral, regarding any such mergers or diversified activities); and (iv) afford customers and others the opportunity to become stockholders of the Company and thereby participate more directly in any future growth of the Company and the Bank. Additionally, by converting to the stock holding company form of organization, the Company will be structured in the form used by many commercial banks and business entities and a growing number of savings institutions. The Company is offering up to 5,750,000 (or 6,612,500 if the Valuation Price Range is increased by 15%) shares of Conversion Stock at $10.00 per share to holders of subscription rights in the following order of priority: (i) Eligible Account Holders; (ii) the Bank's ESOP; (iii) Supplemental Eligible Account Holders; and (iv) Other Members. In the event the number of shares offered in the Conversion is increased above the maximum of the Valuation Price Range, the Bank's ESOP shall have a second priority right, after Eligible Account Holders, to purchase any such shares exceeding the maximum of the Valuation Price Range up to an aggregate of 2% of the Conversion Stock sold in the Offerings. Concurrently, and subject to the prior rights of holders of subscription rights, any shares of Conversion Stock not subscribed for in the Subscription Offering are being offered by the Company, in order of priority, in (i) the Minority Stockholders' Offering to Minority Stockholders and (ii) in the Community Offering to certain members of the general public. Preference may be given in the Community Offering to natural persons who are permanent residents of the Local Community. The Bank has engaged Ryan Beck to consult with and advise the Company and the Bank in the Offerings and Ryan Beck has agreed to use its best efforts to assist the Company in the sale of Conversion Stock in the Offerings. Ryan Beck is not obligated to take or purchase any shares of Conversion Stock in the Offerings. If all shares of Conversion Stock are not sold through the Subscription, Minority Stockholders', and Community Offerings, then the Company expects to offer the remaining shares to the general public in a Syndicated Community Offering managed by Ryan Beck. All shares of Conversion Stock will be sold at the $10.00 Purchase Price per share in the Offerings. See "Use Of Proceeds," "Pro Forma Data" and "The Conversion--Stock Pricing and Number of Shares to be Issued." The Subscription Offering will expire at Noon, Pacific Time, on , unless extended by the Bank and the Company. The Minority Stockholders' Offering, Community Offering and Syndicated Community Offering may terminate on the same date, however in no event later than , 1997, unless extended pursuant to regulatory approval. See "The Conversion." Depositors and other prospective investors are encouraged to read this Prospectus carefully. An investment in the Common Stock must be made pursuant to each investor's own evaluation of his or her best interests. EFFECTS OF THE EXCHANGE ON MINORITY STOCKHOLDERS The following are effects of the Conversion on Minority Stockholders, assuming that at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, one Minority Share will be exchanged for 3.3064, 3.8899, 4.4734 and 5.1444 shares of Common Stock, respectively. See "Pro Forma Data." Effect of the Exchange on Stockholders' Equity Per Share. The Conversion will increase the stockholders' equity per share of Minority Stockholders. At June 30, 1997, stockholders' equity was $15.31 for each share of the Bank Common Stock outstanding, including shares held by the Mutual Holding Company. Based on the pro forma information set forth in "Pro Forma Data" assuming the sale of 5,000,000 shares of Conversion Stock at the midpoint of the Valuation Price Range, at June 30, 1997, the pro forma stockholders' equity per share of Common Stock was $10.20, and the pro forma stockholders' equity for the aggregate number of Exchange Shares to be received for each Minority Share was $39.68. The pro forma stockholders' equity at June 30, 1997 for the aggregate number of Exchange Shares to be received for each Minority Share was $35.87, $43.44 and $47.79 at the minimum, maximum, and adjusted maximum of the Valuation Price Range. Effect of the Exchange on Earnings Per Share. The Conversion will also affect Minority Stockholders' pro forma earnings per share. For the year ended June 30, 1997, the earnings per share was $1.26 for each share of the Bank Common Stock outstanding, including shares held by the Mutual Holding Company. Based on the pro forma information set forth in "Pro Forma Data," assuming the sale of 5,000,000 shares of Common Stock at the midpoint of the Valuation Price Range, the pro forma earnings per share of Common Stock was $0.59 for such period, and the pro forma earnings for the aggregate number of Exchange Shares to be received for each Minority Share was $2.30. For the year ended June 30, 1997, the pro forma earnings per share for the aggregate number of Exchange Shares to be received for each Minority Share was $2.12, $2.46 and $2.62 at the minimum, maximum, and adjusted maximum of the Valuation Price Range. Effect of the Exchange on Market Value. The aggregate number of Exchange Shares to be received for each Minority Share will have a calculated estimated value of $33.06, $38.90, $44.73 and $51.44 at the minimum, midpoint, maximum and adjusted maximum of the Valuation Price Range based on the $10.00 Purchase Price of the Conversion Stock. The most recent known stock trade of Minority Shares preceding the date of this Prospectus was August 8, 1997 at a price of $18.00. PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES To ensure that each purchaser receives a Prospectus at least 48 hours prior to the Expiration Date, Prospectuses may not be mailed later than five days prior to such date or be hand delivered later than two days prior to such date. Order forms may only be distributed with a Prospectus. Execution of a stock order form will confirm receipt or delivery of the Prospectus. The Company will not be required to accept orders submitted on photocopied or telecopied stock order forms. Payment in full by check, bank draft, money order, or withdrawal authorization from any existing certificate of deposit or other deposit account at the Bank must accompany each stock order form. The Bank is prohibited from lending funds for the purchase of the Conversion Stock. See "The Conversion-- Procedure for Purchasing Shares in Offerings." To help ensure that each prospective purchaser is properly identified as to such person's stock purchase priority and to assist in stock allocation in the event of oversubscription, depositors as of the Eligibility Record Date and Supplemental Eligibility Record Date must list on the order form all Bank deposit accounts as of the applicable date, giving all account holders names for each account number. Failure to list all accounts may result in the subscriber's loss of subscription rights. PURCHASE LIMITATIONS AND OWNERSHIP LIMITATION The Plan sets forth purchase limitations applicable to the Offerings. The minimum stock order is 25 shares. Except for the ESOP, which is expected to purchase 2% of the Conversion Stock sold, no person (or persons through a single subscription right), together with any associate or group of persons acting in concert, may subscribe for more than $250,000 in all categories of the Offerings combined. In addition to these purchase limitations, no person, together with any associate or group of persons acting in concert may, upon completion of the Conversion, own more than 2% of the Common Stock outstanding. This ownership limitation pertains to the aggregate of Conversion Stock purchased and Exchange Shares received by the subscriber. Notwithstanding the foregoing, no Minority Stockholder will be required to dispose of Minority Shares if, without purchasing Conversion Stock, the Exchange will result in ownership of in excess of 2% of the Common Stock. The purchase limitations and ownership limitation may be changed at the discretion of the Company, as described herein. See "The Conversion--Limitations on Purchases and Ownership of Shares". STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION Pursuant to applicable Washington law and regulations of the FDIC, the offering of Conversion Stock in the Offerings is required to be based on an independent valuation of the pro forma market value of the Bank and the Mutual Holding Company. RP Financial prepared an independent appraisal, which states that the aggregate pro forma market value of the Bank and the Mutual Holding Company, inclusive of the sale of an approximate 67.83% ownership interest in the Offerings, was $73,713,696 at the midpoint as of the October 10, 1997 update of the original August 15, 1997 Appraisal. The Appraisal was multiplied by 67.83%, which is the Mutual Holding Company's percentage ownership interest in the Bank as adjusted upward from the actual interest of 66.31% to reflect $1,230,000 of dividends declared by the Bank and waived by the Mutual Holding Company and the $120,000 in assets held by the MHC. The resulting amount, $50,000,000, is the midpoint of the dollar amount of Conversion Stock to be offered in the Offerings. The minimum and maximum of the offering range were set at 15% below and above the midpoint, respectively, resulting in an offering range of $42,500,000 to $57,500,000 of Conversion Stock. The Boards of Directors of the Company and the Bank determined that the Conversion Stock would be sold at $10.00 per share Purchase Price, resulting in a range of 4,250,000 to 5,750,000 shares of Conversion Stock being offered. The $10.00 Purchase Price in the Offerings is a uniform price for all subscribers, including the Bank's Board of Directors, its management and ESOP. See "The Conversion--Stock Pricing and Number of Shares to be Issued." THE APPRAISAL IS BASED ON A NUMBER OF FACTORS AND IS NOT INTENDED AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING CONVERSION STOCK NOR CAN ASSURANCE BE GIVEN THAT PURCHASERS OF THE CONVERSION STOCK OR RECIPIENTS OF THE EXCHANGE SHARES WILL BE ABLE TO SELL SUCH SHARES AFTER THE CONVERSION AT A PRICE THAT IS EQUAL TO OR ABOVE THE PURCHASE PRICE. Further, the pro forma stockholders' equity reflected in "Pro Forma Data" is not intended to represent the fair market value of the Common Stock and may be greater than amounts that would be available for distribution to stockholders in the event of liquidation. If necessary, depending on regulatory considerations and changes in market and financial conditions or material changes in the financial condition or performance of the Bank, the Valuation Price Range may be revised based on an updated Appraisal prepared by RP Financial and approved by applicable regulatory agencies. The actual number of shares of Conversion Stock sold must be supported by a final Appraisal. No resolicitation of subscribers will be made and subscribers will not be permitted to modify or cancel their subscriptions unless the gross proceeds from the sale of the Conversion Stock are less than the minimum or more than 15% above the maximum of the current Valuation Price Range or the Offerings are extended beyond . THE EXCHANGE RATIO The Bank and the Mutual Holding Company must demonstrate to the satisfaction of the Division and the FDIC that the basis for the Exchange is fair and reasonable. The Boards of Directors of the Bank and the Company have determined that each Minority Share will, on the Effective Time, be converted into Exchange Shares through the Exchange Ratio. The Exchange Ratio ensures that Minority Stockholders will own approximately the same aggregate percentage of the outstanding Common Stock (which will consist of Conversion Stock plus Exchange Shares) as they own of the outstanding Bank Common Stock immediately prior to the Effective Time. The Minority Stockholders, however, will experience a dilution in ownership interest, from a 33.69% current ownership interest in the Bank to an approximately 32.17% interest in the Company. This is because the FDIC requires that the Exchange Ratio be adjusted downward to reflect the aggregate amount of Bank Common Stock dividends waived by the Mutual Holding Company and the amount of assets other than Bank Common Stock held by the Mutual Holding Company. See "The Conversion--The Exchange." Based on the 609,616 Minority Shares outstanding at June 30, 1997, the Exchange Ratio is expected to be within a range of 2,015,664 to 2,727,075 Exchange Shares for the Minority Shares outstanding immediately prior to the Effective Time. See "The Conversion--Stock Pricing and Number of Shares to be Issued." The following table sets forth, based upon the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range: (i) the total number of shares of Conversion Stock and Exchange Shares to be issued in the Conversion; (ii) the percentage of the total Common Stock represented by the Conversion Stock and the Exchange Shares; and (iii) the Exchange Ratio. The table assumes that there is no cash paid in lieu of issuing fractional Exchange Shares. <TABLE> <CAPTION> CONVERSION STOCK EXCHANGE SHARES TOTAL SHARES TO BE ISSUED(1) TO BE ISSUED(1) OF COMMON ----------------- ----------------- STOCK TO BE EXCHANGE AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING RATIO --------- ------- --------- ------- ------------ -------- <S> <C> <C> <C> <C> <C> <C> Minimum................. 4,250,000 67.83% 2,015,664 32.17% 6,265,664 3.3064 Midpoint................ 5,000,000 67.83 2,371,369 32.17 7,371,369 3.8899 Maximum................. 5,750,000 67.83 2,727,075 32.17 8,477,075 4.4734 15% above maximum ...... 6,612,500 67.83 3,136,136 32.17 9,748,636 5.1444 </TABLE> - -------- (1) Assumes that outstanding exercisable options to purchase 42,717 shares of Bank Common Stock at June 30, 1997 are not exercised prior to consummation of the Conversion. Assuming that all of such options are exercised prior to such consummation, the percentages represented by the Conversion Stock and the Exchange Shares would amount to 66.40% and 33.60% respectively, and the Exchange Ratio would amount to 3.2968, 3.8786, 4.4604 and 5.1294 at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, respectively. THE ACTUAL EXCHANGE RATIO IS NOT DEPENDENT ON THE MARKET VALUE OF MINORITY SHARES. IT WILL BE CALCULATED BASED UPON THE NUMBER OF SHARES OF CONVERSION STOCK SOLD IN THE OFFERINGS AND THE MINORITY STOCKHOLDERS' PERCENTAGE OWNERSHIP INTEREST IN THE BANK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. THE EXCHANGE RATIO IS NOT DEPENDENT ON THE MARKET VALUE OF THE MINORITY SHARES. RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES No person may transfer or enter into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the Plan or to transfer the shares of Conversion Stock to be issued upon their exercise. Each person exercising subscription rights will be required to certify that a purchase of Conversion Stock is solely for the purchaser's own account and that there is no agreement or understanding regarding the sale or transfer of such shares. The Company and the Bank will pursue any and all legal and equitable remedies in the event they become aware of the transfer of subscription rights and will not honor subscriptions known by them to involve the transfer of such rights. Following the Conversion there generally will be no restrictions on the transfer or sale of shares by purchasers other than affiliates of the Company and the Bank. See "Supervision and Regulation--Federal Securities Laws" and "The Conversion--Restrictions on Transferability by Directors and Officers and NASD Members." BENEFITS OF THE CONVERSION TO MANAGEMENT ESOP. The Bank currently has an ESOP, a tax-qualified employee benefit plan for officers and employees of the Company and the Bank, which intends to purchase 2% of the Conversion Shares. The ESOP owned 21,763 shares of Bank Common Stock at June 30, 1997, all of which were allocated to participants' accounts. For additional information concerning the ESOP, see "Management-- Benefits--Employee Stock Ownership Plan," "Risk Factors--Possible Dilutive Effects of Benefit Plans" and "--New Expenses Associated with ESOP and MRP." MRP. The Company intends to seek stockholder approval of a Management Recognition Plan and Trust ("MRP") at a meeting of stockholders occurring no earlier than six months following consummation of the Conversion. The MRP, which will be funded with a number of shares of Common Stock equal to up to 1% of the number of shares of Conversion Stock issued in the Conversion, is a non- tax-qualified restricted stock plan intended for the benefit of key employees and directors of the Company and the Bank. If stockholder approval of the MRP is obtained, it is expected that shares of Common Stock of the Company will be awarded at no cost to such recipients. For additional information concerning the MRP and shares intended to be awarded thereunder, see "Management-- Benefits--Management Recognition Plan," "Risk Factors--Possible Dilutive Effects to Benefit Plans" and "--New Expenses Associated with ESOP and MRP." Stock Option Plan. The Company intends to seek stockholder approval of a stock option plan ("1998 Stock Option Plan"), which will reserve a number of shares of Common Stock equal to up to 10% of the number of shares of Conversion Stock in the Conversion, at a meeting of stockholders occurring no earlier than six months following consummation of the Conversion. If stockholder approval of the 1998 Stock Option Plan is obtained, it is expected that options to acquire up to 575,000 shares of Common Stock will be awarded to key employees and directors of the Company and the Bank (based on the issuance of the maximum of the Valuation Price Range). The exercise price of such options will be 100% of the fair market value of the Common Stock on the date the option is granted. Options granted to officers and directors are valuable only to the extent that such options are exercisable and the market price for the underlying share of Common Stock is in excess of the exercise price. An option effectively eliminates the market risk of holding the underlying security since no consideration is paid for the option until it is exercised and, therefore, the recipient may, within the limits of the term of the option wait to exercise the option until such time as the market price exceeds the exercise price. For additional information concerning the 1998 Stock Option Plan and options intended to be granted thereunder, see "Management--Benefits--1998 Stock Option Plan" and "Risk Factors--Possible Dilutive Effects of Benefit Plans." Employment and Severance Agreements. Effective October 1, 1997, the Company entered into an employment agreement with Mr. Donald V. Rhodes, the Chief Executive Officer of the Company and the Bank, for a term which initially expires on March 14, 2001 and renews annually thereafter unless terminated by either the Company or Mr. Rhodes. The Agreement provides for a base annual salary of $174,000. The Bank has also entered into severance agreements with Messrs. John D. Parry and Brian L. Vance, both Executive Vice Presidents, and with a total of 7 additional key members of management. The agreement with Mr. Rhodes provides that he will be entitled to compensation for up to three years (up to $522,000 based on his current salary) in the event of a change in control of the Bank or the Company and two years (up to $348,000 based on his current salary) in certain other circumstances. The agreements with Messrs. Parry and Vance provide that each will be entitled to compensation for up to two years (up to $204,000 each based on their current salaries) in the event of a change in control of the Bank or the Company. The agreements with the additional officers provide that each will be entitled to compensation for one year in the event of a change in control of the Bank or the Company (an aggregate amount of $455,200 based on their current salaries). Thus, the employment and severance agreements would require an aggregate payment to management of up to $1,385,200 in the event of a change in control of the Bank or the Company, based on current salaries. See "Management--Executive Compensation--Employment and Severance Agreements." For information concerning the possible voting control of officers, directors and employees following the Conversion, see "Risk Factors--Voting Power of Directors and Executive Officers." USE OF PROCEEDS Depending upon the number of shares sold and the expenses of the Conversion, net proceeds from the sale of the Conversion Stock are estimated to range from $41.4 million to $56.2 million (or $64.7 million if the Valuation Price Range is increased by 15%). See "Pro Forma Data." After giving effect to the proposed purchase of shares by the ESOP and MRP, the Company plans to contribute to the Bank 50% of the net proceeds and retain the remaining net proceeds. This would result in the Company retaining approximately $24.4 million of net proceeds (50% of $48.8 million) based on the issuance of 5,000,000 shares at the midpoint of the Valuation Price Range. Because shares of Conversion Stock may be purchased in the Offerings by Bank customers using funds on deposit at the Bank, the net amount of funds available to the Bank following the Offerings will be reduced to the extent that shares are purchased with funds on deposit. Net proceeds contributed to the Bank will increase the Bank's capital. The Bank will use the funds contributed to it for general corporate purposes, including increased lending, possible purchase of loan participations, and investment in securities of the type currently held by the Bank. In addition, depending on the level of market interest rates following consummation of the Conversion, the Bank may use a portion of the proceeds to retire any outstanding FHLB advances. A portion of the net proceeds retained by the Company will be used for a loan by the Company to the Bank's ESOP to fund the ESOP's purchase of shares in the Offerings. The remaining net proceeds will initially be invested primarily in U.S. Government and agency securities and other investment securities of the type currently held by the Bank. Such proceeds will be available for additional contributions to the Bank in the form of debt or equity, to support future internal growth of the Bank and the Company, for possible future acquisitions of financial institutions or branches, as a source of dividends to the stockholders of the Company, and for future repurchases of Common Stock to the extent permitted under applicable law and regulations. Currently, as discussed below under "Use of Proceeds," there are no specific plans, arrangements, agreements or understandings, written or oral, regarding any such acquisitions or repurchases. MARKET FOR COMMON STOCK The Company has received conditional approval to have the Common Stock listed on the Nasdaq National Market under the symbol "HFWA." Ryan Beck has agreed to act as a market maker for the Company's Common Stock following consummation of the Conversion. No assurance can be given that an active and liquid trading market for the Common Stock will develop, or, if developed, be maintained. Further, no assurance can be given that purchasers will be able to sell their shares at or above the Purchase Price after the Conversion. See "Risk Factors-- Absence of Prior Market for the Common Stock" and "Market for Common Stock." DIVIDENDS The Board of Directors of the Company intends to declare cash dividends on the Common Stock commencing with the first full quarter following consummation of the Conversion. The initial quarterly dividend expected to be paid to shareholders of the Company will be in an amount of $0.030, $0.026, $0.022 and $0.019 per share at the minimum, midpoint, maximum and 15% above the Valuation Price Range, respectively. For Minority Stockholders the initial quarterly dividend is expected to equate to $0.40, annually, based upon the expected Exchange Ratio of 3.3064, 3.8899, 4.4734 and 5.1444 at the minimum, midpoint, maximum and 15% above the maximum of the Valuation Price Range, respectively. However, no assurances can be given as to the amount of a dividend or that a dividend will be paid, or if paid, that the dividend will not be reduced or eliminated in future periods. See "Dividend Policy," "The Conversion--Effects of Conversion to Stock Form on Depositors and Borrowers of the Bank" and "Supervision and Regulation--The Company." DISSENTERS' RIGHTS The Plan of Conversion provides that stockholders of the Bank have the right to dissent from the mergers of the Bank with the MHC and with an interim bank formed to facilitate the Conversion, with the Bank as the surviving entity in each merger, and, subject to certain conditions, to receive payment of the "value" of their shares of Bank Common Stock, as provided in the Revised Code of Washington, Chapter 32.34. See "The Conversion--The Exchange" and "-- Dissenters' Rights."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/IDT_idt-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/IDT_idt-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..42cb3a2c21780f03f29436396df43942ceb53ce1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/IDT_idt-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors." The Company's fiscal year ends on July 31. All references to fiscal years in this Prospectus refer to the fiscal years ending in the calendar years indicated (e.g., Fiscal 1996 refers to the fiscal year ended July 31, 1996). Industry data used in this Prospectus were obtained from industry publications and have not been independently verified by the Company. As used in this Prospectus, unless the context otherwise requires, the terms the "Company" and "IDT" refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and their subsidiaries, collectively. This Prospectus makes reference to trademarks of other companies, which marks are the property of such companies. THE COMPANY IDT is a rapidly growing international telecommunications company which offers a broad range of competitively priced long-distance telephone and Internet access services in the U.S. and overseas, and recently began offering Internet telephony services. The Company commenced operations in 1990 as a pioneer in the international call reorigination business and continues as an innovator in the international telecommunications industry with its August 1996 introduction of Net2Phone--the first commercial telephone service to bridge live calls between personal computers and telephones via the Internet. As of October 31, 1996, IDT provided international and domestic long-distance telephone services to over 51,000 individuals, businesses, and other telephone carriers in more than 130 countries, as compared with approximately 12,500 customers as of July 31, 1995. As of October 31, 1996, the Company provided dial-up and dedicated Internet access and on-line services to over 153,100 individual and business customers, a significant increase over the Company's approximately 11,000 customers as of July 31, 1995. The Company's revenues also have grown considerably in recent years, increasing to $28.3 million for the three months ended October 31, 1996 from $6.6 million for the three months ended October 31, 1995 and to $57.7 million for Fiscal 1996 from $11.7 million for Fiscal 1995. The Company operates a growing telecommunications network of Company-owned switches and dedicated leased fiber optic lines in the United States, resold switched services and leased capacity between the United States and London, and existing and in-process leased interconnections with interexchange carriers ("IXCs"), local exchange carriers ("LECs") and foreign carriers. As a result of continuing industry deregulation, increasing traffic volume, and a base of international customers sufficient to cost-justify network expansion, the Company is planning to build-out a telephone switching infrastructure, in selected international locations. The Company also operates a national Internet network of leased lines connecting over 480 points of presence ("POPs"), including 89 Company-owned POPs supplemented by third-party POPs through the Company's alliances with other Internet service providers (the "alliance partners"), including PSINet Inc. ("PSI"). The Company's telecommunications services include: (i) international long- distance call reorigination (call-back) services, which allow callers outside the United States to place U.S.-originated international calls at significant cost savings; (ii) international long-distance direct-dial services for individuals and businesses, currently offered in the United Kingdom; (iii) resale of long-distance minutes to other carriers ("carrier sales"); and (iv) resale of domestic long-distance services provided by WorldCom, Inc. ("WorldCom") to individuals and businesses. IDT's Internet services include dial-up Internet access for individuals and businesses and direct- connect dedicated Internet services for corporate customers. The Company's strategic objective is to become an international carrier's carrier and a leading provider of integrated telecommunications services in the U.S. and abroad, offering international long-distance, Internet, and Internet telephony services. The Company intends to exploit the expected deregulation in the international telecommunications marketplace, and to benefit from the continuing convergence of voice and data technologies. The key elements of the Company's strategy are as follows: . CONTINUE TO FOCUS ON CORE TELECOMMUNICATIONS SERVICES. The Company will continue to focus on its call reorigination and other international long- distance services and seek to identify and enter new markets which offer high growth and profit potential. The Company believes that by continuing to develop and expand its business in call reorigination and other international long-distance services it will be able to (i) enhance its reputation as an alternative, competitively priced long-distance service provider, (ii) establish comprehensive distribution channels, and (iii) capture an increased customer base, all of which should position the Company to more rapidly and cost-effectively build-out its own network of switches and leased lines when and where regulations permit. . EXPAND AND LEVERAGE ITS NETWORK. The Company plans to build-out an international telecommunications network initially in selected countries, to enable the Company to broaden the range of services it offers and to improve operating efficiencies. The Company plans to install Company-owned switching equipment in the United Kingdom, France, Italy and Germany. In addition, the Company plans to deploy certain technologies which the Company believes can enable its existing national Internet backbone to carry domestic telephone traffic. The Company expects that this use of its Internet backbone will lower its operating costs for domestic telephone services and increase its ability to terminate international voice traffic in the United States at competitive rates. . EXPAND AND IMPROVE EFFICIENCIES OF INTERNET BUSINESS. The Company, through increasingly integrating its sales, marketing and promotional efforts to offer bundled telephone, Internet and Internet telephony services, seeks to realize marketing and distribution efficiencies in its Internet access business and to further differentiate itself from competitors who do not offer the same breadth of telecommunications services. In addition, the Company seeks to decrease its Internet subscriber acquisition costs by (i) entering into third party original equipment manufacturers ("OEM") and software distribution agreements such as those recently entered into with GT Interactive Software Corp. ("GTI") and Macromedia Inc. ("Macromedia"), and (ii) offering its Internet network on a private branding basis to national and regional telephone companies seeking to enter the Internet access services market. . ESTABLISH THE COMPANY AS A CARRIER'S CARRIER. The Company has a presence in the carrier sales market. The Company seeks to become a carrier's carrier, offering high quality, cost-competitive services to other carriers, through obtaining transit and operating agreements with international providers. The Company believes that the full breadth of the Company's telecommunications, Internet, and Internet telephony services will enhance its ability to enter into such agreements. The Company believes that these agreements can enable it to become a primary carrier in the subject countries and, together with the Company's carrier sales, they can strengthen IDT's position as an international "clearinghouse" for competitively priced telephone rates. . DEVELOP NET2PHONE AND EXPLOIT OPPORTUNITIES FROM PACKET SWITCHING TECHNOLOGY. By continuing to exploit its new Net2Phone Internet-to-telephone calling technology and develop the associated Net2Phone Direct technology, which is being developed to enable international telephone-to-telephone calling via the Internet, the Company believes it can (i) become a leader in the emerging Internet telephony marketplace, (ii) expand the market for competitively priced international communications, and (iii) position itself to exploit the opportunities and economic efficiencies in international communications believed to be offered by the use of the packet switch technologies common in Internet applications, rather than traditional telephone circuit switch technologies. THE OFFERING On January 2, 1996, the Company issued a warrant (the "Warrant") to the Selling Stockholder exercisable for 575,000 shares of Common Stock, pursuant to which the Company granted the Selling Stockholder certain demand registration rights with respect to the shares of Common Stock issuable upon the exercise of the Warrant. Pursuant to the Warrant, the Company agreed to file the Registration Statement of which this Prospectus forms a part with the Commission, and to keep the Registration Statement effective until the earlier of (i) the date all the shares registered hereunder have been sold and (ii) January 2, 1998 plus a period equal to any Suspension Period (as defined in the Warrant). CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this Prospectus, in the sections captioned "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and elsewhere, including statements regarding the Company's strategy and the anticipated development and expansion of the Company's business, the markets in which the Company's services are offered, anticipated capital expenditures and regulatory reform, the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the future operating performance of the Company and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth in "Risk Factors" and "Business." SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE DATA AND OTHER OPERATING DATA) <TABLE> <CAPTION> THREE MONTHS ENDED YEAR ENDED JULY 31, OCTOBER 31, ------------------------------- --------------------- 1994 1995 1996 1995 1996 ------- ---------- ---------- --------- ---------- <S> <C> <C> <C> <C> <C> STATEMENT OF OPERATIONS DATA: Revenues: Telecommunications.. $ 3,169 $ 10,789 $ 35,708 $ 4,808 $ 18,102 Internet............ -- 875 21,986 1,793 10,137 Net2Phone........... -- -- -- -- 79 ------- ---------- ---------- --------- ---------- Total revenues.... 3,169 11,664 57,694 6,601 28,318 Income (loss) from op- erations............. (329) (2,175) (15,755) (1,656) (3,256) Net income (loss)..... (298) (2,145) (15,643) (1,653) (3,107) Net income (loss) per share................ (.02) (.13) (.86) $ (.10) $ (.15) Weighted average num- ber of shares used in calculation of net income (loss) per share................ 16,569 16,569 18,180 16,569 20,841 OTHER OPERATING DATA: Telecommunications: EBITDA(1)............. (223) 947 3,014 885 829 International call reorigination serv- ices (at Period End): Customers........... 1,420 6,358 19,582 9,150 26,466 Countries marketed in................. 60 110 120 110 130 Minutes of use during period(2)............ 308,000 11,000,000 88,300,000 6,715,000 38,300,000 Internet: EBITDA(1)............. -- (2,818) (16,921) (2,410) (2,513) Dial up subscribers (at Period End): Company............. 600 10,759 90,249 19,626 94,900 Alliance partners and PSI Network.... -- 80 52,451 13,956 58,200 ------- ---------- ---------- --------- ---------- Total............. 600 10,839 142,700(3) 33,582 153,100 POPs (at Period End): Company............. 1 15 75 18 89 Alliance partners and PSI Network.... -- 91 412 194 398 ------- ---------- ---------- --------- ---------- Total............. 1 106 487 212 487 </TABLE> <TABLE> <CAPTION> JULY 31, 1996 OCTOBER 31, 1996 ------------- ---------------- <S> <C> <C> BALANCE SHEET DATA: Cash and cash equivalents...................... $14,894 $9,191 Working capital................................ 13,547 6,366 Total assets................................... 43,797 48,642 Total stockholders' equity..................... 26,843 23,736 </TABLE> - - -------- (1) Represents earnings (loss) before depreciation and amortization, interest expense and income tax expense. The Company understands that such information is used by certain investors as one measure of an issuer's historical ability to service debt. EBITDA should not be considered an alternative to, or more meaningful than, income (loss) from operations, net income (loss) or cash flow as defined by generally accepted accounting principles. (2) Represents the approximate number of minutes of use through the Company's least cost routing ("LCR") telecommunications platform by customers using the international call reorigination services marketed by the Company, and the international long-distance telecommunications services marketed by the Company through carrier sales to other telecommunications carriers. (3) The July 31, 1996 subscriber members include subscribers of entities acquired after July 31, 1996. The revenue amounts are not presented on a pro forma basis for such acquisitions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/INTT_intest_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/INTT_intest_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9ca909de8a76edbc369fa6a5ff96b312dab799f1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/INTT_intest_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, all references herein to the "Company" or "inTEST" include inTEST Corporation ("inTEST CORP") and its subsidiaries. All information in this Prospectus assumes no exercise of the Underwriters' over-allotment option and gives effect to (i) a stock split in the form of a stock dividend in the amount of 0.5579 shares for every one share outstanding which was effected on June 4, 1997, (ii) the termination of the Company's status as an S corporation immediately prior to the offering and (iii) the issuance of an aggregate of 300,443 shares of Common Stock simultaneously with the closing of the offering in exchange for the minority interests in the Company's three foreign subsidiaries (the "Exchange"). See "The Company" and "S Corporation Distributions." The Company The Company is a leading independent designer, manufacturer and marketer of docking hardware and test head manipulators, which are used with automatic test equipment ("ATE") by semiconductor manufacturers during the testing of wafers and packaged devices. The Company believes it is a leader based upon its knowledge and experience in the industry. The Company also designs and markets related ATE interface products including high performance test sockets, interface boards and probing assemblies. The Company's products are designed to improve the utilization and cost-effectiveness of ATE (including testers, wafer probers and device handlers) during the testing of linear, digital and mixed signal integrated circuits. Since inception in 1981, the Company has developed and continues to support over 4,600 products and has been granted 13 U.S. patents for its technology. Testing is an integral and necessary step during the design and manufacture of wafers and packaged devices. Each integrated circuit is tested at least twice during the manufacturing process to ensure the functional and electrical performance of each circuit. The increasing worldwide demand for semiconductors in recent years has led to an increase in the demand for ATE. According to VLSI Research Inc., in 1996 semiconductor manufacturers spent an estimated $3.7 billion on testers and $1.3 billion on wafer probers and device handlers. The increasing complexity of wafers and packaged devices, as manifested by larger wafers, higher speeds, growing pin counts, smaller packaged devices and greater levels of integration has changed the design, architecture and complexity of ATE used during the testing of such devices and has resulted in an increased demand for the Company's products. The Company's docking hardware products mechanically control the intimate interface between the test head's interface board and the prober's probing assembly or handler's test socket. Such docking hardware facilitates the quick, easy and safe changeover of test heads to probers or handlers, thereby allowing semiconductor manufacturers to achieve cost savings by (i) improving ATE utilization, (ii) improving the accuracy and integrity of test results and (iii) reducing the need to repair or replace expensive ATE interface products. The Company's docking hardware can be designed to be used with substantially all makes and models of test heads, probers and handlers, and can usually be designed to allow all ATE on a test floor to be mechanically "plug-compatible." The Company's in2 free-standing, floating-head universal manipulators are designed to be used in either a dedicated or a flexible test environment and have been engineered to hold test heads in an effectively weightless state, and can be moved up or down, right or left, forward or backward and rotated around each axis (six degrees of motion freedom). Consequently, an operator using no more than 22 pounds of force can reposition a test head weighing up to approximately 900 pounds by grasping it in his or her hands and gently moving the test head into position to dock with a prober or handler. The Company's largest customers include Lucent Technologies, Motorola, SGS Thomson and Texas Instruments among semiconductor manufacturers, and Credence Systems, LTX and Teradyne among ATE manufacturers. The Company designs, markets and supports its products globally both through Company account managers based in New Jersey, Texas, California, the U.K., Singapore and Japan and through independent sales representatives in the U.S. and abroad. The Company's executive offices are located in Cherry Hill, New Jersey. Manufacturing facilities are located in New Jersey and the U.K. - ------------ (1) Includes 300,443 shares of Common Stock to be issued in the Exchange, and excludes 150,000 shares of Common Stock issuable upon the exercise of stock options, the grant of which will become effective as of the effective date of the Registration Statement of which this Prospectus is a part (the "Registration Statement") and which will be exercisable at the initial public offering price. None of such options will be exercisable until one year after the effective date of grant. See "Management -- 1997 Stock Plan." (2) Assumes the termination of the Company's S corporation status effective January 1, 1996 and the completion of the Exchange on January 1, 1996, and as a result reflects the amortization of goodwill associated therewith and the absence of a charge for the minority interest. See Note 3 of Notes to Consolidated Financial Statements. (3) Supplemental pro forma net earnings per share reflects the assumed issuance of 200,000 shares of Common Stock, based on an assumed initial public offering price of $8.25 per share, to fund distributions to the Company's current stockholders of previously taxed but undistributed S corporation earnings, net of available cash and cash equivalents (estimated to be $1.7 million as of March 31, 1997). See "Use of Proceeds," "S Corporation Distributions" and Note 3 of Notes to Consolidated Financial Statements. (4) Reflects the acquisition of the minority interests in the Company's foreign subsidiaries pursuant to the Exchange, including goodwill arising from the Exchange, and the effects of the termination of the Company's S corporation status, including the distribution described under "S Corporation Distributions." See Note 3 of Notes to Consolidated Financial Statements. (5) Adjusted to reflect the sale by the Company of 1,820,000 shares of Common Stock offered hereby at an assumed initial public offering price of $8.25 per share and the receipt of the estimated net proceeds therefrom (after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company). See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/INVX_innovex_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/INVX_innovex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..910abe547c8d8aa52fa5b4f4d2b385d643682628
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/INVX_innovex_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) gives effect to the Company's 14.3686 for one stock split and its expected reorganization as a Delaware corporation prior to the consummation of the Offering, and (ii) assumes that the Underwriters' over-allotment option will not be exercised. Unless otherwise indicated by the context, references herein to the "Company" or "Dril-Quip" mean Dril-Quip, Inc., a Delaware corporation that is the issuer of the Common Stock offered hereby, its predecessor and its subsidiaries. THE COMPANY Dril-Quip is one of the world's leading manufacturers of highly engineered offshore drilling and production equipment which is well suited for use in deepwater, harsh environment and severe service applications. The Company designs and manufactures subsea equipment, surface equipment and offshore rig equipment for use by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. The Company's principal products consist of subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, wellhead connectors and diverters. The Company also provides installation and reconditioning services and rents running tools for use in connection with the installation and retrieval of its products. In 1996, the Company derived 82.1% of its revenues from the sale of its products and 17.9% of its revenues from services. Dril-Quip has developed its broad line of subsea equipment, surface equipment and offshore rig equipment exclusively through its internal product development efforts. The Company believes that it has achieved significant market share and brand name recognition with respect to its established products due to the technological capabilities, reliability, cost effectiveness and operational timesaving features of these products. In particular, the Company's Quik- Thread(R) and Quik-Stab(R) specialty connectors, MS-15(R) mudline hanger systems and SS-10(R) and SS-15(R) subsea wellheads are among the most widely used in the industry. The Company believes that, as of June 1, 1997, its subsea wellhead equipment was being used on approximately 70% of the wells being drilled in waters deeper than 3,000 feet worldwide. Since 1991, the Company has introduced a number of new products, including diverters, wellhead connectors, dual-bore and single-bore subsea production trees, subsea and platform valves, platform wellheads, platform trees, drilling risers and Spar and tension leg platform ("TLP") production risers. The Company has grown consistently since its inception in 1981 and has been profitable in every year since 1983. As a result of new product introductions, increased market share in established product lines and increased offshore drilling and production activity, the Company's revenues have increased from $65.2 million in 1992 to $115.9 million in 1996 (an annual growth rate of 15.4%), and its net income has increased from $1.7 million in 1992 to $9.1 million in 1996 (an annual growth rate of 52.1%). From 1995 to 1996, the Company's revenues and net income grew by 7% and 38%, respectively. For the six months ended June 30, 1997, the Company's revenues were $68.7 million and its net income was $5.1 million, representing a 24% increase in revenues and a 26% increase in net income from the comparable period in 1996. The Company has experienced increased demand for its products due to the increased drilling and production activity in offshore areas throughout the world during the last several years, particularly in deeper waters. The increase in offshore drilling and production activity has been driven by a number of factors, including (i) the prospect for relatively larger hydrocarbon discoveries in deepwater areas and (ii) recent technological advances in offshore drilling and production equipment (including those introduced by Dril- Quip), seismic data collection and interpretation techniques, and drilling techniques, which have enhanced the economics of offshore drilling and production. In addition, several foreign national oil companies have recently opened offshore areas for exploration and development by other parties, including major integrated and large independent oil and gas companies. These factors have contributed to the increase in the Company's backlog from approximately $56 million at December 31, 1996 to approximately $101 million at June 30, 1997, an 80% increase. The Company intends to use the proceeds from the Offering to expand its manufacturing capacity in order to satisfy the increased demand for its products. Dril-Quip markets its products through its offices and sales representatives located in all of the major international energy markets throughout the world. In 1996, the Company generated approximately 68% of its revenues from foreign sales. The Company manufactures its products at its facilities located in Houston, Texas; Aberdeen, Scotland; and Singapore, and maintains additional facilities for fabrication and/or reconditioning in Norway, Denmark and Australia. Dril-Quip's manufacturing operations are vertically integrated, with the Company performing substantially all of its forging, heat treating, machining, fabrication, inspection, assembly and testing at its own facilities. Unlike essentially all of the Company's competitors, which depend on outside sources for forging and heat treatment services, Dril-Quip owns a forge and heat treatment facility that handles virtually all of the Company's requirements. This vertically integrated manufacturing capability provides Dril-Quip with competitive advantages because the Company is able to (i) control the quality of its products from initial stages, (ii) control the costs of its production and (iii) assure timely delivery of high-volume and customized orders. The Company was co-founded in 1981 by the current Board of Directors, Larry E. Reimert, Gary D. Smith, J. Mike Walker and Gary W. Loveless (the "Founders"). Together, Messrs. Reimert, Smith and Walker have over 75 years of combined experience in the oilfield equipment industry, essentially all of which has been with the Company and its major competitors. In addition, key department managers have been with the Company over 10 years, on average. See "Management." After the Offering, the Founders will collectively beneficially own approximately 70% of the outstanding Common Stock (approximately 67% if the over-allotment option is exercised in full). STRATEGY The Company's goal is to expand its existing market position in the offshore oil and gas equipment and services sector while at the same time increasing its earnings and cash flow per share to enhance overall stockholder value. Key elements of the Company's strategy for achieving this goal are to: . CONTINUE TO DEVELOP NEW PRODUCTS. The Company plans to utilize its technological expertise to continue to develop and introduce new products and product enhancements in both its existing product lines and new product lines. For example, the Company has recently received purchase orders for drilling risers, production risers and deepwater subsea production trees. The Company believes that the strong brand name recognition and reputation of its existing products will assist it in successfully introducing new products to customers. . INCREASE MANUFACTURING CAPACITY. To maintain and improve market share in its major product lines, the Company plans to expand its manufacturing capacity by approximately 90% during the three year period 1997 through 1999, approximately two-thirds of which is expected to be completed by the end of 1998. The Company has been operating at close to full capacity in recent years, and believes that this expansion is essential in order to meet customer demand for its existing products and to continue its strategy of developing new products. . CONTINUE TO REDUCE COSTS AND INCREASE OPERATIONAL EFFICIENCIES. The Company controls its costs through such activities as performing its own forging and heat treatment, rebuilding quality used machine tools (rather than purchasing new machine tools) and optimizing manufacturing operations to increase the rate of production. Dril-Quip also plans to expand its forging capacity to begin marketing forgings to third parties in addition to supplying its own forging requirements. The Company expects that this will provide additional cost efficiencies as well as additional revenues, thereby contributing to profits. . CONTINUE EXPANSION INTO SELECTED INTERNATIONAL MARKETS. The Company's products are currently utilized primarily in the Gulf of Mexico, the North Sea and in selected markets in Southeast Asia, Australia and South America. The Company has recently engaged international sales representatives in several additional markets, including Mexico, West Africa and the Middle East. The Company believes that there is significant potential for increased sales through focused marketing efforts in other active offshore areas in the world, such as China, Argentina and the Caspian Sea. . CAPITALIZE ON STRONG BALANCE SHEET. The Company plans to use a portion of the net proceeds from the Offering initially to repay its existing indebtedness. The Company believes that its strong balance sheet will provide it with the financial flexibility to carry out its strategy to design and develop new products, significantly increase manufacturing capacity and expand its international presence. THE OFFERING <TABLE> <S> <C> Common Stock offered by: The Company...................... 2,500,000 shares The Selling Stockholders......... 2,500,000 shares Total.......................... 5,000,000 shares Common Stock to be outstanding after the Offering................ 16,870,000 shares (1) Use of Proceeds.................... To increase manufacturing capacity, improve and expand facilities, and manufacture additional running tools for rental. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/IRM_iron_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/IRM_iron_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c361a7309c7f83f2bf58f7b6d194b13a57921a97
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/IRM_iron_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements contained elsewhere in this Prospectus. Except as otherwise indicated by the context, references to the "Company" include Pierce Leahy Corp. and its consolidated subsidiaries. Management is not aware of any definitive information about the size or nature of the North American records management market (vended and unvended, active and inactive). Estimates of such numbers and percentages contained in this Prospectus have been developed by the Company from internal sources and reflect the Company's current estimates; however, no assurance can be given regarding the accuracy of such estimates. Unless otherwise indicated, the information in this Prospectus assumes (i) no exercise by certain of the underwriters in the Equity Offerings of an over- allotment option granted by the Company to purchase additional shares of the Company's Common Stock in the Equity Offerings and (ii) gives effect to the Stock Recapitalization (as hereinafter defined) and the Offerings. In addition, unless otherwise indicated, the pro forma financial information regarding the Company in this Prospectus does not include the acquisition of Advanced File Storage Systems described under "Business--The 1997 Acquisitions" or the Recent Acquisitions described under "Business--Recent Acquisitions" and assumes an initial public offering price of $16.50 per share in the Equity Offerings. THE COMPANY The Company is the largest archive records management company in North America, as measured by its 50 million cubic feet of records currently under management. The Company operates a total of 161 records management facilities of which 148 are in the United States, serving 58 markets, including the 16 largest U.S. markets. In addition, the Company operates 13 records management facilities in five of Canada's six largest markets. The Company is a full-service provider of records management and related services, enabling customers to outsource their data and records management functions. The Company offers storage for all major media, including paper (which has typically accounted for approximately 95% of the Company's storage revenues), computer tapes, optical discs, microfilm, video tapes and X-rays. In addition, the Company provides next day or same day records retrieval and delivery, allowing customers prompt access to all stored material. The Company also offers other data management services, including customer records management programs, imaging services and records management consulting services. The Company believes it is the most technologically advanced records management company in the industry by virtue of its Pierce Leahy User Solution(R) (PLUS(R)) computer system. The PLUS(R) system fully integrates the Company's records management, data retrieval and billing functions on a centralized basis through the use of proprietary, real-time software. The PLUS(R) system assists the Company in efficiently managing records in multiple locations for national and local customers, rapidly integrating acquisitions of records management companies and maintaining a low-cost operating structure. The Company serves a diversified group of over 22,000 customer accounts in a variety of industries such as financial services, manufacturing, transportation, healthcare and law. The Company's storage and related services are typically provided pursuant to contracts that include recurring monthly storage fees, which continue until such records are permanently removed (for which the Company charges a fee), and additional charges for services such as retrieval on a per unit basis. The Company's revenues and operating income before non-recurring charges (on a pro forma basis as defined herein) for the year ended December 31, 1996 were $167.8 million and $23.4 million, respectively. From 1992 to 1996, the Company's revenues and operating income before non-recurring charges grew at compound annual growth rates of 19.9% and 28.7%, respectively. The Company attributes this growth to the expansion of its business with new and existing customers, which has been primarily driven by the trend towards outsourcing of records management functions by companies and the ongoing consolidation of the fragmented records management industry. The Company has successfully acquired and integrated 26 companies from 1992 to 1996. The Company's growth strategy is to expand its business in new and existing markets through (i) targeting new customers, (ii) growing with existing customers and (iii) continuing its acquisition program. The Company has adopted the following approaches to pursue its growth objectives: . Targeting New Customers. The Company has a dual sales strategy focused on both larger, typically multi-location accounts and smaller accounts, with a dedicated sales force for each. The Company's sales and marketing force has increased from 41 persons at the end of 1995 to 73 persons currently. For large regional and national accounts, the Company believes its national presence, sophisticated systems and low-cost operating structure provide a competitive advantage. These organizations are increasingly outsourcing such noncore activities, which enables their management to focus on their core business and to reduce space requirements and records management costs. For smaller accounts, the Company combines the cost benefits of its centralized systems with quality local service. From 1992 to 1996, the average annual growth rate of cubic feet of storage from new customers was approximately 8%. . Growing with Existing Customers. The Company services its existing customers through both a centralized customer service organization and local client service representatives. Existing customers typically generate additional records annually which are stored with the Company. From 1992 to 1996, the average annual growth rate of cubic feet of storage from existing customers was approximately 6%. . Continuing Acquisition Program. The Company believes that the records management industry is highly fragmented and offers substantial opportunity for consolidation. The Company targets potential acquisitions both in the markets it already services and in new markets which it is not yet servicing. From 1992 to 1996, the Company successfully completed and integrated 26 acquisitions, totalling approximately 12.4 million cubic feet of records at the time of acquisition. Since January 1, 1997, the Company has completed eight acquisitions, totalling approximately 7.2 million cubic feet of records at the time of acquisition. As a result of its centralized organizational structure and the PLUS(R) system, the Company has been able to rapidly achieve significant economies of scale in its acquisitions. From 1992 to 1996, the average annual growth rate of cubic feet of storage from acquisitions was approximately 10%. See "Business-- Acquisition and Growth Strategy." The Company's growth strategy is supported by an operating strategy which emphasizes providing premium standardized services while maintaining a low-cost operating structure. As a result, the Company's operating income before non- recurring charges as a percentage of total revenues increased from 13.3% in 1992 to 17.7% in 1996. The Company expects to continue its growth and enhance its position by implementing its strategy based on the following elements: . Using Sophisticated Centralized Systems to Provide High Quality Service. In tandem with the Company's centralized customer service organization and local field support personnel, the Company utilizes its PLUS(R) system to provide a high and consistent level of service (24 hours a day, seven days a week) to its customers on a national and local basis, including providing its customers with real-time access to the database. Although PLUS(R) is centralized, the system permits local management flexibility through a variety of pre-programmed options to customize the system and enhance its utility to different types of customers. . Maintaining its Position as a Low-Cost Provider through Economies of Scale. The Company strives to remain a low-cost operator through achieving economies of scale in labor, real estate, transportation, computer systems and administrative expenses. The PLUS(R) system allows the Company to enhance the efficiency of its facilities while reducing fixed and operating costs. This system eliminates the need to designate permanent locations for an individual customer's records within a facility by using sophisticated bar-coding technology which enables records to be stored wherever space is available and to be positioned within the Company's facilities based on retrieval frequency, thereby reducing labor costs. PLUS(R) is similarly valuable in helping to achieve cost savings in acquisitions. THE RECORDS MANAGEMENT INDUSTRY According to a 1994 study by the Association of Commercial Record Centers (the "ACRC"), an industry trade group with over 500 members, approximately 2,800 companies offer records storage and related services in North America. The Company believes that only 25% of the potential market outsources its records management functions and that approximately 75% is still "unvended," or internally managed. The Company estimates that the North American vended records management industry generates annual revenues in excess of $1.0 billion. Management believes that the industry is highly fragmented, with most industry participants operating on a regional or local basis. Saved documents, or records, generally fall into two categories: active and inactive. Active records refer to information that is frequently referenced and usually stored on-site by the originator. Inactive records are not needed for frequent access, but must be retained for future reference, legal requirements or regulatory compliance. Inactive records, which the Company estimates comprise approximately 80% of all records, are the principal focus of the records management industry. The Company believes that the records management industry is characterized by the following trends: . Industry Consolidation. The records management industry is undergoing a period of consolidation as larger, better capitalized industry participants acquire smaller regional or local participants. Management believes that consolidation is primarily driven by the needs of large customers for fully integrated coverage and the ability to realize economies of scale, especially with respect to labor, real estate, transportation, computer systems and administrative expenses. Industry consolidation also provides private owners of smaller records management companies the ability to obtain liquidity. . Movement Towards Outsourcing. Outsourcing of internal records management functions represents the largest single source of new business for records management companies. The Company believes that as more organizations become aware of the advantages of professional records management, such as net cost reductions and enhanced levels of service, the records management industry will continue to gain a growing portion of the unvended segment. The Company also believes that the establishment of national providers with well-known brand names will help to accelerate this trend. . Increasing Production of Paper. Increasingly widespread technologies such as facsimiles, copiers, personal computers, laser printers and advanced software packages have enabled organizations to create, copy and distribute documents more easily and broadly. In spite of new "paperless" technologies (including the Internet and "e-mail"), information remains predominantly paper based. Additionally, the cost of storing records on paper is currently less expensive than the cost of converting paper records to, and storing on, other media (e.g., computer media, imaging, microfilm, CD-Rom and optical disc). . Expanded Record Keeping Needs. While technology has augmented the growth of paper generation, several external forces and concerns have played an important role in organizations' decisions to store and retain access to records. For example, the continued growth of regulatory requirements and the proliferation of litigation has resulted in increased volumes and lengthened holding periods of documents. Retained records are also remaining in storage for extended periods of time because the process of determining which records to destroy is time consuming and often more costly in the short-term than continued storage. ACQUISITIONS Since January 1997, the Company has acquired eight records management companies, adding an aggregate of 7.2 million cubic feet of records (an increase of approximately 18% from December 31, 1996) at the time of acquisition, including the acquisition of Records Management Services, Inc. ("RMS") on April 2, 1997 and two acquisitions since May 1997 (collectively, excluding the two most recent acquisitions, the "1997 Acquisitions"). The acquisition of RMS added 5.2 million cubic feet of records in eight cities, of which three were in new markets for the Company and five were in existing markets. The two acquisitions completed since May 1997 are sometimes referred to herein as the "Recent Acquisitions." During 1996, the Company acquired 12 records management companies, adding an aggregate of 6.9 million cubic feet of records at the time of acquisition, the majority of which were completed during the second half of 1996. CONCURRENT OFFERING Concurrent with the Notes Offering, by separate prospectus, the Company and certain shareholders of the Company (the "Selling Shareholders") are offering an aggregate of 5,312,614 shares of Common Stock. The net proceeds to the Company from the sale of Common Stock by the Company are estimated to be approximately $77.5 million ($86.2 million if the underwriters' over-allotment option is exercised in full), assuming an initial public offering price of $16.50 per share. The Notes Offering is conditioned upon the consummation of the Equity Offerings.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/LNG_cheniere_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/LNG_cheniere_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c57d48d22ae1a1f69e8d5fcef998dd42a61a8132
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/LNG_cheniere_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements and the notes thereto appearing elsewhere in this Prospectus. THE COMPANY GENERAL Cheniere Energy, Inc., a holding company ("Cheniere," together with Cheniere Operating (as defined below) and Cheniere California (as defined below), the "Company"), is the owner of 100% of the outstanding common stock of Cheniere Energy Operating Co., Inc. ("Cheniere Operating") and Cheniere Energy California, Inc. ("Cheniere California"). Cheniere is a Houston-based company formed for the purpose of oil and gas exploration and if warranted, development and exploitation. Cheniere Operating is currently involved in a joint exploration program which is engaged in the exploration for oil and natural gas along the Gulf Coast of Louisiana, onshore and in the shallow waters of the Gulf of Mexico. The Company commenced its oil and gas activities through such joint program in April 1996. THE COMPANY HAS NOT YET ESTABLISHED OIL AND GAS PRODUCTION, NOR HAS IT BOOKED PROVEN OIL AND GAS RESERVES. The Company is currently a development stage enterprise with no operating revenues and no expectation of generating meaningful operating revenues before calendar year 1998. Cheniere Operating is involved with one major project in the pre- development stage. Cheniere Operating has entered into a joint exploration program pursuant to an Exploration Agreement between Cheniere Operating and Zydeco Exploration, Inc. ("Zydeco"), an operating subsidiary of Zydeco Energy, Inc. (the "Exploration Agreement"), with regard to a new proprietary 3-D seismic exploration project in southern Louisiana (the "3-D Exploration Program"). Cheniere Operating has the right to earn up to a 50% participation in the 3-D Exploration Program. Cheniere Operating believes that the 3-D seismic survey (the "Survey") is the first of its size to cross the shoreline within the Transition Zone of Louisiana, an area extending a few miles on either side of the Louisiana State coastline. The Survey is to be conducted over certain areas located within a total area of approximately 295 square miles running generally 5 miles south and 3 to 5 miles north of the coastline in the most westerly 28 miles of Cameron Parish, Louisiana (the "Survey AMI"). The 3-D Exploration Program does not plan to obtain rights to survey the entire Survey AMI. Currently, the 3-D Exploration Program has permits and similar rights to survey approximately 79% (233 square miles) of the Survey AMI and has purchased and plans additional purchases of non-proprietary seimic data over an additional 14% (40 square miles) of the Survey AMI. The 3-D Exploration Program has no plans to obtain permits or rights to survey the remaining 7% (22 square miles) of the Survey AMI. A seismic data acquisition contract was signed and acquisition of data commenced in September, 1996. Prior to discontinuing operations in late November due to weather conditions, 27 square miles of data had been acquired. Work on the project was resumed in April 1997 under the terms of an amended contract with Grant Geophysical, Inc. The 3-D Exploration Program has acquired seismic data over approximately 75% of the lands on which rights have been acquired, and anticipates that it will complete the data acquisition phase during July 1997. As previously disclosed, Cheniere California signed a Purchase and Sale Agreement with Poseidon Petroleum, LLC ("Poseidon") to acquire Poseidon's 60% working interest in six undeveloped leases in the Bonito Unit of the Pacific Outer Continental Shelf offshore Santa Barbara County, California. Cheniere California and Poseidon have mutually agreed to terminate the Purchase and Sale Agreement pursuant to the terms thereof and that upon termination, neither party thereto shall have any liability thereunder. The Company has decided that it is in its best interests at this time to concentrate its resources on the 3-D Exploration Program. <PAGE> BUSINESS STRATEGY The Company's objective is to expand the net value of its assets by growing its oil and gas reserves in a cost efficient manner. The Company intends to pursue this objective by following an integrated strategy that includes the following elements: . FOCUS ON FEW PROJECTS WITH LARGE RESERVE POTENTIAL. Louisiana Gulf Coast Transition Zone. Cheniere Operating's current activities are focused within one area, the Transition Zone of Louisiana. The Company believes that the Transition Zone, including the westernmost 28 miles of Louisiana coastline that are within the Survey AMI, has significant remaining undiscovered reserves. The 3-D Exploration Program therefore plans to focus its efforts on certain areas, all located within the Survey AMI. In addition, the substantial infrastructure along the Gulf Coast and in the shallow Gulf of Mexico permits Cheniere Operating to lower its operating costs compared to those in other geographic regions and facilitates the timely development of oil and gas discoveries. The Company's officers and Zydeco have extensive experience both onshore and offshore in the Gulf Coast and believe the 3-D Exploration Program is well positioned to evaluate, explore and develop properties in the area. Zydeco Energy and its predecessor companies have operated in south Louisiana onshore and offshore for more than 15 years. Recent activities have been principally focused in the Bay Marchand offshore area. Zydeco's technical staff, which presently includes collectively 11 geologists, geophysicists and landmen, two of which are officers, has had many years of experience in south Louisiana exploration and exploitation. See "Business and Properties". 3 <PAGE> . MAINTAIN A SIGNIFICANT WORKING INTEREST IN EACH PROJECT. Cheniere Operating has the right to earn up to a 50% participation in the 3-D Exploration Program. Under the terms of the Exploration Agreement, Cheniere Operating must timely meet its payment obligations to the 3-D Exploration Program in order to reach a 50% participation. Cheniere Operating does not intend to be an operator in the area, but intends to maintain a significant working interest to better leverage its administrative and technical resources and to better influence operator decisions. . UTILIZE THE LATEST EXPLORATION, DEVELOPMENT AND PRODUCTION TECHNOLOGY. The Company intends to use the latest technology to enhance the efficiency and economy of its exploration, development and production efforts. These include the use of advanced 3-D seismic acquisition and processing techniques in the Survey AMI. Toward that end, Zydeco has leased for use by the 3-D Exploration Program a Hewlett Packard/Convex SPP-1600 parallel processing system and has purchased software to process seismic data from the 3-D Exploration Program. . CONTROL OVERHEAD COSTS. The Company plans to maintain a small, but experienced working staff, and to leverage their talents by focusing on a relatively few projects which have high reserve potential in which it can obtain a high working interest, and to employ outside consultants and seek industry partners with the appropriate geographic and technical experience. Currently, the Company has no employees other than its executive officers and one administrative assistant. 4 <PAGE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/MMS_maximus_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/MMS_maximus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0adc988112a0d0ede0024efb3fdf16e6ba19688
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/MMS_maximus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Financial Statements and related Notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus: (i) assumes that the Underwriters' over-allotment option is not exercised; (ii) has been adjusted to give effect to a 10-for-1 split of the shares of the Company's common stock, no par value per share (the "Common Stock"), in December 1995; and (iii) has been adjusted to give effect to an 11-for-1 split of the shares of the Common Stock in February 1997. THE COMPANY MAXIMUS, Inc. ("MAXIMUS" or the "Company") provides program management and consulting services to government health and human services agencies in the United States. The Company believes that it has been at the forefront of innovation in "Helping Government Serve the People(TM)" since its inception in 1975. The Company's services are designed to make government operations more efficient and cost effective while improving the quality of the services provided to program beneficiaries. The Company applies an entrepreneurial, private sector approach incorporating advanced technology in large scale projects in almost every state in the nation. The Company believes that its leading position in the emerging private sector health and human services industry is reflected by its continued success in being awarded competitively bid contracts by government health and human services agencies and a corresponding growth in its annual revenues from approximately $19 million in fiscal 1990 to over $100 million in fiscal 1996. Federal, state and local government agencies in the United States spend over $200 billion annually on the health and human services programs for which the Company markets its services, including welfare, child care, child support enforcement, food stamps, Social Security Disability Insurance, Supplemental Security Income and Medicaid. These entitlement programs cost an estimated $21.0 billion in annual administrative costs. Public pressure to reduce costs and increase the efficiency and effectiveness of government-provided services has led to intense scrutiny of government spending, including the costs of administering certain functions of health and human services programs. There has been a recent surge in initiatives and legislation to reform federal, state and local health and human services programs, the most significant of which is the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the "Welfare Reform Act"), a comprehensive bipartisan welfare reform plan that legislated dramatic changes in the nation's welfare system. As a result of these initiatives, states have significantly more incentive to seek efficient and cost-effective ways to administer their welfare programs and reduce welfare caseloads. The Company believes that fundamental changes in the nation's entitlement programs will generate significant business opportunities for companies similar to MAXIMUS that are positioned to assist health and human services agencies in operating their programs more cost-effectively in the future. MAXIMUS conducts its operations through two groups, the Government Operations Group and the Consulting Group. The Government Operations Group administers and manages government health and human services programs, including welfare-to-work and job readiness, child support enforcement, managed care enrollment and disability services. The Consulting Group provides health and human services planning, information technology consulting, strategic program evaluation, program improvement, communications planning and revenue maximization services. The Company believes that it possesses several business strengths that provide a competitive advantage, including: (i) Single Market Focus resulting in a thorough understanding of the regulations and operations of government health and human services programs; (ii) Proven Track Record established by more than 21 years of providing successful government program management and consulting services; (iii) Wide Range of Services that meets the increasing demands of government clients for integrated vendor offerings; (iv) Proprietary Case Management Software Program, known as MAXSTAR, that reduces project implementation time and cost; and (v) Experienced Team of Professionals who thoroughly understand the marketing, assessment and delivery of services to government health and human services agencies. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Company's goal is to become the nation's leading provider of program management and consulting services to government health and human services agencies. To achieve this goal, the Company intends to: (i) capitalize on trends toward outsourcing functions of government health and human services programs; (ii) aggressively pursue new business opportunities; (iii) recruit experienced professionals possessing the skills, innovation and relationships necessary to provide high quality program management and consulting services; and (iv) pursue strategic acquisitions to provide fast, cost-effective increases in service capacity to maintain the Company's position as a market leader. There can be no assurance that the Company will be successful in implementing any or all of its strategies or in achieving its goal. MAXIMUS was incorporated in Virginia in September 1975. The Company's principal executive offices are located at 1356 Beverly Road, McLean, Virginia 22101. The Company's World Wide Web address is http://www.maxinc.com. The Company's Web site is not part of this Prospectus. The Company's telephone number is (703) 734-4200.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/MTD_mettler_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/MTD_mettler_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5dfbfddc480f1595209f1588fbf7ce66af7240d9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/MTD_mettler_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the related notes, appearing elsewhere in this Prospectus. Unless otherwise indicated, industry data contained herein is derived from publicly available industry trade journals, government reports and other publicly available sources, which the Company has not independently verified but which the Company believes to be reliable, and where such sources are not available, from Company estimates, which the Company believes to be reasonable, but which cannot be independently verified. As used in this Prospectus, '$' refers to U.S. dollars, 'SFr' refers to Swiss francs, 'pounds ' refers to British pounds sterling and 'CDN' refers to Canadian dollars. Unless otherwise stated or where the context otherwise requires, (i) references herein to the 'Company' or 'Mettler-Toledo' refer to Mettler-Toledo International Inc. and its direct and indirect subsidiaries and (ii) all information herein gives effect to the Reorganization (as defined below) and assumes no exercise of the Underwriters' over-allotment options. THE COMPANY GENERAL Mettler-Toledo is a leading global supplier of precision instruments. The Company is the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. In addition, the Company holds one of the top three market positions in several related analytical instruments such as titrators, thermal analysis systems, pH meters, automatic lab reactors and electrodes. Through its recent acquisition (the 'Safeline Acquisition') of Safeline Limited ('Safeline'), the Company is also the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. The Company focuses on high value-added segments of its markets by providing innovative instruments, by integrating these instruments into application-specific solutions for customers, and by facilitating the processing of data gathered by its instruments and the transfer of this data to customers' management information systems. Mettler-Toledo services a worldwide customer base through its own sales and service organization and has a global manufacturing presence in Europe, the United States and Asia. The Company generated pro forma 1996 net sales of $889.6 million (giving effect to the Safeline Acquisition) which were derived 49% in Europe, 40% in North and South America and 11% in Asia and other markets. The Company believes that in 1996 the global market for the Company's products and services was approximately $6.0 billion. Weighing instruments are among the most broadly used measuring devices, and their results are often used as the basis of commercial transactions. Analytical instruments are critical to the research and development and quality control efforts of end-users, while metal detection systems provide important quality and safety checks in production and packaging. The Company's products are used in laboratories as an integral part of research and quality control processes, in industry for various manufacturing processes such as quality control, materials preparation, filling, counting and dimensioning, and in food retailing for preparation, portioning and inventory control. Customers include pharmaceutical, biotechnology, chemicals, cosmetics, food and beverage, metals, electronics, logistics, transportation and food retailing businesses, as well as schools, universities and government standards laboratories. MARKET LEADERSHIP The Company believes that it maintains a leading position in each of its markets. In the weighing instruments market, Mettler-Toledo is the only company to offer products for laboratory, industrial and food retailing applications throughout the world and believes that it holds a market share more than two times greater than that of its nearest competitor. The Company believes that in 1996 it had an approximate 40% market share of the global market for laboratory balances including the largest market share in each of Europe, the United States and Asia (excluding Japan), and the number two position in Japan. In the industrial and food retailing markets, the Company believes it has the largest market share in Europe and the United States. In Asia, Mettler-Toledo has substantial, rapidly growing industrial and food retailing businesses supported by an established manufacturing presence in China. The Company also holds one of the top three global market positions in several analytical instruments such as titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors. The Company recently enhanced its leading positions in precision instruments through the addition of Safeline's market leading metal detection products, which can be used in conjunction with the Company's checkweighing instruments for important quality and safety checks in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Mettler-Toledo attributes its worldwide market leadership positions to the following competitive strengths: Global Brand and Reputation. The Mettler-Toledo brand name is identified worldwide with accuracy, reliability and innovation. Customers value these characteristics because precision instruments, particularly weighing and analytical instruments, significantly impact customers' product quality, productivity, costs and regulatory compliance. Furthermore, precision instruments generally constitute a small percentage of customers' aggregate expenditures. As a result, the Company believes customers tend to emphasize accuracy, product reliability, technical innovation, service quality, reputation and past experience with a manufacturer's products when making their purchasing decisions for weighing and other precision instruments and experience high switching costs if they attempt to change vendors. A recent independent survey concluded that 'Mettler-Toledo' was one of the three most recognized brand names in the laboratory. The Company's brand name is so well recognized that laboratory balances are often generically referred to as 'Mettlers.' The strength of this brand name has allowed the Company to successfully extend its laboratory product line to include titrators, thermal analysis systems, electrodes, pH meters and automatic lab reactors. Technological Innovation. Mettler-Toledo has a long and successful track record of innovation, as demonstrated by the invention of the single-pan analytical balance in 1945 and the introduction of the first fully electronic precision balance in 1973. The Company has continued to be at the forefront of technology with recent innovations in both weighing and related instrumentation, including its new digital load cell, its ID 20 terminal (the first personal computer interface to be certified by weights and measures regulators), its Brickstone weighing sensor technology, its GOBI moisture determination instrument, a new automatic lab reactor, the Zero Metal-Free Zone metal detector and its new PILAR (Parallel Infrared Laser Array) dimensioning equipment. As with many of the Company's recent innovations, the Company's new Brickstone weighing sensor technology provides greater accuracy, while also significantly reducing manufacturing costs and the time and expense of design changes by reducing from approximately 100 to approximately 50 the number of parts in the sensor. The Company believes it is the global leader in its industry in providing innovative instruments, in integrating its instruments into application-specific solutions for customers, and in facilitating the processing of data gathered by its instruments and the transfer of this data to customers' management information systems. Mettler-Toledo's technological innovation efforts benefit from the Company's manufacturing expertise in sensor technology, precision machining and electronics, as well as its strength in software development. Comprehensive, High Quality Product Range. Mettler-Toledo manufactures a more comprehensive range of weighing instruments than any of its competitors. The Company's broad product line addresses a wide range of weighing applications across and within many industries and regions. Furthermore, the Company's analytical instruments and metal detection systems complement its weighing products, enabling the Company to offer integrated solutions. The Company manufactures its products in its modern manufacturing facilities, most of which are ISO 9001 certified. Mettler-Toledo's broad range of high quality products and the ability to provide integrated solutions allows the Company to leverage its sales and service organization, product development activities and manufacturing and distribution capabilities. Global Sales and Service. The Company has the only global sales and service organization among weighing instruments manufacturers. At September 30, 1997, this organization consisted of approximately 3,000 employees organized into locally-based, customer-focused groups that provide prompt service and support to the Company's customers and distributors in virtually all major markets around the world. The local focus of the Company's sales and service organization enables the Company to provide timely, responsive support to customers worldwide and provides feedback for manufacturing and product development. This global infrastructure also allows the Company to capitalize on growth opportunities in emerging markets. Largest Installed Base. The Company believes that it has the largest installed base of weighing instruments in the world. From this installed base, the Company obtains service contracts which provide a strong, stable source of recurring service revenue. Service revenue represented approximately 17% of net sales in 1996, of which approximately 8% is derived solely from service contracts and repairs with the remainder derived from the sale of spare parts. The Company believes that its installed base of weighing instruments represents a competitive advantage with respect to repeat purchases and purchases of related analytical instruments and metal detection systems, because customers tend to remain with an existing supplier that can provide accurate and reliable products and related services. In addition, switching to a new instrument supplier entails additional costs to the customer for training, spare parts, service and systems integration requirements. Close relationships and frequent contact with its broad customer base also provide the Company with sales leads and new product and application ideas. Geographical, Product and Customer Diversification. The Company's revenue base is diversified by geographic region, product range and customer. The Company's broad range of product offerings is utilized in many different industries, including, among others, chemicals, pharmaceuticals, food processing, food retailing and transportation. The Company supplies customers in over 100 countries, and no one customer accounted for more than 2% of 1996 net sales. The Company's diverse revenue base reduces its exposure to regional or industry-specific economic conditions, and its presence in many different geographic markets, product markets and industries enhances its attractiveness as a supplier to multinational customers. GROWTH STRATEGY Prior to its acquisition on October 15, 1996 (the 'Acquisition') in a transaction sponsored by management and AEA Investors Inc. ('AEA Investors'), Mettler-Toledo operated as a division of Ciba-Geigy AG ('Ciba'). In connection with the Acquisition, Mettler-Toledo began implementing a strategy to enhance its position as global market leader by accelerating new product introductions, capitalizing on market opportunities, focusing on expansion in emerging markets, pursuing selected acquisitions and reengineering its operations in order to reduce its overall cost structure. These initiatives have contributed to an improvement in operating income (gross profit less research and development and selling, general and administrative expenses) before amortization and non- recurring costs ('Adjusted Operating Income') from $37.0 million (5.9% of net sales) for the nine months ended September 30, 1996 to $52.6 million (8.3% of net sales) for the nine months ended September 30, 1997, an increase of 42%. New Product Introductions. The Company intends to continue to invest in product innovation in order to provide technologically advanced products to its customers for existing and new applications. Over the last three calendar years, the Company invested approximately $170.0 million in research and development and customer engineering, which has resulted in a pipeline of innovative and new products, significant reductions in product costs and reduced time to market for new products. Examples of new product introductions planned for the remainder of 1997 and 1998 include: industrial and retail products that apply open-system architecture, a higher performance titrator, a higher performance modular thermal analysis system and new density and refractometry measurement technology. In addition, the Company is also focused on innovations that reduce manufacturing costs. For example, the Company is extending the utilization of its high-accuracy, low-cost Brickstone weighing sensor technology through much of its weighing instrument product line. The Company attributes a significant portion of its recent margin improvement to its research and development efforts. Capitalize on Market Opportunities. Mettler-Toledo believes it is well positioned to capitalize on potential market opportunities including: (i) the integration of weighing instruments into data management software systems to automate processes and/or improve process control; (ii) the development of integrated solutions that combine weighing instruments and related technologies directly into manufacturing processes; (iii) the harmonization of national weighing standards among countries, particularly in the European Union; and (iv) the standardization of manufacturing and laboratory practices through programs such as ISO 9001, Good Laboratory Practices and Good Manufacturing Practices. The Company believes that these trends, together with the Company's brand name, global presence and the pipeline of planned new products, will allow it to increase its penetration of developed markets such as Europe, the United States and Japan. Further Expansion in Emerging Markets. The Company believes that global recognition of the Mettler-Toledo brand name and the Company's global sales, service and manufacturing capabilities position it to take advantage of continued growth opportunities in emerging markets. These growth opportunities have been driven by economic development and global manufacturers' utilization of additional and more sophisticated weighing instruments as they shift production to these markets. The primary focus to date of the Company's emerging market expansion has been in Asia. In Asia (excluding Japan), the Company is the market leader in laboratory weighing instruments and has substantial and rapidly growing industrial and food retailing businesses. The Company maintains two profitable operations in China: first, a 60% owned joint venture which manufactures and sells industrial and food retailing products and, second, a wholly owned facility which manufactures and distributes laboratory products. Both of these operations serve the domestic and export markets. Recently, the Company has opened direct marketing organizations in Taiwan, Korea, Hong Kong, Thailand and Malaysia. The Company is also expanding its sales and service presence in Latin America and other emerging markets. The Company believes that its brand name, its global marketing and manufacturing infrastructure and its already substantial sales in Asia and Latin America position it to take advantage of further growth opportunities in emerging markets. Pursue Selected Acquisition Opportunities. Mettler-Toledo plans to actively pursue additional complementary product lines and distribution channels. In the laboratory market, the Company intends to leverage its existing laboratory distribution system through the acquisition of complementary product lines and the development of integrated laboratory solutions. In the industrial and food retailing markets, the Company plans to pursue the acquisition of related products and technologies that allow for the integration of weighing with other customer operations and information systems. The Company began implementing this strategy through the May 1997 acquisition of Safeline, which had calendar year 1996 revenues of $40.4 million and is the world's leading supplier of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Safeline's metal detection systems enable the Company to offer integrated solutions for quality control and data management to these industries. The Company believes that by taking advantage of its brand name and global sales and service organization it can expand the distribution of acquired product lines and operate acquired businesses more effectively. Reengineering and Cost Reductions. The Company's recent increase in profitability has been achieved in part through: (i) focusing research and development efforts on product cost reductions; (ii) achieving greater flexibility in, and a targeted reduction of, the Company's workforce, including a reduction of approximately 170 personnel in 1996; (iii) consolidating manufacturing facilities, including the closure of the Westerville, Ohio facility; and (iv) moving production to lower-cost manufacturing facilities. The Company has also started implementing a number of additional operational changes such as the restructuring of its ordering process, product delivery and parts inventory management in Europe, the consolidation of worldwide precision balance manufacturing, the realignment of industrial product manufacturing in Europe and the consolidation of the Company's North American laboratory, industrial and food retailing businesses into a single marketing organization. The Company believes that these new initiatives, as well as its continuing efforts to reduce product costs through research and development and the move of production to lower-cost manufacturing facilities, will place the Company in a position to build on its recent improvement in profitability. Furthermore, the Company believes that it can leverage its existing infrastructure, particularly the recent investments made in Asia, to obtain continued sales growth without significant additions to its overall cost base. ACQUISITION AND SAFELINE ACQUISITION Acquisition. On October 15, 1996, the Company acquired the Mettler-Toledo Group from Ciba in a transaction sponsored by management and AEA Investors. As of September 30, 1997, 688 of the Company's employees, including executive officers and key management employees, owned 1,990,550 shares of Common Stock and held options to purchase 3,537,063 additional shares of Common Stock, collectively representing on a fully diluted basis and after giving effect to the Offerings an aggregate ownership interest of approximately 13.5%. In addition, at the request of the Company, the Underwriters have reserved up to 833,333 shares to be sold in the Offerings to certain employees of the Company and certain other persons. See 'Management' and 'Security Ownership of Certain Beneficial Owners and Management.' Safeline Acquisition. On May 30, 1997, the Company acquired Safeline for pounds 61.0 million (approximately $100.0 million at May 30, 1997), plus up to an additional pounds 6.0 million (approximately $10.0 million at May 30, 1997) for a contingent earn-out payment. In October 1997, the Company made an additional payment, representing a post-closing adjustment, of pounds 1.9 million (approximately $3.1 million at October 3, 1997). Such amount will be accounted for as additional purchase price. Safeline, based in Manchester, U.K., is the world's largest manufacturer and marketer of metal detection systems for companies that produce and package goods in the food processing, pharmaceutical, cosmetics, chemicals and other industries. Safeline's metal detectors can also be used in conjunction with the Company's checkweighing products for important quality and safety checks in these industries. From 1992 to 1996, Safeline's net sales increased at a compounded annual growth rate of approximately 30%, in part due to the introduction of new products such as the first digital electronic and Zero Metal-Free Zone metal detectors. Safeline had net sales and Adjusted Operating Income of $40.4 million and $9.9 million, respectively, for the year ended December 31, 1996. CONCURRENT TRANSACTIONS Credit Agreement Refinancing. In connection with the Offerings, the Company intends to refinance its existing credit facility (the 'Credit Agreement') by entering into a new credit facility (the 'New Credit Agreement') with certain financial institutions. The Company expects that it will have pro forma borrowings under the New Credit Agreement of $383.9 million (representing an increase of $71.3 million) as of September 30, 1997 and borrowings of $38.0 million under various other credit arrangements. Of the borrowings under the New Credit Agreement, $200.0 million will be in the form of a term loan and the remainder will be outstanding under a revolving credit facility. The Company's revolving credit facility commitment will increase from $170.0 million to $420.0 million under the New Credit Agreement, and this commitment will include a $100.0 million acquisition facility. Additional borrowings under the New Credit Agreement will be used, together with the net proceeds from the Offerings, to repurchase the Notes (as defined below) and to pay related premiums and fees and expenses. As a result of the Refinancing (as defined below), the Company expects to realize significantly lower interest expense. See 'Use of Proceeds' and 'Capitalization.' Note Repurchase. As part of the Refinancing, the Company has commenced a tender offer (the 'Note Repurchase') for all of the 9 3/4% Senior Subordinated Notes due 2006 (the 'Notes') of the Company's wholly owned subsidiary, Mettler-Toledo, Inc. As of October 17, 1997, all of the Notes had been irrevocably tendered. The Company will use net proceeds from the Offerings and additional borrowings under the New Credit Agreement to finance the Note Repurchase. In connection with the Note Repurchase the Company has obtained the requisite consents to remove substantially all of the restrictive covenants and certain other provisions from the Indenture governing the Notes. The refinancing of the Credit Agreement and the Note Repurchase are collectively referred to as the 'Refinancing.' See 'Use of Proceeds' and 'Capitalization.' In connection with the refinancing of the Credit Agreement and the Note Repurchase, the Company anticipates that it will record an extraordinary loss of approximately $30.0 million representing the premium expected to be paid in connection with the purchase of the Notes and the write-off of related capitalized debt issuance fees resulting from the Refinancing. Reorganization. The name of the Company is currently MT Investors Inc. Mettler-Toledo, Inc. is currently a wholly owned subsidiary of Mettler-Toledo Holding Inc. ('Holding') which in turn is a wholly owned subsidiary of the Company. Mettler-Toledo, Inc. and Holding are the primary assets of the Company. Concurrently with the Offerings (i) Holding will be merged with and into the Company (the 'Merger'), with the Company being the surviving corporation, (ii) as part of the Merger, the Company will convert each share of its existing Class A, Class B and Class C common stock into 12.58392 shares of Common Stock, and (iii) the Company will change its name to Mettler-Toledo International Inc. In the Merger, holders who would receive fractional shares will instead receive a cash payment at the public offering price. These transactions are referred to as the 'Reorganization.' [ALTERNATE PAGE FOR MERGER PROSPECTUS] CONCURRENT TRANSACTIONS Credit Agreement Refinancing. In connection with the Offerings, the Company intends to refinance its existing credit facility (the 'Credit Agreement') by entering into a new credit facility (the 'New Credit Agreement') with certain financial institutions. The Company expects that it will have pro forma borrowings under the New Credit Agreement of $383.9 million (representing an increase of $71.3 million) as of September 30, 1997 and borrowings of $38.0 million under various other credit arrangements. Of the borrowings under the New Credit Agreement, $200.0 million will be in the form of a term loan and the remainder will be outstanding under a revolving credit facility. The Company's revolving credit facility commitment will increase from $170.0 million to $420.0 million under the New Credit Agreement, and this commitment will include a $100.0 million acquisition facility. Additional borrowings under the New Credit Agreement will be used, together with the net proceeds from the Offerings, to repurchase the Notes (as defined below) and to pay related premiums and fees and expenses. As a result of the Refinancing (as defined below), the Company expects to realize significantly lower interest expense. See 'Capitalization.' Note Repurchase. As part of the Refinancing, the Company has commenced a tender offer (the 'Note Repurchase') for all of the 9 3/4% Senior Subordinated Notes due 2006 (the 'Notes') of the Company's wholly owned subsidiary, Mettler-Toledo, Inc. As of October 17, 1997, all of the Notes had been irrevocably tendered. The Company will use net proceeds from the Offerings and additional borrowings under the New Credit Agreement to finance the Note Repurchase. In connection with the Note Repurchase the Company has obtained the requisite consents to remove substantially all of the restrictive covenants and certain other provisions from the Indenture governing the Notes. The refinancing of the Credit Agreement and the Note Repurchase are collectively referred to as the 'Refinancing.' See 'Capitalization.' In connection with the refinancing of the Credit Agreement and the Note Repurchase, the Company anticipates that it will record an extraordinary loss of approximately $30.0 million representing the premium expected to be paid in connection with the purchase of the Notes and the write-off of related capitalized debt issuance fees resulting from the Refinancing. THE MERGER The Boards of Directors of the Company and its direct wholly owned subsidiary, Holding, have authorized and directed their officers to enter into a merger agreement and consummate a merger pursuant to which Holding will be merged with and into the Company, with the Company being the surviving corporation. Delaware law requires that, in addition to such board approval, the affirmative vote of a majority of the outstanding stock of each of Holding and of the Company entitled to vote thereon is required to adopt the Merger Agreement. The Company as the sole shareholder of Holding has approved the Merger. Since only the holders of Class B common stock of the Company have voting rights, the affirmative vote or written consent of holders representing a majority of the outstanding shares of Class B common stock is required to approve the Merger. All holders of the Company's common stock who do not provide their affirmative vote or written consent for the Merger are afforded appraisal rights under Delaware law unless they have otherwise waived such rights. Upon shareholder approval and consummation of the Merger, all capital stock of Holding would be canceled and the equity securities of the Company would become the only outstanding equity securities of the Company. In the Merger, each share of the three classes of the Company's common stock would be converted into and represent the right to receive 12.58392 shares of Common Stock of the Company, except that the holders of such stock would receive a cash payment at a market price in lieu of any fractional shares that would be required to be issued in connection therewith. In the Merger, the Company's certificate of incorporation and by-laws will be amended as set forth herein. See 'The Merger.' No approval of any federal or state regulatory authority is required to consummate the Merger. The Merger will be effective upon filing of the Certificate of Merger with the Secretary of State of the State of Delaware. This is expected to occur prior to consummation of the Offerings if shareholder consent is obtained. The receipt of shares of Common Stock issued pursuant to the Merger will not be a taxable transaction for federal income tax purposes. See 'Certain Federal Income Tax Consequences of the Merger' for more detailed information regarding the federal income tax consequences of the Merger. The transaction being effected by the Merger is referred to herein as the 'Reorganization.' THE OFFERINGS The offering of 5,333,334 shares of the Company's Common Stock, par value $.01 per share, in the United States and Canada (the 'U.S. Offering') and the offering of 1,333,333 shares of the Common Stock outside the United States and Canada (the 'International Offering') are collectively referred to herein as the 'Offerings.' <TABLE> <S> <C> Common Stock Offered by the Company (1)... 6,666,667 shares Common Stock to be Outstanding After the Offerings (1)(2)........................ 37,336,801 shares Use of Proceeds........................... The net proceeds to be received by the Company from the Offerings, together with amounts borrowed under the New Credit Agreement, will be used to repurchase the Notes and to pay related premiums and fees and expenses. See 'Use of Proceeds.'
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/MTH_meritage_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/MTH_meritage_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fb2552127ad1974cf3ba84ea8a17a208ff765e6f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/MTH_meritage_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this Prospectus. The Merger Upon effectuation of the Merger on December 31, 1996, the Monterey Entities merged with and into Homeplex, with Homeplex surviving and changing its name to Monterey Homes Corporation. The Company also effected a one-for-three reverse stock split concurrent with the Merger. As consideration for the Merger, the Monterey Stockholders, who together owned 100% of the outstanding capital stock of the Monterey Entities, received 1,288,726 shares of Common Stock of the Company (the "Exchange Shares"). Although all of the Exchange Shares were issued in the name of the Monterey Stockholders, the Company will hold approximately 16.5% of the Exchange Shares for release to holders of the Warrants upon exercise of the Warrants, and the Company will remit the exercise price paid upon such exercise to the Monterey Stockholders. Upon expiration of unexercised Warrants, the Company will distribute the Exchange Shares allocable to such unexercised Warrants to the Monterey Stockholders. The Monterey Stockholders are entitled to vote the Exchange Shares issued in their names but allocated to the Warrants, prior to the time the Warrants are exercised. In addition to the Exchange Shares, the Company has reserved for issuance 266,667 shares of Common Stock, subject to certain contingencies (the "Contingent Stock"). Approximately 16.5% or 43,947 shares of the Contingent Stock are allocable to the Warrants upon their exercise. When a Warrant is exercised, a portion of the Contingent Stock will be distributed to the exercising holder without additional consideration being paid therefor. For more detailed information concerning the Merger and the Merger consideration, see "The Merger." Business of the Company Prior to the Merger, the Company was engaged in the business of making short-term and intermediate-term mortgage loans on improved and unimproved real property ("Real Estate Loans") and owned mortgage assets. In 1993, the Company decided to shift its focus to making Real Estate Loans from the ownership of mortgage assets consisting of mortgage instruments, including residential mortgage loans and mortgage certificates representing interest in pools of residential mortgage loans ("Mortgage Instruments") and mortgage interests, commonly known as residual interests, representing the right to receive the net cash flows on Mortgage Instruments ("Mortgage Interests"). Substantially all of the Company's Mortgage Instruments and the Mortgage Instruments underlying the Company's Mortgage Interests currently secure or underlie mortgage-collateralized bonds, mortgage pass-through certificates, or other mortgage securities issued by various institutions. Prior to the Merger, the Company had elected to be taxed as a real estate investment trust (a "REIT") pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Company generally was not subject to tax on its income to the extent that it distributed at least 95% of its taxable earnings to stockholders and maintained its qualification as a REIT. As part of the Merger, however, the Company discontinued its status as a REIT because it would no longer be able to meet certain tests with respect to the nature of its assets, share ownership and the amount of distributions, among other things, which are required to be met in order to qualify as a REIT. As a result, any future distributions to the Company's stockholders will not be deductible by the Company in computing its taxable income. In that regard, the Company's Board of Directors intends to retain earnings to finance the growth of the Company's business. The future payment of cash dividends, if any, will depend upon the financial condition, results of operations, and capital requirements of the Company, as well as other factors deemed relevant by the Board. The Company's business has changed substantially as a result of the Merger. The Company is no longer engaged primarily in the business of making Real Estate Loans, but instead is engaged primarily in the homebuilding business - -- the business engaged in by Monterey prior to the Merger. Monterey designs, builds, and sells single-family, move-up and semi-custom, luxury homes in the Phoenix and Tucson, Arizona metropolitan areas. Monterey achieved revenue growth from $20.4 million in 1991 to $86.8 million in 1996 and achieved pre-tax income of $6 million in 1996. Monterey attributes this growth principally to the market knowledge and experience of its management team and strong economic conditions in the Phoenix metropolitan area. For the year ended December 31, 1996, Monterey closed 307 homes generating revenues of $86.8 million and as of that date had a backlog of 120 homes under contract. The Company is a Maryland corporation headquartered in Scottsdale, Arizona. The Company's principal executive offices are located at 6613 North Scottsdale Road, Suite 200, Scottsdale, Arizona 85250, and its telephone number is (602) 998-8700. For additional information concerning the Company, see "Business of the Company" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Offering Securities Offered..................... 212,398 Warrants, which, when exercised, would entitle the holders thereof to purchase, in the aggregate, 256,345 shares of Common Stock including the Contingent Stock issuable upon exercise of the Warrants (equal to approximately 5.6% of the outstanding Common Stock of the Company, after giving effect to the exercise of the Warrants but not to the exercise or conversion of any other stock options, convertible securities, or warrants), subject to adjustment under certain antidilution provisions. Transfer Restrictions................. Certain transfer restrictions apply to the ownership of Common Stock of the Company and will also apply to the ownership of the Warrants. See "The Merger - Amendment to the Articles of Incorporation" and "The Merger - NOL Carryforward" for a description of such restrictions. Warrants Outstanding.................. 212,398 Warrants are outstanding. Common Stock Outstanding.............. As of June 13, 1997, 4,580,611 shares of Common Stock were outstanding. Use of Proceeds....................... There will be no proceeds to the Company from the sale of the Warrants by the Selling Security Holders or from the exercise of the Warrants by the Selling Security Holders. Upon the exercise of the Warrants, the Company will remit the exercise price of $4.0634 per Warrant (subject to adjustment), or aggregate gross proceeds of approximately $863,058 if all of the Warrants are exercised, to the Monterey Stockholders. See "Use of Proceeds" and "The Merger." Description of Warrants: Expiration of Warrants................ October 15, 2001 or such earlier date that the Warrants terminate in accordance with their terms (the "Expiration Date"). Exercise.............................. Each Warrant entitles the holder thereof to purchase 1.2069 shares of Common Stock (including the Contingent Stock issuable upon exercise of a Warrant) for $4.0634 (subject to adjustment as described herein). The Warrants may be exercised at any time on or prior to the Expiration Date. Adjustments........................... The number of shares of Common Stock for which a Warrant is exercisable and the purchase price thereof are subject to adjustment from time to time upon the occurrence of certain events, including, among other things, certain issuances of stock, options, or other securities, certain dividends and distributions, and certain subdivisions, combinations, and reclassifications of Common Stock. A Warrant does not entitle the holder thereof to receive any dividends paid on Common Stock. For additional information concerning the Warrants, see "The Merger - The Merger Consideration" and "Description of the Warrants." For additional information concerning the Warrant Shares, see "Description of Common Stock."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/NRC_national_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/NRC_national_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a11b2e34d360475a3abd0e0de5c746d23cfe895d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/NRC_national_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements and related notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, all information contained in this Prospectus: (i) assumes that the Underwriters' over-allotment option is not exercised and (ii) gives retroactive effect to an approximately 239.5-for-1 stock dividend paid on September 15, 1997. This Prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements can generally be identified as such because the context of the statement includes words such as the Company "believes," "anticipates," "expects," "estimates," "intends" or other words of similar import. Similarly, statements that describe the Company's future plans, objectives and goals are also forward-looking statements. The Company's actual results, performance or achievements could differ materially from those expressed or implied in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. THE COMPANY The Company believes it is a leading provider of ongoing survey-based performance measurement, analysis and tracking services to the healthcare industry. The Company believes it has achieved this leadership position based on its over 16 years of industry experience and its relationships with many of the industry's largest payers and providers. The Company addresses the growing need of healthcare providers and payers to measure the care outcomes, specifically satisfaction and health status, of their patients and/or members. NRC has been at the forefront of the industry in developing tools that enable healthcare organizations to obtain service quality information necessary to comply with industry and regulatory standards and to improve their business practices so that they can maximize new member and/or patient attraction, member retention and profitability. Since its founding 16 years ago, NRC has focused on the information needs of the healthcare industry. While performance data has always been of interest to healthcare providers and payers, such information has become increasingly important to these entities as a result of regulatory, industry and competitive requirements. In recent years, the healthcare industry has been under significant pressure from consumers, employers and the government to reduce costs. Through the implementation of managed care, which currently covers approximately 61% of all Americans, the rate of growth in healthcare costs has been substantially reduced. However, the same parties that demanded cost reductions are now concerned that healthcare service quality is being compromised under managed care. This concern has created a demand for consistent, objective performance information by which healthcare providers and payers can be measured and compared and on which physicians' compensation can, in part, be based. NRC offers three primary types of information services. The NRC Listening System (the "Listening System"), which represented 75.9% of the Company's total revenues in 1996, is a renewable performance tracking tool for gathering and analyzing data from survey respondents, which can include patients, health plan members, physicians and/or employers. The surveys are customized according to the client's needs and the level at which the client would like performance to be measured (from enterprise-wide to physician/caregiver specific), and, in some cases, are personalized to the services provided to each respondent. Survey results are used by the Company's clients to (i) identify improvements that can be made to business practices, (ii) establish physician and other employee compensation, (iii) identify strengths that can be highlighted in marketing and (iv) comply with industry and regulatory requirements. The syndicated NRC Healthcare Market Guide (the "Market Guide"), which represented 10.1% of the Company's total revenues in 1996, is a stand-alone market information and competitive intelligence source as well as a comparative performance database. The Market Guide allows the Company's clients to assess their performance relative to the industry, access best practice examples and utilize competitive information for marketing purposes. Finally, NRC performs custom research for its clients, assisting them in the identification of areas for improvement and the measurement of market issues and opportunities. Custom research represented 14.0% of the Company's total revenues in 1996. The Company expects that revenues from the Listening System and the Market Guide will grow faster than revenues from custom research. During 1996, NRC provided services to more than 200 healthcare organizations, including health maintenance organizations ("HMOs"), integrated healthcare systems, medical groups and industry regulatory bodies. The Company gathered and analyzed over 1,000,000 completed surveys for these clients in 1996. The Company's current clients include Kaiser Permanente-Northern California Region ("Kaiser"), the United States Department of Defense (the Company is a named subcontractor to the primary contract with this new 1997 client), HealthSouth Corporation, BJC Health System and Mayo Clinic. NRC has benefited from a high rate of renewable revenues. Specifically, over 80% of the Company's total billings in each of the last two years was generated from clients billed in the prior year. NRC increased its revenues from $6.8 million in 1994 to $12.6 million in 1996, a compound annual growth rate of 36.6%. Over this same period, the Company increased its operating income from $1.7 million to $3.7 million, a compound annual growth rate of 49.0%. The Company believes that it can continue to grow rapidly through: (i) expanding the depth and breadth of its current clients' performance tracking programs, since healthcare organizations are increasingly interested in gathering performance information at deeper levels of their organizations and from more of their constituencies, (ii) increasing the cross-selling of its complementary services, (iii) adding new clients through penetrating the sizeable portion of the healthcare industry that is not yet conducting performance assessments beyond the enterprise-wide level or is not yet outsourcing this function and (iv) pursuing acquisitions of, or investments in, firms providing products, services or technologies that complement those of the Company. THE OFFERING <TABLE> <S> <C> Shares Offered by the Company........................ 1,250,000 Shares Offered by the Selling Shareholder............ 850,000 Shares Outstanding Immediately After the Offering.... 7,305,000(1) Use of Proceeds...................................... For general corporate purposes, including working capital and possible acquisitions of, or investments in, complementary businesses, products, services or technologies. Nasdaq National Market Symbol........................ NRCI </TABLE> - ------------------------- (1) Excludes (i) 225,000 shares of Common Stock issuable upon exercise of employee stock options to be granted under the National Research Corporation 1997 Equity Incentive Plan (the "Equity Incentive Plan") simultaneously with this offering at an exercise price per share equal to the initial public offering price, (ii) 505,000 additional shares of Common Stock reserved for future issuance under the Equity Incentive Plan and (iii) 30,000 shares of Common Stock reserved for future issuance under the National Research Corporation Director Stock Plan (the "Director Plan"). See "Management -- Employee Benefit Plans -- Equity Incentive Plan" and "-- Director Compensation." SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------- ----------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------- ------- ------- <S> <C> <C> <C> <C> <C> <C> <C> STATEMENT OF INCOME DATA: Revenues: Renewable performance tracking services...................... $ 454 $ 507 $4,420 $6,839 $ 9,569 $4,313 $5,954 Renewable syndicated service..... 415 435 652 493 1,276 101 444 Custom and other research........ 1,737 1,869 1,683 1,585 1,755 899 552 ------ ------ ------ ------ ------- ------ ------ Total revenues................ 2,606 2,811 6,755 8,917 12,600 5,313 6,950 Operating income..................... 157 511 1,658 2,939 3,682 1,595 2,023 Pro forma net income(1).............. 166 514 1,007 1,828 2,300 1,002 1,272 Pro forma net income per share(1).... $ 0.37 $ 0.16 $ 0.20 Weighted average shares outstanding(2)..................... 6,217 6,217 6,217 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ----------------------- PRO FORMA ACTUAL AS ADJUSTED(3) ------ -------------- <S> <C> <C> BALANCE SHEET DATA: Working capital............................................. $2,830 $11,987 Total assets................................................ 7,883 17,189 Total debt.................................................. -- -- Total shareholders' equity.................................. 2,948 12,254 </TABLE> - ------------------------- (1) From 1984 through July 31, 1994, the Company was a C Corporation. Since August 1, 1994, the Company has been an S Corporation and, accordingly, was not subject to Federal and state income taxes for the five months ended December 31, 1994, for the years ended December 31, 1995 and 1996 or for the six months ended June 30, 1996 and 1997. Pro forma net income reflects a pro forma tax provision at a combined Federal and state rate of 40% for the periods the Company was an S Corporation as if it had been a C Corporation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "S Corporation Termination" and Note 3 to the Company's Financial Statements. (2) Includes 162,265 shares of Common Stock which, had they been issued (at an assumed initial public offering price of $12.00 per share less the underwriting discount), would have generated cash sufficient to fund the portion of the estimated S Corporation distributions and special cash bonuses that are in excess of the Company's 1996 net income. See Note 1 to the Company's Financial Statements. (3) Pro forma as adjusted to (i) give effect to special cash bonuses aggregating $1,740,000 to be paid to the named executive officers (as hereinafter defined) of the Company other than the Selling Shareholder and to be recognized by the Company as a compensation charge in the fourth quarter of 1997, (ii) reflect S Corporation distributions subsequent to June 30, 1997 estimated to be $2,654,000, (iii) reflect deferred tax benefits that will arise upon adoption of Financial Accounting Standards No. 109, and (iv) give effect to the sale of 1,250,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $12.00 per share and the application of the estimated net proceeds therefrom. The special cash bonuses will reduce the amount otherwise available for distribution to the Company's shareholders prior to the termination of its S Corporation status upon completion of this offering. Substantially all of the after-tax proceeds of these bonuses will be used by the recipients to purchase shares of the Company's Common Stock in this offering. The deferred tax benefits are estimated to be approximately $250,000 and will be reflected as a deferred tax asset and as a reduction to income tax expense in the statement of income upon termination of the Company's S Corporation status, which will occur upon the completion of this offering. See "Use of Proceeds," "S Corporation Termination," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 1 and 3 to the Company's Financial Statements. *** The Company was founded in 1981 as a Nebraska corporation and reincorporated in Wisconsin in September 1997. The principal office of the Company is located at 1033 "O" Street, Lincoln, Nebraska 68508, and its telephone number is (402) 475-2525.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/NRUC_national_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/NRUC_national_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..db0bf339728beb023f292c6d2af13f77d236609a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/NRUC_national_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. Certain capitalized terms used in the summary that are not defined herein are defined in the "Glossary." SECURITIES OFFERED.................... Each Certificate represents an undivided fractional interest in the assets of the Trust. TRUST................................. The Trust was formed under a Trust Agreement among National Rural Utilities Cooperative Finance Corporation ("CFC"), Kansas Electric Power Cooperative, Inc. (the "Cooperative") and The First National Bank of Chicago (the "Trustee"). The property of the Trust consists of (i) the Notes (as defined in "--Plan of Financing") made by the Cooperative, (ii) the Guarantees by the United States of America, acting through the Administrator of the Rural Utilities Service (as successor to the Rural Electrification Administration) of the United States Department of Agriculture (the "RUS"), of the timely payment of principal of and interest on the Notes (the "Guarantees"), and (iii) a forward interest rate swap agreement (the "Swap Agreement"), relating to interest, between the Cooperative and Morgan Guaranty Trust Company of New York (in such capacity, "Morgan Guaranty"), the benefits and obligations of the Cooperative under which Swap Agreement have been, with certain exceptions, assigned to and assumed by the Trust. NOTES................................. The Notes represent an obligation of the Cooperative to pay interest to the Trust on each June 4 and December 4, and to pay principal on December 4 in the years set forth under "Description of the Certificates--Principal Payments." The principal payments due on the Notes equal the aggregate amounts of Principal to be distributed to the Certificateholders on the corresponding December 15. See "Description of the Certificates--Principal Payments." The interest payments due on the Notes, at 7.654% per annum (which rate is subject to downward adjustment, by not more than 0.15% per annum, in the event certain conditions are satisfied), are sufficient to provide for the scheduled payments of interest due to Morgan Guaranty under the Swap Agreement, plus the Servicer's fees due under the Trust Agreement. See "The Swap Agreement." Pending distribution to Certificateholders, principal payments on the Notes will be invested, at the direction of the Servicer, in certain Eligible Investments. Earnings on amounts invested in Eligible Investments are not for the benefit of Certificateholders. See "Description of the Certificates--Trust Accounts and Investment of Funds." The Notes provide that if an event of default has occurred under the RUS's mortgage on the Cooperative's property referred to in "Kansas Electric Power Cooperative, Inc." (which includes a default on the Notes), the RUS may declare the outstanding principal balance on the Notes payable to the RUS. Upon such a declaration, the RUS will become obligated to pay the principal of and interest on the Notes to the Trustee, as and when due. GUARANTEES............................ The RUS has endorsed on the Notes the Guarantees of the timely payment of the principal of and interest on such Notes. See "The Guarantees." The General Counsel of the Department of Agriculture, in an opinion dated the date of original delivery of the Refunded Certificates (as hereinafter defined), and addressed to the Administrator of the RUS, opined that the Guarantees are an enforceable obligation of the Rural Electrification Administration (predecessor to the RUS) supported by the full faith and credit of the United States of America and are incontestable except for fraud or misrepresentation of which the holder of a Guarantee had actual knowledge at the time it became a holder. SWAP AGREEMENT........................ As discussed herein under "Description of the Certificates--Determination of Interest Rate," the Swap Agreement obligates Morgan Guaranty to pay to the Cooperative a variable market rate of interest to be established from time to time by BT Alex. Brown Incorporated, the successor in interest by merger to Alex. Brown & Sons Incorporated, as initial Remarketing Agent (the "Remarketing Agent"). Pursuant to the assignment by the Cooperative to the Trust of the Cooperative's right to receive payments and its obligation to make payments under the Swap Agreement, Morgan Guaranty will make payments to the Trust that correspond to the Certificate Interest Payment Dates. The variable rate payments due under the Swap Agreement equal the aggregate amounts of variable rate interest scheduled to be distributed to Certificateholders on the Certificate Interest Payment Dates. See "The Swap Agreement" and "Description of the Certificates--Distributions on Certificates." LIQUIDITY............................. Morgan Guaranty Trust Company of New York (in such capacity, "Morgan") has agreed with the Cooperative, subject to the terms of the Liquidity Protection Agreement (as defined in "Glossary"), to provide, or cause another qualified financial institution to provide, a Liquidity Facility to be available to provide moneys to purchase Certificates and pay interest thereon in the event of an Optional Tender or Mandatory Tender. The initial provider of liquidity will be Morgan Guaranty Trust Company of New York. See "The Liquidity Facility." INITIAL MODE.......................... The Certificates will be issued in the Weekly Rate Mode. The Certificates will remain in the Weekly Rate Mode unless and until the Swap Agreement is terminated or the Certificates are converted to the Flex Rate Mode. While in the Weekly Rate Mode, the variable rate payable by Morgan Guaranty under the Swap Agreement, and the interest rate distributable with respect to the Certificates for a particular Weekly Rate Period, shall be the rate established by the Remarketing Agent no later than 3:00 p.m. (New York, New York time) on the Wednesday on which such Weekly Rate Period commences (or the day preceding the Conversion of the Interest Rate Mode to the Weekly Rate Mode) or, if such day is not a Business Day, on the next succeeding Business Day, as the minimum rate of interest necessary, in the judgment of the Remarketing Agent, to enable the Remarketing Agent to sell the Certificates on such Business Day at a price equal to par, but such rate may not exceed the Maximum Certificate Rate. See "Description of the Certificates-- Determination of Interest Rate" and "--Distributions on Certificates." While in the Weekly Rate Mode, interest payments on the Certificates are due on the first Wednesday of each month, or if Wednesday is not a Business Day, the next succeeding Business Day. Interest will be calculated on the basis of the actual number of days elapsed over a year of 360 days. If at any time no Swap Agreement is in effect, or, if on any Certificate Interest Payment Date the Trustee has not received any Swap Payment, Certificateholders shall be entitled to receive distributions of Interest from payments of Guaranteed Interest made by the Cooperative or the RUS to the Trust on the Notes, calculated (on the basis of a year of 360 days consisting of twelve 30-day months) at the Fixed Rate, less the Servicer Spread, on each June 15 and December 15 (or if such day is not a Business Day, the next succeeding Business Day). See "Description of the Certificates--Distributions on Certificates." MODE CONVERSION....................... The Interest Rate Mode for the Certificates may be converted from the Weekly Rate Mode to the Flex Rate Mode (and thereafter back to the Weekly Rate Mode or to a Flex Rate Mode of a different duration) from time to time in whole, but not in part, at the written direction of the Remarketing Agent (with the consent of the Swap Provider). To effectuate such a Conversion, the Remarketing Agent must give notice thereof at least 20 Business Days prior to the effective date of such Conversion. See "Description of the Certificates--Conversion of Interest Rate Mode on Certificates." There is no involvement by the Trust, the Cooperative or CFC in directing the Remarketing Agent. FLEX RATE MODE........................ While the Certificates are in the Flex Rate Mode, the variable rate payable by Morgan Guaranty under the Swap Agreement, and the interest rate distributable with respect to the Certificates for a particular Flex Rate Period, shall be the rate established by the Remarketing Agent not later than 3:00 p.m. (New York, New York time) on the last Business Day next preceding the first day of such Flex Rate Period as the minimum rate of interest necessary, in the judgment of the Remarketing Agent, to enable the Remarketing Agent to sell the Certificates on such day at a price equal to par, but such rate may not exceed the Maximum Certificate Rate. See "Description of the Certificates-- Determination of Interest Rate" and "--Distributions on Certificates." Each Flex Rate Period shall be no less than seven days and no more than 365 days (or 366 days in a leap year) in duration and shall end on the day next preceding a Certificate Interest Payment Date. See "Description of the Certificates--Distributions on Certificates." While the Certificates are in the Flex Rate Mode, interest payments on the Certificates are due on the day following the last day of each Flex Period, or if such day is not a Business Day, the next succeeding Business Day. Interest will be calculated on the basis of the actual number of days elapsed over a year of 360 days. If at any time no Swap Agreement is in effect, or, if on any Certificate Interest Payment Date, the Trustee has not received any Swap Payment, Certificateholders shall be entitled to receive distributions of Interest from payments of Guaranteed Interest made by the Cooperative or the RUS to the Trust on the Notes, calculated (on the basis of a year of 360 days consisting of twelve 30-day months) at the Fixed Rate, less the Servicer Spread, on each June 15 and December 15 (or if such day is not a Business Day, the next succeeding Business Day). See "Description of the Certificates --Distributions on Certificates." Principal payments are due on the Certificates in the amounts and on December 15 in the years set forth under "Description of the Certificates-- Payments of Principal." On any Certificate Principal Payment Date on which distributions of Principal are to be made, the Trustee shall select, by lot, Certificates to be redeemed in an amount equal to such Principal distribution. See "Description of the Certificates--Payments of Principal." OPTIONAL TENDER....................... While the Swap Agreement is in effect, Certificateholders may, while the Certificates are in the Weekly Rate Mode, tender their Certificates for purchase, upon written notice to the Tender Agent, on or before 5:00 p.m. (New York, New York time) on a purchase date that is a Business Day not less than seven calendar days following the date of such notice. Such tendered Certificates must be delivered to the Tender Agent at or prior to 10:00 a.m. (New York, New York time) on the Purchase Date, in exchange for which the tendering Certificateholder will receive the Purchase Price. Certificates are not subject to optional tender by Certificateholders for purchase while in the Flex Rate Mode. See "Description of the Certificates--Optional Tender and Mandatory Tender." MANDATORY TENDER..................... While the Swap Agreement is in effect, Certificates are subject to mandatory tender for purchase (i) on each Conversion Date, at the Principal Amount of each Certificate, (ii) upon the occurrence of a Swap Provider Default (but only if a Liquidity Facility is in effect in accordance with its terms) or upon replacement of the Swap Agreement with an Alternate Swap Agreement, at the Purchase Price, (iii) upon notice from the Tender Agent that any Certificates then subject to purchase under the Liquidity Facility then in effect will cease to be subject to purchase under the Liquidity Facility as a result of the termination or expiration of the term of the Liquidity Facility (other than any termination resulting from suspension of the obligation of the Liquidity Provider to purchase tendered Certificates or any termination occurring immediately without notice or upon receipt by the Trustee of notice of such termination) and, if the Liquidity Facility shall not have been renewed or replaced by an Alternate Liquidity Facility, at least 10 Business Days prior to such termination or expiration or if the Trustee has not received a Rating Confirmation Notice with respect to the proposed Alternate Liquidity Facility on the fifth Business Day prior to the termination or expiration of the then existing Liquidity Facility, at the Purchase Price, and (iv) on the last day of each Flex Rate Period, at the Principal Amount of each Certificate. Certificateholders will receive notice of the mandatory purchase of their Certificates in accordance with the terms of the Trust Agreement. See "Description of the Certificates-- Optional Tender and Mandatory Tender." LIQUIDITY RISK........................ If the Swap Agreement is terminated or if a Swap Provider default has occurred and is continuing, Certificateholders will have no right to tender their Certificates for purchase if the Cooperative has not provided an Alternate Swap Agreement. Prior to this offering, there has been no market for the Certificates, and there is no assurance that a secondary market will develop or, if a secondary market does develop, that it will provide Certificateholders with liquidity of investment or will continue for the life of the Certificates. MANDATORY REDEMPTION.................. The Certificates are subject to redemption, in whole but not in part, on the Business Day following the prepayment or purchase by the Cooperative of the Notes held by the Trust (or the purchase of such Notes by a third party designated by the Cooperative). However, the Cooperative may not deliver notice of prepayment or purchase of the Notes without (i) depositing with the Trustee, 30 days before the date of any such prepayment or purchase, any principal and accrued interest payable on such prepayment or purchase date and (ii) providing for the payment of any termination amount due pursuant to the Swap Agreement. See "Description of the Certificates-- Mandatory Redemptions." The Certificates will be redeemed on the Business Day following the prepayment or purchase of the Notes held by the Trust, at the Purchase Price. The RUS may prepay or purchase the Notes at any time that they may be prepaid or purchased by the Cooperative if there is continuing an event of default under the RUS's mortgage referred to in "Kansas Electric Power Cooperative, Inc." Any such prepayment or purchase will include accrued interest that the Cooperative would be required to pay if it were to prepay or purchase such Notes on such date. The Trustee is obligated, on the Business Day next following any such prepayment or purchase of the Notes, to distribute to Certificateholders principal and accrued interest distributable with respect to the Certificates being redeemed. RECORD DATE........................... While the Swap Agreement is in effect, the record date for any payments on the Certificates is the Business Day next preceding that Certificate Payment Date. If there is no Swap Agreement in effect or if the Trustee has not received a Swap Payment when due, the Record Date is the 15th day prior to the Certificate Payment Date (whether or not a Business Day). TAX STATUS............................ The Trust will be treated as a grantor trust for Federal income tax purposes, and Certificateholders will be treated as beneficial owners of a fractional undivided interest in the assets held by the Trust. For Federal income tax purposes, the Trust will be treated as owning a debt instrument having a principal amount equal to the principal amount of the Notes and bearing interest at a rate equal to the rate payable by Morgan Guaranty under the Swap Agreement. Each Certificateholder will also be required to include in income its allocable share of that amount of interest on the Notes used to pay its share of the Servicer Spread and will generally also be entitled to a corresponding deduction for its share of the Scheduled Servicing Fee. However, a non-corporate Certificateholder may not be allowed to deduct some of or all of his pro rata share of the Scheduled Servicing Fee incurred by the Trust. See "Certain Federal Income Tax Consequences."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/NUS_nu-skin_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/NUS_nu-skin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..442d6df7762eb51fd4c4c02ce916beaf0430aa38
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/NUS_nu-skin_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. As used herein, "Nu Skin Asia Pacific" or the "Company" means Nu Skin Asia Pacific, Inc. and the Subsidiaries. The "Subsidiaries" means Nu Skin Hong Kong, Inc. ("Nu Skin Hong Kong"), Nu Skin Japan Company, Limited ("Nu Skin Japan"), Nu Skin Korea, Inc. ("Nu Skin Korea"), Nu Skin Taiwan, Inc. ("Nu Skin Taiwan") and Nu Skin Personal Care (Thailand) Limited ("Nu Skin Thailand"), collectively. Until September 30, 1994, the Company's fiscal year ended on September 30 of each year. As of October 1, 1994, the Company changed its fiscal year end to December 31 of each year, beginning with the fiscal year ended December 31, 1995. The Company Nu Skin Asia Pacific is a rapidly growing network marketing company involved in the distribution and sale of premium quality, innovative personal care and nutritional products. The Company is the exclusive distribution vehicle for Nu Skin International, Inc. ("Nu Skin International" or "NSI") in the countries of Japan, Taiwan, Hong Kong (including Macau), South Korea and Thailand, where the Company currently has operations, and in Indonesia, Malaysia, the People's Republic of China ("PRC"), the Philippines, Singapore and Vietnam, where operations have not commenced. The Company believes it is one of the fastest growing network marketing companies in Asia. Revenue increased 53.3% to $441.0 million for the six months ended June 30, 1997 from $287.7 million for the same period in 1996. Net income increased 24.7% to $43.8 million for the six months ended June 30, 1997 from $35.1 million for the same period in 1996. Revenue increased 89.2% to $678.6 million for the year ended December 31, 1996 from $358.6 million in 1995. Operating expenses have increased with the growth of the Company's revenue. Net income increased 103.2% to $81.7 million for the year ended December 31, 1996 from $40.2 million in 1995. The Company's network of independent distributors has grown since the Company's inception in 1991 to more than 400,000 active distributors as of June 30, 1997. See "Risk Factors--Managing Growth." A great deal of the Company's success to date is the result of the growth of its Japanese business, which can be attributed to an increasing awareness of the Nu Skin and IDN brands. Significant revenue was recognized from the outset of the Company's operations in Japan in 1993 due to the immediate attention given to the market by leading NSI distributors from around the world. Japan has continued to post strong financial results for the Company, with revenue increasing by approximately 64% in U.S. dollars and 90% in local currency for 1996 compared to 1995 and by approximately 57% in U.S. dollars and 77% in local currency for the six months ended June 30, 1997 compared to the same period in 1996. Given the size of the direct selling market in Japan and the growing Japanese demand for the Company's premium quality and innovative products, management believes that there is still significant opportunity for revenue growth in this market. The Company's product philosophy is to combine the best of science and nature in developing premium quality, innovative personal care and nutritional products which are specifically designed for the network marketing distribution channel. The Company offers products in two distinct categories: personal care products, marketed under the trademark "Nu Skin," and nutritional products, marketed under the trademark "Interior Design Nutritionals" ("IDN"). The Nu Skin personal care product lines include facial care, body care, hair care and color cosmetics, as well as specialty products such as sun protection, oral hygiene and fragrances. The IDN product lines include nutritional supplements, nutritious and healthy snacks, sports and fitness nutritional products and botanical supplements. In Japan, Taiwan and Hong Kong, the Company currently offers most of the Nu Skin personal care products and approximately one-third of the Interior Design Nutritionals products, including LifePak, the core IDN nutritional supplement. In South Korea, the Company currently offers approximately one-half of the Nu Skin personal care products, including most of the Nu Skin core facial and hair care products, and LifePak. In Thailand, the Company currently offers one-third of the Nu Skin personal care products, including most of the core facial and hair care products, and none of the nutritional products. The Company believes that it can significantly grow its business and attract new customers by expanding its product offerings in each of its markets to include more of the existing Nu Skin personal care and IDN products. In addition to expanding its product offerings with existing Nu Skin personal care and IDN products, the Company intends to introduce new products tailored to specific markets. The distribution of products through the network marketing and other direct selling channels has grown significantly in recent years. The World Federation of Direct Selling Associations ("WFDSA") reports that, since 1990, worldwide direct distribution of goods and services to consumers has increased 76%, resulting in the sale of nearly $80 billion of goods and services in 1996. According to the WFDSA, $35 billion of goods and services were sold by its members in 1996 through direct selling channels in the markets in which the Company currently operates, which represents 44% of the global volume of direct sales by its members. Operating Strengths and Growth Strategy The Company believes that its success to date is due to its reputation and commitment to provide a wide range of premium quality, innovative personal care and nutritional products and an appealing global business opportunity for persons interested in establishing a direct sales business. Specifically, the Company's operating strengths include (i) its premium product offerings, (ii) a unique global distributor compensation plan (the "Global Compensation Plan"), which compensates distributors for product sales in downline distribution networks in any country in which NSI and its affiliates operate, (iii) a comparatively high level of distributor incentives paid to independent distributors under the Global Compensation Plan, (iv) a systematic market development program, (v) individual distributor attention and other distributor support programs and (vi) an experienced management team at both the Company and the Subsidiaries. See "Business--Operating Strengths." Consideration of the Company's operating strengths must be tempered by consideration of various risks which impact or may impact the Company and its operations. See "Risk Factors." The Company's primary objective is to capitalize on its operating strengths to become a leading distributor of consumer products in each of its markets. The Company intends to pursue this strategy by (i) introducing new products, (ii) opening new markets, (iii) attracting new distributors and enhancing distributor productivity and (iv) increasing brand awareness and loyalty. See "Business--Growth Strategy." Consideration of the Company's growth strategy should be made in connection with a consideration of the risks associated with such growth strategy. See "Risk Factors." Relationship with Nu Skin International NSI, founded in 1984 and based in Provo, Utah, is engaged in selling personal care and nutritional products and, together with its affiliates, comprises one of the largest network marketing organizations in the world. NSI has provided, and will continue to provide, a high level of support services to the Company, including product development, distributor support services, marketing and other managerial support services. Management believes that the Company's relationship with NSI has allowed the Company to increase revenue and net income at rates that otherwise may not have been possible. Since distributor agreements are entered into between NSI and distributors, all of the distributors who generate revenue for the Company are distributors of NSI. The Company primarily relies on NSI to enforce distributor policies and procedures. NSI's distributor network is licensed by NSI to the Subsidiaries. See "Risk Factors--Reliance Upon Independent Distributors of NSI" and "--Relationship with and Reliance on NSI; Potential Conflicts of Interest." Recent Events The Reorganization. The Company was incorporated on September 4, 1996. On November 20, 1996, the stockholders of Nu Skin Japan, Nu Skin Taiwan, Nu Skin Hong Kong, Nu Skin Korea and Nu Skin Thailand contributed their shares of capital stock to the capital of the Company in a transaction (the "Reorganization") intended to qualify under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"), in exchange for shares of Class B Common Stock. Prior to the Reorganization, all of the outstanding shares of the Subsidiaries were held by these stockholders. As a result of the Reorganization, each of the Subsidiaries became a wholly-owned subsidiary of the Company. The Initial Public Offerings. In November 1996, the Company and certain selling stockholders (the "Selling Stockholders") sold a total of 10,465,000 shares of Class A Common Stock in underwritten public offerings (the "Underwritten Offerings"). Of the 10,465,000 shares of Class A Common Stock sold in the Underwritten Offerings, 4,750,000 shares were offered and sold by the Company and 5,715,000 shares were offered and sold by the Selling Stockholders. Registration Statement for Secondary Public Offering. On June 4, 1997, the Company filed with the Securities and Exchange Commission a registration statement on Form S-1 (File No. 333-28513) related to the public offering by the Existing Stockholders and certain of their affiliates (the "Secondary Offering Selling Stockholders") of 7,000,000 shares of Class A Common Stock. On July 17, 1997, the Company filed a pre-effective amendment No. 1 to this registration statement. The Company converted the registration statement to a resale shelf offering and deleted references to the underwriters. The registration statement has not been declared effective and the shares subject to the registration statement can only be resold by the Secondary Offering Selling Stockholders once the registration statement has been declared effective and only in accordance with the plan of distribution outlined in the registration statement. The Company currently has no intention to proceed with the offering which is the subject of the registration statement. The Rule 415 Offerings Distributor Options Prior to the date of this Prospectus, the Existing Stockholders contributed to the Company 1,605,000 shares of the Company's Class A Common Stock for use in implementing an NSI distributor equity incentive program. Also prior to the date of this Prospectus, the Company granted to NSI an option to acquire such 1,605,000 shares of Class A Common Stock (the "Distributor Options"). Each Distributor Option entitles the holder to purchase one share of Class A Common Stock. Upon vesting, Distributor Options will be exercisable at $5.75, which is 25% of the initial price per share to the public in the Underwritten Offerings (the "Exercise Price"). Distributor Option Allocation. From January 1, 1997 until August 31, 1997 (the "Qualification Period"), existing and new distributors in each country where NSI conducts business and where local laws may permit the issuance of options hereunder had the opportunity to qualify for an allocation of the Distributor Options from NSI by achieving executive distributor levels ("Executive Pin Levels") of Gold or higher under the Global Compensation Plan as of August 31, 1997 and by submitting a representation letter to NSI as provided in the NSI 1996 Distributor Stock Option Plan, as amended (the "NSI Stock Option Plan") (qualifying distributors are hereinafter referred to as "Eligible Distributors"). Pursuant to NSI's policies and procedures, that portion of sales volume for September 1997 which would be attributed to sales volume for August 1997 will be included for purposes of determining commissions paid during the Qualification Period, as well as whether a distributor qualifies as an Eligible Distributor. Each allocation of Distributor Options made to an Eligible Distributor that is an entity (such as a partnership or corporation) shall be made by NSI solely to the entity, not to the owners of the entity individually. NSI will notify Eligible Distributors of the results of the allocation of the Distributor Options by October 31, 1997. Each Eligible Distributor shall have the right to decline his or her Distributor Options by notice to NSI no later than November 15, 1997. Each Eligible Distributor who has not declined his or her Distributor Options on or before November 15, 1997 will be granted a number of Distributor Options determined in accordance with the formula set forth below. Because there is a fixed number of Distributor Options available for this program, the allocation formula and explanations are rather complex. S x (X/Y) = number of Distributor Options to be allocated to an Eligible Distributor; where S = fixed number of Distributor Options available = 1,605,000 X = C x (P+G) = Weighted Individual Compensation C = net commissions paid to the Eligible Distributor on sales volume during the Qualification Period P = Executive Pin Level Weighting Factor G = Business Growth Weighting Factor Y = Sum of Weighted Individual Compensation paid to all Eligible Distributors during the Qualification Period = Weighted Total Compensation Thus, the number of Distributor Options to be allocated to an Eligible Distributor will be determined by multiplying the total number of Distributor Options available ("S" in the formula above) by the quotient obtained by dividing the Eligible Distributor's Weighted Individual Compensation ("X" in the formula above, and as defined below) under the Global Compensation Plan during the Qualification Period by the sum of the Weighted Individual Compensation paid to all Eligible Distributors under the Global Compensation Plan on sales volume during the Qualification Period (the "Weighted Total Compensation," and "Y" in the formula above). An Eligible Distributor's Weighted Individual Compensation is equal to total commissions, net of any withholdings, fines, penalties, or the like, paid to such Eligible Distributor on sales volume during the Qualification Period ("C" in the formula above) multiplied by the sum of his or her Executive Pin Level Weighting Factor ("P" in the formula above, and as defined below) and his or her Business Growth Weighting Factor ("G" in the formula above, and as defined below). Executive Pin Level Weighting Factor. An Eligible Distributor's Executive Pin Level Weighting Factor is the percentage set forth in the table below opposite the actual Executive Pin Level achieved by such Eligible Distributor as of August 31, 1997. Allocations of Distributor Options shall generally be based on the Executive Pin Level at which Eligible Distributors receive commissions, giving consideration to any temporary exceptions which may be granted by NSI from time to time. Executive Executive Pin Level Pin Level as of August 31, 1997 Weighting Factor - --------------------- ---------------- Hawaiian Blue Diamond................................ 100% Blue Diamond......................................... 94% Diamond.............................................. 86% Emerald.............................................. 82% Ruby................................................. 78% Lapis................................................ 74% Gold................................................. 72% Business Growth Weighting Factor. An Eligible Distributor's Business Growth Weighting Factor is based on the increase in his or her average monthly net commissions paid on sales volume during the Qualification Period. An Eligible Distributor's Business Growth Weighting Factor is equal to one-third (1/3) of 1%, up to a maximum of 100%, for each 1% increase in average monthly net commissions paid during the Qualification Period that is greater than actual net commission paid during September 1996 (the "Base Month"). The Base Month for a distributor qualifying as an Eligible Distributor after September 1996 is deemed to be his or her first month as an Eligible Distributor. Illustrations. For purposes of illustration, for the eight-month period ended on August 31, 1996 (the "Illustrative Qualification Period"), the Weighted Total Compensation (Y) will be assumed to have been $200,000,000. An Emerald level distributor who was paid net commissions (C) of $40,000 (or average monthly net commissions of $5,000) during the Illustrative Qualification Period and who had previously been paid net commissions of $1,000 during such distributor's Base Month would apply a weighting factor of 182% to such net commissions (computed using the 82% Executive Pin Level Weighting Factor (P) for an Emerald level distributor plus a 100% Business Growth Weighting Factor (G) based on the 400% increase in average net commissions paid during the Illustrative Qualification Period over net commissions paid during such distributor's Base Month), resulting in Weighted Individual Compensation (X) of $72,800. Such distributor's allocation of Distributor Options at the end of the Illustrative Qualification Period would be equal to the quotient of his or her Weighted Individual Compensation (X = $72,800) divided by the Weighted Total Compensation (X = $200,000,000), multiplied by the total number of Distributor Options (S = 1,605,000). Such distributor would therefore be allocated 584 Distributor Options. To illustrate another example, the Weighted Total Compensation (Y) for the Illustrative Qualification Period will be assumed to have been $300,000,000. A Blue Diamond level distributor who was paid net commissions (C) of $520,000 (or average monthly net commissions of $65,000) during the Illustrative Qualification Period and who had previously been paid net commissions of $50,000 during such distributor's Base Month would apply a weighting factor of 104% to such net commissions (computed using the 94% Executive Pin Level Weighting Factor (P) for a Blue Diamond level distributor plus a 10% Business Growth Weighting Factor (G) based on the 30% increase in average net commissions paid during the Illustrative Qualification Period over net commissions paid during such distributor's Base Month) resulting in Weighted Individual Compensation (X) of $540,800. Such distributor's allocation of Distributor Options at the end of the Illustrative Qualification Period would be equal to the quotient of his or her Weighted Individual Compensation (X = $540,800) divided by the Weighted Total Compensation (Y = $300,000,000), multiplied by the total number of Distributor Options (S = 1,605,000). Such distributor would therefore be allocated 2,893 Distributor Options. Vesting. For Distributor Options to vest, an Eligible Distributor will generally be required to maintain, during the period from September 1, 1997 through December 31, 1997 (the "Vesting Period"), the Executive Pin Level he or she achieved by the end of the Qualification Period (the "Qualifying Executive Pin Level"). If an Eligible Distributor fails to maintain the Qualifying Executive Pin Level for any month during the Vesting Period, the number of Distributor Options vested in such Eligible Distributor will be recalculated at the end of the Vesting Period to be that number of Distributor Options such Eligible Distributor would have been allocated had he or she achieved, at the end of the Qualification Period, the lowest Executive Pin Level held by him or her during the Vesting Period (the "Recalculated Distributor Options"). For example, if an Eligible Distributor ends the Qualification Period as a Diamond level distributor with an Executive Pin Level Weighting Factor of 86% and a Business Growth Weighting Factor of 15%, resulting in a combined weighting factor for Weighted Individual Compensation of 101%, but during the Vesting Period the lowest actual Executive Pin Level to which the distributor falls is Ruby level, which carries an Executive Pin Level Weighting Factor of 78% (the Business Growth Weighting Factor would remain unchanged), the combined weighting factor for Weighted Individual Compensation would be reduced to 93%. The difference between the number of Distributor Options allocated to an Eligible Distributor at the end of the Qualification Period and the Recalculated Distributor Options, if the amount of Recalculated Distributor Options is lower, will be forfeited by such Eligible Distributor. If an Eligible Distributor falls below the Gold Executive Pin Level at any time during the Vesting Period, all Distributor Options held by such Eligible Distributor will be immediately forfeited. Forfeited or declined options will not vest but will revert to NSI. Exercisability. Distributor Options vested in an Eligible Distributor will become exercisable upon receipt of written notice from NSI of the number of Distributor Options vested in such Eligible Distributor which is currently estimated to be by January 31, 1998, and will remain exercisable for a four-year period following December 31, 1997, provided the Eligible Distributor maintains an Executive Pin Level of Gold or higher until the date of exercise. No Distributor Options will be exercisable after December 31, 2001. By exercising any portion of the Distributor Options, each Eligible Distributor who is granted more than 3,000 Distributor Options agrees not to resell in any given six-month period more than 33% of the shares of Class A Common Stock issuable upon exercise of the Distributor Options originally granted to such Eligible Distributor. Upon vesting, Distributor Options will be exercisable at the Exercise Price of $5.75, which is 25% of the initial price per share to the public in the Underwritten Offerings. Certain Factors Impacting Program. The allocation examples presented above are for illustrative purposes only. There can be no assurance that the number of Eligible Distributors will remain constant during the Qualification Period. Given the fixed number of Distributor Options available, the number of Distributor Options allocable to an Eligible Distributor will decrease as the total number of Eligible Distributors increases and conversely will increase as the total number of Eligible Distributors decreases. NSI has historically experienced periods of significant fluctuations in its total number of executive distributors and may experience such fluctuations in the future. An increase in the total number of Eligible Distributors during the Qualification Period could result in a material reduction in the number of Distributor Options allocable to an individual Eligible Distributor. The number of Distributor Options allocable to an Eligible Distributor will also decrease as the number of Eligible Distributors at higher Executive Pin Levels increases as a proportion of all Eligible Distributors and conversely will increase as the number of Eligible Distributors at higher Executive Pin Levels decreases as a proportion of all Eligible Distributors. There can be no assurance that the proportion of Eligible Distributors at each Executive Pin Level will remain constant during the Qualification Period. In addition, the number of Distributor Options allocable to an Eligible Distributor will decrease as such Eligible Distributor's compensation decreases as a proportion of total compensation paid to all Eligible Distributors and conversely will increase as such Eligible Distributor's compensation increases as a proportion of total compensation paid to all Eligible Distributors. There can be no assurance that an Eligible Distributor's compensation will remain constant as a percentage of total Eligible Distributor compensation during the Qualification Period. Further, there can be no assurance that an Eligible Distributor will be able to earn particular compensation amounts during the Qualification Period. In certain countries, including Japan, the formula used in determining allocations among distributors may be modified to comply with local regulations, which will impact the number of Distributor Options allocated to all Eligible Distributors. The Distributor Option program is not intended to be an Eligible Distributor's primary source of income. An Eligible Distributor's primary income source, i.e., product sales and commissions, will continue to be based on the efforts of the Eligible Distributor and his or her downline organization. Regulatory Requirements. The availability of the Distributor Options in each country in which NSI distributors reside is entirely dependent upon and subject to NSI's ability to secure any necessary regulatory approvals, qualifications or exemptions in each such country. The necessary regulatory approvals or qualifications have not been secured in each country, and it is anticipated that in certain countries where regulatory approvals or qualifications have been obtained the exercisability of the Distributor Options may be suspended until further regulatory approvals are secured. In addition, it is possible that NSI may not be able to secure the necessary regulatory approvals or qualifications in certain countries. As of the date of this Prospectus, NSI has been unable to secure the necessary legal approvals to implement the NSI Stock Option Plan in Italy, South Korea and the United Kingdom. In Japan, as required by law, the terms "commission" or "compensation" for purposes of calculating Weighted Individual Compensation and Weighted Total Compensation in the formula used to determine allocations of distributor options, shall not include rebates paid on personal sales efforts or commissions paid on personal sales volume as part of the executive fountain bonus. Due to local legal and other requirements, the NSI Stock Option Plan as implemented in the Netherlands and Hong Kong has been changed to provide that vested distributor options will be exercisable for 90 days following December 31, 1997, provided a Netherlands or Hong Kong distributor holding such options maintains an Executive Pin Level of Gold or higher until the date of exercise. In certain countries, including Belgium, France, Spain and possibly others, only existing distributors and/or existing executive distributors will be allowed to participate in the NSI Stock Option Plan. In Canada, information regarding the NSI Stock Option Plan is permitted to be provided only to distributors with an Executive Pin Level of Gold or higher. In the event the NSI Stock Option Plan was not implemented until after commencement of the Qualification Period, or is suspended after commencement of such period in a given country (a "Deferred Qualification Country"), the formulas referenced above will be modified as follows. For purposes of calculating Weighted Individual Compensation and Weighted Total Compensation, a distributor resident in a Deferred Qualification Country shall be deemed to have been paid during each month during the Qualification Period for which the NSI Stock Option Plan was not implemented or was suspended, net commissions equal to the average monthly net commissions actually paid to such distributor during the portion of the Qualification Period during which the NSI Stock Option Plan was implemented in such Deferred Qualification Country. Product Returns. By receiving an allocation of Distributor Options at the end of the Qualification Period, each Eligible Distributor confirms his or her agreement to continue to resell or personally consume at least 80% of all products purchased by such Eligible Distributor per month. In addition, product returns during the Qualification or Vesting Periods will reduce commission levels and may affect distributor pin levels, consequently impacting the number of Distributor Options received by an Eligible Distributor. In the event of product returns occurring after the Qualification or Vesting Periods which would have affected distributor pin levels or qualification for or vesting of Distributor Options had such product returns been made during the Qualification or Vesting Periods, NSI reserves the right to use any mechanism available to it under the NSI distributor policies and procedures, as may be amended from time to time, to recoup the value of the Distributor Options received by an Eligible Distributor on the Vesting Date in excess of the value of Distributor Options which would have vested had such returns been made prior to the Vesting Date. Employee Stock Bonus Awards Prior to the date of this Prospectus, the Existing Stockholders also contributed an aggregate of 1,250,000 shares of Class A Common Stock to NSI and its affiliates (other than the Company) for use in connection with the employee stock bonus awards to be made by NSI and its affiliates (other than the Company) to their respective employees in connection with the Rule 415 Offerings. The shares of Class A Common Stock underlying each such employee stock bonus award will be issued to the employee recipient at a rate of 25% per year commencing one year following the date of the award, unless otherwise specified, provided the employee recipient is still employed by NSI or one of its affiliates (other than the Company). As of August 21, 1997, NSI and its affiliates (other than the Company) had made stock bonus awards for 480,960 shares of Class A Common Stock, of which awards for 19,096 shares had lapsed in connection with the termination of the employee recipients. The Company will also issue 163,546 shares of Class A Common Stock in connection with stock bonus awards to be made to the Company's employees pursuant to the 1996 Stock Incentive Plan on terms substantially similar to those described above in relation to the employee stock bonus awards to be made by NSI and its affiliates (other than the Company). The Company has made stock bonus awards for 150,959 shares of Class A Common Stock, of which awards for 12,413 shares have lapsed in connection with the termination of the employee recipients. Regulatory and Tax Issues The availability of Distributor Options and employee stock bonus awards in each country in which NSI distributors and/or employees reside is entirely dependent upon and subject to NSI's ability to secure any necessary regulatory approvals, qualifications or exemptions in each such country. There can be no assurance that such qualifications will be secured or, once secured, will not be suspended. The receipt of Distributor Options and employee stock bonus awards will also subject the recipient to potentially material income tax and capital gains tax implications. See "Rule 415 Selling Stockholders--Regulatory and Tax Issues" and "Certain United States Tax Consequences to Non-United States Holders." The Distributor Options, the shares of Class A Common Stock underlying the Distributor Options and the employee stock bonus awards are included in this Prospectus pursuant to Rule 415 under the Securities Act of 1933, as amended (the "1933 Act"). The distribution of the Distributor Options will occur for purposes of Rule 415 upon the assignment of the Distributor Options by NSI to the distributors. The shares of Class A Common Stock will be issued by the Company upon the exercise of the Distributor Options. The Company will not receive any proceeds from the distribution of shares by the Company and the Rule 415 Selling Stockholders in connection with the employee stock bonus awards. The Company will receive the proceeds from the issuance of shares in connection with the exercise of the Distributor Options. See "Rule 415 Selling Stockholders." <TABLE> <S> <C> Distributor Options offered by NSI(1).............. 1,605,000 Distributor Options Common Stock underlying the Distributor Options(2). 1,605,000 shares of Class A Common Stock Employee stock bonus awards offered by the Rule 415 Selling Stockholders(3).............. 1,250,000 shares of Class A Common Stock Employee stock bonus awards offered by the Company....................................... 163,546 shares of Class A Common Stock Common Stock to be outstanding after the Rule 415 Offerings:(4)(5) Class A Common Stock(6)(7).................... 13,491,557 shares Class B Common Stock.......................... 71,696,675 shares Total Common Stock..................... 85,188,232 shares New York Stock Exchange symbol..................... "NUS" Voting rights...................................... The Class A Common Stock and Class B Common Stock vote as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock entitling its holder to one vote and each share of Class B Common Stock entitling its holder to ten votes. In all other respects the holders of Class A Common Stock and the holders of Class B Common Stock have equal rights. All of the shares of Class B Common Stock are owned by the Existing Stockholders and certain of their affiliates. After consummation of the Rule 415 Offerings, the Existing Stockholders and certain of their affiliates will beneficially own shares of Common Stock having approximately 98.2% of the combined voting power of the outstanding shares of Common Stock. </TABLE> (1) Consists of a divisible and assignable option granted by the Company to NSI to purchase shares of Class A Common Stock contributed to the Company by the Existing Stockholders prior to the Rule 415 Offerings, which option will be divided among and assigned to distributors by NSI pursuant to the NSI Stock Option Plan. (2) Consists of shares of Class A Common Stock issuable upon the exercise of the Distributor Options at an exercise price equal to 25% of the initial price per share to the public in the Underwritten Offerings. (3) Includes shares of Class A Common Stock contributed to the Rule 415 Selling Stockholders prior to the Rule 415 Offerings by certain Existing Stockholders. (4) Reflects the conversion by the Existing Stockholders prior to the Rule 415 Offerings of (a) 1,605,000 shares of Class B Common Stock into shares of Class A Common Stock for issuance upon the exercise of the Distributor Options; and (b) 1,250,000 shares of Class B Common Stock into shares of Class A Common Stock for issuance pursuant to employee stock bonus awards. (5) All shares of Class B Common Stock are currently held by the Existing Stockholders and certain of their affiliates and each such share is convertible at any time into one share of Class A Common Stock and converts automatically into one share of Class A Common Stock (i) upon a transfer to a person other than an Existing Stockholder or certain of the affiliates of the Existing Stockholders, and (ii) if the number of shares of Class B Common Stock becomes less than 10% of the aggregate number of shares of Common Stock outstanding. See "Description of Capital Stock--Common Stock--Conversion." (6) Includes: (a) 3,018,546 shares of Class A Common Stock issued and sold in the Rule 415 Offerings (assuming the exercise of all 1,605,000 Distributor Options and the vesting of all 163,546 stock bonus awards offered hereby by the Company to certain of its employees); (b) 10,465,000 shares of Class A Common Stock sold in the Underwritten Offerings by the Company and the Selling Stockholders; and (c) 8,011 shares of Class A Common Stock issued and sold by the Company pursuant to Regulation S under the 1933 Act. (7) Does not include: (i) 3,836,454 shares of Class A Common Stock reserved for issuance pursuant to the 1996 Stock Incentive Plan; and (ii) 250,825 shares of Class A Common Stock subject to a stock option which was granted to an executive officer of the Company. See "Management--1996 Stock Incentive Plan," "Certain Relationships and Related Transactions--Agreements and Arrangements with Management." Forward-Looking Statements Statements made herein under the captions "--Operating Strengths and Growth Strategy," "Risk Factors--Seasonality and Cyclicality; Variations in Operating Results," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "--Seasonality and Cyclicality," "--Outlook," "Business--Operating Strengths," "--Growth Strategy," and "--Country Profiles" are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). In addition, when used in this Prospectus the words or phrases "will likely result," "expects," "intends," "will continue," "is anticipated," "estimates," "projects," "management believes," "the Company believes" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Reform Act. Forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance and financial results of the Company. The forward-looking statements and associated risks set forth herein relate to the: (i) expansion of the Company's market share in its current markets; (ii) Company's entrance into new markets; (iii) development of new products and new product lines tailored to appeal to the particular needs of consumers in specific markets; (iv) stimulation of product sales by introducing new products; (v) opening of new offices, walk-in distribution centers and distributor support centers in certain markets; (vi) promotion of distributor growth, retention and leadership through local initiatives; (vii) upgrading of the Company's technological resources to support distributors; (viii) obtaining of regulatory approvals for certain products, including LifePak; (ix) stimulation of product purchases by inactive distributors through direct mail campaigns; (x) retention of the Company's earnings for use in the operation and expansion of the Company's business; and (xi) development of brand awareness and loyalty. All forward-looking statements are subject to certain risks and uncertainties, including those discussed under the caption "Risk Factors" herein, that could cause actual results to differ materially from historical results and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the important factors listed under the caption "Risk Factors" could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any views or statements expressed with respect to future periods. Important factors and risks that might cause such differences include, but are not limited to, factors related to the allocation and vesting of the Distributor Options, the decrease in the number of Distributor Options available, the effect of product returns, restrictions on the resale of the shares underlying the Distributor Options, regulatory and taxation risks, the Company's reliance upon independent distributors of NSI, the potential effects of adverse publicity, including adverse publicity regarding the Company and other direct selling companies in South Korea, the potential negative impact of distributor actions, currency risks, seasonal and cyclical trends, variations in operating results, government regulation of direct selling activities, government regulation of products and marketing, import restrictions, other regulatory issues, including regulatory action against the Company or its distributors in any of the Company's markets and particularly in South Korea, the Company's reliance on certain distributors, the potential divergence of interests between distributors and the Company, the Company's entering new markets, and the introduction of new products in the Company's existing markets, managing the Company's growth, the possible adverse effect on the Company of the change in the status of Hong Kong, the Company's relationship with and reliance on NSI, potential conflicts of interest between the Company and NSI, control of the Company by the Existing Stockholders, the anti-takeover effects of dual classes of common stock, the adverse impact of the Distributor Option program on the Company's income, the Company's reliance on and the concentration of outside manufacturers, the Company's reliance on the operations of and dividends and distributions from the Subsidiaries, taxation and transfer pricing, the potential increase in distributor compensation expense, product liability issues, market conditions, especially in South Korea, and competition, the Company's operations outside the U.S., the anti-takeover effects of certain charter, contractual and statutory provisions, the existence of shares eligible for future sale into the Company's market for the Class A Common Stock upon exercise of the Distributor Options, the vesting of the employee stock bonus awards and otherwise, dilution, the absence of dividends, potential adverse effects of the Company's price increases on sales and distributor growth, the introduction and acceptance in South Korea of LifePak, the Company's core IDN product, and other risks inherent in the importation, regulation and sale of products in the Company's markets. In light of the significant uncertainties inherent in forward-looking statements, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. See "Risk Factors." ----------- Nu Skin(R), Interior Design Nutritionals(TM), IDN(R), a logo consisting of an image of a gold fountain with the words "Nu Skin" below it, and a logo consisting of the stylized letters "IDN" in black and red are trademarks of NSI which are licensed to the Company. The italicized product names used in this Prospectus are product names and also, in certain cases, trademarks and are the property of NSI. All other tradenames and trademarks appearing in this Prospectus are the property of their respective holders. See "Business--Relationship with NSI--Trademark/Tradename License Agreements," "--Licensing and Sales Agreements" and "--Korean Operating Agreements." The principal executive offices of the Company are located at 75 West Center Street, Provo, Utah 84601, and the Company's telephone number is (801) 345-6100. In this Prospectus, references to "dollars" and "$" are to United States dollars, and the terms "United States" and "U.S." mean the United States of America, its states, territories, possessions and all areas subject to its jurisdiction, references to "yen" and "(Y)" are to Japanese yen, and references to "won" are to South Korean won. SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION The following tables set forth summary consolidated, pro forma and other financial information of the Company. <TABLE> <CAPTION> Six Months Year Ended September 30, Year Ended December 31, Ended June 30, 1992 1993 1994 1994(1) 1995 1996 1996 1997 (in thousands, except per share data) <S> <C> <C> <C> <C> <C> <C> <C> <C> Income Statement Data: Revenue........................ $42,919 $110,624 $254,637 $264,440 $358,609 $678,596 $287,711 $441,010 Cost of sales.................. 14,080 38,842 86,872 82,241 96,615 193,158 80,963 126,199 ------- -------- -------- -------- -------- -------- -------- -------- Gross profit................... 28,839 71,782 167,765 182,199 261,994 485,438 206,748 314,811 Operating expenses: Distributor incentives....... 14,659 40,267 95,737 101,372 135,722 249,613 107,090 169,132 Selling, general and administrative............. 10,065 27,150 44,566 48,753 67,475 105,477 44,551 67,738 Distributor stock expense.... -- -- -- -- -- 1,990 -- 8,954 ------- -------- -------- -------- -------- -------- -------- -------- Operating income......... 4,115 4,365 27,462 32,074 58,797 128,358 55,107 68,987 Other income (expense), net.... 160 133 443 (394) 511 2,833 617 527 ------- -------- -------- -------- -------- -------- -------- -------- Income before provision for income taxes................. 4,275 4,498 27,905 31,680 59,308 131,191 55,724 69,514 Provision for income taxes..... 1,503 417 10,226 10,071 19,097 49,494 20,591 25,720 ------- -------- ------- -------- -------- -------- -------- -------- Net income............... $ 2,772 $ 4,081 $ 17,679 $ 21,609 $ 40,211 $ 81,697 $ 35,133 $ 43,794 ======= ======== ======== ======== ======== ======== ======== ======== Pro forma net income per share(2)........................................ $.50 $1.01 $.44 $.51 Pro forma weighted average common shares outstanding..................... 80,518 81,060 80,518 85,421 </TABLE> <TABLE> <CAPTION> Year Ended Six Months December 31, Ended June 30, 1995 1996 1996 1997 (in thousands, except per share data) <S> <C> <C> <C> <C> Pro Forma Income Statement Data:(3)(4) Revenue................................................. $358,609 $678,596 $287,711 $441,010 Cost of sales........................................... 96,615 193,158 80,963 126,199 -------- -------- -------- -------- Gross profit............................................ 261,994 485,438 206,748 314,811 Operating expenses: Distributor incentives............................... 135,722 249,613 107,090 169,132 Selling, general and administrative.................. 74,433 111,802 47,973 67,738 -------- -------- -------- -------- Operating income........................................ 51,839 124,023 51,685 77,941 Other income (expense), net(5).......................... (2,298) 3,602 884 527 -------- -------- -------- -------- Income before provision for income taxes................ 49,541 127,625 52,569 78,468 Provision for income taxes.............................. 19,005 44,700 18,410 29,033 -------- -------- -------- -------- Net income.............................................. $ 30,536 $ 82,925 $ 34,159 $ 49,435 ======== ======== ======== ======== Net income per share(6)................................. $.36 $.97 $.40 $.58 Weighted average common shares outstanding.............. 85,377 85,377 85,377 85,377 </TABLE> As of June 30, 1997 (in thousands) Balance Sheet Data: Cash and cash equivalents....................................... $ 151,375 Working capital................................................. 107,975 Total assets.................................................... 306,807 Short term note payable to NSI.................................. 10,000 Stockholders' equity............................................ 161,246 <TABLE> <CAPTION> As of September 30, As of December 31, As of June 30, 1992 1993 1994 1994 1995 1996 1996 1997 <S> <C> <C> <C> <C> <C> <C> <C> <C> Other Information:(7) Number of active distributors...... 33,000 106,000 152,000 170,000 236,000 377,000 384,000 416,000 Number of executive distributors... 649 2,788 5,835 6,083 7,550 20,483 12,446 22,520 - ----------- </TABLE> (1) The information for the year ended December 31, 1994 is not included in the Company's Consolidated Financial Statements included elsewhere in this Prospectus. Such information has been presented for comparative purposes only. (2) Reflects the weighted average number of common shares and common share equivalents outstanding during the periods presented assuming that the Company's Reorganization and the resultant issuance of 80,250,000 shares of Class B Common Stock occurred as of January 1, 1995. The weighted average number of common shares and common share equivalents include: (i) an option granted to an executive officer of the Company prior to the Reorganization to purchase 267,500 shares of Class A Common Stock; (ii) the sale of 4,750,000 shares of Class A Common Stock by the Company in connection with the Underwritten Offerings; (iii) the grant of awards for 109,000 shares of Class A Common Stock to certain employees of the Company during November and December 1996; and (iv) the grant of awards for 41,959 additional shares of Class A Common Stock to certain employees of the Company during January 1997. (3) As part of the Reorganization, several actions occurred which impacted the comparability of the historical financial results of the Company with the future results of the Company. Therefore, a pro forma presentation has been prepared to provide comparative data. The unaudited pro forma income statement data reflect the Reorganization as if such event had occurred as of January 1, 1995, and the following adjustments: (i) the amortization over a 20-year period of a $25.0 million payment, consisting of $5.0 million in cash and $20.0 million in notes, to NSI for the exclusive rights to distribute NSI products in Thailand, Indonesia, Malaysia, the PRC, the Philippines, Singapore and Vietnam (the "License Fee"); (ii) the recognition by the Company of additional charges of $4.4 million for the year ended December 31, 1995, $4.0 million for the year ended December 31, 1996 and $2.2 million for the six months ended June 30, 1996, relating to certain support services provided to the Company by NSI and an NSI affiliate and certain other charges related to operating as a public company; (iii) estimated annual compensation expense of $1.2 million related to the employee stock bonus awards granted to employees of the Company, NSI and its affiliates; and (iv) adjustments for U.S. Federal and state income taxes as if the Company had been taxed as a C corporation rather than as an S corporation since inception. (4) The unaudited pro forma income statement data do not reflect the estimated non-cash compensation expense totaling $19.9 million in connection with the one-time grant of the Distributor Options at an exercise price of $5.75 per share. $2.0 million of such expense was recorded as actual distributor stock expense for the year ended December 31, 1996. An additional $9.0 million of such expense was recorded for the six months ended June 30, 1997. Neither of these expenses has been included in the pro forma presentation. The granting and vesting of the Distributor Options are conditioned upon distributor performance under the Global Compensation Plan and the NSI 1996 Distributor Stock Option Plan. The vesting of the Distributor Options is scheduled to occur on December 31, 1997. See "Certain Relationships and Related Transactions--Distributor Options," "Shares Eligible for Future Sale" and "Plan of Distribution." (5) Pro forma other income and expense includes: (i) increased interest expense of $2.7 million for the year ended December 31, 1995 relating to the issuance of promissory notes (the "S Distribution Notes") of $86.5 million from the Subsidiaries' earned and undistributed S corporation earnings through the date of the termination of the Subsidiaries' S corporation status; (ii) increased interest expense of $0.9 million for the year ended December 31, 1995 and $0.1 million each for the year ended December 31, 1996 and the six months ended June 30, 1996 relating to the issuance of $20.0 million in notes as partial payment of the License Fee payable to NSI; and (iii) increased interest income of $0.8 million each for the years ended December 31, 1995 and December 31, 1996 and $0.4 million for the six months ended June 30, 1996 relating to a note receivable from NSI with an estimated principal balance of $13.1 million as consideration for the Distributor Options. (6) Reflects, as if all shares had been issued as of January 1, 1995, the following: (i) 80,250,000 common shares outstanding and common share equivalents after giving effect to the Reorganization; (ii) the sale by the Company of 4,750,000 shares of Class A Common Stock in the Underwritten Offerings; (iii) the grant of awards for 109,000 shares of Class A Common Stock to certain employees of the Company; and (iv) an option granted to an executive officer of the Company to purchase 267,500 shares of Class A Common Stock. Supplemental income per share, calculated as if $25.0 million of the proceeds from the Underwritten Offerings were used to repay notes payable, had a dilutive effect of less than 2% and, therefore, is not presented. (7) Active distributors are those distributors who are resident in the countries in which the Company operates and who have purchased products during the three months ended as of the date indicated, rounded to the nearest thousand. An executive distributor is an active distributor who has submitted a qualifying letter of intent to become an executive distributor, achieved specified personal and group sales volumes for a four month period and maintained such specified personal and group sales volumes thereafter.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/ONIT_onity_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/ONIT_onity_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9c8e93e035ea3382309f7b5320dbd746dbd32480
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/ONIT_onity_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, RISK FACTORS AND FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF OUTSTANDING EMPLOYEE STOCK OPTIONS TO PURCHASE AN AGGREGATE OF 689,477 SHARES OF COMMON STOCK AS OF MARCH 31, 1997. THE COMPANY GENERAL The Company is a specialty financial services company which is engaged, on a nationwide basis, primarily in the business of acquiring, servicing and resolving non-performing and underperforming single and multi-family residential and commercial real estate loans and in selected mortgage lending activities involving servicing-intensive loan products. Since commencing its loan resolution activities in mid-1991, the Company has acquired over $3.81 billion gross principal amount of distressed loans and currently ranks (based on 1996 loan acquisition volume) as the largest purchaser of domestic distressed residential and commercial real estate loan portfolios in the United States. During the past year, the Company also has begun servicing distressed mortgage loans for others on a fee basis. The Company believes that it is currently the leading servicer of distressed mortgage loans in the United States with a servicing portfolio of 38,670 loans aggregating approximately $2.59 billion in gross principal amount at March 31, 1997 (including loans serviced for the Company's joint ventures). The Company's operations are based on the intensive use of technology and proprietary information systems to acquire, manage and resolve distressed assets and other servicing-intensive mortgage products on the most efficient basis possible. The Company began its focus in this area in the early 1990s through the acquisition and resolution of loan portfolios of troubled financial institutions. The Company believes that its specialized focus and investment in technology infrastructure has enabled it to become one of the most efficient servicers of distressed mortgage assets in the industry. Currently, the Company is one of only five special servicers of commercial mortgage loans to have received a rating of "strong" from Standard & Poor's Ratings Services ("Standard & Poor's"). In addition, the Company is rated a Tier 1 servicer and as a preferred servicer for high-risk mortgages by the Federal Home Loan Mortgage Corporation ("FHLMC"), the highest rating categories. The Company's business is conducted primarily through its wholly-owned subsidiary, Ocwen Federal Bank FSB (the "Bank"), which operates through a single branch. Through the Bank the Company is able to access a diversified base of funding sources and maintain high levels of available liquidity. The Company's primary funding comes from brokered certificates of deposit obtained through national and regional investment banking firms and, to a lesser extent, from direct solicitations by the Company, as well as from Federal Home Loan Bank ("FHLB") advances, reverse repurchase agreements and asset securitizations (which have totaled over $1 billion since 1993). The Company believes that these non-branch dependent funding sources provide it with effective asset/liability management tools and have an effective cost that is more attractive than deposits obtained through a branch network after the general and administrative costs associated with operating a branch network are taken into account. RECENT OPERATING RESULTS As the Company's specialized businesses have grown in recent years, its profitability has increased substantially. The Company's core earnings (representing income from continuing operations exclusive of the one-time assessment to recapitalize the Savings Association Insurance Fund ("SAIF") in 1996 and gains from the sale of branch offices in 1995 and 1994, net of related income taxes and profit sharing expense) increased from $24.0 million in 1994 to $54.1 million in 1996 and to $17.0 million in the first quarter of 1997. During this period, the Company's return on average assets increased from 1.40% to 2.61% and its return on average equity increased from 20.06% to 32.05% (in each case based on core earnings). The Company's specialized focus, its emphasis on technology and automated systems and the economies of scale it has been able to achieve also have enabled it to operate at a high level of efficiency: the Company's efficiency ratio based on core earnings improved from 64.1% in 1994 to 41.3% and 42.8% during 1996 and the first quarter of 1997, respectively. At March 31, 1997, the Company had total assets of $2.65 billion, total deposits of $2.11 billion and stockholders' equity of $225.2 million. STRATEGY The Company believes that the current trend toward the sale or outsourcing of servicing by financial institutions and government agencies of non-performing and underperforming loans will continue to grow, particularly in the event that credit quality for some product lines (such as sub-prime mortgage loans) deteriorates, and that the Company will be uniquely positioned to take advantage of this growth. The Company's strategy also focuses on leveraging its technology infrastructure and core expertise to expand its activities into related business lines both for itself and on a fee basis for others. Pursuant to this strategy, the Company has, among other things, recently formed a new corporation, Ocwen Asset Investment Corp. ("OAIC"), which is managed by Ocwen Capital Corporation ("OCC"), a newly-formed, wholly-owned subsidiary of the Company, and which elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. In May 1997, OAIC successfully completed an initial public offering of its common stock, which resulted in estimated net proceeds of $283.8 million (inclusive of the amount contributed by the Company for its shares). Currently, the Company owns approximately 9.8% of the outstanding common stock of OAIC and has a warrant to purchase an additional 10% of OAIC's common stock. BUSINESS ACTIVITIES The Company considers itself to be involved in a single business segment of providing financial services and conducts a wide variety of business within this segment. The Company's primary business activities currently consist of discounted loan acquisition and resolution, multi-family residential and commercial real estate lending, sub-prime single-family residential real estate lending and special servicing of mortgage loans for others. DISCOUNTED LOAN ACQUISITION AND RESOLUTION. The Company has established a core expertise in the acquisition and resolution of non-performing or underperforming single-family residential, multi-family residential and commercial real estate loans, which generally are purchased at a discount to both the unpaid principal amount of the loan and the estimated value of the security property ("discounted loans"). The Company acquires discounted loans from a wide variety of sources in the private sector and governmental agencies such as the U.S. Department of Housing and Urban Development ("HUD") and, to a lesser extent, the Federal Deposit Insurance Corporation ("FDIC"). The Company believes that its experience in the acquisition and resolution of discounted loans, its investment in a state-of-the-art computer infrastructure and related technology which is utilized in this business and its national reputation and nationwide presence in this area make it one of the leaders in this relatively new and evolving business. Between commencing these activities in mid-1991 and March 31, 1997, the Company has acquired over $3.81 billion of gross principal amount of discounted loans. In addition, in 1996, BCBF, L.L.C. ("LLC"), a joint venture which is 50% owned by the Company, acquired discounted single-family residential loans having an aggregate unpaid principal balance of $741.2 million from the Federal Housing Administration ("FHA"), a division of HUD. At March 31, 1997, the Company's discounted loan acquisition and resolution activities were comprised of its discounted loan portfolio, which amounted to $1.28 billion (net of $264.6 million of unaccreted discount and a $16.8 million allowance for loan losses), $96.4 million of real estate owned related to discounted loans and a $32.3 million net investment in LLC, which in the aggregate amounted to $1.41 billion or 53.2% of the Company's total assets. MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LENDING. The Company's lending activities emphasize loans secured by multi-family residential and commercial real estate located nationwide. Recently, the Company transferred the operations associated with its large multi-family residential and commercial real estate lending activities (which generally involve loans with balances in excess of $3.0 million) from the Bank to OCC. In conducting multi-family residential and commercial real estate lending activities, the Company generally seeks to emphasize types of loans and/or lending in geographic areas which, for various reasons, may not be currently emphasized by other lenders and which thus offer attractive returns to the Company relative to other investments. The loans currently emphasized by the Company include loans secured by existing hotels and office buildings, as well as loans for the construction and rehabilitation of hotels and multi-family residential properties. At March 31, 1997, the Company's multi-family residential and commercial real estate loans aggregated $347.1 million, net, or 13.1% of the Company's total assets. The Company also utilizes its multi-family residential lending and other expertise to make investments in low-income housing tax credit partnerships which own projects which have been allocated tax credits under the Internal Revenue Code of 1986, as amended (the "Code"). Such investments amounted to $99.9 million or 3.8% of the Company's total assets at March 31, 1997. SUBPRIME SINGLE-FAMILY RESIDENTIAL LENDING. During 1995, the Company established a program which focuses on the origination or purchase on a nationwide basis of single-family residential loans made to borrowers who have substantial equity in the properties which secure the loans but who, because of prior credit problems, the absence of a credit history or other factors, are unable or unwilling to qualify as borrowers under federal agency guidelines ("sub-prime loans"). The Company utilizes the expertise, technology and other resources which it has developed in connection with the acquisition and resolution of discounted loans in conducting these activities, and believes that the higher risk of default generally associated with these loans, as compared to loans which conform to the requirements established by federal agencies in order to acquire loans, is more than offset by the higher yields on these loans and the higher amount of equity which the borrowers have in the properties which secure these loans. Between commencing these activities in late 1994 and March 31, 1997, the Company purchased or originated an aggregate of $598.8 million of sub-prime single-family residential loans. Recently, the Company consolidated its sub-prime single-family residential lending operations within Ocwen Financial Services, Inc. ("OFS"), a newly-formed, 80% owned subsidiary of the Company which acquired substantially all of the assets of Admiral Home Loan ("Admiral"), the Company's primary correspondent mortgage banking firm for sub-prime single-family residential loans, in a transaction which closed on May 1, 1997. See "Business-- Subsidiaries." OFS currently maintains 17 loan production offices in six states and plans on opening an additional 10 such offices in 1997. The Company classifies its sub-prime single-family residential loans as available for sale because, subject to market conditions, it generally intends to sell such loans or to securitize such loans and sell substantially all of the securities backed by such loans. The Company realized gains of $2.7 million and $7.8 million from the sale of sub-prime single-family residential loans or securities resulting from the securitization of such loans during the three months ended March 31, 1997 and the year ended December 31, 1996, respectively. At March 31, 1997, the Company's sub-prime single-family residential loans amounted to $76.1 million or 2.9% of the Company's total assets. SPECIAL SERVICING OF MORTGAGE LOANS FOR OTHERS. The Company has developed a program to provide loan servicing, including asset management and resolution services, to third party owners of non-performing, underperforming and subprime assets. The amount of loans serviced by the Company for others increased from $361.6 million at December 31, 1995 to $1.92 billion at December 31, 1996 and to $2.59 billion at March 31, 1997. These increases have resulted in servicing fees and other charges, which consist primarily of loan servicing and related fees, increasing from $2.9 million during 1995 to $4.7 million during 1996 and to $5.2 million during the three months ended March 31, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Non-interest Income" and "Business--Loan Servicing Activities." RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered carefully by prospective purchasers of the Capital Securities. THE CAPITAL SECURITIES OFFERING <TABLE> <S> <C> The Trust.................... Ocwen Capital Trust I, a Delaware statutory business trust. The sole assets of the Trust will be the Junior Subordinated Debentures. Securities Offered........... % Capital Securities evidencing undivided beneficial ownership interests in the assets of the Trust. The holders thereof will be entitled to a preference in certain circumstances with respect to Distributions and amounts payable on redemption or liquidation over the Common Securities. Distributions................ Holders of the Capital Securities will be entitled to receive cumulative cash distributions at an annual rate of % of the liquidation amount of $1,000 per Capital Security, accruing from the date of original issuance and payable semi-annually in arrears on and of each year commencing on , 1997. The distribution rate and the distribution and other payment dates for the Capital Securities will correspond to the interest rate and interest and other payment dates on the Junior Subordinated Debentures. See "Description of Capital Securities." Junior Subordinated Debentures................. The Trust will invest the proceeds from the issuance of the Capital Securities and Common Securities in an equivalent amount of % Junior Subordinated Debentures of the Company. The Junior Subordinated Debentures will mature on , 2027. The Junior Subordinated Debentures will rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. In addition, the Company's obligations under the Junior Subordinated Debentures will be structurally subordinated to all existing and future liabilities and obligations of its subsidiaries. See "Risk Factors--Ranking of Subordinate Obligations Under the Guarantee and the Junior Subordinated Debentures," "Risk Factors--Limited Sources for Payments on Junior Subordinated Debentures and Non-Banking Activities" and "Description of Junior Subordinated Debentures--Subordination." Guarantee.................... Payment of distributions out of moneys held by the Trust, and payments on liquidation of the Trust or the redemption of Capital Securities, are guaranteed by the Company to the extent the Trust has funds available therefor. If the Company does not make principal or interest payments on the Junior Subordinated Debentures, the Trust will not have sufficient funds to make Distributions (as defined herein) on the Capital Securities, in which event the Guarantee shall not apply to such Distributions until the Trust has sufficient funds available therefor. The Company's obligations under the Guarantee, taken together with its obligations under the Junior Subordinated Debentures and the Indenture, including its obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Capital Securities), constitute a full and unconditional guarantee of all of the Trust's obligations under the Capital Securities. See "Description of Guarantee" and "Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee." The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior Indebtedness of the Company. See "Risk Factors-- Ranking of Subordinated Obligations Under the Guarantee and the Junior Subordinated Debentures" and "Description of Guarantee." </TABLE> <TABLE> <S> <C> Right to Defer Interest...... The Company has the right to defer payment of interest on the Junior Subordinated Debentures by extending the interest payment period on the Junior Subordinated Debentures, from time to time, for up to 10 consecutive semi-annual periods. There could be multiple Extension Periods of varying lengths throughout the term of the Junior Subordinated Debentures. If interest payments on the Junior Subordinated Debentures are so deferred, distributions on the Capital Securities will also be deferred for an equivalent period and the Company may not, and may not permit any subsidiary of the Company to, (i) declare or pay any dividends or distribu- tions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, the Company's capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank PARI PASSU with or junior to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks PARI PASSU with or junior to the Junior Subordinated Debentures (other than (a) dividends or distributions in common stock of the Company, (b) payments under the Guarantee, (c) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (d) as a result of reclassification of the Company's capital stock into one or more other classes or series of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock, (e) the purchase of fractional interests in the shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged and (f) purchases of common stock related to the issuance of common stock or rights under any of the Company's benefit plans or any of the Company's dividend reinvestment plans). During an Extension Period, interest on the Junior Subordinated Debentures will continue to accrue (and the amount of Distributions to which holders of the Capital Securities are entitled will accumulate) at the rate of % per annum, compounded semi-annually. During an Extension Period, holders of Capital Securities will be required to include the stated interest on their pro rata share of the Junior Subordinated Debentures in their gross income as original issue discount ("OID") even though the cash payments attributable thereto have not been made. See "Description of Junior Subordinated Debentures--Option to Extend Interest Payment Period" and "Certain United States Federal Income Tax Consequences--Original Issue Discount." Redemption................... The Junior Subordinated Debentures are redeemable by the Company in whole or in part on or after , 2007, or at any time, in whole but not in part, upon the occurrence of a Special Event, in either case, subject to the receipt of any necessary prior regulatory approval. If the Junior Subordinated Debentures are redeemed, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures so redeemed. The Trust Securities will be redeemed upon maturity of the Junior Subordinated </TABLE> <TABLE> <S> <C> Debentures. See "Description of Capital Securities--Redemption--Mandatory Redemption" and "--Special Event Redemption or Distribution of Junior Subordinated Debentures." Liquidation of the Trust..... Upon the occurrence and continuation of a Special Event, the Company will have the right, subject to the receipt of any necessary prior regulatory approval, to dissolve the Trust and, after satisfaction of claims of creditors of the Trust, if any, as required by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of the Capital Securities and the Common Securities in liquidation of the Trust. If the Junior Subordinated Debentures are distributed to the holders of Capital Securities upon the liquidation of the Trust, the Company will use its best efforts to list the Junior Subordinated Debentures on such stock exchanges, if any, on which the Capital Securities are then listed. See "Description of Capital Securities--Redemption-- Special Event Redemption or Distribution of Junior Subordinated Debentures." In the event of the liquidation of the Trust, after satisfaction of the claims of creditors of the Trust, if any, as provided by applicable law, the holders of the Capital Securities will be entitled to receive a liquidation amount of $1,000 per Capital Security plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in Junior Subordinated Debentures as described above. If such Liquidation Distribution (as defined herein) can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Capital Securities shall be paid on a pro rata basis. The holder(s) of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securi- ties, except that if an Indenture Event of Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities. See "Description of Capital Securities--Liquidation Distribution Upon Dissolution." Use of Proceeds.............. The proceeds to the Trust from the offering of the Capital Securities will be $125 million. All of the proceeds from the sale of the Capital Securities and the Common Securities will be invested by the Trust in the Junior Subordinated Debentures. The estimated net proceeds received by the Company from the Capital Securities Offering of approximately $ , as well as the estimated $ of net proceeds from the Common Stock Offer- ing ($ if the Common Stock Underwriters' over-allotment options are exercised in full), will be used by the Company primarily to fund discounted loan acquisition and other lending and investment activities which are currently conducted by the Company through non-banking subsidiaries of the Company and the Bank and to develop related businesses. In addition, a portion of the net proceeds from the Offerings also could be used to acquire other businesses, including other financial institutions, mortgage banking companies, particularly those which are engaged in sub-prime single-family residential lending activities, and companies which have software or other technology which would enhance the Company's ability to conduct loan servicing and other activities. Although the Company evaluates potential acquisition opportunities from time to time, currently there are no agreements, arrangements or understandings with regard to any such transaction. See "Use of Proceeds." </TABLE>
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/OSIS_osi_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/OSIS_osi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d501dc41f285111636b91ba8f4d804a909cb718c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/OSIS_osi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus, including the information under "Risk Factors." THE COMPANY OSI Systems, Inc. (the "Company") is a vertically integrated worldwide provider of devices, subsystems and end-products based on optoelectronic technology. The Company designs and manufactures optoelectronic devices and value-added subsystems for original equipment manufacturers ("OEMs") for use in a broad range of applications, including security, medical diagnostics, telecommunications, office automation, aerospace, computer peripherals and industrial automation. In addition, the Company utilizes its optoelectronic technology and design capabilities to manufacture security and inspection products that it markets worldwide to end users under the "Rapiscan" brand name. These products are used to inspect baggage, cargo and other objects for weapons, explosives, drugs and other contraband. In fiscal 1997, revenues from the sale of optoelectronic devices and subsystems amounted to $42.9 million, or approximately 55.2%, of the Company's revenues, while revenues from sales of security and inspection products amounted to $34.7 million, or approximately 44.8%, of the Company's revenues. Optoelectronic Devices and Subsystems The Company manufactures a wide range of optoelectronic devices which it integrates into complex subsystems vital to various end products, including x- ray and computer tomography ("CT") imaging systems, industrial robotics, medical monitoring and diagnostic products, optical drives for computer peripherals, bar code scanners, and aviation gyroscopes. These optoelectronic devices operate by sensing light of varying wave lengths and converting the light into electronic signals. In addition to manufacturing optoelectronic devices, the Company produces optoelectronic subsystems and offers a range of vertically integrated services to its subsystem customers. These services include component design and customization, subsystem concept design and application engineering, product prototyping and development, pre-production, and short-run and high volume manufacturing. In fiscal 1997, the Company manufactured subsystems for use in more than 100 different applications, including those of approximately 50 major OEM customers such as Picker International, Honeywell Avionics, Eastman Kodak, Xerox, Johnson & Johnson, Bausch & Lomb, Texas Instruments, Boeing Aircraft Co. and Hewlett-Packard. During fiscal 1997, no single OEM customer accounted for more than 10.0% of the Company's revenues and the top five customers collectively represented less than 20.0% of the Company's revenues. The Company believes that in recent years advances in technology and reductions in the cost of key components of optoelectronic systems, including computer processing power and memory, have broadened the market by enabling the use of optoelectronic devices in a greater number of applications. In addition, the Company believes that there is a trend among OEMs to increasingly outsource the design and manufacture of optoelectronic subsystems to fully integrated, independent manufacturers who may have greater specialization, broader expertise, and the ability and flexibility to respond in shorter time periods than the OEMs could accomplish in-house. The Company believes that its high level of vertical integration, substantial engineering resources, expertise in the use and application of optoelectronic technology, and low-cost international manufacturing operations, enable it to effectively compete in the market for optoelectronic devices and subsystems. Security and Inspection Products The Company manufactures a range of security and inspection products that are used for conventional security purposes including the detection of concealed weapons and contraband, as well as for a variety of non-security applications. The Company's security and inspection products utilize linear x-ray technology to create a two-dimensional image of the contents of the object being inspected. These products may function either as stand-alone systems or as components of an integrated security system. Locations where these products are currently used for security inspection purposes include airports, government offices, post offices, courthouses, jails, embassies, commercial buildings and mail sorting facilities. Non-security inspection uses of these products include the detection of illegal narcotics, inspection of agricultural products, examination of cargo to mitigate the avoidance of import duties, and non- destructive product testing. The Company currently manufactures 16 models of products with different sizes, price points and imaging capabilities in order to appeal to the breadth of security and non-security applications for its products. Since entering the security and inspection market in 1993, the Company has shipped more than 2,000 units of its security and inspection products to over 50 countries. The Company believes that the growth in the market for security and inspection products will continue to be driven by the increased perception of threat fueled by recent terrorist incidents, increased government mandates and appropriations, and the emergence of a growing market for the non-security applications of its products. The Company's objectives are to be a leading provider of specialized optoelectronic products, to enhance its position in the international inspection and detection marketplace, and to leverage its expertise in the optoelectronic technology industry by integrating into new end-markets on a selective basis. Key elements of the Company's growth strategy include leveraging its expertise in optoelectronic design and manufacturing to address new applications, further penetrating existing security and inspections markets, capitalizing on its high-level of vertical integration and on its global presence, and selectively entering into new end-product markets. Since 1990, the Company has completed four acquisitions. The Company intends to continue to pursue additional acquisition opportunities that expand the Company's technological capabilities, increase the breadth of its product offerings, and increase its geographic presence. As with the security and inspection operations that the Company acquired in 1993, the Company seeks to make acquisitions in which: (i) the Company's core optoelectronic technology is a significant technology component; (ii) the market for the products offers favorable pricing dynamics; (iii) the competitive market dynamics provide for substantial growth in market share; and (iv) the Company's existing manufacturing, sales and service organization provide the acquired operations with a strategic and cost advantage. The Company currently manufactures its optoelectronic devices and subsystems at facilities in Hawthorne, California, in Ocean Springs, Mississippi, in Johor Bahru, Malaysia, and in Horten, Norway. Its security and inspection products are currently manufactured at facilities in Crawley, England, in Long Beach, California, and in Johor Bahru, Malaysia. As of June 30, 1997 the Company marketed its products worldwide through approximately 42 sales and marketing employees located in five countries, and through approximately 95 independent sales representatives. THE OFFERING <TABLE> <S> <C> Common Stock Offered by the Company. 3,330,000 shares Common Stock Offered by the Selling Shareholders....................... 370,000 shares Common Stock Outstanding after the Offering........................... 9,563,778 shares(1) Use of Proceeds..................... To repay certain indebtedness, to increase funds available for research and development, to enhance its sales and marketing capabilities, to pursue possible acquisitions, and for general corporate purposes, including working capital. See "Use of Proceeds." Nasdaq National Market Symbol....... OSIS </TABLE> - --------------- (1) Based on the number of shares outstanding on September 30, 1997. Excludes 783,236 shares of Common Stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $7.74 per share. SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except share and per share data) <TABLE> <CAPTION> YEAR ENDED JUNE 30, ------------------------------------------------- 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues.................... $27,225 $47,735 $49,815 $61,518 $77,628 Cost of goods sold.......... 20,591 36,037 37,818 45,486 56,174 --------- --------- --------- --------- --------- Gross profit................ 6,634 11,698 11,997 16,032 21,454 Operating expenses: Selling, general and administrative(1)......... 4,014 7,974 7,601 9,757 11,304 Research and development... 1,034 1,451 1,591 1,663 2,504 Stock option compensation(2)........... -- -- -- -- 856 --------- --------- --------- --------- --------- Total operating expenses... 5,048 9,425 9,192 11,420 14,664 --------- --------- --------- --------- --------- Income from operations...... 1,586 2,273 2,805 4,612 6,790 Interest expense............ 471 710 1,251 1,359 1,197 --------- --------- --------- --------- --------- Income before income taxes and minority interest...... 1,115 1,563 1,554 3,253 5,593 Provision for income taxes.. 462 814 413 1,111 1,416 --------- --------- --------- --------- --------- Income before minority interest................... 653 749 1,141 2,142 4,177 Minority interest........... 6 38 17 117 -- --------- --------- --------- --------- --------- Net income.................. $659 $787 $1,158 $2,259 $4,177 ========= ========= ========= ========= ========= Net income available to common shareholders(3)(4).. $814 $995 $1,357 $2,308 $4,269 ========= ========= ========= ========= ========= Net income per share(3)(4)(5)............. $0.13 $0.16 $0.22 $0.38 $0.68 ========= ========= ========= ========= ========= Weighted average shares outstanding(5)............. 6,139,429 6,249,674 6,172,901 6,134,669 6,263,963 </TABLE> <TABLE> <CAPTION> JUNE 30, 1997 ---------------------- ACTUAL AS ADJUSTED(6) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash.................................................... $ 553 $29,839 Working capital......................................... 10,800 49,961 Total assets............................................ 47,333 76,619 Total debt.............................................. 13,180 1,258 Total shareholders' equity.............................. 16,809 58,017 </TABLE> - ------------- (1) Fiscal 1994 includes a one-time charge of $1.5 million incurred in connection with the settlement of a governmental proceeding. See "Business--Legal Proceedings."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/POWI_power_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/POWI_power_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..edbb3eb161c3f828bd0102e83f1bb7285d65ca63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/POWI_power_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes appearing elsewhere in this Prospectus. The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." THE COMPANY Power Integrations, Inc. (the "Company") designs, develops and markets proprietary, high-voltage analog integrated circuits ("ICs") for use in AC to DC power conversion. The Company has targeted high-volume power supply markets, including the cellular telephone, personal computer, cable and direct broadcast satellite and various consumer electronics markets. The Company is initially focusing on those markets that are sensitive to size, portability, energy efficiency and time-to-market. The Company believes its patented TOPSwitch ICs, introduced in 1994, are the first highly integrated power conversion ICs to achieve widespread market acceptance. The Company introduced an enhanced family of ICs, TOPSwitch-II, in April 1997. See "Business--Intellectual Property and Others Proprietary Rights." Virtually every electronic device that plugs into a wall socket requires some type of power supply to convert high-voltage, alternating current ("AC") into low-voltage, direct current ("DC"). A large segment of the power supply market in the 0.5 to 150 watt power range consists of switching power supplies ("switchers") which typically use a high-voltage discrete semiconductor along with other components to perform the power conversion. Discrete solutions, which emerged in the 1970s, have not kept pace with the rapid integration trends in the electronics industry and require numerous components and a high level of system complexity compared to a more highly integrated IC solution. The limitations of discrete switchers have become more pronounced as a result of increasing consumer demand for smaller and lighter electronic devices, government guidelines promoting energy efficiency and manufacturers' continuing efforts to reduce costs and simplify system designs. However, prior attempts to replace discrete switchers with integrated switchers through the use of high- voltage analog ICs did not achieve widespread acceptance because they were not as cost-effective as discrete alternatives. The Company's objective is to be the leading provider of high-voltage power conversion ICs that cost effectively enable the integration of AC to DC switching power supplies. The Company's strategy is to target high-volume switching power supply markets with its families of TOPSwitch products. End users include Motorola, Samsung Electronics and Nokia in the cellular telephone market, certain of the world's largest PC manufacturers, and Pace, Nokia and API (Sun Moon Star) in the cable and direct broadcast satellite market. The Company also sells its products into a wide variety of other markets which include PC peripherals, televisions, VCRs, industrial meters and kitchen appliances. As these and other markets emerge as significant opportunities for the Company's TOPSwitch products, the Company intends to focus its resources on the development and penetration of these markets. To accelerate its market penetration, the Company has dedicated approximately 15% of its workforce to applications engineering and offers its customers comprehensive application design support including extensive application notes and production-ready reference design boards. The Company sells its products to OEMs and merchant power supply manufacturers through a direct sales staff and a worldwide network of independent sales representatives and distributors. The Company has established strategic partnerships with Matsushita Electronics Corporation and OKI Electric Industry Co., Inc. in order to attain high-volume manufacturing resources, broad market penetration and royalty revenues. The Company was incorporated in California in March 1988, and will reincorporate in Delaware prior to the consummation of this offering. The Company's executive offices are located at 477 N. Mathilda Avenue, Sunnyvale, California 94086. Its telephone number is (408) 523-9200. Its e-mail address is info@powerint.com. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Company.......................... 2,100,000 shares Common Stock offered by the Selling Stockholders............. 1,900,000 shares Common Stock to be outstanding after the offering............... 11,467,036 shares (1) Use of proceeds................... For working capital and other general corporate purposes as well as the repayment of $2.75 million of subordinated debt. See "Use of Proceeds." Proposed Nasdaq National Market symbol........................... POWI </TABLE> SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> NINE MONTHS FISCAL YEAR ENDED DECEMBER 31, ENDED SEPT. 30, ------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- ----------- ------- <S> <C> <C> <C> <C> <C> <C> <C> CONSOLIDATED STATEMENTS OF (UNAUDITED) OPERATIONS DATA: Net revenues.......... $ 1,944 $ 5,763 $ 7,126 $18,415 $23,943 $ 17,055 $30,458 Gross profit (loss)... (114) 1,999 2,802 6,044 8,397 5,731 12,856 Income (loss) from operations........... (5,406) (3,167) (2,723) (363) (585) (766) 3,292 Net income (loss) .... $(5,409) $(3,532) $(2,752) $ (803) $(1,341) $ (1,287) $ 2,370 Pro forma net income (loss) per share..... $ (0.14) $ (0.13) $ 0.23 Pro forma weighted average common and common equivalent shares (2)........... 9,580 9,556 10,475 </TABLE> <TABLE> <CAPTION> SEPT. 30, 1997 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- <S> <C> <C> CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments..... $10,275 $22,149 Working capital....................................... 11,076 24,253 Total assets.......................................... 27,350 39,224 Long-term debt and capitalized lease obligations, net of current portion................................... 4,160 2,713 Stockholders' equity.................................. 12,096 26,720 </TABLE> - -------- (1) Excludes 733,665 shares of Common Stock issuable upon exercise of outstanding options at September 30, 1997 with a weighted average exercise price of $1.50 per share and 474,212 shares of Common Stock issuable upon exercise of outstanding warrants at September 30, 1997 with a weighted average exercise price of $3.65 per share. See "Capitalization" and "Management--Stock Plans" and Notes 6 and 7 of Notes to Consolidated Financial Statements. (2) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used to compute per share amounts. (3) Adjusted to reflect the sale of 2,100,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $8.00 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/PPC_pilgrims_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/PPC_pilgrims_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4d4af3871c68c412913c18fddeff9dfa53b3f373
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/PPC_pilgrims_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and Consolidated Financial Statements and notes thereto included in this Prospectus. Investors should carefully consider the information set forth under "Risk Factors." Unless otherwise indicated herein, the information contained in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. The term the "Company" or "Pilgrim's Pride" refers to Pilgrim's Pride Corporation and its subsidiaries, unless the context otherwise requires. THE COMPANY Pilgrim's Pride is one of the largest producers of prepared and fresh chicken products in North America and has one of the best known brand names in the chicken industry. The Company is the fourth largest producer of chicken in the United States and one of the two largest in Mexico. Through vertical integration, the Company controls the breeding, hatching and growing of chickens and the processing, preparation, packaging and sale of its product lines. In fiscal 1996, approximately 80% of the Company's net sales were from its U.S. operations, including U.S. produced chicken products sold for export to Canada, Eastern Europe, the Far East and other world markets, with the remaining 20% arising from the Company's Mexico operations. The U.S. chicken industry has grown from 9.0 billion pounds produced in 1976 to 26.1 billion pounds in 1996, a compounded annual growth rate of 5.5%. This growth was in response to both domestic and international demand. In the U.S., annual per capita consumption of chicken grew from 42.5 pounds in 1976 to 71.7 pounds in 1996 while per capita consumption of beef and pork declined. Per capita consumption of chicken in the U.S. surpassed that of pork in 1982 and beef in 1992. Exports of U.S. produced chicken have also increased from 3.2% of production in 1976 to 16.9% in 1996. Management believes these trends will continue in the foreseeable future. In the U.S., the Company is the second largest full-line supplier of chicken products to the foodservice market, which is principally comprised of chain restaurant operations, frozen entree producers, institutions and distributors. The majority of the Company's sales to this market consists of prepared food products, which include portion-controlled breast fillets, tenderloins and strips, formed nuggets and patties and bone-in chicken parts. These products are sold frozen and may be either fully cooked or uncooked. Primarily as a result of growth in the Company's sales of prepared food products to this market, Company sales to the foodservice market from fiscal 1992 through fiscal 1996 grew at a compounded annual growth rate of 10.2%. Based on industry data, the Company estimates that total industry dollar sales to the foodservice market during this same period grew at a compounded annual growth rate of 7.6%. The Company also sells fresh chicken products to the foodservice market and the retail market, the latter consisting primarily of grocery store chains and retail distributors. In Mexico, the Company has made significant capital investments to modernize its production technology, completed strategic acquisitions and transferred experienced management personnel in order to be a low-cost producer of chicken. Management believes that this low-cost producer strategy has resulted in increased market share and higher profit margins relative to most other Mexican chicken producers and has positioned the Company to participate in the anticipated growth in Mexican chicken demand. According to an industry source, annual per capita consumption of chicken in Mexico increased from an estimated 22 pounds in 1982 to an estimated 34 pounds in 1996. Management anticipates that Mexican chicken consumption will grow as the Mexican economy continues to strengthen. The Company's objectives are to increase sales, profit margins and earnings and outpace the growth of the chicken industry (i) by focusing on growth in the prepared food products market, (ii) by focusing on growth in the Mexico market and (iii) through greater utilization of the Company's existing assets. Key elements of the Company's strategy to achieve these objectives are to: . Focus U.S. growth on prepared foods. In recent years the Company has focused on increasing its sales of prepared foods to the foodservice market, particularly to chain restaurants and frozen entree producers. The market for prepared food products has experienced greater growth and higher margins than fresh chicken products, and the Company's sales of prepared food products to the foodservice market have grown from $178.2 million in fiscal 1992 to $303.9 million in fiscal 1996, a compounded annual growth rate of 14.3%. Additionally, the production and sale of prepared foods reduces the impact of feed grain costs on the Company's profitability. As further processing is performed, feed grain costs become a decreasing percentage of a product's total production cost. The Company is now the largest supplier of chicken to Wendy's and Jack-in- the-Box chain restaurants and to Stouffer's frozen entree operations. Other major prepared foods customers include KFC and Taco Bell. Prepared foods constituted 44.9% of the Company's U.S. chicken sales in fiscal 1996. . Focus on customer driven research & development and technology. Much of the Company's growth in prepared foods has been the result of customer- driven research & development focused on designing new products to meet customers' changing needs. The Company's research & development personnel often work directly with institutional customers in developing proprietary products. Approximately $110.9 million of the Company's sales to foodservice customers in fiscal 1996 consisted of new products which were not sold by the Company in fiscal 1992. The Company is also a leader in utilizing advanced processing technology, which enables the Company to better meet its customers' needs for product innovation, consistent quality and cost efficiency. . Enhance the U.S. fresh chicken product mix through value-added, branded products. The Company's fresh chicken business is an important component of its sales and has grown from sales of $232.1 million in fiscal 1992 to $286.2 million in fiscal 1996. In addition to maintaining its sales of mature, traditional fresh chicken products, the Company's strategy is to shift the mix of its U.S. fresh chicken products by continuing to increase sales of higher margin, faster growing products, such as marinated chicken and chicken parts. As a result of this strategy, the Company's compounded annual growth rate of fresh chicken sales from fiscal 1992 to fiscal 1996 exceeded 5.3% while total U.S. industry sales of fresh chicken increased less than 2.0%. . Maintain operating efficiencies and increase capacity on a cost-effective basis. As production and sales have grown, the Company has maintained operating efficiencies by investing in state-of-the-art technology, processes and training and by making cost-effective acquisitions both in the U.S. and Mexico. As a result, according to industry data, since 1993 the Company has consistently been one of the lowest cost producers of chicken. In addition, in two recent studies of 16 production facilities of various large chicken producers, the Company's prepared foods plant ranked as either the first or second lowest cost producer of deboned meat, which is the major cost component of prepared foods. Continuing this strategy, the Company acquired additional chicken producing assets in the U.S. in April 1997, to replace chicken purchased from third parties, at a cost that management believes is significantly less than the cost required to construct a new chicken production complex with similar capacity. . Capitalize on international demand for U.S. chicken. Due to U.S. consumers' preference for chicken breast meat, the Company has targeted international markets to generate sales of leg quarters. The Company has also begun selling prepared food products for export to the international divisions of its U.S. chain restaurant customers. As a result of these efforts, sales for these markets have grown from less than 1% of the Company's total U.S. chicken sales in fiscal 1992 to more than 6% in fiscal 1996. Management believes that (i) U.S. chicken exports will continue to grow as worldwide demand for high grade, low cost protein sources increases and (ii) worldwide demand for higher margin prepared food products will increase over the next five years; and accordingly, the Company is well positioned to capitalize on such growth. . Capitalize on investments and expertise in Mexico. The Company's strategy in Mexico is focused on (i) being one of the most cost-efficient producers and processors of chicken in Mexico by applying technology and expertise utilized in the U.S. and (ii) increasing distribution of its higher margin, value added products to national retail stores and restaurants. This strategy has resulted in the Company obtaining a market leadership position, with its estimated market share in Mexico increasing from 10.5% in 1992 to 18.8% in 1996. THE OFFERING <TABLE> <S> <C> Common Stock offered by the Selling Stockholders: Archer-Daniels-Midland Company... 5,514,900 shares Other non-management 746,482 shares stockholders.................... Total.......................... 6,261,382 shares Common Stock to be outstanding 27,589,250 shares after the Offering................ Use of Proceeds.................... The Company will not receive any of the proceeds of the Offering other than the proceeds, if any, received as a result of the exercise of the Underwriters' over- allotment option. Any proceeds received as a result of the exercise of the over- allotment option will be used to reduce borrowings under the Company's revolving credit facility. New York Stock Exchange symbol..... CHX Dividend Policy.................... $0.015 per share per quarter. See "Price Range of Common Stock and Dividends." </TABLE> SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> FISCAL YEAR ENDED SIX MONTHS ENDED --------------------------------------------------------------- ----------------------- SEPTEMBER 26, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29, 1992 1993(A) 1994 1995(B) 1996 1996 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> INCOME STATEMENT DATA: Net sales.............. $817,361 $887,843 $922,609 $931,806 $1,139,310 $539,479 $601,207 Gross profit........... 32,802 106,036 110,827 74,144 70,640 37,019 53,352 Operating income (loss)................ (12,739) 56,345 59,698 24,930(c) 21,504 (c) 12,509 (c) 25,974 Foreign exchange (gain) loss.................. 736 243 (257) 5,605(c) 1,275 (c) 1,222 (c) 536 Income (loss) before income taxes and extraordinary charge.. (33,712) 32,838 42,448 2,091 47 1,533 17,611(d) Income tax expense (benefit)(e).......... (4,048) 10,543 11,390 10,058 4,551 2,792 2,552 Income (loss) before extraordinary charge.. (29,664) 22,295 31,058 (7,967) (4,504) (1,259) 15,059(d) Net income (loss)...... (29,664) 21,009 31,058 (7,967) (7,284) (4,039) 15,059(d) Income (loss) per common share before extraordinary charge.. $ (1.24) $ 0.81 $ 1.13 $ (0.29) $ (0.16) $ (0.05) $ 0.55(d) Net income (loss) per common share.......... $ (1.24) $ 0.76 $ 1.13 $ (0.29) $ (0.26) $ (0.15) $ 0.55(d) Dividends per common share................. $ 0.06 $ 0.03 $ 0.06 $ 0.06 $ 0.06 $ 0.03 $ 0.03 Weighted average shares outstanding........... 23,880 27,589 27,589 27,589 27,589 27,589 27,589 OTHER DATA: EBITDA(f).............. $ 10,955 $ 79,222 $ 83,658 $ 49,811 $ 47,767 $ 25,948 $ 39,735 Capital expenditures... 14,813 11,511 23,572 71,589 32,534 22,262 12,090 </TABLE> <TABLE> <CAPTION> AT MARCH 29, 1997 <S> <C> BALANCE SHEET DATA: Working capital...................................................... $ 98,526 Total assets......................................................... 531,579 Notes payable and current maturities of long-term debt............... 33,645 Long-term debt, less current maturities.............................. 193,546 Total stockholders' equity........................................... 157,366 </TABLE> - -------- (a) Fiscal 1993 had 53 weeks. (b) On July 5, 1995, the Company acquired certain assets of a group of five chicken companies located near Queretaro, Mexico for approximately $35.3 million. The acquisition has been accounted for as a purchase, and the results of operations for this acquisition have been included in the Company's consolidated results of operations since the acquisition date. (c) In addition to foreign exchange losses, the peso decline and the related economic recession in Mexico contributed significantly to the operating losses experienced by the Company's Mexican operations of $17.0 million, $8.2 million and $3.2 million for fiscal years 1995 and 1996 and the six months ended March 30, 1996, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (d) Reflects $2.2 million (or $1.3 million or $0.05 per share net of tax effect) of income arising from the final settlement of claims resulting from a January 1992 fire at the Company's prepared foods plant. (e) The Company does not include income or losses from its Mexican operations in its determination of taxable income for U.S. income tax purposes based upon its determination that such earnings will be indefinitely reinvested in Mexico. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note D of the Consolidated Financial Statements of the Company. (f) "EBITDA" is defined as the sum of operating income (loss) and depreciation and amortization (excluding amortization of capitalized financing costs). EBITDA should not be considered as an alternative to, or more meaningful than, net income as a measure of the Company's operating performance or cash flows as a measure of the Company's liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/RL_ralph_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/RL_ralph_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..124d1a6e2f99181c7fd74947b8908697598efc8f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/RL_ralph_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto contained elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) gives effect to the Reorganization and Trademark Acquisition (as defined in "-- Reorganization and Related Transactions") and (ii) assumes the Underwriters' over-allotment options are not exercised. As used in this Prospectus, references to the "Company" or "Polo" mean Polo Ralph Lauren Corporation, after giving effect to the Reorganization, including the transfer of certain assets and interests in related entities to Polo Ralph Lauren Corporation, as if the Reorganization had occurred at the beginning of the periods discussed and presented herein. See "Reorganization and Related Transactions". The Company utilizes a 52-53 week fiscal year ending on the Saturday nearest March 31. Accordingly, fiscal years 1993, 1994, 1995, 1996 and 1997 ended on April 3, 1993, April 2, 1994, April 1, 1995, March 30, 1996 and March 29, 1997, respectively. References to licensing partners' wholesale net sales have been derived from information obtained from the Company's licensing partners. Due to the collaborative and ongoing nature of the Company's relationships with its licensees, such licensees are referred to in this Prospectus as "licensing partners" and the relationships between the Company and such licensees are referred to in this Prospectus as "licensing alliances". Notwithstanding these references, however, the legal relationship between the Company and its licensees is one of licensor and licensee, and not one of partnership. THE COMPANY Polo Ralph Lauren Corporation ("Polo" or the "Company") is a leader in the design, marketing and distribution of premium lifestyle products. For 30 years, Polo's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include "Polo", "Polo by Ralph Lauren", "Polo Sport", "Ralph Lauren", "RALPH", "Lauren", "Polo Jeans Co." and "Chaps", among others, constitute one of the world's most widely recognized families of consumer brands. Directed by Ralph Lauren, the internationally renowned designer, the Company believes it has influenced the manner in which people dress and live in contemporary society, reflecting an American perspective and lifestyle uniquely associated with Polo and Ralph Lauren. The Polo brand was established in 1967 when Mr. Lauren introduced a collection of men's ties. In 1968, Polo was established as an independent menswear company offering a line of premium quality men's clothing and sportswear with a distinctive blend of innovation and tradition. The Company's now famous polo player astride a horse logo and Ralph Lauren womenswear products were introduced in 1971. In that same year, the first in-store area dedicated exclusively to Polo Ralph Lauren products ("shop-within-shop boutique") opened in Bloomingdale's flagship store in New York City and the first Polo store was opened by an independent third party. See "Business -- Operations -- Domestic Wholesale and Home Collection Customers and Service -- Shop-within-Shop Boutiques". Commencing in 1973, womenswear products were produced and distributed by a third party under the Company's first licensing alliance. From these beginnings, the Polo and Ralph Lauren brands have been the foundation upon which the Company has based its historic growth. The Company's net revenues, which are comprised of wholesale and retail net sales and licensing revenue, have increased from $767.3 million in fiscal 1993 to $1.2 billion in fiscal 1997, and the Company's income from operations has grown from $82.1 million in fiscal 1993 to $157.4 million in fiscal 1997. Polo combines its consumer insight and design, marketing and imaging skills to offer, along with its licensing partners, broad lifestyle product collections in four categories: apparel, home, accessories and fragrance. Apparel products include extensive collections of menswear, womenswear and children's clothing. The Ralph Lauren Home Collection offers coordinated products for the home including bedding and bath products, interior decor and tabletop and gift items. Accessories encompass a broad range of products such as footwear, eyewear, jewelry and leather goods (including handbags and luggage). Fragrance and skin care products are sold under the Company's Polo, Lauren, Safari and Polo Sport brands, among others. See "Business -- Operations -- Licensing Alliances". Worldwide wholesale net sales of all products bearing the Company's brands, generated by both Polo and its licensing partners, aggregated approximately $2.9 billion in fiscal 1997 and are displayed in the chart below. Of these sales, approximately 31% occurred outside the United States. FISCAL 1997 WORLDWIDE WHOLESALE NET SALES OF POLO RALPH LAUREN PRODUCTS(1)(2) (IN MILLIONS) <TABLE> <CAPTION> MEASUREMENT PERIOD (FISCAL YEAR CHILDREN'S COVERED) MENSWEAR WOMENSWEAR APPAREL ACCESSORIES FRAGRANCES HOME <S> <C> <C> <C> <C> <C> <C> 12/31/96 48.4 16.3 5.0 9.7 9.4 11.2 </TABLE> - --------------- (1) Wholesale net sales for products sold by the Company's licensing partners have been derived from information obtained from such licensing partners. (2) Includes transfers of products to the Company's wholly owned retail operations at wholesale prices or, in the case of outlet stores, at cost. Polo's business consists of four integrated operations: wholesale, Home Collection, direct retail and licensing alliances. Wholesale operations primarily consist of the design, sourcing, marketing and distribution of menswear under the Polo by Ralph Lauren, Polo Sport, Polo Golf and Ralph Lauren/Purple Label brands and of womenswear under the Ralph Lauren Collection and Collection Classics, RALPH and Ralph Lauren Polo Sport brands. See "Business -- Operations -- Wholesale". The Home Collection division designs, markets and sells home products under the Company's brands for its 13 home licensing partners from whom the Company receives royalties. See "Business -- Operations -- Home Collection". Polo's retail sales are generated by the Company's 28 Polo stores (including 21 stores being acquired pursuant to the PRC Acquisition (as defined)) located in regional malls and high-street shopping areas and its 67 outlet stores located primarily in outlet malls. See "Business -- Operations -- Direct Retailing" and "Reorganization and Related Transactions". As part of its licensing alliances, Polo conceptualizes, designs and develops the marketing for a broad range of products under its various brands for which the Company receives royalties from 19 product licensing partners and 14 international licensing partners. See "Business -- Licensing Alliances". Details of the Company's net revenues are shown in the table below. <TABLE> <CAPTION> FISCAL YEAR PRO FORMA -------------------------------------- FISCAL 1997(3) 1995 1996 1997 (UNAUDITED) -------- ---------- ---------- -------------- (IN THOUSANDS) <S> <C> <C> <C> <C> Wholesale net sales(1)................ $496,876 $ 606,022 $ 663,358 $ 623,041 Retail sales.......................... 249,719 303,698 379,972 508,645 -------- ---------- ---------- Net sales........................... 746,595 909,720 1,043,330 1,131,686 Licensing revenue(1)(2)............... 100,040 110,153 137,113 137,113 -------- ---------- ---------- Net revenues........................ $846,635 $1,019,873 $1,180,443 $1,268,799 ======== ========== ========== </TABLE> - --------------- (1) The Company purchased certain of the assets of its former womenswear licensing partner in October 1995 and the fiscal 1996 and 1997 net revenues reflect the inclusion of womenswear wholesale net sales of $36,692 and $98,759, respectively, and an elimination of licensing revenue associated with operations of the womenswear business after the acquisition. (2) Licensing revenue includes royalties received from Home Collection licensing partners. (3) Pro forma financial information presented above gives effect to the PRC Acquisition as if it had occurred on March 31, 1996, the first day of fiscal 1997. Prior to the PRC Acquisition, the Company owned a 50% interest in Polo Retail Corporation ("PRC") which it accounted for using the equity method, and as such, did not consolidate PRC's operations. Accordingly, prior to the PRC Acquisition, net revenues did not include PRC's retail sales, while wholesale net sales reflected the Company's sales to PRC. Simultaneous with the closing of the Offerings, the Company will complete the PRC Acquisition. See "Reorganization and Related Transactions -- PRC Acquisition" and "Unaudited Pro Forma Combined Financial Information". STRATEGY From its inception, Polo has maintained a consistent operating strategy which has driven growth in sales and earnings. Key elements of this core strategy are as follows: OFFER PREMIUM QUALITY PRODUCTS AND DISTINCTIVE DESIGNS. The Company's products reflect a timeless and innovative American style associated with and defined by Polo and Ralph Lauren. The Company's designers work closely with its merchandising, sales and production teams and licensing partners to offer premium quality product collections which incorporate Polo's distinctive lifestyle themes. Mr. Lauren, supported by Polo's design staff of over 180 persons, has won numerous awards for Polo's designs including, most recently, the prestigious 1996 Menswear Designer of the Year and 1995 Womenswear Designer of the Year awards, both of which were awarded by the Council of Fashion Designers of America ("CFDA"). In addition, Mr. Lauren was honored with the CFDA Lifetime Achievement Award in 1991, and is the only person to have won all three of these awards. See "Business -- Design". PROMOTE GLOBAL BRANDS AND IMAGE. The Company strives to project a consistent global image for its brands from product design to marketing to point-of-sale. Portraying core lifestyle themes more often than a particular product, Polo's distinctive advertising builds the Company's brand names and image, season after season. In fiscal 1997, Polo and its licensing partners spent over $130 million to advertise and promote the Company's brands worldwide. Polo also presents seasonal fashion shows, directs in-store events and utilizes the services of prominent athletes and models to promote its image. See "Business -- Marketing". CONTROL AND CUSTOMIZE DISTRIBUTION. Polo's reputation for quality and style is also reflected in the distribution of its products. The Company's products are sold through leading upscale department and specialty stores and Polo stores throughout the world. Polo was a pioneer in utilizing shop-within-shop boutiques in major department stores to encourage the effective merchandising and display of Polo Ralph Lauren products. By presenting a broad selection of Polo products in an attractive customized environment, the shop-within-shop boutiques heighten awareness of the Company's brands and differentiate its offerings. The Company estimates that, as of March 29, 1997, more than three million square feet of retail space worldwide (including Polo stores and approximately 1,700 department store shop-within-shop boutiques in the United States) were exclusively dedicated to products sold under the Company's brands. See "Business -- Operations -- Domestic Wholesale and Home Collection Customers and Service". BUILD STRATEGIC LICENSING ALLIANCES. Polo's licensing alliances have been a key factor in the Company's ability to offer an extensive array of products domestically and internationally. Through these alliances, Polo combines its consumer insight and design, marketing, and imaging skills with the specific product or geographic competencies of its licensing partners to create and build new businesses. Important examples of these alliances include those with industry leaders such as L'Oreal, S.A. in fragrances, WestPoint Stevens, Inc. in bedding and bath products, and Seibu Department Stores, Ltd. in connection with the offering of Polo products in Japan. See "Business -- Operations -- Home Collection" and "-- Operations -- Licencing Alliances", for a description of the Company's material licensing alliances and the percent of revenue attributable to each. DEVELOP POLO RALPH LAUREN STORES. The Company enhances the sale and merchandising of its products and builds the awareness and identity of its brands through its Polo stores and outlet stores. The Company's two flagship stores, located on Madison Avenue in New York City, offer unique shopping environments which communicate the complete Polo lifestyle. Over 100 Polo stores are operated by the Company and its licensing and joint venture partners in over 25 countries worldwide. The Company also operates 67 outlet stores which broaden its customer base and contribute to profitability while maintaining the integrity of its primary distribution channels. See "Business -- Operations -- Direct Retailing". The Company believes that the ongoing implementation of these operating strategies in combination with its growth strategies positions the Company for continued success. Polo's growth strategies are as follows: EXPAND THE FAMILY OF POLO BRANDS. The Company continually creates new brands based upon the original Polo and Ralph Lauren concepts to address new markets and consumer groups and maintain Polo's premium image. For example, in fiscal 1994, the Polo Sport label was created to introduce a new line of fitness apparel targeted at the growing market for functional, performance-oriented sport and outdoor wear. In Fall 1995, Polo launched its exclusive, limited distribution Purple Label brand of men's tailored clothing. Representing the Company's most refined apparel perspective, Purple Label reinforces Polo's reputation for quality, innovation and style. In Fall 1996, Polo introduced a denim-based line of sportswear for men, women and children under the Polo Jeans Co. brand. With price points below those of Polo's core apparel lines and a more casual contemporary styling, Polo Jeans Co. is designed to appeal to younger consumers. See "Business -- Operations -- Wholesale -- Polo Ralph Lauren Menswear" and "-- Operations -- Licensing Alliances -- Product Licensing Alliances". DEVELOP NEW PRODUCT CATEGORIES AND BUSINESSES WITHIN EXISTING BRANDS. Polo builds sales within its existing brands by devoting resources to less developed product areas and adding new product categories. For example, in Spring 1994, the Company added skin care products to its Polo Sport fragrance line and in fiscal 1996, introduced a line of paints and wall finishes as part of Home Collection. Similarly, while Polo has offered footwear since 1972, the Company plans to launch a full range of athletic footwear in 1998. See "Business -- Operations -- Licensing Alliances -- Product Licensing Alliances". LEVERAGE POLO BRANDS IN INTERNATIONAL MARKETS. The Company believes that international markets offer additional opportunities for Polo's quintessential American designs and lifestyle image and is committed to the global development of its businesses. International expansion opportunities may include the roll out of new products and brands following their launch in the U.S., the introduction of additional product lines, the entrance into new international markets and the addition of Polo stores in these markets. For example, following the successful launch of Polo Jeans Co. in the United States in Fall 1996, the Company formalized its plans to introduce the line in Canada, Europe and Asia in Fall 1997. See "Business -- Operations -- Licensing Alliances -- International Licensing Alliances". CAPITALIZE ON WOMENSWEAR OPPORTUNITY. The Company believes the womenswear market offers a significant opportunity for it to further capitalize on its position both domestically and internationally as a leading designer of womenswear. The Company acquired its womenswear business from a former licensing partner in October 1995. In addition to allowing the Company to improve the operations of its existing womenswear designer and bridge lines, the acquisition has enabled Polo to take important growth initiatives in additional segments of the womenswear market. In Fall 1996, for example, the Company and a new licensing partner launched the Lauren line of women's better sportswear and career apparel. See "Business -- Operations -- Wholesale -- Ralph Lauren Womenswear". CONTINUE RETAIL EXPANSION. The Company plans to expand its retail presence by adding five or more Polo stores, including flagship stores in London and Chicago, over the next two years. The Company also plans to add ten to 20 new outlet stores over the next three years. In addition, in fiscal 1998, the Company plans to test market a Polo Jeans Co. store. See "Business -- Operations -- Direct Retailing". REORGANIZATION AND RELATED TRANSACTIONS In anticipation of the Offerings, the Company is effecting an internal reorganization and certain other transactions including the PRC Acquisition and the Trademark Acquisition (as defined), all of which will be completed prior to or simultaneous with the closing of the Offerings. Since October 1994, the Company has conducted its operations primarily through two operating partnerships, Polo Ralph Lauren Enterprises, L.P. ("Enterprises") and Polo Ralph Lauren, L.P. ("Polo LP"), and subsidiaries of Polo LP. In October 1995, the Company purchased certain of the assets of the Company's unaffiliated former womenswear licensing partner, Ralph Lauren Womenswear Inc., a wholly owned subsidiary of Bidermann Industries Corp. ("Bidermann"), and formed The Ralph Lauren Womenswear Company, L.P. ("Womenswear LP" and, together with Enterprises and Polo LP, the "Operating Partnerships"). In May 1997, a corporation wholly owned by Mr. Lauren through which he held certain interests in Enterprises and Polo LP merged into Polo Ralph Lauren Corporation, a newly formed entity also wholly owned by Mr. Lauren, pursuant to which Mr. Lauren received shares of Class B Common Stock (as defined). Prior to the commencement of the Offerings, the Company will declare the Dividend (as defined) and certain investment funds affiliated with The Goldman Sachs Group, L.P. (collectively, the "GS Group") will contribute their interests, either directly or by merger into the Company, and Mr. Lauren and a partnership controlled by Mr. Lauren, RL Holding, L.P. ("Holding LP"), will contribute their interests, in the Operating Partnerships, and Mr. Lauren will contribute all of the outstanding capital stock of Polo Ralph Lauren Womenswear, Inc., a corporation wholly owned by Mr. Lauren ("PRLW"), to the Company in exchange for shares of Class B Common Stock and Class C Common Stock (as defined) and promissory notes (the "Reorganization Notes") of the Company (the "Reorganization"). As a result of such contributions, Enterprises and Polo LP will dissolve by operation of law. Simultaneous with the Reorganization, the Company will also acquire from RL Family, L.P. ("Family LP"), a partnership of which Mr. Lauren is the sole general partner, Family LP's sole membership interest in RL Fragrances, LLC ("Fragrances LLC"), an entity which holds the trademarks and rights under a licensing agreement relating to the Company's U.S. fragrance business and the interest which the Company did not previously own in The Polo/Lauren Company, L.P. in exchange for 1,557,503 shares of Class B Common Stock (the "Trademark Acquisition"). The Polo/Lauren Company, L.P. is currently majority-owned and controlled by the Company and holds the trademarks relating to its international licensing business. The Reorganization, including the Trademark Acquisition, will be completed prior to commencement of the Offerings. Also simultaneous with the Reorganization and the Trademark Acquisition, the Company entered into a new credit facility with The Chase Manhattan Bank, as lender and agent (the "New Credit Facility"), and used the borrowings thereunder to refinance the Polo LP credit facility and to repay in full approximately $56.6 million in aggregate of the borrowings outstanding under the Womenswear LP credit facility and the PRC credit facility, thereby terminating such credit facilities. See "Reorganization and Related Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". Effective April 3, 1997, the Company entered into negotiated, arms-length purchase agreements with Mr. David J. Hare, who has since become an executive officer of the Company, and third parties including Mr. William G. Merriken and Mr. John Slater (both employees of PRC or its subsidiaries) and Franklin Retail Corporation, to acquire the 50% interest in PRC and minority interests in entities related to PRC, Perkins Shearer Venture, Colorado Retail Corp. and Perkins Shearer Polo Ltd. (collectively, "PRC Related Entities"), that the Company did not previously own for aggregate consideration of approximately $10.4 million, which acquisition (the "PRC Acquisition") will be completed simultaneous with the Offerings. The consideration to be paid by the Company includes a cash payment of $8.4 million, made on April 3, 1997, a cash payment of $1.0 million made on May 15, 1997 and a cash payment of $0.3 million made on June 3, 1997. The remaining $0.7 million will be paid concurrent with the closing of the Offerings in 29,787 shares of Class A Common Stock, assuming an initial public offering price of $23.50 per share, the mid-point of the range set forth on the cover page of this Prospectus. See "Reorganization and Related Transactions" and "Certain Relationships and Related Transactions". The principal executive offices of the Company are located at 650 Madison Avenue, New York, New York 10022. The Company's telephone number at such address is (212) 318-7000. THE OFFERINGS The offering hereby of 23,500,000 shares of Class A Common Stock, par value $.01 per share, of the Company (the "Class A Common Stock" and, collectively with the Class B Common Stock, par value $.01 per share (the "Class B Common Stock") and Class C Common Stock, par value $.01 per share (the "Class C Common Stock"), the "Common Stock") initially being offered in the United States (the "U.S. Offering") and the offering of 6,000,000 shares of Class A Common Stock initially being offered in a concurrent international offering outside the United States (the "International Offering") are collectively referred to as the "Offerings". The closing of each Offering is conditioned upon the closing of the other Offering. Class A Common Stock Offered: <TABLE> <S> <C> <C> The Company........................ 9,400,000 Shares The Selling Stockholders........... 20,100,000 Shares ---------- Total......................... 29,500,000 Shares ========== Common Stock to be outstanding after the Offerings: Class A Common Stock.................. 29,858,893 Shares(1) Class B Common Stock.................. 45,935,021 Shares(2) Class C Common Stock.................. 22,720,979 Shares(2) ---------- Total......................... 98,514,893 Shares(1) ========== Use of Proceeds(3)...................... The Company intends to use the estimated net proceeds of approximately $203.2 million from the Offerings to repay indebtedness (including the Subordinated Notes (as defined), the Reorganization Notes and bank debt) and to pay the Dividend (as defined). The Company will not receive any proceeds from the sale of shares of Class A Common Stock by the Selling Stockholders. See "Use of Proceeds". </TABLE> - --------------- (1) Does not include approximately 4,200,000 shares of Class A Common Stock subject to stock options granted to certain employees simultaneous with the commencement of the Offerings. See "Management -- 1997 Stock Incentive Plan" and "-- 1997 Non-Employee Director Option Plan". Includes 29,787 shares of Class A Common Stock which are expected to be issued in connection with the PRC Acquisition based on an initial public offering price of $23.50 per share, the midpoint of the range set forth on the cover page of this Prospectus and 85,106 shares of Class A Common Stock to be granted to Mr. Michael J. Newman under the 1997 Stock Incentive Plan simultaneous with the commencement of the Offerings. See "-- Reorganization and Related Transactions -- PRC Acquisition" and "Management -- 1997 Stock Incentive Plan". (2) Shares of Class B Common Stock are convertible at any time into shares of Class A Common Stock on a one-for-one basis and may not be transferred to anyone other than a Lauren Family Member (as defined). Shares of Class C Common Stock are convertible at any time into shares of Class A Common Stock on a one-for-one basis and may not be transferred to anyone other than among members of the GS Group or any successor of a member of the GS Group. See "Certain Relationships and Related Transactions", "Principal and Selling Stockholders" and "Description of Capital Stock". (3) After deducting the underwriting discount and estimated expenses of the Offerings and assuming no exercise of the Underwriters' over-allotment options. <TABLE> <S> <C> Voting Rights........................... The holders of Class A Common Stock generally have rights identical to holders of Class B Common Stock and Class C Common Stock, except that holders of Class A Common Stock and Class C Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes per share. Holders of all classes of Common Stock generally will vote together as a single class on all matters presented to the stockholders for their vote or approval except for the election and the removal of directors and as otherwise required by applicable Delaware law. Immediately after the closing of the Offerings, holders of Class B Common Stock, voting as a class, will be entitled to elect four of the six members of the Board of Directors. See "Description of Capital Stock -- Common Stock -- Voting Rights".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/RMBS_rambus-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/RMBS_rambus-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..199b901a5be05c495a6d06cc8cd88ce66f7b4a82
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/RMBS_rambus-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/SAH_sonic_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/SAH_sonic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a6229a29b740f6dcf0df2754535dd0e702bc5567
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/SAH_sonic_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. References in this Prospectus to "Sonic" or the "Company" (i) are to Sonic Automotive, Inc. and, unless the context indicates otherwise, its consolidated subsidiaries and their respective predecessors, (ii) give effect to a recently completed Reorganization (as defined below) of the Company, and (iii) assume that the Company has consummated the acquisition of the assets or all the capital stock of six additional dealerships or dealership groups, as described herein, in North Carolina, Tennessee, Florida, Georgia and South Carolina (the "Acquisitions"). See "The Acquisitions." References to the "Offering" are to the offering of 4,000,000 shares of Class A Common Stock made hereby in the United States and Canada by the U.S. Underwriters (the "U.S. Offering") and to the concurrent offering of 1,000,000 shares of Class A Common Stock outside the United States and Canada by the International Managers (the "International Offering"), collectively. References to the "Underwriters" are to the U.S. Underwriters and the International Managers, collectively. Unless otherwise indicated, all information in this Prospectus (a) gives retroactive effect to a 625-for-1 stock split (effected in the form of a stock dividend) of the Company's Class B Common Stock to be consummated prior to the consummation of the Offering (the "Stock Split") and (b) assumes that the Underwriters' over-allotment option is not exercised. The Acquisitions will be consummated on or before the closing of the Offering. The Company The Company is one of the leading automotive retailers in the United States, operating 23 dealership franchises, four standalone used vehicle facilities and seven collision repair centers in the southeastern and southwestern United States. Sonic sells new and used cars and light trucks, sells replacement parts, provides vehicle maintenance, warranty, paint and repair services and arranges related financing and insurance ("F&I") for its automotive customers. The Company's business is geographically diverse, with dealership operations in the Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of which the Company believes is experiencing favorable demographic trends. Sonic sells 15 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler, Dodge, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth, Toyota, Volkswagen and Volvo. In several of its markets, the Company has a significant market share for new cars and light trucks, including 13.7% in Charlotte and 9.1% in Chattanooga in 1996. Pro forma for the Acquisitions, the Company had revenues of $899.6 million and retail unit sales of 24,206 new and 13,475 used vehicles in 1996. The Company believes that in 1996, based on pro forma retail unit sales, it would have been one of the ten largest dealer groups out of a total of more than 15,000 dealer groups in the United States. The Company's founder and Chief Executive Officer, O. Bruton Smith, has over 30 years of automotive retailing experience. In addition, the Company's other executive officers, regional vice presidents and executive managers have on average 18 years of automotive retailing experience. The Company's dealerships are among those dealerships that have won the highest attainable awards from various manufacturers measuring quality and customer satisfaction. These awards include the Five Star Award from Chrysler, the Chairman's Award from Ford, the President's Award from BMW and the President's Circle Award from Infiniti. In addition, the Company was named to Ford's Top 100 Club, which consists of Ford's top 100 retailers based on retail volume and consumer satisfaction. The Company intends to pursue an acquisition growth strategy led by a management team that has experience in the consolidation of automotive retailing as well as motorsports businesses. Bruton Smith, who is also the Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of several motorsports facilities, first entered the automotive retailing business in the mid-1960's. Mr. Smith will devote approximately 50% of his business time to the Company. Since 1990, Mr. Smith has successfully acquired three dealerships and increased his dealerships' revenues from $199.4 million in 1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In the Tennessee market, Nelson E. Bowers, II, the Company's Executive Vice President, has acquired or opened eight dealerships since 1992 and increased revenues (primarily through acquisitions) of the dealership group to be acquired by the Company from $13.2 million in 1992 to $101.5 million in 1996. No assurance can be given that Messrs. Smith and Bowers will be successful in acquiring or opening new dealerships for the Company or increasing the Company's revenues. The Company believes the competitive advantages which differentiate it from its local competitors include the reputation of the Company's management in the automotive retailing industry, regional and national economies of scale, brand and geographic diversity, and the established customer base and local name recognition of the Company's dealerships. The Company has developed and implemented several growth strategies to capitalize on these competitive advantages. One of these is to continue to expand its operations in the Southeast and Southwest by acquiring additional dealerships both within its current markets and in new markets. The Company also is seeking additional growth from the increased sale of higher margin products and services such as wholesale parts, after-market products, collision repair services and F&I. The Company believes that an opportunity exists for dealership groups with significant equity capital and experience in identifying, acquiring and professionally managing dealerships, to acquire additional dealerships and capitalize on changes in [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. References in this Prospectus to "Sonic" or the "Company" (i) are to Sonic Automotive, Inc. and, unless the context indicates otherwise, its consolidated subsidiaries and their respective predecessors, (ii) give effect to a recently completed Reorganization (as defined below) of the Company, and (iii) assume that the Company has consummated the acquisition of the assets or all the capital stock of six additional dealerships or dealership groups, as described herein, in North Carolina, Tennessee, Florida, Georgia and South Carolina (the "Acquisitions"). See "The Acquisitions." References to the "Offering" are to the offering of 1,000,000 shares of Class A Common Stock made hereby outside the United States and Canada by the International Managers (the "International Offering") and the concurrent offering of 4,000,000 shares of Class A Common Stock in the United States and Canada by the U.S. Underwriters (the "U.S. Offering"), collectively. References to the "Underwriters" are to the International Managers and the U.S. Underwriters, collectively. Unless otherwise indicated, all information in this Prospectus (a) gives retroactive effect to a 625-for-1 stock split (effected in the form of a stock dividend) of the Company's Class B Common Stock to be consummated prior to the consummation of the Offering (the "Stock Split") and (b) assumes that the Underwriters' over-allotment option is not exercised. The Acquisitions will be consummated on or before the closing of the Offering. The Company The Company is one of the leading automotive retailers in the United States, operating 23 dealership franchises, four standalone used vehicle facilities and seven collision repair centers in the southeastern and southwestern United States. Sonic sells new and used cars and light trucks, sells replacement parts, provides vehicle maintenance, warranty, paint and repair services and arranges related financing and insurance ("F&I") for its automotive customers. The Company's business is geographically diverse, with dealership operations in the Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of which the Company believes is experiencing favorable demographic trends. Sonic sells 15 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler, Dodge, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth, Toyota, Volkswagen and Volvo. In several of its markets, the Company has a significant market share for new cars and light trucks, including 13.7% in Charlotte and 9.1% in Chattanooga in 1996. Pro forma for the Acquisitions, the Company had revenues of $899.6 million and retail unit sales of 24,206 new and 13,475 used vehicles in 1996. The Company believes that in 1996, based on pro forma retail unit sales, it would have been one of the ten largest dealer groups out of a total of more than 15,000 dealer groups in the United States. The Company's founder and Chief Executive Officer, O. Bruton Smith, has over 30 years of automotive retailing experience. In addition, the Company's other executive officers, regional vice presidents and executive managers have on average 18 years of automotive retailing experience. The Company's dealerships are among those dealerships that have won the highest attainable awards from various manufacturers measuring quality and customer satisfaction. These awards include the Five Star Award from Chrysler, the Chairman's Award from Ford, the President's Award from BMW and the President's Circle Award from Infiniti. In addition, the Company was named to Ford's Top 100 Club, which consists of Ford's top 100 retailers based on retail volume and consumer satisfaction. The Company intends to pursue an acquisition growth strategy led by a management team that has experience in the consolidation of automotive retailing as well as motorsports businesses. Bruton Smith, who is also the Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of several motorsports facilities, first entered the automotive retailing business in the mid-1960's. Mr. Smith will devote approximately 50% of his business time to the Company. Since 1990, Mr. Smith has successfully acquired three dealerships and increased his dealerships' revenues from $199.4 million in 1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In the Tennessee market, Nelson E. Bowers, II, the Company's Executive Vice President, has acquired or opened eight dealerships since 1992 and increased revenues (primarily through acquisitions) of the dealership group to be acquired by the Company from $13.2 million in 1992 to $101.5 million in 1996. No assurance can be given that Messrs. Smith and Bowers will be successful in acquiring or opening new dealerships for the Company or increasing the Company's revenues. The Company believes the competitive advantages which differentiate it from its local competitors include the reputation of the Company's management in the automotive retailing industry, regional and national economies of scale, brand and geographic diversity, and the established customer base and local name recognition of the Company's dealerships. The Company has developed and implemented several growth strategies to capitalize on these competitive advantages. One of these is to continue to expand its operations in the Southeast and Southwest by acquiring additional dealerships both within its current markets and in new markets. The Company also is seeking additional growth from the increased sale of higher margin products and services such as wholesale parts, after-market products, collision repair services and F&I. The Company believes that an opportunity exists for dealership groups with significant equity capital and experience in identifying, acquiring and professionally managing dealerships, to acquire additional dealerships and capitalize on changes in the automotive retailing industry. With approximately $640 billion in 1996 sales, automotive retailing is the largest consumer retail market in the United States. The industry today is highly fragmented, with the largest 100 dealer groups generating less than 10% of total sales revenues and controlling less than 5% of all new vehicle dealerships. The Company believes that these factors, together with increasing capital costs of operating automobile dealerships, the lack of alternative exit strategies (especially for larger dealerships) and the aging of many dealership owners provide attractive consolidation opportunities. Automobile retailing is highly competitive. The Company's competition includes franchised automobile dealerships, some with greater resources than the Company, selling the same or similar makes of vehicles offered by the Company. Other competitors include other franchised dealers, private market buyers and sellers of used vehicles, used vehicle dealers, service center chains and independent service and repair shops. Primarily as a result of competitive pressures, gross profit margins on new vehicle sales have been declining since 1986. The Company has also experienced gross profit margin pressure on used vehicle sales over the last 18 months. For further discussion of competition affecting the Company's business, see "Risk Factors -- Competition" and "Business -- Competition." Growth Strategy (Bullet) Acquire Dealerships. The Company plans to implement a "hub and spoke" acquisition program primarily by pursuing (i) well-managed dealerships in new metropolitan and growing suburban geographic markets, and (ii) dealerships that will allow the Company to capitalize on regional economies of scale, offer a greater breadth of products and services in any of its markets or increase brand diversity. New Markets. The Company looks to acquire well-managed dealerships in geographic markets it does not currently serve, principally in the Southeast and Southwest regions of the United States. Generally, the Company will seek to retain the acquired dealerships' operational and financial management, and thereby benefit from their market knowledge, name recognition and local reputation. Existing Markets. The Company seeks growth in its operations within existing markets by acquiring dealerships that increase the brands, products and services offered in those markets. These acquisitions should produce opportunities for additional operating efficiencies, promote increased name recognition and provide the Company with better opportunities for repeat and referral business. (Bullet) Pursue Opportunities in Ancillary Products and Services. The Company intends to pursue opportunities to increase its sales of higher-margin products and services by expanding its collision repair centers and its wholesale parts and after-market products businesses, which, other than after-market products, are not directly related to the new vehicle cycle. Collision Repair Centers. The Company's collision repair business provides favorable margins and is not significantly affected by economic cycles or consumer spending habits. The Company believes that because of the high capital investment required for collision repair shops and the cost of complying with environmental and worker safety regulations, large volume body shops will be more successful in the future than smaller volume shops. The Company believes that this industry will consolidate and that it will be able to expand its collision repair business. The Company currently has seven collision repair centers accounting for approximately $8.9 million in pro forma revenue for the year ended 1996. Wholesale Parts. Over time, the Company plans to capitalize on its growing representation of numerous manufacturers in order to increase its sales of factory authorized parts to wholesale buyers such as independent mechanical and body repair garages and rental and commercial fleet operators. After-Market Products. The Company intends to expand its offerings of after-market products in many of its dealership locations. After-market products, such as custom wheels, performance parts, telephones and other accessories, enable the dealership to capture incremental revenue on new and used vehicle sales. (Bullet) Enhance Profit Opportunities in Finance and Insurance. The Company offers its customers a wide range of financing and leasing alternatives for the purchase of vehicles, as well as credit life, accident and health and disability insurance and extended service contracts. As a result of its size and scale, the Company believes it will be able to negotiate with the lending institutions that purchase its financing contracts to increase the Company's revenues. Likewise, the Company expects to negotiate to increase the commissions it earns on extended service and insurance products. (Bullet) Increase Used Vehicle Sales. The Company believes that there will be opportunities to improve the used vehicle departments at several of its dealerships. The Company currently operates four standalone used vehicle facilities. In 1998, the Company intends to convert part of an existing facility in Nashville to a used vehicle facility. It also intends to develop used vehicle facilities in other markets where management believes opportunities exist. Operating Strategy (Bullet) Operate Multiple Dealerships in Geographically Diverse Markets. The Company operates dealerships in Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta. By operating in several locations throughout the United States, the Company believes it will be better able to insulate its earnings from local economic downturns. In addition, the Company believes that by establishing a significant market presence in its operating regions, it will be able to provide superior customer service through a market-specific sales, service, marketing and inventory strategy. (Bullet) Achieve High Levels of Customer Satisfaction. Customer satisfaction has been and will continue to be a focus of the Company. The Company's personalized sales process is intended to satisfy customers by providing high-quality vehicles in a positive, "consumer friendly" buying environment. Some Manufacturers offer specific performance incentives, on a per vehicle basis, if certain customer satisfaction index ("CSI") levels (which vary by Manufacturer) are achieved by a dealer. Manufacturers can withhold approval of acquisitions if a dealer fails to maintain a minimum CSI score. Historically, the Company has not been denied Manufacturer approval of acquisitions based on CSI scores. To keep management focused on customer satisfaction, the Company includes CSI results as a component of its incentive compensation program. (Bullet) Train and Develop Qualified Management. Sonic requires all of its employees, from service technicians to regional vice presidents, to participate in in-house training programs. The Company leverages the experience of senior management, along with third party trainers from manufacturers, industry affiliates and vendors, to formally train all employees. This training is also a convenient and effective way to share best practices among the Company's employees at all levels of the various dealerships. The Company believes that its comprehensive training of all employees at every level of their career path offers the Company a competitive advantage over other dealership groups in the development and retention of its workforce. (Bullet) Offer a Diverse Range of Automotive Products and Services. Sonic offers a broad range of automotive products and services, including a wide selection of new and used vehicles, vehicle financing and insurance programs, replacement parts and maintenance and repair programs. Offering numerous new vehicle brands enables the Company to satisfy a variety of customers, reduces dependence on any one Manufacturer and reduces exposure to supply problems and product cycles. (Bullet) Capitalize on Efficiencies in Operations. Because management compensation is based primarily on dealership performance, expense reduction and operating efficiencies are a significant management focus. As the Company pursues its acquisition strategy, the Company's size and market presence should provide it with an opportunity to negotiate favorable contracts on such expense items as advertising, purchasing, bank financings, employee benefit plans and other vendor contracts. (Bullet) Utilize Professional Management Practices and Incentive Based Compensation Programs. As a result of Sonic's size and geographic dispersion, the Company's senior management has instituted a multi-tiered management structure to supervise effectively its dealership operations. In an effort to align management's interest with that of stockholders, a portion of the incentive compensation program for each officer, vice president and executive manager is provided in the form of Company stock options, with additional incentives based on the performance of individual profit centers. Sonic believes that this organizational structure, with room for advancement and the opportunity for equity participation, serves as a strong motivation for its employees. (Bullet) Apply Technology Throughout Operations. The Company believes that, with the customized technology it has introduced in certain markets, it has been able to improve its operations over time by integrating its systems into all aspects of its business. In these markets the Company uses computer-based technology to monitor its dealerships' operating performance and quickly adjust to market changes and to integrate computer systems into its sales, F&I and parts and service operations. The Company intends to expand this computer system into more of its dealerships and markets as existing contracts for computer systems expire. The Reorganization The Company was recently incorporated and capitalized with the stock of the automobile dealerships that have been under the control of Bruton Smith comprised of Town & Country Ford, Town & Country Toyota, Lone Star Ford, Fort Mill Ford and Frontier Oldsmobile-Cadillac (the "Sonic Dealerships"). As of June 30, 1997, the Company effected a reorganization (the "Reorganization") pursuant to which: (i) the Company acquired all of the capital stock or limited liability company interests of the Sonic Dealerships (the "Dealership Securities"); and (ii) the Company issued Class B Common Stock to the Smith Group in exchange for the Dealership Securities. In connection with the Reorganization and the Offering, the Company will convert from the last-in-first-out method (the "LIFO Method") of inventory accounting to the first-in-first-out method (the "FIFO Method") of inventory accounting (the "FIFO Conversion"), conditioned upon the closing of the Offering. In connection with the FIFO Conversion, and in accordance with generally accepted accounting principles, the accompanying financial information of the Company has been retroactively restated to reflect the FIFO Conversion. See "The Reorganization." The Acquisitions In the past five months, the Company has consummated or signed definitive agreements to purchase six dealerships or dealership groups for an aggregate purchase price of approximately $94.8 million. These acquisitions consist of Ken Marks Ford located in Clearwater, Florida (the "Ken Marks Acquisition") (consummated on October 15, 1997), seven dealerships controlled by the Bowers Transportation Group in Chattanooga, Tennessee and one dealership in Nashville, Tennessee (the "Bowers Acquisition"), Lake Norman Dodge and Lake Norman Chrysler-Plymouth-Jeep-Eagle located in Cornelius, North Carolina (the "Lake Norman Acquisition") (consummated on September 29, 1997), Dyer & Dyer Volvo located in Atlanta, Georgia (the "Dyer Acquisition"), the acquisition of the assets of Jeff Boyd Chrysler-Plymouth-Dodge located in Fort Mill, South Carolina, by the Company's subsidiary, Fort Mill Chrysler-Plymouth-Dodge Inc. (the "Fort Mill Acquisition") (consummated on June 3, 1997), and the acquisition of the assets of Williams Motors located in Rock Hill, South Carolina, by the Company's subsidiary, Town and Country Chrysler-Plymouth-Jeep of Rock Hill, Inc. (the "Williams Acquisition") (consummated on October 10, 1997) (collectively, the "Acquisitions"). The dealerships underlying the Acquisitions had aggregate total revenues of approximately $490.1 million in 1996 and enhance the Company's market presence in the Southeast. See "The Acquisitions." The Company's principal executive office is located at 5401 East Independence Boulevard, Charlotte, North Carolina. Its mailing address is P.O. Box 18747, Charlotte, North Carolina 28218, and its telephone number is (704) 532-3301. The Offering <TABLE> <S> <C> Class A Common Stock Offered by the Company........... 5,000,000 shares (1) Class A Common Stock initially offered in: The U.S. Offering (1)............................... 4,000,000 shares The International Offering (1)...................... 1,000,000 shares Common Stock to be outstanding after the Offering: Class A Common Stock................................ 5,000,000 shares (1)(2) Class B Common Stock................................ 6,250,000 shares Total.......................................... 11,250,000 shares Voting Rights......................................... The Class A Common Stock and Class B Common Stock vote as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock entitling its holders to one vote and each share of Class B Common Stock entitling its holder to ten votes except with respect to certain limited matters. See "Description of Capital Stock." Use of proceeds....................................... The net proceeds of the Offering will be used to fund the Acquisitions, including repaying certain indebtedness incurred by the Company in connection with the Acquisitions already consummated. See "The Acquisitions" and "Use of Proceeds." Listing............................................... The Class A Common Stock has been approved for listing on the New York Stock Exchange (the "NYSE"), subject to offical notice of issuance, under the symbol "SAH." </TABLE> - --------------- (1) Does not include up to an aggregate of 600,000 and 150,000 shares of Class A Common Stock, respectively, that may be sold by the Company upon exercise of the over-allotment options granted to the U.S. Underwriters and the International Managers. See "Underwriting." (2) Excludes (i) 1,125,000 shares of Class A Common Stock reserved for future issuance to Company employees under the Company's Stock Option Plan (as defined herein) (including up to 587,509 shares of Class A Common Stock reserved for issuance upon exercise of options to be granted on or before the consummation of the Offering pursuant to the Stock Option Plan), (ii) 150,000 shares of Class A Common Stock reserved for issuance to eligible Company employees under the Company's ESPP (as defined herein) and (iii) 42,187 shares of Class A Common Stock (45,000 shares if the U.S. Underwriters' and the International Managers' over-allotment options are exercised) reserved for issuance under the Dyer Warrant (defined herein). See "The Acquisitions -- The Dyer Acquisition" and "Management -- Stock Option Plan." Risk Factors The Company's ability to make acquisitions in the future may be limited to some extent by the Manufacturers. The Company is required to obtain Manufacturer approval for any acquisition in accordance with industry practice. Moreover, pursuant to Manufacturer policies currently in effect or their approvals of the transactions contemplated hereby, the Company could acquire no more than ten Chrysler dealerships in the United States, no more than the lesser of (i) 15 Ford and 15 Lincoln Mercury dealerships or (ii) that number of Ford and Lincoln Mercury dealerships accounting for 2% of the preceding year's retail sales of those brands in the United States, six additional Toyota dealerships, three Lexus dealerships, six additional Honda dealerships, three Acura dealerships and five additional GM dealerships (within the next two years, subject to increase under certain conditions). For additional information concerning these and other limitations on acquisitions imposed by the Manufacturers, see "Risk Factors -- Risks Associated with Acquisitions," " -- Stock Ownership/Issuance Limits; Limitation on Ability to Issue Additional Equity" and " -- Manufacturers' Restrictions on Acquisitions." See "Risk Factors" beginning on page 9 for a discussion of other factors that should be considered by prospective purchasers of the Class A Common Stock offered hereby. Summary Historical and Pro Forma Combined and Consolidated Financial Data The following Summary Historical and Pro Forma Combined and Consolidated Financial Data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Combined and Consolidated Financial Statements of the Company and the related notes and "Pro Forma Combined and Consolidated Financial Data" included elsewhere in this Prospectus. The Company acquired Fort Mill Ford, Inc. and Fort Mill Chrysler-Plymouth-Dodge in February 1996 and in June 1997, respectively. Both of these acquisitions were accounted for using the purchase method of accounting. As a result the Summary Historical Combined and Consolidated Financial Data below does not include the results of operations of these dealerships prior to the date they were acquired by the Company. Accordingly, the actual historical data for the periods after the acquisition may not be comparable to data presented for periods prior to the acquisitions of Fort Mill Ford and Fort Mill Chrysler-Plymouth-Dodge. Additionally, the Summary Historical and Pro Forma Combined and Consolidated Financial Data below is not necessarily indicative of the results of operations or financial position which would have resulted had the Reorganization, the Acquisitions and the Offering occurred during the periods presented. In connection with the FIFO Conversion, and in accordance with generally accepted accounting principles, the Summary Historical and Pro Forma Combined and Consolidated Financial Data has been retroactively restated to reflect the FIFO Conversion. <TABLE> <CAPTION> Six Months Ended Year Ended December 31, June 30, --------------------------------------------------------------- ------------------- Pro Actual Forma Actual ---------------------------------------------------- -------- ------------------- 1992 1993 1994 1995 1996(1) 1996(2) 1996(1) 1997(3) -------- -------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> (in thousands, except per share and vehicles unit data) Combined and Consolidated Statement of Operations Data: Revenues: Vehicle sales...................... $171,065 $203,630 $227,960 $267,308 $326,842 $788,255 $164,333 $185,077 Parts, service and collision repair........................... 24,543 30,337 33,984 35,860 42,644 94,912 21,005 22,907 Finance and insurance.............. 3,743 3,711 5,181 7,813 7,118 16,471 4,277 4,763 -------- -------- -------- -------- -------- -------- -------- -------- Total revenues................... 199,351 237,678 267,125 310,981 376,604 899,638 189,615 212,747 Cost of sales........................ 174,713 208,445 233,011 270,878 331,047 786,129 167,191 188,422 -------- -------- -------- -------- -------- -------- -------- -------- Gross profit......................... 24,638 29,233 34,114 40,103 45,557 113,509 22,424 24,325 Selling, general and administrative expenses........................... 20,251 22,738 24,632 29,343 33,677 85,856 16,590 18,413 Depreciation and amortization........ 682 788 838 832 1,076 3,510 360 396 -------- -------- -------- -------- -------- -------- -------- -------- Operating income..................... 3,705 5,707 8,644 9,928 10,804 24,143 5,474 5,516 Interest expense floor plan.......... 2,215 2,743 3,001 4,505 5,968 9,342 2,801 3,018 Interest expense, other.............. 290 263 443 436 433 3,171 184 269 Other income......................... 1,360 613 609 449 618 2,222 369 274 -------- -------- -------- -------- -------- -------- -------- -------- Income before income taxes and minority interest.................. 2,560 3,314 5,809 5,436 5,021 13,852 2,858 2,503 Provision for income taxes........... 27 723 2,118 2,176 1,924 5,517 1,093 916 -------- -------- -------- -------- -------- -------- -------- -------- Income before minority interest...... 2,533 2,591 3,691 3,260 3,097 8,335 1,765 1,587 Minority interest in earnings (loss) of subsidiary...................... (31) (22) 15 22 114 -- 41 47 -------- -------- -------- -------- -------- -------- -------- -------- Net income........................... $ 2,564 $ 2,613 $ 3,676 $ 3,238 $ 2,983 $ 8,335 $ 1,724 $ 1,540 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Net income per share (4)............. $ 0.74 -------- -------- <CAPTION> Pro Forma -------- 1997(2) -------- <S> <C> Combined and Consolidated Statement of Operations Data: Revenues: Vehicle sales...................... $418,624 Parts, service and collision repair........................... 49,881 Finance and insurance.............. 9,410 -------- Total revenues................... 477,915 Cost of sales........................ 419,492 -------- Gross profit......................... 58,423 Selling, general and administrative expenses........................... 43,574 Depreciation and amortization........ 1,662 -------- Operating income..................... 13,187 Interest expense floor plan.......... 5,241 Interest expense, other.............. 1,674 Other income......................... 1,247 -------- Income before income taxes and minority interest.................. 7,519 Provision for income taxes........... 2,815 -------- Income before minority interest...... 4,704 Minority interest in earnings (loss) of subsidiary...................... -- -------- Net income........................... $ 4,704 -------- -------- Net income per share (4)............. $ 0.42 -------- -------- </TABLE> Other Combined and Consolidated Operating Data: <TABLE> <S> <C> <C> <C> <C> <C> <C> <C> <C> New vehicle units sold............... 8,060 9,429 9,686 10,273 11,693 24,206 6,027 6,553 Used vehicle units sold -- retail (5)................................ 3,892 4,104 4,374 5,172 5,488 13,475 2,836 2,638 New vehicle sales revenues........... $126,230 $152,525 $164,361 $186,517 $233,146 $540,505 $115,721 $137,069 Used vehicle sales revenues -- retail (5)................................ 33,636 37,742 47,537 60,766 68,054 181,787 35,200 32,666 Parts, service and collision repair sales revenues..................... 24,543 30,337 33,984 35,860 42,644 94,912 21,005 22,906 Gross profit margin.................. 12.4% 12.3% 12.8% 12.9% 12.1% 12.6% 11.8% 11.4% New vehicle gross margin............. 6.7% 6.9% 7.0% 7.3% 7.4% 7.4% 6.6% 6.5% Used vehicle gross margin (retail) (5)................................ 10.7% 10.5% 10.9% 9.5% 8.4% 9.2% 8.4% 8.5% Parts, service and collision repair gross margin....................... 36.3% 36.4% 35.9% 36.1% 36.5% 42.3% 35.8% 35.4% <CAPTION> New vehicle units sold............... 12,596 <S> <C> Used vehicle units sold -- retail (5)................................ 7,043 New vehicle sales revenues........... $285,143 Used vehicle sales revenues -- retail (5)................................ 96,249 Parts, service and collision repair sales revenues..................... 49,881 Gross profit margin.................. 12.2% New vehicle gross margin............. 7.3% Used vehicle gross margin (retail) (5)................................ 8.9% Parts, service and collision repair gross margin....................... 42.3% </TABLE> <TABLE> <CAPTION> As of As of June 30, 1997 December 31, ---------------------------- 1996 Actual Pro Forma -------------- -------- ---------------- <S> <C> <C> <C> Combined and Consolidated Balance Sheet Data: Working capital.............................................................. $ 19,780 $ 16,899 $ 41,382 Total assets................................................................. 110,976 120,384 295,139 Long-term debt............................................................... 5,286 5,137 36,980 Total liabilities............................................................ 84,367 91,978 208,242 Minority interest............................................................ 314 -- -- Stockholders' equity......................................................... 26,295 28,406 86,897 </TABLE> (footnotes on following page) - --------------- (1) The actual statement of operations data for the year ended December 31, 1996 includes the results of Fort Mill Ford, Inc. from the date of acquisition, February 1, 1996. (2) For information regarding the pro forma adjustments made to the Company's historical financial data, which give effect to the Reorganization, the Acquisitions, and the Offering, see "Pro Forma Combined and Consolidated Financial Data."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/SLMBP_slm-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/SLMBP_slm-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..50682c3509ff1c408ae5da049bfb64f00ca9bacd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/SLMBP_slm-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus contains certain forward-looking statements and information relating to the Company that are based on the beliefs of the Company's management and assumptions made by and information available to the Company as of the date of this Prospectus. When used in this document, the words "anticipate," "believe," "estimate" and "expect" and similar expressions, as they relate to the Company's management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company's management with respect to future events and are subject to certain risks, uncertainties and assumptions, described in this Prospectus. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements. THE COMPANY The Company provides a wide range of financial services, processing capabilities and loan origination and servicing systems to meet the needs of educational institutions, lenders and students. The Company was formed in 1997 in connection with the reorganization of Student Loan Marketing Association (the "GSE") pursuant to the Privatization Act. The Company's principal business is the financing and servicing of federally insured student loans, presently conducted through two wholly owned subsidiaries: the GSE, a government-sponsored enterprise chartered by an act of Congress, and Sallie Mae Servicing Corporation ("SMSC"), a Delaware corporation. The Company is the largest nongovernmental source of financing and servicing for education loans in the United States. The GSE was established in 1972 as a for-profit, stockholder-owned, federally chartered corporation to support the education credit needs of students by, among other things, promoting liquidity in the student loan marketplace through secondary market purchases of loans originated under federally sponsored student loan programs. The GSE principally purchases loans originated under the Federal Family Education Loan Program (formerly the Guaranteed Student Loan Program) (the "FFELP"), which are insured by state-related or non-profit guarantee agencies and are reinsured by the U.S. Department of Education (the "DOE"). The GSE also purchases student loans originated under the Health Education Assistance Loan Program ("HEAL"), which are insured directly by the U.S. Department of Health and Human Services. HEAL loans are made to health professions graduate students under the Public Health Services Act. The GSE obtains funds for its operations, including its student loan purchases, primarily by selling debt securities in the domestic and overseas capital markets and, increasingly, by securitizing a portion of its student loan assets. As of June 30, 1997, the GSE's managed portfolio of student loans totaled $41.5 billion, including $37.6 billion of FFELP loans (including loans owned, loans securitized and loan participations) and $2.7 billion of HEAL loans. The Company, through SMSC, is the nation's largest FFELP loan servicer. As of June 30, 1997, the Company serviced approximately $46.6 billion of loans, including approximately $29.3 billion of loans owned by the GSE, $10.0 billion owned by seven securitization trusts sponsored by the GSE, $3.5 billion of loans currently owned by customers who use ExportSS(R), the Company's loan origination and interim loan servicing product, and $3.8 billion owned by a joint venture between the GSE and the Chase Manhattan Bank. The Company currently has six loan servicing centers located in the states of Florida, Kansas, Massachusetts, Pennsylvania, Texas and Washington. The DOE and the various guarantee agencies prescribe rules and regulations that govern the servicing of federally insured loans. The Company's origination and servicing systems, internal procedures and highly trained staff support compliance with these regulations, ensure asset integrity and provide superior service to borrowers. In addition, the Company recently introduced imaging technology to further increase servicing productivity and capacity. To create customer preferences and compete more effectively in the student loan marketplace, the Company has developed a comprehensive set of loan programs and services for borrowers, including numerous loan restructuring and repayment options and programs that encourage and reward good repayment habits. On August 7, 1997, a reorganization (the "Reorganization") authorized by the Privatization Act and approved by GSE shareholders was consummated. Pursuant to the Reorganization, among other things, the GSE became a wholly-owned subsidiary of the Company and will be liquidated and dissolved on or before September 30, 2008 (the period between the Reorganization and the liquidation or dissolution referred to herein as the "Wind-Down Period"). During the Wind-Down Period, all of the Company's business activities will be conducted through the GSE and the Company's other non-GSE subsidiaries. The GSE generally may continue to purchase student loans only through September 30, 2007. Neither the Company nor any of its non-GSE subsidiaries may purchase FFELP loans during the Wind-Down Period for so long as the GSE continues to do so. Subject to the foregoing, however, the Company may elect at any time to commence FFELP student loan purchases outside of the GSE. The GSE has engaged in a number of specialty financial services related to higher education credit, including collateralized financing of FFELP and other education loan portfolios (warehousing advances), credit support for student loan revenue bonds, portfolio acquisitions of student loan revenue and facilities bonds, underwritings of academic facilities bonds and surety bond support for non-federally insured student loans. During the Wind-Down Period, the GSE may only extend warehousing advances and offer student loan revenue bond credit support pursuant to financing and guarantee commitments, respectively, in place as of August 7, 1997. As of June 30, 1997, the GSE held approximately $3.4 billion and $182 million of such warehousing and guarantee commitments, respectively. In addition, management expects that the Company will reduce its warehousing advances, investment activities in academic facilities financing and student loan revenue bonds during the Wind-Down Period. As of June 30, 1997, these assets totaled $2.5 billion, $1.4 billion and $185 million, respectively. During the Wind-Down Period, the GSE's debt obligations, including those that were outstanding at the time of the Reorganization, will continue to be outstanding obligations of the GSE and will not be transferred to any other entity, except in connection with the GSE's dissolution. Also during the Wind-Down Period, (i) the Secretary of the Treasury has extended oversight authority to monitor the GSE and, in certain cases, the Company and its non-GSE subsidiaries, (ii) the Company, the GSE and their affiliates are subject to certain restrictions on intercompany relations, and (iii) the GSE is subject to certain minimum capital requirements. The Company's principal executive offices are located at 11600 Sallie Mae Drive, Reston, VA 20193, and its telephone number is (703) 810-3000. THE WARRANTS The Privatization Act requires the Company to issue the Warrants to the Control Board. The Company issued the Warrants to the Control Board on August 7, 1997. Pursuant to the Privatization Act, the Control Board is authorized to sell or exercise the Warrants and must deposit any proceeds therefrom into an account established for the benefit at the District of Columbia public school system. On September 2, 1997, the Control Board sold the Warrants in a transaction for which it claimed an exemption from the registration requirements of the Securities Act. MARKET DATA Before August 7, 1997, the GSE's common stock traded on the New York Stock Exchange (the "NYSE") under the symbol "SLM." On August 7, 1997, pursuant to the Reorganization, each outstanding share of the GSE's common stock was converted into one share of the Company's common stock. Since August 8, 1997, the Company's common stock has traded on the NYSE under the symbol "SLM." The following table sets forth the high and low sales prices per share of the GSE's common stock (from the first quarter of 1995 through August 7, 1997) and the Company's common stock (from August 8, 1997 through October 15, 1997) as reported on the NYSE Composite Tape, and the quarterly cash dividends declared with respect thereto. <TABLE> <CAPTION> HIGH LOW DIVIDEND -------- ------- --------- <S> <C> <C> <C> 1995 First Quarter . . . . . . . . $ 39 $ 32 7/8 $ .37 Second Quarter . . . . . . . 48 3/8 34 1/2 .37 Third Quarter . . . . . . . . 55 3/4 47 .37 Fourth Quarter . . . . . . . 70 7/8 54 .40 1996 First Quarter . . . . . . . . 86 1/8 63 1/4 .40 Second Quarter . . . . . . . 83 1/2 66 .40 Third Quarter . . . . . . . . 77 69 1/4 .40 Fourth Quarter . . . . . . . 98 1/4 77 1/4 .44 1997 First Quarter . . . . . . . . 114 1/4 89 .44 Second Quarter . . . . . . . 137 3/4 94 5/8 .44 Third Quarter . . . . . . . . 160 1/2 127 .44 Fourth Quarter (through October 15, 1997). 165 1/8 152 5/8 -- </TABLE> As of September 30, 1997, there were 50,466,913 shares of Common Stock outstanding and eligible to be voted, held by approximately 20,000 shareholders. On October 15, 1997, the last sales price of the Common Stock was $161 3/16 per share, as reported on the NYSE Composite Tape. SUMMARY SELECTED FINANCIAL DATA The following table sets forth selected financial and other operating information of SLM Holding. The selected financial data in the table is derived from the consolidated financial statements of SLM Holding. The data should be read in conjunction with the consolidated financial statements, related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ---------------------- ---------------------------------------------------------------- 1997(2) 1996(2) 1996(2) 1995(1)(2) 1994(1)(2) 1993(1)(2) 1992(1)(2) ------- ------- ------- ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> <C> <C> OPERATING DATA: Net interest income.......... $ 406 $ 452 $ 866 $ 901 $ 982 $ 1,169 $ 987 Net income................... 233 201 409 356 410 432 391 Earnings per common share.... 4.36 3.53 7.32 5.27 5.13 4.98 4.30 Dividends per common share .. .88 .80 1.64 1.51 1.42 1.25 1.05 Return on common stockholders' equity..................... 57.26%(3) 49.29%(3) 50.13%(3) 29.17%(3) 27.85%(3) 37.68% 37.26% Net interest margin.......... 1.78 1.96 1.90 1.84 2.14 2.74 2.32 Return on assets............. .98 .84 .86 .69 .85 .97 .87 Dividend payout ratio........ 20.16 22.66 22.40 28.64 27.66 25.10 24.41 Average equity/average assets .................... 1.64 1.64 1.65 2.28 2.96 2.50 2.27 BALANCE SHEET DATA: Student loans purchased...... $29,569 $33,653 $32,308 $34,336 $30,571 $26,978 $24,326 Student loan participations.. 1,919 -- 1,446 -- -- -- -- Warehousing advances......... 2,495 2,972 2,789 3,865 7,032 7,034 8,085 Academic facilities financings................. 1,354 1,546 1,473 1,312 1,548 1,359 1,189 Total assets................. 47,899 47,363 47,630 50,002 53,161 46,682 46,775 Long-term notes.............. 19,489 25,632 22,606 30,083 34,319 30,925 30,724 Total borrowings............. 45,339 44,905 45,124 47,530 50,335 44,544 44,440 Stockholders' equity......... 843(3) 803(3) 834(3) 867(3) 1,388(3) 1,179 1,107 Book value per common share.. 16.10 14.47 15.53 15.03 18.87 14.03 12.39 OTHER DATA: Securitized student loans outstanding ............... $10,048 $ 3,735 $ 6,263 $ 954 $ -- $ -- $ -- Core earnings(4)............. 223 182 381 350 345 388 391 Premiums on debt extinguished............... -- 7 7 8 14 211 141 </TABLE> - ---------- (1) Previously reported results for the years ended December 31, 1995, 1994, 1993 and 1992 have been restated to retroactively reflect the recognition of student loan income as earned (see Note 2 to the Consolidated Financial Statements). This restatement resulted in the elimination of the previously reported 1995 cumulative effect of the change in accounting method of $130 million ($1.93 per common share) and an increase to previously reported net income of $17 million ($.22 per common share), $13 million ($.15 per common share), and $8 million ($.09 per common share) for the years ended December 31, 1994, 1993 and 1992, respectively. (2) As part of the GSE's privatization, SLM Holding became the parent company of, and successor to, the GSE on August 7, 1997. As a result, the GSE's preferred stock (totaling $214 million) is now reflected as a minority interest in the consolidated financial statements. The financial statements for prior periods have been restated to reflect this change. (3) At June 30, 1997 and 1996 and at December 31, 1996, 1995 and 1994, stockholders' equity reflects the addition to stockholders' equity of $345 million, $336 million, $349 million, $371 million and $300 million, respectively, net of tax, of unrealized gains on certain investments recognized pursuant to FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." (4) Core earnings is defined as the Company's net income less the after-tax effect of floor revenues and other one-time charges. Management believes that these measures, which are not measures under generally accepted accounting principles (GAAP), are important because they depict the Company's earnings before the effects of one time events such as floor revenues which are largely outside of the Company's control. Management believes that core earnings as defined, while not necessarily comparable to other companies' use of similar terminology, provide for meaningful period to period comparisons as a basis for analyzing trends in the Company's student loan operations.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/SNDA_sonida_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/SNDA_sonida_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3339d17464f9f82c84871c0237ce8f4423a91afe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/SNDA_sonida_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless indicated otherwise or the context suggests otherwise, references in this Prospectus to the "Company" mean Capital Senior Living Corporation and its subsidiaries and predecessor entities and the Acquired Assets (as defined herein). Unless otherwise indicated, the information in this Prospectus assumes: (i) the completion of the reorganization of the Company and related transactions (the "Formation," as more specifically described under "The Company -- Formation Transactions") simultaneously with the completion of the Offering; (ii) no exercise of the Underwriters' over-allotment option; and (iii) an initial public offering price of $13.00 per share (which represents the mid-point of the range set forth on the cover page of this Prospectus and which affects the number of shares and the amount of proceeds to be received by the parties in the Formation Transactions and the calculation of the net proceeds from the Offering). See "The Company -- Formation Transactions" and "Underwriting." THE COMPANY The Company is one of the largest providers of senior living services in the United States in terms of resident capacity, according to the Assisted Living Federation of America's 1996 Annual Largest Provider Survey. The Company currently owns interests in and/or operates 33 communities in 17 states with a capacity of approximately 5,000 residents, including 17 communities in which it owns interests, 15 communities that it manages for third parties pursuant to multi-year management contracts and one community that it leases from a third party. The Company is currently developing 17 new communities which will have a capacity of approximately 3,130 residents and is expanding 12 existing communities to accommodate 994 additional residents. The Company also operates one home health care agency. Approximately 93% of the Company's revenues and reimbursable expenses are derived from private pay sources. At June 30, 1997, communities which the Company operates and in which it owns interests had an occupancy rate of approximately 95%, its managed communities had an occupancy rate of approximately 95%, and its leased community had an occupancy rate of approximately 95%. The Company and its predecessors have provided senior living services since 1990. The senior living services industry encompasses a broad and diverse range of living accommodations and health care services that are provided primarily to persons 65 years of age or older. For the elderly who require limited services, care in independent living ("IL") residences, supplemented at times by home health care, offers a viable option. Most independent living residences and retirement centers typically offer community living together with a basic services package consisting of meals, housekeeping, laundry, security, transportation, social and recreational activities and health care monitoring. As a senior's need for assistance increases, care in an assisted living ("AL") residence is often preferable and more cost-effective than home-based care or nursing home care. Typically, assisted living represents a combination of housing and 24-hour a day personal support services designed to aid elderly residents with activities of daily life ("ADLs"), such as ambulation, bathing, dressing, eating, grooming, personal hygiene and monitoring or assistance with medications. Certain assisted living residences may also provide assistance to residents with low acuity medical needs (generally consisting of assistance and reminders to residents that suffer from short periods of memory loss and dementia, including reminders regarding medications), or may offer higher levels of personal assistance for incontinent residents or residents with Alzheimer's disease or other cognitive or physical frailties. Generally, assisted living residents require higher levels of care than residents of independent living residences and retirement living centers, but require lower levels of care than patients in skilled nursing ("SN") facilities. For seniors who need the constant attention of a skilled nurse or medical practitioner, a skilled nursing facility may be required. The Company believes that the senior living services industry will require large capital infusions over the next 30 years to meet the growing demand for senior living facilities. The National Investment Conference has estimated that gross capital expenditures for the senior living marketplace will grow from $86 billion in 1996 to $126 billion in 2005 and to $490 billion in 2030, in order to accommodate increasing demand for senior living services. The Company's operating philosophy emphasizes a "continuum of care" which integrates independent living, assisted living, skilled nursing and home health care and provides senior citizens with the opportunity to "age in place." The Company is a fully integrated senior living services organization, with internal capabilities to operate, expand, develop, and acquire "purpose-built" senior living communities (i.e., communities designed for the efficient delivery of senior living services). The Company believes that its size, national scope and comprehensive information systems provide it with economies of scale in its operations and a platform for future growth. The Company anticipates that these factors will position it to capitalize on emerging trends in the senior living services industry and provide it with a competitive advantage. The Company has built a senior management team that it believes is one of the most experienced in the acquisition, development, and operation of senior living communities. The Company was founded by its co- chairmen Jeffrey L. Beck and James A. Stroud, who together have 35 years of experience in the residential and senior living services industries. The Company's eight executive officers have an average of 17 years of industry experience. In addition, the Company's 14 executive, regional and district officers have an average of 14 years of industry experience, and its 26 on-site executive directors have an average of 12 years of industry experience. The Company's senior management will own approximately 51% of the outstanding shares of Common Stock after giving effect to the Offering. The Company has distinguished itself from many of its competitors because it has been profitable in each quarter since 1992. The Company's management team has created substantial value through the intensive management of its communities. From 1992 through 1996, the Company achieved a compounded annual growth rate in net operating income before depreciation and amortization of 15.4% for the nine senior living communities in which the Company owned interests and operated during that period. During the same period, revenues for such communities increased by a compounded annual growth rate of 5.4%, while expenses for such communities increased by a compounded annual growth rate of 2.9%. Growth Strategies The Company believes its current operations throughout the United States provide an established foundation for continued growth and that it has implemented the systems and attracted the personnel necessary to support its future growth plans. The Company plans to continue its growth principally through the following strategies: - Expand Existing Communities. The Company plans to expand certain of its existing communities to include additional independent living and assisted living residences (including special programs and living units for residents with Alzheimer's and other cognitive and physical frailties), and skilled nursing beds. The Company believes that the incremental returns on expansion projects are attractive because they enable the Company to spread the fixed costs associated with a single location over more units and to capitalize on a community's existing market presence. Moreover, expansions provide the Company with more flexible capacity to accommodate residents as they "age in place." The Company currently has 12 expansion projects which it expects to complete in 1998 and 1999, representing an aggregate increase in capacity of 994 residents. The Company or its strategic partners have purchased the land associated with six of the planned expansion projects, with an additional six parcels under contract to be acquired. - Develop New Communities. The Company's senior management has developed in excess of $350 million of senior living communities. In selected markets, the Company is developing new senior living communities that are designed to provide a quality lifestyle that is attractive to a large segment of the senior population. Markets are chosen based on a variety of factors, including demographic and economic factors, the supply of existing or potential senior living communities, as well as potential economies of scale that the Company may achieve through the clustering of communities in a given region. The Company plans to develop new communities, including its proprietary "Waterford" communities, which will be designed to provide middle-income seniors with amenities comparable to communities with higher resident fee structures. The Company plans to develop these communities for its own account, as well as in alliances with for-profit and not-for-profit organizations. The Company has commenced development of 17 senior living communities which are expected to be completed by 1999. Of these 17 new communities, 11 will be Waterford communities (with an expected capacity of approximately 1,496 residents). The Waterford communities will be developed pursuant to an arrangement with Tri Point Communities, L.P. ("Tri Point"), an affiliate of the Company, under which Tri Point will fund the construction and lease-up costs and will pay the Company a fee for development and management services. The Company will have options to purchase the Waterford communities upon their completion. See "Certain Transactions -- Tri Point Development Agreement." In addition, six senior living communities are expected to be developed in strategic alliances with third parties (with an expected capacity of approximately 1,694 residents). The Company or its strategic partners have purchased the land associated with four of the planned development projects, with an additional two parcels under contract to be acquired. Of the 17 new communities under development, four are to be owned by Buckner Retirement Services, Inc., two are to be owned by LCOR Incorporated and 11 are to be owned by Tri Point. Messrs. Beck and Stroud will contribute cash to Tri Point in the form of capital contributions to Tri Point's equity as development of properties are undertaken in an amount sufficient to pay 15% of the construction costs of each project. Funds will be contributed concurrently with the funding of construction draws. While Messrs. Beck and Stroud have represented to the Company that they have sufficient personal resources to make these capital contributions, there can be no assurance that each of them will in fact possess the required amount of funds necessary to make such contributions. If Messrs. Beck and Stroud should fail to make such contributions, Tri Point will be unable to pursue and fund the construction of new communities, which would have a material adverse affect on the Company's future results of operations. Further, the Company may experience a conflict with the interests of Messrs. Beck and Stroud should they default on their obligations to provide such funds to Tri Point. There can be no assurance that such conflict, if it should develop, will be resolved in a manner favorable to the Company. The Company has implemented policies regarding transactions with related parties, as described herein under "Certain Transactions -- Policy of the Board of Directors." The Company has executed a joint venture agreement pursuant to which it will form an entity to develop and operate senior living communities in major cities in the Peoples Republic of China. The Company currently expects that, following its initial development of senior living communities in China, the joint venture will sell individual units in the communities to prospective residents, and the Company will retain the operating responsibilities and management fees associated with such communities. - Pursue Strategic Acquisitions. The Company believes that the fragmented nature of the senior living services industry, combined with the Company's financial resources, national presence and extensive industry relationships, should provide it with ample acquisition opportunities. The Company intends to continue to: (i) increase its ownership interests in certain communities in which it already possesses an interest; (ii) pursue single or portfolio acquisitions of senior living communities; and (iii) pursue strategic acquisitions of other senior living services companies as the industry consolidates. - Expand Home Health Care Services. The Company plans to establish or acquire additional home health care agencies to permit it to expand the range of services that it offers at its senior living communities. In addition, home health care services are planned to be offered in many of the Company's newly-developed communities and expanded communities. The Company currently intends to establish approximately five new home health care agencies at its owned communities by the fourth quarter of 1998. The Company believes that it will have significant capacity to fund additional growth by virtue of its capital structure. Upon completion of the Offering, the Company's ratio of debt-to-total market capitalization (i.e., total indebtedness divided by the sum of total indebtedness plus the market value of outstanding Common Stock) will be less than 3%, and at June 30, 1997, on a pro forma basis after giving effect to the Offering, the Company would have had cash and cash equivalents of approximately $26.4 million. The success of the Company's growth strategy will depend, in large part, on the Company's ability to effectively integrate the operations and assets acquired in the Formation Transactions, as well as new senior living communities that are acquired or developed. In addition, the Company will need to effectively manage the varying sources of revenue resulting from the Company's ownership, management and development of senior living communities and home health care agencies. See "Risk Factors -- No Assurance as to Ability to Manage Growth," "-- Risks in Acquisitions of Communities and Complementary Businesses; Difficulties of Integration," and "-- Risks Associated with Third-Party Management Business." ACQUISITION OF ASSETS OF CAPITAL SENIOR LIVING COMMUNITIES, L.P. As more specifically described herein under "The Company -- Formation Transactions," simultaneously with the consummation of the Offering, the Company will purchase substantially all of the assets (the "Acquired Assets"), other than working capital items, of Capital Senior Living Communities, L.P. ("CSLC") for the assumption of approximately $70.0 million of debt plus cash sufficient so that the sum of the debt assumed plus cash equals $72.9 million (subject to closing prorations and the adjustment described below), and new construction in progress at CSLC's Cottonwood community will be transferred to the Company for assumption by the Company of the related construction loan (which had an outstanding balance of approximately $886,000 at October 21, 1997). The purchase price to be paid for the Acquired Assets is determined as follows: (i) CSLC's communities, other than construction in progress, are valued based on the appraised value of the communities of $41.3 million; (ii) CSLC's investment in HealthCare Properties, L.P. ("HCP") is valued based on the appraised value of HCP's communities of $24.5 million, adjusted for working capital items and other assets and liabilities that are to be settled in cash, multiplied by the percentage of HCP owned by CSLC; (iii) CSLC's investment in promissory notes ("NHP Notes") of NHP Retirement Housing Partners I, L.P. ("NHP") is valued based on discounting the amount of principal and interest payments to be made through the maturity date of the NHP Notes; and (iv) CSLC's investment in NHP limited partnership interests are valued at its historical cost which approximates fair value. The appraised values for the communities have been determined by third-party appraisals. The purchase price to be paid for the Acquired Assets specified above has been calculated as of June 30, 1997 utilizing the ownership percentages of CSLC's investments in HCP and the NHP Notes existing as of that date. It is anticipated that as a result of changes in assets and liabilities of HCP and increases in the investments in HCP and the NHP Notes subsequent to June 30, 1997, the purchase price at the closing of the Offering will be in the range of $73.6 million to $75.6 million, excluding any construction in progress. The debt to be assumed by CSLC was incurred on July 1, 1997 pursuant to a $77.0 mortgage loan agreement with an affiliate of Lehman Brothers, Inc. ("Lehman Brothers"). On July 1, 1997, $70.0 million was outstanding under this loan agreement, of which $5.5 million was used to repay outstanding amounts under CSLC's prior credit facility and $64.5 million was used by CSLC to purchase U.S. Treasury securities. The remaining $7.0 million is available to fund construction in progress at CSLC's Cottonwood community. It is expected that at the consummation of the Offering, and as part of the Formation Transactions, the Acquired Assets will be acquired by the Company through the Company's assumption of such debt, such debt will be reduced with $70.0 million of the net proceeds of the Offering and the U.S. Treasury securities will revert to CSLC. The $64.5 million of U.S. Treasury securities will be retained by CSLC and the Company will have no interest in such securities. Messrs. Beck and Stroud beneficially own approximately 66% of the limited partnership interests in CSLC. Through their ownership of such interests, Messrs. Beck and Stroud will derive financial benefits from CSLC's sale of the Acquired Assets to the Company and the retention by CSLC of the U.S. Treasury securities, and in connection with CSLC's sale of the Acquired Assets, CSLC will pay a company controlled by Messrs. Beck and Stroud a brokerage fee of approximately $2.9 million. See "Certain Transactions -- Formation Transactions" and "Certain Transactions -- LBHI Loan."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/STLD_steel_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/STLD_steel_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dcc97ad3403c3ea7361261caee9fb20368bdb4e8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/STLD_steel_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise indicates, "Steel Dynamics," "SDI" or the "Company" means Steel Dynamics, Inc., an Indiana corporation, and its consolidated subsidiaries. "Common Stock" means the Company's Common Stock, par value $.01 per share. Unless otherwise indicated, the information contained in this Prospectus assumes that the U.S. Underwriters' over-allotment option is not exercised. As used in this Prospectus, the term "tonne" means a metric tonne, equal to 2,204.6 pounds, and the term "ton" means a net ton, equal to 2,000 pounds. Certain information contained in this summary and elsewhere in this Prospectus, including information with respect to the Company's plans and strategy for its business, are forward-looking statements. For a discussion of important factors which could cause actual results to differ materially from the forward-looking statements contained herein, see "Risk Factors." THE COMPANY OVERVIEW Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel mini-mill, which commenced operations in January 1996. The Company was founded by executives and managers who pioneered the development of thin-slab/flat-rolled compact strip production ("CSP") technology and directed the construction and operation of the world's first thin-slab/flat-rolled mini-mill. Building upon their past experience with CSP technology, management founded SDI to produce steel more efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to be the low cost producer of a broad range of high quality flat-rolled steel products, including hot-rolled, cold-rolled and galvanized sheet, as well as other specialty steel products, and to serve more markets than any other flat-rolled mini-mill. In addition, the Company intends to participate in the development and use of new technologies to produce a broad range of steel products. The Company was founded in September 1993 by Keith E. Busse, Mark D. Millett and Richard P. Teets, Jr. In October 1994, Steel Dynamics commenced construction of the mini-mill and commissioned it in December 1995. The Company believes that this 14-month construction period is the fastest ever for this kind of facility. In addition, the Company believes that the approximately $275.7 million initial capital cost of its mini-mill is approximately $75.0 million, or approximately 20%, less than the cost of comparable mini-mills currently operating. Actual production at the mini-mill of primary grade steel commenced on January 2, 1996. The mill achieved an annualized production rate of 1.2 million tons by the end of June 1997, or 85% of its capacity of 1.4 million tons, making the mini-mill's start-up and ramp-up the fastest to date in the industry. Pursuant to the Company's plan to develop downstream processing facilities to produce further value-added steel products, Steel Dynamics is currently constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton annual capacity (the "Cold Mill Project") which is scheduled for completion during the fourth quarter of 1997. Steel Dynamics is also in the process of adding a second melting furnace, a second caster and tunnel furnace, and an additional coiler to expand its annual production capacity of hot-rolled steel from 1.4 million tons to approximately 2.4 million tons (the "Caster Project"). The Caster Project is expected to be completed in the first half of 1998. In addition, the Company's wholly-owned subsidiary, Iron Dynamics, Inc. ("Iron Dynamics" or "IDI"), intends to construct a 600,000 tonne annual capacity plant for the manufacture of direct reduced iron ("DRI"), which the Company expects to be completed in 1998 (the "IDI Project"). The DRI, after further refining into 500,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel scrap substitute. Management strategically located the Company's mini-mill within close proximity to its natural customer base, steel service centers and other end users, abundant supplies of automotive and other steel scrap (SDI's principal raw material), competitive sources of power, and numerous rail and truck transportation routes. Steel Dynamics believes that its strategic location provides it with sales and marketing as well as production cost Gatefold page 1: THE EXISTING MILL January 1996 - - Twin shell, 195t, AC, Electric Arc Furnace Battery - - Ladle Metallurgy Facility, Desulphurization - - SMS, Thin-Slab Caster - - Tunnel Furnace for Direct Charge - - Six Stand, SMS Hot Mill, Single Downcoiler - - CAPACITY @ 1,400,000 TONS THE COLD MILL PROJECT Late 1997 - - Continuous Pickle Line - - Hot-Rolled Products Galvanizing Line - - Semi-Tandem 2-Stand Reversing Cold Rolling Mill - - Cold-Rolled Products Galvanizing Line - - Batch Annealing Furnaces - - Temper Mill - - PLANNED CAPACITY @ 1,000,000 TONS [SDI Logo] advantages. The Company has secured a stable baseload of sales through long-term "off-take" contracts with two major steel consumers, a 30,000 ton per month sales contract with Heidtman Steel Products, Inc. ("Heidtman"), a major Midwest-based steel service center and distributor and an affiliate of one of the Company's stockholders, and a 12,000 ton per month sales contract with Preussag Stahl AG ("Preussag"), a major German steel manufacturer and a stockholder of the Company, with affiliate distributors and steel service centers throughout the United States. The Company has sought to assure itself of a secure supply of both steel scrap and scrap substitute material. To accomplish this objective, SDI has entered into a long-term scrap purchasing services contract with OmniSource Corporation ("OmniSource"), one of the largest scrap dealers in the Midwest and an affiliate of one of the Company's stockholders. In addition, the Company has sought to assure itself of a secure supply of scrap substitute material for use as a lower cost complement to steel scrap as part of the Company's melt mix. SDI has entered into a long-term 300,000 tonne per year "off-take" contract to purchase iron carbide from Qualitech Steel Corporation's ("Qualitech's") iron carbide facility currently under construction in Corpus Christi, Texas which is expected to be completed in 1998. The Company expects to produce additional scrap substitute material in 1998 upon completion of the IDI Project. STRATEGY The Company's business strategy is to use advanced CSP hot-rolled steelmaking and cold-rolling technologies to produce high surface quality flat-rolled steel in a variety of value-added sizes, gauges and surface treatments, emphasizing low production costs, reliable product quality and excellent customer service. In addition, SDI intends to remain financially strong and competitive through the selective purchasing of scrap and scrap substitutes to offset the effects of cyclical cost/price imbalances. The principal elements of the Company's strategy include: - Achieve Lowest Conversion Costs in Industry. Steel Dynamics' electric arc furnace ("EAF") and its caster and rolling mill designs represent substantial improvements over earlier mini-mills using CSP technology. These improvements have been designed to speed the steelmaking process, to limit "power off time" and other non-productive time in the EAF, to reduce the per ton cost of consumables and to yield higher quality finished steel product. The Company believes that its per ton manufacturing costs are already among the lowest in the industry. - Emphasize Value-Added Products and Increase Product Breadth. Steel Dynamics has produced and believes that it will be able to consistently produce thinner gauge (down to .040") steel in hot-rolled form with better surface and edge characteristics than most other flat-rolled producers. The Company believes that its high quality, thinner hot-rolled products will compete favorably with certain more expensive cold-rolled (further processed) products, enabling it to obtain higher margins. In addition, with the anticipated completion of the Cold Mill Project, SDI expects to devote a substantial portion of its hot-rolled products to the production of higher value-added cold-rolled and galvanized products, as well as thinner gauges, down to .015". This increased product breadth should also allow the Company to further broaden its customer base. - Secure Reliable Sources of Low Cost Metallics. The principal raw material used in the Company's mini-mill is steel scrap, which represented approximately 58% of the Company's total manufacturing costs for the six months ended June 30, 1997. Steel Dynamics has pursued a three-part strategy to secure access to adequate low cost supplies of steel scrap and steel scrap substitute materials. First, the Company has entered into a long-term steel scrap contract with OmniSource. Second, SDI has entered into an iron carbide "off-take" contract with Qualitech. Third, Steel Dynamics is pursuing the IDI Project to produce DRI and after further refining, liquid pig iron, as another lower cost complement for use in the melt mix with steel scrap. - Secure a Solid Baseload of Hot Band Sales. In order to help ensure consistent and efficient plant utilization, SDI entered into "off-take" sales and distribution agreements with Heidtman and Preussag, through 2001, pursuant to which Heidtman has agreed to purchase at least 30,000 tons and Preussag Gatefold page 2: THE CASTER PROJECT Mid 1998 - - Second Electric Arc Furnace Battery - - Second Thin-Slab Caster - - Second Tunnel Furnace - - Second Downcoiler - - PLANNED INCREMENTAL CAPACITY @ 1,000,000 TONS THE IRON DYNAMICS PROJECT Late 1998 - - Pelletizing Plant - - Rotary Hearth Reduction Furnace - - Hybrid Electric Arc Furnace - - Desulphurization Station - - PLANNED LIQUID PIG IRON CAPACITY @ 500,000 TONNES [SDI Logo] has agreed to purchase at least an average of 12,000 tons of the Company's flat-rolled products per month, at the Company's market price, subject to certain volume and single run discounts. - Increase Unit Growth at Low Capital Cost. SDI seeks to continue to grow its production of flat-rolled steel coil at low capital and unit costs. The Company plans to invest approximately $85.0 million to finance its Caster Project. The Caster Project, which is expected to be completed in the first half of 1998, is expected to increase the annual production capacity of the Company's mini-mill from 1.4 to approximately 2.4 million tons of hot-rolled steel. In addition, management intends to continue to explore new production technologies to further lower its unit costs of production. - Incentivize Employees. In contrast to the high fixed labor costs of many of the Company's competitors, SDI has established certain incentive compensation programs specifically designed to reward employee teams for their efforts towards enhancing productivity, thereby encouraging a sense of ownership throughout Steel Dynamics. Production employees actively share in the Company's success through a "production" bonus and a "conversion cost" bonus. The production bonus is directly tied to the quantity and quality of products manufactured during a particular shift. The conversion cost bonus encourages employees to use materials and resources more efficiently. Steel Dynamics' employees' bonuses may equal or exceed their base hourly wage. - Pursue Future Opportunities. Steel Dynamics believes that technology development and management's experience will provide significant opportunities for SDI in a broad range of markets, potentially including flat-rolled, non-flat-rolled, stainless and specialty steels. The Company plans to pursue opportunities through greenfield projects, strategic alliances or acquisitions, which may include foreign investments, to secure the long-term future growth and profitability of SDI. The Company is conducting certain preliminary engineering and feasibility analyses for a possible 750,000 ton capacity structural steel facility to manufacture wide flange beams and other structural shapes, utilizing near net shape casting technology in conjunction with a state-of-the-art bloom caster. There is no assurance, however, that such a facility will be approved by the Company for further development efforts once these preliminary studies have been completed, or, if further developed, that the facility will be able to be financed and built. Steel Dynamics will also seek to enter new steel markets and to produce new steel products using the latest technology, with the objective of being a low cost producer. In addition, the Company has a technology sharing agreement with Preussag which will provide SDI with Preussag's expertise and know-how in steel manufacturing, particularly steel finishing. THE OFFERINGS <TABLE> <S> <C> Common Stock offered: By the Company......................................... 1,255,971 shares By the Selling Stockholders............................ 7,144,029 shares Total............................................... 8,400,000 shares Common Stock offered: United States offering................................. 6,720,000 shares International offering................................. 1,680,000 shares Total............................................... 8,400,000 shares Common Stock to be outstanding after the offerings(1).... 49,122,294 shares Use of proceeds.......................................... The net proceeds to the Company will be used for the purchase and installation of a seventh stand for the Company's hot-rolling mill and for general corporate purposes. The Company will not receive any proceeds from the sale by the Selling Stockholders of Common Stock in the offerings. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/TSBK_timberland_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/TSBK_timberland_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f4edb5e1774340fd1caadb7d07a68e0df68baca
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/TSBK_timberland_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The information set forth below should be read in conjunction with and is qualified in its entirety by the more detailed information and Consolidated Financial Statements (including the Notes thereto) presented elsewhere in this Prospectus. The purchase of Common Stock is subject to certain risks. See "RISK FACTORS." Timberland Bancorp, Inc. The Holding Company is a Washington corporation organized on September 8, 1997 at the direction of the Savings Bank to acquire all of the capital stock that the Savings Bank will issue upon its conversion from the mutual to stock form of ownership. The Holding Company has not engaged in any significant business to date. Upon completion of the Conversion, the Holding Company will be regulated by the Federal Reserve. The Holding Company has filed an application with the Federal Reserve and the Division to become a bank holding company and for approval to acquire the Savings Bank. Immediately following the Conversion, the only significant assets of the Holding Company will be the capital stock of the Savings Bank, that portion of the net proceeds of the Offerings permitted by the Division to be retained by the Holding Company and a note receivable from the ESOP evidencing a loan from the Holding Company to fund the Savings Bank's ESOP. See "USE OF PROCEEDS." Management believes that the holding company structure and retention of proceeds may, should it decide to do so, facilitate the repurchase of its stock without adverse tax consequences. There are no present plans, arrangements, agreements, or understandings, written or oral, regarding any such repurchases. The office of the Holding Company is located at 624 Simpson Avenue, Hoquiam, Washington 98550, and its telephone number is (360) 533-4747. Timberland Savings Bank, SSB The Savings Bank was established in 1915 as "Southwest Washington Savings and Loan Association." In 1935, the Savings Bank converted from a state- chartered mutual savings and loan association to a federally chartered mutual savings and loan association, and in 1972, changed its the name to "Timberland Federal Savings and Loan Association." In 1990, the Savings Bank converted to a federally-chartered mutual savings bank under the name "Timberland Savings Bank, FSB." In 1991, the Savings Bank converted to a Washington-chartered mutual savings bank and adopted its current name. The Savings Bank's deposits are insured by the FDIC up to applicable legal limits under the SAIF. The Savings Bank has been a member of the Federal Home Loan Bank ("FHLB") system since 1937. The Savings Bank is regulated by the Division and the FDIC. At June 30, 1997, the Savings Bank had total assets of $206.2 million, total deposit accounts of $167.1 million, and total capital of $23.9 million, on a consolidated basis. The Savings Bank is a community oriented savings bank which has traditionally offered a variety of savings products to its retail customers while concentrating its lending activities on real estate mortgage loans. Lending activities have been focused primarily on the origination of loans secured by one- to four-family residential dwellings, including an emphasis on construction and land development loans, as well as the origination of multi- family and commercial real estate loans. The Savings Bank actively originates adjustable rate residential mortgage loans that do not qualify for sale in the secondary market under Federal Home Loan Mortgage Corporation ("FHLMC") guidelines. At June 30, 1997, the Savings Bank's gross loan portfolio totaled $204.6 million, of which $100.1 million, or 48.9%, were one- to four-family residential mortgage loans, 44.7 million, or 21.9%, were construction and
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/1997/TWI_titan_prospectus_summary.txt b/parsed_sections/prospectus_summary/1997/TWI_titan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..19a90c5be1ec9bda8a3314203db570b00b23c804
--- /dev/null
+++ b/parsed_sections/prospectus_summary/1997/TWI_titan_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and the Consolidated Financial Statements of the Company, including the notes thereto, included elsewhere in this Prospectus. References herein to the Offering refer to the offer and sale of the Notes offered hereby. THE COMPANY Titan Wheel International, Inc. ("Titan" or the "Company") is a leading global manufacturer of steel wheels and tires for off-highway vehicles used in the agricultural, consumer products (including recreational trailers, all terrain vehicles ("ATVs") and grounds care vehicles), earthmoving/construction and military markets. The Company generally manufactures both the wheels and tires for these vehicles and increasingly provides the value-added service of assembling the completed system. The Company offers a broad range of over 25,000 different products that are manufactured in relatively short production runs and must meet Original Equipment Manufacturers' ("OEM") specifications. The Company believes, based upon current industry revenue data, that it is the largest agricultural wheel producer and the third largest agricultural tire manufacturer in North America. Agricultural sales in the aggregate accounted for approximately 44% and 47% of the Company's net sales for the year ended December 31, 1995 and the latest twelve months ended September 30, 1996, respectively. The Company's net sales for the year ended December 31, 1995 and the latest twelve months ended September 30, 1996 were approximately $623.2 million and $648.3 million, respectively. The Company's earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the year ended December 31, 1995 and the latest twelve months ended September 30, 1996 were $98.8 million and $103.7 million, respectively. Titan's major OEM customers include Deere & Company ("Deere"), Case Corporation ("Case"), New Holland North America Inc. ("New Holland") and Caterpillar Inc. ("CAT") in the agricultural and off-highway construction markets and Deere, Bayliner Marine Corporation ("Bayliner") and Polaris Industries, Inc. ("Polaris") in the consumer products market. In addition, the Company continues to expand its sales of wheels and tires to the after-market, where product demand tends to be less cyclical than in the OEM market. The Company distributes its tire products in the after-market through a network of more than 1,500 independent distributors and 12 of its own distribution centers. This distribution network enables the Company to service markets not otherwise accessible through its traditional OEM marketing channels. Through a series of strategic acquisitions, the Company has broadened its expertise in steel wheels, has become a major participant in tire manufacturing and has expanded geographically into Europe. The Company has experienced significant growth, both internally and through acquisitions. In the three years ended December 31, 1995, the Company increased its net sales and EBITDA at a compounded annual rate of 77% and 98%, respectively. The Company's history of successful integration of acquisitions is evidenced by a growth in gross margin over the same period at a compounded rate of 88%. COMPANY STRENGTHS Strong Market Position. The Company has achieved strong positions in both the domestic and European markets for each of its major product categories. Titan's ability to offer a broad range of different products has increased the Company's visibility both in the United States and in Europe and has enhanced the Company's ability to cross-sell its products and consolidate its market positions. Innovative marketing programs have strengthened Titan's market image, and the Company's widening distribution network is reaching increasing numbers of customers in the after-market. Years of product design and engineering experience have enabled the Company to improve existing products and develop new ones that have been well received in the marketplace. In addition, Titan believes that it has benefitted from significant barriers to entry, such as the substantial investment necessary to replicate Titan's manufacturing equipment and numerous tools and dies. Cost-Effective Manufacturing Facilities. The Company believes it enjoys low costs of production relative to the industry as a whole due to its workforce and production facilities. Titan's employees receive continuing training to increase their efficiency and flexibility and the Company's comprehensive maintenance program enables it to utilize its production capabilities to maximum advantage. Completion of Titan's new tire manufacturing facility in Brownsville, Texas will enhance the Company's ability to shift production loads and will provide greater flexibility in meeting output schedules to meet customer demands. Geographic Diversity/Global Presence. The Company has established a strong presence in North America and Europe, with manufacturing facilities in the United States, the United Kingdom, France, Germany and Italy. International sales for the year ended December 31, 1995 and the nine months ended September 30, 1996 accounted for 16% and 22%, respectively, of the Company's aggregate net sales for these periods. The Company's European facilities are located in the four countries that in the aggregate account for a significant majority of the European market for off-highway wheels and tires. Titan believes that there will be opportunities to expand sales of its agricultural wheel and tire products to European OEMs and to Titan's existing North American OEM customers for export to Europe and for their European operations. Proven Track Record of Integrating Acquired Assets. The Company maintains a highly disciplined approach in evaluating prospective acquisitions, focusing on opportunities to improve and complement existing products, establishing a broader market presence and consolidating its engineering, manufacturing and marketing activities, while striving to acquire assets which have been inefficiently utilized or ineffectively managed. By integrating acquired assets with the Company's existing operations, reducing costs of operation and achieving economies of scale, the Company has rapidly improved earnings and cash flows of the majority of its acquired companies. Generally, the Company's acquisitions have allowed it to: (i) expand its market and geographic reach; (ii) enter the market for assembled wheels and tires, a market in which margins are greater than markets for wheels and rims alone; (iii) substantially increase its penetration of the after-market for wheels and tires (which market for tires is larger and less cyclical than the OEM market); (iv) improve significantly the operating efficiencies of its acquired assets and its manufacturing facilities; and (v) improve its ability to service its customers' needs on a timely basis. BUSINESS STRATEGY Titan's business strategy is to increase its penetration of the after-market for tires and wheels, increase its penetration of European and possibly other global markets, focus on possible additional strategic acquisitions, continue to improve its operating efficiencies and continue its emphasis on new product development. Increase After-Market Tire and Wheel Business. Titan has concentrated on increasing its penetration of the tire and wheel after-markets. These after-markets offer higher profit margins and the tire after-market is larger and somewhat less cyclical than the OEM market. The Company estimates that sales in the tire and wheel after-markets represented approximately 14% and 8%, respectively, of the Company's net sales for the first nine months of 1996. Titan intends to continue to devote its resources to future growth in the tire and wheel after-markets. Expand European Markets. Titan currently manufactures wheels for sale to European OEMs in the agricultural and the earthmoving/construction off-highway markets. The Company has established a significant presence in Europe, including the following four markets: the United Kingdom, France, Germany and Italy. A primary motivation for the Company's entry into European markets is its desire to serve the worldwide needs of its major United States OEM customers, many of which have substantial business in Europe. Additionally, the Company believes that, due to the removal of trade barriers in the European Union and political changes in Eastern Europe, the average size of farms in Europe is likely to increase and, as a result, the average size of farm vehicles used in Europe will increase. Because larger farm vehicles utilize larger and a greater number of wheels and tires similar to those produced in the United States, Titan believes that there will be opportunities to expand sales of its agricultural wheel and tire products to European OEMs and to Titan's existing North American OEM customers for export to Europe and for their European operations. Explore Additional Strategic Acquisitions. Titan believes that its expertise in the manufacture of steel wheels has permitted it to take advantage of opportunities to acquire businesses in the United States and Europe that complement this product line, including companies engaged in the tire market and ultimately companies with wheel and tire assembly capabilities. The broadening of Titan's business may permit it to make additional strategic acquisitions in the future. Although the Company continuously reviews opportunities and has discussions with various parties, it has no acquisition agreements at the present time. Improve Operating Efficiencies. The Company continually works to improve the operating efficiency of its acquired assets and its manufacturing facilities. With each acquisition, Titan integrates each facility's strengths, often transferring equipment and business to the facilities that are best equipped to handle the work. This provides capacity to increase utilization and spread operating costs over a greater volume of products. Titan is also continuing a comprehensive program to refurbish, modernize and computerize its equipment. Titan has also centralized and streamlined its inventory controls, instituting a "just-in-time" system of providing raw materials to its manufacturing units. These efforts have led to improved management of order backlog and have substantially improved the Company's ability to respond to customer orders on a timely basis. The Company is continually evaluating opportunities to improve its operating efficiency. The Company is ISO 9000 certified at two of its wheel manufacturing facilities, evidencing its conformance to internationally recognized standards of management and quality assurance. Improve Design Capacity and Increase New Product Development. Equipment manufacturers constantly face changing industry dynamics. Titan directs its business and marketing strategy to understanding all of its markets, addressing the needs of its customers and demonstrating the advantages of its products. In particular, the Company often participates with its customers in the design of new and upgraded products. Titan will from time to time recommend modified products to its customers based on Titan's own market information and research and development. The Company's engineering and research and development staffs test new designs and technologies, developing new methods of manufacturing to improve product quality and performance. These value-added services enhance the Company's relationship with its customers. The Company has spent in excess of $2 million annually on research and development for the fiscal years ending December 31, 1994, 1995 and 1996, and has introduced more than 2,000 new products in those years. The Company believes that its performance orientation provides Titan with a competitive advantage in the global marketplace. RECENT DEVELOPMENTS Acquisition of Delachaux. In December 1996, the Company acquired the wheel subsidiary of the French manufacturing company, Delachaux SA. The company has been renamed Titan France SA ("Titan France") and will initially do business under the name "Titan Delachaux." Titan France manufactures wheels and rims for the French and European off-highway wheel markets. The acquisition enhances the Company's presence in one of the four leading European wheel markets. Redemption of 4 3/4% Notes. In December 1996, the Company redeemed $28.7 million aggregate principal amount of its 4 3/4% Notes, and the remaining $56.6 million aggregate principal amount of the 4 3/4% Notes were converted into 4,530,240 shares of common stock of the Company ("Common Stock"). Construction of Brownsville Plant. In October 1996, the Company announced that it will construct a new off-highway tire manufacturing facility in Brownsville, Texas. The new plant, which will be the first new agricultural tire manufacturing facility constructed in the United States since the early 1960s, is projected to be operational in late 1997 or early 1998. Upon completion, this facility will significantly increase the Company's tire manufacturing capacity. Bank Credit Facility. In September 1996, the Company entered into a $175.0 million credit facility with a syndicate of banks (the "Bank Credit Facility"). In March 1997 the Company amended the Bank Credit Facility in order to, among other things, increase the availability under the Bank Credit Facility to $200.0 million. See "Description of Certain Indebtedness." Offer to Purchase. On February 25, 1997, the Company commenced an offer to purchase (the "Offer to Purchase") up to 5 million shares of its Common Stock (the "Shares") at a price not greater than $15.00 nor less than $12.50 per Share, for a maximum aggregate purchase price of $75 million. The Offer to Purchase will expire on March 24, 1997 unless extended. Because holders of Shares are not required to tender their Shares, no determination can be made of the number of Shares, if any, that will be tendered. The repurchase is expected to be funded by the Company partially from cash on hand and partially from increased borrowings under the Bank Credit Facility. In May 1996, the Board of Directors authorized the Company to repurchase up to five million Shares, and as of February 12, 1997, the Company had repurchased 1,758,100 Shares on the open market. On February 21, 1997, the Executive Committee of the Board of Directors authorized the Company to repurchase an additional five million Shares pursuant to the Offer to Purchase for an aggregate total of ten million Shares. 1996 Results. Sales for the year ended December 31,1996 totaled $634.6 million, an $11.4 million increase over fiscal 1995 sales of $623.2 million. Income from operations totaled $67.3 million for the year ended December 31,1996, compared to $73.1 million in fiscal 1995. The 1996 amounts were impacted by the divestiture of the assets of non-core businesses in the second and third quarters of 1996 and by pricing competition and certain other factors. The Company believes these trends will continue into 1997. Titan is an Illinois corporation, its executive office is located at 2701 Spruce Street, Quincy, Illinois 62301, and its telephone number is (217) 228-6011. THE OFFERING NOTES OFFERED.............. $150,000,000 aggregate principal amount of % Senior Subordinated Notes due 2007. MATURITY DATE.............. , 2007. INTEREST PAYMENT DATES..... and of each year, commencing , 1997. OPTIONAL REDEMPTION........ On and after , 2002, the Notes may be redeemed, in whole or in part, at the option of the Company at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each holder of Notes will have the right to require the Company to repurchase in whole or in part such holder's Notes at a cash purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. See "Description of Notes -- Change of Control." RANKING.................... The Notes will be unsecured senior subordinated obligations of the Company and, as such, will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company, including indebtedness under the Bank Credit Facility (defined below). The Notes will rank pari passu in right of payment with all other existing and future senior subordinated indebtedness, if any, of the Company and will rank senior to all other subordinated indebtedness, if any, of the Company. In addition, the business operations of the Company are conducted in part through its subsidiaries and the Notes will also be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including such subsidiaries' guarantees of the Company's indebtedness under the Bank Credit Facility. As of September 30, 1996, on a pro forma basis after giving effect to the sale of the Notes and the application of the estimated net proceeds therefrom, the redemption and conversion of the 4 3/4% Notes and the repayment of certain other indebtedness, the Company would have had approximately $11.6 million of Senior Indebtedness outstanding and the Company's subsidiaries would have had approximately $129.3 million of Indebtedness outstanding (including trade payables and current, long-term and other liabilities and excluding the guarantees by certain of such subsidiaries of the Company's obligations under the Bank Credit Facility). See "Risk Factors -- Subordination of the Notes," "Risk Factors -- Holding Company Structure" and "Description of the Notes -- Ranking." CERTAIN COVENANTS.......... The indenture relating to the Notes (the "Indenture") will contain certain covenants for the benefit of the holders of the Notes, including, but not limited to, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates, (iv) limitation on certain liens; (v) limitation on certain guarantees; (vi) limitation on other senior subordinated indebtedness; (vii) limitation on the sale or issuance of capital stock of subsidiaries; (viii) limitation on dividend and other payment restrictions affecting subsidiaries; (ix) limitation on sale of assets; (x) change of control; and (xi) limitation on mergers, consolidations and sales of assets. However, these limitations will be subject to a number of important qualifications and exceptions. See "Description of the Notes -- Certain Covenants" and "-- Mergers, Consolidations and Sales of Assets." USE OF PROCEEDS............ The net proceeds to the Company from the sale of the Notes offered hereby are estimated to be approximately $146.0 million (after deducting estimated offering expenses and the Underwriters' discount). The Company will use the net proceeds of the Offering to repay outstanding long-term debt and, if the Offer to Purchase is not consummated, for general corporate purposes, which may include capital expenditures and acquisitions. See "Use of Proceeds" and "Capitalization."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0000318378_banctec_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0000318378_banctec_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b63d0408591584708e14e5ef544d2e9b9c85bd79
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0000318378_banctec_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus, but it does not contain all of the information that you may consider important in making your investment decision. Therefore, you should read the entire prospectus carefully, including, in particular, the "Risk Factors" section beginning on page 11 of this prospectus and the consolidated financial statements and related notes included elsewhere in this prospectus. As used in this prospectus, unless the context otherwise requires or indicates, references to "BancTec," "we," "our," and "us" refer to BancTec, Inc. and its consolidated subsidiaries. BancTec, Inc. Our Business BancTec is a global provider of payment processing and document management solutions and services. We believe our value proposition to our clients is our proprietary software and hardware solutions for processing high-volume, complex business transactions. We currently serve over 1,800 clients across 50 countries that depend on our technology and services to improve productivity, lower costs and optimize business processes. Among these clients are national and multinational organizations, such as Aflac, Inc. ("Aflac"), Bank of America N.A. ("Bank of America"), Discover Financial Services ("Discover"), Hewlett Packard Company ("HP"), U.S. Bancorp N.A. ("U.S. Bank") and Swedbank AB ("Swedbank"). We offer our solutions on a fully outsourced basis, which we own and manage, or on an in-house basis that is acquired and deployed by our clients. We have provided in-house solutions to our clients for nearly 40 years and began offering our fully outsourced solution, which we refer to as business processing outsourcing, or BPO, in 2005. Given the relatively short history of offering BPO services, most of our clients currently deploy our solutions on an in-house basis. Our BPO services use the same software and hardware as our in-house deployments, which facilitates the transition from an in-house to a fully outsourced solution. Our BPO services are provided through our 19 BPO centers located throughout the world. These centers leverage a common proprietary software and hardware technology platform that is designed to provide reliability, security and consistently high levels of performance. Our BPO services include financial process services, electronic document management services and finance and administrative services. We serve companies of all sizes in the banking, insurance, healthcare, utility, government and transportation sectors. Our BPO services are typically contracted on a multi-year basis that includes the payment of recurring monthly or transactional fees. Our BPO revenue has increased every year since we began offering BPO services to our clients. BPO revenue accounted for approximately 11% of total revenue in 2006 and has grown to approximately 38% of total revenue in 2010. Clients who do not use our BPO services for their processing needs can acquire our internally-developed software and hardware solutions to deploy on an in-house basis. We integrate these solutions within our clients' existing business processes. Our in-house solutions are generally sold with a combination of upfront fees, additional fees and recurring annual maintenance fees. Our Industry Globalization and rapid technological innovation are creating an increasingly competitive business environment that requires enterprises to fundamentally change their business processes. This environment is characterized by greater focus on increased quality, lower costs, faster turnaround and heightened regulatory scrutiny. Those companies that process high volumes of payments, documents and other content are particularly challenged by this environment. To make necessary changes and adequately address these needs, companies are focusing on their core competencies and utilizing cost-effective outsourced solutions to improve productivity, lower costs and manage operations more AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents efficiently. Third party research organization NelsonHall, in its report "Global BPO Market Forecast: 2010-2014," dated September 2010 (the "NelsonHall Report"), estimated the size of the global BPO market at $292.6 billion in 2010 and projects that the market will increase at a 7.1% compound annual growth rate to $385.5 billion in 2014. By outsourcing certain processes to BPO providers that have more experience complying with industry-specific regulations, companies are better able to reduce risk, enhance compliance and minimize management distraction. These benefits are highly relevant in the wake of legislation and industry standards such as the Patient Protection and Affordable Care Act (the "Obama Healthcare Plan"), the Sarbanes-Oxley Act of 2002 ("SOX"), the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Payment Card Industry Data Security Standard ("PCI DSS") and the EU Data Protection Directive, which have enhanced the importance of compliance, security practices and internal controls. We believe our business will be positively impacted by these industry dynamics in the future. Our Solution Whether delivered as a BPO service or an in-house solution, our software, hardware and process expertise helps our clients improve throughput, accuracy, cost, exception handling and data delivery. Our payment processing services and solutions bring speed and efficiency to billing and processing of remittances, checks and giros, accounts payable, tax payments and healthcare payments. Our document management solutions and services use recognition technology to capture and process various types of information, including machine print, handwriting, signatures, pictures and bar codes. We offer services and solutions for processing high-volume and complex business transactions, including account origination, scan-to-archive transactions and processing of loans, credit cards, claims and inbound correspondence. Our Competitive Strengths Our principal competitive strengths include: Proven Deployment Across a Sizeable Client Base. We currently serve over 1,800 clients. We believe the long-standing relationships we have developed with these clients provide us with a captive base from which to cross-sell our BPO services to those not currently using them. We have significant experience in deploying and maintaining outsourcing and transaction processing solutions for many of the world's largest and most complex organizations. We leverage our long-standing client relationships and proven deployment knowledge to convert clients from in-house solutions to BPO services. Our clients have come to trust our ability to efficiently and securely deploy hardware and software solutions for their most mission-critical processes. Our process of converting clients from in-house solutions to BPO services is aided by the fact that the same technology and systems are used in both deployments. Deep Domain Expertise in Improving Business Processes. We benefit from nearly 40 years of experience in the payment processing and document management industry. This intellectual capital has enabled us to develop in-depth knowledge of our clients' business processes and industries, allowing us to provide high-value services and solutions. Our extensive domain and process expertise has enabled us to expand our role with current clients and attract new clients. Extensive Solutions. Our clients rely upon our internally-developed solutions to manage their most important business processes. We have an extensive set of products and solutions that allow us to address many different aspects of our clients' business processes. We believe the functionality, performance and quality of our solutions are well recognized in the industry and BANCTEC, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of Incorporation or organization) 7374 (Primary standard industrial classification code number) 75-1559633 (I.R.S. Employer Identification No.) 2701 E. Grauwyler Road Irving, Texas 75061 (972) 821-4000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) J. Coley Clark Chairman and Chief Executive Officer BancTec, Inc. 2701 E. Grauwyler Road Irving, Texas 75061 (972) 821-4000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents are highly differentiated. We continuously develop services and solutions based on new and evolving technology and market demand. Strong Barriers to Entry. The clients that use our proprietary software and hardware have made a substantial financial investment in our solutions and incorporated them into their critical business processes. Our BPO clients have also entrusted us with managing these critical processes on their behalf. We believe that the embedded investment and the associated switching costs that would be incurred if a client were to move to a different provider creates a significant barrier to entry. Experienced Management Team. Our senior management team has over 100 years of payment processing and document management experience and has held leadership positions at large, global BPO organizations, such as HP, Electronic Data Systems, Inc. ("EDS"), a division of HP and Affiliated Computer Services, Inc. ("ACS"), a subsidiary of Xerox Corporation. By leveraging this experience as well as a culture of developing strong relationships with senior level contacts at large organizations around the world, we believe we are better able to expand our BPO services and increase our revenues. Our management team is focused on delivering robust solutions and high levels of customer satisfaction. Our Strategy We intend to enhance our competitive position in payment processing and document management solutions and services. The key elements of our strategy include: Convert Existing In-house Clients to BPO Clients. We believe there is a significant growth opportunity in converting our existing in-house clients to BPO clients. In recent years, several of our clients, including Aflac, British Airways Plc ("British Airways") and Discover have transitioned to our BPO services as they recognize the benefits of using an outsourced solution. When such transitions occur, we typically experience annual revenue from these clients that is several fold greater than what we had previously received. We anticipate that more clients will migrate to our BPO services as they come to recognize the benefits of utilizing our outsourced services as opposed to performing their processing activities on an in-house basis. Grow Recurring Revenue. We have established and maintain long-term relationships with our clients by entering into multi-year contracts that include the payment of monthly or transactional fees, which enables us to generate recurring revenue. We believe that as we expand our BPO business we will continue to grow our recurring revenue base. Leverage Process Automation and Offshoring to Improve Margins. We are focused on increasing our workforce productivity and efficiencies by integrating applications, expanding our India-based labor resources and using internally developed software and hardware solutions throughout our operations and delivery centers. We seek to continue to improve our BPO margins through business process automation and by using the lower cost labor at our captive offshore facility in Delhi, India. Expand Addressable Markets. We intend to focus on expanding the addressable markets for our solutions and BPO services. We believe there is a significant opportunity to target clients in additional document- and compliance-intensive industries, such as the healthcare industry. We also market our payment processing and document management experience to help our clients transition other aspects of their businesses from paper-based to digital processes. We will also seek to continue to expand the marketing of our BPO services in other geographic regions including Africa, Asia and Latin America. Pursue Strategic Acquisitions. We seek to expand our capabilities and geographic reach through acquisitions of businesses and products that complement our portfolio of offerings, allowing us Copies to: Alexander D. Lynch Weil, Gotshal & Manges LLP 767 Fifth Avenue, New York, NY 10153 Telephone: 212-310-8971 Facsimile: 212-310-8007 D. Gilbert Friedlander Weil, Gotshal & Manges LLP 200 Crescent Court, Suite 300 Dallas, TX 75201 Telephone: 214-746-8178 Facsimile: 214-746-7777 Jonathan H. Talcott Nelson Mullins Riley & Scarborough LLP 101 Constitution Avenue NW, Suite 900 Washington, DC 20001 Telephone: 202-712-2806 Facsimile: 202-712-2856 Glenn W. Sturm Nelson Mullins Riley & Scarborough LLP Atlantic Station 201 17th Street NW, Suite 1700 Atlanta, GA 30363 Telephone: 404-322-6106 Facsimile: 404-322-6151 Table of Contents to better penetrate our target markets and expand our client base. We have successfully identified, completed and integrated four acquisitions since 2007: Beta Systems ECM Solutions GMBH ("ECM"), PrivatGirot AB ("PrivatGirot"), Document@Work and DocuData Solutions, L.C. ("DocuData"). Risks Affecting Us Our business is subject to a number of risks as discussed more fully in the section entitled "Risk Factors" beginning on page 11 of this prospectus, which you should read in its entirety. In particular: We have experienced net losses during the last seven years and may not be able to achieve and sustain profitability in the future; If our services or solutions become obsolete or less competitive or are not accepted by the market, our business, ability to become profitable and financial condition could be materially adversely affected; The market for our services and solutions is highly competitive, and our inability to compete with other providers of BPO services and hardware and software solutions could harm our revenue and our ability to become profitable; If we fail to successfully implement our business strategy, including expansion of our sources of recurring revenue and continued growth of our BPO services, we may be unable to sustain our historical growth rate and unable to become profitable; Protection of our intellectual property is limited, and any misuse of our intellectual property by others could harm our business, reputation and competitive position; We may be subject to claims that our services or solutions violate the patents or other intellectual property of others, which would be costly and time-consuming to defend. If our services and solutions are found to infringe the patents or other intellectual property rights of others, we may be required to change our business practices or pay significant costs and monetary penalties; We have not registered copyrights for many of our products, which may limit our ability to enforce them; and Operational failures in our outsourcing or transaction processing facilities could harm our business and reputation. Corporate Information We were founded as a Texas corporation in 1972. Our principal executive offices are located at 2701 E. Grauwyler Road, Irving, Texas 75061 and we maintain a regional headquarters facility in London, United Kingdom. Worldwide, we have operations in 15 countries. We have five major BPO facilities, 13 satellite BPO facilities and one captive offshore BPO facility. Our website is www.banctec.com and our main telephone number is (972) 821-4000. Information on our website is not part of or incorporated into this prospectus and should not be relied upon in determining whether to make an investment in our common stock. Approximate date of commencement of proposed sale to public: As soon as practicable after the Registration Statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non accelerated filer (Do not check if a smaller reporting company) Smaller reporting company The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. (1)The number of shares outstanding after this offering is based on 18,008,048 shares of common stock outstanding as of July 29, 2011. This includes 2,476,719 shares of restricted stock granted pursuant to our Equity Incentive Plans, as defined herein (915,938 of which have vested), and 6,252 shares of restricted stock granted pursuant to our 2007 Director Plan, as defined herein, and excludes 317,895 restricted stock units granted pursuant to the 2007 Director Plan, in each case issued and outstanding, as of July 29, 2011. See "Executive Compensation Narrative Disclosure to Summary Table and Grants of Plan-Based Awards Equity Incentive Plans" for a description of these plans. Table of Contents The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 2011. Preliminary Prospectus Shares Common Stock Table of Contents SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth certain of our summary consolidated financial information for the periods represented. The financial data for the years ended December 31, 2006, 2007, 2008, 2009 and 2010 have been derived from our audited consolidated financial statements and notes thereto. The financial data for the six months ended June 30, 2010 and 2011 have been derived from our unaudited condensed consolidated financial statements and notes thereto. The financial data presented below, and throughout this prospectus, have been adjusted to reflect the January 2009 sale of our Information Technology Services Management ("ITSM") division in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 360-10. See "Note A Summary of Significant Accounting Policies" to the Consolidated Financial Statements included elsewhere in this prospectus. The data presented below should be read in conjunction with, and are qualified in their entirety by reference to "Capitalization," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the notes thereto included elsewhere in this prospectus. Years Ended December 31, Six Months Ended June 30, 2006 2007 2008 2009 2010 2010 2011 (in thousands, except per share data) Statement of Operations Data: Revenue Equipment and software $ 92,136 $ 97,667 $ 74,434 $ 71,315 $ 53,500 $ 24,182 $ 27,639 Software services 43,999 44,650 43,521 35,276 35,217 17,516 $ 20,691 Maintenance and other services 91,462 95,879 90,142 72,937 67,685 30,748 $ 33,506 Business process outsourcing 28,792 37,283 63,823 93,104 97,809 48,504 $ 46,709 Total revenue 256,389 275,479 271,920 272,632 254,211 120,950 128,545 Gross profit 83,056 88,864 76,219 74,771 68,168 26,784 36,504 Operating expenses Research and development 7,275 6,506 5,179 4,246 5,093 2,545 3,096 Selling, general and administrative 59,568 73,669 79,102 69,321 77,601 37,314 38,162 Goodwill impairment 23,442 Total operating expenses 66,843 80,175 107,723 73,567 82,694 39,859 41,258 Operating income (loss) 16,213 8,689 (31,504 ) 1,204 (14,526 ) (13,075 ) (4,754 ) Other income (expenses)(1) (20,104 ) (15,626 ) 503 (5,365 ) (5,389 ) 772 (3,153 ) Loss from continuing operations before income tax (3,891 ) (6,937 ) (31,001 ) (4,161 ) (19,915 ) (12,303 ) (7,908 ) Income tax expense 3,875 6,613 2,355 3,293 2,361 (402 ) 1,222 Net loss from continuing operations $ (7,766 ) $ (13,550 ) $ (33,356 ) $ (7,454 ) $ (22,276 ) $ (11,901 ) $ (9,129 ) Net loss per share from continuing operations Basic and diluted $ (1.28 ) $ (1.51 ) $ (2.15 ) $ (0.48 ) $ (1.39 ) $ (0.74 ) $ (0.56 ) Other Financial Data: Adjusted EBITDA(2) $ 30,031 $ 23,250 $ 21,163 $ 23,814 $ 22,920 $ 7,615 $ 10,000 BancTec, Inc. is offering shares of its common stock and the selling stockholders named in this prospectus are offering an additional shares of common stock. Each share of common stock offered hereby will have associated with it one preferred stock purchase right. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering. We currently expect the initial public offering price of our common stock to be between $ and $ . Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on The NASDAQ Global Market under the symbol of "BTEC." Investing in our common stock involves risks. See "Risk Factors" beginning on page 11 of this prospectus to read about the risks you should consider before investing in our common stock. Per Share Total Public offering price Discounts and commissions to underwriters Offering proceeds to Issuer, before expenses Offering proceeds to selling stockholders Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. We have granted the underwriters the right to purchase up to additional shares of our common stock at the public offering price, less the underwriting discount, within thirty days from the date of the underwriting agreement to cover over-allotments, if any. William Blair & Company Needham & Company, LLC D.A. Davidson & Co. The date of this prospectus is , 2011 (1)Other income (expenses) includes interest expense, interest income, and sundry expenses, which are comprised of exchange rate gains and losses and other miscellaneous expenses. (2)We define Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) as net income (loss) from continuing operations (as calculated under generally accepted accounting principles ("GAAP") in the United States) plus net interest expense, income tax expense, depreciation and amortization, outsourcing contract cost amortization, IPO related costs, purchase accounting adjustment, restructure costs, deal related costs, stock-based compensation and goodwill impairments less PrivatGirot gain. Other companies may calculate Adjusted EBITDA differently than we calculate Adjusted EBITDA. We have provided Adjusted EBITDA because we believe it will help investors and analysts evaluate our operating performance because: securities analysts and other interested parties use it as a measure of financial performance and debt service capabilities; Table of Contents it facilitates management's ability to measure operating performance of our business because it assists us in comparing our operating performance on a consistent basis, given that it removes the effect of items not directly resulting from our core operations; it is used by our management for planning purposes, including the preparation of our internal annual operating budget; it is used by our management to allocate resources to enhance the financial performance of our business; it is used by our management to evaluate the effectiveness of our operational strategies; it is used by our board of directors and management for determining certain management compensation targets and thresholds; and we adopted ASC 718 on January 1, 2006 and recorded stock-based compensation expense. Prior to January 1, 2006, we accounted for stock-based compensation using the intrinsic value method which resulted in zero stock-based compensation expense. By comparing our Adjusted EBITDA in different historical periods, our investors can evaluate our operating results without the additional variations caused by stock-based compensation expense, which is not comparable from year to year due to changes in accounting treatment and is a non-cash expense that is not a key measure of our operations. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP, such as net income, income from operations or cash provided by operating activities. The following are some of the limitations on Adjusted EBITDA's usefulness: it does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; it does not reflect changes in, or cash requirements for, working capital; it does not reflect significant interest expense, or the cash requirements necessary to service interest or principal payments on our Revolving Credit Facility (as defined below); it does not reflect payments made or future requirements for income taxes; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements; and because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to Adjusted EBITDA measures of other companies. Management compensates for these limitations by primarily relying on GAAP results and relying on Adjusted EBITDA only supplementally. However, Adjusted EBITDA does not determine our ability to borrow under our second amended and restated revolving credit facility dated as of March 31, 2010 as amended on April 19, 2011 (as further amended, restated or otherwise modified from time to time, the "Revolving Credit Facility"), by and among BancTec, Inc., the other credit parties thereto, General Electric Capital Corporation, a Delaware Corporation ("GE Capital"), and the financial institutions party thereto as lenders. Instead, our ability to borrow under the Revolving Credit Facility is determined using EBITDA, as defined therein. Management does not believe that EBITDA, as defined under the Table of Contents Revolving Credit Facility, is an effective measure of our annual operating performance due to the significant adjustments to net income required by the terms of the Revolving Credit Facility. In our calculations of EBITDA under the Revolving Credit Facility, the terms thereof require us to: (i)exclude the following items from consolidated net income: the income (or deficit) of any other person accrued prior to the date it became a subsidiary of, or was merged or consolidated into us; the income (or deficit) of any other person (other than a subsidiary) in which we have an ownership interest, except to the extent any such income has actually been received by us in the form of cash dividends or distributions; the undistributed earnings of any of our subsidiaries (other than any such subsidiaries which are designated as credit parties under the Revolving Credit Facility) to the extent that the declaration or payment of dividends or similar distributions by such subsidiaries are not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such subsidiaries; any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; any write-up of any asset; any net gain from the collection of the proceeds of life insurance policies; any net gain arising from the acquisition of any securities or the extinguishment of any indebtedness; any earnings of our successor prior to a consolidation, merger or transfer of assets; and any deferred credit representing the excess of equity in any of our subsidiaries at the date of acquisition of such subsidiaries over the cost to us of the investment in such subsidiaries; (ii)deduct the following items from consolidated net income: income tax credits; interest income; gains from extraordinary items; any aggregate net gain during such period arising from the sale, exchange or other disposition of capital assets; any other non-cash gains that have been added in determining consolidated net income; and non-cash gains resulting from foreign currency conversions; and (iii)add back the following items to consolidated net income: any provision for income or franchise taxes; interest expense; loss from extraordinary items for such period; depreciation and amortization for such period; amortized debt discount for such period; the amount of any non-cash deductions or expenses as the result of any grant to any members of our management of any stock or stock equivalents; Table of Contents any aggregate net loss on the sale of our property outside the ordinary course of business; non-cash losses resulting from foreign currency conversion; subject to certain limitations set forth in the Revolving Credit Facility, any other non-cash losses or charges that have been deducted in determining consolidated net income; subject to certain limitations set forth in the Revolving Credit Facility, severance and other restructuring costs and expenses; subject to certain limitations set forth in the Revolving Credit Facility, fees and expenses incurred in connection with acquisitions; and subject to certain limitations set forth in the Revolving Credit Facility, IPO related costs and expenses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Revolving Credit Facility" included elsewhere in this prospectus. (3)These amounts reflect balance sheet data as of June 30, 2011, as adjusted for the sale of shares of our common stock (excluding the additional shares offered by the selling stockholders) in this offering (based on an assumed offering price of $ per share and assuming the underwriters do not exercise their over-allotment option) after deducting underwriting discounts and commissions, estimated offering expenses payable by us and the application of the net proceeds received by us from this offering as described under "Use of Proceeds." (4)IPO related costs are charges incurred in connection with the filing of the registration statement on Form S-1, initially filed on August 8, 2007, and the amendments thereto, which was subsequently withdrawn on May 16, 2011. The costs were held on the balance sheet until the fourth quarter of 2010 when they were expensed in Sundry, net due to management's decision to pursue a new offering and related registration process in 2011. (5)Purchase accounting adjustment reflects an increase in revenue by the amount that would have been recorded as if such deferred revenue were not adjusted to fair value at the date of the acquisition of ECM in June 2010. (6)Restructure costs are severance costs and site closure costs associated with our restructuring activities. (7)Deal costs are charges incurred for acquisition activities and business development efforts relating to large outsourcing opportunities that were ultimately not implemented by the potential client. (8)PrivatGirot gain is associated with the acquisition of PrivatGirot in June 2009 for a cost less than fair market value. Table of Contents RISK FACTORS An investment in our common stock involves risk. You should carefully consider each of the following risk factors and all of the other information set forth in this prospectus before deciding to invest in our common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected and we may not be able to achieve our goals. If that occurs, the value of our common stock could decline and our stockholders could lose some or all of their investment. Risk Factors Relating to Our Business We have experienced net losses and may not be able to achieve and sustain profitability in the future. We have incurred net losses during the last seven years. We have also historically been unable to generate sufficient cash flow to meet obligations and sustain operations without obtaining additional external financing. Additionally, our cash flows may be insufficient to meet expenses relating to the further development of our services and solutions. If we are unable to achieve profitability in the near term, we may need to fund shortfalls in our liquidity needs with borrowings under our Revolving Credit Facility or through future debt or equity financings. We may not have adequate availability under our Revolving Credit Facility for such borrowing. In addition, we may not be able to complete such future debt or equity financings on a timely basis and under acceptable terms, or at all. Our ability to achieve profitability is dependent upon, among other things, the successful implementation of our business strategy and our ability to compete with other providers of BPO services and business solutions. There can be no assurance that our efforts will be successful or that we will ultimately be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. If our services or solutions become obsolete or less competitive or are not accepted by the market, our business, ability to become profitable and financial condition could be materially adversely affected. The strength of our overall business depends in part on our ability to develop services and solutions based on new or evolving technology and the market's acceptance of those services and solutions. Our industry is characterized by continuing improvement in technology, which results in frequent introduction of new services and solutions, short product life cycles and continual improvement in price/performance characteristics. We must incorporate these new technologies into our services and solutions in order to remain competitive. There can be no assurance that our development activities will be successful, that new technologies will be available to us, that we will be able to deliver new services and solutions in a timely manner, that those services and solutions will meet or exceed generally accepted industry standards or that those services and solutions will achieve market acceptance. Further risks inherent in the development and introduction of new services and solutions include the uncertainty of price-performance relative to products and services of competitors, competitors' responses to our introductions and the desire by clients to evaluate new services and solutions for extended periods of time. In addition, we may not be able to successfully manage our technological transitions. A failure on our part to effectively manage the transition of our services and solutions to new technologies on a timely basis could have a material adverse effect on our revenue, business and results of operations. Our failure to introduce new or enhanced products on a timely basis, keep pace with rapid industry, technological or market changes or effectively manage the transitions to new products or new technologies could have a material adverse effect on our business, financial condition and results of operations. In addition, our business depends on technology trends in our clients' businesses. Many of our traditional services and solutions enable efficient handling of paper-based transactions. To the extent that the volume of paper transactions continues to decline, our traditional business may be adversely impacted. The market for payment processing and document management services and solutions is Table of Contents highly competitive, rapidly evolving and subject to significant technological change, and we expect competition to increase. The pressures we face from technological and competitive trends may have a material adverse effect on our business, financial condition and results of operations. The market for our services and solutions is highly competitive, and our inability to compete with other providers of BPO services and hardware and software solutions could harm our revenue and ability to become profitable. The BPO services and hardware and software solutions industries are each highly competitive. Some of our competitors have greater resources, financial and otherwise, and may develop solutions or services which may make our offerings obsolete or less competitive. We compete primarily on the following factors: functionality, performance, quality, service and price. Our ability to compete on these factors may impact our ability to win new contracts or develop and expand service offerings. Competition places downward pressure on operating margins, particularly for technology outsourcing contract extensions or renewals. As a result, we may not be able to maintain current operating margins for technology outsourcing contracts which are extended or renewed in the future. Current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their services and solutions to address the needs of our existing and prospective clients. Accordingly, it is possible that new competitors or alliances among competitors may emerge and acquire significant market share. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressures faced by us will not materially adversely affect our business, financial condition and results of operations. Our business, financial condition and results of operations could also be adversely affected if our competitors introduce innovative or technologically superior solutions or offer their products at significantly lower prices than we do. No assurances can be given that we will have the resources, marketing and service capability, or technological knowledge to continue to compete successfully. If we fail to successfully implement our business strategy, including expansion of our sources of recurring revenue and continued growth of our BPO services, we may be unable to sustain our historical growth rate and unable to become profitable. Our ability to grow revenues at a pace necessary to become profitable requires that we continue to enter into long-term contracts with new and existing clients that require the payment of recurring fees and that we continue to transition our business away from the sale of products and towards an increased offering of BPO services. In order to expand the market for our BPO services business, we must be able to leverage our existing technology, service and industry-specific solutions. Our history of sales of BPO services has been uneven in recent years. To the extent we fail to persuade new or existing clients to enter into long-term contracts for BPO services, we will be unable to successfully implement our business strategy. As a result, our revenue, business, ability to become profitable, results of operations and financial condition may be materially impaired. Protection of our intellectual property is limited, and any misuse of our intellectual property by others could harm our business, reputation and competitive position. We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary information, technology and brand. We protect our proprietary information and technology, in part, by requiring certain of our employees to enter into agreements providing for the maintenance of confidentiality and the assignment of rights to inventions made by them while employed by us. We also enter into non-disclosure and invention assignment agreements with certain of our technical consultants to protect Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0000775662_vist_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0000775662_vist_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0000775662_vist_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0000928659_teletouch_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0000928659_teletouch_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3bd8eaad36007ce6b804779ecee6b8928ecb0496
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0000928659_teletouch_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information set forth in greater detail elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, It may not contain all the information that may be important to you. You should read this entire prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our common stock, especially the risks of investing in our common stock, which we discuss later in Risk Factors and our financial statements and related notes. Unless the context requires otherwise, references to the Company, Teletouch, we, our, and us, refer to Teletouch Communications, Inc. and its subsidiaries. Our Company Teletouch offers a comprehensive suite of telecommunications solutions, including cellular, two-way radio, GPS-telemetry, wireless messaging and public safety equipment. Teletouch operates 20 cellular retail and agent locations, under the Teletouch and Hawk Electronics brand names. The Company s core-business is acquiring, billing and supporting cellular subscribers under a long-term recurring revenue relationship with AT&T. Through its subsidiary, Progressive Concepts Inc., ( PCI ), the Company provides AT&T cellular services (voice, data and entertainment), as well as other mobile, portable and personal electronics products and services to individuals, businesses and government agencies. PCI operates a chain of retail stores and sells cellular and other products and services under the Hawk Electronics brand, through Hawk-branded sub-agents, its own direct sales force, call center and the Internet. PCI also operates a national wholesale distribution business, known as PCI Wholesale that serves major carrier agents, rural cellular carriers, smaller consumer and electronic retailers and automotive dealers throughout the United States. The Company also maintains certain international customer relationships, primarily in Asia, Europe and Latin America for its cellular related wholesale equipment sales business. Through our two-way business, we provide Public Safety Equipment ( PSE ) products and services primarily to local, state and federal government entities. We are a General Services Administration ( GSA ) multi-year contract holder (contract number GS-07F-0024X) and were recently awarded a multi-year Texas Multiple Award Schedule ( TXMAS ) contract (contract number TXMAS-11-84060). Additionally, we have been named as an approved vendor by the Texas BuyBoard. The terms we, us, our company, our refer to Teletouch Communications, Inc., a Delaware corporation. Recent Developments Change of Ownership and Voting Control of Teletouch Since November 2005, the majority of Teletouch s outstanding common stock has been owned and controlled by TLL Partners, LLC, a Delaware limited liability company ( TLLP ), controlled by Robert M. McMurrey, the Company s Chairman and Chief Executive Officer. In August 2006, immediately prior to Teletouch s acquisition of Progressive Concepts, Inc. ( PCI ), TLLP assumed the senior debt obligations of PCI and settled the subordinated debt obligations of PCI by issuing 4,350,000 shares of its holdings of Teletouch s common stock and converted the balance of the subordinated debt into redeemable Series A preferred units of TLLP. To secure the senior debt obligation, TLLP pledged all of its then held assets, which consisted primarily of its holding of approximately 80% of the outstanding common stock of Teletouch as of August 2006. TLLP is a holding company with no operations with a minimal amount of cash on hand and is dependent upon selling a sufficient number of shares it owns in Teletouch common stock or upon the cash flows of Teletouch through the receipt of future cash dividends to service its outstanding debt obligations. When the senior debt originally matured in August 11, 2007, TLLP did not have sufficient cash or other means to repay this debt and was successful in negotiating an initial extension of the maturity date through October 11, 2007. Subsequent extensions were granted by the senior debt holder to TLLP extending the maturity date through January 31, 2011. In February 2011, TLLP negotiated a settlement of its senior debt obligations which required a series of payments beginning February 2011 and continuing through August 19, 2011, the amended maturity date. In addition to the cash payments and as part of the settlement agreement, TLLP was obligated to transfer 2,000,000 shares of its holdings of Teletouch s common stock to the senior lender at the maturity date. TLLP began selling shares of its holdings of Teletouch s common stock in February 2011 to raise the funds to make these payments on its senior debt obligation. Beginning in February 2011 and continuing through June 2011, TLLP completed sixteen (16) privately negotiated transactions and sold a total of 8,499,001 shares of its holdings of Teletouch s common stock, which is approximately 17.4% of the Company s outstanding common stock at June 13, 2011. Following these sales transactions, TLLP continued to own 30,650,999 shares of our common stock, or 62.9% of the Company s outstanding stock. On August 11, 2011, TLLP entered into a binding agreement titled Heads of Terms (the Binding Agreement ) and certain related agreements with its Series A Preferred unit holders, Stratford Capital Partners, LP ( Stratford ) and Retail & Restaurant Growth Capital, LP ( RRGC ) (together, Stratford and RRGC are hereafter referred to as the Transferees ), whereby, TLLP was required on or before August 17, 2011 to exchange 25,000,000 shares of its holdings of the Company s common stock (the New Shares ) to settle in full TLLP s approximately $18,200,000 redemption obligation on its outstanding Series A Preferred Units (the Preferred Units ) and for additional cash consideration totaling $3,750,000 from the Transferees (the Exchange ). Based on the approximately $21,950,000 consideration exchanged by Transferees, TLLP realized approximately $0.88 per share in value for the shares of the Company s common stock transferred in the Exchange. As a result of the Exchange, Stratford and RRGC received 15,000,000 shares and 10,000,000 shares, respectively, of the Company s common stock in exchange for their respective share of the cash consideration and their respective holdings of the outstanding Preferred Units. The Exchange closed on August 17, 2011 and resulted in the cancellation of the Series A Preferred units. As contemplated by the Binding Agreement, at closing the parties entered into various agreements related to the New Shares including (1) a registration rights agreement providing for the registration of the New Shares, (2) a put and call option and transfer restriction agreement whereby TLLP would have the right to call from Stratford and RRGC the Exchanged Shares for a 15 month period for a call price of $1.00 per share, Stratford and RRGC would have the rights to put their New Shares to TLLP for 30 day period at the end of the call option period for a put price of $1.00 per share, and Stratford and RRCG would agree not to transfer the New Shares for a period of 7 months after the date of the Exchange, (3) a voting agreement whereby Stratford and RRGC agreed to vote their New Shares in proportion to the votes of the other shareholders of Teletouch during the call option period, (4) a pledge and security agreement whereby TLLP pledged certain of its remaining shares of Teletouch s common stock to Stratford and RRGC as security for their put rights, (5) a mutual release of claims between various parties to the Exchange and (6) certain other ancillary documents. Following the Exchange, Stratford owns 17,610,000 shares of Teletouch s common stock (36.1% of outstanding shares as of the date of this Report), RRGC owns 11,740,000 shares or 24.1% and TLLP owns 3,650,999 shares or 7.5%. The result of the Exchange is that there has been a change in voting control at Teletouch whereby TLLP no longer controls the outcome of matters voted on by the shareholders. TLLP s management has communicated to the Company that additional sales of its holdings of the Company s common stock are likely to fund the ongoing operating expenses of TLLP and that it will actively be seeking financing to exercise some or all of its call option during the call option period. TLLP further communicated to the Company that there can be no assurance that TLLP will be successful in its efforts to secure the financing necessary to exercise the call option and purchase the New Shares and regain voting control at the Company; nor can there be any assurance that Stratford and RRGC will not transfer some or all of the shares following the initial 7 month transfer restriction period which in turn, could affect TLLP s ability to exercise the call option, in part or in whole. During the call option period, Stratford and RRCG have agreed to vote in proportion to the other shareholders which could result in a different outcome on matters previously determined by the majority vote TLLP. AT&T Litigation In late June 2007, Apple, Inc. introduced the iPhone to the United States in an exclusive distribution and wireless services partnership with AT&T. AT&T was at the time the only authorized carrier provider for the iPhone. Since that time, AT&T has refused to allow the Company to sell the iPhone as well as other products and services, despite AT&T s contractual obligation to do so under its previously executed distribution agreements between AT&T and the Company. Furthermore, the Company asserts that AT&T has continued to make direct contact with Company customers and aggressively markets, advertises and promotes the iPhone and other AT&T exclusive products and services to Company customers in an attempt to induce them to switch to AT&T. In June 2007, the Company serviced approximately 83,000 cellular subscribers. Through May 31, 2011, more than 27,800 subscribers have transferred their accounts to AT&T, with a significant percentage of these solely due to the exclusive availability of the iPhone through AT&T and Apple designated retail outlets only. Since July 2007, the Company had attempted to negotiate with AT&T for the purpose of obviating the need for legal action. However, such attempts failed. Therefore, on September 30, 2009, the Company, through the legal entity Progressive Concepts, Inc. ( PCI ), commenced an arbitration proceeding against New Cingular Wireless PCS, LLC and AT&T Mobility Texas LLC (collectively, AT&T ) seeking a minimum $100 million in damages. The binding arbitration was commenced to seek relief for damages incurred as AT&T has prevented PCI from selling the popular iPhone and other AT&T exclusive products and services that PCI is and has been contractually entitled to provide to its customers under distribution agreements between PCI and AT&T. The action further asserts that AT&T violated the longstanding non-solicitation provisions of the DFW market distribution agreement by and between the companies by actively inducing customers to leave PCI for AT&T. PCI is represented in the matter by the Company s legal counsel, Bracewell & Giuliani, LLP. Following the Company s commencement of the arbitration proceeding, AT&T filed certain counterclaims with the arbitrator seeking an unspecified amount of damages from PCI and claiming that PCI was operating in violation of certain provisions of the distribution agreements and such agreements should therefore be cancellable by AT&T. On February 28, 2010, Teletouch and its wholly-owned subsidiary, PCI, as Claimant and AT&T as Respondent received the Agreed Scheduling Order from the Judicial Arbitration and Mediation Services, Inc. ( JAMS ) Arbitrator assigned to the binding arbitration. Among other matters, including the provision of the Rules and Law governing the arbitration, the Agreed Scheduling Order set out the proposed completion dates for Discovery, Depositions, Dispositive Motions and Briefing Deadlines, culminating in an Arbitration hearing period scheduled for November 8, 2010 through November 12, 2010. On August 10, 2010, the Agreed Scheduling Order was amended by the JAMS Arbitrator after being petitioned by AT&T for additional time to prepare for the hearing. As a result, all interim completion dates to prepare for the hearing were extended with the Arbitration hearing period re-scheduled for March 21, 2011 through March 25, 2011. On December 23, 2010, the Company received a second amended Agreed Scheduling Order by the JAMS Arbitrator after AT&T requested another extension of time to complete the required Depositions. The Arbitration hearing period was postponed to June 13, 2011 through June 17, 2011. In March 2011, depositions of Company s executive management team and other key personnel as well as the majority of the AT&T personnel selected were completed as required under the arbitration process. Also in March 2011, both the Company s and AT&T s independent valuation experts filed initial damages computations with the arbitrator which valued each party s respective damages as a result of the other party s actions. The Company s expert provided damages computations under several scenarios which included damages assuming PCI s damages were limited to the liquidated damages provision included in the distribution agreement and several alternate computation of lost profits depending on the timing of which it was determined that PCI should have been allowed to sell the iPhone. Under the liquidated damages limitation, PCI s damages are estimated to be $48.9 million. Under the lost profits computations, PCI s damages are estimated to be as high as $35.0 million due to lost profits on subscriber transferred to AT&T and those subscribers that PCI did not get because of it not being allowed to sell the iPhone. Additionally, if it is determined that PCI should also be compensated for the fair value of its subscriber base as of August 31, 2009 (the date of the expiration of the DFW and San Antonio distribution agreements), damages could be increased by $51.8 million, resulting in total damages and compensation due to PCI totaling $86.8 million. AT&T s expert computed AT&T s damages in the range of $7.6 million to $9.9 million, depending on the arbitrator s interpretation of the San Antonio distribution agreement. The Company can provide no assurance that it will prevail in the arbitration matter or, even if and when it does, it will be awarded the amount of damages it currently estimates. There is no assurance that such damages, if and when awarded, will not be significantly less than the damage estimates discussed above. On May 17, 2011 the Company and AT&T attended a mandatory mediation session ordered by the arbitrator in the pending binding arbitration proceeding. At the mediation, the parties made significant progress toward reaching a settlement agreement. On July 19, 2011, as a result of the settlement discussions taking longer than anticipated and the progress that had been made to date, the Company and AT&T mutually agreed to delay the July 22, 2011 arbitration date and continue working toward completing documentation on the terms of the final settlement agreement. The arbitrator in this matter was noticed that the Company may request a specific arbitration hearing date as early as September 2011 if the settlement discussions are unsuccessful or unreasonably delayed by AT&T. As of the date of this Report, the Company and AT&T have made progress on certain terms of the settlement but certain other terms are unacceptable to the Company as proposed by AT&T. The scope of the settlement discussions have expanded since the mediation resulting in certain key new terms being introduced in these negotiations. The Company is attempting to estimate the financial impact of these changes and new concepts. Negotiations are continuing, but if acceptable terms are not agreed to within the next several weeks following the filing of this Report, the Company may have to conclude that it can no longer sustain the continuing damage it is suffering as a result of this unexpected lengthy negotiation process and opt to resume arbitration and schedule a final arbitration hearing date. Terms of the settlement contemplate the Company receiving certain cash and other consideration, as well as a restructured six-year minimum sales and distribution relationship with AT&T, which will allow the Company to continue operating under an updated and expanded arrangement in all of its current and prior market areas including DFW, San Antonio, Houston / South Texas, Austin / Central Texas, Tyler / East Texas and the State of Arkansas. The parties agreement in principle would allow the Company to offer an expanded portfolio of AT&T products and services, including all cellular handsets supported by AT&T to both new and existing customers. Our Contact Information Our corporate headquarters are located at 5718 Airport Freeway, Fort Worth, TX 76117. Our telephone number is (800) 232-3888 and our website is located at http://www.teletouch.com. Information contained on our website is not deemed part of this prospectus. Summary of the Offering Shares of common stock currently outstanding: 48,739,002 shares Shares of common stock offering by us: None Shares of common stock offered by the selling shareholders: up to 32,000,999 shares Use of proceeds: We will not receive any proceeds from the sale of common stock covered by this prospectus. The Selling Shareholders will receive all net proceeds from sale by selling shareholders of our common stock covered by this prospectus. OTC Bulletin Board Symbol: TLLE.OB
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001017290_silver_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001017290_silver_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3657f23e4e05f408facefc7902022547789b12cf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001017290_silver_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. SILVER DRAGON RESOURCES INC. Silver Dragon Resources Inc. was initially incorporated in the State of Delaware on May 9, 1996 under the name American Electric Automobile Company Inc. On July16, 2002, we amended our Certificate of Incorporation to change our name to American Entertainment & Animation Corporation. On February 25, 2005, we again amended our Certificate of Incorporation to change our name to Silver Dragon Resources Inc. to reflect our current business focus on silver. We own a 40% equity interest in Sanhe Sino-Top Resources and Technologies, Ltd. ( Sino-Top ), which was incorporated in 2003 as a Chinese company wholly owned by Huaguan Industrial Corp. ( HIC ), a subsidiary of the state-owned North China Geological Exploration Bureau. Sino-Top became an American-Chinese joint venture in 2005. Silver Dragon Resources Inc. acquired a controlling interest in Sino-Top in 2006, and currently owns 40% of Sino-Top after having sold 50% of its ownership interest to its Chinese partners. Chinese equity partners, led by Gansu Shengda Group Ltd. ( Shengda ), at 52%, and HIC, at 8%, collectively own 60% of Sino-Top. Sino-Top holds exclusive exploration and development rights to six properties in northern China (Inner Mongolia), covering a total area of 139 km2. We are also entitled to 70% of the after-tax proceeds from the Erbahuo Silver mine, to which Chifeng Silver Dragon, a wholly-owned subsidiary of Sino-Top, holds exclusive exploration and mining rights. We operate in Mexico through our wholly-owned subsidiary, Silver Dragon Mining De Mexico S.A. de C.V. ( Silver Dragon Mexico ), a Mexican company incorporated on April 21, 2006. We are engaged in the acquisition and exploration of silver and other mineral properties. Our primary focus is the exploration of seven properties located in the Erbahuo Silver District in Northern China. We also had 15 concessions known as the Cerro Las Minitas property in Guadalupe, Durango, Mexico. The ownership of that property is now subject to legal dispute. Although management expects that it may eventually be successful, it has decided to write-off its Mexican assets as the outcome of the dispute is uncertain. We are still in the exploration stage and have not generated any revenues from the properties in China and operations in Mexico. We have incurred losses since our inception. For the years ended December 31, 2010 and 2009, we did not generate any revenues and incurred net losses of $4,318,318 and $4,869,372, respectively. For the three months ended March 31, 2011, we did not generate any revenues and we incurred net losses of $734,697. At March 31, 2011, we had working capital of $212,191 and an accumulated deficit of $36,788,777. These factors raise substantial doubt about our ability to continue as a going concern. As filed with the Securities and Exchange Commission on May 9, 2011 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ___________________________ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___________________________ SILVER DRAGON RESOURCES INC. (Name of registrant in its charter) Delaware 1040 33-0727323 (State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Organization) Classification Code Number) Identification No.) 5160 Yonge Street, Suite 803 Toronto, Ontario M2N 6L9 (416) 223-8500 (Address and telephone number of principal executive offices and principal place of business) Marc M. Hazout, President and Chief Executive Officer SILVER DRAGON RESOURCES INC. 5160 Yonge Street, Suite 803 Toronto, Ontario M2N 6L9 (416) 223-8500 (Name, address and telephone number of agent for service) Copies to: Thomas A. Rose, Esq. Sichenzia Ross Friedman Ference LLP 61 Broadway, 32nd Flr. New York, New York 10006 (212) 930-9700 (212) 930-9725 (fax) APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ________ The Offering Common stock offered by selling stockholders Up to 12,125,000 shares of our common stock, including up to 12,000,000 shares of common stock issuable upon conversion of a currently outstanding promissory note. Shares outstanding prior to the offering 106,893,198 shares as of May 5, 2011. Shares to be outstanding after the offering 118,893,198 shares. Use of proceeds We will not receive any proceeds from the sale of the common stock. Related Transactions April 2011 Financing On April 19, 2011, we entered into a Note Purchase Agreement (the "Purchase Agreement") with JMJ Financial (the "Investor") whereby we issued and sold, and the Investor purchased a series of unsecured convertible promissory notes in the principal amount of $3,150,000 (the "Company Notes"). The Company Notes are convertible into shares of our common stock based on 75% of the average of the three lowest closing prices in the 20 trading days prior to the date of conversion. The Company Notes each bear a one-time 5% interest rate which can be paid in shares of common stock at the conversion rate of the Company Notes. The consideration for the initial note in the principal amount of $1,050,000 was a series of cash payments totaling $1 million to be made to Silver Dragon, as well as $50,000 representing an origination fee. Such funds will be paid according to the following schedule: $250,000 paid within 5 business days of execution and closing of the Note Purchase Agreement; $150,000 paid within 10 business days of filing of an S-1 registration statement, and that registration statement must be filed no later than 21 days from the date of the Note Purchase Agreement; $100,000 paid within 10 business days of notice of effective registration statement, and that registration must be effective no later than 120 days from the date of the Note Purchase Agreement; $250,000 paid within 120 days of notice of an effective registration statement; and $250,000 paid within 180 days of notice of an effective registration statement. At each of the foregoing funding dates, the funding of such amount is conditioned on the following: The calculated conversion price shall be equal to or greater than $0.0919; Adequate registered shares must be available for issuance; The total dollar trading volume of the Company s stock for the 23 days prior to the date of conversion must be equal to or greater than $750,000; and No event of default shall exist. We are required to file a registration statement with Securities and Exchange Commission, registering the resale of the shares issuable upon conversion of the foregoing note. The subsequent notes each provide $500,000 consideration, totaling $2,000,000, which are secured and collateralized by JMJ Financial, over the remainder of the three-year period. The total face amount of the convertible notes issued to JMJ was $3,150,000, which represented $3,000,000 to be paid to us and other fees and expenses to be paid to JMJ Financial. Each of the Company Notes includes customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment. In addition, it shall constitute an event of default under the Company If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. _________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. _________ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of large accelerated filer, accelerated filed, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Notes if the Company shall not be eligible to transfer shares by DWAC/FAST or it shares shall not be DTC eligible or the Company shall not be current in its filings with the Securities and Exchange Commission. We plan to use proceeds from the financing to: (i) apply for a listing on a Canadian Stock Exchange; (ii) continue the exploration, development and resource conversion program presently under way at the Erbahuo silver properties in China; and (iii) for general corporate purposes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001030916_premier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001030916_premier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3ffc644e9d94e99205aca2650ada3b6cf4cc51c5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001030916_premier_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including Selected Consolidated Financial Data, Management s Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors, Business and our consolidated financial statements and related notes before deciding whether to purchase shares of our capital stock. Unless the context otherwise requires, the terms Premier Holding, the Company, we, us and our in this prospectus refer to Premier Holding Corporation Overview We were incorporated in Nevada on October 18, 1971. Our fiscal year end is December 31. We have never been in bankruptcy, receivership or any similar proceeding, but have been the subject of a custodianship proceeding in the Nevada state courts. Premier Holding Corporation was organized under the name of Mr. Nevada, Inc., and, following the completion of a limited public offering in April 1972, commenced limited operations which were discontinued in 1990. Thereafter, we engaged in reorganization and on several occasions sought to merge with or acquire certain active private companies or operations, all of which were terminated or resulted in discontinued negotiations. On October 20, 1995, we changed our name to Intermark Development Corporation. On November 4, 1996, we acquired all of the capital stock of HVM Development Limited ("HDL"), formerly known as OVM Development Limited, a British Virgin Islands corporation, and changed our name to OVM International Holding Corporation. We were thereafter abandoned by our management, who stripped us of our operating subsidiary. We stopped filing reports in November 2002, and, due to our abandonment by its management, lost our Nevada corporate charter in 2006 for failure to file an annual officer s and director s list with the Secretary of the State of Nevada. On November 1, 2006, our corporate charter was revoked by the Nevada Secretary of State. Subsequently, our resident agent in Nevada resigned for non-payment of fees. On May 8, 2007, the Nevada Court entered a default judgment, appointing a custodian under NRS 78.347(2). On May 9, 2007, the custodian appointed a temporary officer and director, and our charter was restored on May 9, 2007. On May 18, 2007, Dr. Jack Gregory was appointed as Chief Executive Officer and Director and Jasmine Gregory was appointed as Chief Financial Officer, Secretary and Director, and the temporary officer and director resigned. Nevada Discount Registered Agent, Inc. 1855 Wellington East Carson City, NC 89703 775-782-6585 (Name, address, including zip code, and telephone number, including area code, of agent for service) On September 11, 2008, our registration under the Securities and Exchange Act of 1934 was revoked pursuant to Section 12 (j) of the Act for failure to file periodic reports as required by Section 12(g) of the Act and trading of our common stock on the pink sheets was suspended. We re-registered our stock under the Act and, after successfully filing a 15C-211, have once again obtained a quotation of our common stock. The Company stock is now quoted on the over-the-counter bulletin board under the trading symbol, PRHL. Business Summary We sell caskets through a commissioned sales force from our warehouse/showroom at 27525 Avenue 146, Suite C, Porterville, California, under the fictitious business name Premier Commonwealth, a division of Premier Holding Corporation. The sales office telephone number at the showroom is 559-788-1022. Our goal is to become the AVON of the casket industry. The first shipment of caskets included 64 units in 5 different styles and colors all priced at $950 each. The caskets can be viewed at the Corporate web-site www.premierholdingcorporation.com. Adjustments to the Company business plan will be made, as needed, prior to any expansion. Additional products such as urns or other styles and colors of caskets will be added as demand dictates. We are in the development stage, have not earned any revenues and have reported operating losses in each of the periods in which our financial statements have been presented. Our auditors have included a paragraph in their audit reports in the filing that there exists substantial doubt as to our ability to continue as a going concern. Corporate Information We are headquartered in California. Our principal executive offices are located at 4705 West Addisyn Court, Visalia, California 93291, and our telephone number at this location is 559-732-8177. Our website address is www.premierholdingcorporation.com. Information contained on our website is not incorporated by reference into this prospectus and you should not consider information on our website to be part of this prospectus. Risks Affecting Us Our business is subject to a number of risks and uncertainties that you should understand before making an investment decision. These risks are discussed more fully in the section entitled Risk Factors following this prospectus summary. These include: We are a relatively young company with no operating history. We expect to incur net losses in future quarters. We will need to raise funds to operate in accordance with our business plan. If we need additional funds, we may seek to obtain them primarily through equity or debt financings. Such additional financing, if available on terms and schedules acceptable to us, if available at all, could result in dilution to our current stockholders and to you. Our management has no experience in the casket business, which may affect our ability to operate successfully. Our directors and executive officers beneficially own a substantial amount of our common stock. We do not expect to pay dividends for the foreseeable future. There is substantial doubt about our ability to continue as a going concern, which means that we may not be able to continue operations unless we obtain funding. Copies to: Kenneth Eade Counsel 6399 Wilshire Blvd., Suite 507 Los Angeles, CA 90048 (323) 782-8802 Our common stock may be affected by limited trading volume and may fluctuate significantly. Our board of directors has the ability to exercise significant influence over matters submitted for stockholder approval and their interests may differ from other stockholders
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001042784_golden_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001042784_golden_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..385d48a6850a665ff6c61e45769d96932b34530a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001042784_golden_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Business We are a mineral exploration, development and production company, formed in 1997, and reincorporated in the State of Nevada as of May 30, 2008. Our principal executive offices are located at 1675 East Prater Way, Suite 102, Sparks, Nevada 89434. Our telephone number is (775) 853-4919 and the address for our website can be found at www.golden-phoenix.com. Information on our website is not part of this prospectus. Our business includes acquiring and consolidating mineral properties with potential production and future growth through exploration discoveries. Acquisition emphasis is focused on properties containing gold, silver, molybdenum and other strategic minerals that present low political and financial risk and exceptional upside potential located in North, Central and South America. Our primary mining property interests and assets include the following: a 30% joint venture interest on the Mineral Ridge gold and silver property near Silver Peak, Nevada, with Scorpio Gold; 100% ownership of both the Adams Mine and Duff Claim Block near Denio, Nevada, and the Northern Champion molybdenum mine in Ontario, Canada; an agreement to purchase an 80% interest in the Vanderbilt silver and gold project and an option to acquire an 80% interest in the Coyote Fault gold and silver project, both of which are adjacent to the Mineral Ridge gold and silver property near Silver Peak, Nevada. Further, we have entered into a Mining Asset Purchase and Alliance Agreement to acquire an 80% interest in five gold and molybdenum properties in Peru; two on the Pataz Gold Trend in the north and three in the Porvenir area in the south. We have also recently acquired a Canadian-based company with a 100% interest in four gold and base metal properties in the Shining Tree Mining District in Ontario, Canada. The Offering On May 26, 2011, we executed a Purchase Agreement and a Registration Rights Agreement with Lincoln Park Capital Fund, LLC ( LPC ), pursuant to which LPC has purchased 3,333,333 shares of our common stock together with warrants to purchase 3,333,333 shares of our common stock at an exercise price of $0.20 per share, for total consideration of $500,000. The warrants have a term of two years. Under the Purchase Agreement, we also have the right to sell to LPC up to an additional $12,000,000 of our common stock at our option as described below. Pursuant to the Registration Rights Agreement, we are filing this registration statement and prospectus with the Securities and Exchange Commission (the SEC ) covering shares that have been issued or may be issued to LPC under the Purchase Agreement. We do not have the right to commence any additional sales of our shares to LPC until the SEC has declared effective the registration statement of which this Prospectus is a part. After the registration statement is declared effective, over approximately 36 months, generally we have the right to direct LPC to purchase up to an additional $12,000,000 of our common stock in amounts from $60,000 and up to $500,000 as accelerated purchases as often as every two business days under certain conditions. No sales of shares may occur below $0.10 per share. There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to LPC. The purchase price of the shares will be based on the market prices of our shares immediately preceding the time of sale as computed under the Purchase Agreement without any fixed discount. We may at any time in our sole discretion terminate the Purchase Agreement without fee, penalty or cost upon one business day notice. We issued 1,543,210 shares of our common stock to LPC as a commitment fee for entering into the agreement, and we may issue up to 1,543,210 shares pro rata as LPC purchases up to the additional $12,000,000 of our common stock as directed by us. LPC may not assign or transfer its rights and obligations under the Purchase Agreement. As of June 15, 2011, there were 284,803,286 shares outstanding (274,120,992 shares held by non-affiliates) excluding the 4,876,543 shares that we have already issued and are offered by LPC pursuant to this Prospectus. 51,419,753 shares are offered hereby consisting of 3,333,333 shares together with 3,333,333 shares underlying a warrant, which are included in this offering, that we have sold to LPC for $500,000, 1,543,210 shares that we issued as a commitment fee and 43,209,877 shares, of which 1,543,210 shares that we may issue pro rata as up to the additional $12,000,000 of our stock is purchased by LPC, the remainder representing shares we may sell to LPC under the Purchase Agreement. If all of the 51,419,753 shares offered by LPC hereby were issued and outstanding as of the date hereof, such shares would represent 15.3% of the total common stock outstanding or 15.8% of the non-affiliates shares outstanding, as adjusted, as of the date hereof. The number of shares ultimately offered for sale by LPC is dependent upon the number of shares that we sell to LPC under the Purchase Agreement. If we elect to issue more than the 51,419,753 shares offered under this prospectus, which we have the right but not the obligation to do, we must first register under the Securities Act any additional shares we may elect to sell to LPC before we can sell such additional shares. Securities Offered Common stock to be offered by the selling stockholder 51,419,753 shares consisting of: 3,333,333 purchase shares issued; 3,333,333 shares underlying a warrant; 1,543,210 initial commitment shares issued to LPC; 1,543,210 shares that we are required to issue proportionally in the future, as a commitment fee, if and when we sell additional shares to LPC under the Purchase Agreement; and The remainder represent shares we may sell to LPC under the Purchase Agreement. Common stock outstanding prior to this offering 284,803,286 shares (excluding the 4,876,543 shares that we have already issued to LPC offered hereunder) Common stock to be outstanding after giving effect to the issuance of 51,419,753 shares under the Purchase Agreement 336,223,039 shares Use of Proceeds We will receive no proceeds from the sale of shares of common stock by LPC in this offering. However, we may receive up to an additional $12,000,000 under the Purchase Agreement with LPC, plus additional proceeds of $666,666 in the event LPC exercises their warrants for cash. Any proceeds that we receive from sales to LPC under the Purchase Agreement will be used for general working capital purposes. See Use of Proceeds. Risk factors This investment involves a high degree of risk. See Risk Factors for a discussion of factors you should consider carefully before making an investment decision. Symbol on Over-the-Counter Bulletin Board Market GPXM
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001045829_vanguard_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001045829_vanguard_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001045829_vanguard_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001062273_spendsmart_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001062273_spendsmart_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..398ae43fddc85250fb43d79b06242b2aada172bb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001062273_spendsmart_prospectus_summary.txt
@@ -0,0 +1,2514 @@
+PROSPECTUS SUMMARY
+
+1
+
+RISK FACTORS
+
+4
+
+SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
+
+8
+
+USE OF PROCEEDS
+
+8
+
+PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND INFORMATION
+
+9
+
+BUSINESS
+
+11
+
+MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF 
+
+OPERATIONS 
+
+14
+
+MANAGEMENT
+
+20
+
+SELLING STOCKHOLDERS
+
+22
+
+PLAN OF DISTRIBUTION
+
+25
+
+EXECUTIVE COMPENSATION AND OTHER INFORMATION
+
+27
+
+CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
+
+32
+
+SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
+
+33
+
+DESCRIPTION OF CAPITAL STOCK
+
+34
+
+DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILIES
+
+35
+
+LEGAL MATTERS
+
+36
+
+INTEREST OF NAMED EXPERTS AND COUNSEL
+
+36
+
+WHERE YOU CAN FIND MORE INFORMATION
+
+36
+
+INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
+
+F-1
+
+You should rely only on the information that we have provided in this prospectus. We have not authorized anyone to provide you with different information and you must not rely on any unauthorized information or representation. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. This document may only be used where it is legal to sell these securities. You should assume that the information appearing in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus, or any sale of our common stock. Our business, financial condition and results of operations may have changed since the date on the front of this prospectus. We urge you to read carefully this prospectus before deciding whether to invest in any of the common stock being offered.
+
+PROSPECTUS SUMMARY
+
+The following summary highlights material contained in this prospectus. This summary does not contain all the information you should consider before investing in our securities. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements that appear elsewhere in this prospectus.
+
+ 
+
+Business Overview
+
+Our Company BillMyParents, Inc. (formerly known as Socialwise, Inc.) operates under our operating subsidiary incorporated in California, ( BillMyParents-CA ). We develop and market innovative online and traditional retail youth payment solutions. 
+
+We intend to capitalize on the opportunity to facilitate youth commerce through the offering of our online and traditional retail payment platform, BillMyParents ( BMP ). BMP is designed to enable parents and young people to collaborate toward the goal of responsible spending. BMP has two major components. In collaboration with online retailers, we have developed a payment method that allows retailers to make sales to young people who previously lacked a means to pay for products online. We also market a prepaid debit card with special features aimed at young consumers. 
+
+Going forward, we plan to continue to market BMP to the public as a convenient and safe youth payment system. While we are optimistic about the prospects for BMP, since this is a relatively new product offering without material revenues to date, there can be no assurance about whether or when BMP will turn out to be a successful product that will generate sufficient revenues with adequate margins to fund our operations in the future. Significant future revenues will be dependent upon our success in convincing consumers that our payment solutions for young people represent a compelling value which further leads them to open BMP prepaid debit card accounts. 
+
+Our principal executive offices are located at 6440 Lusk Blvd., Suite 200, San Diego, California, 92121. Our telephone number is (858) 677-0080. We maintain a corporate website at www.socialwise.com. Information found on our website is not part of this prospectus.
+
+Shares included in this Prospectus
+
+This prospectus is part of a registration statement of BillMyParents, Inc. filed with the Securities and Exchange Commission. This prospectus relates solely to the offer and sale by the selling stockholders identified in this prospectus of up to 16,846,060 shares. The shares offered in this prospectus include:
+
+ 
+
+8,639,000 shares of common stock sold on November 16, 2010; and
+
+ 
+
+8,207,060 shares of common stock, issuable upon the exercise of outstanding warrants to purchase common stock that were issued in connection with the sale of our unregistered common stock on November 16, 2010.
+
+The shares and shares underlying the outstanding warrants being registered were issued to the selling stockholders in connection with a private placement transaction that closed on November 16, 2010 (either sold directly or issued in compensation for their role as a placement agent) that was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the Act ) and/or Rule 506 of Regulation D under the Securities Act. We will not receive any of the proceeds from the sale of the shares of our common stock by the selling stockholders. We would receive proceeds from the exercise of the warrants and issuance of the underlying shares of our common stock totaling $4,549,236 upon their exercise, however there can be no assurance that the holders of the warrants will exercise their option to purchase the shares or what quantity of shares they will purchase in connection with the outstanding warrants. 
+
+Recent Transactions
+
+From November 20, 2008 through December 19, 2008, we entered into subscription agreements with nine accredited investors pursuant to which we issued 2,034,375 shares of our common stock and warrants to purchase an additional 508,594 shares of our common stock at an exercise price of $1.00 per share for a period of two years after their date of issuance, in exchange for gross proceeds totaling $1,627,500 ($1,507,500 net of cash expenses totaling $120,000). SPN Investments, Inc. ( SPN ) acted as a Finder in connection with the transaction and directed the payment of fees earned in connection with the funds raised totaling $162,750 to three recipients who assisted in the fund raising. The fees were paid in cash ($120,000) and equity of our Company. The equity portion of the Finder fee compensation consisted of 53,438 shares of our unregistered common stock and two year warrants to 
+
+1
+
+purchase an additional 13,360 shares of our common stock at an exercise price of $1.00 per share. As further consideration for its services related to the sale of our common stock, our Company issued an additional 162,750 shares to SPN.
+
+From July 1, 2009 through September 30, 2009, we entered into subscription agreements with 24 accredited investors pursuant to which we issued 735,000 shares of our common stock and warrants to purchase an additional 183,750 shares of our common stock with an exercise price of $1.00 per share for a period of two years after their date of issuance, in exchange for gross proceeds totaling $367,500 ($330,750 net of cash commissions paid to two designees of SPN totaling $36,750). As further consideration for its services related to the sale of our common stock, our Company issued an additional 36,750 shares to SPN.
+
+During the year ended September 30, 2010, we entered into subscription agreements with 79 accredited investors pursuant to which we issued 6,522,075 shares of our common stock and warrants to purchase an additional 4,846,556 shares of our common stock with an exercise price of $0.60 per share for a period of two years after their date of issuance, in exchange for gross proceeds totaling $2,617,830 ($2,384,751 net of expected expenses totaling $233,079). SPN, Kay Holding, Inc. ( Kay ) and Equity Source Partners, LLC ( ESP ) assisted our Company in connection with the transactions and they and their designees earned the fees and commissions therewith.
+
+During the three months ended December 31, 2010, we entered into subscription agreements with 46 accredited investors pursuant to which we issued 8,905,875 shares of our common stock and warrants to purchase an additional 4,804,406 shares of our common stock with an exercise price of $0.60 per share for periods of two to five years after the date of their issuance and warrants to purchase an additional 1,875,000 shares of our common stock with an exercise price of $0.40 per share for five years after their date of issuance, in exchange for gross proceeds totaling $3,562,350 ($3,114,754 net of cash commissions and related expenses totaling $447,596). We also issued warrants to purchase a total of 1,727,810 and 300,000 shares of our common stock with exercise prices of $0.60 per share to Maxim Group LLC ( Maxim ) and ESP who assisted us in connection with the transaction. 
+
+On November 24, 2010, we received notice from the holder of a convertible note payable issued in August 2010 (Mr. Isaac Blech a major shareholder and member of our Board of Directors since March 2011) with an outstanding principal balance of $1 million (unaccreted face value of $818,648 at September 30, 2010) of his election to convert the note into 2,500,000 shares of the Company s common stock at a price of $0.40 per share. At conversion as provided in the Convertible Note Purchase Agreement, Mr. Blech was issued a warrant to purchase up to an additional 1,250,000 shares of our Company s restricted common stock at an exercise price of $0.40 per share. In addition, our Company agreed to issue the Mr. Blech a warrant to purchase 62,500 shares of common stock at an exercise price of $0.40 per share to reflect the interest due to the Mr. Blech under the terms of the Note from inception to its scheduled maturity on February 13, 2011. We paid additional fees to Maxim in connection with the conversion that included cash of $50,000 and five-year warrants to purchase up to 250,000 shares of our Company s common stock at $0.60 per share. We also issued a five year warrant to purchase up to 350,000 shares of our common stock for $0.60 per share to ESP.
+
+On January 19, 2011, we entered into subscription agreement with a trust controlled by Mr. Blech pursuant to which we issued 5,000,000 shares of our common stock and a five-year warrant to purchase an additional 3,750,000 shares of our common stock with an exercise price of $0.40 per share, in exchange for gross proceeds totaling $2,000,000 ($1,785,000 net of estimated cash commissions and related expenses totaling $215,000). In connection with the transaction, Maxim received a commission in cash totaling $200,000 and a warrant to purchase 750,000 shares of our common stock with an exercise price of $0.60 per share. ESP was also granted a five-year warrant to purchase 250,000 shares of our common stock with an exercise price of $0.60 per share. 
+
+On May 20, 2011, we entered into a subscription agreement and common stock purchase warrant with two trusts controlled by Mr. Blech pursuant to which we issued a total of 12,500,000 shares of our common stock, and five year warrants to purchase up to an additional 12,500,000 shares of our common stock at an exercise price of $0.40 per share, in exchange for gross proceeds totaling $5,000,000. Maxim acted as the Placement Agent in connection with the offering and received cash proceeds totaling $500,000 and five-year warrants to purchase up to 1,250,000 shares of Common Stock at an exercise price of $0.60 per share as compensation. ESP (and its designees) received cash proceeds totaling $50,000 and five-year warrants to purchase up to 600,000 shares of common stock at an exercise price of $0.60 per share as compensation.
+
+A more detailed description of these and other recent transactions is also set forth within this Prospectus under the section entitled Company History .
+
+2
+
+The Offering
+
+Shares of our common stock offered for re-sale by the selling stockholders pursuant to this prospectus
+
+16,846,060 shares(1)
+
+ 
+ 
+
+Percent of our outstanding common stock represented by the shares being offered for re-sale by the selling stockholders as of July 27, 2011
+
+20.1% (3)
+
+ 
+ 
+
+Common stock to be outstanding after the offering
+
+92,165,452 shares (2)
+
+ 
+
+ 
+
+Proceeds to the Company
+
+Net proceeds from the exercise of the warrants to purchase shares of our common stock covered by this prospectus (should all the warrants be exercised) would total $3,693,177.
+
+ 
+ 
+
+The total dollar value of the shares of our common stock being registered for resale
+
+ $7,580,727 (4)
+
+ 
+
+ 
+
+Stock Symbol
+
+BMPI
+
+(1)
+
+Shares from the November 16, 2010 sale of 8,639,000 restricted shares of common stock and warrants to purchase 6,479,250 restricted shares of common stock to 37 investors along with warrants to purchase 1,727,810 shares of common stock granted to the placement agent Maxim Group, LLC in connection with the November 16, 2010 funding. 
+
+(2)
+
+Assumes exercise of all the warrants for shares of our common stock subject to this offering. Unless the context indicates otherwise, all share and per-share information in this prospectus is based on 83,958,392 shares of our common stock outstanding as of July 27, 2011 and assumes no exercise of options or warrants, conversions of convertible preferred stock or other rights to acquire our common stock outstanding as of July 27, 2011.
+
+(3)
+
+Determined by dividing the number of shares of common stock offered for re-sale by the number of shares outstanding as of July 27, 2011 (83,958,392).
+
+(4)
+
+Determined by multiplying the number of shares of common stock being registered by the market price for such shares of common stock on July 27, 2011 (closing price of $0.45 per share).
+
+ 
+
+3
+
+RISK FACTORS
+
+Investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this herein before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.
+
+ 
+
+Risks Related to Our Business
+
+We have a very limited operating history overall and have only recently embarked on our current corporate focus of providing online payment solutions. We completed our acquisition of BillMyParents-CA on October 16, 2007. BillMyParents-CA was formed in April 2007 to pursue opportunities in the gift card industry. We have since refocused our efforts on facilitating commerce for young consumers. We do not currently have significant operating revenues and have a very limited operating history. We do not have any historical financial data upon which to base planned operations. Because we have no operating history, our historical financial information is not a reliable indicator of future performance. Therefore, it is difficult to evaluate the business and prospects of our Company. Furthermore, we only recently embarked on a revised business focus centered on BMP. We have no experience as to whether BMP will be popular programs with consumers. Failure to correctly evaluate our Company s prospects could result in an investor s loss of a significant portion or all of his investment in our Company. 
+
+Our failure to obtain additional adequate financing would materially and adversely affect our business. We do not currently have sufficient revenues and gross margin to cover our operating expenses and have never been profitable. We cannot be certain that our Company will ever generate sufficient revenues and gross margin to achieve profitability in the future. Our failure to significantly increase revenues or to raise additional adequate and necessary financing would seriously harm our business and operating results. We have incurred significant costs in building, launching and marketing BMP. If we fail to achieve sufficient revenues and gross margin with BMP, or our revenues grow more slowly than anticipated, or if our operating or capital expenses increase more than is expected or cannot be reduced in the event of lower revenues, our business will be materially and adversely affected and an investor could suffer the loss of a significant portion or all of his investment in our Company. 
+
+We face competition from other online payment systems. We will face competition from other companies with similar product offerings. Many of these companies have longer operating histories, greater name recognition and substantially greater financial, technical and marketing resources than us. Many of these companies also have more extensive customer bases, broader customer relationships and broader industry alliances than us, including relationships with many of our potential customers. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support the cost of our operations.
+
+We have limited resources to develop our product offerings. We face a challenging capital market at the same time that our Company has required funding for the development and marketing of our product offerings. This has caused and will likely continue to cause us to restrict funding of the development of our products and to favor the development of one product offering over the other based on their relative estimated potentials for commercial success as evaluated by our management. Our current focus is on BMP. The failure of BMP to be commercially successful would substantially harm our business and results of operations. Furthermore, in the future we may determine that it is in the best interest of our Company to severely curtail, license, jointly develop with a third party or sell one of our product offerings, which may be on terms which limit the revenue potential of the product offering to the Company.
+
+We rely on third-party suppliers and distributors that are specific to our business and distribution channels such as processors, programmers, social networks and security advisors. We will be dependent on other companies to provide necessary products and services in connection with key elements of our business. Any interruption in our ability to obtain these services, or comparable quality replacements would severely harm our business and results of operations. Our current business model includes our plan to incorporate BMP within existing social networks. We will be dependent on these social networks to allow our product offerings to run within their proprietary Internet websites. Permission for our applications to run on social networks is revocable at any time at the discretion of the social networks. Should any of these adverse contingencies result, they could substantially harm our business and results of operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.
+
+Our ability to protect our intellectual property and proprietary technology surrounding BMP is uncertain. Our future success may depend significantly on our ability to protect our proprietary rights to the intellectual property upon which our products and services will be based. Our pending U.S. patent application, which includes claims to material aspects of our products and services that are not currently protected by issued patents, may not be issued as patents in a form that will be advantageous to us. Any patents we obtain in the future may be challenged by re-examination or otherwise invalidated or eventually be found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt to challenge or invalidate our patents, or may be able to design alternative techniques or devices that avoid infringement 
+
+4
+
+of our patents, or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.
+
+We are dependent upon consumer tastes with respect to preferred methods of online payment for the success of our products and services. Our product offerings acceptance by consumers and their consequent generation of revenues will depend upon a variety of unpredictable factors, including:
+
+ 
+
+Public taste, which is always subject to change;
+
+ 
+
+The quantity and popularity of other payment systems available to the public;
+
+ 
+
+The continued use and popularity of social networking sites; and
+
+ 
+
+The fact that the distribution and sales methods chosen for the products and services we market may be ineffective.
+
+For any of these reasons, our programs may be commercially unsuccessful. If we are unable to market products which are commercially successful, we may not be able to recoup our expenses and/or generate sufficient revenues. In the event that we are unable to generate sufficient revenues, we may not be able to continue operating as a viable business and an investor could suffer the loss of a significant portion or all of his investment in our Company.
+
+Our Company is economically sensitive to general economic conditions, including continued weakening of the economy; therefore a reduction in consumer purchases of discretionary items could consequently materially impact our Company s future revenues from BMP for the worse. Consumer purchases are subject to cyclical variations, recessions in the general economy and the future economic outlook. Our results may be dependent on a number of factors impacting consumer spending, including general economic and business conditions; consumer confidence; wages and employment levels; the housing market; consumer debt levels; availability of consumer credit; credit and interest rates; fuel and energy costs; energy shortages; taxes; general political conditions, both domestic and abroad; and the level of customer traffic on social networking websites. Consumer purchases of discretionary items may decline during recessionary periods and at other times when disposable income is lower. A downturn or an uncertain outlook in the economy may materially adversely affect our business and the success of BMP. 
+
+Financial Risks
+
+Our financial statements have been prepared assuming that the Company will continue as a going concern. The factors described herein raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent registered public accounting firm included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern in their audit report for the fiscal years ended September 30, 2010 and 2009. If we cannot generate the required revenues and gross margin to achieve profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations and an investor could suffer the loss of a significant portion or all of his investment in our Company. 
+
+We do not expect to pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit. We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.
+
+Newly effective accounting rules will continue to cause an unfavorable change to the accounting for our financial position. Beginning with our fiscal year ended September 30, 2010, we were required to account for certain of our issued warrants as derivative liabilities. This accounting was occasioned due to the anti-dilution provisions of the securities which would reduce their future exercise or conversion price in the event our Company in the future either issues equity shares for a price that is lower than the exercise price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price (such an actual reduction of certain of our warrants outstanding and their strike price occurred in October 2009 and August 2010). In the future, our preferred stock and certain of our warrants outstanding will be marked to market at each future reporting period until such time (if ever) that they are converted, cancelled, expire or are exercised for shares of our common stock. Additionally, since not all of our outstanding securities have these anti-dilution provisions, holders of such securities lacking anti-dilution provisions could be 
+
+5
+
+disadvantaged vis- -vis securities outstanding with such features, in the event of a future issuance by our Company of securities for consideration that trigger the anti-dilution provisions. An investor could suffer the loss of a portion or the whole value of their securities in the event of a significant adjustment occasioned by such a future issuance of our Company s securities. 
+
+Our net operating loss carry-forward is limited. We have recorded a valuation allowance amounting to our entire net deferred tax asset balance due to our lack of a history of earnings, possible statutory limitations on the use of tax loss carry-forwards generated in the past and the future expiration of our NOL. This gives rise to uncertainty as to whether the net deferred tax asset is realizable. Internal Revenue Code Section 382, and similar California rules, place a limitation on the amount of taxable income that can be offset by carry-forwards after a change in control (generally greater than a 50% change in ownership). As a result of these provisions, it is likely that given our acquisition of BillMyParents-CA, future utilization of the NOL will be severely limited. Our inability to use our Company s historical NOL, or the full amount of the NOL, would limit our ability to offset any future tax liabilities with its NOL. 
+
+Corporate and Other Risks
+
+Limitations on director and officer liability and indemnification of our Company s officers and directors by us may discourage stockholders from bringing suit against an officer or director. Our Company s articles of incorporation and bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director.
+
+We are responsible for the indemnification of our officers and directors. Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
+
+Our executive officers, directors and insider stockholders beneficially own or control a substantial portion of our outstanding common stock, which may limit your ability and the ability of our other stockholders, whether acting alone or together, to propose or direct the management or overall direction of our Company. Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his shares. A substantial portion of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our directors and executive officers. Accordingly, any of our existing outside principal stockholders together with our directors, executive officers and insider shareholders would have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.
+
+We are dependent for our success on a few key employees. Our inability to retain those employees would impede our business plan and growth strategies, which would have a negative impact on our business and the value of your investment. Our success depends on the skills, experience and performance of key members of our Company. Each of those individuals may voluntarily terminate his employment with the Company at any time. Were we to lose one or more of these key employees, we would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion of limited working capital. We do not maintain a key man insurance policy on any of our key employees.
+
+As we transition from a Company with insignificant revenues to what we hope will be a Company generating substantial revenues, we may not be able to manage our growth effectively, which could adversely affect our operations and financial performance. The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial 
+
+6
+
+performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.
+
+Capital Market Risks
+
+Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares. There is limited market activity in our stock and we are too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. While we are trading on OTC Markets, the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Bulletin Board stocks because they are considered speculative, volatile, thinly traded and the market price of the common stock may not accurately reflect the underlying value of our Company. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including short sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.
+
+The application of the penny stock rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares. As long as the trading price of our common stock is below $5 per share, the open-market trading of our common stock will be subject to the penny stock rules, unless we otherwise qualify for an exemption from the penny stock definition. The penny stock rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that, according to Securities and Exchange Commission ( SEC ) Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.
+
+We may not be able to attract the attention of major brokerage firms, which could have a material adverse impact on the market value of our common stock. Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.
+
+We may be unable to list our common stock on NASDAQ or on any securities exchange. Although we may apply to list our common stock on NASDAQ or the NYSE Amex in the future, we cannot assure you that we will be able to meet the initial listing standards, including the minimum per share price and minimum capitalization requirements, or that we will be able to maintain a listing of our common stock on either of those or any other trading venue. Until such time as we qualify for listing on NASDAQ, the NYSE Amex or another trading venue, our common stock will continue to trade on OTC Markets or another over-the-counter quotation system, or on the pink sheets, where an investor may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, rules promulgated by the SEC impose various practice requirements on broker-dealers who sell securities that fail to meet certain criteria set forth in those rules to persons other than established customers and accredited investors. Consequently, these rules may deter broker-dealers from recommending or selling our 
+
+7
+
+common stock, which may further affect the liquidity of our common stock. It would also make it more difficult for us to raise additional capital.
+
+Future sales of our equity securities could put downward selling pressure on our securities, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.
+
+SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
+
+This prospectus includes forward-looking statements. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words "believe," "expect," "will," "anticipate," "intend," "estimate," "project," "plan," "assume" or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words. All statements contained or incorporated by reference in this prospectus regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, the future of our industries and results that might be obtained by pursuing management's current plans and objectives are forward-looking statements.
+
+You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on the cover of this prospectus, or, in the case of forward-looking statements in documents incorporated by reference, as of the date of the date of the filing of the document that includes the statement. New risks and uncertainties arise from time to time, and it is impossible for us to predict these matters or how they may affect us. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our security holders. Except with respect to our obligation to provide amendments for material changes to the Prospectus during the duration of the offer and sale of our common stock by the selling stockholders, we do not undertake and specifically decline any obligation to update any forward-looking statements or to publicly announce the results of any revisions to any statements to reflect new information or future events or developments.
+
+We have identified some of the important factors that could cause future events to differ from our current expectations and they are described in this prospectus under the caption "Risk Factors," above, and elsewhere in this prospectus which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this prospectus.
+
+USE OF PROCEEDS
+
+This prospectus covers 16,846,060 shares of our common stock, which may be sold from time to time by the selling stockholders. Should the holders of the warrants exercise all of their options to purchase shares of our common stock, the cash proceeds to be received by the Company would total $3,693,177, although there can be no assurance that the warrant holders will exercise all or any of their warrants. Any proceeds will be used by the Company for working capital and general corporate purposes. 
+
+DETERMINATION OF OFFERING PRICE
+
+The selling stockholders may offer and sell the shares of common stock covered by this prospectus at prevailing market prices or privately negotiated prices. See "Plan of Distribution."
+
+PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND INFORMATION
+
+Our Company is a fully reporting public company (a public company that is fully subject to the Securities and Exchange Commission s reporting requirements). Commencing June 13, 2011, our common stock trades publicly on the OTC Bulletin Board under the symbol "BMPI" (we previously traded under the symbol SCLW ). The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. The OTC Bulletin Board securities are traded by a community of market makers that enter quotes and trade reports. Our stock is also quoted on the OTCQB. OTCQB displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. This market is extremely limited and any prices quoted may not be a reliable indication of the value of our common stock.
+
+The following table sets forth the high and low bid prices per share of our common stock for the periods indicated.
+
+8
+
+For the year ended September 30, 2011
+
+High
+
+Low
+
+Third Quarter
+
+$0.51
+
+$0.39
+
+Second Quarter
+
+$0.55
+
+$0.40
+
+First Quarter
+
+$0.62
+
+$0.46
+
+ 
+ 
+ 
+
+For the year ended September 30, 2010
+
+High
+
+Low
+
+Fourth Quarter
+
+$0.60
+
+$0.44
+
+Third Quarter
+
+$0.75
+
+$0.45
+
+Second Quarter
+
+$0.62
+
+$0.43
+
+First Quarter
+
+$0.61
+
+$0.41
+
+ 
+ 
+ 
+
+For the year ended September 30, 2009
+
+High
+
+Low
+
+Fourth Quarter
+
+$0.80
+
+$0.49
+
+Third Quarter
+
+$1.01
+
+$0.30
+
+Second Quarter
+
+$0.84
+
+$0.35
+
+First Quarter
+
+$2.34
+
+$0.83
+
+The prices in the table above have been adjusted for both the 25-to-1 reverse stock split which was effective as of October 16, 2007 and our 3-for-1 forward stock split effective March 12, 2008. Our stock began trading on the OTC Bulletin Board under the symbol IDED on October 18, 2007, after March 12, 2008 traded under the symbol IDAE, after May 13, 2009 traded under the symbol SCLW and traded under our current symbol BMPI on June 13, 2011. Prior to October 18, 2007, our stock traded on the OTC under its previous symbol VOSI . The quotes represent inter-dealer prices, without adjustment for retail mark-up, markdown or commission and may not represent actual transactions. The trading volume of our securities fluctuates and may be limited during certain periods. As a result of these volume fluctuations, the liquidity of an investment in our securities may be adversely affected.
+
+Holders of Record
+
+As of July 28, 2011, 83,958,392 shares of our common stock were issued and outstanding, and held by approximately 1,500 stockholders of record.
+
+Transfer Agent
+
+Our transfer agent is TranShare Corporation, 4626 South Broadway, Englewood, CO 80113, Telephone (303) 662-1112.
+
+Dividends
+
+We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors.
+
+Securities Authorized for Issuance under Equity Compensation Plans
+
+Effective October 16, 2007, our Company adopted the 2007 Equity Incentive Plan which is the only compensation plan under which our common stock is authorized for issuance, and the 2007 Equity Incentive Plan has been approved by our stockholders. The table below sets forth information as of July 27, 2011 with respect to the 2007 Equity Incentive Plan:
+
+Number of securities to be issued upon exercise of outstanding options
+
+Weighted-average exercise price of outstanding options
+
+Number of securities remaining available for future issuance under equity compensation plans(1)
+
+4,165,000
+
+$0.49
+
+835,000
+
+(1)
+
+Subject to shareholder approval of amendment to the plan approved by our Board of Directors to increase the number of authorized shares of stock issuable under the Plan.
+
+9
+
+BUSINESS
+
+History
+
+Our Company was originally incorporated in the State of Colorado on May 14, 1990 as Snow Eagle Investments, Inc. and was inactive from 1990 until 1997. In April 1997, the Company acquired the assets of 1st Net Technologies, LLC, a California limited liability company, and the Company changed its name to 1st Net Technologies, Inc. and operated as an Internet commerce and services business. In August 2001, the Company suspended its operations. In September of 2005, the Company acquired VOS Systems, Inc. (the VOS Subsidiary ) as its wholly owned subsidiary and the Company changed its name to VOS International, Inc. and traded under the symbol VOSI.OB . The VOS Subsidiary operated as a technology company involved in the design, development, manufacturing, and marketing of consumer electronic products. 
+
+On October 16, 2007, we sold the VOS Subsidiary and acquired BillMyParents-CA. Through BillMyParents-CA, we develop and market innovative online and traditional retail youth payment solutions. On May 1, 2009, our Company changed our name from IdeaEdge, Inc. to Socialwise, Inc., and our stock traded under the symbol SCLW.OB . On May 25, 2011, we changed our name to BillMyParents, Inc. and beginning June 13, 2011, our stock trades under the symbol BMPI.OB. 
+
+Current Business
+
+We intend to capitalize on the opportunity to facilitate youth commerce through the offering of our online and traditional retail payment platform, BillMyParents ( BMP ). BMP is designed to enable parents and young people to collaborate toward the goal of responsible spending. BMP has two major components. In collaboration with online retailers, we have developed a payment method that allows retailers to make sales to young people who previously lacked a means to pay for products online. We also market a prepaid debit card with special features aimed at young consumers. 
+
+Going forward, we plan to continue to market BMP to the public as a convenient and safe youth payment system. While we are optimistic about the prospects for BMP, since this is a new product offering without material revenues to date, there can be no assurance about whether or when BMP will turn out to be a successful product that will generate sufficient revenues with adequate margins to fund our operations in the future.
+
+Market Overview and Business Model
+
+We believe there is a compelling opportunity available to our Company to provide needed solutions to significant impediments to online and traditional retail commerce for young people. BMP is designed to address both areas through distinctive products we offer.
+
+Online Commerce Solution
+
+According to the 2007 Harris Interactive Youth Pulse Market Research Report, there are in excess of $40 billion dollars in annual Internet sales that young people research online but end up either not purchasing or purchasing from other sources. The number one reason cited for this failure of young people to complete these sales transactions was their lack of a payment means. The substantial majority of online transactions are completed through the use of credit cards, while the overwhelming majority of young people do not have the ability to pay for online purchases this way. Use of parents credit cards is problematic due to their justified reluctance (for security reasons) to giving their children their credit card information. Also, young people and their parents are seldom in the same physical location when an online sales opportunity arises. 
+
+We believe the BMP online commerce solution will provide a unique solution in order to facilitate these previously lost sales. With one click and the young person s provision of two email addresses and a short message, the parent receives a request for payment from the child. The parent has the option to accept, deny or request more information about the transaction. Upon acceptance, the parent provides information on a simple check screen in order to complete the transaction. BMP transactions can be processed either by Socialwise (where we process the purchase through our credit card processing company) or by the participating merchant (in which case we integrate our system with the merchant s online payment systems). For transactions that we process, we charge a modest fee on a per transaction basis (typically paid by the consumer) and a percentage of the sale amount (paid by the merchant). We believe that our current and planned per-transaction fees are market competitive and provide consumers with superior value in that BMP allows for security and safety online. We also believe that the percentage transaction fees are competitive with the market for other payment options available to merchants and provide them with a method to capture previously foregone youth sales opportunities. 
+
+10
+
+Traditional Retail Solution
+
+Prepaid reloadable debit cards ( BMP Cards ) are similar to debit cards, without the need of a bank account. We believe this represents another wide-open market that meshes well with our focus on youth financial solutions. BMP Cards offer significant advantages over cash and/or the use by young people of their parent s or guardian s credit or debit card. For a comparatively small cost, BMP Cards offer what we believe are compelling features for young people and adults alike. Included among the features of our BMP Cards is:
+
+ 
+
+No credit implications from the use of the cards for either young people or adults;
+
+ 
+
+No overdrafts or related fees;
+
+ 
+
+Controllable transaction alerts to adults at times and frequencies determined by the adult;
+
+ 
+
+Ability of the adult to instantly lock and unlock the card for transactions;
+
+ 
+
+Money loaded on the card is protected if the card is lost and transferred to a new card; and 
+
+ 
+
+Adults have the ability to transfer money instantly to the young person s card in an emergency.
+
+We believe the BMP Card is an excellent option allowing young people to be exposed to the financial world at a very early age. Teaching young people how to spend within a stipulated budget, BMP Cards are accepted anywhere MasterCard TM is accepted. Under newly enacted legislation card holders are required to be 21 years old to be eligible for a regular credit card (if the adult does not guarantee the balance). BMP Cards allow young people 13 years and older to have the card in their own name even without credit implications for an adult. BMP Card holders have other convenient options including the reloading of cards through direct deposit if desired. 
+
+Strategy
+
+We plan to continue to introduce new features to our product offerings that we hope will cause the public to associate BMP with responsible youth spending. We plan to make potential consumers aware of BMP through marketing with endorsements from well-known action sports personalities as well as joint promotional opportunities with providers of consumer products and services. We plan to also pursue action sports retail channel partners and advertising and promotion through popular youth focused media outlets. 
+
+We plan to follow up these activities with plans to actively court popular online retailers. We expect to be able to show the retailers the benefits that BMP will bring to their sites in the form of increased purchases from youth consumers, a highly sought-after customer. By including BMP as a payment option in both online and traditional retail situations, we believe merchants will be able to realize youth sales that are currently lost for reasons previously discussed.
+
+Financial Model
+
+Revenues from BMP are expected to be derived from fees primarily from card holders and secondarily (in the future) from merchants. The direct costs incurred by us in connection with BMP will include discounts and per transaction fees from credit card companies and amounts paid to our processing partner for debit card issuance and transaction costs. 
+
+We continue to extensively employ outside consultants for the build out and ongoing maintenance of the platform and payment system, as well as for marketing, design, business development and other general and administrative functions of our Company. While we intend to restrict the number of new employees we add to our Company s workforce, we believe that new personnel will be necessary in the future in the areas of project management, software programming, operations, accounting and administration. 
+
+Barriers to Entry
+
+Our company has applied for a patent in connection with BMP (in addition to a patent application under review in connection with Socialwise Group Gifting Platform ( SGGP )). We believe that the business processes in connection with BMP are original to our Company; however we may discover that others have patent claims of which we are currently unaware. Should we be successful in obtaining the grant of the patent under application and should we be successful in countering any challenges to its validity that might emerge, the lifetime of the granted patents would be twenty years. Should the patent application in question be approved, it could give us a cost advantage from the license fees that future potential competitors would be required to pay as well as revenues from said license fees. There can be no assurance however that we will be successful in receiving such a patent. 
+
+11
+
+Governmental Regulation
+
+Our company s prepaid debit card product is part of an industry subject to government regulation and oversight. While our relationship with our cardholders is governed by a Cardholder Agreement, many of the terms governing such agreement are dictated by laws enacted for the ostensible protection of consumers at either a federal or state level (none of our cards currently are issued beyond the borders of the United States of America). Two of the more prominent compilations of federal regulations affecting us include the USA Patriot Act and the Gramm-Leach-Bliley Act. Because our cards issuing bank is chartered in the state of Minnesota, this state s regulations figure prominently in our relationships with cardholders. Our management believes that we are currently operating in compliance with governmental regulations in the area of prepaid debit cards. 
+
+In July 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( DFA ) is scheduled to become effective. Included among the provisions of DFA in addition to the creation of the Consumer Financial Protection Bureau ( CFPB ), is the regulation by CFPB of prepaid debit cards (although such regulations have yet to be fully promulgated). Certain industry observers believe that among the forthcoming regulations will be provisions covering increased disclosure (in both English and Spanish) concerning terms, conditions and especially fees. We along with our transaction processor and issuing bank will carefully monitor and comply with any future changes that may arise in the area of government regulation. 
+
+Competitive Business Conditions
+
+The market for alternate payment systems for Internet purchases is large, growing, and highly competitive. We define alternate payment systems as payment systems for Internet purchases that do not involve a consumer s use of his own credit card. We have identified a number of providers of alternate payment systems.
+
+PayPalTM is a pioneer provider of alternatives to credit card use for Internet purchases. PayPalTM facilitates transactions between online buyers and sellers and first became popular for commerce interactions over online auction sites such as eBay (eBay purchased PayPalTM in 2002). Users of PayPalTM establish accounts that are funded by the customer, either through the customer s credit card or a bank account. Upon establishment of the account, a customer can designate that online payments be charged against his PayPalTM account balance. PayPalTM has announced its intention to service the youth payment market through initiatives that would allow owners of PayPalTM accounts to establish allowance accounts for others (e.g. children) that the parents can fund as desired. PayPalTM could potentially present a strong challenge to the BMP program given its substantial name recognition and financial strength. 
+
+American Express TM is a world-wide leader in the credit card and financial services industry whose credit cards account for 24% of total volume of credit card transactions in the United States. American ExpressTM recently issued PASS, a prepaid reloadable card that parents give to teens. PASS has many of the features we plan to offer with our BMP Card and American ExpressTM has devoted substantial resources to publicize this youth oriented payment option. While we believe that PASS has drawbacks not found in BMP Cards (e.g. the adult is required to have an American ExpressTM card), nevertheless American ExpressTM is a world recognized brand with substantial marketing capabilities that is likely to be formidable competition for our Company. 
+
+We are also aware of other debit card providers that have products that seek to facilitate online commerce through added features aimed at both merchants and consumers. There are several debit card providers that specifically target youth in their product offerings (e.g. MYPLASH, PAYjr and Facecard). Similar to the BMP Card, these debit cards represent a way for parents to control youth spending online and provides an attractive option for many online purchases.
+
+There are many reward systems established which allow under-age consumers to purchase primarily services online. Potential purchasers are given credits toward purchases in exchange for taking surveys, providing referrals, and engaging in other online activities desired by merchants. These reward systems can pose significant competition to BMP in our targeted market due to their capability for overcoming an identified obstacle for higher youth online spending: lack of access to a method of payment. 
+
+There are many mobile phone providers that have adopted services allowing a subscriber to make online purchases through his mobile phone account. Online merchants must agree to accept payments in this form and a relationship between the merchant and the phone company is required. Once established however, this method of payment has proven popular with a number of merchants online product offerings. For reasons of convenience and breadth of their user communities, mobile phone providers could represent significant competition to BMP in our targeted market.
+
+In summary, while we face potential future competition from other providers of alternate payment solutions, we currently believe our products offer distinct features that target markets not well served by the potential competitors mentioned above. However, many of these firms have longer operating histories, greater name recognition, and greater financial, technical, and marketing 
+
+12
+
+resources than we. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customer demand and market share to support the cost of our operations. 
+
+DESCRIPTION OF PROPERTY
+
+Our corporate offices are located at 6440 Lusk Blvd., Suite 200, San Diego California 92121, where we lease approximately 1,932 square feet of office space. This lease is on a month-to-month basis. The monthly rental payment for the facility is approximately $2,600. We believe this facility is in good condition and adequate to meet our current and anticipated requirements.
+
+LEGAL PROCEEDINGS
+
+From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. However, there are no legal claims currently pending or threatened against us that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
+
+13
+
+MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
+
+The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this prospectus. See SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS above.
+
+Overview and Financial Condition
+
+Discussions with respect to our Company s operations included herein refer to our operating subsidiary, Socialwise-CA. Our Company purchased Socialwise-CA on October 16, 2007. We have no other operations than those of Socialwise-CA. 
+
+Results of Operations for the years ended September 30, 2010 and 2009 
+
+Revenues 
+
+Our Company had insignificant revenues totaling $6,675 for the year ended September 30, 2010 (no revenues for the year ended September 30, 2009). For most of fiscal 2010, our Company s BMP payment system was only available on several youth gaming sites, and we did not promote BMP s use on those sites to the general public in any significant way. Although during our fiscal fourth quarter, we rolled out BMP on several retailers sites, we currently do not charge either merchants or consumers in connection with transactions pending further refinement of the consumer experience. BMP is targeted at enabling parents and young people to link and communicate in order to guide responsible spending. BMP has been designed with significant features that we hope consumers will find compelling. Going forward we plan to continue to market BMP (both online and in traditional retail settings) to the public as a convenient and safe youth payment system. While we are optimistic about the prospects for BMP, since this is a new product offering (and we have not recognized significant revenues to date), there can be no assurance about whether or when BMP will turn out to be a successful new focus for us or that it will generate sufficient revenues with adequate margins to fund our operations over future periods. 
+
+Cost of Revenues 
+
+Our cost of revenues for the year ended September 30, 2010 totaled $6,173 and represented primarily costs for processing credit card transactions (our gross margin for the same period was $502). Due to the low volume of revenues during the year ended September 30, 2010, we did not generate our planned percentage of gross margin. There were no cost of revenues or gross margin during the year ended September 30, 2009. 
+
+Operating Expenses 
+
+Selling and marketing expenses for the year ended September 30, 2010 totaled $2,522,978 ($840,150 for the year ended September 30, 2009). Included in these expenses for the year ended September 30, 2010 were employee compensation and related expenses of $95,617 ($202,807 for the year ended September 30, 2009), payments to consultants for business development, marketing and merchandising services totaling $137,218 ($104,267 for the year ended September 30, 2009), marketing, sales, creative services and public relations expenses of $360,324, ($159,711 for the year ended September 30, 2009) and noncash stock-based compensation expenses totaling $1,916,321 ($356,139 for the year ended September 30, 2009). The surge in stock-based compensation expenses in 2010 was due primarily to the signing of action sports athletes to endorse BMP and given the nature of the vesting of their warrants granted to purchase common stock, the total should decrease going forward. The reduction in employee compensation and related expenses of $107,190 in 2010 was due to the change in our Company s working arrangement with its Vice President of Business Development from full-time to part-time employment. 
+
+We recognized a loss due to impairment of intangible assets of $209,119 during the year ended September 30, 2009. At September 30, 2009, our intangible assets (prior to the loss recognized) consisted primarily of costs incurred in connection with our group gifting patent application. Given the uncertainty surrounding our future exploitation of this intellectual property, we concluded that there was a substantial doubt as to our ultimate realization of the related costs capitalized and therefore recorded a charge for their impairment. There were no similar charges during the year ended September 30, 2010 and there are no charges of this nature recorded as assets as of this date. 
+
+14
+
+Operations, general and administrative expenses for the year ended September 30, 2010 totaled $3,622,003 ($4,630,926 for the year ended September 30, 2009). Included in these expenses for the year ended September 30, 2010 were operations expenses in connection with building our major IT platforms totaling $581,014 ($1,270,581 for the year ended September 30, 2009), employee compensation and related charges of $1,087,422 ($951,144 for the year ended September 30, 2009), noncash stock-based compensation of $879,159 ($1,556,587 for the year ended September 30, 2009), noncash charges in connection with grant of common stock in connection with investor relations services totaling $698,832 ($245,546 for the year ended September 30, 2009), legal fees of $35,640 ($68,928 for the year ended September 30, 2009), accounting and auditing charges of $45,255 ($62,822 for the year ended September 30, 2009), insurance of $46,299 ($46,080 for the year ended September 30, 2009) and facility related expenses of $33,202 ($33,254 for the year ended September 30, 2009). 
+
+The reduction during 2010 of costs incurred in connection with building our IT platforms of $689,567 resulted from our limiting platform development to the BMP platform (fiscal 2009 included costs related to the development of both BMP and our group gifting platform). The increase in employee compensation and related charges of $136,278 was due primarily to the deployment of three operations related employees during the entire fiscal year 2010 versus only a portion of fiscal year 2009. Noncash stock-based compensation fell $584,539, primarily due to prior large grants of employee options completing their vesting during the first and third quarters of fiscal 2010. Noncash charges in connection with the grant of common stock in connection with investor relations services was $453,286 higher than the previous fiscal year, primarily due to the grant of shares during fiscal 2010 to Kay Holdings, Inc. ( Kay ) (no such grants were made in fiscal 2009). Reductions in legal and accounting fees totaling $50,855 were primarily the result of cost cutting efforts combined with no registration statement filed in fiscal 2010. 
+
+Operating expenses for the year ended September 30, 2010 totaled $6,144,981 ($5,680,195 for the year ended September 30, 2009). The increase in operating expenses compared to the prior year s corresponding period is due primarily to significant charges incurred in connection with the grant of sizable grants of warrants to purchase our common stock to celebrity athlete endorsers of BMP. This was offset by our focusing of all development, implementation, marketing and sales efforts on BMP in the current year (the prior year s expenses included substantial expenditures made in connection with our SGGP platform in addition to BMP). 
+
+Nonoperating Income and Expense
+
+For the year ended September 30, 2010, interest income totaled $1,301 ($13,914 for the year ended September 30, 2009), while interest expense totaled $872,779 for the year ended September 30, 2010 ($210,206 for the year ended September 30, 2009). Interest expense in the current year arose from the recognition of the beneficial conversion feature in connection with notes payable issued in August 2010 ($512,500) and the amortization and accretion of financing costs and note discount along with the amortization of the related value of additional shares issued in connection with another note payable outstanding during all of fiscal 2010. 
+
+In connection with newly adopted accounting principles beginning with our fiscal year ended September 30, 2010, we recognized other income of $87,744 in connection with the change during the year in the fair value of derivative liabilities outstanding. The bulk of the changes in fair value recognized occurred during the three months ended September 30, 2010 and were primarily the result of additional warrants issued in June and August 2010 that were subject to derivative liability accounting treatment. 
+
+Net Loss and Net Loss per Share
+
+For the year ended September 30, 2010, our net loss totaled $6,928,213 ($5,876,487 for the year ended September 30, 2009). Our basic and diluted net loss per share of $0.14 for the years ended September 30, 2010 and September 30, 2009) were identical due to the anti-dilutive effects of common stock equivalents during all the periods represented. 
+
+Results of Operations for the three months ended March 31, 2011 and 2010 
+
+Revenues 
+
+Our Company had insignificant revenues totaling $6,096 and $6,754 for the three and six months ended March 31, 2011, respectively ($1,472 and 1,964 for the three and six months ended March 31, 2010, respectively). Although BillMyParents ( BMP ) is a payment option on several retailers sites, we currently do not charge either merchants or consumers in connection with transactions pending further refinement of the consumer experience. Our revenues in fiscal 2011 resulted from our BMP prepaid debit card which was first marketed to significant numbers of consumers beginning in our fiscal quarter ended March 31, 2011 (revenues in fiscal 2010 were those from payment systems for gaming sites, a product offering we have since discontinued). Revenues are not 
+
+15
+
+representative of those we expect to realize in future periods from the current number of card accounts outstanding due to our having waived initiation fees and fees for the first month. 
+
+BMP is targeted at enabling parents and young people to link and communicate in order to guide responsible spending. BMP has been designed with features that we hope consumers will find compelling. Going forward we plan to continue to market BMP (both online and in traditional retail settings) to the public as a convenient and safe youth payment system. While we are optimistic about the prospects for BMP, since this is a new product offering (and we have not recognized significant revenues to date), there can be no assurance about whether or when BMP will turn out to be a successful new focus for us or that it will generate sufficient revenues with adequate margins to fund our operations over future periods. 
+
+Cost of Revenues 
+
+Our cost of revenues for the three and six months ending March 31, 2011 totaled $3,641 and $4,832 ($1,349 and 3,051 for the three and six months ended March 31, 2010). 
+
+Gross Margin 
+
+Our gross margins for the three and six months ending March 31, 2011 totaled $2,455 and $1,922 ($123 and negative $1,087 for the three and six months ended March 31, 2010). Due to the low volume of revenues (including as a result of our waiving some fees on new accounts) during the periods included herein, we did not realize the margins in percentage terms that we forecast for future periods. 
+
+Operating Expenses 
+
+Selling and marketing expenses for the three and six months ended March 31, 2011 totaled $928,721 and $1,365,192, respectively ($1,068,760 and $1,262,212 for the three and six months ended March 31, 2010, respectively). Included in these expenses for the three and six months ended March 31, 2011 were: 1) no employee compensation and related expenses ($27,733 and $73,287 for the three and six months ended March 31, 2010); 2) payments to consultants for business development, marketing and merchandising services totaling $97,946 and $177,394 respectively ($41,500 and $47,750, respectively, in fiscal 2010); 3) marketing, sales, creative services and public relations expenses of $517,497 and $749,543, respectively ($38,750 and 39,861, respectively in fiscal 2010); and noncash stock-based compensation expenses totaling $307,457 and $431,957, respectively ($958,800 and $1,095,698, respectively in fiscal 2010). 
+
+Operations, general and administrative expenses for the three and six months ended March 31, 2011 totaled $1,665,756 and $2,626,242, respectively ($983,375 and 1,798,464 for the three and six months ended March 31, 2010). Included in these expenses for the three and six months ended March 31, 2011 were: 1) operations expenses in connection with building and maintaining our IT platforms totaling $246,762 and $390,789, respectively ($136,887 and $281,579, respectively in fiscal 2010); 2) employee compensation and related charges of $256,312 and $671,654, respectively ($266,128 and $524,219, respectively in fiscal 2010); 3) noncash stock-based compensation of $229,401 and $468,536, respectively ($281,372 and $450,266, respectively in fiscal 2010); 4) cash and noncash charges in connection with the payment of cash and the grant of common stock in connection with investor relations services totaling $796,800 and $813,600, respectively ($246,800 and $385,232, respectively in fiscal 2010); 5) legal fees of $10,340 and $15,422, respectively ($2,496 and $18,575, respectively in fiscal 2010); 6) accounting and auditing charges of $22,361 and $56,361, respectively ($5,477 and $34,477, respectively in fiscal 2010); 7) insurance of $13,000 and $26,165, respectively ($11,604 and $23,531, respectively in fiscal 2010); and 8) facility related expenses of $8,227 and $16,541, respectively ($8,205 and $16,465, respectively in fiscal 2010).
+
+Operating expenses for the three and six months ended March 31, 2011 totaled $2,594,477 and $3,991,434, respectively ($2,052,135 and $3,060,676, respectively in fiscal 2010), an increase of $542,342 and $930,758, respectively or 26.4% and 30.4%, respectively over the previous year s total. The various components of the comparative operating expense figures are shown above. 
+
+Other Income and Expense
+
+Interest income for the three and six months ended March 31, 2011 were $3,714 and $4,676, respectively ($315 and $769, respectively for fiscal 2010). The increased interest income resulted from cash balances on hand invested in low yielding money market accounts. 
+
+16
+
+We incurred no interest expense for the three months ended March 31, 2011 ($78,559 for the three months ended March 31, 2010) as all of our interest bearing debt was retired or converted prior to January 1, 2011. For the six months ended March 31, 2011, interest expense totaled $133,379 ($199,653 for the six months ended March 31, 2010). Interest expense resulted from the amortization and accretion of financing costs and discount (resulting from stock and warrants issued with debt) in connection with our note payable outstanding during the relevant periods. Interest expense during the six months ended March 31, 2011 was $27,790 from Gemini (repaid in November 2010) and $105,589 from the convertible note payable (converted in November 2010) to Isaac Blech (a member of our Company s Board of Directors beginning in March 2011). Given the lack of material interest bearing debt outstanding going forward, we expect future interest expense to be insignificant. 
+
+We recognized a gain from the change in the fair value of derivative liabilities of $113,634 and $269,601 for the three and six months ended March 31, 2011, respectively (no equivalent amount during the prior comparable periods). This gain resulted from a reduction in the value of derivative liabilities outstanding during fiscal 2011 and was mainly a function of the reduction in the price of our closing stock price from September 30, 2010 to March 31, 2011. It represented no improvement in our financial position with respect to liabilities to be settled in the future with cash. 
+
+Net Loss and Net Loss per Share
+
+For the three and six months ended March 31, 2011, our net loss totaled $2,476,694 and $3,848,614, respectively ($2,130,256 and $3,260,647, respectively in fiscal 2010). Our basic and diluted net loss per share of $0.04 and $0.06 for the three and six months ended March 31, 2011, respectively, ($0.04 and $0.07, respectively in fiscal 2010) did not include the effects of anti-dilutive common stock equivalents during both of the periods represented. 
+
+Liquidity and Capital Resources
+
+We have primarily financed our operations to date through the sale of unregistered equity and with the issuance of notes payable (all of which were repaid or converted as of November 30, 2010). At March 31, 2011, our total assets were $3,298,842, with working capital totaling $1,938,581. Total liabilities were $1,351,299 (all of which were current but which also include derivative liabilities not to be settled in cash totaling $924,645 liabilities to be settled in cash totaled $426,654) and our stockholders equity totaled $1,947,543. Our financial position was strengthened during the last quarter from the conversion by the holder of the convertible note payable outstanding at September 30, 2010 into shares and warrants to purchase shares of our common stock. Our cash and cash equivalents balance at March 31, 2011 totaled $3,140,116. The change in our financial position from the previous amounts reported at September 30, 2010 resulted from the sale of unregistered common stock and warrants to purchase common stock that resulted in additional net cash proceeds totaling $4,904,242, offset by negative cash flows from operating activities totaling $2,141,767 and repayments of the note payable totaling $358,288 during the same period. 
+
+Our total liabilities at March 31, 2010 included $65,072 in salary deferrals from our employees. Also included in current liabilities were amounts recognized in connection with newly issued accounting standards covering derivative liabilities totaling $924,645. These liabilities arose primarily as a result of anti-dilution provisions attached to certain of our warrants outstanding that necessitate the reclassification of their fair values from stockholders equity to derivative liabilities. These liabilities do not represent a future claim on our Company s cash flows as they are not required to be settled in cash by our Company. Any future settlement of these securities could result in either their conversion to our Company s common stock or the receipt of cash by our Company of the cash proceeds of their exercise (assuming the exercise is not effected on a cashless basis allowed by some of the outstanding warrants accounted for as derivatives). 
+
+Plan of Operations
+
+We will be dependent upon future positive gross margin from revenues in order to achieve long-term financial viability. While we are encouraged by the limited positive results achieved to date in adding accounts to our BMP platform, it will be necessary for us in the future to generate significantly higher volumes than those generated to date. Irrespective of our success in obtaining such volumes, we currently estimate that we will have sufficient cash subsequent to the completion of the January 2011 additional funding to continue to fund the operations of our Company past our September 30, 2011 fiscal year end. 
+
+We do not expect to purchase any significant property or equipment, or to have more than minor changes in the number of our employees for the next twelve months. We expect however to continue to incur substantial costs in improving, maintaining and marketing BMP over the rest of fiscal 2011.
+
+17
+
+Going Concern 
+
+Our independent registered public accounting firm included in its report on our financial statements as of and for the year ended September 30, 2010 that there existed a substantial uncertainty about our ability to continue as a going concern significantly past the end of our current fiscal year in September 30, 2011. We believe that our financings subsequent to September 30, 2010 will be adequate to fund operations beyond September 30, 2011, however there can no guarantee that the funds will be sufficient.
+
+Critical Accounting Policies 
+
+Management s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments and we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. 
+
+Critical Accounting Policies Involving Management Estimates and Assumptions
+
+Management s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments and we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.
+
+In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures. We have identified the following accounting policies that we believe require application of management's most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our significant accounting policies are described in more detail in the notes to consolidated financial statements included elsewhere in this filing. If actual results differ significantly from our estimates and projections, there could be a material effect on our financial statements. 
+
+Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
+
+Revenue Recognition. In connection with our on-going businesses, we will recognize revenue at the time the product or service is purchased or contracted for by customers, the product has been shipped or the service rendered, the selling price and our commission for the transaction is fixed, collection is reasonably assured and when both title and risk of loss transfers to the customer, provided no significant obligations remain. Cash to be received in advance of the satisfaction of the criteria for revenue recognition will be deferred until such time as the criteria are satisfied. We do not anticipate collecting sales taxes in the future in connection with our products or services.
+
+Accounting Standards Codification ( ASC ) Topic 605 Revenue Recognition also provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. We believe that our revenue recognition policies are appropriate and in accordance with generally accepted accounting principles and Accounting Standards Codification ( ASC ) Topic 605.
+
+Cash and Cash Equivalents. We consider all investments with an original maturity of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in money market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.
+
+Stock Based Compensation. We account for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. We 
+
+18
+
+use historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information, due to the lack of comparable publicly traded companies.
+
+Derivatives. We account for certain of our outstanding warrants as derivative liabilities, in accordance with newly issued guidance effective with our fiscal year ending September 30, 2010. These securities were determined to be ineligible for equity classification due to provisions of the respective instruments that may result in an adjustment to their conversion or exercise prices. Subsequent changes to the fair value of the derivative liabilities will require adjustments to their carrying value that will be recorded as other income (in the event that their value decreases) or as other expense (in the event that their value increases). In general, we will record income when the market value of our common stock decreases and will record expense when the value of our stock increases. The fair value of these liabilities is estimated using option pricing models that are based on the individual characteristics of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread. 
+
+Recent Accounting Pronouncements
+
+In June 2009, the Financial Accounting Standards Board ( FASB ) issued additional guidance which requires an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is that the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The guidance also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. The new guidance was effective for our Company beginning October 1, 2010 and had no impact on our financial statements.
+
+In October 2009, the FASB issued new accounting guidance for revenue recognition with multiple deliverables. The new guidance affects the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of revenue recognition in accounting for multiple deliverable arrangements. The new guidance was effective for our Company beginning October 1, 2010 and had no impact on our financial statements.
+
+Off-Balance Sheet Arrangements
+
+We did not have any off-balance sheet arrangements as of the date of this prospectus or at any time since our inception on April 3, 2007.
+
+19
+
+MANAGEMENT
+
+Our directors are elected by our stockholders to a term of one year and to serve until his or her successor is duly elected and qualified, or until his death, resignation or removal. Each of our officers is appointed by our board of directors to a term of one year and serves until his successor is duly elected and qualified, or until his death, resignation or removal from office.
+
+Our bylaws provide that the number of directors which shall constitute our whole board of directors shall not be less than one or more than five. The number of directors is determined by resolution of our board of directors or by our stockholders at our annual meeting. The board of directors has currently set the number of directors at three. Our current board of directors consists of directors, two of which were elected to serve on our board of directors on October 16, 2007 and one of which was appointed to our Board of Directors on September 24, 2008.
+
+The following table sets forth certain information regarding our executive officers and directors as of the date of this Registration Statement:
+
+Name
+
+Age
+
+Position
+
+Mark Sandson
+
+71
+
+Director and Interim Chairman of Board of Directors and Interim Chief Executive Officer
+
+Jonathan Shultz
+
+51
+
+Chief Financial Officer, Secretary and Treasurer
+
+Chris Nicolaidis
+
+50
+
+Director
+
+Cary Sucoff
+
+59
+
+Director
+
+Isaac Blech
+
+61
+
+Director
+
+Mr. Shultz has been the Chief Financial Officer and Treasurer of the Company since November 13, 2007. From June 2007 to November 2007, Mr. Shultz worked in the audit and attest practice of Squar, Milner, Peterson, Miranda and Williamson, LLP. From November 2006 to June 2007, Mr. Shultz worked as a financial consultant or interim Chief Financial Officer for several San Diego area public and private companies. From October 2004 to November 2006, Mr. Shultz was the Chief Financial Officer for Neology, Inc., located in Poway, California, which manufactured and deployed radio frequency identification solutions. 
+
+Mr. Nicolaidis has been a Director of our Company since October 16, 2007. From April 2006 until the December 2010, Mr. Nicolaidis was our Vice President of Business Development, Corporate Secretary. From December 2005 to March 2006, he co-founded and was Vice President of DVD Movie Update, Inc., a DVD movie retailer which used the gift card retail channel to sell DVD movies. 
+
+Mr. Sandson was appointed as Interim Chairman and Interim Chief Executive Officer of the Company on April 26, 2011. Mr. Sandson was appointed to the Board of Directors on September 24, 2008. Since May 2001, Mr. Sandson has been the President of Core Technology Partners, a consulting firm that provides merger and acquisition and strategic advisory services. From October 1999 to April 2001, Mr. Sandson was a Vice President with CompuCom Systems, Inc., an information technology products and services company. From August 1990 to September 1999, Mr. Sandson served as a consultant to the information technology and defense systems industries. 
+
+Mr. Sucoff was appointed to our Board of Directors on May 23, 2011. Mr. Sucoff has served as an advisor to our Company since September 2009 through his firm Equity Source Partners, LLC, a firm he has owned and operated since February 2006. Mr. Sucoff currently serves on the Board of Directors of Contrafect Corp., a company developing therapies for infectious diseases. He has been a member of the Board of Trustees of New England Law/Boston for over 20 years.
+
+Mr. Blech was appointed to the Board of Directors on March 10, 2011. Since August 20, 2010, Mr. Blech has been a major shareholder and member of the Board of Directors of ContraFect Corporation, a company developing therapies for infectious diseases. Since February 10, 2011, Mr. Blech has been a member of the Strategic Advisory Board for Medgenics, Inc, a company that has developed a novel technology for the manufacture and delivery of therapeutic proteins. Previously, Mr. Blech was an investor, advisor and director in a number of well-known companies, primarily focused in biotechnology.
+
+In evaluating director nominees, our Company considers the following factors:
+
+ 
+
+The appropriate size of the Board;
+
+ 
+
+Our needs with respect to the particular talents and experience of our directors;
+
+ 
+
+The knowledge, skills and experience of nominees;
+
+ 
+
+Experience with accounting rules and practices; and
+
+ 
+
+The nominees other commitments.
+
+20
+
+Our Company s goal is to assemble a Board of Directors that brings our Company a variety of perspectives and skills derived from high quality business, professional and personal experience. Other than the foregoing, there are no stated minimum criteria for director nominees.
+
+Specific talents and qualifications that we considered for the members of our Company s Board of Directors are as follows:
+
+ 
+
+Mr. Sandson brings a long history of experience in funding companies and in consulting with various management teams to take their companies to a higher level of efficiency and professionalism. Mr. Sandson has been a key sounding board with whom we have been able to consult on matters relating from financing alternatives, investor relations, executive recruitment and retention and compensation. As an independent director, Mr. Sandson is in a unique position to represent our nonaffiliated shareholders. His contributions to our Company have been extremely valuable. 
+
+ 
+
+Mr. Nicolaidis is a co-founder of our Company, its former Vice President of Business Development and a major shareholder. Mr. Nicolaidis has been instrumental in the past in putting us in contact with industry leaders and other important contacts that have advanced the goals of our Company. We have found his contributions to advance the cohesiveness of our Board to be of great use and believe him to be a strong asset to our Board. 
+
+ 
+
+Mr. Sucoff has advised our Company since September 2009 in the area of investment banking, fund raising and capital markets. He has been key to our success in fundraising since joining our firm. Additionally, Mr. Sucoff is an attorney (non-practicing) and contributes valuable insights in the area of legal matters in addition to those areas for which he is contracted with our Company. We believe Mr. Sucoff s broad and diversified background will be a strong asset to our Company. 
+
+ 
+
+Mr. Blech is the owner of 22,500,000 shares of our Company s common stock and warrants to purchase up to an additional 20,062,500 million shares of our Company s common stock. Mr. Blech has been a successful investor and a member of a number of Boards of Directors. We believe Mr. Blech s past experience will be a tremendous benefit to our Company. Included among Mr. Blech s more notable successes were:
+
+o
+
+Celgene Corporation Mr. Blech was a founding shareholder of Celgene in 1986. Celgene has introduced two major cancer drugs and has a stock market valuation (as of March 8, 2011) of approximately $25 billion.
+
+o
+
+ICOS Corporation Mr. Blech was a founding shareholder and member of the Board of Directors of ICOS beginning in 1991. ICOS discovered the drug Cialis and was later acquired by Eli Lilly for over $2 billion. 
+
+o
+
+Nova Pharmaceutical Corporation Mr. Blech was a founding shareholder and member of the Board of Directors of Nova from 1982 to 1990. Nova developed a treatment for brain cancer and subsequently merged with Scios Corporation which was later purchased for $2 billion by Johnson and Johnson. 
+
+o
+
+Pathogeneses Corporation Mr. Blech was a founding shareholder and member of the Board of Directors of Pathogeneses from 1992 to 1997. Pathogeneses created TOBI for the treatment of cystic fibrosis and was later acquired by Chiron Corp for $660 million. 
+
+o
+
+Genetic Systems Corporation Mr. Blech was a founding shareholder and member of the Board of Directors of GSC from 1981 to 1986. GSC developed the first inexpensive and accurate test to diagnose chlamydia and was later acquired by Bristol Myers for approximately $300 million. 
+
+There are no family relationships among members of our management or our Board of Directors.
+
+21
+
+SELLING STOCKHOLDERS
+
+We are registering 16,846,060 shares of our common stock pursuant to this prospectus (8,639,000 shares of common stock sold on November 16, 2010 and 8,207,060 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock that were issued in connection with the sale of our unregistered common stock on November 16, 2010). See also PROSPECTUS SUMMARY Recent Transactions, above. This prospectus is a part of that registration statement. 
+
+On August 13, 2010, we issued a five-year warrant to purchase up to 625,000 shares of our common stock with an exercise price of $0.40 per share to an Isaac Blech in connection with the issuance of a $1,000,000 convertible note payable. 
+
+On November 16, 2010, we sold 8,639,000 restricted shares of common stock (2,500,000 restricted shares to Mr. Blech) and five-year warrants to purchase up to 6,479,250 shares of common stock to 37 investors (warrants to purchase up to 1,875,000 shares of common stock issued to Mr. Blech have an exercise price of $0.40 per share and warrants to purchase up to 4,604,250 shares of common stock have an exercise price of $0.60 per share) for gross cash proceeds totaling $3,455,600. In connection with such sale and as compensation for its acting as our placement agent for the transaction, we granted a five-year warrant to purchase up to 1,727,810 shares of common stock with an exercise price of $0.60 per share to Maxim Group, LLC.
+
+On November 24, 2010, we issued 2,500,000 restricted shares of common stock and warrants to purchase up to 1,312,500 shares of common stock to Mr. Blech in connection with the conversion of a note payable with principal and accrued interest balances outstanding of $1,000,000 and $25,000, respectively. In connection with such conversion, we granted a five-year warrant to purchase up to 250,000 shares of common stock with an exercise price of $0.60 per share to Maxim Group, LLC.
+
+On January 19, 2011, we sold 5,000,000 restricted shares of common stock and five-year warrants to purchase up to 3,750,000 of common stock with an exercise price of $0.40 per share to trust controlled by Mr. Blech in exchange for gross cash proceeds totaling $2,000,000. In connection with such sale and as compensation for its acting as our placement agent for the transaction, we granted a five-year warrant to purchase up to 750,000 shares of common stock with an exercise price of $0.60 per share to Maxim and a five-year warrant to purchase up to 250,000 shares of common stock with an exercise price of $0.60 per share to ESP. 
+
+On May 20, 2011, we entered into a subscription agreement and common stock purchase warrant with two trusts controlled by Mr. Blech pursuant to which we issued a total of 12,500,000 shares of our common stock, and five year warrants to purchase up to an additional 12,500,000 shares of our common stock at an exercise price of $0.40 per share, in exchange for gross proceeds totaling $5,000,000. Maxim acted as the Placement Agent in connection with the offering and received cash proceeds totaling $500,000 and five-year warrants to purchase up to 1,250,000 shares of Common Stock at an exercise price of $0.60 per share as compensation. ESP (and its designees) received cash proceeds totaling $50,000 and five-year warrants to purchase up to 600,000 shares of common stock at an exercise price of $0.60 per share as compensation.
+
+The price at which we issued common stock and the exercise price of the accompanying warrants were negotiated with the purchasers and reflected our progress at the time of the issuance with respect to BillMyParents ( BMP ), our cash position and the amount of funds being invested. Our progress with BMP and the relative strength of our cash position favorably impacted (i.e. increased the price per share and exercise price per share) while the size of the cash contributed tended to result in more favorable terms for the investor (i.e. lowered the price per share and exercise price per share). 
+
+The following table provides information regarding the beneficial ownership of the outstanding shares of our common stock by the selling stockholders. In computing the number of shares beneficially owned by a selling stockholder and the percentage of ownership of that selling stockholder, we have included all shares of common stock owned or beneficially owned by that selling stockholder. Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Securities and Exchange Act of 1934, as amended ( Exchange Act ) and includes shares which can be acquired within 60 days through exercise or conversion of a security. Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to the shares, subject to community property laws where applicable. Each selling stockholder's percentage of ownership in the following table is based on the 83,958,392 shares of our common stock outstanding as of July 27, 2011, the shares of common stock into which the 6,800 outstanding preferred shares are convertible of 2,060,607 and options and warrants exercisable as of (or within sixty days of) July 27, 2011 totaling 54,416,847. In determining the percentage of shares beneficially owned, we have used the sum of these common stock amounts or 140,435,846 shares as the total common stock in order to determine the percentage of class beneficially owned on the table below.
+
+22
+
+Name (4)
+
+ 
+Beneficial Ownership Common Shares Before Offering Number of Shares
+
+Beneficial Ownership Warrants to Purchase Common Shares Before Offering Number of Shares
+
+Number of Shares Being Registered (1)
+
+Number of Shares Underlying Warrants Being Registered (2)
+
+Beneficial Ownership After Offering Shares (3)
+
+Percentage
+
+Isaac Blech
+
+ 
+22,500,000 
+
+20,412,500 
+
+2,500,000 
+
+1,875,000 
+
+38,537,500 
+
+27.44 % 
+
+Andrew Cader
+
+ 
+1,250,000 
+
+937,500 
+
+1,250,000 
+
+937,500 
+
+- 
+
+- % 
+
+Iroquois Master Fund Ltd.
+
+ 
+625,000 
+
+468,750 
+
+625,000 
+
+468,750 
+
+- 
+
+- % 
+
+Adolfo & Donna Carmona
+
+ 
+500,000 
+
+375,000 
+
+500,000 
+
+375,000 
+
+- 
+
+- % 
+
+Vivari, Ltd.
+
+ 
+375,000 
+
+281,250 
+
+375,000 
+
+281,250 
+
+- 
+
+- % 
+
+Graham R. Smith
+
+ 
+250,000 
+
+187,500 
+
+250,000 
+
+187,500 
+
+- 
+
+- % 
+
+Keith Gelles
+
+ 
+250,000 
+
+187,500 
+
+250,000 
+
+187,500 
+
+- 
+
+- % 
+
+Shawn H. Zimberg
+
+ 
+187,500 
+
+140,625 
+
+187,500 
+
+140,625 
+
+- 
+
+- % 
+
+Burt Stangarone
+
+ 
+150,000 
+
+112,500 
+
+150,000 
+
+112,500 
+
+- 
+
+- % 
+
+Jonathan and April Fenton Revocable Trust
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Richard S. Jackson
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Richard Bonenberger
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Charles J. & Karin J. Costich
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Scott Dols Vicki Dols
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Donna C. Bozarth
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+James T. Nutt
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Alkis P. Zingas TTEE, U/A DTD 12-02-81 as amended
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Susan F. Portnoy
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Clayton A. Struve
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Armand & Jean Lindenbaum
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Wealth Concepts LLC
+
+ 
+100,000 
+
+75,000 
+
+100,000 
+
+75,000 
+
+- 
+
+- % 
+
+Lees Summit Holdings, LLC
+
+ 
+92,500 
+
+69,375 
+
+92,500 
+
+69,375 
+
+- 
+
+- % 
+
+Henry Scovern & Laura Pakarow
+
+ 
+84,000 
+
+63,000 
+
+84,000 
+
+63,000 
+
+- 
+
+- % 
+
+Marc Alan Stromen
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Shlomo Caine
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Dave Tadych
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Kevin F. & Anne F. Spalding Family Trust DTD 7-03-93
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Roger S. Lash
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Joshua Schein 2009 Spearfish Trust
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Henry M. Tufo & Carleen A. Tufo
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+John V. Wagner
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Diana and David Freshwater Living Trust
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Monte D. Anglin & Janet S. Anglin JT TEN
+
+ 
+62,500 
+
+46,875 
+
+62,500 
+
+46,875 
+
+- 
+
+- % 
+
+Cedric A. and Margaret E. Veum Living Trust
+
+ 
+50,000 
+
+37,500 
+
+50,000 
+
+37,500 
+
+- 
+
+- % 
+
+Ralph C. Wintrode Trustee Ralph C. Wintrode Trust U/D/T dated May 4, 2001
+
+ 
+50,000 
+
+37,500 
+
+50,000 
+
+37,500 
+
+- 
+
+- % 
+
+Douglas L. Weed
+
+ 
+50,000 
+
+37,500 
+
+50,000 
+
+37,500 
+
+- 
+
+- % 
+
+David M. Schneider
+
+ 
+125,000 
+
+93,750 
+
+125,000 
+
+93,750 
+
+- 
+
+- % 
+
+Maxim Group, LLC
+
+ 
+- 
+
+3,977,810 
+
+- 
+
+1,727,810 
+
+2,250,000 
+
+1.60 % 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+28,639,000 
+
+28,994,560 
+
+8,639,000 
+
+8,207,060 
+
+40,787,500 
+
+29.04 % 
+
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+
+ 
+
+23
+
+(1) Each selling stockholder has agreed not to exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by such selling stockholder and its affiliates after such conversion or exercise exceeds 4.99% of the then issued and outstanding shares of our common stock. Accordingly, the number of shares of common stock set forth in the table for the selling stockholders exceeds the number of shares of common stock that the selling stockholders could own beneficially at any given time through their ownership of the warrants. In that regard, the beneficial ownership of the common stock by the selling stockholder set forth in the table is not determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
+
+(2) Represents the number of shares held by the selling stockholders which we have agreed to include in this Registration Statement.
+
+(3) Represents the number of shares underlying warrants held by the selling stockholders which we have agreed to include in this Registration Statement.
+
+(4) Assumes all of the shares being offered under this prospectus will be sold by the selling stockholders. However, we are unable to determine the exact number of shares that will actually be sold or when or if sales will occur. 
+
+(5) Iroquois Capital Management L.L.C. ( Iroquois Capital ) is the investment manager of Iroquois Master Fund, Ltd ( IMF ). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF, they may be deemed to have voting control and investment discretion over securities held by each of the Iroquois Funds.
+
+(6) Vivari, Ltd. Richard S. Jackson has sole voting and dispositive power over the shares held by Vivari, Ltd.
+
+(7) Wealth Concepts LLC Steven Deutsch has sole voting and dispositive power over the shares held by Wealth Concepts LLC.
+
+(8) Lees Summit Holdings, LLC Craig Schroer has sole voting and dispositive power over the shares held by Lees Summit Holdings LLC.
+
+(9) Maxim Group, LLC Michael Rabinowitz has sole voting and dispositive power over the shares held by Maxim Group, LLC.
+
+To our knowledge, based on information obtained from the selling stockholders, none of the selling stockholders currently have short positions in our common stock. Maxim Group, LLC is a broker-dealer who received compensation in the form of cash and warrants to purchase common stock in consideration for their acting as a Placement Agent in connection with the sale of shares of our common stock and warrants to purchase shares of our common stock. To our knowledge, except for Maxim Group, LLC ( Maxim ) no selling security holder is a FINRA registered broker-dealer or an affiliate of a broker-dealer.
+
+Relationships with the Selling Stockholders
+
+With the exception of Isaac Blech and Maxim, none of the selling stockholders has had any position, office or other material relationship with us within the past three years. 
+
+On August 13, 2010, Mr. Blech tendered $1,000,000 in cash to the Company in exchange for a 5% six-month convertible note payable and warrants to purchase 625,000 shares of common stock. On November 24, 2010, Mr. Blech converted the note payable into 2,500,000 shares of common stock and received additional five-year warrants to purchase up to 1,312,500 additional shares of common stock at $0.40 per share. 
+
+On April 28, 2010, Maxim entered into an agreement with the Company to act as its non-exclusive placement agent and acted as such in connection with the shares and warrants being registered hereunder. Through December 31, 2010, Maxim received cash commissions in connection with the sales of common stock, warrants and convertible notes payable totaling $477,467 and five-year warrants to purchase up to 1,977,810 shares of common stock for $0.60 per share. 
+
+On January 19, 2011, we entered into a subscription agreement with a trust whose trustee is Mr. Blech pursuant to which we issued 5,000,000 shares of our common stock and a five-year warrant to purchase an additional 3,750,000 shares of our common stock with an exercise price of $0.40 per share, in exchange for gross proceeds totaling $2,000,000. In connection with the transaction, Maxim received a commission in cash totaling $200,000 and a warrant to purchase up to 750,000 shares of our common stock with an exercise price of $0.60 per share. 
+
+On May 20, 2011, we entered into a subscription agreement and common stock purchase warrant with two trusts controlled by Mr. Blech pursuant to which we issued a total of 12,500,000 shares of our common stock, and five year warrants to purchase up to an additional 12,500,000 shares of our common stock at an exercise price of $0.40 per share, in exchange for gross proceeds totaling $5,000,000. Maxim acted as the Placement Agent in connection with the offering and received cash proceeds totaling $500,000 and five-year warrants to purchase up to 1,250,000 shares of Common Stock at an exercise price of $0.60 per share as compensation. 
+
+24
+
+PLAN OF DISTRIBUTION
+
+Each Selling Stockholder (the Selling Stockholders ) of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling shares:
+
+ 
+
+ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
+
+ 
+
+block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
+
+ 
+
+purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
+
+ 
+
+an exchange distribution in accordance with the rules of the applicable exchange;
+
+ 
+
+privately negotiated transactions;
+
+ 
+
+settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
+
+ 
+
+broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
+
+ 
+
+through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
+
+ 
+
+a combination of any such methods of sale; or
+
+ 
+
+any other method permitted pursuant to applicable law.
+
+The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the Securities Act ), if available, rather than under this prospectus.
+
+Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440. 
+
+In connection with the sale of the common stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
+
+The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be underwriters within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).
+
+The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. 
+
+Because Selling Stockholders may be deemed to be underwriters within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.
+
+25
+
+We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
+
+Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
+
+26
+
+EXECUTIVE COMPENSATION AND OTHER INFORMATION
+
+Overview of Executive Compensation Objectives and Philosophy
+
+Our Company s Management s objectives are to attract and retain highly competent executives and to compensate them based upon a pay-for-performance mentality. Our current plan relies on goals and objectives agreed upon among the existing executive (officer and non-officer) group and our Company s Board of Directors. The achievement of such goals and objectives constitute requirements for continued employment, advancement with our Company and receipt of incentive bonus payments. With respect to historical bonus payments, we note the following:
+
+ 
+
+An employment retention bonus of 7.5% of our executive team s annual salaries was paid during our third fiscal quarter ended June 30, 2009. 
+
+ 
+
+The first installment of a discretionary bonus for calendar year 2010 was paid totaling $50,000 to three executives (including one non-officer) in August 2010. 
+
+ 
+
+The second installment of the calendar year 2010 discretionary bonus totaling $176,000 was paid to executives (including non-officer executives) and three other employees in November 2010 (these bonuses pertained to our fiscal year ended September 30, 2011 and were recorded during our quarter ended December 31, 2010). 
+
+ 
+
+Bonuses of $57,500 and $45,000 were paid to our former Chief Executive Officer and Chief Financial Officer, respectively, in April 2011 pursuant to performance goals set related to the establishment of BMP debit card accounts. Additional bonuses were paid to non-officer executives totaling $85,937 in April and May 2011 pursuance to similar performance metrics. These bonuses pertained to our fiscal year ended September 30, 2011 and were recorded during our quarter ended June 30, 2011)
+
+With the intent to increase short-term and long-term stockholder value, we have designed our executive compensation policies and practices to reward our Company s executives based on:
+
+ 
+
+Company performance;
+
+ 
+
+Individual performance; and
+
+ 
+
+The demonstration of leadership, team building skills and high ethical standards.
+
+We include a significant equity component in our overall compensation to align the long-term interests of our executives with those of our stockholders. Our executive compensation plan is designed to encourage the success of our executives as a team, rather than only as individual contributors, by attaining overall corporate goals. In setting those goals, we consider the current and anticipated economic conditions in our market place and industry and the performance of other companies in our market place and industry.
+
+Overall, we seek to employ executives that were not only qualified to fulfill the roles of the positions we require at the time of their hire, but who also have prior experience and demonstrated capabilities to function in a far larger and complex entity than where our Company is currently. We believe it is critical that our executives be able to work in an environment without the support of staff subordinates which usually accompany a larger and more seasoned company. Further, along with and given the benefit of maintaining continuity within the executive team, we highly desire executives that can adapt to what we hope will be a rapidly growing company. Our executives must be able to not only fill many roles within their areas of expertise, but also to oversee other areas that may be outside their specialty. Accordingly, we highly value the trait of adaptability.
+
+In order to attract the type of talented executive we seek, we have found that these individuals value the potential large future rewards that come from long-term compensation arrangements in the form of stock ownership and stock option arrangements over current cash compensation. Also, given the current early stage nature of our business and the accompanying premium we must place on cash, this allocation of compensation also currently benefits our Company. Accordingly, we have structured our compensation arrangements accordingly. 
+
+Two of the three remaining members of our executive team were founders of Socialwise and have large holdings of our common stock. By the very nature of their shareholdings in our Company, these executives personal financial well-being is closely tied to our Company s long-term success. Our Chief Financial Officer was employed after the acquisition of Socialwise. Therefore we felt it was necessary in order to incentivize him in a similar manner to the other members of the executive team, to make substantial grants of stock options when he joined our Company and at the time we refocused our business in a new direction. The grants made to Mr. Shultz reflected both our compensation philosophy and the results of negotiations between him and our Board of Directors at the time of the respective grants. Unlike the stock options granted to Mr. Shultz, the common stock received by our Company s other officers (at our Company s founding) did not (and will not) result in noncash compensation expense required to be recognized in our Company s results of operations. 
+
+27
+
+Elements of Executive Compensation
+
+Executive compensation consists of the following elements:
+
+ 
+
+Base salary;
+
+ 
+
+Annual incentive bonuses;
+
+ 
+
+Long-term incentives; and
+
+ 
+
+Retirement benefits under a 401(k) plan and generally available benefit programs.
+
+ 
+
+Base Salary. The base salary for each executive is initially established through negotiation at the time the executive is hired, taking into account his scope of responsibilities, qualifications, experience, prior salary and competitive salary information within our industry. Year-to-year adjustments to each executive officer s base salary are determined by an assessment of his sustained performance against individual goals, including leadership skills and the achievement of high ethical standards, the individual s impact on the Company s business and financial results, current salary in relation to the salary range designated for the job, experience, demonstrated potential for advancement, and an assessment against base salaries paid to executives for comparable jobs in the marketplace. 
+
+Annual Incentive Bonuses. Our Company s bonus plan s year begins on January 1st and runs through December 31st. Payments under future executive bonus plans that may be instituted will be based on achieving both personal and corporate goals. Personal goals will support our overall corporate goals and, wherever possible, contain quantitative components. An executive officer s success or failure in meeting some or all of these personal goals will affect the individual s bonus amount. Corporate goals will consist of specific financial targets for the Company. For example, we would not expect to pay incentive bonuses prior to achieving an annual rate of revenues of at least $1 million, nor would we expect to pay incentive bonuses when we are forecasting needing to raise additional equity capital to fund operations. We believe that offering significant potential income in the form of bonuses will allow us to attract and retain executives and to align their interests with those of our shareholders.
+
+Long-Term Incentives. Our long-term incentives consist of our Company s Common Stock and stock option awards. The objective of these awards is to align the longer-term interests of our shareholders and our executive officers and to complement incentives tied to annual performance. We have used stock options as our primary long-term equity incentive vehicle with respect to our Chief Financial Officer who joined our Company after its founding. The remainder of our executives who are also Company founders are presently incentivized on a long-term basis by way of their shares of Common Stock received at the founding of our subsidiary BillMyParents-CA (that were subsequently exchanged for shares of our Company s Common Stock in October 2007). We have not adopted stock ownership guidelines.
+
+401(k) and Other Benefits. During the years ended September 30, 2010 and 2009, our executive officers were eligible to receive certain benefits available to all our employees on the same terms, including medical and dental insurance. During the year, we also maintained a tax-qualified 401(k) Plan, which provides for broad-based employee participation. Under the 401(k) Plan, all employees are eligible to receive matching contributions from the Company of 100% of employee contributions up to a maximum of 4% of the employees salaries, per year. We do not provide defined benefit pension plans or defined contribution retirement plans to our executives or other employees. We believe that the 401(k) Plan and medical and dental insurance benefits allow us to remain competitive for employee talent, and we believe that the availability of these benefit programs generally enhances employee productivity and retention.
+
+Employment Agreements
+
+On January 31, 2011, our Company entered into employment agreements with the three members of our executive team. The agreements specify: 1) title and duties; 2) term of employment; 3) employee indemnification; 4) termination of employment; and 5) salary, fringe benefits and bonuses. The full text of the employment agreements were filed as exhibits 10.39 and 10.40 to our Company s quarterly report on Form 10-Q filed on February 1, 2011. On May 1, 2011, we entered into an employment agreement with an additional non-officer member of our executive team covering the same specifics related to his employment with our Company. 
+
+The Impact of Tax and Accounting Treatments on Elements of Compensation
+
+We have elected to award non-qualified stock options instead of incentive stock options to all grantees of our Company s stock options that remain outstanding as of the date of this report. All other options or warrants granted to advisors, Directors and consultants were non-qualified options or warrants in order to allow our Company to take advantage of the more favorable tax advantages associated with non-qualified stock options or warrants.
+
+28
+
+Internal Revenue Code Section 162(m) precludes the Company from deducting certain forms of non-performance-based compensation in excess of $1,000,000 to named executive officers. To date, we have not exceeded the $1,000,000 limit for any executive. However, since stock-based awards comprise a significant portion of total compensation, the Board of Directors has taken appropriate steps to preserve deductibility for such awards in the future, when appropriate.
+
+Our Rationale for Selecting a Particular Event to Trigger Payment under a Change of Control Agreement
+
+We are required to make payments upon a change of control of our Company to only one employee, our Chief Financial Officer Jonathan Shultz. Payments or benefits that would be required to be made to Mr. Shultz as a result of any change of control of our Company are as follows: 
+
+ 
+
+Mr. Shultz s stock option grants provide that, in case of an Acquisition of the Company (as defined in Section 11(c)(i) of our Company s 2007 Equity Incentive Plan), all of his stock options then outstanding shall become fully vested; and
+
+ 
+
+On August 12, 2008, our Company entered into a change of control agreement with Mr. Shultz that calls for Mr. Shultz to be paid the cash value of 500,000 shares (as adjusted for any splits or combinations) of our Common Stock, or equivalent acquisition consideration, should our Company be acquired (as defined in the agreement) and he is in our Company s employ on the date of the closing of the transaction.
+
+We adopted these agreements with Mr. Shultz with defined trigger events for such compensation upon a termination following, or as a result of a change of control, in order to provide incentives for him to work for, instead of against, changes of control of the Company that align with our shareholders interests. We do not believe similar agreements are necessary for our other members of management due to their significant existing ownership of Company common stock.
+
+The amount of compensation for which Mr. Shultz would be eligible upon the Company s acquisition, and in the event he remains employed with our Company on the date of the closing of the acquisition, would be the per share price for which the Company was acquired multiplied by 500,000. Based on the closing price of our Common Stock on September 30, 2010 of $0.60, the cash payment that would be due to Mr. Shultz upon a change of control (as defined in the agreement) would be $300,000. 
+
+The agreement with Mr. Shultz defines a change of control as an Acquisition and states as follows. 
+
+Acquisition shall mean (i) any consolidation or merger of the Company with or into any other corporation or other entity or person (the Purchaser ) in which the shareholders of the Company prior to such consolidation or merger (but excluding any ownership by the Purchaser) own less than fifty percent (50%) of the Company's voting power immediately after such consolidation or merger, excluding any consolidation or merger effected exclusively to change the domicile of the Company (collectively, a Stock Purchase ); or (ii) a sale of all or substantially all of the assets of the Company (an Asset Purchase ). 
+
+No other compensation or benefits would be due to Mr. Shultz based on agreements currently in place between him and our Company. Mr. Shultz is the only executive with a change of control agreement as he is the only executive officer that does not have substantial holdings of our Common Stock as a result of being a Company founder.
+
+The Level of Salary and Bonus in Proportion to Total Compensation
+
+Because of the commonality of interests among our executives and our shareholders in achieving the sustained, long-term growth of the value of our stock, we seek to keep cash compensation in line with market conditions and, if justified by the Company s financial performance, place emphasis on the ownership of Company stock and use of stock options as a means of obtaining significantly better than average compensation. Our efforts to keep cash compensation in line with market conditions to date have been informal and based primarily on discussions with business colleagues in the local marketplace, consultation with a local benefits consulting firm and the review of widely available comparative salary data (specifically we make reference to the periodic publication by the San Diego Union-Tribune of San Diego public company executive salaries compiled from their Securities and Exchange Commission annual filings and to the survey State of CEO and CFO Pay San Diego Public Companies published by Barney & Barney, LLC). We also based our conclusions that our cash compensation was in line with market conditions based on our executives prior employment histories with other similar sized companies, in similar responsible positions. We have not engaged in a practice of formal benchmarking of our executive compensation, but expect to formalize our compensation practices in the future should we be successful in growing our business. Part of such formalization may take the form of benchmarking. Because of the significant equity stake or equity incentives that our executives maintain in our Company, we believe their cash compensation and benefits received are modest in comparison to similar sized public companies. We have not engaged the services of compensation consultants but may do so in the future.
+
+29
+
+Other Compensation
+
+We intend to continue to maintain our current benefits for our executives, including medical and dental insurance coverage and the ability to contribute to a 401(k) retirement plan; however, our Board of Directors may in its discretion revise, amend or add to the executive s benefits if it deems it advisable. The benefits currently available to the executives are also available to our other employees. 
+
+Compensation Committee
+
+We do not have a standing compensation committee. Our Board of Directors intends to establish such committee in the future. At present, decisions concerning compensation matters are made by non-executive members of the Board of Directors based on recommendations made by members of our executive management. With the recent resignation of the Chairman of our Board of Directors James Collas, the remaining members of our Company s Board of Directors are non-executives. 
+
+Executive Compensation
+
+In March and April 2008, our Company operated under severe shortages of cash. During those months, our executives elected to defer a significant portion of their compensation. This deferred compensation remains a liability of our Company at September 30, 2010.
+
+The following table summarizes the compensation to our current and former named executive officers and Directors of our Company for the last two fiscal years ending September 30, 2010 and 2009. Our executive officers are employed by our Company s subsidiary, BillMyParents-CA. 
+
+SUMMARY COMPENSATION TABLE
+
+ 
+
+ 
+
+ 
+
+Change in
+
+ 
+
+ 
+
+ 
+
+Pension
+
+ 
+
+ 
+
+ 
+
+Value and
+
+ 
+
+ 
+
+ 
+
+Non-Qual.
+
+ 
+
+ 
+
+ 
+
+Deferred
+
+ 
+
+ 
+
+ 
+
+Stock
+
+Option
+
+Non-equity
+
+Compens.
+
+All Other
+
+ 
+
+Salary
+
+Bonus
+
+Awards
+
+Awards
+
+Incentive
+
+Earnings
+
+ Comp.(1)(4)
+
+Total
+
+Position
+
+Year
+
+($)(5)
+
+($)
+
+($)(2)
+
+($)(2)
+
+Comp ($)
+
+($)
+
+($)
+
+($)
+
+James Collas
+
+2010
+
+230,000
+
+25,000
+
+0
+
+0
+
+0
+
+0
+
+9,833
+
+264,833
+
+2009
+
+230,000
+
+17,250
+
+0
+
+0
+
+0
+
+0
+
+9,200
+
+256,450
+
+Former President and Chief Executive Officer, Former Director
+
+Chris Nicolaidis (5)
+
+2010
+
+87,600
+
+0
+
+0
+
+0
+
+0
+
+0
+
+3,504
+
+91,104
+
+2009
+
+172,800
+
+12,960
+
+0
+
+0
+
+0
+
+0
+
+7,430
+
+193,190
+
+Former Vice President Business Development, Current /Director
+
+Jonathan Shultz (3)
+
+2010
+
+159,277
+
+11,000
+
+0
+
+279,868
+
+0
+
+0
+
+14,632
+
+464,777
+
+2009
+
+172,800
+
+12,960
+
+0
+
+745,800
+
+0
+
+0
+
+7,430
+
+938,990
+
+Chief Financial Officer/Secretary/Treasurer
+
+(1)
+
+Our Company made group life, health, hospitalization and medical plans available for its employees, including the officers listed herein. 
+
+(2)
+
+Refer to Share-based Payments, in the Notes to Consolidated Financial Statements to be included in the Annual Report on Form 10-K for the relevant assumptions used to determine the valuation of our option awards. Amounts included here are equal to the aggregate grant date fair value of option awards issued as computed in our accompanying financial statements for the fiscal years shown in accordance with FASB Accounting Stands Codification Topic 718.
+
+(3)
+
+Mr. Shultz was paid on a part-time basis from August 1, 2010 to September 3, 2010.
+
+(4)
+
+Amounts shown include matching contributions to the officers 401(k) retirement plans for all years presented. 
+
+(5)
+
+Mr. Nicolaidis was employed part-time from February 2010 through April 2010 and then was on a leave of absence from that date through the time of this report. Mr. Nicolaidis resigned as an officer of our Company on December 29, 2010 but remains an employee of our Company.
+
+The above amounts with respect to compensation from option awards equaled the amounts that were recognized as compensation expense in our financial statements for the years ended September 30, 2010 and 2009. The option award amounts were calculated in accordance with generally accepted accounting principles concerning share based payments. 
+
+30
+
+Outstanding Equity Awards at September 30, 2010
+
+Only one of our executive officers has outstanding equity awards through the date of this Prospectus. Information as of the fiscal year ended September 30, 2010, including the value of the stock awards, with respect to our Company s Chief Financial Officer Jonathan Shultz is as follows:
+
+November 13, 2007 grant:
+
+Number of securities underlying unexercised options exercisable:
+
+1,092,500
+
+Number of securities underlying unexercised options unexercisable:
+
+-
+
+Option exercise price:
+
+$0.95
+
+Option expiration date:
+
+November 13, 2012
+
+May 22, 2008 grant:
+
+Number of securities underlying unexercised options exercisable:
+
+1,317,500
+
+Number of securities underlying unexercised options unexercisable:
+
+-
+
+Option exercise price:
+
+$0.74
+
+Option expiration date:
+
+May 22, 2013
+
+Shares for the respective grants vested 1/24 upon the grant date and then 1/24 each month until fully vested. 
+
+Information as of the fiscal year ended September 30, 2010, including the value of the stock award, with respect to our outside director, Mark Sandson, is as follows:
+
+March 25, 2009 warrant issuance:
+
+Number of securities underlying unexercised warrants exercisable:
+
+50,000
+
+Number of securities underlying unexercised warrants unexercisable:
+
+ -
+
+Warrant exercise price:
+
+ $0.40
+
+Warrant expiration date:
+
+March 25, 2011
+
+September 25, 2009 warrant issuance:
+
+Number of securities underlying unexercised warrants exercisable:
+
+100,000
+
+Number of securities underlying unexercised warrants unexercisable:
+
+ -
+
+Warrant exercise price:
+
+ $0.60
+
+Warrant expiration date:
+
+September 25, 2014
+
+August 10, 2010 warrant issuance:
+
+Number of securities underlying unexercised warrants exercisable:
+
+350,000
+
+Number of securities underlying unexercised warrants unexercisable:
+
+ -
+
+Warrant exercise price:
+
+ $0.47
+
+Warrant expiration date:
+
+August 10, 2015
+
+Additionally, our other non-officer directors Mr. Sucoff and Mr. Blech are holders of warrants to purchase our common stock received prior and subsequent to September 30, 2011. None of their warrants were received in connection with their service on our Company s Board of Directors. Such warrants are detailed within the section Security Ownership of Certain Beneficial Owners and Management. 
+
+No options or warrants have been exercised by any of the grantees through the date of this Registration Statement. We have recognized the aggregate grant date fair value of option awards issued in our accompanying statements of operations, computed in accordance with FASB Accounting Stands Codification Topic 718.
+
+None of our directors, executives or employees participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by our Company. None of our named executive officers participate in or have account balances in non-qualified defined contribution plans or other deferred compensation plans maintained by our Company.
+
+Director Compensation
+
+One of our current directors Chris Nicolaidis is an employee of the Company and is not compensated in his capacity as a director. Our one outside director (during fiscal 2010) Mr. Sandson received warrants to purchase a total of 500,000 shares of our Common Stock at the exercise prices per share shown above and from October 2010 through May 31, 2011 was paid $1,000 per 
+
+31
+
+month. On July 19, 2011, Messrs. Sandson, Blech and Sucoff received additional five-year warrants to purchase up to 450,000, 350,000 and 250,000 shares of common stock. Mr. Sucoff also received cash compensation totaling $35,000 for additional services performed on behalf of our Company through the date of this registration statement. 
+
+32
+
+CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
+
+Related Party Transactions. Our Company closely reviews transactions between the Company and persons or entities considered to be related parties (collectively related parties ). Our Company considers entities to be related parties where an executive officer, director or a 5% or more beneficial owner of our common stock (or an immediate family member of these persons) has a direct or indirect material interest. Transactions of this nature require the approval of our management and our Board of Directors. We believe such transactions were at terms comparable to those we could have obtained from unaffiliated third parties. Since October 1, 2007, we have not had any transactions in which any of our related parties had or will have a direct or indirect material interest, nor are any such transactions currently proposed, except for the reimbursement of expenses incurred in connection with the performance of duties on our Company s behalf or for the reimbursement of legal expenses in connection with the recent purchase of shares of our common stock and warrants to purchase common stock by Mr. Isaac Blech (a member of our Board of Directors).
+
+Parent Companies. We do not have a parent company. 
+
+Director Independence. Mr. Nicolaidis is not considered to be an independent director under the NASDAQ listing standards. The Board has determined that Mr. Sandson and Mr. Blech are independent directors under the NASDAQ listing standards. Our entire Board also serves as the audit committee of our Board of Directors.
+
+33
+
+SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
+
+As of July 28, 2011, we had 83,958,392 shares of common stock and 6,800 shares of Series A Cumulative Convertible Preferred stock (the Series A Preferred Stock ) issued and outstanding. The Series A preferred stock is convertible into 2,060,607 shares of our Company s Common Stock. Options and warrants exercisable as of (or within sixty days of) July 27, 2011 total 54,416,847. In determining the percentage of shares beneficially owned, we have used the sum of these common stock equivalent amounts or 140,435,846 shares as the total shares of common stock in order to determine the percentage of class beneficially owned on the table below. The following table sets forth as of July 28, 2011, information regarding the beneficial ownership of our common stock with respect to (i) our officers and directors; (ii) by all directors and executive officers as a group; and (iii) all persons which the Company, pursuant to filings with the Securities and Exchange Commission (the SEC ) and our stock transfer record by each person or group known by our management to own more than 5% of the outstanding shares of our common stock. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a beneficial owner of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within sixty (60) days, such as our Series A Preferred stock, warrants or options to purchase shares of our common stock. Unless otherwise noted, each person has sole voting and investment power over the shares indicated below subject to applicable community property law.
+
+Name and Address of Beneficial Owner (1)
+
+ 
+
+Amount and
+
+Nature of Beneficial Ownership
+
+ 
+
+Percentage
+
+of Class
+
+Beneficially
+
+Owned
+
+Officers and Directors
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Isaac Blech (4)
+
+ 
+42,912,500
+
+ 
+ 
+30.56%
+
+ 
+
+Cary Sucoff (6)
+
+ 
+1,633,925
+
+ 
+ 
+1.16%
+
+ 
+
+Chris Nicolaidis 
+
+ 
+
+4,375,114
+
+ 
+ 
+3.12%
+
+ 
+
+Jonathan Shultz (2)
+
+ 
+
+3,000,000
+
+ 
+ 
+2.14%
+
+ 
+
+Mark Sandson (3)
+
+ 
+1,050,000
+
+ 
+ 
+0.75%
+
+ 
+
+All directors and executive officers as a group
+
+(5 persons)
+
+ 
+
+52,971,539
+
+ 
+ 
+37.72%
+
+ 
+
+5% Stockholders
+
+ 
+ 
+ 
+ 
+ 
+ 
+
+Isaac Blech (4)
+
+ 
+42,912,500
+
+ 
+ 
+30.56%
+
+ 
+
+James Collas (5) 
+
+ 
+
+7,029,473
+
+ 
+ 
+5.01%
+
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+
+ 
+
+ 
+
+ 
+
+(1) Unless otherwise noted, the address is c/o BillMyParents, Inc. 6440 Lusk Blvd., Suite 200, San Diego California 92121.
+
+(2) Amounts are shares of common stock that would result from the exercise of currently exercisable outstanding options. 
+
+(3) Amounts include shares of common stock that would result from the exercise of currently exercisable outstanding warrants to purchase 900,000 shares of our common stock.
+
+(4) Amounts include shares of common stock that would result from the exercise of currently exercisable outstanding warrants to purchase 20,412,500 shares of our common stock. 
+
+(5) Former director, president and chief executive officer. 
+
+(6) Amounts include 140,225 shares of common stock and 1,493,700 shares of common stock that would result from the exercise of currently exercisable outstanding warrants. 
+
+34
+
+DESCRIPTION OF CAPITAL STOCK
+
+Our authorized capital stock consists of 300,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. The following summary is qualified in its entirety by reference to our Amended and Restated Articles of Incorporation, a copy of which is filed as an exhibit to our previous filings with the SEC and incorporated herein by reference.
+
+ 
+
+As of July 27, 2011, there were 83,958,392 shares of common stock outstanding that were held of record by approximately 1,500 stockholders of record, and 6,800 shares of Series A convertible preferred stock (held by three shareholders) outstanding (convertible into 2,060,607 shares of common stock). Holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholders. In the event of our liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the liquidation preference of any outstanding preferred stock. The common stock has no preemptive, conversion or other rights to subscribe for additional securities. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of Series A convertible preferred stock which are issued and outstanding, and any series of preferred stock that we may designate and issue in the future.
+
+Our Series A convertible preferred stock has the following characteristics:
+
+Face Value: Each share of Series A Stock has a face value of $100 per share.
+
+Voluntary Conversion: Each share of Series A Stock is convertible at the election of the holders at any time into approximately 303 shares of our common stock, subject to increase under the anti-dilution provisions under the Certificate of Designation and the Subscription Agreement upon the occurrence of events as defined therein. 
+
+Dividends: Except in the event of default under the terms of the Subscription Agreement, the Series A Stock pays no dividends. In the event of an uncured default by the Company, the Series A Stock pays dividends of 12% per annum during the period our Company is in default as described under the Certificate of Designation. 
+
+Redemption: The Series A Stock is not required to be redeemed by our Company.
+
+Liquidation Rights: Upon the occurrence of a liquidation event (as defined in the Certificate of Designation), the holders of Series A Stock will be repaid their full face value and cumulative accrued dividends prior to the receipt of any other class of preferred or common stock.
+
+Forced Conversion: We have the right to force conversion of each share of Series A Stock into approximately 303 shares of common stock at any time after December 12, 2008, provided our common stock has maintained a closing price of $1.00 per share for three consecutive trading days prior to conversion. 
+
+Voting Rights: Generally, our Series A Stock has no voting rights. 
+
+Covenants: The Subscription Agreement imposes certain covenants on us, including restrictions against incurring additional indebtedness, issuing any additional equity except certain permitted issuances, creating any liens on our property, amending our certificate of incorporation or bylaws in a manner which may adversely affect the Series A Stock holders, redeeming or paying dividends on shares of our outstanding common stock, and entering into certain related party transactions. 
+
+Warrants: The warrants issued in connection with the sale of Series A Preferred Stock are 66 month warrants to purchase shares of our common stock at a price of $0.40 per share (as adjusted), subject to future adjustment, including full-ratchet anti-dilution protection. We have the right under certain conditions to call the warrants.
+
+Reset Provision: The Subscription Agreement also contains a favored nations provision which provides that, other than in connection with the certain excepted issuances, until the sooner to occur of (i) thirty (30) months after the closing date, or (ii) until the Series A Stock is no longer outstanding, if our Company shall agree to or issue any common stock or securities convertible into or exercisable into common stock at a price per share or conversion or exercise price per share which is less than the conversion price for the Series A Stock or warrant exercise price in effect at such time, without the consent of each Series A Stock subscriber, then our Company must issue to each subscriber for each such occasion, additional shares of common stock so that the average per share price of the shares to be received upon conversion of the Series A Stock and 
+
+35
+
+warrants then owned by each subscriber is equal to such other lower price per share and the conversion price and warrant exercise price shall automatically be reduced to such other lower price. 
+
+ 
+
+We have reserved 5,000,000 shares of common stock for issuance pursuant to our 2007 Equity Inventive Plan (subject to the future approval by our shareholders of a previous act of our Company s Board of Directors), of which 4,165,000 shares have been issued in the form of stock options as of July 27, 2011.
+
+At July 27, 2011, we also have outstanding options and warrants to purchase shares of our common stock as follows:
+
+Option and Warrant Shares Outstanding
+
+Weighted Average Exercise Price
+
+Shares Vested
+
+Expiration Fiscal Period
+
+298,196
+
+1.31
+
+298,196
+
+4th Qtr, 2011
+
+2,580,036
+
+0.60
+
+2,580,036
+
+1st Qtr, 2012
+
+2,181,250
+
+0.58
+
+2,181,250
+
+2nd Qtr, 2012
+
+1,110,313
+
+0.59
+
+1,110,313
+
+3rd Qtr, 2012
+
+1,207,244
+
+0.60
+
+1,207,244
+
+4th Qtr, 2012
+
+337,000
+
+0.65
+
+337,000
+
+1st Qtr, 2013
+
+500,000
+
+0.55
+
+500,000
+
+2nd Qtr, 2013
+
+295,000
+
+0.62
+
+295,000
+
+3rd Qtr, 2013
+
+-
+
+-
+
+-
+
+4th Qtr, 2013
+
+2,471,213
+
+0.43
+
+2,471,213
+
+1st Qtr, 2014
+
+1,616,667
+
+0.47
+
+741,673
+
+2nd Qtr, 2014
+
+910,000
+
+0.64
+
+850,000
+
+3rd Qtr, 2014
+
+900,000
+
+0.51
+
+900,000
+
+4th Qtr, 2014
+
+1,476,600
+
+0.51
+
+1,414,098
+
+1st Qtr, 2015
+
+1,171,500
+
+0.52
+
+1,171,500
+
+2nd Qtr, 2015
+
+159,000
+
+0.67
+
+159,000
+
+3rd Qtr, 2015
+
+1,358,777
+
+0.46
+
+1,358,777
+
+4th Qtr, 2015
+
+10,461,560
+
+0.54
+
+10,461,560
+
+1st Qtr, 2016
+
+13,242,000
+
+0.48
+
+7,123,238
+
+2nd Qtr, 2016
+
+14,378,000
+
+0.43
+
+14,378,000
+
+3rd Qtr, 2016
+
+4,050,000
+
+0.48
+
+4,050,000
+
+4th Qtr, 2016
+
+60,704,356
+
+ 
+53,588,098
+
+ 
+
+Certain of the $0.40 and $0.60 (exercise price) warrants have a call provision that allows our Company to require them to be exercised if we have registered the underlying shares of common stock and if the common stock maintains a closing market price of $1.00 per share for three consecutive trading days (subject to certain limitations). Certain of the $0.40 and $0.60 warrants also carry additional provisions in favor of the warrant-holders including: (1) severe penalties for failure to timely deliver underlying share certificates upon exercise; 2) anti-dilution adjustments for any future issuances of common stock at prices less than the exercise price of the warrants; 3) cashless exercise provisions; and 4) piggy-back registration rights.
+
+DISCLOSURE OF COMMISSION POSITION 
+
+OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
+
+Pursuant to our Amended and Restated Articles of Incorporation, our Board of Directors may issue additional shares of common or preferred stock. Any additional issuance of common stock or the issuance of preferred stock could have the effect of impeding or discouraging the acquisition of control of us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for their shares, and thereby protects the continuity of our management. Specifically, if in the due exercise of its fiduciary obligations, the Board of Directors was to determine that a takeover proposal was not in our best interest, shares could be issued by the Board of Directors without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover by:
+
+ 
+
+diluting the voting or other rights of the proposed acquirer or insurgent stockholder group;
+
+ 
+
+ 
+
+putting a substantial voting block in institutional or other hands that might undertake to support the incumbent board of directors; or
+
+ 
+
+ 
+
+effecting an acquisition that might complicate or preclude the takeover.
+
+ 
+
+36
+
+The Colorado Corporations and Associations Act ( Colorado Corporate Law ), with certain exceptions, permits a Colorado corporation to indemnify a present or former director or officer of the corporation (and certain other persons serving at the request of the corporation in related capacities) for liabilities, including legal expenses, arising by reason of service in such capacity if such person shall have acted in good faith and in a manner he reasonably believed to be in, or not opposed, to the best interests of the corporation, and in any criminal proceeding if such person had no reasonable cause to believe his conduct was unlawful. However, in the case of actions brought by or in the right of the corporation, no indemnification may be made with respect to any matter as to which such director or officer shall have been adjudged liable, except in certain limited circumstances.
+
+ 
+
+Our Amended and Restated Articles of Incorporation provide that we shall indemnify our directors and executive officers to the fullest extent now or hereafter permitted by Colorado Corporate Law. The indemnification provided by Colorado Corporate Law and our Amended and Restated Certificate of Incorporation is not exclusive of any other rights to which a director or officer may be entitled. The general effect of the foregoing provisions may be to reduce the circumstances under which an officer or director may be required to bear the economic burden of the foregoing liabilities and expense.
+
+ 
+
+We may also purchase and maintain insurance for the benefit of any director or officer that may cover claims for which we could not indemnify such person.
+
+ 
+
+Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Securities Act ) may be permitted to our directors, officers and controlling persons, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
+
+ 
+
+In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to court of appropriate jurisdiction. We will then be governed by the court's decision.
+
+LEGAL MATTERS
+
+The validity of the shares of common stock being offered hereby will be passed upon for us by Steven James Davis, A Professional Corporation, in San Diego, California.
+
+EXPERTS
+
+The consolidated financial statements as of September 30, 2010 and 2009 and for the years then ended included in this Preliminary Prospectus and in the Registration Statement have been so included in reliance on the reports of BDO USA, LLP, an independent registered public accounting firm, the report on the financial statements contains an explanatory paragraph regarding the substantial doubt about the Company's ability to continue as a going concern, appearing elsewhere herein and in the Registration Statement, given on the authority of said firm as experts in auditing and accounting.
+
+INTEREST OF NAMED EXPERTS AND COUNSEL
+
+No expert or counsel was hired on a contingent basis, and no expert or counsel will receive a direct or indirect interest in the Company or was a promoter, underwriter, voting trustee, director, officer, or employee of the Company. Mr. Davis, the principal of Steven James Davis, A Professional Corporation, is a shareholder of the Company.
+
+WHERE YOU CAN FIND MORE INFORMATION
+
+We filed a registration statement on
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001096241_force10_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001096241_force10_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6fd1b31a26ec10bc1fd1e216e073634da63e7929
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001096241_force10_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001101423_vantone_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001101423_vantone_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fbc4108ccbb87c1f2383e43dee99c6e67d096a17
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001101423_vantone_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Because this is only a summary, it does not contain all of the information that may be important to you. You should carefully read the more detailed information contained in this prospectus, including our financial statements and related notes. Our business involves significant risks. You should carefully consider the information under the heading Risk Factors beginning on page 15. As used in this prospectus, unless otherwise indicated, the terms we, our, us, Company, the Registrant and Vantone refer to Vantone International Group, Inc., formerly known as Senior Optician Service, Inc., a Nevada corporation. We conduct our business through our subsidiaries, which include our wholly-owned subsidiary, Vantone USA, Inc., a Nevada company ( Vantone USA ). China refers to the People s Republic of China. RMB or Renminbi refers to the legal currency of China and $ , US$ or U.S. Dollars refers to the legal currency of the United States. We assumed an exchange rate of 6.36 when converting RMB to US$ (except as otherwise noted). Company Overview We operate as a diversified company in China, headquartered in Shenyang City. Our business consists of three primary segments: (i) the production and sales of water purification products, (ii) insurance agency service and (iii) small financing loans service. We also sell daily commodities, including health food, cosmetic skincare and women care products. In 2010, we also sold electronic products. From April 2007 to April 2010 we developed a sales network across China for all of our businesses, excluding our small loan business which was set up in September 2010. During that time we established approximately 400 franchise stores, as well as branch offices in the Jilin and Heilongjiang Provinces. Through our sales network, we distributed approximately 70 different products, ranging from daily commodities such as health food and products, cosmetics and skincare products, vitamins, water filters, bamboo fiber products, jade mattresses with regulated temperature control, appliances, kitchenware, to insurance products. In April 2010, we closed our 400 franchise stores and began to primarily operate our business through our website Vantone Online. During that time we encouraged customers to open franchises with us. All members who registered as VIP members on Vantone Online could apply to open a merchandise franchise, and the members who meet insurance agent qualifications could also apply to open up an insurance franchise. We not only provided small loans for members to support their businesses, but also provided online order services and online payment services on Vantone Online. The members who opened a merchandise or insurance franchise with us received professional training and instructions before they could operate the franchises themselves. For the fiscal year ended March 31, 2011, we also allowed members to publicize their franchises on our website. Simultaneously, we decided to significantly change our business model to accommodate online orders and e-payment. All of these franchise stores have been closed. In April 2011, in order to increase our sales volume, and satisfy our customers demands, we made the decision to open physical store locations in China. In April 2011, we retained a strategy company to design our VI logo, create a market analysis report, and conduct strategic development of our franchised stores. Currently, we have stopped selling our products through our Vantone Online website and stopped online member registration. Customers are now only able to make orders and purchase our products at our physical store locations, where they can also view samples of our products. Until October 30, 2011, we have set up 18 physical stores in the Liaoning province. Today our website is used for advertising our products and to provide information for our customers and our physical store locations. We believe that by establishing physical store locations we will be able to significantly increase the sales of our products in our three business segments. At our store locations customers will be able to view our products and be able to speak to our sales representatives about our products. Our sales representatives will also be able to introduce customers to our other products in our other business segments that they may not have known about prior to visiting our store locations. We believe that this cross-introduction of products to customers will increase our overall sales. In 2012 we intend to continue our strategy of opening up physical store locations in China. In order to increase the number of customers that visit our physical stores, we intend to provide convenient services in the future, such as credit card payment services, telephone and cell phone prepaid services, travel agency services, traffic penalty payment services, water and electric bill payment services and IC card prepaid services. We plan to start such convenient services in the near future. Copies to: Arthur S. Marcus, Esq. Cheryll J. Calaguio, Esq. Wendy Zheng, Esq. Gersten Savage LLP 600 Lexington Ave., 9th floor New York, NY 10022 Telephone: (212) 752-9700 Facsimile: (212) 980-5192 Richard I. Anslow, Esq. Thomas Slusarczyk, Esq. Anslow & Jaclin, LLP 195 Route 9 South Manalapan, NJ 07726 Telephone: (732) 409-1212 Facsimile: (732) 577-1188 Our Industry and Market Water purifying equipment industry In recent years, there has been public concern for environmental protection and water hygiene, and consumer demand for water purifying equipment continues to rise. The water purifying equipment industry in China is growing rapidly and the volume of production has increased each year. In 2009, the production volume of water purifiers in China reached more than 20 million units. The sales for water purifiers in 2009 were approximately RMB 30 billion or approximately $4.7 billion (http://www.cu-market.com.cn/hgjj/2010-11-16/10520568.html). We believe that with increased concerns of using and drinking clean water in the household, the need for water purifiers will also increase. Furthermore, survey data from the Water Purifying Industry Committee (http://www.cu-market.com.cn/hgjj/2010-11-16/10520568.html) provides that less than 15% of the households in Beijing, Shanghai, and Guangzhou, the largest three cities in China, own water purifiers. The ownership rate of water purifiers in small and medium-sized cities is below 5% and rural market ownership of water purification systems is nominal, illustrating our belief that the water purifier market has huge growth potential in China. Insurance industry According to insurance operating data in China released by the China Insurance Regulatory Commission, CIRC, during the period from January 2011 to July 2011, insurance premium income was approximately RMB 906 billion, or approximately $142 billion, an increase of approximately 0.22% compared to the same period in 2010, where the insurance premium income was approximately RMB 904 billion, or approximately $142 billion. The casualty insurance premium income was approximately RMB 273 billion, or approximately $43 billion, an increase of approximately 17% compared to the same period in 2010, where the insurance premium income was approximately RMB 234 billion, or approximately $37 billion, and the life insurance premium income was approximately RMB 633 billion, or approximately $99.5 billion, a decrease of approximately 6% compared to the same period in 2010, where the life insurance premium income was approximately RMB 670 billion, or approximately $105 billion. Additionally, the Chinese government encourages insurance agencies to (i) form solid insurance marketing teams, and (ii) increase its investment in education and training for salesman, in order to improve the overall quality of the insurance sales market (http://www.gov.cn/gzdt/2010-10/22/content_1727925.htm). Insurance agency companies are encouraged to improve the income and benefits for individual salesmen, train the sales team, and promote the development of the insurance marketing team. Insurance companies and insurance agency companies are also encouraged to actively explore new insurance marketing models and marketing channels in order to realize the specialization and professionalization of insurance sales system. The government encourages the cooperation between insurance companies and insurance agencies to establish a stable exclusive agency relationship and a sales outsourcing model. We believe that with the rapid development of the Chinese economy and the encouragement from the government, the Chinese insurance market has great potential. Small loan industry The small loan industry in China is an emerging market, which is different from Chinese traditional bank lending. Comparing to traditional bank lending, the small loan business model features flexible operations, quick and simple loan procedures, and allows for unsecured loans. In China, a small loan company is incorporated under the relevant provisions of Guidance on the Small Loan Company Pilot of the China Banking Regulatory Commission and the People's Bank of China (No.23, 2008 of China Banking Regulatory Commission). A small loan company is a private financial institution and we believe a useful complement to traditional bank lending. In China, a non-financial institution can operate a small loan business without accepting deposits from the public. We believe that the small loan business has an incomparable advantage over the traditional Chinese banking and financing business. This industry is recognized by the features of flexible, convenient and quick operations and is highly supported and encouraged by the government. Because the speed of China s economic growth has slowed down and inflation is increasing, the Chinese government has raised the deposit interest and the deposit reserve rate in order to tighten the country s monetary policy. This practice has provided an opportunity for small loan business companies, especially in their active supporting roles in the promotion of China s agriculture, farmer and village policy, and satisfying the capital requirements for small and medium-sized enterprises and individual businesses. The Chinese government does impose limits on loans relating to agriculture, such that borrowers are not allowed to apply for a loan over 5% of the registered capital of the small loan financing company. Our Competitive Advantages We believe that our water purification business, our insurance agency service, and our small financing loans service have the following competitive advantages: Online data management and customer research Model, Market Position, Advanced Technology for our water purification business, Solid Customer Base, and Experienced Management Team. Our three business segments are able to coordinate with each other and share customer information: for instance, when the customer comes to view our water purifiers at our physical stores locations we can inform the customer of our other business segments. Our Challenges Our ability to implement our business strategy is subject to numerous risks and uncertainties, as more fully described herein in the section entitled Risk Factors. You should carefully consider all of the information set forth in this prospectus, particularly the Risk Factors section prior to deciding to invest in our common stock. We believe that the following are some of the major risks and uncertainties that may materially adversely affect us: our limited operating history; our ability to respond to competitive pressure; our ability to protect our intellectual property rights; our ability to implement our growth strategies successfully; our ability to maintain an effective system of internal control over financial reporting; and regulatory environment in China. Corporate History and Structure We were incorporated on April 20, 1966 under the laws of the State of Minnesota as Polar Homes, Inc. In 1968, we changed our name to Polar Campers, Inc. We were originally formed to build, manufacture, sell, lease, own, buy and otherwise deal with mobile homes, campers, trailers and any other business in vehicles; and to own and otherwise deal with real estate. We ceased all business operations in 1973 and disposed all assets and liabilities. In August 1991, in anticipation of a business combination with another entity, we changed our name to Access Plus, Inc. This business combination was unsuccessful and was abandoned in January 1992. Concurrent with the abandonment of the proposed business combination, we changed our name to Environmental Protection Corporation. On August 15, 2000, we changed our name to Senior Optician Service, Inc. We intended to enter the specialty eyewear products business and to focus our efforts on specialty eyewear sales and services for senior citizens who are either home or facility bound. On March 31, 2003, this business plan was suspended by the management. On August 31, 2007, we re-domiciled from the State of Minnesota to the State of Nevada. The capital structure of the Company remained unchanged. The change of domicile was implemented by merging the Minnesota entity into a Nevada corporation named Senior Optician Service, Inc. which was formed on June 25, 2007. Senior Optician Service, Inc. was the surviving entity following the completion of the merger. Change of Control and Reverse Merger Transaction On April 7, 2008, Mr. Honggang Yu, our current President and Chief Executive Officer, purchased 5,175,000 shares of our common stock from Gregory M. Wilson and Kaniksu Financial Service, Inc., which represented 86.9% of the outstanding shares of our common stock at the time of the transaction. On May 14, 2009, we issued 23,947,000 shares of common stock in exchange for 100% of the capital shares of Vantone USA, Inc. Mr. Honggang Yu and Mr. Jichun Li, the sole shareholders of Vantone USA, Inc. ( Vantone USA ), received a total of 19,157,600 shares and 4,789,400 shares, respectively. Upon the completion of the transaction Vantone USA became our wholly-owned subsidiary. Effective August 17, 2009, our corporate name was changed from Senior Optician Service, Inc. to Vantone International Group, Inc. ( Vantone ) to better reflect our current business operations. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Proposed Maximum Aggregate Offering Price Amount of Registration Fee(1) Units, each consisting of one share of common stock, $0.001 par value, and one warrant per share (2) $ 10,000,000 $ 1,146.00 Shares of common stock included as part of the units (2) N/A (2 ) Warrants included as part of the units (2) N/A (2 ) Shares of common stock underlying the warrants N/A Total Registration Fee $ 1,146.00 (1) The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). (2) Includes (i) an aggregate of $1,200,000 of units, consisting of an aggregate of $1,200,000 of shares of common stock and an aggregate of $1,200,000 of warrants, which may be issued upon exercise of a 60-day option granted to the underwriters to cover over-allotments, if any, and (ii) an aggregate of $800,000 of units, consisting of an aggregate of $800,000 of shares of common stock and an aggregate of $800,000 warrants, granted to the Underwriter covering a number of units equal to 10% of the total number of units being sold in this offering, excluding over-allotment units. Our Subsidiaries Vantone USA was incorporated under the laws of Nevada on December 5, 2007. It is a holding company that has owned 100% of the equity in Shenyang Vantone Healthcare Products Manufacturing Co., Ltd. ( Vantone Manufacturing ) since July 14, 2008. Most of Vantone s activities are conducted through its wholly owned subsidiaries, Shenyang Heping District Vantone Small Loan Financing Co., Ltd. ( Vantone Small Financing ), Vantone Manufacturing, and Vantone Manufacturing s subsidiaries in the PRC. Vantone Small Financing was incorporated under the law of the PRC. Vantone Yuan and Vantone owns 29.30% and 70.70% of the shares of Vantone Small Financing, respectively. Vantone Manufacturing and Subsidiaries Vantone Manufacturing is a foreign owned enterprise that was incorporated under the laws of LiaoNing Province in the PRC on January 9, 2007. Vantone Manufacturing was incorporated under the name Shenyang Vantone Healthcare Food Co., Ltd., but adopted its current name on June 20, 2007. Its registered term of operations is fifteen years, from January 9, 2007 to January 8, 2022. Vantone Manufacturing and its KangPing branch engage in manufacturing, processing, and marketing of daily commodities, water purifying equipment, and kitchen and bath equipment. Up to March 2008, Vantone Manufacturing had outsourced all of its manufacturing activities to enterprises in the PRC that are dedicated to manufacturing products exclusively for Vantone Manufacturing. Shenyang Vantone Yuan Trading Co., Ltd. ( Vantone Yuan ) was incorporated under the laws of the PRC. It was incorporated under the name Shenyang Tongbida Trading Co., Ltd., but adopted its current name on June 21, 2007. Until October 2011, through contractual agreements, Vantone Manufacturing enjoyed all of the profits and bore all of the losses arising from the business of Vantone Yuan during Vantone Manufacturing s management period. On October 12, 2011, Vantone Manufacturing entered into share transfer agreements (the Transfer Agreements ) with Honggang Yu and Jichun Li, respectively. Such transfer was approved by Shenyang Administration of Industry and Commerce on October 18, 2011. Pursuant to the Transfer Agreements, Honggang Yu transferred 90% of the equity of Vantone Yuan to Vantone Manufacturing; and Mr. Jichun Li transferred 10% of the equity of Vantone Yuan to Vantone Manufacturing. As a result of the two transfers Vantone Yuan is now our 100% wholly-owned indirect subsidiary. On October 18, 2011, we also terminated the following three agreements: (1) Entrusted Management Agreement, dated April 1, 2007, among Honggang Yu, Zhang, Jichun Li, Shenyang Vantone Yuan Trading Co., Ltd. and Shenyang Vantone Healthcare Products Manufacturing Co., Ltd.; (2) Proxy Agreement, dated April 1, 2007, among Shenyang Vantone Healthcare Products Manufacturing Co., Ltd., Shenyang Vantone Yuan Trading Co., Ltd., Honggang Yu and Jichun Li; and (3) Purchase Option and Cooperation Agreement, dated April 1, 2007, among Honggang Yu, Jichun Li, Shenyang Vantone Yuan Trading Co., Ltd. and Shenyang Vantone Healthcare Products Manufacturing Co., Ltd. These three agreements (the Entrusted Management Agreements ) were terminated in connection with the entering into of the Transfer Agreements. The Entrusted Management Agreements stipulated that Vantone Manufacturing will enjoy all of the profits and bear all of the losses arising from the business of Vantone Yuan during Vantone Manufacturing s management period. Pursuant to the terms of the Transfer Agreements, Vantone Yuan is now 100% wholly owned by Vantone Manufacturing. As a result of such direct ownership, the Entrusted Management Agreements are no longer necessary. Kangping Vantone Trading Co., Ltd. ( Kangping Vantone ) was incorporated under the law of the PRC. Vantone Yuan owns 100% of the shares of Kangping Vantone. Liaoning Vantone Insurance Agent Co., Ltd. ( Vantone Insurance ) was incorporated under the law of the PRC. Vantone Yuan owns 88% of the shares of Vantone Insurance. The other 12% is owned by Mr. Jichun Li, our director. Corporate Structure The following chart reflects our organizational structure for our active subsidiaries as of the date of this prospectus. Corporate Information Our principal executive office is located at No.195 Zhongshan Road, Heping District, Shenyang, Liaoning Province, People s Republic of China. Our telephone number at this address is +86-24-2286-6686 and our fax number is +86-24-2285-0906. Investors should contact us for any inquires through the address and telephone number of our principal executive office. Our corporate information website is located at http://www.myvantone.com and our website for investors is located at http://www.vantoneint.com. The information contained on our website is not a part of this prospectus. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION ON DECEMBER 27, 2011 Vantone International Group, Inc. ___________ Units This is an initial public offering of our securities. We are offering _____________ units. Each unit has an offering price of $_________and consists of one share of our common stock and one warrant. Each warrant entitles the holder to purchase one share of our common stock at a price equal to $___________ (120% of the offering price of the units). The warrants will become exercisable six months after the closing of the offering and will expire five years after such closing date. We have the option to redeem the warrants after one year in the event that our common stock trades at 180% of the offering price of the units for a period of 20 consecutive days. The common stock and warrant of each unit sold in the offering must be kept together for a period of one year, provided however, that the units may be separated earlier at the discretion of the underwriter. Upon the exercise of any public warrants, we are obligated to pay the underwriter, as soliciting broker of the warrants, a cash fee consisting of a cash payment equal to three percent (3%) of the total proceeds received from the exercise of the public warrants. Best efforts offering. The underwriter is not required to sell any specific number or dollar amount of the units but will use its best efforts to sell the units offered. The underwriter is under no obligation to purchase the units. This is intended to be a continuous offering that will terminate on _________ (two years from the date of this prospectus), unless suspended or terminated at any earlier time for certain reasons specified in this prospectus or unless extended as permitted under the rules promulgated under the Securities Act of 1933. We are a reporting company under Section 13 of the Securities Exchange Act of 1934, as amended. Our shares of common stock are not currently listed or quoted for trading on any national securities exchange. However, our shares of common stock are currently traded under the symbol of VNTI.PK on the Pink OTC Markets, Inc. We intend to apply to list our common stock, including the shares of common stock being offered under this prospectus, on the NASDAQ Capital Market and/or NYSE Amex under the symbol VNTI . Such listing will subject us to the fulfillment of the original listing requirements of the NASDAQ Capital Market and/or NYSE Amex. We cannot assure you that our common stock will be listed on the NASDAQ Capital Market and/or NYSE Amex. Investing in our common stock involves a high degree of risk. Before buying any units, you should carefully read the discussion of material risks of investing in our units contained under the heading Risk Factors beginning on page 15 of this prospectus. Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of anyone s investment in these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Share Total Public offering price $ $ 10,000,000 Underwriting discounts and commissions (7.5%) $ $ Proceeds, before expenses, to Vantone International Group Inc. $ $ (1) The underwriters will receive compensation in addition to the discounts and commissions, as set forth under Underwriting . The Underwriters have a 60-day option to purchase up to ______________ (15% of total units sold) additional units at the public offering price solely to cover over-allotments, if any (the Over-allotment Shares ). If the Underwriters exercise this option in full, the total underwriting discounts and commissions will be $________, and total proceeds to us, before expenses, from the over-allotment option exercise will be $_________. The Underwriters are offering the units as set forth under the section entitled Underwriting. Delivery of the units will be made on or about _____________, 2012. (1) Excludes (i) up to __________ (10%) shares of common stock underlying warrants to be received by the Underwriter in this offering and (ii) the __________ (15%) shares of our common stock that we may issue upon the Underwriter s over-allotment option exercise. (2) Each warrant entitles the holder to purchase one share of common stock at a price equal to 120% of the offering price of the units. The warrants will become exercisable six months after the closing of the offering and will expire five years after such closing date. Warrants are callable by the company after one year if the shares trade at 180% above the offering price of the shares for 20 consecutive days. The common stock and the warrant of each unit sold in the offering must be kept together for a period of one year, provided however, that the units may be separated at the discretion of the underwriter. (3) Based on 30,001,000 shares of common stock issued and outstanding as of the date of this prospectus and _____________ shares of common stock to be issued in the public offering, which (i) excludes the Underwriter s warrants to purchase ________ shares of our common stock, (ii) excludes _______ shares of common stock underlying public warrants that are exercisable at $______per share and (iii) excludes ___________ shares of our common stock that we may issue upon the Underwriter s over-allotment option exercise. ICM Capital Markets Ltd. SUMMARY OF CONSOLIDATED FINANCIAL DATA The following
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001107895_tripwire_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001107895_tripwire_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b8fb2d48e023ea18f0488aab116ecf9eab4b30b6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001107895_tripwire_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights information contained elsewhere in this prospectus. It does not contain all of the information you should consider before investing in our common stock. You should also read the more detailed information set out in this prospectus, including our financial statements and related notes and the discussion of risks of investing in our common stock
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001127579_masergy_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001127579_masergy_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9af8c8982e6d0619a3a165b6f99d3dc2a6fdbf4c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001127579_masergy_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under Risk Factors and the consolidated financial statements and accompanying notes included elsewhere in this prospectus, before making an investment decision. Overview We provide managed, secure virtualized network services to enterprises with complex information technology needs across multiple locations throughout the world. By delivering enhanced network performance, flexibility and control, together with consultative technical support, we believe we offer a unique value proposition. We enable customers to seamlessly deploy and manage video, voice and other data applications on a global basis by integrating our proprietary cloud-based software with our network. As of December 31, 2010, we served customer locations in 51 countries, representing most major industry verticals. We have generated net income and positive cash flow for the last three fiscal years and we currently have no debt. Our total revenue has grown from $48.4 million in the fiscal year ending June 30, 2006 to $97.5 million in the fiscal year ending June 30, 2010, or 19.2% on an average annual compounded basis. Our network services platform is purpose-built and designed to deliver consistent performance across the enterprise and around the globe. Our model of leveraging third-party long-haul fiber assets and utilizing local access connections allows us to increase capacity and scale our network as dictated by customer demand, avoiding the cost of unused network capacity typical of legacy networks. We provide standard Ethernet connections to all customer locations, regardless of the available local access technology, to simplify the customer interface to our services. By overlaying our proprietary cloud-based software on a private IP architecture, we offer our customers more flexible and measurable application performance. For a depiction of a typical customer solution see Business Products and Services Intelligent Transport Product Line. Our platform delivers the high performance and low latency demanded by complex applications such as HD video conferencing, unified communications, SaaS, CRM and ERP. We believe that our comprehensive managed service offering, together with our award-winning customer service, differentiates us from our competitors. In addition to meeting bandwidth needs, we provide tools to enterprise network administrators so that they can prioritize more important business applications over less critical or less latency-sensitive applications. Our embedded software enables IT professionals to monitor usage, prioritize traffic, optimize bandwidth and perform application and network diagnostics from any location in real time. In addition, we offer a highly consultative sales and service approach, acting as an extension of our customers IT departments. Industry The global enterprise network infrastructure market is growing rapidly, driven by globalization and the demand for complex applications. The challenges involved in managing these applications over a global network has strained the budgets and resources of enterprise IT departments. In response, IT departments must either expand internally or seek globally available managed service offerings. The adoption of Ethernet has greatly enhanced the ability of IT departments to integrate various network technologies to ensure consistent and predictable performance. Ethernet is the most cost-effective network interface, reducing hardware costs and the risks of obsolescence, and is the desired interface for enterprise virtual private networks. In a report entitled Ethernet and IP MPLS VPN Services dated June 15, 2010, Infonetics Research, an independent research firm, estimates that the global Ethernet services market was $21 billion in 2009 and expects it to grow to $39 billion by 2014, representing a compounded annual growth rate of approximately 14%. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion Preliminary Prospectus dated February 2, 2011 PROSPECTUS 7,700,000 Shares Common Stock This is Masergy Communications, Inc. s initial public offering. We are selling 3,850,000 shares of common stock and the selling stockholders are selling 3,850,000 shares of common stock. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. We expect the public offering price to be between $12.00 and $14.00 per share. Currently, no public market exists for the shares. Our common stock has been approved for listing on the New York Stock Exchange under the symbol MSGY. Investing in the common stock involves risks that are described in the
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001139426_michael_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001139426_michael_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5018a9e4278945a612ddee141e8e537894afedee
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001139426_michael_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus. It does not contain all the information that you may consider important in deciding whether to participate in the exchange offer. Therefore, you should read the entire prospectus carefully, including, in particular, the section entitled Risk Factors and the financial statements and the related notes to those statements. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to Michael Foods Group , our company , we , our , ours , us or similar terms refer to Michael Foods Group, Inc., together with its subsidiaries. Michael Foods, Inc., a wholly owned subsidiary of Michael Foods Group, is referred to as Michael Foods . MFI Holding Corporation is referred to as MFI Holding and MFI Midco Corporation is referred to as Parent . The Company We are a diversified producer and distributor of food products in three areas egg products, potato products and cheese and other dairy case products. Our Egg Products Division produces and distributes egg products to the foodservice, retail and food ingredient markets. Our Potato Products Division processes and distributes refrigerated potato products to the foodservice and retail grocery markets in North America. Our Crystal Farms Division markets a broad line of refrigerated grocery products to U. S. retail grocery outlets, including branded and private-label cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods. We have a strategic focus on value-added processing of food products. The strategy is designed to capitalize on key food industry trends, such as (i) the desire for improved safety and convenience, (ii) the focus by foodservice operators on reducing labor and waste, and (iii) the long-term trend toward food consumption away from home, which continues to be slowed somewhat by the recent economic conditions. We believe our operational scale, product breadth and geographic scope make us an attractive and important strategic partner for our customers. The Egg Products Division, comprised of our wholly owned subsidiaries M. G. Waldbaum Company ( Waldbaum ), Papetti s Hygrade Egg Products, Inc. ( Papetti s ), Abbotsford Farms, Inc., and MFI Food Canada Ltd., produces, processes and distributes numerous egg products. Based on management estimates, we believe that our Egg Products Division is the largest processed egg products producer in North America. Our principal value-added egg products are ultrapasteurized, extended shelf-life liquid eggs ( Easy Eggs and Excelle ), egg white based egg products ( All Whites and Better n Eggs ), and hardcooked and precooked egg products ( Table Ready ). Our other egg products include frozen, liquid and dried products that are used as ingredients in other food products, as well as organic and cage free egg products. Our Egg Products Division distributes its egg products to food processors and foodservice customers primarily throughout North America, with limited international sales in the Far East, South America and Europe. Our extended shelf-life liquid eggs (the largest selling product line within the Division) and other egg products are marketed to a wide variety of foodservice and food ingredients customers. The Egg Products Division also is a supplier of egg white-based egg products sold in the U.S. retail and foodservice markets. Our Crystal Farms Division markets a wide range of refrigerated grocery products directly to retailers and wholesale warehouses. We believe that the Crystal Farm Division s strategy of offering quality branded products at a good value relative to national brands has contributed to the Crystal Farm Division s growth. Crystal Farms cheese is positioned in the mid-tier pricing category and is priced below national brands such as Kraft and Sargento and above store brands (private label). The Crystal Farms Division s distributed refrigerated products, which consist principally of cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods, are supplied by various vendors or our other divisions, to Crystal Farms specifications. Cheese accounted for approximately 69% of the Crystal Farms Division s 2010 sales. While we do not produce cheese, we operate a cheese packaging facility in Lake Mills, Wisconsin, which processes and packages various cheese products for our Crystal Farms brand cheese business and for various private-label customers. Table of Contents Table of Additional Registrants Exact Name of Registrant as Specified in its Charter (Or Other Organizational Document) State or Other Jurisdiction of Incorporation or Organization I.R.S Employer Identification Number Address and Telephone Number of Registrant s Principal Executive Offices Abbotsford Farms, Inc. Minnesota 26-1615833 * Casa Trucking, Inc. Minnesota 22-3493806 * Crystal Farms Refrigerated Distribution Company Minnesota 41-1669454 * Farm Fresh Foods, Inc. Nevada 91-2086470 * MFI Food Asia, LLC Delaware 00-0000000 * MFI International, Inc. Minnesota 27-1428245 * Michael Foods, Inc. Delaware 13-4151741 * Michael Foods of Delaware, Inc. Delaware 41-1579532 * Minnesota Products, Inc. Minnesota 41-1394918 * M. G. Waldbaum Company Nebraska 47-0445304 * Northern Star Co. Minnesota 41-1468193 * Papetti s Hygrade Egg Products, Inc. Minnesota 22-3493805 * * Address and telephone number of Registrant s principal executive office is same as that of Michael Foods Group, Inc. The primary industrial classification number for each additional Registrant is 2015. Table of Contents The Crystal Farms Division has expanded its market area using both company-owned and leased facilities and independent distributors. The Crystal Farms Division s market area is the United States, with a large customer concentration in the central United States. We sell our products to a large number of retail stores, a majority of which are served via customers warehouses. The Crystal Farms Division also maintains a fleet of refrigerated tractor-trailers to deliver products daily to its retail customers from nine distribution centers centrally located in its key marketing areas. Our Potato Products Division consists of shredded hash browns and diced, sliced, mashed and other specialty potato products. Refrigerated potato products are produced and sold by our wholly owned subsidiaries, Northern Star Co. ( Northern Star ) and Farm Fresh Foods, Inc. ( Farm Fresh ), to both the foodservice and retail markets. In 2010, approximately 51% of the Potato Products Division s net sales were to the retail market, with the balance to the foodservice market. The Potato Products division sells refrigerated potato products in the United States in the retail grocery market, where they are marketed under the Simply Potatoes brand and in the foodservice market, where they are principally marketed under the Northern Star and Farm Fresh brands. Due to their freshness and quality, refrigerated potato products are generally sold at higher price points than frozen or dehydrated potato products. The Potato Products Division s largest customers include major retail grocery store chains and major foodservice distributors. The Potato Products Division maintains its main processing facility in Minnesota, with a smaller facility located in Nevada. At April 2, 2011 and January 1, 2011, we had total assets of approximately $2,138.1 million and $2,164.1 million, respectively. For the three-month period ended April 2, 2011 and the six-month period ended January 1, 2011, the Company had net sales of approximately $417.1 million and $858.3 million, respectively, and net earnings (loss) of approximately $(0.4) million and $3.3 million, respectively. For the three-month period ended April 2, 2010 and the six-month period ended June 26, 2010, the Predecessor had net sales of approximately $395.3 million and $744.0 million, respectively, and net earnings (loss) of approximately $15.0 million and $(34.3) million, respectively. Corporate History On June 29, 2010, M-Foods Holdings, Inc. and its subsidiaries (the Predecessor ) was merged with and into the Company, with the Company as the surviving entity and MFI Holding as its direct parent. MFI Holding is owned by GS Capital Partners VI Fund, L.P. and its affiliates (collectively, GS Capital Partners ), Thomas H. Lee Partners, L.P. (collectively, THL and together with GS Capital Partners, the Sponsors ) and certain members of management (the Management Stockholders ). Following the merger, GS Capital Partners, THL and the Management Stockholders indirectly own approximately 74%, 21% and 5%, respectively, of the Company. Our Executive Offices Our principal executive offices are located at 301 Carlson Parkway, Suite 400, Minnetonka, Minnesota 55305, and our telephone number at that address is (952) 258-4000. Our website address is www.michaelfoods.com. Information contained on our website is expressly not incorporated by reference into this prospectus. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JULY 15, 2011 PRELIMINARY PROSPECTUS MICHAEL FOODS GROUP, INC. 9.750% Senior Notes due 2018 On June 29, 2010, we issued $430,000,000 9.750% Senior Notes due July 15, 2018 (the Restricted Notes ) in a transaction exempt from the registration requirements of the Securities Act. As part of the issuance of the Restricted Notes, holders were granted benefits pursuant to an exchange and registration rights agreement (the registration rights agreement ) among us, the guarantors and the initial purchasers of the Restricted Notes. To satisfy our obligations under the registration rights agreement, on July 7, 2011, we launched an offer to exchange (the exchange offer ) all Restricted Notes for $430,000,000 9.750% Senior Notes due 2018, the issuance of each of which has been registered under the Securities Act of 1933 (the notes ). The notes bear interest at a rate of 9.750% per annum and mature on July 15, 2018. Interest on the notes is payable on January 15 and July 15 of each year. We have the option to redeem all or a portion of the notes at any time on or after July 15, 2014 at the redemption prices set forth in this prospectus. On or prior to July 15, 2013, we have the option to redeem up to 35% of the notes with proceeds of certain equity offerings at a redemption price equal to 109.750% of their principal amount, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes, plus a make-whole premium and accrued and unpaid interest, if any, to the date of redemption, as described in this prospectus. The notes are guaranteed on a senior unsecured basis by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities and our future subsidiaries that are wholly-owned domestic subsidiaries or that guarantee our senior secured credit facilities (in each case, subject to certain exceptions). The notes effectively rank behind all of our secured debt, including our senior secured credit facilities, to the extent of the value of the assets securing such debt. In addition, the notes are structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. This prospectus includes additional information on the terms of the notes, including redemption and repurchase prices, covenants and transfer restrictions. We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Consider carefully the Risk Factors beginning on page 5 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus has been prepared for and may be used by Goldman, Sachs & Co. and its affiliates in connection with offers and sales of the notes related to market-making transactions in the notes in the secondary market effected from time to time. Goldman, Sachs & Co. and its affiliates may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agents for both. Sales of notes pursuant to this prospectus will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any proceeds from such sales. The date of this prospectus is , 2011 Table of Contents Summary of the Terms of the Notes The following summary describes the principal terms of the notes and is provided solely for your convenience. For a more detailed description of the notes, see Description of Notes . Securities Offered $430,000,000 aggregate principal amount of 9.750% Senior Notes due 2018. Maturity July 15, 2018. Interest Interest will be payable in cash on January 15 and July 15 of each year. Optional Redemption We may redeem all or a portion of the notes beginning on July 15, 2014. The initial redemption price is 104.875% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. The redemption price will decline each year after 2014 and will be 100% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, beginning on July 15, 2016. At any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes plus a make-whole premium and accrued and unpaid interest, if any, to the redemption date, in each case as described in this prospectus under Description of Notes Optional Redemption . In addition, before July 15, 2013, we may redeem up to 35% of the aggregate principal amount of notes with the proceeds of certain equity offerings at 109.750% of their principal amount plus accrued and unpaid interest, if any, to the redemption date. We may make such redemption only if, after any such redemption, at least 65% of the aggregate principal amount of notes originally issued remains outstanding. Offers to Purchase If we sell certain assets without applying the proceeds in a specified manner or experience certain change of control events, each holder of notes may require us to purchase all or a portion of its notes at the purchase prices set forth in this prospectus, plus accrued and unpaid interest, if any, to the purchase date. See Description of Notes Repurchase at the Option of Holders . Our senior secured credit facilities or other agreements may restrict us from repurchasing any of the notes, including any purchase we may be required to make as a result of a change of control or certain asset sales. See Risk Factors Risks Related to the Notes We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the notes. Ranking The notes will rank equally to all of our other unsecured and unsubordinated indebtedness, but will effectively be junior to all of our secured indebtedness, to the extent of the value of the assets Table of Contents securing that indebtedness. The notes will also be structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. Guarantees The notes will be guaranteed by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities. In addition, subject to certain exceptions, the notes will be guaranteed by all of our future wholly-owned domestic restricted subsidiaries and any other domestic restricted subsidiary that guarantees our senior secured credit facilities. The guarantees will rank equally to all other unsecured and unsubordinated indebtedness of the guarantors, but will be effectively junior to all of the secured indebtedness of the guarantors, to the extent of the value of the assets securing that indebtedness. Certain Covenants The terms of the notes restrict our ability and the ability of our restricted subsidiaries (as described in Description of Notes ) to: incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; purchase or redeem capital stock; make investments or certain other restricted payments; sell assets; issue or sell stock of restricted subsidiaries; enter into transactions with affiliates; or effect a consolidation or merger. However, these limitations will be subject to a number of important qualifications and exceptions. For more information, see Description of Notes Certain Covenants . Use of Proceeds This prospectus is delivered in connection with the sale of notes by Goldman, Sachs & Co. and its affiliates in market-making transactions. We will not receive any of the proceeds from such transactions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001139440_papettis_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001139440_papettis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5018a9e4278945a612ddee141e8e537894afedee
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001139440_papettis_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus. It does not contain all the information that you may consider important in deciding whether to participate in the exchange offer. Therefore, you should read the entire prospectus carefully, including, in particular, the section entitled Risk Factors and the financial statements and the related notes to those statements. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to Michael Foods Group , our company , we , our , ours , us or similar terms refer to Michael Foods Group, Inc., together with its subsidiaries. Michael Foods, Inc., a wholly owned subsidiary of Michael Foods Group, is referred to as Michael Foods . MFI Holding Corporation is referred to as MFI Holding and MFI Midco Corporation is referred to as Parent . The Company We are a diversified producer and distributor of food products in three areas egg products, potato products and cheese and other dairy case products. Our Egg Products Division produces and distributes egg products to the foodservice, retail and food ingredient markets. Our Potato Products Division processes and distributes refrigerated potato products to the foodservice and retail grocery markets in North America. Our Crystal Farms Division markets a broad line of refrigerated grocery products to U. S. retail grocery outlets, including branded and private-label cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods. We have a strategic focus on value-added processing of food products. The strategy is designed to capitalize on key food industry trends, such as (i) the desire for improved safety and convenience, (ii) the focus by foodservice operators on reducing labor and waste, and (iii) the long-term trend toward food consumption away from home, which continues to be slowed somewhat by the recent economic conditions. We believe our operational scale, product breadth and geographic scope make us an attractive and important strategic partner for our customers. The Egg Products Division, comprised of our wholly owned subsidiaries M. G. Waldbaum Company ( Waldbaum ), Papetti s Hygrade Egg Products, Inc. ( Papetti s ), Abbotsford Farms, Inc., and MFI Food Canada Ltd., produces, processes and distributes numerous egg products. Based on management estimates, we believe that our Egg Products Division is the largest processed egg products producer in North America. Our principal value-added egg products are ultrapasteurized, extended shelf-life liquid eggs ( Easy Eggs and Excelle ), egg white based egg products ( All Whites and Better n Eggs ), and hardcooked and precooked egg products ( Table Ready ). Our other egg products include frozen, liquid and dried products that are used as ingredients in other food products, as well as organic and cage free egg products. Our Egg Products Division distributes its egg products to food processors and foodservice customers primarily throughout North America, with limited international sales in the Far East, South America and Europe. Our extended shelf-life liquid eggs (the largest selling product line within the Division) and other egg products are marketed to a wide variety of foodservice and food ingredients customers. The Egg Products Division also is a supplier of egg white-based egg products sold in the U.S. retail and foodservice markets. Our Crystal Farms Division markets a wide range of refrigerated grocery products directly to retailers and wholesale warehouses. We believe that the Crystal Farm Division s strategy of offering quality branded products at a good value relative to national brands has contributed to the Crystal Farm Division s growth. Crystal Farms cheese is positioned in the mid-tier pricing category and is priced below national brands such as Kraft and Sargento and above store brands (private label). The Crystal Farms Division s distributed refrigerated products, which consist principally of cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods, are supplied by various vendors or our other divisions, to Crystal Farms specifications. Cheese accounted for approximately 69% of the Crystal Farms Division s 2010 sales. While we do not produce cheese, we operate a cheese packaging facility in Lake Mills, Wisconsin, which processes and packages various cheese products for our Crystal Farms brand cheese business and for various private-label customers. Table of Contents Table of Additional Registrants Exact Name of Registrant as Specified in its Charter (Or Other Organizational Document) State or Other Jurisdiction of Incorporation or Organization I.R.S Employer Identification Number Address and Telephone Number of Registrant s Principal Executive Offices Abbotsford Farms, Inc. Minnesota 26-1615833 * Casa Trucking, Inc. Minnesota 22-3493806 * Crystal Farms Refrigerated Distribution Company Minnesota 41-1669454 * Farm Fresh Foods, Inc. Nevada 91-2086470 * MFI Food Asia, LLC Delaware 00-0000000 * MFI International, Inc. Minnesota 27-1428245 * Michael Foods, Inc. Delaware 13-4151741 * Michael Foods of Delaware, Inc. Delaware 41-1579532 * Minnesota Products, Inc. Minnesota 41-1394918 * M. G. Waldbaum Company Nebraska 47-0445304 * Northern Star Co. Minnesota 41-1468193 * Papetti s Hygrade Egg Products, Inc. Minnesota 22-3493805 * * Address and telephone number of Registrant s principal executive office is same as that of Michael Foods Group, Inc. The primary industrial classification number for each additional Registrant is 2015. Table of Contents The Crystal Farms Division has expanded its market area using both company-owned and leased facilities and independent distributors. The Crystal Farms Division s market area is the United States, with a large customer concentration in the central United States. We sell our products to a large number of retail stores, a majority of which are served via customers warehouses. The Crystal Farms Division also maintains a fleet of refrigerated tractor-trailers to deliver products daily to its retail customers from nine distribution centers centrally located in its key marketing areas. Our Potato Products Division consists of shredded hash browns and diced, sliced, mashed and other specialty potato products. Refrigerated potato products are produced and sold by our wholly owned subsidiaries, Northern Star Co. ( Northern Star ) and Farm Fresh Foods, Inc. ( Farm Fresh ), to both the foodservice and retail markets. In 2010, approximately 51% of the Potato Products Division s net sales were to the retail market, with the balance to the foodservice market. The Potato Products division sells refrigerated potato products in the United States in the retail grocery market, where they are marketed under the Simply Potatoes brand and in the foodservice market, where they are principally marketed under the Northern Star and Farm Fresh brands. Due to their freshness and quality, refrigerated potato products are generally sold at higher price points than frozen or dehydrated potato products. The Potato Products Division s largest customers include major retail grocery store chains and major foodservice distributors. The Potato Products Division maintains its main processing facility in Minnesota, with a smaller facility located in Nevada. At April 2, 2011 and January 1, 2011, we had total assets of approximately $2,138.1 million and $2,164.1 million, respectively. For the three-month period ended April 2, 2011 and the six-month period ended January 1, 2011, the Company had net sales of approximately $417.1 million and $858.3 million, respectively, and net earnings (loss) of approximately $(0.4) million and $3.3 million, respectively. For the three-month period ended April 2, 2010 and the six-month period ended June 26, 2010, the Predecessor had net sales of approximately $395.3 million and $744.0 million, respectively, and net earnings (loss) of approximately $15.0 million and $(34.3) million, respectively. Corporate History On June 29, 2010, M-Foods Holdings, Inc. and its subsidiaries (the Predecessor ) was merged with and into the Company, with the Company as the surviving entity and MFI Holding as its direct parent. MFI Holding is owned by GS Capital Partners VI Fund, L.P. and its affiliates (collectively, GS Capital Partners ), Thomas H. Lee Partners, L.P. (collectively, THL and together with GS Capital Partners, the Sponsors ) and certain members of management (the Management Stockholders ). Following the merger, GS Capital Partners, THL and the Management Stockholders indirectly own approximately 74%, 21% and 5%, respectively, of the Company. Our Executive Offices Our principal executive offices are located at 301 Carlson Parkway, Suite 400, Minnetonka, Minnesota 55305, and our telephone number at that address is (952) 258-4000. Our website address is www.michaelfoods.com. Information contained on our website is expressly not incorporated by reference into this prospectus. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JULY 15, 2011 PRELIMINARY PROSPECTUS MICHAEL FOODS GROUP, INC. 9.750% Senior Notes due 2018 On June 29, 2010, we issued $430,000,000 9.750% Senior Notes due July 15, 2018 (the Restricted Notes ) in a transaction exempt from the registration requirements of the Securities Act. As part of the issuance of the Restricted Notes, holders were granted benefits pursuant to an exchange and registration rights agreement (the registration rights agreement ) among us, the guarantors and the initial purchasers of the Restricted Notes. To satisfy our obligations under the registration rights agreement, on July 7, 2011, we launched an offer to exchange (the exchange offer ) all Restricted Notes for $430,000,000 9.750% Senior Notes due 2018, the issuance of each of which has been registered under the Securities Act of 1933 (the notes ). The notes bear interest at a rate of 9.750% per annum and mature on July 15, 2018. Interest on the notes is payable on January 15 and July 15 of each year. We have the option to redeem all or a portion of the notes at any time on or after July 15, 2014 at the redemption prices set forth in this prospectus. On or prior to July 15, 2013, we have the option to redeem up to 35% of the notes with proceeds of certain equity offerings at a redemption price equal to 109.750% of their principal amount, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes, plus a make-whole premium and accrued and unpaid interest, if any, to the date of redemption, as described in this prospectus. The notes are guaranteed on a senior unsecured basis by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities and our future subsidiaries that are wholly-owned domestic subsidiaries or that guarantee our senior secured credit facilities (in each case, subject to certain exceptions). The notes effectively rank behind all of our secured debt, including our senior secured credit facilities, to the extent of the value of the assets securing such debt. In addition, the notes are structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. This prospectus includes additional information on the terms of the notes, including redemption and repurchase prices, covenants and transfer restrictions. We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Consider carefully the Risk Factors beginning on page 5 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus has been prepared for and may be used by Goldman, Sachs & Co. and its affiliates in connection with offers and sales of the notes related to market-making transactions in the notes in the secondary market effected from time to time. Goldman, Sachs & Co. and its affiliates may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agents for both. Sales of notes pursuant to this prospectus will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any proceeds from such sales. The date of this prospectus is , 2011 Table of Contents Summary of the Terms of the Notes The following summary describes the principal terms of the notes and is provided solely for your convenience. For a more detailed description of the notes, see Description of Notes . Securities Offered $430,000,000 aggregate principal amount of 9.750% Senior Notes due 2018. Maturity July 15, 2018. Interest Interest will be payable in cash on January 15 and July 15 of each year. Optional Redemption We may redeem all or a portion of the notes beginning on July 15, 2014. The initial redemption price is 104.875% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. The redemption price will decline each year after 2014 and will be 100% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, beginning on July 15, 2016. At any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes plus a make-whole premium and accrued and unpaid interest, if any, to the redemption date, in each case as described in this prospectus under Description of Notes Optional Redemption . In addition, before July 15, 2013, we may redeem up to 35% of the aggregate principal amount of notes with the proceeds of certain equity offerings at 109.750% of their principal amount plus accrued and unpaid interest, if any, to the redemption date. We may make such redemption only if, after any such redemption, at least 65% of the aggregate principal amount of notes originally issued remains outstanding. Offers to Purchase If we sell certain assets without applying the proceeds in a specified manner or experience certain change of control events, each holder of notes may require us to purchase all or a portion of its notes at the purchase prices set forth in this prospectus, plus accrued and unpaid interest, if any, to the purchase date. See Description of Notes Repurchase at the Option of Holders . Our senior secured credit facilities or other agreements may restrict us from repurchasing any of the notes, including any purchase we may be required to make as a result of a change of control or certain asset sales. See Risk Factors Risks Related to the Notes We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the notes. Ranking The notes will rank equally to all of our other unsecured and unsubordinated indebtedness, but will effectively be junior to all of our secured indebtedness, to the extent of the value of the assets Table of Contents securing that indebtedness. The notes will also be structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. Guarantees The notes will be guaranteed by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities. In addition, subject to certain exceptions, the notes will be guaranteed by all of our future wholly-owned domestic restricted subsidiaries and any other domestic restricted subsidiary that guarantees our senior secured credit facilities. The guarantees will rank equally to all other unsecured and unsubordinated indebtedness of the guarantors, but will be effectively junior to all of the secured indebtedness of the guarantors, to the extent of the value of the assets securing that indebtedness. Certain Covenants The terms of the notes restrict our ability and the ability of our restricted subsidiaries (as described in Description of Notes ) to: incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; purchase or redeem capital stock; make investments or certain other restricted payments; sell assets; issue or sell stock of restricted subsidiaries; enter into transactions with affiliates; or effect a consolidation or merger. However, these limitations will be subject to a number of important qualifications and exceptions. For more information, see Description of Notes Certain Covenants . Use of Proceeds This prospectus is delivered in connection with the sale of notes by Goldman, Sachs & Co. and its affiliates in market-making transactions. We will not receive any of the proceeds from such transactions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001139445_northern_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001139445_northern_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5018a9e4278945a612ddee141e8e537894afedee
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001139445_northern_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus. It does not contain all the information that you may consider important in deciding whether to participate in the exchange offer. Therefore, you should read the entire prospectus carefully, including, in particular, the section entitled Risk Factors and the financial statements and the related notes to those statements. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to Michael Foods Group , our company , we , our , ours , us or similar terms refer to Michael Foods Group, Inc., together with its subsidiaries. Michael Foods, Inc., a wholly owned subsidiary of Michael Foods Group, is referred to as Michael Foods . MFI Holding Corporation is referred to as MFI Holding and MFI Midco Corporation is referred to as Parent . The Company We are a diversified producer and distributor of food products in three areas egg products, potato products and cheese and other dairy case products. Our Egg Products Division produces and distributes egg products to the foodservice, retail and food ingredient markets. Our Potato Products Division processes and distributes refrigerated potato products to the foodservice and retail grocery markets in North America. Our Crystal Farms Division markets a broad line of refrigerated grocery products to U. S. retail grocery outlets, including branded and private-label cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods. We have a strategic focus on value-added processing of food products. The strategy is designed to capitalize on key food industry trends, such as (i) the desire for improved safety and convenience, (ii) the focus by foodservice operators on reducing labor and waste, and (iii) the long-term trend toward food consumption away from home, which continues to be slowed somewhat by the recent economic conditions. We believe our operational scale, product breadth and geographic scope make us an attractive and important strategic partner for our customers. The Egg Products Division, comprised of our wholly owned subsidiaries M. G. Waldbaum Company ( Waldbaum ), Papetti s Hygrade Egg Products, Inc. ( Papetti s ), Abbotsford Farms, Inc., and MFI Food Canada Ltd., produces, processes and distributes numerous egg products. Based on management estimates, we believe that our Egg Products Division is the largest processed egg products producer in North America. Our principal value-added egg products are ultrapasteurized, extended shelf-life liquid eggs ( Easy Eggs and Excelle ), egg white based egg products ( All Whites and Better n Eggs ), and hardcooked and precooked egg products ( Table Ready ). Our other egg products include frozen, liquid and dried products that are used as ingredients in other food products, as well as organic and cage free egg products. Our Egg Products Division distributes its egg products to food processors and foodservice customers primarily throughout North America, with limited international sales in the Far East, South America and Europe. Our extended shelf-life liquid eggs (the largest selling product line within the Division) and other egg products are marketed to a wide variety of foodservice and food ingredients customers. The Egg Products Division also is a supplier of egg white-based egg products sold in the U.S. retail and foodservice markets. Our Crystal Farms Division markets a wide range of refrigerated grocery products directly to retailers and wholesale warehouses. We believe that the Crystal Farm Division s strategy of offering quality branded products at a good value relative to national brands has contributed to the Crystal Farm Division s growth. Crystal Farms cheese is positioned in the mid-tier pricing category and is priced below national brands such as Kraft and Sargento and above store brands (private label). The Crystal Farms Division s distributed refrigerated products, which consist principally of cheese, eggs and egg products, bagels, butter, muffins, potato products and ethnic foods, are supplied by various vendors or our other divisions, to Crystal Farms specifications. Cheese accounted for approximately 69% of the Crystal Farms Division s 2010 sales. While we do not produce cheese, we operate a cheese packaging facility in Lake Mills, Wisconsin, which processes and packages various cheese products for our Crystal Farms brand cheese business and for various private-label customers. Table of Contents Table of Additional Registrants Exact Name of Registrant as Specified in its Charter (Or Other Organizational Document) State or Other Jurisdiction of Incorporation or Organization I.R.S Employer Identification Number Address and Telephone Number of Registrant s Principal Executive Offices Abbotsford Farms, Inc. Minnesota 26-1615833 * Casa Trucking, Inc. Minnesota 22-3493806 * Crystal Farms Refrigerated Distribution Company Minnesota 41-1669454 * Farm Fresh Foods, Inc. Nevada 91-2086470 * MFI Food Asia, LLC Delaware 00-0000000 * MFI International, Inc. Minnesota 27-1428245 * Michael Foods, Inc. Delaware 13-4151741 * Michael Foods of Delaware, Inc. Delaware 41-1579532 * Minnesota Products, Inc. Minnesota 41-1394918 * M. G. Waldbaum Company Nebraska 47-0445304 * Northern Star Co. Minnesota 41-1468193 * Papetti s Hygrade Egg Products, Inc. Minnesota 22-3493805 * * Address and telephone number of Registrant s principal executive office is same as that of Michael Foods Group, Inc. The primary industrial classification number for each additional Registrant is 2015. Table of Contents The Crystal Farms Division has expanded its market area using both company-owned and leased facilities and independent distributors. The Crystal Farms Division s market area is the United States, with a large customer concentration in the central United States. We sell our products to a large number of retail stores, a majority of which are served via customers warehouses. The Crystal Farms Division also maintains a fleet of refrigerated tractor-trailers to deliver products daily to its retail customers from nine distribution centers centrally located in its key marketing areas. Our Potato Products Division consists of shredded hash browns and diced, sliced, mashed and other specialty potato products. Refrigerated potato products are produced and sold by our wholly owned subsidiaries, Northern Star Co. ( Northern Star ) and Farm Fresh Foods, Inc. ( Farm Fresh ), to both the foodservice and retail markets. In 2010, approximately 51% of the Potato Products Division s net sales were to the retail market, with the balance to the foodservice market. The Potato Products division sells refrigerated potato products in the United States in the retail grocery market, where they are marketed under the Simply Potatoes brand and in the foodservice market, where they are principally marketed under the Northern Star and Farm Fresh brands. Due to their freshness and quality, refrigerated potato products are generally sold at higher price points than frozen or dehydrated potato products. The Potato Products Division s largest customers include major retail grocery store chains and major foodservice distributors. The Potato Products Division maintains its main processing facility in Minnesota, with a smaller facility located in Nevada. At April 2, 2011 and January 1, 2011, we had total assets of approximately $2,138.1 million and $2,164.1 million, respectively. For the three-month period ended April 2, 2011 and the six-month period ended January 1, 2011, the Company had net sales of approximately $417.1 million and $858.3 million, respectively, and net earnings (loss) of approximately $(0.4) million and $3.3 million, respectively. For the three-month period ended April 2, 2010 and the six-month period ended June 26, 2010, the Predecessor had net sales of approximately $395.3 million and $744.0 million, respectively, and net earnings (loss) of approximately $15.0 million and $(34.3) million, respectively. Corporate History On June 29, 2010, M-Foods Holdings, Inc. and its subsidiaries (the Predecessor ) was merged with and into the Company, with the Company as the surviving entity and MFI Holding as its direct parent. MFI Holding is owned by GS Capital Partners VI Fund, L.P. and its affiliates (collectively, GS Capital Partners ), Thomas H. Lee Partners, L.P. (collectively, THL and together with GS Capital Partners, the Sponsors ) and certain members of management (the Management Stockholders ). Following the merger, GS Capital Partners, THL and the Management Stockholders indirectly own approximately 74%, 21% and 5%, respectively, of the Company. Our Executive Offices Our principal executive offices are located at 301 Carlson Parkway, Suite 400, Minnetonka, Minnesota 55305, and our telephone number at that address is (952) 258-4000. Our website address is www.michaelfoods.com. Information contained on our website is expressly not incorporated by reference into this prospectus. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JULY 15, 2011 PRELIMINARY PROSPECTUS MICHAEL FOODS GROUP, INC. 9.750% Senior Notes due 2018 On June 29, 2010, we issued $430,000,000 9.750% Senior Notes due July 15, 2018 (the Restricted Notes ) in a transaction exempt from the registration requirements of the Securities Act. As part of the issuance of the Restricted Notes, holders were granted benefits pursuant to an exchange and registration rights agreement (the registration rights agreement ) among us, the guarantors and the initial purchasers of the Restricted Notes. To satisfy our obligations under the registration rights agreement, on July 7, 2011, we launched an offer to exchange (the exchange offer ) all Restricted Notes for $430,000,000 9.750% Senior Notes due 2018, the issuance of each of which has been registered under the Securities Act of 1933 (the notes ). The notes bear interest at a rate of 9.750% per annum and mature on July 15, 2018. Interest on the notes is payable on January 15 and July 15 of each year. We have the option to redeem all or a portion of the notes at any time on or after July 15, 2014 at the redemption prices set forth in this prospectus. On or prior to July 15, 2013, we have the option to redeem up to 35% of the notes with proceeds of certain equity offerings at a redemption price equal to 109.750% of their principal amount, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes, plus a make-whole premium and accrued and unpaid interest, if any, to the date of redemption, as described in this prospectus. The notes are guaranteed on a senior unsecured basis by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities and our future subsidiaries that are wholly-owned domestic subsidiaries or that guarantee our senior secured credit facilities (in each case, subject to certain exceptions). The notes effectively rank behind all of our secured debt, including our senior secured credit facilities, to the extent of the value of the assets securing such debt. In addition, the notes are structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. This prospectus includes additional information on the terms of the notes, including redemption and repurchase prices, covenants and transfer restrictions. We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Consider carefully the Risk Factors beginning on page 5 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus has been prepared for and may be used by Goldman, Sachs & Co. and its affiliates in connection with offers and sales of the notes related to market-making transactions in the notes in the secondary market effected from time to time. Goldman, Sachs & Co. and its affiliates may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agents for both. Sales of notes pursuant to this prospectus will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any proceeds from such sales. The date of this prospectus is , 2011 Table of Contents Summary of the Terms of the Notes The following summary describes the principal terms of the notes and is provided solely for your convenience. For a more detailed description of the notes, see Description of Notes . Securities Offered $430,000,000 aggregate principal amount of 9.750% Senior Notes due 2018. Maturity July 15, 2018. Interest Interest will be payable in cash on January 15 and July 15 of each year. Optional Redemption We may redeem all or a portion of the notes beginning on July 15, 2014. The initial redemption price is 104.875% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. The redemption price will decline each year after 2014 and will be 100% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, beginning on July 15, 2016. At any time prior to July 15, 2014, we may redeem all or a portion of the notes at a price equal to 100% of the principal amount of the notes plus a make-whole premium and accrued and unpaid interest, if any, to the redemption date, in each case as described in this prospectus under Description of Notes Optional Redemption . In addition, before July 15, 2013, we may redeem up to 35% of the aggregate principal amount of notes with the proceeds of certain equity offerings at 109.750% of their principal amount plus accrued and unpaid interest, if any, to the redemption date. We may make such redemption only if, after any such redemption, at least 65% of the aggregate principal amount of notes originally issued remains outstanding. Offers to Purchase If we sell certain assets without applying the proceeds in a specified manner or experience certain change of control events, each holder of notes may require us to purchase all or a portion of its notes at the purchase prices set forth in this prospectus, plus accrued and unpaid interest, if any, to the purchase date. See Description of Notes Repurchase at the Option of Holders . Our senior secured credit facilities or other agreements may restrict us from repurchasing any of the notes, including any purchase we may be required to make as a result of a change of control or certain asset sales. See Risk Factors Risks Related to the Notes We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the notes. Ranking The notes will rank equally to all of our other unsecured and unsubordinated indebtedness, but will effectively be junior to all of our secured indebtedness, to the extent of the value of the assets Table of Contents securing that indebtedness. The notes will also be structurally subordinated to all liabilities of our subsidiaries that do not guarantee the notes. Guarantees The notes will be guaranteed by all of our existing wholly-owned domestic restricted subsidiaries that guarantee our senior secured credit facilities. In addition, subject to certain exceptions, the notes will be guaranteed by all of our future wholly-owned domestic restricted subsidiaries and any other domestic restricted subsidiary that guarantees our senior secured credit facilities. The guarantees will rank equally to all other unsecured and unsubordinated indebtedness of the guarantors, but will be effectively junior to all of the secured indebtedness of the guarantors, to the extent of the value of the assets securing that indebtedness. Certain Covenants The terms of the notes restrict our ability and the ability of our restricted subsidiaries (as described in Description of Notes ) to: incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; purchase or redeem capital stock; make investments or certain other restricted payments; sell assets; issue or sell stock of restricted subsidiaries; enter into transactions with affiliates; or effect a consolidation or merger. However, these limitations will be subject to a number of important qualifications and exceptions. For more information, see Description of Notes Certain Covenants . Use of Proceeds This prospectus is delivered in connection with the sale of notes by Goldman, Sachs & Co. and its affiliates in market-making transactions. We will not receive any of the proceeds from such transactions.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001164975_cortina_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001164975_cortina_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001164975_cortina_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001274644_ocera_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001274644_ocera_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..576222bdb4b26f6c7518901b176633416feab9cf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001274644_ocera_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Tranzyme, Inc. We are a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing novel, first-in-class small molecule therapeutics for the treatment of acute (hospital-based) and chronic gastrointestinal, or GI, motility disorders. GI motility disorders are conditions which disrupt the normal movement of food throughout the GI tract. Our two most advanced product candidates, ulimorelin, which is in Phase 3, and TZP-102, which is entering Phase 2b, are being evaluated for the treatment of predominantly upper GI motility disorders. We believe approximately 20 percent of adults worldwide are affected by conditions these product candidates are designed to treat. While upper GI motility disorders are a highly prevalent group of persistent and recurring conditions, there are currently a limited number of treatment options for patients suffering from these conditions. Ulimorelin and TZP-102 target the ghrelin receptor, a novel mechanism of action, with a highly potent and direct role in the stimulation of GI motility. Current and formerly available drugs targeted GI function primarily through either the serotonin or dopamine receptors and have had significant safety issues, resulting in product recalls. We believe our product candidates have the potential to offer a safe and effective treatment for GI motility disorders, an area of significant unmet medical need. Ulimorelin (Intravenous Ghrelin Agonist) Ulimorelin is an intravenous ghrelin agonist in Phase 3 clinical development for the management of postoperative ileus, or POI. POI refers to lack of GI motility after surgery before normal bowel function resumes. POI is associated most commonly with major abdominal surgery, such as bowel resection, where some degree of POI occurs universally in these patients. There are an estimated 360,000 bowel resection surgeries performed annually in the United States. Ulimorelin is intended to be administered to these patients shortly after surgery to accelerate the return of normal GI function. In addition, we plan to expand our ulimorelin development program to evaluate the ability of ulimorelin to enhance recovery of GI function in patients suffering from other acute GI motility disorders, such as gastric stasis. Ulimorelin is administered intravenously, the ideal method of delivery in patients hospitalized with these conditions. To date, we have conducted six clinical trials of ulimorelin involving 577 subjects, 365 of whom received ulimorelin. The results of these trials support our belief that ulimorelin will be a safe and effective treatment for improving multiple symptoms associated with acute GI motility disorders. In our Phase 2 POI trial, GI recovery following partial bowel resection surgery was accelerated by approximately 24 hours in patients receiving ulimorelin, as compared to those receiving placebo. In addition, we observed a favorable safety profile for ulimorelin. We have begun dosing in two multinational Phase 3 trials for the management of POI. Each trial will enroll 300 patients and will be conducted at approximately 50 sites in North America and Europe. Based on discussions with the U.S. Food and Drug Administration, or FDA, at our End of Phase 2 meeting, and the advice we received from the European Medicines Agency, or EMA, the primary endpoint for our Phase 3 program will be acceleration of GI recovery in patients undergoing partial bowel resection. In addition, we plan to expand our ulimorelin development program to the treatment of gastric stasis in critical care patients. AMENDMENT NO. 4 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents TZP-102 (Oral Ghrelin Agonist) TZP-102 is an orally-administered ghrelin agonist that we are developing for diabetic gastroparesis, an upper GI motility disorder. Gastroparesis is a debilitating, chronic condition characterized by slow or delayed gastric emptying and gastric retention that can be caused by any disease that induces neuromuscular dysfunction of the GI tract, notably diabetes. Up to 4% of the population in the United States experiences symptomatic manifestations of gastroparesis. There are currently no safe and effective therapies on the market for treating this disorder. As a result, the FDA granted TZP-102 fast track status for the treatment of gastroparesis in diabetic patients. The fast track program is an expedited regulatory review process and is available only for a new drug intended to treat a serious condition that also demonstrates the potential to address unmet medical needs for that condition. Approximately 19.9 million patients with diabetes suffer from gastroparesis worldwide. We evaluated the efficacy and safety of TZP-102 in a 28-day, proof of concept Phase 2 trial of 92 patients with diabetic gastroparesis. TZP-102 was observed to be effective in improving the most prevalent and clinically relevant symptoms associated with gastroparesis in this patient population, including reduction in nausea, early satiety, bloating and upper abdominal pain. In addition we observed a favorable safety profile for TZP-102. We expect to commence a 12-week, Phase 2b trial for the treatment of diabetic gastroparesis in the third quarter of 2011 and to evaluate TZP-102 for the treatment of other upper GI disorders such as functional dyspepsia and refractory gastroesophageal reflux disease, or refractory GERD. Our Technology and Other Product Candidates All of our product candidates have been discovered by our scientists using our proprietary chemistry technology platform, which enables us to construct synthetic libraries of drug-like, macrocyclic compounds in a predictable and efficient manner. In addition to our two clinical stage candidates, we are also developing a motilin antagonist, TZP-201, for the treatment of various forms of moderate-to-severe diarrhea, and a ghrelin antagonist, TZP-301, for the treatment of obesity and other metabolic diseases. We are planning to ultimately move both compounds into clinical development. Our Strategic Partnerships In June 2010, we entered into a license agreement with Norgine B.V., or Norgine, a leading, GI-focused European specialty pharmaceutical company, that provides Norgine with exclusive rights to develop and commercialize ulimorelin in Europe, Australia, New Zealand, Middle East, North Africa and South Africa. We retain rights to ulimorelin in all other territories, including North America, South America and all of Asia. The license permits Norgine to develop and commercialize ulimorelin only in injectable formulations. Norgine will share the cost of our Phase 3 clinical trials and the cost of procuring clinical manufacturing supply for the trials. In addition, we would receive milestone payments and royalties from the sale of ulimorelin in Norgine's territories. In December 2009, we entered into a strategic collaboration with Bristol-Myers Squibb Company, or BMS, to discover, develop and commercialize additional novel compounds discovered using our proprietary chemistry technology platform, other than our product candidates and internal programs, against a limited number of targets of interest to BMS. Under the terms of the agreement, BMS is funding our early lead discovery efforts on these targets and is also primarily responsible for optimizing the identified lead compounds. BMS will be solely responsible for preclinical and clinical development of all the products arising from this collaboration and for their commercialization globally. We would be entitled to development and regulatory milestone and royalty payments. TRANZYME, INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) 63-1192270 (I.R.S. Employer Identification Number) 4819 Emperor Boulevard, Suite 400 Durham, NC 27703 (919) 313-4760 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Vipin K. Garg, Ph.D. President and Chief Executive Officer Tranzyme, Inc. 4819 Emperor Boulevard, Suite 400 Durham, NC 27703 Telephone: (919) 313-4760 Facsimile: (919) 313-4700 Table of Contents Business Strategy Our objective is to develop and bring to market products to treat acute and chronic GI motility disorders that are not satisfactorily or safely treated with current therapies and that represent significant market opportunities. Our business strategy is to: continue development and pursue regulatory approval for our product candidates; pursue additional indications for ulimorelin and TZP-102; explore partnerships to accelerate and maximize the potential of our product candidates while preserving significant commercialization rights; explore building in-house capabilities that will allow us to effectively commercialize ulimorelin in the United States; and leverage our proprietary chemistry technology platform to discover, develop and commercialize a pipeline of first-in-class products in collaboration with discovery partners. We believe the quality as well as the breadth of our product candidate pipeline, technology platform, strategic collaborations and scientific team will enable us to become one of the leading companies focused on treating GI motility disorders. Risk Associated with our Business Our ability to implement our business strategy is subject to numerous risks and uncertainties. As an early stage pharmaceutical company, we face many risks inherent in our business and our industry, as more fully described in the section entitled "Risk Factors" immediately following this prospectus summary, including the following: We currently have no commercial products and we have not submitted any new drug applications, or NDAs, with the FDA, nor have we received regulatory approval for any of our product candidates in any jurisdiction. In addition, we have not generated commercial revenue from any of our product candidates. The regulatory approval process is expensive, time-consuming and uncertain, and our product candidates may not be approved for sale by regulatory authorities. Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties and may never achieve profitability. Any termination or suspension of, or delays in the commencement or completion of, clinical testing of our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospect. It may be difficult and costly to protect our patents and other intellectual property rights, and we cannot ensure the protection of these rights from third parties. We have a history of losses and anticipate that we will continue to incur additional losses for the foreseeable future. We are dependent on our strategic partners for the development and commercialization of our product candidates and the failure of any of these partners to perform its obligations or the termination of our agreements with these partners could delay the development and commercialization of our product candidates. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading "Risk Factors," prior to making an investment in our common stock. Copies to: Mitchell S. Bloom Joseph C. Theis Goodwin Procter LLP Exchange Place Boston, MA 02109 Telephone: (617) 570-1000 Facsimile: (617) 523-1231 Richard I. Eisenstadt VP, Finance and Chief Financial Officer Tranzyme, Inc. 4819 Emperor Boulevard, Suite 400 Durham, NC 27703 Telephone: (919) 313-4760 Facsimile: (919) 313-4700 Paul M. Kinsella Ropes & Gray LLP Prudential Tower 800 Boylston Street Boston, MA 02199 Telephone: (617) 951-7000 Facsimile: (617) 951-7050 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated Filer (Do not check if a smaller reporting company) Smaller reporting company The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine. Table of Contents Company Information In 1998, we formed Tranzyme, Inc., a Delaware corporation, the entity through which we conduct our operations in the United States. In December 2003, we entered into a business combination with Neokimia Inc., a Quebec, Canada based chemistry company, and changed its name to Tranzyme Pharma Inc., or Tranzyme Pharma. Following completion of this offering, Tranzyme Pharma will be our wholly-owned subsidiary. We are headquartered in Durham, North Carolina, with offices also in Canada. Our principal executive offices are located at 4819 Emperor Boulevard, Suite 400, Durham, North Carolina 27703, and our telephone number is (919) 313-4760. "Tranzyme," "Tranzyme Pharma" and MATCH are trademarks or servicemarks of Tranzyme, Inc. Other trademarks or servicemarks appearing in this prospectus are the property of their respective holders. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED APRIL 1, 2011 PRELIMINARY PROSPECTUS 13,500,000 Shares Tranzyme, Inc. Common Stock $4.00 per share Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001289956_atlas_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001289956_atlas_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001289956_atlas_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001289960_beall_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001289960_beall_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001289960_beall_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001301206_ecotality_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001301206_ecotality_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001301206_ecotality_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001310114_concentrix_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001310114_concentrix_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001310114_concentrix_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001311230_terravia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001311230_terravia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001311230_terravia_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001320219_horizon_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001320219_horizon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001320219_horizon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001338042_aegerion_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001338042_aegerion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d49b3e0d2146a38334bec3b26bd530a7ed4d0f00
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001338042_aegerion_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the Risk Factors section and the financial statements and related notes appearing at the end of this prospectus. Our Company We are an emerging biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat severe lipid disorders. Lipids are naturally occurring molecules, such as cholesterol and triglycerides that are transported in the blood. Our lead compound, lomitapide, is a microsomal triglyceride transfer protein inhibitor, or MTP-I, which limits secretion of cholesterol and triglycerides from the intestines and the liver, the main sources of circulating lipids in the body. We are initially developing lomitapide as an oral, once-a-day treatment for patients with a rare genetic lipid disorder called homozygous familial hypercholesterolemia, or HoFH. These patients are at very high risk of experiencing life threatening events at an early age as a result of extremely elevated cholesterol levels in the blood and, as a result have a substantially reduced life span relative to unaffected individuals. We believe that lomitapide, either on a stand-alone basis or in combination with other drugs, has the potential to help these patients achieve recommended target levels of low-density lipoprotein cholesterol, or LDL-C. We are currently evaluating lomitapide in a pivotal Phase III clinical trial for the treatment of patients with HoFH. On May 31, 2011, we announced the results of this trial, through 56 weeks of treatment. We believe based on our prior discussions with the U.S. Food and Drug Administration, or FDA, that these results demonstrate sufficient long-term safety and efficacy to support the submission of our New Drug Application, or NDA, for lomitapide. We refer to these week 56 results as our Filing Data, and we will later supplement the Filing Data with data reflecting the full 78-week trial duration. Before we can submit an NDA, we must complete additional clinical and non-clinical studies to assess various other aspects of lomitapide. On June 15, 2011, we met with the FDA, which informed us that it is not opposed to our submitting our NDA based on the Filing Data. We plan to submit our NDA to the FDA and a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, before the end of 2011. Assuming we obtain approval, in anticipation of our commercial launch of lomitapide initially in the United States and European Union, we have begun to recruit a team of sales representatives and medical education specialists who are experienced in marketing drugs for the treatment of rare, often genetic, disorders. We initially plan to hire a medical education, marketing and sales force of approximately 15 people in the United States and approximately 18 people in the European Union. We also are evaluating other markets to determine other geographies where we will commercialize lomitapide, either alone or in partnership with others. We are planning a Phase III pediatric clinical trial to evaluate lomitapide for the treatment of pediatric and adolescent patients (> 7 to < 18 years of age) with HoFH. In addition to HoFH, we are also in the process of developing a protocol for a Phase III clinical trial of lomitapide for the treatment of adult patients with a severe genetic form of elevated triglycerides, or hypertriglyceridemia, called familial chylomicronemia, or FC. In October 2010, the EMA granted lomitapide orphan drug designation for the treatment of FC. In March 2011, the FDA granted lomitapide orphan drug designation for the same indication. In October 2007, the FDA granted lomitapide orphan drug designation for the treatment of HoFH. In the United States, orphan drug designation is given to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. If our NDA for lomitapide receives the first FDA approval for the disease for which it has such designation, it is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. The EMA generally grants orphan drug designation to drugs that may offer therapeutic benefits for life-threatening or chronically debilitating conditions affecting not more than five in Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JUNE 20, 2011 PRELIMINARY PROSPECTUS 4,250,000 Shares Common Stock We are offering 3,250,000 shares of common stock, and the Selling Stockholders identified in this prospectus are offering an additional 1,000,000 shares of our common stock. We will not receive any of the proceeds from the sale of the shares being sold by the Selling Stockholders. Our common stock is quoted on The NASDAQ Global Market under the symbol AEGR. On June 17, 2011, the last reported sale price of our common stock was $17.72 per share. Investing in our common stock involves risks. See Risk Factors beginning on page 9. Per Share Total Public offering price $ $ Underwriting discounts and commissions $ $ Proceeds, before expenses, to us $ $ Proceeds, before expenses, to the Selling Stockholders $ $ The underwriters may also purchase up to an additional 637,500 shares from us and certain of the Selling Stockholders, at the public offering price, less the underwriting discounts and commissions, within 30 days of the date of this prospectus to cover over-allotments, if any. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $ , total proceeds to the Selling Stockholders, before expenses, will be $ , and total proceeds to us, before expenses, will be $ . Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of common stock on or about , 2011. Joint Book-Running Managers Jefferies Deutsche Bank Securities Co-Managers Leerink Swann Needham & Company, LLC Collins Stewart The date of this prospectus is , 2011. Table of Contents 10,000 people in the European Union. In the European Union, orphan drug designation provides ten years of market exclusivity following drug approval, although the exclusivity period may be reduced to six years if the designation criteria are no longer met. To date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue unless and until we obtain marketing approval of, and commercialize, lomitapide. As of March 31, 2011, we had an accumulated deficit of $97.8 million. Lomitapide We are currently evaluating lomitapide in an ongoing pivotal Phase III clinical trial for the treatment of patients with HoFH. We completed enrollment for this single-arm, open-label trial in March 2010 with a total of 29 patients. Three of these patients withdrew their consent to participate in the trial and three patients discontinued treatment due to gastrointestinal adverse events. The 23 patients remaining in the trial have completed the 26 week period of therapy after which the primary efficacy endpoint was measured, and the 56 week period of therapy during which the Filing Data were collected. As of the date of this prospectus, 19 of these patients have completed the entire 78 weeks of the trial. We expect to complete this trial in the third quarter of 2011. Researchers at the University of Pennsylvania, or UPenn, completed a Phase II clinical trial of lomitapide for the treatment of patients with HoFH in 2004. In addition to the UPenn trial, lomitapide has been evaluated in 13 Phase I and five Phase II clinical trials. A total of 915 patients were treated with lomitapide in these Phase I and Phase II trials, including the patients in the UPenn trial. Currently, there are no MTP-Is approved by the FDA for any indication. Early clinical trials of lomitapide produced meaningful percent reductions in LDL-C levels, but patients discontinued use of lomitapide at a high rate due to gastrointestinal adverse events, such as diarrhea, nausea and vomiting. In addition, a small proportion of patients experienced elevations in liver enzymes and increased mean levels of fat in the liver, or hepatic fat, both of which have also been observed in our ongoing pivotal Phase III clinical trial of lomitapide for the treatment of patients with HoFH. We believe the high rate of discontinuations due to gastrointestinal adverse events in the early clinical trials of lomitapide resulted in large part from the failure to employ dose titration, which is the gradual increase in dosing over time to allow the body to adapt to the impact of a higher dose coupled with a low fat diet. Patients in our ongoing pivotal Phase III clinical trial of lomitapide for the treatment of patients with HoFH, where dose titration has been employed, have also experienced adverse gastrointestinal events, but to a lesser extent than those experienced in the earlier clinical trials. Patient Populations of Interest We are initially developing lomitapide for the treatment of the small number of patients with the rare genetic disorder HoFH. Patients with untreated HoFH have extremely high LDL-C levels, typically between 500 mg/dL and 1,000 mg/dL, and, as a result, are at severely high risk of experiencing premature cardiovascular events, such as a heart attack or stroke. In a report that we commissioned, L.E.K. Consulting LLC, or LEK, an international business consulting firm, estimated that the total number of addressable patients with symptoms consistent with HoFH in each of the United States and, collectively, Germany, the United Kingdom, France, Italy and Spain, which are referred to in this prospectus as the European Union Five, is approximately 3,000 patients, or a combined total of approximately 6,000 patients. LEK s estimate of the addressable patient population is primarily based on, among other things, physician estimates of patients who have symptoms customarily present in patients definitively diagnosed with HoFH, meaning patients with one of the following: (i) documented functional mutations in both LDL receptor alleles or alleles known to affect LDL receptor functionality, (ii) skin fibroblast LDL receptor activity that is 20 percent less than normal, (iii) untreated total cholesterol greater than 500 mg/dL and triglycerides less than 300 mg/dL with both parents having documented total cholesterol greater than 250 mg/dL or (iv) average fasting LDL-C greater than 300 mg/dL on maximally tolerated lipid lowering therapy as decided by the treating physician. Our pivotal Phase III clinical trial specifically included patients Table of Contents TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001345801_nuveen_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001345801_nuveen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7c45877c3cbd38e2b98f530ec6d708367348b506
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001345801_nuveen_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary This is only a summary. You should review the more detailed information contained elsewhere in this prospectus, including the Glossary appearing at the end of Part Two: Statement of Additional Information, which contains explanations of capitalized or other frequently used terms, to understand the offering fully. The Fund Nuveen Diversified Commodity Fund (the Fund ) is a commodity pool. The Fund was organized as a Delaware statutory trust on December 7, 2005, and commenced its investment activities on September 30, 2010 following the completion of its initial public offering. The Fund operates pursuant to an Amended and Restated Trust Agreement ( Trust Agreement ), which is described under Trust Agreement. The Fund is managed by Nuveen Commodities Asset Management, LLC ( NCAM or the manager ), a limited liability company which is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission (the CFTC ). The Fund s shares, which represent units of fractional undivided beneficial interest in, and ownership of, the Fund, may be purchased and sold on the NYSE Amex. The principal offices of the Fund and the manager are each located at 333 West Wacker Drive, Suite 3300, Chicago, Illinois 60606. The main telephone number of the Fund and the manager is (312) 917-7700. Information about the Fund also can be obtained by calling (877) 827-5920. Listing The Fund s shares are listed and trade on the NYSE Amex under the trading or ticker symbol CFD. Secondary market purchases and sales of shares are subject to ordinary brokerage commissions and charges. The Offering The Fund is offering [ ] shares at $[ ] per share through a group of underwriters led by UBS Investment Bank ( UBS ) and Nuveen Securities, LLC ( Nuveen ). The Fund had 9,267,040 shares outstanding as of March 31, 2011. You must purchase at least 100 shares in this offering. The Fund has given the underwriters an option to purchase up to [ ] additional shares to cover orders in excess of [ ] shares. See Underwriting. The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to Completion June 8, 2011 Shares Nuveen Diversified Commodity Fund Common stock The Nuveen Diversified Commodity Fund (the Fund ) is a commodity pool. The Fund s shares represent units of fractional undivided beneficial interest in and ownership of the Fund. The Fund s investment objective is to generate higher risk-adjusted total return than leading commodity market benchmarks and passively managed commodity funds. In pursuing its investment objective, the Fund invests directly in a diversified portfolio of commodity futures and forward contracts to obtain broad exposure to all principal groups in the global commodity markets. The Fund is unleveraged, and the Fund s commodity contract positions are fully collateralized with cash equivalents and short-term, high grade debt securities. The Fund also writes commodity call options seeking to enhance the Fund s risk-adjusted total return. The Fund s investment strategy is discussed further starting on page 3. Nuveen Commodities Asset Management, LLC is the manager of the Fund. Gresham Investment Management LLC is responsible for investing the Fund s assets in commodity futures and forward contracts and implementing the options strategy. Nuveen Asset Management, LLC, an affiliate of the manager, is responsible for the Fund s investments in debt securities used as collateral. Investing in the Fund involves significant risks. See Risk factors starting on page 22. Because the Fund has only recently commenced business, its shares have a limited public trading history and the Fund has a limited performance history. Fund shares are subject to investment risk, including the possible loss of the entire amount of your investment. Investments in commodities have a high degree of price variability, and are subject to rapid and substantial price changes. The Fund may not be able to achieve its investment objective. The Fund s shares are listed on the NYSE Amex, under the trading or ticker symbol CFD. As of [ ], 2011, the last reported sale price of the shares on the NYSE Amex was $[ ] per share. THE FUND IS NOT A MUTUAL FUND, A CLOSED-END FUND, OR ANY OTHER TYPE OF INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER. THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. This prospectus is in two parts: a disclosure document and a statement of additional information. These parts are bound together and both contain important information. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Share Total(2) Public offering price $ $ Underwriting discounts and commissions $ $ Proceeds, before expenses, to the Fund(1) $ $ (1) Total offering expenses relating to issuance and distribution to be paid by the Fund (other than underwriting commissions) are estimated to be approximately $ , which represents approximately $ per share. After payment of such expenses relating to issuance and distribution (other than underwriting commissions), proceeds to the Fund will be $ per share. (2) The Fund has granted the underwriters an option to purchase up to additional shares at the public offering price less the Underwriting Commissions within 30 days from the date of this prospectus, solely to cover overallotments, if any. If such option is exercised in full, the total Public Offering Price, Underwriting Commissions, Estimated Offering Expenses and Proceeds to the Fund will be $ , $ , $ and $ , respectively. See Underwriting. The underwriters are offering the common stock as set forth in Underwriting. Delivery of the shares will be made on or about , 2011. UBS Investment Bank Nuveen Securities, LLC The date of this prospectus is , 2011. Use of Proceeds The Fund will invest the net proceeds of the offering in accordance with the Fund s investment objective as stated in this prospectus. The Fund invests all of its assets in commodity futures and forward contracts, options on commodity futures and forward contracts and short-term high grade debt securities constituting collateral assets. It is presently anticipated that the Fund will be able to invest substantially all of the net proceeds of this offering in accordance with its investment objective within approximately seven business days after the completion of the offering. Who May Want to Invest You should consider your investment goals, time horizons and risk tolerance before investing in the Fund. An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle. The Fund is the first actively managed fund to be listed on any of the exchanges owned by NYSE Euronext that invests primarily in a diversified portfolio of commodity futures and options contracts. The Fund may be an appropriate investment for you if you are seeking the potential for: Exposure to commodity futures and forward contracts with an actively managed, diversified portfolio strategy; Regular monthly distributions; Attractive risk-adjusted returns as compared with passively managed commodity funds; A fully collateralized and unleveraged commodity investment strategy; Access to underlying investments that generally qualify as Section 1256 Contracts which generate gains (losses) that are characterized as 60% long-term capital gains (losses) and 40% short-term capital gains (losses); A more consistent hedge against inflation than U.S. equities, foreign equities or U.S. bonds; Investment in an asset class with historically low correlations to equities and bonds; Access to the commodity subadvisor s commodity expertise and TAP strategy (as described and defined below); and Daily liquidity afforded by listing on the NYSE Amex. COMMODITY FUTURES TRADING COMMISSION Risk disclosure statement YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 20-21 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 18-19. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 22-33. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. However, keep in mind that you will need to assume the risks associated with an investment in the Fund. See Risk factors. Investment Objective The Fund s investment objective is to generate higher risk-adjusted total return than leading commodity market benchmarks and passively managed commodity funds. Risk-adjusted total return refers to the income and capital appreciation generated by a portfolio (the combination of which equals its total return) per unit of risk taken, with such risk measured by the volatility of the portfolio s total returns over a specific period of time. See The Fund s investments beginning on page 34 for a discussion of risk-adjusted total return. In pursuing its investment objective, the Fund invests directly in a diversified portfolio of commodity futures and forward contracts to obtain broad exposure to all principal groups in the global commodity markets. The Fund s investment strategy has three elements: An actively managed portfolio of commodity futures and forward contracts utilizing the commodity subadvisor s proprietary Tangible Asset Program , referred to herein as TAP ; An integrated program of writing commodity call options (the options strategy ) designed to enhance risk-adjusted total return of the Fund s commodity investments; and A collateral portfolio of cash equivalents and short-term, high grade debt securities. The Fund s strategy, which integrates TAP and writing commodity call options, is referred to as TAP PLUSSM. The Fund cannot assure you that it will achieve its investment objective. The Fund s risk-adjusted returns over any particular period may be positive or negative. See Risk factors and The Fund s investments. Investment Strategy Commodity Investments. The manager has selected Gresham Investment Management LLC ( Gresham or the commodity subadvisor ) to manage the Fund s commodities investment strategy and its options strategy. The commodity subadvisor actively manages the Fund s portfolio of commodity futures and forward contracts pursuant to TAP , a fully Other regulatory notices THE BOOKS AND RECORDS OF THE FUND WILL BE MAINTAINED AT THE OFFICES OF NUVEEN COMMODITIES ASSET MANAGEMENT, LLC, OR ITS ADMINISTRATIVE AGENT AND WILL OTHERWISE BE MAINTAINED IN ACCORDANCE WITH THE RULES OF THE COMMODITY FUTURES TRADING COMMISSION. THIS POOL BEGAN TRADING ON SEPTEMBER 30, 2010 AND HAS A LIMITED PERFORMANCE HISTORY. NEITHER THIS POOL OPERATOR NOR ANY OF ITS TRADING PRINCIPALS HAS PREVIOUSLY OPERATED ANY OTHER POOLS OR TRADED ANY OTHER ACCOUNTS. THE COMMODITY SUBADVISOR HAS PREVIOUSLY OPERATED A POOL AND TRADED OTHER ACCOUNTS. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THE FUND HAS NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY UPON IT. THE FUND IS NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS. collateralized, long-only rules-based commodity investment strategy. The Fund invests in a diversified portfolio of commodity contracts with an aggregate notional value substantially equal to the net assets of the Fund. TAP is designed to maintain consistent, fully collateralized exposure to commodities as an asset class. The Fund makes commodity investments in the six principal commodity groups in the global commodities markets: energy; industrial metals; agriculturals; precious metals; foods and fibers; and livestock. See The Fund s investments on pages 34-39 for a list of commodity futures and forward contracts that the Fund may invest in and the exchanges on which they currently trade with the greatest dollar volume. The Fund also may invest in other commodity contracts that are presently, or may hereafter become, the subject of commodity futures investing. Except for certain limitations described herein, there are no restrictions or limitations on the specific commodity investments in which the Fund may invest. Gresham bases its investment decisions on three inputs: (i) systematic calculations of the values of global commodity production; (ii) total U.S. dollar trading volume on commodity futures and forwards exchanges; and (iii) global import/export trade values. The specific commodities in which the Fund invests, and the relative target weighting of those commodities, are determined annually by the commodity subadvisor. The target weights are expected to remain unchanged until the next annual determination in January. The Fund s portfolio concentration in any single commodity or commodity group is limited in an attempt to moderate volatility. The Fund currently intends to limit the target weightings of each commodity group such that no one group s target weighting may constitute more than 35% of TAP , no two groups combined target weightings may constitute more than 60% of TAP and no single commodity s target weighting can constitute more than 70% of its group. Under normal market circumstances, the commodity subadvisor avoids exercising discretion with respect to portfolio weights between such annual determinations. However, the actual portfolio weights may vary during the year and may in certain circumstances be rebalanced subject to TAP s rule-based procedures. Generally, the Fund invests in short-term commodity futures and forward contracts with terms of one to three months, but it may invest in commodity contracts with terms of up to six months. See Management of the Fund Manager and subadvisors Commodity subadvisor. Gresham believes that the relative performance of strategies that invest in exchange-traded commodity futures and forward contracts may be enhanced through active implementation of the rolls of commodity contracts as they are about to expire. Gresham regularly purchases and subsequently sells, i.e. rolls, individual commodity futures and forward contracts throughout the year so as to maintain a fully invested position. As the commodity contracts near their expiration dates, Gresham rolls them over into new contracts. Gresham seeks to add value compared with leading commodity market benchmarks and passively managed commodity funds by actively managing the implementation of the rolls of the commodity contracts. As a result, the roll dates, terms and contract prices selected by Gresham may vary based upon Gresham s judgment of the relative value of different contract terms. Gresham s active management approach is market-driven and opportunistic and is intended to minimize market impact and avoid market congestion during certain days of the trading month. The Fund s investments in commodity futures and forward contracts and options on commodity futures and forward contracts generally do not require significant outlays of principal. Approximately 25% of the Fund s assets are initially committed as initial and variation margin to secure the long futures and forward contract positions. These assets are placed in one Page Authority of the manager 96 Withdrawal and removal of the manager 97 Shareholder meetings 97 Indemnification of the manager 97 Manager expenses 98 Limited liability 98 Expenses 99 The Manager s duties and remedies 99 Provisions of law 99 Termination events 100 Books and records 101 Statements, filings, and reports 101 Fiscal year 102 Amendments to the trust agreement 102 Governing law 102 Legal matters 103 Experts 103 Recent financial information and annual reports 103 Privacy policy 104 Federal income tax considerations 105 Status of the Fund 106 U.S. shareholders 106 Treatment of Fund income 106 Allocation of the Fund s profits and losses 108 Monthly allocation convention 109 Section 754 election 109 Constructive termination 110 Page Treatment of cash distributions 110 Disposition of shares 110 Tax basis in Fund shares 110 Limitations on interest deductions 110 Organization, syndication and other expenses 111 Passive activity income and loss 111 Tax reporting by the Fund 111 Treatment of securities lending transactions involving shares 112 Audits and adjustments to tax liability 112 Foreign tax credits 112 Reportable transactions 113 Non-U.S. shareholders 113 Regulated investment companies 114 Tax-exempt organizations 114 Backup withholding 115 Other tax considerations 116 Where you can find more information 116 PART TWO: STATEMENT OF ADDITIONAL INFORMATION General information 117 The commodity markets 117 Debt securities 124 Glossary of defined terms 125 Report of independent registered public accounting firm F-1 FINANCIAL STATEMENTS F-2 This prospectus contains information you should consider when making an investment decision about the shares. You should rely only on the information contained or incorporated by reference in this prospectus. None of the Fund, the manager nor the underwriters have authorized any person to provide you with different information and, if anyone provides you with different or inconsistent information, you should not rely on it. The Fund is not, the manager is not, and the underwriters are not making an offer to sell the shares in any jurisdiction where the offer or sale of the shares is not permitted. You should not assume that the information in this prospectus is current as of any date other than the date on the front page of this prospectus. The current prospectus for this offering, which may be updated from time to time pursuant to Securities and Exchange Commission and Commodity Futures Trading Commission requirements, is available at the Fund s website (http://www.nuveen.com) as well as at the Securities and Exchange Commission s website (http://www.sec.gov). II-2 or more commodity futures accounts maintained by the Fund at Barclays Capital Inc. ( BCI ), the Fund s clearing broker, and are held in cash or invested in U.S. Treasury bills and other direct or guaranteed debt obligations of the U.S. government maturing within less than one year at the time of investment. The remaining collateral (approximately 75%) is held in a separate collateral investment account managed by Nuveen Asset Management, LLC ( Nuveen Asset Management or the collateral subadvisor ). See Collateral Investments on page 7. Most of the commodity futures and options contracts acquired to facilitate implementing the investment strategy are exchange-listed and generally qualify as Section 1256 Contracts for tax purposes. See Federal income tax considerations. Options Strategy. The Fund s option strategy is designed to enhance the risk-adjusted total return of the Fund s commodity investments. Pursuant to the options strategy, the Fund, at Gresham s discretion, writes (sells) exchange-traded commodity call options that may be up to 20% out-of-the-money on a continual basis up to approximately 50% of the notional value of each of its commodity futures and forward contract positions that, in Gresham s determination, have sufficient option trading volume and liquidity. A call option gives its owner (buyer) the right but not the obligation to buy the underlying futures contract at a particular price, known as the strike price, at anytime between the purchase date and the expiration date of the option. The person who writes (sells) the option to the buyer is thus required to fulfill the contractual obligation (by selling the underlying futures contract to the buyer at the strike price) should the option be exercised. If the option is covered, the writer (seller) has an offsetting futures position. The Fund currently expects to sell commodity call options on approximately 50% of the notional value of its commodity futures and forward contract positions. The Fund currently expects to write short-term commodity call options with terms of one to three months but may write commodity call options with terms up to one year. Subject to the foregoing limitations, the implementation of the options NUVEEN DIVERSIFIED COMMODITY FUND Principal Participants (1) UBS Investment Bank and Nuveen Securities, LLC (formerly known as Nuveen Investments, LLC), a wholly owned subsidiary of Nuveen Investments, Inc. will act as lead underwriters and may engage dealers who are members of the Financial Industry Regulatory Authority, Inc. ( FINRA ) to participate in the selling group. (2) Each of the subadvisory agreements are among the manager, the Fund and the respective subadvisor. (3) NCAM and Nuveen Asset Management are wholly owned subsidiaries of Nuveen Investments, Inc. NCAM owns 840 shares of the Fund. II-3 strategy is within Gresham s discretion. Over extended periods of time, the term and the out-of-the-moneyness of the commodity options may vary significantly. The Fund also may write call options on baskets of commodities or on broad-based commodity indices, such as the Dow Jones-UBS Commodity Index ( DJ-UBSCI ) or the S&P GSCI Commodity Index ( GSCI ), whose prices are expected to closely correspond to at least a substantial portion of the commodity futures and forward contracts held by the Fund. The Fund currently does not intend to purchase commodity put options, but may do so in the future. NCAM and the commodity subadvisor believe that the Fund s options strategy can provide the potential for current gains from option premiums, which may meaningfully reduce return volatility. The goal is to enhance the Fund s risk-adjusted total returns relative to the returns of leading commodity market benchmarks over extended periods of time. In up markets, the portion of the Fund on which call options have been sold will forego potential appreciation in the value of the underlying contracts to the extent the price of those contracts exceeds the exercise price of options written plus the premium collected by writing the call options. In flat or sideways markets, the portion of the Fund on which call options have been sold will generate current gains from the premium collected by writing the call options. In down markets, the Fund will experience declines in the value of the underlying contracts to the extent that the amount of the decline in the value of the underlying contracts exceeds the option premium collected by writing the call options. There can be no assurance that the Fund s options strategy will be successful. The Fund s risk-adjusted returns over any particular period may be positive or negative. See The Fund s investments Overview of investment strategy. Collateral Investments. The Fund s investments in commodity futures and forward contracts and options on commodity futures and forward contracts generally do not require significant outlays of principal. Approximately 25% of the Fund s assets are committed as initial and variation margin to secure the long futures and forward contract positions. These assets are placed in one or more commodity futures accounts maintained by the Fund at BCI and are held in cash or invested in U.S. Treasury bills and other direct or guaranteed debt obligations of the U.S. government maturing within less than one year at the time of investment. The remaining collateral (approximately 75%) is held in a separate collateral investment account managed by Nuveen Asset Management. The Fund s assets held in the Fund s separate collateral account are invested in cash equivalents or short-term debt securities with final terms not exceeding one year at the time of investment. These collateral investments are rated at all times at the applicable highest short-term or long-term debt or deposit rating or money market fund rating as determined by at least one nationally recognized statistical rating organization ( NRSRO ) or, if unrated, are judged by Nuveen Asset Management to be of comparable quality. These collateral investments consist primarily of direct and guaranteed obligations of the U.S. Government and senior obligations of U.S. Government agencies and may also include, among others, money market funds and bank money market accounts invested in U.S. Government securities as well as repurchase agreements collateralized with U.S. Government securities. Leverage. The Fund has no current intention to utilize leverage (except for borrowings for temporary or emergency purposes, as explained in more detail under The Funds investments on page 34 and Investment Policies of the Fund Borrowings on page 64). The Fund may not borrow in excess of 5% of its net assets. Borrowings by the Fund could cause tax-exempt investors to recognize unrelated business taxable income with respect to a portion of their income from the Fund. See Federal income tax considerations Tax-exempt organizations. Special Risk Considerations An investment in the Fund involves special risk considerations, which are summarized below. The Fund may not be able to achieve its investment objective. A more extensive discussion of these risks appears beginning on page 22. The Fund commenced its investment activities on September 30, 2010 following the completion of its initial public offering. Therefore, there is limited performance history for the Fund to serve as a basis for you to evaluate an investment in the Fund. Before the Fund commenced operations, the manager had not previously operated a commodity pool. While the commodity subadvisor had previously managed assets pursuant to TAP , it had never employed TAP PLUSSM when managing assets for outside clients before the Fund commenced operations. An investment in the Fund s shares is subject to investment risk, including the possible loss of the entire amount that you invest. Investments in commodity futures and forward contracts and options on commodity futures and forward contracts have a high degree of price variability and are subject to rapid and substantial price changes. The Fund could incur significant losses on its commodity investments. The net asset value of each share will change as fluctuations occur in the market value of the Fund s portfolio. Investors should be aware that the public trading price of a share may be different from the net asset value of a share. The price difference may be due, in large part, to supply and demand forces at work in the secondary trading market for shares, which may be related to, but are not identical to, the forces influencing the prices of the commodity contracts and other instruments held by the Fund at any point in time. If the Fund experiences more losses than gains during the period you hold shares, you will experience a loss for the period even if the Fund s historical performance is positive. There can be no assurance that the Fund s options strategy will be successful. The Fund uses options on commodity futures and forward contracts to seek to enhance the Fund s risk-adjusted total returns. The Fund may seek to protect its commodity futures and forward contracts positions in the event of a market decline in those positions by purchasing commodity put options that are out-of-the-money. The Fund s use of options, however, may not provide any, or only partial, protection for modest market declines. As the writer of call options for which a premium is received, the Fund will forego the right to any appreciation in the value of each commodity futures or forward contract in its portfolio that effectively underlies a call option to the extent the value of the commodity futures or forward contract exceeds the exercise price of such option on or before the expiration date. The return performance of the Fund s commodity futures and forward contracts may not parallel the performance of the commodities or indices that serve as the basis for the options bought or sold by the Fund; this basis risk may reduce the Fund s overall returns. The investment decisions of the commodity subadvisor may be modified, and commodity contract positions held by the Fund may have to be liquidated at disadvantageous times or prices, to avoid exceeding regulatory position limits, potentially subjecting the Fund to substantial losses. The CFTC is evaluating changes to position limits for other commodities. Any such future changes could limit the Fund s ability to implement its investment strategy. The Fund is subject to numerous conflicts of interest, including those that arise because: The Fund s commodity subadvisor, commodity brokers and their principals and affiliates may execute trades in commodity futures and forward contracts and options on commodity futures and forward contracts for their own account and accounts of other customers that may compete with orders placed for the Fund; commodity contract positions established for the benefit of the Fund may be aggregated with the positions held by the commodity subadvisor, its principals or affiliates for their own account and the accounts of other customers for the purposes of determining position limits, and there can be no assurance that the commodity subadvisor will choose to liquidate the Fund s positions in a proportionate manner in the event of mandatory liquidation of positions held by the commodity subadvisor (or its principals or affiliates) to comply with position limits or for other reasons. The manager has less of an incentive to replace the collateral subadvisor because it is an affiliate of the manager. Each of the manager and the subadvisors resolve conflicts of interest as they arise based on its judgment and analysis of the particular issue. There are no formal procedures to resolve conflicts of interest, and as a result, the manager and/or the subadvisors could resolve a potential conflict in a manner that is not in the best interest of the Fund or its shareholders. The Fund currently expects that up to 30% of its net assets invested in commodity futures and forward contracts and options on commodity futures and forward contracts may be in non-U.S. markets. Some non-U.S. markets present risks because they are not subject to the same degree of regulation as their U.S. counterparts. Regardless of its investment performance, the Fund will incur fees and expenses, including brokerage and management fees. A management fee will be paid by the Fund even if the Fund experiences a net loss for the full year. To break even in one year on shares purchased in the offering, and assuming the Fund s net assets (including the estimated net proceeds of the offering) generate annual
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001355493_sungard_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001355493_sungard_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b4693d2fd26d38a31129e868da5efe321e3d3433
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001355493_sungard_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you in making your investment decision. You should read the entire prospectus, including the financial data and related notes and section entitled Risk Factors, before making an investment decision. Unless the context otherwise indicates, as used in this prospectus, the terms SunGard, we, our, us, and the company and similar terms refer to SunGard Data Systems Inc. and its subsidiaries on a consolidated basis. Some of the statements in this prospectus constitute forward-looking statements. See Forward Looking Statements. Our Company We are one of the world s leading software and technology services companies. We provide software and technology services to financial services, higher education and public sector organizations. We also provide disaster recovery services, managed services, information availability consulting services and business continuity management software. We serve more than 25,000 customers in more than 70 countries. Our high quality software solutions, excellent customer support and specialized technology services result in strong customer retention rates across all of our business segments and create long-term customer relationships. We believe that we are one of the most efficient operators of mission-critical IT solutions as a result of the economies of scale we derive from serving multiple customers on shared processing platforms. We have four business segments: Financial Systems ( FS ), Higher Education ( HE ), Public Sector ( PS ) and Availability Services ( AS ). FS provides mission-critical software and technology services to virtually every type of financial services institution, including buy-side and sell-side institutions, third-party administrators, wealth managers, retail banks, insurance companies, corporate treasuries and energy trading firms. Our broad range of complementary software solutions and associated technology services help financial services institutions automate the business processes associated with trading, managing portfolios and accounting for investment assets. HE provides software and technology services primarily to colleges and universities as well as to school districts. Education institutions rely on our broad portfolio of solutions and technology services to improve the way they teach, learn, manage and connect with their constituents. PS provides software and technology services designed to meet the specialized needs of local, state and federal governments, public safety and justice agencies, utilities and other public sector institutions as well as nonprofits. AS provides disaster recovery services, managed services, information availability consulting services and business continuity management software to 10,000 customers in North America and Europe. With five million square feet of data center and operations space, AS assists IT organizations across virtually all industry and government sectors to prepare for and recover from emergencies by helping them minimize their computer downtime and optimize their uptime. Through direct sales and channel partners, AS helps organizations ensure their people and customers have uninterrupted access to the information systems they need in order to do business. We were acquired in August 2005 in a leveraged buy-out ( LBO ) by a consortium of private equity investment funds associated with Bain Capital Partners, The Blackstone Group, Goldman, Sachs & Co., Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake and TPG ( Sponsors ). As a result of the LBO, we are highly leveraged and our equity is not publicly traded. Our Sponsors continually evaluate various strategic alternatives with respect to the Company, including a potential spin-off of the AS business to our current equity holders. We expect that if we were to spin-off any Table of Contents Exact Name of Registrant Guarantor as Specified in Its Charter State or Other Jurisdiction of Incorporation or Organization I.R.S. Employer Identification Number Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant Guarantor s Principal Executive Offices SunGard Consulting Services LLC Delaware 87-0727844 10375 Richmond Suite 700 Houston, TX 77042 SunGard CSA LLC Delaware 20-4280640 680 E. Swedesford Rd. Wayne, PA 19087 SunGard Development Corporation Delaware 23-2589002 680 E. Swedesford Rd. Wayne, PA 19087 SunGard DIS Inc. Delaware 23-2829670 680 E. Swedesford Rd. Wayne, PA 19087 SunGard Energy Systems Inc. Delaware 13-4081739 601 Walnut St. Suite 1010 Philadelphia, PA 19106 SunGard eProcess Intelligence LLC Delaware 13-3217303 600 Lanidex Plaza Parsippany, NJ 07054 SunGard Financial Systems LLC Delaware 23-2585361 601 2nd Avenue South Hopkins, MN 55343 Sungard Higher Education Inc. Delaware 23-2303679 4 Country View Road Malvern, PA 19355 SunGard Higher Education Managed Services Inc. Delaware 23-2414968 2300 Maitland Center Pkwy Suite 340 Maitland, FL 32751 SunGard Investment Systems LLC Delaware 23-2115509 377 E. Butterfield Road Suite 800 Lombard, IL 60148 SunGard Investment Ventures LLC Delaware 51-0297001 680 E. Swedesford Rd. Wayne, PA 19087 SunGard iWORKS LLC Delaware 23-2814630 11560 Great Oaks Way Suite 100 Alpharetta, GA 30022 SunGard iWORKS P&C (US) Inc. Delaware 13-3248040 200 Business Park Dr. Armonk, NY 10504 SunGard Kiodex LLC Delaware 13-4100480 340 Madison Avenue 8th Floor New York, NY 10173 SunGard NetWork Solutions Inc. Delaware 23-2981034 680 E. Swedesford Rd. Wayne, PA 19087 SunGard Public Sector Inc. Florida 59-2133858 1000 Business Center Drive Lake Mary, FL 32746 Table of Contents business segment, that business segment would incur new debt and we would repay a portion of our existing indebtedness. Additionally, it is possible that along with any spin-off, we would receive cash proceeds from an issuance of equity of SunGard Capital Corp. ( SCC ) or SunGard Capital Corp. II ( SCII ), which together are collectively referred to as our Parent Companies. There can be no assurance that we will ultimately pursue any strategic alternatives with respect to any business segment, including AS, or an equity issuance or, if we do, what the structure or timing for any such transaction would be. SunGard Data Systems Inc. was incorporated under Delaware law in 1982. Our principal executive offices are located at 680 East Swedesford Road, Wayne, Pennsylvania 19087. Our telephone number is (484) 582-2000. Incorporation By Reference The SEC allows us to incorporate by reference the information we file with them into this prospectus. See Incorporation by Reference. Table of Contents Exact Name of Registrant Guarantor as Specified in Its Charter State or Other Jurisdiction of Incorporation or Organization I.R.S. Employer Identification Number Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant Guarantor s Principal Executive Offices SunGard Reference Data Solutions LLC Delaware 72-1571745 340 Madison Avenue 8th Floor New York, NY 10173 SunGard SAS Holdings Inc. Delaware 26-0052190 680 E. Swedesford Rd. Wayne, PA 19087 SunGard Securities Finance LLC Delaware 13-3799258 14 Manor Parkway Salem, NH 03079 SunGard Securities Finance International LLC Delaware 13-3809371 14 Manor Parkway Salem, NH 03079 SunGard Shareholder Systems LLC Delaware 23-2025519 2300 Main Street Suite 400 Kansas City, MO 64108 SunGard Software, Inc. Delaware 51-0287708 680 E. Swedesford Rd. Wayne, PA 19087 SunGard Systems International Inc. Pennsylvania 23-2490902 340 Madison Avenue 8th Floor New York, NY 10173 SunGard Technology Services LLC Delaware 23-2579118 680 E. Swedesford Rd. Wayne, PA 19087 SunGard VeriCenter, Inc Delaware 76-0624039 680 East Swedesford Rd. Wayne, PA 19087 SunGard VPM Inc. New York 11-3159462 1660 Walt Whitman Rd. Suite 130 Melville, NY 11747 SunGard Workflow Solutions LLC Delaware 63-1019430 104 Inverness Place Suite 325 Birmingham, AL 35242 Table of Contents The Notes The summary below describes the principal terms of the notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The sections captioned Description of Senior Notes Due 2015, Description of Senior Notes Due 2018, Description of Senior Notes Due 2020 and Description of Senior Subordinated Notes in this prospectus contain a more detailed description of the terms and conditions of the notes. Issuer SunGard Data Systems Inc. Securities Offered 10 5/8% Senior Notes due 2015. 7 3/8% Senior Notes due 2018. 7 5/8% Senior Notes due 2020. 10 1/4% Senior Subordinated Notes due 2015. Maturity The senior notes due 2015 mature on May 15, 2015. The senior notes due 2018 mature on November 15, 2018. The senior notes due 2020 mature on November 15, 2020. The senior subordinated notes mature on August 15, 2015. Interest Rate The senior notes due 2015 bear interest at a rate of 10 5/8% per annum. The senior notes due 2018 bear interest at a rate of 7 3/8% per annum. The senior notes due 2020 bear interest at a rate of 7 5/8% per annum. The senior subordinated notes bear interest at a rate of 10 1/4% per annum. Interest Payment Dates We pay interest on the senior notes due 2015 on April 1 and October 1, on the senior notes due 2018 and the senior notes due 2020 on May 15 and November 15 and on the senior subordinated notes on February 15 and August 15. Interest accrues from the most recent date to which interest has been paid or, if no interest has been paid, the issue date of the notes. Guarantees Each of our domestic subsidiaries that guarantees the obligations under our senior secured credit facilities are initially jointly and severally and unconditionally guaranteeing the senior notes on a senior unsecured basis and the senior subordinated notes on an unsecured senior subordinated basis. Ranking The senior notes are our senior unsecured obligations and: rank senior in right of payment to our future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior notes, including the senior subordinated notes; rank equally in right of payment to all of our existing and future senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the senior notes; and Table of Contents are effectively subordinated in right of payment to all of our existing and future secured debt including obligations under our senior secured credit facilities and the 4.875% senior notes due 2014 (referred to in this prospectus as the senior secured notes ), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the senior notes. Similarly, the guarantees of the senior notes are senior unsecured obligations of the guarantors and: rank senior in right of payment to all of the applicable guarantor s future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior notes, including such guarantor s guarantee under the senior subordinated notes; rank equally in right of payment to all of the applicable guarantor s existing and future senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the senior notes; and are effectively subordinated in right of payment to all of the applicable guarantor s existing and future secured debt (including such guarantor s guarantee under our senior secured credit facilities and the senior secured notes), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not also a guarantor of the senior notes. The senior subordinated notes are our unsecured senior subordinated obligations and: are subordinated in right of payment to our existing and future senior debt, including our senior secured credit facilities, the senior secured notes and the senior notes; rank equally in right of payment to all of our future senior subordinated debt; are effectively subordinated in right of payment to all of our existing and future secured debt (including our senior secured credit facilities and the senior secured notes), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the senior subordinated notes; and rank senior in right of payment to all of our future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior subordinated notes. Similarly, the guarantees of the senior subordinated notes are unsecured senior subordinated obligations of the guarantors and: are subordinated in right of payment to all of the applicable guarantor s existing and future senior debt, including such guarantor s guarantee under our senior secured credit facilities, the senior secured notes and the senior notes; Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED May 26, 2011 PRELIMINARY PROSPECTUS SunGard Data Systems Inc. 10 5/8% Senior Notes due 2015 7 3/8% Senior Notes due 2018 7 5/8% Senior Notes due 2020 10 1/4% Senior Subordinated Notes due 2015 The 10 5/8% Senior Notes due 2015 (the senior notes due 2015 ) were issued in exchange for the 10 5/8% Senior Notes due 2015 originally issued on September 29, 2008. The 7 3/8% Senior Notes due 2018 (the senior notes due 2018 ) were issued in exchange for the 7 3/8% Senior Notes due 2018 originally issued on November 16, 2010. The 7 5/8% Senior Notes due 2020 (the senior notes due 2020) were issued in exchange for the 7 5/8% Senior Notes due 2020 originally issued on November 16, 2010. The 10 1/4% Senior Subordinated Notes due 2015 (the senior subordinated notes ) were issued in exchange for the 10 1/4% Senior Subordinated Notes due 2015 originally issued on August 11, 2005. The senior notes due 2015, the senior notes due 2018, the senior notes due 2020 (collectively, the senior notes ) and the senior subordinated notes are collectively referred to herein as the notes, unless the context otherwise requires. The senior notes due 2015 bear interest at a rate of 10 5/8% per annum and mature on May 15, 2015. Interest on the senior notes due 2015 is payable on April 1 and October 1 of each year, beginning April 1, 2009. The senior notes due 2018 bear interest at a rate of 7 3/8% per annum and mature on November 15, 2018. The senior notes due 2020 bear interest at a rate of 7 5/8% per annum and mature on November 15, 2020. Interest on the senior notes due 2018 and the senior notes due 2020 is payable on May 15 and November 15 of each year, beginning May 15, 2011. The senior subordinated notes bear interest at a rate of 10 1/4% per annum and mature on August 15, 2015. Interest on the senior subordinated notes due 2015 is payable on February 15 and August 15 of each year, beginning on February 15, 2006. We may redeem some or all of the notes at any time at the redemption prices set forth in this prospectus. The senior notes are our senior unsecured obligations and rank equal in right of payment to all of our existing and future senior indebtedness. The senior subordinated notes are our unsecured senior subordinated obligations and are subordinated in right of payment to all of our existing and future senior indebtedness, including the senior secured credit facilities, the existing senior notes and the senior notes offered hereby. Each of our domestic subsidiaries that guarantees our senior secured credit facilities are initially unconditionally guaranteeing the senior notes with guarantees that rank equal in right of payment to all of the senior indebtedness of such subsidiary, and are initially unconditionally guaranteeing the senior subordinated notes with guarantees that are subordinated in right of payment to all existing and future senior indebtedness of such subsidiary. The notes and the guarantees are effectively subordinated to our existing and future secured indebtedness and that of the guarantors to the extent of the assets securing such indebtedness. This prospectus includes additional information on the terms of the notes, including redemption and repurchase prices, covenants and transfer restrictions. See Risk Factors beginning on page 10 for a discussion of certain risks that you should consider before investing in the notes. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. This prospectus has been prepared for and may be used by Goldman, Sachs & Co. and other affiliates of The Goldman Sachs Group, Inc. in connection with offers and sales of the notes related to market-making transactions in the notes effected from time to time. Such affiliates of The Goldman Sachs Group, Inc. may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agents for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any proceeds from such sales. The date of this prospectus is , 2011. Table of Contents rank equally in right of payment to all of the applicable guarantor s future senior subordinated debt; are effectively subordinated in right of payment to all of the applicable guarantor s existing and future secured debt (including such guarantor s guarantee under our senior secured credit facilities and the senior secured notes), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not also a guarantor of the senior subordinated notes; and rank senior in right of payment to all of the applicable guarantor s future subordinated debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior subordinated notes. As of March 31, 2011, (1) the notes and related guarantees ranked effectively junior to approximately $4,636 million of senior secured indebtedness (which includes $250 million face amount of our senior secured notes that are recorded at $239 million), (2) the senior notes and related guarantees ranked senior to the $1,000 million of senior subordinated notes, (3) the senior subordinated notes and related guarantees ranked junior to the senior indebtedness under the senior secured credit facilities, the senior secured notes, the senior notes and $16 million of payment obligations relating to historical acquisitions and capital lease obligations, all of which totaled approximately $7,078 million, (4) we had an additional $850 million of unutilized capacity under our revolving credit facility, after giving effect to certain outstanding letters of credit and (5) our non-guarantor subsidiaries had approximately $466 million (of the $7,748 million described above) of payment obligations relating to historical acquisitions and capital lease obligations. In addition, $330 million was outstanding under our receivables facility which is secured by accounts receivable of our subsidiaries that participate in the facility. Optional Redemption Prior to April 1, 2012, we have the option to redeem some or all of the senior notes due 2015 for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium (as described in Description of Senior Notes Due 2015 Optional Redemption ) plus accrued and unpaid interest to the redemption date. Beginning on April 1, 2012, we may redeem some or all of the senior notes due 2015 at the redemption prices listed under Description of Senior Notes Due 2015 Optional Redemption plus accrued interest on the senior notes to the date of redemption. Prior to November 15, 2013, we have the option to redeem the senior notes due 2018, in whole or in part, at a price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium, as described under Description of Senior Notes due 2018 Optional Redemption. Beginning on November 15, 2013, we may redeem some or all of the senior notes due 2018 at the redemption prices listed under Description of Senior Notes Due 2018 Optional Redemption plus accrued interest on the senior notes to the date of redemption. Table of Contents You should rely only on the information contained in this prospectus or incorporated by reference into this prospectus. We have not authorized anyone to provide you with different information from that contained in, or incorporated by reference into, this prospectus. The prospectus may be used only for the purposes for which it has been published and no person has been authorized to give any information not contained or incorporated by reference herein. If you receive any other information, you should not rely on it. We are not making an offer of these securities in any state where the offer is not permitted. You should assume that the information in this prospectus or incorporated by reference into this prospectus is accurate only as of the date on the front cover, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, prospects, financial condition and results of operations may have changed since that date. TABLE OF CONTENTS Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001356711_cpg_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001356711_cpg_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001356711_cpg_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001356857_trius_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001356857_trius_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dead268437baa27583d7021f780a53fb2de5753b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001356857_trius_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the information set forth under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes appearing at the end of this prospectus, before making an investment decision. Overview Trius Therapeutics is a biopharmaceutical company focused on the discovery, development and commercialization of innovative antibiotics for life threatening infections. We are developing torezolid phosphate, an intravenous, or IV, and oral antibiotic, for the treatment of serious gram-positive bacterial infections, initially for acute bacterial skin and skin structure infections, or ABSSSI, and subsequently for other indications. ABSSSI is a new classification for complicated skin and skin structure infections, or cSSSI. We initiated our Phase 3 clinical program for torezolid phosphate for the treatment of ABSSSI in August 2010. We completed a Phase 1 clinical trial, during the first quarter of 2011, which evaluated the ability of torezolid phosphate to penetrate into the lung, for potential use in treating lung infections. Based on the results of the study, we plan to pursue further development of torezolid phosphate for the treatment of pneumonia using the same 200 milligram, once daily dose of torezolid phosphate that we are currently testing for skin infections. We are also evaluating potential strategic alliances for an ex-US territory that reflect the strong value that we have created with torezolid phosphate. In addition, we are developing antibiotics for gram-negative infections using our proprietary discovery platform under three contracts: one funded by the National Institute of Allergy and Infectious Diseases, or NIAID, a part of the National Institutes of Health, or NIH, one funded by the Defense Threat Reduction Agency, or DTRA, a part of the Department of Defense, and one funded by Lawrence Livermore National Laboratory, or LLNL, part of the U.S. Department of Energy s Nuclear Security Administration. Our first product candidate, torezolid phosphate is an IV and orally administered second generation oxazolidinone. We are currently conducting a Phase 3 clinical trial of the oral dosage form for the treatment of ABSSSI, including methicillin-resistant Staphylococcus aureus, or MRSA. Oxazolidinones are a class of synthetic compounds used as antibiotics. A second generation oxazolidinone is chemically differentiated from, and designed for improved safety, potency, resistance and spectrum of activity over, the first generation of oxazolidinones that were clinically developed. Gram-positive infections are caused by bacteria that possess a single membrane and a thick cell wall and turn dark-blue or violet when subjected to a laboratory staining method known as Gram s method. There is currently only one approved first generation oxazolidinone, linezolid (marketed by Pfizer, Inc., or Pfizer, as Zyvox), which is currently the leading branded antibiotic for serious gram-positive infections with reported worldwide sales of $1.2 billion in 2010. While there are several currently marketed antibiotics labeled for serious gram-positive infections, Zyvox is the only currently marketed antibiotic labeled for MRSA that is available in both IV and oral dosage forms. We believe torezolid phosphate offers a number of important potential advantages over linezolid, including greater potency, once daily dosing, predictable drug exposure, a shorter course of therapy, in vivo bactericidal (i.e., bacterial killing) activity, lower frequency of resistance, activity against linezolid-resistant bacterial strains and an improved safety profile. We believe that these potential advantages over linezolid may result in lower cost of care for patients with serious gram-positive infections by providing for a more rapid and effective cure and an improved safety profile with greater patient compliance, resulting in earlier discharge from the hospital and lower incidence of resistance. In June 2009, we announced positive results from our Phase 2 clinical trial of three oral doses (200, 300 and 400 milligram once daily) of torezolid phosphate administered for five to seven days in patients with cSSSI. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JUNE 21, 2011 PROSPECTUS 6,412,500 Shares of Common Stock This prospectus covers the sale of an aggregate of 6,412,500 shares of our common stock, $0.0001 par value per share, by the selling stockholders identified in this prospectus, including their transferees, pledgees, donees or successors. The common stock covered by this prospectus consists of 4,750,000 shares of common stock and 1,662,500 shares of common stock issuable upon exercise of outstanding warrants issued in a private placement transaction that closed on May 31, 2011. The selling stockholders may sell their shares of common stock from time to time at market prices prevailing at the time of sale, at prices related to the prevailing market price, or at negotiated prices. We will not receive any proceeds from the sale of common stock by the selling stockholders, other than as a result of the exercise of warrants held by the selling stockholders for cash. No underwriter or other person has been engaged to facilitate the sale of shares of our common stock in this offering. We are paying the cost of registering the shares of common stock covered by this prospectus as well as various related expenses. The selling stockholders are responsible for all selling commissions, transfer taxes and other costs related to the offer and sale of their shares of common stock. Our common stock is traded on the NASDAQ Global Market under the symbol TSRX. On June 17, 2011, the closing sale price of our common stock on the NASDAQ Global Market was $7.61 per share. This investment involves risks. See Risk Factors on page 11. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2011. Table of Contents Ninety-one percent of patients randomized to receive a once daily 200 milligram dose of torezolid phosphate, which we are using in our Phase 3 clinical program, responded positively within 48 hours of receiving the initial dose, as determined by the cessation of spread of the infected lesion and the absence of fever. In the clinically evaluable patients, the cure rate was 96% overall and 98% for the 200 milligram dose, as determined by the clinical investigator s assessment at the end of therapy. The majority of patients in this trial were diagnosed with MRSA infections, of which 100% receiving the 200 milligram dose were cured. In addition to our Phase 2 clinical trial, we have completed six Phase 1 clinical trials of the oral dosage form of torezolid phosphate and one Phase 1 clinical trial of the IV dosage form of torezolid phosphate. The results of our completed clinical trials to date demonstrated that the 200 milligram dose of torezolid phosphate was highly effective against gram-positive pathogens including MRSA, could be dosed once daily for a course of therapy that is half the number of days of the labeled dosing regimen of linezolid for cSSSI and had a favorable safety and tolerability profile compared to linezolid, as demonstrated by dosing of up to 21 days. Under our torezolid phosphate clinical program, we plan to develop torezolid phosphate to treat multiple clinical indications, including ABSSSI and other important indications involving infections of the lung and blood, such as hospital acquired pneumonia, or HAP, ventilator acquired pneumonia, or VAP, and bacteremia. Initially, we are developing torezolid phosphate for the treatment of ABSSSI. We opened our Investigational New Drug applications, or INDs, for the IV and oral dosage forms of torezolid phosphate in August 2009 and November 2007, respectively. Based upon guidance we have received from the United States Food and Drug Administration, or FDA, we plan to conduct two Phase 3 clinical trials for the treatment of ABSSSI. In our first Phase 3 clinical trial which was initiated in August 2010, we are testing the oral dosage form of torezolid phosphate. In our second Phase 3 clinical trial, we plan to initiate patients on IV therapy and transition them to oral therapy. Both trials will be randomized, double-blind studies and will use linezolid as the comparator. We have reached agreement with the FDA on a Special Protocol Assessment, or SPA, for our first Phase 3 clinical trial of the oral dosage form of torezolid phosphate and expect to reach agreement with the FDA on a SPA for our second Phase 3 clinical trial in which patients will be initiated with IV therapy and subsequently transitioned to the oral dosage form of torezolid phosphate by the end of the third quarter of 2011. The SPA process creates a written agreement between the FDA and a sponsor concerning the clinical trial design, clinical endpoints and other clinical trial issues that can be used to support regulatory approval of a drug candidate. The process is intended to provide assurance that if the agreed upon clinical trial protocols are followed, the clinical trial endpoints are achieved and there is a favorable risk-benefit profile, the data may serve as the primary basis of an efficacy claim in support of a New Drug Application, or NDA. We commenced our Phase 3 clinical program in August 2010 and expect to complete enrollment this year and report top-line data from our first Phase 3 clinical trial in early 2012. The potential use of torezolid phosphate to treat follow-on indications involving infections of the lung and blood, such as HAP, VAP and bacteremia, is supported by an extensive, published body of nonclinical data from predictive animal studies. During the first quarter of 2011, we completed a Phase 1 clinical trial which evaluated the ability of torezolid phosphate to penetrate into the lung, for potential use in treating lung infections. The results showed that the same 200 milligram, once daily dose of torezolid that we are currently testing for ABSSSI, also distributed into the lung at concentrations well above that needed to treat infections caused by key gram positive pathogens. Based on these results we plan to pursue further development of torezolid phosphate for the treatment of pneumonia using the same once daily 200 milligram dose. If we obtain regulatory approval, we plan to commercialize torezolid phosphate through our own hospital directed sales force in the United States and/or in collaboration with third parties, and to out-license torezolid phosphate to, or collaborate with, third parties in other countries as we deem appropriate. We have developed a proprietary discovery platform, called focused antisense screening technology, or FAST, which uses antisense technology to validate suitable bacterial drug targets. We have also developed state-of-the-art capabilities in structure based drug design, or SBDD. These proprietary capabilities enable us to rapidly identify optimal bacterial targets and subsequently design highly potent and selective small molecule inhibitors which we believe will enable us to develop new differentiated antibiotics. We have used these Table of Contents TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001361103_complete_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001361103_complete_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001361103_complete_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001366684_homeaway_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001366684_homeaway_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001366684_homeaway_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001369233_ufood_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001369233_ufood_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fd4088e08d023daa9d7542c2001eb076d6a7c419
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001369233_ufood_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary highlights information contained elsewhere in this prospectus. Potential investors should read the entire prospectus carefully, including the more detailed information regarding our business provided below in the Description of Business section, the risks of purchasing our common stock discussed under the Risk Factors section, and our financial statements and the accompanying notes. As used in this prospectus, UFood, the Company, we, us and our refer to UFood Restaurant Group, Inc., a Nevada corporation, and its wholly-owned subsidiaries taken as a whole, unless otherwise stated or the context clearly indicates otherwise. KnowFat refers to the operations of KnowFat Franchise Company, Inc., a Delaware company, prior to the December 18, 2007 merger discussed below, which resulted in KnowFat Franchise Company, Inc. becoming a wholly-owned subsidiary of ours. Our Company We are a franchisor and operator of fast-casual food service restaurants that capitalize on what we believe are the developing trends toward healthier living and eating and the increasing consumer demands for restaurant fare that offers appetizing food with healthy attributes. We believe our menu items are made with higher quality ingredients and healthier cooking techniques than ordinary quick serve food. Delivering great taste and an overall pleasing dining experience for an individual customer is the focus of UFood s mission and concept. We were incorporated in the State of Nevada on February 8, 2006 as Axxent Media Corporation. Prior to December 18, 2007, we were a development stage company as defined by Accounting Standards Codification (ASC) 915, Development Stage Entities. As Axxent Media Corporation, our business was to obtain reproduction and distribution rights to foreign films within North America and also to obtain the foreign rights to North American films for reproduction and distribution to foreign countries. Following the merger described below, we abandoned our plans to obtain reproduction and distribution rights to films. On August 8, 2007, we changed our name to UFood Franchise Company, and on September 25, 2007, we changed our name to UFood Restaurant Group, Inc. On December 18, 2007, a wholly-owned subsidiary of our Company merged with and into KnowFat Franchise Company, Inc., with KnowFat surviving the merger as our wholly-owned subsidiary. Following the merger, we continued KnowFat s business operations. KnowFat was founded in 2004 to capitalize on the popularity of a chain of fast-casual concept restaurants operating under the trade name Lo Fat Know Fat in the greater Boston area, as well as the trend we believe is developing in the United States towards healthier living and eating. After operating for three years as KnowFat! Lifestyle Grille, while continuously modifying and improving the concept, management decided that future locations will operate under the name UFood Grill. During the third quarter of 2008, the four remaining KnowFat! Lifestyle Grille locations were converted to UFood Grill outlets. All of our Company-owned restaurants and franchise-owned locations now operate, and all future locations will operate, under the name UFood Grill. Three of our four Company-owned restaurants that were originally KnowFat! Lifestyle Grilles included an integrated convenience-style retail store that carried a variety of health-oriented nutritional products, such as supplements, vitamins, nutrition bars, energy drinks and healthy snacks. As part of the process of conversion to UFood Grill outlets, floor space formerly devoted to the sale of nutritional products in two of these stores was reconfigured to accommodate the sale of smoothie drinks and frozen yogurt, because we believe that these products will generate higher revenues in these locations. None of our franchise locations currently carries nutrition products, and only our Watertown, Massachusetts Company-owned location carries nutritional products. We will continue to evaluate the placement of nutrition products in our existing and future locations based on our assessment of demand in the particular location and, in the case of franchise locations, the franchisee s preferences. Our operations currently consist of eight restaurants in the Boston area, Dallas Forth Worth, TX, and Cleveland, OH; comprising four Company-owned restaurants and four franchise-owned locations. We have entered into a total of five area development agreements and three franchise agreements covering 65 franchise units in the following states: Texas, Ohio, Massachusetts and the Washington, DC area. Furthermore, two of the area development agreements are for non-traditional locations such as airports, colleges, travel plazas, and hospitals across the United States and Puerto Rico. The 65 units include four franchise locations currently open and operating, and requiring an additional 61 future UFood Grill outlets to be developed by franchisees. The Naples, FL location was closed on July 24, 2010. On July 17, 2010 the Cleveland Hopkins International Airport location was open. The Company intends to open three Company-owned locations in the Aberdeen military base in Maryland. We believe the sale of franchises allows us to expand the UFood Grill brand faster than the construction and operation of Company-owned outlets due to the Company s limited human and financial resources, while allowing us to collect franchise fees and royalties. Under our area development and franchise agreements, we receive royalties on gross franchise sales as described above, and we do not pay any of the construction, opening (other than the training and advice described above), operating or marketing costs. We do not provide or arrange financing to franchisees or area developers. Table of Contents All of our Company-owned restaurants and franchise-owned locations now operate, and all future locations will operate, under the name UFood Grill. Corporate Information Our principal executive offices are located at 255 Washington Street, Suite 150, Newton, Massachusetts 02458. Our telephone number is (617) 787-6000. Our website address is www.ufoodgrill.com. Information contained on our website is not deemed part of this prospectus. The Offering Common stock currently outstanding 48,269,598 shares (1) Common stock offered by the Company None Common stock offered by the selling stockholder 13,500,000 shares Common stock outstanding after the offering 61,769,598 shares Use of proceeds We will not receive any of the proceeds from the sales of our common stock offered by this prospectus. OTC Bulletin Board symbol UFFC.OB Risk Factors You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the Risk Factors section beginning on page 7 of this prospectus before deciding whether or not to invest in shares of our common stock. (1) As of November 7, 2011. This offering relates to the resale of up to 13,500,000 shares of our common stock, par value $0.001 per share, by Selling Security Holder, which are the Put Shares that we will put to Southridge pursuant to the Equity Purchase Agreement. The offered shares represented 28% of the currently outstanding shares of our common stock on November 7, 2011 and 21.9% of the outstanding shares of our common stock on November 7, 2011, including the offered shares. On November 7, 2011, the closing price of our common stock was $0.11 per share. Notwithstanding the foregoing, under the Equity Purchase Agreement, at no point may the number of Put Shares purchased by Southridge exceed the number of such shares that, when aggregated with all other shares of capital stock then owned or deemed owned by Southridge beneficially, result in Southridge owning more than 9.99% of all of our outstanding common stock. On November 7, 2011, we entered into the Equity Purchase Agreement with Southbridge Partners II, LP under which Southridge has committed to purchase up to the lesser of (a) 13,500,000 shares, or (b) $3 million of our common stock over a two year period commencing on the date on which the SEC first declares effective this registration statement to which this prospectus is made a part. For each share of our common stock purchased under the Equity Purchase Agreement, Southridge will pay 92% of the average of the volume weighted average prices (the Closing Prices ) of our common stock reported by Bloomberg, L.P. during the five (5) trading day period (the Valuation Period ) commencing on the date a put notice (the Put Notice ) is delivered to Southridge (the Put Date ) in the manner prescribed in the Equity Purchase Agreement. Subject to the limitations outlined below, we may, at our sole discretion, issue a Put Notice to Southridge, after which Southridge will be irrevocably bound to acquire such shares. In the event that during a Valuation Period for any Put Notice, the Closing Price on any trading day falls more than twenty percent (20%) below the average of the five (5) most recent Closing Prices prior to the Put Date (the Floor Price ), then for each such trading day we shall be under no obligation to sell and Southridge s obligation to fund one-fifth of the put amount for each such Trading Day shall terminate and the put amount shall be adjusted accordingly. In the event that during a Valuation Period the Closing Price falls below the Floor Price for any two (2) trading days not necessarily consecutive then the balance of each party s rights and obligations to purchase and sell the investment amount under such Put Notice shall terminate on such second trading day ( Put Termination Day ), and the put amount shall be adjusted to include only one-fifth (1/5) of the initial put amount for each trading day during the Valuation Period prior to the Put Termination Day that the closing Closing Price equals or exceeds the Floor Price. Furthermore, subject to the terms and conditions of the Equity Purchase Agreement, at any time or from time to time after the effectiveness of this registration statement, we can notify Southridge in writing of the existence of a certain potentially material events (the Blackout Notice ), and Southridge shall not offer or sell any of our securities acquired under the Equity Purchase Agreement from the time the Blackout Notice was provided to Southridge until Southridge receives our written notice that such potentially material event has either been disclosed to the public or no longer constitutes a potentially material event. If we deliver a Blackout Table of Contents Notice within fifteen trading days, commencing the sixth day following a Put Date (the Closing Date ), and the Closing Price immediately preceding the applicable Blackout Period (the Old Closing Price ) is greater than the Closing Price on the first trading day immediately following such Blackout Period (the New Closing Price ), then we are obligated to issue to Southridge a number of additional common shares (the Blackout Shares ) equal to the difference between (i) the product of (X) the shares that were issued to the Southridge on the most recent Closing Date and held by the Southridge immediately prior to the Blackout Period (the Remaining Put Shares ), multiplied by (Y) the Old Closing Price, and divided by (Z) the New Closing Price, and (ii) the Remaining Put Shares. We are relying on an exemption from the registration requirements of the Securities Act, and/or Rule 506 of Regulation D promulgated thereunder. The transaction does involve a private offering, Southridge is an accredited investor and/or qualified institutional buyer, and Southridge has access to information about our Company and its investment. Neither the Equity Purchase Agreement nor any rights or obligations of the parties under the Equity Purchase Agreement may be assigned by either party to any other person. This prospectus relates to the resale of shares purchased by Southridge pursuant to the Equity Purchase Agreement. The offered shares represented 28% of the currently outstanding shares of our common stock on November 7, 2011 and 21.9% of the outstanding shares of our common stock on November 7, 2011, including the offered shares. On November 7, 2011, the closing price of our common stock was $0.11 per share. Notwithstanding the foregoing, under the Equity Purchase Agreement, at no point may the number of Put Shares purchased by Southridge exceed the number of such shares that, when aggregated with all other shares of capital stock then owned or deemed owned by Southridge beneficially, result in Southridge owning more than 9.99% of all of our outstanding common stock. In connection with the execution of the Equity Purchase Agreement, we issued 133,333 shares of restricted common stock to Southridge. There are substantial risks to investors as a result of the issuance of shares of our common stock under the Equity Purchase Agreement. These risks include dilution of stockholders, significant decline in our stock price and our inability to draw sufficient funds when needed. Southridge will periodically purchase our common stock under the Equity Purchase Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Southridge to raise the same amount of funds, as our stock price declines. Summary Financial Information The following tables summarizes historical financial data regarding our business and should be read together with the information in the section titled Management s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and the related notes included in this prospectus. Table of Contents Six months Ended Fiscal Year Ended (unaudited) January 2, 2011 July 3, 2011 June 27, 2010 (restated) December 27, 2009 Statement of Operations Data Revenues $ 2,106,104 $ 2,425,218 $ 4,942,939 $ 5,450,836 Total costs and expenses and Other income 3,233,791 5,011,727 13,131,961 9,408,187 Net loss $ (1,127,687 ) $ (2,586,509 ) $ (8,189,022 ) $ (3,957,351 ) Weighted average shares outstanding, basic and fully diluted 41,197,964 38,551,920 39,184,919 35,320,547 Net loss per common share, basic and fully diluted $ (0.04 ) $ (0.07 ) $ (0.21 ) $ (0.11 ) Statement of Cash Flows Data Net cash used in operating activities $ (1,297,044 ) $ (876,797 ) $ (2,045,702 ) $ (3,189,391 ) Cash and cash equivalents (end of period) 1,227,852 948,381 2,797,452 2,278,427 At At July 3, January 2, At 2011 2011 December 27, Balance Sheet Data (unaudited) ( restated) 2009 Current assets $ 1,501,899 $ 3,042,461 $ 2,711,239 Total assets 2,832,479 4,312,968 4,992,339 Current liabilities 1,611,093 1,228,009 1,517,222 Total liabilities 2,418,172 2,843,358 4,880,964 Total stockholders equity 414,307 1,469,610 111,375 Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001381580_concrete_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001381580_concrete_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001381580_concrete_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001381592_redi-mix_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001381592_redi-mix_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001381592_redi-mix_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001388490_mabcure_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001388490_mabcure_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..429f3657f9f7708ef11b1ad1acd6fd1ffc05e38b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001388490_mabcure_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus; it does not contain all of the information you should consider before investing in our common stock. Before making an investment decision, you should read the entire prospectus carefully, including the sections entitled
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001392522_freescale_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001392522_freescale_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001392522_freescale_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396420_beechcraft_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396420_beechcraft_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396420_beechcraft_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396424_hawker_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396424_hawker_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396424_hawker_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396669_fca_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396669_fca_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396669_fca_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396891_ncop_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396891_ncop_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396891_ncop_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396894_ncop_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396894_ncop_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396894_ncop_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001396899_nco_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001396899_nco_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001396899_nco_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001399356_china-bct_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001399356_china-bct_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..58e6ebb67ef6446a051e5256bedff3c8a9a588b8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001399356_china-bct_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements before making an investment decision. References in this prospectus to the PRC or China are to the People s Republic of China. Except as otherwise specifically stated or unless the context otherwise requires, the terms Company, we, us and our refer to collectively (i) China BCT Pharmacy Group, Inc. (f/k/a China Baicaotang Medicine Limited), a corporation incorporated in the State of Delaware; (ii) Ingenious Paragon Global Limited ( Ingenious ), a British Virgin Islands company which is a wholly-owned subsidiary; (iii) Forever Well Asia Pacific Limited ( Forever Well ), a Hong Kong company which is a wholly-owned subsidiary of Ingenious; (iv) Guangxi Liuzhou Baicaotang Medicine Limited ( Liuzhou BCT ), a PRC wholly foreign-owned enterprise ( WFOE ) which is a wholly-owned subsidiary of Forever Well; (v) Hefeng Pharmaceutical Co. Limited ( Hefeng Pharmaceutical ), a PRC company which is a wholly-owned subsidiary of Liuzhou BCT; and (vi) Guangxi Liuzhou Baicaotang Medicine Retail Limited ( BCT Retail ), a PRC company of which 49% of its registered capital was contributed by Liuzhou BCT and 51% of its registered capital was contributed by Baicaotang Property Management Limited ( Property Management ), an affiliated company. References to BCT Retail s registered capital are to the equity of BCT Retail, which under PRC law is measured not in terms of shares owned but in terms of the amount of capital that has been or will be contributed to a company by a particular shareholder or all shareholders. The portion of a limited liability company s total capital contributed by a particular shareholder represents that shareholder s ownership of the company and the total amount of capital contributed by all shareholders is the company s total equity. Capital contributions are made to a company by deposits into a dedicated account in the company s name, which the company may access in order to meet its financial needs. When a company s accountant certifies to PRC authorities that a capital contribution has been made and the company has received the necessary government permission to increase its contributed capital, the capital contribution is registered with regulatory authorities and becomes a part of the company s registered capital. Business Overview We are engaged in pharmaceutical distribution, retail pharmacy and manufacturing of pharmaceuticals through our three subsidiaries Liuzhou BCT, Hefeng Pharmaceutical, and BCT Retail, each of which is located in Guangxi Province, China. We have integrated operations in the following business segments: Pharmaceutical distribution. Pharmaceutical distribution is our principal business. We conduct our wholesale business through Liuzhou BCT by purchasing from pharmaceutical product suppliers and then distributing the products to our wholesale customers, including hospitals, retail drug stores, other pharmaceutical wholesalers, clinics, medical centers, and individuals. Our pharmaceutical distribution business is focused on the market of Guangxi province, which includes major cities such as Nanning, Liuzhou and Guilin, and which has approximately 50 million people. We operate a large regional wholesale pharmaceutical networks in Guangxi province supported by strategically placed warehouse facilities. For the year ended December 31, 2009, revenue generated from our pharmaceutical distribution segment was $97.1 million, or 71.4% of our total revenues for the year. For the nine months ended September 30, 2010 our pharmaceutical distribution segment accounted for approximately 70.6% of our total revenue after elimination of inter-segment sales. Table of Contents We distribute over 8,000 products from nearly 4,000 suppliers through our wholesale distribution in compliance with applicable PRC regulations. Hefeng Pharmaceutical, which is one of our wholly owned subsidiaries, is also one of our suppliers. In 2009 revenue derived from the distribution of third-party products constituted 99% of our pharmaceutical distribution segment revenue. PRC rules and regulations require most public hospitals and healthcare institutions to purchase medicines from pharmaceutical distributors through a centralized tendering process, which includes the implementation of government-mandated price controls. The manufacturers of provincial catalog medicines that are on the hospitals formularies are invited to bid and participate in the centralized tendering process, which they must do directly. The bidding process covers multiple categories of medicines used by the hospitals. A duly organized committee of pharmaceutical and clinical medical experts is responsible for bid evaluations. Selection is based on a number of factors, including bid price, quality, clinical effectiveness, and manufacturer s reputation and service. The supply of a particular type of medicine is generally made on a non-exclusive basis by multiple manufacturers and distributors. We typically advise and assist pharmaceutical manufacturers in the hospital tendering process and distribute products of pharmaceutical manufacturers upon purchase orders being made by the hospitals after the bidding process. The Guangxi centralized-online tendering system was started in 2006, and in 2009 the tendering started to be applied also under the New Rural Co-operative Health Insurance Plan. At the first tendering in 2009 we were awarded distribution rights for six counties and townships under the New Rural Co-operative Health Insurance Plan, including Liuzhou, Yizhou, Lipu, Gongchen, Luzhai Laibin and Heshan, and were selected as one of two exclusive distributors for these territories. Retail pharmacy. Established in 2001, BCT Retail operates a large regional pharmaceutical retail network in Guangxi province, consisting of 137 directly owned retail stores in Guangxi province under the registered name Baicaotang . Our retail stores provide convenient, high quality and professional pharmaceutical services and supply a wide variety of medicines, including western medicine, traditional Chinese medicine ( TCM ), dried Chinese herbal medicine, roughly processed Chinese herbal medicine, family planning products, and seasonal medicine. Among the 137 stores, there are 26 stores that are medi-care qualified stores, where customers are able to make their purchases either by cash or by using their medi-care insurance card for payment. For the year ended December 31, 2009, revenue generated from our retail pharmacy segment was $31.2 million, or 22.9% of our total revenues for the year. For the nine months ended September 30, 2010 our retail pharmacy segment accounted for approximately 23.9% of our total revenue after elimination of inter-segment sales. Manufacturing of pharmaceuticals. Hefeng Pharmaceutical has a manufacturing facility on approximately 40,000 square meters of land and manufactures four types of products: A Chinese herbal medicine abstraction unit for raw material and medicine paste with 670 tons of annual abstraction capacity (Maximum daily unit production: 2.5 tons per day; maximum days of operation per year: 270 days); A granular formulation unit with an annual production capacity of 0.25 billion packages (Maximum daily unit production: 768,960 packages per day; maximum days of operation per year: 324 days); A pill formulation unit with an annual production capacity of 0.36 billion pills (Maximum daily unit production: 1,252,800 pieces per day; maximum days of operation per annum: 288 days), and A liquid formulation unit with an annual production capacity of 0.1 billion injections (Maximum daily unit production : 347,500 pieces per day; maximum days of operation per annum : 288 days). Hefeng Pharmaceutical produces and sells pharmaceutical products under the registered name Asio ( ) including: traditional anti-inflammatory and antibacterial drugs, cancer treatment drugs, cardio-vascular disease drugs and hepatitis drugs. Hefeng Pharmaceutical s best-selling products include: Registration No. 333-165161 SECURITIES AND EXCHANGE COMMISSION AMENDMENT NO. 12 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CHINA BCT PHARMACY GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 5912 20-8067060 (State or other Jurisdiction of Incorporation) (Primary Standard Classification Code) (IRS Employer Identification No.) No. 102, Chengzhan Road Liuzhou City, Guangxi Province, P.R.C. 545007 Tel.: (86) 772-363-8318 (Address and Telephone Number of Registrant s Principal Executive Offices and Principal Place of Business) Corporation Service Company 2711 Centerville Road Suite 400 Wilmington, Delaware 19808 (Name, Address and Telephone Number of Agent for Service) Copies of communications to: Thomas Wardell, Esq. McKenna Long & Aldridge LLP 303 Peachtree Street Atlanta, Georgia 30308 Tel No.: (404) 527-4990 Fax No.: (404) 527-8890 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. T If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer Accelerated filer Smaller reporting company S Table of Contents Tabellae Sarcandrae, a TCM drug that has similar anti-inflammatory and antibacterial effects as anti-biotics in Western medicine; Corydalis Saxicola Bunting (Yanhuanglian), an important component in various hepatitis prescriptions in TCM; Hydroxycamptotbecine Injection, which is used to treat cancers such as carcinoma ventricui, carcinoma hepatitis and colon cancer; Ethacridine Lactate Injection which is used for second trimester pregnancy termination from week 12-26; and Levodopa, a TCM drug that is used to treat stiffness, tremors, spasms and poor muscle control related to Parkinson s disease. In addition, Hefeng Pharmaceutical collaborates with several renowned medical research universities in China to continuously improve its raw material abstraction efficiency and production process, and to develop alternative formulas for existing drugs. For the year ended December 31, 2009, revenue generated from our manufacturing segment was $7.7 million, or 5.7% of our total revenues for the year. For the nine months ended September 30, 2010, our manufacturing segment accounted for approximately 5.5% of our total revenue after elimination of inter-segment sales. The growth profile of Guangxi province is based on the following three factors: According to data published by the National Bureau of Statistics, Guangxi Province s GDP was RMB770 billion ($112 billion) in 2009. GDP per capita in Guangxi Province was RMB15,821 ($2,316) in 2009 as compared with GDP per capita of RMB42,141 ($6,169) in the coastal regions (including Fujian Province, Guangdong Province, Hainan Province, Jiangsu Province, Shandong Province, Shanghai, and Zhejiang Province). In 2009 Guangxi Province s GDP growth rate was 13.9% as compared to an average GDP growth rate of 10.7% in the coastal regions in 2009. In 2009 Guangxi Province had a population of 48.16 million. In 2009 the population growth rate of Guangxi Province was 7.2% as compared with a population growth rate of 5.17% in the coastal regions. (See http://www.stats.gov.cn/tjsj/ndsj/2009/indexch.htm). the inflation rate in China in 2010 is projected to be 3.5% to 4% based upon the World Bank China Quarterly Update from March 17, 2010. (See http://siteresources.worldbank.org/CHINAEXTN/ Resources/318949-1268688634523/CQU_march2010.pdf). , and the general pharmaceutical industry growth rate resulting from the RMB850 billion healthcare reform bill passed by the Chinese government. Corporate Structure and History We were originally incorporated in the State of Delaware on November 30, 2006 under the name Purden Lake Resource Corp. to engage in the acquisition, exploration and development of natural resource properties. Prior to December 23, 2009 we were a blank check company with nominal assets. We changed our name to China Baicaotang Medicine Limited on December 24, 2009 and to China BCT Pharmacy Group, Inc. on March 25, 2010. Table of Contents Corporate Structure Our wholly-owned subsidiary, Ingenious is a British Virgin Islands corporation that owns 100% of the issued and outstanding capital stock of Forever Well, a Hong Kong company. Forever Well is the sole shareholder of Liuzhou BCT, a PRC wholly foreign-owned enterprise. Liuzhou BCT contributed 100% of the registered capital of Hefeng Pharmaceutical and 49% of the registered capital of BCT Retail. The remaining 51% of the registered capital of BCT Retail was contributed by Property Management, an affiliate of Liuzhou BCT. We do not have direct 100% ownership interest in BCT Retail due to the restriction of foreign investment in pharmacy chains with 30 or more drugstores. We have entered into contractual arrangements with Property Management pursuant to which we loaned money equal to 51% of the registered capital of BCT Retail to the shareholders of Property Management and such Property Management shareholders pledged their 51% equity interests in BCT Retail. In addition, pursuant to a Proxy Agreement we entered into with Property Management, we effectively control BCT Retail and therefore, have consolidated BCT Retail with China BCT Pharmacy, Group and its subsidiaries. The chart below illustrates the current structure of the Company: Reorganization In 2008, the shareholders of Liuzhou BCT (the Liuzhou BCT Shareholders ) and Xiaoyan Zhang, our CFO, developed a restructuring plan for Liuzhou BCT to obtain the benefits available to a U.S. public company (the Restructuring ). The first step was for Forever Well to acquire 100% of the equity interests of Liuzhou BCT and its subsidiaries (the PRC Operating Companies ). In this step, Forever Well, a Hong Kong company formed by Mr. Ping-Ki Yue, was to acquire the PRC Operating Companies. The second step in the Restructuring was for Ingenious, which was 100% owned by Ms Zhang, to acquire Forever Well and the third step was for Ingenious to enter into and complete a transaction with a U.S. public reporting company whereby that company would acquire Ingenious. The first step was completed in conjunction with the second step so that as the PRC Companies became subsidiaries of Forever Well, Forever Well was acquired by Ingenious. As part of the second step of the Restructuring, the Liuzhou BCT Shareholders entered into an earn-in agreement (the Earn-In Agreement ) which provided the Liuzhou BCT Shareholders with a process under which they could purchase for a nominal amount the shares of common stock held by Ms. Zhang. Under the Earn-In Agreement, Ms. Zhang holds legal title to the shares for the five-year term of the agreement or until the shares have been purchased by the Liuzhou BCT Shareholders. Thereafter, the shares can only be transferred upon the agreement of both Ms. Zhang and the Liuzhou BCT Shareholders. For the term of the Earn-In Agreement or until the shares are purchased by the Liuzhou BCT Shareholders, Ms. Zhang holds all of the governance rights with respect to the shares. Table of Contents CALCULATION OF REGISTRATION FEE Title of Each Class Of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Offering Price per share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common stock, $0.001 par value per share 3,519,340 (1) $ 2.00 (2) $ 7,038,680 $ 501.86 Common stock, $0.001 par value per share, issuable upon exercise of investor warrants 1,759,301 $ 3.81 (3) $ 6,702,937 $ 477.92 Common stock, $0.001 par value per share, issuable upon exercise of co-placement agent warrants 351,934 (4) $ 3.05 (5) $ 1,073,399 $ 76.53 Total 5,630,575 (6) $ 14,815,016 $ 1,056.31 (7) (1) Represents the total number of shares of common stock issued to 135 investors in the registrant s private placement of 893.91 units. Each unit consists of (i) 3,937 shares of common stock, and (ii) a warrant to purchase 1,968 shares of common stock at an exercise price of $3.81 per share. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. Although there is an established public trading market for our common stock on the Over-the-Counter Bulletin Board (the OTCBB ), the trading has been limited. Accordingly, the proposed maximum offering price is based on the market price of our shares of common stock on March 2, 2010. (3) Represents the number of shares of common stock issuable upon exercise of the investor warrants at an exercise price of $3.81 per share. (4) Calculated pursuant to Rule 457(g). (5) Represents the number of shares of common stock issuable upon exercise of the co-placement agent warrants at an exercise price of $3.05 per share. (6) In the event that the total number of shares of common stock registered herein (the Registrable Securities ) exceeds the limitation set forth pursuant to Rule 415, the number of Registrable Securities to be registered herein will be reduced first by the Registrable Securities owned by the co-placement agents and second, on a pro rata basis, among the investors based on the total number of unregistered shares of common stock underlying the investor warrants on a fully-diluted basis. (7) A fee of $1,191.81 was previously paid with the initial filing. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. Table of Contents After completion of the first and second steps in the Restructuring, the parties concluded that they needed another agreement to complete the Earn-In Agreement and the restructuring process. They therefore entered into the so-called "entrust shareholding" agreements with respect to each of the first and second steps; they made these agreements effective as of the effective date of the first and second steps. These agreements recited that a third-party would maintain the governance rights and economic benefits of the Liuzhou BCT Shareholders during the period of the Earn-In Agreement. The two entrust shareholding agreements were identical except that the third party in the first was Mr. Ping Ki Yue and in the second was Ms. Zhang. The first agreement had been supplanted by the second even at the time it was signed. Under the second agreement, Ms. Zhang, as owner of the shares, had all voting power and, upon notice from her with respect to a matter, the former shareholders might choose to express a preference as to how she would vote the shares; the agreement also confirmed that the former shareholders economic interest in the shares was preserved as in the Earn-In Agreement. These agreements were in fact never utilized and the parties determined that they had been mistaken in their decision to create them and that the Earn-In Agreement expresses entirely the parties relationship with respect to the shares and with each other. Representatives of the Liuzhou BCT Shareholders hold the majority of seats on the board of the Company. The Earn-In Agreement reflects the intent and purpose of the parties in undertaking and accomplishing the Restructuring. And following the accomplishment of the third step in the Restructuring, the Earn-In Agreement is the operative agreement for all purposes with respect to the relationship of the Liuzhou BCT Shareholders to the Company. The parties having recognized the mistake, for all of these reasons, the entrust shareholding agreements were rescinded as of their effective dates and the Earn-In Agreement governs the rights of the Liuzhou BCT Shareholders with respect to the shares held by Ms. Zhang. Under the Earn-in Agreement, Ms. Zhang has legal title to the shares and there are no limits on her voting rights with respect to the shares. Under the Earn-In Agreement, the Liuzhou BCT Shareholders have the right to obtain the economic benefits of the shares by purchasing the shares upon the Company's attaining the low financial thresholds in the agreement which trigger their purchase rights. Ms. Zhang also has no authority to transfer the shares. This can only be done with the agreement of the Liuzhou BCT Shareholders. Therefore, were the Company not to attain the thresholds that have been placed in the Earn-In Agreement, we anticipate that the agreement would be further modified to establish thresholds that were or are attainable. On December 30, 2009, the goal of the Restructuring was realized when we took the third step and entered into a share exchange agreement with Ingenious, pursuant to which we acquired 100% of the equity of Ingenious in exchange for the issuance of an aggregate of 32,000,000 shares of our common stock to Ms. Zhang and to certain former Liuzhou BCT Shareholders (the Share Exchange ). As of the date of this prospectus, Ms. Zhang owns 58.9% of our common stock although, as a consequence of the Earn-In Agreement ownership of these shares also resides in the Liuzhou BCT Shareholders. As a result of this transaction, we are a holding company which, through our direct and indirect ownership of Ingenious, Forever Well, Liuzhou BCT, Hefeng Pharmaceutical, and BCT Retail, now has operations based in the PRC. Private Placement On October 23, 2009, we entered into a subscription agreement (the Subscription Agreement ) with certain investors (the Investors ) for the sale of up to an aggregate of 1,147 units (the Units ) in a private placement (the Private Placement ). Simultaneously with the closing of the Share Exchange, we completed the initial closing of the Private Placement of approximately $6.3 million or 632.3 Units (the Initial Closing ). Upon the Initial Closing, we issued an aggregate of 2,489,370 shares of our common stock and Investor Warrants exercisable for up to 1,244,368 shares of our common stock at an exercise price of $3.81 per share. In addition, in connection with the Initial Closing of the Private Placement, we issued Agent Warrants to the placement agents (the Co-Placement Agents ) that are exercisable for 248,937 shares of our common stock at an exercise price of $3.05 per share. The funds were held with Signature Bank, acting as escrow agent, and were released to us upon the consummation of the Initial Closing. The closing of the Share Exchange was a condition precedent to the closing of the Private Placement. On February 1, 2010, we completed the second closing of the Private Placement of approximately $2.6 million (the Second Closing ) of 261.61 Units, consisting of an aggregate of 1,029,970 shares of our common stock and Investor Warrants exercisable for 514,933 shares of our common stock at an exercise price of $3.81. In connection with the Second Closing, we issued Agent Warrants to the Co-Placement Agents that are exercisable for 102,997 shares of our common stock at an exercise price of $3.05 per share on a cash or cashless basis. The funds were held with Signature Bank, acting as escrow agent, and were released to us upon the consummation of the Second Closing. We entered into a placement agency agreement (the Placement Agent Agreement ) with the Co-Placement Agents on October 21, 2009 whereby the Co-Placement Agents received as compensation for acting as placement agent in the Private Placement (i) a total cash fee and a non-accountable marketing allowance in the amount of approximately $0.86 million; and (ii) Agent Warrants to purchase up to 302,521 shares of common stock. Pursuant to participating agent agreements by and among Charles Vista, LLC, May Davis and American Capital, Charles Vista, LLC received as compensation for acting as a sub-agent in the Private Placement (i) a cash fee in the amount of approximately $0.22 million; and (ii) Agent Warrants to purchase up to 49,413 shares of common stock at an exercise price of $3.65 per share. The Co-Placement Agents were responsible for raising the minimum offering amount of $5,820,000 of Units and were compensated as set forth above. Agreement to Sell Preferred Shares On January 18, 2011, the Company entered into the Preferred Purchase Agreement with Milestone pursuant to which Milestone agreed to purchase the Preferred Shares. The sale transaction was completed and Milestone purchased the Preferred Shares on February 28, 2011, for an aggregate purchase price of $30 million less expense reimbursement of up to $400,000 for certain reasonable legal and other expenses incurred by Milestone in connection with the Transaction. The Preferred Shares carry a dividend of 5% and are convertible initially into an equal number of shares of our Common Stock at an initial conversion price of $3.20 per share. All conditions to closing the transaction were completed on or prior to February 28, 2011, including the completion and filing of the amendment of our Certificate of Incorporation to increase our authorized capital to 170 million shares of capital stock consisting of 150 million shares of Common Stock (an increase of 50 million shares) and 20 million shares of blank-check preferred stock which our board of directors will have the authority to issue (the Amendment ) and the filing of the Certificate of Designation adopting the terms of the Preferred Shares. All necessary board and stockholder action to approve adoption of the Amendment were taken and the Amendment was filed with the Delaware Secretary of State on February 28, 2011, which was 20 days after the mailing to our stockholders of an information statement pursuant to Section 14(c) of the Exchange Act. The board also approved the Certificate of Designation, subject to the filing of the Amendment, and the Certificate of Designation was also filed on February 28, 2011 in connection with the closing of the sale of the Preferred Shares. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission ( SEC ) is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to completion, dated March 3 , 2011 CHINA BCT PHARMACY GROUP, INC. 5,630,575 Shares of Common Stock This prospectus relates to the resale by the selling stockholders identified in this prospectus of up to 5,630,575 shares (the Shares ) of our common stock, par value $0.001 per share, including (i) 3,519,340 shares of our common stock currently issued and outstanding, (ii) 1,759,301 shares of common stock issuable upon exercise of warrants issued to our investors (the Investor Warrants ), and (iii) 351,934 shares of our common stock issuable upon exercise of the warrants issued to our co-placement agents in the private placement (the Agent Warrants and, together with the Investors Warrants, the Warrants ). The Shares were issued to the selling stockholders in private placement transactions which were exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended. The selling stockholders may offer all or part of their Shares for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. We will not receive any of the proceeds from the Shares by the selling stockholders, but we will receive funds from the exercise of the Warrants if and when those Warrants are exercised on a cash exercise basis. However, there is no assurance that such Warrants will be exercised. In addition, we will not receive any additional proceeds to the extent the Warrants are exercised on a cashless exercise basis. We are paying all of the registration expenses incurred in connection with the registration of the Shares, but we will not pay any of the selling commissions, brokerage fees and related expenses. Our common stock is quoted on the OTCBB under the symbol CNBI . On March 2 , 2011, the last reported sale of our common stock quoted on the OTCBB was $2.30 per share. The selling stockholders, and any broker-dealer executing sell orders on behalf of the selling stockholders, may be deemed to be underwriters within the meaning of the Securities Act of 1933, as amended. Commissions received by any broker-dealer may be deemed underwriting commissions under the Securities Act of 1933, as amended. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 6 to read about factors you should consider before investing in shares of our common stock. NEITHER THE SECURITIES AND EXCHANGE COMMITTEE NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Date of This Prospectus is __________, 2011 Table of Contents In connection with this transaction, the Company and Milestone also entered into a registration rights agreement and, with certain of the Company s principal stockholders, a shareholders agreement. The registration rights agreement provides for registration under the Securities Act of 1933, under various circumstances, of the shares of Common Stock into which the Preferred Shares can be converted. Under the Preferred Purchase Agreement, Milestone (or successor holders of the Preferred Shares) has the right to name one director and to recommend an additional independent director to the Company s board of directors, which we expect will be increased to seven directors after closing of the transaction. The Purchase Agreement also provides that Milestone (or successor holders) will have consent rights with respect to certain operating matters. The shareholders agreement provides limitations on the rights of the principal shareholders to engage in competing businesses in the event that they are no longer employed with the Company and also provides a process for their sale of their shares, including first offering them to the holders of the Preferred Shares and co-sale rights of the holders. Under the Certificate of Designation, the holders of Preferred Shares have pre-emptive rights with respect to future offerings and have voting rights with the Common Stock as well as separate voting rights with respect to certain extraordinary transactions. The Preferred Shares represent 18.5% of the outstanding share capital of the Company on a fully-diluted basis. These shares, together with the shares of Common Stock owned by Ms. Zhang (representing approximately 44.3% of the outstanding share capital after this transaction on a fully-diluted basis) hold the majority voting interest in the Company. The principal agreements with respect to this transaction have been filed as exhibits to our report on Form 8-K describing the transaction and filed with the SEC on January 18, 2011. Where You Can Find Us Our principal executive office is located at No. 102 Chengzhan Road, Liuzhou City, Guangxi province, China and our telephone number is (86) 772-363-8318. Our corporate website is www.china-bct.com. Information contained on, or accessed through our website is not intended to constitute and shall not be deemed to constitute part of this prospectus. The Offering Common stock offered by selling stockholders 5,630,575 shares of common stock. This includes (i) 3,519,340 shares of our issued and outstanding common stock; (ii) 1,759,301 shares of common stock issuable upon exercise of outstanding Investor Warrants; and (iii) 351,934 shares of common stock issuable upon exercise of outstanding Agent Warrants. Common stock outstanding before the offering 38,154,340 shares of common stock as of February 28 , 2011. Common stock outstanding after the offering 40,230,575 shares. (assuming full exercise of all of the Warrants) Terms of the Offering The selling stockholders will determine when and how they will sell the common stock offered in this prospectus. Termination of the Offering The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act of 1933, as amended (the Securities Act ), or any other rule of similar effect. Use of proceeds We are not selling any shares of the common stock covered by this prospectus, and, as a result, will not receive any proceeds from this offering. We may, however, receive proceeds in the event that some or all of the Warrants held by the selling stockholders are exercised for cash. However, there is no assurance that such Warrants will be exercised. In addition, we will not receive any additional proceeds to the extent the Warrants are exercised on a cashless exercise basis. To the extent that the selling stockholders exercise in cash all of the Warrants, we would receive approximately $7,776,336 in the aggregate from such exercise. The proceeds from the cash exercise of such Warrants, if any, will be used by us for working capital and other general corporate purposes. OTCBB Trading Symbol CNBI.OB
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001410181_coastal_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001410181_coastal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e56cc6b86ef9e735b5efef8b6fd720a19f160cb7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001410181_coastal_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary highlights selected information contained in this Prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire Prospectus carefully, including the information set forth under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations, and the financial statements and the notes to the financial statements included in this Prospectus. In this prospectus, "Coastal Pacific Mining Corp.," the "Company," "CPMC" "we," "us" and "our" refer to Coastal Pacific Mining Corp., a corporation organized under the laws of the Province of Alberta, Canada. OVERVIEW We are an exploration stage company engaged in the identification, acquisition, and, where feasible, the exploration of mineral properties. Our joint venture / option agreements entered into through to the end our fiscal year, as of the date of this report, have been terminated due to lack of feasibility or financial resources. We have acquired options on two exploration projects subsequent to year end. We do not presently have any employees, we currently use outside consulting for part-time clerical and administrative assistance and preparation of financial information on an as-needed basis. We have a consulting contract with Ox Financial, a private company of which our Chief Executive Officer and Chief Financial Officer is the sole shareholder. The original contract was for a two year period commencing November 2008 and has been verbally extended for an additional two years expiring on November, 2012. Under the contract, Mr. Bucci provides management services to the Company. The majority of the fees from consultants and Ox Financial for fiscal 2010 were settled by way of a debt settlement undertaken subsequent to the period covered by this report. Currently, fees to Ox Financial and other service providers are being paid monthly from funds raised under a convertible debenture offering. Additional outside advisors, attorneys or consultants are used as required. We have two directors that have geological and mining experience, Mr. David Gibson and Mr. Rick Walker, and who are paid subject to services performed on our mining claims. Prior to this offering, there has been a public market for our common shares. Coastal Pacific Mining Corp. has been quoted on the Over-The-Counter markets since October 2008. The Company currently trades under the ticker OTCQB:CPMCF. The Company is fully reporting with the United States Securities and Exchange Commission and voluntarily files its financial status and business operations with the Commission. CORPORATE INFORMATION Our legal name is Coastal Pacific Mining Corp., and we were incorporated on March 27, 2007 under the Business Corporations Act of Alberta, Canada. Our head office and principal place of business is located at 927 Drury Avenue NE, Calgary, Alberta, T2E 0M3, Canada. Our telephone number is (403) 612-3001, our facsimile number is (403) 313-5449, our website is www.coastalpacificmining.com and our e-mail address is: info@coastalpacificmining.com. The information on or accessible through our website is not a part of this Prospectus. EVENTS Since our inception, we have been an exploration stage company engaged in the identification, acquisition, and, where feasible, the exploration of mineral properties. We have entered into a number of option / joint venture agreements for exploration prospects, all of which, with the exception of two option agreements entered into subsequent to the year end, have been terminated either due to a lack of funds for undertaking required exploration / work programs or the difficulty in undertaking an exploration project due to terrain or weather constraints. Since May 1, 2007 to the end of our 2010 fiscal year, we incurred $64,416 in costs associated with acquiring mineral properties. These costs were associated with the entering into agreements, and were not a result of having undertaken exploration programs. To date, we have been involved in the following projects: We previously held a 100% interest in Tenure Number 530021 registered with the Government of British Columbia, Ministry of Energy, Mines and Petroleum Resources, known as the Violet East Claim, Axe Property, Liard Mining Division, located in the Stikine region of northwestern British Columbia, Canada, approximately 118 miles (190 km) north of Stewart, British Columbia. We originally acquired this mineral claim for a payment of $40,000 USD. This claim was intentionally not renewed by us in 2009 due to the excessive challenges in undertaking exploration activities, the terrain and short exploration season. On May 15, 2009, the Company entered into an Option Agreement with Trio Gold Corp ( Trio ), a company incorporated in the Province of Alberta, Canada. Trio had leased and granted the Company an option to purchase a 100% interest in 29 unpatented mining claims located in Nevada within the Carlin Gold Trend. On July 15, 2009, the parties agreed to amend the Option Agreement whereby we were granted a non-exclusive extension until October 15, 2009. While not formally extended further, the Option Agreement remained in effect until April 2010, at which time the Option Agreement was ended as the requisite terms had not been met. On May 27, 2009, we entered into a joint venture and option agreement with Warrior Ventures Incorporated to acquire an interest in the McNeil Gold Property (the Warrior Agreement ). Warrior was the recorded and beneficial holder of a 100% un-divided interest in certain mining claims/property situated in McNeil and Robertson Townships located south-east of Timmins, Ontario. Under the terms of the joint venture/option agreement, the Company would earn a 40% interest in the McNeil Gold Property. Subsequent to April 30, 2010, after a review of the prospect and upon being presented with an opportunity to acquire the Hotstone Property (as described below), which is our current mining exploration asset, we determined not to pursue the McNeil Gold Property, and the parties mutually agreed to the dissolution, termination and cancelation of joint venture/option agreement. On November 6, 2009, we executed a Letter Of Intent to enter into a definitive Exploration Joint Venture with Lenagold Limited, holder of the prospecting license for a property in Ireland located in the North West of Ireland near the towns of Laghey and Ballintra, County Donegal. The Company was unable to raise the required funds under the Letter of Intent, and a definitive Joint Venture Agreement was not entered into, resulting in dissolution of the Letter of Intent. Subsequent to the period covered by this annual report, on October 6, 2010, we entered into an Option Agreement with David L. Gibson, an officer and director of our Company for the rights to acquire a 50% interest in Mr. Gibson s 100% un-divided interest in certain mining claims/property (the Hotstone ) situated in Greenlaw Township located south-east of Chapleau, Ontario. We have paid the initial $50,000 cash payment on the Hotstone and issued the required 1,000,000 shares of common stock as required under the Option Agreement. This Option Agreement is currently in good standing and we are working on completing an offering of flow-thru shares to raise the required funds to commence exploration on the Hotstone. On October 30, 2010, effective November 1, 2010, we entered into an Option Agreement with Hans Peter Flueck to acquire a 50% interest in certain mining claims situated in the District of Acobambilla, Province of Huancavelica, Department of Huancavelica, in the Republic of Peru; approximately 200 km southeast of Lima. The two (2) subject claims ( Santa Rita ) cover an area of 1200 hectares and are named: (i) Celeste No 3 (200 Hectares); and (ii) Nueva Santa Rita (1000 Hectares). The claims are for metallic minerals giving the titleholder the right to explore and exploit metallic minerals within the bounds of the claims. We have paid a total of $100,000 cash and issued 1,000,000 shares of common stock as required under the Option Agreement. We have commenced exploration of the Santa Rita as of the date of this filing and we expect to have a full crew on the ground and a full exploration program underway by March 15, 2011, subject to flood conditions in Peru receding. We have substantial ongoing commitments in order to earn our 50% interest in the Hotstone and Santa Rita projects. At this time we do not have sufficient funds to undertake all of our commitments on these projects. While we have raised a total of $1,110,000 by way of loans and convertible loans, these monies are not sufficient for us to undertake the required exploration expenditures on either project in total. We will have to raise additional capital to do so. Should we be successful in completing funding under this prospectus then we expect to have sufficient funds to be able to undertake the first phase programs on both properties. We have limited finances and require additional funding in order to accomplish all of our exploration objectives. There is no assurance that we will have revenues in the future or that we will be able to secure other funding necessary for our future growth and expansion. There is also no assurance that our mineral exploration activities will produce commercially viable reserves. Our efforts to extract minerals may be unprofitable. This is no assurance that we will be able to drawdown any funds under the equity financing agreement defined below. We may seek relationships with other mineral exploration and development companies that will allow us to exploit idle and/or undeveloped resources. DRAWDOWN EQUITY FINANCING AGREEMENT On January 5, 2011, we entered into a drawdown equity financing agreement and registration rights agreement (collectively the Agreements ) with Auctus Private Equity Fund, LLC ( Auctus ), and the selling stockholder. In accordance with the Agreements, Auctus has committed, subject to certain conditions set forth in the Agreements, to purchase up to $10 million of our common stock over a term of up to two (2) years. Although we are not mandated to sell shares under the Agreements, the Agreement gives us the option to sell to Auctus shares of common stock at a per share purchase price equal to 95% of the lowest closing Volume Weighted Average Price ( VWAP ) during the five trading days following our delivery of notice to Auctus (the Notice ). At our option, we may set a floor price under which Auctus may not sell the shares which were the subject of the Notice. The floor shall be 75% of the average closing VWAP of the stock over the preceding ten (10) trading days prior to the Notice and can be waived at our discretion. The maximum amount of common stock that we can sell pursuant to any Notice is the greater of: (i) an amount of shares with an aggregate maximum purchase price of $250,000 or (ii) 200% of the average daily trading volume based on 10 days preceding the drawdown notice date, whichever is of larger value. Auctus is not required to purchase the shares unless: a) the shares which are subject to the Notice have been registered for resale and are freely tradable in accordance with the federal securities laws, including the Securities Act of 1933, as amended; and b) under certain conditions which are set forth in the Agreements and which are outside of Auctus control. We are obligated to file with the U.S. Securities and Exchange Commission (the SEC ) a registration statement on Form F-1, of which this Prospectus forms a part, within 30 days from the date of the Agreements and to use all commercially reasonable efforts to have such registration statement declared effective by the SEC within 120 days of filing. We are currently in breach of our agreement with Auctus as we did not file the registration statement within the required 30 days, however, Auctus has not provided any notice of a breach and we are seeking an extension of the 30 day filing period to cure this breach. Should we be successful in raising funds under this funding, we intend to allocate first funds raised on furthering the Santa Rita property exploration program currently underway. We intend to undertake a flow-through share offering to raise the funds required for exploration of the Hotstone Property, but if not successful then we intend to allocate funds, after securing sufficient funding for Santa Rita and operations, towards the Hotstone exploration program and payments due.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001411179_red-giant_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001411179_red-giant_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..55a5f51af64b507562ab2b5dd9a6a7de09ddb7b0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001411179_red-giant_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO PROSPECTIVE INVESTORS. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. As used in this prospectus, unless the context otherwise requires, "the Company", "we", "us", "our" or "Castmor" refers to Castmor Resources Ltd. "SEC" refers to the Securities Exchange Commission. "Securities Act" refers to the Securities Act of 1933, as amended. "Exchange Act" refers to the Securities Exchange Act of 1934, as amended. "NRS" refer to the Nevada Revised Statutes, as amended. OUR BUSINESS Castmor Resources Ltd. is an exploration stage mineral exploration company formed on June 27, 2005, under the law of the State of Nevada. We own a 100% undivided mineral interest in two non-contiguous mineral exploration licenses (license numbers 017985M and 017987M) comprising 17 claims located along south-eastern coastal Labrador (the "White Bear Arm Property"), approximately 13 kilometers northeast of the community of Charlottetown in Labrador, Canada, having a total area of 425 hectares (1,054.8 acres). Our claims give us the exclusive right to any of the mineral deposits situated on the White Bear Arm Property. Our auditors have expressed substantial doubt about our ability to continue as a going concern. If we cannot continue as a going concern, then investors may lose all of their investment. Our business plan is to explore the White Bear Arm Property for commercially exploitable reserves of valuable minerals. The White Bear Arm Property has no proven or probable mineral reserves, and there is no assurance that it contains commercially exploitable reserves of valuable minerals. All of our claims are presently in good standing. We intend to explore the White Bear Arm Property in two phases. The first phase will consist of expanded geological mapping, and geochemical sampling that will cover previously established grid areas, as well as other prospective sites that may be developed to delineate either base metals or industrial minerals. Geochemical sampling will include rock, stream sediment and till sampling. Several airborne electromagnetic anomalies will be re-verified on the ground and mapped for size and extent. If Phase I results in sufficient indication of economic geological value to support further exploration, then we will proceed with the second phase of the proposed exploration program, consisting of 800 to 1000 metres of diamond drilling, mobilized to the nearest road by truck, then helicopter-supported from that point. We anticipate that the first phase of our exploration program will cost approximately $26,680 while the second phase will cost approximately $195,500. To date, we have not commenced exploration on the White Bear Arm Property. We have sufficient working capital to maintain our present level of operations for the next 12 months and to complete Phase I of our proposed exploration program, but not Phase II. Furthermore, the proceeds from this offering will not be sufficient to fund Phase II. We will be required to seek additional funding in order to complete Phase II of our exploration program. We anticipate that any additional funding that we require will be in the form of equity financing from the sale of our common stock. There is no assurance, however, that we will be able to raise sufficient funding from the sale of our common stock. The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine can be demonstrated. We do not have any arrangements in place for any future equity financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations. If we discontinue our exploration of the White Bear Arm Property, we may seek to acquire other natural resource exploration properties. Any such acquisition will involve due diligence costs in addition to the acquisition cost. We will also have an ongoing obligation to maintain our periodic filings with the appropriate regulatory authorities, which will involve legal and accounting costs. In the event that our available capital is insufficient to acquire an alternative resource property and sustain minimum operations, we will need to secure additional funding or else we will be compelled to discontinue our business. We have earned no revenue since inception. From June 27, 2005 (inception) through August 31, 2010, we incurred a net loss of $91,976 with accumulated shareholder's equity of $37,904. Further losses are anticipated in the development of our business. We have limited financial resources and require additional financing to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to locate commercially exploitable reserves of valuable minerals. Our sole officer and director does not have any professional training or technical credentials in the exploration, development, or operation of mines. We therefore intend to retain qualified persons on a contract basis to perform the surveying, exploration, and excavating of the property as needed. We do not have any verbal or written agreement regarding the retention of any qualified engineer or geologist for our exploration program. We currently have no employees other than our sole officer and director, who devotes six hours per week to our operations. We do not intend to hire any employees for the next twelve months or until we have proven mineral reserves. Please carefully read both this prospectus and any prospectus supplement together with the additional information described below under the section entitled "Available Information". Our principal executive offices are located at 427 Princess Street, Suite 406, Kingston, ON K7L 5S9. Our telephone number is (613) 617-5107. Our facsimile number is: (613) 383-0247. THE OFFERING Securities Offered: A minimum of 12,000,000 and a maximum of 20,000,000 shares of common stock, par value $0.0001 Offering price: $0.005 per share Offering period: The offering will remain open until the earlier of the date that all shares offered are sold and 120 days after the date of this prospectus, except that we will have only 90 days to sell at least the first 12,000,000 shares. Net proceeds to us: Minimum: Approximately $55,000, after estimated expenses of $5,000 assuming sale of 12,000,000 shares Maximum: Approximately $95,000, after estimated expenses of $5,000 assuming sale of 20,000,000 shares Use of proceeds: We will use the proceeds to pay for debt repayment, prospecting, professional fees and working capital. Number of shares outstanding 12,487,000 before the offering: Number of shares outstanding Minimum: 24,487,000 assuming after the offering: sale of 12,000,000 shares Maximum: 32,487,000 assuming sale of 20,000,000 shares SUMMARY OF SELECTED FINANCIAL DATA We are an exploration stage company. From the date of our inception on June 27, 2005 we have not generated any revenue or earnings from operations. As of August 31, 2010 our financial data is as follows: ----------------------------------------------------------------- As at or for the period from June 27, 2005 (inception) to August 31, 2010 ----------------------------------------------------------------- Operations Data Revenue: $ - Net Loss: 91,976 Balance Sheet Data Total Assets: 92,838 Total Liabilities: 54,934 Net Tangible Book Value: 37,904 Net Tangible Book Value Per Share: (0.00) -----------------------------------------------------------------
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001429360_wowjoint_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001429360_wowjoint_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001429360_wowjoint_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001432254_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001432254_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d0baf6ea0de1a944871f2f6eb1e53197e67c866a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001432254_first_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1 (1) Unless the context indicates otherwise, all share and per-share information in this prospectus is based on 59,464,480 shares of our common stock outstanding as of May 20, 2011. Our Business First China Pharmaceutical Group, Inc. ( FCPG or the Company ), formerly known as E-Dispatch Inc., was incorporated under the laws of the State of Nevada on July 31, 2007. On September 15, 2010, we closed a voluntary share exchange transaction pursuant to a Share Exchange Agreement, dated August 23, 2010 (the Exchange Transaction ), by and among FCPG, First China Pharmaceutical Group Limited, a Hong Kong company ( FCPG HK ), and Kun Ming Xin Yuan Tang Pharmacies Co. Ltd., a company organized under the laws of the People s Republic of China ( PRC ) and wholly owned subsidiary of FCPG HK ( XYT ). Prior to the Exchange Transaction, we were a development stage company engaged in developing a cell phone-based taxi dispatch system, and a public reporting shell company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result of the Exchange Transaction, the FCPG HK stockholder acquired approximately 25% of our issued and outstanding common stock, FCPG HK and XYT became our wholly-owned subsidiaries, and we acquired the business and operations of FCPG HK and XYT. Through our wholly-owned subsidiary, XYT, we are now engaged in drug logistics and distribution in Yunnan Province, China through drug stores, medical clinics and hospitals, as well as the wholesale distribution of medicine products, chemical agents, antibiotics, biochemistry drugs and biological preparations to hospitals and the XYT store located at the Company s distribution facility in Kunming. XYT was founded in November 2002 and is a provincial pharmaceutical distributor that offers approximately 5,000 drugs, of which approximately 1,000 are over-the-counter drugs, approximately 1,000 are prescription drugs, approximately 2,000 are prepared Chinese medicines and approximately 1,000 are supplements. Currently, we have approximately 4,700 customers and supply approximately 10% of such customers inventories with a sales network that covers the entire Yunnan Province of China. Our continuing strategy is to build a nationwide pharmaceutical distribution network throughout China. We plan to expand our customer base through the use of the following tactics: broadening of our current product line to attract larger customers that currently do not utilize us and benefit from internet ordering and the lower prices that we offer; providing computers to customers to attract new customers as our management is unaware of any other pharmaceutical distribution company providing this benefit; and increasing our current sales force to directly target hospitals, medical clinics and pharmacies. Corporate Information Our principal executive offices are located at FCPG HK s and XYT s headquarters located at Number 504, West Ren Min Road, Kunming City, Yunnan Province, People s Republic of China, 650000, which is also our mailing address. Our telephone number is 852-2138-1668. Transfer Agent Our transfer agent is Routh Stock Transfer Inc., and is located at 6860 N. Dallas Parkway, Suite 200, Plano, Texas, 75024. Their telephone number is (972) 381-2782.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001434477_sunvalley_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001434477_sunvalley_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b460897d7d114130f0af32cfd86c211bc3d3152d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001434477_sunvalley_prospectus_summary.txt
@@ -0,0 +1 @@
+Table of Contents Summary Sunvalley Solar, Inc. We are a California-based solar power technology and system integration company founded in January of 2007. We are focused on developing our expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and maintaining solar power systems. Our customers range from small private residences to large commercial solar power users. We have the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities and warehouses. Our proprietary technologies in solar installation provide our customers with a high quality, low cost and flexible solar power system solutions. We are working to develop as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical support, solar system design and field installation. Our address is 398 Lemon Creek Dr., Suite A, Walnut, CA 91789. Our phone number is (909) 598-0618. Our auditors have issued a going concern opinion and have raised substantial doubt about our ability to continue as a going concern. When an auditor issues a going concern opinion, the auditor has substantial doubt that the company will continue to operate indefinitely and not go out of business and liquidate its assets. This is a significant risk to investors who purchase shares of our common stock because there is an increased risk that we may not be able to generate and/or raise enough resources to remain operational for an indefinite period of time. The proceeds of our transaction with Auctus, as detailed below, will be used to fund the development and expansion of our business plan. In order to move forward with our complete business development plan as set forth in this Prospectus, we will require additional financing in the approximate amount of $4,500,000, to be allocated as follows: Initiate OEM Manufacturing $ 2,000,000 R &D Commercialization Costs $ 500,000 Expansion of Installation Business (3 new branches) $ 1,500,000 Additional working capital and general corporate $ 500,000 Total capital needs $ 4,500,000 We intend to execute the business expansion plans described herein over the course of the next 2-3 years. In order for us to do so, however, we will require additional financing, including the financing available under our transaction with Auctus. Our Transaction With Auctus This prospectus relates to the resale of up to 106,666,663 shares of our common stock by Auctus. Auctus will obtain our common stock pursuant to a Drawdown Equity Financing Agreement ("DEFA"), dated December 31, 2010, entered into by Auctus and Sunvalley Solar, Inc. We have paid Auctus a non-refundable origination fee in the amount of $15,000 cash. Auctus obligations under the equity line agreement are not transferrable. In connection with the DEFA, we have agreed to issue and sell to Auctus, and Auctus has committed to purchase from us, up to $10,000,000 worth of our common stock ("Shares"), par value $0.001 per share over a three year period. At the date of filing, we may not obtain the full $10,000,000 in funding as our average trading price is too low. The DEFA specifies that $10,000,000 is the total amount of available funding in the DEFA. Currently, we anticipate that our total capital needs for our planned business development and expansion are approximately $4.5 million. The DEFA recites $10,000,000 because this is the maximum amount of funding that Auctus is prepared to offer our company. The $10,000,000 is not a reflection of our total capital needs at this time, and we currently do not anticipate accessing the entire available equity line. There is no assurance that the market price of our common stock will increase substantially in the near future. The number of commons shares that remains issuable is lower than the number of common shares we may need to issue in order to have access to the full amount under the DEFA. Therefore, we may not have access to the remaining commitment under the equity line unless we amend our Articles of Incorporation to increase the number of authorized common shares and/or the market price of our common stock increases substantially. Based on our stock price as of January 20, 2011, the registration statement covers the offer and possible sale of only approximately $1,488,000 worth of our shares at current discounted market price of $0.01395 or approximately 93% of $0.015 (our market price at January 20, 2011.) There are no fees or commissions payable in connection with any future sale of common stock to Auctus. We paid a one-time, non-refundable origination fee of $15,000 to Auctus in connection with the DEFA. We are authorized to issue 1,500,000,000 shares of common stock and have 803,068,420 shares issued and outstanding as of January 24, 2011. The number of common shares that remains issuable is lower than the number of common shares we need to issue in order to have access to the full amount under the DEFA. In order to access the entire $10,000,000 in available equity funding at a price of $0.01395 per share, would need to issue a total of 716,845,878 shares, which would constitute a total of approximately 47.26% of our issued and outstanding common stock when issued. This figure would, however, exceed the total number of authorized common shares issuable under our Articles of Incorporation. Therefore, we may not have access to the remaining commitment under the equity line unless we amend our Articles of Incorporation to increase the number of authorized common shares and/or the market price of our common stock increase substantially. The 106,666,663 shares being offered in this Prospectus would, upon issuance, constitute approximately 11.76% of our issued and outstanding common stock. Table of Contents The maximum amount that we shall be entitled to request from each advance ("Advance") shall be equal to, at the Company s election, either (i) $500,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock based on the ten (10) trading days preceding the Drawdown Notice Date (as defined in the DEFA), whichever is larger. The purchase price of the common stock shall be set at ninety-three percent (93%) of the lowest closing bid price of the common stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the Drawdown Notice Date. A total of 106,666, 663 shares are being offered under this Prospectus. At a price of $0.01395, a sale of all of these shares to Auctus would represent total proceeds to us of $1,488.000. Our actual sale prices to Auctus, however, will be determined by reference to the trading price of our common stock in the market, with Auctus receiving a discount from the market trading price as indicated above. Because market prices of our common stock are subject to constant fluctuations, the actual amount to be received by us upon sale of the 106,666,663 shares being offered could vary substantially from the listed offering amount of $1,488,000. If our stock price were to decrease, the total proceeds available to us upon sale of the shares being offered under this Prospectus could correspondingly decrease substantially. The table below illustrates a range of proceeds which may be received by us upon sale of the 106,666.663 shares being offered, assuming a range of different market prices for our common stock: Market price $.005 $0.01 $0.015 $0.02 Price to Auctus $0.00465 $0.0093 $0.01395 $0.0186 Proceeds upon sale of all 106,666,663 shares to Auctus $496,000 $992,000 $1,488,000 $1,984,000 In addition to decreasing the proceeds available to us upon sale of the shares being offered under this Prospectus, a decline in our stock trading price would also substantially increase the total amount of shares that we would be required to issue in order to access the entire $10,000,000 available under the equity line. The table below illustrates a range of the total shares that would need to be issued in order for us to access the entire $10,000,000 equity line, assuming a range of different market prices for our common stock: Market price $.005 $0.01 $0.015 $0.02 Price to Auctus $0.00465 $0.0093 $0.01395 $0.0186 Total shares issuable to receive $10,000,000 2,150,537,634 1,075,268,817 716,845,878 537,634,409 During the five trading days following a drawdown request, we will calculate the amount of shares we will sell to Auctus and the purchase price per share. The purchase price per share of common stock will be based on the lowest closing bid prices of our common stock during the five trading days immediately following the drawdown date, less a discount of 7%. There shall be a minimum of five (5) Trading Days between each Drawdown Notice Date. Under the DEFA, Auctus shall immediately cease selling any shares within a Drawdown Notice if the price falls below a fixed-price floor provided by the Company or seventy-five percent (75%) of the average closing bid price of the common stock over the preceding ten (10) trading days prior to the Drawdown Notice Date (the "Floor"). Under the DEFA, the floor price restriction applies during the five day trading period following our issuance of a draw-down notice. Notwithstanding, we may, in our sole and absolute discretion, waive its right with respect to the Floor and allow Auctus to sell any shares below the Floor Price. In the event that we do not waive its right with respect to the Floor, Auctus shall immediately cease selling any shares within the Drawdown Notice if the price falls below the Floor Price. If we do waive the floor price it could cause the share price to fall substantially. The floor price restriction only applies to the five day trading period then the transaction is closed. In the event that we chose to waive the Floor Price restriction, this action could cause the market value of our common stock to decrease, resulting in a larger number of shares issuable pursuant to the drawdown request to increase. In addition, there is an ownership limit of 4.99% under the DEFA. This means that the number of shares issuable to Auctus pursuant to any equity advance under the DEFA may not cause the aggregate amount of our common stock owned by Auctus to exceed 4.99% of our total issued and outstanding common stock. As discussed above, the number of shares that must be issued in order to receive a given amount of funding under the equity line will increase if the market price of our common stock declines. If the average trading in our common stock is too low, it is possible that we may not be permitted to draw the full amount of proceeds of the drawdown of $500,000, which may not provide adequate funding for our planned operations. On the Advance Date, we shall deliver to Auctus the number of shares of the Common Stock registered in the name of Auctus as specified in the Drawdown Notice. In addition, we must deliver the other required documents, instruments and writings required. If we have not paid the fees, expenses, and disbursements of Auctus in accordance with the DEFA, Section 12.4, the amount of such fees, expenses, and disbursements may be deducted by Auctus directly out of the proceeds of the Advance with no reduction in the amount of shares of our Common Stock to be delivered on the Advance Date. We have certain obligations upon closing that must be met: The shares delivered to Auctus must be done so through a Deposit/Withdrawal at Custodian (DWAC) from a Deposit Trust Company and shares must have proof that they are free of restrictive legends. Our Registration Statement with respect to the resale of the shares of Common Stock delivered in connection with the Advance shall have been declared effective. We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities.. We shall have filed with the SEC in a timely manner all reports, notices and other documents required. All fees set forth in Section 12.4 of the DEFA shall have been paid or withheld. Our transfer agent is DWAC eligible. Table of Contents We believe that we will be able to meet all of the above obligations mandated in Section 2.3 of the DEFA (mentioned above). We are aware that if we fail to perform our obligations and we fail to deliver to Auctus on the Advance Date the shares of Common Stock corresponding to the applicable Advance, Auctus shall suffer financial hardship and therefore we acknowledge that we will be liable for any and all losses, commission, fees, interest, legal fees or any other financial hardships caused to the Investor. Fees and penalties for such losses (liquidated damages) to Auctus shall be paid by the Company in accordance with the following schedule: Payments for Each Number of Days Overdue For each $10,000 Worth of Common Stock 1 $ 100 2 $ 200 3 $ 300 4 $ 400 5 $ 500 6 $ 600 7 $ 700 8 $ 800 9 $ 900 10 $ 1000 Over 10 $1000 + $200 for each Business Day beyond the tenth day Summary Of The Offering Securities Being Offered Up to 106,666,663 shares of our common stock. Securities Issued and to be Issued 803,068,420 shares of our common stock are issued and outstanding as of the date of this prospectus. 909,735,083 shares will be issued and outstanding after completion of this offering. Use of Proceeds We will not receive any proceeds from the sale of the shares of common stock offered by Auctus. However, we will receive proceeds from Auctus under the DEFA. See Use of Proceeds . Summary Financial Information Balance Sheet Data Three Months Ended March 31, 2011 (unaudited) Fiscal Year Ended December 31, 2009 (derived from audited financial information) Fiscal Year Ended December 31, 2010 (derived from audited financial information) Cash $ 429,054 $ 309,453 $ 546,164 Total Assets $ 3,114,096 $ 4,090,291 $ 3,186,456 Liabilities $ 3,251,124 $ 3,796,595 $ 3,068,599 Total Stockholder s Equity (Deficit) $ (137,028) $ 293,696 $ 117,857 Statement of Operations Revenue $ 797,810 $ 4,413,033 $ 4,634,140 Net Income (Loss) for Reporting Period $ (202,504) $ (587,859) $ (375,839) Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001440476_asia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001440476_asia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..23ef753d15dc5c9098e1f925256aaf00ebeee32c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001440476_asia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider in evaluating a potential investment in our common stock. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements, the notes thereto and matters set forth under Risk Factors. Our Business We are a green and organic food producer headquartered in Fujian Province, China. We grow, process and distribute over 100 varieties of fresh and processed agricultural products. Our product offerings can be generally grouped into the following three main categories: Bamboo shoot products Fresh vegetables and fruits Processed vegetables We are one of the leading producers of organic bamboo shoot products in China and revenues from bamboo shoots accounted for approximately 52% of our revenue in the year ended December 31, 2010 and 79% of our revenue in the first quarter of 2011. We are vertically integrated with operations that include the planting, harvesting, processing, packaging and selling of final products. Through our vertically integrated model, we offer direct and strict control over our fresh agricultural products, which we believe allows us to generate high margins and provide stronger guarantees for product quality compared to providers that are not vertically integrated. As of March 31, 2011 , we have the right to use, through long-term lease contracts and transfer of land use right, over approximately 30,500 acres (123.43 square kilometers) of bamboo forest, and, through long-term lease contracts, over approximately 12,500 acres (50.59 square kilometers) of vegetable planting bases. All of our production operations are conducted in China. Our state-of-art food processing facilities are located in Nanping City, Fujian Province, an area that is well-known for producing organic and premium agricultural products, including bamboo shoots, in China. We conduct processing through two subsidiaries, Fujian Yada Group Co., Ltd and Fujian Yaxin Food Co., Ltd with a total annual capacity of 150,000 metric tons of processed agricultural products. We own a 6,000-metric ton cold storage warehouse as at March 31, 2011. We sell our products through an extensive sales and distribution network, consisting of our own sales force as well as more than 100 distributors for the Chinese market and 20 distributors for the Japanese market. Our domestic sales network covers 10 provinces and cities including Shanghai, Beijing, Tianjin, Shandong, Jiangsu, Zhejiang, Fujian, Hubei, Henan, and Guangdong in China. We sell our products to farmer's markets and supermarkets in Fujian Province and Shanghai and to food manufacturers and restaurants in China. In China, we sell both processed and fresh agricultural products. During the year ended December 31, 2010 and the first quarter of 2011, we derived approximately 94% of our revenue domestically and have established strong brand equity in the Chinese market. We also sell our products through distributors to supermarkets, food manufacturers and restaurants in the Japanese market. We sell semi-finished and final processed products to Japan. Sales to the Japanese market contributed approximately 6% of our total revenue during the year ended December 31, 2010 and the first quarter of 2011. For the three months ended March 31, 2011, our net sales were $25.9 million compared to $22.7 million for the same period last year, an increase of $3.2 million or approximately 14%. Net income was relatively unchanged at $6.0 million for the first quarter of 2011, compared to $6.1 million for the first quarter of 2010. Our gross margin for the quarters ended March 31, 2011 and 2010 was 30%. Our sales revenue grew approximately 81% in the fiscal year ended December 31, 2010 to $72.1 million, from $39.8 million in the prior year. Net income grew approximately 78% in the fiscal year ended December 31, 2010 to $21.6 million, from $12.1 million in the prior year. Our gross margin for the year ended December 31, 2010 was approximately 36%. Our Industry The Bamboo shoot industry Bamboo is a group of perennial evergreen plants and is one of the fastest growing woody plants in the world. Bamboo shoots are edible and widely used in a number of Asian dishes and broths. Bamboo shoots are low in saturated fat, cholesterol and sodium; yet they are a good source of protein, vitamin E, niacin, iron, and dietary fiber. (Source: www.wikipedia.com and www.nutritiondata.com) China has over 10 million total acres (40,468 square kilometers) of bamboo forest, placing it first in the world (Source: China Bamboo Shoot Association). China is also the largest producer of bamboo shoot products with over 90% of global market share (Source: China Bamboo Shoot Association). The overall Chinese bamboo shoot industry is highly fragmented; there are currently over 2,000 companies producing bamboo shoots in China. Organic food products industry The global organic food market has experienced over 30% growth in the past few years. China is one of the world's fastest growing markets for organic food products both in terms of consumer demand and commercial production. Sales of organic food products reached $900 million in China in 2007, and accounted for only 1.5% of the global market share. (Source: www.ofcc.org.cn). The Organic Food Certificate Center estimates that China will account for more than 5% of the global organic food industry within the next ten years. (Source: www.ofcc.org.cn) China's approach to organic food is somewhat unique to other countries, in that the organic food space is segmented into Certified Organic and Green Food. "Green Food" refers to safe, fine quality and nutritious food produced and processed under the principals of sustainable development and certified by China Green Food Development Center based on special standards and permitted to be sold with green food logo. Organic food production requires that no chemical be used in the process. The objectives of Green Food are low environmental impact, good food safety and social efficiency. China has adopted the Green Food certifications as an alternative to full Organic certification, enabling the production of nutritious and safe foods, without the typical drop in agricultural production output that full Organic certification could cause. (Source: Wikipedia: Organic Food; Organic Food Certification) We sell products that are certified as Green Food, as well as products that are certified as Organic Food under the JAS (Japanese Agriculture Standard). China has a strong and growing organic and green food industry. The rising popularity of organic and green foods is driven by a number of factors. First and foremost is the increasing concern of China's rising middle class with food safety. The food safety concerns relate to both the short term purity and nutrition of the food, as well as longer term concerns on the and potential health impact of chemicals that are used in the production of the food. There is also increasing concern with the impact of agricultural production on the environment and the residual effects of agricultural chemicals on the ecosystem. Our Competition At present, there are thousands of bamboo shoot producers in China. The market is competitive and highly fragmented. In a letter dated March 12, 2010 from the Chinese Bamboo Industry Association to the Trademark Office of State Administration of Industry and Commerce of China, the Chinese Bamboo Industry Association recommended the Yada trademark of Fujian Yada as a Famous Trademark of China , and stated in the letter that Fujian Yada Group Co., Ltd. is one of the largest producers of boiled bamboo shoots products and dried vegetables in China . Based on the information in this letter, we believe we are one of the largest producers of bamboo shoot food products in China. We attribute our success to date and our potential for future growth to a combination of strengths, including the following: The vertical integration of planting bases and production lines. The strategic location of our production facilities. Our diversified and seasonally complementary product portfolio. A traceable and systematic quality control system that ensures high quality products. Strong R&D capability which allows us to continuously develop new high value-added products. A leading market position and significant brand equity. A multi-layered sales channel and an extensive sales network in Chinese and Japanese markets. Our Growth Strategy We are focused on leveraging industry opportunities and our competitive strengths to become China's leading brand for green and organic food products through the following initiatives: Expand our planting base. Improve profitability through introduction of new high value added products. Further expand our domestic sales and distribution network and enter new markets. Increase our cold storage capacity. Further enhance our brand recognition.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001451565_solar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001451565_solar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..add6ae42c22428264895b5036eb3fba047abd604
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001451565_solar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere or incorporated by reference in this Prospectus. All references in this Prospectus to Shares are as of September 30, 2010, unless otherwise specified. Prospective investors should carefully consider the information set forth under the heading Risk Factors.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001461798_galaxy_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001461798_galaxy_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f4eace612dba612b0c4a8b0e5bcd46bd7ca6ac2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001461798_galaxy_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. GALAXY MEDIA & MARKETING CORP. We were incorporated on October 22, 2001 under the laws of the State of Nevada as DS & E Metals, Inc. In September 2005, in connection with the acquisition of 100% of the membership interests of Amber Alert Safety Centers, L.L.C., a New Jersey limited liability company, we changed our name to Amber Alert Safety Centers, Inc. On January 23, 2009, we changed our name to AMBER Ready, Inc. On April 8, 2010, in connection with the acquisition of Charlston Kentrist 41 Direct, Inc., we changed our name to Galaxy Media & Marketing Corp. to reflect the new direction of our business. We are a development stage company that develops and markets products through the direct response industry. Direct response television advertisements is best known for the use of infomercials, which are long-format television commercials that are typically approximately 28 minutes in length. In addition, there are shorter versions of direct response advertisements that are either one or two minutes long. Infomercials are used to sell all types of products today; from financial services to abdominal exercisers, from cleaning products to nutraceuticals. Our operations involve screening and selecting products which we believe will have mass appeal through the use of direct response marketing, then producing the infomercial and coordinating a multi-pronged marketing strategy, including internet and social media campaigns. We will then outsource the product manufacturing, media purchasing, order processing, order fulfillment and customer service operations involved in the selling of our products. Currently, we have one primary product that is ready for direct response television marketing, our purEffect 4 step acne treatment program. purEffect was created as a differentiated product to treat cases of acne. Like most products for treating acne, purEffect uses Benzoyl Peroxide as one of the main active ingredients. Our purEffect product is a four-step program, involving an acne facial wash, oil reducing toner, acne repair cream and a healing cream. Other acne treatment programs do not have our exclusive four step product, which includes a healing cream, which we believe provides us with a distinct advantage over our competitors. Another advantage is the moisturizing of the skin which other acne treatment products lack. Other advantages include the moisturizing of the skin while it is being treated, healing of both old and new leftover acne blemish marks as a result of special ingredients in our formulations, and the brightening and evening out of skin tones. purEffect comes in a 60 day supply and will be sent to most consumers every 60 days because acne requires constant treatment to both prevent and cure blemishes. There must be a continuity of continuous use of the product which creates opportunities for multiple sales. Our clinical testing indicates that 92% of the users of our four step program prefer the results of purEffect to three step programs of our competitors. purEffect delivers results in acne sufferers from 12 years of age to over 55 years of age, as experienced by men and women with all skin types. We have incurred losses since our inception. For the years ended December 31, 2009 and 2008, we generated revenues of $13,272 and $716, respectively, and incurred net losses of $75,808,771 and $9,835,053, respectively. At December 31, 2009, we had a working capital deficit of $12,853,708 and an accumulated deficit of $88,664,410. These factors raise substantial doubt about our ability to continue as a going concern. For the nine months ended September 30, 2010, we generated revenues of $8,372 and a net loss of $18,152,580. At September 30, 2010, we have a working capital deficit of $25,997,763. To continue our operations and fully carry out our business plans for the next 12 months, we need to raise additional capital (up to $8,000,000) for which we currently do not have any contracts or commitments for additional funding. We can give no assurance that we will be able to raise such capital on terms acceptable to us, if at all. We have limited financial resources until such time that we are able to generate positive cash flow from operations. There is currently no public market for our common stock. We are currently in discussions with various market makers in order to arrange for an application to be made with respect to our common stock, to be approved for quotation on the Over-The-Counter Bulletin Board upon the effectiveness of this prospectus. We are registering shares of our common stock for resale pursuant to this prospectus in order to allow the selling stockholders to sell their holdings in the public market and to begin developing a public market for our securities to be able to seek public financing and business development opportunities in the future, although we currently do not have any contracts or commitments for any public financing or business development opportunities. Our management would like a public market for our common stock to develop from shares sold by the selling shareholders. No assurances can be given that our common stock will be approved for quotation on the on the Over-The-Counter Bulletin Board or that a public market will develop. In the event that our common stock is not approved for quotation or a public market does not develop, the price at which our common stock is likely to sell will decline, possibly significantly, and investors may be unable to resell shares of our common stock. Our principal offices are located at 245 Main Street, Suite 600, White Plains, New York 10601 and our telephone number is (914) 328-2830. We are a Nevada corporation. CALCULATION OF REGISTRATION FEE Title of Each Class Of Securities To Be Registered Amount To Be Registered Proposed Maximum Offering Price Per Security (1) Proposed Maximum Aggregate Offering Price Amount Of Registration Fee Common Stock, par value $.0001 per share 3,438,297 $ 12.00 $ 41,259,564 $ 2,298.16 Common Stock, par value $.0001 per share issuable upon conversion of debentures 1,297,739 $ 12.00 $ 15,572,868 $ 867.41 Common Stock, par value $.0001 per share issuable upon exercise of outstanding warrants 259,560 $ 18.00 $ 4,672,080 $ 260.23 Common Stock, par value $.0001 per share issuable upon exercise of warrants issuable upon conversion of outstanding debentures 1,669,756 $ 18.00 $ 30,055,608 $ 1,674.10 Total 6,665,352 $ 91,560,120 $ 5,099.90 (2) (1) Estimated solely for the purpose of computing amount of the registration fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933 based upon recent prices of private transactions, except for the shares issuable upon exercise of warrants, which is pursuant to Rule 457(g). (2) Fee previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. The Offering Common stock offered by selling stockholders 6,665,352 shares, including the following: -4,215,539 shares of common stock; -up to 1,297,739 shares of common stock underlying convertible debentures in the face amount of $15,571,845.37; -up to 259,560 shares of common stock issuable upon exercise of outstanding common stock purchase warrants exercisable at $18.00 per share; and -up to 1,669,756 shares of common stock issuable upon exercise of common stock purchase warrants issuable upon conversion of outstanding convertible debentures exercisable at $18.00 per share. Shares outstanding prior to the offering 52,598,997 shares as of February 7, 2011 (1) Shares to be outstanding after the offering 55,826,052 shares (assuming that all shares registered hereunder are sold) Use of proceeds We will not receive any proceeds from the sale of the common stock. However, we will receive the sale price of any common stock we sell to the selling stockholder upon exercise of the warrants. However, the warrants entitle the holder to exercise their warrants on a cashless basis. In the event that any selling stockholder exercises their warrants on a cashless basis, then we will not receive any proceeds from the exercise of those warrants. We expect to use the proceeds received from the exercise of the warrants, if any, for general working capital purposes. (1) Does not include shares of common stock issuable upon conversion of outstanding convertible debentures or warrants. Please see our Description of Securities section on page 39 for a complete description of these securities, including their conversion terms. Recent Transactions On April 7, 2010, we filed a certificate of amendment to our articles of incorporation, whereby we effected a 1:12 reverse stock split of all our issued and outstanding shares of common stock. As a result of the reverse stock split, the 73,309,660 shares of our common stock issued and outstanding prior to the reverse split were reduced to 6,109,736, with anyone who was to receive a fractional share being rounded up to next whole share of common stock. On April 8, 2010, we, CK41 Acquisition Corp., our wholly-owned subsidiary, and Charlston Kentrist 41 Direct, Inc., or CK41, entered into an Agreement and Plan of Merger, or the Merger Agreement, which closed on April 8, 2010. Pursuant to the terms of the Merger Agreement, CK41 Acquisition Corp. merged with and into CK41, which became our wholly-owned subsidiary. At the closing of the merger, each share of CK41 s common stock issued and outstanding immediately prior to the closing of the merger was converted into approximately 0.379 shares of our common stock. We issued an aggregate of 6,109,736 shares of our common stock to the holders of CK41 s common stock. The information in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2011 PROSPECTUS GALAXY MEDIA & MARKETING CORP. 6,665,352 Shares of Common Stock This prospectus relates to the sale of up to 6,665,352 shares of our common stock, including 1,297,739 shares of common stock issuable upon conversion of $15,571,845.37 principal amount of convertible debentures, 259,560 shares of common stock issuable upon exercise of outstanding common stock purchase warrants and 1,669,756 shares of common stock issuable upon exercise of common stock purchase warrants issuable upon conversion of outstanding convertible debentures. This is the initial registration of shares of our common stock. The selling stockholders will sell the shares from time to time at $12.00 per share. The selling stockholders may be deemed underwriters of the shares of common stock, which they are offering. We will pay the expenses of registering these shares. Our common stock is not traded on any national securities exchange and is not quoted on any over-the-counter market. We intend to begin discussions with various market makers in order to arrange for an application to be made with respect to our common stock, to be approved for quotation on the Over-The-Counter Bulletin Board upon the effectiveness of this prospectus. If our shares become quoted on the Over-The-Counter Bulletin Board, sales will be made at prevailing market prices or privately negotiated prices. We currently intend to continue with this offering even if our common stock is not approved for quotation on the Over-The-Counter Bulletin Board. There is no assurance that a public market will develop for our shares of common stock. The selling stockholders are offering these shares of common stock. The selling stockholders may sell all or a portion of these shares from time to time in market transactions through any market on which our common stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. The selling stockholders will receive all proceeds from the sale of the common stock. For additional information on the methods of sale, you should refer to the section entitled "Plan of Distribution." The securities offered in this prospectus involve a high degree of risk. See "Risk Factors" beginning on page 4 of this prospectus to read about factors you should consider before buying shares of our common stock. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this Prospectus is ____, 2011
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001466767_amc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001466767_amc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1f77ba5a887ea8e143ebad213eb2a7b18f667636
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001466767_amc_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 a2203993zs-1a.htm S-1/A Table of Contents As filed with the Securities and Exchange Commission on June 24, 2011 Registration No. 333-173042 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 TABLE OF CONTENTS Market and Industry Information ii Special Note Regarding Forward-Looking Statements ii Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001472595_r1-rcm_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001472595_r1-rcm_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a893b2a902a5924f8367646c1273b1186bae9219
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001472595_r1-rcm_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 10, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms Accretive Health , our company , we , us and our in this prospectus to refer to Accretive Health, Inc. and its subsidiaries. Accretive Health Overview Accretive Health is a leading provider of services that help healthcare providers generate sustainable improvements in their operating margins and healthcare quality while also improving patient, physician and staff satisfaction. Our core service offering helps U.S. healthcare providers to more efficiently manage their revenue cycles, which encompass patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. Our quality and total cost of care service offering, introduced in 2010, can enable healthcare providers to effectively manage the health of a defined patient population, which we believe is a future direction of the manner in which healthcare services will be delivered in the United States. Our customers typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent ambulatory clinics, and their affiliated physician practice groups. Our integrated technology and services offerings, which we refer to as our solutions, are adaptable to the evolution of the healthcare regulatory environment, technology standards and market trends, and require no up-front cash investment by our customers. As of December 31, 2010, we provided our integrated revenue cycle service offering to 26 customers representing 66 hospitals, as well as physicians billing organizations associated with several of these customers, and our quality and total cost of care service offering to one of these customers, representing seven hospitals and 42 clinics. The revenue cycle operations of a typical healthcare provider often fail to capture and collect the total amounts contractually owed to it from third-party payors and patients for medical services rendered. Our revenue cycle management solution spans our customers entire revenue cycle, unlike competing services that we believe address only a portion of the revenue cycle or focus solely on cost reductions. Through the implementation of our distinctive operating model that includes people, processes and technology, customers for our revenue cycle management services have historically achieved significant improvements in cash collections measured against the contractual amount due for medical services, which we refer to as net revenue yield, within 18 to 24 months of implementing our solution. Revenue cycle management customers operating under mature managed service contracts typically realize 400 to 600 basis points in yield improvements in the third or fourth contract year. All of a customer s yield improvements during the period we are providing services are attributed to our solution because we assume full responsibility for the management of the customer s revenue cycle. Our methodology for measuring yield improvements excludes the impact of external factors such as changes in reimbursement rates from payors, the expansion of existing services or addition of new services, volume increases and acquisitions of hospitals or physician practices. Introduced in 2010, our quality and total cost of care solution consists of a combination of people, processes and technology that enable our customers to effectively manage the health of a defined patient population. Our technology and service infrastructure can help our customers identify the individuals who are most likely to experience an adverse health event and, as a result, incur high healthcare costs in the coming year. This data allows providers to focus greater efforts on managing these patients within and across the delivery system, as well as at home. Table of Contents The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, dated March 21, 2011 6,500,000 Shares Common Stock All of the shares in this offering are being sold by the selling stockholders identified in this prospectus. Accretive Health will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders. Our common stock is listed on the New York Stock Exchange under the symbol AH . The last reported sale price of our common stock on the New York Stock Exchange on March 18, 2011 was $25.40 per share. See Risk Factors beginning on page 10 to read about factors you should consider before buying shares of our common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Price to the public $ $ Underwriting discount $ $ Proceeds to the selling stockholders $ $ To the extent that the underwriters sell more than 6,500,000 shares of common stock, the underwriters have the option to purchase up to an additional 975,000 shares from the selling stockholders on the same terms set forth above. See Underwriting . The underwriters expect to deliver the shares against payment in New York, New York on , 2011. Goldman, Sachs Co. Credit Suisse J.P.Morgan Baird Prospectus dated , 2011. Table of Contents In assuming responsibility for the management and cost of a customer s revenue cycle or quality and total cost of care operations, we supplement the existing staff involved in the customer s operations with seasoned Accretive Health personnel. We also seek to embed our technology, personnel, know-how and culture within the customer activities we manage with the expectation that we will serve as the customer s on-site operational manager beyond the managed service contract s initial term. To date, we have experienced a contract renewal rate of 100% (excluding exploratory new service offerings, a consensual termination following a change of control and a customer reorganization). Coupled with the long-term nature of our managed service contracts and the fixed nature of the base fees under each contract, our historical renewal experience provides a core source of recurring revenue. Our net services revenue consists primarily of base fees and incentive fees. We receive base fees for managing our customers revenue cycle or quality and total cost of care operations, net of any cost savings we share with those customers. Incentive fees represent our portion of the increase in our customers revenue resulting from our services. When providing quality and total cost of care services, we will also receive a share of the provider community cost savings for our role in providing the technology infrastructure and for managing the care coordination process. We and our customers share financial gains resulting from our solutions, which directly aligns our objectives and interests with those of our customers. We believe that over time, this alignment of interest fosters greater innovation and incentivizes us to improve our customer s operations. A customer s revenue improvements and cost savings generally increase over time as we deploy additional programs and as the programs we implement become more effective, which in turn provides visibility into our future revenue and profitability. In 2010, for example, approximately 87% of our net services revenue, and nearly all of our net income, was derived from customer contracts that were in place as of January 1, 2010. In 2010, we had net services revenue of $606.3 million, representing growth of 19% over 2009 and a compound annual growth rate of 39% since January 1, 2006. We recognized no revenue from our quality and total cost of care offering in 2010. In addition, we were profitable for the years ended December 31, 2007, 2008, 2009 and 2010, and our profitability increased in each of those years. Market Opportunity We believe that current macroeconomic conditions will continue to impose financial pressure on healthcare providers and will increase the importance of managing their revenue cycles and quality and total cost of care activities effectively and efficiently. We estimate that the domestic market opportunity for our revenue cycle services exceeds $50 billion, calculated as 5% (the approximate percentage of a representative hospital system s total annual revenue paid to us for our revenue cycle management services at contract maturity, which percentage is generally reached in three and one-half to four years) of approximately $1,020 billion in total annual revenue for services and goods that our revenue cycle management solution addresses. We expect this market opportunity will continue to grow. In addition, the continued operating pressures facing U.S. hospitals coupled with some of the themes underlying the federal healthcare reform legislation enacted in March 2010 make the efficient management of the revenue cycle and collection of the full amount of payments due for patient services among the most critical challenges facing healthcare providers today. We believe that the inability of healthcare providers to capture and collect the total amounts owed to them for patient services is caused by the following trends: Complexity of Revenue Cycle Management. At most hospitals, there is a lack of standardization across operating practices, payor and patient payment methodologies, data management processes and billing systems. Lack of Integrated Systems and Processes. Although interrelated, the individual steps in the revenue cycle are not operationally integrated across revenue cycle departments at many hospitals. Table of Contents ACCRETIVE HEALTH results providers trust Delivering Results Through: People A talented team with revenue cycle management skills an a focus on outstanding customer service. Process Standardized implementation process and continuing analysis using sophisticated analytics and proprietary algorithms. Technology Integrated proprietary technology suite delivered as a web interface. Helping Our Customers Achieve: Improved Net Revenue Yield Increased Charge Capture More Efficient Revenue Cycle Operations Table of Contents Increasing Patient Financial Responsibility for Healthcare Services. Hospitals are being forced to adapt to the need for direct-to-patient billing and collections capabilities as patients bear payment responsibility for an increasing portion of healthcare costs; however, we believe most hospitals are not very well prepared to address consumer needs regarding the patient s payment obligation. Outdated Systems and Insufficient Resources to Upgrade Them. Many hospitals suffer from operating inefficiencies caused by outdated technology, increasingly complex billing requirements, a general lack of standardization of process and information flow, costly in-house services that could be more economically outsourced, and an increasingly stringent regulatory environment. In addition, we believe there is a significant market for our quality and total cost of care service offering. Many studies have found that U.S. healthcare costs are the highest in the developed world without a corresponding increase in overall population healthcare quality. We believe that improperly aligned incentives, non-coordination of care across healthcare settings and lack of integrated technology systems and information sharing processes are among the trends that have contributed to increases in healthcare costs in excess of increases in the consumer price index. The Accretive Health Solutions Our revenue cycle management solution is intended to address the full spectrum of revenue cycle operational issues faced by healthcare providers. We believe that our proprietary and integrated technology, management experience and well-developed processes are enhanced by the knowledge and experience we gain working with a wide range of customers and improve with each payor reimbursement or patient pay transaction. We deliver improved operating margins to our customers by helping them to improve their net revenue yield; increase their charge capture, which involves ensuring that all charges for medical treatment are included in the associated bill; and make their revenue cycle operations more efficient by implementing advanced technologies, streamlining operations and avoiding unnecessary re-work. While improvements in net revenue yield generally represent the majority of a customer s operating margin improvement, we are able to deliver additional margin improvement through improvements in charge capture and through revenue cycle cost reductions. We typically achieve revenue cycle cost reductions by implementing our proprietary technology and procedures, which reduce manual processes and duplicative work; migrating selected tasks to our shared operating facilities; and transferring certain third-party services, such as Medicaid eligibility review, to our own operations center, which allows us to leverage centralized processing capabilities to perform these tasks more efficiently. Improvements in charge capture are typically attributable to reduced payment denials by payors and identification of additional items that can be billed to payors based on the actual procedures performed. Because our managed service contracts align our interests with those of our customers, we have been able, over time, to improve our margins along with those of our customers. We employ a variety of techniques intended to improve the operating performance of our customers: Gathering Complete Patient and Payor Information. We focus on gathering complete patient information and educating the patient as to his or her potential financial responsibilities before receiving care so the services can be recorded and billed to the appropriate parties. Our systems automatically measure the completeness and accuracy of up-front patient profile information and other data, as well as billing and collections throughout the lifecycle of each patient account. Our analyses of these data show that hospitals employing our services have increased the percentage of non-emergency in-patient admissions with complete information profiles to more than 90%, enabling fewer billing delays and reduced billing cycles. Improving Claims Filing and Third-Party Payor Collections. We implement sophisticated analytics designed to improve claims filing and collection of claims from third-party insurance payors. By employing proprietary algorithms and modeling to determine how hospital staff involved in the revenue cycle should allocate time and resources across a pool of outstanding claims prioritized by level of risk, we can increase the likelihood that patient services will be reimbursed. TABLE OF CONTENTS Prospectus Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001473652_china_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001473652_china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0adc467c098a2c1b0b166e4e0132f7d625b12bfa
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001473652_china_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the "RISK FACTORS" section, the financial statements and the notes to the financial statements. As used throughout this prospectus, the terms "China Teletech", "Company", "we," "us," or "our" refer to China Teletech Limited. Organization China Teletech Limited (formerly known as Stream Horizons Studio, Inc.) was incorporated under the laws of the Province of British Columbia, Canada on October 1, 2001 under the name Infotec Business Strategies, Inc. The Company is a wholly owned subsidiary of CN Dragon Corporation (formerly known as Wavelit). From its inception, the Company was engaged in the production of video for broadcast over the internet, both live streaming video and on-demand pre-recorded video. The full service studio offered full video editing, both post-production and live-editing, green-screen video production, digital still photography services, as well as the capability to broadcast and edit together live video feeds from any location with broadband internet services (virtual studio). The Company had historically been responsible for the broadcast of various live events and creation of corporate videos for the clients of its parent company, CN Dragon. Although we continued to investigate the profitability of pursuing our prior production of internet video for broadcast business, management believed and still believes that there may be more value for our shareholders if we were able to (i) attract a more substantial operating company and engage in a merger or business combination of some kind, or (ii) acquire assets or shares of an entity actively engaged in business which generates revenues. We have investigated several possible merger candidates to determine whether or not they would add value to the Company for the benefit of our shareholders. Following such investigation, we entered into negotiations with Sierra Vista Group Limited, a British Virgin Islands Company, incorporated on January 30, 2008 under the British Virgin Islands Business Companies Act, 2004 as further described below. It shall be noted that Sierra Vista Group Limited changed its company name to China Teletech Limited ( CTL ) on June 2, 2009. On or about February 12, 2009, CN Dragon s Board of Directors approved of a Spin-Off of China Teletech Limited (formerly known as Stream Horizons Studio, Inc.), its wholly owned subsidiary (the Spin-Off ). The purpose of the Spin-Off was to provide an independent company to pursue its independent operations. The proposed Spin Off was disclosed in CN Dragon s Preliminary Form 14C filed with the United States Securities and Exchange Commission (the SEC ) on February 12, 2009 and subsequently amended on March 16, 2009. Pursuant to the terms of the Spin-Off, CN Dragon has agreed to distribute the 8,750,000 shares to be issued in the Spin-Off as a stock dividend (the Distribution ) to its shareholders of record as of February 12, 2009 (the Record Date ). Following the filing of the Preliminary Form 14C, on or about May 20, 2009, upon the approval of the Company s board of directors and a majority of its shareholders, the Company entered into a share exchange agreement (the Exchange Agreement ) with CTL. Pursuant to the Exchange Agreement, the Company agreed to exchange 241,250,000 shares of its common stock for 10 shares of CTL representing 100% of CTL s issued and outstanding shares, thus making CTL a wholly owned subsidiary of the Company. However, pursuant to the terms of the Exchange Agreement, the transaction will not close until the Company is able to properly consummate the Spin-Off, obtain SEC approval and effectiveness of this Registration Statement and file the Definitive Form 14C with the SEC (the Closing Transaction ). In connection with the Spin-Off and as explained above, CN Dragon will distribute the 8,750,000 shares to be issued in the Spin-Off as a Distribution to its shareholders of record as of the Record Date. This Distribution will constitute our initial public offering. The Distribution is expected to be effected as soon as practicable after the date the Registration Statement, of which this Prospectus is a part, is declared effective and the effectiveness of the Closing Transaction. CN Dragon will distribute one (1) share of our common stock for every ______ share of CN Dragon common stock that you own on the Record Date. You will not be charged or assessed for the shares and neither we nor CN Dragon will receive any proceeds from the Distribution of the shares. Following the effectiveness of this Registration Statement and the Closing Transaction, the Company plans to cease its video for broadcast operations and direct its business focus to CTL s business operations. Currently, CTL maintains two operating subsidiaries in the People s Republic of China ( PRC ); namely, (a) Shenzhen Rongxin Investment Co., Ltd. ( Shenzhen Rongxin ) and (b) Guangzhou Rongxin Science and Technology Limited ( Guangzhou Rongxin , formerly known as Guangzhou Yueshen Taiyang Network and Technology Co., Ltd.). CN Dragon will continue its hotel management, development and consulting business. We currently do not have any plans for business involvement with CN Dragon following the transactions. This Registration Statement and related information, including the financial statements and business operations, takes into account and references both our current operations and our operations anticipated after the closing of the transactions as described herein. The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus. The securities offered hereby are speculative and involve a high degree of risk. See "Risk Factors." This summary highlights selected information contained elsewhere in this Prospectus. To understand this offering fully, you should read the entire Prospectus carefully. KEY FACTS ABOUT OUR COMPANY AND THIS PROSPECTUS Common Stock Distributed: 8,750,000 shares Common Stock Outstanding Before The Distribution: 241,250,000 shares. These shares represent the shares that will be issued pursuant to the Exchange Agreement as part of the Closing Transaction. Common Stock Outstanding After The Distribution: 250,000,000 shares Distributing Company CN Dragon corporation, a Nevada corporation ( CN Dragon ). Distributed Company China Teletech Limited, a British Columbia corporation (the Company, we, or us ). Shares to be distributed: CN Dragon will distribute to its stockholders an aggregate of 8,750,000 shares of our common stock, based on the record date, February 12, 2009 (the Record Date and the Shares ). The Shares will constitute 3.5% of our outstanding shares after the Distribution. Immediately following the Distribution, CN Dragon will not own any of our shares and we will be an independent company. The remaining 96.5% of our common stock which will not be distributed to shareholders of CN Dragon will be held by our then President, Chief Executive Officer and Chairman Dong Liu who will hold 48.25% of our outstanding shares after the Distribution and by our then Chief Financial Officer, Secretary and Director Yuan Zhao who will hold 48.25% of our outstanding shares after the Distribution. Record Date: The Record Date for the Distribution is February 12, 2009, if you own shares of common stock of CN Dragon on the Record Date, you will receive one share of our common stock for every ____ shares of CN Dragon that you hold as of the Record Date. Offering Price For purposes of calculating the registration fee for the common stock included in this Prospectus, we have used an estimated price of $0.10 per share. This is an arbitrary price and we can offer no assurances that the $0.10 price bears any relation to the value of the shares as of the date of this Prospectus. Distribution Date: We currently anticipate that the Distribution will occur as soon as practicable after the date the Registration Statement, of which this Prospectus is a part, is declared effective. Distribution On the Distribution Date, the Distribution Agent identified below will distribute the shares representing our common stock to via book entry only to the CN Dragon stockholders as of the Record Date. You will not be required to make any payment or take any other action to receive your shares of our common stock. The distributed shares of our common stock will be freely transferable unless you are one of our affiliates or an affiliate of CN Dragon. Distribution Ratio: The distribution ratio of the Distribution will be on a one for one basis, i.e., each shareholder of CN Dragon as of the Record Date will receive one share of our common stock for every _____ share of CN Dragon that they hold on the Record Date. Distribution Agent Action Stock Transfer 7069 S. Highland Dr., # 300 Salt Lake City, UT 84121 Phone: (801) 274-1088 Fax: (801) 274-1099 Transfer Agent and Registrar for our Shares: Action Stock Transfer 7069 S. Highland Dr., # 300 Salt Lake City, UT 84121 Phone: (801) 274-1088 Fax: (801) 274-1099 Offering Price: The offering price of the shares has been arbitrarily determined by us based on estimates of the price that purchasers of speculative securities, such as the shares, will be willing to pay considering the nature and capital structure of our Company, the experience of our officers and directors and the market conditions for the sale of equity securities in similar companies. The offering price of the shares bears no relationship to the assets, earnings or book value of us, or any other objective standard of value. We believe that no shares registered in the Distribution will be sold prior to us becoming a publicly traded company, at which time such shares will be sold based on the market price of such shares. No Market: No assurance is provided that a market will be created for our securities in the future, or at all. If in the future a market does exist for our securities, it is likely to be highly illiquid and sporadic. Address: Room A, 20/F, International Trade Residential and Commercial Building Nanhu Road, Shenzhen, China Telephone Number: (86) 755-82204422
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001475376_hamburg_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001475376_hamburg_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001475376_hamburg_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001475377_local_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001475377_local_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001475377_local_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001475381_nyc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001475381_nyc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a695b05a116cab7fa7417f6aa2915a8df529fad0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001475381_nyc_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights material information about us and this offering, but does not contain all of the information that you should consider before investing in our Notes. The following summary is qualified in its entirety by the more detailed information and our consolidated financial statements and the accompanying notes included elsewhere or incorporated by reference into this prospectus. You should read this entire prospectus and the information incorporated by reference herein carefully, including the Risk Factors included and incorporated by reference in this prospectus and our consolidated financial statements and the accompanying notes incorporated by reference into this prospectus, before investing. This prospectus and the documents incorporated by reference include forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements. Unless otherwise specified or the context requires otherwise, the terms U.S. Concrete, the Company, we, us, our, or USCR, refer to U.S. Concrete, Inc. and its subsidiaries. Selling noteholders refers to the selling noteholders named in the section of this prospectus entitled Selling Noteholders and certain of their transferees after the date of this prospectus. Our Company We are a major producer of ready-mixed concrete, precast concrete products and concrete-related products in select markets in the United States. We operate our business through our ready-mixed concrete and concrete-related products segment and our precast concrete products segment. We are a leading producer of ready-mixed concrete or precast concrete products in substantially all the markets in which we have operations. Ready-mixed and precast concrete products are important building materials that are used in a vast majority of commercial, residential and public works construction projects. All of our operations are in (and all of our sales are made within) the United States. We operate principally in Texas, California and New Jersey/New York, with those markets representing approximately 36%, 25%, and 19%, respectively, of our consolidated revenues from continuing operations for the year ended December 31, 2010. According to publicly available industry information, those states represented an aggregate of 28% of the consumption of ready-mixed concrete in the United States in 2010 (Texas, 13.1%; California, 9.3%; and New Jersey/New York, 5.4%). Our consolidated revenues from continuing operations for the year ended December 31, 2010 were $455.7 million, of which we derived approximately 87.7% from our ready-mixed concrete and concrete-related products segment and 12.3% from our precast concrete products segment. As of August 31, 2011, we had 102 fixed and 11 portable ready-mixed concrete plants, seven precast concrete plants and seven aggregates facilities. During 2010, these plants and facilities produced approximately 3.8 million cubic yards of ready-mixed concrete and 3.1 million tons of aggregates. We lease two of the seven aggregates facilities to third parties and retain a royalty on production from those facilities. Our ready-mixed concrete and concrete-related products segment engages principally in the formulation, preparation and delivery of ready-mixed concrete to the job sites of our customers. We also provide services intended to reduce our customers overall construction costs by lowering the installed, or in-place, cost of concrete. These services include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs to meet our customers needs. Our marketing efforts primarily target concrete sub-contractors, general contractors, governmental agencies, property owners and developers and home builders whose focus extends beyond the price of ready-mixed concrete to product quality, on-time delivery and reduction of in-place costs. We generally do not provide paving or other finishing services, which construction contractors or subcontractors typically perform. To a lesser extent, this segment is also engaged in the mining and sale of aggregates and the resale of building materials, primarily to our ready-mixed concrete customers. These businesses are generally complementary to our ready-mixed concrete operations and provide us opportunities to cross-sell various products in markets where we sell both ready-mixed concrete and concrete-related products. We provide our ready-mixed concrete and concrete-related products from our continuing operations in north and west Texas, northern California, New Jersey, New York, Washington, D.C. and Oklahoma. Our precast concrete products segment produces precast concrete products at seven plants in three states, with five plants in California, one in Arizona and one in Pennsylvania. Our customers choose precast technology for a variety of architectural applications, including free-standing walls used for landscaping, soundproofing and security walls, panels used to clad a building fa ade and storm water drainage. Our operations also specialize in a variety of finished products, among which are utility vaults, manholes, catch basins, highway barriers, curb inlets, pre-stressed bridge girders, concrete piles and custom-designed architectural products. For a description of our business, financial condition, results of operations and other important information regarding the Company and our consolidated financial statements and the accompanying notes, we refer you to our filings with the Securities and Table of Contents Primary State or Other Standard I.R.S. Jurisdiction of Industrial Employer Incorporation or Classification Identification Name Organization Code Number Number Superior Concrete Materials, Inc. District of Columbia 3272 52-1046503 Titan Concrete Industries, Inc. Delaware 3272 76-0616374 USC Atlantic, Inc. Delaware 3272 20-4166002 USC Management Co., LLC Delaware 3272 27-1015638 USC Payroll, Inc. Delaware 3272 76-0630665 USC Technologies, Inc. Delaware 3272 20-4166055 U.S. Concrete On-Site, Inc. Delaware 3272 76-0630662 U.S. Concrete Texas Holdings, Inc. Delaware 3272 20-4166120 The address of each of the additional registrants is c/o U.S. Concrete, Inc., 2925 Briarpark, Suite 1050, Houston, Texas 77042. TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001477406_activein_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001477406_activein_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f55155f0687ac81cff69fde3c46608071fbb02f8
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001477406_activein_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY ActiVein was incorporated in Delaware in January 2007 under the name UNLTD Ventures Incorporated. Between January 2007 and March 2009 ActiVein did not conduct any business. In March 2009 ActiVein acquired ActiVein Ltd., an Israeli corporation, for 4,800,190 shares of its common stock, 3,770,935 shares of its Series A Preferred stock, and a warrant which allows the holder to purchase an additional 428,768 Series A preferred shares. The agreement relating to the acquisition of ActiVein, Ltd. provided that 1,000,106 shares would be issued to the ActiVein, Ltd. Employee Stock Ownership Plan. However, ActiVein and ActiVein, Ltd. agreed that these shares would not be issued. There is no plan to issue these shares at the present time, primarily due to the fact that, as of the date of this prospectus, ActiVein did not have any full-time employees. On April 9, 2009 UNLTD changed its name to ActiVein, Inc. Unless otherwise indicated, all references to ActiVein's business and operations include the business and operations of ActiVein Ltd. ActiVein is developing a novel intravenous catheter which will reduce the number of times a hospital patient is stuck with a needle to withdraw blood samples. An intravenous (IV) catheter, used to deliver fluids to the patient, is normally inserted into at least one vein of a patient during hospitalization. For various reasons, blood samples cannot be withdrawn through the same catheter. As a result, during a hospital stay a patient may be subjected to numerous needle sticks which are required to obtain blood samples for laboratory tests. ActiVein's dual-action catheter is designed to replace the standard conventional "hospital IV line" by enabling both fluid infusion and blood withdrawal using a single vein over an entire hospitalization period. ActiVein has developed a model that replicates the human peripheral venous system in terms of vessel thickness, diameter, internal valves and pressure. The fluid in this model mimics human blood in terms of viscosity. ActiVein's catheter has been tested in the model to analyze vessel penetration, catheter strength and the capability of the catheter to deliver and draw fluids. The tests have shown that ActiVein's catheter can provide its intended dual functionality of fluid or medication delivery as well as blood withdrawal. As of December 31, 2010 ActiVein had 13,908,257 outstanding shares of common stock, and 3,770,935 outstanding shares of Series A Preferred stock. Each Series A Preferred share is convertible into one share of ActiVein's common stock. ActiVein will need approximately $40,000 to pay the expenses of this offering . During the twelve month period following the date of this prospectus ActiVein will need approximately $200,000 for general and administrative expenses and $1,500,000 for research and development activities, patent filings, and preparing applications to be submitted to regulatory agencies. ACTIVEIN INC. (FORMERLY UNLTD VENTURES INCORPORATED) (A Development Stage Enterprise) Restated Consolidated Statements of Cash Flows For the periods from inception to February 28, 2010 and the years ended February 28, 2010 and February 28, 2009 (Amounts expressed in US Dollars) Cumulative Since February 28, February 28, Inception 2010 2009 Cash Flows from Operating Activities (Restated- (Restated- See note 12) See note 12) Net Loss (1,024,304) (297,237) (312,255) Items not requiring an outlay of cash: Amortization of plant and equipment 7,745 2,307 2,659 Compensation expense on issue of warrants 57,875 - 22,432 Fair value of interest on interest free loan received 670 - 670 Changes in non-cash working capital Prepaid and other receivables (910) 1,132 2,209 Accounts payable and accrued liabilities* 115,598 49,437 12,618 -------------------------------------- Net cash used in operating activities (843,326) (244,361) (271,667) -------------------------------------- Cash Flows from Investing Activities Maturity of short term investment*** 362,606 362,606 - Purchase of plant and equipment (9,817) (1,843) - -------------------------------------- Net cash provided by investing activities 352,789 360,763 - -------------------------------------- Cash Flows from Financing Activities Common shares 22 - - Preference shares 503,031 179,319 Loans and advances** 50,000 - 50,000 Bank overdraft - (10,039) 4,237 -------------------------------------- Net cash provided (used) by financing activities 553,053 (10,039) 233,556 -------------------------------------- Effect of foreign currency exchange rate changes on cash 40,471 (3,376) 38,111 -------------------------------------- Net increase in Cash 102,987 102,987 - Cash- beginning of period - - - -------------------------------------- Cash - end of period 102,987 102,987 - -------------------------------------- Supplemental Cash Flow Information Interest paid - - - -------------------------------------- Income taxes paid - - - -------------------------------------- * Excludes liabilities of the accounting acquiree on date of reverse merger ** Does not include the loans to/from the accounting acquirer and acquiree not settled in cash *** Represents short term investments of the accounting acquiree acquired on reverse merger The accompanying notes are an integral part of these consolidated financial statements ACTIVEIN INC. (FORMERLY UNLTD VENTURES INCORPORATED) (A Development Stage Enterprise) Interim Consolidated Statements of Changes in Stockholders' Deficiency from inception to November 30, 2010 (Amounts expressed in US Dollars) <TABLE> <S> <C> <C> <C> <C> <C> <C> <C> Deficit Preference accumulated Accumulated Common Stock Stock Additional Deferred during the Other Total -------------------------------- Paid stock development Comprehensive Stockholders' Number Amount Number Amount In Capital compensation stage Income Deficiency of Shares $ of Shares $ $ $ $ $ $ ------------------------------------------------------------------------------------------------------------------------------- Common shares issued at par on incorporation (adjusted)* 4,800,190 480 (458) 22 Issue of Preference A shares for cash (adjusted)* 448,908 449 59,442 59,891 Fair value of warrants issued for services 57,875 (57,875) - Amortization of deferred stock compensation 9,646 9,646 Foreign currency translation 105 105 Net loss (97,376) (97,376) ----------- ----- --------- ------ -------- ---------- ---------- ------ --------- Balance February 28, 2007 4,800,190 480 448,908 449 116,859 (48,229) (97,376) 105 (27,712) Issue of Preference A shares for cash 1,977,952 1,978 261,841 263,819 Amortization of deferred stock compensation 25,797 25,797 Foreign currency translation 5,760 5,760 Net loss (317,436) (317,436) ----------- ----- --------- ------ -------- ---------- ---------- ------ --------- Balance February 29, 2008 4,800,190 480 2,426,860 2,427 378,700 (22,432) (414,812) 5,865 (49,772) Issue of Preference A shares for cash 1,344,075 1,344 177,977 179,321 Amortization of deferred stock compensation 22,432 22,432 Fair value of interest on interest free loan received 670 670 Foreign currency translation 44,162 44,162 Net loss (312,255) (312,255) ----------- ----- --------- ------ -------- ---------- ---------- ------ --------- Balance February 28, 2009 4,800,190 480 3,770,935 3,771 557,347 - (727,067) 50,027 (115,442) Reverse acquisition adjustment 8,358,067 836 394,842 395,678 Shares issued as finder fee 750,000 75 (75) Foreign currency translation (12,503) (12,503) Net loss (297,237) (297,237) ----------- ----- --------- ------ -------- ---------- ---------- ------ --------- Balance February 28, 2010 13,908,257 1,391 3,770,935 3,771 952,114 - (1,024,304) 37,524 (29,504) Common stock subscriptions 51,150 51,150 Foreign currency translation (9,803) (9,803) Net loss (161,767) (161,767) ----------- ----- --------- ------ -------- ---------- ---------- ------ --------- Balance November 30, 2010 13,908,257 1,391 3,770,935 3,771 1,003,264 (1,186,071) 27,721 (149,924) </TABLE> * In a reverse merger accounted for as a recapitalization, the historical stockholders' equity of the accounting acquirer (ActiVein Ltd) is retroactively stated for all periods for the equivalent number of shares received in the merger. The accompanying condensed notes are an integral part of these unaudited interim consolidated financial statements 10.1 Agreement relating to the acquisition of ActiVein Ltd. (2) 10.2 Shareholder Agreement (2) 10.3 Employment Agreement with Adi Plaschkes (2) 21 Subsidiaries (2) 23.1 Consent of Attorneys __ 23.2 Consent of Accountants __ (1) Filed with original registration statement. (2) Filed with Amendment No. 1 to registration statement. Item 17. Undertakings The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section l0 (a)(3) of the Securities Act: (ii) To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities that remain unsold at the termination of the offering. As of the date of this prospectus ActiVein had not applied to the FDA or any foreign regulatory authority to obtain clearance to sell any of its products. ActiVein will need FDA clearance to sell any of its products in the United States and clearance from foreign regulatory authorities to sell its products in foreign countries. As of February 28, 2010 and November 30, 2010 ActiVein had total assets of $106,499 and $20,133 respectively. For the year ended February 28, 2010 and the nine months ended November 30, 2010 ActiVein had net losses of $(297,237) and $(161,767) respectively. ActiVein's auditors have expressed substantial doubt regarding ActiVein's ability to continue as a going concern. ActiVein's offices are located at 1 Leshem Street, Kiryat Gat, 82000, Israel. ActiVien's telephone number is 972-8-6811761 and its facsimile number is 972-8-6811763. ActiVein's website is www.activein.co.il ------------------ Forward Looking Statements This Prospectus contains various forward-looking statements that are based on ActiVein's beliefs as assumptions made by and information currently available to ActiVein. When used in this Prospectus, the words "believe", "expect", "anticipate", "estimate" "intend", "project", "predict" and similar expressions are intended to identify forward-looking statements. These statements may involve projections, capital requirements, operating expenses, and the like, and are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from projections or estimates. Factors which could cause actual results to differ materially are discussed at length under the heading "Risk Factors". Should one or more of the enumerated risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Investors should not place undue reliance on forward-looking statements, all of which speak only as of the date made. The Offering By means of this prospectus: o ActiVein is offering to sell up to 5,000,000 shares of its common stock at a price of $0.20 per share, and o Four of ActiVein's shareholders are offering to sell up to 275,000 shares of its common stock. If and when ActiVein's common stock becomes quoted on the OTC Bulletin Board and after ActiVein terminates its offering, the shares owned by the selling shareholders may be sold in the over-the-counter market, or otherwise, at prices and terms then prevailing or at prices related to the then-current market price, or in negotiated transactions. Three of these shareholders are officers of ActiVein. The fourth shareholder is controlled by a former director of ActiVein. ACTIVEIN INC. (FORMERLY UNLTD VENTURES INCORPORATED) (A Development Stage Enterprise) Consolidated Statements of Changes in Stockholders' Deficiency from inception to February 28, 2010 (Amounts expressed in US Dollars) <TABLE> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Deficit Preference accumulated Accumulated Common Stock Stock Additional Deferred during the Other Total -------------------------------- Paid stock development Comprehensive Stockholders' Number Amount Number Amount In Capital compensation stage Income Deficiency of Shares $ of Shares $ $ $ $ $ $ --------- ----- --------- ------ ---------- ------------ ---------- ------------ -------------- Common shares issued at par on incorporation (adjusted)* 4,800,190 480 (458) 22 Issue of Preference A shares for cash (adjusted)* 448,908 449 59,442 59,891 Fair value of warrants issued for services 57,875 (57,875) - Amortization of deferred stock compensation 9,646 9,646 Foreign currency translation 105 105 Net loss (97,376) (97,376) ---------- ----- --------- ----- ------- ------- ---------- ------- -------- Balance February 28, 2007 4,800,190 480 448,908 449 116,859 (48,229) (97,376) 105 (27,712) Issue of Preference A shares for cash 1,977,952 1,978 261,841 263,819 Amortization of deferred stock compensation 25,797 25,797 Foreign currency translation 5,760 5,760 Net loss (317,436) (317,436) ---------- ----- --------- ----- ------- ------- ---------- ------- -------- Balance February 29, 2008 4,800,190 480 2,426,860 2,427 378,700 (22,432) (414,812) 5,865 (49,772) Issue of Preference A shares for cash 1,344,075 1,344 177,977 179,321 Amortization of deferred stock compensation 22,432 22,432 Fair value of interest on interest free loan received 670 670 Foreign currency translation 44,162 44,162 Net loss (312,255) (312,255) ---------- ----- --------- ----- ------- ------- ---------- ------- -------- Balance February 28, 2009 4,800,190 480 3,770,935 3,771 557,347 -- (727,067) 50,027 (115,442) Reverse acquisition adjustment 8,358,067 836 394,842 395,678 Shares issued as finder fee 750,000 75 (75) Foreign currency (12,503) (12,503) translation Net loss (297,237) (297,237) ---------- ----- --------- ----- ------- ------- ---------- ------- -------- Balance February 28, 2010 13,908,257 1,391 3,770,935 3,771 952,114 -- (1,024,304) 37,524 (29,504) ---------- ----- --------- ----- ------- ------- ---------- ------- -------- </TABLE> * In a reverse merger accounted for as a recapitalization, the historical stockholders' equity of the accounting acquirer (Activein Ltd) is retroactively stated for all periods for the equivalent number of shares received in the merger The accompanying notes are an integral part of these consolidated financial statements 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (GAAP); however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at November 30, 2010 and February 28, 2010, the results of its operations for the three and nine-month periods ended November 30, 2010 and November 30, 2009, and its cash flows for the nine-month periods ended November 30, 2010 and November 30, 2009. In addition, some of the Company's statements in this quarterly report on Form 10-Q may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. The results of operations for the nine-month period ended November 30, 2010 are not necessarily indicative of results to be expected for the full year. The Company was incorporated under the laws of the State of Delaware, USA on January 8, 2007. On April 9, 2009 the Company changed its name to ActiVein, Inc. In March 2009 the Company acquired 100 % of the outstanding common and preference shares of ActiVein Ltd., an Israeli corporation. In exchange of all issued and outstanding common and preference shares of ActiVein Ltd, the shareholders of ActiVein Ltd. received 4,800,190 shares of the Company's common stock, In addition, 3,770,935 shares of Series A Preferred stock, and a warrant which allows the holder to purchase an additional 428,768 Series A Preferred shares. The warrant was issued in lieu of and to cancel the warrant issued by ActiVein Ltd. to its warrant holder in financial year 2007 to acquire 809 series `A" preference shares of ActiVein Ltd. These Series A Preferred shares are convertible, at the option of the holder of such shares, into fully paid and non-assessable shares of the Company's. common stock. The Company had 8,358,067 common shares and Nil preference shares issued and outstanding prior to the merger. On post acquisition, shareholders of ActiVein Ltd control 51% of the total issued and outstanding shares of the Company. The exchange resulted in ActiVein Ltd. becoming a wholly owned subsidiary of the Company. The Company is a shell company. The acquisition is accounted for as a reverse merger (recapitalization) with ActiVein Ltd. deemed to be the accounting acquirer, and the Company as the legal acquirer. The reverse merger between the Company, a shell corporation as defined in Exchange Act Rule 12b-2 and ActiVein Ltd., a private development stage entity, is not a business combination but a capital transaction in substance because a shell is normally not a business. The accounting is identical to that resulting from a reverse acquisition, except that no goodwill or other intangible is recorded. Insofar as indemnification for liabilities arising under the Securities Act of l933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: (i) If the registrant is relying on Rule 430B: (A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or (ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a The purchase of the securities offered by this prospectus involves a high degree of risk. Risk factors include the lack of any relevant operating history, losses since ActiVein was incorporated, and the possible need for ActiVein to sell shares of its common stock to raise additional capital. See "Risk Factors"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001477968_fairmount_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001477968_fairmount_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7f00f1368088d18562974f2841e97458c3c2e6f7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001477968_fairmount_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary highlights material information in this prospectus. It may not contain all the information that is important to
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001479683_elite_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001479683_elite_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001479683_elite_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001479779_swordfish_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001479779_swordfish_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cec7ac18c7212a1157f71e2438e683db2bdcd77f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001479779_swordfish_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF OUR OFFERING OUR BUSINESS We were incorporated on October 29, 2009. We are a development stage company. We do not have any revenues or operations, and we have minimal assets and have incurred losses since inception. We intend to open karaoke studios in various locations in China, and serve food and beverage to our patrons in those locations. We have no revenues, have achieved losses since inception, have no operations, have been issued a going concern opinion and rely upon the sale of our securities and loans from our officer and director to fund operations. Also, we have no guarantee that we will be able to generate revenues in the future. While we are still in our development stage, Mr. Hai intends to continue contacting with club and lounge owners to place our business. We expect to incur costs between $500 to $1,000 to negotiate and discuss our proposed plan to potential club and lounge owners who wish to lend space for our business free of charge. We propose to club and lounge owners that our service directly complements with their businesses. Our karaoke service is expected to assist in drawing in more patrons to the facility, and thus, may increase overall revenues for the club or lounge owner willing to offer us empty floor space. We intend to have an arrangement where the club or lounge will lend us space for free, while we generate revenues by renting out our karaoke equipment and selling food and beverages. No government approval is necessary to apply for a business license, however, we may be required to obtain a liquor license. Our business intends to generate revenue by renting out our studios facility where we offer our karaoke service, which is our library of music, to patrons. We intend on charging 100 CNY (15 US) per hour for renting out the karaoke studio. Furthermore, we intend on selling food and beverage in our studios to complement our services. The food and beverages will be provided by the club or lounge that the studio is located in and we intend to be entitled to 1/3 sharing of the net profits. Waitresses will visit each room occasionally to see if the customers would like any refreshments. Songs will be acquired from domestic artists within South East Asia. We will be required to pay a daily charge of 12 yuan ($1.56 US) for each karaoke studio to the National Copyright Administration for the use of copyrighted songs. Currently, we do not have any secure locations for our studios. Once we are funded we will actively explore, negotiate and secure a location for our first studio. Once it is open, we expect the studio will mainly be used in the evenings and weekends. Our business since inception had an average monthly burn rate of $596. Once we begin to implement our proposed business our burn rate is approximately $416 to $1,250 each month in the event that we raise the minimum or maximum amount, respectively. We expect to have a positive cash flow once operations are fully functional after the 12-month period, as explained in our Plan of Operations. We have not conducted any market research into the likelihood of success of our operations or the acceptance of our services by the public. Our administrative office is located at Room B3 20TH Floor Boldwin Industrial Building. Wah Sing Street, Kwai Chung, N.T. Hong Kong. Phone: 852-694-63282 Fax:(852) 69463282. Our fiscal year end is February 28. Management or affiliates thereof will not purchase shares in this offering in order to reach the minimum. THE OFFERING Following is a brief summary of this offering: Securities being offered A minimum of 1,000,000 shares of common stock and a maximum of 2,000,000 shares of common stock, par value $0.001. Offering price per share $0.01 Offering period Our shares are being offered for a period not to exceed 270 days. Net proceeds to us Approximately $5,000 assuming the minimum numbers of shares are sold. Approximately $15,000 assuming the maximum number of shares is sold. Use of proceeds We intend to use the proceeds to pay for offering expenses, the implementation of our business plan, and for working capital. Number of shares outstanding before the offering 4,000,000 Number of shares outstanding after the offering if all of the shares are sold 6,000,000
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001483078_onyx_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001483078_onyx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1099e8ad31361fdf861343292a57191380156451
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001483078_onyx_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including "Risk Factors" and our financial statements, including the notes to the financial statements appearing elsewhere in this prospectus. As used throughout this prospectus, the terms "we," "us," and "our" and words of like import refer to Onyx Service & Solutions, Inc. THE COMPANY The Company was incorporated in the State of Delaware on November 25, 2009. As of December 16, 2010, we own three Automated Teller Machines ( ATMs ) and manage 19 ATMS throughout upstate New York. On November 25, 2009, we entered into an asset purchase agreement with Fresca Worldwide Trading Corp. ( Fresca ), a Nevada corporation, to purchase from Fresca all its assets including without limitation three ATMs and the rights to manage 19 other ATMS throughout upstate New York for $10,400. The acquisition was completed on November 25, 2009. Prior to such acquisition of assets, we had no operations or assets. Our Business Our ATMs are situated at retail stores, convenience stores, bars, restaurants, gas stations, colleges and hospitals. We deploy and operate ATM s primarily under the following two programs: Full placement program Under a full placement arrangement, we own the ATM and are responsible for controlling substantially all aspects of its operation including maintenance, cash management and loading, supplies, signage and telecommunications services. We may pay site owners a commission based on a percentage of sales. We are generally responsible for almost all of the expenses related to the operation of the ATM with the exception of power and, on occasion, telecommunications. We typically use this program for major national and regional merchants. Merchant-owned program Under a merchant-owned arrangement, the merchant (or, for a merchant using lease financing, its lease finance provider) typically buys the ATM through us and the merchant is responsible for most of the operating expenses such as maintenance, cash management and loading, and supplies. We typically provide all transaction processing services, and the merchants use our maintenance services from time to time. Our rental program is similar to our merchant-owned program, except that the merchant rents the ATM from us rather than purchasing it, and we provide the maintenance and supplies for the machine. Most of our new ATM s feature advanced functionality, diagnostics and ease of use including color displays, personal computer-based operating systems, thermal printing, dial-up and remote monitoring capabilities, and upgrade and capacity-expansion capability. All machines can perform basic cash dispensing and balance inquiry transactions, transmit on-screen marketing, dispense coupons and conduct marketing surveys. Most of our equipment is modular in design, which allows us to be flexible and accommodating to the needs of our clients as technology advances. We upgrade our ATM machines in compliance with ATM technology. All ATM machines we operate are upgraded with triple DES encryption, which is compliant with the ATM industry regulations. This upgrade reduces the number and frequency of service calls due to outages and other ATM-related problems and, in turn, reduces the cost of maintaining each ATM machine. The ATM s are also equipped with smart technology that allows us to determine on a preset time basis the operational status of the ATM. It informs us which vault cash is low, the number of times the ATM has been used, as well as other helpful information that helps us provide better service to our ATM using public. Revenue Our revenues are principally derived from two types of fees, which we charge for processing transactions on our ATM network. We receive an interchange fee from the issuer of the credit or debit card for processing a transaction when a cardholder uses an ATM in our network. In addition, in most cases we receive a surcharge fee from the cardholder when the cardholder makes a cash withdrawal from an ATM in our network. We receive interchange fees for transactions on ATM s that we own. We also receive the interchange fee for transactions on ATM s owned by third party vendors included within our network. We keep all interchange fees. The interchange fees received by us vary from network to network and to some extent from issuer to issuer, but generally range from $0.15 to $0.55 per cash withdrawal. Interchange fees for balance inquiries, account transfers and denied transactions are generally substantially less than fees for cash withdrawals. The interchange fees received by us from the card issuer are independent of the service fees charged by the card issuer to the cardholder in connection with ATM transactions. Service fees charged by card issuers to cardholders in connection with transactions through our network range from zero to as much as $2.50 per transaction. We do not receive any portion of these service fees and do not record any revenues therefrom. We impose a surcharge fee for cash withdrawals. Surcharge fees are a substantial additional source of revenue for us and other ATM network operators. The surcharge fee for ATM s in our network ranges between $1.50 and $4.00 per withdrawal. We have 3 different circumstances for recording the surcharge fee as revenue. In the first case, when we own and service the ATM, we receive and report all of the surcharge fee as revenue. In the second case, where we own but do not service the ATMs, we record the surcharge fee as revenue and record the portion of the fee paid to the owner of the ATM location as commission expense for servicing the ATM. In the third case, on ATM s owned and serviced by third party vendors we rebate all of each fee to the third party and do not report any surcharge fee revenue. In addition to revenues derived from interchange and surcharge fees, we also derive revenues from providing network management services to third parties owning ATMs included in our ATM network. These services include 24 hour transaction processing, monitoring and notification of ATM status and cash condition, notification of ATM service interruptions, in some cases dispatch of field service personnel for necessary service calls and cash settlement and reporting services. The fees for these services are paid by the owners of the ATMs. Summary Financial Information The table below summarizes our unaudited balance sheet as of August 31, 2010 and the related statement of operations for the period ended August 31, 2010. Balance Sheet: As of August 31, 2010 Cash $ 51,547 Total Assets $ 70,628 Total Liabilities $ 8,314 Total Stockholders Deficit $ $62,314 Statement of Operations: For the Period ended August 31, 2010 Revenue $ 17,190 Other Income $ 496 Expenses $ 27,217 NET LOSS $ (9,531) Weighted Average Shares Outstanding Basic and Diluted 4,169,452
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001483731_enterologi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001483731_enterologi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d0aa9f4eff2f0ef5fc46ddb31ebe4f097b7b18e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001483731_enterologi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, references to the Company, we, our or us refer to Enterologics, Inc., unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the Risk Factors section, the financial statements and the notes to the financial statements. Corporate Background: We were was incorporated under the laws of the State of Nevada on September 2, 2009 to develop, test, and obtaining regulatory approvals for manufacturing, commercializing and selling new prescription drug products. We are an early stage pre-revenue generating company currently are involved with the development of live biotherapeutic products for gastrointestinal disorders. Unlike probiotic bacteria that are sold over-the-counter as dietary supplements or in food products such as yogurt, we intend to develop products to meet the exacting standards necessary to gain United States Food and Drug Administration ( FDA ) approval as prescription drugs. In January 2011, we entered into a letter of intent with Universal Stabilization Technologies, Inc., a Delaware corporation ( UST ) pursuant to which we were granted a right of first refusal until May 15, 2012 to enter into a definitive license agreement for an exclusive, world-wide license to UST s intellectual property relating to the preservation/stabilization of Escherichia coli ( E. coli ) probiotic bacteria. We believe that UST s preservation/stabilization technology is superior to conventional freeze-drying techniques and can be applied to a wide variety of bacterial strains. We are currently negotiating an one-year development agreement for UST to conduct suitability studies and protocols to produce data demonstrating the suitability of its stabilization technology to produce a thermostable, commercially viable formulation of an E. coli probiotic satisfying our specifications. It is contemplated that during such one-year development project we will make monthly payments to UST of at least CND$8,333 (which amount may be increased depending on the scope of the work). Notwithstanding the lack of a formal agreement with UST, we have already made two monthly payments to UST and anticipate making such payments each month. Our offices are currently located at 1264 University Avenue West, Suite 404, St. Paul, Minnesota 55104. Our telephone number is (516) 303-8181. We do not have an internet website. Intellectual Property: We have a right of first refusal to enter into a license agreement with UST for an exclusive, worldwide license to UST s preservation/stabilization technology which includes certain patents, patent applications, know-how and associated trade secrets. The license is intended to cover the use of E. coli probiotic bacteria but excludes the use to preserve E. coli bacteria as a system for delivering vaccine materials to the gastrointestinal tract. We do not have any other intellectual property rights at the present time. Employees: We currently have no employees. All functions including development, strategy, negotiations and administration are currently being provided by our executive officers on a voluntary basis. The Offering Securities offered: 1,660,000 shares of common stock Share : Shares of our common stock were sold by us to the following selling shareholders as follows (i) Lisa Grossman, a founder of our company, in November 2009 at a purchase price of $0.0001 per share for gross proceeds of $780, and (ii) Surge Partners, Ltd. in consideration of a loan commitment of up to $50,000 made to us in January 2010. Each issuance was made in a transaction not involving a public offering in reliance upon an exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended. The two selling shareholders may sell their shares on the OTC Bulletin Board at prevailing market prices or privately negotiated prices. Shares outstanding prior to offering: 35,020,000 shares of common stock. Shares outstanding after offering: 35,020,000 shares of common stock. Market for the common shares: Our common stock is listed for quotation on the OTCBB under the symbol ELGO . However, our common stock is thinly traded. Use of proceeds: We will not receive any proceeds from the sale of shares by the selling shareholders. Going Concern Considerations: We are in the development stage. As of March 31, 2011, we incurred a net loss of $117,827 from inception and used cash in operations from inception of $77,421. Our independent auditor has issued a going concern opinion after auditing our financial statements; our ability to continue is dependent on our ability to raise additional capital and our operations could be curtailed if we are unable to obtain required additional funding when needed.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001486994_ncop-xii_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001486994_ncop-xii_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001486994_ncop-xii_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001487751_red-pine_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001487751_red-pine_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a70d532bd46bfcff575ddb71e3f5aeb3cbc9e12b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001487751_red-pine_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary contains basic information about us and the offering. Because it is a summary, it does not contain all the information that you should consider before investing. You should read the entire prospectus carefully, including the risk factors and our financial statements and the related notes to those statements included in this prospectus. Except as otherwise required by the context, references in this prospectus to we, our, us, Red Pine, and RPCG refer to Red Pine Capital Group, Inc. Red Pine Capital Group, Inc. is a development stage company incorporated in the State of Nevada on August 31, 2009. We will provide consulting services to Chinese companies looking to enter into the American capital markets. We will provide services ranging from business plan development, consulting on the American public equity market, assistance with listing on the OTCBB, and investor relations. Furthermore, we will provide to those who invest in small and micro cap public companies information and analysis on Chinese companies looking to enter the American capital markets. At the time of this filing we have not identified any Chinese companies with which to consult or advise. Since our inception on August 31, 2009 to January 31, 2011, we have not generated any revenues and have incurred a net loss of $(33,133). Our only business activity has been the formation of our corporate entity and searching for possible Chinese company candidates for us to consult with. We anticipate the commencement of generating revenues in the next twelve months, of which we can provide no assurance. The capital raised in this offering has been budgeted to cover the costs associated with marketing our services in China, beginning to operate our company, basic website development and covering various filing fees and transfer agent fees. There can be no assurance that the actual expenses incurred will not materially exceed our estimates or that cash flows from sales will be adequate to maintain our business. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern in the independent auditors report to the financial statements included in the registration statement. Red Pine intends to become a United States sales and marketing representative for Chinese companies looking to go public in the United States. We currently have no products or services for sale. We intend to offer turnkey services to our customers, including the consulting on how to enter the American capital markets, assisting in putting together a proper business plan, and determining other factors needed for a company to become public and be listed on the OTCBB. We define turnkey services as well defined plan of action that can be applied and used for most businesses. The same business strategy and structure may be used multiple times for multiple businesses. Our business model is built on multiple revenue streams from a variety of industry participants interested in raising capital in the United States. We intend to generate revenues primarily from consulting services. As of the date of this prospectus we have only one officer and one director, acting as our sole employee, who we anticipate devoting only a small portion of his time to the company going forward until the business receives additional capital to expand and the company needs Mr. Sun to dedicate additional hours due to growth. Additionally, even with the sale of securities offered herein, we will not have the financial resources needed to hire additional employees or meaningfully expand our business. We anticipate operating losses for at least the next 12 months. Even if we sell all the securities offered, the majority of the proceeds of the offering will be spent for corporate expenses and additional website development. Investors should realize that following this offering we will be required to raise additional capital to cover the costs associated with our plans of operation. Red Pine s address and phone number is: Red Pine Inc. Floor 7 #30 Dongzhong St. Dongcheng District Beijing, China 100027 Telephone: (01186)13701379808 The Offering Common Stock Offered for Sale Up to a maximum of 1,200,000 shares. Price to the Public $0.25 per share in cash. Use of Proceeds Primarily for Offering expenses, sales and marketing, independent contractors and web site improvement. Number of SharesOutstanding Prior to the Offering 235,000 Number of Shares Outstanding After the Offering 355,000 if 10% of offering sold. 535,000 if 25% of offering sold. 835,000 if 50% of offering sold. 1,135,000 if 75% of offering sold. 1,435,000 if 100% of offering sold. Plan of Distribution This is a direct public offering, with no commitment by anyone to purchase any shares. Our shares will be offered and sold by Yao Sun, our sole officer and director. There is no share minimum investment required from individual investors. Terms of the Offering This is a BEST EFFORTS OFFERING. This is a no minimum offering. Accordingly, as shares are sold, we will use the money raised for our business. The offering will remain open until 365 days from the commencement of the offering upon effectiveness of this S-1, which may be extended for an additional 180 days at the discretion of the board of directors. We cannot be certain that we will be able to sell enough shares to fund our operations appropriately. (1) Management may not, and will not purchase any shares in this offering. SUMMARY FINANCIAL DATA The following summary financial data should be read in conjunction with Management s Discussion and Analysis and Results of Operations and the Financial Statements and Notes thereto, included elsewhere in this prospectus. The statement of operations and balance sheet data from inception August 31, 2009 through January 31, 2010 and January 31, 2011 and for the year ended January 31, 2011 are derived from our audited financial statements. STATEMENT OF OPERATIONS For the year ended January 31, 2011 Period from August 31, 2009 (Inception) to January 31, 201 1 Revenues $ 0 $ 0 Total operating expenses 5,259 36,136 Net loss before income taxes (5,259 ) (36,136 ) Provision for income taxes 0 0 Net loss $ (5,259 ) $ (36,136 ) Net loss per share: basic and diluted $ (0. 02 ) $ ) Weighted average shares outstanding: basic and diluted 235,000 235,000 January 31, 2011 January 31, 2010 ASSETS Current assets Cash and cash equivalents $ 14,864 $ 22,123 TOTAL ASSETS $ 14,864 $ 22,123 LIABILITIES AND STOCKHOLDERS EQUITY Liabilities Current Liabilities Account payable and accrued expenses $ 4,000 $ 6,000 Total Liabilities 4,000 6,000 Stockholders Equity Common stock, $.0001 par value, 110,000,000 shares authorized, 235,000 shares issued and outstanding 24 24 Paid in capital 46,976 46,976 Deficit accumulated during the development stage (36,136 ) (30,877 ) Total Stockholders Equity 10,864 14,620 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 14,864 $ 22,123
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001494037_safenet_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001494037_safenet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001494037_safenet_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001495028_baseline_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001495028_baseline_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fea3b1729d2293b1f382c8c97152d38cad9ff080
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001495028_baseline_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1/A (Amendment No. 6) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Commission File Number 333-169790 BASSLINE PRODUCTIONS, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 4700 (Primary Standard Industrial Classification Code Number) 27-2571663 (I.R.S. Employer Identification Number) 3319 Reynard Way San Diego, CA 92103 (916) 508 5385 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Drew Hall, President BASSLINE PRODUCTIONS, INC. 3319 Reynard Way San Diego, CA 92103 (916) 508 5385 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of Communications to: Stoecklein Law Group Emerald Plaza 402 West Broadway, Suite 690 San Diego, California 92101 (619) 704-1310 Fax (619) 704-1325 Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: x If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company x Calculation of Registration Fee Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price Per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $0.001 par value 500,000 $0.10 $50,000 $5.80 TOTAL 500,000 $0.10 $50,000 $5.80 A Registration Statement relating to these securities has been filed with the Securities Exchange Commission. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. PROSPECTUS BASSLINE PRODUCTIONS, INC. 500,000 Shares of Common Stock Offered by $0.10 per share Per Share Total Public Offering Price $ 0.10 $ 50,000 Underwriting discounts and Commissions $ 0.00 $ 0.00 Proceeds to Bassline Productions $ 0.10 $ 50,000 We are offering to the public 500,000 shares of common stock ( Shares ), at $0.10 per share, for the duration of the offering on a best efforts, all-or-none, basis in a direct public offering through our officers and directors. This offering terminates in twelve months after commencement of this offering, on ____, 2011, with no extensions. If we do not sell all of the 500,000 Shares being offered prior to the termination date, we intend to promptly return all money paid for shares to the purchasers, without interest and without deduction, although all the money may not be returned because it may be subject to creditors claims. This is our initial public offering, and no public market currently exists for our Shares. The securities being registered in this offering may not be liquid since they are not listed on any exchange or quoted in the OTC Bulletin Board, and a market for these securities may not develop. The offering price may not reflect the market price of our Shares after the offering. There is no minimum purchase requirement for prospective stockholders. All funds will be placed into a separate corporate account (not an escrow, trust or similar account), and management will have direct access to this account. However, the funds will not be utilized by us until such time as the offering terms and conditions have been met. An investment in our common stock involves a high degree of risk. You should purchase our common stock only if you can afford a complete loss of your purchase. We urge you to read carefully the Risk Factors section beginning on page 5 where we describe specific risks associated with an investment in BASSLINE PRODUCTIONS, INC., and these securities before you make your investment decision. Our auditors have substantial doubt about our ability to continue as a going concern. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Prospectus (Subject to Completion) Dated _________, 2011 THE DATE OF THIS PROSPECTUS IS __________, 2011. TABLE OF CONTENTS PAGE Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001497074_preferred_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001497074_preferred_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..627838b7db2c17c7c259b36c1e8bf8bdca1adedd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001497074_preferred_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary does not contain all of the information you should consider before making your investment decision. You should read the entire prospectus carefully, including the section titled "Risk Factors" and the financial statements and the notes relating to those statements. We were incorporated in Florida in May 2010. All of our operations to date have been related to the formation and development of our business. We currently have minimal assets, no revenues and no operating history beyond certain start-up activities. Our ability to commence commercial operations and successfully implement our business plan depends on us obtaining adequate financial resources, which cannot be assured. We were formed to develop and market barbecue sauce and other condiments. Since we are in the developmental stage and have not yet introduced any products into the marketplace, we cannot assure you that we will have profitable operations. Our initial product is a yellow mustard-based barbecue sauce. The recipe for this product is based on a recipe which was contributed to us by our founder, Michael H. Jordan, who is the brother of Robert E. Jordan, who is our President and a director. Our principal executive offices are located at 115 NE 6th Blvd., Williston, FL 32696 our telephone number is (800)366-5174. The Offering Stock Offered: 20,000 shares of Series A Convertible Preferred Stock Offering price: $15.00 per share Liquidation Preference: $15.00 per share Dividends: In the event a dividend or distribution is declared on the Common Stock of the Company, in cash or other property (other than a dividend of our Common Stock), the holders of the Series A convertible Preferred Stock will be entitled to receive the amount of cash or property equal to the cash or property which would be received by the holders of the number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock could be converted immediately prior to such dividend or distribution. Optional Conversion: Each share of convertible preferred stock may be converted, at the option of the holder, into 100 shares of our common stock, subject to adjustment in a number of circumstances described under "Description of Series A Convertible Preferred Stock--Conversion Rate Adjustments." No additional payment is required in connection with a conversion. Voting Rights: The Preferred Stock will vote, on an as converted basis, with the Common Stock. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] CALCULATION OF REGISTRATION FEE -------------------------------------------------------------------------------- Proposed Proposed Title of each class Amount of maximum maximum Amount of of securities shares to be offer price aggregate registration to be registered registered per unit (1) offering price fee -------------------------------------------------------------------------------- SERIES A CONVERTIBLE 20,000 $15.00 $300,000 $21.39 PREFERRED STOCK COMMON STOCK (2) 2,000,000 0 0 0(3) -------------------------------------------------------------------------------- (1) Estimated solely for purposes of calculating the registration fee based upon the proposed sale price of the shares. (2) Represents the common stock issuable on the conversion of the Series A Convertible Preferred Stock. (3) No fee pursuant to Rule 457(i) The Registrant hereby amends the Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Acts of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8 (a), may determine. Series A Convertible Preferred None Stock Outstanding: Common Stock outstanding: Prior to offering: 6,200,000 shares Assuming sale of all preferred 8,200,000 shares and conversion of convertible preferred Stock into common stock: Estimated Proceeds: Because this is a self underwritten offering with no minimum, we may receive from $0 up to $300,000 if all 20,000 shares offered are sold. Use of Proceeds: Operations and development of our business, acquire inventory, advertising, marketing, and working capital. Risk Factors: Prospective Investors should carefully evaluate the following matters, including those under the heading "Risk Factors".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001497288_arborgen_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001497288_arborgen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..77385b279d701fbafb5c11fb68499b39cd853f93
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001497288_arborgen_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus. You should also consider, among other things, the matters described under Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations, in each case appearing elsewhere in this prospectus. Unless otherwise stated, all references to us, our, ArborGen, we, the Company and similar designations refer to ArborGen Inc. and its subsidiaries. Our Company We believe we are the world s leading developer of biotechnology tree seedling products, one of the largest providers of conventional and technology-enhanced seedlings to the forestry industry and the only integrated global commercial seedling company. We are focused on improving and selling the most widely grown commercial forestry species in some of the largest markets in the world. Our products are designed for use by our customers in the traditional pulp and paper and wood products markets, the growing biopower and charcoal markets and the emerging biofuels market. We have a base of over 5,000 customers, including some of the largest land owners and managers in the United States, New Zealand and Australia, and in the year ended March 31, 2010, we sold 240 million seedlings in these markets. We also have a growing presence in Brazil through collaborations with the country s leading pulp producers. Based on our research and estimates, we believe that our high-value, technology-enhanced seedling products, including our pipeline of advanced and biotechnology products, improve the productivity of a given acre of land by enabling our customers to grow trees that yield more wood per acre with greater consistency and quality in a shorter period of time. The combination of our fully integrated business model, proprietary technology and established customer base creates a scalable platform that we are using to develop and commercialize the next generation of seedling products. We do not currently sell any biotechnology products and, prior to any commercial sales, our biotechnology products are subject to a multi-year deregulation process. We believe, but cannot guarantee, our biotechnology products will revolutionize productivity standards in the forestry industry and have an impact on that industry similar to the impact that biotechnology crops have had on the agricultural industry. We are currently the only commercial seedling company with products spanning the entire technology spectrum, from conventional and advanced seedlings, which we currently offer, to biotechnology seedlings, which are currently in development. As a result, no single entity competes with us in commercial sales across the full range of our business. In the year ended March 31, 2010, sales of our open-pollinated, or conventional, seedling products represented approximately 72% of our revenue. We also sell advanced seedling products, which consist of our mass-control pollinated, or MCP, and varietal products. These advanced products are designed to improve the growth rates, yields, stress-tolerance, uniformity, wood quality and processing efficiency of trees. In the year ended March 31, 2010, sales of our advanced products represented approximately 28% of our revenue. Our product pipeline includes six advanced and 15 biotechnology products in various stages of development. While we do not currently sell any biotechnology seedling products, our freeze-tolerant tropical eucalyptus product is the first and only biotechnology forestry product under review for deregulation by the United States Department of Agriculture, or USDA. In addition, we have the largest number of regulatory approvals for field tests of biotechnology forestry products in the United States and Brazil. We have developed our products by utilizing our leading technology platform, which is built on over 100 years, in the aggregate, of tree improvement research. Our technology platform combines one of the largest and most diverse repositories of tree genetic resources, or germplasm, and substantially all of the commercial seed orchard and nursery businesses and the related research and development activities of three industry leaders: International Paper Company, MeadWestvaco Corporation and Rubicon Limited. As a result of our technology leadership, our portfolio of owned and exclusively licensed patents and the inherent tree growth time associated with tree improvement research, we believe we are decades ahead of any new market entrants seeking to develop and commercialize a product portfolio and technology platform comparable to ours; however, there is no guarantee that we will be able to commercialize our biotechnology products in the near future. Table of Contents We believe we are the largest provider of tree seedlings to the commercial forestry industry in the world. Based on our annual seedling sales and management estimates, we believe we have an approximately 27% share of the total seedling market in the Southeastern United States, an approximately 36% share of the total seedling market in New Zealand and a more than 10% share of the Australian pine seedling market. In addition, our customers include 13 of the 20 largest land owners and managers in the United States as reported in 2008 by RISI, the leading information provider for the global forest products industry, and our customers include six of the ten largest land owners and managers in New Zealand as reported in 2009 by the New Zealand Forest Owners Association and the New Zealand Ministry of Agriculture and Forestry. The geographies in which we currently operate represent some of the largest commercial forestry markets in the world, and we believe our existing market presence and our pipeline of advanced and biotechnology seedling products position us well to expand into other large and fast-growing forestry markets, including China and markets throughout South America. Our technology platform and our tree improvement expertise gained over multiple generations of tree breeding have allowed us to develop products that increase the productivity of land and address the evolving needs of the global commercial forestry industry, including the increased demand for wood as a source of energy. Our broad portfolio of seedling products, which we sell under the ArborGen and SuperTree Seedlings brand names, includes the most widely grown tree species in the commercial forestry industry, such as loblolly pine, radiata pine and eucalyptus. We continue to enhance traits of these species, including growth rates, yields, stress-tolerance, uniformity, wood quality and processing efficiency, through a variety of conventional and advanced production processes, including open pollination, mass-control pollination and varietal manufacturing, and through the application of biotechnology. As a result, we are able to offer a broad portfolio of seedling products with a range of traits, which allows us to address different potential end-users at different price points and returns on investment. For example, in the United States, our products currently range in price from approximately $45 per 1,000 seedlings for our first-generation conventional open-pollinated loblolly pine seedlings to approximately $400 per 1,000 seedlings for a varietal product of the same species that exhibits enhanced traits selected for suitability in a specific end market and that we believe provides our customers with higher returns on investment. To accelerate adoption of our higher-value products, we intend to leverage our longstanding customer relationships and the improved returns that we believe will be provided by these products. In some of our geographic markets, the transition to higher-value seedling products is already well-established. In the year ended March 31, 2010, we generated approximately 70% of our revenue in New Zealand and Australia from sales of our advanced products. The shift to advanced seedling products and higher average selling price that has already occurred in New Zealand is now beginning to occur with our customer sales in the significantly larger U.S. market. For example, as our customers in the United States have transitioned to our higher-value products, which consist of our elite open-pollinated conventional seedlings, our MCP seedlings and our varietal seedlings, sales of these products have grown from 5.7% of U.S. revenue in the year ended March 31, 2008 to 24.2% in the year ended March 31, 2010, with increasing sales of MCP and varietal seedlings each year. We use the term elite to refer to the latest and most improved generation of a particular open-pollinated pine product. Our advanced and biotechnology products are designed to provide significant additional value, which will be shared by us and our customers. Agricultural biotechnology companies have successfully employed this value-sharing model to establish premium pricing for their higher-value products. However, unlike agricultural biotechnology companies, which typically sell through distributors, we expect to continue to sell our products directly to our customers. As a result, we expect to capture a significant portion of the value created by our advanced and biotechnology products. Over the three-year period ended March 31, 2010, the shift in sales to our higher-value products drove a 15.5% increase in our U.S. average selling price and we expect this trend to continue. We expect to be the first company in our markets to introduce biotechnology products for sale to the commercial forestry industry. Prior to any commercial sales, our biotechnology products are subject to a multi-year deregulation process. We submitted our initial petition for the deregulation of our freeze-tolerant tropical eucalyptus product to the USDA in December 2008 and resubmitted that petition in January 2011 to include additional data. We expect to submit petitions for the deregulation of our short rotation loblolly pine and short Table of Contents Table of Contents rotation populus products to the USDA for review in the next two to four years. We expect to make regulatory submissions to Comiss o T cnica Nacional de Biosseguran a, or CTNBio, the governmental agency in Brazil that regulates biotechnology products, for our short rotation tropical eucalyptus product in the next three to four years and for our improved pulping tropical eucalyptus product in the next four to five years. For the year ended March 31, 2010, we generated $21.6 million of revenue, of which 76% was generated from customers located in the United States, 19% from customers located in New Zealand and 5% from customers located in Australia. Of the 240 million seedlings we sold in the year ended March 31, 2010, 91% were sold in the United States. We generated a gross profit of $5.2 million for the year ended March 31, 2010. After incurring research and development expenses of $11.2 million, or 51.9% of revenue, in the year to enhance and expand our pipeline of future advanced and biotechnology products, we recorded a net loss of $(14.7) million. For the year ended March 31, 2009, we generated $23.7 million of revenue and recorded a net loss of $(15.3) million, and for the year ended March 31, 2008, we generated $18.2 million of revenue and recorded a net loss of $(18.1) million. For the nine months ended December 31, 2010, we generated $11.1 million of revenue and recorded a net loss of $(14.2) million. We expect to continue to incur net losses over the next several years, including the year ending March 31, 2011, primarily as a result of our continuing investment in the research and development of advanced and biotechnology seedling products. As of March 31, 2011, we had 181 employees and operated 13 nurseries, 15 seed orchards, 20 distribution centers and three research and development facilities located throughout the Southeastern United States, New Zealand and Australia, as well as an office in Brazil. Our Market Opportunity Historically, the global commercial forestry industry has relied heavily on the harvesting of native forests. However, the use of wood from native forests is now under increasing pressure from competing uses of land, such as conversion to agricultural uses and the continued expansion of commercial and residential development, and from the limited accessibility to remaining unharvested forests, including as a result of conservation efforts. According to the Food and Agriculture Organization of the United Nations, or the FAO, from 1990 to 2005, the total area of deforestation was approximately 395 million acres, which is more than twice the size of Texas. In addition, over the past ten years, 150 million acres of the remaining global forests have been set aside as protected forests. Further, the FAO expects increases in the global consumption of wood to be driven by economic growth in China and other emerging markets, population growth, environmental policies and regulations, and increased global demand for energy from renewable sources. In its 2011 State of the World s Forest report, the FAO also noted that current wood production levels in certain regions that are becoming major consumers of wood products, such as Asia, will not be sufficient to meet this increased demand. Due to these increasing supply and demand pressures on global wood availability, the FAO expects that purpose-grown trees will meet a larger proportion of the demand for wood in the future, thereby alleviating some of the pressure on native forests. Purpose-grown trees, which are planted, maintained and harvested on plantations for commercial purposes, deliver improved per-acre productivity as compared to harvesting native forests. In 1992, the United Nations Conference on Environment and Development issued an Authoritative Statement stating that purpose-grown trees are a sustainable and environmentally sound source of renewable energy and industrial raw material. Based on the FAO s 2010 Global Forest Resource Assessment, purpose-grown trees currently account for approximately 7% of the global forest area. Purpose-grown trees, however, represent a larger proportion of the wood supply for industrial use. According to a 2005 FAO report, due to the increased productivity of planted forests, these trees contributed approximately 35% of industrial roundwood supply in 2000 and the FAO anticipated that this percentage would rise to 40-44% by 2020. According to the FAO, purpose-grown trees are more productive than native forests as a result of the cumulative impact of improved planting material, nursery practices, the planting of species that are best-suited to a particular end-market or geography, and intensive site management. We believe additional productivity gains result from reduced harvesting costs and the placement of a plantation within close proximity to a paper mill, biopower facility or export hub. In addition, unlike native forests, plantations can be planted with TABLE OF CONTENTS PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001498352_jintai_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001498352_jintai_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..03e686d6633c5b20d6e0d6692a62665ca7cf420a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001498352_jintai_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary contains basic information about us and our securities. The reader should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under Risk Factors. Some of the statements contained in this prospectus, including statements under Summary and Risk Factors are forward-looking statements and may involve a number of risks and uncertainties. We note that our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus. As used in this Prospectus, references to Jintai, the Company, we, our, ours and us refer to Jintai Mining Group, Inc., a Delaware corporation, including its consolidated subsidiaries and variable interest entities ( VIE ), unless the context otherwise requires. Unless otherwise indicated, the term common stock refers to shares of the Company s common stock, par value $0.0001. The following summary highlights some of the information in this prospectus. It may not contain all of the information that is important to you. To understand this offering fully, you should read the entire prospectus carefully, including the risk factors and our financial statements and the notes accompanying the financial statements appearing elsewhere in this prospectus. THE COMPANY Our Company We are an emerging vertically integrated mining company operating in the Guangxi Province of the People s Republic of China ( PRC ); however we are incorporated in the State of Delaware, the United States of America. We are engaged in exploration, mining, separating, smelting and other processing operations of primarily zinc and lead. Through our wholly-owned subsidiary, Jintai Mining Co., Limited ( Jintai HK ), a Hong Kong limited liability company, we own another subsidiary, Guangzhou Xiangguang Corporate Management Co. Ltd ( Xiangguang ), which controls Huanjiang Jintai Mining Company Limited ( Huanjiang Jintai ) through a series of VIE contractual arrangements. Huanjiang Jintai owns and operates an ore mine in an area measuring approximately 2.83 square kilometers ( the Ore Mine ) and owns the exploration rights to an additional 21.58 square kilometers (the Exploration Right Properties ) of very limited production or non-producing properties. Huanjiang Jintai sells the refined zinc and lead based products such as zinc concentrate, lead concentrate, zinc calcine, zinc dust and sand, sulfuric acid and other variations of zinc and lead. It also sells by-products such as tailings that are produced after the concentration process of zinc-lead ores. For a more detailed discussed on the Company s business and the products we sell, please see the sections entitled Description of Business beginning on page 55, and the sub-section entitled Description of Business - Our Products beginning on page 68 hereof. Our Industry Based on a report issued by ResearchInChina issued in 2009, the proven zinc resources and reserves worldwide are approximately 1.9 billion tons, most of which is found in Australia, China, Peru, the United States and Kazakhstan. Together, the collective reserves of these five countries account for 70.9% of the global reserves. Due to its vast zinc and lead resources, a significant number of zinc and lead mines and processing plants have developed in China. While zinc-lead resources may be found throughout the country, a majority of these resources are concentrated within the western and middle areas of China. In 2008, it was reported by ResearchInChina that there were 27 provinces and areas within China wherein zinc-lead ores were explored. However, only 6 of the 27 provinces contained zinc and lead reserves of more than 8 million tons: (i) Yunnan Province- 26.6 million tons; (ii) Inner Mongolia - 16.1 million tons; (iii) Gansu Province - 11.2 million tons (iv) Guangdong Province- 10.8 million tons; (v) Hunan Province - 8.9 million tons; and (vi) Guangxi Province - 8.8 million tons. Based on these figures, the 6 provinces accounted for 82.4 million tons of zinc and lead reserves, or 64% of China s total reserves of 129.6 million tons. Further, a study of the locations of zinc-lead mines within China show that there are five main locations for mining, dressing and smelting and production bases within the country, namely, (i) Northeast; (ii) Hunan; (iii) Guangdong and Guangxi; (iv) Yunnan and Sichuan; and (v) Northwest. In total, the mines and production plants located in these areas have collectively produced more than 95% of the nation s total zinc production and 85% of its total lead production in 2008. The production of zinc ore and refined zinc within China accounts for one-third of the world s total production. In 2007, China produced approximately 3,748,600 tons of refined zinc and 2,604,000 tons of zinc ore. While the 2008 global financial crisis had the effect of reducing the overall demand for zinc and its by-products worldwide, China still increased its overall production to 3,910,000 tons of refined zinc and 3,126,600 tons of zinc ore during the year 2008. Such level of production continues to be consistent from year-to-year and it is estimated that between January and October of 2009, China produced approximately 3,520,000 tons of refined zinc. However, due to the declining price in zinc internationally, the production of zinc ore decreased to 2,440,000 tons between January and October 2009. China has also become the leading producer of refined lead and lead ore. In 2007, China produced approximately 2,717,500 tons of refined lead and 917,600 tons of lead ore. Between 2006 and 2008, the refined lead production in China continued to grow. However, production of lead ore was far behind the production of refined lead and there was a relatively large gap between the production of refined lead and lead ore during such years. During the 2008 global financial crisis, China increased its production of both refined lead and lead ore. Between the months of January and October of 2009, China produced approximately 3,160,000 tons of refined lead and 1,260,000 tons of lead ore. According to statistics, China s zinc consumption in 2008 was roughly 3.7 million tons. Of this amount, consumption by the zinc plating industry accounted for approximately 47%, while die casting alloy is accountable for approximately 22%, brass-15% and oxide-14%. China s consumption of lead is driven mostly by the lead acid storage battery, lead oxide, and lead alloy industries. China s lead production growth is mostly attributable to the lead acid storage battery industry, as it consumes roughly 75% of the lead produced throughout China. Lead oxide, on the other hand, accounts for 13%, while lead alloy accounts for 6%. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price per Share(1) Proposed Maximum Aggregate Offering Price Amount of Registration Fee(2) Common stock, par value $.0001 per share(3) 6,900,000 $ 6.00 41,400,000 $ 2,951.82 Common stock issuable upon the conversion of the Convertible Notes issued to the Selling Stockholders(4) 4,000,000 $ 6.00 24,000,000 $ 1,711.20 Common stock issuable upon exercise of warrants issued to the Selling Stockholders(5) 800,000 $ 6.60 5,280,000 $ 376.46 Total 11,700,000 70,680,000 $ 5,039.49 (6) (1) The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). Includes shares which the underwriter has the option to purchase to cover over-allotments. (2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed Maximum Aggregate Offering Price. (3) Includes 900,000 shares of the Registrant s common stock subject to an option granted to the underwriter solely to cover over-allotments if any. (4) Represents shares of the Registrant s common stock that will be acquired upon the conversion of the Convertible Notes issued to the Selling Stockholders that are being registered for resale. (5) Pursuant to Rule 416, this registration statement also covers such number of additional shares to prevent dilution resulting from stock splits, stock dividends and similar transactions. (6) Previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 (the Securities Act ) or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. 1 Reference from the government website of Guangxi Development and Reform Commission Link: ( http://www.gxdrc.gov.cn/cslm/gyfz/200910/t20091030_153662.htm ); and Reference from the government website of Hong Kong Trade Development Council Link: (http://www.hktdc.com/info/mi/a/mpcn/en/1X072HNY/1/Profiles-Of-China-Provinces-Cities-And-Industrial-Parks/Hechi-Guangxi-City-Information.htm) EXPLANATORY NOTE This registration statement contains two forms of prospectus, as set forth below: Public Offering Prospectus. A prospectus to be used for the direct public offering by the registrant of up to 6,000,000 shares of common stock (in addition, up to 900,000 shares of the Registrant's common stock may be sold upon exercise of the underwriter' over-allotment option) (the Public Offering Prospectus ). Selling Stockholder Prospectus. A prospectus to be used in connection with the potential resale by the selling stockholders of (i) 4,000,000 shares of our common stock issuable upon conversion of convertible promissory notes (the Convertible Notes ) sold to Ms. Liwen Hu and Mr. Haibin Zhong (the Selling Stockholders ) in a private offering in August and November 2010; (ii) 800,000 shares of common stock issuable upon exercise of warrants (the Selling Stockholders Warrants ) issued to Ms. Liwen Hu and Mr. Haibin Zhong in the private offering in August and November 2010 (the Selling Stockholder Prospectus ). The Public Offering Prospectus and the Selling Stockholder Prospectus will be identical in all respects except for the following principal points: they contain different front covers; they contain different Use of Proceeds sections; they contain different Underwriting/Plan of Distribution sections; a Shares Registered for Resale section is included in the Selling Stockholder Prospectus; a Selling Stockholders section is included in the Selling Stockholder Prospectus; and they contain different back covers. The registrant has included in this registration statement, after the financial statements, a set of alternate pages to reflect the foregoing differences between the Public Offering Prospectus and the Selling Stockholder Prospectus. Investors who receive the public offering prospectus from the Company or the underwriter will all be potential investors in the public offering. The purpose of the alternative prospectus in connection with the resale offering is that the selling stockholders, whose shares are being registered in the resale offering prospectus, will be responsible for delivering the alternative prospectus in connection with the sales made by such selling stockholders. Business Strategy We will seek to implement numerous strategies to expand the size of our Company and continue efficient operating advantages. Our strategies include: Expanding the Existing Ore Mine - Our strategy is aimed at efficiently increasing production of our existing mine through the upgrading and improvement of up to four (4) transportation channels or tunnels into the Ore Mine. At present, the Ore Mine has widely scattered working sites or portals and therefore it has not reached maximum production capacity. Survey and develop additional mines in our Exploration Rights Properties - We have mapped out a systematic approach to acquire sufficient geological and assay data to have a reasonable estimate of resources in our Exploration Rights Properties, particularly, the Shangchao-Gangshan lead ore deposit, Shangchao lead ore deposit, and Dongjiang zinc ore deposit. Increase vertical integration of our value chain to include zinc-oxide and facility expansion Our current annual output capacity of 25,000 metric tons of refined zinc products can be doubled to 50,000 metric tons by upgrading and expanding the Jintai Duchuan Smelter facility to include zinc-oxide production lines. It is anticipated that the increased output will be used to produce zinc-oxide, which has greater margins than zinc calcine. Lastly, we intend to further improve our margins by adding a new concentrator to increase ore output to an annual capacity of 450,000 tons of run-of-mine ore, which is raw ore extracted from the ore body. Acquisition Opportunities - We also intend to customarily review other potential development and production oriented acquisitions in the similar geographic concentration as our existing properties. By leveraging our expertise and knowledge of certain markets, increased facility expansion plans, and improved capital structure, we intend to grow our market share in the Chinese market. To a lesser extent, we may seek other properties outside the zinc-lead campaign. At this time, we have no agreements to acquire any entities or properties. We believe that the funding from our anticipated initial public offering could accelerate the execution of our business strategy. While current cash flow from internally generated sources is capable of supporting our growth plans, it would take a significant amount of time for us to reach our objectives if we were to rely on current cash flow alone in order to undertake our planned activities. As such, additional funds are sought through this offering in order to accelerate the execution of our business plan and we anticipate that our corporate planning and business initiatives will be achieved within 18 to 24 months from the completion of this offering. Our goal is to evolve from an emerging diversified mining company to a leading fully integrated mining entity. A more detailed description of our business and strategy can be found in the section of this prospectus entitled the Description of Business . The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE __, 2011 JINTAI MINING GROUP, INC. 6,000,000 SHARES OF COMMON STOCK We are offering 6,000,000 shares of our common stock. We expect the initial public offering price of the shares to be between $4.00 and $6.00 per share. Currently, no public market exists for our common stock. We have applied for the listing of the shares on the NYSE Amex Equities under the symbol JTI and with the NASDAQ under the symbol JTMI ; however, no assurance can be given that either of such applications will be approved in time for completion of this offering or at all. If the application is not approved, or is pending when this prospectus becomes effective, we still plan to complete this offering and await the approval of the listing of our shares on the NYSE Amex Equities or the NASDAQ. In such event, purchasers of the shares offered herein will not be able to re-sell or trade such shares for an indefinite amount of time. Investing in our common stock involves a high degree of risk. Please see the section entitled "Risk Factors" starting on page 10 of this prospectus to read about risks that you should consider carefully before buying shares of our common stock. Per Share (1) Total (2) Initial public offering price $ 5.00 $ 30,000,000 Underwriting discount and commissions $ 0.18 $ 1,110,000 Proceeds, before expenses, to Jintai Mining Group, Inc. $ 4.82 $ 28,890,000 (1)Based on the mid-point price for this offering. (2) The underwriters will receive compensation in addition to the discounts and commissions as set forth under Underwriting. We have granted the underwriter a 45-day option to purchase up to an additional 900,000 shares of our common stock at the public offering price, less the underwriting discount, to cover any over-allotments. The underwriter expects to deliver the shares against payment in New York, New York, on or about ____, 2011. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Maxim Group, LLC The date of this prospectus is ___, 2011 Corporate Structure We are a vertically integrated mining company operating in the Guangxi Province of the PRC. We were incorporated in the State of Delaware on June 14, 2010 under the name Jintai Mining Group, Inc. We are focused on exploration, mining, separating, smelting and other processing operations of primarily zinc and lead. Through our wholly-owned subsidiary, Jintai HK, we own Xiangguang, which controls Huanjiang Jintai through a series of variable interest entity (VIE) contractual arrangements. The VIE contracts grant us, through Xiangguang, the right to manage and control Huanjiang Jintai and further entitle us to receive the revenue and control the assets of Huanjiang Jintai. Other than these interests in these contractual arrangements, we, Jintai HK and Xiangguang have no equity interests in Huanjiang Jintai. A more detailed description of these contractual arrangements is provided in the section of this Prospectus entitled Description of Business - Contractual Arrangements. Huanjiang Jintai owns and operates our Ore Mine and owns the Exploration Right Properties and sells the refined zinc and lead based products such as zinc concentrate, lead concentrate, zinc calcine, zinc dust and sand, sulfuric acid and other variations of zinc and lead. We also sell by-products such as tailings that are produced after the concentration process of zinc-lead ores. Under the structure above, we believe that we do not need to obtain approval from Ministry of Commerce ( MOFCOM ) or the China Securities Regulatory Commission (the CSRC ) prior to publicly listing our securities, even if our operations and assets are concentrated in Huanjiang Jintai, a PRC company. For a discussion of the risks and uncertainties arising from these PRC rules and regulations, see section entitled Risk Factors Risks Related to Our Corporate Structure beginning on page 15 hereof. The following diagram illustrates our shareholding and corporate structure as of the date of this prospectus: Risks Associated With Our Business Investing in our common stock involves a high degree of risk. We are subject to numerous risks and hazards associated with the mining industry, such as risks caused by incremental weather, safety concerns, the potential of operational accidents, output limitations and governmental environment regulation. Our revenue and profitability may be adversely affected by metal price volatility and the non-renewal or termination of our relationship with our two major customers. In addition, we conduct our business through Huanjiang Jintai by means of VIE contractual arrangements. If the PRC government determines that these contractual arrangements do not comply with applicable regulations, our business could be adversely affected. If the PRC regulatory bodies determine that the agreements that establish the structure for operating our business in China do not comply with PRC regulatory restrictions on foreign investment, we could be subject to severe penalties. In addition, changes in existing PRC laws and regulations may materially and adversely affect our business. Please see the section entitled Risk Factors starting on page 10 of this prospectus to read more about risks that you should consider carefully before buying shares of our common stock. Company Information Our principal executive offices are located at No. 48 Qiaodong Road, Sien Town, Huanjiang County Hechi City; Guangxi Province, China. Our correspondence address is Room 1708, B2 Nan Fung Tower, Des Voeux Road, Central Hong Kong. Our telephone number is (86-0778) 220-5911. Our website address is www.jintaimining.com. The information on our website is not a part of this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001499361_dts8_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001499361_dts8_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4b5755ce4b9cf6dc39b247ff891a911302f62c70
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001499361_dts8_prospectus_summary.txt
@@ -0,0 +1 @@
+Future Sales By Existing Stockholders A total of 7,800,000 shares have been issued to the two (2) existing stockholders, all of which are restricted securities, as that term is defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Act. Under Rule 144, such shares can be publicly sold, subject to volume restrictions and certain restrictions on the manner of sale, commencing one year after their acquisition. Any sale of shares held by the existing stockholders (after applicable restrictions expire) and/or the sale of shares purchased in this offering (which would be immediately resalable after the offering), may have a depressive effect on the price of our common stock in any market that may develop, of which there can be no assurance. Our stockholders do not have any plans to sell their shares at any time after this offering is complete. Change in Control As of the date of this Prospectus, our management is unaware of any existing or anticipated contract or an arrangement, the operation of which may, at a subsequent date, result in a change of control of the Company. Certain Relationships and Related Transactions, and Director Independence Transactions with related persons Sean Tan is our sole officer and director. We are currently operating out of the premises of Mr. Tan on a rent-free basis for administrative purposes. This location also serves as Mr. Tan s residence. There is no written agreement or other material terms or arrangements relating to said arrangement. The Company s sole officer and director, on March 29, 2009, purchased 2,100,000 shares of our common stock at a price of $0.001 per share for payment of $2,100 for the Company s incorporation and legal expenses. On February 1, 2010, Mr. Tan purchased 4,200,000 shares of our common stock at a price of $0.001 per share for a cash payment of $4,200 and on March 25, 2010, Mr. Tan purchased 1,000,000 shares of our common stock at a price of $0.10 per share for cash payment of $10,000. As of July 31, 2010, Mr. Tan has been issued a total of 7,300,000 shares of our common stock for a total cash payment of $14,200 and $2,100 paid for Company incorporation and legal fees. On March 25, 2010, Li Hui Juan, an independent investor, was issued 500,000 shares of our common stock at a price of $0.001 per share in exchange for $5,000 travel expenses paid on behalf of the Company. Li Hui Juan has direct beneficial ownership of the 500,000 common shares. Li Hui Juan is unrelated to Sean Tan and is not considered a promoter. As of the date of this Prospectus, there have been no other transactions or proposed transactions in the past two years in which the Company was or is a party to a transaction which has materially affected or will materially affect the Company in which any director, promoter, executive officer or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or indirect material interest. We do not currently have any conflicts of interest by or among our current officer, director or advisors. The Company has established a Conflicts of Interest policy in its Code of Ethics, requiring officers and directors to take certain precautions and actions to protect the Company from potential risks that may arise from conflicts of interests between future officers, directors, vendors or customers. However, the Conflicts of Interest Policy in our Code of Ethics contemplates a corporate structure that is not currently applicable to our Company and therefore is currently ineffective. The company s sole officer and director is also the Chief Executive Officer of DTS8 Coffee (Shanghai) Co. Ltd., which is in the business of roasting and selling coffee to retailers and consumers in China. While the potential customers of the Company are significantly different than the customers of DTS8 Coffee (Shanghai) Co. Ltd; there may be conflicts between the two companies for the purchase of raw coffee beans, which may be resolved only through the exercise of our officer and director s judgment in a manner which is consistent with his fiduciary duties and in the best interest of the Company. As dictated by the Company s policy on Conflicts of Interest and Code of Ethics, any transactions which may pose a conflict of interest, or which may be qualified as a related party transaction, will be fully disclosed. If a conflict of interest arises that cannot be waived or resolved in the best interests of both DTS8 Coffee (Shanghai) Co. Ltd., and the Company, and Mr. Tan is the only officer and director at the time the conflict arises, Mr. Tan has agreed to either resolve the conflict in favor of the Company, or appoint a new director to the Company s Board of Directors and resign as a director. In the future, we intend to appoint additional independent directors to our Board of Directors. Accordingly, conflicts of interest may arise which could influence these persons on evaluating possible acquisitions or in generally acting on behalf of the Company as a result of their respective outside business interests. Directors are to act honestly and in good faith with a view to the best interest of the Company. In addition, directors in a conflict of interest position are required to disclose certain conflicts to the Company and to abstain from voting in connection with the matter. In the future, we cannot ensure that shareholders will agree with all decisions made by our officers and management. Therefore, to assist us in minimizing conflicts of interest between the Company and the management, related-person transactions must be approved by our Board of Directors composed of independent directors, who will approve the transaction only if they determine that it is in the Company s best interests. This is our future intent when we have appointed independent directors. As of the date of this Prospectus, we do not have independent directors therefore it is currently not applicable and ineffective. In considering the transaction, the Board of Directors will consider various factors, including, as applicable: (i) the related person s interest in the transaction; (ii) the approximate dollar value of the amount involved in the transaction; (iii) the approximate dollar value of the amount of the related person s interest in the transaction without regard to the amount of any profit or loss; (iv) our business rationale for entering into the transaction; (v) the alternatives to entering into a related-person transaction; (vi) whether the transaction is on terms no less favorable to us than terms that could have been reached with an unrelated third party; (vii) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; (viii) the overall fairness of the transaction to us; (ix) valuations generated by independent third-party coffee brokers, if any, where the transaction in question is the purchase of coffee from a related party; and (x) any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. Director independence As of the date of this Prospectus, we have one director on the board. Accordingly, the director is not considered to be independent. We will appoint additional independent directors to our board and committees in the future. We do not have any independent board members in our audit committee who are considered to be financial experts. Financial Statements The following financial statements are filed herewith: 1 Unaudited Financial Statements for the six months period ended October 31, 2010 and 2009 and the period of inception (March 27, 2009) to October 31, 2010. 2. Audited Financial Statements for the years ended April 30, 2010 and 2009 and the period since inception, (March 27, 2009) to April 30, 2010. BERKELEY COFFEE & TEA, INC. (A DEVELOPMENT STAGE COMPANY) UNAUDITED FINANCIAL STATEMENTS AS OF OCTOBER 31, 2010 TABLE OF CONTENTS Page Number FINANCIAL STATEMENTS Unaudited Balance Sheets as of October 31, 2010 and April 30, 2010 36 Unaudited Statements of Operations for the six months ended October 31, 2010 and 2009 and the period of inception (March 27, 2009) to October 31, 2010 37 Unaudited Statement of Changes in Stockholders Equity (Deficits) for the period of inception (March 27, 2009) to October 31, 2010 38 Unaudited Statements of Cash Flows for the six months ended October 31, 2010 and 2009 and the period of inception (March 27, 2009) to October 31, 2010 39 Notes to the unaudited Financial Statements 40 BERKELEY COFFEE & TEA, INC. (A Development Stage Company) BALANCE SHEETS October April 31, ,2010 30, 2010 A S S E T S (Unaudited) (Audited) CURRENT ASSETS Cash and cash equivalents $ 1,072 $ 4,161 Subscription receivable - 10,000 TOTAL CURRENT ASSETS 1,072 14,161 TOTAL ASSETS $ 1,072 $ 14,161 L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (DEFICIT) CURRENT LIABILITIES Accounts payables and accruals $ 4,025 $ 972 TOTAL CURRENT LIABILITIES 4,025 972 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY (DEFICIT) Common stock, 75,000,000 shares authorized, $0.001 par value; 7,800,000 shares issued and outstanding. 7,800 7,800 Additional paid-in capital 13,500 13,500 Accumulated deficit (24,253) (8,111) TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ( 2,953) 13,189 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,072 $ 14,161 See accompanying notes to the unaudited financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) UNAUDITED STATEMENTS OF OPERATIONS For the Period From Three Months Ended Three Months Ended Six Months Ended Six Months Ended Inception (March 27, 2009) October October October October to October 31, 2010 31, 2009 31, 2010 31, 2009 31, 2010 REVENUE $ - $ - $ - $ - $ - OPERATING EXPENSES General and administrative 9,144 - 16,142 - 24,253 TOTAL OPERATING EXPENSES 9,144 - 16,142 - 24,253 LOSS FROM OPERATIONS (9,144) - (16,142) - (24,253) LOSS BEFORE INCOME TAXES (9,144) - (16,142) - (24,253) INCOME TAX BENEFIT - - - - - NET LOSS $ (9,144) $ - $ (16,142) $ - $ (24,253) BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.00) $ - (0.00) - WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED 7,800,000 2,100,000 7,800,000 2,100,000 See accompanying notes to the unaudited financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) Common Stock Deficit Accumulated Number Additional Paid-In During Total Stockholders' of Shares Amount Capital Development Stage Equity (Deficit) Balance as of March 27, 2009 (Inception) - $ - $ - $ - $ - Stock issued for expenses at $0.001 per share 2,100,000 2,100 - - 2,100 Net loss from Inception to April 30, 2009 - - - (2,100) (2,100) Balance as of April 30, 2009 (Audited) 2,100,000 2,100 - (2,100) - Stock issued for cash at $0.001 per share 4,200,000 4,200 - - 4,200 Stock issued for cash at $0.01 per share 1,000,000 1,000 9,000 - 10,000 Stock issued for expenses at $0.01 per share 500,000 500 4,500 - 5,000 Net loss for the year ended April 30, 2010 - - - (6,011) (6,011) Balance as of April 30, 2010 (Audited) 7,800,000 7,800 13,500 (8,111) 13,189 Net loss for six months ended October 31, 2010 - - - (16,142) (16,142) Balance as of October 31, 2010 (Unaudited) 7,800,000 $ 7,800 $ 13,500 $ (24,253) $ (2,953) See accompanying notes to the unaudited financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) UNAUDITED STATEMENTS OF CASH FLOWS Six Months Ended Six Months Ended For Period From Inception (March 27, 2009) to October October October 31, 2010 31, 2009 31, 2010 Net loss $ (16,142) $ - $ (24,253) Adjustments to reconcile net loss to net cash used by operating activities: - - - Expenses paid by issuance of shares - - 7,100 Increase/(decrease) in: Accounts payables 3,053 - 4,025 Net cash provided by (used in) operating activities (13,089) - (13,128) Cash flows from investing activities: Net cash used in investing activities - - - - - - Cash flows from financing activities: Collection of stock subscription 10,000 Proceeds from issuance of common stock - - 14,200 Net cash provided by financing activities 10,000 - 14,200 Net increase (decrease) in cash (3,089) - 1,072 Cash, beginning of period 4,161 - - Cash, end of period $ 1,072 $ - $ 1,072 SUPPLEMENTAL DISCLOSURES: Cash paid for interest and income taxes: Interest $ - $ - $ - Income taxes $ - $ - $ - See accompanying notes to the unaudited financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) NOTES TO UNAUDITED FINANCIAL STATEMENTS October 31, 2010 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Berkeley Coffee & Tea, Inc. (hereinafter "Company" We Our or "Berkeley Coffee ) was incorporated in the State of Nevada on March 27, 2009. The Company is in the development stage and plans to market and sell coffee produced in China into United States. The Company is a development stage company as defined in ASC 915 Development Stage Enterprises , as it is devoting substantially all of its efforts to establish a new business and planned principal operations have not commenced. NOTE 2 BASIS OF PRESENTATION The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the year ended April 30, 2010. In the opinion of management, the unaudited interim financial statements furnished herein includes all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company's financial position and results of operations. Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company s accumulated deficit or net losses presented. Operating results for the six-month period ended October 31, 2010 are not necessarily indicative of the results that may be expected for the year ending April 30, 2011. NOTE 3 - GOING CONCERN UNCERTAINTY The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred a material loss from operations. At October 31, 2010, the Company had an accumulated deficit of $24,253, in addition to limited cash, zero revenue and unprofitable operations. For the period ended October 31, 2010, the Company sustained net losses of $16,142. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue and cash flow to meet its obligations on a timely basis. Management's plans in this regard are to raise equity financing of $500,000 by offering to sell 2,500,000 shares of common stock at $0.20 each. If the financing is successful, it will mitigate these factors which raise substantial doubt about the Company's ability to continue as a going concern. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Accounting Methods The Company's financial statements are prepared using the accrual basis of accounting in accordance with the accounting principles generally accepted in the United States of America. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. Cash and Cash Equivalents Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As at October 31, 2010, cash and cash equivalents consist of cash only. Comprehensive Income The Company has adopted ASC 220, "Reporting Comprehensive Income", which requires inclusion of foreign currency translation adjustments, reported separately in its statement of stockholders' equity, in other comprehensive income. The Company had no other comprehensive income for the period ended October 31, 2010. Concentration of Credit Risk The Company maintains the majority of its cash in commercial accounts at a major financial institution. Although the financial institution is considered creditworthy and has not experienced any losses on its deposits, at October 31, 2010, the Company's cash balance did not exceed Federal Deposit Insurance Corporation (FDIC) limits. Derivative Instruments The Financial Accounting Standards Board issued ASC 815, "Accounting for Derivative Instruments and Hedging Activities" (hereinafter "ASC 815"), The statement establishes accounting and reporting standards for derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company has not entered into derivative contracts to hedge existing risks or for speculative purposes. Earnings (Loss) Per Share The Company adopted ASC 260, which provides for calculation of "basic" and "diluted" earnings (losses) per share. Basic earnings (losses) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to diluted earnings per share. Foreign Currency Translation The financial statements are presented in United States dollars. The Company maintains United States dollars as the functional currency. Foreign monetary assets and liabilities are translated into United States dollars at the rates of exchange in effect at the balance sheet dates. Non-monetary items are translated at historical rates. Revenue and expense items are translated using the rate in effect on the date of the transactions. Inventory Inventories are stated at the lower of cost or market. The cost for inventories is determined using the first-in, first-out method. Inventories principally consist of coffee beans. The Company had no inventory at October 31, 2010. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot always be determined with precision. Changes in assumptions can significantly affect estimated fair values. The Company's financial instruments consist of cash, subscription receivable and accounts payable. The carrying amounts of these financial instruments approximate fair value due to the short-term nature of these items. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Organization and Start-up Cost All costs and expenses for the start-up activities, including organization costs, are expensed as incurred. Offering Expenses Offering expenses represent costs associated with the preparation and filing of a Registration Statement under S-1 offering to sell 2,500,000 shares of the Company s common stock at a price of $0.20 per share for gross proceeds of $500,000. Such costs primarily consist of professional fees and consulting services. The offering expenses are paid from cash on hand and charged to expenses as incurred. Property and Equipment Property and equipment are recorded at cost. Depreciation for property and equipment is calculated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are generally amortized over the shorter of seven years or the term of the related leases. Major remodels and improvements are capitalized. Maintenance and repairs that do not improve or extend the life of the respective assets are charged to expense as incurred. Provision for Income Taxes Income taxes are provided based upon the liability method of accounting pursuant to ASC 740, "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax base of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by ASC 740 to allow recognition of such an asset. Revenue Recognition The Company derives its revenue from sale of coffee beans. Our revenue is recognized in the period when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Coffee is considered delivered when title and risk have been transferred to the customer. Stock Issued for Services Transactions in which common stock is issued for services are recorded at the fair value of the services received or the fair value of the stock issued, whichever is more reliably measurable. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses and the accompanying notes during the reporting period. Accordingly, actual results could differ from those estimates. Recent Accounting Pronouncements In June 2009, the FASB established the Accounting Standards Codification ( Codification or ASC ) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ( GAAP ). Rules and interpretive releases of the Securities and Exchange Commission ( SEC ) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented. Statement of Financial Accounting Standards ( SFAS ) No. 165 (ASC Topic 855), Subsequent Events , SFAS No. 166 (ASC Topic 810), Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140 , SFAS No. 167 (ASC Topic 810), Amendments to FASB Interpretation No. 46(R), and SFAS No. 168 (ASC Topic 105), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles- a replacement of FASB Statement No. 162 were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant. Accounting Standards Update ( ASU ) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU s No. 2009-2 through ASU No. 2010-26 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant NOTE 5 - RELATED PARTY TRANSACTIONS The Company s sole officer and director was issued 7,300,000 shares of common stock for $2,100 payment of Company expenses and $14,200 cash payment to the Company. NOTE 6 - COMMITMENTS AND CONTINGENCIES Refer to Note 2 above. NOTE 7 - COMMON STOCK As of October 31, 2010, the authorized capital was 75,000,000 common shares with a par value of $0.001 and 7,800,000 common shares were issued and outstanding. a) On March 29, 2009, the Company issued 2,100,000 common shares at $0.001 per share for $2,100 of Company expenses paid. b) On February 1, 2010, the Company issued 4,200,000 common shares at $0.001 per share for cash proceeds of $4,200. c) On March 25, 2010, the Company issued 500,000 common shares at $0.001 per share for $5,000 of Company expenses paid. d) On March 25, 2010, the Company issued 1,000,000 common shares at $0.01 per share for cash proceeds of $10,000. The $10,000 was received on June 22, 2010. NOTE 8 - CONTRACTS AND AGREEMENTS Nil NOTE 9 CONCENTRATION RISK The Company plans to purchase green bean coffee from China. Consequently, any political, economic and social unrest and/or instability in the coffee growing areas of China may adversely affect the Company s business operations. In particular, instability in the coffee growing regions of China could result in a decrease in the availability of coffee beans needed for the continued operation and growth of the Company s business. It could also lead to an increase in the purchasing costs and increased operating costs. This may adversely affect the Company s business. NOTE 10 SUBSEQUENT EVENTS To provide financing to commence the implementation of its business plan and operations, the Company has prepared and filed a Registration Statement under S-1 offering to sell 2,500,000 shares of its common stock at $0.20 per share for gross proceeds of $500,000. The Company has evaluated the subsequent events from the balance sheet date through the date of the financial statements were issued, and determined that no other significant events have occurred. BERKELEY COFFEE & TEA, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF APRIL 30, 2010 AND 2009 TABLE OF CONTENTS Page Number Report of Independent Registered Public Accounting Firm 46 FINANCIAL STATEMENTS Balance Sheets 47 Statements of Operations 48 Statement of Changes in Stockholders Equity 49 Statements of Cash Flows 50 Notes to the Financial Statements 51 BERKELEY COFFEE & TEA, INC. ( A Development Stage Company) BALANCE SHEETS April 30, April 30, 2010 2009 A S S E T S CURRENT ASSETS Cash and cash equivalents $ 4,161 $ - Subscription receivable 10,000 - TOTAL CURRENT ASSETS 14,161 - TOTAL ASSETS $ 14,161 $ - L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y CURRENT LIABILITIES Accounts payable $ 972 $ - TOTAL CURRENT LIABILITIES 972 - COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY Common stock, 75,000,000 shares authorized, $0.001 par value; 7,800,000 and 2,100,000 shares issued and outstanding, respectively 7,800 2,100 Additional paid-in capital 13,500 - Accumulated deficit (8,111) (2,100) TOTAL STOCKHOLDERS' EQUITY 13,189 - TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,161 $ - See accompanying notes to the financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS For the Period From For the Period From For the Year Ended Inception (March 27, 2009) Inception (March 27, 2009) April 30, to April 30, to April 30, 2010 2009 2010 REVENUE $ - $ - $ - OPERATING EXPENSES General and administrative 6,011 2,100 8,111 TOTAL OPERATING EXPENSES 6,011 2,100 8,111 LOSS FROM OPERATIONS (6,011) (2,100) (8,111) LOSS BEFORE INCOME TAXES (6,011) (2,100) (8,111) INCOME TAX BENEFIT - - - NET LOSS $ (6,011) $ (2,100) $ (8,111) BASIC AND DILUTED NET LOSS PER COMMON SHARE $ - $ - WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED 3,260,548 1,976,471 See accompanying notes to the financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Deficit Common Stock Additional Accumulated Number Paid-In During Total Stockholders' of Shares Amount Capital Development Stage Equity Balance as of March 27, 2009 (Inception) - $ - $ - $ - $ - Stock issued for expenses at $0.001 per share 2,100,000 2,100 - - 2,100 Net loss from Inception to April 30, 2009 - - - (2,100) (2,100) Balance as of April 30, 2009 2,100,000 2,100 - (2,100) - Stock issued for cash at $0.001 per share 4,200,000 4,200 - - 4,200 Stock issued for cash at $0.01 per share 1,000,000 1,000 9,000 - 10,000 Stock issued for expenses at $0.01 per share 500,000 500 4,500 - 5,000 Net loss for the year ended April 30, 2010 - - - (6,011) (6,011) Balance as of April 30, 2010 7,800,000 $ 7,800 $ 13,500 $ (8,111) $ 13,189 See accompanying notes to the financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS Year Ended For Period From Inception (March 27, 2009) to For Period From Inception (March 27, 2009) to April 30, April 30, April 30, 2010 2009 2010 Net loss $ (6,011) $ (2,100) $ (8,111) Adjustments to reconcile net loss to net cash used by operating activities: - - - Expenses paid by issuance of shares 5,000 2,100 7,100 Increase (decrease) in: Accounts payable 972 - 972 Net cash provided by (used in) operating activities (39) - (39) Cash flows from investing activities: - - - Net cash used in investing activities - - - Cash flows from financing activities: Proceeds from issuance of common stock 4,200 - 4,200 Net cash provided by financing activities 4,200 - 14,200 Net increase (decrease) in cash 4,161 - 4,161 Cash, beginning of period - - - Cash, end of period $ 4,161 - 4,161 SUPPLEMENTAL DISCLOSURES: Cash paid for interest and income taxes: Interest $ - $ - $ - Income taxes $ - $ - $ - NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock subscription $ 10,000 $ - $ 10,000 See accompanying notes to the financial statements BERKELEY COFFEE & TEA, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS April 30, 2010 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Berkeley Coffee & Tea, Inc. (hereinafter "Company" We Our or "Berkeley Coffee ) was incorporated in the State of Nevada on March 27, 2009. The Company is in the development stage and plans to market and sell coffee produced in China into United States. The Company is a development stage company as defined in ASC 915 Development Stage Enterprises , as it is devoting substantially all of its efforts to establish a new business and planned principal operations have not commenced. NOTE 2 - GOING CONCERN UNCERTAINTY The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred material loss from operations. At April 30, 2010, the Company had an accumulated deficit of $8,111, in addition to limited cash, zero revenue and unprofitable operation. For the year ended April 30, 2010, the Company sustained net losses of $6,011. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue and cash flow to meet its obligations on a timely basis. Management's plans in this regard are to raise equity financing of $500,000 by offering to sell 2,500,000 shares of common stock at $0.20 each. If the financing is successful, it will mitigate these factors which raise substantial doubt about the Company's ability to continue as a going concern. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Accounting Methods The Company's financial statements are prepared using the accrual basis of accounting in accordance with the accounting principles generally accepted in the United States of America. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. Cash and Cash Equivalents Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As at April 30, 2010, cash and cash equivalents consist of cash only. Comprehensive Income The Company has adopted ASC 220, "Reporting Comprehensive Income", which requires inclusion of foreign currency translation adjustments, reported separately in its statement of stockholders' equity, in other comprehensive income. The Company had no other comprehensive income for the year ended April 30, 2010. Concentration of Credit Risk The Company maintains the majority of its cash in commercial accounts at a major financial institution. Although the financial institution is considered creditworthy and has not experienced any losses on its deposits, at April 30, 2010, the Company's cash balance did not exceed Federal Deposit Insurance Corporation (FDIC) limits. Derivative Instruments The Financial Accounting Standards Board issued ASC 815, "Accounting for Derivative Instruments and Hedging Activities" (hereinafter "ASC 815"), The statement establishes accounting and reporting standards for derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company has not entered into derivative contracts to hedge existing risks or for speculative purposes. Earnings (Loss) Per Share The Company adopted ASC 260, which provides for calculation of "basic" and "diluted" earnings (losses) per share. Basic earnings (losses) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to diluted earnings per share. Foreign Currency Translation The financial statements are presented in United States dollars. The company maintains United States dollars as the functional currency. Foreign monetary assets and liabilities are translated into United States dollars at the rates of exchange in effect at the balance sheet dates. Non-monetary items are translated at historical rates. Revenue and expense items are translated using the rate in effect on the date of the transactions. Inventory Inventories are stated at the lower of cost or market. The cost for inventories is determined using the first-in, first-out method. Inventories principally consist of coffee beans. The Company had no inventory at April 30, 2010. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot always be determined with precision. Changes in assumptions can significantly affect estimated fair values. The Company's financial instruments consist of cash, subscription receivable and accounts payable. The carrying amounts of these financial instruments approximate fair value due to the short-term nature of these items. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Property and Equipment Property and equipment are recorded at cost. Depreciation for property and equipment is calculated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are generally amortized over the shorter of seven years or the term of the related leases. Major remodels and improvements are capitalized. Maintenance and repairs that do not improve or extend the life of the respective assets are charged to expense as incurred. Provision for Income Taxes Income taxes are provided based upon the liability method of accounting pursuant to ASC 740, "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by ASC 740 to allow recognition of such an asset. Revenue Recognition The Company derives its revenue from sale of coffee beans. Our revenue is recognized in the period when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Coffee is considered delivered when title and risk have been transferred to the customer. Stock Issued for Services Transactions in which common stock is issued for services are recorded at the fair value of the services received or the fair value of the stock issued, whichever is more reliably measurable. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses and the accompanying notes during the reporting period. Accordingly, actual results could differ from those estimates. Recent Accounting Pronouncements In June 2009, the FASB established the Accounting Standards Codification ( Codification or ASC ) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ( GAAP ). Rules and interpretive releases of the Securities and Exchange Commission ( SEC ) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented. Statement of Financial Accounting Standards ( SFAS ) No. 165 (ASC Topic 855), Subsequent Events , SFAS No. 166 (ASC Topic 810), Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140 , SFAS No. 167 (ASC Topic 810), Amendments to FASB Interpretation No. 46(R), and SFAS No. 168 (ASC Topic 105), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles- a replacement of FASB Statement No. 162 were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant. Accounting Standards Update ( ASU ) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU s No. 2009-2 through ASU No. 2010-20 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant NOTE 4 - RELATED PARTY TRANSACTIONS The Company s sole officer and director was issued 7,300, 000 shares of common stock for payment of $2,100 expenses and $14,200 cash to the Company. At April 30, 2010, $10,000 was recorded as subscription receivable and was received on June 22, 2010. NOTE 5 - COMMITMENTS AND CONTINGENCIES Refer to Note 2 above. NOTE 6 - COMMON STOCK As of April 30, 2010, the authorized capital was 75,000,000 common shares with a par value of $0.001. a) On March 29, 2009, the Company issued 2,100,000 common shares at $0.001 per share for $2,100 Company expenses paid. b) On February 1, 2010, the Company issued 4,200,000 common shares at $0.001 per share for cash proceeds of $4,200. c) On March 25, 2010, the Company issued 500,000 common shares at $0.001 per share for $5,000 for Company expenses paid. d) On March 25, 2010, the Company issued 1,000,000 common shares at $0.01 per share for cash proceeds of $10,000. The $10,000 was received on June 22, 2010. NOTE 7 - CONTRACTS AND AGREEMENTS Nil NOTE 8 CONCENTRATION RISK The Company plans to purchase green bean coffee from China. Consequently, any political, economic and social unrest and/or instability in the coffee growing areas of China may adversely affect the Company s business operations. In particular, instability in the coffee growing regions of China could result in a decrease in the availability of coffee beans needed for the continued operation and growth of the Company s business. It could also lead to an increase in the purchasing costs and increased operating costs. This may adversely affect the Company s business. NOTE 9 SUBSEQUENT EVENTS The Company received $10,000 subscription receivable on June 22, 2010. The Company intends to file a Registration Statement under S-1 offering to sell 2,500,000 shares of its common stock at $0. 20 each for gross proceeds of $500,000 to provide financing to commence the implementation of its business plan and operations. The Company has evaluated subsequent events from the balance sheet date through August 2, 2010, and no other significant events have occurred. Disclosure of Commission Position on Indemnification for Securities Act Liabilities As permitted by Nevada Statutes, the Company may indemnify its directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil or criminal action brought against them on account of their being or having been directors or officers unless, in any such action, they are adjudged to have acted with gross negligence or willful misconduct. Insofar as indemnification for liabilities originates under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. Except as described in the section entitled Certain Relationships and Related Transactions set forth below, no promoters received or expect to receive any assets, services or other consideration from the Company. No assets will be or are expected to be acquired from any promoter on behalf of the Company. Incorporation of Certain Information Reference None. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Other Expenses of Issuance and Distribution The Company estimates that expenses in connection with the distribution described in this
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001500497_gia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001500497_gia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ef38c1fb6d6f8eba66d2f9fffcaed5444e5d0c80
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001500497_gia_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this Prospectus regarding GIA INVESTMENTS CORP (the Company ). In this Prospectus, unless the context otherwise denotes, references to we, us, our, and GIA are to the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001501310_lender-to_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001501310_lender-to_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001501310_lender-to_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001501720_africa_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001501720_africa_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a83715e09564e706ff0eae170af09c2d2384cfd4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001501720_africa_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS PROVIDES FOR: (i) OUR RESCISSION OFFER, PURSUANT TO WHICH YOU HAVE THE RIGHT TO HAVE THE BRENHAM SHARES YOU
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001502519_icon-eci_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001502519_icon-eci_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001502519_icon-eci_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001503401_china_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001503401_china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001503401_china_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001504222_high_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001504222_high_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e83a2a5b6257947fde5dd607ed9110540819853f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001504222_high_prospectus_summary.txt
@@ -0,0 +1 @@
+7. We intend to become subject to the periodic reporting requirements of the Exchange Act that will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit. Following the effective date of our registration statement of which this prospectus is a part, we will be required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly. In no case will the proceeds of this offering be sufficient to assist us in any way to meet any portion of these incremental costs of being public. 8. Patricia G. Skarpa, our chief executive officer, chief financial officer and principal accounting officer has no significant experience managing a public company and no meaningful accounting or financial reporting education or experience and, accordingly, our ability to meet Exchange Act reporting requirements on a timely basis will be dependent to a significant degree upon others. Patricia G. Skarpa has no significant experience managing a public company and no meaningful financial reporting education or experience. She is and will be heavily dependent on engaging and dealing with outside professional advisors, primarily lawyers and financial advisors/accountants who are and will not be affiliated with our independent auditors. We have no formal arrangements with professionals to help Ms. Skarpa and cannot provide any assurances that we will be able to establish arrangements with professionals on terms or costs that are acceptable or affordable to us. 9. Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision. 10. Having only two directors limits our ability to establish effective independent corporate governance procedures and increases the control of our president over operations and business decisions. We have only two directors, one of whom is our principal executive officer. Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues. In addition, a tie vote of board members is decided in favor of the chairman, which gives her significant control over all corporate issues, including all major decisions on operations and corporate matters such as approving business combinations. Until we have a larger board of directors that would include some independent members, if ever, there will be limited oversight of our president s decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders. 11. Ms. Patricia G. Skarpa, our president, has made all decisions concerning her compensation. These decisions may not be in the best interests of other investors. There is no employment contract with Patricia G. Skarpa at this time. Nor are there any agreements for compensation in the future. Patricia G. Skarpa s compensation has not been fixed or based on any percentage calculations. She has made all decisions determining the amount and timing of her compensation. She will continue making decisions about the timing and amount of her compensation until, if ever, we have a sufficient number of directors to establish a compensation committee of the board of directors. Patricia G. Skarpa s decisions about her compensation may not be in the best interests of other shareholders. Risks Related to Our Common Stock 12. The Company is selling the shares offered in this prospectus without an underwriter and may not be able to sell all or any of the shares offered herein. The common shares are being offered on our behalf by Ms. Skarpa, our president, on a best-effort basis. No broker-dealer has been retained as an underwriter and no broker-dealer is under any obligation to purchase any common shares. There are no firm commitments to purchase any of the shares in this offering. Consequently, there is no guarantee that the Company, through its president, is capable of selling all, or any, of the common shares offered hereby. The sale of just a small number of shares increases the likelihood of no market ever developing for our shares. 13. Since there is no minimum for our offering, if only a few persons purchase shares they will lose their money immediately without us being even able to develop a market for our shares. Since there is no minimum with respect to the number of shares to be sold directly by the Company in its offering, if only a few shares are sold, we will be unable to even attempt to create a public market of any kind for our shares. In such an event, it is highly likely that the entire investment of the early and only share purchasers would be lost immediately. 14. We have no firm commitments or commitments of any kind to purchase any of our shares and may be unable to sell enough shares to create a market for the shares. We have no firm commitment or commitments of any kind for the purchase of any shares and may be unable to identify investors to purchase the shares. 15. The offering price of our common stock has been determined arbitrarily and has no direct link to our operations or assets. The price of our common stock in this offering has not been determined by any independent financial evaluation, market mechanism or by our auditors, and is therefore, to a large extent, arbitrary. Our audit firm has not reviewed management's valuation and, therefore, expresses no opinion as to the fairness of the offering price as determined by our management. As a result, the price of the common stock in this offering may not reflect the value perceived by the market. There can be no assurance that the shares offered hereby are worth the price for which they are offered and investors may, therefore, lose a portion or all of their investment 16. Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock. We have no committed source of financing. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized (99,000,000 shares) but unissued (86,700,000 shares) assuming the sale of 2,000,000 shares in this offering. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders may further dilute common stock book value, and that dilution may be material. 17. The proposed aggregate proceeds of the offering are less than the estimated cost of the offering, so the Company will receive no economic benefits from the completion of the offering. The proposed aggregate proceeds of the offering ($20,000) are substantially less than the proposed costs to complete the offering ($65,000). We will, therefore, receive no financial benefit from the completion of the offering and will have to pay for some of the costs of the offering from the proceeds of operations or from other sources such as loans from officers or from related and unrelated parties. 18. The interests of shareholders may be hurt because we can issue shares of our common stock to individuals or entities that support existing management with such issuances serving to enhance existing management s ability to maintain control of our Company. Our president will own a significant majority of outstanding shares after the completion of the offering. In addition, our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued common shares. Such issuances may be issued to parties or entities committed to supporting existing management and the interests of existing management which may not be the same as the interests of other shareholders. Although transactions, other than those described in this prospectus, are not currently being contemplated or discussed, our ability to issue shares without shareholder approval serves to enhance existing management s ability to maintain control of our Company or participate in other transactions, including entering into possible business combinations, without the support of other shareholders. 19. Our chief executive officer controls all corporate activities and can approve all transactions, including mergers, without the approval of other shareholders. Our chief executive officer has a sufficient number of shares to control all corporate activities and can approve transactions, including possible mergers, issuance of shares and her compensation level, without the approval of other shareholders. Her decisions may not be in the best interests of other shareholders. 20. Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability that may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors. Our Articles of Incorporation at Article XI provide for indemnification as follows: "No director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer: (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law; or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of an Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation of the personal liability of a director or officer of the Corporation for acts or omissions prior to such repeal or modification." We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops. 21. Currently, there is no established public market for our securities, and there can be no assurances that any established public market will ever develop or that our common stock will be quoted for trading and, even if quoted, it is likely to be subject to significant price fluctuations. Prior to the date of this prospectus, there has not been any established trading market for our common stock, and there is currently no established public market whatsoever for our securities. A market maker has filed an application with FINRA on our behalf so as to be able to quote the shares of our common stock on the OTCBB maintained by FINRA commencing upon the effectiveness of our registration statement of which this prospectus is a part and the subsequent closing of this offering. There can be no assurance that the market maker s application will be accepted by FINRA nor can we estimate as to the time period that the application will require or that any buying of our shares will ever take place. Because of the anticipated low price of the securities being registered, many brokerage firms may not be willing to effect transactions in these securities. Purchasers of our securities should be aware that any market that develops in our stock will be subject to the penny stock restrictions. See Plan of Distribution and Risk Factor #22 below. 22. Our shares may not become eligible to be traded electronically which would result in brokerage firms being unwilling to trade them. If we become able to have our shares of common stock quoted on the OTCBB, we will then try, through a broker-dealer and its clearing firm, to become eligible with the Depository Trust Company ("DTC") to permit our shares to trade electronically. If an issuer is not DTC-eligible, then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCBB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions - like all companies on the OTCBB. What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is a necessity to process trades on the OTCBB if a company s stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take. 23. Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible. Our shares will be considered a penny stock. Rule 3a51-1 of the Exchange Act establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $4.00 per share or with an exercise price of less than $4.00 per share, subject to a limited number of exceptions which are not available to us. This classification will severely and adversely affects any market liquidity for our common stock. 24. The market for penny stocks has experienced numerous frauds and abuses that could adversely impact investors in our stock. Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include: Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by sales persons; Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. 25. Any trading market that may develop may be restricted by virtue of state securities Blue Sky laws that prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states. There is currently no established public market for our common stock, and there can be no assurance that any established public market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as Blue Sky laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions prohibit the secondary trading of our common stock. We currently do not intend to and may not be able to qualify securities for resale in at least 17 states which do not offer manual exemptions (or may offer manual exemptions but may not to offer one to us if we are considered to be a shell company at the time of application) and require shares to be qualified before they can be resold by our shareholders. Accordingly, investors should consider the secondary market for our securities to be a limited one. See also Plan of Distribution-State Securities-Blue Sky Laws. 26. Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to affect adversely stockholder voting power and perpetuate their control over us. Our articles of incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. 27. The ability of our president to control our business may limit or eliminate minority shareholders ability to influence corporate affairs. Upon the completion of this offering, our president will beneficially own an aggregate of approximately 81.3% of our outstanding common stock assuming the sale of all shares being registered. Because of her beneficial stock ownership, our president may be in a position to continue to elect our board of directors, decide all matters requiring stockholder approval, including potential mergers or business changes, and determine our policies. The interests of our president may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. The minority shareholders would have no way of overriding decisions made by our president. This level of control may also have an adverse impact on the market value of our shares because our president may institute or undertake transactions, policies or programs that may result in losses, may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares to significantly decrease our price per share. 28. All of our presently issued and outstanding common shares are restricted under rule 144 of the Securities Act, as amended. When the restriction on any or all of these shares is lifted, and the shares are sold in the open market, the price of our common stock could be adversely affected. All of the presently outstanding shares of common stock (10,300,000 shares) are "restricted securities" as defined under Rule 144 promulgated under the Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available. Rule 144 provides in essence that a person who is not an affiliate and has held restricted securities for a prescribed period of at least six months if purchased from a reporting issuer or 12 months (as is the case herein) if purchased from a non-reporting Company, may, under certain conditions, sell all or any of his/her shares without volume limitation, in brokerage transactions. Affiliates, however, may not sell shares in excess of 1% of the Company s outstanding common stock each three months. As a result of revisions to Rule 144 which became effective on February 15, 2008, there is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner for the aforementioned prescribed period of time. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. All 10,300,000 issued and outstanding shares of our common stock are owned by our president (10,000,000) and a director (300,000) and may be sold commencing one year from the date of issuance. See Market for Securities. 29. We do not expect to pay cash dividends in the foreseeable future. We have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock. 30. Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters. The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures. Because none of our directors are independent directors, we do not currently have independent audit or compensation committees. As a result, these directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations. We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles. 31. You may have limited access to information regarding our business because our obligations to file periodic reports with the SEC could be automatically suspended under certain circumstances. As of effectiveness of our registration statement of which this prospectus is a part, we will be required to file periodic reports with the SEC which will be immediately available to the public for inspection and copying (see Where You Can Find More Information elsewhere in this prospectus). Except during the year that our registration statement becomes effective, these reporting obligations may (in our discretion) be automatically suspended under Section 15(d) of the Exchange Act if we have less than 300 shareholders and do not file a registration statement on Form 8A (which we have no current plans to file). If this occurs after the year in which our registration statement becomes effective, we will no longer be obligated to file periodic reports with the SEC and your access to our business information would then be even more restricted. After this registration statement on Form S-1 becomes effective, we will be required to deliver periodic reports to security holders. However, we will not be required to furnish proxy statements to security holders and our directors, officers and principal beneficial owners will not be required to report their beneficial ownership of securities to the SEC pursuant to Section 16 of the Exchange Act until we have both 500 or more security holders and greater than $10 million in assets. This means that your access to information regarding our business will be limited. For all of the foregoing reasons and others set forth herein, an investment in our securities in any market that may develop in the future involves a high degree of risk. USE OF PROCEEDS EBS will apply the proceeds from the offering to pay for accounting fees, legal and professional fees associated with the offering. The total estimated costs of the offering ($65,000) exceed the amount of offering proceeds ($20,000) if all shares are sold. The costs of the offering, which principally relate to professional costs, are estimated to consist of: SEC Registration fee $ 1.43 NASD filing fee 100.00 *Accounting fees and expenses 5,000.00 *Legal fees and expenses 50,000.00 *Transfer agent fees 2,500.00 *Blue Sky fees and expenses 5,000.00 *Miscellaneous expenses 2,398.57 Total $ 65,000.00 *Indicates expenses that have been estimated. All proceeds of the offering will be used to pay expenses of the offering. EBS will pay all costs relating to this offering. The amount of costs in excess of offering proceeds ($45,000 or a greater amount if all registered shares are not sold) will be paid as and when necessary and required or otherwise accrued on the books and records of EBS until we are able to pay the full amount due either from revenues or loans from related or unrelated parties. Absent sufficient revenues to pay these amounts within six months from the date of this prospectus, our president has agreed to sign a personal promissory note due and payable to counsel upon terms negotiated at the time of note issuance. The promissory note will eliminate unpaid liabilities on the Company s books equal to the face amount of the personal promissory note. A formal written arrangement among EBS, our president, the corporate entity and our counsel exists with respect to this matter (filed as Exhibit 10.3) and is binding upon all parties. Our plans will not change regardless of whether the maximum proceeds are raised, except to the extent that as indicated in MD&A Liquidity section, first paragraph, the Company s President is responsible for all costs relating to the offering if same are not paid within six months of the effective date of the Company s Registration Statement of which this Prospectus is a part. THE OFFERING EBS is offering for sale a total of 2,000,000 shares of common stock at a fixed price of $0.01 per share. There is no minimum number of shares that must be sold by us for the offering to close, and we will retain the proceeds from the sale of any of the offered shares that are sold. The offering is being conducted on a self-underwritten, best efforts basis, which means our president and chief executive officer, Ms. Skarpa, will attempt to sell the shares. This prospectus will permit our president and chief executive officer to sell the shares directly to the public, with no commission or other remuneration payable to her for any shares that she may sell. Ms. Skarpa will sell the shares and intends to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, she will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934. The intended methods of communication include, without limitations, telephone and personal contact. In connection with EBS selling efforts in the offering, Ms. Skarpa will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the safe harbor provisions of SEC Rule 3a4-1, promulgated under the Exchange Act. Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer s securities. Ms. Skarpa is not subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. Ms. Skarpa will not be compensated in connection with her participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Ms. Skarpa is not, nor has she been within the past 12 months, a broker or dealer, and she is not, nor has she been within the past 12 months, an associated person of a broker or dealer. At the end of the offering, Ms. Skarpa will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Ms. Skarpa will not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii). The proceeds from the sale of the shares in this offering will be payable to Gary B. Wolff, P.C. - Escrow Account. EBS escrow agent, Gary B. Wolff, P.C., acts as legal counsel for EBS and, therefore, may not be considered an independent third party. All subscription agreements and checks are irrevocable and should be delivered to Gary B. Wolff, P.C. at the address provided on the Subscription Agreement. EBS will receive all proceeds from the sale of the 2,000,000 shares being offered. The price per share is fixed at $0.01 for the duration of this offering. All subscription funds will be held in a noninterest-bearing Account pending the completion of the offering. The offering will be completed 180 days from the effective date of this prospectus (or such earlier date when all 2,000,000 shares are sold), unless extended by our board of directors for an additional 180 days. There is no minimum number of shares that must be sold. All subscription agreements and checks for payment of shares are irrevocable. The Company will deliver stock certificates attributable to shares of common stock purchased directly to the purchasers within 90 days of the close of the offering or as soon thereafter as practicable. We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them. The offering may terminate on the earlier of: i. the date when the sale of all 2,000,000 shares is completed, ii. 180 days from the effective date of this document or any extension thereto. The offering price of the common stock has been determined arbitrarily and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings or net worth. The purchase of the common stock in this offering involves a high degree of risk. The common stock offered in this prospectus is for investment purposes only, and currently no market for our common stock exists. While a market maker has agreed to file a Rule 211 application with FINRA in order to apply for the inclusion of our common stock in the OTCBB, such efforts may not be successful, and our shares may never be quoted and owners of our common stock may not have a market in which to sell the shares. Also, no estimate may be given as to the time that this application process will require. If we become able to have our shares of common stock quoted on the OTCBB, we will then try, through a broker-dealer and its clearing firm, to become eligible with the DTC to permit our shares to trade electronically. If an issuer is not DTC-eligible, then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCBB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions - like all the companies on the OTCBB). What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is a necessity to process trades on the OTCBB if a company s stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take. Please refer to the sections of this prospectus entitled "Risk Factors" and "Dilution" before making an investment in this stock. DETERMINATION OF OFFERING PRICE The offering price of the common stock has been arbitrarily determined and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings or net worth. In determining the offering price, management considered such factors as the prospects, if any, for similar companies, anticipated results of operations, present financial resources and the likelihood of acceptance of this offering. No valuation or appraisal has been prepared for our business. We cannot assure you that a public market for our securities will develop or continue or that the securities will ever trade at a price higher than the offering price. DILUTION Dilution represents the difference between the offering price of the shares of common stock hereby being offered and the net book value per share of common stock immediately after completion of this Offering. "Net book value" is the amount that results from subtracting total liabilities from total assets. In this Offering, the level of dilution is increased as a result of the relatively low net book value of our issued and outstanding common stock and because the proceeds of the offering are substantially less than our estimated costs. Assuming all of the shares of common stock offered herein are sold, the purchasers in this Offering will lose the entire value of their shares purchased in that each purchased share will have a negative net book value of ($0.0052) if 1,000,000 shares are sold and ($0.0040) if 2,000,000 shares are sold. The net book value of existing shareholders shares will also decrease because the estimated costs will exceed the proceeds received from this Offering. The following table illustrates the dilution to the purchasers of the common stock in this offering: Assuming the sale of: 1,000,000 shares 2,000,000 shares Offering Price Per Share $ 0.01 $ 0.01 Book Value Per Share Before the Offering $ (0.0004) $ (0.0004) Book Value Per Share After the Offering $ (0.0052) $ (0.0040) Net decrease to Original Shareholders $ (0.0048) $ (0.0036) Decrease in Investment to New Shareholders $ (.01) $ (.01) Dilution to New Shareholders (%) 100% 100% The following table summarizes the number and percentage of shares purchased, the amount and percentage of consideration paid and the average price per Share paid by our existing stockholders and by new investors in this offering: Price Per Share Number of Shares Held Percentage of Ownership Consideration Paid 2,000,000 shares sold Existing shareholders $.001 10,300,000 83.7 $10,300 Investors in this offering $.01 2,000,000 16.3 $20,000 1,000,000 shares sold Existing shareholders $.001 10,300,000 91.2 $10,300 Investors in this offering $.01 1,000,000 8.8 $10,000 DIVIDEND POLICY We have never paid cash or any other form of dividend on our common stock, and we do not anticipate paying cash dividends in the foreseeable future. Moreover, any future credit facilities might contain restrictions on our ability to declare and pay dividends on our common stock. We plan to retain all earnings, if any, for the foreseeable future for use in the operation of our business and to fund the pursuit of future growth. Future dividends, if any, will depend on, among other things, our results of operations, capital requirements and on such other factors as our board of directors, in its discretion, may consider relevant. MARKET FOR SECURITIES There is no established public market for our common stock, and a public market may never develop. A market maker has filed an application with FINRA so as to be able to quote the shares of our common stock on the OTCBB maintained by FINRA commencing upon the effectiveness of our registration statement of which this prospectus is a part and the subsequent closing of this offering. There can be no assurance that the market maker s application will be accepted by FINRA nor can we estimate as to the time period that the application will require. We are not permitted to file such application on our own behalf. If the application is accepted, there can be no assurances as to whether: any market for our shares will develop; the prices at which our common stock will trade; or the extent to which investor interest in us will lead to the development of an active, liquid trading market. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors. If we become able to have our shares of common stock quoted on the OTCBB, we will then try, through a broker-dealer and its clearing firm, to become eligible with the DTC to permit our shares to trade electronically. If an issuer is not DTC-eligible, then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCBB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions - like all the companies on the OTCBB). What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is a necessity to process trades on the OTCBB if a company s stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take. In addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of EBS and general economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock. The trading of our securities, if any, will be in the over-the-counter market which is commonly referred to as the OTCBB as maintained by FINRA. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities. Because of the anticipated low price of the securities being registered, many brokerage firms may not be willing to effect transactions in these securities. Purchasers of our securities should be aware that any market that develops in our stock will be subject to the penny stock restrictions. Rule 3a51-1 of the Exchange Act establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $4.00 per share or with an exercise price of less than $4.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth: the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their securities. There is no EBS common equity subject to outstanding options or warrants to purchase or securities convertible into our common equity. Also, all current shares of our outstanding common stock are held by Ms. Skarpa, our president (10,000,000 shares), and HallieBeth Skarpa, a director (300,000 shares). HallieBeth Skarpa is the daughter of Patricia G. Skarpa. In general, under Rule 144, a holder of restricted common shares who is an affiliate at the time of the sale or any time during the three months preceding the sale can resell shares, subject to the restrictions described below. If we have been a public reporting company under the Exchange Act for at least 90 days immediately before the sale, then at least six months must have elapsed since the shares were acquired from us or one of our affiliates, and we must remain current in our filings for an additional period of six months; in all other cases, at least one year must have elapsed since the shares were acquired from us or one of our affiliates. The number of shares sold by such person within any three-month period cannot exceed the greater of: 1% of the total number of our common shares then outstanding; or The average weekly trading volume of our common shares during the four calendar weeks preceding the date on which notice on Form 144 with respect to the sale is filed with the SEC (or, if Form 144 is not required to be filed, the four calendar weeks preceding the date the selling broker receives the sell order) This condition is not currently available to the Company because its securities do not trade on a recognized exchange. Conditions relating to the manner of sale, notice requirements (filing of Form 144 with the SEC) and the availability of public information about us must also be satisfied. All of the presently outstanding shares of our common stock are "restricted securities" as defined under Rule 144 promulgated under the Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available. At the present time, the currently outstanding shares of our common stock may be sold subject to the rules and limitations of Rule 144 one year from the date of issuance provided that we are current in all of our Reporting Requirements at that date. Current Public Information In general, for sales by affiliates and non-affiliates, the satisfaction of the current public information requirement depends on whether we are a public reporting company under the Exchange Act: If we have been a public reporting company for at least 90 days immediately before the sale, then the current public information requirement is satisfied if we have filed all periodic reports (other than Form 8-K) required to be filed under the Exchange Act during the 12 months immediately before the sale (or such shorter period as we have been required to file those reports). If we have not been a public reporting company for at least 90 days immediately before the sale, then the requirement is satisfied if specified types of basic information about us (including our business, management and our financial condition and results of operations) are publicly available. However, no assurance can be given as to: the likelihood of a market for our common shares developing, the liquidity of any such market, the ability of the shareholders to sell the shares, or the prices that shareholders may obtain for any of the shares. No prediction can be made as to the effect, if any, that future sales of shares or the availability of shares for future sale will have on the market price prevailing from time to time. Sales of substantial amounts of our common shares, or the perception that such sales could occur, may adversely affect prevailing market prices of the common shares. NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this prospectus which is a part of our registration statement involve risks and uncertainties, including statements as to: our future operating results; our business prospects; any contractual arrangements and relationships with third parties; the dependence of our future success on the general economy; any possible financings; and the adequacy of our cash resources and working capital. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we believe," anticipate, expect, estimate or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this prospectus. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this prospectus, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances except as required pursuant to applicable regulations to update this prospectus during the period of our continuous offering. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Operations We were founded as an unincorporated DBA in February 1997 and were incorporated as a C corporation under the laws of the State of Nevada on October 11, 2010. The incorporation effort included the Company issuing 10,000,000 shares of common stock to Patricia G. Skarpa, who founded and managed the business which had been operating continuously as an unincorporated DBA since February 1997, and 300,000 shares to HallieBeth Skarpa, our other director, for services rendered. These services involving the incorporation planning were valued at $10,300. HallieBeth Skarpa is the daughter of Patricia G. Skarpa. The day-to-day operations of the Company did not change as a result of the change in legal structure. The Company has no plans to be acquired or to merge with any other company nor does the Company or any of its shareholders have any plans to enter into a change of control or similar transaction. Our independent registered auditors included an explanatory paragraph in their opinion on our financial statements as of and for the fiscal year ended July 31, 2010 that states that this lack of resources causes substantial doubt about our ability to continue as a going concern. To maintain operations as a going concern, we are keeping day-to-day operating costs to a minimum and seeking leads for new revenue opportunities. We hope that being a public company will provide us with additional credibility to help our efforts. However, no assurances can be given that we will have any success in our efforts or will remain as a going concern. At June 14, 2011, we provide commercial cleaning services to one commercial building. We have provided the same level and range of cleaning services for this building for three nights a week during each of the fiscal years ended July 31, 2010 and 2009. We have not provided any other significant services during that two-year period of time. Therefore, our business operations are virtually identical during each period. Going forward, we will market our services directly to building owners and managers. At times in the past, we have also done make ready projects that prepared buildings or offices to be ready for immediate occupancy after construction crews have completed their work. In these cases, we entered a project as soon as the construction crews finished their work and cleaned the facility completely to enable a tenant to move in and start work. However, the current economic climate has seen construction of new and renovation of old office facilities at extremely low levels meaning that there is currently an extremely low potential current demand for make ready services. We will not consider competing for these types of engagements until and unless the number of construction and renovation projects increases significantly. If the construction market improves, of which there can be no assurance, the Company will market its make ready services to construction contractors and subcontractors. 2010 2009 REVENUES $ 9,147 $ 9,147 OPERATING EXPENSES Operating and supplies 4,392 823 Compensation 9,180 7,211 Organization - 10,300 TOTAL OPERATING EXPENSES 13,572 18,334 NET LOSS $ (4,425) $ (9,187) The only significant differences involve professional fee expenses of $3,500 relating to accounting services needed for our registration process in 2010 and organizational expenses of $10,300 in 2009 relating to our incorporation as a C corporation. Prior to that, we had been operating continuously as an unincorporated DBA since February 1997. The unaudited results of our operations for the nine months ended April 30, 2011 and 2010 were: 2011 2010 REVENUES $ 6,683 $ 6,333 OPERATING EXPENSES Operating and supplies 1,526 788 Compensation 5,914 8,017 TOTAL OPERATING EXPENSES 7,440 8,805 NET LOSS $ (757) $ (2,472) All of the revenues in both periods were earned from services to one customer. The work that is provided to this customer is performed under verbal agreements that could be terminated at any time. If we lost that customer for any reason, or if the amount of work that we perform for it decreases significantly, our operations are likely to fail. All compensation was paid to our president. There is no formal employment arrangement with Ms. Skarpa at this time. Ms. Skarpa s compensation has not been fixed or based on any percentage calculations. All compensation has been paid in cash and was based on the amount of cash available to pay compensation after other expenses had been paid. She will make all decisions determining the amount and timing of her compensation and, for the immediate future, will receive the level of compensation each month that permits us to meet our obligations. Ms. Skarpa s compensation amounts will be formalized if and when her annual compensation exceeds $150,000. We have extremely limited financial resources and have not established a source of equity or debt financing. Our independent registered public accounting firm has included an explanatory paragraph in its report emphasizing the uncertainty of our ability to remain a going concern. We have not aggressively pursued new customers during the past two years because the economic conditions were forcing companies to cut costs. In turn companies were seeking to reduce the costs of cleaning services. We were reluctant to increase costs of supplies and equipment in order to service customers that were only willing to pay minimal costs. Other As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in Liquidity below and/or elsewhere in this prospectus. We believe that the perception that many people, including potential customers and business associates, have of a public company make it more likely that they will be more likely to engage a public company for services or accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. However, there can be no assurances that we will be successful in any of those efforts even if we are a public entity. Additionally, issuance of restricted shares would necessarily dilute the percentage of ownership interest of our stockholders. Liquidity EBS will pay all costs relating to this offering estimated, based on discussions with our lawyer, at $65,000. This amount will be paid as and when necessary and required or otherwise accrued on the books and records of EBS until we are able to pay the full amount due either from revenues or loans from our president. Absent sufficient revenues to pay these amounts within six months of the date of this prospectus, our president has agreed to sign a personal promissory note due and payable to counsel upon terms negotiated at the time of note issuance. The promissory note will eliminate unpaid liabilities on the Company s books equal to the face amount of the personal promissory note. Our outside counsel, who will be owed the most significant amount of fees, is aware of the uncertainties facing the Company and is also aware that we have no other immediate sources of sort or long-term funding that would be more likely to come through if needed. A formal written arrangement among EBS, our president and our counsel exists with respect to this purpose (filed as Exhibit 10.3). Private capital, if sought, will be sought from former business associates of our founder or private investors referred to us by those business associates. To date, we have not sought any funding source and have not authorized any person or entity to seek out funding on our behalf. If a market for our shares ever develops, of which there can be no assurances, we may attempt to use restricted shares of our common stock to compensate employees/consultants and independent contractors wherever possible. The prices that will be used will be determined during negotiations and may or may not be at perceived market values. We believe that operations will generate sufficient cash to continue operations for the next 12 months from the date of this prospectus at the level that they have been provided that our costs of being a public company remain equal to or below the maximum estimate provided below and we do not lose our customer. We have embarked upon an effort to become a public company and, by doing so, have incurred and will continue to incur additional significant expenses for legal, accounting and related services. Once we become a public entity, subject to the reporting requirements of the Exchange Act of '34, we will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate, based on discussions with consultants, accountants and lawyers, that these costs may range up to $50,000 per year for the next few years. In the next one to two fiscal years, we will take every step possible to minimize these costs. Our president worked for many years with law firms and an accounting firm. She has known and worked with many professionals who are knowledgeable in the area of public company obligations. Although we have no formal commitments, we believe that some of these professionals may assist our president for very reasonable costs. We also hope to be able to use our status as a public company to increase our ability to use noncash means of settling obligations and compensate independent contractors who provide professional and other services to us, although there can be no assurances that we will be successful in any of those efforts. We will reduce the compensation levels paid to management if there is insufficient cash generated from operations to satisfy these costs. There are no current plans to seek private investment. We do not have any current plans to raise funds through the sale of securities except as set forth herein. We hope to be able to use our status as a public company to enable us to use non-cash means of settling obligations and compensate persons and/or firms providing services to us, although there can be no assurances that we will be successful in any of those efforts. We believe that the perception that many people have of a public company make it more likely that they will accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own beliefs. Issuing shares of our common stock to such persons instead of paying cash to them may increase our chances to establish and expand our business. Having shares of our common stock may also give persons a greater feeling of identity with us which may result in referrals. However, these actions, if successful, will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management s ability to maintain control of EBS because the shares may be issued to parties or entities committed to supporting existing management. EBS may offer shares of its common stock to settle a portion of the professional fees incurred in connection with its registration statement. No negotiations have taken place with any professional and no assurances can be made as to the likelihood that any professional will accept shares in settlement of obligations due them. Our independent registered public accounting firm will not accept shares of EBS common stock to settle obligations due to them. There are no other significant liabilities at June 14, 2011. Recently Issued Accounting Pronouncements In February 2010, the FASB issued Accounting Standards Update ( ASU ) No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements ( ASU 2010-09 ), which is included in the FASB Accounting Standards Codification (the ASC ) Topic 855 Subsequent Events. ASU 2010-09 clarifies that an SEC filer is required to evaluate subsequent events through the date that the financial statements are issued. ASU 2010-09 is effective upon the issuance of the final update and did not have a significant impact on the Company s financial statements. In June 2009, the FASB issued guidance now codified as ASC 105, Generally Accepted Accounting Principles as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company s financial statements, but did eliminate all references to pre-codification standards. The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Critical Accounting Policies The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 2 to the financial statements, included elsewhere in this prospectus, includes a summary of the significant accounting policies and methods used in the preparation of our financial statements. Seasonality We have not noted a significant seasonal impact in our business (or businesses like ours) although having just commenced operations it is too early to tell. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future. BUSINESS We were founded as an unincorporated DBA in February 1997 and were incorporated as a C corporation under the laws of the State of Nevada on October 11, 2010. The incorporation effort included the Company issuing 10,000,000 shares of common stock to Patricia G. Skarpa, who founded and managed the business which had been operating continuously as a DBA since February 1997, and 300,000 shares to HallieBeth Skarpa, our other director, for services rendered. These services involving the incorporation planning were valued at $10,300. HallieBeth Skarpa is the daughter of Patricia G. Skarpa. The day-to-day operations of the Company did not change as a result of the change in legal structure. We have only two directors, one of whom is our principal executive officer. Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues. In addition, a tie vote of board members is decided in favor of the chairman, which gives her significant control over all corporate issues. Our chief executive officer has a sufficient number of shares to control all corporate activities and can approve transactions, including possible mergers, issuance of shares and her compensation level, without the approval of other shareholders. No transactions other than those described in this prospectus are currently being contemplated or discussed. However, various transactions or proposals may surface in the future. Her decisions with regard to any proposed transactions that are presented to the Company may not be in the best interests of other shareholders. EBS has provided commercial cleaning services to office buildings of 10,000 to 15,000 square feet in Harris County, TX (the greater Houston area) since 1997. Going forward, we will continue to market our services directly to building owners and managers. At times in the past, we have also done make ready projects that prepared buildings or offices to be ready for immediate occupancy after construction crews have completed their work. In these cases, we entered a project as soon as the construction crews finished their work and cleaned the facility completely to enable a tenant to move in and start work. However, the current economic climate has seen construction of new and renovation of old office facilities at extremely low levels meaning that there is currently an extremely low potential current demand for make ready services. We will not consider competing for these types of engagements until and unless the number of construction and renovation projects increases significantly. If the construction market improves, of which there can be no assurance, the Company will market its make ready services to construction contractors and subcontractors. At June 14, 2011, we provide ongoing commercial cleaning services to one commercial building. Our typical services can be summarized as: Nightly Cleaning A. All Named Areas (Reception/Entry Areas, Offices, Conference Rooms, Training Room and Common Areas) 1. Empty all trash receptacles and trash removed to designated area. 2. Vacuum all rugs and carpet areas - spot cleaning carpet as needed. 3. Thoroughly dust and/or wipe all horizontal surfaces: a. Desktops b. Chairs and Chair legs c. Tables d. File cabinets e. Pictures and Wall hangings f. Window sills g. Equipment, (i.e. - telephones, calculators, computers, etc.) h. All other furnishings 4. Damp wipe and polish all glass furniture surfaces with Windex or equal type glass cleaner. 5. Damp wipe entrance metal and fingermarks on entrance glass. 6. Dust mop and thoroughly damp mop hard surface floors. B. Restrooms 1. Stock towels and tissue (tissue to be left on top of toilet bowl). 2. Empty sanitary napkin receptacles and damp wipe for sanitation. 3. Empty trash receptacles and wipe if needed. 4. Dust partitions, tops of mirrors and frames. 5. Clean and polish mirrors. 6. Wipe towel cabinet covers. 7. Toilets and urinals to be cleaned and sanitized inside and out. Polish bright work. 8. Toilet seats to be cleaned on both sides using a disinfectant. 9. Scour and sanitize all basins. Polish bright work. 10. Remove splash marks from walls around basins. 11. Wet mop and rinse restroom floors with a disinfectant. C. Kitchens 1. Vacuum all rugs and carpet areas - spot cleaning carpet as needed. Clean and disinfect all counters and sinks. 2. Clean and disinfect tabletops. Wipe out all chairs. 3. Empty and disinfect all trash receptacles. 4. Spot clean kitchen trash receptacle. 5. Wipe clean all vending machines, coffee machines, refrigerator, water cooler and microwaves. 6. Spot clean walls. D. Miscellaneous 1. Vacuum all stairwells. 2. Check all doors that are supposed to be locked. 3. Make sure all lights are turned off when leaving premise. 4 Keep janitor s closet clean at all times 5 Check for unattended items and put them aside. Weekly Cleaning A All Named Areas (Reception/Entry Areas. Offices. Conference Rooms, Training Room and Common Areas) 1. Dust and/or damp wipe vertical surfaces of desks, filing cabinets, chairs, tables and other furniture as needed. 2. Dust and damp wipe clean baseboards. 3. Remove dust and cobwebs from stairwell ledges. corners and ceiling areas. Monthly Cleaning A. All Named Areas (Reception/Entry Areas, Offices. Conference Rooms, Training Room and Common Areas) 1. Accomplish all high dusting. 2. Dust all upholstered furniture. 3. Remove fingerprints and marks from around light switches and door frames. 4. Dust mini-blinds. 5. Damp wipe telephones using a disinfectant. Ms. Skarpa performs much of the work that is done. If a subcontractor performs any work, she supervises and/or inspects. As a general rule, the cleaning company provides substantially all cleaning supplies, materials and equipment. Exceptions, if any, will be specified in writing. The customer provides a janitorial closet which can be kept locked. In our case, Ms. Skarpa provides vacuum and buffer machines as part of her compensation. At June 14, 2011, we provide ongoing commercial cleaning services to one commercial building which we have served for ten years. Initially we worked with a formal contract. However, for the past several years, our arrangements with the customer have been verbal and could be canceled at any time. For our current services, we provide the commercial cleaning services and bill for those services based upon an agreed-upon full rate. Our current arrangement is not based on hourly rates. Billing and payment take place monthly. We are normally paid within a few days of billing. Although we would like to negotiate arrangements calling for hourly rate billings and weekly payments, it is unlikely that market conditions will permit that in the foreseeable future. We do not require any licenses to perform our services. The need for liability insurance is linked to the requirements of customers and is subject to negotiation. We currently have no liability insurance. Competition Most of our competitors, which include well-known companies like Jani-King International, Inc., have significantly greater financial and marketing resources than do we. Many of these competitors have sophisticated management, use very inexpensive sub-contractors/franchisees, are in a position to purchase cleaning materials at the lowest wholesale prices and have the ability to advertise in a wide variety of media, including television. Their strategy frequently includes using very low priced sub-contractors and charging customers the lowest possible price. There are also some small competitors operated by sole proprietors, most of whom are immigrants, which propose very low prices. We principally depend on the business contacts of our president and word of mouth. We emphasize seeking office complexes that are being used by the building owner and that are seeking detailed quality services rather that solely consider low prices. However, in the current market conditions, price appears to be the principal factor used by customers in making their decisions. We have always gotten our leads through recommendations and by making unsolicited cold calls on potential customers. Cold calls tend not to be very effective. Leads received from contractors and others doing business with building management are the most effective potential sources of business. We emphasize office buildings in the 10,000 to 15,000 square foot range located in the western part of Harris County. We prefer seeking buildings that are used by the building owner because those owners frequently have a stronger concern for quality services than for the lowest possible price. If a written proposal is requested, we tour the building to determine the extent of work that will be required and determine if the work will be done three or five days per week. We then attempt to determine the rates currently being paid and make some inquiries to determine rates charged by competitors for services in the area of the proposed customer. After gathering the information, we estimate the time that it will take us to perform the work and the cost of supplies and add a small profit. We then compare our estimate to the competitor rates gathered by us in our preliminary process and determine whether we believe that our proposal is viable. If so we submit it, generally by hand. In periods of down economies, cleaning services are confronted with intense price pressures by customers and potential customers seeking to cut costs. There are no assurances that our approach will be successful. Intellectual Property We have no patents or trademarks. Employees At June 14, 2011, we had one employee, our founder and president, Patricia G. Skarpa. For the remainder of 2010, Ms. Skarpa, who is involved in other activities, will devote at least 20 hours a week to us but may increase the number of hours as necessary if cleaning work increases. She currently provides consulting services as a sub-contractor to an unrelated company in the Houston area. However, she has no contractual obligations to that or any other entities and could provide additional hours to our business if additional customers are obtained. Subcontractors have and can be used by us to assist getting required work orders completed. There is no written employment contract or agreement with Ms. Skarpa. Property Our office and mailing address is 914 Park Knoll Lane, Katy, TX 77450. The space is provided to us by Ms. Skarpa. Ms. Skarpa incurs no incremental costs as a result of our using the space. Therefore, she does not charge us for its use. There is no written lease agreement. Litigation We are not party to any pending, or to our knowledge, threatened litigation of any type. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS Our management consists of: Name Age Title Patricia G. Skarpa 49 President, CEO, principal executive officer, treasurer, chairman, principal financial officer and principal accounting officer HallieBeth Skarpa 20 Director Patricia G. Skarpa - Ms. Skarpa founded the business in February 1997 and received the title of president when the Company became a Nevada corporation in October 2010. Having founded and operated the business since its inception, Ms. Skarpa is integral to any success that we may have. Prior to that, she was an executive/legal secretary at Deloitte & Touche (February 1983 through February 1991), Crady, Jewett & McCully, LLP (February 1991 through October 1993), and John M. Young, Attorney-at-Law (October 1993 through October 2005). From March 2007 to August 2009 she was president of Ensign Services Corp., which provided secretarial services. She also performs consulting work as a sub-contractor for PE Group, Inc., a privately held consulting company. All of these entities were and are located in the Houston, Texas area. Ms. Skarpa declared personal bankruptcy in 2009. Patricia G. Skarpa has no significant experience managing a public company and no meaningful financial reporting education or experience. She is and will be heavily dependent on engaging and dealing with outside professional advisors, primarily lawyers and financial advisors/accountants who are not and will not be affiliated with our independent auditors. Our president worked for many years with law firms and an accounting firm. She has known and worked with many professionals who are knowledgeable in the area of public company obligations. Although we have no formal commitments, we believe that some of these professionals may assist our president for very reasonable costs. We also hope to be able to use our status as a public company to increase our ability to use noncash means of settling obligations and compensate independent contractors who provide professional and other services to us, although there can be no assurances that we will be successful in any of those efforts. It is uncertain whether we will be successful in agreeing to financial arrangements with independent consultants that will be achievable by us. We will initially seek consultants who are known directly by our president or who are recommended by people known to our president and who will accept unregistered shares of our common stock as compensation. If we become unsuccessful in that regard, we will initially rely on advice from professionals who are friends of our president. As such, there is risk about our ability to comply with all financial reporting requirements accurately and on a timely basis. HallieBeth Skarpa became a director at the time that the Company became a Nevada corporation in October 2010. She is currently a student at The University of Texas at Arlington and is the daughter of Patricia G. Skarpa. She has been familiar with our business since inception and works well with Patricia G. Skarpa. The Company believes that the knowledge and experience within this business of Patricia G. Skarpa and, to a lesser degree, HallieBeth Skarpa make them effective directors for this Company. Possible Potential Conflicts The OTCBB on which we plan to have our shares of common stock quoted does not currently have any director independence requirements. No member of management will be required by us to work on a full time basis. Accordingly, certain conflicts of interest may arise between us and our officer(s) and director(s) in that they may have other business interests in the future to which they devote their attention, and they may be expected to continue to do so although management time must also be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through their exercise of such judgment as is consistent with each officer's understanding of his/her fiduciary duties to us. Currently we have only one officer and two directors (one of whom is the same person), who are related to each other, and will seek to add additional officer(s) and/or director(s) as and when the proper personnel are located and terms of employment are mutually negotiated and agreed, and we have sufficient capital resources and cash flow to make such offers. Ms. Skarpa provides services on a contractor basis to others. These services relate to matters like office management and organization and are completely unrelated to the services provided by EBS. However, a conflict could arise if the time needed by her in the performance of those services interfere with the time needed from her by EBS. Ms. Skarpa has no written employment agreement with us and no written contractor or employment agreement with any other entity. In an effort to resolve potential conflicts of interest, we have entered into a written agreement with Ms. Skarpa specifying that any business opportunities that she may become aware of independently or directly through her association with us (as opposed to disclosure to her of such business opportunities by management or consultants associated with other entities) would be presented by her solely to us. We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective. Code of Business Conduct and Ethics In September 2010 we adopted a Code of Ethics and Business Conduct which is applicable to our future employees and which also includes a Code of Ethics for our chief executive and principal financial officers and any persons performing similar functions. A code of ethics is a written standard designed to deter wrongdoing and to promote: honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, compliance with applicable laws, rules and regulations, the prompt reporting violation of the code, and accountability for adherence to the code. A copy of our Code of Business Conduct and Ethics has been filed with the Securities and Exchange Commission as Exhibit 14.1 to our Registration Statement of which this prospectus is a part. Board of Directors All directors hold office until the completion of their term of office, which is not longer than one year, or until their successors have been elected. Both directors terms of office expire on August 31, 2011. All officers are appointed annually by the board of directors and, subject to existing employment agreements (of which there are currently none) and serve at the discretion of the board. Currently, directors receive no compensation for their role as directors but may receive compensation for their role as officers. As long as we have an even number of directors, tie votes on issues are resolved in favor of the chairman s vote. Involvement in Certain Legal Proceedings Except as described below, during the past five years, no present director, executive officer or person nominated to become a director or an executive officer of EBS: 1. had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he/she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he/she was an executive officer at or within two years before the time of such filing, except that Patricia G. Skarpa declared personal bankruptcy in 2009; 2. was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 3. was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him/her from or otherwise limiting his/her involvement in any of the following activities: i. acting as a futures commission merchant, introducing broker, commodity trading advisor commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; ii. engaging in any type of business practice; or iii. engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; or 4. was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of an federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3) (i), above, or to be associated with persons engaged in any such activity; or 5. was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and for which the judgment has not been reversed, suspended or vacated. Committees of the Board of Directors Concurrent with having sufficient members and resources, the EBS board of directors will establish an audit committee and a compensation committee. We believe that we will need a minimum of five directors to have effective committee systems. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation arrangements for the officers. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members to establish committees. See Executive Compensation hereinafter. All directors will be reimbursed by EBS for any expenses incurred in attending directors' meetings provided that EBS has the resources to pay these fees. EBS will consider applying for officers and directors liability insurance at such time when it has the resources to do so. Summary Executive Compensation Table The following table shows, for the fiscal years ended July 31, 2010 and 2009, compensation awarded to or paid to, or earned by, our Chief Executive Officer (the Named Executive Officer ). SUMMARY COMPENSATION TABLE Name and principal position (a) Year (b) Salary ($) (c) Bonus ($) (d) Stock Awards ($) (e) Option Awards ($) (f) Non-Equity Incentive Plan Compensation ($) (g) Nonqualified Deferred Compensation Earnings ($) (h) All Other Compensation ($) (i) Total ($) (j) Patricia G. Skarpa CEO, CFO and Director 2010 - - - - - - 9,180 9,180 2009 - - - - - - 7,211 7,211 There is no formal employment arrangement with Ms. Skarpa at this time. Ms. Skarpa s compensation has not been fixed or based on any percentage calculations. All compensation has been paid in cash and was based on the amount of cash available to pay compensation after other expenses had been paid. She will make all decisions determining the amount and timing of her compensation and, for the immediate future, will receive the level of compensation each month that permits us to meet our obligations. Ms. Skarpa s compensation amounts will be formalized if and when her annual compensation exceeds $150,000. Grants of Plan-Based Awards Table None of our named executive officers received any grants of stock, option awards or other plan-based awards. The Company has never issued these types of awards. Options Exercised and Stock Vested Table None of our named executive officers has ever been granted or exercised any stock options, Outstanding Equity Awards at Fiscal Year-End Table No equity award arrangements have ever been awarded or granted by the Company. PRINCIPAL SHAREHOLDERS As of June 14, 2011 we had 10,300,000 shares of common stock outstanding which are held by two shareholders. The chart below sets forth the ownership, or claimed ownership, of certain individuals and entities. This chart discloses those persons known by the board of directors to have, or claim to have, beneficial ownership of more than 5% of the outstanding shares of our common stock as of June 14, 2011; of all directors and executive officers of EBS; and of our directors and officers as a group. Title Of Class Name, Title and Address of Beneficial Owner of Shares(a) Amount of Beneficial Ownership(b) Percent of Class Before Offering After Offering(c) Common Patricia G. Skarpa 10,000,000 97.09% 81.30% Common HallieBeth Skarpa 300,000 2.91% 2.43% All Directors and Officers as a group (2 persons) 10,300,000 100.0% 83.73% (a) The address for purposes of this table is the Company s address which is 914 Park Knoll Lane, Katy, TX 77450 (b) Unless otherwise indicated, EBS believes that all persons named in the table have sole voting and investment power with respect to all shares of the common stock beneficially owned by them. A person is deemed to be the beneficial owner of securities which may be acquired by such person within 60 days from the date indicated above upon the exercise of options, warrants or convertible securities. Each beneficial owner s percentage ownership is determined by assuming that options, warrants or convertible securities that are held by such person (but not those held by any other person) and which are exercisable within 60 days of the date indicated above, have been exercised. (c) Assumes the sale of the maximum amount of this offering (2,000,000 shares of common stock). The aggregate amount of shares to be issued and outstanding after the offering would be 12,300,000 based upon such assumption. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The sole promoter of EBS is Ms. Skarpa, our chief executive officer, president and chief financial officer. Our office and mailing address is 914 Park Knoll Lane, Katy, TX 77450. The space is provided to us by Ms. Skarpa. Ms. Skarpa incurs no incremental costs as a result of our using the space. Therefore, she does not charge us for its use. There is no written lease agreement. Ms. Skarpa also provides all the vacuum and buffing equipment used by the Company. Her compensation is assumed to cover use of this equipment. The Company issued 10,000,000 shares of our common stock to our President, Ms. Skarpa, in exchange for the business of EBS and for costs/services incurred upon incorporation in September 2010 and issued 300,000 shares to our other director, HallieBeth Skarpa, for services rendered. These services were valued at $10,000 and $300, respectively. HallieBeth Skarpa is the daughter of Patricia G. Skarpa. EBS entered into an agreement whereby Ms. Skarpa will, if liabilities associated with our offering are not paid within six months of the date of our prospectus, sign a personal promissory note due and payable to counsel upon terms negotiated at the time of note issuance. The promissory note will eliminate unpaid liabilities on the Company s books equal to the face amount of the personal promissory note (see Exhibit 10.3). A summary of Exhibit 10.3 may be found in the Management s Discussion and Analysis or Plan of Operation section of this prospectus. Exhibit 10.3 is filed as part of our registration statement of which this prospectus is a part. DESCRIPTION OF CAPITAL STOCK Introduction We were incorporated under the laws of the State of Nevada on October 11, 2010. EBS is authorized to issue 99,000,000 shares of common stock and 1,000,000 shares of preferred stock. Preferred Stock Our certificate of incorporation authorizes the issuance of 1,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by our board of directors. No shares of preferred stock have been designated, issued or are outstanding. Accordingly, our board of directors is empowered, without stockholder approval, to issue up to 1,000,000 shares of preferred stock with voting, liquidation, conversion, or other rights that could adversely affect the rights of the holders of the common stock. Although we have no present intention to issue any shares of preferred stock, there can be no assurance that we will not do so in the future. Among other rights, our board of directors may determine, without further vote or action by our stockholders: the number of shares and the designation of the series; whether to pay dividends on the series and, if so, the dividend rate, whether dividends will be cumulative and, if so, from which date or dates, and the relative rights of priority of payment of dividends on shares of the series; whether the series will have voting rights in addition to the voting rights provided by law and, if so, the terms of the voting rights; whether the series will be convertible into or exchangeable for shares of any other class or series of stock and, if so, the terms and conditions of conversion or exchange; whether or not the shares of the series will be redeemable and, if so, the dates, terms and conditions of redemption and whether there will be a sinking fund for the redemption of that series and, if so, the terms and amount of the sinking fund; and the rights of the shares of the series in the event of our voluntary or involuntary liquidation, dissolution or winding up and the relative rights or priority, if any, of payment of shares of the series. We presently do not have plans to issue any shares of preferred stock. However, preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control in our Company or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock. Common Stock Our certificate of incorporation authorizes the issuance of 99,000,000 shares of common stock. There are 10,300,000 shares of our common stock issued and outstanding at June 14, 2011 that are held by two shareholders. The holders of our common stock: have equal ratable rights to dividends from funds legally available for payment of dividends when, as and if declared by the board of directors; are entitled to share ratably in all of the assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs; do not have preemptive, subscription or conversion rights, or redemption or access to any sinking fund; and are entitled to one non-cumulative vote per share on all matters submitted to stockholders for a vote at any meeting of stockholders See also Plan of Distribution regarding negative implications of being classified as a Penny Stock. Authorized but Un-issued Capital Stock Nevada law does not require stockholder approval for any issuance of authorized shares. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existence of un-issued and unreserved common stock (and/or preferred stock) may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our board by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of our common stock at prices higher than prevailing market prices. Shareholder Matters As an issuer of "penny stock" the protection provided by the federal securities laws relating to forward looking statements does not apply to us if our shares are considered to be penny stocks which they currently are and probably will be for the foreseeable future. Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us, including this prospectus, contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. As a Nevada corporation, we are subject to the Nevada Revised Statutes ("NRS" or "Nevada law"). Certain provisions of Nevada law described below create rights that might be deemed material to our shareholders. Other provisions might delay or make more difficult acquisitions of our stock or changes in our control or might also have the effect of preventing changes in our management or might make it more difficult to accomplish transactions that some of our shareholders may believe to be in their best interests. Directors' Duties. Section 78.138 of the Nevada law allows our directors and officers, in exercising their powers to further our interests, to consider the interests of our employees, suppliers, creditors and customers. They can also consider the economy of the state and the nation, the interests of the community and of society and our long-term and short-term interests and shareholders, including the possibility that these interests may be best served by our continued independence. Our directors may resist a change or potential change in control if they, by a majority vote of a quorum, determine that the change or potential change is opposed to or not in our best interest. Our board of directors may consider these interests or have reasonable grounds to believe that, within a reasonable time, any debt which might be created as a result of the change in control would cause our assets to be less than our liabilities, render us insolvent, or cause us to file for bankruptcy protection Dissenters' Rights. Among the rights granted under Nevada law which might be considered material is the right for shareholders to dissent from certain corporate actions and obtain payment for their shares (see Nevada Revised Statutes ("NRS") 92A.380-390). This right is subject to exceptions, summarized below, and arises in the event of mergers or plans of exchange. This right normally applies if shareholder approval of the corporate action is required either by Nevada law or by the terms of the articles of incorporation. A shareholder does not have the right to dissent with respect to any plan of merger or exchange, if the shares held by the shareholder are part of a class of shares which are: listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, or held of record by not less than 2,000 holders. This exception notwithstanding, a shareholder will still have a right of dissent if it is provided for in the articles of incorporation or if the shareholders are required under the plan of merger or exchange to accept anything but cash or owner's interests, or a combination of the two, in the surviving or acquiring entity, or in any other entity falling in any of the three categories described above in this paragraph. Inspection Rights. Nevada law also specifies that shareholders are to have the right to inspect company records (see NRS 78.105). This right extends to any person who has been a shareholder of record for at least six months immediately preceding his demand. It also extends to any person holding, or authorized in writing by the holders of, at least 5% of outstanding shares. Shareholders having this right are to be granted inspection rights upon five days' written notice. The records covered by this right include official copies of: i. the articles of incorporation, and all amendments thereto, ii. bylaws and all amendments thereto; and iii. a stock ledger or a duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all persons who are stockholders of the corporation, showing their places of residence, if known, and the number of shares held by them, respectively. In lieu of the stock ledger or duplicate stock ledger, Nevada law provides that the corporation may keep a statement setting out the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address, including street and number, if any, where the stock ledger or duplicate stock ledger specified in this section is kept. Control Share Acquisitions. Sections 78.378 to 78.3793 of Nevada law contain provisions that may prevent any person acquiring a controlling interest in a Nevada-registered company from exercising voting rights. To the extent that these rights support the voting power of minority shareholders, these rights may also be deemed material. These provisions will be applicable to us as soon as we have 200 shareholders of record with at least 100 of these having addresses in Nevada as reflected on our stock ledger. While we do not yet have the required number of shareholders in Nevada or elsewhere, it is possible that at some future point we will reach these numbers and, accordingly, these provisions will become applicable. We do not intend to notify shareholders when we have reached the number of shareholders specified under these provisions of Nevada law. Shareholders can learn this information pursuant to the inspection rights described above and can see the approximate number of our shareholders by checking under Item 5 of our annual reports on Form 10-K. This form is filed with the Securities and Exchange Commission within 90 days of the close of each fiscal year hereafter. You can view these and our other filings at www.sec.gov in the "EDGAR" database. Under NRS Sections 78.378 to 78.3793, an acquiring person who acquires a controlling interest in company shares may not exercise voting rights on any of these shares unless these voting rights are granted by a majority vote of our disinterested shareholders at a special shareholders' meeting held upon the request and at the expense of the acquiring person. If the acquiring person's shares are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power, any shareholder, other than the acquiring person, who does not vote for authorizing voting rights for the control shares, is entitled to demand payment for the fair value of their shares, and we must comply with the demand. An "acquiring person" means any person who, individually or acting with others, acquires or offers to acquire, directly or indirectly, a controlling interest in our shares. "Controlling interest" means the ownership of our outstanding voting shares sufficient to enable the acquiring person, individually or acting with others, directly or indirectly, to exercise one-fifth or more but less than one-third, one-third or more but less than a majority, or a majority or more of the voting power of our shares in the election of our directors. Voting rights must be given by a majority of our disinterested shareholders as each threshold is reached or exceeded. "Control shares" means the company's outstanding voting shares that an acquiring person acquires or offers to acquire in an acquisition or within 90 days immediately preceding the date when the acquiring person becomes an acquiring person. These Nevada statutes do not apply if a company's articles of incorporation or bylaws in effect on the tenth day following the acquisition of a controlling interest by an acquiring person provide that these provisions do not apply. According to NRS 78.378, the provisions referred to above will not restrict our directors from taking action to protect the interests of our Company and its shareholders, including without limitation, adopting or executing plans, arrangements or instruments that deny rights, privileges, power or authority to a holder of a specified number of shares or percentage of share ownership or voting power. Likewise, these provisions do not prevent directors or shareholders from including stricter requirements in our articles of incorporation or bylaws relating to the acquisition of a controlling interest in the Company. Our articles of incorporation and bylaws do not exclude us from the restrictions imposed by NRS 78.378 to 78.3793, nor do they impose any more stringent requirements. Certain Business Combinations. Sections 78.411 to 78.444 of the Nevada law may restrict our ability to engage in a wide variety of transactions with an "interested shareholder." As was discussed above in connection with NRS 78.378 to 78.3793, these provisions could be considered material to our shareholders, particularly to minority shareholders. They might also have the effect of delaying or making more difficult acquisitions of our stock or changes in our control. These sections of NRS are applicable to any Nevada company with 200 or more stockholders of record and that has a class of securities registered under Section 12 of the 1934 Securities Exchange Act, unless the company's articles of incorporation provide otherwise. By this registration statement, we are registering our common stock under Section 12(g) of the Exchange Act. Accordingly, upon the effectiveness of this registration statement on Form 10-SB we will be subject to these statutes as our Articles of Incorporation do not exempt us from them. These provisions of Nevada law prohibit us from engaging in any "combination" with an interested stockholder for three years after the interested stockholder acquired the shares that cause him to become an interested shareholder, unless he/she had prior approval of our board of directors. The term "combination" is described in NRS 78.416 and includes, among other things, mergers, sales or purchases of assets, and issuances or reclassifications of securities. If the combination did not have prior approval, the interested shareholder may proceed after the three-year period only if the shareholder receives approval from a majority of our disinterested shares or the offer meets the requirements for fairness that are specified in NRS 78.441-42. For the above provisions, "resident domestic corporation" means a Nevada corporation that has 200 or more shareholders. An "interested stockholder" is defined in NSR 78.423 as someone who is either: the beneficial owner, directly or indirectly, of 10% or more of the voting power of our outstanding voting shares; or our affiliate or associate and who within three years immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our outstanding shares at that time. Amendments to Bylaws - Our articles of incorporation provide that the power to adopt, alter, amend, or repeal our bylaws is vested exclusively with the board of directors. In exercising this discretion, our board of directors could conceivably alter our bylaws in ways that would affect the rights of our shareholders and the ability of any shareholder or group to effect a change in our control; however, the board would not have the right to do so in a way that would violate law or the applicable terms of our articles of incorporation. Transfer Agent The Transfer Agent for our common stock is Action Stock Transfer Company, 7069 S. Highland Drive, Suite 30, Salt Lake City, UT 84121. Its telephone number is 801-274-1088. PLAN OF DISTRIBUTION There is no public market for our common stock. Our common stock is currently held by two shareholders. Therefore, the current and potential market for our common stock is limited and the liquidity of our shares may be severely limited. A market maker has filed an application with FINRA so as to be able to quote the shares of our common stock on the OTCBB maintained by FINRA commencing upon the effectiveness of our registration statement of which this prospectus is a part and the subsequent closing of this offering. There can be no assurance as to whether such market maker s application will be accepted by FINRA nor can we estimate the time period that will be required for the application process. In the absence of quotation or listing, no market is available for investors in our common stock to sell their shares. We cannot provide any assurance that a meaningful trading market will ever develop or that our common stock will ever be quoted or listed for trading. If the shares of our common stock ever become tradable, the trading price of our common stock could be subject to wide fluctuations in response to various events or factors, many of which are beyond our control. As a result, investors may be unable to sell their shares at or greater than the price at which they are being offered. This offering will be conducted on a best-efforts basis utilizing the efforts of Ms. Skarpa, president of the Company. Potential investors include, but are not limited to, family, friends and acquaintances of Ms. Skarpa. The intended methods of communication include, without limitation, telephone calls and personal contact. In her endeavors to sell this offering, Ms. Skarpa will not use any mass advertising methods such as the internet or print media. Funds received by the sales agent in connection with sales of our securities will be transmitted immediately into an escrow account. There can be no assurance that all, or any, of the shares will be sold. Ms. Skarpa will not receive commissions for any sales originated on our behalf. We believe that Ms. Skarpa is exempt from registration as a broker under the provisions of Rule 3a4-1 promulgated under the Exchange Act. In particular, Ms. Skarpa: 1 Is not subject to a statutory disqualification, as that term is defined in Section 3(a)39 of the Act, at the time of her participation; a. Is not to be compensated in connection with her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; b. Is not an associated person of a broker or dealer; and c. Meets the conditions of the following: i. Primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; ii. Was not a broker or dealer, or associated persons of a broker or dealer, within the preceding 12 months; and iii. Did not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on paragraphs within this section, except that for securities issued pursuant to rule 415 under the Securities Act of 1933, the 12 months shall begin with the last sale of any security included within a rule 415 registration No officers or directors of the Company may purchase any securities in this offering. There can be no assurance that all, or any, of the shares will be sold. As of this date, we have not entered into any agreements or arrangements for the sale of the shares with any broker/dealer or sales agent. However, if we were to enter into such arrangements, we will file a post effective amendment to disclose those arrangements because any broker/dealer participating in the offering would be acting as an underwriter and would have to be so named herein. In order to comply with the applicable securities laws of certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and with which we have complied. The purchasers in this offering and in any subsequent trading market must be residents of such states where the shares have been registered or qualified for sale or an exemption from such registration or qualification requirement is available. As of this date, we have not identified the specific states where the offering will be sold. The proceeds from the sale of the shares in this offering will be payable to Gary B. Wolff, P.C. Escrow Account. ("Escrow Account") and will be deposited in a noninterest-bearing bank account until the offering is completed. Failure to do so will result in checks being returned to the investor who submitted the check. No interest will be paid to any shareholder or the Company. All subscription agreements and checks are irrevocable. All subscription funds will be held in the Escrow Account pending closing, and no funds shall be released to EBS until the offering is completed. Thereafter, the escrow agreement shall terminate. Investors can purchase common stock in this offering by completing a Subscription Agreement, a copy of which is filed as Exhibit 99.1 to the registration statement of which this prospectus is a part, and sending it together with payment in full. All payments must be made in United States currency either by personal check, bank draft, or cashier check. There is no minimum subscription requirement. All subscription agreements and checks are irrevocable. The Company expressly reserves the right to either accept or reject any subscription. Any subscription rejected will be returned to the subscriber within five business days of the rejection date. Furthermore, once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. Once we accept a subscription, the subscriber cannot withdraw it. Any purchasers of our securities should be aware that any market that develops in our common stock will be subject to penny stock restrictions. We will pay all expenses incident to the registration, offering and sale of the shares other than commissions or discounts of underwriters, broker-dealers or agents. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Any purchasers of our securities should be aware that any market that develops in our stock will be subject to the penny stock restrictions. The trading of our securities, if any, will be in the over-the-counter markets which are commonly referred to as the OTCBB as maintained by FINRA (once and if and when quoting thereon has occurred). As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of, our securities. OTCBB Considerations OTCBB securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTCBB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCBB stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange. To be quoted on the OTCBB, a market maker must file an application on our behalf in order to make a market for our common stock. We are not permitted to file such application on our own behalf. A market maker has filed an application with FINRA on our behalf so as to be able to quote the shares of our common stock on the OTCBB maintained by FINRA commencing upon the effectiveness of our registration statement of which this prospectus is a part. There can be no assurance that the market maker s application will be accepted by FINRA, nor can we estimate as to the time period that the application will require. The OTCBB is separate and distinct from the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTCBB. The SEC s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCBB. Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not meeting those standards, the OTCBB has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files. FINRA cannot deny an application by a market maker to quote the stock of a company assuming all FINRA questions relating to its Rule 211 process are answered accurately and satisfactorily. The only requirement for ongoing inclusion in the OTCBB is that the issuer be current in its reporting requirements with the SEC. Although we anticipate that quotation on the OTCBB will increase liquidity for our stock, investors may have difficulty in getting orders filled because trading activity on the OTCBB in general is not conducted as efficiently and effectively as with NASDAQ-listed securities. As a result, investors orders may be filled at a price much different than expected when an order is placed. Investors must contact a broker-dealer to trade OTCBB securities. Investors do not have direct access to the bulletin board service. For bulletin board securities, there only has to be one market maker. OTCBB transactions are conducted almost entirely manually. Because there are no automated systems for negotiating trades on the OTCBB, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and getting execution. If we become able to have our shares of common stock quoted on the OTCBB, we will then try, through a broker-dealer and its clearing firm, to become eligible with the DTC to permit our shares to trade electronically. If an issuer is not DTC-eligible, then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCBB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions - like all the companies on the OTCBB). What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is a necessity to process trades on the OTCBB if a company s stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take. Because OTCBB stocks are usually not followed by analysts, there may be lower trading volume than for NASDAQ-listed securities. Section 15(g) of the Exchange Act Our shares will be covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules (but is not applicable to us). Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document. Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question. Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction. Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation. Rule 15g-6 requires broker-dealers selling penny stocks to provide their customers with monthly account statements. Rule 3a51-1 of the Exchange Act establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $4.00 per share or with an exercise price of less than $4.00 per share, subject to a limited number of exceptions. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth: the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, which is likely, it could have an adverse effect on the market, if any, for the Company s securities. If the Company s securities are subject to the penny stock rules, investors will find it difficult to dispose of the Company s securities. State Securities Blue Sky Laws There is no established public market for our common stock, and there can be no assurance that any market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as "Blue Sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue-sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. Accordingly, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time. We will consider applying for listing in Mergent, Inc., a leading provider of business and financial information on publicly listed companies, which, once published, will provide EBS with manual exemptions in approximately 33 states as indicated in CCH Blue Sky Law Desk Reference at Section 6301 entitled Standard Manuals Exemptions. Thirty-three states have what is commonly referred to as a "manual exemption" for secondary trading of securities such as those to be resold by selling stockholders under this registration statement. In these states, so long as we obtain and maintain a listing in Mergent, Inc. or Standard and Poor's Corporate Manual, secondary trading of our common stock can occur without any filing, review or approval by state regulatory authorities in these states. These states are: Alaska, Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah, Washington, West Virginia and Wyoming. We cannot secure this listing, and thus this qualification, until after our registration statement is declared effective. Once we secure this listing (assuming that being a development stage and shell company is not a bar to such listing), secondary trading can occur in these states without further action. Upon effectiveness of this Prospectus, the Company intends to consider becoming a reporting issuer under Section 12(g) of the Exchange Act, as amended, by way of filing a Form 8-A with the SEC. A Form 8-A is a short form of registration whereby information about the Company will be incorporated by reference to the Registration Statement on Form S-1, of which this prospectus is a part. Upon filing of the Form 8-A, if done, the Company s shares of common stock will become covered securities, or federally covered securities as described in some states laws, which means that unless you are an underwriter or dealer, you will have a secondary trading exemption under the laws of most states (and the District of Columbia, Guam, the Virgin Islands and Puerto Rico) to resell the shares of common stock you purchase in this offering. However, four states do impose filing requirements on the Company: Michigan, New Hampshire, Texas and Vermont. The Company intends, at its own cost, to make the required notice filings in Michigan, New Hampshire, Texas and Vermont immediately after filings its Form 8-A with the SEC. We currently do not intend to and may not be able to qualify securities for resale in other states which require shares to be qualified before they can be resold by our shareholders. Limitations Imposed by Regulation M Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of such distribution. LEGAL MATTERS The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Gary B. Wolff, P.C., 488 Madison Avenue, Suite 1100, New York, New York 10022. EXPERTS The financial statements of EBS as of July 31, 2010 and 2009 and for the fiscal years then ended included in this prospectus have been audited by independent registered public accountants and have been so included in reliance upon the report of PMB Helin Donovan given on the authority of such firm as experts in accounting and auditing. INTERESTS OF NAMED EXPERTS AND COUNSEL No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee. UNAUDITED INTERIM STATEMENTS The information for the interim period ended April 30, 2011 is unaudited; however, it includes all adjustments considered necessary by management for a fair presentation of our financial condition and results of operations. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S1, including exhibits, schedules and amendments, under the Securities Act with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information included in the registration statement. For further information about us and the shares of our common stock to be sold in this offering, please refer to our registration statement. As of the effective date of this prospectus, EBS became subject to the informational requirements of the Exchange Act, as amended. Accordingly, we will file annual, quarterly and special reports, and other information with the SEC. You may read and copy any document we file at the SEC's public reference room at 100 F Street, N. E., Washington, D.C. 20549. You should call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings will also be available to the public at the SEC's web site at http:/www.sec.gov." You may request, and we will voluntarily provide, a copy of our filings, including our annual report which will contain audited financial statements, at no cost to you, by writing or telephoning us at the following address:
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001505040_mvp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001505040_mvp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c9c37ba6730a94d0ce8d1485b289154ea9a89816
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001505040_mvp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information and does not contain all the information that may be important to you. You should carefully read this prospectus, any related prospectus supplement and the documents we have referred you to in Where You Can Find More Information on page 43 before making an investment in our common stock, including the Risk Factors section beginning on page 11. In this prospectus, references to Company, we, us and our refer to MVP Holdings Corp, our subsidiaries and affiliated entities including MVP Partners Inc and MVP Financial LLC.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001506522_press_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001506522_press_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2ae4629381cfd06819d7355e525512970f78c98a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001506522_press_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this Prospectus and may not contain all of the information you should consider before investing in the Shares. You are urged to read this Prospectus in its entirety, including the information under Risk Factors , Management s Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements, before making an investment decision. In this prospectus, Press, the Company, we, us, and our, refer to Press Ventures, Inc. unless the context otherwise requires. Unless otherwise indicated, the term fiscal year refers to our fiscal year ending October 31, 2010. Unless otherwise indicated, the term common stock refers to shares of the Company s common stock. All dollar amounts are reported in U.S. dollars (USD). Overview This Prospectus relates to the offering of shares by the Company on a self-underwritten basis. The Company proposes to raise $28,000 (the Offering Amount ) through the sale of 2,800,000 shares of the common stock of the Company (each a Share and collectively the Shares ) at the price of $0.01 per Share (the Offering ) as more fully described in the Plan of Distribution. The Company is offering the Shares on an all-or-none basis. If the Company has not received subscriptions for 2,800,000 shares upon the expiration of the Offering Period, all subscription funds will be promptly returned to investors without interest or deduction. Investors should be aware that our independent auditors have issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months. Our auditor's opinion is based on our having incurred a loss since inception with further losses anticipated. Our only other sources for cash at this time are investments by others in our Company or a possible capital advance/loan by our sole officer and director. We need to raise approximately $28,000 to fund operating expenses and begin the first phase of exploration. Our sole officer and director has made an unenforceable and non-binding verbal commitment to advance capital to us up to a maximum of $15,000 if necessary as determined in her sole discretion. The costs for Phase Two exploration, if warranted, are estimated at $109,608. We would need to raise additional funds to proceed beyond phase one exploration. See Risk Factors beginning on page 5. Potential investors should be aware that our President, Ms. Johnston, an officer and director of the Company, presently owns 5,500,000 shares of common stock, which would represent 66.27% of the issued and outstanding common shares of the Company if all the shares offered herein are sold. All of the shares held by Ms. Johnston are restricted shares. All 5,500,000 shares of common stock were purchased at a price of $0.004 per share representing a total of $22,000. The Company Press Ventures, Inc. was incorporated under the laws of the state of Nevada on October 5, 2010. The Company s principal offices are located at 1733 First Avenue NW, Calgary, Alberta, Canada T2N 0B2. Our telephone number is 403-648-2720 and fax number is 403-648-2755. The Company is a mining exploration stage company and will be engaged in the acquisition and exploration of mineral properties. Presently, the Company beneficially owns one mining claim called the Tara Property covering 462.22 hectares located in the Omineca Mining Division of British Columbia, Canada. This property consists of one claim held by Mr. I.J. Boga (the Trustee ) under Declaration of Trust dated October 7, 2010 in favor of the Company. The Tara Property consists of one mineral claim which has showing called the Bull showings. We refer to this claim as the Property or the Claim throughout this Prospectus. We acquired the Property for the cost of $5,000. We have not yet commenced any exploration activities on the Claim other than completing a technical report. We have not generated revenue from mining operations. We received our initial funding of $22,000 through the private sale of common stock to our sole officer and director who purchased 5,500,000 shares of our common stock at $0.004 per share. Our financial statements from inception (October 5, 2010) through July 31, 2011 report a net loss of $31,572. Our independent auditor has issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern. The Property may not contain any mineral reserves and funds that we spend on exploration may be lost. Even if we complete an initial exploration program and are successful in identifying a mineral deposit, we will be required to raise additional and substantial funds to bring our Claim to production. We have no known potential sources of funds for exploration beyond the proceeds of this Offering and an advance, if any, from our sole officer and director. Should the Company determine to raise money by selling securities, the ownership of investors in this Offering would be diluted. Neither Ms. Johnston, our sole officer and director, nor our independent consulting geologist has personally visited the Property. Ms. Johnston is relying upon her discussions with our consulting geologist, and our consulting geologist s recommendations are based upon his expertise and experience in mining operations in Western Canada. The Terms of the Offering Securities Being Offered The Company is offering for sale 2,800,000 shares of common stock. Offering Price The Offering Price is $0.01 per Share. The Offering Price was determined arbitrarily by the Company. Terms of the Offering The Shares will be sold through the efforts of our sole officer and director beginning on the date this registration statement is declared effective (the Effective Date ) by the SEC. Offering Period The Shares may be sold following the Effective Date of the Company s Registration Statement. The Offering will commence promptly after the date of this prospectus and close no later than 180 days from the date of this prospectus. We may, in our sole and absolute discretion, terminate the Offering at any time for any reason whatsoever. Minimum Number of Shares to be Sold in the Offering The Company is offering 2,800,000 shares of common stock on an all-or-none basis. If the Company has not received subscriptions for 2,800,000 shares upon expiration of the Offering Period, subscription funds will be promptly returned to investors without interest or deduction.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001506814_jpx_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001506814_jpx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6b983f53364de892db19bd661ff17a2237cd3637
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001506814_jpx_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY INFORMATION The following summary highlights some of the information in this prospectus. It may not contain all of the information that is important to you. To understand this offering fully, it is important that you read the entire prospectus carefully, including the RISK FACTORS and our financial statements and the notes accompanying the financial statements that appear elsewhere in this prospectus. Unless otherwise specifically noted, the terms Company, we, us or our refers to Jasper Explorations Inc. (fka Jubilee Resources Inc.). Corporate Background and Information JASPER EXPLORATIONS INC. Jasper Explorations Inc. (fka Jubilee Resources Inc.), was organized under the laws of the State of Nevada on December 18, 2008, to explore mineral properties in North America. Jasper Explorations Inc. (fka Jubilee Resources Inc .) is engaged in the exploration for copper, molybdenum and other minerals. The Company has acquired twelve (12) claim units located about near Nimpkish Lake, Northern Vancouver Island, about 300 kilometers northwest of Vancouver, BC, Canada. The total claim area is 247.45 hectares. We refer to these mining claims as the Red Streak Jasper Property. We are an exploration stage company and we have not realized any revenues to date. We do not have sufficient capital to enable us to commence and complete our exploration program. We will require financing in order to conduct the exploration program described in the section entitled, "Business of the Issuer." Our auditors have issued a going concern opinion, raising substantial doubt about Jasper s financial prospects and the Company s ability to continue as a going concern. We require an estimated total of $280,300 to implement the three phases of our business plan. We currently have not implemented our business plan. We are not a "blank check company," as we do not intend to participate in a reverse acquisition or merger transaction. Securities laws define a blank check company as a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person. With its current assets, the Company can remain operational through 2011 if it does not complete Phase 1 of its program and only pays the government fees to keep the claims valid. However, the Company plans to raise the capital necessary to fund our business through a private placement and public offering of our common stock. The Company intends to work directly with private placees once this registration statement is declared effective. The Company anticipates that they will have either a private placement or additional funding from its founder by Summer 2011 in order to conducts its operations. Our offices are located at: 9012-100 St. Westlock, Alberta, T7P 2L4 THE OFFERING Securities offered 10,000,000 shares of common stock Selling stockholder Robert Denman Offering price $0.001 per share Shares outstanding prior to the offering 30,000,000 shares of common stock Shares to be outstanding after the offering 30,000,000 shares of common stock Use of proceeds The Company will not receive any proceeds from the sale of the common stock by the selling stockholder. Summary Financial Information The following tables sets forth the summary financial information for the Company. You should read this information together with the financial statements and the notes thereto appearing elsewhere in this prospectus and the information under Plan of Operation. Quarter Ended Year Ended Consolidated Statements of Income March 31, 2011 December 31, 2010 Revenues $ 0 0 Operating expenses $ 3,500 21,003 Net loss from operations $ (3,500 ) (21,003 ) Net loss before taxes $ (3,500 ) (21,003 ) ) Loss per share - basic and diluted $ (0.007 ) (0.007 ) Weighted average shares outstanding basic 10,027,397 10,027,397 Balance Sheet Data At March 31, 2011 At December 31, 2010 Cash and cash equivalents $ 5,497 8,997 Total current assets $ 5,497 8,997 Stockholders equity $ 3,997 7,497 Additional paid-in capital $ (0 ) (0 ) Total assets $ 5,497 8,997 Total liabilities $ 1,500 1,500 Deficit accumulated during exploration period $ (26,003 ) (22,503 ) Total stockholders' equity $ 5,497 7,497
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001507154_nautilus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001507154_nautilus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001507154_nautilus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001507812_amc-itd_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001507812_amc-itd_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1f77ba5a887ea8e143ebad213eb2a7b18f667636
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001507812_amc-itd_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 a2203993zs-1a.htm S-1/A Table of Contents As filed with the Securities and Exchange Commission on June 24, 2011 Registration No. 333-173042 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 TABLE OF CONTENTS Market and Industry Information ii Special Note Regarding Forward-Looking Statements ii Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001508594_thc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001508594_thc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c4124ba85461f3f650455794ed127de66ccb4dd7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001508594_thc_prospectus_summary.txt
@@ -0,0 +1,9 @@
+Prospectus Summary, Risk Factors, Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this prospectus constitute forward-looking statements. These statements involve risks known to us, significant uncertainties, and other factors which may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements.
+
+ 
+
+You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should specifically consider various factors, including the risks outlined above. These factors may cause our actual results to differ materially from any forward-looking statement.
+
+ 
+
+Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001509191_foreclosur_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001509191_foreclosur_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1b94b08c2f1d8658ce3612baa5f14d2472a0673
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001509191_foreclosur_prospectus_summary.txt
@@ -0,0 +1,1308 @@
+PROSPECTUS SUMMARY 
+
+This summary highlights information contained elsewhere in this Prospectus
+and may not contain all of the information you should consider before investing
+in the Shares. You are urged to read this Prospectus in its entirety, including
+the information under "Risk Factors", "Management's Discussion and Analysis of
+Financial Condition and Results of Operations" and the Financial Statements,
+before making an investment decision.
+
+Overview
+
+This Prospectus relates to the offering of shares by the Company on a
+self-underwritten basis. The Company proposes to raise $10,000,000 (the
+"Offering Amount") through the sale of 10,000,000 shares of the common stock of
+the Company (each a "Share" and collectively the "Shares") at the price of $1.00
+per Share (the "Offering") as more fully described in the "Plan of
+Distribution." No arrangements have been made to place funds into escrow or any
+similar account. Upon receipt, offering proceeds will be deposited into our
+operating account and used to conduct our business and operations.
+
+Our only source for cash at this time are investments by officers in
+our Corporation.We need to raise approximately $10,000,000 to purchase distressed real estate properties
+such as free standing buildings, hotels, motels, apartment buildings, office
+buildings and medical buildings, senior housing, etc. and for day to day
+operating expenses. We buy all these real estate properties through foreclosure
+auctions,short sales and REO's, etc.
+
+Potential investors should be aware that following persons are awarded 22,000,000 shares at inception - 0.0001 per share ( Statement of Ownership )
+
+Esther Jimenez, CEO ..10,000,000 shares, Natavarbhai Patel, PRESIDENT
+..10,000,000 shares
+
+Purvi Patel, DIRECTOR ..1,000,000 shares, Neeti Patel, DIRECTOR ..1,000,000
+shares
+3
+
+The Company
+
+The Company is A Real Estate Operator and Lessor Company.The company purchases distress real
+estate assets in free standing buildings, hotels, motels, apartment buildings,
+office buildings and medical buildings, senior housing, etc . The company
+rehabilitates and re-sells these assets hopefully at profit and unsold properties are rented. We are a new company guided and run by experienced CEO ( Ex-Real Estate company Owner/Agent ) and President ( Ex- RE Broker, EX-Mortgage Banker ).
+
+The Terms of the Offering
+
+ 
+ 
+ Securities Being Offered
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The Company is offering for sale - 10,000,000 shares of common
+ stock.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Offering Price
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The Offering Price is $1.00 per Share. The Offering Price was
+ determined arbitrarily by the Company.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Terms of the Offering
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The Shares will be sold through the efforts of our sole officers and
+ director beginning on the date this registration statement is declared
+ effective (the "Effective Date") by the SEC.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Offering Period
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The Shares may be sold following the Effective Date of the Company's
+ Registration Statement. The offering will conclude when all 10,000,000 shares have been sold or 36 months which ever is shorter.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Minimum Number of Shares to be Sold in the Offering
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ - 10,000,000.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Risk Factors
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The securities offered hereby involve a high degree of risk and should
+ not be purchased by investors who cannot afford the loss of their entire
+ investment. See "Risk Factors" .
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Common Stock Issued And Outstanding Before Offering
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 100,000,000 shares of our common stock are issued and outstanding as of
+ the date of this Prospectus.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Common Stock Issued And Outstanding After Offering
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ Upon completion of the Offering, we will have 68,000,000 shares of
+ common stock issued and outstanding if we sell all of the Shares offered
+ in this Offering.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Net Proceeds to Our Company
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ Assuming 10,000,000 shares are sold in this Offering, the estimated net
+ proceeds will be $10,000,000. Offering expenses estimated at $10,000 will
+ be paid from cash on hand.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Use of Proceeds
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ The Company will use the net proceeds from the Offering substantially
+ for purchasing distressed properties and general working capital.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Dividend Policy
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ We have not declared or paid any dividends on our common stock since
+ our inception, and we do anticipate paying dividends for the foreseeable
+ future.
+ 
+
+ 
+
+ 
+ Lock Period
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ All insiders such as CEO, President, Directors and
+all employees of the corporation will not be allowed to sell any shares for 180
+days from effective date and must comply with Rule 144.
+ 
+
+ 
+
+ 
+ 
+ Our Investors
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ Unlimited Accredited investors,
+ 
+
+ 
+
+ 
+ Investors Information
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ All investors can find company
+information such as security filing: 10-Q, 10-K, 8-K, etc. at no cost to anyone
+who is interested can be found on our website address
+foreclosureventurecapital.com,also can be found at securities and exchange
+commission website.
+ 
+
+ 
+
+4.
+
+Summary Financial Information
+
+ 
+ 
+ Balance Sheet Data
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ December 31, 2010
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Cash and Cash Equivalents
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 1,000
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Total Current Assets
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 1,000
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Current Liabilities
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ -
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Total Stockholder's Equity ( 100,000,000 @0.0001 per share)
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 10,000
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Statement of Operations From Incorporation
+ 
+
+ 
+
+ on May 5, 2010 To December 31, 2010
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Revenue
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ -
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Net Loss
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 0
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+RISK FACTORS
+
+You should carefully consider the risks and uncertainties described below
+and the other information in this Prospectus before deciding whether to invest
+in the Shares we are offering. The risks described below are not the only ones
+we will face. Additional risks and uncertainties not presently known to us or
+that we currently deem immaterial may also impair our financial performance and
+business operations. If any of these risks actually occur, our business and
+financial condition or results of operation may be materially adversely
+affected, the trading price of our common stock could decline and you may lose
+all or part of your investment. We make various statements in this section which
+constitute "forward-looking" statements. 
+
+Risks Relating to Our Company
+
+1. The resale of the purchased property may be delayed and we must rent out
+at lower profit margin or remain vacant for an extended period.
+
+2. The contractors insurance may have lapse without our knowledge therefore
+causing an increase in liability.
+
+3. Court cost may incur due to non-payment of rent from tenant or breach of
+contract.
+
+4. Unexpected environmental expenses, undisclosed by seller.
+
+5. In the event we do not raise enough capital our sole officer and director
+will loan only a limited amount of money to us, we will require additional funds
+to continue operations.
+
+6. We may not be able to sell all of the Shares included in this
+Offering.
+
+7. Our operations require permits for occupancy from governmental agencies
+which may delay the process. We may be unable to obtain these permits in a
+timely manner, on reasonable terms or not at all.
+
+8. It is not always possible to fully insure all our properties against all
+risks.
+
+9. We need to raise approximately $10,000,000 in this Offering in order to
+commence our operation. If we are unable to sell all of the Shares included in
+this Offering, we may not be able to do business or will be limited to do
+business based on the capital raised.
+
+10 . Because we have not yet commenced business operations, evaluating
+our business is difficult.
+
+Although substantial benefits may be derived from our operation, we cannot
+assure you that the Company will benefit from all our investments all the time
+or that it can obtain the funds required on a timely basis .
+
+11. Weather interruptions in the area of the Property may delay or
+prevent renting or selling.
+
+12. We compete with many large and small companies in our
+business, established or non established companies like ours.
+
+13. Upon becoming subject to the reporting requirements of the
+Securities Exchange Act of 1934, we will incur ongoing expenses associated with
+professional fees for accounting, legal and a host of other expenses for annual
+reports and proxy statements, if applicable. We estimate that these costs will
+range up to $10,000 per year for the next few years and will be higher if our
+business volume and activity increases but lower during the first year of being
+public because our overall business volume will be lower.
+
+5
+
+Risks Associated with Our Common Stock
+
+The Offering Price of the Shares is arbitrary.
+
+The Offering Price of the Shares has been determined arbitrarily by the
+Company and bears no relationship to the Company's assets, book value, potential
+earnings or any other recognized criteria of value.
+
+The offering price of the Shares was determined arbitrarily and should not be
+used as an indicator of the future market price of the securities. Therefore,
+the offering price bears no relationship to the actual value of the Company and
+may make our shares difficult to sell, since our company is not listed on a
+major trading corporation such as NASDAQ. The offering price bears no
+relationship to the book value, assets or earnings of our company or any other
+recognized criteria of value. The offering price should not be regarded as an
+indicator of the future market price of the securities.Certain Company actions and the interests of stockholders may differ
+time to time.
+
+Our common stock is unlikely to be followed by any market analysts, and there
+may be few or no institutions acting as market makers for the common stock.
+Either of these factors could adversely affect the liquidity and trading price
+of our common stock. Until our common stock is fully distributed and an orderly
+market develops in our common stock, if ever, the price at which it trades is
+likely to fluctuate significantly. Prices for our common stock will be
+determined in the marketplace and may be influenced by many factors, including
+the depth and liquidity of the market for shares of our common stock,
+developments affecting our business, including the impact of the factors
+referred to elsewhere in these Risk Factors, investor perception of the Company,
+and general economic and market conditions. No assurances can be given that an
+orderly or liquid market will ever develop for the shares of our common stock.
+You will incur immediate and substantial dilution of the price you pay for
+your Shares. We may in the future issue additional common shares to acquire
+additional properties, compensate officers, directors and employees , if any ,
+may dilute our share value. Also it may dilute share value if share splits.
+
+The SEC has adopted regulations which generally define "penny stock" to be
+any equity security that has a market price (as defined) of less than $5.00 per
+share or an exercise price of less than $5.00 per share. Such securities are
+subject to rules that impose additional sales practice requirements on
+broker-dealers who sell them. For transactions covered by these rules, the
+broker-dealer must make a special suitability determination for the purchaser of
+such securities and have received the purchaser's written consent to the
+transaction prior to the purchase. Additionally, for any transaction involving a
+penny stock, unless exempt, the rules require the delivery, prior to the
+transaction, of a disclosure schedule prepared by the SEC relating to the penny
+stock market. The broker-dealer also must disclose the commissions payable to
+both the broker-dealer and the registered representative, current quotations for
+the securities and, if the broker-dealer is the sole market-maker, the
+broker-dealer must disclose this fact and the broker-dealer's presumed control
+over the market. Finally, among other requirements, monthly statements must be
+sent disclosing recent price information for the penny stock held in the account
+and information on the limited market in penny stocks. As the shares immediately
+following this Offering will likely be subject to such penny stock rules,
+purchasers in this Offering will in all likelihood find it more difficult to
+sell their Shares in the secondary market.
+
+We have not voluntarily implemented various corporate governance
+measures, in the absence of which, stockholders may have more limited
+protections against interested director transactions, conflicts of interest and
+similar matters .
+
+Recent U. S. legislation, including the Sarbanes-Oxley Act of 2002, has
+resulted in the adoption of various corporate governance measures designed to
+promote the integrity of the corporate management and the securities markets.
+Some of these measures have been adopted in response to legal requirements.
+Others have been adopted by companies in response to the requirements of
+national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on
+which their securities are listed. Among the corporate governance measures that
+are required under the rules of national securities exchanges and NASDAQ are
+those that address board of directors' independence, audit committee oversight
+and the adoption of a code of ethics. We have not yet adopted any of these
+corporate governance measures and, since our securities are not listed on a
+national securities exchange or NASDAQ, we are not required to do so. It is
+possible that if we were to adopt some or all of these corporate governance
+measures, stockholders would benefit from somewhat greater assurances that
+internal corporate decisions were being made by disinterested directors and that
+policies had been implemented to define responsible conduct. For example, in the
+absence of audit, nominating and compensation committees comprised of at least a
+majority of independent directors, decisions concerning matters such as
+compensation packages to our senior officers and recommendations for director
+nominees may be made by a majority of directors who have an interest in the
+outcome of the matters being decided. Prospective investors should bear in mind
+our current lack of corporate governance measures in formulating their
+investment decisions.
+
+FINRA sales practice requirements may limit a stockholder's ability to
+buy and sell our stock.
+
+FINRA has adopted rules that require that in recommending an investment to a
+customer, a broker-dealer must have reasonable grounds for believing that the
+investment is suitable for that customer. Prior to recommending speculative low
+priced securities to their 
+
+6
+
+non-institutional customers, broker-dealers must
+make reasonable efforts to obtain information about the customer's financial
+status, tax status, investment objectives and other information. Under
+interpretations of these rules, FINRA believes that there is a high probability
+that speculative low priced securities will not be suitable for certain
+customers. FINRA requirements will likely make it more difficult for
+broker-dealers to recommend that their customers buy our common stock, which may
+have the effect of reducing the level of trading activity in our common stock.
+As a result, fewer broker-dealers may be willing to make a market in our common
+stock, reducing a stockholder's ability to resell shares of our common stock.
+
+We are not quoted on any trading exchange but If quoted on the OTC ( Privately owned company )
+the price of our common stock may be volatile, which may substantially increase
+the risk that you may not be able to sell your shares at or above the price that
+you may pay for the shares or may loose entire amount of investment.
+
+Currently, there is no public market for our stock and our stock may never be
+traded on any exchange, or, if traded, a public market may not materialize. Even
+if our shares are quoted for trading on the OTC ( Privately owned company) following this offering and a
+public market develops for our common stock, the market price of our common
+stock may be volatile. It may fluctuate significantly in response to the
+following factors:
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ variations in quarterly operating results;
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ our announcements of significant commissions and achievement of
+ milestones;
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ our relationships with other companies or capital commitments;
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ additions or departures of key personnel;
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ sales of common stock or termination of stock transfer restrictions;
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ changes in financial estimates by securities analysts, if any; and
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ fluctuations in stock market price and volume.
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ .
+ 
+
+ 
+
+ 
+ Your inability to sell your shares during a decline in the price of our stock
+may increase losses that you may suffer as a result of your investment.
+
+ 
+
+ 
+
+The Company will deposit offering proceeds into its operating account
+upon receipt and use them to conduct its business and operations, and proceeds
+are non-refundable.
+
+Item 4.USE OF PROCEEDS
+
+10,000,000 Shares are subscribed for in this Offering, the gross proceeds
+from this Offering will be $10,000,000. We expect to disburse the proceeds from
+this offering in the priority set forth below, within the first 12 months after
+successful completion of this Offering:
+
+ 
+ 
+ Offering Proceeds
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 10,000,000
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Initial purchase of properties and re-habitation
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 9,990,000
+ 
+
+ 
+
+ 
+
+ 
+ 
+ Working Capital
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 10,000
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ Total
+ 
+
+ 
+
+ 
+ 
+ 
+
+ 
+
+ 
+ $
+ 
+
+ 
+
+ 
+ 10,000,000
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001509969_performanc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001509969_performanc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a2e0f81c55228123dbd2ae1939baca9e06c947d7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001509969_performanc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary does not contain all information that you should consider before investing in our Common Stock. You should carefully read the entire Prospectus, including the information set forth under Risk Factors, and the Financial Information beginning on Page F-1 before making an investment decision. Company Overview Performance Sports Brands, Inc. is a Nevada corporation formed on November 12, 2009 as Golfers Incorporated for the purpose of acquiring and operating businesses engaged in the design, distribution and marketing of proprietary branded sports lifestyle products designed to enhance the athletic performance and enjoyment for both professional and amateur sports enthusiasts. See Description of Our Business . During 2010 we acquired all of the operating assets of The Golf Agency and TGA Media, LLC, all of the ownership interests in Face Forward Technologies, LLC and 50% of the ownership interests of Tour Striker-TGA, LLC. We have treated those companies as our predecessors in this Prospectus. We currently operate two business segments: Consumer Product and Media Services. Our Consumer Products Segment manufactures, sells and distributes sports and athletic lifestyle products, which presently consist of golf clubs and golf training products and which will include a line of athletic apparel and accessories beginning in late 2011 or early 2012. We currently have three company owned brands: Tour Striker training aids, F2 wedges and irons and Energy Athletic apparel. Tour Striker: Tour Striker-TGA, LLC (Tour Striker Golf) was started in 2009 and was acquired by us in 2010. It produces and markets a line of golf training clubs designed to intuitively assist golfers in developing improved impact position, more consistent ball striking and increased distance. F2: Face Forward Technologies, LLC (F2 Golf) began in 2006 and was acquired by us in 2010. It produces and markets a line of game improvement golf clubs including wedges, irons, and hybrids. These clubs feature unique, proprietary and patented designs. Energy Athletic: This new product line will be introduced in late 2011 or early 2012 and consists of a golf and casual apparel that incorporates IonX Energy Fabric, a patented, ionized material which stimulates the delivery of oxygen to the muscles to increase energy, strength and focus and accelerate recovery from injuries and fatigue. Our Media Services Segment does business as The Golf Agency and creates, produces, directs and edits instructional videos and short and long form direct response informational and advertising presentations for distribution via print, internet and social media; purchases media space and places advertising content with media sources for products and services targeted at golfers; and provides consulting services relating to product design, branding, packaging and marketing. Our founders and principal owners, Stephen V. Abram and Michael F. Abram, have more than 30 years of combined experience in development and marketing golf products and in writing, producing and directing advertising and promotional materials for golf products. See Information Relating to Management and Certain Holders of Our Common Stock . Summary Financial Data The following summary financial data should be read in conjunction with the Financial Statements and Notes thereto, included elsewhere in this Prospectus: Year Ended August 31, Nine Months Ended May 31, Statements of Operations 2010 2009 2011 2010 (unaudited) Revenues $ 4,305,678 $ 4,552,292 $ 6,142,525 $ 2,170,421 Gross profit 2,567,687 1,717,272 3,448,642 1,079,611 Net income (loss) attributable to Performance Sports Brands, Inc. (214,527 ) 409,421 (763,061 ) (291,233 ) August 31, May 31, Balance Sheets 2010 2009 2011 (unaudited) Cash and cash equivalents $ 189,306 $ 69,256 $ 76,497 Current Assets 1,235,919 329,173 1,760,834 Total Assets 1,525,090 432,483 2,018,461 Total Liabilities 2,062,729 1,032,790 3,012,458 Stockholders Deficiency (537,639 ) (600,307 ) (993,997 ) Terms of Offering The Selling Stockholders named in this Prospectus are offering the shares of Common Stock offered through this Prospectus. We will not receive any proceeds from the sale of the shares covered by this Prospectus. See Use of Proceeds and Plan of Distribution . The offering price of $.50 per share was determined based on the price that purchasers in our most recently completed private placement paid for shares of our Common Stock and is fixed until shares of our Common Stock are admitted to trading on a securities exchange or automated quotation system or quoted in an interdealer market. If our Common Stock is admitted to trading on a securities exchange or an automated quotation system or if shares of our Common Stock are quoted in an interdealer market, the Selling Stockholders may sell shares covered by this Prospectus at prices based upon prevailing market prices. We have agreed to bear all costs associated with registering the shares covered by this Prospectus with the Securities and Exchange Commission for sale by the Selling Stockholders. Each Selling Stockholder is responsible for any commissions, fees and discounts payable to brokers, dealers or intermediaries that they engage in connection with the sale of such shares. See Determination of Offering Price .
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001511198_first_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001511198_first_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..381e587c23593ccb5236c5f595b54d2049400469
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001511198_first_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001514732_saexplorat_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001514732_saexplorat_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001514732_saexplorat_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001516145_octacation_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001516145_octacation_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9be082298e110a5af458e118af1d5ce26d04eb72
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001516145_octacation_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is supported by reference to the more detailed information and the financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. The purchase of the securities offered through this Prospectus involves a high degree of risk. See section entitled "Risk Factors" on pages 6 to 13. As used in this Prospectus, unless the context otherwise requires, "we", "us", "our" the Company or "Octacation" refers to Octacation Productions Ltd., a Nevada corporation, "SEC" refers to the United States Securities Exchange Commission, "Securities Act" refers to the Securities Act of 1933, as amended, and "Exchange Act" refers to the Securities Exchange Act of 1934, as amended. Octacation was incorporated in the State of Nevada on December 14, 2010. Our year end is January 31. We are a development stage enterprise. Our principal office is located at #21 Country Hills Gardens NW, Calgary, AB, Canada, T3K 5A4. Our telephone number is (403) 369-1072 and our e-mail contact is cozacd@gmail.com. Our website can be viewed at http://web.me.com/gomagon/octacations.com/Welcome.html. The information on our website is not a part of this Prospectus. Our plan of operation is to develop entertainment concepts for sale to television and Internet production interests. This planned development is expected to include the production of trailers . Trailers are short videos that demonstrate the concept to potential buyers or licensors. To date, our business activities have been limited to organizational matters, the preparation and filing of the registration statement of which this Prospectus is a part and the acquisition of intellectual property rights ( Rights ) for one project described herein, with the name Smack in the Middle of Nowhere ( the Show ). We have also commenced the planning and development of our introductory trailer to be featured on our website when completed. The Company optioned all right, title and interest in the Show from Gordon Rix, a non-affiliated individual. The Show is registered with the Writers Guild of America ( WGA ), registration # 1001191. The option agreement provides for our Company to spend a minimum of $40,000 on Show development, which development may include trailer costs, prior to December 31, 2011, and, prior to December 31, 2012, to enter into a production and distribution agreement with recognized industry participants to have the Show produced and distributed. We are further obligated to pay Mr. Rix a 5% royalty on all revenues generated to the Company by the Show. In the event that the Company defaults on its obligations, the option agreement will terminate and all title, right and interest will revert back to Mr. Rix. There are no plans to sell or otherwise dispose of these Rights at this time. As we have not recorded a value for our intellectual property as an asset on our balance sheet, we have no significant assets. In order to continue as a going concern we must successfully accomplish the following tasks: Obtain capital through the sale of our common stock through this Offering; Generate a video trailer for the Show; Enter into production and distribution agreements to successfully market and distribute our Show; and Continue to generate or otherwise acquire media rights for other projects. There can be no guarantee or assurance that we will be able to successfully accomplish one or all of these tasks in the future. Investors should be aware that our Auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. Our auditor's opinion is based on our suffering initial losses, having limited operations, and having limited working capital. Our only other source for cash at this time is investments or loans by others in our Company. We must raise cash to implement our projects and begin our operations. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Amount To Be Registered Proposed Maximum Offering Price Per Share Proposed Maximum Aggregate Offering Price (1) Amount of Registration Fee Common Stock, par value $0.0001 40,000,000 $0.0025 $100,000 $11.61 (1) There is no current market for the securities and the price at which the Shares are being offered has been arbitrarily determined by the Company and used for the purpose of computing the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. This Registration Statement shall also cover any additional shares of our common stock which may become issuable by reason of any stock dividend, stock split, recapitalization or other similar adjustments. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. To date we have been able to work within the funds that we have available which has come from the sale of our common stock, totaling $15,000, of which $6,220 cash remained at our fiscal year ended January 31, 2011 and $4,195 cash remains as at the date of the filing of this Prospectus. The minimum costs we expect to incur over the next 12 months relate to our rent, telephone, audit, administration and filing fees. We estimate these expenses to be approximately $20,000. This is an average of $1,666.67 per month. However, the Company does not expect all monthly expenditures to be the same as quarterly audit review costs are not expended on a monthly basis. If we are successful in selling all shares of this Offering we will have an additional $100,000, with which we expect to be able to cover the costs of our operations, including the production of our Show trailer, for more than twelve months. If and when we are able to accomplish the above tasks, in order to achieve and maintain profitability in the future we must produce or acquire additional concepts and trailers that are sold to production companies. Investors must be aware that we do not have sufficient capital to independently finance our own productions. If we are unable to secure additional financing beyond the financing contemplated under this Offering, we may be unable to acquire any additional concepts or produce any additional associated trailers in which case we would be forced to suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations, in which case investors would likely lose their entire investment. We have no operating history on which to base an evaluation of our business and prospects. Prospective purchasers of our stock should be aware of the difficulties normally encountered by new concept development companies and the high rate of failure of such enterprises. We do not know how we will generate revenues from our proposed business and we may be unable to generate revenues at all. These risks include without limitation the high probability that we will be unable to sell a concept and its trailer on a commercially successful basis. If we are unable to profit from the generation of concepts and trailers our business will most likely fail and any investment made into our common stock would be lost. We currently have one unpaid employee. We do not intend to hire any additional employees within the next six months. However, if we are successful in raising capital through this Offering, we intend to engage certain independent contractors to assist us in the implementation of our business plan. All of the operations are currently being undertaken by our current President who works on a part-time basis for the Company, devoting approximately 15% of his free time to Company affairs. He takes no salary and currently provides his services without a management contract. Potential investors should be aware that Darryl Cozac, an officer and director of the Company, presently owns 150,000,000 shares, which would represent 78.9% of the issued and outstanding common shares of the Company if the Offering closes and all Octacation offered shares are sold. All of these shares are restricted shares subject to Rule 144 resale restrictions. All 150,000,000 shares were purchased at a price of $0.0001 per share representing a total cost of $15,000. Since our inception on December 14, 2010 to January 31, 2011, we have not generated any revenues and have a net loss of ($4,950). In the event we raise the minimum of $100,000 sought in this Offering, and including our current cash on hand of $6220, we expect to be able to continue our business operations for at least the next 12 months. We anticipate generating revenues within the first twelve months, assuming that we can raise the $100,000 required to be raised under this Offering. In the event we do not raise the $100,000, we will not be able to continue the pursuit of our business plan. In light of this, our independent auditors have expressed substantial doubt about our ability to continue as a going concern in the independent auditors' report to the financial statements included in the registration statement, of which this Prospectus is a part. As of the date of this Prospectus, Octacation has 150,000,000 shares of $0.0001 par value common stock issued and outstanding that are owned by one shareholder, who is an officer and director of the Company. If we are successful in raising the funds under this offering and all Octacation shares of common stock being offered under this Offering are subscribed to there will be 190,000,000 shares of common stock issued and outstanding. The Offering Octacation is offering, on a self-underwritten basis, a total of 40,000,000 shares of the common stock of the Company at a price of $0.0025 per share. This is a fixed price offering. There is no minimum purchase requirement for individual investors under this Offering. In order to close the Offering all of the shares of Octacation common stock must be sold. This Offering of shares by the Company will terminate 180 days from the effective date of this Prospectus, although we may close the Offering on any date prior if the Offering is fully subscribed. In the event that all 40,000,000 shares of The information contained in this Prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission and these securities may not be sold until that registration statement becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to Completion, Dated: March 21, 2011 Octacation Productions Ltd. 40,000,000 Shares of Common Stock at $0.0025 per share This Prospectus relates to the offer and sale of up to 40,000,000 shares of common stock, $0.0001 par value ( Common Shares ) by Octacation Productions Ltd., a Nevada company ( Octacation , we , us , our , Company or similar terms). There are no securities being sold by existing security holders. This is our initial public offering. Our securities are not listed on any national securities exchange or the Nasdaq Stock market. There is a minimum offering of Octacation shares. The offering price is $0.0025 per share. This offering of shares by the Company will terminate 180 days from the effective date of this prospectus, although we may close the offering on any date prior if the offering is fully subscribed. There will be no extension of the offering period and this offering, if not fully subscribed, will end on the 180th day from the effective date of this prospectus. In the event that Octacation shares are not sold within 180 days from the effective date of this prospectus, on the 181st day from the effective date all money received by us will be returned to each subscriber without interest or deduction of any kind. If Octacation shares are sold within 180 days from the effective date of this prospectus, all money received will be available to us and there will be no refund. The funds will be maintained in a separate bank account established under an escrow agreement for the purposes of this Offering, until we receive $100,000 at which time we will remove those funds and use the same as set forth in the Use of Proceeds section of this Prospectus. In order for this offering to be completed all of the 40,000,000 shares offered under this Prospectus must be purchased. Our officers and directors will market our common stock and offer and sell the securities on our behalf. This is a best efforts direct participation offering that will not utilize broker-dealers. No officer or director will receive any compensation for his role in selling shares in the offering. The Company is considered to be in unsound financial condition. Persons should not invest unless they can afford to lose their entire investment. Before purchasing any of the Common Shares covered by this Prospectus, carefully read and consider the risk factors included in the section entitled RISK FACTORS beginning on page 6. These securities involve a high degree of risk. There is currently no public trading market for the securities. Neither the United States Securities and Exchange Commission ( SEC ), nor any state securities commission, has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. The date of this Prospectus is , 2011 Dealer Prospectus Delivery Obligation Securities offered through this Prospectus will not be sold through dealers, but will be sold on a direct participation basis only. Octacation common stock are not sold within 180 days from the effective date of this Prospectus, on the 181st day from the effective date all money received by us will be returned to each subscriber without interest or deduction of any kind. If all of the shares of common stock of the Company offered under this Offering are sold within 180 days from the effective date of this Prospectus, all money received will be available to us and there will be no return of any funds. The funds will be maintained in a separate bank account established for the purpose of this Offering under an escrow agreement until we receive $100,000 at which time we will remove those funds and use the same as set forth in the Use of Proceeds section of this Prospectus. At any time prior to the closing of the Offering, subscribers may revoke their subscription by written notice to the Company. Should we not raise the entire $100,000 as required under this Offering, then funds will be returned to all subscribers on the 181st day after the effective date of this Prospectus. The offering price of the common stock has been arbitrarily determined and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings or net worth. The Company intends to appoint Holladay Stock Transfer of 2939 N 67th Place, Suite C, Scottsdale, Arizona, 85251 as their transfer agent as soon as the funds have been raised under this Prospectus. Their telephone number is (480) 481-3940. The purchase of the common stock in this Offering involves a high degree of risk. The common stock offered in this Prospectus is for investment purposes only and currently no market for our common stock exists. Please refer to "Risk Factors" on page 6 and "Dilution" on page 15 before making an investment in our stock. Summary of Selected Financial Information The following table sets forth summary financial data derived from Octacation s audited financial statements dated January 31, 2011. The data should be read in conjunction with the financial statements and the related notes thereto, as well as the "Management's Discussion and Plan of Operations" included elsewhere in this Prospectus. Financial Data Summary Statements of Operations Data December 14, 2010 (Inception) To, January 31, 2011 Total Revenues $ 0 Organizational and Professional Expenses 4,950 Total Expenses 4,950 Net Income (Loss) $ (4,950 ) Weighted average number of shares outstanding 150,000,000 Net Income (Loss) per Share $ (0.00 ) Balance Sheet Data January 31, 2011 Cash $ 6,220 Property and Equipment 7,330 Total Assets $ 13,550 Accounts Payable and Accrued Expenses 3,500 Total Liabilities $ 3,500 Shareholders Equity $ 10,050
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001517086_momentive_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001517086_momentive_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001517086_momentive_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001517577_salient_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001517577_salient_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..85471986a07c881918496e836c1d58288aecedc1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001517577_salient_prospectus_summary.txt
@@ -0,0 +1 @@
+Item 3. Prospectus Summary. This summary highlights certain information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information regarding Salient Products Corporation ( Us, We, Our, Salient, Salient Products, the Company, or the Corporation ) and our financial statements and the related notes appearing elsewhere in this prospectus. The Company Our Business Salient Products Corporation was incorporated in the State of Nevada on November 19th, 2010. Salient Products Corporation is a development stage company with a principal business objective of selling computer software programs. The Company plans to have its initial software product be a PC-based software application for end users. The software application will be a module that allows the end-user to control multiple social networking and digital content online accounts in one place. This will be of particular interest to end users who want to have one central location to control their multiple online accounts for entertainment, social networking, blogging, and more. We plan to stay on the cutting edge of the constantly changing online and software application market and our goal is to create a quality reputation within the software community and marketplace. Salient Products conducted research on various marketing venues and plans to sell our initial applications through our own online retail website to end users who want to manage their multiple accounts with other online providers from one central software application. Salient Products Corporation is a development stage company that has not commenced its planned principal operations. Salient Products Corporation operations to date have been devoted primarily to start-up and development activities. Our Founder and past President, Matthew Turnbull, has performed some of the development activities to date, which include the following: 1. Formation of the Company; 2. Conducted research on software application user demographics. 3. Development of the Salient Products Corporation business plan; 4. Development of initial design and structure for desktop applications; On March 21, 2011, Mr. Turnbull appointed our current President, Shehzad Peermahomed, to President, Director, Officer, and Secretary of the Company and subsequently resigned. Mr. Peermahomed has performed the following duties to date: 4. Conducted research on three major marketing channels/strategies including online advertising, press and media attention, and online sales; 5. Formulated product development and marketing strategies for product lines to include: - Desktop application to act as hub for managing multiple accounts with online providers including: - Blogging web sites like www.blogger.com and www.wordpress.com - Online photo web sites such as www.flickr.com and www.photobucket.com - Social networking web sites like www.facebook.com and www.twitter.com; 6. Secured web site domain www.salientproducts.com; Salient Products Corporation is attempting to become operational and anticipates sales to begin during the third quarter of operations following the completion of our offering. In order to generate revenues, Salient Products Corporation must address the following areas: 1. Finalize and implement our long-term marketing plan: In order to effectively penetrate our targeted market, Salient Products will use a long-term but multi-faceted marketing plan that includes a high-end web site, target users of blog web sites, photo web sites, and social networking web sites, and target specific distribution channels using online advertising and media/press attention. Our long-term goal is to have independent commissioned sales representatives will work as middlemen between Salient Products and any potential retailers or other web sites that wish to offer our products. Their responsibilities will include approaching any/all appropriate online retailers, work trade shows and employ creative marketing techniques to attract other web sites and stores to offer our products. . This long term marketing plan is entirely dependent on future financing and thus may not occur. The Company currently does not have any engagements, agreements, or contracts with independent commissioned sales representatives. 2. Tailor our website: Salient Products has secured the web domain located at www.salientproducts.com. The site is currently under construction and we plan to incorporate this site with strategic vertical market e-commerce retailers. We have budgeted the necessary funding to develop a quality site. 3. Constantly monitor our market: We plan to constantly monitor our target market and adapt to consumers needs, wants and desires. To be successful we plan to evolve and diversify our product lines to satisfy the consumer. 4. Run our Company ethically and responsibly. Conduct our business and ourselves ethically and responsibly. Our Statement of Organization: We were incorporated in Nevada on November 19, 2010, as Salient Products Corporation Our principal executive offices are located at 1852 31st Street, San Diego, CA 92102 . Our phone number is 206-426-1775. The Offering The following is a brief summary of this offering. Please see the Plan of Distribution section for a more detailed description of the terms of the offering. Number of Shares Being Offered: The Company is offering 4,000,000 shares of common stock, par value $0.001 Offering Price per share $0.01 Offering Period: The shares are being offered for a period not to exceed 180 days. In the event we do not sell all of the shares before the expiration date of the offering, all funds raised will be promptly returned from the escrow account and returned to the investors, without interest or deduction. Escrow Account: The subscription proceeds from the sale of the shares in this offering will be payable to Diane D. Dalmy Trust Account and will be deposited in a non-interest bearing law office trust bank account until all offering proceeds are raised. All subscription agreements and checks should be delivered to Diane Dalmy. Failure to do so will result in checks being returned to the investor who submitted the check. Salient Products Corporation s escrow agent, Diane Dalmy acts as legal counsel for Salient Products Corporation and is therefore not an independent third party. Gross Proceeds to Company: $40,000 Use of Proceeds: We intend to use the proceeds to expand our business operations. Number of Shares Outstanding Before the Offering: 10,000,000 common shares Number of Shares Outstanding After the Offering: 14,000,000 common shares The offering price of the common stock bears no relationship to any objective criterion of value and has been arbitrarily determined. The price does not bear any relationship to Salient Products Corporation assets, book value, historical earnings, or net worth. Salient Products Corporation will apply the proceeds from the offering to pay for accounting fees, legal and professional fees, equipment, office supplies, salaries/contractors, sales and marketing, and general working capital. The Company has not presently secured an independent stock transfer agent. Salient Products has identified several agents to retain that will facilitate the processing of the certificates upon closing of the offering. The purchase of the common stock in this offering involves a high degree of risk. The common stock offered in this prospectus is for investment purposes only and currently no market for Salient Products Corporation common stock exists. Please refer to the sections herein titled Risk Factors and Dilution before making an investment in this stock. SUMMARY FINANCIAL INFORMATION The following table sets forth summary financial data derived from Salient Products Corporation financial statements. The accompanying notes are an integral part of these financial statements and should be read in conjunction with financial statements, related notes and other financial information included in this prospectus. Salient Products Corporation ((A Development Stage Enterprise) STATEMENT OF OPERATIONS November 19, 2010 For the Three Months Ended For the Six Months Ended (inception) through May 31, May 31, 2011 2011 2011 (unaudited) (unaudited) (unaudited) Revenues $ - $ - $ - EXPENSES Operating Expenses General and administrative 4,906 5,406 5,406 Total operating expenses 4,906 5,406 5,406 Net loss from operations (5,406 ) (5,406 ) NET LOSS $ - $ (5,406 ) $ (5,406 ) BASIC AND DILUTED LOSS PER SHARE $ - $ (0.00 ) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,000,000 10,000,000 The accompanying notes are an integral part of the financial statements.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001518154_trustwave_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001518154_trustwave_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001518154_trustwave_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001519955_cefc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001519955_cefc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9c9535b76fbe8451bed4beec965cafd3935732ba
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001519955_cefc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock. You should carefully read the entire Prospectus, including Risk Factors , Management s Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements, before making an investment decision. In this Prospectus, Astra Ventures, the Company, we, us, and our refer to Astra Ventures, Inc. unless the context otherwise requires. The term fiscal year refers to our fiscal year ended February 28, 2011. Unless otherwise indicated the term Common Stock refers to shares of the Company s common stock. ABOUT OUR COMPANY Astra Ventures, Inc. was incorporated in Nevada on September 23, 2010. On November 8, 2010, the Company issued four million (4,000,000) shares of Common Stock to Sieg Badke for an aggregate purchase price paid to the Company of $20,000. Mr. Badke s shares are restricted securities and are subject to Rule 144 of the Securities Act of 1933 (the Securities Act ). Our principal executive offices are located at 3090 Gordonvale Street, Thunder Bay, Ontario, Canada P7K 1B8. Our telephone number is (807) 333-0064. The Company sold an aggregate of 2,900,000 shares of the Company s common stock in private placement transactions to a total of 29 investors during the period of November 2010 through January 2010 who are the selling stockholders hereunder. The selling stockholders are offering shares of Common Stock of the Company for their own account. The Company will not receive any of the proceeds from the sale of these shares of Common Stock. During the most recently completed fiscal year as of February 28, 2011, the Company had incurred losses of $917, and during the six months ended August 31, 2011 , the Company incurred losses of $10,167 . The Company s accumulated deficit since inception is $11,084 . Since incorporation, the Company has been involved in organizational matters and developing and enhancing the Company s business plan. The Company has not yet commenced operations to implement its business plan. The Company currently does not have enough cash to execute its business plan. The Company will need to obtain additional financing in order to implement its business plan and can make no assurances that it will be able to secure the financing necessary to implement its business plan. The Company will consider public and/or private sales of its common stock or bank financing to raise funds necessary to begin implementation of its business plan. Mr. Sieg Badke, the Company s sole officer and director, has indicated that he would be willing to consider lending funds to the Company on an interim basis if an opportunity arose for which the Company had no available funds from any other source. There is no firm commitment for any such loan and no agreement between the Company and Mr. Badke for such a loan. Additionally, the Company has no third party commitments for financing. CALCULATION OF REGISTRATION FEE Title of Each Class Of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Offering Price per unit1 Proposed Maximum Aggregate Offering Price Amount of Registration fee2 Common Stock, par value $0.001 2,900,000 $0.01 $29,000 $3.37 1This price was determined arbitrarily by the Company 2The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933. Our Common Stock is not traded on any national exchange and in accordance with Rule 457, the offering price was determined by the price shares were sold to our stockholders in an offering exempt from registration pursuant to Regulation S promulgated under the Securities Act of 1933. The price of $0.01 is a fixed price at which the selling stockholders may sell their shares until such time as our Common Stock is quoted on the OTC Bulletin Board ( OTCBB ) or the Pink Sheets at which time the shares may be sold at prevailing market prices or privately negotiated prices. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine. The Company was formed to take advantage of the increasing demand for programming within the film industry which has occurred over the past several years and plans to commence business operations by obtaining distribution rights for films for reproduction and distribution across multiple markets and formats in the US and worldwide. As discussed in the Management s Discussion and Analysis section of this Prospectus, the Company has an accumulated deficit of $11,084 and needs cash in the minimum amount of $10,000 to acquire film or television programming to begin implementation of its business plan. The Company plan of operation is to acquire distribution rights to five films or television programs within the next twelve months. The Company can make no assurances that it will be able to acquire distribution rights as planned or, if such rights are acquired, that it will be able to sell such distribution rights. If it is unable to do either, the Company will not generate any revenue. Until it is able to implement its business plan, the Company is unable to estimate when it will be able to generate sustained revenues. We anticipate the cost of achieving our primary goal of acquiring distribution rights to five films to be within the approximate range of $160,000 and $810,000 and thereafter the cost of achieving our second goal of acquiring distribution rights to ten films to be within the approximate range of $325,000 and $1,625,000. On an ongoing basis, after we have met our two initial goals, we anticipate the cost of achieving our long-term goal of acquiring distribution rights to 50 films and/or television programming annually to be within the approximate range of $900,000 and $4,150,000. The cost estimates provided above include the actual cost of obtaining the film distribution rights as well as the administrative costs associated with achieving such goals. Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements indicating substantial doubt about our ability to continue as a going concern. The Company has incurred losses since inception resulting in an accumulated deficit of $917 at February 28, 2011 and an accumulated deficit of $11,084 as of August 31, 2011 . Further losses are anticipated in the development of the business of the Company raising substantial doubt about the Company s ability to continue as a going concern. The Company s ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Our financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The Company has no or nominal operations and has assets consisting solely of cash and cash equivalents and is, therefore, a shell company as defined under Rule 405. Rule 405 of the Securities Act defines the term shell company as a registrant, other than an asset-backed issuer, that has: (1) No or nominal operations; and (2) Either: (i) No or nominal assets; (ii) Assets consisting solely of cash and cash equivalents; or (iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets. For purposes of this definition, the determination of a registrant s assets (including cash and cash equivalents) is based solely on the amount of assets that would be reflected on the registrant s balance sheet prepared in accordance with generally accepted accounting principles on the date of that determination. TERMS OF THE OFFERING The selling stockholders named in this Prospectus are offering shares of Common Stock of the Company for their own account (the Offering ). The Company will not receive any of the proceeds from the sale of these shares of Common Stock. There will be 6,900,000 shares of our Common Stock outstanding prior to and after this Offering. The Company will bear the expenses of this offering estimated at approximately $16,000. The offering price of $0.01 (the Offering Price ) was determined based upon the price the shares of Common Stock were sold to our stockholders in an offering conducted pursuant to Regulation S and is a fixed price at which the selling stockholders may sell their shares unless and until our Common Stock is quoted on the OTCBB or the Pink Sheets, at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTCBB, nor can there be any assurance that such an application for quotation will be approved. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of the Common Stock may find it difficult to resell the securities offered herein should the purchaser desire to do so. The offering price of the securities to be sold pursuant to this Prospectus is the same price paid by the stockholders to purchase the stock from the Company. The public selling price was, in part, determined based upon current market and economic conditions. The effect of the sales price upon selling stockholders is that selling stockholders will be unable to achieve a profit on the sale of their shares in the absence of the development of an active trading market for the securities. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale of these securities is not permitted. Subject to Completion, Dated __________________ , 2011 PRELIMINARY PROSPECTUS ASTRA VENTURES, INC. 2,900,000 SHARES OF COMMON STOCK $0.01 PER SHARE The selling stockholders of Astra Ventures, Inc. (the Company ) named in this prospectus are offering shares of Common Stock through this Prospectus. The Company will not receive any of the proceeds from the sale of the shares by the selling stockholders. Our Common Stock is presently not traded on any market or securities exchange. The 2,900,000 shares of our Common Stock may be sold by the selling stockholders at a fixed price of $0.01 per share until our shares are quoted on the OTCBB or the Pink Sheets and thereafter at prevailing market prices or privately negotiated prices. The Company plans to explore the possibility of locating a market maker who would file an application for the quotation of the Company s common stock on the OTCBB. However, there can be no assurance that the Company will be successful in establishing such a relationship nor can there be any assurance that that any such application for quotation, if submitted, will be approved by the Financial Industry Regulatory Authority ( FINRA ). There can likewise be no assurance that an active trading market for our shares will develop, or, if developed, that it will be sustained. In the absence of a trading market or an inactive trading market, investors may be unable to liquidate their investment or make any profit from the investment We have agreed to bear the expenses relating to the registration of the shares for the selling stockholders of our Company. THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING RISK FACTORS BEGINNING ON PAGE 3. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. You should rely only on the information contained in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included in this Prospectus. If anyone provides you with different information, you should not rely on it. The date of this Prospectus is [Date] SUMMARY FINANCIAL DATA The following summary financial data should be read in conjunction with Management s Discussion and Analysis, Plan of Operation and the Financial Statements and Notes thereto, included elsewhere in this Prospectus. The statement of operations and balance sheet data for the six months ended August 31, 2011 is derived from our financial statements for that period which are included in this Prospectus. From Inception on September 23, 2010 to August 31, 2011 -$- STATEMENT OF OPERATIONS Revenues 0 Cost of revenues 0 General and Administrative Expenses 11,084 Net Loss (11,084) BALANCE SHEET DATA August 31, 2011 Cash 37,916 Total Assets 37,916 Total Liabilities 0 Stockholders Equity 37,916
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001521013_pulse_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001521013_pulse_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..80a68300fdc1bdc4c5c8a6e704a985ce29cb87e9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001521013_pulse_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION DISCUSSED UNDER "RISK FACTORS" AND "USE OF PROCEEDS" SECTIONS, COMMENCING ON PAGE 4 AND PAGE 13, RESPECTIVELY. AN INVESTMENT IN OUR SECURITIES PRESENTS SUBSTANTIAL RISKS, AND YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF YOUR INVESTMENT. CORPORATE BACKGROUND AND BUSINESS OVERVIEW Our Company was incorporated in the State of Nevada on March 9, 2011 to engage in the development and operation of online games for social networking websites. Our principal executive offices are located at 1 Ahmed Kamal St., Sidi Gaber Alexandria 21311, Egypt. Our phone number is+20 (10) 920-4278. We are a development stage company, we only just completed our first fiscal year end on March 31 and we have no subsidiaries. We are in the early stages of developing our first game that we have named "Curse of the Pharaohs". We currently have no revenues, operating history, and no players or revenues for our game. Our plan of operations over the 12 month period following successful completion of our offering is to gain support for our concept to then raise additional financing to commence with the development of our game (See "Business of the Company" and "Plan of Operations".) We anticipate that we will not have a commercial product available for at least 24-30 months from the date hereof, assuming successful completion of this offering and the successful raise of additional financing of $250-400,000 for game development, and $200,000 for initial marketing and promotion for commercial launch. From inception until the date of this filing we have had limited operating activities, primarily consisting of the incorporation of our company and the initial equity funding by our officer and director. We received our initial funding of $15,000 through the sale of common stock to our officer and director, who purchased 5,000,000 shares at $0.003 per share. We have also recently launched our corporate website which may be accessed at www.isoftinternational.com Our financial statements from inception on March 9, 2011 through June 30, 2011 report no revenues and a net loss of $(6,240). Our independent auditor has issued an audit opinion for our Company which includes a statement expressing substantial doubt as to our ability to continue as a going concern. The following is a brief summary of this Offering: Securities being offered: 1,000,000 shares of common stock, par value $0.001 Offering price per share: $0.05 Offering period: The shares are being offered for a period not to exceed 180 days from the effectiveness of this Prospectus, unless extended by our Board of Directors for an additional 90 days. Net proceeds to us: $50,000 less estimated offering registration costs of $10,300, assuming the maximum number of shares are sold. For further information on the Use of Proceeds, please to Page 13. Number of shares outstanding before the Offering: 5,000,000 Number of shares outstanding after the Offering: 6,000,000 assuming the Maximum number of shares are sold Registration costs We estimate our total offering registration costs to be $10,300. SUMMARY OF FINANCIAL INFORMATION The summarized unaudited financial data presented below is derived from our unaudited financial statements (Please refer to Page F-1 in this prospectus) and related notes from March 9, 2011 to June 30, 2011. It should also be read in conjunction with our audited financial statements and related notes from March 9, 2011 (date of inception) to March 31, 2011 (Please refer to Page F-8 in this prospectus.) As at June 30, 2011 ------------------- (unaudited) Current Assets (1) $ 10,145 Current Liabilities 1,160 Shareholders' Equity $ 8,985 From March 9, 2011 (inception) to June 30, 2011 ------------- (unaudited) Revenue $ -- Net Loss $ (6,240) ---------- (1) Current assets includes $4,685 of costs related to this offering registration, which are currently deferred and subsequently charged to stockholder equity upon receipt of funding and issuance of shares. We have just commenced our operations and are currently without revenue. Our accumulated deficit at June 30, 2011 was $(6,240). We anticipate that we will continue to incur net losses from our operations for the foreseeable future.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001522164_westpoint_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001522164_westpoint_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cc664ba6953d5017c0643dcc0561dcbd1ec1f122
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001522164_westpoint_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, references to the Company, we, our, us, or Westpoint refer to Westpoint Energy, Inc., unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the Risk Factors section, the financial statements and the notes to the financial statements. Corporate Background Westpoint Energy, Inc. was incorporated under the laws of the State of Nevada on December 6, 2010. Westpoint is an exploration-stage company as defined by the Securities and Exchange Commission ( SEC ) and we are in the business of exploring and if warranted, advancing certain oil and gas properties to the discovery point where we believe maximum shareholder returns can be realized. Our primary focus is in the oil and gas sector and our only properties (the "Properties") at this time consist of 2 leases located in the province of Saskatchewan, Canada. We are dependent upon making an oil or gas discovery on the Properties. Should we be able to make an economic find on the Properties, we would then be solely dependent upon the production from the Properties for our revenue and profits, if any. Presently we do not have any known oil or gas resources or reserves. There is no drilling or production plant or equipment located within the Property boundaries. Currently, there is no power supply to the Properties. The probability that oil or gas reserves that meet SEC guidelines will be discovered on the Properties is undeterminable at this time. A great deal of work is required before a determination as to the economic and legal feasibility of an oil and gas production venture on it can be made. We have a work plan for the first year that will include a detailed review of all publicly available drill data, compilation of a list of other entities operating in the area that may present opportunities for partnering, and completion of an initial assessment of potential oil or gas-producing formations that may exist on the Properties. There is no assurance that a commercially viable deposit will be proven through the exploration efforts by us on the Properties. We cannot assure you that funds expended on our Properties or other properties that we may acquire in the future will be successful in leading to the delineation of oil or gas reserves that meet the criteria established under SEC oil and gas industry reporting guidelines. Strategy Our primary focus in the natural resource sector is oil and gas with an emphasis on oil. Though it is possible to take a resource property that hosts a viable oil or gas deposit into production, the costs and time frame for doing so are considerable, and the subsequent return on investment for our shareholders would be very risky. We therefore anticipate partnering or selling any oil or gas deposits that we may discover to a larger oil and gas company. Acquisition of Interest On February 16, 2011 the Company acquired an interest in two PN&G Leases (the Leases ) in the province of Saskatchewan for an aggregate $15,000. The total area covered by the Leases is 132 hectares, or 528 acres. The interests in the Leases were acquired from Titan Oil & Gas, Inc. ( Titan ), an SEC reporting company. Titan disposed of its Saskatchewan leases as Titan s other properties are located in Alberta which is Titan s area of focus. The sole officer of Westpoint is also the sole officer of Titan. In addition, one of the directors of Titan is also a director of Westpoint. The term of each of the Leases is 5 years, requires minimum annual lease payments, and grants the Company the right to explore for potential petroleum and natural gas opportunities on the respective lease. Description and Location of the Saskatchewan Properties Both of the Properties are located in the Estevan area of Southeastern Saskatchewan, Canada. Exploration History and Geology of the Saskatchewan Properties The Bakken Formation is present over a large portion of southeastern Saskatchewan. It is subdivided into three members characterized by a middle siltstone to sandstone unit sandwiched between black organic-rich shales. In southeastern Saskatchewan, the Late Devonian to Early Mississippian Bakken Formation is conformably overlain by grey, fossiliferous limestones of the Souris Valley (Lodgepole) Formation of Mississippian (Kinderhookian) age. There have been no wells drilled on the Company s Saskatchewan properties. Current State of Exploration The Company has not undertaken any exploration or drilling on its properties. There are no known resources or reserves of oil or natural gas on the Company s properties. Geological Exploration Program The Province of Saskatchewan maintains a significant publicly-available database of drilling information from all wells drilled under leases issued by the provincial government. Companies who drill on government land in Saskatchewan are required to submit their drill results to the province. Therefore, previous drilling undertaken on land adjacent to the Company s holding, or drilling on the Company s land by companies exploring for other resources (oil sands for example) are required to submit their drill log data to the Saskatchewan government. As a result, there is a large database of drill results available to the public. Westpoint intends to make use of this publicly-available data to gain an initial understanding of the formations that may potentially exist on our Leases. Competition The oil and gas exploration industry is intensely competitive, highly fragmented and subject to rapid change. We may be unable to compete successfully with our existing competitors or with any new competitors. We compete with many exploration companies that have significantly greater personnel, financial, managerial, and technical resources than we do. Competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business. Government Regulations Development, production and sale of natural gas and oil in Canada are subject to extensive laws and regulations, including environmental laws and regulations. The oil and gas properties currently leased by the Company are owned by the Province of Saskatchewan and are managed by the Department of Energy. We may be required to make large expenditures to comply with environmental and other governmental regulations. Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages. Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that substantially increase our costs. Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations. We believe that compliance with the laws will not adversely affect our business operations Employees We currently have no employees. Property The Company does not currently have physical office space but does currently maintains its executive offices on a shared basis at 871 Coronado Center Drive, Suite 200, Henderson, Nevada, 89052 and its telephone number is (702)-940-2333. We have a one year lease that commenced January 1, 2011 at a rate of $199 per month that includes mail and phone service only. See Acquisition of Interest above. The Offering Securities offered: 5,740,000 shares of common stock Offering price: The selling security holders will be offering their shares of common stock at a price of $0.10 per share, which has been arbitrarily determined as the selling price. This is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTC Bulletin Board, at which time the shares may be sold at prevailing market prices or privately negotiated prices. Shares outstanding prior to offering: 25,740,000 shares of common stock. Shares outstanding after offering: 25,740,000 shares of common stock. Our sole executive officer and a director currently owns 77.7% of our outstanding shares of common stock. As a result, he has substantial control over all matters submitted to our stockholders for approval. Market for the common shares: There has been no market for our securities. Our common stock is not traded on any exchange or on the over-the-counter market. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the FINRA for our common stock to eligible for trading on the Over-The-Counter Bulletin Board. We do not yet have a market maker who has agreed to file such application. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of our common stock may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resale.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001522420_bsb_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001522420_bsb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dffe183394b1d1ecc4546c265530ed39df5699bb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001522420_bsb_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the Consolidated Financial Statements and the notes to the Consolidated Financial Statements. In this prospectus, the terms we, our, and us refer to BSB Bancorp, Inc. and Belmont Savings Bank unless the context indicates another meaning. Belmont Savings Bank Belmont Savings Bank is a Massachusetts chartered savings bank headquartered in Belmont, Massachusetts. We were organized in 1885, and reorganized into the mutual holding company structure in 2009. Belmont Savings Bank is currently the wholly owned subsidiary of BSB Bancorp, Inc., a Massachusetts corporation ( BSB Bancorp Massachusetts ), which is the wholly owned subsidiary of BSB Bancorp, MHC, a Massachusetts mutual holding company. On a consolidated basis, as of March 31, 2011, BSB Bancorp, MHC had total assets of $529.3 million, total loans of $386.0 million, total deposits of $377.3 million and total equity of $47.2 million. We provide financial services to individuals, families and businesses through our four full-service branch offices located in Belmont and Watertown in Southeast Middlesex County, Massachusetts. Our primary lending market includes Essex, Middlesex, Norfolk and Suffolk Counties, Massachusetts. Belmont Savings Bank s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in residential and commercial mortgage loans, home equity lines of credit, consumer loans, primarily consisting of indirect automobile loans, commercial loans and construction loans. We also invest in investment securities, consisting of corporate debt securities, U.S. government and agency obligations, U.S. government sponsored mortgage-backed securities, and to a lesser extent, marketable equity securities. Belmont Savings Bank offers a variety of deposit accounts, including statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts and individual retirement accounts. Belmont Savings Bank s executive offices are located at 2 Leonard Street, Belmont Center, Belmont, MA 02478. Our telephone number at this address is 617-484-6700. Our website address is www.belmontsavings.com. Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus. BSB Bancorp, Inc. BSB Bancorp, Inc. is a newly formed Maryland corporation that will own all of the outstanding shares of common stock of Belmont Savings Bank upon completion of the mutual-to-stock conversion of BSB Bancorp, MHC and the offering. BSB Bancorp, Inc. has not engaged in any business to date. Our executive offices are located at 2 Leonard Street, Belmont Center, Belmont, MA 02478. Our telephone number at this address is 617-484-6700. Our Organizational Structure In 2009, Belmont Savings Bank s mutual predecessor reorganized into the mutual holding company form of organization by forming BSB Bancorp, MHC, a Massachusetts mutual holding Table of Contents PROSPECTUS BSB BANCORP, INC. (Proposed Holding Company for Belmont Savings Bank) Up to Maximum 7,820,000 Shares of Common Stock BSB Bancorp, Inc., a Maryland corporation, is offering shares of common stock for sale in connection with the conversion of BSB Bancorp, MHC from the mutual to the stock form of organization. We expect that our common stock will be listed for trading on the Nasdaq Capital Market under the symbol BLMT upon conclusion of the stock offering. There is currently no public market for the shares of our common stock. We are offering up to 7,820,000 shares of common stock for sale on a best efforts basis. We may sell up to 8,993,000 shares of common stock because of demand for the shares in excess of 7,820,000 shares or changes in market conditions that would increase our pro forma market value in excess of $79.8 million (7,820,000 shares sold multiplied by the $10.00 purchase price per share plus $1.6 million worth of stock that we intend to contribute to a charitable foundation) without resoliciting subscribers. We must sell a minimum of 5,780,000 shares in order to complete the offering. In addition to the shares that we will sell in the offering, we intend to establish a charitable foundation in connection with the conversion and contribute to it shares of our common stock equal to 2.0% of the shares sold in the offering, plus $200,000 in cash. We are offering the shares of common stock in a subscription offering. Depositors of Belmont Savings Bank with aggregate account balances of at least $50 as of the close of business on May 31, 2010 will have first priority rights to buy our shares of common stock. Employees, officers, trustees, directors and corporators of Belmont Savings Bank, BSB Bancorp, Inc. and BSB Bancorp, MHC also have rights to purchase shares in the subscription offering, subject to the priority rights of depositors and Belmont Savings Bank s employee stock ownership plan. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a community offering. We also may offer for sale shares of common stock not subscribed for in the subscription offering or community offering through a syndicated community offering managed by Keefe, Bruyette & Woods, Inc. The minimum number of shares of common stock that you may order is 25 shares. The maximum number of shares of common stock that can be ordered through a single qualifying account or by any person in the subscription offering is 30,000 shares, and no person by himself or with an associate or group of persons acting in concert may purchase more than 60,000 shares in the offering. The subscription offering is expected to expire at 12:00 noon, Eastern time, on [expiration date]. We may extend the subscription offering and/or community offering without notice to you until [extension date], unless the Massachusetts Commissioner of Banks approves a later date, which may not be beyond June 2, 2013. Once submitted, orders are irrevocable unless the offering is terminated or is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 8,993,000 shares or decreased to fewer than 5,780,000 shares. If the offering is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 8,993,000 shares or decreased to fewer than 5,780,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock will be returned promptly with interest. Funds received during the offering will be held in a segregated account at Belmont Savings Bank, and will earn interest at our passbook savings rate, which is currently % per annum. Keefe, Bruyette & Woods, Inc. will assist us in selling our shares of common stock on a best efforts basis. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of the common stock that are being offered for sale. This investment involves a degree of risk, including the possible loss of your investment. Please read Risk Factors beginning on page 15. OFFERING SUMMARY Price: $10.00 per Share Minimum Midpoint Maximum Adjusted Maximum Number of shares 5,780,000 6,800,000 7,820,000 8,993,000 Gross offering proceeds $ 57,800,000 $ 68,000,000 $ 78,200,000 $ 89,930,000 Estimated offering expenses (excluding selling agent fees and expenses) $ 1,108,000 $ 1,108,000 $ 1,108,000 $ 1,108,000 Estimated selling agent fees and expenses (1) (2) $ 550,000 $ 550,000 $ 550,000 $ 550,000 Estimated net proceeds $ 56,142,000 $ 66,342,000 $ 76,542,000 $ 88,272,000 Estimated net proceeds per share $ 9.71 $ 9.76 $ 9.79 $ 9.82 (1) The amounts shown assume that all shares are sold in the subscription and community offerings. If shares are sold in the syndicated community offering, compensation paid to Keefe, Bruyette & Woods, Inc. will be higher and net proceeds and net proceeds per share will be lower. See The Conversion; Plan of Distribution Marketing and Distribution; Compensation for a discussion of Keefe, Bruyette & Woods, Inc. s compensation for this offering. (2) If all shares of common stock are sold in the syndicated community offering, excluding shares purchased by the employees stock ownership plan and shares purchased by insiders of BSB Bancorp, Inc., for which no selling agent commissions would be paid, the selling agent commissions and expenses would be $3.1 million at the minimum, $4.3 million at the maximum and $4.9 million at the adjusted maximum. See The Conversion; Plan of Distribution Marketing and Distribution; Compensation for a discussion of fees to be paid to Keefe, Bruyette & Woods, Inc. and other FINRA member firms in the event that shares are sold in a syndicated community offering. These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation, any other government agency or the Depositors Insurance Fund. None of the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Massachusetts Commissioner of Banks or any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. For assistance, please call the Stock Information Center at [SIC Phone]. KEEFE, BRUYETTE & WOODS The date of this prospectus is , 2011. Table of Contents company. BSB Bancorp, MHC owns 100% of the outstanding shares of common stock of BSB Bancorp Massachusetts. As a mutual holding company, BSB Bancorp, MHC has no stockholders. BSB Bancorp Massachusetts owns 100% of the outstanding shares of common stock of Belmont Savings Bank. BSB Bancorp Massachusetts has not issued shares of stock to the public. Pursuant to the terms of BSB Bancorp, MHC s plan of conversion, BSB Bancorp, MHC will convert from a mutual holding company to the stock holding company corporate structure. Upon the completion of the conversion, BSB Bancorp, MHC and BSB Bancorp Massachusetts will cease to exist, and Belmont Savings Bank will be a wholly owned subsidiary of BSB Bancorp, Inc., a Maryland corporation. The board of corporators of BSB Bancorp, MHC currently has the right to vote on certain matters such as the election of trustees and the conversion. A special meeting of corporators has been scheduled to vote to approve the plan of conversion and the establishment and funding of a charitable foundation. Business Strategy Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of retail customers and small businesses in the communities that we serve. While we intend to continue our origination of one- to four-family residential mortgage loans, we intend to significantly increase our home equity lines of credit, commercial real estate loans, commercial loans and indirect automobile loans. Our operations and strategy will include: continuing to build our retail customer base through new product and marketing-driven initiatives; continuing to emphasize the origination of commercial and multi-family real estate loans, home equity lines of credit, commercial business loans and indirect automobile loans, while maintaining high asset quality; emphasizing lower-cost core deposits from new customers through our commercial real estate lending and small business initiatives; expanding our branch network; increasing our capital to support our future growth; and continuing our community-oriented focus, including the establishment and funding of a new charitable foundation in connection with the conversion. A full description of our products and services begins on page 76 of this prospectus under the heading Business of Belmont Savings Bank. These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors. See Management s Discussion and Analysis of Financial Condition and Results of Operations Business Strategy for a further discussion of our business strategy. Table of Contents Table of Contents Reasons for the Conversion Our primary reasons for converting and raising additional capital through the offering are: to support future growth and profitability through, among other things, branch expansion and increased lending; to compete more effectively in the financial services marketplace by diversifying products and services that we offer to customers; to retain and attract qualified directors, management and employees by establishing stock-based benefit plans; to increase our philanthropic endeavors in the communities that we serve through the establishment and funding of a charitable foundation; and to offer our depositors, employees, management, trustees, directors and corporators an opportunity to purchase our stock. We believe that the additional capital raised in the offering will enable us to take advantage of business opportunities that may not otherwise be available to us. As of March 31, 2011, Belmont Savings Bank was considered well capitalized for regulatory purposes. For further information about our reasons for the conversion and stock offering, please see The Conversion; Plan of Distribution Reasons for the Conversion. Terms of the Conversion and the Offering Under BSB Bancorp, MHC s plan of conversion, our organization will convert to a fully public stock holding company structure. In connection with the conversion, we are offering between 5,780,000 and 7,820,000 shares of common stock to eligible depositors of Belmont Savings Bank, to our employee stock ownership plan, to employees, officers, trustees, directors and corporators of Belmont Savings Bank, BSB Bancorp Massachusetts and BSB Bancorp, MHC, and, to the extent shares remain available, to the general public. The number of shares of common stock to be sold may be increased to up to 8,993,000 as a result of demand for the shares or changes in the market for financial institution stocks. Unless the number of shares of common stock to be offered for sale is increased to more than 8,993,000 or decreased to less than 5,780,000, or the offering is extended beyond [extension date], subscribers will not have the opportunity to change or cancel their stock orders. The purchase price of each share of common stock to be sold in the offering is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc., our marketing advisor in the offering, will use its best efforts to assist us in selling shares of our common stock. Keefe, Bruyette & Woods, Inc. is not obligated to purchase any shares of common stock in the offering. Table of Contents Persons Who May Order Shares of Common Stock in the Offering We are offering the shares of common stock in a subscription offering in the following descending order of priority: First, to depositors of Belmont Savings Bank with aggregate account balances of at least $50 as of the close of business on May 31, 2010. Second, to Belmont Savings Bank s tax-qualified employee plans, including its employee stock ownership plan, which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock issued in the offering (including shares contributed to our charitable foundation). We expect our employee stock ownership plan to purchase 5% of the shares of common stock issued in the offering. Third, to employees, officers, directors, trustees and corporators of Belmont Savings Bank, BSB Bancorp Massachusetts and BSB Bancorp, MHC who do not have a higher priority to purchase stock. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given to natural persons residing in the towns of Arlington, Belmont, Lexington and Watertown, and the cities of Newton and Waltham, in Massachusetts. The community offering may occur concurrently, during or promptly after the subscription offering. If shares remain available for sale following the subscription offering or community offering, we also may offer for sale shares of common stock through a syndicated community offering managed by Keefe, Bruyette & Woods, Inc. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering. To ensure a proper allocation of stock, each subscriber eligible to purchase stock in the subscription offering must list on his or her stock order and certification form all deposit accounts in which he or she had an ownership interest at May 31, 2010. Failure to list all accounts, or providing incorrect information, could result in the loss of all or part of a subscriber s stock allocation. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final. If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first in the order of priority to subscribers in the subscription offering. For a detailed description of the offering, including share allocation procedures, please see The Conversion; Plan of Distribution. How We Determined the Offering Range The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of BSB Bancorp, Inc., assuming the conversion and the offering are completed. RP Financial, LC., our independent appraiser, has estimated that, as of May 13, 2011, the market value of the shares to be issued in the offering (including shares to be contributed to the charitable foundation) ranged from $59.0 million to $79.8 million, with a midpoint of $69.4 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 5,780,000 shares to 7,820,000 shares. If market conditions so warrant, the market value of the shares can be increased to a maximum, as adjusted, market value of $91.7 million and the number of shares offered for sale increased to a maximum, as adjusted, of 8,993,000 shares. The $10.00 per share Table of Contents offering price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. RP Financial, LC. advised the Board of Directors that the appraisal was prepared in conformance with the regulatory appraisal methodology. That methodology requires a valuation based on an analysis of the trading prices of comparable public companies whose stocks have traded for at least one year prior to the valuation date. RP Financial, LC. selected a group of eleven comparable public companies for this analysis. RP Financial, LC. advised the Board of Directors that based on the recent stock market performance and pricing ratios of publicly-traded thrift institutions in general, as well as the appraisal peer group and recent mutual-to-stock conversions, the valuation conclusion took into consideration a slight downward valuation adjustment based on these factors. RP Financial, LC. also considered that we intend to contribute to a charitable foundation shares of our common stock equal to 2.0% of the shares sold in the offering, plus $200,000 in cash. The intended contribution of shares of common stock to the charitable foundation has the effect of reducing our estimated pro forma valuation. See Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation. The appraisal peer group consists of the companies listed in the table below. Asset sizes are as of March 31, 2011, except as noted. Company Name Ticker Symbol Exchange Headquarters Total Assets (in millions) Beacon Federal Bancorp, Inc. (BFED) NASDAQ East Syracuse, NY $ 1,094 Cape Bancorp, Inc. (CBNJ) NASDAQ Cape May Court House, NJ 1,062 Central Bancorp, Inc. (CEBK) NASDAQ Somerville, MA 512 (1) Chicopee Bancorp, Inc. (CBNK) NASDAQ Chicopee, MA 582 ESSA Bancorp, Inc. (ESSA) NASDAQ Stroudsburg, PA 1,094 The Elmira Savings Bank, FSB (ESBK) NASDAQ Elmira, NY 500 (1) Hampden Bancorp, Inc. (HBNK) NASDAQ Springfield, MA 575 Newport Bancorp, Inc. (NFSB) NASDAQ Newport, RI 450 OBA Financial Services, Inc. (OBAF) NASDAQ Germantown, MD 356 Ocean Shore Holding Co. (OSHC) NASDAQ Ocean City, NJ 861 TF Financial Corporation (THRD) NASDAQ Newton, PA 684 (1) As of December 31, 2010. The following table presents a summary of selected pricing ratios for BSB Bancorp, Inc. and the peer group companies identified by RP Financial, LC. Price-to-earnings multiples are shown on a core earnings basis, where earnings have been adjusted to omit non-recurring income and expense items. Price-to-book value multiples are shown for both reported book value and tangible book value, omitting intangible assets. All pricing ratios are based on earnings for the twelve months ended March 31, 2011 and book value as of March 31, 2011. Compared to the median pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a discount of 21.5% on a price-to-book value basis, a discount of 24.7% on a price-to-tangible book value basis and a premium of 536.4% on a price-to-core earnings basis. Our Board of Directors, in reviewing and approving the valuation, considered our pro forma earnings and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other. Table of Contents Price-to-core earnings multiple (1) Price-to-book value ratio Price-to-tangible book value ratio BSB Bancorp, Inc. (pro forma) Maximum, as adjusted 128.00x 71.79 % 71.79 % Maximum 110.80x 68.17 % 68.17 % Midpoint 95.96x 64.39 % 64.39 % Minimum 81.24x 59.95 % 59.95 % Valuation of peer group companies using stock prices as of May 13, 2011 Averages 20.40x 89.33 % 96.12 % Medians 17.41x 86.81 % 90.51 % (1) Based on core, or recurring, earnings calculated by RP Financial, LC. for the twelve months ended March 31, 2011. For purposes of RP Financial, LC. s appraisal report, core earnings are generally defined as reported earnings adjusted for gains and losses from the sale or write-down of assets or liabilities on a tax-effected basis. In the calculation of BSB Bancorp Inc. s core earnings, earnings adjustments to reported earnings of $2,455,000 consisted of elimination of gain on sale of loans equal to $365,000, gain on sale of securities equal to $2,954,000, net loss on trading securities of $302,000 and write-down of impaired securities equal to $204,000. Each of the adjustments were tax-effected, based on a combined federal and state tax rate of 40.0%. Our Board of Directors carefully reviewed the information provided to it by RP Financial, LC. through the appraisal process, but did not make any determination regarding whether prior standard mutual-to-stock conversions have been undervalued, nor did the Board of Directors draw any conclusions regarding how the historical data reflected above may affect BSB Bancorp, Inc. s appraisal. Instead, we engaged RP Financial, LC. to help us understand the regulatory process as it applies to the appraisal and to advise the Board of Directors as to how much capital BSB Bancorp, Inc. would be required to raise under the regulatory appraisal guidelines. The independent appraisal does not indicate per share market value. Do not assume or expect that the valuation of BSB Bancorp, Inc. as indicated above means that, after the conversion and the offering, the shares of common stock will trade at or above the $10.00 offering price. Furthermore, the pricing ratios presented above were utilized by RP Financial, LC. to estimate our market value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location. For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see The Conversion; Plan of Distribution Determination of Share Price and Number of Shares to be Issued. Limits on How Much Common Stock You May Purchase The minimum number of shares of common stock that may be purchased is 25. Generally, no individual with one or more qualifying accounts, or individuals exercising subscription rights through a single qualifying account held jointly, may purchase more than 30,000 shares ($300,000) of common stock in the subscription offering. If any of the following persons purchases shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 60,000 shares ($600,000): Table of Contents your spouse or relatives of you or your spouse living in your house; companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior management position; or other persons who may be your associates or persons acting in concert with you. See the detailed descriptions of acting in concert and associate in The Conversion; Plan of Distribution Limitations on Common Stock Purchases. How You May Purchase Shares of Common Stock In the subscription offering and community offering, you may pay for your shares only by: personal check, bank check or money order, made payable to BSB Bancorp, Inc.; or authorizing us to withdraw funds from the types of Belmont Savings Bank deposit accounts permitted on the stock order and certification form. Belmont Savings Bank is not permitted to knowingly lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a check drawn on a Belmont Savings Bank line of credit or a third-party check to pay for shares of common stock. You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order and certification form, together with full payment or authorization to withdraw from one or more of your Belmont Savings Bank deposit accounts, so that it is received (not postmarked) before 12:00 noon, Eastern time, on [expiration date], which is the expiration of the subscription offering period. You may submit your stock order and certification form by mail using the order reply envelope provided, by overnight courier to the indicated address on the order form, or by hand delivery to our Stock Information Center, located at [SIC Address]. We will not accept stock order forms at our branch offices. You may be able to subscribe for shares of common stock using funds in your individual retirement account (IRA). If you wish to use some or all of the funds in your Belmont Savings Bank IRA to purchase our common stock, the applicable funds must be transferred to a self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. Because individual circumstances differ and processing of IRA fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [expiration date] expiration of the offering period, for assistance with purchases using funds from your Belmont Savings Bank IRA or any other retirement account that you may have. Whether you may use such funds for the purchase of shares in the stock offering may depend on time constraints and, possibly, limitations imposed by the brokerage firm or institution where your funds are held. See The Conversion; Plan of Distribution Procedure for Purchasing Shares for a complete description of how to purchase shares in the stock offering. Table of Contents Deadline for Orders of Common Stock The deadline for purchasing shares of common stock in the offering is 12:00 noon, Eastern time, on [expiration date]. A postmark prior to [expiration date] will not entitle you to purchase shares of common stock unless we receive the envelope by 12:00 noon, Eastern time on [expiration date]. Although we will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 12:00 noon, Eastern time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights. See The Conversion; Plan of Distribution Procedure for Purchasing Shares for a complete description of how to purchase shares in the stock offering. Delivery of Stock Certificates Certificates representing shares of common stock sold in the offering will be mailed to the certificate registration address noted on the order form. We expect stock certificates to be sent to purchasers by first-class mail on or about the day the stock offering closes, and expect trading in the stock typically to begin the business day following the closing of the stock offering. The stock offering is expected to close as soon as practicable following satisfaction of the conditions described in The Conversion; Plan of Distribution Approvals Required. It is possible that, until certificates for the common stock are delivered, purchasers might not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading. Your ability to sell the shares of common stock prior to your receipt of the stock certificate will depend on arrangements you may make with a brokerage firm, as you are generally required to deliver stock certificates within three business days of selling the underlying securities. After-Market Stock Price Performance Provided by Independent Appraiser The following table presents stock price appreciation information for all standard mutual-to-stock conversions completed between January 1, 2010 and May 13, 2011. The group of companies for which price information is provided below is not the same peer group of eleven comparable public companies utilized in RP Financial, LC. s valuation analysis. Table of Contents Mutual-to-Stock Conversion Offerings with Closing Dates between January 1, 2010 and May 13, 2011 Conversion Date Exchange Percentage Price Appreciation From Initial Trading Date Company Name and Ticker Symbol One Day One Week One Month Through May 13, 2011 Franklin Financial Corporation (FRNK) 04/28/11 NASDAQ 19.7 % 17.7 % NA % 18.0 % Anchor Bancorp (ANCB) 01/26/11 NASDAQ 0.0 0.3 4.5 (4.4 ) Wolverine Bancorp, Inc. (WBKC) 01/20/11 NASDAQ 24.5 22.4 35.0 49.0 SP Bancorp, Inc. (SPBC) 11/01/10 NASDAQ (6.0 ) (6.6 ) (8.0 ) 18.6 Standard Financial Corp. (STND) 10/07/10 NASDAQ 19.0 18.9 29.5 54.0 Peoples Federal Bancshares, Inc. (PEOP) 07/07/10 NASDAQ 4.0 6.9 4.2 42.4 OBA Financial Services, Inc. (OBAF) 01/22/10 NASDAQ 3.9 1.1 3.0 48.0 OmniAmerican Bancorp, Inc. (OABC) 01/21/10 NASDAQ 18.5 13.2 9.9 46.2 Athens Bancshares Corporation (AFCB) 01/07/10 NASDAQ 16.0 13.9 10.6 35.5 Sunshine Financial, Inc. (SSNF) 04/06/11 OTC 12.5 11.0 14.0 14.0 Fraternity Community Bancorp, Inc. (FRTR) 04/01/11 OTC 10.0 11.7 10.0 4.0 Madison Bancorp, Inc. (MDSN) 10/07/10 OTC 25.0 25.0 25.0 5.0 Century Next Financial Corporation (CTUY) 10/01/10 OTC 25.0 15.0 10.0 60.0 United-American Savings Bank (UASB) 08/06/10 OTC 0.0 (5.0 ) 5.0 30.5 Fairmount Bancorp, Inc. (FMTB) 06/03/10 OTC 10.0 20.0 10.0 65.0 Harvard Illinois Bancorp, Inc. (HARI) 04/09/10 OTC 0.0 0.0 (1.0 ) (10.0 ) Versailles Financial Corporation (VERF) 01/13/10 OTC 0.0 0.0 0.0 30.0 Average 10.7 % 9.7 % 10.1 % 29.8 % Median 10.0 % 11.7 % 10.0 % 30.5 % Stock price appreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company s assets, and the company s market area. None of the companies listed in the table above are exactly the same as BSB Bancorp, Inc., the pricing ratios for their stock offerings were in some cases different from the pricing ratios for BSB Bancorp, Inc. s common stock and the market conditions in which these offerings were completed were, in most cases, different from current market conditions. The performance of these stocks may not be indicative of how our stock will perform. There can be no assurance that our stock price will not trade
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001524329_saving_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001524329_saving_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..03e574db18f9b5a7a0b67673634bdbaa5d294883
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001524329_saving_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including Risk Factors , Management s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements, before making an investment decision . Business Overview Saving Energy Solar, Inc. ( SES ) is a Nevada corporation formed on March 16, 2007. We are a diversified provider of solar energy related applications. Our core business focuses on (1) the residential and commercial installation of solar panels; (2) mobile, solar-based energy solutions including a portable energy trailer (PET); applications based research and development; (3) solar energy education; and (4) the assembly of solar panel components. Where You Can Find Us Our principal executive office is located at 2043 Pabco Rd, Henderson, Nevada 89011. Telephone No: (702) 448 4410. Our Internet address is www.savingenergysolargroup.com/. Information contained on, or accessed through our website is not intended to constitute and shall not be deemed to constitute part of this prospectus. The Offering Common stock offered by selling security holders 8,067,454 shares of common stock. Common stock outstanding before the offering 63,867,454 shares of common stock. Common stock outstanding after the offering 63,867,454 shares of common stock Terms of the Offering The selling security holders will determine when and how they will sell the common stock offered in this prospectus. Use of Proceeds The Company is not selling any shares of the common stock covered by this prospectus, and, as a result, will not receive any proceeds from this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525251_fp1096-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525251_fp1096-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..49ac69f99e5d98024aa68754ce821c84fb96ec52
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525251_fp1096-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 4
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525615_sharkfish_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525615_sharkfish_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525615_sharkfish_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525622_penthouse_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525622_penthouse_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525622_penthouse_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525623_magnolia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525623_magnolia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525623_magnolia_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525631_streamray_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525631_streamray_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525631_streamray_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525638_west_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525638_west_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525638_west_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525666_fastcupid_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525666_fastcupid_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525666_fastcupid_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525677_fierce_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525677_fierce_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525677_fierce_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525691_gmi-on_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525691_gmi-on_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525691_gmi-on_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001525694_naft-news_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001525694_naft-news_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001525694_naft-news_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001527622_rose-rock_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001527622_rose-rock_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9c149ee06457b10c15b1a19ebf0c803cfd36f000
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001527622_rose-rock_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary provides a brief overview of information contained elsewhere in this prospectus. Because it is abbreviated, this summary does not contain all of the information that you should consider before investing in our common units. You should read the entire prospectus carefully, including the historical combined financial statements, the pro forma financial statements and the related notes included elsewhere herein. The information presented in this prospectus assumes (1) an initial public offering price of $20.00 per common unit (the mid-point of the price range set forth on the cover page of this prospectus) and (2) unless otherwise indicated, that the underwriters option to purchase additional common units is not exercised. You should read Risk Factors beginning on page 21 for more information about important risks that you should consider carefully before investing in our common units. We include a glossary of some of the terms used in this prospectus as Appendix B. Unless the context otherwise requires, references in this prospectus to (i) the partnership, we, our, us or like terms, when used in a historical context, refer to our predecessor, and when used in the present tense or prospectively, refer to Rose Rock Midstream, L.P. and its subsidiaries; (ii) SemGroup refer to SemGroup Corporation (NYSE: SEMG) and its subsidiaries and affiliates, other than our general partner and us; (iii) Rose Rock Midstream GP or our general partner refer to Rose Rock Midstream GP, LLC; and (iv) unitholders refer to our common and subordinated unitholders, and not our general partner. For a description of the entities comprising our predecessor, please see page 16.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001528708_aero_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001528708_aero_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001528708_aero_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001528711_h-l_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001528711_h-l_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001528711_h-l_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001529874_pacific_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001529874_pacific_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b0312bd37665c112c5f3f960c1f814624006e54c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001529874_pacific_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary does not contain all of the information you should consider before buying shares of our common stock. You should read the entire prospectus carefully, especially the "Risk Factors" section and our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in shares of our common stock. PROSPECTIVE INVESTORS ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. We were incorporated on July 16, 2009, under the laws of the state of Wyoming. Our principal offices are located at 109 W. 17th Street, Cheyenne, WY 82001. THE OFFERING Securities Being Offered A minimum of 2,400,000 and up to 4,000,000 shares of common stock, $0.001 par value. Offering Price $0.25 per share. Terms of the Offering We will determine when and how we will sell the common stock offered in this prospectus. Termination of the Offering The offering may terminate on the earlier of: (i) the date when the sale of all 4,000,000 Shares is completed, (ii) anytime after the Minimum Offering of 2,400,000 shares of common stock is achieved, in the Company s discretion, or (ii) 180 days from the effective date of this document, or any extension thereto. Use of Proceeds We will use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures, and potentially for buying gold and silver properties and manufacturing facilities, distribution channels and mining operations. SUMMARY OF OUR BUSINES We are a start-up, exploration stage corporation engaged in the search for gold and silver. We intend to explore and acquire viable gold and silver claims and set up a mining operation specifically in the Caribou Gold District of Northern British Columbia, Canada. Other than $12,454 in cash, we have no assets and no property.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/CIK0001530168_flash_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/CIK0001530168_flash_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..70c3038c5cc00a545169ebbf4e144f9207388da4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/CIK0001530168_flash_prospectus_summary.txt
@@ -0,0 +1 @@
+consolidated financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should carefully read this entire prospectus, including the section entitled Risk Factors and our consolidated financial statements and notes to those statements. As used in this prospectus, unless the context otherwise requires, all references to we, us, our, our company or the company refer to FriendFinder Networks Inc. and, where appropriate, our consolidated direct and indirect subsidiaries, except where it is clear that the terms mean only FriendFinder Networks Inc. The term INI refers to our subsidiary and co-issuer of the Registrable Notes, Interactive Network, Inc. References to our common stock refer only to our voting common stock and except as otherwise noted, such references do not include our Series B common stock or our preferred common stock. Except where we state otherwise, the information presented in this prospectus reflects (i) the amendment and restatement of our bylaws, effective upon the consummation of our initial public offering on May 16, 2011, and (ii) the amendment and restatement of our articles of incorporation, which became effective on January 25, 2010. About Our Company FriendFinder Networks Inc. is a leading internet and technology company providing services in the rapidly expanding markets of social networking and web-based video sharing. Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world. Through our extensive network of more than 44,000 websites, since our inception, we have built a base of more than 484 million registrants and more than 320 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore. We offer our members a wide variety of online services so that they can interact with each other and access the content available on our websites. Our most heavily visited websites include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com. For the nine months ended September 30, 2011, we had net revenue, income from operations and net losses of $249.6 million, $52.4 million and $(20.9) million, respectively. For the year ended December 31, 2010, we had net revenue, income from operations and net losses of $346.0 million, $71.1 million and ($43.2) million, respectively. Our revenues to date have been primarily derived from online subscription and paid-usage for our products and services. These products and services are delivered primarily through two highly scalable revenue-generating technology platforms: Social Networking. Approximately 69% of our total net revenues for the nine months ended September 30, 2011 and 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. We have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. Live Interactive Video. Approximately 24% of our total net revenues for the nine months ended September 30, 2011 and 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. In addition to our revenue-generating technology platforms, we have invested significant time and resources into developing our back-end marketing, analytics and billing technologies, which are a key contributor to the success of our business. We have developed proprietary systems to allow our marketing affiliates to maximize their revenue for our mutual benefit. These systems include proprietary white-labeling solutions, in which we provide back-end technology solutions to permit affiliates and marketing partners to deliver our products and services while maintaining the affiliate s and marketing partner s own branding and style, self-optimizing ad spots, and a robust banner optimization engine that automatically chooses the best possible site and banner to promote in a given ad spot. Our marketing technology has also enabled the creation and continued growth of our network of more than 280,000 affiliates, which we believe is one of the largest of its kind in the world and a significant barrier to entry to potential and existing competitors. Similarly, our proprietary analytics technology provides us with an advantage relative to less sophisticated competitors by enabling us to estimate future revenue based on short-term response to our advertising campaigns, as well as providing for analysis of key data and metrics in order to optimize our marketing spend and maximize the revenues our websites generate. Our robust billing platform allows our customers to pay using many of the widely-adopted methods of e-commerce, both domestically as well as internationally. We categorize our users into five categories: visitors, registrants, members, subscribers and paid users. Visitors. Visitors are users who visit our websites but do not necessarily register. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, representing a growth of more than 300% from our approximately 46.9 million unique worldwide visitors in January 2009, according to comScore. Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the nine months ended September 30, 2011, we averaged more than 6.4 million new registrations on our websites each month. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. Members. Members are registrants who log into one of our websites and make use of our free products and services. For the nine months ended September 30, 2011, we averaged more than 4.0 million new members on our websites each month. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the nine months ended September 30, 2011, we had a monthly average of approximately 950 thousand and for the year ended December 31, 2010, we had a monthly average of approximately 1 million paying subscribers. Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the nine months ended September 30, 2011, we averaged approximately 2.9 million purchased minutes by paid users each month. For the year ended December 31, 2010, we averaged approximately 3.0 million purchased minutes by paid users each month. We focus on the following key business metrics to evaluate the effectiveness of our operating strategies. Average Revenue per Subscriber. We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the nine months ended September 30, 2011, our average monthly revenue per subscriber was $20.22. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 of loss of subscribers, for the nine months ended September 30, 2011 was 16.3% per month. Our average monthly churn rate for the year ended December 31, 2010 was 16.1% per month. Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA for the nine months ended September 30, 2011 was $42.76. Our CPGA for the year ended December 31, 2010 was $47.25. Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber for the nine months ended September 30, 2011 was $81.06. Our Average Lifetime Net Revenue Per Subscriber for the year ended December 31, 2010 was $80.17. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. In addition to our social networks and live interactive video platforms, we also offer professionally-generated content through our premium content technology platform and our non-internet entertainment business. Through websites such as Penthouse.com and HotBox.com, our subscribers and paid users have access to our collection of more than 15,000 hours of professional video, which includes our library of more than 800 standard and high-definition full-length feature films and one million professionally produced images. We began shooting all of our content in 3D in September 2010. Additionally, subscribers have access to editorial content, chat rooms and other interactive features. In addition to our online products and services, we also have a non-technology legacy entertainment business, in which we produce and distribute original pictorial and video content via traditional distribution channels including licensing and retail DVD channels, and license the globally-recognized Penthouse brand to a variety of consumer product companies and entertainment venues and public branded men s lifestyle magazines. Our Competitive Strengths We believe that we have the following competitive strengths that we can leverage to implement our strategy: Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 4.0 million new members each month. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. As of September 30, 2011 and December 31, 2010, we had more than 280,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 46% of our net revenues for the nine months ended September 30, 2011 and 45% of our net revenues for the year ended December 31, 2010. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend for the nine months ended September 30, 2011 and the year ended December 31, 2010 of $64.5 million and $103.5 million, respectively, presents a significant barrier to entry for potential competitors. Our Strategy Our goal is to enhance revenue opportunities while improving our profitability. We plan to achieve these goals using the following strategies: Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $8,000 per month in the nine months ended September 30, 2011 and $9,000 per month for the year ended December 31, 2010. With continued worldwide growth in this advertising segment, we see this as a significant growth opportunity. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. Our New Financing On October 27, 2010, we issued new debt to repay our then existing debt, which we refer to as the New Financing. We, along with our wholly-owned subsidiary Interactive Network, Inc., or INI, co-issued $305.0 million principal amount of the Senior Secured Notes, $13.8 million of the Cash Pay Notes, and $232.5 million of the Non-Cash Pay Notes. Our Initial Public Offering On May 16, 2011, we issued 5,000,000 shares of common stock at a price of $10.00 per share and completed our initial public offering (the IPO ). We raised gross proceeds of $50.0 million, less underwriting fees and commissions of 7.25% of the gross proceeds, or $3.6 million, and incurred other offering expenses of $2.9 million to be paid from the proceeds of the offering, resulting in $43.5 million of net proceeds. In addition, we had incurred and paid as of December 31, 2010, $13.3 million of offering costs, which were included in deferred offering costs in the accompanying balance sheet at December 31, 2010 and written off by a charge to capital in excess of par value in the quarter ended June 30, 2011. On May 19, 2011, we redeemed $37.8 million of our Senior Secured Notes and $1.7 million of our Cash Pay Notes for a total of $39.5 million principal amount of New Financing redeemed from the net proceeds of our IPO and incurred a loss on extinguishment of debt estimated to be approximately $7.3 million. As of September 30, 2011, the outstanding principal amounts of the Senior Secured Notes, Cash Pay Notes and Non-Cash Pay Notes were $235.3 million, $10.6 million and $250.9 million, respectively. Recent Developments In July 2011, we acquired, through one of our subsidiaries, PerfectMatch.com, an online relationship service helping adults seeking successful, lasting connections. We paid approximately $2.5 million in cash and stock to acquire the assets of the website. PerfectMatch.com uses the Duet Total Compatibility System, a system which analyzes the whole person to find friends, taking into account each member s personality, values and ideals, life and love-style preferences to identify and find the person right for them. The acquisition of this website and related assets adds to our portfolio of general audience social networking websites. In September 2011, we acquired, through one of our subsidiaries, BDM Global Ventures Ltd., the company which owns the operations of JigoCity. The acquisition was completed pursuant to an Agreement and Plan of Merger entered into on September 7, 2011 among us, JGC Holdings Limited, our wholly-owned subsidiary, BDM Global Ventures Limited, which we refer to as BDM, Global Investment Ventures LLC and Anthony R. Bobulinski, which we refer to as the Merger Agreement. Under the terms of the Merger Agreement, the shareholders of BDM, in exchange for their outstanding shares and options in BDM and its subsidiaries, received merger consideration consisting of 1,555,555, shares of our common stock, 500,000 of which will be held in escrow until no later than December 31, 2012, and warrants exercisable into 6,436,851 shares of our common stock with exercise prices ranging from $5-$18 per share with an expiration date of December 31, 2021. Pursuant to an equity put agreement we entered into, the shareholders of BDM have the option to sell all of the shares of our common stock and warrants issued as merger consideration back to us in exchange for the return of 70% of the equity in BDM if the volume-weighted average price of our common stock fails to equal or exceed $12.00 per share during any 10 trading day period principally between the closing date and the later of June 30, 2014 and the date upon which our current indentures are fully discharged, or if an indenture modification is made, as defined in the equity put agreement, the later of June 30, 2014 and the date the indenture modification takes place (the later date hereinafter referred to as the Vesting Date ). The equity put agreement provides that the put right shall become exercisable at the sole discretion of the shareholders appointed representative during the period commencing on the Vesting Date and expiring sixty (60) days thereafter. Additionally, if the shareholders of BDM exercise the put right, we have the right to pay them in our common stock and/or cash, having a combined value as of the later of the above dates equal to the product of (i) 2,209,414 shares of common stock (subject to dilutive adjustment) and (ii) the difference between the highest 10 day volume-weighted average price attained by our common stock during such period and $12.00, in which case the put right terminates. Pursuant to a registration rights agreement, we also granted demand registration rights under certain circumstances, with respect to the shares of our common stock and warrants issued as merger consideration. JigoCity is a global social commerce organization committed to providing members with high quality daily deals that are relevant to their individual lifestyles. The acquisition of JigoCity adds to our portfolio a social commerce company and what we believe will be an additional avenue to monetize our foreign markets. Our Corporate Information Our executive offices are located at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and our telephone number is (561) 912-7000. Our website address is www.ffn.com. The information contained in, or accessible through, our website is not part of this prospectus. 6800 Broken Sound Parkway, Suite 200 Boca Raton, Florida 33487 (561) 912-7000 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/EP-PC_kinder_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/EP-PC_kinder_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/EP-PC_kinder_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2011/PSLV_sprott_prospectus_summary.txt b/parsed_sections/prospectus_summary/2011/PSLV_sprott_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2011/PSLV_sprott_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/ACRS_aclaris_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/ACRS_aclaris_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..93c705eea86a729a5aaaa6322fb356fdbf7035fe
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/ACRS_aclaris_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained or incorporated by reference elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes and other documents incorporated by reference in this prospectus, as well as the information under the caption Risk Factors herein and under similar headings in the other documents that are incorporated by reference into this prospectus. Unless the context otherwise requires, we use the terms "Aclaris," "company," "we," "us" and "our" in this prospectus to refer to Aclaris Therapeutics, Inc. and, where appropriate, our subsidiaries. Business Overview We are a clinical-stage specialty pharmaceutical company focused on identifying, developing and commercializing innovative and differentiated drugs to address significant unmet needs in dermatology. Our lead drug candidate, A-101 Topical Solution, is a proprietary high-concentration hydrogen peroxide topical solution that we are developing as a prescription treatment for seborrheic keratosis, or SK, a common non-malignant skin tumor. We have completed three Phase 2 clinical trials of A-101 in over 300 patients with SK. In these trials, following one or two applications of A-101, we observed clinically relevant and statistically significant improvements in clearing SK lesions on the face, trunk and extremities of the body. In the first quarter of 2016, we initiated two multi-center, double-blind Phase 3 clinical trials and one open label Phase 3 clinical trial of A-101 in patients with SK. If the results of these trials are favorable, we plan to submit a New Drug Application for A-101 for the treatment of SK to the U.S. Food and Drug Administration in the fourth quarter of 2016. We also intend to develop A-101 as a prescription treatment for common warts, also known as verruca vulgaris, and A-102, a proprietary gel dosage form of hydrogen peroxide, as a prescription treatment for SK and common warts. In the fourth quarter of 2015, we initiated a Phase 2 clinical trial to evaluate A-101 for the treatment of common warts. We have also in-licensed the exclusive, worldwide rights to inhibitors of the Janus kinase, or JAK, family of enzymes, for specified dermatological conditions. We plan to develop these JAK inhibitors, ATI-50001 and ATI-50002, as potential treatments for hair loss associated with an autoimmune skin disease known as alopecia areata, and potentially for other dermatological conditions, including androgenetic alopecia, also known as male or female pattern baldness, and vitiligo. We intend to in-license or acquire additional drug candidates for other dermatological conditions to build a fully integrated dermatology company. Corporate Information We were incorporated under the laws of the State of Delaware in July 2012. Our principal executive offices are located at 101 Lindenwood Drive, Suite 400, Malvern, Pennsylvania 19355. Our telephone number is (484) 324-7933. Our common stock is listed on the NASDAQ Global Select Market under the symbol ACRS. Our internet website address is www.aclaristx.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. Implications of Being an Emerging Growth Company We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from some of the reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include: being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced Management s Discussion and Analysis of Financial Condition and Results of Operations disclosure; not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) December 31, 2020, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, (3) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th and (4) any date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We may choose to take advantage of some but not all of these reduced burdens. For example, we have taken advantage of the reduced reporting requirements with respect to disclosure regarding our executive compensation arrangements, have presented only two years of audited financial statements and only two years of related "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure in our public filings, and have taken advantage of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. To the extent that we take advantage of these reduced burdens, the information that we provide stockholders may be different than you might obtain from other public companies in which you hold equity interests. In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Aclaris Therapeutics, Inc. (Exact name of registrant as specified in its charter) Table of Contents The Offering Common stock offered by us 1,081,082 shares Common stock outstanding 21,403,005 shares Use of proceeds We will not receive any proceeds from the sale of shares in this offering. See Use of Proceeds. Risk factors See Risk Factors beginning on page 5 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock. NASDAQ Global Select Market symbol ACRS The number of shares of our common stock outstanding is based on 21,403,005 shares of our common stock outstanding as of June 10, 2016 and excludes the following: 1,886,891 shares of common stock issuable upon the exercise of options outstanding as of June 10, 2016, at a weighted average exercise price of $13.85 per share; 85,000 shares of common stock subject to restricted stock units outstanding as of June 10, 2016; and 1,613,805 shares of common stock reserved for future issuance under our 2015 equity incentive plan, plus any additional shares of our common stock that may become available under our 2015 equity incentive plan. Unless otherwise indicated, all information in this prospectus assumes no exercise of outstanding options after June 10, 2016. Delaware 2834 46-0571712 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 101 Lindenwood Drive, Suite 400 Malvern, PA 19355 (484) 324-7933 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/AIRG_airgain_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/AIRG_airgain_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/AIRG_airgain_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/ASFT_appsoft_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/ASFT_appsoft_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/ASFT_appsoft_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/AVTX_avalo_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/AVTX_avalo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7f51cd05052e7ff5a19603942eb3afae4ca76133
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/AVTX_avalo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights information contained or incorporated by reference elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes and other documents incorporated by reference in this prospectus, as well as the information under the caption Risk Factors herein and under similar headings in the other documents that are incorporated by reference into this prospectus. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to Cerecor, the company, we, us and our refer to Cerecor Inc. Company Overview We are a clinical stage biopharmaceutical company that is developing innovative drug candidates to make a difference in the lives of patients with neurological and psychiatric disorders. We have a portfolio of novel clinical and preclinical compounds that we are developing for a variety of indications: CERC-301: Adjunctive Treatment for Major Depressive Disorder. CERC 301 is currently in Phase 2 development as an oral, adjunctive treatment of patients with major depressive disorder, or MDD, who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. We received fast track designation by the U.S. Food and Drug Administration, or FDA, in 2013 for CERC 301 for the treatment of MDD. CERC 301 belongs to a class of compounds known as antagonists, or inhibitors, of the N methyl D aspartate, or NMDA, receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurological adaptation. We believe CERC 301 has the potential to produce a significant reduction in depression symptoms in a matter of days, as compared to weeks or months with conventional therapies, because it specifically blocks the NMDA receptor subunit 2B, or NR2B. We believe this mechanism of action may provide rapid and significant antidepressant activity without the adverse side effect profile of non selective NMDA receptor antagonists, such as Ketamine. We are conducting a Phase 2 clinical trial for CERC-301 in order to evaluate the effect of intermittent oral doses of 12 mg and 20 mg versus placebo. We expect top-line data from this ongoing Phase 2 trial in the first half of 2017. CERC-501: Adjunctive Treatment of MDD and Substance Use Disorders. CERC-501 is a potent and selective oral kappa opioid receptor, or KOR, antagonist being developed as an adjunctive treatment of MDD and to treat substance use disorders. KORs have been shown to play an important role in stress, mood and addiction. CERC-501 has been observed to have positive activity in animal models of depression, nicotine withdrawal and alcohol dependence, and it has been generally well tolerated in three human clinical trials. CERC-501 is currently in Phase 2 development for smoking cessation in a clinical trial that is being supported by a grant from the National Institute on Drug Abuse at the National Institutes of Health, or NIH. This trial will provide us with the opportunity to evaluate the effect of 15 mg of CERC-501 administered orally once per day on tobacco reinstatement behavior and assess subjects craving, mood and anxiety during abstinence periods. We expect to report top-line data from this trial in December 2016. In addition to our Phase 2 trial in smokers, three externally funded clinical trials are being conducted to evaluate the use of CERC-501 in treating depressive symptoms, stress-related smoking relapse and cocaine addiction. One trial is being conducted under the auspices of the National Institute of Mental Health, the second trial is a collaboration between Cerecor and Yale University investigators with NIH funding and the third trial is being conducted at Rockefeller University Hospital and is funded by a private foundation. We plan to initiate a Phase 2 clinical trial with CERC-501 as an adjunctive treatment of MDD in 2017. CERC-406: Cognitive Impairment. CERC 406 is our preclinical candidate that inhibits catechol O methyltransferase, or COMT, within the brain. We believe CERC 406 has potential as a treatment of residual cognitive impairment symptoms in patients with MDD among other psychiatric and neurological conditions frequently impacted by impaired cognition. Table of Contents Product Pipeline The following table summarizes key information about our product candidates: Product Candidate / Platform Potential Indication(s) Stage of Development Anticipated Milestones CERC 301 Adjunctive treatment of MDD with rapid onset Phase 2 Top-line data in the first half of 2017 CERC 501 Adjunctive treatment of MDD and substance use disorders Phase 2 Top-line data in December 2016 CERC 406 Residual cognitive impairment symptoms in MDD Preclinical IND submission (timing dependent on additional funding) Corporate Information We were incorporated as Ceregen Corporation in Delaware on January 31, 2011, and we subsequently changed our name to Cerecor Inc. Our principal executive offices are located at 400 E. Pratt Street, Suite 606, Baltimore, Maryland 21202 and our telephone number is (410) 522 8707. Our website address is www.cerecor.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. The trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other companies trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies or products. Implications of Being an Emerging Growth Company As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced Management s Discussion and Analysis of Financial Condition and Results of Operations disclosure; not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions through 2020 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our capital stock held by non affiliates or issue more than $1.0 billion of non convertible debt over a three year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus and the documents incorporated by reference into this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. Table of Contents In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. The Offering Common stock being offered by the selling stockholder 3,886,010 shares Common stock outstanding 8,650,143 shares (as of September 8, 2016, excluding the Initial Purchase Shares and the Commitment Shares, as defined below) Use of proceeds The selling stockholder will receive all of the proceeds from the sale of the shares offered for sale by it under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholder. However, we may receive up to $15.0 million in proceeds from the sale of our common stock to the selling stockholder under the common stock purchase agreement described below. Proceeds that we receive under the common stock purchase agreement will be used to advance our research and development activities and for working capital and general corporate purposes. NASDAQ Capital Market Symbol CERC
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/BCTF_bancorp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/BCTF_bancorp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..38b224ae6449e854c03fcf29dece41e77491b104
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/BCTF_bancorp_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 t1601821x1_s1a.htm AMENDMENT NO. 1 TO FORM S-1 As filed with the Securities and Exchange Commission on July 26 , 2016 Registration No. 333 -211820 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO THE FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BANCORP 34, INC. (Exact Name of Registrant as Specified in Its Charter) Maryland 6712 Being applied for (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number) 500 East 10th Street Alamogordo, New Mexico 88310 (575) 437-9334 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant s Principal Executive Offices) Jill Gutierrez Chief Executive Officer 500 East 10th Street Alamogordo, New Mexico 88310 (575) 437-9334 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copies to: Eric Luse, Esq. Jennifer D. King, Esq. Ned Quint, Esq. Vedder Price P.C. Luse Gorman, PC 222 North LaSalle Street 5335 Wisconsin Avenue, N.W., Suite 780 Chicago, IL 60601 Washington, D.C. 20015 (312) 609-7500 (202) 274-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company x (Do not check if a smaller reporting company) CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered Proposed maximum offering price per share(1) Proposed maximum aggregate offering price (1) Amount of registration fee Common Stock, $0.01 par value per share 3,438,500 $10.00 $34,385,000 $3,463 (2) (1) Estimated solely for purposes of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended. (2) Previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents TABLE OF CONTENTS Page SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/BEIGF_beone_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/BEIGF_beone_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..aaa79a39f885cf96ce7e3c28ea7b4204af39b749
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/BEIGF_beone_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 a2230318zs-1a.htm S-1/A Use these links to rapidly review the document TABLE OF CONTENTS Table of Contents As filed with the United States Securities and Exchange Commission on November 17, 2016 Registration No. 333-214540 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 We have not, and the underwriters have not, authorized any person to provide you with information different from that contained in this prospectus or any related free-writing prospectus that we authorize to be distributed to you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted. The information in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the securities offered hereby. For investors outside of the United States: Neither we, the selling shareholders, nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus outside of the United States. This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information. All references in this prospectus to "$," "US$," "U.S.$," "U.S. dollars," "dollars" and "USD" mean U.S. dollars and all references to " " and "RMB," mean Renminbi, unless otherwise noted. All references to "PRC" or "China" in this prospectus refer to the People's Republic of China. Please see the Glossary of Scientific Terms on page 159 for definitions of scientific terms. Amendment No. 1 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents We believe that oncology treatment has entered an era of revolutionary change in which cancer drugs will be used both as monotherapy and in combination to attack multiple underlying mechanisms of cancer cell growth and survival. Due to breakthroughs in gene sequencing and methods of tumor characterization, cancer is rapidly being redefined from a paradigm of classification based on tissue of origin to one of specific molecular characteristics. As a result, many more specific disease subpopulations can be targeted with more effective treatment than has been possible in the past. This ability to better classify cancers has allowed the development of molecularly targeted drugs that address specific cancer subpopulations and provide high response rates in tumors with particular mutations. In addition, the development of immuno-oncology agents such as antibodies targeting the CTLA-4 and PD-1 protein receptors and the PD-L1 protein has demonstrated the importance of the human immune system in cancer therapy and the potential for high rates of more durable responses from agents that activate the immune system to identify and eliminate tumors. We believe that the future of cancer therapy will involve combinations of molecularly targeted and immuno-oncology drugs tailored to particular tumor sub-groups and have directed our research efforts at both types of drugs. Our belief that this fundamental shift was about to occur in cancer research led us early in our history to develop a cancer biology platform that addresses the importance of tumor-immune system interactions and the value of primary tumor biopsies in developing new models. Our proximity to leading cancer treatment centers in Beijing and our close relationships with clinicians who treat patients and perform biopsies and surgeries at those centers have allowed us to develop an extensive collection of in vivo, ex vivo and in vitro cancer models. Given our belief that the human immune system can play an important role in combating cancer and that future treatments will involve combination therapies, we have introduced elements of a functional immune system into these models. Our proprietary models allow our research team to better select targets and to screen and evaluate therapeutic agents that we believe have significant potential alone or in combination for treating a variety of cancers. Our models are a key component in the screening cascade we follow in our drug discovery effort and permit us to evaluate potential drug candidates in conditions that much better approximate a patient's cancer at the time of treatment. This is particularly significant when drug discovery requires evaluation not only of monotherapies but also multiple combinations and regimens targeting specific mutations while simultaneously immobilizing the defenses cancer cells mount against the human immune system. Our Clinical Stage Drug Candidates We have used our cancer biology platform to develop four clinical-stage drug candidates that we believe have the potential to be best-in-class or first-in-class. In addition, we believe that each has the potential to be an important component of a drug combination addressing major unmet medical needs. BEIGENE, LTD. (Exact Name of Registrant as Specified in Its Charter) 1Limited collaboration with Merck KGaA 2Partnered with Merck KGaA outside China The following table summarizes our combination therapy pipeline: BGB-3111 is a potent and highly selective small molecule BTK inhibitor. We are currently developing BGB-3111 as a monotherapy and in combination with other therapies for the treatment of a variety of lymphomas. BGB-3111 has demonstrated higher selectivity against BTK than ibrutinib, the only BTK inhibitor currently approved by the FDA and the European Medicines Agency, or EMA, based on biochemical assays and higher exposure than ibrutinib based on their respective Phase I experience. Cayman Islands (State or Other Jurisdiction of Incorporation or Organization) 2834 (Primary Standard Industrial Classification Code Number) 98-1209416 (I.R.S. Employer Identification Number) c/o Mourant Ozannes Corporate Services (Cayman) Limited 94 Solaris Avenue, Camana Bay Grand Cayman KY1-1108 Cayman Islands +1 (345) 949 4123 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Table of Contents In addition, we believe BGB-3111 is the only BTK inhibitor that has demonstrated sustained target inhibition in disease originating tissues. Our preclinical data of ibrutinib show that target inhibition at disease originating tissues, such as bone marrow and spleen, in mice and rats was not sustained over a 24-hour period. Published clinical data on ibrutinib show that ibrutinib's target inhibition in the blood is borderline at the approved dose of 420 mg once a day, with BTK occupancy in a significant portion of patients below 80%. We have completed the 25-patient dose-escalation phase of our clinical trial, and we are currently conducting the dose-expansion phase in patients with different subtypes of B-cell malignancies, including chronic lymphocytic leukemia, diffuse large B-cell lymphoma, follicular lymphoma, mantle cell lymphoma, marginal zone lymphoma, Waldenstr m's Macroglobulinemia and hairy cell leukemia in Australia, New Zealand, the United States and South Korea. We have dosed 291 patients and healthy subjects as of November 7, 2016 in monotherapy and in combination trials. As of June 10, 2016, the cutoff date for the most recent data analysis of the Phase I trial, the preliminary data suggest that BGB-3111 is well-tolerated. Proof-of-concept has been established for BGB-3111 with clinical data indicating that BGB-3111 is a potent BTK inhibitor with objective anti-tumor activity observed in multiple types of lymphomas starting at the lowest dose tested, 40 mg once daily, or QD. The chart below shows the pharmacokinetic profile of BGB-3111 from this Phase I trial, in comparison to historical data with ibrutinib and acalabrutinib. BGB-3111: Drug Exposure in Humans, Half-life, and In Vitro Potency Comparison to Historical Data on Ibrutinib and Acalabrutinib^ Note: Cmax = maximum plasma concentration; AUC = area under the concentration-time curve as a standard measurement of drug exposure; Free drug exposure = unbound AUC as a measurement of unbound drug exposure. ^ Cross-trial comparisons 1 Tam el al., ASH, 2015; 2 Byrd el al., NEJM, 2015; 3 Lannutti el al., AACR, 2015; 4 BeiGene data on file C T Corporation System 111 Eighth Avenue New York, New York 10011 (212) 894-8940 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Table of Contents In addition, sustained BTK occupancy was achieved both in the blood (peripheral blood mononuclear cells, or PBMC) starting at the lowest dose of 40 mg QD, and in the lymph node, with 160 mg twice daily, or BID, in particular, as shown below. BGB-3111: Complete and Sustained BTK Inhibition in PBMC and Lymph Node On October 7, 2016, we presented data from our Phase I trial for a total of 24 Waldenstr m's Macroglobulinemia patients at the 9th International Workshop on Waldenstr m's Macroglobulinemia and Symposium on Advances in Multiple Myeloma. 41 patients with Waldenstr m's Macroglobulinemia were enrolled in the Phase I trial as of September 9, 2016, of which 24 patients were evaluable for response at the cutoff date of June 10, 2016. These 24 patients were from the dose-escalation phase receiving doses ranging from 40 mg to 320 mg QD or 160 mg BID, and the ongoing dose-expansion phase receiving 160 mg BID or 320 mg QD. Responses were determined according to the modified Sixth International Workshop on Waldenstr m's Macroglobulinemia, or IWWM, criteria. Copies to: Mitchell S. Bloom Michael J. Kendall Edwin M. O'Connor Goodwin Procter LLP 100 Northern Avenue Boston, MA 02210 (617) 570-1000 John V. Oyler Chief Executive Officer and Chairman c/o Mourant Ozannes Corporate Services (Cayman) Limited 94 Solaris Avenue, Camana Bay Grand Cayman KY1-1108 Cayman Islands +1 (345) 949 4123 Bruce K. Dallas Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, California 94025 (650) 752-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Accelerated Filer Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller Reporting Company CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered(1) Proposed Maximum Aggregate Offering Price(2)(3) Amount of Registration Fee(4) Ordinary Shares, par value $0.0001 per share $201,250,000 $23,325 (1)American depositary shares, or ADSs, evidenced by American depositary receipts issuable upon deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (File No. 333-209044). Each ADS represents 13 ordinary shares. (2)Includes (i) ordinary shares represented by ADSs that may be purchased by the underwriters pursuant to their option to purchase additional ADSs and (ii) all ordinary shares represented by ADSs initially offered or sold outside the United States that are thereafter resold from time to time in the United States. (3)Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (4)A registration fee of $17,385 was previously paid in connection with the Registration Statement. An additional $5,940 is paid herewith. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents Adverse events were generally mild in severity and self-limited, as shown in the table below. BGB-3111 Phase I Trial in WM: Adverse Events Independent of Causality In the most recent data analysis, which had a cutoff date of June 10, 2016, the most frequent adverse events ( 20%) of any attribution were upper respiratory infection (25%); diarrhea (25%); petechiae, contusion, and bruising (21%); and nausea (21%), all grade 1 or 2 in severity. One patient developed grade 2 atrial fibrillation. Grade 3 or higher adverse events included two cases of anemia and one each of foot fracture, renal artery thrombosis, bronchiectasis, thrombocytopenia, hypertension, cryptococcal meningitis, and neutropenia. There were two serious adverse events assessed as possibly related to BGB-3111 by investigators, grade 2 atrial fibrillation and grade 3 cryptococcal meningitis; in both cases, BGB-3111 was temporarily held but safely resumed. No serious hemorrhage ( grade 3 or CNS hemorrhage of any grade) was reported. After a median follow-up of eight months (range: 3.3 21 months), 24 patients were evaluable for response and the rate of overall response including complete response, or CR, very good partial response, or VGPR, partial response, or PR, and minor response, or MR, was 92% (22 out of 24 patients). The major response rate (CR plus VGPR plus PR) was 83% (20 out of 24 patients), with VGPRs ( 90% reduction in IgM and reduction in extramedullary disease) observed in 33% (eight out of 24 patients) and PRs ( 50 90% reduction in IgM and reduction in extramedullary disease) observed in 50% (12 out of 24 patients) of patients. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion. Dated November 17, 2016. $175,000,000 of American Depositary Shares Representing Ordinary Shares BeiGene, Ltd. We are offering $160 million (approximately 4,336,043) American Depositary Shares, or ADSs, in this offering, assuming a public offering price of $36.90 per ADS. The selling shareholders identified in this prospectus are offering $15 million (approximately 406,503) ADSs. Each ADS represents 13 ordinary shares, par value $0.0001 per share. We will not receive any proceeds from the sale of ADSs by the selling shareholders. The ADSs are listed on the NASDAQ under the symbol "BGNE." The last reported sale price of the ADSs on the NASDAQ on November 16, 2016 was $36.90 per ADS. We are an "emerging growth company" as that term is used in the U.S. Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in the ADSs involves a high degree of risk. See "Risk Factors" on page 22 to read about factors you should consider before buying the ADSs. Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per ADS Total Public offering price $ $ Underwriting discounts(1) $ $ Proceeds, before expenses, to us $ $ Proceeds, before expenses, to the selling shareholders $ $ Table of Contents BGB-3111 Phase I Trial in WM: Efficacy Summary IgM decreased from a median of 29.9g/l at baseline to 3.0g/l, and hemoglobin increased from a median of 10.1g/dl at baseline to 13.5g/dl. Only one patient discontinued BGB-3111, due to exacerbation of pre-existing bronchiectasis while in VGPR. There have been no cases of disease progression. The remainder of patients remain on study treatment. (1)We refer you to "Underwriting" beginning on page 151 for additional information regarding total underwriting compensation. To the extent the underwriters sell more than $175,000,000 of ADSs (approximately 4,742,546 ADSs), the underwriters have the option to purchase up to an additional $26,250,000 of ADSs (approximately 711,381 ADSs) from us at the public offering price less the underwriting discounts. Our existing affiliates, including investors affiliated with Baker Bros. Advisors and Hillhouse Capital Management, Ltd., have indicated an interest in purchasing up to an aggregate of $59.1 million in ADSs in this offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these investors, or any of these investors may determine to purchase more, less or no shares in this offering, including as a result of the pricing terms. See "Prospectus Summary The Offering." The underwriters expect to deliver the ADSs against payment in New York, New York on , 2016. Morgan Stanley Goldman, Sachs & Co. Cowen and Company , 2016 Table of Contents Comparison of Response Rates of BGB-3111 to Historical Data on Ibrutinib with Comparable Follow-Up Time^ Table of Contents BGB-3111 Phase I Trial in WM: Post-Treatment IgM (vs. Baseline) Though MYD88 and CXCR4 sequencing was not included in the original protocol, samples were requested with additional consents, and MYD88 mutational analysis results were available for 15 of the patients who were evaluable for response at the data cutoff of June 10, 2016. Preliminary sequencing data suggest a high VGPR rate seen in six out of 12 evaluable patients with the MYD88L265P genotype that included five additional patients with PR and one patient with stable disease, or SD, as well as response in MYD88WT patients with one PR, one MR, and one SD observed among three evaluable patients. BGB-3111 Phase I Trial in WM: Response Rate by MYD88 Mutation Status Preliminary Results Table of Contents An updated analysis is currently being conducted for presentation at the American Society of Hematology meeting in December 2016 based on a data cutoff date of October 3, 2016 and includes an additional eight patients (all with less than six months follow-up, median 3.8 months). Based on a provisional analysis, which is subject to ongoing data validation, the major response rate is 78% (25 out of 32 patients), with 34% (11 out of 32 patients) of patients achieving VGPR. Compared to the data presented at the IWWM conference, no additional patients have discontinued study treatment for adverse event or progressive disease, and, based on serious adverse event reporting, no new safety signals have been identified. Based on these findings, we plan to initiate a Phase III study in the United States, the European Union, and Australia in late 2016 or early 2017 comparing BGB-3111 and ibrutinib in patients with Waldenstr m's Macroglobulinemia. In addition to data in Waldenstr m's Macroglobulinemia patients, updated data on BGB-3111 in patients with chronic lymphocytic leukemia from the dose-escalation and dose-expansion phases of the Phase I trial has been accepted for presentation at the American Society for Hematology annual conference. An abstract for this presentation was released on November 3, 2016. 29 patients were included in the most recent data analysis with cutoff date of June 10, 2016, from the dose-escalation and dose-expansion phases of the Phase I trial of BGB-3111 as monotherapy. BGB-3111 was well-tolerated in 69% of patients with no drug-related adverse events >grade 1 in severity within the first 12 weeks of therapy. The most frequent adverse events of any attribution were petechiae and bruising (38%), upper respiratory tract infection (31%, all grade 1 and 2), diarrhea (28%, all grade 1 and 2), fatigue (24%, all grade 1 and 2), and cough (21%, all grade 1 and 2). Three serious adverse events were assessed as possibly related to BGB-3111 by investigators, including one each of grade 2 cardiac failure and pleural effusion, and one grade 3 purpura, the only major bleeding event reported. One patient developed grade 2 atrial fibrillation. Three patients had temporary dose interruptions and one patient discontinued from the study due to adverse events. After a median follow-up of 7.5 months (range: 2.9 17.3 months), 29 patients were evaluable and the response rate was 90% (26 out of 29 patients) with PR in 79% of patients (23 out of 29 patients) and partial response with lymphocytosis in 10% of patients (three out of 29 patients). SD were observed in 7% of patients (two out of 29 patients), and one patient had a non-evaluable response due to discontinuation of treatment prior to week 12, the time of first evaluation of tumor response. No instances of disease progression or Richter's transformation have occurred. An updated analysis is currently being conducted for presentation at the American Society of Hematology meeting in December 2016 based on data cutoff date of October 3, 2016 and includes an additional 17 patients (all with less than six months follow-up). Based on a provisional analysis, which is subject to ongoing data validation, the objective response rate is 93% (43 out of 46 patients). Compared to the analysis for ASH abstract publication, no additional patients have discontinued study treatment for adverse event or progressive disease, and, based on serious adverse event reporting, no new safety signals have been identified. We initiated a monotherapy Phase I clinical trial of BGB-3111 in China in July 2016, and we believe BGB-3111 is the first BTK inhibitor being developed in China under the Category 1.1 domestic regulatory pathway to enter the clinic and to present clinical data. In addition, we have seen favorable preclinical data for and initiated combination studies of BGB-3111 with obinutuzumab, a CD20 antibody, in January 2016. We have also initiated combination studies of BGB-3111 with BGB-A317, our PD-1 antibody, on June 30, 2016, based on encouraging synergistic effects observed in our preclinical models. In our primary diffuse large B-cell lymphoma tumor models, we observed enhancement of anti-tumor activity of BGB-A317, our PD-1 antibody, by BGB-3111 in both PD-L1-positive and especially in PD-L1-negative diffuse large B-cell lymphoma tumor models, thus supporting our combination strategy. Table of Contents PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in the ADSs, you should carefully read the entire prospectus, including the information in our filings with the U.S. Securities and Exchange Commission, or SEC, incorporated by reference in this prospectus. You should also consider, among other things, the matters described under "Risk Factors" beginning on page 22 of this prospectus and those identified in our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, or our September 2016 Quarterly Report, and the matters discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2015, or our 2015 Annual Report, and our September 2016 Quarterly Report, each of which is incorporated by reference herein. Unless otherwise stated, all references to "us," "our," "BeiGene," "we," the "company" and similar designations refer to BeiGene, Ltd. and its consolidated subsidiaries, as a whole. Overview We are a globally focused biopharmaceutical company dedicated to becoming a leader in the discovery and development of innovative, molecularly targeted and immuno-oncology drugs for the treatment of cancer. We believe the next generation of cancer treatment will utilize therapeutics both as monotherapies and in combination to attack multiple underlying mechanisms of cancer cell growth and survival. We further believe that discovery of next-generation cancer therapies requires new research tools. To that end, we have developed a proprietary cancer biology platform that addresses the importance of tumor-immune system interactions and the value of primary biopsies in developing new models to support our drug discovery effort. Our strategy is to advance a pipeline of drug candidates with the potential to be best-in-class monotherapies and also important components of multiple-agent combination regimens. Over the last six years, using our cancer biology platform, we have developed clinical-stage drug candidates that inhibit the important oncology targets Bruton's tyrosine kinase, or BTK, RAF dimer protein complex and PARP family of proteins, and an immuno-oncology agent that inhibits the immune checkpoint protein receptor PD-1. Our drug candidates targeting BTK, PD-1, PARP and RAF dimer have demonstrated early activity and favorable safety profiles in the dose-escalation phases of clinical trials conducted in Australia and New Zealand, and all four of our drug candidates are currently in the dose-expansion phases of their respective clinical trials. As of November 7, 2016, our four clinical-stage drug candidates, as monotherapies and in combination, have been dosed in a total of 803 patients and healthy subjects. We have Investigational New Drug Applications in effect for our BTK, PD-1 and PARP inhibitors with the U.S. Food and Drug Administration, or FDA. We have also received approval of our Clinical Trial Applications, or CTAs, for each of our four clinical-stage drug candidates from the China Food and Drug Administration, or CFDA. We believe that each of our clinical-stage drug candidates is the first in their respective classes being developed in China under the Category 1.1 domestic regulatory pathway to enter the clinic and to present clinical data. Our research operations are in China, which we believe confers several advantages including access to a deep scientific talent pool and proximity to extensive preclinical study and clinical trial resources through collaborations with leading cancer hospitals in China. Beyond the substantial market opportunities we expect to have in the United States, Europe and Japan, we believe our location in China provides us the opportunity to bring best-in-class monotherapies and combination therapeutics to our home market where many global standard-of-care therapies are not currently approved or available. We have assembled a team of 318 employees and consultants in China, the United States, Australia, and Taiwan with deep scientific talent and extensive global pharmaceutical experience who are deeply committed to advancing our mission to become a leader in next-generation cancer therapies. Table of Contents BGB-A317 is an investigational humanized monoclonal antibody against the immune checkpoint receptor PD-1. We are developing BGB-A317 as a monotherapy and as a combination agent for various solid-organ and blood-borne cancers. PD-1 is a cell surface receptor that plays an important role in down-regulating the immune system by preventing the activation of certain types of white blood cells called T-cells. PD-1 inhibitors remove the blockade of immune activation by cancer cells. We believe BGB-A317 is differentiated from the currently approved PD-1 antibodies with the ability to bind Fc gamma receptor I specifically engineered out, and we believe this could potentially result in improved activities. In addition, BGB-A317 has a unique binding signature to PD-1 with high affinity and superior target specificity. We have dosed a total of 299 patients with BGB-A317 in either monotherapy or combination trials as of November 7, 2016. In April 2016, we completed the enrollment of the ongoing dose-escalation phase and, in May 2016, we initiated the dose-expansion phase of our clinical trial in relapsed or refractory solid tumor patients in Australia and New Zealand. As of September 30, 2016, the cutoff date for the most recent data analysis, the preliminary clinical data show that BGB-A317 is well-tolerated with adverse events in keeping with the class effect. Among 103 patients evaluable for safety at the time of the data cutoff for the current safety analysis, the most common treatment-related adverse events ( 5%) were fatigue (19%), diarrhea (13%), rash (11%), pruritus (11%), nausea (8%), hypothyroidism (7%), and infusion related reaction (6%). Treatment-related serious adverse events included four cases of colitis, two cases of hypotension, and one case each of diarrhea, diabetes mellitus, diabetic ketoacidosis, dyspnea, hypoxia, infusion-related reaction, and pneumonitis. Among these, grade 3 treatment-related serious adverse events included the two cases of hypotension and one case each of colitis, diabetes mellitus, diabetic ketoacidosis, dyspnea, hypoxia, and pneumonitis. Other treatment-related grade 3 adverse events included two cases each of fatigue and hyperglycemia, and one case each of back pain, elevated alanine aminotransferase and elevated gamma-glutamyl transferase. Among 99 patients evaluable for efficacy as of September 30, 2016, anti-tumor activities were observed in 15 patients with a PR and 23 patients with a SD. The PRs include three PRs in nine renal cell carcinoma patients; three in six urothelial cancer patients; two in four gastric cancer patients; two in two Merkel cell carcinoma patients; one in four nasopharyngeal patients; one in one penis squamous cell carcinoma patient; one in one duodenal carcinoma patient; one in one evaluable patient of two patients with microsatellite instability high, or MSI-h, colorectal cancer, among 13 colorectal cancer patients; one in one pancreatic cancer patient with MSI-h status, among two pancreatic cancer patients. A mixed patient population of 27 different tumor types was included in this data analyses, in which patients with melanoma, non-small cell lung cancer or head and neck cancer were not enrolled, and patients with renal cell cancer and urothelial carcinoma together represented close to 15% of the enrolled patients. To date, we have two internal combination trials ongoing BGB-A317 with BGB-290 in patients with advanced solid tumors and BGB-A317 with BGB-3111 in patients with various hematologic malignancies, respectively. BGB-290 is a molecularly targeted, orally available, potent and highly selective inhibitor of PARP1 and PARP2. We are currently developing BGB-290 as a monotherapy and in combination with other therapies for the treatment of homologous recombination deficient cancers, which are cancers that contain abnormalities in their DNA molecule repair mechanisms, making these cancers particularly sensitive to PARP inhibitors. We believe BGB-290 has the potential to be differentiated from other PARP inhibitors, including olaparib, the only PARP inhibitor currently approved by the FDA and the EMA, in terms of selectivity, DNA-trapping activity, oral bioavailability, and brain penetration. We have a limited collaboration with Merck KGaA on BGB-290. We have dosed a total of 88 patients with BGB-290 in either monotherapy or combination trials as of November 7, 2016. We have completed the dose-escalation phase, and we are evaluating BGB-290 in the ongoing dose-expansion phase of our clinical trial in Australia. Table of Contents At the 2015 AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics, we presented clinical data from our Phase I clinical trial. 29 relapsed or refractory solid tumor patients were enrolled in seven cohorts receiving monotherapy BGB-290 in doses ranging from 2.5 mg BID to 80 mg BID, as of June 30, 2015. Initial analysis of data from this trial suggests that BGB-290 is well-tolerated. Few adverse events of myelosuppression, no liver toxicity signal, and few drug-related grade 3/4 adverse events were observed in the dose-escalation phase. The most common drug-related adverse events were grade 1 and 2 nausea (38%) and fatigue (28%). Drug-related grade 3/4 adverse events include one each (3%) of neutropenia, anaemia, hypophosphatemia and hypokalemia, all grade 3. As of January 19, 2016, drug-related serious adverse events reported by investigators were three cases of grade 3 anemia and one case of shortness of breath. Proof-of-concept was established, with significant anti-tumor activity seen in ovarian cancer patients starting at the lowest tested dose and data suggestive of a wide therapeutic window. Among 14 evaluable patients with ovarian cancer as of June 30, 2015, seven had an objective response (six PRs and one CR). Of the ten ovarian cancer patients with germ-line breast cancer susceptibility gene, or BRCA, mutation, five had an objective response (four PRs and one CR), and of the three ovarian cancer patients with germ-line BRCA wild-type, two had an objective response (two PRs). The remaining one patient had unknown BRCA status and progressive disease, or PD. When assessed by underlying mutations, of six evaluable patients with the BRAF V600E, there was one CR, one PR and four SDs. On February 2, 2016, we initiated a trial with BGB-290 in combination with BGB-A317 for the treatment of cancers with BRCA mutations or deficiencies in homologous recombination or mismatch repair, including ovarian, breast, prostate, colorectal and pancreatic cancers, as well as platinum-sensitive ovarian cancer. BGB-283 is a small molecule inhibitor of both the monomer and dimer forms of the RAF kinase. We are currently developing BGB-283 for the treatment of cancers with aberrations in the mitogen-activated protein kinase, or MAPK, pathway, including BRAF gene mutations and KRAS/NRAS gene mutations where first generation BRAF inhibitors are not effective. The MAPK pathway is a chain of proteins in the cell that communicates a signal from a receptor on the surface of the cell to the DNA in the nucleus of the cell. This pathway plays an essential role in regulating cell proliferation and survival and is described in more detail in the section of our 2015 Annual Report, incorporated by reference herein, titled "Item 1 Business Product Pipeline BGB-283, RAF Dimer Inhibitor Mechanism of Action." We intend to develop BGB-283 to treat various malignancies, including colorectal cancer, non-small cell lung carcinoma, endometrial cancer, ovarian cancer, pancreatic cancer and papillary thyroid carcinoma. Currently approved first-generation BRAF inhibitors, vemurafenib and dabrafenib, are only active against the BRAF monomer. BGB-283 inhibits not only the monomer but also the dimer forms of BRAF. We believe BGB-283 has the potential to be a first-in-class RAF dimer inhibitor globally. We have completed the 37-patient dose-escalation phase of our Phase I clinical trial, and we have completed the enrollment in April 2016 of the dose-expansion phase of our clinical trial in Australia and New Zealand in a broad range of patient populations, including BRAF mutated melanoma, thyroid cancer, colorectal cancer, non-small cell lung cancer and other non-BRAF mutated tumors as well as KRAS/NRAS mutated endometrial cancer, colorectal cancer, non-small cell lung cancer and other KRAS/NRAS mutation bearing cancers, where first-generation BRAF inhibitors have not been effective. We have also initiated a dose-escalation trial in China. We have dosed 168 patients in Australia, New Zealand and China as of November 7, 2016. Initial analysis of data from these trials suggests that BGB-283 is well-tolerated with a favorable safety profile. We presented initial clinical data from our Phase I clinical trial of BGB-283 in patients with BRAF or KRAS/NRAS-mutated cancers at the 2016 American Association for Cancer Research annual conference. As of January 31, 2016, the data cutoff date, among 31 advanced solid tumor patients, the most frequent treatment-related adverse events were fatigue (52%), thrombocytopenia (39%), decreased Table of Contents The following table summarizes our monotherapy clinical pipeline: Table of Contents appetite (39%), hand-foot syndrome (35%), dermatitis acneiform (32%) and hypertension (32%). The most frequent treatment-related grade 3-4 adverse events included thrombocytopenia (13%), fatigue (10%) and liver enzyme elevation (10%). We have achieved proof-of-concept in a range of cancers including those with KRAS and BRAF mutations. At the time of the data cutoff, among 29 patients enrolled in the dose-escalation phase of the trial evaluable for efficacy, one melanoma patient with BRAF V600E mutation had a CR, one endometrial cancer patient with KRAS mutation and one thyroid cancer patient with BRAF V600E mutation had a PR, and 15 patients had an SD, including one non-small cell lung cancer patient with KRAS mutation with a transient PR or durable SD. 15 patients had remained on treatment for over six months, and the patient with CR had ongoing treatment for 342 days, and the two patients with PR had received treatment for 455 days and 574+ days (ongoing), respectively, as of January 31, 2016. When assessed by underlying mutations, of six evaluable patients with the BRAF V600E mutation, there was one CR, one PR and four SDs. Of three evaluable patients with BRAF non-V600E mutation, there were two SDs. Of 20 evaluable patients with KRAS/NRAS mutations, there was one confirmed PR and nine SDs. We have granted exclusive licenses for the rights to develop and commercialize BGB-283 to Merck KGaA worldwide (outside China). We are currently conducting all clinical development and will continue to do so until Merck KGaA exercises its Continuation Option as further described in the section of our 2015 Annual Report, incorporated by reference herein, titled "Item 1 Business Collaboration with Merck KGaA." Our Preclinical Programs. Our proprietary cancer biology platform has also allowed us to develop several preclinical-stage drug candidates in potentially important targeted areas. These currently consist of targeted therapies and immuno-oncology agents including a PD-L1 monoclonal antibody, an additional RAF dimer inhibitor, a TIM-3 cell surface protein monoclonal antibody, and a BTK inhibitor for non-oncology indications. We anticipate advancing one or more of our preclinical assets into the clinic in the next 12 months. We believe we have the opportunity to combine our PD-1 monoclonal antibody with other clinical-stage and preclinical candidates in our pipeline portfolio to target multiple points in the cancer immunity cycle. Our research operations are in China, which we believe confers clinical, commercial and regulatory advantages. Our location provides us with access to a deep scientific talent pool and proximity to extensive clinical trial resources through collaborations with leading cancer hospitals in China. In addition, China accounts for approximately 20 25% of the world's cancer population and is experiencing rapid growth in the market for cancer therapeutics. According to CFDA Southern Medicine Economic Research Institute, targeted oncology therapies achieved significant revenues last year in China, maintaining rapid growth. Despite currently requiring out-of-pocket payment by patients, three EGFR targeted therapies (Iressa, Conmana and Tarceva) combined had a revenue of $462 million in 2015, exemplifying a large cancer therapeutics market. Currently, many global standard-of-care therapies are not approved or available in China, resulting in a significant need for innovative drugs with strong efficacy and safety profiles for patients who are naive to such treatments. While we plan to seek worldwide regulatory approval for our drug candidates, we also plan to seek expedited approval from the CFDA for our drug candidates as locally developed (Category 1) drugs. In August 2015, the Chinese State Council issued a statement, Opinions on reforming the review and approval process for pharmaceutical products and medical devices. In November 2015, the CFDA issued the Circular Concerning Several Policies on Drug Registration Review and Approval. In February 2016, the CFDA released the Opinions on Priority Review and Approval for Resolving Drug Registration Applications Backlog. The foregoing developments aimed to accelerate and improve the drug clinical development process in China. The CFDA is soliciting public opinions on detailed policies regarding the circular, however, how and when the clinical trial approval and drug registration pathway will be changed is still subject to further policies to be issued by the CFDA. We believe these announcements on regulatory developments could Table of Contents significantly accelerate development of innovative oncology agents. Expedited approval of our drug candidates in China will address the current unmet need in China and further our understanding and characterization of these drugs for approval in other markets. As of September 30, 2016, we had a global team of 318 employees and consultants, including a global research and development team of 214 scientists, clinicians, and staff. Our team shares the vision of improving the lives of cancer patients globally and has built a scientifically-driven and collaborative culture fostering both nimble and rational decision-making. Our management team and world-renowned scientific advisory board have deep experience and capabilities in biology, chemistry, drug discovery, clinical development, manufacturing and commercialization. Our scientific advisory board is chaired by our co-founder Xiaodong Wang, Ph.D., a highly respected cancer scientist, member of the U.S. National Academy of Sciences and the Chinese Academy of Sciences and head of China's National Institute of Biological Sciences. Our scientific advisory board also includes Ronald Levy, M.D., Ph.D.; Neal Rosen, M.D., Ph.D.; Charles Sawyers, M.D.; David Schenkein, M.D.; Jedd Wolchok, M.D., Ph.D.; and Steve Young, Ph.D. Our Mission and Strategy Our mission is to become a global leader in the discovery and development of innovative, molecularly targeted and immuno-oncology drugs for the treatment of cancer. To achieve our mission, we intend to pursue the following strategies: Rapidly advance our pipeline programs through global development. In the next 12 months, we plan to make significant advances within our clinical-stage pipeline. We have moved all four of our drug candidates into the dose-expansion phases of their respective clinical trials as monotherapies, and we will continue to enroll multiple expansion cohorts and significantly increase the number of sites globally participating in these trials. We plan to present data from these trials at medical conferences in late 2016 and 2017. We plan to advance BGB-3111 into late-stage development in late 2016 or early 2017 with the initiation of the global Phase III trial for BGB-3111 in Waldenstr m's Macroglobulinemia. We also have a robust pipeline of preclinical programs and are planning to advance one or more of these programs into the clinic in the next 12 months. Pursue global development of combination therapies. We believe our ownership of both molecularly targeted and immuno-oncology drugs puts us in an advantageous position to develop potentially best-in-combination or first-in-combination therapies that could produce high rates of more durable responses in patients. We have four clinical-stage, independently discovered drug candidates in important and combinable molecularly targeted and immuno-oncology drug classes including BTK inhibitor, PD-1 inhibitor, PARP inhibitor and RAF dimer inhibitor. We believe that we are one of only two companies today to wholly own both a clinical-stage BTK inhibitor for cancer treatment and PD-1 inhibitor and one of the few companies to have discovered, and advanced to clinical stage, a PARP inhibitor and PD-1 inhibitor or a BRAF inhibitor and PD-1 inhibitor for use as combination therapies. In addition to monotherapy trials, we have initiated and are planning combination trials using wholly-owned drug candidates as well as third-party agents. For BGB-3111, in January 2016 we initiated a combination trial with the anti-CD20 antibody, obinutuzumab, and the trial is currently in the dose-expansion phase. On June 30, 2016, we initiated a combination trial with BGB-A317 for the treatment of various B-cell malignancies. For BGB-290, we initiated a combination trial with BGB-A317 on February 2, 2016. We plan to present data from these combination trials at medical conferences in 2017. Continue to use our cancer biology platform to discover additional candidates with best-in-class characteristics and potential for use in rational combinations. We plan to use our cancer biology platform to discover additional drug candidates with the potential to be best-in-class monotherapies and also important components of multiple-agent combination regimens. In the last six years, we Table of Contents have been successful in discovering four clinical stage and numerous promising preclinical drug candidates. By further investing in and improving our cancer biology platform, we expect that the platform will continue to help us select relevant drug targets, identify potential best-in-class drug candidates and develop regimens for rational drug combinations. Bring transformative oncology therapeutics to our home market in China. We are committed to addressing the needs of cancer patients in our home market. China is one of the largest and fastest growing markets for cancer drugs worldwide, representing approximately 20 25% of the world's cancer population and an even greater proportion in lung, liver, and gastric cancers. Because many global standard-of-care therapies are not currently approved and available in China, there is a significant unmet need for innovative cancer drugs for patients who are naive to such treatments. In addition, focusing on cancer types of high prevalence in China will aid our global development efforts in these indications. We have received approval of CTAs in China for each of our four clinical-stage drug candidates from the CFDA to develop our drug candidates through the locally developed, Category 1 registration pathway. We plan to pursue accelerated development, single-arm registration studies and brief dose-escalation studies in China. We also strive to have our drug candidates selected and listed as national priorities. The ability to launch our cancer drugs in our home market, which has a large patient population, will also help us establish broad safety and efficacy profiles for each drug, enabling us to build a full portfolio for future drug combinations. Maintain our culture as we grow our business globally. We believe our science-driven, cooperative and non-hierarchical culture is a key strength of our organization and will continue to be instrumental to our success. As an innovative biotechnology company with research facilities in China, we have been able to attract an internationally trained research team. Many members of our team moved back to China from other countries to join us because they share our goals of advancing the discovery and development of drugs in China and of working with Chinese clinicians to treat their patients with innovative and effective drugs not currently available to them. We intend to maintain our patient-focused and research-driven culture as we discover and develop new drugs for China and the rest of the world. Retain the value of our pipeline in our core focus area of oncology. We currently collaborate with Merck KGaA on our BGB-283 program, but retain exclusive development and commercial rights in China, subject to certain non-compete restrictions. Additionally, we currently retain all worldwide development and commercial rights for our other clinical and preclinical therapeutics. We also have a limited collaboration with Merck KGaA on our BGB-290 program. We intend to protect our ability to direct global preclinical studies and clinical trials for our drug candidates as monotherapies and combination therapies and to maintain exclusive rights in our home market. However, we may opportunistically evaluate additional collaboration opportunities that could increase the value of our programs by accessing the expertise or infrastructure of strategic collaborators or by developing drug candidates with potential applications outside of our strategic focus on cancer. Risks Associated with Our Business We are a globally focused biopharmaceutical company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. We have incurred net losses in each period since our inception and anticipate that we will continue to incur net losses for the foreseeable future. We will need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our primary drug candidates. Table of Contents We depend substantially on the success of our drug candidates, particularly BGB-3111, BGB-A317, BGB-290, and BGB-283, which are in clinical development as monotherapies and in combination. Clinical trials of our drug candidates may not be successful. If we are unable to commercialize our drug candidates, or experience significant delays in doing so, our business will be materially harmed. If we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired. Even if any of our drug candidates receives regulatory approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. If we are unable to obtain and maintain patent protection for our technology and drugs, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be adversely affected. We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be substantially harmed. We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements. Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies. We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth. Company and Other Information We are an exempted company incorporated in the Cayman Islands with limited liability on October 28, 2010. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The principal executive office of our research and development operations is located at No. 30 Science Park Road, Zhong-Guan-Cun Life Science Park, Changping District, Beijing 102206, People's Republic of China. Our telephone number at this address is +86 10 58958000. Our current registered office in the Cayman Islands is located at the offices of Mourant Ozannes Corporate Services (Cayman) Limited, 94 Solaris Avenue, Camana Bay, Grand Cayman KY1-1108, Cayman Islands. Our website address is www.beigene.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus. We own various applications and unregistered trademarks and servicemarks, including BeiGene, and our corporate logo. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies' trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Table of Contents Implications of Being an Emerging Growth Company We qualify as an "emerging growth company" as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002; the ability to include only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced disclosure in management's discussion and analysis of financial condition and results of operations in the registration statement for this offering of which this prospectus forms a part; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and exemptions from the requirements of holding a non-binding advisory vote on executive compensation, including golden parachute compensation. We may take advantage of these exemptions for up to five years from our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (1) the last day of the fiscal year in which we have more than $1.0 billion in annual revenue; (2) the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; (3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering. We may choose to take advantage of some but not all of these exemptions. For example, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this extended transition period. However, we have taken advantage of other reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities. Table of Contents The Offering ADSs offered by us 4,336,043 ADSs ADSs offered by the selling shareholders 406,503 ADSs Ordinary shares outstanding immediately after this offering 484,887,590 shares (494,135,543 shares if the underwriters exercise their option to purchase additional ADSs in full) Underwriters' option to purchase additional ADSs We have granted a 30-day option to the underwriters to purchase up to an aggregate of 711,381 additional ADSs. American Depositary Shares Each ADS represents 13 ordinary shares. You will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and all holders and beneficial owners of ADSs issued thereunder. To better understand the terms of the ADSs, you should carefully read the section in this prospectus titled "Description of American Depositary Shares." We also encourage you to read the deposit agreement, as amended, which is filed as an exhibit to the registration statement that includes this prospectus. Depositary Citibank, N.A. Use of proceeds We estimate that we will receive net proceeds from this offering of approximately $149.9 million, or $174.6 million, if the underwriters exercise their option to purchase additional ADSs in full, based upon an assumed public offering price of $36.90 per ADS, which was the last reported sale price of the ADSs on the NASDAQ on November 16, 2016, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We expect to use the net proceeds from this offering to develop our drug candidates and for working capital and other general corporate purposes. We will not receive any proceeds from the sale of ADSs by the selling shareholders. See "Use of Proceeds" for additional information.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/BNO_united_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/BNO_united_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..81c8c488a1c7e51281fc5b124529e19aade3c04b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/BNO_united_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This is only a summary of the prospectus and, while it contains material information about BNO and its shares, it does not contain or summarize all of the information about BNO and the shares contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus, including "Risk Factors Involved with an Investment in BNO" beginning on page 5, before making an investment decision about the shares. For a glossary of defined terms, see Appendix A. BNO United States Brent Oil Fund, LP ("BNO"), a Delaware limited partnership, is a commodity pool that continuously issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca stock exchange ("NYSE Arca"). BNO is managed and controlled by United States Commodity Funds LLC ("USCF"), a Delaware limited liability company. USCF is registered as a commodity pool operator ("CPO") with the Commodity Futures Trading Commission ("CFTC") and is a member of the National Futures Association ("NFA"). BNO s Investment Objective and Strategy: The investment objective of BNO is for the daily changes in percentage terms of its shares per share net asset value ("NAV") to reflect the daily changes in percentage terms of the spot price of Brent crude oil, as measured by the daily changes in the price of a specified short-term futures contract on Brent crude oil called the "Benchmark Futures Contract", less BNO s expenses. What is the "Benchmark Futures Contract"? The Benchmark Futures Contract is the futures contract on Brent crude oil as traded on the Ice Futures Europe Exchange (the "ICE Futures") that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire. BNO seeks to achieve its investment objective by investing primarily in futures contracts for crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the New York Mercantile Exchange (the "NYMEX"), the ICE Futures Exchange or other U.S. and foreign exchanges (collectively, "Futures Contracts"), and to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, other crude oil-related investments such as cash-settled options on Futures Contracts, forward contracts for crude oil, cleared swap contracts and non-exchange traded ("over-the-counter" or "OTC") transactions that are based on the price of crude oil and other petroleum-based fuels, Futures Contracts and indices based on the foregoing (collectively, "Other Crude Oil-Related Investments"). Market conditions that USCF currently anticipates could cause BNO to invest in Other Crude Oil-Related Investments include those allowing BNO to obtain greater liquidity or to execute transactions with more favorable pricing. For convenience and unless otherwise specified, Futures, Contracts and Other Crude Oil-Related Investments, collectively are referred to as "Crude Oil Interests" in this prospectus. In addition, USCF believes that market arbitrage opportunities cause daily changes in BNO s share price on the NYSE Arca on a percentage basis to closely track daily changes in BNO s per share NAV on a percentage basis. USCF further believes that the daily changes in prices of the Benchmark Futures Contract have historically tracked the daily changes in the spot price of Brent crude oil. USCF believes that the net effect of these relationships will be the daily changes in the price of BNO s shares on NYSE Arca on a percentage basis will closely track the daily changes in the spot price of Brent crude oil on a percentage basis, less BNO s expenses. Specifically, BNO seeks to achieve its investment objective by investing so that the average daily percentage change in BNO s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Futures Contract over the same period. Investors should be aware that BNO s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of Brent crude oil or any particular futures contract based on Brent crude oil nor is its BNO s investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured over a time period greater than one day. This is because natural market forces called contango and backwardation have impacted the total return on an investment in BNO s shares during the past year relative to a hypothetical direct investment in Brent crude oil and, in the future, it is likely that the relationship between the market price of BNO s shares and the changes in the spot price of Brent crude oil will continue to be so impacted by contango and backwardation. (It is important to note that the disclosure above ignores the potential costs associated with physically owning and storing Brent crude oil, which could be substantial.) PROSPECTUS United States Brent Oil Fund, LP * 32,200,000 Shares *Principal U.S. Listing Exchange: NYSE Arca, Inc. The United States Brent Oil Fund, LP ("BNO") is an exchange traded fund organized as a limited partnership that issues shares that trade on the NYSE Arca stock exchange ("NYSE Arca"). BNO s investment objective is to track a benchmark of short-term futures contracts. BNO pays its general partner, United States Commodity Funds LLC ("USCF"), a limited liability company a management fee and incurs operating costs. BNO and USCF are located at 1999 Harrison Street, Suite 1530, Oakland, CA 94612. The telephone number for both BNO and USCF is 510.522.9600. In order for a hypothetical investment in shares to break even over the next 12 months, assuming a selling price of $12.31 (the net asset value as of March 31, 2016), the investment would have to generate 0.81% return or $0.10. BNO is an exchange traded fund. This means that most investors who decide to buy or sell shares of BNO shares place their trade orders through their brokers and may incur customary brokerage commissions and charges. Shares trade on the NYSE Arca under the ticker symbol "BNO" and are bought and sold throughout the trading day at bid and ask prices like other publicly traded securities. Shares trade on the NYSE Arca after they are initially purchased by "Authorized Participants," institutional firms that purchase shares in blocks of 50,000 shares called "baskets" through BNO s marketing agent, ALPS Distributors, Inc. (the "Marketing Agent"). The price of a basket is equal to the net asset value ("NAV") of 50,000 shares on the day that the order to purchase the basket is accepted by the Marketing Agent. The NAV per share is calculated by taking the current market value of BNO s total assets (after close of NYSE Arca) subtracting any liabilities and dividing that total by the total number of outstanding shares. The offering of BNO s shares is a "best efforts" offering, which means that neither the Marketing Agent nor any Authorized Participant is required to purchase a specific number or dollar amount of shares. USCF pays the Marketing Agent a marketing fee consisting of a fixed annual amount plus an incentive fee based on the amount of shares sold. Authorized Participants will not receive from BNO, USCF or any of their affiliates any fee or other compensation in connection with the sale of shares. Aggregate compensation paid to the Marketing Agent and any affiliate of USCF for distribution-related services in connection with this offering of shares will not exceed ten percent (10%) of the gross proceeds of the offering. Investors who buy or sell shares during the day from their broker may do so at a premium or discount relative to the market value of the underlying Brent crude oil futures contracts in which BNO invests due to supply and demand forces at work in the secondary trading market for shares that are closely related to, but not identical to, the same forces influencing the prices of Brent crude oil and the Brent crude oil futures contracts that serve as BNO s investment benchmark. Investing in BNO involves risks similar to those involved with an investment directly in the crude oil market, the correlation risk described above, and other significant risks. See "Risk Factors Involved with an Investment in BNO" beginning on page 4. The offering of BNO s shares is registered with the Securities and Exchange Commission ("SEC") in accordance with the Securities Act of 1933 (the "1933 Act"). The offering is intended to be a continuous offering and is not expected to terminate until all of the registered shares have been sold or three years from the date of the original offering, whichever is earlier, unless extended as permitted under the rules under the 1933 Act, although the offering may be temporarily suspended if and when no suitable investments for BNO are available or practicable. BNO is not a mutual fund registered under the Investment Company Act of 1940 ("1940 Act") and is not subject to regulation under such Act. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. BNO is a commodity pool and USCF is a commodity pool operator subject to regulation by the Commodity Futures Trading Commission and the National Futures Association under the Commodities Exchange Act. THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. The date of this prospectus is , 2016. TABLE OF CONTENTS Page Disclosure Document: Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/BOTY_lingerie_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/BOTY_lingerie_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f205cf0b1d434353b3af2ef6b76949bcfdcf1f8d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/BOTY_lingerie_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock of Lingerie Fighting Championships, Inc. (referred to herein as the Company, we, our, and us ). You should carefully read the entire Prospectus, including Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying financial statements and notes before making an investment decision. Business Overview We were incorporated in Nevada on November 29, 2006 under the name Sparking Events, Inc., and on September 16, 2013 our corporate name was changed to Cala Energy Corp., (formally, Xodtec LED, Inc.) under which we were engaged in the business of offering services, such as enhanced oil recovery and material supplies, to gas and oil fields predominantly located in Southeast Asia. We were not successful in our efforts and discontinued this line of business. Since that time, and prior to the Exchange Agreement (defined below) we have been a "shell company", as such term is defined in Rule 12b-2 of the Exchange Act. On March 31, 2015, the Company, pursuant to share exchange agreement (the "Share Exchange Agreement"), among the Company, Lingerie Fighting Championships, Inc. ( LFC ), and the holders of all of the outstanding common stock and convertible notes of LFC exchanged their common stock and convertible notes of LFC for a total of 16,750,000 shares of common stock, which represented 84.70% of the Company's common stock after giving effect to the issuance of the shares pursuant to the Share Exchange Agreement and the shares of common stock issued in the private placement described in the following paragraph. The issuance of the 16,750,000 shares of common stock to the former holders of LFC's common stock and convertible notes in exchange for the capital stock of LFC is referred to as the reverse acquisition transaction. The sole director and chief executive officer of LFC became a director and the chief executive officer of the Company. As a result of the reverse acquisition, the Company's business has become the business of LFC. On March 31, 2015, contemporaneously with the closing pursuant to the Share Exchange Agreement, the Company issued 2,500,000 shares of common stock for a purchase price of $0.08 per share, for a total of $200,000. The proceeds from the private placement were held in escrow on March 31, 2015, and were paid to the Company on April 2, 2015. Accordingly, on March 31, 2015, the proceeds from the private placement are reflected as a subscription receivable. None of the purchasers in the private placement are affiliates of the Company. As a result of the reverse acquisition with LFC, we ceased to be a shell company on March 31, 2015. Effective as of April 1, 2015, we changed our name to "Lingerie Fighting Championships, Inc." a name which more accurately represents our new business. We effected the name change by virtue of a short form merger, pursuant to which LFC (our wholly owned subsidiary after the LFC Acquisition) merged with and into the Company, with the Company remaining as the surviving parent corporation. In connection with the name change, we submitted to FINRA a voluntary request for the change of our OTC trading symbol. Our Common Stock now trades under the symbol BOTY . As a result of, and in connection with, the reverse acquisition, the Company changed its fiscal year to December 31, which was LFC's fiscal year, from a fiscal year ending February 28. On April 20, 2015, the Company effected a one-for-800 reverse split, pursuant to which each share of common stock was converted into, and became 1/800 of a share of common stock, with fractional shares being rounded up to the next higher whole number of shares. As a result of the reverse split, the 339,757,357 shares of common stock, then outstanding, became and were converted into 424,977 shares. All references to shares of common stock and per share information retroactively reflect the reverse split. Investment Agreement with Tangiers Global LLC On April 4, 2016, we closed on an Investment Agreement with Tangiers Global, LLC ( Tangiers ), a Wyoming limited liability company. Pursuant to the terms of the Investment Agreement, Tangiers committed to purchase up to $5,000,000 of our Common Stock during the Open Period. From time to time during the Open Period, the Company may deliver a drawdown notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice (the Put Notice ). The maximum investment amount per notice shall be shall be equal to one hundred percent (100%) of the average of the daily trading dollar volume (U.S. market only) of the Common Stock for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date so long as such amount does not exceed an accumulative amount per month of $100,000 unless a prior approval of the Investor is obtained by the Company. The total purchase price to be paid, in connection to the Put Notice, by Tangiers shall be calculated at a eighteen percent (18%) discount of the lowest trading price of the Common Stock during the five (5) consecutive Trading Days immediately succeeding the applicable Put Notice Date. In connection with the Investment Agreement, we also entered into a registration rights agreement (the Registration Rights Agreement ) with Tangiers, pursuant to which we are obligated to file a registration statement with the SEC. We are obligated to use all commercially reasonable efforts to maintain an effective registration statement until termination of the Investment Agreement. The Company signed a promissory note to pay to the order of Tangiers the Principal Sum of $100,000 as a Commitment fee. The promissory note maturity date is eight (8) months from April 4, 2016. In the event the S-1 related to the Equity Investment Agreement goes effective within 180 days of the April 4, 2016, 2016, the Maturity Date of this Note will be extended to ten (10) months. If this registration statement is declared effective within 90 days of the execution date of the Investment Agreement, the Company and Holder agree the principal balance of the Note will immediately be reduced by $40,000. At the election of Tangiers and upon written notice from Tangiers, at each Closing Date (as defined in the Investment Agreement) after the date which is six (6) months after the Effective Date, Holder shall retain (or the Company shall pay to Holder) an amount equal to ten percent (10%) of each Put Amount (as defined in the Investment Agreement), and the amounts shall be applied by Holder as follows: first against the amount of any unpaid interest or other fees, and second against any unpaid Principal Sum, until such time as all amounts of interest, fees and Principal sum have been paid by the Company. The 3,500,000 shares to be registered herein represents 17.70 % of the total issued and outstanding shares, assuming that the selling stockholder will sell all of the shares offered for sale. There are substantial risks to investors as a result of the issuance of shares of our Common Stock under the Investment Agreement. These risks include dilution of stockholders percentage ownership, significant decline in our stock price and our inability to draw sufficient funds when needed. Tangiers will periodically purchase our Common Stock under the Investment Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Tangiers to raise the same amount of funds, as our stock price declines. The aggregate investment amount of $5,000,000 was determined based on numerous factors, including the following: Current financial operating needs Financing of workover projects Acquisition of assets, business and/or operations Acquisition of additional licensing Other purposes that the Board in its good faith deem in the best interest of the Company Where You Can Find Us We do not have a principal office. Our mailing address is 6955 North Durango, Suite 1115-129, Las Vegas, NV, 89149, telephone (702) 527-2942. Our website is www.lingeriefc.com.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CAHO_caro_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CAHO_caro_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f3325144e06ebd16c4949c18399345dca9f6b2ff
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CAHO_caro_prospectus_summary.txt
@@ -0,0 +1,7 @@
+PROSPECTUS SUMMARY
+ 
+You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this Prospectus. In this Prospectus, unless the context otherwise denotes, references to "we," "us," "our", "Caro Holdings Inc.", "Caro Holdings", and "the Company" are to Caro Holdings Inc. We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements.
+ 
+A Cautionary Note on Forward-Looking Statements
+ 
+This Prospectus contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0000727634_isign_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0000727634_isign_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0000727634_isign_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0000776008_rock_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0000776008_rock_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0000776008_rock_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0000825411_sevcon-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0000825411_sevcon-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4de62fe9d37fbe90f36f8ba677e41666ac4cd5c5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0000825411_sevcon-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this prospectus or in materials incorporated by reference into this prospectus. However, this summary is not complete and does not contain all of the information you should consider before investing in our common stock, and it is qualified in its entirety by the more detailed information included in, or incorporated by reference into, this prospectus. Unless otherwise indicated, each reference to a year means our fiscal year, which ends on September 30. Our Company Sevcon, Inc., or the "Company," is a global supplier of control and power solutions for zero-emission, electric and hybrid vehicles. Our products control on- and off-road vehicle speed and movement, integrate specialized functions, optimize energy consumption and help reduce air pollution. Our recently acquired Bassi Division produces battery chargers for electric vehicles, power management and uninterrupted power source (UPS) systems for industrial, medical and telecom applications, and electronic instrumentation for battery laboratories. We supply customers from our operations in the United States, United Kingdom, France, Germany, Italy, China and the Asia Pacific region, as well as through an international dealer network. We believe we are one of the largest independent suppliers of controls for electrically powered and hybrid vehicles. We are a leader in the worldwide trend that we call "electrification" — the change from an internal combustion or hydraulically powered system to an electrically engineered solution. In 2015, the industry saw acceleration in the demand for electrification, and we saw a substantial increase in our project pipeline associated with electrification. In September 2015, we released the first of our new GEN5 products. GEN5 comprises a set of breakthrough core components that we standardize across our product range allowing the cost-effective development of a wide variety of products and solutions for on-road and industrial electrification. These core components set new standards of reliability, flexibility and security, allowing customers to easily adapt and customize them to their specific applications. Corporate Information We are a Delaware corporation organized in 1987 to carry on the electronic controls business previously conducted by Tech/Ops, Inc. since 1951. Our headquarters are located at 155 Northboro Road, Southborough, Massachusetts 01772, where our telephone number is (508) 281-5510. "Sevcon" is a registered service mark that we own. Our website is www.sevcon.com. Information contained on, or accessible through, our website is not part of this prospectus, and such content is not incorporated by reference herein. The Offering Common stock outstanding as of August 9, 2016 (1) 5,342,924 Common stock offered by selling stockholders: Currently issued and outstanding 1,124,000 Issuable upon exercise of warrants 562,000 Total 1,686,000 Common stock outstanding assuming all warrants are exercised(1) 5,904,924 Use of Proceeds We will not receive any proceeds from the sale of the common stock by the selling stockholders. NASDAQ Symbol Shares of our common stock are listed on the NASDAQ Capital Market under the symbol "SEV."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0000890447_vertex_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0000890447_vertex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..819bac1a3973eefe80b037cf7973f61e88541129
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0000890447_vertex_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 2
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0000896494_senstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0000896494_senstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..de530a6157c8b1ebc8647b98e2cc8f50c2913b65
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0000896494_senstar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY You should read the following summary together with the more detailed information regarding our company and the rights offering, including Risk Factors and our consolidated financial statements and related notes, included elsewhere or incorporated by reference in this prospectus. This summary highlights selected information from this prospectus and does not contain all of the information that may be important to you. Magal Security Systems Ltd. We are a leading international solutions provider of security, safety and site management solutions and products. Based on more than 45 years of experience and interaction with customers, we have developed a unique set of solutions and products, optimized for perimeter, outdoor and general security applications. Our turnkey solutions are typically integrated and managed by sophisticated modular command and control software, supported by expert systems for real-time decision support. Our broad portfolio of critical infrastructure and site protection technologies includes a variety of smart barriers and fences, fence mounted detectors, virtual (volumetric) fences and gates, buried and concealed detection systems and a sophisticated protection package for sub-surface intrusion such as to secure pipelines. We have successfully installed customized solutions and products in more than 80 countries worldwide. We were incorporated under the laws of the State of Israel in 1984. Our principal executive offices and primary manufacturing and research and development facilities are located near Tel Aviv, Israel, in the Yehud Industrial Zone. Our mailing address is P.O. Box 70, Industrial Zone, Yehud 5621617, Israel and our telephone number is +972-3-5391444. Our agent for service of process in the United States is our subsidiary, Senstar Inc., 13800 Coppermine Road, Second Floor, Herndon, Virginia 20171. Our address on the Internet is www.magal-S3.com. The information on our website is not incorporated by reference and should not be considered as part of this prospectus. Recent Developments Acquisition of Aimetis. On April 1, 2016, Senstar Corp., our fully owned subsidiary based in Canada, acquired Aimetis Corp. Senstar paid the shareholders of Aimetis approximately CAD $19.8 million (approximately USD 15.2 million) in cash (including CAD$1.1 million placed in escrow to secure potential indemnity obligations and up to an additional CAD$1.1 million payable in cash, subject to achievement of future performance milestones based on fiscal year 2016 revenues). Aimetis, a Canadian-based company headquartered in Waterloo, Ontario, specializes in intelligent IP video management software (VMS). Six Months Financial Results. On August 31, 2016, we reported revenues of $26.2 million, an operating loss of $1.6 million and a net loss of $2.5 million for the six months ended June 30, 2016 compared to revenues of $27.5 million, operating income of $179,000 and a net loss of $260,000 for the six months ended June 30, 2015. The Rights Offering Securities Offered We are distributing at no charge to the holders of our ordinary shares on September 9, 2016, which we refer to as the record date, subscription rights to purchase up to an aggregate of 4,112,053 of our ordinary shares. We will distribute one subscription right to the holder of record of every four ordinary shares that is held by the holder of record on the record date. Based on 16,448,215, share outstanding on the date hereof, we will issue approximately 4,112,053 subscription rights in the rights offering. The total subscription price for the subscription rights offered in the rights offering will be at maximum $19 million, assuming full participation in the rights offering (and full exercise of the over-subscription right, to the extent applicable), of which no assurance can be given. However, if the holders of exercisable options and warrants exercise their securities prior to the record date, up to an additional 318,715 subscription rights may be issued. Basic Subscription Right Each subscription right, which we refer to as the basic subscription right, entitles the holder to purchase, for the subscription price of $____, one ordinary share. Rights will be rounded down to the nearest whole number and accordingly, no fractional rights will be issued in the rights offering. With respect to ordinary shares registered on our shareholder register maintained by our transfer agent, including those held in the name of DTC, such rounding will be made with respect to each record and beneficial shareholder. Subscription rights may only be exercised for whole numbers of ordinary shares; no fractional ordinary shares will be issued in the rights offering. Over-Subscription Right If you elect to purchase all of the ordinary shares available to you pursuant to your basic subscription right, you may also elect to subscribe for additional ordinary shares that remain unsubscribed as a result of any other shareholders not exercising their basic subscription rights. In honoring over-subscription rights, we will allocate the available shares proportionately by calculating the number of rights a subscriber properly exercised using its basic subscription rights, relative to the number of rights properly exercised using the basic subscription rights by all subscribers who have over-subscribed. We will allocate to you an equivalent proportion of the shares available for over-subscription. We will seek to honor your over-subscription in full, subject to the limitations set forth herein. The exercise of your over-subscription privilege may be limited, however, if there are insufficient shares available, so you may be allocated fewer shares than you subscribed for using your over-subscription privilege. If the proportionate allocation results in you being allocated a greater number of shares than you subscribed for, then we will allocate to you only that number of shares for which you subscribed. We will allocate the remaining shares, on the basis described above, among all holders exercising the over-subscription privilege whose over-subscription was not satisfied in the first allocation. This allocation process will be repeated until all over-subscriptions have been satisfied. Fractional shares resulting from the exercise of the over-subscription privilege will be eliminated by rounding down to the nearest whole share. Payments in respect of over-subscription rights are due at the time payment is made for the basic subscription right. Any excess subscription price payments will be returned, without interest or deduction, promptly after the expiration of the rights offering. Record Date Close of business on September 9, 2016. Commencement Date of Subscription Period After 5:00 p.m., New York City time on September ____, 2016. Expiration Date of Subscription Period 5:00 p.m., New York City time on September ____, 2016, unless we decide to terminate the rights offering earlier. We or the subscription agent must actually receive all required documents and payments before that time and date. Any rights not exercised at or before the applicable time will have no value and expire without any payment to the holders for those unexercised rights. Subscription Intentions of our Controlling Shareholders; Private Placement Section 328(a) of the Israeli Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would hold 25% or more of the voting rights in the company, unless there is already another shareholder of the company with 25% or more of the voting rights. Similarly, Section 328(a) of the Israeli Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would hold more than 45% of the voting rights in the company, unless there is a shareholder with more than 45% of the voting rights in the company. An exception to the requirement to commence a special tender offer is if a purchaser passes the 25% or 45% threshold in a public company, as applicable, by acquiring shares directly from the public company in a private placement that was approved by the company's shareholders as a private placement intended to enable such the shareholder to pass the applicable 25% or 45% threshold. For additional information on special tender offers under the Israeli Companies Law, please see the description under Description of Share Capital Provisions Restricting a Change in Control of Our Company . Our controlling shareholders, certain limited partnerships managed by FIMI FIVE 2012 Ltd., currently hold 39.3% of our voting rights. The FIMI partnerships informed us that they intend to exercise their basic subscription rights in full and may choose to exercise the over-subscription rights set forth herein, all to such extent that the FIMI partnerships holdings do not exceed 50% of our voting rights following the exercise of their subscription rights. Since the contemplated exercise of subscription rights by the FIMI partnership may cause their holdings to exceed 45% of our voting rights (depending on the level of participation by other shareholders in the rights offering), in accordance with the Israeli Companies Law our audit committee (consisting solely of independent directors) and board of directors approved, and recommended, that our shareholders approve a private placement of shares to the FIMI partnerships at a price per share and other terms identical to the terms of this rights offering, so as to enable the FIMI partnerships to cross the 45% threshold. In approving and recommending the FIMI private placement, our audit committee and board of directors determined that the consummation of the FIMI private placement is in the best interest of the company since it significantly increases the likelihood that the rights offerings will be fully subscribed. On August 8, 2016, our shareholders also approved the proposed private placement to the FIMI partnerships in accordance with the Israeli Companies Law. Accordingly, if the exercise of subscription rights causes the FIMI partnerships holdings to exceed 45% of our voting rights, then in order to comply with the Israeli Companies Law, such number of ordinary shares exceeding 45% of our voting rights will be issued to the FIMI partnerships in a private placement at a price per share and other terms identical to the terms of this rights offering. In such case, the issuance of the ordinary shares to FIMI will occur concurrently with the issuance of the shares subscribed for in the rights offering. Subscription Price $_____ per right, payable in immediately available funds. Use of Proceeds We intend to use the net proceeds from this offering for general corporate purposes focused on growing our business, including through acquisitions or investments in complementary companies or technologies. We do not have any agreement or understanding with respect to any such acquisition or investment at this time. Nor do we currently have specific plans or commitments with respect to the net proceeds from this offering and, accordingly, are unable to quantify the allocation of such proceeds among potential uses. We will have broad discretion in the way that we use the net proceeds of this offering. Transferability of Subscription Rights The subscription rights may not be sold or transferred except for being transferable by operation of law. No Board Recommendation Our board of directors makes no recommendation to you about whether you should exercise any subscription rights. You are urged to consult your own financial advisors in order to make an independent investment decision about whether to exercise your subscription rights. Please see the section of this prospectus entitled Risk Factors for a discussion of some of the risks involved in investing in our securities. No Minimum Subscription Requirement There is no minimum subscription requirement. We will consummate the rights offering regardless of the amount raised from the exercise of rights by the expiration date. No Revocation If you exercise any of your basic or over-subscription rights, you will not be permitted to revoke or change the exercise or request a refund of monies paid. Taxation For a discussion of material U.S. federal income tax and Israeli tax considerations of the receipt and exercise of the rights and the ownership and disposition of new ordinary shares, please refer to Material U.S. Federal Income Tax Considerations and Certain Israeli Tax Considerations in this prospectus. Termination, Cancellation and Amendment We may terminate or cancel the offering in our sole discretion at any time on or before September__, 2016 for any reason (including, without limitation, a change in the market price of our ordinary shares). If the offering is terminated, all rights will expire without value and we will promptly arrange for the refund, without interest or deduction, of all funds received from holders of subscription rights. Any termination or cancellation of the rights offering will be followed as promptly as practicable by an announcement. We may not amend or modify the terms of the rights offering, nor can we extend the expiration date of the rights offering. Procedure for Exercising Rights If you are the record holder of our ordinary shares registered on our shareholder register maintained by American Stock Transfer & Trust Company, LLC, our transfer agent, not including those ordinary shares held in the name of DTC, to exercise your subscription rights you must complete the subscription rights certificate and deliver it to the subscription agent, American Stock Transfer & Trust Company, LLC, together with full payment for all the subscription rights you elect to exercise. The subscription agent must receive the proper forms and payments on or before the expiration date. You may deliver the documents and payments by mail or commercial courier. If regular mail is used for this purpose, we recommend using registered mail, properly insured, with return receipt requested. If you are a beneficial owner of our ordinary shares and/or hold them through a broker, dealer, bank or other nominee (including a participant of DTC), you should instruct your broker, dealer, bank or other nominee in accordance with the procedures described in the section of this prospectus entitled The Rights Offering Methods for Exercising Rights and The Rights Offering Payment of Subscription Price . Subscription Agent American Stock Transfer & Trust Company, LLC Information Agent D.F. King & Co. Inc. Questions If you have any questions or need further information about the rights offering, please call D.F. King & Co. Inc., toll free at : 877-283-0321, or you may also contact our General Counsel or Chief Financial Officer, at +972-3-5391490, during their respective normal business hours. Shares Outstanding on the Date of this Prospectus 16,448,215 shares outstanding as of the date of this prospectus. This amount excludes 1,784,861 ordinary shares issuable upon the exercise of outstanding options and warrants. Shares Outstanding after Completion of the Rights Offering 20,560,268 of our ordinary shares will be outstanding immediately after the completion of the rights offering, assuming full participation in the rights offering (and the FIMI private placement, as applicable). This amount excludes 1,784,861 ordinary shares issuable upon the exercise of outstanding exercisable options and warrants and any subscription rights issuable thereunder. Issuance of Our Ordinary Shares The issuance of ordinary shares purchased in the rights offering will be made on or about September__, 2016. American Stock Transfer & Trust Company, LLC will mail certificates representing ordinary shares purchased in the rights to record holders registered on our shareholder register maintained by it promptly after such date. Beneficial owners of our ordinary shares whose shares are held by a nominee will have any ordinary shares acquired in the rights offering credited to the account of such nominee on such date.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001028153_axion_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001028153_axion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5e3f0f17796d434e222a4d5114806d927184d42e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001028153_axion_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights important information about this offering and our business. It does not include all information you should consider before investing in our common stock. Please review this prospectus in its entirety, including the risk factors and our financial statements and the related notes, before you decide to invest. Our Company The cornerstone of our PbC technology is our proprietary PbC lead carbon battery, which substitutes an activated carbon negative electrode for the standard lead negative electrode in a lead-acid battery construct. All other components of the PbC battery (such as case, cover, separator material, positive plate, electrolyte and other components) are identical to those used in a conventional lead-acid battery. The PbC product is part battery with energy storage capabilities and part asymmetric hybrid supercapacitor with a fast recharge rate, charge acceptance and long cycle life. The construct design results in a relatively low cost device that can be manufactured in iterations that deliver maximum power, or deliver maximum energy, or provide a range of balances between the two. Our PbC battery can be used in applications that service the energy storage needs of several markets including transportation, renewable power, frequency regulation and backup power. We have devoted more than ten years to research and development on our PbC technology. Our work has focused on developing our intellectual property, characterizing baseline performance, developing proprietary treatment processes for the activated carbon we use in our electrodes, developing proprietary designs, manufacturing techniques for electrode assemblies and fabricating a series of material and design evaluation prototypes that range from single cell to multi-cell batteries for use in energy storage devices and systems. Our PbC technology is protected by thirteen issued U.S. patents and other proprietary features and structures, and we typically have a number of additional patent applications in process at any point in time. The resulting devices are technically sophisticated yet simple in design. The carbon negative electrode assemblies are fabricated from readily available raw materials using, for the most part, standard industrial processes and techniques. The PbC negative electrodes that are then assembled into PbC batteries can be used with the same case cover, positive plate, separators and electrolyte that are used in conventional lead-acid batteries. Our PbC batteries can be assembled with the same equipment and methodology commonly used for manufacturing conventional lead-acid batteries. PbC batteries use significantly less lead than standard lead-acid batteries with a comparable footprint. Moreover, the lead, plastics and acid employed, just like lead-acid batteries, can be routinely and profitably recycled at existing recycling facilities around the world. A 2007 United States EPA report indicated that in the United States lead-acid batteries are fully recycled 99.2% of the time. We believe our advanced battery technologies are uniquely situated to answer the current challenges facing both the historic lead-acid battery industry and the challenges facing newer battery chemistries such as lithium-ion, nickel metal hydride, etc. While we further commercialize and continue to explore various potential applications for our PbC technology in the future, these two facilities in New Castle, Pennsylvania will continue to provide us with both an important research and development facility and a production plant in which to produce our lead-free activated carbon negative electrodes. We will also accelerate our development of strategic partners for energy storage manufacture. Under the registration rights agreement entered into by us and the selling shareholders in connection with the issuance of the convertible notes due January 5, 2017, and the warrants issued in conjunction therewith ("warrants"), we are required to register for resale 200% of the number of shares of our common stock issuable pursuant to $3,650,000 principal amount of the convertible notes (out of a total of $9,000,000 of the total principal amount of such convertible notes plus $363,500 principal amount of the notes as a result of the "roll over" of certain bridge notes originally issued by us in August 2015), based upon a conversion price of $0.68. This amount represents a good faith estimate of the maximum number of shares issuable pursuant to $3,650,000 principal amount of the convertible notes. Unless otherwise noted, the terms "the Company," "our Company," "Axion," "we," "us" and "our" refer to Axion Power International, Inc. and its subsidiaries. The selling stockholders may offer their shares from time to time directly or through one or more underwriters, broker-dealers or agents, in the over-the-counter market at market prices prevailing at the time of sale, in one or more privately negotiated transactions at prices acceptable to the selling stockholders, or otherwise, so long as our common stock is trading on the Nasdaq Capital Market or the OTCQB, and if it is not trading on the OTCQB, OTCQX or a listed exchange, sales may only take place at fixed prices. We are registering these shares of our common stock for resale by the selling stockholders named in this prospectus, or their transferees, pledgees, donees or assigns or other successors-in-interest that receive any of the shares as a gift, distribution, or other non-sale related transfer. We will not receive any proceeds from the sale of shares by the selling stockholders. These shares are being registered to permit the selling stockholders to sell shares from time to time, in amounts, at prices and on terms determined at the time of offering. The selling stockholders may sell this common stock through ordinary brokerage transactions, directly to market makers of our shares or through any other means described in the section entitled "PLAN OF DISTRIBUTION" beginning of page 45. In connection with any sales of the common stock offered hereunder, the selling stockholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). We will pay the expenses related to the registration of the shares covered by this prospectus. The selling stockholders will pay any commissions and selling expenses they may incur. Our common stock trades on the OTCQB under the symbol "AXPW". The closing sale price on the Nasdaq Capital Market on January 8, 2016, was $0.80 per share. Our principal executive offices are located at 3601 Clover Lane, New Castle PA 16105. Our telephone number at that address is (724) 654-9300. Investing
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001037649_interleuki_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001037649_interleuki_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001037649_interleuki_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001082506_forest_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001082506_forest_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..691adf3ad0992f894eea088f75ab3f224187fb15
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001082506_forest_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary provides an overview of Great Elm and this offering and may not contain all the information that is important to you. This summary is qualified in its entirety by, and should be read together with, the information contained in other parts of this prospectus and the documents we incorporate by reference. You should read this prospectus and the documents that we incorporate by reference carefully in their entirety before making a decision about whether to invest in our securities. Great Elm has undergone a significant transformation in the last year. We: divested our legacy patent business; changed and are further changing our leadership; changed our name from Unwired Planet to Great Elm Capital Group; and began building a diversified holding company. Our goal is to build a diversified holding company focused on return on investment and long term value creation. We will seek to accomplish this principally through: continuous review of acquisition of businesses, securities and assets that have the potential for significant long term value creation; effective use of the skills of our team, our financial resources, including our tax profile and our willingness to create bespoke solutions; and evaluating the retention and disposition of our operations and holdings. Our first investment for long term value creation is in the asset management business. In June 2016, we invested $30 million in Great Elm Capital Corp., or GECC. On November 3, 2016, Full Circle Capital Corporation, or Full Circle, a business development company, merged with and into GECC. Following the Full Circle merger, we will earn management fees and receive expense reimbursement as the external investment manager of GECC; will be entitled to incentive fees from GECC if GECC meets financial targets; and own registered Nasdaq listed shares of GECC that we may hold to generate dividends or sell to redeploy our capital in higher yielding opportunities. We continue to explore other opportunities in the investment management business including, but not limited to, other business development companies that trade at a discount to their net asset value. As of June 30, 2016, we had $1.7 billion of net operating loss carryforwards for federal income tax purposes that expire through 2035. In the near term, we expect to begin marketing financial products that will give us and our counter parties the opportunity to realize after tax returns. We have a business development effort focused on industries and businesses with attractive long term value creation prospects where our business, mergers and acquisitions and financial acumen provides a competitive advantage. On October 18, 2016, we used approximately $31.7 million of our cash resources to redeem our senior secured notes due 2019 that were held by private investment funds managed by MAST Capital. We are a Delaware corporation, and our corporate headquarters are located at 200 Clarendon Street, 51st Floor, Boston, Massachusetts 02116 and our phone number is (617) 375 3006. Our corporate website address is www.greatelmcap.com. The information contained in, or accessible through, our corporate website does not constitute part of this prospectus. You should read carefully in their entirety the documents we incorporate by reference. See Documents Incorporated By Reference. Table of Contents GREAT ELM CAPITAL GROUP, INC. SUBSCRIPTION RIGHTS TO PURCHASE SHARES OF COMMON STOCK We are conducting a rights offering in which we are distributing at no charge to the holders of our common stock rights to purchase up to 13,700,543 shares of our common stock, par value $0.001 per share. Holders of our common stock will receive one right for each share of our common stock owned at the effective date of the close of business on November 23, 2016, or the basic subscription privilege. Unexercised rights will be transferable only to the extent that the shares of our common stock to which they are attached are transferred from and after the effective date. The cash exercise price of each basic subscription privilege is $3.285, which we refer to as the subscription price. Rights holders who fully exercise their basic subscription privilege will be entitled to subscribe for additional shares of our common stock that remain unsubscribed as a result of any unexercised basic subscription privileges on a pro rata basis, which we refer to as the over subscription privilege. We refer to the basic subscription privilege and over subscription privilege collectively as rights. A rights holder may only exercise rights in the aggregate for book entry of whole numbers of shares of our common stock; no fractional shares of our common stock will be issued in this offering. The rights are exercisable beginning on the date of this prospectus and will expire if they are not exercised by 5:00 p.m., Eastern time, on December 23, 2016, the expiration date, unless we extend the offering period. You should carefully consider whether to exercise your rights before the expiration date. Rights that are not exercised by the expiration date will expire and will have no value. All exercises of basic subscription privileges and over subscription privileges are irrevocable. Our common stock is currently traded on the NASDAQ Global Select Market, or Nasdaq, under the symbol GEC. On November 22, 2016, the last reported sale price of our common stock was $3.95 per share. From the effective date to the expiration date, our common stock will trade on Nasdaq along with the associated rights as a trading unit under the symbol GECXU and CUSIP 39036P 308. If you transfer shares of our common stock before the expiration date and before exercising the rights attached to the transferred shares, the rights associated with those shares of our common stock will transfer along with the shares of our common stock under GECXU and CUSIP 39036P 308. Following the exercise of the rights, the trading unit will terminate and the common stock to which the rights had attached will be traded separately from such rights under the symbol GECX and CUSIP 39036P 209. If you exercise the rights and then transfer the common stock as to which the exercised rights originally attached, the new shares of our common stock issuable upon the exercise of the subscription privilege, and oversubscription privilege as applicable, will be issued to you, and not any subsequent transferee of the underlying common stock. From and after the expiration date, all of our common stock will resume trading as GEC under new CUSIP 39036P 209. The exercise of your rights and investment in our shares involves a high degree of risk. You should carefully read the Risk Factors beginning on page 7, as well as the risk factors in any document we incorporate by reference into this prospectus before you make a decision as to the exercise of your rights. Per Unit Total (2) Subscription price $ 3.28 $ 45,000,000 Dealer managers fees and expenses (1) $ 0.11 $ 1,612,500 Proceeds to us, before expenses $ 3.17 $ 43,387,500 Table of Contents QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING The following are examples of what we anticipate will be common questions about this offering. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about this offering. This prospectus and the documents we incorporate by reference contain more detailed descriptions of the terms and conditions of this offering and provide additional information about us and our business, including potential risks related to our business, this offering and our common stock. What happened to our October 14, 2016 rights offering? On October 14, 2016, we commenced a rights offering very similar to the rights offering described in this prospectus. The October 14, 2016 rights were not transferable separate from our common stock. Uncertainty in the market arose as to the non-transferability feature of the October 14, 2016 rights and the effectiveness of an irrevocable exercise of the October 14, 2016 rights under automated subscription processing systems. In order to remove ambiguity, we terminated all of the October 14, 2016 rights as contemplated by our prospectus dated October 14, 2016. All subscriptions made under the October 14, 2016 rights were returned. What are we offering you now? We are issuing to the holders of our common stock as of the close of business on November 23, 2016, which we refer to as the effective date, rights to subscribe for an aggregate of up to 13,700,465 shares of our common stock. Each holder, who we refer to as a rights holder or you, is being issued one right for each share of our common stock owned on the effective date (1 for 1), which we refer to as the basic subscription privilege. Each basic subscription privilege entitles you to purchase 1.3101 shares of our common stock at a cash price of $3.285 per whole share, which we refer to as the subscription price. Your basic subscription privilege may only be exercised in the aggregate for whole numbers of shares of our common stock; no fractional shares of our common stock will be issued in this offering. Any fractional shares will be rounded down to the nearest whole share of common stock and any excess subscription payments will be returned by the subscription agent. Why are my shares trading as GECXU instead of GEC ? Your shares are trading on Nasdaq under the symbol GECXU because that symbol denotes that your shares are trading with the rights attached from the effective date until the earliest of (a) 5:00 p.m. New York time on December 23, 2016, or the expiration date, (b) your exercise of your rights or (c) termination of this offering. At the conclusion of this rights offering, all of our common stock will once again trade under the symbol GEC indicating that those shares no longer have rights attached. If you exercise your rights before the expiration date, your shares as to which you exercised your rights will trade under the symbol GECX to convey to the market that the rights with respect to your shares have been exercised. What is the over subscription privilege? If you purchase all of the shares of our common stock available to you pursuant to your basic subscription privilege, you may also choose to purchase your pro rata share of any shares of our common stock that our other stockholders do not purchase through the full exercise of their basic subscription privileges, which we refer to as the over subscription privilege. You should indicate on your rights certificate, or the form provided by your nominee if your shares are held in the name of a nominee, how many additional shares of our common stock you would like to purchase pursuant to your over subscription privilege. The over subscription privilege allows you to subscribe for additional shares of our common stock. If sufficient shares of our common stock are available, we will seek to honor your over subscription request in full, so long as it does not exceed your pro rata share and the other ownership thresholds described in this prospectus are not exceeded. Table of Contents The Rights Offering The Rights Offering We are distributing at no charge to the holders of shares of our common stock as of the close of business on November 23, 2016, the effective date, one right for each share of our common stock owned of record on the effective date. The basic subscription privilege (as described below) and the over subscription privilege (as described below) are collectively referred to as the rights. Subscription Price If you validly exercise any of your rights, you will receive 1.31 shares of our common stock upon cash payment of $3.285 per whole share, the subscription price, to our rights agent. The subscription price represents a 20% discount to the volume weighted average price of our common stock on Nasdaq over the thirty consecutive trading days ending on and including the effective date. Basic Subscription Privilege Each basic subscription privilege entitles you to purchase 1.31 new shares of our common stock for every share of common stock you owned of record on the effective date. You may exercise all or a portion of your basic subscription privilege or you may choose not to exercise any basic subscription privilege at all. Over Subscription Privilege If any rights holders do not exercise their basic subscription privilege in full, then rights holders who have exercised their basic subscription privilege in full (including subscription privileges acquired as a result of acquiring shares of our common stock between the effective date and expiration date) will be entitled to purchase a portion of the number of shares, if any, that are not purchased by other rights holders through the exercise of their basic subscription privilege at the subscription price, or the over subscription privilege, subject to certain limitations. The maximum number of shares that a rights holder may purchase through the over subscription privilege is the rights holder s pro rata share of the shares not purchased by other rights holders through exercises of their basic subscription privileges. See also Certain Purchase Limitations. If sufficient shares are available, we will seek to honor your over subscription request in full, so long as it does not exceed your pro rata share or other ownership thresholds described in this prospectus. Use of Proceeds Net proceeds of this offering (and the Backstop Commitment, to the extent exercised) will be used for general corporate purposes, which may include investments and acquisitions. Expiration Date The rights expire worthless if they are not validly exercised on or before 5:00 p.m. Eastern time on December 23, 2016, or the expiration date, unless we extend the subscription period (which extension requires the consent of the backstop providers if it results in this offering remaining open for more than 20 days). Transferability of Rights The rights are not transferable separately from the underlying shares of our common stock. The rights will attach to the shares of our common stock and will trade together as a unit under the symbol GECXU and CUSIP 39036P 308 after the effective date until the earlier of the expiration date or the exercise of the rights. Transferability of Common Stock Following Exercise of the Rights If the rights attached to a share of common stock are exercised before the expiration date, shares of common stock as to which the rights have been exercised will be traded separately under the symbol GECX and CUSIP 39036P 209. Trading of Common Stock Following the Expiration Date Following the expiration date, the common stock will trade again under the symbol GEC but with the new CUSIP 39036P 209. No Board Recommendation Our board of directors is not making any recommendation to you with respect to this offering. (1) In connection with this offering, we have agreed to pay to the dealer managers a cash fee equal to 3.5% of the gross proceeds received by us. We have also agreed to reimburse up to $37,500 of the dealer managers legal fees. See Plan of Distribution. (2) Assumes the rights offering is fully subscribed. Table of Contents To properly exercise your over subscription privilege, you must deliver the subscription payment related to your over subscription privilege before this offering expires. Because we will not know the total number of unsubscribed shares of our common stock before this offering expires, if you wish to maximize the number of shares you purchase pursuant to your over subscription privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares that may be available to you (i.e., the aggregate payment for both your basic subscription privilege and for any additional shares you desire to purchase pursuant to your over subscription request). Any excess subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable. We refer to the basic subscription privilege and the over subscription privilege collectively as the rights. Why are we conducting this offering? We are conducting this offering in order to raise additional capital and to improve and strengthen our balance sheet and liquidity position. We intend to use the net proceeds of this offering and the commitment of a consortium of investors to purchase up to $36.6 million of our common stock, or the Backstop Commitment, for general corporate purposes, which may include investments and acquisitions. On October 17, 2016, we redeemed all of our Senior Secured Notes due 2019. Our board of directors considered and evaluated a number of factors relating to this offering, including: our current capital resources and our future need for additional liquidity and capital; our need for increased financial flexibility in order to enable us to achieve our business plan; the size and timing of this offering; the potential dilution to our current stockholders if they choose not to participate in this offering; alternatives available for raising capital, including debt and other forms of equity raises; the potential impact of this offering on the public float for our common stock; and the fact that existing stockholders would have the opportunity to participate on a pro rata basis to purchase additional shares of our common stock, subject to certain restriction. The Amended and Restated Backstop Agreement, dated as of October 13, 2016, and entered into with a consortium of investors led by Gracie Investing, LLC, or the Backstop Agreement, was reviewed, negotiated and approved by our board of directors with Gracie Investing, LLC, a private investment vehicle not affiliated with us or our directors and officers, before the members of our board of directors agreed to participate as investors in the Backstop Commitment. How was the subscription price determined? The $3.285 subscription price was set by our board of directors as a result of negotiations with Gracie Investing, LLC as the largest participant in the backstop. The subscription price represents a 20% discount to the volume weighted average price of our common stock on Nasdaq over the thirty trading days ending on and including the effective date. The factors considered by our board of directors and the process our board of directors undertook to review, consider and approve the subscription price are discussed in The Rights Offering Reasons for the Rights Offering and Determination of the Offering Price. Am I required to exercise the rights I receive in this offering? No. You may exercise any number of your rights or you may choose not to exercise any of your rights. However, if you choose not to exercise your rights or you exercise less than your full amount of rights and other stockholders fully exercise their rights, the percentage of our common stock owned by other stockholders will increase relative to your ownership percentage, and your voting and other rights in Great Elm will likewise be diluted. Table of Contents Backstop Commitment A consortium of investors led by Gracie Investing, LLC has committed to purchase up to $36.6 million of shares of common stock, at the subscription price, to the extent that the exercise of rights result in gross proceeds to us of less than $45 million. Notwithstanding the above, in no case will any backstop provider become the beneficial owner of more than 19.9% of our outstanding shares of common stock as result of the transactions described in this prospectus, and the maximum number of shares issued to each backstop provider in connection with the Backstop Commitment will be proportionately reduced as necessary to give effect to such limitation. We will not pay any fee to the backstop providers. Certain Purchase Restrictions As of June 30, 2016, we had net operating loss carryforwards totaling approximately $1.7 billion, as measured for U.S. federal income tax purposes. The utilization of these net operating loss carryforwards could be limited if we experience a change in ownership under Section 382 of the Internal Revenue Code of 1986, or the Code. The rights will be distributed pro rata among our stockholders. It is therefore intended that no such ownership change will occur as a result of this offering. We have adopted a tax preservation rights plan and an ownership restriction provision in our certificate of incorporation with respect to persons who become owners, for applicable tax purposes, of 4.99% or more of our common stock (each, a 5% Holder), without express approval of our board of directors. No person that is not already a 5% Holder will be entitled to exercise its rights to the extent such an exercise would cause that person to be a 5% Holder (calculated immediately upon closing of this offering after giving effect to the Backstop Commitment). No person that is already a 5% Holder will be entitled to exercise its rights to the extent such exercise would increase that person s proportionate interest in our common stock. It should be noted that our board of directors has granted Gracie Investing, LLC a conditional waiver under our tax benefits preservation rights agreement (our Tax Rights Plan) and the applicable provision of our certificate of incorporation to allow Gracie Investing, LLC to acquire shares of our common stock pursuant to the Backstop Commitment. Participation by Our Largest Stockholders The MAST Funds in the aggregate beneficially own approximately 18.6% of the outstanding shares of our common stock. The MAST Funds have indicated that they intend to fully exercise their basic subscription privilege. There, however, is no binding agreement for them to do so. Exercise by the MAST Funds of their over subscription privilege would require a waiver under our Tax Rights Plan and the ownership restriction in our certificate of incorporation. Participation by Directors & Executive Officers Our directors and executive officers that own shares of our common stock on the effective date are permitted, but not required, to participate in this offering on the same terms and conditions applicable to all stockholders. All of our directors (except Mr. Serota who joined our board after the backstop agreement was executed) are backstop providers. U.S. Federal Income Tax Considerations We intend to take the position that the distribution of rights generally is a non taxable distribution to holders of our common stock and that holders of shares of our common stock generally will not recognize any gain or loss upon the exercise of rights received in this offering. This position, however, is not binding on the Internal Revenue Service, or IRS, or the courts, and if this position is finally determined by the IRS or a court to be incorrect, the distribution of the rights, or the exercise thereof, could be taxable to holders of our common stock. You should refer to U.S. Federal Income Tax Considerations for a more complete discussion, including qualifications and limitations. In addition, you should consult your own tax advisor as to the tax consequences to you of the receipt, exercise and expiration of the rights in light of your particular circumstances. Table of Contents None of our board of directors, officers, information agent or dealer managers is making any recommendation regarding whether you should exercise your rights. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement. Any representation to the contrary is a criminal offense. It is anticipated that delivery of the common stock purchased in this offering will be made on or about December 29, 2016. Dealer Managers Oppenheimer & Co. Janney Montgomery Scott The date of this prospectus is November 22, 2016 Table of Contents What are the rights? The rights give holders of our common stock as of the effective date the opportunity to purchase 1.3101 shares of our common stock for every right held at a subscription price of $3.285 per whole share, however (a) rights may be exercised in aggregate only to purchase whole book entry shares of our common stock and (b) the total subscription price payable upon any exercise of rights will be rounded to the nearest whole cent. You will receive one right for each one of our shares of common stock you owned as of the effective date. For example, if you owned 100 shares of our common stock as of the effective date, your rights would entitle you to purchase a total of 131 shares of our common stock for a total subscription price of $430.34 (after rounding to the nearest whole cent and not including any over subscription privileges). Subject to the limitations described in this prospectus, you may exercise some or all of your rights, or you may choose not to exercise any rights at all. May I transfer my rights if I do not want to purchase any shares? No. The rights attach to our shares of common stock and are not separately transferable. Transfer of ownership of a share of our common stock, however, after the effective date and before the earlier of the expiration date or when the right associated with such share is exercised will also transfer ownership of the right attached to such share. Can I sell my shares after I have exercised my rights? Yes. After you exercise your rights, the shares of common stock will have a new CUSIP 39036P 209 and will be freely tradable and quoted on Nasdaq under the symbol GECX, where our common stock currently trades. After the Expiration Date, all of our common stock will have this CUSIP 39036P 209 and will trade under the symbol GEC . If I purchase shares after commencement of the Rights Offering, will I be able to participate in the Rights Offering? Yes, if the shares of common stock you have purchased still have the rights attached. Shares that have rights attached trade under the symbol GECXU and have CUSIP 39036P 308. Since stock trades may take three business days to settle, please note that if you purchase shares late in the Rights Offering period, you may not receive your shares in time to exercise the attached rights. We are under no obligation, and have no intention, to adjust our procedures to accommodate holders who acquire shares after the Rights Offering has commenced. How do I exercise my rights if my shares of common stock are held in the name of a broker, dealer, custodian bank or other nominee? If you hold your shares of our common stock in the name of a broker, dealer, custodian bank or other nominee who uses the services of The Depository Trust Company, or DTC, DTC will credit one right to your nominee record holder for each share of our common stock that you beneficially owned as of the effective date. If you are not contacted by your nominee, you should contact your nominee as soon as possible. If I hold my shares in the name of a broker, dealer, custodian bank or other nominee, how do I pay the subscription price for my rights? You must have sufficient funds in your account, and your broker, dealer, custodian bank or other nominee will charge your account for your subscription price. Your broker will then pay money on your account to DTC. After the offering, DTC will credit funds to our transfer agent who will ultimately wire the proceeds of this offering to us. How do I exercise my rights if my shares of common stock are held in my name? If you hold your shares of our common stock in your name and you wish to participate in this offering, you must deliver a properly completed and duly executed rights certificate to the subscription agent and deliver all other required Table of Contents Amendment and Extension; Cancellation We may amend the terms of this offering. Our board of directors may decide to extend this offering for additional periods, although it does not currently intend to do so. We also reserve the right to withdraw this offering at any time prior to the expiration date and for any reason. If this offering is cancelled, all subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable to those persons who subscribed for shares in this offering. No Revocation All exercises of rights are irrevocable. Procedures for Exercising Rights To exercise your rights, you must take the following steps: If you hold your common stock through a broker, dealer, custodian bank or other nominee, then your nominee is the record holder of the rights you own. The record holder must exercise the rights on your behalf. If you wish to exercise your rights in this offering, you should contact your broker, dealer, custodian bank or nominee as soon as possible. You will not receive a subscription certificate from us. Please follow the instructions of your nominee. Your nominee may establish a submission deadline that may be before the expiration date If you hold a subscription certificate and you wish to participate in this offering, you must properly complete and sign Form 1 of the subscription certificate for the subscription privilege, and if you wish to exercise a portion or all of your entitlement under the over subscription privilege, Form 2 of the subscription certificate, and deliver the signed subscription certificate, together with payment of the subscription price, to the subscription agent before the expiration date or use the guaranteed delivery procedures described under The Rights Offering Guaranteed Delivery Procedures. You may be required to provide signature guarantees. Please follow the delivery instructions on the subscription certificate. Do not deliver documents to us. You are solely responsible for completing delivery to the subscription agent of your subscription documents, subscription certificate and payment. You should allow sufficient time for delivery of your subscription materials to the subscription agent so that the subscription agent receives them by the expiration date. If you cannot deliver your subscription certificate to the subscription agent prior to the expiration of this offering period, you may follow the guaranteed delivery procedures described under The Rights Offering Guaranteed Delivery Procedures. If you send a payment that is insufficient to exercise the number of rights you requested to exercise, or if such number is not specified in the forms, the payment received will be applied to exercise your rights to the fullest extent possible based on the amount of the payment received, subject to the availability of shares under the over subscription privilege and the elimination of fractional shares. If your payment for the number of rights you requested to exercise is greater than the amount you owe for your subscription, you will be deemed to have exercised your over subscription privilege to purchase the maximum number of shares with your over payment. Any excess subscription payments will be returned by the subscription agent, without interest or penalty, as soon as practicable following the expiration of this offering period. Dealer Managers Oppenheimer & Co. and Janney Montgomery Scott are acting as our dealer managers for this offering. The dealer managers will be paid a fee of 3.5% of our gross proceeds from this offering. Outstanding Shares of Common Stock 10,457,543 shares outstanding as of November 22, 2016. 24,158,008 shares outstanding as of November 22, 2016, assuming all of the rights were exercised. Table of Contents subscription documents, together with payment of the full subscription price, to the subscription agent before 5:00 pm Eastern time on December 23, 2016, which we refer to as the expiration date. If you send an uncertified check, payment will not be deemed to have been delivered to the subscription agent until the check has cleared. In certain cases, you may be required to provide signature guarantees. Please follow the delivery instructions on the rights certificate. Do not deliver documents to us. You are solely responsible for completing delivery to the subscription agent of your rights certificate, all other required subscription documents and subscription payment. You should allow sufficient time for delivery of your subscription materials to the subscription agent so that the subscription agent receives them by the expiration date. See To whom should I send my forms and payment? below. If you send a payment that is insufficient to purchase the number of shares of our common stock you requested, or if the number of shares of our common stock you requested is not specified in the forms, the payment received will be applied to exercise your rights to the fullest extent possible based on the amount of the payment received pursuant to your rights. Any payment that is received but not so applied will be refunded to you without interest (subject to the rounding of the amount so applied to the nearest whole cent). If I hold my shares in my own name and not through a broker, dealer, custodian bank or other nominee, what form of payment is required to purchase shares of common stock? As described in the instructions accompanying the rights certificate, payments submitted to the subscription agent must be made in U.S. currency. Checks or bank drafts drawn on U.S. banks should be payable to Computershare Trust Company, N.A. Payments will be deemed to have been received upon clearance of any uncertified check. Please note that funds paid by uncertified check may take five or more business days to clear. Accordingly, rights holders who wish to pay the subscription price by means of uncertified check are urged to make payment sufficiently in advance of the expiration time to ensure that such payment is received and clears by such date. How soon must I act to exercise my rights? If your shares of our common stock are registered in your name and you elect to exercise any or all of your rights, the subscription agent must receive your properly completed and duly executed rights certificate or the transfer of your rights by DTC, as applicable, all other required subscription documents and full subscription payment, including final clearance of any uncertified check, before the expiration date. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, your nominee may establish an earlier deadline before the expiration date by which time you must provide the nominee with your instructions and payment to exercise your rights. Although our board of directors, or a committee thereof, may extend the expiration date (which extension requires the consent of the backstop providers if it results in this offering remaining open for more than 20 days), it currently does not intend to do so. Although we will make reasonable attempts to provide this prospectus to our stockholders to whom rights are distributed, this offering and all rights will expire at the expiration date, whether or not we have been able to locate and deliver this prospectus to all such stockholders. After I exercise my rights, can I change my mind? No. Once you have exercised your rights, you may not revoke such exercise in whole or in part. Accordingly, any exercise of rights will constitute a binding commitment to purchase and pay for the shares of our common stock issuable upon such exercise, regardless of any changes in the value of such shares, in our business, financial condition, results of operations or future prospects or in your individual circumstances. (1) Includes short and long term investments. (2) Includes current and non current deferred revenue. These amounts have been reclassified to liabilities related to assets sold in the accompanying consolidated balance sheets. (3) Includes current and non current fee share obligation. These amounts have been reclassified to liabilities related to assets sold in the accompanying consolidated balance sheets. Table of Contents Can this offering be cancelled or extended? Yes. Our board of directors may continue to explore and evaluate other potential alternative financing transactions that would qualify as superior transactions as defined in the Backstop Agreement. This offering may only be terminated with the consent of the backstop providers or after the termination of the Backstop Agreement in accordance with its terms. If we withdraw or terminate this offering, neither we nor the subscription agent will have any obligation with respect to rights that have been exercised except to return, without interest or deduction, any subscription payments the subscription agent received from you. If we were to cancel this offering, any money received from subscribing stockholders would be returned promptly, without interest or penalty, and we would not be obligated to issue shares of our common stock to holders who have exercised their rights prior to termination. In addition, we may extend the period for exercising the rights, subject to the terms of the Backstop Agreement, including that any extension that results in this offering remaining open for more than 20 days requires the consent of the backstop providers. Has our board of directors made a recommendation to our stockholders regarding the exercise of rights under this offering? No. Our board of directors has not made, nor will they make, any recommendation to you regarding the exercise of rights in this offering. We cannot predict the price at which our shares of common stock will trade after this offering. You should make an independent investment decision about whether or not to exercise your rights. Stockholders who exercise rights risk losing the new money invested. We cannot assure you that the market price for our common stock will remain above the subscription price or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. If you do not exercise or sell your rights, you will lose any value represented by your rights, and if you do not exercise your rights in full, your percentage ownership interest and related rights in Great Elm will be diluted. You should not view the intentions the members of our board of directors as investors in the Backstop Commitment as a recommendation or other indication by them to you regarding whether exercising your rights is or is not in your best interests. Are there any risks associated with this offering? Stockholders who exercise their rights will incur investment risk on new money invested. The stock market and, in particular, our common stock price, has experienced significant volatility recently. As a result, the market price for our common stock may be volatile. This offering will increase the number of outstanding shares of our common stock (assuming the exercise of the rights in full) by approximately 131% and the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. The market price of our common stock will depend on many factors, which may change from time to time, including our financial condition, performance, creditworthiness and prospects, future sales of our securities and other factors. Volatility in the market price of our common stock may prevent you from being able to sell our common stock when you want or at prices you find attractive. You should make your decision based on your assessment of our business and financial condition, our prospects for the future, the terms of this offering and the information contained in, or incorporated by reference into, this prospectus or any free writing prospectus. You should carefully consider the risks, among other things, described under the heading Risk Factors and in the documents incorporated by reference into this prospectus before exercising your rights and investing in shares of our common stock. Will the directors and executive officers participate in this offering? All of the members of our board of directors (except Mr. Serota who joined our board after the backstop agreement was signed) are investors in the Backstop Commitment. If none of the rights were exercised, members of our board of directors would invest approximately $3.7 million increasing their aggregate ownership of shares of our common stock by approximately 1.1 million shares of common stock outstanding, representing an increase of approximately 10.8% of the shares outstanding on the effective date. (1) Unless extended by us, which extension requires the consent of the backstop providers if it results in this offering remaining open for more than 20 days. (2) Participating rights holders must, by the expiration date (unless this offering is extended), either (a) deliver a subscription certificate and payment for shares or (b) cause to be delivered on their behalf a notice of guaranteed delivery. Table of Contents Will MAST Capital or any of its affiliates participate in this offering? As of the effective date, private investment funds (the MAST Funds) managed by MAST Capital Management, LLC (MAST Capital) beneficially owned 1,755,531 shares of our common stock, constituting approximately 18.6% of our outstanding common stock. While the commitment is not legally enforceable, MAST Capital has advised us of the intention of the MAST Funds to fully exercise their basic subscription privileges. When will I receive my shares of common stock purchased in this offering? Stockholders whose shares are held of record by Cede & Co., or Cede, the nominee of DTC, or by any other depository or nominee on their behalf or their broker dealers behalf will have any shares that they acquire credited to the account of Cede or such other depository or nominee. With respect to all other stockholders, you must provide a brokerage account for your shares acquired in this offering, as we will not issue physical certificates for shares purchased in this offering, unless required to do so by law. Whether your shares are held through DTC or directly with our transfer agent Computershare, shares of common stock acquired in this offering will be issued as soon as possible following the conclusion of the offering. Is there a backstop purchaser? Yes. On October 13, 2016, we entered into an Amended and Restated Backstop Agreement with a consortium of investors led by Gracie Investing, LLC, which we refer to as the backstop providers, pursuant to which we have agreed to issue and sell to the backstop providers, and the backstop providers (severally and not jointly) agreed to purchase, an aggregate number of shares of our common stock equal to the lesser of (a) (i) $45 million, minus (ii) the aggregate proceeds of this offering and (b) $36.6 million, at the subscription price, subject to the terms and conditions of the Backstop Agreement. Notwithstanding the above, in no case will any backstop provider become the beneficial owner of more than 19.9% of our outstanding shares of common stock as result of the transactions described in this prospectus, and the maximum number of shares issued to each backstop provider in connection with the Backstop Commitment will be proportionately reduced as necessary to give effect to such limitation. See Backstop Agreement for additional details on the Backstop Commitment, including the fees to be paid by us and our expense reimbursement obligation. Why are there backstop providers? We obtained the commitment of the backstop providers to act as the backstop purchasers under the Backstop Agreement to increase the likelihood that we would receive $45 million of gross proceeds, less fees and expenses of this offering and the Backstop Commitment. Will I be able to vote the shares issued in the rights offering at the 2016 annual meeting? No. The record date for stockholders entitled to vote at our 2016 annual meeting is the close of business on November 17, 2016. Even if you exercise rights before the close of business on November 17, 2016, the record date for our 2016 annual meeting, the shares issuable upon exercise of your rights will not be issued until the expiration date which is after the annual meeting record date. What effects will this offering have on our outstanding common stock? After giving effect to this offering, assuming that it is fully subscribed, we will have approximately 21,609,715 shares of common stock outstanding, representing an increase of approximately 131% in our outstanding shares as of the effective date. If you fully exercise the rights that we distribute to you, your proportional interest in us will remain the same. If you do not exercise any rights, or you exercise less than all of your rights, your interest in us will be diluted, as you will own a smaller proportional interest in us compared to your interest prior to this offering. If all of our stockholders exercise the rights issued to them, and this offering is therefore fully subscribed, the beneficial ownership percentage of our stockholders will not change. Assuming that no holders, including the MAST Funds, exercise their rights in this offering, the backstop providers would acquire approximately 11,152,172 shares of our Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001084752_inventergy_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001084752_inventergy_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001084752_inventergy_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001099215_protalex_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001099215_protalex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001099215_protalex_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001104265_grow_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001104265_grow_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a69cd9b36b2924e3be2344565c10aca923885711
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001104265_grow_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. You should read the entire prospectus, including "Risk Factors" and the consolidated financial statements and the related notes before making an investment decision. "We," "us," "our company," "our," "Grow Solutions" and the "Company" refer to Grow Solutions Holdings, Inc., Grow Solutions, Inc., and One Love Garden Supply, LLC, but do not include the stockholders of Grow Solutions Holdings, Inc. Corporate Information Grow Solutions Holdings, Inc. (formerly LightTouch Vein & Laser, Inc.) is a corporation incorporated under the laws of the State of Nevada on May 1, 1981. The focus of the business is to provide comprehensive services within the legal cannabis industry to those growing, processing and dispensing legal cannabis and legal cannabis infused products. The Company plans to operate multiple verticals within the legal cannabis industry, consisting of but not limited to (i) financing, (ii) sales of unregulated products through retail agricultural grow stores, (iii) distribution of unregulated products, equipment and supplies to agricultural grow stores, (iv) management and consulting services, (v) real estate, (vi) licensing, and (vii) rights to proprietary, unregulated products. Our business strategy is structured into various operating divisions to attain penetration within our customer base and create opportunities and customer relationships between our operating divisions. We have a team of experienced personnel in each area of our business model and our team has successfully operated legal cannabis grow operations, managed dispensaries and navigated the legal cannabis licensing process in the United States. Further, our planned retail agricultural grow stores are staffed with individuals knowledgeable in all products and growing needs. Corporate History Effective April 28, 2015, Grow Solutions Holdings, Inc. (formerly LightTouch Vein & Laser, Inc.) (the "Company") entered into an Acquisition Agreement and Plan of Merger (the "Grow Solutions Agreement") with Grow Solutions, Inc., a Delaware corporation ("Grow Solutions") and LightTouch Vein & Laser Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("LightTouch Acquisition"). Under the terms of the Grow Solutions Agreement, Grow Solutions merged with LightTouch Acquisition and became a wholly owned subsidiary of the Company (the "Merger"). The Grow Solutions shareholders and certain creditors of the Company received 44,005,000 shares of the Company s common stock in exchange for all of the issued and outstanding shares of Grow Solutions. Following the closing of the Grow Solutions Agreement, Grow Solutions business became the primary focus of the Company and Grow Solutions management assumed control of the management of the Company with the former director of the Company resigning upon closing of the Agreement. The Grow Solutions Agreement and related transaction documents are included as exhibits to the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on February 19, 2015 and are hereby incorporated by reference. All references to the Grow Solutions Agreement and related transaction documents do not purport to be complete and are qualified in their entirety by the text of such exhibits. Effective May 13, 2015 (the "Closing Date"), the Company entered into an Acquisition Agreement and Plan of Merger (the "OneLove Agreement ) with Grow Solutions Acquisition LLC, a Colorado limited liability company and a wholly owned subsidiary of the Company ("Grow Solutions Acquisition"), One Love Garden Supply LLC, a Colorado limited liability company ("OneLove"), and all of the members of OneLove (the "Members"). On the Closing Date, OneLove merged with Grow Solutions Acquisition and became a wholly owned subsidiary of the Company. Under the terms of the OneLove Agreement, the Members received (i) 1,450,000 shares of the Company s common stock (the "Equity"), (ii) Two Hundred Thousand Dollars (US$200,000) (the "Cash"), and (iii) a cash flow promissory note in the aggregate principal amount of $50,000 issued by OneLove in favor of the Members (the "Cash Flow Note"), whereby each fiscal quarter, upon the Company recording on its financial statements $40,000 in US GAAP Net Income ("Net Income") from sales of the Company s products (the "Net Income Threshold"), the Company shall pay to the Members 33% of the Company s Net Income generated above the Net Income Threshold. The aforementioned obligations owed under the Cash Flow Note shall extinguish upon the earlier of (i) payment(s) by Company in an amount equal to $50,000 in the aggregate or (ii) May 5, 2016 (collectively, the Cash Flow Note, the Equity, and the Cash, the "Consideration"). The Consideration provided to the Members was in exchange for all of the issued and outstanding membership interests of OneLove. Following the Closing Date, OneLove s indoor and outdoor gardening supply business was acquired by the Company and the Company s management assumed control of the management of OneLove with the former managing members of OneLove resigning from OneLove upon closing of the OneLove Agreement. Calculation of Registration Fee Title of Each Class of Securities to be Registered Amount to be Registered (1) Proposed Maximum Offering Price Per Share (2) Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, par value $0.001 per share 9,920,000 $ 0.20 $ 1,984,000 $ 200.00 Common Stock, par value $0.001 per share, issuable upon the exercise of certain outstanding warrants 4,905,000 $ 0.40 $ 1,962,000 $ 200.00 (1) This Registration Statement covers the resale by our selling shareholders of up to 14,825,000 shares of common stock previously issued to the selling stockholders listed herein consisting of (i) 5,015,000 shares of common stock of the Company issued for services at $0.001 per share pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated under the Securities Act of 1933, (ii) 4,905,000 shares of common stock of the Company issued pursuant to the Company s private placement offering under Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated under the Securities Act of 1933 (the "Private Placement") and, (iii) 4,905,000 shares of common stock issuable upon exercise of certain outstanding warrants of the Company issued pursuant to the Private Placement. (2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o). Our common stock has limited trading and in accordance with Rule 457; the offering price was determined by the price of the shares that were sold to our stockholders in a private placement memorandum. The selling security holders may sell their shares at a fixed price of $0.20 per share, prevailing market prices or privately negotiated prices. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. Table of Contents TABLE OF CONTENTS PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001168220_altrazeal_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001168220_altrazeal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f4934895c5d457236eccf9bd6568e53cd10b9ca
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001168220_altrazeal_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1 As filed with the Securities and Exchange Commission on January 29, 2016 Registration Number__________ ______________________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ________________________ ULURU Inc. (Exact Name of Registrant as Specified in its Charter) Nevada (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) 41-2118656 (I.R.S. Employer Identification No.) 4452 Beltway Drive Addison, Texas 75001 (214) 905-5145 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant s Principal Executive Offices) Terrance K. Wallberg Chief Financial Officer ULURU Inc. 4452 Beltway Drive Addison, Texas 75001 (214) 905-5145 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) With copies to: Bryan T. Allen, Esq. Parr Brown Gee & Loveless 101 South 200 East, Suite 700 Salt Lake City, Utah 84111 (801) 532-7840 Approximate date of commencement of proposed sale to public: As soon as practicable after the effective date hereof. ________________________ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company ______________________________________________________________________________________ CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered (1) Proposed maximum offering price per share (2) Proposed maximum aggregate offering Price Amount of registration fee (3) Common Stock, $0.001 par value per share 2,500,000 $ 0.145 $ 362,500 $ 36.50 Total 2,500,000 $ 362,500 $ 36.50 (1) We are registering 2,500,000 shares of ULURU Inc. common stock issued to the selling stockholders pursuant to a License Purchase and Termination Agreement dated December 24, 2015. Pursuant to Rule 416 under the Securities Act of 1933 (the Act ), this registration statement shall also include such indeterminate number of additional shares of common stock as may be issuable upon any stock split, stock dividend, or similar transaction. The 2,500,000 shares being registered in this registration statement represent approximately 11.6% of our public float, based on a public float of 21,553,910 as of January 29, 2016. (2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Act. The offering price per share and aggregate offering price are based on the average of the high and low sales price of the Registrant s common stock on January 27, 2016, as reported on the OTCQB. (3) The amount of registration fee is calculated at the rate of $100.70 per $1,000,000. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. The information contained herein is subject to completion or amendment. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state where the offer, solicitation, or sale is not permitted. SUBJECT TO COMPLETION, DATED _______, 2015 PROSPECTUS 2,500,000 SHARES OF COMMON STOCK This prospectus relates to the offer and sale of up to 2,500,000 shares of ULURU Inc. common stock by the selling stockholders identified in this prospectus. Such shares of our common stock were issued to the selling stockholders pursuant to a License Purchase and Termination Agreement dated December 24, 2015. We will not receive any proceeds from the sale of these shares of common stock offered by the selling stockholders. All expenses of registration incurred in connection with this offering are being borne by us. None of the shares covered by this prospectus has been registered prior to the filing of the registration statement of which this prospectus is a part. Our common stock is presently quoted on the OTCQB marketplace, operated by the OTC Markets Group, under the symbol ULUR . On January 29, 2016, the last reported sale price of our common stock on the OTCQB marketplace was $0.18 per share. Investing in our shares involves a high degree of risk. See Risk Factors beginning on page 3 of this prospectus for more information. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus or the prospectus to which it relates is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is January 29, 2016. TABLE OF CONTENTS PROSPECTUS Page CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 1 PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001178946_dragonwave_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001178946_dragonwave_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a939d3075b81b6fd20a5f09b19bacb30950ff526
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001178946_dragonwave_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus or incorporated by reference into this prospectus from our Annual Report on Form 20-F for the year ended February 29, 2016 (our "2016 Annual Report"), our Form 6-K filed with the Securities and Exchange Commission (the "SEC") on July 13, 2016 (the "Q1 2016 Report") and our other filings with the SEC listed in the section of this prospectus entitled "Incorporation of Certain Documents by Reference" and does not contain all of the information you should consider before investing in our common shares or the units offered under this prospectus. You should also consider, among other things, the matters described under "Risk Factors" and "Operating and Financial Review and Prospects," in each case appearing elsewhere in this prospectus or in our 2016 Annual Report, incorporated by reference herein. You should also read and consider the information contained in the documents identified under the headings "Incorporation of Certain Documents by Reference" and "Where You Can Find More Information." You should rely only on the information provided in this prospectus, including the information incorporated by reference. We have not authorized anyone to provide you with different information. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than as of the date of this prospectus or in the case of the documents incorporated by reference, the date of such documents regardless of the time of delivery of this prospectus or any sale of our securities. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. In this prospectus, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in United States dollars. Unless the context otherwise requires, all references in this prospectus to the "Company", "DRWI", "we", "us" and "our" refer to DragonWave Inc., DragonWave Corp., incorporated in the state of Delaware, USA, DragonWave Pte. Ltd., incorporated in Singapore, DragonWave S. r.l., incorporated in Luxembourg, DragonWave Telecommunication Technology (Shanghai) Co., Ltd., incorporated in China, DragonWave Mexico S.A. de C.V., incorporated in Mexico, Axerra Networks Asia Pacific Limited, incorporated in Hong Kong, DragonWave India Private Limited, incorporated in India and DragonWave Inc.'s majority owned subsidiary, DragonWave HFCL India Private Limited, incorporated in India. References in this prospectus to "Nokia" or "NSN" refer to both Nokia Solutions and Networks and its predecessor business as carried on under the name Nokia Siemens Networks. Nokia is a trademark of Nokia Corporation or its affiliates.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001179500_community_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001179500_community_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7e32192c88e2bda5495a5c88c4b5f36f2150769f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001179500_community_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in, or incorporated by reference into, this prospectus. As a result, it does not
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001195116_arno_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001195116_arno_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001195116_arno_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001223533_frelii-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001223533_frelii-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1fbfec33a835d5bd4e36407c7178f6b89b88c17f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001223533_frelii-inc_prospectus_summary.txt
@@ -0,0 +1,75 @@
+PROSPECTUS
+SUMMARY
+
+ 
+
+This summary
+highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may
+want to consider. You should read carefully the more detailed information set forth under "Risk Factors" and the other
+information included in this prospectus. Except where the context suggests otherwise, the terms "we," "us,"
+"our," "Vican" and the "Company" refer to Vican Resources, Inc. We refer in this prospectus
+to our executive officers and other members of our management team, collectively, as "Management."
+
+ 
+
+Vican Resources,
+Inc. was incorporated in the State of Nevada on September 5, 2002. From July 2009 until May 2011, we operated as a real estate
+services firm, seeking to capitalize on the real estate opportunities resulting from the dislocation in the credit markets, and
+by extension, the multifamily housing market, by acquiring, rehabilitating, stabilizing and selling distressed multifamily properties
+in the southern United States, predominantly in Texas.
+
+ 
+
+Until May 2011,
+we operated as a real estate investment services and management company focusing on distressed multifamily properties in select
+U.S. markets. We managed limited partnerships that invest in residential multifamily real property in the southern United States
+and we received management fees and carried interests from the operations, sale or refinancing of these properties. We also managed
+the tenancy, redevelopment, and repairs of these properties through the Company or an affiliate from which we also received fees
+and other compensation. Our future business is based on the exploration, development, drilling, and production of various oil and
+gas properties. We expect to align with industry partners in respect of the drilling and operation of these wells. Our long-term
+focus is to grow and develop existing oil and gas leasehold interests and acquire new interests within and without the continental
+United States. In addition, we intend to acquire interests in older wells that, with the application of newer technologies, may
+increase production and reserves.
+
+ 
+
+Chene C. Gardner
+is the sole member of the board of directors, as well as our Chief Executive Officer and Secretary. Our principal office is located
+at 11650 South State Street, Suite 240, Draper, Utah 84020. We have one employee and utilize the services of various contract personnel
+from time to time.
+
+ 
+
+We are filing this
+prospectus in connection with the resale of 103,434 shares of Class B common shares, by the selling stockholders. Other holders
+of our Class B common shares, who are affiliates of the Company, will not be considered part of the selling stockholders and will
+not be registering their Class B common shares hereunder. The Class B common shares were issued to our stockholders of record at
+a ratio of 1 share of Class B common stock for every 1,000 shares of Class A common stock issued and outstanding as of October
+15, 2013. We have not issued fractional shares and have rounded each fractional share up to the nearest whole share. Additionally,
+we have also rounded up to 200 Class B common shares for each shareholder whose holdings would otherwise be less than 200 shares
+following the Share Exchange.
+
+ 
+
+Because we are considered
+a "shell company", our selling stockholders will be considered underwriters under the Securities Act and, therefore,
+may be liable for material misstatements or omissions in this prospectus.
+
+ 
+
+We are subject to
+the information requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith file quarterly and
+annual reports, as well as other information with the SEC under File No. 333-199169. Such reports and other information filed with
+the SEC can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington,
+D.C. 20549 at prescribed rates, and at various regional and district offices maintained by the SEC throughout the United States.
+Information about the operation of the SEC s public reference facilities may be obtained by calling the SEC at 1-800-SEC-0330.
+The SEC also maintains a website at http://www.sec.gov that contains reports and other information regarding us and other
+registrants that file electronic reports and information with the SEC.
+
+ 
+
+ 
+
+ 2 
+
+ Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001261379_frontier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001261379_frontier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7f3a0f9385602c9464278e88546ee9f4b5da423
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001261379_frontier_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights certain information contained elsewhere in this prospectus. The remainder of this prospectus contains more detailed information. You should read the entire prospectus, including the appendix for each series, the Statement of Additional Information, all exhibits to the prospectus, and all documents incorporated herein by reference before deciding to invest in any series. The Trust Equinox Frontier Funds is a Delaware statutory trust (formed on August 8, 2003) that is currently publicly offering units in three separate series. Each series engages in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), swaps and options contracts and/or other derivative instruments. The purpose of each series is to seek capital appreciation while attempting to control risk and volatility. Equinox Fund Management, LLC, a commodity pool operator and the managing owner of the trust, allocates the assets of each series to a diverse group of experienced commodity trading advisors through investments in one or more trading companies managed by the managing owner and in one or more commodity pools through the Galaxy Plus Platform sponsored and operated by Gemini. The managing owner, from time to time, may also enter into swaps or other derivatives with respect to certain reference trading programs. Each series, which currently invests its assets in both trading companies managed by the managing owner and in commodity pools offered through the Galaxy Plus Platform, expects to ultimately allocate all of its assets to such commodity pools, in addition to entering into any swaps or other derivative instruments with respect to certain reference trading programs. The managing owner expects to liquidate each trading company it manages once no further assets of the series are invested in such trading company. Units are available for subscription on each business day at the then current net asset value per unit. The trust has offered other series in the past and may offer additional series in the future. Since each series has a unique trading and investment strategy, you should review the information relating to each series and its trading and investment strategy. See Appendices to Part I for additional information regarding each series and its trading and investment strategy. The trust will terminate on December 31, 2053 (unless terminated earlier in certain circumstances). See Summary of Agreements Trust Agreement. The principal offices of the trust and the managing owner are located at 1775 Sherman Street, Suite 2010, Denver, Colorado 80203, and their telephone number is (303) 837-0600. The trust and each series of the trust is a multi-advisor pool as defined in Commodity Futures Trading Commission ( CFTC ) Rule 4.10(d)(2). The Managing Owner Equinox Fund Management, LLC is a limited liability company formed in the state of Delaware in June 2003. The managing owner is the commodity pool operator of the trust and each series. The managing owner has been registered with the CFTC as a commodity pool operator since August 6, 2003, and has been a member of the NFA since that date. The managing owner has been registered with the CFTC as a swap firm since March 27, 2013. The managing owner is ultimately responsible for the selection, retention and termination of the trading advisors and investments in, and divestments from, one or more commodity pools offered through the Galaxy Plus Platform, each of which is advised by an individual trading advisor. However, the managing owner is not involved in the selection, retention or termination of any trading advisors retained by such commodity pools. The managing owner is also responsible for entering into, or terminating, the swap reference trading programs on behalf of each series. See The Managing Owner. The managing owner will maintain a 1% interest with respect to the publicly registered units of each series of the trust at all times. See The Managing Owner Managing Owner s Commitments Minimum Purchase Commitment. The managing owner has agreed to accept liability for the obligations of each series that exceed that series net assets. The managing owner, with respect to each series, will: engage in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies) and options contracts and/or other derivative instruments, which may also be affected through the investments in, Table of Contents EQUINOX FRONTIER FUNDS STATEMENT OF ADDITIONAL INFORMATION Table of Contents THE NON-MAJOR COMMODITY TRADING ADVISORS, GALAXY PLUS PLATFORM COMMODITY POOLS AND/OR REFERENCE PROGRAMS SAI 1 THE FUTURES MARKETS SAI 3 GLOSSARY OF TERMS SAI 6 BENEFITS TO INVESTING IN THE TRUST SAI 10 FUND PERFORMANCE SAI 11 MONTHLY PERFORMANCE ATTRIBUTION BY SECTOR SAI 20 FUND EXPOSURE BY FUTURES STRATEGY SAI 22 DESCRIPTION OF INDICES REFERENCED IN THIS STATEMENT OF ADDITIONAL INFORMATION SAI 28 Table of Contents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; THE TRUST 1 SECTION 1.1 Definitions. 1 SECTION 1.2 Name. 4 SECTION 1.3 Delaware Trustee; Business Offices. 5 SECTION 1.4 Purposes and Powers. 5 SECTION 1.5 Tax Treatment. 5 SECTION 1.6 General Liability of the Managing Owner. 6 SECTION 1.7 Legal Title. 6 SECTION 1.8 Series Trust. 6 ARTICLE II THE TRUSTEE 6 SECTION 2.1 Term; Resignation. 6 SECTION 2.2 Powers. 6 SECTION 2.3 Compensation and Expenses of the Trustee. 6 SECTION 2.4 Indemnification. 7 SECTION 2.5 Successor Trustee. 7 SECTION 2.6 Liability of Trustee. 7 SECTION 2.7 Reliance; Advice of Counsel. 8 ARTICLE III UNITS; CAPITAL CONTRIBUTIONS 8 SECTION 3.1 General. 8 SECTION 3.2 Limited Units. 9 SECTION 3.3 Managing Owner s Required Contribution. 10 SECTION 3.4 Establishment of Series of Units. 10 SECTION 3.5 Establishment of Classes and Sub-Classes. 11 SECTION 3.6 Assets of Series. 11 SECTION 3.7 Liabilities of Series. 11 SECTION 3.8 Series Distributions. 12 SECTION 3.9 Voting Rights. 13 SECTION 3.10 Equality. 13 SECTION 3.11 Authority of the Managing Owner to Provide for the Exchange of Units. 13 ARTICLE IV THE MANAGING OWNER 13 SECTION 4.1 Management of the Trust. 13 SECTION 4.2 Authority of Managing Owner. 14 SECTION 4.3 Obligations of the Managing Owner. 15 SECTION 4.4 General Prohibitions. 16 SECTION 4.5 Liability of Covered Persons. 17 SECTION 4.6 Indemnification of the Managing Owner. 17 SECTION 4.7 Expenses. 17 SECTION 4.8 Compensation to the Managing Owner. 18 SECTION 4.9 Other Business of Unitholders. 21 SECTION 4.10 Voluntary Withdrawal of the Managing Owner. 21 SECTION 4.11 Authorization of Registration Statements. 21 SECTION 4.12 Litigation. 21 Table of Contents EQUINOX FRONTIER FUNDS CROSS REFERENCE SHEET Item No. Registration Item Location in Prospectus 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Facing Page; Front Cover Pages. 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Table of Contents; Outside Back Cover Page. 3. Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges Summary; Risk Factors; The Managing Owner. 4. Use of Proceeds Segregated Accounts. 5. Determination of Offering Price Plan of Distribution. 6. Dilution Not Applicable. 7. Selling Security Holders Not Applicable. 8. Plan of Distribution Plan of Distribution. 9. Description of Securities to be Registered Summary of Agreements; Trust Agreement. 10. Interests of Named Experts and Counsel Not Applicable. 11. Information with Respect to the Registrant (a) Description of Business Summary. (b) Description of Property Incorporated by Reference. (c) Legal Proceedings The Managing Owner. (d) Market Price of and Dividends on the Registrant s Common Equity and Related Stockholder Matters Risk Factors. (e) Financial Statements Incorporated by Reference. (f) Selected Financial Data Incorporated by Reference. (g) Supplementary Financial Information Incorporated by Reference. (h) Management s Discussion and Analysis of Financial Condition and Results of Operations Incorporated by Reference. (i) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. (j) Quantitative and Qualitative Disclosures About Market Risk Incorporated by Reference. (k) Directors and Executive Officers The Managing Owner. (l) Executive Compensation Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; The Managing Owner. (m) Security Ownership of Certain Beneficial Owners and Management The Managing Owner. (n) Transactions with Related Person, Promoters and Certain Control Persons and Director Independence Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; Summary of Agreements Advisory Agreements; The Managing Owner. 11A. Material Changes Not Applicable. 12. Incorporation of Certain Information by Reference Summary. 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Not Applicable. Table of Contents COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT COMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 80 THROUGH 89 AS WELL AS IN THE APPENDICES ATTACHED TO THIS PROSPECTUS FOR EACH SERIES OF UNITS AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 17 THROUGH 18. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 19 THROUGH 34. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY ENGAGE IN OFF-EXCHANGE FOREIGN CURRENCY TRADING. SUCH TRADING IS NOT CONDUCTED IN THE INTERBANK MARKET. THE FUNDS THAT THE POOL USES FOR OFF-EXCHANGE FOREIGN CURRENCY TRADING WILL NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTION CONTRACTS. IF THE POOL DEPOSITS SUCH FUNDS WITH A COUNTERPARTY AND THAT COUNTERPARTY BECOMES INSOLVENT, THE POOL S CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY MAY NOT BE TREATED AS A COMMODITY CUSTOMER CLAIM FOR PURPOSES OF SUBCHAPTER IV OF CHAPTER 7 OF THE BANKRUPTCY CODE AND THE REGULATIONS THEREUNDER. THE POOL MAY BE A GENERAL CREDITOR AND ITS CLAIM MAY BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN POOL FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF PRIORITY AND OTHER GENERAL CREDITORS. SWAPS TRANSACTIONS, LIKE OTHER FINANCIAL TRANSACTIONS, INVOLVE A VARIETY OF SIGNIFICANT RISKS. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR SWAP TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THE TRANSACTION AND YOUR CIRCUMSTANCES. IN GENERAL, HOWEVER, ALL SWAPS TRANSACTIONS INVOLVE SOME COMBINATION OF MARKET RISK, CREDIT RISK, COUNTERPARTY CREDIT RISK, FUNDING RISK, LIQUIDITY RISK, AND OPERATIONAL RISK. HIGHLY CUSTOMIZED SWAPS TRANSACTIONS IN PARTICULAR MAY INCREASE LIQUIDITY RISK, WHICH MAY RESULT IN A SUSPENSION OF REDEMPTIONS. HIGHLY LEVERAGED TRANSACTIONS MAY EXPERIENCE SUBSTANTIAL GAINS OR LOSSES IN VALUE AS A RESULT OF RELATIVELY SMALL CHANGES IN THE VALUE OR LEVEL OF AN UNDERLYING OR RELATED MARKET FACTOR. IN EVALUATING THE RISKS AND CONTRACTUAL OBLIGATIONS ASSOCIATED WITH A PARTICULAR SWAP TRANSACTION, IT IS IMPORTANT TO CONSIDER THAT A SWAP TRANSACTION MAY BE MODIFIED OR TERMINATED ONLY BY MUTUAL CONSENT OF THE ORIGINAL PARTIES AND SUBJECT TO AGREEMENT ON INDIVIDUALLY NEGOTIATED TERMS. THEREFORE, IT MAY NOT BE POSSIBLE FOR THE COMMODITY POOL OPERATOR TO MODIFY, TERMINATE, OR OFFSET THE POOL S OBLIGATIONS OR THE POOL S EXPOSURE TO THE RISKS ASSOCIATED WITH A TRANSACTION PRIOR TO ITS SCHEDULED TERMINATION DATE. Table of Contents TABLE OF CONTENTS (Cont d) Page Each Series May Be Subject to Indirect Fees and Expenses Associated with Investments in Swaps or Other Derivative Instruments. 22 The Series May Be Obligated to Make Payments Under Guarantee Agreements. 22 The Failure or Bankruptcy of One of its Futures Clearing Brokers, Central Clearing Brokers, Banks, Counterparties or Other Custodians Could Result in a Substantial Loss of One or More Series Assets. 22 You May Not Be Able to Establish a Basis for Liability Against a Trading Advisor, a Clearing Broker or a Swap Counterparty. 23 The Managing Owner is Leanly Staffed and Relies Heavily on its Key Personnel to Manage the Trust s Trading Activities. The Loss of Such Personnel Could Adversely Affect the Trust. 23 The Trust and the Managing Owner Have Been Represented by Unified Counsel, and Neither the Trust Nor the Managing Owner Will Retain Independent Counsel to Review this Offering. 23 Risks Relating to Trading and the Markets 23 Futures Interests Trading is Speculative and Volatile. 23 Options Trading Can Be More Volatile and Expensive than Futures Trading. 24 Trading Swaps Creates Distinctive Risks. 24 The Trading on Behalf of Each Series Will Be Margined, Which Means that Sharp Declines in Prices Could Lead to Large Losses. 24 The Unregulated Nature of Uncleared Trades in the OTC Markets Creates Counterparty Risks that Do Not Exist in Futures Trading on Exchanges or in Cleared Swaps. 25 Foreign Currency and Spot Contracts Historically Were Not Regulated When Traded Between Certain Eligible Contract Participants and Are Subject to Credit Risk. 25 Trading on Foreign Exchanges Presents Greater Risks to the Series than Trading on U.S. Exchanges. 25 Assets Held in Accounts at U.S. Banks May Not Be Fully Insured. 26 Exchanges of Futures for Physicals May Adversely Affect Performance. 26 Cash Flow Needs May Cause Positions to Be Closed Which May Cause Substantial Losses. 26 Your Investment Could Be Illiquid. 26 The Trading Advisors Trading is Subject to Execution Risks. 26 An Investment in Units May Not Diversify an Overall Portfolio. 27 Markets or Positions May Be Correlated and May Expose a Series to Significant Risk of Loss. 27 The Trading Advisors Positions May Be Concentrated From Time to Time, Which May Render Each Series Susceptible to Larger Losses than if the Positions Were More Diversified. 27 Turnover in Each Series Portfolio May Be High, Which Could Result in Higher Brokerage Commissions and Transaction Fees and Expenses. 27 There Are Certain Risks Associated with the Trust s Investment in U.S. Government Debt Securities. 27 The Trust s Investment in U.S. Government Debt Securities Will Be Subject to Interest Rate Risk. 27 The Hedging Program Directed by Quest May Not Perform to Minimize Risk as Intended. 27 Investments in Reference Programs Through a Swap or Other Derivative Instrument May Not Always Replicate Exactly Performance of the Relevant CTA Trading Program(s). 28 Risks Relating to the Trading Advisors 28 Specific Risks Associated with a Multi-Advisor Commodity Pool. 28 Table of Contents or divestments from, trading companies managed by the managing owner and/or one or more commodity pools available on the Galaxy Plus Platform, each of which will be advised by an individual trading advisor, and enter into one or more swap contracts, and may, from time to time, engage in cash and spot transactions; maintain a portion of such series assets at the trust level for cash management; maintain separate, distinct records for each series, and account for its assets separately from the other series and the other trust assets; and calculate the net asset value of its units separately from the other series. The Units Each series is available in two classes. Class 1 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 1a) units are subject to an initial service fee equal to up to 2.0% of the purchase price and, after the first year, an ongoing annual service fee of up to 2.0% of the net asset value of your units, which is payable either monthly or quarterly (as agreed with the selling agent). The initial service fee will generally be prepaid by the managing owner to the applicable selling agent and will be reimbursed by the applicable series over the first 12 months of your investment. Class 2 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 2a) units are not subject to an initial service fee and will only be offered to investors who invest through approved selling agents who are separately compensated by the investor directly. See Fees and Expenses Service Fees. Class 2 and 2a units may be subject to ongoing service fees for certain administrative services provided by the selling agents in an amount equal to 0.25% annually of the net asset value of each unit (an additional amount of up to 0.25% of the net asset value may be paid by the managing owner), payable at the end of each month. Class 1 and 1a units and class 2 and 2a units will be redesignated as class 3 or class 3a units, respectively, of such series, for administrative purposes as of any business day when the managing owner determines in its sole discretion that the service fee limit will be reached. The service fee limit applicable to each unit sold pursuant to this prospectus is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. There are no service fees or redemption fees associated with the class 3 or 3a units. Class 3 and 3a units are not offered directly to investors and have been registered, and will be maintained, under federal and state securities laws to administer the designation of class 1, 1a, 2 and 2a units that have reached the service fee limit as class 3 or 3a units. See Plan of Distribution. The percentage return (and associated dollar amount) that your investment must earn in the indicated series, after taking into account estimated interest income, in order to break-even after one year is as follows (please see the Break-Even Analysis on page 17): Equinox Frontier Diversified Fund: Class 1 6.90% ($69.02); Class 2 4.60% ($45.96); Class 3 4.27% ($42.67); Equinox Frontier Masters Fund: Class 1 7.27% ($72.68); Class 2 5.08% ($50.81); Class 3 4.77% ($47.68); and Equinox Frontier Long/Short Commodity Fund: Class 1a 8.00% ($79.95); Class 2a 5.78% ($57.82); Class 3a 5.47% ($54.66). The offering of units is subject to federal and state securities laws and regulations, federal laws and regulations relating to investments in commodities and related products, and the rules of FINRA and NFA. The Series The trust publicly offers units in three separate series: Equinox Frontier Diversified Fund, Equinox Frontier Masters Fund and Equinox Frontier Long/Short Commodity Fund. The trust has offered other series in the past and may offer additional series and/or units in the future. The trust allocates the assets of each series to one or more of the trading advisors or reference programs described below through either the use of one or more trading companies formed in the state of Delaware and managed by the managing owner, or Table of Contents Page ARTICLE V TRANSFERS OF UNITS 22 SECTION 5.1 General Prohibition. 22 SECTION 5.2 Transfer of Managing Owner s General Units. 22 SECTION 5.3 Transfer of Limited Units. 22 ARTICLE VI DISTRIBUTION AND ALLOCATIONS 24 SECTION 6.1 Capital Accounts. 24 SECTION 6.2 Book Capital Account Allocations. 24 SECTION 6.3 Allocation of Profit and Loss for United States Federal Income Tax Purposes. 24 SECTION 6.4 Allocation of Distributions. 25 SECTION 6.5 Admissions of Unitholders; Transfers. 25 SECTION 6.6 Liability for State and Local and Other Taxes. 26 ARTICLE VII REDEMPTIONS 26 SECTION 7.1 Redemption of Units. 26 SECTION 7.2 Redemption by the Managing Owner. 27 SECTION 7.3 Redemption Fee. 27 SECTION 7.4 Exchange of Units. 27 ARTICLE VIII THE LIMITED OWNERS 28 SECTION 8.1 No Management or Control; Limited Liability. 28 SECTION 8.2 Rights and Duties. 28 SECTION 8.3 Limitation on Liability. 29 ARTICLE IX BOOKS OF ACCOUNT AND REPORTS 29 SECTION 9.1 Books of Account. 29 SECTION 9.2 Annual Reports and Monthly Statements. 29 SECTION 9.3 Tax Information. 29 SECTION 9.4 Calculation of Net Asset Value of a Series. 30 SECTION 9.5 Other Reports. 30 SECTION 9.6 Maintenance of Records. 30 SECTION 9.7 Certificate of Trust. 30 SECTION 9.8 Registration of Units. 30 ARTICLE X FISCAL YEAR 30 SECTION 10.1 Fiscal Year. 30 ARTICLE XI AMENDMENT OF TRUST AGREEMENT; MEETINGS 30 SECTION 11.1 Amendments to the Trust Agreement. 30 SECTION 11.2 Meetings of the Trust. 31 SECTION 11.3 Action Without a Meeting. 31 ARTICLE XII TERM 32 SECTION 12.1 Term. 32 ARTICLE XIII TERMINATION 32 SECTION 13.1 Events Requiring Dissolution of the Trust or any Series. 32 SECTION 13.2 Distributions on Dissolution. 33 SECTION 13.3 Termination; Certificate of Cancellation. 33 Table of Contents EQUINOX FRONTIER FUNDS Maximum Available Units Class 1/1a Class 2/2a
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001261734_aeolus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001261734_aeolus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7851d84de5a3388519156e2b699b1b8d7b7743bc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001261734_aeolus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read the entire prospectus, including Risk Factors and our financial statements and related notes before you decide whether to invest in our common stock. Investing in our common stock involves risks. See Risk Factors beginning on page 8. All dollar amounts referred to in this prospectus are in U.S. dollars unless otherwise indicated. Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to rounding. Unless otherwise indicated or unless the context otherwise requires, all references in this document to we, us, our, the Company and similar expressions are references to Aeolus Pharmaceuticals, Inc. Our Company and Business We are a Southern California-based biopharmaceutical company leveraging significant U.S. Government funding to develop a platform of novel compounds for use in biodefense, fibrosis, oncology, infectious disease and diseases of the central nervous system. The platform consists of approximately 180 compounds licensed from the University of Colorado ( UC ) Duke University ( Duke ) and National Jewish Health ( NJH ). Our lead compound, AEOL 10150 ( 10150 ), is being developed under contract with the Biomedical Advanced Research and Development Authority ( BARDA and the BARDA Contract ), a division of the U.S. Department of Health and Human Services ( HHS ), as a medical countermeasure ( MCM ) against the pulmonary sub-syndrome of acute radiation syndrome ( Pulmonary Acute Radiation Syndrome or Lung-ARS ) and the delayed effects of acute radiation exposure ( DEARE ). Lung-ARS is caused by acute exposure to high levels of radiation due to a nuclear detonation or radiological event. On January 23, 2014, we announced that 10150 was granted Orphan Drug Designation by the U.S Food and Drug Administration ( FDA ) for the Lung-ARS indication. We are also developing 10150 for the treatment of lung fibrosis, including idiopathic pulmonary fibrosis ( IPF ) and other fibrotic diseases. This new development program was created based upon lung protection data generated from animal studies in Lung-ARS and chemical gas lung exposure under the BARDA Contract and National Institutes of Health ( NIH ) grants, as well as a company-funded study in a bleomycin lung fibrosis model. On March 17, 2015, we announced that 10150 was granted Orphan Drug Designation by the U.S Food and Drug Administration ( FDA ) for the IPF indication. The Company plans to initiate a Phase I safety study in patients with IPF in 2017. After we have completed safety studies, we plan to initiate efficacy studies in patients with fibrosis. AEOL 10150 has previously been tested in two Phase I human clinical trials with no drug-related serious adverse events reported. We are also developing 10150 for use in combination with radiation therapy for cancer as a treatment to reduce side effects caused by radiation toxicity and improve local tumor control. Pre-clinical studies at Duke, the University of Maryland and Loma Linda University have demonstrated that 10150 protects healthy, normal tissue, while not interfering with the benefit of radiation therapy or chemotherapy in prostate and lung cancer. Additional studies have demonstrated that 10150 enhances the anti-tumor activity of chemotherapy and radiation. A significant portion of the development work funded by the BARDA contract is applicable to the development program for radiation oncology, including safety, toxicology, pharmacokinetics and Chemistry, Manufacturing and Controls ( CMC ). After we have completed safety studies, we plan to initiate studies to demonstrate efficacy in protecting against the toxic side effects related to radiation therapy. We are also developing 10150 as a MCM for exposure to chemical vesicants (e.g., chlorine gas, sulfur mustard gas and phosgene gas) and nerve agents (e.g., sarin gas and soman gas) with grant money from the NIH Countermeasures Against Chemical Threats ( NIH-CounterACT ) program. 10150 has consistently demonstrated safety and efficacy in animal studies of chemical gas exposure and nerve gas exposure. The Company is developing a second compound, AEOL 11114B ( 11114 ), as a treatment for Parkinson s disease. Research funded by the Michael J Fox Foundation for Parkinson s disease ( MJFF ) demonstrated the neuro-protective activity of 11114 in mouse and rat models of Parkinson s disease. The compounds were invented by Brian J. Day, PhD at NJH and Manisha Patel, PhD at UC in collaboration with the Company. We have obtained worldwide, exclusive licenses to develop the compounds from NJH and the UC. Optimization of the manufacturing and formulation of the compound were finished in 2016, and we plan to complete the remaining work to file an Investigational New Drug ( IND ) application with the FDA during 2017. As filed with the Securities and Exchange Commission on December 20, 2016 Registration No. 333-___________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AEOLUS PHARMACEUTICALS, INC. (Exact Name of Issuer in Its Charter) Delaware 2834 56-1953785 (State or Other Jurisdiction of Incorporation or Organization) (Primary Standard Industrial Classification Number) (I.R.S. Employer Identification No.) Aeolus Pharmaceuticals, Inc. 26361 Crown Valley Parkway, Suite 150 Mission Viejo, California 92691 (949) 481-9825 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) ______________ John McManus President and Chief Executive Officer Aeolus Pharmaceuticals, Inc. 26361 Crown Valley Parkway, Suite 150 Mission Viejo, California 92691 (949) 481-9825 (Name, address, including zip code, and telephone number, including area code, of agent for service) ______________ Copies of all communications to: Brian J. Lynch Drinker Biddle & Reath LLP One Logan Square, Suite 2000 Philadelphia, Pennsylvania 19103-6996 (215) 988-1119 ______________ In April 2015, we announced the discovery of a new compound, AEOL 20415 ( 20415 ), which has demonstrated anti-inflammatory and anti-infective properties, and could be effective in treating cystic fibrosis and combatting anti-biotic resistant bacteria. The compound was developed under collaboration between Brian J. Day, PhD at NJH and Aeolus Pharmaceuticals. We have obtained a worldwide, exclusive license to develop the rights to the compound from NJH. Animal efficacy studies are underway to confirm the efficacy seen in in-vitro testing against anti-biotic resistant bacteria, and, assuming confirmation, we plan to initiate the work to file an IND application with the FDA during the first half of 2017. Finally, we have a pipeline of approximately 180 additional compounds. We expect that the development of additional compounds in our portfolio is dependent on our finding non-dilutive capital sources to fund such pipeline opportunities. We were incorporated in the State of Delaware in 1994. Our common stock trades on the OTCQB under the symbol AOLS. Our principal executive offices are located at 26361 Crown Valley Parkway, Suite 150 Mission Viejo, California 92691, and our phone number at that address is (949) 481-9825. Our website address is www.aolsrx.com. However, the information on, or that can be accessed through our website is not part of this report. We also make available, free of charge through our website, our most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Strategy Our strategy is to pursue the development of our promising platform of anti-fibrotic, anti-inflammatory, anti-infective and anti-oxidant compounds that address important unmet medical indications of clinical and national strategic importance. Our objective is to use non-dilutive capital whenever possible. To date, we, and/or our research collaborators, have been awarded more than $149 million in non-dilutive U.S. government funding in the form of grants and contracts from federal agencies, such as BARDA, NIH-NIAID and NIH-CounterACT. Additional research has been conducted on our compounds with funding from private foundations, such as the MJFF and Citizens United for Research in Epilepsy ( CURE ). The expected benefit of this strategy is threefold. First, safety, toxicology, pharmacokinetic and CMC work funded by the government and foundations is applicable to our traditional commercial development programs. As an example, significant work funded under the BARDA contract for Lung-ARS has generated data that can be used to support our New Drug Applications ( NDA ) for pulmonary fibrosis and/or radiation therapy for cancer. Second, cost-plus development contracts, like our contract with BARDA, include funds for overhead and profit. These overhead and profit streams have significantly reduced our cash burn rate, which reduces our need to raise capital and incur dilution. Third, some government contracts, such as the Lung-ARS contract with BARDA are designed to lead to the acquisition of the product under development by the US Government for use as a MCM in the Strategic National Stockpile ( SNS or the Stockpile ). Government procurement could result in significant revenue to the Company, which could be used to further the development of the product in other indications or for the development of other promising products. Procurements may be made if either the drug meets the requirements for approval by the U.S. FDA under the Animal Rule or prior to Animal Rule approval following the filing of a pre-Emergency Use Authorization ( EUA ) application. Most of BARDA s procurements to date have been following the filing of a pre-EUA application. Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company The amount of any potential procurement is undisclosed by BARDA at this time and is unknown to us. Based on publicly available information, as well as other procurements made by the agency after pre-EUA applications, we believe the agency may purchase sufficient courses of therapy to treat a minimum of one hundred thousand people, with options to purchase an additional two hundred thousand courses of treatment. If purchases of such volumes occurred, the revenue to the Company could provide funding to advance numerous clinical studies, including potentially large Phase III programs in lung fibrosis and radiation therapy for cancer. This funding could allow us to fund studies with less dependence on collaborative partnering arrangements and future equity offerings, which is consistent with our strategy to deploy non-dilutive capital wherever possible to develop our compounds for unmet medical indications and thereby generate value for our stockholders. In addition, purchases of such volumes of drug could make the Company profitable. Business Overview We are developing a platform of compounds with anti-fibrotic, anti-inflammatory, anti-infective and anti-oxidant activity based on technology discovered and researched at Duke, UC and NJH, developed by Drs. Irwin Fridovich, Brian Day and others. Dr. Day is our Chief Scientific Officer. Our lead compound, 10150, protects tissue from damage and increases survival in animal models of lung damage after exposure to radiation toxic chemicals, disease and trauma by mitigating and/or preventing cell death, inflammation and fibrosis through its action on oxidative stress (Reactive Oxygen Species, or ROS ) and regulation of growth factors and chemokines including PTEN, TGF- 1, HIF-1 , TNF- and IL-6, as well as impacting subsequent signaling pathways of ROS production, apoptosis and fibrosis such as NOX4, PTEN, PI3K/p-Akt and p53/Bax (for scientific definitions, see Glossary under AEOL 10150 in Idiopathic Pulmonary Fibrosis ). 10150 is an extremely potent catalytic anti-oxidant that has been shown in scores of animal studies to reduce oxidative stress by neutralizing reactive oxygen and nitrogen species. The neutralization of these species impacts the inflammatory and fibrotic response to insults and reduces or eliminates subsequent tissue damage-signaling cascades that typically result. We are developing 10150 as a MCM for national defense and for use in oncology and treating lung fibrosis. Our most extensive development program to date is the advanced development of 10150 for Lung-ARS and DEARE. On February 11, 2011, we signed a cost-plus contract with BARDA for the development of 10150 as a MCM against Lung-ARS. BARDA is the government agency responsible for the advanced development and purchase of medical countermeasures for chemical, biological, radiological and nuclear threats. The contract contemplates the advanced development of 10150 through approval by the FDA under 21 CFR Part 314 Subpart I and Part 601 Subpart H (the Animal Rule. ) The Animal Rule allows for approval of drugs using only animal studies when human clinical trials cannot be conducted ethically. The ultimate goal of the BARDA Contract is to complete all of the work necessary to obtain FDA approval for 10150 as a MCM for Lung-ARS. In addition, the BARDA Contract is designed to generate the data that would allow for acquisition of the drug by BARDA prior to FDA approval under a pre-EUA application. Pursuant to the BARDA Contract, we were awarded approximately $10.4 million for the base period of the contract (from February 2011 to April 2012). On April 16, 2012, we announced that BARDA had exercised two options under the BARDA Contract worth approximately $9.1 million. On September 17, 2013, we announced that BARDA had exercised $6.0 million in additional contract options. On May 7, 2014, we announced that BARDA had exercised a Contract Modification worth approximately $1.8 million. The Contract Modification allowed Aeolus to reconcile actual costs incurred with billings under the original provisional indirect billing rate. It established a new provisional indirect billing rate and placed a cap on the current and future provisional indirect billing rates. On June 26, 2015, we announced that BARDA had exercised $3.0 million in additional contract options under its advanced research and development contract for 10150. On February 8, 2016, BARDA exercised a Contract Modification worth approximately $0.1 million. On May 25, 2016, we announced that BARDA had exercised a Contract Modification worth approximately $0.4 million. The purpose of the Contract Modification was to provide funding to complete a pharmacometric analysis of data from all completed animal efficacy studies of 10150 to estimate optimal dose, dose frequency and duration of treatment. The total contract value exercised as of September 30, 2016 is approximately $30.8 million, of which $30.6 million has been billed. We may receive up to an additional $87.6 million in options exercisable over the remainder of the BARDA Contract. Options are exercised based on the progress of the development program, including the completion of clinical trials or manufacturing tasks under previously exercised options. ______________________ Pursuant to Rule 429 under the Securities Act, the prospectus contained in this Registration Statement will be used as a combined prospectus in connection with (i) this Registration Statement and (ii) the Registration Statement on Form S-1 (File No. 333-209119), which became effective on February 12, 2016, and the Post-Effective Amendments to the Registration Statements on Form S-1 (File No. 333-188670 and File No. 333-181409), which became effective on June 20, 2014 (collectively, the Prior Registration Statements ). This Registration Statement constitutes Post-Effective Amendment No. 2 to File No. 333-188670 and Post-Effective Amendment No. 3 to File No. 333-181409. Such post-effective amendments shall hereafter become effective concurrently with the effectiveness of this Registration Statement in accordance with Section 8(c) of the Securities Act. ______________________ The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ______________________ CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered (1)(6) Proposed Maximum Offering Price per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $0.01 par value per share (2) (2) (2) (2) Common Stock, $0.01 par value per share (3) (3) (3) (3) Common Stock, $0.01 par value per share (4) (4) (4) (4) Common Stock, $0.01 par value per share 12,067,660 $ 0.18 (5) $ 2,172,178.80 $ 251.75 Total 12,067,660 $ 2,172,178.80 $ 251.75 (1) Pursuant to Rule 429 under the Securities Act of 1933, as amended, and as further described herein, shares of common stock previously registered on the registrant s Registration Statements on Form S-1 filed with the Securities and Exchange Commission (File Nos. 333-209119, 333-188670 and 333-181409) (collectively, the Prior Registration Statements ) are being included in this registration statement. (2) Consists of 73,432,471 shares of common stock previously registered under File No. 333-209119. The registration fee was previously paid in connection with the filing of such Prior Registration Statement. (3) Consists of 30,591,501 shares of common stock previously registered under File No. 333-188670. The registration fee was previously paid in connection with the filing of such Prior Registration Statement. (4) Consists of 88,714,577shares of common stock previously registered under File No. 333-181409. The registration fee was previously paid in connection with the filing of such Prior Registration Statement. (5) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act. (6) Pursuant to Rule 416 under the Securities Act, this registration statement also covers such additional shares of common stock as may hereafter be issued with respect to the shares being registered hereby as a result of stock splits, stock dividends, recapitalizations or similar adjustments. The final goal of the contract is to achieve FDA approval for 10150 and the development of commercial manufacturing capability. In order to achieve these goals, we believe it will be necessary for BARDA to exercise the majority of the options in the contract. We also believe that BARDA is likely to continue to exercise options as long as 10150 continues to demonstrate efficacy in animal testing and safety in humans for Lung-ARS. In the event we begin sales to the U.S. government following the filing of a pre-EUA application, we believe that BARDA is likely to exercise the majority of the remaining options under the contract. One of the requirements of an EUA is that the development program continue towards the goal of FDA approval. If all of the options are exercised by BARDA, the total value of the contract would be approximately $118.4 million. There are no existing treatments for Lung-ARS or DEARE and we are not aware of any compounds in development that have shown efficacy in increasing survival when administered after exposure to radiation. 10150 has demonstrated efficacy in two animal models (mouse and non-human primate) when administered after exposure to radiation. The U.S. government s planning scenario for a radiation incident is a 10 kiloton detonation of a nuclear device in a major American city. It is estimated that several hundred thousand civilians would be exposed to high doses of radiation in this scenario. The BARDA contract is also designed to complete the work necessary for 10150 to be purchased for the Stockpile. BARDA currently acquires drugs for the SNS through a Special Reserve Fund (the SRF ) created under Project BioShield and reauthorized at $2.8 billion under the Pandemic All-Hazards Preparedness Reauthorization Act of 2013. Although the final goal of the contract is full FDA approval under the Animal Rule, BARDA may purchase product prior to FDA approval following the filing of a pre-EUA application. BARDA has made numerous acquisitions of compounds that were not approved by the FDA, but were the subject of a pre-EUA filing. Procurements from BARDA following a pre-EUA application could result in a significant increase in revenues for Aeolus and potential profitability. In August 2014, we filed an Investigational New Drug ( IND ) application with the Division of Medical Imaging Products of the U.S. Food & Drug Administration ( FDA ) for 10150 as a treatment for Lung-ARS. On September 4, 2014, the Company announced positive results from a study in non-human primates ( NHP ) exposed to lethal radiation and treated with 10150. The study demonstrated that administration of 10150 24 hours after exposure to lethal radiation impacted survival at six months post-exposure as follows: survival in the 60 day treatment group was 50%, compared to 25% survival in the radiation only untreated control group. The data from this study, combined with development work completed in manufacturing and human safety data, will form the basis for a pre-EUA application. On September 22, 2014, we received a letter from the FDA placing our proposed Phase I study in healthy normal volunteers for 10150 as a treatment for Lung-ARS on clinical hold. On February 19, 2016, we received notice from the FDA that the clinical hold had been lifted, thereby allowing us to proceed with a Phase I single dose study of 10150 in healthy normal volunteers. We also benefit from research funded by grants from the NIH CounterACT program for the development of 10150 as a MCM for the effects chemical vesicant gasses (e.g., mustard gas, phosgene gas and chlorine gas) exposure. Funding for this indication is provided directly to the research institution and does not flow through our financial statements. Continued funding is generally dependent on continuing evidence of efficacy in animal trials. In October 2011, NJH was awarded a $12.5 million grant from NIH CounterACT to continue the development of 10150 as a MCM against sulfur mustard and chlorine gas exposure. Also included in the grant was support for research looking at tissue plasminogen activator ( TPA ) and Silabilin, which are not Aeolus assets, as MCMs against sulfur mustard gas exposure. Work under this grant was completed in September 2016, and NJH reported in September 2016 that final studies under the grant demonstrated that 10150 treatment significantly improved acute (2 to 3 days post-exposure) and longer term (28 days post-exposure) in a rodent model of sulfur mustard gas lung exposure. Development of a large animal model is currently being funded by the US Government, independent of Aeolus, and once that model is completed, the Company plans to enter into a Material Transfer Agreement with the US Government to test 10150 and confirm efficacy in the rodent model. Aeolus plans to meet with the FDA during the first half of 2017 to discuss filing an IND for the sulfur mustard indication and to discuss what human safety data would be required for making a pre-EUA filing and ultimately for approval under the Animal Rule. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Registration Nos.: 333-209119 333-188670 333-181409 333-______ Subject to completion, dated December , 2016 PRELIMINARY PROSPECTUS 204,809,209 Common Stock This prospectus relates to the offer and sale from time to time by the selling stockholders identified in this prospectus of up to 204,809,209 shares of our common stock, par value $0.01 per share, including common stock issuable upon conversion of Series C Convertible Preferred Stock and shares of common stock issuable upon exercise of warrants, as set forth herein. This prospectus also relates to 50,000 shares of our common stock issuable upon the exercise of warrants that we issued in 2014. The shares of common stock, Series C Convertible Preferred Stock and warrants registered herein were issued in transactions in 2015, 2013, 2012 and previous periods in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Rule 506 promulgated thereunder. For additional information regarding the private placements, please see Description of the Shares included in this Prospectus below. We are not selling any common stock under this prospectus and will not receive any of the proceeds from the sale of shares by the selling stockholders; however, we will receive the proceeds of any cash exercise of the warrants. The selling stockholders may sell the shares from time to time at the market price quoted on the OTC Bulletin Board (or any stock exchange on which our common stock may be listed in the future) at the time of offer and sale, or at prices related to such prevailing market prices, in negotiated transactions or in a combination of such methods of sale directly or through brokers. See Plan of Distribution for additional information on how the selling stockholders may conduct sales of their shares of common stock. If there are substantial sales of shares of our common stock, the price of our common stock could decline. Other than underwriting discounts and commissions, and transfer taxes, if any, we have agreed to bear certain expenses incurred in connection with the registration and sale of the common stock offered by the selling stockholders. Our common stock is quoted on the OTC Bulletin Board under the symbol AOLS. On December 14, 2016, the closing price of our common stock was $0.18 per share. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 8 for certain risks you should consider before purchasing any shares. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ______________ The date of this prospectus is December , 2016 We are also funded by grant money from the NIH CounterACT program and the National Institute of Neurological Disorders and Stroke ( NINDS ) for the development of 10150 as a MCM for the effects of nerve gas (e.g., sarin and soman) exposure. NIH-CounterACT awarded a contract on September 24, 2011 worth approximately $735,000, to UC to develop 10150 as a MCM against nerve agents. Work performed with this initial funding demonstrated that 10150 significantly improved survival when administered with current treatment in a pilocarpine model for nerve gas exposure. In September 2013, we announced that Dr. Manisha Patel at UC had been awarded a $4.3 million grant from NINDS to further develop as a MCM for exposure to sarin gas and other nerve agents. Efficacy studies in a mouse model of soman gas are ongoing, and results are expected during 2017. Substantially all of the past costs for the Lung-ARS program have been funded by the BARDA Contract. We may use our own capital to fund any future costs of the Lung-ARS program that are not funded by the BARDA Contract. To date, the chlorine, phosgene, mustard gas and nerve agent programs have been funded by NIH-CounterACT and NINDS through programs at NJH, UC, and the United States Army Medical Research Institute for Chemical Defense ( USAMRICD ). We are also developing 10150 for the treatment of lung fibrosis, including idiopathic pulmonary fibrosis ( IPF ) and other fibrotic diseases. Data demonstrating efficacy of 10150 in IPF was initially generated from animal studies in Lung-ARS and chemical gas lung exposure under the BARDA Contract and NIH grants. Additionally, 10150 demonstrated efficacy in the bleomycin model of IPF, in a study funded by Aeolus. On March 17, 2015, we announced that 10150 was granted Orphan Drug Designation by the U.S Food and Drug Administration ( FDA ). The Company plans to initiate a Phase I safety study in patients with IPF in 2017. After we have completed safety studies, we plan to initiate efficacy studies in patients with IPF. Although we believe that BARDA may fund a portion of the IPF development work, we may need use our own capital to fund a portion of the future costs of work associated with IPF and other fibrotic diseases. We are also developing 10150 for use in combination with radiation therapy for cancer as a treatment to reduce side effects caused by radiation toxicity and to improve local tumor control. Pre-clinical studies at Duke and Loma Linda University have demonstrated that 10150 does not interfere with the benefit of radiation therapy or chemotherapy in prostate and lung cancer. Additional studies have shown that 10150 enhances the anti-tumor activity of radiation and chemotherapy. A significant portion of the development work funded by the BARDA contract is applicable to the development program for radiation oncology, including safety, toxicology, pharmacokinetics and Chemistry, Manufacturing and Controls ( CMC ). After we have completed safety studies, we plan to initiate studies to demonstrate efficacy in toxic side effects related to radiation therapy. We expect to fund a portion of the future costs of work related to radiation therapy opportunities from our own capital. 10150 has been tested in two human Phase I safety studies where it was well-tolerated and no adverse events were observed. Efficacy has been demonstrated in animal models for Lung-ARS, chlorine gas exposure, phosgene gas exposure, sulfur mustard gas exposure (lungs and skin) and nerve gas exposure. In both mouse and NHP studies for Lung-ARS, 10150 treated groups showed significantly reduced weight loss, inflammation, oxidative stress, lung damage, and most importantly, mortality. Therapeutic efficacy has been demonstrated when 10150 is administered 24 hours after exposure to radiation, a requirement for consideration as a radiation MCM for the SNS. Following the events at the Fukushima nuclear plant in Japan in 2011, we performed radiation exposure studies in mice at the request of Japanese researchers to determine how the administration of 10150 would impact the use of leukocyte growth factors ( LGF ) used to treat the hematopoietic or bone marrow syndrome of ARS ( H-ARS ). Data showed that 10150 does not interfere with the efficacy of LGF (in this case Amgen s Neupogen ). Additionally, the study demonstrated that administration of Neupogen , the current standard of care for H-ARS, increased damage to the lungs. When 10150 was administered with Neupogen this damage was significantly reduced. We believe that this finding may have important implications for the potential procurement of 10150 for the SNS. In September 2013, BARDA announced that it had entered into a procurement and inventory management agreement with Amgen to provide Neupogen for the SNS. On March 30, 2015, the FDA approved Neupogen for the treatment of H-ARS. In addition to our active IND for Lung-ARS, we have an active IND on file with the FDA for 10150 as a potential treatment for amyotrophic lateral sclerosis ( ALS ). At this time, we do not have any plans to continue development of 10150 for ALS. We have already completed two Phase I safety studies in 52 humans (39 receiving drug and 13 control) demonstrating that 10150 is safe and well tolerated. CMC work has been completed, pilot lots have been prepared and production is being scaled up under the BARDA Contract. The Company is developing a second compound, 11114, as a treatment for Parkinson s disease. Research funded by MJFF demonstrated the neuro-protective activity of 11114 in mouse and rat models of Parkinson s disease. The compounds were invented by Brian J. Day, PhD at NJH and Manisha Patel, PhD at UC in collaboration with the Company. We have obtained worldwide, exclusive licenses to develop the compounds from NJH and UC. We plan to complete the remaining work to file an IND application with the FDA during 2017. In April 2015, we announced the discovery of a new compound, 20415, that has demonstrated anti-inflammatory and anti-infective properties and could be effective in treating cystic fibrosis and combatting anti-biotic resistant bacteria. The compound was developed under a collaboration between Brian J. Day, PhD at NJH and Aeolus Pharmaceuticals. We have obtained a worldwide, exclusive license to develop the rights to the compound from NJH. We plan to initiate the work to file an Investigational New Drug ( IND ) application with the FDA during 2017. Risks Associated with Our Business Our business is subject to numerous risks. Please see the Risk Factors section beginning on page 8 of this prospectus. Corporate Information We were incorporated in the State of Delaware in 1994. Our common stock trades on the OTC Bulletin Board under the symbol AOLS. Our principal executive offices are located at 26361 Crown Valley Parkway, Suite 150, Mission Viejo, California 92691, and our phone number at that address is (949) 481-9825. Our website address is www.aeoluspharma.com. However, the information in, or that can be accessed through, our web site is not part of the registration statement of which this prospectus forms a part. We also make available free of charge through our website our most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission, which we refer to as the SEC. You should only rely on the information contained in this prospectus. We have not, and the selling stockholders have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only, regardless of the time of delivery of this prospectus or of any sale of our securities. Our business, prospects, financial condition and results of operations may have changed since that date. This document may only be used where it is legal to sell these securities. Certain jurisdictions may restrict the distribution of these documents and the offering of these securities. We require persons receiving these documents to inform themselves about, and to observe any, such restrictions. We have not taken any action that would permit an offering of these securities or the distribution of these documents in any jurisdiction that requires such action. _________________________________ We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder. Use or display by us of other parties trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship by us of, the trademark, trade name or service mark owner _________________________________ Industry and Market Data Unless otherwise indicated, the market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources. Although we believe these third-party sources are reliable, we have not independently verified the information. Except as otherwise noted, none of the sources cited in this prospectus has consented to the inclusion of any data from its reports, nor have we sought their consent. In addition, some data are based on our good faith estimates. Such estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as our own management s experience in the industry, and are based on assumptions made by us based on such data and our knowledge of such industry and markets, which we believe to be reasonable. However, except as otherwise noted, none of our estimates have been verified by any independent source. Our estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in the Risk Factors section of this prospectus and the other information contained herein. These and other factors could cause our actual results to differ materially from those expressed in the estimates and assumptions. 1 Note to Aeolus Please confirm Offering numbers.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001272550_root9b_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001272550_root9b_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a08543f26350f4734188c939c560a591c1588b88
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001272550_root9b_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained throughout this prospectus and is qualified in its entirety by reference to the more detailed information and financial statements in this prospectus and related notes included elsewhere herein. This prospectus contains forward-looking statements, which involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Cautionary Note Regarding Forward-Looking Statements and under Risk Factors and elsewhere in this prospectus. Since this is only a summary, it does not contain all of the information that may be important to you in making your investment decision. You should carefully read the more detailed information contained in this prospectus, including our financial statements in this prospectus and related notes. Our business involves significant risks. You should carefully consider the information under the heading Risk Factors beginning on page 9 of this prospectus. As used in this prospectus, unless context otherwise requires, the words we, us, our, the Company and root9B refer to root9B Technologies, Inc. and its subsidiaries. Also, any reference to common stock refers to our common stock, $0.001 par value per share. Corporate Information We were incorporated on January 5, 2000 as Continuum Group C Inc. under the laws of the State of Nevada, and did not conduct business as such. On November 5, 2004, we consummated a share exchange agreement dated as of October 12, 2004, among us, Premier Alliance Group, Inc., a North Carolina corporation ( North Carolina Premier ), and the shareholders of North Carolina Premier. As a result, North Carolina Premier merged into us and our name was changed to Premier Alliance Group, Inc. North Carolina Premier had commenced operations in 1995 and was founded by a group of experienced consultants that specialized in technology and financial services. In November 2004, and as a result of the merger of North Carolina Premier into the Company, it became part of a publicly traded company. In 2011, we re-domiciled under the laws of the state of Delaware. We have grown significantly both organically and through strategic acquisitions of complementary businesses. Significant acquisitions we have completed include root9B, LLC in November 2013 and IPSA International, Inc. in February 2015. Effective December 1, 2014, we changed our name from Premier Alliance Group, Inc. to root9B Technologies, Inc. In September 2014, the Company announced a shift in strategy to accelerate the differentiated capabilities of its wholly-owned cybersecurity subsidiary root9B, and to focus primarily on cybersecurity and regulatory risk mitigation. In connection with this strategic shift, the Company changed its name and OTCQB ticker symbol as part of a rebranding effort, to root9B Technologies, Inc. and RTNB. Our team is made up of individuals that have deep experience and training as cyber security experts, analysts, technology and engineer specialists, business and project consultants. We have hired our experienced professionals from a wide variety of organizations and key industries, which include financial services, utilities, life science, technology, government and healthcare. Company Summary We are a provider of cybersecurity, regulatory risk mitigation, and energy and controls solutions. We help clients in diverse industries to provide full scale cyber operations and solutions, mitigate risk, comply with complex regulations, improve performance and productivity, and leverage and integrate technology. We work with our customers to assess, design, and provide customized solutions and advisory services that are tailored to address each client s particular requirements and needs. Our clients range in size from Fortune 100 companies to mid-sized and owner-managed businesses across a broad range of industries including local, state, and federal agencies. Company Overview We are a provider of cyber security, business advisory services principally in regulatory risk mitigation, and energy and controls solutions. Our services and solutions target mitigating risk, assisting with compliance, and maximizing profits by addressing these core areas for businesses, primarily cyber security, regulatory compliance, risk mitigation and energy and controls related initiatives. During the first quarter of 2016 and during 2015, we provided our services through three operating segments: Cyber Solutions, IPSA/Business Advisory Solutions and Energy and Controls Solutions. For the quarter ended March 31, 2016, 9.5% of our revenue was generated from Cyber Solutions, 87.6% from IPSA/Business Advisory Solutions and 2.9% from Energy and Controls Solutions. For the year ended December 31, 2015, 10% of our revenue was generated from Cyber Solutions, 84% from IPSA/Business Advisory Solutions and 6% from Energy and Controls Solutions. Cyber Solutions We are a provider of cyber security and advanced technology training capabilities, operational support and consulting services. From our offices in Colorado Springs, Colorado, Honolulu, Hawaii, New York, NY, and San Antonio, Texas, we provide services to the US Government and commercial organizations in the United States and overseas. Our services range from cyber operations assessments, analysis and testing, to cyber training, forensics, exploitation, and strategic defense planning. Our cybersecurity personnel are recognized providers of cyber services across the defense, civil, intelligence and commercial communities. Our capabilities include but are not limited to: Vulnerability Assessment & Penetration Testing Network Defense Operations Computer Forensics Malware Analysis & Reverse Engineering Forensic Data Analysis Mobile Forensics Tool Development Mobile Cyber Protection SCADA Security Operations Wireless Technology Support Compliance Testing Data Breach Prevention & Remediation Cyber Policy Assessment & Design Curriculum Development IPSA/Business Advisory Solutions IPSA specializes in Anti-Money Laundering (AML) operational, investigative and remedial services, AML risk advisory and consulting services, conducting high-end investigations with expertise in services ranging from complex financial crime and intellectual property issues to conducting anti-bribery investigations or due diligence on a potential partner or customer. Our Business Advisory Solutions team focuses on delivering solutions in both regulatory compliance and risk mitigation. The group works to assist our customers with compliance by applying our expertise in various regulations and deploying processes and automation. Similarly, we have deep expertise in risk assessment and work with our customers to develop solutions and structures to evaluate and mitigate risk. A typical customer is an organization that has complex business processes, large amounts of data to manage, and faces change driven by regulatory or market environments, or strategic, growth and profitability initiatives. Key areas of focus continue to be large, mandated regulatory efforts including complying with the Sarbanes-Oxley Act of 2002 (SOX), BASEL ACCORDS (for financial institutions), the Dodd-Frank Wall Street Reform and Consumer Protection Act and cybersecurity initiatives, where the team partners with the Cyber Solutions group. Energy and Controls Solutions The Energy and Controls Solutions group works with our customers to assess, design and install processes and automation to address energy regulation, strategy, cost, and usage initiatives. Examples of solutions and areas of expertise include automated control systems and energy management systems. These systems apply technology to respond to events, scenarios or data patterns automatically adjusting for more efficient processes. Our customers include companies in the commercial sector, not for profit entities and local municipalities. Corporate Information Our principal executive office is located at 4521 Sharon Road, Suite 300, Charlotte, North Carolina, 28211, telephone number (704) 521-8077. Our website address is www.root9technologies.com. No information found on our website is part of this prospectus. Also, this prospectus may include the names of various government agencies or the trade names of other companies. Unless specifically stated otherwise, the use or display by us of such other parties names and trade names in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties. The Offering Common stock offered by the selling stockholders 32,323,825 shares of our common stock, of which: 1,428,571 shares of common stock underlying convertible notes which remain unconverted and were issued in a private placement financing transaction closed between October 23, 2014 and November 18, 2014 (the 2014 Financing ). 214,288 shares of common stock underlying convertible notes which were converted into common shares together with interest on convertible notes paid in shares of common stock. 630,000 shares underlying the warrants issued in conjunction with the 2014 Financing. 85,000 shares underlying warrants issued for services rendered in connection with the 2014 Financing. 9,542,780 shares issued in connection with the acquisition by the Company of IPSA International, Inc. in 2015 (the IPSA Acquisition ). 160,000 and 480,000 shares underlying the warrants issued in October 2015 and April 2016, respectively, in consideration of the extension of the convertible notes issued in the 2014 Financing. 3,686,818 shares of common stock which were issued in a private placement financing closed March 12, 2015 (the March 2015 Financing ). 1,843,413 shares of common stock underlying the warrants which were issued in the March 2015 Financing. 50,000 shares of common stock underlying warrants issued for services rendered in connection with the 2015 Financing. 7,000,000 shares of common stock which were issued in a private placement financing closed between November 5, 2015 and March 10, 2016 (the 2016 Financing ). 7,000,000 shares of common stock underlying the warrants which were issued in the 2016 Financing. 202,955 shares underlying warrants issued in connection with the 2016 Financing. Common stock to be outstanding after the offering 83,808,314 shares of common stock. Use of Proceeds We will not receive any proceeds from the sale of common stock by the selling stockholders participating in this offering; however, we will receive an aggregate of approximately $12,284,809 upon the exercise of all of the warrants. The selling stockholders will receive all of the net proceeds from the sale of their respective shares of common stock in this offering. See Use of Proceeds on page 16 of this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001275272_cbs-radio_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001275272_cbs-radio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001275272_cbs-radio_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001287900_t-rex-oil_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001287900_t-rex-oil_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8fbaee29449b9b11e3bb2f709546ea834a046586
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001287900_t-rex-oil_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES T-Rex Oil, Inc. was organized under the laws of the State of Nevada as Rancher Energy Corp. ("Rancher.") On October 17, 2014, we merged into our wholly owned subsidiary, T-Rex Oil, Inc., a Colorado corporation and as a result were re-domiciled in the state of Colorado and our name changed to T-Rex Oil, Inc. ("T-Rex.") Prior to August 2014, we had minimal operations that were focused mainly on administrative activities, the identification of potential oil and gas prospects, and one prospect participation in Colorado that was rescinded in June 2014, as discussed below. We are an independent oil and gas exploration and production company focused on the acquisition, enhancement and development of oil and gas assets primarily in the Rocky Mountain region of Wyoming. Based on a 2007 research study conducted by the Enhanced Oil Recovery Institute at the University of Wyoming using reservoir production data provided by the Wyoming Oil & Gas Conservation Commission ("WOGCC"), Wyoming has produced 7,024 million barrels of oil from 1,237 producing fields with the top 400 fields producing 97.7% of the total produced oil, or 6,865 million barrels of oil. A research report published by the Independent Petroleum Association of America in November 2014 ranked Wyoming as the 9th largest U.S. state in terms of crude oil production and the 5th largest U.S. state in terms of natural gas production. Our management team has extensive experience acquiring, enhancing and operating oil and gas assets in Wyoming, which we believe will provide for a competitive advantage in executing this business strategy. As of October 2015, according to www.drillingedge.com, there are 358 active oil and gas operators in Wyoming, with the largest producer being EOG Resources, Inc. representing only 9.24% of total production, according to the WOGCC. We believe that there remain several under-developed, or mismanaged oil and gas properties in Wyoming that with proper field management, application of modern exploration and development techniques, enhanced recovery methods and in-field drilling will increase current production and the ultimate recovery factor of oil and gas reserves from these fields. In addition, while we are focusing on the acquisition of proven properties that we believe can be economically enhanced in this current commodity price environment, in certain market conditions, we believe there could be additional upside realized through the development of deeper productive horizons, or applying tertiary recovery applications to these acquired fields. We have focused our activities in Eastern Wyoming along the Salt Creek/Big Muddy trend in the Powder River Basin. Starting with the Salt Creek field in Natrona County, following the Salt Creek/Big Muddy trend down to the South Glenrock field in Converse County, we believe there are a series of analogous fields that could provide ideal targets for us to execute this business strategy. Our approach is to acquire lower risk Proven Developed Producing properties. The ideal candidate will also include Proven Undeveloped well sites, which should supply upside development potential. Specifically, properties that have the advantage of having established producing oil and/or natural gas wells that have drillable offset locations and have wells that may be shut-in but are candidates for re-working or re-completion, are high priority acquisition targets. Our acquisition strategy also takes older wells that are shut in or have lower production results and applies new and existing technologies to work-over and/or recomplete so as to increase production and ultimate recovery. Technologies to be deployed include 3-D seismic imaging to target undeveloped areas of the reservoir that contain remaining primary reserves; horizontal drilling to increase recoveries; as well as secondary and tertiary recovery methods to increase ultimate produced reserves. We intend to build operations through the following: Build a Portfolio of Low-Risk, High-Return Oil and Gas Assets in the Rocky Mountain Region Acquire, Explore & Develop Assets. Identification of unique opportunities that utilize the potential of the tertiary technologies and programs, such as CO2 injection, to take advantage of current environmental mandates. In the last 12 months, we have acquired interests in producing and undeveloped properties in Wyoming and western Nebraska. At the end of March 2015, we completed and closed the acquisition of Western Interior Oil and Gas, Inc. ("WIOG.") As part of the acquisition of Western Interior Oil and Gas, we acquired approximately 6,028 gross acres spread across the Big Horn Basin, the Wind River Basin and south central Wyoming. These properties are adjunct to our existing properties in south central Wyoming. In January 2016, our equity investment T-Rex Oil, LLC#3, acquired approximately 13,286 gross acres in the Powder River Basin in Wyoming. These acres are specifically, in the Cole Creek Field and has 19 producing oil wells. The Company currently has properties in the Cole Creek field and, now through it has access to depths below those it currently owns. Factors that make this offering highly speculative or risky are: There is a limited market for our securities; We have limited revenues or sales; We are undercapitalized. We have offices and/or operations in Broomfield, Colorado, Casper, Wyoming and Western Nebraska. Our corporate executive offices are located at 520 Zang Street, Suite 250, Broomfield, Colorado 80021 and our telephone number is (720) 502-4483. We maintain a website at www.trexoilinc.com and such website is not incorporated into or a part of this filing. Summary of Financial Information As at December 31, 2015 Total Assets $14,829,253 Current Liabilities $1,735,552 Shareholders' Equity $13,093,701 For the Nine Months Ended December 31, 2015 Revenues $390,705 Net Loss for the nine months ended December 31, 2015 ($2,995,105) As of March 31, 2015, our accumulated deficit was ($11,056,972). As of December 31, 2015, our accumulated deficit for was ($14,052,077). We anticipate that we will operate in a deficit position and continue to sustain net losses for the foreseeable future. At December 31, 2015, we have $359,791 cash on hand and warrants exercisable for 407,094 shares with an exercise price of $3.00 and a term of 3 years. In addition, the Company has outstanding warrants exercisable for 942,858 shares with exercise prices ranging from $0.25 to $3.50 per share and terms of 3 years. The Offering We are registering all securities listed for sale on behalf of the selling security holders, including shares underlying Series A Preferred Shares, warrants and options: 1,000,000 shares of common stock of selling shareholder; 400,000 shares of common stock underlying Series A Shares; and 407,094 shares of common stock underlying $3 Warrants exercisable at $3.00 per share; 1,885,250 shares of common stock underling $0.10 Options exercisable at $0.10 per share; 100,000 shares of common stock underlying $0.25 Options exercisable at $0.25 per share. A total of $1,221,282 may be raised by us if all of the warrants described above are exercised. A total of $188,525 and $25,000 may be raised by us if all of the $0.10 and $0.25 Options described above are exercised. We have already received the funds from the sale of 407,094 shares of our Series A Preferred Shares and $3 Warrants. We will not receive any additional funds from their conversion of our Series A Preferred Shares into shares of our common stock. We will not receive any proceeds from sales of shares by selling shareholders. Furthermore, given that we have limited operating history and have only recently recognized revenues from our activities, it is highly unlikely that our $3 Warrants will be exercised at $3.00 in the foreseeable future. The Series A Preferred Shares are redeemable six months from their date of issuance and are convertible into shares of our common stock in whole or in part at a conversion price based upon a 20% discount of the 10 day average market closing price of our common stock on the OTCQB. Each $3.00 Warrant entitles the holder to purchase one share of common stock at $3.00 during the three-year period from the date of issuance. Each $3.00 Warrant is callable after nine months if our common stock has a closing price of $5 or greater for a period of 5 consecutive days. Each $0.10 and $0.25 Option entitles the holder to purchase one share of common stock at $0.10 or $0.25 per share, respectively during the three-year period from the date of issuance. Our common stock, only, will be transferable immediately after the closing of this offering. We will undertake to keep the registration statement, of which this Prospectus is a part, current during the term of the warrants. (See "Description of Securities") Common shares outstanding before this offering 16,384,742 Maximum common shares being offered by our existing selling shareholders 1,000,000 Maximum shares of common stock underlying Series A Preferred Shares 400,000 Maximum shares of common stock underlying $3 Warrants 407,094 Maximum shares of common stock underlying $0.10 Options 1,885,250 Maximum shares of common stock underlying $0.25 Options 100,000 Maximum common shares outstanding after this offering (1) 20,177,086 (1) Assuming exercise of all Series A Preferred Shares $3 Warrants, $0.10 options and $0.25 Options being registered herewith. We are authorized to issue 100,000,000 shares of common stock, par value $0.001. Our current shareholders, officers and directors collectively own 16,384,742 shares of restricted common stock. We are authorized to issue 5,000,000 shares of Series A Preferred Stock, par value $0.001. Our current shareholders, including a director, collectively own 407,094 shares of Series A Preferred Stock. The common stock is presently traded on the over-the-counter market on the OTCQB of the OTC Markets maintained by the Financial Industry Regulatory Authority (the "FINRA"). The OTCQB symbol for the Common Stock is "TRXO". OUR COMPANY RISK FACTORS Our securities, as offered hereby, are highly speculative and should be purchased only by persons who can afford to lose their entire investment in us. Each prospective investor should carefully consider the following risk factors, as well as all other information set forth elsewhere in this prospectus, before purchasing any of the shares of our common stock. OUR BUSINESS HAS AN OPERATING HISTORY OF ONLY TWO YEARS AFTER BANKRUPTCY EMERGENCE AND IS UNPROVEN AND THEREFORE RISKY. We have only recently begun operations under the business plan discussed herein. Potential investors should be made aware of the risk and difficulties encountered by a new enterprise in the oil and gas industry, especially in view of the intense competition from existing businesses in the industry. WE HAVE A LACK OF REVENUE HISTORY AND HAVE A SHORT HISTORY OF OPERATIONS. We have only recently begun operations in the oil and gas industry. During the year ended March 31, 2015, we recognized a net loss of $11,043,541 compared to $13,431 during the year ended March 31, 2014. With our acquisition of Western Interior during the first quarter of the fiscal year ended March 31, 2016, we have started to recognize revenues from operations, though these are not enough to support operations. As such during the nine months ended December 31, 2015, we recognized revenues of $390,705 and a corresponding net loss of $2,995,105. We are not profitable and the business effort is considered to be in an early stage of operations. We must be regarded as a new or development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject. WE ARE NOT DIVERSIFIED AND WE WILL BE DEPENDENT ON ONLY ONE BUSINESS. Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within the energy industry and therefore increase the risks associated with our operations due to lack of diversification. WE MAY HAVE A SHORTAGE OF WORKING CAPITAL IN THE FUTURE WHICH COULD JEOPARDIZE OUR ABILITY TO CARRY OUT OUR BUSINESS PLAN. Our capital needs consist primarily of expenses related to geological evaluation, general and administrative and potential exploration participation and could exceed $10,000,000 in the next twelve months. Such funds are not currently committed. If we find oil and gas reserves to exist on a prospect we will need substantial additional financing to fund the necessary exploration and development work. Furthermore, if the results of that exploration and development work are successful, we will need substantial additional funds for continued development. We will not receive proceeds from this offering to conduct such work and, therefore, we will need to obtain the necessary funds either through debt or equity financing, some form of cost-sharing arrangement with others, or the sale of all or part of the property. There is no assurance that we will be successful in obtaining any financing. These various financing alternatives may dilute the interest of our shareholders and/or reduce our interest in the properties. WE WILL NEED ADDITIONAL FINANCING FOR WHICH WE HAVE NO COMMITMENTS, AND THIS MAY JEOPARDIZE EXECUTION OF OUR BUSINESS PLAN. We have limited funds, and such funds may not be adequate to carry out the business plan in the oil and gas industry. Our ultimate success depends upon our ability to raise additional capital. We have not investigated the availability, source, or terms that might govern the acquisition of additional capital and will not do so until it determines a need for additional financing. If we need additional capital, we have no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to us. If not available, our operations will be limited to those that can be financed with our modest capital. WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS. We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current shareholders, which could present significant risks to investors. WE HAVE SECURED CONVERTIBLE DEBT WHICH IS CONVERTIBLE INTO OUR COMMON STOCK. A CONVERSION OF SUCH DEBT COULD HAVE A DILUTIVE EFFECT TO EXISTING SHAREHOLDERS. During the fourth quarter, directors/officers of the Company advanced funds to the Company in exchange for secured convertible promissory notes totaling $100,000. These notes are due in September 2016 and are convertible into shares of our common stock in whole or in part at a conversion price equal to a 30% discount of the 10 day average closing market price of the Company's common stock. The conversion of the convertible promissory notes into shares of our common stock could have a dilutive effect to the holdings of our existing shareholders. The Secured Convertible Promissory Notes are secured by the Company's 16.67% equity interest in T-Rex Oil LLC #3, which owns certain properties in the Powder River Basin, which the Company operates. Mr. Nicolaysen and Mr. Bennett each hold a note for $50,000. WE HAVE WARRANTS AND OPTIONS ISSUED AND OUTSTANDING WHICH ARE CONVERTIBLE INTO OUR COMMON STOCK. A CONVERSION OF SUCH EQUITY INSTRUMENTS COULD HAVE A DILUTIVE EFFECT TO EXISTING SHAREHOLDERS. At March 14, 2016, we have warrants issued and outstanding exercisable into 1,349,952 shares of our common stock at ranges from $0.10 to $3.50 per share and options issued and outstanding exercisable into 1,985,250 shares of common stock at prices ranging from $0.10 to $0.25 per share. As part of this registration statement we are registering shares underlying certain warrants exercisable for 407,094 shares of our common stock and an exercise price of $3.00 per share. We are also registering shares underlying all of our issued and outstanding options. They are exercisable in whole or in part. The exercise of the warrants and/or options into shares of our common stock could have a dilutive effect to the holdings of our existing shareholders. WE HAVE AUTHORIZED AND DESIGNATED A SERIES A CONVERTIBLE PREFERRED STOCK, WHICH HAVING VOTING RIGHTS EQUIVALENT TO OUR COMMON STOCK. Series A Preferred Stock of which 5,000,000 shares of preferred stock have been authorized for the series and the shares have a deemed purchase price at $2.00 per share. The Series A Preferred Stock are to have voting rights equivalent to one (1) share of common stock. At this time, 407,094 shares of the Series A Preferred Stock have been issued. Holders of the Series A Preferred Stock would have the ability equal to that of our common stockholders to vote in any vote of the common stockholders. The Series A Preferred Stock issued would have a voting equivalent of 2.42%, at this time. OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTERESTS AS TO CORPORATE OPPORTUNITIES WHICH WE MAY NOT BE ABLE OR ALLOWED TO PARTICIPATE IN. Presently there is no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. WE HAVE AGREED TO INDEMNIFICATION OF OFFICERS AND DIRECTORS AS IS PROVIDED BY COLORADO STATUTE. Colorado Revised Statutes provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup. OUR DIRECTORS' LIABILITY TO US AND SHAREHOLDERS IS LIMITED Colorado Revised Statutes exclude personal liability of our directors and our stockholders for monetary damages for breach of fiduciary duty except in certain specified circumstances. Accordingly, we will have a much more limited right of action against our directors than otherwise would be the case. This provision does not affect the liability of any director under federal or applicable state securities laws. RISK FACTORS RELATING TO OUR BUSINESS OUR BUSINESS, THE OIL AND GAS BUSINESS HAS NUMEROUS RISKS WHICH COULD RENDER US UNSUCCESSFUL. The search for new oil and gas reserves frequently results in unprofitable efforts, not only from dry holes, but also from wells which, though productive, will not produce oil or gas in sufficient quantities to return a profit on the costs incurred. There is no assurance we will find or produce oil or gas from any of the wells we have acquired or which may be acquired by us, nor are there any assurances that if we ever obtain any production it will be profitable. WE HAVE SUBSTANTIAL COMPETITORS WHO HAVE AN ADVANTAGE OVER US IN RESOURCES AND MANAGEMENT. We are and will continue to be an insignificant participant in the oil and gas business. Most of our competitors have significantly greater financial resources, technical expertise and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying and developing or exploring suitable prospects. Competitor's resources could overwhelm our restricted efforts to acquire and explore oil and gas prospects and cause failure of our business plan. WE WILL BE SUBJECT TO ALL OF THE MARKET FORCES IN THE ENERGY BUSINESS, MANY OF WHICH COULD POSE A SIGNIFICANT RISK TO OUR OPERATIONS. The marketing of natural gas and oil which may be produced by our prospects will be affected by a number of factors beyond our control. These factors include the extent of the supply of oil or gas in the market, the availability of competitive fuels, crude oil imports, the world-wide political situation, price regulation, and other factors. Current economic and market conditions have created dramatic fluctuations in oil prices. Any significant decrease in the market prices of oil and gas could materially affect our profitability of oil and gas activities. There generally are only a limited number of gas transmission companies with existing pipelines in the vicinity of a gas well or wells. In the event that producing gas properties are not subject to purchase contracts or that any such contracts terminate and other parties do not purchase our gas production, there is assurance that we will be able to enter into purchase contracts with any transmission companies or other purchasers of natural gas and there can be no assurance regarding the price which such purchasers would be willing to pay for such gas. There may, on occasion, be an oversupply of gas in the marketplace or in pipelines; the extent and duration may affect prices adversely. Such oversupply may result in reductions of purchases and prices paid to producers by principal gas pipeline purchasers. (See "Our Business and Competition, Markets, Regulation and Taxation.") WE BELIEVE INVESTORS SHOULD CONSIDER CERTAIN NEGATIVE ASPECTS OF OUR OPERATIONS. Dry Holes: We may expend substantial funds acquiring and potentially participating in exploring properties which we later determine not to be productive. All funds so expended will be a total loss to us. Technical Assistance: We will find it necessary to employ technical assistance in the operation of our business. As of the date of this Prospectus, we have not contracted for any technical assistance. When we need it such assistance is likely to be available at compensation levels we would be able to pay. Uncertainty of Title: We will attempt to acquire leases or interests in leases by option, lease, farmout or by purchase. The validity of title to oil and gas property depends upon numerous circumstances and factual matters (many of which are not discoverable of record or by other readily available means) and is subject to many uncertainties of existing law and our application. Government Regulations: The area of exploration of natural resources has become significantly regulated by state and federal governmental agencies, and such regulation could have an adverse effect on our operations. Compliance with statutes and regulations governing the oil and gas industry could significantly increase the capital expenditures necessary to develop our prospects. Nature of our Business: Our business is highly speculative, involves the commitment of high-risk capital, and exposes us to potentially substantial losses. In addition, we will be in direct competition with other organizations which are significantly better financed and staffed than we are. General Economic and Other Conditions: Our business may be adversely affected from time to time by such matters as changes in general economic, industrial and international conditions; changes in taxes; oil and gas prices and costs; excess supplies and other factors of a general nature. OUR BUSINESS IS SUBJECT TO SIGNIFICANT WEATHER INTERRUPTIONS. Our activities may be subject to periodic interruptions due to weather conditions. Weather-imposed restrictions during certain times of the year on roads accessing properties could adversely affect our ability to benefit from production on such properties or could increase the costs of drilling new wells because of delays. RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY TURN OUT TO BE INACCURATE. ANY MATERIAL INACCURACIES IN THESE RESERVE ESTIMATES OR UNDERLYING ASSUMPTIONS WILL MATERIALLY AFFECT THE QUANTITIES AND PRESENT VALUE OF OUR RESERVES. THE COMPANY'S CURRENT ESTIMATES OF RESERVES COULD CHANGE, POTENTIALLY IN MATERIAL AMOUNTS, IN THE FUTURE, IN PARTICULAR DUE TO THE RECENT SIGNIFICANT DECLINE IN COMMODITY PRICES. The process of estimating crude oil and natural gas reserves is complex and inherently imprecise. It requires interpretation of available technical data and many assumptions, including assumptions relating to current and future economic conditions, production rates, drilling and operating expenses, and commodity prices. Any significant inaccuracy in these interpretations or assumptions could materially affect our estimated quantities and present value of our reserves. See Part b, Item 11 of this filing for information about our estimated crude oil and natural gas reserves, PV-10, and Standardized Measure of discounted future net cash flows as of March 31, 2015. In order to prepare reserve estimates, we must project production rates and the amount and timing of development expenditures. Our booked proved undeveloped reserves must be developed within five years from the date of initial booking under SEC reserve rules. Changes in the timing of development plans that impact our ability to develop such reserves in the required time frame could result in fluctuations in reserves between periods as reserves booked in one period may need to be removed in a subsequent period. We must also analyze available geological, geophysical, production and engineering data in preparing reserve estimates. The extent, quality and reliability of this data can vary with the uncertainty of decline curves and the ability to model heterogeneity of the porosity, permeability and pressure relationships in unconventional resources. The process also requires economic assumptions, based on historical data but projected into the future, about matters such as crude oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The prices used in calculating our estimated proved reserves are, in accordance with SEC requirements, calculated by determining the unweighted arithmetic average of the first-day-of-the-month commodity prices for the preceding 12 months. Commodity prices declined significantly in the fourth quarter of calendar year 2014 and throughout 2015and if such prices do not increase significantly, our future calculations of estimated proved reserves will be based on lower commodity prices which could result in our having to remove non-economic reserves from our proved reserves in future periods. Actual future production, crude oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable crude oil and natural gas reserves will vary and could vary significantly from our estimates. Any significant variance could materially affect the estimated quantities and present value of our reserves, which in turn could have an adverse effect on the value of our assets. In addition, we may adjust estimates of proved reserves, potentially in material amounts, to reflect production history, results of exploration and development, prevailing crude oil and natural gas prices and other factors, many of which are beyond our control. THE PRESENT VALUE OF FUTURE NET REVENUES FROM OUR PROVED RESERVES WILL NOT NECESSARILY BE THE SAME AS THE CURRENT MARKET VALUE OF OUR ESTIMATED CRUDE OIL AND NATURAL GAS RESERVES AND, IN PARTICULAR, MAY BE REDUCED DUE TO THE RECENT SIGNIFICANT DECLINE IN COMMODITY PRICES. You should not assume the present value of future net revenues from our proved reserves is the current market value of our estimated crude oil and natural gas reserves. In accordance with SEC rules, we base the estimated discounted future net revenues from proved reserves on the 12-month unweighted arithmetic average of the first-day-of-the-month commodity prices for the preceding twelve months. Actual future prices may be materially higher or lower than the SEC pricing used in the calculations. Actual future net revenues from crude oil and natural gas properties will be affected by factors such as: the actual prices we receive for sales of crude oil and natural gas; the actual cost and timing of development and production expenditures; the timing and amount of actual production; and changes in governmental regulations or taxation. The timing of both our production and our incurrence of expenses in connection with the development and production of crude oil and natural gas properties will affect the timing and amount of actual future net revenues from proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net revenues may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with our reserves or the crude oil and natural gas industry in general. WE MAY BE REQUIRED TO WRITE DOWN THE CARRYING VALUES OF OUR CRUDE OIL AND NATURAL GAS PROPERTIES IF CRUDE OIL PRICES REMAIN AT THEIR CURRENT LEVELS OR DECLINE FURTHER. Accounting rules require that we periodically review the carrying values of our crude oil and natural gas properties for possible impairment. Based on specific market factors, prices, and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying values of our crude oil and natural gas properties. A write-down results in a non-cash charge to earnings. We have incurred impairment charges in the past and may incur additional impairment charges in the future, particularly if crude oil prices remain at their currently low levels or decline further, which could have a material adverse effect on our results of operations for the periods in which such charges are taken WE ARE SUBJECT TO SIGNIFICANT OPERATING HAZARDS AND UNINSURED RISK IN THE ENERGY INDUSTRY. Our proposed operations will be subject to all of the operating hazards and risks normally incident to exploring, drilling for and producing oil and gas, such as encountering unusual or unexpected formations and pressures, blowouts, environmental pollution and personal injury. We will maintain general liability insurance but we have not obtained insurance against such things as blowouts and pollution risks because of the prohibitive expense. Should we sustain an uninsured loss or liability, or a loss in excess of policy limits, our ability to operate may be materially adversely affected. WE ARE SUBJECT TO FEDERAL INCOME TAX LAWS AND CHANGES THEREIN WHICH COULD ADVERSELY IMPACT US. Federal income tax laws are of particular significance to the oil and gas industry in which we engage. Legislation has eroded various benefits of oil and gas producers and subsequent legislation could continue this trend. Congress is continually considering proposals with respect to Federal income taxation which could have a material adverse effect on our future operations and on our ability to obtain risk capital which our industry has traditionally attracted from taxpayers in high tax brackets. WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION IN THE ENERGY INDUSTRY WHICH COULD ADVERSELY IMPACT US. The production and sale of oil and gas are subject to regulation by state and federal authorities, the spacing of wells and the prevention of waste. There are both federal and state laws regarding environmental controls which may necessitate significant capital outlays, resulting in extended delays, materially affect our earnings potential and cause material changes in the in our proposed business. We cannot predict what legislation, if any, may be passed by Congress or state legislatures in the future, or the effect of such legislation, if any, on us. Such regulations may have a significant effect on our operating results. RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK THERE IS A LIMITED TRADING MARKET FOR OUR COMMON STOCK, THEREBY LIMITING A SHAREHOLDERS' OPPORTUNITY TO SELL SUCH COMMON STOCK. Currently, only a limited trading market exists for our common stock. The common stock trades on the OTCQB under the symbol "TRXO." The OTCQB is a limited market and subject to substantial restrictions and limitations in comparison to the NASDAQ system. Any broker/dealer that makes a market in our stock or other person that buys or sells our stock could have a significant influence over its price at any given time. We cannot assure our shareholders that a greater market for our common stock will be sustained. There is no assurance that our common stock will have any greater liquidity than shares that do not trade on a public market. A shareholder may be required to retain their shares for an indefinite period of time, and may not be able to liquidate their shares in the event of an emergency or for any other reasons. THE REGULATION OF PENNY STOCKS BY THE SEC AND FINRA MAY DISCOURAGE THE TRADABILITY OF OUR SECURITIES. We are a "penny stock" company. Our securities currently trade on the OTCQB of the OTC Markets and are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions. In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions. Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level consequent shareholder losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. THE COMPANY WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE. We have not paid dividends on our common stock and do not ever anticipate paying such dividends in the foreseeable future. RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE. A portion of the outstanding shares of common stock are held by our present officers, directors, and affiliate stockholders as "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted Shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of one year. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. TRADING IN OUR SHARES IN THE PUBLIC MARKET WILL MOST LIKELY BE VOLATILE BECAUSE OF FACTORS BEYOND OUR CONTROL. There can be no assurance that our shares will continue to be quoted on the OTCQB or that they will be accepted for trading on another recognized trading market, or that if they are, there will be an active trading market for the shares. Accordingly, it could be difficult for holders of our common stock to liquidate their shares. The market price of our common stock could be subject to significant fluctuations and the market price could be subject to any of the following factors: our failure to achieve and maintain profitability; changes in earnings estimates and recommendations by financial analysts; actual or anticipated variations in our quarterly and annual results of operations; changes in market valuations of similar companies; announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments; loss of significant clients or customers; loss of significant strategic relationships; and general market, political and economic conditions. In the past, following periods of extreme volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management's time and attention, which would otherwise be used to benefit our business. RISK FACTORS RELATING TO OFFERING SPECULATIVE NATURE OF INVESTMENT. Due to the highly speculative nature of the Company's business, it is likely that the investment in the securities offered hereby will result in a total loss to the investor. Investors should be able to financially bear the loss of their entire investment. Investment in the securities should, therefore, be limited to that portion of discretionary funds not needed for normal living purposes or for reserves for disability and retirement. BURDEN TO INVESTORS. The financial risk of our water remediation activities will be borne primarily by existing shareholders, who will have contributed a significantly greater portion of the Company's capital, than prior investors. We will incur expenses in connection with SEC Filing Requirements and we may not be able to meet such costs, which could jeopardize our filing status with the SEC. These costs can increase significantly if the Company is subject to comment from the SEC on its filings and/or is required to file supplemental filings for transactions and activities. If we are not compliant in meeting the filing requirements of the SEC, we could lose our status as a 1934 Act Company, which could compromise our ability to raise funds and maintain its trading status on the OTCQB. OFFERING PRICE. We have arbitrarily determined the Offering Price of the shares underlying our Series A Preferred Shares, $3 Warrants. $0.10 Options and $0.25 Options. Such price does not bear any relationship to the assets, income or net worth of the Company, nor any market value. We have set the Offering Price of the 1,000,000 shares of common stock we are registering on behalf of our Selling Shareholders on the 5 day average of the last sale of the shares of our common stock on the OTCQB. The Offering Price should not be considered an indication of the actual value of the shares or securities. Any market price is subject to change as a result of market conditions and other factors, and no assurance can be given that the shares can ever be resold at the Offering Price or any market price, if at all. OUR INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS CONSIDERATIONS IN THE FUTURE. There may be substantial dilution to our shareholders as a result of future decisions of our Board to issue shares without shareholder approval for cash, services, or acquisitions. We also may issue warrants or options, exercisable for shares of our restricted common stock at a fixed price in the future. The exercise of these warrants or options could be dilutive to our shareholders, when exercised.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001289850_neurometri_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001289850_neurometri_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001289850_neurometri_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001291520_plx_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001291520_plx_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001291520_plx_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001345756_panex_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001345756_panex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1e0e64a292a8e9f0a89cb5098a3c20862e42a528
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001345756_panex_prospectus_summary.txt
@@ -0,0 +1 @@
+2. Summary of Significant Accounting Policies (Continued) j. Foreign Currency Translation and Transactions The Company's functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated into the United States dollar using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. k. Concentration of Credit Risk The Company's financial instruments that are exposed to concentration of credit risk consist of cash. The Company's cash is in demand deposit accounts placed with federally insured financial institutions in Canada. l. Recent Accounting Pronouncements In May 2014, FASB issued ASU No. 2014-09 "Revenue from Contracts from Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. In July 2015, the FASB delayed the effective date by one year. This new standard is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively, with early adoption now permitted to the original effective date of December 15, 2016. The Company is currently evaluating the new standard and assessing the potential impact on its operations and financial statements. In August 2014, FASB issued ASU No. 2014-15 "Presentation of Financial Statements Going Concern (Subtopic 205-40)": Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments in ASU 2014-15 provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The new requirements are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company is currently evaluating the new standard and assessing the potential impact on its financial statement disclosures. In April 2015, FASB issued ASU No. 2015-03 "Update No. 2015-03 Interest Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". To simplify presentation of debt issuance costs, the amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments in ASU 2015-03 is permitted for financial statements that have not been previously issued. The Company is currently evaluating the new standard and assessing the potential impact on its financial statements and operations. In September 2015, FASB issued ASU No.2015-16 "Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments". The amendments in ASU 2015-16 require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not been issued. The Company assessed that there is no impact to the financial statements on this update. Management has evaluated any recently issued accounting pronouncements to determine their applicability and does not believe that any of these pronouncements will have a significant impact on the Company's financial statements. Table of Contents PROSPECTUS SUMMARY The following summary highlights aspects of the offering. This prospectus does not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the "Risk Factors" section and the financial statements, related notes and the other more detailed information appearing elsewhere in this prospectus before making an investment decision. In this prospectus, unless otherwise indicated, "we," "us," "our", "Panex" and the "Company" refer to Panex Resources, Inc. OUR COMPANY Panex is an exploration stage company engaged in the acquisition and exploration of mineral properties. From the time of its incorporation in 2004, Panex has been actively engaged in the exploration of various mineral projects, prospective for gold, silver and copper. On September 27, 2010, Panex changed its name from "De Beira Goldfields Inc." to "Panex Resources Inc." At that time management wanted to expand the Company's focus and identify and assess new projects for acquisition purposes that were more global in nature and believed that the name change would result in the Company having a name that more accurately reflected the new focus of its business. The name change has not yet had an impact on Panex's business operation. The accompanying financial statements have been prepared assuming Panex will continue as a going concern. As discussed in Note 1 to the financial statements, Panex has not generated any cash flow from operations and has accumulated losses since inception. These factors raise substantial doubt about Panex's ability to continue as a going concern. Panex is in the exploration stage and to date has not generated any revenue. In an exploration stage company, management devotes most of its activities to acquiring and exploring mineral properties. The financial statements have been prepared on a going concern basis, which implies that Panex will continue to realize its assets and discharge its liabilities in the normal course of business. Panex is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. There is no guarantee that Panex will be able to raise any equity financing or generate profitable operations. As of August 31, 2015, Panex has accumulated losses of $13,898,314 since inception. These factors raise substantial doubt regarding Panex's ability to continue as a going concern. To date Panex has raised $13,969,321 via offerings and shares for debt completed between March 2005 and November 30, 2015 . Please see DESCRIPTION OF BUSINESS beginning on page 24 for detailed descriptions of our business operations. Although we have established more than one web site to market our products, prospective investors are strongly cautioned that any information appearing on one of our web sites should not be deemed to be a part of this prospectus and should not be utilized in making a decision whether to buy our Common Stock. - 6 - Table of Contents SUMMARY OF THIS OFFERING Up to 500,000,000 Shares of our Common Stock are being offered for sale by the Company. Our Common Stock is described in further detail in the section of this prospectus titled "DESCRIPTION OF SECURITIES Common Stock." Offering Price We will sell the Shares at $0.001. This price was determined by us arbitrarily. Securities Offered By Selling Stockholders Up to 1,011,143,556 Shares of our Common Stock owned by selling stockholders are included in this Prospectus. The selling stockholders are not obligated to sell any Shares. The selling shareholders are deemed underwriters within the meaning of the Securities Act of 1933, as amended. Accordingly, the offering period of shares being sold by selling shareholders is 270 days from the date of effectiveness and the offering price by the selling shareholders is 270 days. At the end of 270 days, selling shareholders will no longer be able to sell shares of common stock pursuant to this registration statement. The offering price of shares by selling shareholders is fixed at $0.001 per share during the life of this registration statement. Offering Price Selling shareholders may sell their shares of common stock for a period of 270 days from the effective date of this registration statement. At the end of 270 days, selling shareholders will no longer be able to sell shares of common stock pursuant to this registration statement. The offering price of shares by selling shareholders is fixed at $0.001 per share during the life of this registration statement. Number of shares outstanding before the offering 1,115,636,507 shares of Common Stock issued and outstanding as at the date of this prospectus. Total number of shares of Common Stock outstanding after the offering (if fully subscribed) 1,615,636,507 shares of Common Stock. Net Proceeds to the Company We intend to accomplish this offering on a "self-underwritten" basis directly through our officers, directors and/or employees, who will not be separately compensated therefore. However, we reserve the right to utilize an underwriter in which case we will amend this Prospectus to disclose the material terms of such relationship as they pertain to the offering. Additionally, we estimate that costs of this offering for such items as legal and accounting fees, printing, and SEC registration fees, and other charges will total approximately $46,000. Thus net proceeds to the Company if this offering is fully subscribed without the use of underwriters will be $454,000 (assuming $46,000 in Offering expenses are paid). In the event that only 50% of the Shares are sold we will generate net proceeds of $204,000 (assuming $46,000 in Offering expenses are paid). In the event that we only sell 10% of the Shares, we will generate net proceeds of $4,000 (assuming $46,000 in Offering expenses are paid). We will not receive any proceeds from the sale of common stock by our selling shareholders. Use of Proceeds We will use the proceeds from this offering to: (1) strategy to secure interests in mineral projects (upon completion of the identification and evaluation phase) through farm-in arrangements; (2) exploration activities; and (3) provide working capital to finance corporate acquisitions and the integration of new technologies. A summary of our intended use of the proceeds of this offering is set forth in the section of this prospectus titled USE OF PROCEEDS Consummation of the offering We will terminate this offering upon the earlier to occur of (1) one year from the effective date of this prospectus, (2) sale of all the Shares being offered, or (3) any time after a minimum of six months from the date of the Prospectus at our sole discretion if we determine that it is in our best interests to withdraw the offering. - 7 - Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001347022_positiveid_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001347022_positiveid_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..79220c85e61c53a0dec8f4d9da08099c7ff75e6d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001347022_positiveid_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock of PositiveID Corporation (referred to herein as "we," "our," "us," "PositiveID" or the "Company"). You should carefully read the entire prospectus, including "Risk Factors," "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the accompanying financial statements and the related notes to the Financial Statements before making an investment decision. Business Overview PositiveID Corporation, including its wholly-owned subsidiaries PositiveID Diagnostics Inc. (f/k/a Microfluidic Systems) ("PDI"), and E-N-G Mobile Systems, Inc. ("ENG"), and Thermomedics, Inc. ("Thermomedics"), (collectively, the "Company" or "PositiveID"), develops molecular diagnostic systems for bio-threat detection and rapid medical testing; markets the Caregiver non-contact clinical thermometer; and manufactures specialty technology vehicles. The Company s fully automated pathogen detection systems and assays are designed to detect a range of biological threats. The Company s M-BAND (Microfluidic Bio-agent Autonomous Networked Detector) system is an airborne bio-threat detection system developed for the homeland defense industry to detect biological weapons of mass destruction. The Company is developing Firefly Dx, an automated pathogen detection system for rapid diagnostics, both for clinical and point-of-need applications. The Company s Caregiver thermometer is an FDA-cleared infrared thermometer for the professional healthcare market. The Company also manufactures specialty technology vehicles focused primarily on mobile laboratory and communications applications. On May 23, 2011, we entered into a Stock Purchase Agreement to acquire PDI, pursuant to which PDI became a wholly-owned subsidiary. Since 2012, PDI has been doing business as PositiveID. The Company specializes in the production of automated instruments for a wide range of applications in the detection and processing of biological samples, ranging from rapid medical testing to airborne pathogen detection for homeland security. On October 21, 2015, we entered into an agreement to acquire all of the outstanding capital stock of Thermomedics, Inc., a Nevada corporation ("Thermomedics"), pursuant to a Stock Purchase Agreement by and between PositiveID and Sanomedics Inc., a Delaware corporation ("Sanomedics"), the shareholder of Thermomedics (collectively the "Thermomedics Acquisition"). On December 4, 2015, we entered into a First Amendment to the Stock Purchase Agreement with the Sanomedics. PositiveID, Sanomedics and Thermomedics also entered into a Management Services and Control Agreement (the "Control Agreement"), dated December 4, 2015, whereby PositiveID was appointed the manager of Thermomedics. On March 4, 2016, PositiveID, Sanomedics and Thermomedics entered into a letter agreement (the "March Agreement"), which included an amendment to the Control Agreement, an agreement to terminate intercompany indebtedness, and an agreement for the transfer of Thermomedics intellectual property. Under the terms of the March Agreement, PositiveID, Sanomedics and Thermomedics agreed to extend the closing date for the Stock Purchase Agreement to March 31, 2016. As a result of the Company assuming control of Thermomedics on December 4, 2015, the Company determined, pursuant to ASC 805-10-25-6, that December 4, 2015 was the acquisition date of Thermomedics for accounting purposes and began consolidating the balance sheet and results of operations of Thermomedics as of that date. The Company completed the acquisition of the capital stock of Thermomedics in the third quarter of 2016. On December 22, 2015, we entered into a Stock Purchase Agreement to acquire ENG, pursuant to which ENG became a wholly-owned subsidiary. ENG manufactures specialty technology vehicles focused primarily on mobile labs, command and communications centers, and cellular applications. The acquisition of ENG closed on December 24, 2015. On April 8, 2016, our Board of Directors (the "Board") approved an amendment to the Amended and Restated By-Laws of the Corporation (the "By-Laws"), to allow for action by written consent of stockholders in lieu of an annual or special meeting if the consent is signed by the holders of outstanding shares having at least the minimum number of votes necessary to authorize or take that action. The foregoing summary of the By-Laws is qualified in its entirety by reference to the full text of the Second Amended and Restated Bylaws, filed as Exhibit 3.1 to the Company s 2015 Annual Report on Form 10-K filed with the SEC on April 12, 2016. On September 2, 2016, the Company filed a Certificate of Elimination for its Series C Convertible Preferred Stock ("Series C"), Series F Convertible Preferred Stock ("Series F"), and Series H Convertible Preferred Stock ("Series H") ("Certificate of Elimination") with the Delaware Secretary of State to eliminate from its Second Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), all references to the Company's Series C, Series F, and Series H. No shares of the Series C, Series F, or Series H were issued or outstanding upon filing of the Certificate of Elimination. A copy of the Certificate of Elimination, which became effective on September 2, 2016, is attached to the Form 8-K we filed with SEC on September 2, 2016. Beginning with the acquisition of PDI in 2011, the Company began a process to focus its operations on diagnostics and detection. Since that acquisition, the Company has either sold or exclusively licensed all of its legacy businesses, including its VeriChip assets, its iglucose technology, the GlucoChip technology, and its patent related to a glucose breath detection system. See "Our Business" on this Form S-1 for more information and description of the Company s current business. Our principal executive offices are located at 1690 South Congress Avenue, Suite 201, Delray Beach, Florida 33445. Our telephone number is (561) 805-8000. Unless the context provides otherwise, when we refer to the "Company," "we," "our," or "us" in this registration statement, we are referring to PositiveID Corporation and its consolidated subsidiaries. Stock Split On June 27, 2016, the Board approved a reverse stock split in the ratio of 1-for-50 and the Company filed the Eighth Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to affect the reverse stock split. The reverse split only affected outstanding common stock and the number of authorized shares was not adjusted. On July 5, 2016, the reverse stock split became effective. All share amounts in this prospectus have been adjusted to reflect the 1-for-50 reverse stock split. Securities Purchase Agreement and Equity Line with GHS On August 16, 2016, 2016, the Company closed a Securities Purchase Agreement ("GHS SPA") with GHS, dated August 11, 2016, providing for the purchase of a Secured Convertible Promissory Note in the aggregate principal amount of up to $330,000 (the "GHS Note"), with the first tranche funded being in the amount of $50,000. Subsequent tranches of $50,000 will be delivered to the Company bi-weekly and at the sole discretion of GHS. The GHS Note has a 10% original issuance discount to offset transaction, diligence and legal costs. The GHS Note bears an interest rate of 10%, which is payable in the Company s common stock based on the conversion formula (as defined below), and the maturity date for each funded tranche will be 12 months from the date on which the funds are received by the Company. The GHS Note may be converted by GHS at any time into shares of Company s common stock at a 37.5% discount to the lowest volume-weighted average price for the Company s common stock during the 15 trading days immediately preceding a conversion date. The GHS Note is secured by all property of the Company, however, is behind the security interests previously in place with three other creditors as set forth in the GHS SPA. The GHS Note is a long-term debt obligation that is material to the Company. The GHS Note may be prepaid in accordance with the terms set forth in the GHS Note. The GHS Note also contains certain representations, warranties, covenants and events of default including if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission, and increases in the amount of the principal and interest rates under the GHS Note in the event of such defaults. In the event of default, at the option of GHS and in GHS s sole discretion, GHS may consider the GHS Note immediately due and payable. On August 29, 2016, the Company entered into the Financing Agreement and a Registration Rights Agreement (the "Registration Agreement" and, collectively, the "GHS Agreements") with GHS. Pursuant to the GHS Agreements, GHS agrees to purchase up to $7,000,000 of PSID common stock from time to time from the Company over a twenty-four-month period. Additionally, the Company, upon filing of the registration statement of which this prospectus forms a part, shall issue GHS a promissory note in the amount of $30,000 with a maturity date of six (6) months as a commitment fee to offset transaction and diligence costs. Where You Can Find Us Our principal executive offices are located at 1690 South Congress Avenue, Suite 201, Delray Beach, Florida 33445. Our telephone number is (561) 805-8000. Unless the context provides otherwise, when we refer to "we," "our," "us," "PositiveID" or the "Company" in this prospectus, we are referring to PositiveID Corporation and its consolidated subsidiaries. THE OFFERING Common stock offered by Selling Stockholder 12,508,520 shares of common stock Common
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001347452_andalay_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001347452_andalay_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..972be98823ae2a350a927041b32df52406ccf191
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001347452_andalay_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus; it does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus before making an investment decision. Throughout this prospectus, the terms the Company, Andalay Solar, we, us, our, and our company refer to Andalay Solar, Inc., a Delaware corporation. Company Overview Andalay Solar and its subsidiaries (Andalay Solar, the Company, we, us or our) is a designer of integrated solar mounting hardware which are integrated with compatible solar panels with microinverters (which we call AC solar panels). We design, market and sell these solar power systems to solar installers and do-it-yourself customers in the United States, Canada, the Caribbean and South America through distribution partnerships, our dealer network and retail outlets. Our products are designed for use in solar power systems for residential and commercial rooftop customers. Prior to September 2010, we were also in the solar power installation business, but decided to exit that business. During the fourth quarter 2014, we re-entered the solar power installation business. In August, 2015, we revamped our business and implemented our new strategy of licensing our patented products to large module manufacturers and until recently have been focusing our direct efforts on partnering with large national installers. As part of this effort to re-focus our business, we have terminated our solar power installation business, substantially reduced our headcount and have placed most of our existing mounting hardware parts inventory on consignment at reduced prices at three regional companies to serve as the direct sales and support for customers who would like to purchase our products, and are also de-emphasizing our direct efforts. Our main focus is now to rely upon our distribution partners to host customer visits and conduct product demonstrations with support from our personnel. We believe that this new strategy is less capital intensive and aligns us with companies that have proven track records in the residential solar industry. In September 2007, we introduced our plug and play solar panel technology (under the brand name Andalay ), which we believe significantly reduces the installation time and costs, and provides superior reliability and aesthetics, when compared to other solar panel mounting products and technology. Our panel technology offers the following features: (i) mounts closer to the roof with less space in between panels; (ii) no unsightly racks underneath or beside panels; (iii) built-in wiring connections; (iv) approximately 70% fewer roof-assembled parts and approximately 50% less roof-top labor required; (v) approximately 25% fewer roof attachment points; (vi) complete compliance with the National Electric Code and UL wiring and grounding requirements. We have seven U.S. patents (Patent No. 7,406,800, Patent No. 7,832,157, Patent No. 7,866,098, Patent No. 7,987,641, Patent No. 8,505,248, Patent 8,813,460 and Patent No. 8,938,919) that cover key aspects of our Andalay solar panel technology, as well as U.S. Trademark No. 3481373 for registration of the mark Andalay Solar. In addition to these U.S. patents, we have eight foreign patents. Currently, we have 15 issued patents and nine other pending U.S. and foreign patent applications that cover the Andalay technology working their way through the United States Patent and Trademark Office ( USPTO ) and foreign patent offices. In February 2009, we began a strategic relationship with Enphase, a leading manufacturer of microinverters, to develop and market solar panel systems with ordinary AC house current output instead of high voltage DC output. We introduced Andalay AC panel products and began offering them to our customers in the second quarter of 2009. Andalay AC panels cost less to install, are safer, and generally provide higher energy output than ordinary DC panels. Andalay AC panel systems deliver 5-25% more energy compared to ordinary DC panel systems, produce household AC power, and have built-in panel level monitoring, racking, wiring, grounding and microinverters. With 80% fewer parts and 5 25% better performance than ordinary DC panel systems, we believe Andalay AC panels are an ideal solution for solar installers and do-it-yourself customers. On May 30, 2013, we entered into a supply agreement for assembly of our proprietary modules with Environmental Engineering Group Pty Ltd, (EEG) an assembler of polycrystalline modules located in Australia. In August 2013, we began receiving product from EEG and began shipping product to customers during the third calendar quarter of 2013. In September 2013, we entered into a supply agreement for assembly of our proprietary modules with Tianwei New Energy Co, Ltd., (Tianwei) a panel supplier located in China. We began receiving initial shipments from Tianwei in February 2014, but that supply is now discontinued. On July 16, 2014, we entered into an agreement for supply of solar PV modules with Auxin Solar Inc. These modules are assembled in the United States and we received the first slate of panels in December 2014. In June 2015, we entered into a licensing agreement with Hyundai Heavy Industries Co., Limited ( Hyundai ), whereby Hyundai will manufacture our frames under license from us. We have agreed to waive royalties under the agreement for a period of time in exchange for Hyundai investing resources to support this license agreement including as it relates to marketing, sales, certification and undertaking the needed modification of their manufacturing facility to produce the Andalay compatible modules. Hyundai has the right but not the obligation to produce Andalay compatible modules under the agreement. We believe that having Hyundai available to produce the Andalay compatible modules will increase our addressable market given the bankability and name recognition of Hyundai among our target customers and intend to achieve and grow revenue by selling the mounting hardware that complements the Andalay compatible modules. We were incorporated in February 2001 as Akeena Solar, Inc. in the State of California and elected at that time to be taxed as an S corporation. During June 2006, we reincorporated in the State of Delaware and became a C corporation. On August 11, 2006, we entered into a reverse merger transaction ( merger ) with Fairview Energy Corporation, Inc. ( Fairview ). Pursuant to the Merger, our stockholders received one share of Fairview common stock for each issued and outstanding share of our common stock. Our common shares were also adjusted from $0.01 par value to $0.001 par value at the time of the Merger. On May 17, 2010, we entered into an exclusive worldwide license agreement with Westinghouse, Inc, which permitted us to manufacture, distribute and market solar panels under the Westinghouse name and in connection therewith, on April 6, 2011, we changed our name to Westinghouse Solar, Inc. On April 13, 2011, we effected a reverse split of our common stock at a ratio of 1 for 4. On August 23, 2013, the license agreement with Westinghouse, Inc. was terminated and on September 19, 2013, we changed our name to our current name, Andalay Solar, Inc. and increased the number of authorized shares of common stock to 500,000,000. On June 9, 2015, we increased the number of authorized shares of common stock to 1,250,000,000. Our Corporate headquarters is located at 336 Bon Air Ctr., #352, Greenbrae, CA 94904. Our telephone number is (408) 402-9400. Additional information about us is available on our website at http://www.andalaysolar.com. The information on our web site is not incorporated herein by reference. Table of Contents The Offering Common stock that may be offered by selling stockholder 250,000,000 shares Common stock currently outstanding 603,153,951 shares Total proceeds raised by offering We will not receive any proceeds from the resale or other disposition of the shares covered by this prospectus by Southridge, the selling shareholder. We will receive proceeds from the sale of shares to Southridge. Southridge has committed to purchase up to $5,000,000 worth of shares of our common stock over a period of time terminating on the earlier of: (i) July 16, 2016, which date is 18 months from the effective date of the Initial Registration Statement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the December Equity Purchase Agreement for an aggregate maximum purchase price of $5,000,000. To date, Southridge has purchased $1,410,000 worth of shares of common stock from us under the December Equity Purchase Agreement. The purchase price to be paid by Southridge will be 90% of the average of the daily VWAP during the Valuation Period. On the date the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice ( Estimated Shares ). The Valuation Period begins on the first trading day after the Estimated Shares have been delivered to Southridge s brokerage account and have been cleared for trading and terminates on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001351573_pure_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001351573_pure_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5570263d27b5533518b453aa9927c3833bd4c97d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001351573_pure_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES OUR COMPANY Our Company, The Pocket Shot Company ("Pocket Shot", the "Company", "We", "Us", or "Our"), incorporated in the State of Colorado on December 7, 2005, and organized for the purpose of engaging in any lawful business. Pocket Shot is a portable spirit company, producing and distributing hard liquor in a single-shot pouch form. The flexible pouch delivery method is unique and is patented under U.S. Patent D533,462 S. Our main corporate strategy is to expand the regional distribution of Pocket Shots and to expand the product offering, including a new item called Pocket Shot Energy TM. Corporate History Pocket Shot was originally organized under the laws of the State of Colorado as a Limited Liability Company. We are engaged in the design, production, and distribution of hard liquors in flexible single-serving pouches. On December 12, 2006, Pocket Shot received a United States Patent (US D533,462 S) for our proprietary design of a flexible fluid container. The Pocket Shot Company is engaged in the design, production, and distribution of hard liquors and other beverages in flexible single-serving pouches. Pocket Shot, LLC ("the LLC"), a Colorado limited liability company, was initially formed on April 18, 2004. Under a 351 Exchange Agreement, the members chose to contribute 100% of their membership interests in the LLC to The Pocket Shot Company, a Colorado corporation in conversion for shares of common stock of the corporation in accordance with the terms and provisions of the agreement. The effective date for the exchange was January 1, 2006. On December 12, 2006, Jarrold R. Bachmann and assignee, Pocket Shot, LLC, received a United States Patent (US D533,462 S) for the proprietary design of a flexible fluid container. Company Overview Jarrold Bachmann, President of the Company, devised the idea for the product after seeing farm workers in South Africa celebrate payday with crude plastic sachets of alcohol. As an avid outdoorsman, Bachmann saw the opportunity to develop a product to fit his lifestyle and extend across all demographics from the older golfer to the extreme sport generation. Pocket Shot is an innovative concept that provides the consumer with "grab and go" convenient and user-friendly package for beverages, both alcoholic and non-alcoholic. Each Pocket Shot is packaged with a distinctive shape to resemble a miniature bottle complete with bottleneck for easy pouring. Pocket Shot, through its exclusive Licensee for alcoholic beverages, Frank-Lin Distillers Products, Ltd. ("Frank-Lin"), has been producing and distributing its alcoholic beverage products since 2006. The original Pocket Shot comes in a 50 ml single serve flexible stand-up pouch containing 80 proof varietals including: Kentucky Straight Bourbon Whiskey Aged Four Years Imported Caribbean Gold Rum Premium, Triple Distilled Vodka Brandy Especial Gold Tequila Imported from Mexico Cherry Vodka Honey Cinnamon Canadian Whiskey Defrost Peppermint Schnapps Spiced Rum Hot Cinnamon Schnapps Pocket Shot has an exclusive licensing relationship with the alcohol manufacturer and distributor, Frank-Lin. Frank-Lin handles all aspects of the filling and distribution of Pocket Shot to each state where it is available for sale under its ATF alcohol production and packaging license. Pocket Shot product is shipped two ways and retailers can order Pocket Shot with a shipper display carton or a shelf hanger unit with a range of 60 - 120 units per case, depending on the specific product. Amcor produces the pouches for Pocket Shot, which are then provided to Packaging Arts for labeling, and finally to Frank-Lin for filling. Pocket Shot is available in several states and is also available through online retailers. Pocket Shot is paid as a royalty based on the sales proceeds by Frank-Lin of various types of alcohol. Pocket Shot has an exclusive licensing relationship with PS Ventures, Inc. for the manufacture and distribution of Pocket Shot Energy, an energy shot enhanced with vitamins, minerals, nutrients and caffeine, using Pocket Shot's proprietary packaging. To date, Pocket Shot Energy has not been produced or sold. Our operations to date include: (i) development of our business plan; (ii) locating and entering into agreements with suppliers for our equipment, pouches and liquor products; (iii) creating our marketing strategy; and (v) selling our products through Frank-Lin. Our first sale of Pocket Shot was in 2006 and has continued to date. Factors that make this offering highly speculative or risky are: There is a limited market for any securities; We have little experience with the requirements of a public reporting company; and We are undercapitalized. Our executive offices are located at 32950 Inverness Dr., Evergreen, CO 80439 and the telephone number is 303-674-2622. We maintain a website at www.pocketshot.com (must be 21 years or older to enter) focused solely on our products; however, such website is not incorporated into or a part of this filing. JUMPSTART OUR BUSINESS STARTUPS ACT We qualify as an "emerging growth company" as defined in Section 101 of the Jumpstart our Business Startups Act ("JOBS Act") as we do not have more than $1,000,000,000 in annual gross revenue and did not have such amount as of December 31, 2015, our last fiscal year. We may lose our status as an emerging growth company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $1,000,000,000 or (ii) we issue more than $1,000,000,000 in non-convertible debt in a three-year period. We will lose our status as an emerging growth company if at any time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company on the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement. As an emerging growth company, we may take advantage of specified reduced reporting and other burdens that are otherwise applicable to generally reporting companies. These provisions include: A requirement to have only two years of audited financial statement and only two years of related Management Discussion and Analysis Disclosures; Reduced disclosure about the emerging growth company's executive compensation arrangements; and No non-binding advisory votes on executive compensation or golden parachute arrangements. As an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934. Such sections are provided below: Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public company's auditor to attest to, and report on, management's assessment of its internal controls. Sections 14A(a) and (b) of the Securities and Exchange Act, implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation. We have already taken advantage of these reduced reporting burdens in this registration statement, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As long as we qualify as an emerging growth company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We are choosing to irrevocably opt out of the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. Summary of Financial Information The following tables set forth, for the periods and as of the dates indicated, our summary financial data. The statements of operations for the six months ended June 30, 2016, and the balance sheet data as of June 30, 2016 are derived from our unaudited condensed consolidated financial statements. The unaudited financial statements include, in the opinion of management, all adjustments consisting of only normal recurring adjustments, that management considers necessary for the fair presentation of the financial information set forth in those statements. You should read the following information together with the more detailed information contained in "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year. The statements of operations for the years ended December 31, 2015 and 2014, and balance sheet data as of December 31, 2015, are derived from our audited financial statements included elsewhere in this prospectus. You should read the following information together with the more detailed information contained in "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not indicative of the results to be expected in the future. Six Months Ended June 30, Years Ended December 31, 2016 2015 2014 Total Assets $258,946 $297,081 $280,699 Current Liabilities $21,429 $2,821 $17,795 Stockholders' Deficit $237,516 $294,260 $262,904 Three Months Ended June 30, 2016 (Unaudited) Six Months Ended June 30, 2016 (Unaudited) December 31, 2015 (Audited) Revenues $35,813 $52,073 $100,550 Net Loss $(9,127) $(56,743) $(54,213) At June 30, 2016, the accumulated deficit was $(345,552). At December 31, 2015, the accumulated deficit was $(288,809). At December 31, 2014, the accumulated deficit was $(234,596). We anticipate that we will operate in a deficit position and continue to sustain net losses for the foreseeable future. The Offering We are registering 4,634,657 shares for sale on behalf of selling shareholders. We will not receive any proceeds of sales. Our common stock as registered herein, will only be transferable by Selling Shareholders immediately after the effectiveness of this Registration Statement. (See "Description of Securities") Common shares outstanding before this offering 6,458,657 Maximum common shares being offered by our existing selling shareholders 4,634,657 We are authorized to issue 25,000,000 shares of common stock. Our current shareholders, officers and directors collectively own a total of 6,458,657 shares of stock as of September 6, 2016. These shares were issued at a price of approximately $0.0227 per share (based on a conversion to stock from membership units of Pocket Shot, LLC) for 4,400,000 shares (founders), $0.11 per share (based on a conversion to stock from membership units of Pocket Shot, LLC) for 543,657, $0.50 per share for 675,000 shares with 1 warrant per share to purchase at $1 per share (all expired), $0.50 per share for 50,000 shares, and $0.10 per share for 790,000 shares with 1 warrant per share to purchase at $0.50 per share. There is currently no public market for our shares as it is presently not traded on any market or securities exchange. Forward Looking Statements This prospectus contains various forward-looking statements that are based on our beliefs as well as assumptions made by and information currently available to us. When used in this prospectus, the words "believe", "expect", "anticipate", "estimate" and similar expressions are intended to identify forward-looking statements. These statements may include statements regarding seeking business opportunities, payment of operating expenses, and the like, and are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from projections or estimates. Factors which could cause actual results to differ materially are discussed at length under the heading "Risk Factors". Should one or more of the enumerated risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Investors should not place undue reliance on forward-looking statements, all of which speak only as of the date made. RISK FACTORS RELATED TO OUR COMPANY Our securities, as offered hereby, are highly speculative and should be purchased only by persons who can afford to lose their entire investment in us. Each prospective investor should carefully consider the following risk factors, as well as all other information set forth elsewhere in this prospectus, before purchasing any of the shares of our common stock. WE ARE AN "EMERGING GROWTH COMPANY" UNDER THE JUMPSTART OUR BUSINESS STARTUPS ACT. WE CANNOT BE CERTAIN IF THE REDUCED REPORTING REQUIREMENTS APPLICABLE TO EMERGING GROWTH COMPANIES WILL MAKE OUR SHARES OF COMMON STOCK LESS ATTRACTIVE TO INVESTORS. We are and will remain an "emerging growth company" until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary of its initial public offering, (c) the date on which we, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (d) the date on which we are deemed a "large accelerated filer" (with at least $700 million in public float) under the Exchange Act. For so long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" as described in further detail in the risk factors below. We cannot predict if investors will find its shares of common stock less attractive because we will rely on some or all of these exemptions. If potential investors find our shares of common stock less attractive as a result, there may be a less active trading market for its shares of common stock and its stock price may be more volatile. Notwithstanding the above, we are also currently a "smaller reporting company", meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. If we avail ourselves of certain exemptions from various reporting requirements, the reduced disclosure may make it more difficult for investors and securities analysts to evaluate the Company and may result in less investor confidence. OUR BUSINESS HAS A LIMITED OPERATING HISTORY OVER THE PAST 10 YEARS AND IS UNPROVEN AND THEREFORE RISKY. We propose operations under the business plan discussed herein. Potential investors should be made aware of the risk and difficulties encountered by a new enterprise in the alcoholic beverage industry, especially in view of the intense competition from existing businesses in the industry. We are not profitable and the business effort is considered to be in a development stage. We must be regarded as a development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject. WE ARE NOT DIVERSIFIED AND WE WILL BE DEPENDENT ON ONLY ONE BUSINESS. Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within the energy industry and therefore increase the risks associated with our operations due to lack of diversification. WE CAN GIVE NO ASSURANCE OF SUCCESS OR PROFITABILITY TO OUR INVESTORS. There is no assurance that we will ever operate profitably. There is no assurance that we will generate revenues or profits, or that the market price of our common stock will be increased thereby. WE MAY HAVE A SHORTAGE OF WORKING CAPITAL IN THE FUTURE WHICH COULD JEOPARDIZE OUR ABILITY TO CARRY OUT OUR BUSINESS PLAN. Our capital needs consist primarily of expenses related to marketing, increasing production and distribution of our products, general and administrative, and could exceed $100,000 in the next twelve months. Such funds are not currently committed, and at the time of this filing we do not have cash on hand to support our operations. We have limited operating history and limited revenues and it may be unlikely that we will be able to raise additional working capital. WE WILL NEED ADDITIONAL FINANCING FOR WHICH WE HAVE NO COMMITMENTS, AND THIS MAY JEOPARDIZE EXECUTION OF OUR BUSINESS PLAN. We have limited funds, and such funds may not be adequate to carry out the business plan in the alcoholic beverage industry. Our ultimate success depends upon our ability to raise additional capital. We have not investigated the availability, source, or terms that might govern the acquisition of additional capital and will not do so until it determines a need for additional financing. If we need additional capital, we have no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to us. If not available, our operations will be limited to those that can be financed with our modest capital. WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS. We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current shareholders, which could present significant risks to investors. WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY NOT BE AVAILABLE ON REASONABLE TERMS AND AS NEEDED. To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Board, without any input from stockholders, will make the selection of any such advisors. Furthermore, we anticipate that such persons will be engaged on an "as needed" basis without a continuing fiduciary or other obligation to us. In the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able to provide the required services. WE WILL DEPEND UPON MANAGEMENT BUT WE WILL HAVE LIMITED PARTICIPATION OF MANAGEMENT. Our directors are also acting as our officers. We will be heavily dependent upon their skills, talents, and abilities, as well as several consultants to us, to implement our business plan, and may, from time to time, find that the inability of the officers, directors and consultants to devote their full-time attention to our business results in a delay in progress toward implementing our business plan. Consultants may be employed on a part-time basis under a contract to be determined. Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, our officers and directors may have potential conflicts including their time and efforts involved in participation with other business entities. Each officer and director of our business is engaged in business activities outside of our business, and the amount of time they devote as Officers and Directors, (See "Directors and Executive Officers"). Because investors will not be able to manage our business, they should critically assess all of the information concerning our officers and directors. OUR OFFICERS AND DIRECTORS ARE NOT EMPLOYED FULL-TIME BY US WHICH COULD BE DETRIMENTAL TO THE BUSINESS. Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, our officers and directors may have potential conflicts including their time and efforts involved in participation with other business entities. Each officer and director of our business is engaged in business activities outside of our business, and the amount of time they devote as Officers and Directors to our business will be up to 20 hours per week. (See "Directors and Executive Officers") We do not know of any reason other than outside business interests that would prevent them from devoting full-time to our Company, when the business may demand such full-time participation. OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTERESTS AS TO CORPORATE OPPORTUNITIES WHICH WE MAY NOT BE ABLE OR ALLOWED TO PARTICIPATE IN. Presently there is no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring business opportunity from any affiliate or officer or director. WE HAVE AGREED TO INDEMNIFICATION OF OFFICERS AND DIRECTORS AS IS PROVIDED BY COLORADO STATUTES. Colorado Statutes provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup. OUR DIRECTORS' LIABILITY TO US AND SHAREHOLDERS IS LIMITED Colorado Revised Statutes exclude personal liability of our directors and our stockholders for monetary damages for breach of fiduciary duty except in certain specified circumstances. Accordingly, we will have a much more limited right of action against our directors that otherwise would be the case. This provision does not affect the liability of any director under federal or applicable state securities laws. RISK FACTORS RELATING TO OUR BUSINESS Any person or entity contemplating an investment in the securities offered hereby should be aware of the high risks involved and the hazards inherent therein. Specifically, the investor should consider, among others, the following risks: OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN. The audited financial statements included in the registration statement have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of securities. Based on our financial history since inception, in their report on the financial statements for the period ended December 31, 2015, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has earned limited revenue. There is no assurance that any revenue will be realized in the future. There can be no assurance that we will have adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern. IF OUR EXCLUSIVE LICENSEE/DISTRIBUTOR BREACHES OR TERMINATES OUR AGREEMENT, OR THE CONTRACT TERMINATES FOR ANY REASON, WE MAY FACE UNFORSEEN LOSSES AND BE UNABLE TO CONTINUE OPERATIONS. We rely entirely on our contract with Frank-Lin Distillers Products, Ltd. ("Frank-Lin") for manufacturing, filling, and distribution of Pocket Shots and marketing our products through licensed alcohol distributors. Any breach or termination of the contract will negatively affect our sales and distribution, decreasing our revenues. It may be difficult, expensive, or impossible to find a replacement supplier/distributor. COMPLIANCE WITH GOVERNMENT REGULATIONS PERTAINING TO THE LIQUOR INDUSTRY MAY RESULT IN INCREASED COSTS. The distribution of alcohol-based beverages is subject to extensive regulation, which requires both The Pocket Shot Company and Frank-Lin to obtain and renew various permits and licenses to import, warehouse, transport, distribute and sell wine and spirits. As a condition to holding these permits and licenses, compliance with applicable Federal and State regulations is necessary. Various government regulations applicable to the alcohol-based beverage industry may be changed so as to impose more stringent requirements on Frank-Lin's operations, which may in turn increase our costs. CONSUMPTION OF PRODUCTS WE SELL MAY DECLINE. We rely on consumers' demand for our products. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, public health policies, and changes in leisure, dining and beverage consumption patterns. Our continued success will require us to anticipate and respond effectively to shifts in consumer behavior and drinking tastes. If consumer preferences were to move away from our brands, in any of our major markets, our financial results might be adversely affected. There have been periods in the past in which there were sequential declines in the overall per capita consumption of certain beverage alcohol product categories in the U.S. and other markets in which we participate. A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including: a general decline in economic or geopolitical conditions; concern about the health consequences of consuming beverage alcohol products and about drinking and driving; a general decline in the consumption of beverage alcohol products in on-premise establishments, such as may result from smoking bans and stricter laws relating to driving while under the influence of alcohol; consumer dietary preferences favoring lighter, lower calorie beverages such as diet soft drinks, sports drinks and water products; the increased activity of anti-alcohol groups; increased federal, state, provincial and foreign excise or other taxes on beverage alcohol products and possible restrictions on beverage alcohol advertising and marketing; increased regulation placing restrictions on the purchase or consumption of beverage alcohol products or increasing prices due to the imposition of duties or excise tax; inflation; and wars, pandemics, weather and natural or man-made disasters. In addition, our continued success depends, in part, on our ability to develop new products. The launch and ongoing success of new products are inherently uncertain especially with regard to their appeal to consumers. The launch of a new product can give rise to a variety of costs and an unsuccessful launch, among other things, can affect consumer perception of existing brands and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs. WE MAY BE SUBJECT TO LITIGATION DIRECTED AT THE BEVERAGE ALCOHOL INDUSTRY AND OTHER LITIGATION. Companies in the beverage alcohol industry are, from time to time, exposed to class action or other litigation relating to alcohol advertising, product liability, alcohol abuse problems or health consequences from the misuse of alcohol. Any such litigation may result in damages, penalties or fines as well as reputational damage to us, and as a result, our business could be materially adversely affected. CLIMATE CHANGE, OR LEGAL, REGULATORY OR MARKET MEASURES TO ADDRESS CLIMATE CHANGE, MAY NEGATIVELY AFFECT OUR BUSINESS OR OPERATIONS, AND WATER SCARCITY OR POOR WATER QUALITY COULD NEGATIVELY IMPACT OUR PRODUCTION COSTS AND CAPACITY. There is a growing concern that carbon dioxide and other so-called 'greenhouse' gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or increased pricing for certain raw materials that are necessary for our products, such as sugar, cereals, agave and grapes. Water is the main ingredient in substantially all of our products and it is also a limited resource in many parts of the world. As demand for water continues to increase, and as water becomes scarcer and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could adversely affect our operations and profitability. AN INCREASE IN THE COST OF RAW MATERIALS OR ENERGY COULD AFFECT OUR PROFITABILITY. The components that our producer uses for the production of our beverage products are largely commodities that are subject to price volatility caused by changes in global supply and demand, weather conditions, agricultural uncertainty and/or governmental controls. Commodity price changes may result in unexpected increases in the cost of raw materials, plastics, flavors and other packaging materials and our beverage products. We may also be adversely affected by shortages of such materials or by increases in energy costs resulting in higher transportation, freight and other operating costs. We may not be able to increase our prices to offset these increased costs without suffering reduced volume, sales and operating profit. VARIOUS DISEASES, PESTS AND CERTAIN WEATHER CONDITIONS. Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of grapes, grains and other agricultural raw materials available, decreasing the supply of our products and negatively impacting profitability. We cannot guarantee that our suppliers of agricultural raw materials will succeed in preventing contamination in existing vineyards or fields. Future government restrictions regarding the use of certain materials used in growing agricultural raw materials may increase costs and/or reduce production of crops. Growing agricultural raw materials also requires adequate water supplies. A substantial reduction in water supplies could result in material losses of crops, which could lead to a shortage of our product supply. RELIANCE ON MANUFACTURER/DISTRIBUTOR. Local market structures and distribution channels vary worldwide. Within our primary market in the U.S., we offer (through Frank-Lin, our distributor/package distributor) a range of alcoholic beverage products across the spirits category. We sell our products through Frank-Lin to wholesalers for resale to retail outlets. We have entered into an exclusive arrangement with our Licensee/manufacturer/distributor that generates the entirety of our U.S. spirits sales. The replacement or poor performance of our major Licensee/manufacturer/distributor could result in temporary or longer-term sales disruptions or could materially and adversely affect our results of operations and financial condition for a particular period. Our inability to collect accounts receivable from our manufacturer/distributor could also materially and adversely affect our results of operations and financial condition. Our industry is being affected by the trend toward consolidation in the wholesale and retail distribution channels, particularly in the U.S. If we are unable to adapt successfully to this changing environment, our net income, market share and volume growth could be negatively affected. In addition, wholesalers and retailers of our products offer products which compete directly with our products for retail shelf space, promotional support and consumer purchases. Accordingly, wholesalers or retailers may give higher priority to products of our competitors. REGULATORY DECISIONS AND CHANGES IN THE LEGAL AND REGULATORY ENVIRONMENT COULD INCREASE OUR COSTS AND LIABILITIES OR LIMIT ITS BUSINESS ACTIVITIES. Our operations and those of our contractors are subject to extensive regulatory requirements relating to production, distribution, importation, marketing, advertising, promotion, sales, pricing, labeling, packaging, product liability, labor, pensions, antitrust, compliance and control systems, and environmental issues. Changes in laws, regulations or governmental or regulatory policies and/or practices could cause us to incur material additional costs or liabilities that could adversely affect its business. In particular, governmental bodies may impose new labeling, product or production requirements, limitations on the marketing, advertising and/or promotion activities used to market beverage alcohol, restrictions on retail outlets, restrictions on importation and distribution or other restrictions on the locations or occasions where beverage alcohol is sold which directly or indirectly limit the sales of our products. Regulatory authorities under whose laws we operate may also have enforcement power that can subject the group to actions such as product recall, seizure of products or other sanctions which could have an adverse effect on our sales or damage its reputation. Any changes to the regulatory environment in which we operate could cause us to incur material additional costs or liabilities, which could adversely affect our performance. Beverage alcohol products may also be subject to national excise, import duty and other duties in most countries around the world. An increase in any such duties could have a significant adverse effect on our sales revenue or margin, both through reducing overall consumption and by encouraging consumers to switch to lower-taxed categories of beverage alcohol. Our reported after tax income is calculated based on extensive tax and accounting requirements in each of its relevant jurisdictions of operation. Changes in tax law (including tax rates), accounting policies and accounting standards could materially reduce our reported after tax income. DAMAGE TO OUR REPUTATION. Maintaining a good reputation is critical to selling our branded products. Product contamination or tampering or the failure to maintain our standards for product quality, safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components obtained from suppliers, may reduce demand for our products or cause production and delivery disruptions. Although our producer/distributor maintains standards for the materials and product components received from suppliers, it is possible that a supplier may not provide materials or product components which meet the required standards or may falsify documentation associated with the fulfillment of those requirements. If any of our products becomes unsafe or unfit for consumption, is misbranded or causes injury, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple product recalls, or a significant product liability judgment could cause our products to be unavailable for a period of time, which could further reduce consumer demand and brand equity. Our reputation could be impacted negatively by public perception, adverse publicity (whether or not valid), negative comments in social media, or our responses relating to: a perceived failure to maintain high ethical, social and environmental standards for all of our operations and activities; a perceived failure to address concerns relating to the quality, safety or integrity of our products; our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or effects that are perceived as insufficient to promote the responsible use of alcohol. Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to provide accurate and timely financial statement information, or to protect our information systems against service interruptions, misappropriation of data or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation, competitive position and brand equity. CONTAMINATION. The success of our brands depends upon the positive image that consumers have of those brands. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Contaminants in raw materials, packaging materials or product components purchased from third parties and used in the production of our beer, wine or spirits products or defects in the fermentation or distillation process could lead to low beverage quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all of our brands. DEPENDENCE UPON TRADEMARKS AND PROPRIETARY RIGHTS, FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS. Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We have been granted several trademark registrations covering our brands and products and have filed, and expect to continue to file, trademark applications seeking to protect newly-developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any of our trademark applications. There is also a risk that we could, by omission, fail to timely renew or protect a trademark or that our competitors will challenge, invalidate or circumvent any existing or future trademarks issued to or licensed by us. WE HAVE SUBSTANTIAL COMPETITORS WHO HAVE AN ADVANTAGE OVER US IN RESOURCES AND MANAGEMENT. We are and will continue to be an insignificant participant in the alcoholic beverage business. Most of our competitors have significantly greater financial resources, technical expertise and managerial capabilities than us and, consequently, we will be at a competitive. Competitor's resources could overwhelm our and cause failure of our business plan. WE BELIEVE INVESTORS SHOULD CONSIDER THE FOLLOWING NEGATIVE ASPECTS OF OUR OPERATIONS. GOVERNMENT REGULATIONS: The liquor and spirits industry is significantly regulated by state and federal governmental agencies, and such regulation could have an adverse effect on our operations. Compliance with statutes and regulations governing the alcoholic beverage industry could significantly increase the capital expenditures necessary to develop our prospects. NATURE OF OUR BUSINESS: Our business is highly speculative, involves the commitment of high-risk capital, and exposes us to potentially substantial losses. In addition, we will be in direct competition with other organizations which are significantly better financed and staffed than we are. GENERAL ECONOMIC AND OTHER CONDITIONS: Our business may be adversely affected from time to time by such matters as changes in general economic, industrial and international conditions; changes in taxes; oil and gas prices and costs; excess supplies and other factors of a general nature. LEGAL PROCEEDINGS The Company anticipates that it (including any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate disposition will not have a materially adverse effect on the Company's business, financial condition, cash flows or results of operations. The Company is not a party to any pending legal proceedings, nor is the Company aware of any civil proceeding or government authority contemplating any legal proceeding as of the date of this filing. RISK FACTORS RELATED TO OUR STOCK OUR PRESENT AND FUTURE SHAREHOLDERS WILL SUFFER DILUTION BY ANY NEW ISSUANCES IN THE FUTURE WHICH MAY OCCUR. Upon the sales of shares, there may be substantial dilution to our Security holders. The sale price of our shares is substantially higher than the pro forma current net tangible book value per share of our outstanding common stock. The net tangible book value attributable to our shares as of December 31, 2015 and 2014 was $0.05 and $0.06 per share, respectively. Net tangible book value per share of common stock is determined by dividing the number of outstanding shares of common stock into the net tangible book value attributable to our common stock, which are our total tangible assets less our total liabilities. WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS. We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current shareholders, which could present significant risks to investors. WE WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE. We have not paid dividends on our common stock and do not ever anticipate paying such dividends in the foreseeable future. NO PUBLIC MARKET EXISTS FOR OUR COMMON STOCK AT THIS TIME, AND THERE IS NO ASSURANCE OF A FUTURE MARKET. There is no public market for our common stock, and no assurance can be given that a market will develop or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as those discussed in the "Risk Factors" section may have a significant impact upon the market price of the shares offered hereby. Due to the low price of our securities, many brokerage firms may not be willing to effect transactions in our securities. Even if a purchaser finds a broker willing to effect a transaction in our shares, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of our shares as collateral for any loans. RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE. All of the outstanding shares of common stock held by our present officers, directors, and affiliate stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. We are registering 4,634,657 shares of our outstanding 6,458,657 shares so officers, directors and affiliates will be able to sell a portion of their shares if this Registration Statement becomes effective. Rule 144 provides in essence that a person who has held restricted securities for six months, under certain conditions, may sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a nonaffiliate after the owner has held the restricted securities for a period of two years. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. OUR STOCK WILL IN ALL LIKELIHOOD BE THINLY TRADED AND AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES. The shares of our common stock, if approved for trading, may be thinly-traded on the OTC Pink Sheets, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of any of our Securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our Securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that a broader or more active public trading market for our common Securities will develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their securities of our Company. WE HAVE WARRANTS ISSUED AND OUTSTANDING WHICH ARE CONVERTIBLE INTO OUR COMMON STOCK. A CONVERSION OF SUCH EQUITY INSTRUMENTS COULD HAVE A DILUTIVE EFFECT TO EXISTING SHAREHOLDERS. At June 30, 2016, we have warrants issued and outstanding, exercisable into 790,000 shares of our common stock at $0.50 per share. The warrants are exercisable in whole. The exercise of the warrants into shares of our common stock could have a dilutive effect to the holdings of our existing shareholders. OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SECURITIES AT OR ABOVE THE PRICE THAT YOU MAY PAY FOR THE SECURITY. Because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. The inability to sell your securities in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our securities may suffer greater declines because of our price volatility. The price of our common stock that will prevail in the market after this business combination may be higher or lower than the price you may pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to the following: Variations in our quarterly operating results; Loss of a key relationship or failure to complete significant transactions; Additions or departures of key personnel; and Fluctuations in stock market price and volume. Additionally, in recent years the stock market in general, has experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock. THE REGULATION OF PENNY STOCKS BY THE SEC AND FINRA DISCOURAGES THE TRADABILITY OF OUR SECURITIES. We are a "penny stock" company, as our stock price is less than $5.00 per share. As a "penny stock," our stock is subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited stockholders. For purposes of the rule, the phrase "accredited stockholders" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of shareholders to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions. In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions. Stockholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in past years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. Investors in penny stocks have limited remedies in the event of violations of penny stock rules. While the courts are always available to seek remedies for fraud against us, most, if not all, brokerages require their customers to sign mandatory arbitration agreements in conjunctions with opening trading accounts. Such arbitration may be through an independent arbiter. Stockholders may file a complaint with FINRA against the broker allegedly at fault, and FINRA may be the arbiter, under FINRA rules. Arbitration rules generally limit discovery and provide more expedient adjudication, but also provide limited remedies in damages usually only the actual economic loss in the account. Stockholders should understand that if a fraud case is filed an against a company in the courts it may be vigorously defended and may take years and great legal expenses and costs to pursue, which may not be economically feasible for small stockholders. Absent arbitration agreements, specific legal remedies available to stockholders of penny stocks include the following: If a penny stock is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. If a penny stock is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud, for damages. The fact that we are a penny stock company will cause most brokers to refuse to handle transactions in the stocks, and will discourage trading activity and volume, or result in wide disparities between bid and ask prices. These may cause stockholders significant illiquidity of the stock at a price at which they may wish to sell or in the opportunity to complete a sale. Stockholders will have no effective legal remedies for these illiquidity issues. MANY OF OUR SHARES OF COMMON STOCK WILL IN THE FUTURE BE AVAILABLE FOR RESALE. ANY SALES OF OUR COMMON STOCK, IF IN SIGNIFICANT AMOUNTS, ARE LIKELY TO DEPRESS THE MARKET PRICE OF OUR SECURITIES. Assuming all of the shares of common stock we are offering held by the selling security holders registered hereby are sold, we would have approximately 2,478,000 shares that are freely tradable owned by non-affiliates. Unrestricted sales of these shares of stock by our selling stockholders could have a huge negative impact on our share price and the market for our shares. ANY NEW POTENTIAL INVESTORS WILL SUFFER A DISPROPORTIONATE RISK AND THERE WILL BE IMMEDIATE DILUTION OF EXISTING INVESTOR'S INVESTMENTS. Our present shareholders have acquired their securities at a cost significantly less than that which the investors purchasing pursuant to shares will pay for their stock holdings or at which future purchasers in the market may pay. Therefore, any new potential investors will bear most of the risk of loss. OUR BUSINESS IS HIGHLY SPECULATIVE AND THE INVESTMENT IS THEREFORE RISKY. Due to the speculative nature of our business, it is probable that the investment in shares offered hereby will result in a total loss to the investor. Investors should be able to financially bear the loss of their entire investment. Investment should, therefore, be limited to that portion of discretionary funds not needed for normal living purposes or for reserves for disability and retirement. WE ARE NOT A REPORTING COMPANY AT THIS TIME, BUT WILL BECOME ONE DUE TO THIS REGISTRATION. There is no trading market for our common stock. We will be subject to the reporting requirements under the Securities and Exchange Act of 1934, Section 13a, after the effectiveness of this offering, pursuant to Section 15d of the Securities Act and we intend to be registered under Section 12(g). As a result, after we become registered under Section 12(g) shareholders will have access to the information required to be reported by publicly held companies under the Exchange Act and the regulations thereunder. We intend to provide our shareholders with quarterly unaudited reports and annual reports containing financial information prepared in accordance with generally accepted accounting principles audited by independent certified public accountants prior to the time we register under the Securities Exchange Act of 1934, Section 12(g). WE HAVE DETERMINED AN ARBITRARY OFFERING PRICE OF OUR SHARES. Our offering price of our shares has been determined arbitrarily by us with no established criteria of value. There is no direct relationship between these prices and our assets, book value, lack of earnings, shareholder's equity, or any other recognized standard of value of our business.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001358356_limestone_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001358356_limestone_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..348b227ea6a2b3f3aaf1abc3412f254e08f4380e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001358356_limestone_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Porter Bancorp, Inc. is a Louisville, Kentucky-based bank holding company that operates 15 banking centers in twelve counties through its wholly owned subsidiary, PBI Bank. Our markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt, and extend south along the Interstate 65 corridor to Tennessee. We serve south central Kentucky and southern Kentucky from banking offices in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess Counties. We also have an office in Lexington Kentucky, the second largest city in Kentucky. PBI Bank is a traditional community bank offering a wide range of personal and business banking products and services. On April 15, 2016, we completed a $5.03 million stock offering to accredited investors in a private placement transaction exempt from the registration requirements of the federal and state securities laws. In the private placement transaction, we sold 2,300,000 Common Shares and 1,100,000 Non-Voting Common Shares to non-affiliate investors at $1.25 per share. Three directors of the Company, including President and CEO John T. Taylor, also purchased a total of 600,000 Common Shares for $1.30 per share, but otherwise on the same terms and conditions as the other investors. The common shares purchased by the three directors are not being registered for resale. We did not pay commissions or placement fees in connection with the private placement transaction. Approximately $2.8 million of the proceeds were directed by the investors to make interest payments on the outstanding capital securities of the Company s subsidiary trusts, bringing interest payments current through the second quarter of 2016. The balance of the proceeds will be used for general corporate purposes and to support the Company's wholly owned subsidiary, PBI Bank. The securities purchase agreement and the other transaction documents we entered into in connection with the private placement transaction are exhibits to our Current Report on Form 8-K filed with the SEC on April 20, 2016, and are incorporated herein by reference.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001358762_reata_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001358762_reata_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a0d984d784529bd5afbd6a9767d0180b770e1134
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001358762_reata_prospectus_summary.txt
@@ -0,0 +1 @@
+by, the more detailed information and consolidated financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the entire prospectus, especially our consolidated financial statements and the notes thereto appearing at the end of this prospectus and the Risk Factors section of this prospectus, before deciding to invest in our Class A common stock. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to Reata Pharmaceuticals, Reata, the company, we, us, and our refer to Reata Pharmaceuticals, Inc. and, where appropriate, our consolidated subsidiaries. Overview We are a clinical stage biopharmaceutical company focused on identifying, developing, and commercializing product candidates to address rare and life-threatening diseases with few or no approved therapies by targeting molecular pathways that regulate cellular metabolism and inflammation. Our lead product candidates, bardoxolone methyl and omaveloxolone, are members of a class of small molecules called antioxidant inflammation modulators, or AIMs, and target an important transcription factor, called Nrf2, to restore mitochondrial function, reduce oxidative stress, and inhibit pro-inflammatory signaling. Bardoxolone methyl is currently being studied in a Phase 3 trial, known as CATALYST, for the treatment of pulmonary arterial hypertension, or PAH, associated with connective tissue disease, or CTD-PAH, which began enrolling patients in October 2016. Bardoxolone methyl is also being studied in a Phase 2 trial known as LARIAT, for the treatment of pulmonary hypertension due to interstitial lung disease, or PH-ILD, and PAH, each of which are subsets of pulmonary hypertension, or PH. In addition, we recently met with the U.S. Food and Drug Administration, or the FDA, and received guidance on endpoints and general design for a single, pivotal Phase 2/3 trial utilizing bardoxolone methyl for the treatment of chronic kidney disease, or CKD, caused by Alport syndrome. Omaveloxolone is being studied in Phase 2 trials for the treatment of multiple diseases, including Friedreich s ataxia, or FA, mitochondrial myopathies, or MM, and metastatic melanoma, known as MOXIe, MOTOR, and REVEAL, respectively. Beyond our lead product candidates, we have several promising preclinical development programs. We believe that our product candidates and preclinical programs have the potential to improve clinical outcomes in numerous underserved patient populations. The Foundational Biology of AIMs The foundational biology of AIMs underlies our two lead product candidates, bardoxolone methyl and omaveloxolone. AIMs bind to Keap1, a protein that coordinates the cellular response to reactive oxygen species, or ROS, and other stimuli, each of which can cause cellular damage, which is generally referred to as oxidative stress. Binding to Keap1 activates Nrf2, a transcription factor that promotes normal mitochondrial function by making reducing equivalents available for production of cellular energy, or ATP, and increases cellular antioxidant and detoxification enzymes. This reduces mitochondrial ROS production and ROS-mediated activation of inflammatory signaling complexes. Binding to Keap1 also inhibits NF- B, the primary transcription factor producing proteins that promote inflammation and the production of ROS. Through the combined effect on Nrf2 activation and NF- B inhibition, AIMs restore mitochondrial production of ATP, increase production of antioxidant and detoxification enzymes, reduce oxidative stress, and reduce pro-inflammatory signaling. Since mitochondrial dysfunction, oxidative stress, and inflammation are features of many diseases, AIMs have many potential clinical applications and have been the subject of more than 200 peer-reviewed scientific papers. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED DECEMBER 6, 2016 Shares Reata Pharmaceuticals, Inc. Class A Common Stock We are selling shares of Class A common stock in this offering. We have granted the underwriters an option to purchase up to additional shares of Class A common stock to cover over-allotments. Our Class A common stock is listed on The NASDAQ Global Market under the symbol RETA. On December 2, 2016, the last reported sale price of our Class A common stock was $25.96 per share. Investing in our Class A common stock involves risks. See Risk Factors beginning on page 17. We are an emerging growth company under applicable Securities and Exchange Commission rules and are eligible for reduced public company disclosure requirements. See Summary Implications of Being an Emerging Growth Company. Certain of our directors or their affiliates have indicated an interest in purchasing up to approximately $15 million of shares of Class A common stock in this offering at the public offering price. However, because the indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer, or no shares in this offering to these persons, or these persons may determine to purchase more, fewer, or no shares of Class A common stock in this offering. The underwriters will receive the same underwriting discounts and commissions on any shares of Class A common stock purchased by these persons as they will on any other shares of Class A common stock sold to the public in this offering. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Public Offering Price $ $ Underwriting Discount(1) $ $ Proceeds to Reata Pharmaceuticals, Inc. (before expenses) $ $ (1) We refer you to Underwriting beginning on page 170 for additional information regarding underwriter compensation. The underwriters expect to deliver the shares of Class A common stock to purchasers on or about December , 2016, through the book-entry facilities of The Depository Trust Company. Citigroup Cowen and Company Piper Jaffray December , 2016. Table of Contents Bardoxolone Methyl Bardoxolone methyl, our most well-characterized AIM, is currently being tested in a Phase 3 trial in CTD-PAH as well as a Phase 2 trial in several forms of PH-ILD and PAH. In addition, we recently met with the FDA and received guidance on endpoints and general design characteristics of a single, pivotal Phase 2/3 trial in CKD caused by Alport syndrome and are in the process of designing that trial. Although CTD-PAH and Alport syndrome have different causes and inflammatory stimuli, at a molecular level, mitochondrial dysfunction, inflammation, and proliferative signaling are common to the pathophysiology of both diseases. The anti-inflammatory and anti-fibrotic properties of bardoxolone methyl may therefore be relevant to preventing remodeling of the pulmonary vasculature in CTD-PAH as well as inhibiting structural alterations and glomerulosclerosis in Alport syndrome. Bardoxolone Methyl in Pulmonary Hypertension Pulmonary Hypertension PH is a multi-organ condition characterized by an abnormally high pressure in the network of arteries and veins that lead to and from the lungs due, in part, to narrowing of the pulmonary vasculature as a result of inflammation, remodeling, proliferation, and endothelial dysfunction. Mitochondrial dysfunction has also been implicated in PH, and impaired energetics of skeletal muscle is a common feature of PH. PH patients experience increased pressure on the right side of the heart, ultimately leading to ventricular failure and death. PH can be caused by a number of different underlying defects, which have been classified into five groups by the World Health Organization, or WHO. We are currently studying bardoxolone methyl in CATALYST in patients with WHO Group 1 CTD-PAH. We are also studying bardoxolone methyl in LARIAT in patients from certain subgroups of WHO Groups 3 and 5 PH-ILD and WHO Group 1 PAH. While there are vasodilator therapies approved for the treatment of PAH, there are currently no therapies to treat PH-ILD. Further, current therapies for PAH are less effective in CTD-PAH, which makes up about 30% of the PAH population. There are an estimated 12,000 CTD-PAH patients in the United States and 52,000 worldwide. CTD-PAH is a late and often fatal manifestation of many types of autoimmune disease, including systemic sclerosis, or scleroderma, systemic lupus erythematosus, mixed connective tissue disease, and others. PAH results in a progressive remodeling and fibrosis of the pulmonary vasculature, which increases pulmonary vascular resistance and ultimately leads to right ventricular heart failure and death. Patients with CTD-PAH are generally less responsive to existing therapies and have shorter survival than patients with other forms of PAH. In the United States, the five-year survival rate for CTD-PAH patients is approximately 44% compared to idiopathic PAH, or I-PAH, patients, who have a 68% five-year survival rate. Additionally, CTD-PAH patients make up 10-15% of patients with scleroderma or lupus erythematosus, and scleroderma patients without CTD-PAH have a five-year survival rate of approximately 85%, compared to a five-year survivial rate of 10% for patients with CTD-PAH. Currently approved therapies to treat PAH include endothelin receptor antagonists, nitric oxide pathway modulators, and prostacyclin pathway agonists, all of which are systemic vasodilators that directly modulate vasoconstrictive and vasodilatory pathways. All three classes of existing therapies do not specifically target the pulmonary vasculature and have systemic hemodynamic effects. Further, due to their vasodilatory mechanism, the efficacy of currently approved therapies is impacted by the number of other PAH therapies being administered to a patient, with each new therapy yielding lower marginal efficacy. These systemic hemodynamic effects can result in hypotension and syncope, or fainting, which generally limits their clinical effectiveness. These hemodynamic effects can be exacerbated when a patient is prescribed multiple vasodilators. In addition, clinically significant drug-drug interactions have been observed that can further limit the ability to deliver effective drug combinations. Table of Contents Vasodilators approved for PAH also generally do not yield significant functional improvements in CTD-PAH patients because their disease involves more remodeling and fibrosis that is less affected by vasodilators. Recent research has indicated that PAH patients, and particularly CTD-PAH patients, experience mitochondrial dysfunction, which occurs in the pulmonary vasculature, heart, and other organ systems. Mitochondrial dysfunction promotes reduced energy production, inflammation, and tissue remodeling, which causes impaired cardiac and skeletal muscle function, fibrosis, and eventual death. As described in a recently published large meta-analysis performed at the University of Pennsylvania that analyzed data from eleven Phase 3 and Phase 4 clinical trials, CTD-PAH patients treated with vasodilator therapies have 6-minute walk distance, or 6MWD, improvements of only one third compared to the improvements seen in I-PAH patients. Bardoxolone methyl directly targets the bioenergetic and inflammatory components of PH. PH patients experience mitochondrial dysfunction, increased activation of NF- B and related inflammatory pathways involved in ROS signaling, cellular proliferation, and fibrosis. Bardoxolone methyl, through the combined effect of Nrf2 activation and NF- B suppression, has the potential to inhibit inflammatory and proliferative signaling, suppress ROS production and signaling, reduce the production of enzymes related to fibrosis and tissue remodeling, and increase ATP production and cellular respiration. Bardoxolone methyl targets multiple cell types relevant to PH, including endothelial cells, smooth muscle cells, and macrophages. Additionally, unlike current therapies, bardoxolone methyl does not have systemic hemodynamic effects or drug-drug interactions in PH patients. By addressing a novel pathway in PH, we believe that bardoxolone methyl may provide additional benefits beyond current PAH therapies, including: Increased functional capacity. We believe the bioenergetic effects of bardoxolone methyl may result in increased functional capacity and the ability to perform everyday functions for PH patients due to its effects on energy production and cellular respiration, as have been characterized in preclinical studies with bardoxolone methyl and other AIMs. Potential effects beyond functional improvements. Bardoxolone methyl has potential anti-inflammatory, anti-proliferative, and anti-fibrotic effects and targets multiple cell types relevant to PH, including endothelial cells, smooth muscle cells, and macrophages. We believe that bardoxolone methyl may, over an extended period of time, affect the synergistic effects of vasoconstriction, thrombosis, fibrosis, and vascular remodeling within the pulmonary arterial system, potentially improving patient outcomes. Broader applicability. Bardoxolone methyl may be useful in treating CTD-PAH patients, earlier stage PAH patients, and PH-ILD patients, all of whom are underserved by existing PAH therapies, likely because vasoconstriction is not as prominent a feature in these patients as it is in idiopathic and other PAH patients. In addition, lack of embryofetal toxicity may allow for the use of bardoxolone methyl in pregnant women, who are currently limited to prostacyclins. Potential as a combination therapy. To date, it has been observed that bardoxolone methyl does not have systemic hemodynamic effects or drug-drug interactions in PH patients. This may provide clinicians with greater flexibility in dosing, ultimately resulting in a more favorable safety profile, and allow for use in combination with other therapies with a greater incremental effect than an additional vasodilator. Phase 3 Development On October 6, 2016, the first patient was enrolled in CATALYST, an international, randomized, double-blind, placebo-controlled Phase 3 trial examining the safety, tolerability, and efficacy of bardoxolone methyl in patients with WHO Group 1 CTD-PAH when added to standard-of-care vasodilator therapy. Patients will be on up to two background therapies and will be randomized 1:1 to bardoxolone methyl or placebo. Patients will be enrolled at approximately 100 sites in the U.S., Canada, Australia, Japan, Mexico, Europe, Israel, and South Table of Contents America, and the study drug will be administered once daily for 24 weeks. Patients randomized to bardoxolone methyl will start at 5 mg and will dose-escalate to 10 mg at Week 4 unless contraindicated clinically. The primary endpoint is the change from baseline in 6MWD relative to placebo at Week 24. Secondary endpoints include time to first clinical improvement as measured by improvement in WHO functional class, increase from baseline in 6MWD by at least 10%, or decrease from baseline in creatine kinase (as a surrogate biomarker for muscle injury and inflammation) by at least 10%. The trial will enroll between 130 and 200 patients. To determine the final sample size, a pre-specified, blinded sample size re-calculation based on 6MWD variability and baseline characteristics will be conducted after 100 patients have been enrolled in the trial. Data from CATALYST are expected to be available during the first half of 2018. During our interaction with the FDA in October 2015, the FDA noted that CATALYST, together with the Phase 2 data from our LARIAT trial in PAH patients and prior clinical trials with bardoxolone methyl, would provide adequate data for a New Drug Application, or NDA, review of the safety profile of bardoxolone methyl. Prior to this meeting, we had completed a series of clinical pharmacology studies, including a Thorough QT study, hepatic impairment study, food effect study, and three drug-drug interaction studies. The FDA recommended conducting a single additional clinical drug-drug interaction study and otherwise had no clinical trial, clinical pharmacology, or preclinical study requests. In preparation for, and in advance of, the initiation of CATALYST, we analyzed data for all CTD-PAH patients treated with doses of up to 10 mg who had completed the 16-week treatment period (or terminated early) in the ongoing LARIAT trial. A total of 22 CTD-PAH patients, including patients from cohorts 1, 2, and 3a, which are discussed below, met these criteria, with 15 randomized to bardoxolone methyl and seven randomized to placebo. The LARIAT statistical analysis plan defined the treatment effect as the time-averaged change from baseline in 6MWD values using a longitudinal model to assess the average of all available 6MWD timepoints, improving the study s sensitivity to detect a significant difference between the active drug and placebo groups. Change from baseline in 6MWD at Weeks 4, 8, 12, and 16 were analyzed using a mixed-model repeated measures, or MMRM, analysis to compare the difference between the active drug and placebo groups. The analysis showed that patients treated with bardoxolone methyl demonstrated a statistically significant mean time-averaged increase in 6MWD compared to baseline of 26.7 meters (p=0.001). Placebo-treated patients had a non-significant time-averaged mean change from baseline in 6MWD of 0.6 meters (p=0.96). The placebo-corrected time-averaged change in 6MWD was 26.1 meters (p=0.06). Patients with moderate to severe anemia, which represents a small percentage of the patient population, will be excluded from CATALYST because treatment with iron supplementation or erythropoietin post-randomization can affect 6MWD values independent of study drug effect. Three CTD-PAH patients enrolled in LARIAT and included in the above analysis were anemic at screening (as defined by low hemoglobin values), and two of these patients, both randomized to placebo, received post-randomization anemia treatments. An analysis was conducted excluding patients with anemia at screening to estimate the treatment effect in patients who meet the final CATALYST eligibility criteria. MMRM analysis showed that CATALYST-eligible patients treated with bardoxolone methyl in LARIAT demonstrated a statistically significant mean time-averaged increase in 6MWD compared to baseline of 30.2 meters (p<0.001), and placebo-treated patients had a non-significant mean change from baseline in 6MWD of 10.1 meters (p=0.39) for a placebo-corrected change of 40.3 meters (p=0.009). The method of statistical analysis for the CATALYST primary endpoint is the placebo-corrected change from baseline in 6MWD at the end-of-treatment at 24 weeks. This method allows for greater separation in 6MWD values between active and placebo groups assuming improved efficacy over time, which was observed in the CTD-PAH patients in LARIAT. Table of Contents We performed an analysis applying the statistical methods for CATALYST to the available end-of-treatment (Week 16) change in 6MWD data from CTD-PAH patients in LARIAT. Using MMRM to estimate change from baseline in 6MWD at Week 16, patients treated with bardoxolone methyl demonstrated a statistically significant mean increase of 38.2 meters (p<0.001). Placebo-treated patients had a non-significant mean change from baseline in 6MWD of 9.8 meters (p=0.44). The placebo-corrected change in 6MWD at Week 16 was 28.4 meters (p=0.07). Excluding patients with moderate to severe anemia at screening, the patients treated with bardoxolone methyl demonstrated a statistically significant mean increase in 6MWD compared to baseline of 42.7 meters (p<0.001). Placebo-treated patients had a non-significant mean change from baseline in 6MWD of -5.8 meters (p=0.68). The placebo-corrected change in 6MWD at Week 16 was 48.5 meters (p=0.005). With respect to safety, bardoxolone methyl continued to be well-tolerated. None of the 15 bardoxolone methyl treated patients discontinued early, whereas one of the seven placebo treated patients discontinued prematurely. The expanded data set shows no clinically meaningful differences in safety variables including vital signs and laboratory data. Bardoxolone methyl was combined with approved vasodilator therapies without increasing the risk of hypotensive events or exacerbating their adverse event profile. CATALYST is designed to detect a minimum treatment effect of 12.5 meters assuming a standard deviation of 50 meters. The observed treatment effect in the LARIAT CTD-PAH subgroup analyses, both with and without the anemic patients included, was larger than the minimally detectable treatment effect in CATALYST. Further, the pooled standard deviation observed in LARIAT of 37 meters is lower than the estimated standard deviation of 50 meters in CATALYST. Phase 2 Development We initially tested bardoxolone methyl in PH patients in LARIAT, a randomized, placebo-controlled, double-blinded, dose-escalation Phase 2 trial evaluating the safety and efficacy of once daily, orally administered bardoxolone methyl in PH patients with PAH or PH-ILD. LARIAT is comprised of four separate cohort groups. The cohorts from the LARIAT trial are described below. Cohort 1. The first cohort began enrolling in May 2014 and consists of PAH patients in the United States. Eligible patients must have a baseline 6MWD of greater than or equal to 150 meters but less than or equal to 450 meters and must be receiving at least one disease-specific PAH background therapy. Patients are randomized 3:1 in each dose group to either bardoxolone methyl at doses of 2.5 mg, 5 mg, 10 mg, or 20 mg, or placebo. Cohort 2. The second cohort began enrolling in January 2015 and consists of PAH patients in the United States. Eligible patients must have a baseline 6MWD of greater than 450 meters and must be receiving at least one disease-specific PAH background therapy. Patients are randomized 3:1 in each dose group to bardoxolone methyl at doses of 5 mg or 20 mg, or placebo. Cohort 3. The third cohort was activated in September 2015, and consists of PAH patients in the United States and potentially other countries, and is comprised of two sub-cohorts for CTD-PAH (cohort 3a) patients and non-CTD-PAH (cohort 3b) patients. Eligible patients must have a baseline 6MWD of greater than or equal to 150 meters and must be receiving zero to two disease-specific PAH background therapies. Patients are randomized 2:1 to bardoxolone methyl or placebo. Patients in the treatment group are titrated from 5 mg to 10 mg doses based on tolerability. Cohort 4. The fourth cohort was activated in September 2015, and consists of PH-ILD patients in the United States and potentially other countries, and is comprised of four sub-cohorts based on the patient s underlying type of ILD: (a) PH-ILD caused by CTD, such as scleroderma and lupus, or CTD-PH-ILD; (b) PH-ILD caused by idiopathic pulmonary fibrosis, or IPF-PH-ILD; (c) PH-ILD caused by idiopathic Table of Contents interstitial pneumonia, or IIP-PH-ILD; and (d) PH-ILD caused by sarcoidosis, or SA-PH-ILD. Eligible patients must have a baseline 6MWD of greater than or equal to 150 meters. As no therapies are approved to treat these patients, no background therapies are required for enrollment. Patients are randomized 2:1 to bardoxolone methyl or placebo. Patients in the treatment group are titrated from 5 mg to 10 mg doses based on tolerability. The primary endpoint of the LARIAT trial is change in 6MWD during a 16 week treatment period. All patients who complete the treatment period are eligible to continue into an extension trial to evaluate the intermediate and long-term safety and efficacy of bardoxolone methyl. Those patients who had been receiving placebo are converted to bardoxolone methyl in the extension trial. The initial treatment period for cohorts 1 and 2 has been completed and, initial results from patients in these two LARIAT cohorts were presented at CHEST in October 2015. Initial data from cohort 3 also have been publicly presented and the cohort continues to enroll. We intend to use data from CTD-PAH patients to help support an application to the FDA for breakthrough status for the treatment of CTD-PAH, once we have enough data to do so. Because bardoxolone methyl was active in patients with CTD-PAH, a fibrotic disease, we believe that bardoxolone methyl may be effective in PH-ILD patients. We have also begun enrolling patients with PH-ILD caused by CTD, idiopathic pulmonary fibrosis, non-specific interstitial pneumonia, and sarcoidosis in LARIAT cohorts 4a, 4b, 4c, and 4d, respectively. Data have not been presented from cohort 4. We previously reported that a serious adverse event, or SAE, involving a patient death had occurred in cohort 4a and that the investigator had initially reported it as possibly related to study drug. The investigator has since changed his evaluation to unlikely related. In addition, the Protocol Safety Review Committee that oversees safety for the LARIAT trial concluded that the SAE was unlikely treatment-related. We anticipate that data from PH-ILD patients in the LARIAT trial will be available in the second half of 2017. Market Opportunity in Pulmonary Hypertension We believe there is significant opportunity for once-daily, orally administered bardoxolone methyl to address the PAH market currently served only by the existing vasodilator therapies. In 2015, global sales of approved PAH treatments were approximately $4.7 billion. In addition, recently approved treatments such as Opsumit and Adempas have shown rapid uptake in the PAH market and, based on industry reports, Opsumit is projected to reach between $1 and $2 billion in annual sales within seven years from launch. By 2020, it is estimated that the global PAH population will be almost twice what it is today, and it is projected that there will be at least 20,000 PAH patients in the United States alone. There are no therapies currently approved for PH-ILD. There are at least 20,000 patients in the United States and approximately 75,000 worldwide with the forms of PH-ILD that we are targeting. Bardoxolone Methyl in Chronic Kidney Disease Caused by Alport Syndrome Bardoxolone methyl has the potential to address the underlying causes of glomerular filtration rate, or GFR, loss in Alport syndrome patients because it activates molecular pathways that promote the resolution of inflammation by restoring mitochondrial function, reducing oxidative stress, and inhibiting ROS-mediated pro-inflammatory signaling. Bardoxolone methyl binds to Keap1 and activates Nrf2, a transcription factor that increases cellular antioxidant and detoxification enzymes and promotes normal mitochondrial function by making reducing equivalents available for ATP production. This reduces mitochondrial ROS production and ROS-mediated activation of inflammatory signaling complexes. Through these effects, bardoxolone methyl restores mitochondrial production of ATP, increases production of antioxidant and detoxification enzymes, reduces oxidative stress, and reduces pro-inflammatory signaling. Bardoxolone methyl reverses endothelial dysfunction and pathogenic mesangial cell contraction, resulting in increased surface area of the glomerulus and increased GFR. Additionally, bardoxolone methyl inhibits activation of inflammatory and pro-fibrotic pathways that lead to structural remodeling and glomerulosclerosis. Table of Contents As a result, bardoxolone methyl and closely related structural analogs have been shown to improve renal function, reduce inflammation, and prevent injury, remodeling, and fibrosis in a number of animal models of renal injury and disease. Specifically, bardoxolone methyl and analogs reverse endothelial dysfunction and mesangial cell contraction in response to angiotensin II, thereby increasing the surface area of the glomerulus and increasing GFR. Further, data from animal models relevant to chronic renal disease demonstrate that the compounds are anti-fibrotic and have protective effects on the renal interstitium in response to high protein, pressure overload in the setting of hyperfiltration, and dyslipidemia. Bardoxolone methyl has been studied in seven studies enrolling approximately 2,600 patients with Type 2 diabetes and CKD. Improvements in renal function, including inulin clearance, creatinine clearance, and estimated GFR, or eGFR, have been observed with bardoxolone methyl treatment in a number of clinical studies. Reata s Asian development partner, Kyowa Hakko Kirin Co., Ltd., or KHK, recently demonstrated that bardoxolone methyl treatment resulted in a significant improvement in measured GFR, as assessed by inulin clearance, after 16 weeks of treatment compared to placebo. Two separate studies showed that increases in eGFR in patients with CKD caused by diabetes treated with bardoxolone methyl were sustained for at least one year. Furthermore, after one year of treatment, a residual eGFR increase from baseline was observed in bardoxolone methyl patients after cessation of drug for four weeks, while an eGFR decline from baseline was observed in placebo patients. In other studies in patients with CKD caused by diabetes, bardoxolone methyl has been shown to significantly reduce uremic solutes (BUN, uric acid, and phosphate) in inverse correlation to eGFR increases and to numerically reduce renal serious adverse events, or SAEs, and end-stage renal disease, or ESRD, events. The data from these studies suggest that bardoxolone methyl has the potential to prevent renal function decline, which could ultimately prevent or delay ESRD. In Alport syndrome patients, who have average eGFR declines of 4.0 mL/min/1.73 m2 per year, the potential effect of a sustained eGFR increase with bardoxolone methyl treatment is clinically meaningful and could provide a multi-year delay in disease progression to ESRD. Chronic Kidney Disease Caused by Alport Syndrome Alport syndrome is a rare and serious hereditary disease that affects approximately 12,000 children and adults in the United States and 40,000 globally. It is caused by mutations in the genes encoding type IV collagen, a major structural component of the glomerular basement membrane, or GBM, in the kidney. The abnormal expression of type IV collagen causes loss of GBM integrity, abnormal leakage of proteins through the GBM, and excessive reabsorption of protein in the proximal tubules of the kidney. Like other forms of CKD, excessive reabsorption of protein in the tubules induces oxidative stress and renal interstitial inflammation and fibrosis. Patients with Alport syndrome are normally diagnosed with the disease in childhood to early adulthood and have average GFR declines of 4.0 mL/min/1.73 m2 per year. The progressive decline of GFR in Alport syndrome inexorably leads to renal failure and ESRD, with a median survival of approximately 55 years. Fifty percent of males with the most prevalent subtype of Alport syndrome require dialysis or kidney transplant by age 25. The incidence of renal failure in these patients increases to 90% by age 40 and nearly 100% by age 60. Similar to patients with other forms of CKD, Alport syndrome patients receiving dialysis are at increased risk for cardiovascular disease and infections, which are the most common causes of death in these patients. Currently, there are no approved therapies for the treatment of Alport syndrome. The pathogenic role of inflammatory processes in Alport syndrome disease progression and declining renal function is similar to that of other chronic kidney diseases. The GBM defects and leaked proteins in Alport syndrome, the hyperglycemia in diabetes, and hypertension in cardiovascular disease all activate pro-inflammatory signaling pathways that normally detect cellular damage or pathogens. These signals induce mitochondrial dysfunction in which production of ATP is impaired in favor of production of pro-inflammatory ROS. ROS is a central feature of inflammation and activates pro-inflammatory signaling complexes including Table of Contents NF- B and the NLRP3 complex referred to as the inflammasome. ROS-mediated activation of NF- B and the inflammasome produce cytokines that promote inflammation in glomerular endothelial cells, mesangial cells, and podocytes while also recruiting activated macrophages and other inflammatory effector cells to the renal interstitium. Chronic activation of pro-inflammatory pathways in kidney cells promotes GFR loss by at least three mechanisms. First, inflammation-associated ROS reduce the amount of nitric oxide available to the endothelial cells in the blood vessels of the glomerulus. This results in a decrease of the overall surface area of the glomerulus that is available for filtration, and thus decreases GFR. Second, inflammation-associated ROS cause contraction of mesangial cells in the kidney. The primary function of these cells is to remove debris and protein from the GBM allowing proper filtration to occur. Mesangial cell contraction reduces their function, and thus reduces GFR. Third, inflammation-associated ROS lead to fibrosis, which changes the structure of the mesangial cell layer and causes thickening of the GBM, contributing to decline of GFR. Anticipated Clinical Development Plans for Bardoxolone Methyl in Alport Syndrome During a meeting with the FDA in October 2016, the FDA provided us with guidance on key elements of a single, pivotal clinical trial that would study the safety and efficacy of bardoxolone methyl in patients with CKD caused by Alport syndrome. We are in the process of designing the Phase 2/3 pivotal trial as an international, multi-center, double-blind, randomized, placebo-controlled trial to study the safety, tolerability, and efficacy of bardoxolone methyl in qualified patients with Alport syndrome from age 12 to 60 at 30 to 60 sites. The Phase 2 portion of the trial will be open-label and the primary endpoint will assess eGFR change at 12 weeks. These patients will be followed for two years and will not be included in the Phase 3 portion of the trial. The Phase 3 portion will be designed to support registration. These patients will be randomized 1:1 to either bardoxolone methyl or placebo. The eGFR change at one year will be measured after 48 weeks while the patient is on treatment, and after withdrawal of drug for four weeks (retained eGFR). After withdrawal, patients will be restarted on study drug with their original treatment assignments and will continue on study drug for a second year. The change from baseline in eGFR in bardoxolone methyl-treated patients relative to placebo will be measured again after two years. The eGFR change at two years will also be measured after 100 weeks while the patient is on treatment and after withdrawal of drug for four weeks (retained eGFR). If the trial is successful, the year one retained eGFR data could support accelerated approval under subpart H of the Federal Food, Drug, and Cosmetic Act, or the FD&C Act, and the year two retained eGFR data could support full approval under the FD&C Act. We plan to initiate the open label Phase 2 portion of the integrated Phase 2/3 trial in the first half of 2017 and have data by the end of 2017 or early 2018. We expect to have the one year withdrawal data that could support accelerated approval in the first half of 2019. We intend to submit a request to the FDA for orphan drug designation for bardoxolone methyl for the treatment of CKD caused by Alport syndrome in the first half of 2017. Market Opportunity for Bardoxolone Methyl in Chronic Kidney Disease Caused by Alport System Alport syndrome is a rare and serious hereditary disease that affects approximately 12,000 children and adults in the United States and 40,000 globally. Approximately 1,200 of the U.S. patients are identified in the Alport Syndrome Foundation s registry. Patients with CKD caused by Alport syndrome are often misdiagnosed with other congenital kidney diseases. However, we believe that if and when an effective treatment for CKD caused by Alport syndrome is approved and marketed, more patients will be encouraged to be genetically tested. Omaveloxolone Omaveloxolone is a close structural analog of bardoxolone methyl that was developed to improve tissue distribution, including blood-brain barrier penetration. Omaveloxolone is in clinical development for multiple Table of Contents indications. We are currently conducting a randomized, placebo-controlled, double-blind, dose-escalation Phase 2 trial, known as MOXIe, to evaluate the safety and efficacy of omaveloxolone in patients with FA, for which there are currently no approved therapies. We are also currently conducting a randomized, placebo-controlled, double-blind, dose-escalation Phase 2 trial, known as MOTOR, to evaluate the safety and efficacy of omaveloxolone in patients with MM, for which there are also no currently approved therapies. In addition, we are currently conducting an open-label multi-center, dose-escalation Phase 1b/2 trial, known as REVEAL, to evaluate the safety, pharmacodynamics, and efficacy of omaveloxolone in combination with existing immunotherapies for the treatment of metastatic melanoma. Initial data from MOXIe and MOTOR are expected in the first half of 2017, while we expect data from REVEAL in the second half of 2017. We also recently completed a Phase 2 proof of concept trial, known as GUARD, of a topical formulation of omaveloxolone for use in cataract surgery to reduce the loss of corneal endothelial cells, in which the primary endpoint was not attained, but promising pharmacological activity was observed at the low dose of 0.5%. We continue to evaluate the best indications for which to develop and commercialize omaveloxolone. AIM Follow On Opportunities and Earlier Stage Programs If beneficial bioenergetic effects are demonstrated in our ongoing PAH, PH-ILD, FA, or MM trials, this could indicate that our AIM pharmacology may also provide therapeutic benefit for patients suffering from other diseases where mitochondrial dysfunction is implicated, such as Duchenne s muscular dystrophy, familial Parkinson s disease, Huntington s disease, amyotrophic lateral sclerosis, or ALS, and mitochondrial dysfunction-related epilepsies. We are also pursuing preclinical development of non-AIM neuroprotective Hsp90 inhibitors, including RTA 901, for the potential treatment of ALS, diabetic neuropathy, spinocerebellar ataxia, and spinal bulbar muscular atrophy, and ROR T inhibitors for the treatment of a variety of autoimmune and inflammatory conditions. Our Clinical Pipeline The chart below is a summary of our current clinical programs: (1) We are currently designing a Phase 2/3 clinical trial and expect to initiate the Phase 2 portion of the integrated Phase 2/3 in the first half of 2017, with Phase 2 data expected at the end of 2017 or early 2018. Additionally, the one year withdrawal data which could support accelerated approval is expected in the first half 2019. (2) We continue to evaluate development of omaveloxolone for this indication. Table of Contents Our Approach We seek to identify and select, for development and commercialization, small molecules with novel mechanisms of action that we believe have biological properties with broad applicability. Once we have selected a class of small molecules, we apply their biological properties to clinical settings with unmet needs, and we triage opportunities based on development timeline and cost, regulatory pathway, and commercial opportunity. Once we have identified suitable molecules for clinical development, we endeavor to run multiple clinical programs in parallel to maximize our probability of success. Our Strategy Our goal is to become a leader in the discovery, development, and commercialization of small molecule therapies for the treatment of severe and life-threatening diseases. Our strategy is to mitigate development risk by maintaining a diversified and broad clinical pipeline, rapidly analyzing data to determine the potential of each program, and entering into development collaborations with industry-leading collaborators, and includes: Continuing to rapidly advance bardoxolone methyl. We are currently studying bardoxolone methyl in a Phase 3 clinical trial in CTD-PAH and in a Phase 2 clinical trial in PH-ILD and PAH patients. Our goal is to seek regulatory approval for the commercialization of bardoxolone methyl initially in CTD-PAH patients, and, if successful, we intend to further pursue development and regulatory approval for the treatment of PH-ILD patients. In addition, we plan to advance bardoxolone methyl into chronic kidney disease caused by Alport syndrome, and, if successful, we intend to further pursue development and regulatory approval for the treatment of other renal diseases. Continuing to rapidly advance omaveloxolone. We believe that omaveloxolone has the potential to treat multiple indications, such as FA, MM, advanced solid tumors, and other diseases where mitochondrial dysfunction, oxidative stress, and inflammation are implicated. We plan to continue Phase 2 clinical development of omaveloxolone and to opportunistically advance this product candidate into Phase 3 clinical development for the treatment of the most promising indications. Advancing our preclinical programs into clinical development. We intend to advance our preclinical programs, including our neuroprotective Hsp90 inhibitors and our ROR T inhibitors, through preclinical studies into clinical development. We believe that the neuroprotective and bioenergetic effects of Hsp90 inhibitors have the potential to benefit patients suffering from ALS, diabetic neuropathy, spinocerebellar ataxia, and spinal bulbar muscular atrophy, and that the anti-inflammatory effects of ROR T inhibitors may be promising for the treatment of a number of autoimmune and inflammatory disorders. Leveraging our technologies to expand our development pipeline. We intend to leverage our multiple technologies by exploring preclinical and clinical proof of concept studies with multiple new molecules. We believe that our technologies may enable us to treat indications beyond those that we are currently exploring. Commercializing our lead product candidates in the United States. We retain U.S. commercial rights to our lead product candidates, bardoxolone methyl and omaveloxolone, and intend to commercialize these product candidates, if approved, in the United States. As we advance towards regulatory approvals for our lead product candidates, we intend to establish a specialty sales and marketing infrastructure and to contract with third parties for commercial scale manufacturing. Leveraging and opportunistically expanding our strategic collaborations to commercialize our product candidates outside of the United States. We plan to internationally commercialize our lead product candidates, bardoxolone methyl and omaveloxolone, subject to regulatory approvals, either with our own sales force or with our strategic collaborators AbbVie Ltd., or AbbVie, and KHK, depending on their participation in the programs and the terms of our contractual arrangements. With the expansion of our product candidate pipeline, we may opportunistically seek additional strategic collaborations to maximize our commercial opportunities for these new product candidates outside of the United States. Table of Contents Using our expertise to identify promising novel molecules and technologies. Our management team collectively has over 200 years of experience in small molecule development, and we intend to use this expertise, together with our established drug selection and development methodology, to advance what we believe to be the most promising small molecules that we currently own and to opportunistically in-license additional small molecules for development. Commercial Rights The commercialization of our AIM programs is subject to collaborations with AbbVie and KHK. Under the terms of our collaborations, we retain commercial rights to market and sell bardoxolone methyl in the United States. KHK has licensed from us the right to commercialize bardoxolone methyl in certain parts of Asia, and AbbVie has licensed from us the right to market and sell bardoxolone methyl in all non-KHK territories outside of the United States. We retain all U.S. commercial rights to market and sell omaveloxolone and have licensed to AbbVie commercialization rights to the rest of the world. Depending on opt-in decisions by our collaborators and the terms of our contractual arrangements, we plan to either commercialize in territories outside the U.S. or work closely with our collaborators to devise global commercialization strategies for bardoxolone methyl and omaveloxolone if these product candidates are approved and intend to market and sell these products, if approved, in the United States. Our non-AIM programs are not subject to any collaborations and we retain worldwide rights with respect to these programs. Financial Overview Our revenue to date has been generated primarily from collaboration and license revenue pursuant to our agreements with AbbVie and KHK. We have not generated any revenue from sales of commercial products to date. As of September 30, 2016, we had $95.7 million of cash and cash equivalents and an accumulated deficit of $285.2 million.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001361540_globalink_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001361540_globalink_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fc79a4ea35f1cd4ad8661ad3322df25a3bbcac9e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001361540_globalink_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1 RISK FACTORS 6 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 29 OUR HISTORY AND CORPORATE STRUCTURE 31 ENFORCEABILITY OF CIVIL LIABILITIES 32 USE OF PROCEEDS 33 DILUTION 34 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 36 MANAGEMENT S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS 38 DESCRIPTION OF OUR BUSINESS 51 LEGAL PROCEEDINGS 74 EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE 76 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 83 PLAN OF DISTRIBUTION 83 DESCRIPTION OF SECURITIES 85 DIVIDEND POLICY 86 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 86 LEGAL MATTERS 86 EXPERTS 86 DISCLOSURE OF COMMISSION S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 86 WHERE YOU CAN FIND MORE INFORMATION 87 PROSPECTUS SUMMARY This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully and you should carefully consider, among other things, our financial statements and the related notes and the sections entitled
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001383154_copsync_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001383154_copsync_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9326f5b463d10e3f12f26edfac3bbbae9a904c37
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001383154_copsync_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide to invest in our common stock, you should read and carefully consider the following summary together with the entire prospectus, including our financial statements and the related notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections in this prospectus entitled Risk Factors, Summary Consolidated Financial Data and Management s Discussion and Analysis of Financial Condition and Results of Operations. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See the section in this prospectus entitled Special Note Regarding Forward-Looking Statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the Risk Factors and other sections of this prospectus. Our Company COPsync Network COPsync, Inc. operates what we believe to be the only real-time, law enforcement mobile data information system in the United States. We refer to this real-time, in-car information sharing, communication and data interoperability network as the "COPsync Network." The COPsync Network, delivered via software as a service (SaaS), is designed for the purpose of: Allowing law enforcement officers to compile and share information, in real-time, via a common database accessible by all such officers on the COPsync Network, regardless of agency jurisdiction; Allowing officers to query, in real time, various local, state and federal law enforcement databases, including (i) the FBI Criminal Justice Information Service (CJIS) database, (ii) the law enforcement telecommunications system databases for the States of Texas, Mississippi and Massachusetts, (iii) the historical databases of our agency subscribers who have provided us with such access, (iv) the Department of Homeland Security's El Paso Intelligence Center (EPIC) database, which collects information relating to persons crossing the United States - Mexico border, and (v) our COPsync Network database, and, as we expand the scope of our operations to states other than those noted above, we anticipate that we will provide access to the law enforcement telecommunications databases in those states as well, subject to approvals from the applicable governing state agencies; Allowing dispatchers and officers to send, in real time, BOLO (be on the lookout) and other alerts of child kidnappings, robberies, car thefts, police pursuits, and other crimes in progress to all officers on the COPsync Network, regardless of agency jurisdiction; Allowing officers to write tickets, offense reports, crash reports and other reports and electronically and seamlessly send, in real time or near real-time, the information in those reports to the COPsync Network database and local court and agency databases; Informing officers of outstanding Texas Class C misdemeanor warrants, in real-time, at the point of a traffic stop and allowing the officers to collect payment for those warrants using a credit card, through a specific feature enhancement to the COPsync Network that we sometimes refer to as the WARRANTsync system. In the Homeland Security Act of 2002, Congress mandated that all U.S. law enforcement agencies, federal, state and local, implement information sharing solutions, referred to as "interoperability." Our COPsync Network provides this interoperability. Prior to the introduction of the COPsync Network, significant information sharing among law enforcement agencies, regardless of agency jurisdiction, did not exist in the United States. We believe that this lack of interoperability existed because law enforcement software vendors maintain proprietary systems that are not intended to interface with systems of other vendors. Our business model is to bring real-time information sharing, communication and data interoperability to as many law enforcement agencies as possible. Table of Contents COPsync911 Threat Alert System We also offer the COPsync911 threat alert service for use in schools, hospitals, day care facilities, government office buildings, energy infrastructure and other facilities with a high level of concern about security. When used in schools, the COPsync911 service enables school personnel to instantly and silently send emergency alerts directly to the closest law enforcement officers in their patrol vehicles, and to the local 911 dispatch center, with the mere click of an icon, from any computer within the facility and from any cell phone and other mobile devices associated with the facility. The alert is also sent to the cell phones of all law enforcement officers in the area and to all teachers, administrators, and other staff at the school, alerting them of imminent danger. We expect our COPsync911 service to reduce emergency law enforcement response times in those circumstances when seconds and minutes count. Once the alert is sent, a "crisis communication portal" is established among the person(s) sending the alert, the responding patrol vehicles and the local law enforcement 911 dispatch center. This allows the person(s) initiating the alert to silently communicate with responding officers and the 911 dispatch center about the nature of the threat, whether it is an active gunman, fire, suspicious person or other emergency. The crisis communication portal also provides a link to a diagram of the school or other facility and a map to its location. COURTsync System We also offer the COURTsync service to enhance courthouse protection and efficiency. COURTsync utilizes our WARRANTsync system to give patrol officers utilizing our COPsync Network access to Class C warrant information from the court, enabling them to collect warrant fees for the court. When used in courthouses, the COURTsync service enables judges and court personnel to instantly send emergency alerts directly to the closest law enforcement officers in their patrol vehicles and to the local 911 dispatch center, from any computer within the facility. Court personnel are also able to query federal law enforcement databases and databases pertaining to officer safety and dangerous persons. VidTac In-Vehicle Video System In addition to the COPsync Network and COPsync911, we offer a 100% digital, high-performance, software-driven video system designed for law enforcement. Its ultra-compact twin lens camera system not only doubles the image resolution quality but also the effective visual range of both video and still images. Unlike traditional in-vehicle video systems, which are expensive, hardware centric DVR-based systems, our VidTac software-driven system eliminates the need for a separate DVR, which allows us to offer VidTac for about half the price. Business Model We offer the COPsync Network, the COPsync911 threat alert service and the COURTsync service via a SaaS business model, under which our customers subscribe to use the COPsync Network and the COPsync911 service for a specified term. The subscription fees are typically paid annually at the inception of each year of service. Our business model is to obtain subscribers to use our service, achieve a high subscription renewal rate from those subscribers and then grow our revenue through a combination of acquiring new subscribers and obtaining renewals from existing subscribers. Pertinent attributes of our business model include the following: We have incurred and will continue to incur material research and development costs to continue to build out our infrastructure and add new features and functionality to our offerings; We have incurred start-up cost to establish our services and continue to incur recurring fixed costs to maintain our services; As we acquire subscribers and bring them onto our services, we experience variable acquisition costs related to sales, installation and deployment; We recruit subscribers with the goal of reaching a level of aggregate subscriber payments that exceeds our fixed (and variable) recurring service costs; We seek to maintain a high renewal rate among existing subscribers; and We augment these recurring revenues with product revenues from sales of our VidTac law enforcement in-vehicle video system. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Table of Contents Assuming that we are successful in obtaining new users of our services, as well as retaining high renewal rates of existing subscribers, we anticipate that the recurring nature of our subscription model will result in annually recurring, sustainable and predictable cash flow and revenue growth, year-over-year. However, we can provide no assurance that we will be successful in implementing our business model and achieving our operational and financial objectives. We sell our products and services through direct sales efforts and indirectly through a small network of distributors and resellers. Virtually all of our sales to date have been derived from the direct sales efforts of sales representatives that we employ. Regarding our indirect sales channels, we have one distributor for our products and services, which has exclusive distribution rights in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Virginia, except that COPsync may sell in such territories, and non-exclusive distribution rights in certain other states. We also have one reseller, with non-exclusive re-sale rights, for the COPsync Network and the COPsync911 threat alert system in Louisiana. We have several non-exclusive resellers, mainly vehicle up-fitters for the VidTac system in Texas. Our indirect sales channels have not contributed material sales to date when viewed in the context of our aggregate historical sales. We plan to devote time, energy and resources to develop a more robust and commercially successful network of indirect sales channels. Intellectual Property We hold a patent (patent no. 9,047,768) entitled, Method, System and Computer Program for Law Enforcement, which is utilized in the COPsync Network. This patent, which expires in August 2032, is for a method performed by an information handling system comprising a network connection for communicating information about at least one subject, wherein the subject includes at least one of a subject vehicle or a subject person. We also hold a patent (patent no. 9,143,670) entitled, Video Capturing System Including Two Independent Image Sensors, which is utilized in our VidTac product. This patent is for an in-vehicle video system comprising a forward-looking camera system that includes two independent image sensors and associated digital signal processors for processing imagery received from the respective independent image sensors. We also have three pending patents in application. The federal trademark COPSYNC is held by a third party, but we dispute the validity of the registered holder s rights in the mark. If the third party were to assert a trademark infringement claim against us, we could incur substantial costs and expenses of defending the claim and could be forced to relinquish our use of the COPSYNC mark and adopt a different trademark. This could cause a loss of the goodwill we have accumulated with respect to the sales of our products and services using the COPSYNC mark. We do, however, hold a Texas trademark registration for the mark COPSYNC, which expires in May 2018, and can be renewed for subsequent five-year terms as long as the mark remains in use. We also have a trademark registration application pending with the State of Texas for the mark COPSYNC 911. Additionally, we hold federal trademark registrations for the marks VIDTAC and WARRANTSYNC, which expire in December 2022 and January 2024, respectively, and can be renewed for subsequent ten-year terms as long as the marks remain in use. Public Offering On November 18, 2015, we closed a $10.6 million public offering. In connection with the public offering, we issued 3,028,572 shares of our common stock and warrants to purchase 3,028,572 shares of our common stock at an exercise price of $3.125 per share. On December 17, 2015, we closed an overallotment exercise in connection with this public offering. In connection with this overallotment exercise, we issued warrants to purchase 440,420 shares of our common stock at an exercise price of $3.125 per share. Amendment No. 1 to Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents Risks Associated with Our Business Before you invest in our common stock and warrants, you should carefully consider all the information in this prospectus, including matters set forth under the heading Risk Factors. We believe that the following are some of the major risks and uncertainties that may affect us: We have a short operating history, a relatively new business model, and have not produced significant revenues, which makes it difficult to evaluate our future prospects and increases the risk that we will not be successful; We have a history of operating losses, which may continue and may harm our ability to obtain financing and continue our operations; It is possible that we may require additional financing to continue to grow our business operations, which would dilute the ownership held by our stockholders. If we are unable to obtain additional financing our business operations may be harmed or discontinued, and if we do obtain additional financing our stockholders may suffer substantial dilution; General economic conditions may adversely affect our business, operating results and financial condition; If our existing products and services are not accepted by potential customers or we fail to introduce new products and services, our business, results of operations and financial condition will be harmed; We rely heavily on sales to governmental entities, and the loss of a significant number of contracts would impact our ability to reach profitability; If we are unable to adequately compete with our competitors, some of whom may have greater resources with which to compete, it may impact our ability to effectively market and sell our products; Sales to many of our customers involve long sales and implementation cycles, which may cause revenues and operating results to vary significantly, making it more difficult to analyze our financial statements and prepare accurate financial projections; If we are unable to retain the services of key personnel, we may not be able to continue our operations; Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand; and Intellectual property litigation could harm our business. Our Corporate Information We were incorporated in Delaware in October 2006 and operated with nominal or no assets or operations until 2008. We acquired the predecessor-in-interest to our business, PostInk Technology, LP, a Texas limited partnership, in April 2008 and began realizing revenues from operations in the fourth quarter of 2008. Our principal executive offices are located at 16415 Addison Road, Suite 300, Addison, Texas 75001, and our telephone number is (972) 865-6192. Our website address is www.copsync.com. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and are not considered part of, this prospectus. You should not rely on any such information in making your decision to purchase our common stock. COPsync, Inc. (Exact name of registrant as specified in its charter) (1) The number of shares of our common stock outstanding prior to this offering is based on 8, 362 ,903 shares outstanding as of January 21, 2016 and excludes the following: 63,615 shares of common stock reserved for issuance pursuant to certain convertible and non-convertible promissory note conversion agreements; 244 ,900 shares of common stock issuable upon exercise of outstanding stock options, at a weighted average exercise price of $ 5.38 per share; 4,523,629 shares of common stock issuable upon exercise of outstanding warrants, at a weighted average exercise price of $3.49 per share; and 2,000 shares of common stock issuable upon the conversion of our Series A Preferred Stock. (2) The total number of shares of our common stock outstanding after this offering is based on 8,362,903 shares outstanding as of January 21, 2016 . Delaware 3576 98-0513637 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) COPsync, Inc. 16415 Addison Road, Suite 300 Addison, Texas 75001 (972) 865-6192 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Ronald A. Woessner Chief Executive Officer COPsync, Inc. 16415 Addison Road, Suite 300 Addison, Texas 75001 (972) 865-6192 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: James M. Jenkins, Esq. Alexander R. McClean, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, New York 14604 (585) 232-6500 Table of Contents Summary Consolidated Financial Data The following table summarizes our consolidated financial data. We have derived the following consolidated statements of operations data for the years ended December 31, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2014 from our audited consolidated financial statements, included elsewhere in this prospectus. We have derived the summary statements of operations data for the nine months ended September 30, 2015 and 2014 and the summary balance sheet data as of September 30, 2015 from our unaudited interim condensed financial statements included elsewhere in this prospectus. Our historical results for prior periods are not necessarily indicative of results to be expected for any future period. The summary consolidated financial data presented below should be read in conjunction with Management s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto, included elsewhere in this prospectus. The summary consolidated financial data in this section is not intended to replace our consolidated financial statements and the related notes thereto. Statement of Operations Data: For the Twelve Months Ended For the Nine Months Ended December 31, September 30, 2014 2013 2015 2014 Total Revenues $ 5,910,328 $ 4,725,617 $ 3,681,023 $ 4,369,678 Total Cost of Revenues $ 3,644,495 $ 3,468,840 $ 2,170,471 $ 2,681,295 Gross Profit $ 2,265,833 $ 1,256,777 $ 1,510,552 $ 1,688,383 Total Operating Expenses $ 6,321,707 $ 4,842,607 $ 4,235,445 $ 3,602,730 Loss from Operations $ (4,055,874 ) $ (3,585,830 ) $ (2,724,893 ) $ (1,914,347 ) Total Other Expense $ (167,593 ) $ (29,026 ) $ (830,207 ) $ (103,854 ) Net Loss $ (4,223,467 ) $ (3,614,856 ) $ (3,555,100 ) $ (2,018,201 ) Series B preferred stock dividend $ (33,693 ) $ (105,000 ) $ (26,034 ) $ (27,020 ) Accretion of beneficial conversion feature on preferred shares dividends issued in kind $ (71,307 ) $ -- $ (52,500 ) $ (51,514 ) Cost of Series B warrants extension $ -- $ (120,000 ) $ -- $ -- Net Loss Attributable to Common Shareholders $ (4,328,467 ) $ (3,839,856 ) $ (3,633,634 ) $ (2,096,735 ) Loss Per Common Share - Basic & Diluted $ (1.18 ) $ (1.10 ) $ (0.89 ) $ (0.59 ) Weighted Average Number of Common Shares Outstanding - Basic & Diluted 3,659,735 3,474,990 4,053,557 3,545,332 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. x If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Table of Contents Balance Sheet Data: December 31, 2014 December 31, 2013 September 30, 2015 Total Current Assets $ 1,377,306 $ 990,364 $ 1,329,465 Total Property and Equipment $ 328,665 $ 248,642 $ 309,958 Accumulated Depreciation $ (152,789 ) $ (113,489 ) $ (180,459 ) Net Property and Equipment $ 175,879 $ 135,153 $ 129,499 Total Other Assets $ -- $ 436,471 $ -- Total Assets $ 1,553,182 $ 1,561,988 $ 1,458,964 Total Current Liabilities $ 4,862,131 $ 4,726,839 $ 5,460,435 Total Long-Term Liabilities $ 1,906,838 $ 1,754,241 $ 2,243,569 Total Liabilities $ 6,768,969 $ 6,484,080 $ 7,704,004 Series A Preferred Stock, par value $0.0001 per share, 100,000 shares authorized, 100,000 shares issued and outstanding, respectively $ 10 $ 10 $ 10 Series B Preferred Stock, par value $0.0001 per share, 375,000 shares authorized, 375,000 shares issued and outstanding, respectively $ 37 $ 37 $ 37 Common Stock, par value 0.0001 per share, 500,000,000 shares authorized, 4,037,043 and 3,500,291 shares issued and outstanding, respectively $ 404 $ 350 $ 411 Additional paid-in-capital $ 17,650,034 $ 13,727,123 $ 19,635,809 Accumulated deficit $ (22,908,272 ) $ (18,651,112 ) $ (26,477,288 ) Total Stockholders' Deficit $ (5,215,787 ) $ (4,922,092 ) $ (6,245,040 ) Total Liabilities and Stockholders Deficit $ 1,533,182 $ 1,561,988 $ 1,458,964 Table of Contents CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered (1)(2) Proposed Maximum Offering Price per Share (3) Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $0.0001 par value per share (4) 365,795 $ 2.05 $ 749,878 $ 75.51 (5) Total Common Stock underlying Warrants (4) 292,645 $ 2.05 $ 599,922 $ 60.41 (5) Common Stock, $0.0001 par value per share 220,502 $ 1.77 $ 390,289 $ 39.30 Total Common Stock underlying Warrants 176,407 $ 1.77 $ 312,240 $ 31.44 Total Common Stock 1,055,349 $ 1.95 $ 2, 052,329 $ 206.66 (1) This Registration Statement covers the resale by certain selling securityholders named herein of up to 1,055,349 shares of our common stock, par value $0.0001 per share, including (i) up to 586,297 shares of our common stock previously issued to such selling securityholders in connection with the automatic conversion of their convertible promissory notes issued in a private placement and (ii) up to 469,052 shares of our common stock issuable upon exercise of outstanding warrants that were issued to the selling securityholders in connection with a private placement. (2) In the event of a stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act. (3) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the Securities Act ), based upon the average of the high and low per share sales prices of the Registrant s common stock as reported on the NASDAQ Capital Market on December 16, 2015 with respect to shares registered on December 18, 2015 and January 22, 2016 with respect to all other shares . (4) Included on registrant s initial Registration Statement on Form S-1, filed on December 18, 2015. (5) Previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001383183_combimatri_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001383183_combimatri_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..29085a758f80a6199a88641ae00fa355f8582c94
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001383183_combimatri_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information described in greater detail elsewhere or incorporated by reference in this prospectus. Before deciding to invest in our securities you should read the entire prospectus carefully, including the "Risk Factors" section contained in this prospectus, and our consolidated financial statements and the related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other documents incorporated by reference into this prospectus. Our Company We provide valuable molecular diagnostic solutions for reproductive health, along with comprehensive clinical support, facilitating the highest quality of care. We specialize in pre-implantation genetic screening, miscarriage analysis, prenatal diagnosis and pediatric developmental disorders, offering DNA-based testing for the detection of genetic abnormalities beyond what can be identified through traditional methodologies. We perform genetic testing utilizing a variety of advanced cytogenomic techniques, including chromosomal microarray, or CMA, standardized and customized fluorescent in-situ hybridization, or FISH, and high resolution karyotyping. Our emphasis is on supporting healthcare professionals to ensure their understanding of complex test results and how best to communicate those results to their patients. We deliver technology-driven answers, with a high degree of support for the ordering physicians and their staff. Services Offered We utilize the latest technologies to deliver molecular diagnostic services primarily in the area of reproductive health for the diagnosis of developmental disorders associated with intellectual disability, congenital anomalies, dysmorphic features, and autism spectrum disorders in the following four areas: In Vitro Fertilization, or IVF, Diagnostic Testing. IVF testing is focused on screening embryos for aneuploidy (i.e., an abnormal chromosome complement) and is referred to as either Preimplantation Genetic Screening, or PGS, or Comprehensive Chromosomal Screening, or CCS. A significant proportion of embryos created through IVF have an abnormal chromosomal complement known as aneuploidy, and this percentage dramatically increases with age. The goal of PGS is to determine the chromosomal make-up of each embryo to help the IVF specialist identify the most suitable embryo(s) for transfer. We believe this market segment is rapidly growing due to the impact of delayed childbearing as well as the negative impact of increased obesity on fertility. As most insurers do not provide coverage benefits for IVF, this market involves fee-for-service billing of the testing directly to the patient, as opposed to the patient's insurance. Miscarriage Analysis. It is estimated that 50-60% of all first trimester pregnancy losses are due to chromosomal abnormalities. Being able to identify the cause of the miscarriage in one out of every two women means that physicians are better able to provide personalized reproductive counseling and plan future pregnancy management for a much larger segment of their patient population. Microarray testing that we provide is particularly useful in this area in order to help determine the cause of the miscarriage, simply by analyzing the DNA from the product of conception, or POC, whether direct from the operating room or from tissue samples that have been previously archived. Prenatal Diagnostics: We provide molecular diagnostic testing of fetal DNA in utero, which allows the physician and patient to make better pregnancy management and care decisions, as well as allowing for the opportunity to provide anticipatory care with respect to abnormalities that may be associated with a specific disorder that may not yet be recognizable. Such knowledge can inform decisions about where to deliver (such as at a tertiary care center for an infant with complex abnormalities) and how aggressive to be with neonatal support in very severe cases. Postnatal Diagnostics: We also provide molecular diagnostic testing of a child's DNA. Once the cause of a child's development disorder and/or congenital anomalies has been identified, parents, teachers and physicians can work toward ensuring that appropriate medical and educational care decisions are made based on the child's condition. And as with prenatal care, microarray analysis can assist in providing appropriate anticipatory care, such as initiating screening tests at an earlier age when the child's disorder is associated with an increased risk of a specific disorder or disease complication. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 18, 2016 8,000 Shares of Series F Convertible Preferred Stock (and 2,209,944 Shares of Common Stock Underlying the Series F Convertible Preferred Stock) 2,209,944 Warrants to Purchase up to 2,209,944 Shares of Common Stock (and 2,209,944 Shares of Common Stock Issuable Upon Exercise of Warrants) Table of Contents Technologies In order to achieve the promise of personalized medicine, our objective is to provide a suite of molecular diagnostic tests based on the following technologies: Oligo Arrays with Single Nucleotide Polymorphisms, or SNPs We use the Illumina CytoSNP-850K BeadChip microarray to perform our microarray testing for our POC, prenatal genetics, and postnatal developmental disorders markets. Illumina's CytoSNP-850K microarray is comprised of 50 nucleotide base, or 50-mer, probes attached to individual silica beads, which self-assemble into microwells on the array's surface. Each SNP probe is represented with a high degree of redundancy to improve sensitivity by increasing the signal-to-noise ratio. BAC Arrays For our IVF testing, we use the Illumina 24sure Microarray, which is comprised of thousands of bacterial artificial chromosome, or BAC, probes that are immobilized on the surface of a glass slide. Unlike the 50-mer SNP probes utilized in the 850K BeadChip microarray, BAC probes contain tens to hundreds of thousands of nucleotides per probe, and rely on extensive complimentary base pairing of single stranded patient and reference DNA. Market Opportunity We believe the molecular diagnostics market is one of the fastest-growing segments within the overall diagnostics market. Molecular diagnostics refers to the use of an individual's genetic analysis to guide medical decision-making in the area of disease diagnosis and post-diagnostic patient care management. We believe innovative approaches to re-sequencing of the human genome and a growing clinical appreciation and acceptance of the utility of genomic information in guiding clinical care are enabling rapid growth of this market. We believe that the use of molecular diagnostics will continue to grow in the coming years and will have a significant impact on the way in which medicine is practiced. Our Strategy Our strategic intent is to become the preeminent diagnostics services laboratory for reproductive health, and we leverage our sales organization and channel partners to drive market adoption of our tests in the four markets noted above. Through channel partners and our direct sales organization, we are able to service IVF clinics, the underserved pathology community, maternal fetal medicine, or MFM, specialists, and also to obstetrics and gynecology specialists, or OB-GYN. Recent Alliances and Partnerships We have established several key partnerships, most notably with Sequenom, Inc., where we jointly announced in August 2013 that we entered into a collaboration agreement to market and promote CMA to broaden and confirm the results of NIPS for physicians and their patients. Under this agreement, our two companies collaboratively use our respective marketing channels and sales forces to promote the use of NIPS and CMA and work together to provide technical training to physicians and counseling, education and support services to expectant parents. Our two companies provide, when clinically appropriate, a comprehensive test results report for physicians and parents. Corporate Information Our principal business office is located at 310 Goddard, Suite 150, Irvine, California 92618, and our telephone number is (949) 753-0624. Our website address is www.combimatrix.com. Information contained on our website or any other website does not constitute part of, and is not incorporated into, this prospectus. We are offering 8,000 units to purchasers in this offering, with each unit consisting of (1) one share of Series F convertible preferred stock, or Series F preferred stock, which is convertible into that number of shares of our common stock equal to 1,000 divided by the conversion price of the Series F preferred stock and (2) 276.243 warrants each exercisable for one share of our common stock, which number of warrants equals 100% of the number of shares of our common stock issuable upon conversion of a share of Series F preferred stock at the conversion price, at an exercise price per share equal to $ , which is 100% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement. This prospectus also covers up to 2,209,944 shares of common stock issuable upon conversion of the Series F preferred stock and up to 2,209,944 shares of common stock issuable upon exercise of the warrants. The units will be sold for a purchase price equal to $1,000 per unit. Units will not be issued or certificated. The shares of Series F preferred stock and the warrants are immediately separable and will be issued separately. Subject to certain ownership limitations, the Series F preferred stock is convertible at any time at the option of the holder into shares of our common stock at a conversion price per share equal to $ , which is 75% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement. Subject to certain ownership limitations, the warrants are immediately exercisable and expire on the fifth anniversary of the date of issuance. For a more detailed description of the Series F preferred stock, see the section entitled "Description of Capital Stock Series F Preferred Stock" beginning on page 46. For a more detailed description of the warrants, see the section entitled "Description of Securities We Are Offering Warrants to Purchase Common Stock" beginning on page 54 of this prospectus. For a more detailed description of our common stock, see the section entitled "Description of Capital Stock Common Stock and Preferred Stock" beginning on page 44 of this prospectus. We refer to the Series F preferred stock issued hereunder, the warrants to purchase common stock issued hereunder and the shares of common stock issuable upon conversion of the Series F preferred stock and upon exercise of the warrants issued hereunder, collectively, as the securities. Certain investors in this offering will be subject to certain leak-out provisions governing their sales of our common stock. See "Description of Securities We Are Offering Investor Leak-Out Agreement". Our common stock is listed on The NASDAQ Capital Market under the symbol "CBMX". On March 17, 2016, our common stock closed at $4.88 per share. The preferred stock will not be listed on any national securities exchange. We intend to apply for listing of the warrants on the NASDAQ Capital Market under the trading symbol "CBMXW". Investing in our securities involves a high degree of risk. See "Risk Factors" beginning on page 10 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Table of Contents The Offering The following summary contains basic information about the offering and the securities we are offering and is not intended to be complete. It does not contain all the information that is important to you. For a more complete understanding of the securities we are offering, please refer to the sections of this prospectus titled "Description of Capital Stock" and "Description of Securities We Are Offering." Securities offered by us 8,000 units, with each unit consisting of one share of Series F convertible preferred stock, or Series F preferred stock, and 276.243 warrants each exercisable for one share of our common stock, which number of warrants equals 100% of the number of shares of our common stock issuable upon conversion of a share of Series F preferred stock at the initial conversion price, at an exercise price per share equal to $ , which is 100% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement.(1) Units will not be issued or certificated. The shares of Series F preferred stock and the warrants are immediately separable and will be issued separately. Offering Price $1,000 per unit Description of Series F preferred stock Each unit includes one share of Series F preferred stock. Series F preferred stock has a liquidation preference, has full ratchet price based anti-dilution protection, and is subject to certain ownership limitations. In addition, we have the right to require holders to convert the Series F preferred stock if certain equity conditions are met and if the volume weighted average price of our common stock exceeds 200% of the conversion price for any 20 of 30 consecutive trading days and the daily dollar trading volume during such period exceeds $200,000 per trading day. See the section entitled "Description of Capital Stock Series F Preferred Stock" beginning on page 46. This prospectus also relates to the offering of shares of common stock issuable upon conversion of the Series F preferred stock at its initial conversion price. Conversion Price of Series F preferred stock $ per share (subject to adjustment as described in this prospectus), which is 75% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement. Until the volume weighted average price of our common stock exceeds 200% of the conversion price of the Series F preferred stock for any 20 of 30 consecutive trading days and the daily dollar trading volume for each trading day during such period exceeds $200,000 per trading day, the Series F preferred stock has full ratchet price based anti-dilution protection, subject to customary carve-outs, in the event of a down-round financing below the conversion price. Shares of common stock underlying the shares of Series F preferred stock included in units 2,209,944(1) Description of warrants The warrants will have an exercise price of $ per share, which is 100% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement, will be immediately exercisable and will expire on the fifth anniversary of the date of issuance. This prospectus also relates to the offering of shares of common stock issuable upon exercise of the warrants. Shares of common stock underlying the warrants included in units 2,209,944(1) Per Unit (one Share of Series F Preferred Stock and one warrant) Total Public offering price $ $ Underwriting discounts and commissions(1) $ $ Proceeds to us (before expenses) $ $ (1)We have agreed to reimburse the underwriters for certain expenses. See "Underwriting" on page 25 of this prospectus for a description of the compensation payable to the underwriters. The underwriters expect to deliver the shares and warrants against payment on or about , 2016 subject to satisfaction of certain conditions. (1)Based on a Series F preferred stock conversion price of $ per share, which was 75% of the consolidated closing bid price of our common stock on The NASDAQ Capital Market on the date we entered into the underwriting agreement. The number of warrants equals 100% of the number of shares of our common stock issuable upon conversion of a share of Series F preferred stock at the conversion price. Ladenburg Thalmann Sole Bookrunning Manager Aegis Capital Corp. Lead Manager Prospectus dated . Table of Contents (2)The number of shares of common stock to be outstanding after this offering as reflected in the table above is based on the actual number of shares outstanding as of March 17, 2016, which was 856,929, and does not include, as of that date: 69,995 shares of common stock issuable upon the exercise of outstanding stock options under our 2006 Incentive Plan, having a weighted average exercise price of $99.19 per share; 27,842 shares of common stock issuable upon the vesting of certain restricted stock units under our 2006 Incentive Plan; 643,317 shares of common stock issuable upon the exercise of outstanding warrants, having a weighted average exercise price of $40.95 per share; 83,272 shares of common stock issuable upon the conversion of outstanding Series E preferred stock at the present conversion price of $26.25 per share; additional shares of common stock that may be issuable upon conversion of Series E preferred stock pursuant to the anti-dilution provisions thereof; and shares of common stock that may be issued under the warrants to be issued in this offering and additional shares of common stock that may be issuable upon conversion of Series F preferred stock pursuant to the anti-dilution provisions thereof. Unless otherwise stated, outstanding share information throughout this prospectus excludes such outstanding options and warrants to purchase shares of common stock. Recent Developments On January 29, 2016, we filed a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse split of our common stock at a ratio of one-for-fifteen, which became effective at the close of business on that day. As a result, each share of CombiMatrix common stock outstanding as of January 29, 2016 was automatically changed into one-fifteenth of a share of common stock. No fractional shares were issued in connection with the reverse stock split, and cash paid to stockholders for fractional shares was insignificant. The number of shares of common stock subject to outstanding options, restricted stock units, warrants and convertible securities were also reduced by a factor of fifteen as of January 29, 2016. All historical share and per share amounts reflected throughout this prospectus have been adjusted to reflect the reverse stock split. The authorized number of shares and the par value per share of our common stock were not affected by the reverse stock split. On February 4, 2016, we entered into a Series E 6% Convertible Preferred Stock Repurchase Agreement, or the Repurchase Agreement, with the holders of our outstanding Series E 6% Convertible Preferred Stock, or the Series E Preferred Stock. Pursuant to the terms of the Repurchase Agreement, we agreed to pay each such holder $300 per share of Series E Preferred Stock, or approximately $656,000 in the aggregate, in consideration for the right to repurchase such holder's Series E Preferred Stock at a price per share of $1,000, which was the original price per share paid by holders for their Series E Preferred Stock in February 2015. We must repurchase the Series E Preferred Stock within one business day after closing this offering. In connection with entering into the Repurchase Agreement, we were granted certain consents and waivers relating to this offering. In the event that this offering is not consummated by the date set forth in the Repurchase Agreement, the Repurchase Agreement will terminate and we will not be obligated to repurchase the Series E Preferred Stock. By entering into the Repurchase Agreement, we have averted the potentially significant dilution that would have occurred from the full ratchet of the conversion price of the Series E Preferred Stock upon closing of this offering. Recent Financial Information During 2015, our business activities were driven primarily by commercialization efforts for our suite of molecular diagnostic tests, expansion of our test menu and by the infusion of additional capital. For the year ended December 31, 2015, our operating activities included the recognition of $10.1 million of total revenues, which increased by $2.0 million from 2014, due primarily to increased volumes of microarray diagnostic tests performed, particularly in the reproductive health testing market, which includes testing volumes from prenatal, miscarriage analysis and pre-implantation genetic screening, or PGS, diagnostic tests. Volumes from our reproductive health testing services increased by 40% in 2015 compared to 2014, and total microarray testing increased by 22% in 2015 compared to 2014. Our net loss from operations in 2015 decreased over 2014 primarily due to increased revenues and Table of Contents decreased operating expenses as a result of reduced litigation expenses, partially offset by increased cost of services from higher testing volumes as well as from higher sales and marketing expenses from increased sales and sales-support staff. The decrease in our net loss attributable to common stockholders was partially offset by $1.1 million of deemed dividends incurred from the issuance of Series E Preferred Stock and modification of Series E warrants. Cash, cash equivalents and short-term investments as of December 31, 2015 was $3.9 million compared to $5.2 million as of December 31, 2014. We used $5.7 million in cash to fund operating activities during 2015 compared with $8.7 million to fund operating activities during 2014. The significant decreases in net cash used to fund operating activities for 2015 resulted from lower litigation expenses, coupled with improved cash reimbursement of $9.3 million in 2015 compared with $7.4 million in 2014. Table of Contents Summary Selected Consolidated Financial Information You should read the summary selected consolidated financial information presented below in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and our consolidated financial statements and the notes to those consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, 2015, which is incorporated by reference in this prospectus. The following tables set forth our summary statement of operations data for the years ended December 31, 2015 and 2014 and our summary balance sheet data as of December 31, 2015 and 2014. Our statement of operations data for the years ended December 31, 2015 and 2014 and our balance sheet data as of December 31, 2015 and 2014 were derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015, which is incorporated by reference in this prospectus. The results indicated below and elsewhere in this prospectus are not necessarily indicative of our future performance. Years Ended December 31, 2015 2014 (Amounts in thousands, except per share data) Consolidated Statement of Operations Data: Revenues: Diagnostic services $ 9,941 $ 7,893 Royalties 147 149 Total revenues 10,088 8,042 Operating expenses: Cost of services 5,444 4,432 Research and development 466 725 Sales and marketing 4,979 4,349 General and administrative 5,540 7,176 Patent amortization and royalties 100 114 Impairment of cost-basis investment 97 Total operating expenses 16,626 16,796 Operating loss (6,538 ) (8,754 ) Other income (expense): Interest income 16 23 Interest expense (79 ) (84 ) Warrant derivative gains 152 Warrant modification charge (44 ) Total other income (expense) (63 ) 47 Net loss $ (6,601 ) $ (8,707 ) Deemed dividends from issuing and modifying Series E convertible preferred stock and warrants (1,058 ) Net loss attributable to common stockholders $ (7,659 ) $ (8,707 ) Basic and diluted net loss per share $ (7.95 ) $ (11.84 ) Deemed dividends from issuing and modifying Series E convertible preferred stock and warrants (1.27 ) Basic and diluted net loss per share attributable to common stockholders $ (9.22 ) $ (11.84 ) Basic and diluted weighted average common shares outstanding 830,835 735,284 As of December 31, 2015 2014 Consolidated Balance Sheet Data: Cash, cash equivalents and short-term investments $ 3,901 $ 5,240 Working capital 5,417 6,642 Total assets 7,922 8,632 Total liabilities 2,066 1,512 Stockholders' equity 5,856 7,120 Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001385508_opiant_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001385508_opiant_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8e7096570f0809f84e240a884ccf2d1be2682f78
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001385508_opiant_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock of Opiant Pharmaceuticals, Inc. (referred to herein as "we," "our," "us,"
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001386965_ironshore_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001386965_ironshore_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001386965_ironshore_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001388319_u-s-stem_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001388319_u-s-stem_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1a4dc5dfb3a336a2a5ca984bea77417d0e91a9f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001388319_u-s-stem_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the Common Stock. Before making an investment decision, you should read the entire prospectus carefully, including the "RISK FACTORS" section, the financial statements and the notes to the financial statements. As used throughout this Registration Statement and prospectus, the term Registrant refers to U.S. Stem Cell, Inc. and the terms "Company", "we," "us," or "our" refer to U.S. Stem Cell, Inc. and its consolidated subsidiaries unless the context otherwise requires. Our Company Overview We are a biotechnology company focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies for the treatment of chronic and acute heart damage. Our lead product candidate is MyoCell, an innovative clinical therapy designed to populate regions of scar tissue within a patient s heart with autologous muscle cells, or cells from a patient s body, for the purpose of improving cardiac function in chronic heart failure patients. Biotechnology Product Candidates Our business includes the development of proprietary cell therapy products as well as revenue generating physician and patient based regenerative medicine / cell therapy training services, cell collection and cell storage services, the sale of cell collection and treatment kits for humans and animals, and the operation of a cell therapy clinic. Management maintains that revenues and their associated cash in-flows generated from our businesses will, over time, provide funds to support our clinical development activities as they do today for our general business operations. We believe the combination of our own therapeutics pipeline combined with our revenue generating capabilities provides the Company with a unique opportunity for growth and a pathway to profitability. US Stem Cell Training, ( SCT ), an operating division of U.S. Stem Cell, Inc., is a content developer of regenerative medicine / cell therapy informational and training materials for physicians and patients. SCT also provides in-person and online training courses which are delivered through in-person presentations at SCT s state of the art facilities and globally at university, hospital and physician s office locations as well as through online webinars. Additionally, SCT provides hands-on clinical application training for physicians and health care professionals interested in providing regenerative medicine / cell therapy procedures. Vetbiologics, ( VBI ), an operating division of our company, is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses. VBI provides veterinarians with extensive regenerative medicine capabilities including the ability to isolate regenerative stem cells from a patient s own adipose (fat) tissue directly on-site within their own clinic or stall-side. US Stem Cell Clinic, LLC, ( SCC ), a partially owned 33.3% investment of our company, is a physician run regenerative medicine/cell therapy clinic providing cellular treatments for patients afflicted with neurological, autoimmune, orthopedic and degenerative diseases. SCC is operating in compliance with the FDA 1271s which allow for same day medical procedures to be considered the practice of medicine. We isolate stem cells from bone marrow and adipose tissue and also utilize platelet rich plasma. MyoCell/MyoCell SDF-1 MyoCell is a clinical therapy intended to improve cardiac function for those with congestive heart failure and is designed to be utilized months or even years after a patient has suffered severe heart damage due to a heart attack or other cause. We believe that MyoCell has the potential to become a leading treatment for severe, chronic damage to the heart due to its perceived ability to satisfy, at least in part, what we believe to be an unmet demand for more effective and/or more affordable therapies for chronic heart damage. MyoCell uses myoblasts, cells that are precursors to muscle cells, from the patient s own body. The myoblasts are removed from a patient s thigh muscle, isolated, grown through our proprietary cell culturing process, and injected directly in the scar tissue of a patient s heart. A qualified physician performs this minimally invasive procedure using an endoventricular catheter. We entered into an agreement with a Johnson & Johnson company to use its NOGA Cardiac Navigation System along with its MyoStar injection catheter for the delivery of MyoCell in the MARVEL Trial. Table of Contents CALCULATION OF REGISTRATION FEE Title of each class of securities to be Registered Amount to be Registered (1) Proposed Maximum Offering Price Per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $.001 par value 341,718 (2) $ 0.76 (3) $ 259,706 $ 26.00 Total 341,718 (2) $ 0.76 (3) $ 259,706 $ 26.00 * (1) Represents shares offered by the Selling Stockholder. Includes an indeterminable number of additional shares of Common Stock, pursuant to Rule 416 under the Securities Act that may be issued to prevent dilution from stock splits, stock dividends or similar transaction that could affect the shares to be offered by Selling Stockholder. (2) Consists of 341,718 issuable on conversion of convertible promissory notes held by the Selling Stockholder. (3) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457 under the Securities Act, using the average of the high and low prices as reported on the OTC Markets marketplace on January 26, 2016 . * Previously paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. The information in this Prospectus is not complete and may be changed. The Selling Stockholder may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the sale is not permitted. PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED ________, 2016 Table of Contents When injected into scar tissue within the heart wall, myoblasts have been shown to be capable of engrafting in the damaged tissue and differentiating into mature skeletal muscle cells. In a number of clinical and animal studies, the engrafted skeletal muscle cells have been shown to express various proteins that are important components of contractile function. By using myoblasts obtained from a patient s own body, we believe MyoCell is able to avoid certain challenges currently faced by other types of cell-based clinical therapies including tissue rejection and instances of the cells differentiating into cells other than muscle. Although a number of therapies have proven to improve the cardiac function of a damaged heart, no currently available treatment, to our knowledge, has demonstrated an ability to generate new muscle tissue within the scarred regions of a heart. We believe the market for treating patients in NYHA Class II or NYHA Class III heart failure is significant. According to the AHA Statistics and the European Society of Cardiology Task Force for the Treatment of Chronic Heart Failure, in the United States and Europe there are approximately 5.2 million and 9.6 million, respectively, patients with heart failure. The AHA Statistics further indicate that, after heart failure is diagnosed, the one-year mortality rate is high, with one in five dying and that 80% of men and 70% of women under age 65 who have heart failure will die within eight years. We believe that approximately 60% of heart failure patients are in either NYHA Class II or NYHA Class III heart failure based upon a 1999 study entitled Congestive Heart Failure Due to Diastolic or Systolic Dysfunction Frequency and Patient Characteristics in an Ambulatory Setting by Diller, PM, et. al. MyoCell SDF-1 is intended to be an improvement to MyoCell. MyoCell SDF-1 is similar to MyoCell except that the myoblast cells to be injected for use in MyoCell SDF-1 will be modified prior to injection by an adenovirus vector or non-viral vector so that they will release extra quantities of the SDF-1 protein, which expresses angiogenic factors. AdipoCell is a patient-derived cell therapy proposed for the treatment of acute myocardial infarction, chronic heart ischemia, and lower limb ischemia. We hope to demonstrate that these product candidates are safe and effective complements to existing therapies for chronic and acute heart damage. MyoCath The MyoCath was developed by U.S. Stem Cell co-founder Robert Lashinski specifically for delivering new cells to damaged tissue. It is a deflecting tip needle injection catheter that has a larger needle which is 25 gauge for better flow rates and less leakage than systems that are 27 gauge. This larger needle allows for thicker compositions to be injected which helps with cell retention in the heart. Also, the MyoCath needle has more fluoroscopic brightness than the normally used nitinol needle, enabling superior visualization during the procedure. Seeing the needle well during injections enables the physician who is operating the catheter to pinpoint targeted areas more precisely, thus improving safety. The MyoCath competes well with other biological delivery systems on price and efficiency and allows the physician to utilize standard fluoroscopy and echo equipment found in every cath lab. The MyoCath is used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart ischemic and congestive heart failure. We are currently utilizing a contract manufacturer to produce catheters as needed. AdipoCell U.S. Stem Cell has successfully completed various trials using adipose stem cells. We have completed the Phase 1 Angel Trial for AdipoCell (adipose derived stem cells). Five patients were enrolled and treated in the second quarter of 2013. At the twelve (12) month time point, patients demonstrated a statistically significant average improvement in ejection fraction (EF) by echocardiogram. At the three (3) month time point, 100% of the patients demonstrated either improvement or stayed the same. After three (3) months, patients showed an average absolute improvement of 3 percentage points in EF. The patients continued to improve from 3 months to 6 months with a statistically significant average absolute improvement of 10 percentage points (p=0.01) and at the 12 month follow up patients showed this same level of improvement (p=0.01). We have also initiated several Institutional Review Board studies in 2013 using adipose derived stem cells for various indications including dry macular degeneration, degenerative disc disease, erectile dysfunction and chronic obstructive pulmonary disease. In the second quarter of 2014, we announced the treatment of a patient in Honduras with congestive heart failure using AdipoCell and MyoCell. This was the first patient treated in the world using a combination of stem cells. We have begun two clinical trials in India. The first cardiac patient has successfully been enrolled and treated in India using AdipoCell or adipose derived stem cells. The second trial will involve the combination of AdipoCell and MyoCell or muscle derived stem cells for congestive heart failure patients. These trials are active and ongoing. Table of Contents U.S. STEM CELL, INC. 341,718 Shares of Common Stock This prospectus relates to the resale of up to 341,718 shares of our common stock, which may be offered by the selling stockholder, Magna Equities II, LLC, a New York limited liability company, or Magna. The shares of common stock being offered by the selling stockholder are issuable (i) upon conversion of a senior convertible note in the principal amount of $110,000, or the First Convertible Note, that we issued to Magna on October 1, 2015 and amended and restated on December 3, 2015, pursuant to the terms and conditions of a Securities Purchase Agreement with Magna, dated October 1, 2015 (the Initial Purchase Agreement ) and (ii) upon conversion of a senior convertible note in the principal amount of $262,500, or the Second Convertible Note, that we issued to Magna on December 3, 2015, pursuant to the terms and conditions of a subsequent Securities Purchase Agreement with Magna, dated December 3, 2015 (collectively, with the Initial Purchase Agreement, the Purchase Agreement ) We are not selling any securities under this prospectus and will not receive any of the proceeds from the resale of shares of our common stock by the selling stockholder under this prospectus, however, we have received gross proceeds of $100,000 from the sale of the First Convertible Note to Magna and $250,000 from the sale of the Second Convertible Note to Magna. This prospectus relates to the resale of up to 341,718 shares of our common stock, which may be offered by the selling stockholder, Magna Equities II, LLC, a New York limited liability company, or Magna. The shares of common stock being offered by the selling stockholder are issuable (i) upon conversion of a senior convertible note in the principal amount of $160,000, or the Convertible Note, that we issued to Magna on October 1, 2015, pursuant to the terms and conditions of a Securities Purchase Agreement with Magna, dated October 1, 2015 (the Purchase Agreement ). We are not selling any securities under this prospectus and will not receive any of the proceeds from the resale of shares of our common stock by the selling stockholder under this prospectus, however, we have received gross proceeds of $100,000 from the sale of the Convertible Note to Magna. Magna may offer all or part of the shares for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. We provide more information about how Magna may sell its shares of common stock in the section titled Plan of Distribution on page 48. We will pay the expenses incurred in connection with the offering described in this prospectus, with the exception of brokerage expenses, fees, discounts and commissions, which will be paid by the selling stockholder. With respect to the shares of common stock that have been and may be issued pursuant to the Purchase Agreement, Magna is an underwriter within the meaning of Section 2(a) (11) of the Securities Act of 1933, as amended, or the Securities Act, and with respect to any other shares of common stock, Magna may be deemed to be an underwriter within the meaning of Section 2(a) (11) of the Securities Act. Our common stock is quoted on the OTCQB Marketplace operated by OTC Markets Group Inc., or the OTCQB, under the symbol USRM . The last reported closing price of our common stock on the OTCQB on January 29, 2016 was $ 0.44 per share. Investing in our common stock involves a high degree of risk. Please see the sections entitled Risk Factors on page 16 of this prospectus and Part I Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is [_________], 2016 . You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless of when the time of delivery of this prospectus or the sale of any Common Stock occurs. The Selling Stockholder may not sell the securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, the Common Stock in any jurisdiction in which the offer or sale is not permitted. Table of Contents Trading Market Our common stock, par value $0.001 per share, commenced trading on February 19, 2008, on the NASDAQ Global Market under the symbol BHRT . Effective June 11, 2008, we transferred the listing of our common stock to the NASDAQ Capital Market and then, during the course of 2009 our stock was delisted from NASDAQ and commenced quotation on the OTC Markets under the symbol BHRT and, following our name change to U.S. Stem Cell, Inc. to USRM. Corporate Information We were incorporated in Florida in 1999 under the name Bioheart and operate under the current name U.S. Stem Cell, Inc. and continue to be a Florida corporation. Our principal executive offices are located at 13794 NW 4th Street, Suite 212, Sunrise, Florida 33325. Our telephone number is (954) 835-1500. Our website address is www.us-stemcell.com. Our website and the information contained on our website are not incorporated into this prospectus or the Registration Statement of which it forms a part. Further, our references to the URLs for our website are intended to be inactive textual references only. Magna Equities II, LLC Senior Convertible Note Financing with Magna Equities II, LLC Note Purchase Agreement and Convertible Note On October 1, 2015 (the Closing Date ), Bioheart, Inc., a Florida corporation (the Company ), entered into a securities purchase agreement dated as of the Closing Date (the Purchase Agreement ) with Magna Equities II, LLC, a New York limited liability company ( Magna ). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, Magna shall purchase from the Company on the Closing Date a senior convertible note with an initial principal amount of $160,000 (the Convertible Note ) for a purchase price of $100,000 (a 37.5% original issue discount). Pursuant to the Purchase Agreement, on the Closing Date, the Company issued the Convertible Note to Magna. The Convertible Note matures on August 1, 2016 and, in addition to the 37.5% original issue discount, accrues interest at the rate of 12% per annum. The Convertible Note is convertible at any time, in whole or in part, at Magna s option into shares of the Company s common stock, par value $0.01 per share (the Common Stock ), at a fixed conversion price of $0.00072 per share (subject to adjustment). This conversion price represents a discount of approximately 55% from the lowest trading price of the Common Stock during the five trading days prior to the Closing Date. If the Company has not properly filed a registration statement with the SEC on or prior to the date that is 70 calendar days after the Closing Date covering the resale by Magna of all of the shares of Common Stock issued or issuable upon conversion of the Convertible Note, then, from and after such date, the Convertible Note will be convertible at any time, in whole or in part, at Magna s option into Common Stock at a conversion price equal to a 55% discount from the lowest trading price of the Common Stock during the five consecutive trading days ending and including the trading day immediately preceding the applicable date of conversion. At no time will Magna be entitled to convert any portion of the Convertible Note to the extent that after such conversion, Magna (together with its affiliates) would beneficially own more than 4.99% of the outstanding shares of Common Stock as of such date. The Convertible Note includes full ratchet and standard anti-dilution protection. The Convertible Note includes customary event of default provisions, and provides for a default interest rate of 18%. Upon the occurrence of an event of default, Magna may require the Company to pay in cash the Event of Default Redemption Price which is defined in the Convertible Note to mean the greater of (i) the product of (A) the amount to be redeemed multiplied by (B) 140% (or 100% if an insolvency related event of default) and (ii) the product of (X) the conversion price in effect at that time multiplied by (Y) the product of (1) 140% (or 100% if an insolvency related event of default) multiplied by (2) the greatest closing sale price of the Common Stock on any trading day during the period commencing on the date immediately preceding such event of default and ending on the date the Company makes the entire payment required to be made under this provision. The Company has the right at any time to redeem all, but not less than all, of the total outstanding amount then remaining under the Convertible Note in cash at a price equal to 140% of the total amount of the Convertible Note then outstanding. The Purchase Agreement contains customary representations, warranties and covenants by, among and for the benefit of the parties. The Company also agreed to pay up to $10,000 of reasonable attorneys fees and expenses incurred by Magna in connection with the transaction. The Purchase Agreement also provides for indemnification of Magna and its affiliates in the event that Magna incurs losses, liabilities, obligations, claims, contingencies, damages, costs and expenses related to a breach by the Company of any of its representations, warranties or covenants under the Purchase Agreement. Table of Contents U.S. STEM CELL, INC. TABLE OF CONTENTS Page PART I: INFORMATION REQUIRED IN PROSPECTUS Prospectus Summary 5
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001389128_frontier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001389128_frontier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7f3a0f9385602c9464278e88546ee9f4b5da423
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001389128_frontier_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights certain information contained elsewhere in this prospectus. The remainder of this prospectus contains more detailed information. You should read the entire prospectus, including the appendix for each series, the Statement of Additional Information, all exhibits to the prospectus, and all documents incorporated herein by reference before deciding to invest in any series. The Trust Equinox Frontier Funds is a Delaware statutory trust (formed on August 8, 2003) that is currently publicly offering units in three separate series. Each series engages in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), swaps and options contracts and/or other derivative instruments. The purpose of each series is to seek capital appreciation while attempting to control risk and volatility. Equinox Fund Management, LLC, a commodity pool operator and the managing owner of the trust, allocates the assets of each series to a diverse group of experienced commodity trading advisors through investments in one or more trading companies managed by the managing owner and in one or more commodity pools through the Galaxy Plus Platform sponsored and operated by Gemini. The managing owner, from time to time, may also enter into swaps or other derivatives with respect to certain reference trading programs. Each series, which currently invests its assets in both trading companies managed by the managing owner and in commodity pools offered through the Galaxy Plus Platform, expects to ultimately allocate all of its assets to such commodity pools, in addition to entering into any swaps or other derivative instruments with respect to certain reference trading programs. The managing owner expects to liquidate each trading company it manages once no further assets of the series are invested in such trading company. Units are available for subscription on each business day at the then current net asset value per unit. The trust has offered other series in the past and may offer additional series in the future. Since each series has a unique trading and investment strategy, you should review the information relating to each series and its trading and investment strategy. See Appendices to Part I for additional information regarding each series and its trading and investment strategy. The trust will terminate on December 31, 2053 (unless terminated earlier in certain circumstances). See Summary of Agreements Trust Agreement. The principal offices of the trust and the managing owner are located at 1775 Sherman Street, Suite 2010, Denver, Colorado 80203, and their telephone number is (303) 837-0600. The trust and each series of the trust is a multi-advisor pool as defined in Commodity Futures Trading Commission ( CFTC ) Rule 4.10(d)(2). The Managing Owner Equinox Fund Management, LLC is a limited liability company formed in the state of Delaware in June 2003. The managing owner is the commodity pool operator of the trust and each series. The managing owner has been registered with the CFTC as a commodity pool operator since August 6, 2003, and has been a member of the NFA since that date. The managing owner has been registered with the CFTC as a swap firm since March 27, 2013. The managing owner is ultimately responsible for the selection, retention and termination of the trading advisors and investments in, and divestments from, one or more commodity pools offered through the Galaxy Plus Platform, each of which is advised by an individual trading advisor. However, the managing owner is not involved in the selection, retention or termination of any trading advisors retained by such commodity pools. The managing owner is also responsible for entering into, or terminating, the swap reference trading programs on behalf of each series. See The Managing Owner. The managing owner will maintain a 1% interest with respect to the publicly registered units of each series of the trust at all times. See The Managing Owner Managing Owner s Commitments Minimum Purchase Commitment. The managing owner has agreed to accept liability for the obligations of each series that exceed that series net assets. The managing owner, with respect to each series, will: engage in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies) and options contracts and/or other derivative instruments, which may also be affected through the investments in, Table of Contents EQUINOX FRONTIER FUNDS STATEMENT OF ADDITIONAL INFORMATION Table of Contents THE NON-MAJOR COMMODITY TRADING ADVISORS, GALAXY PLUS PLATFORM COMMODITY POOLS AND/OR REFERENCE PROGRAMS SAI 1 THE FUTURES MARKETS SAI 3 GLOSSARY OF TERMS SAI 6 BENEFITS TO INVESTING IN THE TRUST SAI 10 FUND PERFORMANCE SAI 11 MONTHLY PERFORMANCE ATTRIBUTION BY SECTOR SAI 20 FUND EXPOSURE BY FUTURES STRATEGY SAI 22 DESCRIPTION OF INDICES REFERENCED IN THIS STATEMENT OF ADDITIONAL INFORMATION SAI 28 Table of Contents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; THE TRUST 1 SECTION 1.1 Definitions. 1 SECTION 1.2 Name. 4 SECTION 1.3 Delaware Trustee; Business Offices. 5 SECTION 1.4 Purposes and Powers. 5 SECTION 1.5 Tax Treatment. 5 SECTION 1.6 General Liability of the Managing Owner. 6 SECTION 1.7 Legal Title. 6 SECTION 1.8 Series Trust. 6 ARTICLE II THE TRUSTEE 6 SECTION 2.1 Term; Resignation. 6 SECTION 2.2 Powers. 6 SECTION 2.3 Compensation and Expenses of the Trustee. 6 SECTION 2.4 Indemnification. 7 SECTION 2.5 Successor Trustee. 7 SECTION 2.6 Liability of Trustee. 7 SECTION 2.7 Reliance; Advice of Counsel. 8 ARTICLE III UNITS; CAPITAL CONTRIBUTIONS 8 SECTION 3.1 General. 8 SECTION 3.2 Limited Units. 9 SECTION 3.3 Managing Owner s Required Contribution. 10 SECTION 3.4 Establishment of Series of Units. 10 SECTION 3.5 Establishment of Classes and Sub-Classes. 11 SECTION 3.6 Assets of Series. 11 SECTION 3.7 Liabilities of Series. 11 SECTION 3.8 Series Distributions. 12 SECTION 3.9 Voting Rights. 13 SECTION 3.10 Equality. 13 SECTION 3.11 Authority of the Managing Owner to Provide for the Exchange of Units. 13 ARTICLE IV THE MANAGING OWNER 13 SECTION 4.1 Management of the Trust. 13 SECTION 4.2 Authority of Managing Owner. 14 SECTION 4.3 Obligations of the Managing Owner. 15 SECTION 4.4 General Prohibitions. 16 SECTION 4.5 Liability of Covered Persons. 17 SECTION 4.6 Indemnification of the Managing Owner. 17 SECTION 4.7 Expenses. 17 SECTION 4.8 Compensation to the Managing Owner. 18 SECTION 4.9 Other Business of Unitholders. 21 SECTION 4.10 Voluntary Withdrawal of the Managing Owner. 21 SECTION 4.11 Authorization of Registration Statements. 21 SECTION 4.12 Litigation. 21 Table of Contents EQUINOX FRONTIER FUNDS CROSS REFERENCE SHEET Item No. Registration Item Location in Prospectus 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Facing Page; Front Cover Pages. 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Table of Contents; Outside Back Cover Page. 3. Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges Summary; Risk Factors; The Managing Owner. 4. Use of Proceeds Segregated Accounts. 5. Determination of Offering Price Plan of Distribution. 6. Dilution Not Applicable. 7. Selling Security Holders Not Applicable. 8. Plan of Distribution Plan of Distribution. 9. Description of Securities to be Registered Summary of Agreements; Trust Agreement. 10. Interests of Named Experts and Counsel Not Applicable. 11. Information with Respect to the Registrant (a) Description of Business Summary. (b) Description of Property Incorporated by Reference. (c) Legal Proceedings The Managing Owner. (d) Market Price of and Dividends on the Registrant s Common Equity and Related Stockholder Matters Risk Factors. (e) Financial Statements Incorporated by Reference. (f) Selected Financial Data Incorporated by Reference. (g) Supplementary Financial Information Incorporated by Reference. (h) Management s Discussion and Analysis of Financial Condition and Results of Operations Incorporated by Reference. (i) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. (j) Quantitative and Qualitative Disclosures About Market Risk Incorporated by Reference. (k) Directors and Executive Officers The Managing Owner. (l) Executive Compensation Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; The Managing Owner. (m) Security Ownership of Certain Beneficial Owners and Management The Managing Owner. (n) Transactions with Related Person, Promoters and Certain Control Persons and Director Independence Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; Summary of Agreements Advisory Agreements; The Managing Owner. 11A. Material Changes Not Applicable. 12. Incorporation of Certain Information by Reference Summary. 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Not Applicable. Table of Contents COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT COMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 80 THROUGH 89 AS WELL AS IN THE APPENDICES ATTACHED TO THIS PROSPECTUS FOR EACH SERIES OF UNITS AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 17 THROUGH 18. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 19 THROUGH 34. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY ENGAGE IN OFF-EXCHANGE FOREIGN CURRENCY TRADING. SUCH TRADING IS NOT CONDUCTED IN THE INTERBANK MARKET. THE FUNDS THAT THE POOL USES FOR OFF-EXCHANGE FOREIGN CURRENCY TRADING WILL NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTION CONTRACTS. IF THE POOL DEPOSITS SUCH FUNDS WITH A COUNTERPARTY AND THAT COUNTERPARTY BECOMES INSOLVENT, THE POOL S CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY MAY NOT BE TREATED AS A COMMODITY CUSTOMER CLAIM FOR PURPOSES OF SUBCHAPTER IV OF CHAPTER 7 OF THE BANKRUPTCY CODE AND THE REGULATIONS THEREUNDER. THE POOL MAY BE A GENERAL CREDITOR AND ITS CLAIM MAY BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN POOL FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF PRIORITY AND OTHER GENERAL CREDITORS. SWAPS TRANSACTIONS, LIKE OTHER FINANCIAL TRANSACTIONS, INVOLVE A VARIETY OF SIGNIFICANT RISKS. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR SWAP TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THE TRANSACTION AND YOUR CIRCUMSTANCES. IN GENERAL, HOWEVER, ALL SWAPS TRANSACTIONS INVOLVE SOME COMBINATION OF MARKET RISK, CREDIT RISK, COUNTERPARTY CREDIT RISK, FUNDING RISK, LIQUIDITY RISK, AND OPERATIONAL RISK. HIGHLY CUSTOMIZED SWAPS TRANSACTIONS IN PARTICULAR MAY INCREASE LIQUIDITY RISK, WHICH MAY RESULT IN A SUSPENSION OF REDEMPTIONS. HIGHLY LEVERAGED TRANSACTIONS MAY EXPERIENCE SUBSTANTIAL GAINS OR LOSSES IN VALUE AS A RESULT OF RELATIVELY SMALL CHANGES IN THE VALUE OR LEVEL OF AN UNDERLYING OR RELATED MARKET FACTOR. IN EVALUATING THE RISKS AND CONTRACTUAL OBLIGATIONS ASSOCIATED WITH A PARTICULAR SWAP TRANSACTION, IT IS IMPORTANT TO CONSIDER THAT A SWAP TRANSACTION MAY BE MODIFIED OR TERMINATED ONLY BY MUTUAL CONSENT OF THE ORIGINAL PARTIES AND SUBJECT TO AGREEMENT ON INDIVIDUALLY NEGOTIATED TERMS. THEREFORE, IT MAY NOT BE POSSIBLE FOR THE COMMODITY POOL OPERATOR TO MODIFY, TERMINATE, OR OFFSET THE POOL S OBLIGATIONS OR THE POOL S EXPOSURE TO THE RISKS ASSOCIATED WITH A TRANSACTION PRIOR TO ITS SCHEDULED TERMINATION DATE. Table of Contents TABLE OF CONTENTS (Cont d) Page Each Series May Be Subject to Indirect Fees and Expenses Associated with Investments in Swaps or Other Derivative Instruments. 22 The Series May Be Obligated to Make Payments Under Guarantee Agreements. 22 The Failure or Bankruptcy of One of its Futures Clearing Brokers, Central Clearing Brokers, Banks, Counterparties or Other Custodians Could Result in a Substantial Loss of One or More Series Assets. 22 You May Not Be Able to Establish a Basis for Liability Against a Trading Advisor, a Clearing Broker or a Swap Counterparty. 23 The Managing Owner is Leanly Staffed and Relies Heavily on its Key Personnel to Manage the Trust s Trading Activities. The Loss of Such Personnel Could Adversely Affect the Trust. 23 The Trust and the Managing Owner Have Been Represented by Unified Counsel, and Neither the Trust Nor the Managing Owner Will Retain Independent Counsel to Review this Offering. 23 Risks Relating to Trading and the Markets 23 Futures Interests Trading is Speculative and Volatile. 23 Options Trading Can Be More Volatile and Expensive than Futures Trading. 24 Trading Swaps Creates Distinctive Risks. 24 The Trading on Behalf of Each Series Will Be Margined, Which Means that Sharp Declines in Prices Could Lead to Large Losses. 24 The Unregulated Nature of Uncleared Trades in the OTC Markets Creates Counterparty Risks that Do Not Exist in Futures Trading on Exchanges or in Cleared Swaps. 25 Foreign Currency and Spot Contracts Historically Were Not Regulated When Traded Between Certain Eligible Contract Participants and Are Subject to Credit Risk. 25 Trading on Foreign Exchanges Presents Greater Risks to the Series than Trading on U.S. Exchanges. 25 Assets Held in Accounts at U.S. Banks May Not Be Fully Insured. 26 Exchanges of Futures for Physicals May Adversely Affect Performance. 26 Cash Flow Needs May Cause Positions to Be Closed Which May Cause Substantial Losses. 26 Your Investment Could Be Illiquid. 26 The Trading Advisors Trading is Subject to Execution Risks. 26 An Investment in Units May Not Diversify an Overall Portfolio. 27 Markets or Positions May Be Correlated and May Expose a Series to Significant Risk of Loss. 27 The Trading Advisors Positions May Be Concentrated From Time to Time, Which May Render Each Series Susceptible to Larger Losses than if the Positions Were More Diversified. 27 Turnover in Each Series Portfolio May Be High, Which Could Result in Higher Brokerage Commissions and Transaction Fees and Expenses. 27 There Are Certain Risks Associated with the Trust s Investment in U.S. Government Debt Securities. 27 The Trust s Investment in U.S. Government Debt Securities Will Be Subject to Interest Rate Risk. 27 The Hedging Program Directed by Quest May Not Perform to Minimize Risk as Intended. 27 Investments in Reference Programs Through a Swap or Other Derivative Instrument May Not Always Replicate Exactly Performance of the Relevant CTA Trading Program(s). 28 Risks Relating to the Trading Advisors 28 Specific Risks Associated with a Multi-Advisor Commodity Pool. 28 Table of Contents or divestments from, trading companies managed by the managing owner and/or one or more commodity pools available on the Galaxy Plus Platform, each of which will be advised by an individual trading advisor, and enter into one or more swap contracts, and may, from time to time, engage in cash and spot transactions; maintain a portion of such series assets at the trust level for cash management; maintain separate, distinct records for each series, and account for its assets separately from the other series and the other trust assets; and calculate the net asset value of its units separately from the other series. The Units Each series is available in two classes. Class 1 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 1a) units are subject to an initial service fee equal to up to 2.0% of the purchase price and, after the first year, an ongoing annual service fee of up to 2.0% of the net asset value of your units, which is payable either monthly or quarterly (as agreed with the selling agent). The initial service fee will generally be prepaid by the managing owner to the applicable selling agent and will be reimbursed by the applicable series over the first 12 months of your investment. Class 2 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 2a) units are not subject to an initial service fee and will only be offered to investors who invest through approved selling agents who are separately compensated by the investor directly. See Fees and Expenses Service Fees. Class 2 and 2a units may be subject to ongoing service fees for certain administrative services provided by the selling agents in an amount equal to 0.25% annually of the net asset value of each unit (an additional amount of up to 0.25% of the net asset value may be paid by the managing owner), payable at the end of each month. Class 1 and 1a units and class 2 and 2a units will be redesignated as class 3 or class 3a units, respectively, of such series, for administrative purposes as of any business day when the managing owner determines in its sole discretion that the service fee limit will be reached. The service fee limit applicable to each unit sold pursuant to this prospectus is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. There are no service fees or redemption fees associated with the class 3 or 3a units. Class 3 and 3a units are not offered directly to investors and have been registered, and will be maintained, under federal and state securities laws to administer the designation of class 1, 1a, 2 and 2a units that have reached the service fee limit as class 3 or 3a units. See Plan of Distribution. The percentage return (and associated dollar amount) that your investment must earn in the indicated series, after taking into account estimated interest income, in order to break-even after one year is as follows (please see the Break-Even Analysis on page 17): Equinox Frontier Diversified Fund: Class 1 6.90% ($69.02); Class 2 4.60% ($45.96); Class 3 4.27% ($42.67); Equinox Frontier Masters Fund: Class 1 7.27% ($72.68); Class 2 5.08% ($50.81); Class 3 4.77% ($47.68); and Equinox Frontier Long/Short Commodity Fund: Class 1a 8.00% ($79.95); Class 2a 5.78% ($57.82); Class 3a 5.47% ($54.66). The offering of units is subject to federal and state securities laws and regulations, federal laws and regulations relating to investments in commodities and related products, and the rules of FINRA and NFA. The Series The trust publicly offers units in three separate series: Equinox Frontier Diversified Fund, Equinox Frontier Masters Fund and Equinox Frontier Long/Short Commodity Fund. The trust has offered other series in the past and may offer additional series and/or units in the future. The trust allocates the assets of each series to one or more of the trading advisors or reference programs described below through either the use of one or more trading companies formed in the state of Delaware and managed by the managing owner, or Table of Contents Page ARTICLE V TRANSFERS OF UNITS 22 SECTION 5.1 General Prohibition. 22 SECTION 5.2 Transfer of Managing Owner s General Units. 22 SECTION 5.3 Transfer of Limited Units. 22 ARTICLE VI DISTRIBUTION AND ALLOCATIONS 24 SECTION 6.1 Capital Accounts. 24 SECTION 6.2 Book Capital Account Allocations. 24 SECTION 6.3 Allocation of Profit and Loss for United States Federal Income Tax Purposes. 24 SECTION 6.4 Allocation of Distributions. 25 SECTION 6.5 Admissions of Unitholders; Transfers. 25 SECTION 6.6 Liability for State and Local and Other Taxes. 26 ARTICLE VII REDEMPTIONS 26 SECTION 7.1 Redemption of Units. 26 SECTION 7.2 Redemption by the Managing Owner. 27 SECTION 7.3 Redemption Fee. 27 SECTION 7.4 Exchange of Units. 27 ARTICLE VIII THE LIMITED OWNERS 28 SECTION 8.1 No Management or Control; Limited Liability. 28 SECTION 8.2 Rights and Duties. 28 SECTION 8.3 Limitation on Liability. 29 ARTICLE IX BOOKS OF ACCOUNT AND REPORTS 29 SECTION 9.1 Books of Account. 29 SECTION 9.2 Annual Reports and Monthly Statements. 29 SECTION 9.3 Tax Information. 29 SECTION 9.4 Calculation of Net Asset Value of a Series. 30 SECTION 9.5 Other Reports. 30 SECTION 9.6 Maintenance of Records. 30 SECTION 9.7 Certificate of Trust. 30 SECTION 9.8 Registration of Units. 30 ARTICLE X FISCAL YEAR 30 SECTION 10.1 Fiscal Year. 30 ARTICLE XI AMENDMENT OF TRUST AGREEMENT; MEETINGS 30 SECTION 11.1 Amendments to the Trust Agreement. 30 SECTION 11.2 Meetings of the Trust. 31 SECTION 11.3 Action Without a Meeting. 31 ARTICLE XII TERM 32 SECTION 12.1 Term. 32 ARTICLE XIII TERMINATION 32 SECTION 13.1 Events Requiring Dissolution of the Trust or any Series. 32 SECTION 13.2 Distributions on Dissolution. 33 SECTION 13.3 Termination; Certificate of Cancellation. 33 Table of Contents EQUINOX FRONTIER FUNDS Maximum Available Units Class 1/1a Class 2/2a
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001390131_biocrude_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001390131_biocrude_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..085d21c3012939efe2d038e6d612ab4ee409ac8a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001390131_biocrude_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information from this prospectus and may not contain all the information that is important to you. To understand our business and this offering fully, you should read this entire prospectus carefully, including the financial statements and the related notes beginning on page 42. This prospectus contains forward-looking statements and information relating to BioCrude Technologies, Inc. See Cautionary Note Regarding Forward Looking Statements on page 9. The Company The Company was formed on August 4, 2015 in the State of Nevada. The Company is a startup company and our auditors have issued a going concern opinion. Business Strategy The Company is a resource management expertise and services provider, catering to commercial, municipal, and industrial customers, primarily in the areas of solid waste management and recycling services. BioCrude Technologies, Inc. has developed efficient, cost-effective, and environmentally friendly products, processes and systems for the reformation of waste material, waste management and creation of renewable energy. The versatility and potential of the BioCrude Technologies, Inc. has been demonstrated by the many uses that our R&D department has already tested and verified. The avenues they have explored include sustainable and cost efficient methods that will enlarge composting and biomethanation yields and rates of decomposition while increasing output and providing a higher quality of end product. Their focus is on waste treatment protocols for Municipal Solid Waste (MSW), cellulose, all organic waste and all manure types; renewable energy sources such as biogas, ethanol and biodiesel; waste water treatment, and multiple other applications. One very important area that BioCrude Technologies, Inc. excels in is the reformation of Municipal Solid Waste (MSW) into renewable energy and marketable end-by-products, using its intrinsic intellectual property and know how in its "Integrated Municipal Solid Waste to Energy Proposed Complexes" for municipal applications. Understanding the non-homogenous nature and characteristics of the waste, we can define distinct processes to optimally handle the procurement of the varied categories of waste (MSW can be classified into organics, fuels, recyclables, inerts and others), once segregated with an efficient separation process and materials recovery facility (MRF). There is no intellectual property protection as of yet. BioCrude will be filing for certain Intellectual property and know how protection via a patent for "Integrated Municipal Solid Waste to Energy Systems" while developing the Union of Comoros project. In addition to patent applications, the Company will apply for trademark protection where appropriate. The long-term vision of the organization is to build a highly sustainable and profitable company by transforming traditional solid waste streams into renewable resources and marketable by-products. Global competition for limited resources is, the Company believes, creating significant business opportunities for companies that can sustain and extract value in the form of energy and raw materials from resources previously considered an irretrievable waste stream. BioCrude s business strategy has been firmly tied to creating a sustainable resource management model and the Company continues to be rooted in these same tenets today. Each day the Company strives to create long-term value for all stakeholders: customers, employees, communities, and shareholders, by helping customers and communities manage their resources in a sustainable and financially sound manner. Environmental issues have taken the forefront globally, creating solid expectations for investments in green technology. The Company will pursue Licensing agreements, Joint Ventures and Revenue sharing agreements for the use, fabrication and sale of the independent products and processes. The Company intends to achieve successful market penetration in numerous segments of the industry, generating escalating positive cash flows on an annual basis so that the Company becomes a competitive leading participant in the industry. Management will look to have its Integrated Municipal Solid Waste to Energy Complexes widely implemented across Africa, Asia, the Balkans and North America with a view to expanding to other international markets (Latin America), while continuing to pursue Concession Agreements under private license/joint ventures and other conventional arrangements. The executive offices are located at1255 Phillips Square, Suite 605, Montreal, Quebec, CA H3B 3G5. Our telephone number is (877) 778-1268. The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act The Company shall continue to be deemed an emerging growth company until the earliest of: (A)the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; (B)the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title; (C)the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (D)the date on which such issuer is deemed to be a , ' ': large accelerated filer , as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto. As an emerging growth company, the Company is exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company, the Company is exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes. The Company has irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act. The Offering This prospectus covers up to 20,000,000 shares of common stock to be issued and sold by the Company at a price of $1.75 per share in a direct public offering and 6,715,145 shares held by selling shareholders to be sold at $1.75 per share. ABOUT THIS OFFERING Securities Being Offered Up to 20,00,000 Shares of BioCrude Technologies, Inc. to be sold by the Company at a price of $1.75 per share and 6,715,145 shares of common stock of BioCrude Technologies, Inc. to be sold by selling shareholders at a price of $1.75 per share. Initial Offering Price The Company will sell up to 20,000,000 Shares at a price of $1.75 per share and the selling shareholders will sell up to 6,715,145 shares at a price of $1.75 per share. Terms of the Offering The Company will offer and sell the Shares of its common stock at a price of $1.75 per share in a direct offering to the public. The selling shareholders will offer and sell the shares of their common stock at a price of $1.75 per share. Termination of the Offering The offering by the Company will conclude when the Company has sold all of the 20,000,000 Shares of common stock offered by it. The Company may, in its sole discretion, decide to terminate the registration of the shares offered by the Company. The selling shareholder offering will remain open until all selling shareholder shares registered hereunder have been sold.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001392902_endurance_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001392902_endurance_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001392902_endurance_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001394872_ambient_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001394872_ambient_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3f81e9045d7a1def2894132764cfcbc739125b77
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001394872_ambient_prospectus_summary.txt
@@ -0,0 +1 @@
+Holders of Common Stock As of December 31, 2015, there were approximately 265 holders of record of our common stock. As of such date, 177,407,091 shares of our common stock were issued and outstanding. Equity Compensation Plan Information The Company s Board of Directors approved the adoption of the 2008 Stock Plan on September 9, 2008, pursuant to which the Company may grant stock options to employees and consultants, including directors and officers, from time to time. The Board of Directors of the Company reserved 2,500,000 shares of Company Common Stock for eventual issuance pursuant to the exercise of stock options granted under the Plan. On October 24, 2008, the Company filed a registration statement on Form S-8 registering the plan and its 2,500,000 shares. The Company s Board of Directors approved the adoption of the 2012 Stock Option Plan on July 10, 2012, pursuant to which the Company may grant stock options to employees and consultants, including directors and officers, from time to time. The Board of Directors of the Company reserved 42,500,000 shares of Company Common Stock for issuance pursuant to the exercise of stock options granted under the Plan. The Company's majority shareholders approved and adopted the 2012 Stock Option Plan on July 10, 2012. The table includes information as of the end of the most recently completed fiscal year (December 31, 2015) with respect to compensation plans, including individual compensation arrangements, under which equity securities are authorized for issuance. Equity Compensation Plan Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders - - Equity compensation plans not approved by security holders 15,242,000 $0.17 29,758,000 Total 15,242,000 $0.17 29,758,000 On July 10, 2012, the Company granted to Jeff Stockdale and Jeff Mitchell 13,742,000 and 14,947,000 common stock options, respectively. These common stock options have an exercise price of $0.18. On May 1, 2013, the Company granted 1,500,000 common stock options to Gordon Myers. These common stock options expired on August 1, 2014. On July 22, 2013, the Company granted to 750,000 common stock options to Keith White, Jeff Stockdale and Jeff Mitchell, collectively 2,250,000 common stock options. These common stock options have an exercise price of $0.11. The options vest over four (4) years. After one year, one-quarter (25%) of the options vest. Thereafter, the options vest 6.25% each quarter. The options have a ten (10) year exercisable term from date of issuance. On July 6, 2015, Jeff Mitchell tendered his resignation as a member of the Board of Directors effective June 30, 2015. Stock options for Jeff Mitchell vested through June 30, 2015. All of Mr. Mitchell's unexercised stock options expired on October 6, 2015. DILUTION Investors who purchase our common stock will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of our common stock. As of December 31, 2015, we had a negative net tangible book value of $(2,214,435), or approximately ($0.01248) per share of common stock. Dilution in net tangible book value per share represents the difference between the assumed offering price per share of common stock of $0.0017 (the closing price of our common stock on April 4, 2016) and the pro forma as adjusted net tangible book value per share of common stock immediately after the sale of the 90,000,000 shares of common stock being registered for resale to River North under the Purchase Agreement. Therefore, after giving effect to our assumed receipt of $114,750 in estimated net proceeds from the issuance of 90,000,000 shares of common stock under the Purchase Agreement (which is the number of shares being registered for resale to River North hereunder) and registered in this offering (assuming a purchase price of $0.001275 per share, 75% of the closing price of the common stock on April 7, 2016, and assuming such sale was made on April 7, 2016, our pro forma as adjusted net tangible book value as of April 7, 2016 would have been negative ($2,331,841), or ($0.005358) per share. This would represent an immediate increase in the net tangible book value of $0.001827 per share to existing shareholders attributable to this offering. The following table illustrates this per share dilution: Assumed offering price per share of common stock $ 0.001275 Net tangible book value as of March 31, 2016 $ (2,346,591) Increase in as adjusted net tangible book value per share attributable to the sale of shares under the Purchase Agreements 114,750 Pro forma net tangible book value per share after the sale of shares under the Purchase Agreements (2,331,841) (0.005358) Dilution per share to new investors $ (0.006633) To the extent that we sell more or less than $114,750 worth of shares under the Purchase Agreement, or to the extent that some or all sales are made at prices lower than or in excess of the assumed price per share of $0.001275, then the dilution reflected in the table above will differ. The above table is based on 326,580,006 shares of our common stock outstanding as of March 31, 2016, adjusted for the assumed sale of $114,750 in shares to River North under the Purchase Agreement at the assumed purchase price described above. To the extent that we issue additional shares of common stock in the future, there may be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or business considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders. The number of shares of our common stock reflected in the discussion and calculations for the figures appearing in the table above is based on 326,580,006 shares of our common stock outstanding as of March 31, 2016 and excludes, as of that date: 12,961,150 shares issuable upon exercise of outstanding vested options at a price of $0.11 to $0.18 per share; 1,340,000 shares issuable upon the exercise of outstanding warrants at a price of $0.03 per share; 1,210,200,651 shares issuable upon the conversion of convertible notes. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. You should read this analysis in conjunction with our audited consolidated financial statements and related notes and our unaudited consolidated interim financial statements and their notes. Some of the statements contained in this Prospectus that are not historical facts are forward-looking statements which can be identified by the use of terminology such as estimates, projects, plans, believes, expects, anticipates, intends, or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Prospectus, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation: our ability to raise capital when needed and on acceptable terms and conditions; our ability to attract and retain management, and to integrate and maintain technical information and management information systems; the intensity of competition; general economic conditions; the acceptance and success of our product line; and other factors discussed in
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001396877_united_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001396877_united_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..91dddf5105baa4cd0af04dfd87c4c6ef386a842d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001396877_united_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This is only a summary of the prospectus and, while it contains material information about UHN and its shares, it does not contain or summarize all of the information about UHN and the shares contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus, including "Risk Factors Involved with an Investment in UHN" beginning on page 4, before making an investment decision about the shares. For a glossary of defined terms, see Appendix A. United States Diesel-Heating Oil Fund, LP ("UHN"), a Delaware limited partnership, is a commodity pool that continuously issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca stock exchange ("NYSE Arca"). UHN is managed and controlled by United States Commodity Funds LLC ("USCF"), a Delaware limited liability company. USCF is registered as a commodity pool operator ("CPO") with the Commodity Futures Trading Commission ("CFTC") and is a member of the National Futures Association ("NFA ).
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001402785_fluorophar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001402785_fluorophar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..214bda21e56d5a0ea55f43f27e375e390c45427a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001402785_fluorophar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled Risk Factors before deciding to invest in our common stock. References in this prospectus to FluoroPharma, we, us or our refer to FluoroPharma Medical, Inc. and our wholly-owned subsidiary, FluoroPharma, Inc., unless the context otherwise requires. Overview FluoroPharma Medical, Inc. ("we", the "Company" or the "Registrant") is a biopharmaceutical company specializing in discovering, developing and commercializing molecular imaging pharmaceuticals with initial applications in the area of cardiology. Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes. Our initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease, or CAD. We currently have two clinical-stage molecular imaging pharmaceutical product candidates: 18-F TPP (BFPET) and 18-F FCPHA (CardioPET). Corporate History FluoroPharma Medical, Inc. (f/k/a Commercial E-Waste Management Inc.) was organized in January 2007 under the laws of the State of Nevada to serve as an electronics waste management solution provider, specializing in the collection, retirement, storage and remarketing of excess, damaged or obsolete electronic assets. FluoroPharma Inc. was organized in June 2003 under the laws of the State of Delaware to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (PET) market. Pursuant to an Agreement and Plan of Merger by and among FluoroPharma Medical, Inc., FluoroPharma, Inc., and FPI Merger Corporation., a wholly owned Delaware subsidiary of FluoroPharma Medical, Inc. ( MergerCo ), on May 16, 2011, MergerCo merged with and into FluoroPharma Inc., and FluoroPharma Inc., as the surviving corporation, became a wholly owned subsidiary of FluoroPharma Medical, Inc. (the Merger ) Since the Merger, we have conducted our business through our wholly-owned subsidiary. 2015 Private Placement of Convertible Notes and Warrants (the 2015 Placement ) On May 28, 2015, we entered into a Note and Warrant Purchase Agreement (the Purchase Agreement ) with certain accredited investors identified therein for the issuance and sale in a private placement of an aggregate principal amount of up to $3,000,000 of convertible promissory notes (the 2015 Notes ), convertible into shares of common stock at a conversion price per share of $0.35 (the Conversion Price ). In addition, pursuant to the Purchase Agreement, we issued Warrants at an initial exercise price per share of $0.50 to purchase a number of shares of common stock equal to fifty percent of the number of shares of common stock such investor would receive upon full conversion of the 2015 Notes. The 2015 Notes mature one year from the date of issuance and bear interest at the rate of 8% per annum payable upon the earlier of (i) exchange or conversion of the 2015 Notes in accordance with the terms thereof and (ii) the maturity date. Interest is payable in cash or in additional shares of common stock at the sole option of the investor. In the event that interest under the 2015 Notes is paid with interest shares, the number of interest shares to be issued shall be based on the average of the three lowest volume weighted average prices of the common stock for the ten trading days immediately preceding the date such interest payment is due. Table of Contents All principal and accrued interest under the 2015 Notes (the Outstanding Balance ) will, at the sole option of the investor (i) convert into our next equity or equity-linked financing in which we raise gross proceeds of at least $3,600,000 (the Subsequent Financing ), into such securities, including warrants, as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the Outstanding Balance as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing), or (ii) convert into a new financing in which we shall issue to the investor one share of common stock and one-half of one warrant at a purchase price no greater than $0.35 per share. For the purpose of calculating the formula in subclause (i) of the preceding sentence, the per security price of the securities sold in the Subsequent Financing shall not exceed $0.35. The investor shall have the right, at its option at any time, to convert the principal amount of the 2015 Notes plus any accrued interest into shares of common stock as is obtained by multiplying (i) Outstanding Balance to be converted by (ii) the Conversion Price; provided, however, if an event of default has occurred and is continuing, the Conversion Price shall be adjusted to $0.15 per share. The 2015 Notes are subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations, as well as full-ratchet anti-dilution adjustments for future issuances of other company securities (subject to certain standard carve-outs). The 2015 Notes contain the following event of default provisions: the failure to pay principal within ten days after such amounts are due; we breach any material covenant or other term or condition of the 2015 Notes, the Purchase Agreement or other transaction document, except for a breach of payment, in any material respect and such breach, if subject to cure, continues for a period of twenty days after written notice to us from the investor; we are advised by written notice from the investor that a material representation or warranty made in the 2015 Notes or Purchase Agreement was false or misleading in any material respect; any dissolution, liquidation or winding up by us or a subsidiary of a substantial portion of their business; any cessation of operations by us or a subsidiary; the failure by us or any subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct our business (whether now or in the future) and such breach is not cured with thirty days after written notice to such effect; any money judgment shall be entered or made in a non-appealable adjudication against us or any subsidiary or any of our properties or other assets for more than $250,000 in excess of our insurance coverage, unless stayed vacated or satisfied within 60 days; or we file any petition or action for relief under any bankruptcy or make any assignment for the benefit of creditors or an involuntary petition is filed against us under any bankruptcy statute now or hereafter in effect, and such petition is not dismissed or discharged within 60 days. As filed with the Securities and Exchange Commission on February 4 , 2016 Registration No. 333-208196 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ____________ FLUOROPHARMA MEDICAL, INC. (Exact name of registrant as specified in its charter) Nevada 2835 20-8325616 (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 8 Hillside Avenue, Suite 108 Montclair, NJ 07042 (973) 744-1565 (Address and telephone number of principal executive offices) Thomas H. Tulip, Ph.D. President and Chief Executive Officer 8 Hillside Avenue, Suite 108 Montclair, NJ 07042 (973) 744-1565 (Name, address and telephone number of agent for service) Copies to: David J. Levine, Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 (212) 407-4923 (212) 898-1184 (fax) Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents So long as at least fifty percent of the principal amount of the 2015 Notes issued pursuant to the Purchase Agreement remain outstanding, we shall not, without the consent of the investors of at least a majority of the principal amount of the 2015 Notes outstanding at the time, in which the holders of the 2015 Notes vote separately as a class: (i) make any new loans or advances in excess of $100,000 to any person or entity; (ii) guarantee any indebtedness of any person or entity other than us or our wholly-owned subsidiaries; (iii) make any investment in securities other than wholly-owned subsidiaries; (iv) incur any aggregate incremental indebtedness in excess of $250,000 that is not already included in a budget approved by our Board; (v) change our principal business, enter into new lines of business, or exit our current line of business; (vi) sell, assign, license, pledge or encumber material technology or intellectual property, except in the ordinary course of business and consistent with past practice; (vii) enter into any corporate strategic relationships involving the payment, contribution or assignment by us or to us of assets greater than $250,000; (viii) decide to liquidate, dissolve, wind up, merge or consolidate; or (ix) sell, lease, transfer, license or dispose of all or substantially all of our assets. The Warrants expire five years following the date of the final closing under the Purchase Agreement and may be exercised on a cashless basis commencing six months from the issuance thereof if there is not an effective registration statement under the Securities Act of 1933, as amended (the Securities Act ), providing for the resale of the warrant shares. The exercise price of the Warrants is subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations, as well as full-ratchet anti-dilution adjustments for future issuances of other company securities (subject to certain standard carve-outs). We entered into a registration rights agreement with the investors, in which we agreed to file a registration statement (the Registration Statement ) with the Securities and Exchange Commission to register for resale the conversion shares and the warrant shares within 90 calendar days of the final closing date of the 2015 Placement (the Filing Date ), and to have the Registration Statement declared effective within 120 calendar days after the Filing Date. 2014 Private Placement of Convertible Notes (the 2014 Placement ) On July 22, 2014, we accepted subscriptions pursuant to a Note Purchase Agreement (the 2014 Purchase Agreement ) entered into with certain accredited investors identified therein for the issuance and sale in the 2014 Placement of an aggregate principal amount of approximately $2,000,000 of promissory notes (the 2014 Notes and, together with the 2015 Notes, the Convertible Notes ). The 2014 Notes, as amended in May 2015, mature on January 22, 2016 and bear interest at the rate of 8% per annum. All principal and accrued interest under the 2014 Notes (the 2014 Outstanding Balance ) will automatically convert into the Company s next equity or equity-linked financing (the Subsequent Financing ), without any action on the part of the investor, into such securities, including warrants of the Company as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the 2014 Outstanding Balance as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing). The investors shall be deemed to be investors in the Subsequent Financing and subject to the terms of such Subsequent Financing. In addition, the investors shall be granted standard piggyback registration rights in connection with the securities to be issued in any Subsequent Financing. The issuance of promissory notes by the Company in a transaction with a substantially similar structure to the transactions contemplated by the 2014 Notes shall not be deemed a Subsequent Financing. Upon the closing of a Subsequent Financing, each of the investors shall be issued, in addition to any warrants issued in connection with a Subsequent Financing, an additional warrant (the Additional Warrant ), to purchase a number of shares of common stock equal to fifty percent (50%) of the number of shares of common stock purchased by such investor in the Subsequent Financing assuming a per share purchase price of the securities to be issued in the Subsequent Financing. The terms of the Additional Warrants shall be substantially identical to the terms of the warrants issued in the Subsequent Financing, except the exercise price per share of the Additional Warrants shall be equal to the per share purchase price of the securities issued in the Subsequent Financing. In the event no warrants are issued in the Subsequent Financing, each of the investors shall nonetheless be entitled to an Additional Warrant, which Additional Warrant shall be non-callable, exercised on a cash only basis and have a term of five (5) years following the closing date of the Subsequent Financing. The 2014 Notes contain the following event of default provisions: the failure to pay principal within ten days after such amounts are due; the Company breaches any material covenant or other term or condition of the Note, the 2014 Purchase Agreement or other transaction document, except for a breach of payment, in any material respect and such breach, if subject to cure, continues for a period of twenty days after written notice to the Company from the holder; the Company is advised by written notice from the holder that a material representation or warranty of the Company made in the 2014 Notes or the 2014 Purchase Agreement was false or misleading in any material respect; any dissolution, liquidation or winding up by the Company or a subsidiary of a substantial portion of their business; any cessation of operations by the Company or a subsidiary; the failure by the Company or any subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with thirty days after written notice to such effect; any money judgment shall be entered or made in a non-appealable adjudication against the Company or any subsidiary or any of their properties or other assets for more than $250,000 in excess of the Company s insurance coverage, unless stayed vacated or satisfied within 60 days; the Company files any petition or action for relief under any bankruptcy or makes any assignment for the benefit of creditors; or an involuntary petition is filed against the Company under any bankruptcy statute now or hereafter in effect, and such petition is not dismissed or discharged within 60 days. Certain of our directors invested an aggregate of $22,500 of accrued but unpaid director fees in the 2014 Placement. Monarch Capital Group, LLC acted as placement agent in connection with the 2014 Placement and was paid an aggregate cash placement fee of $81,600 and the reimbursement of customary expenses, including legal fees, in connection with the 2014 Placement. In January 2016, we entered into a further amendment to the 2014 Notes, which provided as follows: The maturity date of the 2014 Notes were extended for additional six months; The interest rate of the 2014 Notes were adjusted up to 12%, applied retroactively from the initial issuance date of the 2014 Notes. Interest is payable in cash or in additional shares of common stock at the sole option of the investor. In the event that interest under the 2014 Notes is paid with interest shares, the number of interest shares to be issued shall be based on the average of the three lowest volume weighted average prices of the common stock for the ten trading days immediately preceding the date such interest payment is due; The investor shall have the right, at its option at any time, to convert the principal amount of the 2014 Notes plus any accrued interest into shares of common stock as is obtained by dividing (i) 2014 Outstanding Balance to be converted multiplied by 1.25, by (ii) the conversion price of $0.35; provided, however, if an event of default has occurred and is continuing, the conversion price shall be adjusted to $0.15 per share. The 2014 Notes are subject to customary adjustments for issuances of shares of common stock as a dividend or distribution on shares of the common stock, or mergers or reorganizations, as well as full-ratchet anti-dilution adjustments for future issuances of other company securities (subject to certain standard carve-outs); The right to have the conversion shares registered on the Registration Statement; and The right to the Additional Warrant will survive, even in the event the 2014 Notes are voluntarily converted prior to maturity. The Offering Common stock offered by the selling stockholders................................................................ 23,820,973 shares Common stock outstanding........................................................................................................ 32,994,792 shares (1) Common stock outstanding after the offering (assuming conversion in full of the Convertible Notes and exercise in full of the Warrants)............................................. 55,726,614 shares Use of proceeds .................................................................................................................... We will not receive any proceeds from the sale of the shares by the selling stockholders. However, to the extent that the Warrants are exercised for cash, we will receive proceeds from any exercise of the Warrants up to an aggregate of approximately $2.2 million. We intend to use any proceeds received from the exercise of the Warrants for working capital and other general corporate purposes.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001403802_spindle_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001403802_spindle_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..99d0bbec9c4ec3e43203c8b0378846c48cd64b22
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001403802_spindle_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled Risk Factors before deciding to invest in our common stock. About Our Business We supply mobile marketing and payments products and services that enable merchants to attract and retain customers through the use of our proprietary platforms and systems. Our integrated payment and marketing services are available through a single mobile- or website-based interface that allows a merchant to simply and securely market to and transact business with new customers in as little as 10 minutes. We also deliver mobile products and services to consumers, allowing them to discover new merchants, subscribe to their personal favorite merchants, and make purchases using their mobile devices. Our target market is small and medium sized businesses, because due to their limited resources, limited expertise, and a lack of turnkey mobile applications, we believe that the majority of these merchants are at a competitive disadvantage in the rapidly evolving mobile economy. Our products enable small and medium sized businesses and consumers to interact within a mobile environment and engage in commerce in real-time virtual and physical marketplaces. Since our acquisition of Spindle Mobile, Inc. in December 2011, we have expanded our business by acquiring assets that facilitate electronic payment processing services to merchants, allow us to develop, market and license a mobile marketing platform for use by small and medium sized merchants and consumers, and provide retail coupons through a mobile application. Our goal is to expand the use of our products and services, which we are doing in two ways. First of all we engage in direct selling using employees and contract labor, web or app store traffic and referrals from our customers and merchants. Aside from direct selling, we have also signed several reseller agreements to extend our reach into specialized markets such as mobile advertising and display, micro mobile merchant aggregation via physical cellular locations (mPOS), independent sales offices (ISOs), SaaS based point of sale (POS), and website merchant services (eCommerce). We consider these sales indirect . Indirect sales are made when we provide the technology and/or bundle our marketing and payment systems with the reseller s products. In some cases our systems carry the Yowza!! brand, while in other cases our systems are branded under the reseller s name, imaging, and logos. We have operated as a Payment Facilitator for all of 2015, which enables our merchants to get the benefit of instant boarding, and we have also recently added traditional merchant services to our offering as a registered Agent of Citizens Bank, N.A. Providence, RI (the Sponsoring Bank ), which enables us to offer merchant services worldwide. Corporate Information The address of our corporate headquarters is 8700 E. Vista Bonita Dr., STE 260, Scottsdale, AZ 85255 and our telephone number is (800) 560-9198. Our website can be accessed at www.spindle.com. The information contained on, or that may be obtained from, our website is not a part of this prospectus. The Offering This prospectus relates to the offer and sale, from time to time, of up to 3,949,074 shares of our common stock by the selling stockholders listed in this prospectus (the Selling Stockholders ). We are also registering for sale any additional shares of common stock which may become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration, which results in an increase in the number of outstanding shares of our common stock. The Company sold 3,949,074 shares of its common stock to ten investors for an aggregate purchase price of $465,625.00. The Company agreed to register these shares in accordance with each investor s stock purchase agreement. The Company also agreed to register 500,000 shares of its common stock pursuant to registration rights held by a shareholder. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): [ ] Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered(1) Proposed Maximum Offering Price Per Share(2) Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee Shares of Common Stock, par value $0.001 per share 3,949,074 $0.15 $592,361.10 $59.65 (1) This Registration Statement shall also cover any additional shares of common stock which become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the registrant s receipt of consideration which results in an increase in the number of the outstanding shares of registrant s common stock. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, based on the average of the bid and ask price of the registrant s common stock as reported by the OTCQB on April 4, 2016. (3) Registration fees of $62.52 were previously paid. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Securities Offered Common Stock offered by the selling stockholders 3,949,074 shares. Common Stock Outstanding 67,698,740 shares as of March 30, 2016 Common Stock to be Outstanding Immediately after the Offering 67,698,740 shares (1) Terms of the Offering The selling stockholders will determine when and how they will sell the common stock offered in this prospectus. The selling stockholders will offer and sell the shares of our common stock at prices related to the then-current market price, or at privately negotiated prices in transactions that are not in the public market. Termination of the Offering The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect. Trading Market Our common stock is quoted on the OTCQB under the symbol SPDL . Use of Proceeds We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus. Dividend Policy We have never declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in financing the growth of our business and do not anticipate paying any cash dividends for the foreseeable future. See Dividends under the section DESCRIPTION OF SECURITIES TO BE REGISTERED.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001414374_paragon_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001414374_paragon_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001414374_paragon_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001419625_apptio-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001419625_apptio-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b3c8447fa22f37359073b82d7504feef3a46888e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001419625_apptio-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+Table of Contents Future sales of our common stock could cause our stock price to fall. Our stock price could decline as a result of sales of a large number of shares of our common stock after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Upon the closing of this offering, 6,000,000 shares of our Class A common stock will be outstanding (6,900,000 shares of Class A common stock will be outstanding assuming exercise in full of the underwriters option to purchase additional shares) and 31,285,839 shares of our Class B common stock will be outstanding, based on our shares outstanding as of June 30, 2016. All shares of Class A common stock expected to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless held by our affiliates, as that term is defined in Rule 144 under the Securities Act. The resale of the 31,285,839 shares of Class B common stock, or approximately 84% of our outstanding shares after this offering, is currently prohibited or otherwise restricted as a result of securities law provisions, market standoff agreements entered into by our stockholders with us or lock-up agreements entered into by our stockholders with the underwriters; however, subject to applicable securities law restrictions, these shares will be able to be sold in the public market beginning 180 days after the date of this prospectus. In addition, the shares subject to outstanding options and warrants, of which options and warrants to purchase 11,394,824 shares and 75,214 shares, respectively, were outstanding as of June 30, 2016, and the shares reserved for future issuance under our stock option and equity incentive plans will become available for sale immediately upon the exercise of such options and the expiration of any applicable market stand-off or lock-up agreements, and Rule 144 and Rule 701 under the Securities Act. For more information see the section of this prospectus captioned Shares Eligible for Future Sale. Upon the closing of this offering, the holders of 27,976,982 shares (including the shares underlying warrants described in the section of this prospectus captioned Shares Eligible for Future Sale Warrants ), or approximately 75% of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register the offer and sale of all shares of common stock that we may issue under our equity compensation plans. Once we register the offer and sale of shares for the holders of registration rights and shares to be issued under our equity incentive plans, they can be freely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions of Rule 144 under the Securities Act in the case of our affiliates, described in the section of this prospectus captioned Shares Eligible For Future Sale. In addition, in the future, we may issue additional shares of Class A common stock or other equity or debt securities convertible into Class A common stock in connection with a financing, acquisition, commercial relationship, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. Our management team has broad discretion to use the net proceeds from this offering and its investment of these proceeds may not yield a favorable return. They may invest the proceeds of this offering in ways with which investors disagree. We expect to use the net proceeds from this offering for working capital and other general corporate purposes. We may also use a portion of the net proceeds to expand our current business through acquisitions of or investments in other complementary businesses, technologies, or other assets. However, we currently have no agreements or commitments with respect to any such acquisitions or investments at this time. Table of Contents In addition, within the scope of our plan, and in light of the various risks to our business that are set forth in this Risk Factors section, our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways our stockholders may not agree with or that do not yield a favorable return, if at all. If we do not invest or apply the proceeds of this offering in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline. Anti-takeover provisions in our charter documents and under Delaware or Washington law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and adversely affect our stock price. Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws will: permit the board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate; provide that the authorized number of directors may be changed only by resolution of the board of directors; provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; divide the board of directors into three classes; provide that a director may only be removed from the board of directors by the stockholders for cause; require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be taken by written consent; provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as to the form and content of a stockholder s notice; prevent cumulative voting rights (therefore allowing the holders of a plurality of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); require that, to the fullest extent permitted by law, a stockholder reimburse us for all fees, costs and expenses incurred by us in connection with a proceeding initiated by such stockholder in which such stockholder does not obtain a judgment on the merits that substantially achieves the full remedy sought; provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer (or president, in the absence of a chief executive officer) or by the board of directors; Table of Contents provide that stockholders will be permitted to amend the bylaws only upon receiving at least two-thirds of the total votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class; and authorize two classes of common stock, as discussed above. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a target corporation from engaging in any of a broad range of business combinations with any stockholder constituting an acquiring person for a period of five years following the date on which the stockholder became an acquiring person. See the section of this prospectus captioned Description of Capital Stock Anti-Takeover Effects of Delaware and Washington Law and Our Certificate of Incorporation and Bylaws for additional information. Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. Our certificate of incorporation provides that, unless we otherwise consent in writing, the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our Class A common stock less attractive to investors. We are an emerging growth company, as defined in the Jumpstart Our Business Startups, or JOBS, Act enacted in April 2012, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to Table of Contents five years following the closing of this offering, although, if we have more than $1.0 billion in annual revenue, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three-year period before the end of that five-year period, we would cease to be an emerging growth company as of the following December 31. We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on these exemptions. If some investors find our Class A common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Class A common stock and our stock price may be more volatile. As an emerging growth company the JOBS Act, allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. We will incur increased costs by being a public company. As a public company, and particularly after we cease to be an emerging growth company, we will incur greater legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also anticipate that we will incur costs associated with relatively recently adopted corporate governance requirements, including requirements of the SEC and The NASDAQ Global Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements that are based on management s beliefs and assumptions and on information currently available to management. Some of the statements in the sections of this prospectus captioned Prospectus Summary, Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations and Business and elsewhere in this prospectus contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: may, will, could, would, should, expect, intend, plan, anticipate, believe, estimate, predict, project, potential, continue, ongoing or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties, assumptions and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this prospectus include, but are not limited to, statements about: our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses, ability to generate cash flow and ability to achieve and maintain future profitability; the impact of competition in our industry and innovation by our competitors; the anticipated trends, growth rates and challenges in our business and in the TBM market; maintaining and expanding our customer base and our relationships with go-to-market partners; our liquidity and working capital requirements; our anticipated growth and growth strategies and our ability to effectively manage that growth and effect these strategies; our ability to sell our solutions and expand internationally; our involvement with, and the activities of, the TBM Council; the reliability of the third-party infrastructure on which our solutions depend; our ability to hire and retain necessary qualified employees to expand our operations; our ability to adequately protect our intellectual property; the effect on our business of litigation to which we are or may become a party; our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally; Table of Contents the increased expenses and administrative workload associated with being a public company; our ability to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud; our use of the net proceeds from this offering; and the estimates and estimate methodologies used in preparing our consolidated financial statements and determining option exercise prices. In addition, you should refer to the section of this prospectus captioned Risk Factors for a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations, market position, market opportunity and market size, is based on information from various sources, including independent industry publications like those generated by Gartner, Inc. In presenting this information, we have also made assumptions based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets for our service and related solutions. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Risk Factors and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. The Gartner reports described herein, or the Gartner Reports, represent research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc., or Gartner. Each Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Reports are subject to change without notice. In certain instances where the Gartner Reports are identified as the sources of market and industry data contained in this prospectus, the applicable report is identified by superscript notations. The sources of these data are provided below: (1) Gartner, Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2014-2020, 2Q16 Update, July 25, 2016. (2) Gartner, IT Key Metrics Data 2016; Key Industry Measures: Professional Services Analysis: Current Year, December 14, 2015. Table of Contents USE OF PROCEEDS We estimate that the net proceeds to us from the sale of the shares of Class A common stock in this offering will be approximately $74.8 million, or approximately $86.5 million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed initial price to public of $14.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial price to public of $14.00 per share, would increase (decrease) the net proceeds to us from this offering by approximately $5.6 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 500,000 in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $6.5 million, assuming that the assumed initial price to public remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial price to public or the number of shares by these amounts would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital. The principal purposes of this offering are to create a public market for our Class A common stock, facilitate our future access to the public capital markets and improve brand awareness, as well as to obtain additional capital. We intend to use the net proceeds to us from this offering to repay $20.2 million principal and prepayment fees for amounts borrowed under our credit facilities, and the remainder for working capital and general corporate purposes. Other than the repayment of indebtedness we have not quantified or allocated any specific portion of the net proceeds or range of net proceeds to any particular purpose. Additionally, we may choose to expand our current business through acquisitions of, or investments in, other complementary businesses, technologies, or other assets. However, we currently have no agreements or commitments with respect to any such acquisitions or investments. We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering. In addition, the amount, allocation and timing of our actual expenditures will depend upon numerous factors. Pending other uses, we intend to invest the proceeds in interest-bearing, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from our initial public offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds. The $10.0 million principal amount of term borrowings under our senior credit facility to be repaid from the net proceeds of this offering accrues interest at a floating rate equal to the prime rate plus 1.25% and is scheduled to mature on April 20, 2020. The $10.0 million principal amount of term borrowings under our subordinated loan and security agreement to be repaid from the net proceeds of this offering accrues interest at 9.5% and is scheduled to mature on April 20, 2019. We used the proceeds of such borrowings for working capital. In addition, we intend to pay a prepayment penalty and a final payment fee in the aggregate amount of $200,000 from the net proceeds of this offering incurred in connection with the foregoing repayment under our subordinated loan and security agreement. Table of Contents DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. In addition, our credit facilities materially restrict, and future debt instruments we issue may materially restrict, our ability to pay dividends on our Class A common stock or Class B common stock. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant. Table of Contents CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2016: on an actual basis; on a pro forma basis, to reflect: (1) the automatic conversion of all outstanding shares of our convertible preferred stock as of June 30, 2016 into an aggregate of 18,239,475 shares of Class B common stock, which conversion will occur immediately prior to the closing of this offering, as if such conversion had occurred on June 30, 2016; (2) the conversion of warrants to purchase 27,321 shares of convertible preferred stock into warrants to purchase 27,321 shares of Class B common stock; and (3) the filing of our amended and restated certificate of incorporation immediately prior to the closing of this offering; and on a pro forma as adjusted basis, giving effect to (a) the pro forma adjustments set forth above, (b) the sale and issuance by us of 6,000,000 shares of Class A common stock in this offering at an assumed initial price to public of $14.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and (c) the application of such proceeds as described in the section of this prospectus captioned Use of Proceeds. Table of Contents Investors should read the information in this table together with the financial statements and related notes to those statements, as well as the sections of this prospectus captioned Selected Consolidated Financial Data and Management s Discussion and Analysis of Financial Condition and Results of Operations. As of June 30, 2016 Actual Pro Forma Pro Forma As Adjusted(1) (in thousands, except share and per share amounts) Cash and cash equivalents $ 42,052 $ 42,052 $ 96,672 Long-term debt, current and non-current, net of debt issuance costs $ 19,432 $ 19,432 $ Preferred stock warrant liability 406 Convertible preferred stock, $0.0001 par value per share; issuable in series, 18,430,604 shares authorized, 18,239,475 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted 133,809 Stockholders (deficit) equity: Preferred stock, $0.0001 par value per share, no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted Common stock, $0.0001 par value per share, 44,100,000 shares authorized, 13,046,364 shares issued and outstanding, actual; no shares authorized, issued or outstanding pro forma and pro forma as adjusted 1 Class A common stock, $0.0001 par value per share, no shares authorized, issued or outstanding, actual; 451,000,000 shares authorized, no shares issued or outstanding, pro forma; 451,000,000 shares authorized, 6,000,000 shares issued and outstanding, pro forma as adjusted 1 Class B common stock, $0.0001 par value per share, no shares authorized, issued or outstanding, actual; 44,000,000 shares authorized, 31,285,839 shares issued and outstanding, pro forma and pro forma as adjusted 3 3 Additional paid-in capital 31,720 165,933 240,752 Accumulated other comprehensive loss Accumulated deficit (183,652 ) (183,652 ) (184,420 ) Total stockholders (deficit) equity (151,931 ) (17,716 ) 56,336 Total capitalization $ 1,716 $ 1,716 $ 56,336 (1) Each $1.00 increase (decrease) in the assumed initial price to public of $14.00 per share, would increase (decrease) each of the pro forma as adjusted cash and equivalents, additional paid-in capital, total stockholders (deficit) equity and total capitalization by approximately $5.6 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 500,000 in the number of shares offered by us would increase (decrease) each of the pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders (deficit) equity and total capitalization by approximately $6.5 million, assuming that the assumed initial price to public remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial price to public and other terms of this offering determined at pricing. Table of Contents The number of shares of common stock to be outstanding following this offering is based on 31,285,839 shares of common stock outstanding as of June 30, 2016, giving effect to the conversion of all outstanding shares of convertible preferred stock into an aggregate of 18,239,475 shares of Class B common stock immediately prior to the closing of this offering. The outstanding share information in the table above excludes as of June 30, 2016: 11,394,824 shares of Class B common stock issuable upon exercise of options outstanding as of June 30, 2016, at a weighted-average exercise price of $9.28 per share; 551,548 shares of Class B common stock reserved for future issuance under our 2007 Stock Plan as of June 30, 2016; provided, however, that upon the effectiveness of the registration statement of which this prospectus forms a part, our 2007 Stock Plan will terminate so that no further awards may be granted under our 2007 Stock Plan; 222,920 shares of Class B common stock reserved for future issuance under our 2011 Executive Equity Incentive Plan as of June 30, 2016; provided, however, that upon the effectiveness of the registration statement of which this prospectus forms a part, our 2011 Executive Equity Incentive Plan will terminate so that no further awards may be granted under our 2011 Executive Equity Incentive Plan; an aggregate of 4,550,000 shares of Class A common stock reserved for future issuance under our 2016 Equity Incentive Plan and 2016 Employee Stock Purchase Plan, each of which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part; and 75,214 shares of Class B common stock issuable upon the exercise of warrants outstanding as of June 30, 2016, at a weighted-average exercise price of $9.52 per share. Table of Contents DILUTION Investors purchasing Class A common stock in this offering will experience immediate and substantial dilution in the pro forma net tangible book value of their shares of Class A common stock. Dilution in pro forma net tangible book value represents the difference between the price to public per share of our Class A common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after the offering. Pro forma net tangible book value per share represents our total tangible assets less total liabilities, divided by the number of outstanding shares of Class A common stock and Class B common stock. After giving effect to (1) the automatic conversion of our outstanding convertible preferred stock into an aggregate of 18,239,475 shares of Class B common stock immediately prior to the closing of this offering, (2) the issuance of 6,000,000 shares of Class A common stock in this offering and (3) receipt of the net proceeds from our sale of 6,000,000 shares of Class A common stock in this offering at an assumed initial price to public of $14.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2016 would have been approximately $54.6 million, or $1.47 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $2.12 per share to existing stockholders and an immediate dilution of $12.53 per share to new investors purchasing Class A common stock in this offering. The following table illustrates this dilution on a per share basis to new investors: Assumed initial price to public per share $ 14.00 Pro forma net tangible book value per share before this offering $ (0.65 ) Increase in net tangible book value per share attributable to investors participating in this offering 2.12 Pro forma as adjusted net tangible book value per share, as adjusted to give effect to this offering 1.47 Pro forma as adjusted dilution per share to investors participating in this offering $ 12.53 Each $1.00 increase (decrease) in the assumed initial price to public of $14.00 per share, would increase (decrease) our pro forma as adjusted net tangible book value by approximately $5.6 million, or approximately $0.15 per share, and increase (decrease) the dilution per share to investors in this offering by approximately $0.85 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase of 500,000 in the number of shares offered by us would increase our pro forma as adjusted net tangible book value by approximately $6.5 million, or $0.15 per share, and the dilution per share to investors participating in this offering would be $12.38 per share, assuming that the assumed initial price to public remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each decrease of 500,000 in the number of shares offered by us would decrease our pro forma as adjusted net tangible book value by approximately $6.5 million, or $0.16 per share, and the dilution per share to investors participating in this offering would be $12.69 per share, assuming that the assumed initial price to public remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial price to public and other terms of this offering determined at pricing. If the underwriters exercise their option in full to purchase 900,000 additional shares of Class A common stock in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $1.74 per share, the increase in the pro forma net tangible book value per share Table of Contents to existing stockholders would be $0.27 per share and the pro forma dilution to new investors purchasing Class A common stock in this offering would be $12.26 per share. The following table summarizes, on a pro forma basis as of June 30, 2016, the differences between the number of shares of common stock purchased from us, the total consideration and the weighted-average price per share paid by existing stockholders and by investors participating in this offering at an assumed initial price to public of $14.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us: Shares Purchased Total Consideration Weighted- Average Price Per Share Number Percent Amount (In thousands) Percent Existing stockholders before this offering 31,285,839 84 % $ 143,347 63 % $ 4.58 Investors participating in this offering 6,000,000 16 84,000 37 14.00 Total 37,285,839 100 % $ 227,347 100 % 6.10 Each $1.00 increase (decrease) in the assumed initial price to public of $14.00 per share, would increase (decrease) total consideration paid by new investors by $6.0 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 500,000 in the number of shares offered by us would increase (decrease) total consideration paid by new investors by $7.0 million, assuming that the assumed initial price to public remains the same. The outstanding share information in the table above excludes as of June 30, 2016: 11,394,824 shares of Class B common stock issuable upon exercise of options outstanding as of June 30, 2016, at a weighted-average exercise price of $9.28 per share; 551,548 shares of Class B common stock reserved for future issuance under our 2007 Stock Plan as of June 30, 2016; provided, however, that upon the effectiveness of the registration statement of which this prospectus forms a part, our 2007 Stock Plan will terminate so that no further awards may be granted under our 2007 Stock Plan; 222,920 shares of Class B common stock reserved for future issuance under our 2011 Executive Equity Incentive Plan as of June 30, 2016; provided, however, that upon the effectiveness of the registration statement of which this prospectus forms a part, our 2011 Executive Equity Incentive Plan will terminate so that no further awards may be granted under our 2011 Executive Equity Incentive Plan; an aggregate of 4,550,000 shares of Class A common stock reserved for future issuance under our 2016 Equity Incentive Plan and 2016 Employee Stock Purchase Plan, each of which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part; and 75,214 shares of Class B common stock issuable upon the exercise of warrants outstanding as of June 30, 2016, at a weighted-average exercise price of $9.52 per share, after conversion of the convertible preferred stock. Share reserves for the equity incentive plans will also be subject to automatic annual increases in accordance with the terms of the plans. To the extent that new options are issued under the equity benefit plans or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. Table of Contents SELECTED CONSOLIDATED FINANCIAL DATA We derived the following selected consolidated statements of operations data for the years ended December 31, 2014 and 2015 and the selected consolidated balance sheet data as of December 31, 2014 and 2015 from audited consolidated financial statements appearing elsewhere in this prospectus. We derived the following selected consolidated statement of operations data for the year ended December 31, 2013, and the selected consolidated balance sheet data as of December 31, 2013, from audited consolidated financial statements not included in this prospectus. We derived the following selected consolidated statements of operations data for the six months ended June 30, 2015 and 2016 and the summary consolidated balance sheet data as of June 30, 2016 from unaudited consolidated financial statements appearing elsewhere in this prospectus. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair presentation of the financial statements. Historical results are not necessarily indicative of the results that may be expected in the future and the results for the six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the full year or any other period. The selected financial data set forth below should be read together with the financial statements and the related notes to those statements, as well as the sections of this prospectus captioned Management s Discussion and Analysis of Financial Condition and Results of Operations. Year Ended December 31, Six Months Ended June 30, 2013 2014 2015 2015 2016 (in thousands, except per share amounts) Consolidated Statements of Operations Data Revenue: Subscription $ 54,206 $ 78,719 $ 99,924 $ 47,242 $ 61,681 Professional services 19,562 27,896 29,327 14,913 13,941 Total revenue 73,768 106,615 129,251 62,155 75,622 Cost of revenue: Subscription(1) 8,325 14,686 23,457 11,142 13,039 Professional services(1) 19,034 25,731 25,720 13,036 12,712 Total cost of revenue(1) 27,359 40,417 49,177 24,178 25,751 Gross profit 46,409 66,198 80,074 37,977 49,871 Operating expenses: Research and development(1) 17,804 23,099 30,553 14,674 17,057 Sales and marketing(1) 43,415 60,775 71,337 33,274 35,956 General and administrative(1) 8,597 14,245 17,763 7,698 10,684 Total operating expenses 69,816 98,119 119,653 55,646 63,697 Loss from operations (23,407 ) (31,921 ) (39,579 ) (17,669 ) (13,826 ) Other income (expense): Interest (expense) income and other, net (51 ) 2 (18 ) 19 (434 ) Foreign exchange loss (163 ) (697 ) (1,301 ) (607 ) (407 ) Loss before provision for income taxes (23,621 ) (32,616 ) (40,898 ) (18,257 ) (14,667 ) Provision for income taxes (114 ) (256 ) (109 ) (149 ) (214 ) Net loss $ (23,735 ) $ (32,872 ) $ (41,007 ) $ (18,406 ) $ (14,881 ) Net loss per share attributable to common stockholders, basic and diluted $ (2.11 ) $ (2.72 ) $ (3.24 ) $ (1.47 ) $ (1.14 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 11,256 12,080 12,653 12,485 13,016 Pro forma net loss per share attributable to common stockholders, basic and diluted(2) $ (1.33 ) $ (0.48 ) Weighted-average shares used to compute pro forma net loss per share attributable to common stockholders, basic and diluted(2) 30,893 31,256 Table of Contents (1) Includes stock-based compensation expense as follows: Year Ended December 31, Six Months Ended June 30, 2013 2014 2015 2015 2016 (in thousands) Cost of revenue: Subscription $ 75 $ 220 $ 482 $ 196 $ 332 Professional services 314 609 738 395 367 Research and development 836 1,465 2,283 1,160 1,267 Sales and marketing 1,047 2,006 2,477 1,210 1,441 General and administrative 789 1,466 1,835 894 1,008 Total stock-based compensation $ 3,061 $ 5,766 $ 7,815 $ 3,855 $ 4,415 (2) See Note 8 of the notes to our consolidated financial statements included in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share and pro forma net loss per share attributable to common stockholders and the weighted-average number of shares used in the computation of the per share amounts. As of December 31, As of June 30, 2016 2013 2014 2015 (in thousands) Consolidated Balance Sheet Data Cash and cash equivalents $ 35,816 $ 19,686 $ 17,256 $ 42,052 Working capital, excluding deferred revenue 77,198 66,574 61,544 71,965 Total assets 110,509 108,462 99,151 107,485 Deferred revenue, current and non-current 46,259 63,289 83,225 82,184 Long-term debt, current and non-current, net of debt issuance costs 19,432 Preferred stock warrant liability 241 357 414 406 Convertible preferred stock 133,809 133,809 133,809 133,809 Accumulated deficit (94,892 ) (127,764 ) (168,771 ) (183,652 ) Total stockholders deficit (86,147 ) (111,827 ) (142,261 ) (151,931 ) Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measure is useful in evaluating our business performance. We regularly review the liquidity measure set forth below. Year Ended December 31, Six Months Ended June 30, 2013 2014 2015 2015 2016 (in thousands) Other Non-GAAP Financial Data: Free cash flow(1) $ (15,480 ) $ (24,276 ) $ (18,234 ) $ (8,071 ) $ (3,729 ) (1) We define free cash flow as net cash used in operating activities, plus purchases of property and equipment. We believe free cash flow facilitates period-to-period comparisons of liquidity. We consider free cash flow to be an important measure because it measures the amount of cash we generate from our operations after our capital expenditures and reflects changes in working capital. We use free cash flow in conjunction with traditional GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our liquidity. Table of Contents Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our free cash flow should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. We compensate for these limitations by providing investors and other users of our financial information reconciliations of free cash flow to the related GAAP financial measure, net cash used in operating activities. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view free cash flow in conjunction with the related GAAP financial measure. The following table provides a reconciliation of net cash used in operating activities to free cash flow. Year Ended December 31, Six Months Ended June 30, 2013 2014 2015 2015 2016 (in thousands) Net cash used in operating activities $ (11,264 ) $ (17,957 ) $ (10,591 ) $ (3,312 ) $ (1,409 ) Plus: purchases of property and equipment (4,216 ) (6,319 ) (7,643 ) (4,759 ) (2,320 ) Free cash flow $ (15,480 ) $ (24,276 ) $ (18,234 ) $ (8,071 ) $ (3,729 ) Table of Contents MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere, particularly in the
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001424549_futureland_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001424549_futureland_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..38e6ade8566dec9f4053d7709b4a8a674618f4ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001424549_futureland_prospectus_summary.txt
@@ -0,0 +1,8740 @@
+PROSPECTUS SUMMARY
+
+ 
+
+The following
+summary highlights selected information contained in this prospectus. This summary does not contain all the information you should
+consider before investing in our common stock. You should read the entire prospectus carefully, including the "Risk Factors"
+beginning on page 6, and our financial statements and the notes to the financial statements included elsewhere in this prospectus.
+As used throughout this prospectus, the terms "FutureLand," "Company", "we," "us," "FUTL,"
+or "our" refer to FutureLand Corp. also referred to as "FL."
+
+ 
+
+ 
+
+PROSPECTUS
+SUMMARY
+
+ 
+
+You should rely only on the
+information contained in this prospectus. We have not authorized anyone to provide you with information different from the
+information that is contained in this prospectus. You should not rely on any information or representations not contained in this
+prospectus, if given or made, as having been authorized by us. This prospectus does not constitute an offer or solicitation in
+any jurisdiction in which the offer or solicitation would be unlawful. The information contained in this prospectus is accurate
+only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.
+
+ 
+
+Except
+as otherwise indicated, market data and industry statistics used throughout this prospectus are based on independent industry publications
+and other publicly available information.
+
+ 
+
+Recent
+Developments
+
+ 
+
+FutureLand Corp. (formerly known as AEGEA, Inc.) ("we",
+"us", the "Company") was incorporated in Colorado on November 29, 2007 under the name Forever Valuable Collectibles,
+Inc. The Company changed its name effective July 1, 2013 in connection with a July 22, 2013 acquisition of AEGEA, LLC which was
+in the planning stages of developing an international community and mega-resort destination in the heart of South Florida called
+AEGEA. Prior to the acquisition of AEGEA, LLC, the Company was engaged in the business of buying and reselling commemorative professional
+and college sports memorabilia. On March 10, 2015, an Exchange Agreement was entered (the "Agreement"), by and among
+certain shareholders and debt holders of the Company, representing the majority of the outstanding shares of the Company ("the
+AEGA Holders"), and FutureWorld, Corp. (hereafter referred to as "FWDG"), a Colorado Corporation which was the owner
+of the wholly owned subsidiary, FutureLand Properties, LLC, (hereafter referred to as "FLP"), a Colorado Limited Liability
+Corporation. Additionally, on June 1, 2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated
+March 10, 2015, FWDG sold all rights, title and ownership of FutureLand Properties, LLC to the Company, including all member units,
+assets, intellectual property, contracts, leases, and real property which includes 200 acres in La Vita, Colorado,
+
+ 
+
+In connection with the Exchange
+Agreement, we issued an aggregate of 27,845,280 shares of our common stock to FWDG and or its assignee. FWDG and the AEGA Holders
+entered into the purchase and exchange agreement where the AEGA Holders agreed to deliver to FutureWorld their shareholdings in
+the Company in exchange for certain actions, including AEGEA Holders resignation as directors and officers of the Company and the
+simultaneous appointment of two directors as designated by FLP. In return for the AEGEA Holders shares of the Company, in combination
+with certain debt forgiveness totaling $100,000 by the AEGEA Holders, the AEGA Holders shall receive, an amount of shares to be
+equal to 4.9% of the outstanding shares of the Company calculated after the reverse stock split which became effective on May 1,
+2015. Such shares as held by the AEGA Holders which are surrendered in return for the new exchange shares to be issued, shall be
+cancelled in such exchange and returned to treasury. Such exchange shares when issued shall contain certain anti-dilutive rights
+whereby the AEGEA Holders shall receive additional shares for a period of one year from the date of issuance in order to retain
+4.9% of the outstanding shares of the Company, issuable within ten days of the end of each fiscal quarter following such initial
+issuance. Pursuant to the Agreement, all assets of the Company, including all intellectual property, contractual rights, business
+plans, architectural works, property rights, and other valuable matters, shall be sold to the AEGA
+
+ 
+
+ 
+
+ 
+
+Holders, into a new private
+entity formed at their direction, control and benefit, in settlement for another $100,000 in debt due to AEGEA Holders by the Company
+and certain liabilities will be assumed by the new private entity.
+
+ 
+
+In May 2015, we changed our
+name to FutureLand Corp. and effected a 1 for 400 reverse stock split of our common stock. All share and per share data in this
+annual report have been retroactively restated to reflect the reverse stock split.
+
+As of the date of this report,
+all of the required actions have been taken by the parties such as change in management and the issuance of 27,845,280 common shares
+as discussed above and such Exchange Agreement is binding on the parties with closing subject to the completion of remaining actions.
+Upon closing and the cancellation of all outstanding shares of Series B convertible preferred stock has occurred, the additional
+shares to the AEGA Holders has occurred, all payments for contracts and vendors has been paid and/or settled by the Company, this
+transaction is expected to be accounted for as a reverse recapitalization of FLP with the business of FLP being the continuing
+business since the member of FLP will have voting and management control of the combined entity.
+
+ 
+
+On October 30, 2014, FLP closed on 239.96 Acres in
+La Vita, Colorado in Huerfano County for $60,000. FLP entered into a lease agreement contract with a lease with Colorado
+Flower Company, LTD on Dec 1, 2014 allotting 37 acres for their grow facilities. FLP was formed as a Colorado State company
+on October 6, 2014 by FutureWorld Corp.
+
+ 
+
+Prior to FLP being formed, the State of Colorado amended
+their laws allowing cannabis grow facilities to be separated from cannabis dispensaries effectively opening up an entirely new
+business opportunity that FLP entered into at that time. At such time, FLP pursued the business plan to secure a cannabis or hemp
+grower to execute their business plan of leasing the land, the structures, the technologies and provide maintenance contracts associated
+with the grow. Integral to its strategy is to provide the financing for the entire grow operation so as to establish a position
+by which to harness a competitive advantage in striking the right kind of lease in conjunction with Colorado State laws that would
+allow FLP to make above average returns. On Jan 20, 2015 FLP entered a contract with GPS, La Vita, Inc. allotting 5 acres
+for their immediate grow facilities. All of these contracts, and land ownings are currently in FLP. 
+
+ 
+
+ 
+
+The FutureLand
+Story - Our Business
+
+ 
+
+FutureLand Corp. is an agricultural land lease company
+catering to the industrial hemp, legal medical marijuana and recreational cannabis market. FutureLand was started to capitalize
+upon the distinct separation of the cultivation grows from the dispensaries, specifically with respect to Colorado. In the State
+of Colorado, which has become the quintessential poster-child for what the industry may look like for the rest of America, at least
+temporarily, as other states determine what exact direction they will choose to go, there are residency laws that must be adhered
+to. For instance, in order to get a license to grow or profit from cannabis in Colorado you must be a 2 year resident. 
+The laws are very specific; anyone who is not a 2 year resident cannot profit from the sale of the cannabis flower or infused products. 
+Because of this mandate, Future Land Corp must be a land owner and leaser in order to effectively participate in the cannabis grow
+industry, which we believe is essential in order to gain a competitive advantage. We also must own the structures on the
+land to control the lease and our future position in the industry.
+
+ 
+
+The business model is simple; offer growers the opportunity
+to grow. We have the land and then we find a growers requiring assist in funding and obtaining their license and grow facility. 
+Next, we arrange for additional operational items needed, including but not limited to, complete build-outs provided from our associated
+company, HempTech Corp, in order to capture additional revenue.
+
+ 
+
+Solving the Problem of Land to Grow Cannabis
+
+A complete and current market survey was conducted for the Colorado State Department of Revenue which estimated usage in Colorado
+to be up to 346,000 lbs. per annum for residents and visitors combined.
+
+ 
+
+ 
+
+ 
+
+At December 1, 2014 the Colorado market was currently
+being serviced by 92 licensed growers which have led to continued shortages in the supply chain.
+
+ 
+
+There are three main customer groups: pharmaceutical
+and research laboratories, dispensaries, and recreational outlets. The customer segments are sufficiently distinct to be able to
+target each one differently. The industry has been undergoing consolidation for several years now. We believe will be able to serve
+the industry by leveraging the competitive edge of healthy, potent plants on a consistent supply basis.
+
+ 
+
+FL's Land and its Operations in Walsenburg, Colorado
+
+On, October 30th, 2014 FutureLand closed on 239.96 Acres in La Vita, Colorado in Huerfano County for $60,000. 
+The property has increased in value ten times since then. At such time, FL went into overdrive to secure a cannabis grower
+to execute their business plan of leasing the land, the structures, the technologies and provide maintenance contracts associated
+with the grow. Integral to our strategy was to provide the financing for the entire grow operation so as to establish a position
+by which to harness a competitive advantage in striking the right kind of lease in conjunction with Colorado State laws that would
+allow FL to make above average returns.
+
+ 
+
+FL will have units that are leased out to growers 
+that have licenses (we will fund the application). 90% of all growing will be done in Grow Houses.
+
+ Medical and Recreational
+
+ FL will initially focus on Leasing to Recreational Growers due to Demand
+
+FL will also fund its own grow facilities that will be
+JV's with local growers (See Grow Houses sections). This will be done in various states as the market opens up allowing publicly
+traded companies to do so. Presently there are 4 legal states plus the District of Columbia open for retail/recreational
+cannabis: Alaska, Colorado, Washington, Oregon and Washington D.C. In the next years, it is likely that several more states
+will also legalize recreational use of cannabis.
+
+Overview of FL's Land Lease Terms
+
+FL will lend to the Lessees initial Licensing Costs (out
+of first proceeds)
+
+ Funding for licenses (lend money for the license)
+
+ Application assistance
+
+ 
+
+Included in Lessees Monthly Rent:
+
+ 
+
+ Road Infrastructure to Grow house
+
+ Building the Grow Houses (FL will own buildings)
+
+ Equipment
+
+ Access to water (will buy from FL)
+
+ Technology through Hemp Tech Corp.
+
+ Security
+
+ Lighting
+
+ Hydroponic Systems without soil growing
+
+ Office
+
+ Drying Room
+
+ Hoop Houses temporary
+
+ Water tanks
+
+ Propane tanks
+
+ Generator
+
+Additional costs to Lessee (Not included in Monthly
+Rent)
+
+ Staffing & Master Grower
+
+ 
+
+ 
+
+ 
+
+ Seeds
+
+ Buy nutrients for plants (i.e., Miracle grow-like nutrients)
+
+ Electricity
+
+ Buying water from FL
+
+FL's Current Land Divided into Lots for Lessees and FL
+Funded Grow Houses
+
+FL's Goals 3 Lessors with 24 Units &
+3 FL funded Grow Houses with 24 Units
+
+Our five year goal is to continue to expand operations
+in and around the existing operations. Our initial operations are designed with expansion in mind through re-investment. We have
+chosen facilities, at the expense of initial profits, with this "room for expansion" without significant capital outlay,
+in mind. This expansion can be achieved through either additional licensed crop growth, i.e. multiple crops, or additional crop
+rotation through faster maturing crops. We will use the profits from our grow cycles to fund new growth, expand employment and
+develop the infrastructure in both the medicinal and recreational fields.
+
+ 
+
+We have identified four keys factors that will be
+instrumental to our success.
+
+1)The first key factor is the implementation of strict financial controls. By having the proper controls,
+production efficiency and accountability will be maximized.
+
+2)The second key factor will be the "never ending pursuit of perfection"; similar to the
+wine industry, bouquet, flavor and strength are key elements to production.
+
+3)The third key factor is the recognition and implementation of the philosophy that 100% regulatory
+compliance and customer satisfaction is required to ensure a profitable business.
+
+4)The fourth key is consistency, consistency of supply, consistency of product. In an industry currently
+plagued by product shortages (some dispensaries have had to close their doors due to lack of product) and erratic quality, consistency
+will ensure continued sales.
+
+Land Lease and Grow Competitors
+
+There are 106 MED Licensed Retail Marijuana Product Manufacturers
+in Colorado as of March 2, 2015. (See attached "MED Licensed Retail Marijuana Product Manufacturers as of March 2, 2015"). 
+As mentioned previously, this limited number of Product Manufacturers has led to shortages of supply for many Retail Dispensaries.
+
+Grow Licensing
+
+Licensing, both State and Local is a precursor to all
+production. Initial application will be for Type 1 License which allows for the production of 3,600 plants. It is envisaged
+that as the need requires and future production facilities become available, further applications will be made for Type 2 licensing
+(6,000 plants) and Type 3 licensing (10,000 plants).
+
+ 
+
+Production levels are directly contingent on space availability
+and set-up costs. Further details relating to set-up costs and operating expenses can be found in the appendices to this document.
+
+Production Level Analysis
+
+Attached as an appendix is a Production Level Financial
+Analysis which is predicated on the following:
+
+ on average, 1 crop per quarter (13 week grow, harvest, dry and deliver);
+
+ deep water under current systems yield on average 8 ounces a plant (final
+yields may be higher);
+
+ additional Seeds / Clones purchased in 2nd through 4th quarters to access/blend
+different strains;
+
+ Federal Income Tax is calculated by the application of Section 280E of the
+Income Tax
+
+ 
+
+Assessment Act which disallows (amongst other items)
+items that are not directly attributable to the growth of the product. Therefore, in general, items such as excise duty, rent,
+advertising, depreciation, legal fees, wages, utilities, and security services that form part of the General and Administrative
+Expenses of the corporation, on a Federal level, are not allowed as a deduction from income. Legal actions are currently in play
+to repeal this section of the act in relation to Legalized Marijuana operations. Should such actions be successful it would have
+the effect of reducing the Federal Income Tax Expense by the following:
+
+ 
+
+ 
+
+ 
+
+ 3,600 Plants $ 307,926
+
+ 3,200 Plants $ 274,198
+
+ 2,800 Plants $ 240,471
+
+ 2,400 Plants $ 206,744
+
+ 2,000 Plants $ 173,022
+
+ 
+
+Further analysis schedules provide details of the cost
+/ equipment requirement involved in the set-up and operating of an individual crop cycle. Concurrent cycles, subject to licensing
+constraints, can be approximated by doubling the Supplies, Lighting Equipment, Utilities Analyses and adding additional accounting,
+sales, growing, harvesting and packaging employees.
+
+Security of the Land and its Products
+
+FutureLand will make use of its relationship with HempTech Corp. to provide a state of the art security system. HempTech
+Corp has the SPIDer (Secure Perimeter Intrusion Detection Network) line of products to meet the needs of security and intrusion
+detection in the indoor and outdoor cannabis grow industry.
+
+ 
+
+The SPIDer Intrusion Detection network is a multifaceted
+product family which provides near real-time detection of intruders for either a remote inside facility or large open air agricultural
+facilities. Product examples include but not limited to; active fence systems, HD infrared and color camera networked via radio
+systems, motion detectors, microwave security systems and intelligent LED lighting systems. HempTech will design specific
+packages to support applications ranging from small indoor facilities to large outdoor agriculture facilities covering hundreds
+of acres. The SPIDer systems consist of 3 levels of detection to identify intruders and threats in areas that are restricted.
+
+ 
+
+The first level utilizes an electronically charged coaxial
+cable, FlexPS, woven into your chain link fencing. Excessive fence movement will set off an alarm through your network notification
+system that someone is attempting to enter your facility. This is a very cost effective means to secure your site to meet
+security requirements for your company. A Microwave Protection system, MPS* product is also available to protect gates and
+open fields where appropriate fencing is unavailable.
+
+ 
+
+The second
+level consists of a microwave intrusion monitoring system ltrawave which creates a secure corridor of detection within
+the restricted area. When activated, this system will detect any movement within the defined corridor. Intrusion detection
+becomes extremely reliable by combining the fence system with the corridor intrusion detection thus eliminating nuisance alarms
+at the perimeter such as objects hitting a fence.
+
+ 
+
+The third level is a multi-level detection and verification
+network that uses both level one and level two systems to rapidly identify a potential intruder and provide you information for
+a rapid decision. Full motion light and inferred cameras are also integrated into the system. These cameras can be directed
+by the response of the intrusion detection network. This level of integration requires CaNNaLyTiX software to fully integrate all
+the components. FL will outsource armed security for operations and armored trucks for moving cash. 
+
+ 
+
+Government Regulation
+
+ 
+
+Our business plan includes allowing
+medical and recreational license holders in legal states to lease land for the purpose of growing cannabis which we believe
+could be deemed to be aiding and abetting illegal activities, a violation of Federal law. We intend on remaining within the guidelines
+outlined in the Cole Memo (as more fully described in this prospectus), which does not alter the Department of Justice's authority
+to enforce Federal law, including Federal laws relating to cannabis, but does recommend that U.S. Attorneys prioritize enforcement
+of Federal law away from the cannabis industry operating as permitted under certain state laws so long as certain conditions are
+met. However, we cannot provide assurance that we are in full compliance with the Cole Memo or any other laws or regulations.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Company Information
+
+ 
+
+We are a Colorado corporation. Our
+address is 8400 E. Crescent Parkway, Suite 600, Greenwood Village, Colorado 80111. Our telephone number is (720) 370-3558 and our
+website is www.futurelandcorp.com. Our second office is at 10901 Roosevelt Blvd, Suite 1000c, Saint Petersburg, FL 33716. The information
+on our website is not a part of this prospectus.
+
+ 
+
+Emerging Growth Company
+
+We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from
+various reporting requirements that are applicable to other public companies.
+
+ 
+
+Section 107(b) of the JOBS Act provides
+that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B)
+of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company"
+can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have
+irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section
+107(b) of the JOBS Act.
+
+ 
+
+We could remain an "emerging
+growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual
+gross revenues are $1 billion, as adjusted, or more, (ii) the date that we become a "large accelerated filer" as defined
+in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which would occur if the market
+value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently
+completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during
+the preceding three-year period.
+
+ 
+
+ 
+
+ 
+
+ 
+
+THE OFFERING
+
+ 
+
+ Securities offered
+ 
+ Up to 2,000,000 shares of our Common Stock
+ 
+
+ Maximum Offering Amount
+ 
+ $1,000,000. 
+ 
+
+ Offering price
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ Common stock issued and outstanding before this offering
+ 
+ 32,397,930
+ 
+ 
+
+ Common stock issued and outstanding after this offering
+ 
+ 34,397,930
+ 
+ 
+
+ Use of proceeds
+ 
+ FutureLand will use the net proceeds from this offering for our general corporate purposes and working capital, to accelerate company growth, purchase more lands in other legal states and continue developing our current leases in Colorado. See "Use of Proceeds."
+ 
+
+ Risk factors
+ 
+ See "Risk Factors" beginning on page 10 and the other information set forth in this prospectus for a discussion of factors you should consider before deciding to invest in our securities.
+ 
+
+ Market for Common Stock
+ 
+ Since May 9, 2015, our common stock has been quoted on the OTCPINKS under the symbol "FUTL". The last reported sale price of the Company's common stock, as of May 16, 2016 was $0.35 per share. See "Market for Common Stock" on page 23.
+ 
+
+ 
+
+ 
+ 
+ We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future. 
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ (1) Based on 32,397,930 shares of common stock outstanding on May 16, 2016 and excludes. 
+
+ 
+
+The number of shares of our common
+stock outstanding before this offering excludes:
+
+ 
+
+ 
+ 
+ 4,000,000 shares of common stock issuable under our 2014 Equity Incentive Plan to certain employees and directors, not included in this Offering.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+CAUTIONARY
+NOTE REGARDING FORWARD-LOOKING STATEMENTS
+
+ 
+
+The information contained
+in this Prospectus, including in the documents incorporated by reference into this Prospectus, includes some statements that are
+not purely historical and that are forward-looking statements. Such forward-looking statements include, but are not
+limited to, statements regarding our management s expectations, hopes, beliefs, intentions and/or strategies regarding the
+future, including our financial condition and results of operations. In addition, any statements that refer to projections, forecasts
+or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
+The words anticipates, believes, continue, could, estimates, 
+ expects, intends, may, might, plans, possible, 
+ potential, predicts, projects, seeks, should, would 
+and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words
+does not mean that a statement is not forward-looking.
+
+ 
+
+RISK FACTORS
+
+ 
+
+An investment in our securities is subject to numerous
+risks, including the risk factors described below. You should carefully consider the risks, uncertainties, and other factors described
+below, in addition to the other information set forth in this Prospectus, before making an investment decision with regard to our
+securities. Any of these risks, uncertainties, and other factors could materially and adversely affect our business, financial
+condition, results of operations, cash flows, or prospects. In that case, the trading price of our Common Stock could decline,
+and you may lose all or part of your investment. See also "Cautionary Note Regarding Forward-Looking Statements."
+
+ 
+
+RISKS RELATING TO OUR FINANCIAL CONDITION
+
+ 
+
+ 
+
+ 
+
+We have a limited operating history, which may
+make it difficult for investors to predict future performance based on current operations.
+
+ 
+
+We have a limited operating history upon which investors
+may base an evaluation of our potential future performance. In particular, we have not proven that we can maintain and lease properties
+associated with FutureLand grow operations, locations, leaseholds, placements, supply hydroponic growing equipment or sell our
+hydroponic produce in a manner that enables us to be profitable and meet customer requirements, develop intellectual property to
+enhance FutureLand leased grow facilities, obtain the necessary permits and/or achieve certain milestones to develop leased facilities,
+FutureLand's line of products cigarettes, develop and maintain relationships with key manufacturers and strategic partners to extract
+value from our intellectual property, raise sufficient capital in the public and/or private markets, or respond effectively to
+competitive pressures. As a result, there can be no assurance that we will be able to develop or maintain consistent revenue sources,
+or that our operations will be profitable and/or generate positive cash flows.
+
+ 
+
+Any forecasts we make about our operations may prove
+to be inaccurate. We must, among other things, determine appropriate risks, rewards, and level of investment in our product lines,
+respond to economic and market variables outside of our control, respond to competitive developments and continue to attract, retain,
+and motivate qualified employees. There can be no assurance that we will be successful in meeting these challenges and addressing
+such risks and the failure to do so could have a materially adverse effect on our business, results of operations, and financial
+condition. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies
+in the early stage of development. As a result of these risks, challenges, and uncertainties, the value of your investment could
+be significantly reduced or completely lost.
+
+ 
+
+Our independent auditor's report from inception
+to the fiscal years ended March 31, 2015 is qualified as to our ability to continue as a going concern.
+
+ 
+
+Due to the uncertainty of our ability to meet our current
+operating and capital expenses, in our audited annual financial statements as of and for the year ended March 31, 2015, our independent
+auditors included a note to our financial statements regarding concerns about our ability to continue as a going concern. Recurring
+losses from operations raise substantial doubt about our ability to continue as a going concern. The presence of the going concern
+note to our financial statements may have an adverse impact on the relationships we are developing and plan to develop with third
+parties as we continue the commercialization of our products and could make it challenging and difficult for us to raise additional
+financing, all of which could have a material adverse impact on our business and prospects and result in a significant or complete
+loss of your investment.
+
+ 
+
+We have incurred significant losses in prior periods,
+and losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial
+condition, our ability to pay our debts as they become due, and on our cash flows.
+
+ 
+
+We have incurred significant losses in prior periods.
+The Company had a net loss and net cash used in operations of $1,263, for the three months ended September 30, 2015 and a working
+capital deficit, stockholders' deficit, and deficit accumulated during the development stage of $1,985,451, at September 30, 2015
+and is in the development stage with limited revenues. These matters raise substantial doubt about the Company's ability to continue
+as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to further
+implement its business plan, raise additional capital, and generate revenues. The consolidated financial statements do not include
+any adjustments that might be necessary if the Company is unable to continue as a going concern.
+
+ 
+
+We will likely need additional capital to sustain
+our operations and will likely need to seek further financing, which we may not be able to obtain on acceptable terms or at all.
+If we fail to raise additional capital, as needed, our ability to implement our business model and strategy could be compromised.
+
+ 
+
+We have limited capital resources and operations. To
+date, our operations have been funded entirely from the
+
+ 
+
+ 
+
+ 
+
+proceeds of debt and equity financings. We expect to
+require substantial additional capital in the near future to expand our product lines, develop our intellectual property base,
+and establish our targeted levels of commercial production. We may not be able to obtain additional financing on terms acceptable
+to us, or at all.
+
+ 
+
+Even if we obtain financing for our near-term operations,
+we expect that we will require additional capital thereafter. Our capital needs will depend on numerous factors including: (i)
+our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and
+development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able
+to obtain capital in the future to meet our needs.
+
+ 
+
+If we raise additional funds through the issuance of
+equity or convertible debt securities, the percentage ownership held by our existing stockholders will be reduced and our stockholders
+may experience significant dilution. In addition, new securities may contain rights, preferences, or privileges that are senior
+to those of our Common Stock. If we raise additional capital by incurring debt, this will result in increased interest expense.
+If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of Common Stock
+could limit our ability to obtain equity financing.
+
+ 
+
+We cannot give you any assurance that any additional
+financing will be available to us, or if available, will be on terms favorable to us. If we are unable to raise capital when needed,
+our business, financial condition, and results of operations would be materially adversely affected, and we could be forced to
+reduce or discontinue our operations.
+
+ 
+
+RISKS RELATING TO OUR BUSINESS AND INDUSTRY
+
+ 
+
+We face intense competition and many of our competitors
+have greater resources that may enable them to compete more effectively.
+
+ 
+
+The industries in which we operate in general are subject
+to intense and increasing competition. Some of our competitors may have greater capital resources, facilities, and diversity of
+product lines, which may enable them to compete more effectively in this market. Our competitors may devote their resources to
+developing and marketing products that will directly compete with our product lines. Due to this competition, there is no assurance
+that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our products. There are
+no assurances that competition in our respective industries will not lead to reduced prices for our products. If we are unable
+to successfully compete with existing companies and new entrants to the market this will have a negative impact on our business
+and financial condition.
+
+ 
+
+If we fail to protect our intellectual property,
+our business could be adversely affected.
+
+ 
+
+Our viability will depend, in part, on our ability to
+develop and maintain the proprietary aspects of our technology to distinguish our products from our competitors' products. We rely
+on copyrights, trademarks, trade secrets, and confidentiality provisions to establish and protect our intellectual property.
+
+ 
+
+Any infringement or misappropriation of our intellectual
+property could damage its value and limit our ability to compete. We may have to engage in litigation to protect the rights to
+our intellectual property, which could result in significant litigation costs and require a significant amount of our time. In
+addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United
+States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that
+are similar to those developed or licensed by us.
+
+ 
+
+Competitors may also harm our sales by designing products
+that mirror the capabilities of our products, grow operations, leasing strategies, sources of products and sales or technology
+without infringing on our intellectual property rights. If we do not obtain sufficient protection for our intellectual property,
+or if we are unable to
+
+ 
+
+ 
+
+ 
+
+effectively enforce our intellectual property rights,
+our competitiveness could be impaired, which would limit our growth and future revenue.
+
+ 
+
+We may also find it necessary to bring infringement or
+other actions against third parties to seek to protect our intellectual property rights. Litigation of this nature, even if successful,
+is often expensive and time-consuming to prosecute and there can be no assurance that we will have the financial or other resources
+to enforce our rights or be able to enforce our rights or prevent other parties from developing similar technology or designing
+around our intellectual property.
+
+ 
+
+Although we believe that our technology does not
+and will not infringe upon the patents or violate the proprietary rights of others, it is possible such infringement or violation
+has occurred or may occur, which could have a material adverse effect on our business.
+
+ 
+
+We are not aware of any infringement by us of any person's
+or entity's intellectual property rights. In the event that products we sell are deemed to infringe upon the patents or proprietary
+rights of others, we could be required to modify our products, obtain a license for the manufacture and/or sale of such products,
+or cease selling such products. In such event, there can be no assurance that we would be able to do so in a timely manner, upon
+acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon
+our business.
+
+ 
+
+There can be no assurance that we will have the financial
+or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. If our products
+or proposed products are deemed to infringe or likely to infringe upon the patents or proprietary rights of others, we could be
+subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse
+effect on our business and our financial condition.
+
+ 
+
+ 
+
+Our trade secrets may be difficult to protect.
+
+ 
+
+Our success depends upon the skills, knowledge, and experience
+of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. Because we operate
+in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes.
+However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate
+partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally
+require that the receiving party keep confidential and not disclose to third parties confidential information developed by the
+receiving party or made known to the receiving party by us during the course of the receiving party's relationship with us. These
+agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will
+be our exclusive property, and we enter into assignment agreements to perfect our rights.
+
+ 
+
+These confidentiality, inventions, and assignment agreements
+may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently
+discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The
+enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive,
+and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to
+protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive
+position.
+
+ 
+
+Our business, financial condition, results of operations,
+and cash flows have been, and may in the future be, negatively impacted by challenging global economic conditions.
+
+ 
+
+ 
+
+ 
+
+ 
+
+The recent global economic slowdown has caused disruptions
+and extreme volatility in global financial markets, increased rates of default and bankruptcy, and declining consumer and business
+confidence, which has led to decreased levels of consumer spending. These macroeconomic developments have and could continue to
+negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result,
+we may not be able to maintain our existing customers or attract new customers, or we may be forced to reduce the price of our
+products and not be able to source new grow operations in selected states or expand such abilities. We are unable to predict the
+likelihood of the occurrence, duration or severity of such disruptions in the credit and financial markets and adverse global economic
+conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition,
+results of operations, and cash flows.
+
+ 
+
+Our future success depends on our key executive
+officers and our ability to attract, retain, and motivate qualified personnel.
+
+ 
+
+Our future success largely depends upon the continued
+services of our executive officers and management team. If one or more of our executive officers are unable or unwilling to continue
+in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses
+to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company,
+we may lose some or all of our customers. Finally, we do not maintain "key person" life insurance on any of our executive
+officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial
+condition, and results of operations, and thereby an investment in our Common Stock.
+
+ 
+
+Our continuing ability to attract and retain highly qualified
+personnel will also be critical to our success because we will need to hire and retain additional personnel as our business grows.
+There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition
+for skilled personnel in our industry. This competition may make it more difficult and expensive to attract, hire, and retain qualified
+managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely
+affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely
+lost.
+
+ 
+
+Our success depends, in part, on the adoption
+of FutureLand Technology, facilities and products by several segments, including local available licensed cannabis or hemp farmers,
+and greenhouse growers, and if these segments do not adopt our products and plans, then our revenue will be severely limited.
+
+ 
+
+The major groups to whom we believe may hire FutureLand
+for leases, leaseholds, operations, and business plan may not continue to embrace its products. Acceptance of FutureLand grow operations
+will depend on several factors, including cost, ease of use, familiarity of use, convenience, timeliness, strategic partnerships,
+and reliability. If we fail to meet FutureLand's customers' needs and expectations adequately, its product offerings may not be
+competitive and our ability to commence or continue generating revenues could be reduced. We also cannot ensure that our business
+model will gain wide acceptance among all targeted groups. If the market fails to continue to develop, or develops more slowly
+than we expect, our ability to commence or continue generating revenues could be reduced.
+
+ 
+
+A drop in the retail price of commercially grown
+produce may negatively impact FutureLand's business.
+
+ 
+
+The demand for FutureLand grown
+produce depends in part on the price of commercially grown produce and crops to be produced on such land, and for such products
+produced. Fluctuations in economic and market conditions that impact the prices of commercially grown produce, such as increases
+in the supply of such produce and the decrease in the price of commercially grown produce, could cause the demand for hydroponic
+grown produce to decline, which would have a negative impact on our business.
+
+ 
+
+We may not be able to effectively manage our growth
+or improve our operational, financial, and management
+
+ 
+
+ 
+
+ 
+
+information systems, which would impair our results
+of operations.
+
+ 
+
+In the near term, we intend to expand the scope of our
+operations activities significantly. If we are successful in executing our business plan, we will experience growth in our business
+that could place a significant strain on our business operations, finances, management and other resources. The factors that may
+place strain on our resources include, but are not limited to, the following:
+
+ 
+
+ The need for continued development of our financial and information management
+systems;
+
+ The need to manage strategic relationships and agreements with manufacturers,
+customers and partners; and
+
+ Difficulties in hiring and retaining skilled management, technical, and other
+personnel necessary to support and manage our business.
+
+ Financial abilities to accumulate additional grow properties for cultivation
+facilities.
+
+ 
+
+Additionally, our strategy envisions a period of rapid
+growth that may impose a significant burden on our administrative and operational resources. Our ability to effectively manage
+growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract,
+train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting
+and retaining new employees, or retaining existing employees.
+
+ 
+
+We cannot provide assurances that our management will
+be able to manage this growth effectively. Our failure to successfully manage growth could result in our sales not increasing commensurately
+with capital investments or otherwise materially adversely affecting our business, financial condition, or results of operations.
+
+ 
+
+If we are unable to adopt or incorporate technological
+advances into FutureLand products, our business could become less competitive, uncompetitive, or obsolete and we may not be able
+to compete effectively with competitors' products.
+
+ 
+
+We expect that technological advances in the processes
+and procedures for hydroponic growing equipment will continue to occur. As a result, there are risks that products that compete
+with FutureLand grow operations could be improved or developed. If we are unable to adopt or incorporate technological advances,
+FutureLand grow operations could be less efficient or cost-effective than methods developed and sold by its competitors, which
+could cause FutureLand grow operations to become less competitive, uncompetitive or obsolete, which would have a material adverse
+effect on FutureLand Technology's financial condition, and to a much lesser extent, on our financial condition.
+
+ 
+
+Competing forms of specialized agricultural equipment
+may be more desirable to consumers or make FutureLand grow operations obsolete.
+
+ 
+
+There are currently several different specialized agricultural
+equipment technologies being deployed in farming operations. Further development of any of these competitive technologies may lead
+to advancements in farming techniques that will make some of our methods of farming obsolete. Both Growers and Consumers may prefer
+alternative technologies and products. Any developments that contribute to the obsolescence of certain technologies and advances
+may substantially impact our business, reducing our ability to generate revenues.
+
+ 
+
+Litigation may adversely affect our business, financial
+condition, and results of operations.
+
+ 
+
+From time to time in the normal course of our business
+operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or
+may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation
+may be significant and may
+
+ 
+
+ 
+
+ 
+
+require a diversion of our resources. There also may
+be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of
+whether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficient
+amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance
+coverage for any claims could adversely affect our business and the results of our operations.
+
+Our major shareholders have significant control
+over stockholder matters and the minority stockholders will have little or no control over our affairs.
+
+ 
+
+Our major shareholders, being FutureWorld
+Corp. and Talari Industries currently own approximately 75% of our outstanding Common Stock, and, through the ownership of preferred
+stock, have approximately 97% of stockholder voting power, and thus significant control over stockholder matters, such as election
+of directors, amendments to the Articles of Incorporation, and approval of significant corporate transactions. As a result, our
+minority stockholders will have little or no control over its affairs.
+
+ 
+
+If we fail to implement and maintain proper and
+effective internal controls and disclosure controls and procedures pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our
+ability to produce accurate and timely financial statements and public reports could be impaired, which could adversely affect
+our operating results, our ability to operate our business, and investors' views of us.
+
+ 
+
+As of March 31, 2015, management assessed the effectiveness
+of our internal controls over financial reporting. Management concluded, as of the three months ended September 30, 2015, that
+our internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules. Management
+concluded that our internal controls were adversely affected by deficiencies in the design or operation of our internal controls,
+which management considered to be material weaknesses. These material weaknesses include the following:
+
+ 
+
+ lack of a functioning audit committee due to a lack of a majority of independent
+members and a lack of a majority of outside directors on our Board, resulting in ineffective oversight in the establishment
+and monitoring of required internal controls and procedures;
+
+ inadequate segregation of duties consistent with control objectives; and
+ineffective controls over period end financial disclosure and reporting processes.
+
+ The failure to implement and maintain proper and effective internal controls
+and disclosure controls could result in material weaknesses in our financial reporting such as errors in our financial statements
+and in the accompanying footnote disclosures that could require restatements. Investors may lose confidence in our reported financial
+information and disclosure, which could negatively impact our stock price.
+
+ 
+
+We do not expect that our internal controls over financial
+reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
+not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect
+the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls
+can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the
+controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance
+with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due
+to error or fraud may occur and not be detected.
+
+ 
+
+Our insurance coverage may be inadequate to cover
+all significant risk exposures.
+
+ 
+
+We will be exposed to liabilities that are unique to
+the products and land holdings we provide. While we intend to maintain insurance for certain risks, the amount of our insurance
+coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from
+risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and
+liabilities. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse
+effect on our business,
+
+ 
+
+ 
+
+ 
+
+financial condition, and results of operations. We do
+not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and
+diversion of resources.
+
+ 
+
+Because we do not have an audit or compensation
+committee, stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions.
+
+ 
+
+Because we do not have an audit or compensation committee,
+stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions. Thus,
+there is a potential conflict of interest in that our officers and directors have the authority to determine issues concerning
+management compensation, nominations, and audit issues that may affect management decisions.
+
+ 
+
+Federal regulation and enforcement may adversely
+affect the implementation of medical marijuana laws and regulations may negatively impact our revenues and profits.
+
+ 
+
+Currently, there are 23 states plus the District of Columbia
+that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use
+of cannabis in connection with medical treatment. Many other states are considering similar legislation. Conversely, under the
+Controlled Substance Act (the "CSA"), the policies and regulations of the Federal government and its agencies are that
+cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited.
+Unless and until Congress amends the CSA with respect to medical marijuana, as to the timing or scope of any such potential amendments
+there can be no assurance, there is a risk that federal authorities may enforce current federal law, and we may be deemed to be
+producing, cultivating, or dispensing marijuana in violation of federal law with respect to the licensed and leased activities
+of FutureLand and its subsidiary FutureWorld Holdings, Inc. current or proposed business operations or we may be deemed to be facilitating
+the sale or distribution of drug paraphernalia in violation of federal law with respect to our use of proprietary technologies
+in our business operations. Active enforcement of the current federal regulatory position on cannabis may thus indirectly and adversely
+affect our revenues and profits. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings,
+and stated federal policy remains uncertain.
+
+ 
+
+The U.S. Supreme Court declined to hear a case brought
+by San Diego County, California that sought to establish federal preemption over state medical marijuana laws. The preemption claim
+was rejected by every court that reviewed the case. The California 4th District Court of Appeals wrote in its unanimous ruling,
+"Congress does not have the authority to compel the states to direct their law enforcement personnel to enforce federal laws."
+However, in another case, the U.S. Supreme Court held that, as long as the CSA contains prohibitions against marijuana, under the
+Commerce Clause of the United States Constitution, the United States may criminalize the production and use of homegrown cannabis
+even where states approve its use for medical purposes.
+
+ 
+
+In an effort to provide guidance to federal law enforcement,
+the DOJ has issued Guidance Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney
+General David Ogden on October 19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011, and in a memorandum
+from Deputy Attorney General James Cole on August 29, 2013. Each memorandum provides that the DOJ is committed to the enforcement
+of the CSA, but, the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant
+threats in the most effective, consistent, and rational way. The August 29, 2013 memorandum provides updated guidance to federal
+prosecutors concerning marijuana enforcement in light of state laws legalizing medical and recreational marijuana possession in
+small amounts.
+
+ 
+
+The memorandum sets forth certain enforcement priorities
+that are important to the federal government:
+
+ 
+
+ Distribution of marijuana to children;
+
+ Revenue from the sale of marijuana going to criminals;
+
+ Diversion of medical marijuana from states where it is legal to states where
+it is not; Using state authorized
+
+ 
+
+ 
+
+ 
+
+marijuana activity as a
+pretext of other illegal drug activity; Preventing violence in the cultivation and distribution of marijuana;
+
+ Preventing drugged driving;
+
+ Growing marijuana on federal property; and
+
+ Preventing possession or use of marijuana on federal property.
+
+ 
+
+The DOJ has not historically devoted resources to prosecuting
+individuals whose conduct is limited to possession of small amounts of marijuana for use on private property but has relied on
+state and local law enforcement to address marijuana activity. In the event the DOJ reverses its stated policy and begins strict
+enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there
+may be a direct and adverse impact to our business and our revenue and profits. Furthermore, H.R. 83, enacted by Congress on December
+16, 2014, provides that none of the funds made available to the DOJ pursuant to the 2015 Consolidated and Further Continuing Appropriations
+Act may be used to prevent certain states, including Colorado and California, from implementing their own laws that authorized
+the use, distribution, possession, or cultivation of medical marijuana.
+
+ 
+
+We could be found to be violating laws related
+to medical cannabis.
+
+ 
+
+Currently, there are 23 states plus the District of Columbia
+that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use
+of cannabis in connection with medical treatment. Many other states are considering similar legislation. Conversely, under the
+CSA, the policies and regulations of the federal government and its agencies are that cannabis has no medical benefit and a range
+of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with
+respect to medical marijuana, as to the timing or scope of any such amendments there can be no assurance, there is a risk that
+federal authorities may enforce current federal law. The risk of strict enforcement of the CSA in light of Congressional activity,
+judicial holdings, and stated federal policy remains uncertain. This would cause a direct and adverse effect on our subsidiaries'
+intended businesses and on our revenue and profits.
+
+Variations in state and local regulation and enforcement
+in states that have legalized medical cannabis that may restrict marijuana-related activities, including activities related to
+medical cannabis, may negatively impact our revenues and profits.
+
+ 
+
+Individual state laws do not always conform to the federal
+standard or to other states laws. A number of states have decriminalized marijuana to varying degrees, other states have created
+exemptions specifically for medical cannabis, and several have both decriminalization and medical laws. Four states, Colorado,
+Washington, Oregon, and Alaska, have legalized the recreational use of cannabis. Variations exist among states that have legalized,
+decriminalized, or created medical marijuana exemptions. For example, Alaska and Colorado have limits on the number of marijuana
+plants that can be homegrown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for
+those states that allow small-scale cultivation by the individual in possession of medical marijuana needing care or that person's
+caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectly and adversely affect
+our business and our revenue and profits.
+
+ 
+
+It is possible that federal or state legislation
+could be enacted in the future that would prohibit us or potential customers from selling FutureLand grow operations, and if such
+legislation were enacted, our revenues could decline, leading to a loss in your investment.
+
+ 
+
+We are not aware of any federal or state regulation that
+regulates the sale of indoor cultivation equipment to medical or recreational marijuana growers. The extent to which the regulation
+of drug paraphernalia under the CSA is applicable to our business and the sale of FutureLand products is found in the definition
+of "drug paraphernalia." Drug paraphernalia means any equipment, product, or material of any kind that is primarily intended
+or designed for use in manufacturing, compounding, converting, concealing, producing processing, preparing, injecting, ingesting,
+inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Our understanding of federal or state regulation is that
+the sale of indoor cultivation equipment to medical or recreational cannabis growers is prohibited if the primary intent or design
+of the equipment is for indoor cultivation of medical or recreational cannabis. Our products are primarily designed for general
+agricultural use. There are no direct or indirect design features in our equipment specifically or primarily for the cultivation
+of medical marijuana. Although it is possible that medical marijuana may be grown with our equipment, we make no inquiry of our
+customers as to their intended agricultural use of our technology products. If federal and/or state legislation is enacted which
+prohibits the sale of our growing equipment to medical cannabis growers, our revenues would decline, which could lead to a loss
+of a material portion of your investment.
+
+ 
+
+Prospective customers may be deterred from doing
+business with a company with a significant nationwide online presence because of fears of federal or state enforcement of laws
+prohibiting possession and sale of medical or recreational marijuana.
+
+ 
+
+Our website is visible in jurisdictions where medicinal
+and/or recreational use of marijuana is not permitted and, as a result, we may be found to be violating the laws of those jurisdictions.
+We could lose potential customers as they could fear federal prosecution for growing marijuana with FutureLand's equipment, reducing
+our revenue. In most states in which the production and sale of marijuana have been legalized, there are additional laws or licenses
+required and some states altogether prohibit home cultivation, all of which could make the loss of potential customers more likely.
+
+ 
+
+Marijuana remains illegal under federal law.
+
+ 
+
+Marijuana is a Schedule-I controlled substance and is
+illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of
+federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement
+of federal law regarding marijuana would likely result in our inability to proceed with our business plans, especially in respect
+of FutureLand.
+
+ 
+
+We may not obtain or maintain the necessary permits
+and authorizations to operate licensed marijuana grow businesses.
+
+ 
+
+FutureLand may not be able to obtain or maintain the
+necessary licenses, permits, authorizations, or accreditations, or may only be able to do so at great cost, to operate their respective
+medical marijuana business. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable
+to the medical marijuana industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations, or accreditations
+could result in restrictions on our ability to operate the medical marijuana business, which could have a material adverse effect
+on our business.
+
+ 
+
+If we incur substantial liability from litigation,
+complaints, or enforcement actions, our financial condition could suffer.
+
+ 
+
+FutureLand participation in the medical marijuana industry
+may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental
+authorities against these subsidiaries. Litigation, complaints, and enforcement actions involving these subsidiaries could consume
+considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, revenue, profitability,
+and growth prospects. As FutureLand, we are dependent upon existing license holders as lessees on their properties in Colorado,
+or other states in the future and will itself only be able to start the process of obtaining final licenses to cultivate and sell
+medical marijuana in Colorado, and are not as such presently engaged in the cultivation or distribution of marijuana, our subsidiaries
+have not been, and are not currently, subject to any material litigation, complaint, or enforcement action regarding marijuana
+(or otherwise) brought by any federal, state, or local governmental authority.
+
+ 
+
+ 
+
+ 
+
+ 
+
+We may have difficulty accessing the service of
+banks, which may make it difficult for us to operate.
+
+ 
+
+Since the use of marijuana is illegal under federal law,
+there is a strong argument that banks cannot accept for deposit funds from businesses involved in the marijuana industry. Consequently,
+businesses involved in the marijuana industry often have difficulty finding a bank willing to accept their business. The inability
+to open bank accounts may make it difficult for us to operate our contemplated medical marijuana businesses in the case FutureLand
+Properties marijuana growing and leasing land business.
+
+ 
+
+FutureLand business activities in some states
+is dependent upon obtaining certain licenses for grow operations. 
+
+FutureLand's business model includes helping licensees
+get their licenses from both the county and the state in order to grow on our land. In the state of Colorado, in order to
+be able to grow cannabis you must be a two year resident and be approved both from the county in which you want to grow and also
+at the state level. The county and state have non-refundable costs associated with applying to get a license. They
+vary some from county to county. In Huerfano County there is a $1,300 fee due at the time of application and a $10,000 refundable
+retainer that is given back in a year's time, with the assumption that they don't need to use it for some legal purpose. 
+At the state level there is a $5,000 fee associated with making an application. Other factors include potential moratoriums
+instituted from time to time either from the state or the counties for getting licenses in certain areas. Currently you cannot
+be a convicted felon and get a grow license. Additionally, the individual grow licenses need to be attached to a particular
+location. It is possible, however, to get a locational license transferred to a different property but there is an application
+process that goes along with the request that may or may not get approved.
+
+We are dependent on appropriate zoning and
+variances for our grow operations. The lack of such zoning and needed variances could materially impact our business and production.
+
+The zoning for being able to grow cannabis seems to be
+a bit of a moving target right now. On the one hand it is agricultural so you might expect it to be able to be grown on agricultural
+permitted land, but there seems to be push backs at the county level to have cannabis properties designated as commercial to keep
+them from being able to reach out for special grants and subsidies typically only offered only to agriculturally zoned products. 
+There seems to be resistance from farmers to not allow cannabis an agricultural designation which could cause some zoning problems
+going forward.
+
+ 
+
+We are dependent upon Water supplies and sourcing.
+The lack of water from grow facilities could materially impact our business.
+
+The entire state of Colorado is over-appropriated for
+water. This means that every ounce of water, even water that does not exist yet, from say a future flood, is already accounted
+for by people making claim to the water and having been given those claims by the state. The state reserves the right to
+make modifications regularly concerning these matters for things like priority of the water, abatement of water to other users
+of water, and reallocation of water to different parties or expanding area allotments for water and many other such determinations. 
+This often involves water consultants, water attorneys, water selling, and lengthy water courts. However, while growers of
+cannabis will often need to go down this path, the state has provided a substitutionary water plan application to allow for growing
+during the period the licensee must go through the courts. That being said, there are still risks associated with getting
+approval for the amount of water needed. The amount will vary too whether there is a hydroponic grow versus a potted grow. 
+In Colorado water is calculated on acre feet of water, which come up to approximately 325,000 gallons per year per acre. 
+It is important to attach your ballot to the right race horse going in.
+
+FL is arranging to purchase water from the city of Walsenburg
+who already has a very large supply of water rights. They are parceling out a portion of those rights and will be applying
+to the state to expand its allocation out to our 240 acres along with many other properties. It makes sense to attach our
+ticket alongside the goals of a municipality that already has ample water rights available, and desires to sell a portion of those
+rights to us. This minimizes our risk to get them, on the one hand, and increases the chance for us to get more water from
+an abundant and ready supply while not needing to go back to water court in order to obtain such sourcing.
+
+ 
+
+ 
+
+ 
+
+ 
+
+RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
+
+ 
+
+We may allocate net proceeds
+from this offering in ways which differ from our estimates based on our current plans and assumptions discussed in the section
+entitled "Use of Proceeds" and with which you may not agree.
+
+ 
+
+The allocation of net proceeds of
+the offering set forth in the "Use of Proceeds" section below represents our estimates based upon our current plans and
+assumptions regarding industry and general economic conditions, our future revenues and expenditures. The amounts and timing of
+our actual expenditures will depend on numerous factors, including access to new business ventures, land deals, success of our
+FutureLand for Business initiatives, cash generated by our operations and business developments. We may find it necessary or advisable
+to use portions of the proceeds from this offering for other purposes. Circumstances that may give rise to a change in the use
+of proceeds and the alternate purposes for which the proceeds may be used are discussed in the section entitled "Use of Proceeds"
+below. You may not have an opportunity to evaluate the information on which we base our decisions on how to use the proceeds and
+may not agree with the decisions made. Additional information is available in the "Use of Proceeds" section of this Registration
+Statement of which this Prospectus is a part of.
+
+ 
+
+We expect to experience volatility in the price
+of our Common Stock, which could negatively affect stockholders' investments.
+
+ 
+
+The trading price of our Common
+Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond
+our control. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or
+disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors
+may seriously affect the market price of companies' stock, including ours, regardless of actual operating performance. All of these
+factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell
+your shares at a price that you determine to be fair or favorable.
+
+ 
+
+The market price for our common
+stock will be particularly volatile given our status as a relatively unknown company, with a limited operating history and lack
+of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your
+purchase price, which may result in substantial losses to you.
+
+ 
+
+Our stock price will be particularly
+volatile when compared to the shares of larger, more established companies that trade on a national securities exchange and have
+large public floats. The volatility in our share price will be attributable to a number of factors. First, our common
+stock will be compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence
+of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence
+the price of those shares in either direction. The price for our shares could decline precipitously in the event that a large
+number of our common stock are sold on the market without commensurate demand. Secondly, we are a speculative or "risky"
+investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our
+potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all
+or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market
+more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on
+a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease
+the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections
+as to what the prevailing market price for our common stock will be at any time. Moreover, the OTC MARKET is not a liquid market
+in contrast to the major stock exchanges. We cannot assure you as to the liquidity or the future market prices of our common stock
+if a market does develop. If an active market for our common stock does not develop, the fair market value of our common stock
+could be materially adversely affected.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Our Common Stock is categorized as "penny
+stock," which may make it more difficult for investors to sell their shares of Common Stock due to suitability requirements.
+
+ 
+
+Our Common Stock is categorized as "penny stock."
+The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price
+(as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The
+price of our Common Stock is significantly less than $5.00 per share, and is therefore considered "penny stock." This
+designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers
+and accredited investors. The penny stock rules require a broker- dealer buying our securities to disclose certain information
+concerning the transaction, obtain a written agreement from the purchaser, and determine that the purchaser is reasonably suitable
+to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability and/or
+willingness of brokers or dealers to buy or sell our Common Stock, either directly or on behalf of their clients, may discourage
+potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.
+
+ 
+
+Financial Industry Regulatory Authority ("FINRA")
+sales practice requirements may also limit a stockholder's ability to buy and sell our Common Stock, which could
+depress the price of our Common Stock.
+
+ 
+
+In addition to the "penny stock" rules described
+above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable
+for that customer before recommending an investment to a customer. Prior to recommending speculative low priced securities to their
+non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status,
+tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a
+high probability that speculative low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements
+make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability
+to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress
+our price per share of Common Stock.
+
+ 
+
+The elimination of monetary liability against our
+directors, officers, and employees under Colorado law and the existence of indemnification rights for our obligations to our directors,
+officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers,
+and employees.
+
+ 
+
+Our Articles of Incorporation contain a provision permitting
+us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty
+as a director or officer to the extent provided by Colorado law. We may also have contractual indemnification obligations under
+any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial
+expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup.
+These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches
+of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors
+and officers even though such actions, if successful, might otherwise benefit us and our stockholders.
+
+ 
+
+We may issue additional shares of Common Stock
+or preferred stock in the future, which could cause significant dilution to all stockholders.
+
+ 
+
+Our Articles of Incorporation authorize the issuance
+of up to 1,000,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, with no par value. As of March 31, 2016,
+we had 32,397,930 shares of Common Stock, 0 shares of Series A Preferred Stock, and
+2,000 shares of Series B Preferred Stock outstanding; however, we may issue additional shares of Common Stock or preferred stock
+in the future in connection with a financing or an acquisition.
+
+ 
+
+Anti-takeover effects of certain provisions of
+Colorado state law hinder a potential takeover of us.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Colorado has a business combination law which prohibits
+certain business combinations between Colorado corporations and "interested stockholders" for three years after an "interested
+stockholder" first becomes an "interested stockholder," unless the corporation's board of directors approves the
+combination in advance. For purposes of Colorado law, an "interested stockholder" is any person who is (i) the beneficial
+owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation,
+or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner,
+directly or indirectly, of ten percent or more of the voting power of the then-outstanding shares of the corporation. The definition
+of the term "business combination" is sufficiently broad to cover virtually any kind of transaction that would allow
+a potential acquirer to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather
+than the interests of the corporation and its other stockholders.
+
+The effect of Colorado's business combination law is
+to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board.
+Both of these provisions could limit the price investors would be willing to pay in the future for shares of our Common Stock.
+
+ 
+
+Because we do not intend to pay any cash dividends
+on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.
+
+ 
+
+We intend to retain any future earnings to finance the
+development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable
+future. Declaring and paying future dividends, if any, will be determined by our Board, based upon earnings, financial condition,
+capital resources, capital requirements, restrictions in our Articles of Incorporation, contractual restrictions, and such other
+factors as our Board deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares
+unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.
+
+ 
+
+We are classified as an "emerging
+growth company" as well as a "smaller reporting company" and we cannot be certain if the reduced disclosure requirements
+applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
+
+ 
+
+We are an "emerging growth
+company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements
+that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation
+requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic
+reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
+and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find
+our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive
+as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
+
+ 
+
+Section 107 of the JOBS Act provides
+that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B)
+of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company"
+can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We
+have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to
+Section 107(b) of the JOBS Act.
+
+ 
+
+We could remain an "emerging
+growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual
+gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under
+the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million
+as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more
+than $1 billion in non-convertible debt during the preceding three-year period.
+
+ 
+
+Notwithstanding the above, we are
+also currently a "smaller reporting company." Specifically, similar to "emerging
+
+ 
+
+ 
+
+ 
+
+growth companies," "smaller
+reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the
+provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an
+attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure
+obligations in their SEC filings.
+
+ 
+
+Decreased disclosures in our SEC
+filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder
+for investors to analyze our results of operations and financial prospects.
+
+ 
+
+The application of Rule 144 creates some investment
+risk to potential investors; for example, existing shareholders may be able to rely on Rule 144 to sell some of their holdings,
+driving down the price of the shares you purchased.
+
+ 
+
+There are 6,450,281
+shares of our common stock held by non-affiliates and 5,508,080 shares held by affiliates
+that Rule 144 of the Securities Act of 1933 defines as restricted securities. The SEC adopted amendments to Rule 144 which became
+effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person
+who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities
+provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three
+months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the
+sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time
+of sale.
+
+ 
+
+Persons who have beneficially owned
+restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during
+the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell
+within any three-month period only a number of securities that does not exceed the greater of either of the following:
+
+ 
+
+ 
+ 
+ 
+ 1% of the total number of securities
+ of the same class then outstanding (32,397,930 shares of common stock as of the date of this Report); or
+
+ 
+
+ 
+ 
+ the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
+
+ 
+
+provided, in each case, that we
+are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates
+must also comply with the manner of sale, current public information and notice provisions of Rule 144.
+
+ 
+
+Risks Related to Short-Term
+Financing
+
+ 
+
+Convertible Promissory Notes
+in the aggregate amount of $272,000 mature on August 22, 2016, and if we do not have
+sufficient financial resources to repay the Notes when due, our business would suffer.
+
+ 
+
+On
+March 22, 2016, we became obligated on two promissory notes of $272,500 in aggregate principal amount due on August 22,
+2016. The Company currently does not have sufficient financial resources to repay these notes. If the Company does not generate
+or secure sufficient financial resources in the short six-month period from the date of issuance of the notes, the Company would
+default, the Lenders could take actions to collect the unpaid amounts due and the Company s business would suffer.
+
+ 
+
+The Conversion Price under
+the Convertible Promissory Notes may be less than the then-prevailing market price for our common stock.
+
+ 
+
+ 
+
+ 
+
+ 
+
+The Conversion Price under the
+Convertible Promissory Notes is $.30, and possibly less if there is a default, which may be less than the then-prevailing market
+price for our common stock. The Lenders have a financial incentive to sell our common stock immediately upon receiving the shares
+to realize the profit equal to the difference between the discounted price and the market price. If the Lenders sell the shares,
+the price of our common stock could decrease. If our stock price decreases, the Lenders may have a further incentive to sell the
+shares of our common stock that it holds. These sales may have a further impact on our stock price.
+
+ 
+
+Risks Related to our Agreements
+with Kodiak Capital
+
+ 
+
+The sale of our common stock
+to Kodiak Capital may cause dilution, and the sale of the shares of common stock acquired by Kodiak Capital, or the perception
+that such sales may occur, could cause the price of our common stock to fall.
+
+ 
+
+On April 08, 2016, we entered
+into the Purchase Agreement with Kodiak Capital. Pursuant the Purchase Agreement, Kodiak Capital has committed to purchase up to
+an aggregate of $1,000,000 of our common stock. The shares that may be sold pursuant to the Purchase Agreement in the future may
+be sold by us to Kodiak Capital at our discretion from time to time, commencing after the SEC has declared effective the registration
+statement that includes this prospectus and concluding on the one-year anniversary thereof. The purchase price of the Put Shares
+will be equal to 80% of the lowest closing bid price of the Common Stock for any trading day during the five consecutive trading
+days immediately following the date of the Company s notice to the Purchaser requesting the purchase.
+
+ 
+
+We generally have the right
+to control the timing and amount of any sales of our shares to Kodiak Capital, except that, pursuant to the terms of the Purchase
+Agreement, we would be unable to sell shares to Kodiak Capital if such purchase would result in its beneficial ownership equaling
+more than 9.99% of the outstanding common stock. Kodiak Capital may ultimately purchase all, some or none of the shares of our
+common stock that may be sold pursuant to the Purchase Agreement and, after it has acquired shares, Kodiak Capital may sell all,
+some or none of those shares. Therefore, sales to Kodiak Capital by us could result in substantial dilution to the interests of
+other holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Kodiak Capital,
+or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future
+at a time and at a price that we might otherwise wish to effect sales.
+
+ 
+
+Kodiak Capital will pay
+less than the then-prevailing market price for our common stock for purchases under the Purchase Agreement.
+
+ 
+
+The common stock to be issued to
+Kodiak Capital pursuant to the Purchase Agreement will be purchased at a 30% discount to the lowest closing bid price of the common
+stock for the five consecutive trading days immediately following our request for Kodiak Capital to purchase the shares. Kodiak
+Capital has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to
+the difference between the discounted price and the market price. If Kodiak Capital sells the shares, the price of our common stock
+could decrease. If our stock price decreases, Kodiak Capital may have a further incentive to sell the shares of our common stock
+that it holds. These sales may have a further impact on our stock price.
+
+ 
+
+NOTE ABOUT FORWARD-LOOKING STATEMENTS
+
+ 
+
+Statements under, "Prospectus
+Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
+"Description of Business" and elsewhere in this prospectus may be "forward-looking statements." Forward-looking
+statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions
+or any other statements relating to our future activities or other future events or conditions. These statements include, among
+other things, statements regarding:
+
+ 
+
+ 
+ 
+ the growth of our business and revenues and our expectations about the factors that influence our success;
+ 
+ 
+
+ 
+
+ 
+ 
+ our plans to continue to invest in systems, facilities, and infrastructure, increase our hiring and grow our business;
+ 
+
+ 
+ 
+ our plans for FutureLand to purchase more lands for lease to the cultivators;
+ 
+ 
+ 
+
+ 
+ 
+ our ability to attain funding and the sufficiency of our sources of funding;
+ 
+ 
+ 
+ 
+
+ 
+ 
+ our expectation that our cost of revenues, development expenses, sales and marketing expenses, and general and administrative expenses will increase;
+
+ 
+ 
+ fluctuations in our capital expenditures;
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ our plans for potential business partners and any acquisition plans;
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+as well as other statements regarding
+our future operations, financial condition and prospects, and business strategies. These statements are based on current expectations,
+estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees
+of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes
+and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due
+to numerous factors, including those described above and those risks discussed from time to time in this registration statement,
+of which this prospectus is a part, including the risks described under "Risk Factors." Any forward- looking statements
+speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement
+to reflect events or circumstances that occur in the future.
+
+ 
+
+If one or more of these or other
+risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially
+from what we may have projected. Any forward-looking statements you read in this prospectus reflect our current views with respect
+to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of
+operations, financial condition, growth strategy and liquidity. You should specifically consider the factors identified in this
+prospectus that could cause actual results to differ before making an investment decision.
+
+ 
+
+ 
+
+ 
+
+TAX CONSIDERATIONS
+
+ 
+
+We are not providing any tax advice
+as to the acquisition, holding or disposition of the securities offered herein. In making an investment decision, investors are
+strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and any applicable foreign tax consequences
+relating to their investment in our securities.
+
+ 
+
+USE OF PROCEEDS
+
+ 
+
+This prospectus relates
+to shares of our common stock that may be offered and sold from time to time by the selling stockholder. We will not receive any
+proceeds upon the sale of shares by the selling stockholder in this offering. However, we may receive gross proceeds of up to $1,000,000
+under the Purchase Agreement, assuming that we sell the full amount of our common stock that we have the right, but not the obligation,
+to sell to Kodiak Capital under such agreement. See Plan of Distribution elsewhere in this prospectus for more information.
+
+ 
+
+We currently expect
+to use the funds and the net proceeds from the sale of shares to Kodiak Capital under the Purchase Agreement to fund the scaling
+of operations and for general corporate purposes. We will have broad discretion in determining how we will allocate the proceeds
+from any sales to Kodiak Capital.
+
+ 
+
+Even if we sell $1,000,000
+worth of shares of our common stock to Kodiak Capital pursuant to the Purchase Agreement, we may need to obtain additional financing
+in the future in order to fund our current and future planned operations. We may seek additional capital in the private and/or
+public equity markets. We are evaluating additional
+
+ 
+
+ 
+
+ 
+
+equity financing opportunities
+on an ongoing basis and may execute them when appropriate. However, there can be no assurances that we can consummate such a transaction,
+or consummate a transaction at favorable pricing.
+
+ 
+
+DIVIDEND POLICY
+
+ 
+
+We have never declared
+nor paid any cash dividends, and currently intend to retain all our cash and any earnings for use in our business and, therefore,
+do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at
+the discretion of the Board of Directors and will be dependent upon our consolidated financial condition, results of operations,
+capital requirements and such other factors as the Board of Directors deems relevant.
+
+ 
+
+MARKET FOR COMMON
+EQUITY AND RELATED MATTERS
+
+ 
+
+Since April 9, 2015, our common
+stock has been quoted on the OTCPINKS under the symbol "FUTL". Trading in our common stock has historically lacked consistent
+volume, and the market price has been volatile.
+
+ 
+
+The following table presents, for
+the periods indicated, the high and low sales prices of the Company's common stock, and is based upon information provided by the
+OTCPINKS Marketplace. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and
+may not necessarily represent actual transactions.
+
+ 
+
+ 
+
+ 
+ CLOSING BID PRICE PER SHARE*
+ 
+
+ 
+ HIGH
+ 
+ LOW
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ Year ended December 31, 2015
+ 
+ 
+ 
+ 
+
+ First Quarter
+ 
+ $
+ 5.50
+ 
+ 
+ $
+ 4.00
+ 
+
+ Second Quarter
+ 
+ $
+ 10.87
+ 
+ 
+ $
+ 4.50
+ 
+
+ Third Quarter
+ 
+ $
+ 2.50
+ 
+ 
+ $
+ 0.60
+ 
+
+ Fourth Quarter
+ 
+ $
+ 0.60
+ 
+ 
+ $
+ 0.55
+ 
+
+ 
+
+* The quotations do not reflect inter-dealer
+prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
+
+ 
+
+On April 16, 2016,
+the closing bid price on the OTC Markets Group, Inc. s OTCPINK tier for our Common Stock was $0.35.
+
+ 
+
+As of December 31, 2015, there were
+32,397,930 shares of our common stock issued and outstanding and 4,000,000 shares of common stock issuable under our 2015 Equity
+Incentive Plan to certain employees and directors.
+
+ 
+
+SHARES
+ELIGIBLE FOR FUTURE SALE
+
+ 
+
+There is
+currently a very limited market for sale and purchase of our common stock. We cannot predict the effect, if any, that market sales
+of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common
+stock prevailing from time to time. Sales of substantial amounts of our common stock in the public market after this offering could
+adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our
+equity securities.
+
+ 
+
+Transfer
+Agent and Registrar
+
+ 
+
+ 
+
+ 
+
+ 
+
+The transfer
+agent and registrar for the Company's common stock will be ClearTrust LLC, 16540 Pointe Village Dr, Ste 206, Lutz, FL 33558. We
+have appointed the transfer agent on August 4, 2014. ClearTrust is an SEC registered stock transfer agent.
+
+ 
+
+2015 Equity Incentive Plan
+
+ 
+
+The following table sets forth equity
+compensation plan information as of March 31, 2015:
+
+ 
+
+ Plan category
+ 
+ Number of securities to be issued upon exercise of outstanding options, warrants and rights
+ 
+ 
+ Weighted-average exercise price of outstanding options, warrants and rights
+ 
+ 
+ Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
+ 
+
+ 
+ 
+ (a)
+ 
+ 
+ (b)
+ 
+ 
+ (c)
+ 
+
+ Equity compensation plans approved by security holders:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 2015 Equity Incentive Plan
+ 
+ 
+ 4,000,000
+ 
+ 
+ 
+ 
+ 
+ $
+ 4,000,000
+ 
+
+ Equity compensation plans not approved by security holders
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Total
+ 
+ 
+ 4,000,000
+ 
+ 
+ 
+ 
+ 
+ 
+ $
+ 4,000,000
+ 
+
+ 
+
+2015 Equity Incentive Plan. In
+June 2015, our shareholders approved our 2015 Equity Incentive Plan ("2015 Plan"). Our 2015 Plan provides for the
+grant of incentive stock options to our employees and our parent and subsidiary corporations' employees, and for the grant of nonstatutory
+stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our
+employees, including officers, consultants and directors. Our 2015 Plan also provides that the grant of performance stock awards
+may be paid out in cash as determined by the Committee (as defined herein).
+
+ 
+
+Authorized Shares. A
+total of 4,000,000 shares of our common stock are reserved for issuance pursuant to the 2015 Plan. Shares issued under our 2015
+Plan may be authorized but unissued or reacquired shares of our common stock. Shares subject to stock awards granted under our
+2015 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not
+reduce the number of shares available for issuance under our 2015 Plan. Additionally, shares issued pursuant to stock awards under
+our 2015 Plan that we repurchase or that are forfeited, as well as shares reacquired by us as consideration for the exercise or
+purchase price of a stock award, will become available for future grant under our 2015 Plan.
+
+ 
+
+Administration. Our
+Board of Directors, or a duly authorized committee thereof (collectively, the "Committee"), has the authority to administer
+our 2015 Plan. Our Board may also delegate to one or more of our officers the authority to designate employees other than Directors
+and officers to receive specified stock, which, in respect to those awards, said officer or officers shall then have all that the
+Committee would have.
+
+ 
+
+Subject to the terms of our 2015
+Plan, the Committee has the authority to determine the terms of awards, including recipients, the exercise price or strike price
+of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock,
+the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable
+upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under our 2015 Plan.
+The Committee has the power to modify
+
+ 
+
+ 
+
+ 
+
+outstanding awards under our 2014
+Plan, subject to the terms of the 2015 Plan and applicable law. Subject to the terms of our 2015 Plan, the Committee has the authority
+to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation
+right in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under
+generally accepted accounting principles, with the consent of any adversely affected participant.
+
+ 
+
+Stock Options. Stock
+options may be granted under the 2015 Plan. The exercise price of options granted under our 2015 Plan must at least be equal to
+the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed 10 years,
+except that with respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock,
+the term must not exceed 5 years and the exercise price must equal at least 110% of the fair market value on the grant date. The
+Committee will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property
+acceptable to the Committee, as well as other types of consideration permitted by applicable law. No single participant may receive
+more than 25% of the total options awarded in any single year. Subject to the provisions of our 2015 Plan, the Committee determines
+the other terms of options.
+
+ 
+
+Performance Shares. Performance
+shares may be granted under our 2015 Plan. Performance shares are awards that will result in a payment to a participant only if
+performance goals established by the administrator are achieved or the awards otherwise vest. The Committee will establish organizational
+or individual performance goals or other vesting criteria in its discretion, which, depending on the extent to which they are met,
+will determine the number and/or the value of performance shares to be paid out to participants. After the grant of a performance
+share, the Committee, in its sole discretion, may reduce or waive any performance criteria or other vesting provisions for such
+performance shares. The Committee, in its sole discretion, may pay earned performance units or performance shares in the form of
+cash, in shares or in some combination thereof, per the terms of the agreement approved by the Committee and delivered to the participant.
+This agreement will state all terms and condition of the agreements.
+
+ 
+
+Restricted Stock. The
+terms and conditions of any restricted stock awards granted to a participant will be set forth in an award agreement and, subject
+to the provisions in the 2015 Plan, will be determined by the Committee. Under a restricted stock award, we issue shares of our
+common stock to the recipient of the award, subject to vesting conditions and transfer restrictions that lapse over time or upon
+achievement of performance conditions. The Committee will determine the vesting schedule and performance objectives, if any, applicable
+to each restricted stock award. Unless the Committee determines otherwise, the recipient may vote and receive dividends on shares
+of restricted stock issued under our 2015 Plan.
+
+ 
+
+Other Share-Based Awards and
+Cash Awards. The Committee may make other forms of equity-based awards under our 2015 Plan, including, for example, deferred
+shares, stock bonus awards and dividend equivalent awards. In addition, our 2015 Plan authorizes us to make annual and other cash
+incentive awards based on achieving performance goals that are pre-established by our compensation committee.
+
+ 
+
+Change in Control. If
+the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to
+another company while awards or options remain outstanding under the 2015 Plan, unless provisions are made in connection with such
+transaction for the continuance of the 2015 Plan and/or the assumption or substitution of such awards or options with new options
+or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to
+the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed
+or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified
+in the relevant agreements, terminate immediately as of the effective date of any such merger, consolidation or sale.
+
+ 
+
+Change in Capitalization. If
+the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend,
+or other increase or reduction of the number of shares of the common stock outstanding, without receiving consideration therefore
+in money, services or property, then awards amounts, type, limitations, and other relevant consideration shall be appropriately
+and proportionately adjusted. The Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Plan Amendment or Termination. Our
+Board has the authority to amend, suspend, or terminate our 2015 Plan, provided that such action does not materially impair the
+existing rights of any participant without such participant's written consent. The 2015 Plan will terminate ten (10) years after
+the earlier of (i) the date the 2015 Plan is adopted by the Board, or (ii) the date the 2015 Plan is approved by the stockholders,
+except that awards that are granted under the 2015 Plan prior to its termination will continue to be administered under the terms
+of the 2015 Plan until the awards terminate, expire or are exercised.
+
+ 
+
+ Penny Stock
+Considerations
+
+ 
+
+Our shares are "penny
+stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of
+less than $5.00. Thus, our shares are subject to rules that impose sales practice and disclosure requirements on broker-dealers
+who engage in certain transactions involving a penny stock.
+
+ 
+
+Under the penny stock
+regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability
+determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless
+the broker-dealer is otherwise exempt.
+
+ 
+
+In addition, under
+the penny stock regulations, the broker-dealer is required to:
+
+ 
+
+ Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
+
+ 
+
+ Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
+
+ 
+
+ Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and
+
+ 
+
+ Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.
+
+ 
+
+Because of these regulations,
+broker-dealers may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of
+selling shareholders or other holders to sell their shares in the secondary market, and have the effect of reducing the level of
+trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the
+sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may
+be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability are subject
+to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
+
+ 
+
+Sales of our common stock under
+Rule 144
+
+ 
+
+There are 6,450,281
+shares of our common stock held by non-affiliates and 5,508,080 shares held by affiliates
+that Rule 144 of the Securities Act of 1933 defines as restricted securities.
+
+ 
+
+There are currently
+5,438,951 of our shares currently held by non-affiliates which may be resold without
+restrictions under Rule 144. The remaining non-affiliate shares as well as all of the affiliates shares are subject
+to the resale restrictions of Rule 144. In general, non-affiliates holding restricted securities must hold their shares for
+a period of at least six months. In general, affiliates holding restricted securities must hold their shares for a period
+of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and
+must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial
+amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.
+
+ 
+
+Holders
+
+ 
+
+ 
+
+ 
+
+ 
+
+As of the date of this registration
+statement, we had 132 shareholders of record of our common stock.
+
+ 
+
+Dividends
+
+ 
+
+We have not declared
+any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We
+plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend
+on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
+
+ 
+
+Where You Can Find Additional
+Information
+
+ 
+
+We have filed
+with the Securities and Exchange Commission a registration statement on Form S-1. For further information about us and
+the shares of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules
+thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates,
+at the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549. The public may obtain information on
+the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The registration statement and other
+information filed with the SEC are also available at the web site maintained by the SEC at http://www.sec.gov.
+
+ 
+
+ 
+
+MANAGEMENT S
+DISCUSSION AND ANALYSIS
+
+OF FINANCIAL CONDITION
+AND RESULTS OF OPERATIONS
+
+ 
+
+The following discussion
+of our financial condition and results of operations should be read in conjunction with our financial statements and the related
+notes, and other financial information included in this Form 10-K.
+
+ 
+
+Our Management's
+Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking
+statements are, by their very nature, uncertain and risky. Although the forward-looking statements in this Report reflect
+the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently,
+and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ
+materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider
+the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may
+affect our business, financial condition, and results of operations and prospects.
+
+ 
+
+ Forward-Looking
+Statements
+
+ 
+
+The following discussion
+of our financial condition and results of operations should be read in conjunction with our audited financial statements and the
+related notes, and other financial information included in this Form 10-K.
+
+ 
+
+Our Management's Discussion
+and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking
+statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national,
+and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully
+make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the
+failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers;
+fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions;
+the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange
+rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Although the forward-looking
+statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors
+currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties,
+the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You
+are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt
+to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations
+and prospects.
+
+ 
+
+ 
+
+DESCRIPTION OF
+BUSINESS
+
+ 
+
+Company Information; Organization
+
+ 
+
+FutureLand, Corp. (formerly known as AEGEA, Inc.) ("we",
+"us", the "Company") was incorporated in Colorado on November 29, 2007 under the name Forever Valuable Collectibles,
+Inc. The Company changed its name effective July 1, 2013 in connection with a July 22, 2013 acquisition of AEGEA, LLC which was
+in the planning stages of developing an international community and mega-resort destination in the heart of South Florida called
+AEGEA. Prior to the acquisition of AEGEA, LLC, the Company was engaged in the business of buying and reselling commemorative professional
+and college sports memorabilia. On March 10, 2015, an Exchange Agreement was entered (the "Agreement"), by and among
+certain shareholders and debt holders of the Company, representing the majority of the outstanding shares of the Company ("the
+AEGA Holders"), and FutureWorld Corp. (hereafter referred to as "FWDG"), a Delaware Corporation which was the owner
+of the wholly owned subsidiary, FutureLand Properties, LLC, (hereafter referred to as "FLP"), a Colorado Limited Liability
+Corporation. Additionally, on June 1, 2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated
+March 10, 2015, FWDG sold all rights, title and ownership of FutureLand Properties, LLC to the Company, including all member units,
+assets, intellectual property, contracts, leases, and real property which includes 200 acres in La Vita, Colorado,
+
+ 
+
+In connection with the Exchange
+Agreement, we issued an aggregate of 27,845,280 shares of our common stock to FWDG and or its assignee. FWDG and the AEGA Holders
+entered into the purchase and exchange agreement where the AEGA Holders agreed to deliver to FutureWorld their shareholdings in
+the Company in exchange for certain actions, including AEGEA Holders resignation as directors and officers of the Company and the
+simultaneous appointment of two directors as designated by FLP. In return for the AEGEA Holders shares of the Company, in combination
+with certain debt forgiveness totaling $100,000 by the AEGEA Holders, the AEGA Holders shall receive, an amount of shares to be
+equal to 4.9% of the outstanding shares of the Company calculated after the reverse stock split which became effective on May 1,
+2015. Such shares as held by the AEGA Holders which are surrendered in return for the new exchange shares to be issued, shall be
+cancelled in such exchange and returned to treasury. Such exchange shares when issued shall contain certain anti-dilutive rights
+whereby the AEGEA Holders shall receive additional shares for a period of one year from the date of issuance in order to retain
+4.9% of the outstanding shares of the Company, issuable within ten days of the end of each fiscal quarter following such initial
+issuance. Pursuant to the Agreement, all assets of the Company, including all intellectual property, contractual rights, business
+plans, architectural works, property rights, and other valuable matters, shall be sold to the AEGA Holders, into a new private
+entity formed at their direction, control and benefit, in settlement for another $100,000 in debt due to AEGEA Holders by the Company
+and certain liabilities will be assumed by the new private entity.
+
+ 
+
+In May 2015, we changed our
+name to FutureLand, Corp. and effected a 1 for 400 reverse stock split of our common stock. All share and per share data in this
+annual report have been retroactively restated to reflect the reverse stock split.
+
+ 
+
+As of the date of this report,
+all of the required actions have been taken by the parties such as change in management and the issuance of 27,845,280 common shares
+as discussed above and such Exchange Agreement is binding on the parties with closing subject to the completion of remaining actions.
+Upon closing and the cancellation of all
+
+ 
+
+ 
+
+ 
+
+outstanding shares of Series
+B convertible preferred stock has occurred, the additional shares to the AEGA Holders has occurred, all payments for contracts
+and vendors has been paid and/or settled by the Company, this transaction is expected to be accounted for as a reverse recapitalization
+of FLP with the business of FLP being the continuing business since the member of FLP will have voting and management control of
+the combined entity.
+
+ 
+
+On, October 30, 2014, FLP closed on 239.96 Acres in La
+Vita, Colorado in Huerfano County for $60,000. FLP entered into a lease agreement contract with a lease with Colorado Flower
+Company, LTD on Dec 1, 2014 allotting 37 acres for their grow facilities. FLP was formed as a Colorado State company on October
+6, 2014 by FutureWorld Corp.
+
+ 
+
+Prior to FLP being formed, the State of Colorado amended
+their laws allowing cannabis grow facilities to be separated from cannabis dispensaries effectively opening up an entirely new
+business opportunity that FLP entered into at that time. At such time, FLP pursued the business plan to secure a cannabis or hemp
+grower to execute their business plan of leasing the land, the structures, the technologies and provide maintenance contracts associated
+with the grow. Integral to its strategy is to provide the financing for the entire grow operation so as to establish a position
+by which to harness a competitive advantage in striking the right kind of lease in conjunction with Colorado State laws that would
+allow FLP to make above average returns. On Jan 20, 2015 FLP entered a contract with GPS, La Vita, Inc. allotting 5 acres
+for their immediate grow facilities. All of these contracts, and land ownings are currently in FLP. 
+
+ 
+
+We are a Colorado corporation. Our
+address is 8400 E. Crescent Parkway, Suite 600, Greenwood Village, Colorado 80111. Our telephone number is (720) 370-3558 and our
+website is www.futurelandcorp.com. Our second office is at 3637 4th Street North, Saint Petersburg, FL 33704. The information
+on our website or mobile apps is not a part of this prospectus.
+
+ 
+
+Our independent registered public
+accounting firm has issued an audit opinion for our Company which includes an explanatory paragraph expressing substantial doubt
+as to our ability to continue as a going concern.
+
+ 
+
+We have never declared bankruptcy,
+have never been in receivership, and have never been involved in any legal action or proceedings. Since incorporation, we have
+not made any significant purchase or sale of assets. We do not own physical properties.
+
+ 
+
+We are not a blank check registrant,
+as that term is defined in Rule 419(a)(2) of Regulation C of the Securities Act, since we have a specific business plan or purpose.
+We have not had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements or understandings
+with, any representatives of the owners of any business or company regarding the possibility of an acquisition or merger.
+
+ 
+
+Results of Operations
+
+ 
+
+For the fiscal year
+ended December 31, 2015 we generated no revenue with cost of sales of $64. We did
+not generate any revenue as of December 31, 2014.
+
+ 
+
+For the fiscal year
+ended December 31, 2015 and December 31, 2014, we incurred $1,279,597 and $443,541,
+respectively, in operating expenses. The increase in our operating expenses are due to increases in costs related to additional
+payroll costs, building lease, increased operational activities and professional expenses related to being a publicly traded Company.
+
+ 
+
+Our expenses related
+to research and development for the fiscal year ended December 31, 2015 and December 31, 2014 were $20,518
+and $36,080, respectively.
+
+ 
+
+ 
+
+ 
+
+ 
+
+As of December
+31, 2015 we had total liabilities of $110,147, while at December 31, 2014, we had
+total liabilities of $21,245. The increase was the result of accrued payroll
+expenses from hiring new employees, accounts payable and accrued expenses and deferred rent on our building lease.
+
+ 
+
+Liquidity
+and Capital Resources
+
+ 
+
+As of December
+31, 2015, we had $168,804 in total current assets. We had current liabilities of
+$76,885 as of December 31, 2015. Accordingly, we had a working capital of $91,919
+as of December 31, 2015.
+
+ 
+
+Operating activities
+used $704,230 in cash for the year ended December 31, 2015, as compared with $411,335
+used for the year ended December 31, 2014. Our negative operating cash flow for the year ended July 31, 2015 was mainly a result
+of our net loss for the period, offset by the effects of depreciation, loss on the sale of the asset, stock issued for services,
+increase in accounts receivable, inventory and prepaid expense, the increase in accounts payable and accrued liabilities and decrease
+in costs and estimated earnings in excess of billings for the ongoing projects, decrease in accrued compensation and a decrease
+in deferred rent.
+
+ 
+
+Financing activities
+for the year ended December 31, 2015 generated $461,262 in cash, as compared with
+$864,750 for the year ended December 31, 2014. Proceeds from financing activities
+consisted primarily of proceeds from issuance of common stock for cash.
+
+ 
+
+Cash Requirements:
+Current Operational Activities
+
+ 
+
+Our estimated
+minimum day-to-day operational costs, exclusive of those costs in our Plan of Operations for the next 12 months, as set forth above,
+are estimated to be approximately $430,800 to maintain current operational activities
+during the next 12 months. Our minimal annual operating expenses includes $352,000
+in payroll expenses, our lease agreement for our 1,000 sq. ft. facility of $55,200
+per year, our estimated annual utility expenses of $10,800 and $12,800
+in miscellaneous operating expenses. In addition, we will have $75,000 in costs related
+to maintaining our publicly traded status over the next 12 months.
+
+ 
+
+Existing
+Cash and Operational Cash Flow
+
+ 
+
+As of April 16,
+2016, we had $262,285 in cash.
+
+ 
+
+Kodiak
+Capital Group LLC Investment Agreement for $1,000,000
+
+ 
+
+On April 08, 2016,
+the Company entered into an Equity Purchase Agreement (the Purchase Agreement ) and a Registration Rights Agreement
+(the Registration Rights Agreement ) with Kodiak Capital Group, LLC (the Purchaser ). Under the Purchase
+Agreement, the Company shall issue and sell to the Purchaser a number of shares of its common stock, par value $0.0001 per share
+( Common Stock ) at a purchase price equal to the Maximum Commitment Amount (as defined in the Purchase Agreement)
+of $1,000,000 (the Put Shares ). In accordance with the Registration Rights Agreement, the Company has agreed to file
+a registration statement on Form S-1 by June 30, 2016 (the Registration Statement ) to register for resale the Put
+Shares of Common Stock that may be issued under the Purchase Agreement.
+
+ 
+
+Pursuant to the Purchase
+Agreement, from the date that the Securities and Exchange Commission has declared the Registration Statement effective (the Effective
+Date ) until the one-year anniversary thereof, the Company has the right to sell, from time to time, up to an aggregate of
+$1,000,000 Put Shares of Common Stock to the Purchaser. The Company will control the timing and amount of future sales, if any.
+The purchase price of the Put Shares will be equal to 70% of the lowest closing bid price of the Common Stock for any trading day
+during the five consecutive trading days immediately following the date of the Company s notice to the Purchaser requesting
+the purchase.
+
+ 
+
+ 
+
+ 
+
+ 
+
+There is no minimum
+amount that the Company may require the Purchaser to purchase at any one time. The Company may not require the Purchaser to purchase
+Put Shares of Common Stock if such purchase, together with the shares of Common Stock underlying the Note, would result in the
+Purchaser s beneficial ownership exceeding 9.99% of the outstanding Common Stock. The Purchase Agreement contains customary
+representations, warranties, covenants, closing conditions, and indemnification and termination provisions. The Purchaser has covenanted
+not to cause or engage in any direct or indirect short selling of the Common Stock. The Purchase Agreement may be terminated by
+the Company at any time at its discretion without any cost to the Company.
+
+ 
+
+The Purchase Agreement
+and the Registration Rights Agreement are provided to give investors information regarding the agreements respective terms.
+They are not provided to give investors factual information about the Company or any other parties thereto. In addition, the representations,
+warranties and covenants contained in the Purchase Agreement and the Registration Rights Agreement were made only for purposes
+of those agreements and as of specific dates, were solely for the benefit of the parties to those agreements, and may be subject
+to limitations agreed by the contracting parties, including being qualified by disclosures exchanged between the parties in connection
+with the execution of such agreements. Investors are not third-party beneficiaries under these agreements and should not view the
+representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions
+of the Company.
+
+ 
+
+Meeting
+Cash Requirements
+
+ 
+
+Based upon the
+assumption of our monthly current operational burn rate remaining unchanged during the fiscal year, exclusive of those costs in
+our Additional Planned Operations for the next 12, months as set forth above, the Company currently has sufficient funds through
+a combination of the Sources of Funding above to continue our current operations for the next 12 months. There is no assurance
+we will obtain the anticipated funds from our Sources of Funding. For example, in order to raise funding through our Equity
+Purchase Agreement, we will first have to clear a registration statement with the SEC. There can be no assurance that the funds
+from the Equity Purchase Agreement can be utilized, or that additional financing will be available to us on acceptable terms, or
+at all. If we don't obtain the anticipated funds from our Sources of Funding, and we don't take other measures such as cutting
+back operational activities, we may not have sufficient funds to continue operations for the next 12 months.
+
+ 
+
+The ability to
+fund our Additional Planned Operational Activities is contingent upon us obtaining additional financing. If we don't obtain
+the anticipated funds from our Sources of Funding beyond those needed for Current Operational Activities, we may be able to finance
+our Additional Planned Operations and continue growing our business.
+
+ 
+
+We cannot guarantee
+we will be successful in our business operations. We cannot guarantee that we will have sufficient financial resources to
+fund Current Operational Activities and Additional Planned Operational Activities. Our business is subject to risks inherent
+in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources
+currently available to us for the implementation of our business strategies. To become profitable and competitive, we must continue
+to execute our business plan as described above.
+
+ 
+
+Off-Balance
+Sheet Arrangements
+
+ 
+
+We do not have
+any off-balance sheet arrangements.
+
+ 
+
+Critical Accounting
+Policies and Estimates
+
+ 
+
+For a discussion of our accounting
+policies and related items, please see the Notes to the Financial Statements, included in Item
+8.
+
+ 
+
+ 
+
+ 
+
+ 
+
+BUSINESS
+
+ 
+
+FutureLand Corp. operates its presented business as an
+agricultural company catering to the industrial hemp, legal medical marijuana and recreational cannabis market. FutureLand was
+started to capitalize upon the distinct separation of the cultivation grows from the dispensaries, specifically with respect to
+Colorado. In the State of Colorado, which has become the quintessential poster-child for what the industry may look like for the
+rest of America, at least temporarily, as other states determine what exact direction they will choose to go, there are residency
+laws that must be adhered to. For instance, in order to get a license to grow or profit from cannabis in Colorado you must
+be a 2 year resident. The laws are very specific; anyone who is not a 2 year resident cannot profit from the sale of the
+cannabis flower or infused products. Because of this mandate, Future Land Corp must be a land owner and leaser in order to
+effectively participate in the cannabis grow industry, which we believe is essential in order to gain a competitive advantage. 
+We also must own the structures on the land to control the lease and our future position in the industry.
+
+ 
+
+The business model is simple; offer growers the opportunity
+to grow. We have the land and then we find a growers requiring assist in funding and obtaining their license and grow facility. 
+Next, we arrange for additional operational items needed, including but not limited to, complete build-outs provided from an associated
+company, HempTech Corp, in order to capture additional revenue.
+
+ 
+
+Solving the Problem of Land to Grow Cannabis
+
+A complete and current market survey was conducted for
+the Colorado State Department of Revenue which estimated usage in Colorado to be up to 346,000 lbs. per annum for residents and
+visitors combined. As of March 2, 2015 the Colorado market was currently being serviced by 106 licensed growers which have led
+to continued shortages in the supply chain.
+
+ 
+
+There are three main customer groups: pharmaceutical
+and research laboratories, dispensaries, and recreational outlets. The customer segments are sufficiently distinct to be able to
+target each one differently. The industry has been undergoing consolidation for several years now. We believe will be able to serve
+the industry by leveraging the competitive edge of healthy, potent plants on a consistent supply basis.
+
+Land Lease and Grow Competitors
+
+There are 106 MED Licensed Retail Marijuana Product Manufacturers in Colorado as of March 2, 2015. (See attached "MED Licensed
+Retail Marijuana Product Manufacturers as of March 2, 2015"). As mentioned previously, this limited number of Product
+Manufacturers has led to shortages of supply for many Retail Dispensaries.
+
+Grow Licensing
+
+Licensing, both State and Local is a precursor to all
+production. Initial application will be for Type 1 License which allows for the production of 3,600 plants. It is envisaged
+that as the need requires and future production facilities become available, further applications will be made for Type 2 licensing
+(6,000 plants) and Type 3 licensing (10,000 plants).
+
+Production levels are directly contingent on space availability
+and set-up costs. Further details relating to set-up costs and operating expenses can be found in the appendices to this document.
+
+Production Level Analysis
+
+Attached is an appendix is a Production Level Financial
+Analysis which is predicated on the following:
+
+ 
+
+ on average, 1 crop per quarter (13 week grow, harvest, dry and deliver);
+
+ deep water under current systems yield on average 8 ounces a plant (final
+yields may be higher);
+
+ additional Seeds / Clones purchased in 2nd through 4th quarters to access/blend
+different strains;
+
+ Federal Income Tax is calculated by the application of Section 280E of the
+Income Tax
+
+ 
+
+Assessment Act which disallows (amongst other items)
+items that are not directly attributable to the growth of the
+
+ 
+
+ 
+
+ 
+
+product. Therefore, in general, items such as excise
+duty, rent, advertising, depreciation, legal fees, wages, utilities, and security services that form part of the General and Administrative
+Expenses of the corporation, on a Federal level, are not allowed as a deduction from income. Legal actions are currently in play
+to repeal this section of the act in relation to Legalized Marijuana operations. Should such actions be successful it would have
+the effect of reducing the Federal Income Tax Expense by the following:
+
+ 
+
+ 3,600 Plants $ 307,926
+
+ 3,200 Plants $ 274,198
+
+ 2,800 Plants $ 240,471
+
+ 2,400 Plants $ 206,744
+
+ 2,000 Plants $ 173,022
+
+ 
+
+Further analysis schedules provide details of the cost
+/ equipment requirement involved in the set-up and operating of an individual crop cycle. Concurrent cycles, subject to licensing
+constraints, can be approximated by doubling the Supplies, Lighting Equipment, Utilities Analyses and adding additional accounting,
+sales, growing, harvesting and packaging employees.
+
+Security of the Land and its Products
+
+FutureLand will make use of the relationship FutureLand Corp (FUTL) has with HempTech Corp. to provide a state of the art security
+system. HempTech Systems has the SPIDer (Secure Perimeter Intrusion Detection Network) line of products to meet the needs
+of security and intrusion detection in the indoor and outdoor cannabis grow industry.
+
+ 
+
+The SPIDer Intrusion Detection network is a multifaceted
+product family which provides near real-time detection of intruders for either a remote inside facility or large open air agricultural
+facilities. This technology is derived from the Infrax SPIDer Intrusion detection networks designed for electrical substations
+and remote facilities in the electric energy business. Product examples include but not limited to; active fence systems,
+HD infrared and color camera networked via radio systems, motion detectors, microwave security systems and intelligent LED lighting
+systems. Infrax Systems Inc. will design specific packages to support applications ranging from small indoor facilities to
+large outdoor agriculture facilities covering hundreds of acres. The SPIDer systems consist of 3 levels of detection to identify
+intruders and threats in areas that are restricted.
+
+ 
+
+ 
+
+The first level utilizes an electronically charged coaxial
+cable, FlexPS, woven into your chain link fencing. Excessive fence movement will set off an alarm through your network notification
+system that someone is attempting to enter your facility. This is a very cost effective means to secure your site to meet
+security requirements for your company. A Microwave Protection system, MPS* product is also available to protect gates and
+open fields where appropriate fencing is unavailable.
+
+ 
+
+The second
+level consists of a microwave intrusion monitoring system ltrawave which creates a secure corridor of detection within the
+restricted area. When activated, this system will detect any movement within the defined corridor. Intrusion detection
+becomes extremely reliable by combining the fence system with the corridor intrusion detection thus eliminating nuisance alarms
+at the perimeter such as objects hitting a fence.
+
+ 
+
+The third level is a multi-level detection and verification
+network that uses both level one and level two systems to rapidly identify a potential intruder and provide you information for
+a rapid decision. Full motion light and inferred cameras are also integrated into the system. These cameras can be directed
+by the response of the intrusion detection network. This level of integration requires CaNNaLyTiX software to fully integrate all
+the components. This is complete proprietary technology licensed to FUTL and FL. FL will outsource armed security for operations
+and armored trucks for moving cash. 
+
+Background and Overview of FL's Land Lease Business
+Silo
+
+FL Corp is an agricultural company catering to the industrial
+hemp, legal medical marijuana and recreational cannabis market. Future Land was started to capitalize upon the distinct separation
+of the cultivation grows from the
+
+ 
+
+ 
+
+ 
+
+dispensaries, specifically with respect to Colorado.
+In the State of Colorado, which has become the quintessential poster-child for what the industry may look like for the rest of
+America, at least temporarily, as other states determine what exact direction they will choose to go, there are residency laws
+that must be adhered to. For instance, in order to get a license to grow or profit from cannabis in Colorado you must be
+a 2 year resident. The laws are very specific; anyone who is not a 2 year resident cannot profit from the sale of the cannabis
+flower or infused products. Because of this mandate, Future Land Corp must be a land owner and leaser in order to effectively
+participate in the cannabis grow industry, which we believe is essential in order to gain a competitive advantage. We also
+must own the structures on the land to control the lease and our future position in the industry.
+
+ 
+
+The business model is simple; offer growers the opportunity
+to grow. We have the land and then we find a growers requiring assist in funding and obtaining their license and grow facility. 
+Next, we arrange for additional operational items needed, including but not limited to, complete build-outs provided from our sister
+company, HempTech Corp, in order to capture additional revenue.
+
+Solving the Problem of Land to Grow Cannabis
+
+A complete and current market survey was conducted for
+the Colorado State Department of Revenue which estimated usage in Colorado to be up to 346,000 lbs. per annum for residents and
+visitors combined.
+
+ 
+
+There are three main customer groups: pharmaceutical
+and research laboratories, dispensaries, and recreational outlets. The customer segments are sufficiently distinct to be able to
+target each one differently. The industry has been undergoing consolidation for several years now. We believe will be able to serve
+the industry by leveraging the competitive edge of healthy, potent plants on a consistent supply basis.
+
+FL's Land and it's Product and Service in Walsenburg,
+Colorado
+
+On, October 30th, 2014 Future Land closed
+on 239.96 Acres in La Vita, Colorado in Huerfano County for $60,000. The property has increased in value ten times since
+then. At such time, FL went into overdrive to secure a cannabis grower to execute their business plan of leasing the land,
+the structures, the technologies and provide maintenance contracts associated with the grow. Integral to our strategy was
+to provide the financing for the entire grow operation so as to establish a position by which to harness a competitive advantage
+in striking the right kind of lease in conjunction with Colorado State laws that would allow FL to make above average returns.
+
+ 
+
+FL will have units that are leased out to growers 
+that have licenses (we will fund the application). 90% of all growing will be done in Grow Houses.
+
+ 
+
+ Medical and Recreational
+
+ FL will initially focus on Leasing to Recreational Growers due to Demand
+
+ 
+
+FL will also fund its own grow facilities that will be
+JV's with local growers (See Grow Houses sections). This will be done in various states as the market opens up allowing publicly
+traded companies to do so. Presently there are 4 legal states plus the District of Columbia open for retail/recreational
+cannabis: Alaska, Colorado, Washington, Oregon and Washington D.C. In the next years, it is likely that several more states
+will also legalize recreational use of cannabis.
+
+ 
+
+Overview of FL's Land Lease Terms
+
+FL will lend to the Lessees initial Licensing Costs (out
+of first proceeds)
+
+ 
+
+ Funding for licenses (lend money for the license)
+
+ Application assistance
+
+ 
+
+Included in Lessees Monthly Rent:
+
+ 
+
+ 
+
+ 
+
+ 
+
+ Road Infrastructure to Grow house
+
+ Building the Grow Houses (FL will own buildings)
+
+ Equipment
+
+ Access to water (will buy from FL)
+
+ Technology through Hemp Tech Corp.
+
+ Security
+
+ Lighting
+
+ Hydroponic Systems without soil growing
+
+ Office
+
+ Drying Room
+
+ Hoop Houses temporary
+
+ Water tanks
+
+ Propane tanks
+
+ Generator
+
+ 
+
+Additional costs to Lessee (Not included in Monthly
+Rent)
+
+ 
+
+ Staffing & Master Grower
+
+ Seeds
+
+ Buy nutrients for plants (i.e., Miracle grow-like nutrients)
+
+ Electricity
+
+ Buying water from FL
+
+FL's Goals 3 Lessors with 24 Units & 3
+FL funded Grow Houses with 24 Units
+
+Our five year goal is to continue to expand operations
+in and around the existing operations. Our initial operations are designed with expansion in mind through re-investment. We have
+chosen facilities, at the expense of initial profits, with this "room for expansion" without significant capital outlay,
+in mind. This expansion can be achieved through either additional licensed crop growth, i.e. multiple crops, or additional crop
+rotation through faster maturing crops. We will use the profits from our grow cycles to fund new growth, expand employment and
+develop the infrastructure in both the medicinal and recreational fields
+
+We have identified four keys factors that will be instrumental
+to our success.
+
+ 
+
+1) The
+first key factor is the implementation of strict financial controls. By having the proper controls, production efficiency and accountability
+will be maximized.
+
+2) The
+second key factor will be the "never ending pursuit of perfection"; similar to the wine industry, bouquet, flavor and
+strength are key elements to production.
+
+3) The
+third key factor is the recognition and implementation of the philosophy that 100% regulatory compliance and customer satisfaction
+is required to ensure a profitable business.
+
+4) The
+fourth key is consistency, consistency of supply, consistency of product. In an industry currently plagued by product shortages
+(some dispensaries have had to close their doors due to lack of product) and erratic quality, consistency will ensure continued
+sales.
+
+Land Lease and Grow Competitors
+
+There are 92 MED Licensed Retail Marijuana Product Manufacturers
+in Colorado as of December 1, 2014. (See attached "MED Licensed Retail Marijuana Product Manufacturers as of December 1, 2014"). 
+As mentioned previously, this limited number of Product Manufacturers has led to shortages of supply for many Retail Dispensaries.
+
+Grow Licensing
+
+Licensing, both State and Local is a precursor to all
+production. Initial application will be for Type 1 License which
+
+ 
+
+ 
+
+ 
+
+allows for the production of 3,600 plants. It is
+envisaged that as the need requires and future production facilities become available, further applications will be made for Type
+2 licensing (6,000 plants) and Type 3 licensing (10,000 plants).
+
+Production levels are directly contingent on space availability
+and set-up costs. Further details relating to set-up costs and operating expenses can be found in the appendices to this document.
+
+ 
+
+Production Level Analysis
+
+Attached as an appendix is a Production Level Financial
+Analysis which is predicated on the following:
+
+ 
+
+ on average, 1 crop per quarter (13 week grow, harvest, dry and deliver);
+
+ deep water under current systems yield on average 8 ounces a plant (final
+yields may be higher);
+
+ additional Seeds / Clones purchased in 2nd through 4th quarters to access/blend
+different strains;
+
+ Federal Income Tax is calculated by the application of Section 280E of the
+Income Tax
+
+ 
+
+Assessment Act which disallows (amongst other items)
+items that are not directly attributable to the growth of the product. Therefore, in general, items such as excise duty, rent,
+advertising, depreciation, legal fees, wages, utilities, and security services that form part of the General and Administrative
+Expenses of the corporation, on a Federal level, are not allowed as a deduction from income. Legal actions are currently in play
+to repeal this section of the act in relation to Legalized Marijuana operations. Should such actions be successful it would have
+the effect of reducing the Federal Income Tax Expense by the following:
+
+ 3,600 Plants $ 307,926
+
+ 3,200 Plants $ 274,198
+
+ 2,800 Plants $ 240,471
+
+ 2,400 Plants $ 206,744
+
+ 2,000 Plants $ 173,022
+
+ 
+
+Further analysis schedules provide details of the cost
+/ equipment requirement involved in the set-up and operating of an individual crop cycle. Concurrent cycles, subject to licensing
+constraints, can be approximated by doubling the Supplies, Lighting Equipment, Utilities Analyses and adding additional accounting,
+sales, growing, harvesting and packaging employees.
+
+Security of the Land and its Products
+
+FutureLand will make use of the relationship FutureLand
+Corp (FUTL) has with HempTech Corp. to provide a state of the art security system. HempTech Systems has the SPIDer (Secure
+Perimeter Intrusion Detection Network) line of products to meet the needs of security and intrusion detection in the indoor and
+outdoor cannabis grow industry.
+
+ 
+
+The SPIDer Intrusion Detection network is a multifaceted
+product family which provides near real-time detection of intruders for either a remote inside facility or large open air agricultural
+facilities. This technology is derived from the Infrax SPIDer Intrusion detection networks designed for electrical substations
+and remote facilities in the electric energy business. Product examples include but not limited to; active fence systems,
+HD infrared and color camera networked via radio systems, motion detectors, microwave security systems and intelligent LED lighting
+systems. Infrax Systems Inc. will design specific packages to support applications ranging from small indoor facilities to
+large outdoor agriculture facilities covering hundreds of acres. The SPIDer systems consist of 3 levels of detection to identify
+intruders and threats in areas that are restricted.
+
+ 
+
+Challenges Water
+
+The city of Walsenburg has 20 years of reserve water. 
+We sat down with the mayor and administrator and were told that they are willing to put in an application to expand the reaches
+of a portion of this reserve to extend to the outlying regions of the city to include our property in Majors Ranch. Specifically,
+they are willing to sell us all the water that we need. One condition was that we get on the same page as our HOA. 
+We then met with the President
+
+ 
+
+ 
+
+ 
+
+and its board and had a meeting of the minds about the
+project. When we are ready the city will apply to the state and we will apply with the city for a substitutionary water plan
+to put into effect while the main plan is going through water court. These plans can take up to 5 years to approve, but the
+substitutionary water plan allows us to buy the water from the city as if it existed until such time as the main plan is approved. 
+There are other paths to go down. For instance, we could look to truck the water, but this is not a good long-term plan for
+the amount of water CFC will need.
+
+ 
+
+FL has Two Executed Leases with CFC and GPS 
+La Vita (First Lessees)
+
+ 
+
+ Colorado Flower Company
+ GPS La Vita, Inc. Subsidiary of INCC (Publically Traded)
+
+ 
+ Leased them 37 acres at $10K/per acre
+
+ 5
+ Year Renewable Lease is for $575K/month
+
+ $370K
+ for land
+
+ $205K
+ for All other
+
+ Total
+ Rent for Unit #1: $575K
+
+ 
+
+ 
+ Lessee
+ Land Only - $10K/per acres
+
+ Lessee
+ is paying for all grow house buildings FL will buy building back in 3 years from Proceeds
+
+ Total
+ Rent for Lessee #2 Unit #1: $345
+
+ 
+
+FL's Capital Requirements for its Land Lease Silo
+- $3M
+
+The Colorado Flower Company lease is set on the back
+39.96 acres as shown above (Lessee #1). The GPS, La Vita, Inc. lease is located adjacent to the 39.96 acres on the
+southern edge of the 200 acres known as Lot 19 in HOA Majors Ranch, La Vita CO (Lessee #2). The beauty of this land is that
+it comes with relative little clearing required and is already zoned agricultural and legal to grow cannabis and hemp. Colorado
+Flower Company, LTD will grow 3600 plants in accordance with a Tier 1 license and once they have been able to demonstrate to the
+state that they can sell it, they will be eligible to apply for a Tier 2 (6000 Plants) and then a Tier 3 license (10,000 Plants).
+
+ 
+
+FL went to contract with a lease for Colorado Flower
+Company, LTD on Dec 1, 2014 allotting 37 acres for their grow facilities. It is a 5-year lease with 2 three-year renewals. 
+The lease specifies $385,000 per month to FL for leasing the land and the structure. $10,000 per month per acre plus $15,000
+for the structure per month. In the future as structures get added to the property we will lease each out for an additional
+$15,000 per month plus a management/consulting fee of approximately $333,333 per month per new facility. On Jan 20, 2015
+FL went to contract with GPS, La Vita, Inc. allotting 5 acres for their immediate grow facilities with the ability to scale up
+into 35 acres. This lease is $10,000 per month per acre starting with the first 5 acres and FL reserves the right to participate
+in expansion, dollar for dollar, beyond the first 5 acres allotted. This, too, is a 5 year lease with options to renew.
+
+ 
+
+Revenue Centers from Land Lease Silo
+
+Based on 3,600 acres plant grows, below are the two revenue
+centers and their break downs:
+
+ 
+
+ Revenue Centers by Units
+
+ 
+ 
+ Revenue Center #1
+ 
+ Revenue Center #2
+
+ Define a Unit
+ 
+ Lessee's First Unit Rent
+ 
+ Lessee's Rent Units 2-8
+
+ Gross Revenue
+ 
+ $575,000 per month
+ 
+ $345,000 per month
+
+ Cost of Goods Sold
+ 
+ 0
+ 
+ 0
+
+ Gross Margin
+ 
+ $575,000
+ 
+ $345,000
+
+ Gross Margin %
+ 
+ 100%
+ 
+ 100%
+
+ 
+
+ 
+
+Business Silo #2-Grow
+Houses
+
+ 
+
+ 
+
+ 
+
+Overview of FL's Grow Houses
+
+FL will enter the Cannabis growing business. Each
+grow house requires a license. To qualify to obtain a growing license, the majority owner (50.1%) must reside in the state
+(i.e., Colorado, Oregon, etc.). Therefore, FL will do joint ventures with entrepreneurs who are specialist in Cannabis growing. 
+FL will provide the funding and land (depending on the location) for these grow houses.
+
+What defines FL's Grow Houses Business Silo?
+
+The primary market segments which FL's Grow House Silo
+will be selling are:
+
+ 
+
+1.Recreational Dispensaries which sell cannabis and secondary products in accordance
+with State and Local laws to the public. The tax structure and strain development is very different than the medicinal industry.
+
+ 
+
+2.Medicinal Dispensaries, which sell cannabis and secondary products to aid in the
+treatment or management of a physical condition and is prescribed to individual via a medical establishment. The product strains
+are developed for very specific conditions like hunger and pain management as well as seizure control. The focus of the strains
+makes it a very different pursuit than the recreational strain development.
+
+ 
+
+3.Pharmaceutical Science Labs which purchase raw plants and concentrates to further
+medicinal studies on cannabis.
+
+ 
+
+4.Cannabis Secondary Product Processors, which manufacture medical grade, concentrates,
+secondary, and retail end products for their own labels. These companies purchase the plants to extract the THC and transform process
+it into sell able secondary products for their own brand.
+
+ 
+
+FL's Grow Houses Solving the Industry's
+Problem
+
+Some of the major problems facing current Grow Houses
+are:
+
+ 
+
+1.These businesses were started by inexperienced entrepreneurs who lacked Proper planning;
+
+2.The funding the needed
+
+3.The business expertise
+
+4.Changing laws
+
+5.The financial and banking challenges
+
+6.Initial negative public opinion; and
+
+7.Many entrepreneurs jumped into the industry because they loved the product, but did not know how
+to monetize the product correctly, efficiently and effectively.
+
+ 
+
+FL will be able to address all of these problems and
+correct them with:
+
+ 
+
+1.Proper planning and education to the entrepreneurs
+
+2.Provide all of the necessary funding
+
+3.Provide the land and equipment needed
+
+4.Provide the back-office support including executive guidance to the Grow House Entrepreneur
+
+5.Provide buying discounts
+
+6.Assist with all building a national brand and all Sales and Marketing
+
+ 
+
+FL's LOI and JV with Pueblo Flower Company, LLC.
+
+FL has signed an LOI to do a joint venture with Pueblo Flower Company, LLC. These grow experts have already
+
+ 
+
+ 
+
+ 
+
+established their expertise in this area. They have an
+accomplished business team that will be operational managers of this grow house.
+
+ 
+
+FL's JV and Deal Structure with Pueblo Flower Company,
+LLC.
+
+The terms of this lease Joint Venture are outlined below
+with $3M in funding in exchange for the following:
+
+ 
+
+ 49.9% equity ownership with a non-dilution clause (Note: currently,
+laws demand that out-of-state equity owners can only be minority shareholders)
+
+ 1 Board Seat with the corporate bylaws set up requiring unanimous
+consent of the board
+
+ Executive Oversight of all Operational and Financial Issues by FL's EVP's
+
+ Quarterly Cash Distributions
+
+ Annual Audits
+
+ Pueblo's executive team will complete a comprehensive 5-Year business plan
+with financial projections
+
+ 
+
+As FL is contributing initial outlay of capital for this
+company, the majority equity owners must also contribute capital back into the company for growth from their portion of the profit
+proceeds. Therefore, upon the initial cash flow, the majority equity owners will reinvest $2.5M from their portion of the
+profits back into the company to equal out capital contributions on both from both parties. This capital contribution from the
+majority owners (out of the 50.1% owners) can be done over the course of the first 4 harvests (at 25% per cash distribution).
+
+Pueblo's $3M Use of Proceeds
+
+Pueblo's $3M Use of Proceeds includes:
+
+ 
+
+ Purchase of Land
+
+ Construction of Grow House and purchase of all Equipment
+
+ Operating Capital
+
+ 
+
+Revenue Centers #3 from Grow House Silo
+
+ 
+
+Based on 3,600 acres plant grows, below are the two revenue
+centers and their break downs. Wholesale product pricing are estimated at $2,400 per pound; with Retail pricing at $4,000
+per pound.
+
+ 
+
+Business Silo #3 Dispensaries & Distribution
+Centers
+
+FL's Dispensaries Medical and Recreational
+and Their Products
+
+FL's dispensaries will be both medical and recreational
+in nature. The products must be separate and cannot be sold in the same dispensaries (depending on laws in each state).
+
+ 
+
+In both types of dispensaries, FL will provide three
+major types of products:
+
+ 
+
+1.Cannabis buds (flowers)
+
+2.Foods Infusible
+
+3.Oils, Waxes and other products
+
+ 
+
+All dispensaries will be managed with the same basic
+format regardless of if they are recreational or medical. Their branding will be different and regionally, other
+brands may be developed (i.e., FL dispensaries verses Blunt Inc. dispensaries). Additionally, to promote brand awareness
+and consistence, FL will seek to have all architecture and d cor done in the same basic format in each dispensary. 
+FL will have security and testing of
+
+ 
+
+ 
+
+ 
+
+products available to consumers (depending on Medical
+or Recreational Dispensaries.
+
+ 
+
+Initially, FL will have grow houses attached to their
+dispensaries (i.e., Blunt, Inc.). However, until FL identifies new opportunities to fund or purchase individual dispensaries,
+FL will supply retail product to its dispensaries through their own onsite grow houses from land they purchased or leased.
+
+FL signs an LOI with Blunt, Inc. for Recreational
+Dispensaries in Oregon
+
+Blunt Inc. an Oregon company will do a joint venture with FL. Their business model includes having land with their own grow houses
+and then multiple dispensaries based. This Oregon based company's primary focus on the development and sales of recreational cannabis
+using a unique sales and marketing plan. Blunt's business model is mirrored off the very successful beer distributor's model.
+Their unique sales and marketing plan calls for an aggressive branding and marketing campaign using celebrity spokes people and
+events with the cast members from hit show on Comedy Central "Workaholics" a cannabis based comedy that his a
+hit show for the college aged community and cannabis-loving community.
+
+ 
+
+- 33 -
+
+ 
+
+ 
+
+ 
+
+ 
+
+FL's JV and Deal Structure with Blunt Inc.
+
+The terms of this LOI and Joint Venture are outlined
+below with FL providing $3M in funding in exchange for the following:
+
+ 
+
+ 40% equity ownership with a non-dilution clause (Note: currently, laws
+demand that out-of-state equity owners can only be minority shareholders)
+
+ 1 Board Seat with the corporate bylaws set up requiring unanimous
+consent of the board
+
+ Executive Oversight of all Operational and Financial Issues by FL's EVP's
+
+ Quarterly Cash Distributions
+
+ Annual Audits
+
+ Blunt's executive team will complete a comprehensive 5-Year business plan
+with financial projections
+
+ 
+
+As FL is contributing initial outlay of capital for this
+company, the majority equity owners must also contribute capital back into the company for growth from their portion of the profit
+proceeds. Therefore, upon the initial cash flow, the majority equity owners will reinvest $2.5M from their portion of the
+profits back into the company to equal out capital contributions on both from both parties. This capital contribution from the
+majority owners (out of the 50.1% owners) can be done over the course of the first 4 harvests (at 25% per cash distribution).
+
+Blunt's $3M Use of Proceed
+
+ Purchase of Land
+
+ Construction of Grow House and purchase of all Equipment
+
+ Operating Capital
+
+Revenue Center #4 from Dispensaries Silo
+
+Based on 3,600 acres plant grows, below is FL's 4th revenue
+center: Blunt Inc. Grow Houses and Dispensaries) and its breakdowns: medical and recreational. As Blunt will be both growing
+the product and selling it in their dispensaries, the revenue shown is at a retail pricing at $4,000 per pound.
+
+ 
+
+FL's Entrance into Dispensaries
+
+ 
+
+ 
+
+ 
+
+FL will likely invest in dispensaries and manufacturing
+of waxes, oils and other infusible product in the near future. However, for the sake of this business plan, no revenue is
+shown for dispensaries only, only Blunt Inc.'s JV that includes both (1) Real Estate and Grow Houses; and (2) their own brand of
+dispensaries in Oregon.
+
+ 
+
+Business Silo #4 - Medical Businesses
+
+The Medical Cannabis Industry Opportunities
+
+Dating back to ancient Chinese medicine, there has long been a following of this "magical" herb, praised for its soothing
+and hallucinogenic qualities [Source: Guy, Whittle and Robson]. Though recreational use of the drug is still illegal in the U.S.,
+the popularity of the drug for medicinal purposes is on the rise. With more states legalizing medical cannabis each year 
+currently 20+ states and the District of Columbia have passed legislation governing the drug's use for medical purposes the substance
+is increasingly being used to help treat these five common ailments.
+
+ 
+
+There are two types of receptors in our body that allows
+us to take in the effects of medical cannabis - CB1 receptors that are found primarily in the brain, spinal cord, and
+periphery and CB2 receptors that are found on the immune tissues [source: McCarberg, Bill M.D.]. When coming into contact
+with cannabis, our body produces molecules (called endocannabinoids) that interact with these CB1 and CB2 receptors which produces
+the euphoric state that helps to dull our senses to various symptoms [source: McCarberg, Bill M.D.].
+
+ 
+
+One common use of medical cannabis is to ease the symptoms
+of nausea. In trials conducted by National Cancer Institute, two FDA-approved cannabis-based drugs, dronabinol and nabilone, helped
+to reduce chemotherapy-related nausea and vomiting in cancer patients. When taken orally, the drugs "worked as well as or
+better than some of the weaker FDA-approved drugs to relieve nausea and vomiting" [source: National Cancer Institute].
+
+ 
+
+States around the country more than 20+ in total
+ have legalized medical marijuana. Experts have been changing their minds too recently, CNN's chief medical
+correspondent Sanjay Gupta reversed his opinion on medical marijuana. While recreational pot usage is controversial, many
+people agree with Gupta's new stance, and believe that the drug should be legal for medical uses.
+
+ 
+
+And even though the benefits of smoking pot may be overstated
+by advocates of marijuana legalization, new laws will help researchers study the drug's medicinal uses and better understand how
+it impacts the body. Currently only 6% of studies on marijuana analyze its medicinal properties. Keep in mind, though,
+that there are negative effects of smoking too much pot or using it for non-medicinal purposes. When overused or abused, pot
+can lead to dependency and mess with your memory and emotions.
+
+There are at least two active chemicals in marijuana
+that researchers think have medicinal applications. Those are Cannabidiol (CBD) which seems to impact the brain without
+a high and tetrahydrocannabinol (THC) which has pain relieving (and other) properties. Also keep in mind that
+some of these health benefits can potentially be gained by taking THC pills like Dronabinol, a synthetic form of THC, which in
+some ways might be more effective than smoked marijuana. (Source: Randy Astaiza).
+
+ 
+
+Medical Uses of Cannabis
+
+There are proven medical benefits to Cannabis use including:
+
+ 
+
+ It can be used to treatGlaucoma.
+
+ Cannabis reduces some of theawful pain and nausea from chemo, and
+stimulates appetite.
+
+ It may help reverse thecarcinogenic effects of tobacco and improve lung
+health.
+
+ It can help controlepileptic seizures.
+
+ It often helps enormously withchronic pain
+
+ Decreases the symptoms of a severe seizure disorder known asDravet's Syndrome.
+
+ 
+
+ 
+
+ 
+
+ A chemical found in marijuanastops cancer from spreading.
+
+ It may decreaseanxiety.
+
+ THC slows the progression ofAlzheimer's disease.
+
+ The drug eases the pain ofmultiple sclerosis.
+
+ Other types ofmuscle spasms could be helped too.
+
+ It lessens side effects from treatinghepatitis C and increases treatment
+effectiveness.
+
+ Marijuana treatsinflammatory bowel diseases.
+
+ It relievesarthritis discomfort.
+
+ It helps yourmetabolism.
+
+ It improves the symptomsof Lupus, an autoimmune disorder.
+
+ While not really a health benefit, marijuanaspurs creativity in the brain.
+
+ Marijuana might be able to help withCrohn's disease.
+
+ Pot soothes tremors for people withParkinson's disease.
+
+ Marijuana helps veterans suffering fromPTSD.
+
+ Marijuana protects the brain after astroke.
+
+ It might protect the brain fromconcussions and trauma.
+
+ It can helpeliminate nightmares.
+
+ 
+
+FL's Medical Marijuana will target Research and Product
+Development Businesses
+
+FL's will be identifying and targeting investment opportunities
+in the medical marijuana (Cannabis) space. These investment opportunities may be in research or product development.
+
+The merits of each investment opportunity will be judged
+on an individual basis. However, given recent findings in the medical marijuana space, FL anticipates that this will be a
+growing and very lucrative investment opportunity given the increasing number of states that are legalizing its use for medicinal
+purposes.
+
+Business Silo #5 Entertainment
+
+ 
+
+FL Plans to enter into the Entertainment Arena of
+the Cannabis Industry
+
+With Cannabis only recently being legalized for recreational
+use, there are very few entertainment based destination venues that cannabis users can go to legally to utilize the product in
+public environments. FL is developing a business model that will bring together fun and product sales. We call this
+project: FutureLand.
+
+ 
+
+Creating a Destination devoted to Cannabis. This
+Entertainment Venue will include celebrity endorsements and branding with the following:
+
+ 
+
+1.Gated/Private Daily Cover Charge
+
+2.Cannabis Dispensaries
+
+3.Cannabis Gift Shops
+
+4.Multiple Restaurants / Food Courts
+
+5.Open Areas for Product Use including Hookah Bars (Alcohol served if legal)
+
+6.Adult Video Arcade
+
+7.Comedy Theater
+
+8.Movies with food served
+
+9.Chucky Cheese -like games
+
+10.Gardens and outdoor area for customers
+
+11.Out-door Amp theater for concerts
+
+12.Nearby Lodging adjacent to Park
+
+ 
+
+ 
+
+ 
+
+ 
+
+Market Conditions
+
+ 
+
+FutureLand is poised to take advantage
+of two rapidly growing industry: cannabis.
+
+ 
+
+Cannabis Market Growth and Current
+Trends
+
+ 
+
+Since the launch of FutureLand,
+there have been a series of events that have help further shape the development of the cannabis and mobile technology industries:
+
+ 
+
+ 
+ 
+ On August 29, 2013, Deputy Attorney General James Cole issued a memo ("The Cole Memo") in response to certain states passing measures to legalize the medical and adult-use of cannabis. The Cole Memo does not alter the Department of Justice's authority to enforce Federal law, including Federal laws relating to cannabis, regardless of state law, but does recommend that U.S. Attorneys to focus their time and resources on certain priorities, rather than businesses legally operating under state law. These guidelines focus on ensuring that cannabis does not cross state lines, keeping dispensaries away from schools and public facilities, strict-enforcement of state laws by regulatory agencies, among other priorities.
+
+ 
+ 
+ On January 1, 2014, the first sales of cannabis for adult-use permissible under state law took place in Colorado. This event resulted in significant media coverage for the industry. Since that time, three other states have made adult-use permissible under their state law and several states have ballot proposals pending at upcoming elections.
+
+ 
+
+On February 14, 2014, the Departments
+of Justice and Treasury issued a joint memo allowing banks and financial institutions to accept deposits from dispensaries operating
+legally under state law. In most cases, dispensaries had been forced to operate on a cash basis, presenting significant security
+and accounting issues. This was a major step in legitimizing and accepting the cannabis industry on a national level.
+
+ 
+
+Current States with Laws Permitting
+the Medical or Adult Use of Cannabis
+
+ 
+
+As of June 30, 2015, 23 states and
+the District of Columbia have passed laws allowing some degree of medical use of cannabis, while four of those states and the District
+of Columbia have also legalized the adult-use of cannabis. The states which have enacted such laws are listed below:
+
+ 
+
+ State
+ 
+ 
+ Year Passed
+ 
+
+ 1. Alaska*
+ 
+ 
+ 1998
+ 
+
+ 2. Arizona
+ 
+ 
+ 2010
+ 
+
+ 3. California
+ 
+ 
+ 1996
+ 
+
+ 4. Colorado*
+ 
+ 
+ 2000
+ 
+
+ 5. Connecticut
+ 
+ 
+ 2012
+ 
+
+ 6. District of Columbia*
+ 
+ 
+ 2010
+ 
+
+ 7. Delaware
+ 
+ 
+ 2011
+ 
+
+ 8. Hawaii
+ 
+ 
+ 2000
+ 
+
+ 9. Illinois
+ 
+ 
+ 2013
+ 
+
+ 10. Maine
+ 
+ 
+ 1999
+ 
+
+ 11. Maryland
+ 
+ 
+ 2014
+ 
+
+ 12. Massachusetts
+ 
+ 
+ 2012
+ 
+
+ 13. Michigan
+ 
+ 
+ 2008
+ 
+
+ 14. Minnesota
+ 
+ 
+ 2014
+ 
+
+ 15. Montana
+ 
+ 
+ 2004
+ 
+
+ 16. Nevada
+ 
+ 
+ 2000
+ 
+
+ 17. New Hampshire
+ 
+ 
+ 2013
+ 
+
+ 
+
+ 
+ 
+ 
+ 2010
+ 
+
+ 19. New Mexico
+ 
+ 
+ 2007
+ 
+
+ 20. New York
+ 
+ 
+ 2014
+ 
+
+ 21. Oregon*
+ 
+ 
+ 1998
+ 
+
+ 22. Rhode Island
+ 
+ 
+ 2006
+ 
+
+ 23. Vermont
+ 
+ 
+ 2004
+ 
+
+ 24. Washington*
+ 
+ 
+ 1998
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+* State has enacted laws permitting
+the adult use of cannabis, in addition to medical use.
+
+ 
+
+ 
+
+Public Support for Legalization
+Increasing
+
+ 
+
+A Gallup poll conducted in October
+2013 found that 58% of the American people supported legalizing the adult-use of cannabis, an increase of 22% from 2005 alone.
+This is the first time in American history the majority of registered voters support the full legalization of cannabis for adult-use.
+Moreover, of 67% participants aged 35 and below voted in support of recreational adult-use, setting the trend for years to come.
+
+ 
+
+A 2013 ArcView Market Research report
+predicts an additional 14 states will legalize the adult-use of cannabis and two states will legalize medical-use within the next
+five years. If public support for cannabis legalization continues to increase, we believe it is likely that Federal policies towards
+marijuana will be reformed. The combination of additional states legalizing adult-use under state law, expansion of medical-use
+provisions in states where it is currently permitted under state law and increased public awareness is projected to cause marijuana
+sales permitted under state law to grow from $1.43 billion in 2013 to $10.2 billion in 2018, according to ArcView Market Research.
+
+ 
+
+Market Conditions that Could
+Limit Our Business
+
+ 
+
+Cannabis is a Schedule I Controlled
+Substance under Federal law and, as such, there are several factors that could limit our market and our business. They include,
+but are not limited to:
+
+ 
+
+ 
+ 
+ The Federal government and many private employers prohibit drug use of any kind, including cannabis, even where it is permissible under state law. Random drug screenings and potential enforcement of these employment provisions significantly reduce the size of the potential cannabis market;
+
+ 
+ 
+ Enforcement of Federal law prohibiting cannabis occurs randomly and often without notice. This could scare many potential investors away from cannabis-related investments and makes it difficult to make accurate market predictions;
+
+ 
+ 
+ There is no guarantee that additional states will pass measures to legalize cannabis under state law. In many states, public support of legalization initiatives is within the margin of error of pass or fail. This is especially true when a supermajority is needed to pass measures, like in Florida where a state constitutional amendment permitting medical cannabis has been proposed, but requires 60% approval to pass. Changes in voters' attitudes and turnout have the potential to slow or stop the cannabis legalization movement and potentially reverse recent cannabis legalization victories;
+
+ 
+ 
+ There has been some resistance and negativity as a result of recent cannabis legalization at the state level, especially as it relates to drugged driving. The lack of clearly defined and enforced laws at the state level has the potential to sway public opinion against marijuana legalization; and
+
+ 
+ 
+ Even if the Federal government does not enforce the Federal law prohibiting cannabis, the legality of the state laws regarding the legalization of cannabis are being challenged through lawsuits. Oklahoma and Nebraska recently sued Colorado over the legalization of cannabis, and other lawsuits have been brought by private groups and local law enforcement officials. If these lawsuits are successful, state laws permitting cannabis sales may be overturned and significantly reduce the size of the potential cannabis market and affect our business.
+
+ 
+
+Employees and Consultants
+
+ 
+
+ 
+
+ 
+
+ 
+
+FutureLand has 2 full-time employees
+and one full time independent contractor.
+
+ 
+
+Insurance
+
+We do not maintain any insurance
+and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party of a legal
+action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that
+could cause us to cease operations.
+
+ 
+
+Government Regulation
+
+ 
+
+Marijuana is a categorized as a
+Schedule I controlled substance by the Drug Enforcement Agency and the United States Department of Justice and is illegal to grow,
+possess and consume under Federal law. However, since 1995, 23 states and the District of Columbia have passed state laws that
+permit doctors to prescribe cannabis for medical-use and four states and the District of Columbia have enacted laws that legalize
+the adult-use of cannabis for any reason. This has created an unpredictable business-environment for dispensaries and collectives
+that legally operate under certain state laws but in violation of Federal law. On August 29, 2013, United States Deputy Attorney
+General James Cole issued the Cole Memo to United States Attorneys guiding them to prioritize enforcement of Federal law away from
+the cannabis industry operating as permitted under certain state laws, so long as:
+
+ 
+
+ 
+ 
+ cannabis is not being distributed to minors and dispensaries are not located around schools and public buildings;
+ 
+
+ 
+ 
+ the proceeds from sales are not going to gangs, cartels or criminal enterprises;
+ 
+ 
+ 
+ 
+
+ 
+ 
+ cannabis grown in states where it is legal is not being diverted to other states;
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ cannabis-related businesses are not being used as a cover for sales of other illegal drugs or illegal activity;
+ 
+ 
+
+ 
+ 
+ there is not any violence or use of fire-arms in the cultivation and sale of marijuana;
+ 
+ 
+ 
+
+ 
+ 
+ there is strict enforcement of drugged-driving laws and adequate prevention of adverse health consequences; and
+
+ 
+ 
+ cannabis is not grown, used, or possessed on Federal properties.
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+The Cole Memo is meant only as a
+guide for United States Attorneys and does not alter in any way the Department of Justice's authority to enforce Federal law, including
+Federal laws relating to cannabis, regardless of state law. We believe and have implemented procedures and policies to ensure we
+are operating in compliance with the "Cole Memo". However, we cannot provide assurance that our actions are in full compliance
+with the Cole Memo or any other laws or regulations.
+
+ 
+
+Patents and Trademarks
+
+ 
+
+We may apply for trademarks as we
+progress as a company.
+
+ 
+
+Legal Proceedings
+
+ 
+
+We are not currently a party to
+any legal proceedings, and we are not aware of any pending or potential legal actions.
+
+ 
+
+Sources and Availability of Raw
+Materials
+
+ 
+
+We do not use raw materials in our
+business
+
+ 
+
+Seasonal Aspect of our Business
+
+ 
+
+ 
+
+ 
+
+ 
+
+None of our products are affected
+by seasonal factors.
+
+ 
+
+DESCRIPTION OF
+PROPERTIES
+
+ 
+
+We are a Colorado corporation. Our
+address is 8400 E. Crescent Parkway, Suite 600, Greenwood Village, Colorado 80111. Our telephone number is (720) 370-3558 and our
+website is www.futurelandcorp.com. Our HQ office is at 10901 Roosevelt Blvd, Suite 1000c, Saint Petersburg, FL 33716. We share
+13,500 sf of office space with FutureWorld Corp. at no expense. Our office in Greenwood Village, Colorado is an executive space
+that costs approximately $100 per month to maintain. We are considering relocating to a bigger space with the completion of this
+offering. FL also owns 239.96 Acres in La Vita, Colorado in Huerfano County.
+
+ 
+
+We believe that our facilities are
+adequate for our current needs and that, if required, we will be able to locate suitable new office space and obtain a suitable
+replacement for our executive and administrative headquarters.
+
+ 
+
+LEGAL PROCEEDINGS
+
+ 
+
+We are not a party
+to any material legal proceedings nor are we aware of any circumstance that may reasonably lead any third party to initiate material
+legal proceedings against us.
+
+ 
+
+Reports to Security Holders
+
+ 
+
+We are required to file reports
+and other information with the SEC. You may read and copy any document that we file at the SEC's public reference facilities at
+100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference
+facilities. Our SEC filings are available to you free of charge at the SEC's web site at www.sec.gov. We are an electronic filer
+with the SEC and, as such, our information is available through the Internet site maintained by the SEC that contains reports,
+proxy and information statements and other information regarding issuers that file electronically with the SEC. This information
+may be found at www.sec.gov and posted on our website at investors.Futurelandcorp.com.
+
+ 
+
+ 
+
+ 
+
+ 
+
+LEADERSHIP
+
+ 
+
+Directors and Executive Officers
+
+ 
+
+The names and ages of our Directors
+and Executive Officers are set forth below. Our By-Laws provide for not less than one and not more than nine Directors. All Directors
+are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors
+are duly elected and qualified.
+
+ 
+
+ Name
+ 
+ Age
+ 
+ Position and Term
+
+ Cameron Cox
+ 
+ 
+ 41
+ 
+ 
+ Director (Since 2014), Chief Executive Officer (Since 2014)
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Sam Talari
+ 
+ 
+ 53
+ 
+ 
+ Director & Chairman (Since 2014)
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ John Verghese
+ 
+ 
+ 55
+ 
+ 
+ Director (Since 2015), Chief Technology Officer (Since 2015)
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cameron
+Cox, Chief Executive Officer, and Director
+
+Cameron
+Cox is the co-founder, CEO, and Board member of FutureLand since our inception. He is responsible for
+
+ 
+
+ 
+
+ 
+
+executing
+our strategic business development. Mr. Cox is a business entrepreneur with a wide bastion of knowledge to draw upon from many
+different walks of life. A real estate expert and developer he brings ground level pragmatism to the field of dreams. 
+He has been involved in hundreds of millions of dollars of real estate projects from mixed use, to condos/residential, marinas,
+mobile home parks, hotels, stand-alone commercial boxes and land deals with a focus on arbitrage. Mr. Cox has held a real
+estate license in the state of Florida since
+
+ 2001.
+
+ 
+
+President
+of multiple companies from Real Estate Development to 1031 Exchange Services to Business Consulting and more. Mr. Cox has
+served as VP of Business Development for HempTech Corp and currently serves as Vice-President of FutureWorld Corp. (FWDG) and CEO
+of FutureLand Corp. (FUTL). FutureWorld Corp. won product of the year after 94 days from launch of their THC/CBD home potency
+test kit at the Cannabis Business Awards in Denver 2014 through its subsidiary CBScientific. Mr. Cox is a consummate venture
+capitalist and advocate of the oncoming "Green Rush". He envisions an untapped American oncoming potential to rival
+anything we have seen, or are likely to see, this century or the next. A U.S. Army Vet, and graduate of Michigan State University
+with a BA in Communication, he also attended Westminster Theological Semi nary for a MDIV and University of South Florida for a
+MBA.
+
+ 
+
+Sam
+Talari Chairman of the Board
+
+ 
+
+Mr. Talari,
+raised as an entrepreneur, found his calling in incubating exciting leading edge technology companies in private and public sector,
+with a unique business plan merging the boundaries between a hedge fund and a VC. Mr. Talari has been the Chief Executive Officer
+of FutureWorld Corp. since November 21, 2005. Mr. Talari served as the Acting Chief Executive Officer at Infrax Systems, Inc. since
+November 21, 2008 and Chief Operating Officer until October 2009 and served as its Interim President. Mr. Talari founded and manages
+FutureTech since 2001 and Talari Industries since 2008. He serves as a Director at PowerCon Energy Systems, Inc, and Chairman &
+CEO of Lockwood Technology. He studied Computer Science and Mathematics at the University of New Hampshire. Mr. Talari holds a
+Bachelor's Degree in Computer Science, Engineering, and Mathematics from University of Lowell.
+
+ 
+
+John
+Verghese-CTO, Board Member
+
+ 
+
+Seasoned
+telecommunication expert with 23+ years of experience in building and operating local and wide area networks. Well rounded
+in all the functional areas of the telecom industry from planning, engineering and operations to sales and customer support. 
+Extensive experience working for a local power utility to provide voice, video and data communications to corporate facilities,
+power plants and substations. He also now serves as President and CEO of HempTech Corp, a global leader in solutions to the
+cannabis industry.
+
+ 
+
+Legal Proceedings
+
+ 
+
+No officer, director,
+or persons nominated for such positions, promoter or significant employee has been involved in the last five years, except as noted,
+in any of the following:
+
+ 
+
+ 
+ A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner, or any corporation or business association of which he was an executive officer, all at or within two years before the time of such filing,
+
+ 
+ Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),
+
+ 
+ Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,
+
+ 
+
+ 
+ Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
+
+ 
+ Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.
+
+ 
+ Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.
+
+ 
+ Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Corporate Governance
+
+ 
+
+The Company's Board of Directors
+is composed of three members: Sam Talari, who serves as Chairman of the Board, Cameron Cox and John Verghese. Talari is not "independent"
+as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Exchange Act, as amended. Moving forward, at such time the
+Board of Directors deems additional independent directors desirable, or that we are required to have additional independent directors,
+either as a result of our future listing on the NASDAQ Capital Market, or a similar market or exchange, or that we are otherwise
+required by applicable law to have independent directors, we will promptly take steps to appoint such independent directors.
+
+ 
+
+We do not have any standing audit,
+nominating and compensation committees of the Board of Directors, or committees performing similar functions. All Board actions
+have been taken by Written Action rather than formal meetings.
+
+ 
+
+In lieu of an Audit Committee, the
+Company's Board of Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors,
+reviewing the scope, results and effectiveness of the annual audit of the Company's financial statements and other services provided
+by the Company's independent public accountants. The Board of Directors reviews the Company's internal accounting controls, practices
+and policies.
+
+ 
+
+Moving forward, at such time as
+the Board of Directors believes that nominating, compensation or audit committees are necessary or desirable, or that we are required
+to have such committees, either as a result of our future listing on the NASDAQ Capital Market or a similar market or exchange,
+or otherwise as required by law, we will take steps to form such committees and adopt charters as may be required to comply with
+all applicable rules and regulations.
+
+ 
+
+We currently have a Code of Ethics
+applicable to our principal executives, financial and accounting officers. A copy of the Code is available at our investor website:
+www.futurelandcorp.com/investors
+
+ 
+
+Shareholder Communications
+
+ 
+
+Although we do not have a formal
+policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at 8400 E. Crescent
+Parkway, Suite 600, Greenwood Village, Colorado 80111, Attention: Legal. Shareholders who would like their submission directed
+to a member of the Board may so specify, and the communication will be forwarded, as appropriate.
+
+ 
+
+Certain Relationships and Related
+Transactions
+
+ 
+
+Except as described herein (or within
+the section entitled Executive Compensation of this prospectus), none of the following parties (each a "Related Party")
+has, in our fiscal year ended March 2015, had any material interest, direct or indirect, in any transaction with us or in any presently
+proposed transaction that has or will materially affect us:
+
+ 
+
+ 
+ 
+ any of our directors or officers;
+ 
+ 
+
+ 
+
+ 
+ 
+ any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or
+
+ 
+ 
+ any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons.
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+On August 5, 2015, the Company approved
+the issuance of 2,800,000 shares of common stock to Cameron Cox, our Chief Executive Officer and Director, per employment agreement
+with Mr. Cox as a co-founder of the company in exchange for his services as a grant.
+
+ 
+
+On
+September 9, 2015, the Company approved the issuance of 170,000 shares of common stock to Cameron Cox, our Chief Executive Officer
+and Director, per employment agreement, for back wages. The market value of the issued shares is $51,000 and is approximated to
+be the fair market value of the services received. These shares were recorded as Common
+Stock to be issued and subsequently issued.
+
+ 
+
+ 
+
+EXECUTIVE COMPENSATION
+
+ 
+
+Named Executive Officers
+
+ 
+
+Our "named executive officers"
+for the 2015 fiscal year consisted of the following individuals:
+
+ 
+
+Cameron Cox, our Chief Executive
+Officer
+
+John Verghese, our Chief Technology
+Officer
+
+ 
+
+Summary Compensation Table
+
+ 
+
+The table below summarizes all compensation
+awarded to, earned by, or paid to our Chief Executive Officer and our two most highly compensated executive officers who occupied
+such position at the end of our last fiscal year for all services rendered in all capacities to us during the previous two fiscal
+years.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ Name & 
+
+Principal 
+
+Position
+ 
+ Year
+ 
+ Salary 
+
+$
+ 
+ Bonus
+
+$
+ 
+ Stock 
+
+Awards (5)
+
+$
+ 
+ Option
+
+Awards (1)(5)
+
+$
+ 
+ Non-Equity 
+
+Incentive Plan
+
+Compensation
+
+$
+ 
+ All Other 
+
+Compensation
+
+$
+ 
+ Total
+
+$
+
+ Cameron Cox
+
+Chief Executive Officer, Director
+ 
+ 
+ 
+ 2014
+
+ 2015
+
+ 
+ 
+ 
+ 
+ -
+
+ $80,000
+
+ 
+ 
+ 
+ 
+ -
+
+ -
+
+ 
+ 
+ 
+ -
+ 
+ 
+ 
+ 
+ 
+
+ -
+
+ 
+ 
+ - 
+
+-
+ 
+ - 
+
+-
+ 
+ 
+ 
+ -
+
+ $80,000
+
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Outstanding Equity Awards at
+March 31, 2015 Fiscal Year End
+
+ 
+
+No named executive officer had unexercised
+outstanding equity awards at December 31, 2015.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Narrative Disclosure to Summary
+Compensation and Option Tables
+
+ 
+
+On April 1, 2015, we entered into
+an agreement with Cameron Cox, our Chief Executive Officer and Director, to provide services to us. For his services for a term
+of four years, Mr. Cox received compensation of $6,666 per month, and was provided a stock award of 2,800,000 shares.
+
+ 
+
+Equity Compensation Plan Information
+
+ 
+
+Information on the 2015 Plan is
+available in the section of this prospectus entitled "Market for Common Stock" found above.
+
+ 
+
+Director Compensation
+
+ 
+
+Our interested directors do not
+receive additional compensation for their service as directors. 
+
+ 
+
+The following table shows for the
+fiscal year ended December 31, 2015, certain information with respect to the compensation of all non-employee directors of the
+Company:
+
+ 
+
+ Name
+ 
+ 
+ 
+ 
+ Fees Earned or
+
+Paid in Cash
+ 
+ 
+ Stock
+
+Awards (1)
+ 
+ 
+ Option
+
+Awards (1)
+ 
+ 
+ Total
+ 
+
+ Sam Talari
+ 
+ 
+ (2
+ )
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+
+ John Verghese
+ 
+ 
+ (2
+ )
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+ 
+ $
+ 0
+ 
+
+ 
+ 
+
+ 
+
+ (1)
+ 
+ These amounts are the aggregate fair value of the equity compensation paid to our directors during the fiscal year. The aggregate fair value is computed in accordance with FASB ASC Topic 718. See Note 3 to our consolidated financial statements contained in this Annual Report on Form 10-K regarding assumptions underlying valuation of equity awards.
+
+ 
+
+ (2)
+ 
+ Mr. Talari and Mr. Verghese joined the Company's Board of Directors on April 1, 2015.
+
+ 
+
+ 
+
+Indemnification of Officers and
+Directors
+
+ 
+
+Our Amended and Restated Certificate
+of Incorporation provides that we shall indemnify our officers and directors to the fullest extent permitted by applicable law
+against all liability and loss suffered and expenses (including attorneys" fees) incurred in connection with actions or proceedings
+brought against them by reason of their serving or having served as officers, directors or in other capacities. We shall be required
+to indemnify a director or officer in connection with an action or proceeding commenced by such director or officer only if the
+commencement of such action or proceeding by the director or officer was authorized in advance by the Board of Directors.
+
+ 
+
+We do not currently maintain director's
+and officer's liability insurance but we may do so in the future.
+
+ 
+
+SECURITY OWNERSHIP
+OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
+
+ 
+
+ 
+
+ 
+
+ 
+
+The following table sets forth certain
+information with respect to the beneficial ownership of common stock by: (i) each director, (ii) each of the executive
+officers of the Company, (iii) all current directors and executive officers as a group, and (iv) each stockholder known
+to the Company to be the beneficial owner of more than 5% of the outstanding shares of common stock.
+
+ 
+
+Unless otherwise indicated in the
+footnotes to the table, all information set forth in the table is as of September 30, 2015, and the address for each director and
+executive officer of the Company is: c/o FutureLand Corp., 3637 4th Street North, Saint Petersburg, FL 33704. The addresses
+for the greater than 5% stockholders are set forth in the footnotes to this table.
+
+ 
+
+ 
+ 
+ Common Stock
+
+ 
+ 
+ 
+ Number of Shares
+
+ Beneficially Owned (1)
+
+ 
+ 
+ Percentage
+
+ Outstanding (2)
+
+ Directors and Officers
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cameron Cox
+ 
+ 
+ 2,800,000
+ 
+ 
+ 
+ 8.64
+ %
+
+ John Verghese
+ 
+ 
+ 0
+ 
+ 
+ 
+ 0
+ %
+
+ Sam Talari
+ 
+ 
+ 10,000,000
+ (3)
+ 
+ 
+ 30.87
+ %
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ All directors and named executive 
+
+officers as a group (3 persons)
+ 
+ 
+ 12,800,000
+ 
+ 
+ 
+ 39.51
+ %
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 5% Stockholders
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ FutureWorld Corp (4)
+ 
+ 
+ 17,845,280 (5)
+ 
+ 
+ 
+ 55.1%
+ 
+
+ 
+
+ 
+
+ 
+
+ (1)
+ 
+ The Company believes that each stockholder has sole voting and investment power with respect to the shares of common stock listed, except as otherwise noted. The number of shares beneficially owned by each stockholder is determined under rules of the SEC, and the information is not necessarily indicative of ownership for any other purpose. Under these rules, beneficial ownership includes (i) any shares as to which the person has sole or shared voting power or investment power and (ii) any shares which the individual has the right to acquire within 60 days after September 30, 2015 through the exercise of any stock option, warrant, conversion of preferred stock or other right, but such shares are deemed to be outstanding only for the purposes of computing the percentage ownership of the person that beneficially owns such shares and not for any other person shown in the table. The inclusion herein of any shares of common stock deemed beneficially owned does not constitute an admission by such stockholder of beneficial ownership of those shares of common stock.
+
+ 
+
+ (2)
+ 
+ Based on 32,397,930 shares of common stock outstanding as of December 31, 2015.
+
+ 
+
+ (3)
+ 
+ Sam Talari own the shares under the corporate name of Talari Industries, LLC. Mr. Talari hold 100% control of the Talari Industries, LLC. The address of Talari Industries, LLC is as follows: Talari Industries, LLC 3637 4th Street North, #330, ST. Pete FL 33704.
+
+ 
+
+ (4)
+ (5)
+ FutureWorld Corp was the previous parent company of FutureLand. FutureWorld received 17,845,280 of common stock of the FutureLand Corp from Aegea after the merger. Mr. Talari is the CEO of FutureWorld Corp and has majority voting power and control of the company.
+
+ 
+
+ 
+
+DESCRIPTION OF
+PURCHASE AGREEMENT
+
+ 
+
+General
+
+ 
+
+ 
+
+ 
+
+ 
+
+On April 08, 2016,
+we entered into the Purchase Agreement with Kodiak Capital and entered into a registration rights agreement (the Registration
+Rights Agreement ) with Kodiak Capital. Pursuant to the terms of the Registration Rights Agreement, we agreed to register
+for resale all of the shares that may be issued to Kodiak Capital under the Purchase Agreement.
+
+ 
+
+Pursuant to the terms
+of the Registration Rights Agreement, we have filed with the SEC the registration statement that includes this prospectus to register
+for resale under the Securities Act of 1933, as amended (the Securities Act ) the shares that may be issued to Kodiak
+Capital upon conversion under the Purchase Agreement.
+
+ 
+
+We do not have the
+right to commence any sales to Kodiak Capital under the Purchase Agreement until the SEC has declared effective the registration
+statement of which this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct Kodiak
+Capital to purchase shares of our common stock. The purchase price per share will be equal to 70% of the lowest closing bid price
+of the common stock for the five consecutive trading days immediately following our request for Kodiak Capital to purchase the
+shares.
+
+ 
+
+Purchase of
+Shares Under the Purchase Agreement
+
+ 
+
+Under the Purchase
+Agreement, we may direct Kodiak Capital to purchase up to $1,000,000 shares of our common stock. The closing of the sale of the
+shares will occur on the sixth trading day following our request for Kodiak Capital to purchase the shares. The purchase price
+per share will be equal to 70% of the lowest closing bid price of the common stock for the five consecutive trading days immediately
+following our request for Kodiak Capital to purchase the shares (the Valuation Period ). There is no minimum amount
+that we may require Kodiak Capital to purchase at any one time. The Company may not require Kodiak Capital to purchase shares under
+the Purchase Agreement if such purchase would result in Kodiak Capital s beneficial ownership exceeding 9.99% of the outstanding
+common stock. Other than as set forth above, there are no trading volume requirements or restrictions under Purchase Agreement,
+and we will control the timing and amount of any sales of our common stock to Kodiak Capital under the Purchase Agreement.
+
+ 
+
+Conditions
+to Sales
+
+ 
+
+Under the Purchase
+Agreement, the following conditions must be satisfied in order for us to sell shares of our common stock to Kodiak Capital:
+
+ 
+
+ 
+ 
+ The registration statement of which this prospectus forms a part, and any amendment or supplement thereto, must be effective for the sale by Kodiak Capital of the shares to be purchased by it, and (i) neither we nor Kodiak Capital have received notice that the SEC has issued or intends to issue a stop order with respect to the registration statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the registration statement, either temporarily or permanently, or intends or has threatened to do so and (ii) there is no other suspension of the use or withdrawal of the effectiveness of the registration statement or this prospectus.
+
+ 
+
+ 
+ 
+ Our representations and warranties contained in the Purchase Agreement must be true and correct in all material respects (except for representations and warranties specifically made as of a particular date), except for any conditions that have temporarily caused any representations or warranties to be incorrect and which have been corrected with no continuing impairment to us or the Kodiak Capital.
+
+ 
+ 
+ 
+
+ 
+ 
+ We must have performed in all material respects all covenants, agreements and conditions required by the Purchase Agreement to be performed, satisfied or complied with by us.
+
+ 
+ 
+ 
+
+ 
+ 
+ No statute, rule, regulation, executive order, decree, ruling or injunction has been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the Purchase Agreement, and no proceeding has been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by the Purchase Agreement.
+
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ The trading of our common stock has not been suspended by the SEC, the principal trading market for our common stock or Financial Industry Regulatory Authority, Inc. and our common stock has been approved for listing or quotation on and has not been delisted from such principal market.
+
+ 
+ 
+ 
+
+ 
+ 
+ The number of shares of our common stock to be purchased by Kodiak Capital at a particular closing may not exceed the number of shares that, when aggregated with all other shares of common stock then beneficially owned by it, would result in Kodiak Capital owning more than 9.99% of all of our outstanding common stock.
+
+ 
+ 
+ 
+
+ 
+ 
+ We must have no knowledge of any event more likely than not to have the effect of causing the registration statement of which this prospectus forms a part to be suspended or otherwise ineffective.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Our Termination
+Rights
+
+ 
+
+We have the unconditional
+right, at any time, for any reason and without any payment or liability to us, to give notice to Kodiak Capital to terminate the
+Purchase Agreement.
+
+ 
+
+No Short-Selling
+by Kodiak Capital
+
+ 
+
+Kodiak Capital
+has agreed that neither it nor any of its affiliates shall engage in any direct or indirect short-selling of our common stock during
+any time prior to the termination of the Purchase Agreement.
+
+ 
+
+Effect of Performance
+of the Purchase Agreement on Our Stockholders
+
+ 
+
+All shares of
+common stock registered in this offering are expected to be freely tradable. The sale by Kodiak Capital of a significant amount
+of shares registered in this offering at any given time could cause the market price of our common stock to decline and to be highly
+volatile.
+
+ 
+
+It is anticipated
+that shares registered in this offering under issuable under the Purchase Agreement will be sold over a period commencing on the
+date that the registration statement including this prospectus becomes effective through the one-year anniversary thereafter. Kodiak
+Capital may ultimately purchase all, some or none of the shares of common stock not yet issued but registered in this offering.
+If we sell these shares to Kodiak Capital, Kodiak Capital may sell all, some or none of such shares. Therefore, sales to Kodiak
+Capital by us under the Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock.
+In addition, if we sell a substantial number of shares to Kodiak Capital under the Purchase Agreement, or if investors expect that
+we will do so, the actual sales of shares or the mere existence of our arrangement with Kodiak Capital may make it more difficult
+for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect
+such sales. However, we have the right to control the timing and amount of any sales of our shares to Kodiak Capital and the Purchase
+Agreement may be terminated by us at any time at our discretion without any cost to us.
+
+ 
+
+Pursuant to the
+terms of the Purchase Agreement, we have the right, but not the obligation, to direct Kodiak Capital to purchase up to $1,000,000
+of our common stock. Depending on the price per share at which we sell our common stock to Kodiak Capital, we may be authorized
+to issue and sell to Kodiak Capital under the Purchase Agreement more shares of our common stock than are offered under this prospectus.
+If we choose to do so, we must first register for resale under the Securities Act any such additional shares, which could cause
+additional substantial dilution to our stockholders. The number of shares ultimately offered for resale by Kodiak Capital under
+this prospectus is dependent upon the number of shares we direct Kodiak Capital to purchase under the Purchase Agreement.
+
+ 
+
+SELLING STOCKHOLDERS
+
+ 
+
+ 
+
+ 
+
+ 
+
+The following
+table sets forth the shares beneficially owned, as of May 16, 2016, by the selling stockholder prior to the offering contemplated
+by this prospectus, the number of shares the selling stockholder is offering by this prospectus and the number of shares it would
+own beneficially if all such offered shares are sold.
+
+ 
+
+Beneficial ownership
+is determined in accordance with rules of attribution as promulgated by the SEC. Under these rules, a person is deemed to be a
+beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting
+of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also
+deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days.
+Under SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed
+to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below,
+each person has sole voting and investment power.
+
+ 
+
+The percentages
+below are calculated based on 32,397,930 shares of our common stock issued and outstanding as of May 16, 2016. The selling stockholder
+does not hold any options, warrants or other securities exercisable for or convertible into shares of our common stock.
+
+ 
+
+ Selling stockholders
+ 
+ Shares Beneficially Owned Before this Offering (1)
+ 
+ 
+ Percentage of Outstanding Shares Beneficially Owned Before this Offering (1)
+ 
+ Shares to be Sold in this Offering (2)
+ 
+ Number Of Shares Beneficially Owned After this Offering
+ 
+ 
+ Percentage of Outstanding Shares Beneficially Owned After this Offering (3)
+ 
+
+ Kodiak Capital Group, LLC (4)
+ 
+ 
+ -
+ 
+ 
+ -
+ 
+ 1,000,000
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+
+ 
+ (1)
+ Based on 32,397,930 outstanding shares of our common stock as of May 16, 2016.
+
+ 
+ 
+ 
+
+ 
+ (2)
+ Because the actual date and price per share for the Company s put right under the Purchase Agreement is unknown, price and purchase price under the Purchase Agreement are unknown. Accordingly, the actual shares issuable pursuant the Purchase Agreement may be more or less than the amount of shares being registered herein.
+
+ 
+ 
+ 
+
+ 
+ (3)
+ Based on 34,397,930 outstanding shares should all shares registered hereunder be issued.
+
+ 
+ 
+ 
+
+ 
+ (4)
+ A Delaware limited liability company owned and controlled by Ryan C. Hodson. Kodiak Capital Group, LLC is not a broker-dealer or affiliate of a broker dealer. The address of this selling shareholder is 260 Newport Center Drive, Newport Beach, CA 92660.
+
+ 
+
+Except for the
+Purchase Agreement and other documents ancillary thereto, and the shares as described in this prospectus, there is no prior or
+existing material relationship between us or any of our directors, executive officers, or control persons and the selling stockholder.
+
+ 
+
+PLAN OF DISTRIBUTION
+
+ 
+
+Equity Purchase
+Agreement / Registration Rights Agreement
+
+ 
+
+On April 08, 2016,
+we entered into an Equity Purchase Agreement and a Registration Rights Agreement with Kodiak Capital Group, LLC in order to establish
+a possible source of funding for us.
+
+ 
+
+ 
+
+ 
+
+ 
+
+Under the Equity
+Purchase Agreement, Kodiak has agreed to provide us with up to $1,000,000 of funding during the period beginning on the effective
+date of this prospectus and ending on the one-year anniversary thereof. 2,000,000 shares of our common stock are being registered
+pursuant to this prospectus pursuant to a Put Notice(s) under the Purchase Agreement. During this period, we can deliver a put
+under the Equity Purchase Agreement by selling shares of our common stock to Kodiak and Kodiak will be obligated to purchase the
+shares. A put transaction must close before we can deliver another put notice to Kodiak.
+
+ 
+
+We may request
+a put by sending a put notice to Kodiak, stating the amount of the put. During the five trading days following a notice, we will
+calculate the amount of shares we will sell to Kodiak and the purchase price per share. The number of shares of Common Stock that
+Kodiak shall purchase pursuant to each put notice shall be determined by dividing the amount of the put by the purchase price.
+
+ 
+
+The purchase price
+per share of common stock will be set at eighty percent (70%) of the lowest closing bid price of our common stock during the pricing
+period, which is five consecutive days following a put notice.
+
+ 
+
+There is no minimum
+amount we can put to Kodiak at any one time. Upon effectiveness of the Registration Statement, the Company shall deliver instructions
+to its transfer agent to issue shares of Common Stock to Kodiak free of restrictive legends on or before each closing date.
+
+ 
+
+Pursuant to the
+Purchase Agreement, Kodiak and its affiliates shall not be issued shares of our common stock that would result in its beneficial
+ownership equaling more than 9.99% of our outstanding common stock.
+
+ 
+
+Kodiak will not
+engage in any short-sale (as defined in Rule 200 of Regulation SHO) of our common stock at any time during this Agreement.
+On April 08, 2016, we entered into a Registration Rights Agreement with Kodiak requiring, among other things, that we prepare and
+file with the SEC a Registration Statement on Form S-1 covering the shares issuable to Kodiak under the Equity Purchase Agreement.
+
+ 
+
+As per the Equity
+Purchase Agreement, none of Kodiak s obligations thereunder are transferrable and may not be assigned to a third party.
+
+ 
+
+Kodiak Capital
+is an underwriter within the meaning of the Securities Act of 1933, as amended (the Securities Act )
+in connection with the resale of our common stock under the Equity Purchase Agreement.
+
+ 
+
+Penny Stock
+Rules
+
+ 
+
+The SEC has also
+adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks as such term
+is defined by Rule 15g-9. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered
+on certain national securities exchanges or quoted on the Nasdaq system provided that current price and volume information with
+respect to transactions in such securities is provided by the exchange or system).
+
+ 
+
+The shares offered
+by this prospectus constitute penny stocks under the Exchange Act. The shares may remain penny stocks for the foreseeable future.
+The classification of our shares as penny stocks makes it more difficult for a broker-dealer to sell the stock into a secondary
+market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser
+for the purpose of selling his or her shares in FutureLand Corp will be subject to the penny stock rules.
+
+ 
+
+The penny stock
+rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized
+risk disclosure document approved by the SEC, which: (i) contains a description of the nature and level of risk in the market for
+penny stocks in both public offerings and secondary trading; (ii) contains a
+
+ 
+
+ 
+
+ 
+
+description of
+the broker s or dealer s duties to the customer and of the rights and remedies available to the customer with respect
+to a violation to such duties or other requirements of the Securities Act; (iii) contains a brief, clear, narrative description
+of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price;
+(iv) contains a toll-free telephone number for inquiries on disciplinary actions; (v) defines significant terms in the disclosure
+document or in the conduct of trading in penny stocks; and (vi) contains such other information and is in such form as the SEC
+shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in
+a penny stock, (i) bid and offer quotations for the penny stock; (ii) the compensation of the broker-dealer and its salesperson
+in the transaction; (iii) the number of shares to which such bid and ask prices apply, or other comparable information relating
+to the depth and liquidity of the market for such stock; and (iv) monthly account statements showing the market value of each penny
+stock held in the customer s account.
+
+ 
+
+In addition, the
+penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer
+must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s
+written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks,
+and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing
+the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders
+may have difficulty selling those securities.
+
+ 
+
+Regulation
+M
+
+ 
+
+During such time
+as we may be engaged in a distribution of any of the shares we are registering by this registration statement, we are required
+to comply with Regulation M of the Securities Exchange Act of 1934. In general, Regulation M precludes any selling security holder,
+any affiliated purchasers and any broker-dealer or other person who participates in a distribution from bidding for or purchasing,
+or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire
+distribution is complete. Regulation M defines a distribution as an offering of securities that is distinguished
+from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods.
+Regulation M also defines a distribution participant as an underwriter, prospective underwriter, broker, dealer,
+or other person who has agreed to participate or who is participating in a distribution.
+
+ 
+
+Regulation M prohibits,
+with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant
+has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases
+made in order to stabilize the price of a security in connection with a distribution of the security. We have informed the selling
+stockholder that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus,
+and we have also advised the selling stockholder of the requirements for delivery of this prospectus in connection with any sales
+of the common stock offered by this prospectus.
+
+ 
+
+ 
+
+DESCRIPTION OF
+CAPITAL STOCK
+
+ 
+
+Our authorized common stock consists
+of 1,000,000,000 shares, no par value per share, of which 990,000,000 is authorized common stock and 100,000,000 authorized preferred
+stock of which 32,397,930 shares of common were issued and outstanding and 3,000 shares of preferred series B were issued and outstanding
+as of December 31, 2015.
+
+ 
+
+Common Stock:
+
+ 
+
+General
+
+ 
+
+ 
+
+ 
+
+ 
+
+The following description of our
+common stock is intended as a summary only and is qualified in its entirety by reference to our amended and restated certificate
+of incorporation and bylaws, which are filed as exhibits to the registration statement of which this prospectus forms a part.
+
+ 
+
+Voting Rights
+
+ 
+
+Each share of common stock entitles
+the holder to one vote on all matters submitted to a vote of the stockholders. Except as otherwise required by Delaware law, the
+holders of our common stock possess all voting power. Pursuant to Delaware law, directors of the Company are elected at the annual
+meeting of the stockholders by a plurality of the votes cast at the election. According to our bylaws, in general, the affirmative
+vote of a majority of the shares represented at a meeting and entitled to vote on any matter, is to be the act of our stockholders.
+Our bylaws provide that a majority of the outstanding shares of the Company entitled to vote, represented in person or by proxy,
+constitutes a quorum at a meeting of our stockholders. Our bylaws also provide that any action which may be taken at any annual
+or special meeting of our stockholders may be taken without a meeting if a written memorandum, setting forth the action so taken,
+is signed by all of the holders of outstanding shares of our common stock.
+
+ 
+
+Dividend Rights
+
+The holders of our common stock are entitled to receive dividends as may be declared by our Board of Directors out of funds legally
+available for dividends. Our board of directors is not obligated to declare a dividend. Any future dividends will be subject to
+the discretion of our board of directors and will depend upon, among other things, future earnings, the operating and financial
+condition of our company, its capital requirements, general business conditions and other pertinent factors. We have not paid any
+dividends since our inception and we do not anticipate that dividends will be paid in the foreseeable future.
+
+ 
+
+Miscellaneous Rights and Provisions
+
+ 
+
+In the event of our liquidation,
+dissolution or winding up, each share of our common stock is entitled to share ratably in any assets available for distribution
+to holders of our common stock after satisfaction of all liabilities, subject to rights, if any, of the holders of any of our other
+securities.
+
+ 
+
+Our common stock is not convertible
+or redeemable and has no preemptive, subscription or conversion rights. There are no conversions, redemption, sinking fund or similar
+provisions regarding our common stock.
+
+ 
+
+Our common stock, after the fixed
+consideration thereof has been paid or performed, are not subject to assessment, and the holders of our common stock are not individually
+liable for the debts and liabilities of our company.
+
+ 
+
+Our bylaws provide that our Directors
+may amend our bylaws by a majority vote of Directors or a majority vote of our shareholders.
+
+ 
+
+Preferred Stock
+
+ 
+
+The Company
+has two classes of preferred stock authorized. As of the date of this prospectus, Preferred stock, No par value; 100,000,000 shares
+authorized; Series A convertible preferred Stock, no par value; 200,000 shares authorized, no shares issued and outstanding at
+December 31, 2015. Series B convertible preferred Stock, no par value; 20,000 shares authorized, 3,000 shares issued and outstanding
+at December 31, 2015. Each Series B Convertible Preferred Stock is entitled to vote, on a one for one million basis, with
+the holders of our common stock on all corporate matter on which common shareholders are entitled to vote and each share is convertible
+into one share of our common stock.
+
+ 
+
+ 
+
+ 
+
+ 
+
+DISCLOSURE OF
+COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES
+
+ 
+
+Certain provisions
+of Colorado Law, allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of
+defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person
+acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation. Neither
+our Certificate of Formation nor or Bylaws provide specifically for indemnification of officers or directors, and as such we may
+only provide such indemnification as is provided for in Colorado Law. Insofar as indemnification for liabilities arising
+under the Securities Act of 1933 may be permitted to our director, officer and controlling persons, we have been advised that in
+the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities
+Act of 1933 and is, therefore, unenforceable.
+
+ 
+
+LEGAL MATTERS
+
+ 
+
+The validity of the
+shares of our common stock offered hereby will be passed upon by the law firm of Securus Law Firm, Tampa, Florida.
+
+ 
+
+EXPERTS
+
+ 
+
+The audited financial
+statements for the years ended December 31, 2015 included in this Prospectus and the Registration Statement have been audited by
+Turner, Stone & Company, an independent registered public accounting firm, to the extent and for the periods set forth in their
+report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the
+authority of said firm as experts in auditing and accounting.
+
+ 
+
+The legality of
+the shares offered under this registration statement is being passed upon by Securus Law Firm, Tampa, Florida.
+
+ 
+
+WHERE YOU CAN
+FIND MORE INFORMATION
+
+ 
+
+We have filed
+with the Securities and Exchange Commission, Washington, D.C. 20549, under the Securities Act of 1933, a registration statement
+on Form S-1 relating to the shares offered hereby. This prospectus does not contain all of the information set forth in the registration
+statement and the exhibits and schedules thereto. For further information with respect to our company and the shares offered by
+this prospectus, you should refer to the registration statement, including the exhibits and schedules thereto. You may inspect
+a copy of the registration statement without charge at the Public Reference Section of the Securities and Exchange Commission at
+Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference
+Room by calling the Securities and Exchange Commission. The Securities and Exchange Commission also maintains an Internet site
+that contains reports, proxy and information statements and other information regarding registrants that file electronically with
+the Securities and Exchange Commission. The Securities and Exchange Commission s World Wide Web address is http://www.sec.gov.
+
+ 
+
+Statements contained
+in this prospectus as to the contents of any contract or other document that we have filed as an exhibit to the registration statement
+are qualified in their entirety by reference to the exhibits for a complete statement of their terms and conditions.
+
+ 
+
+The representations,
+warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus
+is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating
+risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover,
+such representations, warranties or covenants were made as of an earlier date. Accordingly, such representations, warranties and
+covenants should not be relied on as accurately representing the current state of our affairs.
+
+ 
+
+ 
+
+ 
+
+ 
+
+We file periodic
+reports, proxy statements and other information with the Securities and Exchange Commission in accordance with requirements of
+the Exchange Act. These periodic reports, proxy statements and other information are available for inspection and copying at the
+regional offices, public reference facilities and Internet site of the Securities and Exchange Commission referred to above. We
+make available through our website, free of charge, copies of these reports as soon as reasonably practicable after we electronically
+file or furnish them to the Securities and Exchange Commission. Our website is located at http://www.indoorharvest.com. You can
+also request copies of such documents, free of charge, by contacting the company at 10901 Roosevelt Blvd, Suite 1000c, Saint Petersburg,
+FL 33716, Attention: Cameron Cox.
+
+ 
+
+Information contained
+on our website is not a prospectus and does not constitute a part of this prospectus.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+FUTURELAND, CORP. AND SUBSIDIARIES
+
+(FORMERLY AEGEA, INC.)
+
+INDEX TO CONSOLIDATED
+FINANCIAL STATEMENTS
+
+December 31, 2015
+
+ 
+
+ 
+
+CONTENTS
+
+ Report of Independent Registered Public Accounting Firm
+ F-2
+
+ 
+ 
+
+ Consolidated Financial Statements:
+ 
+
+ 
+
+ 
+ 
+
+ Consolidated Balance Sheets - As of December 31, 2015 and 2014
+ F-3
+
+ 
+ 
+
+ Consolidated Statements of Operations -
+ 
+
+ For the Years Ended December 31, 2015 and 2014
+ F-4
+
+ 
+ 
+
+ Consolidated Statements of Changes in Stockholders' Deficit -
+ 
+
+ For the Years Ended December 31, 2015 and 2014
+ F-5
+
+ 
+ 
+
+ Consolidated Statements of Cash Flows 
+ 
+
+ For the Years Ended December 31, 2015 and 2014
+ F-6
+
+ 
+ 
+
+ Notes to Consolidated Financial Statements
+ F-7 to F-16
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+F-1
+
+ 
+
+ 
+
+ 
+
+ 
+
+Report of Independent Registered
+Public Accounting Firm
+
+ 
+
+Report of Independent
+Registered Public Accounting Firm
+
+The Board of Directors and Stockholders
+
+FutureLand, Corp. and subsidiaries
+
+Saint Petersburg, Florida
+
+We have audited the accompanying consolidated
+balance sheet of FutureLand, Corp. and subsidiaries (the Company ), as of December 31, 2015 and the related consolidated
+statements of operations, stockholders equity (deficit), and cash flows for the year then ended. These consolidated financial
+statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these consolidated
+financial statements based on our audit.
+
+We conducted our audit in accordance with
+the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
+the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
+is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
+consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
+circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over
+financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
+the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles
+used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe
+that our audit provides a reasonable basis for our opinion.
+
+In our opinion, the consolidated financial
+statements referred to above present fairly, in all material respects, the financial position of FutureLand, Corp. and its subsidiaries
+as of December 31, 2015 and the results of their operations and cash flows for the year then ended, in conformity with accounting
+principles generally accepted in the United States of America.
+
+The accompanying financial statements
+have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
+the Company requires a substantial amount of additional financing to further implement its business plan and continue operations,
+which raises substantial doubt about its ability to continue as a going concern. Management s plans in regard to these matters
+are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this
+uncertainty.
+
+/s/ Turner, Stone & Company, L.L.P.
+
+Certified Public Accountants
+
+Dallas, Colorado
+
+April 14, 2016
+
+ 
+
+F-2
+
+ 
+
+ 
+ 
+
+ (FORMERLY AEGEA, INC.)
+ 
+
+ Consolidated Balance Sheets
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ December 31,
+ 
+
+ 
+ 
+ 2015
+ 
+ 
+ 2014
+ 
+
+ Assets
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Current Assets:
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash
+ 
+ $
+ (92)
+ 
+ 
+ $
+ 0
+ 
+
+ Vacant land deposit
+ 
+ 
+ 4,000
+ 
+ 
+ 
+ 0
+ 
+
+ Total Current Assets
+ 
+ 
+ 3,908
+ 
+ 
+ 
+ 0
+ 
+
+ 
+ 
+
+ 
+
+ Other Assets
+
+ Land
+
+ 
+ 
+ 60,251
+ 
+ 
+ 
+ 0 
+ 
+
+ Construction in Progress
+ 
+ 
+ 4,543
+ 
+ 
+ 
+ 0 
+ 
+
+ Provisional Goodwill
+ 
+ 
+ 3,801,036
+ 
+ 
+ 
+ 0 
+ 
+
+ Related Party Receivable
+ 
+ 
+ 3,450,000
+ 
+ 
+ 
+ 0 
+ 
+
+ Total Assets
+ 
+ $
+ 7,319,738
+ 
+ 
+ $
+ 0
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Liabilities and Stockholders' Equity (Deficit)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Current Liabilities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Accounts payable
+ 
+ $
+ 42,338
+ 
+ 
+ $
+ 86,633
+ 
+
+ Accrued expenses
+ 
+ 
+ 94,435
+ 
+ 
+ 
+ 27,829
+ 
+
+ Short-term loans - related parties
+ 
+ 
+ 113,636
+ 
+ 
+ 
+ 76,807
+ 
+
+ Convertible debenture payable, net of premium and discount
+ 
+ 
+ 72,750
+ 
+ 
+ 
+ 191,273
+ 
+
+ Accrued interest
+ 
+ 
+ 0
+ 
+ 
+ 
+ 27,454
+ 
+
+ Line of credit - related party
+ 
+ 
+ 0
+ 
+ 
+ 
+ 250,000
+ 
+
+ Accrued interest - related party
+ 
+ 
+ 0
+ 
+ 
+ 
+ 126,852
+ 
+
+ Derivative liability
+ 
+ 
+ 0
+ 
+ 
+ 
+ 10,912
+ 
+
+ Total Liabilities
+ 
+ 
+ 323,636
+ 
+ 
+ 
+ 797,219
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Stockholders' Equity (Deficit):
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Preferred stock, No par value; 100,000,000 shares authorized;
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ Series A convertible preferred Stock,
+ no par value; 200,000 designated
+
+ No shares issued & outstanding at
+ December 31, 2015 and 2014, respectively
+
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+
+ 
+ Series B convertible preferred Stock,
+ No par value; 20,000 designated
+
+ 3,000 shares issued &outstanding
+ at December 31, 2015 and 2014, respectively
+
+ 
+ 
+ 6,450
+ 
+ 
+ 
+ 2,150
+ 
+
+ 
+ Common stock, no par value; 1,000,000,000
+ shares authorized,
+
+ 32,397,930 and 298,812 shares issued
+ and outstanding as of
+
+ December 31, 2015 and 2014, respectively
+
+ 
+ 
+ 1,019,597
+ 
+ 
+ 
+ 1,012,846
+ 
+
+ Additional paid-in capital
+ 
+ 
+ 9,727,395
+ 
+ 
+ 
+ 764,934
+ 
+
+ Accumulated deficit
+ 
+ 
+ (3,666,864
+ )
+ 
+ 
+ (2,577,149
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Total Stockholders' Equity (Deficit)
+ 
+ 
+ 7,086,578
+ 
+ 
+ 
+ (797,219
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Total Liabilities and Stockholders' Equity (Deficit)
+ 
+ $
+ 7,319,738
+ 
+ 
+ $
+ 0
+ 
+
+ 
+ 
+
+ See accompanying notes to consolidated
+ financial statements.
+
+ 
+
+ 
+
+F-3
+
+ 
+
+ 
+ 
+
+ (FORMERLY AEGEA, INC.)
+ 
+
+ Consolidated Statements of Operations
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ For the Year Ended
+
+ December 31,
+
+ 
+
+ 
+ 
+ 2015
+ 
+ 
+ 2014
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Revenue
+ 
+ $
+ -
+ 
+ 
+ $
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Operating Expenses:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ General and administrative
+ 
+ 
+ 41,058
+ 
+ 
+ 
+ 69,895
+ 
+
+ Salaries and Benefits
+ 
+ 
+ 944,720
+ 
+ 
+ 
+ 
+ 
+
+ Professional fees
+ 
+ 
+ 96,474
+ 
+ 
+ 
+ 329,222
+ 
+
+ Research and development expenses
+ 
+ 
+ 0
+ 
+ 
+ 
+ 42,113
+ 
+
+ Total Operating Expenses
+ 
+ 
+ 1,082,252
+ 
+ 
+ 
+ 441,230
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Loss from Operations
+ 
+ 
+ (1,082,252
+ )
+ 
+ 
+ (441,230
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Other Income (Expenses):
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Gains on settlement of liabilities
+ 
+ 
+ 0
+ 
+ 
+ 
+ 7,913
+ 
+
+ Interest expense
+ 
+ 
+ (6,534
+ )
+ 
+ 
+ (135,158
+ )
+
+ Change in fair value of derivative liability
+ 
+ 
+ 0
+ 
+ 
+ 
+ 5,082
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Total Other Expenses
+ 
+ 
+ (6,534
+ )
+ 
+ 
+ (122,163
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net Loss
+ 
+ $
+ (1,088,786
+ )
+ 
+ $
+ (563,393
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net Loss Per Common Share:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Basic
+ 
+ $
+ (0
+ )
+ 
+ $
+ (1.89
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Weighted Average Number of Common Shares Outstanding:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Basic
+ 
+ 
+ 19,395,997
+ 
+ 
+ 
+ 298,032
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ See accompanying notes to consolidated financial statements.
+ 
+
+F-4
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+
+ (FORMERLY AEGEA, INC.)
+ 
+ 
+
+ Consolidated Statements of Cash Flows
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ For the Year ended
+
+ December 31,
+
+ ________
+ 
+
+ 
+ 
+ 2015
+ 
+ 
+ 2014
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash Flows from Operating Activities:
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net loss
+ 
+ $
+ (1,084,790
+ )
+ 
+ $
+ (563,393
+ )
+
+ Adjustments to reconcile net loss to net cash used in operating activities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Common stock issued for services
+ 
+ 
+ 810,500
+ 
+ 
+ 
+ 100,940
+ 
+
+ Contributed rent and services
+ 
+ 
+ -
+ 
+ 
+ 
+ 141,506
+ 
+
+ Amortization of discount and premium related to convertible debt
+ 
+ 
+ 27,308
+ 
+ 
+ 
+ 66,472
+ 
+
+ Change in fair value of derivative
+ 
+ 
+ -
+ 
+ 
+ 
+ (5,082)
+ 
+
+ Security-Retainer Deposit
+ 
+ 
+ (4000)
+ 
+ 
+ 
+ -
+ 
+
+ Shares issued for accrued interest
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+
+ Gain on debt conversion
+ 
+ 
+ -
+ 
+ 
+ 
+ (52)
+ 
+
+ Changes in operating assets and liabilities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Accounts payable
+ 
+ 
+ 42,337
+ 
+ 
+ 
+ (36,901)
+ 
+
+ Accrued expenses
+ 
+ 
+ 87,900
+ 
+ 
+ 
+ 541
+ 
+
+ Accrued interest - debenture payable
+ 
+ 
+ 6,534
+ 
+ 
+ 
+ 23,685
+ 
+
+ Accrued interest - related party
+ 
+ 
+ -
+ 
+ 
+ 
+ 45,001
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net Cash Used in Operating Activities
+ 
+ 
+ (114,211)
+ 
+ 
+ 
+ (227,283
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash Flows from Investing Activities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Acquisition of cash in recapitalization
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+
+ Payment for vacant land deposit
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+
+ Refund of vacant land deposit `
+ 
+ 
+ -
+ 
+ 
+ 
+ 250,000
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net Cash Provided by (Used in) Investing Activities
+ 
+ 
+ -
+ 
+ 
+ 
+ 250,000
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash Flows from Financing Activities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Proceed from convertible debentures
+ 
+ 
+ 140,000
+ 
+ 
+ 
+ 52,000
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Proceed from short-term loans - related party
+ 
+ 
+ 51,619
+ 
+ 
+ 
+ 162,915
+ 
+
+ Repayment of short-term loans 
+ 
+ 
+ (37,500)
+ 
+ 
+ 
+ (246,108)
+ 
+
+ Repayment of short-term loans - related party
+ 
+ 
+ (40,000)
+ 
+ 
+ 
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net Cash (Used in) Provided by Financing Activities
+ 
+ 
+ 114,119
+ 
+ 
+ 
+ (31,193)
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net (Decrease) Increase in Cash
+ 
+ 
+ (92
+ )
+ 
+ 
+ (8,476
+ ) 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash, beginning of year
+ 
+ 
+ 0
+ 
+ 
+ 
+ 8,476
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash, end of year
+ 
+ $
+ (92)
+ 
+ 
+ $
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash Paid for:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Interest
+ 
+ $
+ -
+ 
+ 
+ $
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+ 
+ $
+ -
+ 
+ 
+ $
+ -
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Non-cash Investing and Financing Activities:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Common stock issued for convertible debt
+ 
+ $
+ 16,000
+ 
+ 
+ $
+ 17,400
+ 
+
+ Put premium reclassified to additional paid-in capital
+ 
+ $
+ -
+ 
+ 
+ $
+ 17,452
+ 
+
+ Increase in debt discount and derivative liability
+ 
+ $
+ -
+ 
+ 
+ $
+ 15,453
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ See accompanying notes to consolidated financial statements.
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+F-5
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+FUTURELAND, CORP. AND SUBSIDIARIES
+
+(FORMERLY AEGEA, INC.)
+
+NOTES TO CONSOLIDATED FINANCIAL
+STATEMENTS
+
+DECEMBER 31, 2015 AND 2014
+
+ 
+
+ 
+
+NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION,
+RECAPITALIZATION AND GOING CONCERN
+
+ 
+
+FutureLand, CORP. (formerly known
+as AEGEA, Inc.) ("we", "us", the "Company") was incorporated in Colorado on November 29, 2007 under
+the name Forever Valuable Collectibles, Inc. We changed our name effective July 1, 2014 in connection with our July 22, 2014 acquisition
+of AEGEA, LLC which is in the planning stages of developing an international community and mega-resort destination in the heart
+of South Florida called AEGEA. Prior to the acquisition of AEGEA, LLC, we were been engaged in the business of buying and reselling
+commemorative professional and college sports memorabilia.
+
+ 
+
+On March
+10, 2015, an Exchange Agreement was entered (the "Agreement"), by and among certain shareholders and debt holders of
+the Company, representing the majority of the outstanding shares of the Company ("the AEGA Holders"), and FutureWorld,
+Corp. (hereafter referred to as "FWDG"), a Delaware Corporation which is the owner of the wholly owned subsidiary, FutureLand
+Properties, LLC, (hereafter referred to as "FLP"), a Colorado Limited Liability Corporation. Additionally, on June 1,
+2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated March 10, 2015, FWDG sold all rights,
+title and ownership of FLP to the Company, including all member units, assets, intellectual property, contracts, leases, and real
+property which includes 200 acres in La Vita, Colorado,
+
+ 
+
+ In
+connection with the Exchange Agreement, we issued an aggregate of 27,845,280 shares of our common stock to FWDG and or its assignee.
+FWDG and the AEGA Holders entered into the purchase and exchange agreement where the AEGA Holders agreed to deliver to FutureWorld
+their shareholdings in the Company in exchange for certain actions, including AEGEA Holders resignation as directors and officers
+of the Company and the simultaneous appointment of two directors as designated by FLP. In return for the AEGEA Holders shares of
+the Company, in combination with certain debt forgiveness totaling $100,000 by the AEGEA Holders, the AEGA Holders shall receive,
+an amount of shares to be equal to 4.9% (27,845,280} of the outstanding shares of the Company calculated after the reverse stock
+split which became effective on May 1, 2015. Such shares as held by the AEGA Holders which are surrendered in return for the new
+exchange shares to be issued, shall be cancelled in such exchange and returned to treasury. Such exchange shares when issued shall
+contain certain anti-dilutive rights whereby the AEGEA Holders shall receive additional shares for a period of one year from the
+date of issuance in order to retain 4.9% of the outstanding shares of the Company, issuable within ten days of the end of each
+fiscal quarter following such initial issuance. Pursuant to the Agreement, all assets of the Company, including all intellectual
+property, contractual rights, business plans, architectural works, property rights, and other valuable matters, shall be sold to
+the AEGA Holders, into a new private entity formed at their direction, control and benefit, in settlement for another $100,000
+in debt due to AEGEA Holders by the Company and certain liabilities will be assumed by the new private entity. This transaction
+is expected to be accounted for as a reverse recapitalization of FLP with the business of FLP being the continuing business since
+the member of FLP will have voting and management control of the combined entity.
+
+In May 2015,
+we changed our name to FutureLand, Corp. and effected a 1 for 400 reverse stock split of our common stock. All share and per share
+data in this annual report have been retroactively restated to reflect the reverse stock split.
+
+ 
+
+F-6
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+The transaction has been accounted for using the acquisition
+method of accounting which requires that, among other things, assets acquired and liabilities assumed be recorded at their fair
+market values as of the acquisition date. The Company has not finalized the determination of the fair values of the liabilities
+assumed and assets acquired and therefore the provisional amounts set forth are subject to adjustment when valuations are completed.
+Under GAAP, companies have up to one year following an acquisition to finalize acquisition accounting.
+
+ 
+
+The following details the preliminary fair value of the
+provisional goodwill transferred to effect the acquisition;
+
+ 
+
+AEGEA Entertainment stock issuance
+
+per merger agreement 1,470,000 shares of common @ $3 per share $4,410,000
+
+ 
+
+AEGEA Shareholders stock cancellation
+
+per merger agreement -202,988 (cancellation of shares per agreement) ($608,964) 
+
+ 
+
+Fair value of the provisional goodwill transferred $3,801,036 
+
+ 
+
+In accordance with ASC Topic 805, Business Combination,
+the application of purchase accounting requires that the total purchase price be allocated to the fair value of identifiable assets
+acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding the fair values recorded
+as goodwill. Goodwill represents the future economic benefit arising from other assets acquired that could not be individually
+identified and separately recognized. The allocation process requires, among other things, an analysis of acquired fixed completed
+the determination of the fair value of assets acquired and liabilities assumed, accordingly; management has not made adjustments
+to the provisional fair values for the assets acquired and liabilities assumed. In addition, the Company has not made a determination
+as to the deductibility of all or a portion of goodwill for tax purposes.
+
+ 
+
+Description of Business
+
+ 
+
+FutureLand Properties LLC. was originally formed
+as a wholly-owned subsidiary of FutureWorld Corp. On October 6, 2014 FutureWorld entered into a Contribution Agreement with FutureLand,
+a wholly-owned subsidiary of the Company. In accordance with this agreement, FutureLand, in return for contribution of intellectual
+property, cash, and web development services by the Company, has exchanged 40,000,000 shares of its common stock representing 100%
+of the shares outstanding. On March, 10th, FutureLand Properties LLC did a merger agreement with Aegea Inc. (FutureLand Corp),
+ensuing FutureLand Properties LLC to become Aegea Inc. (FutureLand Corp) wholly owned subsidiary. The agreement resulted in the
+FutureLand Properties LLC s shareholders (FutureWorld Corp) to be issued 27,845,280 shares of Aegea Inc. (FutureLand Corp).
+This will result in FutureLand Corp s shares being held for investment on FutureWorld s balance sheet.
+
+ 
+
+FutureLand Corp. operates its presented business
+through its subsidiary, FutureLand Properties, is an agricultural land lease company catering to the industrial hemp, legal medical
+marijuana and recreational cannabis market. Future Land was started to capitalize upon the distinct separation of the cultivation
+grows from the dispensaries, specifically with respect to Colorado. In the State of Colorado, which has become the quintessential
+poster-child for what the industry may look like for the rest of America, at least temporarily, as other states determine what
+exact direction they will choose to go, there are residency laws that must be adhered to. For instance, in order to get a license
+to grow or profit from cannabis in Colorado you must be a 2-year resident. The laws are very specific; anyone who is not a 2-year
+resident cannot profit from the sale of the cannabis flower or infused products.
+
+F-7
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Because of this mandate, Future Land Corp must be
+a land owner and leaser in order to effectively participate in the cannabis
+
+ 
+
+grow industry, which we believe is essential in order
+to gain a competitive advantage. We also must own the
+
+structures on the land to control the lease and our
+future position in the industry.
+
+ 
+
+The business model is simple; offer growers the opportunity
+to grow. We have the land and then we find a growers requiring assist in funding and obtaining their license and grow facility.
+Next, we arrange for additional operational items needed, including but not limited to, complete build-outs provided from our associated
+company, HempTech Corp, in order to capture additional revenue. 
+
+ 
+
+EXCHANGE AGREEMENT AND SALE OF AEGEA ASSETS
+
+ 
+
+As discussed above, on March 10,
+2015, an Exchange Agreement was entered, by and among certain shareholders and debt holders of the Company, representing the majority
+of the outstanding shares of the Company ("the AEGA Holders"), and FWDG and its wholly-owned subsidiary, FLP. Additionally,
+on June 1, 2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated March 10, 2015, FWDG sold
+all rights, title and ownership of FLP to the Company, including all member units, assets, intellectual property, contracts, leases,
+and real property which includes 200 acres in La Vita, Colorado.
+
+ 
+
+Our current asset will comprise of
+240 acres of prime property in southern Colorado and two signed lease agreements for grow facilities on its land. Our business
+plan is to continue attracting legal license holders to lease land and grow facilities on our 240 acres. We have other developmental
+land use plans for other projects being pursued as well.
+
+ 
+
+On, October 30, 2014, FLP closed
+on 239.96 Acres in La Vita, Colorado in Huerfano County for $60,000. FLP entered into a lease agreement contract with a lease
+with Colorado Flower Company, LTD on Dec 1, 2014 allotting 37 acres for their grow facilities. FLP was formed as a Colorado
+State company on October 6, 2014 by FutureWorld Corp.
+
+ 
+
+Prior to FLP being formed, the State
+of Colorado amended their laws allowing cannabis grow facilities to be separated from cannabis dispensaries effectively opening
+up an entirely new business opportunity that FLP entered into at that time. At such time, FLP pursued the business plan to secure
+a cannabis or hemp grower to execute their business plan of leasing the land, the structures, the technologies and provide maintenance
+contracts associated with the grow. Integral to its strategy is to provide the financing for the entire grow operation so as to
+establish a position by which to harness a competitive advantage in striking the right kind of lease in conjunction with Colorado
+State laws that would allow FLP to make above average returns. On Jan 20, 2015 FLP entered a contract with GPS, La Vita,
+Inc. allotting 5 acres for their immediate grow facilities. All of these contracts, and land ownings are currently in FLP.
+
+ 
+
+Principles of Consolidation
+
+The accompanying consolidated financial
+statements include the accounts of the Company and its wholly-owned inactive subsidiaries, Florida Heartland EB-5 Regional Center
+LLC and Aegea, LLC. All inter-company balances and transactions have been eliminated in consolidation.
+
+F-8
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Going Concern
+
+ 
+
+As reflected in the accompanying consolidated
+financial statements, the Company had a net loss of $1,088,786 and net cash used in operations of $114,211, for the year ended
+December 31, 2015 and a working capital deficit and accumulated deficit of $3,666,864, at December 31, 2015 and has no revenues.
+These matters raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to
+continue as a going concern is dependent on the Company's ability to further implement its business plan, raise additional capital,
+and generate revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company
+is unable to continue as a going concern.
+
+ 
+
+Management s plans with regard to
+these matters encompass the following actions: 1) obtain funding from new and potentially current investors to alleviate the Company s
+working deficiency, and 2) implement a plan to generate sales. The Company s continued existence is dependent upon its ability
+to translate its user base into sales. However, the outcome of management s plans cannot be ascertained with any degree of
+certainty. The accompanying financial statements do not include any adjustments that might result should the Company be unable
+to continue as a going concern.
+
+ 
+
+NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+
+ 
+
+Cash and Cash Equivalents
+
+ 
+
+Cash and cash equivalents include
+highly liquid investments with maturities of three months or less at the time of purchase.
+
+ 
+
+Use of Estimates
+
+ 
+
+The preparation of consolidated financial
+statements in conformity with accounting principles generally accepted in the United States of America requires management to make
+estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
+at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most
+significant assumptions and estimates relate to the valuation of equity issued for services, valuation of equity associated with
+convertible debt, the valuation of derivative liabilities, and the valuation of deferred tax assets. Actual results could differ
+from these estimates.
+
+ 
+
+Fair Value Measurements and Fair Value
+of Financial Instruments
+
+ 
+
+The Company adopted ASC Topic 820, Fair
+Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes
+a fair value hierarchy to classify the inputs used in measuring fair value as follows:
+
+ 
+
+Level 1: Inputs are unadjusted quoted prices
+in active markets for identical assets or liabilities available at the measurement date.
+
+ 
+
+F-9
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Level 2: Inputs are unadjusted quoted prices
+for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets
+that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable
+market data.
+
+ 
+
+Level 3: Inputs are unobservable inputs
+which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset
+or liability based on the best available information.
+
+ 
+
+The estimated fair value of certain financial
+instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because
+of the short-term nature of these instruments.
+
+ 
+
+Stock-based Compensation
+
+ 
+
+ASC 718, "Compensation-Stock Compensation"
+requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments
+over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period).
+We measure the cost of employee services received in exchange for an award based on the grant-date fair value of the award.
+
+ 
+
+We account for non-employee share-based
+awards based upon ASC 505-50, "Equity-Based Payments to Non-Employees." ASC 505-50 requires the costs of goods and services
+received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the
+fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the
+measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete.
+Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple
+reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate
+portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that
+the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance
+is complete.
+
+ 
+
+NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+
+Derivative Liability
+
+ 
+
+We evaluate convertible instruments, options,
+warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to
+be separately accounted for under ASC Topic 815, "Derivatives and Hedging." The result of this accounting
+treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. 
+In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations
+as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value
+at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified
+as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the
+instrument on the reclassification date.
+
+ 
+
+Income Taxes
+
+ 
+
+The Company has adopted FASB ASC 740-10,
+Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.
+Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis
+of assets and liabilities that
+
+F-10
+
+ 
+
+ 
+
+ 
+
+ 
+
+will result in taxable or deductible amounts
+in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable
+income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
+
+ 
+
+ Net Loss per Common Share
+
+ 
+
+The Company computes net earnings (loss)
+per share in accordance with ASC 260-10, "Earnings per Share." ASC 260-10 requires presentation of both basic and diluted
+earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net income (loss) available
+to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect
+to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares
+if their effect is anti-dilutive. At December 31, 2015 and 2014, we excluded 1,000 shares of Series B Preferred Stock convertible
+into 1,000 shares of common stock and 18,955 and 2,995, respectively, shares of the Company's common stock were reserved for issuance
+upon conversion of convertible notes as their effect was anti-dilutive.
+
+ 
+
+As of April 14, 2016, the Company has common
+shares reserved for issuance upon conversion of convertible notes.
+
+ 
+
+Research and Development
+
+ 
+
+In accordance with ASC 730-10, expenditures
+for research and development are expensed when incurred and are included in operating expenses. The Company recognized research
+and development costs of $42,113 and $118,664 for the years ended December 31, 2015 and 2014, respectively, relating to contract
+services performed for architectural and creative design.
+
+ 
+
+Recent Accounting Pronouncements
+
+ 
+
+ASU 2014-10, "Development Stage Entities
+(Topic 915): Elimination of Certain Financial Reporting Requirements". ASU 2014-10 eliminates the distinction of a development
+stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements
+of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting
+periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted.
+The Company evaluated and adopted ASU 2014-10 during the year ended December 31, 2015.
+
+ 
+
+In August 2014, the FASB issued ASU No.
+2014-15, "Presentation of Financial Statements Going Concern." The provisions of ASU No. 2014-15 require management
+to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently
+in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an
+evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's
+plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans,
+(5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment
+for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in
+this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
+The Company is currently assessing the impact of this ASU on the Company's consolidated financial statements.
+
+ 
+
+Other accounting standards which were not
+effective until after December 31, 2015 are not expected to have a material impact on the Company's consolidated financial position
+or results of operations.
+
+F-11
+
+ 
+
+ 
+
+ 
+
+NOTE 3: CONCENTRATIONS
+
+ 
+
+Concentrations of Credit Risk
+
+ 
+
+The Company maintains accounts with financial
+institutions. All cash in checking accounts is non-interest bearing and is fully insured by the Federal Deposit Insurance Corporation
+(FDIC). At times, cash balances in money market accounts may exceed the maximum coverage provided by the FDIC on insured depositor
+accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions.
+There were no cash deposits in excess of FDIC insurance at December 31, 2015.
+
+ 
+
+NOTE 4: VACANT LAND DEPOSIT
+
+ 
+
+N/A
+
+ 
+
+NOTE 5: SHORT-TERM LOAN RELATED
+PARTIES
+
+ 
+
+None
+
+ 
+
+NOTE 6: CONVERTIBLE DEBENTURES AND NOTES
+
+ 
+
+At December 31, 2015 and 2014, the Company
+had convertible debt consisting of the following:
+
+ 
+
+ 
+ 
+ 
+ December 31,
+
+ 2015
+
+ 
+ 
+ 
+ December 31,
+
+ 2014
+
+ 
+
+ Convertible debt
+ 
+ $
+ 155,000
+ 
+ 
+ $
+ 168,000
+ 
+
+ Plus: put premium
+ 
+ 
+ 5,000
+ 
+ 
+ 
+ 3,000
+ 
+
+ Less: debt discount
+ 
+ 
+ (87,250
+ )
+ 
+ 
+ (35,294
+ )
+
+ Convertible debt, net
+ 
+ $
+ 72,750
+ 
+ 
+ $
+ 105,706
+ 
+
+ 
+
+Convertible debt principal payments of $12,500 were in default
+on maturity date as of December 31, 2015 as of the issuance date of these consolidated financial statements.
+
+ 
+
+NOTE 6: CONVERTIBLE DEBENTURES AND NOTES (continued)
+
+ 
+
+On October 05, 2015, the Company issued
+a debenture for $55,000 for a cash advances during October 2015.
+
+The debenture accrues interest at 10% per
+annum and will convert into the company s common stock at 45% of the
+
+lowest closing bid price 20 days before
+the conversion date. The Holder is restricted from any conversions that
+
+would result in the Holder owning over
+9.9% of the outstanding common shares of the Company after the conversion.
+
+ 
+
+On November 25, 2015, the Company issued a debenture for $100,000
+for a cash advances during November 2015.
+
+The debenture accrues interest at 10% per annum and will convert
+into the company s common stock at 45% of the
+
+lowest closing bid price 20 days before the conversion date.
+The Holder is restricted from any conversions that
+
+would result in the Holder owning over 9.9% of the outstanding
+common shares of the Company after the conversion.
+
+F-12
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+On January 04, 2016, the Company issued a debenture for $30,000
+for a cash advances during January 2016.
+
+The debenture accrues interest at 10% per annum and will convert
+into the company s common stock at 50% of the
+
+lowest closing bid price 20 days before the conversion date.
+The Holder is restricted from any conversions that
+
+would result in the Holder owning over 9.9% of the outstanding
+common shares of the Company after the conversion.
+
+ 
+
+On January 07, 2016, the Company registered 6,000,000 shares
+of common stock under form S8 with SEC for employee and consultant compensation.
+
+ 
+
+On January 28, 2016, the Company issued a debenture for $93,750
+for a cash advances during January 2016.
+
+The debenture accrues interest at 10% per annum and will convert
+into the company s common stock at 50% of the
+
+lowest closing bid price 20 days before the conversion date.
+The Holder is restricted from any conversions that
+
+would result in the Holder owning over 9.9% of the outstanding
+common shares of the Company after the conversion.
+
+ 
+
+On February 16, 2016, the Company issued a debenture for $80,000
+for a cash advances during February 2016.
+
+The debenture accrues interest at 8% per annum and will convert
+into the company s common stock at 50% of the
+
+lowest closing bid price 20 days before the conversion date.
+The Holder is restricted from any conversions that
+
+would result in the Holder owning over 9.9% of the outstanding
+common shares of the Company after the conversion.
+
+ 
+
+On April 07, 2016, the Company issued a debenture for $30,000
+for an advanced fee on an equity line of credit for $1,000,000. The debenture accrues interest at 8% per annum and will convert
+into the company s common stock at 50% of the lowest closing bid price 20 days before the conversion date. The Holder is
+restricted from any conversions that would result in the Holder owning over 9.9% of the outstanding common shares of the Company
+after the conversion.
+
+ 
+
+NOTE 7: LINE OF CREDIT RELATED PARTY
+
+N/A
+
+NOTE 8: STOCKHOLDERS' DEFICIT
+
+ 
+
+Preferred Stock
+
+On
+October 4, 2014 and April 10, 2015, the Company filed a Certificate of Designations under its Amended and Restated Articles of
+Incorporation (the "Certificate of Designations") with the State of Colorado to (a) designate 200,000 shares of its previously
+authorized Preferred Stock as Series A Convertible Preferred Stock and (b) designate 3,000 shares of its previously authorized
+Preferred Stock as Series B Preferred Stock including 1,000 shares that were previously issued on October 4, 2014. On June 9th,
+2015, previously issued 1,000 shares on October 4, 2014 were cancelled. The Certificate of Designations and their filing were approved
+by the board of directors of the Company on September 30, 2014 without shareholder approval as provided for in the Company's articles
+of incorporation and under Colorado law. 
+
+F-13
+
+ 
+
+ 
+
+ 
+
+On
+April 10, 2015, the Company issued 2,000 shares of its Series B Preferred Stock to certain related party officers and directors
+valued at $2,150 based on the common stock quoted trading value of $2.15 (post-reverse stock split) at the grant date and a one
+to one conversion rate of the Series B shares into common stock. The certificate of designation does not provide for any adjustment
+to the quantity or conversion terms of the Series B convertible preferred stock resulting from stock splits or other recapitalization
+of common stock of the Company. Therefore, all amounts discussed above reflect pre-reverse stock split amounts.
+
+Description
+of Series A Convertible Preferred Stock
+
+The
+200,000 shares of Series A Convertible Preferred Stock have the following the designations, rights and preferences: the stated
+value of each share is $500, the holder of the shares will be entitled to vote, on a one-for-one basis, with the holders of our
+common stock on all corporate matter on which common shareholder are entitled to vote, the shares pay quarterly dividends in arrears
+at the rate of 4% per annum based on the stated value of each share, each share is convertible into shares of our common stock
+at a conversion price of $2,000 per share, subject to adjustment, at any time upon : (I) the seventh anniversary of the original
+issue date of Series A Preferred Stock or (ii) the date the beneficial holder qualifies as a Permanent U.S. resident, whichever
+occurs earliest, the shares are redeemable by us under certain conditions, and the conversion price of the Series A Convertible
+Preferred stock is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
+
+Description of Series B Convertible Preferred
+Stock
+
+The 2,000 shares of Series B Convertible
+Preferred Stock have the following the designations, rights and preferences:
+
+The Company is not permitted to pay or
+declare dividends or other distributions to the holders of the Series B Preferred Stock, whether in liquidation or otherwise, the
+holder of the shares will be entitled to vote, on a one million-for-one basis, with the holders of our common stock on all corporate
+matter on which common shareholders are entitled to vote, and Each share is convertible into one share of our common stock.
+
+Common
+Stock
+
+Of the
+authorized common stock, 33,867,930 shares are outstanding as of immediately after the closing of the Acquisition and after giving
+effect to the shares to be issued to the former FutureLand shareholders as a result of the Acquisition. The holders of our common
+stock are entitled to receive dividends from our funds legally available therefor only when, as and if declared by our Board, and
+are entitled to share ratably in all of our assets available for distribution to holders of our common stock upon the liquidation,
+dissolution or winding-up of our affairs. Holders of our common stock do not have any preemptive, subscription, redemption or conversion
+rights. Holders of our common stock are entitled to one vote per share on all matters which they are entitled to vote upon at meetings
+of stockholders or upon actions taken by written consent pursuant to Colorado corporate law. The holders of our common stock do
+not have cumulative voting rights, which mean that the holders of a plurality of the outstanding shares can elect all of our directors.
+All of the shares of our common stock currently issued and outstanding are fully-paid and non-assessable. No dividends have been
+paid to holders of our common stock since our incorporation, and no cash dividends are anticipated to be declared or paid in the
+reasonably foreseeable future.
+
+Pursuant
+to the Acquisition Agreement, upon consummation of the Acquisition, AEGEA assumed all of FutureLand's options and warrants issued
+and outstanding immediately prior to the Acquisition. Prior to and as a condition to the closing of the Acquisition, each then-current
+AEGEA stockholder agreed to surrender certain shares of common stock held by such holder to AEGEA and the then-current AEGEA stockholders
+will retain or be issued additional shares to be an aggregate of 4.9% of common stock. Therefore, following the Acquisition, FWDG
+designated holders now hold 27,845,280 shares of AEGEA common stock which is approximately 98.93% of the Company Common Stock outstanding.
+The percentage ownership by FWDG designated holders will drop to around 94% of common shares after the issuance of the 4.9% new
+issuance of common shares to the AEGEA stockholders.
+
+F-14
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+CHANGES IN COMMON STOCK
+
+ 
+
+We report 33,867,930 shares outstanding as of April 4,
+2016.The difference in shares consists of the following issuances in 2016:
+
+ 
+
+01/12/2016 Saeed Talari, Director 400,000 (Officer
+Bonus)
+
+01/26/2016 Hemp, Inc. 700,000 (Consulting)
+
+01/29/2016 Alan Brantley 50,000 (Consulting)
+
+01/29/2016 Stanley Kwong 20,000 (Consulting)
+
+02/15/2016 Cameron Cox, CEO 100,000 (Officer Bonus)
+
+04/01/2016 Craig Huffman, Counsel 200,000 (Consulting
+fee)
+
+ 
+
+NOTE 9: INCOME TAXES
+
+Income taxes
+are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
+attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
+tax bases and operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
+enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
+or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
+includes the enactment date.
+
+The Company recognizes
+the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions
+are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are
+reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized
+tax benefits as a component of general and administrative expenses. Our consolidated federal tax return and any state tax returns
+are not currently under examination.
+
+The
+Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting
+and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial
+statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted
+tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
+are established when necessary to reduce deferred tax assets to the amount expected to be realized.
+
+ 
+
+F-15
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+NOTE 10: RELATED PARTIES
+
+On April 23,2015, a Site Development and Licensed Agreement was signed between HempTech Corp and FutureLand Corp. The agreement
+is for 5 years and calls for HempTech to provide exclusive consulting agreement on design, development and construction of grow
+facilities being leased by FutureLand Corp. The initial consulting fee of $50,000 has been recorded and owed by FutureLand to HempTech
+corp. Mr. Talari is the largest shareholder of both HempTech and FutureLand Corp have
+
+ 
+
+NOTE 11: SUBSEQUENT EVENTS
+
+ 
+
+The Company issued Mr. Craig Huffman 200,000 shares of
+common stock in S8 shares for his consulting resulting in the merger between Aegea, Inc. and FutureLand Properties LLC in March
+2015. The Company is expecting to issue a total of 750,000 shares of common stock in the relations to aforementioned consulting
+fee.
+
+ 
+
+On April 07, 2016, the Company issued a debenture for
+$60,000 to Kodiak Capital for an advanced fee on an equity line of credit for $1,000,000. The debenture accrues interest at 8%
+per annum and will convert into the company s common stock at 50% of the lowest closing bid price 20 days before the conversion
+date. The Holder is restricted from any conversions that would result in the Holder owning over 9.9% of the outstanding common
+shares of the Company after the conversion.
+
+ 
+
+F-16
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+PROSPECTUS SUBJECT TO COMPLETION
+DATED May 18, 2016
+
+FutureLand, Corp.
+
+ 
+
+YOU SHOULD RELY ONLY
+ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
+INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON
+STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
+
+ 
+
+ 
+
+Dealer Prospectus
+Delivery Obligation
+
+ 
+
+Until _____________________ (90 days
+from the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in this
+offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when
+acting as underwriters and with respect to their unsold allotments or subscriptions.
+
+ 
+
+ 
+
+ 
+
+ 
+
+The Date of This
+Prospectus Is: _____ __, 2016
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+Part II-INFORMATION
+NOT REQUIRED IN PROSPECTUS
+
+ 
+
+INDEMNIFICATION
+OF OFFICERS AND DIRECTORS
+
+ 
+
+The TBCA contains
+specific provisions for indemnification of officers and directors. In 1989, the Colorado Legislature amended the TBCA to expand
+the scope of this indemnification and to provide for assistance by a corporation with respect to litigation costs incurred by its
+officers or directors in certain circumstances.
+
+ 
+
+I. Standards
+for Indemnification
+
+ 
+
+Article 2.02-1
+of the TBCA identifies circumstances by which indemnification must be made, may be made, and may not be made, and defines different
+standards for indemnification depending on the director's conduct.
+
+ 
+
+A. Mandatory
+indemnification
+
+ 
+
+A defendant-director
+is entitled to indemnification as a matter of right if he was "wholly successful, on the merits or otherwise, in the defense
+of the proceeding." TBCA art. 2.02-1 H. A director who successfully defends against the suit wholly on a procedural or other
+nonsubstantive ground is nevertheless entitled to mandatory indemnification. If the director who prevails in the litigation is
+later forced to file suit against the corporation in order to recover his indemnification, the expenses of that suit are also recoverable
+under the statute. TBCA art. 2.02-11.
+
+ 
+
+B. Discretionary
+indemnification
+
+ 
+
+In cases where
+a director is found liable to a third person, but has not received a personal benefit, or the director settles a lawsuit brought
+by or on behalf of the corporation, indemnification by the corporation is discretionary. TBCA art. 2.02-IB. The corporation may
+not exercise its discretion to indemnify the director in these circumstances, however, unless the director (i) conducted himself
+in good faith; (ii) reasonably believed that his conduct was in the corporation's best interests or, in cases where the questioned
+actions were not committed by the director in his official capacity, that his conduct was at least not opposed to the corporation's
+best interests; and (iii) in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful.
+Id.
+
+ 
+
+The determination
+of whether discretionary indemnification of the director is even permitted must be made either: (i) by a majority vote of a quorum
+of disinterested directors (i.e., directors who are not named in the lawsuit at the time the vote is taken); (ii) if such a quorum
+is unavailable, by a majority vote of a committee of two or more disinterested directors selected by a vote of all directors; (iii)
+by special legal counsel selected either by a vote of a quorum of disinterested directors, the committee established in the manner
+described above, or, if neither of those options is available, by vote of all directors; or (iv) by vote of the shareholders, excluding
+shares held by directors named as defendants in the proceeding. art. 2.02-1F.
+
+ 
+
+Once it is determined
+that indemnification is permitted, the corporation's discretionary decision to actually authorize the indemnification, and its
+determination as to the "reasonableness" of the expenses for which indemnification is sought, must be made in the same
+manner, unless the determination that indemnification is permissible was made by special legal counsel, in which event the authorization
+decision must be made in the manner specified for selection of the special legal counsel. art. 2.02-IF(3), 2.02-1G. By a 1985 statutory
+clarification of section G, a mandatory indemnification agreement in the articles of incorporation, bylaws, a resolution of shareholders
+or directors or an agreement that makes the permissive indemnification provision in section B mandatory is enforceable even though
+it was not adopted in the manner described above, and it may not be avoided by the corporation failing to authorize the indemnification
+under article 2.02-1G. The issue of whether a director is eligible for indemnification is not foreclosed by the defendant's settlement
+of the case or even a judgment entered against him, because a director may be deemed to have been found liable for a claim only
+if he shall have been so adjudged in a court of competent jurisdiction after exhaustion of all appeals. art. 2.02-1D.
+
+ 
+
+ 
+
+ 
+
+ 
+
+In many cases,
+a director may seek to avoid liability to a third person through a contractual release or indemnity by such third person. In effect,
+such a provision would prevent the need for any corporate indemnification of the director with respect to such matter and thus
+any related interpretation under article 2.02-1 of the TBCA. It is important to note, however, that the Supreme Court of Colorado
+recently held that a person seeking indemnity from a third person as a result of the consequences of such person's own negligence
+must express such intent in a conspicuous manner within the four comers of a written contract. Dresser Indus., Inc. v. Page Petroleum,
+Inc., 853 S.W.2d 505, 508 (Tex. 1993). Accordingly, directors should take great care to ensure that any contractual release or
+indemnity by a third person satisfies such requirements.
+
+ 
+
+C. Prohibited
+Indemnification
+
+ 
+
+Article 2.2-1C
+prohibits indemnification when the director "is found liable on the basis that personal benefit was improperly received by
+him, whether or not the benefit resulted from an action taken in the person's official capacity" and when the director "is
+found liable to the corporation." However, that provision is modified by article 2.02-1E, which allows corporations to indemnify
+directors even if they are found liable to the corporation or are found to have improperly received a personal benefit, but the
+indemnification is limited to "reasonable expenses actually incurred by the director in connection with the proceeding."
+No indemnification is available if the director is found liable for "willful or intentional misconduct in the performance
+of his duty to the corporation." Id.
+
+ 
+
+Our Articles of
+Incorporation provide that no director or officer of the Company shall be personally liable to the Company or its stockholders
+for monetary damages for any breach of fiduciary duty by such person as a director or officer, except for the payment of dividends
+in violation of Colorado law. Our Bylaws provide, in pertinent part, that the Company shall indemnify any person made a party
+to or involved in any civil, criminal or administrative action, suit or proceeding by reason of the fact that such person is or
+was a director or officer of the Company, or of any corporation which such person served as such at the request of the Company,
+against expenses reasonably incurred by, or imposed on, such person in connection with, or resulting from, the exercise of such
+action, suit, proceeding or appeal thereon, except with respect to matters as to which it is adjudged in such action, suit or proceeding
+that such person was liable to the Company, or such other corporation, for negligence or misconduct in the performance of such
+persons duties as a director or officer of the Company. The determination of the rights of such indemnification and the amount
+thereof may be made, at the option of the person to be indemnified, by (1) order of the Court or administrative body or agency
+having jurisdiction over the matter for which indemnification is being sought; (2) resolution adopted by a majority of a quorum
+of our disinterested directors; (3) if there is no such quorum, resolution adopted by a majority of the committee of stockholders
+and disinterested directors of the Company; (4) resolution adopted by a majority of the quorum of directors entitled to vote at
+any meeting; or (5) Order of any Court having jurisdiction over the Company. Such right of indemnification is not exclusive
+of any other right which such director or officer may have, and without limiting the generality of such statement, they are entitled
+to their respective rights of indemnification under any bylaws, agreement, vote of stockholders, provision of law, or otherwise
+in addition to their rights under our Bylaws.
+
+ 
+
+With regard to
+the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such
+indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
+In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid
+by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is
+asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in
+the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction
+the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended,
+and will be governed by the final adjudication of such case.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+OTHER EXPENSES
+OF ISSUANCE AND DISTRIBUTION
+
+ 
+
+The following
+table is an itemization of all expenses, without consideration to future contingencies, incurred or expected to be incurred by
+us in connection with the issuance and distribution of the securities being offered by this prospectus. Items marked with an asterisk
+(*) represent estimated expenses. We have agreed to pay all the costs and expenses of this offering. Selling security holders will
+pay no offering expenses.
+
+ 
+
+ ITEM
+ 
+ AMOUNT
+ 
+
+ 
+ 
+ 
+ 
+
+ SEC Registration Fee*
+ 
+ $
+ 101
+ 
+
+ Legal Fees and Expenses*
+ 
+ $
+ 25,000
+ 
+
+ Accounting Fees and Expenses*
+ 
+ $
+ 5,000
+ 
+
+ Miscellaneous
+ 
+ $
+ -
+ 
+
+ Total*
+ 
+ $
+ 30,101
+ 
+
+____________
+
+* Estimated Figure
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+EXHIBITS
+
+ 
+
+Item 3
+
+ 
+
+ 1
+ Articles of Incorporation FutureLand Corp.
+
+ 
+ 
+
+ 2
+ Bylaws - FutureLand Corp.
+
+ 
+
+Item 4
+
+ 
+
+ 1
+ Form of common stock Certificate of FutureLand Corp. (1)
+
+ 
+ 
+
+ 2
+ FutureLand 2015 Stock Award Plan (2)
+
+ 
+
+Item 5
+
+ 
+
+ 1
+ Legal Opinion of Securus Law Firm, P.A. (11)
+
+ 
+
+Item 10
+
+ 
+
+ 1
+ Employment Agreement Cox (1)
+
+ 
+ 
+
+ 2
+ Equity purchase agreement between FutureLand Corp and Kodiak Capital Group, LLC. * (Exhibit 10.2)
+
+ 
+
+Item 23
+
+ 
+
+ 1
+ Consent of Turner & Stone * (Exhibit 23.1)
+
+ 
+ 
+
+ 2
+ Consent of Securus Law Firm (included in Exhibit 5.1) (11)
+
+ 
+
+All other Exhibits called for by Rule
+601 of Regulation S-K are not applicable to this filing.
+
+____________
+
+(*) Information pertaining to
+our common stock is contained in our Articles of Incorporation and Bylaws.
+
+UNDERTAKINGS
+
+ 
+
+The undersigned registrant hereby undertakes:
+
+ 
+
+ 
+ 1.
+ To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
+
+ 
+
+ 
+ i.
+ To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
+
+ 
+
+ 
+ ii.
+ To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+ iii.
+ To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
+
+ 
+
+ 
+ 2.
+ That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
+
+ 
+
+ 
+ 3.
+ To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
+
+ 
+
+ 
+ 4.
+ 
+ That, for the purpose of determining liability
+ under the Securities Act of 1933 to any purchaser: Each prospectus filed pursuant to Rule 424(b) as part of a registration
+ statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
+ reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
+ after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
+ statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
+ that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
+ or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or
+ made in any such document immediately prior to such date of first use.
+
+ 
+
+ Insofar as indemnification for liabilities
+ arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised
+ that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the
+ Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such
+ liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the corporation
+ in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
+ with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling
+ precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy
+ as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.
+
+ 
+
+ 
+ (5)
+ That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
+
+ 
+
+ 
+ 
+ (i)
+ The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
+
+ 
+
+ 
+ 
+ 
+ (a)
+ Any
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001428369_thar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001428369_thar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001428369_thar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001435375_xg_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001435375_xg_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7c20e2eed6b63e54ff89c3cc4aec27f92fafc3cf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001435375_xg_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1 THE OFFERING 5 RISK FACTORS 7 FORWARD-LOOKING STATEMENTS 19 MARKET AND INDUSTRY DATA AND FORECASTS 19 USE OF PROCEEDS 20 CAPITALIZATION 21 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS 22 DIVIDEND POLICY 24 DETERMINATION OF OFFERING PRICE 25 DILUTION 26 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27 DESCRIPTION OF OUR BUSINESS 39 MANAGEMENT 60 EXECUTIVE COMPENSATION 70 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 73 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 76 DESCRIPTION OF SECURITIES 79 PLAN OF DISTRIBUTION 89 LEGAL MATTERS 91 EXPERTS 91 WHERE YOU CAN FIND ADDITIONAL INFORMATION 91 FINANCIAL STATEMENTS OF XG SCIENCES, INC. F-1 PROSPECTUS F-31 PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS II-1 SIGNATURES II-9 POWER OF ATTORNEY II-9 You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell securities in any state where the offer or solicitation is not permitted. The information contained in this prospectus is complete and accurate as of the date on the front cover of this prospectus, but information may have changed since that date. We are responsible for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required by law. i PROSPECTUS SUMMARY This prospectus of XG Sciences, Inc., a Michigan corporation (together with its sole subsidiary, the "Company", "XG Sciences", "XGS" or "we", "us", or "our") is a part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (SEC). This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including "Risk Factors", "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes beginning on page F-1 before making an investment decision. XG Sciences was formed in May 2006 for the purpose of commercializing certain technology to produce graphene nanoplatelets. First isolated and characterized in 2004, graphene is a single layer of carbon atoms configured in an atomic-scale honeycomb lattice. Among many noted properties, graphene is harder than diamonds, lighter than steel but significantly stronger, and conducts electricity better than copper. Graphene nanoplatelets are particles consisting of multiple layers of graphene. Graphene nanoplatelets have unique capabilities for energy storage, thermal conductivity, electrical conductivity, barrier properties, lubricity and the ability to impart strength when incorporated into plastics or other matrices. We believe the unique properties of graphene and graphene nanoplatelets will enable numerous new product applications and the market for such products will quickly grow to be a significant market opportunity. Our business model is to design, manufacture and sell advanced materials we call xGnP graphene nanoplatelets and value-added products based on these nanoplatelets. We currently have hundreds of customers trialing our products for numerous applications, including, but not limited to lithium ion batteries, supercapacitors, thermal shielding and heat transfer, inks and coatings, printed electronics, construction materials, composites, and military uses. We target our xGnP nanoplatelets for use in a range of large and growing end-use markets. Our proprietary manufacturing processes allow us to produce nanoplatelets with varying performance characteristics that can be tuned to specific end-use applications based on customer requirements. We currently offer three commercial "grades" of bulk materials, each of which is available in various particle sizes, which allows for surface areas ranging from 50 to 800 square meters of surface area per gram of material depending on the product. Other grades may be made available, depending on the needs for specific applications. In addition, we sell our material in the form of pre-dispersed mixtures with water, alcohol, or other organic solvents and resins. We also formulate xGnP nanoplatelets into value-added products and formulations that further enhance the value we deliver to our customers. We have also licensed some of our base manufacturing technology to other companies and we consider technology licensing a component of our business model. We sell products to customers around the world and have sold materials to over 1,000 customers (entities that have purchased our materials) in 47 countries since 2008. Some of these customers are research organizations and some are commercial organizations. Because graphene is a new material, our customers are developing new uses for our products and purchase them in quantities consistent with development purposes. A few of our customers have indicated to us that they have introduced commercial products that use our materials, but our customers are under no obligation to report to us on the usage of our materials. Our customers have included well-known automotive and OEM suppliers around the world (Ford, Johnson Controls, Magna, Honda Engineering) world-scale lithium ion battery manufacturers in the US, South Korea and China (Samsung SDI, LG Chem, Lishen, A123) and diverse specialty material companies (3M, BASF, Henkel, Dow Chemical, Dupont) as well as many others. We also work closely with our licensees, POSCO and Cabot Corporation ("Cabot"), who further extend our technology through their customer network. Ultimately, we expect to benefit in terms of royalties on sales of xGnP produced and sold by our licensees. 1 The above graphs show total orders and customers based on actual purchases of our materials and do not include free samples or materials used in joint development programs. The average order size in 2014 was $2,175 and in 2015 was $600, which indicates these orders were for materials that were not yet incorporated into large-volume commercial products. However, six customers have informed us of their intent to begin commercializing products using our products during 2016. As a result, we expect to begin shipping significantly greater quantities of our products in 2016. Based on the status of current discussions with such customers, we believe that we will begin to scale up revenue as 2016 progresses and that we will be able to book approximately $5-10 million of revenue in 2016. In addition to graphene nanoplatelets, we also offer a sheet product, called XG Leaf , to customers for a variety of thermal spreading and other applications. XG Leaf is ideally suited for use in thermal management in cell phones, tablets and PC s. As these devices continue to adopt faster electronics, higher data management capabilities, brighter displays with ever increasing definition, they generate more and more heat. Managing that heat is a key requirement for the portable electronics market and our XG Leaf product line is well suited to address the need. In a press release dated March 3, 2015, Gartner, Inc., a leading research organization, estimated the 2014 global cell phone market at 1.88 billion units. Every cell phone has some form of thermal management system, and we believe many of the new smart phones being developed can benefit from the performance advantages we are able to achieve with XG Leaf . In August 2015, International Data Corporation (IDC) in their Worldwide Quarterly Tablet Tracker, estimated the global shipment of tablets in 2015 at 212 million units. Thus, we believe our XG Leaf product line is well positioned to address a very large and rapidly growing market. According to Prismark Partners, LLC, a leading electronics industry consulting firm specializing in advanced materials, the 2014 market for finished graphitic heat spreaders as sold to the OEM and EMS companies with adhesive, PET, and/or copper backing for selected portable applications was $600 million, and is expected to reach $900 million in 2018. The market is currently in a significant expansion period driven by the demand for portable devices. We also offer a specially formulated silicon-graphene composite material (also referred to as "SiG" in this prospectus) for use in lithium-ion battery anodes. SiG targets the never-ending need for higher battery capacity and longer life. In several customer trials, our SiG material has demonstrated the potential to increase battery energy storage capacity by 3-5x what is currently available with conventional lithium ion batteries today. The market for materials used in lithium ion battery anodes is large and growing as shown in the figure below (Avicenne Energy, "The Rechargeable Battery Market, 2014–2025", July 2015). We believe our ability to address next generation anode materials represents a significant opportunity for us. 2 We also offer specially-formulated inks and coatings for electrical and thermal applications that are showing promise in diverse customer applications such as advanced packaging, electrostatic dissipation and thermal management. These three product areas — custom XG Leaf sheets, our SiG anode materials, and custom inks/coatings — comprise the set of core value-added product groups on which we are focusing our internal development resources. The following are examples of commercial and development uses of our products (See also exhibit 99.1 for our Summary Customer Pipeline): Construction company demonstrating less than one weight percent of our product in construction material composites improves flexural strength by more than 30%, and Large oil and lubricant supplier showing gear and friction improvements when incorporated into industrial and automotive greases, and Engineering design firm for automotive manufacturers found 20% reduction in operating temperature and in thermal uniformity when XG Leaf replaces standard cooling fins in lithium ion battery packs , and Auto manufacturer showing increased tensile and flexural strength and reduced weight in automotive composites, and Battery manufacturers demonstrating improved cycle life and energy storage when used as additives in lead acid batteries. Some of our proprietary manufacturing processes were developed at Michigan State University (MSU) and licensed to us in 2006. We licensed four U.S. patents and patent applications from MSU. However, over time, our scientists and engineers have made many further discoveries and inventions that are embodied in the form of ten additional patent applications, and numerous trade secrets. Our general IP strategy is to keep as trade secrets those manufacturing processes that are difficult to enforce should they be disclosed and to seek patent coverage for other manufacturing processes, materials derived from those processes, unique combinations of materials and end uses of materials containing graphene nanoplatelets. We believe that the combination of our rights under the MSU license, patents and patent applications, and our trade secrets create a strong intellectual property position. We have developed and scaled-up capacity for two manufacturing processes — one based on chemical intercalation of graphite and subsequent exfoliation and classification; and the second based on a high-shear mechanical process. In March 2012, we took possession of a production facility under terms of a long-term lease and moved our headquarters to this new location. Initial production commenced in this facility in September 2012. Currently, this facility is capable of producing approximately 30 – 50 tons per year of intercalated materials (depending on product mix) if operated on a continuous basis. We also operate a separate production facility in leased manufacturing space which is used for the production of certain specialty materials. This facility is capable of producing approximately 30 – 60 tons per year of materials (depending on product mix) if operated on a continuous basis. We believe these manufacturing facilities will be sufficient to meet demands for the majority of our bulk materials for a number of years, with suitable additions of capital equipment as warranted. However, additional manufacturing capabilities for certain value-added products and certain bulk materials remain to be developed and will likely require the acquisition of additional facilities. In particular, the production processes for XG Leaf and our silicon-graphene electrode materials and our conductive inks will require additional capital and additional facilities to meet expected future customer demand. Many of the Company s products are new products that have not yet been fully developed and for which manufacturing operations have not yet been fully scaled. This means that investors are subject to the risks incident to the creation and development of multiple new products and their associated manufacturing processes. As of the date of this prospectus, we have not yet demonstrated sales of products at a level capable of covering our fixed expenses. Although we expect to begin to significantly scale revenue in 2016, we have not yet demonstrated the capability to produce sufficient materials to generate the ongoing revenues necessary to sustain our operations in the long-term. For additional information please see "Risk Factors". Developing, manufacturing and selling nanomaterials in commercially-viable quantities requires substantial funding. Since inception, we have raised approximately $32 million of capital through the issuance of equity and equity-linked securities and through licensing fees. Notable investors in the Company include Samsung Ventures, Hanwha Chemical Corporation, POSCO Corporation, and the Aspen Advanced Opportunity Fund. Since our inception we have incurred annual losses every year and have accumulated a deficit from operations of $(43,371,368) through December 31, 2015. As of December 31, 2015 our total stockholder s deficit was $(4,071,624). On December 31, 2015, we 3 issued and sold non-convertible promissory notes ("December Notes") which mature on June 30, 2016 and warrants ("December Warrants") to purchase 20,625 shares of our common stock having a strike price of $8.00 and a five year term to several existing stockholders (the "December Placement") for proceeds to the Company of $550,000. As a result, as of December 31, 2015, we had cash on hand of $1,060,224. However, as of the date of this prospectus, we have cash on hand that is only sufficient to fund our operations through the end of April 2016. We also believe that we will need approximately $4.8 million to sustain us for the next 12 months. The Company s financial projections show that the Company may need to raise an additional $15,000,000 or more before it is capable of achieving sustainable cash flow from operations. We intend that the primary means for raising such funds will be through this offering. However, there is no assurance that the Company will be able to raise these funds or that the terms and conditions of future financing will be workable or acceptable for the Company and its stockholders. As a result of the December Placement, the conversion price of our Series A Preferred Stock was adjusted to $6.40 per share. In addition, pursuant to the Certificate of Designation for the Series B Preferred Stock, holders of Series B Units received the right to exchange Series B Units (consisting of one share of Series B Preferred Stock with a liquidation preference of $16.00 per share and warrants to purchase shares of common stock at an exercise price of $16.00 per share, also referred to herein as the "Series B warrants") into any future equity or equity-linked securities sold by the Company until December 31, 2017. Thus, as a result of this offering, holders of the Series B Units will have the right to exchange each Series B Unit for two shares of common stock, and the Series B Preferred Stock and the Series B warrants which constitute the exchanged Series B Unit will be cancelled (the "Series B Exchange Rights"). Pursuant to the Certificates of Designation for the Series A and Series B Preferred Stock, all then-outstanding shares of Series A and Series B Preferred Stock, respectively, will automatically convert into shares of common stock upon the listing of the Company s common stock on a Qualified National Exchange (a securities exchange registered with the SEC under Section 6(a) of the Securities Exchange Act of 1934, as amended (Exchange Act), such as the NASDAQ Capital Market or the New York Stock Exchange, or (ii) the quotation of our common stock on the OTCQB or OTCQX marketplaces operated by OTC Markets Group, Inc. (OTC Markets), and the act of achieving such listing or quotation, generally referred to hereafter as a "Public Listing" in this prospectus). As a result, there will only be one class of equity securities outstanding — common stock — after the Company achieves a Public Listing. Prior to any such listing, the Series A and Series B Preferred Stock may be voluntarily converted into shares of common stock at their respective then-current conversion rates (current rate for the Series A Preferred Stock is 1.875 for 1, current rate for Series B Preferred Stock is 1 for 1). Although holders of Series B Units have no obligation to do so, we expect that most, if not all, of such holders will exchange their Series B Units into common stock pursuant to their Series B Exchange Rights, because each share of Series B Preferred Stock otherwise issued as part of the Series B Units and not exchanged would automatically convert into only one share of common stock upon the listing of the Company s common stock on a Qualified National Exchange at the current rate, or may voluntarily convert prior to any such listing at such rate (See "Description of Securities — Series B Units"). In order to achieve a Public Listing, we will have to meet certain initial listing qualifications of the Qualified National Exchange on which we are seeking the Public Listing. In addition, we will need to have market makers agree to make a market in our common stock and file a FINRA Form 15c211 with the SEC on our behalf before we can achieve a Public Listing, and we will also need to remain current in our quarterly and annual filings with the SEC. We cannot make any assurances that our common stock will ever be quoted or traded on Qualified National Exchange or that any market for our common stock will develop. As of the date of this prospectus, we had 22 full-time employees. Employees include the following four senior managers that report to the CEO: a Vice President of Operations, a Vice President of Energy Markets, a Vice President of Research & Development, and a Controller. The Company employs a total of 6 full-time scientists and technicians in its R&D group, including the Vice President of Research & Development. 4 THE OFFERING Common stock to be offered by the Company 3,000,000 shares Common stock issued and outstanding before the offering(1) 836,544 shares Offering price $8.00 per share Duration of offering This offering shall commence on the effective date of this prospectus and terminate on the earlier of (i) 180 days from the effective date of this prospectus, (ii) the date when the sale of all 3,000,000 shares is completed, and (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 3,000,000 shares registered under the Registration Statement of which this prospectus is part. Common stock issued and outstanding after the offering after giving effect to the sale of 3,000,000 shares by the Company(1) 3,836,544 shares Pro forma common stock issued and outstanding after the offering after giving effect to the sale of 3,000,000 shares by the Company assuming the conversion of all issued and issuable shares of Series A and Series B Preferred Stock(2) 9,764,162 Ticker Symbol and Market for our common stock This is our initial public offering and no public market currently exists for our shares and a public market may never develop, or, if any market does develop, it may not be sustained. After this offering is completed, we intend to seek either (i) a listing of our common stock on a securities exchange registered with the SEC under Section 6(a) of the Exchange Act, such as the NASDAQ Capital Market or NYSE, or (ii) the quotation of our common stock on the OTCQB or OTCQX marketplaces operated by OTC Markets Group, Inc. (each of the foregoing, a "Qualified National Exchange"). In order to achieve such a Public Listing, we will have to meet certain initial listing qualifications of such Qualified National Exchange on which we are seeking the Public Listing. In addition, we will need to have market makers agree to make a market in our common stock and file a FINRA Form 15c211 with the SEC on our behalf before we can achieve a Public Listing. No market maker has agreed to file such application. We will also need to remain current in our quarterly and annual filings with the SEC to achieve and maintain a Public Listing. There can be no assurance that our common stock will ever be quoted on Qualified National Exchange or that any market for our common stock will develop. Offering use of proceeds We intend to use the net proceeds from the sale of 3,000,000 shares by the Company for (a) capital expenditures in 2016 and 2017, working capital, and other general corporate purposes. Pending such use, we reserve the right to temporarily invest the proceeds. See "Use of Proceeds beginning on page 20. 5 Subscriptions All subscriptions, once accepted by us, are irrevocable. Risk Factors The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors" beginning on page 7. Dividend policy We do not intend to pay dividends on our common stock. We plan to retain any earnings for use in the operation of our business and to fund future growth. ____________ (1)Includes the actual number of shares outstanding as of March 31, 2016 and, for the avoidance of doubt, does not include the conversion or exchange of any preferred shares or the exercise of any options or warrants. (2)This figure includes (a) 836,544 shares of common stock currently outstanding as of March 31, 2016, (b) the issuance of 3,376,299 shares of common stock upon conversion of all 1,800,696 shares of Series A Preferred Stock currently outstanding at the current Series A Conversion Rate (see "Description of Securities — Series A Convertible Preferred Stock"), (c) the issuance of 2,011,347 shares upon the conversion of 1,072,720 shares of Series A Preferred Stock (at the Series A Conversion Rate) issued upon the exercise of 1,072,720 warrants to purchase Series A Preferred Stock (the "Series A warrants") and (d) the issuance of 539,974 shares of common stock upon the voluntary exchange of all 269,987 Series B Units (consisting of 269,987 shares of Series B Preferred Stock and warrants to purchase 224,897 shares of common stock) (see also "Description of Securities — Series B Units"). There is no assurance that we will raise the full $24,000,000 anticipated from the sale by the Company of 3,000,000 shares, and there is no guarantee that we will receive any proceeds from the offering. We may sell only a small portion or none of the offered shares. Emerging Growth Company In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an "emerging growth company," or EGC, can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, including exemptions from the requirement to provide an auditor s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of: the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Corporate Information The Company was incorporated in Michigan on May 23, 2006 and is organized as a "C" corporation under the applicable laws of the United States and State of Michigan. Our headquarters and principal executive offices are located at 3101 Grand Oak Drive, Lansing, Michigan, 48911 and our telephone number is (517) 703-1110. Our website address is http://www.xgsciences.com, although the information contained in, or that can be accessed through, our website is not part of this prospectus. 6 RISK FACTORS THE SECURITIES BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING ALL EXHIBITS, AND CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE FOLLOWING RISK FACTORS. Risks Relating to Our Business and Industry We are a young company with a limited operating history, making it difficult for you to evaluate our business and your investment. XG Sciences, Inc. was incorporated on May 23, 2006. We have not yet demonstrated sales of products at a level capable of covering our fixed expenses. Since inception, we have not demonstrated the capability to produce sufficient materials to generate the ongoing revenues necessary to sustain our operations in the long-term. Nor have we demonstrated the ability to generate sufficient sales to sustain the business. There can be no assurance that the Company will ever produce a profit. Many of the Company s products represent new products that have not yet been fully developed and for which manufacturing operations have not yet been fully scaled. This means that investors are subject to all the risks incident to the creation and development of multiple new products and their associated manufacturing processes, and each investor should be prepared to withstand a complete loss of their investment. Because we are subject to these uncertainties, there may be risks that management has failed to anticipate and you may have a difficult time evaluating our business and your investment in our Company. Our ability to become profitable depends primarily on our ability to successfully commercialize our products in the future. Even if we successfully develop and market our products, we may not generate sufficient or sustainable revenue to achieve or sustain profitability, which could cause us to cease operations and you will lose all of your investment. We have no sustainable base of products approved for commercial use by our customers, have never generated significant product revenues and may never achieve sufficient revenues for profitable operations, which could cause us to cease operations. XG Sciences primarily sells bulk materials or products made with these materials to other companies for incorporation into their products. To date, there has been no significant incorporation of our materials or products into customer products that are released for commercial sale. Because there is no demonstrated history of commercial success for our products, it is possible that such commercial success may never happen and that we will never achieve the level of revenues necessary to sustain our business. We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms, which could have a materially adverse effect on our business. Developing, manufacturing and selling nanomaterials in commercially-viable quantities requires substantial funding. On December 31, 2015, the Company issued and sold promissory notes and warrants to several existing investors in a private placement (the December Notes and December Warrants) for proceeds to the Company of $550,000. As a result, as of December 31, 2015, we had cash on hand of approximately $1.1 million. However, as of the date of this prospectus, we have cash on hand that is only sufficient to fund our operations through the end of April 2016. We also believe that we will need approximately $4.8 million to sustain us for the next twelve months. The Company s financial projections show that the Company may need to raise an additional $15,000,000 or more before it is capable of achieving sustainable cash flow from operations. We intend that the primary means for raising such funds will be through this offering. The Company can make no assurance that it will be able to raise these funds or that the terms and conditions of future financing will be workable or acceptable for the Company and its stockholders. In the event that the Company is not able to raise substantial additional funds in the future on terms that are acceptable or adjust its business model accordingly, the Company may be forced to curtail or cease operations and you could lose all or a significant part of your investment. If we are unable to continue as a going concern, our securities will have little or no value. The report of our independent registered public accounting firm that accompanies our consolidated financial statements for the year ended December 31, 2015 contains a going concern qualification in which such firm expressed substantial doubt 7 about our ability to continue as a going concern. We currently anticipate that our cash and cash equivalents will be sufficient to fund our operations through the end of April 2016, without raising additional capital. Our continuation as a going concern is dependent upon continued financial support from our shareholders, the ability of us to obtain necessary equity and/or debt financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding our ability to continue as a going concern. We cannot make any assurances that additional financings will be available to us and, if available, completed on a timely basis, on acceptable terms or at all. If we are unable to complete an equity or debt offering, or otherwise obtain sufficient financing when and if needed, it would negatively impact our business and operations, which would likely cause the price of our common stock to decline. It could also lead to the reduction or suspension of our operations and ultimately force us to cease our operations. We have limited experience in the higher volume manufacturing that will be required to support profitable operations, and the risks associated with scaling to larger production quantities may be substantial. We have limited experience manufacturing our products. We have established small-scale commercial or pilot-scale production facilities for our bulk powders, XG Leaf and SiG materials, but these facilities do not have the existing production capacity to produce sufficient quantities of materials for us to reach sustainable sales levels. In order to develop the capacity to produce much higher volumes, it will be necessary to produce multiples of existing processes or engineer new production processes in some cases. There is no guarantee that we will be able to economically scale-up our production processes to the levels required. If we are unable to scale-up our production processes and facilities to support sustainable sales levels, the Company may be forced to curtail or cease operations and you could lose all or a significant part of your investment. Projection of fixed monthly expenses and operating losses for the near future means that investors may not earn a return on their investment or may lose all of their investment. Because of the nature of the Company s business, the Company projects considerable fixed expenses that lead to projected monthly deficits for the near future. Fixed manufacturing expenses to maintain production facilities, compensation expenses for scientists and other critical personnel, and ongoing rent and utilities amount to several hundred thousand dollars per month, and the Company believes that such expenses are required as a precursor to significant customer sales. However, there can be no assurance that monthly sales will ever reach a sufficient level to cover the cost of ongoing monthly expenses. If sufficient regular monthly sales are not generated to cover these fixed expenses, we will continue to experience monthly profit deficits which, if not eliminated, will require continuing new investment in the Company. If monthly deficits continue beyond levels that investors find tolerable, we may not be able to raise additional funds may be forced to curtail or cease operations and you could lose all or a significant part of your investment. We have a long and complex sales cycle and have not demonstrated the ability to operate successfully in this environment. It has been our experience since our inception that the average sales cycle for our products can range from one to seven years from the time a customer begins testing our products until the time that they could be successfully used in a commercial product. The product introduction timing will vary based on the target market, with automotive uses typically being toward the long end and consumer electronics toward the shorter end. We have not demonstrated a track record of success in completing customer development projects, which makes it difficult for you to evaluate the likelihood of our future success. The sales and development cycle for our products is subject to customer budgetary constraints, internal acceptance procedures, competitive product assessments, scientific and development resource allocations, and other factors beyond our control. If we are not able to successfully accommodate these factors to enable customer development success, we will be unable to achieve sufficient sales to reach profitability. In this case, the Company may not be able to raise additional funds and may be forced to curtail or cease operations and you could lose all or a significant part of your investment. We could be adversely affected by our exposure to customer concentration risk. We are subject to customer concentration risk as a result of our reliance on a relatively small number of customers for a significant portion of our revenues. For 2015 we had one customer (one of our Asian distributors) whose purchases accounted for 9% of total product revenues. In 2014 we had another customer that represented 69% of total product revenues. Due to the nature of our business and the relatively large size of many of the applications our customers are developing, we anticipate that we will be dependent on a relatively small number of customers for the majority of our revenues for the next several years. It is possible that only one or two customers could place orders sufficient to utilize most or all of our existing manufacturing capacity. 8 In this case, there would be a risk of significant loss of future revenues if one or more of these customers were to stop ordering our materials, which could in turn have a material adverse effect on our business and on your investment. Our revenues often fluctuate significantly based on one-off orders from customers or from the recognition of grant revenues which vary from period-to-period, which may materially impact our financial results from period to period. Because of the potential for large revenue swings from one-time large orders or grants it may be difficult to accurately forecast the needs for inventory, working capital, and other financial resources from period-to-period. Such orders would require a significant short-term increase in our production capacity and would require the financial resources to add staff and support the associated working capital. If such large one-time orders were not handled smoothly, customer confidence in us as a viable supplier could be reduced and we might not succeed in capturing the additional larger orders that may be reflected in our business plan. We operate in an advanced technology arena where hypothesized properties and benefits of our products may not be achieved in practice, or in which technological change may alter the attractiveness of our products. Because there is no sustained history of successful use of our products in commercial applications, there is no assurance that broad successful commercial applications may be technically feasible. Most, if not all, of the scientific and engineering data related to our products has been generated in our own laboratories or in laboratory environments at our customers or third-parties, like universities and national laboratories. It is well known that laboratory data is not always representative of commercial applications. Likewise, we operate in a market that is subject to rapid technological change. Part of our business strategy is to monitor such change and take steps to remain technologically current, but there is no assurance that such strategy will be successful. If the Company is not able to adapt to new advances in materials sciences, or if unforeseen technologies or materials emerge that are not compatible with our products and services or that could replace our products and services, our revenues and business prospects would likely be adversely affected. Such an occurrence may have severe consequences, including the potential for our investors to lose all of their investment. Competitors that are larger and better funded may cause the Company to be unsuccessful in selling its products. The Company operates in a market that is expected to have significant competition in the future. Global research is being conducted by substantially larger companies who have greater financial, personnel, technical, and marketing resources. There can be no assurance that the Company s strategy of offering better materials based on the Company s proprietary exfoliated graphite nanoplatelets will be able to compete with other companies, many of whom will have significantly greater resources, on a continuing basis. In the event that we cannot compete successfully, the Company may be forced to cease operations and investors may lose some or all of their investment. Because of our small size and limited operating history, we are dependent on key employees. The Company s operations and development are dependent upon the experience and knowledge of Philip L. Rose, our Chief Executive Officer, Dr. Liya Wang, Vice President of Research & Development, Robert Privette, Vice President of Energy Markets, Scott Murray, Vice President of Operations, and Dr. Hiroyuki Fukushima, Technical Director. If the services of any of these individuals should become unavailable, the Company s business operations might be adversely affected. If several of these individuals became unavailable at the same time, the ability of the Company to continue normal business operations might be adversely affected to the extent that revenue or profits could be diminished and you could lose all or a significant amount of your investment. Our success depends in part on our ability to protect our intellectual property rights, and our inability to enforce these rights could have a material adverse effect on our competitive position. We rely on the patent, trademark, copyright and trade-secret laws of the United States and the countries where we do business to protect our intellectual property rights. We may be unable to prevent third parties from using our intellectual property without our authorization. The unauthorized use of our intellectual property could reduce any competitive advantage we have developed, reduce our market share or otherwise harm our business. In the event of unauthorized use of our intellectual property, litigation to protect or enforce our rights could be costly, and we may not prevail. 9 Many of our technologies are not covered by any patent or patent application, and our issued and pending U.S. and non-U.S. patents may not provide us with any competitive advantage and could be challenged by third parties. Our inability to secure issuance of our pending patent applications may limit our ability to protect the intellectual property rights these pending patent applications were intended to cover. Our competitors may attempt to design around our patents to avoid liability for infringement and, if successful, our competitors could adversely affect our market share. Furthermore, the expiration of our patents may lead to increased competition. Our pending trademark applications may not be approved by the responsible governmental authorities and, even if these trademark applications are granted, third parties may seek to oppose or otherwise challenge these trademark applications. A failure to obtain trademark registrations in the United States and in other countries could limit our ability to protect our products and their associated trademarks and impede our marketing efforts in those jurisdictions. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some foreign countries. In some countries, we do not apply for patent, trademark or copyright protection. We also rely on unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. Although we generally enter into confidentiality agreements with our employees and third parties to protect our intellectual property, these confidentiality agreements are limited in duration and could be breached, and may not provide meaningful protection of our trade secrets or proprietary manufacturing expertise. Adequate remedies may not be available if there is an unauthorized use or disclosure of our trade secrets and manufacturing expertise. In addition, others may obtain knowledge about our trade secrets through independent development or by legal means. The failure to protect our processes, apparatuses, technology, trade secrets and proprietary manufacturing expertise, methods and compounds could have a material adverse effect on our business by jeopardizing critical intellectual property. Where a product formulation or process is kept as a trade secret, third parties may independently develop or invent and patent products or processes identical to our trade-secret products or processes. This could have an adverse impact on our ability to make and sell products or use such processes and could potentially result in costly litigation in which we might not prevail. We could face intellectual property infringement claims that could result in significant legal costs and damages and impede our ability to produce key products, which could have a material adverse effect on our business, financial condition and results of operations. If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and the standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted. In addition, management s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management s assessment of our internal controls over financial reporting, or disclosure of our independent registered public accounting firm s report on management s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock. Future adverse regulations could affect the viability of the business. The Company s bulk products have been approved for sale in the United States by the U.S. Environmental Protection Agency after a detailed review of our products and production processes for our H, M and C grade materials. In most cases, as far as we are aware, there are no current regulations elsewhere in the world that prevent or prohibit the sale of the Company s products. Nevertheless, the sale of nano-materials is a subject of regulatory discussion and review in many countries around the world. In some cases, there is a discussion of potential testing requirements for toxicity or other health effects of nano-materials before they can be sold in certain jurisdictions. If such regulations are enacted in the future, the Company s business could be adversely 10 affected because of the requirement for expensive and time-consuming tests or other regulatory compliance. There can be no assurance that future regulations might not severely limit or even prevent the sale of the Company s products in major markets, in which case the Company s financial prospects might be severely limited, causing investors to lose some or all of their investment. Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and attention away from revenue generating activities. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities, which could have an adverse effect on our business. Risks Relating To Our Common Stock There is a risk of dilution of your percentage ownership of common stock in the Company. In addition to the shares which we may sell pursuant to this offering, the Company has the right to raise additional capital or incur borrowings from third parties to finance its business. The Company may also implement public or private mergers, business combinations, business acquisitions and similar transactions pursuant to which it would issue substantial additional capital stock to outside parties, causing substantial dilution in the ownership of the Company by its existing stockholders. Subject to certain exceptions (See "Management — Shareholder Side Letter"), our Board of Directors has the authority, without the consent of any of the stockholders, to cause the Company to issue more shares of common stock and/or preferred stock at such price and on such terms and conditions as are determined by the Board in its sole discretion. The sale of the shares being offered by us hereunder, as well as the shares of common stock issuable upon the exercise of options and warrants, the shares issuable upon conversion of Series A Preferred Stock (including the shares of Series A Preferred Stock issuable upon the exercise of warrants), shares issuable upon conversion of Series B Preferred Stock, shares issuable upon the voluntary exchange of the Series B Units, and the issuance of additional shares of capital stock by the Company will dilute your ownership percentage in the Company and could impair our ability to raise capital in the future through the sale of equity securities. Certain stockholders who are also officers and directors of the Company may have significant control over our management, which may not be in your best interests. As of March 31, 2016, the directors, or the entities they represent, and executive officers of the Company owned approximately 69.5% of the voting stock of the Company. Certain of these executives and directors, or the companies they represent, converted secured convertible notes into an additional 1,456,126 shares of Series A Preferred Stock on December 31, 2015. Additionally, our existing stockholders are a party to that certain Shareholder Agreement, which was amended on February 26, 2016. Although shareholders purchasing shares in this offering will not be subject to the Shareholders Agreement, certain provisions of such Shareholders Agreement may impact the governance of the Company. Pursuant to the Shareholders Agreement, (a) so long as AAOF or its affiliates own 10% of more of the aggregate outstanding Shareholder Stock (as defined in the Shareholder Agreement), (i) the size of the Board of Directors shall be set at seven individuals (provided, however, that the number of directors on the Board of Directors may be increased or decreased with the prior written consent of AAOF and shareholders (including AAOF) who in the aggregate then own Shareholder Stock representing a majority of the then issued and outstanding voting stock of the Company), (ii) one person nominated by AAOF shall be elected to the Board of Directors, (iii) two members of the Board of Directors, other than those nominated by AAOF, POSCO or Hanwha Chemical, shall qualify as independent Directors; (b) so long as POSCO owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by POSCO shall be elected to the Board of Directors (POSCO does not currently own 10% or more of the aggregate outstanding Shareholder Stock and therefore does not maintain a seat on our Board of Directors); and (c) so long as Hanwha Chemical owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by Hanwha Chemical shall be elected to the Board of Directors (Hanwha does not currently own 10% or more of the aggregate outstanding Shareholder Stock and therefore does not maintain a seat on our Board of Directors). The Shareholder Agreement contains certain restrictions on transfer. Pursuant to the Shareholder Agreement, the Company has a first right of first refusal with respect to certain stock transfers. In the event that the Company does not exercise this right, each non-transferring shareholder shall have the right to purchase its pro rata share of the transferring shareholder s stock. Subject 11 to certain exclusions, each shareholder and holder of convertible notes who is a signatory to the Shareholders Agreement has a preemptive right to purchase his, her or its pro rata share of the Company s common stock in subsequent offerings. The Shareholders Agreement also contains a right of co-sale and bring-along rights where a shareholder or shareholders owning more than 50% of the Company s common stock on a fully diluted basis may cause other shareholders to tender their shares to a third party purchaser. Under the Shareholders Agreement, shareholders may not, while such person is a shareholder, directly or indirectly, either alone or in association with others, in any other capacity: (i) conduct, become engaged or interested in, any business that competes, directly or indirectly, with the business of the Company or any of its affiliates worldwide; (ii) solicit, divert or take away or attempt to solicit, divert or take away, directly or indirectly, any of the Company s or its affiliates current, prior, or prospective customers: or (iii) solicit or attempt to solicit any person who is employed or engaged to perform services by the Company or its affiliates to leave his or her employment or engagement with Company or its Affiliates. After such shareholder ceases to be a shareholder, the former shareholder may not for a period of three (3) years from the date of sale, directly or indirectly, either alone or in association with others, for himself or herself or in any other capacity: (i) conduct, become engaged in, or interested in, any business that competes, directly or indirectly, with the business of the Company or any of its affiliates worldwide; (ii) solicit, divert or take away or attempt to solicit, divert or take away, directly or indirectly, any of the Company s or its affiliates current, prior, or prospective customers; or (iii) solicit or attempt to solicit any person who is employed or engaged to perform services by the Company or its affiliates to leave his or her employment or engagement with Company or its affiliates. These restrictions on competition and solicitation will not be violated, however, by a shareholder s passive ownership of up to 2% of a class of outstanding publicly traded shares of a corporation that is listed or quoted on a national securities exchange including any such corporation that competes with the business of the Company. On February 26, 2016, the Shareholders Agreement was amended (the "Amendment to Shareholders Agreement") to provide that holders of Excluded Stock are not subject to the terms of the Shareholders Agreement. Excluded Stock means shares of common stock that are subject to a registration statement that has been filed with the SEC and has been declared effective. The Amendment to Shareholders Agreement takes effect when (i) a majority of the Board of Directors and shareholders holding at least 60% of the voting power of all shares of Shareholder Stock have consented to the amendment to the Shareholders Agreement, and (ii) a registration statement registering the shares of common stock has been filed with the SEC and declared effective. The first condition in (i) above has been satisfied, and the second condition in (ii) above will be satisfied upon the effectiveness of the registration statement of which this prospectus is made a part. The Amendment to the Shareholders Agreement further clarifies that preemptive rights shall not apply to Excluded Stock, and amends the termination date of the Shareholders Agreement. Specifically, the Shareholder Agreement has been amended to provide that it continues in effect until (i) the date of the closing of a public offering of common stock pursuant to a registration statement filed with the SEC that is declared effective in which the Company receives gross proceeds of at least $10,000,000, on which date it shall terminate in its entirety, unless the Shareholder Agreement is earlier terminated in accordance with its terms, or (ii) the date on which the Company s common stock is listed on the NASDAQ Stock Market of the New York Stock Exchange. As a result, in the event that the Company is unable to raise at least $10,000,000 in this offering, the Shareholder Agreement will continue to remain in effect and certain of our larger shareholders will be entitled to continue to exercise their rights under such Shareholders Agreement, but purchasers of shares of common stock under this registration statement, if it is made effective, will not be required to adopt the Shareholders Agreement. Furthermore, in conjunction with a financing from Samsung Ventures on January 15, 2014, we and our existing stockholders entered into a voting agreement with Samsung Ventures whereby for so long as Samsung Ventures owns 10% or more of the aggregate outstanding common stock of XGS (assuming Full Conversion, but excluding any shares of common stock issuable upon the exercise of any warrants held by Samsung Ventures), each stockholder made a party thereto shall vote all of his, her or its voting securities from time to time in whatever manner is necessary to ensure that at each annual or special meeting of the stockholders at which an election of Directors is held or pursuant to any written consent of the stockholders, one person nominated by Samsung Ventures is elected to our Board as a Director. The rights granted to Samsung Ventures under a voting agreement are effective until the first to occur of (1) the date on which the Minimum Ownership Requirement is no longer satisfied, (2) the date on which the Shareholder Agreement (which is described above) is terminated for any reason and (3) the date that Samsung Ventures agrees in writing to terminate the Agreement. As a result, such entities have a significant influence on the affairs and management of the Company, as well as on all matters requiring stockholder approval, including electing and removing members of the Company s Board of Directors, causing the Company to engage in transactions with affiliated entities, causing or restricting the sale or merger of the Company, and certain other matters. Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control of the Company even when such a change of control would be in the best interests of the Company s stockholders. 12 We may, in the future, issue additional shares of common stock, which would reduce investors percent of ownership and may dilute our share value. Our Articles of Incorporation, as amended, authorize the issuance of up to 25,000,000 shares of common stock and up to 8,000,000 shares of preferred stock. As of March 31, 2016, the Company had 836,544 shares of common stock, 1,800,696 shares of Series A Preferred Stock and 269,987 Series B Units (consisting of 269,987 shares of Series B Preferred Stock and warrants to purchase 224,897 shares of common stock) issued and outstanding. All issued and outstanding shares of Series B Preferred Stock are a part of the Series B Units. Upon a Public Listing on a Qualified National Exchange, all Series A Preferred Stock then currently outstanding will automatically convert into shares of common stock at the then-current Series A Conversion Rate (current ratio is 1.875 for 1), which would result in the issuance of 3,376,299 shares of common stock assuming the conversion of 1,800,696 shares of Series A Preferred Stock. Series A Preferred Stock holders may also voluntarily convert at the then-current rate at any time prior to any such Public Listing on a Qualified National Exchange. In addition, as a result of this offering, holders of Series B Units will have the right, at their discretion, to exchange each Series B Unit for two shares of common stock, which, if all Series B Units were exchanged, would result in the issuance of 539,974 shares of common stock (and the cancellation of the 269,987 shares of Series B Preferred Stock and the Series B warrants to purchase 224,897 shares of common stock at an exercise price of $16.00 per share which constitute the Series B Units). If none of our Series B Unit holders exchange their Series B Units pursuant to their Series B Exchange Rights, then upon a Public Listing on a Qualified National Exchange, all shares of Series B Preferred Stock (all of which are a part of the Series B Units) then outstanding will automatically convert into shares of common stock at the then-current conversion ratio (current ratio is 1 for 1) which would result in the issuance of 269,987 shares of common stock assuming the conversion of 269,987 shares of common stock. Series B Preferred Stock holders may also voluntarily convert at the then-current rate at any time prior to any such Public Listing on a Qualified National Exchange. As of March 31, 2016, the Company had also granted options to purchase up to 419,750 shares of common stock and had issued warrants to purchase up to (i) 267,122 shares of common stock (including the 224,897 shares underlying the Series B warrants which are a component of the Series B Units) and (ii) 1,072,720 shares of Series A Preferred Stock which, if exercised, would be convertible into shares of common stock at the then-current Series A Conversion Rate (at the current ratio of 1.875 shares for each share of Series A Preferred Stock, we would issue 2,011,347 shares of common stock). Therefore, we have committed to issue up to an additional 6,389,593 shares of common stock, which includes the issuance of (a) 3,376,299 shares upon conversion of all 1,800,696 shares Series A Preferred Stock currently outstanding at the Series A Conversion Rate, (b) 539,974 shares upon the exercise by all of the Series B Unit holders of their Series B Exchange Rights, (c) 2,011,347 shares upon the conversion of 1,072,720 shares of Series A Preferred Stock (at the current Series A Conversion Rate) which are issuable upon exercise of 1,072,720 Series A warrants, (c) 419,750 shares upon the exercise of options and (d) the issuance of 42,225 shares upon the exercise of warrants, and excludes, for the avoidance of doubt, shares issuable upon the exercise of the 224,897 Series B warrants which we assume will be cancelled upon the exchange of the Series B Units. If we issued all 6,389,593 shares, we would have, in addition to the 836,544 shares currently outstanding, 7,226,137 shares issued and outstanding, with 17,773,863 authorized shares available for future issuance and if we assume the sale of all 3,000,000 shares being offered hereunder, we would have 14,773,863 authorized shares available for future issuance. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading market for our common stock and could impair our ability to raise capital in the future through the sale of equity securities. We have a large number of restricted shares outstanding, a portion of which may be sold under Rule 144, which may reduce the market price of our shares. Our Series A Preferred Stock may be voluntarily converted, or will automatically convert upon a Public Listing of our common shares on a Qualified National Exchange, into shares of common at the then-current Series A Conversion Rate (at the current ratio of 1.875 for 1, all shares of Series A Preferred Stock outstanding at March 31, 2016 would result in an issuance of 3,376,299 shares of common stock). Furthermore, our Series B Preferred Stock may be voluntarily converted, or will automatically convert upon a Public Listing of our common shares on a Qualified National Exchange, into shares of common stock at the then-current Series B Conversion Rate (at the current ratio of 1 for 1, all shares of Series B Preferred Stock outstanding at March 31, 2016 would result in an issuance of 269,987 shares of common stock). 13 However, pursuant to the Series B Exchange Rights, holders of Series B Preferred Stock also have the right, prior to any Public Listing on a Qualified National Exchange of our common stock, at their discretion, to exchange each Series B Unit for two shares of common stock which, if all Series B Unit holders exercised such right, would result in the issuance of 539,974 shares of common stock (and the cancellation of the 269,987 shares of Series B Preferred Stock and 224,897 Series B warrants). As of March 31, 2016, of the 836,544 shares of common stock issued and outstanding, 50,000 shares of common stock were held by affiliates and 786,544 shares of common stock were held by non-affiliates. Of the 4,752,817 shares of common stock that would be issued and outstanding on a fully diluted basis assuming (i) the exchange of all Series B Units into 539,974 shares of common stock, (ii) the conversion of all 1,800,696 shares of Series A Preferred Stock into 3,376,299 shares of common stock and (iii) no warrants or stock options are converted or exercised, 1,592,115 shares of common stock would be held by non-affiliates and 3,160,702 shares of common stock would be held by affiliates of the Company. All of such shares are deemed "restricted securities" within the meaning of Rule 144 as promulgated under the Securities Act. It is anticipated that all of the aforementioned "restricted securities" will be eligible for resale under Rule 144. In general, under Rule 144, subject to the satisfaction of certain other conditions, a person, who is not an affiliate (and who has not been an affiliate for a period of at least three months immediately preceding the sale) and who has beneficially owned restricted shares of our common stock for at least six months is permitted to sell such shares without restriction, provided that there is sufficient public information about us as contemplated by Rule 144. An affiliate who has beneficially owned restricted shares of our common stock for a period of at least one year may sell a number of shares equal to one percent of our issued and outstanding common stock approximately every three months. The possibility that substantial amounts of our common stock may be sold under Rule 144 into the public market may adversely affect prevailing market prices for the common stock and could impair our ability to raise capital in the future through the sale of equity securities. The Company is considered a smaller reporting company and is exempt from certain disclosure requirements, which could make our stock less attractive to potential investors. Rule 12b-2 of the Exchange Act defines a "smaller reporting company" as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: Had a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or In the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or In the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available. As a "smaller reporting company" (in addition to and without regard to our status as an "emerging growth company") we are not required and may not include a "Compensation Discussion and Analysis" section in our proxy statements; we provide only 3 years of business development information; provide fewer years of selected financial data; and have other "scaled" disclosure requirements that are less comprehensive than issuers that are not "smaller reporting companies" which could make our stock less attractive to potential investors, which could make it more difficult for you to sell your shares. The Company is considered an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an "emerging growth company," as defined in the Jumpstart our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (A) following the fifth anniversary of our first sale of common equity securities pursuant to an effective registration statement, (B) in which we have total annual 14 gross revenue of at least $1.0 billion, or (C) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile when trading occurs. We will become subject to the periodic reporting requirements of the Exchange Act, which will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs will negatively affect our ability to earn a profit. Following the effective date of the registration statement in which this prospectus is included, we will be required to file periodic reports with the Securities and Exchange Commission pursuant to the Exchange Act and the rules and regulations thereunder. In order to comply with such requirements, our independent registered auditors will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. Factors such as the number and type of transactions that we engage in and the complexity of our reports cannot accurately be determined at this time and may have a major negative effect on the cost and amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit. However, for as long as we remain an "emerging growth company" we intend to take advantage of certain exemptions from various reporting requirements until we are no longer an "emerging growth company." We also qualify as a smaller reporting company, and so long as we remain a smaller reporting company, we benefit from the same exemptions and exclusions as an emerging growth company. In the event that we cease to be an emerging growth company as a result of a lapse of the five year period, but continue to be a smaller reporting company, we would continue to be subject to the exemptions available to emerging growth companies until such time as we were no longer a smaller reporting company. After, and if ever, we are no longer an "emerging growth company," we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with those requirements applicable to companies that are not "emerging growth companies," including Section 404 of the Sarbanes-Oxley Act. For so long as we are an emerging growth company, we may rely on certain exemptions provided in the JOBS Act, including reduced disclosure regarding executive compensation, not seeking an advisory vote with respect to executive compensation and not requiring our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting, which could make our common stock less attractive to investors due to the nature of the reduced disclosure. We are an "emerging growth company," as defined in the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail 15 ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common stock could decline. The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us, the trading price for our common stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline. If our common stock becomes a "penny stock," you may have greater difficulty selling your shares. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. After a Public Listing, our common stock may become a "penny stock" within the meaning of the rules, the rules apply to us and to our securities if we are not listed on a national securities exchange. These rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, even if our common stock is quoted on either the OTCQX or OTCQB market place operated by the OTC Markets, our common stock will be subject to Rule 15g-9 under the Exchange Act (the "Penny Stock Rules"). The Penny Stock Rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the broker s or dealer s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; contains a toll-free telephone number for inquiries on disciplinary actions; defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock it becomes designated as a Penny Stock. Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able 16 to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired. Downturns in general economic conditions could adversely affect our profitability. Downturns in general economic conditions can cause fluctuations in demand for our products, product prices, volumes and gross margins. Future economic conditions may not be favorable to our industry. A decline in the demand for our products or a shift to lower-margin products due to deteriorating economic conditions could adversely affect sales of our products and our profitability and could also result in impairments of certain of our assets. Furthermore, any uncertainty in economic conditions may result in a slowdown to the global economy that could affect our business by reducing the prices that our customers may be able or willing to pay for our products or by reducing the demand for our products. An increase in the cost of raw materials or electricity might affect our profits. Any increase in the prices of our raw materials or energy might affect the overall cost of our products. If we are not able to raise our prices to pass on increased costs to our customers, we would be unable to maintain our existing profit margins. Our major cost components include items such as graphite, sulfuric acid, and electricity, which items are normally readily available industrial commodities. During our history as a business, we have not seen any material impact (as defined by GAAP) on our cost structure from fluctuations in raw material or energy costs, but this could change in the future. Our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period. Our manufacturing operations are subject to disruption due to extreme weather conditions, floods and similar events, major industrial accidents, strikes and lockouts, adoption of new laws or regulations, changes in interpretations of existing laws or regulations or changes in governmental enforcement policies, civil disruption, riots, terrorist attacks, war, and other events. We cannot assure you that no such events will occur. If such an event occurs, it could have a material adverse affect on us. Significant risks may be associated with future acquisitions. Our Company may pursue the acquisition of other companies or product lines in order to add new businesses and/or product lines or simply complement our existing businesses and product lines. Along with such acquisitions come certain risks, including, but not limited to the following: the difficulty of identifying appropriate acquisition candidates; the difficulty of assimilating the operations and personnel of the acquired entities; the potential disruption of our ongoing business; the potential incurrence of new debt or the issuance of new equity that could increase our leverage or dilute our stockholders equity interests; our inability to capitalize on the opportunities presented by acquisitions; and our failure to implement and maintain uniform standards, controls, procedures and policies at any acquired businesses. Given our limited resources, we may not effectively manage our growth. There is no guarantee that we have the resources, financial or operational, required to manage our growth. This is particularly true as we expand facilities and manufacture our products on a greater commercial scale. Furthermore, rapid growth in our operations may place a significant strain on our management, administrative, operational and financial infrastructure. The inability to adequately manage our growth could have a material and adverse affect on our business, financial condition or results of operations, thus resulting in a lower quoted price of our common stock. 17 Risks Related to this Offering Because
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001439567_united_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001439567_united_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..91fa109828a1739652857e4a441944df2be52414
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001439567_united_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This is only a summary of the prospectus and, while it contains material information about DNO and its shares, it does not contain or summarize all of the information about DNO and the shares contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus, including "Risk Factors Involved with an Investment in DNO" beginning on page 4, before making an investment decision about the shares. For a glossary of defined terms, see Appendix A. United States Short Oil Fund, LP ("DNO"), a Delaware limited partnership, is a commodity pool that continuously issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca stock exchange ("NYSE Arca"). DNO is managed and controlled United States Commodity Funds LLC ("USCF"), a Delaware limited liability company. USCF is registered as a commodity pool operator ("CPO") with the Commodity Futures Trading Commission ("CFTC") and is a member of the National Futures Association ("NFA").
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001443089_wearable_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001443089_wearable_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c49f38b89e1f7fb51b26b6dc0807c00c24b3c36
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001443089_wearable_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our securities and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially the section entitled
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001444403_code_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001444403_code_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..63f501f9fe1e16581272c210d4be11942c155894
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001444403_code_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is only a summary of the information, financial statements and the notes included in this Prospectus. You should read the entire Prospectus carefully, including "Risk Factors" and our Financial Statements and the notes to the Financial Statements before making any investment decision. Unless the context indicates or suggests otherwise, the terms "Company", "we," "our" and "us" means Code Green Apparel Corp. Principal Offices Our corporate headquarters is located at 31642 Pacific Coast Highway, Suite 102, Laguna Beach, CA 92651. Our Business Code Green Apparel Corp. ("Code Green" or the "Company") was incorporated in Nevada on December 11, 2007 under the name Fluid Solutions, Inc. On May 6, 2009, Fluid Solutions, Inc. acquired all of the outstanding capital stock of GS Wyoming in exchange for 100,669,998 shares of its common stock pursuant to an Exchange Agreement dated May 6, 2009 with that corporation and its shareholders. On May 18, 2009, Fluid Solutions, Inc. changed its name to "Gold Standard Mining Corp." and effected a 3.3-to-1 forward stock split. On July 17, 2012, Gold Standard Mining Corp. changed its name to J.D. Hutt Corporation as it sought to engage in opportunities outside of mining and natural resource exploration. From that time, and for a period of nearly two years, the Company s operations consisted of seeking other opportunities. On April 26, 2014, and with the appointment of George Powell as its CEO and Sole Director, the Company officially changed its business model to offer eco-friendly corporate apparel primarily constructed from recycled textiles. To better reflect the Company s change in business direction, the Company officially changed its name to Code Green Apparel Corp. on May 15, 2015. The Company is engaged in the business of manufacturing, selling, marketing and outfitting companies of all sizes and industries with eco-friendly apparel made from recycled textiles. The corporate apparel market encompasses a wide variety of apparel products and accessories ranging from customized uniforms to caps, t-shirts and aprons. We believe that many of these companies are actively seeking ways to incorporate being more environmentally friendly into their company and would entertain mandating that all uniforms be manufactured from recycled fabrics. As all of our products are eco-friendly, our strategy is to emphasize the sustainability features while at the same time providing our products at market competitive rates. Our Stock Although our common stock is traded on the OTC Markets Group, Inc., current information tier or "Pink", under the symbol "CGAC", there is currently no public market for our common stock. Penny Stock Rules Our common stock will be considered a "penny stock", and subject to the requirements of Rule 15g-9, promulgated under the Securities Exchange Act of 1934, as amended. "Penny stock" is generally defined as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. The required penny stock disclosures include the required delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market. In addition, various state securities laws impose restrictions on transferring "penny stocks" and as a result, investors in the common stock may have their ability to sell their shares of the common stock impaired. Explanatory Note On April 20, 2016, we filed with the Securities and Exchange Commission a registration statement on Form S-1/A (File No. 333-206089) to register the sale of 44,308,609 shares of our common stock by certain selling shareholders. The Registration Statement was declared effective by the Commission on April 28, 2016. This Post-Effective Amendment No. 1 to the Form S-1/A is being filed to correct a typo on page F-3. The December 31, 2014 column for Additional paid-in capital has been updated to read 8,564,025. In our registration filed on April 20, 2016, it inadvertently stated as 8,56,025. No additional securities are being registered under this Post-Effective Amendment. All filing fees payable in connection with the registration of these securities were previously paid by us in connection with the filing of the Form S-1. The Offering Common stock offered by selling stockholders 44,308,609 shares of common stock. This number represents 11.93 (%) percent of our current outstanding common stock as of April 20, 2016. Common stock outstanding before the offering 371,349,646 common shares as of April 20, 2016. Common stock outstanding after the offering 371,349,646 shares. Terms of the Offering The selling stockholders will determine when and how they will sell the common stock offered in this prospectus. The selling stockholders intend to dispose of the shares at a fixed price of $0.037 per share until such time as our shares are quoted on the OTCQB and thereafter at prevailing market prices or privately negotiated prices. Trading Market Although our common stock is traded on the OTC Markets Group, Inc., current information tier or "Pink", under the symbol "CGAC", there is currently no public market for our common stock. Use of proceeds We are not selling any shares of the common stock covered by this prospectus. Need for Additional Financing: We believe that we may need to raise additional capital in the future. Risk Factors An investment in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth under "Risk Factors" on page 5 and the other information contained in this prospectus before making an investment decision regarding our common stock. The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement is filed with the Securities and Exchange Commission and becomes effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED APRIL 20, 2016 CODE GREEN APPAREL CORP. Relating to the Resale of 44,308,609 Shares of Common Stock By means of this prospectus a number of our shareholders are offering to sell up to 44,308,609 shares of our common stock. The selling stockholders intend to dispose of the shares at a fixed price of $0.037 per share until such time as our shares are quoted on the OTCQB and thereafter at prevailing market prices or privately negotiated prices. Our common stock is traded on the OTC Markets Group, Inc., current information tier or "Pink", under the symbol "CGAC". The Company is not a shell company as defined in Rule 405 under the Securities Act (17 CFR 230.405) and Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2). There are no underwriters, discounts or commissions. All proceeds will be distributed to the existing selling stockholders. This prospectus will not be used before the effective date of the registration statement. Information in this prospectus will be amended or completed as needed. This registration statement has been filed with the Securities and Exchange Commission. These securities will not be sold until the registration statement becomes effective. We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and, as such, have elected to comply with certain reduced public company reporting requirements for future filings. See "Description of Business: Government Regulations " contained herein and "Risk Factors" below. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. FOR A DESCRIPTION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE UNDERSTAND "RISK FACTORS" STARTING ON PAGE 6 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. The Company is not a blank check company because it has a specific business purpose and has no plans or intention to merge with an operating company. None of the Company s shareholders or management have plans to enter a change of control or change of management. The information in this Prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such state.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001445283_kineta_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001445283_kineta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea4724ee95a03c7cdedefb22786287ab5eae901f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001445283_kineta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary does not contain all of the information you should consider before buying shares of our common stock. You should read the entire prospectus carefully, especially the Risk Factors section beginning on page 12, Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 61 and our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in shares of our common stock. Overview We are an innovative biopharmaceutical company committed to the discovery and development of novel therapeutics that treat diseases caused by an imbalance in the proteostasis network, a set of pathways that control protein biosynthesis, folding, trafficking and clearance. Our initial therapeutic focus is on cystic fibrosis, or CF, which is caused by defects in the cystic fibrosis transmembrane conductance regulator, or CFTR, protein and insufficient CFTR protein function. CF is an orphan disease that affects an estimated 70,000 to 100,000 patients worldwide, with the vast majority of affected individuals in the United States, Canada, Europe and Australia. CF is the most common fatal inherited disease in Caucasians, and there is presently no cure. Our founders and scientific advisory board members include many of the world s foremost proteostasis network experts and serve as an ongoing resource to complement our internal team s core competencies. Leveraging our unique and comprehensive expertise of the proteostasis network, we have developed the Disease Relevant Translation, or DRT, technology platform, a validated drug screening approach for identifying highly translatable therapeutics based on predictive and functionally pertinent phenotypic assays and disease relevant models. Using this proprietary platform, we identified a new class of small molecules, which we call amplifiers, that modulate proteins in the proteostasis network. Our Lead Product Candidate PTI-428 Our lead product candidate PTI-428 is an orally bioavailable CFTR modulator belonging to the amplifier class. CFTR modulators are compounds that affect the folding, trafficking and clearance of CFTR protein and can be classified according to the ways in which they affect CFTR protein. Amplifiers are CFTR modulators that selectively increase the amount of the newly synthesized, unfolded form of CFTR protein, thereby providing additional substrate for other CFTR modulators, such as correctors or potentiators, to act upon. Correctors, such as lumacaftor or VX-661, are CFTR modulators that are believed to improve protein folding and trafficking to enable abnormally folded CFTR protein to achieve some level of activity without repairing the actual protein. Potentiators, such as ivacaftor, are CFTR modulators that increase the opening time of the CFTR protein channel resulting in higher ion flow across the cell membrane. Using industry-standard in vitro studies, we have confirmed that co-administration of PTI-428 with other CFTR modulators significantly improves the in vitro CFTR protein activity achieved by those CFTR modulators alone. Our in vitro studies show that PTI-428, when combined with ivacaftor and either lumacaftor or VX-661, nearly doubles the in vitro CFTR protein activity in cells homozygous for F508del, the most common CFTR gene mutation, in our Ussing Chamber Assays compared to a combination of only ivacaftor and either lumacaftor or VX-661. In December 2015, the investigational new drug application, or IND, that we submitted to the U.S. Food and Drug Administration, or FDA, for a Phase 1 clinical trial to evaluate our PTI-428 product candidate became effective. We initiated our first Phase 1 clinical trial in CF patients in the first quarter of 2016 and initiated a second Phase 1 study of PTI-428 in healthy volunteers in the second quarter of 2016. The Phase 1 trial in CF patients will include single ascending dose, or SAD, multiple ascending dose, or MAD, and proof-of-concept cohorts. The Phase 1 trial in healthy volunteers will include SAD and MAD cohorts to assess the safety, pharmacokinetic and exploratory biomarker results as well as a drug-drug interaction, or DDI, cohort to assess the potential for DDIs between oral contraceptives and PTI-428. The dose level tested in the DDI cohort will be Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion Preliminary Prospectus dated September 6, 2016 PROSPECTUS 4,250,000 Shares Common Stock We are offering 4,250,000 shares of our common stock. Our common stock is listed on The NASDAQ Global Market under the symbol PTI. The last reported sale price of our common stock on September 1, 2016 was $15.10 per share. We are an emerging growth company under federal securities laws and, as such, are subject to reduced public company disclosure standards for this prospectus and future filings. See Prospectus Summary Implications of Being an Emerging Growth Company. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 12 of this prospectus to read about the factors you should consider before buying shares of our common stock. Per Share Total Price to the public $ $ Underwriting discounts and commissions(1) $ $ Proceeds, before expenses, to us $ $ (1) See Underwriting for a detailed description of compensation payable to the underwriters. The underwriters have the option to purchase up to an additional 637,500 shares of common stock from us at the offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus. Certain of our existing principal stockholders have indicated an interest in purchasing up to an aggregate of approximately $7.0 million in shares of our common stock in this offering at the public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to such stockholders, and such stockholders may determine to purchase more, less or no shares in this offering. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares to investors against payment on or about , 2016. Leerink Partners RBC Capital Markets H.C. Wainwright & Co. Baird The date of this prospectus is , 2016 Table of Contents based on results from the SAD and MAD cohorts. We believe the in vitro profile of PTI-428 suggests a low risk of interaction with oral contraceptives. If confirmed clinically through this study, we could enroll CF patients taking oral contraceptives in future studies. DDI with oral contraceptives is a known risk with many marketed drugs including Orkambi. We have reported preliminary safety, pharmacokinetic and exploratory biomarker data from a total of 24 subjects in SAD cohorts in the Phase 1 clinical trial in healthy volunteers. Thus far, the safety review committee, which includes both our representatives and those of the clinical contract research organization that we have retained to conduct our trials, has not identified any safety concerns about PTI-428 based upon reviews of adverse events, vital signs, ECGs, chemistry and hematology lab values. Preliminary exploratory biomarker nasal CFTR mRNA and protein data confirm target engagement and provide data to support dose selection for the proof-of-concept study in CF subjects. We observed approximately a two-fold increase in CFTR mRNA and protein from nasal brushing data in subjects where PTI-428 achieved a threshold concentration. We aim to have substantially complete data sets from both Phase 1 clinical trials with topline proof-of-concept efficacy data in a total of 20 CF patients on the standard of care of Orkambi by the end of 2016. We expect the topline proof-of-concept efficacy data in those patients on Kalydeco or on PTI-428 as monotherapy by the end of the first quarter of 2017. We will assess proof-of-concept by improvement in lung function, as measured by forced expiratory volume in one second, or FEV1, after four weeks of dosing. If our Phase 1 clinical trial results are favorable, we plan to initiate our 90-day dose-ranging Phase 2 clinical trial in the first half of 2017 with topline data also expected to be available in the first half of 2017. We have exclusive worldwide commercial rights to PTI-428. Initially, we plan to pursue regulatory approval for PTI-428 in regions where ivacaftor and lumacaftor are commercially available. Given the well-characterized and clearly identified patient populations with CF in the United States, Canada, Europe and Australia, we plan to independently commercialize PTI-428 in those regions. Outside of those regions, we may seek a partner to commercialize our products. Our commercialization strategy will target key prescribing physicians and advocacy groups, as well as provide patients with support programs, ensure product access and secure reimbursement. In January 2016, we received Fast Track designation from the FDA for the investigation of PTI-428 for the treatment of CF. We have applied for orphan drug designation for PTI-428 with the FDA in the United States and plan to seek the same in the European Union, where it is projected that in 2018, the market for CF therapeutics will exceed $5 billion, of which more than $4.3 billion will be attributable to CFTR modulators. PTI-NC-733, a Novel Combination Solution Built around PTI-428 With the advent of CFTR modulators, the CF treatment paradigm is shifting from palliative care to the advancement of disease-modifying modulators that target CFTR gene mutations. We are leveraging our DRT technology platform and other expertise to design and develop our own correctors and potentiators that are optimized to work more synergistically with PTI-428 and our other amplifiers than third-party modulators. There is significant potential for improvement in clinical outcomes beyond existing treatments and therapies presently in clinical development for the treatment of CF. We believe that the treatment paradigm in CF for the vast majority of patients will be based on combination therapies of CFTR modulators anchored by PTI-428. We have nominated PTI-801, a corrector molecule, and PTI-808, a potentiator molecule, as drug development candidates that, when combined with PTI-428, are active components of PTI-NC-733, our novel triple combination product candidate. PTI-801 and PTI-808 have demonstrated desirable drug-like properties in preclinical testing, and we plan to submit INDs for both molecules by the end of this year and initiate Phase 1 studies in the first half of 2017, subject to satisfactory completion of our toxicology and other preclinical testing to support our IND applications. If our clinical trial results for PTI-428, PTI-801 and PTI-808 are favorable, we plan to initiate a proof-of-concept clinical trial with such combination in the second half of 2017. PTI-130 for the Treatment of COPD We are using our DRT technology platform to independently explore the activity of other CFTR modulators in additional respiratory diseases. PTI-130 is a novel small molecule amplifier that we are developing for the treatment of chronic obstructive pulmonary disease, or COPD, a progressive disorder characterized by poor airflow. COPD is a Table of Contents TABLE OF CONTENTS Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001450720_frontier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001450720_frontier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7f3a0f9385602c9464278e88546ee9f4b5da423
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001450720_frontier_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights certain information contained elsewhere in this prospectus. The remainder of this prospectus contains more detailed information. You should read the entire prospectus, including the appendix for each series, the Statement of Additional Information, all exhibits to the prospectus, and all documents incorporated herein by reference before deciding to invest in any series. The Trust Equinox Frontier Funds is a Delaware statutory trust (formed on August 8, 2003) that is currently publicly offering units in three separate series. Each series engages in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), swaps and options contracts and/or other derivative instruments. The purpose of each series is to seek capital appreciation while attempting to control risk and volatility. Equinox Fund Management, LLC, a commodity pool operator and the managing owner of the trust, allocates the assets of each series to a diverse group of experienced commodity trading advisors through investments in one or more trading companies managed by the managing owner and in one or more commodity pools through the Galaxy Plus Platform sponsored and operated by Gemini. The managing owner, from time to time, may also enter into swaps or other derivatives with respect to certain reference trading programs. Each series, which currently invests its assets in both trading companies managed by the managing owner and in commodity pools offered through the Galaxy Plus Platform, expects to ultimately allocate all of its assets to such commodity pools, in addition to entering into any swaps or other derivative instruments with respect to certain reference trading programs. The managing owner expects to liquidate each trading company it manages once no further assets of the series are invested in such trading company. Units are available for subscription on each business day at the then current net asset value per unit. The trust has offered other series in the past and may offer additional series in the future. Since each series has a unique trading and investment strategy, you should review the information relating to each series and its trading and investment strategy. See Appendices to Part I for additional information regarding each series and its trading and investment strategy. The trust will terminate on December 31, 2053 (unless terminated earlier in certain circumstances). See Summary of Agreements Trust Agreement. The principal offices of the trust and the managing owner are located at 1775 Sherman Street, Suite 2010, Denver, Colorado 80203, and their telephone number is (303) 837-0600. The trust and each series of the trust is a multi-advisor pool as defined in Commodity Futures Trading Commission ( CFTC ) Rule 4.10(d)(2). The Managing Owner Equinox Fund Management, LLC is a limited liability company formed in the state of Delaware in June 2003. The managing owner is the commodity pool operator of the trust and each series. The managing owner has been registered with the CFTC as a commodity pool operator since August 6, 2003, and has been a member of the NFA since that date. The managing owner has been registered with the CFTC as a swap firm since March 27, 2013. The managing owner is ultimately responsible for the selection, retention and termination of the trading advisors and investments in, and divestments from, one or more commodity pools offered through the Galaxy Plus Platform, each of which is advised by an individual trading advisor. However, the managing owner is not involved in the selection, retention or termination of any trading advisors retained by such commodity pools. The managing owner is also responsible for entering into, or terminating, the swap reference trading programs on behalf of each series. See The Managing Owner. The managing owner will maintain a 1% interest with respect to the publicly registered units of each series of the trust at all times. See The Managing Owner Managing Owner s Commitments Minimum Purchase Commitment. The managing owner has agreed to accept liability for the obligations of each series that exceed that series net assets. The managing owner, with respect to each series, will: engage in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies) and options contracts and/or other derivative instruments, which may also be affected through the investments in, Table of Contents EQUINOX FRONTIER FUNDS STATEMENT OF ADDITIONAL INFORMATION Table of Contents THE NON-MAJOR COMMODITY TRADING ADVISORS, GALAXY PLUS PLATFORM COMMODITY POOLS AND/OR REFERENCE PROGRAMS SAI 1 THE FUTURES MARKETS SAI 3 GLOSSARY OF TERMS SAI 6 BENEFITS TO INVESTING IN THE TRUST SAI 10 FUND PERFORMANCE SAI 11 MONTHLY PERFORMANCE ATTRIBUTION BY SECTOR SAI 20 FUND EXPOSURE BY FUTURES STRATEGY SAI 22 DESCRIPTION OF INDICES REFERENCED IN THIS STATEMENT OF ADDITIONAL INFORMATION SAI 28 Table of Contents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; THE TRUST 1 SECTION 1.1 Definitions. 1 SECTION 1.2 Name. 4 SECTION 1.3 Delaware Trustee; Business Offices. 5 SECTION 1.4 Purposes and Powers. 5 SECTION 1.5 Tax Treatment. 5 SECTION 1.6 General Liability of the Managing Owner. 6 SECTION 1.7 Legal Title. 6 SECTION 1.8 Series Trust. 6 ARTICLE II THE TRUSTEE 6 SECTION 2.1 Term; Resignation. 6 SECTION 2.2 Powers. 6 SECTION 2.3 Compensation and Expenses of the Trustee. 6 SECTION 2.4 Indemnification. 7 SECTION 2.5 Successor Trustee. 7 SECTION 2.6 Liability of Trustee. 7 SECTION 2.7 Reliance; Advice of Counsel. 8 ARTICLE III UNITS; CAPITAL CONTRIBUTIONS 8 SECTION 3.1 General. 8 SECTION 3.2 Limited Units. 9 SECTION 3.3 Managing Owner s Required Contribution. 10 SECTION 3.4 Establishment of Series of Units. 10 SECTION 3.5 Establishment of Classes and Sub-Classes. 11 SECTION 3.6 Assets of Series. 11 SECTION 3.7 Liabilities of Series. 11 SECTION 3.8 Series Distributions. 12 SECTION 3.9 Voting Rights. 13 SECTION 3.10 Equality. 13 SECTION 3.11 Authority of the Managing Owner to Provide for the Exchange of Units. 13 ARTICLE IV THE MANAGING OWNER 13 SECTION 4.1 Management of the Trust. 13 SECTION 4.2 Authority of Managing Owner. 14 SECTION 4.3 Obligations of the Managing Owner. 15 SECTION 4.4 General Prohibitions. 16 SECTION 4.5 Liability of Covered Persons. 17 SECTION 4.6 Indemnification of the Managing Owner. 17 SECTION 4.7 Expenses. 17 SECTION 4.8 Compensation to the Managing Owner. 18 SECTION 4.9 Other Business of Unitholders. 21 SECTION 4.10 Voluntary Withdrawal of the Managing Owner. 21 SECTION 4.11 Authorization of Registration Statements. 21 SECTION 4.12 Litigation. 21 Table of Contents EQUINOX FRONTIER FUNDS CROSS REFERENCE SHEET Item No. Registration Item Location in Prospectus 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Facing Page; Front Cover Pages. 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Table of Contents; Outside Back Cover Page. 3. Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges Summary; Risk Factors; The Managing Owner. 4. Use of Proceeds Segregated Accounts. 5. Determination of Offering Price Plan of Distribution. 6. Dilution Not Applicable. 7. Selling Security Holders Not Applicable. 8. Plan of Distribution Plan of Distribution. 9. Description of Securities to be Registered Summary of Agreements; Trust Agreement. 10. Interests of Named Experts and Counsel Not Applicable. 11. Information with Respect to the Registrant (a) Description of Business Summary. (b) Description of Property Incorporated by Reference. (c) Legal Proceedings The Managing Owner. (d) Market Price of and Dividends on the Registrant s Common Equity and Related Stockholder Matters Risk Factors. (e) Financial Statements Incorporated by Reference. (f) Selected Financial Data Incorporated by Reference. (g) Supplementary Financial Information Incorporated by Reference. (h) Management s Discussion and Analysis of Financial Condition and Results of Operations Incorporated by Reference. (i) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. (j) Quantitative and Qualitative Disclosures About Market Risk Incorporated by Reference. (k) Directors and Executive Officers The Managing Owner. (l) Executive Compensation Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; The Managing Owner. (m) Security Ownership of Certain Beneficial Owners and Management The Managing Owner. (n) Transactions with Related Person, Promoters and Certain Control Persons and Director Independence Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; Summary of Agreements Advisory Agreements; The Managing Owner. 11A. Material Changes Not Applicable. 12. Incorporation of Certain Information by Reference Summary. 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Not Applicable. Table of Contents COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT COMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 80 THROUGH 89 AS WELL AS IN THE APPENDICES ATTACHED TO THIS PROSPECTUS FOR EACH SERIES OF UNITS AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 17 THROUGH 18. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 19 THROUGH 34. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY ENGAGE IN OFF-EXCHANGE FOREIGN CURRENCY TRADING. SUCH TRADING IS NOT CONDUCTED IN THE INTERBANK MARKET. THE FUNDS THAT THE POOL USES FOR OFF-EXCHANGE FOREIGN CURRENCY TRADING WILL NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTION CONTRACTS. IF THE POOL DEPOSITS SUCH FUNDS WITH A COUNTERPARTY AND THAT COUNTERPARTY BECOMES INSOLVENT, THE POOL S CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY MAY NOT BE TREATED AS A COMMODITY CUSTOMER CLAIM FOR PURPOSES OF SUBCHAPTER IV OF CHAPTER 7 OF THE BANKRUPTCY CODE AND THE REGULATIONS THEREUNDER. THE POOL MAY BE A GENERAL CREDITOR AND ITS CLAIM MAY BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN POOL FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF PRIORITY AND OTHER GENERAL CREDITORS. SWAPS TRANSACTIONS, LIKE OTHER FINANCIAL TRANSACTIONS, INVOLVE A VARIETY OF SIGNIFICANT RISKS. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR SWAP TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THE TRANSACTION AND YOUR CIRCUMSTANCES. IN GENERAL, HOWEVER, ALL SWAPS TRANSACTIONS INVOLVE SOME COMBINATION OF MARKET RISK, CREDIT RISK, COUNTERPARTY CREDIT RISK, FUNDING RISK, LIQUIDITY RISK, AND OPERATIONAL RISK. HIGHLY CUSTOMIZED SWAPS TRANSACTIONS IN PARTICULAR MAY INCREASE LIQUIDITY RISK, WHICH MAY RESULT IN A SUSPENSION OF REDEMPTIONS. HIGHLY LEVERAGED TRANSACTIONS MAY EXPERIENCE SUBSTANTIAL GAINS OR LOSSES IN VALUE AS A RESULT OF RELATIVELY SMALL CHANGES IN THE VALUE OR LEVEL OF AN UNDERLYING OR RELATED MARKET FACTOR. IN EVALUATING THE RISKS AND CONTRACTUAL OBLIGATIONS ASSOCIATED WITH A PARTICULAR SWAP TRANSACTION, IT IS IMPORTANT TO CONSIDER THAT A SWAP TRANSACTION MAY BE MODIFIED OR TERMINATED ONLY BY MUTUAL CONSENT OF THE ORIGINAL PARTIES AND SUBJECT TO AGREEMENT ON INDIVIDUALLY NEGOTIATED TERMS. THEREFORE, IT MAY NOT BE POSSIBLE FOR THE COMMODITY POOL OPERATOR TO MODIFY, TERMINATE, OR OFFSET THE POOL S OBLIGATIONS OR THE POOL S EXPOSURE TO THE RISKS ASSOCIATED WITH A TRANSACTION PRIOR TO ITS SCHEDULED TERMINATION DATE. Table of Contents TABLE OF CONTENTS (Cont d) Page Each Series May Be Subject to Indirect Fees and Expenses Associated with Investments in Swaps or Other Derivative Instruments. 22 The Series May Be Obligated to Make Payments Under Guarantee Agreements. 22 The Failure or Bankruptcy of One of its Futures Clearing Brokers, Central Clearing Brokers, Banks, Counterparties or Other Custodians Could Result in a Substantial Loss of One or More Series Assets. 22 You May Not Be Able to Establish a Basis for Liability Against a Trading Advisor, a Clearing Broker or a Swap Counterparty. 23 The Managing Owner is Leanly Staffed and Relies Heavily on its Key Personnel to Manage the Trust s Trading Activities. The Loss of Such Personnel Could Adversely Affect the Trust. 23 The Trust and the Managing Owner Have Been Represented by Unified Counsel, and Neither the Trust Nor the Managing Owner Will Retain Independent Counsel to Review this Offering. 23 Risks Relating to Trading and the Markets 23 Futures Interests Trading is Speculative and Volatile. 23 Options Trading Can Be More Volatile and Expensive than Futures Trading. 24 Trading Swaps Creates Distinctive Risks. 24 The Trading on Behalf of Each Series Will Be Margined, Which Means that Sharp Declines in Prices Could Lead to Large Losses. 24 The Unregulated Nature of Uncleared Trades in the OTC Markets Creates Counterparty Risks that Do Not Exist in Futures Trading on Exchanges or in Cleared Swaps. 25 Foreign Currency and Spot Contracts Historically Were Not Regulated When Traded Between Certain Eligible Contract Participants and Are Subject to Credit Risk. 25 Trading on Foreign Exchanges Presents Greater Risks to the Series than Trading on U.S. Exchanges. 25 Assets Held in Accounts at U.S. Banks May Not Be Fully Insured. 26 Exchanges of Futures for Physicals May Adversely Affect Performance. 26 Cash Flow Needs May Cause Positions to Be Closed Which May Cause Substantial Losses. 26 Your Investment Could Be Illiquid. 26 The Trading Advisors Trading is Subject to Execution Risks. 26 An Investment in Units May Not Diversify an Overall Portfolio. 27 Markets or Positions May Be Correlated and May Expose a Series to Significant Risk of Loss. 27 The Trading Advisors Positions May Be Concentrated From Time to Time, Which May Render Each Series Susceptible to Larger Losses than if the Positions Were More Diversified. 27 Turnover in Each Series Portfolio May Be High, Which Could Result in Higher Brokerage Commissions and Transaction Fees and Expenses. 27 There Are Certain Risks Associated with the Trust s Investment in U.S. Government Debt Securities. 27 The Trust s Investment in U.S. Government Debt Securities Will Be Subject to Interest Rate Risk. 27 The Hedging Program Directed by Quest May Not Perform to Minimize Risk as Intended. 27 Investments in Reference Programs Through a Swap or Other Derivative Instrument May Not Always Replicate Exactly Performance of the Relevant CTA Trading Program(s). 28 Risks Relating to the Trading Advisors 28 Specific Risks Associated with a Multi-Advisor Commodity Pool. 28 Table of Contents or divestments from, trading companies managed by the managing owner and/or one or more commodity pools available on the Galaxy Plus Platform, each of which will be advised by an individual trading advisor, and enter into one or more swap contracts, and may, from time to time, engage in cash and spot transactions; maintain a portion of such series assets at the trust level for cash management; maintain separate, distinct records for each series, and account for its assets separately from the other series and the other trust assets; and calculate the net asset value of its units separately from the other series. The Units Each series is available in two classes. Class 1 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 1a) units are subject to an initial service fee equal to up to 2.0% of the purchase price and, after the first year, an ongoing annual service fee of up to 2.0% of the net asset value of your units, which is payable either monthly or quarterly (as agreed with the selling agent). The initial service fee will generally be prepaid by the managing owner to the applicable selling agent and will be reimbursed by the applicable series over the first 12 months of your investment. Class 2 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 2a) units are not subject to an initial service fee and will only be offered to investors who invest through approved selling agents who are separately compensated by the investor directly. See Fees and Expenses Service Fees. Class 2 and 2a units may be subject to ongoing service fees for certain administrative services provided by the selling agents in an amount equal to 0.25% annually of the net asset value of each unit (an additional amount of up to 0.25% of the net asset value may be paid by the managing owner), payable at the end of each month. Class 1 and 1a units and class 2 and 2a units will be redesignated as class 3 or class 3a units, respectively, of such series, for administrative purposes as of any business day when the managing owner determines in its sole discretion that the service fee limit will be reached. The service fee limit applicable to each unit sold pursuant to this prospectus is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. There are no service fees or redemption fees associated with the class 3 or 3a units. Class 3 and 3a units are not offered directly to investors and have been registered, and will be maintained, under federal and state securities laws to administer the designation of class 1, 1a, 2 and 2a units that have reached the service fee limit as class 3 or 3a units. See Plan of Distribution. The percentage return (and associated dollar amount) that your investment must earn in the indicated series, after taking into account estimated interest income, in order to break-even after one year is as follows (please see the Break-Even Analysis on page 17): Equinox Frontier Diversified Fund: Class 1 6.90% ($69.02); Class 2 4.60% ($45.96); Class 3 4.27% ($42.67); Equinox Frontier Masters Fund: Class 1 7.27% ($72.68); Class 2 5.08% ($50.81); Class 3 4.77% ($47.68); and Equinox Frontier Long/Short Commodity Fund: Class 1a 8.00% ($79.95); Class 2a 5.78% ($57.82); Class 3a 5.47% ($54.66). The offering of units is subject to federal and state securities laws and regulations, federal laws and regulations relating to investments in commodities and related products, and the rules of FINRA and NFA. The Series The trust publicly offers units in three separate series: Equinox Frontier Diversified Fund, Equinox Frontier Masters Fund and Equinox Frontier Long/Short Commodity Fund. The trust has offered other series in the past and may offer additional series and/or units in the future. The trust allocates the assets of each series to one or more of the trading advisors or reference programs described below through either the use of one or more trading companies formed in the state of Delaware and managed by the managing owner, or Table of Contents Page ARTICLE V TRANSFERS OF UNITS 22 SECTION 5.1 General Prohibition. 22 SECTION 5.2 Transfer of Managing Owner s General Units. 22 SECTION 5.3 Transfer of Limited Units. 22 ARTICLE VI DISTRIBUTION AND ALLOCATIONS 24 SECTION 6.1 Capital Accounts. 24 SECTION 6.2 Book Capital Account Allocations. 24 SECTION 6.3 Allocation of Profit and Loss for United States Federal Income Tax Purposes. 24 SECTION 6.4 Allocation of Distributions. 25 SECTION 6.5 Admissions of Unitholders; Transfers. 25 SECTION 6.6 Liability for State and Local and Other Taxes. 26 ARTICLE VII REDEMPTIONS 26 SECTION 7.1 Redemption of Units. 26 SECTION 7.2 Redemption by the Managing Owner. 27 SECTION 7.3 Redemption Fee. 27 SECTION 7.4 Exchange of Units. 27 ARTICLE VIII THE LIMITED OWNERS 28 SECTION 8.1 No Management or Control; Limited Liability. 28 SECTION 8.2 Rights and Duties. 28 SECTION 8.3 Limitation on Liability. 29 ARTICLE IX BOOKS OF ACCOUNT AND REPORTS 29 SECTION 9.1 Books of Account. 29 SECTION 9.2 Annual Reports and Monthly Statements. 29 SECTION 9.3 Tax Information. 29 SECTION 9.4 Calculation of Net Asset Value of a Series. 30 SECTION 9.5 Other Reports. 30 SECTION 9.6 Maintenance of Records. 30 SECTION 9.7 Certificate of Trust. 30 SECTION 9.8 Registration of Units. 30 ARTICLE X FISCAL YEAR 30 SECTION 10.1 Fiscal Year. 30 ARTICLE XI AMENDMENT OF TRUST AGREEMENT; MEETINGS 30 SECTION 11.1 Amendments to the Trust Agreement. 30 SECTION 11.2 Meetings of the Trust. 31 SECTION 11.3 Action Without a Meeting. 31 ARTICLE XII TERM 32 SECTION 12.1 Term. 32 ARTICLE XIII TERMINATION 32 SECTION 13.1 Events Requiring Dissolution of the Trust or any Series. 32 SECTION 13.2 Distributions on Dissolution. 33 SECTION 13.3 Termination; Certificate of Cancellation. 33 Table of Contents EQUINOX FRONTIER FUNDS Maximum Available Units Class 1/1a Class 2/2a
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001450722_frontier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001450722_frontier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7f3a0f9385602c9464278e88546ee9f4b5da423
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001450722_frontier_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights certain information contained elsewhere in this prospectus. The remainder of this prospectus contains more detailed information. You should read the entire prospectus, including the appendix for each series, the Statement of Additional Information, all exhibits to the prospectus, and all documents incorporated herein by reference before deciding to invest in any series. The Trust Equinox Frontier Funds is a Delaware statutory trust (formed on August 8, 2003) that is currently publicly offering units in three separate series. Each series engages in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), swaps and options contracts and/or other derivative instruments. The purpose of each series is to seek capital appreciation while attempting to control risk and volatility. Equinox Fund Management, LLC, a commodity pool operator and the managing owner of the trust, allocates the assets of each series to a diverse group of experienced commodity trading advisors through investments in one or more trading companies managed by the managing owner and in one or more commodity pools through the Galaxy Plus Platform sponsored and operated by Gemini. The managing owner, from time to time, may also enter into swaps or other derivatives with respect to certain reference trading programs. Each series, which currently invests its assets in both trading companies managed by the managing owner and in commodity pools offered through the Galaxy Plus Platform, expects to ultimately allocate all of its assets to such commodity pools, in addition to entering into any swaps or other derivative instruments with respect to certain reference trading programs. The managing owner expects to liquidate each trading company it manages once no further assets of the series are invested in such trading company. Units are available for subscription on each business day at the then current net asset value per unit. The trust has offered other series in the past and may offer additional series in the future. Since each series has a unique trading and investment strategy, you should review the information relating to each series and its trading and investment strategy. See Appendices to Part I for additional information regarding each series and its trading and investment strategy. The trust will terminate on December 31, 2053 (unless terminated earlier in certain circumstances). See Summary of Agreements Trust Agreement. The principal offices of the trust and the managing owner are located at 1775 Sherman Street, Suite 2010, Denver, Colorado 80203, and their telephone number is (303) 837-0600. The trust and each series of the trust is a multi-advisor pool as defined in Commodity Futures Trading Commission ( CFTC ) Rule 4.10(d)(2). The Managing Owner Equinox Fund Management, LLC is a limited liability company formed in the state of Delaware in June 2003. The managing owner is the commodity pool operator of the trust and each series. The managing owner has been registered with the CFTC as a commodity pool operator since August 6, 2003, and has been a member of the NFA since that date. The managing owner has been registered with the CFTC as a swap firm since March 27, 2013. The managing owner is ultimately responsible for the selection, retention and termination of the trading advisors and investments in, and divestments from, one or more commodity pools offered through the Galaxy Plus Platform, each of which is advised by an individual trading advisor. However, the managing owner is not involved in the selection, retention or termination of any trading advisors retained by such commodity pools. The managing owner is also responsible for entering into, or terminating, the swap reference trading programs on behalf of each series. See The Managing Owner. The managing owner will maintain a 1% interest with respect to the publicly registered units of each series of the trust at all times. See The Managing Owner Managing Owner s Commitments Minimum Purchase Commitment. The managing owner has agreed to accept liability for the obligations of each series that exceed that series net assets. The managing owner, with respect to each series, will: engage in the speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies) and options contracts and/or other derivative instruments, which may also be affected through the investments in, Table of Contents EQUINOX FRONTIER FUNDS STATEMENT OF ADDITIONAL INFORMATION Table of Contents THE NON-MAJOR COMMODITY TRADING ADVISORS, GALAXY PLUS PLATFORM COMMODITY POOLS AND/OR REFERENCE PROGRAMS SAI 1 THE FUTURES MARKETS SAI 3 GLOSSARY OF TERMS SAI 6 BENEFITS TO INVESTING IN THE TRUST SAI 10 FUND PERFORMANCE SAI 11 MONTHLY PERFORMANCE ATTRIBUTION BY SECTOR SAI 20 FUND EXPOSURE BY FUTURES STRATEGY SAI 22 DESCRIPTION OF INDICES REFERENCED IN THIS STATEMENT OF ADDITIONAL INFORMATION SAI 28 Table of Contents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; THE TRUST 1 SECTION 1.1 Definitions. 1 SECTION 1.2 Name. 4 SECTION 1.3 Delaware Trustee; Business Offices. 5 SECTION 1.4 Purposes and Powers. 5 SECTION 1.5 Tax Treatment. 5 SECTION 1.6 General Liability of the Managing Owner. 6 SECTION 1.7 Legal Title. 6 SECTION 1.8 Series Trust. 6 ARTICLE II THE TRUSTEE 6 SECTION 2.1 Term; Resignation. 6 SECTION 2.2 Powers. 6 SECTION 2.3 Compensation and Expenses of the Trustee. 6 SECTION 2.4 Indemnification. 7 SECTION 2.5 Successor Trustee. 7 SECTION 2.6 Liability of Trustee. 7 SECTION 2.7 Reliance; Advice of Counsel. 8 ARTICLE III UNITS; CAPITAL CONTRIBUTIONS 8 SECTION 3.1 General. 8 SECTION 3.2 Limited Units. 9 SECTION 3.3 Managing Owner s Required Contribution. 10 SECTION 3.4 Establishment of Series of Units. 10 SECTION 3.5 Establishment of Classes and Sub-Classes. 11 SECTION 3.6 Assets of Series. 11 SECTION 3.7 Liabilities of Series. 11 SECTION 3.8 Series Distributions. 12 SECTION 3.9 Voting Rights. 13 SECTION 3.10 Equality. 13 SECTION 3.11 Authority of the Managing Owner to Provide for the Exchange of Units. 13 ARTICLE IV THE MANAGING OWNER 13 SECTION 4.1 Management of the Trust. 13 SECTION 4.2 Authority of Managing Owner. 14 SECTION 4.3 Obligations of the Managing Owner. 15 SECTION 4.4 General Prohibitions. 16 SECTION 4.5 Liability of Covered Persons. 17 SECTION 4.6 Indemnification of the Managing Owner. 17 SECTION 4.7 Expenses. 17 SECTION 4.8 Compensation to the Managing Owner. 18 SECTION 4.9 Other Business of Unitholders. 21 SECTION 4.10 Voluntary Withdrawal of the Managing Owner. 21 SECTION 4.11 Authorization of Registration Statements. 21 SECTION 4.12 Litigation. 21 Table of Contents EQUINOX FRONTIER FUNDS CROSS REFERENCE SHEET Item No. Registration Item Location in Prospectus 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Facing Page; Front Cover Pages. 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Table of Contents; Outside Back Cover Page. 3. Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges Summary; Risk Factors; The Managing Owner. 4. Use of Proceeds Segregated Accounts. 5. Determination of Offering Price Plan of Distribution. 6. Dilution Not Applicable. 7. Selling Security Holders Not Applicable. 8. Plan of Distribution Plan of Distribution. 9. Description of Securities to be Registered Summary of Agreements; Trust Agreement. 10. Interests of Named Experts and Counsel Not Applicable. 11. Information with Respect to the Registrant (a) Description of Business Summary. (b) Description of Property Incorporated by Reference. (c) Legal Proceedings The Managing Owner. (d) Market Price of and Dividends on the Registrant s Common Equity and Related Stockholder Matters Risk Factors. (e) Financial Statements Incorporated by Reference. (f) Selected Financial Data Incorporated by Reference. (g) Supplementary Financial Information Incorporated by Reference. (h) Management s Discussion and Analysis of Financial Condition and Results of Operations Incorporated by Reference. (i) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. (j) Quantitative and Qualitative Disclosures About Market Risk Incorporated by Reference. (k) Directors and Executive Officers The Managing Owner. (l) Executive Compensation Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; The Managing Owner. (m) Security Ownership of Certain Beneficial Owners and Management The Managing Owner. (n) Transactions with Related Person, Promoters and Certain Control Persons and Director Independence Summary; Actual and Potential Conflicts of Interest; Fiduciary Responsibility; Risk Factors; Summary of Agreements Advisory Agreements; The Managing Owner. 11A. Material Changes Not Applicable. 12. Incorporation of Certain Information by Reference Summary. 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Not Applicable. Table of Contents COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT COMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 80 THROUGH 89 AS WELL AS IN THE APPENDICES ATTACHED TO THIS PROSPECTUS FOR EACH SERIES OF UNITS AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 17 THROUGH 18. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 19 THROUGH 34. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY ENGAGE IN OFF-EXCHANGE FOREIGN CURRENCY TRADING. SUCH TRADING IS NOT CONDUCTED IN THE INTERBANK MARKET. THE FUNDS THAT THE POOL USES FOR OFF-EXCHANGE FOREIGN CURRENCY TRADING WILL NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTION CONTRACTS. IF THE POOL DEPOSITS SUCH FUNDS WITH A COUNTERPARTY AND THAT COUNTERPARTY BECOMES INSOLVENT, THE POOL S CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY MAY NOT BE TREATED AS A COMMODITY CUSTOMER CLAIM FOR PURPOSES OF SUBCHAPTER IV OF CHAPTER 7 OF THE BANKRUPTCY CODE AND THE REGULATIONS THEREUNDER. THE POOL MAY BE A GENERAL CREDITOR AND ITS CLAIM MAY BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN POOL FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF PRIORITY AND OTHER GENERAL CREDITORS. SWAPS TRANSACTIONS, LIKE OTHER FINANCIAL TRANSACTIONS, INVOLVE A VARIETY OF SIGNIFICANT RISKS. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR SWAP TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THE TRANSACTION AND YOUR CIRCUMSTANCES. IN GENERAL, HOWEVER, ALL SWAPS TRANSACTIONS INVOLVE SOME COMBINATION OF MARKET RISK, CREDIT RISK, COUNTERPARTY CREDIT RISK, FUNDING RISK, LIQUIDITY RISK, AND OPERATIONAL RISK. HIGHLY CUSTOMIZED SWAPS TRANSACTIONS IN PARTICULAR MAY INCREASE LIQUIDITY RISK, WHICH MAY RESULT IN A SUSPENSION OF REDEMPTIONS. HIGHLY LEVERAGED TRANSACTIONS MAY EXPERIENCE SUBSTANTIAL GAINS OR LOSSES IN VALUE AS A RESULT OF RELATIVELY SMALL CHANGES IN THE VALUE OR LEVEL OF AN UNDERLYING OR RELATED MARKET FACTOR. IN EVALUATING THE RISKS AND CONTRACTUAL OBLIGATIONS ASSOCIATED WITH A PARTICULAR SWAP TRANSACTION, IT IS IMPORTANT TO CONSIDER THAT A SWAP TRANSACTION MAY BE MODIFIED OR TERMINATED ONLY BY MUTUAL CONSENT OF THE ORIGINAL PARTIES AND SUBJECT TO AGREEMENT ON INDIVIDUALLY NEGOTIATED TERMS. THEREFORE, IT MAY NOT BE POSSIBLE FOR THE COMMODITY POOL OPERATOR TO MODIFY, TERMINATE, OR OFFSET THE POOL S OBLIGATIONS OR THE POOL S EXPOSURE TO THE RISKS ASSOCIATED WITH A TRANSACTION PRIOR TO ITS SCHEDULED TERMINATION DATE. Table of Contents TABLE OF CONTENTS (Cont d) Page Each Series May Be Subject to Indirect Fees and Expenses Associated with Investments in Swaps or Other Derivative Instruments. 22 The Series May Be Obligated to Make Payments Under Guarantee Agreements. 22 The Failure or Bankruptcy of One of its Futures Clearing Brokers, Central Clearing Brokers, Banks, Counterparties or Other Custodians Could Result in a Substantial Loss of One or More Series Assets. 22 You May Not Be Able to Establish a Basis for Liability Against a Trading Advisor, a Clearing Broker or a Swap Counterparty. 23 The Managing Owner is Leanly Staffed and Relies Heavily on its Key Personnel to Manage the Trust s Trading Activities. The Loss of Such Personnel Could Adversely Affect the Trust. 23 The Trust and the Managing Owner Have Been Represented by Unified Counsel, and Neither the Trust Nor the Managing Owner Will Retain Independent Counsel to Review this Offering. 23 Risks Relating to Trading and the Markets 23 Futures Interests Trading is Speculative and Volatile. 23 Options Trading Can Be More Volatile and Expensive than Futures Trading. 24 Trading Swaps Creates Distinctive Risks. 24 The Trading on Behalf of Each Series Will Be Margined, Which Means that Sharp Declines in Prices Could Lead to Large Losses. 24 The Unregulated Nature of Uncleared Trades in the OTC Markets Creates Counterparty Risks that Do Not Exist in Futures Trading on Exchanges or in Cleared Swaps. 25 Foreign Currency and Spot Contracts Historically Were Not Regulated When Traded Between Certain Eligible Contract Participants and Are Subject to Credit Risk. 25 Trading on Foreign Exchanges Presents Greater Risks to the Series than Trading on U.S. Exchanges. 25 Assets Held in Accounts at U.S. Banks May Not Be Fully Insured. 26 Exchanges of Futures for Physicals May Adversely Affect Performance. 26 Cash Flow Needs May Cause Positions to Be Closed Which May Cause Substantial Losses. 26 Your Investment Could Be Illiquid. 26 The Trading Advisors Trading is Subject to Execution Risks. 26 An Investment in Units May Not Diversify an Overall Portfolio. 27 Markets or Positions May Be Correlated and May Expose a Series to Significant Risk of Loss. 27 The Trading Advisors Positions May Be Concentrated From Time to Time, Which May Render Each Series Susceptible to Larger Losses than if the Positions Were More Diversified. 27 Turnover in Each Series Portfolio May Be High, Which Could Result in Higher Brokerage Commissions and Transaction Fees and Expenses. 27 There Are Certain Risks Associated with the Trust s Investment in U.S. Government Debt Securities. 27 The Trust s Investment in U.S. Government Debt Securities Will Be Subject to Interest Rate Risk. 27 The Hedging Program Directed by Quest May Not Perform to Minimize Risk as Intended. 27 Investments in Reference Programs Through a Swap or Other Derivative Instrument May Not Always Replicate Exactly Performance of the Relevant CTA Trading Program(s). 28 Risks Relating to the Trading Advisors 28 Specific Risks Associated with a Multi-Advisor Commodity Pool. 28 Table of Contents or divestments from, trading companies managed by the managing owner and/or one or more commodity pools available on the Galaxy Plus Platform, each of which will be advised by an individual trading advisor, and enter into one or more swap contracts, and may, from time to time, engage in cash and spot transactions; maintain a portion of such series assets at the trust level for cash management; maintain separate, distinct records for each series, and account for its assets separately from the other series and the other trust assets; and calculate the net asset value of its units separately from the other series. The Units Each series is available in two classes. Class 1 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 1a) units are subject to an initial service fee equal to up to 2.0% of the purchase price and, after the first year, an ongoing annual service fee of up to 2.0% of the net asset value of your units, which is payable either monthly or quarterly (as agreed with the selling agent). The initial service fee will generally be prepaid by the managing owner to the applicable selling agent and will be reimbursed by the applicable series over the first 12 months of your investment. Class 2 (and, in the case of the Equinox Frontier Long/Short Commodity Fund, class 2a) units are not subject to an initial service fee and will only be offered to investors who invest through approved selling agents who are separately compensated by the investor directly. See Fees and Expenses Service Fees. Class 2 and 2a units may be subject to ongoing service fees for certain administrative services provided by the selling agents in an amount equal to 0.25% annually of the net asset value of each unit (an additional amount of up to 0.25% of the net asset value may be paid by the managing owner), payable at the end of each month. Class 1 and 1a units and class 2 and 2a units will be redesignated as class 3 or class 3a units, respectively, of such series, for administrative purposes as of any business day when the managing owner determines in its sole discretion that the service fee limit will be reached. The service fee limit applicable to each unit sold pursuant to this prospectus is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. There are no service fees or redemption fees associated with the class 3 or 3a units. Class 3 and 3a units are not offered directly to investors and have been registered, and will be maintained, under federal and state securities laws to administer the designation of class 1, 1a, 2 and 2a units that have reached the service fee limit as class 3 or 3a units. See Plan of Distribution. The percentage return (and associated dollar amount) that your investment must earn in the indicated series, after taking into account estimated interest income, in order to break-even after one year is as follows (please see the Break-Even Analysis on page 17): Equinox Frontier Diversified Fund: Class 1 6.90% ($69.02); Class 2 4.60% ($45.96); Class 3 4.27% ($42.67); Equinox Frontier Masters Fund: Class 1 7.27% ($72.68); Class 2 5.08% ($50.81); Class 3 4.77% ($47.68); and Equinox Frontier Long/Short Commodity Fund: Class 1a 8.00% ($79.95); Class 2a 5.78% ($57.82); Class 3a 5.47% ($54.66). The offering of units is subject to federal and state securities laws and regulations, federal laws and regulations relating to investments in commodities and related products, and the rules of FINRA and NFA. The Series The trust publicly offers units in three separate series: Equinox Frontier Diversified Fund, Equinox Frontier Masters Fund and Equinox Frontier Long/Short Commodity Fund. The trust has offered other series in the past and may offer additional series and/or units in the future. The trust allocates the assets of each series to one or more of the trading advisors or reference programs described below through either the use of one or more trading companies formed in the state of Delaware and managed by the managing owner, or Table of Contents Page ARTICLE V TRANSFERS OF UNITS 22 SECTION 5.1 General Prohibition. 22 SECTION 5.2 Transfer of Managing Owner s General Units. 22 SECTION 5.3 Transfer of Limited Units. 22 ARTICLE VI DISTRIBUTION AND ALLOCATIONS 24 SECTION 6.1 Capital Accounts. 24 SECTION 6.2 Book Capital Account Allocations. 24 SECTION 6.3 Allocation of Profit and Loss for United States Federal Income Tax Purposes. 24 SECTION 6.4 Allocation of Distributions. 25 SECTION 6.5 Admissions of Unitholders; Transfers. 25 SECTION 6.6 Liability for State and Local and Other Taxes. 26 ARTICLE VII REDEMPTIONS 26 SECTION 7.1 Redemption of Units. 26 SECTION 7.2 Redemption by the Managing Owner. 27 SECTION 7.3 Redemption Fee. 27 SECTION 7.4 Exchange of Units. 27 ARTICLE VIII THE LIMITED OWNERS 28 SECTION 8.1 No Management or Control; Limited Liability. 28 SECTION 8.2 Rights and Duties. 28 SECTION 8.3 Limitation on Liability. 29 ARTICLE IX BOOKS OF ACCOUNT AND REPORTS 29 SECTION 9.1 Books of Account. 29 SECTION 9.2 Annual Reports and Monthly Statements. 29 SECTION 9.3 Tax Information. 29 SECTION 9.4 Calculation of Net Asset Value of a Series. 30 SECTION 9.5 Other Reports. 30 SECTION 9.6 Maintenance of Records. 30 SECTION 9.7 Certificate of Trust. 30 SECTION 9.8 Registration of Units. 30 ARTICLE X FISCAL YEAR 30 SECTION 10.1 Fiscal Year. 30 ARTICLE XI AMENDMENT OF TRUST AGREEMENT; MEETINGS 30 SECTION 11.1 Amendments to the Trust Agreement. 30 SECTION 11.2 Meetings of the Trust. 31 SECTION 11.3 Action Without a Meeting. 31 ARTICLE XII TERM 32 SECTION 12.1 Term. 32 ARTICLE XIII TERMINATION 32 SECTION 13.1 Events Requiring Dissolution of the Trust or any Series. 32 SECTION 13.2 Distributions on Dissolution. 33 SECTION 13.3 Termination; Certificate of Cancellation. 33 Table of Contents EQUINOX FRONTIER FUNDS Maximum Available Units Class 1/1a Class 2/2a
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001464623_natcore_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001464623_natcore_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2e516542e8d5205880377b99ef96ebd6764d74cb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001464623_natcore_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and provides an overview of the material aspects of this offering. This summary does not contain all of the information you should consider before making an investment decision. This summary contains forward-looking statements that contain risks and uncertainties. Natcore s actual results may differ significantly from future results due to factors such as those set forth in the sections Risk Factors and Forward-Looking Statements. Investors should read this entire prospectus carefully before making an investment decision. This prospectus is part of a registration statement that the Company has filed with the Securities and Exchange Commission, (the SEC ). Under this registration process, the Company may offer and sell from time to time, on a best efforts basis, of up to8,061,111 common shares of Natcore Technology, Inc, a corporation incorporated under the laws of British Columbia (the Company ), consisting of (i) 5,000,000 newly issued common shares offered by the Company; (ii) 2,661,111 shares for resale by selling shareholders (See Selling Shareholder Table p22); and (iii)400,000shares of the Company s Common shares by LoPresti Law Group, P.C. ( LLG ) to be paid to LLG in exchange for the provision of legal services rendered (hereinafter, the shareholders listed on the Selling Shareholder Table and LoPresti Law Group, P.C. shall be collectively referred to as the Selling Shareholders ). The Company will not receive any of the proceeds from sale of shares by the Selling Shareholders. The Company will receive approximately $1,550,000 in proceeds from the sale of the newly issued shares. The Company has agreed to pay all expenses incurred in connection with the registration of the shares of common stock covered by this prospectus. Information about the Company and Selling Shareholders may change over time. Any changed information given to the Company by the Selling Shareholders will be set forth in a prospectus supplement if and when necessary. Further, in some cases, the Selling Shareholders will also be required to provide a prospectus supplement containing specific information about the terms on which they are offering and selling the Company s common stock. If a prospectus supplement is provided and the description of the offering in the prospectus supplement varies from the information in this prospectus, you should rely on the information in the prospectus supplement. THERE MAY BE SITUATIONS WHERE ALL SOURCES OF REVENUE DESCRIBED BELOW (OR ANY REVENUE AT ALL) MAY NOT BE AVAILABLE GIVEN MARKET CONDITIONS AND CUSTOMER REQUIREMENTS. THE COMPANY HAS HAD NET LOSSES IN EACH OF THE LAST THREE FISCAL YEARS 2015, 2014, 2013 OF $3,488,129 $2,193,532, AND $3,938,828, RESPECTIVELY. AS OF DECEMBER 31, 2015 THE COMPANY HAS HAD RECURRING LOSSES FROM OPERATIONS AND A CUMULATIVE DEFICIT OF APPROXIMATELY $19,916,942. THE COMPANY IS STILL CONSIDERED A DEVELOPMENT STAGE COMPANY AND HAS RECEIVED AN OPINION LETTER FROM ITS AUDITOR EXPRESSING MATERIAL UNCERTAINTY THAT MAY GIVE RISE TO SIGNIFICANT DOUBT ABOUT THE COMPANY S ABILITY TO CONTINUE AS A GOING CONCERN.IN DECEMBER 2015 AND MARCH 2016, THE COMPANY COMPLETED NON-BROKERED PRIVATE PLACEMENTS ISSUING 2,552,112 UNITS FOR GROSS PROCEEDS OF $1,143,507. AS OF MARCH 31, 2016, THE COMPANY HAD $587,636 IN CASH. THE COMPANY ANTICIPATES ITS CURRENT CASH AND CASH EQUIVALENTS WILL BE SUFFICIENT TO FUND OPERATIONS FOR APPROXIMATELY 6 MONTHS AND IS PURSUING ADDITIONAL FINANCING ALTERNATIVES, INCLUDING COMPLETING ANOTHER PRIVATE PLACEMENT, TO FUND OPERATIONS BEYOND ONE YEAR. The Company Natcore is a research and development company pioneering solar cells with improved efficiency and reduced cost. Natcore s intellectual property is currently protected by 63 patents granted or pending. Natcore does not plan to manufacture solar cells, but rather to license its technology to manufacturers through partnerships that will ultimately yield licensing and royalty revenue. Natcore s primary technology is laser-processed back-contact cells. The vast majority of solar cells produced today limit cell efficiency to about 19%. This is due to the use of front contact and thermally diffused emitters. Many front contact cells have a grid of thin metal lines that block light and thus reduce efficiency. In addition, standard solar cells are made using a thermally diffused emitter, which requires very high process temperatures (>800C). The combination of front contact and thermally diffused emitters limits current cell efficiency. Recently, a company reported 25.6% efficiency the highest efficiency ever reached for a silicon solar cell using only back contact and a silicon heterojunction (SHJ) emitter, eliminating the high-temperature diffusion steps. While this achievement showed the value of these approaches, the cell was produced using a complicated, high-cost process. Natcore s process uses highly defined regions of heavily doped silicon to form a base contact of the solar cell. Natcore then uses a powerful, focused laser beam to melt small regions of the silicon surface, which allows a specially applied dopant to penetrate the silicon matrix. Natcore has also discovered a method to laser-form the dopant regions without disturbing the high-quality emitter already present on the solar cell. This process is rapid, and thus can be performed with low-capital equipment at atmospheric conditions. In addition, Natcore has developed technology which eliminates the need for high-cost silver from mass-manufactured silicon solar cells. Currently, silver is used in the metallization process as it is highly conductive and easy to process. However, silver can represent 30% to 50% of the fabrication cost of a solar cell. Natcore s unique approach to metallization relies on a simple multilayer structure, which uses inexpensive aluminum as its main conductor, and thus results in lower production costs. This cell technology may also result in cost savings when incorporated into other modules. Generally, cell-to-module loss is 8%-10%. However, when Natcore s cells have been incorporated into the production of photovoltaic modules the cell-to-module loss was 0%, resulting in cost savings. The Company continues to be in the research and development stage and its potential products are not yet at the stage of commercial production. The Company anticipates generation of initial revenues within the fiscal year 2016, but plans to continue its research and development programs for the purposes of developing additional applications for its technologies. The Company is currently conducting its own research and development but does anticipate subcontracting certain work with joint venture partners, as described below. The Company s long-term objective is to commercialize its technologies in order to generate commercial revenues. In order for the Company to meet this long-term objective, the following events must occur: Event Target Date Cost Research and development for the Company s technologies, including identifying additional applications Ongoing Not known Additional patent and other intellectual property applications Ongoing Not known The short-term objectives of the Company over the next 12 months are to improve the efficiencies of the Company s technologies and commence licensing of the Company s technologies. In order to complete same, the Company anticipates spending between $470,000 and $670,000 outsourcing certain work with joint developer partners, including use of equipment. At this stage, it is not anticipated that the Company must expend further funds to commence licensing, but may consider allocating funds towards marketing in the future. The solar cell market is one of the fastest growing sectors of the United States economy. A significant shift is underway in the world-wide silicon solar cell industry, driven by the rising prices of silicon feedstock material. Cell producers are now moving to produce thinner solar cells to reduce their requirements for silicon feedstock. Technologies that reduce or eliminate high temperatures will be required and will be in demand. Making this long-term shift will enable the silicon solar cell industry to sustain its historic annual growth rates well into the future. New developments in technology may negatively affect the development or sale of the Company s products or make the Company s technologies obsolete. Natcore intends to maintain its competitive position and prevent the impacts of obsolescence by continuing to develop and perfect its technologies and find additional commercial usages for its technologies. Natcore is not aware of any material market controls or regulations within the technology sector which might affect the marketing of its technologies. Natcore is not aware of any material regulatory approvals necessary for its research and development work, other than approval of appropriate patent applications in the jurisdictions the Company intends to do business. Company History Natcore was a capital pool company[1] until it completed a Qualifying Transaction on May 8, 2009. The Qualified Transaction involved a reverse take-over of Syracuse Capital Corp. by Natcore Technology Inc., a Delaware company, which is now a wholly owned subsidiary of the Company. Syracuse Capital Corp. was a company incorporated under the British Columbia Business Corporations Act and a Capital Pool Company, having its common shares listed on the TSX Venture Exchange under the trading symbol SYU.P. Natcore completed its Qualifying Transaction by acquiring all of the issued and outstanding securities of Natcore Technology, Inc. a private Delaware company in consideration of the issuance of 12,960,686 common shares of the Company having a deemed price of CDN$0.40 per share and the issuance of 2,145,000 share purchase warrants, each warrant exercisable into one additional common share at a price of CDN$0.40 per share for a period of five years expiring May 9, 2014. The Company s Shares are quoted on the TSX Venture Exchange under the ticker symbol NXT and on the OTCQB marketplace under symbol NTCXF . On December 11, 2009, Natcore completed the acquisition of NewCyte, Inc. ( NewCyte ), a private Delaware company. NewCyte s portfolio of intellectual property included issued and pending patents covering the coating of fullerenes (including carbon nanotubes) with silica, dielectric and semiconducting films for a variety of potential applications, including photon, chemical and biomolecule sensing. As consideration for the purchase of NewCyte, Natcore had issued NewCyte shareholders a total of 200,000 share purchase warrants entitling the holders to acquire Natcore shares at strike prices ranging from CDN $0.75/share to CDN $2.00/share, all of which warrants have since expired. On May 19, 2010, the Company completed the acquisition of Vanguard Solar, Inc. ( Vanguard ), a private Delaware company controlling key intellectual property in the field of solar energy. Vanguard was focused on the development of a flexible, thin-film photovoltaic material believed to be capable of silicon solar cell-like efficiency performance. Vanguard employed a proprietary chemical bath process similar to Natcore s liquid phase deposition technology, although Vanguard planned to grow II-VI compound semiconductor thin films on carbon nanotubes at room temperature and ambient pressure, while Natcore has thus far concentrated on growing silicon dioxide films on silicon substrates. As consideration for the purchase of Vanguard, Natcore issued to Vanguard shareholders 375,236 common shares. In March 2012, the Company opened its Research and Development Center (the R&D Center ) in Rochester, NY. The R&D Center is enabling Natcore to develop applications based on the company s proprietary liquid phase deposition technology. The Company also entered into an exclusive worldwide licensing agreement with the National Renewable Energy Laboratory (NREL) to commercialize Black Silicon. NREL and the Company are working together to reduce solar cell costs and increase solar panel energy output. On October 25, 2012, the Company announced that its scientists created the world s first Black Silicon solar cell using processes amenable to low-cost mass production. After having previously treated a wafer to make it the blackest silicon solar cell surface ever recorded, Natcore s technicians used their scalable liquid phase deposition process to create the Black Silicon solar cell, from wafer to finished cell, in their R&D Center. The Company has taken steps to form an Australian solar panel joint venture. After having signed a Memorandum of Understanding in September 2013, the Company and the Australian group Denzo Pty Limited have begun planning for Natcore Australia, a joint venture that would produce solar cells and solar panels in Australia, with Australia as the headquarters for this activity. The joint venture would move initially with currently available technologies. Future technologies would be deployed as they become available. Natcore Australia would have exclusive access to Natcore s intellectual property portfolio in Australia. Financing for the venture would come from government and private sources. The Company made its first commercial offering with turnkey solar manufacturing programs in November 2014. The Company established a program through which it would design, supervise and build facilities to produce solar cells, solar panels and power plants for third party clients. Natcore plans to serve on these projects as a consultant or general contractor, hiring subcontractors and selecting the optimum components, prices and quality available. Clients would also gain exclusive access, on a geographical basis, to Natcore s technologies- including black silicon, laser-processing and rear contact technology- as they come on line. _____________________ 1The Capital Pool Company program is a two-step listing process offered by the TSX Venture Exchange. In step one, a new company(a Capital Pool Company ) is listed on the TSX Venture Exchange as an initial public offering. In step two (the Qualifying Transaction ), the Capital Pool Company acquires an asset or completes a transaction with a private business which results in the listing of the acquired business on the TSX Venture Exchange. If the acquired business can meet the minimum listing requirements of the Toronto Stock Exchange (the TSX ); it can be directly listed on the TSX at the closing of the Qualifying Transaction. The listing of a business via the Capital Pool Company program can be more cost and time efficient than a listing through a traditional initial public offering. On January 27, 2015, Natcore announced that it had used its proprietary advances in laser technology to produce an all-low-temperature laser-doped solar cell with all of its electrical contacts on the back of the cell. Eliminating the contacts from the cell increases output by a similar amount. While other all-back-contact cells have been produced, those cells use high-temperature diffusion in their doping steps and highly complex multi-step patterning processes to apply the electrical contacts. Natcore s all-back-contact cell, on the other hand, uses only high-speed, inexpensive laser processing to define the doping regions and the contacts. On February 17, 2015, the Company announced that it had formed a heterojunction solar sell using germanium quantum dots on an ordinary n-type silicon wafer. Quantum-dot solar cells have the potential to be transformational for terrestrial solar energy, with efficiencies far above anything available commercially as of the date of their formation. One month later, Natcore produced an all-back-contact silicon HIT-structure (heterojunction with intrinsic thin layer) solar cell using their proprietary laser technology. On July 9, 2015, Natcore developed a new solar cell structure that was expected to completely eliminate high-cost silver from mass-manufactured silicon solar cells. By August 2015 the Company was able to build an all-back-contact silicon heterojunction cell structure in which the use of silver was eliminated. This substitution was accomplished with no loss of performance and a substantial decrease in the metallization cost of a solar cell and total raw material cost of a solar module.In March 2016, the Company announced that it had reached an efficiency level of 17.5% for its laser processed cells through further refinement of its all-back contact silicon cell structure. Natcore is currently focused on using its proprietary nanotechnology discoveries to enable a variety of compelling applications including laser processing, tandem quantum-dot solar cells and its all-back-contact silicon heterojunction (HIT) cell structure, the development of which eliminates the need to use high-cost silver in mass-manufactured silicon solar cells. Natcore s laser and all-back-contact cell technologies are also aimed at replacing traditional high cost processes, while also allowing for cell efficiencies well above today s standard products. This technology combines two traditional steps in the manufacturing process thus reducing cost. To protect the Company s exclusive rights in such technologies, as of June 6, 2016, Natcore had licensed or owns 27 granted and 36 pending patents. Implications of being an Emerging Growth Company As a company with less than $1 billion in annual gross revenue during last fiscal year, Natcore qualifies as an emerging growth company pursuant to the Jumpstart Our Business Startups Act of 2012 (the JOBS Act ). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. These provisions include an exemption from the auditor attestation requirement in the assessment of the emerging growth company s internal control over financial reporting. The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. Furthermore, Natcore is not required to present selected financial information or any management s discussion herein for any period prior to the earliest audited period presented in connection with this prospectus. Natcore will remain an emerging growth company until the earliest of (1) the last day of Natcore s fiscal year during which it has total annual gross revenue of at least $1 billion; (2) the last day of its fiscal year following the fifth anniversary of the completion of this offering; (3) the date on which Natcore, during the previous three-year period, issued more than $1 billion in non-convertible debt; or (4) the date that Natcore is deemed to be a large accelerated filer under the Securities Exchange Act of 1934, or the Exchange Act. When Natcore is no longer deemed to be an emerging growth company, Natcore will not be entitled to the exemptions provided in the JOBS Act discussed above however reduced reporting obligations may still be available as a small company. If Natcore chooses to take advantage of any of these reduced reporting burdens, the information that Natcore provides shareholders may be different than what investors might get from other public companieswhich may make its common stock less attractive to investors. Natcore has opted out of the extended transition period provided in Securities Act Section 7(a)(2)(B) for complying with new accounting standards; this election is irrevocable. Competitive Landscape Given the complex nature and cost of the systems now in use by the solar cell industry, Natcore expects to offer value to its customers. Natcore s black silicon technology is expected to replace an expensive, energy and manpower intensive, thermal vacuum process with a simple wet chemistry process that will make an improved anti-reflection surface on silicon solar cells. In addition, the Company s all-back contact cell will increase efficiency and power output without an increase in manufacturing cost. An independent engineering study comparing Natcore s technology to that now used by the solar cell industry shows conclusively that solar cell manufacturing costs can be reduced by up to 23.5%. The study included both capital and lifecycle costs when making the comparison. Other studies completed by the Company have shown that Natcore s LPD technology can be tailored to solar cell technologies other than silicon, and while costs savings have not been quantified, preliminary results indicate they will result in at least single digit percentage cost reductions. The Company expects to see growing demand for low-temperature, non-vacuum, anti-reflective coating systems for the emerging solar cell market. The Company is unaware of any competing room temperature anti-reflective coating technology in development or commercial use. While current thermal and vacuum systems are adequate, Natcore s technology will enable cell producers to improve their profit margins by offering lower cost and higher throughput rates. In addition, while there are some companies that manufacture high-efficiency HIT cells, those companies use a very complicated and costly process to produce such cells. Typically, the production costs of such companies are twice as expensive as the standard commercial cells currently available. Independent industry studies also confirm substantial global growth in the production of monocrystalline silicon ( mono-silicon ) and the oversupply in the market. This is particularly important since Natcore s technologies are particularly suited to maximize the efficiencies of mono-silicon, n-type solar cells. In particular, industry studies project global mono-silicon demand will top out at less than 10GW in 2015, but global mono-silicon wafer capacity has already reached 14GW. This oversupply has led to a substantial price drop in the mono-silicon wafer market. In 2016, wafer manufacturers have been expanding their mono-silicon capacity as they are optimistic about the market prospects. In sum, industry analysts project that the global mono-silicon capacity will surpass 17GW in 2016, with the annual growth rate exceeding 20%. Nonetheless, oversupply will persist in the mono-silicon wafer market next year unless end-market demand increases substantially. Therefore, Natcore will be able to maximize the efficiencies of mono-silicon, n-type solar cells at a lower cost. Given the increasing demand for solar cell technology, competition can be expected to increase substantially. Accordingly, there can be no assurances that the Company will compete successfully with existing or new competitors, or that the competition will not have a material adverse effect on the business, operating results or financial condition of the Company. At the same time, this increased competition could also benefit Natcore since manufacturers would be anxious to access a technology that would give them cost or efficiency advantages.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001467652_neos_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001467652_neos_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6fd1b31a26ec10bc1fd1e216e073634da63e7929
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001467652_neos_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001481512_ra_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001481512_ra_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b30cfb40d752e90af1d17a9cccaa88af81262ad2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001481512_ra_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." As used in this prospectus, unless the context otherwise requires, references to the "company," "we," "us" and "our" refer to Ra Pharmaceuticals, Inc. together with its subsidiaries. Overview We are a clinical-stage biopharmaceutical company using our proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases that are caused by excessive or uncontrolled activation of the complement system, a critical component of the immune system. Inappropriate activation of the complement system can quickly turn it from a beneficial defense system to an aggressor that plays a major role in immune and inflammatory diseases. We are developing our lead product candidate, RA101495, a convenient self-administered subcutaneous, or SC, injection, which is an injection into the tissue under the skin, for the treatment of paroxysmal nocturnal hemoglobinuria, or PNH. PNH is a rare, chronic, life-threatening, blood disorder where red blood cells are mistakenly attacked and destroyed by the complement system. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and release data in the second half of 2017. We are also developing RA101495, administered SC, to treat other debilitating complement-mediated diseases such as refractory generalized myasthenia gravis, or rMG, and lupus nephritis, or LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017. RA101495 is a synthetic macrocyclic peptide, a ring-shaped chain of amino acids, which is a potent inhibitor of complement component 5, or C5. C5 plays a key role in the rupture and destruction of red blood cells, or hemolysis, associated with PNH. Inhibition of C5 is a clinically validated target for the control and suppression of complement-induced hemolysis in patients with PNH. Currently the only drug approved to treat PNH is eculizumab (Soliris), a humanized monoclonal antibody that acts as a C5 inhibitor and is administered biweekly by intravenous, or IV, infusion by healthcare professionals. Eculizumab had reported annual sales of $2.6 billion in 2015 for its two approved indications, PNH and aHUS. However, loss of hemolysis control, or breakthrough hemolysis, has been observed in patients treated with eculizumab, particularly towards the end of its two-week administration cycle. If approved for PNH, we believe RA101495 when self-administered SC on a more frequent basis, will provide sustained and improved disease control, which reduces the risk of breakthrough hemolysis, and offers PNH patients more convenience and flexibility compared with eculizumab. The complement system, which consists of approximately 30 interacting proteins, offers a target-rich opportunity for us to leverage our Extreme Diversity platform technology that was pioneered by Nobel Laureate Dr. Jack Szostak and allows us to inhibit certain uncontrolled complement pathway factors involved in complement-mediated diseases. Our platform allows us to produce synthetic macrocyclic peptides that combine the diversity and specificity of antibodies with the pharmacological properties of small molecules. The highly specific and stable peptide-like molecules generated are much smaller than monoclonal antibodies and other biologics, enabling more convenient routes of administration while still offering the opportunity to target protein-protein interactions, a type of molecular interaction that historically has been difficult to address with other small molecules. We believe our technology will allow us to pursue challenging targets for which only monoclonal antibodies have been developed. Our platform has been externally validated in a collaboration with Merck & Co., Inc., or Merck, when we successfully identified and delivered to Merck orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity. We are developing a portfolio of drug candidates designed to treat a variety of complement-mediated diseases, including rare blood, neurologic, ophthalmologic, renal and inflammatory diseases. We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies, including Factor D for ophthalmologic and renal diseases, an oral, small molecule C5 inhibitor and C1s for certain autoimmune and central nervous system, or CNS, diseases. Amendment No. 2 to FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 (1)In the table above, we refer to various indications as follows: PNH: paroxysmal nocturnal hemoglobinuria; rMG: refractory generalized myasthenia gravis; LN: lupus nephritis; AMD: age-related macular degeneration; GA: geographic atrophy; DDD: dense deposit disease; C3GN: C3 glomerulonephritis; and CNS: central nervous system. (2)We intend to leverage our work in PNH, including the chemistry, manufacturing and controls, or CMC, and preclinical data packages, to advance our programs for RA101495 for rMG and LN, which have not yet been initiated. (3)For additional information about our collaboration with Merck, see the section titled "Management's Discussion and Analysis of Financial Conditions and Results of Operations Financial Overview." RA PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Table of Contents Our Programs Our lead product candidate, RA101495, is a potent synthetic macrocyclic peptide inhibitor of C5 formulated for daily SC administration that we are initially developing for the treatment of PNH. We expect to initiate our Phase 2 clinical program for RA101495 in PNH patients in the first quarter of 2017 and to release data in the second half of 2017. In addition to developing RA101495 for PNH, we are also developing RA101495, administered SC, to treat other serious complement-mediated diseases such as rMG and LN. In the second half of 2017, we expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN. In addition to RA101495 and our collaboration with Merck, we have discovery and preclinical programs targeting selective inhibition of other complement factors, including Factor D administered by intravitreal injection for dry AMD, Factor D administered SC for DDD and C3GN, an oral, small molecule C5 inhibitor, and C1s inhibitors for certain autoimmune and CNS diseases. RA101495 for Paroxysmal Nocturnal Hemoglobinuria PNH is a rare, chronic, debilitating, acquired blood disorder that is most frequently diagnosed in early adulthood and usually continues throughout the life of the patient. Some of the prominent symptoms of PNH include severe anemia, a condition that results from having too few healthy red blood cells, severe abdominal pain, severe headaches, back pain, excessive weakness and fatigue. If not treated, PNH results in the death of approximately 35% of affected individuals within five years of diagnosis, and 50% of affected individuals within 10 years of diagnosis, primarily due to the formation of life-threatening blood clots inside the blood vessels, or thrombosis. We estimate that there are approximately 16,000 PNH patients worldwide. Eculizumab, the only drug currently approved to treat PNH, had reported worldwide sales of approximately $2.6 billion in 2015 for its two approved indications. A third-party study estimated that, as of 2015, the cost per year for treatment with eculizumab was approximately $543,000 in adults. Eculizumab is administered intravenously by healthcare professionals at biweekly intervals. RA101495 is designed to bind C5 and reduce hemolysis in humans to similar levels as eculizumab. However, RA101495 binds to a site on C5 that is distinct from that of eculizumab, potentially conferring additional benefits, including the treatment of patients with R885H/C mutations, a population of PNH patients that does not respond to eculizumab. We are developing RA101495 as a SC formulation packaged as a convenient, self-administered product that can be administered in a small daily, or less frequent, such as weekly, dose. We believe this approach will facilitate sustained hemolysis suppression, greatly reducing the possibility of breakthrough hemolysis. In our recently completed Phase 1 randomized, double-blind, placebo controlled clinical trial of RA101495 in single-ascending dose cohorts and a multiple-dose cohort, in healthy volunteers, we observed the following in subjects treated with RA101495, as compared to those receiving placebo: highly predictable, dose dependent pharmacokinetics after single and multiple dose SC injections; maintenance of robust ex vivo hemolysis suppression and complement inhibition with daily SC dosing; near-complete suppression of ex vivo hemolysis and complement activity after a single SC dose; and an acceptable safety and tolerability profile with no serious adverse events reported. We expect to initiate our Phase 2 clinical program in PNH patients in the first quarter of 2017 and to release data from this program in the second half of 2017. Table of Contents RA101495 for Refractory Generalized Myasthenia Gravis Myasthenia gravis, or MG, is a rare complement-mediated autoimmune disease characterized by the production of autoantibodies targeting proteins that are critical for the normal transmission of electrical signals from nerves to muscles. Patients present with muscle weakness that characteristically becomes more severe with repeated use, and recovers with rest. Muscle weakness can be localized to specific muscles, such as those responsible for eye movements, but often progresses to more diffuse muscle weakness. Although the prognosis of MG is generally benign, in 10% to 15% of patients disease control either cannot be achieved with current therapies, or results in severe side effects of immunosuppressive therapy. This severe form of MG is known as rMG, and affects approximately 9,000 individuals in the United States. Current therapies focus on either boosting the acetylcholine receptor signal or suppressing the immune response, and none of these treatments targets the injury to the post-synaptic muscle endplate caused by complement attack. We believe that inhibiting terminal complement activity with our C5 inhibitor RA101495 may block complement-mediated damage to the motor endplate, thereby preserving responsiveness to signaling and potentially preventing muscle weakness. We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for rMG and intend to initiate a Phase 2 clinical trial of RA101495 in patients with rMG in the second half of 2017. RA101495 for Lupus Nephritis Systemic lupus erythematosus, or SLE, is a serious, potentially lethal autoimmune disorder characterized by multi-organ involvement and a chronic relapsing clinical course. LN refers to the specific involvement of the kidney that is seen in approximately 20% of SLE patients. It is estimated that approximately 63,000 individuals in the United States have LN. Although immunosuppressive therapy has improved prognosis for patients with LN, approximately 10% to 15% of these patients will develop end-stage renal disease, requiring a kidney transplant or initiation of dialysis. These immunosuppressive treatments have significant toxicities associated with long-term use, and do not address complement-mediated tissue injury. As such, LN is associated with an approximately six-fold increase in the rate of mortality compared with the general population. We believe that RA101495, by binding C5, may prevent progression of kidney disease in LN by blocking complement-mediated damage to kidney cells. By inhibiting renal injury, we believe that RA101495 may reduce dependence on steroids and other immunosuppresive agents, thereby potentially improving the long-term outcome for patients. We plan to leverage our work in PNH to efficiently advance clinical development of RA101495 for LN and intend to initiate a Phase 1b clinical trial of RA101495 in LN in the second half of 2017. Our Discovery Programs We also have preclinical programs targeting selective inhibition of other complement factors for diseases with no approved therapies. These include: a Factor D inhibitor program for intravitreal administration designed to prevent or reduce progression of geographic atrophy, the most advanced form of dry AMD, for which there is an estimated 1,000,000 patients in the United States, thereby potentially preventing further vision loss and preserving sight; a Factor D inhibitor program designed to block certain complement activity to prevent renal injury in order to treat C3 Glomerulonephritis and dense deposit disease, which cause compromised renal function and high blood pressure and for which there are combined approximately 1,000 patients in the United States; 87 Cambridge Park Drive Cambridge, MA 02140 (617) 401-4060 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents an oral, small molecule C5 inhibitor designed to treat PNH, rMG and LN in pill form; and a C1s inhibitor program with potential applications in a range of autoimmune and CNS diseases. Our Team We were founded by Dr. Douglas A. Treco, an experienced rare disease drug developer and our chief executive officer and president, and by Dr. Jack Szostak, a pioneer in the field of mRNA display from the Massachusetts General Hospital, an affiliate of Harvard University, and Howard Hughes Medical Institute. Dr. Szostak currently serves as the chairman of our scientific advisory board and a consultant to us. Our management team consists of drug discovery, development and commercialization experts with experience in translating scientific discoveries into innovative approved products for rare diseases, including Replagal for Fabry disease, Elaprase for Hunter syndrome, and Vpriv for Gaucher's disease, as well as Dynepo for chronic kidney disease, and immunology products, including Rituxan and Actemra. Our progress has been supported by several leading biopharmaceutical investors, including New Enterprise Associates, Novartis Bioventures, Morgenthaler Venture Partners, RA Capital, Novo A/S, Amgen Ventures, Lightstone Ventures, Rock Springs Capital, and Limulus Venture Partners. Our Strategy Our goal is to become a leading biopharmaceutical company that transforms the lives of patients with serious complement-mediated diseases by combining our expertise in complement with our leadership in macrocyclic peptide technology. To achieve this goal, we are executing on the following strategy: Advance our lead program, RA101495 subcutaneous, through clinical development. In our Phase 2 clinical program, we intend to establish clinical proof-of-concept by using convenient SC self-administration in PNH patients. We believe RA101495 will provide improved control of hemolysis, reduce the risk of breakthrough hemolysis, and offer PNH patients greater convenience and flexibility. We expect to initiate our Phase 2 clinical program in PNH patients in the first quarter of 2017 and to release data in the second half of 2017. Efficiently advance clinical development of RA101495 for other serious complement-mediated diseases, such as rMG and LN. We intend to leverage our work in PNH, including the CMC and preclinical data packages, to advance RA101495 for other complement-mediated diseases, initially including rMG and LN. There is strong mechanistic and clinical evidence for a beneficial effect of C5 inhibition in patients with rMG, and in LN. We expect to initiate a Phase 2 clinical trial with RA101495 for rMG and a Phase 1b clinical trial in LN in the second half of 2017. If approved, commercialize RA101495 globally either independently or by collaborating selectively in certain geographies. We have worldwide development and commercialization rights to RA101495. We intend to independently pursue the approval and commercialization of RA101495 in PNH patients in the United States and Europe. Outside of the United States and Europe, we may pursue the approval and commercialization of RA101495 for PNH patients either independently or in collaboration with others. We intend to develop and commercialize RA101495 for other indications independently or through collaborations with third parties. Pursue clinical development of our pipeline programs targeting additional serious complement-mediated diseases with limited treatment options. In addition to developing RA101495 for PNH, rMG and LN, we are also leveraging our structural knowledge of C5 to develop traditional, oral C5 inhibitors for follow on, next generation products to RA101495 and a broader spectrum of diseases of complement dysfunction such as diabetes, autoimmune diseases and neurodegeneration. Other programs in our complement pipeline include Factor D administered Douglas A. Treco, Ph.D. President and Chief Executive Officer 87 Cambridge Park Drive Cambridge, MA 02140 (617) 401-4060 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents by intravitreal injection, a clinically validated approach for dry AMD, Factor D administered SC for orphan renal diseases, DDD and C3GN, and C1s inhibitors for certain autoimmune and CNS diseases. Enhance our leadership position in the field of macrocyclic peptide technology through continued development of our Extreme Diversity platform. We have validated our Extreme Diversity platform by successfully identifying and delivering orally-available cyclic peptides for a non-complement cardiovascular target with a large market opportunity in a collaboration with Merck. We intend to enhance our proprietary drug discovery capabilities by expanding the chemical diversity of our peptide libraries to identify molecules with more favorable drug-like properties. We are also using our novel macrocyclic peptides to guide the development of next-generation, orally-available small molecule drugs that bind to and inhibit targets in similar ways as the original peptides. Our Extreme Diversity Platform RA101495 and our pipeline of peptide product candidates were discovered using our Extreme Diversity platform, our proprietary technology that allows us to rapidly and efficiently discover cyclic peptides comprised of natural and non-natural amino acids, with the advantages set forth below. High affinity and potency. Our peptides are cyclic, and therefore are conformationally rigid, thereby "locking" the molecule in the conformation in which it binds optimally to its target and leading to affinity and potency similar to antibodies. High specificity. Our peptides are larger than most drugs taken in pill form, allowing them to have more contact points when bound to their targets, thus affording similar specificity as antibodies. Novel mechanisms of interaction. The use of non-natural amino acids with new chemical functionalities expands the manner in which peptides can interact with target proteins, potentially enabling new mechanisms to modulate protein function in the body. High stability. The backbone modification and relatively rigid, cyclic structure of our peptides are designed to reduce degradation. As a result, we believe our peptides will have higher stability in the body than natural peptides. Further, they will not denature or unfold over time, and have higher stability than antibodies and biologics, potentially allowing for room temperature storage over the entire distribution chain. Improved bioavailability. The relatively small size of our peptides allows them to enter the circulation readily when administered by a variety of potential routes, including subcutaneous injection or oral administration, an advantage over many monoclonal antibody and biologic therapies which require intravenous infusion. Half-life modification. As synthetic products, we can readily modify our cyclic peptides with chemical groups that modify the circulating half-life in the body, including lipids, carbohydrates, and polymers such as polyethylene glycol, providing the potential to optimize dosing by fine-tuning the pharmacokinetic properties. Reduced safety risks. Unlike antibodies and biologics, our peptides are completely synthetic, eliminating the potential for viral and cellular protein contamination, risks to therapeutics produced in mammalian cells, and potentially allowing for administration to patients with hypersensitivity to products produced using mammalian cells. Favorable manufacturing processes and costs. As synthetic products, our peptides do not need complex fermentation facilities, allowing their production to be easily sourced from multiple vendors at lower costs than mammalian cell products. Copies to: Kingsley L. Taft, Esq. Ryan S. Sansom, Esq. Goodwin Procter LLP 100 Northern Avenue Boston, Massachusetts 02210 (617) 570-1000 David C. Lubner Executive Vice President and Chief Financial Officer Ra Pharmaceuticals, Inc. 87 Cambridge Park Drive Cambridge, Massachusetts 02140 (617) 401-4060 Peter N. Handrinos, Esq. Brandon J. Bortner, Esq. Latham & Watkins LLP John Hancock Tower 200 Clarendon Street Boston, Massachusetts 02116 (617) 948-6000 Table of Contents Risks Associated with Our Business Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include the following. We have a history of significant operating losses, and expect to incur significant and increasing losses for the foreseeable future, and may never achieve or maintain profitability and investors may lose their entire investment. Our independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability to continue as a going concern. we will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and product development programs or commercialization efforts; we are at a very early stage in our development efforts, our approach is unproven and we may not be able to successfully develop and commercialize any product and discovery candidates; our business depends heavily upon the success of RA101495, which is still under development. If we are unable to obtain regulatory approval for or successfully commercialize RA101495, our business will be materially harmed; if clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we, or any future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates; even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates; we rely on third parties to conduct our clinical trials and to manufacture and distribute our product candidates for our clinical trials. If these third parties do not perform satisfactorily, our development or commercialization efforts could be delayed or impaired; we expect to seek to establish collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans; and if we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business. Corporate History We were incorporated under the laws of the State of Delaware in June 2008 under the name Ra Pharmaceuticals, Inc. Our executive offices are located at 87 Cambridge Park Drive, Cambridge, Massachusetts 02140, and our telephone number is (617) 401-4060. Our website address is www.rapharma.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus. We own various U.S. federal trademark applications and unregistered trademarks, including our company name, Ra Pharmaceuticals, Ra Pharma and our logo. All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Accelerated Filer Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller Reporting Company Table of Contents trademarks and trade names in this prospectus are referred to without the symbols and , but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. Implications of Being an Emerging Growth Company We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure; reduced disclosure about our executive compensation arrangements; no non-binding advisory votes on executive compensation or golden parachute arrangements; exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and an exemption from new or revised financial accounting standards until they would apply to private companies and from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation. We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. We have irrevocably elected to "opt out" of the exemption for the delayed adoption of certain accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered(1) Proposed Maximum Offering Price Per Share Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee(3) Common Stock, par value $0.0001 per share 6,670,000 $14.00 $93,380,000 $9,513 (1)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act. Includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. (2)Calculated pursuant to Rule 457(a) under the Securities Act based on an estimate of the proposed maximum aggregate offering price. (3)$8,686 of this registration fee was previously paid by the Registrant to register securities in the proposed maximum aggregate offering price of $86,250,000 on September 30, 2016. Table of Contents THE OFFERING Common stock offered in this offering 5,800,000 shares Common stock to be outstanding immediately after this offering 20,239,550 shares (21,109,550 shares if the underwriters exercise their option to purchase additional shares in full) Underwriters' option to purchase additional shares We have granted a 30-day option to the underwriters to purchase up to an aggregate of 870,000 additional shares of common stock from us at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus. Use of proceeds We estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of approximately $68.4 million, or $78.9 million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to fund development of RA101495 through Phase 2 clinical trials in PNH patients and rMG patients, and through our Phase 1b clinical trial in LN patients, advance our pipeline programs and for working capital and other general corporate purposes. For a more complete description of our intended use of the proceeds from this offering, see "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001496646_direxion_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001496646_direxion_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..27288fb8e8d214c2902dd768eee2aea1ab92f6e3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001496646_direxion_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1 1 d308740ds1.htm S-1 S-1 Table of Contents As filed with the Securities and Exchange Commission on December 14, 2016 Registration No. 333-[ ] UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Direxion Shares ETF Trust II (Exact name of registrant as specified in its charter) Delaware 6799 27-6710917 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 1301 Avenue of the Americas (6th Avenue), 28th Floor New York, New York 10019 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Daniel D. O Neill 1301 Avenue of the Americas (6th Avenue), 28th Floor New York, New York 10019 Copies to: W. Thomas Conner Angela Brickl Reed Smith LLP Direxion Asset Management, LLC 1301 K St., NW 1301 Avenue of the Americas (6th Avenue), Suite 1100, 28th Floor East Tower New York, New York 10019 Washington, DC 20005 (Name, address, including zip code, and telephone number, including area code, of agent for service) (Approximate date of commencement of proposed sale to the public): As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price(1) Amount of Registration Fee(2) Direxion Daily Crude Oil Bull 3X Shares Shares of Beneficial Interest $20,000,000 $2,318 Direxion Daily Crude Oil Bear 3X Shares Shares of Beneficial Interest $20,000,000 $2,318 (1) The proposed maximum aggregate offering price has been calculated assuming that Shares are sold at a price of $25.00 per Share. (2) The amount of the registration fees for the indicated securities have been calculated in reliance upon Rule 457(o) under the Securities Act of 1933, as amended (the 1933 Act ). This amount is being paid contemporaneously with the filing of this Registration Statement. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents DIREXION SHARES ETF TRUST II TABLE OF CONTENTS DISCLOSURE DOCUMENT Page PART ONE 1 OFFERED SERIES DISCLOSURE 1 SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001497350_inventiv_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001497350_inventiv_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4c95b61ee8c325faae7f7cb4ca1aed25850c0d79
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001497350_inventiv_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information appearing elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read this entire prospectus carefully, including the section entitled Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, Unaudited Pro Forma Condensed Consolidated Financial Information and our consolidated financial statements and the notes thereto included elsewhere in this prospectus, before investing in our common stock. The terms inVentiv, Company, we, us and our refer to inVentiv Group Holdings, Inc. and its consolidated subsidiaries. Various financial terms, including EBITDA, Adjusted EBITDA and Constant currency net revenues are described under Summary Consolidated Financial and Operating Data and Management s Discussion and Analysis of Financial Condition and Results of Operations Exchange Rate Fluctuations. Overview We are a leading global provider of outsourced clinical development and commercialization services to biopharmaceutical companies. We are the only provider delivering a full suite of services to enhance our clients ability to successfully develop, launch and market their products. We offer our services on both a standalone basis and as integrated solutions to support clinical development and commercialization. Our solutions are designed to drive greater efficiency and lower costs. We helped develop or commercialize over 80% of all new molecular entities approved by the Food and Drug Administration ( FDA ) and 70% of those products granted marketing authorization by the European Medicines Agency ( EMA ) over the last five years through our innovative model. In 2015, we served more than 550 client organizations, including all 20 of the largest global biopharmaceutical companies, and have the ability to service clients in over 90 countries. We focus on the large and rapidly growing outsourcing component of the estimated $250 billion biopharmaceutical clinical development and commercialization market. Our services cover the entire biopharmaceutical development and commercialization continuum spanning from first-in-human clinical trials to the ongoing commercialization of mature products. Our services are designed to enhance our clients revenues and profitability, increase the likelihood of success of their clinical programs and commercial efforts and accelerate the execution of their projects in order to shorten the time from lab to life. Our Clinical business is a leading global contract research organization ( CRO ) that is therapeutically-focused and provides a wide range of capabilities, including Phase I (early stage) and Phase II IV clinical development, delivered on a project (full service), functional (strategic resourcing) or hybrid basis. Our services are designed to accelerate our clients pursuit of regulatory approval. We provide our services through teams that possess operational and scientific expertise in a broad range of therapeutic areas with a particular focus in high growth areas such as oncology, neuroscience, pain and respiratory. Our Commercial business is a contract commercial organization ( CCO ), the biopharmaceutical industry s only provider of a full suite of complementary commercialization services, including selling solutions, communications, consulting and medication adherence. We believe this unique CCO model provides a competitive advantage by integrating strategic, creative and operational expertise enhanced by the deep therapeutic expertise from our Clinical business to help optimize performance, reduce risk and expedite delivery of innovative products. We have over 15,000 employees globally, including more than 750 M.D.s and Ph.D.s, and offer clients a differentiated set of solutions designed to enhance operational and financial efficiencies across the clinical development and commercialization continuum. Our Clinical and Commercial segments inform and enhance one another, and the flexibility of our model allows us to provide additional services over time as the needs of our clients evolve. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JUNE 27, 2016 Shares inVentiv Group Holdings, Inc. Common Stock This is an initial public offering of shares of common stock of inVentiv Group Holdings, Inc. We are offering shares of common stock. Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $ and $ per share. We intend to apply to list our common stock on the New York Stock Exchange ( NYSE ) under the symbol INV. The underwriters have an option, for a period of 30 days from the date of this prospectus, to purchase a maximum of additional shares of our common stock at the initial public offering price, less the underwriting discount. We will be a controlled company under the corporate governance rules for NYSE-listed companies and therefore we will be permitted to, and we intend to, elect not to comply with certain NYSE corporate governance requirements. See Management. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 23. Initial public offering price Underwriting discounts and commissions(1) Proceeds to us Per Share $ $ $ Total $ $ $ (1) We have agreed to reimburse the underwriters for certain FINRA-related expenses in connection with this offering. See Underwriting. Delivery of the shares of common stock will be made on or about , 2016. Neither the Securities and Exchange Commission (the SEC ) nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Credit Suisse Morgan Stanley Goldman, Sachs & Co. Jefferies Citigroup BofA Merrill Lynch Barclays Wells Fargo Securities Baird William Blair The date of this Prospectus is , 2016 Table of Contents INDUSTRY AND MARKET DATA Some of the market and industry data contained in this prospectus are based on independent industry publications or other publicly available information. Although we believe that these independent publications and other publicly available information are reliable as of their respective dates, we have not verified the accuracy or completeness of the data presented from independent sources. In addition, certain market and industry data contained in this prospectus are based on internal data, studies and management estimates, which are derived from information obtained from analysts reports, independent industry publications or publicly available sources, as well as our clients, partners, trade and business organizations and other contacts in the markets in which we operate, and also reflect our management s understanding of industry conditions. In particular, our estimates of current commercialization spend and the growth rate of commercialization spend by biopharmaceutical companies through 2020 is based on the assumption that growth in selling, general and administrative ( SG&A ) expenses is indicative of growth in commercialization expenses, its largest component, over the same period. Although we believe that such information included in this prospectus is reliable as of their respective dates, such data, studies and estimates, particularly as they relate to market size, market growth, penetration, market share and our general expectations, involve important risks, uncertainties and assumptions and are subject to change based on various factors, including those discussed under Risk Factors and Cautionary Note Regarding Forward-Looking Statements in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates and beliefs made by the independent parties and by us. References in this prospectus to (i) our top clients are based upon such clients contribution to our 2015 net revenues and (ii) the largest global biopharmaceutical companies are based upon 2014 revenues within the biopharmaceutical industry. TRADEMARKS AND TRADE NAMES inVentiv Health and the associated logo are some of our registered and unregistered trademarks. This prospectus also includes other registered and unregistered trademarks of ours. All other trademarks, tradenames and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, certain trademarks, service marks and trade names referred to in this prospectus are listed without the and symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. Table of Contents The creation of our comprehensive and integrated approach to serve the biopharmaceutical development and commercialization continuum began in 2010 with our acquisition by our sponsor, Thomas H. Lee Partners, L.P. ( THL ). We have made substantial investments, strategic acquisitions and operational changes to expand and strengthen our clinical development and commercial service offerings, geographic presence, human capital, systems and infrastructure to better serve our clients. These strategic and operational initiatives included: Completion and integration of 10 strategic acquisitions, including three CROs, to offer a full suite of services on a global basis; Enhancement of therapeutic area focus with particular expertise in oncology, neuroscience, pain and respiratory; Integration and rationalization of legacy commercial acquisitions and separately-operated brands into the biopharmaceutical industry s only CCO providing a full suite of complementary commercialization services; Expansion of our geographic capabilities in Japan, India, Western Europe, Latin America and China; Evolution of our selling solutions capabilities into a market-leading strategic offering with expertise in helping clients launch and market complex biopharmaceutical products; and Recruitment of Michael A. Bell, our Chairman and CEO who has extensive experience across the healthcare delivery continuum and who has managed and grown sophisticated global service organizations. These initiatives have helped us create a leading biopharmaceutical outsourcing business with an unmatched ability to provide a full suite of integrated services to meet our clients needs. Each of our top 10 clients and 24 of our top 25 clients utilized services from both our Clinical and Commercial segments in 2015. The following financial metrics are reflective of our improved performance: Net revenues increased 10.4% on an as-reported basis (13.0% on a constant currency basis) from 2014 to $1,994.3 million in 2015, and increased 20.0% on an as-reported basis (21.5% on a constant currency basis) from the first quarter of 2015 to $541.3 million in the first quarter of 2016. Clinical segment net revenues increased 8.9% from 2014 to $947.9 million (47.2% of total net revenues) in 2015, and increased 16.0% from the first quarter of 2015 to $254.9 million (46.7% of total net revenues) in the first quarter of 2016. Table of Contents Table of Contents Commercial segment net revenues increased 12.3% from 2014 to $1,059.9 million (52.8% of total net revenues) in 2015, and increased 24.1% from the first quarter of 2015 to $290.9 million (53.3% of total net revenues) in the first quarter of 2016. Net loss decreased 20.2% from 2014 to $150.6 million in 2015, and decreased 58.5% from the first quarter of 2015 to $18.7 million in the first quarter of 2016. Net loss as a percentage of net revenues decreased from 10.5% in 2014 to 7.6% in 2015, and decreased from 10.0% in the first quarter of 2015 to 3.4% in the first quarter of 2016. Adjusted EBITDA increased 35.9% from 2014 to $281.1 million in 2015, and increased 61.9% from the first quarter of 2015 to $85.0 million in the first quarter of 2016. Adjusted EBITDA as a percentage of net revenues increased from 11.4% in 2014 to 14.1% in 2015, and increased from 11.6% in the first quarter of 2015 to 15.7% in the first quarter of 2016. See Summary Consolidated Financial and Operating Data for a discussion of Adjusted EBITDA and Management s Discussion and Analysis of Financial Condition and Results of Operations Exchange Rate Fluctuations for a discussion of constant currency net revenues. Our Markets Global demand for biopharmaceutical products is expected to continue to increase in both developed and emerging markets, driven by expanding access to care, increasing life expectancy and the growing prevalence of chronic conditions. Growing regulatory requirements, pricing and reimbursement challenges, a need to replenish product pipelines and a shift to more targeted and personalized medicines are driving higher costs and complexities and increasing pressures on biopharmaceutical companies. Additionally, advancements in science are driving new therapies (such as gene therapies, stem cells and biologics) that necessitate more complex clinical development and commercialization services. Faced with these pressures, biopharmaceutical companies are increasingly seeking to improve the efficiencies and effectiveness of their clinical development and commercialization activities by outsourcing these services throughout the entire product lifecycle. In particular, the following trends are expected to increase demand for outsourced clinical development and commercialization services: Growth in R&D Spending. We estimate the total research and development ( R&D ) spending in the biopharmaceutical industry was approximately $140 billion in 2015. Potential outsourcing development spending accounted for approximately 70%, or $100 billion, and is estimated to grow approximately 4% annually through 2020. Increased Product Commercialization Spending. We estimate that spending related to product commercialization in the biopharmaceutical industry exceeded $150 billion in 2015 and will grow at approximately 2% to 3% annually through 2020. Expansion in the Use of Outsourcing Services. We estimate that total clinical development outsourcing to CROs in 2015 was approximately 30% of total potential outsourcing development spending, representing an approximately $30 billion market. This market is expected to achieve approximately 40% penetration, or approximately $55 billion of spending, by 2020. Because the market for product commercialization services is more diverse, it is difficult to estimate the current amount of outsourced product commercialization services and the expected growth in such services. However, we estimate that less than 15% of product commercialization expenditures are currently being outsourced. As business models continue to evolve in the healthcare sector, we believe that the rate of commercial outsourcing could follow a similar path to the clinical development market. Table of Contents TABLE OF CONTENTS Industry and Market Data ii Trademarks and Trade Names ii Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001498068_american_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001498068_american_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ef3ef9145b51411d8d06b5760edf924991a1254c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001498068_american_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of selected information contained elsewhere in this prospectus. It does not contain all of the information that you should consider before deciding to purchase shares of our common stock. You should read this entire prospectus carefully, especially the "Risk Factors" section immediately following this prospectus summary and the consolidated financial statements and the notes to the financial statements at the end of this prospectus. Overview We are the largest dialysis services provider in the United States focused exclusively on joint venture partnerships with physicians. We provide high-quality patient care and clinical outcomes to patients suffering from the most advanced stage of chronic kidney disease, known as end stage renal disease ("ESRD"). Our core values create a culture of clinical autonomy and operational accountability for our physician partners and staff members. We believe our joint venture ("JV") model has helped us become one of the fastest-growing national dialysis services platforms, in terms of the growth rate of our non-acquired treatments since 2012. We operate our clinics exclusively through a JV model, in which we partner primarily with local nephrologists to develop, own and operate dialysis clinics, while the providers of the majority of dialysis services in the United States operate through a combination of wholly owned subsidiaries and joint ventures. Each of our clinics is maintained as a separate joint venture in which generally we have the controlling interest and our nephrologist partners and other joint venture partners have a noncontrolling interest. As of December 31, 2015, on average we held 54% of the interests in our clinics and our nephrologist partners held 46% of the interests. We believe our JV model, combined with a high-quality operational infrastructure, provides our physician partners the independence to make improved clinical decisions so they can focus on maximizing patient care and grow their clinical practices. We believe our approach has attracted physician partners and facilitated the expansion of our platform through de novo clinics. Since 2012, we have opened 15 or more de novo clinics each year. As of December 31, 2015, we owned and operated 192 dialysis clinics in partnership with 347 nephrologist partners treating over 13,000 patients in 24 states and the District of Columbia. From 2012 to 2015, our total number of treatments grew at a compound annual growth rate ("CAGR") of 15.0%, driven primarily by increases in non-acquired treatments, which grew at a CAGR of 11.1%. During the same period, our revenues, Adjusted EBITDA-NCI and net income attributable to us has grown at a CAGR of 15.7%, 11.6% and 28.2%, respectively. For the year ended December 31, 2015, our revenues, Adjusted EBITDA-NCI and net income attributable to us reached $657.5 million, $113.8 million and $18.8 million, respectively. For definitions of Adjusted EBITDA and Adjusted EBITDA-NCI and a reconciliation of Adjusted EBITDA and Adjusted EBITDA-NCI to net income (loss), see " Summary Historical and Pro Forma Consolidated Financial Data." Our Strategy Differentiates Our Business Model We strive for best-in-class physician partnership, patient care and staff satisfaction. Our core values emphasize quality patient care, providing physicians with clinical autonomy and operational support, hiring and retaining the best possible staff and providing best practices management services. We believe our track record has built premier brand recognition for the ARA brand, further validating our core values and our strategy. Amendment No. 5 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION Unless otherwise indicated or the context otherwise requires, references in this prospectus to "we," "our," "us" and "our company" and similar terms refer to American Renal Associates Holdings, Inc. and its consolidated entities taken together as a whole, except where these terms refer to providers of dialysis services, in which case they refer to our dialysis clinic joint ventures, in which we have a controlling interest and our physician partners have the noncontrolling interest, or to the dialysis facilities owned by such joint venture companies, as applicable. References to "ARA" and "Holdings" refer to American Renal Associates Holdings, Inc. and not any of its consolidated entities. References to "ARH" refer to American Renal Holdings Inc., an indirect wholly owned subsidiary of Holdings. Our financial statements reflect 100% of the revenues and expenses for our joint ventures (after elimination of intercompany transactions and accounts) and 100% of the assets and liabilities of these joint ventures (after elimination of intercompany assets and liabilities), although we do not own 100% of the equity interests in these consolidated entities. The net income attributable to our joint venture partners is classified within the line item Net income attributable to noncontrolling interests, which we refer to as "NCI." In this prospectus, we refer to "non-acquired" treatments and revenues. We consider our existing clinics and our newly developed or "de novo" clinics (including those with existing partners) to be our non-acquired clinics, and we refer to treatments performed at those clinics as non-acquired treatments. We evaluate our operating performance based on non-acquired treatment growth, which we calculate by dividing the number of treatments performed during the applicable period by the number of treatments performed during the corresponding prior period, in each case, excluding the number of treatments performed at clinics acquired during the applicable period, and expressing the resulting number as a percentage. Our non-acquired revenues consist of revenues generated by our existing and de novo clinics during the applicable period. In this prospectus, we present certain financial information on a per treatment basis by dividing the relevant number by the number of treatments performed in the applicable period. In particular, we evaluate our patient service operating revenues, patient care costs, general and administrative expenses and provision for uncollectible accounts on a per treatment basis to assess our operational efficiency. In this prospectus, we refer to the number of de novo clinics opened during specific periods and the number of clinics as of the end of such periods. We consider a de novo clinic to be opened at the time when such clinic performs its first treatment and include in the number of clinics those clinics that are still performing treatments as of the date specified. We present Adjusted EBITDA and Adjusted EBITDA-NCI as non-U.S. generally accepted accounting principles ("non-GAAP") financial measures in various places throughout this prospectus, including under "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Our presentation of Adjusted EBITDA and Adjusted EBITDA-NCI has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. generally accepted accounting principles ("GAAP"). We believe Adjusted EBITDA and Adjusted EBITDA-NCI provide information useful for evaluating our business and understanding our operating performance in a manner similar to management. Because Adjusted EBITDA and Adjusted EBITDA-NCI are not measures determined in accordance with GAAP and are susceptible to varying calculations, we caution investors that these measures as presented may not be comparable to similarly titled measures of other companies. Under "Prospectus Summary Summary Historical and Pro Forma Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations Adjusted EBITDA," we include a quantitative reconciliation of Adjusted EBITDA and Adjusted EBITDA-NCI to net income and net income attributable to us, the most directly comparable GAAP financial performance measures. Table of Contents Our Core Values Drive Our Strategy and Delivery of Outstanding Patient Care and Clinical Outcomes We provide nephrologists the clinical autonomy and operating infrastructure to take excellent care of their patients. We value our clinic staff members and seek to hire and retain the most well-trained qualified staff. In conjunction with our medical directors, we proactively develop and suggest clinical protocols, clinical training and best practices to be shared across our network. Our corporate office focuses on the needs of our doctors, patients and staff. As a result, our physicians and staff have delivered an outstanding track record of clinical, operating and financial performance. Exclusive Focus on the JV Model Drives Clinical and Operational Excellence Our founders were among the first to recognize and implement the JV model for providing dialysis services in the United States, which we believe provides significant benefits for our patients, providers and payors. Our JV model aligns the interests of our physician partners with ours and enables physicians to focus on high-quality patient outcomes. We believe that such alignment of interests makes us a preferred partner for nephrologists. Our joint venture partners include both individual nephrologists and affiliated groups of nephrologists, including many groups that have interests in multiple clinics with us. In addition, we provide best practices management services to our JV clinics and physician partners, including patient insurance education, revenue cycle management, regulatory and clinical compliance and other back-office operations. We believe that our operational infrastructure helps us deliver quality patient care. Predictable Clinic Growth Model with Proven Track Record We have 143 de novo clinics as of December 31, 2015. Our track record has helped us establish a predictable de novo clinic model for the unit economics, growth and returns of each new clinic. Since 2012, we have opened 15 or more de novo clinics each year; the historical growth of these clinics provides evidence of the consistency and success of our de novo clinic model. We have also successfully applied our clinic development expertise to 49 clinics as of December 31, 2015 that we have acquired and integrated with our JV model. Our track record helps us attract new nephrologists and maintain an active pipeline of de novo clinics to be opened in the near future. Our Opportunity We believe our strategy has positioned us to benefit from trends in the dialysis services and broader physician services markets. Growing Prevalence of the Joint Venture as a Model for Providing Dialysis Services A significant portion of dialysis clinics in the United States are wholly owned. However, we believe the JV model has gained in prevalence as the dialysis services model for practicing nephrologists and has been growing rapidly over the past several years. According to a report prepared for the American Society of Nephrology, there are over 10,000 full-time practicing nephrologists in the United States, and we believe that a significant portion of these physicians treat their patients at clinics in which they have no ownership interest. As of December 31, 2015, we have partnered with 347 of these nephrologists, or less than 4% of all full-time practicing nephrologists in the United States, giving us significant opportunity to grow as a premier JV model operator within the nephrologist community. Large Dialysis Services Market with Favorable Demographics The number of ESRD patients in the United States has historically grown at a rate of 3% to 5% annually since 2000 and has grown approximately 77% from 2000 to 2014. As of December 31, 2014, there were 692,268 patients with ESRD in the United States. From 2000 to 2013, the prevalence rate of ESRD per million in the U.S. population (adjusted for sex and race) increased approximately 15% for ages 22 to 44; approximately 24% for ages 45 to 64; approximately 31% for ages 65 to 74; and AMERICAN RENAL ASSOCIATES HOLDINGS, INC. (Exact name of Registrant as specified in its charter) Table of Contents MARKET AND INDUSTRY DATA Certain market data and other statistical information used throughout this prospectus are based on the July 2015 ESRD Quarterly Update, the 2015 Annual Data Report, the 2014 Annual Data Report and the 2013 Annual Data Report prepared by the United States Renal Data System ("USRDS") and information from the Centers for Medicare and Medicaid Services ("CMS"). Some data is also based on our good faith estimates and derived from management's review of internal data and information, as well as independent sources such as independent industry publications, government publications, reports by market research firms or other published independent sources. Although we believe these sources are reliable, we have not independently verified the information contained therein. The most recent information reported in the USRDS 2015 Annual Data Report is as of and for the year ended December 31, 2013. The most recent information reported in the USRDS July 2015 ESRD Quarterly Update is as of and for the year ended December 31, 2014. In recent years, the gap between patient numbers and patient number growth rates reported by the two leading U.S. data sources has widened, accompanied by a significant time lag in reporting this data. This could lead to revised data for both reported patient numbers as well as growth rates for the U.S. market in the future. TRADEMARKS, SERVICE MARKS AND TRADE NAMES AmericanRenal , AmericanRenal Associates , ARA , The Nephrologist is the Center of Our Universe , the American Renal Associates logo and other trademarks, service marks and trade names of our company appearing in this prospectus are our property. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this prospectus are without the and symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. Table of Contents more than 50% for ages 75 and older. Those with ESRD require dialysis or kidney transplantation to sustain life. As of December 31, 2013, the dialysis population reached 466,607 patients, an increase of approximately 4% from the prior year and an increase of approximately 63% from 2000. Expenditures for patients with ESRD in the United States approximate $49 billion annually, according to the latest available USRDS data. We believe the prevalence rates and demographics favor continued growth of the dialysis services market. Increasing Trend of Clinical Autonomy and Economic Alignment for Physicians In the current healthcare regulatory environment, the physician is increasingly moving towards the center of care management initiatives. Across various specialties, physicians have been incentivized to share risk, drive cost containment and deliver superior clinical outcomes. We believe key drivers for physician success in this environment include clinical and operational autonomy combined with excellent administrative support and economic alignment with all stakeholders. Our Competitive Strengths Our competitive strengths are well-aligned with an evolving healthcare services market that demands high-quality patient care, physician-centered care management and continuous clinical and administrative improvement and efficiency. Table of Contents Upon the completion of this offering, we intend to enter into the TRA for the benefit of our pre-IPO stockholders, which will provide for the payment by us to our pre-IPO stockholders on a pro rata basis of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of the Option Deductions. While the actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the amount and timing of the taxable income we generate in the future and whether and when any Relevant Stock Options are exercised and the value of our common stock at such time, we expect that during the term of the TRA the payments that we make will be material. See "Certain Relationships and Related Party Transactions Income Tax Receivable Agreement." We will initially record a liability for the value of the TRA. We will calculate fair value of the TRA initially and for future periods by using a Monte Carlo simulation-based approach that relies on significant assumptions about our stock price, stock volatility and risk-free rate as well as the timing and amounts of options exercised. Changes in assumptions based on future events, including the price of our common stock, will change the amount of the liability for the TRA, and such changes may be material. Any changes to the TRA liability in the future would be recognized in our statement of operations as other income (expense) in future periods. The costs described above may materially affect our results of operations in the future and are not reflected in our historical results. Key Performance Indicators We use a variety of financial and other information to evaluate our financial condition and operating performance. Some of this information is financial information that is prepared in accordance with GAAP, while other financial information, such as Adjusted EBITDA, is not prepared in accordance with GAAP. The following table presents certain operating data, which we monitor as key performance indicators, for the periods indicated. Year Ended December 31, 2013 2014 2015 Operating Data: Number of clinics (as of end of period) 150 175 192 Number of de novo clinics opened (during period) 17 15 16 Patients (as of end of period) 10,095 11,581 13,151 Number of treatments 1,382,548 1,563,802 1,804,910 Non-acquired treatment growth 14.8 % 12.4 % 11.7 % Patient service operating revenues per treatment $ 361 $ 360 $ 364 Patient care costs per treatment $ 209 $ 211 $ 217 General and administrative expenses per treatment $ 53 (a) $ 40 $ 43 Provision for uncollectible accounts per treatment $ 2 $ 2 $ Table of Contents Exclusive Focus on the JV Model Delivers Compelling Value Proposition for Patients, Physicians and Payors We believe our results reflect the compelling value proposition of our JV model: For Patients High-quality patient care: Provided by well-qualified nephrologists adhering to best practices Well-trained and professional staff: Focused on patient care and comfort Consistent clinical outcomes: Meet or exceed CMS core measures Attractive and comfortable facilities: Conveniently located within communities and equipped with state-of-the-art amenities Flexible schedules: Treatment schedules that accommodate patients' convenience Continuity of care: Continuity of care and consistent experience supported by minimal voluntary turnover of nephrologists and clinicians For Physicians Clinical and operational autonomy: To focus on delivering high-quality patient care Outstanding clinical support: From well-qualified and motivated clinical staff Experienced managerial and operational support: For key functions such as clinical and technical services, billing, collections, payor contracting, regulatory and compliance Proactive education to patients of physicians: On insurance coverage to help alleviate cost and scope of coverage concerns Attractive work environment: Empowerment through partnership model to maximize patient care while optimizing clinic operating efficiency and driving practice growth For Payors Cost containment: Provide high-quality care in an outpatient setting Quality care: Consistent high-quality clinical outcomes Robust compliance: Adherence to stringent billing, reimbursement and compliance procedures Effectiveness of our JV Model in Delivering High Performance We meet or exceed the core measures established by CMS to promote high-quality services in outpatient dialysis facilities. As an example, we have demonstrated strong performance in the ESRD Quality Incentive Program ("QIP"), which changes the way Medicare pays for the treatment of patients with ESRD by linking a portion of payment directly to facilities' performance on CMS core measures. The ESRD QIP reduces future payments to dialysis facilities that do not meet or exceed certain performance standards in the measurement year. The maximum payment reduction CMS can apply to any facility is 2% of all payments for services performed by the facility in a given year. Since the inception of the QIP program in 2010, the impact of payment reductions on our revenues has not exceeded 0.1% of our revenues in any year. Based on our performance in measurement years 2013 and 2014, only 1.4% and 1.2% of our clinics were penalized by CMS for payment years 2015 and 2016, respectively, compared to 5.6% and 5.5% of dialysis clinics across the United States penalized by CMS for the same periods, respectively, according to publicly available data from CMS. We believe our performance is driven by a culture of compliance and the advantages of our JV model. 500 Cummings Center, Suite 6550 Beverly, Massachusetts 01915 (978) 922-3080 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents Premier Brand Recognition and Alignment of Interests Makes ARA a Preferred Partner for Nephrologists We believe that the ARA brand has a strong reputation and widespread recognition in the industry. We believe that our premier brand has been and will continue to be a key factor in our success. Our nephrologists appreciate the quality of our dialysis clinics, best practices management services and solid track record of clinical and regulatory compliance. According to physician feedback collected by Press Ganey Associates, Inc. in an August 2015 report (the "Press Ganey survey"), 98% of the 51 physicians who responded to the survey agreed or strongly agreed that our clinics provide high-quality care and service (with the remaining 2% giving neutral responses). To date, none of our physician partners has voluntarily left us to join a competitor or terminated a partnership. Further, by owning a portion of the clinics where their patients are treated, our physician partners have a vested stake in the quality, reputation and performance of the clinics. We believe our JV model drives growth by enabling our physician partners to reinvest in their practices and develop their practices by adding new nephrologists, which provides us with the opportunity to expand existing clinics or add new clinics. According to the Press Ganey survey, 100% of the responding physicians agreed or strongly agreed that they have adequate input into clinic decisions that affect their practices and 98% agreed or strongly agreed that they had confidence in ARA leadership (with the remaining 2% giving neutral responses). Our physician partners' satisfaction leads to positive references and new physician recommendations within the broader nephrology community, thereby enhancing our ability to partner with leading, established nephrologists. According to the Press Ganey survey, 98% of the responding physicians agreed or strongly agreed that they would recommend our clinics to other physicians and medical staff as a good place to practice medicine (with the remaining 2% giving neutral responses). Proven De Novo Clinic Model Drives Predictable Market Leading Organic Growth We have primarily grown through de novo clinic development. We have developed a streamlined approach to opening clinics that results in competitive return on invested capital for both our company and our physician partners. As of December 31, 2015, we had a portfolio of 143 clinics developed as de novo clinics. Since 2012, we have opened 15 or more de novo clinics each year. Highly competitive de novo clinic economics. A typical de novo clinic is 6,000 to 7,000 square feet, has 15 to 20 dialysis stations (performing approximately 9,000 to 10,000 annual treatments on average) and requires approximately $1.3 to $1.7 million of capital for equipment purchases, leasehold improvements and initial working capital. We have a long track record of achieving positive clinic-level monthly EBITDA within, on average, six months after the first treatment at a clinic. The consistent historical growth of each year's class of de novo clinics attests to the success of our de novo model. For example, eight de novo clinics opened in 2010 generated an average revenue of $2.3 million per clinic in their first year, which grew to $3.8 million per clinic in their second year and $4.4 million per clinic in their third year (a three-year CAGR of approximately 38%); 12 de novo clinics opened in 2011 generated an average revenue of $1.4 million per clinic in their first year, which grew to $2.8 million per clinic in their second year and $3.1 million per clinic in their third year (a three-year CAGR of approximately 47%); 16 de novo clinics opened in 2012 generated an average revenue of $1.7 million per clinic in their first year, which grew to $3.0 million per clinic in their second year and $3.4 million per clinic in their third year (a three-year CAGR of approximately 41%); 17 de novo clinics opened in 2013 generated an average revenue of $1.8 million per clinic in their first year, which grew to $2.9 million per clinic in their second year; and 15 de novo clinics opened in 2014 generated an average revenue of $1.6 million per clinic in their first year. Robust business development efforts to maintain momentum of signing de novo clinics. Our successful track record helps us attract new nephrologists and maintain an active pipeline of de novo clinics to be opened in the near future. At any given time, we have an active roster of nephrologists, including existing physician partners, seeking to open clinics within the next twelve months. We refer to Joseph A. Carlucci Chief Executive Officer and Chairman of the Board of Directors American Renal Associates Holdings, Inc. 500 Cummings Center, Suite 6550 Beverly, Massachusetts 01915 (978) 922-3080 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents clinics for which a medical director agreement, an operating agreement and a management services agreement have been signed as our "signed de novo clinics". On average, our signed de novo clinics begin serving patients within 15 months of signing of the agreements. From that point, a clinic may take approximately two to three years to achieve the stabilized revenue initially projected for that clinic. As of December 31, 2014, we had 23 signed de novo clinics. As of December 31, 2015, we had opened 15 of such clinics and had 32 signed de novo clinics scheduled to be opened in 2016 and 2017. Innovative and Experienced Management Team with a Proven Track Record Our management team is among the most experienced in the dialysis services industry. Our executives, including our two founders, have on average 22 years of professional experience in the dialysis services industry while our two founding executives collectively have on average 37 years of professional experience in the dialysis services industry. Our two founding executives and other senior management firmly believe in the advantages of the JV model and the importance of attracting, developing and retaining skilled staff at our clinics, and they endeavor to continue to build our company on these founding philosophies. Most of our executive and senior management have held multiple positions with one or more of our competitors and have contacts throughout the dialysis services industry with physicians, clinical staff, payors, vendors and other parties. Our executive leadership is supported by an experienced team of regional vice presidents who maintain a hands-on approach and are focused on the success of each local clinic in their respective markets. This breadth and depth of experience gives our management team the knowledge and resources to more effectively manage relations with physician partners and other personnel, enhance operating results and promote growth. Our Growth Strategy We believe our focus on the JV model, our core values and the strength of our experienced management team have driven the growth in our patient population and physician relationships, and position us to execute on the following growth strategies. Partner with High-Quality Nephrologists with Strong Local Market Reputation and Patient Relationships We partner with nephrologists who are well-qualified and have strong reputations and patient relationships in the local market. We have a well-established protocol to evaluate the quality of a potential nephrologist partner. Our success to date, together with the opportunities provided by our JV model, make us an attractive partner for nephrologists, including those nephrologists whose contractual relationships as medical directors at our competitors' clinics have expired. Further, our nephrologist partners also generate awareness and recognition of our company within the broader nephrology community and provide recommendations of potential new nephrologist partners. We currently work with 347 nephrologists, or less than 4% of the total number of nephrologists in the United States, giving us significant opportunity to grow as a premier JV model operator within the nephrologist community. Grow Organically Through De Novo Clinics in New and Existing Markets and Expansion of Existing Clinics We intend to leverage our JV model and our reputation in the nephrology community to continue to develop de novo clinics in new as well as existing markets in the United States. As of December 31, 2015, our portfolio included 143 clinics developed as de novo clinics. De novo clinics with new physician partners. We believe our strong brand reputation and widespread recognition in the closely knit nephrologist community give us an opportunity to attract new nephrologists as our physician partners and staff. We believe that patients choose to have their dialysis services at one of our clinics due to their relationship with our physician partners and staff, consistent high-quality care, a comfortable patient care experience, and convenience of location and available With a copy to: Michael D. Nathan, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 (212) 455-2000 Michael R. Costa, Esq. Vice President and General Counsel American Renal Associates Holdings, Inc. 500 Cummings Center, Suite 6550 Beverly, Massachusetts 01915 (978) 922-3080 Peter N. Handrinos, Esq. Nathan Ajiashvili, Esq. Latham & Watkins LLP John Hancock Tower 200 Clarendon Street Boston, Massachusetts 02116 (617) 948-6000 Table of Contents treatment times. Our de novo clinics showcase a core competence in building and operating de novo clinics that are supported by our best practice management services, and grow predictably. The historical growth of these clinics provides evidence of the consistency and success of our de novo clinic model. Since 2012, we have opened 38 new clinics with new physician partners, representing approximately 59% of our de novo clinic openings. Additional clinics with existing physician partners. Our JV model provides our physician partners with opportunities to grow their individual or group practices within their local markets. The growth of our partners' practices contributes to the development of additional clinics with existing partners as new JVs in the same geographic area. New clinics sometimes begin as smaller clinics under the common supervision of an existing clinic in the same market. Over time, these new clinics may grow to the same size as the original clinic, or they may continue to operate fewer shifts or otherwise offer services to a smaller patient base. In either case, new clinics allow us to increase our market share by serving new patients who may find the new clinic location more convenient, or by freeing up capacity at the larger clinic where existing patients may have previously sought treatment. Since 2012, we have opened 26 new clinics with existing physician partners in their respective local markets, representing approximately 41% of our de novo clinic openings. Expansion of capacity in existing clinics. Depending on demand and capacity utilization, we may have space within our existing clinics to accommodate a greater number of dialysis stations or operate additional shifts in order to increase patient volume without compromising our quality standards. Such expansions offer patients more flexibility in scheduling and leverage the fixed cost infrastructure of our existing clinics, which in return provides high incremental returns on capital invested. We intend to continue to work with our physician partners to broaden our market share in existing markets by seeking opportunities to expand our treatment volume through expansion of existing clinics. From 2012 to 2015, we added 137 dialysis stations to our existing clinics, representing the equivalent of nearly eight de novo clinics or an average per year increase in capacity of 1.4%, which further enhance our non-acquired treatment growth rate profile. Opportunistically Pursue Acquisitions We currently operate 49 clinics that we acquired and integrated with our JV model. Because the acquisition cost for an existing dialysis clinic is typically higher than the cost to develop a de novo clinic, we have a disciplined approach to acquiring existing dialysis clinics. Our acquisition strategy is primarily driven by the quality of the nephrologist in the market. We pursue acquisitions in situations where we believe the nephrologist could be a potential partner and where there is an attractive opportunity to enter a new market or expand within an existing market. Our disciplined acquisition strategy has yielded significant benefits. Since 2012, we have acquired 24 clinics, two of which were acquired in 2015. Under our JV model, we provide best practices management services such as incorporating the clinic into our revenue cycle management, helping physician partners expand their practices and improving the acquired clinic's cost structure including for laboratory testing, medical supplies, medications and services. As a result, the profitability of these clinics is typically improved. Clinics that we have acquired before 2014 (for which we have data and have no prior relationship) have, on average, increased revenue in the twelve months following acquisition by approximately 35% over the prior twelve-month period. We intend to continue to opportunistically pursue acquisitions of clinics with reputations for quality and service. In making these acquisitions, we intend to integrate the ownership of the acquired clinic with our JV model. In addition, from time to time, we may evaluate the acquisition of existing dialysis clinic operators that have implemented a JV model similar to ours. Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. Table of Contents Deliver on Our Core Values with Best Practices Management Services We intend to continue to focus on providing high-quality patient care, clinical autonomy to physicians and extensive professional, operational and managerial support to our clinics through management services arrangements. Based on our experience in the dialysis services industry, we will continue to follow a disciplined approach to enhancing performance in key areas such as: revenue cycle management; patient registration; facilitation and verification of insurance; payor interaction and arrangements; and billing and collection. We believe this has positively impacted our revenue per treatment and allowed us to maintain low levels of days' sales outstanding and bad debt expense. In addition, we believe our management services reduce the burden of back-office management responsibilities associated with the daily operations of a dialysis clinic and enable our physician partners to focus on providing high-quality patient care. As a result, we consistently deliver high-quality clinical outcomes. Pre-IPO Distributions We intend to engage in several transactions, effective at the time of this offering, which are described below and which we refer to collectively as the "Pre-IPO Distributions." As a purchaser in this offering, you will not be eligible to participate in the Pre-IPO Distributions. For additional detail on these transactions and certain other transactions that will occur at or prior to the completion of this offering, please see "Unaudited Pro Forma Condensed Consolidated Financial Information" and "Certain Relationships and Related Party Transactions." Income Tax Receivable Agreement Upon the completion of this offering, we intend to enter into an income tax receivable agreement ("TRA") for the benefit of our pre-IPO stockholders, which will provide for the payment by us to our pre-IPO stockholders on a pro rata basis of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of any deductions (including net operating losses resulting from such deductions) attributable to the exercise of (or any payment, including any dividend equivalent right or payment, in respect of) any compensatory stock option issued by us that is outstanding (whether vested or unvested) as of the day before the date of this prospectus. In connection with entering into the TRA, subject to the completion of this offering, we intend to equitably adjust outstanding stock options by reducing exercise prices and, if necessary, increasing the number of shares subject to such stock options. In connection with entering into the TRA, equitable adjustments are required by the terms of our equity incentive plans established after the Acquisition (as defined under " Our Principal Stockholder") and, with respect to our other equity incentive plans established prior to the Acquisition, are being made at the discretion of our board of directors. Clinic Loan Assignment and NewCo Distribution We partially finance the de novo clinic development costs of some of our joint venture subsidiaries by providing intercompany term loans and revolving loans through our wholly owned operating subsidiary American Renal Associates LLC ("ARA OpCo"). At the time of this offering, we intend to transfer substantially all of the intercompany term loans ("assigned clinic loans") provided to our joint venture subsidiaries by ARA OpCo to a newly formed entity ("NewCo"), which will initially be wholly owned by us. The membership interests in NewCo will then be distributed to our pre-IPO stockholders pro rata in accordance with their ownership in our company, after which we will not own any interest in NewCo. We refer to the distribution of the membership interests in NewCo as the "NewCo Distribution." The balance of such assigned clinic loans was $28.1 million as of December 31, 2015 and $26.1 million as of the date of this prospectus. Such loans are currently eliminated in consolidation as intercompany obligations. As a result of the NewCo Distribution, the balance of such assigned clinic If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents loans will be reflected on our consolidated balance sheet in future reporting periods. Each assigned clinic loan is and will continue to be guaranteed by us and the applicable joint venture partner or partners in proportion to our respective ownership interests in the applicable joint venture. We guaranteed $14.9 million and $13.8 million of such assigned clinic loans as of December 31, 2015 and the date of this prospectus, respectively. Following the NewCo Distribution, our pre-IPO stockholders will own NewCo, which will be entitled to receive all interest and principal paid on such loans as the new holder of the assigned clinic loans. In connection with the NewCo Distribution, subject to the completion of this offering, we intend to equitably adjust outstanding stock options by reducing exercise prices and making cash dividend equivalent payments of $2.5 million, of which $0.2 million is payable to vested option holders and $2.3 million is payable to unvested option holders only if such unvested options become vested. In connection with the NewCo Distribution, equitable adjustments are required by the terms of our equity incentive plans established after the Acquisition and, with respect to our other equity incentive plans established prior to the Acquisition, are being made at the discretion of our board of directors. Cash Dividend Upon the completion of this offering, we intend to pay a cash dividend to our pre-IPO stockholders of $28.9 million in the aggregate and make equitable adjustments in the form of cash dividend equivalent payments of $7.4 million in the aggregate to our pre-IPO option holders, of which $1.1 million is payable to vested option holders and $6.3 million is payable to unvested option holders only if such unvested options become vested. In connection with the cash dividend, equitable adjustments are required by the terms of our equity incentive plans established after the Acquisition and, with respect to our other equity incentive plans established prior to the Acquisition, are being made at the discretion of our board of directors. Credit Facility Amendment and Incremental Debt Financing Concurrently with, and subject to completion of, this offering, we intend to amend our first lien credit agreement to, among other things, increase the borrowing capacity under our first lien revolving credit facility by $50.0 million to an aggregate amount of $100.0 million, provide for additional borrowings of $60.0 million of incremental first lien term loans, permit the repayment of our outstanding second lien term loans and permit the Pre-IPO Distributions. We intend to apply the net proceeds of such incremental first lien term loans and borrowings under our first lien revolving credit facility, together with the net proceeds received by us from this offering and cash on hand, to repay in full all outstanding amounts under our second lien credit facility. We refer to such increase of revolving credit facility borrowing capacity, borrowings under our first lien credit facility and repayment of second lien term loans as the "Refinancing." See "Description of Indebtedness." Investment Risks An investment in shares of our common stock involves substantial risks and uncertainties that may adversely affect our business, financial condition and results of operations and cash flows. Some of the more significant challenges and risks relating to an investment in us involve, among other things, the following: decline in the number of patients with commercial insurance or decline in commercial payor reimbursement rates; our ability to successfully develop de novo clinics, acquire existing clinics, attract new physician partners and attract and retain medical directors; our ability to compete effectively in the dialysis services industry; CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered(1) Proposed maximum offering price per share(2) Proposed maximum aggregate offering price(1)(2) Amount of registration fee(3) Common Stock, par value $0.01 per share 8,625,000 $23.00 $198,375,000 $21,526.36 (1)Includes 1,125,000 shares subject to the underwriters' option to purchase additional shares of common stock. (2)Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. (3)Previously paid. Table of Contents changes to the Medicare ESRD program that could affect reimbursement rates and evaluation criteria, as well as changes in Medicaid or other non-Medicare government programs or payment rates; federal or state healthcare laws that could adversely affect us; our ability to comply with all of the complex federal, state and local government regulations that apply to our business, including those in connection with federal and state anti-kickback laws and state laws prohibiting the corporate practice of medicine or fee-splitting, and risks arising from heightened federal and state investigations and enforcement efforts; changes in the availability and cost of genetically engineered forms of erythropoietin, erythropoietin-stimulating agents and other pharmaceuticals used in our business; unauthorized disclosure of personally identifiable, protected health or other sensitive or confidential information; the sufficiency of our insurance coverage for claims and losses relating to malpractice, professional liability and other matters, and rising insurance costs; shortages of qualified, skilled clinical personnel or higher than normal turnover rates; loss of any members of our senior management; our ability to meet our obligations and comply with restrictions under our substantial level of indebtedness; and the ability of our principal stockholder, whose interests may not coincide with yours, to control significant corporate activities after the completion of this offering. Please see "Risk Factors" for a discussion of these and other important factors you should consider before making an investment in shares of our common stock. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. (1)Nephrologist partners and other joint venture partners. American Renal Holdings Intermediate Company, LLC ("Holdings Intermediate") was formed in Delaware on March 18, 2010. American Renal Associates Holdings, Inc. ("Holdings") owns 100% of the membership interests in Holdings Intermediate, which itself has no operations or assets other than its ownership of 100% of the shares of the capital stock of American Renal Holdings Inc. ("ARH"). Holdings Intermediate guarantees our indebtedness under our credit facilities. Holdings and Holdings Intermediate were incorporated and formed, respectively, on the same day in March 2010 in anticipation of the Acquisition and the desire for flexibility in structuring our debt financing in the future. For example, our organizational structure has enabled Holdings Intermediate to provide a secured guarantee of our credit facilities, pledging 100% of the capital stock of ARH. ARH was incorporated in Delaware on July 19, 1999. All of our operations are conducted through ARH and its operating subsidiaries. The primary asset of ARH is its ownership of 100% of the membership interests in ARA OpCo. ARH is the borrower under our credit facilities. ARA OpCo was formed in Delaware on November 3, 2005. Its primary assets are its ownership interests in our operating clinic joint ventures. See "Business Our Operating Structure." A portion of our third-party clinic-level debt is guaranteed by ARH or American Renal Associates LLC, as the case may be. American Renal Management LLC, the direct wholly owned subsidiary of American Renal Associates, LLC, was formed in Delaware on January 26, 2000. American Renal Management LLC is the subsidiary through which we conduct our management services for our joint ventures, including revenue cycle management, compliance and other back-office operations. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion Preliminary Prospectus dated April 20, 2016 PROSPECTUS 7,500,000 Shares AMERICAN RENAL ASSOCIATES HOLDINGS, INC. Common Stock This is the initial public offering of our common stock. We are selling 7,500,000 shares of our common stock. We expect the initial public offering price to be between $20.00 and $23.00 per share. Currently, no public market exists for the shares. Our common stock has been approved for listing on the New York Stock Exchange under the symbol "ARA." Investing in the common stock involves risks that are described in the "Risk Factors" section beginning on page 20 of this prospectus. After the completion of this offering, Centerbridge Capital Partners, L.P. and certain of its affiliates will continue to own a majority of the voting power of all outstanding shares of our common stock. As a result, we will be a "controlled company." See "Management Controlled Company Exception" and "Principal Stockholders." We are an "emerging growth company" as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. See "Prospectus Summary Emerging Growth Company Status." Per Share Total Public offering price $ $ Underwriting discount(1) $ $ Proceeds, before expenses $ $ Table of Contents Our Principal Stockholder On May 7, 2010, we were acquired by certain affiliates of Centerbridge Capital Partners, L.P. (together with such affiliates, "Centerbridge") and certain members of management in a series of transactions (the "Acquisition"). After completion of this offering, Centerbridge will continue to control a majority of the voting power of our outstanding capital stock. Centerbridge is a private investment firm with offices in New York and London and manages approximately $25 billion of capital as of December 31, 2015 on a discretionary basis. Centerbridge focuses on private equity and credit investments. Centerbridge is dedicated to partnering with world-class management teams across targeted industry sectors to help companies achieve their operating and financial objectives. For a discussion of certain risks, potential conflicts and other matters associated with Centerbridge's control of us, see "Risk Factors Risks Related to this Offering and Ownership of Our Common Stock Centerbridge controls us and its interests may conflict with ours or yours in the future" and "Description of Capital Stock." Our Corporate Information American Renal Associates Holdings, Inc. was incorporated in Delaware on March 18, 2010. Our principal executive offices are located at 500 Cummings Center, Suite 6550, Beverly, Massachusetts 01915 and our telephone number is (978) 922-3080. Our corporate website address is www.americanrenal.com. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only. Emerging Growth Company Status We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act enacted on April 5, 2012 (the "JOBS Act"). For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory "say-on-pay" and "say-when-on-pay" votes on executive compensation and shareholder advisory votes on golden parachute compensation. Under the JOBS Act, we will remain an emerging growth company until the earliest of: the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more; the last day of the fiscal year following the fifth anniversary of the completion of this offering; the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934 (the "Exchange Act") (we will qualify as a large accelerated filer as of the first day of the first fiscal year after we (i) have more than $700 million in aggregate market value of outstanding common equity held by our non-affiliates as of the last day of our second fiscal quarter of our prior fiscal year and (ii) have been public for at least 12 months). We have taken advantage of reduced disclosure requirements in this prospectus by providing reduced disclosure regarding executive compensation arrangements. We may choose to take advantage of some, but not all, of these reduced disclosure obligations in future filings. If we do, the information (1)We refer you to "Underwriting (Conflicts of Interest)" beginning on page 176 of this prospectus for additional information regarding underwriting compensation. The underwriters may also exercise their option to purchase up to an additional 1,125,000 shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The shares will be ready for delivery on or about , 2016. BofA Merrill Lynch Barclays Goldman, Sachs & Co. Wells Fargo Securities SunTrust Robinson Humphrey Leerink Partners The date of this prospectus is , 2016. Table of Contents that we provide stockholders may be different than the information you might get from other public companies in which you hold stock. The JOBS Act also provides that an emerging growth company may utilize the extended transition period provided for complying with new or revised accounting standards. However, we are choosing to "opt out" of such extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. Table of Contents Table of Contents The Offering Common stock offered 7,500,000 shares (8,625,000 shares if the underwriters exercise their option to purchase additional shares in full) Common stock to be outstanding after the offering 29,719,803 shares (30,844,803 shares if the underwriters exercise their option to purchase additional shares in full) Option to purchase additional shares of common stock The underwriters have the option to purchase up to an additional 1,125,000 shares of common stock from us. The underwriters may exercise this option at any time within 30 days from the date of this prospectus. Use of Proceeds We estimate that net proceeds received by us from this offering, after deducting the estimated underwriting discount and estimated offering expenses payable by us, will be approximately $142.3 million (which accounts for $5.5 million of offering-related costs incurred prior to December 31, 2015). We intend to use the net proceeds received by us from this offering, together with borrowings under our first lien credit facility, as amended, and cash on hand, to repay in full all outstanding amounts under our second lien credit facility. We may use the remaining balance, if any, for working capital and other general corporate purposes, including to fund our continued growth through the development of new clinics, expansion of existing clinics or acquisition of clinics that we may identify from time to time. Conflicts Because an affiliate of Goldman, Sachs & Co. is a lender under our second lien credit facility and will receive 5% or more of the net proceeds of this offering due to the repayment of borrowings under our second lien credit facility, Goldman, Sachs & Co. is deemed to have a conflict of interest within the meaning of Rule 5121 of the Financial Industry Regulatory Authority, Inc. ("FINRA"). Accordingly, this offering will be conducted in accordance with Rule 5121, which requires, among other things, that a "qualified independent underwriter" participate in the preparation of, and exercise the usual standards of "due diligence" with respect to, the registration statement and this prospectus. Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to act as a qualified independent underwriter for this offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act of 1933, as amended (the "Securities Act"), specifically including those inherent in Section 11 thereof. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. We have agreed to indemnify Merrill Lynch, Pierce, Fenner & Smith Incorporated against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. See "Underwriting (Conflicts of Interest) Conflicts of Interest." Table of Contents Dividend Policy We have no current plans to pay dividends on our common stock in the foreseeable future, except upon the completion of this offering as described under " Pre-IPO Distributions." Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. Because we are a holding company, and have no direct operations, we expect to pay dividends, if any, only from funds we receive from our subsidiaries. Reserved Shares At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares offered by this prospectus for sale to some of our directors, officers and employees. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001499790_rainbow_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001499790_rainbow_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001499790_rainbow_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001506270_rightscorp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001506270_rightscorp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..440d9ee60f540a4b64e884c171705fac1a55b6c2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001506270_rightscorp_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 forms1a.htm FORM S-1/A As filed with the Securities and Exchange Commission on April 26, 2016 No. 333-199991 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 5 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 RIGHTSCORP, INC. (Exact name of registrant as specified in its charter) Nevada 7380 33-1219445 (State of incorporation) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 3100 Donald Douglas Loop North Santa Monica, CA 90405 (310) 751-7510 (Address, including zip code, and telephone number of registrant s principal executive offices) Christopher Sabec Chief Executive Officer 3100 Donald Douglas Loop North Santa Monica, CA 90405 (310) 751-7510 (Name, address, including zip code, and telephone number of agent for service) With Copies to: Gregory Sichenzia, Esq. Jeff Cahlon, Esq. Sichenzia Ross Ference Friedman LLP 61 Broadway, 32nd Floor New York, NY 10006 (212) 930-9700 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X] The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities under this prospectus until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not a solicitation of an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED APRIL 26 , 2016 PROSPECTUS Up to 26,720,000 Shares of Common Stock This prospectus relates to the offering by the selling stockholders of Rightscorp, Inc. of up to 26,720,000 shares of common stock, par value $0.001 per share. All of the shares of common stock offered by this prospectus are being sold by the selling stockholders. These shares include 10,928,000 issued and outstanding shares of common stock and 15,792,000 shares of common stock underlying unexercised warrants to purchase common stock, each issued to the selling stockholders in connection with a private placement offering completed as of September 30, 2014, or the September 2014 private placement. Each of the shares offered by the selling stockholders has been issued or is issuable to the selling stockholders upon the exercise of warrants to purchase our common stock at an exercise price of $0.01 per share. The selling stockholders have advised us that they will sell the shares of common stock from time to time in the open market, on the OTC QB maintained by the OTC Markets Group, Inc., in privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at prices related to the prevailing market prices or at negotiated prices. The selling stockholders may sell the common shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or dealers may receive discounts, commissions or concessions from the selling stockholders, purchasers in connection with sales of the common shares, or both. Additional information relating to the distribution of the common shares by the selling stockholders can be found in this prospectus under the heading "Plan of Distribution." If underwriters or dealers are involved in the sale of any securities offered by this prospectus, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in a supplement to this prospectus. We will not receive any proceeds from the sale of common stock by the selling stockholders. We will receive proceeds from the selling stockholders from any exercise of their warrants, on a cash basis. Our common stock is traded on the OTC QB under the symbol "RIHT." On April 25 , 2016, the closing price of our common stock was $0.055 per share. Investing in our common stock involves a high degree of risk. Before making any investment in our common stock, you should read and carefully consider the risks described in this prospectus under "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001509351_eventure_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001509351_eventure_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5d40273b2f53910ed9fb076c36743f8ad0c11d9c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001509351_eventure_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should carefully read the entire prospectus including Risk Factors , Management s Discussion and Analysis of Financial Condition and Results of Operations and our Financial Statements, before making an investment decision. In this prospectus, unless otherwise specified, all references to common shares refer to shares of our common stock and the terms we , us , our , and Eventure mean Eventure Interactive, Inc., a Nevada corporation. Corporate Overview We were incorporated in the State of Nevada under the name Charlie GPS Inc. on November 29, 2010 to engage in the business of distribution of GPS tracking units with user ability to track their assets over internet based systems. We developed our business plan and commenced operations in this area but did not achieve any operating revenues. In November 2012, we engaged in discussions involving a possible purchase of social communications related assets. On November 20, 2012, we filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State to, among other things, (i) change our name to Live Event Media, Inc.; (ii) increase our authorized capitalization from 75,000,000 shares, consisting of 75,000,000 shares of common stock, $0.001 par value per share, to 310,000,000 shares, consisting of 300,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of blank check preferred stock, $0.001 par value per share; and (iii) limit the liability of our officers and directors to us, our stockholders and our creditors to the fullest extent permitted by Nevada law. Our Board of Directors, by written consent dated November 19, 2012, approved, and stockholders holding 8,000,000 shares (approximately 76.92%) of our outstanding common stock on November 19, 2012, consented in writing to, this charter amendment. On November 21, 2012, we entered into and closed an Asset Purchase Agreement with Local Event Media, Inc., our wholly owned Nevada subsidiary, and Gannon Giguiere and Alan Johnson under which Messrs. Giguiere and Johnson sold to us assets (the Social Communications Assets ) intended to enable us to engage in the social communications business. The Assets consisted of a software platform with millions of lines of code authored in various languages including, but not limited to HTML, Java, Python and SQL. The software platform operates at multiple levels from a back-end, middle-ware and front-end, all which have been compiled into a fully functional web based application. The software has been and will continue to be written locally by various software developers, committed to a storage vault and then compiled into a functional application, which is then served on rented servers or what is currently referred to as a cloud server farm. In conjunction with the November 21, 2012 Asset Purchase Agreement and in consideration of the purchase of the Social Communications Assets, we issued an aggregate of 14,582,500 shares of our restricted common stock to Messrs. Giguiere and Johnson and their assigns. In conjunction with the closing under the Asset Purchase Agreement, we closed on the sale of 200,000 shares of our common stock at a price of $0.50 per share or an aggregate of $100,000 pursuant to a private offering in which we were offering a minimum of 200,000 shares of common stock ($100,000) and a maximum of 2,000,000 shares of common stock ($1,000,000). On February 20, 2013, we filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State to change our name to Eventure Interactive, Inc., Our Board of Directors, by written consent dated February 19, 2013, approved and stockholders holding 13,431,250 shares (approximately 75.1%) of our outstanding common stock on February 20, 2013, consented in writing to this charter amendment. On July 29, 2014 we dissolved Local Event Media, Inc. Prior to dissolution, Local Event Media, Inc. transferred all of its assets and liabilities to us. On August 12, 2014, we acquired the business operations, including the assets, of Gift Ya Now, an electronic gift card platform created by Vinay Jatwani, who joined us in a consulting capacity in conjunction therewith. Gift Ya Now has more than 450 retailers and restaurants on its platform which enables consumers to quickly and easily find, purchase and send electronic gift cards from leading brands. The assets of Gift Ya Now are comprised of software code base, original design / creative elements, domain name and strategic relationships. We intend to integrate Gift Ya Now into the Eventure Service as well as maintaining Gift Ya Now as a standalone brand. Mr. Jatwani will be working with us with respect to such integration and the launch of Gift Ya Now as part of our product offerings. We continue to work through partnership relationships and core integration into our Website, Android and iOS applications. Table of Contents On April 8, 2015, we filed a Certificate of Designation with the Nevada Secretary of State to create a series of preferred stock designated Series A Super-Voting Preferred Stock (the Series A Preferred Stock ) consisting of 10,000,000 shares. Holders of shares of Series A Preferred Stock are entitled to cast the equivalent of 1,000 common votes per share. The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect two directors of the Company and the holders of record of the shares of common stock, exclusively and as a separate class, shall be entitled to elect one director of the Company. At any time when shares of Series A Preferred Stock shares are outstanding, the Company may not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or our Articles of Incorporation) the written consent or affirmative vote of the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect: liquidate, dissolve or wind-up the business and affairs of the Company, effect any merger or consolidation or any other similar event, or consent to any of the foregoing; amend, alter or repeal any provision of the Articles of Incorporation or Bylaws of the Company in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock; create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Company, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary; or increase or decrease the authorized number of directors constituting the Company s board of directors. The shares of Series A Preferred Stock are not redeemable. Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth in the Certificate of Designation may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least fifty (50%) of the shares of Series A Preferred Stock then outstanding. Except for the aforementioned voting rights, there are no other rights, privileges, or preferences attendant or relating to in any way the Class A Preferred Stock, including by way of illustration but not limitation, those concerning dividend, ranking, conversion, other redemption, participation, or anti-dilution rights or preferences. No shares of Series A Preferred Stock are presently issued and outstanding, but it is expected that shares of Series A Preferred Stock will be issued to one or more members of current management in the future to better enable them to maintain their existing voting control. On June 18, 2015, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada in order to increase the number of authorized common stock to one billion (1,000,000,000) shares. On September 23, 2015, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada in order to increase the number of authorized common stock to five billion (5,000,000,000) shares. N600 Investment Agreement and Registration Rights Agreement This prospectus includes the resale of up to 1,208,000,000 shares of our common stock by N600. N600 will obtain our common stock pursuant to the Investment Agreement entered into by N600 and us, dated December 2, 2015. Although we are not mandated to sell shares under the Investment Agreement, the Investment Agreement gives us the option to sell to N600, up to $10,000,000 worth of our common stock ( Put Shares ), par value $0.001 per share, over the period ending twenty four months after this registration statement is effective. There is no assurance that the market price of our common stock will increase in the future. Based on our stock price as of December 31,, 2015, the registration statement covers the offer and possible sale of $483,200 4.8% of the entire investment amount available to us) of our shares at $0.0004 a current discounted market price of approximately 80% of $0.0005 (our market price at the close of business on December 31, 2015). Both the Company and N600 decided on a $10,000,000 maximum investment amount under the Agreement. This amount was used as a starting point for the investment and may be modified by entering into another agreement or by amending the existing agreement. Both the Company and N600 have a long-term view in the relationship and anticipate the share price to appreciate over the years, thus the investment amount of $10,000,000 was selected as the initial target amount. Table of Contents The purchase price of the common stock will be set at eighty percent (80%) of the volume weighted average price ( VWAP ) of our common stock during the pricing period. The pricing period will be the ten consecutive trading days immediately after the Put notice date. On the Put date, we are required to deliver shares to N600 in an amount (the Estimated Put Shares ) determined by dividing the closing price on the trading day immediately preceding the Put notice date multiplied by 80% and N600 is required to simultaneously deliver to us, the investment amount indicated on the Put notice. At the end of the pricing period when the purchase price is established and the number of Put Shares for a particular Put is definitely determined, N600 must return to us any excess Put Shares provided as Estimated Put Shares or alternatively, we must deliver to N600 any additional Put Shares required to cover the shortfall between the amount of Estimated Put Shares and the amount of Put Shares. At the end of the pricing period we must also return to N600 any excess related to the investment amount previously delivered to us. N600 is not permitted to engage in short sales involving our common stock during the commitment period ending November 24, 2017 (or twenty-four months following effect of this registration statement). In accordance with Regulation SHO however, sales of our common stock by N600 after delivery of a Put notice of such number of shares reasonably expected to be purchased by N600 under a Put will not be deemed a short sale. In addition, we must deliver the other required documents, instruments and writings required. N600 is not required to purchase the Put Shares unless: Our registration statement with respect to the resale of the shares of common stock delivered in connection with the applicable Put shall have been declared effective. We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the registrable securities. We shall have filed with the SEC in a timely manner all reports, notices and other documents required. We believe that we will be able to meet all of the above obligations mandated in the Investment Agreement set forth above. Business Overview and Strategy Since November 21, 2012, we have engaged in the social communications business. We are a social application development company that is capturing everyday events and turning them into meaningful memories to be scrapbooked, organized, and referenced forever (automatically). Every day, millions of people are forced to use multiple applications to plan, invite, navigate, capture, organize and share their social and business events. Without organization and a simple retrieval system, sharing and recalling the memories are often difficult, and many times non-existent. In addition, currently used techniques of memory sharing are person-to-person as opposed to people-to-event, so many captured memories never end up being socially shared on an optimum basis. Most of the currently available apps are disjointed which results in a scattered experience for the user. It is not uncommon for a person to have several thousand photos on his camera roll and also replicated on his hard drive; have to toggle between multiple calendars and invite applications; and have to spend endless hours organizing and attaching photos and videos; just so he can share the memories captured from an event. Thus, there is not a simple one-stop solution that detects relevancy of a group conversation, syncs with device applications and allows for access / review of activities. Our technically unique, yet simple-to-use, patented mobile-to-web technology platform provides users with a single application that addresses these inefficiencies in the social marketplace by enabling captured memories to be centrally stored and effortlessly shared among event attendees in a secure, real-time, mobile ad-hoc network. Eventure Everywhere is keystone to our business offerings and strategy to maximize the experience of each event with rich features to successfully schedule, capture, scrapbook (store); and share one s life and events in a meaningful way. Eventure Everywhere includes: Anonymous Messaging, Event Genius, Wish I was There, I ll Be There, Intelligent Pursing and device learning. Combined, they are core viral adoption drivers of our solution into various target markets. During 2015, we have continued to develop and commercialize our social communications business. This has required us to raise additional funds to support our future growth plans. We represent a speculative investment. Investors may lose some or all of their investment in us. We have incurred losses since our inception resulting in an accumulated deficit of $40,801,476 as of September 30, 2015 and further losses are anticipated in the near term in connection with the further development of our business. Our independent registered accounting firm issued a report in connection with their December 31, 2014 audit that included an explanatory paragraph referring to our recurring net losses and accumulated deficit and expressing substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional financing, attain operating efficiencies, reduce expenditures and ultimately to generate significantly more revenues. Table of Contents Asset Purchase Agreement In conjunction with the November 21, 2012 Asset Purchase Agreement and in consideration of the purchase of the Social Communications Assets, we issued an aggregate of 14,582,500 shares of our restricted common stock to Messrs. Giguiere and Johnson and their assigns. In conjunction with the closing under the Asset Purchase Agreement, we closed on the sale of 200,000 shares of our common stock at a price of $0.50 per share or an aggregate of $100,000 pursuant to a private offering in which we were offering a minimum of 200,000 shares of common stock ($100,000) and a maximum of 2,000,000 shares of common stock ($1,000,000). We also took the following actions: We transferred all of our pre-Asset Purchase Agreement assets, excluding the private placement offering proceeds, and all of our pre-Asset Purchase Agreement liabilities, to a newly formed wholly owned subsidiary, Charlie GPS Split Corp. ( Split-Off Subsidiary ) and in connection therewith transferred all of the outstanding shares of capital stock of Split-Off Subsidiary to our pre-Asset Purchase Agreement principal stockholder in exchange for the surrender and cancellation of 8,000,000 shares of our common stock owned by such stockholder. On November 19, 2012, our board of directors and persons holding a majority of our outstanding common stock adopted a Two Million Five Hundred Thousand (2,500,000) share Equity Incentive Plan for future issuances, at the discretion of our board of directors, of awards to officers, key employees, consultants and directors. On July 1, 2013 our board of directors and persons holding a majority of our outstanding shares authorized an increase in the number of shares issuable under the Equity Incentive Plan to Seven Million Five Hundred Thousand (7,500,000). Effective at closing, our pre-Asset Purchase Agreement officers and directors resigned and we appointed new executive officers and two directors to fill the vacancies created by the resignations. In connection therewith we appointed Gannon Giguiere as our Chairman, Chief Executive Officer and Secretary and appointed Alan Johnson as our President and as a Director. Effective at closing, we executed 24 month lock-up agreements with all post-closing officers and directors and all stockholders holding ten percent or more of our common stock. On March 10, 2014 we terminated the lock-up agreements. Effective at closing, we entered into Employment Agreements with Gannon Giguiere and Alan Johnson. Effective at closing, we entered into Indemnification Agreements with Gannon Giguiere and Alan Johnson under which we agreed to indemnify Messrs. Giguiere and Johnson and to provide for advancement of expenses under certain circumstances to the fullest extent permitted by applicable law. We adopted a Code of Ethics applicable to our principal officers. Corporate Information Our principal executive offices are located at 3420 Bristol Street, Costa Mesa, CA 92626. Our telephone number is 855.985.5669. Our website address is http://www.eventure.com. The information on, or that can be accessed through, our website is not part of this prospectus. Summary of the Offering Shares currently outstanding: 1,434,226,648 common shares Shares being offered: The selling stockholders identified in this prospectus may offer and sell up to 1,208,000,000 shares of our common stock to be sold by N600 pursuant to the Investment Agreement. If issued presently, the 1,208,000,000 shares of common stock registered for resale by N600 would represent approximately 84.23% of our existing issued and outstanding shares of common stock as of December 31, 2015 which totals 1,434,226,648, and 45.71% of the total issued and outstanding share capital upon issuance. Offering Price per share: The selling stockholders may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. Use of Proceeds: We will not receive any proceeds from the sale of the shares of our common stock by the selling stockholders. However, we will receive proceeds from our initial sale of shares to N600 pursuant to the Investment Agreement. We will pay for expenses of this offering, except that the selling stockholders will pay any broker discounts or commissions or equivalent expenses applicable to the sale of their shares. OTC Markets Symbol: EVTI
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001518380_buscar-co_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001518380_buscar-co_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4ffeebc9f5964d6ba26bde2ad238bd4368015f17
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001518380_buscar-co_prospectus_summary.txt
@@ -0,0 +1,3 @@
+PROSPECTUS SUMMARY
+ 
+The following summary highlights material information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled "Where you can find more information" in this prospectus and any amendment or supplement hereto. Unless otherwise indicated, the terms the "Company," "Buscar Company" "we," "us," and "our" refer and relate to Buscar Company
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001519820_jobbot-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001519820_jobbot-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e909d97f212326fe5add7b878da77d5c231157f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001519820_jobbot-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, references to the "Company," "we," "our" or "us" refer to Jobbot, Inc., unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements. Corporate Background Jobbot, Inc. was incorporated under the laws of the State of New York on April 21, 2011. We are an early stage company, engaged in the business of providing an online employment service. Jobbot owns the domain name www.jobbot.biz which the Company intends to develop as an online employment website to be utilized by employers and job seekers to either fill or find open employment positions. Presently, the Company is seeking web developers and/or partner service providers, to complete development of our website. Up until June 26, 2016, Jobbot was party to a partnership program with Simply Hired Inc. which allowed Jobbot to utilize Simply Hired, Inc.'s ("Simply Hired") proprietary software "Simply Partner". This software enabled Jobbot to populate our website with open employment positionsanywhere in the United States. On June 26, 2016, Simply Hired Inc suspended its program for all publishers. Our offices are currently located at Jobbot, Inc., 1730 62nd Street, Brooklyn, New York 11204. Our telephone number is (646) 780-0992. We have a corporate internet website at the following URL: www.jobbot.biz. Information on our website, or which can be accessed through our website, is not part of the registration statement of which this prospectus is a part. We are an "emerging growth company," as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior December 31st, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. In addition, the JOBS Act permits an emerging growth company to "test the waters" by communicating orally or in writing with qualified institutional buyers or other accredited investors to gauge interest in a contemplated securities offering, even if a registration statement has not yet been filed, and permits analysts to publish research reports about an emerging growth company that is going public even if the analyst s firm is one of the underwriters in the issuer s IPO. We have not provided any such information to any qualified institutional buyers or other accredited investors, and we are not aware of any research reports about us being published by analysts. We are considered a "shell company," as defined in Rule 12b-2 of the Exchange Act and are subject to additional regulatory requirements as a result, including, but not limited to, the inability of our shareholders to sell their shares in reliance upon Rule 144, promulgated pursuant to the Securities Act, a safe harbor on which holders of restricted securities usually rely to resell securities until one year from the date that we cease to be a shell company, and file required information with the SEC. Because we are a "shell company", the Selling Security Holders are considered underwriters within the meaning of Section 2(11) of the U.S. Securities Act of 1933, as amended (the "Securities Act"). We will be unable to register our securities on Form S-8 (an abbreviated form of registration statement) until 60 days after the date that we cease to be a shell company and have filed required information with the SEC. The report of M&K CPAS, PLLC, our independent registered public accounting firm, expresses substantial doubt with respect to our ability to continue as a going concern. The Offering Securities offered: 1,545,000 shares of common stock Offering price : The offering of the shares by the selling shareholders in this prospectus is deemed to be an indirect primary offering by our Company through the selling shareholders as underwriters. Accordingly, the offering price of the shares must be fixed for the duration of the offering. The offering price has been fixed at $0.02 per share. Refer to "Plan of Distribution". Shares outstanding prior to offering: 12,505,000 shares of common stock. Shares outstanding after offering: 12,505,000 shares of common stock. Our executive officers and directors currently own 84% of our outstanding common stock. As a result, our executive officers and directors have substantial control over all matters submitted to our shareholders for approval. Market for the common shares: There has been no market for our securities. Our common stock is not traded on any exchange or on the over-the-counter market. A market maker has filed an application together with the necessary documents, with FINRA, which operates the OTC Bulletin Board. Comments from FINRA are being responded to and, after the effective date of the registration statement relating to this prospectus, it is anticipated that the application will be approved. However, there can be no assurance that such an application for quotation will be approved. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of our common stock may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resale. Use of proceeds: We will not receive any proceeds from the sale of shares by the selling security holders. S-1/A 1 jobbot_s1a.htm FORM S-1/A jobbot_s1a.htmAs filed with the Securities and Exchange Commission on November 7, 2016 Registration No. 333-199833 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-1/A (Amendment No. 6) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 JOBBOT, INC. (Exact name of Registrant as specified in its charter) New York 7363 45-1957218 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code) (I.R.S. Employer Identification No.) c/o Patrick Giordano Jobbot, Inc. 1730 62nd Street Brooklyn, New York 11204 Telephone: (646) 780-0992 (Address and telephone number of Registrant s principal executive offices) c/o Patrick Giordano Jobbot, Inc. 1730 62nd Street Brooklyn, New York 11204 (Address of principal place of business or intended principal place of business) c/o Patrick Giordano Jobbot, Inc. 1730 62nd Street Brooklyn, New York 11204 Tel: (646) 780-0992 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of all Correspondence to: Frederick M. Mintz, Esq. THE MINTZ FRAADE LAW FIRM, P.C. Counselors at Law 271 Madison Avenue, 12th Floor New York, New York 10016 Telephone: (212) 486-2500 Facsimile: (212) 486-0701 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), please check the following box: x If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a small reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). (Check one) Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company x Calculation of Registration Fee Title of Class of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Price Per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $0.0001 per share (1) 1,545,000 $ 0.02 (2 ) $ 30,900 $ 3.11 Total 1,545,000 $ 0.02 (2 ) $ 30,900 $ 3.11 _________________ (1) Represents common shares currently outstanding to be sold by the selling security holders. (2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o). Our common stock is not traded and any national exchange and in accordance with Rule 457, the offering price was determined by the price shares were sold to the selling security holders in private placement transactions. The selling shareholders may sell shares of our common stock at a fixed price of $0.02 per share. The fixed price of $0.02 has been determined as the selling price based upon the original purchase price paid by the selling security holders of $0.01 plus an increase based upon the fact that the shares will beregistered and the Company will be a public reporting company. A market maker has filed an application together with the necessary documents, with the Financial Industry Regulatory Authority ("FINRA"), which operates the Over The Counter ("OTC") Electronic Bulletin Board. Comments from FINRA are being responded to and, after the effective date of the registration statement relating to this prospectus, it is anticipated that the application will be approved. However, there can be no assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling securityholders. In the event of a stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Summary Financial Information Three Months Ended June 30, 2016 (Unaudited) For the Six Months Ended June 30, 2016 (Unaudited) Year Ended December 31, 2015 (Audited) Period From April 21, 2011 (inception) to June 30, 2016 (Unaudited) Statement of Operations Data Operating revenues $- $- $- $- Lossfrom operations $(1,377) $(5,387) $(16,059) $(72,701) Net loss $(1,377) $(5,387) $(16,059) $(72,701) Balance Sheet Data (Unaudited): June 30, 2016 (Unaudited) December 31, 2015 (Audited) Working capital $(30,401) $(25,766) Total assets $- $- Total liabilities $30,401 $(25,766) Shareholders Deficit $(30,401) $(25,766)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001520108_spiral_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001520108_spiral_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8f1de0d8d45069a59de52dd57f6e55632434242c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001520108_spiral_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001527027_aristocrat_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001527027_aristocrat_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0eeb8fd55289d5cd8d396aa230dcc3f8187669c4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001527027_aristocrat_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock of Aristocrat Group Corp. (referred to herein as the "Company," "we," "our," and "us"). You should carefully read the entire prospectus, including "Risk Factors," "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the accompanying financial statements and notes before making an investment decision. Company Overview We were incorporated in Florida on July 20, 2011. On April 1, 2015, the Company reincorporated from Florida to Nevada. The Company s board of directors and majority shareholder consented to the reincorporation. Each of our shareholders on the record date received one share of the Nevada company s common stock for each 100 shares of common stock they own in the Florida company. Fractional shares will be rounded up to the next whole share, and each shareholder will receive at least five shares. The Nevada company is authorized to issue 480 million shares of common stock and 20 million shares of preferred stock, each with a par value of $0.001 per share. The board of directors and officers of the Nevada company consist of the same persons who are currently directors and officers On February 3, 2015, our board of directors adopted the 2015 Omnibus Equity Incentive Plan. On October 17, 2012, we formed Luxuria Brands LLC as a wholly owned subsidiary. On January 10, 2013, we formed Level Two Holdings, LLC as our wholly owned subsidiary. On January 15, 2013, we formed Top Shelf Distributing, LLC ("Top Shelf") as our wholly owned subsidiary. Top Shelf is focused on developing our distilled spirits line of business and currently markets and sells RWB Ultra Premium Handcrafted Vodka ("RWB Vodka"). Top Shelf has a wholesalers license in the State of Texas and currently markets and sells RWB Vodka. RWB Vodka is a potato-based gluten-free vodka, which is currently distributed in North America and sold by a growing number of retailers. Our fiscal year end is July 31. The Offering Common Stock Offered 590,000 shares underlying convertible promissory note held by selling stockholder Common stock outstanding 3,260,957 shares of common stock Common stock to be outstanding immediately after the offering 3,850,957 shares of common stock Use of Proceeds We will not receive any proceeds upon the sale of shares of common stock by the selling stockholder in this offering. However, we received net proceeds of $269,815 upon the issuance of the convertible promissory note of which the common stock registered herein is issuable upon conversion. Selling stockholder will receive all of the proceeds from the sale of their shares offered by them under this prospectus. If all the registered shares are sold, our outstanding debt will be reduced by $5,900. OTC Market Group, Inc. s OTCQB tier ASCC
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001532750_titan_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001532750_titan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a4a2a942c85c1f2b1b7b274e96ba422a10cacb97
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001532750_titan_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary provides a brief overview of information contained elsewhere in this prospectus and the documents we incorporate by reference. It does not contain all of the information you should consider before making an investment decision. You should read this entire prospectus and the documents incorporated by reference, including our Predecessor s Annual Report on Form 10-K for the year ended December 31, 2015 (including the section entitled Item 1A: Risk Factors therein), our Predecessor s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2016 and June 30, 2016 and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, before making an investment decision. Titan Energy, LLC Overview We are a publicly traded (OTCQX: TTEN) Delaware limited liability company and an independent developer and producer of natural gas, crude oil and NGLs with operations in basins across the United States. We sponsor and manage tax-advantaged investment partnerships ( Drilling Partnerships ), in which we coinvest, to finance a portion of our natural gas, crude oil and NGL production activities. We believe we have established a strong track record of growing our reserves, production and cash flows through a balanced mix of natural gas, oil and NGLs exploitation and development, sponsorship of our Drilling Partnerships, and the acquisition of oil and gas properties. Recent Developments Consummation of the Plan On August 26, 2016, an order confirming the Plan of the Predecessor Companies was entered by the United States Bankruptcy Court for the Southern District of New York. On September 1, 2016, the Predecessor Companies substantially consummated the Plan and emerged from their Chapter 11 cases. As part of the transactions undertaken pursuant to the Plan, (i) our Predecessor s equity was cancelled, (ii) our Predecessor transferred all of its assets and operations to us and (iii) our Predecessor dissolved. As a result, we became the successor issuer to our Predecessor for purposes of and pursuant to Rule 12g-3 of the Exchange Act. In connection with the consummation of the Plan, we and Titan Operating, as borrower, entered into a $440 million third amended and restated first lien credit agreement (the First Lien Exit Facility ) dated September 1, 2016, with the lenders under our Predecessor s senior secured revolving credit facility (the First Lien Lenders ). The initial borrowing base consists of a $410 million conforming reserve based tranche plus a $30 million non-conforming tranche, and initial commitments of the lenders are $600 million. The First Lien Exit Facility also provides for the issuance of letters of credit, which reduce our borrowing capacity. The non-conforming tranche will mature on May 1, 2017 and the conforming reserve-based tranche will mature on August 23, 2019, an extension of maturity of more than a year from the maturity date of our Predecessor s prior senior secured revolving facility. In addition, we and Titan Operating, as borrower, entered into an amended and restated second lien credit agreement (the Second Lien Exit Facility ) dated September 1, 2016, with the lenders under our Predecessor s second lien credit agreement (the Second Lien Lenders ) and Wilmington Trust, National Association, as administrative agent and collateral agent. The Second Lien Exit Facility has an aggregate principal amount of $252.5 million and matures on February 23, 2020. On September 1, 2016, we also issued 5,000,000 new Common Shares in accordance with the Plan. The Second Lien Lenders received 500,000 Common Shares (representing 10% of the initially outstanding Common Shares). Holders of our Predecessor s senior notes, in exchange for 100% of the $668 million aggregate principal amount of notes outstanding plus accrued but unpaid interest as of the commencement of the Chapter 11 cases, received 4,500,000 Common Shares (representing 90% of the initially outstanding Common Shares). We also issued the Series A Preferred Share to Titan Management. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion, dated November 30, 2016 PROSPECTUS Titan Energy, LLC 3,266,936 Common Shares Representing Limited Liability Company Interests This prospectus covers the offer and sale of 3,266,936 common shares representing limited liability company interests of Titan Energy, LLC (the Common Shares ) by the selling shareholders (which term as used in this prospectus includes pledgees, donees, transferees or other successors-in-interest) identified on page 30 of this prospectus. We will not receive any proceeds from these resales. Pursuant to this prospectus, the selling shareholders may offer and sell the Common Shares from time to time, if and to the extent as they may determine, through public or private transactions or through other means described in the section of this prospectus entitled Plan of Distribution at prevailing market prices, at prices different than prevailing market prices or at privately negotiated prices. The selling shareholders may sell shares through agents or through underwriters and dealers. The selling shareholders also may sell shares directly to investors. If the selling shareholders use agents, underwriters or dealers to sell the shares, we will name such agents, underwriters or dealers and describe any applicable commissions or discounts in a supplement to this prospectus if required. Our Common Shares are quoted on the OTCQX Market under the symbol TTEN. The last reported sales price of our Common Shares on the OTCQX Market on November 28, 2016 was $23.00 per share. Investing in our Common Shares involves risks. Please read Risk Factors beginning on page 5 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities. Any representation to the contrary is a criminal offense. Prospectus dated , 2016 Table of Contents ABOUT THIS PROSPECTUS On August 26, 2016, an order confirming the pre-packaged plan of reorganization (the Plan ) of our Predecessor and certain of its subsidiaries (collectively with our Predecessor, the Predecessor Companies ) was entered by the United States Bankruptcy Court for the Southern District of New York. On September 1, 2016, the Predecessor Companies substantially consummated the Plan and emerged from their Chapter 11 cases. As part of the transactions undertaken pursuant to the Plan, (i) our Predecessor s equity was cancelled, (ii) our Predecessor transferred all of its assets and operations to us as a new holding company and (iii) our Predecessor dissolved. As a result, we became the successor issuer to our Predecessor for purposes of and pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act ). Prior to the consummation of the transactions undertaken pursuant to the Plan, we (as Atlas Resource Finance Corporation) were the co-issuer of our Predecessor s senior notes, which were cancelled pursuant to the Plan. Other than the notes, however, we did not have any independent assets or operations. Accordingly, we are a new holding company for our Predecessor s business, assets and operations going forward. Additional information, including our Predecessor s financial statements and the notes thereto, is incorporated in this prospectus by reference to our Predecessor s and our reports filed with the Securities Exchange Commission (the SEC ). Please read Where You Can Find More Information. You are urged to read this prospectus carefully, including Risk Factors, Cautionary Statement Regarding Forward-Looking Statements, and the documents incorporated by reference in their entirety before investing in our securities. Unless the context requires otherwise or unless otherwise noted, all references in this prospectus to: the Company refer to Titan Energy, LLC (formerly known as Atlas Resource Finance Corporation) and its subsidiaries; our Predecessor refer to Atlas Resource Partners, L.P.; we, our, us or like terms refer, after the consummation of the Plan, to the Company and, prior to the consummation of the Plan, to our Predecessor and the entirety of its business, assets and operations that were contributed to us in connection with the consummation of the Plan; Titan Operating refer to Titan Energy Operating, LLC, our wholly owned subsidiary, through which we hold the assets of our Predecessor; Titan Management refer to Titan Energy Management, LLC, a wholly owned subsidiary of ATLS; and ATLS refer to Atlas Energy Group, LLC. Table of Contents For more information regarding the Plan and the associated transactions, please read our Current Report on Form 8-K filed on September 7, 2016, which is incorporated by reference herein. Contractual Obligations The following table summarizes our contractual obligations at September 30, 2016 following the consummation of the Plan, including the cancellation of our Predecessor s senior notes (in thousands): Payments Due By Period Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years Contractual cash obligations: Total debt $ 748,559 $ 30,000 $ 405,809 $ 312,750 $ Interest on total debt 118,855 26,499 79,933 12,423 Operating leases 13,282 3,738 5,587 3,044 913 Total contractual cash obligations $ 880,696 $ 60,237 $ 491,329 $ 328,217 $ 913 Amount of Commitment Expiration Per Period Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years Other commercial commitments: Standby letters of credit $ 4,191 $ 4,191 $ $ $ Other commercial commitments(1) 9,207 5,585 1,673 767 1,182 Total commercial commitments $ 13,398 $ 9,776 $ 1,673 $ 767 $ 1,182 (1) Our other commercial commitments include our share of drilling and completion commitments and our throughput contracts, including firm transportation obligations for natural gas and gathering commitments as a result of our acquisition of certain assets from EP Energy E&P Company, L.P. in July 2013 and of the acquisition of certain assets from GeoMet, Inc. in May 2014. Fresh-Start Accounting Upon the consummation of the Plan, we adopted fresh-start accounting in accordance with Accounting Standards Codification 852, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of our emergence from the Chapter 11 cases on September 1, 2016. The fair values of our assets and liabilities differ materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets. The effects of the Plan and the application of fresh-start accounting will be reflected in our annual, quarterly and current reports and other information that we file with the SEC. In addition, please see the pro forma financial statements included elsewhere in this prospectus for more information about the effects of the consummation of the Plan and the adoption of fresh-start accounting. Drilling Partnerships We recently evaluated certain of our Drilling Partnerships that were no longer economic for us and their limited partners. In connection with that evaluation, we formed a special committee of the managing general partner of those Drilling Partnerships to, with the assistance of a financial advisor, explore options and make recommendations as to a course of action. Based on the special committee s recommendation, we have determined to proceed with the liquidation of those Drilling Partnerships. In connection with those liquidations, we acquired approximately $31 million of gas and oil properties from those Drilling Partnerships in exchange for our assumption of their liabilities, effective as of October 1, 2016.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001533527_aegis_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001533527_aegis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b44ef42bb5dc4ada7087ddeaf30b00ddf016755e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001533527_aegis_prospectus_summary.txt
@@ -0,0 +1 @@
+Table of Contents In February 2016, the Financial Accounting Standards Board ( FASB ) issued a comprehensive standard related to lease accounting to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Most significantly, the new guidance requires lessees to recognize operating leases with a term of more than 12 months as lease assets and lease liabilities. The adoption will require a modified retrospective approach at the beginning of the earliest period presented. The new standard is effective for the fiscal year beginning after December 15, 2018, with early adoption permitted. We are evaluating the impact of this standard on our consolidated financial statements. In January 2016, the FASB issued a new standard related primarily to accounting for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. The new standard will be effective for the fiscal year beginning after December 15, 2017 and early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements. In November 2015, the FASB issued guidance simplifying the presentation of deferred tax liabilities and assets requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The new standard is effective for the fiscal year beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements. In May 2015, the FASB issued guidance about a customer s accounting for fees paid in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance is effective for the fiscal year beginning after December 15, 2015 and may be applied on either a prospective or retrospective basis. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements. In November 2014, FASB issued ASU 2014-16, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity" ("ASU 2014-16"). ASU 2014-16 clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendment clarifies that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of a host contract. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. ASU 2014-16 is not expected to have a material impact on our financial position, results of operations or cash flows. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). We have adopted ASU 2015-03 in these financial statements and it did not have a material impact on our financial position, results of operations and cash flows. We do not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. Quantitative and Qualitative Disclosures about Market Risk We currently have no material exposure to interest rate risk. In the future, we intend to invest our excess cash primarily in money market funds, debt instruments of the U.S. government and its agencies and in high quality corporate bonds and commercial paper. Due to the short-term nature of these investments, we do not believe that there will be material exposure to interest rate risk arising from our investments. Table of Contents BUSINESS Overview We started our business in August 2011 to provide the IAM market with new and specialized software products based on current open-standards technologies and more competitive pricing. The founding members of our company acquired valuable knowledge from their collective experience in providing IAM services utilizing multiple industry-leading IAM products over the past decade. This experience and product knowledge led our management team to embark on the development of our proprietary TridentHE software, which is a new, differentiated software product focused exclusively on the education market segment that includes higher education and TridentK12 software aimed at elementary and secondary school districts. According to a report by the Center for Digital Education, an independent market research publication, the education technology market segment received approximately $6.6 billion in 2015 investment. We believe that IAM educational software products are a significant growth opportunity for our business. Our corporate objective is to provide the education sector with identity infrastructure that enables the protection of digital identities created by the growth of internet technologies. Through existing personnel and key new hires, we have experience across multiple IAM platforms, including Sun Microsystems, Oracle, Novell, Microsoft, Symplified and other open-source software. We have a source-code licensing agreement with OpenIAM, LLC, a leader in the development of open-standards identity software, which can be adapted and extended for specific users, to utilize its identity manager software as part of the infrastructure of TridentHE and our other software products. Industry Overview and Target Markets The increasing use of internet technologies is transforming the way people work and communicate. Consequently, more people have access to information, including certain corporate and personal data, which should be restricted. In the digital age, identities are established, validated through an authoritative source and certain rights are provisioned either by one s role (i.e., student, faculty or alumni) or by a rule (i.e., a Vice President has more access than a manager). This administrative software is called identity and access management software. IAM software provides rights and services to individuals accurately and securely, based on validating identities and authorizing access using a variety of contemporary software techniques. IAM is one of the primary market segments within the broader cyber-security market, which includes, in addition to IAM, risk and compliance management, data encryption, data leakage prevention, data recovery, anti-virus protection, and fire wall and network security. IAM offers four main security functions: (i) user authentication through the identification of users, roles and resources to be accessed and the creation of user accounts, (ii) authorization through password creation and management, (iii) reconciliation that assesses security risks and ensures appropriate user access, and (iv) auditing where users can create IAM reports and have centralized access to their IAM records. Key drivers of IAM software and services include: meeting compliance requirements for access to critical systems and applications, improving internal security, enabling growth through secure use of the internet, improving end user productivity via a single sign-on enabling access to multiple applications, facilitating business-to-business interactions via identity federation, and improving IT efficiency by automating user provisioning and reducing calls to the help desk. There is a particular need in the education market for IAM software due to the unique sources of authentication and the constant turnover of thousands of students each year. Our TridentHE and TridentK12 software was designed to serve the needs of the education market by connecting to the applications used in that industry and supply provisioning services based on the needs of students, faculty and alumni. The diagram below illustrates the intended benefits of our IAM system: Table of Contents IAM Market Overview IDC, an independent market research firm, estimated in a November 2014 report that the worldwide IAM market is expected to account for $7.1 billion in license, maintenance and SaaS revenue by 2018. While IDC s report showed significant historical revenue growth and predicted strong future growth in the IAM market, it also revealed considerable market fragmentation with respect to the market share and overall number of vendors. We believe that this fragmentation creates a significant growth opportunity for our business, and we have attempted and plan to continue to attempt to capitalize on this potential through an aggressive product strategy that we believe is superior to the approach to IAM software and services used by several of our competitors within the general IAM market. In our experience, we believe the IAM products of our competitors are built for use by multiple industries, for example, financial services, healthcare, technology and other sectors, while our products are built specifically for educational institutions. Our software is configured to meet the needs of the collaborative environment of educational institutions rather than for the needs of commercial enterprises. Our software is also designed to handle the routine turnover of large numbers of digital identities for students and staff at educational institutions, which greatly exceeds the rate of turnover of employees at most businesses. Our software on-boards new digital identities and removes departing individuals in a way that is both efficient and meets compliance and security policies of education institutions. Our IAM products also allow for digital identities that have multiple simultaneous roles (student, employee, faculty member), while commercial IAM software often limits digital identities to single roles, and our software allows individuals who depart an educational institution to maintain access rights to email or IT systems, such as when a graduating student s .edu email address remains functional until they obtain a job, rather than immediately terminating all rights upon an individual s departure from the institution, as is the custom when an employee leaves a business. During 2015, approximately $6.6 billion was invested in the education technology market segment, according to a report by The Center for Digital Education, an independent market research publication. We believe education technology lags behind numerous other commercial enterprises in terms of technological advancements, leading to greater demand for solutions that enhance student data privacy, a topic of increasing importance as there have been many data breaches in recent years. As we focus exclusively on the education IAM market, we believe demand for our tailored, scalable solutions in the education technology market will continue to increase. Provisioning, the key IAM function of our TridentHE and TridentK12 software, is the process of providing users such as students, faculty and employees with access to data and technology resources like email, inclusion in certain directories and access to certain information in response to automated or interactive business processes. Other segments of the IAM market are web single sign-on, enterprise single sign-on and directory services. We believe that, based on industry data, provisioning accounts for a majority of all IAM market revenues due to further acceptance of the enterprise environment, incorporation of managing identities in cloud computing applications, inroads into the midmarket and continued requirement of significant consulting and integration investment for implementation. Table of Contents IAM Market Strategy Our strategy is based on our belief that customers are unsatisfied with many of the products and services offered by the largest companies in the IAM market. In conversations with a leading provisioning vendor, we were informed that 50% of third-party provisioning products end up as software that is not actually used. Forrester Research, Inc. and other analyst groups have commented about a shift in the way IAM products are being developed by vendors. A Forrester report released in 2014 noted [p]roducts that give quick answers to immediate security and audit problems (privileged user, password management, identity audit and enterprise single sign-on) continue to excel and move fast along our adoption curves. We believe that the current state of market fragmentation has created an opportunity for us. In order to capture this opportunity, we entered into a strategic licensing agreement with OpenIAM to produce and develop our own proprietary identity management software. In addition, we assembled a highly-experienced leadership team to bring our software products to market. We offer one of the first open-standards, enterprise-class identity manager software products in the education market. We believe that our TridentHE and TridentK12 products are higher quality, lower cost and easier to implement and maintain than the software offered by our competitors. Target Market Opportunity We believe that our focus on the education sector provides a significant market opportunity for our company. Certain members of our management have acquired extensive market knowledge through their respective business experience, including numerous higher education IAM implementations and membership in leading national education organizations such as EDUCAUSE. We believe this market has significant needs and has demonstrated that IAM continues to be a top priority year after year. There are over 4,700 universities and colleges and over 13,800 K-12 school districts within the United States, collectively representing a market opportunity of approximately $2.3 billion, according to IDC. Solving IAM problems can be complex, expensive and difficult to accomplish. Our ability to offer an innovative software product based on open-standards, common frameworks and well-known methodologies provides significant value to the education sector. Since we provide software products built on open-standards technology that reduce the cost and complexity of implementing IAM software and services, we believe that we have significant potential to expand into and succeed in markets that were traditionally out of reach to IAM vendors because less human and monetary resources are required. Our Identity and Access Management Software Products and Services Our TridentHE, TridentK12 and other software products improve the efficiency of IT systems with automated tools for on-boarding of new users and provisioning of user access rights. In addition, our software products provide our customers with multiple IAM functions, including user authentication through the identification of users, roles and resources to be accessed and the creation of user accounts, authorization through password creation and management, reconciliation that assesses security risks and ensures appropriate user access, and auditing where users can create IAM reports and have centralized access to their IAM records. Below is a description of each of our current software products: TridentHE for Higher Education Market TridentHE is an open-standards (software that can be easily adapted and extended for specific users) and enterprise-class identity management software program dedicated to addressing the specific needs of higher education. TridentHE provides comprehensive provisioning, password management and identity synchronization. TridentHE s provisioning capabilities allow for the creation of users, roles and resources, access that is role- and rule-based, automated workflows, delegated access administration and approvals, multiple authoritative sources of record and multiple targets. TridentHE enables the establishment of a password policy, the synchronization of passwords to all applications, self-service password changes, profile management, access request approvals, white pages and FERPA compliance, and integration of our software with a help desk. TridentHE s reconciliation functionality allows connectors to determine if target systems have the correct credentials, automated error detection and correction, and periodic user access confirmation. TridentHE s audit abilities include the creation of ad hoc and custom reports. Our TridentHE software, first released in October 2011, and its associated services and maintenance represented a majority of our total revenue for the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014. Revenue from TridentHE sales is expected to continue to constitute a significant percentage of our total revenue for the full 2016 year. Table of Contents TridentK12 for K-12 Education Market TridentK12 is an identity-management software designed specifically for K-12 education, providing quality provisioning, password management and identity synchronization. TridentK12 is a cost-effective, open standards-based identity software program that provides out-of-the-box integration for K-12 education environments. TridentK12 s provisioning capabilities allow for near real-time account creation with multiple authoritative sources of record and multiple access targets based on users information, roles and resources, as well as automated workflow control and delegated access approvals and administration. TridentK12 s password management allows for the establishment of a customized password policy, self-service password changes, profile management, access request approvals, white pages and the school s FERPA compliance, synchronization of passwords to all applications, and integration of our software with a help desk. TridentK12 s functionality allows for connectors to determine if target systems have the correct credentials, automated error detection and correction, and the periodic sending of access configurations to appropriate access approvers to confirm access of a user. TridentK12 s audit abilities include the creation of ad hoc and custom reports, automated audit workflows to enforce an organization s access policy and centralized account and access records. Our TridentK12 software was released in late 2014. TridentK12 generated minimal revenue in the first quarter of 2016 and during 2015. We expect that revenue from TridentK12 sales will increase as a percentage of our total revenue in future periods as we expand our marketing and distribution efforts in the K-12 market segment. EduZone EduZone is a platform of technologies that brings together an ecosystem we call Digital Citizenship in Education. Digital citizenship is the online presence, via school district systems, of students, teachers, administration, technology leaders, academic leaders, parents, application providers and other partners representing the educational community today and of the future. In EduZone, digital citizens access a single platform where they find their digital resources, secured by a unique login, that allow them to focus on a student s performance. The platform is designed to be fully integrated with school district identity and information systems, under the full control and discretion of the school district, enhancing student data privacy and providing control and fast adoption that the ecosystem requires. We initially demonstrated a prototype of our EduZone platform in mid 2015 and EduZone is currently in its pilot stage. In order to bring EduZone to market, we are finalizing the multi-tenant functionality of our Trident database, the integration of an operational data store and the connector work to integrate educational applications into our EduZone system. We expect to roll-out EduZone to the education market on a commercial basis following the completion of this offering. EduZone offers the following features: EZ Application Launcher This is a single website where citizens can log-in and access all of a school district s approved applications. These applications are all secured by the same login information issued and controlled by the school district so all the participating applications are unlocked once a citizen is logged into the application launcher. EZ Application Marketplace As applications join EduZone, all participating citizens can browse the pool of applications. Because these applications will have already gone through the integration process, requesting a school district to approve them for use may be made through a mouse click. Once approved, these apps will appear in the application launcher. EZ Identity Users of school district resources, whether parents, students, teachers or administrators, become digital citizens in education when their on-line persona is created upon registration, enrollment or hire. The digital identity enables secure access to approved applications by the school district and under the privacy guidelines of the school district. EZ Registry School districts and application providers access a single registry to enroll their organizations in the EduZone platform and become digital citizens. In the registry, the school district securely sets up access into their authentication information and approves access to other necessary information allowing EduZone to facilitate the identity exchange, as well as making approved data available to applications. In the registry, the school district controls and sets up agreements with how applications may use and maintain the data. Application providers use the registry to make their applications available in the EduZone Application Marketplace and agree to the terms of use by the school districts. EZ Data School districts and applications providers use and generate data that each one needs independently, but when interoperability allows them to share the data, student success is expected to improve. EduZone data is an interoperable platform that allows the school district to maintain control while facilitating the exchange of data with the application providers. By using the Application Programming Interface to EduZone Data, application providers have an up-to-date view into school district data while the school district maintains full control over that data and its access. School districts can enable teachers to have a concise view into student performance, parents to access their children s snapshot, and administrators to have a consolidated view of their domains. Table of Contents TridentCloud TridentCloud is a flexible and simple to implement software designed to provide IAM services to higher education and K-12 institutions from a cloud environment, which we refer to as IDaaS. Once deployed within its infrastructure, an educational institution can deliver quality provisioning, password management and identity synchronization services with the financial benefits of economies of scale. The current version of our TridentCloud is operational and is being rolled out to K-12 school districts to provide them with IDaaS services. Subsequent versions of TridentCloud are being developed in conjunction with strategic educational partners and service providers to service the higher education market segment. For TridentHE, TridentK12 and EduZone customers, we offer services for Shibboleth software, which principally utilizes the OASIS Security Assertion Markup Language, among other widely used identity standards, to provide a federated single sign-on and attribute exchange framework. A user authenticates with his or her organizational credentials, and the organization (or identity provider) passes the minimum identity information necessary to the service provider to enable an authorization decision. Shibboleth also provides extended privacy functionality allowing a user and their home site to control the attributes released to each application. Actual University Case Study In 2009, a university located in the southern United States first invested in an IAM solution to create a simplified sign-on environment for its students and faculty. At the time, the university s departments could create their own active directories resulting in an individual having upwards of five passwords. To address this problem, the university sought a more efficient system to manage identities and deployed an IAM solution from Oracle. When it came time to upgrade the system, Oracle was no longer supporting the software, and the university would have needed to make significant investments in another IAM system. In order to avoid re-implementing its entire IAM system, the university sought an IAM solution that could improve its existing system. The university ultimately selected TridentHE software for its compatibility with the university s existing IT administration system for students and its ability to tie together the university s Oracle applications for its human resources department and its student IT administration system. In addition, TridentHE provides the university with key directory, database and password syncing applications. The TridentHE solution met the university s needs, as it was easy to deploy and had a smaller hardware/storage footprint than the university s IAM system because of its use of open standards software. Once the university fully implemented our TridentHE software, the impact to end users from the upgrade of the IAM system was minimal. Other than a new, sleek and modern interface, the university s users saw no change to the university s IAM system. The university s students and employees responded positively to the upgraded system and like the interface of the new self-service portal (where they go to claim their account and set up challenge questions for password protection). Without inconveniencing users through the adoption of our TridentHE software, the university has: reduced the time to implement IAM system changes by six months due to TridentHE s simplicity and the ability to leverage already documented best practices; significantly reduced the amount of hardware needed for data storage; and increased flexibility for future IAM system software integrations, with no additional skills needed by IT staff due to TridentHE s use of open standards software. Our Growth and Expansion Strategy Overall Strategy We intend to grow our business organically by expanding our reseller channel, developing our in-house channel support, extending our product line, building our industry position and accelerating our marketing and distribution efforts. We also intend to commercially launch our EduZone technology platform, which we expect to further broaden our product line and service offerings, and provide additional growth opportunities for our business. Table of Contents We plan to develop an international market by focusing initially on countries where English is a primary working language, limiting exports to countries with sufficiently robust intellectual property and software copyright laws, enhancing global partnerships, creating greater brand awareness and building customer support infrastructure. Along with organic growth, we plan to position our company as a consolidation platform for cyber security-focused companies that service the EdTech marketplace, and we will seek business combination transactions with well-positioned companies to the extent that we believe such transactions may be accretive and synergistic in terms of immediate revenues, business lines, customers and cross-selling opportunities. Areas of interest to us are cyber-security companies that could provide complementary software and/or technology platforms, existing customer bases in various niche or regional markets and experienced technical employees. As of the date of this prospectus, we have not entered into any term sheets or agreements with respect to an acquisition. Key Initiatives We are currently pursuing multiple initiatives to meet our strategic objectives. These initiatives include the following key elements: TridentHE Growth. We intend to promote TridentHE software and services in order to capitalize on the opportunities created by IAM market fragmentation by filling the need for a contemporary open-standards software program in the education market. Aegis Identity Center of Excellence. We provide a customer-centric service center through a membership organization owned by our company through which IAM industry vendors can offer a one-stop shop for proof of concepts in education. K-12 Market Initiative. We will continue to offer our TridentK12 software and EduZone as cost-effective IAM solutions to support the digital evolution in K-12 education. We provide secure and timely IAM accessibility customized to each user and software that can be rapidly scaled. Second Vertical Market Evaluation. We intend to apply our TridentHE software across other vertical markets, capitalizing on the fact that identity issues in the education market are much more difficult to solve than those in the commercial market. We intend to pursue the selection of a second vertical market in 12 to 18 months. Customers Our present and potential customers are major universities and school systems. Sales are currently performed by our internal sales team that is being expanded to include a reseller channel that will purchase and resell our IAM software products and provide integration and support services. Our IAM software products are being used by the following schools: California State Polytechnic, Pomona, CA Radford University, Radford, VA California State University, San Bernardino, CA Rockefeller University, New York, NY Colorado School of Mines, Golden, CO Southern Illinois University, Carbondale, IL Colorado State University, Pueblo, CO St. Edward s University, Austin, TX Hawaii Pacific University, Honolulu, HI University of Oregon, Eugene, OR New Jersey Institute of Technology, Newark, NJ Wake Forest University, Winston-Salem, NC Queen s University, Kingston, Ontario, Canada Washington College, Chestertown, MD In 2015, our five largest customers (by revenue) were IlliniCloud, Chicago State University, Colorado School of Mines, City College of San Francisco and The College of William and Mary. In 2014, this list included IlliniCloud, Radford University, Chicago State University, West Virginia University and Queen s University (Canada), all of which continue to license our software. IlliniCloud and Chicago State University accounted for $226,919 and $221,400, respectively, or approximately 12.8% and 12.5%, respectively, of our revenue during the year ended December 31, 2015. IlliniCloud and Radford University accounted for $314,253 and $197,955, respectively, or approximately 17.9% and 11.3%, respectively, of our revenue during the year ended December 31, 2014. Except for these customers, no single customer accounted for more than 10% of our revenue during the years ended December 31, 2015 and 2014. Marketing and Distribution We market and distribute our software products through direct sales and our resellers. We currently have two resellers located in the United States. We intend to devote a portion of the net proceeds of this offering to enhance our marketing and distribution efforts. We expect approximately 20% of software implementations will be performed directly by us with service providers or channel partners being utilized to perform the remaining implementation requirements. Table of Contents Total Indebtedness Table at March 31, 2016
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001537658_aa-group_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001537658_aa-group_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001537658_aa-group_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001537659_aa-group_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001537659_aa-group_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001537659_aa-group_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001537917_tyme_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001537917_tyme_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8659e177d44a7873b20c749795ab30b965c57fd3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001537917_tyme_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 s-1.htm AMENDMENT NO. 2 ON FORM S-1 TO FORM S-3 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on September 9 , 2016 Registration No. 333-211489 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ AMENDMENT NO. 3 ON FORM S-1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __________________________________________________ TYME TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of Incorporation or Organization) 45-3864597 (I.R.S. Employer Identification Number) 44 Wall Street – 12th Floor New York, New York Telephone: (646) 205-1603 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) __________________________________________________ Steve Hoffman President and Chief Executive Officer TYME TECHNOLOGIES, INC. 44 WALL STREET – 12th FLOOR NEW YORK, NY 10005 Telephone: (646) 205-1603 (Name, address, including zip code, and telephone number, including area code, of agent for service) __________________________________________________ Copies of all communications to: Brian J. Lynch Drinker Biddle & Reath LLP One Logan Square, Suite 2000 Philadelphia, Pennsylvania 19103-6996 (215) 988-1119 __________________________________________________ Approximate date of commencement of proposed sale to public: Promptly after effectiveness, on a continuous basis more than 30 days after the initial effective date of this registration statement. __________________________________________________ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. x If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer Accelerated filer x Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be Registered Proposed Maximum Offering Price per Class of Security Proposed Maximum Aggregate Offering Price Amount of Registration Fee (1) Common Stock, par value $0.0001 per share $ 150,000,000 (2) (3) $ 150,000,000 (3) $ 15,105 Preferred Stock, par value $0.0001 per share $ 40,000,000 (2) (3) $ 40,000,000 (3) $ 4,028 Debt Securities $ 50,0000,000 (2) (3) $ 50,0000,000 (3) $ 5,035 Warrants $ 10,000,000 (2) (3) $ 10,000,000 (3) $ 1,007 Total $ 250,000,000 (2) $ 250,000,000 $ 25,175 (4) (1) Calculated pursuant to Rule 457 under the Securities Act of 1933, as amended, or the Securities Act. The Registrant is registering securities on this Registration Statement with an aggregate offering price for each class of securities specified below and corresponding with amounts listed alongside footnote ( 2 ). (2) There are being registered hereunder such indeterminate number of shares of common stock and preferred stock, such indeterminate principal amount of debt securities and such indeterminate number of warrants to purchase common stock, preferred stock or debt securities as may be issued hereunder , provided such issuances shall have an aggregate initial offering price not to exceed the corresponding amount set forth alongside such securities as set forth next to footnote 2 in the table above. Separate consideration may or may not be received for securities that are issuable on exercise, conversion or exchange of other securities. If any debt securities are issued at an original issue discount, then the principal amount of such debt securities shall be in such greater amount as shall result in an aggregate initial offering price not to exceed $50,000,000, less the aggregate dollar amount of all debt securities previously issued hereunder. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. The securities registered also include such indeterminate number of shares of common stock and preferred stock and amount of debt securities as may be issued upon conversion of or exchange for preferred stock or debt securities that provide for conversion or exchange, upon exercise of warrants or pursuant to the anti-dilution provisions of any such securities. In addition, pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of common stock and preferred stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions. (3) The proposed maximum aggregate offering price per class of security will be determined after effectiveness by the registrant in connection with the issuance by the registrant of the securities registered hereunder up to the corresponding amount set forth alongside such securities as set forth next to footnote 2 in the table above. (4) Previously paid. _____________________________________ The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. We may not sell these securities or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any state where such offer or sale is not permitted. Subject to Completion Dated September 9 , 2016 Prospectus TYME TECHNOLOGIES, INC. $150,000,000 Common Stock $40,000,000 Preferred Stock $50,000,000 Debt Securities $10,000,000 Warrants We plan to offer up to $250,000,000 in securities, subject to the limit for each class specified herein , for the securities described in this prospectus in one or more offerings. We plan to sell pursuant to this prospectus no more than: $150,000,000 in common stock; $40,000,000 in preferred stock; $50,000,000 in debt securities; and $10,000,000 in warrants. We plan to sell such securities at a fixed price or prices, which may be changed; at market prices prevailing at the time of sale; at prices related to such prevailing market prices; or at negotiated prices. We plan to offer, as may be required, securities as may be issuable upon conversion, redemption, repurchase, exchange or exercise of any securities registered hereunder, including any applicable anti-dilution provisions. This prospectus provides a general description of the securities we may offer. Each time we sell securities (other than common stock), we will provide specific terms of the securities offered in a supplement to this prospectus. We may also authorize one or more free writing prospectuses to be provided to you in connection with these offerings. The prospectus supplement and any authorized free writing prospectus may also add, update or change information contained in this prospectus. You should carefully read this prospectus, the applicable prospectus supplement and any authorized free writing prospectus, as well as any documents incorporated by reference, before you invest in any of the securities being offered. This prospectus may not be used to consummate a sale of any securities unless accompanied by a prospectus supplement. Our common stock is traded on the OTCBB under the symbol "TYMI." On September 8 , 2016, the last reported sale price of our common stock was $ 4.50 per share. The applicable prospectus supplement will contain information, where applicable, as to any other listing on any other securities market or other exchange of the securities, if any, covered by securities issued under the prospectus supplement. We may sell these securities directly to investors, through agents designated by us or to or through underwriters or dealers, on a continuous basis after the effective date of the registration statement of which this prospectus forms a part . For additional information on the methods of sale, you should refer to the section entitled "Plan of Distribution" in this prospectus. If any agents or underwriters are involved in the sale of any securities with respect to which this prospectus is being delivered, the names of such agents or underwriters and any applicable fees, commissions, discounts or over-allotment options will be set forth in a prospectus supplement. The price to the public of such securities and the net proceeds we expect to receive from such sale will also be set forth in a prospectus supplement. __________________________________________________ Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described and cross-referenced under the heading "Risk Factors" contained herein and in the applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus. __________________________________________________ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. __________________________________________________ The date of this prospectus is September __, 2016 ABOUT THIS PROSPECTUS This prospectus is a part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission, or SEC, utilizing a "shelf" registration process. Under this shelf registration process, we may sell any combination of the securities described in this prospectus, subject to the limits on sale for each class of securities specified herein, in one or more offerings up to a total aggregate offering price of $250,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we sell securities under this prospectus, we will provide a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update or change information contained in this prospectus or in any documents that we have incorporated by reference into this prospectus. You should read this prospectus, any applicable prospectus supplement and any related free writing prospectus, together with the information incorporated herein by reference as described under the heading "Incorporation of Certain Information by Reference," before investing in any of the securities offered. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE A SALE OF SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. Neither we, nor any agent, underwriter or dealer has authorized any person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus, any applicable prospectus supplement or any authorized free writing prospectus prepared by or on behalf of us or to which we have referred you. This prospectus, any applicable supplement to this prospectus or any such free writing prospectus do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate, nor do this prospectus, any applicable supplement to this prospectus or any such free writing prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus, any applicable prospectus supplement or any authorized free writing prospectus is accurate on any date subsequent to the date set forth on the front of the document or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus, any applicable prospectus supplement or any authorized free writing prospectus is delivered, or securities are sold, on a later date. This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the heading "Where You Can Find More Information." - i - SUMMARY This summary highlights selected information from this prospectus and does not contain all of the information that you need to consider in making your investment decision. You should carefully read the entire prospectus, the applicable prospectus supplement and any authorized free writing prospectus, including the risks of investing in our securities discussed under the heading "Risk Factors" contained herein as well as in the applicable prospectus supplement and any such free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully read the information incorporated by reference into this prospectus, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part. As used in this prospectus, unless the context indicates otherwise, the terms "we," "our," "us," the "Company," or "registrant" refer to Tyme Technologies, Inc. and includes its subsidiaries and predecessors. Company Overview We are a clinical-stage pharmaceutical company focused on discovering and developing highly targeted cancer therapeutics for a broad range of oncology indications. We are currently developing for use in humans SM-88, our proprietary combination drug candidate. Combination drug products are commonly referred to as "drug cocktails." We believe SM-88 can become a first-in-class oncology therapy that could increase the power of the body s innate defenses to utilize oxidative stress to kill cancer cells. SM-88 SM-88 is a novel combination of a proprietary novel molecule with three currently-marketed drugs that are generally considered safe for their already approved indications, which are in areas other than cancer treatment. We believe that SM-88 is capable of synergistically targeting the unique metabolic features of cancer cells and selectively altering the susceptibility of cancer cells to oxidative stress. This selectivity is underscored by evidence indicating that, to date, the SM-88 drug combination drug candidate has been shown to be nontoxic to noncancerous cells, unlike most current anticancer drugs and treatments. SM-88 s therapeutic potential is based on its ability to increase the availability of free radicals at the cancer site and promote their entry into the cell by stripping the cancer cells of their normal barriers to these toxic electrons. The active components of SM-88 are all administered in low doses. We believe, based on SM-88 s mechanism of action and proof-of-concept clinical data, that our drug may ultimately improve overall response rates, clinical outcomes and survival rates in cancer patients. Based on its novel proposed mechanism of action and the factors described below, SM-88 may prove particularly beneficial to cancer patients who have relapsed following traditional cancer therapies. SM-88 is designed to penetrate only living cancer cells, where it introduces multiple mechanisms to kill cancer cells without toxic effects and without involving healthy body tissue. Based upon preliminary data and responses from a phase I clinical trial study and IRB compassionate care studies, we believe that the mechanism of action for SM-88 may induce the transfer of electrons in cancer cells that allow catalyzed external free radicals to react and stress the cancer cells, creating an engineered metabolic response that results in decreased mucin and decreased defense to reactive oxygen. Our Initial Clinical Trial Our initial proof-of-concept clinical trial, we believe, demonstrated that our drug was well-tolerated and showed preliminary activity across a number of different cancer types in terms of tumor regression, biomarker improvement, and in overall survival. Promising results were shown in the 30 enrolled subjects eligible for efficacy evaluation in a proof-of-concept institutional review board (IRB)-approved clinical trial. Results from the 30 patients indicated that a complete response was observed in two patients, partial response in six patients, stable disease in 19 patients and progressive disease in three patients. We cannot predict whether such results will be shown in the future clinical trials and other testing we will be required to undertake in order to obtain regulatory approval of SM-88. - 1 - IRB-Sanctioned Compassionate Use Program Commencing in January 2012 and concluding in June 2014, we conducted a single-center, open-label, proof-of-concept study for SM-88 in 53 late-stage cancer patients with relapsed or highly refractory disease, including individuals with breast, pancreatic and primary lung cancers, as well as glioblastoma. The trial was conducted under an institutional review board (IRB)-sanctioned compassionate use protocol. In the study, patients received one to ten cycles of treatment, each consisting of daily administration, five days per week, for six weeks. Results from the 53 patients indicated that a complete response was observed in six patients, partial response in 17 patients, stable disease in 18 and progressive disease in 12 patients. During cycle one, improvements were noted by nearly all subjects in Eastern Cooperative Oncology Group Performance Status, European Organization for Research and Treatment of Cancer Quality of Life and self-reported pain scores. SM-88 was well tolerated, and drug-related adverse events ("AEs") in cycle one were mild to moderate and self-limiting, with no therapy required. Most AEs occurred within the first cycle of treatment, with the exception of hyperpigmentation, which eventually occurred in all subjects. Our Clinical Trial Objectives We are developing a regulatory and drug development program for SM-88 and are working towards the initiation of our first phase II clinical trial. In September of 2015, we filed an IND with the FDA for our SM-88 drug candidate. In October of 2015, the FDA accepted the IND and concluded that we may proceed with a clinical investigation of SM-88 for breast cancer. Subsequent to the FDA s acceptance of our IND for SM-88 and approval of our clinical trial for breast cancer, we made a determination, based on input from various sources and the strong interest of several clinical sites, to prioritize our clinical trial objectives by initiating a study in prostate cancer. On June 13, 2016, we announced that we have begun recruiting for a phase Ib/II clinical trial, using our proprietary compound, SM-88, to treat prostate cancer. Unlike traditional chemotherapy, SM-88 is designed to target only active cancer calls. The trial is designed to confirm SM-88 s earlier reported activity in reducing the prostate-specific antigen ("PSA") without causing the medical castration-like effects often experienced with the current standard of care. The trial will be a single-arm, open label trial and up to five clinical sites will be involved. Prospective enrollees will have prostate cancer, rising PSA levels, without metastatic disease, and have failed androgen deprivation therapy. Recruitment for the study is currently underway. We will report results on PSA levels and novel biomarker components, as well as progression free survival data at the conclusion of the study, or earlier, if appropriate milestones are met. We are also evaluating protocols for clinical trial studies to evaluate SM-88 for breast and pancreatic cancer. Focused Strategies of Our Research We have focused our research and development efforts on a proprietary platform technology, for which we retain global IP and commercial rights, for use in creating drugs to treat the unmet medical needs of oncology patients. This population includes patients with limited life expectancy and scarce therapeutic options, such as those with refractory cancer (i.e., cancer that is unresponsive to treatment with standard therapies), those who are undergoing salvage therapy or patients who have relapsed. We believe this development strategy directed at this patient population may allow for faster regulatory approval and may likely require smaller clinical trials, as compared to those indications with more therapeutic options and larger patient populations. Our approach is intended to take advantage of the deregulated energy state of tumors to selectively kill cancer cells using electrochemical pathways. While mechanism of action studies are being designed and tested, our IP and drug research program deals with a multi-part process. It is proposed that the high-energy needs of rapidly proliferating tumor cells may be harnessed as a means of stopping cancer cell growth, reducing the size of tumors and eventually destroying those cells. A normal cell uses a process called oxidative phosphorylation to generate approximately 32-high-energy molecules (adenosine triphosphate) from glucose to provide energy for the cell. In contrast, cancer cells use a process called glycolysis that only generates approximately two such high-energy molecules from glucose and requires the additional metabolism of lipids (fats) for energy. This results in a very high-energy requirement for the cancer cells. Cancer cells reproduce rapidly and must synthesize large amounts of proteins to drive their proliferation and, accordingly, their amino acid needs are also quite high. Our approach is to use tumor cells own exaggerated hunger against them. Our approach is to essentially change the metabolic uptake of the cancer cell. Our SM-88 drug is designed to exploit a cancer s weakness in a manner that we believe has never before been exploited. - 2 - Platform Technology SM-88 consists of four drugs in a proprietary combination and is intended as an oral therapy. SM-88 is comprised of three approved drugs, Phenytoin, Methoxsalen, Sirolimus, and a proprietary Tyrosine isomer that we have developed. The components are SM-88 consist of: Phenytoin, which stimulates production of reactive lipid species which are associated with apoptosis; Methoxsalen, which promotes toxic electron transfer and enhances reactive oxygen species ("ROS") which results mitochondrial directed apoptosis; Sirolimus, which is an mTOR inhibitor that decreases insulin actions and results in an increase in tumor cells demand upon LAT 1 for exogenous amino acids and ROS; and, LAT-1, our novel molecule, which is an amino acid exchanger which results in preferential tyrosine uptake. SM-88 utilizes a proprietary combination of non-nutritive tyrosine analogs that cannot be used in protein synthesis. We believe that the lack of functional tyrosine impairs the synthesis of tyrosine dependent molecules, e.g. mucins, and other essential moieties, making the cancer more vulnerable to cell death. Our Strengths We believe we can become a leader in developing cancer therapies with our platform technology for the following reasons: Our initial drug candidate, SM-88, is believed to be a first-in-class immuno-modulating-electrochemical-response-modifier cancer therapy SM-88 has demonstrated its potential as an aggressive combination drug product treatment, with encouraging antitumor activity that has not, to date, shown significant toxic side effects at current therapeutic dose levels We have filed patents for additional drug candidates to provide a pipeline of oncology drug development programs based on our technology platform We currently retain all commercial rights for SM-88 and have undertaken an extensive multinational patent effort to protect those rights Our management team is leveraging its strong track record in the development and commercialization of new technologies and discoveries into the life sciences field and We have a technology base and patent portfolio in the field of targeted electrochemical immuno-oncology. Our Corporate Strategy Our goal is to develop and commercialize targeted electrochemical immuno-oncology therapies in humans aimed at improving and extending patients lives. Key elements of our strategy to achieve this goal are to: Successfully advance SM-88 through clinical development, including its phase II clinical trials, a phase III program and commercial launch. We intend to pursue a worldwide development and commercialization plan for SM-88. Continue to invest in our technology platform and IP portfolio to further build our electrochemical immuno-oncology therapy pipeline. We plan to expand our R&D efforts to encompass other indications within the oncology field, to investigate other uses and patient populations and to conduct further mechanism studies that could potentially pave the way for adding further drugs to our pipeline of innovative therapies for humans. - 3 - Build a balanced portfolio of proprietary and partnered programs. We plan to independently develop and commercialize multiple drug candidates for human indications within the oncology field. For targets outside our core areas of interest or where a partner can contribute specific expertise, we intend to evaluate potential collaborations with strategic partners and/or potential acquisitions of other companies who can augment our expertise and technology, as well as a means to acquire rights or ownership of additional IP. We also contemplate exploring global development partners and arrangements, where appropriate. The Securities Offered We plan to offer shares of our common stock and preferred stock, one or more series of debt securities and warrants to purchase any of our securities, up to a total aggregate offering price of $250,000,000 (subject to the limits specified in this prospectus for each class of securities sold hereunder) in one or more offerings under this prospectus, together with any applicable prospectus supplement and any authorized free writing prospectus, at prices and on terms to be determined by negotiation and/or market conditions at the time of the relevant offering. This prospectus provides you with a general description of the securities we may offer. Each time we sell a type or series of securities under this prospectus, we will provide a prospectus supplement that will describe the specific amounts, prices and other important terms of the securities, including, to the extent applicable: aggregate offering price; aggregate principal amount; maturity, if applicable; original issue discount, if any; rates and times of payment of interest or dividends, if any; redemption, conversion, exchange or sinking fund terms, if any; conversion or exchange prices or rates, if any, and, if applicable, any provisions for changes to or adjustments in the conversion or exchange prices or rates and in the securities or other property receivable upon conversion or exchange; ranking, if applicable; restrictive covenants, if any; designation or classification; voting or other rights, if any; and material U.S. federal income tax considerations. The prospectus supplement and any authorized free writing prospectus that we may authorize to be provided to you may also add, update or change information contained in this prospectus or in documents we have incorporated by reference. However, no such prospectus supplement or free writing prospectus will offer a security that is not registered and described in this prospectus at the time of the effectiveness of the registration statement of which this prospectus is a part. This prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement. We may sell the securities directly to investors or through underwriters, dealers or agents. We, and our underwriters or agents, reserve the right to accept or reject all or part of any proposed purchase of securities. If we do offer securities through underwriters or agents, we will include in the applicable prospectus supplement: the names of underwriters; the name of agents; applicable underwriting discounts, fees and commissions to be paid to them; - 4 - details regarding over-allotment terms, if any; and the estimated net proceeds to us. Common Stock. We plan to offer and issue shares of our common stock pursuant to this offering . Holders of our common stock are entitled to one vote per share for the election of directors and on all other matters that require stockholder approval. Subject to any preferential rights of any then outstanding preferred stock, in the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in the assets remaining after payment of liabilities and the liquidation preferences of any then outstanding preferred stock. Our common stock does not carry any preemptive rights enabling a holder to subscribe for, or receive shares of, any class of our common stock or any other securities convertible into shares of any class of our common stock, or any redemption rights. Preferred Stock. We plan to offer and issue shares of our preferred stock pursuant to this offering, potentially in one or more series , dependent upon negotiation with investors, directly or through underwriters or agents . Under our Amended and Restated Certificate of Incorporation (our "Certificate of Incorporation"), our board of directors has the authority, without further action by stockholders, to designate up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be greater than the rights of the common stock. To date, none of the 10,000,000 authorized shares of preferred stock have been designated by our board of directors. Convertible preferred stock will be convertible into our common stock or exchangeable for our other securities. Conversion may be mandatory or at the option of the holders of our preferred stock and would be at prescribed conversion rates. We will fix the rights, preferences, privileges, qualifications and restrictions of the preferred stock of each series that we sell under this prospectus and related prospectus supplements in the certificate of designation relating to that series. We will set forth in a prospectus supplement, or as applicable incorporate by reference into the registration statement of which this prospectus is a part , the form of any certificate of designation that describes the terms of the series of preferred stock we are offering before the issuance of the related series of preferred stock. We urge you to read the prospectus supplements (and any free writing prospectus that we may authorize to be provided to you related to the series of preferred stock being offered, as well as the complete certificate of designation that contains the terms of the applicable series of preferred stock. Debt Securities. We plan to offer and sell debt securities , potentially in one or more series, as either senior or subordinated debt or as senior or subordinated convertible debt , dependent upon negotiation with investors, directly or through underwriters or agents . The senior debt securities will rank equally with any other unsecured and unsubordinated debt. The subordinated debt securities will be subordinate and junior in right of payment, to the extent and in the manner described in the instrument governing the debt, to all of our senior indebtedness. Convertible debt securities will be convertible into our common stock or preferred stock. Conversion may be mandatory or at the holder s option and would be at prescribed conversion rates as set forth in any applicable prospectus statement. The debt securities will be issued under one or more documents called indentures, which are contracts between us and a national banking association or other eligible party, as trustee. In this prospectus, we have summarized certain general features of the debt securities. We urge you, however, to read the applicable prospectus supplement (and any free writing prospectus that we may authorize to be provided to you) related to the series of debt securities being offered, as well as the complete indentures that contain the terms of the debt securities. A form of indenture has been filed as an exhibit to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt securities containing the terms of the debt securities being offered will be set forth in a prospectus supplement, or as applicable incorporated by reference into the registration statement of which this prospectus is a part from certain reports that we file with the SEC. Warrants. We plan to offer and sell warrants for the purchase of common stock, preferred stock and/or debt securities , potentially in one or more series , dependent upon negotiation with investors, directly or through underwriters or agents . We may issue warrants independently or together with common stock, preferred stock and/or debt securities, and the warrants may be attached to or separate from these securities. In this prospectus, we have summarized certain general features of the warrants. We urge you, however, to read the applicable prospectus supplement (and any free writing prospectus that we may authorize to be provided to you) related to the particular series of warrants being offered, as well as the complete warrant agreements and warrant certificates that contain the terms of the warrants. Forms of the warrant agreements and forms of warrant certificates containing the terms of the warrants being offered will be set forth in a prospectus supplement, or as applicable, will be incorporated by reference in to the registration statement of which this prospectus is a part from certain reports that we file with the SEC. We will evidence each series of warrants by warrant certificates that we will issue. Warrants may be issued under an applicable warrant agreement that we enter into with a warrant agent. We will indicate the name and address of the warrant agent, if applicable, in the prospectus supplement relating to the particular series of warrants being sold . - 5 - Corporate Information We are incorporated under the laws of the State of Delaware. Our principal executive office is located at 44 Wall Street, 12th Floor , New York, New York 10005 . Our telephone number is (646) 205-1603. Our website address is www.tymeinc.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our securities offered in this prospectus. "Tyme", the Tyme logo and other trademarks or service marks of the Company appearing in this prospectus are the property of Tyme Technologies, Inc. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001538123_ifan_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001538123_ifan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0cb3075314d869b5a25b3c67ca2d2538afd05aef
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001538123_ifan_prospectus_summary.txt
@@ -0,0 +1 @@
+ITEM 3. PROSPECTUS SUMMARY IFAN FINANCIAL, INC. This summary contains material information about us and the offering which is described in detail elsewhere in the Prospectus. Since it may not include all of the information you may consider important or relevant to your investment decision, you should read the entire Prospectus carefully, including the more detailed information regarding our company, the risks of purchasing our Common Stock discussed under "Risk Factors" on page 11, and our financial statements and the accompanying notes. Unless the context otherwise requires, the terms "we," "our," "us," the "Company" and "IFAN" refer to IFAN Financial, Inc., a Nevada corporation. Company Overview The Offering Common Stock 10,000,000 shares that may be offered by the Selling Stockholder. Shares Outstanding Common Stock 89,646,245 shares outstanding as of the date of this prospectus. Total proceeds We will not receive any proceeds from the resale or other disposition of the shares covered by this prospectus by the Selling Stockholder. We will receive proceeds from our sale of shares to SBII. SBII has committed to purchase up to $2,000,000 worth of shares of our common stock over a period of time terminating on the earlier of: (i) 18 months from the effective date of the Equity Line of Credit Agreement (the "2015 Equity Line"); or (ii) the date on which SBII has purchased shares of our common stock pursuant to the 2015 Equity Line for an aggregate maximum purchase price of $2,000,000. The purchase price to be paid by SBII will be equal to 80% of the Market Price of the common stock as determined under the 2015 Equity Line. We will be entitled to put a Draw Down Notice to SBII on each Draw Down that equals the lesser of (i) $25,000, or (ii) 200% of the average of the dollar volume based on the trailing 10 Trading Days preceding the first day of the Draw Down Notice that constitutes the Draw Down Pricing Period; provided that the number of shares to be purchased by SBII shall not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by SBII, would exceed 4.99% of the number of shares of our common stock outstanding. Our Business We were incorporated under the laws of the State of Nevada on June 11, 2010. Our general business strategy is to become a leader in the ever-growing field of mobile payments, IFAN Financial has a unique opportunity to enhance the lives of consumers with a revolutionary platform that offers an instantaneous method for processing transactions at rates that are less than the industry standards. The Platform s proprietary design decentralizes the consumers card information and assures no customer information is ever provided to the merchant. All customers who enter the Platform are able to make purchases through mobile, online, or in-store while being better protected from the threat of card or identity theft at the point of sale. Our security process is triple encrypted, tokenized, and helps significantly reduce the risk of identity theft, fraudulent transactions, and counterfeit chargebacks. All transactions within the Platform are FDIC-insured. The IFAN Platform has revolutionary functionality in that we have combined on-demand payments, autopay features, proximity services, local and long distance cash transfers, and split-payment capabilities. On the enterprise level, we can , ' ': white label the Platform, bringing the first to market fully optimized mobile solution for merchants with already installed customer bases. We give businesses the ability to create a fully custom mobile, online, and in-store commerce experience based on their customer needs. Our Platform is true integration from front-end to back-end and streamlines the transaction processes and reduces the time it takes merchants to receive funds. We currently do have provisional patents on our mobile payment products and services and related products. Please refer to "Description of Our Business." We have no revenues, have sustained losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. We may not generate revenues even if any of our mobile payment technology is developed into full scale production. Accordingly, we will be dependent on future financings in order to maintain our operations and continue our research and development. Please refer to "Risk Factors." The Company qualifies as an "emerging growth company" as defined in the Jumpstart our Business Startups Act (the "JOBS Act"). The Company s fiscal year end is August 31st. Where You Can Find Us Our principal executive office is located at 3517 Camino Del Rio South, Suite 407, San Diego, CA 92108. The telephone number at our principal executive office is (619) 537-9998. Our History The Company was incorporated on June 11, 2010, under the laws of the State of Nevada. The Company is currently a development stage company and, since its formation, it has not realized any revenues from operations. The Company originally intended to develop and distribute an organic clothing line designed for children. All our clothing was going to be made of only natural materials. The Company now intends to commence operations in the electronic transfer of funds using mobile applications. Since inception we worked toward the introduction and development of our website. We have no revenues, have experienced losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities and borrowings to fund operations. In April 2014, the Company had a change in control and abandoned the initial business plan. On April 25, 2014, J. Christopher Mizer ("Mr. Mizer") acquired control of Seven Million One Hundred Twenty-Two Thousand Thirty (7,122,030) shares of common stock of the Company, representing approximately 97.1% of the Company s total issued and outstanding common stock, from Danielle Joan Borrie ("Ms. Borrie") in accordance with a Stock Purchase Agreement between Ms. Borrie and Mr. Mizer. On April 28, 2014, Danielle Joan Borrie resigned as the Company s Board of Directors and as the Company s President, Chief Executive Officer, Chief Financial Officer, and Treasurer. On April 28, 2014, Nopporn Sadmai resigned as the Company s Secretary. On April 28, 2014, J. Christopher Mizer was appointed as a member of the Company s Board of Directors and as the Company s President and Chief Executive Officer. On April 28, 2014, Steve Scholl was appointed as a member of the Company s Board of Directors and as the Company s Chief Financial Officer, Treasurer, and Secretary. On May 8, 2014, the Board of Directors of the Company, with the approval of a majority of its shareholders by written consent, approved the issuance of 600,000 shares of Series A Preferred Stock (as defined and described under Item 3.2) (the "Series A Preferred Stock") to J. Christopher Mizer, and 300,000 shares of Series A Preferred Stock to Steve Scholl ("Preferred Shareholders") in exchange for J. Christopher Mizer s cancellation of 6,764,887 shares, representing the ownership of approximately 92.2%, of the Company s Common Stock. J. Christopher Mizer retained an ownership of 357,143 shares of common stock in the Company after this cancellation. Also on May 8, 2014, the Board of Directors, with the approval of a majority vote of its shareholders approved the filing of a Certificate of Designation establishing the designations, preferences, limitations and relative rights of the Company s Series A Preferred Stock (the "Designation" and the "Series A Preferred Stock"). The Board of Directors authorized the issuance of 900,000 shares of Series A Preferred Stock, which the Board agreed to issue to the Preferred Shareholders or its assigns, upon the Company filing the Certificate of Designation with the Nevada Secretary of State. The terms of the Certificate of Designation of the Series A Preferred Stock, which was filed with the State of Nevada on May 8, 2014, include the right to vote in aggregate, on all shareholder matters equal to 700 votes per share of Series A Preferred Stock and each Series A Preferred Stock share is convertible into shares of our common stock at a conversion rate of 700 shares of common stock for each one (1) share of Series A Preferred Stock. On May 8, 2014, the Company filed a Certificate of Amendment with the Nevada Secretary of State to increase its authorized capital to Eight Hundred Ten Million shares (810,000,000) of which Eight Hundred Million (800,000,000) shall be shares of Common Stock, par value $0.001 per share, and ten million (10,000,000) shall be shares of Preferred Stock, par value $0.001 per share with one million (1,000,000) of such shares being designated as Series A Preferred Stock. The Increase in authorized shares was effective with the Nevada Secretary of State on May 8, 2014, when the Certificate of Amendment was filed. The increase in authorized shares was approved by the Board of Directors and the shareholders holding a majority of the total issued and outstanding shares of common stock on May 8, 2014. On August 4, 2014, the Directors of the Company, receiving the majority vote of the Company s Shareholders, approved: (i) a change in the Company name from "Infantly Available, Inc." to "IFAN Financial, Inc." and (ii) a 140-for-1 forward stock split of the issued and outstanding shares of common stock of the Company, which shall be payable as a dividend and upon surrender. All amounts in the financial statements have been retroactively restated to reflect this change. On August 5, 2014, the Company filed a Certificate of Amendment with the Secretary of State of Nevada, giving effect to the name change, among other things. Effective September 3, 2014, in accordance with approval from the Financial Industry Regulatory Authority ("FINRA"), our company changed its name from Infantly Available, Inc. to IFAN Financial, Inc. On June 6, 2014, the Company signed a share exchange agreement ("Agreement") with Mobicash America, Inc. D/B/A Quidme, a company incorporated under the laws of the State of California ("Quidme"), and the shareholders of Quidme (the "Selling Shareholders") pursuant to a share exchange agreement by and among the Company, Quidme and the Selling Shareholders. The Company was to acquire 100% of the issued and outstanding securities of Quidme in exchange for the issuance of 43,000,000 shares of IFAN common stock, par value $0.001 per share. The Company also agreed to fund $500,000 over the next six months to support the continued development and commercialization of Quidme s technology. As a result of the Agreement the Selling Shareholders would receive up to 35% of the Company s currently issued and outstanding shares of common stock. Upon completion of the Agreement, Quidme would become the wholly-owned subsidiary and the Company would acquire the business and operations of Quidme. Further, on the closing date of the Agreement, Christopher Menya, would also be appointed the Chief Technology Officer and a Director of IFAN and as President of the Quidme operating subsidiary, and John C. De Puy would be appointed as a Director of Quidme. The Agreement was to be completed contingent on the successful financial audit of Mobicash America, Inc. On October 3, 2014, we received the August 31, 2013, audited financial statements of Mobicash America, Inc., and we closed the share exchange by acquiring Mobicash America, Inc. and through an amended Share Exchange Agreement (the "Amended Agreement") we issued the 61,858 shares of Series A preferred stock to the shareholders of Mobicash America, Inc., d/b/a Quidme. On April 3, 2015, Christopher Menya resigned as the Company s Chief Technical Officer and as a Director. On April 8, 2015, John De Puy was appointed as a member of the Company s Board of Directors. Our principal executive office is located at 3517 Camino Del Rio South, Suite 407. The telephone number at our principal executive office is (619) 537-9998. Our fiscal year end is August 31. We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups (JOBS) Act. As a result of the closing of the share exchange agreement with Mobicash America, Inc., Mobicash America, Inc. has become our wholly owned subsidiary and we now carry on the business of developing, producing, marketing and selling mobile electronic payment systems. Our company is in the development stage and has generated no revenues to date. The Equity Line of Credit Agreement On May 28, 2015, The Company and SBII entered into an Eighteen Month (18) Equity Line of Credit Agreement (the "2015 Equity Line of Credit"). The Company pledged 11,000,000 restricted Common Shares to an affiliate of SBII in satisfaction of a $550,000 commitment fee due under the 2015 Equity Line of Credit. Unless earlier terminated in accordance with its terms, the 2015 Equity Line of Credit shall terminate automatically on the earlier of (i) the first day of the month following the 18-month anniversary of the "Effective Date" (as hereinafter defined), or (ii) the date on which SBII shall have made payment of Advances pursuant to the 2015 Equity Line of Credit in the aggregate amount of $2,000,000. Pursuant to the terms of the 2015 Equity Line of Credit, The Company may in its sole discretion, and upon giving written notice to SBII (an "Advance Notice"), periodically sell Common Shares to SBII ("Shares") at a per Share price ("Purchase Price") equal to 80% of the average of the 3 lowest daily volume weighted average price (the "VWAP") of the Common Stock during a respective Draw Down Pricing Period, or (ii) 85 % of the price of the Common Stock on the last Trading Day of the respective Draw Down Pricing Period for a Common Share as quoted by Bloomberg, L.P. (as such term is defined in the 2015 Equity Line of Credit) following the delivery by the Company of a Draw Down Notice, (the "Draw Down Pricing Period"). The Company is not obligated to sell any Shares to SBII but may, over the term of the 2015 Equity Line of Credit and in its sole discretion, sell to SBII that number of Shares valued at the Purchase Price from time to time in effect that equals up to two million dollars ($2,000,000) in the aggregate. SBII is obligated under the 2015 Equity Line of Credit to purchase such Shares from The Company subject to certain conditions including: (i) The Company filing a registration statement with the SEC to register the resale by SBII of the Shares sold to SBII under the 2015 Equity Line of Credit ("Registration Statement"), (ii) the SEC declaring such Registration Statement effective (the date of such declaration by the SEC being the "Effective Date"), (iii) periodic sales of Shares to SBII must be separated by a time period of at least two Trading Days ("Trading Cushion"), and (iv) the dollar value of any individual periodic sale of Shares designated by the Company in any Draw Down Notice may not exceed the lesser of (a) $25,000, or (b) 200% of the average Daily volume based on the trailing 10 Trading Days preceding the first day of the Draw Down Notice Period. Daily volume is the product obtained by multiplying the number representing the daily trading volume of Common Shares for such Trading Day by the VWAP for a Common Share on such Trading Day. The Company qualifies as an "emerging growth company" as defined in the Jumpstart our Business Startups Act (the "JOBS Act"). We intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As well, our election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until they apply to private companies. Therefore, as a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates. THE OFERING Terms
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001538928_viamet_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001538928_viamet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8fd5bb7187e8b27bf866a2e5d6c1ecc6ec059eb9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001538928_viamet_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the section in this prospectus entitled Risk Factors beginning on page 13 and our audited and unaudited consolidated financial statements and the related notes thereto appearing at the end of this prospectus, before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to the company, Viamet, we, us and our refer to (i) following the date of the Conversion discussed under the heading Corporate Conversion, Viamet Pharmaceuticals Corp. and its consolidated subsidiaries, or any one or more of them as the context may require, and (ii) prior to the date of the Conversion, Viamet Pharmaceuticals Holdings, LLC and its subsidiaries, or any one or more of them as the context may require. Additionally, references to our board of directors refer to (i) following the date of the Conversion, the board of directors of Viamet Pharmaceuticals Corp. and (ii) prior to the date of the Conversion, the board of managers of Viamet Pharmaceuticals Holdings, LLC. Our Company We are a biopharmaceutical company focused on the discovery, development and commercialization of novel pharmaceuticals based on our proprietary metalloenzyme chemistry and biology technology platform. Metalloenzymes, which contain a metallic atom that is primarily responsible for enzyme activity, are an important class of drug targets for the treatment of a broad range of diseases. We utilize our technology to design novel drugs that we expect will have significant benefits as compared to currently marketed metalloenzyme inhibitors, including greater efficacy, improved safety, more favorable pharmacokinetic properties and superior therapeutic index. We have leveraged our technology to develop several product candidates that we believe have the potential to become best-in-class antifungal agents. VT-1161, our lead product candidate, is currently in separate Phase 2b clinical trials for the treatment of onychomycosis, a fungal infection of the nail, and recurrent vulvovaginal candidiasis, a recurrent form of vaginal yeast infection. In recent interim analyses of these Phase 2b clinical trials, we observed positive results in terms of both safety and efficacy for both indications. We expect final data on the principal efficacy and safety endpoints, or top-line final data, from our ongoing Phase 2b clinical trials to be available during the fourth quarter of 2016. Our other product candidates include VT-1129 for the treatment of cryptococcal meningitis, a life-threatening invasive fungal infection of the central nervous system currently in a Phase 1 clinical trial, and VT-1598 for the treatment of coccidioidomycosis, a fungal infection in the southwestern United States also known as Valley Fever, currently in IND-enabling studies. In addition to the development of novel antifungal agents, we are leveraging our technology to pursue drug discovery programs in oncology and certain orphan diseases. We refer to our broad array of metalloenzyme chemistry and biology technologies as our MIDAS (Metalloenzyme Inhibitor Design and Synthesis) technology platform. This platform, built over the past decade, encompasses a powerful set of chemistry and biology tools that address the challenges and complexities of metalloenzyme drug discovery and enable the design of highly differentiated metalloenzyme inhibitors. Our technology is comprised of a deep understanding of over 120 potential metalloenzyme targets, a set of proprietary computer-based design tools, a library of over 200 unique metal-binding groups, knowledge of important counter-screens and pharmacologic expertise. We have focused our efforts on disease areas that are characterized by significant unmet medical need and commercial opportunity and for which our technology provides an opportunity to develop highly differentiated agents which may have compelling advantages over currently available therapies. Table of Contents EXPLANATORY NOTE Viamet Pharmaceuticals Holdings, LLC, or the LLC entity, the registrant whose name appears on the cover of this registration statement, is a Delaware limited liability company. Prior to the effectiveness of this registration statement, the LLC entity will convert into a Delaware corporation and change its name from Viamet Pharmaceuticals Holdings, LLC to Viamet Pharmaceuticals Corp. We refer to this conversion throughout the prospectus included in this registration statement as the Conversion. Shares of the common stock of Viamet Pharmaceuticals Corp. are being offered by the prospectus included in this registration statement. Table of Contents Our initial drug discovery and development efforts have been focused on a metalloenzyme target, fungal CYP51, which has broad application in the treatment of human fungal infections. CYP51 is a clinically validated target in that a number of other antifungal compounds targeting CYP51 have either been approved or are currently in clinical-stage development. Ranging from extremely common dermatologic and mucosal infections to life-threatening infections of the central nervous system and internal organs, fungal infections represent an area of significant unmet medical need. Although several antifungal agents are currently available, each of these drugs has limitations with regard to efficacy, safety and pharmacokinetic properties. For example, terbinafine (Lamisil), the most widely prescribed drug for the treatment of onychomycosis, has a labeled complete cure rate of only 38% at the 48-week evaluation point and its use is limited by liver toxicity and frequent drug-drug interactions. Similarly, amphotericin B, which is used for the treatment of cryptococcal meningitis, is highly toxic to the kidneys and is very poorly tolerated. We have applied our technology to design antifungal compounds that we believe are highly differentiated from, and will address the shortcomings of, currently available antifungal agents. Our Development Pipeline The following table summarizes our development programs, target indications, current stages of development and key upcoming milestones: Our Product Candidates VT-1161 for Onychomycosis VT-1161 is an orally available inhibitor of fungal CYP51 that has shown high potency and selectivity in in vitro studies. VT-1161 blocks the production of ergosterol, an essential component of the fungal cell membrane, which is critical to fungal proliferation. In preclinical studies, VT-1161 demonstrated potent activity against Trichophyton rubrum, or T. rubrum, and Trichophyton mentagrophytes, or T. mentagrophytes, the two most common fungal species that cause onychomycosis, a fungal infection of the nail that affects approximately 32 million individuals in the United States. Despite the high prevalence of onychomycosis, current therapies for this disease are suboptimal with respect to efficacy, safety and dosing convenience. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS (Subject to Completion) Dated May 3, 2016 5,700,000 Shares COMMON STOCK Viamet Pharmaceuticals Corp. is offering 5,700,000 shares of its common stock. This is our initial public offering, and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $14.00 and $16.00 per share. We have applied to list our common stock on The NASDAQ Global Market under the trading symbol VMET. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See Prospectus Summary Implications of Being an Emerging Growth Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001544861_nostalgia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001544861_nostalgia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f7b3b22b2b6037c6cad23ffa306c1b26f6092f74
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001544861_nostalgia_prospectus_summary.txt
@@ -0,0 +1,2641 @@
+PROSPECTUS SUMMARY
+ 
+This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read the entire prospectus carefully together with our financial statements and the related notes appearing elsewhere in this prospectus before you decide to invest in our common stock. This prospectus contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed under the heading "Risk Factors" and other sections of this prospectus.
+ 
+Overview
+ 
+We aim to acquire ownership and other rights to discontinued consumer product brands, with the ultimate goal of reviving these products and commercializing them, based on an idea that nostalgia for such brands will be a powerful incentive to purchase among the senior population. We believe that many formerly popular brand names that were discontinued by their parent companies still resonate with the senior population and if so revived and made available in supermarkets and other retail establishments, would attract this population and others as consumers. 
+ 
+We are a newly established company and have limited operations. For the period from November 5, 2010 (Inception) to March 31, 2016 , we have not generated any revenue and incurred net losses of $(114,819). Due to the "early" nature of our business, we expect to incur losses as we expand. To date, our cash flow requirements have been met in part by an equity financing and debt. If we are unable to successfully generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of our operations. For these reasons, our independent registered public accounting firm believes that there is substantial doubt that we will be able to continue as a going concern.
+ 
+We will be unable to begin our proposed operations unless and until we obtain additional funds. 
+ 
+ 
+6
+
+ 
+ 
+Proposed Products
+ 
+We intend to target for purchase the intellectual property and other rights to discontinued consumer product brands. We consider a product to be discontinued if it is no longer available at traditional retail levels such as grocery and drug stores, or on the internet. 
+ 
+We do not currently own any brand names or have any products for sale. To date, we have researched over 100 discontinued products and are focusing upon 20 of these products in following three categories of consumer products: candy, food other than candy, and personal products, as follows: 
+ 
+ Candy. Bit-O-Licorice, Big Yank, Old Nick and Hollywood candy bars.
+ 
+ Food Other Than Candy. Amazo Instant Dessert, Ballard Cornbread Mix, Cocomalt, Hydrox Cookies, Krumbles Cereal, Ann Page Pork and Beans, Pep Cereal, Puffa Puffa Rice Cereal and Van Camp's Chili Con Carne.
+ 
+ Personal Products. Calox Tooth Powder, Chipso Laundry Soap, Forhans for the Gums, Rapid Shave, Shower Mate, Stopette Deodorant and Sun 'N' Surf.
+
+ 
+We hope to acquire at least one product from each category. Some of the product brands we intend to target for acquisition are in the public domain while the rights to others are still owned by companies from whom we would endeavor to acquire the manufacturing and distribution rights either upon a royalty basis or outright purchase. 
+ 
+There can be no assurance that we will be successful in acquiring rights to any of the above targeted products or any other discontinued products. We do not believe that any of our targeted products are available on the internet or at the retail level. 
+ 
+Corporate Background and Business Overview
+ 
+We were incorporated on November 5, 2010 under the laws of the State of Delaware. Our principal executive office is located at 20 Pape Drive, Atlantic Highlands, New Jersey 07716, and our telephone number at that office is (732) 291-3661. We intend to purchase rights to, and develop, our website at the following address: www.nostalgiafamilybrands.com. Our website and information contained on, or that can be accessed through, our website are not part of this prospectus. 
+ 
+We are an "emerging growth company," as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. In addition, the JOBS Act permits an emerging growth company to "test the waters" by communicating orally or in writing with qualified institutional buyers or other accredited investors to gauge interest in a contemplated securities offering, even if a registration statement has not yet been filed, and permits analysts to publish research reports about an emerging growth company that is going public even if the analyst's firm is one of the underwriters in the issuer's IPO. We have not provided any such information to any qualified institutional buyers or other accredited investors, and we are not aware of any research reports about us being published by analysts. 
+ 
+ 
+7
+
+ 
+ 
+MARKET FOR OUR COMMON STOCK
+ 
+Market Information
+ 
+There is currently no public market for our common stock and we have not applied for listing or quotation on any public market. We intend to seek a market maker to file an application on our behalf to have our common stock quoted on the OTC Bulletin Board. In order for such applicable to be accepted, we will have to satisfy certain criteria in order for our common stock to be quoted on the OTC Bulletin Board. There can be no assurance that our common stock will ever be quoted on the OTC Bulletin Board or that any market for our common stock will develop. We currently have no market maker that is willing to list quotations for our common stock. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. 
+ 
+We have issued 3,800,000 shares of our common stock since our inception on November 5, 2010. We have a convertible note in the principal amount of $50,000 outstanding, the principal and interest of which can be converted into shares of common stock at a purchase price of $0.10 per share. 
+ 
+ 
+8
+
+ 
+ 
+
+ THE OFFERING
+
+ 
+Securities Being Registered 
+We are registering and have included in the offering pursuant to this prospectus, an aggregate of 3,500,000 shares of Common Stock. This offering shall terminate ninety (90) days after the Registration Statement is declared effective by the SEC which may be extended by the Company for additional ninety (90) day periods up to twelve months.
+
+ 
+Plan of Distribution 
+We are registering 3,500,000 shares of common stock which shall be sold by either our officers, director or by agents or brokers engaged by us. At this time, we have not entered into any agreement nor have we had any discussions with any agents or brokers. The sale of our shares may involve block transactions on the over-the-counter market or on other quotation services or exchanges on which the shares are then quoted or listed, pursuant to the rules of the applicable exchanges or in the over-the-counter market; or by any other legally available means. 
+
+ 
+Offering Price 
+We shall sell the Company's Shares at a price of $0.10 per share. 
+
+ 
+Use of Proceeds 
+We estimate that our net proceeds from this offering will be approximately $298,000, based on an initial public offering price of $0.10 per share and after deducting estimated offering expenses payable by us of approximately $52,000. 
+We intend to use the net proceeds from the sale of our common stock in this offering to purchase the rights to and commercialize discontinued consumer product brands and for general corporate purposes. See "Use of Proceeds."
+ 
+Securities Outstanding 
+As of the date of this Registration Statement, there are three million eight hundred thousand (3,800,000) shares of Common Stock issued and outstanding. If the Company sells all of the Company's Shares pursuant to this offering, there shall be seven million three hundred thousand (7,300,000) shares of Common Stock issued and outstanding at the termination of this offering.
+
+ 
+Risk Factors 
+An investment in our shares is highly speculative and purchasers may suffer a rapid and substantial dilution per common share compared to the purchase price. No individual should invest in our common shares who cannot afford to risk the loss of his or her entire investment. See "Risk Factors" on Page 10 of this Prospectus.
+
+ 
+ 
+9
+
+ 
+ 
+RISK FACTORS
+ 
+An investment in our Company is highly speculative in nature and involves an extremely high degree of risk.
+ 
+Accordingly, prospective investors should consider carefully the following risk factors, in addition to the other information with respect to our business contained in this Prospectus, before purchasing the Shares pursuant to this Prospectus. 
+ 
+Risks Related to Our Business 
+ 
+As a newly established company with an unproven business strategy, our limited history of operations makes evaluation of our business and prospects difficult.
+ 
+We were incorporated on November 5, 2010 and our business is in its early planning stages and has not commenced operations. Our business prospects are difficult to predict because of our limited operating history, early stage of establishment and unproven business strategy. While we intend to focus on acquiring rights to and reviving discontinued consumer product brands, there can be no assurance that we will be successful in implementing our business plan. We may never generate revenues or attain profitable operations, and our management may not succeed in realizing our business objectives. 
+ 
+We are uncertain of our ability to function as a going concern, indicating the possibility that we may not be able to operate in the future.
+ 
+To date, we have completed only the initial stages of our business plan and we can provide no assurance that we will be able to generate sufficient revenue, if any, from our business in order to achieve profitability. It is not possible at this time for us to predict with assurance the potential success of our business. The revenue and income potential of our proposed business and operations are as of yet unknown. Wei, Wei & Company, LLC, our independent registered public accounting firm, has expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to completely execute our business plan. As a result, we may have to cease our business and liquidate any assets we own and purchasers of our common stock may lose their entire investment. 
+ 
+Our business will fail if we are unable to identify, acquire, commercialize, market and sell discontinued consumer product brands or otherwise implement our business plan successfully.
+ 
+The success of our business plan is dependent, among other things, on our ability to identify, acquire, commercialize, market and sell discontinued consumer product brands. It is our current plan to purchase the intellectual property and other rights to certain discontinued consumer product brands; however, we currently do not own any intellectual property and have not obtained any rights to any products, copyrights, patents or trademarks in respect of any intellectual property. Our business will fail if we cannot successfully implement our business plan or successfully market our planned products. 
+ 
+We expect to suffer losses for the foreseeable future.
+ 
+We expect to incur operating losses for the foreseeable future. These losses will occur because we do not yet have any revenues to offset the expenses associated with the development of our planned business. We cannot guarantee that we will ever become successful in generating sufficient revenues in the future. If we are unable to generate sufficient revenues, we will not be able to earn profits or continue operations. If we are unsuccessful in addressing these risks, our business will most likely fail. 
+ 
+If our views on the purchasing power of nostalgia as a driver for sales of consumer products is erroneous, our financial condition and results of operations will likely suffer.
+ 
+We believe that there is a potential market for the revival of discontinued consumer product brands based upon the strength of nostalgia in the senior population. We can give no assurance that our views on nostalgia or its use as a marketing tool to sell products will prove to be successful, especially considering that any brands we may acquire were likely discontinued due to a lack of sales or popularity at such time. If such views turn out to be erroneous, our results of operations and financial condition would be materially and adversely affected and our business may fail. 
+ 
+ 
+10
+
+ 
+ 
+We intend to enter a competitive market which could impact our ability to gain market share and accordingly, could harm our financial performance.
+ 
+The market for consumer products is very competitive. Although we intend to differentiate ourselves from other companies, there are a number of companies, many of which are established, adequately funded and which sell numerous products which would compete with any brands we may acquire. If we cannot gain shelf space for our planned products at retailers or gain market share, our business and financial performance will be adversely affected. 
+ 
+We may not be able to execute our business plan or stay in business without additional funding.
+ 
+Our ability to successfully develop our business, generate operating revenues and achieve profitability depends upon our ability to obtain the necessary financing to implement our business plan. We will require financing through the issuance of additional debt and/or equity in order to implement our business plan, including identifying, acquiring and distributing consumer products, building inventory, hiring additional personnel as needed and eventually establishing profitable operations. Such financing may not be forthcoming. As it has been widely reported, global and domestic financial markets and economic conditions have been, and continue to be, disrupted and volatile due to a variety of factors, including, but not limited to, weak economic conditions. As a result, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets has diminished significantly, even more so for smaller companies like ours. If such conditions and constraints continue, we may not be able to acquire funds either through credit markets or through equity markets and, even if financing is available, it may not be available on terms which we find favorable. Failure to secure funding when needed will have an adverse effect on our ability to meet our obligations and remain in business. 
+ 
+If our estimates related to expenditures are erroneous or inaccurate, our business may fail.
+ 
+Our success is dependent in part upon the accuracy of our management's estimates of expenditures for the next twelve months and beyond, including, but not limited to, the expenditures we expect to incur as a public reporting company, costs relating to acquiring rights to consumer product brands and commercialization of those brands, website development, and advertising and administrative expenses all of which management estimates will cost an aggregate minimum of approximately $300,000 over the next 12 months. If such estimates are erroneous or inaccurate, or we encounter unforeseen expenses and delays, we may not be able to carry out our business plan, which could result in the failure of our business. 
+ 
+If we are unable to identify and retain qualified personnel, our business and financial performance may suffer.
+ 
+We expect to be dependent on relationships with third parties in order to successfully commercialize our planned product lines. As a new company with very limited operating history and resources we may have difficulty in attracting and retaining the personnel required by us. If we are unable to fill those key positions or if we fail to hire or retain the necessary personnel, our business will suffer. 
+ 
+We need to retain key personnel to support our product and ongoing operations.
+ 
+Our future success depends upon the continued service of Mr. William P. McDermitt, our Chief Executive Officer and sole Director, and Mr. Edward O'Donnell, our Vice President, Chief Financial Officer and Secretary, upon whom we are relying to implement our business plan. The loss of the services of either Mr. McDermitt or Mr. O'Donnell could negatively impact our ability to select and commercialize potential brands, which would adversely affect our financial results and impair our operations. 
+ 
+Each of our executive officers are part-time employees and have committed to spend such time as they deem reasonably necessary to launch our business. Our inability to have a full-time chief financial officer may make it more difficult to, or cause a delay in, launching and developing our business and in meeting the reporting requirements of a public company. 
+ 
+ 
+11
+
+ 
+ 
+Our Chief Executive Officer and sole Director lacks experience in and with publicly traded companies.
+ 
+While we intend to rely heavily upon Mr. McDermitt, he has no experience serving as an officer and/or director of a publicly traded company or experience with the reporting requirements which public companies are subject to. In addition, Mr. McDermitt has no experience with the financial accounting and preparation requirements of financial statements which are required to be filed quarterly and annually under the Securities Exchange Act of 1934, as amended. Due to lack of financial resources, we were unable to timely file a number of our annual and quarterly reports with the SEC in the past. Consequently, our operations and ultimate financial success may suffer substantial harm due to our chief executive officer's lack of experience with publicly traded companies and the financial accounting and preparation requirements of the Exchange Act. 
+ 
+We could be subject to SEC penalties if we do not file all of our SEC reports. 
+ 
+Although we are presently up to date in our filings, in the past we have not timely filed all of our annual and quarterly reports required to be filed by us with the SEC in a timely manner. It is the management's intention to meet the SEC's requirements and to be up to date in all of our filings, but we cannot insure it because of the Company's lack of financial resources. It is possible that the SEC could take enforcement action against us, including potentially the de-registration of our securities, if we fail to file our annual and quarterly reports in a timely manner as required by the SEC. If the SEC were to take any such actions, it could adversely affect the liquidity of the future trading in our common stock and the amount of information about our Company that is publicly available. 
+ 
+In the event we are delinquent with respect to our reporting requirements in the future, the Securities and Exchange Commission may revoke the registration of our common stock and, if our common stock is quoted on the OTC Bulletin Board, quotation of our common stock will be terminated. 
+ 
+If, in the future, we are delinquent with respect to our reporting requirements, the Commission may revoke the registration of our common stock. If the Commission revokes the registration of our common stock, brokers, dealers and other market participants would be prohibited from buying, selling, making a market in, publishing quotations of, or otherwise effecting transactions with respect to such common stock until, in the case of suspension, the lifting of such suspension, or, in the case of a revocation, we file a new registration statement with the Commission under the Exchange Act and that registration statement is declared effective. As a result, public trading of our common stock would cease and investors would find it extraordinarily difficult to acquire or dispose of our common stock or obtain accurate price quotations for our common stock, which could result in a significant decline in the value of our stock. In addition, any business which we acquire or start may be adversely impacted, including, without limitation, an adverse impact on our ability to issue stock to raise equity capital, engage in business combinations or provide employee incentives. 
+ 
+In addition, if our shares become quoted on the OTC Bulletin Board, we will be required to remain current in our filings with the SEC and our securities will not be eligible for quotation if we are not current in our filings with the SEC. In the event that we become delinquent in our required filings with the SEC, quotation of the common stock will be terminated following a 30 day grace period if we do not make our required filing during that time. 
+ 
+Risks Related to our Common Stock
+ 
+There is currently no public market for our securities and there can be no assurance that any public market will develop or that our Common Stock will be quoted for trading.
+ 
+There is no public market for our securities and there can be no assurance that an active trading market for our Common Stock will develop, or, if developed, be sustained. Our Common Stock may never be quoted on the Over-the-Counter Bulletin Board, or, even if quoted, a public market may not materialize. 
+ 
+ 
+12
+
+ 
+ 
+Because we will be subject to "penny stock" rules if our shares are quoted on the Over-the-Counter Bulletin Board, the level of trading activity in our stock may be reduced.
+ 
+Broker-dealer practices in connection with transactions in "penny stocks" are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules. If a trading market does develop for our common stock, these regulations will likely be applicable, and investors in our common stock may find it difficult to sell their shares. 
+ 
+FINRA sales practice requirements may limit a stockholder's ability to buy and sell our stock.
+ 
+FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder's ability to resell shares of our common stock. 
+ 
+State securities laws may limit secondary trading, which may restrict the states in which stockholders may sell their shares. 
+ 
+Stockholders may not be able to resell the shares which they purchase in a certain state unless and until the shares of our common stock are qualified for secondary trading under the applicable securities laws of such state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in such state. There can be no assurance that we will be successful in registering or qualifying our common stock for secondary trading, or identifying an available exemption for secondary trading in our common stock in every state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of our common stock in any particular state, the shares of common stock cannot be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the market for the common stock will be limited, which could drive down the market price of our common stock, and reduce the liquidity of the shares of our common stock and a stockholder's ability to resell shares of our common stock at all or at current market prices, which could increase a stockholder's risk of losing some or all of his investment. 
+ 
+If quoted, the price of our common stock may be volatile, which may substantially increase the risk that stockholder's may not be able to sell their shares at or above the price which they paid for the shares.
+ 
+Even if our shares are quoted for trading on the Over-the-Counter Bulletin Board or other over-the-counter market and a public market develops for our common stock, the market price of our common stock may be volatile. It may fluctuate significantly in response to the following factors: 
+ 
+ variations in quarterly operating results;
+ 
+ our announcements of the acquisition of assets and achievement of milestones, or the inability to so acquire assets or achieve milestones;
+ 
+ our relationships with other companies or capital commitments;
+ 
+ additions or departures of key personnel;
+ 
+ sales of capital stock or termination of stock transfer restrictions;
+ 
+ changes in financial estimates by securities analysts, if any;
+ 
+ fluctuations in stock market price and volume; and
+ 
+ general economic and market conditions
+
+ 
+ 
+13
+
+ 
+ 
+Because we do not intend to pay any dividends on our common stock, holders of our common stock must rely on stock appreciation for any return on their investment.
+ 
+We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future. Accordingly, holders of our common stock will have to rely upon capital appreciation, if any, to earn a return on their investment in our common stock. 
+ 
+Additional issuances of our securities will result in immediate dilution to existing stockholders.
+ We are authorized to issue up to 50,000,000 shares of common stock, $0.001 par value, of which 3,800,000 shares of common stock are currently issued and outstanding. Our Board of Directors has the authority to cause us to issue additional shares of common and preferred stock and to determine the rights, preferences and privilege of such shares, without consent of any of our stockholders. We may issue shares in connection with financing arrangements or otherwise. Any such issuances will result in immediate dilution to our existing stockholders' interests, which will negatively affect the value of their shares. 
+ 
+The market price of our common stock may decline as a result of sales of a large number of shares of our common stock or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also may make it more difficult for us to raise additional capital by selling equity securities in the future, at a time and price that we deem appropriate. 
+ 
+We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock, including, but not limited to, shares issued in connection with an acquisition or the perception that such sales or distributions could occur, may cause the market price of our common stock to decline. 
+ 
+Any issuance of preferred stock would make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which would depress the price of our common stock.
+ 
+Our Board of Directors has the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock may be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price and adversely affecting the market price and the voting and other rights of the holders of our common stock. 
+ 
+We will incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, which could result in sanctions or other penalties that would harm our business.
+ 
+We will incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended, and regulations regarding corporate governance practices, such as accurately and timely filing annual and interim reports, soliciting proxies for annual and special meetings of stockholders, conflicts of interest policies and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors' and officers' insurance, on acceptable terms. 
+ 
+ 
+14
+
+ 
+ 
+After a public offering, we will be subject to the rules of the SEC, and may be subject to Section 404 of The Sarbanes-Oxley Act of 2002 which generally require our management and if we meet certain requirements, our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Section 404 generally requires an annual management assessment of the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or a smaller reporting company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. 
+ Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2015 . Based upon this evaluation, Management concluded our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate; because of the Company's lack of financial resources, causing the Company to be delinquent in its Exchange Act filings. 
+ 
+If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm, if required, may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, failure to maintain an effective system of internal control, or any other problems with our financial systems or internal controls, could result in delays or inaccuracies in reporting financial information or failure to comply with SEC reporting and other regulatory requirements. Any of these situations could adversely affect our business and stock price. 
+ 
+We are an "emerging growth company"
+ 
+The JOBS Act permits "emerging growth companies" like us to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies, which are companies that have a non-affiliate public float of less than $75 million. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor's attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above and are also exempt from the requirement to submit "say-on-pay", "say-on-pay frequency" and "say-on-parachute" votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies. 
+ 
+In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. In addition, the JOBS Act permits an emerging growth company to "test the waters" by communicating orally or in writing with qualified institutional buyers or other accredited investors to gauge interest in a contemplated securities offering, even if a registration statement has not yet been filed, and permits analysts to publish research reports about an emerging growth company that is going public even if the analyst's firm is one of the underwriters in the issuer's IPO. We have not provided any of such information to any qualified institutional buyers or other accredited investors, and we are not aware of any research reports about us being published by analysts. 
+ 
+ 
+15
+
+ 
+ 
+We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and could cause our stock price to decline. 
+ 
+Use of Proceeds
+ 
+Assuming the sale of all 3,500,000 shares of common stock we are offering pursuant to this prospectus, we estimate that we will receive approximately $298,000 in net proceeds from this offering after deducting estimated expenses of $52,000.
+ 
+We expect to use the net proceeds that we receive from this offering to purchase the rights to and commercialize discontinued consumer product brands and for general corporate purposes. However, as of the date of this prospectus, we have no definitive agreement relating to any such acquisition or investment.
+ 
+The maximum proceeds of this offering shall be $350,000. Depending upon the number of shares sold in this offering, we shall apply the proceeds substantially as set forth in the table below within the first 12 months after successful completion of this offering and receipt of the funds.
+ 
+As is the case with any business, it should be expected that certain expenses unforeseeable to our management at this juncture will arise in the future.
+ 
+ 
+16
+
+ 
+ 
+ 
+Amount (25%)
+ 
+ 
+Amount (50%)
+ 
+ 
+Amount (75%)
+ 
+ 
+Maximum
+ 
+
+Product Acquisition
+ 
+$6,250 
+ 
+$12,500 
+ 
+$18,750 
+ 
+$25,000 
+
+Manufacturing
+ 
+$25,000 
+ 
+$50,000 
+ 
+$75,000 
+ 
+$100,000 
+
+Advertising and Marketing
+ 
+$18,750 
+ 
+$31,500 
+ 
+$53,750 
+ 
+$75,000 
+
+Accounts Payable
+ 
+$10,000 
+ 
+$20,000 
+ 
+$30,000 
+ 
+$40,000 
+
+Legal and accounting fees
+ 
+ 
+- 
+ 
+$10,000 
+ 
+$12,000 
+ 
+$15,000 
+
+Salaries and consulting fees
+ 
+ 
+- 
+ 
+$7,500 
+ 
+$11,250 
+ 
+$15,000 
+
+Office overhead
+ 
+$4,250 
+ 
+$5,000 
+ 
+$7,500 
+ 
+$10,000 
+
+Miscellaneous expenses
+ 
+$5,000 
+ 
+$9,000 
+ 
+$13,500 
+ 
+$18,000 
+
+Expenses Related to Offering
+ 
+$18,250 
+ 
+$29,500 
+ 
+$40,750 
+ 
+$52,000 
+
+TOTAL
+ 
+$87,500 
+ 
+$175,000 
+ 
+$262,500 
+ 
+$350,000 
+
+ 
+DIVIDEND POLICY
+ 
+We have not paid any dividends since our inception and do not anticipate the payment of dividends in the foreseeable future. At present, our policy is to retain earnings, if any, to develop and market our business. The payment of dividends in the future will depend upon factors including, but not limited to, our earnings, capital requirements, and operating financial conditions.
+ 
+Determination of Offering Price
+ 
+We have arbitrarily determined the offering price of $0.10 per share. The offering price bears no relationship to our assets, book value, earnings or any other customary investment criteria.
+ 
+Dilution.
+ 
+Our net tangible book value deficit as of March 31, 2016 was approximately $(94,000), or negative $0.02 per share of common stock based upon 3,800,000 shares of common stock outstanding as of such date. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of March 31, 2016. Dilution in net tangible book value per share to new investors represents the difference between the amount per share paid by purchasers of shares in this offering and the net tangible book value per share of common stock immediately after completion of this offering.
+ After giving effect to the sale of all the shares being sold pursuant to this offering at the offering price of $0.10 per share and after deducting estimated offering expenses payable by us of $52,000, our net tangible book value would be approximately $204,000, or $0.03 per share of common stock. This represents an immediate increase in net tangible book value of $0.05 per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $0.07 per share, or 70% per share, to new investors purchasing the shares in this offering.
+__________________ [1] Our Common Stock will be sold by either our officers and directors or by an underwriter engaged by us. At this time, we have not entered into any agreement nor have we had any discussions with any underwriters. To the extent that our Common Stock is sold by an underwriter, we anticipate that the underwriter shall receive a commission of up to 6% and a non accountable expense allowance of up to 2% which shall increase the expenses related to this offering and decrease working capital. 
+ 
+ 
+17
+
+ 
+ 
+The following table illustrates this per share dilution if all 3,500,000 shares are sold:
+ 
+ Offering ($0.10) 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Public offering price per share of common stock 
+ 
+ 
+ 
+ 
+$0.10 
+
+Net tangible (deficit) per common share as of March 31, 2016 
+ 
+$(0.02) 
+ 
+ 
+ 
+
+Increase in net tangible book value per share attributable to existing stockholders 
+ 
+ 
+0.05 
+ 
+ 
+ 
+ 
+
+Net tangible book value per share as adjusted after this offering 
+ 
+ 
+ 
+ 
+ 
+ 
+0.03 
+
+Dilution per share to new investors 
+ 
+ 
+ 
+ 
+ 
+$(0.07) 
+
+ 
+Because we are offering up to 3,500,000 shares on a best efforts basis and there are no minimum proceeds required to close this offering, it is probable that we may only be able to sell less than 3,500,000 shares that we are offering. The following tables provide the per share dilution if 75%, 50%, and 25% of the 3,500,000 shares offered pursuant to this prospectus are sold: 
+ 
+After giving effect to the sale of 75%, or 2,625,000 shares being sold pursuant to this offering at the offering price of $0.10 per share, and after deducting estimated offering expenses payable by us in the amount of $40,750, our net tangible book value would be approximately $129,000, or $0.02 per share of common stock. This represents an immediate increase in net tangible book value of $0.04 per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $0.08 per share, or 80% per share, to new investors purchasing the shares in this offering. 
+ The following table illustrates this per share dilution if 75%, or 2,625,000 shares are sold: 
+ 
+ Offering ($0.10)
+ 
+ 
+ 
+ 
+ 
+ 
+
+Public offering price per share of common stock 
+ 
+ 
+ 
+ 
+$0.10 
+
+Net tangible (deficit) per common share as of March 31, 2016 
+ 
+$(0.02) 
+ 
+ 
+ 
+
+Increase in net tangible book value per share attributable to existing stockholders 
+ 
+ 
+0.04 
+ 
+ 
+ 
+ 
+
+Net tangible book value per share as adjusted after this offering 
+ 
+ 
+ 
+ 
+ 
+ 
+0.02 
+
+Dilution per share to new investors 
+ 
+ 
+ 
+ 
+ 
+$(0.08) 
+
+ 
+After giving effect to the sale of 50%, or 1,750,000 shares being sold pursuant to this offering at the offering price of $0.10 per share, and after deducting estimated offering expenses payable by us in the amount of $29,500, our net tangible book value would be approximately $52,000, or $0.01 per share of common stock. This represents an immediate increase in net tangible book value of $0.03 per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $0.09 per share, or 90% per share, to new investors purchasing the shares in this offering. 
+ The following table illustrates this per share dilution if 50%, or 1,750,000 shares are sold: 
+ 
+ Offering ($0.10)
+ 
+ 
+ 
+ 
+ 
+ 
+
+Public offering price per share of common stock 
+ 
+ 
+ 
+ 
+$0.10 
+
+Net (deficit) per common share as of March 31, 2016 
+ 
+$(0.02) 
+ 
+ 
+ 
+
+Increase in net tangible book value per share attributable to existing stockholders 
+ 
+ 
+0.03 
+ 
+ 
+ 
+ 
+
+Net tangible book value per share as adjusted after this offering 
+ 
+ 
+ 
+ 
+ 
+ 
+0.01 
+
+Dilution per share to new investors 
+ 
+ 
+ 
+ 
+ 
+$(0.09) 
+
+ 
+After giving effect to the sale of 25%, or 875,000 shares being sold pursuant to this offering at the offering price of $0.10 per share, and after deducting estimated offering expenses payable by us in the amount of $52,000, our net tangible (deficit) would be approximately $(24,000), or equal to $(0.00) per share of common stock. This represents an immediate increase in net tangible book value of $0.01 per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $(0.11) per share, or 110% per share, to new investors purchasing the shares in this offering. 
+ 
+ 
+18
+
+ 
+ 
+The following table illustrates this per share dilution if 25%, or 875,000 shares are sold: 
+ 
+ Offering ($0.10)
+ 
+ 
+ 
+ 
+ 
+ 
+
+Public offering price per share of common stock 
+ 
+ 
+ 
+ 
+$0.10 
+
+Net (deficit) per common share as of March 31, 2016 
+ 
+$(0.02) 
+ 
+ 
+ 
+
+Increase in net tangible book value per share attributable to existing stockholders 
+ 
+ 
+0.02 
+ 
+ 
+ 
+ 
+
+Net tangible book value per share as adjusted after this offering 
+ 
+ 
+ 
+ 
+ 
+ 
+(0.00)
+Maximum Dilution per share to new investors 
+ 
+ 
+ 
+ 
+ 
+$(0.10)
+ 
+The following table summarizes the number and percentage of shares purchased, the amount and percentage of consideration paid and the average price per share paid by our existing stockholders and by new investors in this offering assuming the sale of all of the shares we are offering pursuant to this prospectus: 
+ 
+ 
+ 
+Price Per Share
+ 
+ 
+Number of Shares Held
+ 
+ 
+Percent of Ownership
+ 
+ 
+Aggregate Consideration Paid
+ 
+
+Existing stockholders 
+ 
+$0.01 
+ 
+ 
+3,800,000 
+ 
+ 
+52.05% 
+$38,000 
+
+Investors in this offering 
+ 
+$0.10 
+ 
+ 
+3,500,000 
+ 
+ 
+47.95% 
+$350,000 
+
+ 
+Selling Security Holders
+ 
+Not Applicable. 
+ 
+Plan of Distribution
+ 
+Upon effectiveness of the registration statement of which this prospectus is a part, we will conduct the sale of 3,500,000 shares which we are offering on a self-underwritten, best-efforts basis. This offering will be conducted upon a best-efforts basis utilizing the efforts of our officers and sole director. There is no public market for our common stock. To date, we have not obtained listing or quotation of our securities on a national stock exchange or association or inter-dealer quotation system. We have not identified any market makers with respect to assisting us to apply for such quotation. We are unable to estimate when we expect to undertake this endeavor or whether we will be successful. In the absence of listing, no market is available for investors in our common stock to sell the shares offered herein. We cannot guarantee that a meaningful trading market will develop or that we will be able to get the shares listed for trading.
+ 
+If the shares ever become tradable, the trading price of such shares may be subject to wide fluctuations in response to various events or factors, many of which are beyond our control. As a result, investors may be unable to sell the shares at a price greater than the price at which they are being offered. We do not anticipate entering into any agreements or arrangements for the sale of the shares with any broker/dealer or sales agent. However, if we were to enter into such arrangements, we will file a post-effective amendment to disclose those arrangements.
+ 
+We plan to sell our shares by our officers and directors through personal contacts. In the alternative, we might enter into an agreement with an under w riter. At this time, we have not entered into any agreement nor have we had any discussions with any underwriters. 
+Our Chief Executive Officer and sole director, William McDermitt, is not subject to a statutory disqualification as such term is defined in Section 3(a)(39) of the Securities Exchange Act of 1934. He will rely upon Rule 3a4-1 to sell our securities without registering as a broker-dealer. Mr. McDermitt serves as our Chief Executive Officer and primarily performs substantial duties for or on our behalf other than in connection with transactions in securities and he will continue to perform those duties at the end of the offering. Mr. McDermitt has not been a broker or dealer or an associated person of a broker or dealer within the preceding 12 months, and he has not nor will he participate in the sale of securities for any issuer more than once every 12 months. He will not receive commissions in connection with his participation.
+ 
+ 
+19
+
+ 
+ 
+We plan to offer our shares to the public at a fixed price of $0.10 per share with no minimum amount required to be sold. Our officers and sole director will not purchase any shares in this offering. Investors can purchase the shares in this offering by contacting us. We accept payments for the shares in the form of either cash payments made in United States currency either by personal check, bank draft, or cashier's check. We expressly reserve the right to either accept or reject any subscription. All accepted subscription agreements are irrevocable. Any subscription rejected will be returned to the subscriber within five business days of the rejection date. Furthermore, once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. We will keep the offering of 3,500,000 shares of common stock open until we sell all of the shares registered or for ninety days from the effective date of this offering, whichever occurs first. The Board of Directors may also elect to extend the offering for additional ninety day periods up to 12 months if all shares have not been sold by the end of the initial ninety day period. There can be no assurance that we will sell all or any of the shares offered. We have no arrangement nor can we guarantee that we will sell any shares.
+ 
+In order to comply with the applicable securities laws of certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and with which we have complied. The purchasers in this offering and in any subsequent trading market must be residents of such states where the shares have been registered or qualified for sale or an exemption from such registration or qualification requirement is available. As of this date, we intend to offer our common stock upon effectiveness of this prospectus in the State of New York.
+ 
+ T he expenses of the registration of the shares, including legal and accounting fees, and such expenses are estimated to be approximately (assumes the sale of the maximum) $52,000 which will be paid out of the proceeds of the offering . 
+ Transfer of our common stock may be restricted under the securities regulations or laws promulgated by various states and foreign jurisdictions, commonly referred to as "Blue Sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the Blue Sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state Blue-Sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. Accordingly, investors may not be able to liquidate their investments and should be prepared to hold the shares of our common stock for an indefinite period of time.
+ 
+Description of Securities to be Registered
+ 
+DESCRIPTION OF CAPITAL STOCK
+ 
+General 
+ 
+The following summary describes the material terms of our capital stock. However, you should refer to the actual terms of the capital stock contained in our amended and restated certificate of incorporation, amended and restated bylaws and applicable law. We intend to amend and restate our certificate of incorporation and bylaws prior to consummation of this offering. A copy of our amended and restated certificate of incorporation and amended and restated bylaws will be filed as exhibits to the Registration Statement of which this prospectus is a part. 
+ 
+Our authorized capital stock consists of 50,000,000 shares of common stock, par value $0.001 per share. Upon the consummation of this offering, assuming the sale of all of the shares offered pursuant to this prospectus, 7,300,000 shares of common stock will be issued and outstanding. All of our issued and outstanding shares of capital stock are, and the shares of capital stock to be issued in this offering will be, validly issued, fully paid and non-assessable. 
+ 
+ 
+20
+
+ 
+ 
+Common Stock 
+ 
+The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.
+ 
+The holders of our common stock are entitled to receive dividends, if declared by our board of directors, from the funds legally available subject to any statutory or contractual restrictions on the payment of dividends.
+ 
+The holders of our common stock do not have preemptive, subscription, redemption or conversion rights.
+ 
+Voting 
+ 
+Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by all shares of common stock.
+ 
+Anti-Takeover Effects of Provisions of Delaware Law 
+ 
+We are subject to Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder, unless the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, in the case of affiliates or associates of the corporation, within three years prior to the determination of interested stockholder status, owned 15% or more of a corporation's voting stock. The existence of this provision could have anti-takeover effects with respect to transactions not approved in advance by our board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.
+ 
+Stockholders will not be entitled to cumulative voting in the election of directors. The foregoing provisions of the Delaware General Corporation Law may have the effect of deterring or discouraging hostile takeovers or delaying changes in control of our company.
+ 
+Charter and Bylaws Anti-Takeover Provisions 
+ 
+Our bylaws require that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by a consent in writing.
+ 
+Our bylaws establish an advance notice procedure for stockholders to bring matters before special stockholder meetings, including, but not limited to, proposed nominations of persons for election to our board of directors. These procedures specify the information stockholders must include in their notice and the timeframe in which they must give us notice. At a special stockholder meeting, stockholders may only consider nominations or proposals specified in the notice of meeting. A special stockholder meeting for any purpose may only be called by our board of directors or our chief executive officer and will be called by our chief executive officer at the request of the holders of a majority of our outstanding shares of capital stock.
+ 
+Our bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a meeting. However, our bylaws may have the effect of precluding the conduct of that item of business at a meeting if the proper procedures are not followed. These provisions may discourage or deter a potential third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of our company.
+ 
+The foregoing provisions of our certificate of incorporation, our bylaws and the Delaware General Corporation Law may have the effect of deterring or discouraging hostile takeovers or delaying changes in control of the company.
+ 
+ 
+21
+
+ 
+ 
+Limitation on Liability and Indemnification of Directors and Officers 
+ 
+Our bylaws limit our directors' and officers' liability to the fullest extent permitted under Delaware corporate law. Specifically, our directors and officers will not be liable to us or our stockholders for monetary damages for any breach of fiduciary duty by a director or officer, except for liability:
+ 
+ for any breach of the director's or officer's duty of loyalty to us or our stockholders;
+ 
+ for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
+ 
+ under Section 174 of the Delaware General Corporation Law; or
+ 
+ for any transaction from which a director or officer derives an improper personal benefit.
+
+ 
+If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the Company shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. 
+ 
+The provision regarding indemnification of our directors and officers in our bylaws will generally not limit liability under state or federal securities laws. 
+ 
+Delaware law and our bylaws provide that we will, in certain situations, indemnify any person made or threatened to be made a party to a proceeding by reason of that person's former or present official capacity with our company against judgments, penalties, fines, settlements and reasonable expenses including reasonable attorney's fees. Any person is also entitled, subject to certain limitations, to payment or reimbursement of reasonable expenses in advance of the final disposition of the proceeding. 
+ 
+The limitation of liability and indemnification provisions in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. 
+ 
+Transfer Agent
+ 
+We have engaged Vstock Transfer, LLC as our transfer agent to serve as such for shares of our common stock. Vstock Transfer, LLC will commence its services as soon as practicable following the effectiveness of the registration statement of which this prospectus forms a part and the successful sale of the common stock offered pursuant to this prospectus. Until Vstock Transfer, LLC commences its services, we will be responsible for all record-keeping and administrative functions in connection with the shares of our common stock. Our officers do not have any experience acting as a transfer agent for publicly traded securities.
+ 
+Interests of Named Experts and Counsel
+ 
+LEGAL MATTERS
+ 
+The validity of the common stock offered hereby will be passed upon by The Mintz Fraade Law Firm, P.C., New York, New York.
+ 
+EXPERTS
+ 
+The financial statements included in this prospectus have been so included in reliance on the report of Wei, Wei & Co. LLC, for the years ended December 31, 2014 and December 31, 2015. Wei, Wei & Co LLC is an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.
+ 
+22
+
+ 
+ 
+Information with Respect to the Registrant
+ 
+WHERE YOU CAN FIND ADDITIONAL INFORMATION
+ 
+You may inspect a copy of the registration statement and the exhibits and schedules thereto without charge at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C.20549. You may obtain copies of all or any part of the registration statement from such office at prescribed rates. You may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website, which is located at http://www.sec.gov. The Internet website contains reports, proxy, information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement, of which this prospectus is a part, at the SEC's Internet website.
+ 
+Description of Business
+PROPOSED BUSINESS
+ 
+Overview 
+ 
+We were incorporated under the laws of the State of Delaware on November 5, 2010. 
+ 
+In 2012, we filed a Registration Statement with respect to the sale of up to 3,000,000 shares of our common stock at a purchase price of $0.10 per share. The registration statement went effective on August 13, 2012. We were unable to raise any money pursuant to the prior Registration Statement. 
+ 
+The Company is an "emerging growth company" ("EGC"), that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act ("the JOBS Act"), that eases restrictions on the sale of securities and increases the number of shareholders a company must have before becoming subject to the U.S. Securities and Exchange Commission's ("SEC's") reporting and disclosure rules (See Emerging Growth Companies Section Below). The Company has selected December 31 as its year end.
+ 
+We aim to acquire ownership of and other rights to discontinued consumer product brands with the ultimate goal of reviving these products and commercializing them based on the concept that nostalgia for such brands will be a powerful incentive to purchase by the 55 and over population, which we refer to in this report as the senior population. We believe that many formerly popular brand names that were discontinued by their parent company still resonate with the senior population and if so revived and made available in supermarkets and other retail establishments, would attract this population and others as consumers.
+ 
+We believe that as a person ages, he or she often feels left behind and tends to remember the "good old days" when life was simpler. We believe we can tap into these feelings and use it as a trigger for purchasing decisions, as studies have shown that seniors miss their youth and many of the products which they used during childhood that are no longer available. Older adults have a preference to purchase brands which have been established for a long time1. This is likely due to a number of factors including, but not limited to, experience with products, attachment to products, nostalgia, habit, and possible aversion to change2. We believe that the combination of familiarity and positive associations linger as a person ages, and we intend to build on these associations to revive a retail presence for one or more discontinued consumer product brands that at one time were widely recognized.
+ 
+We are a newly established company and have limited operations. For the period from November 5, 2010 (Inception) to December 31, 2015, we have not generated any revenue and incurred net losses of $(113,740). For the three months ended March 31, 2016, we have generated net losses of $(1,079). Due to the "newly-established" nature of our business, we expect to incur losses as we expand. To date, our cash flow requirements have been met by an equity financing and debt. If we are unable to s8uccessfully generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any financing arrangement will be sufficient to cover cash requirements during the early stages of our operations. For these reasons, our independent registered public accounting firm believes that there is substantial doubt that we will be able to continue as a going concern.
+___________________ 1 Lambert-Pandraud R, Laurent G, Lapersonne E. Repeat purchasing of new automobiles by older consumers: empirical evidence and interpretations. J Market. 2005;69:97 103. 
+2 Lambert-Pandraud R, Laurent G. Impact of age on brand choice. In: Drolet A, Schwarz N, Yoon C, editors. The Aging Consumer: Perspectives from Psychology and Economics. Taylor and Francis; London: 2010. pp. 191 208.
+ 
+ 
+23
+
+ 
+ 
+Proposed Products
+ 
+We intend to target for purchase the intellectual property and other rights to discontinued consumer product brands. We consider a product to be discontinued if it is no longer available at traditional retail levels such as grocery and drug stores, or on the internet. 
+ 
+We do not currently own any brand names or have any products for sale. To date, we have researched over 100 discontinued products and are focusing upon 20 of these products in following three categories of consumer products: candy, food other than candy, and personal products, as follows: 
+ 
+ Candy. Bit-O-Licorice, Big Yank, Old Nick and Hollywood candy bars.
+ 
+ Food Other Than Candy. Amazo Instant Dessert, Ballard Cornbread Mix, Cocomalt, Hydrox Cookies, Krumbles Cereal, Ann Page Pork and Beans, Pep Cereal, Puffa Puffa Rice Cereal and Van Camp's Chili Con Carne.
+ 
+ Personal Products. Calox Tooth Powder, Chipso Laundry Soap, Forhans for the Gums, Rapid Shave, Shower Mate, Stopette Deodorant and Sun 'N' Surf.
+
+ 
+We hope to acquire at least one product from each category. Some of the product brands we intend to target for acquisition are in public domain while the rights to others are still owned by companies from whom we would endeavor to acquire the manufacturing and distribution rights either upon a royalty basis or outright purchase. 
+ 
+There can be no assurance that we will be successful in acquiring rights to any of the above targeted products or any other discontinued products. We do not believe that any of our targeted products are available on the internet or at the retail level. 
+ 
+Demographics
+ 
+According to our research: 
+ 
+ An estimated 88 million people in the United States are over the age of 55 according to the World Factbook updated on September 24, 2015 (the "WF 2015"). We believe this large and growing segment of the population are a viable demographic market with more financial resources and an increasing awareness of their power as consumers. According to the article titled "Targeting the mature market: opportunities and challenges", Journal of Consumer Marketing, Vol. 14 No. 4 1997, pp.282 293, by George Moschis (Director of the Center for Mature Consumer Studies at Georgia State University), Euehun Lee and Anil Mathur, there were approximately 55 million people aged 55 and older and 33 million aged 65 and older in the USA, and the US elder population is expected to double by the year 2030.
+
+ 
+ The number of U.S. persons age 65 and over in 2015 was estimated at more than 47 million persons according to the WF 2015 which is approximately 14.88% of the nation's total population and greater than the populations of more than 200 of the world's countries (GeoHive.com-2015).
+
+ 
+ 
+24
+
+ 
+ 
+ The senior population possesses over $900 billion in spending money, and nearly a quarter of householders aged 65 to 69 have a net worth of $250,000 or more (George Moschis, Director of the Center for Mature Consumer Studies at Georgia State University).
+
+ 
+ According to Pew Research Center surveys conducted during March 17-April 12, May 28-31 and June 10-July 12, 2015, about four-in-ten adults ages 65 and older (39%) do not use the internet, compared with only 3% of 18- to 29-year-olds.
+
+ 
+The U.S. government statistics from 2013 show that Florida has the highest percentage of population of people aged 65 and over followed by Maine, West Virginia, Delaware, Pennsylvania and Montana. According to the United States Census Bureau, 31 states had a proportion of older people that exceeded the national proportion of 14.1%. 
+ 
+Marketing, Advertising and Distribution
+ 
+As demonstrated by the above Pew Research Center surveys, due to the fact that there is still a substantial percentage (39%) of the U.S. senior population (exceeding 47 million persons) who do not use the internet, we plan to market our anticipated product brands using a combination of radio and print media advertising. Advertising over the radio is expected to commence in the areas most concentrated with a senior population. Our website will not initially offer our products for sale, but rather will direct potential consumers to area retail outlets carrying our products. 
+ 
+In addition, we intend to purchase advertising space for particular regions of the major weekend supplement Parade, and AARP Magazine and to target our market and advise the senior population that their favorite brands are once again available at retail stores in their area. We intend to purchase the advertising space through cash payments and payments in the form of shares of our common stock. We believe that advertising can be purchased for cash or stock with little or no lead time and at substantial discounts from prevailing market prices for "remainders" which are sections of a national run by these and other publications when not sold by print time; provided however, there can be no assurance that we will be successful in purchasing advertising space through cash or stock payments or at all. 
+ 
+We expect that if and when demand is created through our advertising campaigns, it will be easier to retain independent manufacturer's representatives to sell our products to regional buyers at independent retailers and retailers will be more likely to stock our products as a result of advertising-generated demand. These independent representatives also obviate the need for us to have sales personnel on our payroll, thus keeping our labor costs down. We expect independent representatives will charge us a fee of between 5% and 15% of any sales brokered by them with potential bonuses for meeting pre-determined sales levels. 
+ 
+We intend to ultimately sell our products primarily in the mass market retail channel in all 50 states, including, but not limited to, supermarket chains, drug stores, gas station marts, mass merchandisers and warehouse clubs. 
+ 
+Production
+ 
+We expect that all product production will initially be out-sourced to third-party manufacturers. We do not anticipate expenses with respect to inventory, distribution and storage. All of our products will be shipped directly to consumers from third-party manufacturers or distributors. 
+ 
+Competition
+ 
+Our proposed business is subject to significant competition. The food and consumer products industry is fragmented, highly competitive and is dominated by large multinational companies including, but not limited to, Nestle, Kraft Foods, Mars, Proctor & Gamble and Unilever, as well as smaller competitors, many of whom have already established their brand name recognition in our proposed markets. In addition, many of our competitors have significantly larger marketing personnel and financial resources than we have and competition for shelf space in grocery stores and other retail outlets is intense, costly and poses great difficulty for smaller food and consumer product companies and distributors. 
+ 
+ 
+25
+
+ 
+ 
+We intend to offer distinctive products which address specific consumer needs. We will target the senior population where nostalgia is expected to be a strong motivator for purchases. However, these efforts will not guarantee that we will be competitive or that our business plan will be successful. Further, we intend to compete with other companies that see the value of reintroducing discontinued product brands. 
+ 
+We believe that competition is based primarily upon availability, price, quality and efficacy of products, customer service, brand name recognition and marketing and trade support, and successful product introductions. 
+ 
+Intellectual Property 
+ 
+We do not own any intellectual property. As part of our acquisition strategy, we will endeavor to purchase all relevant trademarks, trade names, trade secrets and other intellectual property of the consumer product brands which we aim to acquire. 
+ 
+Research and Development Activities 
+ 
+Other than time spent researching our proposed business and identifying potential product acquisitions, we have not spent any funds on research and development activities to date. We do not currently plan to spend any material funds on research and development activities in the future.
+ 
+Employees 
+ 
+We do not presently have any employees other than our two executive officers, neither of whom are expected to be full-time employees. Our officers are responsible for planning, developing and operational duties, and will continue to do so throughout the early stages of our growth. We have no intention of hiring employees until our business has been successfully launched and we have sufficient, reliable revenue from our operations, which is not expected for at least the next 12 months. Although we cannot reliably estimate the percentage of time each of our executive officers will spend on behalf of our Company prior to the successful launch of our business, of which we can give no assurance of success, they have each committed to spend such time as they deem reasonably necessary to launch our business. Mr. McDermitt is available to work as a full-time employee if and when we successfully launch our business. Mr. O'Donnell, our CFO, will re-evaluate his time commitments to us if and when we successfully launch our business.
+ 
+We intend to retain independent manufacturer's representations to seek buyers of our products, once available. We have not yet identified any such independent representatives.
+ 
+Description of Property
+ 
+We do not own interests in any real property. We are using our president's home address as our business address. We do not pay any money to use 20 Pape Drive, Atlantic Highlands, New Jersey 07716 as our business address.
+ 
+We believe our office is in good operating condition and adequately serves our current business operations. We also anticipate suitable additional or alternative space will be available at commercially reasonable terms for future expansion to the extent necessary.
+ 
+ 
+26
+
+ 
+ 
+Legal Proceedings
+ 
+A complaint against the Company was served on January 17, 2014 by Vintage Filings PR Newswire in the Superior Court of New Jersey for an amount of indebtedness of $5,894. The claim was settled and a stipulation was filed with the court on May 8, 2014, providing for payments by the Company commencing July 1, 2014, in the aggregate amount of $6,084. Subsequently, a judgment was entered into against the Company on September 9, 2014 for the amount of $6,084 plus costs and interest from August 28, 2014. To date, $500 has been paid with respect to the judgment. The plaintiff initially agreed to defer taking action to enforce the judgment; however, the time frame which the plaintiff initially agreed upon has expired. The Company intends to negotiate an extension which the Company believes shall be sufficient time to complete this offering. 
+ 
+Market price of and Dividends on the Registrant's Common Equity and related stockholder matters
+ 
+The company's common stock is currently not traded. Arrangements are being made for an offering to sell up to 3,500,000 shares of our common stock on a best efforts, self-underwritten basis for up to ninety (90) days following the date of this prospectus at a fixed price of $0.10 per share which may by extended by us for additional ninety (90) day periods up to 12 months. We intend to file an application with the Financial Industry Regulatory Authority to have our common stock quoted on the Over-the-Counter Bulletin Board or the OTC Pink Market. However, there can be no assurances that the Company's stock will ever be listed or traded on a public market. 
+ 
+There are currently 44 holders of common stock. 
+ 
+We have not paid any dividends since our inception and do not anticipate the payment of dividends in the foreseeable future. At present, our policy is to retain earnings, if any, to develop and market our business. The payment of dividends in the future will depend upon factors including, but not limited to, our earnings, capital requirements, and operating financial conditions. 
+ 
+Financial Information
+ 
+We have not been involved in any business combination, acquisition or transaction with another company. 
+ 
+Supplementary Financial Information
+ 
+Securities Authorized for Issuance under Equity Compensation Plans
+ 
+We have not established any compensation plans under which equity securities are authorized for issuance. 
+ 
+MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
+ 
+The following discussion of our financial condition and results of operation should be read in conjunction with the financial statements and related notes that appear elsewhere in this prospectus. This discussion contains forward-looking statements and information relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks and uncertainties, including the risks in the section entitled Risk Factors beginning on page 10, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
+ 
+These forward-looking statements speak only as of the date of this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with regard thereto or to conform these statements to actual results. We are in a developmental stage. We have not generated any revenues to date. Our entire activity since our inception has been to launch our planned business and prepare for our proposed fundraising through an offering of our equity securities.
+ 
+ 
+27
+
+ 
+ 
+Overview 
+ 
+We aim to acquire ownership and other rights to discontinued consumer product brands, with the ultimate goal of reviving these products and commercializing them, based on an idea that nostalgia for such brands will be a powerful incentive to purchase among the senior population. We believe that many formerly popular brand names that were discontinued by their parent companies still resonate with the senior population and if so revived and made available in supermarkets and other retail establishments, would attract this population and others as consumers. 
+ 
+We are a newly established company and have limited operations. For the period from November 5, 2010 (Inception) to December 31, 2015, we have not generated any revenue and incurred net losses of $(113,740). For the three months ended March 31, 2016 , we have generated net losses of $(1,079). Due to the "early" nature of our business, we expect to incur losses as we expand. To date, our cash flow requirements have been met in part by an equity financing and debt. If we are unable to successfully generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of our operations. For these reasons, our independent registered public accounting firm believes that there is substantial doubt that we will be able to continue as a going concern. 
+ 
+We will be unable to begin our proposed operations unless and until we obtain additional funds. 
+ 
+JOBS Act 
+ 
+In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. 
+ 
+Business Activities to Date
+ 
+As of the date of this prospectus, we have spent time researching our proposed business and identifying potential product acquisitions. We intend to purchase rights to and develop our website at the following address: www.nostalgiafamilybrands.com. 
+ 
+Results of Operations 
+ 
+We have not generated any revenues since our inception on November 5, 2010. 
+ 
+ For the three month period ended March 31, 2016 and 2015, our operating expenses were primarily comprised of selling, general and administrative expenses and professional fees of $1,079 and $1,576, respectively. 
+ 
+For the year ended December 31, 2015, our operating expenses were primarily comprised of selling, general and administrative expenses and professional fees of $5,475. 
+ 
+For the year ended December 31, 2014, our operating expenses were primarily comprised of selling, general and administrative expenses and professional fees of $5,875. 
+ 
+ Our total assets as of March 31, 2016 are $17,000, consisting entirely of a prepaid expense. 
+ 
+Our total assets as of December 31, 2015 are $17,000, consisting entirely of a prepaid expense. 
+ Our total assets as of December 31, 2014 are $17,000, consisting entirely of a prepaid expense
+ 
+ 
+28
+
+ 
+ 
+Known Trends and Uncertainties
+ 
+The success of our business plan is dependent, among other things, on our ability to identify, acquire, commercialize, market and sell discontinued consumer product brands. Our business will fail if we cannot successfully implement our business plan, or successfully market our planned products. Additionally, if our views on the strength of nostalgia as a driver for sales of consumer products is erroneous, our financial condition and results of operations would likely suffer. See "Risk Factors-Risks Related to our Business." 
+ 
+Expenditures
+ 
+Assuming all of the shares being offered by us are sold, resulting in gross proceeds to us of $350,000, we expect to use the proceeds in the priority set forth below, within the first 12 months after successful completion of this offering and receipt of the funds. 
+ 
+ Proceeds to the Company 
+ 
+$350,000 
+
+Expenses relating to this offering 
+ 
+ 
+52,0002 
+
+Net Proceeds
+ 
+$298,000 
+
+ 
+ 
+ 
+ 
+
+Expenditures 
+ 
+ 
+ 
+ 
+
+Product Acquisition 
+ 
+$25,000 
+
+Manufacturing 
+ 
+ 
+100,000 
+
+Advertising and Marketing
+ 
+ 
+75,000 
+
+Accounts Payable 
+ 
+ 
+40,000 
+
+Working capital and general corporate purposes 
+ 
+ 
+ 
+ 
+
+Legal and accounting fees 
+ 
+ 
+15,000 
+
+Salaries and consulting fees 
+ 
+ 
+15,000 
+
+Office overhead 
+ 
+ 
+10,000 
+
+Miscellaneous expenses
+ 
+ 
+18,000 
+
+Use of Net Proceeds
+ 
+$298,000 
+
+ 
+We hope to raise $350,000 from our offering to complete our projected 12-month plan. If we are not successful in raising this amount, it will impact our ability to acquire, manufacture and commercialize discontinued consumer product brands. If we are unable to raise the maximum amount being offered in this offering, we would have to reduce the number of brands acquired, which would result in less funds needed to be allocated for manufacturing and advertising, among other expenditures. 
+ 
+Liquidity and Capital Resources
+ 
+We are a newly established company with limited operating history. There is a limited operating history by which to evaluate the likelihood of our success or our ability to continue as a going concern. To date, we have not generated any revenues. We will require additional funding in order to continue operations for the next 12 months. If we do complete the implementation of our business plan, we may nevertheless not be able to generate sufficient revenues to become profitable, and will likely need additional funding to continue operations. We may never secure any additional funding necessary to continue our operations. On August 13, 2015 we filed with the Securities and Exchange Commission a registration statement on Form S-1 to raise $350,000 . If we need additional funds, we may seek to obtain additional funds through additional private placement(s) of equity or debt. We have no other financing plans at this time. 
+ 
+On December 14, 2012, the Company issued a non-interest bearing convertible promissory note in the principal amount of $50,000 evidencing a loan in such amount, maturing on December 31, 2015. The convertible promissory note was subsequently assigned to Cubbo, Inc. and the maturity date was extended to June 30, 2017. In the event of default, interest shall accrue on the outstanding principal amount at a rate of 8% per annum. The holder of the note is entitled to convert all or a portion of the convertible note plus accrued interest, if any, at the lender's sole option, into shares of common stock at a conversion price of $0.10 per share. A copy of the convertible promissory note, the assignment of the convertible promissory note and letter agreementhave been filed as an exhibit to the Registration Statement of which this prospectus is a part.
+_____________________
+2 Our Common Stock will be sold by either our officers and directors or by an underwriter engaged by us. At this time, we have not entered into any agreement nor have we had any discussions with any underwriters. To the extent that our Common Stock is sold by an underwriter, we anticipate that the underwriter shall receive a commission of up to 6% and a non accountable expense allowance of up to 2% which shall increase the expenses related to this offering and decrease working capital. 
+ 
+ 
+29
+
+ 
+ 
+Going Concern Consideration
+ 
+The report of our independent registered public accounting firm expresses concern about our ability to continue as a going concern based upon the absence of an established source of revenue, recurring losses from operations, and our need for additional financing in order to fund our operations. 
+ 
+Recently Issued Accounting Pronouncements
+ In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The guidance is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. This accounting standard update is not expected to have a material impact on the Company's consolidated financial statements. 
+ 
+ In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for public companies annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and for annual reporting periods beginning after December 15, 2017 for private companies. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. This accounting standard update is not expected to have a material impact on the Company's consolidated financial statements. 
+ 
+ In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company has early adopted ASU 2014-10 in its financial statements on January 1, 2014. 
+ 
+In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 provides guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This accounting standard update is not expected to have a material impact on the Company's financial statements.
+ 
+ In January 2015, the FASB issued Accounting Standards Update ("ASU") ASU 2015-01 Income Statement Extraordinary and Unusual Items (Subtopic 225-20). This ASU addressed the simplification of income statement presentation by eliminating the concept of extraordinary items. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. This accounting standard update is not expected to have a material impact on the Company's financial statements. 
+ 
+ In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our financial statements. 
+ 
+30
+
+ 
+ 
+Off-Balance Sheet Arrangements
+ 
+We have no off-balance sheet arrangements. 
+ 
+Contractual Obligations
+ 
+As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. 
+ 
+Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
+ 
+There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosures. 
+ 
+Quantitative and Qualitative Disclosures about Market Risk
+ 
+As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. 
+ 
+Directors and Executive Officers
+ 
+Set forth below is a list of the names, ages and positions of our executive officers and sole director.
+ 
+ Name 
+Age
+Position(s)
+
+William P. McDermitt 
+87 
+Chief Executive Officer, President and Director 
+
+Edward O'Donnell 
+49 
+Vice President, Chief Financial Officer and Secretary 
+
+ 
+Biographies of Executive Officers and Sole Director 
+ 
+William P. McDermitt has had a long and varied career in marketing and advertising of food and personal products, starting as a sales representative in 1953 for Proctor & Gamble selling case foods to supermarket chains. He has held positions since then at the Drug Research Corporation selling drug products to wholesalers and chain drug stores in 11 western states, from 1957 to 1959; Young & Rubicam Advertising Agency as an account manager of personal products and baby products for Johnson & Johnson, from 1960 to 1969; and with consumer magazines in advertising sales management positions including The New York Times Magazine, Ladies' Home Journal and McCall's, selling major corporations on advertising their brands in the publications, from 1970 to 1997. Accounts have included General Foods, Johnson & Johnson, Bristol Myers, S.C. Johnson Co. and General Mills. Since stepping down from his sales management position at McCall's Magazine in 1997, Mr. McDermitt has been active as a volunteer at Riverview Hospital in Red Bank, New Jersey. Mr. McDermitt holds a Bachelors of Science degree in Marketing from the New York University School of Commerce.
+ 
+ 
+31
+
+ 
+ 
+Edward O'Donnell is a certified public accountant and from February 2013 until March 2015 was Chief Financial Officer of Audio Eye Communications, Inc., a software service company. From December 2010 to January 2013, Mr. O'Donnell, was Vice President, Finance, of Augme Technologies, Inc., a mobile marketing and technology company. Prior to that, until November 2010, he was the Secretary and Chief Financial Officer of Carlyle Capital Group. Prior to that, he was the Senior Vice President of Finance & Investor Relations at ACTV, Inc. a digital media company prior to its acquisition by Liberty Media. He has provided financial and modeling expertise for many innovative projects from inception through deployment and has implemented systems and controls that lead to accurate and timely financial results. Mr. O'Donnell is a member of the New York State Society of Certified Public Accountants and the American Institute of Certified Public Accountant, holds a Bachelors of Science degree in accounting from Villanova University, and in 2003, he received a Masters in Business Administration degree from Columbia University.
+ 
+Board Composition 
+ 
+Our Bylaws provide that the Board of Directors will consist of at least one member and that our stockholders will determine the number of directors from time to time. Each director will serve for a term which will expire upon the next annual meeting of stockholders. Each director will hold office until such time as the director's successor, if any, has been elected and qualified, or until the earlier of his resignation, removal from office, or death. 
+ 
+Committees of the Board of Directors 
+ 
+We do not have a separate audit committee, compensation committee, nominating committee, executive committee or any other committees. 
+ 
+The Board of Directors acts as the audit committee and oversees matters with respect to compensation and nominations of directors. The Company does not have a qualified financial expert at this time. 
+ 
+Director Independence 
+ 
+We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of "independent directors." Our determination of independence of directors is made using the definition of "independent director" contained in Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market, even though such definition does not currently apply to us because we are not listed on Nasdaq. Under this definition, our sole director is not independent.
+ 
+Involvement in Certain Legal Proceedings 
+ 
+A complaint against the Company was served on January 17, 2014 by Vintage Filings PR Newswire in the Superior Court of New Jersey for an amount of indebtedness of $5,894. The claim was settled and a stipulation was filed with the court on May 8, 2014, providing for payments by the Company commencing July 1, 2014, in the aggregate amount of $6,084. Subsequently, a judgment was entered into against the Company on September 9, 2014 for the amount of $6,084 plus costs and interest from August 28, 2014. To date, $500 has been paid with respect to the judgment. The plaintiff initially agreed to defer taking action to enforce the judgment; however, the time frame which the plaintiff initially agreed upon has expired. The Company intends to negotiate an extension which the Company believes shall be sufficient time to complete this offering. 
+ 
+Stockholder Communications with the Board 
+ 
+We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our Board of Directors. Nevertheless, every effort will be made to ensure that the views of stockholders are heard by our Board of Directors, and that appropriate responses are provided to stockholders in a timely manner. During the upcoming year, our Board will continue to monitor whether it would be appropriate to adopt such a process.
+ 
+ 
+32
+
+ 
+ 
+Compensation Committee Interlocks and Insider Participation 
+ 
+None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more of its executive officers serving as a member of our board of directors. We do not have a compensation committee.
+ 
+Executive Compensation and Corporate Governance
+ 
+We have not paid our officers since our inception, nor do we owe, any compensation to our officers. We have not entered into any arrangements or employment agreements with either of William McDermitt or Edward O'Donnell pursuant to which either of them will be compensated now, or in the future for any services provided to us as an executive officer, and we do not anticipate entering into any such arrangements or agreements until such time as we become profitable.
+ 
+We do not currently have a stock option plan or any long-term incentive plans that provide compensation intended to serve as an incentive for performance. No individual grants of stock options or other equity incentive awards have been made to our officers and sole director since our inception.
+ 
+There are currently no employment or other contracts or arrangements with our officers. There are no compensation plans or arrangements, including, but not limited to, payments to be made by us, with respect to our officers and sole director that would result from the resignation, retirement or any other termination of such person. There are no arrangements for sole director which would result from a change-in-control. 
+ 
+Director Compensation
+ 
+We have not compensated our sole director for his service on our Board of Directors since our inception. There are no arrangements pursuant to which directors will be compensated in the future for any services provided as a director.
+ 
+PRINCIPAL STOCKHOLDERS
+ 
+Security Ownership of Certain Beneficial Owners and Management 
+ 
+The following table sets forth information regarding the beneficial ownership of our capital stock as of June 1 5 , 2016 with respect to:
+ 
+ each person known to us to own beneficially more than 5% of any class of our outstanding shares;
+ 
+ each of our named executive officers;
+ 
+ our sole director; and
+ 
+ our sole director and all of our executive officers as a group.
+
+ 
+In accordance with the rules and regulations of the SEC, beneficial ownership includes voting or investment power with respect to securities. We have a convertible note in the principal amount of $50,000 outstanding, the principal and interest of which can be converted into shares of common stock at a purchase price of $0.10 per share. To our knowledge, except pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of our common stock. The address for each stockholder listed below is c/o Nostalgia Family Brands, Inc., 20 Pape Drive, Atlantic Highlands, New Jersey 07716.
+ 
+ 
+33
+
+ 
+ 
+ Beneficial Owner
+ 
+Number of Shares Beneficially Owned
+ 
+ 
+Percent of Shares Beneficially Owned
+ 
+
+William P. McDermitt 
+ 
+ 
+500,000 
+ 
+ 
+13.16%
+Edward O'Donnell 
+ 
+ 
+100,000 
+ 
+ 
+2.63%
+All executive officers and sole director as a group (2 people) 
+ 
+ 
+600,000 
+ 
+ 
+15.79%
+ 
+Mr. McDermitt and Mr. O'Donnell may be deemed to be our "parents" and "promoters" as such terms are defined under the federal securities laws. Mr. McDermitt has from time to time, and may in the future, consult with Mr. Edward Downe who was the majority shareholder of the entity which was a former employer of Mr. McDermitt - on business and marketing matters with respect to our Company. There is no agreement between Mr. Downe and our company. Mr. Downe is the president of Cubbo, Inc. Cubbo, Inc. received $30,000 in advance for consulting services provided and to be provided. 
+ 
+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 
+ 
+Transactions with Related Persons, Promoters and Certain Control Persons and Corporate Governance
+ 
+We have not entered into any other transaction, nor are there any proposed transactions, in which our executive officers and our sole director, or any significant stockholder, or any member of the immediate family of any of the foregoing, had or is to have a direct or indirect material interest.
+ 
+Disclosure of Commission Position on Indemnification for Securities Act Liabilities
+ 
+The indemnification provisions relating to directors, officers and controlling persons of the registrant against liability arising under the Securities Act is included in the section titled "Indemnification of Directors and Officers" below. 
+ 
+Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant, the registrant has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
+ 
+Principal Accounting Fees and Services.
+ 
+Wei, Wei & Co. LLC is our independent registered public accounting firm.
+ 
+Audit Fees 
+ 
+Audit Fees represent the aggregate fees for professional services for the audit of our annual and quarterly financial statements, and S-1 review. For the years ended December 31, 2015 and 2014 , we accrued $4,400 and $4,900, respectively. 
+ 
+Tax Fees 
+ 
+For the years ended December 31, 2015 and 2014 , we paid $0 and $0 , respectively. 
+ All Other Fees
+ 
+For the years ended December 31, 2015 and 2014 , we paid $0 and $0 , respectively.
+ 
+34
+
+ 
+ 
+NOSTALGIA FAMILY BRANDS, INC.
+INDEX TO FINANCIAL STATEMENTS for the years
+ENDED DECEMBER 31, 2015 AND 2014
+ 
+ CONTENTS 
+ 
+PAGE 
+ 
+
+ 
+ 
+ 
+ 
+
+Report of Independent Registered Public Accounting Firm
+ 
+F-1
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+Balance Sheets as of March 31, 2016 (Unaudited), December 31, 2015 and December 31, 2014 
+F-2
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ Statement of Operations for the three months ended March 31, 2016 and 2015 (Unaudited) and years ended December 31, 2015 and 2014 
+F-3
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ Statement of Cash Flows for the three months ended March 31, 2016 and 2015 (Unaudited) and years ended December 31, 2015 and 2014 
+F-4
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+Statements of Changes in Stockholders' Equity for the three months ended March 31, 2016 (unaudited) and years ended December 31, 2015 and 2014. 
+F-5
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+Notes to Financial Statements 
+ 
+F-6
+ 
+
+ 
+35
+
+ 
+ 
+REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
+ 
+To Board of Directors and Stockholders of 
+Nostalgia Family Brands, Inc.
+ 
+We have audited the accompanying balance sheets of Nostalgia Family Brands, Inc. (the "Company"), as of December 31, 2015 and 2014, and the related statements of operations, changes in stockholders' (deficit), and cash flows for each of the years in the two year period ended December 31, 2015. The Company's management is responsible for the financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
+ 
+We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
+ 
+In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nostalgia Family Brands, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
+ 
+The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 7, the Company is subject to substantial risks and uncertainties of a new business and has not generated revenues since inception. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
+ 
+/s/ Wei, Wei & Co., LLP
+April 14, 2016
+Flushing, New York
+ 
+ 
+F-1
+
+ 
+
+ 
+Nostalgia Family Brands, Inc.
+BALANCE SHEETS
+ 
+
+ 
+ 
+ March 31, 
+ 
+ 
+December 31,
+ 
+
+ 
+ 
+ 2016 
+ 
+ 
+2015
+ 
+ 
+2014
+ 
+
+ 
+ 
+ (Unaudited) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ASSETS
+
+Current assets: 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cash (Note 2) 
+ 
+$- 
+ 
+ $ - 
+ 
+ $ - 
+
+Prepaid expenses (Note 4) 
+ 
+ 
+17,000 
+ 
+ 
+ 17,000 
+ 
+ 
+17,000 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+TOTAL ASSETS 
+ 
+$17,000 
+ 
+ $ 17,000 
+ 
+ $ 17,000 
+
+ 
+ LIABILITIES AND STOCKHOLDERS' (DEFICIT)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Current liabilities: 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Accounts payable and accrued expenses (Note 8) 
+ 
+ $ 43,819 
+ 
+ $ 42,740 
+ 
+$37,265 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Total current liabilities 
+ 
+ 
+ 43,819 
+ 
+ 
+42,740 
+ 
+ 
+37,265 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Convertible promissory note payable (Notes 2 and 6)
+ 
+ 
+ 50,000 
+ 
+ 
+50,000 
+ 
+ 
+50,000 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Stockholders' (deficit) (Note 5): 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Common stock, $0.001 par value; 50,000,000 shares authorized; 3,800,000 shares issued and outstanding 
+ 
+ 
+ 3,800 
+ 
+ 
+3,800 
+ 
+ 
+3,800 
+
+Additional paid-in capital 
+ 
+ 
+ 34,200 
+ 
+ 
+34,200 
+ 
+ 
+34,200 
+
+Accumulated (Deficit)
+ 
+ 
+ (114,819 ) 
+ 
+(113,740) 
+ 
+(108,265)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Total stockholders' (deficit) 
+ 
+ 
+ (76,819 ) 
+ 
+(75,740) 
+ 
+(70,265)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
+ 
+ $ 17,000 
+ 
+ $ 17,000 
+ 
+$17,000 
+
+ 
+See report of independent registered public accounting firm and accompanying notes to financial statements.
+ 
+ 
+F-2
+
+ 
+
+ 
+Nostalgia Family Brands, Inc.
+STATEMENTS OF OPERATIONS
+ 
+
+ 
+ 
+ Three Months Ended 
+ March 31, 
+ 
+ 
+ Year Ended 
+ December 31, 
+ 
+
+ 
+ 
+ 2016 
+ 
+ 
+2015
+ 
+ 
+ 2015 
+ 
+ 
+2014
+ 
+
+ 
+ 
+ (Unaudited) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Operating expenses:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Selling, general and administrative
+ 
+ $ (79 ) 
+ $ (576 ) 
+ $ (1,075) 
+ $ (475)
+Professional fees
+ 
+ 
+ (1,000 ) 
+ 
+ (1,000 ) 
+ 
+(4,400) 
+ 
+(5,400)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Total operating expenses 
+ 
+ 
+ (1,079 ) 
+ 
+ (1,576 ) 
+ 
+ (5,475 ) 
+ 
+ (5,875 ) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Net (loss) 
+ 
+ $ (1,079 ) 
+ $ (1,576 ) 
+ $ (5,475 ) 
+ $ (5,875 ) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ (Loss) per common share, basic and diluted 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ (Note 2) 
+ 
+ $ (0.00 ) 
+ $ (0.00 ) 
+ $ (0.00 ) 
+ $ (0.00 ) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Weighted average shares outstanding, basic and diluted 
+ 
+ 
+ 3,800,000 
+ 
+ 
+ 3,800,000 
+ 
+ 
+ 3,800,000 
+ 
+ 
+ 3,800,000 
+
+ 
+See report of independent registered public accounting firm and accompanying notes to financial statements.
+ 
+ 
+F-3
+
+ 
+
+ 
+Nostalgia Family Brands, Inc.
+STATEMENTS OF CASH FLOWS
+ 
+ 
+ 
+ Three Months Ended 
+ March 31, 
+ 
+ 
+Year Ended
+December 31,
+ 
+
+ 
+ 
+ 2016 
+ 
+ 
+2015
+ 
+ 
+ 2015 
+ 
+ 
+2014
+ 
+
+ 
+ 
+ (Unaudited) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cash flows from operating activities: 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Net (loss) 
+ 
+ $ (1,079 ) 
+ $ (1,576 ) 
+ $ (5,475) 
+$(5,875)
+Change in operating assets and liabilities: 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Decrease in prepaid expenses 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+1,000 
+
+Increase in accounts payable and accrued expenses 
+ 
+ 
+ 1,079 
+ 
+ 
+ 1,576 
+ 
+ 
+5,475 
+ 
+ 
+4,875 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Net cash (used in) operating activities 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Net change in cash 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+
+Cash, beginning of the period 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cash, end of the period 
+ 
+$- 
+ 
+$- 
+ 
+ $ - 
+ 
+ $ - 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Supplemental disclosure of cash flow information 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cash paid for income taxes 
+ 
+$- 
+ 
+$- 
+ 
+ $ - 
+ 
+ $ - 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Cash paid for interest 
+ 
+$- 
+ 
+$- 
+ 
+ $ - 
+ 
+ $ - 
+
+ 
+See report of independent registered public accounting firm and accompanying notes to financial statements.
+ 
+ 
+F-4
+
+ 
+
+ 
+Nostalgia Family Brands, Inc.
+STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
+ 
+ 
+ 
+Common Stock
+ 
+ 
+Additional paid-in 
+ 
+ 
+Accumulated
+ 
+ 
+ 
+ 
+
+ 
+ 
+Shares
+ 
+ 
+Amount
+ 
+ 
+capital
+ 
+ 
+Deficit 
+ 
+Total
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Balance-December 31, 2014 
+ 
+ 
+3,800,000 
+ 
+ $ 3,800 
+ 
+ $ 34,200 
+ 
+ $ (108,265) 
+ $ (70,265)
+Net (loss) 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+(5,475) 
+ 
+(5,475)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Balance-December 31, 2015
+ 
+ 
+3,800,000 
+ 
+ 
+3,800 
+ 
+ 
+34,200 
+ 
+ 
+(113,740) 
+ 
+(75,740)
+ Net (loss) 
+ 
+ 
+ - 
+ 
+ 
+ - 
+ 
+ 
+ - 
+ 
+ 
+ (1,079 ) 
+ 
+ (1,079 ) 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Balance-March 31, 2016 (unaudited) 
+ 
+ 
+ 3,800,000 
+ 
+ $ 3,800 
+ 
+ $ 34,200 
+ 
+ $ (114,819 ) 
+ $ (76,819 ) 
+
+ 
+See report of independent registered public accounting firm and accompanying notes to financial statements.
+ 
+ 
+F-5
+
+ 
+
+ 
+
+Nostalgia Family Brands, Inc.
+NOTES TO FINANCIAL STATEMENTS
+For the three months ended March 31, 2016 (Unaudited) and years ended December 31, 2015 and 2014
+ 
+ 1.GENERAL
+
+ Organization and Business Nature
+ 
+Nostalgia Family Brands, Inc. (the "Company") is a Delaware Corporation organized on November 5, 2010 and began developing its plan of operations during the first quarter 2011. The Company aims to develop the web site "nostalgiafamilybrands.com". The Company's business model consists of plans to manufacture products that had been popular in the 1950's and 1960's and perhaps other decades, but have been discontinued. The specific product categories include candy, food and personal hygiene products. Examples of the proposed products include: Bit-O-Licorice, Hollywood Candy Bars, Hydrox Cookies, Puffa Puffa Rice Cereal, Chipso Laundry Soap and Stopette Deodorant. These items represent some of the products that the older generations enjoyed that the Company intends to target to make available once again at retail supermarkets and drug stores.
+ 
+The Company has not generated any revenues from operations and can give no assurance of any future revenues. The Company will require substantial additional funding to initiate and develop its operations. There is no assurance that the Company will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to the Company. 
+ 
+ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+
+ Basis of Presentation and Presentation 
+ 
+ The unaudited interim financial statements of the Company as of March 31, 2016 and for the three months ended March 31, 2016 and 2015, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP ") and the rules and regulations of the Securities and Exchange Commission (the "SEC") which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2016. 
+ 
+ 
+F-6
+
+ 
+
+ 
+ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+
+ 
+ Basis of Accounting and Presentation (continued) 
+ 
+ The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). 
+ 
+Cash and Cash Equivalents
+ 
+The Company considers all liquid investments with an original maturity of three months or less that are readily convertible into cash to be cash equivalents. 
+ 
+Revenue Recognition
+ 
+The Company intends to generate its revenue from the sale of products to traditional retail outlets.
+ 
+All sources of revenue will be recorded pursuant to FASB ASC 605, Revenue Recognition, when persuasive evidence of arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is reasonably assured.
+ 
+Convertible Debt
+ 
+Convertible debt is accounted for under FASB ASC 470, Debt Debt with Conversion and Other Options. The Company records a beneficial conversion feature (" BCF ") related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued. The BCF for the convertible instruments, if any, is recognized and measured as a reduction to the carrying amount of the convertible instrument equal to the relative fair value of the conversion features, which is credited to additional paid-in-capital. 
+ 
+ 
+F-7
+
+ 
+
+ 
+ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+
+ Concentration of Credit Risk 
+ 
+ The Company maintains its cash accounts at a commercial bank. The Federal Deposit Insurance Corporation ("FDIC") covers $250,000 per bank for substantially all depository accounts. At March 31, 2016, the Company did not have cash balances which were in excess of the FDIC insurance limit. The Company performs ongoing evaluation of the financial institution to limit its concentration of risk exposure. Management believes this risk is not significant due to the financial strength of the financial institution utilized by the Company. 
+ 
+Income Taxes
+ 
+The Company has not generated any taxable income, and, therefore, no provision for income taxes has been provided. 
+ 
+The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. At March 31, 2016 and December 31, 2015, the Company has established full valuation allowances against its deferred tax assets, principally for operating losses, due to the uncertainty in realizing their benefits. At March 31, 2016 , the Company had approximately $115,000 of unused operating losses expiring through 2036 . 
+ 
+The Company follows the provisions of FASB ASC 740-10-25. The provisions prescribe a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns and require that uncertain tax positions are evaluated in a two-step process. The Company does not have any uncertain tax positions.
+ 
+The Company is in the process of preparing and filing its federal income tax returns for the years ended December 31, 2015, 2014, 2013 and 2012. For the period from November 5, 2010 (inception) to March 31, 2016 , the Company recorded its State of Delaware franchise tax, filing fee, penalties, and interest of $3,747 as general and administrative expenses in the accompanying statements of operations.
+ 
+ 
+F-8
+
+ 
+
+ 
+ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 
+
+ Fair Value of Financial Instruments
+ 
+FASB ASC 820, Fair Value Measurement, specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:
+ 
+Level 1 Inputs Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
+ 
+Level 2 Inputs Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
+ 
+Level 3 Inputs Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.
+ 
+FASB ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 
+ 
+The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Non-derivative financial instruments include accounts payable and accrued expenses. As of March 31, 2016 and December 31, 2015, the carrying values of these financial instruments approximated their fair values due to their short term nature. The convertible promissory note payable is recorded at cost. The carrying amount approximated fair value.
+ 
+Use of Estimates
+ 
+The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
+ 
+ 
+F-9
+
+ 
+
+ 
+ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+
+ Earnings (Loss) per Share
+ 
+The Company computes net earnings (loss) per common share in accordance with FASB ASC 260, Earnings Per Share ("ASC 260") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of ASC 260 and SAB 98, basic net earnings (loss) per common share is computed by dividing the amount available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. The Company's common stock equivalents were excluded in the computation of diluted net (loss) per share since their inclusion would be anti-dilutive.
+ 
+ 3. RECENTLY ISSUED ACCOUNTING STANDARDS
+
+ In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our financial statements.
+ 
+In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40):Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 provides guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This accounting standard update is not expected to have a material impact on the Company's financial statements. 
+ 
+ 
+F-10
+
+ 
+
+ 
+ 3. RECENTLY ISSUED ACCOUNTING STANDARDS (continued)
+
+ In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance , after amendment is effective for annual reporting periods beginning after December 15, 2017 , including interim periods within that reporting period. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. This accounting standard update is not expected to have a material impact on the Company's financial statements. 
+ 
+ 4. PREPAID EXPENSES
+
+ 
+The Company entered into a management consulting relationship with CUBBO, Inc., which required the prepayment of $30,000 in fees. Prepaid expenses at March 31, 2016 represent a prepayment of $17,000 with CUBBO, Inc. for consulting services to be rendered in the future. CUBBO, Inc. performs various management functions . 
+ 
+ 5. COMMON STOCK
+
+ The Company sold 3,800,000 shares of common stock to 44 investors. Among them, 500,000 shares were sold to the Company's Chief Executive Officer, and 100,000 shares were sold to the Company's Chief Financial Officer. All shares were sold at $0.01 per share. 
+ 
+ 6. CONVERTIBLE PROMISSORY NOTE
+
+ On December 14, 2012, the Company issued a non-interest bearing convertible promissory note in the principal amount of $50,000 , maturing on June 30, 2017. In the event of default, interest shall accrue on the outstanding principal amount at a rate of 8% per annum. The holder of the note is entitled to convert all or a portion of the convertible note plus accrued interest, if any, at the lender's sole option, into shares of common stock at a conversion price of $0.10 per share.
+ 
+ 
+F-11
+
+ 
+
+ 
+ 7. GOING CONCERN
+
+ The Company's financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. The Company has not generated any revenues since inception. While the Company is attempting to commence operations and generate revenues, the Company's cash position is currently not sufficient to support the Company's daily operations. This raises substantial doubt about the Company's ability to continue as a going concern.
+ 
+Management is hoping to raise additional funds through the issuance of additional equity or debt securities. 
+ 
+While the Company believes in its ability to raise additional funds and the viability of its strategy, there can be no assurances that they will be successful. The Company's ability to continue as a going concern is dependent upon the continued financial support from its stockholders and its ability to obtain the necessary equity or debt financing and eventually attain profitable operations. 
+ 
+The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
+ 
+ 8. UNSETTLED ACTION
+
+ A claim against the Company was served on January 17, 2014 by Vintage Filings PR Newswire in the Superior Court of New Jersey for approximately $5,900 related to services rendered in 2012. The claim was settled in April 2014 for $6,083, including fees, which is included in accounts payable and accrued expenses in the accompanying balance sheets. In September 2014, $500.00 was paid by CUBBO, Inc. with respect to the judgment. The plaintiff initially agreed to defer taking action to enforce the judgment; however, the time frame which the plaintiff initially agreed upon has expired. The Company intends to negotiate an extension which the Company believes shall be sufficient time to complete this offering . 
+ 
+ 9. SUBSEQUENT EVENTS
+
+ The Company's management has performed subsequent events procedures through May 19 , 2016, which is the date the financial statements were available to be issued. There were no subsequent events requiring adjustment to or disclosure in the financial statements . 
+ 
+ 
+F-12
+
+ 
+ 
+INFORMATION NOT REQUIRED IN PROSPECTUS
+ 
+Other Expenses of Issuance and Distribution
+ 
+The following table sets forth the costs and expenses expected to be incurred by Nostalgia Family Brands, Inc. (the "Registrant") in connection with this offering described in this registration statement. All amounts shown are estimates, except the SEC registration fee.
+ 
+ Item 
+ 
+Amount to be Paid
+ 
+
+SEC registration fee 
+ 
+$35.25 
+
+Legal fees and expenses 
+ 
+ 
+45,000.00 
+
+Accounting fees and expenses 
+ 
+ 
+2,000.00 
+
+Printing and engraving expenses 
+ 
+ 
+1,000.00 
+
+Transfer agent fees 
+ 
+ 
+1,500.00 
+
+Blue sky fees and expenses 
+ 
+ 
+1,500.00 
+
+Miscellaneous 
+ 
+ 
+964.75 
+
+ 
+ 
+ 
+ 
+
+Total 
+ 
+$52,000.00 
+
+ 
+Indemnification of Directors and Officers
+ 
+The Registrants' bylaws limits its directors' and officers' liability to the fullest extent permitted under Delaware corporate law. Specifically, the Registrant's directors and officers will not be liable to it or its stockholders for monetary damages for any breach of fiduciary duty by a director or officer, except for liability: 
+ 
+ for any breach of the director's or officer's duty of loyalty to the Registrant or the Registrant's stockholders;
+ 
+ for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
+ 
+ under Section 174 of the Delaware General Corporation Law; or
+ 
+ for any transaction from which a director or officer derives an improper personal benefit.
+
+ 
+If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of the Registrant's directors and officers shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. 
+ 
+The provision regarding indemnification of the Registrant's directors and officers in its bylaws will generally not limit liability under state or federal securities laws. 
+ 
+Delaware law and the Registrant's bylaws provide that the Registrant will, in certain situations, indemnify any person made or threatened to be made a party to a proceeding by reason of that person's former or present official capacity with the Registrant against judgments, penalties, fines, settlements and reasonable expenses including reasonable attorney's fees. Any person is also entitled, subject to certain limitations, to payment or reimbursement of reasonable expenses in advance of the final disposition of the proceeding.
+ 
+ 
+36
+
+ 
+ 
+Recent Sales of Unregistered Securities
+ 
+Except as set forth below, the Company has not issued any securities which were not registered under the Securities Act.
+ 
+During the period between January 3, 2011 and January 13, 2012, we issued a total of 3,800,000 shares of our common stock to 44 investors, for a purchase price of $0.01 per share, or aggregate proceeds of $38,000. These shares were issued in a series of transactions in reliance upon an exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder for transactions not involving any public offering. The Registrant believes that the exemption was available because the offer and sale of the securities did not involve a public offering and because of the limited number of recipients, each of the purchaser's representation of sophistication in financial matters, and his or her access to information concerning the Registrant. No underwriters were involved in the foregoing sales of securities. 
+ 
+All purchasers represented in writing that they acquired the securities for their own accounts. A legend was placed on the stock certificates stating that the securities have not been registered pursuant to the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom, but may be sold pursuant to the exemption provided by Section 4(1) of the Securities Act or Rule 144 of the Securities Act. 
+ 
+ 
+37
+
+ 
+ 
+Exhibits and Financial Statement Schedules
+ 
+Exhibits 
+ 
+ Exhibit No. 
+Description 
+
+3.1 
+Certificate of Incorporation* 
+
+3.2 
+By-Laws* 
+
+4.1 
+Form of specimen certificate representing common stock* 
+
+5.1 
+Opinion of The Mintz Fraade Law Firm, P.C. 
+
+10.1
+Convertible Note between Nostalgia Family Brands, Inc. and Robert M. Rubin, Assignment of Convertible Note between Robert M. Rubin and Cubbo, Inc. and Letter Agreement** 
+
+23.1 
+Consent of Wei, Wei & Co., LLP 
+
+23.3 
+Consent of The Mintz Fraade Law Firm, P.C. (included in Exhibit 5.1) 
+
+_________
+* Filed with previous S-1 on May 24, 2012
+ ** Filed with previous S-1/A on May 12, 2016 
+ 
+Financial Statement Schedules 
+ 
+All schedules are omitted since the required information is not applicable, the information is presented in the Registrant's consolidated financial statements and the related notes thereto or is not present in amounts sufficient to require submission of the schedules. 
+ 
+Undertakings
+ 
+The undersigned Registrant hereby undertakes: 
+ 
+(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: 
+ 
+(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act"); 
+ 
+(ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most-recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; 
+ 
+(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. 
+ 
+(2) That, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 
+ 
+(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 
+ 
+ 
+38
+
+ 
+ 
+(4) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 
+ 
+(5) That, for the purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. 
+ 
+(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: 
+ 
+(i) Any
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001545447_valmie_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001545447_valmie_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..18ea997107d4d9e4d054fe2f5fa8cf35480952d7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001545447_valmie_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights material information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled "Where You Can Find More Information" in this prospectus and any amendment or supplement hereto.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001552451_myokardia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001552451_myokardia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5ec025153a15ff2601a60213e4f598ed07de4da7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001552451_myokardia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere and incorporated by reference in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including the section titled Risk Factors and the information in our filings with the U.S. Securities and Exchange Commission, or the SEC, incorporated by reference in this prospectus. Unless the context suggests otherwise, all references to us, our, MyoKardia, we, the Company and similar designations refer to MyoKardia, Inc. and, where appropriate, our subsidiary. MyoKardia, Inc. Our Company We are a clinical stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious and neglected rare cardiovascular diseases. Our initial focus is on the treatment of heritable cardiomyopathies, a group of rare, genetically-driven forms of heart failure that result from biomechanical defects in cardiac muscle contraction. We have used our precision medicine platform to generate a robust pipeline of therapeutic programs for the chronic treatment of the two most common forms of heritable cardiomyopathy hypertrophic cardiomyopathy, or HCM, and dilated cardiomyopathy, or DCM. We have generated several proprietary, orally administered small molecules to address a variety of biomechanical defects that cause disruptions in heart muscle contraction. By correcting the underlying biomechanical defects, we believe our targeted therapies can correct or offset the downstream disruption in cardiac muscle function that drives disease progression. Our lead product candidate, MYK-461, is designed to reduce excessive cardiac muscle contractility leading to HCM. In September 2016, we began to initiate clinical sites to begin screening for patients in a Phase 2 clinical trial of MYK-461, which we refer to as PIONEER-HCM. In three Phase 1 clinical trials, we have observed favorable tolerability of single and multiple doses of MYK-461 in both healthy volunteers and HCM patients. Across the same group of trial subjects, we have demonstrated proof of mechanism, or the ability of MYK-461 to reduce cardiac muscle contraction, an important biomarker of disease. Additionally, we generated preliminary evidence in two patients with obstructive HCM that leads us to believe that MYK-461 has the potential to be effective in reducing obstruction of the left ventricular outflow tract, or LVOT. In 2016, MYK-461 was granted Orphan Drug Designation by the FDA for the treatment of symptomatic, obstructive HCM. We believe that if approved, MYK-461 would be the first targeted therapy to treat an underlying biomechanical defect leading to HCM. Our second product candidate, MYK-491, is designed to treat genetic DCM by restoring normal contractility in the diseased DCM heart. We intend to initiate a Phase 1 clinical trial of MYK-491 in the first half of 2017 and report topline results in the third quarter of 2017. In preclinical animal models, MYK-491 has been shown in separate experiments to improve systolic function (cardiac muscle contractility and cardiac output) with minimal impact on diastolic function. We believe that if approved, MYK-491 would be the first targeted therapy to treat an underlying biomechanical defect leading to DCM. Additionally, we have two discovery programs, HCM-2 and LUS-1. HCM-2 is intended to reduce cardiac muscle contractility to normal levels in HCM patients through a different mechanism than that of MYK-461. LUS-1 is intended to counteract a muscle disruption that results in impaired relaxation of the heart, a biomechanical defect found in specific HCM and genetic DCM patient subgroups, as well as in other less common heritable cardiomyopathies. We have formed a strategic collaboration with Sanofi S.A., or Sanofi, to help fund a portion of our research and development expenses while leveraging Sanofi s cardiovascular and rare disease expertise in exchange for certain program and product rights, pursuant to a license and collaboration agreement we entered into in August 2014 with Aventis Inc., a wholly-owned subsidiary of Sanofi, which we refer to as the Collaboration Agreement. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION DATED SEPTEMBER 26, 2016 PRELIMINARY PROSPECTUS Shares Common Stock MyoKardia, Inc. is offering 3,800,000 shares of common stock. Our common stock is listed on The NASDAQ Global Select Market under the symbol MYOK. The closing price of our common stock on The NASDAQ Global Select Market on September 23, 2016, was $16.92 per share. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012, as amended, and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in our common stock involves risks. See Risk Factors beginning on page 8. Price to Public Underwriting Discounts and Commissions(1) Proceeds, before expenses, to MyoKardia, Inc. Per Share $ $ $ Total $ $ $ (1) The underwriters will receive compensation in addition to underwriting discounts and commissions. See Underwriting beginning on page 88 for additional information regarding underwriting compensation. We have granted the underwriters an option to purchase up to 570,000 additional shares of our common stock from us at the public offering price, less underwriting discounts and commissions. The underwriters can exercise this option at any time within 30 days after the date of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Sanofi, our strategic collaboration partner and one of our existing stockholders (through its wholly owned subsidiary Aventis Inc.), has indicated an interest in purchasing up to an aggregate of approximately 450,000 shares of our common stock in this offering at the public offering price and on the same terms as the other purchasers in this offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell fewer shares to Sanofi than it indicated an interest in purchasing or sell no shares to Sanofi, and Sanofi could determine to purchase fewer shares than it indicated an interest in purchasing or purchase no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by Sanofi as they will on any other shares sold to the public in this offering. The underwriters expect to deliver the shares of common stock to purchasers on or about , 2016. Credit Suisse Cowen and Company BMO Capital Markets Wedbush PacGrow The date of this prospectus is , 2016 Table of Contents In the United States, we retain the right to commercialize MYK-461 and HCM-2 as well as co-promotion rights for MYK-491. Additionally, we are entitled to receive tiered royalties in the mid-single digits to the mid-teens on net sales of certain HCM and DCM products outside the United States and on net sales of certain DCM products in the United States. We retain all rights to our LUS-1 program and our future programs. Risks Associated with Our Business Our business is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in the section entitled Risk Factors in this prospectus. These risks include, among others: We are a very early-stage company with a limited operating history, have incurred significant losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future and may never generate any revenue from product sales or be profitable; Our precision medicine approach to the discovery and development of drugs for heritable cardiomyopathies is novel and may never lead to marketable products; We are heavily dependent upon the success of MYK-461, which is in the early stages of clinical development, and all of our other programs are in discovery or preclinical development; Preclinical and clinical drug development involves a lengthy and expensive process with an uncertain outcome, and we may never obtain regulatory approval for any product candidates; We are substantially dependent on our collaboration agreement with Sanofi, and if this collaboration is unsuccessful or is terminated, for which Sanofi must make a decision as to whether to continue the collaboration prior to December 31, 2016, we will not receive additional funding from this relationship and may not be able to successfully commercialize certain product candidates, including MYK-461; If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates or our platform technology, we may not be able to compete effectively; Even if this offering is successful, we will need to raise additional funding before we can expect to complete the development of any of our product candidates or generate any revenue from product sales; and Our success depends in part upon our ability to retain our key employees, consultants and advisors and to attract, retain and motivate other qualified personnel. Implications of Being an Emerging Growth Company We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an emerging growth company, we have elected to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: reduced disclosure about our executive compensation arrangements; no non-binding advisory votes on executive compensation or golden parachute arrangements; and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. We may take advantage of these exemptions for up to five years from our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (ii) December 31, 2020; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the last day of the fiscal year in which we Table of Contents TABLE OF CONTENTS Prospectus Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001555177_emerge_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001555177_emerge_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..18e75410c02e329954e11c2f7b1d544b2a31372c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001555177_emerge_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary provides a brief overview of information contained elsewhere in this prospectus and the documents we incorporate by reference. It does not contain all of the information you should consider before making an investment decision. You should read this entire prospectus and the documents incorporated by reference, including our Annual Report on Form 10-K for the year ended December 31, 2015 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2016, June 30, 2016 and September 30, 2016 (including the sections entitled "Risk Factors" therein), before making an investment decision. Overview We are a publicly-traded limited partnership formed in 2012 by management and affiliates of Insight Equity to own, operate, acquire and develop a diversified portfolio of energy service assets. We are currently engaged in the businesses of mining, processing, and distributing silica sand, a key input for the hydraulic fracturing of oil and gas wells. We conduct our operations through our subsidiary SSS. We believe that our SSS brand has significant name recognition and a strong reputation with our customers. Our general partner, Emerge Energy Services GP LLC, is a Delaware limited liability company. We are managed by our general partner. Our principal executive offices are located at 180 State Street, Suite 225, Southlake, TX 76092 and our telephone number for our principal executive office is (817) 865-5830. AMENDMENT NO. 1 TO Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents About this prospectus Additional information, including our financial statements and the notes thereto, is incorporated in this prospectus by reference to our reports filed with the Securities and Exchange Commission (the "SEC"). Please read "Where you can find more information" in this prospectus. You are urged to read this prospectus carefully, including "Risk factors," "Cautionary note regarding forward-looking statements," and the documents incorporated by reference in their entirety before investing in our common units. References in this prospectus to "the Partnership," "we," "our," "us" and like terms refer to Emerge Energy Services LP and our subsidiaries, unless the context otherwise requires or where otherwise indicated. References in this prospectus to "Emerge GP" refer to Emerge Energy Services GP LLC, our general partner. References in this prospectus to "Insight Equity" refer to Insight Equity Management Company LLC and its affiliated investment funds and its controlling equity owners, Ted W. Beneski and Victor L. Vescovo. References in this prospectus to "Emerge Holdings" refer to Emerge Energy Services Holdings LLC, a Delaware limited liability company owned by Insight Equity that controls our general partner. We conduct our operations through our indirect subsidiary Superior Silica Sands LLC, or "SSS." References to "our operating companies" refer to Emerge Energy Services Operating LLC, or "Emerge Operating," and SSS. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001556226_cur-media_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001556226_cur-media_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001556226_cur-media_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001558009_epic_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001558009_epic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b23f349c16d53e1d1867e8f9fffdd420972d03e5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001558009_epic_prospectus_summary.txt
@@ -0,0 +1 @@
+following summary highlights selected information contained elsewhere in this prospectus and in the documents incorporated by reference in this prospectus and does not contain all the information you will need in making your investment decision. You should read carefully this entire prospectus and the documents incorporated by reference in this prospectus before making an investment
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001561257_helpful_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001561257_helpful_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..241e32c09ad4ad0edac8855f8de13a013206154c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001561257_helpful_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary highlights important information about this Offering and our business. It does not include all information you should consider before investing in our Common Stock. Please review this prospectus in its entirety, including the risk factors and our financial statements and the related notes before you decide to invest. Unless otherwise indicated, terms such as the "Company," "we," "us," "our" and similar expressions refer to Helpful Alliance Company, a Florida corporation. Overview We were incorporated in the state of Florida on April 11, 2012. We are a development stage construction management company. Our mission is to effectively upgrade America s neighborhoods with next generation, health-conscious, energy-efficient properties. Headquartered, in Deerfield Beach, Florida (within the Fort Lauderdale, FL metropolitan area), we are presently focused on building residential and commercial real estate properties within the Chicago, IL, Richmond, VA, and Fort Lauderdale, FL metropolitan areas at lower cost and superior speed by capitalizing on available EVG-3D technology and eventually expanding to other areas and offering our own proprietary pre-fabricated building (or "home") kits for various construction needs by utilizing this technology. We have not developed any home kits that are ready for market use to date. From our inception to date, the majority of our operations have been focused on engineering activities, researching and developing novel building materials and methods, and searching for land suitable for pilot-testing the selected technologies in real construction projects. However, because of significant time and effort constraints in conducting research and development and locating land for suitable construction projects to test the selected construction technology, the majority of our revenues to date have been derived from financial assistance activities engaged in to generate sufficient working capital to fund our early stage development growth. Business Operations We conduct our business operations through four principal divisions: (i) Land and Property, (ii) Engineering, (iii) Construction, and (iv) Financial Assistance. Below is a summary of each division. In 2016, we anticipate ceasing our Financial Assistance activities and focus our future operations solely on Land and Property, Engineering, and Construction activities. Land and Property Division Through our Land and Property division, we intend to acquire land and properties, to be further used for remodeling, reconstruction, or site clearing/demolition and new construction. Our goal is to target "niche" markets with low vacancy rate, strong expected growth, land that can be purchased economically, but yet support a strong resale price per square foot for completed construction. Then, we will conduct due diligence for potential project analysis, including, but not limited to, market research using a network of local real estate agents and calculations of expected financial pro forma for project type, size, timeline, budgets and profit. Many properties, whether or not it is vacant land or land already built upon, are expected to require rezoning. Zoning relates to the division of an area into zones as to restrict the amount and types of buildings and their uses. Rezoning is the process that reclassifies a property into a different usage zone, and thus subject to different restrictions. Site plans and building designs must be created as well in order to prepare the potential property for the construction phase. On November 30, 2015, we formed a limited liability company in the Commonwealth of Virginia, Seasons Creek Development LLC, of which the Company is currently the sole member, in order to purchase and develop a parcel of land consisting of approximately 28.8 acres located in Chesterfield, Virginia. We consummated our purchase of the land on December 11, 2015. The land has been zoned to accommodate up to 70 single family homes and currently holds a tentative plan of development approval. We intend to develop this land into a residential subdivision to be called "Seasons Creek" consisting of 70 single family homes built with the novel construction materials and methods we have researched. As of the date of this prospectus, we have started engineering revisions of our plan of development for the 70 buildable lots. From the net proceeds from this Offering, we anticipate using approximately $6 million (excluding general and administrative expenses and other concurrent operating expenses associated with management of the project LLC) to conduct land development and homebuilding efforts. We intend to market and sell these homes to the public. We estimate approximately a 5-year project duration from the purchase of land to the sale of homes. On May 3, 2016, we formed a limited liability company in the Commonwealth of Virginia, River City Park LLC, of which the Company currently owns 100%, in order to potentially locate, purchase, and develop a parcel of land in Virginia that we intend to consist of at least 400 acres and be located along a river. As of the date of this prospectus, we have not reached any material agreements for an acquisition of such land. Furthermore, presently we have no material agreements based on which we could determine the minimum amount of proceeds that would be required to purchase such land. The amount of proceeds that we raise for such an acquisition will determine the land that we may purchase. If we are successful in locating and acquiring such land, we intend to develop this land into a residential community to be called "River City Park". If we sell from 50% to 100% of the 14,500,000 shares in this offering, we will use approximately $7.0 million from the net proceeds from this offering (excluding general and administrative expenses and other concurrent operating expenses associated with management of the project LLC) to purchase such land. If an acquisition of land for our River City Park would require an amount in excess of $7 million, we intend using a part or all of the $7.25 million towards the purchase of such land. If we sell only 25% of the 14,500,000 shares in this offering, we will not use any of the net proceeds from this offering . As of the date of this prospectus, we cannot assure our shareholders, including those who may invest into this offering, that we will have the necessary financing to purchase the land we contemplate purchasing for our River City Park project. The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission (the "SEC") is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Helpful Alliance Company 14,500,000 shares of Common Stock by Company 525,658 shares of Common Stock by Selling Stockholders $2.00 per share This is the initial public offering of Common Stock of Helpful Alliance Company (the "Company") and no public market currently exists for the securities being offered. This prospectus relates to the sale of a total of 15,025,658 shares of the Company s Common Stock, par value $0.001 per share (the "Shares"), consisting of (i) 14,500,000 shares of Common Stock being offered by the Company on a self-underwritten, "best efforts" basis, meaning that the Company is not required to sell any specific number or dollar amount of securities but will use its best efforts to sell the securities offered, and (ii) 525,658 shares of Common Stock being offered by existing stockholders named in this prospectus for their own account (the "Selling Stockholders"). This is a self-written offering by the officers and directors of the Company on a "best efforts" basis. There is currently no underwriter for the Shares registered for sale by the Company; however, the Company reserves the right to retain the services of one or more FINRA registered broker-dealers to serve as the underwriter of the Shares offered by sale by the Company in consideration for customary fees and commissions not exceeding those imposed by FINRA. There is currently no public trading market for our Common Stock. The offering price of the Shares has been arbitrarily determined by the Company and bears no relationship to conventional criteria, such as book value or earnings per share. There can be no assurance that the offering price bears any relation to the current fair market value of the Common Stock. Upon the effectiveness of the registration statement, of which this prospectus is a part (the "Registration Statement"), under the Securities Act of 1933, as amended, we intend to solicit a FINRA-registered broker-dealer to apply to FINRA as a market maker of our Common Stock on the OTC Markets OTCQB tier. However, there is no guarantee that will be able to solicit a broker dealer to file a Form 211 with FINRA or that our Common Stock will be accepted for quotation on the OTCQB, or any other OTC Market tier or stock exchange or other electronic inter-dealer quotation system. The Shares being offered for sale by the Company will be offered at a fixed price of $2.00 per share for a period not to exceed 180 days from the date of this prospectus, unless extended by our Board of Directors for an additional 90 days. There is no minimum number of Shares required to be purchased by any investor. The Company has made no arrangements to place subscription funds in an escrow, trust or similar account, which means that funds from the sale of any Shares will be immediately available to the Company for use in its business plan. See "Use of Proceeds" and "Plan of Distribution." The Company anticipates receiving gross offering proceeds of up to $29,000,000 from the sale of the 14,500,000 Shares offered by it in this Offering. The Selling Stockholders may sell some or all of their Shares at a fixed price of $2.00 per share until our Common Stock is quoted on the OTC, for anticipated aggregate gross proceeds of approximately $1,051,316, and thereafter at prevailing market prices or privately negotiated prices at the discretion of the Selling Stockholders. We will not receive any proceeds from the sale of any Shares by the Selling Stockholders. We will bear all costs relating to the registration of these Shares. The Selling Stockholders may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended, in connection with these sales. Selling Party: Amount of Common Stock: Price to the Public: Underwriting Discount and Commissions: Proceeds to the Issuer: Company 14,500,000 $2.00 $0(1) $28,550,000 (2) Selling Stockholders 525,658 $2.00(3) $0 $0(4) TOTAL: 15,025,658 — — $28,550,000 (1) This is a self-written offering by the officers and directors of the Company on a "best efforts" basis. There is currently no underwriter for the Shares registered for sale by the Company; however, the Company reserves the right to retain the services of one or more FINRA registered broker-dealers to serve as the underwriter of the Shares offered by sale by the Company in consideration for customary fees and commissions not exceeding those imposed by FINRA. Engineering Division Through our Engineering division, we will continue to develop and deploy construction methods, materials, and equipment. Since our inception in April 2012, the majority of our operations have been on engineering and research and development activities. It took us approximately 24 months to conduct engineering and technology research to select the EVG-3D panel technology for an application in pilot projects. During that period, we screened hundreds of patents, building know-how and processes. In December 2012, we selected EVD-3D technology as our base for the development of our first line of products. The EVG-3D construction system was invented by EVG (Entwicklungs- und Verwertungs-Gesellschaft m.b.H) of Austria in the early 1980s and is becoming adapted in the global construction industry. The construction system offers a new building material using the high strength, load bearing modular panels that are used to construct the shell of a building or home. The EVG-3D panel consists of a three dimensional welded wire frame fitted with a rigid, high-density polystyrene core. These panels can be used in walls, flooring, and ceilings including roofing structure. The EVG-3D construction system is believed to be extremely versatile and to cater to creative architectural designs. Additionally, the structural integrity and energy savings of the EVG-3D construction system is expected to provide ongoing long term benefits for the owner. Various manufacturers of EVG-3D panels have reported that their internal testing indicates that the degree of heat insulation of the EVG-3D panel built walls significantly exceeds that of walls built with traditional systems such as wood frame construction. The panels keep heat exchange with the outside at a minimum and limit energy consumption due to the extremely low level of thermal conductivity of the EPS core. Manufacturers have reported, in both prototype testing and actual buildings that have been put into the consumer marketplace, energy savings of up to 50% when compared with traditional systems such as wood frame construction. We have internally conducted tests within our Company that seem to support these claims. However, until a continuous testing in actual homebuilding will pass building code compliance inspections, and until the process of applying the EVG-3D Panel technology is optimized through actual application on site, there can be no guarantee or assurance that EVG-3D Panel technology is tested successfully. Our vision with building (or "home") kits is to be able to offer various sets of EVG-3D panels that will be everything required to erect the shell (other than concrete) tailored to specific designs of single-family homes, condominium buildings, townhouse buildings, and commercial buildings. They will come as set of consolidated materials to be able to quickly and efficiently construct the shell of the respective building, yet still be able to build less expensively than average market cost. We intend to offer the kits that we design to both other developers and the general consumer. (2) After deducting estimated offering expenses of $450,000 for accounting, legal, filing, printing and other miscellaneous fees and expenses. (3) The Selling Stockholders may sell some or all of their Shares at a fixed price of $2.00 per share until our Common Stock is quoted on the OTC, and thereafter at prevailing market prices or privately negotiated prices at the discretion of the Selling Stockholders. (4) The Company will not receive any proceeds from the sale of the Shares sold by the Selling Stockholders. WE ARE AN "EMERGING GROWTH COMPANY" AS THAT TERM IS USED IN THE JUMPSTART OUR BUSINESS STARTUPS ACT OF 2012 AND WILL BE SUBJECT TO REDUCED PUBLIC COMPANY REPORTING REQUIREMENTS. We are an emerging growth company as defined in the JOBS Act. As an emerging growth company, we have elected, pursuant to Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards. We will therefore delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We may take advantage of this extended transition period provided in Securities Act Section 7(a)(2)(B) until the first to occur of the date we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Securities Act Section 7(a)(2)(B). As such, our financial statements may not be comparable to companies that comply with public company effective dates. THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED IN SECTION "RISK FACTORS" BEGINNING ON PAGE 9. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. REQUIRED LEGEND FOR FLORIDA RESIDENTS ONLY: THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND ARE OFFERED TO BONA FIDE RESIDENTS OF FLORIDA ONLY. THESE SECURITIES HAVE BEEN REGISTERED BY THE STATE OF FLORIDA, OFFICE OF FINANCIAL REGULATION, AS HAVING COMPLIED WITH CHAPTER 517, FLORIDA STATUTES. THE OFFICE OF FINANCIAL REGULATION HAS NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND SUCH REGISTRATION DOES NOT CONSTITUTE A RECOMMENDATION OF THE SECURITIES FOR INVESTMENT PURPOSES. This prospectus omits certain information concerning the Company and its securities, and does not contain all the information submitted to the Office of Financial Regulation by way of exhibits and schedules relating thereto, which the Company filed pursuant to Chapter 517, Florida Statutes, as amended, and to which reference is hereby made for further information. The Date of This Preliminary Prospectus is _____________, 2016. We are continuously monitoring the development progress of other technologies, including possible applications of construction robots and 3-D printers. We are also continually involved in the research and development of our own building block and interlocking construction method based on U.S. Patent Application 14/ 337,069, which we own and anticipate will give us strong competitive advantages for swift building of walls in earthquake and hurricane areas. Construction Division Through our Construction division, we intend to remodel and build properties and to test novel methods, materials, equipment, and related technologies on actual projects. We expect this to involve constructing the shell, managing subcontractors throughout the construction process, and marketing the properties that are built. We intend to either engage subcontractors or partner with localized developers who would engage subcontractors. In September 2014, we engaged in our first pilot project, called " 3089 Parkside," which was a remodeling of a single family house in the Chicago, IL metro area. All works under this project were completed, and sale of the property was consummated in the third fiscal quarter of 2015. We were not allowed to use EVG-3D panels for this project due to the absence of product acceptance by the local municipality. From March to May 2015, we participated in three other construction projects in the Chicago, IL area. However, because we were unable to raise sufficient capital to commence construction activities after obtaining rezoning grants for these three projects, we withdrew from one of these projects ("Racine") on July 15, 2015 and two of these projects ("Ashland" and "Madison") on September 1, 2015. In September 2015, our deposits for these three projects (totaling $750,000) were returned to us and used such funds to settle a $1,000,000 6% promissory note terminated by the lender. We intend to target niche residential markets primarily in metropolitan areas having similar economic characteristics, geography and product type. We are currently considering project origination in the Chicago, IL, Richmond, VA, and Fort Lauderdale, FL metropolitan areas, although we are not restricted from operating in any specific geographic region or jurisdiction. We intend to structure our involvement in these projects through multi-member limited liability companies ("LLCs") specifically formed for each project and intend to be involved in all phases of planning and building, including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of the properties we build. Financial Assistance Division Since our inception in 2012, we have operated our Financial Assistance division which has issued loans for real estate properties and are used as collateral. We entered into these financial assistance activities in order to generate and collect interest to fund our working capital requirements during the early stages of our business development and to conduct research and development activities. Starting September 2014, we have been withdrawing from financial assistance activities and, instead, using the capital to fund our product engineering and construction activities. We anticipate ceasing our financial assistance activities division in 2016. Business Plan The statements contained in this prospectus that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading "Risk Factors" in this prospectus. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. You should not place undue reliance on any forward-looking statement. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. There is no assurance that the milestones, business plans, or contemplated future events we identify in this prospectus will be achieved, or/and that we will actually be able to raise the investment proceeds as currently planned and described in this prospectus, or that if we obtain such investments, we will be actually able to complete the milestones of our business plan, according to the anticipated timeframe, if at all. Investors should give due and careful consideration to such an uncertainty in light of the Risk Factors described on page 11 of this prospectus. We believe that our business opportunity derives from the lack of statistically-proven construction processes for practical application of novel building materials and methods, and the increasing consumer demand for eco-friendly, energy-efficient, health-conscious properties. We believe that this opportunity is catalyzed by a unique combination of our management s specialized knowledge and core competencies. Our Chief Executive Officer and a founder of the Company, Dr. Maxim Temnikov, has over ten years of specialized experience in operating and growing The Mirax Group, a real-estate development company in Russia with an extensive infrastructure of general and specialty contractors and subcontractors involved into high- and low-rise construction, into a multi-billion dollar company with numerous notable real-estate developments. Considering that, we believe our Company is well positioned for growth based on Dr. Temnikov s expertise. TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001566265_axiom-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001566265_axiom-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4f29e059af4ac15f79c48ef191c0fc643306cbf3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001566265_axiom-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock. You should carefully read the entire prospectus, including "Risk Factors," "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements, before making an investment decision. In this prospectus, the terms "Axiom," "Company," "we," "us" and "our" refer to Axiom Corp., a Colorado corporation. and its subsidiary, Papernuts Corporation. Overview We, through our subsidiary PaperNuts Corporation, provide an alternative packaging solution to plastic and corn based loose fill material. We are taking a new approach to the loose-fill packaging industry currently dominated by the polystyrene plastic "peanut" styrofoam fillers, bubble wrap, air pillows, crumpled paper, foam-in-place and corn starch peanut products. The waste and inconvenience of dealing with plastic material is a problem for many end users. It commonly needs to be separated from organic or recyclable waste for proper disposal and lasts for thousands of years in landfills. Plastic and corn-based fillers do a poor job of protecting items as they are smooth and can be easily compressed allowing items to migrate and damage to occur. Our product "PaperNuts" is re-usable whereas many plastic products are not. Where You Can Find Us Our principal executive office is located at 380 Vansickle Rd. Unit 600, St. Catharines, ON Canada L2S 0B5. Our telephone number is 905-646-8781. Our website is: http://www.axiompaper.com. Calculation of Registration Fee Title of Each Class Of Securities to be Registered Amount to be Registered (1) Proposed Maximum Offering Price Per Share (2) Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common stock, par value $0.00001 per share, issuable pursuant to the conversion of the 10% senior convertible notes 18,333,333 $0.012 $220,000 $22.16 Common stock, par value $0.00001 per share, issuable to Carter, Terry & Company under a Financial Advisor Agreement 100,000 $0.02 2,000 0.20 Total 18,433,333 $222,000 $22.36 (1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, (the "Securities Act") this registration statement shall be deemed to cover the additional securities to be offered or issued in connection with any provision of any securities purported to be registered hereby to be offered pursuant to terms which provide for a change in the amount of securities being offered or issued to prevent dilution resulting from stock splits, stock dividends or similar transactions. (2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. Table of Contents THE OFFERING Securities offered 18,433,333 shares of the Company's Common Stock, par value $0.00001, per share (the "Common Stock") consisting of: (i) 18,333,333 shares underlying the Convertible Notes and and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter Terry Common stock outstanding before the offering: 67,397,975 Common stock outstanding after the offering: 67,397,975 Termination of the offering: The offering will conclude upon such time as all of the Common Stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect. OTCBB trading symbol: AXMM Use of proceeds: We are not selling any shares of the Common Stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of Common Stock covered by this prospectus. Risk factors: The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors" beginning on page 3. *does not include Common Stock underlying any convertible notes, warrant or option, including ones offered in this registration statement. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The information contained in this prospectus, including in the documents incorporated by reference into this prospectus, includes some statements that are not purely historical and that are "forward-looking statements." Such forward-looking statements include, but are not limited to, statements regarding our Company and management s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the Company s individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipates," "believes," "continue," "could," "estimates," "expects," "intends," "may," "might," "plans," "possible," "potential," "predicts," "projects," "seeks," "should," "will," "would" and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and the potential effects on the Company and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. EXPLANATORY NOTE This registration statement contains one prospectus as set forth below: Resale Prospectus. This prospectus is to be used by the selling security holders in connection with a potential resale by certain seller security holders of up to an aggregate of 18,433,333 shares of the registrant s Common Stock (as defined below), par value $0.00001, per share consisting of: (i) 18,333,333 shares of Common Stock underlying shares of the registrant s 10% senior convertible notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter, Terry & Company ("Carter Terry"). Table of Contents RISK FACTORS You should carefully consider each of the risks and uncertainties described below and elsewhere in this Registration Statement on Form S-1, as well as any amendments or updates reflected in subsequent filings with the SEC. We believe these risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity. Further, additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our results and business operations. Risks Associated with Our Business Our independent registered public accounting firm has substantial doubt as to our ability to continue as a going concern. The audited financial statements included in the registration statement have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of securities. Based on our financial history since inception, in their report on the financial statements for the years ended December 31, 2014 and 2013, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. The Company s ability to continue as a going concern is dependent upon its ability to raise additional funding to further develop operations and a sales and marketing program so as to grow revenue and attain profitability. There can be no assurance that we will have adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern. Our business is subject to risks associated with manufacturing processes. We internally manufacture our own products at our production facilities. While we maintain insurance covering our manufacturing and production facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of our facilities due to accident, fire, explosion, labor issues, weather conditions, other natural disaster or otherwise, whether short or long-term, could have a material adverse effect on us. Unexpected failures of our equipment and machinery may result in production delays, revenue loss and significant repair costs, injuries to our employees, and customer claims. Any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative impact on our profitability and cash flows. Our business interruption insurance may not be sufficient to offset the lost revenues or increased costs that we may experience during a disruption of our operations. Raw material cost increases or shortages could adversely affect our results of operations. We are a manufacturer and our sales and profitability are dependent on the availability and cost of raw materials, which are subject to price fluctuations. Inflationary and other increases in the costs of raw materials have occurred in the past and are expected to recur, and our performance depends in part on our ability to reflect changes in costs in selling prices for our products. Natural disasters and government regulation of environmental emissions, may negatively impact the production or delivery capacity of our raw material suppliers in the chemical and paper industries. This could result in increased raw material costs or supply shortages, which may have a negative impact on our profitability if we are unable to pass along the increased costs in our selling prices or, in the case of a shortage, secure raw materials from alternative sources. We have limited contractual relationships with our customers and, as a result, our customers may unilaterally reduce the purchase of our products. Our customers may unilaterally reduce the purchase of our products or, in certain cases, terminate existing orders for which we may have incurred significant production costs. If key customers experience financial pressure, they could attempt to demand more favorable contractual terms, which would place additional pressure on our margins and cash flows. In addition, our success depends on our ability to respond timely to changes in customer product needs and market acceptance of our products. We must produce products that meet the quality, performance, and price expectations of our customers. Changes in customers preferences for our products can also affect the demand for our products. Lower demand for our products could adversely impact our business, financial condition and results of operations. The loss of several customers could, in the aggregate, materially adversely affect our operations and financial condition. In the event we lose any of our larger customers, we may not be able to quickly replace that revenue source, which could harm our financial results. The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission ("SEC") is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to completion, dated January 25, 2016 AXIOM CORP. 18,433,333 SHARES OF COMMON STOCK Axiom Corp. (the "Company") closed a financing transaction by entering into a Securities Purchase Agreement dated October 5, 2015 (the "Securities Purchase Agreement") with certain funds and investors signatory to such Securities Purchase Agreement (the "Purchasers") for an aggregate subscription amount of $575,000 (the "Purchase Price"). Pursuant to the Securities Purchase Agreement, the Company issued the 10% Convertible Promissory Notes with an aggregate principal amount of $612,250 (the "Convertible Notes"). This prospectus is to be used by certain funds and accounts (the "Selling Security Holders") in connection with a potential resale by certain Seller Security Holders of up to an aggregate of 18,433,333 shares of the Company's Common Stock, par value $0.00001, per share (the "Common Stock") consisting of: (i) 18,333,333 shares underlying the Convertible Notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter Terry. Our Common Stock is quoted on the Over-The-Counter ("OTC") Pink Marketplace under the ticker symbol "AXMM." The Selling Security Holders have not engaged any underwriter in connection with the sale of their shares of Common Stock. Common Stock being registered in this registration statement may be sold by Selling Security Holders at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. On December 1, 2015, the closing price of our Common Stock was $0.02 per share. Investing in our Common Stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of the material risks of investing in our Common Stock in "Risk Factors" beginning on page 3 of this prospectus. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the SEC is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. AXIOM CORP. The date of this prospectus is _________, 2015 Table of Contents Loss of third-party transportation providers upon whom we depend or increases in fuel prices could increase our costs or cause a disruption in our operations. We depend upon third-party transportation providers for delivery of our products to our customers. Strikes, slowdowns, transportation disruptions or other conditions in the transportation industry, including, but not limited to, shortages of truck drivers, disruptions in rail service, decreases in ship building or increases in fuel prices, could increase our costs and disrupt our operations and our ability to service our customers on a timely basis. We Face Intense Competition Our industry is highly competitive, and no single company dominates an industry. Our competitors include large and small, vertically integrated packaging products companies and numerous non-integrated smaller companies. We generally compete with companies operating in North America. Competition from domestic or foreign lower cost manufacturers in the future could negatively impact our sales volumes and pricing. Litigation or regulatory developments could adversely affect our business operations and financial performance. We may, in the future become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. As we hope to expand our global footprint, we become exposed to more uncertainty regarding the regulatory environment. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments or settlements, either of which could require substantial payments. Our success is dependent on our ability to develop and successfully introduce new products and to acquire and retain intellectual property rights. Our ability to develop and successfully market new products and to develop, acquire, and retain necessary intellectual property rights is essential to our continued success, but cannot reasonably be assured. The Company has a limited operating history and limited revenues from operations. The Company is subject to many risks common to enterprises with limited operating history, including potential under-capitalization, limitations with respect to personnel, financial and other resources, and limited customers and revenue sources. The Company s ability to successfully generate sufficient revenues from operations is dependent on a number of factors, including availability of funds to fund its current and anticipated operations, and to commercialize its business concept. There can be no assurance that the Company will not encounter setbacks with the on-going development and implementation of its business plan, or that funding will be sufficient to allow it to fully implement its business plan. In addition, the Company s assumptions and projections may not prove to be accurate, and unexpected capital needs may arise. If such needs arise, the Company s inability to raise additional funds, either through equity or debt financing, will materially impair its ability to implement its business plan and generate revenues. Further, as a result of the recent volatility of the global markets, a general tightening of lending standards, and a general decrease in equity financing and similar type transactions, it could be difficult for the Company to obtain funding to allow it to continue developing its business operations. As a new business enterprise, the Company likely will experience fluctuations in its operating results. The Company's operating results may fluctuate significantly as a result of a variety of factors, many of which are outside its control. As a result of the Company's lack of operating history it is difficult for the Company to forecast its revenues or earnings accurately. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to the Company s planned expenditures would have an immediate, adverse effect on its business, results of operations and financial condition. If the Company fails to manage its growth effectively, its business could be harmed. To manage its growth effectively, the Company will have to develop and enhance its systems, procedures and controls and locate, hire, train and retain management and operating personnel. The Company cannot offer any assurance that it will be able to respond on a timely basis to all of the changing demands that its planned expansion will impose on its management and infrastructure. If the Company is unable to manage its growth effectively, its business and operating results could be materially adversely impacted. The Company is dependent on its key personnel, and the loss of any could adversely affect its business. The Company depends on the continued performance of its officers and directors. If the Company loses the services of any key individuals and is unable to locate suitable replacements for such persons in a timely manner, its business could be materially adversely affected. The Company does not expect to obtain key man life insurance for any members of management in the foreseeable future. We may not be able to retain our executive officers and key personnel or attract additional qualified key employees in the future. Competition for qualified employees is intense, and the loss of such persons, or an inability to attract, retain and motivate additional highly skilled employees, could have a material adverse effect on our results of operations and financial condition and prospects. There can be no assurance that we will be able to retain our existing personnel or attract and retain additional qualified employees. Table of Contents Risks Associated with Our Common Stock The Company s stock price may be volatile. The market price of the Company s common stock is likely to be highly volatile and could fluctuate widely in price in response to various potential factors, many of which will be beyond the Company s control, including: competition; additions or departures of key personnel; the Company s ability to execute its business plan; operating results that fall below expectations; loss of any strategic relationship; industry developments; economic and other external factors; and period-to-period fluctuations in the Company s financial results. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Company s common stock. Dividends Payment of dividends on the Common Stock is within the discretion of the Board of Directors, is subject to state law, and will depend upon the Company's earnings, if any, its capital requirements, financial condition and other relevant factors. Penny Stock Regulations If a market develops and the price of the Company's stock is below $5.00 per share, or the Company does not have $2,000,000 in net tangible assets, or is not listed on an exchange or on the NASDAQ National Market System, among other conditions, the Company's shares may be subject to a rule promulgated by the Securities and Exchange Commission (the "SEC") that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and institutional accredited investors. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written consent to the transaction prior to the sale. Furthermore, if the price of the Company's stock is below $5.00, and does not meet the conditions set forth above, sales of the Company's stock in the secondary market will be subject to certain additional new rules promulgated by the SEC. These rules generally require, among other things, that brokers engaged in secondary trading of stock provide customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and asked prices, and disclosure of the compensation to the broker-dealer and disclosure of the sales person working for the broker-dealer. These rules and regulations may affect the ability of broker-dealers to sell the Company's securities, thereby limiting the liquidity of the Company's securities. They may also affect the ability of the Company s shareholders to resell their securities in the secondary market. FINRA sales practice requirements may limit a stockholder s ability to buy and sell our stock. The Financial Industry Regulatory Authority ("FINRA") has adopted rules that relate to the application of the SEC s penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. FINRA s requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a shareholder s ability to resell shares of our common stock. Table of Contents USE OF PROCEEDS We will not receive any proceeds from the sale of shares by the Selling Security Holders. However, we will receive an aggregate of $612,250 from the sale of the Convertible Notes to the Purchasers, pursuant to the Securities Purchase Agreement. The funding calls for $250,000 at the time of closing of the Securities Purchase Agreements and Notes, $75,000 upon the filing of a registration statement with the SEC, $50,000 upon receipt of the first round of comments from the SEC regarding the registrations statement, $100,000 upon the effectiveness of the registration statement, and at the Company s option, $100,000 thirty (30) days after the registration statement becomes effective. We will receive net proceeds of $575,000 after commissions, professional fees and payoff of OID (original issue discount) promissory notes. We intend to use the net proceeds for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors (the "Board"), in its good faith deem to be in the best interest of the Company. The Company has agreed to bear the expenses relating to the registration statement for the shares underlying the Convertible Notes issued to the Selling Security Holders. DETERMINATION OF OFFERING PRICE The prices at which the shares of Common Stock underlying the Convertible Notes can be converted or exercised are determined based on such price or formula in the Securities Purchase Agreement thereof between the Company and the Selling Security Holders. The prices at which the shares or Common Stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of Common Stock, by negotiations between the Selling Security Holders and buyers of our Common Stock in private transactions or as otherwise described in "Plan of Distribution" on page 8. DILUTION There is not substantial disparity between the public offering price and the effective cash cost to officers, directors, promoters and affiliated persons of common equity acquired by them in transactions during the past five years and we were subject to the reporting requirements of section 13(a) and 15(d) of the Exchange Act immediately prior to filing the registration statement. In the event that the 18,433,333 shares of Common Stock and the shares underlying the Convertible Notes being offered in this prospectus are converted into Common Stock, as the case may be, the current common shares outstanding will be diluted by approximately 27.4%. SELLING SECURITY HOLDERS The 18,433,333 shares of Common Stock being offered for resale by the three (3) Selling Security Holders consist of: (i) 18,333,333 shares of Common Stock underlying shares of the registrant s 10% senior convertible notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter, Terry & Company ("Carter Terry"). On October 16, 2015, the Company closed a financing transaction pursuant to Securities Purchase Agreements, dated October 5, 2015 (the "Securities Purchase Agreements") and Convertible Promissory Notes, dated October 5, 2015 (the "Notes"), each entered into by the Company and two investors, Bluestem Advisors, LLC and Old Main Capital, LLC (together, the "Purchasers"). Pursuant to the Securities Purchase Agreements, as described below, the principal amount of the Notes is $612,250, and the purchase price of the Notes is $575,000. The terms of the Notes are as follows: The Notes, dated October 5, 2015, (the "Issue Date"), earns interest at an annual rate equal to 10% and provides for a maturity date of October 5, 2016. The funding calls for $250,000 at the time of closing of the Securities Purchase Agreements and Notes, $75,000 upon the filing of a registration statement with the Securities and Exchange Commission, $50,000 upon receipt of the first round of comments from the SEC regarding the registrations statement, $100,000 upon the effectiveness of the registration statement, and at the Company s option, $100,000 thirty (30) days after the registration statement becomes effective. As part of the Securities Purchase Agreements, the Company entered into a Registration Rights Agreement (, ' ': RRA") with the Purchasers (Exhibit B of the Securities Purchase Agreements). Pursuant to the RRA, the Company shall use its best efforts to file a registration statement on Form S-1 (the "Registration Statement") with the Securities and Exchange Commission (the "SEC"), registering the shares of common stock which may be issued to the Purchasers pursuant to the Securities Purchase Agreements. The Company must use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC. Any amount of principal or interest not paid when due on the Notes will bear interest at an annual rate of 24% applied from the due date until the date of payment. The Notes carry an original issue discount of $28,750. The Company agrees to pay the Purchasers 8,500 to cover certain fees incurred in connection with the Securities Purchase Agreements and Notes. The original issue discount and the amount for fees are included in the initial principal amount of the Notes. The conversion price is equal to 60% multiplied by the lowest average trading price for the Company s common stock during the twenty (20) day trading period ending on the latest complete trading day prior to the date of conversion. While the Purchasers conversion rights exist, the Company will reserve a sufficient number of shares from its authorized and unissued shares of common stock to provide for the issuance of common stock upon the full conversion of the Notes. Table of Contents In the event the Company redeems the Notes in full, the Company is required to pay off all principal balance, interest and any other amounts owing multiplied by 125%. In the event of default, the amount of principal and accrued interest will be due immediately, multiplied by 130%. The Securities Purchase Agreements restricts the ability of the Purchasers to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Purchasers represent that they are an "accredited investor" as that term is defined in Rule 501 of Regulation D. In addition, on May 26, 2015, the Company entered into a financial advisor agreement with Carter Terry. Under the terms of the agreement, Carter Terry agreed to serve as the Company s exclusive Financial Advisor Investment Bank and Placement Agent in exchange for the delivery of 100,000 restricted shares of the Company s common stock, such shares maintaining piggy-back registration rights. The following table sets forth the names of the Selling Security Holders, the number of shares of Common Stock beneficially owned by each of the Selling Security Holders as of December 4, 2015 and the number of shares of Common Stock being offered by the Selling Security Holders. The shares being offered hereby are being registered to permit public secondary trading, and the Selling Security Holders may offer all or part of the shares for resale from time to time. However, the Selling Security Holders are under no obligation to sell all or any portion of such shares nor are the Selling Security Holders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the Selling Security Holders. Axiom Corp. Registration of Common Shares for Underlying the 10% Senior Convertible Notes Common Stock Prior to the offering After the offering Selling Security Holder (1) Number of Shares of Common Stock Beneficially Owned Percentage of Common Stock (3) Shares Being Offered (2) Number of Shares of Common Stock Beneficially Owned Percentage of Common Stock Old Main Capital, LLC (4) 16,656,458 24.71 % 16,656,458 0 0.00 % Bluestem Advisors, LLC (5) 1,676,875 2.5 % 1,676,875 0 0.00 % Carter, Terry & Company(6) 100,000 * 100,000 0 0.00 % Total 18,433,333 18,433,333 0 (1) Certain funds, accounts and individuals (listed above) are offering for resale of an aggregate of (i) 18,333,333 shares of Common Stock underlying shares of the registrant s 10% senior convertible notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter, Terry & Company ("Carter Terry"). (2) The 18,433,333 shares of Common Stock being offered for resale in this registration statement consist of: (i) 18,333,333 shares of Common Stock underlying shares of the registrant s 10% senior convertible notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter, Terry & Company ("Carter Terry"). (3) Based on 67,397,975 shares of Common Stock issued and outstanding as of January 15, 2016. Beneficial ownership percentage is determined under the rules of the SEC and includes investment power with respect to Common Stock. The number of shares beneficially owned by a person includes shares of Common Stock underlying warrants, stock options and other derivative securities to acquire our Common Stock held by that person that are currently exercisable or convertible within 60 days after January 15, 2016. The shares issuable under these securities are treated as outstanding for computing the percentage ownership of the person holding these securities, but are not treated as outstanding for the purposes of computing the percentage ownership of any other person. (4) Mark Rozeboom and Eric Rogers have voting and investment control over the securities held by Old Main Capital, LLC. (5) Jaime Long has voting and investment control over the securities held by Bluestem Advisors, LLC. (6) Timothy Terry has voting and investment control over the shares held by Carter, Terry & Company. * Individuals holding less than 0.1% of the Common Stock. Table of Contents To our knowledge, none of the Selling Security Holders or their beneficial owners: has had a material relationship with us other than as a shareholder at any time within the past three years; or has ever been one of our officers or directors or an officer or director of our predecessors or affiliates; or are broker-dealers or affiliated with broker-dealers. PLAN OF DISTRIBUTION This prospectus is to be used by the Selling Security Holders in connection with a potential resale by certain Seller Security Holders of up to an aggregate of 18,433,333 shares of the registrant s Common Stock consisting of: (1) 18,333,333 shares of Common Stock underlying shares of the registrant s 10% senior convertible notes; and (ii) 100,000 shares of Common Stock issuable pursuant a certain financial advisor agreement with Carter, Terry & Company ("Carter Terry"). Each Selling Security Holder of our Common Stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Security Holder may use any one or more of the following methods when selling shares: ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; purchases by a broker-dealer as principal and resale by the broker-dealer for its account; an exchange distribution in accordance with the rules of the applicable exchange; privately negotiated transactions; settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; in transactions through broker-dealers that agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share; through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; a combination of any such methods of sale; or any other method permitted pursuant to applicable law. The Selling Security Holders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. Table of Contents Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with Financial Industry Regulatory Authority ("FINRA") Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440. In connection with the sale of the Common Stock or interests therein, the Selling Security Holders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Security Holders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may sell these securities. The Selling Security Holders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Security Holders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each of the Selling Security Holders has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%). Because Selling Security Holders may be deemed to be "underwriters" within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. The Selling Security Holders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Security Holders. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, Selling Security Holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the Selling Security Holders or any other person. We will make copies of this prospectus available to the Selling Security Holders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act). DESCRIPTION OF SECURITIES Authorized Capital and Common Stock Our authorized capital stock consists of (1) 200,000,000 shares of Common Stock, par value $0.00001 per share, (2) 5,000,000 shares of Series A Preferred Stock, par value $0.00001, and (3) 5,000,000 shares of Series B Preferred Stock, par value $0.00001. As of November 6, 2015, there were 67,397,975 shares of Common Stock outstanding, 2,666,668 shares of Series A Preferred Stock outstanding, and 1,000,002 shares of Series B Preferred Stock outstanding. Common Stock The following is a summary of the material rights and restrictions associated with our Common Stock. The holders of our Common Stock currently have: (i) equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of the affairs of the Company; (iii) do not have pre-emptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. Please refer to the Company s Articles of Incorporation, by-laws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company s securities. Table of Contents Preferred Stock Series A Preferred Stock Series A Preferred Shares are convertible into Common Shares at the option of the holder at a ratio of 1:10, meaning each Preferred A Share can convert into ten (10) Common Shares of the Company. In addition, holders of each Series A Preferred Share shall have the right to one (1) vote for each Common Share into which such Series A Preferred Share could be converted. Assuming the exercise of all convertible securities including warrants, the Series A Preferred Shares represent 7.7% of the total voting power of the Company s shareholders. Series B Preferred Stock Series B Preferred Shares are convertible into Common Shares at the option of the holder at a ratio of 1:10, meaning each Preferred B Share can convert into ten (10) Common Shares of the Company. In addition, holders of each Series B Preferred Share shall have the right to twenty-five (25) votes for each Common Share into which such Series B Preferred Share could be converted. Assuming the exercise of all convertible securities including warrants, the Series B Preferred Shares represent 71.7% of the total voting power of the Company s shareholders. Warrants The Company had 5,650,000 Warrants issued and outstanding. Pursuant to the Share Exchange Agreement, the Company also issued warrants to purchase an aggregate of 5,650,000 shares of the Company s common stock at exercise prices ranging from $0.056 to $0.075 per share to replace warrants previously held by Papernuts warrant holders (the "Share Exchange Warrants"). The Share Exchange Warrants are currently exercisable and may be exercised for a period of 24 months from the date of issuance, February 26, 2015. INTERESTS OF NAMED EXPERTS AND COUNSEL No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Common Stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee. The financial statements as of December 31, 2014 and December 31, 2013 included in this prospectus and the registration statement have been audited by Sadler, Gibb and Associates LLC to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting. As disclosed under "Changes in and Disagreements with Accountants and Accounting and Financial Disclosure," on April 27, 2015, the Company dismissed Sadler, Gibb & Associates, LLP and appointed MNP, LLP as its new registered independent public accountant. Therefore, the financial statements subsequent to December 31, 2014 have not been reviewed by Sadler, Gibb & Associates, LLC. The validity of the issuance of the Common Stock hereby will be passed upon for us by Szaferman Lakind Blumstein & Blader, P.C., Lawrenceville, New Jersey. Table of Contents DESCRIPTION OF BUSINESS Business Overview PaperNuts Corporation, is a corporation established under the laws of the Province of Ontario, Canada, We were incorporated on April 8, 2010 as "2239794 Ontario, Inc." On January 19, 2015, we filed articles of amendment with the Ministry of Government Services in the Province of Ontario to change our name to "Papernuts Corporation". The Company provides an alternative packaging solution to plastic and corn based loose fill material. We are taking a new approach to the loose-fill packaging industry currently dominated by the polystyrene plastic "peanut" styrofoam fillers, bubble wrap, air pillows, crumpled paper, foam-in-place and corn starch peanut products. The waste and inconvenience of dealing with plastic material is a problem for many end users. It commonly needs to be separated from organic or recyclable waste for proper disposal and lasts for thousands of years in landfills. Plastic and corn-based fillers do a poor job of protecting items as they are smooth and can be easily compressed allowing items to migrate and damage to occur. Our product "PaperNuts" is re-usable whereas many plastic products are not. Using 100% recycled paper and our PaperNuts machine, PaperNuts interlocks with each other forming a protective matrix around packaged items. The trend towards environmentally friendly packaging solutions is gaining momentum with companies such as Wal-Mart and other industry leaders, adopting new standards for responsible packaging by way of the "Sustainable Packaging Scorecard." (http://news.walmart.com/news-archive/2006/11/01/wal-mart-unveils-packaging-scorecard-to-suppliers) The main objection to polystyrene "foam peanuts" and corn fillers, besides their typical higher cost and larger carbon footprint, is that they are not made on site but manufactured in a centrally located manufacturing facility forcing the finished product to be transported with a substantial shipping cost to the purchaser. PaperNuts is now purchased as a finished product but for high volume users we are also planning to have the ability to supply compact PaperNuts "Factories" or machines that require only 10 square feet or less of floor space. Thus, providing the ability to manufacture Papernuts on demand on site, which greatly reduces the shipping and overall storage costs associated with competitive products. We currently have a supplier agreement with SP Fiber Technologies, which has the capacity to supply our current raw material needs, as well as our expected future needs. There are other suppliers in the marketplace that we could purchase from, but we do not anticipate a need for any additional suppliers for the foreseeable future. It was announced on August 11, 2015 that Norcross, GA based WestRock Company (NYSE: WRK) had entered into a definitive agreement to acquire SP Fiber Holdings Inc., the parent company of SP Fiber Technologies. It is our intention to continue our relationship with the Dublin, GA mill s new ownership and expect to continue business as usual. We are currently selling the finished PaperNuts product to customers and are actively pursuing the needs of high volume end-users. Additionally, we are in negotiations with several large providers of recycled paper to ensure long-term availability. During the year ended 2014, approximately 66% of revenues were derived from one customer. For the year ended 2013, approximately 73% of revenues were derived from this same customer. Located in a St. Catharines , Ontario industrial complex, our location serves as corporate office, production facility and storage. The staff is made up of a team of experienced individuals including, management, sales and marketing personnel. Company Background and Opportunity Summary On March 1, 2013, we entered into an agreement with Devipack Oy, Finland to purchase its technology and intellectual property. PaperNuts competes favorably on both price and performance with polystyrene plastic peanuts and corn-based products. Supplied as a finished product or manufactured on site, PaperNuts is a new approach to sustainable packaging that provides increased protection and cushioning when shipping items throughout the supply chain. PaperNuts are made from 100% recycled paper that was destined for landfill and are both biodegradable and fully recyclable after use. PaperNuts are clean and easy to handle, non-polluting and low in particulates. Accordingly, PaperNuts is a cost effective "green alternative" to competitive fillers and is a sustainable product. PaperNuts eliminates the contamination of its customers receiving areas and the problem of collecting, segregating and disposing of plastic waste. Many consumers are demanding a "green" alternative that is in keeping with the movement to cleaner and more environmentally responsible packaging solutions. Using PaperNuts shows that a company cares about the environment and offers many superior performance benefits as the material expands rather than settles during shipment eliminating product migration and damage as the formation causes interlocking of individual PaperNuts. Available in various grades of paper and lengths depending on the application, we believe that PaperNuts will quickly become the new industry standard. PaperNuts can be shipped as a finished product ready for use or can be manufactured on site. Table of Contents The Market Opportunity The North American loose fill market is highly fragmented with many different providers and products servicing this packaging function. Loose fill, biopolymer beads, foam and plastic padding are all competing to be the packaging material of choice. The vast majority of these products are more expensive, environmentally hazardous and offer inferior protection as compared to PaperNuts. Over 1,000 companies produce, distribute, or manufacture loose fill products. We believe that our strategy to partner with large recyclable paper producers will ensure it is the lowest cost producer of superior loose-fill products. In North America and around the world, there is a push for increased regulations governing the use of loose-fill packaging material. In California, there has been a movement towards the banning of certain polystyrene products and this represents a large business opportunity for PaperNuts as more and more states adopt "green" guidelines. Environmental concerns have led to governments throughout Western Europe taking steps to deal with the issue of packaging waste and recycling. Recent packaging directives from the European Commission have led to the imposition of challenging targets for recycling. Many governments are examining new ways to discourage packaging waste with landfill becoming a major political issue. With governments implementing landfill taxes all companies will be seeking alternatives that are cost effective and environmentally friendly. While North America represents a significant market opportunity, so do markets where products are being sent to North America. Consumers are now demanding more environmentally sound solutions to packaging issues. Several multi-national companies, including Wal-Mart, now use an industry standard "Sustainable Packaging Scorecard" when selecting many of their supply partners. Our strategy centers on providing high volume users the ability to produce Papernuts on site, on demand via Papernut machines thus reducing the customer s carbon footprint and reducing their cost per package. Products and Services We launched our newest industrial machine model during the second quarter of 2015. This unit has an improved gearing system and cut off process and is significantly faster and more reliable than prior versions. We have filed provisional patent applications over the use of several design, manufacturing, and process improvements made by the company to the PaperNuts original intellectual property. The immediate "Patent Pending" status over these innovations will help safeguard the Company's exclusive rights to the latest PaperNuts technology and create a foundation for additional patents and claims as the Company continues to make additional advancements. The planned provisional and subsequent non-provisional application would protect the latest PaperNuts technology with patent exclusivity to 2035 or beyond, if granted and extended. We are also in the process of applying for patent protection on the latest PaperNuts machine (the "Omni-channel machine") that will have a much smaller footprint and will primarily be focused on supporting the Omni-channel market for large retailers. Finally, a number of modifications on the type of paper nut have been developed including variable length, weight, single and double cut products. We have partnered with Spark Innovations, a leading Canadian industrial design company, for the completion of design and prototype development. The Omni-channel machine will be smaller, quieter, and lighter than current industrial scale machines and will enable select retail channel partners to manufacturer PaperNuts on-site on-demand at the retail store level. This will allow consumers direct access to PaperNuts products at their favorite local shipping and supply stores while freeing valuable shelf space at retailers that can be reallocated to selling other products. We intend to customize our products such that each addresses individual industry requirements. In most cases we will supply the machine at no cost to qualified customers conditional upon a minimum paper usage. Our plan of operations assumes a customer purchases a minimum of 2500 lbs of paper per month. Given that the capacity of a machine is at least 30,000 lbs of product per month we believe this is a reasonable expectation on minimum usage. A single machine can produce 1500 lbs of PaperNuts/day in an 8 hour shift. For low volume end users we will provide a finished product. We see this as less than 10% of the overall business. However, we do feel there is a significant opportunity to provide a number of large national retailers with retail ready packages as many of them are currently selling polystyrene foam peanuts. Additionally, we will be working towards establishing strategic alliances with large end users where we will provide them with our PaperNut machines at little to no cost on a contractual basis that they procure a minimum amount of paper sales through us on a monthly basis. The Competition The main competition to PaperNuts is: polystyrene plastic "peanuts" or corn fillers, bubble wrap; foam and air pillows. These products were the solution of choice for most business operators but as industry is moving away from oil-based products and more towards "eco" friendly solutions a new market has developed for eco-friendly biodegradable solutions such as PaperNuts. In addition to their negative environmental impact many of these oil-based products need to be shipped at a significant cost to the customer, which ultimately increases the customer s carbon footprint and negatively effects bottom line performance. Table of Contents PaperNuts produces a "green" product that addresses all the shortcomings of polystyrene solutions. The packaging industry as a general rule will look for change only if the change results in a direct cost savings to operations. The environmentally friendly product, or "green" product, would only be selected by a majority of customers who can identify a lower cost and take the added benefit of being eco-friendly. In other words, if the competition to an oil-based product does not come at a lower overall cost then there is a strong possibility it will not be considered as a viable replacement; even if it is "green". Providing an eco-friendly "green" product that is cost competitive is our goal. We believe most businesses that can identify an immediate savings in their packaging costs will chose to switch products. Anticipated Timelines and Costs We had previously expected to have additional industrial machine units and Omni-channel machines available for sale during the third and fourth quarter of 2015 respectively. Due to financing delays we were unable to meet these targets. We now expect these items to be available beginning in the first quarter of 2015. We anticipate research and development expenditures of $175,000 over the next twelve months. We estimate an additional $350,000 in fixed asset purchases over the same time frame. Both machine models are expected to be produced at a cost of $5,000 per unit. PaperNuts will have all CSA & ESA certifications for both its industrial and Omni-channel machines.. We have chosen Canadian Eco Systems of Concord, Ontario to assist us with the approval process to ensure we can achieve the respective certifications within a timely manner. "CSA" refers to the "Canadian Standards Association" who provide product certification to manufacturers, retailers, code authorities and consumers around the world. In order to sell our products to the North American market, they must be tested by an accredited third party testing agency, such as CSA, to applicable industry standards. The certification process involves sending product samples to CSA laboratories for inspection and testing. Once all the requirements outlined in the standards are met, CSA will issue a certification report and certificate of compliance. "ESA" refers to the Electrical Safety Authority which is the regulatory body governing electrical product safety in the process of Ontario. The objectives of ESA are to ensure that electrical products do not present a serious product hazard; to ensure that electrical products are approved; and to ensure accountability for the safety of electrical products offered for sale. ESA approvals are obtained by obtaining a certification mark or field evaluation label from a recognized testing agency. Machine Fabrication PaperNuts has selected Girotti Machine as its North American Manufacturer of the PaperNuts Paper Converter, which is the machine that turns ordinary 100% recycled kraft paper into our finished product – PaperNuts. Girotti Machine, located in St. Catharines Ontario, is strategically positioned close to company headquarters. Having served the manufacturing industry in the Niagara area for more than half a century, Girotti Machine developed the expertise to serve its customers in any capacity, from machining and fabrication to machine repair on both Ajax and National forging presses. Girotti Machine has been able to use their expertise to serve a larger customer base across North America. With ISO 9001and Z299 certification, Girotti Machine has managed projects in the power generation sectors, both nuclear and oil and gas, as well as the steel manufacturing industry. From material handling equipment, to ship winches, Girotti Machine has the capability and expertise to move this project forward. Girotti Machine has assembled a manufacturing team for the PaperNuts Paper Converter including; mechanical designers, gearing experts, electricians, machining technicians, and a project manager. Strategic Alliances SP Fiber Technologies SPFT is our main paper supplier. SPFT is one of only a few packaging companies that produces 100% recycled materials. They are deeply committed to minimizing their impact on the environment, and strive to be the "greenest" mill in North America. Major capital investments were made in 2013 at the Dublin, GA mill, and they now have the two largest and most efficient paper machines in the kraft paper market. They are also currently converting a newsprint machine at their Newberg, OR location, which will make them capable of being a low cost supplier to all of North America. Because of their commitment to the environment, their capacity to supply all of North America, and their capability to do so in an efficient and low cost manner, we view SPFT as a key supplier and partner going forward. It was announced on August 11, 2015 that Norcross, GA based WestRock Company (NYSE: WRK) had entered into a definitive agreement to acquire SP Fiber Holdings Inc., the parent company of SPFT. It is our intention to continue our relationship with the Dublin, GA mill s new ownership and expect to continue business as usual. Spark Innovations Founded in 1989, Spark Innovations is an award-winning industrial design company specializing in the development of innovative products and inventions. Spark's professional team of industrial designers and mechanical engineers has taken thousands of products from the early stages of an idea to the mass market. Spark's in-house team works closely with clients on product development, strategy, product management, manufacturing, patents, and logistics. We help companies and individual inventors identify, visualize, and communicate product design opportunities to create revenue. Spark designs projects ranging from electronic consumer goods and housewares to sports and industrial equipment. Spark's strategic design development process has resulted in over 240 U.S. patents issued. For additional information regarding Spark Innovations, visit www.sparkinnovations.com. Table of Contents Research & Innovation Division, Niagara College We are in collaboration with Niagara College, uses advanced manufacturing techniques to create machinery engineered specifically for the packaging industry In our first project, we performed an analysis of our machine to evaluate its operations and then developed and implemented potential modifications, with the overall goal of making a more cost efficient machine, thus allowing the Company to scale its business model within the North American marketplace. Positive results from the first project resulted in a second project, which is currently in progress. This entails creating a material handling system for dispensing the PaperNuts product. The result of this project will enable us to respond to our customers' needs by introducing our dispenser into the packaging process. The center at Niagara College allows us access to expertise, technology, students and equipment. This access allows us to develop new process improvements for the next generation of PaperNuts products. We do not have any intellectual property arrangements with Niagara College. Marketing We plan to market our product through two immediate initiatives: 1.) Paper Consumable Contracts - We provide large end users with our PaperNut machines at little to no cost on a contractual basis that they procure a minimum amount of paper sales through us on a monthly basis. 2.) National Retailers – We feel there is a significant opportunity to provide a number of large national retailers with retail ready packages, as many of them are currently selling polystyrene foam peanuts at significantly higher costs. The primary distribution strategy will involve forming strategic partnerships with large North American distribution companies that are looking for sustainable packaging solutions. These companies have their own sales teams across North America with a specific focus on packaging products making it a natural fit. As a result, it avoids us having to build out a North American sales team and supply chain network. We believe this is the most efficient market strategy and will allow us to scale the business faster than any other option. Over the past year we have introduced our product to a number of potential customers, both large and medium sized operations, and haves received an overwhelming positive response. The issue to be resolved in meeting customer requests was machine availability. To date, customer responses received were based upon a limited marketing attempt by the Company and were "word of mouth" opportunities. Employee We had 6 employees as of January 15, 2016. Other Information News and information about Axiom Corp. and our wholly owned subsidiary is available on and/or may be accessed through our website, www.axiompaper.com. In addition to news and other information about our company, we have provided access through this site to our filings with the SEC as soon as reasonably practicable after we file or furnish them electronically. Information on our website does not constitute part of and is not incorporated by reference into this registration statement or any other report we file or furnish with the SEC. You may also read and copy any document that we file at the public reference facilities of the SEC in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC s website at http://www.sec.gov. DESCRIPTION OF PROPERTY We have maintained executive offices at 380 Vansickle Road, Unit 600, St. Catharines, Ontario, Canada. The office and general expenses associated with leasing our office space is approximately $2,500.00 per month. We believe that our office space is adequate for our current needs, but growth potential may require a facility due to anticipated addition of personnel. We do not have any policies regarding investments in real estate, securities or other forms of property. We do not own any real property. LEGAL PROCEEDINGS Other than stated below, we know of no material, existing or pending legal proceedings against the Company or PaperNuts Corporation, nor is the Company or PaperNuts Corporation involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which directors, officers or any affiliates, or any registered or beneficial shareholders, of the Company or PaperNuts Corporation is an adverse party or has a material interest adverse to the interests of the Company or PaperNuts Corporation. In the first quarter of 2015 PaperNuts became aware of a potential claim from an individual stating that he was owed $150,000 worth of common shares. No action has been commenced as of the date of this report. Management is of the opinion that this potential claim is without merit. Accordingly, no provision has been made in the financial statements. Table of Contents MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Market For Common Equity As a private company not listed on a public exchange, there is a limited market for Axiom common stock. As of January 15, 2016, we had 57 record holders of our common stock. Prior to February 24, 2015, there was very limited and sporadic trading of the Axiom Common Stock. The following table sets forth the high and low prices of issuances of our common stock beginning on February 24, 2015, without retail mark-up, mark-down or commission and may not be reflective of actual transactions: Fiscal Year Ended December 31, 2015 Quarter Ended High Low December 31, 2015 $ 0.03 $ 0.02 September 30, 2015 $ 0.06 $ 0.02 June 30, 2015 $ 0.44 $ 0.04 March 31, 2015 $ 1.84 $ 0.31 Dividends No cash dividends were paid on our shares of common stock to the Axiom Shareholders. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future. Recent Sales of Unregistered Securities The information provided in Item 15 of this Registration Statement on Form S-1 is incorporated herein by reference. Re-Purchase of Equity Securities None. Securities Authorized for Issuance under Equity Compensation Plan None. HOLDERS As of January 15, 2016 we had approximately 57 record holders of our Common Stock, holding 67,397,975 shares of Common Stock. Such number does not include persons whose shares are held by a bank, brokerage house or clearing company, but does include such bank, brokerage houses and clearing companies. Holders of our Common Stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of Common Stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of Common Stock voting for the election of directors can elect all of the directors. Holders of our Common Stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Although there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares of Common Stock that may contain rights or restrictions that could have this effect. Holders of Common Stock are entitled to share in all dividends that the Board, in its discretion, declares from legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the Common Stock. Holders of our Common Stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our Common Stock. DIVIDEND POLICY Historically, we have not declared or paid a cash dividend to shareholders. The Board presently intends to retain any future earnings to finance our operations and does not expect to authorize cash dividends in the foreseeable future. TRANSFER AGENT AND REGISTRAR The transfer agent for our Common Stock is Globex Transfer, LLC at 780 Deltona Blvd., Suite 202, Deltona, Florida 32725, and its telephone number is (813) 344-4490 Table of Contents MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Registration Statement contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our unaudited consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this Registration Statement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Registration Statement. In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock. As used in this Registration Statement, the terms "we", "us", "our", "Axiom" and "our company" mean Axiom Corp. and our 95.6% majority-owned subsidiary, Papernuts Corporation ("Papernuts Canada"), a corporation established under the laws of the province of Ontario, Canada, unless otherwise indicated. Overview The Company, through our subsidiary Papernuts Canada, provides an alternative packaging solution to plastic and corn based loose fill material. We are taking a new approach to the loose-fill packaging industry currently dominated by the polystyrene plastic "peanut" styrofoam fillers, bubble wrap, air pillows, crumpled paper, foam-in-place and corn starch peanut products. The waste and inconvenience of dealing with plastic material is a problem for many end users. It commonly needs to be separated from organic or recyclable waste for proper disposal and lasts for thousands of years in landfills. Plastic and corn-based fillers typically do a poor job of protecting items as they are smooth and can be easily compressed allowing items to migrate and damage to occur. Our product "Papernuts" is re-usable whereas many plastic products are not. Using 100% recycled paper and our Papernuts machine, Papernuts interlocks with each other forming a protective matrix around packaged items. The trend towards environmentally friendly packaging solutions is gaining momentum with companies such as Wal-Mart and other industry leaders, adopting new standards for responsible packaging by way of the "Sustainable Packaging Scorecard." (http://news.walmart.com/news-archive/2006/11/01/wal-mart-unveils-packaging-scorecard-to-suppliers) The main objection to polystyrene "foam peanuts" and corn fillers, besides their typical higher cost and larger carbon footprint, is that they are not made on site but manufactured in a centrally located installation forcing the finished product to be transported with a substantial shipping cost to the purchaser. Papernuts is now purchased as a finished product but for high volume users we also have the ability to supply compact Papernuts "Factories" or machines that require only 10 square feet of floor space. Thus, providing the ability to manufacture product protection on site, which greatly reduces the shipping and storage costs associated with competitive products. We are currently selling the finished Papernuts product to customers and are actively pursuing the needs of high volume end-users. Located in a St. Catharines , Ontario industrial complex, our location serves as corporate office, production facility and storage. The staff is made up of a team of experienced individuals including, management, sales and marketing personnel. Recent Events Share Exchange Transaction On February 23, 2015, the Company entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Papernuts Corporation, a corporation established under the laws of the Province of Ontario, Canada ("Papernuts Canada"), the shareholders of Papernuts Canada (the "Papernuts Canada Shareholders"), and Kranti Kumar Kotni, the controlling stockholder of the Company (the "Controlling Stockholder"). Pursuant to the Share Exchange Agreement, the Company agreed to acquire up to 1,220,165 shares, which represents 100% shares of common stock of Papernuts Canada, from the Papernuts Canada Shareholders (the "Papernuts Canada Shares") in exchange for up to Fifty Two Million (52,000,000) restricted shares of the Company s common stock (the "Company Shares"). On February 26, 2015, the Company closed on the Share Exchange Agreement, with 95.6% of the Papernuts Canada Shareholders exchanging a total of 1,166,540 Papernuts Canada Shares (the "Papernuts Exchanged Shares") for a total of 49,714,642 Company Shares (the "Company Exchanged Shares"). Each Papernuts Exchanged Shares was converted into the number of Papernuts Exchanged Shares at an exchange ratio of 42.617187019 (the "Exchange Ratio"), rounded, if necessary, up to the nearest whole share (the "Share Exchange"). After the Share Exchange, Papernuts Canada becomes a majority-owned subsidiary of the Company. Pursuant to the Share Exchange Agreement, the Company also issued warrants to purchase an aggregate of 5,650,000 shares of the Company s common stock at exercise prices ranging from $0.056 to $0.075 per share to replace warrants previously held by Papernuts Canada warrant holders (the "Warrants"). The Warrants are currently exercisable and may be exercised for a period of 24 months from the date of issuance, February 26, 2015. Table of Contents The Share Exchange Agreement contains customary representations and warranties. Additionally, as required by the Share Exchange Agreement, the Company and Mr. Kotni entered into a Share Transfer & Assignment Agreement dated February 26, 2015, pursuant to which the Company, following the Closing of the Share Exchange Agreement, transferred to Mr. Kotni all of the issued and outstanding shares of the Company s formerly wholly-owned subsidiary, Acton Holdings Limited, a Kenyan company. Mr. Kotni assumes all the liabilities of Acton Holdings Limited. As a result of the Share Exchange Agreement, (i) we have discontinued all prior operations, and our principal business has become the business of Papernuts Canada, and (ii) Papernuts became a majority owned subsidiary of the Company. As the Papernuts Canada Shareholders obtained the majority of the outstanding shares of the Company through the acquisition, the acquisition is accounted for as a reverse merger or recapitalization of the Company. As such, Papernuts Canada is considered the acquirer for accounting purposes. Issuance of Preferred Stocks In March, 2015, the Company completed transactions with three directors of Papernuts Corporation for the cancellation of 40,000,000 shares of common stock of the Company in exchange for a combination of newly issued Series A Preferred Shares and Series B Preferred Shares. After the transaction, the 40,000,000 shares of common stock were converted into 2,666,668 Series A Preferred Shares and 1,000,002 Series B Preferred Shares. Series A Preferred Shares are convertible into shares of common stock at a ratio of 1:10, meaning each Preferred A Share can convert into ten (10) Common Shares of the Company. In addition, holders of each Series A Preferred Share shall have the right to one (1) vote for each Common Share into which such Series A Preferred Share could be converted. Series B Preferred Shares are convertible into shares of common stock at a ratio of 1:10, meaning each Preferred B Share can convert into ten (10) Common Shares of the Company. In addition, holders of each Series B Preferred Share shall have the right to twenty-five (25) votes for each Common Share into which such Series B Preferred Share could be converted. October 2015 Financing On October 16, 2015, the Company closed a financing transaction pursuant to Securities Purchase Agreements, dated October 5, 2015 (the "Securities Purchase Agreements") and Convertible Promissory Notes, dated October 5, 2015 (the "Notes"), each entered into by the Company and two investors, Bluestem Advisors, LLC and Old Main Capital, LLC (together, the "Purchasers"). Pursuant to the Securities Purchase Agreements, as described below, the principal amount of the Notes is $612,250, and the purchase price of the Notes is $575,000. The terms of the Notes are as follows: The Notes, dated October 5, 2015, (the "Issue Date"), earns interest at an annual rate equal to 10% and provides for a maturity date of October 5, 2016. The funding calls for $250,000 at the time of closing of the Securities Purchase Agreements and Notes, $75,000 upon the filing of a registration statement with the Securities and Exchange Commission (the "SEC"), $50,000 upon receipt of the first round of comments from the SEC regarding the registrations statement, $100,000 upon the effectiveness of the registration statement, and at the Company s option, $100,000 thirty (30) days after the registration statement becomes effective. As part of the Securities Purchase Agreements, the Company entered into a Registration Rights Agreement (, ' ': RRA") with the Purchasers (Exhibit B of the Securities Purchase Agreements). Pursuant to the RRA, the Company shall use its best efforts to file a registration statement on Form S-1 (the "Registration Statement") with the Securities and Exchange Commission (the "SEC"), registering the shares of common stock which may be issued to the Purchasers pursuant to the Securities Purchase Agreements. The Company must use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC. Any amount of principal or interest not paid when due on the Notes will bear interest at an annual rate of 24% applied from the due date until the date of payment. The Notes carry an original issue discount of $28,750. The Company agrees to pay the Purchasers 8,500 to cover certain fees incurred in connection with the Securities Purchase Agreements and Notes. The original issue discount and the amount for fees are included in the initial principal amount of the Notes. The conversion price is equal to 60% multiplied by the lowest average trading price for the Company s common stock during the twenty (20) day trading period ending on the latest complete trading day prior to the date of conversion. While the Purchasers conversion rights exist, the Company will reserve a sufficient number of shares from its authorized and unissued shares of common stock to provide for the issuance of common stock upon the full conversion of the Notes. In the event the Company redeems the Notes in full, the Company is required to pay off all principal balance, interest and any other amounts owing multiplied by 125%. In the event of default, the amount of principal and accrued interest will be due immediately, multiplied by 130%. The Securities Purchase Agreements restricts the ability of the Purchasers to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Purchasers represent that they are an "accredited investor" as that term is defined in Rule 501 of Regulation D. Table of Contents The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the year ended December 31, 2014 which are included herein. Our operating results for years ended December 31, 2014 and 2013 are summarized as follows: Year Ended December 31, 2014 Year Ended December 31, 2013 General and administrative $49,646 $66,572 Interest expense $4,039 251 Net loss $(53,685) $(66,823) Our expenses for the year ended December 31, 2014 totaled $53,685. Our expenses for the year ended December 31, 2013 totaled $66,823. Expenses were mainly comprised of professional fees, transfer agent and filing fees, bank charges and interest expense. Our net loss for the year ended December 31, 2014 was $53,685. Liquidity and Capital Resources Working Capital At At December 31, December 31, 2014 2013 Current Assets $822 $9,262 Current Liabilities $83,065 $37,820 Working Capital $(82,243) $(28,558) Cash Flows Year Ended Year Ended December 31, December 31, 2014 2013 Net Cash Used In Operating Activities $(26,639) $(46,704) Financing Activities 18,199 15,000 Increase (Decrease) in Cash $(8,440) $(31,704) We did not engage in any investing or financing activities over the same period. Future Financings We have not generated any revenues, have achieved losses since our inception, and are relying on our ability to raise additional funding to further develop operations and a sales and marketing program so as to grow revenue and attain profitability. Our financial statements for the year ended December 31, 2014 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. Although we have been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to our Company. If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations, including our accounting and legal fees, so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital may not be sufficient to enable us to establish our operations over the next 12 months, even if we do decide to scale back our operations Contractual Obligations As a "smaller reporting company", we are not required to provide tabular disclosure obligations. Going Concern The accompanying financial statements have been prepared assuming that our company will continue as a going concern. As shown in the accompanying financial statements, our company incurred a net loss of $53,685 for the year ended December 31, 2014 and has not yet produced revenues from operations. These factors raise substantial doubt about our company s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that our company cannot continue as a going concern. Management anticipates that it will be able to raise additional working capital through the issuance of stock and through additional loans from investors. The ability of our company to continue as a going concern is dependent upon our company s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing. There can be no assurance that management s plan will be successful. Table of Contents Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations is based upon the accompanying consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America and are expressed in United States Dollars. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. Principles of Consolidation The consolidated financial statements include the accounts of our company and our 100% owned subsidiary, Acton Holdings Limited, a company incorporated in Kenya. All significant intercompany balances and transactions have been eliminated upon consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. Our company bases our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Cash and Cash Equivalents Our company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. In prior years, our company had funds in a bank account in Ethiopia, which were designated as a minimum amount of liquid capital available while our company applied for a business license in Ethiopia. Our company is no longer pursuing this license and accordingly, these funds have not been segregated from Cash and Cash Equivalents at December 31, 2014. Financial Instruments Our Company s financial instruments consist principally of cash, accounts payable, related party payables and loan payable. The fair value of our company s cash equivalents is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The carrying value of accounts payable, related party payables and loans payable approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management s opinion our company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Earnings (Loss) Per Share Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At December 31, 2014 and 2013, our company had no potentially dilutive securities outstanding. Table of Contents Foreign Currency Translation Our company s planned operations will be in the United States and Canada, which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to our company s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, our company does not use derivative instruments to reduce our exposure to foreign currency risk. Our company's functional currency for operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations. Income Taxes Our company accounts for income taxes using the asset and liability method which provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized Recent Accounting Pronouncements Our Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. For the Three and Nine Months Ended September 30, 2015 Results of Operations Our operating results for three and nine months ended September 30, 2015 and 2014 are summarized as follows: Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Revenue $16,628 $15,761 $42,896 $44,755 Cost of revenue (7,505) (2,786) (22,801) (14,402) Total expense 192,433 88,407 866,935 165,052 Net loss $(166,727) $(94,637) $(836,953) $(161,273) Nine Months Ended September 30, 2015 Revenue for Revenue for the nine months ended September 30, 2015 was $42,896 (2014 - $44,755) and cost of revenue was $22,801 (2014 - $14,402) for gross profit of $20,095 and $30,353. Revenue is expected to increase when the newly designed retail machines are available for sale. Management expects development of the machines to be completed in the fourth quarter of 2015 with a corresponding increase in sales in the first and second quarters of 2016. The Company believes that all expired patents can be extended based on noticeable improvements to the machine/apparatus as well as the finished product itself. The Company has filed provisional patents on these new machines and the associated intellectual property. The Company has introduced an entirely new generation of PaperNuts machines that was designed to service a variety of large retail channels/outlets across North America and ultimately abroad as the business grows. We expect to file provisional patents on the retail machine in the fourth quarter. Table of Contents Expenditures during the nine month period ended September 30, 2015 totaled $866,935 (2014– $165,052) which include the below items: The Company incurred advertising and promotion expenses of $2,182 (2014 - $8,915) in connection with promotional activity during the period. The Company incurred interest expenses of $11,617 (2014 – $7,178) in connection with its shareholder loans outstanding and note payable. The future expense will increase or decrease as further loans are advanced or repaid. The Company incurred office and general expenses of $28,569 (2014 - $19,210). The Company incurred rent expenses of $10,142 (2014 - $11,138) which was consistent with the prior period. Rent expense is expected to be consistent in the short-term. The Company incurred salaries and consulting fees expenses of $385,798 (2014 - $43,072). Fees were higher than expected in the first quarter of 2015 as a result of the share exchange transaction. These costs are expected to be reduced in the short-term. The Company incurred travel expenses of $7,074 (2014 - $5,604). The Company had a depreciation and amortization expense of $16,795 (2014- $3,554) in connection with its existing capital and intangible assets. As the Company adds further equipment, the expense will increase. The Company incurred research and development costs of $100,602 (2014 – $1,812). The increase in research and development costs relates to the design and development of the Company s latest PaperNuts converter which was completed during the second quarter of 2015. The Company incurred professional fees of $156,031 (2014- $64,569) which include audit and review fees as well as legal counsel. The increase relates to additional costs associated with the share exchange transaction described above. The Company recorded stock-based compensation expense of $148,125 (2014 - $Nil) relating to warrants issued by the Company during the period. The warrants were valued using the Black-Scholes pricing model. The Company recorded a gain on foreign exchange of $9,887 (2014 – loss of $7,291) in connection with the fluctuating exchange rate. The Company recorded an impairment of assets of $Nil (2014 - $19,283). The Company had net loss and comprehensive loss of $836,953 (2014 - $161,273). The increased loss year over year relates to the additional staff costs in the current period, as well as increased professional fees in connection with the share exchange transaction. Also contributing to the loss was a share-based compensation valuation for options issued in the current period. Three Months Ended September 30, 2015 Revenue for the three months ended September 30, 2015 was $16,628 (2014 - $15,761) and cost of revenue was $7,505 (2014 - $2,786) for gross profit of $9,123 and $12,974. Expenditures during the three month period ended September 30, 2015 totaled $192,433 (2014– $88,407) which include the below items: The Company incurred advertising and promotion expenses of $50 (2014 - $8,338) in connection with promotional activity during the period. The Company incurred interest expenses of $4,354 (2014 – $2,048) in connection with its shareholder loans outstanding and note payable. The future expense will increase or decrease as further loans are advanced or repaid. The Company incurred office and general expenses of $9,084 (2014 - $10,718). The Company incurred rent expenses of $3,104 (2014 - $3,731) which was consistent with the prior period. Rent expense is expected to be consistent in the short-term. The Company incurred salaries and fees expenses of $112,227 (2014 - $25,716). The increase is a result of additional staff hired at the end of 2014, including the Chief Executive and Chief Financial Officers. This expense is expected to be reduced in the short term. Table of Contents The Company recorded a travel expense recovery of $2,126 (2014 – expenses of $1,236). The Company had a depreciation and amortization expense of $6,621 (2014- $2,418) in connection with its existing capital and intangible assets. As the Company adds further equipment, the expense will increase. The Company incurred research and development costs of $105 (2014 – $Nil). The Company incurred professional fees of $59,014 (2014- $34,202) which include audit and review fees as well as legal counsel. The Company recorded a gain on foreign exchange of $16,583 (2014 – $78) in connection with the fluctuating exchange rate. The Company recorded an impairment of assets of $Nil (2014 - $19,283). The Company had net loss and comprehensive loss of $166,727 (2014 - $94,637). Liquidity and Capital Resources At At September 30, December 31, 2015 2014 Working Capital Current Assets $149,785 $46,269 Current Liabilities $780,277 $248,977 Working Capital Deficiency $(630,492) $(202,708) Nine Months Ended Nine Months Ended September 30, September 30, 2015 2015 Cash Flows Net Cash (Used In) Operating Activities $(490,670) $(119,887) Increase in Cash $91,296 $273,050 The Company had working capital deficit of approximately $630,492 as at September 30, 2015 (December 31, 2014 - $202,708). The Company has some revenue but additional funding will be required for working capital and further expansion of the business. Management believes that it will have sufficient capital to fund its operations for the next twelve months. Our financial statements for the three and nine months ended September 30, 2015 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. Although we have been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to our Company. We anticipate that we will meet our ongoing cash requirements through equity or debt financing as well as product sales. We estimate that our expenses over the next 12 months will be approximately $770,000 which consists of salaries and management fees of $385,000, professional fees of $125,000, research and development expenses of $175,000, administrative expenses of $60,000 and interest of $25,000. We further anticipate fixed asset purchases of approximately $350,000 over the next twelve months. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources. In addition to product sales, we intend to meet our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements. We decided to become a reporting company to be better equipped to raise capital by providing transparency to the public about our operations and development. There is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us. If we are not able to raise the funds necessary to implement our business plan as anticipated, we will scale back our business development in line with available capital. Our main priority will be to retain our reporting status with the Securities and Exchange Commission which means that we will first ensure that we have sufficient capital to cover our legal and accounting expenses. Once these costs are accounted for, in accordance with how much financing we are able to secure, we will focus on developing our marketing our products, and paying consulting and management fees. We will likely not expend funds on the remainder of our planned activities unless we have the required capital. Management is unaware of any demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way. Table of Contents Investing Activities We used $23,401 in investing activities relating to equipment purchases during the period ended September 30, 2015. Financing Activities We received $60,367 in related party loans and advances during the nine month period ended September 30, 2015. In March, 2015 the Company received $270,000 from a private investor in a private sale in exchange for 900,000 shares of the Company s common stock. In May, 2015 the Company received $75,000 from a private investor in a private sale in exchange for 250,000 shares of the Company s common stock. In September, 2015 the Company received $200,000 from a demand note. Contractual Obligations As a "smaller reporting company", we are not required to provide tabular disclosure obligations. Going Concern The accompanying financial statements have been prepared assuming that our company will continue as a going concern. As shown in the accompanying financial statements, our company incurred a net loss of $836,953 for the nine months ended September 30, 2015. These factors raise substantial doubt about our company s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that our company cannot continue as a going concern. Management anticipates that it will be able to raise additional working capital through the issuance of stock and through additional loans from investors. The ability of our company to continue as a going concern is dependent upon our company s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing. There can be no assurance that management s plan will be successful. Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations is based upon the accompanying consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America and are expressed in United States Dollars. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. Principles of Consolidation The consolidated financial statements include the accounts of our company and our 95.6% owned subsidiary, Papernuts Canada. All significant intercompany balances and transactions have been eliminated upon consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Significant estimates include the useful life of its equipment and intangible assets and the valuation of equipment and intangible assets. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At September 30, 2015 and December 31, 2014, the Company had a cash balance of $99,898 and $8,602 respectively. Financial Instruments The Company s financial instruments include cash, accounts receivables, bank overdraft, accounts payable and accrued liabilities and loans payable to related parties. The carrying value of these instruments approximates their fair values due to their short-term nature. Cash and accounts receivables are classified as loans and receivables, bank overdraft, accounts payable and accrued liabilities and loans payable to related parties are classified as other financial liabilities, all of which are measured at amortized cost. It is the opinion of Management that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. Table of Contents Earnings (Loss) Per Share Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. In periods that the Company reports a net loss, loss per share is not presented on a diluted basis, as the result would be anti-dilutive. Foreign Currency Translation Our company s planned operations will be in the United States and Canada, which results in exposure to market risks from changes in foreign currency exchange rates. The financial risk is the risk to our company s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, our company does not use derivative instruments to reduce our exposure to foreign currency risk. Our company's functional currency for operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations. Income Taxes Our company accounts for income taxes using the asset and liability method which provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Recent Accounting Pronouncements Our Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND FINANCIAL DISCLOSURE Previous Independent Auditors: (a) On April 27, 2015, Axiom Corp. (the "Company") dismissed the registered independent public accountant, Sadler, Gibb & Associates, LLP ("Sadler Gibb") of 2455 East Parleys Way, Suite 320, Salt Lake City, Utah, 84109. (b) Sadler Gibb s report on the financial statements for the year ended December 31, 2014 and 2013 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to audit scope or accounting, except that the report contained an explanatory paragraph stating that there was substantial doubt about the Company s ability to continue as a going concern. (c) Our Board of Directors participated in and approved the decision to change independent accountants. Through the period covered by the financial audit for the years ended December 31, 2014 and 2013 and through April 27, 2015 (date of dismissal), there have been no disagreements with Sadler Gibb on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of the Sadler Gibb would have caused them to make reference thereto in their report on the financial statements. (d) We have authorized Sadler Gibb to respond fully to the inquiries of the successor accountant. (e) During the years ended December 31, 2014 and 2013, and the interim period through March 31, 2015, there have been no reportable events with us as set forth in Item 304(a)(1)(v) of Regulation S-K. (f) The Company provided a copy of the foregoing disclosures to Sadler Gibb prior to the date of the filing of this Report and requested that Sandler Gibb furnish it with a letter addressed to the Securities & Exchange Commission stating whether or not it agrees with the statements. ) A copy of such report was filed as an Exhibit 16.1 of our Form 8-K filed with the SEC on May 1, 2015 and is incorporated by reference herein to this current Report. New Independent Auditors: On April 27, 2015, the Company s engaged MNP, LLP ("MNP") of 900-50 Burnhamthorpe Road West, Mississauga, Ontario Canada L5B 3C2 as its new registered independent public accountant. During the years ended December 31, 2014 and 2013 and prior to April 27, 2015 (the date of the new engagement), we did not consult with MNP regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company s financial statements by MNP, in either case where written or oral advice provided by MNP would be an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively). Prior to this appointment, MNP served as the registered independent accountant for Papernuts, Corporation. Table of Contents DIRECTORS AND EXECUTIVE OFFICERS Identification of Executive Officers and Directors of the Company Our current executive officers and directors are as follows: Name and Age Position(s) Held Tenure Tyler Pearson, 33 Chief Executive Officer & Director From February 26, 2015 to present Scott MacRae, 52 Director From February 26, 2015 to present Andrew Hilton, 33 Chief Financial Officer & Treasurer From February 26, 2015 to present Jerry Moes, 55 Director From February 26, 2015 to present John Lynch, 54 Director From February 26, 2015 to present Tyler Pearson, 33 – Chief Executive Officer and Director A graduate of Wilfrid Laurier University s Business Program in 2004, Tyler has held a variety of progressive sales and sales management roles within the North American packaging and distribution industry. His primary duties included business development, P&L responsibility and North American account management. From October 2004 to July 2014, Tyler held a number of progressive roles with Unisource Worldwide where he was primarily in charge of business development within their packaging and supply chain vertical. Most recently, from 2012 to 2014, he managed North American Corporate Accounts for Unisource Worldwide – now Veritiv Corp. NYSE:VRTV – where his primary role was to create customized supply chain and packaging solutions for a number of Fortune 500 companies. Tyler has been with PaperNuts since the beginning of February 2015 as CEO. He has a tremendous amount of industry knowledge within the global fulfillment vertical and will be a critical component in developing and ultimately executing the overall go to market business strategy for PaperNuts. Mr. Pearson was selected as a director because of his extensive management experience, his background in the industry and his knowledge of the business of the Company. Scott MacRae, 52 – Director Scott is the founder of PaperNuts Canada and its original seed investor. He attended Texas A&M University. From the early 1980 s through the 1990 s worked as a computer engineer with Nortel Networks on several international telecom projects in US, China and Japan. He later worked with the Balaton Group where he focused on mergers and acquisitions in the high tech sector. From 1995-2009 Scott worked with several government agencies on numerous international transactions in the communications sector. The Company believes that based upon the above experience, Mr. MacRae has the qualifications and skill set to serve as a director. Andrew Hilton, 33 – Chief Financial Officer and Treasurer Andrew is a Chartered Professional Accountant, and has been since 2008. Andrew joined the Company in September 2014 to provide accounting services and was appointed Chief Financial Officer in February, 2015. Andrew has also served as the Chief Financial Officer of Jaguar Financial Corporation since 2013. For the past four (4) years, Andrew has worked as a consultant to various public and private companies assisting with the drafting and preparation of financial statements. Prior to that, from 2010 to 2012, Andrew was the Chief Financial Officer of GC-Global Capital Corp. Andrew has a wealth of knowledge in accounting, risk management, finance and financial modeling. Jerry Moes, 55 – Director A successful entrepreneur, Jerry established Rice Road Greenhouses and Garden Centre in 1983 and grew the business to annual sales of over $5 million with 95 employees. Rice Road Greenhouses and Garden Centre is primarily engaged in the sales of garden products. In 2011, he and his brother organized a subdivision development consisting of 100 homes, and as of January 2015 approximately 75% have been sold. He has a varied background, which includes agriculture, real estate development and a keen interest in environmentally clean technology, which led him to become involved with PaperNuts Canada as an investor. The Company believes that based upon the above experience, Mr. Moes has the qualifications and skill set to serve as a director. Table of Contents John Lynch, 54 – Director John brings extensive expertise in corporate management, administration and corporate governance specifically in the public market sector. For the past five years, he has served as CEO of Santa Rosa Mining. He served as the Chief Executive Officer and President of NWT Uranium Corp from June 2008 to April 2012 and has held a variety of other high profile roles within the public market space. John also has a tremendous amount of experience working within the North American packaging marketplace. The Company believes that based upon the above experience, Mr. Lynch has the qualifications and skill set to serve as a director. Term of Office Each director of the Company and PaperNuts Canada serves for a term of one year and until his successor is elected and qualified at the next Annual Shareholders Meeting, or until his death, resignation or removal. Each officer of the Company and PaperNuts Canada serves for a term of one year and until his successor is elected and qualified at a meeting of the Board of Directors. Significant Employees In addition to the officers and directors set forth herein, we have one (1) significant employee, Steve Martin. Mr. Martin has held progressive positions in sales and sales management for over fifteen years. With a career spanning technology consulting and the forest products industry, Mr. Martin has worked for organizations ranging from start up firms to large, multi-national corporations. For the past ten years, he has held various responsibilities for Resolute Forest Products, a $4 billion plus, international, corporation. Most recently, he managed a $100 million plus sales region (northeast United States), and a specialty product line for Resolute Forest Products. Mr. Martin has been with PaperNuts since 2014 and his main responsibilities include business development, material sourcing, and customer service. Family Relationships There are no family relationships among the Company s or PaperNuts Canada s officers, directors or persons nominated for such positions. Involvement in Certain Legal Proceedings During the past ten years no director, executive officer, promoter or control person of the Company or PaperNuts Canada s has been involved in the following: (1) A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; (2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; ii. Engaging in any type of business practice; or iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; (4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; Table of Contents (5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; (6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; (7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or (8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Code of Ethics The Company has not adopted any formal Code of Ethics. Committees of the Board of Directors The Company does not presently have a separately designated standing audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. The functions of those committees are undertaken by our Board of Directors. We believe that the creation of these committees, at this time, would be cumbersome and constitute more form over substance. Audit Committee The Company has not established a separately designated standing audit committee. However, the Company intends to establish a new audit committee of the Board of Directors that shall consist of independent directors. The audit committee s duties will be to recommend to the Company s board of directors the engagement of an independent registered public accounting firm to audit the Company s financial statements and to review the Company s accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee shall at all times be composed exclusively of directors who are, in the opinion of the Company s board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles. EXECUTIVE COMPENSATION PRE-TRANSACTION AXIOM CORP. Compensation of Executive Officers The following table sets forth the compensation paid to the Company s executive officers during the years ended August 31, 2014 and 2013. SUMMARY COMPENSATION TABLE(1) Name and Principal Position Year Salary ($) All Other Compensation ($) Total ($) Kranti Kumar Kotni(2) Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director 2014 2013 Nil Nil Nil Nil Nil Nil Michael Tesfaye Wuhib(3) Vice President 2014 2013 Nil 5,000 Nil N/A Nil 5,000 (1) We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table. Table of Contents (2) Kranti Kumar Kotni has acted as our chief executive officer, chief financial officer, president, secretary, treasurer and director since our inception on April 2, 2012 through his resignation on February 26, 2015. (3) Michael Tesfaye Wuhib has acted as our vice president from September 17, 2013 to March 7, 2014. Narrative Disclosure to Summary Compensation Table There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person s responsibilities following a change in control of the Company. Outstanding Equity Awards at Fiscal Year-End There are no current outstanding equity awards to our executive officers as of August 31, 2014. Long-Term Incentive Plans There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Compensation Committee We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation. Compensation of Directors The directors of the Company receive no extra compensation for their services on our Board of Directors. PRE-TRANSACTION PAPERNUTS CORP. The following table sets forth the compensation paid to PaperNuts executive officers during the years ended December 31, 2013 and 2014. All amounts are set forth in Canadian Dollars. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) All Other Compensation ($) Total ($) Tyler Pearson – Chief Executive Officer 2013 2014 $ $0 20,000 $ $ 0 0 $ $ 0 20,000 Scott MacRae – Director 2013 2014 $ $0 27,000 $ $ 0 0 $ $ 0 27,000 Andrew Hilton – Chief Financial Officer 2013 2014 $ $0 20,000 $ $ 0 0 $ $0 20,000 Jerry Moes – Director 2013 2014 $ $0 0 $ $ 0 0 $ $0 0 John Lynch – Director 2013 2014 $ $0 0 $ $ 0 0 $ $0 0 (1) We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table. Table of Contents Narrative Disclosure to Summary Compensation Table There are no employment contracts, compensatory plans or arrangements, including payments to be received from the PaperNuts Corporation with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with PaperNuts Corporation or its subsidiaries, any change in control, or a change in the person s responsibilities following a change in control of PaperNuts Corporation. Outstanding Equity Awards at Fiscal Year-End There are no current outstanding equity awards to PaperNuts Corporation s executive officers as of December 31, 2014. Long-Term Incentive Plans There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Compensation Committee We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation. Compensation of Directors The directors of PaperNuts Corporation receive no extra compensation for their services on the Board of Directors. Director Independence For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of the Company s Common Stock are quoted does not have any director independence requirements. The NASDAQ definition of "Independent Director" means a person other than an Executive Officer or employee or any other individual having a relationship, which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, two of our directors, Jerry Moes and John Lynch qualify as independent. Involvement in Certain Legal Proceedings To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has: been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; been found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Table of Contents SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of the date of this Current Report by: (i) each of our directors; (ii) each of our executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our issued and outstanding shares of common stock. Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own. Amount and Nature of Beneficial Ownership Common Stock (1) Series A Preferred Stock (2) Series B Preferred Stock (3) % Total Voting Name and Address of Beneficial Owner No. of Shares % of Class No. of Shares % of Class No. of Shares % of Class Power (4) Directors and Officers Tyler Pearson 50 Lynn Williams Street, Suite 2104 Toronto, Ontario M6K 3R9 1,250,000(5) 1.85% 666,667 25% 333,334 33.33% 26.17% Scott MacRae 1089 Quaker Road Fonthill, ON L0S 1E4 7,300,987(6) 10.83% 1,333,334 50% 333,334 33.33% 29.81% Andrew Hilton 1031 Sands Lane Sydenham, ON K0H 2T0 100,000(7) * 0 0% 0 0% * Jerry Moes 64 Broadway Avenue St. Catharines, ON L2M 1M4 2,797,217(8) 4.15% 666,667 25% 333,334 33.33% 26.61% John Lynch 2067 Lakeshore Blvd. West, Suite 1002 Toronto, Ontario M6K 3R9 750,000(9) 1.12% 0 0% 0 0% * All officers and directors as a group (five persons) 12,198,204 18.1% 2,666,668 100% 1,000,002 100% 82.84% * Less than 1%. (1) Based on 67,397,975 shares of common stock issued and outstanding as of January 15, 2016. The number and percentage of shares beneficially owned is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown that are beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. (2) Based on 2,666,668 shares of Series A Preferred Stock issued and outstanding as of June 4, 2015. Each share of Series A Preferred Stock are convertible into 10 shares of common stock and shall be entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company and shall be entitled to one (1) vote of each share of common stock convertible into, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. (3) Based on 1,000,002 shares of Series B Preferred Stock issued and outstanding as of June 4, 2015. Each share of Series B Preferred Stock are convertible into 10 shares of common stock and shall be entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company and shall be entitled to twenty-five (25) votes of each share of common stock convertible into, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. (4) Percentage Total Voting Power represents total voting power for each beneficial owner with respect to all shares of our common stock, Series A Preferred Stock and Series B Preferred Stock beneficially owner as of June 4, 2015. (5) Including warrants to purchase 1,250,000 shares of common stock. (6) Including 6,950,987 shares of common stock and warrants to purchase 350,000 shares of common stock. (7) Including warrants to purchase 100,000 shares of common stock. (8) Including 2,397,217 shares of common stock and warrants to purchase 400,000 shares of common stock. (9) Including warrants to purchase 750,000 shares of common stock. Table of Contents TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS Related Party Transactions On August 1, 2012, PaperNuts Canada received loans of $32,445 (CDN$32,500) from shareholders Jim Vanderzalm and Rob Moes. The loans were unsecured, and were due and payable on demand as they were contracted to meet PaperNuts Canada s 2012 general fiscal obligations. In April, 2014 and January 25, 2015 Mr. Moes made additional advances of $6,818 (CDN$7,500) and $30,184 (CDN$37,500) respectively to PaperNuts Canada. As at September 30, 2015 there is principal and interest of $66,443 ($40,290 as at December 31, 2014) outstanding in relation to those loans. The largest outstanding balance during the period ended September 30, 2015 was $66,443, including principal of $58,074. On March 28, 2013, PaperNuts Canada received loans of $18,345 (CDN$18,629) from Jerry Moes, shareholder and director of PaperNuts Canada. The loans were unsecured, and were due and payable on demand as they were contracted to meet PaperNuts Canada s 2013 general fiscal obligations. Mr. Moes made further advances of $30,180 (CDN$32,098) on December 31, 2013 and $11,190 (CDN$12,310) from January 1, 2014 to April 1, 2014. In January, 2015 Mr. Moes advanced an additional $15,625 (CDN$18,750). As at September 30, 2015, there is principal and interest of $69,384 ($59,522 as at December 31, 2014) outstanding in relation to those loans. The largest outstanding balance during the period ended September 30, 2015 was $69,094 including principal of $61,286. In January, 2015, PaperNuts Canada received a loan of $15,625 (CDN$18,750) from Ron Vanderzalm, a shareholder of PaperNuts Canada. As at September 30, 2015, there is a principal and interest of $14,817 (December 31, 2014 - $Nil) outstanding in relation to this loan. The largest outstanding balance during the period ended September 30, 2015 was $14,817 including principal of $14,050. During the periods ended September 30, 2015 and 2014 the shareholders above charged interest of $8,130 (CDN$10,242) and $5,348 (CDN$5,849), respectively on these demand loans. No payments of interest have been made and the unpaid interest is included in the loan balances noted above. During the year ended December 31, 2013, Joanne Secord, a former vice-president of PaperNuts Canada earned sales commissions of CDN$18,596 and earned additional sales commissions of CDN$6,044 in 2014. These commissions were satisfied through the issuance of 50,000 common shares on April 2, 2014. In June, 2014, PaperNuts Canada received an advance of CDN$25,000 from Scott MacRae, a director of PaperNuts Canada. This amount was non-interest bearing and was repaid in July, 2014. As of September 30, 2015, the Company owes Mr. Kotni, a former director of the Company $Nil (December 31, 2014 - $810) for expenditures paid on behalf of the Company. The amount included in due to related parties is unsecured, non-interest bearing, and has no specified repayment terms. As at September 30, 2015, due to related party included an additional $41,577 (December 31, 2014 - $6,594) in fees and due to officers of the Company, including Tyler Pearson, CEO, Scott MacRae, Director and Andrew Hilton, CFO. Review, Approval or Ratification of Transactions with Related Persons We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. Table of Contents DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES Our directors and officers are indemnified as provided by the Nevada corporate law and our by-laws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. We have been advised that in the opinion of the SEC indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court s decision. WHERE YOU CAN FIND ADDITIONAL INFORMATION We filed with the SEC a registration statement under the Securities Act for the shares of Common Stock in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our Common Stock, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the SEC at 100 F. Street, N.E., Washington, DC 20549-6010, and copies of all or any part of the registration statement may be obtained from the SEC upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the site is www.sec.gov. TABLE OF CONTENTS PAGE Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001566373_f-star_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001566373_f-star_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0c7f03335eafcdbf6e86ad4d0456b7d9ee1c2410
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001566373_f-star_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1 1 d300474ds1.htm S-1 S-1 Table of Contents As filed with the Securities and Exchange Commission on December 15, 2016 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Spring Bank Pharmaceuticals, Inc. (Exact name of registrant as specified in its charter) Delaware 2834 52-2386345 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.) 86 South Street Hopkinton, MA 01748 (508) 473-5993 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Jonathan P. Freve Chief Financial Officer Spring Bank Pharmaceuticals, Inc. 86 South Street Hopkinton, MA 01748 (508) 473-5993 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Stuart M. Falber, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, MA 02109 (617) 526-6000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Amount to be Registered(1) Proposed Maximum Aggregate Offering Price Per Share(2) Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee(3) Common Stock, $0.0001 par value per shares 3,830,321 $7.58 $29,033,833.18 $3,366.00 (1) Represents shares offered by the selling stockholders. Includes an indeterminable number of additional shares of common stock, pursuant to Rule 416 under the Securities Act of 1933, as amended, that may be issued to prevent dilution from stock splits, stock dividends or similar transactions that could affect the shares to be offered by selling stockholders. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average high and low prices of the Registrant s common stock on December 12, 2016, as quoted on the Nasdaq Capital Market. (3) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents The information in this preliminary prospectus is not complete and may be changed. The selling stockholders named in this preliminary prospectus may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell and the selling stockholders named in this prospectus are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY SUBJECT TO COMPLETION DATED DECEMBER , 2016 PROSPECTUS Spring Bank Pharmaceuticals, Inc. 3,830,321 Shares of Common Stock This prospectus relates to the resale by the selling stockholders identified in this prospectus of up to 3,830,321 shares of our common stock that held by the selling stockholders, including 1,798,084 shares of our common stock that are issuable upon the exercise of outstanding warrants to purchase our common stock held by the selling stockholders. We will not receive any proceeds from the sale of these shares by the selling stockholders. We are not selling any shares of common stock and will not receive any proceeds from the sale of the shares under this prospectus. We have agreed to bear all of the expenses incurred in connection with the registration of these shares. The selling stockholders will pay or assume brokerage commissions and similar charges, if any, incurred for the sale of shares of our common stock. The selling stockholders identified in this prospectus, or their pledgees, donees, transferees or other successors-in-interest, may offer the shares from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. For additional information on the methods of sale that may be used by the selling stockholders, see the section entitled Plan of Distribution on page 59. For a list of the selling stockholders, see the section entitled Selling Stockholders on page 56. We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision. Our common stock is traded on the Nasdaq Capital Market under the symbol SBPH. On December 12, 2016, the closing sale price of our common stock on the Nasdaq Capital Market was $7.63 per share. You are urged to obtain current market quotations for the common stock. We are an emerging growth company as defined under federal securities laws and will be subject to reduced public company reporting requirements. See Prospectus Summary Implications of Being an Emerging Growth Company. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 10 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2016 Table of Contents ABOUT THIS PROSPECTUS We have not authorized anyone to provide you with information that is different from that contained in this prospectus or any supplement or amendment or free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholders are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. For investors outside the United States: We have not have taken any action to permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. We own or have rights to trademarks, trade names and service marks that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, trade names and service marks referred to in this prospectus are listed without the and symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, trade names and service marks. Industry and Other Data We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source. - ii - Table of Contents PROSPECTUS SUMMARY This summary highlights selected information included elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including the Risk Factors section beginning on page 10 and our consolidated financial statements and the related notes appearing at the end of this prospectus before making an investment decision. Unless the context otherwise requires, we use the terms Spring Bank, our company, we, us and our in this prospectus to refer to Spring Bank Pharmaceuticals, Inc. and our consolidated subsidiary. Overview We are a clinical-stage biopharmaceutical company engaged in the discovery and development of a novel class of therapeutics using our proprietary small molecule nucleic acid hybrid, or SMNH, chemistry platform. Our SMNH compounds are small segments of nucleic acids that we design to selectively target and modulate the activity of specific proteins implicated in various disease states. We are developing our most advanced SMNH product candidate, SB 9200, for the treatment of viral diseases. We have designed SB 9200 to selectively activate within infected cells the cellular proteins retinoic acid-inducible gene 1, or RIG-I, and nucleotide-binding oligomerization domain-containing protein 2, or NOD2, to inhibit viral replication and to cause the induction of intracellular interferon signaling pathways for antiviral defense. We believe that SB 9200 may play an important role in antiviral therapy by modulating the body s immune response through its mechanisms of action to fight viral infections. We are also developing a second SMNH product candidate, SB 11285, as an immunotherapeutic agent for the treatment of selected cancers through the activation of the STimulator of INterferon Genes, or STING, pathway. We are developing SB 9200 for the treatment of chronic hepatitis B virus, or HBV. In the second quarter of 2016, we initiated a Phase 2a clinical trial in non-cirrhotic patients infected with chronic HBV, in which patients first receive SB 9200 as a monotherapy and then receive the oral antiviral agent Viread (tenofovir disoproxil fumarate). We expect to report preliminary results from the first dosing cohort of the Phase 2a clinical trial in the first half of 2017 with top line results for all patients treated with SB 9200 by the first half of 2018. Subject to the results of the Phase 2a clinical trial, we expect to initiate a Phase 2b clinical trial in mid-2018 in patients with chronic HBV to explore the use of SB 9200 as a monotherapy and in combination with Viread. Both trials are to be conducted under our clinical trial collaboration with Gilead Sciences, Inc., or Gilead. In 2014, we completed a Phase 1 clinical trial of SB 9200 in 38 non-cirrhotic patients infected with the hepatitis C virus, or HCV, who had not received any prior antiviral treatment. The two-stage trial was designed to evaluate the safety and tolerability, pharmacokinetics, pharmacodynamics and antiviral activity of ascending doses of the oral formulation of SB 9200 and to demonstrate proof of principle of the mechanisms of action of SB 9200. SB 9200 was well tolerated in all dose groups in the trial, and no dose-limiting toxicities or systemic interferon-like side effects such as flu-like symptoms or fever were observed. Additionally, antiviral activity was seen at all dose levels except for the lowest dose cohort. We believe that the data from the Phase 1 clinical trial, together with data from preclinical and toxicology studies that we have conducted in animal models, support the continued development of SB 9200 for the treatment of chronic HBV. Chronic HBV Infection. We are developing an oral formulation of SB 9200 for the treatment of chronic HBV infection. The World Health Organization, or WHO, estimates that 240 million people worldwide are chronically infected with HBV, including approximately 14 million people in the United States and Europe combined. Standard of care treatments for chronic HBV include pegylated interferon- , or PEG-IFN- , products - 1 - Table of Contents and oral antiviral agents such as Baraclude (entecavir), marketed by Bristol-Myers Squibb Company, Viread and Vemlidy (tenofovir alafenamide), marketed by Gilead, each of which suppress viral replication. In 2014, reported worldwide revenues for Baraclude and Viread were approximately $2.5 billion in the aggregate primarily for the treatment of HBV. However, these treatments have limitations. In particular, although treatment with PEG-IFN- products can reduce the amount of HBV DNA, or viral load, in the body, this treatment only has a limited effect on the rate of HBsAg reduction or loss. HBsAg is the surface antigen of HBV that indicates active hepatitis B infection. Oral antiviral agents such as Baraclude and Viread are potent suppressors of HBV DNA, but generally only suppress the virus during treatment without providing significant levels of HBsAg loss or clearance, and patients taking these oral antiviral agents require potentially life-long treatment. By achieving HBsAg loss or clearance, there is the potential to have a finite period of treatment and improved clinical prognosis, such as a reduction in the risks of cirrhosis and liver cancer. As such, experts believe that loss or clearance of HBsAg is indicative of a functional cure. We believe that there is a significant unmet need for treatments that can achieve a functional cure for chronic HBV when used alone or in combination with other antiviral agents. Preclinical studies of SB 9200 in the woodchuck model of chronic HBV showed significant reductions in viral load, including viral replication intermediates, and in surface antigen. Since the discovery of woodchuck hepatitis virus, or WHV, in 1978, the American woodchuck has been studied and widely accepted as a suitable animal model for chronic HBV. We believe that SB 9200, by virtue of its mechanisms of action, may provide a functional cure for chronic HBV by stimulating the immune system in a manner similar to PEG-IFN- products, but with better efficacy and tolerability. Other Development Efforts. We also plan to explore the potential use of SB 9200 in other viral diseases, including respiratory syncytial virus, or RSV, human immunodeficiency virus, or HIV, latency and hepatitis delta virus, or HDV. According to the United States Centers for Disease Control and Prevention, RSV infection in the United States accounts for approximately 177,000 adult hospitalizations and 14,000 deaths among adults over age sixty-five each year and is the most common cause of lower respiratory tract infections in young children. There are no FDA-approved therapies for the treatment of RSV infection. We believe that there is a significant unmet medical need for an effective treatment for RSV in pediatric and at-risk adult populations, including the immunocompromised, the elderly and those with respiratory co-morbidities such as chronic obstructive pulmonary disease and emphysema. Other Development Efforts for HBV. We are pursuing the development of the co-formulation of SB 9200 with entecavir and with tenofovir as potential fixed-dose combination products for the treatment of chronic HBV patients who may benefit from the combined use of SB 9200 as an immunomodulatory agent, and entecavir or tenofovir, as the antiviral agent. We anticipate that the fixed-dose combination product could result in enhanced patient compliance and potentially allow for the delivery of lower doses of the individual compounds for equivalent efficacy and a more favorable safety profile. We have conducted early development work on the co-formulations and believe SB 9200 and the antiviral agents are compatible in the same formulation. We are also seeking to enter into collaborations with third parties that are developing compounds with different pharmacological mechanisms of action than SB 9200 for the treatment of chronic HBV. We believe that the immunomodulation provided by SB 9200 could be a key component of a combinatorial treatment of chronic HBV patients that could increase the percentage of chronic HBV patients that achieve a functional cure. In September 2016, pursuant to this strategy, we entered into an agreement with Arrowhead Pharmaceuticals, Inc., or Arrowhead, to collaborate on the study of the combined use of SB 9200 and Arrowhead s small interfering ribonucleic acid, or siRNA, product pipeline, for the treatment of chronic HBV. Under our collaboration with Arrowhead, we agreed first to study preclinical models with both agents together, with the potential to be added to a clinical study. - 2 - Table of Contents SB 11285. We are developing SB 11285, a novel proprietary STING agonist, as a potential immunotherapeutic agent for the treatment of selected cancers. Recent published scientific literature indicates that the activation of the STING pathway can result in the induction of cellular interferons and cytokines and promote an aggressive and strong anti-tumor response through the induction of innate and adaptive immune response. In our studies performed in vitro cancer models, SB 11285 was shown to cause the induction of interferon and other cytokines and apoptosis of multiple tumor-derived cell lines. We plan to develop SB 11285 as a potential important addition to the current standard of care in the treatment of various cancers that could increase the treatment responses in patients. We hope to achieve further pre-clinical proof-of-principle for SB 11285 in relevant oncology models in 2017. HIV latency exists when the virus is present in a person without symptoms. HDV is a rare, orphan chronic disease with a mortality rate of 2% to 20% according to the WHO, which occurs in association with HBV and requires HBsAg to allow replication of HDV. We also plan to conduct preclinical research on additional SMNH product candidates as antiviral therapies and early-stage research programs exploring the use of SMNH compounds against targets implicated in certain inflammatory diseases. The following table summarizes the status of the development of our product candidates. We retain exclusive, global commercial rights to SB 9200 and all of our additional SMNH product candidates. Product Candidate Indication/ Therapeutic Area Stage of Development Anticipated Milestones SB 9200 Chronic HBV Phase 2 Phase 2a clinical trial initiated in 1H 2016; topline data on first cohort expected 1H 2017 HBV/fixed dose combinations Research Establish preclinical proof-of-principle HBV/collaborations for combination therapy Research Establish preclinical proof-of-principle HDV* Research Establish preclinical proof-of-principle SB 11285 Immuno-oncology Research Establish preclinical proof-of-principle * subject to additional fundingEstablish preclinical proof-of-principle We currently do not plan to conduct a Phase 1 clinical trial of SB 9200 in patients with chronic HBV. We believe that the Phase 1 clinical trial of SB 9200 that we completed in 2014 in non-cirrhotic patients infected with HCV who had not received any prior antiviral treatment, and the preclinical and toxicology studies of SB 9200 that have been conducted, have generated pharmacokinetic, pharmacodynamics and safety data that support our planned Phase 2 clinical trial in chronic HBV without the need for a Phase 1 clinical trial. We have a global intellectual property portfolio consisting of over 50 issued patents worldwide and multiple patent applications directed to our lead product candidates, together with trade secrets and know-how. We own one U.S. patent, one European patent and multiple other foreign patents with claims covering the composition of matter of SB 9200 that expire in December 2026 and a second U.S. patent with claims covering the composition of matter of SB 9200 that expires in June 2030, in each case, without considering potential patent term extensions. - 3 - Table of Contents Our Business Strategy Our primary objective is to maintain our leadership position in developing SMNH therapeutics for the treatment of viral infections, certain cancers and inflammatory diseases. To achieve this goal, we are pursuing the following strategies: Continue to advance the clinical development of SB 9200 for chronic HBV. We are conducting a Phase 2a clinical trial of SB 9200 in non-cirrhotic patients infected with chronic HBV in which patients first receive SB 9200 as a monotherapy and later receive Viread (tenofovir). We expect to report preliminary results from the first dosing cohort of the Phase 2a clinical trial in the first half of 2017 with top line results for all patients treated with SB 9200 by the first half of 2018. Subject to the results of the Phase 2a clinical trial, we expect to initiate a Phase 2b clinical trial in mid-2018 in patients with chronic HBV to explore the use of SB 9200 as a monotherapy and in combination with Viread. Both trials are to be conducted under our clinical collaboration with Gilead. Develop SB 11285, our lead STING agonist compound, as a potential immunotherapeutic for selected cancers. We are developing SB 11285, a novel proprietary STING agonist, as a potential immunotherapeutic agent for the treatment of selected cancers. We believe SB 11285 could be an important addition to the current standard of care in the treatment of various cancers. We are currently conducting pre-clinical studies of SB 11285 in selected cancer models and hope to achieve pre-clinical proof-of-principle in relevant oncology models in 2017. Also, we are developing back-up compounds from our STING platform. Develop fixed-dose combinations of SB 9200 with entecavir and with tenofovir for the treatment of chronic HBV. We are pursuing the development of the co-formulation of SB 9200 with entecavir and with tenofovir as potential fixed-dose combination products for the treatment of chronic HBV patients who may benefit from the combined use of SB 9200 as an immunomodulatory agent, and entecavir or tenofovir, as the antiviral agent. We anticipate that the fixed-dose combination product could result in enhanced patient compliance and potentially allow for the delivery of lower doses of the individual compounds for equivalent efficacy and a more favorable safety profile. Seek to enter into pre-clinical and clinical collaborations with third parties that are developing compounds with different pharmacological mechanisms of action for the treatment of chronic HBV. We are seeking to enter into collaborations to explore the potential clinical benefits of administering SB 9200 in combination with investigational agents with different mechanisms of action for the treatment of chronic HBV patients. Develop additional SMNH candidates from our proprietary platform as antiviral and anti-inflammatory agents. We are developing next-generation analogs of SB 9200, including SB 9400, SB 9941 and SB 9946. These compounds are in preclinical development as antiviral agents. We also have identified SMNH compounds that act as phosphodiesterase type 4, or PDE4, inhibitors, which are enzymes that act as potential anti-inflammatory agents. In preclinical studies, each of these compounds demonstrated one or both of antiviral and anti-inflammatory activity against various disease-causing targets. Investigate the potential use of SB 9200 in other viral diseases, notably RSV and the emerging fields of HIV latency and HDV. Subject to obtaining additional financing, we may plan to explore the development of SB 9200 for the treatment of RSV, HIV latency and HDV. If we determine to proceed with development of SB 9200 for RSV, we would expect to initiate a Phase 2 clinical trial of SB 9200 in otherwise healthy adult volunteers inoculated with RSV. Scientific literature supports that HIV is able to replicate in cells by evading innate immune mechanisms involving - 4 - Table of Contents sensory proteins such as RIG-I. In addition, studies suggest that disrupting HIV that is latent or dormant in an infected cell will require re-invigoration of the immune system. We believe that compounds that activate and induce RIG-I, such as SB 9200, may play a role in disrupting HIV latency or dormancy, allowing for the potential treatment and eradication of the disease with antiviral regimens. If we determine to proceed with the development of SB 9200 for HIV latency, we would seek to collaborate with major research centers and third parties with significant expertise in HIV to explore the potential use of SB 9200 in the eradication of HIV. In addition, we believe that therapies such as SB 9200, which can reduce or cause loss or clearance of HBsAg, may play an important role in the treatment of HDV co-infected HBV patients. Currently, long-term administration of PEG-IFN- products are used for the treatment of HDV with marginal effect, significant toxicity and poor patient tolerability. Our SMNH Chemistry Platform We design our SMNH compounds to modulate the interaction between nucleotides or nucleic acids and proteins. Because SMNH compounds resemble naturally occurring nucleotides and nucleic acids in the body, we believe they can be more efficient in modulating the interactions with proteins through higher selectivity than traditional small molecule approaches. We have focused our research on the optimization of SMNH compounds with favorable drug attributes using various approaches including rational drug design, combinatorial chemistry, structural biology and phenotypic screening approaches. By making specific structural modifications to SMNH compounds, we enable them to bind to targets in the diseased tissues with high affinity and selectivity. Unlike other nucleic acid-based approaches, such as RNA interference, that act by inhibiting specific protein expression through downregulation of messenger RNA, SMNH compounds act directly on proteins and therefore can be used to either upregulate or downregulate the activities of the proteins that play a role in disease processes. For example, we have designed SB 9200 to bind selectively to and upregulate RIG-I and NOD2, each of which is involved in the activation of the body s immune response to foreign pathogens. Some of the features of our SMNH compounds that we believe to be important include: Novel mechanisms of action. SB 9200 and our other SMNH compounds are designed to inhibit viral replication through 2 mechanisms: firstly, an interaction with DNA polymerase, an enzyme that is implicated in viral replication, and secondly to stimulate the innate immune response through production of natural immunomodulatory cytokines, including interferon, inside cells through the activation of RIG-I and NOD2. Viruses have evolved mechanisms to block the protective effects of interferon production. Our SMNH compounds are designed to restore interferon production in infected cells. We believe that induction of the innate immune response is required for loss or clearance of HBsAg and the achievement of a functional cure. Multiple routes of delivery, including oral administration. Because our SMNH compounds have small molecule characteristics, they can be delivered orally. Additionally, our SMNH compounds potentially may be delivered intravenously and through intra-nasal and inhalation delivery depending on the target disease. Treat a broad range of viral, inflammatory and oncological diseases. We design our SMNH compounds to selectively target certain proteins whose presence or activity contributes to disease severity or causes the underlying disease. We believe that this approach is potentially applicable to a broad range of viral, inflammatory and oncological diseases. - 5 - Table of Contents No observed immune overstimulation. To date, our SMNH compounds, including SB 9200, have not triggered a nonspecific immune response in our preclinical studies. In addition, no nonspecific immune response was observed in our completed Phase 1 clinical trial of SB 9200. Potential for use in combination with other antiviral agents. Because our SMNH compounds are designed to act by an immunomodulatory function, we believe they may be developed for use in combination with other antiviral agents that act against viral disease by different mechanisms of action. Intact excretion limits likelihood of unwanted drug-drug interactions. We believe that SMNH compounds are less likely to have drug-drug interactions with drugs metabolized by CYP450, a major pathway for drug metabolism in the liver, because our SMNH compounds are not metabolized by enzyme systems in the liver and are excreted mostly intact. Relative ease of manufacturing. Because our SMNH compounds are chemically synthesized by a proprietary solution-phase method, they can be produced in a scalable and reproducible manner. Risks Associated with Our Business Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled Risk Factors immediately following this prospectus summary. Some of these risks are: we have a history of limited operations, have incurred significant losses since our inception, expect to incur losses for the foreseeable future and may never achieve or maintain profitability; we will need additional funding to complete the development of our product candidates and before we can expect to become profitable from the sales of our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts; our business currently depends substantially on the success of clinical trials for SB 9200, which is still under development. If we are unable to obtain regulatory approval for, or successfully commercialize SB 9200, our business will be materially harmed; we are very early in our development efforts and our product candidates may not be successful in later stage clinical trials. As a result, they may never be approved as marketable therapeutics; we rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for preclinical and clinical testing. These third parties may not perform satisfactorily, which could delay our product development activities; if we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects; and we may not be able to retain key executives or to attract, retain and motivate key personnel. It is difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. - 6 - Table of Contents Our Corporate Information We were incorporated under the laws of the Commonwealth of Massachusetts as Spring Bank Technologies, Inc. on October 7, 2002. On May 12, 2008, we filed a certificate of incorporation in the State of Delaware and changed our state of incorporation to Delaware and our name to Spring Bank Pharmaceuticals, Inc. Our principal executive offices are located at 86 South Street, Hopkinton, MA 01748 and our telephone number is (508) 473-5993. Our website address is www.springbankpharm.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. Implications of Being an Emerging Growth Company The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly public companies that qualify as emerging growth companies. We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have $1.0 billion or more in annual gross revenue; the date we qualify as a large accelerated filer, with at least $700 million of equity securities held by non-affiliates; the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or the last day of the fiscal year ending after the fifth anniversary of the closing of our initial public offering. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended, or the Securities Act, declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standard. We have chosen to opt out of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition periods for complying with new or revised accounting standards is irrevocable. For certain risks related to our status as an emerging growth company, see the disclosure elsewhere in this prospectus under Risk Factors Risks Related to Our Common Stock and this Offering We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors. - 7 - Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001569568_lord_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001569568_lord_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d72ed7225ddd1cbd31b7363bacfbf8e71eb44832
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001569568_lord_prospectus_summary.txt
@@ -0,0 +1 @@
+ITEM 3. PROSPECTUS SUMMARY This summary contains material information about us and the offering which is described in detail elsewhere in the Prospectus. Since it may not include all of the information you may consider important or relevant to your investment decision, you should read the entire Prospectus carefully, including the more detailed information regarding our company, the risks of purchasing our common stock discussed under Risk Factors on page 8, and our financial statements and the accompanying notes. Unless the context otherwise requires, the terms we, our, us, the Company, and Bigfoot, refer to Bigfoot Project Investments Inc., a Nevada corporation. Bigfoot Project Investments Inc. We were formed under the laws of the State of Nevada on November 30, 2011. Bigfoot Project Investments Inc., acquired assets of Searching for Bigfoot Inc. pursuant to an asset transfer agreement. The agreement contains the customary warranties and representations. After the closing of the transfer agreement, the business and operations of Searching for Bigfoot Inc. were the business and operations of the issuer. In January 2013, Bigfoot Project Investments Inc., acquired all the assets of Searching for Bigfoot Inc. Since the majority shareholder of Searching for Bigfoot Inc. is also the majority shareholder in Bigfoot Project Investments Inc. the asset acquisition was treated as a related party transaction and was not considered an arm s length transaction under Generally Accepted Accounting Principles. The assets acquired were transferred over at the existing book value listed on the balance sheet of Searching for Bigfoot Inc. at the time of transfer. The transfer agreement called for the issuance of 4,400,000 shares of common stock which were valued at $.10 per share and the issuance of a promissory note in the amount of $484,029. The Company recorded a deemed distribution related to this transaction in the amount of $924,029. During the year, the Company increased the promissory note by $489 to add an asset that was not included in the original transfer. As part of the asset transfer agreement Bigfoot Project Investments Inc. received the following assets: Footprint casts of Bigfoot 73 original casts Photographs of Dead Creature from Strickler, Arkansas 1994 Dead Creature Incident 109-inch Skeleton Various Media Artifacts Video TV News Media 52 news stories Contract to sell Dinosaur fossil most recent estimate by Paleontologist $1.2 million dollars Rubber suit from 2008 hoax Various DNA samples Hair, and nails License to use 6 dinosaur displays Exclusive rights to the Bigfoot Website Exclusive rights to the Bigfoot Live Radio Show Exclusive rights to the Bigfoot Live Radio Show Website 360 hours of raw footage from expeditions for movie development Various DVD Movies and Documentary film projects Exclusive rights to all current contracts negotiated under Searching For Bigfoot Inc. including the advertising/marketing contract held with The Bosko Group The above list is a complete list of the fixed assets for Bigfoot Project Investments Inc. We are a development stage company who has, over the past few years, developed nine DVD Movies; all of which have been completed for distribution. We have established a contract with a Media Marketing Distribution Company (The Bosko Group), who has contracted seven of the nine DVD movies to their distribution agents. This is a continuation of a contract negotiated by Searching for Bigfoot, Inc. which was included in the asset transfer. We have previously filed a copy of this contract with our exhibits. We are a development stage company with only minimal revenues to date: we have minimal assets, and have incurred losses since inception. Bigfoot Project Investments Inc., plans to establish itself as the most reliable and dependable source for materials including documentaries, physical evidence, and eye witness accounts for the purpose of documenting the evidence of the existence of Bigfoot. Our major source of revenue will be the sale of documentaries and specials that follow our progress. We have found that there is a market for these films and have started selling them on a semi-regular basis. In addition to the film sales we plan on having expeditions to locations where there have been multiple eye witness accounts as well as periodic exhibitions of the physical evidence that has been accumulated. We plan on focusing expeditions efforts to locations that have had multiple eye witness reports to maximize the chances of locating the creature and producing films that will be marketable to the public. Our current burn rate is approximately $25,000 per year. Or current revenue rate is $5,440 per year. April 30, 2016 we currently have less than $20,000 cash on hand. We estimate we will require a minimum of $300,000 to provide sufficient capital to substantially develop our business plan. The amount of funds necessary may not be fully obtained from the offering cannot be predicted with any certainty and may exceed any estimates we set forth. We anticipate our burn rate will increase to a range of $50,000 to $100,000 per year as we locate sites for expeditions and develop documentaries from those expeditions. We further expect our revenue rate to increase as the availability of our media increases in the market place and we develop additional DVDs and participate in exhibitions. The Company has previously filed and closed a Form S-1 Registration statement (SEC File Number 333-209509), on a best efforts basis; wherein, the Company was allowed to raise a total of $3,000,000, at a share price of $0.10 per shares. Due to the Company s intent on becoming a publicly traded Company it closed the offering after selling 1,227,000 shares at a price of $0.10 per share and applied to FINRA in order to become publicly listed. Now that the Company is publicly trading on the OTC Pink Sheets the Company would like to raise more capital at the price of $0.75 per share to continue to fund its business plan, through the use of this Offering. The Company is filing this Offering without a minimum amount raised restriction; therefore, the completion of this Offering is not subject to the Company raising a minimum amount of money. The offering proceeds received from investors, in this Offering will be immediately available to the Company, which means that all funds collected for subscriptions will be immediately available to the Company for use in the implementation of its business plan. We may receive no or only minimal proceeds from this Offering and potential investors may end up holding shares in a company that has not received enough proceeds to fully begin its operations and has no established market for its shares. If we raise less than 10% of our offering, we plan to proceed with our business plan as stated. We will resort to borrowing funds from our Directors or selling additional common stock. We have no commitments from our Directors or any other source to provide additional financing, and if we are unable to sell stock in this Offering we may not be able to raise money after this Offering through the sale of additional common stock. We do not have any arrangements to sell additional shares at this time other than the proceeds from this offering. Please refer to the Use of Proceeds section for more information. The implied aggregate price of our common stock based on the offering price of $0.75 and assuming all newly offered shares are sold is $15,000,000. In the event that the company is unable to raise funding from the maximum of 20,000,000 shares to be sold by the company the growth rate of the Company will be severely restricted. Our total stockholders equity (deficit) as of the latest balance sheet date is $(841,769). Our auditor has raised substantial doubts about our ability to continue as a going concern and if we are unable to continue our business, our shares may have little or no value. The company s ability to become a profitable operating company is dependent upon its ability to generate revenues and/or obtain financing adequate to fulfill its research and market introduction activities, and achieving a level of revenues adequate to support our cost structure. This has raised substantial doubts about our ability to continue as a going concern. We plan to attempt to raise additional equity capital by selling shares in this offering and, if necessary, through one or more private placement or public offerings. However, the doubts raised, relating to our ability to continue as a going concern, may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital. Where You Can Find Us Our principal executive office is located at 570 El Camino Real NR-150 Redwood City, CA 94063 and our telephone number is (415) 518-8494. The Company is an emerging growth company under the Jumpstart Our Business Startups Act.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001572702_atlas_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001572702_atlas_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..32dbbf0bb9ca36ff09e229b8fff5f5e00211ad75
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001572702_atlas_prospectus_summary.txt
@@ -0,0 +1 @@
+Accordingly, we urge you to read this summary together with all the information contained in this prospectus, including the information under the caption Risk Factors on page 28. We include definitions of certain terms used to describe oil and gas properties and operations under the caption Glossary in this prospectus. Additional definitions of terms used in this prospectus are set forth in Section 2.01 of the First Amended and Restated Partnership Agreement of Atlas Growth Partners, L.P., or our Partnership Agreement (also referred to as the Pre-Listing Partnership Agreement), which is included as Exhibit A to this prospectus. As used in this prospectus, the terms we, us, our or the Partnership refer to Atlas Growth Partners, L.P. and our consolidated subsidiaries, unless the context otherwise requires. In addition, the term general partner refers to our general partner, Atlas Growth Partners GP, LLC. The term common units refers to our common units, which may, but are not required to be, delineated as Class A common units and Class T common units, in each case representing limited partner interests. The term unitholders refers to the holders of our common units collectively, unless the context otherwise requires. The term Post-Listing Partnership Agreement refers to the Second Amended and Restated Agreement of Limited Partnership, the form of which is attached as Exhibit B to this prospectus. The terms the offering, this offering and the primary offering refer to the offering of Class A common units and Class T common units on a best efforts basis and excludes common units offered pursuant to our distribution reinvestment program, or our DRIP.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001573683_fantex-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001573683_fantex-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ea2bba5c223ab1ede83ad3b7e5f420b0f526031d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001573683_fantex-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights certain information about us and this offering contained or incorporated by reference in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere or incorporated by reference in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the following summary together with the entire prospectus, including the documents incorporated by reference herein, before deciding to invest in our Fantex Sports Portfolio 1 Units. Some of the statements in this prospectus constitute forward looking statements that involve risks and uncertainties. See Special Note Regarding Forward Looking Statements and Industry Data. Our actual results could differ materially from those anticipated in such forward looking statements as a result of certain factors, including those discussed in the Risk Factors and other sections of this prospectus and in the information incorporated by reference herein. We are a company whose focus is on acquiring minority interests in the future brand income of professional athletes and assisting such individuals in growing these income streams. We focus our business on three core areas: targeting, evaluating, and assessing athletes with the potential to generate significant income ( brand income ); acquiring minority interests in such brand income; and assisting athletes who have entered into contracts with us (Fantex athletes) to increase the potential value of their future brand income, primarily through mentoring and network/audience development. Tracking stocks related to our brand contracts with Vernon Davis, EJ Manuel, Mohamed Sanu, Alshon Jeffery, Michael Brockers, Jack Mewhort, Kendall Wright, Andrew Heaney, Terrance Williams and Ryan Shazier are included in the Units being sold in this offering. In addition, we currently have brand contracts with five other professional athletes whose brand contracts are not included in this offering. We intend to enter into additional brand contracts in the future with other individuals with the potential to generate significant brand income, and in some cases, with the affiliates of these individuals, whom we refer to, together with the individual, as the contract party. We are actively pursuing these additional brand contracts, but as of the date of this prospectus we have no current commitments to enter into any such additional brand contracts. All of our brand contracts, including those that we enter into in the future with other contract parties, are or are expected to be contingent upon obtaining financing to fund the acquisition of the minority interest in the respective brands, and we intend to finance the acquisition of additional brands through the issuance of additional tracking stocks and/or Units comprised of tracking stocks, linked to the value of such brands. Evaluation, Acquisition and Enhancement of Brands Prior to entering into a brand contract, we conduct a detailed evaluation of the brand and the contract party to determine whether, in our opinion, the brand would be a suitable brand with the potential to generate significant brand income based on the criteria set forth below. We consider a brand to be a distillation of a complex set of associations people make with respect to an individual, including athletic performance, appearance, history and personal story, products or services such individual is associated with, public statements or positions on matters of public concern, how an individual acts or the image such individual projects to the world. We seek brands that convey images and associations that we believe will be recognized and valued in the marketplace. As part of our brand evaluation, we review the brand s reputation and relative standing in its principal field, such as a professional athlete in the National Football League (the NFL ) or Major League Baseball ( MLB ), collect and analyze widely followed statistics, review existing contracts and potential for future contracts, assess the character and reputation of the contract party, assess potential future cash flow expected to be generated by the contract party as well as examine the brand s current positioning and marketing footprint (such as, for example, if they are on social media, the reach (number of followers), engagement level (participation level of followers), and potential for growth). This evaluation provides a framework to develop further marketing strategies to aid us in our efforts to enhance the value of the brand. Cornell Buck French Chief Executive Officer Fantex, Inc. 330 Townsend Street, Suite 234 San Francisco, California 94107 (415) 592 5950 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents We believe we have extensive industry contacts among the board of directors, employees, consultants and advisors of our company and our affiliates, our parent company, Fantex Holdings Inc. ( Fantex Holdings or our parent ) and Fantex Brokerage Services, LLC ( FBS ), which we utilize to access individuals and brands that meet our criteria. Through our contacts we seek to establish working relationships with these brands and their key advisors to begin the process of educating them about our business and the benefits of a brand contract and a continuing relationship. We enter into an arm s length negotiation primarily to finalize a purchase price, our percentage of the contract party s brand income ( acquired brand income or ABI ), and the scope of brand income, including whether or not there would be any specific exclusions. We do, however, have limited experience in evaluating and entering into similar contracts with athletes, entertainers and other high profile individuals because we are pioneering a new business model and to date we have only entered into a small number of brand contracts. We believe that developing a diverse portfolio of global brands will enable us to increase brand reach across our portfolio and allow us to provide unique insights that contract parties may employ to increase consumer awareness of their brands and our brands more generally. We believe that our combined efforts could lead to increased consumer engagement with the brands by optimizing message delivery, including driving engagement through the use of content developed by us or third parties. We seek to aid our brands in fostering positive brand associations in order to create a unique position in the marketplace that is independent of their primary occupation as a professional athlete. We believe this will drive greater engagement with a connected audience and lead to greater longevity of the brands. We also believe that investors in a tracking stock linked to one or more brands are more likely to be consumer advocates for those brands. Investors in a tracking stock would have an economic interest in the growth of the associated brand, and therefore we believe they may be more likely to follow and share brand information and be more active promoters of the associated brand than other fans or social network followers of the brand. However, we have no history to demonstrate, and we can make no assurances, that any of our investors will in fact actively promote the associated brand. In addition to our services intended to help optimize the reach of the brand, we intend to provide advice to contract parties based on our experience that would aid them in obtaining more attractive terms in their negotiations with future sponsors. We believe that our proprietary internal data and our marketing insights will assist our contract parties to more accurately evaluate their brand value in the marketplace and potentially increase future endorsement amounts and brand longevity post career. We note, however, that we have no contractual obligation to the contract party to engage in any of these activities that may enhance the value of our brands, and the contract party has no contractual obligation to act on any advice that we may provide. Brand development is a long term strategy, and any investment we may make to promote our acquired brands will be for long or medium term results and would not be expected to increase brand income in the near term, if at all. Moreover, as with other forms of marketing and brand enhancement strategies, the impact of our efforts on brand value may be difficult to determine objectively. Even if our promotion activities increase the endorsement income to a contract party, they may nonetheless have a negative impact on the market value of shares of the associated tracking stock because we will only receive a portion of any increased brand income. For example, because the ABI under our typical brand contract is 10% of brand income, our promotion efforts must produce brand income equal to at least ten times our costs for such promotion efforts in order to return our investment. If our brand enhancement strategy is unsuccessful, or if a contract party chooses not to accept any brand enhancement assistance from us, then the success of any brands we acquire will be entirely dependent upon the efforts of the contract party. In addition, our contract parties are neither affiliate, directors, officers or employees of our company and consequently our contract parties owe no fiduciary duties to us or any of our stockholders, and have no obligation to take any action whatsoever to enhance the value of their brand. Copies to: Patrick A. Pohlen, Esq. Jim Morrone, Esq. Alexander T. White, Esq. Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 (650) 328 4600 David G. Peinsipp, Esq. Robert W. Phillips, Esq. J. Carlton Fleming, Esq. Cooley LLP 101 California Street, 5th Floor San Francisco, California 94111 (415) 693-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the Securities Act ), check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Table of Contents Our Tracking Stocks Included in This Offering Tracking stocks related to our brand contracts with each of the following contract parties are included in the Units being sold in this offering: Contract Party Effective Date of Brand Contract Tracking Stock Related to the Brand Contract Vernon Davis October 30, 2013 Fantex Series Vernon Davis EJ Manuel February 14, 2014 Fantex Series EJ Manuel Mohamed Sanu May 14, 2014 Fantex Series Mohamed Sanu Alshon Jeffery September 18, 2014 Fantex Series Alshon Jeffery Michael Brockers January 9, 2015 Fantex Series Michael Brockers Jack Mewhort March 26, 2015 Fantex Series Jack Mewhort Kendall Wright March 26, 2015 Fantex Series Professional Sports Andrew Heaney September 10, 2015 Fantex Series Professional Sports Terrance Williams September 17, 2015 Fantex Series Professional Sports Ryan Shazier September 23, 2015 Fantex Series Professional Sports Conversion into Platform Common Stock Our platform common stock is intended to track and reflect the economic performance of all of our tracking stocks by having a small percentage of ABI from these tracking stocks attributed to it. In addition, to the extent not attributed to a particular tracking stock, our platform common stock will have attributed to it any of the direct liabilities, costs and expenses related to any of our offerings of our tracking stocks (other than underwriting discounts and commissions as applicable for any offering) or incurred by us or our parent in connection with any brand development activities prior to the consummation of the offering of any tracking stock. Our board of directors may at any time following the two year anniversary of the filing of a certificate of designations creating a new tracking stock and convert such tracking stock into fully paid and non assessable shares of our platform common stock at a conversion ratio to be determined by dividing the fair value of a share of such tracking stock by the fair value of a share of our platform common stock. The Units We are offering 1,984,000 Units in this offering. Each Unit has an assumed initial public offering price of $13.00 and consists of 0.047 shares of Fantex Series Vernon Davis, 0.127 shares of Fantex Series EJ Manuel, 0.040 shares of Fantex Series Mohamed Sanu, 0.277 shares of Fantex Series Alshon Jeffery, 0.117 shares of Fantex Series Michael Brockers, 0.089 shares of Fantex Series Jack Mewhort and 0.683 shares of Fantex Series Professional Sports. Holders of the Units will be entitled to all of the rights, preferences and privileges of holders of shares of the tracking stocks that comprise the Units, to the extent of their fractional interest in a whole share of such tracking stocks and there are no incremental rights, preferences, privileges or other benefits associated with the Units beyond those derived from the tracking stocks that comprise the Units. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b 2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non accelerated filer (Do not check if a smaller reporting company) Smaller reporting company (1) Represents the fair value as of March 31, 2016 (unaudited), the date Vernon Davis signed a new, one-year contract with the Washington Redskins, reflecting changes in various inputs to our valuation model based upon the full 2015 NFL season statistics. For comparative purposes, the fair value as of December 31, 2015 was $1,646,375. March 31, 2016 amounts have not been subject to an audit or review by our independent auditors. (2) Represents the fair value as of December 31, 2015 reflecting changes in various inputs to our valuation model based upon the full 2015 NFL season statistics. Fair value represents the total attributed net equity for each series of tracking stock. For additional information on attributed financial information for our tracking stocks, please see the attributed balance sheet information in Exhibit 99.1 to our Annual Report on Form 10-K for the year ended December 31, 2015. (3) Represents the fair value as of March 10, 2016 (unaudited), the date Mohamed Sanu signed a new, five-year contract with the Atlanta Falcons, reflecting changes in various inputs to our valuation model based upon the full 2015 NFL season statistics. For comparative purposes, the fair value as of December 31, 2015 was $1,826,241. March 10, 2016 amounts have not been subject to an audit or review by our independent auditors. The gross proceeds needed to finance the payment of the purchase price for the ABI pursuant to our brand contracts with Kendall Wright, Andrew Heaney, Terrance Williams and Ryan Shazier, as set forth in the following table: Gross Proceeds Kendall Wright Brand Contract $ 3,324,468 Andrew Heaney Brand Contract 3,591,398 Terrance Williams Brand Contract 3,290,323 Ryan Shazier Brand Contract 3,344,086 Total Fantex Series Professional Sports $ 13,550,275 The components of attributed net equity as of December 31, 2015 (as of March 31, 2016 (unaudited) for Vernon Davis, the date he signed a new, one-year NFL player contract and as of March 10, 2016 (unaudited) for Mohamed Sanu, the date he signed a new, five-year NFL player contract) reflecting changes in various inputs to our valuation model based upon the full 2015 NFL season statistics, for each of the convertible tracking stocks included in the Unit are as set forth in the table below. March 31, 2016 and March 10, 2016 amounts have not been subject to an audit or review by our independent auditors. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price(1)(2)(3) Amount of Registration Fee(4) Fantex Sports Portfolio 1 Units (the Units ), each consisting of 0.047 shares of Fantex Series Vernon Davis Convertible Tracking Stock, par value $0.0001 per share, 0.127 shares of Fantex Series EJ Manuel Convertible Tracking Stock, par value $0.0001 per share, 0.040 shares of Fantex Series Mohamed Sanu Convertible Tracking Stock, par value $0.0001 per share, 0.277 shares of Fantex Series Alshon Jeffery Convertible Tracking Stock, par value $0.0001 per share, 0.117 shares of Fantex Series Michael Brockers Convertible Tracking Stock, par value $0.0001 per share, 0.089 shares of Fantex Series Jack Mewhort Convertible Tracking Stock, par value $0.0001 per share, and 0.683 shares of Fantex Series Professional Sports Convertible Tracking Stock, par value $0.0001 per share. $28,371,200 $2,856.98 Fantex Series Vernon Davis Convertible Tracking Stock Fantex Series EJ Manuel Convertible Tracking Stock Fantex Series Mohamed Sanu Convertible Tracking Stock Fantex Series Alshon Jeffery Convertible Tracking Stock Fantex Series Michael Brockers Convertible Tracking Stock Fantex Series Jack Mewhort Convertible Tracking Stock Fantex Series Professional Sports Convertible Tracking Stock Platform Common Stock, par value $0.0001 per share(5) Total $28,371,200 $2,856.98 (1) Includes 198,400 Units subject to the underwriters option to purchase additional Units. (2) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act. (3) An indeterminate amount of securities are being registered hereby to be offered solely for market-making purposes by specified affiliates of the registrant. Pursuant to Rule 457(q) under the Securities Act, no filing fee is required. (4) A registration fee of $3,076.74 was paid previously in connection with this registration statement based on an estimate of the aggregate offering price. (5) Represents up to 50,000,000 shares of platform common stock of Fantex, Inc. issuable upon the conversion of shares of one or more of the tracking stocks that comprise the Units. The precise number of shares of platform common stock to be registered is not presently determinable because the conversion ratio as of the conversion date, if any, of any of the tracking stocks that comprise the Units is not currently known. Pursuant to Rule 457(i) under the Securities Act the registration fee is calculated on the basis of the proposed offering price of the Units alone because no additional consideration is to be received in connection with the future conversion, if any, of the tracking stocks that comprise the Units into platform common stock. Table of Contents Assets / (Liabilities) Prior to Attribution Attributed Net Equity Cash and Cash Equivalents Amounts Due from Athlete Other Investments Brand Contract Liabilities Net Equity Platform Common Tracking Stock Fantex Series Vernon Davis $ 671,354 $ - $ 110,800 $ 840,488 $ - $ 1,622,642 $ 81,132 $ 1,541,510 Fantex Series EJ Manuel 172,064 35,722 950,303 (4,445) 1,153,644 57,682 1,095,962 Fantex Series Mohamed Sanu 161,445 18,241 2,187,366 (7,474) 2,359,579 117,979 2,241,600 Fantex Series Alshon Jeffery 159,017 115,408 7,789,801 (2,663) 8,061,563 403,078 7,658,485 Fantex Series Michael Brockers 211,752 19,901 3,138,539 (11,263) 3,358,928 167,947 3,190,981 Fantex Series Jack Mewhort 45,088 8,180 3,092,826 (2,398) 3,143,697 157,185 2,986,512 Total $ 1,420,720 $ 197,452 $ 110,800 $ 17,999,323 $ (28,243) $ 19,700,053 $ 985,003 $ 18,715,050 We update the fair value of our brand contracts on a quarterly basis to account for cash collected and any known events that could materially impact future estimated cash to be received from each brand contract. In addition, on an annual basis, we include in our fair value update of each brand contract the full regular season statistics for each player from the most recently completed season. For further discussion of the Units, please see the section entitled Description of Capital Stock beginning on page 172. Estimated Fair Value of Fantex Series Professional Sports Convertible Tracking Stock Fantex Series Professional Sports is intended to track and reflect the economic performance of our brand contracts with four athletes: Kendall Wright, Andrew Heaney, Terrance Williams and Ryan Shazier. The amount of proceeds to be paid for the purchase of these four brand contracts was determined based on our estimates of the fair value of these brand contracts as of the following dates: December 1, 2014 in the case of Kendall Wright s brand contract, January 1, 2015 in the case of Andrew Heaney s brand contract, February 1, 2015 in the case of Terrance Williams brand contract and September 1, 2015 in the case of Ryan Shazier s brand contract. Our estimates of the fair values of these four brand contracts in turn reflect the estimated brand income under these brand contracts as of those respective dates. Since those respective dates, developments and events that could reasonably be expected to impact the fair value of their respective brand contracts have occurred, including, among other things, changes in player performance, comparable contract projections and/or estimated career length. We are not providing and do not purport to provide fair value estimates of these brand contracts as of any other date, including the date of this prospectus. See Management s Discussion and Analysis of Financial Condition and Results of Operations Unconsummated Brand Contracts as of December 31, 2015, Estimated Fair Value for an explanation of quantitative and qualitative factors that were utilized to estimate fair value for the four brand contracts associated with Fantex Series Professional Sports at the time of respective dates listed above. For estimation of fair value, we treat Fantex Series Professional Sports in the aggregate. As of the date of this prospectus, we do not believe that there has been an adverse change in the aggregate fair value of the four brand contracts associated with Fantex Series Professional Sports as of December 31, 2015 relative to the gross proceeds to be paid for such brand contracts. However, there is no guarantee that such changes will not occur in the future. See Risk Factors Risks Relating to Our Brand Contracts and Our Business for a discussion of the risks that are generally attributable to our brand contracts, our business and our athletes and for an explanation of the developments, events and limitations of the due diligence procedures that we have conducted on those brands. See Risks Related to Each of Our Contract Parties and the specific risks that relate to each named athlete for a description of the impact that such developments and events and our due diligence may have on the fair value of our brand contracts at any given time and the market value of the Units. Our Brands Included in This Offering Vernon Davis Brand Our brand contract with Vernon Davis entitles us to receive 10% of brand income for Vernon Davis from and after October 30, 2013. As consideration for the ABI under the brand contract, we paid Vernon Davis a one-time cash The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents amount of $4.0 million upon the completion of the offering of Fantex Series Vernon Davis. We have no further financial obligation to Vernon Davis under the brand contract, other than certain indemnity obligations. The brand contract is intended to remain in effect indefinitely and, except as set forth in the brand contract, may be terminated only upon mutual agreement of Vernon Davis and us. If Vernon Davis resigns from the NFL within two years of the date of the completion of the offering of shares of Fantex Series Vernon Davis for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $4.21 million (net of any amounts previously paid to us by him pursuant to the brand contract), which includes a pro rata share of underwriting expenses from the initial public offering of Fantex Series Vernon Davis. We are also entitled to certain other ongoing information and audit rights. For a further description of our brand contract with Vernon Davis, please see Business Vernon Davis Brand Vernon Davis Brand Contract. EJ Manuel Brand Our brand contract with EJ Manuel entitles us to receive 10% of brand income for EJ Manuel from and after February 14, 2014. As consideration for the ABI under the brand contract, we paid EJ Manuel a one-time cash amount of $4.98 million upon the completion of the offering of Fantex Series EJ Manuel. We have no further financial obligation to EJ Manuel under the brand contract, other than certain indemnity obligations. The brand contract is intended to remain in effect indefinitely and, except as set forth in the brand contract, may be terminated only upon mutual agreement of EJ Manuel and us. If EJ Manuel resigns from the NFL within two years of the date of the completion of the offering of shares of Fantex Series EJ Manuel for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $5.24 million (net of any amounts previously paid to us by him pursuant to the brand contract), which includes a pro rata share of underwriting expenses from the initial public offering of Fantex Series EJ Manuel. We are also entitled to certain other ongoing information and audit rights. For a further description of our brand contract with EJ Manuel, please see Business EJ Manuel Brand EJ Manuel Brand Contract. Mohamed Sanu Brand Our brand contract with Mohamed Sanu entitles us to receive 10% of brand income for Mohamed Sanu from and after May 14, 2014. As consideration for the ABI under the brand contract, we paid Mohamed Sanu a one-time cash amount of $1.56 million upon the completion of the offering of Fantex Series Mohamed Sanu. We have no further financial obligation to Mohamed Sanu under the brand contract, other than certain indemnity obligations. The brand contract is intended to remain in effect indefinitely and, except as set forth in the brand contract, may be terminated only upon mutual agreement of Mohamed Sanu and us. If Mohamed Sanu resigns from the NFL within two years of the date of the completion of the offering of shares of Fantex Series Mohamed Sanu for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $1.64 million (net of any amounts previously paid to us by him pursuant to the brand contract), which includes a pro rata share of underwriting expenses from the initial public offering of Fantex Series Mohamed Sanu. We are also entitled to certain other ongoing information and audit rights. For a further description of our brand contract with Mohamed Sanu, please see Business Mohamed Sanu Brand Mohamed Sanu Brand Contract. Alshon Jeffery Brand Our brand contract with Alshon Jeffery entitles us to receive 13% of brand income for Alshon Jeffery from and after September 7, 2014 with respect to brand income payable under Alshon Jeffery s NFL player contracts, and from and after September 18, 2014 with respect to all other brand income. As consideration for the ABI under the brand contract, we paid Alshon Jeffery a one-time cash amount of $7.94 million upon the completion of the offering of Fantex Series Alshon Jeffery. We have no further financial obligation to Alshon Jeffery under the brand contract, other than certain indemnity obligations. The brand contract is intended to remain in effect indefinitely and, except as set forth in the brand contract, may be terminated only upon mutual agreement of Alshon Jeffery and us. If Alshon Jeffery resigns from the NFL within two years of the date of the completion of the offering of shares of Fantex Series Alshon Jeffery for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $8.36 million (net of any amounts previously paid to us by him Table of Contents The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED APRIL 15, 2016 PRELIMINARY PROSPECTUS 1,984,000 Units Fantex Sports Portfolio 1 Units We are offering 1,984,000 Fantex Sports Portfolio 1 Units (each, a Unit and together, the Units ). We anticipate that the initial public offering price of the Units will be $13.00 per Unit. Each Unit consists of 0.047 shares of Fantex Series Vernon Davis Convertible Tracking Stock ( Fantex Series Vernon Davis ), 0.127 shares of Fantex Series EJ Manuel Convertible Tracking Stock ( Fantex Series EJ Manuel ), 0.040 shares of Fantex Series Mohamed Sanu Convertible Tracking Stock ( Fantex Series Mohamed Sanu ), 0.277 shares of Fantex Series Alshon Jeffery Convertible Tracking Stock ( Fantex Series Alshon Jeffery ), 0.117 shares of Fantex Series Michael Brockers Convertible Tracking Stock ( Fantex Series Michael Brockers ), 0.089 shares of Fantex Series Jack Mewhort Convertible Tracking Stock ( Fantex Series Jack Mewhort ) and 0.683 shares of Fantex Series Professional Sports Convertible Tracking Stock ( Fantex Series Professional Sports ). A Unit cannot be separated into its component parts at any time. In this prospectus, we sometimes refer to the convertible tracking stocks that comprise the Units as the Unit Tracking Stocks, and to our convertible tracking stocks more generally as our tracking stocks. There is no established trading market for these Units. We have applied to list the Units on the NYSE MKT LLC under the symbol FXSP. Shares of our Fantex Series Vernon Davis, Fantex Series EJ Manuel, Fantex Series Mohamed Sanu, Fantex Series Alshon Jeffery, Fantex Series Michael Brockers and Fantex Series Jack Mewhort are quoted on the website of our affiliated broker-dealer, Fantex Brokerage Services, LLC ( FBS ), under the symbols VNDSL, EJMLL, SANUL, JEFFL, BRKSL and JKMTL, respectively. On April 8, 2016, the last reported sales prices of Fantex Series Vernon Davis, Fantex Series EJ Manuel, Fantex Series Mohamed Sanu, Fantex Series Alshon Jeffery, Fantex Series Michael Brockers and Fantex Series Jack Mewhort on the FBS alternative trading system were $7.90 per share, $6.00 per share, $11.00 per share, $11.50 per share, $8.50 per share and $12.00 per share, respectively. The securities that are included in the Units are tracking stocks. Neither our tracking stocks nor the Units represent an interest in a separate legal entity. Each of our tracking stocks is intended to track and reflect the separate economic performance of one or more specific brand contracts we have signed with an athlete, entertainer or other high profile individual. However, holders of any Units or tracking stocks will not have a direct investment in the associated brand, brand contract or individual. Rather, an investment in a tracking stock, including through purchase of any Units, will represent an ownership interest in our company as a whole, which will expose holders to additional risks associated with any individual tracking stock that exists at the time of any investment or that we may establish and issue in the future. Our contract parties are, and we expect they will continue to be, individuals and legal entities that are separate and independent from us, with separate ownership, management and operations. The creation or issuance of a tracking stock or Unit will not result in an actual transfer of our assets or the creation of a separate legal entity. This is also an offering of shares of our platform common stock into which the shares of the Unit Tracking Stocks are convertible. References in this prospectus to an offering of Units shall be deemed also to include the underlying shares of platform common stock into which the shares of our Unit Tracking Stocks are convertible. The platform common stock is intended to track and reflect the economic performance of all of our tracking stocks currently existing and those we may issue in the future. We will attribute to our tracking stocks and the platform common stock certain assets and expenses, including in certain cases expenses related to other series of common stock of Fantex that may be issued from time to time in the future. Our board of directors at its sole discretion may convert the shares of any tracking stock, including the Unit Tracking Stocks that comprise the Units, into platform common stock at any time following the two-year anniversary of the filing of a certificate of designations creating that tracking stock. See Description of Capital Stock and Management and Attribution Policies included in this prospectus. Holders of shares of our platform common stock and any of our tracking stocks, including through the purchase of Units, are each entitled to one vote per whole share of tracking stock held and fractional votes for fractional shares held (whether directly or through the Unit). Following the consummation of this offering, Fantex Holdings, Inc. ( Fantex Holdings ), will hold all 100,000,000 outstanding shares of our platform common stock, and thus will hold substantially all of the voting power of our outstanding common stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001574969_microphase_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001574969_microphase_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001574969_microphase_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001576915_bavarian_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001576915_bavarian_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001576915_bavarian_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001577189_flasr-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001577189_flasr-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..78a8b80b2092894f82cc0169b92ff966c8340ae7
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001577189_flasr-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+On January 11, 2016, the Company filed a Certificate of Amendment to the Company s Articles of Incorporation with the Secretary of State to effect a 1-for-500 Reverse Split of all outstanding shares of common stock of the Company, par value $0.001 per share. Unless otherwise specified, all share numbers and share prices in this prospectus have been adjusted to take into account the Reverse Split. On January 13, 2016, the Company entered into a Memorandum of Understanding (the Memorandum ) with Craigstone Ltd., a Marshall Islands company ( Craigstone ), in response to a letter from Craigstone regarding repayment of outstanding notes held by Craigstone with an aggregate principal amount of $400,000 (the Craigstone Notes ). Pursuant to the Memorandum, in settlement of the Craigstone Notes and related claims, the Company issued a warrant (the Craigstone Warrant ) exercisable for 2,500,000 shares of Series A-1 Preferred Convertible Stock at an exercise price of $0.001 per share. The Warrant vests and become exercisable monthly over nine months starting on the date of issuance of the Warrant. On February 23, 2016, the Company filed an Amended and Restated Certificate of Designation and Preferences of Series A Convertible Preferred Stock (the "Series A Certificate of Designation") with the Secretary of State to reduce the number of authorized shares of Series A Convertible Preferred Stock thereunder to 2,500,000 shares and adjust each of the dividend, conversion and voting rights to a 2,000-to-1 ratio relative to the common stock of the Company. Mr. Dickson currently holds 2,465,000 shares of our Series A Convertible Preferred Stock. Also on February 23, 2016, the Company filed a Certificate of Designation and Preferences of Series A-1 Convertible Preferred Stock (the "Series A-1 Certificate of Designation") with the Secretary of State designating 2,500,000 shares of preferred stock of the Company having a par value of $0.001 per share as Series A-1 Convertible Preferred Stock (the "Series A-1 Preferred Stock"). Each share of the Series A-1 Preferred Stock will receive 160 times the dividends declared and paid with respect to each share of our common stock. The holders of the Series A-1 Preferred Stock will have the right to convert their Series A-1 Preferred Stock into fully paid and nonassessable shares (subject to certain adjustments as provided in the Series A-1 Certificate of Designation) of our common stock at a conversion rate of 160 shares of common stock for each share of Series A-1 Preferred Stock. Company Contact Information Our principal executive offices are located at 1075 Peachtree Street NE, Suite 3650, Atlanta, Georgia 30309, telephone (409) 965-3761. Our website is located at www.FLASR.com. The information on the Company s website is not part of this prospectus. The Offering This prospectus relates to the resale of up to 33,140,000 shares of our common stock by the selling stockholders, which includes (i) up to 33,139,052 shares of our common stock issuable under the Equity Purchase Agreement, dated as of August 17, 2015 (the Equity Purchase Agreement ), between the Company and Premier Venture Partners, LLC, a California limited liability company ( Premier ), a selling stockholder pursuant to a put right under the Equity Purchase Agreement and (ii) 948 shares of common stock issued to Premier as a commitment fee (the Initial Commitment Shares ) in connection with the Equity Purchase Agreement. A copy of the Equity Purchase Agreement, and a copy of the Registration Rights Agreement, dated as of August 17, 2015, between the Company and Premier in connection with the Equity Purchase Agreement (the Registration Rights Agreement ) were filed as exhibits to our Current Report on Form 8-K filed with the SEC on August 20, 2015. The Equity Purchase Agreement permits us to put up to $3,000,000 in shares of our common stock to Premier. Premier will pay us 90 percent of the lowest closing bid price of the common stock during the ten consecutive trading days immediately following the date we have electronically deposited the number of shares of common stock related to each put into Premier s brokerage account (a Pricing Period ), pursuant to the Equity Purchase Agreement. Proceeds from the sale of common stock covered by this prospectus will be received by the selling stockholders. We will not receive any proceeds from the sale of the shares of our common stock covered by this prospectus. However, we will receive proceeds from the sale of securities pursuant to our exercise of the put right described in the Equity Purchase Agreement. We will bear all costs associated with this registration. Premier is an underwriter within the meaning of the Securities Act of 1933, as amended (the Securities Act ) in connection with the resale of our common stock under the Equity Purchase Agreement. For the purpose of determining the number of shares of common stock to be offered by this prospectus, we have assumed, other than the 948 Initial Commitment Shares discussed above, that we will issue no more than 33,139,052 shares pursuant to the exercise of our put right under the Equity Purchase Agreement, although the number of shares that we will actually issue pursuant to the put right may be more or less than 33,139,052, depending on the trading price of our common stock at the time of the exercise of our put right. We currently do not intend to exercise the put right in a manner which would result in our issuance of more than 33,139,052 shares, other than the 948 Initial Commitment Shares, but if we were to exercise the put right in that manner, we would be required to file a subsequent registration statement with the SEC and that registration statement would have to be declared effective prior to the issuance of any additional shares. Notwithstanding anything to the contrary in the Equity Purchase Agreement, in no event shall Premier be entitled to purchase that number of shares our common stock, which when added to the sum of the number of shares of our common stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Exchange Act), by Premier, would exceed 4.99 percent of the number of shares of our common stock outstanding on a Closing Date under the Equity Purchase Agreement, as determined in accordance with Rule 13d-1(j) of the Exchange Act. Subject to the terms and conditions set forth in the Equity Purchase Agreement, FLASR shall issue and sell to Premier, and Premier shall purchase from FLASR, up to that number of shares of our common stock having an aggregate purchase price of $3,000,000. The 948 Initial Commitment Shares are not included in the $3,000,000 worth of our common stock. Subject to the terms, conditions and limitations set forth in the Equity Purchase Agreement, and from time to time during the period beginning on the first trading day following the effective date of this Registration Statement (the Effective Date ) and ending on the earlier of (i) the thirty-six (36) month anniversary of the Effective Date or (ii) the date the Equity Purchase Agreement is terminated (the Open Period ), FLASR may, in its sole discretion, deliver a Put Notice to Premier which states the number of shares of our common stock that FLASR intends to sell to Premier on a Closing Date (the Put ). The maximum number of shares of our common stock that FLASR shall be entitled to Put to Premier per any applicable Put Notice (the Put Amount ) shall not be less than $10,000 worth of our common stock and shall not exceed 400 percent of the average daily trading volume of our common stock on the five trading days prior to the date the Put Notice is received by Premier. Subject to the satisfaction of the conditions set forth in the Equity Purchase Agreement, the closing of the purchase by Premier of shares of our common stock (a Closing ) shall occur on the trading day immediately following the applicable Pricing Period (each a Closing Date ). Upon each such Closing Date, Premier shall deliver to FLASR the Purchase Price to be paid for such shares of our common stock, determined as set forth below. Notwithstanding the preceding sentence, to the extent that the Purchase Price for any particular Put would exceed $100,000, then the amount over $100,000 may be paid by Premier within 16 trading days after the Put Notice date. Notwithstanding anything to the contrary in the Equity Purchase Agreement, FLASR shall not be entitled to deliver a Put Notice and Premier shall not be obligated to purchase any shares of our common stock at a Closing unless each of the following conditions are satisfied: A registration statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice; At all times during the period beginning on the related Put Notice date and ending on and including the related Closing Date, the shares of our common stock (i) shall have been listed or quoted for trading on the principal market on which our common stock is listed, (ii) shall not have been suspended from trading thereon, and (iii) FLASR shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the shares of our common stock; FLASR has complied with its obligations and is otherwise not in breach of or in default under the Equity Purchase Agreement, the Registration Rights Agreement or any other agreement executed in connection therewith which has not been cured prior the applicable Put Notice date; No injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the common stock under the Equity Purchase Agreement; and The issuance of the Securities will not violate any stockholder approval requirements of the principal market on which our common stock is listed. Purchase Price. The Purchase Price for the shares of common stock issuable under the Equity Purchase Agreement for each Put shall be the Put Amount multiplied by 90 percent of the lowest closing price of the shares of our common stock during the applicable Pricing Period. Overall Limit on Common Stock Issuable. Notwithstanding anything contained in the Equity Purchase Agreement to the contrary, if during the Open Period, FLASR becomes listed on an exchange that limits the number of shares of our common stock that may be issued without stockholder approval, then the number of shares of our common stock issuable by FLASR and purchasable by Premier, shall not exceed that number of the shares of our common stock that may be issuable without stockholder approval pursuant to the listing rules of such exchange (the Maximum Common Stock Issuance ). If such issuance of shares of our common stock could cause a delisting on the principal market on which our common stock is listed, then the Maximum Common Stock Issuance shall first be approved by FLASR s stockholders in accordance with applicable law and our bylaws and Articles of Incorporation. The Equity Purchase Agreement will terminate when any of the following events occur: When Premier has purchased an aggregate of $3,000,000 in the shares of the common stock of FLASR pursuant to the Equity Purchase Agreement (not including theInitial Commitment Shares); On the date which is 36 months after the date the SEC declares this registration statement effective; The trading of the shares of our common stock is suspended by the SEC, the principal market on which our shares are traded or FINRA for a period of two consecutive trading days during the Open Period; or, The shares of our common stock cease to be registered under the Exchange Act or listed or traded on the principal market on which our shares are traded or this registration statement is no longer effective (except as permitted hereunder). Number of Shares to be Offered. As we exercise Puts under the Equity Purchase Agreement and convert portions of the Notes, shares of our common stock may be sold into the market by the selling stockholders. The sale of these additional shares could cause our stock price to decline. In turn, if our stock price declines and we exercise more Puts and convert additional portions of the Notes, more shares will come into the market, which could cause a further drop in our stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the Equity Purchase Agreement. If our stock price declines, we will be required to issue a greater number of shares under the Equity Purchase Agreement. We have no obligation to utilize the full amount available under the Equity Purchase Agreement. Common stock offered Up to 33,140,000 shares of common stock, par value $0.001 per share, to be offered for resale by the selling stockholders Common stock to be outstanding after this offering 169,594,181 shares Use of proceeds We will not receive any proceeds from the sale of the shares of common stock offered by the selling stockholder. However, we will receive proceeds from the Equity Purchase Agreement. See Use of Proceeds. OTC symbol FLSRD
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001578305_xli_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001578305_xli_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c3716f7356b9b2a15a305d83c5ca1a6669d2663
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001578305_xli_prospectus_summary.txt
@@ -0,0 +1,845 @@
+PROSPECTUS SUMMARY
+ 
+The following summary highlights material information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled "Where You Can Find More Information" in this prospectus and any amendment or supplement hereto. Unless otherwise indicated, the terms the "Company," "XLIT," "we," "us," and "our" refer and relate to XLI Technologies, Inc.
+ 
+Corporate History and Predecessor Business
+ 
+XLI Technologies, Inc., (f/k/a Mineria Y Exploraciones Olympia, Inc.) was incorporated on August 22, 2012 under the laws of the State of Nevada. On September 2, 2012 the Company incorporated a wholly-owned subsidiary in the Dominican Republic named Consorcio de Mineria & Exloraciones Olympia, SR. Though its subsidiary the Company acquired certain mineral rights located north of the city of Santo Domingo in the Dominican Republic. In order to determine if there existed any mineralization the subsidiary undertook ground exploration in the early part of 2013 and in February obtained a geological report authored by Hilario Santos Sosa, Professional Geologist. Based on these results the Company undertook a further sampling program in the fall of 2013.
+ 
+In September 2014, the Director of Mines for the Dominican Republic cancelled the Company's interest in the mineral rights on the Olympia claim. Therefore, the Company has no further interest in the minerals on the Olympia claim.
+ 
+On October 14, 2015, James Schramm and Francisco Antonio Jerez Garcia, the Company's former sole officer and director and former majority shareholder, entered into a stock purchase agreement pursuant to which Mr. Garcia sold Mr. Schramm 50,000,000 shares of common stock of the Company owned at the time by Mr. Garcia. Pursuant to the terms of the purchase agreement:
+ 
+ (i)
+Effective on October 14, 2015, Mr. Garcia appointed Mr. Schramm to serve as President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary, with Mr. Garcia resigning from all such positions, and
+
+(ii)
+Effective on October, 26, 2015, Mr. Garcia appointed Mr. Schramm sole director of the Company and Mr. Garcia resigned as sole director of the Company.
+
+ 
+As a result of these transactions, control of the Company passed to Mr. Schramm. Following consummation of the purchase agreement, Mr. Schramm owned approximately 67% of the issued and outstanding common stock of the Company.
+ 
+On October 20, 2015, the Company entered into a share exchange agreement (the "Share Exchange") with Bosch International, LLC, a Nevada limited liability company ("BIL"), pursuant to which the Company acquired 100% of the issued and outstanding membership interests of BIL. Accordingly, BIL became a wholly-owned subsidiary of the Company and BIL's business is the Company's sole line of business. In connection with the Share Exchange the Company issued Mr. Schramm, BIL's sole member, 25 million shares of common stock. On October 29, 2015, the Company merged with and into a newly formed wholly-owned subsidiary to change its name to "XLI Technologies, Inc." from "Mineria y Exploraciones Olympia, Inc." 
+ 
+Summary of Our Business
+ 
+Through our wholly-owned subsidiary BIL, we distribute nanotechnology printed light sheets to the entertainment sector, including movie theaters, movie studios, production and distribution companies, talent and management agencies, marketing and PR firms, and outdoor media in the United States, Canada and the Caribbean. We have also purchased the rights to distribute light sheets in the automotive sector and to distribute nanotechnology printed solar panels and nanotechnology printed batteries. As of May 2016 we have placed our light sheets in 250 theater locations in the United States and expect to complete placements in approximately 1,900 theaters by July 2016. We believe that we have established relationships and credibility with theater chains, media companies and studios through Jim Schramm, our sole officer and director, who has over fifteen years of experience as a producer and distributor of movies and television shows.
+ 
+Nanotechnology powers our products. Nanotechnology is science, engineering, and technology conducted at the nanoscale, which is about 1 to 100 nanometers. One nanometer is one billionth, or 10 9, of a meter. By comparison, typical carbon-carbon bond lengths, or the spacing between these atoms in a molecule, are in the range 0.12 0.15 nm, and a DNA double-helix has a diameter around 2 nm. The smallest cellular life-forms, the bacteria of the genus Mycoplasma, are around 200 nm in length. By convention, nanotechnology is taken as the scale range 1 to 100 nm following the definition used by the National Nanotechnology Initiative. The lower limit is set by the size of atoms (hydrogen has the smallest atoms, which are approximately a quarter of a nm diameter) since nanotechnology must build its devices from atoms and molecules. The upper limit is more or less arbitrary but is around the size that phenomena not observed in larger structures start to become apparent and can be made use of in the nano device. The comparative size of a nanometer to a meter is the same as that of a marble to the size of the earth. 
+ 
+1
+
+ 
+
+ Emerging Growth Company Status
+ 
+We qualify as an "emerging growth company," as that term is defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). For as long as we qualify as an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that do not qualify as emerging growth companies, including, without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations relating to executive compensation and exemptions from the requirements of holding advisory "say-on-pay," "say-when-on-pay" and "golden parachute" executive compensation votes.
+ 
+Under the JOBS Act, we will remain an emerging growth company until the earliest of:
+ 
+ 
+the last day of the fiscal year during which we have total annual gross revenues of $1.0 billion or more;
+
+ 
+ 
+the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering;
+
+ 
+ 
+the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and
+
+ 
+the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, or the Exchange Act (i.e., the first day of the fiscal year after we have (1) more than $700.0 million in outstanding common equity held by our non-affiliates, measured each year on the last day of our second fiscal quarter, and (2) been public for at least 12 months).
+
+ 
+We may elect to take advantage of reduced reporting requirements in future filings with the SEC. As a result, the information that we provide to our stockholders may be different than the information you receive from other public reporting companies.
+ 
+The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended ("Securities Act") for complying with new or revised accounting standards. 
+ 
+Securities Registered in this Prospectus
+ 
+This prospectus covers the resale by our selling shareholders (the "Selling Shareholders") of up to 9,591,118 shares of common stock consisting of (i) 9,498,073 shares of common stock issuable upon conversion of certain convertible notes issued or issuable pursuant to a stock purchase agreement between us and RDW Capital LLC ("RDW") dated January 14, 2016 and amended March 1, 2016, March 9, 2016 and March 15, 2016 (the "Purchase Agreement") and (ii) 93,045 shares of common stock issued or issuable to Carter Terry & Company ("Carter") pursuant to an engagement letter dated November 17, 2015 (the "Engagement Letter").
+ 
+The Purchase Agreement provides for the purchase by RDW of eight convertible original issue discount notes in the aggregate principal amount of $1,837,500 for an aggregate purchase price of $1,750,000 (the "Notes"). The purchases will occur in eight tranches, with the first tranche of $250,000 ($262,500 principal amount) invested on January 14, 2016, the second tranche of $25,000 ($26,250 principal amount) invested on March 2, 2016, the third tranche of $40,000 ($42,000 principal amount) invested on March 15, 2016, the fourth tranche of $35,000 ($36,750 principal amount) invested on April 6, 2016, the fifth tranche of $100,000 ($105,000 principal amount) invested on April 29, 2016, the sixth tranche of $13,750 ($14,437.50 principal amount) invested on May 13, 2016, the seventh tranche of $635,562.50 ($667,340.63 principal amount) to be invested three business days after the registration statement of which this prospectus forms a part (the "Registration Statement") is declared effective and the eighth tranche of $650,000 ($682,500 principal amount) to be invested five business days after the Registration Statement is declared effective. Each Note may be converted in whole or in part at the holder's discretion at any time 90 days after the date of issuance and bears interest the rate of 8% per annum with the interest due and payable at each conversion date and maturity date. The conversion price of each Note is equal to 60% of the lower of (i) the lowest traded price of our common stock during the 20 trading days preceding the applicable conversion date or (ii) the lowest traded price of our common stock during the 20 trading days preceding the date of issuance of such Note. 
+ 
+ 
+2
+
+ 
+ 
+We have agreed to reserve for issuance 300% of the common stock issuable under the Notes and register for resale all of the shares of common stock issuable upon conversion of the Notes; provided, however, that this Registration Statement only provides for the sale of up to 9,498,073 shares underlying the Notes issuable to RDW in tranche seven. Conversions of the Notes shall not be permitted if such conversion will result in the holder owning more than 4.99% of our common shares outstanding after giving effect to such conversion. 
+ 
+The Engagement Letter provides, among other things, for the issuance to Carter, during the term of the Engagement Letter, of restricted stock equal to four percent of any capital raised from investors introduced to the Company by Carter divided by the closing price of our common stock on the date of a raise. For the purposes of the Registration Statement, we have included an aggregate of 93,045 shares issuable to Carter in connection with financings by a third party investor in December 2015 and March 2016 and the first five issued RDW notes. We have not included shares issuable to Carter upon the issuance of the sixth, seventh and eighth tranches of RDW Notes.
+ 
+Because several of the actual issuance dates, conversion dates and conversion prices under the Notes remain unknown, there is no maximum amount of our shares that may be issued by the Company upon conversion of the Notes. Because several of the actual issuance dates and market prices on the dates of issuance of the Notes remain unknown, and because the actual dates of potential future financings by investors introduced to us by Carter and the market prices of our common stock on the dates of these future financings remain unknown, there is no maximum amount of our shares that may be issued to Carter pursuant to the Engagement Letter. Accordingly, we caution readers that, although we are registering 9,591,118shares, the number of shares actually issued under the Purchase Agreement and the Engagement Agreement may be substantially greater than the number registered.
+ 
+Value of Common Stock Registered for Resale
+ 
+The total dollar value of the shares of common stock underlying the Notes we are registering for resale is set forth below, using the closing price per share for those securities on the OTCPink Marketplace on January 14, 2016, the date of the sale of the Notes. 
+ 
+ 
+(A)
+ 
+ 
+(B)
+ 
+ 
+(C)
+ 
+
+ 
+Shares of Common Stock 
+Underlying Notes Registered for Resale
+ 
+ 
+Market Price
+on Date of Sale
+ 
+ 
+Dollar Value of Common 
+Stock Registered for Resale (1)
+ 
+
+ 
+ 
+9,498,073 
+ 
+$1.02 
+ 
+$9,688,034.46 
+
+ 
+(1) The product of column (A) multiplied by column (B).
+ 
+ 
+3
+
+ 
+ 
+Value of Payments Made to Carter and RDW in Connection with the Notes
+ 
+In connection with the issuance of the Notes to RDW, we are obligated to pay Carter cash fees of 10% of the capital raised up to $1,000,000, 8% of the capital raised up to $5,000,000 and 6% of the capital raised over $5,000,000 and equity compensation in shares of common stock equal to 4% of the capital raised divided by the closing price of our common stock on the date of close. We have paid or are obligated to pay Carter the following amounts upon the issuance of each Note: 
+ 
+ (A)
+ 
+(B)
+ 
+ 
+(C)
+ 
+ 
+(D)
+ 
+ 
+(E)
+ 
+ 
+(F)
+ 
+ 
+(G)
+ 
+
+Date of Issuance
+ 
+Amount Invested / Gross Proceeds to Company
+ 
+ 
+Cash Compensation
+ 
+ 
+Equity Compensation (Shares of
+Common Stock)
+(1)
+ 
+ 
+Market
+Price
+(2)
+ 
+ 
+Dollar Value of Equity Compensation
+(3)
+ 
+ 
+Total Dollar
+Value of Cash
+and Equity Compensation
+(4)
+ 
+
+January 14, 2016
+ 
+$250,000 
+ 
+$25,000 
+ 
+ 
+9,804 
+ 
+$1.02 
+ 
+$10,000 
+ 
+$35,000 
+
+March 2, 2016
+ 
+$25,000 
+ 
+$2,500 
+ 
+ 
+1,124 
+ 
+$0.89 
+ 
+$1,000 
+ 
+$3,500 
+
+March 15, 2016
+ 
+$40,000 
+ 
+$4,000 
+ 
+ 
+1,322 
+ 
+$1.21 
+ 
+$1,600 
+ 
+$5,600 
+
+April 6, 2016
+ 
+$35,000 
+ 
+$3,500 
+ 
+ 
+14,000 
+ 
+$0.10 
+ 
+$1,400 
+ 
+$4,900 
+
+April 29, 2016
+ 
+$100,000 
+ 
+$10,000 
+ 
+ 
+44,444 
+ 
+$0.09 
+ 
+$4,000 
+ 
+$14,000 
+
+May 13, 2016
+ 
+$13,750 
+ 
+$1,375 
+ 
+ 
+6,875 
+ 
+$0.08 
+ 
+$550 
+ 
+$1,925 
+
+Note Issuable Three Business Days Following Effectiveness (5)
+ 
+$636,250 
+ 
+$61,625(6) 
+ 
+282,778(7) 
+$0.09(8) 
+$25,450(7) 
+$87,075(7)
+Note Issuable Five Business Days Following Effectiveness (5)
+ 
+$650,000 
+ 
+$60,000(6) 
+ 
+288,889(7) 
+$0.09(8) 
+$26,000(7) 
+$86,000(7)
+Total
+ 
+$1,750,000(9) 
+$168,000(8)(10) 
+ 
+648,472 (7)(11) 
+ 
+ 
+ 
+ 
+$70,000 (7)(12) 
+$238,000(7)(13)
+_____________ (1) The equity compensation is 4% of the capital raised divided by the closing price of our common stock on the date of issuance of the Note.
+
+(2) The closing OTCPink Marketplace price per share of common stock on the date of issuance of the Note.
+
+(3) Product of column (D) multiplied by column (E).
+
+(4) Sum of column (C) added to column (F).
+
+(5) As of the date of this prospectus this Note has not yet been issued.
+
+(6) Not yet payable to Carter as of the date of this prospectus.
+
+(7) Estimated based on an estimated closing price of $0.09 on the date of issuance of the seventh tranche and eighth tranches.
+
+(8) Estimated.
+
+(9) Includes $1,286,250 not yet invested as of the date of this prospectus.
+
+(10) $121,625 not yet payable to Carter as of the date of this prospectus.
+
+(11) Includes 289,653 shares of common stock not yet issuable to Carter as of the date of this prospectus.
+
+(12) Includes $51,450 based on common stock not yet issuable to Carter as of the date of this prospectus.
+
+(13) Includes $173,075 not yet payable to Carter as of the date of this prospectus.
+
+ 
+ 
+4
+
+ 
+
+ 
+The dollar amount of actual and potential payments we are required to pay to RDW upon the occurrence of certain events is set forth below ("Calculable RDW Payments"). 
+ 
+ Maximum Interest Payment on Notes at Maturity (1)
+ 
+ 
+Late Fee on Unpaid Interest at Maturity (2)
+ 
+ 
+Maximum Early Repayment
+Premium (3)
+ 
+ 
+Payment on
+Occurrence of
+Event Not Timely
+Cured (4)
+ 
+ 
+Public
+Information
+Failure
+Payments (5)
+ 
+ 
+Payment of
+Legal Fees (6)
+ 
+ 
+Total
+ 
+
+$111,883 
+ 
+$20,139 
+ 
+$602,400 
+ 
+$9,188 
+ 
+$18,375 
+ 
+$10,000 
+ 
+$771,986 
+
+____________
+ 1. Represents the maximum amount of interest payable (calculated at 8% per annum based on 274 days) by the Company to RDW under all of the Notes assuming that all interest payments under the Notes are timely made and that the interest is paid in cash.
+
+2. Represents the maximum amount of interest payable (calculated at 18% per annum) by the Company to RDW if the Company fails to pay $111,883 in interest due upon Maturity for a period of one year from the date such interest payment is due.
+
+3. Represents the maximum early repayment premium calculated as 135% of the outstanding principal amount of the Notes issued to RDW in the first five tranches and interest accrued thereon through May 31, 2016. Excludes Notes issued to RDW in tranches six, seven and eight. Represents the amount of partial liquidated damages payable in cash to RDW, calculated as 0.5% of the aggregate subscription amount paid by RDW, or $1,837,500, until the applicable Event (as defined in the Registration Rights Agreement) is cured. Excludes the interest payment of 18% per annum, or such lesser maximum amount that is permitted to be paid by applicable law, if the Company fails to pay the foregoing partial liquidated damages within seven days after the date such liquidated damages becomes payable.
+
+4. Represents the monetary penalties that would be payable if at any time during the period commencing from the six month anniversary of the date of the Purchase Agreement and ending at such time that all of the securities, if a registration statement is not available for the resale of all the securities, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), if the Company shall fail for any reason to satisfy the current public information requirement of Rule 144(c) ("Public Information Failure"). As partial liquidated damages to RDW by reason of any delay in or reduction of its ability to sell the securities, the Company shall pay to RDW an amount in cash equal to 1% of the aggregate subscription price on the day of a Public Information Failure and on every 30th day (prorated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144. Excludes an interest rate penalty at 1.5% per month on such Public Information Failure payments in the event the Company fails to make Public Information Failure payments in a timely manner (prorated for partial months) until such Public Information Failure is paid in full.
+
+5. At the Closing, the Company paid RDW an aggregate of $10,000 for RDW's legal fees.
+
+ 
+The payments above do not include the following payments which cannot be calculated until the occurrence of future events ("Other RDW Payments"):
+ 
+ 1. Pursuant to each Note, the Company shall be liable to pay RDW $500 per trading day for each trading day after the Share Deliver Date until stock certificates are delivered to RDW upon the conversion of the Notes or until such time that RDW rescinds its conversion request. Share Delivery Date means not later than three trading days after each conversion date.
+
+2. Pursuant to each Note, if the Company fails to deliver certificates to RDW by the Share Delivery Date and if thereafter RDW is required to purchase or RDW's brokerage firm otherwise purchases shares of common stock to deliver in satisfaction of a sale by RDW of the shares issuable upon conversion, then the Company shall (A) pay in cash the amount, if any, by which (x) RDW's total purchase price, including brokerage commissions, for the common stock so purchased exceeds (y) the product of (1) the aggregate number of shares of common stock that RDW was entitled to receive from the conversion at issued multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed and (B) at the option of RDW, either reissue the Note in a principal amount equal to the principal amount of the attempted conversion or deliver to RDW the number of shares of common stock that would have been issued if the Company had timely delivered the shares of the Common Stock. For example, if RDW purchases common stock having a total purchase price of $11,000 with respect to an attempted conversion of a Note with respect to which the actual sale price of the conversion shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay RDW $1,000.
+
+3. Pursuant to each Note, if any Event of Default (as defined in the Notes) occurs that results in the acceleration of such Note, the interest rate on such Note shall accrue at an additional interest rate equal to the lesser of (i) 2% per month (24% per annum) or (ii) the maximum rate permitted under applicable law.
+
+4. Pursuant to the Purchase Agreement, the Company shall pay to RDW, in cash, as partial liquidated damages, $500 per trading day for each trading after the Legend Removal Date until certificates are delivered to RDW without a legend. Legend Removal Date means the third trading day following the date that a restrictive legend is no longer required on stock certificates issued to RDW.
+
+ 
+The company has the intention, and a reasonable basis to believe that it will have the financial ability, to make all payments on the Notes if it is successful in executing its business plan and raising additional funds through private placements of its securities. 
+ 
+ 
+5
+
+ 
+ 
+Total Possible Profit to RDW
+ 
+Calculated as if the Notes were Converted and Underlying Shares Resold on January 14, 2016, the Date of Sale of the Notes
+ 
+The table below sets forth the total possible profit RDW could realize as a result of the conversion discount for the shares of common stock, using (i) the OTCPink Marketplace price per share of the securities underlying the convertible notes on January 14, 2016, the date of the sale of the Notes, and (ii) the conversion price per share of the underlying securities on the date of the sale of the Notes, calculated by using the conversion discount rate and the closing OTCPink Marketplace price per share on the date of the sale of the Notes. Please note however, that because the conversion price of each Note is equal to 60% of the lower of (i) the lowest traded price of our common stock during the 20 trading days preceding the applicable conversion date or (ii) the lowest traded price of our common stock during the 20 trading days preceding the date of issuance of such Note, the actual total possible profit RDW could realize depends on the price of our common stock on and during the 20 trading days preceding the applicable conversion dates and may differ from the information set forth below.
+ 
+ (A)
+ 
+(B)
+ 
+ 
+(C)
+ 
+ 
+(D)
+ 
+ 
+(E)
+ 
+ 
+(F)
+ 
+ 
+(G)
+ 
+ 
+(H)
+ 
+ 
+(I)
+ 
+ 
+(J)
+ 
+
+Date of Sale
+ 
+Note
+Principal 
+(1)
+ 
+ 
+Amount Invested / Gross Proceeds to Company
+ 
+ 
+Conversion Price per Share
+(2)
+ 
+ 
+Combined Conversion Price
+(3)
+ 
+ 
+Shares of Common Stock Underlying the Notes
+(4)
+ 
+ 
+Market Price on Date of Sale and Resale
+(5)
+ 
+ 
+Combined Market Price on Date of Sale and Resale / Proceeds from Resale
+(6)
+ 
+ 
+Total Possible Discount to the OTCPink Marketplace Price
+(7)
+ 
+ 
+Possible Profit to RDW
+(8)
+ 
+
+January 14, 2016
+ 
+$1,837,500.00 
+ 
+$1,750,000.00 
+ 
+$0.432 
+ 
+$1,837,500.00 
+ 
+ 
+4,253,472 
+ 
+$1.02 
+ 
+$4,338,542 
+ 
+$2,501,042 
+ 
+$2,588,542 
+
+____________
+ (1) Includes original issue discount.
+
+(2) The conversion price may be adjusted upon the occurrence of a stock split, stock combination, or subsequent equity sale a price per share lower than the then effective conversion price.
+
+(3) The product of column (D) multiplied by column (F).
+
+(4) The quotient of column (B) divided by column (D). Assumes no interest payments and complete conversion through the terms of the Notes.
+
+(5) Assumes that RDW resells the shares underlying each Note at the closing market price on the date of sale.
+
+(6) The product of column (F) multiplied by column (G).
+
+(7) Column (H) less column (E).
+
+(8) Column (H) less column (C).
+
+(9) As of the date of this prospectus this Note has not yet been issued.
+
+ 
+ 
+6
+
+ 
+
+ 
+Calculated as if the Notes were Converted and Underlying Shares Resold on May 31, 2016
+ 
+The conversion price of each Note is equal to 60% of the lower of (i) the lowest traded price of our common stock during the 20 trading days preceding the applicable conversion date or (ii) the lowest traded price of our common stock during the 20 trading days preceding the date of issuance of such Note. The table below sets forth the total possible profit RDW could realize as a result of the conversion discount for the shares of common stock assuming RDW had determined to convert the Notes on May 31, 2016, using (i) the OTCPink Marketplace price per share of the securities underlying the convertible notes on May 31, 2016 and (ii) the conversion price per share of the underlying securities on May 31, 2016, calculated by using the conversion discount rate and the closing OTCPink Marketplace price per share on such date.
+ 
+ (A)
+ 
+(B)
+ 
+ 
+(C)
+ 
+ 
+(D)
+ 
+ 
+(E)
+ 
+ 
+(F)
+ 
+ 
+(G)
+ 
+ 
+(H)
+ 
+ 
+(I)
+ 
+ 
+(J)
+ 
+
+Assumed Date of Conversion 
+ 
+Note Principal 
+(1)
+ 
+ 
+Amount Invested / Gross Proceeds to Company
+ 
+ 
+Conversion Price
+(2)
+ 
+ 
+Combined Conversion Price
+(3)
+ 
+ 
+Shares of Common Stock Underlying the Notes
+(4)
+ 
+ 
+Market Price on Assumed Date of Conversion and Resale
+ 
+ 
+Combined Market Price on Assumed Date of Conversion and Resale / Proceeds from Resale
+(5)
+ 
+ 
+Total Possible Discount to the OTCPink Marketplace Price
+(6)
+ 
+ 
+Possible Profit to RDW
+(7)
+ 
+
+May 31, 2016
+ 
+$1,837,500.00 
+ 
+$1,750,000.00 
+ 
+$.042 
+ 
+$1,837,500.00 
+ 
+ 
+43,750,000 
+ 
+$0.09 
+ 
+$3,937,500.00 
+ 
+$2,100,000.00 
+ 
+$2,187,500.00 
+
+___________ 
+ (1) Includes original issue discount.
+
+(2) For the purposes hereof, we have estimated that the conversion price of the Notes for the purposes of calculating the shares issuable to RDW will be $0.042, which is 60% of the lowest traded price of our common stock during the 20 trading days preceding May 31, 2016. The conversion price may be adjusted upon the occurrence of a stock split, stock combination, or subsequent equity sale a price per share lower than the then effective conversion price.
+
+(3) The product of column (D) multiplied by column (F).
+
+(4) The quotient of column (B) divided by column (D). Assumes no interest payments and complete conversion through the terms of the Notes.
+
+(5) The product of column (F) multiplied by column (G).
+
+(6) Column (H) less column (E).
+
+(7) Column (H) less column (C).
+
+ 
+ 
+7
+
+ 
+ 
+Proceeds to the Company and Related Ratios
+ 
+Calculated as if the Notes were Converted and Underlying Shares Resold on January 14, 2016, the Date of Sale of the Notes
+ 
+The table below sets forth (i) the gross proceeds paid or payable to the Company upon the issuance of the Notes, (ii) all calculable actual and potential payments that have been or may be required to be made in connection with the Notes, (iii) the resulting net proceeds to the Company, (iv) the combined total possible profit to be realized as a result of any conversion discounts regarding the securities underlying the convertible notes held by RDW, (v) ratio of the calculable actual and potential payments that have been or may be required to be made in connection with the Notes to the net proceeds to the Company from the sale of the Notes, and (vi) the ratio of the possible profit payable to RDW to the net proceeds to the Company from the sale of the Notes. The conversion price of each Note is equal to 60% of the lower of (i) the lowest traded price of our common stock during the 20 trading days preceding the applicable conversion date or (ii) the lowest traded price of our common stock during the 20 trading days preceding the date of issuance of such Note. The calculations in the table below assume that RDW converted the Notes and resold the underlying shares on January 14, 2016.
+ 
+ (A)
+ 
+(B)
+ 
+ 
+(C)
+ 
+ 
+(D)
+ 
+ 
+(E)
+ 
+ 
+(F)
+ 
+ 
+(G)
+ 
+
+Date of Sale
+ 
+Amount Invested / Gross Proceeds to Company
+ 
+ 
+Payments by Company 
+(1)
+ 
+ 
+Net Proceeds to Company (2)
+ 
+ 
+Possible Profit to RDW 
+(3)
+ 
+ 
+Ratio of Payments by
+Company to Net Proceeds to Company 
+(4)
+ 
+ 
+Ratio of Possible Profit by RDW to Net Proceeds to Company
+(5)
+ 
+
+January 14, 2016
+ 
+$1,750,000 
+ 
+$1,001,985 
+ 
+$748,015 
+ 
+$2,588,542 
+ 
+ 
+134% 
+ 
+346%
+____________ 
+ (1) Includes $771,985 in Calculable RDW Payments and all payments paid or payable to Carter and excludes the Other RDW Payments and prepayment penalties on Notes issued or issuable in tranches six, seven and eight. The payments paid and payable to Carter are calculated as described above in this prospectus and are not calculated using the closing price of our common stock on January 14, 2016.
+
+(2) Column (B) less column (C).
+
+(3) Equals the total possible profit RDW could realize as a result of the conversion discount for the common stock underlying the Notes, if RDW converted and sold the Notes on January 14, 2016, using the conversion price of 0.42, based on the lowest price of the common stock on the OTCPink Marketplace for the 20 trading days prior to January 14, 2016.
+
+(4) Quotient of column (C) divided by column (D).
+
+(5) Quotient of column (E) divided by column (D).
+
+ 
+ 
+8
+
+ 
+
+ 
+Calculated as if the Notes were Converted and Underlying Shares Resold on May 31, 2016
+ 
+The table below sets forth (i) the gross proceeds paid or payable to the Company upon the issuance of the Notes, (ii) all calculable actual and potential payments that have been or may be required to be made in connection with the Notes, (iii) the resulting net proceeds to the Company, (iv) the combined total possible profit to be realized as a result of any conversion discounts regarding the securities underlying the convertible notes held by RDW, (v) ratio of the calculable actual and potential payments that have been or may be required to be made in connection with the Notes to the net proceeds to the Company from the sale of the Notes, and (vi) the ratio of the possible profit payable to RDW to the net proceeds to the Company from the sale of the Notes. The conversion price of each Note is equal to 60% of the lower of (i) the lowest traded price of our common stock during the 20 trading days preceding the applicable conversion date or (ii) the lowest traded price of our common stock during the 20 trading days preceding the date of issuance of such Note. The calculations in the table below assume that RDW converted the Notes and resold the underlying shares on May 31, 2016.
+ 
+ (A)
+ 
+(B)
+ 
+ 
+(C)
+ 
+ 
+(D)
+ 
+ 
+(E)
+ 
+ 
+(F)
+ 
+ 
+(G)
+ 
+
+Date of Issuance
+ 
+Amount Invested / Gross Proceeds to Company
+ 
+ 
+Payments by Company
+(1)
+ 
+ 
+Net Proceeds to Company (2)
+ 
+ 
+Possible Profit to RDW 
+(3)
+ 
+ 
+Ratio of Payments by
+Company to Net Proceeds to Company 
+(4)
+ 
+ 
+Ratio of Possible Profit by RDW to Net Proceeds to Company
+(5)
+ 
+
+May 31, 2016
+ 
+$1,750,000 
+ 
+$1,001,985 
+ 
+$748,015 
+ 
+$2,187,500.00 
+ 
+ 
+134% 
+ 
+292%
+___________ 
+ (1) Includes $771,985 in Calculable RDW Payments and all payments paid or payable to Carter and excludes the Other RDW Payments and prepayment penalties on Notes issued or issuable in tranches six, seven and eight. The payments paid and payable to Carter are calculated as described above in this prospectus and are not calculated using the closing price of our common stock on January 14, 2016.
+
+(2) Column (B) less column (C).
+
+(3) Equals the total possible profit RDW could realize as a result of the conversion discount for the common stock underlying the Notes, if RDW converted and sold the Notes on January 14, 2016, using the conversion price of 0.42, based on the lowest price of the common stock on the OTCPink Marketplace for the 20 trading days prior to January 14, 2016.
+
+(4) Quotient of column (C) divided by column (D).
+
+(5) Quotient of column (E) divided by column (D).
+
+ 
+Shares Held by Non-Affiliates and RDW
+ 
+The table below sets forth the number of shares of common stock held by non-affiliates and shareholders other than RDW immediately prior to entry into the Purchase Agreement and the number of shares registered for resale hereunder. 
+ 
+ Held by Non-Affiliates and Persons Other
+than RDW Prior to Entry into Purchase Agreement
+ 
+ 
+Shares Registered for Resale on Behalf of
+RDW 
+
+ 
+30,000,500
+ 
+ 
+ 
+9,591,118
+ 
+ 
+9
+
+ 
+ 
+Other Financings and Other Issuances
+ 
+In addition to entry into the Purchase Agreement and Engagement Letter, the Company also entered into the transactions described below in the third and fourth fiscal quarters of its fiscal year ended May 31, 2016. Any conversion of the Series B Preferred Stock, the December 3, 2015 note and the March 31, 2016 note will result in immediate and substantial dilution to the Company's stockholders. Upon liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Stock may be entitled to a liquidation preference of up to $10.00 per share, or an aggregate of $47,000,000
+ 
+December 3, 2015 Convertible Note
+ 
+On December 3, 2015 we consummated an offering (the "JSJ Financing") pursuant to which we issued a $250,000 convertible note to JSJ Investments Inc. ("JSJ"). The note bears interest at 12% per year and outstanding principal and accrued interest will be payable on demand on or after the September 3, 2016 maturity date of the note. The conversion price of the note is the lower of (i) a 40% discount to the lowest trading price during the previous 20 trading days to the date of a conversion notice or (ii) $0.18, a 40% discount to the lowest trading price during the previous 20 trading days prior to December 3, 2015. We issued Carter 8,065 shares of common stock as equity compensation in connection with this financing. We are not registering shares issuable to JSJ in this prospectus.
+ 
+March 31, 2016 Convertible Note
+ 
+On March 31, 2016 we consummated an offering (the "JMJ Financing") pursuant to which we issued a 10% original issue discount note to JMJ Financial ("JMJ"), an entity that we believe is related to JSJ. The principal amount of the note was $55,555.56 and the consideration paid to the Company was $50,000. The conversion price of the note is the lower of $0.20 or 60% of the lowest trading price in the 25 trading days previous to the conversion date. The holder may, at its sole discretion, issue additional identical notes up to an aggregate principal amount of $500,000. The principal is due on March 31, 2018 together with a one-time interest charge of 12%, or $6,666.67. We were required to issue Carter 14,286 shares of common stock as equity compensation in connection with this financing. We are not registering shares issuable to JMJ in this prospectus.
+ 
+Series B Preferred Stock
+ 
+On March 6, 2016, the Company filed the Certificate of Designation of Series B Preferred Stock ("Series B COD") with the Nevada Secretary of State in connection with a distribution/marketing agreement with Bosch Technologies LLC ("Bosch").The Company designated 4,700,000 shares of Series B Preferred Stock, all of were issued to Bosch pursuant to the distribution/marketing agreement. The Series B Preferred Stock, with respect to dividend rights and rights on liquidation, winding-up and dissolution, in each case ranks subordinate and junior to the Company's Series A Preferred Stock and all other securities of the Company issued or established after March 9, 2016 which, by their respective terms, are senior to the Series B Preferred Stock. The Series B Preferred Stock is senior to the Company's common stock and all other securities of the Company issued and established after March 9, 2016 that do not expressly provide that such securities rank on parity with or senior to the Series B Preferred Stock. The Preferred Shares have a liquidation preference of the greater of (i) the sum of (A) $10.00 per share and (B) the amount of any declared, but unpaid distribution and (ii) the amount Bosch would have received it such share of Series B Preferred Stock had been fully converted into shares of the Company's common stock in accordance with the Series B COD. Upon liquidation, dissolution or winding up of the Company, if Bosch is entitled to a liquidation preference of $10.00 per share, Bosch shall receive $47,000,000. Each share of Series B Preferred Stock is convertible into shares of the Company's common stock at a price equal to the volume weighted average price per share for the 10 trading days prior to the date of conversion. The aggregate conversion amount is determined by multiplying the converted amount of Series B Preferred Shares by the conversion price of each tranche converted. The aggregate conversion amount of the Series B Preferred Shares when converted into shares of common stock shall be equal to or greater than $47,000,000 and upon the final conversion, if the aggregate conversion amount is less than $47,000,000, Bosch shall be entitled to receive from the Company on a pro rata basis shares of common stock in an amount necessary so that the aggregate conversion amount is then equal to $47,000,000. The Company may at any time redeem all of the outstanding Series B Preferred Shares for a cash payment of $10.00 per share. Even though Bosch may not convert the note into shares of the Company's common stock if such conversion would result in Bosch owning morning than 4.99% of the Company's outstanding stock, this restriction does not prevent Bosch from selling some of its holdings and then converting additional shares.
+ 
+10
+
+ 
+
+ 
+Issuance to Netgain Financial, Inc.
+ 
+On April 25, 2016, the Company issued Netgain Financial, Inc. ("Netgain") 6,000,000 shares of common stock as compensation for investor relations services pursuant to an engagement agreement. The Company has agreed to register these shares for resale. The contract has a term of six months and shall be automatically extended for additional six month terms unless the Company terminates the engagement prior to the then effective term. The Company has agreed to indemnify Netgain from damages that arise out of or are due to the inaccuracy or incompleteness of any information supplied to Netgain by the Company. 
+SUMMARY OF THIS OFFERING
+ 
+ Securities Offered
+9,591,118 shares of common stock. Our common stock is described in further detail in the section of this prospectus titled "DESCRIPTION OF OUR SECURITIES."
+
+Securities Offered by the Company
+None.
+
+Common Shares Outstanding Before
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001580167_accushares_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001580167_accushares_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..45f8189d5086034bb68aa66cb4df897b0b94a0ff
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001580167_accushares_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 e70079s1a.htm PRE-EFFECTIVE AMENDMENT NO. 2 As filed with the Securities and Exchange Commission on June 13, 2016 Registration No. 333 204416 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Pre-Effective Amendment No. 2 Form S 1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ACCUSHARES TRUST I Sponsored by AccuShares Investment Management, LLC (Exact name of Registrant as specified in its charter) Delaware 6799 36 7629280 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 300 First Stamford Place 4th Floor East Stamford, CT 06902 1-855-286-7866 (Address, including zip code, and telephone number, including area code, of Registrant s principal executive offices) Wilmington Trust, N.A., Trustee Rodney Square North 1100 North Market Street Wilmington, DE 19890 302 651 1000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Kathleen H. Moriarty, Esq. Kaye Scholer LLP 250 West 55th Street New York, NY 10019 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o If this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b 2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o Non accelerated filer x Smaller reporting company o (Do not check if a smaller reporting company) Calculation of Registration Fee Title of each class of securities to be registered Proposed maximum aggregate offering price(1) Amount of registration fee(2) AccuShares S&P GSCI Crude Oil Excess Return Up Shares $ 200,000,000 $23,240(3) AccuShares S&P GSCI Crude Oil Excess Return Down Shares $ 200,000,000 $23,240(3) (1)The proposed maximum aggregate offering price has been calculated assuming that shares are sold at a price of $25.00 per share. (2)The amount of the registration fee of the shares is calculated in reliance upon Rule 457(o) under the Securities Act of 1933 and using the proposed maximum aggregate offering price as described above. (3) Registration fees of $23,240 for the $200,000,000 in aggregate offering price of AccuShares S&P GSCI Crude Oil Excess Return Up Shares and $23,240 for the $200,000,000 in aggregate offering price of AccuShares S&P GSCI Crude Oil Excess Return Down Shares were previously paid in the initial filing of the registration statement on Form S-1, filed on May 22, 2015. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. The Trust may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to completion, dated June 13, 2016 PROSPECTUS ACCUSHARES TRUST I Proposed Maximum Aggregate Offering Price of Up Shares (Ticker Symbol) Proposed Maximum Aggregate Offering Price of Down Shares (Ticker Symbol) AccuShares S&P GSCI Crude Oil Excess Return Fund $200,000,000 (OILU) $200,000,000 (OILD) AccuShares Trust I is a Delaware statutory trust organized into separate fund series, and sponsored by AccuShares Investment Management, LLC ( Sponsor ). The series listed above ( Fund ) will always issue, distribute and redeem Up and Down Shares in equal quantities. The Fund s shares represent fractional undivided interests in and ownership of the Fund only. The Fund will offer its shares on a continuous basis and be listed on the NASDAQ OMX. The Fund is not intended to be used as a long term passive investment vehicle. The Fund is not appropriate for you if you do not intend to actively monitor and manage your holdings in the Fund before and immediately following the Fund distribution date. The objective of the Fund is to track the changes in the prices of specified commodities where such prices are published as an index value ( Underlying Index ) by S&P Dow Jones Indices LLC, which is unaffiliated with the Fund or the Sponsor. Exposure to changes in the Underlying Index will be achieved through the allocation of the Fund s liquidation value to each of its classes ( Class Value ) and the resulting distribution to Fund shareholders of cash or cash and paired Up and Down Shares declared on prescribed distribution dates. The Fund s Up Shares will generally be entitled to a distribution when the Fund s Underlying Index has increased as of specified dates ( Regular Distributions ) or by more than 75% ( Special Distributions ). Similarly, the Fund s Down Shares will generally be entitled to Regular or Special Distributions when the Underlying Index has declined. The change in the allocation of the Fund s liquidation value to each class, as well as any resulting Regular or Special Distribution, will have a total value, after adjustment for dilution in value of shares held by the recipient following any Regular or Special Distribution, equal to the favorable, but no more than 90%, Underlying Index change since the previous distribution declaration date or since the Fund s inception in the case of the first distribution. Regular and Special Distributions are expected to be made principally in cash, though the Sponsor will cause the Fund to make all or any part of any such distribution in paired shares where further cash distributions would have an adverse effect on the liquidity of the market for the Fund s shares as described herein. After the first six months of trading in the Fund s shares, the Sponsor intends to cause the Fund to continue to make Regular and Special Distributions entirely in cash, unless further distributions in cash would result in the Fund having less than $25 million in assets. The share class having an adverse experience from Underlying Index changes will receive no Regular or Special Distribution and will experience dilution in value caused by the distribution to the opposing share class. Corrective distributions of shares ( Corrective Distributions ) may occur if the Fund s share classes exchange trading prices deviate persistently from the value per share representing their share class relative portion of the Fund s liquidation value ( Class Value per Share ). See Investment Objectives, Distributions and Distribution Dates, and Description of the Shares & Certain Terms of the Trust Agreement. The Fund will hold only cash, short dated U.S. Treasuries or collateralized U.S. Treasury repurchases. The Fund will not invest in commodities, futures, swaps, or other assets that may track its Underlying Index. The Fund will continuously offer and redeem its shares only in blocks of 25,000 Up Shares and 25,000 Down Shares ( Creation Units ). Only Authorized Participants may purchase and redeem Creation Units for cash. The initial purchaser may, though it is under no obligation to do so, make initial purchases of one or more Creation Units of the Fund at an initial price per share of $25.00. Thereafter, shares of the Fund will be offered to Authorized Participants in Creation Units at the Fund s Class Values per Share for each class. See Creation and Redemption of Shares and Plan of Distribution. All other investors may only buy or sell the Fund s shares in the secondary market at current market prices and may incur fees or brokerage commissions on their transactions. The Fund s Up and Down Shares will trade separately. Investing in the shares involves significant risks. See Risk Factors beginning on page 26. Neither the Securities and Exchange Commission ( SEC ) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is ________, 2016 The Fund is not suitable for all investors The Fund is very different from most mutual funds, exchange-traded funds, commodity pools and other exchange-traded products. You should note that: (1)Down Shares Are Unlike Other Traditional Fund Investments. The Down Shares of the Fund pursue investment goals which are inverse to the performance of its Underlying Index, a result opposite from the results of most mutual funds, exchange-traded funds, and other exchange-traded products. (2)Distributions Can Reduce or Eliminate Your Desired Exposure to the Underlying Index and Cash Distributions Will Reduce the Size of the Fund. The Fund s Regular and Special Distributions of cash, or cash and shares, will reduce your opportunity for gains arising from changes in the Fund s Underlying Index in subsequent periods. Any Corrective Distribution will eliminate your opportunity for such gains in subsequent periods. The Sponsor intends to cause the Fund to make Regular and Special Distributions in cash, although the Sponsor will cause the Fund to make all or any part of any such distribution in paired shares instead of cash where further cash distributions would adversely affect the liquidity of the market for the Fund s shares. The payment of cash distributions over time is expected to cause a decline in the Fund s Class Values. If the Fund s Class Values decline to a significant extent, the market for the Fund s shares may become less liquid. Moreover, a significant decline in the Fund s Class Values may cause the Sponsor to terminate the Fund if its continued operation would be uneconomical. In any event, the Fund will always have sufficient assets to redeem all of its outstanding shares at the prevailing Class Values per Share. When the Fund makes a distribution in paired shares, it will not issue fractional shares but will instead distribute cash in lieu of fractional shares. Regular and Special Distributions of shares will be made in equal quantities of Up Shares and Down Shares (or the cash value of such shares) only to the share class of the Fund whose Class Value per Share has increased since the beginning of the distribution measurement period that starts with the prior distribution declaration date or the inception of Fund operations in the case of the first distribution declaration date ( Measuring Period ). If a distribution is in cash, any amounts held in cash will have no responsiveness to the Underlying Index. Any portion of your Fund holdings in your portfolio that is represented by equal amounts of Up Shares and Down Shares will also have no responsiveness to any changes in the level of the Fund s Underlying Index since change in the relative Class Values per Share of each Up Share and each Down Share will exactly offset each other with respect to changes in the Underlying Index. (3)If You Seek to Maintain a Maximum Exposure to the Underlying Index, You May Need to Rebalance Your Fund Investments After Every Distribution. Investors wishing to maximize exposure to the Underlying Index (in either direction) or investors wishing to compound gains over one or more distribution dates must invest any cash distributed in the class of shares aligned with their investment objectives. To the extent that a distribution is made in paired shares, investors will need to sell all shares of the class of i shares they receive in such distribution that opposes their intended exposure to the Underlying Index and use the sale proceeds (combined with any cash distributions) to invest in the class of shares aligned with their investment objectives. (4)Trading Prices and Trading Transaction Costs Will Adversely Impact Your Ability to Closely Track the Underlying Index through an Investment in the Shares of the Fund. There is no assurance that an investor will be able to execute purchases and sales at any consistent or desired trading price. For example, if you initially hold Up Shares in the Fund and the Class Value per Share of the Up Shares exceeds the Class Value per Share of the Down Shares on the declaration date for the next Regular Distribution, you will receive a Regular Distribution of cash, or cash and an equal number of Up and Down Shares, whose value (in the aggregate, including all cash and any shares distributed) will represent the increase in value of your original Up Shares as of the distribution declaration date caused by the increase over the Measuring Period in the Underlying Index. If you wish to maintain a total positive exposure to the Underlying Index at the increased value of your original Up Shares after the distribution date, you will need to use any cash distributed to you to purchase additional Up Shares. To the extent you received a distribution of paired shares, you will need to sell any Down Shares that were distributed to you and use the sale proceeds plus distributed cash to purchase additional Up Shares. Both your sale of the Down Shares, if any, and the purchase of additional Up Shares will occur at trading prices and not the Class Values per Share for such shares. Moreover, your transaction in the Fund s shares may be subject to your broker s commissions or other charges. The trading prices you receive and your transaction expenses may impede your ability to closely track the performance of the Underlying Index through an investment in the shares of the Fund. The Fund is designed to be utilized only by sophisticated investors who are expected to monitor and manage their position in the shares not less frequently than each distribution date. Investors who do not intend to actively manage and monitor their Fund investments at least as frequently as each distribution date should not buy shares of the Fund. There is no assurance that the Fund will achieve its objectives and an investment in the Fund could lose money. The Fund is not a complete investment program. Neither the Trust nor the Fund is a mutual fund or any other type of investment company within the meaning of the Investment Company Act of 1940, and neither is subject to regulation thereunder. Although the Sponsor is registered as a commodity pool operator with the Commodity Futures Trading Commission ( CFTC ), the Trust, and the Fund are not subject to regulation under the Commodities Exchange Act or by the CFTC. The shares of the Fund are neither interests in nor obligations of any of the Trust s sponsor, trustee or any of their respective affiliates. The shares are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. REGULATORY NOTICES You should rely only on the information contained in this prospectus or to which we have referred you. We do not authorize anyone to provide you with information that is different. This prospectus does not constitute an offer or solicitation to sell or a solicitation of an offer to buy, nor shall there be any offer, solicitation, or sale of the shares in any jurisdiction in which such offer, solicitation, or sale is not authorized or to any person to whom it is unlawful to make any such offer, solicitation, or sale. PROSPECTUS ACCUSHARES TRUST I $200,000,000 AccuShares S&P GSCI Crude Oil Excess Return Up Shares $200,000,000 AccuShares S&P GSCI Crude Oil Excess Return Down Shares Until ________, 2016 (25 calendar days after the date of this prospectus), all dealers effecting transactions in the shares, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions. ________, 2016 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The Registrant ( Registrant or Trust ) shall not bear any expenses incurred in connection with the issuance and distribution of the securities being registered. These expenses shall be paid by AccuShares Investment Management, LLC, the sponsor of the Registrant ( Sponsor ). Item 14. Indemnification of Directors and Officers. Section 2.4 of the Registrant s Second Amended and Restated Trust Agreement ( Trust Agreement ) between Wilmington Trust, N.A., a national banking association, the Registrant s Trustee ( Trustee ), and the Sponsor provides that each series of the Trust (each, a Fund ), on a joint and several basis (or any Fund separately to the extent the matter in question relates to a single Fund or is otherwise disproportionate), whether or not any of the transactions contemplated under the Trust Agreement shall be consummated, shall assume liability for, and shall indemnify, protect, save and keep harmless, the Trustee and its directors, officers, shareholders, employees, and agents ( Trustee Indemnified Parties ) from and against any and all claims, losses, liabilities or expenses (including but not limited to, the reasonable fees and expenses of counsel) of any kind and nature whatsoever (collectively, Expenses ), which may be imposed on, incurred by or asserted against the Trustee Indemnified Parties in any way relating to or arising out of or in connection with the formation, operation or termination of the Trust or such Fund, the execution, delivery and performance of the Trust Agreement or any other agreements with respect to the Trust or such Fund to which the Trust is a party or the action or inaction of the Trustee thereunder with respect to the Trust or such Fund, except for Expenses resulting from the gross negligence, bad faith or willful misconduct of any Trustee Indemnified Party. Such indemnity shall include payment from the applicable Fund s assets of the costs and expenses incurred by such Trustee Indemnified Party in defending itself against any claim or liability in its capacity as a Trustee Indemnified Party. Any amounts payable to a Trustee Indemnified Party under Section 2.4 may be payable in advance or may be secured by a lien on the applicable Fund s assets. Any such Expenses relating to the Trust rather than any particular Fund shall be allocated among the Funds. Section 5.9 of the Trust Agreement provides that the Trust (or any Fund separately to the extent the matter in question relates to a single Fund or is otherwise disproportionate), whether or not any of the transactions contemplated under the Trust Agreement shall be consummated, shall assume liability for, and shall indemnify, protect, save and keep harmless, the Sponsor and its affiliates, and their respective directors, officers, shareholders, partners, members, managers or employees ( Sponsor Indemnified Parties ) from and against any and all Expenses which may be imposed on, incurred by or asserted against the Sponsor Indemnified Parties in any way relating to or arising out of or in connection with the formation, operation or termination of the Trust or such Fund, the execution, delivery and performance of the Trust Agreement or any other agreements with respect to the Trust or such Fund to which the Trust is a party or the action or inaction of the Sponsor thereunder with respect to the Trust or such Fund, except for Expenses resulting from the gross negligence, bad faith or willful misconduct of any Sponsor Indemnified Party. Any such Expenses relating to the Trust rather than any particular Fund shall be allocated among the Funds. The indemnities contained in Sections 2.4 and 5.9 of the Trust Agreement shall survive the termination of the Trust Agreement, the resignation of the Trustee or the Sponsor, respectively, the dissolution or other cessation to exist of the Trustee Indemnified Party or the Sponsor Indemnified Party, respectively, the withdrawal, adjudication of bankruptcy or insolvency of the Trustee Indemnified Party or the Sponsor Indemnified Party, respectively, or the filing of a voluntary or involuntary petition in bankruptcy under the Bankruptcy Code by or against the Trustee Indemnified Party or the Sponsor Indemnified Party, respectively. Item 15. Recent Sales of Unregistered Securities. Not applicable. II-1 Item 16. Exhibits and Financial Statement Schedules. (4) Exhibits Exhibit Number Description 4.1(a) Second Amended and Restated Trust Agreement ("Trust Agreement") (1) 4.1(b) Amendment to the Trust Agreement dated June 5, 2015 (2) 4.1(c) Amendment to the Trust Agreement dated September 29, 2015 (3) 4.1(d) Amendment to the Trust Agreement dated June 8, 2015, filed herewith 4.2 Form of Authorized Participant Agreement (4) 4.3 Form of Global Certificate for Up Shares (attached as Exhibit A to the Trust Agreement) 4.4 Form of Global Certificate for Down Shares (attached as Exhibit B to the Trust Agreement) 4.5 Sponsor Agreement (1) 5.1 Opinion of Kaye Scholer LLP as to legality (3) 8.1 Opinion of Morrison & Foerster LLP as to tax matters (5) 10.1 Domestic Custodian Agreement (1) 10.2 Administration Agreement (1) 10.3 Depository Agreement (1) 10.4 Transfer Agency and Service Agreement (1) 10.5 Non Custody Investment Advisory Agreement (1) 10.6 Index Sublicense Agreement (1) 10.7 ETF Licensing Agreement by and between AccuShares Investment Management, LLC and S&P Opco, LLC (6) 23.1 Consent of Independent Registered Public Accountants, filed herewith 23.2 Consents of Kaye Scholer LLP and Morrison & Foerster LLP are included in Exhibits 5.1 and 8.1, respectively 24.1 Powers of attorney (3) _____________________________ (1) Incorporated by reference to the Exhibit identified with the same number and filed with Pre-Effective Amendment No. 1 to the registration statement of the Trust filed with the Securities and Exchange Commission on July 17, 2014 (File No. 333-194666). (2) Incorporated by reference to the Exhibit identified as Exhibit 4.1 and filed with the Trust s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2015 (File No. 001-36890). (3) Incorporated by reference to the Exhibit identified with the same number and filed with Pre-Effective Amendment No. 1 to the registration statement of the Trust filed with the Securities and Exchange Commission on September 29, 2015 (File No. 333-204416). (4) Incorporated by reference to the Exhibit identified with the same number and filed with Pre-Effective Amendment No. 2 to the registration statement of the Trust filed with the Securities and Exchange Commission on March 16, 2015 (File No. 333-194666). (5) Incorporated by reference to the Exhibit identified with the same number and filed with the registration statement of the Trust filed with the Securities and Exchange Commission on May 22, 2015 (File No. 333-204416). (6) Incorporated by reference to the Exhibit identified with the same number and filed with Pre-Effective Amendment No. 4 to the registration statement of the Trust filed with the Securities and Exchange Commission on May 11, 2015 (File No. 333-194666). Portions of this Exhibit were omitted and have been filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment pursuant to Rule 406 under the Securities Act of 1933, as amended (as well as Rule 24b-2 under the Securities Exchange Act of 1934, as amended). (b) Financial Statement Schedules Not applicable. II-2 Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: (i) If the Registrant is relying on Rule 430B: (A) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or (ii) If the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. II-3 (5) That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. (6) That insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, Connecticut, on June 13, 2016. ACCUSHARES INVESTMENT MANAGEMENT, LLC Sponsor of AccuShares Trust I By: /s/ Jack Fonss Jack Fonss President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities* and on the dates indicated. Signature Capacity Date /s/ Jack Fonss Jack Fonss President and Chief Executive Officer (principal executive officer) June 13, 2016 /s/ Robert Rokose Robert Rokose Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer) June 13, 2016 * The Registrant is a Trust and the persons are signing in their capacities as officers of AccuShares Investment Management, LLC, the sponsor of the Registrant. Exhibit Index Exhibit Number Description 4.1(d) Amendment to the Trust Agreement dated June 8, 2015 23.1 Consent of Independent Registered Public Accountants iii ACCUSHARES TRUST I Table of Contents SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001581987_tigenix-nv_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001581987_tigenix-nv_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001581987_tigenix-nv_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001582244_corning_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001582244_corning_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bc0976279bac4bbf64b656dc528a021cfecbd88a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001582244_corning_prospectus_summary.txt
@@ -0,0 +1 @@
+highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you. This prospectus includes information about our business and our financial and operating data. Before making an investment decision, we encourage you to read the entire prospectus carefully, including the risks discussed in the Risk Factors section beginning at page 10. We also encourage you to review our financial statements and the other information we provide in the reports and other documents that we file with the SEC as described under Where You Can Find More Information . We use the terms we, us, our, the Holding Company, and Corporation, in this prospectus to refer to Corning Natural Gas Holding Corporation. When we refer the Holding Company and its business generally we are referring to the Holding Company as a whole including its wholly-owned consolidated subsidiary Corning Natural Gas Corporation, which we refer to as the Gas Company , and our fifty percent membership interests in our joint ventures: Leatherstocking Gas Company, LLC and Leatherstocking Pipeline Company, LLC, which we sometimes refer to collectively as the Leatherstocking JVs . Our Company Overview We are a public utility company holding company headquartered in Corning, New York, incorporated in 2013. Our principal subsidiary is the Gas Company, a regulated natural gas distribution company with operations in New York, which was incorporated in 1904. The Gas Company purchases, transports, distributes and sells natural gas. The Gas Company has over 425 miles of gas distribution main, 15,000 services, and 86 regulating stations. Our customer base includes residential, commercial, industrial and municipal customers in the Southern Tier area of New York and gas utilities that service the Bath area and Elmira, New York. The Gas Company is franchised to supply gas service in all of the political subdivisions in which it operates. The Gas Company also transports and compresses gas for a gas producer from its gathering network into an interstate pipeline. The Gas Company is under the jurisdiction of the NYPSC, which oversees and sets the rates for New York gas distribution companies. Our largest customers are Corning Incorporated, New York State Electric & Gas, Bath Electric, Gas & Water Systems, and Repsol Energy North America (formerly Talisman Energy USA Incorporated). Although Repsol is a significant customer, unlike our other customers, we do not deliver gas to Repsol. Rather, we receive gas from several of its gathering systems and wells and transport its gas through our system. These customers accounted for approximately 18.8% of our revenues in fiscal year 2015 and 17.7% in fiscal year 2014. We have contracted with various sources to provide natural gas to our distribution system. We contract for pipeline capacity, as well as storage capacity of approximately 736,000 dekatherms ( Dth ). Prior to 2014, the Gas Company contracted with a third party to manage its gas supply and storage. After that date, we began to manage our transportation and storage capacity with internal resources. We have secured the NYPSC-required fixed price and storage gas supply for the 2015-2016 winter season and are managing our storage and gas supply contracts to assure that we follow our gas supply and acquisition plan. Assuming no extraordinary conditions for the winter season, gas supply, flowing and storage, will be adequate to serve our approximately 15,000 customers. Our business is highly seasonal because a material portion of our total sales and delivery volumes is to customers whose usage varies depending upon temperature. Our present rate structure, however, includes both a weather normalization clause and a revenue decoupling mechanism that are designed to mitigate the effect of departures from normal temperatures on both our earnings and cost to our customers. Our utility operations are subject to regulation by the New York Public Service Commission, or the NYPSC, as to rates, service area, adequacy of service and safety standards. We also own a 50% interest in two joint ventures with Mirabito Regulated Industries, LLC: Leatherstocking Gas Company, LLC and Leatherstocking Pipeline Company, LLC, which we sometimes collectively refer to as the Leatherstocking JVs. The businesses of our Leatherstocking JVs require capital to secure franchises and build pipelines and our agreements with the co-owner of the Leatherstocking JVs require that we match, on a one-for-one basis, the contributions of capital made by Mirabito Regulated Industries, LLC. Leatherstocking Gas distributes gas in Susquehanna and Bradford Counties, Pennsylvania, and has franchises to provide gas distribution services in Broome, Chenango, Delaware, and Ostego Counties, New York. Leatherstocking Pipeline currently supplies gas from the Williams Partners L.P. s Laser pipeline to one customer in Lawton, Pennsylvania. Leatherstocking Gas owns three gate stations and approximately 16 miles of pipeline in Susquehanna and Bradford counties, Pennsylvania. Recent Industry Trends Since 2000, domestic energy markets have experienced significant price volatility. Natural gas markets have been particularly volatile, principally due to weather and changes in supply availability. Rising natural gas prices and the development of new technologies (specifically, hydraulic fracturing) have resulted in a surge in supply-related investment that has increased domestic production. In part as a result of the significant increase in domestic supply, gas prices have fallen significantly. Historically, the competition in our residential market has been primarily from electricity for cooking, water heating and clothes drying, and to a small degree, electricity, fuel oil and propane for heating. The price of gas remains low in comparison to that of alternative fuels in the Gas Company s service territory and our competitive position in the residential, commercial and industrial markets continues to be strong. Over 90 percent of our residential customers heat with gas. When we expand our distribution system to attract new customers, our principal competition is oil and propane. Natural gas enjoys a price advantage over these fuels today. In addition, increasing supplies and price induced conservation have favorably impacted natural gas prices. Given the current environment, we expect that natural gas will maintain a favorable competitive position compared to other fuels. Given natural gas s clean burning attributes, we believe environmental regulations may enhance this competitive outlook. Further, we do not expect a shortage of natural gas to impact our business over the next five to ten years. Natural gas supply over the last several years has been positive, and domestic reserves and production have increased. This is especially true in proximity to our distribution network. We likewise anticipate no shortages of the necessary pipes and valves for safe distribution of natural gas, and continue to receive material inventory from various reliable sources. Our Operating and Growth Strategy We intend to enhance shareholder value through revenue growth and reduction of our operating costs. As a gas utility, the Gas Company s earnings are primarily determined by a rate of return set by the NYPSC on the investments in our facilities and equipment (e.g., our rate base) to ensure service to our customers. Over the next several years, we intend to continue making significant capital investments to ensure the safety and reliability of our gas network. Based on these capital investments, we anticipate that we will increase our rate base. In addition, we have identified growth opportunities that we believe will contribute to our revenues, earnings and rate base, including growth in our existing service territory, expansion into new areas and increased connections with local production sources. We also invest in our joint ventures, each a 50%-owned subsidiary, Leatherstocking Gas Company, LLC and Leatherstocking Pipeline Company, LLC. Leatherstocking Gas distributes gas in Susquehanna and Bradford Counties, Pennsylvania, and has franchises to provide gas distribution services in Broome, Chenango, Delaware, and Ostego Counties, New York. Leatherstocking Pipeline currently supplies gas from the Williams Partners L.P. s Laser pipeline to one customer in Lawton, Pennsylvania. We have agreed, subject to regulatory approvals and certain other conditions to closing, to acquire all of the capital stock of Pike County Light & Power Company, a Pennsylvania electric and gas utility which provides electric service to approximately 4,600 customers and natural gas service to 1,200 customers in Pike County, Pennsylvania. Experienced Management Team; Employees Our executive management team and board of directors have over 130 years of collective experience in the utility industry. The Gas Company had 58 employees as of September 30, 2015, and 57 as of September 30, 2014. Of this total, nearly half are union labor working under an agreement effective until April 2, 2018. Our principal executive offices are located at 330 West William Street, Corning, New York 14830, and our telephone number is 607-936-3755. Our web site is www.corninggas.com. The information available on our web site is not part of this prospectus or any other reports filed by us with the SEC other than our actual filings with the SEC expressly incorporated by reference in this prospectus. SUMMARY OF THE OFFERING The subscription rights We are distributing non-transferable subscription rights to holders of our common stock, as a dividend, at no charge, at the rate of one right for each share of common stock owned as of 5:00 p.m. on the record date for the dividend of April 14, 2016, for a total of 2,469,871 subscription right. There is no minimum amount of proceeds required to complete the rights offering. Basic subscription Each right entitles the recipient shareholder with the right to purchase either: (i) one-eighth share of our 6% Series A Cumulative Preferred Stock for $25.00, or (ii) one-sixth share of our Series B Convertible Preferred Stock for $20.75. No fractional shares of Preferred Stock will be issued. A shareholder must hold eight subscription rights to subscribe for one share of Series A Cumulative Stock or six subscription rights to subscribe for one share of Series B Convertible Stock. For example, a stockholder with 1,000 shares of common stock will receive 1,000 subscription rights and may purchase 125 shares of Series A Cumulative Preferred Stock for $3,125, or 166 shares of Series B Convertible Preferred Stock for $3,444.50, or some combination of Series A and Series B Preferred Stock. The subscription rights are not transferable. The Series A and Series B Preferred Stock have not been issued or traded prior to this offering and will not be listed on any exchange. No trading market may develop for the Preferred Stock. If the total subscriptions for Series A Cumulative Preferred Stock exceed 140,000 shares, or for Series B Convertible Preferred Stock exceed 360,000, we will allocate shares of the applicable series of Preferred Stock pro rata among the shareholders exercising their basic subscription rights for such series of Preferred Stock. Over-subscription privilege If you fully exercise your basic subscription privilege, the over-subscription privilege entitles you to subscribe for additional securities (Series A Cumulative Preferred Stock or Series B Convertible Preferred Stock) at the subscription price. If there are not enough shares of either class of Preferred Stock authorized under our certificate of incorporation, as amended, to satisfy all subscriptions made under the over-subscription privilege, we will allocate the available securities pro rata among the over-subscribing rights holders. Since we have no commitments from shareholders to exercise their subscription rights, it is possible that we will not raise any funds in this rights offering. Expiration date and extensions 5:00 p.m. New York City time, June 20, 2016, unless otherwise extended by us to a later date. We may, in our sole discretion, extend the time for exercising the subscription rights. If we extend the time for exercising the subscription rights, we will not extend such time more than 30 days past the original expiration date. Procedure for exercising rights You may exercise your basic subscription privilege and your over-subscription privilege by properly completing the rights card and forwarding it to the subscription agent with payment of the subscription price, including payment for all the securities you wish to purchase with both the basic subscription privilege and the over-subscription privilege. The subscription agent must actually receive both the subscription rights card (enclosed with this prospectus, the form of which is attached as Appendix B to this prospectus) and payment at or prior to the expiration of the rights offering. Any personal checks must be for good funds and clear the banking system by the expiration date. If you send rights card by mail, you are urged to use insured, registered mail. Pro ration of exercises of Rights in excess of authorized shares We have 140,000 shares of Series A Cumulative Stock and 360,000 shares of Series B Convertible Stock authorized for issuance under our certificate of incorporation, as amended. In the event that shareholders exercise subscription rights to purchase more than the authorized number of shares of either series of Preferred Stock, we will pro rate the number of shares issued to the subscribers for that series. Shareholders exercising basic subscription rights will first be allocated the authorized shares of the series of Preferred Stock for which they have subscribed. They would be entitled to purchase a number of shares of that series of Preferred Stock in proportion to the number of shares of that series for which they have subscribed, over the total number of shares of that series for which basic subscription rights have been exercised, multiplied by the number of authorized shares of that series. No fractional shares of Preferred Stock will be issued and if the pro ration of shares would result in a fractional share, it will be rounded down to the nearest whole share. Over-subcription rights will only be accepted for a series of Preferred Stock to the extent that the basic subscriptions for that series of Preferred Stock are for fewer than the total authorized number of shares of that series. If, after the basic subscription rights exercised to purchase any series of Preferred Stock are satisfied, the over-subscription rights is greater than the remaining number of authorized shares of that series of Preferred Stock, the shareholders exercising over-subscription rights will be allocated the remaining authorized shares of that series of Preferred Stock in proportion to the number of shares of that series for which they have exercised their over-subscription rights over the total number of shares of that series for which over-subscription rights have been exercised, multiplied by the remaining number of authorized shares of that series of Preferred Stock. No fractional shares of Preferred Stock will be issued and if the pro ration of shares would result in a fractional share, it will be rounded down to the nearest whole share. If the number of subscription rights exercised for either series of Preferred Stock exceed the number authorized shares and will require pro ration, the Holding Company will issue a press release notifying the shareholders that the basic or over-subscription rights for a series of preferred stock will require pro ration and file the press release with the SEC with a Current Report on Form 8-K. Subscription agent Computershare Trust Company, N.A. is the subscription agent for the subscription rights, as well as the transfer agent and registrar for the 6% Series A Cumulative Preferred Stock, the Series B Convertible Preferred Stock and our common stock. Use of proceeds We will use the proceeds of this rights offering, borrowings from Manufacturers and Traders Trust Company ( M&T Bank ), and distributions paid to us by the Gas Company to fund our obligations in connection with our agreement to acquire Pike County Light & Power Company, a Pennsylvania corporation, including among others, prepayment of outstanding Pike County Light & Power bonds; and, to the extent funds are available, for capital contributions to our existing subsidiary Corning Natural Gas Corporation (the Gas Company ) and our Leatherstocking Gas and Leatherstocking Pipeline joint ventures (the Leatherstocking JVs ) to fund capital expenditures, replacement of distribution mains and customer service lines, and growth in our existing service area and nearby areas, and costs of this offering. The rights offering does not have a minimum amount of proceeds. See Use of Proceeds below. Risk factors Exercise of your subscription rights and purchase of the securities involve risks common to other investments in equity securities as well as other risks particular to the Holding Company. You should carefully read the section entitled Risk Factors in this prospectus and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015, as well as the other information included in or incorporated by reference in this prospectus before you exercise your rights. Federal income tax considerations For U.S. federal income tax purposes, you will not recognize income or loss in connection with the receipt or exercise of subscription rights unless the rights offering is part of a disproportionate distribution within the meaning of applicable tax law, in which case you may recognize taxable income upon receipt of the subscription rights. We believe that the rights offering should not be part of a disproportionate distribution. The disproportionate distribution rules are complicated, however, and their application is uncertain. This position is not binding on the Internal Revenue Service, or the courts and accordingly, it is possible that the Internal Revenue Service could challenge this position. You may be required to allocate a portion of your tax basis in your common stock to the subscription rights we distribute to you in the offering, depending on the value of the subscription rights. For further information, please see Material U.S. Federal Income Tax Consequences below. You are urged to consult your own tax advisor as to your particular tax consequences resulting from the receipt and the disposition or exercise of subscription rights and the receipt, ownership and disposition of Series A Cumulative Preferred Stock and/or the receipt, ownership and disposition of the Series B Convertible Preferred Stock and of an conversion of such Series B Convertible Preferred Stock into shares of common stock, including the receipt, ownership and disposition of that common stock. SUMMARY OF THE TERMS OF THE 6% SERIES A CUMULATIVE PREFERRED STOCK Issue6% Series A Cumulative Preferred Stock Initial price $25.00 per share Number of shares Up to 140,000, such number as are subscribed for purchase by shareholders upon exercise of their subscription rights, including any over-subscription purchases Dividend rate 6.0% of the liquidation preference per share, cumulative Dividend payment dates Dividends will be paid when, as and if declared on or about the 14th day of April, July, October and January of each year, commencing October 14, 2016 Dividend record dates: March 31, June 30, September 30 or December 31, as the case may be, immediately preceding the relevant dividend payment date Stated maturity On September 30, 2023, outstanding shares of Series A Cumulative Preferred Stock will mature and be redeemed solely in cash at a redemption price equal to the Liquidation Preference ($25.00) per share plus an amount equal to all accrued but unpaid dividends, if any, on such shares (whether or not declared) to and including the redemption date, subject to our having funds legally available for such redemption under New York law. Redemption at the option of the holder upon a fundamental change If a fundamental change occurs at any time prior to the redemption date, holders of the Series A Cumulative Preferred Stock will have the right to require us to redeem their shares, in whole or in part, for the amount of the Liquidation Preference ($25.00) during the period beginning on, and including, the effective date of such fundamental change and ending on, and including, the date that is twenty (20) business days after such effective date, subject to our having funds legally available under New York law for such redemption. Holders of shares of Series A Cumulative Preferred Stock who tender their shares for redemption with the fundamental change redemption period will also receive any accumulated and unpaid dividends for any dividend period prior to the effective date of the fundamental change. Holders of Series A Cumulative Preferred Stock will have no other rights in the event of a fundamental change unless otherwise expressly provided in the Charter, as amended by the Certificate of Amendment. A fundamental change means the occurrence of a change in control, which will be deemed to have occurred if any of the following occurs after the initial issuance date of the preferred stock: (1) any person or group within the meaning of Section 13(d) under the Securities Exchange Act of 1934, as amended (the Exchange Act ), other than us, our subsidiaries or any of our employee benefit plans, files any schedule, form or report under the Exchange Act disclosing that such person has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of shares of our voting stock representing 50% or more of the total voting power of all outstanding classes of our voting stock entitled to vote generally in elections of directors, or has the power, directly or indirectly, to elect a majority of the members of our board of directors; (2) we consolidate with, enter into a binding share exchange, merger or similar transaction with or into another person other than one or more of our subsidiaries or we sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of our assets, or any person consolidates with, or merges with or into, us, in any such event, where the consideration consists, in full or in part, of rights, securities or property other than cash; or (3) the holders of our capital stock approve any plan or proposal for the liquidation or dissolution of us (whether or not otherwise in compliance with the Charter, provided, that certain mergers or consolidations may be deemed liquidation events triggering a mandatory redemption). Liquidation preference $25.00 per share Deemed Liquidation Events A Deemed Liquidation Event consists of: (1) a merger or consolidation in which we are a constituent party and in which the consideration consists solely of cash and/or the right to receive cash; except any such merger or consolidation in which the shares of our capital stock outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (a) the surviving or resulting entity; or (b) if the surviving or resulting entity is a wholly owned subsidiary of another entity immediately following such merger or consolidation, the parent entity of such surviving or resulting corporation; or (2) the sale, lease, transfer or other disposition in which the consideration consists solely of cash, in a single transaction or series of related transactions, by us, or any subsidiary of ours, of all or substantially all our assets and our subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more of our subsidiaries if substantially all of our assets and our subsidiaries assets taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer or other disposition is to a wholly owned subsidiary of ours. We may not effect a Deemed Liquidation Event referred to in (1) above unless the agreement or plan of merger or consolidation for such transaction provides that the consideration payable to our shareholders shall be allocated in accordance with the liquidation preference rights of the Series A Cumulative Preferred Stock. In the event of a Deemed Liquidation Event referred to in (2) above, if we do not effect a dissolution of the Company under the New York Business Corporation Law within ninety (90) days , then upon the written request of any holder of Series A Cumulative Preferred Stock delivered to us not later than one hundred twenty (120) days after such Deemed Liquidation Event, we will use the consideration received for such Deemed Liquidation Event and any other assets of the Company legally available for distribution to shareholders, to redeem all, but not less than all, shares of Series A Cumulative Preferred Stock held by such requesting shareholder at a price per share equal to the Series A Liquidation Preference (i.e., $25.00), plus any accumulated and unpaid dividends for any dividend period prior to the effective date of the Deemed Liquidation Event. In the event the available proceeds are not sufficient to redeem all shares of Series A Cumulative Preferred Stock and capital stock on parity with it from all shareholders requesting such redemption, we will ratably redeem each such shareholder s shares of Series A Cumulative Preferred Stock to the fullest extent of such available proceeds, and will redeem the remaining shares held by such shareholders as soon as we may lawfully do so. Voting rights The holders of Series A Cumulative Preferred Stock will have no voting rights except as specifically required by New York law or by the Charter, as amended by the Certificate of Amendment, which will include, among other things the following voting rights: If dividends on shares of Series A Cumulative Preferred Stock have not been declared and paid for eight or more consecutive dividend periods, the holders of Series A Cumulative Preferred Stock and Series B Convertible Preferred Stock, voting together as a single class with holders of all other preferred stock of equal rank having similar voting rights, will be entitled at our next special or annual meeting of shareholders to vote for the election of a total of one additional member of our Board of Directors, subject to certain limitations; The affirmative vote or consent of holders of at least a majority of the outstanding shares of all preferred stock of equal rank having similar voting rights, voting together as a single class is required for us to: (1) authorize or create, or increase the authorized amount of, any specific class or series of stock ranking senior to the preferred stock; (2) amend, alter or repeal the provisions of our Certificate of Incorporation so as to adversely affect the special rights, preferences, privileges or voting powers of the Series A Cumulative Preferred Stock; or (3) consummate a binding share exchange or reclassification involving shares of Series A Cumulative Preferred Stock or a merger or consolidation of us with another entity unless the Series A Cumulative Preferred Stock remains outstanding or is replaced by preference securities with terms not materially less favorable to holders, in each case subject to certain exceptions. Ranking The Series A Cumulative Preferred Stock will rank, with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up: senior to all classes or series of our common stock, and to any other class or series of our capital stock issued in the future, unless the terms of that capital stock expressly provide that it ranks senior to, or on parity with, the Series B Convertible Preferred Stock; on parity with any class or series of our capital stock, the terms of which expressly provide that it will rank on parity with the Series A Cumulative Preferred Stock, including the Series B Convertible Preferred Stock; and junior to any other class or series of our capital stock, the terms of which expressly provide that it will rank senior to the Series A Cumulative Preferred Stock, none of which exists on the date hereto, and the issue of which would be subject to the approval of a majority of the outstanding shares of Preferred Stock voting as a class; and subject to funds legally available and payment of or provision for our debts and other liabilities. SUMMARY OF THE TERMS OF THE SERIES B CONVERTIBLE PREFERRED STOCK IssueSeries B Convertible Preferred Stock Initial price $20.75 per share Number of shares Up to 360,000, such number as are subscribed for purchase by shareholders upon exercise of their subscription rights, including any over-subscription purchases Dividend rate 4.8% of the liquidation preference, cumulative Dividend payment dates Dividends will be paid when, as and if declared on or about the 14th day of April, July, October and January of each year, commencing October 14, 2016 Dividend record dates March 31, June 30, September 30 or December 31, as the case may be, immediately preceding the relevant dividend payment date Liquidation preference $20.75 per share Deemed Liquidation Events A Deemed Liquidation Event consists of: (1) a merger or consolidation in which we are a constituent party and in which the consideration consists solely of cash and/or the right to receive cash; except any such merger or consolidation in which the shares of our capital stock outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (a) the surviving or resulting entity; or (b) if the surviving or resulting entity is a wholly owned subsidiary of another entity immediately following such merger or consolidation, the parent entity of such surviving or resulting corporation; or (2) the sale, lease, transfer or other disposition in which the consideration consists solely of cash, in a single transaction or series of related transactions, by us, or any subsidiary of ours, of all or substantially all our assets and our subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more of our subsidiaries if substantially all of our assets and our subsidiaries assets taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer or other disposition is to a wholly owned subsidiary of ours. We may not effect a Deemed Liquidation Event referred to in (1) above unless the agreement or plan of merger or consolidation for such transaction provides that the consideration payable to our shareholders shall be allocated in accordance with the liquidation preference rights of the Series B Convertible Preferred Stock. In the event of a Deemed Liquidation Event referred to in (2) above, if we do not effect a dissolution of the Company under the New York Business Corporation Law within ninety (90) days , then upon the written request of any holder of Series B Convertible Preferred Stock delivered to us not later than one hundred twenty (120) days after such Deemed Liquidation Event, we will use the consideration received for such Deemed Liquidation Event and any other assets of the Company legally available for distribution to shareholders, to redeem all, but not less than all, shares of Series B Convertible Preferred Stock held by such requesting shareholder at a price per share equal to the Series B Liquidation Preference (i.e., $20.75) plus any accumulated and unpaid dividends for any dividend period prior to the effective date of the Deemed Liquidation Event. In the event the available proceeds are not sufficient to redeem all shares of Series B Convertible Preferred Stock and capital stock on parity with it from all shareholders requesting such redemption, we will ratably redeem each such shareholder s shares of Series B Convertible Preferred Stock to the fullest extent of such available proceeds, and will redeem the remaining shares held by such shareholders as soon as we may lawfully do so. Conversion right At any time and from time to time after issuance, the shares of Series B Convertible Preferred Stock are convertible, in whole or in part, at the option of the holder into shares of common stock at the rate of one (1) share of our common stock for each one (1) share of Series B Convertible Preferred Stock, subject to adjustment under certain circumstances (the Conversion Rate ). If all shareholders were to exercise their subscription rights to purchase Series B Convertible Preferred Stock and all of those holders were to convert their Series B Convertible Preferred Stock into shares of common stock at the initial Conversion Rate, we would issue 360,000 additional shares of common stock. The number of shares of common stock issuable upon conversion of each shares of Series B Convertible Stock is subject to adjustment under certain circumstances. Notwithstanding anything to the contrary set forth in this prospectus, in the event a holder of shares of the Series B Convertible Preferred Stock elects to convert any shares of Series B Convertible Preferred Stock and if such holder would be deemed to hold more than 10% of the capital stock of the Gas Company, either before or after the conversion, such holder may be subject to the provisions of Section 70 of the New York Public Service Law that require prior consent by the New York Public Service Commission (NYPSC). Although NYPSC consent is not required to purchase the Series B Convertible Stock itself, prior consent may be required when the Series B Convertible Stock is converted into voting common stock. In the past, the NYPSC has interpreted Section 70 of the Public Service Law to permit holders of the Gas Company s common stock to exercise subscription rights equal to such holders percentage ownership of common stock, without having to seek separate, individual authorization (e.g., a holder owning or deemed to own 12% of the common stock of the Gas Company could subscribe for up to 12% of the shares offering in a rights offering available to all common shareholders, without the need for review by the NYPSC of the specific transaction). Although that interpretation was limited to the circumstances pertaining to the particular prior subscription rights offering, those circumstances are similar to the current rights offering. Accordingly, the Holding Company intends to request a determination from the NYPSC that the conversion of the shares of Class B Convertible Stock into common stock, in proportion to existing ownership interests, either does not require separate, individual authorization or, alternatively, if such authorization is required, that it be granted. The Holding Company will not pay any cash to a holder in respect of such conversion or otherwise settle any such conversion in cash, other than the right of the holder to receive payment in lieu of any fraction of a share in exchange therefor. Stated maturity On September 30, 2026, outstanding shares of Series B Convertible Preferred Stock will mature and be redeemed solely in cash at a redemption price equal to the Liquidation Preference ($20.75) per share plus an amount equal to all accrued but unpaid dividends, if any, on such shares (whether or not declared) to and including the redemption date, subject to our having funds legally available for such redemption under New York law. Anti-dilution adjustments The conversion rate may be adjusted in the event of, among other things: (a) stock dividends or distributions; (b) subdivisions or combinations of our common stock; and (c) certain tender or exchange offers by us or one of our subsidiaries for our common stock, in each case subject to certain exceptions. Redemption at the option of the holder upon a fundamental change If a fundamental change occurs at any time, holders of the Series B Convertible Preferred Stock will have the right to require us to redeem their shares, in whole or in part, for the amount of the Liquidation Preference ($20.75) during the period beginning on, and including, the effective date of such fundamental change and ending on, and including, the date that is 40 business days after such effective date, subject to our having funds legally available under New York law for such redemption. Holders whose shares of Series B Convertible Preferred Stock who tender their shares for redemption with the fundamental change redemption period will also receive any accumulated and unpaid dividends for any dividend period prior to the effective date of the fundamental change. Holders of Series B Convertible Preferred Stock will have no other rights in the event of a fundamental change unless otherwise expressly provided in the Charter, as amended by the Certificate of Amendment. A fundamental change means the occurrence of a change in control, which will be deemed to have occurred if any of the following occurs after the initial issue date of the preferred stock: (1) any person or group within the meaning of Section 13(d) under the Exchange Act, other than us, our subsidiaries or any of our employee benefit plans, files any schedule, form or report under the Exchange Act disclosing that such person has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of shares of our voting stock representing 50% or more of the total voting power of all outstanding classes of our voting stock entitled to vote generally in elections of directors, or has the power, directly or indirectly, to elect a majority of the members of our board of directors; (2) we consolidate with, enter into a binding share exchange, merger or similar transaction with or into another person other than one or more of our subsidiaries or we sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of our assets, or any person consolidates with, or merges with or into, us, in any such event, where the consideration consists, in full or in part, of rights, securities or property other than cash; or (3) the holders of our capital stock approve any plan or proposal for the liquidation or dissolution of us (whether or not otherwise in compliance with the Charter), provided, that certain mergers or consolidations may be deemed liquidation events triggering a mandatory redemption. Voting rights The holders of Series B Convertible Preferred Stock will have no voting rights except as specifically required by New York law or by the Charter, as amended by the Certificate of Amendment, which will include, among other things the following voting rights: If dividends on shares of Series B Convertible Preferred Stock have not been declared and paid for eight or more consecutive dividend periods, the holders of Series B Convertible Preferred Stock and the Series A Cumulative Preferred Stock, voting together as a single class with holders of all other preferred stock of equal rank having similar voting rights, will be entitled at our next special or annual meeting of shareholders to vote for the election of a total of one additional member of our Board of Directors, subject to certain limitations; The affirmative vote or consent of holders of at least a majority of the outstanding shares of Series B Convertible Preferred Stock and all other preferred stock of equal rank having similar voting rights, voting together as a single class is required for us to: (1) authorize or create, or increase the authorized amount of, any specific class or series of stock ranking senior to the preferred stock; (2) amend, alter or repeal the provisions of our Certificate of Incorporation so as to adversely affect the special rights, preferences, privileges or voting powers of the Series B Convertible Preferred Stock; or (3) consummate a binding share exchange or reclassification involving shares of Series B Preferred Stock or a merger or consolidation of us with another entity unless the Series B convertible preferred stock remains outstanding or is replaced by preference securities with terms not materially less favorable to holders, in each case subject to certain exceptions. Ranking The Series B Convertible Preferred Stock will rank, with respect to priority of dividend payments and rights upon liquidation, dissolution or winding up: senior to all classes or series of our common stock, and to any other class or series of our capital stock issued in the future, unless the terms of that capital stock expressly provide that it ranks senior to, or on parity with, the Series A Cumulative Preferred Stock; on parity with any class or series of our capital stock, the terms of which expressly provide that it will rank on parity with the Series B Convertible Preferred Stock, including the Series A Cumulative Preferred Stock; and junior to any other class or series of our capital stock, the terms of which expressly provide that it will rank senior to the Series B Convertible Preferred Stock, none of which exists on the date hereto, and the issue of which would be subject to the approval of a majority of the outstanding shares of Preferred Stock voting as a class; and subject to funds legally available and payment of or provision for our debts and other liabilities.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001582341_mydx-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001582341_mydx-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d88cfa608d34bd83274d951813703334d3cf24d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001582341_mydx-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in our securities. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements that appear elsewhere in this prospectus. As used in this prospectus, the terms "we", "us", "our", and the "Company" means MyDx, Inc. a Nevada corporation and its subsidiaries. Our Business We are an early-stage science and technology company and plan to develop nanotechnology to measure chemicals of interest in many solid, liquid, or gas samples. The Company s first product, MyDx, is an analyzer in the palm of one s hands. Using one device with interchangeable sensors, MyDx is intended to allow consumers to test for pesticides in food, fruits, herbs, plants and vegetables; chemicals in water; and, toxins in the air. Acting as an electronic nose, MyDx is engineered to detect molecules in vapor. The analyzer itself has a user friendly interface designed to communicate with any iOS or Android smartphone. Once the app is downloaded and the device is synced, a sample can be placed in the sample chamber, which can be stimulated to release the chemicals of interest into the vapor phase for detection. Over the course of the next 24 months, the MyDx team plans to develop different sensors, the first of which is programmed to test for the presence of specific analytes and chemical constituents in fruits, herbs, plants and vegetables. Using the associated app, MyDx is intended to allow consumers to determine the concentrations of specific analytes and chemical constituents in their samples with a reasonable degree of accuracy. The Company s first product which is being sold commercially contains the CannaDx sensor. The Company s CannaDx Sensor measures the levels of key chemicals of interest in Cannabis, including Cannabinoids and Terpenes and the "Total Canna Profile" (TCP) of the plant. This is intended to allow individual consumers to test the broader chemical profile of their cannabis samples and correlate it to how it makes them feel so they can more consistently find a strain that works for them. The Cannabis samples "sniffed" by the sensor are sent via Bluetooth to the MyDx App, giving users a chemical profile of a sample and asking them, "How did this make you feel?" or "What did it help you relieve?". The Company shipped beta units in February 2015 and shipped the first revenue generating units in July 2015. The Company s foundational proprietary technology derives from research developed at the California Institute of Technology, Pasadena, California, for the Jet Propulsion Laboratory, used by NASA as well as an additional project funded by the Bill & Melinda Gates Foundation for other exploratory research and medical applications. The Company has a portfolio of intellectual property rights covering principles and enabling instrumentation of chemical sensing technology across solid, liquid, and gas samples, including certain patented and patent pending technologies from Next Dimension Technologies, Inc. pursuant to a joint development agreement discussed below. The Company incurred research and development expenses of approximately $1.5 million in 2014 related to the development of the MyDx Analyzer and the sensors. The Company had limited revenues during the year ended December 31, 2015. The Company currently has limited working capital, and has not completed its efforts to establish a source of revenues sufficient to cover operating costs. The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by early-stage companies. These risks include, but are not limited to, the uncertainty of availability of financing and the uncertainty of achieving future profitability. Management anticipates that the Company will be dependent, for the near future, on investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise funds through the capital markets. There can be no assurance that such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise capital or reduce certain discretionary spending could have a material adverse effect on the Company s ability to achieve its intended business objectives. We reported negative cash flow from operations for the years ended December 31, 2015 and 2014. It is anticipated that we will continue to report negative operating cash flow in future periods, likely until one or more of our products generates sufficient revenue to cover our operating expenses. If any of the warrants are exercised, all net proceeds of the warrant exercise will be used for working capital to fund negative operating cash flow. Our cash will not be sufficient to fund our operations for the next 12 months. Additionally, if we are unable to generate sufficient revenues to pay our expenses, we will need to raise additional funds to continue our operations. We have historically financed our operations through private equity and debt financings. The delays in our ability to ship products and generate revenues may have adversely affected our capital raising opportunities. We do not have any commitments for financing at this time, and financing may not be available to us on favorable terms, if at all. If we are unable to obtain debt or equity financing in amounts sufficient to fund our operations, if necessary, we will be forced to suspend or curtail our operations. In that event, current stockholders would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests of existing stockholders. CALCULATION OF REGISTRATION FEE Proposed Proposed Maximum Maximum Amount of Amount to be Offering Price Aggregate Registration Title of Each Class of Securities to be Registered Registered (1) Per Share (2) Offering Price Fee (3) Common stock, $0.001 par value per share 10,837,414 $ 0.40 $ 4,334,966 $ 436.53 Common stock underlying Warrants 7,571,395 $ 0.40 $ 3,028,558 $ 304.98 Total 18,408,809 $ 0.40 $ 7,363,524 $ 741.51 (1) All shares registered pursuant to this registration statement are to be offered by the selling stockholders. Pursuant to Rule 416, this registration statement also covers such number of additional shares of common stock to prevent dilution resulting from stock splits, stock dividends and similar transactions. (2) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) using the average of the bid and asked price as reported on the OTCQB on May 9, 2016. (3) Previously paid with the initial filing of this registration statement. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business and other factors beyond our control. Economic crisis and disruptions in the U.S. and global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business. The Company cannot provide any assurances that it will be able to raise the additional capital needed to fund its operations, or if the Company is able to raise such additional capital, that any such financing will be on terms which are beneficial to the existing shareholders. Shares Included in this Prospectus The shares that the selling stockholders named in this prospectus may offer and sell, from time to time, include 10,837,414 shares of common stock issued or issuable to shareholders of CDx and 6,739,100 shares of common stock underlying warrants for the right to purchase shares of our common stock issued to or issuable to shareholders of CDx whom we collectively refer to as the "CDX selling stockholders" in this prospectus and whom we refer to collectively as "CDx" in this prospectus; and 832,295 shares of common stock underlying warrants for the right to purchase shares of our common stock issued to or issuable to a placement agent. The 18,408,809 shares that are being registered for offer and sale by the CDx selling stockholders include the following: 599,833 shares issued to the CDx common stockholders exchanged for our common stock effected by the Merger on April 30, 2015 (the "CDx Merger"); 1,620,000 issued to the CDx Series A preferred stockholders, including shares issued to an officer and major shareholder, exchanged for our common stock effected by the CDx Merge; 6,284,554 shares issued to the CDx Series B preferred stockholders exchanged for our common stock effected by the CDx Merger; 1,858,407 shares issued to nine employees, ten consultants and five vendors for services and/or goods provided as assumed in accordance with the CDx Merger; 474,620 shares of common stock issued to an officer and major shareholder; 6,739,100 shares of common stock underlying warrants for the right to purchase shares of our common stock issued to or issuable to Series B shareholders of CDx which were issued in connection with the CDx Merger; and 832,295 shares of common stock underlying warrants issued to a placement agent to purchase shares of our common stock represent warrants originally issued to purchase shares of CDx common stock based on our assumption of the warrants effected by the CDx Merger; See "The accompanying notes to the CDx March 31, 2015 and December 31, 2014 Financial Statements—Recent Financings—Debt and Stockholders Equity" for more information regarding the conversion of the preferred stock into shares of our common stock. Employees and Vendors Selling Stockholders We executed stock grants to employees and vendors who had earned compensation or provided goods and services that had yet to be paid. The stock grants were entered into to eliminate all accrued and unpaid compensation or accounts payable to those employees and/or vendors. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED May 10, 2016 18,408,809 Shares of Common Stock This prospectus relates to the offer and sale, from time to time, by the selling stockholders named in this prospectus of up to 18,408,809 shares of our common stock, including 10,837,414 shares of our common stock and 7,571,395 shares of our common stock issuable upon the exercise of warrants to purchase shares of our common stock. The selling stockholders may resell or dispose of the shares of our common stock at fixed prices, at prevailing market prices at the time of sale or at prices negotiated with purchasers, to or through underwriters, broker-dealers, agents, or through any other means described in this prospectus under the section entitled "Plan of Distribution" beginning on page 47 of this prospectus. The selling stockholders will bear all commissions and discounts, if any, attributable to the sale or disposition of the shares. We will bear all costs, expenses and fees in connection with the registration of the shares. We will not receive any of the proceeds from the sale of the shares of our common stock by the selling stockholders. However, we will receive proceeds from the exercise of the warrants if the warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes. Our common stock is listed on the OTCQB under the symbol "MYDX". The closing price per share of our common stock, as reported by the OTCQB on May 9, 2016 was $0.40. The Registrant is not a "blank check company" as defined under Rule 419 of Regulation C under the Securities Act of 1933, as amended, and the Company has no plans or intentions to engage in a business combination following this offering. We are an "emerging growth company" under applicable U.S. federal securities laws and may elect to comply with reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. You should read carefully the "Risk Factors" beginning on page 4 of this prospectus before investing in the shares of our common stock that are the subject of this offering. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is: May 10, 2016. Table of Contents The Offering Shares of our common stock offered for re-sale by the selling stockholders pursuant to this prospectus 18,408,809 shares (1) Percent of our outstanding common stock represented by the shares being offered for re-sale by the selling stockholders as of April 16, 2016 83.3% (2) Common stock to be outstanding after the offering 29,653,323 shares (3) Proceeds to the Company All of the net proceeds from the sale of our common stock covered by this prospectus will be received by the selling stockholders who offer and sell shares of our common stock. We will not receive any proceeds from the sale of our common stock offered by the selling stockholders. The total dollar value of the shares of our common stock being registered for resale $7,363,524 (4) OTC QB Symbol MYDX (1) Consists of shares issued or issuable to the MyDx selling stockholders and employees and vendors selling stockholders and one of our officers named as selling stockholders in this prospectus. See "—Shares Included in this Prospectus," above. (2) Unless the context indicates otherwise, all share and per-share information in this prospectus is based on 22,081,928 shares of our common stock outstanding as of April 16, 2016. Unless the context indicates otherwise, all share and per-share information in this prospectus assumes no exercise of options, warrants or other rights to acquire our common stock outstanding as of December 31, 2015. (3) Shares of common stock to be outstanding after the offering assumes the issuance of an additional 7,571,395 shares resulting from the exercise of warrants. (4) Determined by multiplying the number of shares of common stock being registered by the closing price per share of our common stock, as reported by the OTCQB on May 9, 2016, which was $0.40. TABLE OF CONTENTS PAGE PROSPECTUS SUMMARY 1 RISK FACTORS 4 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 14 USE OF PROCEEDS 15 DETERMINATION OF OFFERING PRICE 15 PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND INFORMATION 15 DESCRIPTION OF PROPERTIES 15 LEGAL PROCEEDINGS 16 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS 16 DESCRIPTION OF BUSINESS 20 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 25 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 26 SELLING STOCKHOLDERS 30 PLAN OF DISTRIBUTION 40 EXECUTIVE COMPENSATION 41 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE 45 DESCRIPTION OF CAPITAL STOCK 46 LEGAL MATTERS 48 EXPERTS 48 INTEREST OF NAMED EXPERTS AND COUNSEL 49 WHERE YOU CAN FIND MORE INFORMATION 49 INDEX TO FINANCIAL STATEMENTS 50 This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission, or the SEC, using the "shelf" registration process. Under this prospectus, the selling stockholders may from time to time, in one or more offerings, sell the common stock described in this prospectus. You should rely only on the information that we have provided in this prospectus. We have not authorized anyone to provide you with different information and you must not rely on any unauthorized information or representation. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. This document may only be used where it is legal to sell these securities. You should assume that the information appearing in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus, or any sale of our common stock. Our business, financial condition and results of operations may have changed since the date on the front of this prospectus. We urge you to read carefully this prospectus before deciding whether to invest in any of the common stock being offered. Table of Contents RISK FACTORS Investing in our common stock involves risk. Before making an investment in our common stock, you should carefully consider the risks described below, together with the other information included in this prospectus, and the risks we have highlighted in other sections of this prospectus. The risks described below are those which we believe are the material risks we face. Any of the risks described below could significantly and adversely affect our business, prospects, financial condition and results of operations. As a result, the trading price of our common stock could decline and you may lose part or all of your investment. Additional risks and uncertainties not presently known to us or not currently believed by us to be immaterial may also impact us. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. Risks Related to our Business We have a limited operating history and a history of operating losses, and we may not be able to achieve or sustain profitability. In addition, we may be unable to continue as a going concern. MyDx was incorporated in December 2012 and has only a limited operating history. We had not generated any revenues until July 2015. We are not profitable and have incurred losses since our inception. We continue to incur research and development and general and administrative expenses related to our operations. We have experienced significant losses to date and may require additional capital to fund our operations. The current financial climate may make it more difficult to secure financing, if we need it. If our business model is not successful, or if we are unable to generate sufficient revenue to offset our expenditures, we may not become profitable, and the value of your investment may decline. We incurred a net loss of approximately $6,367,000 for the year ended December 31, 2015 and a cumulative net loss of approximately $9,898,000 from September 16, 2013 (date of inception) to December 31, 2015. We expect to continue to incur losses for the foreseeable future, and these losses will likely increase as we continue to commercialize our products. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If our products do not achieve market acceptance, we may never become profitable. The initial cost of completing development of our products and penetrating our anticipated markets will be substantial, and there is no assurance that we will be successful in doing so. Although we shipped our first revenue units in the third quarter of 2015, if we are not successful in growing revenues and controlling costs, we will not achieve profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Absent a significant increase in revenue or additional equity or debt financing, we may not be able to sustain our ability to continue as a going concern. Furthermore, we are experiencing the costs and uncertainties of a young operating company, including unforeseen costs and difficulties. We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful. Negative Operating Cash Flow We reported negative cash flow from operations for the years ended December 31, 2015 and 2014. It is anticipated that we will continue to report negative operating cash flow in future periods, likely until one or more of our products are placed into production and released to our customers. If any of the warrants are exercised, all net proceeds of the warrant exercise will be used for working capital to fund negative operating cash flow. We believe our cash balance, together with anticipated cash flows from operations, is insufficient to fund our operations for at least the next 12 months. We project that additional funding in the amount of $2,000,000 will be required to fund our operations for the next 12 months. Additionally, if we are unable to generate sufficient revenues to pay our expenses, we will need to raise additional funds to continue our operations. We have historically financed our operations through private equity and debt financings. The delays in our ability to ship products and generate revenues may have adversely affected our capital raising opportunities. We do not have any commitments for financing at this time, and financing may not be available to us on favorable terms, if at all. If we are unable to obtain debt or equity financing in amounts sufficient to fund our operations, if necessary, we will be forced to suspend or curtail our operations. Changes in accounting guidance could have an adverse effect on our results of operations, as reported in our financial statements. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, which is periodically revised and/or expanded. Accordingly, from time to time we are required to adopt new or revised accounting guidance and related interpretations issued by recognized authoritative bodies, including the Financial Accounting Standards Board and the SEC. Market conditions have prompted these organizations to issue new guidance that further interprets or seeks to revise accounting pronouncements related to various transactions as well as to issue new guidance expanding disclosures. The impact of accounting pronouncements that have been issued but not yet implemented is disclosed in our annual report on Form 10-K and our quarterly reports on Form 10-Q. An assessment of proposed standards is not provided, as such proposals are subject to change through the exposure process and, therefore, their effects on our financial statements cannot be meaningfully assessed. It is possible that future accounting guidance we are required to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have an adverse effect on our results of operations, as reported in our consolidated financial statements. Table of Contents We are an early-stage company, and as such, we have no meaningful operating or financial history, we have a limited amount of products in the marketplace. CDx commenced operations in January 2014. Therefore, there is limited historical financial information upon which to base an evaluation of our performance and future prospects. Due to our lack of operating history, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in the early-stage of operations, including, without limitation, the following: absence of an operating history; a limited amount of products in the marketplace; insufficient capital; expected continual losses for the foreseeable future; no history on which to evaluate our ability to anticipate and adapt to a developing market; uncertainty as to market acceptance of our initial and future products; limited marketing experience and lack of sales organization; and competitive and highly regulated environment. Because we are subject to these risks, potential investors may have a difficult time evaluating our business and their investment in our Company. We may be unable to successfully overcome these risks, any of which could irreparably harm our business. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with a new enterprise, the commercial launch of a new product which still requires testing, and the operation in a competitive industry. We expect to sustain losses in the future as we implement our business plan. There can be no assurance that we will ever operate profitably. We will require substantial additional funding, which may not be available to us on acceptable terms, or at all. Our cash balance as of December 31, 2015 was approximately $144,000. We do not have adequate funds to fully develop our business, and we need other capital investment to fully implement our business plans. Our current estimate of additional funds required is $2,000,000. We do not have any contracts or commitments for additional funding, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our development plans. In that event, current stockholders would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests of existing stockholders. We are dependent on our current management team. If we fail to attract and retain key management personnel, we may be unable to successfully develop or commercialize our products. In the early stages of development, our business will be significantly dependent on our management team. Our success will be particularly dependent upon our executive officers. The loss of any of their services could have a material adverse effect on us. We have not obtained key-man insurance on the lives of any members of our management team. Moreover, in order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified sales and marketing and management personnel. Competition for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain existing employees or that we will be able to find, attract and retain qualified personnel to join the Company on acceptable terms. We may not be able to attract or retain qualified management and research personnel in the future due to the intense competition for qualified personnel in our industry. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will impede significantly the achievement of our research and development objectives, our ability to raise additional capital and our ability to implement our business strategy. In particular, if we lose any members of our senior management team, we may not be able to find suitable replacements in a timely fashion or at all, and our business may be harmed as a result. Table of Contents We have experienced recent management and director changes. On July 10, 2015, at the request of the Company s Board of Directors and as part of management reorganization, Daniel Yazbeck resigned his position as Chief Executive Officer of the Company and the Company s subsidiary, CDx, Inc. As part of the reorganization, Thomas Gruber was appointed as the Chief Executive Officer of the Company and CDx, Inc. On August 4, 2015, the Company terminated its President, Chief Technology Officer and Chief Marketing Officer. On August 6, 2015, Thomas Gruber resigned as the Chief Executive Officer, Chief Operating Officer and a director of the Company and CDx. Mr. Gruber continued as the Chief Financial Officer and Secretary of the Company and CDx. On August 6, 2015, Daniel Yazbeck was appointed as the Interim Chief Executive Officer of the Company and CDx. On September 1, 2015, Mr. Gruber resigned as Chief Financial Officer and Secretary of the Company and CDx. On September 9, 2015, Daniel Yazbeck resigned as the Interim Chief Executive Officer of the Company and CDx and Albert Hugo-Martinez was appointed as the Chief Executive Officer and Interim Chief Financial Officer of the Company and CDx. On September 23, 2015, Mr. Hugo-Martinez resigned as the Chief Executive Officer and Interim Chief Financial Officer of the Company and CDx. On September 24, 2015 Michael Harris resigned from the Board of Directors of the Company, and on September 29, 2015 Edward Roffman resigned from the Board of Directors of the Company. On September 29, 2015, Daniel Yazbeck was appointed as the Chief Executive Officer and Chief Financial Officer of the Company and CDx. Mr. Yazbeck has remained as the Chairman of the Board of the Company since his appointment effective April 30, 2015. Between July 10, 2015 and September 29, 2015, Mr. Yazbeck was the Chief Innovation Officer of the Company. On September 24, 2015 Michael Harris resigned from the Board of Directors of the Company, and on September 29, 2015 Edward Roffman resigned from the Board of Directors of the Company. On September 29, 2015, Daniel Yazbeck was appointed as the Chief Executive Officer and Chief Financial Officer of the Company and CDx. On February 23, 2016, Federico Pier and George Jackoboice resigned from the Board of Directors of the Company and CDx. On February 26, 2016, Steven Katz resigned from the Board of Directors of the Company and CDx. These changes have been disruptive to the management and operations of the Company and could have a material adverse effect on our business, operating results, and financial condition. Initially we will be dependent on one product. Our Aero, Aqua and Organa Sensors will not be commercialized in the near future. Therefore, the Canna Sensor will account for a substantial portion of our revenues for the foreseeable future. As a result, our initial operating results are dependent upon market acceptance of our Canna product. Factors adversely affecting the pricing of, demand for, or market acceptance of the sensors, such as regulatory complications, competition, or technological change, could have a material adverse effect on our business, operating results, and financial condition. One of our initial products the Canna Sensor, relates to cannabis, which is a controlled substance under Federal law. Despite the development of a legal medical or recreational cannabis industry under certain state laws, cannabis use and possession remains illegal under Federal law, and such state laws are in conflict with the Federal Controlled Substances Act. Since our initial product, the Canna Sensor, relates to the use of cannabis, it may generate public controversy and be the subject of federal regulation or other action. Political and social pressures and negative publicity could limit or restrict the introduction and marketing of our initial or future product candidates. Adverse publicity from cannabis misuse, adverse side effects from cannabis or other cannabinoid products may harm the commercial success or market penetration achievable by our Canna Sensor. The nature of our Canna Sensor product attracts a high level of public and media interest, and in the event of any resultant negative publicity, our reputation may be harmed. Laws and regulations affecting the cannabis industry are constantly changing, which could detrimentally affect our business, and we cannot predict the impact that future legislation or changes in enforcement practices may have on our company. There is a substantial amount of change occurring in the United States regarding both the medical and recreational use of cannabis, and a number of individual states have enacted state laws to enable distribution, possession, and use of cannabis for medical, and in some cases, recreational purposes. The Obama Administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute individuals lawfully abiding by state-designated laws allowing for use and distribution of medical and recreational cannabis. However, there is no guarantee that the Obama Administration will not change its stated policy regarding enforcement of federal laws in states where cannabis has been legalized. Further, the change in administration after the 2016 presidential election cycle could introduce a less favorable policy with respect to enforcement of federal laws concerning cannabis. Future active enforcement of the current federal regulatory position on cannabis on a regional or national basis may directly and adversely affect the willingness of customers to invest in or buy our Canna Sensor, which is used in connection with cannabis. In addition, federal or state legislation could be enacted in the future that could prohibit customers of our Canna Sensor from distributing, possessing, or using cannabis. If such legislation were enacted, customers may discontinue use of our Canna Sensor, our potential source of customers would be reduced, and our revenues may decline. Violation of any federal or state law, or allegations of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial condition. Table of Contents As the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the services that we provide to users, and as such may be subject to enforcement actions which could materially and adversely affect our business The possession, use, cultivation, or transfer of cannabis remains illegal under the Federal Controlled Substances Act. Our Canna Sensor may be sold to customers that are engaged in the business of possession, use, cultivation, or transfer of cannabis. As a result, law enforcement authorities regulating the illegal use of cannabis may seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another s criminal activities. The Federal aiding and abetting statute provides that anyone who "commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal." 18 U.S.C. 2(a). As a result of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect on our business and operations. Due to the use of our first product, the Canna Sensor, in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liabilities. Insurance that is generally readily available, such as workers compensation, general liability, and directors and officers insurance, may be more difficult for us to find, and more expensive, because our Canna Sensor provides a service to companies and customers in the cannabis industry. There are no guarantees that we will be able to secure such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances, we may be prevented from entering into certain business sectors, our growth may be inhibited, and we may be exposed to additional risks and financial liabilities. We expect to derive revenue from sales of our MyDx units and other products we may develop. If we fail to generate revenue from these sources, our results of operations and the value of our business will be materially and adversely affected. We expect our revenue to be generated from our MyDx units and other products we may develop. Future sales of these products, if any, will be subject to, among other things, possible receipt of governmental approvals and commercial and market uncertainties that may be outside of our control. If we fail to generate our intended revenues from these products, our results of operations and the value of our business and securities would be materially affected. We may not be able to compete effectively against products introduced into our market space. The industry surrounding handheld consumer analyzers is rapidly evolving, and the market landscape is currently uncertain. However, we expect that as consumers begin to learn and adapt to having handheld analyzer capability, products that will compete with our offerings will rapidly proliferate. These competitive products could have similar applications, perhaps using superior technology, and may provide additional benefits that our sensors do not. We expect that the market could be occupied by larger competitors with greater financial and other resources, which could hinder our market share. We may be forced to modify or alter our business and regulatory strategy, as well as our sales and marketing plans, in response to, among other things, changes in the market, competition, and technological limitations. Such modifications may pose additional delays in achieving our goals. We rely on third parties to manufacture and supply all of our initial products. Our initial products are manufactured by third parties. If these manufacturing partners are unable to produce our products or component parts in the amounts or on the timeline that we require, the development and initial commercialization of our products may be delayed, depriving us of potential product revenue and resulting in other losses. Our ability to replace any then-existing manufacturer may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to identify and engage a replacement manufacturer on acceptable terms in a timely manner, or at all. If we need to engage a replacement manufacturer but are unable to do so, our business and results of operations could be severely impacted. We depend on third-party suppliers for materials and components for our products. We depend on a limited number of third-party suppliers for the materials and components required to manufacture our products. A delay or interruption by our suppliers may harm our business, results of operations, and financial condition, and could also adversely affect our future profit margins. In addition, the lead time needed to establish a relationship with a new supplier can be lengthy, and we may experience delays in meeting demand in the event we must change or add new suppliers. Our dependence on our suppliers exposes us to numerous risks, including but not limited to the following: our suppliers may cease or reduce production or deliveries, raise prices, or renegotiate terms; we may be unable to locate a suitable replacement supplier on acceptable terms or on a timely basis, or at all; and delays caused by supply issues may harm our reputation, frustrate our customers, and cause them to turn to our competitors for future needs. We may be subject to product liability claims, and may not have sufficient product liability insurance to cover any such claims, which may expose us to substantial liabilities. We may be exposed to product liability claims from consumers of our products. It is possible that any product liability insurance coverage we obtain will be insufficient to protect us from future claims. Further, we may not be able to obtain or maintain insurance on acceptable terms or such insurance may be insufficient to cover any potential product liability claim or recall. Failure to obtain or maintain sufficient insurance coverage could have a material adverse effect on our business, prospects, and results of operations if claims are made that exceed our coverage. Table of Contents We have incurred costs and expect to incur additional costs related to the Merger. We have incurred, and expect to continue to incur, various non-recurring costs associated with the Merger, including, but not limited to, legal, accounting, and financial advisory fees. The substantial majority of our non-recurring expenses have been composed of these costs and expenses related to the execution of the acquisition From time to time we may need to license patents, intellectual property, and proprietary technologies from third parties, which may be difficult or expensive to obtain. We may need to obtain licenses to patents and other proprietary rights held by third parties to successfully develop, manufacture and market our products. As an example, it may be necessary to use a third party s proprietary technology to reformulate a product in order to create a new type of sensor in response to market demand, or to improve the abilities of our current sensors. If we are unable to timely obtain these licenses on reasonable terms, our ability to commercially exploit our products may be inhibited or prevented. If we are unable to adequately protect our technology or enforce our intellectual property rights, our business could suffer. Our success with the products we will develop will depend, in part, on our ability to obtain and maintain patent protection for these products. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent s scope can be modified after issuance. Furthermore, if patent applications that we file or license are not approved or, if approved, are not upheld in a court of law, our ability to competitively exploit our products would be substantially harmed. Additionally, such patents may or may not provide competitive advantages for their respective products or they may be challenged or circumvented by our competitors, in which case our ability to commercially exploit any related products may be diminished. We also will rely on trade secret and contractual protections for our unpatented, confidential, and proprietary technology. Trade secrets are difficult to protect. While we will enter into proprietary information agreements with certain of our employees, consultants, and others, these agreements may not successfully protect our trade secrets or other confidential and proprietary information. It is possible that these agreements will be breached, or that they will not be enforceable in every instance, and that we will not have adequate remedies in the case of any such breach. It is also possible that our trade secrets will become known or independently developed by our competitors. If we are unable to adequately protect our technology, trade secrets, or proprietary know-how, or enforce our patents, our business, financial condition, and prospects could suffer. Intellectual property litigation is increasingly common and increasingly expensive, and may result in restrictions on our business and substantial costs, even if we prevail. Patent and other intellectual property litigation is becoming more common, and such litigation may be necessary to defend against or assert claims of infringement, to protect trade secrets, to determine the scope and validity of proprietary rights of third parties, or to enforce our patent rights, including those we may license from others. Currently, no third party is asserting that we are infringing upon their patent or other intellectual property rights, nor are we aware or believe that we are infringing or will infringe upon any third party s patent or other intellectual property rights. We may, however, currently be infringing or infringe in the future upon a third party s patent or other intellectual property rights. In that event, litigation asserting such claims might be initiated in which we may not prevail, or may not be able to obtain the necessary licenses on reasonable terms, if at all. All such litigation, whether meritorious or not, as well as litigation initiated by us against third parties, is time-consuming and very expensive to defend or prosecute and to resolve. In addition, if we infringe the intellectual property rights of others, we could lose our right to develop, manufacture, or sell our products or could be required to pay monetary damages or royalties to license proprietary rights from third parties. An adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from manufacturing or selling our products, which could harm our business, financial condition, and prospects. If our competitors prepare and file patent applications in the United States that claim technology we also claim, we may have to participate in interference or derivation proceedings required by the United States Patent and Trademark Office to determine priority of invention, which could result in substantial costs, even if we ultimately prevail. Results of these proceedings are highly unpredictable and may result in us having to try to obtain licenses in order to continue to develop or market our product candidate. If our competitors file administrative challenges of our patent applications after grant, we may have to participate in post-grant challenge proceedings, such as oppositions, inter-partes review, post grant review or a derivation proceeding, that challenge our entitlement to an invention or the patentability of one or more claims in our patent applications or issued patents. Such proceedings could result in substantial costs, even if we ultimately prevail. Results of these proceedings are highly unpredictable and may result in us losing proprietary intellectual property rights as claimed in the challenged patents. We may encounter unanticipated obstacles to execution of our business plan which may cause us to change or abandon our current business plan. Our business plan may change significantly based on our encountering unanticipated obstacles. Many of our potential business endeavors are capital intensive, and may be subject to statutory or regulatory requirements and other factors that we cannot control, and which could be detrimental to our business plan. We believe that our chosen undertakings and strategies make our plans achievable in light of current economic and legal conditions and with the skills, background, and knowledge of our management team and advisors. We reserve the right to make significant modifications to our stated strategies depending on future events. Table of Contents We depend on contract manufacturers to manufacture substantially all of our products, and any delay or interruption in manufacturing by these contract manufacturers would result in delayed or reduced shipments to our customers and may harm our business. We have various manufacturers for the components of our products, including Next Dimension Technologies, Inc. We do not have long-term purchase agreements with our contract manufacturers and we depend on a concentrated group of contract manufacturers for a substantial portion of manufacturing our products. There can be no assurance that our contract manufacturers will be able or willing to reliably manufacture our products, in volumes, on a cost-effective basis or in a timely manner. If we cannot compete effectively for the business of these contract manufacturers, or if any of the contract manufacturers experience financial or other difficulties in their businesses, our revenue and our business could be adversely affected. In particular, if one of our contract manufacturers decides to cease doing business with us or becomes subject to bankruptcy proceedings, we may not be able to obtain any of our products made by the contract manufacturer, which could be detrimental to our business. Risks Related to Our Common Stock There is currently a limited public trading market for our common stock and one may never develop. There currently is a limited public trading market for our securities, and it is not assured that any such public market will develop in the foreseeable future. While this is true of any small cap company, the fact that one of our initial products is a device that will be associated with the use of cannabis, the legal status of which has not been completely resolved at the state level in many states or on the federal level, may make the path to a listing on an exchange or actively traded in the over-the-counter market more problematic. Moreover, there can be no assurance that even if our common stock is approved for listing on an exchange or is quoted in the over-the-counter market in the future, that an active trading market will develop or be sustained. Therefore, we cannot predict the prices at which our common stock will trade in the future, if at all. As a result, our investors may have limited or no ability to liquidate their investments. Trading in our common stock is conducted on the OTCQB Markets, as we currently do not meet the initial listing criteria for any registered securities exchange. The OTCQB Markets are less recognized markets than the registered securities exchanges and is often characterized by low trading volume and significant price fluctuations. These and other factors may further impair our stockholders ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders could find it difficult to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited. If a public market for our common stock does develop, these factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock. The market price of our common stock may be highly volatile and such volatility could cause you to lose some or all of your investment. The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as: the announcement of new products or product enhancements by us or our competitors; developments concerning intellectual property rights; changes in legal, regulatory, and enforcement frameworks impacting our products; variations in our and our competitors results of operations; fluctuations in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts; the results of product liability or intellectual property lawsuits; future issuances of common stock or other securities; the addition or departure of key personnel; announcements by us or our competitors of acquisitions, investments or strategic alliances; and general market conditions and other factors, including factors unrelated to our operating performance. Further, the stock market has recently experienced extreme price and volume fluctuations. The volatility of our common stock could be further exacerbated due to low trading volume. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock and the loss of some or all of our investors investment. Some or all of the "restricted" shares of our common stock held by our stockholders, may be offered from time to time in the open market pursuant to an effective registration statement under the Securities Act, or without registration pursuant to Rule 144 promulgated thereunder, and these sales may have a depressive effect on the market price of our common stock. A significant numbers of shares of our common stock held by our officers, directors and employees may become tradable in the near future based on meeting the restrictions pursuant to Rule 144. Such future transactions may have an adverse effect on the market price of our common stock. Table of Contents Because our common stock is a "penny stock," it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected. Our common stock is a "penny stock" because, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange, and the Company has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get their money back. The penny stock rules may make it difficult for stockholders to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate. Financial Industry Regulatory Authority, Inc. ("FINRA") sales practice requirements may limit a shareholder s ability to buy and sell our common shares. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a client, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that client. Prior to recommending speculative low priced securities to their non-institutional clients, broker-dealers must make reasonable efforts to obtain information about the client s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some clients. FINRA requirements make it more difficult for broker-dealers to recommend that their clients buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. We may be the subject of securities class action litigation due to future stock price volatility. In the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management. We have never paid dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future. We have paid no cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility, if any, may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders sole source of gain for the foreseeable future. Our common stock is quoted on the OTCQB, which may be detrimental to investors. Our common stock is currently quoted on the OTCQB. Stocks quoted on the OTCQB generally have limited trading volume and exhibit a wide spread between the bid/ask quotation. Accordingly, you may not be able to sell your shares quickly or at the market price if trading in our stock is not active. Because we became public by means of a reverse merger, we may not be able to attract the attention of brokerage firms. Additional risks may exist because we became public through a "reverse merger." Securities analysts of brokerage firms may not provide coverage of our Company since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future. Compliance with the reporting requirements of federal securities laws can be expensive. We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial. If we do not provide current information about our Company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of stockholders to resell their stock. Table of Contents There are limitations in connection with the availability of quotes and order information on the OTC Markets. Trades and quotations on the OTC Markets involve a manual process and the market information for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available. The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price. Execution of trades, execution reporting and the delivery of legal trade confirmation may be delayed significantly. Consequently, one may not be able to sell shares of our Common Stock at the optimum trading prices. There are delays in order communication on the OTC Markets. Electronic processing of orders is not available for securities traded on the OTC Marketplace and high order volume and communication risks may prevent or delay the execution of one s OTC Marketplace trading orders. This lack of automated order processing may affect the timeliness of order execution reporting and the availability of firm quotes for shares of our Common Stock. Heavy market volume may lead to a delay in the processing of OTC Marketplace security orders for shares of our Common Stock, due to the manual nature of the market. Consequently, one may not able to sell shares of our Common Stock at the optimum trading prices. There is a risk of market fraud on the OTC Marketplace. OTC Marketplace securities are frequent targets of fraud or market manipulation. Not only because of their generally low price, but also because the OTC Marketplace reporting requirements for these securities are less stringent than for listed or NASDAQ traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of our Common Stock. There is a limitation in connection with the editing and canceling of orders on the OTC Markets. Orders for OTC Marketplace securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTC Markets. Due to the manual order processing involved in handling OTC Markets trades, order processing and reporting may be delayed, and one may not be able to cancel or edit one s order. Consequently, one may not be able to sell its shares of our Common Stock at the optimum trading prices. Increased dealer compensation could adversely affect our stock price. The dealer s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of shares of our Common Stock on the OTC Markets if the stock must be sold immediately. Further, purchasers of shares of our Common Stock may incur an immediate "paper" loss due to the price spread. Moreover, dealers trading on the OTC Markets may not have a bid price for shares of our Common Stock on the OTC Markets. Due to the foregoing, demand for shares of our Common Stock on the OTC Markets may be decreased or eliminated. Our board of directors has the right to issue additional shares of common stock or preferred stock, without stockholder consent, which could have the effect of creating substantial dilution or impeding or discouraging a takeover transaction. Pursuant to our certificate of incorporation, our board of directors may issue additional shares of common or preferred stock. Any additional issuance of common stock or the issuance of preferred stock could have the effect of impeding or discouraging the acquisition of control of us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for their shares, thereby protecting the continuity of our management. Specifically, if in the due exercise of its fiduciary obligations, our board of directors was to determine that a takeover proposal was not in the best interest of the Company or our stockholders, shares could be issued by our board of directors without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover by: diluting the voting or other rights of the proposed acquirer or insurgent stockholder group; putting a substantial voting block in institutional or other hands that might undertake to support the incumbent board of directors; or effecting an acquisition that might complicate or preclude the takeover Our investors ownership in the Company may be diluted in the future. In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders. We expect to need to issue a substantial number of shares of common stock or other securities convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations, and other business purposes. We expect to authorize an additional three million shares of common stock for issuance under the 2014 Equity Incentive Plan in connection with the Merger, and plan to issue equity awards to management and employees under the 2014 Equity Incentive Plan. Additional shares of common stock issued by us in the future will dilute an investor s investment in the Company. Table of Contents Our sole executive officer, director and insider stockholder beneficially owns or controls a substantial portion of our outstanding common stock, which may limit your ability and the ability of our other stockholders, whether acting alone or together, to propose or direct the management or overall direction of our Company. A substantial portion of our outstanding shares of common stock is beneficially owned and controlled by our sole director and executive officer. Accordingly, our sole director and officer would have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required, including amendments to our articles of incorporation, mergers or other business combinations. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his or her shares. Additionally, our sole director may take action that could be a conflict of interest and not in the best interest of all stockholders. Such actions could adversely affect the price of our stock and discourage new stockholders from purchasing shares of our stock. We have no Independent Board Members and only one person sitting on the Board. Currently, the Company has only one Board member who is not independent. Our sole director and insider stockholder beneficially owns or controls a substantial portion of our outstanding common stock. Therefore, the Company does not receive the benefit of independent oversight over actions being taken. Without independent oversight, actions may be taken that may not be in the best interest of all stockholders which could adversely affect the price of our stock and discourage new stockholders from purchasing our stock. These changes have been disruptive to the management and operations of the Company and could have a material adverse effect on our business, operating results, and financial condition. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock. We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement. We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our common stock. For the year ended December 31, 2015, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting due to: i) the Company not maintaining a sufficient complement of personnel with an appropriate level of accounting knowledge and experience in the application of accounting for warrants to purchase common and preferred stock issued in connection with convertible notes payable and convertible preferred stock and accounting for non-employee stock options, ii) insufficient segregation of duties within the accounting function with respect to the review and approval of the underlying accounting records, iii) the inability to close the Company s books and timely issue financial statements, and iv) inadequate management oversight resulting from the departure of all independent non-employee Board of Directors members in February 2016. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. If the Company does not address the material weaknesses, we may not be able to manage our business as effectively as would be possible with an effective control system in place. Our future operating results may vary substantially from period to period and may be difficult to predict. On an annual and a quarterly basis, there are a number of factors that may affect our operating results, many of which are outside our control. These include, but are not limited to: changes in market demand; customer cancellations; competitive market conditions; new product introductions by us or our competitors; market acceptance of new or existing products; cost and availability of components; timing and level of expenditures associated with new product development activities; Table of Contents mix of our customer base and sales channels; mix of products sold; continued compliance with industry standards and regulatory requirements; and general economic conditions. These factors are difficult to forecast and may contribute to substantial fluctuations in our quarterly revenues and substantial variation from our projections. Any failure to meet investor expectations regarding our operating results may cause our stock price to decline. We may experience delays in introducing products or services to the market and our products or services may contain defects which could seriously harm our results of operations. We may experience delays in introducing new or enhanced products or services to the market. Such delays, whether caused by factors such as unforeseen technology issues or otherwise, could negatively impact our sales revenue in the relevant period. In addition, we may terminate new product, service or enhancement development efforts prior to any introduction of a new product, service or enhancement. Any delays for new offerings currently under development or any product defect issues or product recalls could adversely affect the market acceptance of our products or services, our ability to compete effectively in the market, and our reputation, and therefore, could lead to decreased sales and could seriously harm our results of operations. Our success also depends on third parties in our distribution channels. Our plan is to sell our products both directly to customers and through distribution channels. We may not be successful in developing additional distribution In addition, distributors and resellers may not dedicate sufficient resources or give sufficient priority to selling our products. Our failure to develop new distribution channels, the loss of a distribution relationship or a decline in the efforts of a reseller or distributor could adversely affect our business. Risks Related To Our Financial Condition The impact of the current economic climate and tight financing markets may impact consumer demand for our products and services. Our customers often have limited discretionary funds, which they may choose to spend on items other than our products and services. If our customers experience economic hardship, it could negatively affect the overall demand for our products and services, could cause delay and lengthen sales cycles and could cause our revenue to decline. Although we maintain allowances for returns and doubtful accounts for estimated losses resulting from product returns and the inability of our customers to make required payments, and such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same return and bad debt rates that we have in the past, especially given the current economic conditions. Additionally, challenging economic conditions could have a negative impact on the results of our operations. We have experienced significant losses to date and may require additional capital to fund our operations. The current financial climate may make it more difficult to secure financing, if we need it. If our business model is not successful, or if we are unable to generate sufficient revenue to offset our expenditures, we may not become profitable, and the value of your investment may decline. We incurred a net loss of approximately $6,367,000 for the year ended December 31, 2015, and a cumulative net loss of approximately $9,898,000 from September 16, 2013 (date of inception) to December 31, 2015. We expect to continue to incur losses for the foreseeable future, and these losses will likely increase as we continue to commercialize our products. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If our products do not achieve market acceptance, we may never become profitable. The initial cost of completing development of our products and penetrating our anticipated markets will be substantial, and there is no assurance that we will be successful in doing so. Although we shipped our first revenue units in the third quarter of 2015, if we are not successful in growing revenues and controlling costs, we will not achieve profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Absent a significant increase in revenue or additional equity or debt financing, we may not be able to sustain our ability to continue as a going concern. Furthermore, we are experiencing the costs and uncertainties of a young operating company, including unforeseen costs and difficulties. We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful. Table of Contents Our ability to use our net operating loss carryforwards may be limited. As of December 31, 2015, we had federal and state net operating loss carryforwards of approximately $8.3 million and $8.3 million respectively, some of which, if not utilized, will begin expiring in 2033. Our ability to utilize the net operating loss carryforwards is dependent upon generating taxable income. We have recorded a corresponding valuation allowance to offset the deferred tax assets as it is more likely than not that the deferred tax assets will not be realized. Section 382 of the U.S. Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of net operating loss carry forwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. For tax purposes, we cannot foresee if any future financing activities or sales of shares of our common stock will result in any limitations on our ability to use our net operating loss carryforwards. In addition, it is possible that this offering, either on a standalone basis or when combined with future transactions (including, but not limited to, significant increases during the applicable testing period in the percentage of our stock owned directly or constructively by (i) any stockholder who owns 5% or more of our stock or (ii) some or all of the group of stockholders who individually own less than 5% of our stock), will cause us to undergo one or more ownership changes. In that event, our ability to use our net operating loss carry forwards could be adversely affected. To the extent our use of net operating loss carry forwards is significantly limited under the rules of Section 382 (as a result of this offering or otherwise), our income could be subject to U.S. corporate income tax earlier than it would if we were able to use net operating loss carry forwards, which could result in lower profits. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements," which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of financial resources. These forward-looking statements include, without limitation, statements regarding: proposed new programs; expectations that regulatory developments or other matters will not have a material adverse effect on our financial position, results of operations and our liquidity; statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; and statements of management s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and management s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: our ability to deploy our solutions and develop new products; our ability to grow revenue, and in amounts greater than our operating and capital expenditures; our ability to evaluate our current and future prospects; access by us and our customers to financing; our ability to keep pace with changes in technology; our ability to protect our intellectual property; competition and competitive factors; the amount of capital expenditures required to grow our business; our ability to comply with government regulation affecting our business; the impact of worldwide economic conditions; and the
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001582962_canna-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001582962_canna-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..36e1ad9ad403008aff347a9b12ecfada068b9c32
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001582962_canna-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. In this Prospectus, the terms "Rich Cigars," "Company," "we," "us" and "our" refer to Rich Cigars, Inc. Overview Our Company, Rich Cigars, was established in July 2013 to manufacture and distribute cigars under the Rich Cigars brand name. Our founders seek to create sales of high-quality, hand-rolled, premium cigars. Founder Alfred Rushing has been involved with the cigar industry for more than 20 years. Through Rich Cigars, he intends to introduce new styles of premium cigars to build sales of private label cigars. We intend to conduct our business principally in the U.S. through our own sales and marketing team. Where You Can Find Us We presently maintain our principal offices at 5100 SW 103rd Street, Ocala, FL 34476. Our telephone number is (214) 702-8775. Implications of Being an Emerging Growth Company We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include: A requirement to have only two years of audited financial statements and only two years of related MD Exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; Reduced disclosure about the emerging growth company's executive compensation arrangements; and No non-binding advisory votes on executive compensation or golden parachute arrangements. We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)2(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. For more details regarding this exemption, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies." The Offering Common stock offered by selling security holders is 246,080 shares of common stock. This number represents 51.6% of our current outstanding common stock (1). 158,080 common shares registered hereby to be distributed to Distributees of RichKeys Enterprises, LLC are included in this total. Common stock outstanding before the offering is 471,080 as of June 29, 2016. Common stock outstanding after the offering is 471,080. Terms of the Offering: Our selling security holders will determine when and how they will sell the common stock offered in this prospectus. Our selling security holders may sell at a fixed price of $0.50 per share until our common stock is quoted on the OTCQB, and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. Termination of the Offering: The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect. Trading Market: There is currently no trading market for our common stock. We intend to apply soon for quotation on the OTC Bulletin Board. We will require the assistance of a market-maker to apply for quotation and there is no guarantee that a market-maker will agree to assist us. Use of Proceeds: We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus. Risk Factors: Our common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors" beginning on page 6. (1) Based on 471,080 shares of common stock outstanding as of June 29, 2016. Summary of Financial Information The following tables set forth, for the periods and as of the dates indicated, our summary financial data. The statements of operations for the three months ended March 31, 2016, and the balance sheet data as of March 31, 2016 are derived from our unaudited condensed consolidated financial statements. The unaudited financial statements include, in the opinion of management, all adjustments consisting of only normal recurring adjustments, that management considers necessary for the fair presentation of the financial information set forth in those statements. You should read the following information together with the more detailed information contained in "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year. The statements of operations for the years ended December 31, 2015 and 2014, and balance sheet data as of December 31, 2015, are derived from our audited financial statements included elsewhere in this prospectus. You should read the following information together with the more detailed information contained in "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not indicative of the results to be expected in the future. Three Months Ended March 31 Years Ended December 31 2016 2015 2014 Total Assets $36,835 $32,351 $11,550 Current Liabilities $4,488 $1,408 $954 Shareholders' Equity $32,347 $30,943 $10,596 March 31, 2016 (Unaudited) December 31, 2015 (Audited) Revenues $0 $0 Net Loss $(28,176) $(97,216) At March 31, 2016, the accumulated deficit was $(336,584). At December 31, 2015, the accumulated deficit was $(308,408). At December 31, 2014, the accumulated deficit was $(234,596). We anticipate that we will operate in a deficit position and continue to sustain net losses for the foreseeable future. RISK FACTORS The shares of our common stock being offered for resale by the selling security holders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose their entire amount invested in the common stock. Accordingly, prospective investors should carefully consider, along with other matters referred to herein, the following risk factors in evaluating our business before purchasing any Units. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment. You should carefully consider the risks described below and the other information in this process before investing in our common stock. Risks Related to Our Business LIMITED OPERATING HISTORY There can be no assurance that our management will be successful in its attempts to implement the our business plan, build the corporate infrastructure required to support operations at the levels called for by our business plan or that we will generate sufficient revenues to meet expenses or to achieve or maintain profitability. We will encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to: Obtain sufficient working capital to support our establishment and expansion; Find and realize the asset management opportunities required to generate revenue; Maintain adequate control of our expenses allowing us to realize anticipated income growth; and Anticipate and adapt to changing conditions in the tobacco products industry resulting from changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics. OUR MANAGEMENT TEAM HAS NO EXPERIENCE OPERATING A PUBLIC COMPANY. ANY FAILURE TO COMPLY OR ADEQUATELY COMPLY WITH FEDERAL AND STATE SECURITIES LAWS, RULES OR REGULATIONS COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Members of our management team have no experience managing and operating a public company and may rely in many instances on the professional experience and advice of third parties including its attorneys and accountants. Failure to comply or adequately comply with any federal or state securities laws, rules, or regulations may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in achieving either the effectiveness of a registration statement relating to the Securities being sold in this Offering or the development of an active and liquid trading market for our common stock. OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN. The audited financial statements included in the registration statement have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of securities. Based on our financial history since inception, in their report on the financial statements for the period ended December 31, 2015, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has not commenced revenue. There is no assurance that any revenue will be realized in the future. There can be no assurance that we will have adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern. IF WE NEED ADDITIONAL CAPITAL TO FUND OUR FUTURE OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS. If adequate additional financing is not available on reasonable terms, we may not be able to undertake sufficient sales and business development efforts required to identify clients and assist them with asset acquisitions, development of their real estate projects or management of existing stabilized assets, which may result in a negative impact to our cash flow and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us. In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the development of similar products undertaken by our competition; (iii) the level of our investment in sales and marketing; and (iv) the amount of our capital expenditures, including corporate acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs. In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we cannot obtain additional funding, we may be required to: (i) limit our expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to the Shares. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. YOU WILL EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK If we raise additional capital subsequent to hereto through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, we may also have to issue securities that may have rights, preferences and privileges senior to our common stock. In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense. WE WILL DEPEND UPON MANAGEMENT BUT WE MAY AT TIMES HAVE LIMITED PARTICIPATION OF MANAGEMENT. Our directors are also acting as our officers. We will be heavily dependent upon their skills, talents, and abilities, as well as several consultants to us, to implement our business plan, and may, from time to time, find that the inability of the officers, directors and consultants to devote their full-time attention to our business results in a delay in progress toward implementing our business plan. Consultants may be employed on a part-time basis under a contract to be determined. Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, our officers and directors may have potential conflicts including their time and efforts involved in participation with other business entities. Each officer and director of our business, except for Mr. Davis, is engaged in business activities outside of our business, and the amount of time they devote as Officers and Directors to our business will be up to 25 hours per week. Mr. Davis, President, CEO and a director, works full time pursuing the business plan of the Company and has been working with retail stores for product placement and distribution relationships, as well as spending up to 30 hours a week on product event planning for the Company. He has also been working with potential brand ambassadors of the Company, with the help of Mr. Saunders. Mr. Al Rushing, Vice President, Secretary, COO and a director, is an owner and operations manager at The Cigar Factory in New Orleans, LA, and spends approximately 20 hours a week on our Company's business. Mr. Michael Rushing, Vice President of Sales and a director, is an Executive Team Leader at Target Corporation and will spend approximately 40 hours per week on our Company's business. Mr. Saunders, Senior Vice President of Marketing and Entertainment and a director, is Senior Director of Entertainment Marketing at Jordan Brand, a division of Nike, and will spend approximately 30 hours per week on our Company's business. Because investors will not be able to manage our business, they should critically assess all of the information concerning our officers and directors. We do not know of any reason other than outside business interests that would prevent them from devoting full-time to our Company, when the business may demand such full-time participation. WE WILL BE DEPENDENT UPON KEY PERSONNEL FOR THE FORESEEABLE FUTURE. We will be dependent on several key members of its management and operations teams for the foreseeable future. In particular, we are dependent on Richard Davis as our president and Alfred Rushing, our Vice President, Secretary and Operation's Officer. The loss of the services of either executive could have a material adverse effect on our operations and prospects. At this time, we have no employment agreements with any of these individuals, though it is contemplated that the Company may enter into such agreements with certain of its key employees on terms and conditions usual and customary for its industry. We do not currently have any "key man" life insurance on any employees or officers. WE MAY FACE DIFFICULTIES ESTABLISHING A NEW BRAND Our principal business strategy is to develop the Rich Cigars brand name as a respected brand associated with the highest quality premium cigars. The marketing of luxury consumer goods such as high-quality, premium cigars is highly dependent on creating favorable consumer perception through well-orchestrated advertising and public relations. We will be expending a significant percentage of the proceeds of any future cash raises for advertising and promotional activities. The Company has little advertising experience, having spent only minimal amounts on such activities to-date. The Company's competitors have significantly greater advertising resources and experience and enjoy well-established brand names. There can be no assurance that our initial advertising and promotional activities will be successful in creating the desired consumer perception. WE MAY REQUIRE ADDITIONAL FUNDING We are highly dependent on the infusion of additional capital through other private placements or loans supporting ongoing operations and expansion. If we are not successful in obtaining subscriptions for this Offering it could be necessary to seek additional financing elsewhere or to materially curtail our expansion plans. There can be no assurance that such other financing would be available to us on satisfactory terms or at all. Failure to obtain such financing could materially impair our ability to increase sales and achieve profitability. See "USE OF PROCEEDS." WE MAY BE ADVERSELY AFFECTED BY CHANGES IN THE REGULATION OF TOBACCO PRODUCTS All manufacturers of tobacco products are subject to extensive and increasing regulation at the federal, state and local levels. These regulations have, for example, imposed labeling requirements, limited advertising of tobacco products, restricted smoking in public areas such as office buildings and restaurants and prohibited sales of tobacco products to minors. Proposals have been entertained to transfer regulation of tobacco products from the Federal Trade Commission to the Food and Drug Administration, which has expressed the intention to regulate tobacco products as an addictive "drug." There can be no assurance as to the content, timing or effect of future regulations on the federal, state or local levels or that such regulations would not have a material adverse effect on our business. WE MAY FACE LITIGATION ISSUES SIMILAR TO THOSE IN THE CIGARETTE INDUSTRY Manufacturers and distributors of tobacco products have been the subject of increasing litigation seeking to extend product liability to such companies for allegedly tobacco-related medical conditions of smokers. While such litigation has primarily centered on cigarettes, there can be no assurance that the increased popularity and visibility of cigars will not result in similar litigation against manufacturers and distributors of cigars. If we were to become a party to such litigation, either any finding of liability on our or the expense and diversion of management time in defending such litigation could have a material adverse effect on our Company. WE MAY BE SUBJECT TO INCREASING EXCISE TAXES Cigars (and tobacco products generally) have long been subject to excise taxes on the federal, state and local levels. From time to time proposals have been made to increase such taxes to fund various legislative initiatives. Substantial increases in excise taxes could have a material adverse impact on the cigar industry in general and our Company in particular. OUR COMPETITION IS MUCH LARGER AND HAS BEEN IN THE MARKETPLACE MUCH LONGER Several large, well-financed competitors with long-standing brand recognition, successful histories of new product introductions and long-standing relationships dominate the market for the distribution of premium cigars with tobacco growers and distributors. We compete with well-established companies for sales to distributors and to consumers. While we believe that the rapidly expanding market for sales of premium cigars has created room for new competitors to achieve substantial sales and profits, there can be no assurance that we can compete successfully on price or in obtaining raw materials, building facilities and attracting and keeping skilled labor, which could result in material adverse effects on our business. WE FACE RISKS ASSOCIATED WITH INTERNATIONAL MANUFACTURING AND IMPORTATION Our operations are in Ocala, Florida, but the sources of our products and tobacco are located in Nicaragua. As such, we are subject to the risks of changes in social, political and regulatory climate inherent in foreign trade, including potential changes in either Nicaraguan or U.S. laws or regulations regarding foreign investment in and transfers of capital from Nicaragua. While we are not aware of any such social, political or regulatory changes, if such a change should occur, it could materially impair our operations and its financial condition. WE WILL INCUR SIGNIFICANT COSTS TO BE A PUBLIC COMPANY TO ENSURE COMPLIANCE WITH U.S. CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS AND WE MAY NOT BE ABLE TO ABSORB SUCH COSTS. We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect these costs to be approximately $50,000-$75,000 per year. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations. WE ARE AN "EMERGING GROWTH COMPANY," AND ANY DECISION ON OUR PART TO COMPLY ONLY WITH CERTAIN REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO "EMERGING GROWTH COMPANIES" COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS. We are an "emerging growth company," as defined in the JOBS Act, and, for as long as we continue to be an "emerging growth company," we expect and fully intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)2(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to opt in to the extended transition period for complying with the revised accounting standards. We have elected to rely on these exemptions and reduced disclosure requirements applicable to "emerging growth companies" and expect to continue to do so. WE MAY NOT BE ABLE TO MEET THE FILING AND INTERNAL CONTROL REPORTING REQUIREMENTS IMPOSED BY THE SEC WHICH MAY RESULT IN A DECLINE IN THE PRICE OF OUR COMMON SHARES AND AN INABILITY TO OBTAIN FUTURE FINANCING. As directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release No. 33-8934 on June 26, 2008, the SEC adopted rules requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual reports. In addition, the independent registered public accounting firm auditing a company's financial statements may have to also attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting. We may be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement Of management's responsibility for establishing and maintaining adequate internal control over its financial reporting; Of management's assessment of the effectiveness of its internal control over financial reporting as of year-end; and Of the framework used by management to evaluate the effectiveness of our internal control over financial reporting. Furthermore, our independent registered public accounting firm may be required to file its attestation on whether it believes that we have maintained, in all material respects, effective internal control over financial reporting. While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer. In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market price of our common stock and our ability to secure additional financing as needed. THE JOBS ACT ALLOWS US TO DELAY THE ADOPTION OF NEW OR REVISED ACCOUNTING STANDARDS THAT HAVE DIFFERENT EFFECTIVE DATES FOR PUBLIC AND PRIVATE COMPANIES. Since, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. OUR COMMON SHARES WILL NOT INITIALLY BE REGISTERED UNDER THE EXCHANGE ACT AND AS A RESULT WE WILL HAVE LIMITED REPORTING DUTIES WHICH COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS. Our common shares are not registered under the Exchange Act. As a result, we will not be subject to the federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In additional our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year. Our common shares are not registered under the Securities Exchange Act of 1934, as amended, and we do not intend to register our common shares under the Exchange Act for the foreseeable future, provided that, we will register our common shares under the Exchange Act if we have, after the last day of our fiscal year, more than either (i) 2000 persons; or (ii) 500 shareholders of record who are not accredited investors, in accordance with Section 12(g) of the Exchange Act. As a result, although, upon the effectiveness of the registration statement of which this prospectus forms a part, we will be required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our common shares are not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our common shares are not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding common shares will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directs, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common shares and other equity securities, on Forms 3, 4 and 5, respectively. Such information about our directors, executive officers, and beneficial holders will only be available through this (and any subsequent) registration statement, and periodic reports we file thereunder. Furthermore, so long as our common shares are not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations. BECAUSE OUR COMMON STOCK IS NOT REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OUR REPORTING OBLIGATIONS UNDER SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MAY BE SUSPENDED AUTOMATICALLY IF WE HAVE FEWER THAN 300 SHAREHOLDERS OF RECORD ON THE FIRST DAY OF OUR FISCAL YEAR. Our common stock is not registered under the Exchange Act, and we do not intend to register our common stock under the Exchange Act for the foreseeable future (provided that, we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, $10,000,000 in total assets and either more than 2,000 shareholders of record or 500 shareholders of record who are not accredited investors (as such term is defined by the Securities and Exchange Commission), in accordance with Section 12(g) of the Exchange Act). As long as our common stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations. OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS. Our By-Laws include provisions that eliminate the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the State of Florida or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Florida law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director's duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director's liabilities under the federal securities laws or the recovery of damages by third parties. REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT AND COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, INCLUDING ESTABLISHING AND MAINTAINING ACCEPTABLE INTERNAL CONTROLS OVER FINANCIAL REPORTING, ARE COSTLY AND MAY INCREASE SUBSTANTIALLY. The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price. As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an "emerging growth company." The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. We are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and could be several hundred thousand dollars per year. In addition, if and when we retain independent directors and/or additional members of senior management, we may incur additional expenses related to director compensation and/or premiums for directors' and officers' liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses individually, or in the aggregate, may also be material. In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. The increased costs associated with operating as a public company may decrease our net income or increase our net loss, and may cause us to reduce costs in other areas of our business or increase the prices of our products or services to offset the effect of such increased costs. Additionally, if these requirements divert our management's attention from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. WE MAY BE SUBJECT TO LITIGATION IN THE FUTURE WHICH COULD IMPACT THE FINANCIAL HEALTH OF THE COMPANY. Currently there are no legal proceedings pending or threatened against the Company. However, from time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Risks Related to Our Common Stock THERE IS NO ASSURANCE OF A PUBLIC MARKET OR THAT OUR COMMON STOCK WILL EVER TRADE ON A RECOGNIZED EXCHANGE. THEREFORE, YOU MAY BE UNABLE TO LIQUIDATE YOUR INVESTMENT IN OUR STOCK. There is no established public trading marketing for our common stock and there can be no assurance that one will ever develop. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities may not find purchasers for our securities should they to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time. WE MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS. We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any dividends in the foreseeable future, but will review this policy as circumstances dictate. THE OFFERING PRICE OF THE COMMON STOCK IS ARBITRARY, AND THEREFORE SHOULD NOT BE USED AS AN INDICATOR OF THE FUTURE MARKET PRICE OF THE SECURITIES. THEREFORE, THE OFFERING PRICE BEARS NO RELATIONSHIP TO ANY ACTUAL VALUE, AND MAY MAKE OUR SHARES DIFFICULT TO SELL. Since our shares are not listed or quoted on any exchange or quotation system, the offering price of $0.50 per share for the shares of common stock was determined arbitrarily. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of our company or any other recognized criteria of value. Our share offering price herein should not be regarded as an indicator of the future market price of the securities. OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH MAY BE SUBJECT TO RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES. We may be subject now and in the future to the SEC's "penny stock" rules if our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001585790_advanced_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001585790_advanced_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001585790_advanced_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001586573_heyu_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001586573_heyu_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e7e48abef922093c894f5da12f3c2ced3a027cdd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001586573_heyu_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Registrant and the common stock being sold in this offering, including "Risk Factors" and the financial statements and related notes, included elsewhere in this prospectus. The Registrant History Heyu Leisure Holidays Corporation ("the Registrant"), a Delaware corporation, specializes in managing hotels and in-house leisure clubs to meet the needs of business and recreational travellers. The Registrant was incorporated on July 9, 2013 and was formerly known as Cloud Run Acquisition Corporation ("Cloud Run" or "Cloud Run Acquisition"). In January 2014, the Registrant implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the Registrant changed its name from Cloud Run Acquisition Corporation to Heyu Leisure Holidays Corporation. In February 2015, the Registrant completed the acquisition of Heyu Capital Ltd. ("Heyu Capital"), a limited liability company formed under the laws of Hong Kong, in a stock-for stock transaction (the "Acquisition") under a method similar to the pooling-of-interest method ("Pooling-of-Interest") as the Registrant and Heyu Capital are both under common control with and by the same majority shareholder. Heyu Capital was the sole shareholder of Xiamen Heyu Hotel Management Ltd. ("Xiamen Heyu"), a limited liability company formed under the laws of the People s Republic of China. Xiamen Heyu in turn, is the parent company of Xiamen Wujiaer Hotel Ltd. ("Xiamen Wujiaer"), a limited liability company formed under the laws of the People s Republic of China. The purpose of the Acquisition was to facilitate and prepare the Registrant for a registration statement and/or public offering of securities. Heyu Capital was incorporated June 27, 2013 under the laws of Hong Kong. On December 18, 2013, Heyu Capital registered 100% equity interest in Xiamen Heyu, but not yet contributes any capital into Xiamen Heyu as of December 31, 2013. Heyu Capital contributes capital of $966,130 in Xiamen Heyu as of September 30, 2014. Since its inception, Xiamen Heyu Hotel Management Ltd. has focused on marketing and negotiations to manage and operate hotels in China. On January 25, 2014, Xiamen Heyu entered into a Share Transfer Agreement with existing shareholders of Xiamen Wujiaer with a consideration of $622,379 (approximately 3,800,000 in RMB) in cash for the acquisition. As a result of Acquisition, each of Heyu Capital, Xiamen Heyu and Xiamen Wujiaer become wholly owned subsidiaries of the Registrant as follow: The Registrant is located at Westwood Business Center 611 South Main Street Grapevine, Texas 76051. The Registrant s main phone number is (+86) 592 504 9622. Business The Registrant specializes in managing and operating hotel chains in China via selected mergers, acquisitions and joint ventures, with a focus on providing a full range of services to its hotels and amenities to their guests. The Registrant plans to establish hotel chains synonymous with in-house leisure, and to meet the needs of business and recreational travelers alike. To achieve this goal, the Registrant intends to be among the first budget hotels in the world to offer a wide variety of mobile office options in each of its hotels, including conference facilities, audio/video equipment, Internet access and staff that can help plan and conduct guests meetings. The Registrant also plans to offer select complimentary beverages and other services to hotel guests. The Registrant will also offer memberships for Heyu Hotel leisure clubs. Club members will be entitled to complimentary drinks, food and other services when they visit club facilities. Risks and Uncertainties facing the Registrant The Registrant has limited revenues to date, including during the recent year ended December 31, 2014, and the Registrant may experience losses in the near term. The Registrant needs to maintain a steady operating structure, ensuring that expenses are contained such that profits are consistently achieved. In order to expand the Registrant s business, the Registrant would likely require additional financing. As a company with limited revenues to date, management of the Registrant must continually develop and refine its strategies and goals in order to execute the business plan of the Registrant on a broad scale and expand the business. One of the biggest challenges facing the Registrant will be in securing adequate capital to continue to expand its business and build a larger scale and more efficient set of operations. Secondarily, an ongoing challenge remains the maintenance of an efficient operating structure and business model. The Registrant must keep its expenses and the costs of employees at a minimum in order to generate a profit from the revenues that it receives. Third, in order to expand, the Registrant will need to continue to identify suitable hotel properties and opportunities that can be realized at a reasonable cost. Due to financial constraints and the current stage of the Registrant s life, the Registrant has to date not conducted advertising and marketing to reach customers. In addition, the Registrant has not yet located the sources of funding to develop the Registrant on a broader scale through acquisitions or other major partnerships. As the Registrant expands, the Registrant may need such partnerships and marketing campaigns to better build its business. Due to these and other factors, the Registrant s independent auditors have issued a report raising substantial doubt of the Registrant s ability to continue as a going concern. Trading Market Currently, there is no trading market for the securities of the Registrant. The Registrant intends to work with market-makers for its securities that will apply for quotation of its common stock on the OTC Bulletin Board. However, the Registrant does not know if any such application will be made and whether it will be successful if made, how long such application will take, or, that if successful, that a market for the common stock will ever develop or continue on the OTC Bulletin Board. There can be no assurance that the Registrant will qualify for quotation of its securities on the OTC Bulletin Board. See "RISK FACTORS" and "DESCRIPTION OF SECURITIES". The Offering The maximum number of Shares that can be sold pursuant to the terms of this offering is 10,999,097 of Shares. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier fully subscribed or terminated by the Registrant. This prospectus relates to the offer and sale by certain shareholders of the Registrant of up to 10,999,097 of Shares (the "Selling Shareholder Shares"). The selling shareholders, who are deemed to be statutory underwriters, will offer and sell their shares at a fixed price of $1.50 per share for the duration of this offering. Common stock outstanding before the offering 60,001,000(1) Common stock for sale by selling shareholders 10,999,097 Common stock outstanding after the offering 60,001,000 Offering Price $1.50 per share Proceeds to the Registrant $0 (1) Based on number of shares outstanding as of the date of this prospectus. The total number of shares being registered through this prospectus exceeds the number of shares held by non-affiliates of the Registrant. All shares of the Registrant s common stock currently held by non-affiliates are being registered pursuant to this prospectus. Summary Financial Information The Registrant had no substantive business operations or specific business plan until the Registrant merged with Heyu Capital Ltd ("Heyu Capital"), a corporation existing under the laws of Hong Kong (Special Administrative Region of the PRC) on February 9, 2015. Pursuant to the merger, the Registrant acquired all of the outstanding common shares of Heyu Capital through the issuance of common shares of the Registrant to the shareholders of Heyu Capital. The transaction has been accounted for as a business combination under a method similar to the pooling-of-interest method ("pooling-of-interest") as the Registrant and Heyu Capital are both under common control by the same shareholder. The audited consolidated statements of operations data for the years ended December 31, 2015 and 2014, the audited consolidated balance sheet data as of December 31, 2015 and 2014, respectively, are derived from the Registrant s audited financial statements and related notes thereto included in this prospectus. For the year ended For the year ended December 31, 2015 December 31, 2014 Statement of operations data Revenue $ 329,514 306,882 Gross loss $ (156,782 ) (117,619 ) Loss from operations $ (1,027,932 ) (3,083,699 ) Net loss $ (1,027,932 ) (3,083,699 ) At December 31, 2015 At December 31, 2014 Balance sheet data Cash $2,762 $61,654 Other assets $510,733 $634,444 Total assets $513,495 $696,098 Total liabilities $1,430,946 $592,714 Total shareholders equity (deficit) $(917,451) $103,384 Total liabilities and shareholders equity(deficit) $513,495 $696,098 For the three months ended September 30, For the nine months ended September 30, 2016 2015 2016 2015 Revenue $ 46,978 $ 109,165 $ 106,247 $ 254,034 Cost of revenue (69,660 ) (141,703 ) (253,457 ) (391,774 ) Operating expenses (96,851 ) (226,541 ) (317,559 ) (741,428 ) Loss from operation (119,813 ) (263,483 ) (466,296 ) (886,810 ) Net operating loss (119,813 ) (263,483 ) (466,296 ) (886,810 ) At September 30, 2016 At December 31, 2015 Balance sheet data Cash $ 2,135 $ 2,762 Other assets $ 251,638 $ 510,733 Total assets $ 253,773 $ 513,495 Total liabilities $ 1,631,976 $ 1,430,946 Total shareholders (deficit) $ (1,378,203 ) $ (917,451 ) Total liabilities and shareholders (deficit) $ 253,773 $ 513,495 Heyu Capital Limited ("Hong Kong entity") The Registrant had no operations or specific business plan until the acquisition of Heyu Capital on February 9, 2015. The financial information presented below is with respect to Heyu Capital prior to the merging with the Registrant. The statements of operations data for the years ended December 31, 2014 and December 31, 2013, respectively, and the balance sheet data as of December 31, 2014 and December 31, 2013, respectively, are derived from Heyu Capital Ltd. s audited consolidated financial statements and related notes thereto included in this prospectus. For the period from Year ended December 31, 2014 July 2, 2013 (inception) to September 30, 2013 Statement of operations data Revenue $ 306,882 $ - Gross profit $ (117,619 ) $ - Loss from operations $ (3,083,699 ) $ (22,299 ) Net loss $ (3,083,699 ) $ (22,299 ) At December 31, 2014 At December 31, 2013 Balance sheet data Cash $61,654 $452,723 Other assets $634,444 $39,672 Total assets $696,098 $492,395 Total liabilities $557,529 $79,977 Total members equity $138,569 $412,418 Xiamen Wujiaer Hotel Limited Heyu Capital had no operations or specific business plan until the acquisition of Xiamen Wujiaer Hotel Limited on January 9, 2014. The financial information presented below is with respect to Xiamen Wujiaer Hotel Limited prior to the merging with the Heyu Capital Limited, The statements of operations data for the years ended December 31, 2013 and December 31, 2012 respectively, and the balance sheet data as of December 31, 2013 and December 31, 2012, respectively, are derived from Xiamen Wujiaer Hotel Limited s audited financial statements and related notes thereto included in this prospectus. Year ended Year ended December 31, 2013 December 31,2012 Statement of operations data Revenue $245,988 $296,305 Gross profit $84,781 $194,477 Loss from operations $(160,627) $(84,754) Net loss $(160,627) $(84,754) At December 31, 2013 At December 31, 2012 Balance sheet data Cash $13,900 $14,622 Other assets $498,218 $535,450 Total assets $512,118 $550,072 Total liabilities $128,889 $21,057 Total members equity $383,229 $529,015
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001588550_biolight_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001588550_biolight_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001588550_biolight_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001588972_societal_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001588972_societal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..718f479f47dc86bc7ece88f387d417327b7bccbd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001588972_societal_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained in other parts of this prospectus and in the documents we incorporate by reference. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus, any applicable free writing prospectus and the documents incorporated by reference herein and therein. You should read all such documents carefully, especially the risk factors and our consolidated financial statements and the related notes included or incorporated by reference herein or therein, before deciding to buy shares of our common stock. Unless the context requires otherwise, references in this prospectus to Recro, we, us and our refer to Recro Pharma, Inc. and our subsidiaries. Overview Company Overview We are a revenue-generating, specialty pharmaceutical company primarily focused on developing innovative products for hospitals and ambulatory care settings. Our lead product candidate, injectable meloxicam, is a proprietary injectable form of meloxicam, a long-acting preferential COX-2 inhibitor that has successfully completed four Phase II clinical trials in the treatment of moderate to severe post-operative pain, and two pivotal Phase III clinical trials in patients following bunionectomy and abdominoplasty surgeries. As injectable meloxicam is not in the opioid class of drugs, we believe it will overcome many of the issues associated with commonly prescribed opioid therapeutics, including addiction, misuse/diversion, respiratory distress and constipation while maintaining analgesic, or pain relieving, effect. In addition to developing proprietary drug candidates, we, through our subsidiary, Recro Gainesville LLC, or Recro Gainesville, leverage our formulation expertise to develop and manufacture pharmaceutical products using our proprietary delivery technologies for commercial partners who commercialize or plan to commercialize these products. These collaborations result in revenue streams including royalties, profit sharing, research and development and manufacturing, which support continued operations for Recro Gainesville as well as our research and development of proprietary product candidates. Recent Developments In November 2016, we announced positive results from the second of our two pivotal Phase III clinical trials for intravenous, or IV, meloxicam, evaluating pain relief over a 24-hour period in a soft tissue, post-operative pain model (abdominoplasty). In the trial, IV meloxicam achieved the primary endpoint of a statistically significant difference in Summed Pain Intensity Difference, or SPID, over the first 24 hours, or SPID24, compared to placebo. In this multicenter, randomized, double-blind, placebo-controlled clinical trial, 219 patients were enrolled and randomly assigned to receive a postoperative regimen of IV meloxicam (30mg bolus injection) or placebo in a 1:1 ratio, once every 24 hours. The IV meloxicam treatment arm demonstrated a statistically significant reduction in SPID24 (p 0.0145) compared to the placebo arm. With the positive data from this study, we believe this completes the efficacy program for the IV meloxicam new drug application, or NDA. Lead Product Candidate Injectable Meloxicam Meloxicam is a long-acting, preferential COX-2 inhibitor that possesses anti-inflammatory, analgesic, and antipyretic activities, which are believed to be related to the inhibition of cyclooxygenase, or COX, Table of Contents The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject To Completion, Dated December 12, 2016 PRELIMINARY PROSPECTUS 6,430,868 Shares RECRO PHARMA, INC. Common Stock Recro Pharma, Inc. is offering 6,430,868 shares of common stock. The last reported sale price for our common stock on the Nasdaq Capital Market on December 12, 2016 was $6.22 per share. The actual offering price per share will be as determined between us and the underwriters at the time of pricing. Trading Symbol: Nasdaq Capital Market REPH. We are an emerging growth company as defined by the Jumpstart Our Business Startups Act of 2012 and, as such, we are eligible for reduced public company reporting requirements. Please see Summary Implications of Being an Emerging Growth Company. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 11 of this prospectus and under similar headings in the documents incorporated by reference into this prospectus. Per Share Total Public offering price $ $ Underwriting discounts and commissions(1) $ $ Proceeds, before expenses, to us $ $ (1) See Underwriting for additional disclosure regarding underwriting discounts, commissions and estimated offering expenses, including expenses for which we have agreed to reimburse the underwriters. We have granted the underwriters an option for a period of 30 days to purchase an additional 964,630 shares of our common stock. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Delivery of the shares of common stock is expected to be made on or about , 2016. Piper Jaffray The date of this prospectus is , 2016. Table of Contents and subsequent reduction in prostaglandin biosynthesis. Meloxicam has been marketed by Boehringer Ingelheim Pharmaceuticals, Inc. since the 1990s as an oral agent, Mobic . Mobic tablets and suspension are indicated for the relief of the signs and symptoms of osteoarthritis and rheumatoid arthritis and the relief of the signs and symptoms of pauciarticular or polyarticular juvenile rheumatoid arthritis in patients 2 years or older. We believe that IV meloxicam compares favorably to competitive therapies in onset of pain relief, duration of pain relief, extent of pain relief and time to peak analgesic effect. In early 2016, based on feedback from the U.S. Food and Drug Administration, or FDA, we commenced our Phase III clinical trial program for IV meloxicam. The program includes two pivotal Phase III clinical trials, both of which IV meloxicam has successfully completed. In July 2016, we announced positive results from one pivotal clinical trial, evaluating pain relief over a 48-hour period in a hard tissue, post-operative pain model (bunionectomy). In the trial, IV meloxicam achieved the primary endpoint of a statistically significant difference in SPID over the first 48 hours, or SPID48, compared to placebo. In this multicenter, randomized, double-blind, placebo-controlled clinical trial, 201 patients were enrolled and randomly assigned to receive a postoperative regimen of IV meloxicam (30mg bolus injection over 15-30 seconds) or placebo in a 1:1 ratio, once every 24 hours for up to three doses following bunionectomy surgery, a representative hard tissue surgery. The IV meloxicam treatment arm demonstrated a statistically significant reduction in SPID48 (p 0.0034) compared to the placebo arm. The study also achieved 15 of the 19 secondary endpoints, including statistically significant differences in SPID6 (p 0.0153), SPID12 (p 0.0053), SPID24 (p 0.0084), SPID24-48 (p 0.0050), time to first use of rescue medication (p 0.0076), and several other rescue use and pain relief metrics during the first 48 hours, compared to placebo. The safety results demonstrated that IV meloxicam was well tolerated with no serious adverse events, or SAEs, or bleeding events in the IV meloxicam-treated patients. The most common adverse events, or AEs, occurring in at least 3% of IV meloxicam-treated treated patients, were nausea, headache, pruritus, constipation vomiting, dizziness, flushing and somnolence, and were comparable to the placebo group. The IV meloxicam-treated patients experienced injection site pain and injection site erythema at a rate comparable to placebo. The majority of treatment emergent AEs, or TEAEs, were mild in nature and there were no discontinuations due to AEs. There were no meaningful differences between treatment groups in vital signs, ECGs or clinical lab assessments. In November 2016, we announced positive results from the second of our two pivotal clinical trials, evaluating pain relief over a 24-hour period in a soft tissue, post-operative pain model (abdominoplasty). In the trial, IV meloxicam achieved the primary endpoint of a statistically significant difference in SPID24, compared to placebo. In this multicenter, randomized, double-blind, placebo-controlled clinical trial, 219 patients were enrolled and randomly assigned to receive a postoperative regimen of IV meloxicam (30mg bolus injection) or placebo in a 1:1 ratio, once every 24 hours. The IV meloxicam treatment arm demonstrated a statistically significant reduction in SPID24 (p 0.0145) compared to the placebo arm. The study also achieved statistical significance for 10 of the secondary endpoints, including statistically significant differences in SPID12 (p 0.0434), time to perceptible pain relief (p 0.0050), subjects with 30% improvement at 24 hours (p 0.0178), number of times patients required rescue in the first 24 hours after randomization (p 0.0275), as well as number of times rescued from 24 to 48 hours (p 0.0009), and several other pain relief metrics, compared to placebo. The safety results demonstrated that IV meloxicam was well tolerated with no difference in SAEs related to bleeding for IV meloxicam treated patients versus placebo (1 each). There were two additional SAEs observed in the placebo group. The most common ( 2% in the IV meloxicam group) AEs were nausea, headache, vomiting, and dizziness. The incidence of these events was lower than those observed in the placebo group. The majority of AEs were mild in nature and one patient in the placebo group discontinued treatment due to an adverse event of post-procedural bleeding. There were no meaningful differences between treatment groups in vital signs, ECGs or clinical lab assessments. Table of Contents TABLE OF CONTENTS Page SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001593470_tiger_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001593470_tiger_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f3c23c1aaa0b7921087eaae5fef45e38f6cd372
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001593470_tiger_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus, including, but not limited to, the risk factors beginning on page 9. References to we, us, our, Blue Water or the Company mean Blue Water Bar & Grill, Inc. Forward-Looking Statements This prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate , believe , plan , expect , future , intend and other similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in the "Risk Factors" section and elsewhere in this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001595380_mapi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001595380_mapi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001595380_mapi_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001597313_viewray_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001597313_viewray_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001597313_viewray_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001600132_belleropho_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001600132_belleropho_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001600132_belleropho_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001602381_momentous_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001602381_momentous_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0ca7ba652fc012502c941f9643014161736c6546
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001602381_momentous_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary financial data should be read in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. Balance Sheet Data: December 31, 2015 June 30, 2016 (unaudited) Current assets $ 47,423 $ 90,278 Current liabilities $ 921,817 $ 1,030,901 Stockholders deficit $ (874,394) $ (940,623) Operating: Year Ended December 31, 2015 Six Months Ended June 30, 2016 (unaudited) Net revenues $ 566 $ 2,500 Operating expenses $ 1,016,342 $ 413,836 Net (loss) $ (1,026,987) $ (655,630) Net (loss) per common share basic and diluted $ (0.01) $ (0.01) Weighted average number of shares outstanding basic and diluted 73,961,414 85,003,758 RISK FACTORS You should be aware that there are various risks to an investment in our common stock. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide to invest in shares of our common stock. If any of the following risks were to develop, then our business, financial condition, results of operations and/or prospects could be materially adversely affected. If that happens, the market price of our common stock, if any, could decline, and investors may lose all or part of their investment. Risks Related to the Business 1. We have a limited operating history as an entertainment company in which to evaluate our business. We plan on being an entertainment, direct response marketing, motion picture and music production company. However, we have been unable to implement much of this new business model because of financing and resource constraints and limitations. To date, we have limited revenues from music CD sales and a very limited operating history as a motion picture company upon which an evaluation of our future success or failure can be made. Current and future Company assets, including scripts and other properties that may be obtained in the future, may not be suitable for development unless additional financing is secured. No assurances of any nature can be made to investors that we will be profitable or that it will remain in business. There can be no assurances that our management will be successful in managing Momentous as an entertainment company. 2. Our independent registered auditors report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. We have no committed sources of debt or equity financing. Our independent registered auditors included an explanatory paragraph in their opinion on our financial statements as of and for the year ended December 31, 2015 that states that this lack of resources causes substantial doubt about our ability to continue as a going concern. No assurances can be given that we will generate sufficient revenue or obtain necessary financing to continue as a going concern. 3. Momentous is and will continue to be completely dependent on the services of our three founders, the loss of any of one or more of whose services may cause our business operations to cease, and we will need to engage and retain qualified employees and consultants to further implement our strategy. Our operations and business strategy are completely dependent upon the knowledge and business connections of Mr. Neubauer, our President, Chief Executive Officer and Chairman, Mr. Pepe, our Secretary and Chief Operations Officer, and Mr. Williams, our Executive Vice President of Business Development. They are under no contractual obligation to remain employed by us. If one or more should choose to leave us for any reason or become ill and are unable to work for an extended period of time before we have hired additional personnel, our operations will likely fail. Even if we are able to find additional personnel, it is uncertain whether we could find someone who could develop our business along the lines described in this prospectus. We will fail without the services of each of our three founders or an appropriate replacement(s). We intend to acquire key-man life insurance on the lives of Messrs. Neubauer and Pepe naming us as the beneficiary when and if we obtain the resources to do so and if they are insurable at the time of application. We have not yet procured such insurance, and there is no guarantee that we will be able to obtain such insurance in the future. Accordingly, it is important that we are able to attract, motivate and retain highly qualified and talented personnel and independent contractors. 4. Because the entertainment industry is intensely competitive and we lack the name recognition and resources of many of our competitors, we may never generate any revenues or become profitable. The entertainment industry is highly competitive. We believe that a motion picture s theatrical success is dependent upon general public acceptance, marketing technology, advertising and the quality of the production. Some of the production and distribution companies with which we will compete to varying extents are The Weinstein Company, Jerry Bruckheimer Films, Miramax Films, Lions Gate Entertainment Corp., Sony Pictures Entertainment, Inc., New Line Cinema, a subsidiary of Time Warner, Universal Studios, 20th Century Fox Film Corporation, a subsidiary of News Corp., Buena Vista Motion Pictures Group, a collection of affiliated motion picture studios all subsidiaries of The Walt Disney Company, Paramount Pictures Corporation, a subsidiary of Viacom, and Troma Entertainment, Inc. All of these competitors are significantly larger than we are, have a long-standing business relationship with customers, vendors and financial institutions, and have established staying power in the industry over the past 20 years. Our management believes that in recent years there has been an increase in competition in virtually all facets of the motion picture industry. With increased alternative distribution channels for many types of entertainment, the motion picture business competes more intensely than previously with all other types of entertainment activities, as well as television. While increased use of pay-per-view television, pay television channels, and home video products are potentially beneficial, there is no guarantee that we will be able to successfully penetrate these markets. Failure to penetrate these potential distribution channels would have a material adverse impact on our results of operations and ability to maintain operations. 5. We may be unable to obtain or license entertainment media that will be popular in the marketplace. We will seek to obtain or license entertainment media developed by others. If we are unable to do so or if the entertainment media that we do acquire or license is not well-received in the marketplace, our operations will fail. 6. Piracy of the original motion pictures that we plan to produce or distribute may reduce our revenues and potential earnings. Based on conversations that we have had with industry participants, we believe that piracy losses in the motion picture industry have increased substantially over the past decade. In certain regions of the world, motion picture piracy has been a major issue for some time. With the proliferation of the DVD format around the globe, along with other digital recording and playback devices, losses from piracy have spread more rapidly in North America and Europe. Piracy of original motion pictures that we produce and/or distribute may adversely impact the gross receipts realized from these films, which could have a material adverse effect on our future business, results of operations or financial condition. 7. Our three officers will make all decisions concerning their compensation for the foreseeable future. These decisions may not be in the best interests of other investors. There is no employment contract with any of our three executive officers at this time; nor are there any agreements for compensation in the future. Their compensation has not been fixed or based on any percentage calculations. They will make all decisions determining the amount and timing of compensation for the foreseeable future until, if ever, we establish a compensation committee of the board of directors. Their decisions about compensation may not be in the best interests of other shareholders. 8. We are subject to the periodic reporting requirements of the Exchange Act that will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit. We are required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be specifically predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. The incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly. 9. Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Our internal controls may become inadequate or ineffective if our operations grow, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision. 10. Our operating results will fluctuate significantly from period to period. Like participants in the entertainment industry, our revenues and results of operations will be significantly dependent upon the timing of releases and the commercial success of the motion pictures and other media that we distribute, none of which can be predicted with certainty. In addition, we will only be able to issue a very limited number of films or other media in any individual accounting period. The level of market acceptance for each release is likely to vary and may vary greatly. Accordingly, our revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods. In accordance with generally accepted accounting principles and industry practice, we intend to amortize film costs using the individual-film-forecast method under which such costs are amortized for each film in the ratio that revenue earned in the current period for such title bears to management's estimate of the total revenues to be realized from all media and markets for such title. To comply with this accounting principle, our management plans to regularly review, and revise when necessary, our total revenue estimates on a title-by-title basis, which may result in a change in the rate of amortization and/or a write-down of the film asset to net realizable value. Results of operations in future years should be dependent upon our amortization of film costs and may be significantly affected by periodic adjustments in amortization rates. The likelihood of the Company's reporting of losses is increased because the industry's accounting method requires the immediate recognition of the entire loss in instances where it is expected that a motion picture should not recover the Company's investment. Similarly, should any of our films be profitable in a given period, we will recognize that profit over the entire revenue stream expected to be generated by the individual film. 11. Film and entertainment production budgets may and often do increase and film production spending may exceed such budgets. It is common for future film and entertainment budgets to increase as the production process is underway for a variety of factors including, but not limited to, (1) escalation in compensation rates of people required to work on the projects, (2) number of personnel required to work on the projects, (3) equipment needs, (4) the enhancement of existing or the development of new proprietary technology and (5) the addition of facilities to accommodate the amended or unseen requirements of the project. Due to production exigencies, which are often difficult to predict, it is not uncommon for film production spending to exceed film production budgets, and our projects may not be completed within the budgeted amounts. In addition, when production of each film is completed, we may incur significant carrying costs associated with transitioning personnel on creative and development teams from one project to another. This situation becomes more severe if several projects are being undertaken at the same time or planned to be done contiguously. Our limited resources may not permit us to meet unexpected costs during productions. If such cost excesses occur and we are unable to arrange for the necessary financial needs, our operations may cease. 12. If we are alleged or accused of having infringed on the intellectual property or other rights of third parties, we could be subject to significant liability for damages and invalidation of our proprietary rights. Our business activities are and will be highly dependent upon intellectual property, a field that has encountered increasing litigation in recent years. If third parties allege that we have infringed on their intellectual property rights, privacy rights or publicity rights or have defamed them, we could become a party to litigation. These claims and any resulting lawsuits could subject us to significant liability for damages and invalidation of our proprietary rights and/or restrict our ability to publish and distribute the infringing or defaming content. In addition, defending such cases involves significant levels of legal costs. There can be no assurance that we would prevail in any such litigation. If we were to lose a litigation relating to intellectual property, we could be forced to pay monetary damages and to cease the sale of certain products or the use of certain technology. Any of the foregoing may adversely affect our business and may cause us to cease operations. 13. There are significant potential conflicts of interest Our key personnel and directors have other investments and involvements in other entities and, accordingly, these individuals may have conflicts of interest in allocating time among various business activities. In the course of other business activities, certain key personnel may become aware of business opportunities which may be appropriate for presentation to us, as well as the other entities with which they are affiliated. As such, there may have conflicts of interest in determining to which entity a particular business opportunity should be presented. We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective. Risks Related to Our Common Stock 14. Shareholders may be diluted significantly because of the issuance of convertible financial instruments through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock. At August 15, 2016 there are various debt obligations outstanding which can be converted, at the holders option, into an aggregate of 48,086,603 shares of our common stock. We have no committed source of financing. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations or to acquire rights to or licenses for films or other products. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders may further dilute common stock book value, and that dilution may be material. 15. The interests of shareholders may be hurt because we can issue shares of our common stock to individuals or entities that support existing management with such issuances serving to enhance existing management s ability to maintain control of our Company. Our three executive officers and directors own a significant majority of outstanding shares. In addition, our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued common shares. Such issuances may be issued to parties or entities committed to supporting existing management and the interests of existing management which may not be the same as the interests of other shareholders. Although transactions, other than those described in this prospectus, are not currently being contemplated or discussed, our ability to issue shares without shareholder approval serves to enhance existing management s ability to maintain control of our Company or participate in other transactions, including entering into possible business combinations, without the support of other shareholders. 16. Our chief executive officer controls all corporate activities and can approve all transactions, including mergers, without the approval of other shareholders. Our chief executive officer holds preferred shares that give him the right to 51% in all shareholder votes. Therefore, he effectively controls all corporate activities and can approve transactions, including possible mergers, issuance of shares and compensation levels, without the approval of other shareholders. His decisions may not be consistent with or in the best interests of other shareholders. 17. Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability that may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors. Our Articles of Incorporation at Article XI provide for indemnification as follows: "No director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer: (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law; or (ii) the payment of dividends in violation of Section of the Nevada Revised Statutes. Any repeal or modification of an Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation of the personal liability of a director or officer of the Corporation for acts or omissions prior to such repeal or modification." We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops. 18. Currently, there is no established public market for our securities, and there can be no assurances that any established public market will ever develop and, even if trading begins, it is likely to be subject to significant price fluctuations. We received a trade symbol, MMEG, in March 2015, and there is currently very low trading levels of our common stock. There are no assurances can be given that a significant level of trading volume will ever develop. Because of the anticipated low price of the securities being registered, many brokerage firms may not be willing to effect transactions in these securities. Purchasers of our securities should be aware that any market that develops in our stock will be subject to the penny stock restrictions. 19. Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible. Our shares will be considered a penny stock. Rule 3a51-1 of the Exchange Act establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. This classification will severely and adversely affects any market liquidity for our common stock. 20. The market for penny stocks has experienced frauds and abuses that could adversely impact our investors in our stock. Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include: Control of the market for the security by one or a few broker-dealers that are often related to the promotor or issuer; Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases Boiler room practices involving high pressure sales tactics and unrealistic price projections by sales persons; Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. 21. Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to affect adversely stockholder voting power and perpetuate their control. Our articles of incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. 22. The ability of our executive officers and directors to control our business may limit or eliminate minority shareholders ability to influence corporate affairs. Our executive officers and directors will beneficially own in excess of 60% of our outstanding common stock. Because of their beneficial stock ownership, they will be in a position to continue to elect our board of directors, decide all matters requiring stockholder approval, including potential mergers or business changes, and determine our policies. The interests of our executive officers and directors may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. The minority shareholders would have no way of overriding decisions made by our executive officers and directors. This level of control may also have an adverse impact on the market value of our shares because our three executive officers may institute or undertake transactions, policies or programs that may result in losses, may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares to significantly decrease our price per share. 23. A significant portion of our presently issued and outstanding common shares are restricted under rule 144 of the Securities Act, as amended. When the restriction on any or all of these shares is lifted, and the shares are sold in the open market, the price of our common stock could be adversely affected. A significant portion of the presently outstanding shares of common stock (61,219,025 shares) are "restricted securities" as defined under Rule 144 promulgated under the Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available. Rule 144 provides in essence that a person who is not an affiliate and has held restricted securities for a prescribed period of at least six months if purchased from a reporting issuer or 12 months (as is the case herein) if purchased from a non-reporting Company, may, under certain conditions, sell all or any of his/her shares without volume limitation, in brokerage transactions. Affiliates, however, may not sell shares in excess of 1% of the Company s outstanding common stock each three months. As a result of revisions to Rule 144 which became effective on February 15, 2008, there is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner for the aforementioned prescribed period of time. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. 24. We do not expect to pay cash dividends in the foreseeable future. We have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock. 25. Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters. The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures. We do not currently have independent audit or compensation committees. As a result, our president and other two officers have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations. We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles. 26. We could be removed from the OTCBB if we fail to remain current with our financial reporting requirements. Companies trading on the OTCBB must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCBB. If we fail to remain current in our reporting requirements, we would be removed from the OTCBB. As a result, the market liquidity of our securities, if any, could be severely adversely affected by limiting the ability of broker-dealers to trade our securities and the ability of stockholders to sell their securities in the secondary market. 27. Our financial statements may not be comparable to those of companies that comply with new or revised accounting standards. We have elected to take advantage of the benefits of the extended transition period that Section 107 of the JOBS Act provides an emerging growth company, as provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Our financial statements may, therefore, not be comparable to those of companies that comply with such new or revised accounting standards. Because the JOBS Act has only recently been enacted, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, here may be a less active trading market for our common stock and our stock price may be more volatile. 28. Our status as an emerging growth company under the JOBS Act OF 2012 may make it more difficult to raise capital when we need to do so. Because of the exemptions from various reporting requirements provided to us as an emerging growth company and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected. 29. We will incur increased costs and demands upon management as a result of complying with the laws and regulations that affect public companies, which could materially adversely affect our results of operations, financial condition, business and prospects. As a public company and particularly after we cease to be an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. Based on discussions with our professionals, these costs may reach $50,000 per year during the first two years following the effective date of our Registration Statement. These requirements include compliance with provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NASDAQ. In addition, our management team will also have to adapt to the requirements of being a public company. We expect that compliance with these rules and regulations will substantially increase our legal and financial compliance costs and will make some activities more time- consuming and costly. The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. Additionally, if these requirements divert our management s attention from other business concerns, they could have a material adverse effect on our results of operations, financial condition, business and prospects. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. 30. We will not be required to comply with certain provisions of the Sarbanes-Oxley Act for as long as we remain an emerging growth company. We are not currently required to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. Though we will be required to disclose changes made in our internal control procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the later of (i) the year following our first annual report required to be filed with the SEC or (ii) the date we are no longer an emerging growth company as defined in the JOBS Act. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. 31. Reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors. As an emerging growth company , we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Risks Related to the Equity Line 32. Future issuances of common shares may be adversely affected by the Equity Line. The market price of our common stock could decline as a result of issuances and sales by us, including pursuant to the Equity Line, or sales by our existing stockholders, of common stock, or the perception that these issuances and sales could occur. Sales by our stockholders might also make it more difficult for us to issue and sell common stock at a time and price that we deem appropriate. It is likely that the sale of shares by Southridge will depress the market price of our common stock. 33. Draw downs under the Equity Purchase Agreement may cause dilution to existing shareholders. Under the terms of the Equity Purchase Agreement, Southridge has committed to purchase up to $3,000,000 worth of shares of our common stock. From time to time during the term of the Equity Purchase Agreement, and at our sole discretion, we may present Southridge with a Draw Down Notice requiring Southridge to purchase shares of our common stock. The purchase price to be paid by Southridge will be 88% of the average of the daily VWAP during the Valuation Period. On the date the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice ( Estimated Shares ). The Valuation Period will begin the first trading day after the Estimated Shares have been delivered to Southridge s brokerage account and have been cleared for trading and terminate on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. As a result, our existing stockholders will experience immediate dilution upon the purchase of any of the shares by Southridge. The issue and sale of the shares under the Equity Purchase Agreement may also have an adverse effect on the market price of the common shares. Southridge may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Southridge in exchange for each dollar of the put amount. Under these circumstances, the existing stockholders of our Company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Southridge, and because our existing stockholders may disagree with a decision to sell shares to Southridge at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding. 34. There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement. Although the Equity Purchase Agreement provides that we can require Southridge to purchase, at our discretion, up to $3,000,000 worth of shares of our common stock in the aggregate, there can be no assurances given that we will be able to satisfy the closing conditions applicable for each put. Further, there are limitations on the number of shares in that each draw down amount is limited to the lowest closing bid price during the Valuation Period, subject to the floor. In addition, the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. Other conditions include requiring that the registration statement of which this prospectus forms a part remains effective at all times during the term of the Equity Purchase Agreement, that there is no material adverse change to our business on the date of delivery of a Draw Down Notice and that our common stock continues to trade of the OTCBB. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to Southridge. 35. There is no guarantee that we will be able to fully utilize the Equity Line. There are limitations on the number of put shares that may be sold in each put. The number of put shares that Southridge shall be obligated to purchase in a given put shall not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. Thus, our ability to access the bulk of the funds available under the Equity Purchase Agreement depends in part on Southridge s resale of stock purchased from us in prior puts. If with regard to a particular put, the share volume limitation is reached, we will not be able to sell the proposed put shares to Southridge. Accordingly, the Equity Line may not be available at any given time to satisfy our funding needs. 36. We issued a $50,000 note payable in connection with the Equity Line with no source of funds to pay except proceeds from the Equity Line. Pursuant to the terms of the Equity Purchase Agreement we issued a note payable to Southridge having a principal balance of $50,000 and bearing interest at the rate of 10 per cent per annum. The note is due on January 31, 2017. Our only potential source of cash to pay this note is the Equity Line. If for any reason we are unable to draw funds from the Equity Line, we will be unable to satisfy the note. There are no assurances that the terms of the note can or will be modified. For all of the foregoing reasons and others set forth herein, an investment in the Company s securities in any market which may develop in the future involves a high degree of risk. USE OF PROCEEDS We will not receive any proceeds from the sale of the common stock by the selling security holder pursuant to this prospectus. All proceeds from the sale of the shares will be for the account of the selling security holder. We have agreed to bear the expenses relating to the registration of the shares for the selling security holder. We anticipate receiving proceeds from any puts tendered to Southridge under the Equity Line. Such proceeds from the Equity Line are intended to be used approximately as follows: DETERMINATION OF OFFERING PRICE The offering price for the shares sold to Southridge under the put will equal 88% of the average of the daily VWAP during the Valuation Period. To the extent that the disparity between the offering price and market price of the common stock is material, such disparity was determined by us to be fair in consideration of Southridge establishing a line of credit to facilitate our ongoing operations. Equity Purchase Agreement The purchase price per share to be paid by Southridge will be 88% of the average of the daily VWAP during the Valuation Period. On the date the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice. The Valuation Period begins the first trading day after the Estimated Shares have been delivered to Southridge s brokerage account and have been cleared for trading and terminate on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. As a result, our existing stockholders will experience immediate dilution upon the purchase of any of the shares by Southridge. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to Southridge. Southridge's obligations under the Equity Line are not transferable. There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice. There are circumstances under which we will not be entitled to put shares to Southridge, including the following: We will not be entitled to put shares to Southridge unless there is an effective registration statement under the Securities Act of 1933, as amended (the Securities Act ), to cover the resale of the shares by Southridge; We will not be entitled to put shares to Southridge unless our common stock continues to be publicly trade; We will not be entitled to put shares to Southridge if an injunction shall have been issued and remain in force against us, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the shares to Southridge; We will not be entitled to put shares to Southridge to the extent that such shares would cause Southridge s beneficial ownership to exceed 9.99% of our outstanding shares; and We will not be entitled to put shares to Southridge if we take any of the following actions on any trading day after a Draw Down Notice is delivered: (a) subdivide or combine shares of common stock; (b) pay a dividend in shares of common stock or make any other distribution of shares of common stock, except for dividends paid with respect to any series of preferred stock authorized by us, whether existing now or in the future; (c) issue any options or other rights to subscribe for or purchase shares of common stock other than pursuant to the December Equity Purchase Agreement, and other than options or stock grants issued or issuable to directors, officers and employees pursuant to a stock option program, whereby the price per share for which shares of common stock may at any time thereafter be issuable pursuant to such options or other rights shall be less than the closing bid price in effect immediately prior to such issuance; (d) issue any securities convertible into or exchangeable for shares of common stock and the consideration per share for which shares of common stock may at any time thereafter be issuable pursuant to the terms of such convertible or exchangeable securities shall be less than the closing bid price in effect immediately prior to such issuance; (e) issue shares of common stock otherwise than as provided in the foregoing subsections (a) through (d), at a price per share less, or for other consideration lower, than the closing bid price in effect immediately prior to such issuance, or without consideration; or (f) make a distribution of our assets or evidences of indebtedness to the holders of common stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of our assets (other than under the circumstances provided for in the foregoing subsections (a) through (e). The Equity Purchase Agreement further provides that Southridge is entitled to customary indemnification from us for any losses or liabilities it suffers as a result of any material misrepresentation, breach of warranty or nonfulfillment of or a failure to perform any material covenant or agreement contained in the Equity Purchase Agreement. The Equity Purchase Agreement also contains representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Equity Purchase Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Equity Purchase Agreement. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a stockholder or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts. Pursuant to the terms of the Equity Purchase Agreement we issued a note payable to Southridge having a principal balance of $50,000 and bearing interest at the rate of 10 per cent per annum. The note is due on January 31, 2017. Southridge has agreed that any time prior to the termination of the Equity Purchase Agreement neither it nor any of its affiliates shall engage in or enter into, directly or indirectly, any short-sale of our common stock or any hedging transaction that establishes a net short position in our common stock. Likelihood of Accessing the Full Amount of the Equity Line Notwithstanding that the Equity Line is in an amount of $3,000,000, we anticipate that the actual likelihood that we will be able access the full $3,000,000 is relatively low due to several factors, including that our ability to access the Equity Line is limited by share volume restrictions and the fact that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. The 12,000,000 shares which we determined to register in this registration statement, represents approximately one-third of our public float (after subtracting restricted shares and the holdings of insiders and controlling stockholders) and at the current market price of $.0166 per share on August 29, 2016, utilizes $175,296 (or 5.84%) of the $3,000,000 available under the Equity Funding Facility. If the market price of our stock should increase to or above $0.28 per share then the 12,000,000 shares registered hereby would enable us to use the full $3,000,000. Conversely, if the market price of our stock should decrease below $.0166 for any reason, then the 12,000,000 shares registered hereby would enable us to use less than $175,296. DILUTION Dilution represents the difference between the offering price of the shares of common stock hereby being offered and the net book value per share of common stock immediately after completion of this Offering. "Net book value" is the amount that results from subtracting total liabilities from total assets. Although the offering price of $0.0166 per share was based on the closing price of our shares of common stock as listed on the OTCBB on August 29, 2016, it may not be the actual sales price of the shares registered hereunder at the time they are sold. If shares were to be sold at such price, investors would experience an immediate and substantial dilution compared to the projected net book value of the common stock. The net book value of our common stock as of June 30, 2016 was ($940,623), or ($0.011) per share of common stock. The difference between the public offering price per share and the pro forma net book value per share of our common stock after this offering constitutes the dilution to investors in this offering. DIVIDEND POLICY We have never paid cash or any other form of dividend on our common stock, and we do not anticipate paying cash dividends in the foreseeable future. Moreover, any future credit facilities might contain restrictions on our ability to declare and pay dividends on our common stock. We plan to retain all earnings, if any, for the foreseeable future for use in the operation of our business and to fund the pursuit of future growth. Future dividends, if any, will depend on, among other things, our results of operations, capital requirements and on such other factors as our board of directors, in its discretion, may consider relevant. MARKET FOR OUR SECURITIES Our common stock has been quoted on the OTCBB Marketplace since October 7, 2015. Our common stock is currently quoted on the OTCBB, which is sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current bids and asks, as well as volume information. Our shares are quoted on the OTCBB under the symbol MMEG. The following table sets forth the range of high and low bid quotations for our common stock for the each of the 12 months in the period ended July 31, 2016. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Month Ended High Low August 31, 2015 $ 0.00 $ 0.00 September 30, 2015 0.00 0.00 October 31, 2015 2.00 2.00 November 30, 2015 1.05 1.05 December 31, 2015 0.30 0.30 January 31, 2016 0.25 0.25 February 29, 2016 0.2258 0.18 March 31, 2016 0.13 0.13 April 30, 2016 0.0601 0.0601 May 31, 2016 0.04 0.04 June 30,2016 0.0202 0.0202 July 31,2016 0.0326 0.0326 The last reported sale price of our common stock on the OTCBB Marketplace on August 29, 2016, was $0.0166 per share. As of August 15, 2016, there were approximately 107 holders of record of our common stock. We have not declared or paid any cash dividends on our common stock and do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. We currently expect to retain future earnings, if any, for the development of our business. Dividends may be paid on our common stock only if and when declared by our board of directors. Penny Stock Our stock is considered to be a penny stock. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities. NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this prospectus which is a part of our registration statement involve risks and uncertainties, including statements as to: our future operating results; our business prospects; any contractual arrangements and relationships with third parties; the dependence of our future success on the general economy; any possible financings; and the adequacy of our cash resources and working capital. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we believe," anticipate, expect, estimate or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this prospectus. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this prospectus, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances except as required pursuant to applicable regulations to update this prospectus during the period of our continuous offering. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Note Regarding Forward-Looking Statements Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this annual report involve risks and uncertainties, including statements as to: our future operating results, our business prospects, our contractual arrangements and relationships with third parties, the dependence of our future success on the general economy and its impact on the industries in which we may be involved, the adequacy of our cash resources and working capital, and other factors identified in our filings with the SEC, press releases, if any and other public communications. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we believe," anticipate, expect, estimate or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The following discussion and analysis provides information which management believes to be relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read together with the Company's financial statements and the notes to financial statements, which are included in this report. This management's discussion and analysis or plan of operation should be read in conjunction with the financial statements and notes thereto of the Company included elsewhere in this prospectus. Because of its nature of a development stage company, the reported results will not necessarily reflect the future. We qualify as an emerging growth company under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to: have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); submit certain executive compensation matters to shareholder advisory votes, such as say-on-pay and say-on-frequency; and disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO s compensation to median employee compensation. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. We will remain an emerging growth company for up to five years, or until the earliest of i. the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, ii. the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or iii. the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Operating Plan Our principal efforts for the next few months will be preparing and developing the following: Film and TV Content Online Streaming Distribution The Company has signed an agreement to deliver film, TV and sports content on a video on demand and subscription video on demand business model with Pool Works, Germany s largest social media platform with 10 million plus members. The Company will source the film, TV and sports content from their Hollywood and global relationships, and work with a designated video delivery platform to fulfill the integration into the social media websites. Reality TV Series The Company s two planned reality TV series, The Bobby Earnhardt Show and Dennis Gile: Quarterback Academy, are being reviewed by a professional talent agency which is seeking potential promotional representation and parties interested in broadcasting the shows. We are currently in discussions to determine the next steps. Music The Company has started work on a third album, title Crossing From Here to Eternity which will feature singing artist Suzanne Olmon and a special appearance by Grammy award-winner singer, Cynthia Clawson. The work will be focused on the adult contemporary listening market to offer the broadest appeal possible and afford us the opportunity for radio airtime play, and being rated on platforms such as Billboard. The album is currently in the planning and rehearsal phase with plans of moving into the recording studio by the fourth quarter of 2016. Merger and Acquisition Program The Company has developed and started implementing an acquisition plan to acquire several international film and TV distribution companies. The Company has been working with an advisor to assist in this process. Acquisitions, if they occur, will likely be done using common stock of the Company which, to accomplish, is likely to require increases in the trading volume and price of the Company s common stock. Direct Response Media Marketing MEG plans to utilize direct response media marketing and a variety of advertising channels to increase exposure among prospective purchasers for our products such as music albums and products that we are marketing for our customers. The direct response industry, consisting of direct response television and radio marketing, live home shopping channels, direct mail, catalogs, internet marketing and advertising, and outbound telemarketing, is one of the fastest growing segments of the retailing industry. We cannot predict the likelihood or timing of the successful achievement of any of the foregoing operating plans. Operations A summary of operations for the six months ended June 30, 2016 and 2015 as follows: 2016 2015 Revenue $ 2,500 $ 81 Costs and Expenses: Project costs - 32,500 Marketing, general and administrative 413,836 57,647 Loss from operations (411,336) (90,066) Interest expense 283,229 3,935 Change in Derivative Liability (38,935) - Net loss $ (655,630) $ (94,001) Marketing, general and administrative costs consist principally of marketing costs and professional consulting fees. Other As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in Liquidity below and/or elsewhere in this prospectus. We believe that the perception that many people, including potential customers and business associates, have of a public company make it more likely that they will be more likely to engage a public company for services or accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. However, there can be no assurances that we will be successful in any of those efforts even if we are a public entity. Additionally, issuance of restricted shares would necessarily dilute the percentage of ownership interest of our stockholders. Liquidity The Company s operations have not yet generated cash. All cash received by the Company has come from loans and investors. Cash used in operations amounted to $156,998 and $191,732 at June 30, 2016 and 2015 respectively. During the second quarter 2016, and 2015, $156,984 and $181,295 were provided by financing activities and to date, the Company has used no cash in investing activities. At June 30, 2016 the Company was obligated for demand loans of $343,430 due to the Company s President. The loans were made from his personal resources, the proceeds from which were used to finance operations. All demand loans made by the Company s President bears interest at 3% per annum. His personal resources do not permit him to make additional loans to the Company. At June 30, 2016, the Company is obligated under one convertible notes payable due to an unrelated third party, with a principal balance of $12,000, which matures in 2016. The note is convertible at $0.50 per share price or an aggregate of 24,000 shares if the note is converted. The Company has one demand loan payable outstanding in the principal amount of $21,900, from an officer and a director and is non-interest bearing. The note is unsecured. On February 9, 2016, The Company has entered into a $280,000 Convertible Loan Agreement with TYPENEX CO-INVESTMENT, LLC, an unaffiliated entity, with the following key provisions: The Note has a 9.1% Original Issue Discount and bears interest at the rate of 10%. The conversion price is fixed at $.35 per share and is subject to reduction if the Company issues shares below the conversion price. The Company will make automatic installment payments beginning 180 days from Closing (and continuing in equal installments for the next 14 months (for a total of 15 payments) or until the balance is paid in full. The Installment Amount due on each Installment Date is equal to the sum of all accrued but unpaid interest and a principal amount equal to approximately $21,167. The Installment Amount can be paid in either cash or Common Stock. If the Company chooses to make a payment in Common Stock, such stock shall be issued at the Market Price. The Market Price of the common stock is defined as 70% of the average of the three lowest closing bid prices for the 20 consecutive trading days prior to the date on which the Market Price is measured. 70% shall be replaced with 60% if the average of the three lowest closing bid prices is less than $.10. As of June 30, 2016, the Company borrowed $45,000 against this Convertible Loan Agreement. The Company evaluated the floating conversion rate associated with this debt instrument and determined that it was a derivative and nature was not clearly and closely associated with the host instrument such that it constituted an embedded derivative liability which required it to be separately accounted for from the host instrument. As of June 30, 2016, the Company recorded $1,755 in accrued interest on this loan agreement. On March 22, 2016, the Company entered into an agreement with LG Capital Funding, LLC, a New York Limited Liability Company with respect to a private investment of up to $260,000 of convertible debt securities with a 12-month term. The $260,000 convertible debt is comprised of two $65,000 front-end notes and two $65,000 back-end notes. The principal and interest outstanding under this Agreement will be convertible into shares of Common Stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back from the date converted. The notes bear interest at 8%. As of June 30, 2016, The Company borrowed a total of $102,000 against this Convertible Loan Agreement and accrued interest of $2,144 relating to his amount has been recorded. The Company has also recorded $13,600 in broker fees and $7,250 in legal fees associated with these borrowings. On March 22, 2016, the Company entered into an agreement with Adar Bays, LLC, a Florida Limited Company, with respect to a private investment up to $140,000 of convertible debt securities with a 12-month term. The $140,000 convertible debt is comprised of two $35,000 front-end notes and two back-end notes. The outstanding principal and accrued interest under the notes will be convertible into shares of common stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back. The notes bear interest at 8%. As of June 30, 2016, the Company has borrowed $35,000 against this Convertible Loan Agreement and recorded $756 in accrued interest on this loan agreement. The Company also recorded $3,500 in broker s fees and $2,000 in legal fees associated with this borrowing. On June 3, 2016, the Company entered into a Convertible Note Agreement with T. McNeil Advisors, LLC for $15,000 with interest of 8% per annum and a maturity date of June 3, 2017. The $15,000 note was issued as full consideration for three months of advisory services. The Company is entitled, at its option, at any time, to convert all or any of the outstanding principal into shares of common stock of Company at a conversion price for each share of common stock equal to 65% of the lowest trading price of the common stock as reported in the OTC Marketplace Exchange. As of June 30, 2016, the Company recorded accrued interest of $94 on this note agreement. On July 28, 2016, the Company entered into an Equity Purchase Agreement with Southridge Partners II, LLP (Southridge) in which the Company has agreed to issue and sell Southridge (the Put Shares ) of its common stock, $0.001 par value per share from time to time for an aggregate investment price of up to $3,000,000. Southridge will pay 88% of the average of the daily volume weighted average price during the Valuation Period for put shares and the equity line terminates on the earlier of: (i) 24 months from the effective date of the registration statement filed in connection with the Equity Purchase Agreement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Purchase Agreement for an aggregate maximum purchase price of $3,000,000. The number of shares to be purchased by Southridge under the Equity Purchase Agreement may never exceed the number of shares that, when added to the number of shares of the Company s common stock then beneficially owned by Southridge, would exceed 9.99% of the Company s shares of common stock outstanding. The Company has agreed to file an S1 Registration Statement with the Securities and Exchange Commission with respect to the shares that may be sold under the Equity Purchase Agreement. No sales will occur until that Registration Statement is effective. Private capital, if sought, will be sought from former business associates of our founder or private investors referred to us by those business associates. To date, we have not sought any funding source and have not authorized any person or entity to seek out funding on our behalf. If a market for our shares ever develops, of which there can be no assurances, we may attempt to use shares of our common stock to compensate employees/consultants and independent contractors wherever possible. The prices that will be used will be determined during negotiations and may or may not be at perceived market values. We also believe that if a market does develop for our shares that our chances to raise funds will increase significantly. We have become a public company and, by doing so, have incurred and will continue to incur additional significant expenses for legal, accounting and other services. We are subject to the reporting requirements of the Exchange Act of '34 and will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate, based on verbal discussions with consultants, accountants and lawyers that these costs may range up to $50,000 per year for the next few years. In the next one to two fiscal years, we will take every step possible to minimize these costs. Through their past work and various participations in business organizations, our three executive officers know many professionals who are knowledgeable in the area of public company obligations. Although we have no formal commitments, we believe that some of these professionals may assist us for very reasonable costs. We also hope to be able to use our status as a public company to increase our ability to use noncash means of settling obligations and compensate independent contractors who provide professional and other services to us, although there can be no assurances that we will be successful in any of those efforts. We will reduce the compensation levels paid to management if there is insufficient cash generated from operations to satisfy these costs. Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may, therefore, not be comparable to those of companies that comply with such new or revised accounting standards. Critical Accounting Policies The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 2 to the financial statements, included in the Registration Statement on Form S1, includes a summary of the significant accounting policies and methods used in the preparation of our financial statements. Seasonality We expect that business volume will typically be highest during the period May through October. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements, as defined in Item 303(a) (4) (ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future. BUSINESS
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001603429_parnell_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001603429_parnell_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0755b0ac242c7d59423e59eda9dbe05284f3ab19
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001603429_parnell_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This prospectus summary highlights certain information about our business and this offering. Because it is a summary, it may not contain all of the information that you should consider before deciding whether to purchase our securities. You should carefully read this prospectus and the documents incorporated by reference herein for a more complete understanding. You should pay special attention to the section entitled "Risk Factors" beginning on page 8 of this prospectus, Item 3.D. of our Annual Report filed on Form 20-F for the year ended December 31, 2015, as filed with the SEC, and our consolidated audited financial statements and the notes thereto in our Annual Report on Form 20-F for the year ended December 31, 2015 filed with the SEC and incorporated by reference herein. Business Overview We are a fully integrated, veterinary pharmaceutical company focused on developing, manufacturing and commercializing innovative animal health solutions. We currently manufacture and market five products for companion animals and production animals in 14 countries. We augment our pharmaceutical products with proprietary software platforms – Fetch and mySYNCH . These innovative technology solutions are designed to enhance the quality of life and/or performance of animals and are provided to animal owners who use our drug products as a value added service offering to differentiate us from our competitors. We also have a pipeline of seven drug products covering large therapeutic areas in orthopedics, dermatology, anesthesiology, nutraceuticals and metabolic disorders for companion animals as well as reproduction and mastitis for cattle. Our disease-modifying product, Zydax , for the treatment of osteoarthritis, or OA, in dogs and horses, both stimulates the growth of new cartilage and inhibits cartilage breakdown. OA is a slowly progressive and often severely debilitating degenerative joint disease, or DJD. We estimate that the market for OA in animals in the U.S. and the European Union, or the EU, is over $410 million in annual sales of prescription drugs, with the global market for alternative treatments such as nutraceutical products comprising at least another $500 million in annual sales. The most common treatments for OA are anti-inflammatory drugs, which ease symptoms but do not address the underlying disease process. By contrast, Zydax is designed to enable veterinarians and animal owners to safely and effectively manage the cause of OA. Zydax has an excellent efficacy and safety profile, with one million doses sold, and has led to improved quality of life for dogs and improved performance of sport horses. We have marketed Zydax in Australia, New Zealand, Hong Kong, Singapore and the United Arab Emirates and we are seeking approval from the FDA for marketing in the U.S. and from the European Medicines Agency, or EMA, for marketing in the European Union, or EU. We plan to launch Zydax for dogs in the U.S. and EU once regulatory approval has been received. We filed an application with the Food and Drug Administration, or the FDA, for regulatory approval for Zydax in the U.S. in October 2015 and have now received a response from the FDA asking clarifying questions and additional information on our Chemistry and Manufacturing Controls Technical Section as well as on the Target Animal Effectiveness Section. We have had preliminary discussions with the FDA and, based on our current expectations, plan to file our response and the required data with the FDA in the second quarter of 2016. Meeting this response timeframe would keep us on track for a potential approval for Zydax in late fourth quarter 2016. Our application for approval in the EU was filed with the European Medicines Agency, or EMA, in February 2016, and we anticipate approval in the first quarter of 2017. In addition to Zydax, we also have a nutraceutical product for OA, Glyde , which is a combination of glycoaminoglycans, a building block for cartilage (derived from chondroitin sulfate and glucosamine) and a potent natural anti-inflammatory, ecoisatetranoic acid (derived from green-lipped mussel powder). Glyde is currently marketed in the same countries where Zydax is currently approved, as well as in the U.S. We launched Glyde in the U.S. in September 2015 through the establishment of a new U.S. companion animal sales and marketing team, providing us with an established presence in the companion animal market in advance of the anticipated FDA approval of Zydax in 2016. We also expect to launch two new companion animal products in the U.S. in 2016. Luminous is a novel nutraceutical product we have developed for use in dermatological conditions. The dermatology market has seen recent rapid expansion with the introduction of novel pharmaceuticals and we expect Luminous to appeal to dog owners who want their dogs to have healthy skin and shiny coats. We are also proud to have recently in-licensed a novel liquid bandage product with antimicrobial properties called Reviderm . The current standard of care for wounds is the use of adhesive bandages which can irritate dogs and cause them to chew off the bandage, which in turn can lead to complications at the wound site. We believe Reviderm offers a more elegant solution, combining antimicrobial properties that support wound healing with an impervious elasto-polymer that wears off naturally over time. We have constructed a sterile manufacturing facility located in Sydney, Australia, which has been inspected by the FDA and other regulatory agencies, enabling us to manufacture products for sale in the U.S., EU, Australia, New Zealand and Canada, as well as other jurisdictions under mutual recognition procedures. We believe this new facility provides us with a low-cost and reliable supply of our products and has approximately 75% available capacity above our current manufacturing demand, creating significant contract manufacturing and pipeline expansion opportunities. We have now completed negotiations on our first Contract Manufacturing agreement. We anticipate this deal, once signed, will generate several million dollars in revenue over a ten-year period and contribute to the utilization of our spare capacity. We continue to explore further contract manufacturing opportunities with other large multinationals from the Animal Health industry. Our lead reproductive hormone products, estroPLAN and GONAbreed , are designed to safely and effectively improve cattle breeding performance and are currently marketed in 12 countries. We were the first company to achieve FDA approval for the indication of estrous synchronization in lactating dairy and beef cows. We market our reproductive hormone products in conjunction with our proprietary software platform, mySYNCH, in order to deliver superior breeding outcomes. Since launching in the U.S. in mid-2013, we have steadily acquired market share and finished 2015 with over 10% share of the U.S. reproductive hormone product market and triple-digit sales growth. We expect to continue to expand our commercial presence in the U.S. in 2016. In other markets we operate in, we typically enjoy a top three market share position, including in Australia, New Zealand and Canada, where we have been selling our products for many years. We believe our products are differentiated through our complementary software platforms designed to assist animal owners in maximizing the performance and efficiency of our products. Fetch, for companion animal customers, and mySYNCH, for production animal customers, provide our customers with a personalized software solution which is currently provided as a free service offering to our customers. These software platforms provide mobile and interactive education and diagnostics, data analytics and customer management capabilities. Fetch and mySYNCH also provide us direct interaction with animal owners to manage and personalize their brand experience with our products. Our technology offerings enable us to increase customer interaction, brand recognition and overall customer satisfaction and in the future may also provide an additional revenue stream opportunity through charging for the provision of premium services in our digital technologies. In the last decade, we have significantly enhanced our core competencies across the entire pharmaceutical value chain. A key strength of our business is our research and development, clinical trial and regulatory development experience. We have conducted over 31 clinical trials across six countries in 70 trial sites during the last ten years. Our products have been approved by regulators in the U.S., Europe, Canada, Australia, New Zealand and multiple other jurisdictions throughout Latin America, Asia, the Middle East and Africa. We are planning to conduct up to 25 additional clinical trials over the next four years. Our clinical science expertise is augmented by a strong network of academic institutions, private research organizations and veterinary clinics across multiple countries around the world. Our current revenues are derived from operations in 14 countries, with a direct marketing presence in Australia, New Zealand and the U.S. We utilize a range of multi-national and local marketing partners in other markets including Canada, the Middle East and Africa and will continue to seek additional marketing partners who can assist us in bringing our products to market in those geographies where we do not expect to establish a direct presence such as Europe, Asia and Latin America. We have recently expanded our business operations in the U.S. where we conduct all drug development and drug commercialization functions from our global headquarters in Overland Park, Kansas. This shift in focus has enabled us to establish a U.S. sales and marketing presence and we believe will enable us to be well positioned for future potential approvals of our product candidates including Zydax. It also enables us to explore a variety of licensing opportunities arising from the large U.S. animal health and biotechnology industries. We believe that our fully-integrated, pharmaceutical value chain positions us to effectively and efficiently leverage our current product portfolios, expand and scale our pipeline of product candidates and potentially elicit attractive in-licensing or acquisition opportunities. We believe that the combination of these capabilities and opportunities positions us to become a leading innovator in animal health products. Risks Related to Our Business Our ability to successfully implement our business strategy is subject to numerous risks, as more fully described in the section entitled "Risk Factors" immediately following this prospectus summary and in our Annual Report on Form 20-F filed with the SEC on March 4, 2016, which we incorporate by reference in this prospectus. These risks include, among others: We have incurred a loss for the fiscal years ended June 30, 2014 and 2013 and the fiscal year ended December 31, 2015 and six-month period ended December 31, 2014. If we do not increase our revenues, we will continue to incur losses and may be reliant upon external capital in order to continue to fund our operations. Failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts. Sales of our existing reproductive hormones and OA products may decline as a result of increased competition and other market factors. Zydax, our most advanced product candidate, may take longer to, or may never, receive regulatory approval in the U.S., Europe or in any other significant market. The API for all our products and product candidates is supplied by contract manufacturers. If these third party suppliers discontinue our supply relationship or are unable to supply our needs on a timely basis or on terms and conditions acceptable to us, we may experience significant disruption to the continuation of our sales. Our pipeline of product candidates will require contract manufacturers to develop manufacturing processes for the development of API for our product candidates. These processes may take substantially longer and cost significantly more than we anticipate. We have supply agreements in place for the API contained in our estroPLAN and GONAbreed products. If these contractual arrangements terminate or are otherwise not renewed, our ability to timely acquire the necessary API will be impaired and may result in a material adverse effect on our business and financial condition. Our market is highly competitive and failure to compete successfully could have a material adverse effect on our business, financial condition, and results of operations. We have limited redundancy built into our Information Technology systems. Corporate Information We were incorporated as a proprietary company limited by shares in Australia on June 25, 2009 as part of our corporate restructuring that occurred on July 10, 2009. Pursuant to a Share Exchange Agreement, we acquired all of the outstanding share capital of Parnell Laboratories (Aust) Pty Ltd, which was beneficially owned by Dr. Alan Bell, Chairman of our Board of Directors and had been trading since September 1986. On April 28, 2014, we converted our corporate status under the Australian Corporations Act 2001 (Cth), or the Corporations Act, from a proprietary company limited by shares to that of a public company limited by shares, which became effective on June 6, 2014. On April 28, 2014, we effected a ten-for-one consolidation of our ordinary shares, which has the effect of a ten-for-one reverse stock split. Our principal executive offices are located at Unit 4 Century Estate, 476 Gardeners Rd, Alexandria, NSW, 2015, Australia. We also have an executive office at 9401 Indian Creek Parkway, Suite 1170, Overland Park, Kansas 66210. Our main telephone number in Australia is 61-2-9667-4411, and our main telephone number in the U.S. is (913) 312-0786. Our corporate website address is www.parnell.com. The information on our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus. We have included our website address as an inactive textual reference only. Implications of Being an Emerging Growth Company Pursuant to The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), we are classified as an "Emerging Growth Company." Under the JOBS Act, Emerging Growth Companies are exempt from certain reporting requirements, including the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Under this exemption, our auditor will not be required to attest to and report on management s assessment of our internal controls over financial reporting during a five-year transition period. Pursuant to the JOBS Act, we will remain an Emerging Growth Company until the earliest of: the last day of our fiscal year following the fifth anniversary of the date of our initial public offering of ordinary shares; the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more; the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and the date on which we are deemed to be a "large accelerated filer," which will occur at such time as we (a) have an aggregate worldwide market value of ordinary shares held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months, and (c) have filed at least one annual report pursuant to the Exchange Act. Implications of Being a Foreign Private Issuer We are also considered a "foreign private issuer." In our capacity as a foreign private issuer, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ordinary shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. The Offering Ordinary shares to be offered pursuant to this offering 2,325,581 ordinary shares Ordinary shares outstanding prior to this offering 14,095,302 ordinary shares Ordinary shares to be outstanding after giving effect to the issuance of ordinary shares under this prospectus. 16,420,883 ordinary shares Option to Purchase Additional Shares We have granted the underwriter a 30-day option to purchase up to 348,837 additional ordinary shares to cover over-allotments, if any. Use of Proceeds The net proceeds from this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us will be approximately $4.25 million (or $4.95 million if the underwriters exercise in full their option to purchase additional ordinary shares from us). We intend to use the net proceeds from this offering for general corporate purposes and working capital requirements. See "Use of Proceeds."
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001606766_pointclick_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001606766_pointclick_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001606766_pointclick_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001607057_guardianli_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001607057_guardianli_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..617af08c049b65abe9690f3f001ca94e030a87ec
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001607057_guardianli_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to we , us , our , and Company are to GuardianLink
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001607611_vantage_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001607611_vantage_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..74dd49f0014cac0f1679e19ad13fb7c54c846f82
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001607611_vantage_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary provides a brief overview of information contained elsewhere in this prospectus. You should read this entire prospectus and the documents to which we refer you before making an investment decision. You should carefully consider the information set forth under "Risk Factors", "Cautionary Statement Regarding Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical and pro forma financial statements and the related notes to those financial statements included elsewhere in this prospectus. Where applicable, we have assumed an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus). Unless otherwise indicated, the information presented in this prospectus assumes that the underwriters' option to purchase additional shares of common stock is not exercised. Unless otherwise indicated, the estimated reserve volumes, estimated reserve values and EURs presented in this prospectus were prepared by our independent reserve engineers based on the Securities and Exchange Commission ("SEC") pricing at December 31, 2015, as described in " Reserve and Operating Data". Certain operational terms used in this prospectus are defined in the "Glossary of Oil and Natural Gas Terms" set forth in Annex A hereto. Our Company We are a growth-oriented, independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties in the United States, with a focus on the Appalachian Basin. We are the largest leaseholder in Greene County, Pennsylvania, an area with significant dry natural gas resources and stacked reservoirs. We hold a largely contiguous acreage position in what we believe to be the core of the Marcellus, Upper Devonian and Utica Shales. Additionally, we have a sizeable position in what we believe to be the core of the Barnett Shale in Texas. We believe these areas are among the most prolific unconventional resource plays in North America, and are generally characterized by high well recoveries relative to drilling and completion costs, predictable production profiles, significant hydrocarbons in place and constructive operating environments. We own interests in 88,634 net acres in Greene County, of which 13,642 acres are held in fee and 5,027 of such fee acres are leased to third parties. We believe that substantially all of this acreage is prospective for the Marcellus, Upper Devonian and Utica Shales. The Marcellus Shale is the largest unconventional natural gas field in the U.S. and the Upper Devonian and Utica Shales are stacked reservoirs above and below the Marcellus Shale, respectively. Based on our drilling results, as well as drilling results publicly released by other operators, we believe that the Marcellus Shale in Greene County offers some of the most attractive single-well rates of return in North America. We own and operate midstream infrastructure in Greene County, including a natural gas gathering system with complementary water sourcing and distribution assets (see " Midstream"). We gather all of our operated natural gas production in Greene County and believe that our system will support our future production growth. We believe that Greene County is among the best-served areas in the Appalachian Basin by current and planned infrastructure, and due to this access has the greatest potential for natural gas production growth in the Appalachian Basin. In addition to our midstream system, a number of long-haul transmission pipelines converge in Greene County, including Spectra Energy Partners' TETCo system, Dominion Resources' DTI system, Columbia Gas Transmission's T system, National Fuel Gas' Line N system and EQT Midstream's Equitrans system. The energy content of our Appalachian Basin dry natural gas production, which ranges from 1,000 to 1,060 MBtu/Mcf, enables us to capture incremental revenue on a volumetric basis, while also meeting the specifications of these long-haul transmission pipelines, thereby allowing us to avoid additional processing and blending expenses. Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents Commonly Used Defined Terms As used in this prospectus, unless the context indicates or otherwise requires, the terms listed below have the following meanings: "Vantage", "we", "our", "us" or like terms refer collectively to our predecessor and Vantage I, together with their consolidated subsidiaries before the completion of our corporate reorganization described in "Corporate Reorganization" (except as otherwise disclosed) and to Vantage Energy Inc. and its consolidated subsidiaries, including Vantage I and Vantage II, as of and following the completion of our corporate reorganization; "Vantage I" refers to Vantage Energy, LLC; "Vantage II" refers to Vantage Energy II, LLC; "Vantage II Alpha" refers to Vantage Energy II Alpha, LLC; "Vantage II Consolidation" refers to the merger of Vantage II Alpha with and into Vantage II or its direct or indirect wholly owned subsidiary that will be completed prior to our corporate reorganization; "Vantage Investment I" refers to Vantage Energy Investment LLC; "Vantage Investment II" refers to Vantage Energy Investment II LLC; "Alpha Acquisition" refers to Vantage II Alpha's June 2016 acquisition of certain natural gas properties located in Greene County, Pennsylvania from a wholly owned subsidiary of Alpha Natural Resources, Inc. ("Alpha Natural Resources"); "Existing Owners" refers, collectively, to the Sponsors and the Management Members that own equity interests in Vantage I, Vantage II and Vantage II Alpha prior to the completion of our corporate reorganization and in Vantage Investment I, Vantage Investment II and us directly as of and following the completion of our corporate reorganization; "Management Members" refers, collectively, to our individual officers and employees and other individuals who, together with the Sponsors, initially formed Vantage I, Vantage II and Vantage II Alpha; "our predecessor" or "Predecessor" refer, collectively, to (a) Vantage II and its consolidated subsidiaries and (b) for the periods after the closing of the Alpha Acquisition and prior to the completion of the Vantage II Consolidation, Vantage II Alpha; and "Sponsors" refers, collectively, to investment funds affiliated with or managed by Quantum Energy Partners ("Quantum"), Riverstone Holdings LLC ("Riverstone") and Lime Rock Partners ("Lime Rock"). We have also included a glossary of some of the oil and natural gas industry terms used in this prospectus in Annex A to this prospectus. Presentation of Financial and Operating Data Unless otherwise indicated, the summary historical consolidated financial information presented in this prospectus is that of our predecessor. The financial information of our predecessor presented in this prospectus treats the Vantage II Consolidation as a reorganization of entities under common control. The pro forma financial information presented in this prospectus treats the combination of Vantage I and Vantage II in connection with our corporate reorganization as an acquisition in a business combination of Vantage I by our predecessor. Please see "Corporate Source: Drillinginfo In addition to our Appalachian Basin acreage, we have 37,481 net acres in the Barnett Shale, of which 22,623 net acres are located in what we believe to be the core of the Barnett Shale in Tarrant, Denton and Wise Counties in Texas. Covering over 5,000 square miles and 18 counties in North Texas, the Barnett Shale was the first shale reservoir to be successfully exploited using horizontal drilling and fracture stimulation techniques. The Barnett Shale remains one of the most productive shale plays in North America and produced 4.4 Bcf/d of natural gas in 2015 according to the Texas Railroad Commission. Our management team has a proven track record of implementing technically driven growth strategies to target best-in-class returns in some of the most prominent unconventional plays across the United States. Roger Biemans, our Chairman and Chief Executive Officer, and Tom Tyree, our President and Chief Financial Officer, founded our company with investments from affiliates of Quantum Energy Partners, Riverstone Holdings LLC and Lime Rock Partners. We made our initial entry into the Barnett Shale in 2007 and the Appalachian Basin in 2010. Since then, we have been committed to a strategy of disciplined growth through acquisitions and development drilling in the highest quality areas of these plays. We efficiently exploit our resource base by applying and integrating micro-seismic technology, 3D seismic interpretation and petro-physical core analysis to define the reservoir and optimize formation targeting. This subsurface expertise translates to value maximizing inter-well spacing and highly economic development realized through best-in-class drilling, completion and operational strategies, including multi-well pad drilling, fit for purpose rig utilization, advanced down hole steering, targeted reservoir stimulation and optimized flow back practices. In addition, we have significant experience in our operating areas. We operate 80 gross horizontal wells in the Marcellus Shale, four gross horizontal wells in the Upper Devonian Shale and 185 gross horizontal wells in the Barnett Shale. We believe that our horizontal drilling and completion expertise, coupled with the favorable geologic characteristics of our Appalachian Basin and Barnett Shale acreage, positions us for continued strong well economics and growth. We have organically grown our net daily VANTAGE ENERGY INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 1311 (Primary Standard Industrial Classification Code Number) 46-5608050 (I.R.S. Employer Identification No.) 116 Inverness Drive East, Suite 107 Englewood, Colorado 80112 (303) 386-8600 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Thomas B. Tyree, Jr. President and Chief Financial Officer 116 Inverness Drive East, Suite 107 Englewood, Colorado 80112 (303) 386-8600 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents Reorganization" and the unaudited pro forma financial statements included elsewhere in this prospectus. In addition, unless otherwise indicated, the reserve and operational data presented in this prospectus is that of our predecessor and Vantage I on a combined basis as of the dates and for the periods presented. Unless another date is specified, (a) all acreage, well count, hedging and drilling location data presented in this prospectus is as of June 30, 2016 and (b) all other financial, reserve and operational data presented in this prospectus in respect of dates or periods occurring prior to the consummation of the Alpha Acquisition does not include the assets or operations acquired in the Alpha Acquisition. Unless otherwise noted, references to production volumes refer to sales volumes net to our interests. Certain amounts and percentages included in this prospectus have been rounded. Accordingly, in certain instances, the sum of the numbers in a column of a table may not exactly equal the total figure for that column. Industry and Market Data The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled "Risk Factors". These and other factors could cause results to differ materially from those expressed in these publications. Trademarks and Trade Names We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties' trademarks, service marks, trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the , TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names. (1)CAGR stands for compounded annual growth rate. (2)Includes 5.4 MMcfe/d of average daily production for the three months ended June 30, 2016 associated with a royalty interest acquired in the Alpha Acquisition. During 2015, we ran a two rig drilling program with one rig operating in the Appalachian Basin and one rig operating in the Barnett Shale. In 2015, we completed 73 wells on our acreage, including 31 wells in the Appalachian Basin and 42 wells in the Barnett Shale. After temporarily reducing the pace of our drilling and completions activities in the first half of 2016 due to depressed commodity prices, we are currently running two rigs in the Marcellus Shale with the intention of adding a third rig in the Marcellus Shale by year end. Due to our temporary reduction in the pace of our drilling and completion activities in the first half of 2016, our average daily production in the second half of 2016 is anticipated to be lower than our average daily production in the first half of 2016. As a result of our increased drilling and completion activities in the second half of 2016, we anticipate that our average daily production in the first half of 2017 will be materially higher than our average daily production in the second half of 2016. We retain the flexibility to adjust our rig count based on the commodity price environment and other factors. As of June 30, 2016, we had 1,361 identified drilling locations, including 769 in the Marcellus Shale, 210 in the Upper Devonian Shale, 153 in the Utica Shale and 229 in the Barnett Shale. Copies to: Douglas E. McWilliams Julian J. Seiguer Vinson & Elkins L.L.P. 1001 Fannin, Suite 2500 Houston, Texas 77002 (713) 758-2222 Matthew R. Pacey Eric M. Willis Kirkland & Ellis LLP 600 Travis Street, Suite 3300 Houston, Texas 77002 (713) 835-3600 Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company (1)We refer to the summation of our horizontal acreage across the multiple target formations as our "Effective Horizontal Acreage". We believe this acreage metric more accurately conveys our horizontal drilling opportunities in our target formations than our total surface acreage, and we believe our analysis of engineering, geological, geochemical and seismic data to estimate our horizontal drilling opportunities is based on industry standards. Our calculation of our Effective Horizontal Acreage is an inexact estimate. We cannot represent that the Effective Horizontal Acreage in each of our target formations is prospective for such formation. Additionally, we cannot represent what portion of our Effective Horizontal Acreage will ultimately be drilled. See "Risk Factors Risks Related to Our Business Our Effective Horizontal Acreage is based on our and other operators' current drilling results and our interpretation of available geologic and engineering data and therefore is an inexact estimate subject to various uncertainties". In the Appalachian Basin, 13,642 net acres are held in fee and 5,027 of such fee acres are leased to third parties. (2)Includes 84, 6 and 112 identified drilling locations associated with proved undeveloped reserves as of December 31, 2015 on our Marcellus Shale, Upper Devonian Shale and Barnett Shale acreage, respectively. For a discussion of how we identify drilling locations, a portion of which constitute estimated locations based on our acreage and spacing assumptions, please see "Business Our Operations Reserve Data Determination of Identified Drilling Locations". (3)Net Producing Lateral Feet is calculated by multiplying the working interest for each of our producing wells in a reservoir by the lateral length of such well. (4)Net undeveloped identified lateral feet is calculated by multiplying the working interest for each of our identified drilling locations in a reservoir by the expected lateral length of such identified drilling location. The average lateral length for our identified drilling locations is 6,345, 6,447, 5,777 and 5,448 feet for the Marcellus, Upper Devonian, Utica and Barnett Shales, respectively. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Proposed Maximum Offering Price(1)(2) Amount of Registration Fee(3)(4) Common Stock, par value $0.01 per share $100,000,000 $10,070 (1)Includes common stock issuable upon exercise of the underwriters' option to purchase additional common stock. (2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the "Securities Act"). (3)To be paid in connection with the initial filing of the registration statement. (4)A registration fee of $94,182.10 for 27,082,500 shares of common stock was previously paid in connection with the filing of a registration statement on Form S-1 (File No. 333-197265) on September 15, 2014. Pursuant to Rule 457(p) under the Securities Act, such previously paid registration fee is being used to offset the total registration fee due hereunder. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents (5)Total Lateral Feet is calculated by adding Net Producing Lateral Feet and Net Undeveloped Identified Lateral Feet in a reservoir. Management believes that the ratio of Net Producing Lateral Feet to Total Lateral Feet is useful because it provides investors a method for evaluating the estimated future production associated with our identified drilling locations. (6)Represents the average net revenue interest associated with our weighted average working interest in our drilling locations. Our average net revenue interest equals our working interest percentage multiplied by the net revenue interest. (7)Represents the average EUR per 1,000 feet of horizontal lateral associated with the proved undeveloped reserves reflected in our reserve reports as of December 31, 2015, which assumed a 30-year reserve life. (8)Represents the expected average drilling and completion cost per 1,000 feet of horizontal lateral (in thousands), as reviewed by our third-party auditors, associated with the proved undeveloped reserves reflected in our reserve report as of December 31, 2015, which assumed a 30-year reserve life. (9)Effective Horizontal Acreage is represented in multiple stacked reservoirs and therefore represents a multiple of our total acreage. This acreage metric represents what we believe to be our combined horizontal acreage position that is prospective for hydrocarbon production underneath our total surface acreage. Our total net surface acreage in the Appalachian Basin and the Barnett Shale as of June 30, 2016, was 88,634 acres and 37,481 acres, respectively. (10)Represents a weighted average calculated using the number of identified drilling locations in the respective reservoir. Midstream We own and operate midstream infrastructure in Greene County, including a natural gas gathering system with complementary water sourcing and distribution assets. We believe our ownership of this midstream infrastructure allows us to reduce our costs, promote overall efficiency of operations and increase our rates of return. We gather all of our operated natural gas production in Greene County and believe that our system will support our future production growth. We also intend to seek out commercial third-party gathering and water opportunities on our system. Our natural gas gathering infrastructure currently has a demonstrated throughput capacity of over 400 MMcf/d and includes approximately 30 miles of gathering pipeline and 7,100 horsepower of compression. For the six months ended June 30, 2016, gross throughput on our midstream system was 325 MMcf/d, 59 MMcf/d of which was attributable to our joint venture partner's interest in the system, representing a 63% increase from the corresponding period in 2015. Our midstream segment generated pro forma Midstream Segment Adjusted EBITDA of $22.4 million for the six months ended June 30, 2016, compared to $12.5 million for the corresponding period in 2015. Our natural gas gathering system is designed to grow to an ultimate total throughput capacity of approximately 1,800 MMcf/d with 147 miles of pipeline and 145,000 horsepower of compression. We intend to expand our existing system over time to meet our expected production growth, including increasing our throughput capacity to approximately 600 MMcf/d by 2018 and approximately 1,000 MMcf/d by 2022. Our water sourcing and distribution system is designed for a total supply of 118,000 Bbls/d. We expect the buildout of our water sourcing and distribution system to accommodate the expected future growth of our development activities. We do not currently own or operate midstream infrastructure in the Barnett Shale and rely on third-party service providers for the gathering of our production in that basin. Marketing We routinely manage our commodity and regional price risk through hedging arrangements, firm marketing agreements and active analysis of primary and secondary firm transportation opportunities. As part of our marketing activities, we continually review regional supply and demand fundamentals with a focus on current and forecasted long-haul pipeline utilization. In addition to the numerous takeaway capacity alternatives currently available to producers in Greene County, we believe that planned takeaway capacity additions of approximately 17 Bcf/d expected to come online by December 2018 will be sufficient to meet expected supply growth from producers in and around Greene County for the foreseeable future. Significant new takeaway projects include Tallgrass Energy's Rockies Express Zone 3 Capacity Enhancement, Energy Transfer's Rover Pipeline, Nexus Gas Transmission, Spectra Energy Partners' TETCo Gulf Markets Expansion, multiple Columbia Pipeline Group projects, Dominion Resources' Atlantic Coast Project and EQT's Mountain Valley Pipeline. See "Business Our Properties Midstream Marketing". Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted. Subject to Completion, dated September 13, 2016 PROSPECTUS Shares Vantage Energy Inc. Common Stock This is the initial public offering of the common stock of Vantage Energy Inc., a Delaware corporation. We are offering shares of our common stock. No public market currently exists for our common stock. We are an "emerging growth company" and are eligible for reduced reporting requirements. Please see "Prospectus Summary Emerging Growth Company Status". We have applied to list our common stock on the New York Stock Exchange under the symbol "VEI". We anticipate that the initial public offering price will be between $ and $ per share. Investing in our common stock involves risks. Please see "Risk Factors" beginning on page 22 of this prospectus. Per share Total Price to the public $ $ Underwriting discounts and commissions(1) $ $ Proceeds to us (before expenses) $ $ (1)Assumes a third rig will be added in the Appalachian Basin during the three months ended . By operating the substantial majority of our acreage, the amount and timing of these capital expenditures is largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including but not limited to the success of our drilling activities, prevailing and anticipated prices for natural gas, NGLs and oil, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions and drilling and acquisition costs. Any reduction in our capital expenditure budget could have the effect of delaying or limiting our development program, which would negatively impact our ability to grow production and could materially and adversely affect our future business, financial condition, results of operations or liquidity. (1)Please see "Underwriting" for a description of all underwriting compensation payable in connection with this offering. We have granted the underwriters the option to purchase up to additional shares of common stock on the same terms and conditions set forth above if the underwriters sell more than shares of common stock in this offering. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares on or about , 2016. Joint Book-Running Managers Goldman, Sachs & Co. Barclays Credit Suisse Citigroup J.P. Morgan Wells Fargo Securities Senior Co-Managers BofA Merrill Lynch Capital One Securities Deutsche Bank Securities KeyBanc Capital Markets SunTrust Robinson Humphrey Tudor, Pickering, Holt & Co. Co-Managers ABN AMRO Baird BOK Financial Securities, Inc. Fifth Third Securities Heikkinen Energy Advisors Williams Trading, LLC Prospectus dated , 2016 Table of Contents Business Strategy Our strategy is to leverage our management team's experience in identifying, acquiring and developing economic natural gas and oil resources to cost efficiently grow our reserves, production and cash flow and thus maximize the value of our assets. Our strategy has the following principal elements: Growing shareholder value through optimizing development of our extensive drilling inventory. We began our Barnett Shale development program in 2008 and our Appalachian Basin development program in 2011, and we have increased production from 18 MMcfe/d for the year ended December 31, 2011 to approximately 398.5 MMcfe/d for the three months ended June 30, 2016. We intend to continue to drill and develop our portfolio of 1,361 identified drilling locations with the goal of growing production, cash flow and reserves in an economically efficient manner in order to maximize shareholder value. We are currently running two rigs in the Marcellus Shale with the intention of adding a third rig in the Marcellus Shale by year end, and we retain the flexibility to adjust our rig count based on the commodity price environment and other factors. Enhancing returns by focusing on capital and operating cost efficiencies. We target best-in-class returns in the Appalachian Basin and Barnett Shale. As the operator of the substantial majority of our acreage, we are able to manage the timing and level of our capital spending, our exploration and development strategies and our operating costs. We aim to maximize well production and recoveries relative to drilling and completion costs through optimizing lateral length, the number and distribution of frac stages, perforation cluster spacing and the type of fracture stimulation employed. We believe we have distinctive competencies in managing costs, and as a result, we believe we will continue to capture incremental capital and operating cost efficiencies. Continue growing our acreage position in the core of the Appalachian Basin through opportunistic leasing and acquisitions. We have selectively built our Appalachian Basin position from less than 200 net acres as of December 31, 2010 to approximately 88,634 net acres, of which 13,642 acres are held in fee and 5,027 of such fee acres are leased to third parties. We believe that the Appalachian Basin continues to have significant expansion and consolidation opportunities, and we intend to pursue transactions that meet our strategic and financial objectives, such as our recent 31,323 net acre acquisition from Alpha Natural Resources. We are currently focused on acreage swaps and infill lease acquisitions that we believe will further consolidate our acreage, increase net lateral lengths and result in operational efficiencies. Utilizing our midstream infrastructure to support upstream operations and enhance access to markets for our natural gas production. The midstream infrastructure we own and operate in Greene County gathers all of our operated natural gas production in the Appalachian Basin. Going forward, we expect to continue to invest in our Greene County gas gathering and water systems to (i) optimize our gathering and takeaway capacity, including access to interstate pipelines, (ii) support our expected production growth, (iii) provide greater control over the direction and planning of our drilling schedule, (iv) achieve lower capital and operating costs and generate overall efficiencies and (v) provide gathering and water services to third parties. Managing commodity price exposure through an active hedging and marketing program to protect our expected future cash flows. We maintain an active commodity price risk management program through hedging, firm marketing arrangements and continuing analysis of primary and secondary firm transportation opportunities. We have historically hedged through basis using primarily fixed price swap contracts at liquid pricing Table of Contents Table of Contents benchmarks to reduce our exposure to price volatility in the underlying commodity as well as regional pricing differentials. Business Strengths We have a number of strengths that we believe will help us successfully execute our business strategy and grow stockholder value, including: Large and highly contiguous land position in the core of the Appalachian Basin. Since 2010, we have built a largely contiguous acreage position of 88,634 net acres in the Appalachian Basin through a disciplined and focused leasing and acquisition program. We are the largest leaseholder in Greene County, which we believe to be the dry natural gas core of the Marcellus, Upper Devonian and Utica Shales. We benefit from our concentrated, core position through our high net revenue interest and operational efficiencies. We believe our Marcellus Shale acreage offers some of the most attractive single-well rates of return in North America. Multi-year, low-risk drilling inventory. We believe our concentrated acreage positions in the Appalachian Basin and Barnett Shale are well delineated, characterized by low geological risk and possess repeatable drilling opportunities that we expect will result in a predictable production growth profile. As of June 30, 2016, we had 1,361 identified drilling locations, including 769 in the Marcellus Shale, 210 in the Upper Devonian Shale, 153 in the Utica Shale and 229 in the Barnett Shale. Assuming a two rig program, our drilling inventory is approximately 22 years based on our Marcellus Shale locations and approximately 32 years when including our Upper Devonian and Utica Shale locations. We believe that we and other operators in the area have substantially delineated and de-risked our acreage position in the Marcellus and Barnett Shales. Likewise, we believe the drilling activity and well results of other operators in the area have substantially reduced the risk associated with our drilling locations in the Upper Devonian and Utica Shales. Efficient operations drive low drilling and completion costs resulting in higher returns. We have historically had an intense focus on managing costs which has translated into meaningful reductions in our overall drilling and completion costs. We have implemented operational efficiencies to continue lowering our costs, such as pad drilling and the use of less expensive, shallow vertical drilling rigs to drill to the kick-off point of the horizontal wellbore, and optimized well spacing and completion designs. Our average drilling and completion cost, normalized for each 1,000 feet of horizontal lateral, decreased by 38% for the first half of 2016 compared to the three months ended December 31, 2014. Exceptionally low operating cost structure with significant control across our acreage position. Our acreage position in the Appalachian Basin and Barnett Shale is generally in contiguous blocks which allows us to conduct our operations more cost effectively and develop this acreage more efficiently. Additionally, our operational control allows us to more efficiently manage the pace of development activities, the gathering and marketing of our production and operating costs. We are continually looking to increase efficiencies and decrease our operating cost structure and were able to achieve a lease operating expense per Mcfe of $0.13 for the three months ended June 30, 2016, a reduction of 66% compared to the three months ended December 31, 2014. This reduction was largely attributable to a shift toward recycling substantially all of our produced water in Greene County. Our company, which was comprised of just 63 employees at December 31, 2015, managed total production of 398.5 MMcfe/d for the three months ended June 30, 2016 and deployed $354 million in capital expenditures during the year ended December 31, 2015. Our general and Table of Contents administrative expense per Mcfe was $0.12 for the three months ended June 30, 2016, a reduction of 52% compared to $0.25 for the three months ended December 31, 2014. Strategic, efficient midstream infrastructure supports production growth and access to markets. We gather all of our operated natural gas production in Greene County, and the concentrated nature of our stacked pay acreage in that area allows us to build out and operate our midstream infrastructure in a manner that captures significant capital and operating cost efficiencies. For the three months ended December 31, 2014 and June 30, 2016, our midstream operating expense was approximately $0.04 per Mcf based on our Appalachian Basin throughput volumes. Additionally, our natural gas gathering system is strategically located with interconnections to multiple downstream pipeline systems including TETCo and Dominion interstate pipelines. Complementary position in the core of the Barnett Shale. We have assembled a large and attractive leasehold position of approximately 37,481 net acres in the Barnett Shale, including approximately 22,623 net acres in Tarrant, Denton, and Wise Counties in Texas, which we believe constitute the core of the Barnett Shale. Our Barnett Shale acreage position is characterized by mature, long-lived production profiles that provides us with access to multiple markets and favorable WAHA-based pricing. Strong commodity price risk management protects capital investment. Our focus on commodity price risk management through hedging, firm marketing agreements and firm transportation opportunities protects our capital investment and future cash flows by reducing exposure to commodity prices. As of July 31, 2016, we had entered into hedging contracts through December 31, 2019 covering approximately 219 TBtu of future natural gas, NGLs and oil production. Substantially all of the natural gas hedges are linked to Dominion South Point and WAHA price indices, consistent with the pricing we receive for our natural gas production. The weighted average prices of our WAHA and Dominion South Point natural gas hedges are $3.04 and $2.26 per MMbtu, respectively. Inclusive of our NGLs and oil hedges, the weighted average price of our hedging contracts was $2.43 per MMbtu. Significant liquidity and financial flexibility. Following the completion of this offering, we estimate that we will have availability under our new revolving credit facility of approximately $ million and $ million of cash on hand. After giving effect to this offering, we expect that our capital expenditures through 2017 will be fully funded with proceeds from this offering, cash flows from operations and available capacity under our new revolving credit facility, consistent with our overall financial strategy of maintaining a strong and stable capitalization profile. Proven, experienced and incentivized management and technical teams. We believe our management team's experience and expertise across multiple resource plays provides a distinct competitive advantage. Our management team has an average of over 25 years of industry experience including executive officer positions at public exploration and production companies and key members with significant experience operating in the Appalachian Basin and Barnett Shale. We have assembled a strong technical staff of engineers, geoscientists and field operations managers with extensive experience in horizontal development and operating multi-rig development programs. We have been early adopters of new oilfield service technologies and techniques for drilling and completions. Our management and technical teams have a significant economic interest in us through their interests in our controlling stockholders, Vantage Investment I and Vantage Investment II. Table of Contents Recent Developments Alpha Acquisition On May 16, 2016, we entered into a purchase and sale agreement with a wholly owned subsidiary of Alpha Natural Resources to purchase certain natural gas properties located in Greene County (the "Alpha Properties") for cash consideration of $339.5 million, subject to post-closing adjustment (the "Alpha Acquisition"). The Alpha Properties consist of approximately 31,323 net acres, of which 5,027 acres are held in fee and leased to third parties, along with non-operating royalty interests in 42 producing Marcellus horizontal wells and certain related midstream and other assets. The Alpha Acquisition was completed in June 2016, with an effective date of April 1, 2016. The Alpha Acquisition added 330 identified drilling locations, including 226 in the Marcellus Shale, 72 in the Upper Devonian Shale and 32 in the Utica Shale. Midstream Acquisition We entered into two purchase and sale agreements (the "AMS Purchase Agreements") with Appalachia Midstream Services, L.L.C. ("Seller") to purchase certain midstream assets in Greene County (the "AMS Acquisition"). The AMS Acquisition consists of the remaining 62% interest not currently owned in the Rogersville Gas System and a 67.5% interest in the Wind Ridge Gathering System. The aggregate purchase price was $50.0 million in cash and the AMS Purchase Agreement contains customary representations and warranties, covenants and indemnification provisions, and has an effective date of April 1, 2016. We and the Seller expect to close the AMS Acquisition in the third quarter of 2016.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001609472_gh_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001609472_gh_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2028d91991fd96e845012b04b71a389cc4ff54d3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001609472_gh_prospectus_summary.txt
@@ -0,0 +1,191 @@
+PROSPECTUS SUMMARY
+
+ 
+
+This summary highlights selected information
+contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing
+in the Common Stock. You should carefully read the entire prospectus, including "Risk Factors", "Management s
+Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an
+investment decision. In this Prospectus, the terms "GH Capital Inc.," "GHC," "Company," "we,"
+"us" and "our" refer to GH Capital Inc.
+
+ 
+
+Overview
+
+ 
+
+GH Capital Inc. (the "Company"),
+a Florida corporation, has developed an online payment gateway called "ClickDirectPay" to process online wire transfer
+transactions for diversified online merchants with a target market in Europe. We were incorporated on May 5, 2014 in the State
+of Florida. On November 12, 2015, we filed a certificate of amendment with the State of Florida to change our name from Global
+Humax Capital Management, Inc. to GH Capital Inc.
+
+ 
+
+Our service intends on allowing
+web-based merchants to utilize ClickDirectPay, which is available at https://www.clickdirectpay.com. More specifically,
+we plan on focusing on establishing ClickDirectPay as a cost-effective alternative to current payment gateway systems used throughout
+Europe. Our President, Wolfgang Ruecker, intends on operating the Company primarily in Europe where he resides. Our service will
+assist online merchants to increase profits by reducing existing processing costs. Currently, customers and users throughout Europe
+(including Germany, Austria, Spain, Italy, Greece, and the Netherlands) prefer to pay bills with an online wire transfer instead
+of paying with credit cards or Paypal. We believe our ClickDirectPay payment gateway will meet the needs of the European online
+marketplace.
+
+ 
+
+ClickDirectPay
+began Beta testing of the system on May 6, 2016. The Beta testing is currently limited to one merchant accepting real-time transactions
+from customers. The service is only available to the single merchant from 9am to 8pm Central Europe Time (the service will be
+available 24 hours a day when fully operational). Currently, transactions generated through ClickDirectPay from
+this single merchant were nominal. This merchant is currently a customer of Global Humax Cyprus Ltd., which is an affiliated company.
+Accordingly, we invoice Global Humax Cyprus Ltd, for the ClickDirectPay revenues earned by this merchant and we have generated
+net revenues - related party of approximately $1,570. 
+
+ 
+
+Where You Can Find Us
+
+ 
+
+The Company s
+principal executive office and mailing address is 200 South Biscayne Boulevard, Suite 2790, Miami, FL 33131. Our telephone
+number is (305) 714-9397.
+
+ 
+
+ -1- 
+
+ Table of Contents
+
+ 
+
+Implications of Being an Emerging Growth Company
+
+ 
+
+We qualify as an emerging growth company as
+that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens
+that are otherwise applicable generally to public companies. These provisions include:
+
+A requirement to have only two years of audited financial statements and only two years of related MD 
+
+Exemption from the auditor attestation requirement in the assessment of the emerging growth company s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
+
+Reduced disclosure about the emerging growth company s executive compensation arrangements; and
+
+No non-binding advisory votes on executive compensation or golden parachute arrangements. 
+
+We have already taken advantage of these reduced
+reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2
+of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
+
+ 
+
+In addition, Section 107 of the JOBS Act also
+provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
+the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards.
+We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable
+to companies that comply with public company effective dates.
+
+ 
+
+We could remain an emerging growth company
+for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed
+$1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act,
+which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business
+day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible
+debt during the preceding three year period.
+
+ 
+
+For more details regarding this exemption,
+see "Management s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting
+Policies."
+
+ 
+
+ -2- 
+
+ Table of Contents
+
+ 
+
+The Offering
+
+ 
+
+ 
+ Common stock offered by selling security holders
+
+ 
+ 16,997,417 shares of common stock. This number represents
+ 49.16% of our current outstanding common stock (1).
+
+ 
+ 
+ 
+
+ Common stock outstanding before the offering
+ 
+ 34,577,417 
+
+ 
+ 
+ 
+
+ Common stock outstanding after the offering
+ 
+ 34,577,417 
+
+ 
+ 
+ 
+
+ Terms of the Offering
+ 
+ The selling security holders will determine when and how they will sell the Common Stock offered in this prospectus. The selling security holders will sell at a fixed price of $0.15 per share until our Common Stock is quoted on the OTC Markets, and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market.
+
+ 
+ 
+ 
+
+ Termination of the Offering
+ 
+ The offering will conclude upon the earliest of (i) such time as all of the Common Stock has been sold pursuant to the Registration Statement or (ii) such time as all of the Common Stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect.
+
+ 
+ 
+ 
+
+ Trading Market
+ 
+ There is currently no trading market for our Common Stock. We intend to apply soon for quotation on the OTC Markets. We will require the assistance of a market-maker to apply for quotation and there is no guarantee that market-maker will agree to assist us.
+
+ 
+ 
+ 
+
+ Use of proceeds
+ 
+ We are not selling any shares of the Common Stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of Common Stock covered by this prospectus.
+
+ 
+ 
+ 
+
+ Risk Factors
+ 
+ The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors" beginning on page 5.
+
+ 
+ 
+ 
+
+ (1) Based on 34,577,417 shares of common stock outstanding as of August 26, 2016. 
+
+ 
+
+ -3- 
+
+ Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001609989_blue_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001609989_blue_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001609989_blue_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001610607_jiucaitong_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001610607_jiucaitong_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..578f24233762b633a245a42ae218589b96ecb87c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001610607_jiucaitong_prospectus_summary.txt
@@ -0,0 +1 @@
+PART I: INFORMATION REQUIRED IN PROSPECTUS SPIRIT INTERNATIONAL, INC. 2620 REGATTA DR. SUITE 102 LAS VEGAS, NEVADA 89128 (702) 359-0881 SUMMARY OF PROSPECTUS You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Company" refer to "Spirit International, Inc.".
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001610764_amchi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001610764_amchi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ac6ed676b323cd0c0b7b81a4cae294fb21677457
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001610764_amchi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including Risk Factors and the financial statements and related notes, included elsewhere in this prospectus. The Company History Amchi Gendynamy Science Corporation (the Company ) is an early-stage development company using a special designed message machine along with acoustic wave to replace medicine and insulin to help diabetes patients to recovery from high blood sugar and medicine side effect. In China, Amchi is one of a few companies in the field of developing a physical method to treat Diabetes, utilizing electrical frequencies and special acoustic waves, which the founder of the Company has devoted many years in researching this Chinese traditional sound wave treatment. The Company has been working to determine what is the right multiple frequency, and how this frequency works on Diabetes to lower blood sugar. The theory behind this is that we believe certain frequency with the right fore trajectory message through the spinal cord can build on the right energy field of the body to help certain acoustic waves to penetrate to the cell level to stimulate the insulin secretion and enhancement of the sugar metabolism in order to lower the blood sugar level. The Company has completed several therapy sessions with individuals in China with some success in rehabilitating and in the prevention of various Diabetes, and to replace insulin and medicine to lower the blood sugar. Preliminary clinical results have shown that it has effectiveness. The Company is planning to do more case studies on Diabetes in China and the United States. Those case reports may not be as effective as the Company may expect. If the case reports are as Company expect, the Company intends to raise capital to get relative prove for commercialize the products. The therapy protocol and its energy treatment will be proved by the scientific and medical communities by the reports of the case studies. The Company is looking for a partner to join it for diabetes dynamic pathophysiology studies at the end of 2016. The Company s research is in its early stages and there is no assurance that its therapy protocol or its energy devices will ever be able to be proved and accepted by the scientific and medical communities. Furthermore, the Company, as of this date, has not published any peer reviewed studies or articles, nor has it conducted any clinical trials or studies that have received approval in any country where approval of this therapy will be sought, or have we received any regulatory approvals for the commercialization of our products. The Company was incorporated in the State of Delaware in May 20, 2014, and was formerly known as Pretty Valley Acquisition Corporation. On June 18, 2014, Pretty Valley Acquisition Corporation filed a registration statement with the Securities and Exchange Commission on Form 10 by which it became a public reporting company. The Company operated as a shell company until October, 2015. In October, 2015, the Company implemented a change of control by redeeming shares of existing shareholders, issuing shares to new shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors and implemented a business plan as set forth herein. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company s name from Pretty Valley Acquisition Corporation to Amchi Gendynamy Science Corporation. Risks and Uncertainties facing the Company As a development stage company, the Company has a limited operating history and has continuously experienced losses since its inception. The Company s independent auditors have issued a report questioning the Company s ability to continue as a going concern. That is, the Company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the Company has no prior experience in developing and selling energy devices similar to that planned by the Company and in marketing and distributing such devices and the therapy s associated therewith on a broad scale. One of the biggest challenges facing the Company is the ability to raise adequate capital to complete the research, design and the development of its energy devices and genome repair with physiotherapy. Due to financial constraints, the Company has to date conducted limited operations. If the Company were unable to develop strong and reliable sources of funding for project opportunities, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the aforementioned assumes that the Company s efforts are met with customer satisfaction in the marketplace and exhibit steady adoption of its solutions amongst the potential base of customers, neither of which are currently known or guaranteed. Trading Market Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board. The information contained in this prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission and these securities may not be sold until that registration statement becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PROSPECTUS Subject to Completion, Dated September 16, 2016 AMCHI GENDYNAMY SCIENCE CORPORATION 27,207,994 shares of common stock offered by selling shareholders at 1.00 per share This prospectus relates to the offer and sale of 27,207,994 shares of common stock (the Shares ) of Amchi Gendynamy Science Corporation ("AGS" or the Company ), $.0001 par value per share by the holders thereof who are deemed to be statutory underwriters. The shares offered by the selling shareholders (the "Shares") will be offered at a price of $1.00 until the Company s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board (or a successor); after which, the selling shareholders may sell their shares at prevailing market or privately negotiated pries, including (without limitation) in one or more transactions that may take place by ordinary broker s transactions, privately-negotiated transactions or through sales to one or more dealers for resale. The maximum number of Shares that can be sold pursuant to the terms of this offering by the selling shareholders is (in aggregate) 27,207,994 Shares. Funds received by the selling shareholders will be immediately available to such selling shareholders for use by them. The Company will not receive any proceeds from the sale of the Selling Shareholder Shares. All costs incurred in the registration of the Shares and the Selling Shareholder Shares are being borne by the Company. The offering will terminate twenty-four (24) months from the date that the registration statement relating to the Shares is declared effective, unless earlier fully subscribed or terminated by the Company. The Company intends to maintain the current status and accuracy of this prospectus and to allow selling shareholders to offer and sell the Shares for a period of up to two (2) years, unless earlier completely sold, pursuant to Rule 415 of the General Rules and Regulations of the Securities and Exchange Commission. Prior to this offering, there has been no public market for the Company s common stock. No assurances can be given that a public market will develop following completion of this offering or that, if a market does develop, it will be sustained. The offering price for the Shares has been arbitrarily determined by the Company and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. Neither the Company nor any selling shareholders has any current arrangements nor entered into any agreements with any underwriters, broker-dealers or selling agents for the sale of the Shares. If the Company or selling shareholders can locate and enter into any such arrangement(s), the Shares will be sold through such licensed underwriter(s), broker-dealer(s) and/or selling agent(s). Per Common Stock Share Offered Assumed Price To Public $ 1.00 per share NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Company is an "emerging growth company" as defined in the Jumpstart Our Business Startups Act. The Company s independent auditors have issued a report raising substantial doubt of the Company s ability to continue as a going concern. These securities involve a high degree of risk. See RISK FACTORS contained in this prospectus beginning on page 5. Amchi Gendynamy Science Corporation 1809 Pritchard Way, Hacienda Heights, CA 91745 Prospectus dated __________________, 2016 The Offering The maximum number of Shares that can be sold pursuant to the terms of this offering is 27,207,994. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier terminated by the Company. This prospectus relates to the offer and sale of 27,207,994 shares of common stock of Amchi Gendynamy Science Corporation offered by the holders thereof who are deemed to be statutory underwriters. The selling shareholders will offer their shares at a price of $1.00 until such time as the Shares are quoted on the OTC Bulletin Board and only thereafter at prevailing market or privately negotiated prices in one or more transactions that may take place by ordinary broker's transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market if a market should develop. Common stock outstanding before the offering 247,207,994 (1) Common stock for sale by selling shareholders 27,207,994 Common stock outstanding after the offering 247,207,994 Offering Price $ 1.00 Proceeds to the Company $0 (1) Based on number of shares outstanding as of the date of this prospectus. In the future, following the completion of this offering, the Company will very likely need to raise capital for the projects which it anticipates to develop. The Company anticipates that it may raise such capital by an offering of its shares of common stock. If the Company does affect equity offerings of its securities and if the price paid for shares offered in such an offering is less than paid by the purchasers of Shares, then such purchasers will suffer a dilution in the value of their shares. Furthermore the issuance of such additional shares may impact the ability of any investor to sell their Shares once such shares are eligible for sale. The Company cannot anticipate that it will be able to affect such additional offerings of its securities and then failure of it to do so may severely impact its available capital to develop its services and products or further its business plan. Summary Financial Information The following financial data for the years ended December 31, 2015 and 2014 is derived from the Company s audited financial statements, respectively, and related notes thereto included elsewhere in this prospectus. The following summary financial data should be read in conjunction with additional discussions of the financial status of the Company and the Financial Statements and Notes thereto included elsewhere in this prospectus. The following information is derived from the financial statements. BALANCE SHEET As of June 30, 2016 As of December 31, 2015 Total Assets $ 503,357 $ 77,637 Total Liabilities $ 52,512 $ 177,617 Stockholder s Equity (Deficit) $ 450,845 $ (99,980 ) OPERATING DATA Year Ended June 30, 2016 Year Ended December 31, 2015 Revenue $ 0.00 $ 0.00 Net Loss $ 116,830 $ 101,024 Net Loss Per Share $ (0.00 ) $ (0.01 )
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001611787_advanced_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001611787_advanced_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8a36f20831e3feadfd658c3d5b61e83a436714d9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001611787_advanced_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including the Risk Factors, Business and Management s Discussion and Analysis of Financial Condition and Results of Operations sections and our consolidated financial statements and the notes thereto included elsewhere in this prospectus, before deciding to invest in the ADSs. Overview We are an innovative radiopharmaceutical company that develops, produces and commercializes radiolabelled pharmaceuticals and diagnostic nuclear medicines. Our products use trace amounts of radioactive compounds to treat diseases such as cancer or create functional images of organs and lesions. Our lead radiotherapeutic product candidate, Lutathera , is a novel compound in development for the treatment of neuroendocrine tumors, or NETs, a heterogeneous group of tumors arising from cells of the endocrine and nervous systems. Lutathera is designed to target somatostatin receptor positive NETs. Somatostatin is overexpressed in approximately 80% of NETs. Based on U.S. and European census data, we estimate that the overall incidence of NETs for the combined populations of the United States and the European Union was approximately 47,300 in 2013. There are currently no approved radiotherapeutic products for the treatment of NETs and current therapeutic treatment alternatives are limited to symptom management. Following successful completion of pivotal clinical trials of Lutathera, we submitted a new drug application, or NDA, to the U.S. Food and Drug Administration, or FDA, in April 2016 for the treatment of gastroenteropancreatic NETs, including foregut, midgut, and hindgut NETs in adults. We have been assigned a Prescription Drug User Fee Act, or PDUFA, target action date of December 28, 2016. We also submitted a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, for Lutathera for the same indications in April 2016. We are also developing additional radiopharmaceutical therapeutics and diagnostics and are planning clinical studies to evaluate their efficacy and safety. In addition to our radiolabeled pharmaceuticals portfolio, we have also built a leadership position in nuclear medicine diagnostics in Europe. In June 2016, we gained approval from the FDA for NETSPOT (formerly known as Somakit-TATE), a novel, patent-pending, sterile and easy-to-use kit designed to diagnose the presence of somatostatin-receptor-positive NETs, which we believe will serve to further diversify our leadership position in the accurate diagnosis and treatment of NETs. In August 2016, NETSPOT was administered to its first patient in the United States. The combination of NETSPOT and our product candidate SomaKit-TOC, which we refer to as our Somakit products, are agents which we believe will help improve diagnosis and staging of NET patients. We also manufacture and commercialize our broad portfolio of six diagnostic products, including Gluscan, for a number of clinical indications. Our total sales have grown from 69.9 million (US$78.0 million) for the year ended December 31, 2014 to 88.6 million (US$98.9 million) for the year ended December 31, 2015 and from 43.0 million (US$48.0 million) for the six months ended June 30, 2015 to 54.6 million (US$60.9 million) for the six months ended June 30, 2016. Lutathera an innovative radiopharmaceutical for the treatment of NETs Lutathera is a ready-to-inject solution of a Lu-177-labeled analogue of somatostatin, a hormone that acts as an important regulator of the endocrine system. Lutathera is a peptide that carries a radioactive isotope within its overall structure which binds to somatostatin receptors type 2 (sstr2), which are overexpressed by NETs. Lutathera belongs to a class of therapy called Peptide Receptor Radionuclide Therapy, or PRRT, which is an emerging form of treatment for patients with inoperable somatostatin-receptor-positive NETs. Lutathera is the first ever PRRT radiopharmaceutical product candidate to have completed a Phase 3 trial for the treatment of progressive midgut NETs. Lutathera has received orphan drug designation from the EMA and FDA for the treatment of NETs. Many patients with NETs do not exhibit symptoms or their symptoms are unspecific and the correct diagnosis is often delayed. The current standard of care is surgery to remove the tumor for operable NETs, or if the tumor has progressed beyond surgical intervention, somastatin analogues are used to manage symptoms. Lutathera is a cytotoxic therapy that binds to somatostatin receptors overexpressed by NETs and delivers radiation within the cancer cell to cause tumor death. TABLE OF CONTENTS The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to completion, dated October 4, 2016 PROSPECTUS $125,000,000 Advanced Accelerator Applications S.A. (incorporated in France) This is a public offering of $125,000,000 of American Depositary Shares, or ADS, representing ordinary shares of Advanced Accelerator Applications S.A., or AAA, a French company. Each ADS represents two ordinary shares, nominal value 0.10 per share. The ADSs are listed on the Nasdaq Global Select Market under the symbol AAAP. At an assumed offering price of $37.75, the last reported sale price of the ADSs on the NASDAQ Global Select Market on October 3, 2016, we would be offering 3,311,258 ADSs. We have granted the underwriters an option for a period of 30 days to purchase up to $18,750,000 of additional ADSs or 496,688 ADSs at the assumed offering price described above. Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. We are an emerging growth company under the U.S. federal securities laws and are currently subject to reduced public company reporting requirements. Investing in the ADSs involves risks. See Risk Factors beginning on page 15 of this prospectus. Per ADS Total Public offering price Underwriting discounts and commissions Proceeds, before expenses, to us The underwriters will also be reimbursed for certain expenses incurred in this offering. See Underwriting for details. The ADSs will be ready for delivery on or about , 2016. J.P. Morgan Jefferies Wells Fargo Securities Canaccord Genuity JMP Securities The date of this prospectus is , 2016. TABLE OF CONTENTS In September 2015, we presented the results of our pivotal Phase 3 NETTER-1 trial evaluating Lutathera for the treatment of inoperable progressive midgut NETs at the European Society of Molecular Oncology conference. Updated information was also presented at the North American Neuroendocrine Tumor Society conference in October 2015, the Gastrointestinal Cancers Symposium of the American Society for Clinical Oncology in January 2016 and the European Neuroendocrine Tumor Society conference in March 2016, and the American Society for Clinical Oncology and Society of Nuclear Medicine Imaging conference in June 2016. The Phase 3 trial was a multi-center, randomized, comparator-controlled, parallel-group study evaluating the efficacy and safety of Lutathera administered in combination with Octreotide LAR 30 mg compared to Octreotide LAR 60 mg alone. Lutathera demonstrated a significant improvement in the primary endpoint, assessing progression free survival, or PFS. There were 23 confirmed progression event deaths in the Lutathera arm and 68 confirmed progression event deaths in the Octreotide LAR 60 mg arm. The median PFS for the Octreotide LAR 60 mg arm was 8.4 months while the median PFS for the Lutathera arm had not yet been reached by the time of the analysis, meaning that more than 50% of the patients in the Lutathera arm had survived without any progression event at that time. Lutathera is also currently administered on a compassionate use and named patient basis for the treatment of NETs in ten European countries and in the United States under an Expanded Access Program. We estimate that over 4,310 doses of Lutathera have been provided to over 1,320 patients with NETs in Europe and the U.S. under these programs. We intend to commercialize Lutathera in the United States with a targeted oncology-focused sales force, which we are currently ramping up. We have identified approximately 56 nuclear medicine centers in the United States that we believe treat over 80% of midgut NET patients in the United States. Similarly, we have identified approximately 80 nuclear medicine centers in the EU5 (France, Germany, Italy, Spain and the United Kingdom) that we believe treat over 80% of midgut NET patients in the EU5. We believe we can efficiently target these nuclear medicine centers with a specialty sales force of approximately 25 customer-facing representatives in the U.S. and 40 in the EU5. We have formulated Lutathera with a three-day shelf life, which we believe will enable us to efficiently produce and distribute it in the European Union through our European manufacturing and commercialization infrastructure. In the United States, we are in the process of opening a production facility for Lutathera in Millburn, New Jersey that will provide the U.S. supply of Lutathera. To further support our production of Lutathera and future product candidates, we acquired the IDB Group, or IDB, a leading manufacturer of Lu-177, in January 2016, providing us with what we believe to be a reliable production source of Lu-177. In May 2016, we increased our production capacity at our Ivrea site in Italy for Lutathera production in anticipation of the NDA and MAA approvals and ahead of FDA inspections of such facilities. The FDA performed inspections at the Ivrea and Meldola, Italy sites in August 2016. IDB s production site was also inspected by the FDA in August 2016. We expect that these sites in Europe and the United States will be sufficient to produce our forecasted global demand for Lutathera. In June 2015, we entered into an exclusive distribution and license agreement for Lutathera in Japan with FUJIFILM RI Pharma, Co., Ltd., or FRI, a leading in-country distributor of nuclear medicine and diagnostic imaging products. Our agreement calls for FRI to finance and conduct its own bridging study, and then to submit its findings to the applicable regulatory authorities in Japan for approval. We intend to support this process by manufacturing Lutathera for FRI s study and providing supplementary data from our previous clinical trials. Other Nuclear Medicine Therapeutic and Diagnostic Candidates We are developing 177Lu-PSMA-SR6 and 68Ga-PSMA-SR6 to treat, image, monitor and stage prostate cancer. 177Lu-PSMA-SR6 will be aimed at treating and monitoring prostate cancer and 68Ga-PSMA-SR6 will help diagnose and stage the disease. In November 2015, we signed an exclusive license agreement with Johns Hopkins University in Baltimore, Maryland to develop and market PSMA-SR6 in prostate cancer. A proof-of-concept study in humans is planned for 2017. We are developing 177Lu-NeoBOMB1 and 68Ga-NeoBOMB1 to treat various types of cancer, such as gastrointestinal stromal tumors, prostate cancer and breast cancer. NeoBOMB1 is a unique new generation antagonist bombesin analogue targeting GRPR-expressing malignancies. We plan to radiolabel TABLE OF CONTENTS NeoBOMB1 to develop a theragnostic pair: 177Lu-NeoBOMB1 for treatment and 68Ga-NeoBOMB1 for diagnosis. We have signed an exclusive license agreement with Erasmus University Medical Center and Demokritos National Center for Scientific Research to develop NeoBOMB1. We are currently planning three clinical studies in different indications including gastrointestinal stromal tumors, prostate cancer and breast cancer. Nuclear Medicine Diagnostic Portfolio We are a leading European player in nuclear medicine diagnostics with a portfolio of six diagnostic positron emission tomography, or PET, and single-photon emission computed tomography, or SPECT, products, including Gluscan. PET and SPECT are imaging techniques with applications in clinical oncology, cardiology, neurology and inflammatory/infectious diseases. Our leading diagnostic product is Gluscan, our branded 18-fluorodeoxyglucose, or FDG, PET imaging agent. Gluscan assists in the diagnosis of serious medical conditions, primarily in oncology, by assessing glucose metabolism. We are building on our diagnostics foundation by developing additional diagnostic product candidates to further strengthen our existing portfolio. In June 2016, the FDA approved NETSPOT for the localization of somatostatin receptor positive NETs in adult and pediatric patients. In August 2016, NETSPOT was first administered to a patient in the United States. We believe NETSPOT will serve to provide improved diagnosis of NETs and has the potential to serve as a diagnostic PET product for Lutathera. We believe NETSPOT will offer significant potential improvements versus the currently approved diagnostic products improved sensitivity and specificity, reduced radiation exposure of patients, better patient acceptability, time saving procedure for the hospital (2 hours vs. 24 hours), and no radioactive product-related delivery restrictions in its kit form. Both NETSPOT and SomaKit-TOC have received orphan drug designation in the European Union and the United States. We partnered with four U.S.-based radiopharmacy companies, Cardinal Health, Inc., Zevacor Pharma, Inc., Triad Isotopes, Inc., and Nuclear Diagnostic Products in order to establish a network to prepare and deliver NETSPOT doses to advanced medical imaging sites in key metropolitan areas where high demand is anticipated. We also initiated Phase 1/2 clinical trials for Annexin V-128, a SPECT product candidate for the imaging of apoptotic and necrotic lesions, which has potential applications in a broad range of indications such as assessment of rheumatoid arthritis and spondyloarthritis, diagnosis of atherosclerosis and atherosclerosis advanced lesions, and assessment of chemotherapy-induced cardiotoxicity. Our PET production sites are strategically positioned close to our customers. We manufacture a majority of our products at our 19 production sites currently in operation as of end of June 2016. In May 2016, our subsidiary, AAA Germany GmbH acquired the rights to operate two additional F-18 radiopharmaceutical production sites in south Germany. Our Millburn facility also serves as a distribution center for NETSPOT. We also have another site under construction in Murcia, Spain that we are developing for the manufacture of PET products. The Millburn and Murcia, Spain sites are expected to be operational in the first half of 2017 and the fourth quarter of 2016, respectively. The global molecular nuclear medicine market, which includes radiopharmaceuticals, was estimated at approximately US$4.3 billion as of December 31, 2015 (with 90% of sales in diagnostics and 10% of sales in therapeutics) according to MEDraysintell. While the market is largely concentrated in diagnostics, where we believe we have a leading position in Europe, therapeutics represents a fast-growing field within molecular nuclear medicine. MEDraysintell projects that therapeutic sales may constitute up to US$15.0 billion of total molecular nuclear medicine sales of US$25.0 billion by 2030, representing a compound annual growth rate of 27%. Our Strengths A late-stage radiopharmaceutical therapeutic candidate targeting foregut, midgut and hindgut NETs: Lutathera is an innovative therapeutic candidate with orphan drug status in the United States and the European Union. We believe Lutathera, along with the diagnostic agents NETSPOT and SomaKit-TOC, has the potential to become a new paradigm for the treatment of midgut NETs and of NETs more broadly. TABLE OF CONTENTS Leveraging our leadership position and vertical integration to produce differentiated molecular nuclear medicine products: We have developed significant expertise and established an integrated R&D, manufacturing and commercialization infrastructure to become a leading player in the growing molecular nuclear medicine market. We believe our leading position in molecular nuclear medicine is underpinned by our (i) pan-European presence and future U.S. manufacturing and distribution capabilities, (ii) proximity to our more than 200 principal customers through our PET production facilities, a key advantage given the short half-life of PET and other molecular nuclear medicine products, (iii) scalable and modular manufacturing, (iv) extensive scientific know-how and (v) ongoing interaction with the healthcare field through hospitals, universities and research centers. We have R&D teams based in seven of our production facilities (in addition to our dedicated R&D facility in Nantes, France), which allows them to link practical manufacturing know-how to pipeline product candidate development to maximize the opportunity for commercial success. This arrangement allows us to exploit synergies between manufacturing and R&D and enabled us to advance Lutathera with a new formulation targeting midgut NETs soon after we acquired it. Diversified, attractive product candidate development pipeline: We leverage our successful diagnostics business to invest in multiple avenues of growth by developing product candidates across the therapy, PET and SPECT categories of radiopharmaceuticals, including mid- and late-stage product candidates. We seek to leverage diagnostic candidates to improve the efficacy of our therapeutic candidates and improve the standard of care for indications with significant unmet need. Established molecular nuclear medicine platform in a market characterized by significant barriers to entry: Our network of 19 production facilities across Europe, all of which we believe operate in conformity with current good manufacturing practice, or cGMP, pan-European platform, potential U.S. manufacturing and distribution capabilities, our production infrastructure and our proven and reliable logistical capabilities have enabled us to secure significant customer loyalty and establish our position as a partner for global players, such as GE Healthcare and Eli Lilly, for the production of their molecular diagnostic products. Highly qualified and experienced management team with a proven track record of launching innovative products and successfully integrating acquired companies: Our senior management team combines extensive experience in molecular nuclear medicine and our founding members still direct our strategy and development 14 years after our inception. We have successfully acquired businesses and promising product candidates that further leverage our logistical infrastructure, as well as manufacturing facilities to expand our existing network and enable us to enter into new markets. Our Strategy Obtain approval for Lutathera in the United States and Europe: We believe Lutathera is a promising therapeutic candidate, initially for progressive midgut NETs, a significant unmet medical need, and potentially for related indications. The FDA and the EMA have historically allowed approval based on a single Phase 3 trial where the trial is well-designed, well-conducted and internally consistent, and provides statistically persuasive efficacy findings such that confirmation of the trial results in a second trial would be ethically or practically impossible. We believe that our Phase 3 trial results will meet this threshold based upon (i) our discussions with the FDA and the EMA regarding the allowance of market access based upon a single trial (if successful), (ii) our Phase 3 trial s large randomized patient pool, which has allowed us to demonstrate what we believe to be a significant improvement in primary endpoint PFS, as well as improvement in overall survival, compared to the current standard of care, (iii) the current lack of available therapy for patients in Lutathera s targeted indication and (iv) the receipt of Priority Review from the FDA for Lutathera s NDA. Commercialize Lutathera in the United States and Europe: We anticipate commencing marketing for Lutathera in the United States and EU5 soon after we receive FDA and/or EMA approval. TABLE OF CONTENTS Our commercial leadership team is already in place and we are currently in the early stages of establishing our commercial infrastructure. We intend to contract with select partners to commercialize Lutathera outside the U.S. and EU5. Expand access to high value, differentiated radiopharmaceutical and diagnostic nuclear medicine: We aim to broaden our customer base by entering into new manufacturing and licensing agreements in our existing markets, targeting hospitals with which we do not currently have relationships and marketing our diagnostic nuclear medicine products in new markets. Pursue strategic acquisitions: We aim to continue our track record of identifying, acquiring and integrating businesses and assets into our company that we believe hold strategic value to us. We have successfully acquired and integrated seven commercial-stage companies, two development-stage companies, one promising product candidate and three manufacturing facilities since 2009. We expect to continue to target acquisitions that will further build our product pipeline and expand our production capacity and geographic coverage. Leverage our platform to pursue additional strategic partnerships: We plan to explore new opportunities to work with global pharmaceutical companies that would supplement our current production of their diagnostic products and strengthen our business relationships. In addition, we plan to establish important new industry partnerships by: (i) leveraging our manufacturing expertise to in-license additional compounds; (ii) capitalizing on our R&D efforts and healthcare industry connections to strategically out-license our products to others; and (iii) using our expertise in manufacturing diagnostics to explore the potential for working with pharmaceutical companies to develop diagnostics with those companies. History and Development of the Company We were founded in 2002 by Mr. Buono, our CEO and a physicist who had previously worked at CERN with Nobel Physics Prize winner Carlo Rubbia, Paolo Pom , a private equity firm partner, G rard Ber, our COO and a pharmacist with more than 30 years experience in pharmaceutical and molecular nuclear medicine sales and marketing, and Enrico De Maria, an engineer and the CEO of our Italian subsidiary. In 2003 we constructed our first radiopharmaceutical laboratory in Saint-Genis-Pouilly, Rh ne-Alpes, France, the first of six laboratories that we constructed between 2003 and 2009. In December 2004 we obtained our first marketing authorization from Swiss authorities to commercialize Gluscan in Switzerland. We began production of Gluscan at our Saint-Genis-Pouilly site and have since added production sites in France and Italy. In December 2008, we acquired Gipharma, an Italian pharmaceutical contract manufacturer for small-volume injectable and freeze-dried solutions, specializing in SPECT radiopharmaceuticals. In 2010 we made an initial equity investment in Atreus Pharmaceuticals Corporation, or Atreus, a development-stage biopharmaceutical company headquartered in Ottawa, Canada, to help progress its leading compound Annexin V-128 into a Phase 1/2 trial for early diagnosis of rheumatoid arthritis. In 2010, we also acquired BioSynthema Inc., or BioSynthema, which specialized in molecular nuclear medicine discovery, and with it Lutathera, our lead radiotherapeutic product candidate, which we have advanced through a pivotal Phase 3 trial for the treatment of progressive midgut NETs that has produced positive results. In November 2015, we completed our initial public offering pursuant to which we received net proceeds of approximately US$80.4 million after deducting underwriting discounts and commissions and other expenses, providing additional financing for the expansion of the marketing, manufacturing and commercialization capabilities of Lutathera, funding clinical trials and other R&D efforts, expanding our manufacturing infrastructure and general corporate purposes. Over the last several years, we have expanded our existing operations by: acquiring the rights to operate two F-18 radiopharmaceutical production sites in South Germany, which we refer to as the PetNet business acquisition, in May 2016. The first site, located in Erlangen, is wholly owned and operated by our subsidiary AAA Germany GmbH. The second site, located in Munich, remains the property of the University Hospital of Munich (Klinikum der Universit t M nchen or KUM), with AAA Germany GmbH responsible for production and TABLE OF CONTENTS commercialization onsite. The Munich contract includes a long-term F-18 in-house supply agreement with the KUM. We also entered into an agreement with Itel Telecomunicazioni Srl (ITEL) to manufacture and commercialize F-18 radiopharmaceuticals to hospitals and imaging centers in selected regions of Southern Italy; acquiring 100% of the shares of IDB in January 2016. IDB is a leading manufacturer of Lu-177. IDB produces, markets and sells Lu-177 under the brand name LuMark , which it has established as the leading brand of Lu-177 worldwide. LuMark is the only Lu-177 product to have received European marketing authorization. We believe that, in line with our vertical integration strategy, acquiring IDB will enable AAA to obtain a reliable supply of Lu-177 for production of Lutathera and certain of our future potential product candidates; acquiring a production site in Millburn, NJ in July 2015 to establish manufacturing capacity to support our commercialization of Lutathera in the United States. We intend to start manufacturing operations there in the first half of 2017 after receiving all necessary authorizations and licenses; completing private placements in May and June 2015 through which we raised a total of 23.1 million (US$25.77 million), providing additional financing for clinical development of our portfolio of molecular nuclear medicine diagnostic and therapeutic products; acquiring the remaining 49.9% of Atreus in December 2014 to become its sole owner. The complete ownership of Atreus facilitates our R&D efforts for Annexin V-128 and, if we are successful in obtaining market authorization, we believe it will allow us to better exploit the commercial potential of Annexin V-128; acquiring the remaining 49.9% of AAA Germany GmbH (formerly Umbra), a German radiopharmaceutical company, in December 2014 to become its sole owner. We had initially acquired a 50.1% stake in Umbra, giving us our first direct presence in Germany, in February 2012. We paid 1.2 million (US$1.3 million) in cash for the purchase price for the remaining share ownership; entering into an agreement with GE Healthcare in the third quarter of 2014 to acquire its Italian FDG-PET imaging agent business for 0.9 million (US$1.0 million) in cash over the following two years, and 1.2 million (US$1.3 million) in estimated royalty payments to be made between October 2016 and October 2017. The acquisition reinforces our position as one of the leading companies in the PET market in Italy; expanding into the United States in the second quarter of 2014 and establishing an office in New York as part of our early efforts to build a commercialization platform for Lutathera in the United States; completing a capital increase of 41.1 million (US$45.9 million) in February 2014, allowing us to accelerate our international expansion, including an increased presence in the United States, and helping us to finance the clinical development of our portfolio of molecular nuclear medicine diagnostic and therapeutic products; and acquiring 100% of IEL, a privately held UK distributor of nuclear medicine products and technologies in February 2014. The acquisition gives us our first direct presence in the United Kingdom and Ireland, expanding our existing services and expertise in nuclear medicine and providing us with an established manufacturing and commercialization platform. IEL generated sales of approximately 10.3 million (US$11.49 million) for the year ended December 31, 2013, an increase of 51% over the previous year. Risks Associated with Our Business Our business is subject to numerous risks, as more fully described in the section entitled Risk Factors immediately following this prospectus summary. You should read these risks before you invest in the ADSs. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include: TABLE OF CONTENTS Our future profitability depends significantly on the success of our lead radiotherapeutic product candidate, Lutathera, which has completed clinical development, but which may not obtain regulatory approval or be successfully commercialized. We depend on Gluscan, our branded version of a generic FDG product with no patent protection, for a significant percentage of our sales (46.8%, 51.6% and 61.4% of our sales in fiscal years 2014, 2013 and 2012, respectively, and 41.1% and 48.2% of our sales for the six months ended June 30, 2016 and June 30, 2015, respectively). We have no or in some cases, limited, intellectual property rights related to our products and product candidates, including Lutathera and our Somakit products, Lutathera s diagnostic product candidates, as a result of which we may not be able to compete effectively in our market. We rely on obtaining and maintaining orphan drug status for market exclusivity for our product candidates, including for Lutathera and for our Somakit products. Orphan drug status may not ensure that we have market exclusivity in a particular market, and we could fail to obtain orphan drug market exclusivity if another drug is approved first containing the same active moiety, or lose exclusivity if another drug demonstrates clinical superiority. We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth. While we have consistently realized sales from our products in recent years, we have incurred losses for the six months ended June 30, 2016, for the years ended December 31, 2015, 2014 and 2013, respectively, and in other, earlier fiscal years. We may continue to incur losses for the foreseeable future, and we may not achieve or maintain profitability. We have identified material weaknesses and significant deficiencies in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, this could have a material adverse effect on our business. We may need to raise additional capital in connection with our continuing operations, which may cause dilution to our shareholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates. We are expanding our organization and may experience difficulties in managing this growth, which could disrupt our operations. Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel. Implications of Being a Foreign Private Issuer We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer, or FPI, status. As long as we qualify as a FPI under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including: the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and Regulation Fair Disclosure, or Regulation FD, which regulates selective disclosures of material information by issuers. TABLE OF CONTENTS Our Corporate Structure We were incorporated as a soci t responsabilit limit e, or SARL, under the laws of the French Republic on March 4, 2002 and converted into a soci t anonyme, or S.A, on August 19, 2002. Prior to our initial public offering, we were a privately owned company. We are registered in Bourg en Bresse, France. Our principal executive offices are located at 20 rue Diesel, 01630 Saint Genis Pouilly, France and our telephone number at this address is +33 (0) 4 50 99 30 70. Our website is www.adacap.com. The information contained on our website is not a part of this prospectus. TABLE OF CONTENTS
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001612047_performanc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001612047_performanc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001612047_performanc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001613288_ecolomondo_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001613288_ecolomondo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..652c7d79984b51578ebb1ff7c61f11a57b2cb06b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001613288_ecolomondo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001614818_cardconnec_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001614818_cardconnec_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a14884204225816756ae88b4f3516711c97eab7d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001614818_cardconnec_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1 The Offering 2 Selected Historical Consolidated Financial Information 3 Selected Historical Financial Information of Cardconnect 4 Selected Unaudited Pro Forma Condensed Combined Financial Information 5 Comparative Per Share Data 7 Risk Factors 8 Cautionary Note Regarding Forward-Looking Statements 28 Market Price of Our Common Stock 29 Use of Proceeds 30 Dividend Policy 31 Description of Business 31 Management s Discussion and Analysis of Financial Condition and Results of Operations 50 Management 75 Executive Compensation 83 Certain Relationships and Related Party Transactions 99 Plan of Distribution 105 Description of Securities 106 Legal Matters 113 Experts 113 Transfer Agent and Registrar 113 Where You Can Find Additional Information 113 Index to Financial Statements F-1 Table of Contents INTRODUCTORY NOTE On July 29, 2016, we consummated the acquisition of FTS Holding Corporation by the merger of FTS Holding Corporation with and into FinTech Merger Sub, Inc., our wholly-owned subsidiary, which we refer to as the Merger. In connection with the closing of the Merger, we changed our name from FinTech Acquisition Corp. to CardConnect Corp. and FinTech Merger Sub, Inc. changed its name to FTS Holding Corporation. Unless the context otherwise requires, "we," "us," "our," and the "Company" refer to the combined Company and its subsidiaries, "FinTech" refers to the company prior to the closing of the Merger and "CardConnect" refers to FTS Holding Corporation prior to the Merger. SUMMARY This summary highlights certain information about us, this offering and the information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including the information referred to under the heading "Risk Factors" and the financial statements and other information included elsewhere in this prospectus, before making an investment decision. See also the section entitled "Where You Can Find More Information." Overview CardConnect Corp., a Delaware corporation, is a provider of payment processing solutions to merchants throughout the United States. Our secure, proprietary platform allows us to provide payment solutions, superior customer support and first-rate tools for our distribution partners and merchants. Our solutions and services enable distribution partners to effectively manage their business and for merchants to securely accept electronic payments. Risk Factors There are a number of risks related to our business and our common stock that you should consider before making an investment decision. You should carefully consider all the information presented in the section entitled "Risk Factors" beginning on pages 8 of this prospectus and the other information contained in this prospectus. Company History We were formed in November 2013 as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination. On July 29, 2016, we acquired CardConnect pursuant to the Merger and changed our name to CardConnect Corp. in connection with the Merger. Prior to the Merger, our securities were traded on the NASDAQ Capital Market under the symbols "FNTCU," "FNTC" and "FNTCW." Upon the closing of the Merger, we continued the listing of our common stock and warrants on the NASDAQ Capital Market under the symbols "CCN" and "CCNWW," respectively, effective August 1, 2016. CardConnect was founded in 2006 as Financial Transaction Services, LLC and in September 2010, merged into FTS Holding Corp. in connection with the sale of a controlling interest in the company. Presentation of Financial and Operating Data The Merger was accounted for as a reverse merger. CardConnect is considered the "acquirer" and FinTech is treated as the "acquired" company for financial reporting purposes. Corporate Information The mailing address of our principal executive office is 1000 Continental Drive, Suite 300, King of Prussia, Pennsylvania 19406 and our telephone number is (484) 581-2200. Our website address is www.cardconnect.com. The information found on our website is not part of this prospectus. CALCULATION OF REGISTRATION FEE Title of securities to be registered Amount to Be Registered (1) Proposed maximum offering price per share (2) Proposed maximum aggregate offering price (2) Amount of Registration Fee Common Stock, par value $0.0001 per share 10,300,000(3) $12.00 $123,600,000 $12,447 (1) In the event of a stock split, stock dividend or other similar transaction involving the registrant s common stock, in order to prevent dilution, the number of shares of common stock registered hereby shall be automatically increased to cover the additional common shares in accordance with Rule 416(a) under the Securities Act of 1933, as amended (the "Securities Act"). (2) In accordance with Rule 457(i), the proposed offering price is calculated based on the additional consideration to be received upon the exercise of each warrant of $12.00 per warrant to purchase one share of the registrant s common stock. (3) Consists of 10,300,000 shares of our common stock issuable upon the exercise of warrants that were issued by FinTech Acquisition Corp., a Delaware corporation, now known as CardConnect Corp. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents ABOUT THIS PROSPECTUS You should rely only on the information contained in this prospectus or contained in any prospectus supplement or free writing prospectus filed with the SEC. If any statement in one of these documents is inconsistent with a statement in another document having a later date—for example, a subsequently filed document in this prospectus—the statement in the document having the later date modifies or supersedes the earlier statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. We have not authorized anyone to provide you with any different or additional information other than that contained in this prospectus and the accompanying prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide. We are making an offer to sell our common stock in any jurisdiction where the offer or sale is not permitted. You should not assume that the information appearing in this prospectus is accurate as of any date other than the date of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date. This prospectus does not constitute an offer, or an invitation on our behalf, to subscribe for and purchase any of the securities, and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Table of Contents THE OFFERING Common stock offered 10,300,000 shares Common stock outstanding as of August 24, 2016 28,751,331 shares Use of proceeds We will receive the proceeds from the exercise of the warrants, but not from the sale of the underlying shares of common stock. See "Use of Proceeds." Dividend policy We currently expect to retain any future earnings for use in our business operations, and, accordingly, we do not anticipate paying any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Risk factors Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 8 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock. Symbol for trading on The NASDAQ Capital Market Our common stock is quoted under the symbol "CCN" Our warrants are quoted under the symbol "CCNWW" Unless otherwise indicated, all information in this prospectus relating to the number of shares of our common stock to be outstanding immediately after this offering is based on 28,751,331 shares outstanding as of August 24, 2016, which excludes (a) the 10,300,000 shares of common stock offered by this prospectus, which are issuable upon exercise of 10,300,000 warrants at an exercise price of $12.00 per share; and (b) options to purchase 7,233,858 shares of our common stock at a weighted average exercise price of $7.33 per share. The information in this prospectus is not complete and may be changed. We may not sell or offer these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to completion, dated August 25, 2016 PROSPECTUS 10,300,000 Shares of Common Stock of CardConnect Corp. This prospectus relates to the issuance by us of up to 10,300,000 shares of our common stock, par value $0.001 per share, upon the exercise of warrants that were issued by FinTech Acquisition Corp., a Delaware corporation, now known as CardConnect Corp. The warrants became exercisable on August 28, 2016, which was 30 days after the completion of the transactions contemplated by the Merger (as defined and described below). See "Summary—Company History" and "Management s Discussion and Analysis of Financial Condition and Results of Operation—Recent Events" beginning on pages 1 and 51, respectively. The warrants will expire at 5:00 p.m., New York time, July 29, 2021 or earlier upon redemption or liquidation. Each warrant entitles its holder to purchase one share of common stock at an exercise price of $12.00 per share. We will receive the proceeds from the exercise of the warrants, but not from the sale of the underlying shares of common stock. See "Plan of Distribution" beginning on page 105. We may redeem the outstanding warrants at a price of $0.01 per warrant if the last sale price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period. Our common stock is traded on The NASDAQ Capital Market under the symbol "CCN." The warrants are traded on The Nasdaq Capital Market under the symbol "CCNWW." On August 24, 2016, the last reported sale price of our common stock was $10.00 per share and the last reported sale price of the warrants was $1.35 per share. Investing in our common stock involves a high degree of risk. These risks are described under the caption "Risk Factors" that begins on page 8 of this prospectus. Neither the United States Securities and Exchange Commission (the "SEC"), nor any state securities commission has approved or disapproved of the common stock that may be offered under this prospectus, nor have any of these regulatory authorities determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2016. Table of Contents SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION The following table sets forth selected historical FinTech financial information. FinTech s balance sheet data as of April 30, 2016 and 2015 and income statement data for the six months ended April 30, 2016 and 2015 are derived from FinTech s unaudited financial statements included elsewhere in this prospectus. FinTech s balance sheet data as of October 31, 2015 and 2014 and income statement data for the years ended October 31, 2015 and 2014 are derived from its audited financial statements included elsewhere in this prospectus. The following information is only a summary and should be read in conjunction with FinTech s condensed consolidated financial statements and related notes contained elsewhere in this prospectus. The historical results included below and elsewhere in this prospectus are not indicative of our future performance. Six Months Ended April 30, Year Ended October 31, 2016 2015 2015 2014 (dollars in thousands, except per share data) Income Statement Data: Operating costs $745 $41 $229 $29 Gain on reduction of deferred underwriting fee payable 1,000 — — — Unrealized gain (loss) on securities 61 — (50) — Interest income 28 28 35 — Net income (loss) 344 (13) (244) (29) Basic and diluted income (loss) per share 0.07 (0.00) (0.06) (0.01) As of April 30, As of October 31, 2016 2015 2015 2014 (dollars in thousands) Balance Sheet Data: Cash $65 $314 $153 $5 Cash and securities held in Trust Account 100,075 100,028 99,985 — Total assets 100,201 100,441 100,210 226 Common stock subject to redemption 90,429 90,316 90,085 — Total stockholders equity (deficit) 5,000 5,000 5,000 (4) Six Months Ended April 30, Year Ended October 31, 2016 2015 2015 2014 (dollars in thousands) Cash Flow Data: Net cash used in operating activities $(373) (160) $(321) $(8) Net cash used in investing activities — (100,000) (100,000) — Net cash provided by financing activities 285 100,470 100,470 13 Table of Contents SELECTED HISTORICAL FINANCIAL INFORMATION OF CARDCONNECT The following table sets forth selected historical financial information of CardConnect as of the dates and for the periods presented. The financial information for CardConnect as of December 31, 2015 and 2014 and for the periods ended December 31, 2015, 2014 and 2013 has been derived from CardConnect s audited financial statements for such periods, audited by Marcum LLP, independent registered public accountants, included elsewhere in this prospectus. The financial information for CardConnect as of December 31, 2013, 2012 and 2011, for the years ended December 31, 2012 and 2011 and as of and for the six months ended June 30, 2016 and 2015 has been derived from CardConnect s unaudited financial statements for such periods. You should read the following selected financial information in conjunction with the section entitled "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes contained elsewhere in this prospectus. Six Months Ended June 30, Year Ended December 31, 2016 2015 2015 2014 2013 2012 2011 (dollars in thousands) Income Statement Data: Revenue $278,454 $213,245 $458,648 $389,985 $348,905 $251,071 $154,969 Expenses 273,729 210,801 454,806 392,098 350,892 251,370 149,026 Total other expenses 1,039 723 1,285 1,299 1,478 1,000 721 Income (loss) before income tax provision 3,686 1,721 2,556 (3,412) (3,465) (1,299) 5,223 Net income (loss) 3,394 721 1,172 (12,011) (2,152) (843) 3,336 As of June 30, As of December 31, 2016 2015 2014 2013 2012 2011 (dollars in thousands) Balance Sheet Data: Cash and cash equivalents $9,356 $3,575 $1,158 $257 $630 $4,765 Total assets 149,809 145,912 110,967 125,405 128,832 67,104 Total liabilities 86,708 87,205 52,619 56,994 59,932 17,117 Total stockholders equity 63,101 58,707 58,348 68,411 68,900 49,987 Six Months Ended June 30, Year Ended December 31, 2016 2015 2015 2014 2013 2012 2011 (dollars in thousands) Cash Flow Data: Net cash provided by operating activities $12,049 $10,107 $20,071 $19,683 $18,232 $7,231 $7,993 Net cash used in investing activities (4,488) (9,254) (37,171) (9,998) (14,317) (59,083) (10,033) Net cash (used in) provided by financing activities (1,780) (1,175) 19,517 (8,784) (4,288) 47,717 6,314 Table of Contents SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following unaudited pro forma condensed combined balance sheet as of April 30, 2016 combines the unaudited historical consolidated balance sheet of CardConnect as of June 30, 2016 with the unaudited historical condensed consolidated balance sheet of FinTech as of April 30, 2016, giving effect to the Merger as if it had been consummated as of that date. The following unaudited pro forma condensed combined income statement for the year ended October 31, 2015 combines the audited historical consolidated statement of operations of CardConnect for the year ended December 31, 2015 with the audited historical statement of operations of FinTech for the year ended October 31, 2015, giving effect to the Merger as if it had occurred on November 1, 2014. The following unaudited pro forma condensed combined income statement for the six months ended April 30, 2016 combines the unaudited historical consolidated statement of operations of CardConnect for the six months ended June 30, 2016 with the unaudited historical condensed consolidated statement of operations of FinTech for the six months ended April 30, 2016, giving effect to the Merger as if it had occurred on November 1, 2015. The historical financial information has been adjusted to give pro forma effect to final events that are related and/or directly attributable to the Merger, are factually supportable and are expected to have a continuing impact on the results of the combined Company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined Company upon consummation of the Merger. The historical financial statements of FinTech and CardConnect have been prepared in accordance with accounting principles generally accepted in the United States of America, which we refer to as GAAP. The historical financial information for CardConnect as of December 31, 2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015 has been derived from CardConnect s audited financial statements included elsewhere in this prospectus. The historical financial information for CardConnect as of June 30, 2016 and for the six months ended June 30, 2016 has been derived from CardConnect s unaudited financial statements. The historical financial information of FinTech was derived from the audited financial statements of FinTech for the years ended October 31, 2015 and 2014 and the unaudited condensed consolidated financial statements of FinTech for the six months ended April 30, 2016 and 2015 included elsewhere in this prospectus. This information should be read together with CardConnect s and FinTech s audited and unaudited financial statements and related notes, "Management s Discussion and Analysis of Financial Condition and Results of Operations" and other financial information included elsewhere in this prospectus or incorporated by reference in this prospectus. The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined Company will experience. CardConnect and FinTech have not had any historical relationship prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies. Table of Contents Selected Unaudited Pro Forma Financial Information (dollars in thousands except per share amounts) FinTech CardConnect Pro Forma Combined Statement of Operations Data – For the Six Months Ended April 30, 2016 (Fintech) and Six Months Ended June 30, 2016 (CardConnect) Revenue $— $278,454 $278,454 Total operating expenses $745 $273,729 $276,271 Operating (loss) income $(745) $4,725 $2,183 Net (loss) income $344 $3,394 $(957) Net (loss) income per common share – basic and diluted $0.07 $(0.03) Balance Sheet Data – As of April 30, 2016 (Fintech) and June 30, 2016 (CardConnect) Total current assets $127 $45,737 $59,984 Total assets $100,201 $149,809 $164,056 Total current liabilities $647 $82,987 $30,384 Total liabilities $4,772 $86.708 $163,057 Total stockholders equity (deficit) $5,000 $63,101 $(36,502) FinTech CardConnect Pro Forma Combined Statement of Operations Data – For the Year Ended October 31, 2015 (Fintech) and Year Ended December 31, 2015 (CardConnect) Revenue $— $458,648 $458,648 Total operating expenses $229 $454,806 $458,628 Operating (loss) income $(229) $3,842 $20 Net (loss) income $(244) $1,172 $(4,249) Net loss per common share – basic and diluted $(0.06) $(0.15) Table of Contents COMPARATIVE PER SHARE DATA The following table sets forth the per share data of FinTech and CardConnect on a stand-alone basis and the unaudited pro forma condensed combined per share data for the six months ended April 30, 2016 and the year ended October 31, 2015 after giving effect to the Merger. You should read the information in the following table in conjunction with the selected historical financial information summary included elsewhere in this prospectus. The unaudited FinTech and CardConnect pro forma combined per share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this prospectus. The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of FinTech and CardConnect would have been had the companies been combined during the period presented. FinTech CardConnect Pro Forma Combined (in thousands except share and per share amounts) Six Months Ended April 30, 2016 (FinTech) and Six Months Ended June 30, 2016 (CardConnect) Net (loss) income $344 $3,394 $(957) Stockholders equity (deficit) at April 30, 2016 $5,000 $63,101 $(36,502) Weighted average shares outstanding – basic and diluted 4,728,248 28,782,439 Basic and diluted net income (loss) per share $0.07 $(0.03) Stockholders equity (deficit) per share – basic and diluted – at April 30, 2016 $1.06 $(1.27) Year Ended October 31, 2015 (FinTech) and Year Ended December 31, 2015 (CardConnect) Net (loss) income $(244) $1,172 $(4,249) Weighted average shares outstanding – basic and diluted 4,316,202 28,370,393 Basic and diluted net loss per share $(0.06) $(0.15) Table of Contents RISK FACTORS An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Before deciding whether to invest in our securities you should also refer to the other information contained in this prospectus. Risks Relating to Our Business The payment processing industry is highly competitive and such competition is likely to increase, which may adversely influence the prices we can charge to merchants for our services and the compensation we must pay to our distribution partners, and as a result, our profit margins. The payment processing industry is highly competitive. We primarily compete in the small and medium business ("SMB") merchant industry. Competition has increased recently as other providers of payment processing services have established a sizable market share in the SMB merchant industry, with the largest ten processors representing approximately 80% of the SMB market. Our primary competitors for SMB merchants in these markets include financial institutions and their affiliates and well-established payment processing companies that target SMB merchants directly and through third parties, including Bank of America Merchant Services, Chase Paymentech, Elavon, Inc. (a subsidiary of U.S. Bancorp), First Data Corporation, Vantiv, Inc., Global Payments, Inc., Heartland Payment Systems, Inc. (an affiliate of Global Payments, Inc.), BluePay and Square. Competing with financial institutions is challenging because, unlike us, they often bundle processing services with other banking products and services. We also compete with many of these same entities for the assistance of distribution partners. For example, many of our distribution partners are not exclusive to us but also have relationships with our competitors, such that we have to continually expend resources to maintain those relationships. Our growth will depend on the continued growth of payments with prepaid, debit and credit cards, which we refer to as Electronic Payments, and our ability to increase our market share through successful competitive efforts to gain new merchants and distribution partners. In addition, many financial institutions, subsidiaries of financial institutions or well-established payment processing companies with which we compete, have substantially greater capital, technological, management and marketing resources than we have. These factors may allow our competitors to offer better pricing terms to merchants and more attractive compensation to distribution partners, which could result in a loss of our potential or current merchants and distribution partners. This competition may effectively limit the prices we can charge our merchants, cause us to increase the compensation we pay to our distribution partners and require us to control costs aggressively in order to maintain acceptable profit margins. Our future competitors may also develop or offer services that have price or other advantages over the services we provide. We are also facing new competition from emerging and non-traditional payment processing companies as well as traditional companies offering alternative electronic payments services and products. Certain of these competitors integrate proprietary software and service solutions with electronic payments services and have significant financial resources and robust networks that could allow them to have access to merchants needing electronic payments services. If these new entrants gain a greater share of total electronic payments transactions, they could impact our ability to retain and grow our relationships with merchants and distribution partners. These new entrants also may compete in ways that minimize or remove the role of traditional, point of sale, or POS software in the electronic payments process upon which our services are based, which could also limit our ability to retain or grow those relationships. Table of Contents To acquire and retain a segment of our merchants, we depend in part on distribution partners that may not serve us exclusively and are subject to attrition. We rely in significant part on the efforts of integrated service vendors and referral partners to market our services to merchants seeking to establish a merchant acquiring relationship. These distribution partners seek to introduce us, as well as our competitors, to newly established and existing SMB merchants, including retailers, restaurants and other businesses. Generally, our agreements with distribution partners (with the exception of a portion of our integrated technology partners and bank referral partners) are not exclusive and distribution partners retain the right to refer merchants to other merchant acquirers. Gaining and maintaining loyalty or exclusivity can require financial concessions to maintain current distribution partners and merchants or to attract potential distribution partners and merchants from our competitors. We have been required, and expect to be required in the future, to make concessions when renewing contracts with our distribution partners and such concessions can have a material impact on our financial condition or operating performance. If these distribution partners switch to another merchant acquirer, cease operations or become insolvent, we will no longer receive new merchant referrals from them, and we risk losing existing merchants that were originally enrolled by them. Additionally, our distribution partners are subject to the requirements imposed by our bank sponsors, which may result in fines to them for non-compliance and may, in some cases, result in these entities ceasing to refer merchants to us. We cannot accurately predict the level of attrition of our distribution partners or merchants in the future, particularly those merchants we acquired as customers in the portfolio acquisitions we have completed in the past six years, which makes it difficult for us to forecast growth. If we are unable to establish relationships with new distribution partners or merchants, or otherwise increase our transaction processing volume in order to counter the effect of this attrition, our revenues will decline. Unauthorized disclosure of merchant or cardholder data, whether through breach of our computer systems, computer viruses, or otherwise, could expose us to liability, protracted and costly litigation and damage our reputation. We are responsible for data security for our self and for third parties with whom we partner and under the rules and regulations established by the payment networks, such as Visa, MasterCard, Discover and American Express, and debit card networks. These third parties include merchants, our distribution partners and other third-party service providers and agents. We and other third parties collect, process, store and/or transmit sensitive data, such as names, addresses, social security numbers, credit or debit card numbers and expiration dates, driver s license numbers and bank account numbers. We have ultimate liability to the payment networks and our bank sponsors that register us with Visa or MasterCard for our failure or the failure of third parties with whom we contract to protect this data in accordance with payment network requirements. The loss, destruction or unauthorized modification of merchant or cardholder data by us or our contracted third parties could result in significant fines, sanctions and proceedings or actions against us by the payment networks, governmental bodies, consumers or others. Threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. For example, certain of our employees have access to sensitive data that could be used to commit identity theft or fraud. Concerns about security increase when we transmit information electronically because such transmissions can be subject to attack, interception or loss. Also, computer viruses can be distributed and spread rapidly over the Internet and could infiltrate our systems or those of our contracted third parties. Denial of service or other attacks could be launched against us for a variety of purposes, including interfering with our services or to create a diversion for other malicious activities. These types of actions and attacks and others could disrupt our delivery of services or make them unavailable. Any such actions or attacks against us or our contracted third parties could hurt our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured liability, result in the loss of our bank sponsors or our ability to participate in the payment networks, subject us to lawsuits, fines or sanctions, distract our management or increase our costs of doing business. Table of Contents We and our contracted third parties could be subject to breaches of security by hackers. Our encryption of data and other protective measures may not prevent unauthorized access to or use of sensitive data. A breach of a system may subject us to material losses or liability, including payment network fines, assessments and claims for unauthorized purchases with misappropriated credit, debit or card information, impersonation or other similar fraud claims. A misuse of such data or a cybersecurity breach could harm our reputation and deter merchants from using electronic payments generally and our services specifically, thus reducing our revenue. In addition, any such misuse or breach could cause us to incur costs to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, and result in the imposition of material penalties and fines under state and federal laws or by the payment networks. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, our insurance coverage may be insufficient to cover all losses. In addition, a significant cybersecurity breach of our systems or communications could result in payment networks prohibiting us from processing transactions on their networks or the loss of our bank sponsors that facilitate our participation in the payment networks, either of which could materially impede our ability to conduct business. Although we generally require that our agreements with distribution partners or our service providers which may have access to merchant or cardholder data include confidentiality obligations that restrict these parties from using or disclosing any merchant or cardholder data except as necessary to perform their services under the applicable agreements, we cannot guarantee that these contractual measures will prevent the unauthorized use, modification, destruction or disclosure of data or allow us to seek reimbursement from the contracted party. In addition, many of our merchants are small and medium businesses that may have limited competency regarding data security and handling requirements and may thus experience data breaches. Any unauthorized use, modification, destruction or disclosure of data could result in protracted and costly litigation, and our incurring significant losses. In addition, our agreements with our bank sponsors and our third-party payment processors (as well as payment network requirements) require us to take certain protective measures to ensure the confidentiality of merchant and consumer data. Any failure to adequately comply with these protective measures could result in fees, penalties, litigation or termination of our bank sponsor agreements. Any significant unauthorized disclosure of sensitive data entrusted to us would cause significant damage to our reputation, and impair our ability to attract new integrated technology and referral partners, and may cause parties with whom we already have such agreements to terminate them. Potential distribution partners and merchants may be reluctant to switch to a new merchant acquirer, which may adversely affect our growth. Many potential distribution partners and merchants worry about potential disadvantages associated with switching merchant acquirers, such as a loss of accustomed functionality, increased costs and business disruption. For our distribution partners, switching to us from another merchant acquirer or integrating with us may constitute a significant undertaking. As a result, many distribution partners and merchants often resist change. There can be no assurance that our strategies for overcoming potential reluctance to change vendors or initiate a relationship with us will be successful, and this resistance may adversely affect our growth and performance results. As we increase our sales efforts toward larger enterprise customers, our sales cycle may become more time-consuming, expensive and harmful to our business. While the primary source of our revenue is derived from the SMB merchant segment, we also compete in, and have increased our sales efforts toward, larger businesses that primarily utilize sophisticated Enterprise Resource Planning ("ERP") systems to manage their businesses (referred to as "Enterprise" customers). As we increase our sales efforts at Enterprise customers, we will face greater costs, longer sales cycles and less predictability in completing some of our sales. A prospective Enterprise customer s decision to use our solutions may be an enterprise-wide decision and, if so, these sales would require us to provide greater education to the prospective customer about our solutions uses and benefits. Additionally, implementation of our services may be more costly and time consuming because larger customers typically demand more customization, integration services and features. Consequently, these sales opportunities may require us to devote greater sales support and professional services resources to individual sales, increasing the costs and time required to complete sales and diverting sales and professional services resources to a smaller number of larger transactions. We cannot guarantee you that we will be able to increase our Enterprise customer base and our sales efforts to obtain such customers may become time consuming, costly and harmful to our financial performance. Table of Contents We are subject to extensive government regulation, and any new laws and regulations, industry standards or revisions made to existing laws, regulations or industry standards affecting the electronic payments industry may have an unfavorable impact on our business, financial condition and results of operations. We are subject to numerous regulations that affect electronic payments including, U.S. financial services regulations, consumer protection laws, escheat regulations, and privacy and information security regulations. Regulation and proposed regulation of our industry has increased significantly in recent years. Changes to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could increase our cost of doing business or affect the competitive balance. Failure to comply with regulations may have an adverse effect on our business, including the limitation, suspension or termination of services provided to, or by, third parties, and the imposition of penalties or fines. Interchange fees, which are typically paid by the payment processor to the issuer in connection with electronic payments, are subject to increasingly intense legal, regulatory, and legislative scrutiny. In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or The Dodd-Frank Act, significantly changed the U.S. financial regulatory system, including by regulating and limiting debit card fees charged by certain issuers, allowing merchants to set minimum dollar amounts for the acceptance of credit cards and allowing merchants to offer discounts or other incentives for different payment methods. New rules implementing the Dodd-Frank Act also contain certain prohibitions on payment network exclusivity and merchant routing restrictions. These restrictions could limit the number of debit transactions, and prices charged per transaction, which would negatively affect our business. The Dodd-Frank Act also created the Consumer Financial Protection Bureau, or the CFPB, which has assumed responsibility for most federal consumer protection laws, and the Financial Stability Oversight Council, which has the authority to determine whether any non-bank financial company, such as us, should be supervised by the Board of Governors of the Federal Reserve System, or the Federal Reserve, because it is systemically important to the U.S. financial system. Any such designation would result in increased regulatory burdens on our business, which increases our risk profile and may have an adverse impact on our business, financial condition and results of operations. We and many of our merchants are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices. That statement and other laws, rules and or regulations, including the Telemarketing Sales Act, may directly impact the activities of certain of our merchants and, in some cases, may subject us, as the merchant s electronic processor or provider of certain services, to investigations, fees, fines and disgorgement of funds if we were deemed to have improperly aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal or improper activities of the merchant through our services. Various federal and state regulatory enforcement agencies, including the Federal Trade Commission and state attorneys general, have authority to take action against non-banks that engage in unfair or deceptive practices or violate other laws, rules and regulations and to the extent we are processing payments or providing services for a merchant that may be in violation of laws, rules and regulations, we may be subject to enforcement actions and as a result may incur losses and liabilities that may impact our business. Our business may also be subject to the Fair Credit Reporting Act, or the FCRA, which regulates the use and reporting of consumer credit information and also imposes disclosure requirements on entities that take adverse action based on information obtained from credit reporting agencies. We could be liable if our practices under the FCRA are not in compliance with the FCRA or regulations under it. Separately, the Housing Assistance Tax Act of 2008 included an amendment to the Internal Revenue Code of 1986, as amended, or the Code, that requires, the filing of yearly information returns by payment processing entities and third-party settlement organizations with respect to payments made in settlement of electronic payment transactions and third-party payment network transactions occurring in that calendar year. Reportable transactions are also subject to backup withholding requirements. We could be liable for penalties if our information returns do not comply with these regulations. These and other laws and regulations, even if not directed at us, may require us to make significant efforts to change our products and services and may require that we incur additional compliance costs and change how we price our services to merchants. Implementing new compliance efforts may be difficult because of the complexity of new regulatory requirements, and may cause us to devote significant resources to ensure compliance. Furthermore, regulatory actions may cause changes in business practices by us and other industry participants which could affect how we market, price and distribute our products and services, which could limit our ability to grow, reduce our revenues, or increase our costs. In addition, even an inadvertent failure to comply with laws and regulations, as well as rapidly evolving social expectations of corporate fairness, could damage our business or our reputation. Table of Contents Governmental regulations designed to protect or limit access to or use of consumer information could adversely affect our ability to effectively provide our services to merchants. Governmental bodies in the United States have adopted, or are considering the adoption of, laws and regulations restricting the use, collection, storage, and transfer of, and requiring safeguarding of, non-public personal information. Our operations are subject to certain provisions of these laws. Relevant federal privacy laws include the Gramm-Leach-Bliley Act of 1999, which applies directly to a broad range of financial institutions and indirectly, or in some instances directly, to companies that provide services to financial institutions. These laws and regulations restrict the collection, processing, storage, use and disclosure of personal information, require notice to individuals of privacy practices and provide individuals with certain rights to prevent the use and disclosure of protected information. These laws also impose requirements for safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, there are state laws restricting the ability to collect and utilize certain types of information such as Social Security and driver s license numbers. Certain state laws impose similar privacy obligations as well as obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and consumer reporting agencies and businesses and governmental agencies that own data. In May 2014, the Executive Office of the President of the United States issued two reports on the subjects of Big Data and Privacy. These reports indicate the potential, if not likelihood, for increased regulation of the collection, storage, use and transfer of personal information. Particularly, these reports seek to emphasize the need for future regulation of use of personal information. Any such changes may cause changes in business practices by us and other industry participants which could affect how we market, price and distribute our products and services, which limit our ability to grow, reduce our revenues or increase our costs. In connection with providing services to our merchants, we are required by regulations and contracts with them and with our financial institution referral partners to provide assurances regarding the confidentiality and security of non-public consumer information. These contracts require periodic audits by independent companies regarding our compliance with industry standards and also allow for similar audits regarding best practices established by regulatory guidelines. The compliance standards relate to our infrastructure, components and operational procedures designed to safeguard the confidentiality and security of non-public consumer personal information shared by our merchants with us. Our ability to maintain compliance with these standards and satisfy these audits will affect our ability to attract, grow and maintain business in the future. If we fail to comply with the laws and regulations relating to the protection of data privacy, we could be exposed to suits for breach of contract or to governmental proceedings. In addition, our relationships and reputation could be harmed, which could inhibit our ability to retain existing merchants and distribution partners and obtain new merchants and distribution partners. If more restrictive privacy laws or rules are adopted by authorities in the future on the federal or state level, our compliance costs may increase and our ability to perform due diligence on, and monitor the risk of, our current and potential merchants may decrease, which could create liability for us. Additionally, our opportunities for growth may be curtailed by our compliance capabilities or reputational harm, and our potential liability for security breaches my increase. Table of Contents Failure to comply with the rules established by payment networks or standards established by third-party processors could result in those networks or processors imposing fines or the networks suspending or, terminating our registrations through our bank sponsors. In order to provide our merchant acquiring services, we are registered through our bank sponsors with the Visa and MasterCard networks as service providers for member institutions. More than 85% of our $19.5 billion in processing volume in the fiscal year ended December 31, 2015 was attributable to transactions processed on the Visa and MasterCard networks. We are also registered directly with other payment networks, including Discover and American Express. As such, we and our merchants are subject to payment network rules. The payment networks routinely update and modify requirements applicable to merchant acquirers including rules regulating data integrity, third-party relationships (such as those with respect to bank sponsors), merchant chargeback standards and Payment Card Industry and Data Security Standards (the "PCI DSS"). Standards governing our third-party processing agreements may also impose requirements with respect to compliance with PCI DSS. If we do not comply with the payment network requirements or standards governing our third-party processing agreements, our transaction processing capabilities could be delayed or otherwise disrupted, and recurring non-compliance could result in the payment networks or third-party processors seeking to fine us, the payment networks suspending or terminating our registrations which allow us to process transactions on their networks, which would make it impossible for us to conduct our business on its current scale. We have received notices of non-compliance and fines, which have typically related to excessive chargebacks by a merchant, data security failures or merchant non-compliance with PCI DSS on the part of a merchant. If we are unable to resolve the issues presented in such notices, recover fines from or pass-through costs to our merchants, or recover losses under insurance policies, we would experience a financial loss and any such loss could be significant. Under certain circumstances specified in the payment network rules or our third-party processing agreements, we may be required to submit to periodic audits, self-assessments or other assessments of our compliance with the PCI DSS. Such activities may reveal that we have failed to comply with the PCI DSS. In addition, even if we comply with the PCI DSS, there is no assurance that we will be protected from a security breach. The termination of our registration with the payment networks, or any changes in payment network or issuer rules that limit our ability to provide merchant acquiring services, could have an adverse effect on our payment processing volumes, revenues and operating costs. If an audit or self-assessment under PCI DSS identifies any deficiencies that we need to remediate, the remediation efforts may distract our management team and be expensive and time consuming. Changes in payment network rules or standards could adversely affect our business, financial condition and results of operations. Payment network rules are established and changed from time to time by each payment network as they may determine in their sole discretion and with or without advance notice to their participants. The timelines imposed by the payment networks for expected compliance with new rules have historically been, and may continue to be, highly compressed, requiring us to quickly implement changes to our systems which increases the risk of non-compliance with new standards. In addition, the payment networks could make changes to interchange or other elements of the pricing structure of the merchant acquiring industry that would have a negative impact on our results of operations. An example of a recent payment network standard is Europay, Mastercard and Visa ("EMV"), a credit and debit authentication methodology mandated by Visa, MasterCard, American Express and Discover that was to be supported by payment processors by April 2013 and by merchants by October 2015. This standard sets new requirements, including requiring POS systems to be capable of accepting the more secure "chip" cards that utilize the EMV standard and setting new rules for data handling and security. We are liable to our EMV networks for losses resulting from fraudulent Electronic Payments made at our merchant customers that have not yet complied with the mandate by implementing EMV compliant payment terminals. Our contracts seek to mitigate this risk by allowing us to recover these fraud-related losses from our merchant customers. However, our merchant customers may be insolvent or we may otherwise be unable to recover these fraud-related losses in full or at all. We have invested significant resources to ensure our systems compliance and to assist our merchants in becoming EMV compliant. Any failure to recover fraud-related losses from our merchants that have not yet complied with EMV standards could result in our incurring material losses. Table of Contents There may be a decline in the use of Electronic Payments as a payment mechanism for consumers or adverse developments with respect to the electronic payments industry in general which could adversely affect our business, financial condition and operating results. Maintaining or increasing our profitability is dependent on consumers and businesses continuing to use credit, debit and prepaid cards at the same or greater rate than previously. If consumers do not continue to use these cards for their transactions or if there is a change in the mix of payments between cash and Electronic Payments which is adverse to us our business could decline and we could incur material losses. Regulatory changes may also result in merchants seeking to charge customers additional fees for use of Electronic Payments. Additionally, in recent years, increased incidents of security breaches have caused some consumers to lose confidence in the ability of retailers to protect their information, causing consumers to discontinue use of electronic payment methods. In addition, security breaches could result in financial institutions cancelling large numbers of credit and debit cards, or consumers electing to cancel their cards following such an incident. In order to remain competitive and to continue to increase our revenues and earnings, we must continually update our products and services, a process which could result in increased costs and the loss of revenues, earnings, merchants and distribution partners if the new products and services do not perform as intended or are not accepted in the marketplace. The electronic payments industry in which we compete is subject to rapid technological changes and is characterized by new technology, product and service introductions, evolving industry standards, changing merchant needs and the entrance of non-traditional competitors. We are subject to the risk that our existing products and services become obsolete, and that we are unable to develop new products and services in response to industry demands. Our future success will depend in part on our ability to develop or adapt to technological changes and evolving industry. We are continually involved in a number of projects, such as the introduction of our SMB retail terminal solution and other new offerings emerging in the electronic payments industry, many of which require investment in non-revenue generating products or services that our distribution partners and merchants expect to be included in our product and service offerings. These projects carry the risks associated with any development effort, including difficulty in determining market demand and timing for delivery of new products and services, cost overruns, delays in delivery and performance problems. In addition, new products and offerings may not perform as intended or generate the business or revenue growth expected. Defects in our software and errors or delays in our processing of electronic transactions could result in additional development costs, diversion of technical and other resources from our other development efforts, loss of credibility with current or potential distribution partners and merchants, harm to our reputation, fines imposed by card networks, or exposure to liability claims. Any delay in the delivery of new products or services or the failure to differentiate our products and services could render them less desirable, or possibly even obsolete, to our merchants. Additionally, the market for alternative payment processing products and services is evolving, and it may develop too rapidly or not rapidly enough for us to recover the costs we have incurred in developing new products and services. We may not be able to continue to expand our share of the existing electronic payments industry or expand into new markets, which would inhibit our ability to grow and increase our profitability. Our future growth and profitability depend, in part, upon our continued expansion within the markets in which we currently operate, the emergence of other markets for electronic payments and our ability to penetrate these markets and our current distribution partners merchant base. Future growth and profitability of our business may depend upon our ability to penetrate new industries and markets for electronic payments. Our ability to expand into new industries and markets also depends upon our ability to adapt our existing technology or to develop new technologies to meet the particular needs of each new industry or market. We may not have adequate financial or technological resources to develop effective and secure services or distribution channels that will satisfy the demands of these new industries or markets. Penetrating these new industries or markets may also prove to be more challenging or costly or take longer than we may anticipate. If we fail to expand into new and existing electronic payments industries and markets, we may not be able to continue to grow our revenues and earnings. Table of Contents Our acquisitions subject us to a variety of risks that could harm our business. We review and complete selective acquisition opportunities. There can be no assurances that we will be able to complete suitable acquisitions for a variety of reasons, including the identification of and competition for acquisition targets, the need for regulatory approvals, the inability of the parties to agree to the structure or purchase price of the transaction and our inability to finance the transaction on commercially acceptable terms. In addition, any completed acquisition will subject us to a variety of other risks: we may need to allocate substantial operational, financial and management resources in integrating new businesses, technologies and products, and management may encounter difficulties in integrating the operations, personnel or systems of the acquired businesses; acquisitions may have a material adverse effect on our business relationships with existing or future merchants or distribution partners, in particular, to the extent we consummate acquisitions that increase our sales and distribution capabilities; we may assume substantial actual or contingent liabilities, known and unknown; acquisitions may not meet our expectations of future financial performance; we may experience delays or reductions in realizing expected synergies or benefits; we may incur substantial unanticipated costs or encounter other problems associated with acquired businesses or devote time and capital investigating a potential acquisition and not complete the transaction; we may be unable to achieve our intended objectives for the transaction; and we may not be able to retain the key personnel, customers and suppliers of the acquired business. Additionally, we may be unable to maintain uniform standards, controls, procedures and policies as we attempt to integrate the acquired businesses, and this may lead to operational inefficiencies. These factors related to our acquisition strategy, among others, could have a material adverse effect on our business, financial condition and results of operations. Potential changes in the competitive landscape, including disintermediation from other participants in the payments value chain, could harm our business. We expect that the competitive landscape will continue to change, including the following developments. Rapid and significant changes in technology may result in technology-led marketing that is focused on business solutions rather than pricing, new and innovative payment methods and programs that could place us at a competitive disadvantage and reduce the use of our services. Competitors, distribution partners, and other industry participants may develop products that compete with or replace our value-added products and services. Participants in the financial services payments and technology industries may merge, create joint ventures or form other business combinations that may strengthen their existing business services or create new payment services that compete with us. New services and technologies that we develop may be impacted by industry-wide solutions and standards related to migration to EMV chip technology, tokenization or other security-related technologies Failure to compete effectively against any of these competitive threats could have a material adverse effect on our business, financial condition and results of operations. Table of Contents We may not be able to successfully manage our intellectual property and may be subject to infringement claims. We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our proprietary technology. Third parties may challenge, circumvent, infringe or misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of service offerings or other competitive harm. Others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property and, in such cases, we could not assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights and know-how, which is expensive, could cause a diversion of resources and may not prove successful. Also, because of the rapid pace of technological change in our industry, aspects of our business and our services rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. The loss of intellectual property protection or the inability to license or otherwise use third-party intellectual property could harm our business and ability to compete. We may also be subject to costly litigation if our services and technology are alleged to infringe upon or otherwise violate a third party s proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology. Any of these third parties could make a claim of infringement against us with respect to our products, services or technology. We may also be subject to claims by third parties for patent, copyright or trademark infringement, breach of license or violation of other third-party intellectual property rights. Any claim from third parties may result in a limitation on our ability to use the intellectual property subject to these claims. Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement or other violations and attempting to extract settlements from companies like ours. Even if we believe that intellectual property related claims are without merit, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of our management and employees. Claims of intellectual property infringement or violation also might require us to redesign affected products or services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products or services. Even if we have an agreement for indemnification against such costs, the indemnifying party, if any in such circumstances, may be unable to uphold its contractual obligations. If we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. We are subject to economic and political risk, the business cycles of our merchants and distribution partners and the overall level of consumer and commercial spending, which could negatively impact our business, financial condition and results of operations. The Electronic Payments industry depends heavily on the overall level of consumer, commercial and government spending. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income and changes in consumer purchasing habits. A sustained deterioration in general economic conditions or increases in interest rates could adversely affect our financial performance by reducing the number or aggregate dollar volume of transactions made using Electronic Payments. If our merchants make fewer sales of their products and services using Electronic Payments, or consumers spend less money through Electronic Payments, we will have fewer transactions to process at lower dollar amounts, resulting in lower revenue. In addition, a weakening in the economy could force merchants to close at higher than historical rates, resulting in exposure to potential losses and a decline in the number of transactions that we process. We also have material fixed and semi-fixed costs, including rent, debt service, contractual minimums and salaries, which could limit our ability to quickly adjust costs and respond to changes in our business and the economy. A substantial portion of all of our merchants are small- and medium-sized businesses, which may increase the impact of economic fluctuations and merchant attrition on us. We market and sell our solutions to SMB merchants. For the year ended December 31, 2015, approximately $446.4 million, or 97% of our revenue, was derived from SMB merchants. SMB merchants are typically more susceptible to the adverse effects of economic fluctuations than larger businesses. We experience attrition in merchants and merchant charge volume in the ordinary course of business resulting from several factors, including business closures, transfers of merchants accounts to our competitors and account closures that we initiate due to heightened credit risks relating to, or contract breaches by, a merchant. Adverse changes in the economic environment or business failures of our SMB merchants may have a greater impact on us than on our competitors who do not focus on SMB merchants to the extent that we do. We cannot accurately predict the level of SMB merchant attrition in the future. If we are unable to establish accounts with new merchants or otherwise increase our payment processing volume in order to counter the effect of this attrition, our revenues will decline. Table of Contents Our systems and our third-party providers systems may fail due to factors beyond our control, which could interrupt our service, resulting in our inability to process, cause us to lose business, increase our costs and expose us to liability. We depend on the efficient and uninterrupted operation of numerous systems, including our computer network systems, software, data centers and telecommunication networks, as well as the systems and services of our bank sponsors, the payment networks, third-party providers of processing services and other third parties. Our systems and operations or those of our third-party providers, such as our provider of dial-up authorization services, or the payment networks themselves, could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry, computer viruses, denial-of-service attacks, acts of terrorism, human error or sabotage, financial insolvency and similar events. Our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur. At present, our critical operational systems, such as our payment gateway, are fully redundant, while certain of our less critical systems are not. Therefore, certain aspects of our operations may be subject to interruption. Also, while we have disaster recovery policies and arrangements in place, they have not been tested under actual disasters or similar events. Defects in our systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures or other difficulties could result in failure to process transactions, additional operating and development costs, diversion of technical and other resources, loss of revenue, merchants and distribution partners, loss of merchant and cardholder data, harm to our business or reputation, exposure to fraud losses or other liabilities and fines and other sanctions imposed by payment networks. We rely on other service and technology providers. If they fail or discontinue providing their services or technology generally or to us specifically, our ability to provide services to merchants may be interrupted, and, as a result, our business, financial condition and results of operations could be adversely impacted. We rely on third parties to provide or supplement bankcard processing services and for infrastructure hosting services. We also rely on third parties for specific software and hardware used in providing our products and services. The termination by our service or technology providers of their arrangements with us or their failure to perform their services efficiently and effectively may adversely affect our relationships with our merchants and, if we cannot find alternate providers quickly, may cause those merchants to terminate their relationship with us. We also rely in part on third parties for the development and access to new technologies, or updates to existing products and services for which third parties provide ongoing support, which increases the cost associated with new and existing product and service offerings. Failure by these third-party providers to devote an appropriate level of attention to our products and services could result in delays in introducing new products or services, or delays in resolving any issues with existing products or services for which third-party providers provide ongoing support. Fraud by merchants or others could cause us to incur losses. We face potential liability for fraudulent electronic payment transactions initiated by merchants or others. Merchant fraud occurs when a merchant opens a fraudulent merchant account and conducts fraudulent transactions or when a merchant, rather than a customer (though sometimes working together with a customer engaged in fraudulent activities), knowingly uses a stolen or counterfeit card or card number to record a false sales transaction, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Any time a merchant is unable to fund a chargeback, we are responsible for that chargeback. Additionally, merchant fraud occurs when employees of merchants change the merchant demand deposit accounts to their personal bank account numbers, so that payments are improperly credited to the employee s personal account. We have established systems and procedures to detect and reduce the impact of merchant fraud, but we cannot be sure that these measures are or will be effective. Failure to effectively manage risk and prevent fraud could increase our chargeback or other liability. Table of Contents We also have potential liability for losses caused by fraudulent card-based payment transactions. Card fraud occurs when a merchant s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise or services. In a card-present transaction, if the merchant swipes the card, receives authorization for the transaction from the issuer and verifies the signature on the back of the card against the paper receipt signed by the customer, the issuer remains liable for any loss. In a card-not-present transaction, even if the merchant receives authorization for the transaction, the merchant is liable for any loss arising from the transaction. Many of the merchants that we serve transact a substantial percentage of their sales in card-not-present transactions over the Internet or in response to telephone or mail orders, which makes these merchants more vulnerable to fraud than merchants whose transactions are conducted largely in card-present transactions. We rely on bank sponsors, which have substantial discretion with respect to certain elements of our business practices, in order to process electronic payment transactions. If these sponsorships are terminated and we are not able to secure new bank sponsors, we will not be able to conduct our business. Because we are not a bank, we are not eligible for membership in the Visa, MasterCard and other payment networks, and are, therefore, unable to directly access these payment networks, which are required to process transactions. These networks operating regulations require us to be sponsored by a member bank in order to process Electronic Payment transactions. We are currently registered with Visa and MasterCard through Wells Fargo and Synovus Bank. The current term of our agreement with Wells Fargo lasts through December 2021 and will thereafter automatically renew for two-year periods unless either party provides the other at least three months notice of its intent to terminate. The current term of our agreement with Synovus Bank lasts through October 2020 and will thereafter automatically renew for two-year periods unless either party provides the other at least six months notice of its intent to terminate. Our bank sponsors may terminate their agreements with us if we materially breach the agreements and do not cure the breach within an established cure period, if our membership with Visa and/or MasterCard terminates, if we enter bankruptcy or file for bankruptcy, or if applicable laws or regulations, including Visa and/or MasterCard regulations, change to prevent either the applicable bank or us from performing services under the agreement. If these sponsorships are terminated and we are unable to secure a replacement bank sponsor within the applicable wind down period, we will not be able to process electronic payment transactions. Furthermore, our agreements with our bank sponsors provide the bank sponsors with substantial discretion in approving certain elements of our business practices, including our solicitation, application and underwriting procedures for merchants. We cannot guarantee that our bank sponsors actions under these agreements will not be detrimental to us, nor can we provide assurance that any of our bank sponsors will not terminate their sponsorship of us in the future. Our bank sponsors have broad discretion to impose new business or operational requirements on us, which may materially adversely affect our business. If our sponsorship agreements are terminated and we are unable to secure another bank sponsor, we will not be able to offer Visa or MasterCard transactions or settle transactions which would likely cause us to terminate our operations. Our bank sponsors also provide or supplement authorization, funding and settlement services in connection with our bankcard processing services. If our sponsorships agreements are terminated and we are unable to secure another bank sponsor, we will not be able to process Visa and MasterCard transactions which would have a material adverse effect on our business, financial condition and results of operations. We incur liability when our merchants refuse or cannot reimburse us for chargebacks resolved in favor of their customers. We have potential liability for chargebacks associated with the transactions we process. If a billing dispute between a merchant and a cardholder is not ultimately resolved in favor of the merchant, the disputed transaction is "charged back" to the merchant s bank and credited or otherwise refunded to the cardholder. The risk of chargebacks is typically greater with those merchants that promise future delivery of goods and services rather than delivering goods or rendering services at the time of payment. If we or our bank sponsors are unable to collect the chargeback from the merchant s account or reserve account (if applicable), or if the merchant refuses or is financially unable (due to bankruptcy or other reasons) to reimburse the merchant s bank for the chargeback, we may bear the loss for the amount of the refund paid to the cardholder. Any increase in chargebacks not paid by our merchants could increase our costs and decrease our revenues. Table of Contents Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks. We operate in a rapidly changing industry. Accordingly, our risk management policies and procedures may not be fully effective to identify, monitor, manage and remediate our risks. Some of our risk evaluation methods depend upon information provided by others and public information regarding markets, merchants or other matters that are otherwise inaccessible by us. In some cases, that information may not be accurate, complete or up-to-date. Additionally, our risk detection system is subject to a high degree of "false positive" risks being detected, which makes it difficult for us to identify real risks in a timely manner. If our policies and procedures are not fully effective or we are not always successful in capturing all risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that materially increase our costs and subject us to reputational damage that could limit our ability to grow and cause us to lose existing merchant clients. Legal proceedings could have a material adverse effect on our business, financial condition or results of operations. In the ordinary course of business, we may become involved in various litigation matters, including but not limited to commercial disputes and employee claims, and from time to time may be involved in governmental or regulatory investigations or similar matters arising out of our current or future business. Any claims asserted against us, regardless of merit or eventual outcome, could harm our reputation and have an adverse impact on our relationship with our merchants, distribution partners and other third parties and could lead to additional related claims. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business. Our insurance or indemnities may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation and cause us to expend resources in our defense. Furthermore, there is no guarantee that we will be successful in defending ourselves in future litigation. Should the ultimate judgments or settlements in any pending litigation or future litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations. The loss of key personnel or of our ability to attract, recruit, retain and develop qualified employees could adversely affect our business, financial condition and results of operations. Our success depends upon the continued services of our senior management and other key personnel who have substantial experience in the electronic payments industry and the markets in which we offer our services. In addition, our success depends in large part upon the reputation within the industry of our senior managers who have, developed relationships with our distribution partners, payment networks and other payment processing and service providers. Further, in order for us to continue to successfully compete and grow, we must attract, recruit, develop and retain personnel who will provide us with expertise across the entire spectrum of our intellectual capital needs. Our success is also depends on the skill and experience of our sales force, which we must continuously work to maintain. While we have a number of key personnel who have substantial experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining the continuity of our operations. The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Failure to retain or attract key personnel could impede our ability to grow and could result in our inability to operate our business profitably. In addition, contractual obligations related to confidentiality, assignment of intellectual property rights, and non-solicitation may be ineffective or unenforceable and departing employees may share our proprietary information with competitors in ways that could adversely impact us, or seek to solicit our distribution partners or merchants or recruit our key personnel to competing businesses. Table of Contents Risk Relating to Indebtedness We have a substantial amount of indebtedness, which may limit our operating flexibility and could adversely affect its results of operations and financial condition. On a pro forma basis after giving effect to the Merger, CardConnect would have had approximately $140.0 million of indebtedness as of June 30, 2016, consisting of amounts outstanding under the first lien term loan facility and second lien term loan facility entered into in connection with the Merger. Our Company s indebtedness may have important consequences to our investors, including, but not limited to: increasing the our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions; requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes; limiting our flexibility in planning for, or reacting to, changes in our business and the competitive environment; and limiting our ability to borrow additional funds and increasing the cost of any such borrowing. Pursuant to the credit agreement with BMO Harris Bank N.A. ("BMO"), acting as administrative agent for a group of lenders, for a first lien credit facility (the "First Lien Facility"), and the second lien credit agreement with Babson Capital Finance LLC ("Babson"), also acting as administrative agent for a group of lenders, for a second lien term loan facility (the "Second Lien Facility" and, together with the First Lien Facility, the "Credit Facilities") interest rates payable with respect to the First Lien Facility and Second Lien Facility vary at stated margins above either LIBOR or BMO s base rate. See "Management s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities" for a description of the credit agreements for the Credit Facilities. An increase in interest rates would adversely affect our profitability. Upon the occurrence of an event of default relating to our Credit Facilities, the lenders could elect to accelerate payments due and terminate all commitments to extend further credit. Consequently, we may not have sufficient assets to repay the amounts outstanding under the Credit Facilities, as well as other secured and unsecured indebtedness. The credit agreements for the Credit Facilities provide that upon the occurrence of an event of default, the lenders will be able to elect to declare all amounts outstanding under the Credit Facilities to be immediately due and payable and terminate all commitments to lend additional funds. If we are unable to repay those amounts, the lenders for the Credit Facilities could proceed to foreclose against the collateral we granted to them to secure that indebtedness. We pledged substantially all of our and our subsidiaries assets as collateral for the Credit Facilities. If the lenders for the Credit Facilities accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay the amounts outstanding under the Credit Facilities, as well as any other secured and unsecured indebtedness, and if the lenders foreclose on our assets, it could render your common stock worthless. The credit agreements for the Credit Facilities and the terms of our outstanding Series A Preferred Stock issued as partial financing for the Merger (the "Equity Financing") contain restrictive covenants that may impair our ability to conduct business. The credit agreements for the Credit Facilities and the terms of our Series A Preferred Stock contain operating covenants and financial covenants that may in each case limit management s discretion with respect to certain business matters. Among other things, these covenants restrict our and Merger Sub s ability to, among other things, incur additional debt, change the nature of our business, sell or otherwise dispose of assets, make acquisitions, and merge or consolidate with other entities. As a result of these covenants and restrictions, we are limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration under the credit agreements for the Credit Facilities and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants, which may result in foreclosure on our assets and our common stock becoming worthless. See "Management s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for a description of the credit agreements for the Credit Facilities. Table of Contents Risks Relating to Our Corporate Structure and the Merger Following the consummation of the Merger, our only significant asset is ownership of CardConnect s business through our 100.0% ownership interest in Merger Sub. If CardConnect s business is not profitably operated, Merger Sub may be unable to pay us dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations. Following the consummation of the Merger, we have no direct operations and no significant assets other than the ownership of Merger Sub, which operates CardConnect s business. We will depend on profits generated by CardConnect s business for distributions, debt repayment and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our capital stock. Legal and contractual restrictions in the credit agreements for the Credit Facilities and any future indebtedness of the Company, as well as the financial condition and operating requirements of the Company, may limit our ability to receive distributions from Merger Sub and the CardConnect business. Provisions in our charter and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management. Our charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. A market for our securities may not continue, which would adversely affect the liquidity and price of our securities. Following the Merger, the price of our securities may fluctuate significantly due to the market s reaction to the Merger and general market and economic conditions. An active trading market for our securities following the Merger may never develop or, if developed, it may not be sustained. NASDAQ may not continue to list our securities on its exchange, and we may be unable to satisfy listing requirements in the future, which could limit investors ability to effect transactions in our securities and subject us to additional trading restrictions. As a result of the proposed Merger, NASDAQ rules require that we apply to continue the listing of our common stock and warrants. While we have applied to have our common stock and warrants continue to be listed on NASDAQ upon consummation of the Merger, we must meet NASDAQ s initial listing requirements. We may be unable to meet those requirements. Even if our securities are listed on NASDAQ following the Merger, we may be unable to maintain the listing of our securities in the future. If we fail to meet the initial listing requirements and NASDAQ does not list our securities on its exchange, or if we are delisted, there could be significant material adverse consequences, including: a limited availability of market quotations for our securities; a limited amount of news and analyst coverage for the combined Company; and a decreased ability to obtain capital or pursue acquisitions by issuing additional equity or convertible securities. Table of Contents We will incur increased costs and obligations as a result of being a public company. As a privately held company, CardConnect has not been required to comply with many corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company, we will incur significant legal, accounting and other expenses that CardConnect was not required to incur in the recent past. These expenses will increase once the combined Company is no longer an "emerging growth company" as defined under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd Frank, the Sarbanes-Oxley Act, regulations related hereto and the rules and regulations of the SEC and NASDAQ, have increased the costs and the time that must be devoted to compliance matters. We expect these rules and regulations will increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities. For as long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." We may remain an "emerging growth company" for up to five years from FinTech s initial public offering (the "IPO") or until such earlier time that we have more than $1.0 billion in annual revenues, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, or if we no longer can be classified as an "emerging growth company," we expect that we will incur additional compliance costs, which will reduce our ability to operate profitably. As an "emerging growth company," we cannot be certain if the reduced disclosure requirements applicable to "emerging growth companies" will make our common stock less attractive to investors. As an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, which we have elected to do. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active market for our common stock, our share price may be more volatile and the price at which our securities trade could be less than if we did not use these exemptions. If we do not develop and implement all required accounting practices and policies, we may be unable to provide the financial information required of a U.S. publicly traded company in a timely and reliable manner. Prior to the Merger, CardConnect was a privately held company and as such was not been required to adopt all of the financial reporting and disclosure procedures and controls required of a U.S. publicly traded company. We expect that the implementation of all required accounting practices and policies and the hiring of additional financial staff will increase the operating costs of the combined Company and could require the management of the combined Company to devote significant time and resources to such implementation. If we fail to develop and maintain effective internal controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports that are timely and reliable. Any such delays or deficiencies could harm us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and damaging our reputation, which in either cause could impede our ability to implement our growth strategy. In addition, any such delays or deficiencies could result in our failure to meet the requirements for continued listing of our common stock on NASDAQ. Table of Contents We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interest in us and may depress the market price of our common stock. We may issue additional shares of common stock or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or grants under CardConnect Corp. 2016 Omnibus Equity Compensation Plan (the "2016 Omnibus Plan") without shareholder approval in a number of circumstances. Our issuance of additional common stock or other equity securities could have one or more of the following effects: our existing shareholders proportionate ownership interest in us will decrease; the amount of cash available per share, including for payment of dividends in the future, may decrease; the relative voting strength of each previously outstanding share of common stock may be diminished; and the market price of our common stock may decline. If our performance following the Merger does not meet market expectations, the price of our securities may decline. If our performance following the Merger does not meet market expectations, the price of our common stock may decline. In addition, following the Merger, fluctuations in the price of our common stock could contribute to the loss of all or part of your investment. Prior to the Merger, there has not been a public market for CardConnect s stock, and trading in our common stock has not been active. Accordingly, the valuation ascribed to CardConnect and our common stock in the Merger may not be indicative of the price that will prevail in the trading market following the Merger. If an active market for our common stock develops and continues, the trading price of our common stock following the Merger could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our common stock and our common stock may trade at prices significantly below the price you paid for them. Factors affecting the trading price of our common stock following the Merger may include: actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; changes in the market s expectations about our operating results; success of competitors; our operating results failing to meet market expectations in a particular period; changes in financial estimates and recommendations by securities analysts concerning us or the payments processing industry and market in general; operating and stock price performance of other companies that investors deem comparable to us; our ability to market new and enhanced products on a timely basis; changes in laws and regulations affecting our business; commencement of, or involvement in, litigation involving us; changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; the volume of shares of our common stock available for public sale; any significant change in our board or management; sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. Table of Contents Broad market and industry factors may depress the market price of our common stock irrespective of our operating performance. The stock market in general and NASDAQ have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for financial technology stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our common stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. The public warrants may never be in the money and they may expire worthless. The exercise price for our warrants is $12.00 per share, which exceeds the market price of our common stock, which was $10.00 per share based on the closing price as of August 24, 2016. There can be no assurance that the public warrants will ever be in the money prior to their expiration and, as such, the warrants may expire worthless. The terms of our warrants may be amended in a manner that may be adverse to the holders. The warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant. We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless. We have the ability to redeem outstanding warrants (excluding any placement warrants held by our Sponsor, Cantor Fitzgerald & Co., the underwriter for FinTech s IPO ("Cantor"), or their respective permitted transferees) at any time after they become exercisable and prior to their expiration, at $0.01 per warrant, if the last reported sales price (or the closing bid price of our common stock in the event the shares of our common stock are not traded on any specific trading day) of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third business day prior to the date we send proper notice of such redemption, provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force a warrant holder: (i) to exercise your warrants and pay the exercise price therefore at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, will be substantially less than the market value of your warrants. Table of Contents Warrants to purchase our common stock are exercisable as of August 28, 2016, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. Outstanding warrants to purchase an aggregate of 10,300,000 shares of our common stock are exercisable as of August 28, 2016, the 30th day following the closing of the Merger, in accordance with the terms of the warrant agreement governing those securities. These warrants consist of 10,000,000 warrants originally included in the units issued in our IPO and 300,000 warrants included in the placement units. Each warrant entitles its holder to purchase one share of our common stock at an exercise price of $12.00 per share and will expire at 5:00 p.m., New York time, on July 29, 2021, or earlier upon redemption of our common stock or our liquidation. To the extent warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to our then existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress affect the market price of our common stock. We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002 that will be applicable to us after the Merger, which could have a material adverse effect on our business. As a private company, CardConnect was not subject to Section 404 of the Sarbanes-Oxley Act. However, following the Merger, the combined Company is required to provide management s attestation on internal controls commencing with the Company s annual report for the year ending December 31, 2016. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of CardConnect as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to the Company after the Merger. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and lead to a decrease in the market price of our common stock. Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an "emerging growth company." Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an "emerging growth company." We will be an "emerging growth company" until the earlier of (1) the last day of the fiscal year (a) following February 12, 2020, the fifth anniversary of our IPO, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Accordingly, until we cease being an "emerging growth company" stockholders will not have the benefit of an independent assessment of the effectiveness of our interest comfort environment. The unaudited pro forma financial information included in this prospectus may not be indicative of what our actual financial position or results of operations would have been. The unaudited pro forma financial information in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the Merger been completed on the date indicated. See "Unaudited Pro Forma Condensed Combined Financial Information" for more information. Table of Contents Our ability to successfully operate the business after the Merger depends largely upon the efforts of certain key personnel, including the key personnel of CardConnect, all of whom we expect to continue to stay with the combined Company following the Merger. The loss of such key personnel could adversely affect the operations and profitability of the post-combination business. Our ability to recognize certain benefits of the Merger and successfully operate CardConnect s business following the Merger will depend upon the efforts of certain key personnel of CardConnect. Although we expect all of such key personnel will continue to remain with the Company following the Merger, the unexpected loss of key personnel may adversely affect the operations and profitability of the Company. In addition, our future success depends in part on our ability to identify and retain key personnel to succeed senior management. Furthermore, while we have closely scrutinized the skills, abilities and qualifications of the key CardConnect personnel that will be employed by the Company, our assessment may not prove to be correct. If such personnel do not possess the skills, qualifications or abilities we expect or those necessary to manage a public company, the operations and profitability of the Company s business may be negatively impacted. Following the Merger, our ability to meet expectations and projections in any research or reports published by securities or industry analysts, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for our common stock. The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If no or few securities or industry analysts commence coverage of the combined Company, our stock price would likely be less than that which would obtain if we had such coverage and the liquidity, or trading volume of our common stock may be limited, making it more difficult for a stockholder to sell shares at an acceptable price or amount. If any analysts do cover the combined Company, their projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of research analysts covering us. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. Future sales of our common stock issued to CardConnect shareholders may reduce the market price of our common stock that you might otherwise obtain. Under the Merger Agreement, the CardConnect shareholders received as consideration in the Merger, among other things, an aggregate of: (i) 15,162,470 shares of FinTech common stock and options to purchase 3,463,950 shares of FinTech common stock, which were issued upon conversion of options to purchase shares of CardConnect common stock outstanding immediately prior to the Merger (together, the "Stock Merger Consideration"). Certain CardConnect stockholders also purchased an aggregate of 350,000 shares of unregistered common stock in a private placement (the "PIPE Transaction") consummated concurrently with the Merger. The CardConnect stockholders are restricted from transferring any shares of our common stock that they receive as a result of the Merger until the earlier of (i) the completion of a secondary underwritten offering, which we refer to as the Follow On Offering, that we are required to consummate within 12 months following the Merger pursuant the registration rights agreement described in the following paragraph, and (ii) 180 days after the closing of the Merger, subject to certain limited exceptions. Upon the closing for the Merger we entered into a registration rights agreement with the CardConnect stockholders, which we refer to as the Registration Rights Agreement, with respect to the shares of our common stock that were issued to former CardConnect stockholders under the Merger Agreement and in the PIPE Transaction. Under the Registration Rights Agreement, we will agree to use commercially reasonable best efforts to consummate the Follow On Offering, which will be a registered underwritten public offering of shares of our common stock held by any CardConnect holder that elects to participate in such offering. Under the Registration Rights Agreement have also agreed to file a registration statement to register any shares of our common stock held by FTVENTURES III, L.P., FTVENTURES III-N, L.P. and FTVENTURES, which we refer to as the FTV Entities, for resale, which we refer to as the FTV Shelf Registration Statement. If the FTV Shelf Registration Statement is unavailable, the FTV Entities will have certain demand and piggyback registration rights. Upon expiration of the lockup period applicable to shares of our common stock held by the CardConnect stockholders, effectiveness of the registration statement we file for the Follow On Offering, or effectiveness of the FTV Shelf, these parties may sell large amounts of our stock in the open market or in privately negotiated transactions. The registration and availability of such a significant number of shares of common stock for trading in the public market may increase the volatility in our stock price or put significant downward pressure on the price of our stock. In addition, we may use shares of our common stock as consideration for future acquisitions, which could further dilute our stockholders. Table of Contents Under the Merger Agreement we have no right to seek indemnification from CardConnect shareholders following the Merger. The representations, warranties and covenants made by CardConnect in the Merger Agreement did not survive closing and are not subject to indemnification. As a result, if CardConnect is found to have breached any of its representations, warranties or covenants contained in the Merger Agreement, other than those covenants that by their terms apply or are to be performed in whole or in part at or after the closing of the Merger, we have no recourse against CardConnect s former shareholders other than for actual fraud. We may be required to take write-downs or write-offs, restructuring and impairment or other charges following the Merger that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment. Although FinTech s management conducted a due diligence examination of CardConnect, we cannot assure you that this examination revealed all material issues that may be present in CardConnect s business, or that factors outside of our and CardConnect s control will not later arise. As a result, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all. Registration of the shares underlying the warrants and a current prospectus may not be in place when an investor desires to exercise warrants. If our common stock is delisted from NASDAQ, we may, at our option, require holders of public warrants who exercise such warrants to do so on a "cashless basis," and in such event we would not be required to maintain in effect a current registration statement for the common stock issuable upon exercise of the warrants. If an exemption from registration is not available, this may prevent an investor from being able to exercise its warrants, possibly resulting in such warrants expiring worthless. Under the warrant agreement, we are obligated to use our best efforts to maintain the effectiveness of a registration statement under the Securities Act, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of, and subject to certain exceptions contained in, the warrant agreement. We are required to permit holders to exercise their warrants on a "cashless basis." In addition, if our common stock is delisted from NASDAQ and no longer satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, we may require public warrant holders who exercise warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act. In such event, we would not be required to file or maintain in effect a registration statement for the common stock issuable upon exercise of the warrants, which means that we would not be required to maintain the effectiveness of the registration statement of which this prospectus is a part. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the shares issuable upon such exercise are registered or qualified under the Securities Act and securities laws of the state of the exercising holder to the extent an exemption is unavailable. In no event will we be required to issue cash, securities or other compensation in exchange for the warrants in the event that the shares underlying such warrants are not registered or qualified under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or deemed exempt, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this prospectus that reflect our current views with respect to future events and financial performance, business strategies, expectations for our business and any other statements of a future or forward-looking nature, constitute "forward-looking statements" for the purposes of federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about the benefits of the Merger and the future financial performance of the combined Company. The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this prospectus. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to: our future financial performance; changes in the market for our products; the ability to obtain or maintain the listing of our common stock on NASDAQ following the Merger; the ability to recognize the anticipated benefits of the Merger, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably; changes in applicable laws or regulations; the possibility that we or CardConnect may be adversely affected by other economic, business and/or competitive factors; other risks and uncertainties, including those described under the heading "Risk Factors"; and other statements preceded by, followed by or that include the words "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" or similar expressions. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Table of Contents MARKET PRICE OF OUR COMMON STOCK Our common stock trades on the NASDAQ Capital Market under the symbol "CCN." Prior to our IPO and the first separation of our units, there was no public market for our common stock. As of August 24, 2016, there were approximately 64 holders of record of our common stock, not including beneficial holders whose securities are held in street name. The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in "street name" or persons, partnerships, associates, corporations, or other entities identified in security position listings maintained by depositories. The table below sets forth for the periods indicated the high and low sales prices per share of our common stock reported on the NASDAQ for the periods set forth below. The following table includes the high and low sales prices for our common stock for the periods presented. Quarter Ended Common Stock Low High March 31, 2015 NA NA June 30, 2015 $9.70 $10.25 September 30, 2015 $9.75 $10.10 December 31, 2015 $9.74 $9.80 March 31, 2016 $9.51 $11.00 June 30, 2016 $9.75 $10.14 The last reported sale price of our common stock on August 24, 2014 was $10.00 per share. Table of Contents USE OF PROCEEDS We will receive the proceeds from the exercise of the warrants, but not from the sale of the underlying shares of our common stock. We intend to use the cash proceeds from the exercise of the warrants for general corporate purposes, including the repurchase of our capital stock or other securities, working capital, general and administrative matters, repayment of indebtedness and capital expenditures. We may also use a portion of the proceeds to acquire or invest in complementary products or businesses. Our management will have broad discretion over the uses of the proceeds from the exercise of the warrants. Pending these uses, we intend to invest the proceeds from the exercise of warrants in short-term, investment-grade, interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. Assuming the exercise of all the warrants for cash, we will receive proceeds of approximately $123.6 million. There is no assurance that the holders of the warrants will elect to exercise any or all of the warrants. To the extent that warrants are exercised on a "cashless basis," the amount of cash we would receive from the exercise of warrants will decrease. Table of Contents DIVIDEND POLICY We have not paid any cash dividends on our common stock to date. We expect that we will retain earnings for use in business operations and, accordingly, we do not anticipate our board of directors declaring any dividends in the foreseeable future. In addition, the terms of our credit facilities and Series A Preferred Stock include restrictions on our ability to pay dividends as described under "Management s Discussion and Analysis of CardConnect s —Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities" and " –Series A Preferred Stock." Table of Contents DESCRIPTION OF BUSINESS Throughout this section, unless otherwise noted "we", "us" and the "Company" refer to CardConnect and its consolidated subsidiaries. The business of CardConnect and its consolidated subsidiaries is the business of the combined Company following the Merger. Company Overview We are a provider of payment processing solutions to merchants throughout the United States. Our secure, proprietary platform allows us to provide payment solutions, superior customer support and first-rate tools for our distribution partners and merchants. Our solutions and services enable distribution partners to effectively manage their business and for merchants to securely accept electronic payments. We sell our solutions through distribution partners which consist primarily of independent sales organizations and our direct sales staff. We have built our diverse network of over 1,000 distribution partners by offering industry leading tools and exceptional partner support since CardConnect was founded in 2006. Our distribution partners act as a consistent and predictable source of merchant accounts. We believe this offering has led to loyal distribution partners and increased partner retention. Our distribution channels are comprised of: Independent Sales Organizations. We support independent sales organizations and sales agents who operate in a self-sufficient manner utilizing our products and sales automation tools to secure merchant relationships. Direct Sales Staff. Our direct sales staff is segmented and either targets SMB merchants or Enterprise customers. Integrated Software Vendors. Our integrated software vendors are software companies that partner with us to provide payment services to their customer base. We combine our secure platform, solutions and distribution strategy to provide Merchant Acquiring services and Enterprise services to small and mid-sized merchants and larger businesses. We served over 60,000 merchants and processed over $17 billion in bankcard transaction volume in 2015. We generate revenues from the fees charged to merchants for card-based processing services and other services fees. We also generate revenues by selling our technology solutions. Our revenues are recurring in nature because they are generated from our merchants sales and merchants are under multi-year contracts. Our efficient distribution strategy and proprietary platform drive scale and allow us to generate strong profit margins. Our revenue for the years ended December 31, 2015, 2014 and 2013 was $458.6 million, $390.0 million and $348.9 million, respectively, representing a 14.7% compound annual growth rate over the period. We were founded in 2006 as Financial Transaction Services, LLC. In September 2010, we merged into FTS Holding Corp. in connection with the sale of a controlling interest in our company to the FTV Entities. We are incorporated under the laws of the State of Delaware. Merchant Acquiring Services Our primary business is to provide Merchant Acquiring services to merchants throughout the United States. Merchant Acquiring services involves providing end-to-end electronic payment processing services to merchants by facilitating the exchange of information and funds between them and cardholders financial institutions. To accomplish this, we undertake, or facilitate with third parties, merchant set-up and training, transaction authorization, settlement, merchant funding, merchant assistance and support, and risk management. Our card-accepting customers are primarily SMB merchants. SMB merchants often lack the resources and sophistication to address the complex payments landscape. As a result, merchants often rely on independent sales organizations or software vendors to provide payments solutions. For merchants utilizing software providers for important business services, we provide an integrated solution that utilizes our proprietary gateway. In addition, our platform provides merchants multiple benefits, including account management, a single source for payment processing data and reporting, and a marketplace for add-on functionality. These capabilities allow us to provide an enhanced experience for our merchants. Table of Contents Our partner focused distribution strategy allows us to efficiently access the large pool of SMB merchants in the United States. In 2015, we served over 60,000 SMB merchants across many industries that are well dispersed across the country. Our merchant base lacks concentration, with no single merchant accounting for more than 1.0% of our revenue during 2015. For the years ended December 31, 2015, 2014 and 2013, revenue includes $453.3 million, $387.3 million and $347.2 million, respectively, of revenue related to Merchant Acquiring services, including Merchant Acquiring service fees paid by our Enterprise customers. Enterprise Services We also provide services to Enterprise customers that primarily utilize sophisticated Enterprise Resource Planning ("ERP") systems to manage their businesses. These services are primarily ERP integration services utilizing our secure hosted payment gateway, and also include secure, point-to-point encryption ("P2PE") payment terminals and acceptance devices. We also provide Merchant Acquiring services to certain of our Enterprise customers. Our hosted payment gateway is enabled through the robust ERP middleware that we have developed internally. This solution benefits Enterprise customers in several different capacities including: Addresses ERP payment needs. Our solution supports a variety of payment card streams and addresses ERP payment needs in several payment function areas, including authorizations, reversals and/or split deliveries, settlement, automated reconciliation and security. Cost reduction. Our solution removes ERP systems from Payment Card Industry ("PCI") scope, considerably reducing operational and third-party expenses while protecting cardholder data. Information integration. Our solution integrates information flow between the ERP system and various points of customer interaction and ensures encryption for sensitive payment data travelling externally. Enterprise customers are often concerned about securing sensitive cardholder data and faced with the potential risks associated with a data breach. Our proprietary tokenization and encryption technology offering mitigates these risks by encrypting sensitive card data for both card present and card not present transactions. Our tokenization technology and off-site vault keeps our Enterprise customers information private and out of their ERP systems. The tokens are "smart" and will comply with data integrity checks performed by various ERP systems, while encrypted card numbers are stored in a 100% PCI compliant environment. We believe that our solutions have become increasingly important as data breaches have become more prevalent and visible in the marketplace. We believe we are an industry leader in card-present P2PE systems. Our solution for securing card present transactions includes secure, P2PE payment terminals and acceptance devices. P2PE provides for the encryption of sensitive card data upon swipe or card data input. This data is instantly encrypted, which secures cardholder data at the point of entry. Our secure hosted payment gateway and P2PE offering create a compelling value proposition that enables us to sell into the Enterprise market. We sell our Enterprise services primarily through a division of our direct sales staff focused exclusively on our Enterprise customers. Revenues from our Enterprise services are largely driven by recurring fees charged for ERP integration and hosting services and recurring P2PE device fees. For the years ended December 31, 2015, 2014 and 2013, revenue includes $3.6 million, $2.4 million and $1.6 million, respectively, of revenue related to Enterprise services, excluding Merchant Acquiring service fees paid by our Enterprise customers. Acquisitions On October 31, 2015, we purchased certain assets and assumed certain liabilities of Vanco Payment Solutions, Inc. ("Vanco"), a provider of card-based payment processing services. Table of Contents On November 26, 2012, we acquired Dependable Payment Processing, Inc. and Discount Payment Processing, Inc., a provider of card-based payment processing services. On July 13, 2012, we acquired Marathon Solutions, Inc. ("Marathon"), a provider of card-based payment processing services. On March 7, 2012, we acquired Charge Card Systems, Inc., a provider of card-based payment processing services. On February 14, 2012 we acquired Princeton Payment Solutions, Inc., a technology provider of payment security and gateway services. For more information regarding our acquisitions, see Note 3 to our annual consolidated financial statements included elsewhere in this prospectus. Business Structure Our Merchant Acquiring revenue is recurring in nature, as we typically enter into five-year service contracts with our merchants. Our Merchant Acquiring revenue is generated primarily from payment processing fees, which is comprised of a fee equal to a percentage of the dollar amount of each transaction we process, which we refer to as a Merchant Acquiring service fee. We make mandatory payments of interchange fees to the card issuer through the card networks and dues, assessments and other network fees to Visa, MasterCard, American Express and Discover. Our Merchant Acquiring revenue is largely driven by the Visa and MasterCard volume processed by our merchants. We also realize card processing revenues from processing transactions for our merchants accepting American Express and from processing Discover transactions. Providing Merchant Acquiring services requires us to closely coordinate with a number of industry participants that provide the services and infrastructure necessary to allow merchants to access and use the card payments ecosystem. These participants consist of merchant acquirers, third-party processors, sponsor banks, payment card networks (card associations), and issuing banks. Within this ecosystem, CardConnect serves as a merchant acquirer, acting as the touch point for the merchant to the payments ecosystem. The definitions and diagram below outline this payment ecosystem and the economics for a typical payment processing transaction for a $100 retail transaction. Merchant—accepts payment from the cardholder. Merchant Acquirer—provides payment processing services to the merchant, enabling the merchant to accept payments from cardholders. Merchant acquirers own the merchant relationships. To provide these services, merchant acquirers undertake, or facilitate with third parties, merchant set-up and training, transaction authorization, settlement, merchant funding, merchant assistance and support, and risk management. Third-Party Processors—provider authorization and settlement services that facilitate the flow of payment information through the card networks to the issuing bank. We utilize two third-party processors with agreements in effect through December 2021 and November 2020, which automatically renew for consecutive two-year terms. Sponsor Bank—provides settlement and funding services that enable merchant acquirers to settle funds between cardholders and merchants. We utilize two sponsor banks with agreements in effect through December 2021 and October 2020, which automatically renew for consecutive two-year terms. Our sponsorship agreements with the sponsor banks require, among other things, that we abide by the bylaws and regulations of the card networks. Card Networks—providers of the infrastructure for card payment information to flow between the sponsor bank and the issuing bank. Card networks establish rules and regulations for participants in the payments ecosystem, including merchant acquirers and issuing banks. We are contractually obligated to abide by the card networks rule and regulations under our contractual agreements with sponsor banks. Issuing Banks—financial institutions that issue the cardholder s payment card and which are required to complete the card transaction in accordance with the terms of the cardholder agreement. Table of Contents Our Merchant Base Our merchants vary in size and span various industries. We focus on merchants that we believe present relatively low risk, as their consumers are generally present and the products or services are generally delivered at the time the transaction is processed. The following table summarizes bankcard volume by industry for the year ended December 31, 2015. The number of our active SMB merchants located across the United States was 48,400, 38,059 and 37,948 as of December 31, 2015, 2014 and 2013, respectively. An active SMB merchant is a merchant that has processed transactions in the relevant period. We grow the number of active SMB merchants through various distribution channels, which include our partnerships with independent sales organizations, integrated software vendors and direct sales efforts. We also grow the number of active SMB merchants through acquisitions of complementary businesses. In 2015, we added approximately 6,400 of our active SMB merchants through the Vanco acquisition. Table of Contents Merchant attrition is expected in the Merchant Acquiring industry in the ordinary course of business. We experience attrition in bankcard volume as a result of several factors, including business closures, transfers of merchants accounts to our competitors and account closures that we initiate due to heightened credit risks. No single merchant accounted for more than 1.0% of our revenue during 2015, and our top 25 merchants represented 4.8% of our revenue during 2015. In 2015, approximately 82% of our revenue came from merchants we added in 2014 and earlier. For the year ended December 31, 2015, merchants located in the following states represented the largest percentages of our bankcard processing volume: New York represented 10%, California represented 10%, Florida represented 7%, Pennsylvania represented 7%, Texas represented 6% and Illinois represented 6%. No other state represented more than 5% of our total bankcard processing volume. Our geographic concentration tends to reflect the states with the highest economic activity, as well as certain states where we have stronger distribution partners. This industry and geographic diversification makes us less sensitive to changing economic conditions in any particular industry or region. We believe that the loss of any single merchant would not have a material adverse effect on our financial condition or results of operations. The following graphic summarizes our bankcard volume by state for the year ended December 31, 2015. Our Solutions We provide a comprehensive set of products and services to our merchants and distribution partners. Our offerings are designed to support the payments needs of any potential merchant. We have a flexible and open platform where our products and capabilities are simple to mix, match and, most importantly, integrate into the merchant s current environment. Table of Contents Payments Solutions for Distribution Partners CoPilot Distribution Partner Management Residual/commission reporting Communication—account alerts, marketing and industry updates Portfolio management Sub-agent performance reporting Merchant Enrollment Lead management Digital Merchant Application Online E-Signature Automated underwriting & Approval Process Application status tracking Product Enrollment Easy enrollment for CardConnect Product Suite Self Service and Activation Customer Support Account reconciliation Statement review Online ticketing management Customer retention Collections/ACH reject recovery Risk monitoring Commission Processing In depth reporting with summary and line item detail Provide agents flexible commission system for sub-agents calculation & payment Multiple agents with unique pricing schedules per account Data Management Processor residual reconciliation Exception reporting Multi-source data aggregation and standardization Flexible user driven data mapping Payments Solutions for Merchants and Enterprise Customers CardPointe Allows merchants to manage their account and view all payment processing data in one place with robust reporting and account alerts A self-service marketplace provides access add-on products and features, including: Virtual Terminal, CardPointe Terminal, CardPointe Mobile App, Recurring Billing, ACH/eCheck and out-of-box integrations PCI Compliance Management via integration with Trustwave Accessible via a browser or using a native iOS/Android app SMB Gateway & Application Developer-friendly API making payment integration easy Programming Interface ("API") Rich library of gateway features, including account updater, PIN-less debit, and 3-D Secure API includes use of all proprietary payment security processes, including P2PE for card-present and tokenization for card-not-present transactions Gateway usage provides merchants with real-time, full transaction lifecycle reporting in CardPointe CardSecure Patented tokenization and PCI validated P2PE application provide payment security for card present and card not present environments Delivers instant PCI compliance to merchants who integrate CardSecure into all sales channels ERP Middleware Integrates information flow between ERP system, various points of sale/customer interaction, and processor/banking system Ensures encryption for sensitive payment data travelling externally Tokenizes all payment related data within merchant network/systems Automates the reconciliation of card-to-receipts Table of Contents Our Technology Our technology consists of a secure payments platform for SMB and Enterprise solutions. A powerful, feature-rich payment gateway and patented payment security technology – tokenization and P2PE – establish the foundation of our platform. We offer a comprehensive online merchant portal, virtual terminal, mobile app, APIs and additional technology products to our SMB merchants. For the Enterprise market, we integrate payment acceptance, security and reconciliations into ERPs such as Oracle, SAP and JD Edwards. In addition to this customer-facing technology, we also support an extensive network of independent sales organizations with an online merchant and residual management system. CoPilot—Our customer management system is used by our distribution partners and our internal operational staff. This online portfolio management tool provides automated customer onboarding, product enrollment, a digital merchant application, customer service ticketing, risk monitoring, residual payment calculation and commission processing. This system is critical to optimizing our operational efficiencies and provides a scalable platform to attract quality distribution partners. CardPointe—Our core payments system provides a single location for merchant account management, including transaction processing, full transaction-lifecycle management, custom reporting and product enrollment. The CardPointe system extends a variety of value-add products, including: CardPointe App—a native iOS and Android app that includes all the key benefits of the online, browser-based application. Merchants can process both card-present and card-not-present transactions via our virtual terminal, while receiving in depth transaction and funding reporting. Table of Contents CardPointe Terminal—we built a retail terminal device application that runs on third party terminals and is integrated through our payment gateway. This integrated terminal secures transactions at the point of entry, with our proprietary encryption technology. This terminal also supports EMV cards and NFC standards, while providing cost-saving interchange optimization capabilities. Additionally, the terminal is integrated to the CardPointe system so merchants can view and manage transactions instantly, and create customer profiles from any transaction. Virtual Terminal—our virtual terminal allows our SMB merchants to process transactions directly from an online and mobile application and is compatible with USB and mobile payment devices. For recurring transactions, extensive support of billing plans is included. eCommerce Solutions—our out-of-box shopping cart, accounting software integrations and proprietary hosted payment pages, cover an extensive array of merchants eCommerce needs. CardConnect Gateway & APIs—We have developed a secure payment gateway that facilitates payment acceptance in both card present and card not present environments. We have integrated and certified our payment gateway with numerous third-party processors. Our payment architecture allows us to continually add new connections and capabilities. Our payment gateway facilitates authorizations, settlement and funding from the third party processor to the customer. Customers can leverage our payment gateway and transaction security features with a variety of developer-friendly APIs. CardSecure Tokenization and Point-to-Point Encryption—With the critical need to secure payment card information, we developed industry leading and patented encryption and tokenization solutions that have been scaled to protect our entire customer base. These solutions have been recognized and validated by the PCI Council, the organization established by the payment networks to set payment security standards. These security solutions simplify the PCI compliance requirements for our merchants, while allowing us to securely interact with the third party processor. Industry Overview The payment processing industry provides merchants with credit, debit, gift and loyalty card and other payment processing services, along with related information services. The industry continues to grow as a result of wider merchant acceptance, increased consumer use of bankcards and advances in payment processing and telecommunications technology. The proliferation of bankcards has made the acceptance of bankcard payments a virtual necessity for many businesses, regardless of size, in order to remain competitive. This increased use of bankcards and prepaid cards, payment processing via smart phones, enhanced technology initiatives, efficiencies derived from economies of scale and the availability of more sophisticated products and services to all market segments has resulted in a highly competitive and specialized industry. SMB merchants payment processing needs generally are served by a large number of smaller payment processors, including banks and independent sales organizations, that generally procure most of the payment processing services they offer from large payment processors. It is difficult, however, for banks and independent sales organizations to customize payment processing services for the SMB merchant on a cost-effective basis or to provide sophisticated value-added services. Services to the SMB merchant market historically have been characterized by basic payment processing without the availability of the more customized and sophisticated processing, information-based services or customer service that are offered to large merchants. The continued growth in bankcard transactions is expected to cause SMB merchants to increasingly value sophisticated payment processing and information services similar to those provided to large merchants. Key Trends Impacting SMB Merchants The following are key trends impacting SMB merchants: Shift to Integrated POS—SMB merchants are increasingly using software to manage everyday business functions such as inventory management, customer engagement and loyalty. SMB merchants now look to merchant acquirers who can integrate seamlessly with these software providers to simplify their business operations. We believe merchant acquirers that can effectively support these bundled solutions will have the most success attracting and retaining SMB merchants. Table of Contents Adoption of New Technologies—Cloud-based computing and software-as-a-service delivery models are lowering the costs and complexity of technology. As a result, SMB merchants are looking for new technologies, including mobile and tablet-based solutions delivered by applications, to make use of sophisticated payment offerings that were previously not accessible to them. We believe merchant acquirers need to be able to offer new, complementary technology solutions that can effectively leverage data and new applications seamlessly and conveniently. Utilization of Value-Added Services—SMB merchants looking to grow and expand their business are adopting and promoting their own rewards and loyalty programs. They are also demanding more sophisticated tools to analyze the data collected from their payment transactions to utilize business intelligence and more effectively manage their operations. We believe merchant acquirers that have the technology to provide these value-added services through a flexible integrated platform that can integrate these solutions will be able to capitalize on the growth of these high-margin offerings. Need for Multi-Channel Commerce—As commerce trends continue to evolve, SMB merchants are increasingly looking for multi-channel solutions which enable them to sell their goods and services at their brick and mortar locations, on the Internet or remotely via mobile devices, such as smart phones and tablets, on a single integrated platform provided by a single vendor. To meet this demand, we believe merchant acquirers can gain a competitive advantage by offering a payment gateway that provides a single point of access for POS, e-commerce and mobile commerce capabilities at an affordable price. Demand for Greater Security—Merchants continue to face new security challenges as the electronic payments industry continues to grow in size and complexity. With the evolution of more payment channels, access devices and card types, we believe that maintaining the integrity of the payment system has never been more challenging or more critical for merchant acquirers. In addition, new initiatives by the payment networks to shift from magnetic stripe to chip-enabled cards, using the EMV technology standard, will lead many SMB merchants to upgrade their legacy POS hardware, including IPOS. As a result, merchant acquirers will need to have the technical capabilities, expertise and partnerships to deploy new security solutions and safely integrate with new solutions. New Industry Adoption—We believe that industries such as healthcare, education and government, as well as other industries, will continue to see higher transaction volume growth as migration from paper-based payments to electronic payments continues. These industries often utilize software with embedded payment processing technology tailored specifically for their business type. Merchant acquirers will need to possess the industry and business expertise to deliver targeted POS and online processing solutions to these industries that seamlessly integrate into their existing business management software. Our Sales and Distribution Merchant Acquiring Services Our strategy for acquiring SMB merchant relationships is to leverage our distribution partners, which consist primarily of independent sales organizations, integrated software vendors and our direct sales staff. Our distribution partners act as a consistent and predictable source of SMB merchant accounts. Through our products and solutions, we believe we provide first-rate service for our partners to support their referred merchants. We believe our focus on offering industry leading tools and partner support has led to loyal distribution partners and increased partner retention. Independent Sales Organizations. We primarily support independent sales organizations with products and tools that enable them to secure SMB merchant relationships. A majority of our independent sales organizations leverage the CardConnect brand while marketing Merchant Acquiring services. We provide valuable back office support, training and the tools necessary for independent sales organizations to manage their business. Table of Contents Direct Sales Staff. Our direct sales staff primarily sells to association-based SMB merchants through telesales efforts. Associations are typically industry trade groups that have a loyal and trusted relationship with their members. We work with these associations to offer merchant services as a benefit to its members, and create a marketing plan to market our products and services to the members of the association. Integrated Software Vendors. Our integrated software vendors are software companies that partner with us to provide payment services to their merchant base. These software based partners integrate their business management software into our platform which provides a consolidated solution for merchants, which we believe leads to increased retention. We are establishing positions in several industries, including not-for-profit and event management. Our SMB marketing strategy is to promote our brand and generate demand for our products and solutions that target distribution partners and SMB merchants. Our distribution partners, primarily independent sales organizations and integrated software vendors, market their own businesses in order to refer merchant accounts for which they receive commissions. Our primary SMB marketing activities include: Presence and participation in payments conferences, tradeshows and industry events to create brand awareness and recruit new distribution partners; Website development that educates prospective partners and merchants; Press and industry relations to garner third-party validation and generate positive coverage; Multi-channel advertising; and Webinars that we host, featuring our employees and product offering. Enterprise Services We provide services to Enterprise customers that primarily utilize sophisticated ERP systems to manage their businesses. We sell these services with a direct sales staff focused exclusively on these prospective Enterprise customers. This direct sales staff is comprised of several sales personnel located throughout the United States and is supported by our marketing efforts. These solutions provide integration and hosting for payment acceptance, security and reconciliations into ERP systems. Our focus has been to solely provide these solutions for Oracle, SAP and JD Edwards ERP systems. Our Enterprise marketing strategy is to promote our brand and generate demand for our Enterprise services offerings. We use a variety of marketing efforts across traditional and social media channels to target prospective Enterprise customers. Our primary Enterprise marketing activities include: Presence and participation in ERP user conferences, tradeshows and industry events to create brand awareness; Website development that educates prospective customers through product information, blogs and white papers; Digital advertising through social media channels, such as LinkedIn and Twitter; Search engine marketing and advertising optimized for ERP customers; Email marketing campaign with high quality content on ERP payments; Press and industry relations to garner third-party validation and generate positive coverage; and Customer testimonials. Table of Contents Our Operations Our Operations division is designed to maximize the efficiency of supporting the needs of all merchants and distribution partners. Our Technology division is structured to rapidly enhance and effectively maintain our products and services. Business Operations Our Operations division is designed to maximize the efficiency of supporting the needs of all merchants and distribution partners. Our Technology division is structured to rapidly enhance and effectively maintain our products and services. Merchant Onboarding. Our underwriting and onboarding process leverages both our third-party processors systems and our proprietary customer management system, CoPilot, to activate new merchants timely and efficiently. Our distribution partners are also provided access to CoPilot to ensure transparency and consistency in this process and to track the progress of each merchant application. CoPilot provides real-time workflow and status updates to both the merchant and the distribution partner from submission to full account activation. Merchant Support. Our merchant support is available from phone, email and web inquiries. All inquiries are managed through CoPilot and provide both our partners and merchants with tracking and visibility into each merchant interaction with our team. Our support offerings are available 24/7 and focus on educating our merchants and distribution partners on our solutions and services. Risk and Underwriting. Our credit underwriting and risk management function is designed to prevent and detect fraud and credit risk exposure, while helping to ensure our merchants and distribution partners remain profitable. We adhere to sponsor bank guidelines and card brand rules and regulations in underwriting and fraud, including monitoring of merchant transactions, volumes, chargebacks, and customer disputes. Partner Support. Our partner support function provides our distribution partners with comprehensive support for our solutions, products and services to enable them to attract new merchants and support existing merchants. Distribution partners have access to our comprehensive online support center that details our products, our operational procedures and industry guidelines. Technology Operations Network & Security. Our network and security function ensures that our systems are secure and fully operational while meeting industry and PCI security standards. Information Management. Our information management function manages the acceptance, processing and storage of all transaction, customer and partner data interfacing between our systems and third parties. Our executive management team and employees utilize information made available through analytics constructed by our information management capabilities. SMB Product Development. Our SMB product development function manages the development and deployment of our SMB merchant product suite, primarily including CardPointe and CoPilot. Enterprise Development & Integration. Our Enterprise development and integration function manages our Enterprise services solutions. Enterprise integrations are executed with knowledge of secure payment processing in certain ERP systems, primarily Oracle, SAP and JD Edwards. Our project managers ensure that our implementations and solutions do not alter our Enterprise customer s existing ERP environment. Technical Support. Our technical support function is responsible for technical inquires on our Merchant Acquiring and Enterprise services products. This staff provides 24/7 support with phone, email and web inquiries all managed through our automated CoPilot ticketing system. Table of Contents Security, Disaster Recovery and Back-up Systems In the course of our operations, we maintain a large database of information relating to our merchants and their transactions, and large amounts of card information across our network. We maintain a high level of security to attempt to protect the information of our merchants and their customers. We update our network and operating system security releases and virus definitions, and have engaged a third party to regularly test our systems for vulnerability to unauthorized access. Further, we encrypt the cardholder numbers and merchant data that are stored in our databases using what we believe are the strongest commercially available encryption methods. We have a dedicated team responsible for security incident response. This team develops, maintains, tests and verifies our Incident Response Plan. The primary function of this team is to react and respond to intrusions, denial of service, data leakage, malware, vandalism, and many other events that could potentially jeopardize data availability, integrity, and confidentiality. This team is responsible for investigating and reporting on any and all malicious activity in and around our information systems. In addition to handling security incidents, the incident response team continually educates themselves and the company on information security matters. Disaster recovery is built in to our infrastructure through our hosting provider. Our hosting provider has locations in Philadelphia, Pennsylvania and St. Louis, Missouri that are configured and operating in parallel with each other to immediately replicate all data and application updates. We monitor the availability of services in each site, and if one becomes unavailable, all traffic is automatically switched to the other site. This duplicate processing capability ensures uninterrupted transaction processing during maintenance windows and other times processing may be interrupted in one data center. Third Party Processors and Sponsor Banks In the course of facilitating bankcard processing services, we rely on third parties to provide or supplement these services, which primarily include authorization, settlement and funding services. We utilize FirstData and TSYS to provide authorization and settlement services. As of December 31, 2015, 98% and 2% of our bankcard volume was processed through FirstData and TSYS, respectively. Each merchant s internal payment acceptance infrastructure dictates which third party processor will be utilized. Our processing agreement with FirstData (the "FirstData Agreement") was entered into in April 2012, amended in October 2015, and is in effect through December 2021 and automatically renews for successive two-year terms unless either party provides written notice of non-renewal to the other party. In connection with the Vanco acquisition in October 2015, we entered into a processing agreement with TSYS and assumed the processing arrangements that were in place with existing Vanco merchants (collectively, the "TSYS Agreement"). The TSYS Agreement is effective through November 2020 and automatically renews for consecutive two-year terms unless either party provides written notice of non-renewal to the other party. We utilize Wells Fargo Bank and Synovus Bank to provide settlement and funding services for our merchants. Additionally, we adhere to the underwriting guidelines provided by the sponsor bank. Because we are not a "member bank as defined by Visa and MasterCard, in order to process and settle these bankcard transactions for our merchants, we have entered into sponsorship agreements with member banks. Visa and MasterCard rules restrict us from performing funds settlement or accessing merchant settlement funds and require that these funds be in the possession of the member bank until the merchant is funded. Our sponsorship agreements enable us to route Visa and MasterCard bankcard transactions under the member bank s control and bank identification numbers to clear credit and signature debit bankcard transactions through Visa and MasterCard. Our sponsorship agreements also enable us to settle funds between cardholders and merchants by delivering funding files to the member bank, which in turn transfers settlement funds to the merchants bank accounts. These restrictions place the settlement assets and liabilities under the control of the member bank. Our sponsorship agreements with the member banks require, among other things, that we abide by the bylaws and regulations of the Visa and MasterCard networks. If we were to breach these sponsorship agreements, the sponsor banks can terminate the agreement and, under the terms of the agreement, we would have 180 days to identify an alternative sponsor bank. As of December 31, 2015, we have not been notified of any such issues by our sponsor banks, Visa or MasterCard. See "Risk Factors—Risk Factors Related to CardConnect—We rely on bank sponsors, which have substantial discretion with respect to certain elements of our business practices, in order to process electronic payment transactions. If these sponsorships are terminated and we are not able to secure new bank sponsors, we will not be able to conduct our business." Table of Contents The sponsorship agreement with Wells Fargo Bank is for a five-year term expiring in December 2021 and will automatically renew for successive two-year periods unless either party provides three months written notice of non-renewal to the other party. The sponsorship agreement with Synovus Bank is for a five-year term expiring on October 8, 2020 and will automatically renew for successive two-year periods unless either party provides six months written notice of non-renewal to the other party. Wells Fargo Bank sponsors transactions for FirstData and Synovus Bank sponsors transactions for TSYS. Merchant and Transaction Risk Management We focus on low-risk merchants and have developed systems and procedures designed to minimize our exposure to potential merchant losses. We have established merchant bases in industries that we believe present relatively low risks as the customers are generally present and the products or services are generally delivered at the time the transaction is processed. These industries include restaurants, brick-and-mortar retailers, professional service providers, auto repair and others. See "—Business Structure—Our Merchant Base." Effective risk management helps us minimize merchant losses relating to chargebacks, reject losses and merchant fraud for the mutual benefit of our merchants and ourselves. We believe our knowledge and experience in dealing with attempted fraud has resulted in our development and implementation of effective risk management and fraud prevention systems and procedures for the types of fraud discussed in this section. The card brand networks generally allow chargebacks up to four months after the later of the date the transaction is processed or the delivery of the product or service to the cardholder. If the merchant incurring the chargeback is unable to fund the refund to the card issuing bank, we are required to do so. In 2015, 2014 and 2013, we experienced merchant losses of $1.5 million, $1.9 million and $1.3 million, respectively, or 0.9 basis points, 1.3 basis points and 1.0 basis points, respectively, on total bankcard dollar volumes processed of $17.1 billion, $14.7 billion and $13.2 billion, respectively. Underwriting of Our Merchants. New applications are submitted to our credit underwriting department for review and consideration. The credit underwriting department performs a number of verification and credit related checks on all applicants. As part of the underwriting process, credit risk exposure is calculated based on the nature of business, requested volume, transaction size, industry, non-delivery of services or goods and dispute levels. This becomes a primary factor used when deciding whether to accept or reject a merchant account. Pricing, transaction thresholds, processing history and/or the financial condition of the applicant/business are reviewed during this process. As a condition of approval, cash or non-cash collateral may also be a requirement. These reviews and conditions are documented and help to assist the risk management team in the ongoing monitoring of merchant transactions and volume. Depending upon their experience level, our underwriting staff is assigned a signing authority equal to an established credit risk exposure amount. This allows them to render autonomous decisions on new applications based on exposure, but to also include adjusting transaction and volume thresholds, establishing funding delays, and/or requesting cash or non-cash collateral. These levels are set by management and appropriate concurrence sign offs are required for approval based upon the credit risk exposure of each application. Our sponsor banks review and approve our merchant underwriting policies and procedures to ensure compliance with all card brand operating rules and regulations. Risk Management /Merchant Monitoring. We rely on third-party and internal reporting to identify and monitor credit/fraud risk. Our systems compile daily and historical merchant activity in a number of customized reports. The risk management team reviews all unusual activity, which may include average ticket, rolling volume levels, refund and chargeback levels as well as authorization history. Merchant parameters are utilized in order to identifying suspicious processing activity. Risk management tools and reporting are reviewed daily in order to suspend unusual merchant processing activity. All accounts with suspended funds are investigated daily and the risk management team decides if any transactions should be held for further review. This allows us to minimize credit and fraud risk by providing time to formally review the processing with the merchant, the customers and or the issuing banks. Validating merchant activity is a daily process within risk management. Certain merchants may require special monitoring and periodic internal reviews may be completed. We also have engaged a web crawling solution that scans all merchant websites for content and adherence to card brand rules and regulations. Table of Contents Investigation and Loss Prevention. If a merchant exceeds the parameters established by our underwriting and/or risk management staff or is found to have violated card brand operating rules or the terms of our merchant agreement, one of our team members will identify and document the incident. The review will include the actions taken to reduce our exposure to loss and the exposure of our merchant. These actions may include requesting additional transaction information, withholding or diverting funds, verifying delivery of merchandise or even deactivating the merchant account. The financial condition of the business may also be considered during these investigations. Collateral. We require some of our merchants to establish cash or non-cash collateral which may include certificates of deposit, letters of credit, rolling merchant reserves or upfront cash. This collateral is utilized in order to offset potential credit or fraud risk liability that we may incur. We hold such cash deposits or letters of credit for as long as we are exposed to a loss resulting from a merchant s payment processing activity. Our Competition We compete with a variety of merchant acquirers that have different business models, go-to-market strategies and technical capabilities. We believe the most significant competitive factors in our markets are: (1) economics, including fees charged to merchants and commission payouts to distribution partners; (2) product offering, including emerging technologies and development by other participants in the payments ecosystem; (3) service, including product functionality, value-added solutions and strong customer support for both distribution partners and merchants; and (4) trust, including a strong reputation for quality service and trusted distribution partners. Our competitors range from large and well established companies to smaller, earlier-stage business. See "Risk Factors—Risks relating to Our Business—The payment processing industry is highly competitive and such competition is likely to increase, which may adversely influence the prices we can charge to merchants for our services and the compensation we must pay to our distribution partners, and as a result, our profit margins." Government Regulation We operate in an increasingly complex legal and regulatory environment. Our business and the products and services that we offer are subject to a variety of federal, state and local laws and regulations and the rules and standards of the payment networks that we utilize to provide our electronic payment services, as more fully described below. Dodd-Frank Act The Dodd-Frank Act and the related rules and regulations have resulted in significant changes to the regulation of the financial services industry. Changes impacting the electronic payments industry include providing merchants with the ability to set minimum dollar amounts for the acceptance of credit cards and to offer discounts or incentives to entice consumers to pay with cash, checks, debit cards or credit cards, as the merchant prefers. New rules also contain certain prohibitions on payment network exclusivity and merchant routing restrictions of debit card transactions. Additionally, the Durbin Amendment to the Dodd-Frank Act provides that the interchange fees that certain issuers charge merchants for debit transactions will be regulated by the Federal Reserve and must be "reasonable and proportional" to the cost incurred by the issuer in authorizing, clearing and settling the transactions. Rules released by the Federal Reserve in July 2011 to implement the Durbin Amendment mandate a cap on debit transaction interchange fees for issuers with assets of $10 billion or greater. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the "CFPB"), which has assumed responsibility for most federal consumer protection laws, and the Financial Stability Oversight Council, which has the authority to determine whether any non-bank financial company, such as us, should be supervised by the Board of Governors of the Federal Reserve System because it is systemically important to the U.S. financial system. Any new rules or regulations implemented by the CFPB or the Financial Stability Oversight Council or in connection with Dodd-Frank Act that are applicable to us, or any changes that are adverse to us resulting from litigation brought by third parties challenging such rules and regulations, could increase our cost of doing business or limit permissible activities. Table of Contents Payment Network Rules and Standards Payment networks establish their own rules and standards that allocate responsibilities among the payment networks and their participants. These rules and standards, including the PCI DSS, govern a variety of areas including how consumers and merchants may use their cards, data security and allocation of liability for certain acts or omissions including liability in the event of a data breach. The payment networks may change these rules and standards from time to time as they may determine in their sole discretion and with or without advance notice to their participants. These changes may be made for any number of reasons, including as a result of changes in the regulatory environment, to maintain or attract new participants, or to serve the strategic initiatives of the networks and may impose additional costs and expenses on or be disadvantageous to certain participants. Participants are subject to audit by the payment networks to ensure compliance with applicable rules and standards. The networks may fine, penalize or suspend the registration of participants for certain acts or omissions or the failure of the participants to comply with applicable rules and standards. An example of a recent standard is EMV, which is mandated by Visa, MasterCard, American Express and Discover. This mandate sets new requirements and technical standards, including requiring IPOS systems to be capable of accepting the more secure "chip" cards that utilize the EMV standard and set new rules for data handling and security. Processors and merchants that do not comply with the mandate or do not use systems that are EMV compliant risk fines and liability for fraud-related losses. We have invested significant resources to ensure our systems compliance with the mandate, and to assist our merchants in becoming compliant by the applicable deadlines. To provide our electronic payments services, we must be registered either indirectly or directly as service providers with the payment networks that we utilize. Because we are not a bank, we are not eligible for membership in certain payment networks, including Visa and MasterCard, and are therefore unable to directly access these networks. The operating regulations of certain payment networks, including Visa and MasterCard, require us to be sponsored by a member bank as a service provider. We are registered with certain payment networks, including Visa and MasterCard, through Wells Fargo and Synovus Bank. The agreements with our bank sponsors give them substantial discretion in approving certain aspects of our business practices including our solicitation, application and qualification procedures for merchants and the terms of our agreements with merchants. We are registered directly as service providers with Discover, American Express and certain other networks. We are also subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transaction processed by us using the Automated Clearing House Network. In December 2013, the U.S. District Court for the Eastern District of New York issued a final order approving a definitive class settlement agreement resolving the plaintiffs claims in a merchant class multi-district interchange litigation against Visa, MasterCard and the named member banks. Among other terms, the settlement agreement provides for the modification of Visa s and MasterCard s rules to allow merchants to impose a surcharge on credit card transactions at the POS under certain conditions, to accept Visa or MasterCard credit or debit cards at some but not all of a merchant s stores and to offer discounts to customers who make payments through methods that carry lower fees than Visa or MasterCard credit or debit cards. This provision or other provisions in the final settlement agreement, which has been appealed by certain plaintiffs, could ultimately result in decreased use of credit cards, demands for lower fees for our services or have other adverse impacts that are not readily known and that we may not know for some time. Privacy and Information Security Regulations We provide services that may be subject to privacy laws and regulations of a variety of jurisdictions. Relevant federal privacy laws include the Gramm-Leach-Bliley Act of 1999, which applies directly to a broad range of financial institutions and indirectly, or in some instances directly, to companies that provide services to financial institutions. These laws and regulations restrict the collection, processing, storage, use and disclosure of personal information, require notice to individuals of privacy practices and provide individuals with certain rights to prevent the use and disclosure of protected information. These laws also impose requirements for safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. Our business may also be subject to the Fair Credit Reporting Act, which regulates the use and reporting of consumer credit information and also imposes disclosure requirements on entities who take adverse action based on information obtained from credit reporting agencies. In addition, there are state laws restricting the ability to collect and utilize certain types of information such as Social Security and driver s license numbers. Certain state laws impose similar privacy obligations as well as obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and consumer reporting agencies and businesses and governmental agencies that possess data. Table of Contents Anti-Money Laundering and Counter-Terrorism Regulation Our business is subject to U.S. federal anti-money laundering laws and regulations, including the Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001, or "BSA." The BSA, among other things, requires money services businesses to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity and maintain transaction records. We are also subject to certain economic and trade sanctions programs that are administered by the Treasury Department s Office of Foreign Assets Control ("OFAC"), that prohibit or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals, narcotics traffickers and terrorists or terrorist organizations. Similar anti-money laundering, counter-terrorist financing and proceeds of crime laws apply to movements of currency and payments through electronic transactions and to dealings with persons specified on lists maintained by organizations similar to OFAC in several other countries and which may impose specific data retention obligations or prohibitions on intermediaries in the payment process. We have developed and continue to enhance compliance programs and policies to monitor and address related legal and regulatory requirements and developments. Unfair or Deceptive Acts or Practices We and many of our merchants are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices, or UDAP. In addition, the UDAP and other laws, rules and or regulations, including the Telemarketing Sales Act, may directly impact the activities of certain of our merchants, and in some cases may subject us, as the merchant s payment processor or provider of certain services, to investigations, fees, fines and disgorgement of funds if we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal or improper activities of the merchant through our services. Various federal and state regulatory enforcement agencies including the Federal Trade Commission and the states attorneys general have authority to take action against non-banks that engage in UDAP or violate other laws, rules and regulations and to the extent we are processing payments or providing services for a merchant that may be in violation of laws, rules and regulations, we may be subject to enforcement actions and as a result may incur losses and liabilities that may impact our business. Indirect Regulatory Requirements A number of our clients are financial institutions that are directly subject to various regulations and compliance obligations issued by the CFPB, the Office of the Comptroller of the Currency and other agencies responsible for regulating financial institutions. While these regulatory requirements and compliance obligations do not apply directly to us, many of these requirements materially affect the services we provide to our clients and us overall. The banking agencies, including the Office of the Comptroller of the Currency, have imposed requirements on regulated financial institutions to manage their third-party service providers. Among other things, these requirements include performing appropriate due diligence when selecting third-party service providers; evaluating the risk management, information security, and information management systems of third-party service providers; imposing contractual protections in agreements with third-party service providers (such as performance measures, audit and remediation rights, indemnification, compliance requirements, confidentiality and information security obligations, insurance requirements, and limits on liability); and conducting ongoing monitoring of the performance of third-party service providers. Accommodating these requirements applicable to our clients imposes additional costs and risks in connection with our financial institution relationships. We expect to expend significant resources on an ongoing basis in an effort to assist our clients in meeting their legal requirements. Table of Contents Banking Regulations We are considered by the Federal Financial Institutions Examination Council to be a technology service provider ("TSP") based on the services we provide to financial institutions. As a TSP, we are subject to audits by an interagency group consisting of the Federal Reserve System, FDIC, and the Office of the Comptroller of the Currency. Other Regulation We are subject to U.S. federal and state unclaimed or abandoned property (escheat) laws which require us to turn over to certain government authorities the property of others we hold that has been unclaimed for a specified period of time such as account balances that are due to a distribution partner or merchant following discontinuation of its relationship with us. The Housing Assistance Tax Act of 2008 requires certain merchant acquiring entities and third-party settlement organizations to provide information returns for each calendar year with respect to payments made in settlement of electronic payment transactions and third-party payment network transactions occurring in that calendar year. Reportable transactions are also subject to backup withholding requirements. The foregoing is not an exhaustive list of the laws and regulations to which we are subject and the regulatory framework governing our business is changing continuously. See "Risk Factors—Risks Related to CardConnect s Business—We are subject to extensive government regulation, and any new laws and regulations, industry standards or revisions made to existing laws, regulations or industry standards affecting the electronic payments industry may have an unfavorable impact on our business, financial condition and results of operations." Our Intellectual Property We have developed a payments platform that includes many instances of proprietary software, code sets, work flows and algorithms. It is our practice to enter into confidentiality, non-disclosure, and invention assignment agreements with our employees and contractors, and into confidentiality and non-disclosure agreements with other third parties, in order to limit access to, and disclosure and use of, our confidential information and proprietary technology. In addition to these contractual measures, we also rely on a combination of trademarks, copyrights, registered domain names, and patent rights to help protect the CardConnect brand and our other intellectual property. As of August 2016, we have two patents for tokenization, which relates to our payment security solution, CardSecure. We also have ten active trademarks and one additional pending trademark that pertain to company, product names and logos. We intend to file additional patent applications as we innovate through our research and development efforts, and to pursue additional patent protection to the extent we deem it beneficial and cost-effective. We also own a number of domain names including cardconnect.com and cardpointe.com. Our Employees As of December 31, 2015, we employed 152 employees, consisting of 57 operations employees, 45 IT employees, 40 sales employees, and 10 general and administrative employees. None of our employees is represented by a labor union and we have experienced no work stoppages. We consider our employee relations to be good. Table of Contents Our Facilities We maintain several offices across the United States, all of which we lease. Our office locations include: Corporate headquarters in King of Prussia, Pennsylvania with approximately 27,207 leased square feet; Data management in Lone Tree, Colorado with approximately 1,230 leased square feet; and Telesales office in Overland Park, Kansas with approximately 6,735 leased square feet. We lease several small facilities for sales and operations. Our current facilities meet our employee base and can accommodate our currently contemplated growth. We believe that we will be able to obtain suitable additional facilities on commercially reasonable term to meet any needs. Legal Proceedings We are currently not a party to any legal proceedings that would be expected to have a material adverse effect on our business or financial condition. From time to time, we are subject to litigation incidental to our business, as well as other litigation of a non-material nature in the ordinary course of business. Table of Contents MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following management s discussion and analysis together with "Selected Historical Financial Information of CardConnect" and CardConnect s audited financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements about CardConnect s business, operations and industry that involve risks and uncertainties, such as statements regarding CardConnect s plans, objectives, expectations and intentions. CardConnect s future results and financial condition may differ materially from those currently anticipated by CardConnect as a result of the factors described in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." Throughout this section, unless otherwise noted or unless the context requires otherwise, "we", "us" and the "Company" refer to CardConnect and its consolidated subsidiaries. Certain amounts in this section may not foot due to rounding. Overview General Our primary business is to provide Merchant Acquiring services to merchants throughout the United States. Merchant Acquiring services involves providing end-to-end electronic payment processing services to merchants by facilitating the exchange of information and funds between them and cardholders financial institutions. To accomplish this, we undertake, or facilitate with third parties, merchant set-up and training, transaction authorization, settlement, merchant funding, merchant assistance and support, and risk management. We also provide integrated payment solutions utilizing our proprietary payment gateway. Our card-accepting customers are primarily SMB merchants. We also provide services to Enterprise customers that primarily utilize sophisticated ERP systems to manage their businesses. These services are primarily ERP integration services utilizing our secure hosted payment gateway, and also include secure, P2PE payment terminals and acceptance devices. We also provide Merchant Acquiring services to certain of our Enterprise customers. How we Assess the Performance of our Business Merchant Acquiring Services We use bankcard volume, number of active SMB merchants and same store sales to measure the performance of our Merchant Acquiring services. Our total bankcard volume for the three months ended June 30, 2016 and 2015 was $5.7 billion and $4.2 billion, respectively, representing a period to period growth rate of 35.5%. Our total bankcard volume for the six months ended June 30, 2016 and 2015 was $10.6 billion and $8.0 billion, respectively, representing a period to period growth rate of 32.8%. An active SMB merchant is a merchant that has processed transactions in the relevant period. The number of our active SMB merchants located across the United States was 51,234 at June 30, 2016, compared to 48,400 at December 31, 2015 and 39,740 at June 30, 2015, representing growth rates of 5.9% and 28.9%, respectively, over the periods. Bankcard volume reflects the addition of new merchants and same store sales of existing merchants, partially offset by merchants who attrited during the period. We grow the number of active SMB merchants through various distribution channels, which include independent sales organizations, integrated software vendors and our direct sales staff. We also grow the number of active SMB merchants through acquisitions of complementary businesses. In connection with our acquisition of Vanco Payment Solutions, Inc. ("Vanco") in the fourth quarter of 2015, we added approximately 6,400 of our active SMB merchants. Table of Contents We measure same store sales of existing merchants as the change in card processing volume for all card merchants that were processing with us for the same period in the prior year. Same store sales of existing merchants results from the combination of the increasing or decreasing use by consumers of bankcards for the purchase of goods and services at the POS, and sales growth experienced by our retained SMB merchants. Historically, our same store sales experience has tracked with the overall economic conditions in the industries we serve. The following table compares our same store sales growth during 2016 and 2015: Same Store Sales of Existing Merchants 2016 2015 First Quarter 0.9% 6.7% Second Quarter 1.9% 5.2% Third Quarter — 4.2% Fourth Quarter — 2.4% Full Year — 4.6% Merchant attrition is expected in the Merchant Acquiring industry in the ordinary course of business. We experience attrition in bankcard volume as a result of several factors, including business closures, transfers of merchants accounts to our competitors and account closures that we initiate due to heightened credit risks. We measure bankcard net volume attrition relative to all merchants that were processing with us in the same period in the prior year, net of same store sales growth. During the three months ended June 30, 2016, we experienced 20.3% net volume attrition compared to net volume attrition of 15.3% for the three months ended June 30, 2015. During the six months ended June 30, 2016, we experienced 20.5% net volume attrition compared to net volume attrition of 14.4% for the six months ended June 30, 2015. Our Merchant Acquiring revenue is recurring in nature, as we typically enter into five-year service contracts with our merchants. Our Merchant Acquiring revenue is generated primarily from payment processing fees, which are a combination of a fee equal to a percentage of the dollar amount of each transaction we process plus a flat fee per transaction. We make mandatory payments of interchange fees to the card issuer through the card networks and pay dues, assessments and other network fees to Visa, MasterCard, American Express and Discover. Our Merchant Acquiring revenue is largely driven by the Visa and MasterCard volume processed by our merchants. We also realize card processing revenues from processing transactions for our merchants accepting American Express and from processing Discover transactions. Enterprise Services Revenues from our Enterprise services are largely driven by recurring fees charged for ERP integration and hosting services, and recurring P2PE device fees. For the three months ended June 30, 2016 and 2015, revenue includes $1.2 million and $841 thousand, respectively, of revenue related to Enterprise services. For the six months ended June 30, 2016 and 2015, revenue includes $2.3 million and $1.6 million, respectively, of revenue related to Enterprise services. Recent Events On July 29, 2016 (the "Closing Date"), we consummated the previously announced transactions contemplated by the Agreement and Plan of Merger, dated as of March 7, 2016, as amended June 24, 2016 (the "Merger Agreement"), by and among the FinTech, Merger Sub and CardConnect. The Merger Agreement provided for the acquisition of CardConnect by FinTech pursuant to the Merger. In connection with the closing of the Merger, the company changed its name from FinTech Acquisition Corp. to CardConnect Corp. and Merger Sub changed its name to FTS Holding Corporation. As a result of the completion of the transaction, CardConnect Corp. became a public company. The aggregate consideration paid in the Merger consisted of (i) 15,162,470 shares of FinTech common stock and options to purchase 3,463,950 shares of FinTech common stock, which were issued upon conversion of options to purchase shares of CardConnect common stock outstanding immediately prior to the Merger and (ii) $179.1 million in cash (which includes $2.1 million in "Excess Cash" (as defined in the Merger Agreement)). Table of Contents In connection with the closing of the Merger, FinTech redeemed a total of 1,119,051 shares of its common stock at a redemption price of $10.01 per share pursuant to the terms of the Company s amended and restated certificate of incorporation in effect at the Merger closing, resulting in a total payment to redeeming stockholders of approximately $11,201,701. Immediately following the Merger, there were 1,500,000 shares of Series A Preferred Stock outstanding, 28,751,331 shares of the Company s common stock outstanding, warrants to purchase 10,300,000 shares of the Company s common stock and options to purchase 6,854,429 shares of the Company s common stock. As of the Closing Date, the former stockholders of CardConnect owned approximately 54.6% of the Company s outstanding common stock, the former stockholders of FinTech owned approximately 43.6% of the Company s outstanding common stock (13.3% held by the Initial Stockholders) and the Series A Purchaser owned approximately 1.7% of the Company s outstanding common stock. In connection with the Merger, on the Closing Date, the Company, through Merger Sub, entered into the First Lien Facility and the Second Lien Facility. See "Liquidity and Capital Resources—Credit Facilities" for a description of each of these credit facilities. In connection with the Merger, on the Closing Date, the Company issued 1,500,000 shares of its Series A Preferred Stock. See "Liquidity and Capital Resources—Series A Preferred Stock" for a description of this transaction and certain material terms of the Series A Preferred Stock. Acquisitions On October 31, 2015, we purchased certain assets and assumed certain liabilities of Vanco, a provider of card-based payment processing services, for cash of $24 million. The purchase was funded primarily with borrowings under our $65.0 million credit facility. The asset purchase added over 8,000 merchants to our business. On July 1, 2013, we acquired Smartpay, LLC, a provider of an online billing solution, for cash of $1.1 million. The purchase was funded from operating cash flows. On July 13, 2012, we acquired Marathon, a provider of card-based payment processing services. In 2013 and 2014, we paid $4.7 million and $255.5 thousand, respectively, in contingent consideration relating to the acquisition. On November 26, 2012, we acquired Dependable Payment Processing, Inc. and Discount Payment Processing, Inc. In 2014 and 2015, we paid $909.1 thousand and $3.7 million, respectively, in contingent consideration relating to the acquisition. The results of operations of these acquired businesses have been included in our financial statements since the applicable acquisition date. For more information regarding these transactions, see Note 3 to our consolidated financial statements included elsewhere in this prospectus. Components of Revenues and Expenses Revenues Revenue. Revenue consists of card processing fees charged to merchants for card-based processing services. We charge merchants various rates for our services, which depend upon various factors including the type of bankcard, card brand, the merchant s charge volume, the merchant s industry and the merchant s risk profile. Fees principally consist of bankcard volume and transaction fees, which are a percentage of the dollar amount of each credit or debit transaction and fixed transaction fees. We also generate card processing revenues by charging merchants a variety of service fees, including fees for monthly minimum charge volume requirements, statement fees, annual fees, and fees for other miscellaneous services, including handling chargebacks. We also generate revenues by selling our technology solutions, which include hardware and software products, maintenance, and professional installation and training services. Table of Contents Expenses Cost of services. Cost of services consists of interchange and pass-through and other cost of services. Interchange and pass-through consists of interchange fees, dues and assessment, debit network fees and other pass-through costs. We expect interchange and pass-through to increase proportionately as a percentage of revenue. Other cost of services consists of commissions to our distribution partners and internal sales staff and other third-party processing costs attributable to payment processing and related services to merchants. Other cost of services also includes merchant supplies and service expenses. General and administrative. General and administrative expenses include salaries and other employment costs, professional services, rent and utilities and other operating costs. Stock-based compensation. Stock-based compensation reflects the amortization of the estimated fair value of share-based awards. We recognize stock-based compensation as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. Depreciation and amortization of intangibles. Depreciation expense consists of depreciation on our investments in property, equipment and computer hardware and software, and our amortization of acquired intangible assets and internally developed software. Depreciation expense is recognized on a straight-line basis over the estimated useful life of the asset. Amortization expense for acquired intangible assets is recognized using a proportional cash flow method. Amortization expense for internally developed software is recognized over the estimated useful life of the asset. Interest expense, net. Our interest expense consists of interest on our outstanding indebtedness under our revolving credit facility. Factors Affecting CardConnect s Business and Results of Operations A number of factors impact our business, result of operations and financial condition including: the amount and mix of volume being processed; the demand for our products and services; our ability to attract and retain distribution partners and merchants on reasonable terms; our ability to attract and obtain Enterprise customers; our ability to capitalize on recent acquisitions and identify and complete future acquisitions; general economic conditions and consumer spending trends; and the emergence of new technologies and payment types. Increases in payment network fees and other related costs have not historically had a material effect on the growth of our business or results of our operations as such costs are generally passed through to our merchants. Results of Operations This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for (i) the three and six months ended June 30, 2016 and 2015, (ii) the years ended December 31, 2015 and 2014 and (iii) the years ended December 31, 2014 and 2013. We have derived this data from our quarterly and annual consolidated financial statements included elsewhere in this prospectus. Table of Contents Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015 The following table shows certain income statement data for the periods indicated: Three Months Ended June 30, Change 2016 2015 Amount % (dollars in thousands) Revenue $148,444 $112,165 $36,279 32.3% Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 109,028 82,795 26,233 31.7% Other cost of services 23,577 16,816 6,761 40.2% Total cost of services 132,605 99,611 32,994 33.1% General and administrative 6,817 5,520 1,297 23.5% Stock-based compensation 391 462 (71) (15.4%) Depreciation 432 307 125 40.5% Amortization of intangibles 4,937 4,974 (37) (0.8%) Total expenses 145,181 110,875 34,306 30.9% Income from operations 3,263 1,291 1,972 152.8% Other expense: Interest expense, net (452) (299) (153) 51.3% Other, net (122) (110) (12) 11.0% Total other expense (574) (408) (165) 40.5% Income before income tax provision 2,689 882 1,807 204.8% Provision for income taxes (218) (512) 294 (57.4%) Net income $2,471 $370 $2,101 568.2% Revenue Revenue increased $36.3 million, or 32.3%, from $112.2 million for the three months ended June 30, 2015 to $148.4 million for the three months ended June 30, 2016. This increase was driven by increased bankcard volume of $1.5 billion, or 35.5%. The growth in bankcard volume consisted of bankcard volume from new merchants and same store sales of existing merchants, partially offset by merchants who attrited during the same period. See "Overview" and "How we Assess the Performance of our Business." Cost of Services Cost of services increased $33.0 million, or 33.1%, from $99.6 million for the three months ended June 30, 2015 to $132.6 million in for the three months ended June 30, 2016. This increase was driven by increased interchange and pass-through and increased other cost of services. Interchange and pass-through increased $26.2 million, or 31.7%, from $82.8 million for the three months ended June 30, 2015 to $109.0 million for the three months ended June 30, 2016. This increase was driven by increased bankcard volume as discussed above. Other cost of services increased $6.8 million, or 40.2%, from $16.8 million for the three months ended June 30, 2015 to $23.6 million in for the three months ended June 30, 2016. This increase was driven by increased bankcard volume resulting in increased commissions paid to our distribution partners and direct sales staff of $4.0 million, an increase in third-party processing costs of $1.1 million, an increase in merchant losses of $633 thousand and an increase in the cost of equipment sales of $742 thousand. General and Administrative Expenses General and administrative expenses increased $1.3 million, or 23.5%, from $5.5 million for the three months ended June 30, 2015 to $6.8 million for the three months ended June 30, 2016. This increase was driven by an increase in employment costs of $1.1 million due to an increase in headcount. Table of Contents Stock-based Compensation Stock-based compensation decreased $71 thousand, or 15.4%, from $462 thousand for the three months ended June 30, 2015 to $391 thousand for the three months ended June 30, 2016. This decrease was driven by the vesting of 2011 and 2012 grants in 2015 and 2016, respectively, of $140 thousand, 2015 fair value adjustments of stock options of $18 thousand and forfeitures of $8 thousand, partially offset by additional compensation expense recognized for stock options granted in 2015 of $96 thousand. Depreciation and Amortization Depreciation and amortization increased $87 thousand, or 1.7%, from $5.3 million for the three months ended June 30, 2015 to $5.4 million for the three months ended June 30, 2016. This increase was driven by amortization of intangible assets acquired in the Vanco acquisition of $797 thousand and depreciation of fixed assets placed into service of $173 thousand. These increases were partially offset by a decrease in amortization of acquisition related intangibles, excluding Vanco, of $484 thousand and a decrease in amortization of residual buyouts of $374 thousand. Provision for Income Taxes The provision for income taxes decreased $294 thousand, or 57.4%, from $512 thousand for the three months ended June 30, 2015 to $218 thousand for the three months ended June 30, 2016. The effective tax rates were 8.1% and 58.1% for the three months ended June 30, 2016 and 2015, respectively. The effective rate for the three months ended June 30, 2016 differs from the federal statutory rate due to the expected decrease of the valuation allowance against our deferred tax assets, which reduced our effective tax rate by 36.6%. This was partially offset by the impact of indefinitely-lived intangible assets and state taxes, which increased our effective tax rate by 6.1% and 2.3%, respectively. The effective rate for the three months ended June 30, 2015 differs from the federal statutory rate due to an expected increase in the valuation allowance against our deferred tax assets and state taxes, which increased our effective tax rate by 16.7% and 2.5%, respectively. Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015 The following table shows certain income statement data for the periods indicated: Six Months Ended June 30, Change 2016 2015 Amount % (dollars in thousands) Revenue $278,454 $213,245 $65,209 30.6% Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 204,603 156,615 47,988 30.6% Other cost of services 43,823 32,607 11,215 34.4% Total cost of services 248,426 189,222 59,204 31.3% General and administrative 13,505 10,674 2,831 26.5% Stock-based compensation 849 923 (74) (8.1%) Depreciation 853 589 264 44.8% Amortization of intangibles 10,096 9,393 703 7.5% Total expenses 273,729 210,801 62,928 29.9% Income from operations 4,725 2,444 2,281 93.3% Other expense: Interest expense, net (872) (570) (302) 53.0% Other, net (167) (153) (14) 8.8% Total other expense (1,039) (723) (316) 43.6% Income before income tax provision 3,686 1,721 1,965 114.2% Provision for income taxes (292) (999) 707 (70.8%) Net income $3,394 $721 $2,673 370.6% Table of Contents Revenue Revenue increased $65.2 million, or 30.6%, from $213.2 million for the six months ended June 30, 2015 to $278.5 million for the six months ended June 30, 2016. This increase was driven by increased bankcard volume of $2.6 billion, or 32.8%. The growth in bankcard volume consisted of bankcard volume from new merchants and same store sales of existing merchants, partially offset by merchants who attrited during the same period. See "Overview" and "How we Assess the Performance of our Business." Cost of Services Cost of services increased $59.2 million, or 31.3%, from $189.2 million for the six months ended June 30, 2015 to $248.4 million in for the six months ended June 30, 2016. This increase was driven by increased interchange and pass-through and increased other cost of services. Interchange and pass-through increased $48.0 million, or 30.6%, from $156.6 million for the six months ended June 30, 2015 to $204.6 million for the six months ended June 30, 2016. This increase was driven by increased bankcard volume as discussed above. Other cost of services increased $11.2 million, or 34.4%, from $32.6 million for the six months ended June 30, 2015 to $43.8 million in for the six months ended June 30, 2016. This increase was driven by increased bankcard volume resulting in increased commissions paid to our distribution partners and direct sales staff of $6.6 million, an increase in third-party processing costs of $2.1 million, an increase in the cost of equipment sales of $878 thousand and an increase in merchant losses of $1.8 million. General and Administrative Expenses General and administrative expenses increased $2.8 million, or 26.5%, from $10.7 million for the six months ended June 30, 2015 to $13.5 million for the six months ended June 30, 2016. This increase was driven by an increase in employment costs of $2.2 million due to an increase in headcount and an increase in other operating expenses of $324 thousand. Stock-based Compensation Stock-based compensation decreased $74 thousand, or 8.1%, from $923 thousand for the six months ended June 30, 2015 to $849 thousand for the six months ended June 30, 2016. This decrease was driven by the vesting of 2011 and 2012 grants in 2015 and 2016, respectively, of $214 thousand, 2015 fair value adjustments of stock options of $37 thousand and forfeitures of $18 thousand, partially offset by additional compensation expense recognized for stock options granted in 2015 of $195 thousand. Depreciation and Amortization Depreciation and amortization increased $967 thousand, or 9.7%, from $10.0 million for the six months ended June 30, 2015 to $10.9 million for the six months ended June 30, 2016. This increase was driven by amortization of intangible assets acquired in the Vanco acquisition of $1.6 million and depreciation of fixed assets placed into service of $330 thousand. These increases were partially offset by a decrease in amortization of acquisition related intangibles, excluding Vanco, of $957 thousand. Table of Contents Provision for Income Taxes The provision for income taxes decreased $707 thousand, or 70.8%, from $999 thousand for the six months ended June 30, 2015 to $292 thousand for the six months ended June 30, 2016. The effective tax rates were 7.9% and 58.1% for the six months ended June 30, 2016 and 2015, respectively. The effective rate for the six months ended June 30, 2016 differs from the federal statutory rate due to the expected decrease of the valuation allowance against our deferred tax assets, which reduced our effective tax rate by 36.6%. This was partially offset by the impact of indefinitely-lived intangible assets and state taxes, which increased our effective tax rate by 6.1% and 2.3%, respectively. The effective rate for the six months ended June 30, 2015 differs from the federal statutory rate due to an expected increase in the valuation allowance against our deferred tax assets and state taxes, which increased our effective tax rate by 16.7% and 2.5%, respectively. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 The following table shows certain income statement data for the periods indicated: Year ended December 31, Year ended December 31, Change 2015 2014 Amount % (dollars in thousands) Revenue $458,648 $389,985 $68,663 17.6% Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 338,005 283,669 54,336 19.2% Other cost of services 71,072 62,273 8,799 14.1% Total cost of services 409,078 345,943 63,135 18.3% General and administrative 23,480 24,062 (583) (2.4%) Stock-based compensation 1,887 1,908 (21) (1.1%) Depreciation 1,188 870 317 36.5% Amortization of intangibles 19,175 18,544 630 3.4% Change in contingent earnout obligations — 771 (771) (100.0%) Total expenses 454,806 392,098 62,708 16.0% Income (loss) from operations 3,842 (2,113) 5,955 (281.8%) Other expense: Interest expense, net (1,204) (1,153) (51) 4.4% Other, net (81) (146) 64 (44.2%) Total other expense (1,285) (1,299) 14 (1.1%) Income (loss) before income tax provision 2,556 (3,412) 5,969 (174.9%) Provision for income taxes (1,384) (8,598) 7,215 (83.9%) Net income (loss) $1,172 $(12,011) $13,183 (109.8%) Revenue Revenue increased $68.7 million, or 17.6%, from $390.0 million in 2014 to $458.6 million in 2015. This increase was driven by increased bankcard volume of $2.4 billion, or 16.4%. The growth in bankcard volume consisted of bankcard volume from new merchants and same store sales of existing merchants, partially offset by merchants who attrited during the year. See "Overview" and "How we Assess the Performance of our Business." Table of Contents Cost of Services Cost of services increased $63.1 million, or 18.3%, from $345.9 million in 2014 to $409.1 million in 2015. This increase was driven by increased interchange and pass-through and increased other cost of services. Interchange and pass-through increased $54.3 million, or 19.2%, from $283.7 million in 2014 to $338.0 million in 2015. This increase was driven by increased bankcard volume as discussed above. Other cost of services increased $8.8 million, or 14.1%, from $62.3 million in 2014 to $71.1 million in 2015. This increase was driven by increased bankcard volume resulting in increased commissions paid to our distribution partners and direct sales staff of $6.1 million, an increase in merchant supplies and services expenses of $1.9 million and increased third-party processing costs of $902.1 thousand. General and Administrative Expenses General and administrative expenses decreased $582.8 thousand, or 2.4%, from $24.1 million in 2014 to $23.5 million in 2015. This decrease was driven by a decrease in employment costs of $1.7 million, partially offset by increased other operating expenses of $1.2 million. The decrease in employment costs reflects severance expense of $384.1 thousand in 2015, compared to $3.4 million in 2014, which was primarily related to the departure of our then Chief Executive Officer. Stock-based Compensation Stock-based compensation decreased $21.2 thousand from $1.9 million in 2014 to $1.9 million in 2015. This decrease was driven by the vesting of our 2010 and 2011 grants in 2014 and 2015, respectively, of $427.7 thousand and forfeitures of $23.9 thousand, partially offset by fair value adjustments of stock options of $205.3 thousand, the full-year impact of stock options granted in 2014 of $134.8 thousand and additional stock options granted in 2015 of $90.2 thousand. Depreciation and Amortization Depreciation and amortization increased $947.9 thousand, or 4.9%, from $19.4 million in 2014 to $20.4 million in 2015. This increase was driven by amortization of intangible assets acquired in the Vanco acquisition of $441.6 thousand in 2015. Provision for Income Taxes The provision for income taxes decreased $7.2 million, or 83.9%, from $8.6 million in 2014 to $1.4 million in 2015. The effective tax rates were 54.1% and (252.0)% for the years ended December 31, 2015 and 2014, respectively. The effective rate for 2015 differs from the federal statutory rate primarily due to an increase in the valuation allowance, which increased our effective tax rate by 16.7%. The effective rate for 2014 differs from the federal statutory rate primarily due to recording a valuation allowance against our deferred tax assets, which increased our effective tax rate by 294.0% in 2014. Table of Contents Year Ended December 31, 2014 Compared to Year Ended December 31, 2013 The following table shows certain income statement data for the periods indicated: Year ended December 31, Year ended December 31, Change 2014 2013 Amount % (dollars in thousands) Revenue $389,985 $348,905 $41,080 11.8% Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 283,669 251,185 32,484 12.9% Other cost of services 62,273 59,076 3,197 5.4% Total cost of services 345,943 310,261 35,682 11.5% General and administrative 24,062 19,003 5,060 26.6% Stock-based compensation 1,908 1,563 345 22.0% Depreciation 870 684 186 27.2% Amortization of intangibles 18,544 19,406 (862) (4.4%) Change in contingent earnout obligations 771 (25) 795 (3239.9%) Total expenses 392,098 350,892 41,206 11.7% Income (loss) from operations (2,113) (1,988) (126) 6.3% Other expense: Interest expense, net (1,153) (1,304) 151 (11.6%) Other, net (146) (173) 28 (16.0%) Total other expense (1,299) (1,478) 178 (12.1%) Income (loss) before income tax provision (3,412) (3,465) 53 (1.5%) Provision for income taxes (8,598) 1,313 (9,911) (755.0%) Net income (loss) $(12,011) $(2,152) $(9,859) 458.0% Revenue Revenue increased $41.1 million, or 11.8%, from $348.9 million in 2013 to $390.0 million in 2014. This increase was driven by increased bankcard volume of $1.5 billion, or 11.5%. See "Overview" and "How we Assess the Performance of our Business." Cost of Services Cost of services increased $35.7 million, or 11.5%, from $310.3 million in 2013 to $345.9 million in 2014. This increase was driven by increased interchange and pass-through and increased other cost of services. Interchange and pass-through increased $32.5 million, or 12.9%, from $251.2 million in 2013 to $283.7 million in 2014. This increase was driven by increased bankcard volume. Other costs of services increased $3.2 million, or 5.4%, from $59.1 million in 2013 to $62.3 million in 2014. This increase was driven by increased bankcard volume resulting in increased commissions paid to our distribution partners and direct sales staff of $3.4 million and an increase in merchant supplies and services expenses of $1.1 million, partially offset by decreased third-party processing costs of $1.3 million. General and Administrative Expenses General and administrative expenses increased $5.1 million, or 26.6%, from $19.0 million in 2013 to $24.1 million in 2014. This increase was driven by an increase in employment costs of $4.6 million and an increase in rent and utilities of $862.7 thousand, partially offset by a decrease in professional services of $1.0 million. The increase in employment costs reflects severance expense of $3.4 million in 2014, compared to $107.6 thousand in 2013, and an increase in headcount. The increase in rent and utilities in 2014 reflects additional space leased at our King of Prussia, PA location. The decrease in professional services reflects decreased legal expense resulting from a 2013 settled legal matter. Stock-based Compensation Stock-based compensation increased $344.6 thousand, or 22.0%, from $1.6 million in 2013 to $1.9 million in 2014. This increase was driven by the full-year impact of stock options granted in 2013 of $295.8 thousand and stock options granted in 2014 of $51.0 thousand. Table of Contents Depreciation and Amortization Depreciation and amortization decreased $675.6 thousand, or 3.4%, from $20.1 million in 2013 to $19.4 million in 2014. This decrease was driven by a $1.8 million decrease in amortization of acquisition related intangible assets, partially offset by a $952.0 thousand increase in amortization of our internally developed software and website development. Provision for Income Taxes The provision for income taxes increased $9.9 million, from a benefit of $1.3 million in 2013 to an expense of $8.6 million in 2014. The effective tax rates were (252.0)% and 37.9% for the years ended December 31, 2014 and 2013, respectively. The effective rate for 2014 differs from the federal statutory rate primarily due to our recording a $10.0 million valuation allowance against our deferred tax assets in 2014, which increased our effective tax rate by 294.0%. The effective rate for 2013 differs from the federal statutory rate primarily due to tax credits and state income taxes, which increased our effective tax rate by 3.4% and 2.1%, respectively. These benefits were partially offset by a liability for unrecognized tax benefits of 1.8%. Selected Quarterly Results of Operations The following tables set forth unaudited quarterly statement of income data for all quarters of 2014 and 2015, and the first two quarters of 2016. We have prepared the statement of income data for each of these quarters on the same basis as the audited financial statements included elsewhere in this prospectus and, in the opinion of our management, each statement of operations includes all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods. This information should be read in conjunction with the audited financial statements included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for any future period. Quarter Ended March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 (dollars in thousands) Revenue $88,841 $98,906 $100,187 $102,051 Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 63,631 71,954 73,186 74,898 Other cost of services 14,480 15,974 15,954 15,866 Total cost of services 78,111 87,928 89,140 90,764 General and administrative 6,616 5,557 5,264 6,625 Stock-based compensation 554 480 465 409 Depreciation 218 223 170 259 Amortization of intangibles 4,927 4,341 4,726 4,551 Change in contingent earnout obligations — — — 771 Total expenses 90,426 98,528 99,765 103,380 Income (loss) from operations (1,584) 378 422 (1,329) Other expense: Interest expense, net (315) (266) (293) (280) Other, net (16) (63) (50) (15) Total other expense (331) (329) (343) (296) Income (loss) before income tax provision (1,916) 49 79 (1,624) Provision for income taxes 666 (17) (58) (9,190) Net income (loss) $(1,249) $32 $21 $(10,814) Table of Contents Quarter Ended March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015 (dollars in thousands) Revenue $101,080 $112,165 $117,861 $127,542 Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 73,820 82,795 86,785 94,605 Other cost of services 15,791 16,816 18,661 19,804 Total cost of services 89,611 99,611 105,446 114,410 General and administrative 5,153 5,520 5,829 6,977 Stock-based compensation 461 462 462 502 Depreciation 282 307 293 305 Amortization of intangibles 4,419 4,974 5,055 4,727 Change in contingent earnout obligations — — — — Total expenses 99,926 110,875 117,085 126,921 Income (loss) from operations 1,153 1,291 776 622 Other expense: Interest expense, net (271) (299) (274) (360) Other, net (44) (110) (20) 92 Total other expense (315) (408) (294) (268) Income (loss) before income tax provision 838 882 482 354 Provision for income taxes (487) (512) (315) (69) Net income (loss) $351 $370 $166 $285 Table of Contents Quarter Ended March 31, 2016 June 30, 2016 (dollars in thousands) Revenue $130,057 $148,444 Cost of services (exclusive of depreciation and amortization shown separately below) Interchange and pass-through 95,575 109,028 Other cost of services 20,293 23,577 Total cost of services 115,868 132,605 General and administrative 6,688 6,817 Stock-based compensation 458 391 Depreciation 422 432 Amortization of intangibles 5,159 4,937 Change in contingent earnout obligations — — Total expenses 128,595 145,181 Income (loss) from operations Other expense: Interest expense, net (420) (452) Other, net (45) (122) Total other expense (465) (574) Income (loss) before income tax provision 997 2,689 Provision for income taxes (74) (218) Net income (loss) $923 $2,471 Table of Contents Seasonality We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenues as a result of consumer spending patterns and recognition of non-transaction based fees. Historically, our revenues have been strongest in our third and fourth quarters, and weakest in our first quarter. Some variability results from seasonal retail events and the number of business days in a month or quarter. Operating expenses do not typically fluctuate seasonally. Liquidity and Capital Resources Background Liquidity and capital resource management is a process focused on providing the funding we need to meet our short and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, our technology solutions, and to make acquisitions with the expectation that these investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs for capital. Our principal uses of cash are to pay commissions to our distribution partners and internal sales staff, residual buyouts and distribution partner advances, operating expenses, income taxes and interest expense, invest in our technology infrastructure and fund acquisitions. Our working capital, defined as current assets less current liabilities, was negative by $37.3 million and positive by $8.1 million at June 30, 2016 and December 31, 2015, respectively. The decrease in working capital was due to reclassifying our long-term debt to current liabilities in anticipation of repayment of our credit facility in connection with the consummation of the Merger. At June 30, 2016, we had cash and cash equivalents totaling $9.4 million compared to $3.6 million at December 31, 2015. These balances do not include restricted cash, which reflects amounts due to merchants for processing-related cash in transit and collateral of $1.8 million and $1.6 million at June 30, 2016 and December 31, 2015, respectively. Our long-term debt represents the outstanding balance under our prior revolving credit facility which we have historically used to fund acquisitions and for general corporate purposes. In addition to borrowings under our prior revolving credit facility, we historically have funded our cash needs primarily with cash flows from our operating activities. Upon closing of the Merger, we repaid the outstanding balance of approximately $58.0 million under our prior revolving credit and entered into the new Credit Facilities discussed below under "—Revolving Credit Facility" and ""—Credit Facilities," respectively. We believe that our current cash balance and cash generated from operations will provide sufficient liquidity to meet our anticipated needs for operating capital for at least the next twelve months. Statements of Cash Flows The following tables reflect the changes in cash flows for the comparative periods. Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015 Six Months Ended June 30, 2016 2015 (dollars in thousands) Net cash provided by (used in): Operating activities $12,049 $10,107 Investing activities (4,488) (9,254) Financing activities (1,780) (1,175) Net change in cash and cash equivalents $5,781 $(322) Table of Contents Cash Flow Provided By Operating Activities. We reported net cash provided by operating activities of $12.0 million for the six months ended June 30, 2016, compared to $10.1 million for the six months ended June 30, 2015. Cash provided by operating activities for the six months ended June 30, 2016 reflects net income as adjusted for non-cash operating items including depreciation and amortization and stock-based compensation. Additionally, the net cash provided for the six months ended June 30, 2016 reflects increases in accounts receivable of $3.0 million, other current assets of $616 thousand, prepaid expenses of $329 thousand and prepaid income taxes of $77 thousand. These uses of cash were partially offset by increases in residuals payable of $878 thousand and processing liabilities of $427 thousand. Cash provided by operating activities for the six months ended June 30, 2015 reflects net income as adjusted for non-cash operating items including depreciation and amortization and stock-based compensation. Additionally, the net cash provided for the six months ended June 30, 2015 reflects increases in accounts receivable of $2.5 million, other current assets of $873 thousand and prepaid expenses of $441 thousand, and a decrease in accrued expenses of $598 thousand. These uses of cash were partially offset by a decrease in prepaid income taxes of $1.4 million and an increase in deferred revenue of $970 thousand. Cash Flow Used In Investing Activities. Net cash used in investing activities was $4.5 million for the six months ended June 30, 2016 and $9.3 million for the six months ended June 30, 2015. Cash flows used in investing activities for the six months ended June 30, 2016 reflects funding of residual buyouts of $2.3 million, additions to our internally developed software of $1.5 million and property and equipment and leasehold improvements of $594 thousand. Cash flows used in investing activities for the six months ended June 30, 2015 reflects funding of residual buyouts of $6.4 million, additions to our internally developed software of $1.4 million and purchases of property and equipment and leasehold improvements of $1.1 million. Cash Flow Used In Financing Activities. Net cash used in financing activities was $1.8 million for the six months ended June 30, 2016 and $1.2 million for the six months ended June 30, 2015. Cash flows used in financing activities for the six months ended June 30, 2016 reflects payments under our revolving credit facility of $2.0 million. Cash flows used in financing activities for the six months ended June 30, 2015 reflects pre-payments under our revolving credit facility of $4.0 million, payment of contingent consideration of $3.7 million in connection with prior acquisitions and the purchase of treasury stock of $2.7 million from our then non-executive chairman. These uses of cash were partially offset by borrowings under our revolving credit facility of $9.2 million. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 and Year Ended December 31, 2013 Fiscal Year Ended December 31, 2013 2014 2015 (dollars in thousands) Net cash provided by (used in): Operating activities $18,232 $19,683 $20,071 Investing activities (14,317) (9,998) (37,171) Financing activities (4,288) (8,784) 19,517 Net change in cash and cash equivalents $(373) $901 $2,417 Table of Contents Cash Flow Provided By Operating Activities. We reported net cash provided by operating activities of $20.1 million in 2015, compared to $19.7 million in 2014 and $18.2 million in 2013. Cash provided by operating activities in 2015 reflects net income as adjusted for non-cash operating items including depreciation and amortization and stock-based compensation. Additionally, the net cash provided for 2015 reflects increases in accounts receivable and other receivables of $6.8 million, partially offset by increases in accounts payable and residuals payable of $3.1 million. Cash provided by operating activities in 2014 reflects a net loss as adjusted for non-cash operating items including depreciation and amortization, deferred tax expense and stock-based compensation. Additionally, the net cash provided for 2014 reflects increases in accrued expenses and residuals payable of $1.2 million and a decrease in prepaid income taxes of $755.0 thousand. Cash provided by operating activities in 2013 reflects a net loss as adjusted for non-cash operating items including depreciation and amortization and stock-based compensation, partially offset by a deferred tax benefit. Additionally, the net cash provided for 2013 reflects an increase in accounts receivable of $1.5 million, partially offset by a decrease in other receivables of $846.8 thousand. Cash Flow Used In Investing Activities. Net cash used in investing activities was $37.2 million for 2015, $10.0 million for 2014 and $14.3 million for 2013. Cash flows used in investing activities in 2015 reflect the acquisition, net of cash acquired, of Vanco for $22.7 million, funding of residual buy outs of $6.8 million, purchases of property and equipment and leasehold improvements of $4.8 million, and additions to our internally developed software of $2.6 million. Cash flows used in investing activities in 2014 reflects funding of residual buy outs of $4.8 million, additions to our internally developed software of $3.0 million and purchases of property and equipment of $1.1 million. Cash flows used in investing activities in 2013 reflect advances to related parties of $3.0 million, advances to sales agents net of repayments of $2.1 million, funding of residual buy outs of $3.6 million, additions to our internally developed software of $2.9 million, purchases of property and equipment of $1.4 million and the acquisition of Smartpay, LLC for $1.1 million. Cash Flow Provided By (Used In) Financing Activities. Net cash provided by financing activities was $19.5 million in 2015, compared to net cash used in financing activities of $8.8 million in 2014 and $4.3 million in 2013. Cash flows provided by financing activities in 2015 reflect borrowings of $33.2 million under our revolving credit facility partially offset by pre-payments under our revolving credit facility of $10.0 million, payment of contingent consideration of $3.7 million and the purchase of treasury stock of $2.7 million from our non-executive chairman. Cash flows of used in financing activities in 2014 reflect pre-payments under our revolving credit facility of $9.0 million and payment of contingent consideration of $909.1 thousand. These decreases were partially offset by borrowings under our revolving credit facility of $1.1 million. Cash flows used in financing activities in 2013 reflect payment of contingent consideration of $4.2 million and pre-payments of $2.0 million on our revolving credit facility. These decreases were partially offset by borrowings of $2.0 million under our revolving credit facility. Table of Contents Revolving Credit Facility As of June 30, 2016, we had a revolving credit facility, governed by a credit agreement dated July 12, 2012, as amended, with Bank of America, N.A., as administrative agent, and another lender party thereto. As of June 30, 2016, we had $58.0 million outstanding under our revolving credit facility and $6.9 million available under our revolving credit facility, and we had two outstanding standby letters of credit totaling $84.4 thousand which were issued in connection with two of our lease agreements and no swingline loans outstanding. Our revolving credit facility had a maturity date of August 30, 2017 and a weighted average interest rate of 2.42% as of June 30, 2016. On the Closing Date, in connection with the consummation of the Merger, we repaid and terminated our revolving credit facility and the Company entered into a new first lien credit facility and second lien credit facility described above under "Recent Events." Credit Facilities In connection with the Merger, on the July 29, 2016, the combined Company, through Merger Sub, entered into a credit agreement with BMO, acting as administrative agent for a group of lenders, for the First Lien Facility, and entered into a second lien credit agreement with Babson, also acting as administrative agent for a group of lenders, for the Second Lien Facility. Each facility is guaranteed by the Company and its two indirect wholly-owned subsidiaries, CardConnect, LLC and Princeton Payment Solutions, LLC and secured by a pledge of all of the assets of the Company and its subsidiaries. First Lien Facility The First Lien Facility consists of the following: a $30 million senior secured first lien revolving credit facility, with a $10 million sublimit for issuance of standby letters of credit and a $5 million sublimit for swing line loans; and a $100 million senior secured first lien term credit facility. The First Lien Facility permits the Company to increase the first lien facilities by up to $35 million (less amounts obtained from the related expansion feature under the Second Lien Facility), subject to customary restrictions and conditions, including compliance with specified leverage ratios (as described below). The First Lien Facility matures five years from the Merger closing date and bears interest at rates based either on the three-month London Interbank Offered Rate, or LIBOR, plus a margin of between 2.00% and 3.50%, or, at the Company s option, BMO s base rate plus a margin of between 1.00% and 2.50%, with the margin in each case depending upon consolidated total net leverage ratios (described below). The term loan portion of the First Lien Facility will amortize $1.25 million per quarter beginning with the quarter ending December 31, 2016 through the quarter ending September 30, 2018; thereafter $1.875 million per quarter through the quarter ending September 30, 2020; and finally $2.5 million per quarter through the quarter ending June 30, 2021. The Company may prepay the first lien credit facilities, without premium. The first lien credit facilities require mandatory prepayments, without premium, in the following amounts: 100% of the net cash proceeds of (i) sales of assets not in the ordinary course of business, (ii) sales of debt securities, and (iii) casualty or condemnation events (subject to specified thresholds and exceptions, including permitted reinvestment periods); and 75% of "Excess Cash Flow," as defined in Exhibit E to the first lien credit agreement which is included as an exhibit to this report, with a reduction to 50% if the total net leverage ratio for the fiscal year is 3.00 to 1.00, and a reduction to 25% if such ratio is 2.50 to 1.00. Table of Contents The first lien credit agreement contains covenants that are usual and customary for loans of this type, including affirmative and operational covenants and restrictive covenants regarding, among other matters, incurrence of debt, incurrence of liens, investments (including an aggregate cumulative limit of $100 million plus the "available amount" (generally, the proceeds of equity raised plus the balance available above the "Excess Cash Flow" used for prepayments, less amounts used as otherwise permitted by the First Lien Facility, including other acquisitions, dividends and debt repayments) on acquisitions in excess of $10 million during the term of the first lien facilities), mergers, dispositions and specified uses of cash (including payment of dividends and distributions). The definitive credit agreement also contains covenants requiring the Company to maintain: a minimum fixed charge coverage ratio of 1.25 to 1.00; a maximum first lien leverage ratio of 3.50 to 1.00, reducing periodically until the ratio becomes 2.50 to 1.00 for quarters following June 30, 2018; and a maximum total net leverage ratio of 4.75 to 1.00, reducing periodically until the ratio becomes 3.50 to 1.00 for quarters after June 30, 2019. In general, the "fixed charge coverage ratio" is defined as the ratio of EBITDA (less unfinanced capital expenditures, cash taxes and restricted payments, as defined) to the sum of scheduled debt principal payments over the most recently ended four quarters; the "first lien leverage ratio" is defined as the ratio of senior secured debt (net of unrestricted cash not to exceed $5.0 million) to EBITDA for the four fiscal quarter period most recently ended; and the "total leverage ratio" is defined as the ratio of consolidated indebtedness (net of unrestricted cash not to exceed $5.0 million) to EBITDA for the four fiscal quarter period most recently ended, with EBITDA to be determined on a pro forma basis. Second Lien Credit Facility The Second Lien Facility consists of a $40 million senior secured second lien term loan which has a $35 million expansion feature similar to, and coordinated with, the expansion feature of the first lien financing such that the maximum aggregate expansion for both such financings cannot exceed $35 million. The Second Lien Facility matures six years from the Merger closing date and bears interest at LIBOR plus 9.50% (with a LIBOR floor of 1.00%) or, at our option, the Base Rate (generally, the Wall Street Journal "prime rate") plus 8.50% (with a base rate floor of 2.00%). The Second Lien Facility does not amortize and may not be prepaid prior to the payment in full of the first lien facilities, notwithstanding the foregoing, the Company is permitted to make payments under the Second Lien Facility out of the "available amount" (as defined under the First Lien Facility). If voluntary prepayments (in addition to those allowed to be made from the available amount) become permitted (following payment of the first lien facilities in full), there will be a prepayment fee of 2% of the outstanding principal amount during the first loan year, 1% of the outstanding principal amount in the second loan year and no prepayment fee thereafter. Mandatory prepayments are the same as under the first lien facilities but are conditioned on the prior repayment in full of the first lien facilities. The representations and covenants in the Second Lien Facility are the same as those for the First Lien Facility, modified to reflect the second lien status of the Second Lien Facility, except that the minimum fixed charge coverage ratio is 1.00 to 1.00, the maximum total leverage ratio is 5.50 to 1.50, reducing periodically until it becomes 4.25 to 1.00 for quarters subsequent to June 30, 2019, and there is no first lien leverage ratio requirement. Series A Preferred Stock Offering On July 29, 2016, in connection with the partial financing of the Merger, FinTech issued (a) 1,500,000 shares of FinTech s newly created Series A Preferred Stock (the "Preferred Stock") and (b) 480,544 shares of common stock to Falcon Strategic Partners V, LP ("Series A Purchaser") in a private placement pursuant to a Securities Purchase Agreement (the "Purchase Agreement") with the Series A Purchaser dated June 23, 2016. FinTech sold the shares of Preferred Stock and common stock to the Series A Purchaser in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated by the SEC. Table of Contents The aggregate purchase price for the Shares was $37.5 million, of which FinTech used $30.0 million to pay a portion of the cash consideration for the Merger, repay CardConnect s existing debt in connection with the Merger, pay transaction expenses relating to the Merger and for general corporate purposes, and the remaining $7.5 million was placed by FinTech in a separate account for use in funding the first two years of cash dividends on the Preferred Stock. See "Description of Securities—Series A Preferred Stock" for a description of certain material terms of the Series A Preferred Stock. Contractual Obligations The card brand networks generally allow chargebacks up to four months after the later of the date the transaction is processed or the delivery of the product or service to the cardholder. If the merchant incurring the chargeback is unable to fund the refund to the card issuing bank, we are required to do so. For the three months ended June 30, 2016 and 2015, we experienced merchant losses of $953 thousand and $320 thousand, respectively, or 1.7 basis points and 0.8 basis points, respectively, on total bankcard dollar volumes processed of $5.7 billion and $4.2 billion, respectively. For the six months ended June 30, 2016 and 2015, we experienced merchant losses of $1.3 million and $802 thousand, respectively, or 1.2 basis points and 1.0 basis points, respectively, on total bankcard dollar volumes processed of $10.6 billion and $8.0 billion, respectively. In 2015, 2014 and 2013, we experienced merchant losses of $1.5 million, $1.9 million and $1.3 million, respectively, or 0.9 basis points, 1.3 basis points and 1.0 basis points, respectively, on total bankcard dollar volumes processed of $17.1 billion, $14.7 billion and $13.2 billion, respectively. These losses are included in cost of services in our consolidated statements of operations. The following table sets forth our contractual obligations and commitments for the periods indicated as of December 31, 2015. The following table does not give effect to the Merger and related transactions. Payments Due by Period Contractual Obligations Total Less than 1 year 1 to 3 years 3 to 5 Years More than 5 years (dollars in thousands) Processing minimums(a) $15,375 $9,755 $2,570 $3,050 $— Facility leases 13,676 1,801 3,507 3,268 5,099 Revolving Credit Facility(b) 59,965 — 59,965 — — $89,016 $11,556 $66,042 $6,318 $5,099 (a)We have agreements with our third-party processors to provide to us, on a non-exclusive basis, payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require us to submit a minimum annual number of transactions or volume for processing. If we submit a number of transactions or volume that is lower than the minimum, we are required to pay the third-party processors the fees that they would have received if we had submitted the required minimum number or volume of transactions. (b)In connection with the Merger, we repaid and terminated our existing revolving credit facility and entered into the First Lien Facility and Second Lien Facility. At consummation of the Merger, the outstanding balance under our existing revolving credit facility of $57,964,989 was repaid, See "Liquidity and Capital Resources—Revolving Credit Facility" and "Recent Events" for more information. Unrecognized Tax Benefits. At June 30, 2016, we had gross tax-effected unrecognized tax benefits of $222 thousand. As of June 30, 2016, we were unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority, therefore the unrecognized tax benefits have been excluded from the above contractual obligations table. Table of Contents Off-Balance Sheet Arrangements We have not entered into any transactions with third parties or unconsolidated entities whereby we have financial guarantees, subordinated retained interest, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities or other obligations other than for chargebacks. Summary of Critical Accounting Policies Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Our critical accounting policies are described below. Estimates The preparation of our financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition We recognize revenue from card processing at the time merchant transactions are processed on a gross basis equal to the full amount of the discount charged to the merchant because we are the primary obligor and have latitude in establishing price. We recognize revenue from discount and other fees related to payment transactions at the time the merchants transactions are processed. We recognize revenues from sales of our technology solutions when they are realized or realizable and earned. We consider revenue realized and earned when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; and collection of the resulting receivable is reasonably assured. Contractual arrangements are evaluated for indications that multiple element arrangements may exist including instances where more-than-incidental software deliverables are included. Arrangements may contain multiple elements, such as hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each element based on the selling price hierarchy. The selling price for a deliverable is based on vendor specific objective evidence ("VSOE") of selling price, if available, third party evidence ("TPE") if VSOE of selling price is not available, or estimated selling price ("ESP") if neither VSOE or selling price nor TPE is available. We establish ESP, based on our judgment, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple elements, we determine allocation of the transaction price at inception of the arrangement based on the relative selling price of each unit of accounting. In multiple element arrangements where more-than-incidental software deliverables are included, we applied the residual method to determine the amount of software license revenues to be recognized. Under the residual method, if fair value exists for undelivered elements in a multiple-element arrangement, such fair value of the undelivered elements is deferred with the remaining portion of the arrangement consideration recognized upon delivery of the software license or services arrangement. We allocate the fair value of each element of a software related multiple-element arrangement based upon its fair value as determined by VSOE, with any remaining amount allocated to the software license. If evidence of the fair value cannot be established for the undelivered elements of a software arrangement then the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established. Table of Contents Accounts Receivable Accounts receivable consists primarily of amounts due from merchants for Merchant Acquiring service fees net of interchange fees, monthly statement fees, and other merchant revenue, as required by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 210-20, Offsetting, on transactions processed during the month ending on the balance sheet date. In addition to receivables for transaction fees we charge our merchants for processing transactions. Accounts receivable also includes amounts resulting from our practice of advancing interchange fees to most of our merchants during the month. Accounts receivable are typically received within 30 days following the end of each month. Accounts receivable also includes amounts due from sales of our technology solutions. Goodwill Goodwill represents the excess of acquisition costs over the fair values of net assets acquired in business combinations. We apply the provisions of FASB ASC Topic 350, Intangibles—Goodwill and Other(ASC 350) in accounting for its goodwill. We test goodwill for impairment at least annually in the fourth quarter and between annual tests if an event occurs or changes in circumstances suggest a potential decline in the fair value of the reporting unit. Significant judgment is involved in determining whether an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others: a significant decline in expected future cash flows; a significant adverse change in in the business climate; unanticipated competition; and slower growth rates. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. The option of whether to perform a qualitative assessment is made annually and may vary by reporting unit. Factors we consider in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying value, then we perform a two-step quantitative test for that reporting unit. In the first step, the fair value of each reporting unit is compared to the reporting unit s carrying value, including goodwill. If the fair value of a reporting unit is less than its carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment, if any. In the second step, the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had been acquired in a business combination and the purchase price was equivalent to the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of the reporting unit s goodwill is then compared to the actual carrying value of the goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized for the difference. Significant estimates and assumptions are used in our goodwill impairment review and include the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Our assessment of qualitative factors involves significant judgments about expected future business performance and general market conditions. In a quantitative assessment, the fair value of each reporting unit is determined based on a combination of techniques, including the present value of future cash flows, applicable multiples of competitors and multiples from sales of like businesses, and requires us to make estimates and assumptions regarding discount rates, growth rates and our future long-term business plans. Changes in any of these estimates or assumptions could materially affect the determination of fair value and the associated goodwill impairment charge for each reporting unit. We have determined that we have two reporting units, card processing services and technology solution services. As of June 30, 2016, we performed a quantitative assessment for each of our reporting units. Based on the quantitative assessment of our reporting units, we determined that the goodwill for the reporting units was not impaired and no adjustment was necessary. Table of Contents Intangible Assets Intangible assets primarily include merchant and agent relationships, residual buyouts, employment agreements, a service contract, tradenames, internally developed software, and website development costs. Intangible assets, acquired in connection with various acquisitions, are recorded at fair value determined using a discounted cash flow model as of the date of the acquisition. After the fair value of all separately identifiable assets has been estimated in a business combination, goodwill is recorded to the extent the consideration paid for the acquisition exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Residual buyouts represent the right to not have to pay a residual to an independent sales agent related to certain future transactions of the agent s referred merchants. Residual buyout intangible assets are recorded at cost as of the date of acquisition. Employment agreements represent the estimated values of non-solicit and non-compete agreements entered into in business combinations. Trade name intangibles represent the estimated values of trade names acquired in business combinations. Merchant relationships represent the estimated values of card processing revenues acquired in business combinations. Agent relationships represent the estimated values of revenues to be generated from sales agents acquired in business combinations. Service contract intangibles primarily represent the estimated value of the amended and restated merchant processing agreement with First Data Merchant Services Corporation. Technology intangibles represent the estimated values of software, to be sold or licensed, acquired in business combinations. We amortizes finite-lived identifiable intangible assets using a method that reflects the pattern in which the economic benefits of the intangible asset are expected to be consumed or otherwise utilized. The estimated useful lives of our customer-related intangible assets approximate the expected distribution of cash flows generated from each asset. The useful lives of contract-based intangible assets are equal to the terms of the agreement. The assets are amortized over their estimated useful lives, which range from 1 to 14 years. Management periodically evaluates the remaining useful lives and carrying values of the intangible assets, to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include reductions in underlying operating cash flows or increases in attrition rates from estimates. To the extent the estimated cash flows exceed the carrying value, no impairment is necessary. If the estimated cash flows are less than the carrying value, an impairment charge is recorded. We capitalize software development costs and website development costs incurred in accordance with ASC 350-40, Internal Use Software. These costs include salaries and related employee benefits. Amortization of internally developed software and website development costs is recorded on a straight-line basis over an estimated useful life of three years. This useful life is consistent with the time period over which we believe we will obtain economic benefit for these assets. Stock-Based Compensation We account for grants of stock options to employees in accordance with ASC 718, Compensation—Stock Compensation. This standard requires compensation expense to be measured based on the estimated fair value of the share-based awards on the date of grant and recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. Stock based payments issued to non-employees are recorded at their fair values, and are revalued quarterly as the equity instruments vest and are recognized as expense over the related service period in accordance with the provisions of ASC 718 and ASC 505, Equity. The value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The option pricing model requires the input of highly subjective assumptions, including the grant date fair value of our stock, expected volatility and risk-free interest rates. To determine the grant date fair value of our stock we engage an outside consultant to prepare a valuation of the stock price on an annual basis, using information provided by our management and information obtained from private and public sources. When an observable transaction occurs near the grant date of an option award, such as the purchase of treasury stock, we will use the observable price to estimate the grant date fair value of the options. We use an expected volatility based on the historical volatilities of a group of guideline companies and expected life of its stock options based on historical data. Stock based payments to non-employees are recognized at fair value on the date of grant and re-measured at each subsequent reporting date through the settlement of the instrument. The risk free interest rates were obtained from publicly available U.S. Treasury yield curve rates. Table of Contents Income Taxes We account for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize a valuation allowance if, based on the weight of available evidence regarding future taxable income, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Regarding the recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, we follow a two-step process prescribed by GAAP. The first step for evaluating a tax position involves determining whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities. The second step then requires a company to measure the tax position benefits as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify interest and penalties on tax liabilities on the consolidated statements of income as components of other expenses. Accounting for Preferred Stock The Series A Convertible Preferred stock of CardConnect outstanding prior to the Merger does not represent a legal obligation under which its holders have creditor rights in bankruptcy, and, as such, the instrument is not required to be classified as a liability pursuant to ASC 480, Distinguishing Liabilities from Equity. Accordingly, the preferred shares are reported as equity on the consolidated balance sheets and are deemed more akin to an equity host instrument. Fair Value Measurements We account for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are: Level 1—Quoted prices for identical instruments in active markets. Level 2— Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets. Recent Accounting Pronouncements In May 2014, the FASB issued guidance on revenue from contracts with customers, which requires an entity to recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance addresses in particular contracts with more than one performance obligation as well as the accounting for some costs to obtain or fulfill a contract with a customer and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date. This made the new guidance effective December 15, 2017 for annual reporting periods beginning after that date. The FASB also approved early adoption of the standard, but not before the original effective date which was for reporting periods beginning after December 15, 2016. We have not yet selected a transition method and are currently assessing the impact the adoption of this guidance will have on our consolidated financial statements and disclosures. Table of Contents In February 2015, the FASB issued amendments to the current consolidation guidance. The amendments affect both the variable interest entity and voting interest entity consolidation models. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. The new guidance is not expected to have a material impact on our consolidated financial statements. In April 2015, the FASB issued guidance on debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. In August 2015, the FASB issued updated guidance to clarify that an entity may elect to present debt issuance costs related to a line-of-credit arrangement as an asset, regardless of whether or not there are any outstanding borrowings on the line-of-credit arrangement. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The new guidance should be applied on a retrospective basis. The effect of this update is still being evaluated and is not expected to have a material effect on our consolidated financial statements. In July 2015, the FASB issued guidance to more clearly articulate the requirements for the subsequent measurement of inventory and related disclosures. The new guidance clarifies the basis for measuring inventory at the lower of cost and net realizable value. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. Early adoption is permitted. The new guidance should be applied on a prospective basis. The effect of this update is still being evaluated and is not expected to have a material effect on our consolidated financial statements. In July 2015, the FASB issued guidance to more clearly articulate the requirements for the subsequent measurement of inventory and related disclosures. The new guidance clarifies the basis for measuring inventory at the lower of cost and net realizable value. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. Early adoption is permitted. The new guidance should be applied on a prospective basis. The effect of this update is still being evaluated and is not expected to have a material effect on our consolidated financial statements. In August 2015, the FASB issued guidance that clarified the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. Such costs may be presented in the balance sheet as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The new guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Earlier adoption is permitted for financial statements that have not been previously issued. This new guidance is not expected to have a material impact on our consolidated financial statements. In September 2015, the FASB issued guidance to simplify the accounting for measurement-period adjustments for business combinations. The new guidance eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2015. Early adoption is permitted. The new guidance should be applied on a prospective basis. The effect of this update is still being evaluated and is not expected to have a material effect on our consolidated financial statements. In November 2015, the FASB issued guidance to simplify the balance sheet classification of deferred taxes. The new guidance requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. Early adoption is permitted. The new guidance can be applied on either a prospective or retrospective basis. We have elected to early adopt this guidance and apply it on a prospective basis in 2015. Adoption of this ASU resulted in a reclassification of our net current deferred tax asset to the net long-term deferred tax liability in our Consolidated Balance Sheet as of December 31, 2015. No prior periods were retrospectively adjusted. Table of Contents In February 2016, the FASB issued guidance that requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2018. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We have not yet determined the effect of the adoption of this standard on our consolidated financial statements. In March 2016, the FASB issued guidance that simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. We have not yet determined the effect of the adoption of this standard on our consolidated financial statements. In March 2016, the FASB issued guidance that clarifies the principal versus agent implementation guidance in ASC 606—Revenue from Contracts with Customers. This guidance clarifies the unit of account to be used in principal versus agent assessments and emphasizes that a principal obtains control of a good or service that it then transfers to the customer. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2017. Early adoption is permitted for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. CardConnect has not yet determined the effect of the adoption of this standard on CardConnect s financial position, results of operations and related disclosures. In June 2016, the FASB issued guidance that will change the accounting for credit impairment. Under the new guidance, companies are required to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The effect of this update is still being evaluated and is not expected to have a material effect on our consolidated financial statements. Effects of Inflation While inflation may impact our revenues and cost of services, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future. Qualitative and Quantitative Disclosure about Market Risk Interest rate risk Our prior revolving credit facility bears interest at a variable rate based on LIBOR plus a fixed margin. As of June 30, 2016, we had $58.0 million in outstanding borrowings under our revolving credit facility. A hypothetical 1% increase or decrease in the interest rate on our indebtedness as of June 30, 2016 would have increased or decreased cash interest expense on our indebtedness by approximately $580 thousand per annum. Our revolving credit facilities bear interest at a variable rate based on LIBOR plus a fixed margin. Upon closing of the Merger, we had $140.0 million in outstanding borrowings under our credit facilities. A hypothetical 1% increase or decrease in the interest rate on our indebtedness as closing of the Merger would have increased or decreased cash interest expense on our indebtedness by approximately $1.40 million per annum. Foreign exchange risk Invoices for our services are denominated in U.S. dollars. We do not expect our future operating results to be significantly affected by foreign currency transaction risk. Table of Contents MANAGEMENT Executive Officers and Board of Directors Set forth below is certain information regarding the Company s current executive officers and directors: Name Age Position Jeffrey Shanahan* 38 Chief Executive Officer, President and Director Charles Bernicker 51 Chief Financial Officer Patrick Shanahan* 31 Chief Operating Officer Abraham Marciano 40 Chief Information Officer Robert Nathan 37 Executive Vice President—Integrated Solutions Angelo Grecco 37 Executive Vice President—Business Development Peter Burns 71 Director Betsy Z. Cohen 74 Director Toos Daruvala 60 Director Richard Garman 59 Chairman of the Board Ronald Taylor 72 Director Christopher Winship 41 Director * Jeffrey Shanahan and Patrick Shanahan are brothers. Directors Peter Burns has served as a director of the Company since July 2016. He served from April 2009 through his retirement in April 2016 part time as Senior Payments Advisor at Heartland Payment Systems Inc., where he works with the company s chief executive officer on industry policy issues and internal strategies. He also serves as a director of Barclays Bank Delaware, where he has served on the board and as chair of its audit committee since 2010. In the not for profit arena he has served on the board of directors of Clarifi, a regional financial counseling agency, since 2009. From 2000 to 2009 he served as vice president and founding director of the Payment Cards Center of the Federal Reserve Bank of Philadelphia (the "Center"). He was responsible for the establishment of the Center and its development as a source of expertise and policy insight on issues related to consumer credit and payments. He continues to serve on the Center s industry advisory council. From 1996 to 2000 he was managing director of the Financial Institutions Center at the University of Pennsylvania s Wharton School. Mr. Burns has an extensive background in the financial services industry, having held a number of senior management positions during a 25-year career with CoreStates Financial Corporation and its predecessor, The Philadelphia National Bank. Mr. Burns received an AB degree from Lehigh University and an MBA in Finance from the University of Chicago s Booth School of Business. Our board of directors has determined that Mr. Burns is qualified to serve on our board of directors because of his extensive business expertise in the financial industry and experience in both management and director positions. Betsy Z. Cohen has served as a director of the Company since November 2013 and as Chairman of the Board from July 2014 to July 2016. She served as Chief Executive Officer of Bancorp and its wholly-owned subsidiary, Bancorp Bank, since September 2000 and Chairman of Bancorp Bank since November 2003, and resigned from these positions effective December 31, 2014. She served as the Chairman of the Board of Trustees and as a trustee of RAIT Financial Trust (NYSE: RAS), a real estate investment trust, since its founding in August 1997, through her resignation as of December 31, 2010 and served as RAIT s Chief Executive Officer from 1997 to 2006. Mrs. Cohen served as a director of Hudson United Bancorp (a bank holding company), the successor to JeffBanks, Inc., from December 1999 until July 2000 and as the Chairman of the Jefferson Bank Division of Hudson United Bank (Hudson United Bancorp s banking subsidiary) from December 1999 through March 2000. Before the merger of JeffBanks, Inc. with Hudson United Bancorp in December 1999, Mrs. Cohen was Chairman and Chief Executive Officer of JeffBanks, Inc. from its inception in 1981 and also served as Chairman and Chief Executive Officer of each of its subsidiaries, Jefferson Bank, which she founded in 1974, and Jefferson Bank New Jersey, which she founded in 1987. From 1985 until 1993, Mrs. Cohen was a director of First Union Corp. of Virginia (a bank holding company) and its predecessor, Dominion Bancshares, Inc. In 1969, Mrs. Cohen co-founded a commercial law firm and served as a senior partner until 1984. Mrs. Cohen is also a director of Aetna, Inc. (NYSE: AET), an insurance company. Our board has determined that Mrs. Cohen s extensive experience in the financial services industry generally, and the financial technology industry in particular, as well as extensive experience in operating financial services companies in a public company environment, qualifies her to serve as a member of our board of directors. Table of Contents Toos Daruvala has served as a director of the Company since July 2016. He has been a Senior Advisor and Director Emeritus of McKinsey & Company ("McKinsey"), a management consulting firm, since December 2015. From June 2011 until his retirement in December 2015, he led McKinsey s risk management practice in the Americas, and prior to that he led McKinsey s banking and securities practice in the Americas from 2005 to May 2011. During his career at McKinsey, Mr. Daruvala advised a broad range of financial institutions on matters of corporate strategy, operational performance improvement and organization effectiveness. Mr. Daruvala is a member of the Advisory Board of the Ross School of Business at the University of Michigan and the Board of the New York Philharmonic, and serves on the Board of Directors and the Governance Committee, and is the chairman of the Risk Committee, for The Royal Bank of Canada (NYSE: RY). He is an Executive-in-Residence at the Columbia Business School. Mr. Daruvala holds a Master of Business Administration from the University of Michigan and a Bachelors of Technology in Electrical Engineering from the Indian Institute of Technology. Our board has determined that that Mr. Daruvala s breadth of experience with the banking and financial services industry, and his knowledge of risk management, qualifies him to serve on our board of directors. Richard Garman has served as a director of the Company and as chairman of the Company s board of director s since July 2016. He has been a director of CardConnect since September 2010 and served on CardConnect s compensation committee from September 2010 until July 2016, and has been a Managing Partner at FTV Capital, a growth equity investment firm that focuses on enterprise technology/services, financial services and payments/transaction processing, since September 2004 and a Partner at FTV Capital from 1999 through September 2004. Prior to joining FTV Capital, Mr. Garman served from 1995 to 1999 as President and Chief Executive Officer of Electronic Payment Services, Inc., a merchant processing solutions and card payment services provider, and prior to that held executive positions with First Financial Management Corp. and First Data Management Company, companies that provide information and card processing services. He has served as a director and on the compensation committee of Catalyst Repository Systems, Inc. since September 2010, of Cedar Capital since January 2015, of Company.com Corp. since July 2010, of InvestCloud, LLC since September 2015, of StoneEagle, LLC since February 2016 and of Swan Global Investments, LLC since December 2014. Mr. Garman received a B.S. in Accounting and Finance from Southwest Missouri State University and an M.B.A. from Oklahoma City University. Our board has determined that that Mr. Garman s extensive and in depth experience in the financial technology and services industry, qualifies him to serve on our board of directors. Jeffrey Shanahan has served on as a director of the Company and as the Company s Chief Executive Officer and President since July 2016, and has served as CardConnect s Chief Executive Officer since February 2014 and as CardConnect s President since August 2006. Mr. Shanahan was has been a member of CardConnect s board of directors since February 2008. Prior to joining CardConnect, Mr. Shanahan was employed as a Management Consultant for Booz Allen Hamilton ("Booz Allen"), a management and technology consulting firm, and Cap Gemini, S.A., a multinational management consulting firm, where his responsibilities included project management, analysis of regulatory compliance, and case management system implementations, pricing policy development, business case development and SAP process/systems analysis and testing. Mr. Shanahan is a graduate of the Pennsylvania State University with a degree in Management Science and Information Systems. Our board has determined that Mr. Shanahan s extensive experience in the financial services industry generally, and specifically in the payment processing sector, as well as extensive experience in operating and advising financial services companies, qualifies him to serve as a member of our board of directors. Table of Contents Ronald L. Taylor has served as a director of the Company since July 2016. He has been a Director of DeVry Education Group Inc. (NYSE: DV) ("Devry Group") since November 1987 and has served as a Senior Advisor to DeVry Group since November 2006. In July 2004 he became DeVry Group s Chief Executive Officer and served in that capacity until November 2006. From August 1987 until his November 2002 appointment as Co-Chief Executive Officer of Devry Group, he was President and Chief Operating Officer of Devry Group. In 1973 Mr. Taylor co-founded Keller Graduate School of Management and was its President and Chief Operating Officer from 1981 to 1987 and its Chief Operating Officer from 1973 until 1981. For over thirty-five years, Mr. Taylor served as a consultant/evaluator for the Higher Learning Commission. Mr. Taylor is a former member of the Board of Trustees of the North Central Association of Colleges and Schools and the Higher Learning Commission. Mr. Taylor also currently serves as a director of Adeptus Health Inc. (NYSE: ADPT), where he has served on the board of directors since December 2011 and is a member of its audit committee and compensation committee. Mr. Taylor also serves on the board of directors of each of Fusion Education Group, Ross University School of Medicine and Ross University School of Veterinary Medicine. Mr. Taylor received his undergraduate degree, cum laude, in government and international relations from Harvard University, and his master s degree in business administration from Stanford University. Our board has determined that Mr. Taylor s experience as a director of public companies in the finance industry and significant experience with respect to business and financial matters qualified him to serve as a member of our board of directors. Christopher Winship has served as a director of the Company since July 2016. He has served as a director of CardConnect since September 2010 and served as on CardConnect s audit committee and compensation committee from September 2010 until July 2016, and has been a Partner and Managing Member of FTV Management Company, an affiliate of FTV Capital, since March 2008. Prior to joining FTV in 1999, Chris served as an Associate and Principal at FTV Capital where he joined in 1999 and prior to joining FTV he served as a Financial Analyst with Salomon Smith Barney s Media and Telecommunication Group. He has served as a director of WePay, Inc. since May 2015, of Clearent LLC since April 2015, of Vindicia, Inc. since January 2015, of Credorax Inc. since July 2013, of Empyrean Benefit Solutions, Inc. since February 2013, of CashStar, Inc. since September 2011 and of StoneEagle, LLC since February 2016. Mr. Winship has a B.A. in Government from Dartmouth College. Our board has determined that Mr. Winship s extensive experience in the financial services and transaction processing industries both as an investor and board advisor of various private high growth companies qualifies him to serve on our board of directors. Executive Officers Jeffrey Shanahan s biographical information is set forth in the above under "Directors." Charles Bernicker has served as the Company s Chief Financial Officer since July 2016, and has served as CardConnect s Chief Financial Officer since July 2012. Prior to joining CardConnect, Mr. Bernicker served as an Executive Director of Heartland Payment Systems (NYSE: HPY) ("Heartland") from June 2010 until July 2012 where he was responsible for corporate and business development. Prior to his employment with Heartland, Mr. Bernicker held senior leadership positions with both Bank of America, a banking and financial services corporation, and TD Bank, a U.S. national bank, where he focused on bank operations related to issuing processing, merchant processing and loss prevention, served as a member of the Card Operations and Risk Executive Council for Visa, Inc. (USA), a financial services company, and prior to that was a member of the audit group in the Philadelphia office of Ernst & Young, LLP. Mr. Bernicker holds a bachelor s degree in accounting from the University of Delaware. Patrick Shanahan has served as the Company s Chief Operating Officer since July 2016, and has served as CardConnect s Chief Operating Officer since August 2011, where he is responsible for operational efficiencies of customer enrollment, customer support, partner solutions, underwriting and risk management. Mr. Shanahan manages strategic partner relationships, integration of company acquisitions and internal development efforts. From 2008 to July 2011, Mr. Shanahan served as Director of Operations for CardConnect. Prior to joining CardConnect, Mr. Shanahan was a management consultant for Booz Allen where he consulted on information technology projects for the federal government. Mr. Shanahan holds a bachelor s degree in Political Science from the Pennsylvania State University. Table of Contents Abraham Marciano has served as the Company s Chief Information Officer since July 2016, and has served as CardConnect s Chief Information Officer since April 2016. Prior to joining CardConnect, Mr. Marciano served as Head of Business Integration & Operations at Braintree, a next generation payments company acquired by PayPal Holdings Inc. (NASDAQ: PYPL) ("PayPal") from October 2014 until April 2016 where he was responsible for all business and operations integration activities resulting from the PayPal acquisition. Prior to his employment with PayPal, Mr. Marciano held senior leadership positions with eBay Enterprise, (NASDAQ: EBAY), where he was responsible for leading the delivery of an emerging enterprise e-commerce platform and technical portfolio management for the entire customer base. Mr. Marciano holds a MBA from the University of Virginia, Darden School of Business. Robert Nathan has served as the Company s Executive Vice President – Integrated Solutions since July 2016, and has served as CardConnect s Executive Vice President – Integrated Solutions since October 2014 and is responsible for leading CardConnect s integrated payments initiative and overseeing the strategic growth of technology and core product offerings. From August 2011 through October 2014 he served as CardConnect s Chief Technology Officer and from March 2010 through August 2011 he served as CardConnect s Chief Operating Officer. Prior to joining CardConnect, Mr. Nathan led business recovery and technology integration projects with PricewaterhouseCoopers, LLP, a provider of audit and assurance, tax and consulting services, and with FTI Consulting, Inc., a business advisory firm. In these roles he advised debtors in Chapter 11 restructurings, provided expertise in data analytics and information management and implemented operational improvements for clients across multiple industries. Mr. Nathan is a graduate of Indiana University s Kelley School of Business and holds a degree in Computer Information Systems, Business Process Management and Operations Management. Angelo Grecco has served as the Company s Executive Vice President – Business Development since July 2016 and has served as CardConnect s Executive Vice President – Business Development since May 2007. Prior to joining CardConnect, Mr. Grecco founded and previously served as President of Allied Bancard, LLC, a provider of administrative serves for merchant payment processing programs, which was acquired by CardConnect in May 2007, and served as VP of Operations at Allied Merchant Services, Inc., a full service credit and debit card processing company, where he managed the day-to-day needs of the company s agents and merchants. Mr. Grecco is a graduate of Indiana University with a degree in Business Management. Committees of the Board of Directors The standing committees of our board of directors currently consist of an Audit Committee and a Compensation Committee and a Nominating and Corporate Governance Committee. Audit Committee Our Audit Committee consists of Messrs. Burns, Taylor and Daruvala, with Mr. Burns serving as the Chairman. We believe that Messrs. Burns, Taylor and Daruvala meet the independent director standards for audit committee members under NASDAQ s listing standards and under Rule 10A-3(b)(1) of the Exchange Act. The Audit Committee will at all times be composed exclusively of independent directors who are "financially literate" as defined under NASDAQ s listing standards. The NASDAQ listing standards define "financially literate" as being able to read and understand fundamental financial statements, including a company s balance sheet, income statement and cash flow statement. In addition, the Company is required to certify to NASDAQ that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual s financial sophistication. We have determined that Mr. Burns satisfies NASDAQ s definition of financial sophistication and also qualifies as an "audit committee financial expert," as defined under rules and regulations of the SEC. The audit committee s duties, which are specified in our Audit Committee Charter, include, but are not limited to: reviewing and discussing with management and the independent auditor our annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Annual Report on Form 10-K; Table of Contents discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; discussing with management major risk assessment and risk management policies; monitoring the independence of the independent auditor; verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; reviewing and approving all related-party transactions; inquiring and discussing with management our compliance with applicable laws and regulations; pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; appointing or replacing the independent auditor; determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and approving reimbursement of expenses incurred by our management team in identifying potential target businesses. The written charter for the Audit Committee is available on the Company s website at www.cardconnect.com. The information on this website is not part of this prospectus. Audit Committee Pre-Approval Policies and Procedures Our audit committee, on at least an annual basis, will review audit and non-audit services performed by Marcum LLP ("Marcum"), our independent registered public accounting firm, as well as the fees charged by Marcum for such services. Our policy is that all audit and non-audit services must be pre-approved by the audit committee. See "FinTech Officer and Director Compensation—Audit Committee Pre-Approval Policies and Procedures" for a discussion of pre-approval policies and procedures prior to the Merger. Compensation Committee Our Compensation Committee consists of Messrs. Taylor and Winship and Mrs. Cohen, with Mr. Taylor serving as the Chair. Our board has determined that each member of the Compensation Committee is independent for purposes of serving on our Compensation Committee, as determined in accordance with applicable NASDAQ listing rules and Rule 10C promulgated under the Exchange Act. The Compensation Committee s duties, which are specified in our Compensation Committee charter, include, but are not limited to: reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer s compensation, if any, evaluating our Chief Executive Officer s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer s based on such evaluation; reviewing and approving the compensation, if any, of all of our other executive officers; reviewing our executive compensation policies and plans; Table of Contents implementing and administering our incentive compensation equity-based remuneration plans; assisting management in complying with our proxy statement and annual report disclosure requirements; approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; producing a report on executive compensation to be included in our annual proxy statement; and reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC. The written charter for the Compensation Committee is available on the Company s website at www.cardconnect.com. The information on this website is not part of this prospectus. Compensation Committee Interlocks and Insider Participation Our Compensation Committee consists Messrs. Taylor and Winship and Mrs. Cohen, with Mr. Taylor serving as the Chair. Mrs. Cohen owns founder shares. For a description of the transactions between us and Mrs. Cohen, see Note 5 to FinTech s Condensed Financial Statements—Related Party Transactions included elsewhere in this prospectus. Mr. Winship is a managing member of FTVentures Management III, L.L.C., which is the general partner of the FTV Entities. The FTV Entities purchased shares in the PIPE Transaction. See "Certain Relationships and Related Person Transactions—FinTech Related Person Transactions—Private Placement" for a description of this transaction. Apart from these transactions, no member of the Compensation Committee has any relationship that would be required to be reported under Item 404 of Regulation S-K under the Securities Act. No member of the Compensation Committee serves or served during the fiscal year as a member of the board of directors or compensation committee of a company that has one or more executive officers serving as a member of our board of directors or compensation committee. Corporate Governance and Nominating Committee Our Nominating and Corporate Governance Committee consists of Messrs. Garman, Taylor and Daruvala and Mrs. Cohen, with Mrs. Cohen serving as the Chair. Our board has determined that each member of the Nominating and Corporate Governance Committee is independent under the applicable NASDAQ listing standards and under Rule 10A-3(b)(1) of the Exchange Act. The duties of the Nominating and Corporate Governance Committee include, but are not limited to: Determining the qualifications, qualities, skills, and other expertise required to be a director and developing and recommending to the board for approval, criteria to be considered in selecting nominees for director; Identifying and screening individuals qualified to become directors, consistent with the criteria determined by the committee, and considering director candidates recommended by stockholders pursuant to the procedures set forth in the combined Company s organizational documents and described in the combined Company s proxy statement; Selecting and recommending to the board the nominees for director to be submitted to a stockholder vote at the annual meeting of stockholders; Overseeing corporate governance practices and procedures, including identifying best practices and reviewing and recommending to the board for approval any changes to the documents, policies and procedures in the combined Company s corporate governance framework; Developing and recommending to the board for approval standards for determining whether a director has a relationship with the combined Company that would impair his or her independence; Table of Contents Reviewing and discussing with management disclosure of the combined Company s corporate governance practices, including information regarding the operations of the committee and other board committees, director independence and the director nominations process, and recommending that this disclosure be included in the combined Company s proxy statement or annual report on Form 10-K, as applicable; Monitoring compliance with the combined Company s code of business conduct and ethics, investigating any alleged breach or violation of such code, enforcing the provisions of such code and reviewing such code periodically and recommending any changes to the board; Developing and recommending to the board for approval an officer succession plan, reviewing the succession plan periodically with management of the combined Company, developing and evaluating potential candidates for executive positions and recommending to the board any changes to, and any candidates for succession under, the succession plan; Administer annual performance evaluations of the board and all of its committees; Determining the form and amount of director compensation and to conduct an annual review of director compensation; and Undertaking any other duties as may be delegated by the board. The written charter for the Nominating and Corporation Governance Committee is available on the Company s website at www.cardconnect.com. The information on this website is not part of this prospectus. Code of Conduct and Ethics We have adopted a code of ethics that applies to the Company s directors, officers and employees in accordance with applicable federal securities laws. A copy of the code of ethics is available on the Company s website at www.cardconnect.com. The information on this website is not part of this prospectus. The Company will make a printed copy of the code of conduct and ethics available to any stockholder who so requests. Requests for a printed copy may be directed to: CardConnect Corp. 1000 Continental Drive, Suite 300, King of Prussia, PA 19406, Attention: Secretary. If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer by posting the required information on the Company s website atwww.cardconnect.com. The information on this website is not part of this prospectus. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of any publicly traded class of our equity securities, to file reports of ownership and changes in ownership of our equity securities with the SEC. Our officers, directors, and greater-than-ten-percent stockholders are required by the SEC s regulations to furnish us with copies of all Section 16(a) forms that they file. Based solely upon a review of Forms 3 and Forms 4 furnished to us during the Company s most recent fiscal year, and Forms 5 with respect to the Company s most recent fiscal year, we believe that all such forms required to be filed pursuant to Section 16(a) of the Exchange Act were timely filed by our officers, directors, and security holders required to file the same during the fiscal year ended October 31, 2015, except that the Form 3 filed by William Lamb was not filed on a timely basis. Table of Contents Board Leadership Structure and Role in Risk Oversight Prior to the Merger, FinTech s Board of Directors recognized that the leadership structure and combination or separation of the Chief Executive Officer and Chairman roles was driven by the needs of the Company at any point in time. As a result, prior to the Merger no policy existed requiring combination or separation of leadership roles and our governing documents did not mandate a particular structure. This allowed FinTech s Board of Directors the flexibility to establish the most appropriate structure for FinTech at any given time. Consistent with the Company s Corporate Governance Guidelines, we expect the Company s board following the Merger to maintain the policy of flexibility with respect to leadership structure. Our Board of Directors is responsible for overseeing the overall risk management process at the Company. Risk management is considered a strategic activity within the Company and prior to the Merger, responsibility for managing risk rested with executive management while the Board of Directors participated in the oversight of the process. The oversight responsibility of our Board of Directors was enabled by management reporting processes designed to provide visibility to the Board of Directors about the identification, assessment, and management of critical risks. These areas of focus included strategic, operational, financial and reporting, compliance and other risks. We expect the Board of Directors of the company to develop its own risk management policies following the Merger. Stockholder and Interested Party Communications Prior the Merger, the Company s Board of Directors did not provide a process for stockholders or other interested parties to send communications to the Board of Directors because management believed that it was premature to develop such processes given the limited liquidity of our common stock at that time. However, management of the Company following the Merger may establish a process for stockholder and interested party communications in the future. Table of Contents EXECUTIVE COMPENSATION CardConnect Officer and Director Compensation The following discussion relates to the CardConnect s historical compensation prior to the Merger. The following section provides compensation information pursuant to the scaled disclosure rules applicable to "emerging growth companies" under the rules of the SEC. For the purposes of this section, the terms "we," "our," "us" and "CardConnect" refer to FTS Holding Corporation prior to the Merger. Overview CardConnect s "Named Executive Officers" for the year ended December 31, 2015, include Jeffrey Shanahan, our President and Chief Executive Officer, Charles Bernicker and Patrick Shanahan, our two most highly compensated executive officers other than Mr. Shanahan who were serving as CardConnect s executive officers as of December 31, 2015 (collectively, the "Named Executive Officers"). Our compensation policies and philosophies are designed to align compensation with business objectives and the creation of stockholder value, while also enabling us to attract, motivate and retain individuals who contribute to our long-term success. We believe our executive compensation program must be competitive in order to attract and retain executive officers. We seek to implement compensation policies and philosophies by linking a significant portion of executive officers cash compensation to performance objectives and by providing a portion of their compensation as long-term incentive compensation in the form of equity awards. To date, the compensation of our Named Executive Officers has consisted of a base salary, an annual cash incentive bonus, stock options and health and welfare benefits. Pursuant to their employment agreements, the Named Executive Officers are also eligible to receive certain payments and benefits upon a termination of employment under certain circumstances. Upon closing of the Merger, the Named Executive Officers entered into amended and restated employment agreements with the Company upon terms substantially similar to the terms currently governing their employment with us. See "—Amended and Restated Employment Agreements" for a description of the material terms of these amended and restated employment agreements. Our board of directors has historically determined all of the components of compensation of our executive officers. As we transition from a private company to a publicly-traded company, the combined Company will evaluate its compensation program as circumstances require. As part of the ongoing evaluation, it is expected that the compensation committee of the combined Company will apply CardConnect s policies and philosophies described above. Compensation Tables The following table presents summary information regarding the total compensation for the years ended December 31, 2014 and 2015 for the Named Executive Officers. Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Nonequity Incentive Plan Compensation ($) Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Jeffrey Shanahan 2015 $500,262 $— $— $— $300,000 $— $ 27,313(1) $827,574 President and CEO 2014 $500,260 $— $— $— $200,000 $— $20,956(1) $721,215 Charles Bernicker 2015 $350,262 $— $— $— $125,000 $— $25,399(2) $500,661 Chief Financial Officer 2014 $333,593 $— $— $— $75,000 $— $22,517(2) $431,110 Patrick Shanahan 2015 $350,262 $— $— $— $100,000 $— $17,065(3) $467,327 Chief Operating Officer 2014 $309,010 $— $— $— $50,000 $— $14,997(3) $374,007 (1) For 2015, Mr. Shanahan received $11,501 and $15,811 related to health insurance benefits and 401(k) matching contributions, respectively. For 2014, Mr. Shanahan received $10,342 and $10,614 related to health insurance benefits and 401(k) matching contributions, respectively. (2) For 2015, Mr. Bernicker received $11,501 and $13,897 related to health insurance benefits and 401(k) matching contributions, respectively. For 2014, Mr. Bernicker received $10,003 and $12,513 related to health insurance benefits and 401(k) matching contributions, respectively. (3) For 2015, Mr. Shanahan received $4,928 and $12,138 related to health insurance benefits and 401(k) matching contributions, respectively. For 2014, Mr. Shanahan received $3,354 and $11,643 related to health insurance benefits and 401(k) matching contributions. Table of Contents Salaries The Named Executive Officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each Named Executive Officer is intended to provide a fixed component of compensation reflecting the executive s skill set, experience, position and responsibilities. Non-Equity Incentive Bonuses Our Named Executive Officers were eligible to receive cash bonuses based on a budgeted pool of funds depending on achievement of certain performance targets and financial metrics at the discretion of our board of directors. For each of 2015 and 2014, our Named Executive Officers received 100% of the bonuses based on the pool set aside for our Named Executive Officers. Option Awards Historically, we have awarded options to officers and employees, including certain of the Named Executive Officers. No option grants were awarded to the Named Executive Officers in 2014 or 2015. Stock options vest quarterly over a four-year period, 25% upon the first anniversary of the grant date, 50% upon the second anniversary of the grant date, 75% upon the third anniversary of the grant date and 100% upon the fourth anniversary of the grant date. Upon the consummation of a change of control, any unvested portion of the option will vest and become exercisable in full. Upon consummation of the Merger, a portion of these options were exchanges for a portion of the cash consideration paid in the Merger, and the remaining 3,463,950 options were assumed by the combined Company and converted into stock options to acquire common stock of the combined Company pursuant to the terms of the Merger Agreement. Employment Agreements The Named Executive Officers are party to employment agreements with us. Upon closing of the Merger, the Named Executive Officers entered amended and restated employment agreements with the combined Company upon terms substantially similar to the terms currently governing their employment with us. See "Management Following the Merger—Officer and Director Compensation Following the Merger—Amended and Restated Employment Agreements" for a description of the material terms of these amended and restated employment agreements Equity Awards The following table summarizes, for each of the Named Executive Officers, the number of shares of CardConnect common stock underlying outstanding stock options held as of December 31, 2015. Outstanding Equity Awards at Fiscal Year End Option Awards Stock Awards Name and Principal Position Option Grant Date # Securities Underlying Unexercised Options (#) Exercisable (1) # Securities Underlying Unexercised Options (#) Unexercisable (1) Equity Incentive Plan Awards: # Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date # Shares or Units of Stock that have not vested (#) Market Value # Share or Units of Stock that have not vested ($) # Unearned Shares, Units or Other Rights that have not vested (#) Payout Value of Unearned Shares, Units or other Rights that have not vested ($) Jeffrey Shanahan 9/15/2010 763,500 — — $2.39 9/15/2020 — $— — $— President and CEO 3/26/2012 187,500 12,500 — $4.58 3/26/2022 — $— — $— Charles Bernicker Chief Financial Officer 7/19/2012 325,000 75,000 — $4.45 7/19/2022 — $— — $— Patrick Shanahan 9/15/2010 137,200 — — $2.39 9/15/2020 — $— — $— Chief Operating Officer 10/7/2011 145,000 — — $4.65 10/7/2021 — $— — $— 6/7/2012 65,625 9,375 — $4.55 6/7/2022 — $— — $— 10/23/2013 25,000 25,000 — $4.73 10/23/2023 — $— — $— (1) Stock options vest quarterly over a four-year period, 25% upon the first anniversary of the grant date, 50% upon the second anniversary of the grant date, 75% upon the third anniversary of the grant date and 100% upon the fourth anniversary of the grant date. See "—FTS Holding Corporation 2010 Stock Option Plan—Option Awards" for more information. Table of Contents FTS Holding Corporation 2010 Stock Option Plan On September 15, 2010, CardConnect adopted the FTS Holding Corporation 2010 Stock Option Plan (the "CardConnect Option Plan"). The CardConnect Option Plan is administered by our board of directors, but may be administered by a committee of one or more directors as may be designated by our board of directors. Options may be granted under the plan to our executives and other key employees, directors and consultants. In addition to our board of directors, our President and Chief Executive Officer has the authority to grant awards to employees, directors or consultants providing services to the Company or any of its subsidiaries, subject to the terms and limitations of the plan. The board of directors may designate an option under the plan as an incentive stock option or a non-qualified stock option at the time the grant is made, provided that an option may be designated as an incentive stock option only if the applicable participant is an employee of CardConnect on the date of grant. Our board, board committee or Chief Executive Officer will determine the number of shares of CardConnect common stock with respect to which options may be granted under the CardConnect Option Plan, which will not exceed 5,200,000 shares of common stock in the aggregate, subject to adjustment as set forth in the CardConnect Option Plan. Our board or board committee will determine the conditions upon which the options will vest and all other limitations, restrictions and conditions relating to the options. Our board or board committee will determine the term of each option granted under the CardConnect Option Plan, which will not exceed ten years from the date of grant. In addition, the board of directors may add specific terms and conditions to each option agreement, subject to the general terms and conditions of the CardConnect Option Plan. The exercise price per share may not be less than 100% of the fair market value of the common stock on the date of grant. No participant may be granted incentive stock options under the plan that would result in incentive stock options to purchase shares of CardConnect s common stock with an aggregate fair market value (measured on the date of grant) of more than $100,000 first becoming exercisable by the participant in any one calendar year. The exercise price of each incentive stock option will be equal to or greater than the fair market value of the common stock subject to the incentive stock option as of the date of grant of the incentive stock option, provided that no incentive stock option can be granted to any person who, at the time the option is granted, owns stock (including stock owned by application of the constructive ownership rules in Section 424(d) of the Internal Revenue Code) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of CardConnect, unless at the time the incentive stock option is granted the exercise price is at least one hundred ten percent (110%) of the fair market value of CardConnect s common stock subject to the incentive stock option and the incentive stock option by its terms is not exercisable for more than five (5) years from the date of grant. Optionholders do not have any voting or other rights as a CardConnect stockholder with respect to any shares issuable upon exercise of an option until exercise of the option and the holder becomes the holder of record of such shares of CardConnect common stock. Options may not be transferred other than by will or the laws of descent and distribution, and may only be exercised by the participant s beneficiary. Table of Contents Except as otherwise provided in an option agreement, if a participant s employment with us is terminated, all of the participant s unvested options will expire and be forfeited. If a participant dies or becomes subject to a disability, the portion of the participant s option that is vested will expire on the first anniversary of the date of death or disability, but in no event after its expiration date. If a participant retires with the approval of the board, the portion of the participant s option that is vested will expire 90 days after the date of retirement, but in no event after its expiration date. If a participant s employment is terminated other than for cause, the portion of the participant s option that is vested will expire 90 days after the date of termination, but in no event after is expiration date. Under all other circumstances, any portion of a participant s option that is vested and exercisable on a participant s termination date will expire and be forfeited on such participant s termination date. In the event of a change of control (as defined in the CardConnect Option Plan), our board or board committee may provide that all options outstanding on the date of the change in control that have not previously vested or terminated under the terms of the applicable award agreement shall be immediately and fully vested and exercisable. "Change of control" is defined in the CardConnect Option Plan to include the consummation of any transaction in connection with which seventy-five percent (75%) or more of CardConnect s common stock beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) by CardConnect s stockholders immediately prior to such transaction is disposed of and no longer held by those stockholders. The CardConnect Option Plan contains restrictive covenants applicable to all participants, including an agreement not to compete, solicit clients or customers or solicit our employees for a period of 12 months following termination of employment. Our board or board committee may amend, suspend or terminate the CardConnect Option Plan in any manner, provided that no such amendment, suspension or termination may impair the rights of participants under outstanding options without the consent of the affected participants. No options may be granted under the CardConnect Option Plan after September 15, 2020. Post-Retirement Benefits 401(k) Plan We maintain a tax-qualified defined contribution plan meeting the requirements of Section 401(k) of the Internal Revenue Code, commonly called a 401(k) plan, for substantially all of our U.S. employees. The 401(k) plan is available on the same terms to all of our U.S. employees, including the Named Executive Officers. Each participant can elect to contribute from 0% to 100% of his or her base salary to the 401(k) plan, subject to Internal Revenue Service and ERISA limitations. The deferred amount is invested in accordance with the election of the participant in a variety of investment choices. Subject to certain limitations, we match a participant s contributions to the 401(k) plan. The company match, which is also applicable to the Named Executive Officers, is 100% for the first 3% and 50% for the next 2%. All contributions under the plan are fully vested. Director Compensation No CardConnect directors received compensation for their services as director for the year ended December 31, 2015. FinTech Officer and Director Compensation The following discussion relates to FinTech s historical compensation prior to the Merger. The following section provides compensation information pursuant to the scaled disclosure rules applicable to "emerging growth companies" under the rules of the SEC. For the purposes of this section, the terms "we," "our," "us" and "FinTech" refer to FinTech Acquisition Company. FinTech Executive Officers The following persons served as FinTech s executive officers prior to the consummation of the Merger in July 2016. Table of Contents Daniel G. Cohen, age 47, served as a director of FinTech from November 2013 until July 2016, as FinTech s President and Chief Executive Officer from August 2014 until July 2016, and previously served as FinTech s Executive Vice President from July 2014 through August 2014. He has been the Chairman of Bancorp and Chairman of the Executive Committee of Bancorp s Board of Directors since its inception in 1999. Mr. Cohen is Vice-Chairman of Bancorp Bank s Board of Directors and Chairman of its Executive Committee. He had previously been Chairman of Bancorp Bank s Board of Directors from September 2000 to November 2003 and, from July 2000 to September 2000, had been Bancorp Bank s Chief Executive Officer. Mr. Cohen has served as the President of Cohen & Company Financial Limited (formerly Euro DeKania Management Ltd.), a wholly owned subsidiary of IFMI (NYSE: IFMI), an investment firm specializing in credit-related fixed income investments, formerly Cohen & Company Inc., and Alesco Financial, Inc. (which merged into IFMI), investment firms specializing in credit-related fixed income investments, since September 2013. Mr. Cohen has also served since September 2013, as President and Chief Executive Officer of all businesses of IFMI, LLC arising out of or related to Europe. Mr. Cohen served as Chief Executive Officer and Chief Investment Officer of IFMI from December 2009 through September 2013, as their respective Chairman of the Board of Directors since October 2006 and as Executive Chairman from October 2006 through December 2009. He is also Chairman of JVB Financial, a broker dealer subsidiary of IFMI. In addition, before its merger with Alesco Financial, Mr. Cohen served as the Chairman of the Board of Managers of Cohen Brothers LLC, an investment firm specializing in credit related fixed income investment, from 2001, as Chief Investment Officer from October 2008 and as Chief Executive Officer from December 2009. He previously served as Chief Executive Officer of RAIT from December 2006, when it merged with Taberna Realty Finance Trust, to February 2009, and served as a trustee from the date RAIT acquired Taberna until his resignation from that position in February 2010. Mr. Cohen was Chairman of the Board of Trustees of Taberna Realty Finance Trust from its inception. James J. McEntee, III, age 58, served as FinTech s Chief Financial Officer and Chief Operating Officer from August 2014 to July 2016. He has served as the Managing Principal of StBWell, LLC, an owner and operator of real estate, since June 2010. Mr. McEntee has been a director of both Bancorp and its wholly-owned subsidiary Bancorp Bank since September 2000 and a director of T-Rex Group, Inc., a provider of risk analytics software for investors in renewable energy, since November 2014. Mr. McEntee was the Chief Executive Officer of Alesco Financial, Inc. from the date of its incorporation in 2006 until its merger with Cohen & Company in December 2009 and was the Chief Operating Officer of Cohen & Company from March 2003 until December 2009, and was a managing director of IFMI (a successor company to Cohen & Company) and was the Vice-Chairman and Co-Chief Operating Officer of JVB Financial through October 2013. Mr. McEntee was a principal in Harron Capital, L.P., a media and communications venture capital fund, from 1999 to September 2002. From 1990 through 1999, Mr. McEntee was a stockholder at Lamb McErlane, PC, and from 2000 until 2004 was of counsel to Lamb McErlane. Mr. McEntee was previously a director of Pegasus Communications Corporation, a publicly held provider of communications and other services, and of several other private companies. Mr. McEntee has served since 2008 as a director of The Chester Fund, a nonprofit organization, and has served as its Chairman since July 2012. Compensation Discussion and Analysis None of FinTech s executive officers or directors received any compensation (cash or non-cash) for services rendered prior to the Merger. FinTech did not pay compensation of any kind, including finder s and consulting fees, to holders of founder shares, executive officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the consummation of the Merger other than (i) repayment of loans made to us by our Sponsor to cover offering-relating and organization expenses and (ii) repayment of $579,070 in loans from our Sponsor to finance transaction costs in connection with the Merger. However, these individuals were reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations, including the Merger. FinTech s audit committee was required to approve all payments in excess of $5,000 to be made to certain affiliate stockholders, our Sponsor, our directors and officers or our or their affiliates. FinTech was not party to any agreements with its executive officers and directors that provided for benefits upon termination of employment. Following consummation of the Merger, Betsy Cohen remained a director of the combined Company and may receive compensation for from the combined Company for services provided to the combined Company. See "Officer and Director Compensation of the Combined Company" for additional information. Table of Contents Independent Auditors Fees The firm of Marcum was FinTech s independent registered public accounting firm prior to the Merger. The following is a summary of fees paid or to be paid to Marcum for services rendered to FinTech. Marcum also currently acted as CardConnect s independent registered public accounting firm prior to the Merger and following the Merger is as the independent registered public accounting firm for the Company. Audit Fees During the years ended October 31, 2015 and 2014, audit fees for our independent registered public accounting firm were $60,156 and $54,260, respectively. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum in connection with regulatory filings. Audit-Related Fees We did not receive audit-related services that are not reported as audit fees for the years ended October 31, 2015 and 2014. Tax Fees During the years ended October 31, 2015 and 2014, our independent registered public accounting firm did not render any tax services to us. All Other Fees During the years ended October 31, 2015 and 2014, there were no fees billed for services provided by our independent registered public accounting firm other than those set forth above. Audit Committee Pre-Approval Policies and Procedures Since our audit committee was not formed until February 2015, the audit committee did not pre-approve any of the foregoing services prior to such date, although any services rendered prior to the formation of the audit committee were reviewed and ratified by the committee following its formation. Our audit committee, on at least an annual basis, reviewed audit and non-audit services performed by Marcum as well as the fees charged by Marcum for such services. Our policy is was that all audit and non-audit services must be pre-approved by the audit committee. All of such services and fees provided subsequent to February 2015 were pre-approved. Officer and Director Compensation of the Combined Company The following discussion relates to compensation for the combined Company following the Merger. For the purposes of this section, the terms "we," "our," and "us" refer to CardConnect Corp., the combined Company following the Merger. Overview We expect the combined Company to adopt an executive compensation program that is consistent with CardConnect s existing compensation policies and philosophies, which are designed to align compensation with CardConnect s business objectives and the creation of stockholder value, while enabling CardConnect to attract, motivate and retain individuals who contribute to the long-term success of CardConnect. See "Executive Compensation—Overview" CardConnect s compensation policies and philosophies were designed to align compensation with CardConnect s business objectives and the creation of stockholder value, while enabling CardConnect to attract, motivate and retain individuals who contribute to the long-term success of CardConnect. CardConnect believed its executive compensation program must be competitive in order to attract and retain executive officers. CardConnect sought to implement compensation policies and philosophies by linking a significant portion of executive officers cash compensation to performance objectives and by providing a portion of their compensation as long-term incentive compensation in the form of equity awards. Table of Contents Decisions on the executive compensation program will be made by the Compensation Committee, which consists of Betsy Cohen, Ronald Taylor and Christopher Winship. The following discussion is based on the present expectations as to the executive compensation program to be adopted by the Compensation Committee. The executive compensation program actually adopted will depend on the judgment of the members of the Compensation Committee and may differ from that set forth in the following discussion. We anticipate that compensation for our executive officers will have three primary components: base salary, an annual cash incentive bonus and long-term incentive-based compensation in the form of stock-based awards. We anticipate that decisions regarding executive compensation will reflect our belief that the executive compensation program must be competitive in order to attract and retain our executive officers. We anticipate that the Compensation Committee will develop formal or informal policies or guidelines for allocating compensation between long-term and currently paid compensation, between cash and non-cash compensation, or among different forms of compensation. Base Salary We expect that our Named Executive Officers base salaries as described under "Executive Compensation—Amended and Restated Employment Agreements," will be reviewed annually by the Compensation Committee based upon advice and counsel of its advisors. Annual Bonuses We expect that the combined Company will use annual cash incentive bonuses for the Named Executive Officers to tie a portion of their compensation to financial and operational objectives achievable within the applicable fiscal year. We expect that, near the beginning of each year, the Compensation Committee will select the performance targets, target amounts, target award opportunities and other terms and conditions of annual cash bonuses for the Named Executive Officers, subject to the terms of their amended and restated employment agreements. Following the end of each year, the Compensation Committee will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the Named Executive Officers. Stock-Based Awards We expect the combined Company to use stock-based awards to reward long-term performance of the Named Executive Officers. Prior to the Merger, CardConnect believed that stock-based awards aligned the incentives of its Named Executive Officers with the interests of its stockholders and served to motivate and retain the individual Named Executive Officers. Stock-based awards have been and will be awarded under the 2016 Omnibus Plan. For a description of the 2016 Stock Option, see "—2016 Omnibus Plan." Other Compensation We expect the combined Company to continue to maintain various employee benefit plans, including medical, dental, life insurance and 401(k) plans, in which the named executive officers will participate. We also expect the combined Company to continue to provide its Named Executive Officers long-term disability insurance subject to the Compensation Committee s ongoing review. Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code denies a federal income tax deduction for certain compensation in excess of $1.0 million per year paid to the chief executive officer and the three other most highly-paid executive officers (other than a company s chief executive officer and chief financial officer) of a publicly-traded corporation. Certain types of compensation, including compensation based on performance criteria that are approved in advance by stockholders, are excluded from the deduction limit. We expect our policy will be to qualify compensation paid to our executive officers for deductibility for federal income tax purposes to the extent feasible. However, to retain highly skilled executives and remain competitive with other employers, the Compensation Committee may authorize compensation that would not be deductible under Section 162(m) or otherwise if it determines that such compensation is in the best interests of the combined Company and its stockholders. Table of Contents 2016 Omnibus Plan The 2016 Omnibus Plan was approved by stockholders on, and effective as of, July 27, 2016. The purpose of the 2016 Omnibus Plan is to provide eligible employees, directors and consultants the opportunity to receive stock-based incentive awards in order to encourage such persons to contribute materially to our growth and align the economic interests of such persons with those of our stockholders. Because the 2016 Omnibus Plan was approved by our stockholders, (i) the compensation attributable to grants under the 2016 Omnibus Plan may qualify for an exemption from the $1,000,000 deduction limit under section 162(m) of the Code (see the discussion of section 162(m) under "—Federal Income Tax Consequences" below), and (ii) incentive stock options may meet the requirements of the Code. Set forth below is a summary of the material terms of the 2016 Omnibus Plan. This summary is qualified in its entirety by reference to the complete text of the 2016 Omnibus Equity Compensation Plan, a copy of which is attached as an exhibit to the registration statement of which this prospectus forms a part. Summary of Material Terms of the 2016 Omnibus Plan General. The 2016 Omnibus Plan provides that grants may be in any of the following forms: incentive stock options (referred to as ISOs) nonqualified stock options (referred to as (NQSOs) stock appreciation rights (referred to as SARs) stock units performance shares stock awards dividend equivalents other stock-based awards The 2016 Omnibus Plan authorizes up to 3,796,296 shares of common stock for issuance. As of August 9, 2016, there were grants for 3,796,296 shares outstanding under the 2016 Omnibus Plan and no shares available for issuance. If and to the extent options and SARs granted under the 2016 Omnibus Plan terminate, expire or are cancelled, forfeited, exchanged or surrendered without being exercised or if any stock awards, stock units, performance shares, dividend equivalents or other stock-based awards are forfeited or terminated, or otherwise not paid in full, the shares subject to such grants will become available again for purposes of the 2016 Omnibus Plan. If any shares of common stock are withheld to pay the exercise price of an option or withheld for purposes of satisfying our minimum tax withholding obligations with respect to a grant, such shares will not be available for re-issuance under the 2016 Omnibus Plan. If SARs are granted, the full number of shares subject to the SARs shall be considered issued under the Plan, without regard to the number of shares issued upon exercise of the SARs. To the extent any grants are paid in cash, and not in shares of common stock, any shares previously subject to such grants will not count against the share limits under the 2016 Omnibus Plan. The 2016 Omnibus Plan provides that the maximum aggregate number of shares of common stock with respect to which grants, other than dividend equivalents, may be made to any individual during any calendar year is 400,000 shares, subject to adjustment as described below. Grantees may not accrue dividend equivalents during any calendar year under the 2016 Omnibus Plan in excess of $250,000. The individual limits described in this paragraph shall apply without regard to whether the grants are to be paid in common stock or in cash; provided, however, that such individual limits shall not apply to the awards granted to Jeffrey Shanahan, Patrick Shanahan and Charles Bernicker in connection with the Merger and described in the employment agreement for each such individual. See "—Amended and Restated Employment Agreements" for a description of these grants. All cash payments (other than dividend equivalents) shall equal the fair market value of the shares of common stock to which the cash payment relates. Table of Contents Administration. The 2016 Omnibus Plan is administered and interpreted by the Compensation Committee of our board of directors, except that our board of directors may make grants under the 2016 Omnibus Plan to our non-employee directors. The Administrator may delegate its authority under the 2016 Omnibus Plan, as appropriate, with respect to grants to persons who are not subject to Section 16 of the Exchange Act. References to the Administrator mean the Compensation Committee or our board of directors, including any delegates, as appropriate. The Administrator has the authority to (i) determine the individuals to whom grants will be made under the 2016 Omnibus Plan, (ii) determine the type, size and terms of the grants, (iii) determine the time when grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, subject to the limitations described below, (v) adopt guidelines separate from the 2016 Omnibus Plan that set forth the specific terms and conditions for grants under the 2016 Omnibus Plan, and (vi) deal with any other matters arising under the 2016 Omnibus Plan. The determinations of the Administrator are made in its sole discretion and are final, binding and conclusive. Eligibility for Participation. All of our employees and directors, as well as other persons who provide services to the combined Company, are eligible for grants under the 2016 Omnibus Plan. Types of Awards. Stock Options The Administrator may grant options that are intended to qualify as incentive stock options within the meaning of section 422 of the Code (ISOs) or NQSOs that are not intended to so qualify or any combination of ISOs and NQSOs. Anyone eligible to participate in the 2016 Omnibus Plan may receive a grant of NQSOs. Only employees of our company and certain of our subsidiaries may receive a grant of ISOs. The Administrator fixes the exercise price per share for options on the date of grant. The exercise price of any option granted under the 2016 Omnibus Plan may not be less than the fair market value of the underlying shares of common stock on the date of grant. However, if the grantee of an ISO is a person who holds more than 10% of the total combined voting power of all classes of outstanding stock of our company or a subsidiary, the exercise price per share of an ISO granted to such person must be at least 110% of the fair market value of a share of common stock on the date of grant. To the extent that the aggregate fair market value of shares of common stock, determined on the date of grant, with respect to which ISOs become exercisable for the first time by a grantee during any calendar year exceeds $100,000, such ISOs will be treated as NQSOs for tax purposes. The Administrator determines the term of each option; provided, however, that the term may not exceed ten years from the date of grant and, if the grantee of an ISO is a person who holds more than 10% of the combined voting power of all classes of outstanding stock of our company or a subsidiary, the term for such person may not exceed five years from the date of grant. The vesting period for options commences on the date of grant and ends on such date as is determined by the Administrator, in its sole discretion, which is specified in the grant letter. A grantee may pay the exercise price and any withholding taxes upon exercise of an option: (i) in cash or by certified check, (ii) with the approval of the Administrator, by withholding shares of common stock having a fair market value on the date of exercise equal to the exercise price, by delivering shares of common stock already owned by the grantee and having a fair market value on the date of exercise equal to the exercise price or through attestation to ownership of such shares, (iii) in cash, on the T+3 settlement date that occurs after the exercise date specified in the notice of exercise, provided that the grantee exercises the option through an irrevocable agreement with a registered broker and the payment is made in accordance with the procedures permitted by Regulation T of the Federal Reserve Board and such procedures do not violate applicable law, or (iv) by such other method as the Administrator may approve, to the extent permitted by applicable law. Table of Contents SARs The Administrator may grant SARs to anyone eligible to participate in the 2016 Omnibus Plan. SARs may be granted in connection with, or independently of, any option granted under the 2016 Omnibus Plan. Upon exercise of a SAR, the grantee will receive an amount equal to the excess of the fair market value of the common stock on the date of exercise over the base amount set forth in the grant letter. The base amount shall not be less than the fair market value of the common stock subject to the SARs on the date of grant. Such payment to the grantee will be in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the Administrator. The Administrator will determine the period when SARs vest and become exercisable, the base amount for SARs and whether SARs will be granted in connection with, or independently of, any options. SARs have a maximum term of ten years from the grant date. SARs may be exercised while the grantee is employed by or providing service to our company or within a specified period of time after termination of such employment or service. Stock Units The Administrator may grant stock units to anyone eligible to participate in the 2016 Omnibus Plan. Each stock unit provides the grantee with the right to receive a share of common stock or an amount based on the value of a share common stock at a future date. The Administrator determines the number of stock units that will be granted, whether stock units will become payable if specified performance goals or other conditions are met, or under other circumstances, and the other terms and conditions applicable to the stock units. Stock units may be paid at the end of a specified period or deferred to a date authorized by the Administrator. If a stock unit becomes distributable, it will be paid to the grantee in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the Administrator. Performance Shares The Administrator may grant performance shares to anyone eligible to participate in the 2016 Omnibus Plan. Each performance share provides the grantee with the right to receive a share of common stock or an amount based on the value of a share common stock, if specified performance goals are met. The Administrator determines the number of performance shares that will be granted, the performance goals and other conditions for payment of performance shares, the target amount that will be paid under a performance share based on the achievement of the performance goals, and the other terms and conditions applicable to the performance shares. Payments with respect to performance shares will be made in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the Administrator. Stock Awards The Administrator may grant stock awards to anyone eligible to participate in the 2016 Omnibus Plan. The Administrator may require that grantees pay consideration for the stock awards and may impose restrictions on the stock awards. If restrictions are imposed on stock awards, the Administrator will determine whether they will lapse over a period of time or according to such other criteria as the Administrator determines. The Administrator determines the number of shares of common stock subject to the grant of stock awards and the other terms and conditions of the grant. The Administrator will determine to what extent and under what conditions grantees will have the right to vote shares of common stock and to receive dividends or other distributions paid on such shares during the restriction period. The Administrator may determine that a grantee s entitlement to dividends or other distributions with respect to stock awards will be subject to the achievement of performance goals or other conditions. Dividend Equivalents The Administrator may grant dividend equivalents to anyone eligible to participate in the 2016 Omnibus Plan. Dividend equivalents may be granted in connection with any grants under the 2016 Omnibus Plan, other than options or SARs, and may be payable in cash or shares of common stock. Dividend equivalents may be paid currently or accrued as contingent cash obligations or converted to stock units, as determined by the Administrator. The terms and conditions of dividend equivalents are determined by the Administrator. Dividend equivalents may accrue on unearned performance awards but shall not be payable unless and until such performance metrics are met. Table of Contents Other Stock-Based Awards The Administrator may grant other stock-based awards (which are awards other than options, SARs, stock units, performance shares, stock awards and dividend equivalents) under the 2016 Omnibus Plan. The Administrator may grant such other stock-based awards to anyone eligible to participate in the 2016 Omnibus Plan. These grants may be cash-based or based on, measured by or payable in shares of common stock, and will be payable in cash, in shares of common stock, or in a combination of cash and shares of common stock. The terms and conditions for these grants will be determined by the Administrator. Qualified Performance Based Compensation. The Administrator may make grants to employees of stock units, performance shares, stock awards, dividend equivalents and other stock-based awards that are intended to meet the requirements of qualified performance based compensation under section 162(m) of the Code. The Administrator will establish in writing (i) the objective performance goals that must be met in order for the grants to vest or be payable, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Administrator deems appropriate and consistent with the 2016 Omnibus Plan and the requirements of section 162(m) of the Code. Forfeiture of all or part of any such grant will occur if the performance goals are not met, as determined by the Administrator. The Administrator will establish in writing the performance goals that must be met either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed. The Committee may not increase the amount of compensation that is payable upon achievement of the designated performance goals, but the Committee may reduce the amount of compensation that is payable upon achievement of the designated performance goals. The performance goals, to the extent designed to meet the requirements of section 162(m) of the Code, will be based on one or more of the following measures: common stock price, earnings per share of common stock, net earnings, operating earnings, return on assets, stockholder return, return on equity, revenue growth, assets under management, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. The foregoing measures may be based on the employee s business unit or the performance of our company or our subsidiaries independently or as a whole, or a combination of the foregoing. Deferrals. The Administrator may permit or require grantees to defer receipt of the payment of cash or the delivery of shares of common stock that would otherwise be due to the grantee in connection with a grant under the 2016 Omnibus Plan. The Administrator will establish the rules and procedures applicable to any such deferrals. Adjustment Provisions. If there is any change in the number or kind of shares of common stock by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, by reason of a merger, reorganization or consolidation, by reason of a recapitalization or change in par value or by reason of any other extraordinary or unusual event affecting the outstanding shares of common stock as a class without our receipt of consideration, or if the value of outstanding shares of common stock is substantially reduced as a result of a spinoff or our payment of an extraordinary dividend or distribution, the number of shares of common stock available for grants, the limit on the number of shares of common stock for which any individual may receive pursuant to grants in any year, the number of shares covered by outstanding grants, the kind of shares to be issued or transferred under the 2016 Omnibus Plan, and the price per share or the applicable market value of such grants will be equitably adjusted by the Administrator to reflect any increase or decrease in the number or kind of issued shares of common stock in order to preclude, to the extent practicable, the enlargement or dilution of the rights and benefits under such grants. Change of Control. If a change of control occurs where the combined company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Administrator determines otherwise, all outstanding options and SARs that are not exercised will be assumed by, or replaced with comparable options and rights by, the surviving corporation (or a parent or subsidiary of the surviving corporation), and other grants that remain outstanding will be converted to similar grants of the surviving corporation (or a parent or subsidiary of the surviving corporation). Table of Contents In the event of a change of control, the Administrator may also take any of the following actions with respect to outstanding grants: (i) provide that all outstanding options and SARs will automatically accelerate and become fully exercisable, (ii) provide that the restrictions and conditions on all outstanding stock awards will immediately lapse, (iii) provide that grantees holding outstanding stock units, performance shares, dividend equivalents and other stock-based awards will receive payment in settlement of such award in an amount determined by the Administrator, (iv) require that grantees surrender their outstanding options and SARs in exchange for payment, in cash or shares of common stock as determined by the Administrator, in an amount equal to the amount (if any) by which the then fair market value subject to the grantee s unexercised options and SARs exceeds the exercise price of the option or the base amount of the SAR, as applicable, or (v) after giving grantees the opportunity to exercise their outstanding options and SARs, the Administrator may terminate any or all unexercised options and SARs at such time as the Administrator determines appropriate. The Administrator making the determinations following a change of control must be comprised of the same members as those on the Administrator immediately before the change of control. The Administrator making the foregoing determinations following a Change of Control must be comprised of the same persons who constitute the Administrator immediately before the Change of Control. No Repricing of Options or SARs. Except in connection with a corporate transaction involving us (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding options or SARs or cancel outstanding options or SARs in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, without stockholder approval. Amendment and Termination of the 2016 Omnibus Plan. Our board of directors may amend or terminate the 2016 Omnibus Plan at any time, subject to stockholder approval if such approval is required under any applicable laws or stock exchange requirements. The 2016 Omnibus Plan will terminate on July 27, 2016, unless the 2016 Omnibus Plan is terminated earlier by our board of directors or is extended by our board of directors with the approval of the stockholders. The last sales price of our common stock on August 24, 2016, was $10.00 per share. Federal Income Tax Consequences The Federal income tax consequences arising with respect to grants under the 2016 Omnibus Plan will depend on the type of grant. The following provides only a general description of the application of federal income tax laws to grants under the 2016 Omnibus Plan. This discussion is intended for the information of stockholders considering how to vote at the special meeting and not as tax guidance to grantees in the 2016 Omnibus Plan, as the consequences may vary with the types of grants made, the identity of the recipients and the method of payment or settlement. The summary does not address the effects of other federal taxes or taxes imposed under state, local, or foreign tax laws. From the recipients standpoint, as a general rule, ordinary income will be recognized at the time of payment of cash, or delivery of actual shares of common stock. Future appreciation on shares of common stock held beyond the ordinary income recognition event will be taxable at capital gains rates when the shares of common stock are sold. As a general rule, we will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the recipient, and we will not be entitled to any tax deduction in respect of capital gain income recognized by the recipient. Exceptions to these general rules may arise under the following circumstances: (i) if shares of common stock, when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment or performance-related condition, ordinary income taxation and our tax deduction will be delayed until the risk of forfeiture lapses (unless the recipient makes a special election to ignore the risk of forfeiture under section 83(b) of the Code); (ii) if an employee is granted an option that qualifies as an "incentive stock option," no ordinary income will be recognized, and we will not be entitled to any tax deduction, if shares of common stock acquired upon exercise of such option are held until the greater of one year from the date of exercise and two years from the date of grant; (iii) we will not be entitled to a tax deduction for compensation attributable to grants to one of our top five officers, if and to the extent such compensation does not qualify as qualified performance-based compensation under section 162(m) of the Code, and such compensation, along with any other non-performance-based compensation paid in the same year, exceeds $1 million, and (iv) an award may be taxable to the recipient as ordinary income, with an additional 20% tax, at the time it becomes vested (even if the vesting date is prior to settlement of the award), if the award constitutes "deferred compensation" under section 409A of the Code, and the requirements of section 409A of the Code are not satisfied. Table of Contents Section 162(m) of the Code generally disallows a publicly held corporation s tax deduction for compensation paid to its chief executive officer or any of its three other most highly compensated officers, other than the chief financial officer, in excess of $1,000,000 in any year. Compensation that qualifies as qualified performance based compensation is excluded from the $1,000,000 deduction cap, and therefore remains fully deductible by the corporation that pays it. Options and SARs are intended to meet the requirements of qualified performance based compensation. Stock units, performance shares, stock awards, dividend equivalents and other stock-based awards granted under the 2016 Omnibus Plan will only meet the requirements of qualified performance based compensation if the Administrator conditions such grants on the achievement of specific performance goals in accordance with the requirements of section 162(m) of the Code. We have the right to require that grantees pay to us an amount necessary to satisfy our federal, state or local tax withholding obligations with respect to grants under the 2016 Omnibus Plan. We may withhold from amounts payable under the 2016 Omnibus Plan or other compensation an amount necessary to satisfy tax withholding obligations. The Administrator may permit a grantee to satisfy the withholding obligation by having shares withheld from payment of a grant, provided that the number of shares withheld does not exceed the minimum applicable tax withholding for federal, state and local tax liabilities. The Administrator may permit a grantee to satisfy our withholding obligation that exceeds the minimum applicable withholding rate by transferring to us previously acquired shares of common stock. Effective Date; Term The 2016 Omnibus Plan was adopted by our board of directors on April 29, 2016. No award will be granted under the 2016 Omnibus Plan on or after the tenth anniversary of the closing date of the Merger. Any award outstanding under the 2016 Omnibus Plan at the time of termination will remain in effect until such award is exercised or has expired in accordance with its terms. Amended and Restated Employment Agreements On July 29, 2016, each of the Named Executive Officers entered into an amended and restated employment agreement with the Company on connection with the closing of the Merger. The terms of these amended and restated employment agreements are substantially similar to the terms governing the Named Executive Officers employment agreements with CardConnect in effect prior to the Merger. The following summary sets forth the material terms of these amended and restated employment agreements. Jeffrey Shanahan The amended and restated employment agreement with Jeffrey Shanahan provides that Mr. Shanahan will serve as the President and Chief Executive Officer of the combined Company and its subsidiaries. The initial term of Mr. Shanahan s employment period will extend for five years and thereafter automatically renews for additional one-year periods unless either party notifies the other that it does not wish to renew the agreement no later than sixty (60) days prior to the end of the current term. Mr. Shanahan s base salary is set at $500,000 per year, and is subject to increase from time to time as approved by the combined Company s compensation committee. Subject to continued employment, Mr. Shanahan will be eligible to receive an annual bonus based on the combined Company s performance, as measured by the combined Company s achievement of certain target(s) approved by the combined Company s compensation committee. Mr. Shanahan s target annual bonus will not be less than 60% of his base salary. Pursuant to the terms of the amended and restated employment agreement, Mr. Shanahan was granted stock options pursuant to the 2016 Omnibus Plan to purchase 1,238,749 shares of our common stock in connection with the closing of the Merger. Such options will vest and become exercisable in four annual installments beginning on the first anniversary of the date of Mr. Shanahan s amended and restated employment agreement, except that the options will become fully vested and exercisable (a) if Mr. Shanahan s employment period is terminated by the combined Company without "cause" or by Mr. Shanahan with "good reason," each as defined below, or (b) upon a "change of control," as defined in the 2016 Omnibus Plan. Table of Contents If Mr. Shanahan s employment period is terminated by the combined Company without cause or by Mr. Shanahan with good reason, Mr. Shanahan is entitled to receive: the prorated portion of his base salary and annual bonus through the termination date; and continued base salary payments and medical benefits for 24 months following termination. If Mr. Shanahan s employment is terminated for any reason, he is subject to certain restrictive covenants including ongoing confidentiality and non-disclosure covenants, and non-compete and non-solicitation covenants and a prohibition on hiring employees of the combined Company during the 24 months following termination Pursuant to the terms of Mr. Shanahan s amended and restated employment agreement, the Company reimbursed Mr. Shanahan approximately $11 thousand for documented legal fees and expenses of Mr. Shanahan s counsel incurred in connection with preparation of his amended and restated employment agreement. For purposes of the amended and restated employment agreements for each of Jeffrey Shanahan, Charles Bernicker and Patrick Shanahan, the following definitions apply: "Cause" means with respect to executive one or more of the following: (i) the conviction of, or plea of no contest by, executive with respect to a felony or other crime involving moral turpitude offense if, and only if, it is determined by the combined Company s board of directors that such event has occurred and merits termination of the executive s employment pursuant to his employment agreement, (ii) the commission of any other act or omission by executive involving misappropriation, embezzlement, dishonesty, theft or fraud with respect to the combined Company, its subsidiaries or any of their respective business relationships, (iii) executive s illegal possession of a controlled substance, use of illegal drugs or repetitive abuse of alcohol or other behavior which materially interferes with the performance of his duties to the combined Company or any of its subsidiaries or which compromises the integrity and reputation of executive, the combined Company or any of its subsidiaries, (iv) executive s failure to substantially perform material duties as reasonably directed by any officer so authorized or by the combined Company s board of directors in accordance with his employment agreement continuing beyond thirty (30) days prior written notice of such failure, (v) executive s willful act or omission aiding or abetting a competitor of the combined Company or any of its subsidiaries to the material disadvantage or detriment of the combined Company or its subsidiaries, (vi) executive s willful failure to comply in all material respects with the combined Company s material policies, procedures and guidelines, including corporate governance and human relations policies, and applicable laws with respect to the combined Company s business operations, (vii) executive s breach of fiduciary duty, gross negligence or willful misconduct with respect to the combined Company or any of its subsidiaries, or (viii) any other material breach by executive of the executive s employment agreement which is not cured to the reasonable satisfaction of the combined Company s board of directors within thirty (30) days after written notice thereof to executive. For purposes of clauses (v), (vi) and (vii) above, no act or failure to act on the part of executive shall be considered "willful" unless it is done, or omitted to be done, by executive in bad faith or without reasonable belief that executive s action or omission was in the best interests of the combined Company. "Good reason" means if executive resigns from employment with the combined Company prior to the end of executive s employment period as a result of one or more of the following reasons: (i) any material breach by the combined Company of executive s employment agreement including a reduction in executive s base salary or target annual bonus opportunity or a material reduction in executive s employee benefits in the aggregate under his employment agreement, (ii) a material reduction or diminution of executive s duties, authority or responsibilities (including any change in his reporting requirements), or (iii) a material change in executive s principal place of employment to a location more than 25 miles outside of King of Prussia, Pennsylvania. Notwithstanding the above, the occurrence of any of the events described in (i), (ii) or (iii) above will not constitute a "good reason" unless executive gives the combined Company written notice, within sixty (60) calendar days after the occurrence of any such events that such circumstances constitute "good reason," and the combined Company thereafter fails to cure such circumstances within 30 days after receipt of such notice. The termination of executive s employment period for cause will preclude executive s resignation with good reason. Table of Contents Charles B. Bernicker The amended and restated employment agreement with Charles B. Bernicker provides that Mr. Bernicker will serve as Chief Financial Officer of the combined Company and its subsidiaries. The initial term of Mr. Bernicker s employment period will extend for five years and thereafter automatically renews for additional one-year periods unless either party notifies the other that it does not wish to renew the agreement no later than sixty (60) days prior to the end of the current term. Mr. Bernicker s base salary is set at $350,000 per year, and is subject to increase from time to time as approved by the combined Company s compensation committee. Subject to continued employment, Mr. Bernicker will be eligible to receive an annual bonus based on the combined Company s performance, as measured by the combined Company s achievement of certain target(s) approved by the combined Company s compensation committee. Mr. Bernicker s target yearly bonus will not be less than 35% of his base salary. Pursuant to the terms of the amended and restated employment agreement, Mr. Bernicker was granted stock options pursuant to the 2016 Omnibus Plan to purchase 569,444 shares of our common stock in connection with the closing of the Merger. Such options will vest and become exercisable in four annual installments beginning on the first anniversary of the date of Mr. Bernicker s amended and restated employment agreement, except that the options will become fully vested and exercisable (a) if Mr. Bernicker s employment period is terminated by the combined Company without cause or by Mr. Bernicker with good reason or (b) upon a "change of control," as defined in the 2016 Omnibus Plan. If Mr. Bernicker s employment period is terminated by the combined Company without cause or by Mr. Bernicker with good reason, Mr. Bernicker is entitled to receive: the prorated portion of his base salary and yearly bonus through the termination date; and continued base salary payments and medical benefits for 12 months following termination. If Mr. Bernicker s employment is terminated for any reason, he is subject to certain restrictive covenants including ongoing confidentiality and non-disclosure covenants, and non-compete and non-solicitation covenants and a prohibition on hiring employees of the combined Company during the 12 months following termination. Patrick Shanahan The amended and restated employment agreement with Patrick Shanahan provides that Mr. Shanahan will serve Chief Operating Officer of the combined Company and its subsidiaries. The initial term of Mr. Shanahan s employment period will extend for five years and thereafter automatically renews for additional one-year periods unless either party notifies the other that it does not wish to renew the agreement no later than sixty (60) days prior to the end of the current term. Mr. Shanahan s base salary is set at $350,000 per year, and is subject to increase from time to time as approved by the combined Company s compensation committee. Subject to continued employment, Mr. Shanahan will be eligible to receive an annual bonus based on the combined Company s performance, as measured by the combined Company s achievement of certain target(s) approved by the combined Company s compensation committee. Mr. Shanahan s target yearly bonus will not be less than 35% of his base salary. Pursuant to the terms of the amended and restated employment agreement, Mr. Shanahan was granted stock options pursuant to the 2016 Omnibus Plan to purchase 455,555 shares of our common stock in connection with the closing of the Merger. Such options will vest and become exercisable in four annual installments beginning on the first anniversary of the date of Mr. Shanahan s amended and restated employment agreement, except that the options will become fully vested and exercisable (a) if Mr. Shanahan s employment period is terminated by the combined Company without cause or by Mr. Shanahan with good reason or (b) upon a "change of control," as defined in the 2016 Omnibus Plan. Table of Contents If Mr. Shanahan s employment period is terminated by the combined Company without cause or by Mr. Shanahan with good reason, Mr. Shanahan is entitled to receive: the prorated portion of his base salary and yearly bonus through the termination date; and continued base salary payments and medical benefits for 12 months following termination. If Mr. Shanahan s employment is terminated for any reason, he is subject to certain restrictive covenants including ongoing confidentiality and non-disclosure covenants, and non-compete and non-solicitation covenants and a prohibition on hiring employees of the combined Company during the 12 months following termination. Director Compensation We expect that the non-employee and the non-affiliate directors of the combined company will receive an annual retainer of $30,000 paid in cash and $70,000 paid in equity in connection with their services on the board. We expect that each non-employee director serving as a chair of a committee of the board of the combined company will also receive an additional fee of $5,000 paid in cash on an annual basis. On July 29, 2016, each non-employee and non-affiliate director received a grant of 6,597 shares of restricted stock under the 2016 Omnibus Plan, representing a grant of $70,000 in shares of common stock to each such director based on the fair market value of the common stock ($10.61 per share) on the date of the grant. Table of Contents CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS FinTech Related Person Transactions For the purposes of this "FinTech Related Person Transactions" section, unless the context requires otherwise, the terms "we," "our" and the "Company" refer to FinTech Acquisition Corp. Founder Shares and Placement Units On November 1, 2013, we issued an aggregate of 112 founder shares to Daniel G. Cohen, Betsy Z. Cohen, DGC Family FinTech Trust, Frank Mastrangelo and James J. McEntee, III for an aggregate purchase price of $112; on July 2, 2014, we issued an aggregate of 3,916,555 founder shares to such persons and our Sponsor for an aggregate purchase price of $24,888; and, on January 12, 2015, we issued 16,666 founder shares to our Sponsor for an aggregate purchase price of $250. On March 29, 2015, the underwriter s overallotment option for our IPO expired without being exercised and certain of the initial stockholders, pursuant to a written agreement us, forfeited an aggregate of 500,000 founder shares. On February 12, 2016, Daniel Cohen transferred 90,000 of his founder shares to Shami Patel, a director of FinTech, and 10,000 founder shares to Alan Joseph Ferraro, a consultant to FinTech. On August 8, 2016, the Sponsor distributed its founder shares to its members. The founder shares are identical to the shares of our common stock included in the units sold in our IPO, except that the founder shares are subject to certain transfer restrictions, as described in more detail below. The holders of founder shares have agreed not to transfer, assign or sell any of their founder shares (except to permitted transferees) until (i) with respect to 20% of such shares, upon consummation of the Merger, (ii) with respect to 20% of such shares, when the closing price of our common stock exceeds $12.00 for any 20 trading days within a 30-trading day period following the consummation of the Merger, (iii) with respect to 20% of such shares, when the closing price of our common stock exceeds $13.50 for any 20 trading days within a 30-trading day period following the consummation of the Merger, (iv) with respect to 20% of such shares, when the closing price of our common stock exceeds $15.00 for any 20 trading days within a 30-trading day period following the consummation of the Merger and (v) with respect to 20% of such shares, when the closing price of our common stock exceeds $17.00 for any 20 trading days within a 30-trading day period following the consummation of the Merger or earlier, in any case, if, following the Merger, the combined Company engages in a subsequent transaction (1) resulting in our shareholders having the right to exchange their shares for cash or other securities or (2) involving a consolidation, merger or other change in the majority of our board of directors or management team in which the combined Company is the surviving entity. The Sponsor purchased 200,000 placement units at a price of $10.00 per unit for an aggregate purchase price of $2.0 million, in the private placement consummated in connection with our IPO. The placement units include one share of our common stock and one placement warrant to purchase one share of our common stock at an exercise price of $12.00. The placement warrants are identical to the warrants included in the units sold in our IPO, except that if held by our Sponsor, Cantor or their permitted assigns, they (a) may be exercised for cash or on a cashless basis, (b) are not subject to being called for redemption and (c) they (including our common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the consummation of our initial business combination. Loan from our Sponsor Prior to our IPO, in order to finance organizational costs and other costs relating to our IPO, our Sponsor committed to loan us funds as may be required, to a maximum of $500,000. These loans were non-interest bearing, unsecured and payable on the earlier of March 31, 2015 or the consummation of our IPO. We repaid an aggregate of $139,211 loans to the Sponsor upon the consummation of our IPO or shortly thereafter. In order to finance transaction costs in connection with an initial business combination, the Sponsor has committed to loan us funds as may be required, to a maximum of $750,000. Upon consummation of the Merger, we repaid approximately $579,070 in funds the Sponsor advanced to us under this loan. Table of Contents IPO Registration Rights The holders of founder shares, placement units (including securities contained therein) and warrants that may be issued upon conversion of loans made by our Sponsor have the right to require us to register under the Securities Act a sale of any our securities held by them pursuant to the registration rights agreement entered into concurrently with the closing of the IPO. These holders will be entitled to make up to three demands, excluding short form registration demands. In addition, these holders will have "piggy-back" registration rights allowing them to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements. Merger Registration Rights On July 29, 2016, in connection with the Merger closing, FinTech entered into a registration rights agreement with the CardConnect stockholders other than the executive officers of the Company, which provides registration rights with respect to the shares of the Company s common stock that were issued to such CardConnect stockholders as partial consideration under the Merger Agreement and other shares acquired prior to the Follow On Offering. The registration rights granted to CardConnect stockholders provide for the Follow On Offering, a shelf registration and include demand rights and piggyback rights, subject to customary underwriter cutbacks and issuer blackout periods. FinTech agreed to pay customary fees and expenses relating to registrations under the registration rights agreement. Letter Agreement On July 29, 2016, in connection with the Merger closing, FinTech entered into a letter agreement (the "Letter Agreement") with the CardConnect stockholders and each of the Sponsor, Daniel G. Cohen, Cohen Sponsor Interests, LLC, Betsy Z. Cohen, DGC Family FinTech Trust, Frank Mastrangelo, James J. McEntee, III, Shami Patel and Alan Joseph Ferraro (together, the "Initial Stockholders"), and certain other stockholders of FinTech signatory thereto pursuant to which (i) the parties thereto agreed not to sell, transfer or otherwise dispose of any of their shares of the common stock of the Company for a period of 180 days following the consummation of the Merger, subject to certain exceptions, and (ii) the Initial Stockholders agreed to waive their registration rights under their existing registration rights agreement with FinTech dated February 12, 2015. Shareholders Agreement On July 29, 2016, in connection with the Merger closing, FinTech entered into a stockholders agreement with the FTV Entities., Brian Shanahan, the executive officers of the Company, and certain of the Initial Stockholders (the "Shareholders Agreement"), pursuant to which such stockholders have certain director nominee designation rights and have agreed to vote for the director nominees designated under the Shareholders Agreement. The stockholders party thereto will cease to have any continuing director designation rights under the Shareholders Agreement if their respective ownership of the common stock of the Company is at any time less than 5% of total outstanding common stock. Private Placement On July 27, 2016, FinTech entered into securities purchase agreements (the "Purchase Agreements") with each of the FTV Entities, Brian Shanahan, certain other former CardConnect stockholders and an affiliate of Betsy Cohen, who is a director of the Company (collectively the "Investors"), for the PIPE Transaction. On July 29, 2016, the Company issued and sold 467,647 shares of the Company s common stock pursuant to the Purchase Agreements for an aggregate purchase price of $4,700,000. Of the shares sold in the PIPE Transaction, 350,000 shares were sold at a purchase price of $10.00 per share, and the remaining 117,647 shares, which were sold to the affiliate of Mrs. Cohen, were sold at a purchase price of $10.20 per share, the most recent closing bid price of the common stock, as required by applicable NASDAQ Listing Rules. The shares sold in the PIPE Transaction were sold to the Investors in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Table of Contents The closing of the PIPE Transaction occurred immediately prior to the closing of the Merger. The Company used the proceeds from the PIPE Transaction to pay a portion of the cash consideration for the Merger, repay CardConnect s existing debt in connection with the Merger, pay transaction expenses relating to the Merger and redeem shares of common stock in connection with the Merger pursuant to FinTech s charter. All of the shares purchased by the Investors are subject to transfer restrictions pursuant to the letter agreement described above under "Letter Agreement." All shares purchased by the Investors, other than shares held by the affiliate of Betsy Cohen, are entitled to registration rights with respect to all Shares purchased in the PIPE Transaction pursuant to the registration rights agreement entered into in connection with the Merger described under "Merger Registration Rights." CardConnect Related Person Transactions Transition, Employment and General Release Agreement On February 14, 2014, CardConnect entered into a transition, employment and general release agreement (the "Transition Agreement") with Brian Shanahan, the then Chief Executive Officer of CardConnect s predecessor, Financial Transaction Services, LLC. Pursuant to the agreement, Mr. Shanahan (1) resigned from his position as Chief Executive Officer, (2) was appointed Non-Executive Chairman of CardConnect s board of directors, (3) entered into an amended and restated employment agreement with CardConnect to transfer his employment from Financial Transaction Services, LLC to CardConnect for consideration of $1.0 million, which was paid in February, 2014 and (4) received additional payments of $500,000 each in June and September, 2014, and a payment of $950,000 in December, 2014. Additionally, CardConnect was required to make donations to two charitable organizations on behalf of Mr. Shanahan, totaling $250,000, which were paid in January, 2014. Loans to Brian Shanahan On March 23, 2013, Brian Shanahan, CardConnect s then Chief Executive Officer, and current non-executive chairman, issued CardConnect a non-negotiable, non-interest bearing promissory note in an initial principal amount of $1.5 million, which was amended in June 2013 to increase the principal amount of $1.7 million. The March 23, 2013 note matures on the earlier of (i) the date CardConnect sells all or substantially all of its assets, merges, or is otherwise acquired or (ii) March 31, 2018. On September 25, 2013, Mr. Shanahan issued CardConnect a non-negotiable, non-interest bearing promissory note in the principal amount of $2.0 million. The September 25, 2013 note matures on the earlier of (i) the date CardConnect sells all or substantially all of its assets, merges, or is otherwise acquired or (ii) June 30, 2015. Interest on these notes accrues at a rate per annum equal to the greater of (i) two percent or (ii) the mid-term applicable federal rate. As of December 31, 2015, $2.45 million in principal amount remains outstanding under these notes. The notes were repaid in full upon closing of the Merger. In connection with relocating its corporate headquarters, CardConnect provided Mr. Shanahan a loan to assist with the purchase of a new residence. Interest on the loan accrues semiannually at the then-applicable Federal Short-Term Rate. The loan is forgiven by CardConnect in 36 equal monthly installments beginning the first month following the funding date. If CardConnect terminates Mr. Shanahan without cause, then the outstanding principal amount and any unpaid interest accrued will be forgiven. If CardConnect terminates Mr. Shanahan for cause, or he voluntarily terminates his employment, then the outstanding principal amount and any unpaid interest accrued shall become due immediately. As of December 31, 2015, the outstanding balance of the loan is $116,887. The loan was repaid in full upon consummation of the Merger. Loan to Jeffrey Shanahan On May 9, 2013, CardConnect s then President, and current Chief Executive Officer, Jeffrey Shanahan, issued CardConnect a non-negotiable promissory note in the amount of $500,000. The note was subsequently amended to increase the principal amount to $1.25 million. The note matures on the earlier of (i) the date CardConnect sells all or substantially all of its assets, merges, or is otherwise acquired or (ii) March 31, 2018 and bears interest at a rate of the greater of 2.0% or an applicable federal rate. As of December 31, 2015, the outstanding principal balance of the note was $1.25 million. The note was repaid in full upon closing of the Merger. Table of Contents Independent Contractor Agreement with Sales Agents On January 16, 2013, CardConnect entered into an independent contractor agreement with a sales agent, Integrated Transactions, LLC ("Integrated"), a company founded and controlled by Michael Shanahan, the brother of CardConnect s Chief Executive Officer, Jeffrey Shanahan, and director, Brian Shanahan. In connection with the agreement, CardConnect provided Integrated a $250,000 revolving line of credit note. The note matures in August 2016 and bears interest rate of 5.0%. If certain performance targets are met, either 50% or 100% of the outstanding loan balance shall be forgiven. On May 9, 2014, the note was amended to extend the repayment to 25 months after the effective date of the original note. As of December 31, 2014, the outstanding loan balance was $237,693. CardConnect expects the sales agent to achieve the performance target to forgive 50% of the outstanding balance and has accrued a reserve of $125,000 at December 31, 2014. On October 13, 2014, CardConnect entered into an independent contractor agreement with a sales agent, Bill Bernicker, who is the brother of CardConnect s Chief Financial Officer, Charles Bernicker. In connection with the agreement, CardConnect provided a $200,000 revolving line of credit note to Mr. Bernicker. Mr. Bernicker may draw down a maximum of $15,000 per month for the time period of 12 months after the effective date. The note matures in November 2018, and is subject to an interest rate of 5.0%, which begins accruing one year after the effective date of the note. Payments commence 25 months after the effective date of the note and the outstanding balance will be paid in 24 monthly installments. If certain performance targets are met within 24 months of the effective date, either 50% or 100% of the outstanding loan balance shall be forgiven. As of December 31, 2015, the outstanding loan balance was $170,000. During 2015, CardConnect entered into residual buyout agreements with Integrated. Total consideration under these agreements was $560,000, of which $352,209 was paid in cash by CardConnect and $207,791 provided for the repayment of all outstanding loan balances owed by Integrated. Contract with Trustwave CardConnect relies on Trustwave Holdings, Inc. ("Trustwave") to provide certain Payment Card Industry compliance services. Richard Garman, a non-executive director of CardConnect, is also a non-executive director of Trustwave. During the years ended December 31, 2015, 2014 and 2013 CardConnect recorded expenses of $647,302, $632,626 and $456,056, respectively, for these services. At December 31, 2015 amounts due to Trustwave totaled $128,655. Stock Repurchase On February 26, 2015, CardConnect purchased 540,000 outstanding shares of its common stock from its then non-executive chairman, Brian Shanahan, for $2.7 million. Management Carve Out Agreements CardConnect was party to management carve-out agreements with certain of its employees providing for payments to such persons upon a change in control. Pursuant to such management carve out agreements, Brian Shanahan, CardConnect s non-executive chairman, Jeffrey Shanahan, CardConnect s Chief Executive Officer, Patrick Shanahan, CardConnect s Chief Operating Officer and Angelo Grecco, CardConnect s Executive Vice President of Sales, received $5,505,000, $1,250,000, $329,150 and $254,240, respectively, upon closing of the Merger. The Management Carve Out Agreements terminated upon the closing of the Merger. Policies and Procedures for Related Person Transactions Our board of directors has adopted a written related person transaction policy that sets forth the policies and procedures for the review and approval or ratification of related person transactions. Our policy requires that a "related person" (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our Chief Financial Officer any "related person transaction" (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we are or will be a participant and the amount involved exceeds $120,000 and in which any related person has or will have a direct or indirect material interest) in which such related person has or will have a direct or indirect material interest and all material facts with respect thereto. The Chief Financial Officer will promptly communicate such information to our Audit Committee or another independent body of our board of directors. No related person transaction will be entered into without the approval or ratification of our Audit Committee or another independent body of our board of directors. It is our policy that directors interested in a related person transaction will recuse themselves from any such vote. Our policy does not specify the standards to be applied by our Audit Committee or another independent body of our board of directors in determining whether or not to approve or ratify a related person transaction and we accordingly anticipate that these determinations will be made in accordance with the DGCL. Table of Contents Security Ownership of Certain Beneficial Owners and Management The following table sets forth information known to the Company regarding beneficial ownership of shares of common stock of the Company as of August 23, 2016 by: each person who is the beneficial owner of more than 5% of the outstanding shares of the Company s common stock; each of the Company s executive officers and directors; and all executive officers and directors of the Company as a group. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Beneficial ownership of common stock of the Company is based on 28,751,331 shares of common stock of the Company issued and outstanding as of July 29, 2016, the closing date of the Merger. Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially. Following the Merger Name and Address of Beneficial Owners Number of Shares Percentage Directors, Nominees and Executive Officers Post-Merger:(1) Charles Bernicker 268,788(2) * Peter Burns 6,597 - Betsy Cohen 943,543 3.3% Richard Garman 10,602,403(3) 36.9% Jeffrey Shanahan 1,018,789(4) 3.5% Patrick Shanahan 314,456(5) 1.1% Ronald Taylor 6,597 - Christopher Winship 10,602,403(3) 36.9% Toos Daruvala - - All directors and executive officers as a group (post-Merger) (11 individuals) 13,676,271 45.0% Five Percent Holders: Wellington Management Group LLP 1,644,180(6) 5.6% Polar Asset Management Partners Inc. 1,489,488(7) 5.2% FTV Entities 10,602,403(8) 36.9% Brian Shanahan 2,414,137(9) 8.3% Parties to Shareholder Agreement 17,782,322(10) 56.9% Table of Contents (1) Unless otherwise noted, the business address of each of the directors and executive officers is 1000 Continental Drive, Suite 300, King of Prussia, Pennsylvania 19406. (2) Represents options to purchase 267,788 shares exercisable within 60 days which were granted as partial consideration in the Merger. (3) Includes 9,756,030 shares, 528,983 shares and 317,390 shares held directly by FTVentures III, L.P., FTVentures III-N, L.P. and FTVentures III-T, L.P., respectively (together, the "FTV Entities"). FTVentures Management III, L.L.C. ("FTVentures") is the general partner of the FTV Entities. Richard N. Garman, Brad E. Bernstein, David A. Haynes, Chris H. Winship, James C. Hale and Robert A. Huret, as the managing members (the "Managing Members") of FTVentures acting by a majority vote, share voting and dispositive power over the limited liability company interests in the FTV Entities held directly by FTVentures, and therefore share an indirect beneficial interest in our common stock held directly by the FTV Entities. The Managing Members hereby disclaim beneficial ownership of any shares of the Company s common stock except to the extent of their pecuniary interest therein. The address for the FTV Entities, FTVentures and the Managing Members is c/o FTV Capital, 555 California St, Suite 2850, San Francisco, CA 94104. (4) Includes 370,126 shares and options to purchase 648,663 shares exercisable within 60 days which were granted as partial consideration in the Merger. (5) Includes 41,353 shares and options to purchase 273,103 shares exercisable within 60 days which were granted as partial consideration in the Merger. (6) Based on information contained in a Schedule 13D/A filed on August 5, 2016, filed by (i) Wellington Management Group LLP, a Massachusetts limited liability partnership ("WMG"), (ii) Wellington Group Holdings LLP, a Delaware limited liability partnership ("WGH"), (iii) Wellington Investment Advisors Holdings LLP, a Delaware limited liability partnership ("WIAH") and (iv) Wellington Management Company LLP, a Delaware limited liability partnership ("Wellington Management"), these securities were acquired by investment advisory clients ("Clients") of Wellington Management, with Wellington Management making the investment decision on behalf of the Clients. The Clients may be considered to be affiliates of each other and of Wellington Management. Each of the Clients used its own assets to acquire the securities, which in some cases may have included funds borrowed in the ordinary course in margin accounts. As an investment adviser, Wellington Management may be deemed to beneficially own the shares that are held by its Clients. WIAH is the direct parent of Wellington Management and, accordingly, may be deemed to beneficially own the shares held by such Clients. WGH is the direct parent of WIAH and, accordingly, may be deemed to beneficially own the shares held by such Clients. WMG is the direct parent of WGH and, accordingly, may be deemed to beneficially own the shares held by such Clients. Each of WMG, WGH, WIAH and Wellington Management share voting and dispositive power over the shares beneficially owned by such entities. The business address of each reporting person is c/o Wellington Management Company LLP, 280 Congress Street, Boston, Massachusetts 02210. Includes warrants to purchase 499,590 shares exercisable within 60 days. (7) Based on information contained in a Schedule 13G/A filed on April 18, 2016 by Polar Asset Management Partners Inc. The business address of the reporting person is 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H 2Y4, Canada. (8) Includes 9,756,030 shares, 528,983 shares and 317,390 shares held directly by FTVentures III, L.P., FTVentures III-N, L.P. and FTVentures III-T, L.P., respectively. See footnote 3 above for additional information regarding these entities. (9) Includes 1,817,540 shares and options to purchase 465,837 shares exercisable within 60 days which were granted as partial consideration in the Merger. (10) Includes shares held by each of the parties to the Shareholders Agreement. Includes 70,000 warrants and options to purchase 2,444,786 shares of our common stock that are exercisable within 60 days. Table of Contents PLAN OF DISTRIBUTION The shares of common stock offered and sold pursuant to this prospectus will be issued directly to the holders of warrants upon payment of the exercise price therefor to us. We are required to pay all fees and expenses incident to the registration of the shares of our common stock to be offered and sold pursuant to this prospectus. Table of Contents DESCRIPTION OF SECURITIES Authorized and Outstanding Stock Our charter authorizes the issuance of 210,000,000 shares, consisting of 200,000,000 shares of common stock, $0.001 par value per share and 10,000,000 shares of preferred stock, $0.001 par value, of which 1,500,000 shares are designated as Series A Preferred Stock. As July 29, 2016, the closing date of the Merger, there were 28,751,331 shares of our common stock outstanding and 1,500,000 shares of our Series A preferred stock outstanding. Common Stock Holders of common stock are entitled to one vote for each share held on all matters to be voted on by stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Our stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor. Holders of our common stock have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to our common stock. If we liquidate, dissolve or wind up after our initial business combination, our stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Preferred Stock Our charter provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions, applicable to the shares of each series. Series A Preferred Stock On July 29, 2016, pursuant to a purchase agreement dated June 23, 2016 and in connection with the partial financing of the Merger, FinTech issued (a) 1,500,000 shares of FinTech s newly created Series A Preferred Stock (the "Preferred Stock") and (b) 480,544 shares of common stock to the Series A Purchaser. FinTech sold the shares of Preferred Stock and common stock to the Series A Purchaser in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated by the SEC. The aggregate purchase price for the Shares was $37.5 million, of which FinTech used $30.0 million to pay a portion of the cash consideration for the Merger, repay CardConnect s existing debt in connection with the Merger, pay transaction expenses relating to the Merger and for general corporate purposes, and the remaining $7.5 million was placed by FinTech in a separate account for use in funding the first two years of cash dividends on the Preferred Stock. The Preferred Stock has an aggregate liquidation preference of $37.5 million plus all unpaid dividends. During the first two years following issuance, dividends accrue at 11.43% per annum, compounding quarterly, of which 10.0% will be payable in cash and 1.43% will accrue and be payable in connection with a redemption of the Preferred Stock or a Change of Control (as defined below). Thereafter, dividends accrue at 13.40% per annum, compounding quarterly, all of which will accrue and be payable in connection with a redemption of the Preferred Stock or a Change of Control. Table of Contents The Preferred Stock is redeemable, at the Series A Purchaser s option, beginning seven years following the date of issuance (the "Mandatory Redemption Date") at a price equal to the then aggregate liquidation preference of the outstanding Preferred Stock. The Company has the right (the "Optional Redemption Right") to redeem the Preferred Stock beginning three and a half years following the date of issuance. The redemption price (the "Redemption Price") will be 102% of the liquidation preference if the redemption occurs during the first redemption year, 101% of the liquidation preference if the redemption occurs during the second redemption year, and 100% of the liquidation value thereafter. If on the Mandatory Redemption Date any shares of Preferred Stock remain outstanding, the dividend rate on the outstanding shares of Preferred Stock will increase by 1.0% per annum, with the rate per annum being increased an additional 1.0% on the first day of each successive 180 day period thereafter. In addition, if at any time, (1) the ratio of the Company s indebtedness (including for this purpose, the liquidation preference of the Preferred Stock) to its 12 month trailing EBITDA, on a pro forma basis, exceeds 7.7x, or (2) there is a payment or financial covenant default under the Company s First Lien Facility (each, a "Trigger Event"), the dividend rate on the outstanding shares of Preferred Stock will increase upon the occurrence of the Trigger Event by the greater of (A) any increase in the interest rate of the Company s second lien term loan credit facility or (B) 1.0%, with the rate per annum being increased an additional 1.0% on the first day of each successive 180 day period. Any such additional rate increase described in the prior sentence shall remain in effect until the default or Trigger Event has been cured, resolved or waived by the applicable party. In addition, upon certain "Changes of Control" (as defined in the Certificate of Designation for the Preferred Stock (the "Certificate of Designation")), if the holders of at least 66 2/3% of the outstanding shares of Preferred Stock request redemption of the Preferred Stock, the Company must repurchase all outstanding Preferred Stock at a price equal to the then-applicable Redemption Price, or, if the Change of Control occurs during the period when the Company is not permitted to exercise its Optional Redemption Right, at a price equal to the liquidation preference of the Preferred Stock plus a "make whole" premium. The "make whole" premium is equal to the total value of the Preferred Stock dividends that would otherwise have been payable during the period prior to the commencement of the Company s Optional Redemption Right, discounted at the rate applicable to U.S. Treasury bills or notes of similar duration plus 50 basis points, plus 2.0%. The Preferred Stock is non-voting; however, the following actions will require the consent of 66 2/3% of the outstanding shares of Preferred Stock: Changes to the Company s charter or bylaws that adversely affect the powers, preferences, or rights of the Preferred Stock. Issuances of additional shares of Preferred Stock or equity securities of the Company senior to, or pari passu with, the Preferred Stock, or issuances of capital stock by any subsidiary of the Company other than issuances to the Company or a wholly-owned subsidiary of the Company. Reclassifications, alterations or amendments to any existing security of the Company that is junior to the Preferred Stock in a way that would make such security senior to, or pari passu with, the Preferred Stock. Purchases or redemptions of, or distributions on, any capital stock of the Company other than the Preferred Stock, and other than certain specified redemptions of the Company s common stock. Issuances of any debt security or the incurrence of indebtedness for borrowed money and capital leases, other than certain permitted indebtedness, that (a) would result in the ratio of the Company s indebtedness to its trailing 12 month adjusted EBITDA, on a pro forma basis, exceeding 6.0x for the first 12 months following the issuance of the Preferred Stock, and exceeding 5.5x thereafter, or (b) includes terms that could prohibit the Company from paying the cash dividends payable on the Preferred Stock. Affiliate transactions resulting in payments of more than $150,000 per year, subject to certain specified exceptions. Changes in the Company s tax status. Consummation of a Change of Control pursuant to which the consideration payable to the Company s stockholders would be allocated in a manner other than as set forth in the Certificate of Designation. Table of Contents If any shares of Preferred Stock are outstanding following the Mandatory Redemption Date, or if at any time the ratio of the Company s total indebtedness (including for these purposes the liquidation preference of the outstanding shares of Preferred Stock less any accumulated dividends on the Preferred Stock) to its trailing 12 month adjusted EBITDA, on a pro forma basis, exceeds 7.7x, then the following actions will also require the consent of 66 2/3% of the outstanding shares of Preferred Stock: A sale, in one or more transactions, of in excess of 27.5% of the Company s consolidated net assets, except pursuant to a directed sale of assets in connection with a foreclosure by the lenders under the Company s First Lien Facility. The liquidation, dissolutions or winding up of the Company s business and affairs, a voluntary filing for bankruptcy, reorganization, insolvency or other relief from creditors, or an assignment for the benefit of creditors other than as contemplated by the definitive agreements for the Company s First Lien Facility. The issuance of equity securities below fair market value other than in an underwritten public offering or in a private placement in which at least a majority of the securities are purchased by persons or entities that are not affiliates of the Company. Founder Shares and Placement Shares The founder shares and placement shares are each identical to our shares of common stock and holders of founder shares or placement shares have the same stockholder rights as public stockholders, except that the founder shares and placement shares are subject to certain transfer restrictions. See "Certain Relationships and Related Transactions—FinTech Related Person Transactions—Founder Shares and Placement Units" for additional information. Warrants Public Warrants Each warrant entitles the registered holder to purchase one share of our common stock at a price of $12.00 per share, subject to adjustment as discussed below, at any time commencing on August 28, 2016. The warrants will expire on July 29, 2021, at 5:00 p.m., New York time, or earlier upon redemption or our liquidation. We will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of common stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt from the registration or qualifications requirements of the securities laws of the state of residence of the registered holder of the warrants. If the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the warrant holder will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit. Table of Contents We have agreed that, as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the warrants, and we will use our best efforts to take such action as is necessary to register or qualify for sale, in those states in which the warrants were initially offered by us, the shares of common stock issuable upon exercise of the warrants, to the extent an exemption therefrom is not available. We will use our best efforts to cause the post-effective amendment or new registration statement the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. In addition, we have agreed to use our best efforts to register the shares of common stock issuable upon exercise of a warrant under the blue sky laws of the states of residence of the exercising warrant holder to the extent an exemption is not available. No warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants has not been declared effective by the 60th business day following the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act. If cashless exercise is permitted, each holder of our warrants exercising on a cashless basis would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing: (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the warrant exercise price and the "fair market value" by (y) the fair market value. For these purposes, fair market value will mean the volume weighted average price of common stock as reported during the ten (10) trading day period ending on the trading day prior to the date that notice of exercise is received by the warrant agent from the holder of such warrants or our securities broker or intermediary. Once the warrants become exercisable, we may call the warrants for redemption: in whole and not in part; at a price of $0.01 per warrant; upon not less than 30 days prior written notice of redemption (the "30-day redemption period") to each warrant holder; and if, and only if, the reported last sale price of the common stock (or the closing bid price of our common stock in the event shares of our common stock are not traded on any specific day) equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending three business days before we send the notice of redemption to the warrant holders. We will not redeem the warrants unless an effective registration statement covering the shares of common stock issuable upon exercise of the warrants is current and available throughout the 30-day redemption period. We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the common stock may fall below the $18.00 redemption trigger price as well as the $12.00 warrant exercise price after the redemption notice is issued. A holder of a warrant may notify us in writing if it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person s affiliates), to the warrant agent s actual knowledge, would beneficially own in excess of 9.8% of the shares of common stock outstanding immediately after giving effect to such exercise. Table of Contents If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of common stock. A rights offering to holders of common stock entitling holders to purchase shares of common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of common stock equal to the product of (i) the number of shares of common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for common stock) multiplied (ii) one (1) minus the quotient of (x) the price per share of common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for common stock, in determining the price payable for common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights. In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of common stock in connection with a proposed initial business combination, or (d) in connection with the redemption of our public shares upon our failure to consummate our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common stock in respect of such event. If the number of outstanding shares of our common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of common stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of common stock. Whenever the number of shares of common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of common stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of common stock so purchasable immediately thereafter. If, at any time while the warrants are outstanding, we effect (a) a merger with another company, in which our stockholders immediately prior to such transaction own less than a majority of the outstanding stock of the surviving entity, (b) any sale of all or substantially all of our assets in one or a series of related transactions, (c) a tender offer or exchange offer approved or authorized by our board is completed pursuant to which holders of at least a majority of our outstanding shares of common stock tender or exchange their shares for other securities, cash or property, or (d) a reclassification of our shares or any compulsory share exchange pursuant to which shares of our common stock are effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of our common stock), the holders of the warrants will thereafter have the right to receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares or other securities or property receivable upon such event, that the holder of the warrants would have received if such holder had exercised his or its warrants immediately before the event. If less than 70% of the consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant. The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders. Table of Contents No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. Placement Warrants Certain stockholders and Cantor Fitzgerald hold an aggregate of 300,000 placement warrants. The placement warrants are identical to the public warrants, except that, if held by such stockholders, Cantor or their permitted assigns, they (a) may be exercised for cash or on a cashless basis; (b) are not subject to being called for redemption and (c) they (including the common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the consummation of our initial business combination. In addition, for as long as the placement warrants are held by Cantor or its designees or affiliates, they may not be exercised after February 12, 2020. Dividends We have not paid any cash dividends on our common stock to date. We expect that we will retain earnings for use in business operations and, accordingly, we do not anticipate our board of directors declaring any dividends in the foreseeable future. In addition, the terms of our credit facilities and Series A Preferred Stock include restrictions on our ability to pay dividends as described under "Management s Discussion and Analysis of Financial Condition and Results of Operationss—Liquidity and Capital Resources—Credit Facilities" and "—Series A Preferred Stock." Rule 144 Pursuant to Rule 144, a person who has beneficially owned restricted shares of our common stock or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale. Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of: 1% of the total number of shares of common stock then outstanding; or the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us. Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met: the issuer of the securities that was formerly a shell company has ceased to be a shell company; the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. Table of Contents Registration Rights Holders of our founder shares and placement units (including the underlying securities) have been granted registration rights in connection with our IPO as described under "Certain Relationships and Related Transactions—FinTech Related Person Transactions—IPO Registration Rights." Certain stockholders of CardConnect have been granted registration rights with respect to the shares of our common stock issued to them as partial consideration in the Merger as described under "Certain Relationships and Related Transactions—FinTech Related Person Transactions—Merger Registration Rights. Our Transfer Agent and Warrant Agent The transfer agent for our Common Stock and warrant agent for our Warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity. Quotation of Securities Our common stock and warrants are quoted on The NASDAQ Capital Market under the symbols "CCN" and "CCNW," respectively. Table of Contents LEGAL MATTERS The validity of the shares of common stock offered pursuant to this prospectus will be passed upon by Ledgewood, PC, Philadelphia, Pennsylvania. EXPERTS The financial statements of FinTech Acquisition Corp. as of October 31, 2015 and 2014, and for the years ended October 31, 2015 and 2014, and the financial statements of FTS Holding Corporation and Subsidiaries as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 appearing in this prospectus have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere in this prospectus, and are included in reliance on such report given on the authority of such firm as an expert in accounting and auditing. TRANSFER AGENT AND REGISTRAR The transfer agent for our securities is Continental Stock Transfer & Trust Company. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock you should refer to the registration statement and its exhibits. Statements contained in this prospectus concerning any of our contracts, agreements or other documents are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. We are subject to the informational requirements of the Exchange Act and file annual, quarterly and current reports and other information with the SEC. Our filings with the SEC are available to the public on the SEC s website at http://www.sec.gov. Those filings are also available to the public on, or accessible through, our website under the heading "Investors Relations" at www.cardconnect.com. The information we file with the SEC or contained on or accessible through our corporate website or any other website that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part. You may also read and copy, at SEC prescribed rates, any document we file with the SEC, including the registration statement (and its exhibits) of which this prospectus is a part, at the SEC s Public Reference Room located at 100 F Street, N.E., Washington D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Table of Contents PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth all costs and expenses in connection with the offer and sale of the securities being registered. All amounts shown are estimates except for the SEC registration fee. Amount SEC registration fee $12,447 Legal fees and expenses 50,000 Accounting fees and expenses 10,000 Miscellaneous expenses 27,553 Total $100,000 Item 14. Indemnification of Officers and Directors Section 145 of the Delaware General Corporation Law ("DGCL") authorizes a court to award, or a corporation s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act. Our charter provides for that our directors shall not be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL amended. Our bylaws provide for indemnification of our directors and officers to the maximum extent permitted by the DGCL. We expect to maintain standard policies of insurance that provide coverage to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act. Item 15. Recent Sales of Unregistered Securities On July 27, 2016, the Company entered into securities purchase agreements providing for the issuance and sale of the Company s common stock in a private placement to certain CardConnect stockholders and an affiliate of Betsy Cohen, a director of the Company. See "Certain Relationships and Related Transactions—FinTech Related Person Transactions—Private Placement" for additional information, which is incorporated herein by reference. On July 29, 2016, pursuant to a purchase agreement dated June 23, 2016 and in connection with the partial financing of the Merger, FinTech issued (a) 1,500,000 shares of FinTech s newly created Series A Preferred Stock and (b) 480,544 shares of common stock to the Series A Purchaser. FinTech sold the shares of Series A Preferred Stock and common stock to the Series A Purchaser in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated by the SEC. See "Description of Securities—Authorized and Outstanding Stock—Series A Preferred Stock" for additional information, which is incorporated herein by reference. On February 19, 2015, FinTech sold 300,000 placement units in a private placement for an aggregate purchase price of $3,000,000, or $10.00 per unit, to the Sponsor (200,000 Units) and Cantor Fitzgerald (100,000 Units), pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act. Each placement unit consists of one share of common stock and a placement warrant. See "Description of Securities—Placement Warrants" for a description of the placement warrants, which is incorporated by reference herein. II-1 Table of Contents On March 29, 2015 the underwriter s over-allotment option in connection with the FinTech initial public offering expired without exercise and the Sponsor, and certain of FinTech s initial shareholders returned to FinTech an aggregate of 500,000 founder shares, which were subsequently cancelled. Item 16. Exhibits and Financial Statement Schedules (a) The list of exhibits is set forth under "Exhibit Index" at the end of this registration statement. (b) See the Index to Consolidated Financial Statements included on page F-1 for a list of the financial statements included in this registration statement. All schedules not identified above have been omitted because they are not required, are inapplicable, or the information is included in the consolidated financial statements or notes contained in this registration statement. Item 17. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(l)(i), (a)(l)(ii) and (a)(l)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001616788_legacy_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001616788_legacy_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..89dd5b1e074e1cf0104d2cad1faf947f6ead7746
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001616788_legacy_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including "Risk Factors", "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. In this prospectus, the terms "Legacy Ventures" "Company," "we," "us" and "our", "our company" refer to Legacy Ventures International, Inc. Overview We were incorporated on March 4, 2014 under the laws of the State of Nevada. We offered management and consulting services to residential and commercial real estate property owners prior to the acquisition of RM Fresh. We now operate through our wholly-owned subsidiary RM Fresh, who services food and beverage retailers and distributors who are looking for innovative, trend-setting products across North America and in international markets. With a focus on sustainable, category changing consumables, RM Fresh acquired the rights to distribute an extensive portfolio of highly desirable brands, including Boxed Water, Cleansify, Uncle Si s Iced Tea, Chef 5-Minute Meals, Gurkha Cigars, Shimla Foods, Aloe Gloe and Arriba Horchata. We are headquartered in Mississauga, Ontario, Canada and offers logistic and warehouse services out of our principal warehouse facility in Mississauga, servicing the greater Toronto area. Through a network of sub-distribution partners across Canada, RM Fresh provides national product distribution and brokerage services. The Company has an emerging focus on the United States and Middle East through the establishment of sub-distribution partners. On September 30, 2015, we entered into a share exchange agreement with Rehan Saeed, RM Fresh Brands Inc. ("RM Fresh"), and the RM Fresh shareholders, Ron Patel and Mirwan Ferris. Pursuant to the terms of the agreement, the Company issued an aggregate of 2,000,000 shares of its common stock to the RM Fresh shareholders in exchange for all the issued and outstanding shares of RM Fresh. The principals of RM Fresh, Ron Patel and Mirwan Ferris, remain as officers and directors of RM Fresh. In connection with the share exchange agreement, the Company entered into a share cancellation agreement with Rehan Saeed whereby Mr. Saeed, owning an aggregate of 37,800,000 shares of the Company s common stock, agreed to cancel 25,800,000 shares, and to transfer an aggregate of 10,000,000 shares of common stock to the RM Fresh executives and their affiliates. In addition, RM Fresh entered into executive management agreements with (1) Shadon Global Inc., for the services of Ron Patel and (2) Ferris Brand Management Inc., for the services of Mirwan Ferris. Pursuant to the agreements, the RM Fresh executives will be responsible for the day-to-day operations of RM Fresh and shall direct the business of RM Fresh in its sole discretion and in the best interests of RM Fresh, including but not limited to with respect to selection of products for distribution, employment or engagement of personnel, engagement of professional assistance, including without limitation legal and accounting professionals. In exchange, the RM Fresh executives shall be entitled to receive an annual base salary of one hundred thousand dollars ($100,000) and an annual bonus equal to 2.5% of the annual gross sales of RM Fresh. In July 2014, we completed a Regulation S offering in which we sold 1,600,000 shares of common stock to 32 investors, at a price per share of $0.01 per share for an aggregate offering price of $16,000. Where You Can Find Us The Company's principal executive office and mailing address is 2215-B Renaissance Drive, Las Vegas, Nevada 89119. Our telephone number is 1-800-918-3362. Calculation of Registration Fee Title of Each Class Of Securities to be Registered Amount to be Registered (1) Proposed Maximum Offering Price per Share (2) Proposed Maximum Offering Price Amount of Registration Fee (3) Common stock, par value $0.0001 per share 9,250,000 $0.925 8,556,250 861.61 (1) This registration statement covers the resale by our selling shareholders of up to 9,250,000 shares of common stock previously issued to such selling shareholders. (2) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(o) promulgated under the Securities Act of 1933, as amended. Share price determined based upon the average of the bid and asked price quoted on the OTCQB as of January 13, 2016. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. Table of Contents Implications of Being an Emerging Growth Company We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include: A requirement to have only two years of audited financial statements and only two years of related MD Exemption from the auditor attestation requirement in the assessment of the emerging growth company s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; Reduced disclosure about the emerging growth company s executive compensation arrangements; and No non-binding advisory votes on executive compensation or golden parachute arrangements. We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission (the "SEC") becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION ON JANUARY 19, 2016 LEGACY VENTURES INTERNATIONAL INC. 9,250,000 SHARES OF COMMON STOCK The selling shareholders named in this prospectus are offering all of the shares of common stock offered through this prospectus. The common stock to be sold by the selling shareholders as provided in the "Selling Security Holders" section is common stock that are shares that have already been issued and are currently outstanding. We will not receive any proceeds from the sale of the common stock covered by this prospectus. Our common stock is currently quoted on the OTCQB under the symbol "LGYV." The last reported sale price of our common stock as reported on the OTC: QB on January 15, 2016 was $1.08 per share. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and are subject to reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 4 to read about factors you should consider before buying shares of our common stock. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Date of This Prospectus is: ________________. Table of Contents The Offering Common stock offered by selling security holders 9,250,000 shares of common stock. Common stock outstanding before the offering 28,857,000 shares of common stock. Common stock outstanding after the offering 28,857,000 shares of common stock. Terms of the Offering The selling security holders will determine when and how they will sell the common stock offered in this prospectus. Termination of the Offering The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act (iii) or we decide at any time to terminate the registration of the shares at our sole discretion. Trading Market Our common stock is currently quoted on the OTCQB under the symbol "LGYV." Use of proceeds We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001617351_mu-yan_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001617351_mu-yan_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3f8960d312b5c9e022a9d6c131cebf68aa8d8e0f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001617351_mu-yan_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Lepota" are to Lepota, Inc.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001618182_playa_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001618182_playa_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cd70224cd53496b4fc4decd5cf927a05639b35ef
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001618182_playa_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights certain information contained elsewhere in this prospectus and may not contain all of the information that is important to you in making a decision to invest in our ordinary shares. Before making an investment decision, you should read the entire prospectus carefully, including the section entitled Risk Factors and our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. Overview We are a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. Upon the completion of this offering, we will be the only publicly-traded company focusing exclusively on the all-inclusive segment of the lodging industry. We own a portfolio consisting of 13 resorts (6,142 rooms) located in Mexico, the Dominican Republic and Jamaica. All-inclusive resorts provide guests with an integrated experience through prepaid packages of room accommodations, food and beverage services and entertainment activities. We believe that our properties are among the finest all-inclusive resorts in the markets they serve. All of our resorts offer guests luxury accommodations, noteworthy architecture, extensive on-site activities and multiple food and beverage options. Our guests also have the opportunity to purchase upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages. For the year ended December 31, 2015, we generated net income of $9.7 million, total revenue of $408.3 million, Net Package RevPAR (as defined below) of approximately $179 and Adjusted EBITDA (as defined below) of $101.7 million. For the six months ended June 30, 2016, we generated net income of $46.4 million, total revenue of $287.3 million, Net Package RevPAR of approximately $218 and Adjusted EBITDA of $100.3 million. This represents increases from the six months ended June 30, 2015, during which we generated net income of $24.3 million, total revenue of $214.9 million, Net Package RevPAR of approximately $201 and Adjusted EBITDA of $68.0 million. We believe that our resorts have a competitive advantage due to their location, extensive amenities, scale and guest-friendly design. Our portfolio is comprised of all-inclusive resorts that share the following characteristics: (i) prime beachfront locations; (ii) convenient air access from a number of North American and other international gateway markets; (iii) strategic locations in popular vacation destinations in countries with strong government commitments to tourism; (iv) high quality physical condition; and (v) capacity for further revenues and earnings growth through incremental renovation or repositioning opportunities. We focus on the all-inclusive resort business because we believe it is a rapidly growing segment of the lodging industry that provides our guests and us with compelling opportunities. Our all-inclusive resorts provide guests with an attractive vacation experience that offers value and a high degree of cost certainty, as compared to traditional resorts, where the costs of discretionary food and beverage services and other amenities can be unpredictable and significant. We believe that the all-inclusive model provides us with more predictable revenue, expenses and occupancy rates as compared to other lodging industry business models because, among other reasons, guests at all-inclusive resorts often book and pay for their stays further in advance than guests at traditional resorts. Since stays are generally booked and paid for in advance, customers are less likely to cancel, which allows us to manage on-site expenses and protect operating margins accordingly. These characteristics of the all-inclusive model allow us to more accurately adjust certain operating costs in light of expected demand, as compared to other lodging industry business models. We also have the opportunity to generate incremental revenue by offering upgrades, premium services and amenities not included in the all-inclusive package. For the year ended December 31, 2015, over 53% of our guests came from the United States. We believe that guests from the United States purchase upgrades, premium services and amenities that are not included in the all-inclusive package more frequently than guests from other markets. Our portfolio consists of resorts marketed under a number of different all-inclusive brands. Hyatt Ziva, Gran and Dreams are all-ages brands. Hyatt Zilara, THE Royal and Secrets are adults-only brands. We believe that these brands enable us to differentiate our resorts and attract a loyal guest base. We have a strategic relationship with Hyatt, a global lodging company with widely recognized brands, pursuant to which we jointly developed the standards for the operation of the all-ages Hyatt Ziva and the adults-only Hyatt Zilara brands (together, the Hyatt All-Inclusive Resort Brands ). We currently are the only Hyatt-approved operator of the Hyatt All-Inclusive Resort Brands and we have rebranded five of our resorts under the Hyatt All-Inclusive Resort Brands since 2013. Pursuant to a strategic alliance agreement (the Hyatt Strategic Alliance Agreement ), we and Hyatt have provided each other a right of first offer through 2018 with respect to any proposed offer or arrangement to acquire a property on which a resort under the Hyatt All-Inclusive Resort Brands would operate (a Development Opportunity ) in Mexico, Costa Rica, the Dominican Republic, Jamaica and Panama (together, the Market Area ). Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion Preliminary Prospectus dated September 27, 2016 PROSPECTUS Shares PLAYA HOTELS & RESORTS B.V.(1) Ordinary Shares This is the initial public offering of Playa Hotels & Resorts B.V. We are selling ordinary shares. No public market currently exists for our ordinary shares. We currently expect the initial public offering price of our ordinary shares to be between $ and $ per share. We intend to apply for the listing of our ordinary shares on the NASDAQ Global Select Market ( NASDAQ ), under the symbol PLYA. We are an emerging growth company under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our ordinary shares involves substantial risks. See Risk Factors beginning on page 18 of this prospectus to read about factors you should consider before making a decision to invest in our ordinary shares. Per Ordinary Share Total Public offering price $ $ Underwriting discount(a) $ $ Proceeds, before expenses, to us $ $ (a) See Underwriting for additional information regarding underwriting compensation. The underwriters may also purchase up to an additional ordinary shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus solely to cover overallotments, if any. Neither the Securities and Exchange Commission nor any state or other securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The ordinary shares will be ready for delivery on or about , 2016. Joint Book-Running Managers BofA Merrill Lynch Deutsche Bank Securities The date of this prospectus is , 2016 (1) We will be converted from a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) to a Dutch public limited liability company (naamloze vennootschap) and renamed Playa Hotels & Resorts N.V. upon the completion of this offering. Table of Contents Specifically, if we intend to accept a Development Opportunity in the Market Area (and if Hyatt exercises the right of first offer), we must negotiate in good faith with Hyatt the terms of a franchise agreement and related documents with respect to such property, and if Hyatt intends to accept a Development Opportunity in the Market Area (and if we exercise the right of first offer), Hyatt must negotiate in good faith with us the terms of a management agreement and other documents under which we would manage the resort. In addition, if either party is approached by a third party with respect to the management or franchising of an all-inclusive resort in the Market Area, and such third party has not identified a manager or franchisor for the resort, the parties have agreed to notify each other and provide an introduction to the third party for the purposes of negotiating a management agreement or a franchise agreement, as the case may be. In addition to creating potential future opportunities to expand our business, we believe that our strategic relationship with Hyatt will further establish us as a leader in the all-inclusive resort business by providing our Hyatt All-Inclusive Resort Brand resorts access to Hyatt s distribution channels and guest base that includes leisure travelers. We believe that our strategic relationship with Hyatt and the increasing awareness of our all-inclusive resort brands among potential guests will enable us to increase the number of bookings made through lower cost sales channels, such as direct bookings through Hyatt, with respect to our Hyatt All-Inclusive Resort Brand resorts, and our resort websites. In connection with this offering, Hyatt has committed to convert up to $50 million of our preferred shares currently owned by Hyatt into our ordinary shares upon the completion of this offering and the repurchase by us of the portion of Hyatt s preferred shares that it has not committed to convert. As a result and assuming that Hyatt converts $ million of its preferred shares at $ per share, Hyatt will own approximately % of our ordinary shares upon completion of this offering and the repurchase by us of the portion of Hyatt s preferred shares that it has not committed to convert. Our goal is to be the leading owner, operator and developer of all-inclusive resorts in the markets we serve and to generate attractive risk-adjusted returns and provide long-term value appreciation to our shareholders. In pursuit of this goal, we will seek to leverage our senior management team s operational expertise and experience in acquiring, expanding, renovating, repositioning, rebranding and managing resorts. In addition, upon the completion of this offering, as the only publicly-traded company focusing exclusively on the all-inclusive segment of the lodging industry, we believe that we will be well-positioned to acquire additional all-inclusive resorts and traditional resorts or hotels that we can convert to the all-inclusive model, as we seek to aggregate an increasingly larger portfolio in the highly fragmented all-inclusive segment of the lodging industry. Our Competitive Strengths We believe the following competitive strengths distinguish us from other owners, operators, developers and acquirers of all-inclusive resorts: Premier Collection of All-Inclusive Resorts in Highly Desirable Locations. We believe that our portfolio represents a premier collection of all-inclusive resorts. Our resorts, a number of which have received public recognitions for excellence, are located in prime beachfront locations in popular vacation destinations, including Canc n, Playa del Carmen, Puerto Vallarta and Los Cabos in Mexico, Punta Cana in the Dominican Republic and Montego Bay in Jamaica. Guests may conveniently access our resorts from a number of North American and other international gateway markets. Our portfolio has been well-maintained and, in some cases, recently renovated and is in excellent physical condition. Since January 2014, we have made $228.5 million, or approximately $109,200 per room, of development capital improvements at four of our resorts, which included the addition of 362 rooms. Recently Renovated Portfolio with Significant Embedded Growth Opportunities. We believe there are significant opportunities within our portfolio to increase revenue and Adjusted EBITDA from the recently completed expansion, renovation, repositioning and rebranding of certain of our resorts. By redeveloping and rebranding our properties and offering additional amenities to our guests, we endeavor to increase both occupancy and Net Package ADR (as defined below) at these properties in order to achieve attractive risk-adjusted returns on our invested capital. For example, in late 2014, we completed the process of expanding, renovating, repositioning and rebranding our Jamaica resort, which was formerly operated as a Ritz-Carlton hotel by the previous owner. The property was rebranded under both the all-ages Hyatt Ziva brand and the adults-only Hyatt Zilara brand. For the six months ended June 30, 2016, our Hyatt Ziva and Hyatt Zilara Rose Hall resort in Jamaica generated net income of $8.0 million and Adjusted EBITDA of $11.7 million. In addition, in late 2015 we completed the expansion and renovation of the resort formerly known as Dreams Canc n, and we rebranded it as Hyatt Ziva Canc n. We also renovated the resort formerly known as Dreams Puerto Vallarta, and rebranded it as Hyatt Ziva Puerto Vallarta. In conjunction with these two rebrandings, we also internalized management and eliminated the management fees that we previously paid to a third-party manager with respect to these resorts. While all three rebranded resorts registered a combined revenue growth of 113.3% in the six months ended June 30, 2016, compared to the corresponding 2015 period, we believe these resorts are still in their ramp-up phase and there is room for future growth in their operational results. Table of Contents [INSERT IMAGE FOR INSIDE COVER] Table of Contents We believe that these initiatives, which favorably impacted revenue in 2015 and the six months ended June 30, 2016, will be significant drivers of future growth. We also believe that we can generate earnings growth by internalizing, over time, resort management functions at the five resorts in our portfolio that we currently do not manage. We may also seek additional growth at these and other resorts through targeted, smaller investments where we believe we can achieve attractive risk-adjusted returns on our invested capital. For example, over the last two years, we have converted 128 rooms at Dreams La Romana and 120 rooms at Dreams Palm Beach to the preferred and premium categories, which generated a $25 and $24 increase in Net Package ADR for the rooms that were converted at Dreams La Romana and Dreams Palm Beach, respectively, for the year ended December 31, 2015, as compared to the corresponding period in 2014. These increases in Net Package ADR, and thus incremental revenue, ultimately produced a return on investment from 2014 to 2015 for these projects of approximately 29%. First Mover Advantage in a Highly Fragmented Industry. We believe that we are well-positioned to pursue acquisitions in the all-inclusive segment of the lodging industry and further establish us as a leading owner and operator of all-inclusive resorts. The all-inclusive resort segment is highly fragmented and includes numerous resorts owned and managed by smaller operators who often lack capital resources to maintain their competitive position. We believe that our management team s experience with executing and integrating resort acquisitions, track record of renovating, repositioning and rebranding resorts, and relationships with premier all-inclusive resort brands, together with our developed and scalable resort management platform and strong brands, position us to grow our portfolio of all-inclusive resorts through targeted acquisitions. We believe that our ability to offer potential resort sellers the option of receiving our publicly-traded securities (instead of or in combination with cash) may provide us a competitive advantage over private buyers, as such securities can provide sellers potential appreciation from an investment in a diversified portfolio of assets. Our senior management team s proven track record of sourcing and executing complex acquisitions has helped establish an international network of resort industry contacts, including resort owners, financiers, operators, project managers and contractors. For example, our August 2013 acquisition of Real Resorts included the purchase of four resorts located in Canc n with a total of 1,577 rooms and a resort management company for consideration consisting of cash, debt and our preferred shares. Exclusive Focus on the All-Inclusive Model. We believe the all-inclusive resort model is increasing in popularity as more people come to appreciate the benefits of a vacation experience that offers value and a high degree of cost certainty without sacrificing quality. We also believe that the all-inclusive model provides us with advantages over other lodging business models through relatively higher occupancy predictability and stability, and the ability to more accurately forecast resort utilization levels, which allows us to adjust certain operating costs in pursuit of both guest satisfaction and more efficient operations. Because our guests have pre-purchased their vacation packages, we also have the opportunity to earn incremental revenue if our guests purchase upgrades, premium services and amenities that are not included in the all-inclusive package. For the six months ended June 30, 2016, we generated $38.2 million of this incremental revenue, representing an increase of 34.7% over the comparable period in the prior year. Integrated and Scalable Operating Platform. We believe we have developed a scalable resort management platform designed to improve operating efficiency at the eight resorts we currently manage and enable us to potentially internalize the management of additional resorts we own or may acquire, as well as to proficiently manage hotels owned by third parties. Our integrated platform enables managers of each of our key functions, including sales, marketing and resort management, to observe, analyze, share and respond to trends throughout our portfolio. As a result, we are able to implement management initiatives on a real-time and portfolio-wide basis. Our resort management platform is scalable and designed to allow us to efficiently and effectively operate a robust and diverse portfolio of all-inclusive resorts, including resorts owned by us, resorts we may acquire and resorts owned by third parties that we may manage for a fee in the future. Strategic Relationship with Hyatt to Develop All-Inclusive Resorts. Our strategic relationship with Hyatt, which will own approximately % of our ordinary shares upon the completion of this offering, provides us with a range of benefits, including the right to operate certain of our existing resorts under the Hyatt All-Inclusive Resort Brands in certain countries and, through 2018, certain rights with respect to the development and management of future Hyatt All-Inclusive Resort Brands resorts in the Market Area. The Hyatt Ziva brand is marketed as an all-inclusive resort brand for all-ages and the Hyatt Zilara brand is marketed as an all-inclusive resort brand for adults-only. These brands are currently Hyatt s primary vehicle for all-inclusive resort growth and demonstrate Hyatt s commitment to the all-inclusive model. We also have, with respect to Table of Contents TABLE OF CONTENTS Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001619563_us-assets_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001619563_us-assets_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..87b7a5f4a87875927296f881ef70b62738305c98
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001619563_us-assets_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights material information concerning our business and this offering. This summary does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus and the information incorporated by reference into this prospectus, including the information presented under the section entitled "Risk Factors" and the financial data and related notes, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements as a result of factors such as those set forth in "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." In this prospectus, unless the context indicates otherwise, "US Assets," the "Company," "we," "our," "ours" or "us" refer to US Assets Inc., a Nevada corporation. Our Company We were organized as a Nevada corporation on July 28, 2014. The Company's governing documents became operative on such date and do not expire the Company has perpetual existence until its existence is terminated pursuant to its Articles of Incorporation (the "Articles"). The Company is a real estate investment company located in Dallas, Texas. Our business plan is to profitably source, negotiate and acquire commercial real estate assets for investment and resale. The Company will purchase, develop and leaseback single tenant commercial properties as well as invest in mortgage receivables and other assets. The Company is in development stages and therefore operations to date have been devoted primarily to organizational activities, commencing operations and undertaking the initial acquisition and sale of a commercial properties, acquiring a large portfolio of residential mortgages and expanding into commercial properties through joint ventures in future commercial properties (e.g., urgent care facilities and gas/convenience store, and other single tenant commercial businesses). For the period from July 28, 2014 (date of inception) through June 30, 2015 and the year ended June 30, 2016, we generated total revenue of $0 and $1,251,998, respectively, and had a net loss of $(4,804) and $(474,772), respectively. For the fiscal year ended June 30, 2015, we had an accumulated deficit of approximately $(4,804). For the year ended June 30, 2016, we had an accumulated deficit of approximately $(481,901) and recurring losses from operations as of June 30, 2016. At June 30, 2016 we had total stockholders' equity of $346,849. Recent Developments On October 1, 2015, we entered into a five year, four month lease for a private office in Dallas, Texas for our primary operations. The current monthly rent obligation is $5,024 and is subject to annual 3% increases and consumer price index adjustments. On November 1, 2015, we entered into a purchase agreement with FP Management Group, LLC ("FP"), a mortgage servicer, to purchase a pool of approximately 178 seller financed first lien residential mortgage loans on residential properties located in Texas (the "FP Purchase Agreement"). The total purchase price was $12,267,637. The purchase price was paid $200,000 in a down payment, with the balance due under the FP Purchase Agreement. Jeffrey Love, CEO, contributed the $200,000 down-payment for this purchase, pursuant to a promissory note between Mr. Love as the maker and FP as the payee (the "FP Note"). The FP Note has a 5% annual interest rate, and the FP Note is payable in installments, with 50% of the amount owed payable on November 1, 2016 and the remaining due on November 1, 2017. The November 1, 2016 payment has already been made. The FP Note has a late charge of 5% for any late payment. The balance owed under the FP Purchase Agreement accrues interest at the rate of 9% per annum through October 1, 2017. Interest only payments are due through October 1, 2017, at which time the remaining principal balance and all interest is due and payable in full. The Company entered into a Management Agreement dated November 1, 2015 with FP Management, LLC (the "Management Agreement") to manage the properties related to the FP Purchase Agreement. In February 2016, the Company and Mr. Love were approached to assist in securing financing for a purchase/leaseback transaction for two emergency room clinics. An agreement was made to incorporate a new business, called Exceptional Health Care, Inc. ("Exceptional"), a Texas corporation, for the purpose of building and operating medical facilities, and the properties would be added to that entity. The Company's fee for their efforts was agreed to be $260,000, and Mr. Love would be named to the Board of Directors of Exceptional. On March 4, 2016, the Company entered into a Preliminary Partnership Agreement with certain other minority owners, pursuant to which we acquired a 10% interest in Exceptional. On March 29, 2016, Exceptional closed on the sale/leaseback transaction on two currently operating Emergency Care Clinics in Garland and Livingston, Texas., whereby Exceptional sold the two clinics to an unaffiliated third party and then leased the facilities back and the Company received the agreed fee of $260,000 for facilitating this transaction, which was paid in cash at the closing of the transaction. Following the closing of this transaction Mr. Love was named to the directors of Exceptional, and is now an active participant in Exceptional's operations. Exceptional currently has contracted to purchase 7 different locations in Texas to build, leaseback and operate emergency care clinics. All building plans and designs have been produced and approved, and construction loan approval has been provided. There are no formal provisions within the Preliminary Partnership Agreement regarding distributions, liability of members, or governance. US Assets will design, develop and build to own gas station/convenience store locations. Currently, 2 lots have been placed under contract to begin construction. US Assets will contract with a gas supply company for the fuel delivery for these stations. On September 30, 2016, US Assets entered into a 2-year lease with Petromark, Inc., for six gas station and convenience stores. The lease also provides US Assets an option to purchase these stores. Management believes that the purchase of these stores is very likely to occur prior to the end the lease. In addition, on September 30, 2016, White Oak Station, LLC, an entity which is one-third owned by the Company, entered into a 20-year lease with Petromark, Inc. pursuant to which White Oak Station, LLC is leasing 25 stores, also with an option to purchase these stores. Emerging Growth Company and Smaller Reporting Company Status Emerging Growth Company We are an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of all of these exemptions. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, and delay compliance with new or revised accounting standards until those standards are applicable to private companies. We could be an emerging growth company until the last day of the first fiscal year following the fifth anniversary of our first common equity offering, although circumstances could cause us to lose that status earlier if our annual revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in any three-year period or if we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange of 1934, as amended (the "Exchange Act"). Smaller Reporting Company We also qualify as a "smaller reporting company" under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as are no longer an emerging growth company, we will still have reduced disclosure requirements for our public filings some of which are similar to those of an emerging growth company, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Company Information Our principal office is located at 1910 Pacific Ave., Suite 17060, Dallas, TX 75201 and our phone number is (469) 607-8448. Our corporate website address is www.usassetsinc.com. Information contained on, or accessible through, our website is not a part of, and is not incorporated by reference into, this prospectus. The Offering Issuer US Assets Inc. Securities being offered by the selling stockholders 2,590,000 shares of common stock Common stock outstanding before this offering 57,590,000, shares Common stock to be outstanding after this offering 57,590,000, shares Initial offering price $0.10. See "Determination of Offering Price" and "Plan of Distribution." Market for our common stock No public market currently exists for our common stock and a public market may not develop, or, if any market does develop, it may not be sustained. There cannot be any assurance that a market maker will agree to file the necessary documents with FINRA for our common stock to be eligible for quotation on the OTC Markets, nor can there be any assurance that such an application for quotation will be approved. Use of proceeds We will not receive any proceeds from the sale of common stock by the selling stockholders in this offering. See "Principal and Selling Stockholders." Termination of the offering The offering will conclude on the earlier of (i) the date that all 2,590,000 shares have been sold and (ii) the date that is nine months from the date of this prospectus. Risk factors Investment in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 7 of this prospectus for a discussion of some of the factors you should carefully consider before deciding to invest in our common stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001619917_patriot_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001619917_patriot_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001619917_patriot_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001620546_baxalta_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001620546_baxalta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ed48803212ab307348e4744779d62883a4c02340
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001620546_baxalta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following is a summary of information included elsewhere in this prospectus or in documents incorporated by reference herein. This summary may not contain all the information that may be important to you. To better understand the offering and Baxalta s business and financial position, you should carefully review this entire prospectus, including the sections entitled Cautionary Statement Concerning Forward-Looking Statements and Risk Factors, and the documents incorporated by reference herein. See Incorporation of Certain Documents by Reference. Except as otherwise indicated or unless the context otherwise requires, the information included in this prospectus assumes the completion of all the transactions referred to in this prospectus in connection with the separation and distribution. This prospectus and the documents incorporated by reference herein describe the businesses transferred to Baxalta by Baxter in the separation as if the transferred businesses were Baxalta s businesses for all historical periods described. References in this prospectus or in documents incorporated by reference herein to Baxalta s historical assets, liabilities, products, businesses or activities of Baxalta s business are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the transferred businesses as the businesses were conducted as part of Baxter and its subsidiaries prior to the separation. BAXALTA INCORPORATED Overview Baxalta is a global, innovative biopharmaceutical leader with a sustainable portfolio of differentiated therapies that seek to address unmet medical needs across many disease areas, including hemophilia, immunology and oncology. More specifically, the company develops, manufactures and markets a diverse portfolio of treatments for hemophilia and other bleeding disorders, immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute medical conditions, as well as oncology treatments for acute lymphoblastic leukemia. Baxalta is also investing in emerging technology platforms, including gene therapy and biosimilars. Baxalta s business strategy is aimed at improving diagnosis, treatment and standards of care across a wide range of bleeding disorders and other rare chronic and acute medical conditions, capitalizing on the company s differentiated portfolio, ensuring the sustainability of supply to meet growing demand for therapies across core disease areas, and accelerating innovation by developing and launching new treatments while leveraging its expertise into new emerging therapeutics through acquisitions of and collaborations with others. Baxalta s core disease therapies include: ADVATE [Antihemophilic Factor (Recombinant)], is the world s leading recombinant factor VIII (rFVIII) therapy. ADVATE is a recombinant antihemophilic factor indicated for use in adults and children with hemophilia A (congenital factor VIII deficiency or classic hemophilia) for control and prevention of bleeding episodes, perioperative management and routine prophylaxis to prevent or reduce the frequency of bleeding episodes. FEIBA [Anti-Inhibitor Coagulant Complex], is the company s plasma-based inhibitor bypass therapy, and is a leading plasma-derived inhibitor management therapy. FEIBA is indicated for use in hemophilia A and hemophilia B patients with inhibitors for control of spontaneous bleeding episodes, to cover surgical interventions and routine prophylaxis to prevent or reduce the frequency of bleeding episodes. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY AND SUBJECT TO COMPLETION, DATED MARCH 15, 2016 PROSPECTUS $2,340,071,679 Baxalta Incorporated Common Stock This is a public offering of shares of common stock of Baxalta Incorporated. Our common stock is listed on the New York Stock Exchange under the symbol BXLT. On March 14, 2016, the last reported sales price of our common stock was $39.40 per share. In connection with this offering, Baxter International Inc., which currently holds 94,329,679 shares of our common stock, will exchange approximately 59,392,682 of those shares of common stock, based on an assumed public offering price of $39.40 per share, for certain indebtedness of Baxter that is owned by J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and UBS Securities LLC, who are collectively the underwriters in this offering. We refer to the underwriters in such role as the selling shareholders. Following the exchange, the selling shareholders will sell those shares of common stock pursuant to this offering. The selling shareholders, and not Baxalta or Baxter, will receive the net proceeds from the sale of the shares in this offering. However, as a result of exchanging the shares of our common stock with the selling shareholders prior to this offering, Baxter may be deemed to be a selling shareholder in this offering solely for U.S. federal securities law purposes. Investing in our common stock involves risks. See
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001622936_earth_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001622936_earth_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f36ab4f9e88744f6f75324b1e483da9869fa90cf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001622936_earth_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus or incorporated by reference in this prospectus. This summary does not contain all of the information that you should consider in making your investment decision. You should read the entire prospectus carefully, especially the discussion regarding the risks of investing in our securities under the heading "Risk Factors" beginning on page 2 of this prospectus and our financial statements and related notes incorporated by reference in this prospectus, before investing in our securities. In this prospectus, "Earth Brand," the "Company," "we," "us," and "our" refer to Earth Brand Holdings, Inc. Overview We were incorporated on December 18, 2013 in the State of Nevada. In March 2014, Earth Brand entered into an Exchange Agreement with all the shareholders of GoGreen to acquire all of their issued and outstanding shares of GoGreen in consideration for the issuance of an aggregate of 3,500,000 shares of our common stock to said shareholders. GoGreen had acquired the business of Ecoready Corporation, which was a distressed technology company that intended to focus on "green" products and technologies, with an initial product being alkaline batteries manufactured without lead, cadmium and mercury. Upon closing of the share exchange transaction in March 2014, GoGreen became our wholly owned subsidiary. As a result, the Company is in the business of commercializing sustainable technology products as well as offering a free battery recycling service through its GoGreen operating subsidiary. Initial products offered by the Company consist of alkaline batteries manufactured without lead, cadmium and mercury, EZ Boost, a portable mobile charger, LED flashlights and headlights and outdoor lanterns and tap lights. We outsource all the manufacturing and recycling of our products and do not have any formal agreements in place with any of our current suppliers. We also have no employees and all our current officers are employed full-time in other businesses. We have no proprietary or intellectual property rights in any of the products we currently offer for sale. Our corporate headquarters are located at 4675 Route 9N, Howell, New Jersey 07731 and our telephone number is (855) 462-7373. SUMMARY OF THE OFFERING The following is a summary of the shares being offered by this prospectus: Common Stock offered by selling stockholders: Up to 8,948,276 shares of common stock which includes 2,000,000 shares of common stock issuable upon the conversion of our outstanding shares of Series A Cumulative Prior Preferred Stock and 6,948,276 shares of common stock issued and outstanding. Common Stock outstanding prior to the offering: 26,198,276 shares. Common Stock to be outstanding after the offering: 28,198,276 shares, as a result of the conversion of the Series A Cumulative Prior Preferred Stock to 2,000,000 shares of common stock. Market for our common stock: There is no public market for our common stock. After the effective date of the registration statement of which this prospectus is a part, we intend to seek a market maker to file an application on our behalf to have our common stock quoted on the OTCQB. We may never be approved for trading on any exchange. We currently have no market maker who is willing to list quotations for our stock. There is no assurance that a trading market for our stock will develop be sustained if developed. Proceeds We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders. Going Concern The Company had sales of $844,070 for the nine months ended September 30, 2015 and $431,306 in revenues for the year ended December 31, 2014. The Company incurred a net loss of $107,928 for the nine months ended September 30, 2015 and $352,606 for the year ended December 31, 2104. In addition, the Company had an accumulated deficit of $1,957,656 at December 31, 2014. These factors raise substantial doubts about the Company s ability to continue as a going concern, and our independent auditors included an explanatory paragraph regarding this uncertainty in their report on our financial statements for the year ended December 31, 2014. CALCULATION OF REGISTRATION FEE Title of Class of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Price Per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee Common Stock, $0.0001 per share (1) 3,500,000 $0.03(2) $105,000 $13.52 Common Stock, $0.0001 per share (3) 2,000,000 $0.15 $300,000 $38.40 Common Stock, $0.0001 per share (1) 3,448,276 $0.03(2) $103,448.28 $13.45 Total 8,948,276 $65.37* (1)Represents common stock currently outstanding to be sold by the selling stockholders. We have agreed to bear the expenses relating to the registration of the shares for the selling stockholders. (2)In accordance with Rule 457(a), the offering price has been arbitrarily determined by us and bears no relationship to assets, earnings or other valuation criteria. No current trading market exists for our common stock. No assurance can be given that the shares offered hereby will have a market value or that they may be sold as this, or any price. The selling stockholders may sell shares of our common stock only at a fixed price of $0.03 per share until such time, if at all, our shares are quoted on the OTC QB ("OTCQB") and thereafter at prevailing market prices or privately negotiated prices. The fixed price of $0.03 has been arbitrarily determined as the selling price. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority ("FINRA"), nor can there be any assurance that such an application for quotation will be approved. (3)Represents shares of common stock issuable upon the conversion of our outstanding shares of Series A Cumulative Prior Preferred Stock. * Previously paid The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Table of Contents RISK FACTORS An investment in the securities offered involves a high degree of risk and represents a highly speculative investment. In addition to the other information contained in this prospectus, prospective investors should carefully consider the following risks before investing in our common stock. If any of the following risks actually occur, our business, operating results and financial condition could be materially adversely affected. As a result, the price of our common stock could decline from the offer price and, if the common stock ever trades, the trading price could decline, and you may lose all or part of your investment in our common stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See "Cautionary Note Regarding Forward Looking Statements" in this prospectus. Additional risks and uncertainties not currently known to us or that we presently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations and value of our stock. You should not purchase the securities offered unless you can afford the loss of your entire investment. RISKS RELATED TO OUR BUSINESS AND INDUSTRY Our independent auditors have expressed their concern as to our ability to continue as a going concern. As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the year ended December 31, 2014 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively use the funds we now have to begin to generate revenue from our three product lines, so that we can fund our operations from our sales. If we are not able to do this, we may not be able to continue as an operating company. We have generated limited revenues to date and have a limited operating history upon which we may be evaluated. We were incorporated on December 18, 2013. Our limited operating history may not provide a meaningful basis for evaluating our business. We have generated limited revenues from operations to date. We have a limited operating history with respect to commercializing sustainable technology products or offering a battery recycling service which makes it difficult to evaluate our business. We face all of the risks inherent in a new business and those risks specifically inherent in the business of developing, manufacturing, commercializing and selling new products, with all of the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject. We will continue to encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to: obtain sufficient working capital to support our expansion; expand our product offerings and maintain the high quality of our products; manage operations and continue to fill customers orders on time; maintain adequate control of our expenses allowing us to realize anticipated income growth; implement our product development and sales strategies and adapt and modify them as needed; successfully integrate any future acquisitions; and anticipate and adapt to changing conditions in the battery and LED lighting industry resulting from changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics. Accordingly, we expect to incur substantial operating losses. We cannot assure you that we will be able to generate revenues or profits from operation of our business or that we will be able to generate or sustain profitability in the future. If we are not successful in addressing any or all of the foregoing risks, our business may be materially and adversely affected. PROSPECTUS EARTH BRAND HOLDINGS, INC. 6,948,276 shares of common stock issued and outstanding and 2,000,000 shares of common stock issuable upon conversion of outstanding preferred stock This prospectus relates to the resale, from time to time, of (i) up to 3,500,000 shares of our common stock by selling stockholders which shares of common stock were issued pursuant to a stock exchange agreement we entered into with GoGreen Power Inc., a Delaware corporation ("GoGreen") and the GoGreen stockholders which we refer to in this prospectus as the Exchange Agreement, (ii) up to 3,448,276 shares of our common stock by three selling stockholders who purchased shares and (ii) up to 2,000,000 shares of common stock issuable upon the conversion of our outstanding shares of Series A Cumulative Prior Preferred Stock. See the section of the prospectus summary entitled "Overview" for a description of the Exchange Agreement and the section entitled "Selling Stockholders" for additional information about the selling stockholders. Such registration does not mean that the selling stockholders will actually offer or sell any of these shares. We will not receive any proceeds from the sales of shares of our common stock by the selling stockholders. Our common stock is not traded on any market or securities exchange. The selling stockholders may sell shares of our common stock only at a fixed price of $0.03 per share until such time, if at all, as our shares are quoted on the OTCQB and thereafter at prevailing market prices or privately negotiated prices. The fixed price of $0.03 has been arbitrarily determined as the selling price. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with FINRA, for our common stock to be eligible for quotation on the OTCQB. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority ("FINRA") nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling shareholders. INVESTING
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001623013_fuda_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001623013_fuda_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e3da06727c070eda259d0bffa5e91067f4a61eb1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001623013_fuda_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including "Risk Factors" and the financial statements and related notes, included elsewhere in this prospectus. NB: In China, property belongs to the country and is not sold to individual entities. An entity, such as the Company, can only acquire land use rights which give the acquirer rights to cultivate, develop, mine and/or use the land for period of 70 years but actual ownership of the property remains with the country. Given such property ownership law in China, in this registration statement instances of the use of the term "acquire the property" refers to the actual acquisition of the "land use rights" and such terms may be used interchangeably herein . The Company The Company, primarily focused on the region of Northeastern China, intends to concentrate on three channels: oGold, precious metal, granite, marble, flourite and graphite commodities trading; oThe eventual ownership (solely or in jointly) of mining operations of gold, precious metal, granite and marble; oEventual possible mergers and acquisition projects The Company plans to develop into an international company with offices and operations throughout the world. The Company s long term projections are to purchase or enter into joint ventures for the acquisition of operating gold mines or other granite or other natural resources mines and to revitalize any such mine pursuant to the Company s model. The Company does not intend to necessarily operate such mines, but to increase the efficiency and model of the current operators. Over time, the Company plans to have several subsidiaries with diverse operations in different countries. The Company intends to seek properties with known mineralization that are currently being mined but which the Company believes can be increased in value. The only revenues received by the Company to date have been derived from the trading business segment. The Company intends further diversification into construction commodities, such as granite and marble, through established vendor and supplier networks. The Company will expand and strengthen its upstream asset resources by seeking and exploring properties in the region. The Company anticipates that it will obtain funds to execute its business plan through this offering at $292,500,000 and additional fundings. There is no assurance that any such additional fund raising will occur or if it occurs that it will be successful in raising the anticipated amount. If the Company is unable to raise additional funds, it may be required to proportionally curtail its development plan or to postpone any such development until funds can, if ever, be raised. Corporate History The Company was incorporated in the State of Delaware in September, 2014, and was initially known as Spruce Valley Acquisition Corporation ("Spruce Valley"). In February 2015, Spruce Valley effected a change in control and, as part of such change in control, changed its name to Fuda Group (USA) Corporation. As part of the change of control, the then current management of Spruce Valley resigned and new officers and directors were appointed. Subsequent to the change in control, new management of the Company effected acquisitions (collectively the "Acquisitions") in September 2015 with two companies: Fuda Gold (UK) Limited ("Fuda UK"), a private company organized under the laws of England and Wales, and Marvel Investment Corporation Limited ("Marvel"), a private company organized under the laws of Hong Kong. The acquisition of Marvel included its subsidiary, Liaoning Fuda Mining Co. Ltd. The Company is headquartered at 48 Wall Street, 11th Floor, New York 10005, NY, USA. The main phone number of the Company is +1 (646) 751-7488. Business Operations: In 2015, granite sales and trading accounted for over 97.9% or $29,481,294 of the Company revenues. The summary of the Company s past operations is as follows: Barter Trades Gain For the Years Ended December 31, December 31, 2015 2014 Barter Trade-Affiliated parties $7,631,963 $15,967,123 Barter Trade-Third parties 2,969 4,557,423 Total $7,634,932 $20,524,546 Revenues For the Years Ended December 31, December 31, 2015 2014 Regular Trade-Related parties $- $- Regular Trade-Third parties 30,144,145 12,966,742 Total $30,144,145 $12,966,742 The breakdown by products for sales revenues and barter trade gain is: Sales Revenues For the Years Ended December 31, December 31, 2015 2014 Granite blocks $17,646,868 58.6% $11,773,147 90.8% Granite slabs 11,834,426 39.3% 1,193,595 9.2% Graphite 224,936 0.7% - 0.0% Fluorite 249,926 0.8% - 0.0% Gold 187,989 0.6% - 0.0% Total $30,144,145 100% $12,966,742 100% Barter Trade Gain For the Years Ended December 31, December 31, 2015 2014 Granite blocks $7,634,932 100.0% $20,524,546 100.0% Granite slabs - 0.0% - 0.0% Graphite - 0.0% - 0.0% Fluorite - 0.0% - 0.0% Gold - 0.0% - 0.0% Total $7,634,932 100% $20,524,546 100% The purchase price and sales price of the granite for regular trade and barter trade is as follows: Purchase Quantity Sales Quantity December 31, 2014 Price Purchased Price/Barter Sold/Barter Granite Blocks (Ton) $7,294,331 43,575 $41,324,875 59,039 Granite Slabs (Square Meter) $597,947 37,235 $1,193,595 37,386 Total $7,892,278 $42,518,470 Purchase Quantity Sales Quantity December 31, 2015 Price Purchase Price/Barter Sold/Barter Granite Blocks (Ton) $5,187,556 91,145 $25,907,614 91,240 Granite Slabs (Square Meter) $6,876,383 383,316 $11,834,426 383,316 Total $12,063,939 $37,742,040 (1) In 2013 and 2014, the Company was primarily focused on the shipping and trading of purchased granite block and slabs. In 2014, the Company developed a greater focus on domestic sales and reduced sales in international export of granite bocks and granite construction slabs. The purchase price of granite was higher in 2013 because the granite involved additional effort and costs for the supplier to prepare to meet the requirements of the international customer as well as the standards to export. As of December 31, 2013, the Company had ending inventory in the amount of RMB34,702,993 or US$5,679,391 to carryover to 2014. The Company generated granite block sales of $11,773,147 and $17,646,868 for the years ended December 31, 2014 and 2015, respectively. The Company generated granite slab sales of $1,193,595 and $11,834,426 for the years ended December 31, 2014 and 2015, respectively. The Company also barter traded granite blocks with fair market value of $29,551,728 and $8,260,746 for the years ended December 31, 2014 and 2015, respectively. The barter traded granite was netted with cost of the granite to show as Gain on barter trade. The shift from international to domestic market enabled the Company to renegotiate the purchase price of the granite with the suppliers. The suppliers agreed to lower the price of the goods as there was less effort and lower cost such as handling, loading, and labor for the supplier to prepare the goods for domestic customers. As a result of the 2013 ending inventory that was carried over to 2014 and the renegotiation of prices with the suppliers, the cost of goods and gross margin were effected in 2014. Business Operations: Business Plan The Acquisitions have resulted in both Fuda UK and Marvel becoming wholly owned subsidiaries of the Company, the surviving entity. The Company has thereby inherited the respective operations and business plans of both Fuda UK and Marvel. Marvel Investment Corporation Limited; Marvel was incorporated in Hong Kong in 2009 and had minimal business operations until it acquired Liaoning Fuda Mining Co. Ltd., ("Liaoning Fuda"), a Chinese company, pursuant to an equity transfer agreement executed on February 28, 2015 and later consummated on June 30, 2015. Marvel derives its revenues from trading graphite and fluorite targeting industrial manufacturers, engineering companies and trading companies. Liaoning Fuda Mining Co. Ltd (a subsidiary of Marvel): Liaoning Fuda is a natural resource trading company which natural resources consist of raw blocks, stone carvings, slabs, pavers and wall claddings with operations concentrated in an area around Dandong City, Liaoning Province, situated in the region of Northeast China. Fuda Gold (UK) Limited: Fuda (UK) was incorporated in 2015 in the United Kingdom with initial minimal business operations. Fuda (UK) derives its revenues from trading gold stones, gold sand, or gold bars. The Company has also entered into agreements with gold mines to sort and process their tailings. Through its subsidiaries, the Company now has the ability to diversify its operations into the profitable granite and marble business connected with the construction materials industry. The business plan of the Company envisions trying to acquire a controlling percentage in operating mines. The Company does not necessarily anticipate acquiring 100% of any operating mine but envisions acquiring a majority interest and retaining the current operators of operating mines that may have preliminary studies for possible mineral deposits. The Company has purchased certain land use rights on property surrounding operating gold mines. The Company does not currently intend to mine these lands but anticipates that it may enter into joint venture agreements with such mine operators for acquisition, either partial or total of their operating mines, or expansion into the Company s land. Or the Company may simply sell these land assets when, and if, the resale price so justifies. At the current preliminary stage of gold and precious metals operations, the Company is purchasing gold ores, powder or sand from various suppliers with the intention to trade on these. These gold powder and ores are sourced from other gold mines around Northern China. Further, the Company has entered into a cooperative operating agreement with a mine owner whereby the Company will filter and sort gold mine tailings from discarded mine materials. Business Strategy The Company s business strategy is to widen its market position in gold, fluorite, graphite, granite and the marble mining and trading industry by directly acquiring a number of operating mines throughout Asia. The Company seeks properties with known mineralization that are in an advanced stage of exploration and have previously undergone some drilling but are under-explored, which it believes can increase value. The execution of the Company s business strategy is based on the amount of funds that it is able to raise. The Company anticipates that it will raise capital in addition to that raised in this offering in stages. Depending on the proceeds raised in this offering and additional tranches, the Company intends to buy operating active granite or gold mines whether in whole or in joint venture with the current operator or other investors. The ultimate goal is to achieve the mining, production, trading and wholesale of the precious metals and other commodities with the eventual possibility of entering into the retail market with its own brand products. The Company s Advantage Although the Company has been in operation for only a number of years, it believes that it has certain advantages over its above state-owned competitors. These advantages are: Experienced management with international exposure; Outstanding track record in the industry (based on customer reviews and feedback, including positive customer experience, history of financial success and strong Company performance; Vertical integration structure that will allow the Company to oversee all eventual areas of the supply chain which develops smooth operations; Ability to directly access and associate with multiple mines and refineries; Willingness to integrate cutting-edge technology directly into mining techniques and marketing strategy. Market Opportunity – Mining Acquisition in China The Company believes that a significant opportunity exists in the natural resources market especially in gold and precious metal. In 2011, the demand for gold (25% of global gold demand) exceeded demand from East Indians (23% of global gold demand) who were previously to that the largest consumers of gold (90.9 metric tons compared to India's 85.6 metric tons, China's represented a doubling over the previous year). That's after China demanded twice as much gold (in the form of bullion imports) as it produced in 2010 (700 tons against 351 tons) a significant feat considering it was by far the largest producer of gold that year. Those trends are ultimately expected to lead to a large international role for Chinese mining companies that recognize the market conditions ripe for foreign deals (expanding their gold reach outside of the country). Management The Company s management personnel have substantial experience in the areas of precious metals, mining, trading, gold and diamonds. The Company s management is buttressed by the strong experience and profiles of its individual members: Mr. Xiaobin Wu is the President of FUDA Group (USA). He holds a Master of Business Administration Degree from Beijing University. Having been in business for over two decades, he has developed a wide network of business and political contacts in China. He has significant experience providing fiscal, strategic and operational leadership in uniquely challenging situations. Mr. Wu is also a dynamic, results-oriented leader with a strong performance track record. Dr. Wei Guo Lang obtained his Master s and Doctorate degrees in Engineering from the University of Saskatchewan, Canada and has more than 20 years experience in the mining, technology and agriculture sectors. He serves as an advisor to various Chinese private and governmental companies involved in mining and mining finance sectors worldwide. He has many years experience in mining project development and capital operations. Since August, 2015, Dr. Lang has been Chief Executive Officer of Ultra Lithium Inc. (Symbol TSX V:ULI) . He is also the Executive Director of Zhongsheng Resources Holdings Limited (Symbol: 2623.HK), primarily responsible for business development and investment. Prior to that, he acted as director for Klondex Mines Ltd. (TSX: KDX; NYSE MKT:KLDX), Agro International Inc., Zhongrun (Tianjin) Mining Development Co., Ltd., Ventek Systems Inc. and Q-Net Technologies Inc (Symbol: QNTI). Mr. Mihir J. Sangani holds a Degree in Finance from Bombay University, India. Mr. Sangani has significant global marketing and business development experience along with relation investor exposure. Mr. Sangani has managed an over-$200MM portfolio in the area of investment and asset management. Mr. Sangani has 14 years of experience in the diamond and precious metals trading sectors. He has previous marketing experience with the following companies: Charles Wolf & Sons Inc, New York; Blue Diamonds Inc, New York; Simi-Diam Thailand/Prime Star HK; Al-Othaim Jewelry Saudi Arabia. Mr. Jimmy Lee has a Bachelor of Science Degree in Accounting from the University of Albany. He is well versed with both the US and Asian markets and has deep knowledge of auditing, financial reporting, consulting, taxation, and financial planning. Mr. Li Bin is a graduate from Fudan University, a renowned Chinese university. Mr. Li finished his Masters Degree and Doctor of Jurisprudence Degree in the United States. Mr. Li externed for the Honorable Ronald Lew of the Central District of California, and is licensed by the State Bar of California to appear before the California Superior Court and Court of Appeal, the Federal District Court and Bankruptcy Court for the Central District of California. Ms. Lynn Lee is a graduate in Economic and Statistics from the National University of Singapore. She has many years of working experience in international locations within various industries in both public and private sectors, as well as multinational corporations to local companies. She has extensive people management experience and significant organization planning and development know-how. Together, these professionals form a well-rounded team of leaders that hold skills and abilities needed to succeed in the natural resources industry. Summary Financial Information The Company had no operations or specific business plan until the Acquisitions. The consolidated statements of operations data for the years ended December 31, 2015 and December 31, 2014, respectively, and the condensed balance sheet data as of December 31, 2015 and December 31, 2014, respectively, are derived from the consolidated audited financial statements of the Company, and related notes thereto included herein. Past performance is not necessarily an indicator of future performance as future trends events and uncertainties may impact future performance in material ways that may be unfavorable. At December 31, 2015 At December 31, 2014 Balance sheet data Cash $18,178,550 $466 Total current assets $19,684,391 $2,702,311 Land, property & equipment (net) $49,478,802 $52,286,087 Other assets $46,233 $48,872 Total assets $69,209,426 $55,037,270 Total liabilities $3,666,799 $10,327,151 Total stockholders equity $65,542,627 $44,710,119 Year ended Year ended December 31, 2015 December 31, 2014 Statement of operations data Total sales $30,147,357 $19,417,843 Gross margin $18,211,078 $12,397,770 Income (Loss) from operations $16,445,821 $11,166,734 Net income (loss) $24,215,164 $27,014,470 Financial Projection: Funding The Company has undertaken this offering to raise funds to acquire a gold, fluorite, graphite, granite, marble or other natural resource operating mine. Depending on the amount of funds raised, the Company may only be able to acquire a percentage of such operating mine. The intention of the Company is to acquire at least a controlling interest (51%) of any such mine. The Company anticipates that it may be presented with the opportunity to enter into such a purchase as a joint venture or other business combination with another company. If such an event should occur, the Company anticipates that negotiations between the parties prior to entering into any such joint venture would determine the parameters of the joint venture including management of the mine(s), revenue distribution, dissolution and other matters. The Company would only enter into such a joint venture if it determined that the management team of the other party was experienced in the industry and had developmental and operational plans not inconsistent with the business plan of the Company. In all events, for any mine acquired whether in whole or in part, the Company anticipates streamlining the operations of such mine with technology, efficiency and cash infusion to increase the value and output of such mine. The Company does not envision being the operators of the mining operation but retaining the then current operators. The Company anticipates that it will undertake to raise additional funding in order to acquire gold, fluorite, graphite, granite and/or marble resource mines and facilities. The amount of funds raised in this offering and any other additional fundings, if any, will determine what, if any, land use rights or mines the Company can acquire. Listing on a National Exchange The Company will apply to list its common stock on The NASDAQ Stock Market. In order for the common stock to be listed, the Company must fulfill certain listing requirements including a minimum stock price for the common stock. At our Special Meeting of Stockholders held on 1 October, 2015, the Company received stockholder approval to effect a reverse stock split of our outstanding common stock and to change the allowable exchange ratio to not less than 1-for-4 and not more than 1-for-25. The Company expects that such a reverse stock split would initially result in an increase in the price per share of the common stock and substantially reduce the risk that a U.S. national securities exchange would decline to list our common stock on the basis of failure to meet the exchange s minimum stock price. No assurances can be given that, even if the Company satisfies this listing requirement, its listing on The NASDAQ Stock Market or another U.S. national securities exchange will be approved, or that, if listed on The NASDAQ Stock Market or another U.S. national securities exchange, it will be able to satisfy the maintenance requirements for continued listing. Risk Factors Investment in this offering involves risks that include the limited operating history, securing adequate capital to continue to expand, maintaining an efficient operating and business, speculative nature of gold trading, competition, volatile commodity prices and other material factors. For a discussion of these risks and other considerations that could negatively affect the Company, including risks related to this offering and our common stock, see "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." Corporate Information The Company s principal office is located at 48 Wall Street, 11 Floor, New York, NY 10005, and its telephone number is (646) 751-7488 and its website is www.fudagroupusa.com. As a public reporting company, the Company makes periodic filings with the Securities and Exchange Commission which can be viewed on its web site at www.sec.gov under the Edgar filing CIK number 0001623013. The Company expects to make such reports and other information filed with or furnished to the SEC available free of charge through its website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this prospectus. The Offering This prospectus relates to the offer and sale of 50,000,000 shares ("Shares") of common stock of the Company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001623077_pixarbio_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001623077_pixarbio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..94782f8e25fbabdc37fe54dc15ec072b6f249f96
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001623077_pixarbio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary contains basic information about us and the offering. Because it is a summary, it does not contain all the information that you should consider before investing. Before making an investment decision, you should read the entire prospectus carefully, including the Risk Factors section, our financial statements and the notes to the financial statements included in this prospectus. As used in this prospectus, references to the Company, we, our or us refer to PixarBio Corporation, unless the context otherwise indicates. The selling stockholders may sell these shares from time to time after the registration statement is declared effective by the Securities and Exchange Commission ( SEC ). We will not receive any of the proceeds received by the selling stockholders. We were originally incorporated as BMP Holdings Inc. in the State of Delaware on August 4, 2014. We were originally formed to provide yoga classes, private instruction, specialty workshops, clinics and yoga teacher training to the general public through our subsidiary, BM, LLC, at its facility in Ridgefield, Connecticut. Frank Reynolds, Katrin Holzhaus, and Dr. Robert S. Langer co-founded PixarBio Nevada in August 2013 to develop novel drug delivery systems for neurological diseases. On October 13, 2016, BMP Holdings formed PixarBio Acquisition Corp. ( PixarBio Acquisition ), a wholly-owned subsidiary, under the laws of the State of Nevada. On October 31, 2016, pursuant to a merger agreement, PixarBio Acquisition was merged with and into PixarBio Nevada. As a result of such merger, PixarBio Nevada was the surviving corporation and a wholly-owned subsidiary of BMP Holdings. On the same date, BMP Holdings effected a parent/subsidiary short-form merger with PixarBio Nevada, our wholly-owned subsidiary. As a result of the second merger, (i) BMP Holdings was the surviving entity and PixarBio Nevada merged out of existence, (ii) BMP Holdings changed its name to PixarBio Corporation and (iii) the shareholders of PixarBio Nevada exchanged their shares of PixarBio Nevada for 78,529,976 shares of common stock of BMP Holdings, representing 97.9% of our issued and outstanding stock. We are a specialty pharmaceutical company focused on pre-clinical and commercial development of novel neurological drug delivery systems for post-operative pain. Our lead product platform, NeuroRelease, is a novel biodegradable microparticle delivery system for delivery of FDA approved non-opiate prescription paid drugs. NeuroRelease has achieved sustained therapeutic pre-clinical release over time of a non-opiate drug for post-operative, acute and chronic pain in pre-clinical models involving rodents and pigs. NeuroRelease is a true product platform that can treat multiple conditions, including pain, Parkinson s disease, epilepsy and spinal cord injury. We have core competencies in neuroscience, drug delivery, regeneration, R&D and current Good Manufacturing Practices in accordance with regulations enforced by the FDA. As of September 30, 2016, we had $856,964 in current assets and current liabilities in the amount of $2,143,881. Our address, phone number and website are as follows: PixarBio Corporation 200 Boston Avenue, Suite 1875 Medford, Massachusetts 02155. Tel: (617) 803-8838 http://www.pixarbio.com Information on our website, or which can be accessed through our website, is not part of the registration statement of which this prospectus is a part. We are an emerging growth company, as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior December 31st, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. In addition, the JOBS Act permits an emerging growth company to test the waters by communicating orally or in writing with qualified institutional buyers or other accredited investors to gauge interest in a contemplated securities offering, even if a registration statement has not yet been filed, and permits analysts to publish research reports about an emerging growth company that is going public even if the analyst s firm is one of the underwriters in the issuer s IPO. Summary of the Offering Securities offered by selling stockholders: 82,531,743 shares of common stock Shares issued and outstanding: 80,209,976 shares of common stock. Our executive officers and directors currently own 62.3% of our outstanding common stock. As a result, our executive officers and directors have substantial control over all matters submitted to our shareholders for approval. Market for the common shares: There has been a limited market for our securities. Our common stock is traded on the OTCQB under the symbol PXRB . There is no assurance that a trading market will be sustained. Consequently, a purchaser of our common stock may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resale. Use of proceeds: We will not receive any proceeds from the sale of shares by the selling security holders. Summary Financial Information of BMP Holdings Three Months Ended September 30, 2016 (Unaudited) For the Nine Months Ended September 30, 2016 (Unaudited) Year Ended December 31, 2015 (Audited) Period From August 4, 2014 (inception) to September 30,2016 (Unaudited) Statement of Operations Data Operating revenues $ 14,995 $ 56,514 $ 100,312 $ 316,993 Operating expenses $ 61,501 $ 194,695 $ 195,748 $ 573,943 Net loss $ (46,506) $ (138,181) $ (95,436) $ (256,950) Summary Financial Information of PixarBio Nevada Three Months Ended September 30, 2016 (Unaudited) For the Nine Months Ended September 30, 2016 (Unaudited) Year Ended December 31, 2015 (Audited) Period From August 29, 2013 (inception) to September 30,2016 (Unaudited) Statement of Operations Data Operating revenues $ - $ - $ - $ Operating expenses $ 4,498,527 $ 9,884,774 $ 4,871,876 $ (16,986,014) Net loss $ (4,506,187) $ (9,913,574) $ (5,954,423) $ (18,416,875) Balance Sheet Data of BMP Holdings: September 30, 2016 (Unaudited) December 31, 2015 (Audited) Working capital $ (1,476) $ (86,367) Total assets $ 361,949 $ 369,288 Total liabilities $ 5,414 $ 91,072 Shareholders deficit $ (233,617) $ (95,436) Balance Sheet Data of PixarBio Nevada: September 30, 2016 (Unaudited) December 31, 2015 (Audited) Working capital $ (960,441) $ 1,357,121 Total assets $ 2,826,597 $ 3,505,799 Total liabilities $ 2,206,387 $ 1,522,874 Shareholders deficit $ (19,117,836) $ (9,204,262) The 3,593,047 shares of Common Stock and the shares underlying the warrants issued in the private placement held by PixarBio Nevada, which closed in October 2016, were not registered under the Securities Act of 1933, as amended (the Securities Act ), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) and Regulation D (Rule 506(b)) under the Securities Act and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. Each buyer was an accredited investor as such term is defined in Regulation D promulgated under the Securities Act. PixarBio Nevada agreed to use the net proceeds from the private placement for general working capital purposes. The aggregate proceeds raised from the private placement was $7,186,094. Each investor who purchased shares in the private placement, which terminated on October 30, 2016, received one warrant for each share purchased with an exercise price of $4.50 per share. A total of 3,593,047 warrants were issued to the investors. If and when the warrants are exercised, we will receive approximately $16,168,711. Pursuant to a private placement agreement, PixarBio Nevada agreed to pay Newbridge Securities Corporation, which acted as a placement agent for the private placement, a retainer fee of $25,000, a cash fee of 10% of the gross purchase price paid for by an investor in the private placement introduced by Newbridge Securities Corporation and to issue to it warrants to purchase such number of shares of common stock equal to 8% of the sum of number of shares of common stock issued at the Closing and the number of shares of common stock issuable upon exercise or conversion of any and all convertible securities issued at the Closing. PixarBio Nevada also agreed to the same terms with ViewTrade Securities, Inc. for investors introduced by it in the private placement. A total of 208,720 warrants were issued to such registered broker-dealers with an exercise price of $2.00 per share.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001623338_brilliant_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001623338_brilliant_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6f241f028460e1b964aee484372dfe481ecec73c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001623338_brilliant_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before buying our common stock. You should read the following summary together with the more detailed information appearing in this prospectus, including our financial statements and related notes, and our risk factors beginning on page 4, before deciding whether to purchase our securities. Unless the context otherwise requires, we use the terms "Brilliant Sands," the "company," "we," "us" and "our" in this prospectus to refer to Brilliant Sands Incorporated. The information included in this prospectus reflects the effects of the 1-for-3 reverse stock split of our issued and outstanding common stock, which was effective March 16, 2015. For more information about our common stock see "Description of Capital Stock" below. The Company We were incorporated as the Helena and Livingston Smelting and Reduction Company in the State of Montana in May 1888. We changed our name to "Helena Silver Mines, Inc." in June 1970 and to "Consolidated Goldfields Corporation" in July 2006 in connection with our acquisition of Dome Copper, Inc., a Colorado corporation engaged in the mining business. At the time of the transaction, Dome Copper had fifteen projects consisting of unpatented claims and mining leases. From July 2006 to December 2014, we were an independent exploration stage mining company in the business of acquiring, exploring and developing mineral natural resource properties, primarily gold and silver. From February 2010 to September 2014, we had worked with another company to develop what had been our largest asset, known as the Cahuilla project, pursuant to two Exploration Earn-In Agreements with Teras Resources Inc. We were also engaged in maintaining, exploring and developing our other mineral projects. We currently have four exploration stage projects in our gold and silver property portfolio. In December 2014, we acquired rights to three properties in Canada and began our strategy to become a leading producer and supplier of frac sand in Canada. The transaction included an initial cash payment of approximately $43,000 and the issuance of 7,833,334 shares of our common stock, an additional 7,833,334 shares of our common stock held in escrow to be released under certain conditions, an additional cash payment of CAD$50,000 within the 45 days after closing and an additional cash payment of CAD$175,000 to be paid concurrently with the completion of a financing transaction by us. Since our acquisition of the frac sand properties, our immediate priorities have been to finance the exploration of these properties and then to begin the process to bring them into development and production. Following this transaction, we changed our name to "Brilliant Sands Incorporated" to reflect our evolution from a junior gold-silver company to a more diversified mining company with interests in other minerals. In January 2014, we acquired the Muskox Data Inventory from Prize Mining Corporation. The Muskox Data consists of several years worth of work on the Ni-Cu-Pd-Pt bearing Muskox Layered Intrusion in Nunavut, Canada. The Muskox intrusion is believed to be one of the most promising targets for platinum group elements. We are currently analyzing and preparing the data for possible sale. Corporate Information Our corporate headquarters are located at 3983 S. McCarran Blvd., Suite 458, Reno, Nevada 89502. Our telephone number is (775) 461-2545. Our website address is www.brilliantsands.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock. This prospectus contains additional trade names and trademarks of ours and of other companies. We do not intend our use or display of other companies trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "non-accelerated filer," or "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (do not check if a smaller reporting company Smaller reporting company x The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. THE OFFERING Securities offered by the selling security holders 16,903,645 shares of issued and outstanding common stock Common stock outstanding as of August 1, 2016 30,336,283 shares(1) Use of proceeds We will not receive any of the proceeds from the sale of the securities owned by the selling security holders pursuant to this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001624203_aquarius_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001624203_aquarius_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6f0a5325b3e76de0cce0ae3d894220401925b51f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001624203_aquarius_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock. You should carefully read the entire prospectus, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. In this Prospectus, the terms "Aquarius," "Company," "we," "us" and "our" refer to Aquarius Cannabis Inc. Overview We were incorporated on July 3, 2014, under the laws of the state of Nevada. We acquired Aquarius Holdings LLC, a Colorado limited liability company ("Aquarius Colorado"), on December 1, 2014, via a share exchange agreement with Aquarius Colorado's members (the "Share Exchange"). In exchange for all of the membership interests of the members of Aquarius Colorado, we gave them shares of Common Stock and Aquarius Colorado became our wholly-owned subsidiary. Aquarius Colorado was formed on October 20, 2011. Business We are a U.S.-based branding, packaging and consulting company in the medical and recreational marijuana industries. We are focused on building long-term consumer loyalty to exceptional, consistent, and pesticide-free marijuana products that are marketed and sold under our Aquarius Cannabis brands. We do not produce, distribute, or own the actual marijuana products that are distributed under our brand names. We anticipate that we will profit from contracts with growers in California and other states and will increase the number of our contracts resulting in increased revenues. We expect to form long-standing, mutually beneficial relationships with licensees of our brands by providing consistent and reliable products and services resulting in increased profitability for licensees. Once our brands gain traction, we believe our easily scalable model can be employed to license additional facilities and grow our brands. To accomplish this, we contracted with Michael Leigh, a top-tier grower, and Hollister Keene, a horticulture specialist, to develop the growing methods and environmental designs to systemize the production process as part of the Aquarius Cannabis brands platform. Our proprietary growing methods and environmental designs outline a specific process with approved materials for all steps of the cultivation process that provide the backbone for consistent marijuana. We will license our growing methods and environmental designs and hire top-tier experts in marijuana growing and horticultural production to provide producers, who license our Aquarius Cannabis brands, access to on-site consulting to meet the quality and consistency standards we set in their marijuana flowers. Our consultants will advise growers at every step of the way to ensure their success including: site planning, site set-up, and crop scheduling, as well as guidance and troubleshooting during production, harvest, curing, and packaging. We will help producers by lowering growing costs, increasing wholesale revenue, and decreasing the effort put into sales of their products. We intend to fill the noticeable void in the medical and recreational marijuana industries of producers and brands able to provide consistent products. Because we own the Aquarius Cannabis brands, we are responsible to the end consumer for ensuring that each and every Aquarius Cannabis branded product is produced, packaged, and labeled consistently. Delivering on the brand promises of quality and consistency is how we add value to the end consumer. Since Aquarius Cannabis Inc. s inception, our operations have been limited to raising capital resources and developing our flagship production process that allows for commercially viable, pesticide-free production of marijuana. Aquarius Cannabis Inc. is currently in search of medical and recreational growers with the intention of negotiating flagship production partnerships in California and Colorado and searching for growers interested in micro-branding. We believe we are an early mover in a developing industry. We believe we have the necessary experience and expertise in our industry, a clear plan to capitalize on current market opportunities, and that we are well positioned to become a market leader in this nascent industry. At the date hereof, we have minimal cash at hand. We require additional capital to implement our business and fund our operations. See "Management's Discussion and Analysis" on page 31. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Offering Price per Share (2) Proposed Maximum Aggregate Offering Price (2) Amount of Registration Fee Common Stock, $0.0001 par value per share 9,834,353 (1) $ 0.0777 $ 764,130 $ 76.95 (3) (1) This Registration Statement covers the resale by our selling security holders of up to a total of 9,834,353 shares of Common Stock which consists of: (a) 1,850,000 shares of Common Stock issued to a portion of our selling security holders in a private offering; (b) 1,975,000 shares of Common Stock issued to two selling shareholders who purchased shares through securities purchase agreements; (c) 3,850,000 shares of Common Stock issuable to a portion of our selling security holders upon conversion of convertible promissory notes issued by Aquarius Holdings LLC in two private offerings; (d) 258,275 shares of Common Stock issued to a portion of our selling shareholders upon conversion of convertible promissory notes and warrants issued by the Company to consultants for services rendered; (e) 1,058,062 shares of common stock issued to a portion of our selling shareholders as share based compensation for our independent contractors for services rendered; and (f) 843,016 shares of common stock issued to a portion of our selling shareholders as consideration for their ownership in AH LLC entity. (2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o). Our Common Stock is not traded on any national exchange and in accordance with Rule 457; the offering price was determined by the price of the shares that were sold to a portion of our selling security holders in a private offering. The price of $0.0777 is a fixed price at which the selling security holders may sell their shares until our Common Stock is quoted in the OTCQB marketplace of OTC Link and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority, which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved. (3) The Registrant previously submitted $90.86 on the original filing of this registration statement filed on December 12, 2014 and $30.92 on the amended filing of this registration statement on August 12, 2015. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. Government Regulation The United States federal government regulates drugs through the Controlled Substances Act (21 U.S.C. 811), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug, which is viewed as highly addictive and having no medical value. The United States Federal Drug Administration has not approved the sale of marijuana for any medical application. Doctors may not prescribe cannabis for medical use under federal law, however they can recommend its use under the First Amendment. In 2010, the United States Veterans Affairs Department clarified that veterans using medicinal cannabis will not be denied services or other medications that are denied to those using illegal drugs. As of December 20, 2015, 23 states, as well as Washington D.C and Guam have legalized medical marijuana and four states, as well as the District of Columbia, have legalized recreational marijuana use. The state laws are in conflict with the federal Controlled Substances Act , which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of federal laws. Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal government s enforcement of current federal laws could cause significant financial damage to us. While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the Federal or state governments. We could be deemed to be participating in marijuana cultivation, which remains illegal, and we are potentially exposed to criminal liability and property seizure. In California, marijuana for medical use was legalized in 1996 under Proposition 215 also known as the Compassionate Use Act . As of today, recreational use laws have not been approved. Legal private medical use with a medical marijuana card is used for the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. Possession is limited to those carrying medical marijuana cards. Production of 6 mature or 12 immature plants per patient is allowed. Distribution is limited to licensed medical marijuana dispensaries. In Colorado, marijuana was approved for both medical and recreational consumption on a limited basis in Colorado with the passing of Amendment 64 to Colorado s constitution in 2012. Recreational use is now fully enacted as article 18 section 16 of the Colorado constitution and recreational use and legal sales began in January of 2014. Under medical use terms patients are allowed to possess up to 2 ounces of useable marijuana. Under recreational use terms there is no penalty for possession of up to 1 ounce of useable marijuana. Cultivation of marijuana for medical use is limited to 6 plants for patients or their designated primary caregivers. Under recreational use terms there is no penalty for cultivation of up to 6 plants with no more than 3 plants being mature plants. Distribution is allowed through state licensed dispensaries. Where You Can Find Us Our principal executive office and mailing address is 515 South Flower Street 36th Floor, Los Angeles, CA 90071. Our telephone number is 888-317-0460. Our Website Our internet address is www.aquariuscannabis.com. Information contained on our website is not part of this prospectus. Implications of Being an Emerging Growth Company We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and relief from other burdens that are otherwise applicable generally to public companies. These provisions include: A requirement to have only two years of audited financial statements and only two years of related MD Exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"); Reduced disclosure about the emerging growth company's executive compensation arrangements; and Exemption from non-binding advisory votes on executive compensation or golden parachute arrangements. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED AS OF FEBRUARY 10, 2016 AQUARIUS CANNABIS INC. 9,834,353 SHARES OF COMMON STOCK The selling security holders named in this prospectus are offering all of the shares of Common Stock offered through this prospectus. The Common Stock to be sold by the selling security holders as provided in the "Selling Security Holders" section is (a) 1,850,000 shares of Common Stock issued to a portion of our selling security holders in a private offering; (b) 1,975,000 shares of Common Stock issued to two selling shareholders who purchased shares through securities purchase agreements; (c) 3,850,000 shares of Common Stock issuable to a portion of our selling security holders upon conversion of convertible promissory notes issued by Aquarius Holdings LLC in two private offerings; (d) 258,275 shares of Common Stock issued to a portion of our selling shareholders upon conversion of convertible promissory notes and warrants issued by the Company to consultants for services rendered; (e) 1,058,062 shares of common stock issued to a portion of our selling shareholders as share based compensation for our independent contractors for services rendered; and (f) 843,016 shares of common stock issued to a portion of our selling shareholders as consideration for their ownership in AH LLC entity. We will not receive any proceeds from the sale of the Common Stock covered by this prospectus. Our Common Stock is presently not traded on any market or securities exchange. The selling security holders have not engaged any underwriter in connection with the sale of their shares of Common Stock. Common Stock being registered in this Registration Statement may be sold by selling security holders at a fixed price of $0.0777 per share until our Common Stock is quoted in the OTCQB marketplace of OTC Link and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority ("FINRA"), which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares of the selling security holders. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and are subject to reduced public company reporting requirements. Investing in our Common Stock involves a high degree of risk. See "Risk Factors" beginning on page 6 to read about factors you should consider before buying shares of our Common Stock. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Date of This Prospectus is: February __, 2016 We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We elect to use the extended transition period provided below and therefore our financial statements may not be comparable to companies that comply with public company effective dates. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. For more details regarding this exemption, see "Risk Factors." TABLE OF CONTENTS PAGE Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001625285_arma_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001625285_arma_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f38907a3d505cd431f029531476be8d56409ee6e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001625285_arma_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, unless the context otherwise requires "we," "us," "our" and "Arma Services" are to Arma Services, Inc. The following summary does not contain all of the information that may be important to you. You should read the entire prospectus before making an investment decision to purchase our common stock.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001625639_benaiah_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001625639_benaiah_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..51a6d2cf382ff5cb1db5054cabfa756ee152605a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001625639_benaiah_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This Prospectus and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section beginning on Page 8 of this Prospectus and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section beginning on page 29 of this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary does not contain all of the information that you should
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001627631_global_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001627631_global_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3818d5ab3528720456ec3c091c9316a46b30f919
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001627631_global_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this Prospectus regarding Global Gard, Inc. ( GG ). In this Prospectus, unless the context otherwise denotes, references to the Company , we, us, our, , GG and Global Gard, Inc. are to the Company. A Cautionary Note on Forward-Looking Statements This prospectus contains forward-looking statements, which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors, that may cause our industry s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Summary Information about Global Gard, Inc. Global Gard, Inc. (GG, we, the Company) was incorporated in the State of Nevada as a for-profit Company on July 16, 2014 and established December 31st as its fiscal year end. We are a development-stage Company that intends to develop security applications for smartphones (apps). We have not yet developed any app. Our first app to be developed is called G.G.App, intended to be used in dangerous situations and moments of panic or distress. Our to-be-developed app would alert the user s family and friends ("observers") in possible moments of danger. It may also be used to call Emergency Services such as the Police, Fire Department or Medical Services. We plan to develop two modes of operation: Stealth Mode and Caution Mode . The Company anticipates that it will not be able to offer the Global Guard application through the Apple s Apps store as the Company s application will require its users to Jail Break* their IPhones, the Company anticipates it will be able to offer its G.G.APP on the Google Play store as Android phones will not need to be Jail Broken and or Rooted. * See definition of Jail Breaking / Rooting under risks related to the company s market and strategy. Once G.G.App has been activated in the Stealth Mode, the user cannot deactivate it, only the Company for a fee can terminate it. To terminate the application, the user will have to call into the Company and pay a $19.99 (see Description of Apps on page 23 for full disclosure). Contingent on the sale of at least 75% of the shares offered herein, we also intend to develop a second app: the G.G.App Encriptor. This app is planned to encrypt all data exchanged by internet (Wi-Fi, 3G and 4G) and phone conversations. The objective is to prevent stolen passwords and data obtained by internet connection on untrusted Wi-Fi connections. We intend to sell G.G.App on Google Play and for download on our website for US$ 0.99. Also, we plan on offering a trial version of G.G.App. Encriptor for a month, and after this period, this app can be used for monthly payment of US$1.99. The Global Guard encryption application can be sold in both the Apple Apps Store and the Google Play store, as its use will not require its users to Jail break their smart phones. Global Gard, Inc. has no plans to change its business activities or partner with another business and is not aware of any circumstances or events that might cause this plan to change. GG believes that the sale of at least 25% of the offered shares herein would allow us to implement our Plan of Operations and our reporting status with the SEC. We expect to try to implement our Plan of Operations even if we sell less than 25% of the shares offered herein, but more funds would likely be necessary. If necessary and if the Company is generating enough funds (after the implementation of our plan of operation), we intend to hire an American president to run our day-to-day operations in the USA. Mr. Siwarirat would remain as the company s CEO. The table below summarizes our use of proceeds in the under 25%, 25%, 50%, 75% and 100% sales scenarios (see Use of Proceeds on page 15 and Plan of operations on page 35 for more detailed information and estimated costs): We anticipate allocating part of the proceeds to keep our status current with the SEC. Our Company will use the funds available to pay for the expenses related to this offering and the expenses to maintain our reporting status for 12 months after the effective date. Our plan of operations is based on the net proceeds from this offer: NP = GP ERTTO ETMORS NP = NET PROCEEDS GP = GROSS PROCEEDS (dependant on the sales of shares offered herein) ERTTO = EXPENSES RELATED TO THIS OFFERING (estimated at a fixed cost of $8,770) ETMORS = EXPENSES TO MAINTAIN OUR REPORTING STATUS (for 12 months after effective date - estimated at a fixed cost of $17,600) Our officer and director has committed to lend funds (up to $10,000) to the company for the next twelve months to cover expenses to maintain the reporting status current with the SEC, if necessary. Mr. Phiraphat Siwarirat is willing to lend the full amount of these funds to the Company as the expenses are incurred, if no other proceeds are available to the Company and if the amount raised through this offering is not enough to cover such expenses. However, there is no contract in place or written agreement with Mr. Siwarirat and the funds expressed in the above verbal commitment, would be in the form of a non-secured loan and would have no interest and no fixed repayment date. If we are unable to raise enough funds through this offering, the Company would have to seek additional capital through debt or equity. As of the date of this filing, the Company has generated no revenues and has not entered into any agreement, arrangement or understanding with any third party Company or individual. Complete failure to raise funds will require the Company to cease operations. We have not yet contacted or secured any kind of agreement and/or contract with any third party and we have not identified any potential client. Our business office is located at 509 Village no.12, Khok Kruad Sub-District, Mueang Nakhon Ratchasima District Nakhon Ratchasima Province, 30280 Thailand; our telephone number is 702-553-4109, our Email address is phiraphat.siwarirat@globalgard.com and our fax number is 702-446-8374. Our United States and registered statutory office is located at 2360 Corporate Circle, Suite 400, Henderson, Nevada, 89074, telephone number 888-866-9552. The Company does not own or rent any property. Or business office space is provided by our president at no charge. GG has no plans to change its business activities or partner with another business and is not aware of any circumstances or events that might cause this plan to change. As of June 30 , 201 6 , the end of fiscal quarter , GG had raised $11,500 through the sale of its common stock to our sole officer and director. There is $ 703 of cash on hand in the corporate trust account. The Company currently has liabilities of $ 13,650 , represented by expenses accrued during its start-up related to incorporation costs. In addition, the Company anticipates incurring costs associated with this offering totaling approximately $8,770, represented by SEC filing fee ($20), legal ($2,000), accounting ($3,500), EDGAR expenses ($750), transfer agent and printing costs ($1,000), bookkeeping (1,500). The Company s sole officer and director, Mr. Siwarirat, owns 100% of the outstanding shares and will own 62.8% after this offering is completed, if all the offered shares are sold. Being an Emerging Growth Company GG is a shell company as defined in Rule 405, because it is a company with nominal operations and it has assets consisting solely of cash and cash equivalents. We have no plans or intention to be acquired or to merge with an operating company. Additionally, there are no plans to enter into a change of control or similar transaction or change the management of the company. The Company is an emerging growth company, but the company has irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to section 107(B) of the Jump Start Business Act of 2012. An issuer remains an emerging growth company until the earliest of: The last day of the fiscal year during which it had total annual gross revenues of $1 billion or more; The last day of the fiscal year following the fifth anniversary of its initial public offering date; The date on which it has, during the previous three-year period, issued more than $1 billion in non-convertible debt; or The date on which it is deemed to be a large accelerated filer , as defined in section 240.12b 2 of title 17, Code of Federal Regulations, or any successor thereto. An emerging growth company could be capable of taking advantage of several exceptions, such as: Say-On-Pay. Section 14A(e) of the Exchange Act has been amended to exempt emerging growth companies from the say-on-pay , say-on-pay frequency and say-on-golden parachute requirements that were enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. After cessation of emerging growth company status, if an issuer was an emerging growth company for less than two years after its initial public offering date, it must hold a say-on-pay vote no later than the end of the three-year period beginning on the date it is no longer an emerging growth company. Any other company that has ceased to be an emerging growth company must hold a say-on-pay vote no later than the end of the one-year period beginning on the date it is no longer an emerging growth company. In addition, following cessation of emerging growth company status, a company will become subject to the say-on-pay-frequency and say-on-golden parachute provisions of Rule 14a-21 promulgated under the Exchange Act. Pay-versus-Performance. Section 14(i) of the Exchange Act has been amended to exempt emerging growth companies from the pay versus-performance requirements that were enacted as part of the Dodd-Frank Act. The SEC has not yet finalized the regulations implementing the pay-versus-performance requirements of the Dodd-Frank Act. CEO Pay Ratio Disclosure. Section 953(b)(1) of the Dodd-Frank Act has been amended to exempt emerging growth companies from the requirement to compare CEO compensation to the median of the annual total compensation of all employees of the issuer other than the CEO. The SEC has not yet finalized the regulations implementing the pay ratio disclosure requirements of the Dodd-Frank Act. Compensation Disclosures. Emerging growth companies may comply with the less burdensome executive compensation disclosure requirements applicable to any issuer with a market value of less than $75 million of outstanding voting and nonvoting common equity held by non-affiliates. Currently these provisions are set forth in Item 402(l) through (r) of Regulation S-K as applicable to smaller reporting companies. Financial Statement Requirements. Section 7 of the Securities Act has been revised to require that two years, rather than three years, of audited financial statements be included in any registration statement filed with the SEC by an emerging growth company. Similarly, an emerging growth company need only present its Management s Discussion and Analysis of Financial Condition and Results of Operations for each period for which financial statements are presented rather than the periods required by Item 303 of Regulation S-K. Furthermore, an emerging growth company need not present selected financial data for any period prior to the earliest audited period presented in connection with its initial public offering. In addition, an emerging growth company need not comply with any new or revised financial accounting standard until such date that a company that is not an issuer , as defined in Section 2 of the Sarbanes Oxley Act of 2002 (generally, a nonpublic company), is required to comply with such new or revised accounting standard. Similar changes were also made to Section 13(a) of the Exchange Act. Internal Control over Financial Reporting. Section 404(b) of Sarbanes-Oxley has been amended to exempt emerging growth companies from the requirement to obtain an attestation report on internal control over financial reporting from the issuer s registered public accounting firm. Currently, this requirement is only applicable to accelerated filers and large accelerated filers as defined in Rule 12b-2 promulgated under the Exchange Act. PCAOB Rules. The Public Company Accounting Oversight Board must exclude emerging growth companies from any rules it might adopt addressing mandatory audit firm rotation or requiring a supplement to the auditor s report in which the auditor would provide additional information about the audit and the financial statements of the issuer (a so-called auditor discussion and analysis). No PCAOB rules adopted after the date of enactment of the JOBS Act will apply to an emerging growth company unless the SEC determines that the application of such rules is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition and capital formation. The exemptions listed above could be available to the Company, but we have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to section 107(B) of the Jump Start Business Act of 2012. The Company intends to file, in a period up to 90 days after the termination of this offering, a Form 8A making the Company a mandatory reporting issuer under the Securities and Exchange Act of 1934 as Amended. The Company intends to offer its stock for sale in all jurisdictions that its prospectus is valid in and is not limited to any region or country. The Offering This prospectus covers the offering of 6,800,000 shares of GG s Common Stock. The offering price is $0.02 per share. Officers, Directors or significant investors own none of the shares being offered. Our sole Officer and Director owns 11,500,000 shares of Common Stock. There is no minimum number of shares that must be sold but the Company will use its best efforts to sell the securities offered. The Company will retain the proceeds from the sale of any of the offered shares. This is our initial public offering and no public market currently exists for shares of GG common stock. We can offer no assurance that an active trading market will ever develop for our common stock. The Company s sole officer and director will sell the common stock upon effectiveness of this registration statement. Securities being offered 6,800,000 shares of common stock, $ .001 par value Offering price per share $ .02 Offering Period The shares are being offered for a period not to exceed 90 days from the effective date of the prospectus. GG may at its discretion extend the offering for an additional 90 days and intends to file an amended S-1 to announce the extension period, if that is the case. Minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $ .02. Upon the effectiveness of this registration statement we intend to arrange for a broker dealer to apply on our behalf for quotation on the Over the Counter Bulletin Board ( OTCBB ). There are no assurances that we can get a broker dealer to apply on our behalf or that our common stock will be approved for quotation on the OTCBB or that, if approved, any meaningful market for our common stock will ever develop. Use of proceeds Expenses Related to this offering ($8,770); Expenses to maintain our report status for 12 months after effective date ($17,600); Product Development ($76,741); Testing phase ($10,963); Marketing & Selling phase ($16,444.50); Internet, Office supplies and Telephone costs ($5,481.50) Number of Shares Outstanding Before the Offering 11,500,000 Number of Shares Outstanding After the Offering If all offered share are sold 18,300,000 You should rely only upon the information contained in this prospectus. GG has not authorized anyone to provide you with information different from that which is contained in this prospectus. The Company is offering to sell shares of common stock and seeking offers only in jurisdictions where offers and sales are permitted.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001629137_global_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001629137_global_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d405329e9a6fe3fcdbc08aad48bc27d8e8680284
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001629137_global_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere and incorporated by reference in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including the section titled Risk Factors and the information in our filings with the U.S. Securities and Exchange Commission, or the SEC, incorporated by reference in this prospectus. Unless the context suggests otherwise, all references to us, our, GBT, we, the Company and similar designations refer to Global Blood Therapeutics, Inc. and, where appropriate, our subsidiaries. Global Blood Therapeutics, Inc. Our Company We are a clinical-stage biopharmaceutical company dedicated to discovering, developing and commercializing novel therapeutics to treat grievous blood-based disorders with significant unmet need. We are developing our initial product candidate, GBT440, as an oral, once-daily therapy for sickle cell disease, or SCD, and are currently evaluating GBT440 in SCD subjects in an ongoing Phase 1/2 clinical trial. SCD is a genetic disease marked by red blood cell, or RBC, destruction and occluded blood flow and hypoxia, leading to anemia, stroke, multi-organ failure, severe pain crises, and shortened patient life span. GBT440 inhibits abnormal hemoglobin polymerization, the underlying mechanism of RBC sickling. In our clinical trials of GBT440 in SCD subjects, we observed reduced markers of red blood cell destruction, improvements in anemia, improvements in markers of tissue oxygenation, reduced numbers of sickled RBCs, and reduced markers of inflammation. In addition to GBT440 for the treatment of SCD, we intend to evaluate GBT440 for the treatment of hypoxemic pulmonary disorders. In June 2016, we initiated clinical sites which began screening for a Phase 2a clinical trial of GBT440 in idiopathic pulmonary fibrosis, or IPF, and we expect to initiate a Phase 2b clinical trial of GBT440 in a hypoxemic pulmonary disorder in the second half of 2016. We are also engaged in other research and development activities targeted towards hereditary angioedema, or HAE. In 2015, we nominated GBT018713, a proprietary, small molecule kallikrein inhibitor, for development as an orally administered therapy intended for the prevention of HAE attacks. We plan to complete toxicology studies to enable the filing of an Investigational New Drug (IND) application, and subject to submission and clearance of the IND, we expect to initiate a Phase 1 clinical trial for GBT018713 in early 2017. We own or jointly own and have exclusively licensed rights to our portfolio of product candidates in the United States, Europe and other major markets. We own two issued U.S. patents that cover the composition of matter and method of use for GBT440, which are due to expire in 2032 and 2034, respectively (absent any applicable patent term extensions), and we own or co-own additional pending patent applications in the United States and selected foreign countries. We have never been profitable and have incurred net losses in each year since inception. Our net losses were $16.6 million and $7.4 million for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016 we had an accumulated deficit of $115.1 million. To date, we have not generated any revenue. We do not expect to receive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize our products or enter into collaborative agreements with third parties. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. As of March 31, 2016, we had $134.0 million of cash and cash equivalents. Overview of Sickle Cell Disease SCD is a genetic blood disorder caused by a single point mutation in the beta-chain of hemoglobin, which results in the formation of abnormal hemoglobin known as sickle hemoglobin, or HbS. Normally, oxygenated Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS (Subject to Completion) Dated June 20, 2016 $100,000,000 COMMON STOCK Global Blood Therapeutics, Inc. is offering $100,000,000 in shares of common stock. Our common stock is listed on The NASDAQ Global Select Market under the symbol GBT. At an assumed offering price of $17.83 per share, the last reported sale price of our common stock on The NASDAQ Global Select Market on June 17, 2016, we would be offering 5,608,524 shares of our common stock. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012, as amended, and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in our common stock involves risks. See Risk Factors beginning on page 11. PRICE $ A SHARE Price to Public Underwriting Discounts and Commissions (1) Proceeds, before expenses, to Global Blood Therapeutics, Inc. Per Share $ $ $ Total $ $ $ (1) The underwriters will receive compensation in addition to underwriting discounts and commissions. See Underwriting beginning on page 102 for additional information regarding underwriting compensation. We have granted the underwriters an option to purchase up to $15,000,000 in additional shares of our common stock from us at the public offering price, less underwriting discounts and commissions. The underwriters can exercise this option at any time within 30 days after the date of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of common stock to purchasers on or about , 2016. J.P. Morgan Morgan Stanley Cowen and Company Wedbush PacGrow , 2016 Table of Contents RBCs travel from the lung through blood vessels. Hemoglobin, the oxygen-carrying protein inside RBCs, releases oxygen at the tissues. In SCD, when oxygen is released at the tissues, HbS becomes sticky and aggregates into polymers, or long, rigid rods within an RBC, much like a sword within a balloon. The RBC assumes a sickled shape and becomes inflexible, which can cause blockage in small blood vessels. These polymers destroy RBCs and block blood flow, resulting in decreased oxygen delivery to tissues. Beginning in early childhood, SCD patients suffer many clinical consequences, including unpredictable and recurrent episodes, or crises, of severe chronic and acute pain, anemia, stroke, spleen failure, pulmonary hypertension, acute chest syndrome, liver disease, kidney failure, other morbidities, and premature death. These consequences are directly related to reduced blood flow and insufficient oxygen delivery. A 2014 publication noted that in the United States, SCD resulted in a shortened patient life expectancy by approximately 25 to 30 years even with available therapies. Current treatment options for SCD are limited to hydroxyurea, or HU, blood transfusions and bone marrow transplantation. The utilization of these treatments is significantly limited due to their suboptimal efficacy and significant toxicity. As a result, patients with SCD continue to suffer serious morbidity and premature mortality. We believe there is a significant unmet medical need for a novel SCD therapy that: inhibits abnormal hemoglobin polymer formation, the underlying mechanism of RBC sickling; stops inappropriate RBC destruction and improves blood flow and oxygen delivery to tissues; prevents or reduces the episodes or crises of severe pain associated with SCD; modifies the long-term course of the disease; is effective in all SCD genotypes, and in both children and adults; has a more favorable side effect profile than currently available therapies; and is available as a convenient, oral therapy. Our Product Candidate GBT440 s therapeutic approach was inspired by the natural activity of fetal hemoglobin, or HbF. HbF, which is present during fetal development and in early infancy until it is replaced with adult hemoglobin, has an inherently increased oxygen affinity that allows a fetus to extract oxygen from the mother s blood. Typically, newborns with SCD do not experience RBC sickling until approximately six to nine months of age, after which HbF is usually no longer expressed. Additionally, it has been observed that rare individuals who have inherited both the HbS mutation as well as a gene deletion that allows them to continue to express 10 to 30% HbF in their RBCs into adulthood do not exhibit the clinical manifestations of SCD, despite expressing up to 90% HbS in their blood. HbF dilutes the concentration of deoxygenated HbS that can participate in polymerization, and thereby prevents hemoglobin polymers from forming. GBT440 is a novel, investigational drug that increases hemoglobin s affinity for oxygen by binding to the alpha-chain of hemoglobin. GBT440 has been observed to keep a proportion of sickle hemoglobin in its oxygenated state, which cannot participate in polymerization. Similar to HbF, by diluting total HbS with a proportion of GBT440-bound hemoglobin, GBT440 prevents hemoglobin polymer formation. In December 2014, we initiated our randomized, placebo-controlled, double-blind, single and multiple ascending dose Phase 1/2 clinical trial of GBT440 in healthy subjects and subjects with SCD. The study is being conducted in three parts: Part A (single dose administration), Part B (multiple dose administration, daily for 15 days in healthy subjects and 28 days in SCD subjects), and Part C (multiple dose administration, daily for 90 Table of Contents TABLE OF CONTENTS Prospectus Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001632935_the_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001632935_the_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a25fe775cde3eaf4fc2f436727de3defda0a23ce
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001632935_the_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary does not contain all of the information you should consider before investing in our shares. You should read the following summary together with the entire prospectus carefully, including the "Risk Factors" section beginning on page 9 and the financial statements and the accompanying notes to those financial statements beginning on page F-1 before making an investment decision. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriter s over-allotment option or underwriter s warrants. All references to shares, Class A common stock, Class B common stock, and per share data reflect 1 for 2 reverse stock split consummated on January 29, 2016. Our Business We provide educational content, we own copyrights for textbooks, publish national magazines related to intellectual property and the use of technology in education, and we host competitions, such as the Network Originality Competitions (the "NOC"), for the education market in the PRC. Starting in late 2014, we also began focusing on a new business where we develop online and mobile education platforms for K-12 students and provide integrated educational solutions to schools. Our products are designed to help students improve and strengthen their academic performance, confidence, motivation, and self-esteem. Chinese cultural and educational reforms focusing on the use of technology to provide top-quality education have provided opportunities to use the Internet and other media as a platform to promote cultural and educational development. Our business activities are carried out by Beijing Zhongtulian Culture & Education Development Center ("ZTL") and its subsidiaries and Shenzhen Asia-Pacific Future Education Technology Development Co., Ltd. ("APFE"), both of which are variable interest entities ("VIEs"). ZTL was formed in 1998 and is based in Beijing, PRC and APFE was formed in 2014 and is based in Shenzhen PRC. We operate our business in the PRC through certain contractual agreements between our subsidiary, The Future Leading Education (Shenzhen) Company Limited, or WFOE, and ZTL, and a separate series of contractual arrangements between WFOE and APFE. The contractual arrangements provide us with control over the business and affairs of ZTL and APFE. ZTL and APFE are variable interest entities, or VIEs, which means we have a controlling financial interest in the companies, but we do not own any equity interests in the companies. Historically, mainly through ZTL and its subsidiaries, we have generated most of our revenue from what we refer to as our traditional lines of businesses, which consist of (1) publishing and distributing national magazines featuring topics on innovation, intellectual property and the use of technology in education; (2) hosting government approved competitions for K-12 and college students and teachers, known as NOC s; (3) cooperating with qualified publishers and/or educational hardware manufacturers to distribute textbooks and digital educational hardware products, such as calculators, to schools throughout China; and (4) distributing an educational content database to educational institutions for use in their platform, with content that has been developed in-house and content that has been licensed from others. Our online and mobile education platforms and integrated educational solutions business is conducted through APFE and consists of a series of five programs and platforms: (1) the NOC online learning platform for use by teachers and parents; (2) the NOC online competition platform; (3) FEG (Find Excellent Genius), an academic and personal evaluation system for K-12 students; (4) O-chat mobile application, which allows for interaction between teachers, students and their parents and provides a mobile platform for students to study, perform self-assessments and produce creative-work; and (5) the Future Classroom, a cloud-based e-classroom environment integrating teaching equipment, teaching innovation patterns and e-educational content, which can be customized to meet the specifications provided by a school. In 2015, APFE entered into an agreement to acquire 100% ownership of Shanghai Bohao Information and Technology Company Limited ("Bohao"). Bohao has been engaged in the research and development of e-learning classroom software and hardware. As a result of such research, Bohao is able to provide the key elements of an integrated educational solution that we named the "Future Classroom." The Future Classroom offers an integrated educational solution that is customized to meet the specifications provided by a school. A Future Classroom package includes hardware that is embedded with teaching patterns and software, and furniture, which is purchased from Bohao, and interactive cloud based educational content to be used by teachers in the classroom, which is developed and provided by us. The closing of the acquisition of Bohao was subject to a number of conditions, including, without limitation, completion of the registration of APFE with the relevant administration for industry and commerce reflecting the change in equity ownership and delivery of certain financial statements by Bohao, as well as payment of the balance of the purchase price by APFE on an agreed upon payment schedule. On February 6, 2016, APFE and Bohao agreed to terminate the acquisition agreement because APFE was unable to timely pay the balance of the purchase price. However, on March 16, 2016, we entered into a five-year strategic cooperation agreement with Bohao, whereby we exclusively sell and distribute the Future Classrooms to K-12 schools. Since its launch in the fourth quarter of 2015, we entered into sales contract with three schools to sell the Future Classroom. We are in the process of entering into letters of intent for the sale of the Future Classroom, which are only subject to government approval for funding. The sales price of a Future Classroom ranges between RMB300,000 to RMB1.2 million ($46,000 to $185,000) based on the hardware, as well as the educational programs and content the school specifies. We estimate that the average purchase price of Future Classroom is approximately RMB500,000 ($77,000). By the second half of 2015, our management decided that we needed to change the manner in which we sold our educational content database. Previously we extracted certain data from our database, packaged the content and sold it for a one-time fee to customers. We decided to no longer continue sales of the content by this method and instead we intend to utilize the content for our online and mobile education platforms and for the Future Classroom. Since we decided to focus our marketing and sales efforts on our online and mobile education platforms and integrated educational solutions, we ceased sales of our digital educational products. As a result of the reduction in sales of the digital educational products, as well as the increase in our sales force, the hiring of third-party distributors and an increase in expenditures for product development, we experienced a 39.3% decrease in revenues and had a net loss of $4.55 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. We expect a continued decrease in revenue from these business lines during 2016 as we continue to focus on the sale and distribution of the NOC online learning platform and the Future Classroom in anticipation for the start of the school year in the fall of 2016. Industry Background and Market Opportunity According to a report issued by the PRC Ministry of Finance (2016), the education expenditures of the PRC in 2015 was RMB135.7 billion. The government s objective is to continue to promote education, science, technology, cultural reform and development. The general public expenditure budget of the PRC in 2016 is estimated to be approximately RMB8.6 trillion, an increase of 6.3% over the prior year s budget. The educational system in the PRC is under pressure to reform and develop. On March 5, 2014, the second session of the 12th National People s Congress concluded that the PRC government set education as a strategic priority with a focus on promoting equitable education development, with a continued increase in investment in educational resources. The government is expected to deepen comprehensive educational reforms by actively reforming the examination and enrollment systems, encouraging the development of private schools and accelerating the construction of a modern employment-oriented vocational education system. The digitalization of educational content and delivery is also driving a substantial shift in the education market. Cloud computing-enabled, internet-based and mobile technologies are being adapted for educational uses and an increasing number of schools are implementing online or blended learning environments by utilizing digital content in classrooms. These trends are supported by widespread research which demonstrates improved efficacy in learning derived through online, interactive programs. An analysis conducted by the Department of Education in 2009 that surveyed more than one thousand empirical studies of online learning found that, on average, students in an online learning environment performed modestly better than those receiving face-to-face instruction. While the adoption of technology within the education market may differ significantly across districts and schools, due to varying resources and infrastructure, most schools are seeking to further expand the use of technology and online interactive programs and are seeking partners to help them create effective learning environments. Competition We compete with a number of PRC and international companies in the PRC market. In our online education business lines, many of our competitors are larger, more established companies, such as China Education Alliance, Inc. and New Oriental Education & Technology Group, Inc. Many of our competitors have diverse businesses and are better specialized in either the online educational field, onsite training, or both. In addition, there are many new local companies that are entering the education market in the PRC and are offering products and services at lower costs to increase their market share. In our other business lines, we compete with many other companies in the education market. Our Strategy Our objective is to be a leading provider of affordable and effective educational solutions in the PRC by providing web-based and mobile internet technology, integrated online and offline programs, including advanced educational content, e-learning classroom hardware, professional intelligence assessment and database analysis, all of which aim to establish an intelligence education ecosphere. To achieve this objective, our growth strategy is to: Develop and Market Our Online and Mobile Education Platforms and the Future Classroom. We intend to capitalize on the growing demand for interactive online and mobile educational resources. In the first quarter of 2016, we launched the NOC Online Learning Platform to Kindergartens located in Xinjiang, Anhui, Hubei, Hunan, and Guangdong provinces and we have substantially completed the FEG (Find Excellent Genius) assessment platform for grades 1 to 12. Commencing in the fourth quarter of 2015, we began marketing and selling the Future Classroom. We will continue to invest in developing new online platforms. See "Our Products, Services and Programs." Increase Sales Penetration of our Online and Mobile Education Platforms and The Future Classroom in the PRC K-12 Market. We plan to continue adding full-time sales employees at our executive offices. However, instead of establishing sales centers throughout the PRC, we intend to develop relationships with third-party distributors in different cities throughout the PRC to sell our products, services and programs. We plan to market the Future Classroom to public schools through government bidding, and to promote our online products, such as the NOC Learning Platform and our FEG educational content database, through our employees and distributors who have access to networks of teachers, and parents in public and private schools. Leverage the NOC Brand. After 13 years of development, we believe we have successfully grown the NOC brand name. We broadcast the NOC final competition on television every year. We intend to leverage the NOC brand name to market our online and mobile education platforms. Strategic Cooperation with Vendors. Future Classroom requires support from software and hardware vendors that have advanced technologies. We intend to establish long-term cooperation arrangements with key vendors who fit in with our strategic product development which is focused on further enhancing the Future Classroom. Acquire New Businesses. Schools in the PRC have responded to the increasing public interest in improving education, in part, by investing in educational technologies, such as computer hardware and software, computer-assisted learning programs and professional development training, among other programs. We will continue to seek opportunities to acquire businesses with potential to accelerate our expansion plans. Principal Executive Offices Our principal executive offices are located in Beijing, PRC and an additional office is located in Shenzhen, PRC. Our office in Beijing is located at Room 501, Gaohelanfeng Building, East 3rd Ring South Road, Chaoyang District, Beijing, P. R. China, and our telephone number is +86 10-87663458. Our Shenzhen office is located at Floor 1, Building A, Thunis Sci-Tech. Park, No. 13, Langshan Road, Hi-and-New Tech Park (North Zone), Nanshan District, Shenzhen, PRC. Implications of Being an Emerging Growth Company As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement in the assessment of the emerging growth company s internal control over financial reporting. The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. We have chosen to avail ourselves of all of the exemptions afforded by the JOBS Act. Furthermore, we are not required to present selected financial information or any management s discussion herein for any period prior to the earliest audited period presented in connection with this prospectus. We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. If we choose to take advantage of any of these reduced reporting burdens, the information that we provide shareholders may be different than you might get from other public companies. The Offering Common stock we are offering [*] shares of Class A common stock. Public offering price We currently estimate that the initial public offering price will be between $[*] and $[*] per share. Over-allotment option We have granted a forty-five (45) day option (commencing from the date of this prospectus) to the underwriters to purchase an additional fifteen percent (15%) of the shares of Class A common stock offered in this offering to cover over-allotments, if any. Common stock outstanding before this offering 21,729,535 shares, which includes 6,529,535 shares of Class A common stock and 15,200,000 shares of Class B common stock. Common stock outstanding after this offering [*] shares, which includes [*] shares of Class A common stock and 15,200,000 shares of Class B common stock. Xiaoheng Ren, our chief executive officer and a director, and certain of her affiliates, will be deemed to beneficially own all of our issued and outstanding shares of Class B common stock and will be able to exercise approximately [*]% of the total voting power of our issued and outstanding capital stock, immediately following the completion of this offering. Each share of Class B common stock is entitled to five votes and is convertible into one share of Class A common stock. Lock-up We, our directors, executive officers and shareholders owning five percent (5%) or more of our common stock have agreed with the underwriter not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of twelve (12) months following the closing of the offering of the shares. See "Underwriting" for more information. Use of proceeds We estimate that the net proceeds from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the proceeds of this offering for further development of our online educational platform, and for working capital and other general corporate purposes. Proceeds of this offering in the amount of $600,000 shall be used to fund an escrow account for a period of 30 months following the closing date of this offering, which account shall be used in the event we shall have to indemnify the underwriters pursuant to the terms of the Underwriting Agreement.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001633438_azure_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001633438_azure_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4d98e4c332afba8847169f16816e74365ef86558
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001633438_azure_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our equity shares. You should read this entire prospectus carefully, including Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision. Overview Our mission is to be the lowest-cost power producer in the world. We sell solar power in India on long-term fixed price contracts to our customers, at prices which in many cases are at or below prevailing alternatives for these customers. We are also developing micro-grid applications for the highly fragmented and underserved electricity market in India. Since inception, we have achieved an 83% reduction in total solar project cost, which includes a significant decrease in balance of systems costs due in part to our value engineering, design and procurement efforts. We developed India s first utility scale solar project in 2009. As of July 31, 2016, we operated 24 utility scale projects and several commercial rooftop projects with a combined rated capacity of 357MW which represents a compound annual growth rate, or CAGR, of 114% from July 2012. As of such date we were also constructing 12 projects with a combined rated capacity of 390MW and had an additional 258MW committed, bringing our total portfolio capacity to 1,005MW. Megawatts committed represents the aggregate megawatt rated capacity of solar power plants pursuant to customer power purchase agreements, or PPAs, signed or allotted or where we have been declared as one of the winning bidders, but not yet commissioned and operational as of the reporting date. We are targeting having 520MW operating by December 31, 2016. Our longer term goal is to achieve 5GW committed or operating by December 31, 2020. Our ability to achieve these goals will depend on, among other things, our ability to acquire the required land for the new capacity (on lease or direct purchase), raising adequate project financing and working capital, the growth of the Indian power market in line with current government targets, our ability to maintain our market share of India s installed capacity as competition increases, the need to further strengthen our operations team to execute the increased capacity, and the need to further strengthen our systems and processes to manage the ensuing growth opportunities, as well as the other risks and challenges discussed under the caption
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634291_ihealthcar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634291_ihealthcar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e14e62834efde899c4d45e366075653b25409dc5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634291_ihealthcar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY In this Prospectus, "Ihealthcare,"the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to Ihealthcare, Inc., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending November 30. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 9, and the financial statements in their entirety, before making an investment decision. The Company The Company was originally incorporated with the name Opulent Acquisition, Inc., under the laws of the State of Delaware on November 25, 2014 with an objective to acquire, or merge with, an operating business. On January 14, 2016 Mr. Jeffrey DeNunzio, the sole shareholder of the Company, transferred to Ihealthcare, Inc., a Florida Company, 20,000,000 shares of our common stock which represented all of our issued and outstanding shares at the time of transfer, in consideration of $25,000. The transfer was the result of the sale of the Company to Ihealthcare, Inc., the Florida Company. On January 14, 2016 Ihealthcare, Inc., a Florida Company, became the controlling shareholder of Opulent Acquisition, Inc. At the time of the sale of Opulent Acquisition, Inc., Mr. Mijares owned 62.5% and Mr. Bingaman owned 37.5% of the issued and outstanding shares of Ihealthcare, Inc., the Florida Company. On January 14, 2016, Mr. Jeffrey DeNunzio resigned as Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director. On January 14, 2016, Mr. Noel Mijares was appointed as Chairman of the Board of Directors, Chief Executive Officer, and President. On January 14, 2016, Mr. David A. Bingaman was appointed as Chief Operating Officer, Vice President, and Secretary. On April 22, 2016 we, Opulent Acquisition, Inc. ("Ihealthcare, Inc.-Delaware") entered into and consummated a merger with Ihealthcare, Inc., a Florida Company ("Ihealthcare, Inc.-Florida"). Ihealthcare, Inc.-Delaware is the Surviving Corporation as result of the merger. The officers and directors of Opulent Acquisition, Inc., now known as Ihealthcare, Inc., remained the same and unchanged. Our officers and directors continue to serve their respective positions with the Company. The aforementioned merger was treated as a reverse merger between the two entities, both of which were, and still are, under common control. Previous to the Merger Noel Mijares owned 6,250 shares of common stock of Ihealthcare, Inc., the Florida Company and David A Bingaman owned 3,750 shares of common stock of Ihealthcare, Inc., the Florida Company. After the merger each one of these shares were converted into 100 shares of our common stock (Ihealthcare, Inc., a Delaware Company, formerly known as Opulent Acquistion, Inc). The 20,000,000 shares of common stock owned by Ihealthcare, Inc., a Florida Company of Ihealthcare, Inc., formerly known as Opulent Acquistion Inc., a Delaware Company were cancelled upon consummation of the merger. Currently, Noel Mijares owns 625,000 shares of our common stock and David A Bingaman owns 375,000 shares of our common stock. On April 22, 2016, the Company filed with the Delaware Secretary of State an amendment to the Company s certificate of incorporation, changing its name to Ihealthcare, Inc. On May 13, 2016 David A. Bingaman was appointed as Chief Financial Officer, Chief Accounting Officer, and Director. On July 25, 2016 we, Ihealthcare, Inc., organized Ihealthcare Surgical, LLC, a Florida Limited Liability Company. The members of the LLC include Ihealthcare, Inc., and All in 1 Medical, LLC. Each of the aforementioned parties own 50% of the membership interests in Ihealthcare Surgical, LLC. All in 1 Medical, LLC is owned and operated by Mark Heffner, who is a non-affiliate of Ihealthcare, Inc. As of August 31, 2016 Ihealthcare Surgical, LLC has not had any monetary transactions. Per the above the Company has applied ASC 323 for presentation and disclosure requirements. Because Ihealthcare Surgical, LLC conducted no monetary business as of August 31, 2016 there were no transactions recorded on the books for the period. On August 19, 2016 Ihealthcare Surgical, LLC, entered into and consummated a joint venture agreement with All In 1 Medical, LLC. The purpose of the joint venture agreement is to forge a relationship that through means, which will be determined at a future date, will bring together both parties in an effort to sell, to be determined, medical products. Each party retains a 50% interest in the joint venture. Each party has also agreed to split profits and expenses equally that relate to the joint venture. The term of the joint venture agreement is through August 4, 2026. It may be renewed for an additional five year term if agreed upon by both parties. Each party of the joint venture agreement has agreed to contribute $500 for business purposes set forth in the joint venture agreement. Neither party has, as of the date of this report, contributed the $500, however both parties intend to make such contribution after a joint bank account is opened up for the purpose of the joint venture. On October 3, 2016 Ihealthcare Surgical, LLC entered into and consummated an agreement with Precision Spine, Inc., "Precision," to act as Precision s sales agent in regards to the sale of spinal implants and other medical products that are manufactured for or by Precision. Ihealthcare, Inc. is to receive a 40% commission on the sale of spinal implants for the fourth quarter of 2016 and effective January of 2017, 35%, +5% each quarter if Ihealthcare is able to generate sales of $300,000 or more in a quarterly period. For "Biologic" products as they are categorized in the agreement, Ihealthcare will receive a to be decided upon commission that is agreed upon by both parties at a later date. Regarding disposable single use instruments, Ihealthcare, Inc. will receive a 20% commission for any sales generated on Precision s behalf. On October 10, 2016 our subsidiary, iHealthcare Surgical, LLC entered into an agreement with Gensano, LLC. Under the terms of the agreement iHealthcare Surgical, LLC will act as a sales agent for Gensano, LLC by attempting to sell products on their behalf. In this agreement iHealthcare Surgical, LLC will receive a sales commission which will be comprised of the difference between the price of Gensano s products and the actual cost at which iHealthcare Surgical manages to sell the products. Gensano has set a fixed cost, per product, that they must receive from the sale of each item. IHealthcare Surgical, LLC will not directly purchase products from Gensano, and all shipping will be conducted directly from Gensano to the customer. Our principal executive offices are located at 3901 NW 28th Street, 2nd Floor, Miami, FL 33142. Table of Contents In their audit report dated February 17, 2016, our auditors have expressed an opinion that substantial doubt exists as to whether we can continue as an ongoing business. Because officers and directors may be unwilling or unable to loan or advance any additional capital to us, we may be required to suspend or cease the implementation of our business plan. Our Offering The total number of shares of stock that the Corporation shall have authority to issue is 150,000,000, consisting of 143,500,000 shares of Common Stock, $0.0001 par value per share, and 6,500,000 shares of Preferred Stock, $0.0001 par value per share. The first Series of Preferred Stock is designated "Series A Preferred Stock" and consists of 1,500,000 shares. The second Series of Preferred Stock is designated "Series B Preferred Stock" and consists of 5,000,000 shares. Currently, we have 1,000,000 shares of Common Stock and no shares of Preferred Stock issued and outstanding. We will sell the 250,000 shares that we are registering herein at a fixed price of $0.25 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will receive all of the proceeds from this offering. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Company 250,000 shares of common stock, at a fixed price of $0.25 offered by the Company in a direct public offering. This fixed price applies at all times for the duration of this offering. This offering will automatically terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may, at our discretion, terminate the offering at any time. Offering price per share The Company will sell the shares at a fixed price per share of $0.25 for the duration of this Offering. Number of shares outstanding before the offering of common stock 1,000,000 common shares are currently issued and outstanding. Number of shares outstanding after the offering of common shares 1,250,000 common shares will be issued and outstanding. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $0.25 We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. Termination of the Offering This offering will automatically terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 250,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days or terminate the offering at any time. Registration Costs We estimate our total offering registration costs to be approximately $25,000. Risk Factors: See "Risk Factors" and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. *Our officers and directors, Noel Mijares and David A. Bingaman collectively own 100% of the shares of our outstanding capital stock. You should rely only upon the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. We are offering to sell common stock and seeking offers to common stock only in jurisdictions where offers and sales are permitted. The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634394_redwood_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634394_redwood_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ab8c05f9987e104011b8416b9e931d79ffcfe120
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634394_redwood_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1 1 fs12016_redwood.htm REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on February 12, 2016 Registration No. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 REDWOOD SCIENTIFIC TECHNOLOGIES, INC A Nevada Corporation 41-3165559 (State or Other Jurisdiction of Incorporation or Organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 250 W. First Street, Suite 310 Claremont, CA 91711 Tel: 310-693-5401 Copies to: Louis Taubman, Esq. Hunter Taubman Fischer, LLC 1450 Broadway, Floor 26 New York, New York 10018 Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this S-1 Registration Statement. You should carefully read the entire Registration Statement and should consider, among other things, the matters set forth in , ' ': , ' ': Risk Factors before deciding to invest in the Units. In this S-1 Registration Statement, unless the context otherwise requires, all references to "we, , ' ': , ' ': us, , ' ': , ' ': our, and similar terms, and "Redwood," "RST" and "the Company" refer to Redwood Scientific Technologies, Inc., a Nevada corporation and our wholly owned subsidiary Redwood Scientific Technologies, Inc., a California corporation. Our Business Redwood Scientific Technologies, Inc. was organized in January 2014 under the name Advanced Men's Institute Prolongz, LLC ("AMI") in the State of California and began selling its products in February 2014. In November 2014, AMI changed its name to Redwood Scientific Technologies, LLC. Immediately after the name change Redwood Scientific Technologies, LLC filed a statement of conversion whereby it converted from an LLC into a California corporation to become Redwood Scientific Technologies, Inc. This became the operating subsidiary to Redwood Scientific Technologies Inc., a Nevada Corporation (the "Company"), as a result of a share exchange on January 6, 2015. The Company develops and markets consumer homeopathic drugs and supplements. The Company utilizes patent-pending, sublingual strip delivery technology that enhances bioavailability. Currently, the Company has four products for sale or about to reach the market: ProlongzTM (FDA Registration # 69308-000-01) is the first drug of its kind that addresses a specific sexual performance dysfunction in men and is the only drug that can be taken orally through a sublingual strip; TBX-FreeTM (FDA Registration # 69461-001-01) is the first FDA registered oral strip that helps smokers safely, quickly, and effectively eliminate the craving to smoke; Product-X: The first sublingual strip delivery medication for the treatment of erectile dysfunction; and Comfort-Time: a children's aspirin is the only oral strip pain reliever that quickly reduces inflammation and the pain without the risk of chocking. All the company s products are sold either through a membership subscription model (a direct marketing program) or at any given number of retail locations. The Company develops and markets consumer homeopathic drugs and supplements. The Company utilizes patent-pending, sublingual strip delivery technology that enhances bioavailability. The Company s wholly owned subsidiary began operations in the first quarter of 2014 and the Company was incorporated in Nevada in December 2014. Through our subsidiary, we develop and market consumer OTC drugs and supplements that address unmet needs in the multi-billion-dollar health and wellness consumer markets. RST utilizes Patent-pending, sublingual strip delivery technology that enhances bioavailability. The Company s initial product, Prolongz, an Over-the-Counter drug, designed to treat premature ejaculation in men and management believes is the only such drug that can be taken orally through sublingual strip delivery. Prolongz has been registered with the FDA , ' ': # 69308-000-01 , allowing Redwood to elevate itself from its competitors. As of the date of this Registration Statement and based solely on our internal research, we believe that Prolongz is the only OTC drug registered with the FDA as useful treatment for premature ejaculation through our sublingual delivery mechanism. In the fourth quarter 2015, the Company launched its smoking cessation product TBX-FreeTM (FDA #69461-001-01), the first FDA registered sublingual strip that helps smokers safely and quickly eliminate the craving to smoke. As of the date of this Registration Statement and based on our research, we believe that TBX-FreeTM is the only nicotine free OTC drug registered with the FDA as useful treatment for the cessation of cravings to smoke. Redwood is on course to establish itself as the industry leader for both these products in their respective markets through its membership (subscription) model. The Company is aggressively trying to expand its customer population through heavy investments in national cable television commercials and infomercials which also drive consumer awareness and retail sales. The Company is also in the development phase for other products that address health concerns for adults and children, prostate health, and other health areas, all through the use of Company s patent pending sublingual delivery mechanism. All of Redwood s products will be centered on the innovative sublingual strip technology that the Company has developed. These products may include a product for prostate health, women s sexual health and others. The Company s launch timeline for these additional products is set for 2016. It is intended that all of RST s products, including those in the development pipeline will be submitted to the FDA registration process. CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered (1) Proposed maximum offering price per share (2) Proposed maximum aggregate offering price Amount of registration fee Common Stock (3) 2,355,146 2.25 5,299,078 533.62 Common Stock underlying Warrants (4) 1,707,127 2.25 3,841,035 386.79 Total 4,062,273 2.25 9,140,114 920.41 (1) Pursuant to Rule 416 and 457 of the Securities Act of 1933, as amended, the shares of common stock offered hereby also include such presently indeterminate number of shares of our common stock as shall be issued by the Registrant to the selling stockholders to prevent dilution resulting from stock splits, stock dividends or similar transactions. (2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(a). Our common stock is not traded on any national exchange and in accordance with Rule 457, the offering price was determined by the price of the shares that were sold to our shareholders in the Offering. The price of $2.25 is a fixed price at which the selling security holders shall sell their shares until they are quoted on the OTC Bulletin Board, after which time they will be sold at prevailing market prices; we are currently in the process of applying to have our common stock quoted on the OTC Bulletin Board. There can be no assurance that our application for quotation will be approved. (3) Includes: 1,529,445 shares of common stock underlying the Units issued in the Offering and 825,701 shares of common stock underlying $1,500,000 10% Secured Convertible Notes issued pursuant to the private placement we completed on March 2, 2015 (the "Private Placement"). (4) Includes: (i) 764,723 shares of common stock underlying the Warrants included in the Units; (ii) 761,421 shares of common stock underlying warrants issued pursuant to the secured convertible notes, including the shares of common stock issued pursuant to the anti-dilution provisions of such warrants; (iii) 180,983 shares of common stock underlying the warrants issued to the Placement Agents of
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634408_nextglass_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634408_nextglass_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8d5eb7d393d49c783d039fe11ff745f336367208
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634408_nextglass_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including "Risk Factors" and the financial statements and related notes, included elsewhere in this prospectus. The Company NextGlass Technologies Corporation (the "Company") is an early-stage company planning to produce and distribute glass products (which the Company calls "smart glass" solutions). The Company intends to make these products based on technology that is covered by patents that it purchased from SWIS Co. Limited. The Company was incorporated in the State of Delaware in January 2015, and was formerly known as Black Grotto Acquisition Corporation ("Black Grotto" or "Black Grotto Acquisition"). The Company is located at 9454 Wilshire Boulevard, Suite 612, Beverly Hills, California 90212. The Company s main phone number is (888) 588-7974. Business The Company plans to produce and distribute glass products (which the Company calls "smart glass" solutions). The Company intends to make these products based on technology that is covered by patents that it acquired from SWIS Co., Limited. The patents covered consist of 9 patents. Eight of these patents are registered in Korea, and one patent is registered in Taiwan. The Company plans to make smart glass solutions for many types of applications, including car windows, car sunroofs and airplane windows. The Company s smart glass solutions are expected to include adhesive film inside the smart glass, bullet-proofing, non-scattering effects, noise reduction, ITO-coated film, PDLC-coated Film and functional glass. The Company s smart glass solutions are intended to help users of the products control room temperature and change the color and the amount of light passing through the smart glass product. On April 28, 2016, the Company agreed to acquire SWIS Co., Ltd., based in Korea. SWIS Co. Ltd., holds as its principal asset a plant located in Seoul, Korea and conducts operations through the company s research and development department. Although the transaction was agreed between the parties on April 28, 2016 under Korean law, the change of ownership did not actually occur until August 10, 2016. On that date, August 10, 2016, the Korean government approved the acquisition of the third party company, SWIS Co., Ltd., which was in connection with the Share Exchange Agreement (the "Exchange Agreement") entered into on April 28, 2016. Pursuant to the Exchange Agreement, the Company purchased all 100,000 shares outstanding of SWIS Co., Ltd. SWIS Co., Ltd. was established on September 2, 2014. Its major business is to research and develop PDLC film and the technology associated with making smart glass. The technology of SWIS Co. Ltd. will be owned by the Company through the acquisition. In the future, the Company plans to raise additional funds in order to build its own factory and purchase machineries to manufacture the smart glass internally using the patented technologies acquired through SWIS Co. Ltd. There can be no assurances that the Company s efforts to develop its proposed smart glass solutions will succeed, or that the Company will be able to successfully market the proposed smart glass solutions, if developed. Risks and Uncertainties facing the Company As an early-stage company, the Company has limited operating history and is expected to continuously experience losses in the near term. The Company needs to increase its revenue or locate additional financing in order to continue its developmental plans. As a company in the early part of its life, management of the Company must build and market its initial construction and development plans in order to execute the business plan of the Company on a broad scale. The Company anticipates that it would need substantial funding in the future in order to continue as a going concern and expand its operations in accordance with its current business plan (which includes, but is not limited to, building its own factory and purchase machineries to manufacture the smart glass internally using the patented technologies acquired through SWIS Co., Ltd.). One of the biggest challenges facing the Company will be in securing adequate capital to acquire or develop its own factory and purchase its own machineries. Likewise, the Company will need to secure sufficient capital to develop, build, manufacture and commercialize the smart glass products that it intends to market and sell. The Company has not yet devised its initial sales, marketing and advertising strategy, and the Company will need to skillfully design, test, implement and refine this strategy over time in order to achieve success in its business. The Company anticipates that it will need to secure funding of approximately $2,500,000 in order to acquire or develop its own factory and purchase its own machineries. As discussed above, securing this capital is one of the biggest challenges facing the Company. Due to financial constraints and the early stage of the Company s life, the Company has to date conducted limited advertising and marketing to reach customers. In addition, the Company has not yet located the sources of funding to develop the Company on a broader scale. If the Company were unable to locate such financing and/or later develop strong and reliable sources of potential capital to grow and expand its business, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company s smart glass products and services (once developed, manufactured and commercialized) are consistently met with client satisfaction in the marketplace and exhibit steady success amongst the potential customer base, neither of which is reasonably predictable or guaranteed. Due to these and other factors, the Company s need for additional capital, the Company s independent auditors have issued a report raising substantial doubt of the Company s ability to continue as a going concern. Trading Market Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible, which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board. See "RISK FACTORS" and "DESCRIPTION OF SECURITIES". The Offering The maximum number of Shares that can be sold pursuant to the terms of this offering is 2,500,000. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier fully subscribed or terminated by the Company. This prospectus relates to the offer and sale by certain shareholders of the Company of up to 2,500,000 Shares (the "Selling Shareholder Shares"). The selling shareholders, who are deemed to be statutory underwriters, will offer their shares at a fixed price of $1.00 per share for the duration of the offering. Common stock outstanding before the offering 10,000,000(1) Common stock for sale by selling shareholders 2,500,000 Common stock outstanding after the offering 10,000,000 Offering Price $1.00 per share Proceeds to the Company $0 (1) Based on number of shares outstanding as of the date of this prospectus. Summary Financial Information The statements of operations data for the period from January 12, 2015 (inception) to December 31, 2015, and the balance sheet data as of December 31, 2015, are derived from the Company s audited financial statements and related notes thereto included elsewhere in this prospectus. The statement of operations data for the period from January 1, 2016 to June 30, 2016, and the balance sheet as of June 30, 2016, provided below are derived from the unaudited financial statements and related notes thereto included elsewhere in this prospectus. January 1, 2016 January 12, 2015 to (inception) to June 30, 2016 December 31, 2015 (unaudited) Statement of operations data Revenue $ 0 $ 0 Gross profit $ 0 $ 0 Income (Loss) from operations $ (144,543 ) $ (7,493 ) Net income (loss) $ (147,608 ) $ (7,493 ) At June 30, 2016 At December 31, 2015 (unaudited) Balance sheet data Cash $ 126,089 $ 57,219 Other assets $ 341,187 $ 0 Total assets $ 467,276 $ 57,219 Total liabilities $ 613,965 $ 61,000 Total shareholders equity (deficit) $ (146,689 ) $ (3,781 ) History In June 2015, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company s name from Black Grotto Acquisition Corporation to NextGlass Technologies Corporation in May 2015.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634421_ogl_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634421_ogl_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4de17f894dbcf627d8c2faa977d25db8a39e104a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634421_ogl_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including "Risk Factors" and the financial statements and related notes, included elsewhere in this prospectus. The Company History OGL Holdings Ltd. (the "Company") is an early-stage ecologically conscious company formed to design, build and manage an ecological theme park showcasing agriculturally advanced technologies and to produce organic agricultural food utilizing such technology for efficient and non-destructive production. Rapid growth, ecological ignorance, and corporate indifference are things that the Company believes have contributed to the major pollution situation facing China. The Company believes that China is just beginning to develop environmental and ecological programs and the Company intends to help educate and advance these new programs. The agricultural theme park will provide visitors fun attractions and exhibitions including hand picking fruit, seeing high-tech greenhouse cultivation as well as theme park type amusements. The park will provide visitors the opportunity to see the layout and operation of a high-tech smart greenhouse for organic plant cultivation and then use these models for their farms and greenhouses. The Company was incorporated in the State of Delaware in January, 2015, and was formerly known as Red Grotto Acquisition Corporation. In March, 2015, Red Grotto Acquisition Corporation filed a registration statement with the Securities and Exchange Commission on Form 10 by which it became a public reporting company. In September, 2015, the Company implemented a change of control by redeeming shares of existing shareholders, issuing shares to new shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company s name from Red Grotto Acquisition Corporation to OGL Holdings Ltd. Business The Company has two major goals: to start agricultural tourism by providing the leading industry theme park; and to produce organic agricultural food using advanced efficient and non destructive production technology The Company plans to design, build and manage an ecological theme park showcasing agriculturally advanced technologies and to produce organic agricultural food utilizing such technology for efficient and non-destructive production. The agricultural theme park will provide visitors fun attractions and exhibitions including fruit picking by hand, high-tech greenhouse cultivation as well as theme park type amusements. The park will also provide visitors the opportunity to see the layout and operation of a high-tech smart greenhouse for organic plant cultivation. The park will be built in accordance to green, organic and effective planting and infrastructure. Risks and Uncertainties facing the Company As a development stage company, the Company has no operating history and has continuously experienced losses since its inception. The Company s independent auditors have issued a report questioning the Company s ability to continue as a going concern. That is, the Company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the Company has no prior experience in building and selling projects similar to that planned by the Company and in marketing and distributing such projects on a broad scale. One of the biggest challenges facing the Company is the ability to raise adequate capital to develop and execute project opportunities in the building of theme parks and in the production of organic food products. Due to financial constraints, the Company has to date conducted limited operations. If the Company were unable to develop strong and reliable sources of funding for project opportunities, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company s efforts are met with customer satisfaction in the marketplace and exhibit steady adoption of its solutions amongst the potential base of customers, neither of which are currently known or guaranteed. Trading Market Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board. The Offering The maximum number of Shares that can be sold pursuant to the terms of this offering is 1,722,000. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier terminated by the Company. This prospectus relates to the offer and sale of 1,722,000 shares of common stock of OGL Holdings Ltd. offered by the holders thereof who are deemed to be statutory underwriters. The selling shareholders will offer their shares at a price of $4.50 until such time as the Shares are quoted on the OTC Bulletin Board and only thereafter at prevailing market or privately negotiated prices in one or more transactions that may take place by ordinary broker's transactions, privately-negotiated transactions or through sales to one or more dealers for resale or at prevailing market if a market should develop. Common stock outstanding before the offering 21,222,000 (1) Common stock for sale by selling shareholders 1,722.000 Common stock outstanding after the offering 21,222,000 Offering Price $ 4.50 Proceeds to the Company $0 (1) Based on number of shares outstanding as of the date of this prospectus. In the future, following the completion of this offering, the Company most likely will need to raise capital for the projects which it anticipates to develop. The Company anticipates that it may raise such capital by an offering of its shares of common stock. If the Company does affect equity offerings of its securities and if the price paid for shares offered in such an offering is less than paid by the purchasers of Shares, then such purchasers will suffer a dilution in the value of their shares. Furthermore the issuance of such additional shares may impact the ability of any investor to sell their Shares once such shares are eligible for sale. The Company cannot anticipate that it will be able to affect such additional offerings of its securities and then failure of it to do so may severely impact its available capital to develop any of its ecological or organic food products. Or further its business plan. SUMMARY FINANCIAL INFORMATION The following table provides summary financial statement data as of the fiscal year ended December 31, 2015. The financial statement data as of the fiscal year ended December 31, 2015, has been derived from our audited financial statements. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period. The data set forth below should be read in conjunction with "Management s Discussion and Analysis of Financial Condition and Results of Operations," our financial statements and the related notes included in this prospectus, and the statements and related notes included in this prospectus. BALANCE SHEET As of December 31, 2015 Total Assets $0.00 Total Liabilities $0.00 Stockholders Equity $113,241 OPERATING DATA Year Ended December 31, 2015 Revenue $0.00 Net Loss $113,241 Net Loss Per Share $0.005
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634447_isun-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634447_isun-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634447_isun-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001634933_help_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001634933_help_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..72b792ec166678c42c20226ccca92a425fce8628
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001634933_help_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information from this prospectus and may not contain all the information that is important to you. To understand our business and this offering fully, you should read this entire prospectus carefully, including the financial statements and the related notes beginning on page F-1. This prospectus contains forward-looking statements and information relating to Help International, Inc. See Cautionary Note Regarding Forward Looking Statements on page 9. Our Company The Company was formed on October 3, 2014 in the State of Nevada under the name Help Worldwide. On March 30, 2016 the name was changed to Help International, Inc. The Company has no operating history other than organizational matters. The Company is an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act. The Company is a Shell Company as defined in the Exchange Act of 1934. The Company is a separate and distinct company from Help Worldwide, Inc. in Delaware. The Company is seeking to become a publicly traded company to raise substantial capital for its business operations. It intends to file a Form 8-A to register its common stock under the Exchange Act. The Company has no current plans, arrangements, discussions or intentions, whether written or oral, to engage in a merger or acquisition with an identified or unidentified company or a person to be used as a vehicle for a private company to become a reporting company. Business Strategy Help International, Inc. may license technology that will revolutionize the way consumer loyalty is tracked, rewarded and distributed for the benefit of non-profit organizations across the world. The core business of Help International, Inc. will allow members (consumers), merchants, and non-profit organizations to join together in creating real change. Centered on a coopetition business model, Help International, Inc. intends to be a global network of socially-conscious consumers, businesses that want to make a difference, and charities seeking to support important causes around the world. HELP stands for the Humanitarian Empowerment Loyalty Program and its goal is to help support humanity by generating charitable donations with everyday shopping. With this goal in mind, the Help International, Inc. executive management team intend to create a new kind of loyalty and rewards membership, incorporating points, discounts, rewards, and charitable giving within one ultimate rewards package. With a Help International, Inc. Membership, members will be able to earn points, discounts, deals, rewards, and cash back all while supporting the charity that is close to their heart. By joining Help International, Inc., members are able to support charitable causes in their local communities and/or globally with every transaction at a participating merchant. Our executive offices are located at 21050 Centre Pointe Parkway, Santa Clarita, CA 91350. Our telephone number is (661) 286-4334. The Offering This prospectus covers up to 20,000,000 shares to be issued and sold by the company at a price of $0.50 per share in a direct public offering. ABOUT THIS OFFERING Securities Being Offered Up to 20,000,000 shares of common stock of Help International, Inc. to be sold by the company at a price of $0.50 per share. Initial Offering Price The company will sell up to 20,000,000 shares at a price of $0.50 per share. Terms of the Offering The company will offer and sell the shares of its common stock at a price of $0.50 per share in a direct offering to the public. Termination of the Offering The offering will conclude when the company has sold all of the 20,000,000 shares of common stock offered by it up to a maximum of 360 days. The company may, in its sole discretion, decide to terminate the registration of the shares offered by the company.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001635136_duo-world_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001635136_duo-world_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..69566a8b29532c614ed69f148ccffa75d448552e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001635136_duo-world_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the detailed information contained under the heading "Risk Factors," the financial statements and the accompanying notes to those financial statements included elsewhere in this prospectus. The Company Overview Duo World, Inc. is an information technology and software solutions company, focused on bringing value to its clients through every customer interaction. Duo World specializes in subscription management and billing solutions, and customer lifecycle management solutions. Duo World s business model allows us to deliver consistent, quality service, at a scale and in the geographies that meet our clients business needs. We leverage our breadth and depth of capabilities to help companies create quality customer experiences across multiple channels, while increasing revenue and reducing their cost to serve their customers. Duo World was formed as a Nevada corporation in 2014 for the purpose of acquiring (i) Duo Software (Pvt.) Limited, a Sri Lankan company, from Mr. Muhunthan Canagasooryam, Duo World s President and founder, in exchange for 28,000,000 shares of our Common Stock and 5,000,000 shares of our Series A Preferred Stock; and (ii) Duo Software (Pte.) Limited, a Singaporean company, from Ms. Koshala Nishaharan, in exchange for 2,000,000 shares of our Common Stock. The acquisition of Duo Software (Pte.) Limited also included that company s wholly-owned subsidiary, Duo Software India (Private) Limited, an Indian company. These acquisitions were accomplished as of December 3, 2014. The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED __________, 2016 PROSPECTUS Duo World Inc. 8,567,467 Shares of Common Stock Duo World, Inc. is registering an aggregate of 8,567,467 shares of our common stock to be sold, from time to time, by one or more of the selling shareholders, none of whom is an officer or director of Duo World, Inc. The selling shareholders may only sell their shares of our common stock using this prospectus at $1.00 per share until o ur shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. The proceeds from the sale of the selling shareholders shares will go directly to the selling shareholders and will not be available to us. The selling shareholders and any broker/dealer executing sell orders on behalf of the selling shareholders are "underwriters" within the meaning of the Securities Act of 1933, as amended. Currently, no public market exists for our common stock. We will seek to have a market maker publish quotations for our common stock on the OTC Bulletin Board ("OTCBB"), which is maintained by the Financial Institutions National Regulatory Authority. However, we have no agreement or understanding with any potential market maker to do so. We cannot assure you that a public market for our common stock will develop. Ownership of our common stock is likely to be an illiquid investment. Investing in our common stock involves a high degree of risk. We urge you to read the "Risk Factors" beginning on page 4. Brokers or dealers effecting transactions in these shares should confirm that the shares are registered under the applicable state law or that an exemption from registration is available. We are an "emerging growth company" as that term is defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act") and, as such, we have elected to comply with certain reduced public company reporting requirements permitted by the JOBS Act. See "Prospectus Summary – Implications of Being an Emerging Growth Company." Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. __________________, 2016 Our Business and Products We are an information technology and software solutions company. As a result of the acquisitions described above, we specialize in subscription management and billing solutions ("SMBS") and customer lifecycle management solutions ("CLM"). We cater our products to organizations with small to large-scale operations in diverse industries and support subscription management, recurring billing, invoicing, customer life cycle management and contact (call) center operations. Our SMBS solution caters to clients across industries such as local newspaper distributors and car rental companies, who have a small subscription bases, and also to large telecom operators, who have large subscriber bases. It is a scalable and reliable system with the ability to scale up or down to satisfy our client s needs. Previously, Duo Software Sri Lanka commercially launched two enterprise software applications known as DuoSubscribe Version 4.9 (SMBS) and DuoCLM Version 4.9 (CLM). Since their releases, these products have been marketed mainly in the South East Asian region (India, Maldives, Nepal, Sri Lanka and the Middle East) to companies in banking (Bank of Ceylon and DFCC Vardhana Bank PLC), payment clearing (LankaClear (Pvt) Ltd.), insurance (Amana Takaful Insurance), retail (Singer Sri Lanka), Pay TV (Topas TV, PT. Megamedia Indonesia and DEN Networks), telecommunications (Hutchison Telecommunications), travel agencies (Classic Travels, one of the leading travel agencies in Sri Lanka), airline (Sri Lankan Airlines, the national carrier of Sri Lanka) and business process outsourcing partners (Hello Corp.). DuoSubscribe, specializes in invoicing customers on a monthly/recurring basis and managing the services of the customer. DuoSubscribe is currently offered as an enterprise or on premises solution. We intend to offer a significantly enhanced model of DuoSubscribe, called CloudCharge, as a cloud based, Software-as-a-Service ("SaaS") solution, by the end of October 2016. DuoCLM (also called Duo Contact), is designed to manage the entire customer life cycle from the initial contact point with a customer to after sales support. DuoCLM is currently offered as an enterprise or on premises solution to large organizations that have dedicated customer support/call centers to maintain their customer relationships. We intend to offer a significantly enhanced model of DuoCLM, called FaceTone, as a cloud based ("SaaS") solution, by the end of October 2016. We will be commercially launching some additional products (CloudCharge, CloudCharge-Pay TV, FaceTone, Veery, DigIn and SmoothFlow) by the end of October 2016. Most of our product development, research and development, global support center, project management, business process and implementation, finance and treasury and human resource management functions are conducted and managed through Duo Software Sri Lanka. Duo Software Singapore was established primarily for the purpose of marketing of our enterprise versions DuoSubscribe and DuoCLM. Duo Software Singapore has been highly instrumental in generating successful sales leads through its presence at trade exhibitions and in following up sales leads. Duo Software India was established for the purposes of having a dedicated sales team in India to promote and support our enterprise versions of DuoSubscribe and DuoCLM, which we developed for the robust Pay TV and subscription industry in India. India is the world s second most populated country and has a large number of Pay TV operators in the subscription economy in India. Duo Software India has been successful in penetrating the Pay TV industry, and enterprise versions of DuoSubscribe and DuoCLM are being employed as the operation platform by some of the dominant Pay TV operators in New Delhi and Kolkata, India, such as DEN Networks Limited, India s largest cable TV distribution company serving 13 million homes in over 200 cities. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. Where You Can Find Us Our principal executive offices in the United States are located at 170 S. Green Valley Parkway, Suite 300, Henderson, Nevada 89012. Our U.S. telephone number is (870) 505-6540. Our primary overseas offices are located at c/o Duo Software (Pvt.) Ltd., No. 403 Galle Road, Colombo 03, Sri Lanka. Our overseas telephone number is + (94) 112 375 000. Implications of Being an Emerging Growth Company We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 or "JOBS Act." We will remain an emerging growth company until the earlier of (1) December 31, 2021 (the last day of the fiscal year following the fifth anniversary of the first sale of common stock in this offering), (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, (3) the last day of the fiscal year in which we are deemed to be a "large accelerated filer," as defined in the Securities Exchange Act of 1934, and (4) the date on which we have issued more than $1.0 billion in nonconvertible debt during the prior three-year period. As an emerging growth company, we may take advantage of reduced or "scaled" disclosure requirements that are otherwise applicable to public companies. These reduced or scaled disclosure requirements include, but are not limited to: 1. being permitted to present only two years of audited financial statements and only two years of related "Management s Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus; 2. not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; 3. being able to take advantage of the reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and 4. being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies that are not emerging growth companies. The JOBS Act also provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected to not avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Compliance after Termination of Emerging Growth Company Status After our emerging growth company status is terminated, we will not be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 1. and 4., above. However, in the event we are a "smaller reporting company," as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, after our emerging growth company status has terminated, we will still be able to take advantage of the reduced or scaled disclosure requirements described in subparagraphs 2. and 3., above, for as long as we continue to have smaller reporting company status. THE OFFERING Securities Being Offered Up to 8,567,467 shares of Common Stock. Initial Offering Price The selling shareholders will sell our shares at $1.00 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. This price was arbitrarily determined by our board of directors and may not be indicative of the real value of a share of our Common Stock. Terms of the Offering The selling shareholders will determine when and how they will sell their Common Stock offered in this prospectus. TABLE OF CONTENTS GENERAL 1 PROSPECTUS SUMMARY 1 RISK FACTORS 4 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 16 TAX CONSIDERATIONS 16 USE OF PROCEEDS 16 DETERMINATION OF OFFERING PRICE 16 DILUTION 17 SELLING SHAREHOLDERS 17 PLAN OF DISTRIBUTION 18 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS 23 DESCRIPTION OF SECURITIES 24 INTERESTS OF NAMED EXPERTS AND COUNSEL 26 LEGAL REPRESENTATION 26 EXPERTS 27 STOCK TRANSFER AGENT 27 DESCRIPTION OF BUSINESS 27 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 34 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34 DIRECTORS AND EXECUTIVE OFFICERS 46 EXECUTIVE COMPENSATION 56 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 57 MARKET PRICE FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS 60 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 60 SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION WHERE YOU CAN FIND MORE INFORMATION 60 FINANCIAL STATEMENTS 62 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT. Termination of the Offering The offering will conclude when all of the 8,567,467 shares of Common Stock have been sold or we, in our sole discretion, decide to terminate the registration of the shares. We may decide to terminate the registration if it is no longer necessary due to the operation of the resale provisions of Rule 144 promulgated under the Securities Act of 1933, as amended. We also may terminate the offering for no reason whatsoever.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001635804_oilfield_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001635804_oilfield_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..23e771fc731e35eb27268ae9ddceec8cd0df3ec3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001635804_oilfield_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this Prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire Prospectus, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. In this Prospectus, the terms "OILFIELD" "Company," "we," "us" and "our" refer to Oilfield Safety Holdings Inc. OVERVIEW We are a for-profit company, and electing a fiscal year end of December 31. We were incorporated in the State of Nevada on December 29, 2014, under the name of Oilfield Safety Holdings Inc. Oilfield Safety Holdings Inc. is a company with a limited history. The company will sell one product: a mobile evaporative cooling trailer called Kool-Breez (herein after Kool-Breez). GENERAL INTRODUCTION Oilfield Safety Holdings Inc. is an assembly company that intends to provide one (1) product to consumers: a mobile evaporative cooling trailer that is an 83" by 16' foot cooling trailer called Kool-Breez. We expect to continue to incur losses for at least the next 12 months. We do not expect to generate revenue that is sufficient to cover our expenses, and we do not have sufficient cash and cash equivalents to execute our plan of operations for at least the next 12 months. We will need to obtain additional financing, through equity security sales, debt instruments and private financing, to conduct our day-to-day operations, and to fully execute our business plan. We plan to raise the capital necessary to fund our business through the sale of equity securities, debt instruments or private financing. (See "Plan of Operation"). Taking into account that our Company is a new startup and is without an established income stream and/or profit and loss statement and has sold 7 Kool Breeze units , the estimated annual burn rate for the operating plan is projected during the first fiscal year, without due consideration for adjustment is $85,000. This includes a three month burn, in cash; of $13,500 (at $4,500 per month) considering the company encounters a bad quarter during its first year in business. In addition to the $85,000 needed for the operating plan, the company will need approximately $10,000 for the costs of this offering and subsequent public company compliance. Mr. Smoot our president and major shareholder has agreed to fund the Company through a written agreement until such time as the Company raises $85,000 for the operating plan and $10,000 for registration expenses. The agreement calls for Mr. Smoot to charge six (6) percent interest for the loaned funds. Our independent auditors have added an explanatory paragraph to their report of our audited financial statements for the period from December 29, 2014, (inception) to December 31, 2014, stating that our accumulated loss of $715, lack of substantial revenues and dependence on our ability to raise additional capital to continue our business, raise substantial doubt about our ability to continue as a going concern. Our financial statements and their explanatory notes included as part of this Prospectus do not include any adjustments that might result from the outcome of this uncertainty. There is no guarantee that we will be able to raise funds through equity security sales, debt instruments, and private financing. Currently, we have no agreements in place to raise money through debt instruments or private financing. If we fail to obtain additional financing, either through an offering of our securities or by obtaining loans, we may be forced to cease our planned business operations altogether. Presently, other than Mr. Smoot, no other sources of financing have been identified and it is unknown if any other sources will be identified. There is no assurance that the Company will be able to obtain any bank loans or private financing. Since our inception on December 29, 2014, through September 30, 2015, we have incurred cumulative losses of $29,970. INITIAL SALES STRATEGY We have established a two -prong sales approach; our approach utilizes direct sales to oil drilling companies through Shawn Smoot, and the company will use its website to sell to the general public. Our direct sales will be conducted by Shawn Smoot. He will market the product locally in Oklahoma and Northern Texas area to oil drilling companies. His current marketing strategy consists of various Point of Sale materials, including posters and flyers developed by Mr. Smoot over the last several years. The company will utilize the second prong of its sales approach through the internet when funds become available to complete the website. We intend to derive income from these sales and our goal is to establish brand recognition. Mr. Shawn Smoot is the Chief Executive Officer, President, (Principal Executive Officer) and Director. Currently the company has one employee; Shawn Smoot, however as it grows, it plans to employ additional employees as needed. DESCRIPTION OF PROPERTY Our corporate office is located at 1507 N. 1st Street, McAlester Oklahoma 74501. Oilfield Safety Holdings Inc. occupies office/warehouse space that is being provided to the Company on a sublease basis from Mobile Safety Innovations, for $14,400 over a 12 month period beginning January 1, 2015. The warehouse space consists of 2,500 square feet in two separate buildings at the location. There are currently no proposed programs for renovation, improvement or development of the facility currently in use. PRINCIPAL OPERATIONS OF THE COMPANY Oilfield Safety Holdings Inc. is an assembly company that intends to provide one (1) product to consumers: a mobile evaporative cooling trailer that is a 83" by 16' foot cooling trailer called Kool-Breez. Presently, Mobile Safety Innovations purchases the component pieces of machinery and assembles the unit for us at our leased space in McAlester Oklahoma for $13,343 per unit, Mobile Safety Innovations also bills the customers for the trailers because they are licensed by the state of Oklahoma as a trailer dealer. Funds are paid by the customer directly to Oilfield Safety Holdings, Inc. Mr. Smoot to date has sold 7 Kool Breeze units for a total of $97,904. When funds permit the company will purchase the component pieces of machinery, assemble the units and use its own transportation license. Oilfield Safety Holdings has a pending application with the Department of Motor Vehicles for a Seller license. The cooling trailer is a self-contained, fully equipped cooling system that allows people to sit in and escape the outdoor heat by lowering temperatures as much as 30 degrees. The cooling trailers are designed to aid in the relief of heat stress in outdoor work sites. The cooling trailer is made up of several component pieces of machinery that are assembled into a finished product . The cooling trailer will have two 3,500 lb axles, brakes with a breakaway kit, 12,000 lb jack, two 5/16 adjustable cast coupler, 3 x 2 Angle cross members, 5" Channel frame and tongue, 5" Boxed flush floor, all lights sealed rubber mounted in frame and 225/75/15 8 ply tires with spare. The system will use an evaporating cooling system and a 325 gallon water tank. The cooling trailer will be sold to the customers at a price of approximately $13,986. Since our inception on December 29, 2014 through September 30, 2015 we have incurred cumulative losses of $29,970 . Achievement of our business objective is basically dependent upon the judgment, skill and knowledge of our management. Mr. Smoot is currently our sole executive officer and director. There can be no assurance that a suitable replacement could be found for any of our officers upon their retirement, resignation, inability to act on our behalf, or death. RISK FACTORS The Company's financial condition, business, operation and prospects involve a high degree of risk. You are urged to carefully read and consider the risks and uncertainties beginning on page 9 of this Prospectus entitled Risk Factors as well as the other information in this report before deciding to invest in our company. All known materials risks are discussed in the Risk Factors section of this Prospectus. If any of the risks beginning on page 9 of this Prospectus entitled "Risk Factors" are realized, our business, operating results and financial condition could be harmed and the value of our stock could go down. This means that our stockholders could lose all or a part of their investment.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001637348_us-export_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001637348_us-export_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b3b35daed2468eb06660ba6c0046c68f799b536f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001637348_us-export_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 usep020116s1a.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 US EXPORT, INC. (Exact name of registrant as specified in its charter) New York 6512 45-5138547 (State or other jurisdiction of incorporation) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number 160 Kerns Avenue Buffalo, New York, 14211 Tel. No.: (716) 200 1162 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Copies to: Law Offices of Scott D. Marchant, Esq. 5373 Transit Road Williamsville, New York 14221 If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price Per Share (2) Proposed Maximum Aggregate Offering Price (2) Amount of Registration Fee Common stock, no par value per share (the "Common Stock")(1) 4,338,500 $1.00 $4,338,500 $504.13 Total 4,338,500 $4,338,500 $504.13 This registration statement covers the resale by our selling shareholders of up to 4,338,500 shares of Common Stock previously issued to such selling shareholders.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001637666_optiv-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001637666_optiv-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..64aca185dcc6b536162748cb5ae0512e1173086c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001637666_optiv-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in shares of our common stock. You should read this entire prospectus carefully, including the section entitled Risk Factors and the financial statements and the related notes thereto included elsewhere in this prospectus, before you decide to invest in shares of our common stock. OPTIV INC. Overview We are a market-leading provider of end-to-end cyber security solutions, ranked in the top 10% of solution providers by revenue according to the CRN Solution Provider 500. We exclusively focus on cyber security and leverage our proprietary technologies, intellectual property, third-party products, market intelligence and scalable platform to provide comprehensive and optimized solutions to our clients. Our team of over 1,700 employees includes over 1,300 cyber security experts who plan, build and run cyber security programs tailored to our clients needs. Through our strong partnerships with over 400 established and emerging security software providers and hardware manufacturers, we offer our clients a broad portfolio of cyber security products and services, along with strategic advice and ongoing management of their security infrastructure. The broad portfolio of products and services available to us allows us to be vendor-agnostic, in that we are free to select the products and services we believe best meet our clients needs, rather than being compelled to sell products we develop internally or that are supplied by a limited pool of available vendors. Formed through the merger of Accuvant and FishNet Security, we believe we are the largest pure-play, vendor-agnostic cyber security solutions provider in North America more than five times larger than our next-largest comparable competitor based on 2014 revenue and the CRN Solution Provider 500 list. Over the past three years, our diversified, blue-chip client base has included 71 of the Fortune 100 and 604 of the Fortune 1000, and we have served over 7,500 clients in 76 countries. Cyber attacks have impacted nearly every organization, placing cyber security as a top priority for senior executives and boards of directors. Cyber attacks continue to increase and have evolved into highly sophisticated global, automated and organized attacks by criminal syndicates and nation-states that have resulted in significant reputational, financial and political damage. These attacks are frequent, visible and costly. In addition, technology trends, such as cloud computing, mobility and the Internet of Things ( IoT ), are driving organizations to rethink their security framework to protect against new entry points of attack. Historically, organizations have responded to cyber crime tactically by purchasing more point solutions. Over the past five years, the number of publicly-traded cyber security point-solution vendors has more than doubled, and, according to a July 2016 report from CB Insights, $10.9 billion was invested in over 1,200 private cyber security startups from 2012 to July 2016, making the landscape more fragmented and confusing for organizations. Despite more spending on fragmented solutions, cyber crime incidents continue to accelerate in frequency. We believe technology alone is not the solution and that organizations realize that they need a strategic, programmatic approach to cyber crime. This involves developing a plan, implementing products and services and continuously monitoring and adapting that plan based on new threat intelligence. Organizations increasingly want a single provider to plan, build and run their comprehensive security environment and combine point offerings from various providers into an integrated, holistic solution. We solve this problem for our clients through our comprehensive, consultative and unified approach to cyber security. As their trusted advisor, we believe our clients view us as an extension of their own teams and rely on our expertise in designing and executing security programs that are aligned with their business objectives. Our end-to-end integrated security solutions address every major domain of cyber security. We have two reportable segments: Security Technology and Security Services. Through our Security Technology business, we provide our clients a complete range of security product advice and services, including client needs analyses, product evaluation and testing, product procurement and security vendor management. We also help implement Table of Contents The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and neither we nor the selling stockholders are soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to completion, dated November 18, 2016 Preliminary Prospectus Shares [Graphic] Optiv Inc. COMMON STOCK Optiv Inc. is offering shares of common stock and the selling stockholders are offering shares. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share. We have applied to list our common stock on the New York Stock Exchange under the symbol OPTV. After the completion of this offering, our Sponsors (as defined herein) will continue to own a majority of the voting power of shares eligible to vote in the election of our directors. As a result, we will be a controlled company within the meaning of the corporate governance standards of the NYSE. See Management Controlled Company Exception and Principal and Selling Stockholders. We are an emerging growth company under the federal securities laws. Investing in our common stock involves risks. See Risk Factors beginning on page 17. PRICE $ A SHARE Price to Public Underwriting Discounts and Commissions(1) Proceeds to Optiv Proceeds to Selling Stockholders Per Share $ $ $ $ Total $ $ $ $ (1) See Underwriting (Conflicts of Interest) for additional information regarding underwriting compensation. The Selling Stockholders have granted the underwriters the right to purchase up to an additional shares of common stock to cover over-allotments. The Securities and Exchange Commission and state securities regulators have not approved or disapproved of the securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of common stock to purchasers on , 2016. MORGAN STANLEY GOLDMAN, SACHS & CO. BARCLAYS CITIGROUP Blackstone Capital Markets Raymond James William Blair Evercore ISI Guggenheim Securities PJT Partners LP , 2016 Table of Contents subsidiary of Optiv, simultaneously merged with and into Accuvant and FishNet Security, respectively, with Accuvant and FishNet Security surviving their respective mergers. Accuvant is our predecessor for accounting purposes. This prospectus includes audited financial statements of FishNet Holdings, Inc. for the fiscal years ended December 31, 2014 and 2013. The only differences of note between the financial statements of FishNet Holdings, Inc. and the financial statements of its parent, Firewall, are a result of certain indebtedness incurred by Firewall, all of which was repaid in connection with the FishNet Security Merger (as defined herein). Investment funds associated with or designated by The Blackstone Group L.P., our current majority owners following the Accuvant/Blackstone Transaction (as defined herein), are referred to herein as Blackstone, Blackstone and affiliates of Investcorp Bank BSC ( Investcorp ) and Sverica International Investment Fund III LP ( Sverica ) are referred to as our Sponsors and our Sponsors, together with the other owners of Optiv Inc. prior to this offering, are collectively referred to as our pre-IPO owners. See Management s Discussion and Analysis of Financial Condition and Results of Operations Significant Transactions for a description of the Accuvant/Blackstone Transaction and the FishNet Security Merger. Unless indicated otherwise, the information included in this prospectus assumes no exercise by the underwriters of their over-allotment option to purchase up to an additional shares of common stock from the selling stockholders and that the shares of common stock to be sold in this offering are sold at $ per share of common stock, which is the midpoint of the price range indicated on the front cover of this prospectus. Table of Contents and integrate these products into their networks. Our Security Services business consists of security consulting, security operations, managed security services ( MSS ), incident response, support services and strategic staffing. We manage and monitor our clients security operations 24x7 from our three security operations centers ( SOCs ). Through our security consulting business, we advise clients on designing and executing an overall security strategy, which utilizes our knowledge base of the threat landscape and available solutions. At the core of our platform are our proprietary technologies, processes and intellectual property ( IP ) that serve as the foundation for our integrated businesses. We are well-positioned to understand all of the components of a security strategy problems, threats, issues, options, products and techniques because of the depth and breadth of our platform and our lifecycle approach to serving clients. We apply the insights gained from one client situation to other clients in similar situations, which allows us to quickly multiply our insights and advice. As we accumulate more data and greater insights, we better serve our clients over time through the information we obtain and reinforce our value to clients and vendor partners. Our vendor partner ecosystem includes over 400 established and emerging cyber security software providers and hardware manufacturers, giving us access to thousands of technology options for our clients. We objectively evaluate new technologies as they become available to ensure that our cyber security experts are able to identify the appropriate solutions for each client. We also provide our clients with commercial insights in the form of consultations, workshops, technology reviews, research results, best practices and visibility into integration and interoperability with multi-vendor technologies. Our role in designing our clients emerging security infrastructure positions us to evaluate new technologies and establish early relationships with product vendors. We deploy a differentiated client engagement model designed to manage and grow client relationships and guide our clients to plan, build and run successful programs. We have a large team of multi-disciplined, client-facing personnel that brings clients valuable capabilities and team extensions. We design our teams around our clients and provide expertise and engagement throughout the lifecycle of projects. As of September 30, 2016, we had over 1,700 employees, with over 1,300 security experts, including over 290 client managers and over 250 client advisors. Our Office of the CISO offers our clients advisory services from seasoned Chief Information Security Officers ( CISOs ) and subject-matter expert advisors who help create security strategies and provide industry-wide thought leadership and best practices. We address every major cyber security domain, spanning multiple levels of engagement, largely due to the diverse experiences of our people. We employ ex-CISOs, white hat hackers, engineers, architects, strategists, researchers, developers and compliance experts. Together, we have served over 7,500 clients over the past three years. We have been successful in expanding our business with clients over time. Over the six years ended September 30, 2016, on average, our returning clients have spent nearly twice as much with us in the second year of our relationship. On an historical basis, without giving effect to the FishNet Security Merger for the period from January 1 to January 28, 2015, our revenue for the year ended December 31, 2015 was $947.3 million and our revenue for the nine months ended September 30, 2016 was $643.8 million. We are in the process of assessing the impact of Accounting Standards Update ( ASU ) No. 2014-09, Revenue from Contracts with Customers ( ASU 2014-09 ), on our consolidated financial statements. Our assessment is not complete. However, if there were a change from presenting all products revenue from a gross to net basis due to adoption of the new standard, we estimate our revenue for the year ended December 31, 2015 would have been $404.4 million and our revenue for the nine months ended September 30, 2016 would have been $336.2 million. See Management s Discussion and Analysis of Financial Condition and Results of Operations Recent Accounting Pronouncements on pages 99 and 100 for additional detail. The actual effects of adopting ASU 2014-09 on our reported results of operations may differ materially. For the year ended December 31, 2015, we had a net loss of $14.4 million and for the nine months ended September 30, 2016, we had a net loss of $5.7 million. Our Adjusted EBITDA for the year ended December 31, 2015 and the nine months ended September 30, 2016 was $97.5 million and $61.2 million, respectively. See Summary Historical and Pro Forma Financial and Other Data for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss). Table of Contents Table of Contents On a pro forma basis, after giving effect to the FishNet Security Merger and the other Transactions as described under Unaudited Pro Forma Consolidated Financial Information, for the year ended December 31, 2015, our revenue was $972.6 million, and we had a net loss of $5.6 million. On this same pro forma basis, for the year ended December 31, 2015, our Adjusted EBITDA was $96.4 million. Industry Background Cyber Security is Mission Critical and at the Forefront of Technology Needs for Enterprises of All Sizes Cyber security is one of the highest priorities for enterprises of all sizes. The accelerating adoption of new technologies, such as cloud computing, mobility and IoT is increasing the surface area of exposure. According to Cisco, by 2020, it is predicted that 50 billion devices will be network connected. As the surface area of exposure increases, and breaches become more damaging and visible in the public domain, security becomes a higher priority for Chief Information Officers ( CIOs ), senior executives and boards of directors. Today, organizations are allocating a greater proportion of information technology ( IT ) budgets toward security to preserve brand, reputation and overall business operations. The Economic Damage from Cyber Crime is Substantial and Increasing Rapidly An estimated 97% of businesses have been breached, according to a 2014 study by FireEye, Inc. Today, cyber criminals often act in concert, have political, monetary or even terrorist motivations, are sophisticated in their coordination, preparation and planning, and are equipped to cause extensive damage. According to a 2014 McKinsey report, between $9 trillion and $21 trillion of global economic value creation in the next five to seven years could be at risk if organizations and governments are unable to adopt successful strategies to combat cyber threats. Despite the rising spend on security solutions and compliance measures, the number of breaches continues to increase. Traditional Approaches to Ensuring an Organization s Security Have Not Led to a Reduction in Cyber Crime Incidents Traditional approaches to solving cyber security problems have been largely tactical, with companies purchasing a greater number of point products. Our work and research with our clients lead us to believe that large-scale organizations have a multitude of products and technologies, many of which are partially or ineffectively deployed and do not integrate well with other systems. With the growing threat landscape and rapidly increasing number of vendors, organizations are increasingly unable to stay current with the most recent threats, products, vendors and industry advancements. To be effective, organizations must approach security strategically, and an effective strategic security framework must holistically combine products, policies, procedures and controls, all aligned with the organization s business priorities. Many Organizations Lack the Expertise, Resources and Time to Effectively Design and Run Their Own Security Infrastructure Many organizations lack the qualified security personnel with the knowledge to design, implement and manage the hybrid security offerings that exist in the market today, and specialized cyber security personnel are scarce. Internal security functions are often run by IT technicians without specialized security training who lack the ability to design complex security programs. Without sufficient bandwidth or internal resources to design and run their own security systems, organizations increasingly look to outside resources to address more of their cyber security needs. According to a 451 Research study, based on responses from over 1,000 IT professionals, security managers reported significant obstacles in implementing desired security projects due to lack of staff expertise (35%) and inadequate staffing (26%), with only 24% reporting that their enterprises have 24 7 monitoring of their technology systems in place using internal resources. Table of Contents Organizations Must Choose from an Increasingly Fragmented Landscape of Providers The cyber security landscape consists of highly fragmented categories of product and service providers that focus on a specific area within security. Organizations must not only choose from within each category but also implement and integrate solutions from various vendors. The landscape is comprised of the following categories of primarily point solution providers: Product manufacturers. Product manufacturers offer individual products and product suites that generally address a targeted subset of cyber security risks. By nature, manufacturers are incentivized to sell their products and promote their offerings, which may not be the optimal solution for a client s existing infrastructure or long-term security roadmap. Managed security service providers ( MSSPs ). Clients use MSSPs to host and monitor their infrastructure at a lower cost than using internal resources. Typically, MSSPs only provide monitoring services for existing infrastructure and do not have the ability to use real-time threat intelligence to stop attacks. Further, most MSSPs operate in silos and, therefore, cannot incorporate data from other sources to react to threats in real time. Pure-play cyber security consultants. Pure-play cyber security consultants provide project-based services to help organizations with architecture, product implementation, testing and assessment and compliance. They tend to be small, specialized and focused on only one area of security. This market is highly fragmented with numerous specialized players. Cyber security consulting divisions of larger IT and consulting companies. Many large technology and consulting firms have add-on cyber security divisions that are not the core focus of their companies. Management consulting firms are typically focused on providing advice to executives on architecture selection and design but rarely perform deployments, integration and implementations. IT companies generally use consulting as a channel for their other products and services and often lack industry expertise across domains. Distributors. Distributors provide third-party products to end clients. Most distributors focus on lower margin fulfillment services for a catalog of various products but typically lack advisory services and in-depth cyber security knowledge. Given the accelerating frequency and complexity of cyber risks, organizations are seeking an end-to-end cyber security solutions provider at scale that has awareness over every domain of cyber security and the ability to execute a comprehensive security strategy. Our Market Opportunity We believe our ability to provide holistic, end-to-end cyber security solutions enables us to broadly address the global enterprise information security market, which is expected to be a $88.8 billion market in 2016 according to Gartner. Within this broader market, the security services market, which includes security consulting, hardware support, implementation and IT outsourcing, is expected to grow from $55.9 billion in 2016 to $78.1 billion in 2020, representing a compound annual growth rate of 9%, and the security hardware and software products market, which is comprised of identity access management, infrastructure protection and network security equipment, is expected to grow from $32.9 billion in 2016 to $42.7 billion in 2020, representing a compound annual growth rate of 7%. We believe our top technology vendor partners derive the majority of their revenue through a third-party channel, and we expect this to increase over time. Table of Contents For the security services market, a significant portion of our future opportunity relates to spending on outsourced security services. We believe our clients and potential clients are increasingly recognizing the need to depend on external security experts to manage their cyber security operations. Gartner estimates that, by 2019, total enterprise spending on security outsourcing services will be 75% of the spending on security software and hardware products, up from 50% in 2015. Our Solutions We are a leading provider of cyber security services and integrated solutions for organizations. We help organizations address their full range of cyber risk and security needs in a customized and integrated fashion through a holistic, lifecycle and strategic approach. The key benefits of our solutions include: Programmatic approach to security. We offer a comprehensive security framework for our clients and take a strategic approach to designing and executing security solutions through our consultative, technology-neutral approach. Our large partner ecosystem provides us with a vast toolkit, which allows us to select the solutions that best meet our clients needs, rather than limiting our and our clients options to the products of any individual product vendor. Industry-leading expertise and diversity of our client-facing employees. Our employees come from a broad range of professional and technical backgrounds and include over 1,300 cyber security experts consisting of ex-CISOs, engineers, architects, strategists, researchers, analysts and risk and compliance experts. We also have the Office of the CISO, which is specifically designed to partner with our clients CISOs to provide advice and leadership in building best-of-breed security practices in organizations. Comprehensive cyber security solutions. Our comprehensive solutions cover every major domain of cyber security, and our business model enables us to operate as a single-source solution provider for our clients. We help our clients solve their problems in an integrated and customized way, addressing the full lifecycle of their needs. Our end-to-end cyber security solutions are created from our nearly 20 years in the cyber security industry and the collective experience of our cyber security experts. Differentiated and proprietary technology platforms. We have developed and employ hundreds of proprietary tools, scripts (small custom software), processes and methodologies, including intellectual and proprietary capital, to support the numerous services we offer. These tools are created by subject-matter experts within each practice and represent the institutionalization of our knowledge and intellectual capital, allowing us to continue to deliver high-impact services at scale. Our Competitive Strengths We have several competitive advantages that will enable us to maintain and extend our leadership position in cyber security solutions. Our key competitive strengths include: 100% focus on cyber security. We believe our clients and vendor partners recognize our leading position and value our expertise. Our singular focus allows us to stay ahead of the latest innovations in security, giving us a sustainable advantage. We actively maintain in-depth expertise across all three cornerstone domains of security: consulting, operations and technology, setting us apart from our competition. Leadership position in providing comprehensive security solutions. We believe we are the largest pure-play cyber security solutions company, with over $972.6 million of revenue on a pro forma basis in 2015, over 7,500 clients in the three years ended September 30, 2016, more than 400 technology vendor partners and over 1,700 employees. Our scale provides greater reach to clients, the ability to cover a large vendor partner network and a vast knowledge base into security threats from our extensive client network. Table of Contents Diversified, blue-chip client base. Over the past three years, our clients have included 71 of the Fortune 100 companies and 604 of the Fortune 1000 companies. We serve large and sophisticated clients across a broad range of industries and believe that our diversified, blue-chip client base gives us superior visibility into the threat landscape and minimizes our exposure to the risk of any particular client industry. Significant network effects. Our business model benefits from significant network effects that reinforce our leadership. Given our broad client reach, we have visibility into a wide variety of cyber security threats and attack vectors, which we use along with threat intelligence from our MSS and consulting businesses to protect our clients. We are thus able to quickly multiply our insights and advice, which in turn makes us more attractive to clients. As we grow our client base, we believe we become more attractive to vendor partners and prospective employees, reinforcing our leadership. Access to a broad set of established and emerging security vendors without single vendor risk. We partner with over 400 security vendors across every major aspect of cyber security, including well-established firms as well as small emerging vendors. Our position enables us to identify and assess the most promising emerging technologies and capitalize on established technologies. We are well-positioned to benefit from the overall growth of the security technology industry, without the potential downside of a concentrated technology risk from a single vendor. Founder-led management team with significant cyber security experience. Our Chief Executive Officer, Daniel D. Burns, founded Accuvant over 13 years ago and continues to lead our management team with his clear and strategic vision. Key members of our senior-level management team have been with the predecessor companies of Optiv for over 10 years. We believe that our management team and cyber security talent position us to continue to provide thought leadership and drive innovation. Our Growth Strategy The following are key elements of our strategy to become the world s most advanced, comprehensive and trusted partner for cyber security solutions. Expand within our existing client base. We believe we have a significant opportunity to increase penetration in our existing client base, where we believe we have less than 10% of their current cyber security spend. Our increasing portfolio of solutions provides a significant opportunity to upsell and cross-sell incremental security services and technologies. Expand our consulting, managed security and security operations offerings. We plan to enhance our current offerings by adding new services and expand our offerings in new, emerging areas of the industry based on evolving threats and client needs. We have consistently added new offerings, and we intend to continue to improve our offerings by adding people, infrastructure and technology. Develop proprietary technology and intellectual property. We plan to expand our investments in software tools, data analytics and industry intelligence, as well as new processes and methods to deliver more effective and efficient solutions to our clients. We intend to enhance our proprietary tools and extensive knowledge base to sustain our significant advantages in the market. Attract new clients. We operate in a large and highly fragmented market and are well positioned to grow our current market share of less than 5%. We plan to continue investing in our field-based client engagement organization and expand awareness of the Optiv brand to highlight our scale, the scope of our domain expertise and our core capabilities to continue to attract new clients. Expand our global footprint. We have a proven model of growth among our large clients with global operations, and we intend to leverage that model and our relationships with our vendor partners to expand globally. We plan to pursue clients internationally through partnerships with regional vendors Table of Contents and by opening more offices outside the United States. In addition, we may consider selectively pursuing strategic acquisitions in targeted geographies where established players have a significant brand, product offering or client base. Our Sponsors Blackstone (NYSE: BX) is one of the world s leading investment firms. Blackstone s alternative asset management businesses include the management of corporate private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. Through its different businesses, Blackstone had total assets under management of approximately $361.0 billion as of September 30, 2016. Investcorp is a leading provider and manager of alternative investment products and is publicly traded on the Bahrain Bourse (INVCORP). The Investcorp Group has offices in Bahrain, New York, London, Riyadh, Abu Dhabi and Doha. Investcorp has three business areas: corporate investment in the United States, Europe and the Ara Gulf, real estate investment in the United States and global hedge funds. As at September 30, 2016, the Investcorp Group had $10.8 billion in total assets under management, including assets managed by third-party managers where Investcorp receives fees calculated on the basis of total assets under management. Sverica is the successor to Sverica International, which was founded in 1993. Sverica is a leading private equity firm that has raised over $500 million of investment capital and focuses on lower middle market buy-outs. Sverica invests in and works closely with management teams and builds companies that are or could become leaders in their industries. As a firm founded by former operators, Sverica partners with talented executives while devoting significant internal resources to help its portfolio management teams create and execute growth strategies. After the completion of this offering, our Sponsors will own % of our common stock, or % if the underwriters exercise their over-allotment option in full. As a result, we will be a controlled company within the meaning of the NYSE corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance standards, including the requirements (1) that a majority of our board of directors consist of independent directors, (2) that our board of directors have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee s purpose and responsibilities and (3) that our board of directors have a nominating and corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee s purpose and responsibilities. For at least some period following this offering, we intend to utilize these exemptions. As a result, immediately following this offering, we do not expect a majority of our directors will be independent or that our compensation committee or nominating and corporate governance committee to be comprised entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a controlled company and our shares continue to be listed on the NYSE, we will be required to comply with these provisions within the applicable transition periods. Investment Risks An investment in shares of our common stock involves substantial risks and uncertainties that may adversely affect our business, financial condition and results of operations and cash flows. Some of the more significant challenges and risks relating to an investment in our Company include, among other things, the following: Our client engagement cycles can be long and unpredictable, and our client engagement efforts require considerable time and expense. As a result, our revenue is difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly. Table of Contents If we are unable to sell additional cyber security solutions to, or renew our agreements with, our existing clients, our future revenue and operating results will be harmed. If we are unable to attract new clients, our future revenue and operating results will be harmed. If we fail to meet our service level obligations under our service level agreements, we may be subject to certain penalties and could lose clients. Our computer networks and information systems could experience security breaches or denial of service attacks that may disrupt our services and adversely affect our results of operations. We could face liability or reputational damage if we fail to protect client or Optiv data or information systems or if our information systems are breached or rendered inoperable. Breaches or denial of service attacks experienced by our clients could result in litigation and other liability to us and could damage our brand. Our recent combination of Accuvant and FishNet Security creates integration challenges for our business, which could cause our business to suffer. We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations. We could experience material changes to the agreements with our vendor partners, including changes to purchase discounts and rebate programs, if certain technology manufacturers consolidate. The cyber security market is rapidly evolving within the increasingly challenging cyber threat landscape. If the industry does not continue to develop as we anticipate, our revenue will not grow as quickly as expected, if at all, and our share price could decline. If we do not accurately predict, prepare for, and respond promptly to the rapidly evolving technological and market developments and changing client needs in the cyber security market, our competitive position and prospects will be harmed. Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations. We believe that our brand is integral to our success. If we fail to cost-effectively promote or protect our brand, our business and competitive position may be harmed. We have observed certain vendor partners and other ecosystem partners expand their service capabilities into areas that directly compete with our service offerings. This creates a unique set of challenges that could materially change our vendor and other relationships. Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry or our ability to pay our debts, and could divert our cash flow from operations to debt payments. Our Sponsors and their respective affiliates control us, and their interests may conflict with ours or yours in the future. Please see Risk Factors for a discussion of these and other factors you should consider before making an investment in shares of our common stock. Implications of Being an Emerging Growth Company As a company with less than $1.0 billion in revenue during our most recently completed fiscal year prior to the initial filing date of the registration statement of which this prospectus forms a part, we qualify as an emerging growth company as defined in Section 2(a) of the Securities Act of 1933, as amended (the Table of Contents Securities Act ), as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act ). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include: presentation of three years of summary historical financial information rather than five years in this prospectus; reduced disclosure about our executive compensation arrangements; no non-binding stockholder advisory votes on executive compensation or golden parachute arrangements; and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company upon the earliest of: (1) the end of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year during which our annual gross revenue was $1.0 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We have taken advantage of reduced disclosure regarding executive compensation arrangements in this prospectus, and we may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide stockholders may be different than you might get from other public companies in which you hold stock. The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to take advantage of this extended transition period, and, as a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are generally applicable to public companies. Optiv Inc. was incorporated in Delaware on October 23, 2014 under the name AF Security Holdings Corp. On June 22, 2015, we changed our name to Optiv Inc. Our predecessors, FishNet Security and Accuvant, were founded in 1996 and 2002, respectively. Our principal executive offices are located at 1125 17th Street, Suite 1700, Denver, Colorado 80202 and our telephone number is (303) 298-0600. Table of Contents THE OFFERING Common stock offered by us shares. Common stock offered by the selling stockholders shares. Over-allotment option to purchase additional shares from the selling stockholders shares. Common stock outstanding after giving effect to this offering shares. Use of proceeds We estimate that the net proceeds to Optiv Inc. from this offering, after deducting estimated underwriting discounts and commissions, will be approximately $ million. We intend to use the net proceeds from this offering to repay a portion of our outstanding indebtedness and for general corporate purposes. We will not receive any proceeds from the sale of shares of common stock offered by the selling stockholders (including any sales pursuant to the over-allotment option). Dividend policy We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries. In addition, our ability to pay dividends will be limited by covenants in our existing indebtedness and may be limited by the agreements governing any indebtedness we or our subsidiaries may incur in the future. See Dividend Policy.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001639611_corcentric_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001639611_corcentric_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0fa6fd0e59d55314fd7adc3fe21d20b9c9ae5f48
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001639611_corcentric_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements." Unless the context requires otherwise, the words "we," "us," "our," "our company" and "our business" refer to AmeriQuest, Inc., a Delaware corporation, and prior to the reorganization described elsewhere in this prospectus summary, AmeriQuest Business Services, Inc., a New Jersey corporation, and in each case, their consolidated subsidiaries. Overview We are a growing provider of technology-enabled business-to-business solutions that address the financial process, procurement and asset management needs of businesses. Our solutions are designed to eliminate the inefficiency, expense and lost opportunities caused by traditional paper-based processes, allowing our customers to be competitive. We leverage our deep industry expertise, proprietary technology and customer and supplier relationships to help enterprises and organizations of varying sizes manage complex and dynamic operational and administrative processes that are frequently managed manually and require substantial internal resources. While we originated as a provider of procurement and fleet management solutions for the transportation industry, we have used our technology and the expertise we developed to offer robust financial process automation solutions and more advanced procurement solutions to companies in multiple industries in recent years. Our financial process automation solutions consist primarily of our cloud-based technology offerings that automate accounts receivable and accounts payable processes for our customers, including e-invoicing, credit and collections management, working capital management and reporting analytics. These solutions are delivered through two products: our accounts receivable automation platform; and our accounts payable automation platform. Our procurement solutions leverage our financial process automation technology to conduct group purchasing, predominantly for goods supporting the transportation industry, enabling companies to optimize their procurement processes from sourcing through payment. Our asset management solutions provide data-driven strategic planning, asset acquisition and disposition, and asset financing and usage alternatives to help businesses, predominantly in the transportation industry, to lower the total cost of capital asset ownership. Our cloud-based solutions are highly scalable and offered in an la carte format, so that our customers can selectively purchase those solutions that they need. These complementary business solutions enable us to capitalize on our customer and supplier network, cross-selling opportunities and operational scale. PayStream Advisors, a third-party research and consulting firm, estimates that business-to-business trade in the United States was conducted through 16.5 billion invoices distributed among approximately 10 million businesses during 2013. Entities of various sizes incur substantial costs to process and facilitate these business-to-business transactions. Traditionally, these transactions have been paper-based, labor-intensive and error-prone. Moreover, many businesses lack scale, real-time data and specialized personnel for these transactions, all of which can cause operational inefficiencies and excess cost. We have provided technology-enabled solutions to the transportation sector for nearly twenty years. However, we expanded our focus in recent years, and our financial process automation solutions and our procurement solutions now offer a comprehensive suite of technology-enabled services to Amendment No. 4 to FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 Table of Contents purchasers and suppliers in other sectors, including the manufacturing, retail, energy, higher education and media industries. During the year ended December 31, 2015, we serviced over 2,375 customers varying by size and industry, including Daimler Trucks North America, LLC, or Daimler, the University of Florida, Dot Transportation, Inc. and Cardinal Logistics Management Corporation. We processed $14.6 billion in transaction volume and 10.3 million transactions through our financial process automation and procurement solutions for our customers and their transaction partners during the year ended December 31, 2015. Our company has grown as we have expanded into new sectors. Our total revenue was $67.4 million, $84.8 million and $86.8 million during the years ended December 31, 2013, 2014 and 2015, respectively, a compound annual growth rate, or CAGR, of 13.5% over those periods. Our net income was $4.6 million, $6.8 million and $6.4 million during the years ended December 31, 2013, 2014 and 2015, respectively. Our adjusted EBITDA was $21.6 million, $25.9 million and $29.0 million during the years ended December 31, 2013, 2014 and 2015, respectively, representing a CAGR of 15.8% over those periods. Industry background and trends We believe a significant market opportunity exists for technology-enabled business-to-business solutions that assist enterprises with their financial process, procurement and asset management needs. These traditional processes are often poorly managed or controlled within a business, resulting in several common challenges: Traditional, manual business-to-business processes are often expensive and error-prone. Ardent Partners recently estimated that "best-in-class" corporations experience invoice exceptions at less than half the rate experienced by other businesses. These best-in-class businesses are characterized by a high level of standardized accounts payable processes, automated approval routing and straight-through invoice processing. Ardent Partners estimates that these best-in-class businesses process accounts payable invoices at over 86% lower cost and over 78% faster than other businesses. Achieving the benefits of scale is difficult even for large organizations. Many suppliers provide improved pricing with greater purchasing volume. Businesses that lack sufficient purchasing volume for certain goods and services may receive inferior pricing as compared to competitors, notwithstanding that procurement spending may be a relatively large and material element of their business. Traditional finance and procurement overhead is often fixed. Finance and procurement personnel costs are typically fixed and not easily scaled to respond to fast-changing business conditions. Businesses need more staff during periods of growth and fewer staff during slowdowns. In addition, manual staffing is inherently difficult to size, even at its most effective, in smaller organizations. Businesses are also reluctant to invest in qualified and experienced administrative and operations personnel due to unpredictable market conditions. Multi-party business transactions are complex. The average U.S. business annually transacts with hundreds of counterparties, including customers, partners, and suppliers, creating complex multi-party transactions. These participants frequently operate without a common system to communicate in an automated and paperless environment, often relying on several different types of electronic data interchange, or EDI, systems and data formats, which also increases the complexity of transactions. Increased need for real-time visibility and effective internal controls. Businesses are operating in an increasingly fast-paced, complex and global environment. Enabling fast and accurate decision-making with real-time and reliable information is critical to the long-term success of most AMERIQUEST, INC. (Exact name of Registrant as specified in its charter) Table of Contents organizations. Beyond the business incentive, many businesses are also subject to increasing demands on their internal controls structure imposed by increased regulations. Managing working capital efficiently can be challenging. Many companies have the opportunity to enhance stockholder value by managing working capital more efficiently but are encumbered by a number of internal challenges. Aberdeen Group estimates that comprehensive accounts payable automation solutions increase a business's early payment discount savings by up to 340 basis points as compared to businesses without a centralized, automated accounts payable system. At the same time, many suppliers lack the resources to efficiently manage the large number of customers that they service. Legacy business-to-business systems lack modern architecture and desired user experience. Users expect immediate and secure access to their enterprises' critical business information, but many business-to-business applications do not offer an optimized user experience, availability on personal mobile devices and ease-of-deployment. Our solutions Our solutions are designed to leverage our industry experience and investments in technology to address common challenges for businesses of various sizes and across a variety of industries. Financial process automation solutions Our cloud-based financial process automation solutions address key participants in the business-to-business community, including manufacturers, suppliers, dealers, distributors, trading partners and end customers. We enable companies to streamline, automate and manage transaction processes including e-invoicing, accounts payable, accounts receivable, collections, order management, credit risk management, reporting and payments. Our financial process automation solutions provide the following key benefits: Automation of manual, labor-intensive processes. By transforming manual, paper-based purchase order and invoice processes to automated and electronic processes, our solutions help companies eliminate unnecessary overhead and error risk related to these tasks. Seamless integration. Our cloud-based financial process automation and procurement solutions utilize our proprietary transaction engine technology to enable fast connections among trading partners by turning every trading transaction into standardized data that is transmitted real-time into the relevant system. Increased visibility and reporting capabilities. Customers benefit from end-to-end visibility into transaction processes, which enables them to maintain visibility of and collaboration among buyers and sellers and to automate entire accounts receivable and accounts payable departments without compromising business requirements. Access to channel finance and credit and collections management. Our accounts receivable financial process automation solutions provide channel finance to a closed community of purchasers that vary by size and industry, allowing suppliers to reduce and often minimize their credit exposure to significant segments of their customer base. Cloud-based delivery with enhanced user experience. Our financial process automation solutions utilize a cloud-based Business-Process-as-a-Service, or BPaaS, delivery model and provide a modern and intuitive user interface. Deep domain and best practices expertise. Our financial process automation solutions are supported by our long history in financial process management. Delaware (State or other jurisdiction of incorporation or organization) 7374 (Primary Standard Industrial Classification Code Number) 47-3684547 (I.R.S. Employer Identification Number) AmeriQuest, Inc. 457 Haddonfield Road Suite 220 Cherry Hill, NJ 08002 (800) 608-0809 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Table of Contents Procurement solutions Our procurement solutions enable organizations to realize the benefits of volume-based, electronic procurement by identifying and establishing contracts with suppliers, aggregating the collective purchasing power of all participating customers and promoting process efficiencies of electronic transactions. Our procurement solutions provide the following key benefits: High-volume purchasing power. We aggregate the purchasing power of our customers to provide pricing comparable to that available to high-volume purchasers, allowing our customers to more effectively compete. Enhanced access to supplier network and purchasers. Our purchasers gain access to more than 5,000 dealers and distributors for over 135 suppliers currently using our solution. At the same time, we assume credit responsibility for customers purchasing through our system and guarantee timely payment to suppliers, allowing suppliers to reach more customers. Strategic procurement expertise. Our supply management team has deep expertise in strategic sourcing, contract and price negotiation, supplier selection and supplier relationship management. Seamless integration. Our cloud-based procurement solutions are delivered entirely using our proprietary transaction engine, the same interface platform that supports our cloud-based financial process automation solutions, which enables fast and standardized communication among participants. Enhanced user experience. Our customers and suppliers input and process their transactions through our financial process automation platform, allowing purchasers the benefit of a comprehensive buyer's guide, workflow improvement tools and automated spending analysis in addition to our procurement pricing benefits. Purchaser and supplier user experiences are designed to be intuitive and accessible to novice users with minimal training. Asset management solutions Our asset management solutions provide data-driven strategic planning, asset acquisition and disposition strategies, and asset financing and asset utilization alternatives, all of which are designed to lower the total cost of capital asset ownership. Although these solutions are presently focused on the transportation industry, we believe they have application across a variety of industries with similar needs. Our solutions provide the following key benefits: Data-driven asset management strategy. Utilizing our proprietary technology platform and deep transportation industry expertise, we can provide businesses with analyses of their current asset usage and suggest alternative strategies, allowing our customers to gain operational leverage by lowering the total cost of ownership of capital equipment. Lower asset acquisition costs and optimum resale gains. When capital equipment is identified and specified properly by an acquirer, and is part of an overall asset lifecycle strategy, companies benefit from lower asset acquisition costs, and can also dispose of their assets at the optimal time to ensure maximum residual value. Deep domain expertise in asset management and regulatory compliance. Our established relationships with some of the country's largest lenders allow us to provide advice and access strategic financing for our customers for the full lifecycle of capital assets. Our asset management experts also have deep knowledge of asset regulations and mandates. Douglas W. Clark President and Chief Executive Officer 9045 Strada Stell Court Suite 301 Naples, FL 34109 (800) 608-0809 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents Our strengths We believe that we are well positioned to benefit from the transformations occurring in the business-to-business transaction market, including the growing trend toward enterprise-wide automation. Our key competitive strengths include: End-to-end solution suite. Our flexible, menu-driven approach allows companies to select individual services from our solutions in order to maximize value and impact. Our financial process automation solutions address the full procure-to-pay cycle and the full order-to-cash sales cycle. Our procurement and asset management solutions assist in managing the procurement and full capital asset purchase and use cycle needs of our customers. Highly scalable, proprietary technology. Our proprietary financial process automation and procurement solutions are delivered via a cloud-based BPaaS model. Our infrastructure has the flexibility to support significant growth in transaction volume from new and existing customers. As an example, since December 31, 2012, our financial process automation and procurement solutions transaction volume has increased from $3.4 billion to $14.6 billion, or 329%, and the number of transactions has increased from 2.7 million to 10.3 million, or 281%, without the need for substantial capital expenditures or significant changes to our technology infrastructure to support the increased demands on our solutions. Powerful network effect. Our proprietary CorConnect solution is a closed-loop private commerce network that connects an entire purchasing cycle ecosystem suppliers, dealers, distributors, vendors and purchasers. As our networks of purchasers and suppliers grow, they become more powerful and mutually reinforcing, increasing the value and desirability of participation in our solutions. Strong customer retention. We focus extensively on assisting our customers to maximize their benefit from our solutions, and we frequently engage with our customers to continue to improve our offerings to meet their needs. As an illustration, 96% of our top 100 financial process automation and procurement solutions customers in 2012 made purchases from us in the year ended December 31, 2015. We determined our top 100 financial process automation and procurement solutions customers based on our customers' overall gross transaction volume in dollars in 2012. Deep domain expertise. We have deep domain experience and are an established leader in the transportation industry. In 2015, approximately a third of North America's 100 largest private trucking fleets utilized us for one or more of our financial process automation, procurement or asset management solutions. Highly visible business model. Our transaction-based model with volume minimums for our financial process automation solutions and consistency of customer transaction levels year-over-year for our procurement solutions provide strong visibility of future revenue, enhancing our ability to effectively manage our business. Our growth strategy Our key strategic initiatives include: Selectively expand into new markets. We intend to continue to selectively expand into new markets in which we can leverage our domain expertise, particularly in industries lagging in the adoption of paperless solutions for processes such as procurement and billing. Further penetrate our existing markets. We will continue to invest in sales and marketing to increase our profile within the transportation industry, while also increasing our emphasis on customer acquisition opportunities in adjacent industries, such as manufacturing and industrials. Copies to: Jeffrey D. Saper, Esq. Michael C. Labriola, Esq. Kenisha D. Nicholson, Esq. Wilson Sonsini Goodrich & Rosati, P.C. 1700 K Street NW, Fifth Floor Washington, DC 20006 (202) 973-8800 Mark Joyce Executive Vice President and Chief Financial Officer AmeriQuest, Inc. 2651 Warrenville Road Suite 560 Downers Grove, IL 60515 (800) 608-0809 Keith Townsend, Esq. Laura Bushnell, Esq. Carrie Ratliff, Esq. King & Spalding LLP 1180 Peachtree Street, N.E. Atlanta, GA 30309 (404) 572-4600 Table of Contents Capitalize on cross-selling opportunities. As of December 31, 2015, only 8% of our customers purchased more than one of our solutions during the fiscal year then ended, which we believe provides a substantial sales opportunity within our existing base of more than 2,375 customers. As we expand our product capabilities to include additional features, we expect our customers will perceive and derive even greater value from our platform and expand their use in the future. Leverage our technology offerings. We intend to enhance our collaboration with our customers and continue to build functionality to address their needs and requirements. The investment in our software solutions, expansion of our procurement capabilities and development of new applications, features and functionality should allow us to expand our addressable market across other verticals. Selectively pursue acquisitions. We may pursue acquisitions of businesses, technologies and solutions that are complementary to our existing offerings. We may also pursue acquisitions that allow us to expand into new industries or geographies where we do not currently have a significant presence. Risks affecting us Investing in our common stock involves risk. You should carefully consider all the information in this prospectus prior to investing in our common stock. These risks are discussed more fully in the section entitled "Risk Factors" immediately following this prospectus summary. These risks and uncertainties include, but are not limited to, the following: our failure to adequately assess and monitor the credit risks of our customers; our dependence on a small number of customer relationships, such as with Daimler; a loss of or decrease in sales from key customers or supplier relationships; long and unpredictable sales cycles that require significant employee time and financial resources; our inability to effectively expand the reach of our existing products to new customers and new markets and sustain recent growth rates; our inability to compete effectively; and declines in general economic conditions, and in particular, demand for products and services offered through our procurement solutions. Corporate information and reorganization We were originally organized in 1996 as a New Jersey corporation. In September 2015, we effected a corporate reorganization. Pursuant to this reorganization, AmeriQuest, Inc., a Delaware corporation formed in April 2015, acquired all of the outstanding shares of capital stock of AmeriQuest Business Services, Inc., or ABI, in a share exchange. Following such reorganization, ABI became a wholly owned subsidiary of AmeriQuest, Inc., the issuer in this offering. Our principal executive offices are located at 457 Haddonfield Road, Suite 220, Cherry Hill, NJ 08002, and our telephone number is (800) 608-0809. You can access our website at www.ameriquestcorp.com. Information contained on our website is not part of this prospectus and is not incorporated in this prospectus by reference. We have registered the AMERIQUEST, AMERIQUEST TRANSPORTATION SERVICES, COR360 and ONECONNECT trademarks in the U.S. in certain classes of goods and services applicable to our business. We have several other trademarks, service marks and pending applications Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents relating to our solutions, including for CORCONNECT and CORCENTRIC. Solely for convenience, trademarks, service marks and trade names referred to in this prospectus may appear without the , TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names. This prospectus may also contain trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine. Table of Contents THE OFFERING Common stock offered by us shares Common stock to be outstanding after this offering shares Underwriters' option The underwriters have been granted a 30-day option to purchase up to an additional shares, of which will be sold by us and of which will be sold by the selling stockholders named herein. Use of proceeds We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately $ million, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The principal purposes of this offering are to create a public market for our common stock and to facilitate our future access to the public capital markets, as well as to obtain additional capital. We may use a portion of the proceeds from this offering for future acquisitions of complementary businesses, technologies or other assets, although we do not currently have any plans for any acquisitions. In addition, if we do not apply some or all of the proceeds towards acquisitions, we may use some of the remaining net proceeds from this offering to reduce the outstanding indebtedness under the long-term promissory notes issued in connection with purchase of equipment for certain of our asset management leasing operations, and we may use the remainder of the net proceeds from this offering for working capital and general corporate purposes, which may include investing in our sales and marketing and product enhancement efforts. We will not receive any proceeds from the shares sold by selling stockholders, if any. See "Use of Proceeds." Directed share program At our request, the underwriters have reserved up to 5.0% of the shares of common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees and business associates, including certain of our customers, suppliers and other persons with which we have an existing business relationship. If these persons purchase shares, this will reduce the number of shares available for sale to the public.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001639874_tech_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001639874_tech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c2644f25fb534b12617cc4c4184e7a0db81c87f4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001639874_tech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the prospectus. Any representation to the contrary is a criminal offense. You should read the following summary together with the more detailed information about our company and the common stock being registered in this offering and our financial statements and the notes to those statements included elsewhere in this prospectus. The selling stockholders are selling shares of common stock covered by this prospectus for their own account References in this prospectus to "we," "our," "us", "TC" and the "Company" refer to TECH CENTRAL, INC.. Organizational History Tech Central, Inc. was incorporated in the state of Wyoming on April 28, 2014. We were formed to develop businesses, assets and opportunities, some acquired and contributed from third parties and our founding shareholders, as a full-service multi-media Company and related fields. The Company believes it will be able to successfully compete in today's multi-media industry marketplace by controlling production costs and by limiting its distribution expenses using, primarily, online marketing tools to promote its products and to further develop its digital strategies. Introduction The Company has only an, approximately, twenty four (24) months operating history. The Company's primary, current business is as a producer of digital online video and photography content development and distribution, and a developer of website and mobile app technology and integration design. The company is also currently in production on a digital video production of an aerial view of the California coastal areas. The Company, currently generates revenues from the sale of rights to its digital video or photo content, and the integration of stock and or customized digital content into website design. Company Assets The Company's principal assets ("Assets") consist of cash, drone equipment and film equipment All of the Company's income to date has been generated from the sale of the rights to its digital video and photo content and the integration of digital video and photo content into website design. It is management's opinion that the assets it has, including cash, equipment, contracts, future revenue streams, rights and certain business concepts will adequately capitalize the Company for the next twelve (12) months. The Company intends to develop, operate and capitalize the Assets, as well as to create new products for its distribution, to form an ongoing and diverse multi media entity. Company Cash Flow The Company has cash assets derived from the sale of the rights to its digital video and photo content and the integration of digital video and photo content into website design. Assuming the Company does not generate any income from the sale or production and distribution of current digital video or photo content or commercial video work it still will have sufficient cash to operate for the next twelve (12) months. Our burn rate is anticipated to be approximately $3,000 per month based on our current projections. If we do not have substantial revenues, or an infusion of capital by the end of the next 12 months we would not be able to meet our capital requirements. At December 31, 2015 we had cash of $74,799 and for the year ended December 31, 2015 the Company had Revenues of $118,500. At June 30, 2016 we had cash of $93,797 and revenues of $26,700. Our auditor have issued a going concern opinion in regards to our financial statements, "The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note # 1 to the financial statements, the Company has had minimal operations. This raises substantial doubt about its ability to continue as a going concern." JOBS Act Recently the United States Congress passed the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), which provides for certain exemptions from various reporting requirements applicable to public companies that are reporting companies and are "emerging growth companies." We are an "emerging growth company" as defined in Section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and we will continue to qualify as an "emerging growth company" until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer," as defined in Exchange Act Rule 12b–2. Therefore, we expect to continue to be an emerging growth company for the foreseeable future. Generally, a registrant that registers any class of its securities under Section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act a management report on internal control over financial reporting and, subject to an exemption available to registrants that meet the definition of a "smaller reporting company" in Exchange Act Rule 12b-2, an auditor attestation report on management's assessment of internal control over financial reporting. However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report in our annual reports filed under the Exchange Act, even if we do not qualify as a "smaller reporting company". In addition, as an emerging growth company, we are able to avail ourselves to the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and to not present to our stockholders a nonbinding advisory vote on executive compensation, obtain approval of any golden parachute payments not previously approved or present the relationship between executive compensation actually paid and our financial performance. We have irrevocably elected to comply with new or revised accounting standards even though we are an emerging growth company. Future Assets and Growth We will continue to generate limited future income from our Assets, however, we cannot provide absolute assurances or estimates of these revenues. The Company had Net Income in its initial, short fiscal period, however, the Company anticipates it may operate at a deficit for its next fiscal years and may expend most of its available capital. The Company's cash on hand is, primarily, budgeted to cover the anticipated costs to complete, deliver and market a partially completed feature length documentary film owned by the Company, to market the pre-production film rights it owns, to market its commercial video and web site integration services and for various administrative costs associated with developing and operating the businesses going forward including costs for legal, accounting and Transfer Agent services. We believe that the Company will have sufficient capital to operate its businesses over the next twelve (12) months. There can be no assurances, however, that actual expenses incurred will not materially exceed our estimates or that cash flows from our existing Assets will be adequate to maintain our businesses. Our business model is predicated on the assumption that we can continue to generate multiple revenue streams from various world wide media sources from our existing Assets and from products we intend to develop, produce and distribute over the next fiscal year and that we can, successfully, manage our costs by capitalizing on new and emerging digital technologies, business developments and our management. Although the Company generated revenues, in its initial, approximate, twenty (20) months of operation it anticipates it may lose money in its next, full year of operation and it shall require raising additional capital to develop its Concepts. The Company may plan on filing for a Secondary offering of its stock in 2017 to raise capital for its projects and concepts which will result in further dilution to shareholders. The Company's primary manager, its CEO Mr. Lewis, has limited experience and expertise in the multi media and related industries and has no experience operating a public company. The Company will continue to seek consultation from those persons more adept in the multi-media industry possibly as a director, or employee. Until such time as the Company is more established and capitalized, we will not be able to employ any personnel on a full time basis. (For Details on our Business Plan Please See: Description of Business, p. 17) . FOUNDING SHAREHOLDERS The following individuals and entities are considered founding shareholders of our Company. Class Name Shares Percentage Common Joe Lewis 6,100,000 70% (1) Mr. Joe Lewis, is the CEO of TC. Terms of the Offering The selling shareholders named in this prospectus are offering all of the shares of common stock offered through this prospectus. The selling stockholders are selling shares of common stock covered by this prospectus for their own account. We will not receive any of the proceeds from the resale of these shares. The offering price of $.50 was determined by the price shares were sold to our shareholders in a private placement memorandum plus an increase based on the fact the shares will be liquid and registered. $.50 is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTCQB or another Exchange, at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with FINRA nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001639889_corporate_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001639889_corporate_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9cbce6300dd1ec76f47024957d4c71d6f9450baf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001639889_corporate_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary provides an overview of selected information contained elsewhere in this prospectus. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the following summary together with the more detailed information in this prospectus and review our financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Company" refer to Corporate Coaches, Inc. As of the date of our most recent audit, December 31, 2014, we had $0 in total assets and, as of September 30, 2015, we had $15,486 in total assets. CORPORATE COACHES, INC. Organization We were incorporated in the State of Nevada as a for-profit company on November 26, 2014, under the name Corporate Coaches, Inc. and our incorporator adopted our bylaws and appointed our two directors. To date, we have limited operations and are implementing our business plan to provide executive placement and coaching services to executives in North America. From November 26, 2014 to August 13, 2014, our business activities were limited to organizational matters development of our business model and plan. On August 14, 2015, we entered into a consulting agreement with our first client. We have established a fiscal year end of December 31. On November 26, 2014, we issued 20,000,000 shares of our $0.0001 par value common stock, valued at $0.0001 per share, to our 2 founders, which includes 19,400,000 common shares to our chief executive officer and director, Christopher Mussallem and 600,000 common shares to our vice president, secretary and director, Andr Brown, in exchange for organizational services incurred in our formation, which our board of directors valued at $0.0001 per share, or $1,900 and $60, respectively for preformation services rendered to develop our organization, business model and development of our website site map. From November 26, 2014 to December 31, 2014, we incurred $32,764 in operational expenses and as of June 30, 2015, we incurred $69,266 in operational expenses. We anticipate our burn rate will be approximately $1,500 per month. Our majority shareholder has orally agreed to advance us the necessary funds to complete this offering and provide for our working capital in the event we are unable to raise any funds from this offering. We believe that our majority shareholder s advances will be sufficient to cover our monthly burn rate for the next 12 months. We believe that we will require approximately $50,000 to $200,000 in cash to accomplish the goals set out in our plan of operation. To the extent we are unable to accomplish our goals with the proceeds from the issuance of our common stock, then we intend to raise additional capital from private investors through the sale of our common stock or from loans or advances from our majority shareholder. Our principal business, executive and registered statutory office is located at 1050 S. Flower St., Suite 501, Los Angeles, CA 90015 and our telephone number is (424) 299-4545, fax is (424) 299-4546 and email contact is info@corpcoaches.com. Our URL address is www.corpcoaches.com. Business We are a startup company that commenced operations in December 2014 and until August 13, 2015, our operations were limited to organizational and business development activities. We are a human resource and start-up consulting company that intends to assists executives at start-ups and development stage companies, as well as established companies, with personnel placement, corporate coaching and consulting services. We intend to offer our services to companies with a focus on providing employees and strategic consulting to them. Our mission is to assist management with services designed to help them find and place key employees, either on a temporary or permanent placement and to provide the strategic support to their development and personnel needs. We intend to focus our initial marketing efforts in the real estate, digital media, sports and entertainment industries. We intend to use the Internet as well as the services of independent contractors to market our services to companies with our initial efforts focused in Southern California. We intend to generate revenues by billing clients hourly, on a fixed-fee basis and on a contingency fee. We have had limited operations and have limited financial resources. Our auditors indicated in their report on our financial statements (the "Report") that "the Company s lack of business operations and early losses raise substantial doubt about our ability to continue as a going concern." Our operations from inception to August 2014, were devoted primarily to start-up, development and operational activities, which include: 1.Formation of the Company; 2.Development of our business plan; 3.Evaluating various target industries to market our placement and consulting services; 4.Research on marketing channels/strategies for our services; 5.Secured our website domain www.corpcoaches.com and beginning the development of our initial online website; 6.Research on services and pricing of our placement and consulting services; and 7.Entering into our first consulting agreement. We intend to provide services to target companies with the mission to assist the founders develop their talent pool to enable them to market their product and services. We also intend to provide hands-on support to guide executives with market advice. We believe that the placement and coaching services will increase the value of our potential clients businesses thereby increasing the demand for additional services. Market Opportunity We believe the human resource, job placement and corporate coaching and counseling industries are growing sectors of the U.S. economy, and companies building various real estate, sports, entertainment and social media operations have grown in recent years. We believe that an attractive opportunity exists for a public company focused on assisting these businesses in the early-stage of their existence and technological development by providing key personnel and strategic human resource guidance. Our Business Strategy Our goal is to consult with executives in real estate, digital media, sports and entertainment companies, as well as other companies, by providing personnel search, corporate coaching and consulting services, which will allow management to focus on their core business instead of consuming time on human resource functions. We believe that by providing this service, management will be able to utilize their time to devote to operations. We believe our management s relationships in the industries we intend to focus on will allow us to source and place personnel in these industries. The following are key elements of our strategy: Guide our clients through the challenges of early personnel placement. We intend to help provide our client companies with the human capital to execute on their business plans and grow into profitability. We believe that our services will reduce time, costs and accelerate the time to bring the clients products and services to market through the placement of personnel in their needed employment areas. As the client companies mature, we can advise them by providing strategic personnel guidance. We believe that our relevant experience in the related industries will allow us to understand the clients needs in the respective industries. Apply a structured consulting process to our deployment of personnel and consultants. Web-based technology is becoming increasingly capital-efficient, and we intend to partner with software application partners to leverage our model of personnel placement and consulting. By advising clients on personnel placement in the earliest stages of their businesses we believe that we will assist them in achieving their goals. We intend are in discussion with a few companies that utilize software programs to match candidates based on profiles rather than key words typically used by candidates for job matching. Consult to diverse, innovative and dynamic clients. We believe that the low capital requirements to consult with our target clients will enable us to spread our resources across a wide spectrum of clients. We intend to provide human resource and corporate coaching and consulting services to management and offer our services for an hourly or other form of compensation. We will negotiate our fees on a case-by-case basis and intend to offer hourly rates, flat fees and contingent fees for our services, which will include job placement services, job search functions, human resource compliance and corporate coaching to executives by providing strategies to assist management in fulfilling their search and placement functions. We intend to derive income from our clients for the performance of these services. As of the date of this Prospectus, we have 20,000,000 shares of $0.0001 par value common stock issued and outstanding, which is owned by 2 shareholders. We have 10,000,000 authorized shares of preferred stock of which none are issued. The aggregate market value of our common stock based on the offering price of $0.10 per share is $2,000,000. Our stockholders deficit, as of our most recent audit, is ($32,764) and, as of September 30, 2015, is ($62,866). THE OFFERING We are offering for sale a total of 2,000,000 shares of common stock at a fixed price of $0.10 per share. There is no minimum number of shares that must be sold by us for the offering to proceed, and we will retain the proceeds from the sale of any of the offered shares. The proceeds from the sale of the offered shares will not be placed in escrow or a trust account and will be immediately available to us. The offering is being conducted on a self-underwritten, best efforts, basis, which means our chief executive officer and director, Mr. Christopher Mussallem and our other officer and director, Mr. Brown, will attempt to sell the shares. This prospectus will permit them to sell the shares directly to the public, with no commission or other remuneration payable to them for any shares they may sell. Mr. Mussallem and Mr. Brown will sell the shares and intend to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, they will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934 (the "Exchange Act"). The intended methods of communication include, without limitations, telephone and personal contact. The following is a brief summary of this offering. Please see the "Plan of Distribution" section for a more detailed
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001639992_it_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001639992_it_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c9640b2cdb6fc49f3a4f5b166b71b1a83c5b46d6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001639992_it_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1 THE OFFERING 3 SUMMARY OF FINANCIAL INFORMATION 5 RISK FACTORS 6 USE OF PROCEEDS 16 DETERMINATION OF OFFERING PRICE 16 DILUTION 16 SELLING SECURITY HOLDER 16 SHARES ELIGIBLE FOR FUTURE SALE 18 DIVIDEND POLICY 19 MARKET FOR SECURITIES 19 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 20 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 28 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 31 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32 DESCRIPTION OF SECURITIES 32 PLAN OF DISTRIBUTION 34 INTEREST OF NAMED EXPERTS 37 INDEX TO FINANCIAL STATEMENTS 39 INDEX TO CONDENSED FINANCIAL STATEMENTS F-9 Part II 40 Through and including July 30, 2016 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current on as of its date. PROSPECTUS SUMMARY This summary provides an overview of selected information contained elsewhere in this prospectus. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the following summary together with the more detailed information in this prospectus and review our financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Company" refer to IT Management, Inc. As of the date of our most recent audit, December 31, 2015, we had $52,353 in total assets and, as of March 31, 2016, we had $49,271 in total assets. IT MANAGEMENT, INC. Organization We were incorporated in the State of Nevada as a for-profit company on October 27, 2014 and established a fiscal year end of December 31. On October 27, 2014, our incorporator adopted our bylaws and appointed our initial directors. From October 27, 2014 to June 2015, we had limited operations and were implementing our business plan to provide information technology consulting services to companies in North America. Our business activities were limited to organizational matters development of our business model and plan. We have established a fiscal year end of December 31. In July 2015, we began marketing our services and in September 2015, we signed consulting agreements with our first two customers. On October 27, 2014, we issued 8,750,000 shares of our common stock, par value $0.0001 per share, to our founders, Claude Beauregard, Daniel Trudeau and Ringar Investments, LLC at a price of $0.001 per share for $8,750 in cash. Mr. Beauregard is our Chairman, President and Chief Executive Officer. Mr. Trudeau is our Vice President, Chief Financial Officer, Secretary and Director. From October 27, 2014 to October 31, 2014, we issued 3,250,000 shares of our common stock, par value at $0.0001 per share, to 8 investors at a price of $0.001 per share for $3,250 in cash. On July 1, 2015, these 8 investors executed lock-up agreements with us that restrict their right to sell their shares for a period of 18 months. Under the terms of the lock-up agreement, each investor is allowed to sell 25% of the share subject to the lock-up agreement in this offering, 25% in 6 months, 25% in one year and the balance in 18 months. On October 16, 2014, we issued a 10% one-year convertible note to an investor for $10,000 in cash. The holder of the convertible note had the option to convert the principal, plus accrued interest, into shares of our common stock at the conversion price of $0.025 per share. On February 27, 2015, the holder converted the principal plus $337 in accrued interest into 413,479 shares of our common stock. From November 11, 2014 to March 28, 2015, we issued 1,910,000 shares of our common stock, par value at $0.0001 per share, to 28 investors for $95,500 in cash or $0.05 per share. Presently, we estimate our monthly burn rate is approximately $2,500 per month, which consists of general and administrative expenses and professional fees. We believe that our present capital is sufficient to cover our monthly burn rate for the next 12 months. We believe that we will require approximately $30,000 in either cash or our common stock to accomplish the goals set out in our plan of operation, which we intend for fund from the recent sale of our common stock as well as advances from our majority shareholders, if necessary, which they have orally agreed to advance. We also intend to use our common stock to accomplish these goals in order to conserve our cash if we are able to negotiate the payment for services with our shares. To the extent we are unable to accomplish our goals with the issuance of common stock for services and products, then we use our capital or we will borrow funds from our majority shareholders. We will not receive any proceeds from the sale of the shares in this offering. See "Use of Proceeds." Our principal business, executive and registered statutory office is located at 1395 Brickell Avenue, Suite 800, Miami, FL 33131 and our telephone number is (305) 200-8891, fax (305) 200-8801 and email contact is info@itprofessionals.com. Our URL address is www.itprofessionals.com. Business We commenced operations in October 2014 and, until July 2015, have been limited to organizational and business development activities. In July 2015, we began marketing our services to potential customers. In September 2015, we entered into consulting agreements with our first two customers and have recorded minimal revenue. We are an information technology consulting company that advises companies on providing research, analysis and purchasing decisions for their software and hardware solutions. Our mission is to assist companies in evaluating the best options for making software and hardware purchases to enable them to cost-effectively manage their business and data information by advising them on what we believe are their best options given their budget and software needs. We are focusing our marketing efforts with technology companies; however, we will also look at all business opportunities. We intend to use the Internet as well as the services of independent sales consultants to market our services to potential clients. We have had limited operations and have limited financial resources. Our auditors indicated in their report on our financial statements (the "Report") that "the Company s lack of business operations and early losses raise substantial doubt about our ability to continue as a going concern." Our operations from October 2014 to June 2015 were devoted primarily to start-up, development and operational activities, which include: 1.Formation of the Company; 2.Development of our business plan; 3.Evaluating various information technology companies and professionals to market our services; 4.Research on marketing channels/strategies for our services; 5.Secured our website domain www.itprofessionals.com and beginning the development of our initial online website; and 6.Research on services and the pricing of our services. Prospectus THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. IT MANAGEMENT, INC. 3,135,979 SHARES OF COMMON STOCK BEING SOLD BY THE SELLING SECURITY HOLDERS $0.10 per share $313,598 Offering We are registering 3,135,979 shares of common stock on behalf of certain selling security holders ("Selling Security Holders") named under "Selling Security Holders" within this registration statement. The Selling Security Holders are selling all of the shares. The offering price for the shares will be $0.10 per share until the shares are quoted on the Over-The-Counter Bulletin Board ("OTCBB") or an exchange. The Selling Security Holders will sell at prevailing market prices or privately negotiated prices only after the shares are quoted on either the OTCBB or an exchange. There is no guarantee that the shares will ever be quoted on the OTCBB or an exchange. The Selling Security Holders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. We will not receive any proceeds from the sale of any of the shares held by the Selling Security Holders. The offering will conclude on the earlier of when all 3,135,979 shares of common stock registered in this statement by the Selling Security Holders have been sold, or 180 days after this registration statement becomes effective with the Securities and Exchange Commission. We may, at our discretion, extend the offering for an additional 180 days. Prior to this offering, there has been no public trading market for the common stock. Our common stock is presently not traded on any market or securities exchange. PLEASE READ THIS PROSPECTUS CAREFULLY. BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, CAREFULLY READ AND CONSIDER THE RISK FACTORS INCLUDED IN THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 11. YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL OF THE RISKS ASSOCIATED WITH PURCHASING THE SHARES, INCLUDING A LOSS OF ALL OF YOUR INVESTMENT. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. The Company is a "shell company" as defined under Rule 405 of the Securities Act of 1933 and as such is subject to certain restrictions on the transferability of its stock. See "Risk Factors" herein for a description of such restrictions. The date of this Prospectus is July 5, 2016 We are offering consulting services to companies with the mission to assist them in their software purchasing decisions and to assist their management in evaluation equipment and software solutions that are economically feasible for them to accomplish their goals. Our goal is to assist companies by offering them hardware and software solutions, analysis and guidance to enhance their ability to manage their data and maximize the use of their information. By analyzing their current needs and budget, we believe we can source the most cost effective solutions for them. Since we are not a direct seller of software, we believe that we can offer objective advice on which software solutions would be most cost effective to satisfy their needs. While we believe that we are offering potential customers a service that will satisfy their needs, there is no assurance that customers will engage our services or that our efforts to market our information technology services will be perceived to be cost effective or that we will succeed in our efforts. Market Opportunity The software and mobile technology industries are rapidly growing sectors of the U.S. economy, and companies building social media applications have grown their user bases and revenues at unprecedented rates in recent years. We believe that an attractive opportunity exists for a public company focused on assisting these businesses in the evaluation and execution of hardware and software applications and technological development will provide our opportunity, which can include: Global adoption of Internet infrastructure and the proliferation of mobile technology. The cost of Internet access continues to decline, facilitating an increasing number of Internet users and driving up time spent online. This trend is magnified by the proliferation of smartphones and mobile technology, resulting in users with perpetual access to the Internet. As the Internet becomes more accessible, more data is being transmitted online, requiring evolving applications and businesses to manage this flow of information. Dramatic shifts in the way people share and consume information. The growing usage and availability of the Internet results in an increasing number of human connections. As more people are connected, an increasing volume of information is being shared. The benefits of this information flow manifest themselves in more ways than simply interacting with friends, and the Internet is becoming an increasingly important tool in businesses marketing programs. Connectivity among humans, when harnessed by businesses, can drive marketing costs down to virtually zero. We believe that as more consumption occurs on the Internet, more mediums of efficiently disseminating information are required. This secular shift creates vast opportunities for companies creating and investing in these technologies. Declining costs to build web- and mobile-based technology. The cost of starting and operating an Internet-based business has dramatically declined over the last decade as a result of dropping hardware costs and maturing open-source software. This decline has resulted in a shift in the capabilities web technology founders look for in a partner. Increasingly, entrepreneurs are valuing business support, brand connections, marketing and product support over the level of funding available from a partner. This adaptation creates a large and growing opportunity for web-technology incubators providing comprehensive support services to entrepreneurs. Increasing focus on web-based technology companies by the capital markets. The explosive growth of social media and content companies has attracted significant capital from investors. By providing hardware and software consulting to these businesses, we believe we will benefit from this heightened desire for social media investments in companies that have developed the proper hardware and software solutions to meet consumer demand. Our Business Strategy Our goal is to consult with companies that need information technology solutions to grow their businesses, which will allow them to minimize their hardware and software expenses while maximizing the information they need to manage their business including the use and application of mobile based apps. We believe that by advising management on their purchasingl decisions, we will generate client loyalty while we add value for our potential clients. The following are key elements of our strategy: Guide our clients through the challenges of early analysis. We intend to help provide our clients with the research and analysis to minimize their time to evaluate hardware and software. We believe that our services will reduce time, costs and accelerate the time to enable the client to purchase or lease information technology solutions without the pressure of commission sales professionals. We believe that we can advise them by evaluating their needs, budgets and personnel and providing strategic guidance on what hardware and software would be most economical while providing them with the data solutions they need to manage their business. Apply a structured consulting process to our clients. Web-based technology is becoming increasingly capital-efficient, and we intend to leverage this trend, when applicable, through the use of the Internet and various online software tools. By advising clients in the earliest stages of their evaluation of potential hardware and software purchases, we believe that we will allow them to achieve desired goals without the sales pressure or commissions associated with typical information technology purchases. Consult to diverse, innovative and dynamic clients. We believe that the low capital requirements to consult with our target clients enable us to spread our resources across a wide spectrum of clients. Some clients will be interested in leasing equipment and software on a monthly basis while others will be interested in purchasing their hardware and software. By diversifying our target clients, we believe we will mitigate risk and enhance the value of our services to our clients. We intend to provide information technology consulting services to our clients for fee-based compensation. We will negotiate our fees on a case-by-case basis and intend to offer hourly rates and flat fees for our services. We will provide a variety of services to client companies, including the following: Analysis of current trends; Consulting on various software applications; Assisting in the evaluation of cyber security risks and applications to minimize such risks; Investment analysis of hardware and software purchases; Formulating training and operating strategies for the purchases; and Formulating other strategies designed to maximize use of the software and/or hardware to achieve the information goals. We intend to derive income from our clients for the performance of these services. Since October 27, 2014 (our inception) to August 31, 2015, we did not generate any revenues; however, in July 2015, we commenced our marketing services and, as of September 2015, we entered into agreements with two clients. As of December 31, 2015, we have an audited accumulated deficit of $(76,525) and as of March 31, 2016, we have an accumulated deficit of $(84,656). We anticipate that we will generate revenues as we secure clients in the next twelve months. We believe that we have sufficient working capital to continue our operations for the next 12 months; however, our majority shareholders have orally agreed to advance us our working capital, if necessary. Our Selling Security Holders are offering for sale, 3,135,979 shares of common stock at an offering price of $0.10 per share. We currently have two officers and directors. These individuals allocate time and personal resources to us on a part-time basis and devote approximately 15 hours per week to us. As of the date of this Prospectus, we have 14,323,479 shares of $0.0001 par value common stock issued and outstanding, which is owned by 34 shareholders. We do not have any shares of preferred stock issued and outstanding. The aggregate market value of our common stock based on the offering price of $0.10 per share is $1,432,348. Our stockholders equity as of our most recent audit, which is December 31, 2015, is $51,312 and, as of March 31, 2016, is $43,181. THE OFFERING We have 14,323,479 shares of common stock issued and outstanding and are registering 3,135,979 of these shares on behalf of 31 certain individuals ("Selling Security Holders") named under Selling Security Holders within this registration statement. The Selling Security Holders may endeavor to sell all 3,135,979 shares of their common stock after this registration becomes effective.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001640313_amplify_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001640313_amplify_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001640313_amplify_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001640579_univision_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001640579_univision_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5ba2824f91b59ed8b51f2cc2b521fedf0edd448d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001640579_univision_prospectus_summary.txt
@@ -0,0 +1 @@
+The items in the following summary are described in more detail later in this prospectus. This summary provides an overview
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001641279_bebuzee_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001641279_bebuzee_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f170a47b7b472808a32ba4aa4cf5b8888ca76138
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001641279_bebuzee_prospectus_summary.txt
@@ -0,0 +1,419 @@
+PROSPECTUS SUMMARY 
+
+ 
+
+This summary highlights
+information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making
+your investment decision. Before deciding whether to invest in our common shares, you should carefully read this entire prospectus,
+especially the risks of investing in our common shares discussed under the heading "Risk Factors." 
+
+ 
+
+Overview 
+
+ 
+
+We intend to operate an innovative social
+networking internet platform consisting of seven products – http:/www.bebuzee.com. We plan for our platform to enable our
+users to connect and communicate with each other, share information and user-generated content, shop for deals and enjoy a wide
+range of other features and services. Our goal is to lead and redefine the internet social networking industry. To achieve this
+goal, we intend to provide a highly engaging and interactive platform that promotes connectivity, communication and sharing among
+our users.
+
+ 
+
+We intend to create a platform that
+will include seven products to offer users a unique and comprehensive experience. These products will be:
+
+ 
+
+ 
+ -
+ Bebuzee:
+ our primary product and social network, is the first of its kind to share advertising revenue with its users by accumulating
+ impressions, which then add up to become an earning. Bebuzee users are able to post/share statuses, write blogs, ask questions,
+ start trends and even rate other users images, with a modern-day approach and a true emphasis on enabling users to
+ get the most out of their social media. The Social Network aspect allows users to select, edit, filter and upload a range
+ of images and videos of their choice to share with their networks.
+
+ 
+
+ 
+ -
+ Shopping-By-Images:
+ an online shopping website that allows users and suppliers to create an account and either make purchases/add new products.
+ Users can set their current location and carry out detailed searches for items within a particular distance and add items
+ to their favorites.
+
+ 
+
+ 
+ -
+ Properbuz:
+ an online real estate database, Properbuz supplies information on millions of rental and for sale properties across the world.
+ Properbuz is open to all, whether you are searching for a property or an agent/landlord looking to add a new listing.
+
+ 
+
+ 
+ -
+ Points:
+ a worldwide directory of businesses, Points is a crowd-sourced business review site with a strong social networking element.
+ Users have the ability to endorse, review and communicate with the business or organization directly. Businesses can also
+ post advice or notes related to their industry for the public to view.
+
+ 
+
+ 
+ -
+ Adbuz:
+ an advertising network that gives advertisers the opportunity to specifically target visitors by locations; age groups; languages
+ and industry categories that are likely to generate them maximum revenue. Adbuz also allows advertisers to maximize their
+ returns by promoting posts, sponsoring hash tags, growing their network and using the featured business directory, all of
+ which are accessible on Bebuzee.
+
+5
+
+ 
+
+ 
+
+ 
+
+ 
+ -
+ Bebuzee
+ World News: a new platform, where the public can find the latest of world news and gossip. News categories will ranging from
+ breaking news to sport and politics. News feeds are updated several times a day, allowing users to stay current on the news
+ that is important to them.
+
+ 
+
+ 
+ -
+ Question
+ & Answer: a community-driven question and answer site that allows to use the collective knowledge of other users as a
+ resource. While anyone will be able to view the site, only Bebuzee users will be able to ask open questions under categories.
+ Other users can then respond or make one or more comments on what they believe is the most suitable answer.
+
+ 
+
+The Company intends to offer users a comprehensive
+and unique alternative to other social networking sites. However, there can be no assurances that our efforts to develop the proposed website
+will succeed, or that we will be able to successfully market the proposed website, if developed.
+
+ 
+
+ 
+
+Since inception in November, 2012, we have
+generated minimal revenues ( 3,471) and have incurred a cumulative deficit of ( 80,991) We will seek to generate revenues
+primarily from online advertising. We will also seek to generate revenues through paid monthly subscriptions from real estate
+agents listed on "Properbuz" and merchants listed on "Shopping by Images."
+
+ 
+
+Our Industry 
+
+ 
+
+Social networking internet services provide
+users with interactive platforms to share and consume various forms of media content. We believe that as users have become more
+comfortable and trusting in their interactions with others over the internet, the real name model for social networking has become
+increasingly popular worldwide, and will continue to grow in the near future. Social networks provide benefits to users by facilitating
+personal communication and sharing among actual friends as well as to advertisers by facilitating word-of-mouth advertising among
+friends and offering targeted advertising based on user s preferences, personal traits and online activities. Social networking
+service providers can monetize their user base through multiple channels, including online advertising and subscription revenue.
+Our services will seek to take advantage of this opportunity by offering users and businesses unique ways to connect.
+
+ 
+
+Our Competitive Strengths
+
+We believe that the following strengths contribute
+to our success and differentiate us from our competitors:
+
+ 
+
+ 
+
+ 
+ 
+ 
+ integrated
+ platform consisting of multiple services and features; 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ introduction
+ of new features and services; 
+
+ 
+
+ 
+ 
+ 
+ multiple
+ established revenue sources; 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ innovative and user-oriented
+ culture, with a philosophy of giving back to our users.
+
+ 
+
+Our Strategies 
+
+ 
+
+Our goal is to redefine and lead the internet
+social networking industry worldwide. We intend to achieve our goal through implementing the following key strategies:
+
+ 
+
+ 
+ 
+ 
+ focusing
+ on long-term success; 
+
+ 
+
+ 
+ 
+ 
+ continually
+ enhancing our user experience and engagement; 
+
+ 
+
+ 
+ 
+ 
+ growing
+ and broadening our user base; 
+
+ 
+
+ 
+ 
+ 
+ leveraging
+ our platform and brand to increase monetization; 
+
+ 
+
+ 
+ 
+ 
+ growing
+ mobile usage of our platform; and 
+
+ 
+
+ 
+ 
+ 
+ pursuing strategic alliances
+ and partnerships.
+
+ 
+
+Our Challenges
+
+ 
+
+We expect to face risks and uncertainties
+related to our business and industry, including those relating to our ability to:
+
+ 
+
+ 
+
+ 
+ 
+ 
+ effectively
+ respond to competition in all aspects of our business; 
+
+ 
+
+ 
+ 
+ 
+ achieve
+ and sustain operating profit, given our history of operating losses; 
+
+ 
+
+ 
+ 
+ 
+ leverage
+ our user base to expand into new services which we believe have synergies with our platform; 
+
+ 
+
+ 
+
+6
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ increase
+ our revenues from online advertising and other sources; 
+
+ 
+
+ 
+ 
+ 
+ maintain
+ a strong brand image. 
+
+ 
+
+See "Risk Factors"
+and other information included in this prospectus for a discussion of these and other risks and uncertainties associated with
+our business and investing in our common shares.
+
+ 
+
+Corporate History and Structure 
+
+ 
+
+We began our operations on November 12, 2012
+as Everyposition Limited, an England and Wales limited liability corporation. On June 16, 2014 we changed our corporate name to
+Bebuzee Limited
+
+ 
+
+On September 18, 2009, we implemented a 1,500,000-
+for-one share split, which redesignated the 200 common shares outstanding as 300,000,000 shares outstanding All information in
+this prospectus concerning share and per share data gives retroactive effect to the share split.
+
+ 
+
+ 
+
+Corporate Information
+
+ 
+
+Our principal executive offices are located
+at 30 Avenue Road, Bournemouth, BH2 5SL, United Kingdom. Our telephone number at this address is +44 1202 554 950.
+
+ 
+
+Investors should submit any inquiries to the
+address and telephone number of our principal executive offices set forth above. Our corporate website is www.bebuzee.com, and
+the information contained on this website is not a part of this prospectus. Our agent for service of process in the United States
+is Adam S. Tracy, Esq., 520 W. Roosevelt Road, Suite 201, Wheaton, IL 60187
+
+ 
+
+ 
+
+Implications of Being an Emerging Growth Company and a
+Foreign Private Issuer 
+
+ 
+
+ As
+a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company"
+as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage
+of specified reduced reporting and other burdens that are otherwise applicable generally to public companies in the United States.
+These provisions include:
+
+ 
+ -
+ a
+ requirement to have only two years of audited financial statements and only two years of related Management's Discussion and
+ Analysis of Financial Condition and Results of Operations disclosure;
+
+ 
+
+ 
+ -
+ an
+ exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant
+ to the Sarbanes-Oxley Act of 2002; and
+
+ 
+
+ 
+ -
+ an
+ ability to take advantage of an extended transition period to comply with new or revised accounting standards applicable to
+ public companies.
+
+ 
+
+We will take advantage of these provisions
+if applicable for up to five years or such earlier time that we are no longer an emerging growth company. Because we are taking
+advantage of these provisions, the information that we provide to shareholders may be different than the information you might
+receive from other public companies in which you hold equity.
+
+ 
+
+ We
+would cease to be an emerging growth company if we have more than $1 billion in annual revenue, have more than $700 million
+in market value of the ordinary shares held by non-affiliates, or issue more than $1 billion of non-convertible debt over
+a three-year period or otherwise after the last day of our fiscal year following the fifth anniversary of the date of the sale
+of ordinary shares in this offering.
+
+ 
+
+ Upon
+the completion of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as
+a non-U.S. company with foreign private issuer status. Even if we no longer qualify as an emerging growth company, as long as
+we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that
+are applicable to U.S. domestic public companies, including:
+
+ 
+
+ the sections of the Exchange
+Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange
+Act;
+
+ the sections of the Exchange
+Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit
+from trades made in a short period of time; and
+
+ the rules under the Exchange
+Act requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports on Form 10-Q containing
+unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant
+events.
+
+ 
+
+Both foreign private issuers
+and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even
+if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from
+the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private
+issuer.
+
+ 
+
+7
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001642363_seguin_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001642363_seguin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ac9d2b1fa1c283e4bb0e5dd14997ed1557bb7c5b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001642363_seguin_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001643858_blue-coat_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001643858_blue-coat_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001643858_blue-coat_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001643930_dynamic_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001643930_dynamic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..118d32d498b8f549d53845b544670c4029a6460a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001643930_dynamic_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights material information appearing elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary may not contain all the information you should consider before investing in our common stock. You should carefully read this prospectus in its entirety before investing in our common stock, including the sections titled "Risk Factors" and "Management s Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. Unless the context otherwise requires, we use the terms "we", "us" and "our" in this prospectus to refer to Dynamic Enviro, Inc., a Florida incorporated entity. None of our officers or directors agreed to serve as our officer or director in connection with any plan, agreement or understanding that they, respectively, would solicit, participate in, or facilitate the sale of us (or a business combination with) to a third party looking to obtain or become a public reporting entity, and the officers and directors also confirm that they have no such present intentions. This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire Prospectus, including "Risk Factors", "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. Our management has determined that it is in our best interests to become a reporting company under the Securities and Exchange Act of 1934 as amended ("Exchange Act"), and endeavor to establish a public trading market for our common stock. Our management believes that establishing a public market: (i) will increase our profile as an active company in the environmental remediation/emergency response services market, giving us greater identity and recognition: and (ii) will make it easier for us to attract additional equity capital, which we need to expand our business in other geographic areas. There is no assurance that we will accomplish any of the foregoing goals and prospective investors are cautioned to carefully read the risk factors set forth herein prior to making an investment decision. Corporate Background We were incorporated in the State of Florida on October 31, 2014; however, we did not commence operations until on or about January 31, 2015. From June 2005 to January 30, 2015, we operated under the name Dynamic Environmental ("Dynamic Environmental"), an Illinois corporation incorporated on June 21, 2005. Dynamic Environmental conducted environmental and disaster response services but ceased providing such services as of February 2015. In January 2015, we assumed Dynamic Environmental s operations and business. On October 30, 2015, Dynamic Environmental was dissolved in the State of Illinois because as disclosed under the title immediately below, "Transition from Dynamic Environmental to Our Current Business Operations and Corporate Structure", we had developed business contacts in Florida and we then planned (and continue to plan) on establishing a service center in Northern Florida. We did not dissolve Dynamic Environmental until October 30, 2015 because from May 2015 to September 2015, we were transferring the title of our trucks, trailers and pressure washer equipment from Dynamic Environmental to us. The transition from Dynamic Environmental to our current business operations and corporate structure was not the result of a share exchange, reorganization, business combination or other combination or transaction between Dynamic Environmental and us. We no longer conduct business through Dynamic Environmental; however, as stated in Note 1 to our audited financials for the periods ending December 31, 2014 and December 31, 2015, we are considered a continuation of Dynamic Environmental and our audited financials are presented in which the prior historical information consists solely of Dynamic Environmental s results of operations and cash flows. As such, the revenues and net income (losses) and other financial statement entries and disclosure reflected in our financial statements for our fiscal years 2014 and 2015 only reflect the financial results of Dynamic Environmental. As reflected in our audited financial statements, our revenues for the years ended December 31, 2014 and December 31, 2015 were $909,352 and $1,905,069, respectively. We had a net profit of $54,378 for the year ended December 31, 2014 and a net loss of $206,780 for the year ended December 31, 2015. The foregoing revenues and net profit and net losses pertain only to Dynamic Environmental consistent with the preparation of our financial statements, which is reflected in our audited financials Transition from Dynamic Environmental to Our Current Business Operations and Corporate Structure We transitioned our business and our domicile from the Illinois incorporated Dynamic Environmental to the Florida incorporated entity, Dynamic Enviro, Inc. and dissolved Dynamic Environmental because Dynamic Environmental had conducted subcontracted environmental remediation services during the period of 2008 to 2013 predominately in the Gulf coast and based on the foregoing had decided that its first area of expansion would occur in Florida by establishing a regional service center to be located in Northern Florida (See Expansion Plans at pages 24-25). In connection with the transition, apart from related accounting and auditing costs, the only material expenditure of our assuming the business of Dynamic Environmental is $1,168 pertaining to the transfer of titles, license plates and permits from Dynamic Environmental to us. Our services and financial operations as detailed on pages 22-24 of this prospectus are identical to Dynamic Environmental. We assumed the operations of Dynamic Environmental, a related company under common control with our Founder/Director, by our continuing its business while Dynamic Environmental, ceased operations of its business. Therefore, we are considered a continuation of Dynamic Environmental. The transfer of the business from Dynamic Environmental. to us was accomplished solely through the transfer of Dynamic Environmental s net assets to us and did not involve a merger, business combination, exchange of shares or other transaction. The assumption of Dynamic Environmental s business was accounted for as a transfer of a business between entities under common control and the financial statements included herein are presented as a retrospective combination of the entities for all periods presented as if the combination had been in effect since the inception of common control. As such, Dynamic Environmental s revenues and net profit/loss are considered our revenues and net profit/loss for our fiscal years 2015 and 2014. Our Chief Executive Officer/Director, Brant Cochran, is the founder, organizer and 100% owner of Dynamic Environmental as a private company. Brant Cochran founded and organized our business and owns 77.1% of our outstanding common stock shares and under the securities definition of a promoter is considered a promoter. Apart from Dynamic Environmental (as a private company) and us, our Chief Executive Officer/Director or our Chief Financial Officer/Director or our Director has never founded or organized any business associated with a pre-pubic or public company or associated with any offering involving a pre-public or a public company. Going Concern Our financial statements have been audited by MaloneBailey, LLP, our auditors, and prepared by management on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities and commitments in the normal course of business for the foreseeable future. We had a working capital deficit of $17,183 at December 31, 2015 and had suffered net losses of $206,780 for the fiscal year ended December 31, 2015. We have funded activities to date from debt financings and earnings. These factors raise substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs over the next twelve months with existing cash on hand and public issuance of common stock. While we believe that we will be successful in obtaining the necessary financing and generating revenue to fund our operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such additional funding will be achieved and that we will succeed in our future operations. Where You Can Find Us Our principal executive office and mailing address is 9100 Kiln Waveland Cutoff Road, Waveland, Mississippi 39576. Our telephone number is (228) 231-1187 Business Overview We are a solutions orientated company providing a complete array of environmental remediation and emergency response services. Overall Strategic Direction. To expand our business and geographic service areas through the establishment of service centers that operate within a 100-200 mile radius as detailed on pages 22-24. Our Website Our website is located at www.deienv.com. No information included in our website is included in this prospectus. Risk Factors Because our Chief Executive Officer and Chief Financial Officer have no experience managing an SEC Reporting Company that is publicly traded this could adversely impact our ability to comply with the reporting requirements of US securities laws. We fact intense competition with environmental companies that have greater financial, operational and personnel resources than we do. We have potential liabilities involving our customers and third parties. Because we do not intend to pay any dividends on our common stock, investors seeking dividend income or liquidity should not purchase shares of our common stock in this offering. Shares of our stock may suffer from low trading volume and wide fluctuations in market price. There is no public trading market for our common stock and an active market may never develop. Because we are an environmental remediation company, should regulation of environmental matters decrease, our results of operations will be adversely affected. A material decrease in our emergency response business will negatively impact our results of operations. Should we fail in our expansion plans, our results of operations will be negatively impacted. Our financial results may be adversely affected if we are unable to execute on our marketing strategy. We have incurred, and will continue to incur, increased costs, and are subject to additional regulations and requirements as a result of being a public company, which could lower our profits or make it more difficult to run our business. The shares of our common stock are highly speculative in nature and involve a high degree of risk. A material decrease in our emergency response business will negatively impact our results of operations. Approximately 88% and 97% of our business has been composed of 2 customers each for the fiscal year ending December 31, 2015 and the 3-month period ending March 31, 2016, respectively; should we lose one or more of these customers, our revenues will be materially and adversely affected. We may have difficulty obtaining officer and director coverage or obtaining such coverage on favorable terms or be financially unable to obtain any such coverage, which may make it difficult for our attracting and retaining qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. Emerging Growth Company Status We are an "emerging growth company", as defined in the Jumpstart our Business Startups Act of 2012 ("JOBS Act"), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of the transition period pursuant to Section 107(b). We could remain an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Notwithstanding the above, we are also currently a "smaller reporting company", meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a "smaller reporting company", at such time are we cease being an "emerging growth company", the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth company" or a "smaller reporting company". Specifically, similar to "emerging growth companies", "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001644149_spelt_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001644149_spelt_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d4f3e5da5d8acf8d53bd688ad4b004eabceccf72
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001644149_spelt_prospectus_summary.txt
@@ -0,0 +1,101 @@
+PROSPECTUS SUMMARY
+
+ 
+
+As used in this prospectus, unless the context otherwise requires, we, us, our, and Spelt Group Corp. Refers to Spelt Group Corp. The following summary does not contain all of the information that may be important to you. You should read the entire prospectus before making an investment decision to purchase our common stock.
+
+ 
+
+SPELT GROUP CORP.
+
+ 
+
+Spelt Group Corp. was incorporated in Nevada on October 26, 2014. We are a development stage company and intend to commence operations in the business of graphic design. Our primary services are aimed at medium-sized businesses and planned to be as follows: creating, producing, redesigning and delivering graphic works of various kinds on customer demand. By graphic works it is implied: personal or corporate logos, brand logos, brand identities, redesign of existing logos or designing logos based on customer s sketches, graphic posters, and customer s brandbooks. 
+
+It is not intended by the Company, the Company s officers and directors, any Company promoters, or their affiliates for the Company, once it is reporting, to be used as a vehicle for a private company to become a reporting company.
+
+Spelt Group Corp. is not a Blank Check company. We have no plans or intentions to engage in a merger or acquisition with an unidentified company, companies, entity or person.
+
+We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $27,000 for the next twelve months as described in our Plan of Operations. We have to sell a minimum of 50% of the offering shares to obtain our required minimum ($27,000) of net offering proceeds taking into account the anticipated $8,000 costs of the offering. There is no assurance that we will generate significant revenue in the first 12 months after completion of our offering or ever generate significant revenue.
+
+Being a development stage company, we have a very limited operating history. If we do not generate significant revenue we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at Landhausstrasse, 228, Stuttgart, Germany 70178. Our phone number is +442038082670. 
+
+From inception (October 26, 2014) until the date of this filing, we have had limited operating activities. From inception (October 26, 2014) through November 30, 2015 we reported revenue of $3,800 and an accumulated deficit of $2,646. Our independent registered public accounting firm has issued an audit opinion for Spelt Group Corp., which includes an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern. To date, we have established our Company, developed our business plan and developed the business-model of our graphic design agency and have been looking for the potential clients. On November 1, 2015 we signed a Graphic Design Agreement with KonoPostWelle, LLC. As a result of this agreement, we have received $2,000 of revenue.
+
+As of November 30, 2015, we have completed and delivered full service (Logo Design, Brand Identity Design, Business Card Design, Corporate Stationery Design, Company Brochure Design) to KonoPostWelle, LLC and preparing additional work on an hourly basis, according to the main terms of the signed Graphic Design Agreement.
+
+On November 18, 2015 we signed a Graphic Design Agreement with Blumenen Brucke, GmbH and as a result of this agreement we generated $1,800 of revenue.
+
+As of November 30, 2015, we have completed and delivered full service (Corporate Magazine Design, Imposition, Typesetting) to Blumenen Brucke, GmbH.
+
+On November 30, 2015
+
+,
+
+ we have signed a Representative Agreement with independent contractor to promote our services through a sales representative. On December 1, 2015, we signed a Graphic Design Agreement with Ei Gi Ci, GmbH. The price of this contract is $4,000
+
+, and we have received $2,000 of prepayment on January 11, 2016. We have started to prepare Logo Design, Business Card Design, Corporate Stationery Design, Company Brochure Design and Promo Design according to the main terms of the signed Graphic Design Agreement.
+
+On December 3, 2015, we
+
+signed a Freelance Graphic Design Contract with a freelance designer on a temporary basis.
+
+As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. 
+
+Proceeds from this offering are required for us to proceed with our business plan over the next twelve months. We require minimum funding of approximately $27,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. We have to sell a minimum of 50% of the offering shares to obtain our required minimum ($27,000) of net offering proceeds taking into account the anticipated $8,000 costs of the offering. If we are unable to obtain minimum funding of approximately $27,000, our business may fail. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities.
+
+5
+
+THE OFFERING
+
+The Issuer:
+
+ 
+
+Spelt Group Corp.
+
+Securities Being Offered:
+
+ 
+
+7,000,000 shares of common stock
+
+Price Per Share:
+
+ 
+
+$0.01
+
+Duration of the Offering:
+
+ 
+
+The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 7,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 7,000,000 shares registered under the Registration Statement of which this Prospectus is part. 
+
+ 
+
+Gross Proceeds
+
+ 
+
+If 25% of the shares sold - $17,500
+
+If 50% of the shares sold - $35,000
+
+If 75% of the shares sold - $52,500
+
+If 100% of the shares sold - $70,000
+
+Securities Issued and Outstanding:
+
+There are 7,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Elena Petrova. 
+
+If we are successful at selling all the shares in this offering, we will have 14,000,000 shares issued and outstanding.
+
+Subscriptions
+
+All subscriptions once accepted by us are irrevocable.
+
+Registration Costs
+
+We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001644675_mimecast_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001644675_mimecast_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0e9698f2a9499221f091e7efd7b5cc781e21a952
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001644675_mimecast_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary This summary does not contain all of the information you should consider before buying our ordinary shares. You should read the entire prospectus carefully, especially the Risk Factors section beginning on page 10, Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 43 and our consolidated financial statements and the related notes appearing elsewhere in this prospectus, before deciding to invest in our ordinary shares. Company overview We are a leading provider of next generation cloud security and risk management services for corporate information and email. Our fully-integrated suite of proprietary cloud services protects customers of all sizes from the significant business and data security risks to which their email system exposes them. We protect customers from today s rapidly changing threat landscape where email has become a powerful attack vector and data leak concern. We also mitigate the significant business disruption that email failure or downtime causes. In addition, our archiving services secure, store and manage critical corporate communications and information to address growing compliance and e-discovery requirements and enable customers to use this increasing archive of information to improve employee productivity. Email is a critical tool for organizations of all sizes. Protecting and managing email has become more complicated due to expanding security and compliance requirements and the rapid increase in both the volume and the importance of the information transmitted via email. Organizations are increasingly at risk from security breaches of sensitive data as sophisticated email-based attacks or data leaks have become more common. Additionally, organizations are not just using email for communication, they are also increasing their use of email archives as an active repository of vital corporate information needed to meet compliance requirements and support employee productivity. As a result, email represents one of the highest concentrations of business risk that organizations may face. We developed our proprietary cloud architecture to offer customers comprehensive email security, continuity and archiving capabilities in a single service that makes it easier for them to protect themselves effectively in a worsening and rapidly changing security and risk environment. Providing a fully-integrated service also simplifies ongoing management and service deployment. Customers can then decommission the often costly and complex point products and on-premises technology they have traditionally used to tackle these risks. We also make it easier for customers to move more of their IT workloads to the cloud. We serve approximately 19,900 customers and protect millions of their employees across the world. Our service scales effectively to meet the needs of customers of all sizes and we have optimized our sales organization and channel to address each segment effectively. We have more than 700 employees in nine offices in the United States, the United Kingdom, Australia and South Africa. For the fiscal years ended March 31, 2016, 2015 and 2014, our revenues were $141.8 million, $116.1 million and $88.3 million, respectively, representing year-over-year growth of 22% for 2016 and 31% for 2015. Revenue growth on a constant currency basis was 30% and 33% for the fiscal years ended March 31, 2016 and 2015, respectively. For the three months ended June 30, 2016 and 2015, our revenues were $41.5 million and $33.3 million, respectively, representing year-over-year growth for the period of 24%. Growth for this period was 32% on a constant currency basis. Our net loss, net income and net loss in the fiscal years ended March 31, 2016, 2015 and 2014 were $3.2 million, $0.3 million and $16.9 million, respectively. Our net income and net loss in the three months ended June 30, 2016 and 2015 were $0.2 million and $2.2 million, respectively. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Prospectus (Subject to completion) Issued September 26, 2016 4,000,000 shares Mimecast Limited Ordinary shares The selling shareholders identified in this prospectus are selling a total of 4,000,000 ordinary shares of Mimecast Limited. We are not selling any ordinary shares and will not receive any proceeds from the sale of ordinary shares by the selling shareholders. Our ordinary shares are listed on the NASDAQ Global Select Market under the symbol MIME . On September 23, 2016, the last reported sale price of our ordinary shares on the NASDAQ Global Select Market was $16.24 per share.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001645926_multi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001645926_multi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001645926_multi_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001646576_rito_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001646576_rito_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b0c7f5a1bbc6c2acfccd2e188a68562be7e7fadc
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001646576_rito_prospectus_summary.txt
@@ -0,0 +1 @@
+PRELIMINARY PROSPECTUS Rito Group Corp. 1,820,000 SHARES OF COMMON STOCK $0.0001 PAR VALUE PER SHARE Prior to this Offering, no public market has existed for the common stock of Rito Group Corp. Upon completion of this Offering, we will attempt to have the shares quoted on the OTCQB operated by OTC Markets Group, Inc. There is no assurance that the Shares will ever be quoted on the OTCQB. To be quoted on the OTCQB, a market maker must apply to make a market in our common stock. As of the date of this Prospectus, we have not made any arrangement with any market makers to quote our shares. Additionally, it should be noted that our company is currently a shell company. We are not however, a blank check company and have no plans or intentions to engage in a business combination following this offering. In this public offering we, "Rito Group Corp." are offering 1,000,000 shares of our common stock and our selling shareholders are offering 820,000 shares of our common stock. We will not receive any of the proceeds from the sale of shares by the selling shareholders. Shareholders may also sell their shares at market prices or in privately negotiated transactions if at such time are shares are quoted on the OTC marketplace. The offering is being made on a self-underwritten, "best efforts" basis. There is no minimum number of shares required to be purchased by each investor. The shares offered by the Company will be sold on our behalf by our Chief Executive Officer, Choi Tak Yin Addy. Mr. Choi is deemed to be an underwriter of this offering. Our Chief Operating Officer, Mr. Or Ka Ming is also deemed to be an underwriter. There is uncertainty that we will be able to sell any of the 1,000,000 shares being offered herein by the Company. Mr. Choi will not receive any commissions or proceeds for selling the shares on our behalf. All of the shares being registered for sale by the Company will be sold at a fixed price of $1.50 per share for the duration of the Offering. After this offering has ended or terminated, if at any such time our shares are quoted on the Over The Counter Marketplace "OTC" shareholders may sell their own shares at prevailing market prices or at privately negotiated prices. Assuming all of the 1,000,000 shares being offered by the Company are sold, the Company will receive $1,500,000 in gross proceeds. Assuming 750,000 shares (75%) being offered by the Company are sold, the Company will receive $1,125,000 in gross proceeds. Assuming 500,000 shares (50%) being offered by the Company are sold, the Company will receive $750,000 in gross proceeds. Assuming 250,000 shares (25%) being offered by the Company are sold, the Company will receive $375,000 in gross proceeds. There is no minimum amount we are required to raise from the shares being offered by the Company and any funds received will be immediately available to us. There is no guarantee that we will sell any of the securities being offered in this offering. Additionally, there is no guarantee that this Offering will successfully raise enough funds to institute our company s business plan. Additionally, there is no guarantee that a public market will ever develop and you may be unable to sell your shares. This primary offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this Prospectus, unless extended by our directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. In their audit report dated August 7, 2015, our auditors have expressed substantial doubt as to our ability to continue as a going concern. *Choi Tak Yin Addy will be selling shares of common stock on behalf of the Company simultaneously to selling shares of his own personal stock from his own account. A conflict of interest may arise between Mr. Choi s interest in selling shares for his own account and in selling shares on the Company s behalf. Please note that at this time Mr. Choi intends to sell the Company s shares prior to selling his own shares, although he is under no obligation to do so. Mr. Choi will decide whether shares are being sold by the Company or by himself. Regarding the sale of Mr. Choi s shares, they will be sold at a fixed price of $1.50 for the duration of the offering. If all the shares are not sold in the company s offering, there is the possibility that the amount raised may be minimal and might not even cover the costs of the offering, which the Company estimates at $25,000. The proceeds from the sale of the securities will be placed directly into the Company s account; any investor who purchases shares will have no assurance that any monies, beside their own, will be subscribed to the prospectus. All proceeds from the sale of the securities are non-refundable, except as may be required by applicable laws. All expenses incurred in this offering are being paid for by the Company. There has been no public trading market for the common stock of Rito Group Corp. The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, which became law in April 2012 and will be subject to reduced public company reporting requirements. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE REFER TO , ' ': RISK FACTORS BEGINNING ON PAGE 6. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. You should rely only on the information contained in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included in this Prospectus. If anyone provides you with different information, you should not rely on it. The date of this prospectus is ________________, 2015 - 1 - The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001647092_arc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001647092_arc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3034a1f8c7d7873822b4b12bf60b5e801cca271d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001647092_arc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, references to the "Company," "we," "our", "us" or "ARC" refer to Arc LifeStyle Group Inc. unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001647338_gridsum_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001647338_gridsum_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9d9df925da39ebd8dbde0e6ce1b1fa03aa7c79db
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001647338_gridsum_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under "Risk Factors," before deciding whether to buy the ADSs. Our Business Gridsum is a leading provider of sophisticated data analysis software for multinational and domestic enterprises and government agencies in China. Our proprietary distributed data architecture allows our customers to efficiently collect and analyze vast amounts of information that is collected, indexed and stored in an organized manner, or structured data, and information that is not organized, or unstructured data. Our core technology, the Gridsum Big Data Platform, with its machine learning capability, performs multi-dimensional correlation analysis and analyzes complex real-time events. With the support of our Big Data Platform, our customers use our data visualization and data-mining technologies to identify complex relationships within their data and gain new insights that help them make better business decisions. Our leading position is based on our solutions and our core technologies. Our software products are designed for a variety of commercial and governmental applications. To help our enterprise customers reach China's large and growing online and mobile population, our initial products have focused on digital marketing analytics and automation solutions. We were among the first companies to offer web analytics solutions based on data warehouse technology, and we were among the first digital intelligence companies in China to build solutions entirely on a distributed data warehouse architecture using the open-source Hadoop framework. In addition, we believe we are the only China-based company to provide solutions to enterprise customers that cover web, video and mobile analytics. Our solutions analyze data from approximately 61 million internet and mobile sessions per day from users operating on over 233 million desktop and mobile devices. By leveraging the analytic capabilities of our Big Data Platform, we have developed additional software solutions, including new media analytics and information discovery solutions, to address a broad range of customer needs. In 2015, our customers included Fortune 500 and China 500 enterprises, comprising more than 300 customers across diverse industries, including over 30 Chinese government agencies. We have grown rapidly in recent periods, with net revenues in 2013, 2014 and 2015 of RMB62.5 million, RMB124.5 million and RMB234.8 million (US$35.3 million), respectively, representing year-over-year growth of 99% and 89%, respectively, and net revenues in the six months ended June 30, 2015 and 2016 of RMB84.6 million and RMB148.1 million (US$22.3 million), respectively, representing period-over-period growth of 75%. We have continued to make expenditures and investments, including in our technologies, personnel, sales and marketing, infrastructure and operations, and incurred net losses of RMB30.7 million, RMB37.3 million, RMB48.8 million (US$7.3 million) and RMB29.7 million (US$4.5 million) in 2013, 2014, 2015 and the six months ended June 30, 2016, respectively. Our customers increased in number from 141 in 2013 to 211 in 2014 and 307 in 2015, and over the same period, our average customer contribution increased 33% and 30% year over year. We enjoy high customer loyalty and revenue retention, with 168%, 116% and 138% revenue retention rates in 2013, 2014 and 2015, respectively. We calculate average customer contribution by dividing total net revenues in a period by total number of customers in the same period. Our revenue retention rate consists of aggregate net revenues from all customers in the prior period that remain customers in the current period, divided by total net revenues from all customers in that prior period. Key Advantages of our Solutions We deliver our solutions as cloud-based software-as-a-service, or SaaS, offerings that are easy to deploy, easy to access, automatically updated without disruption, and enable our customers to reduce AMENDMENT NO. 2 TO FORM F-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents IT support costs by outsourcing hardware and software maintenance and support. The key advantages of our solutions include: fast and efficient multi-dimensional drill-down that enables customers to derive valuable intelligence from both structured and unstructured data quickly and easily; simple, customizable visualization that is intuitive and user-friendly; fully integrated solution suites that share a common user interface accessible across all screen formats; easy and rapid deployment, without specialized training requirements, and ready integration with customers' management and operating systems; lower total cost of ownership without investment in additional hardware or IT infrastructure; and designed with the China market in mind and readily customizable for the needs of specific enterprise customers. Our Core Technology We offer suites of solutions that are built on our core technology. These end-to-end solution suites address customer needs in marketing automation, e-Government, new media, information discovery and visualization. Our solutions and core technologies are built on our distributed data warehouse architecture using the open-source Hadoop framework. Our data architecture offers high scalability and high performance characteristics. Our core technology consists of our data visualization and interactive data mining technologies, the Gridsum Big Data Platform and our data acquisition and data pre-processing technologies. Our Competitive Strengths Our mission is to help enterprises and government organizations in China use data in new and powerful ways to make better informed decisions and be more productive. The competitive strengths that we believe enable us to achieve our mission include: our position as a digital intelligence pioneer; powerful cumulative data assets; our diversified customer base; high customer loyalty and revenue retention; scalable business model; and experienced and visionary management team. Our Growth Strategy In order to grow our business and to fulfill our mission, we have implemented a number of key strategies, including: continuing to innovate; increasing market penetration; growing our customer base; and expanding our share of customer IT and marketing budgets. Gridsum Holding Inc. (Exact name of Registrant as specified in its charter) Not Applicable (Translation of Registrant's name into English) Cayman Islands (State or other jurisdiction of incorporation or organization) 7372 (Primary Standard Industrial Classification Code Number) Not Applicable (I.R.S. Employer Identification Number) Jade Palace Hotel Office Building, 8th Floor 76 Zhichun Road Haidian District, Beijing 100086 People's Republic of China (86-10) 8261-9988 (Address, including zip code and telephone number, including area code, of Registrant's principal executive offices) Table of Contents Corporate History and Structure We commenced operations in December 2005 with the establishment of Beijing Gridsum Technology Co., Ltd., or Beijing Gridsum, in China. We have established five additional operating companies: Beijing Moment Everlasting Ad Co., Ltd., in January 2011, and its wholly owned subsidiary, Beijing Yunyang Ad Co., Ltd., in March 2013, Guoxinjunhe (Beijing) Technology Co., Ltd., in April 2012, Beijing Guoxinwangyan Technology Co., Ltd., in August 2015, and Beijing Gridsum Yizhun Technology Co., Ltd., in February 2016. We refer to these operating companies as Beijing Moment, Beijing Yunyang, Guoxinjunhe, Beijing Guoxinwangyan and Beijing Yizhun, respectively. From July to December 2014, we undertook a reorganization of our group of companies in preparation for our proposed initial public offering in the United States. We incorporated Gridsum Holding Inc., or Gridsum Cayman, under the laws of the Cayman Islands on July 21, 2014, as the parent holding company of our group of related companies. Gridsum Cayman established a wholly-owned subsidiary in Hong Kong, Gridsum Holding (China) Limited, or Gridsum HK, which in turn established a wholly owned subsidiary in the PRC, Dissector (Beijing) Technology Co., Ltd., which we refer to as the WFOE. Also as part of this reorganization, we established Gridsum Holding (Beijing) Co., Ltd., or Gridsum PRC Holding, in China, which acquired full ownership of Beijing Gridsum, Beijing Moment and Guoxinjunhe. The beneficial owners of Gridsum PRC Holding are our founders, Guosheng Qi and Guofa Yu, and other key employees. To comply with applicable PRC laws and regulations, we conduct our operations in China principally through Beijing Gridsum, Guoxinjunhe, Beijing Moment, Beijing Yunyang, Beijing Guoxinwangyan and Beijing Yizhun, all of which are subsidiaries of Gridsum PRC Holding. The WFOE has entered into a series of contractual arrangements with Gridsum PRC Holding, the parent of our PRC operating companies, and the shareholders of Gridsum PRC Holding. These contractual arrangements allow us to exercise effective control over Gridsum PRC Holding and receive substantially all of the economic benefits of Gridsum PRC Holding. As a result, we are the primary beneficiary of Gridsum PRC Holding and treat it as our variable interest entity, or VIE, under accounting principles generally accepted in the United States, or U.S. GAAP. We have consolidated the financial results of Gridsum PRC Holding and its subsidiaries in our consolidated financial statements. Law Debenture Corporate Services Inc. 4th Floor, 400 Madison Avenue New York, New York 10017 (212) 750-6474 (Name, address, including zip code and telephone number, including area code, of agent for service) Table of Contents The following diagram illustrates our corporate structure, including our significant subsidiaries, our consolidated VIE and its subsidiaries: Implications of Status as an Emerging Growth Company As a company with less than US$1.0 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specific reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the required auditor attestation of the emerging growth company's internal controls. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to "opt out" of this provision, and as a result we will comply with new or revised accounting standards when they are adopted and compliance is required for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable. We will remain an emerging growth company until the earliest of: the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; the last day of our fiscal year following the fifth anniversary of the completion of this offering; the date on which we have, Copies to: Gordon K. Davidson, Esq. Horace L. Nash, Esq. Fenwick & West LLP 801 California Street Mountain View, CA 94041 United States of America (650) 988-8500 Niping Wu, Esq. Eva H. Wang, Esq. Fenwick & West LLP Unit 908, 1155 Fang Dian Road Pudong, Shanghai 201204 People's Republic of China (86-21) 8017-1200 Chris K.H. Lin, Esq. Daniel Fertig, Esq. Simpson Thacher & Bartlett LLP c/o 35th Floor, ICBC Tower 3 Garden Road Central Hong Kong (852) 2514-7600 Table of Contents during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, which would occur on the first day of our next fiscal year after the market value of the ADSs held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will no longer be entitled to the exemptions provided in the JOBS Act discussed above. Corporate Information Our principal executive offices are located at Jade Palace Hotel Office Building, 8th Floor, 76 Zhichun Road, Haidian District, Beijing, People's Republic of China. Our telephone number at this address is (86-10) 8261-9988. Our registered office in the Cayman Islands is located at the offices of International Corporation Services Ltd., Harbour Place 2nd Floor, 103 South Church Street, P.O. Box 472, George Town, Grand Cayman KY1-1106. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 4th Floor, 400 Madison Avenue, New York, New York 10017. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is www.gridsum.com. The information contained on our website is not a part of this prospectus. GRIDSUM, the term "Dissector," the slogan "Empower your e-performance," and our other registered or unregistered trade names, trademarks or service marks appearing in this prospectus are our intellectual property. This prospectus also contains trade names, trademarks and service marks of other companies that are the property of their respective owners. Conventions That Apply to this Prospectus Except where the context otherwise requires and for purposes of this prospectus only: "ADSs" refers to our American depositary shares, and each ADS represents one Class B ordinary share; "China" and "PRC" refer to the People's Republic of China, excluding Taiwan, Hong Kong and Macau; "RMB" and "Renminbi" refer to the legal currency of the People's Republic of China; "shares" and "ordinary shares" refer to our Class A and Class B ordinary shares, US$0.001 par value per share; "US$" and "U.S. Dollar" refer to the legal currency of the United States; and "we," "us," and "our company" refer to Gridsum Holding Inc., a Cayman Islands company, and its predecessor Cayman Islands entity, subsidiaries and consolidated affiliated entities. We use RMB as our reporting currency in our financial statements and in this prospectus. This prospectus contains translations of RMB amounts into U.S. Dollars at specific rates solely for the convenience of the readers. Unless otherwise noted, any RMB amounts are translated into U.S. Dollars at the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 30, 2016, which was RMB6.6459 to US$1.00. We make no representation that any RMB or U.S. Dollar amounts could have been, or could be, converted into U.S. Dollars or RMB, as the case may be, at any particular rate, at the rate stated above, or at all. The exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on September 16, 2016 was RMB6.6707 to US$1.00. See "Exchange Rate Information." Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Table of Contents THE OFFERING Offering price We currently estimate that the initial public offering price will be between US$10.50 and US$12.50 per ADS. ADSs offered 6,521,740 ADSs ADSs to Class B ordinary share ratio Each ADS represents one Class B ordinary share, US$0.001 par value per share. ADSs outstanding immediately after this offering 6,521,740 ADSs (or 7,500,001 ADSs if the underwriters exercise their option to purchase additional ADSs in full). Ordinary shares outstanding immediately after this offering 4,543,461 Class A ordinary shares and 24,008,445 Class B ordinary shares (or 4,543,461 Class A ordinary shares and 24,986,706 Class B ordinary shares if the underwriters exercise their option to purchase additional ADSs in full). The ADSs Each ADS represents one Class B ordinary share. The depositary will be the holder of the Class B ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and owners and beneficial owners of ADSs from time to time. You may surrender the ADSs to the depositary to withdraw the Class B ordinary shares underlying your ADSs. The depositary will charge you fees for such exchange. We may amend or terminate the deposit agreement without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs. To better understand the terms of the ADSs, you should carefully read the "Description of American Depositary Shares" section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus. Option to purchase additional ADSs We have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to additional 978,261 ADSs. CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered(1)(3) Proposed maximum offering price per share(1) Proposed maximum aggregate offering price(1)(2) Amount of registration fee(4) Class B ordinary shares, US$0.001 par value per share(2)(3) 7,500,001 US$12.50 US$93,750,012.50 US$9,440.63 (1)Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933. (2)Includes Class B ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public, and also includes Class B ordinary shares that may be purchased by the underwriters pursuant to an option to purchase additional shares. These Class B ordinary shares are not being registered for the purpose of sales outside the United States. (3)American depositary shares issuable upon deposit of the Class B ordinary shares registered hereby are registered under a separate registration statement on Form F-6 (Registration No. 333-213560). Each American depositary share represents one Class B ordinary share. (4)Previously paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine. Table of Contents Potential subscription by existing shareholders Our existing shareholder PA Venture Opportunity VII Limited has indicated to us its interest in purchasing up to US$10.0 million worth of ADSs offered in this offering at the initial public offering price and on the same terms as the other ADSs being offered in this offering. Our existing shareholders, Moon Capital Master Fund Ltd. and Moon Capital Partners Master Fund Ltd., have indicated to us their interest in purchasing up to an aggregate of 652,174 ADSs offered in this offering at the initial public offering price and on the same terms as the other ADSs being offered in this offering. Our existing shareholder Quantum Strategic Partners Ltd. has indicated to us its interest in purchasing up to 10% of the ADSs offered in this offering at the initial public offering price and on the same terms as the other ADSs being offered in this offering. We and the underwriters are currently under no obligation to sell ADSs to these existing shareholders. The number of ADSs available for sale to the general public will be reduced to the extent that these existing shareholders purchase our ADSs. The ADSs sold to our existing shareholders will not be subject to the 180-day lock-up restrictions as described in "Shares Eligible for Future Sale Lock-Up Agreements" in our preliminary prospectus. Use of proceeds We expect that we will receive net proceeds from this offering of approximately US$64.8 million, or approximately US$75.2 million if the underwriters exercise their option to purchase additional ADSs from us in full, assuming an initial public offering price of US$11.50 per ADS, the midpoint of the price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds to invest in technology, infrastructure and product development, to expand sales and marketing efforts, and for working capital and other general corporate purposes. See "Use of Proceeds" for more information. NASDAQ symbol "GSUM" Depositary Citibank, N.A. Lock-up We, our directors and executive officers, our existing shareholders and certain of our option holders have agreed with the underwriters not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus, subject to certain exceptions. In addition, we will not authorize or permit Citibank, N.A., as depositary, to accept any deposit of any Class B ordinary shares or issue any ADSs for 180 days after the date of this prospectus unless we expressly consent to such deposit or issuance and we have agreed not to provide such consent without the prior written consent of Goldman Sachs (Asia) L.L.C. and Citigroup Global Markets Inc. The foregoing does not affect the right of ADS holders to cancel their ADSs and withdraw the underlying Class B ordinary shares. See "Shares Eligible for Future Sale" and "Underwriting (Conflicts of Interest)." Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion. Dated September 21, 2016. 6,521,740 American Depositary Shares Gridsum Holding Inc. Representing 6,521,740 Class B Ordinary Shares Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001647771_birdbill_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001647771_birdbill_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1452080b6acb3edf493cbfc0cf2b39e39c466dc3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001647771_birdbill_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. All references in this Prospectus to Shares are as of March 31, 2015, unless otherwise specified. Prospective investors should carefully consider the information set forth under the heading Risk Factors and are urged to read this prospectus in its entirety. Company Overview Birdbill, Inc. ( Birdbill or the Company ), was incorporated on May 18, 2015 under the laws of the State of Nevada, by Mr. Ying Wai Leung. On March 26, 2014, Mr. Leung established Hotdeal Asia Limited ( Hotdeal ) in Hong Kong as a Company Limited by Shares. On May 26, 2015, Mr. Leung, as the sole shareholder of Birdbill and Hotdeal, entered into a Sale and Purchase Agreement through which all of the assets and liabilities of Hotdeal were purchased by Birdbill and through which Hotdeal became a wholly-owned subsidiary of Birdbill. The Business Birdbill s subsidiary, Hotdeal Asia Limited, is principally engaged in the provision of business and IT consulting services, as well as the operation of birdbill.com. The Company provides comprehensive IT solutions to its clients to improve the efficiency of daily business operations and identifies opportunities for growth in e-commerce markets. We help our clients with our industry relationships and knowledge of IT security, information systems management, e-payment solution, e-marketing and promotion, computer networking and IT help desk support. The services usually include the following: Website design, hosting, and set-up of e-mail, database, and application servers Set-up consultation for e-commerce, including marketing, content management, and backend operation Social network promotion through Facebook, Weibo, Instagram, Wechat, and other social media platforms Online-to-offline promotion with event management Business restructuring and process reengineering Photo and video editing Building and maintenance of one-stop intranet and internet networks for small-to-medium enterprises and small office/home office entities Outsourcing for in-house IT help desk Birdbill.com is an online payment platform that launched in Hong Kong, in December 2014. The platform is a payment gateway that enables merchants to promote their products and events and drive sales of content and services with a wide range of media and partners in Hong Kong. End-users can purchase or earn Birdbill Points through well-known online stores and convenience stores in Hong Kong. The Birdbill Points can be used to redeem products and services that offered by the platform. Our clients can provide "Redeem codes" or connect our system with an API key to let their customers in Hong Kong purchase their digital content or services. Birdbill s sales and promotion channels in Hong Kong include over one thousand brick-and-mortar retail shops and convenience stores, including the 7-Eleven convenience stores. It also has several online sales and promotion channels through online stores including OpenShop by 2000 Fun Limited (http://www.openshop.com.hk/search.html?keyword=birdbilll) and game.now.comby PCCW Media Limited (http://pctv.netvigator.com/pctv/estore/netgamedisplay?GAMEID=BIRDBILL). Our principal offices are located at Room 1715, 17/F, Pacific Trade Centre, 2 Kai Hing Road, Kowloon Bay, Kowloon, Hong Kong. Our telephone number is (852) 2723-8178. Our year-end is March 31, 2015. Except as otherwise indicated, as used throughout the remainder of this prospectus, references to Company, Birdbill, we, us, or our refer to Birdbill, Inc., a Nevada corporation. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001649054_forceshare_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001649054_forceshare_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ab1cc9adb8e855c776219c72d6cca970f5c20a64
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001649054_forceshare_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This is only a summary of the prospectus and, while it contains material information about the ForceShares Daily 4X US Market Futures Long Fund (the "Long Fund") and the ForceShares Daily 4X US Market Futures Short Fund (the "Short Fund" and, together with the Long Fund, the "Funds") and the common units issued by each Fund representing fractional undivided beneficial interests in such Fund (such Fund s "Shares"), it does not contain or summarize all of the information about the Funds and their respective Shares contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus, including "What Are the Risk Factors Involved with an Investment in a Fund?" beginning on page [18], before making an investment decision about a Fund s Shares. Before making an investment decision, you should understand that each Fund seeks leveraged investment results for a single day only, not for longer periods. This means that the return of a Fund for a period longer than a single trading day will be the result of each day s returns compounded over the period, which will very likely differ from four times (400%) the total performance, in the case of the Long Fund, or four times the inverse (-400%) of the total performance, in the case of the Short Fund, of the Benchmark for that period. Due to a number of reasons as described throughout this prospectus, including, but not limited to, mathematical compounding, daily rebalancing, leverage and volatility, the Long Fund will not track, and the Short Fund will not track the inverse of, movements in the Benchmark (as defined below) for a period longer than a single trading day and may experience tracking error intra-day. Further, the return for investors that invest for periods less than a full trading day or for a period different than a trading day will not be the product of the return of a Fund s stated primary daily leveraged investment objective and the performance of the Benchmark for the full trading day. Each Fund is also riskier than similarly benchmarked exchange-traded products that do not use leverage. Accordingly, the Funds may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily leveraged investment results. Additionally, the Short Fund pursues a primary daily leveraged investment objective that is the inverse of the performance of the Benchmark, a result opposite of most mutual funds and exchange-traded products. Shareholders should actively manage and monitor their investments, as frequently as daily. Investors in the Funds should: understand the risks associated with the use of leverage, understand the consequences of seeking daily leveraged investment results, for the Short Fund, understand the risk of shorting, and intend to actively monitor and manage their investments. Investors who do not understand the Funds or do not intend to actively manage their funds and monitor their investments should not buy the Funds. As used in this prospectus, the terms "daily," "day," and "trading day," refer to the period from the close of the markets on one trading day to the close of the markets on the next trading day. There is no assurance that either Fund will achieve its investment objectives and an investment in a Fund could lose money. Neither Fund is a complete investment program. FORCESHARES TRUST FORCESHARES DAILY 4X US MARKET FUTURES LONG FUND FORCESHARES DAILY 4X US MARKET FUTURES SHORT FUND TABLE OF CONTENTS STATEMENT REGARDING FORWARD-LOOKING STATEMENTS iv PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001649801_nova_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001649801_nova_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..168a4909ed15ba612bbde00b9a33f612e1df30df
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001649801_nova_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, references to the "Company," "we," "our", "us" or "Nova" refer to Nova Smart Solutions Inc. unless the context otherwise indicates. The following summary highlights selected information contained in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001651035_psav-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001651035_psav-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ddd79341ebc8295d523412d0c9d515c293c1b367
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001651035_psav-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the risk factors, the consolidated financial statements and related notes thereto and the other documents to which this prospectus refers before making an investment decision. Unless otherwise stated in this prospectus, or as the context otherwise requires, references to PSAV, we, us or our company refer to (i) PSAV Holdings LLC and its subsidiaries or AVSC Holding Corp. prior to the corporate reorganization and (ii) PSAV, Inc. and its subsidiaries after giving effect to the corporate reorganization. Prior to the corporate reorganization and this offering, PSAV, Inc. held no material assets and did not engage in any operations. See Organizational Structure. Overview PSAV is a leading provider of audiovisual and event technology services in North America. Our highly-trained technical staff delivers innovative solutions in support of events ranging from small meetings in single conference rooms to global multi-media conference events with thousands of attendees. As our customers look to deliver more dynamic and impactful events, the event technology services we provide are a critical need and continue to grow in importance. We are the event technology provider of choice at leading hotels, resorts and convention centers ( venues or venue partners ). Our business model is based on long-term partnerships with these venues, which establish us as the exclusive on-site provider of event technology services. Our customers, including corporations, event organizers, trade associations and meeting planners, hire us primarily through our on-site presence at venues to plan and execute their events. We have built a premier brand based on our comprehensive service offerings, strong track record of customer service, broad geographic footprint and on-site employee service model. Our largest market is the United States where we hold the number one position and serve more than five times the total venues of our closest competitor. In addition, we have a leading position in four of the 12 countries we serve internationally. Our market-leading position and scale is evidenced by the following: We support over 1.5 million meetings per year and are hired by over 1,100 meeting planners and event organizers on average each day. We are the exclusive on-site event technology provider to over 1,400 venues globally, including venues representing 46% of the meeting and event space across all luxury and upper upscale hotel properties within the United States. Approximately 95% of our over 8,200 employees are customer-facing, working alongside our venue partners sales teams and hospitality staff. We are the market leader in 19 of the top 20 U.S. hotel markets. We operate in 12 international markets with leading positions in Canada, Germany, Mexico and the United Kingdom. We have averaged 98% venue retention rates and organic growth of 48 new venue openings per year since 2011. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion. Dated August 19, 2016. 14,193,548 Shares PSAV, Inc. Common Stock This is an initial public offering of shares of common stock of PSAV, Inc. All of the 14,193,548 shares of common stock are being sold by the Company. Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $12.00 and $13.00. We have applied to list the common stock on the New York Stock Exchange under the symbol PSAV. After the completion of this offering, we expect to be a controlled company within the meaning of the corporate governance standards of the New York Stock Exchange. See Principal Stockholders. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 20 to read about factors you should consider before buying shares of the common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Initial public offering price $ $ Underwriting discount(1) $ $ Proceeds, before expenses, to PSAV, Inc. $ $ (1) See Underwriting (Conflicts of Interest and Other Relationships) for a description of the compensation payable to the underwriters. To the extent that the underwriters sell more than 14,193,548 shares of common stock, the underwriters have the option to purchase up to an additional 2,129,032 shares of common stock from the Company at the initial price to the public less the underwriting discount. The underwriters expect to deliver the shares against payment in New York, New York on , 2016. Goldman, Sachs & Co. Morgan Stanley Barclays Credit Suisse Macquarie Capital Piper Jaffray William Blair Prospectus dated , 2016. Table of Contents BASIS OF PRESENTATION OF FINANCIAL INFORMATION Prior to this offering, we conducted our business through PSAV Holdings LLC, a Delaware limited liability company, and its subsidiaries. Prior to the consummation of this offering, PSAV Holdings LLC will enter into a corporate reorganization, whereby holders of equity interests of PSAV Holdings LLC will become stockholders of PSAV, Inc., a Delaware corporation and the Registrant. See Organizational Structure. Except as disclosed in this prospectus, the consolidated financial statements, selected historical consolidated financial data and other financial information included in this prospectus are those of PSAV Holdings LLC and its consolidated subsidiaries, or its predecessor, AVSC Holding Corp., and do not give effect to the corporate reorganization that will be effected in connection with the offering contemplated by this prospectus. Shares of common stock of PSAV, Inc. are being offered by this prospectus. Prior to the corporate reorganization and this offering, PSAV, Inc. held no material assets and did not engage in any operations. Following the corporate reorganization, the historical financial information of PSAV Holdings LLC or AVSC Holding Corp., as applicable, will be the historical financial information for PSAV, Inc. TRADEMARKS, SERVICE MARKS AND TRADE NAMES We own or have the rights to use various trademarks, service marks and trade names referred to in this prospectus. Solely for convenience, we refer to trademarks, service marks and trade names in this prospectus without the , SM and symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks, service marks and trade names. Other trademarks, trade names or service marks appearing in this prospectus are the property of their respective owners. MARKET AND INDUSTRY DATA Unless otherwise indicated, market position, market opportunity, market size and addressable market information used throughout this prospectus are estimated based on management s experience and knowledge of the industry and the good faith estimates of management. Management utilized industry surveys, publications and other publicly available information prepared by a number of sources, including STR Inc. ( STR ), PKF Hospitality Research, a division of CBRE ( PKF ), PricewaterhouseCoopers LLP ( PwC ), the Content Marketing Institute, MarketingProfs and TravelClick by Passkey to estimate their market position, market opportunity, market size and addressable market information. The Boston Consulting Group also provided related consulting services to us with respect to the event technology services industry and the relevant market. STR and PKF data are as of December 31, 2015. All other such market data presented in this prospectus was compiled as of June 2015 unless otherwise indicated. All of the market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the estimated market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Risk Factors, Forward-Looking Statements and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates prepared by independent parties and by us. Table of Contents We offer a compelling value proposition to both our venue partners and our customers. For our venue partners, meetings and events are an important source of revenue and profit. Through our services, these venues are able to generate significant incremental revenue with limited investment on their part. For our customers, meetings and events are critical marketing and communication vehicles to reach clients, employees and other stakeholders. Our event technology services enhance the delivery of the customer s message to its audience and increase the overall impact of the event. Our premier brand, scale and differentiated capabilities allow us to partner with some of the most iconic, marquee venues in the world, for whom we are the exclusive on-site provider of event technology services. Our venue partners consist primarily of luxury and upper upscale hotel properties, including properties operating under all 10 of the largest hotel chains as measured by meeting space in the United States, high-profile convention centers and other meeting spaces. Our long-term contracts with venues help align our mutual interests to maximize revenue and profitability from the customer events hosted at the venues. Our on-site staff interacts with the customer directly and is entrusted with maintaining the brand equity and professional standards of that particular venue. We offer our customers a comprehensive set of event technology solutions to address the entire scope of their events from planning to execution. The rising technological complexity and growing importance of meetings and events enhances the importance of the relationship between the customers holding an event and the venues and service providers executing the event. Leveraging our technical expertise, our sales and production teams work with customers directly to identify key messages and goals for an event and develop ways to convey those messages in a creative and compelling fashion. During the event, our technicians work to ensure the services are effectively, professionally and reliably delivered. Table of Contents Table of Contents Our suite of services capitalizes on the industry s growing demand for greater technological sophistication. We believe we have the broadest suite of services and solutions to meet the varied needs of venues and to capture the majority of their customers event planning spend. The following graphic illustrates some of our visible, and less visible, services: We have experienced rapid growth as a result of our market-leading position, our contractual relationships with venues, our broad service offering and our strategic acquisitions. Since 2011, we have increased the number of contracted venues by approximately 80%. We also averaged same venue revenue growth of 10.6% from 2011 through 2015. In addition to our strong organic growth, our strategic acquisitions have enhanced our capabilities, increased our density in local markets and expanded our scale. Internationally, our broad, established and highly scalable platform allows us to capitalize on increasing customer spending on overseas events, and the global trend towards event technology outsourcing. We are taking advantage of this opportunity by entering new markets, expanding within the international markets of our leading hotel chain partners, building relationships with new international venue partners and making strategic acquisitions. By extending our international footprint, we will further solidify our existing venue relationships. Our annual international revenue has grown 57% since 2011. Between 2011 and 2015, our revenue increased from $645.5 million to $1,487.2 million, Adjusted EBITDA increased from $53.4 million to $174.5 million and net loss improved from $19.0 million to Table of Contents $5.8 million. For the year ended December 31, 2015, our revenue of $1,487.2 million grew 17.7% versus the prior year. In this same period, our Adjusted EBITDA of $174.5 million represented 11.7% of revenue and 11.2% growth over the prior year. The 2014 amounts reflect the combined predecessor period from January 1, 2014 through January 24, 2014 and successor period from January 25, 2014 through December 31, 2014 adjusted to give effect to the Sponsors Acquisition (as defined under Our Principal Stockholders ) (the 2014 Pro Forma Combined Period ). See Management s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations. Adjusted EBITDA is a non-GAAP measure. For a reconciliation of Adjusted EBITDA to net income (loss), see Selected Historical Consolidated Financial Data. Our History Through our focus on innovation and customer service, we have evolved from a small, regionally-based provider of audiovisual services to a leading global event technology services provider. Initially focused on U.S. hotel venues, we started developing relationships with venues at a time when most properties still chose to provide their own, in-house audiovisual services to their customers. By the 1990s, as events and the associated technology needs grew increasingly complex, we observed that more U.S. hotels began outsourcing event technology services, bringing third-party providers on-site to work with guests directly regarding their needs for specialized technological expertise. Over the last decade, this trend has accelerated and broadened to include other venues such as convention centers, conference centers and sports stadiums. We anticipated this outsourcing trend and began establishing relationships with leading hotel chains at the corporate level. These relationships served as an endorsement of our brand and provided us access to the venues customers which helped fuel our growth. In addition to our core growth, we have continued to grow our business through strategic acquisitions and through geographic expansion. Our largest acquisition was Swank Holdings, Inc. ( Swank ) in November 2012. Swank was the second largest outsourced provider of event technology services for hotels, resorts and conference centers throughout the United States and brought to us additional talent and complementary venue relationships. Additionally, we have completed four more acquisitions since 2013 that have broadened our portfolio of services and increased our density in key markets. More recently, we have focused on building our geographic footprint internationally. We continue to leverage our strong relationships with our leading international hotel chain partners in Canada, Mexico, Europe and the Middle East. Table of Contents Industry Background Our Addressable Market We believe we have an approximately $42 billion total addressable market. Our primary addressable market is an estimated $23 billion global audiovisual and event technology services industry. In addition, we selectively participate in the just under $20 billion estimated market for the design and construction of permanent audiovisual installations. The market for core event technology services focuses on equipment, staging and production, which we estimate to be $9.3 billion across U.S. hotels, conference and convention centers and non-traditional venues (e.g., museums, sports stadiums and wedding halls). Today, we provide event technology services primarily in hotels, with the substantial majority in the luxury and upper upscale segments. Our Domestic segment revenue for the year ended December 31, 2015 was $1,350.0 million. We estimate the market for core event technology services at luxury and upper upscale hotels internationally is $4.6 billion. There is a significant installed base of our targeted luxury and upper upscale hotel venues that presents an attractive opportunity to generate growth, including approximately 1,750 of such hotels in Asia Pacific,1 1,670 in Europe, Middle East and Africa (collectively, EMEA 1), 370 in Mexico and Canada, and 220 in South America.1 In these regions, our largest hotel chain partners, Starwood, Hilton, Marriott and Hyatt, have approximately 1,000 locations that may facilitate our expansion. Outside the United States, the geographies with the largest event technology spending include China, Western Europe, Southeast Asia, Japan and Canada. We expect demand for event technology services to grow faster in many regions internationally than in the United States, driven by higher economic growth rates, the trend toward more complex U.S.-style event production and the transition to outsourced event technology services. We currently operate in 12 countries outside the United States, including Canada, Germany, Mexico and the United Kingdom and generated International segment revenue of $137.2 million for the year ended December 31, 2015. (1) Asia Pacific: Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore and Thailand; EMEA: Egypt, Belgium, France, Germany, Greece, Ireland, Israel, Italy, Jordan, Russia, Spain, Switzerland, Turkey, United Arab Emirates and United Kingdom; South America: Argentina, Brazil, Chile, Colombia, Ecuador, Peru and Uruguay. Table of Contents We also participate in what we estimate to be the $9.1 billion global market for specialty services in venues, including high-speed internet, power distribution and rigging. We believe rigging constitutes nearly half of that market and has been an area of growth for us since 2011. We believe the need for these services will continue to grow in importance for events. The proportion of our venue revenue generated by specialty services has increased from 10.6% in 2011 to 13.9% in 2015. Our ability to provide these complementary services enhances our value proposition to our customers and allows us to capture a greater portion of the spend on each event. Meeting and Event Activity Historically Correlated with RevPAR In the United States, meeting and event activity historically has been highly correlated with the hospitality industry metric Revenue per Available Room ( RevPAR ) and Group Revenue per Available Room ( Group RevPAR ), which are calculated by STR and PKF. STR is an independent, third-party service that collects and compiles the data used to calculate RevPAR and Group RevPAR, and PKF is an independent, third-party service that collects and compiles historical data used to calculate RevPAR. Whereas RevPAR is a total industry metric, Group RevPAR measures total guest hotel room revenue generated by group bookings (blocks of guest hotel rooms sold simultaneously in a group of 10 or more rooms), divided by total number of available guest hotel rooms. Because meetings and events generally require lodging for their participants, event activity typically correlates with Group RevPAR at nearby hotels, regardless of whether the events themselves are held on-site at hotels or at other nearby venues. As we provide event technology services primarily in hotels in the luxury and upper upscale segments, we refer to Group RevPAR for hotels in these segments as they more closely align with our business. Within the United States, RevPAR has grown on average by 5.1% annually since 1970 according to PKF. Group RevPAR is a newer industry metric and represents a segment of the RevPAR performance, but tracks closely to overall RevPAR. Since 1970, RevPAR has only decreased in times of significant downturns in travel such as after September 11, 2001 and during the global financial crisis that began in 2008. More recently, both RevPAR and Group RevPAR have demonstrated strong growth in the rebound from the financial crisis, with overall RevPAR growing at a compound annual growth rate of 9.3% since 2010. Looking ahead, we expect RevPAR for luxury and upper upscale hotels to grow between 2%-3% in 2016. Our revenue historically has been correlated with Group RevPAR and our same venue revenue growth has exceeded Group RevPAR growth for each of the past six years as we have increased average revenue per event and expanded the services we offer through our venues. Industry Trends Continued Importance of Meetings and Events. In-person meetings and events continue to be rated as the single most effective marketing and communication vehicle. Companies recognize that face-to-face interactions are highly impactful and continue to support in-person events, despite the ubiquity of technology-based solutions such as video conferencing, social media, company websites, articles and webinars. In most cases, these technologies are used to supplement rather than replace in-person meetings. Meetings and events were estimated to contribute $280 billion of total spending in the United States in 2012, according to PwC, as companies and other organizations continued to deploy marketing budgets towards in-person meetings. Venues are Focused on Increasing Group Revenue. Revenues generated by group bookings ( Group Revenue ) were estimated to contribute approximately $40 billion in hotel revenue in the United States and approximately $100 billion globally as of 2013 according to research consolidated by Travel Click by Passkey. Group Revenue often constitutes a hotel s most profitable segment because of the increased associated spend on meeting space, banquet catering and event technology services. Luxury hotels in particular have focused on expanding Group Revenue by Table of Contents growing aggregate meeting space which has grown at a 10% compounded annual growth rate ( CAGR ) from 2009 through 2015. As hotels and other venues focus on this large and profitable segment of their business, they seek expanded service offerings to support meetings and events, including event technology services. Rising Complexity in Event Technology. The rise in consumer technology has led to an increased demand for technological sophistication at meetings and events. These heightened expectations drive meeting and event planners to deliver a more interactive and engaging audience experience than they have in the past. For example, our customers are frequently requesting Wi-Fi access in all meeting spaces and seeking to use video, sound and staging to create branding and special effects for audience impact. The demands of tech-savvy audiences require more complex event technology solutions and trusted providers who can implement those solutions. This development has led to an increase in our average revenue per event across our domestic venues from $2,359 in 2011 to $3,407 in 2015. Venues are Increasingly Outsourcing Event Technology Services. Given the rising complexity in event technology services and associated capital expenditure requirements, venues are increasingly looking to partner with outsourced providers such as us. Venues and customers benefit from high-quality customer service, broad service offerings and deep domain knowledge. At the corporate level, hotel chains benefit from a consistent standard of service across their venues. In addition, outsourced providers are often able to increase venues event technology revenue beyond what venues could achieve on their own because of event technology providers expanded offerings and specific focus on meetings and events. Since 2011, we have contracted to provide event technology services at 56 venues that were previously in-sourcing these services. During the same period, approximately 27% of our new domestic venues were conversions from self-operated sites. Internationally, Event Technology Opportunity Continues to Grow. We forecast that spending on event technology services at international luxury and upper upscale hotels will grow from an estimated $4.6 billion in 2015 to $5.4 billion in 2020, with many individual markets growing more quickly. We believe this growth is driven primarily by outsized economic growth in developing economies, increased globalization driving more meetings and events and U.S. hotel chains seeking to expand their international footprints. We expect international venues to increasingly adopt outsourcing of event technology services to realize the benefits of the on-site model that has proven successful in the United States. Competitive Strengths We believe our competitive strengths are as follows: Highly Skilled Workforce with a Focus on Customer Service. We believe our ability to deliver high-quality, comprehensive event technology solutions is a direct result of our ability to hire, train and retain the best event technology services staff in the industry. Approximately 95% of our over 8,200 employees are in customer-facing roles. We provide numerous education and training programs to develop our personnel, focusing on hospitality and customer service as well as technical expertise. Our venue managers have an average tenure of nearly nine years and our regional vice presidents have an average tenure of approximately 15 years. Our employees technical expertise and familiarity with the specific venues in which they are based enable them to deliver seamless event execution to our customers. Long-Term Relationships with High-Profile Venues and Hotel Chains. We have a long track record of delivering high-quality, comprehensive event technology solutions at the venues with whom we partner, including luxury and upper upscale hotel chains who have high expectations for customer service and execution. In addition, hotel chains value our ability to provide a consistent level Table of Contents of service across their venues. We have long-term master service agreements ( MSAs ) signed with four of the five largest domestic hotel chains naming us as a preferred provider of event technology services at their hotels. Individual venues in the chain may then choose to contract with us as the exclusive on-site provider pursuant to the terms established in the MSA. The MSAs typically provide us with a powerful endorsement as the only chain-endorsed event technology services provider and position us well to establish new contracts with additional hotels in the chain. For the individual venues where we provide on-site service, our integration with their operations and knowledge of their customers event technology needs provides them with strong incentives to renew their contracts with us, resulting in our average 98% annual venue retention rate since 2011. U.S. Market Leader with Broad Reach, Expansive Scale and Breadth of Service Offerings. We are the audiovisual and event technology services market leader in the United States with significantly greater market share than any of our competitors. We have venue contracts representing 46% of the meeting and event space in all of the luxury and upper upscale hotel properties in the United States. Our deep and broad platform includes over 8,200 employees, over 1,400 worldwide on-site event technology venues and 49 global branch warehouse locations. Our scale and reach offers several advantages. First, it enables us to offer the broadest range of event technology services and solutions, from core audiovisual services to specialty services such as rigging and power. Second, our network density enables us to leverage our people and our specialized equipment efficiently, driving higher margins and allowing us to provide our services at a wider range of venues cost effectively. Finally, our scale provides a barrier to entry to smaller, regional providers who we believe are unable to provide comparable expertise and capabilities. Strong Historical Same Venue Revenue Growth. In the United States, our historical same venue revenue growth has exceeded Group RevPAR by an average of 605 basis points since 2011 as shown in the table below. We have been able to achieve this revenue growth due to our track record of outstanding customer service, increasing suite of services and sales team effectiveness. Our comprehensive solution set has enabled us to benefit from the industry-wide increase in technology spend per event as our customers migrate to more advanced technologies and purchase more of our services to support their events. For example, the proportion of our venue revenue generated by specialty services has increased from 10.6% in 2011 to 13.9% in 2015. As these underlying trends continue, we expect our differentiated capabilities will allow for continued growth in same venue revenue. Table of Contents Strong and Growing International Presence. We have a leading market position in Canada, Germany, Mexico and the United Kingdom with a presence in France, Monaco, Switzerland, Austria, Hungary, United Arab Emirates, Dominican Republic and Singapore. We have strong relationships internationally with both venues and customers, and we provide a broad range of services at nearly 400 on-site properties outside the United States. Our contractual relationships with leading hotel chains and strong market position provide us with a competitive advantage over small, local providers who lack our scale and technological expertise. Compelling Financial Model with Multiple Levers to Drive Profitability and Manage Free Cash Flow. Our strong free cash flow allows us to continue to invest in our business, our people and our equipment. Furthermore, we have a flexible cost structure that allows resiliency in varied market conditions. Our overall cost of revenue is approximately 75% variable, driven by the variable nature of venue commissions, which is our primary expense. Our part-time labor force and strategic network of branch locations allow us to manage peak demand and sustain margins. Furthermore, most of our capital investment is success-based, with most significant capital investments tied to new or renewed venue contracts which are evaluated against our return requirements. The resulting flexibility in our cost structure and capital requirements allows us to deliver high-quality service to our customers while maintaining profitability and strong free cash flow. Proven Management Team with Deep Industry Expertise. Our management team combines deep industry expertise with specific functional experience. They have presided over significant growth in the past several years and have led our transformation into a global event technology service provider. At the same time, they have instilled a collaborative company culture focusing on innovation and customer service, which has resulted in significant growth, high levels of satisfaction across customers and venue partners and a best-in-class team. Our senior operational team has an average of 18 years of industry experience and has operated across a variety of economic conditions and geographies. Growth Strategies We intend to pursue the following growth strategies in order to enhance our market leading position: Capture More Events at Existing Venues. We believe significant opportunity exists to capture incremental events at our venues. We estimate that we currently service approximately 70% of the event technology spend in our existing venues with the remaining 30% spent by customers on other event service providers without an on-site venue presence. Win New Venue Partners. We intend to expand our revenue by pursuing new venue partners. We estimate we have contracts with approximately 40% of the luxury and upper upscale U.S. hotel venues, and we believe that the remaining 60% provides a significant target market in which to win new venues. In addition, with less than 10% of our revenues generated from events at non-hotel venues, we believe we have a significant opportunity in the $6.2 billion non-hotel venue market including convention centers, sports stadiums, theaters, museums and other cultural centers, as we have on-site contracts at select non-hotel venues and additionally provide services to existing customers at non-hotel venues where we are not currently the preferred on-site provider of event technology services. Win More Customers Independent of Venue. We manage approximately 250 customers as national accounts because their event technology needs require highly customized solutions or because they seek a consistent solution across a range of venues or geographies. This market Table of Contents represents a significant revenue opportunity as a large portion of the domestic marketplace continues to be serviced by event technology providers who are not on-site at a particular venue. We plan to leverage our broad branch network and specialized sales teams to continue to capture incremental share in this market. Develop and Market Adjacent Services to Increase Revenue per Event. The trend towards increased technology spend per event is creating substantial opportunities to increase our event technology revenue across our suite of services. In the near term, we believe this trend will allow us to further penetrate the $9.1 billion specialty services market. Our event technology services that are considered part of the specialty services market include rigging, power, Wi-Fi services and creative services and contributed $52.6 million of revenue in 2011, which has grown to $171.2 million of revenue in 2015. We will continue to focus on expanding our suite of services to grow our event technology revenue. Continue to Expand Margins Through Operational Efficiencies. We have proven our ability to leverage operational efficiencies in driving profitability as our Adjusted EBITDA margin has expanded by approximately 350 basis points between 2011 and 2015. We have several initiatives in process to continue to increase margins, focused primarily on labor and equipment utilization. For example, we are improving our labor utilization by standardizing our planning and forecasting of our hourly workforce to optimize staffing levels and introducing new initiatives on equipment sharing between venues and our branch network. Expand International Revenue. The $4.6 billion international event technology services market represents a compelling growth opportunity. The four largest U.S.-based hotel chains with whom we have strong domestic relationships represent approximately 25% of total hotels in key addressable international markets. We are already working with these partners to add new venues across our existing international footprint. In addition, we intend to enter new markets as we have recently done in Singapore and are currently exploring further expansion opportunities in Asia through the establishment of a new office in Hong Kong. Selectively Pursue Acquisitions. We intend to pursue acquisitions to enter new markets and accelerate growth in existing markets. Over the past few years we have acquired and integrated four event technology service providers and have demonstrated a track record of achieving forecasted synergies. We maintain a pipeline of acquisitions which we evaluate based on established investment criteria including alignment with our culture and customer focus. In February 2016, for example, we became a leading event technology service provider in Germany with our acquisition of KFP Holding GmbH ( KFP ). Our Principal Stockholders On January 24, 2014, affiliates of The Goldman Sachs Group, Inc. ( Goldman Sachs ) and Olympus Partners (together with Goldman Sachs, the Sponsors ), together with certain management investors and other investors formed PSAV Holdings LLC, which in turn acquired 100% of the voting equity interests in AVSC Holding Corp., which became an indirect wholly-owned subsidiary of PSAV Holdings LLC. We refer to the foregoing acquisition as the Sponsors Acquisition. Olympus Partners and Goldman Sachs currently each own approximately 45.53% of our equity. In connection with the Sponsors Acquisition, one of our subsidiaries entered into a management advisory services agreement with Goldman, Sachs & Co., and Olympus Advisors LLC, affiliates of our Sponsors, to provide business and organizational strategy, financial and advisory services to us. We pay an annual advisory fee of $1.5 million apportioned equally between the Sponsors on January 24th of each year. We also paid a one-time fee of $6.0 million to Olympus Advisors LLC and $8.0 million to Table of Contents Goldman, Sachs & Co. under the agreement at the time of the Sponsors Acquisition. The management advisory services agreement will terminate in connection with this offering, and we believe the Sponsors currently intend to waive any amounts due to them pursuant to such termination. We expect the total amount of fees paid under the agreement to be $10.3 million to Goldman, Sachs & Co. and $8.3 million to Olympus Advisors LLC. For further information regarding the management advisory services agreement, see Certain Relationships and Related Person Transactions The Sponsors Acquisition Management Advisory Services Agreement. In addition, in May 2015 and December 2015, we paid distributions totaling $174.1 million in the aggregate to the members of PSAV Holdings LLC, of which $79.3 million was paid to each of the Sponsors. Following this offering, our Sponsors will continue to control our board of directors and corporate decisions. Our Sponsors may acquire or hold interests that compete directly with us, or may pursue acquisition opportunities that are complementary to our business, making such an acquisition unavailable to us. Our amended and restated certificate of incorporation will contain provisions renouncing any interest or expectancy held by our directors affiliated with our Sponsors in certain corporate opportunities. For further information, see Management Composition of Our Board of Directors and Risk Factors Risks Related to This Offering and Ownership of Our Common Stock Our Sponsors can significantly influence our business and affairs and may have conflicts of interest with us in the future. Controlled Company Following the consummation of this offering, approximately 67.3% of our outstanding common stock (or approximately 65.3% if the underwriters exercise their option to purchase additional shares in full) will be beneficially owned by affiliates of Goldman Sachs and Olympus Partners. In particular, affiliates of Goldman Sachs collectively will beneficially own approximately 33.6% of our common stock (or approximately 32.7% if the underwriters exercise their option to purchase additional shares in full) and Olympus Partners will beneficially own approximately 33.6% of our common stock (or approximately 32.7% if the underwriters exercise their option to purchase additional shares in full). As a result, we will be a controlled company within the meaning of the New York Stock Exchange s corporate governance rules. For a discussion of the applicable limitations and risks that may result from our status as a controlled company, see Risk Factors Risks Related to This Offering and Ownership of Our Common Stock We are a controlled company within the meaning of the New York Stock Exchange rules and, as a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements. Table of Contents Corporate Reorganization Prior to this offering, PSAV Holdings LLC and its subsidiaries conducted our business. Prior to the completion of this offering, a series of transactions will occur pursuant to which holders of equity interests in PSAV Holdings LLC will become holders of common stock in PSAV, Inc., the issuer of shares in this offering. For a more detailed description, see Organizational Structure. The diagram below reflects our organizational structure following the corporate reorganization, this offering and the use of the net proceeds therefrom as if each occurred on June 30, 2016:
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001651235_acacia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001651235_acacia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..60110ea6b50a807dd40e49bcbb98bbd8e5e79016
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001651235_acacia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 12, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms Acacia Communications, Acacia, our company, we, us and our in this prospectus to refer to Acacia Communications, Inc. and its subsidiaries. Overview Our mission is to deliver high-speed coherent optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated costs. By converting optical interconnect technology to a silicon-based technology, a process we refer to as the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry s integration of multiple functions into a microprocessor. Our products include a series of low-power coherent digital signal processor application-specific integrated circuits, or DSP ASICs, and silicon photonic integrated circuits, or silicon PICs, which we have integrated into families of optical interconnect modules with transmission speeds ranging from 40 to 400 gigabits per second, or Gbps, for use in long-haul, metro and inter-data center markets. We are also developing optical interconnect modules that will enable transmission speeds of one terabit (1,000 gigabits) per second and more. Our modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, our modules can be easily integrated with customers network equipment. The advanced software in our modules enables increased configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of which increase flexibility and reduce operating costs. Our modules are rooted in our low-power coherent DSP ASICs and/or silicon PICs, which we have specifically developed for our target markets. Our coherent DSP ASICs are manufactured using complementary metal oxide semiconductor, or CMOS, and our silicon PICs are manufactured using a CMOS-compatible process. CMOS is a widely-used and cost-effective semiconductor process technology. Using CMOS to siliconize optical interconnect technology enables us to continue to integrate increasing functionality into our products, benefit from higher yields and reliability associated with CMOS and capitalize on regular improvements in CMOS performance, density and cost. Our use of CMOS also enables us to use outsourced foundry services rather than requiring custom fabrication to manufacture our products. In addition, our use of CMOS and CMOS compatible processes enables us to take advantage of the major investments in manufacturing and the technology and integration improvements driven by other computer and communications markets that rely on CMOS. Our engineering and management teams have extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and verification, silicon photonic integration, system software development, hardware design and high-speed electronics design. This broad expertise in a range of advanced technologies, methodologies and processes enhances our innovation, design and development capabilities and has enabled us to develop and introduce ten optical interconnect modules, five coherent DSP ASICs and three silicon PICs since 2009. Our sixth coherent DSP ASIC is currently under development and anticipated to be introduced in the fourth quarter of 2016. In the course of our product development cycles, we continuously engage with our Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion, dated October 4, 2016 PRELIMINARY PROSPECTUS 4,500,000 Shares Common Stock Acacia Communications, Inc. is offering 1,210,302 of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering 3,289,698 shares. Acacia Communications will not receive any of the proceeds from the sale of shares being sold by the selling stockholders. Our common stock is listed on the Nasdaq Global Select Market under the symbol ACIA. The last reported sale price of our common stock on the Nasdaq Global Select Market on October 3, 2016 was $99.50 per share. As an emerging growth company, we are eligible for reduced public company reporting requirements. See Prospectus Summary Implications of Being an Emerging Growth Company. See Risk Factors beginning on page 12 to read about factors you should consider before buying shares of the common stock. Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Price to the public $ $ Underwriting discount(1) $ $ Proceeds, before expenses, to Acacia Communications $ $ Proceeds, before expenses, to the selling stockholders $ $ (1) See Underwriting beginning on page 132 of this prospectus for a description of the compensation paid to underwriters. To the extent that the underwriters sell more than 4,500,000 shares of common stock, the underwriters have the option to purchase up to an additional 675,000 shares from certain of the selling stockholders at the same terms set forth above. See Underwriting. The underwriters expect to deliver the shares against payment in New York, New York on , 2016. Goldman, Sachs & Co. BofA Merrill Lynch Deutsche Bank Securities Morgan Stanley Needham & Company Cowen and Company William Blair Northland Capital Markets Prospectus dated , 2016 Table of Contents customers as they design their current and next-generation network equipment, which provides us with insights into current and future market needs. We sell our products through a direct sales force to leading network equipment manufacturers. The number of customers who have purchased and deployed our products has increased from eight in 2011 to more than 25 during the twelve months ended June 30, 2016. We have experienced rapid revenue growth over the last several years. Our revenue for 2015 was $239.1 million, a 63.5% increase from $146.2 million of revenue in 2014. Our revenue for the six months ended June 30, 2016 was $200.7 million, a 91.0% increase from $105.1 million of revenue in the six months ended June 30, 2015. In 2015, we generated net income of $40.5 million and our adjusted EBITDA was $47.5 million, compared to net income of $13.5 million and adjusted EBITDA of $20.4 million in 2014. For the six months ended June 30, 2016, we generated net income of $32.2 million and our adjusted EBITDA was $52.6 million, compared to net income of $9.0 million and adjusted EBITDA of $17.7 million for the six months ended June 30, 2015. See Selected Consolidated Financial Data Non-GAAP Financial Measures for more information regarding our use of adjusted EBITDA and other non-GAAP financial measures and a reconciliation of adjusted EBITDA to net income. Industry Background According to Cisco s VNI Complete Forecast Highlights Report, dated June 2016, or the VNI Report, global Internet protocol, or IP, traffic is projected to nearly triple from 2.4 exabytes per day in 2015 to 6.4 exabytes per day in 2020, representing a 22% compound annual growth rate, or CAGR. This growth is expected to be driven by a variety of factors, including increased data and video consumption, growth in mobile and 4G/LTE communications, proliferation of cloud services, changing traffic patterns in metro and inter-data center networks, and adoption of the Internet of Things. To satisfy this growth in demand for bandwidth, cloud infrastructure operators and content and communications service providers, which we refer to collectively as cloud and service providers, are investing in the capacity and performance of their network equipment. The table below outlines the principal types of networks and estimated annual spend on high-speed optical network hardware related to the long-haul, metro and inter-data center markets, as described in the ACG 1H-2016 Worldwide Optical Infrastructure and Worldwide Data Center Interconnect (DCI) forecast: Estimated Spend Network Type Description 2015 Forecast for 2020 CAGR Long-haul Distances greater than 1,500 km, and subsea connections $ 4.6 billion $ 6.9 billion 8.3% Metro Distances less than 1,500 km connecting regions and cities $ 6.1 billion $ 9.6 billion 9.3% Inter-data center Various lengths connecting large data centers $ 1.0 billion $ 4.2 billion 32.1% Importance of Optical Interconnect Technologies Optical equipment that interfaces directly with fiber relies on optical interconnect technologies that take digital signals from network equipment, perform signal processing to convert these digital signals to optical signals for transmission over a fiber network, and then perform the reverse functions on the Table of Contents TABLE OF CONTENTS Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001651530_shimmick_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001651530_shimmick_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001651530_shimmick_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001651561_tabula_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001651561_tabula_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2f510ad7e08825194a0c4a3c97ae1fa00e234c4c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001651561_tabula_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the entire prospectus, including our consolidated financial statements and the notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections "Risk Factors," "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our common stock. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to "Tabula Rasa," "the company," "we," "us" and "our" refer, prior to the Reorganization Transaction discussed below, to CareKinesis, Inc., or CareKinesis, and, after the Reorganization Transaction, to Tabula Rasa HealthCare, Inc., in each case together with its consolidated subsidiaries. Overview We are a leader in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize medication regimens to improve patient outcomes, reduce hospitalizations, lower healthcare costs and manage risk. We deliver our solutions through a comprehensive suite of technology-enabled products and services for medication risk management, which includes bundled prescription fulfillment and reminder packaging services for client populations with complex prescription needs. We also provide risk adjustment services, which help our clients to properly characterize a patient's acuity, or severity of health condition, and optimize the associated payments for care. With approximately 4.4 billion prescriptions filled in the United States in 2015, medication treatment is the most common medical intervention, and its imprecise use represents the fourth leading cause of death and contributes to an estimated 45 to 50 million adverse drug events, or ADEs, annually with 2.5 to 4.0 million of those ADEs considered serious, disabling or fatal. ADEs result in more than 100,000 deaths annually in the United States and approximately 125,000 hospitalizations, one million emergency room visits, two million affected hospital stays and 3.5 million physician office visits every year. The incidence of ADEs is highly correlated to the number of medications an individual is taking and non-adherence to prescribed regimens, and thus is particularly relevant to populations with complex healthcare needs. Our technology-driven approach to medication risk management represents an evolution from prevailing non-personalized approaches that primarily rely on single drug-to-drug interaction analysis. We currently serve approximately 125 healthcare organizations that focus on populations with complex healthcare needs and extensive medication requirements. Our suite of cloud-based software solutions provides prescribers, pharmacists and healthcare organizations with sophisticated and innovative tools to better manage the medication-related needs of patients. We believe we offer the first prospective clinical approach to medication risk management, which is designed to increase patient safety and promote adherence to a patient's personalized medication regimen. Furthermore, our medication risk management technology helps healthcare organizations lower costs by reducing ADEs, enhancing quality of care and avoiding preventable hospital admissions. Our products and services are built around our novel and proprietary Medication Risk Mitigation Matrix, or MRM Matrix, which enables optimization of a patient's medication regimen, involving personalizing medication selection, dosage levels, time-of-day administration and reducing the total medication burden by eliminating unnecessary prescriptions. The MRM Matrix analyzes a combination of clinical and pharmacology data, population-based algorithms and extensive patient-specific data, including medical history, lab results, medication lists and individual medication-related genomic information, to deliver "precision medicine." We provide software-enabled solutions that can be bundled with prescription fulfillment and reminder packaging services, which are informed by a patient's personalized MRM Matrix to increase adherence to a patient's optimized regimen, through our three prescription fulfillment pharmacies serving clients across the United States. Our team of clinical pharmacists is available to support prescribers at the point of care through our proprietary technology platform, including real-time secure messaging, with more than 136,000 messages exchanged in August Amendment No. 4 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents 2016. In 2015, we began offering software solutions on a standalone software-as-a-service basis, although to date, all of our medication risk management clients have contracted for a bundled offering of our software-enabled solutions, prescription fulfillment and reminder packaging services. While prescription medication revenue has comprised substantially all of our revenue to date, we do not offer prescription fulfillment and reminder packaging services on a standalone basis. As the U.S. healthcare market continues to evolve from fee-for-service to value-based models of care, healthcare organizations require new and emerging technologies to optimize treatment and manage risk on a patient-specific, customized basis. Our solutions are targeted currently to "at-risk" healthcare organizations that are clinically and financially responsible for the populations they serve, receiving a fixed payment for the care provided to each patient for an entire episode of care or enrollment period. According to the Congressional Budget Office, or CBO, there were approximately 136 million people in the United States covered under government-sponsored programs in 2015, and this number is expected to reach 162 million by 2020. Government-sponsored programs are leading the shift to value-based care. Our solutions support our clients in achieving the Institute for Healthcare Improvement, or IHI, "Triple Aim" of improving a patient's experience, while managing the health of a client's population and controlling costs. We are led by highly experienced and entrepreneurial executive officers with more than 70 years of cumulative experience in the healthcare industry. Our co-founder, Dr. Calvin H. Knowlton, founded excelleRx, Inc. and, along with Dr. Orsula Knowlton and other members of our management team, built it into the largest national hospice medication management pharmacy in the United States, servicing approximately 400 hospice agencies with approximately 48,000 patients in 46 states, at the time it was sold to Omnicare, Inc. in 2005. Since our first year of active operations in 2011, our revenue has grown to $70.0 million for the year ended December 31, 2015, and $42.6 million for the six months ended June 30, 2016, with a net loss of $2.9 million and $77 thousand, respectively, and adjusted EBITDA of $8.6 million and $5.6 million, respectively, for those periods. See "Selected Consolidated Financial Data Adjusted EBITDA" for our definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss). We had an annual revenue retention rate of 99% and client retention rate of 96% in 2015. See "Management's Discussion and Analysis of Financial Condition and Results of Operations Key Business Metrics" for our definitions of revenue retention rate and client retention rate. Market Opportunity We believe the following market trends drive a growing need for our medication risk management and risk adjustment products and services. Pervasive Use of Medication is Driving Increased Complexity in Healthcare Medication treatment is the most common medical intervention. In any given month, 48% of Americans take a prescription drug and 11% take five or more prescription drugs. The number of prescription drugs individuals are using in the United States is increasing as the number of medication therapies rises, the population ages and chronic diseases become more prevalent. We believe the pervasive and rising use of prescription and non-prescription drugs is increasing the complexity of medication management for healthcare organizations and making adherence to medication regimens more difficult for patients. Imprecise Use of Medication Harms Patients and Increases Healthcare Costs Given the extensive and increasing use of medication in the United States, the potential for harm from ADEs and patient medication non-adherence constitutes a critical patient safety and public health challenge. According to the Alliance for Human Research Protection, 2.5 to 4 million serious, disabling or fatal ADEs occur on an annual basis in the United States. In 2012, the IMS Institute of Healthcare Tabula Rasa HealthCare, Inc. (Exact name of registrant as specified in its charter) Table of Contents Informatics estimated that medication non-adherence and unnecessary use of medicines are responsible for more than $200 billion in otherwise avoidable medical spending annually in the United States alone, and ADEs contribute $3.5 billion to U.S. healthcare costs on a yearly basis, according to the Institute of Medicine. Healthcare Organizations Have a Significant Unmet Need for Comprehensive, Personalized Medication Risk Management The current tools for medication safety produce inconsistent results and are widely viewed as ineffective. Personalized and precision-based methods are typically absent in prevailing trial-and-error approaches to medication selection, rendering providers ineffective and ultimately limited in their ability to deliver optimal patient care due to insufficient data at the point of prescribing. Research suggests that a majority of ADEs are preventable. According to the American Academy of Pediatrics, ADEs account for up to 25% of all hospital admissions and 12% of emergency room visits in adults, of which up to 70% are preventable. Industry Dynamics Favor a Personalized Approach to Medication Safety The shift to value-based healthcare has increasingly placed healthcare organizations at financial risk related to imprecise medication usage, providing new incentives to reduce costs and improve quality. Rising healthcare costs and strained government budgets have driven both federal and state government agencies to expand the role of value-based, capitated payment models, which shift the incentives of healthcare organizations away from volume and toward quality and value. In these at-risk models, the provider is incentivized to deliver efficient care, increasing pressure on providers to simultaneously lower costs and improve care quality, safety and the patient experience. As a result of this transition, data on patient-specific disease states and co-morbidities, clinical and quality outcomes, resource utilization and individualized patient information have become increasingly relevant to healthcare delivery. Accurate Coding is Critical for Optimizing Reimbursement Accurate coding of medical procedures and diagnoses is increasingly complex and is required throughout the healthcare landscape for proper reimbursement and regulatory compliance. Coding is particularly important in at-risk, value-based care models as healthcare organizations bear financial risk for their patients' medical expenses. Risk scoring based on accurate coding is a significant factor in determining premium reimbursement rates and payments in many government-sponsored healthcare programs. In addition, government agencies, including the Centers for Medicare & Medicaid Services, or CMS, regularly perform audits of healthcare organizations to validate coding practices. Our Solutions Medication risk management is our leading offering, and our cloud-based software applications, including EireneRx and MedWise Advisor, together with our bundled prescription fulfillment and reminder packaging services, provide solutions for a range of payors, providers and other healthcare organizations. Our products and services are built around our proprietary MRM Matrix, which combines clinical and pharmacology data, population-based algorithms and extensive patient-specific data, including medical history, lab results, medication lists and personal genomic information, to deliver what the U.S. Food and Drug Administration, or FDA, refers to as "precision medicine." Our suite of technology products is built on a powerful rules engine that houses comprehensive pharmacotherapy profiles, provides risk alerts and includes a combination of proprietary decision-support tools, real-time secure messaging, e-prescribing and advanced precision-dosing functionality, among other functions. Our software applications help reduce ADEs, enhance medication adherence and quality of care, improve medication safety at the individual patient level and reduce the total medication burden by eliminating unnecessary prescriptions. We also provide risk adjustment services and pharmacy cost management Delaware (State or other jurisdiction of incorporation or organization) 8099 (Primary Standard Industrial Classification Code Number) 46-5726437 (I.R.S. Employer Identification Number) 228 Strawbridge Drive, Suite 100 Moorestown, NJ 08057 (866) 648 - 2767 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents services to help our clients achieve correct reimbursement, maintain regulatory compliance and optimize pharmacy spend. Precision-Based Approach to Deliver Patient-Specific Solutions We believe we are at the forefront of precision medicine with solutions that help our clients tailor medical treatment to the individual characteristics of each patient. Our cloud-based software solutions are designed to identify high-risk individuals, detect susceptibility to ADEs and embed proper dosing guidelines. Our optional medication-adherence technology promotes adherence to a patient's personalized regimen and dosing schedule. By providing patient-specific, data-driven analytical insights and medication safety solutions, we help clients reduce trial-and-error-based medication selection, unintentional medication overdoses and other causes of ADEs. Demonstrated Ability to Produce Higher Quality Outcomes, Reduce the Cost of Care and Improve the Patient Experience By offering solutions that improve outcomes in a cost-effective manner, we are aligned with healthcare organizations that are transitioning to value-based healthcare. Our clients have reported that our medication risk management services have resulted in significant reductions in hospital admissions, length of hospital stays and emergency room visits for their patients, thereby reducing their medical expenditures. Our pharmacy cost management services saved our clients more than $48 million in recovered or prevented overpayments in 2015, and our risk adjustment clients realized revenue increases of approximately $385 per patient per month on average in 2015. Our Strengths Innovative Technology Solutions for Medication Risk Management Aligned with Transformative Shifts in Healthcare We believe our innovative technology platform is uniquely equipped to provide comprehensive medication risk management solutions to a variety of healthcare organizations. The shift from a fee-for-service to a value-based model of care, which focuses on outcomes and quality, is driving the rapid adoption of risk-based arrangements across many healthcare organizations. First-Mover Advantage with Track Record of Improved Outcomes We believe the seven years we have devoted to developing and optimizing our solutions, and our intellectual property portfolio, provide a significant competitive advantage over potential competitors. Leveraging our industry experience, we believe we offer the first prospective clinical approach to medication risk management, utilizing advanced patient safety tools and medication-adherence technology that enable depth and breadth of data-driven analytical insights and actionable interventions. In addition, we integrate directly with many industry-leading electronic health record systems, or EHRs, that are used by many of our clients. Expertise in Serving At-Risk Healthcare Organizations with Complex Patient Populations Since our founding, we have leveraged our knowledge of medication risk management and risk adjustment to develop expertise in serving the growing at-risk segment of the healthcare system. Our focus on medication risk management is highly relevant to populations with complex care requirements, and we have developed solutions to address the needs of these patients and their providers and payors. Highly Scalable Platform We believe the scalability of our technology platform allows us to rapidly and cost-effectively pursue new opportunities and meet rising market demand. Our clients access our products and services Dr. Calvin H. Knowlton, Ph.D. Chief Executive Officer Tabula Rasa HealthCare, Inc. 228 Strawbridge Drive, Suite 100 Moorestown, NJ 08057 (866) 648 - 2767 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents through an efficient and scalable cloud-based technology platform that allows for on-demand capacity expansion, rapid deployment capabilities and accelerated speed of execution. Recurring Revenue Model with Significant Operating Leverage We believe we have an attractive business model due to the recurring and predictable nature of our revenue, embedded growth opportunities within our existing client base and significant operating leverage. Our client contracts are typically exclusive and multi-year and, while they do not include minimum member or prescription volume or mix requirements, based on our experience, patient populations at our clients do not generally decline over time, the number of medications per patient have been consistent following an initial onboarding period and the overall mix of medications dispensed is generally predictable. As such, our contracts provide significant visibility into our future cash flows. The revenue models under these contracts typically include charges and dispensing fees for medication fulfillment for our clients' patients, which are often high-acuity patients with long-term prescription needs, payments on a per-member per-month basis and payments on a subscription basis. Our annual revenue retention rate was 95% and 99% for 2014 and 2015, respectively, and our client retention rate was 97% and 96%, respectively. As we grow our revenue base, we expect our operating expenses to decrease as a percentage of revenue, providing for substantial operating leverage. Experienced Management Team We are led by highly experienced and entrepreneurial executive officers with more than 70 years of cumulative experience in the healthcare industry. Prior to our founding in April of 2009, our co-founder, Dr. Calvin H. Knowlton, founded excelleRx, Inc., which became the largest national hospice medication management pharmacy in the United States. excelleRx was sold to Omnicare, Inc. in 2005. We believe that our experienced management team and a strong commitment to our culture are key drivers of our success and position us well for long-term growth. Our Strategy Further Penetrate and Grow with the Expansion of Our Current At-Risk Markets By leveraging our industry expertise and thought leadership and expanding our sales and marketing efforts, we believe that we can increasingly penetrate the market for existing and new at-risk clients. We are the market leader in providing medication risk management to Program of All-Inclusive Care for the Elderly, or PACE, a CMS sponsored program through which participating healthcare organizations provide fully integrated healthcare delivery on an at-risk basis for elderly adults, most of whom are dually eligible for Medicare and Medicaid, where we believe we have a significant opportunity to continue to grow. The number of participants enrolled in PACE organizations, who have a typical length of stay exceeding four years, has doubled over the last five years, yet, according to a study we commissioned from AEC Consulting, LLC, an independent healthcare consulting firm, represents only 4% of the total eligible individuals within current PACE service areas. We expect our clients to continue to grow to cover more eligible lives. We are also the market leader in risk adjustment and front-end coding for PACE organizations and we plan to continue to expand these services to other Medicare Advantage programs. Continue Expansion into Emerging At-Risk Provider and Payor Markets We intend to leverage our expertise and experience from our existing clients to expand to other at-risk providers and payors through increased investment in our sales force and marketing efforts. We believe that the growth in government healthcare programs and the shift to value-based care models are creating opportunities for many organizations to capture growing portions of the expanding healthcare market. Accordingly, we are actively targeting at-risk, value-based markets, including managed care organizations, physician provider groups, self-insured companies and Accountable Care Organizations, Copies to: James W. McKenzie, Jr. Jeffrey P. Bodle Kevin S. Shmelzer Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 (215) 963 - 5000 Brian W. Adams Chief Financial Officer Tabula Rasa HealthCare, Inc. 228 Strawbridge Drive, Suite 100 Moorestown, NJ 08057 (866) 648 - 2767 Charles S. Kim Brent B. Siler Divakar Gupta Cooley LLP 1114 Avenue of the Americas New York, NY 10036 (212) 479 - 6000 Table of Contents or ACOs, which are healthcare organizations characterized by a payment and care delivery model that ties provider reimbursement to quality metrics and the total cost of care for an assigned population. We also target post-acute healthcare organizations, which provide a range of medical services to support an individual's recovery or manage chronic illness after a period of in-patient care. As the market leader in pharmacy cost management solutions in the post-acute market, we believe we are also well positioned to further serve these organizations with medication risk management solutions as they migrate to an at-risk reimbursement structure. Expand Offerings to a Large and Growing Behavioral Health Market We believe our solutions have the potential to offer substantial value to the behavioral health market. Behavioral health medications are powerful, are subject to trial-and-error prescribing methods and are prone to side effects and ADEs. The behavioral health market is growing, in part as a result of the Patient Protection and Affordable Care Act, or ACA, which significantly expanded coverage for mental health and substance use disorder services. Accordingly, we are currently pursuing intervention studies or pilot programs to evaluate the benefits of our medication risk management solutions in the behavioral health population. Continue to Innovate and Expand Platform Offerings to Meet Evolving Market Needs We believe our investments in human capital, technology and services capabilities position us to continue to pursue rapid innovation and expand our medication risk management solutions and other platform offerings to the broader healthcare marketplace. We are developing or piloting new technologies and offerings to capitalize on these opportunities. Selectively Pursue Strategic Acquisitions, Joint Ventures and Partnerships Since our founding in 2009, we have completed and integrated four acquisitions. We plan to continue to acquire assets and businesses and may enter into joint ventures and partnerships that strengthen or expand our service offerings, capabilities and geographic reach and facilitate our entry into new markets. Develop International Market Opportunities We believe we are well positioned to provide our products and services to international healthcare organizations that face challenges similar to those that our clients face domestically. Our solutions are readily scalable and can be utilized by healthcare organizations abroad seeking to achieve the IHI Triple Aim. Risks Associated with Our Business Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the section titled "Risk Factors." If any of these risks actually occur, our business, results of operations, financial condition or prospects could be materially and adversely affected. Below is a summary of some of the principal risks we face: the market for technology-enabled healthcare products and services is in its early stages, which makes it difficult to forecast demand for our technology-enabled products and services; consolidation in the healthcare industry could lead to the elimination of some of our clients and make others larger, which could decrease demand for our solutions or create pricing pressure; if we are unable to offer new and innovative products and services or our products and services fail to keep pace with our clients' needs, our clients may terminate or fail to renew their relationships with us; Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents we have incurred significant net losses and we may not be able to generate net income in the future; we may not grow at the rates we historically have achieved or at all, even if our key metrics may indicate growth; we derive a significant portion of our revenue from PACE organizations, and any changes in laws or regulations or any other factors that cause a decline in the use of PACE organizations to provide healthcare, could hurt our ability to generate revenue and grow our business; a few clients account for a significant portion of our revenue and the loss of one or more of these clients could cause us to lose significant revenue; our sales and implementation cycle can be long and unpredictable and can require considerable time and expense, which may cause our operating results to fluctuate; we may face competition and aggressive business tactics in our markets by potential competitors and may lack sufficient financial or other resources to compete successfully; data loss or corruption due to failures or errors in our systems may expose us to liability, hurt our reputation and relationships with existing clients and force us to incur significant costs; upon the completion of this offering, our executive officers, directors and principal stockholders will, in the aggregate, beneficially own shares representing approximately 55% of our capital stock and, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs; complying with, and changes to, significant state and federal regulations could restrict our ability to conduct our business or cause us to incur significant costs; and we may require additional capital to support business growth, and this capital might not be available to us on acceptable terms or at all. Our Corporate Information We were incorporated under the laws of the state of Delaware on May 21, 2014 under the name Tabula Rasa HealthCare, Inc. Our principal executive offices are located at 228 Strawbridge Drive, Suite 100, Moorestown, NJ 08057 and our telephone number is (866) 648-2767. Our website address is www.tabularasahealthcare.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. Reorganization Transaction Effective June 30, 2014, in order to facilitate the administration, management and development of our business and the proposed initial public offering, we implemented a holding company reorganization pursuant to which we became the new parent company and CareKinesis became our direct, wholly owned subsidiary. To implement the reorganization, we formed CK Merger Sub, Inc. The holding company structure was implemented by the merger of CK Merger Sub, Inc. with and into CareKinesis, with CareKinesis surviving the merger as our direct, wholly owned subsidiary. As a result of the reorganization, each share of CareKinesis issued and outstanding immediately prior to the merger automatically converted into the same share, with the same rights and preferences, in our company. The business conducted by CareKinesis immediately prior to the corporate reorganization continues to be conducted by CareKinesis following the reorganization. In addition, in connection with the reorganization, CareKinesis distributed all of the equity interests in two of its wholly owned subsidiaries, Capstone Performance Systems, LLC, or Capstone, and CareVentions, Inc., to us. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents Implications of Being an Emerging Growth Company As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure; not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 2016 PRELIMINARY PROSPECTUS 4,300,000 Shares Common Stock Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001651577_capstone_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001651577_capstone_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..69faac99bd69ccb0270e3c3eb4462422522f3d9c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001651577_capstone_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 5
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001652414_pmv_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001652414_pmv_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..01c1e38eb9e37c0fc75be8812cfafd884f8fc0b5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001652414_pmv_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary only highlights the more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus, references to: we, us, company or our company are to PMV Acquisition Corp.; public shares are to shares of our common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); public stockholders are to the holders of our public shares, including our initial stockholders and members of our management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder s and member of our management team s status as a public stockholder shall only exist with respect to such public shares; management or our management team are to our executive officers and directors; sponsor are to Nevada PMV Acquisition Holding Company, LLC, a Delaware limited liability company that is affiliated with certain members of our management and which is majority owned by CIBL, Inc. (OTC Pink : CIBY). Mario J. Gabelli, the founder, Chairman, Chief Executive Officer and Co-Chief Investment Officer of GAMCO Investors, Inc. (NYSE: GBL) and Chairman and Chief Executive Officer of Associated Capital Group, Inc. (NYSE: AC), serves as CIBL s Chairman and is its largest shareholder. Our Chief Executive Officer, Christopher J. Marangi, serves as Co-Chief Investment Officer of GAMCO; founder shares refer to shares of our common stock initially purchased by our sponsor in a private placement prior to this offering; warrants or public warrants refer to the redeemable warrants included in the units we are offering hereby, each warrant entitling the holder thereof to purchase one-half of one share of our common stock at a price of $5.75 per half share, subject to adjustment as described herein; private placement warrants are to the warrants to be issued to CIBL, Inc. in a private placement that will close simultaneously with the closing of this offering; private units refer to the units to be issued to Mario J. Gabelli in a private placement that will close simultaneously with the closing of this offering; private shares refer to the shares of common stock underlying the private units; private warrants refer to the warrants underlying the private units; and initial stockholders are to holders of our founder shares prior to this offering. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. General We are a newly organized blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to throughout this prospectus as our initial business combination. We have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. Nevada PMV Acquisition Holding Company, LLC, our sponsor, is majority-owned by CIBL (OTC Pink : CIBY). CIBL s holdings primarily consists of cash and cash equivalents and a 43% ownership interest in ICTC Group, Inc., a provider of broadband and voice communications services. The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION DATED MAY 18, 2016 PRELIMINARY PROSPECTUS $100,000,000 10,000,000 Units PMV Acquisition Corp. is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to throughout this prospectus as our initial business combination. This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of one share of our common stock and one redeemable warrant, which we refer to throughout this prospectus as our warrants. Each warrant entitles the holder thereof to purchase one-half of one share of our common stock at a price of $5.75 per half share, subject to adjustment as described in this prospectus. Warrants may be exercised only for a whole number of shares of common stock. As a result, you must exercise warrants in multiples of two warrants, at a price of $11.50 per full share, subject to adjustment as described in this prospectus, to validly exercise your warrants. We have also granted the underwriters a 45-day option to purchase up to an additional 1,500,000 units to cover over- allotments, if any. We will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their public shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount on deposit in the trust account (net of taxes payable) or (2) provide our public stockholders with the opportunity to sell their public shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable and interest previously released to us), in each case calculated as of two business days prior to the date of conversion or tender and subject to the limitations described herein. If we are unable to complete our business combination within 24 months from the closing of this offering, we will redeem 100% of the public shares and private shares described below at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account (net of taxes payable and interest previously released to us), divided by the number of then outstanding public shares and private shares, subject to applicable law and as further described herein. Currently, there is no public market for our units, common stock or warrants. We intend to apply to list our units on the NASDAQ Capital Market, or NASDAQ, under the symbol PMVAU on or promptly after the date of this prospectus. Once the securities comprising the units begin separate trading, we expect that the common stock and warrants will be listed on NASDAQ under the symbols PMV and PMVAW, respectively. We cannot guarantee that our securities will be approved for listing on NASDAQ. Mario J. Gabelli has committed to purchase an aggregate of 1,000,000 units, which we refer to throughout this prospectus as the private units, at a price of $10.00 per unit in a private placement that will close simultaneously with the closing of this offering. Mr. Gabelli is the founder, Chairman, Chief Executive Officer and Co-Chief Investment Officer of GAMCO Investors, Inc. (NYSE: GBL), the Chairman and Chief Executive Officer of Associated Capital Group, Inc. (NYSE: AC) and serves as the Chairman and is the largest shareholder of CIBL, Inc, or CIBL. CIBL is the majority owner and managing member of Nevada PMV Acquisition Holding Company, LLC, which we refer to as our sponsor throughout this prospectus. Each private unit that Mr. Gabelli is purchasing is identical to the units being sold in this offering, including the right to receive liquidation distributions if we are unable to consummate our initial business combination, except that the warrants included in the private units will be non-redeemable by us and exercisable on a cashless basis so long as they are still held by Mr. Gabelli or his permitted transferees. Additionally, CIBL has committed to purchase an aggregate of 7,000,000 warrants, which we refer to throughout this prospectus as the private placement warrants, at a price of $0.50 per warrant ($3,500,000 in the aggregate) in a private placement that will close simultaneously with the closing of this offering. Each private placement warrant is exercisable to purchase one-half of one share of our common stock at $5.75 per half share. We are an emerging growth company under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See Risk Factors beginning on page 22 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Unit Total Public offering price $ 10.00 $ 100,000,000 Underwriting discounts and commissions(1) $ 0.60 $ 6,000,000 Proceeds, before expenses, to us $ 9.40 $ 94,000,000 (1) Includes $0.35 per unit, or approximately $3,500,000 in the aggregate payable to the underwriters for deferred underwriting commissions to be placed in a trust account located in the United States as described herein. The deferred commissions will be released to the underwriters only on completion of an initial business combination as described in this prospectus. Does not include certain fees and expenses payable to the underwriters in connection with this offering. See Underwriting beginning on page 111 for a description of compensation and other items of value payable to the underwriters. Of the proceeds we receive from this offering and the sale of the private units and private placement warrants, $110.0 million, or $125.0 million if the underwriters over-allotment option is exercised in full ($10.00 per unit in either case), will be deposited into a trust account with Continental Stock Transfer & Trust Company acting as trustee. The underwriters are offering the units for sale on a firm commitment basis. The underwriters expect to deliver the units to the purchasers on or about , 2016. Joint Book-Running Managers Cantor Fitzgerald & Co. Stifel , 2016 Mario J. Gabelli, the founder, Chairman, Chief Executive Officer and Co-Chief Investment Officer of GAMCO Investors, Inc. (NYSE: GBL) and Chairman and Chief Executive Officer of Associated Capital Group, Inc. (NYSE: AC), serves as CIBL s Chairman and is its largest shareholder. GAMCO, founded in 1997, is a widely-recognized provider of investment advisory services to open and closed-end funds, institutional and private wealth management investors, and investment partnerships, principally in the United States. Associated Capital Group recently spun-out from GAMCO on November 30, 2015, acts as general partner and investment manager to various event-driven arbitrage hedge funds and alternative investments and provides institutional research services to institutional clients and investment partnerships. Since its inception, GAMCO has been closely identified with its Private Market Value (PMV) with a Catalyst stock selection process. Our Chief Executive Officer, Christopher J. Marangi, serves as Co-Chief Investment Officer of GAMCO. He, along with our Executive Vice President, Gary M. Julien, possess extensive public market investment experience. We believe our principals backgrounds and GAMCO affiliation provide us with the ability to source transactions and identify companies that can thrive in a public-listing environment. In all, we have assembled a group of officers, directors and advisors who bring us significant public company executive leadership, operations oversight and mergers and acquisitions, capital markets and corporate strategy experience. We believe this experience will be a significant benefit to us as we evaluate potential acquisition or merger candidates and assist us in completing an initial business combination. Additionally, over the course of their careers, our management team, board and advisors have developed an extensive network of contacts and corporate relationships which we believe will provide us with an important source of transaction opportunities. Nevertheless, there can be no assurance of these facts. While we may pursue an acquisition opportunity in any business, industry, sector or geographical location, we intend to focus on industries that complement our management team s backgrounds and professional networks identify and acquire a business within the global telecommunications, media, entertainment, technology, industrial or consumer markets. We intend to focus on companies that are either non-core divisions of public or private companies, private equity-owned and other privately-owned businesses, both domestically and internationally. We will seek to acquire one or more businesses with an aggregate enterprise value of approximately $250 million to $500 million. In general, we will seek to acquire a readily understood business with sustainable competitive advantages, predictable cash flows and a solid management team at an attractive valuation. Initial Business Combination NASDAQ rules provide that our initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm, a qualified independent accounting firm or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire with respect to the satisfaction of such criteria. Notwithstanding the foregoing, if we are delisted from NASDAQ, we would no longer be required to meet the 80% fair market value requirement. We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post- transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses. We have identified the following criteria and guidelines that we believe are important in evaluating prospective target businesses. However, we may decide to enter into a business combination with a target business that does not meet these criteria and guidelines: Leading Industry Market Position: We intend to pursue companies whose products or services have leading positions within their respective market niche with sustainable competitive advantages and natural barriers to market entry. Such product or service characteristics may include leading market share, strong customer loyalty, unique and leading product or service characteristics, limited likelihood of product or service obsolescence, strong customer support, high product or service switching costs, strong brand recognition and solid intellectual property protection; Solid Free Cash Flow Generation: We will seek to acquire an established company with a history of attractive operating margins, strong free cash flow generation and solid recurring revenue streams with low capital expenditure and working capital investment requirements; Strong Management Team: We will seek to acquire a target business with an experienced management team with a proven track record of executing on its business plan, driving revenue growth and enhancing profitability. Our investment premise is to work in partnership with target management to provide the strategic resources and access to capital to allow them to execute on their business objectives; Favorable Long-Term Industry Outlook: We will seek to acquire a target business where the end user markets of such target business products or services have a favorable long-term growth outlook. We believe that strong organic growth potential of a target business is fundamental to our investment strategy; Diversified Customer and Supplier Base: We intend to pursue businesses that have a diversified customer and supplier base with a series of products or services that serve a variety of end-user markets. Further, we will seek target businesses whose products or services currently serve or have the potential to serve a large geographic footprint; Potential Transaction Platform: We intend to seek business combinations that have significant opportunities for a selective acquisition program that can be executed on a geographically diverse basis; and Benefit from Being a Public Company: We intend to acquire one or more businesses that will benefit from being publicly traded and can effectively utilize the broader access to capital and the public profile that are associated with being a publicly traded company. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination will be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant to our business objective. In evaluating a prospective target business, we expect to conduct an extensive due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, interviews with customers and suppliers, as well as review of financial and other information which will be made available to us. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm, a qualified independent accounting firm or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire that our initial business combination is fair to our company from a financial point of view. Members of our management team may directly or indirectly own common stock and warrants following this offering, and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. For additional information regarding our executive officers and directors business affiliations and potential conflicts of interest, see Management Directors and Executive Officers and Management Conflicts of Interest. Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that the fiduciary duties or contractual obligations of our executive officers will materially affect our ability to complete our business combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Our sponsor, executive officers and directors have agreed, pursuant to written letter agreements, not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within 24 months after the closing of this offering. We are an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to emerging growth company shall have the meaning associated with it in the JOBS Act. Our executive offices are located at 165 West Liberty Street, Suite 210, Reno, Nevada 89501 and our telephone number is (775) 329-8555. THE OFFERING In making your decision whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section below entitled Risk Factors beginning on page 22 of this prospectus. Securities offered 10,000,000 units, at $10.00 per unit, each unit consisting of: one share of common stock; and one redeemable warrant to purchase one-half of one share of common stock. Proposed NASDAQ symbols Units: PMVAU Common Stock: PMV Redeemable Warrants: PMVAW Trading commencement and separation of common stock and warrants The units will begin trading on or promptly after the date of this prospectus. The common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Cantor Fitzgerald & Co. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. The decision as to whether to allow our securities to trade separately prior to the 52nd day following the date of this prospectus would be based on a variety of factors, such as Cantor Fitzgerald & Co. s assessment of the relative strengths of the securities markets and blank check companies in general, the trading pattern of, and demand for, our securities in particular and any other factors deemed relevant at the time. Once the shares of common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of common stock and warrants. Separate trading of the common stock and warrants is prohibited until we have filed a Current Report on Form 8-K In no event will the common stock and warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date the units commence trading. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. Units: Number outstanding before this offering 0 Number of private units to be sold in a private placement simultaneously with this offering 1,000,000 Number outstanding after this offering and the private placement 11,000,000(1) Common stock: Number outstanding before this offering 3,125,000(2) Number of shares of common stock to be included in private units to be sold in a private placement simultaneously with this offering 1,000,000 Number outstanding after this offering and the private placement 13,750,000(1) Redeemable Warrants: Number of warrants outstanding before this offering 0 Number of private placement warrants and private warrants to be sold in private placements simultaneously with this offering 8,000,000(1) Number of warrants to be outstanding after this offering and the private placement 18,000,000(1) Exercisability Each warrant offered in this offering is exercisable to purchase one-half of one share of our common stock. Warrants may be exercised only for a whole number of shares of common stock. Because the warrants may only be exercised for whole numbers of shares, only an even number of warrants may be exercised at any given time. We structured each warrant to be exercisable for one-half of one share of our common stock, as compared to warrants issued by some other similar blank check companies which are exercisable for one whole share, in order to reduce the dilutive effect of the warrants upon completion of a business combination as compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Exercise price $5.75 per half share ($11.50 per whole share), subject to adjustments as described herein. Exercise period The warrants will become exercisable on the later of: 30 days after the completion of our initial business combination, and (1) Assumes no exercise of the underwriters over-allotment option. With respect to shares of common stock outstanding, also assumes the forfeiture by our sponsor of 375,000 founder shares due to the underwriters over-allotment option not being exercised. (2) This number includes up to 375,000 shares that are subject to forfeiture by our sponsor depending on the extent to which the underwriters over-allotment option is exercised. 12 months from the closing of this offering; provided in each case that we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). We are not registering the shares of common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than thirty (30) days after the closing of our initial business combination, we will use our best efforts to file with the SEC and have an effective registration statement covering the shares of common stock issuable upon exercise of the warrants, to maintain a current prospectus relating to those shares of common stock until the warrants expire or are redeemed. If a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective by the ninetieth (90th) day after the closing of the business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis. The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account. Redemption of warrants Once the warrants become exercisable, we may redeem the outstanding warrants (except with respect to the private placement warrants or private warrants as described herein): in whole and not in part; at a price of $0.01 per warrant; upon a minimum of 30 days prior written notice of redemption, which we refer to as the 30-day redemption period; and if, and only if, the last sale price of our common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. We will not redeem the warrants unless an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In determining whether to require all holders to exercise their warrants on a cashless basis, our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Please see the section entitled Description of Securities Warrants Public Stockholders Warrants for additional information. None of the private placement warrants or private warrants will be redeemable by us so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. Founder shares In August 2015, our sponsor purchased an aggregate of 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. Prior to the initial investment in the company of $25,000 by the sponsor, the company had no assets, tangible or intangible. The purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the number of founder shares issued. In September 2015, our sponsor sold an aggregate of 72,500 founder shares to our directors and advisors for the same per-share price originally paid for such shares. On May 12, 2016, we declared a stock dividend of 0.08695652173 shares for each outstanding share on such date resulting in an additional 250,000 shares of common stock being issued for an aggregate of 3,125,000 total founder shares outstanding. Up to 375,000 founder shares will be subject to forfeiture by our sponsor (or its permitted transferees) depending on the extent to which the underwriters over-allotment option is exercised so that the total number of founder shares outstanding represents 20% of the outstanding shares upon completion of this offering and the private placement of private units. If we increase or decrease the size of the offering pursuant to Rule 462(b) under the Securities Act, we will effect a stock dividend or share contribution back to capital, as applicable, immediately prior to the consummation of the offering in such amount as to maintain the ownership of our stockholders prior to this offering at 20.0% of our issued and outstanding shares of our common stock upon the consummation of this offering and private placement of private units (not taking into account any units they may purchase in this offering). The founder shares are identical to the shares of common stock included in the units being sold in this offering, except that: the founder shares are subject to certain transfer restrictions, as described in more detail below, and our initial stockholders, officers and directors have entered into letter agreements with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within the required time period as described herein (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our business combination within the prescribed time frame). If we submit our initial business combination to our public stockholders for a vote, our initial stockholders and their affiliates have agreed to vote their founder shares, private shares and any public shares purchased during or after this offering in favor of our initial business combination. As a result, we would need only 4,125,001 of the 11,000,000 public shares and private shares, or 37.5%, sold in this offering and private placement to be voted in favor of a transaction in order to have our initial business combination approved (assuming the over- allotment option is not exercised and all shares were present and entitled to vote at the meeting). Transfer restrictions on founder shares Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares until one year after the completion of our initial business combination (except as described herein under Principal Stockholders Transfers of Founder Shares and Private Placement Warrants ). We refer to such transfer restrictions throughout this prospectus as the lock-up. Notwithstanding the foregoing, if, prior to one year after the completion of our initial business combination, (1) the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (2) we consummate a subsequent transaction which results in our stockholders having the right to exchange their shares for cash, securities or other property, the founder shares will be released from the lock-up at such time. Private units Mario J. Gabelli has committed to purchase an aggregate of 1,000,000 private units at a price of $10.00 per unit in a private placement that will close simultaneously with the closing of this offering. Mr. Gabelli is the founder, Chairman, Chief Executive Officer and Co-Chief Investment Officer of GAMCO Investors, Inc. (NYSE: GBL), the Chairman and Chief Executive Officer of Associated Capital Group, Inc. (NYSE: AC) and serves as the Chairman, and is the largest shareholder of CIBL. CIBL is the majority owner and managing member of our sponsor. The purchase price of the private units will be added to the proceeds from this offering to be held in the trust account. If we do not complete our initial business combination within 24 months from the closing of this offering, the proceeds of the sale of the private units will be used to fund the redemption of our public shares and private shares (subject to the requirements of applicable law). Each private unit is identical to the units being sold in this offering, including the right to seek conversion in connection with a proposed business combination that we consummate and the right to receive liquidation distributions if we are unable to consummate our initial business combination as described above, except that the warrants included in the private units will be non-redeemable by us and exercisable on a cashless basis so long as they are still held by Mr. Gabelli or his permitted transferees. Transfer restrictions on private units The private units (including the private shares and private warrants) will not be transferable, assignable or saleable until after the completion of our initial business combination except to permitted transferees. Private placement warrants CIBL, the majority owner of our sponsor, has committed, pursuant to a written agreement, to purchase an aggregate of 7,000,000 private placement warrants, each exercisable to purchase one-half of one share of our common stock at $5.75 per half share, at a price of $0.50 per warrant ($3,500,000 in the aggregate) in a private placement that will occur simultaneously with the closing of this offering. The purchase price of the private placement warrants will be added to the proceeds from this offering to be held in the trust account. If we do not complete our initial business combination within 24 months from the closing of this offering, the proceeds of the sale of the private placement warrants will be used to fund the redemption of our public shares and private shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless. The private placement warrants are identical to the warrants included in the units offered hereby except that the private placement warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by CIBL, Inc. or its permitted transferees (except as described below under Principal Stockholders Transfers of Founder Shares and Private Placement Warrants ). If the private placement warrants are held by holders other than CIBL or its permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Transfer restrictions on private placement warrants The private placement warrants (including the common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or saleable until after the completion of our initial business combination except to permitted transferees. Proceeds to be held in trust account NASDAQ rules provide that at least 90% of the gross proceeds from this offering and the private placements be deposited in a trust account. Of the approximately $113.5 million in proceeds we will receive from this offering and the sale of the private placement warrants and private units described in this prospectus, or approximately $128.5 million if the underwriters over-allotment option is exercised in full, $110.0 million, or $125.0 million if the underwriters over-allotment option is exercised in full ($10.00 per share in either event), will be deposited into a segregated trust account located in the United States at with Continental Stock Transfer & Trust Company acting as trustee, and $3.5 million will be used to pay expenses in connection with the closing of this offering and for working capital following this offering. The proceeds to be placed in the trust account include $3,500,000 in deferred underwriting commissions. Except for the withdrawal of interest to pay taxes or working capital expenses, our amended and restated certificate of incorporation, as discussed below and subject to the requirements of law and stock exchange rules, provides that none of the funds held in the trust account will be released from the trust account until the earlier of (i) the completion of our initial business combination and (ii) the redemption of 100% of our public shares if we are unable to complete our initial business combination within 24 months from the closing of this offering. Conditions to completing our initial business combination There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination. NASDAQ rules provide that our initial business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. Notwithstanding the foregoing, if we are delisted from NASDAQ, we would no longer be required to meet the 80% fair market value requirement. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm, a qualified independent accounting firm or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire. We will complete our initial business combination only if the post-transaction company in which our public stockholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test, provided that in the event that the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses. Permitted purchases of public shares by our affiliates If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial stockholders, directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Subsequent to the consummation of this offering, we will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material nonpublic information and (ii) clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Our initial stockholders, directors, executive officers, advisors or their affiliates will not make any purchases if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Redemption rights for public stockholders upon completion of our initial business combination We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest (which interest shall be net of taxes payable and working capital released to us) divided by the number of then outstanding public shares and private shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our initial stockholders have entered into letter agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may acquire during or after this offering in connection with the completion of our business combination. Prior to acquiring any securities from our initial stockholders, permitted transferees must enter into a written agreement with us agreeing to be bound by the same restriction. Manner of conducting redemptions We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20.0% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation: conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. Upon the public announcement of our business combination, if we elect to conduct redemptions pursuant to the tender offer rules, our sponsor, members of our management team and their affiliates will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination. If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will: conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and file proxy materials with the SEC. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. In such case, our initial stockholders have agreed to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. Each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction. Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s penny stock rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of common stock submitted for redemption will be returned to the holders thereof. Limitation on redemption rights of stockholders holding 15% or more of the shares sold in this offering if we hold stockholder vote Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in this offering. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders ability to redeem to no more than 15% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders ability to vote all of their shares (including all shares held by those stockholders that hold 15% or more of the shares sold in this offering) for or against our business combination. Redemption Rights in connection with proposed amendments to our certificate of incorporation Our amended and restated certificate of incorporation may be amended by holders of 65% of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who will collectively beneficially own up to 20.0% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. However, our sponsor, executive officers and directors have agreed, pursuant to written agreements with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us), divided by the number of then outstanding public shares. Release of funds in trust account on closing of our initial business combination On the completion of our initial business combination, all amounts held in the trust account will be released to us. We will use these funds to pay amounts due to any public stockholders who exercise their redemption rights as described above under Redemption rights for public stockholders upon completion of our initial business combination, to pay the underwriters the deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using stock or debt securities, or not all of the funds released from the trust account are used for payment of the items set forth above, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination or thereafter, to fund the purchase of other companies or for working capital. Redemption of public shares and distribution and liquidation if no initial business combination Our sponsor, executive officers and directors have agreed that we will have only 24 months from the closing of this offering to complete our initial business combination although our Board of Directors may determine to voluntarily liquidate earlier than such date if it appears that a business combination will not be able to be completed within such time period. If we are unable to complete our initial business combination within such period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares and private shares, at a per- share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable and working capital released to us), divided by the number of then outstanding public shares and private shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of clauses (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination within the required time period. Our initial stockholders have entered into letter agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering. However, the holder of the private shares would be entitled to share in any liquidating distributions we make with respect to such private shares. Additionally, if our initial stockholders acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted time frame. The underwriters have agreed to waive all rights to the deferred underwriting commission held in the trust account in the event we do not complete our initial business combination within 24 months from the closing of this offering and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. Indemnification The managing member of our sponsor, CIBL, has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes and working capital, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, CIBL will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether CIBL has sufficient funds to satisfy his indemnity obligations and CIBL may not be able to satisfy those obligations. We have not asked CIBL to reserve for such eventuality. We believe the likelihood of CIBL having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Limited payments to insiders There will be no finder s fees, reimbursements or cash payments made to our sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, other than the following payments: Repayment of up to $150,000 in loans, and any additional advances, made to us by our sponsor prior to the date of this prospectus to cover offering-related and organizational expenses; Payment of $10,000 per month to an affiliate of our sponsor for office space, utilities and secretarial support, subject to adjustment as described herein; Payment of customary management fees to Gabelli Funds, LLC, a wholly owned subsidiary of GAMCO if we determine to invest the trust funds in the Gabelli U.S. Treasury Money Market Fund (which such fees will be paid from interest earned on the funds held in the trust account); Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors after the date of this prospectus to finance our necessary working capital and transaction costs in connection with an intended initial business combination, the terms of which are described elsewhere in this prospectus. Audit Committee We have established and will maintain an audit committee, which will be composed entirely of independent directors. Our audit committee will review on a quarterly basis all payments that are made to our sponsor, officers or directors, or our or their affiliates. The audit committee will also monitor compliance with the terms relating to this offering described in this prospectus. If any noncompliance is identified, then the audit committee will be charged with the responsibility to promptly take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section entitled Management Committees of the Board of Directors Audit Committee. RISKS We are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see Proposed Business Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419. You should carefully consider these and the other risks set forth in the section entitled Risk Factors beginning on page 22 of this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001652842_truenorth_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001652842_truenorth_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..824917d39b1196041bc37ad38d732f3f3dd80dc1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001652842_truenorth_prospectus_summary.txt
@@ -0,0 +1 @@
+PRELIMINARY PROSPECTUS Bosy Holdings Corp. 1,100,000 SHARES OF COMMON STOCK $0.0001 PAR VALUE PER SHARE Prior to this Offering, no public market has existed for the common stock of Bosy Holdings Corp. Upon completion of this Offering, we will attempt to have the shares quoted on the OTCQB operated by the OTC Markets Group, Inc. There is no assurance that the Shares will ever be quoted on the OTCQB. To be quoted on the OTCQB, a market maker must apply to make a market in our common stock. As of the date of this Prospectus, we have not made any arrangement with any market makers to quote our shares. In this public offering we, "Bosy Holdings Corp." are offering 1,100,000 shares of our common stock. The offering is being made on a self-underwritten, "best efforts" basis. There is no minimum number of shares required to be purchased by each investor. The shares offered by the Company will be sold on our behalf by our Chief Executive Officer, Teoh Kooi Sooi. There is uncertainty that we will be able to sell any of the 1,100,000 shares being offered herein by the Company. Mr. Teoh will not receive any commissions or proceeds for selling the shares on our behalf. All of the shares being registered for sale by the Company will be sold at a fixed price of $1.00 per share for the duration of the Offering. Assuming all of the 1,100,000 shares being offered by the Company are sold, the Company will receive $1,100,000 in gross proceeds. Assuming 825,000 shares (75%) being offered by the Company are sold, the Company will receive $825,000 in net proceeds. Assuming 550,000 shares (50%) being offered by the Company are sold, the Company will receive $550,000 in net proceeds. Assuming 275,000 shares (25%) being offered by the Company are sold, the Company will receive $275,000 in net proceeds. There is no minimum amount we are required to raise from the shares being offered by the Company and any funds received will be immediately available to us. There is no guarantee that we will sell any of the securities being offered in this offering. Additionally, there is no guarantee that this Offering will successfully raise enough funds to institute our company s business plan. Additionally, there is no guarantee that a public market will ever develop and you may be unable to sell your shares. This primary offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this Prospectus, unless extended by our directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Our Chief Executive Officer Teoh Kooi Sooi owns approximately 9.93% of the voting power of our outstanding capital stock. Additionally, Bosy Holdings Limited, a Seychelles Company, owns 89.37% of our common stock. Bosy Holdings Limited is founded and controlled by Chen Zheru who is the sole stockholder and director of Bosy Holdings Limited. Chen Zheru is also our founder and Director. The Company estimates the costs of this offering at $22,500. All expenses incurred in this offering are being paid for by the Company. The proceeds from the sale of the securities will be placed directly into the Company s account; any investor who purchases shares will have no assurance that any monies, beside their own, will be subscribed to the prospectus. All proceeds from the sale of the securities are non-refundable, except as may be required by applicable laws. It should be noted that our company is currently a shell company. We are not however a blank check shell company. We have performed limited business operations and have generated no revenue to date. The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, which became law in April 2012 and will be subject to reduced public company reporting requirements. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE REFER TO , ' ': RISK FACTORS BEGINNING ON PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. You should rely only on the information contained in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included in this Prospectus. If anyone provides you with different information, you should not rely on it. The date of this prospectus is __________________. - 1 - The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2 RISK FACTORS 5 SUMMARY OF FINANCIAL INFORMATION 12 MANAGEMENT S DISCUSSION AND ANALYSIS 13 INDUSTRY OVERVIEW 13 FORWARD-LOOKING STATEMENTS 14 DESCRIPTION OF BUSINESS 14 USE OF PROCEEDS 16 DETERMINATION OF OFFERING PRICE 16 DILUTION 17 PLAN OF DISTRIBUTION 18 DESCRIPTION OF SECURITIES 19 INTERESTS OF NAMED EXPERTS AND COUNSEL 20 REPORTS TO SECURITIES HOLDERS 20 DESCRIPTION OF FACILITIES 20 SHELL COMPANY STATUS 20 LEGAL PROCEEDINGS 21 PATENTS AND TRADEMARKS 21 DIRECTORS AND EXECUTIVE OFFICERS 21 EXECUTIVE COMPENSATION 22 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 24 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24 PRINCIPAL ACCOUNTING FEES AND SERVICES 24 MATERIAL CHANGES 24 FINANCIAL STATEMENTS F1-F10 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 25 INDEMNIFICATION OF OFFICERS AND DIRECTORS 25 RECENT SALES OF UNREGISTERED SECURITIES 26 EXHIBITS TO REGISTRATION STATEMENT 26 UNDERTAKINGS 27 SIGNATURES 28 You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. Table of Contents PROSPECTUS SUMMARY In this Prospectus, , ' ': , ' ': Bosy Holdings, "Bosy" the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to Bosy Holdings Corp., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending December 31st. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 5, and the financial statements, before making an investment decision. The Company Bosy Holdings Corp., a Nevada corporation ("the Company") was incorporated under the laws of the State of Nevada on June 23, 2015. The Company s executive offices are located at Unit Room 7C, World Trust Tower Building, 50 Stanley Street, Central, Hong Kong. We believe we need to raise $1,100,000 to execute our business plan over the next 12 months. The funds raised in this offering, even assuming we sell all the shares being offered, may be insufficient to carry out our intended business operations. We will receive proceeds from the sale of 1,100,000 shares of our common stock and intend to use the proceeds from this offering to further develop our operations. There is uncertainty that we will be able to sell any of the 1,100,000 shares being offered herein by the Company. The expenses of this offering, including the preparation of this prospectus and the filing of this registration statement, estimated at $22,500.00, are being paid for by the Company. The maximum proceeds to us from this offering ($1,100,000) will satisfy our basic subsistence level, cash requirements for up to 12 months. 75% of the possible proceeds from the offering by the company ($825,000) will satisfy our basic, subsistence level cash requirements for up to 9 months, while 50% of the proceeds ($550,000) will sustain us for up to 6 months, and 25% of the proceeds ($275,000) will sustain us for up to 3 months. Our budgetary allocations may vary, however, depending upon the percentage of proceeds that we obtain from this offering. For example, we may determine that it is more beneficial to allocate funds toward securing potential financing and business opportunities in the short terms rather than to conserve funds to satisfy continuous disclosure requirements for a longer period. During the 12 months following the completion of this offering, we intend to offer planting and cultivation services to land owners in regards to the planting and cultivation of Aquilaria Subintegra & Aquilaria Sinensis trees. We also intend to provide services relating to the extraction of Agarwood from such trees through a process known as "inoculation." We believe we will be able to generate revenue from providing such services by charging a fee. We will determine at a later date an appropriate fee to charge, depending on the the particular service or services that we will provide. If our revenues should grow to the point it is financially feasible to do so we also intend to purchase or rent our own plot of land so that we too can plant and cultivate such trees, and subsequently extract the Agarwood from them, of which we can then resell to consumers and distributors. Important note: Aquilaria Subintegra & Aquilaria Sinensis trees, through infection of mold, act as a catalyst to the development of Agarwood. Agarwood is a dark aromatic resin with a very distinctive smell. - 2 - Table of Contents We believe that if we are not able to raise additional capital within 12 months of the effective date of this registration statement, we may be adversely effected and may have to curtail operations or continue operations at a limited level that is financially suitable for the Company. Our Offering We have authorized capital stock consisting of 600,000,000 shares of common stock, $0.0001 par value per share ("Common Stock") and 200,000,000 shares of preferred stock, $0.0001 par value per share ("Preferred Stock"). We have 201,406,000 shares of Common Stock and no shares of Preferred Stock issued and outstanding. Through this offering we will register a total of 1,100,000 shares. We may endeavor to sell all 1,100,000 shares of common stock after this registration becomes effective. The price at which we, the company, offer these shares is at a fixed price of $1.00 per share for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will receive all proceeds from the sale of our common stock. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Company 1,100,000 shares of common stock, at a fixed price of $1.00 offered by us in a direct offering. Our offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Offering price per share We will sell the shares at a fixed price per share of $1.00 for the duration of this Offering. Number of shares of common stock outstanding before the offering of common stock 201,406,000 common shares are currently issued and outstanding. Number of shares of common stock outstanding after the offering of common stock 202.506,000 common shares will be issued and outstanding if we sell all of the shares we are offering. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $1.00. We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. The offering price for the shares will remain at $1.00 per share for the duration of the offering. - 3 - Table of Contents Use of Proceeds We intend to use the gross proceeds to us for working capital, and to fund the inoculation and plantation management of both Aquilaria Subintegra & Aquilaria Sinensis trees. We also plan to use the gross proceeds to hire employees, purchase cultivation materials, research and develop inoculation technology, and to develop our company website. For a full description of our use of proceeds please see the section titled "Use of Proceeds". Termination of the Offering This offering will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 1,100,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days. At any time and for any reason we may also terminate the offering. Terms of the Offering Our Chief Executive Officer, Teoh Kooi Sooi will sell the 1,100,000 shares of common stock on behalf of the company, upon effectiveness of this registration statement, on a BEST EFFORTS basis. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs We estimate our total offering registration costs to be approximately $22,500.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001652923_avexis-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001652923_avexis-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2b20e9b1242581fd4575e94a77e3f1c6b693c3f3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001652923_avexis-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and in the documents incorporated by reference. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus and the documents incorporated by reference in this prospectus carefully, especially the "Risk Factors" section beginning on page 12 and our consolidated financial statements and the related notes incorporated by reference in this prospectus, before making an investment decision. As used in this prospectus and the documents incorporated by reference, unless the context otherwise requires, references to "we," "us," "our," "the company" and "AveXis" refer to AveXis, Inc. AveXis, Inc. Overview We are a clinical-stage gene therapy company dedicated to developing and commercializing novel treatments for patients suffering from rare and life-threatening neurological genetic diseases. Our initial product candidate, AVXS-101, is our proprietary gene therapy product candidate currently in a Phase 1 clinical trial for the treatment of spinal muscular atrophy, or SMA, Type 1, the leading genetic cause of infant mortality. SMA Type 1 is a lethal genetic disorder characterized by motor neuron loss and associated muscle deterioration, resulting in mortality or the need for permanent ventilation support before the age of two for greater than 90% of patients. The survival motor neuron, or SMN, is a critical protein for normal motor neuron signaling and function. Patients with SMA Type 1 either carry a mutation in their SMN1 gene or their SMN1 genes have been deleted, which prevents them from producing adequate levels of functional SMN protein. AVXS-101 is designed to deliver a fully functional human SMN gene into the nuclei of motor neurons that then generates an increase in SMN protein levels and we believe this will result in improved motor neuron function and patient outcomes. In our ongoing, fully enrolled, Phase 1 clinical trial, we have treated 15 SMA Type 1 patients, divided into two dosing cohorts, as of July 1, 2016, and have observed a favorable safety profile that is generally well-tolerated and have also observed preliminary signs of increased survival and improved motor function compared to what would normally be expected in patients suffering from SMA Type 1. The U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, have each granted AVXS-101 orphan drug designation for the treatment of all types of SMA and the FDA has granted AVXS-101 fast track designation for the treatment of SMA Type 1. In July 2016, the FDA also granted Breakthrough Therapy Designation for AVXS-101 for the treatment of SMA Type 1 in pediatric patients. We have submitted, at the FDA's request, a Type B meeting request for a multidisciplinary, comprehensive discussion of the development program for AVXS-101. In addition to developing AVXS-101 to treat SMA Type 1, we plan to develop AVXS-101 to treat additional SMA types and develop other novel treatments for rare neurological genetic diseases. We intend to initiate a Phase 1/2a safety and dosing study of AVXS-101 via intrathecal delivery in patients with SMA Type 2 in the second half of 2016. Spinal Muscular Atrophy (SMA) SMA is a severe neuromuscular disease characterized by the loss of motor neurons leading to progressive muscle weakness and paralysis. The incidence of SMA is approximately one in 10,000 live births. SMA is generally divided into sub-categories termed SMA Type 1, 2, 3 and 4. SMA, and the SMA sub-types, are diagnosed first by identifying the existence of a genetic defect in the SMN1 gene and then by determining the number of copies of the SMN2 backup gene, which correlates with disease onset and severity. If insufficient protein is expressed, muscles do not develop Amendment No. 1 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents properly. Approximately 60% of new SMA patients have Type 1, the most severe type of SMA, with observation of disease symptoms within six months of birth. Patients with SMA Type 1 have difficulty breathing and swallowing and will never develop the strength to sit up independently or the ability to crawl or walk. Patients with SMA Type 1 frequently die in early childhood due to complications related to respiratory failure resulting from motor neuron degeneration. We believe there is a significant unmet medical need for patients with SMA Type 1, as there are currently no treatments approved by the FDA for SMA. The current standard of care for patients with SMA is limited to palliative therapies, including life-long respiratory care, ventilator support, nutritional care, orthopedic care and physical therapy. Our Product Candidate AVXS-101 We believe gene therapy is a therapeutic approach that is well-suited for the treatment of SMA due to the monogenic nature of the disease, meaning it is caused by a deletion or mutation in a single gene. AVXS-101 is designed to possess the key elements of an optimal gene therapy approach to SMA: delivery of a fully functional human SMN gene into target motor neuron cells; production of sufficient levels of SMN protein required to improve motor neuron function; and rapid onset of effect in addition to sustained SMN expression. AVXS-101 utilizes a non-replicating adeno-associated virus serotype 9, or AAV9, capsid to deliver a functional copy of a human SMN gene to the patient's own cells without modifying the existing DNA of the patient. Unlike many other capsids, the AAV9 capsid utilized in AVXS-101 crosses the blood-brain barrier, a tight protective barrier which regulates the passage of substances between the bloodstream and the brain, thus allowing for intravenous administration. In addition, AAV9 has been observed in preclinical studies to efficiently target motor neuron cells when delivered via either intrathecal or intravenous administration. AVXS-101 has a self-complementary DNA sequence that enables rapid onset of effect and a continuous promoter that is intended to allow for continuous and sustained SMN expression. In April 2014, we initiated an open-label, dose-escalation Phase 1 clinical trial of AVXS-101 in patients with SMA Type 1 at Nationwide Children's Hospital in Columbus, Ohio, or NCH. The primary objective of the trial is safety and tolerability, while the secondary objective is to measure the time from birth until an "event," which is defined as death or at least 16 hours per day of required ventilation support for breathing for at least 14 consecutive days in the absence of acute reversible illness or perioperatively. In September 2014, we completed the dosing of the first cohort of three patients, who received a dose of AVXS-101 administered at 6.7 1013 vector genome per kilogram, or vg/kg, or the low dose, and in December 2015, we completed the dosing of 12 patients in the second cohort, who received the 2.0 1014 vg/kg dose or the proposed therapeutic dose. Use of the term "proposed therapeutic dose" does not imply that we have established efficacy, but this dose is the dosing level that we presently intend to evaluate in future trials. We will likely be required to conduct a pivotal trial followed by review and approval of the product candidate by the FDA before making any claims of efficacy as to our product candidate or the appropriate dose. We have a Type B meeting scheduled with FDA in late September 2016 to discuss the development program for AVXS-101 in SMA Type 1. We intend to discuss, among other matters, the design of our pivotal trials. We have an exclusive, worldwide license with NCH under certain patent applications related to both the intravenous and intrathecal delivery of AVXS-101 for the treatment of all types of SMA, and an exclusive, worldwide license from a predecessor to REGENXBIO Inc., or REGENXBIO, under certain patents and patent applications owned by the Trustees of the University of Pennsylvania and licensed to ReGenX Biosciences, LLC, or ReGenX, to use the AAV9 capsid for the in vivo gene therapy treatment of SMA in humans. In addition, we have a non-exclusive, worldwide license AveXis, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 2836 (Primary Standard Industrial Classification Code Number) 90-1038273 (I.R.S. Employer Identification No.) 2275 Half Day Rd, Suite 160 Bannockburn, Illinois 60015 (847) 572-8280 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents agreement with Asklepios BioPharmaceutical Inc., or AskBio, under certain patents and patent applications owned by The University of North Carolina at Chapel Hill and licensed to AskBio for the use of its self-complementary DNA technology for the treatment of SMA. Our Strategy We are building a patient-centric business with the goal of developing innovative gene therapy treatments that transform the lives of patients and their families suffering from rare and life-threatening neurological genetic diseases. In order to accomplish this goal, we plan to execute on the following key strategies: Rapidly advance our SMA Type 1 program through clinical trials in the United States. We are currently conducting an open-label, dose-escalation Phase 1 clinical trial of AVXS-101 in patients with SMA Type 1 at NCH. In December 2015, we completed the enrollment of our Phase 1 trial, having dosed a total of 15 patients in two dosing cohorts. The FDA has granted AVXS-101 fast track and breakthrough therapy designations for the treatment of SMA Type 1, and the EMA and the FDA have granted orphan drug designation for the treatment of all types of SMA. Expand the development of AVXS-101 into SMA Types 2 and 3. Based on preclinical and our preliminary clinical observations to date, we believe AVXS-101 may also have the ability to treat patients with SMA Types 2 and 3, which result from the same genetic defect as SMA Type 1. In the United States, the incidence of SMA is approximately one in 10,000 live births with SMA Types 1 and 2 being the most common representing approximately 60% and 27% of all new cases of SMA, respectively, and SMA Type 3 being less common. The prevalence of SMA Types 2 and 3 is approximately 52% and 36%, respectively, of all patients with SMA. Advance the development of AVXS-101 outside of the United States. The incidence, standard of care and prognosis of SMA globally are generally consistent. With no approved treatments, we believe there is significant unmet need for patients suffering from SMA outside the U.S. We intend to conduct clinical trials outside of the United States, beginning in Europe, in an effort to expand access to AVXS-101 to patients in international markets. Build a pipeline of gene therapy treatments for other rare and life-threatening neurological genetic diseases. In addition to our programs in SMA, we also intend to identify, acquire, develop and commercialize novel product candidates for the treatment of other rare and life-threatening neurological genetic diseases with mechanisms of action that we believe can be treated with gene therapy. We intend to employ a targeted approach to acquisition and licensing transactions reflecting our goal to be a leading gene therapy company focused on the treatment of rare and life-threatening neurological diseases. Continue to invest in and develop robust and sustainable manufacturing processes and multiple supply sources to ensure the supply of high-quality products. To date, our manufacturing processes have been consistent with the stage of product development that we are in. We have evaluated and are implementing a plan to scale up our manufacturing processes to meet our needs in later-stage clinical trials. In addition to engaging third-party manufacturers, we are establishing our own commercial scale cGMP-compliant manufacturing facility to provide multiple long-term supply alternatives to meet commercial demand in the event that AVXS-101 receives marketing approval. Invest in developing and accessing intellectual property to further expand our product portfolio. To date, we have secured our intellectual property position through our agreements with our key collaborators and other third parties. We plan to build upon this intellectual property position through additional patent applications related to AVXS-101. Sean P. Nolan President and Chief Executive Officer AveXis, Inc. 2275 Half Day Rd, Suite 160 Bannockburn, Illinois 60015 (847) 572-8280 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents With respect to future product candidates, we expect to continue to work with REGENXBIO and other creators of next generation vectors to ensure appropriate access to additional therapeutic candidates. Continue to develop a strong, collaborative network of key stakeholders, including patient advocacy groups, healthcare professionals, key opinion leaders and research institutions, to inform our clinical development and commercialization strategies. We believe that it is imperative to put the patient at the center of our focus, and we intend to work and listen closely to key stakeholders to ensure that we clearly understand their issues, insights and recommendations. The feedback from and collaboration with these groups will inform our key strategies to transform the lives of patients and their families suffering from rare and life-threatening neurological genetic diseases with safe and effective therapies. Recent Developments Below is a summary of the preliminary results of our ongoing Phase 1 trial as of July 1, 2016: AVXS-101 appears to have a favorable safety profile and to be generally well-tolerated in patients studied. As of July 1, 2016, there have been a total of 107 adverse events, or AEs, reported, 31 of which were determined to be serious adverse events, or SAEs. Two of the 31 were deemed treatment-related and, as previously reported, those SAEs were clinically asymptomatic liver enzyme elevations. Of the 76 non-serious AEs, three were treatment-related elevations in liver enzymes experienced by two patients. All elevated liver enzyme AEs and SAEs were resolved with prednisolone treatment. Other non-treatment-related AEs were expected and were associated with SMA. No patients in either of the two dosing cohorts have experienced an "event," defined as death or until a patient requires at least 16 hours per day of ventilation support for breathing for 14 consecutive days in the absence of an acute reversible illness, or perioperatively. The median event-free age of all 15 patients was 17.9 months, and the median event-free age of patients in the first, low-dose cohort, or Cohort 1, was 28.8 months and in the second, proposed therapeutic-dose cohort, or Cohort 2, was 14.8 months. All 15 patients are over 8 months of age. The first patient treated with AVXS-101 completed the two-year follow-up period in May 2016 and, therefore, this patient's age is reported in this analysis as of May 2016. Based on an independent, peer-reviewed natural history study of SMA Type 1 conducted by the Pediatric Neuromuscular Research Network for SMA and published in Neurology in 2014, or the Finkel Study, the natural history of the disease indicates that 25 percent of untreated SMA Type 1 patients survive event-free at 13.6 months of age and that 8 percent survive event-free at 20 months of age. The lethality of the disease is further supported by the recent release of results from the NeuroNEXT NIH-sponsored natural history study in SMA Type 1, or the NeuroNEXT NIH Study, which indicates a median time to death or tracheostomy for ventilation support for breathing from birth to 8 months. Mean increases of 9.0 points and 23.3 points in CHOP-INTEND scores were observed in Cohort 1 and Cohort 2, respectively. Eleven out of 12 patients (92%), eight out of 12 patients (67%), and three out of 12 patients (25%) in Cohort 2 have achieved CHOP-INTEND scores of at least 40 points, 50 points or 60 points, respectively. Of the three patients who have achieved CHOP-INTEND scores of at least 60 points, which is considered normal, two patients have achieved the maximum CHOP-INTEND score of 64. The Children's Hospital of Philadelphia Infant Test of Neuromuscular Disorders, or CHOP-INTEND, is a test developed to measure motor skills of patients with SMA Type 1. The NeuroNEXT NIH Study indicates a mean decline of 10.5 points in CHOP-INTEND scores over a one-year period in untreated Copies to: Divakar Gupta Darren DeStefano Joshua A. Kaufman Cooley LLP 1114 Avenue of the Americas New York, New York 10036 (212) 479-6000 Mark V. Roeder Brian J. Cuneo Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 (650) 328-4600 Table of Contents SMA Type 1 patients, highlighting the rapid loss of motor function occurring early in the disease course. During review of the data as of July 1, 2016, we learned that one patient in Cohort 1 who was suffering from hypersalivation (a condition experienced by some SMA patients), underwent salivary ligation surgery on July 13, 2016. The patient required non-invasive ventilation for 16 or more hours per day continuously for greater than two weeks pre-operatively which is classified by the study protocol as reaching the "permanent ventilation endpoint." This patient did not reach the permanent ventilation endpoint until after the time period covered by the July 1, 2016 data analysis. An independent Data Safety Monitoring Board, or the DSMB, determined that this development was not a "permanent ventilation endpoint" for the data as of July 1, 2016, but would be classified as an "event" for the next data period ending in September 2016. This event was determined by the DSMB to represent progression of disease and not an adverse event related to the use of AVXS-101. In September 2016, Dr. Brian Kaspar, our Chief Scientific Officer, who has previously served in this capacity on a part-time basis, while continuing as a full time faculty member of NCH, began a six month entrepreneurial leave of absence from his role at NCH to allow Dr. Kaspar to focus his efforts on AveXis on a full time basis. Our Team When AveXis was founded, we formed a collaboration with NCH to explore the use of gene therapy for the treatment of SMA and secured our first institutional investors and expanded our leadership team. Our current operations are a result of this collaboration with NCH and research conducted by our Chief Scientific Officer, Dr. Brian Kaspar. Dr. Kaspar has over 20 years of gene therapy experience. Historically, Dr. Kaspar has served as a principal investigator in the Center for Gene Therapy at the Research Institute at NCH, although in September 2016, Dr. Kaspar began a six month entrepreneurial leave of absence from NCH. NCH is a leading pediatric gene therapy research institute. To execute on AveXis' mission, we have assembled a management team that includes individuals with expertise in gene therapy, regulatory development, product development, manufacturing and commercialization, with a history of success in building and operating innovative biotechnology and healthcare companies focused on rare and life-threatening diseases. This team is led by our President and Chief Executive Officer, Sean P. Nolan, who brings 25 years of broad leadership and management experience in the biopharmaceutical industry to AveXis. Most recently he was the chief business officer of InterMune, Inc. where he led multiple functions across the organization, including North American commercial operations, global marketing, corporate and business development, and global manufacturing and supply chain. Our other management team members also have successful track records developing and commercializing drugs through previous experiences at companies such as Abbott Laboratories, Amgen, Auspex, InterMune, Hospira, Novartis, Pfizer, Daiichi Sankyo and Quest Diagnostics. Risks Associated with Our Business Our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the pharmaceutical industry. An investment in our shares involves a high degree of risk. These risks may limit our ability to successfully execute our business strategy and are discussed in greater detail under "Risk Factors" beginning on page 12 of Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Proposed Maximum Aggregate Offering Price(1) Amount of Registration Fee(2) Common Stock, $0.0001 par value per share par value per share $159,160,000 $16,027.41(3) (1)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes the offering price of additional shares that the underwriters have the option to purchase. (2)Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. (3)Of this amount, $12,738.55 was previously paid. Table of Contents this prospectus. Some of the principal risks relating to our business and our ability to execute our business strategy include: We have incurred net losses since inception and anticipate that we will continue to incur net losses for the foreseeable future and may never achieve or maintain profitability. We have never generated revenue from product sales and may never be profitable. The development and commercialization of AVXS-101, or any other product candidates we may develop, is subject to many risks. If we do not successfully develop and commercialize any product candidate, our business will be adversely affected. AVXS-101 is based on a novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval. To our knowledge, no gene therapy product has been approved in the United States and only one such product has been approved in the European Union. Success in preclinical studies or early clinical trials, including in our ongoing Phase 1 clinical trial, may not be indicative of results obtained in later trials. AVXS-101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval. Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize AVXS-101 and the approval may be for a more narrow indication than we seek. Breakthrough therapy designation by the FDA may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that any of our product candidates will receive marketing approval in the United States. Even if we obtain and maintain approval for AVXS-101 from the FDA, we may never obtain approval for AVXS-101 outside of the United States, which would limit our market opportunities and adversely affect our business. The commercial success of AVXS-101 will depend upon its degree of market acceptance by physicians, patients, third party payors and others in the medical community. A third party has conducted the only clinical trial of AVXS-101 to date and had sponsored this trial through November 6, 2015, and our ability to influence the design and conduct of this trial has been limited. Any failure by a third party to meet its obligations with respect to the clinical and regulatory development of AVXS-101 may delay or impair our ability to obtain regulatory approval for AVXS-101 and result in liability for us. We are in the process of changing our third party manufacturer of AVXS-101 and, although we intend to establish our own AVXS-101 manufacturing facility, we expect to utilize third parties to conduct our product manufacturing for the foreseeable future. Therefore, we are subject to the risk that these third parties may not perform satisfactorily. If we are unable to establish sales, medical affairs and marketing capabilities or enter into agreements with third parties to market and sell AVXS-101, we may be unable to generate any product revenue. Delays in obtaining regulatory approval of our manufacturing process and facility or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts. To date, to our knowledge, no cGMP gene therapy The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents manufacturing facility in the United States has received approval from FDA for the manufacture of an approved gene therapy product. We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize AVXS-101. Our rights to develop and commercialize AVXS-101 are subject to the terms and conditions of licenses granted to us by others. If we are unable to obtain and maintain patent protection for our current product candidate, any future product candidates we may develop and our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our current product candidate, any future product candidates we may develop and our technology may be adversely affected. We have identified material weaknesses in our internal control over financial reporting, which remain unremediated as of June 30, 2016. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock. Implications of Being an Emerging Growth Company We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include: reduced obligations with respect to financial data, including presenting only two years of audited financial statements and only two years of selected financial data in this prospectus; an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements. We may take advantage of these provisions for up to five years or such earlier time that we no longer qualify as an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates as of the end of our second fiscal quarter or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. For example, we have taken advantage of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. To the extent that we take advantage of these reduced reporting burdens, the information that we provide stockholders may be different than you might obtain from other public companies in which you hold equity interests. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion. Dated September 6, 2016 4,000,000 Shares Common Stock Table of Contents In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our Corporate Information We were originally formed under the laws of the state of Delaware in March 2010 under the name BioLife Cell Bank, LLC. In January 2012, we converted from a limited liability company to a Delaware corporation, BioLife Cell Bank, Inc. In January 2014, we amended and restated our certification of incorporation to change our name to AveXis, Inc. Our principal executive offices are located at 2275 Half Day Road, Suite 160, Bannockburn, Illinois 60015, and our telephone number is (847) 572-8280. Our website address is www.avexis.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. We are offering 3,566,474 shares of our common stock. PBM Capital Investments, LLC, the selling stockholder identified in this prospectus, is offering an additional 433,526 shares of our common stock. We will not receive any proceeds from the sale of shares to be offered by the selling stockholder. Our common stock is listed on The NASDAQ Global Select Market under the symbol "AVXS." The last reported sale price of our common stock on The NASDAQ Global Select Market on September 2, 2016 was $34.60 per share. We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in our common stock involves a high degree of risk. See "Risk Factors," beginning on page 12 of this prospectus, as well as in the documents incorporated or deemed to be incorporated by reference into this prospectus, for a discussion of the factors you should carefully consider before deciding to purchase our common stock. The number of shares of our common stock to be outstanding after this offering is based on 23,013,838 shares of our common stock outstanding as of June 30, 2016. The number excludes: 2,348,617 shares of common stock issuable upon the exercise of outstanding stock options as of June 30, 2016, at a weighted-average exercise price of $18.70 per share; 310,220 shares of common stock issuable upon the exercise of outstanding warrants as of June 30, 2016, at a weighted-average exercise price of $2.57 per share; and up to a maximum of 4,339,451 shares of our common stock reserved for future issuance under our 2016 Equity Incentive Plan, or the 2016 Plan, as of June 30, 2016, as well as any automatic increases in the number of shares of common stock reserved for future issuance under the 2016 Plan. Unless otherwise indicated, this prospectus reflects and assumes the following: no exercise of outstanding options or warrants after June 30, 2016; and no exercise by the underwriters of their option to purchase additional shares of our common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Public offering price $ $ Underwriting discounts and commissions(1) $ $ Proceeds to AveXis, Inc., before expenses $ $ Proceeds to selling stockholder, before expenses $ $ (1)For an explanation of the method used to calculate basic and diluted net loss per common share, see (a) Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, (1)See "Underwriting" beginning on page 110 for additional information regarding underwriting compensation. To the extent that the underwriters sell more than 4,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 600,000 shares from us at the initial price to the public less the underwriting discount, within 30 days from the date of this prospectus. (1)The as adjusted column reflects the receipt of the net proceeds from the sale of 4,000,000 shares of our common stock at an assumed public offering price of $34.60 per share, the last reported sale price of our common stock on The NASDAQ Global Select Market on September 2, 2016, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive proceeds from the sale of the shares by the selling stockholder, accordingly, there is no impact upon the adjusted consolidated balance sheet for these sales. (2)A $1.00 increase (decrease) in the assumed public offering price of $34.60 per share, the last reported sale price of our common stock on The NASDAQ Global Select Market on September 2, 2016, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $3.4 million, assuming the number of shares offered by us as stated on the cover of this prospectus remains unchanged and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a 1,000,000 increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $32.5 million, at the assumed public offering price of $34.60 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of our public offering determined at pricing. The underwriters expect to deliver the shares against payment in New York, New York on or about , 2016. Goldman, Sachs & Co. Jefferies BMO Capital Markets Chardan Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001653247_waitr_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001653247_waitr_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3b758ffb33f4283a9ed82164672f69a73e37b216
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001653247_waitr_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary only highlights the more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus, references to: we, us, company or our company are to Landcadia Holdings, Inc.; common stock are to our Class A common stock and our Class F common stock; FEI sponsor or FEI is to Fertitta Entertainment, Inc., a Texas corporation; founder shares refer to shares of our Class F common stock held by our sponsors prior to this offering and the shares of our Class A common stock issued upon the automatic conversion thereof at the time of our initial business combination as provided herein; initial stockholders are to holders of our founder shares prior to this offering; Leucadia sponsor or Leucadia is to Leucadia National Corporation, a New York corporation; management or our management team is to our executive officers, directors and director nominees; public shares are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); public stockholders are to the holders of our public shares, including our initial stockholders and members of our management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder s and member of our management team s status as a public stockholder shall only exist with respect to such public shares; rights offering refers to the rights issued by us on a pro-rata basis to our sponsors in October 2015 to purchase sponsor warrants as described herein; sponsors are to our FEI sponsor and our Leucadia sponsor; and sponsor warrants are to the warrants issued to our sponsors in connection with the exercise of their rights under the rights offering. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. General We are a blank check company whose business purpose is to enter into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Although our efforts to identify a prospective target business will not be limited to a particular industry or geographic region, we intend to focus on investment opportunities in the dining, hospitality, entertainment and gaming industries in the United States. Our management team and sponsors have significant experience investing in and advising companies in these areas. Our management team is led by Tilman Fertitta, our Co-Chairman and Chief Executive Officer, and Richard Handler, our Co-Chairman and President. Mr. Fertitta is the sole shareholder, Chairman and Chief Executive Officer of our FEI sponsor, Fertitta Entertainment, Inc., and Mr. Handler is the Chief Executive Officer of our Leucadia sponsor, Leucadia National Corporation, and its largest operating subsidiary, Jefferies Group LLC, or Jefferies, a global investment banking firm. TABLE OF CONTENTS EXPLANATORY NOTE This Registration Statement contains a prospectus relating to the initial public offering of units of Landcadia Holdings, Inc. for $10.00 per unit, consisting of one share of Class A common stock and one warrant. This Registration Statement also contains a prospectus relating to offer and sales of units of Landcadia Holdings, Inc. in connection with certain market making transactions, that may be effected by Jefferies LLC in the secondary market for 30 days following the date of this prospectus. The complete prospectus relating to the initial public offering of our units (the IPO Prospectus ) follows immediately after this Explanatory Note. Following the IPO Prospectus are certain pages of the prospectus relating solely to such market making transactions (together with the remainder of the prospectus as modified as indicated below, the Market Making Prospectus ), including an alternate front and back cover page, an alternate table of contents and alternate sections entitled Summary The Offering, Use of Proceeds and Plan of Distribution. Each of such alternate pages has been marked Alternate Page for Market Making Prospectus. The Market Making Prospectus will not include the information in the sections of the IPO Prospectus entitled Risk Factors Our sponsors paid an aggregate of $11,000, or approximately $0.0015 per founder share assuming the forfeiture of 1,125,000 founder shares and, accordingly, you will experience immediate and substantial dilution from the purchase of our Class A common stock, Risk Factors The determination of the offering price of our units and the size of this offering is more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our units properly reflects the value of such units than you would have in a typical offering of an operating company, Dilution, Capitalization, Use of Proceeds and Underwriting (Conflict of Interest). All other sections of the IPO Prospectus are to be used in the Market Making Prospectus. A complete version of each of the IPO Prospectus and the Market Making Prospectus will be filed with the U.S. Securities and Exchange Commission in accordance with Rule 424 under the Securities Act. TABLE OF CONTENTS FEI is an international dining, hospitality, entertainment and gaming company. Under Mr. Fertitta s leadership, FEI has executed a disciplined and opportunistic growth strategy, including over 20 acquisitions, transforming FEI into an organization that generated revenue in excess of $3.2 billion for the twelve months ended December 31, 2015, with assets of more than $3.6 billion as of December 31, 2015. FEI is one of the largest full-service restaurant owners and operators in the United States, owning more than 400 full service restaurants and operating more than 500 venues in 35 states with more than 50 different restaurant brands including McCormick & Schmick s, Chart House, Landry s Seafood, Rainforest Cafe, Saltgrass Steak House, Bubba Gump Shrimp Company, Claim Jumper and many more award-winning concepts. Landry s Signature Group of restaurants includes some of the world s premier fine dining concepts, like Mastro s Steakhouse and Ocean Club, Morton s The Steakhouse, The Oceanaire, Vic & Anthony s, Brenner s Steakhouse, Grotto, La Griglia and Willie G s. In addition to restaurants, FEI is also engaged in the ownership and operation of numerous gaming, hospitality and entertainment businesses, which include hotels, casinos and aquariums such as the iconic Golden Nugget Hotel and Casino brand, with locations in Las Vegas, Atlantic City, Laughlin, Biloxi and Lake Charles. FEI recently entered online internet gaming in the state of New Jersey with the Golden Nugget Casino brand as well. In the Houston/Galveston area, Mr. Fertitta operates the award winning San Luis Resort, Spa & Conference Center, The Westin Houston Downtown and several other award-winning regional hotels. Other FEI entertainment destinations include the Historic Pleasure Pier, The Kemah Boardwalk, Downtown Aquarium Denver and Houston and Tower of Americas in San Antonio, which are all featured on the Forbes, Travel Channel or USA Today s top five lists of attractions. Mr. Fertitta has been frequently featured in the nation s top financial and industry publications. He is a frequent guest of prominent national business programs on networks like CNBC and Fox Business News. He is one of the foremost authorities in the dining, hospitality, entertainment and gaming industries. Mr. Fertitta s many personal honors include receiving the Houston Entrepreneur of the Year Award from Ernst & Young and induction into the Texas Business Hall of Fame as the second-youngest inductee. In 2012, he was named Amusement Today s Person of the Year, in 2013, he was named Casino Journal s Executive of the Year, and in 2015, he was named to Nation s Restaurant News s Power List for 2015. Mr. Fertitta debuted on the Forbes 400 list in 2012. Leucadia is a diversified holding company with over a 30 year track record focused on return on investment and long-term value creation to maximize long-term shareholder returns. Leucadia continuously reviews acquisitions of businesses, securities and assets that have the potential for significant value creation, invests in a broad variety of businesses, and evaluates the retention and disposition of its existing operations and holdings. Leucadia s financial services businesses and investments include Jefferies, Leucadia Asset Management, Berkadia (commercial mortgage banking and servicing), FXCM (a publicly traded company providing online foreign exchange trading) and HomeFed (real estate). Leucadia also has investments in a diverse array of other businesses, including National Beef (beef processing), HRG Group, Inc. (a publicly traded diversified holding company), Vitesse Energy and Juneau Energy (oil and gas exploration and development), Garcadia (automobile dealerships), Linkem (fixed wireless broadband services in Italy), Conwed Plastics and Idaho Timber (manufacturing companies), and Golden Queen (a gold and silver mining project). Mr. Handler has been CEO of Leucadia s largest operating subsidiary, Jefferies Group LLC since 2001 and is currently one of Wall Street s most tenured CEO s. Leucadia, under Mr. Handler s stewardship since the 2013 merger with Jefferies, is an active investor, deploying new capital while also exiting investments on a timely basis. Through December 31, 2015, Leucadia has committed over $2.6 billion in new investments since the merger and realized over $2.5 billion in cash from asset sales since July 2012, all the while continuing to cultivate and develop its extensive existing portfolio. The new investments range from consumer to financial services to energy, among other sectors, and reflect the ability to source and close unique transactions in a competitive marketplace by leveraging relationships from both the Leucadia and Jefferies platforms. Recent examples of Mr. Handler s relationships leading to attractive investment opportunities include Leucadia s investments in Folger Hill, FXCM and HRG Group, Inc. Messrs. Fertitta and Handler share a similar investment philosophy focused on identifying undervalued assets through evaluation of the business fundamentals and the opportunity for operational or capital structure improvements. We believe that the demonstrated ability of our management team and sponsors to source and TABLE OF CONTENTS The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED MAY 20, 2016 PRELIMINARY PROSPECTUS LANDCADIA HOLDINGS, INC. $300,000,000 30,000,000 Units Landcadia Holdings, Inc. is a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of one share of our Class A common stock and one warrant. Each warrant entitles the holder thereof to purchase one-half of one share of our Class A common stock at a price of $5.75 per one-half share ($11.50 per whole share), subject to adjustment as described in this prospectus. Warrants may be exercised only for a whole number of shares of Class A common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on the later of 30 days after the completion of our initial business combination and 12 months from the closing of this offering, and will expire five years after the completion of our initial business combination or earlier upon redemption or liquidation, as described in this prospectus. We have also granted the underwriters a 45-day option to purchase up to an additional 4,500,000 units to cover over-allotments, if any. We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of our Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account described below as of two business days prior to the consummation of our initial business combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding shares of Class A common stock that were sold as part of the units in this offering, which we refer to collectively as our public shares, subject to the limitations described herein. If we are unable to complete our initial business combination within 24 months from the closing of this offering, we will redeem 100% of the public shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less taxes payable and up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and as further described herein. Our sponsors, Fertitta Entertainment, Inc. and Leucadia National Corporation, have subscribed to purchase an aggregate of 16,000,000 warrants (or 17,800,000 warrants if the over-allotment option is exercised in full) at a price of $0.50 per warrant ($8,000,000 in the aggregate, or $8,900,000 if the over-allotment option is exercised in full) in a private placement that will close simultaneously with the closing of this offering. These subscriptions were made under a private pro rata rights offering we conducted in October 2015. We refer to these warrants throughout this prospectus as the sponsor warrants. Each sponsor warrant is exercisable to purchase one-half of one share of our Class A common stock at $5.75 per half-share. Our sponsors currently own an aggregate of 8,625,000 shares of Class F common stock, or founder shares (up to 1,125,000 of which are subject to forfeiture depending on the extent to which the underwriters over-allotment option is exercised). The shares of Class F common stock will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as provided herein. In addition, holders of the Class F common stock will have the right to elect all of our directors prior to our initial business combination. Prior to this offering, there has been no public market for our units, Class A common stock or warrants. We have applied to list our units on the NASDAQ Capital Market, or NASDAQ, under the symbol LCAHU on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for listing on NASDAQ. We expect the Class A common stock and warrants comprising the units to begin separate trading on the 52nd day following the date of this prospectus unless Jefferies LLC and Deutsche Bank Securities Inc. inform us of their decision to allow earlier separate trading, subject to our filing a Current Report on Form 8-K with the United States Securities and Exchange Commission, or the SEC, containing an audited balance sheet reflecting our receipt of the gross proceeds of this offering and issuing a press release announcing when such separate trading will begin. Once the securities comprising the units begin separate trading, we expect that the Class A common stock and warrants will be listed on NASDAQ under the symbols LCA and LCAHW, respectively. We are an emerging growth company under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See Risk Factors beginning on page 27 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. In addition, our independent registered public accounting firm s report on our financial statements includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern. Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Unit Total Public offering price $ 10.00 $ 300,000,000 Underwriting discounts and commissions 1 $ 0.55 $ 16,500,000 Proceeds, before expenses, to us $ 9.45 $ 283,500,000 1 Includes $0.35 per unit, or $10,500,000 (or up to $12,075,000 if the underwriters over-allotment option is exercised in full) in the aggregate payable to the underwriters for deferred underwriting commissions to be placed in a trust account located in the United States as described herein. The deferred commissions will be released to the underwriters only on completion of an initial business combination, in an amount equal to $0.35 multiplied by the number of shares of Class A common stock sold as part of the units in this offering, as described in this prospectus. Does not include certain fees and expenses payable to the underwriters in connection with this offering. See also Underwriting beginning on page 129 for a description of compensation and other items of value payable to the underwriters. Of the $302 million in net proceeds we receive from this offering and the sale of the sponsor warrants described in this prospectus, or $347 million if the underwriters over-allotment option is exercised in full, $300 million ($10.00 per unit), or $345 million if the underwriters over-allotment option is exercised in full ($10.00 per unit), will be deposited into a trust account at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and $2 million (regardless of the extent to which the underwriters over-allotment option is exercised) will be used to pay expenses in connection with the closing of this offering and for working capital following the closing of this offering. Except for the withdrawal of interest to pay income taxes and franchise taxes, if any, our second amended and restated certificate of incorporation will provide that none of the funds held in trust will be released from the trust account until the earliest of (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our second amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, or (iii) the redemption of all of our public shares if we are unable to complete our business combination within 24 months from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders. The underwriters are offering the units for sale on a firm commitment basis. The underwriters expect to deliver the units to the purchasers on or about , 2016. Jefferies Deutsche Bank Securities Ladenburg Thalmann , 2016 TABLE OF CONTENTS close investments in a variety of businesses, particularly in the dining, hospitality, entertainment and gaming industries, coupled with our management team s contacts and sources in these industries and their deep operational experience, will allow us to identify a business combination target and consummate a business combination. We also believe that potential sellers of target businesses will view the fact that our management team and sponsors have assisted numerous companies in improving their financial and operating performance as a positive factor in considering whether or not to enter into a business combination with us. Our executive officers and directors will allocate their time to other businesses and are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that Messrs. Fertitta, Handler or any of our other executive officers or directors devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process. Business Strategy We intend to focus our search for business combination targets in the dining, hospitality, entertainment and gaming industries, although we may pursue an acquisition in any business industry or sector. We believe the acquisition of one or more businesses in these industries can serve as a platform for expansion, both organically and through further acquisitions. We believe our management team and sponsors have a track record of identifying businesses at attractive valuations, uncovering and improving operational inefficiencies, and investing in accretive acquisitions that have resulted in value creation for their investors. Our management team will seek to leverage their access to proprietary deal flow, sourcing capabilities and network of industry contacts to generate business combination opportunities. Business Combination Target Criteria Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. Underperforming potential peak operational and/or financial performance capabilities. We believe that given our management team s experience with value-oriented investing, we are well-positioned to identify targets where additional capital investment and effective sponsorship will result in improvements in operational and/or financial performance. Opportunities for organic growth and add-on acquisitions. We will seek targets that we believe we can grow both organically and through acquisitions. We intend to leverage the industry experience and financial acumen of our management team to identify additional operational improvement opportunities for the target business. In addition, we believe that we can utilize our extensive networks to source proprietary opportunities and execute transactions that will help the business or businesses we acquire grow through further acquisitions if appropriate or beneficial. Offers a value proposition that is not recognized by the market. We will conduct due diligence with respect to potential business combination targets, with a goal of uncovering value that has been unrecognized and would allow us to invest in companies and buy assets at prices that we believe to be below intrinsic value. History of, or potential for, free cash flow generation. We will seek one or more businesses or assets that have a history of, or potential for, strong, stable free cash flow generation, with predictable and recurring revenue streams. Experienced and motivated management team. We will seek one or more businesses or assets that have strong, experienced management teams or those that provide a platform for us to assemble an effective and experienced management team. We will focus on management teams with a proven track record of driving revenue growth, enhancing profitability and creating value for their stockholders. TABLE OF CONTENTS You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus. TABLE OF CONTENTS These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our sponsors and management team may deem relevant. In the event that we decide to enter into a business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of proxy solicitation or tender offer materials, as applicable, that we would file with the United States Securities and Exchange Commission, or the SEC. In evaluating a prospective target business, we expect to conduct a due diligence review which may encompass, among other things, meetings with incumbent ownership, management and employees, document reviews, interviews of customers and suppliers, inspections of facilities, as well as reviewing financial and other information which will be made available to us. In addition, although we intend to focus on identifying business combination candidates in the dining, hospitality, entertainment and gaming industries, we will consider a business combination candidate outside of these industries if we determine that such candidate offers an attractive opportunity for our company. Sourcing of Potential Initial Business Combination Targets Our management team and sponsors have developed a broad network of contacts and corporate relationships. This network has been developed through their experience in sourcing, acquiring, operating, developing, growing, financing and selling businesses; reputation for integrity and fair dealing with sellers, capital providers and target management teams; and experience in executing transactions under varying economic and financial market conditions. This network has provided our management team and sponsors with a flow of referrals that have resulted in numerous transactions. We believe that the network of contacts and relationships of our management team and sponsors will provide us with an important source of business combination opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment banking firms, private equity firms, consultants, accounting firms and business enterprises. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsors, executive officers or directors, or completing the business combination through a joint venture or other form of shared ownership with our sponsors, executive officers or directors. In the event we seek to complete our initial business combination with a target that is affiliated with our sponsors, executive officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent accounting firm, or independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, that our initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context. As more fully discussed in Management Conflicts of Interest, if any of our executive officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. All of our executive officers currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. Initial Business Combination Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or an independent accounting firm with respect to the satisfaction of such criteria. We do not intend to purchase multiple businesses in unrelated industries in connection with our initial business combination. TABLE OF CONTENTS We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire substantially all of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than substantially all of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses even if the acquisitions of the target businesses are not closed simultaneously. Risks Related to Our Business Our business, financial condition, results of operations and prospects are subject to numerous risks, including those in the section entitled Risk Factors beginning on page 27 of this prospectus. These risks include: We may not be able to complete our initial business combination within 24 months after the closing of this offering, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate. Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. Our executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination. Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses. Our sponsors, and their affiliates, have no obligation to provide us with potential investment opportunities or to devote any specified amount of time or support to our company s business. There is currently no market for our securities and a market for our securities may not develop, which would adversely affect the liquidity and price of our securities. TABLE OF CONTENTS If the net proceeds of this offering not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination, and we will depend on loans from our sponsors or management team to fund our search, to pay our franchise and income taxes and to complete our business combination. We may seek investment opportunities with a financially unstable business or an entity lacking an established record of sales or earnings. Registration of our Securities Prior to the date of this prospectus, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We will not file a Form 15 to suspend our reporting or other obligations under the Exchange Act prior to the consummation of our business combination, or liquidation of the trust account in the event we do not consummate a business combination within the required timeframe, and have no current intention of doing so after the consummation of the business combination, unless we are not the surviving entity in such business combination. Corporate Information We were incorporated as a Delaware corporation in 2008. We have not had any operations to date. Our executive offices are located at 1510 West Loop South, Houston, Texas 77027, and our telephone number is (713) 850-1010. We are an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to emerging growth company shall have the meaning associated with it in the JOBS Act. TABLE OF CONTENTS The Offering In making your decision whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section below entitled Risk Factors beginning on page 27 of this prospectus. Securities offered 30,000,000 units, at $10.00 per unit, each unit consisting of: one share of Class A common stock; and one warrant to purchase one-half of one share of Class A common stock. NASDAQ symbols Units: LCAHU Class A Common Stock: LCA Warrants: LCAHW Trading commencement and separation of Class A common stock and warrants The units are expected to begin trading on or promptly after the date of this prospectus. The Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Jefferies LLC and Deutsche Bank Securities Inc. inform us of their decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock and warrants. Separate trading of the Class A common stock and warrants is prohibited until we have filed a Current Report on Form 8-K In no event will the Class A common stock and warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. TABLE OF CONTENTS Units: Number outstanding before this offering 0 Number outstanding after this offering 30,000,000 1 Common stock: Number outstanding before this offering 8,625,000 2 3 Number outstanding after this offering 37,500,000 1 4 Warrants: Number of sponsor warrants to be sold to our sponsors 16,000,000 1 Number of warrants to be outstanding after this offering and the sale of the sponsor warrants 46,000,000 (exercisable for 23,000,000 shares) 1 Exercisability Each warrant offered is exercisable to purchase one-half of one share of our Class A common stock. Warrants may be exercised only for a whole number of shares of Class A common stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder. As a result, warrant holders not purchasing an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional interest that will not be issued. We structured each warrant to be exercisable for one-half of one share of our Class A common stock, as compared to warrants issued by some other similar blank check companies which are exercisable for one whole share, in order to reduce the dilutive effect of the warrants upon completion of a business combination as compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive business combination partner for target businesses. Exercise price $5.75 per one-half share ($11.50 per whole share), subject to adjustments as described herein. Warrants may be exercised only for a whole number of shares of Class A common stock. (1) Assumes no exercise of the underwriters over-allotment option and the forfeiture by our initial stockholders of 1,125,000 founder shares upon the earlier to occur of the expiration or termination of the underwriters over-allotment option. (2) This number consists solely of founder shares and includes up to 1,125,000 shares that are subject to forfeiture by our initial stockholders depending on the extent to which the underwriters over-allotment option is exercised. (3) Founder shares are classified as shares of Class F common stock, which shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as described below adjacent to the caption Founder shares conversion and anti-dilution. (4) Includes 30,000,000 public shares and 7,500,000 founder shares. TABLE OF CONTENTS Exercise period The warrants will become exercisable on the later of: 30 days after the completion of our initial business combination, and 12 months from the closing of this offering; provided in each case that we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed to use our best efforts to file and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of common stock until the warrants expire or are redeemed, as specified in the warrant agreement; provided, that if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in this offering. The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. Redemption of warrants Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the sponsor warrants): in whole and not in part; at a price of $0.01 per warrant; upon a minimum of 30 days prior written notice of redemption, which we refer to as the 30-day redemption period; and if, and only if, the closing price of our Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. TABLE OF CONTENTS We will not redeem the warrants unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may exercise our redemption right even if the issuance of shares of Class A common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws and we are unable to effect such registration or qualification, subject to our obligation in such case to use our best efforts to register or qualify the shares of Class A common stock under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in this offering. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In determining whether to require all holders to exercise their warrants on a cashless basis, our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Please see Description of Securities Warrants Public Stockholders Warrants for additional information. None of the sponsor warrants will be redeemable by us so long as they are held by the initial purchasers of the sponsor warrants or their permitted transferees. Amendment to Terms of Warrants The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Founder shares As of the date of this prospectus, each of our sponsors owned 50% of the 8,625,000 issued and outstanding founder shares and we had $11,000 of invested capital, or approximately $0.0015 per share assuming the forfeiture of 1,125,000 founder shares. TABLE OF CONTENTS Prior to the initial investment by our Leucadia sponsor in 2008, we had no assets, tangible or intangible. The purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the number of founder shares issued. On April 27, 2016, we conducted a 1:3 stock split, resulting in our initial stockholders holding an aggregate of 8,625,000 founder shares. The number of outstanding founder shares was determined based on the expectation that the total size of this offering would be a maximum of 34,500,000 units if the underwriters over-allotment option is exercised in full, and therefore that such founder shares would represent 20% of the outstanding shares after this offering. If we increase or decrease the size of this offering pursuant to Rule 462(b) under the Securities Act, we will effect a forward or reverse pro-rata stock split or other appropriate mechanism, as applicable, with respect to our Class F common stock immediately prior to the consummation of this offering in such amount as to maintain the ownership of founder shares by our initial stockholders at 20% of our issued and outstanding shares of common stock upon the consummation of this offering. Our initial stockholders will collectively own 20% of our issued and outstanding shares after this offering (assuming they do not purchase any units in this offering). Up to 1,125,000 founder shares will be subject to forfeiture by our initial stockholders depending on the extent to which the underwriters over-allotment option is exercised. None of the 1,125,000 founder shares subject to forfeiture will be forfeited until the earlier to occur of the expiration or termination of the underwriters over-allotment option. At such time, our initial stockholders will forfeit founder shares in such an amount so as to maintain the ownership of our initial stockholders at 20% of the Company s issued and outstanding shares of common stock upon the consummation of this offering and any exercise of the underwriters over-allotment option. The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, except that: only holders of the founder shares have the right to vote on the election of directors prior to our initial business combination; the founder shares are subject to certain transfer restrictions, as described in more detail below; our initial stockholders, officers, directors and director nominees have entered into letter agreements with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a stockholder vote to approve an amendment to our second amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we TABLE OF CONTENTS have not consummated an initial business combination within 24 months from the closing of our initial public offering and (iii) to waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our business combination within the prescribed time frame). If we submit our initial business combination to our public stockholders for a vote, our initial stockholders have agreed, pursuant to written agreements with us, to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination; and the founder shares are automatically convertible into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in more detail below. Transfer restrictions on founder shares Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares (except to certain permitted transferees) until one year after the completion of our initial business combination or earlier if subsequent to our initial business combination, (i) the closing price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination or (ii) we consummate a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. We refer to such transfer restrictions throughout this prospectus as the lock-up. Founder shares conversion and anti-dilution rights The shares of Class F common stock will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the business combination, the ratio at which shares of Class F common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class F common stock agree to waive such adjustment) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class F common stock will equal, in the aggregate, on an as-converted basis, 20% of the total number of all shares of common stock outstanding upon the completion of this offering TABLE OF CONTENTS plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the business combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination or pursuant to warrants issued to our sponsors. Election of Directors; Voting Prior to our initial business combination, only holders of our founder shares will have the right to vote on the election of directors. Holders of our public shares will not be entitled to vote on the election of directors during such time. These provisions of our second amended and restated certificate of incorporation may only be amended by a vote of the majority of at least 90% of our common stock voting at a meeting. With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our initial business combination, except as required by law, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote. Conflict of Interest Because our Leucadia sponsor is an affiliate of Jefferies LLC, an underwriter of this offering, and beneficially owns 50% of our outstanding common stock prior to the consummation of this offering, Jefferies LLC is deemed to have a conflict of interest within the meaning Rule 5121 of FINRA. Accordingly, this offering is being made in compliance with the applicable provisions of FINRA Rule 5121. FINRA Rule 5121 prohibits Jefferies LLC from making sales to discretionary accounts without the prior written approval of the account holder and requires that a qualified independent underwriter, as defined in FINRA Rule 5121, participate in the preparation of the registration statement and exercise its usual standards of due diligence with respect thereto. Deutsche Bank Securities Inc. is acting as qualified independent underwriter for this offering. See Underwriting (Conflict of Interest) on page 129 for more information. Sponsor warrants On October 2, 2015, our sponsors subscribed to purchase an aggregate of 16,000,000 warrants (or 17,800,000 warrants if the over-allotment option is exercised in full) at a price of $0.50 per warrant ($8,000,000 in the aggregate, or $8,900,000 if the over-allotment option is exercised in full) in a private placement that will close simultaneously with the closing of this offering. These subscriptions were made under a private pro rata rights offering we conducted in October 2015 to all of our stockholders as of such time. Each sponsor warrant is exercisable to purchase one-half of one share of our Class A common stock at $5.75 per one-half share. The purchase price of the sponsor warrants will be added to the proceeds from this offering to be held in the trust account. If we do not complete our initial business combination within 24 months from the closing of this offering, the proceeds of the sale of the sponsor warrants will be used to fund the redemption of our public shares (subject to the requirements of applicable law) and the sponsor warrants will expire worthless. The sponsor warrants will be non-redeemable so long as they are held by their initial purchasers or their permitted transferees (except as described below under Principal Stockholders Transfers of TABLE OF CONTENTS Founder Shares and Sponsor Warrants ). If the sponsor warrants are held by holders other than their initial purchasers or their permitted transferees, the sponsor warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Our sponsors, or their permitted transferees, have the option to exercise the sponsor warrants on a cashless basis. Transfer restrictions on sponsor warrants The sponsor warrants (including the shares of Class A common stock issuable upon exercise of the sponsor warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination and they will be non-redeemable so long as they are held by the initial purchasers of the sponsor warrants or their permitted transferees (except as described herein under Principal Stockholders Transfers of Founder Shares and Sponsor Warrants ). Proceeds to be held in trust account NASDAQ rules provide that at least 90% of the gross proceeds from this offering and the sale of the sponsor warrants be deposited in a trust account. Of the $302,000,000 in net proceeds we receive from this offering and the sale of the sponsor warrants described in this prospectus, or approximately $347,000,000 if the underwriters over-allotment option is exercised in full, $300,000,000 ($10.00 per unit), or approximately $345,000,000 ($10.00 per unit) if the underwriters over-allotment option is exercised in full, will be deposited into a segregated trust account located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and $2,000,000 (regardless of the extent to which the underwriters over-allotment option is exercised) will be used to pay expenses in connection with the closing of this offering and for working capital following this offering. The proceeds to be placed in the trust account include up to $10,500,000 (or up to $12,075,000 if the underwriters over-allotment option is exercised in full) in deferred underwriting commissions. Except for the withdrawal of interest to pay income taxes and franchise taxes, if any, our second amended and restated certificate of incorporation, as discussed below and subject to the requirements of law and regulation, provides that none of the funds held in the trust account will be released from the trust account until the earlier of (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our second amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, or (iii) the redemption of 100% of our public shares if we are unable to complete our initial business combination within 24 months from the closing of this offering. Based on current interest rates, we do not expect that the interest earned on the trust account, net of TABLE OF CONTENTS income taxes, will be sufficient to pay Delaware franchise taxes for 2016. To the extent that the interest earned on the trust account, net of income taxes, is not sufficient to pay Delaware franchise taxes for 2016, we could pay such franchise taxes with a combination of funds from the interest earned on the trust account (net of income taxes), working capital held outside the trust account and/or loans which may be made to us by our sponsors or an affiliate of our sponsors or certain of our officers and directors. We expect that we will use all of the interest generated on the funds held in the trust account to pay taxes. As a result, we expect that such interest will not be a part of the redemption or liquidating distributions described above. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders. Conditions to completing our initial business combination There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination. Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm. We will complete our initial business combination only if the post-transaction company in which our public stockholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test, provided that in the event that the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses even if the acquisitions of the target businesses are not closed simultaneously. Permitted purchases of securities by our affiliates If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial TABLE OF CONTENTS stockholders, directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Subsequent to the consummation of this offering, we will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing our securities during certain blackout periods and when they are in possession of any material non-public information and (ii) clear all trades of company securities with our general counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Our initial stockholders, directors, executive officers, advisors or their affiliates will not make any purchases if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. The purpose of any such purchases of shares could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our business combination that may not otherwise have been possible. In addition, if such purchases are made, the public float of our common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or TABLE OF CONTENTS trading of our securities on a national securities exchange. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions. Anticipated expenses and funding sources Unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use, except for the withdrawal of interest to pay income taxes and franchise taxes, if any. Unless and until we complete our initial business combination, we may pay our other expenses only from: the net proceeds of this offering and the sale of the sponsor warrants not held in the trust account, which will be approximately $1,100,000 in working capital after the payment of $6,000,000 in upfront underwriting commissions and approximately $900,000 in expenses relating to this offering; and any loans or additional investments from our sponsors, members of our management team or their affiliates or other third parties, although they are under no obligation to advance funds or invest in us, and provided any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of a business combination. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $0.50 per warrant at the option of the lender. Redemption rights for public stockholders upon completion of our initial business combination We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our initial stockholders have entered into letter agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may acquire during or after this offering in connection with the completion of our business combination. Limitations or redemptions Our second amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s penny TABLE OF CONTENTS stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. In connection with a proposed business combination, the determination of whether we satisfy such net tangible asset or cash requirement would take into account payment in full of the deferred underwriting commissions upon consummation of such business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof. Manner of conducting redemptions We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding shares of common stock or seek to amend our second amended and restated certificate of incorporation would require stockholder approval. If we decide to seek stockholder approval, we will: conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and file proxy materials with the SEC. If we seek stockholder approval, we will only complete our initial business combination if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. In such case, our initial stockholders have agreed, pursuant to written agreements with us, to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. Accordingly, if we seek stockholder approval of our initial business combination, it is more TABLE OF CONTENTS likely that the necessary stockholder approval will be received than would be the case if our sponsors, officers, directors and director nominees agreed to vote their founder shares and public shares, as applicable, in accordance with the majority of the votes cast by our public stockholders. Each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction or vote at all. Upon the public announcement of our business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our sponsors will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than the number of public shares we are permitted to redeem under our second amended and restated certificate of incorporation. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination. Our second amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. In connection with a proposed business combination, the determination of whether we satisfy such net tangible asset or cash requirement would take into account payment in full of the deferred underwriting commissions upon consummation of such business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of common stock submitted for redemption will be returned to the holders thereof. Public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in street name, may be required to either tender their certificates to our transfer agent prior to the date set forth in the proxy materials or TABLE OF CONTENTS tender offer documents, as applicable, mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using Depository Trust Company s DWAC (Deposit/Withdrawal At Custodian) System, at the holder s option. The proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate the applicable delivery requirements. Accordingly, a public stockholder would have up to two days prior to the vote on the business combination if we distribute proxy solicitation materials or from the time we send out our tender offer materials until the close of the tender offer period, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares. Limitation on redemption rights of stockholders holding 15% or more of the shares sold in this offering if we hold stockholder vote Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our second amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in this offering. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders ability to redeem to no more than 15% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders ability to vote all of their shares (including all shares held by those stockholders that hold more than 15% of the shares sold in this offering) for or against our business combination. TABLE OF CONTENTS Redemption rights in connection with proposed amendments to our certificate of incorporation Some other blank check companies have a provision in their charter which prohibits the amendment of certain charter provisions. Our second amended and restated certificate of incorporation will provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of this offering and the sale of the sponsor warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of our common stock, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock. Our initial stockholders, who will collectively beneficially own 20% of our outstanding shares of common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our second amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. Our sponsors, executive officers, directors and director nominees have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our second amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. Our sponsors have entered into letter agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination. Release of funds in trust account on closing of our initial business combination On the completion of our initial business combination, all amounts held in the trust account will be released to us, other than funds that the trustee will use to pay amounts due to the underwriters in respect of the deferred underwriting commissions and any public stockholders who exercise their redemption rights as described above under Redemption rights for public stockholders upon completion of our initial business combination, which amounts shall be paid directly from the trust account to the underwriters and the redeeming stockholders, respectively. We will use the remaining funds to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released TABLE OF CONTENTS from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. Redemption of public shares and distribution and liquidation if no initial business combination Our sponsors, executive officers, directors and director nominees have agreed that we will have only 24 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less taxes payable and up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination within the 24-month time period. Our initial stockholders have entered into letter agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering. However, if our initial stockholders acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time frame. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the trust account in the event we do not complete our initial business combination within 24 months from the closing of this offering and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. Our sponsors, executive officers, directors and director nominees have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our second amended and restated certificate of incorporation that would affect the substance or TABLE OF CONTENTS timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described above under Limitations on redemptions. Limited payments to insiders There will be no finder s fees, reimbursements or cash payments made to our sponsors, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination. However, we will be permitted to make the following payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: Repayment of up to an aggregate of $300,000 in loans made to us by our sponsors to cover offering-related and organizational expenses; and Reimbursement for office space, secretarial and administrative services provided to members of our management team by our FEI sponsor, in an amount not to exceed $10,000 per month. The above amounts will be paid out of the $900,000 of proceeds from this offering and the concurrent private placement that will be held outside the trust account. In addition, we will not be prohibited from making the following payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; At the closing of our initial business combination, a customary financial advisory fee to an affiliate of our Leucadia sponsor in an amount that constitutes a market standard financial advisory fee for comparable transactions; and Repayment of loans which may be made by our sponsors or an affiliate of our sponsors or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $0.50 per warrant at the option of the lender. TABLE OF CONTENTS In addition, no agreement with our Leucadia sponsor or its affiliates will be entered into, and no fees for such services will be paid to our Leucadia sponsor or its affiliates, prior to the date that is 90 days from the date of this prospectus, unless FINRA determines that such payment would not be deemed underwriting compensation in connection with this offering. Audit Committee Prior to the effectiveness of this registration statement, we will have established and will maintain an audit committee. Among its responsibilities, the audit committee will review on a quarterly basis all payments that were made to our sponsors, officers or directors, or our or their affiliates and monitor compliance with the other terms relating to this offering. If any noncompliance is identified, then the audit committee will be charged with the responsibility to immediately take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section entitled Management Committees of the Board of Directors Audit Committee. Indemnification of Trust Account Our sponsors have agreed that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share or (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsors will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsors have sufficient funds to satisfy their indemnity obligations and, therefore, our sponsors may not be able to satisfy those obligations. We have not asked our sponsors to reserve for such eventuality. We believe the likelihood our sponsors having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. TABLE OF CONTENTS Risks We are a blank check company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see Proposed Business Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419. You should carefully consider these and the other risks set forth in the section entitled Risk Factors beginning on page 27 of this prospectus. TABLE OF CONTENTS
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001655008_haha_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001655008_haha_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e2a34608f5c977e8ae13669f318feee1f4ff752c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001655008_haha_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY For the sake of clarity, this prospectus follows English naming convention of first name followed by last name, regardless of whether a person s name is Chinese or English. For example, the name of our president, treasurer and member of our board of directors is specified as Hsuan-Hsien Liao, even though, in Chinese, her name would be presented as Liao Hsuan-Hsien. The Company Our Business The Company was incorporated in the State of Nevada on June 10, 2014. We are a development stage company with a principal business of marketing and distributing in Taiwan silica energy clothing manufactured by Shinin Silica Corp., a Taiwanese corporation ( Shinin ). Generally, that clothing consists of mens and womens undergarments and related apparel. That clothing is made from an energy silicon fiber and yarn made from a fine nanoscale silicon powder and polymer materials which, together, result in a reactive energy material. Additionally, that clothing is bio-degradable and quick-drying. We anticipate that we will receive revenue from the distribution and sale of that silicon energy clothing. As of the date of this prospectus, we have not sold any of that silicon energy clothing nor have we generated any revenue from operations. Our operations to date have been devoted primarily to start-up and development activities. Our Chief Executive Officer, Hsuan-Hsien Liao, has performed all of those activities to date, which include the following: Formation of the Company Development of our business plan Negotiation of a Marketing and Distribution Agreement with Shinin Silica Corp. Ms. Liao will be responsible for our operations until such time as we hire additional personnel, which we intend to do at such time as we have sufficient funds. We will attempt to become operational during the fourth quarter of operations following the completion of this offering. Our principal executive offices are located at 4F, No. 132, Songshan Rd., Xinyi District, Taipei City, 110, Taiwan (Republic of China). Our phone number is 886-227492597. Our fiscal year ends on December 31. As of the date of this prospectus, we have 210,281 shares of our $.10 par value common stock issued and outstanding and held by 32 shareholders. We are registering for sale 160,000 shares of our common stock pursuant to the Securities Act of 1933. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements included in the registration statement of which this prospectus is a part do not include any adjustments that might result from the uncertainty about our ability to continue in business. As of September 30, 2015, we had $3,368 in current assets and $3,186 in liabilities. Accordingly, our working capital as of September 30, 2015 was $182. As of November 30, 2015, we had $3,368 in cash and cash equivalents. Currently, we do not have enough cash to finance our operations. We estimate that we need approximately $200,000 to support our operations during the next twelve months. This amount includes $18,750, which is our estimated cost necessary to comply with our reporting requirements during the next twelve months. We believe the maximum proceeds from this offering will be sufficient to meet our cash requirements for the next twelve months. Our cash shortfall will be $49,818, $99,818 and $149,818, respectively, if we sell 75%, 50% and 25% of the maximum offering. We plan to meet any such shortfall through revenue from operations, private placements of our capital stock, and/or loans from Hsuan-Hsien Liao, our sole officer and director. In that regard, we have a written commitment from Hsuan-Hsien Liao for a 12 month line of credit in the amount of $100,000 at no interest; and a copy of that commitment is attached as Exhibit 99 to that registration statement of which this prospectus is a part. Presently, we have no employees. Our sole officer and director is responsible for all planning, development and operational duties and will continue to do so throughout the early stages of our growth. Human resource planning will be a part of an ongoing process that will include regular evaluation of our operations. We intend to hire employees at such time as we determine it is appropriate. We can provide no assurance or guarantee on the date on which we will hire employees. We have no present plans to be acquired by or to merge with another company, nor do our shareholders have plans to enter into a change of control or similar transaction. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. Table of Contents Jumpstart Our Business Startups Act We are electing to not opt out of the JOBS Act of 2012 extended accounting transition period. This may make our financial statements more difficult to compare to other companies. Pursuant to the JOBS Act of 2012, as an emerging growth company, we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board ( PCAOB ) or the Securities and Exchange Commission (the SEC ). We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the standard for a private company. This may make comparison of our financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible, as possible different or revised standards may be used. Emerging Growth Company: The JOBS Act of 2012 is intended to reduce the regulatory burden on emerging growth companies. We meet the definition of an emerging growth company, and as long as we qualify as an emerging growth company, we will, among other things: be temporarily exempted from the internal control audit requirements Section 404(b) of the Sarbanes-Oxley Act; be temporarily exempted from various existing and forthcoming executive compensation-related disclosures, for example: say-on-pay , pay-for- performance , and CEO pay ratio ; be temporarily exempted from any rules that might be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or supplemental auditor discussion and analysis reporting; be temporarily exempted from having to solicit advisory say-on-pay, say- on-frequency and say-on-golden-parachute shareholder votes regarding executive compensation pursuant to Section 14A of the Securities Exchange Act of 1934, as amended; be permitted to comply with the SEC s detailed executive compensation disclosure requirements on the same basis as a smaller reporting company; and be permitted to adopt any new or revised accounting standards using the same timeframe as private companies (if the standard applies to private companies). We will continue to be an emerging growth company until the earliest of: the last day of the fiscal year during which we have annual total gross revenues of $1 billion or more; the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered pursuant to the Securities Act of 1933, as amended; the date on which we issue more than $1 billion in non-convertible debt securities during a previous three-year period; or the date on which we become a large accelerated filer, which generally is a company with a public float of at least $700 million (Securities Exchange Act Rule 12b-2). The Offering The following is a brief summary of this offering. Please see the PLAN OF DISTRIBUTION section for a more detailed description of the terms of the offering. Number of Shares Being Offered: The Company is offering as many as 160,000 shares of common stock, par value $0.10 Offering Price per share: $1.25 Offering Period: The shares are being offered for a period not to exceed 270 days from the effective date of the registration statement of which this prospectus is a part. Net Proceeds to Company: If 160,000 shares (100%) are sold: $200,000 If 120,000 shares (75%) are sold: $150,000 If 80,000 shares (50%) are sold: $100,000 If 40,000 shares (25%) are sold: $50,000 Use of Proceeds: We intend to use the proceeds to expand our business operations. Number of Shares of our Common Stock Outstanding Before the Offering: 210,281 shares Number of Shares of our Common Stock Outstanding After the Offering: If 160,000 shares (100%) are sold: 370,281 shares If 120,000 shares (75%) are sold: 330,281 shares If 80,000 shares (50%) are sold: 290,281 shares If 40,000 shares (25%) are sold: 250,281 shares Offering Expenses: The expenses associated with this offering total approximately $18,750 (excluding filing fees). THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE COMPANY MAY NOT SELL ITS SECURITIES UNTIL THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE OF THESE SECURITIES IS NOT PERMITTED. PRELIMINARY PROSPECTUS Dated February ___, 2016 HAHA GENERATION CORP. 160,000 Shares of Common Stock $1.25 per share HAHA Generation Corp. ( our , we , us the Company) is offering on a best-efforts basis of as many as 160,000 shares of its common stock at a price of $1.25 per share. This is the initial offering of our common stock, and no public market exists for the securities being offered. The Company is offering those shares on a self-underwritten, best-efforts, basis directly by our sole officer and director. There is no minimum number of shares required to be purchased by any investor. Hsuan-Hsien Liao, our sole officer and director, intends to sell those shares directly. No commission or other compensation related to the sale of those shares will be paid to Ms. Liao or any other person. The intended methods of communication regarding the offer and sale of those shares include, without limitation, telephone and personal contact. Our selling efforts will not include any mass media methods, such as Internet or print media. There can be no assurance that all, or any, of the shares offered will be sold. The offering shall terminate on the earlier of (i) the date when the sale of all 160,000 shares is completed or (ii) two hundred seventy (270) days from the effective date the registration statement of which this prospectus is a part. We are a development stage, start-up company. Any investment in the shares offered herein involves significant risks. You should only purchase shares if you can afford a complete loss of your investment. We may not sell all 160,000 shares offered. There is no minimum number of shares we must sell before we can utilize the proceeds from the purchase of shares. If we do not sell all 160,000 shares within the offering period (270 days), we will close the offering and subscription funds will not be returned to subscribers. In the event we do not sell all 160,000 shares offered, the amount of money we receive from the sale of those shares which are, in fact, purchased be minimal and may not be enough to even pay the costs of this offering. Funds from this offering will be deposited in our corporate bank account in our name. As a result, if we are sued for any reason and a judgment is rendered against us, investors subscriptions could be seized in a garnishment proceeding and investors could lose their investments. Investors do not have the right to withdraw invested funds. For more information, see the sections titled PLAN OF DISTRIBUTION and USE OF PROCEEDS herein. We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, which became law in April, 2012 and will be subject to reduced public company reporting requirements. See Jumpstart Our Business Startups Act specified herein. We are considered a shell company under applicable securities rules and subject to additional regulatory requirements as a result, including the inability of our shareholders to sell our shares in reliance on Rule 144 promulgated pursuant to the Securities Act of 1933, as well as additional restrictions. Accordingly, investors should consider our shares to be significantly risky and illiquid investments. Refer to the section entitled RISK FACTORS beginning on Page 4. As of the date of this prospectus, we have not developed or sold any of our products nor have we generated any revenue from operations. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY, THE RISK FACTORS SECTION, BEGINNING ON PAGE 4. NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Our common stock is not traded on any public market and, although we intend to apply to have the prices of our common stock quoted on the Over-The-Counter Bulletin Board ( OTCBB ) maintained by the Financial Industry Regulatory Authority ( FINRA ) when the registration statement of which this prospectus is a part is declared effective, there can be no assurance that a market marker will agree to file the necessary documents with FINRA to enable us to participate on the OTCBB, nor can there be any assurance that any application filed by any such market maker for quotation on the OTCBB will be approved. Table of Contents We may not sell all 160,000 shares offered. There is no minimum number of shares we must sell before we can utilize the proceeds from the purchase of shares. If we do not sell all 160,000 shares within the offering period (270 days), we will close this offering and subscription funds will not be returned to subscribers. In the event we do not sell all 160,000 shares offered, the amount of money we receive from the sale of those shares which are, in fact, purchased may be minimal and not be enough to even pay the costs of this offering. The offering price of the common stock has no relationship to any objective criterion of value and has been arbitrarily determined. The offering price does not have any relationship to our assets, book value, historical earnings, or net worth. We will use the proceeds from the offering to pay for accounting fees, legal and professional fees, product design and development, and general working capital. The Company has not presently engaged an independent stock transfer agent. We have identified several agents to facilitate the processing of stock certificates upon closing of this offering. The purchase of the common stock in this offering involves significant risks. The common stock offered in this prospectus is for investment purposes only and, currently, no market for our common stock exists. Please refer to the sections herein titled RISK FACTORS and DILUTION before making an investment in our stock. Summary Financial Information The following table sets forth summary financial data derived from our financial statements. The accompanying notes are an integral part of those financial statements and should be read in conjunction with the financial statements, related notes and other financial information included in this prospectus. There is no trading market for our common stock. We intend to apply for participation on the Over-the-Counter Bulletin Board ( OTCBB ), and we hope that thereafter such trading market will develop. We intend to enter into an agreement with a broker-dealer registered with the SEC and a member in good standing of FINRA to assist us in connection with causing the prices of our common stock to be quoted on the OTCBB. There can be no assurance that any application filed by any sponsoring marker maker for such quotation on the OTCBB will be approved. As of the date of this prospectus, we have not developed or sold any of our silica energy clothing products nor have we generated any revenue from operations. June 10, 2014 (inception) through September 30, 2015 (unaudited) Revenue: $ -0- Interest Income: 6 Operating Expenses: General & administrative expense 201,105 Total operating expenses 201,105 Net Loss $ (201,099 ) Net loss per common share, basic and diluted $ (1.50 ) Weighted average number of common shares, basic and diluted, outstanding 134,033 Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001655440_transfirst_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001655440_transfirst_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..81fa92e66285e60b6f4231e66e3e1370db85e3d9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001655440_transfirst_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock, and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before deciding to buy shares of our common stock. Unless the context requires otherwise, references in this prospectus to: (i) the Company, TransFirst, we, us and our refer to TransFirst Inc. and its consolidated subsidiaries for all periods prior to the Vista Acquisition and to TransFirst Holdings Corp. and its consolidated subsidiaries for all periods following the Vista Acquisition; (ii) Issuer refers to TransFirst Holdings Corp. without its subsidiaries; (iii) Predecessor refers to TransFirst Inc. and its consolidated subsidiaries prior to November 12, 2014; (iv) Successor refers to TransFirst Holdings Corp. and its consolidated subsidiaries on and after November 12, 2014; and (v) VEP Group, LLC and certain of its affiliated funds, our current majority owners, are referred to herein as Vista. Our Company We are a leading provider of payment technology solutions to merchants in the United States, as measured by processing volume. We are differentiated by our single proprietary technology platform, which enables us to provide a broad suite of payment products, end-to-end payment solutions and superior customer support. We are able to deliver these services across multiple points of access ( multi-channel ), including brick and mortar locations, software integration, e-commerce, mobile and tablet-based solutions. We sell our solutions through a diversified network of over 1,300 distribution partners that we have built over the past 20 years by leveraging our specialized expertise in integrating and developing these relationships. We believe superior customer service is essential to enhance and retain our network of distribution partners and merchants. Our network of distribution partners includes: Integrated Technology Partners These providers include independent software vendors ( ISVs ) and value-added resellers ( VARs ) of software solutions. We integrate our payment processing services into their software so that merchants can benefit from a fully integrated business software solution. Referral Partners We work with financial institutions, trade associations and independent distribution partners to provide payment solutions to their merchant customers and thereby enhance their brand loyalty and revenue opportunities. We combine our single proprietary platform, multi-channel capabilities and partner-centric distribution model to create a compelling value proposition that enables us to penetrate the attractive small and medium-sized business ( SMB ) segment of the market in what we believe to be a highly efficient manner. We served over 200,000 merchants and processed over $48 billion in volume in 2014. According to the March 2015 issue of The Nilson Report, we were ranked as the seventh largest non-bank merchant acquirer in the United States by processing volume. The industry for providing payment solutions to merchants, known as merchant acquiring, is large and growing rapidly. According to the January 2015 issue of The Nilson Report, purchase volume on credit, debit and prepaid cards in the United States reached approximately $4.5 trillion in 2013 and is estimated to reach nearly $10.0 trillion by 2023, resulting in a compound annual growth rate Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities nor a solicitation of an offer to buy these securities in any jurisdiction where the offer and sale is not permitted. Subject to Completion Preliminary Prospectus dated January 4, 2016 P R O S P E C T U S Shares TRANSFIRST HOLDINGS CORP. Common Stock This is the initial public offering of our common stock. We are selling shares of our common stock. We currently expect the initial public offering price to be between $ and $ per share of common stock. Prior to this offering there has been no public market for our common stock. We have applied to list our common stock on The NASDAQ Global Select Market ( NASDAQ ) under the symbol TF. Upon completion of this offering, we will be a controlled company within the meaning of the corporate governance standards of NASDAQ. Investing in our common stock involves risk. See Risk Factors beginning on page 15. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Per Share Total Public offering price $ $ Underwriting discount(1) $ $ Proceeds to us before expenses $ $ (1) See Underwriting for a detailed description of compensation payable to the underwriters. We have granted the underwriters an option to purchase up to additional shares of common stock from us at the initial public offering price less the underwriting discount for 30 days after the date of this prospectus. The underwriters expect to deliver the shares of common stock to investors on or about , 2016. Goldman, Sachs & Co. J.P. Morgan Credit Suisse Barclays Deutsche Bank Securities Citigroup Jefferies RBC Capital Markets Wells Fargo Securities Raymond James William Blair Prospectus dated , 2016 Table of Contents Basis of Presentation On October 12, 2014, TransFirst Inc. entered into an Agreement and Plan of Merger (the Merger Agreement ) with Tyche Holdings, LLC ( Parent ) and Tyche Merger Sub, Inc., a wholly owned subsidiary of Parent ( Merger Sub ) (both Parent and Merger Sub were affiliates of the private equity firm Vista Equity Partners). At the time, TransFirst Inc. was controlled by private equity investor Welsh, Carson, Anderson & Stowe X, L.P. and certain of its affiliated funds ( WCAS ). Pursuant to the Merger Agreement, (a) Merger Sub was merged with and into TransFirst Inc., with TransFirst Inc. continuing as the surviving corporation and as a wholly owned subsidiary of Parent; (b) each issued and outstanding share of common stock of TransFirst Inc. was converted into a right to receive a cash payment as merger consideration; and (c) each outstanding restricted stock unit and stock option outstanding under any equity incentive plan of TransFirst Inc. was converted into a right of the holder thereof to receive a cash payment. The transactions contemplated by the Merger Agreement were consummated on November 12, 2014 (the Vista Acquisition ). Following the Vista Acquisition, TransFirst Inc. became an indirect wholly owned subsidiary of TransFirst Holdings Corp. (formerly known as Tyche Topco, Inc.), the issuer of shares in this offering. Prior to the completion of this offering, TransFirst Inc. will merge with and into TransFirst Holdings Corp. with TransFirst Holdings Corp. continuing as the surviving corporation. As a result of the Vista Acquisition, we applied the purchase method of accounting and established a new basis of accounting on November 12, 2014. The years ended December 31, 2012 and 2013 and the period from January 1, 2014 to November 11, 2014 (the 2014 Predecessor Period ) reflect the historical cost basis of accounting that existed prior to the Vista Acquisition and are referred to collectively as the Predecessor periods. The periods from November 12, 2014 to December 31, 2014 (the 2014 Successor Period ) and thereafter reflect the new basis of TransFirst Inc. upon the Vista Acquisition, with the recognition of assets and liabilities at their fair values pursuant to acquisition accounting, and are referred to as the Successor periods. Due to the application of acquisition accounting, the results for the Successor periods are not necessarily comparable to the Predecessor periods. Industry and Market Data Although we are responsible for all disclosure contained in this prospectus, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings Cautionary Note Regarding Forward-Looking Statements and Risk Factors in this prospectus. Trademarks and Service Marks We own or have rights to trademarks and service marks that we use in connection with the operation of our business, including, but not limited to, TRANSFIRST (in the United States, Mexico and Europe), FIRST IN SECURE ELECTRONIC PAYMENTS , TF TRANSFIRST FIRST IN SECURE ELECTRONIC PAYMENTS design (in the United States, Mexico and Europe), ELAPP and PROCESSNOW . All other trademarks or service marks appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the , (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. Table of Contents ( CAGR ) of 8.3%. In addition, we believe the competitive dynamics of this market are changing as merchants are increasingly looking to access multi-channel capabilities, new technology solutions, new products and value-added services. SMB merchants often lack the technical expertise, financial resources and time to adequately address the evolving payments landscape and are faced with a complex array of products and services offered by a large number of disparate providers. As a result, these merchants often rely on trusted technology vendors or service providers, which provide other important business services to them. Because these service providers core focus is not payments technology, they in turn are increasingly looking to refer their merchants to a trusted partner to handle the complexities of integrated payments functionality and to offer more effective customer service. To address this growing demand, we strategically built a single proprietary platform that provides us with a powerful set of capabilities that we believe gives us a competitive advantage in the marketplace. Our single proprietary platform provides a full suite of integrated payment products and services that can be used across multiple channels and industry verticals. In addition, our single proprietary platform provides our merchants the ability to adopt and seamlessly integrate our payments solutions into business management software applications. To help distribute our services, we built a large and diversified network of over 1,300 partners that use their position as trusted technology vendors and service providers to allow us to integrate and cross-sell our services to their customer base. Our model creates value for our distribution partners and merchants by providing access to differentiated solutions and superior support. Our distribution partners realize the benefits of our approach through increased revenues and customer retention. We benefit from our partner-centric distribution model by gaining access to a large number of SMB merchants through trusted vendors in a highly scalable and cost effective manner. We currently serve over 200,000 SMB merchants across numerous industry verticals, and we have built specialized capabilities and expertise in several high-growth verticals, such as healthcare. We build and maintain a direct relationship with our merchants in order to control our sales, pricing negotiation, underwriting, boarding and support processes. Our model enables us to manage customer support quality, cross-sales efforts and product and service selection. We generate revenues from the fees that we charge for processing payment transactions, value-added services and other more advanced technology solutions that we increasingly provide to our merchants. Because processing fees are generated from the daily sales of our merchants under multi-year contracts, they are highly recurring in nature. For the year ended December 31, 2014, on a pro forma basis, we had revenues of $1,259.9 million and net loss of $4.8 million. For the nine months ended September 30, 2015, on a pro forma basis, we had revenues of $1,148.7 million and net income of $23.3 million. See Unaudited Pro Forma Consolidated Financial Data. Industry Background Overview of the Electronic Payments Industry The electronic payments industry is large, fast-growing and fueled by powerful secular trends that are continuing to drive the acceptance and use of card-based payments, such as credit and debit cards, as well as the more recent trends of accepting payment on the Internet or remotely via mobile Table of Contents Table of Contents devices, such as smart phones and tablets, and Europay, Mastercard and Visa ( EMV ) technology standard and near field communication ( NFC ) transactions. The industry is serviced by a variety of providers including issuers, payment networks and merchant acquirers. Overview of the Merchant Acquiring Industry The merchant acquiring industry has grown significantly over the past 60 years as more and more merchants have chosen to accept electronic payments in response to their growing adoption by consumers. We believe there are approximately 100 merchant acquirers in the United States serving this growing market and the increasingly sophisticated demands at merchants points of sale. These providers can be generally categorized as non-bank merchant acquirers, banks, independent sales organizations ( ISOs ) and non-traditional and early-stage, less established vendors seeking to offer new payment methods and devices. The services provided directly to merchants and the fees collected from merchants for those services can vary depending on each provider s in-house technology capabilities and the number of services that they outsource to other providers. Merchant acquirers will earn more revenue if they provide more services in-house; however, only a few providers in the United States have the capability to provide all of these solutions, and even fewer can provide all of their services from a single integrated platform. Overview of the Merchant Customer Base Traditional merchant acquirers sell their payment processing services to merchants of every size. A number of acquirers focus on the SMB segment due to its attractive characteristics. The SMB segment tends to have more new business starts and higher growth rates than larger, more mature businesses. SMBs are also typically in greater need of outsourced technology capabilities and require higher quality and more customer support than larger merchants, who often have larger internal technology and service departments. The merchants in the SMB segment also have lower scale efficiencies and are therefore less price sensitive than larger merchants. Because the SMB segment consists of more numerous and diversified merchants, it leads to lower customer concentration and creates a greater opportunity for merchant acquirers to provide specialized services. As a result, we believe merchants in the SMB segment represent the largest and most profitable revenue opportunity in the market. In addition, SMB merchants are being impacted by several key trends and not all merchant acquirers have the capabilities to meet these evolving needs. Key Trends Impacting SMB Merchants The following are key trends impacting SMB merchants: Shift to Integrated Point-of-Sale SMBs are increasingly using software to manage everyday business functions such as inventory management, customer engagement and loyalty. SMBs now look to merchant acquirers who can integrate seamlessly with these software providers to simplify their business operations. Adoption of New Technologies Cloud-based computing and software-as-a-service delivery models are lowering the costs and complexity of technology. As a result, SMBs are looking for new technologies, including mobile and tablet-based solutions delivered by applications, to make use of sophisticated payment offerings that were previously not accessible to them. Table of Contents TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001655971_glacier_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001655971_glacier_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cb11c8482e4838f27af92e71a577d1358a427561
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001655971_glacier_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. You should read the entire prospectus, including Risk Factors and the financial statements and the related notes before making an investment decision. You should carefully read all information in the prospectus, including the financial statements and their footnotes , under the Financial Statements prior to making an investment decision. Overview We were founded as a sole proprietorship on August 26, 2013. We changed our structure to a corporation on August 17, 2015 by incorporating in the State of Nevada. We were founded by Kenneth T. Moore to commercialize an online marketplace for buyers and sellers of goods and services. Our principal executive office is located at 201 S.E. 15th Terrace, Suite 203, Deerfield Beach, Florida 33431 and our telephone number is 954-464-1642. Our website is located at www.PostAds.com and is not part of this prospectus. Business We operate an online marketplace at www.PostAds.com which provides a platform for buyers and sellers to purchase new and used goods and services. Because we offer an internet site where buyers are charged no fees and sellers of products and services can list their products and services without charge in all categories other than employment and personal ads, we expect to generate a large number of registered users who place product and service ads. After the inventories of product and service ads are generated, we expect to generate revenue from premium placement, ad enhancements and advertisements on our website directed at visitors to our site. We also plan to generate revenue from two paid ad categories, employment and personals. There is no assurance that we will be successful in these efforts. We completed our initial website in August of 2015 and completed enhanced features of our site in April of 2016. Since our inception, we have placed over 11,114 free ads and obtained 3,134 registered users of the Post Ads marketplace. Since our inception, we have placed over 11,114 free ads and obtained 3,134 registered users of the Post Ads marketplace. We plan to convert our registered users into paying users by offering enhanced listings on our platform which increase the visibility of the ad. Because we offer free ads in all categories other than employment and personal, we expect our registered user base and product and service offerings to continually increase over time. Our key activities to date include: (i) development of the business plan and plan of operations for the Post Ads Marketplace; (ii) development of the retail and fee-for-service features of the Post Ads Marketplace (iii) development of the auction platform of the Post Ads Marketplace; (iv) creation of our classified ad categories and features for the Post Ads Marketplace; (v) entering into an agreement with our website developer; (vi) creating features allowing visitors to become registered users of our online marketplace (vii) setting up our initial website to generate registered users, (viii) obtaining 3,134 registered users, (ix) placing more than 11,114 ads without charge and screening the ads prior to placement to ensure compliance with our terms of service, and (x) completing our website and enhancing its features including functionality and security features. For the years ended December 31, 2014 and 2015 and for the six (6) months ended June 30, 2016, we had revenues of $0, $0 and $50, respectively, and net losses of $648, $344,916 and $155,581 respectively. From September 2015, through February 2016, we sold 2,978,400 shares of common stock to nineteen (19) persons at the price of $.05 per share for aggregate proceeds of approximately $148,920. In August 2015, we issued an aggregate of 6,796,000 common shares to five (5) persons for services rendered which we valued at $.05 per share or an aggregate of $339,800. On August 14, 2016, 998,000 shares issued to one (1) person were cancelled for non-performance and returned to treasury. Upon our incorporation on August 17, 2015, we issued 9,000,000 shares to Kenneth T. Moore our President, Chief Executive Officer and Director as a recapitalization pursuant to our reorganization from a sole proprietorship to a C corporation. As of the date of this prospectus, we had cash on hand of approximately $20,000 for our operational needs. Currently, our operating expenses are approximately $6,000 per month. After this registration statement is declared effective, our operating expenses will be approximately $11,000 per month. Once this registration statement is declared effective, if we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we will not have available cash for our operating expenses after approximately two (2) months. Risk Factors Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks including: Because we do not have an audit or compensation committee, shareholders must rely on our sole officer and director Kenneth T. Moore, who is not independent, to perform these functions. Our sole officer and director, Kenneth T. Moore has voting control over all matters submitted to a vote of our common stockholders because of his ownership of 6,700,000 common shares and 2,000,000 shares of Series A Preferred Stock that provide him with an aggregate of 100,000,000 votes, he holds 106,700,000 out of 117,776,400 votes representing 90.6% of the votes on all matters submitted to our stockholders, which prevents our minority shareholders from having the ability to control any of our corporate actions. There is substantial doubt about our ability to continue as a going concern as a result of our limited operating history and financial resources, and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations. We are an early stage company with no historical performance for you to base an investment decision upon. We are dependent upon the sale of our securities to fund our operations. If we are unable to generate sufficient revenues for our operating expenses we will need financing, which we may be unable to obtain. We are dependent on our ability to convert free users of the PostAds Marketplace into paying customers. Expenses required to operate as a public company will reduce funds available to develop our business. Third parties can develop the same website portal we have which may negatively affect our revenues. If we fail to develop our brand cost-effectively, our business may be adversely affected. We are dependent upon the efforts of our sole officer and director, Kenneth T. Moore who has no experience managing a public company which is required to establish and maintain disclosure controls and procedures and internal control over financial reporting. Our obligations as an SEC reporting company may require significant management time which will reduce the amount of time our sole officer and director can dedicate to our operations.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001656053_traqer_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001656053_traqer_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ac9d2b1fa1c283e4bb0e5dd14997ed1557bb7c5b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001656053_traqer_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001656589_fotv_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001656589_fotv_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4a808cbc5806bc6b8565b536f72b6bbed6c9945b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001656589_fotv_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 d12707ds1a.htm S-1/A S-1/A Table of Contents As filed with the Securities and Exchange Commission on August 12, 2016 Registration No. 333-212396 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Amendment No. 2 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FOTV MEDIA NETWORKS INC. (Exact name of registrant as specified in its charter) Delaware 7841 45-3343730 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) FOTV Media Networks Inc. 338 N. Canon Drive, 3rd Floor Beverly Hills, California 90210 (877) 733-1830 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Alkiviades (Alki) David Chairman and Chief Executive Officer FOTV Media Networks Inc. 338 N. Canon Drive, 3rd Floor Beverly Hills, California 90210 (877) 733-1830 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of all communications to: Spencer G. Feldman, Esq. Olshan Frome Wolosky LLP 1325 Avenue of the Americas, 15th Floor New York, New York 10019 Telephone: (212) 451-2300 Fax: (212) 451-2222 Email: sfeldman@olshanlaw.com Richard I. Anslow, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas, 11th Floor New York, New York 10105 Telephone: (212) 370-1300 Fax: (212) 370-7889 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer Accelerated Filer Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller reporting company The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion, dated August 12, 2016 PRELIMINARY PROSPECTUS 3,750,000 Shares FOTV MEDIA NETWORKS INC. Common Stock This is an initial public offering of shares of our common stock. We are offering on a best efforts basis up to 3,750,000 shares of our common stock, with a minimum offering amount of 2,500,000 shares of our common stock. Prior to this offering, there has been no public market for our common stock. We expect that the initial public offering price will be $8.00 per share. We have reserved the symbol FOTV for purposes of listing our common stock for trading on the Nasdaq Capital Market and have applied to list our common stock on such exchange. If the application is approved, trading of our common stock on the Nasdaq Capital Market is expected to begin upon the closing of this offering. Investing in our common stock may be considered speculative and involves a high degree of risk, including the risk of losing your entire investment. See Risk Factors beginning on page 21 to read about the risks you should consider before buying shares of our common stock. We are an emerging growth company as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 14 of this prospectus for more information. Public Offering Price Underwriting Commissions(1) Proceeds to Us, Before Expenses(2) Per share $ 8.00 $ 0.56 $ 7.44 Total minimum offering(2) $ 20,000,000 $ 1,400,000 $ 18,600,000 Total maximum offering(2) $ 30,000,000 $ 2,100,000 $ 27,900,000 (1) For the purpose of estimating the underwriting commissions, we have assumed that the underwriters will receive their maximum commission on all sales made in this offering. The underwriters will also be entitled to reimbursement of out-of-pocket expenses incurred in connection with this offering, including fees and expenses of their counsel. (2) We estimate the total expenses of this offering, excluding the underwriting commissions, will be $575,000 if the minimum number of shares is sold in this offering and $625,000 if the maximum number of shares is sold in this offering. Because this is a best efforts offering, the actual public offering amount, underwriting commissions and proceeds to us are not presently determinable and may be substantially less than the total maximum offering set forth above. See Underwriting beginning on page 103 of this prospectus for more information on this offering and the underwriting arrangements. Monarch Bay Securities, LLC is acting as the sole representative of the underwriters and, together with Network 1 Financial Securities, Inc., is acting as co-manager for this offering. The underwriters are selling shares of our common stock in this offering on a best efforts basis and are not required to sell any specific number or dollar amount of the shares offered by this prospectus, but will use their best efforts to sell such shares. We do not intend to close this offering unless we sell at least a minimum number of 2,500,000 shares of common stock, at the price per share set forth in the table above. This offering will terminate on , 2016 (60 days after the date of this prospectus), unless we sell the maximum number of shares of common stock set forth above before that date or we decide to terminate this offering prior to that date. The gross proceeds of this offering will be deposited at UMB Bank, Denver, Colorado, in an escrow account established by us, until we have sold a minimum of 2,500,000 shares of common stock. Once we satisfy the minimum stock sale condition, the funds will be released to us. In the event we do not sell a minimum of 2,500,000 shares of common stock and raise minimum gross proceeds of $20,000,000 by , 2016, all funds received will be promptly returned to investors without interest or offset. See Prospectus Summary The Offering on page 17. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Underwriters and Co-Managers Monarch Bay Securities, LLC Network 1 Financial Securities, Inc. The date of this prospectus is August , 2016 Table of Contents All of our OTT platforms, which contain multiple interactive features and are highly customizable, are available through any internet-connected device including computers, smart phones (iPhone or Android), tablets and iPads, and internet-enabled set-top boxes and devices. Through these various portals, we monetize our platform through advertising, premium subscriptions, transactional video on demand, and other video and audio offerings such as pay-per-view events and licensing of our digital media. In addition to our vast digital media content offerings, we offer our proprietary FilmOn.com Affiliate System platform to verified partners for interest-specific programming, which can be managed through a user-friendly, web-based control panel. We also carry a number of interactive online communities such as BattleCam, a popular social television channel that incorporates user chats and user-generated live video and audio streams into our BattleCam broadcast channel. Since August 2012, under a partnership agreement with a subsidiary of Lenovo Group Ltd., the world s largest personal computer vendor by unit sales according to Gartner, Inc., an independent information technology research and advisory company, our FilmOn app has been preloaded as the default OTT app on more than 19 million personal and tablet computers manufactured by Lenovo, according to Lenovo s data, as well as offered for download in its app store, providing direct access to our platform to millions more Lenovo users. With the net proceeds of this public offering, we plan to further expand our content offerings to become one of the major OTT platforms in the world. We were founded by media entrepreneur Alkiviades (Alki) David in 2007 and launched our streaming video site in the United Kingdom in 2009 and in the United States in 2010. We manage our worldwide business from our two central offices located in Beverly Hills, California and London, England. Our FilmOnTV programming reaches satellite-television audiences by Dish Network in the United States pursuant to written channel programming arrangements with each satellite provider. These television broadcasts highlight our full complement of online offerings. We distinguish our FilmOn OTT platform from our competitors by offering interactive television services and hologram projection programs as part of our original branded content through strategic relationships with Alki David Productions Inc. and HUSA Development Inc. These offerings are increasingly popular among a large cross section of audiences worldwide, particularly younger viewers, brand sponsors and advertisers. We currently have the capacity to deliver over 2.5 billion pre-roll and mid-roll video ads and display banners per month to our existing global audience of more than 75 million monthly unique visitors, approximately 50% of whom are located in the United States, that watch our live television offerings of over 800 specialized linear channels available through our online platform, 90,000 on-demand movies, documentaries, music videos, podcasts and original social television programming. We work with many of the world s largest advertising networks and agencies and major brand sponsors to monetize our platform s advertising-funded business model. Based on the analysis of third-party measurement tools, including Google s Interactive Media Ads server technology, we currently monetize approximately 10% of our advertising capacity and have the potential to significantly increase our advertising revenue by expanding our internal advertising and sponsorship teams to deliver more advertisements to our growing global audience. Since our inception, we have been an innovator in the OTT business. Our significant experience and unwavering commitment to this space has resulted in the creation of a sophisticated back-end system to support our multilayered online video entertainment technology. This technology includes licensed data transmission systems technology that is used for tracking aggregation and billing through a central hub and has wide applicability in the video on-demand and internet streaming markets. Our technology succeeds at connecting the next generation of content consumers with online content streaming, social networking and video sharing experiences. Our affiliate partnerships and internet solutions services are growing with over 9,500 affiliate partner websites that have been enabled to host our FilmOn platform. Our content aggregation and ownership of content are key assets and we believe that we are the largest single content portal of professionally-made videos in the world. Table of Contents Table of Contents We also develop, acquire and manage our own proprietary digital media content. Our video and audio library presently consists of more than 27,000 owned titles in addition to our over 340,000 licensed video and audio offerings. The library contains titles across virtually all genres including romantic comedies, horror, science fiction, musicals, westerns, martial arts, war themes, animation, documentaries, biographies and classic television, as well as over 3,500 licensed podcasts including many from well-known brands and celebrities. Our digital media is delivered in dozens of languages from countries around the world. Thousands of our titles are available in high definition and we are constantly upgrading the streaming quality of our content. The digital distribution of our content to any internet-connected device offers not only a wide variety of ad-supported, subscription-based and transactional modes of access for viewers to stream video content, but also creates multiple avenues for revenue through the use of the latest mobile technology. Viewers that interact with our FilmOn, CinemaNow and OVGuide platforms through personal devices such as tablets, smart phones and laptops can access video on demand ( VOD ) content via subscription VOD, advertising-supported VOD and transactional VOD (pay-per-view). As used in this prospectus, OTT refers to the distribution of digital content over the internet, unique visitors are individuals that visit our online platforms on a monthly basis, and a visit is a series of page views that a single visitor makes during a period of activity, with a visit ending after the visitor closes the browser, clears cookies or is inactive for 30 minutes. Page views refer to an instance of an individual visiting or looking at a particular page on our website. Linear channels refers to video content that is delivered in a pre-determined, schedule mode. Our core strategy is to grow our ad-based, subscription and transactional VOD business domestically and internationally by expanding our unique and exclusive video content library, broadening our subscriber and user bases, increasing streaming advertising revenue opportunities, enhancing our user interface and extending our direct-to-consumer streaming service continually to the most advanced internet-connected devices. We intend to grow both organically and through acquisitions. We seek to acquire and operate companies that could augment or complement our current offerings through the addition of content licensing and pay-per-view arrangements, content distribution agreements, platform white label service arrangements and production services. We currently have no commitments or agreements with respect to any such acquisitions, and there can be no assurance that we will complete any acquisitions in the future. We recorded consolidated revenues of $13.1 million and $13.5 million and net losses of $8.7 million and $5.3 million for the years ended December 31, 2015 and 2014, respectively. CinemaNow recorded revenues of $10.2 million and a net loss of $6.9 million for the year ended December 31, 2015. OVGuide recorded revenues of $2.1 million and a net loss of $0.8 million for the year ended December 31, 2015. On a pro forma basis to reflect the acquisitions of CinemaNow on December 28, 2015 and OVGuide on February 29, 2016 as if they each occurred on January 1, 2015, our total revenue and net loss were $25.4 million and $18.8 million, respectively, for the year ended December 31, 2015. Following these acquisitions, we recorded revenues and net losses for the three months ended March 31, 2016 of $3.5 million and $6.0 million, respectively (which include the results of CinemaNow and the full month of March 2016 for OVGuide) and, on a pro forma basis to reflect the OVGuide acquisition during the full three-month period, $3.8 million and $6.2 million, respectively. Our Industry As increasingly reported by the media, traditional distribution and viewing of video content on terrestrial bands, satellite and cable is rapidly shifting to distribution and viewing of streaming digital media via the internet, commonly referred to as cord-cutting. At the same time, streaming of digital media via the internet is shifting from computers to video-capable mobile devices. According to Adobe Digital Index s U.S. Digital Video 2014 Inaugural Report, in a sample of 191 billion total online video starts (the number of times that actual non-ad video content starts playing) in the United States, 26% of the video starts were on a mobile device in 2014, compared to 16% in 2013, representing a year-on-year share increase of 63%. Increasingly, people are Table of Contents TABLE OF CONTENTS Page Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001656596_afs_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001656596_afs_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..60c51e530a29ee6803554db881eecd59cb539ed6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001656596_afs_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 afs030816forms1a5.htm FORM S-1/A As filed with the Securities and Exchange Commission on March 8 , 2016 Registration No. 333-207587 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Amendment No. 5 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AFS Holdings, Inc. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation) 2899 (Primary Standard Industrial Classification Code Number) 46-5750207 (IRS Employer Identification No.) 310 Fourth Avenue South, Suite 7000, Minneapolis, MN 55415 (Address and telephone number of registrant s principal executive offices) Kent Rodriguez, President 310 Fourth Avenue South, Suite 7000, Minneapolis, MN 55415 Telephone: 612-200 8456 (Name, address and telephone number of agent for service) Copies of all communications to: Bart and Associates LLC Kenneth Bart, Esq. 8400 East Prentice Avenue, Suite 1500, Greenwood Village, CO 80111 Telephone 720-226-7511 Fax 720-528-7765 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Large accelerated filer Accelerated Filer Non-accelerated filer Smaller reporting company CALCULATION OF REGISTRATION FEE Title of Each Class Of Securities to be Registered Amount to be Registered Proposed Maximum Aggregate Offering Price per share (2) Proposed Maximum Aggregate Offering Price (3) Amount of Registration fee (1) Common Stock, par value $0.001 to be sold by the Company 4,000,000 $1.00 $4,000,000.00 $464.80 Total 4,000,000 $1.00 $4,000,000.00 $464.80 _________________ (1) Registration Fee has been paid via Fedwire. (2) This is the initial offering and no current trading market exists for our common stock. (3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457, paragraph O. AFS HOLDINGS, INC. SUMMARY OF PROSPECTUS One should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our," the "Company", "AFS Holdings, Inc.", "AFS Holdings" and "AFS" refer to AFS Holdings, Inc. General Information about Our Company AFS Holdings, Inc. was formed under the laws of the State of Nevada on May 9, 2014. On October 5, 2015, the Company amended its articles of incorporation in order to increase its authorized stock to 250,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of Preferred Stock, par value $0.001. 1,000 of the Preferred Shares are designated as Series A Preferred Shares and carry the rights listed in the section of this prospectus titled "Description of Our Securities". On December 1, 2014, Avalon Oil and Gas, Inc. ("Avalon"), our largest shareholder, entered into an exclusive license agreement with Ronald Knight, whereby Avalon received an exclusive worldwide license to certain anti-corrosion trade secrets and anti-corrosion technology in exchange for 300,000 shares of its Common Stock, valued at $0.09 per share. Ronald Knight invented and owns the anti-corrosion technology, and he has dual degrees in math and chemistry from Youngstown State University, and has worked on corrosion prevention projects in a wide range of industries. Mr. Knight is retired, and other than the license agreement with Avalon, he does not have any employment history or business experience during the previous five years. Mr. Knight is 75 years old. The license agreement between Avalon and Ronald Knight has been added as Exhibit 10.3 to the revised registration statement. The chemical makeup of the proprietary technology is held in escrow, by Mr. Knight s attorney, Sam Reiber, and can only be released pursuant to Section 7.1 of the License Agreement between Mr. Knight and Avalon. There is no escrow agreement, separate from the language contained in the License Agreement between Mr. Knight and Avalon. Avalon did not pursue the commercialization of the anti-corrosion technology, but instead decided to license the technology to AFS, in order to allow AFS to market and sell the anti-corrosion technology and related products. On June 1, 2015, AFS Holdings, Inc. entered into a license agreement with Avalon, whereby the Company received an exclusive, worldwide license to the same anti-corrosion trade secrets and anti-corrosion technology related to the production of products and the process of application of the products for underground fuel storage tank sump pumps, to mitigate corrosion. The license agreement is included as Exhibit 10.1 to this registration statement. Pursuant to the license agreement between Avalon and AFS Holdings, we have licensed the rights to make, use, offer for sale, and sell products utilizing the proprietary technology and applications, and to sublicense any of those rights. As consideration for the license of the technology, we are required to pay Avalon a fee of $300,000 by December 31, 2015, which is more than eleven times the amount that Avalon paid for the same license, as well as an ongoing fee of five percent of all gross received from sales of our products. If AFS Holdings, Inc. fails to make the required payments to Avalon, or fails to provide required progress reports to Avalon, Avalon may hold the Company in material breach of the Agreement. If Avalon were to hold the Company in material breach of the Agreement, the Company would have thirty days to cure the breach. If the Company does not cure the breach within 30 days, Avalon would be able to terminate the Agreement. Although the Company does not have unencumbered access to the chemical makeup of the licensed technology, the Company determined that $300,000 was an appropriate license fee based on what the Company believes its costs will be associated with the production of its products, as well as the potential value that the Company believes its planned products will have. The Company is able to research and develop the technology by applying the corrosion products in different quantities, and in varying intervals, to determine the optimal application amount and frequency to provide effective products to its customers. The Company is able to conduct this research without owning or possessing the chemical makeup of the technology. The License Agreement between Avalon and the Company, filed as Exhibit 10.1 to the first amended registration statement, incorrectly stated that Avalon owns the licensed technology. Mr. Knight owns the technology, and Avalon holds a license for the technology. The Company has filed an Amendment to the Avalon and AFS Holdings, Inc. License Agreement as Exhibit 10.4 to this registration statement, which corrects the ownership language to state that Mr. Knight owns the technology, and Avalon holds a license for the technology, which it subsequently sublicensed to the Company. The anti-corrosion technology, products and process licensed by AFS consists of the anti-corrosion solution owned by Knight, as well as the process of using the proprietary anti-corrosion solution in order to remove rust from the sump pumps, and prevent further corrosion. Mr. Knight prepares a concentrate, consisting of the chemical compound of the anti-corrosive material at the request of the Company. Mr. Knight then ships the concentrate to the Company. The Company mixes the concentrate with liquid polytetrafluorethylene, which results in the final anti-corrosive solution product, or "kit" that the company plans to sell. The Company will purchase the liquid polytetrafluorethylene through internet retailers, as there are many suppliers and manufacturers of the product. The cost of the liquid polytetrafluorethylene has been included in the cost of producing each kit that the Company plans to sell. As the concentrate is shipped directly by Mr. Knight, the Company can be assured of its authenticity. There is no additional agreement for Mr. Knight providing the concentrate, but as he is the only holder of the chemical structure of the anti-corrosive compound, other than as is held in escrow, he is required to provide the concentrate so it may be used by the Company pursuant to the License Agreements. If Mr. Knight does not provide the concentrate, it would place him in default of the License Agreements, at which time Avalon, and subsequently the Company, would receive the chemical compound information that is held in escrow, which would allow the Company to create the concentrate on its own. The Company and Avalon are related parties, and have the same President, board of directors, and share the same office space. The Company and Avalon are negotiating an extension to the license agreement, whereby the initial payment of $300,000 would not be owed until December 31, 2016. All revenue payments would still be owed as earned. The Company will use proceeds from this offering to pay for the licensing agreement with Avalon. If the Company raises at least $500,000 in this offering, $300,000 will be used as payment for the Avalon license agreement. If the Company receives $300,000 or less in this offering, the Company will negotiate a deferred repayment with Avalon to allow the Company to use offering proceeds for its business objectives. We intend to engage in research and development work involving the proprietary technology licensed from Avalon in order to develop commercially viable products based upon these technologies, and ultimately sell the anti-corrosive products and license the rights to manufacture and sell the products. The initial technologies we are developing are for anti-corrosion products and the process of application of the products for underground fuel storage tank sump pumps to mitigate corrosion. The Company has not yet signed any agreements with third parties related to the sale or licensing of our proposed products. In order to pursue its strategic objectives, the Company plans to utilize a portion of the proceeds received from this offering, as well as its available cash, cash generated from operations and additional cash as may be raised via equity or debt offerings as may be approved by its Board of Directors. The administrative office of the Company is located at 310 Fourth Avenue South, Suite 7000, Minneapolis, MN 55415. The Company plans to use this office space until it requires larger space. The company fiscal year end is March 31. The Company has not been subject to any bankruptcy, receivership or similar proceeding. The Offering Following is a brief summary of this offering. Please see the "Plan of Distribution" section for a more detailed description of the terms of the offering. Securities Being Offered 4,000,000 shares of common stock, par value by the Company: $0.001, on a best-efforts basis Offering Price per Share: $1.00 Offering Period: The shares being sold by the Company are being offered for a period not to exceed 180 days, unless extended by the Board of Directors for an additional 90 days. Net Proceeds to Our Company: $4,000,000, if all the shares are sold Use of Proceeds: The Company intends to use the proceeds received from the sale of its common stock to use as working capital, fund business operations and assist in research and development of its planned products. The Company believes that it needs to raise a minimum of $500,000 in order to complete its plan of operations. Number of Shares Outstanding Before the Offering: 3,280,000 common shares, and 50 Series A Preferred shares. Number of Shares Outstanding After the Offering: 7,280,000 common shares, if all the shares are sold, and 50 Series A Preferred shares. The Company s officers and directors, and control persons do not intend to purchase any shares in this offering. There is no current market for the securities. Although the registrant s common stock has a par value of $0.001, the registrant has valued the common stock in good faith and for the purposes of the registration fee, based on $1.00 per share. In the event of a stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE. The information in this prospectus is not complete and may be changed. The Company may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The date of this Prospectus is March 8 , 2016 Prospectus AFS HOLDINGS, INC. 4,000,000 Shares of Common Stock $1.00 per share No Minimum This is the initial offering of Common Stock of AFS Holdings, Inc. (the "Company") and no public market exists for the securities being offered. AFS Holdings, Inc. is offering for sale a total of 4,000,000 shares of its Common Stock, par value $0.001, on a "self-underwritten", best efforts basis meaning that the Company is not required to sell any specific number or dollar amount of securities but will use its best efforts to sell the securities offered. All 4,000,000 shares are being registered for sale by the Company. The aggregate offering price for the shares to be sold by the Company is $4,000,000, and the net proceeds from the shares to be sold by the Company is $1.00 per share, or $4,000,000 in aggregate. The offering is being conducted on a self-underwritten basis, which means the Company s officers and directors will attempt to sell the shares being offered by the Company. They will not receive any commissions or proceeds from the offering for selling the shares on its behalf. All of the shares being registered for sale by the Company will be sold at a price per share of $1.00 for the duration of the offering. To be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market in our common stock. While the Company plans to have its shares quoted on the OTCBB there is no assurance that its shares will be approved for quotation on the OTCBB or on any other quotation service or exchange. The shares being offered for sale by the Company will be offered at a fixed price of $1.00 per share for a period not to exceed 180 days from the date of this prospectus, unless extended by our Board of Directors for an additional 90 days. There is no minimum number of shares required to be purchased. The Company has made no arrangements to place subscription funds in an escrow, trust or similar account which means that funds from the sale of the shares will be immediately available to the Company for use in its business plan. See "Use of Proceeds" and "Plan of Distribution". You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. We have not authorized anyone to provide you with different information. AFS Holdings, Inc. is a development stage company that has not yet generated revenue and currently does not have any developed products. The company has had losses from operations, expects to generate losses for the next twelve months, and our auditors have raised questions about our ability to continue as a going concern. Any investment in the shares offered herein involves a high degree of risk. One should purchase shares only if one can afford a complete loss of one s investment. Due to the fact that this offering is a best efforts offering, we may not receive any proceeds from this offering. Due to the fact that there is no required number of shares to be purchased as part of this offering, there will be no refund issued to any investors who participate in the offering. We are an "emerging growth company" as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. AFS Holdings, Inc. is not a blank check company and has no plans or intentions to engage in a business combination following this offering. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY, THE
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001656987_otg-exp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001656987_otg-exp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..44b58878bc65db5d94729e93062efd843474e5c3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001656987_otg-exp_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights material information about our business and this offering of our Class A common stock. This is a summary of material information contained elsewhere in this prospectus and is not complete and does not contain all of the information that may be important to you. For a more complete understanding of our business and this offering, you should read this entire prospectus, including the section entitled Risk Factors, as well as the consolidated financial statements and the related notes thereto. Overview of OTG OTG is a high-growth company that is transforming the airport travel experience for millions of travelers every year. We combine world-class hospitality and award-winning cuisine with innovative design and state-of-the-art technology to provide what we call the OTG Experience. OTG s proprietary restaurant concepts are complemented by our signature tablet platform which was the first, and remains the only one of its kind in our industry. OTG started in 1996 with a single restaurant location in the Philadelphia International Airport and the goal of delivering a great restaurant experience that just happened to be in an airport. Today, we are one of the leading airport food and beverage ( F&B ) operators in North America with more than 220 locations in 23 terminals across 10 airports. Our current target market is North America s top 30 airports by enplanement, which recorded 576 million enplanements and $5.2 billion total F&B and news and gifts ( N&G ) concession sales in 2014. OTG s approach as an operator of its own proprietary concepts is highly differentiated in the airport concessions industry. Over the past 20 years, we have expanded our offerings from F&B to include N&G and concession management services. We have become a one-stop airport solutions provider with a demonstrated ability to design, develop, operate and manage entire terminal concessions programs, which refers to the programs where we either operate substantially all of the F&B concessions or F&B and N&G concessions or have management authority over the concession program or terminal, which is a key area of focus for us. OTG s customers are comprised of two distinct groups. The first group, which we refer to as our business partners, includes airlines, airport operators and concession program managers, and increasingly other commercial enterprises seeking to leverage the impact of the OTG Experience. The second group consists of the tens of millions of people each year that pass through the airports containing OTG operations, as well as the employees and crewmembers of our airline and airport partners. Our passionate crewmembers deliver the OTG Experience to our customers in some of the most frequently traveled airports in North America, including Kennedy, LaGuardia, Newark, Philadelphia, Reagan, Minneapolis-St. Paul and Toronto-Pearson, through the following: Inviting Hospitality. We seek to provide a personal touch and a first-class experience for all travelers, not just those flying first class. Now, everyone can enjoy concierge style service while waiting for their flight. Through our interactive tablet programs, travelers can order everything from gourmet sandwiches and salads, to sushi and steak accompanied by a fine wine or a locally-brewed craft beer. Utilizing our 2U service, customers can also shop for electronics and travel accessories such as headphones and neck pillows. One of our crewmembers will deliver their meal and purchases right to their seat in one of our restaurants or even at the gate. Travelers can also charge their personal devices at an array of tabletop outlets and USB ports and use our tablets to surf the Internet, play games, order personalized services or shop with our retail partners. These services and conveniences reduce traveler anxiety and allow our customers to have a more relaxing travel experience. Authentic Dining Experiences. We own and operate restaurants inside of airports, not airport restaurants. We create culturally inspired, authentic food programs through relationships with renowned local, national and international chefs, including Michelin-starred chefs, James Beard award winners and Iron Chefs. We develop expansive menus and product selections that are designed to appeal to a wide variety of travelers. We seek to source the freshest ingredients locally using artisan purveyors and greenmarkets for our farm-to-terminal model. As a result, our food and beverage concepts are known for award-winning cuisine across a broad spectrum of styles and service options, from food courts to full-service dining, to grab-and-go gourmet markets. We primarily operate proprietary concepts such as our gourmet burger concept Custom Burger 1 TABLE OF CONTENTS (with meats sourced through Pat Lafrieda), our pizza concept Tagliere, our coffee concept WorldBean and other examples that include New England-inspired seafood shack Anglers, sandwiches at Interwich and contemporary Japanese cuisine at Kombu. For those on the run, we have fresh to-go food options at CIBO Express that can be picked up on the way to the gate. Thoughtful and Innovative Design. OTG reimagines the physical space of the airport and works with some of the world s leading design firms to plan and build customer-centric, free flowing and modern facilities. OTG develops integrated concession programs dedicated to enhancing not only the function, but also the look and feel, of an airport terminal. We have changed traditional gate-hold areas beset with tight and limited seating and services, into revenue generating spaces containing comfortable restaurant, bar and lounge seating and offering a variety of service and entertainment options. Additional design innovations allow us to change the look, functionality and menu offerings of a single location depending on the time of day, for example by changing from a bakery cafe in the morning to an Italian-style deli in the afternoon. We work closely with our airline and airport partners in all phases of a project from conception and development to operations. State-of-the-Art Technology. We are known as the company that put iPads in airports, and our program is on track to be one of the largest consumer-facing deployments of the iPad in the world. Our state-of-the-art technology allows us to deliver enhanced customer experiences that drive higher sales revenues. Our tablet program provides more accurate ordering (in over 20 languages) and faster delivery and check-out services. Our customers can conveniently order more products and services, and we can serve more customers and process more transactions. In addition, our recommendation engines seamlessly offer customized and personalized food and beverage suggestions. Lastly, our tablet platform allows for the creation of additional sources of revenue from advertising, marketing, gaming and entertainment programs with other business partners including credit card companies, car rental companies and online shopping sites. The seamless integration of these elements defines the OTG Experience, changing the need to get to the airport early to the want to get to the airport early. We have deployed our focused business model in a variety of settings, but it is always anchored by the personal touch reflected in our core values of integrity, passion, quality, safety, caring, fun and creativity. We have continued to learn and evolve around the needs of our customers and partners and have grown significantly over the last three years primarily by focusing on large projects involving the redevelopment of entire terminal concession programs. During fiscal 2012 to 2014, we grew from 111 F&B locations in eight airports to over 220 locations across 10 airports. During the same time period, our net sales grew from $146 million to $274 million, representing a 23% compound annual growth rate ( CAGR ). 2 TABLE OF CONTENTS Our Industry OTG operates in the growing airport concession market, which comprises F&B, N&G, specialty retail and commercial services. The two primary metrics that drive growth in the airport concession industry are enplanements and revenue per enplanement ( RPE ), and airport concession companies like OTG have benefited from long-term growth in these metrics. According to ARN, enplanements have increased by a 1.9% CAGR and combined F&B and N&G RPE has increased by a 4.6% CAGR from 2009 to 2014 in the top 30 North American airports based on RPE. OTG has been a key contributor in driving this RPE growth during this period. In addition, during this period, total revenue from F&B and N&G concession sales at these airports increased by a 6.7% CAGR. In 2014, F&B and N&G concession sales at the top 30 North American airports by enplanements were $5.2 billion, generated from 576 million enplanements. We believe that these growth trends will continue as the FAA projects positive growth in enplanements over the next 10 years. Additionally, as described below, we believe RPEs will increase in the future due to a number of favorable factors. Airport concessions provide important and necessary passenger services. Concession revenues are a significant part of the airport business, and we believe that airport authorities and airlines have increasingly focused on growth in this area. Several factors that impact the air traveler experience are also driving increases in RPE. These factors include the increased use of the hub-and-spoke airline model, lengthy security procedures and flight delays and a significant increase in the amount of dwell time. According to ARN, average dwell times can last more than 90 minutes at certain airports like Kennedy. Meeting the travelers in-terminal F&B needs has also become more important as in-flight meals have been eliminated or offered for purchase with limited selection and quantity and often with inferior quality. Travelers are increasingly demanding other and often healthier dining alternatives to the typical fast food franchises and have demonstrated a willingness to spend more on the higher-quality products and services offered by OTG. Given that airport concession contracts generally have a term of between seven and ten years, we expect to have significant and consistent opportunities to bid for concession contracts, including at major hubs, over the next ten years as existing contracts expire. In connection with these expirations, and as a result of all of the above described dynamics, we believe many airports and airlines will be interested in redeveloping existing or outdated airport F&B concessions that have often relied heavily on a collection of separate franchised fast food or other licensed chain restaurant concepts. We believe this is particularly true at major hubs that can justify the significant levels of investments required to redevelop terminal concession programs. In the United States, air traffic growth is increasingly being directed to large hub airports in major metropolitan markets as the major airline carriers consolidate and focus on the most profitable routes stemming from these hubs. Given the limited number of aircraft takeoff and landing slots allotted at major airports such as Kennedy, La Guardia and Reagan, airlines are also choosing to deploy larger aircrafts and fly longer distances, resulting in more enplanements at these airports. With our award-winning offerings, our ability to deliver a customized variety of dynamic, proprietary dining options, integrated retail and other services, innovative designs, state-of-the-art technologies, and an overall focus on major hubs, we believe that we will continue to benefit from these industry trends. Our Strengths We believe the following competitive strengths are key to our continued growth and success: Delivering the OTG Experience. We have been recognized throughout the industry for elevating the air travel experience, earning numerous accolades for ourselves and our airline and airport partners, including: 50 Most Innovative Companies of 2014 Fast Company, and The Judges Award for Driving Innovation in Airports International Airport Food & Beverage FAB Awards (2014). The unwavering focus on the key drivers of the OTG Experience differentiates us from our competitors. We believe that delivery of each of the elements of the OTG Experience (1) inviting hospitality, (2) authentic dining experiences, (3) thoughtful and innovative design and (4) state-of-the-art technology creates a superior value proposition for travelers and our airline and airport partners that will continue to lead to market share growth and some of the highest RPEs in the industry. Our performance has generated increasing demand for the types of programs that OTG offers and has led to significant additional growth opportunities through privately negotiated agreements and both public and private request-for-proposals ( RFP ) processes. Over the past five years, we have won approximately 89% of the contracts we have pursued when competing for entire terminal concession programs. As a result, we have 3 TABLE OF CONTENTS doubled our market share for F&B in the top 50 performing North American airports by RPE from approximately 3% in 2008 to approximately 6% of sales in 2014. Airport travelers also respond favorably to the breadth of our high-quality dining options, atmosphere, conveniences and services we offer and, ultimately, they spend more at OTG operated concession locations. Concession programs operated by OTG, especially its entire terminal concession programs, rank highly amongst the top 50 performing North American airports by RPE and consistently generate some of the highest RPEs in the industry. Our ability to generate higher revenue is evidenced by what we call takeover growth the growth in RPE when comparing our first full year of operations with the year prior to when we took over a concession program which has averaged 26% across our entire terminal concession programs. Differentiated business model. We continue to learn and evolve, and over the past 20 years have worked on refining our business model to address the needs and preferences of our customers and partners. By relying almost exclusively on proprietary concepts, we create a differentiated experience for our customers, avoid paying franchise fees and are well positioned to take advantage of changes in consumer trends and commodity costs. Unlike most of our competitors that rely on licensing and franchising restaurant brands, we have full control over almost all of our restaurant concepts and menus and are able to react quickly and effectively to changes in consumer needs. We re-design terminals around the customer experience and increase points of sales throughout the terminal by creating revenue generating capacity from previously unproductive and dormant space, such as gate-hold rooms. Our technology also sets us apart and results in many customer benefits, additional revenue generating opportunities as well as cost savings. Today, we focus on pursuing the most complex, yet most rewarding, projects at the busiest airports and seek to grow at major hubs and other large-market, high-traffic airports. Where possible, we aim to take over responsibility for entire airport or entire terminal concession programs, rather than to simply operate individual or small numbers of concession locations, which we believe allows us to benefit from economies of scale and deliver all of the elements of the OTG Experience. Strong business partnerships. Our ability to deliver the OTG Experience has led to strong long-term relationships with our airline and airport partners. Our successful track record and meaningful relationships with our partners have led to high contract win rates and additional business opportunities. Further, we have been able to negotiate concession agreements on favorable terms that include longer lease terms, lower percentage rents and greater operational flexibility for us, but that still result in higher absolute dollar returns to our partners. By custom designing and operating separate and unique concepts for each airline and airport, we allow these partners to leverage the OTG Experience to enhance their own brands and drive their own customer loyalty initiatives. For example, we work with our airline partners to extend special services to their most frequent and valued customers and develop ways to interact with their loyalty programs, such as our pay with miles function for United Airlines. The favorable press we have garnered for our larger entire terminal concession programs have also generated billions of media impressions for our airline partners that have significant dollar value. Moreover, our demonstrated ability to design, develop, operate and manage entire terminal concession programs relieves our airline and airport partners of much of the burden of managing all or a part of these programs themselves. Significant barriers to entry. We believe that our business model is not easily replicated even by seasoned concession operators, as we have been delivering the OTG Experience for the last 20 years, and that there are significant barriers to entry for potential new competitors, particularly for entire terminal concession programs. The intensive capital requirements that underpin our highly differentiated programs and our ability to generate some of the highest RPEs in the industry limit both the willingness and the ability for other operators to compete with us. We understand and effectively manage the myriad of legal, regulatory and logistical obstacles involved in operating a business in a heavily regulated and secure environment. Given the strict security at airports, we have the benefit of a streamlined onboarding process for our crewmembers, including FBI fingerprinting and background checks. In addition, our experienced teams specialize in delivering new projects within extremely compressed time tables in a variety of circumstances. We have repeatedly demonstrated an ability to transition and transform an entire terminal concession program virtually overnight without disruption to the overall business or other airport operations. We can manage the logistics for the largest phased transitions as well. For example, in 2014, during the takeover of Newark Terminal C, we successfully opened 49 F&B and N&G locations in 42 days. 4 TABLE OF CONTENTS Attractive terminal-level economics. OTG s proven business model results in strong terminal-level economics characterized by some of the highest RPEs in the industry, attractive operating margins and strong cash flow generation on an individual contract basis. Whenever we take over an entire terminal concession program from a prior operator, we generate takeover growth of 26% on average, in the first full year of operations. Our ability to quickly transition concession facilities from prior operators and open (at least) temporary concessions enables us to generate revenue with minimal construction or renovation delays. For entire terminal concession programs, we are generally able to achieve run-rate revenue within the first 24 months following the completion of construction, which refers to a month during which revenue, on an annualized basis, reflects the amount of revenue projected for a fully operational business. The breadth of our F&B concepts also allows us to provide service during all day parts, including breakfast, lunch, dinner and late night. As such, OTG has been able to achieve, sustain and grow some of the highest RPEs in the industry. We target a terminal-level contribution margin of at least 20%. We believe that these margins are higher than our peers as a result of the proprietary nature of OTG restaurants, resulting in no franchising fees, lower terminal rents and greater efficiencies through the use of technology. Our tablet based ordering systems allow us to operate with a more efficient labor and inventory management model than typical restaurants. Further, we do not require large marketing and advertising budgets like other restaurant businesses. For entire terminal concession programs, we target a sales to investment ratio of 1:1. Once all of the initial capital expenditures are made, there are minimal ongoing capital expenditures required. The combination of our industry leading revenue generation which we calculate based on our takeover growth, and strong margins allow us to target terminal-level pre-tax internal rates of return ( IRR ) for the contract term and extension option periods in excess of 30%. Our terminal-level economics are underpinned by our long-term contracts and our stable customer base. Experienced management team. Our team is comprised of passionate and experienced senior leaders with an average of over 15 years at OTG and in the industry. OTG is led by its Chairman, Chief Executive Officer and founder Eric J. ( Rick ) Blatstein, who founded the business in 1996 after taking over a single restaurant location at the Philadelphia International Airport. Rick has directed the business since inception and has overseen the growth of the Company for the past 20 years. Rick has over 30 years of experience in the restaurant and hospitality industry and his foresight into consumer trends, focus on the customer experience, and ability to conceive of innovative concepts have transformed the Company and the entire airport concessions industry. Joe Ozalas, our Chief Financial Officer, joined OTG in 2004 and brings over 30 years of valuable experience, having held senior financial management positions in the telecom, publishing and retail industries. Rick and Joe are supported by a talented executive leadership team that has deep experience in entertainment, themed-restaurants, foodservice operations, airport concessions, airport development, airport and airline operations, financial management and credit card loyalty programs. We believe that our management team is a key driver of our success and positions us well for long-term growth. Our Growth Strategies We believe that we are well-positioned to achieve significant, sustainable financial growth, primarily driven by the following: Expansion into new airports and terminals in major airports. We believe significant new business development opportunities will continue to arise for the foreseeable future for expansion into airports or terminals in major hubs and other large-market, high-traffic airports where we do not currently operate. While we have expanded significantly since 2008, we remain in the very early stages of our overall growth plan, having operations in only 23 terminals across 10 airports in North America today. Given that airport concession contracts generally have a term of between seven and ten years, we expect to have significant and consistent opportunities to bid for concession contracts, including at major hubs, over the next decade as existing contracts expire. In 2014, the top 30 airports in North America by enplanement recorded 576 million enplanements and generated total F&B and N&G concession sales of $5.2 billion, yet to date we have significant operations in only six of these airports. We believe that we are well positioned to win new business because of our highly differentiated product offering and the strength of our relationships with our airline partners. We regularly receive inbound interest from international airlines and airport operators. Given the 5 TABLE OF CONTENTS volume of new business opportunities that exists domestically, our focus has historically been on the U.S. market. However, we monitor and will opportunistically pursue opportunities for international expansion as we did with Toronto-Pearson in 2013. We have developed a near term growth plan that targets four new entire terminal concession programs in 2016 and up to seven in 2017 (including those described under Recent Developments New Concession Programs ). Over the longer-term, we believe we can significantly grow our footprint in new and existing markets by obtaining new contracts for entire terminal concession programs while generating some of the highest RPEs in the industry. We typically target entire terminal concession programs of various sizes, which, based on the number of terminals in a given project and enplanements per terminal, could generate a wide range of revenues. We generally expect our smaller projects to generate on average approximately $40 million in net sales, our mid-sized projects to generate on average approximately $85 million in net sales and our larger projects to generate on average approximately $180 million in net sales. The size and timing of new projects can have a material impact on our business as new contracts are awarded. The higher enplanements and RPEs generated in major market and hub airports reduce our investment risk as they can more easily support the level of investment we typically make in order to deliver the OTG Experience. Our goal is to take over entire terminal concession programs, where possible, rather than operate individual concessions. While we will continue to monitor and selectively respond to RFP opportunities, we believe that a substantial portion of our future growth may be driven largely through privately negotiated agreements, including buyout opportunities, outside of the public RFP process. Increase sales in existing operations. Our goal is to grow our existing operations by increasing the frequency of customer visits and sales through the continued delivery of the OTG Experience. We intend to increase our capture rate by continuing to evolve our design and offerings and creating fresh and dynamic concepts and menus. We expect that these efforts will lead to an increase in the number of travelers that visit our concession locations and order our products, and ultimately grow our sales. As travelers pass through airports where we operate and become more familiar with the OTG Experience, we hope to create loyalty to our proprietary concepts and brands. We believe that these factors will increase sales in our current locations. Leverage our technology to create new revenue streams in new and existing locations. Our goal is to place one tablet for each seat at our restaurants and certain other F&B locations and at a majority of the seats in the gate-hold rooms of the terminals in which we operate. We believe the repeated and continuous interaction of our customers with our tablets will generate higher RPE and an increasing number of opportunities to develop additional and potentially significant revenue streams. The following initiatives represent significant growth opportunities for us, both for locations where we have not yet placed tablets and for locations where tablets are currently deployed: Expand advertising and marketing. Our tablet platform generates advertising and marketing revenues. We believe that the size of this revenue stream will grow over time as the potential power and reach of the tablet platform as a marketing medium is further accepted and understood by advertisers and our business partners. Our current partners include credit card companies, rental car companies and online shopping sites. Develop digital entertainment and gaming content. We are working on creating digital entertainment and gaming content for purchase and free, advertising-driven content to be enjoyed by our customers on tablets that often provide faster connectivity to the Internet at the airport than personal devices. We have observed that playing the free games pre-loaded on our tablets is one of the most popular ways in which customers pass time while waiting for their flight. We are currently developing a variety of games, such as casino style games, electronic lottery, monetized social gaming and games of skill. Our exclusive gaming programs will allow us to offer sweepstakes and games of skill and award prizes to our customers ranging from free food and beverages, to flight upgrades and miles awards, to vacation packages. We believe additional future revenues will be generated by increased sales of products and services associated with game play, in-application purchases and in-application advertising. Increase personalized sales. The recommendation engines we have developed for the tablet ordering software also suggest F&B pairings or other N&G products based on the time of day, prior customer 6 TABLE OF CONTENTS preferences, flight destinations or length of travel. We believe we can also create and leverage our own databases of customer preferences by analyzing prior transactions in general and for specific customers who opt-in to receive personalized offers and services. We believe information gleaned from these databases will help to further increase sales and RPE via the recommendation and targeted marketing of specific additional products and services, including those of our business partners. Our strong understanding of customer preferences will also enable us to identify leading items that drive demand and allow us to react quickly to introduce these items across other operations. These product recommendations have already provided increased sales in the locations where tablets are deployed. Further integration with business partners. We will continue to develop ways to integrate our technology with business partner loyalty programs and accept payment in alternative forms of currency as we have recently done with the pay with miles function for United Airlines. These programs not only increase sales as a result of allowing customers to access a new and seemingly free or otherwise inaccessible source of capital, but they also eliminate credit card processing fees on all incremental sales. Recent Developments Preliminary Financial Results for the Fiscal Year Ended December 27, 2015 Our financial results for the fiscal year ended December 27, 2015 or fiscal 2015 are not yet available. Set forth below are certain preliminary estimates of the results of operations that we expect to report for fiscal 2015. Our actual results may differ materially from these estimates due to the completion of our financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for fiscal 2015 are finalized. We estimate that net sales will be approximately $380 million for fiscal 2015. This represents net sales growth of 39% over fiscal 2014. The increase in net sales is primarily due to expansion into two new airports, Newark and Reagan. We estimate that our same terminal sales growth will be approximately 6.6% for fiscal 2015. We estimate that our terminal-level contribution will range between $75.3 million and $80.5 million for fiscal 2015. This represents terminal-level contribution growth of 38% over fiscal 2014, assuming the mid-point of the estimated range. The increase in terminal-level contribution is primarily due to additional contribution derived from expansion into new terminals. Terminal-level contribution is not required by, or presented in accordance with, U.S. generally accepted accounting principles ( GAAP ). Terminal-level contribution is a supplemental measure of operating performance of our terminals, and our calculations thereof may not be comparable to similar measures reported by other companies. Terminal-level contribution has limitations as an analytical tool and should not be considered as a substitute for analysis of our results as reported under GAAP. See Summary Historical Consolidated Financial and Other Data. A reconciliation of terminal-level contribution to loss from operations, the most directly comparable GAAP measure, for both the high and low end of the range for fiscal 2015 is set forth below: Fiscal Year 2015 ($ in millions) Low High (unaudited) Terminal-level contribution $ 75.3 $ 80.5 Less: Deferred rent(a) 3.6 2.2 Less: Selling, general and administrative(b) 29.4 26.6 Less: New business development and pre-opening expenses 17.5 15.8 Less: Depreciation and amortization 39.7 36.9 Loss from operations $ (14.9 ) $ (1.0 ) (a)Reflects the extent to which our annual rent expense has been above or below our cash rent payments. (b)Adjusted to exclude credit card fees, building insurance and bank fees. 7 TABLE OF CONTENTS At the midpoint of our expected range of terminal-level contribution, our terminal-level contribution for the fourth fiscal quarter of fiscal 2015 will be lower than our terminal-level contribution for the third fiscal quarter of fiscal 2015, on a sequential basis, due to seasonality and other expenses, which typically impact our fourth quarter financial results. Our Adjusted EBITDA, on a quarterly basis, is impacted by this factor, and as a result, we anticipate that Adjusted EBITDA for the fourth fiscal quarter of fiscal 2015 will follow a similar sequential trend as our terminal-level contribution. The preliminary financial data included in this prospectus has been prepared by and is the responsibility of our management. Neither our independent registered public accounting firm nor any other independent registered public accounting firm has audited, reviewed, prepared or compiled, examined or performed any procedures with respect to the estimated results, nor have they expressed any opinion or any other form of assurance on the preliminary estimated financial results. This preliminary information reflects management s estimates based solely upon information available as of the date of this prospectus and is not a comprehensive statement of our financial results for the fiscal year ended December 27, 2015. The information presented herein should not be considered a substitute for the financial information to be filed with the SEC on Form 10-K for the fiscal year ended December 27, 2015 once it becomes available. We have no intention or obligation to update the preliminary financial data in the prospectus prior to filing our Annual Report on Form 10-K for the fiscal year ended December 27, 2015.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001657249_road_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001657249_road_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6e245de471c800db2cdab6582b5eb929baebdc0f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001657249_road_prospectus_summary.txt
@@ -0,0 +1 @@
+PRELIMINARY PROSPECTUS Road Marshall, Inc. 7,250,000 SHARES OF COMMON STOCK $0.0001 PAR VALUE PER SHARE Prior to this Offering, no public market has existed for the common stock of Road Marshall, Inc. Upon completion of this Offering, we will attempt to have the shares quoted on the OTCQB operated by OTC Markets Group, Inc. There is no assurance that the Shares will ever be quoted on the OTCQB. To be quoted on the OTCQB, a market maker must apply to make a market in our common stock. As of the date of this Prospectus, we have not made any arrangement with any market makers to quote our shares. As of the date of this registration statement it should be noted that our company is currently a shell company. We are not however, a blank check company. In this public offering we, "Road Marshall, Inc." are offering 5,000,000 shares of our common stock and our selling shareholders are offering 2,250,000 shares of our common stock. We will not receive any of the proceeds from the sale of shares by the selling shareholders. The offering is being made on a self-underwritten, "best efforts" basis. There is no minimum number of shares required to be purchased by each investor. The shares offered by the Company will be sold on our behalf by our Chief Executive Officer, Engchoon Peh. Mr. Peh is deemed to be an underwriter of this offering. The selling shareholders are also deemed to be underwriters of this offering. There is uncertainty that we will be able to sell any of the 5,000,000 shares being offered herein by the Company. Mr. Peh will not receive any commissions or proceeds for selling the shares on our behalf. All of the shares being registered for sale by the Company will be sold at a fixed price of $0.005 per share for the duration of the Offering. Additionally, all of the shares offered by the selling shareholders will be sold at a fixed price of $0.005 for the duration of the Offering. Assuming all of the 5,000,000 shares being offered by the Company are sold, the Company will receive $25,000 in gross proceeds. Assuming 3,750,000 shares (75%) being offered by the Company are sold, the Company will receive $18,750 in net proceeds. Assuming 2,500,000 shares (50%) being offered by the Company are sold, the Company will receive $12,500 in net proceeds. Assuming 1,250,000 shares (25%) being offered by the Company are sold, the Company will receive $6,250 in net proceeds. There is no minimum amount we are required to raise from the shares being offered by the Company and any funds received will be immediately available to us. There is no guarantee that we will sell any of the securities being offered in this offering. Additionally, there is no guarantee that this Offering will successfully raise enough funds to institute our company s business plan. Additionally, there is no guarantee that a public market will ever develop and you may be unable to sell your shares. This primary offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this Prospectus, unless extended by our directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. In their audit report dated December 11, 2015, our auditors have expressed substantial doubt as to our ability to continue as a going concern. Currently, our Chief Executive Officer Engchoon Peh and our Chief Operating Officer Zhencong Bai, together own approximately 64% of the voting power of our outstanding capital stock. After the offering, assuming all of their personal shares that are being registered herein and those shares being offered on behalf of the company are sold, both Mr. Peh and Mr. Bai will together have the ability to control approximately 50.33% of the voting power of our outstanding capital stock. Currently, our officers and directors together own 100% of our outstanding voting stock. If all of the shares being registered herein are sold our officers and directors will collectively control 75.83% of our outstanding voting stock. Currently, our Chief Executive Officer Engchoon Peh owns 3,750,000 shares of restricted common stock and 50,000 shares of preferred stock. Every one share of preferred stock is equivalent to the voting rights of 100 shares of common stock. Currently, our Chief Operating Officer Zhencong Bai owns 2,250,000 shares of restricted common stock and 50,000 shares of preferred stock. Every one share of preferred stock is equivalent to the voting rights of 100 shares of common stock. *Engchoon Peh will be selling shares of common stock on behalf of the Company simultaneously to selling shares of his own personal stock from his own account. A conflict of interest may arise between Mr. Peh s interest in selling shares for his own account and in selling shares on the Company s behalf. Regarding the sale of Mr. Peh s shares, they will be sold at a fixed price of $0.005 for the duration of the offering. The Company estimates the costs of this offering at $40,000. All expenses incurred in this offering are being paid for by Engchoon Peh, our Chief Executive Officer. There has been no public trading market for the common stock of Road Marshall, Inc. The proceeds from the sale of the securities will be placed directly into the Company s account; any investor who purchases shares will have no assurance that any monies, beside their own, will be subscribed to the prospectus. All proceeds from the sale of the securities are non-refundable, except as may be required by applicable laws. The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, which became law in April 2012 and will be subject to reduced public company reporting requirements. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE REFER TO , ' ': RISK FACTORS BEGINNING ON PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. You should rely only on the information contained in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included in this Prospectus. If anyone provides you with different information, you should not rely on it. The date of this prospectus is __________________. - 1 - The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2 RISK FACTORS 5 SUMMARY OF FINANCIAL INFORMATION 13 MANAGEMENT S DISCUSSION AND ANALYSIS 14 INDUSTRY OVERVIEW 14 FORWARD-LOOKING STATEMENTS 15 DESCRIPTION OF BUSINESS 15 USE OF PROCEEDS 17 DETERMINATION OF OFFERING PRICE 17 DILUTION 18 SELLING SHAREHOLDERS 20 PLAN OF DISTRIBUTION 20 DESCRIPTION OF SECURITIES 21 INTERESTS OF NAMED EXPERTS AND COUNSEL 22 REPORTS TO SECURITIES HOLDERS 22 DESCRIPTION OF FACILITIES 22 LEGAL PROCEEDINGS 23 PATENTS AND TRADEMARKS 23 DIRECTORS AND EXECUTIVE OFFICERS 23 EXECUTIVE COMPENSATION 23 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 26 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 26 PRINCIPAL ACCOUNTING FEES AND SERVICES 26 MATERIAL CHANGES 26 FINANCIAL STATEMENTS F1-F14 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 27 INDEMNIFICATION OF OFFICERS AND DIRECTORS 27 RECENT SALES OF UNREGISTERED SECURITIES 28 EXHIBITS TO REGISTRATION STATEMENT 28 UNDERTAKINGS 29 SIGNATURES 30 You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. For the duration of this offering all dealers and or sellers that effect transactions in these securities, whether or not participating in this offering, are required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. This offering will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 7,250,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days. At any time and for any reason we may also terminate the offering. Table of Contents PROSPECTUS SUMMARY In this Prospectus, , ' ': , ' ': Road Marshall, the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to Road Marshall, Inc., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending September 30th. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 5, and the financial statements, before making an investment decision. The Company Road Marshall, Inc., a Delaware corporation ("the Company") was incorporated under the laws of the State of Delaware on September 17, 2015. Road Marshall, Inc. is a technology company engaged in the development of a mobile application for iOS and Android devices. The Company s executive offices are located at 194 Pandan Loop #05-08 Singapore 128383. Our activities have been limited to developing our business and financial plans. At present we have not yet begun generating revenue and have experienced a net loss of $9,910. Our application, Road Marshall, has been downloaded five times. *Rule 405 of the Securities Act defines the term "shell company" as a registrant, other than an asset-backed issuer, that has: (1) No or nominal operations; and (2) Either: (i) No or nominal assets; (ii) Assets consisting solely of cash and cash equivalents; or (iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets. For purposes of this definition, the determination of a registrant s assets (including cash and cash equivalents) is based solely on the amount of assets that would be reflected on the registrant s balance sheet prepared in accordance with generally accepted accounting principles on the date of that determination. The Company has no or nominal operations and has assets consisting solely of cash and cash equivalents and is, therefore, a shell company as defined under Rule 405. -The Company s shell company status results in the following consequences: -The Company is ineligible to file a registration of securities using Form S-8; and -Rule 144 is unavailable for transfers of our securities until we have ceased to be a shell company, are subject to the reporting requirements of the Exchange Act; we have filed Exchange Reports for 12 months and a minimum of one year has elapsed since the filing of Form 10 information on Form 8-K changing our status from a shell company to a non-shell company. *There is the possibility, due to our status as a shell company, we may be unable to fully fulfill or carry out our intended business operations and that you may lose your entire investment if this should occur. There are a substantial number of steps that need to be taken to fulfill our business plan. We believe we need to raise $25,000 to execute our business plan over the next 12 months. The funds raised in this offering, even assuming we sell all the shares being offered, may be insufficient to carry out our intended business operations. Road Marshall, Inc. is a company with the intent to become one of the, if not the primary, leading publicly traded iOS and Android application development and promotion companies in the industry. Our proprietary application,which is fully developed but not yet being marketed, is called Road Marshall. Road Marshall is an application which will be invaluable to its users in the event of car trouble and should revolutionize the way tow truck companies are found within the United States, and eventually around the world. The Company intends to monetize the mobile application through third party advertisements. Our application is described in further detail in our business information section beginning on page 15. We will receive proceeds from the sale of 5,000,000 shares of our common stock and intend to use the proceeds from this offering to further develop and market our mobile application known as "Road Marshall." There is uncertainty that we will be able to sell any of the 5,000,000 shares being offered herein by the Company. The expenses of this offering, including the preparation of this prospectus and the filing of this registration statement, estimated at $40,000, are being paid for by the Company s Chief Executive Officer, Engchoon Peh. The maximum proceeds to us from this offering ($25,000) will satisfy our basic subsistence level, cash requirements for up to 12 months. 75% of the possible proceeds from the offering by the company ($18,750) will satisfy our basic, subsistence level cash requirements for up to 9 months, while 50% of the proceeds ($12,500) will sustain us for up to 6 months, and 25% of the proceeds ($6,250) will sustain us for up to 3 months. Our budgetary allocations may vary, however, depending upon the percentage of proceeds that we obtain from this offering. For example, we may determine that it is more beneficial to allocate funds toward securing potential financing and business opportunities in the short terms rather than to conserve funds to satisfy continuous disclosure requirements for a longer period. During the 12 months following the completion of this offering, we intend to continue our current business plan and increase operations relating to the development and marketing of our mobile application. - 2 - Table of Contents In their audit report dated December 11, 2015, our auditors have expressed an opinion that substantial doubt exists as to whether we can continue as an ongoing business. Because our Chief Executive Officer Engchoon Peh may be unwilling or unable to loan or advance any additional capital to us, we believe that if we do not raise additional capital within 12 months of the effective date of this registration statement, we may be adversely effected and may have to curtail operations or continue operations at a limited level that is financially suitable for the Company. The recently enacted JOBS Act is intended to reduce the regulatory burden on "emerging growth companies". The Company meets the definition of an "emerging growth company" and so long as it qualifies as an "emerging growth company," it will, among other things: -be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting; -be exempt from the "say on pay" provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute" provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers; -be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and instead provide a reduced level of disclosure concerning executive compensation; and -be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board (the "PCAOB") requiring mandatory audit firm rotation or a supplement to the auditor s report on the financial statements. Although the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an "emerging growth company". The Company has elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an "emerging growth company", which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an "emerging growth company", the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected. Notwithstanding the above, we are also currently a "smaller reporting company", meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a "smaller reporting company", at such time are we cease being an "emerging growth company", the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth company" or a "smaller reporting company". Specifically, similar to "emerging growth companies", "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze the Company s results of operations and financial prospects. Our Offering We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.0001 par value per share ("Common Stock") and 20,000,000 shares of preferred stock, $0.0001 par value per share ("Preferred Stock"). We have 15,000,000 shares of Common Stock and 100,000 shares of Preferred Stock issued and outstanding. Through this offering we will register a total of 7,250,000 shares. These shares represent 5,000,000 additional shares of common stock to be issued by us and 2,250,000 shares of common stock by our selling stockholders. We may endeavor to sell all 5,000,000 shares of common stock after this registration becomes effective. Upon effectiveness of this Registration Statement, the selling stockholders may also sell their own shares. The price at which we, the company, offer these shares is at a fixed price of $0.005 per share for the duration of the offering. The selling stockholders will also sell shares at a fixed price of $0.005 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will receive all proceeds from the sale of our common stock but we will not receive any proceeds from the selling stockholders. *The primary offering on behalf of the company is separate from the secondary offering of the selling stockholders in that the proceeds from the shares of stock sold by the selling stockholder s will go directly to them, not the company. The same idea applies if the company approaches or is approached by investors who then subsequently decide to invest with the company. Those proceeds would then go to the company. Whomever the investors decide to purchase the shares from will be the beneficiary of the proceeds. None of the proceeds from the selling stockholder s will be utilized or given to the company. Mr. Peh will clarify for investors at the time of purchase whether the proceeds are going to the company or directly to himself. *Mr. Peh will be able to sell his shares at any time during the duration of this offering. Regarding the sale of Mr. Peh s shares, they will be sold at a fixed price of $0.005 for the duration of the offering. *Mr. Peh will be selling shares of common stock on behalf of the Company simultaneously to selling shares of his own personal stock from his own account. A conflict of interest may arise between Mr. Peh s interest in selling shares for his own account and in selling shares on the Company s behalf. Please note that at this time Mr. Peh intends to sell the Company s shares prior to selling his own shares, although he is under no obligation to do so. Mr. Peh will decide whether shares are being sold by the Company or by Mr. Peh himself. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Company 5,000,000 shares of common stock, at a fixed price of $0.005 offered by us in a direct offering. Our offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Securities being offered by the Selling Stockholders 2,250,000 shares of common stock, at a fixed price of $0.005 offered by selling stockholders in a resale offering. As previously mentioned this fixed price applies at all times for the duration of the offering. The offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus, unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Offering price per share We and the selling shareholders will sell the shares at a fixed price per share of $0.005 for the duration of this Offering. Number of shares of common stock outstanding before the offering of common stock 15,000,000 common shares are currently issued and outstanding. Number of shares of common stock outstanding after the offering of common stock 20,000,000 common shares will be issued and outstanding if we sell all of the shares we are offering. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $0.005. We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. The offering price for the shares will remain at $0.005 per share for the duration of the offering. - 3 - Table of Contents Use of Proceeds We intend to use the gross proceeds to us for working capital, marketing and further development of our mobile application "Road Marshall." Termination of the Offering This offering will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 7,250,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days. At any time and for any reason we may also terminate the offering. Terms of the Offering Our Chief Executive Officer, Engchoon Peh will sell the 5,000,000 shares of common stock on behalf of the company, upon effectiveness of this registration statement, on a BEST EFFORTS basis. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs We estimate our total offering registration costs to be approximately $40,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001657564_gabbit_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001657564_gabbit_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..8d15a9e7b1b81ab78c7ce396ef03b18b527044af
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001657564_gabbit_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, WE, US, OUR, AND GABBIT CORP. REFERS TO GABBIT CORP. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. GABBIT CORP. Gabbit Corp. was incorporated in Nevada on August 16, 2015. We are development stage company and intend to commence operations in the business of tour agency. We intend to provide leisure tours in Austrian Alps with extreme activities. We intend to sell our service both entities (touristic agencies, tour resellers or companies that are considered extreme tours as team-building activity for their emloyees) and groups of individuals which request an extreme tour in Austrian Alps. We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $37,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate sufficient revenue in the first 12 months after completion our offering or ever generate sufficient revenue. According to our audit report we have no revenues and our net loss for the audited period is $949. Being a development stage company, we have very limited operating history. If we do not generate additional revenue, we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at Gymnasiumstrasse 19-21, Vienna, Austria 1180. Our phone number is +43-720-816-770. From inception (August 16, 2015) until the date of this filing, we have had limited operating activities. Our financial statements from inception (August 16, 2015) through February 29, 2016, reports no revenue and a net loss of $949. Our independent registered public accounting firm has issued an audit opinion for Gabbit Corp., which includes a statement expressing substantial doubt as to our ability to continue as a going concern. To date, we have established our Company, developed our business plan, developed business-model of our company and have been looking for the potential clients. On February 20, 2016 we signed the Agreement with EcoFur&Ris, LLC. As a result of this agreement, as of the date of this prospectus, we have generated $5,000 in revenues. As of May 25, 2016 we have cash reserves of approximately $7,060. The current rate at which we use funds in our operations is approximately $833 a month. The maximum period of time we will be able to conduct planned operations using currently-available capital resources is approximately eight months. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $37,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $37,000, our business may fail. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities. THE OFFERING The Issuer: Gabbit Corp. Securities Being Offered: 9,000,000 shares of common stock. Price Per Share: $0.01 Duration of the Offering: The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240days from the effective date of this prospectus), (ii) the date when the sale of all 9,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 9,000,000 shares registered under the Registration Statement of which this Prospectus is part. Gross Proceeds: If 50% of the shares sold - $45,000 If 75% of the shares sold - $67,500 If 100% of the shares sold - $90,000 Securities Issued and Outstanding: There are 9,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Vladimir Karelin. If we are successful at selling all the shares in this offering, we will have 18,000,000 shares issued and outstanding. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs: We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001657803_inbit-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001657803_inbit-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3fd89169980b333b93a8fcacce3ac9dae7afaa91
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001657803_inbit-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 3
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001658304_clic_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001658304_clic_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..671b92844ba8b2c3a2ed5a4fd6750043a9e4eaea
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001658304_clic_prospectus_summary.txt
@@ -0,0 +1,1613 @@
+summary of financial data summarizes certain information from our audited financial statements as at September 30, 2015. 
+ 
+ 
+ 
+ 
+As of
+June 30,
+2016
+ 
+ 
+As of
+September 30,
+2015
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Revenues
+ 
+$0 
+ 
+$0 
+
+Operating Expenses
+ 
+$(11,709) 
+$(1,832)
+Net Loss
+ 
+$(11,709) 
+$(1,832)
+Working Capital
+ 
+$(3,541) 
+$(1,832)
+Shareholder's Equity (Deficit)
+ 
+$(3,541) 
+$(1,832)
+ 
+RISK FACTORS
+ 
+An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below may not be all of the risks facing our company. Additional risks not presently known to us or that we currently consider immaterial may also impair our business operations. You could lose all or part of your investment due to any of these risks.
+ 
+Risks Related to Our Company
+ 
+We are a recently organized as an early stage company but have not yet commenced operations in our business. We expect to incur operating losses for the foreseeable future.
+ 
+We were incorporated on September 4, 2015 and to date have been involved primarily in organization activities. We have not yet commenced business operations. Further, we have not yet fully developed our business plan, or our management team, nor have we targeted or assembled any real or intangible property rights. Accordingly, we have no way to evaluate the likelihood that our business well be successfully. We have not earned any revenues as of the date of this prospectus. Potential investors should be aware of the difficulties normally encountered by a new niche market online sales activities and the high rate of failure for such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the operations that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to our proposed platform and website development, market acceptance of our proposed crowdfunding platform by businesses or entrepreneurs, and challenges relating to bringing potential donors to projects presented on proposed platform and additional costs and expenses that may exceed current estimates. Prior to time that we are ready to launch our prospective platform, we anticipate that FundThatCompany will incur increased operating expenses without realizing any revenues. We expect to incur significant losses into the foreseeable future. We recognize that if the effectiveness of our business plan is not forthcoming we will not be able to continue business operations. There is no operating history upon which to base any assumption as to the likelihood that we will prove successful and it is doubtful that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
+ 
+We are an early-stage organization and have a correspondingly small financial and accounting organization. Being a public company may strain our resources, divert management's attention and affect its ability to attract and retain qualified officers and directors.
+ 
+We are an early-stage company with no developed finance and accounting organization and the rigorous demands of being a public company require a structured and developed finance and accounting group. As a reporting company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934. However, the requirements of these laws and the rules and regulations promulgated there under entail significant accounting, legal and financial compliance costs which may be prohibitive to us as we develop our business plan, services and scope. These costs have made, and will continue to make, some activities more difficult, time consuming or costly and may place significant strain on its personnel, systems and resources. 
+ 
+The Securities Exchange Act requires, among other things, that companies maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required. As a result, management's attention may be diverted from other business concerns, which could have a material adverse effect on the development of our business, financial condition and results of operations. 
+ 
+These rules and regulations may also make it difficult and expensive for us to obtain director and officer liability insurance. If we are unable to obtain adequate director and officer insurance, our ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, will be significantly curtailed. 
+ 
+9
+
+ 
+
+ 
+Our Company's Management has no prior experience in running a public company; the Company may be faced with additional costs to maintain its reporting requirements. Such costs could have a material adverse effect on our business financial condition and operating results.
+ 
+Because the Company's management has no prior experience in running a public company, the Company may be faced with additional costs to maintain its reporting requirements and as such may be reliant upon external consultants and additional accounting and legal advice. These costs may be significant and such costs may have an adverse effect on our ability to operate and our results of operations.
+ 
+We have incurred net losses since our inception and expect losses to continue.
+ 
+We have not been profitable since our inception. Since our inception on September 4, 2015 to September 30, 2015, we had a net loss of $1,832. We have not generated revenues from operations and do not expect to generate revenues from operations unless and until we are able to bring our concept. There is a risk that we may never bring launch our proposed concept to the market place or that our business concept will attract customer. In addition there is no guarantee and that our operations will be profitable in the future and you could lose your entire investment. 
+ 
+One of the biggest challenges facing us will be in securing adequate capital to implement our proposed plan of operations. Secondarily, an ongoing challenge remains the maintenance of an efficient operating structure and business model. We must keep our expenses and the costs of marketing and the development of our proposed online platform at a minimum in order to generate a profit from the revenues that we anticipate receiving from the charging of a 5% fee of funds raised from our proposed reward-based crowdfunding platform. Third, in order to expand, we will need to implement effective sales and marketing strategies to reach and forge new business markets to attract businesses, entrepreneurs and pledge donors to our proposed on-line site. We have devised our initial sales, marketing and advertising strategies, however, we will need to continue refinement of these strategies and also skillfully implement these plans in order to achieve ongoing and long-term success in its business. Fourth, we will continuously identify, attract, solicit and manage potential employee talent, which requires us to consistently recruit, incent and monitor various employees. High employee turnover or attrition is a significant risk for us as it requires expending substantial resources to locate and train new personnel and also to replace personnel for clients. These tasks require significant time and attention from our management, and employees may nevertheless become dissatisfied with their respective tenure with us. 
+ 
+Due to financial constraints and the early stage of our life, we have to date conducted no advertising and marketing to reach potential customers. In addition, we have not yet located the sources of funding for development of our proposed concept on a broader scale through acquisitions or other major partnerships. If we were unable to locate such financing and/or later develop strong and reliable sources of potential new business relationships and a means to efficiently reach new business partners and customers, it is unlikely that we will be able to develop its proposed expanded operations and business plan. Moreover, the above assumes that our proposed services are consistently met with client satisfaction in the marketplace and exhibit steady success amongst the potential customer base, neither of which is reasonably predictable or guaranteed 
+ 
+Our auditors have questioned our ability to continue operations as a "going concern." Investors may lose all of their investment if we are unable to continue operations and generate revenues. We hope to obtain significant revenues from future fees generated from our proposed reward-based crowdfunding platform. In the absence of significant sales and profits, we may seek to raise additional funds to meet our working capital needs, principally through the additional sales of our securities. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, substantial doubt exists about our ability to continue as a going concern.
+ 
+We may not be able to continue as a going concern if we do not obtain additional financing.
+ 
+Our independent accountants' audit report states that there is substantial doubt about our ability to continue as a going concern. We have incurred only losses since our inception raising substantial doubt about our ability to continue as a going concern. Therefore, our ability to continue as a going concern is highly dependent upon obtaining additional financing for our planned operations. There can be no assurance that we will be able to raise any additional funds, or we are able to raise additional funds, that such funds will be in the amounts required or on terms favorable to us.
+ 
+Our competition is intense in all phase of our business.
+ 
+The Reward-Based Crowdfunding market is dominated by KICKSTARTER with more than 13 million visitors per month (crowd101-July, 2015) and INDIEGOGO with 7.6 million unique visitors (beebom.com April, 2015). According to Statista (statista.com -2012) there are 454 crowdfunding platforms worldwide and of those 191 were located in the United States. Other crowdfunding platforms included GoFundMe, GoGetFunding, Tubestart, Pozible and Rockethub to name a few. Nearly all of our competitors are more experienced, have vastly greater financial and management resources and have more established proprietary trademarks and distribution networks than we do. These and other competitors are likely to have distribution and marketing channels for their platforms that we do not have, which places us at a significant disadvantage. Failure of the Company to achieve market acceptance could have a material adverse effect on our business, financial conditions and the results of our operations. 
+ 
+10
+
+ 
+
+ 
+Our business is subject to many regulations and noncompliance is costly.
+ 
+The marketing and development of our proposed on-line crowdfunding platform comes under the Jumpstart Our Business Startup ("JOBS") Act. These rules related to exemptions under the Securities Act of 1933 and are administered by the Securities and Exchange Commission ("SEC"). If a regulatory authority finds that we are not in compliance with any of these regulations, we may be fined, or we may be stopped from operating our proposed on-line platform, thus adversely affecting our financial conditions and operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our proposed crowdfunding platform. Furthermore, the rules and regulation are subject to change from time to time and while we closely monitor developments in this area, we have no way of anticipating whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements could have an adverse effect on our business, financial condition and results of operations.
+ 
+Our president and chief executive officer does not have any formal training specific to the rewards-based crowdfunding business.
+ 
+Our President and Chief Executive Officer is Mr. Chayut Ardwichai. Mr. Ardwichai has no direct training or experience in developing and marketing of a reward-based crowdfunding business for the general market place. Our management team may not be fully aware of the specific requirements related to working within this industry. Consequently, our operations, earnings and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.
+ 
+Our current president and chief executive officer has other business interests.
+ 
+Chayut Ardwichai, our President and Chief Executive Officer, currently devotes approximately fifteen hours per week providing management services to us. While he presently possesses adequate time to attend to our interest, it is possible that the demands on him from other obligations could increase, with the result that he would no longer be able to devote sufficient time to the management of our business. The loss of Mr. Ardwichai to our company could negatively impact our business development.
+ 
+Because our sole officer and director resides' abroad, shareholders may have difficulties enforcing their legal rights under United States securities laws.
+ 
+Mr. Ardwichai is a citizen and resident of Thailand. In the event that any shareholder action was launched including a suit or judgment or other legal matters there is no assurance that Mr. Ardwichai will be able to appear within the jurisdiction. Additionally, it may be difficult to effect service or process within the United States against Mr. Ardwichai; to enforce any United States Court judgements based on civil liability provisions of the United States federal securities laws against him in the United States; to enforce in a Thailand court judgments base on civil liability provisions of the United States federal securities laws; and to bring action against Mr. Ardwichai in a Thailand court based on civil liability provisions of the United States federal securities laws. This may lead to delays, unforeseen situations and lack of investors' trust in our sole officer and director. Such matters could have a significant negative effect on the success of our business.
+ 
+We have requirements for and there is an uncertainty of access to additional capital. 
+ 
+At September 30, 2015, we had no cash and working capital of $1,832. We will continue to incur development costs to fund our proposed plan of operations and intend to fund our proposed plan of operations from working capital, equity subscriptions and shareholders' loans. Ultimately, our ability to continue our business operations depends in part on our ability to obtain financing through , debt financing, equity financing, or commence operations and generate revenues or some combination of these or other means. There can be no assurance that we will be able to obtain any such financing.
+ 
+We have no cash flow from operations and depend on equity financing and shareholder loans for our operations. 
+ 
+Our current operations do not generate any cash flow. Our current operating funds are less than necessary to complete our intended plan of operations. We will need the funds from the offering to begin to operate our proposed business only until Phase I of our Plan of Operation, which requires minimum funding of $150,000 for Phases I and II. Our failure to obtain such additional financing could result in delay or indefinite postponement of proposed operations which would have a material adverse effect on our business.
+ 
+We lack an operating history.
+ 
+We were incorporated on September 4, 2015 and we have not realized any revenues. We have very little operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the completion of this offering, and our ability to attract businesses/entrepreneurs and pledge donors to our proposed on-line site and to generate revenues from successful campaigns offered on our proposed site.
+ 
+We expect to incur losses in the future.
+ 
+Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business. 
+ 
+11
+
+ 
+
+ 
+Our operating results may prove unpredictable.
+ 
+Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control over. Factors that may cause our operating results to fluctuate significantly include: our ability to generate enough working capital from future equity sales; the level of commercial acceptance by the public of our proposed product; fluctuations in the demands of our product; the amount and timing operating costs and capital expenditures relating to expansion of our business, operations, infrastructure and general economic conditions. If realized, any of these factors could have a material effect on our business, financial condition and operating results, which could result in the complete loss of your investment.
+ 
+We may not be able to gain any significant market acceptance.
+ 
+The Company's growth strategy is substantially dependent upon our ability to access potential businesses and entrepreneurs to our proposed on-line site to present their campaigns; and our ability to draw donors to our site and pledge funds to the campaigns presented to our rewards-based crowdfunding platform. However, our planned crowdfunding product may not achieve significant market acceptance. Such acceptance, if achieved, may not be sustained for any significant period of time. Failure of the Company's to produce a viable and vibrant on-line presence and achieve market acceptance could have a material adverse effect on our business, financial conditions and results of our operations.
+ 
+RISKS ASSOCIATED WITH THIS OFFERING
+ 
+There is no minimum number of shares that must be sold and no assurance that the proceeds from the sale of shares will allow the Company to meet its goals. 
+ 
+We are selling our shares on a "best efforts" basis, and there is no minimum number of shares that must be sold by us in this Offering. Similarly, there are no minimum purchase requirements. We do not have an underwriter, and no party has made a firm commitment to buy any or all of our securities. We intend to sell the shares through our President and Chief Executive Officer, who will not be separately compensated for his efforts. Even if we only raise a nominal amount of money, we will not refund any funds to you. Any money we do receive will be immediately used by us for our business purposes. Upon completion of this Offering, we intend to utilize the net proceeds to finance our business operations. While we believe that the net proceeds from the sale of all shares in this Offering will enable us to meet our business plans and enable us to operate as other than a going concern, there can be no assurance that all these goals can be achieved. Moreover if less than all of the shares are sold, management will be required to adjust its plans and allocate proceeds in a manner which it believes, in our sole discretion, will be in our best interests. It is highly likely that if not all of the shares are sold there will be a need for additional financing in the future, without which our ability to operate as other than a going concern may be jeopardized. No assurance whatsoever can be given or is made that such additional financing, if and when needed, will be available or that it can be obtained on terms favorable to us. Accordingly you may be investing in a company that does not have adequate funds to conduct its operations. If that happens, you will suffer a loss of your investment. 
+ 
+Our officers and directors may have a conflict of interest with the minority shareholders.
+ 
+Chayut Ardwichai, our President and Chief Executive Officer and sole Director, beneficially owns 100% of our outstanding common stock. Assuming the sale of all 5,000,000 shares in this offering, Mr. Ardwichai will own approximately 66.67% of all shares of common stock of the Company. The interest of Mr. Ardwichai may not be, at all times, the same as that of our other shareholders. Mr. Ardwichai is not simply a passive investor but is also an executive officer and director of the Company and his interests as an executive may, at times be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon Mr. Ardwichai exercising, in a manner fair to all of our shareholders, his fiduciary duties as an officer or as a member of the Company's Board of Directors. Also, Mr. Ardwichai has the ability to control the outcome of most corporate actions requiring shareholder approval, including the sale of all or substantially all of our assets, amendments to our Articles of Incorporation and the election of directors. This concentration of ownership may also have the effect of delaying, deferring or preventing a change of control of us, which may be disadvantageous to minority shareholders. 
+ 
+12
+
+ 
+
+ 
+We Are An "Emerging Growth Company" And We Cannot Be Certain If The Reduced Disclosure Requirements Applicable to Emerging Growth Company Will Make Our Common Stock Less Attractive to Investors.
+ 
+We are an "emerging growth company," as defined in the Jumpstart our Business Start-ups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
+ 
+Under the Jumpstart our Business Start-ups Act, we will remain an "emerging growth company" until the earliest of:
+ 
+ 
+ 
+the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
+
+ 
+ 
+the last day of the fiscal year following the fifth anniversary of the completion of this offering;
+
+ 
+ 
+the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and
+
+ 
+ 
+the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, or the Exchange Act.
+
+ 
+Under the Jumpstart Our Business Start-ups Act, "emerging growth companies" can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies."
+ 
+There has been no prior public market for our securities and the lack of such a market may make resale of the stock difficult.
+ 
+No prior public market has existed for our securities and we cannot assure any investor that a market will develop subsequent to this offering. An investor must be fully aware of the long-term nature of an investment in us. We intend to apply for quotation of our common stock on the OTCBB or OTCQB as soon as possible which may be while this offering is still in process. However, we do not know if we will be successful in such application, how long such application will take, or, that if successful, that a market for the common stock will ever develop or continue on the OTCBB or OTCQB. If for any reason the common stock is not listed on the OTCBB or a public trading market does not otherwise develop, investors in the offering may have difficulty selling their common stock should they desire to do so. 
+ 
+Our shares may not become eligible to be traded electronically which could result in brokerage firms being unwilling to trade them.
+ 
+Our shares of common stock may be eligible to be quoted on the OTCBB or OTCQB. Our shares are not eligible with Depository Trust Company (DTC) to trade electronically. Because we are not DTC eligible, our shares will not be electronically transferred between brokerage accounts, the practical effect of which means that our shares will not trade much, if at all, on the OTCBB or OTCQB. In order for our shares to trade on the OTCBB or OTCQB, our shares would need to be traded manually between broker dealers and their accounts, which is time consuming, costly and cumbersome. We cannot guaranty that our shares will ever become DTC eligible or, if in the event we apply for DTC eligibility, how long it will take to become eligible.
+ 
+We do not intend to pay dividends to our stockholders so investors will not receive any return on investment in us prior to selling their equity interest.
+ 
+We do not project paying dividends but anticipate that we will retain future earnings for funding our growth and development. Therefore, investors should not expect us to pay dividends in the foreseeable future. As a result, investors will not receive any return on their investment prior to selling their shares, and if and when a market for such shares develops. Furthermore, even if a market for our securities does develop, there is no guarantee that the market price for the shares would be equal to or more than the initial per share investment price paid by any investor. There is a possibility that the shares could lose all or a significant portion of their value from the initial price paid in this offering.
+ 
+Our stock will be a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.
+ 
+As the Company's shares may be trading under $5.00 per share is the offering becomes effective, the shares may be traded as a "penny stock". The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject to the penny stock. 
+13
+
+ 
+
+ 
+We are not registered on any market or public stock exchange. There is presently no demand for our common stock and to public market exists for the shares being offered in this prospectus. We plan to contact a market maker immediately following the completion of the offering and apply to have our shares of common stock quoted on the Over-the-Counter Bulletin Board ("OTCBB"). The OTCBB or OTCQB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in the over-the-counter securities. The OTCBB or OTCQB is not an issuer listing service, market or exchange. Although the OTCBB or OTCQB does not have any listing requirements per say, to be eligible for quotation on the OTCBB, issuers must remain correct in their filings with the SEC or applicable regulatory authority. Market makers are not permitted to begin quotation of a security whose issue does not meet the filing requirements. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30 to 60 day grace period if they do not make their required filings during that time. We cannot guarantee that we will be able to find a market maker who will submit a Form 15c-211 application for us to FINRA or that application, if submitted, will be accepted or approved and our stock listed and quoted for sale. As of the date of this filing, there have been no discussions or understandings between FundThatCompany and anyone acting on our behalf, with any market maker regarding participation in a future trading market four our securities. If no market is ever developed for our common stock, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all. In addition, if we fail to have our common stock quoted on a public trading market, your common stock will not have a quantifiable value and it may be difficult, if not impossible, to ever resell your shares, resulting in an inability to realize any value from your investment.
+ 
+Offering price has been arbitrarily set by company.
+ 
+The offering price and other terms and conditions relative to the Company's shares have been arbitrarily determined by us and do not bear any relationship to assets, earnings, book value or any other objective criteria of value. Additionally, as the Company was formed on September 4, 2015 and has only a limited operating history and no earnings, the price of the offered shares is not based on its past earnings and no investment banker, appraiser or other independent third party has been consulted concerning the offering price for the shares or the fairness of the offering price used for the shares, as such our stockholders may not be able to receive a return on their investment when they sell their shares of common stock.
+ 
+Investing in the company is highly speculative investment.
+ 
+A purchase of the offered shares is highly speculative and involves significant risks. The offered shares should not be purchased by any person who cannot afford the loss of their entire investment. The business objectives of the Company are also speculative, and it is possible that we could be unable to satisfy them. The Company's shareholders may be unable to realize a substantial return on their purchase of the offered shares, or any return whatsoever, and may lose their entire investment. For this reason, each prospective purchaser of the offered shares should read this prospectus and all of its exhibits carefully and consult with their attorney, business and/or investment advisor.
+ 
+Buyers will pay more for our common stock than the pro rata portion of the assets.
+ 
+The offering price and other terms and conditions regarding the Company's shares have been arbitrarily determined and to not bear any relationship to assets, earnings, book value or any other objective criteria of value. Additionally, no investment banker, appraiser or other independent third party has been consulted concerning the offering price for the shares or the fairness of the offering price used for the shares. Buyers of our shares pursuant to this offering will pay more for our common stock than the pro-rata portion of the assets are worth and as a result, investing in our Company may result in an immediate loss.
+ 
+The Company's management could issue additional shares.
+ 
+The Company has 75,000,000 authorized common shares, of which 10,000,000 are currently issued and outstanding and only 15,000,000 will be issued and outstanding after this offering terminates. The Company's management could, without the consent of the existing shareholders, issue substantially more shares, causing a large dilution in the equity portion of the Company's current shareholders. Additionally, large share issuances would generally have a negative impact on the Company's share price. It is possible that, due to additional share issuance, you could lose a substantial amount, or all, or your investment.
+ 
+We do not have an escrow or trust account for investors' subscriptions.
+ 
+Invested funds for this offering will not be placed in an escrow or trust account. Accordingly, if we file for bankruptcy protection, or a petition for involuntary bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to bankruptcy laws. As such, you will lose your investment and your funds will be used to pay creditors. 
+ 
+14
+
+ 
+
+ 
+Because our Company is a shell company there are restrictions imposed upon the transferability of unregistered shares and the use of Form S-8, which will likely have a negative impact on our ability to attract additional capital. 
+ 
+FundThatCompany is a shell company as defined in Rule 405, because it is a company with nominal operations and it has assets consisting solely of cash and cash equivalents. Accordingly, there will be illiquidity of any future trading market until the company is no longer considered a shell company, as well as restrictions imposed upon the transferability of unregistered shares outlined in Rule 144(i). Shareholders who hold privately placed shares which are not subject to a registration statement under the Securities Act often rely upon Rule 144 for their resale. Rule 144 are not available for the resale of securities initially issued by either reporting or non-reporting shell companies or an issuer that has been, at any time previously, a reporting or non-reporting shell company. This restriction may have an impact on our ability to attract additional capital and implement our business plan and sustain operations. 
+ 
+Moreover, because we are a shell company, we are not entitled to file registration statements on Form S-8, which is typically used to register stock that is offered to employees and consultants via benefit or incentive plans. As a result, we may have difficulties attracting qualified employees and consultants because we are not able to compensate them in the same fashion that non-shell companies can. Being a shell company, there are enhanced reporting requirements imposed on us: when reporting an event that causes us to cease being a shell company, we have to file with the Commission the same type of information that it would be required to file to register a class of securities under the Securities Exchange Act of 1934. These restrictions and requirements will likely have a negative impact on our ability to attract additional capital. 
+ 
+Anti-takeover rules of certain provisions of the Nevada state law my hinder a potential takeover.
+ 
+The Nevada Business Corporation Law contains a provision governing "Acquisition of Controlling Interest." This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires "control shares" whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to 50%, (3) more than 50%. A "control share acquisition" is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the Articles of Incorporation or Bylaws of the corporation. Our Articles of Incorporation and Bylaws do not exempt our common stock from the control share acquisition act. The control share acquisition act is applicable only to shares of "Issuing Corporations" as defined by the act. An Issuing Corporation is a Nevada corporation, which (1) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada; (2) does business in Nevada directly or through an affiliated corporation. At this time, we do not have 100 stockholders of record of Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisitions act may discourage companies or persons interested in acquiring a significant interest in or control of FundThatCompany, regardless of whether such acquisition may be in the interest of our stockholders.
+ 
+Nevada law and our Articles of Incorporation may protect our director from certain types of lawsuits. 
+ 
+Nevada law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances. 
+ 
+15
+
+ 
+
+ 
+Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act would lead to loss of investor confident in our reports of financial information. 
+ 
+Pursuant to proposals related to Section 404 of the Sarbanes-Oxley Act of 2002, after our Registration Statement is declared effective by the Securities and Exchange Commission, we intend to make a filing to which would result in the company becoming a mandatory filer under the Securities Exchange Act of 1934, as amended. For subsequent reports, we will be required to furnish a report by our management on our internal control over financial reporting. If we cannot provide reliable financial reports or prevent fraud, then our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly. 
+ 
+To maintain compliance with Section 404 of the Act, we intend to engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging and requires management to dedicate scarce internal resources and to retain outside consultants. 
+ 
+During the course of our testing, we may identify deficiencies which we may not be able to remediate in time for securities disclosure reporting deadlines. In addition, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time; we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud.
+ 
+We do not anticipate paying dividends.
+ 
+We do not anticipate paying dividends on our common stock in the foreseeable future, but plan rather to retain earnings, if any for the operation, growth and expansion of our business. Because the Company does not anticipate paying cash dividends in the foreseeable future which may lower expected returns for investors, and as such our stockholders will not be able to receive a return on their investment unless they sell their shares of common stock.
+ 
+Risks Related to Investing in Our Company
+ 
+We lack an operating history.
+ 
+We were incorporated on September 4, 2015 and we have not realized any revenues. We have very little operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the completion of this offering, our ability to attract customers and to generate revenues through our sales. 
+ 
+We expect to incur losses in the future.
+ 
+Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
+ 
+We may be open to lawsuits if campaigns offered on our site turnout to be fraudulent.
+ 
+While we will make every effort to ensure that the campaigns offered on our site are legitimate, there is no assurance that fraudulent campaigns may be listed. This may result in possible lawsuits against the Company and significant harm to the Company's market profile.
+ 
+ 
+16
+
+ 
+ 
+Our operating results may prove unpredictable.
+ 
+Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control over. Factors that may cause our operating results to fluctuate significantly include: our ability to generate enough working capital from future equity sales; the level of commercial acceptance by the public of our service/product; fluctuations in the demands of our product; the amount and timing operating costs and capital expenditures relating to expansion of our business, operations, infrastructure and general economic conditions. If realized, any of these factors could have a material effect on our business, financial condition and operating results, which could result in the complete loss of your investment.
+ 
+Please read this prospectus carefully. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information provided by the prospectus is accurate as of any date other than the date on the front of this prospectus.
+ 
+FORWARD-LOOKING STATEMENTS
+ 
+The information in this prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Further any safe harbor protections implied or stated do not apply to any statements made in connection with the offer. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology.
+ 
+USE OF PROCEEDS
+ 
+FundThatCompany offering is being made on a self-underwritten basis: no minimum number of shares must be sold in order for the offering to proceed. The offering price per share is $0.03. The following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100%, respectively, of $150,000 is raised in this offering, the Company will operate on a limited basis, meeting only its obligations to file its reports with the Securities and Exchange Commission, and seek financing. However, the Company currently has no source of additional funding, will not commence seeking additional financing until this registration statement is effective, and we cannot provide investors with any assurance that we will be able to raise sufficient funds to proceed with any work or activities.
+ 
+ Use of Proceeds
+ 
+25% of
+Shares Sold ($37,500)
+ 
+ 
+50% of
+Shares Sold ($75,000)
+ 
+ 
+75% of Shares
+Sold
+($112,500)
+ 
+ 
+100% of
+Shares Sold
+($150,000)
+ 
+
+ 
+ 
+$
+ 
+ 
+$
+ 
+ 
+$
+ 
+ 
+$
+ 
+
+ Less Offering & Reporting Expenses 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Legal & Accounting
+ 
+ 
+10,000 
+ 
+ 
+10,000 
+ 
+ 
+10,000 
+ 
+ 
+10,000 
+
+Printing costs
+ 
+ 
+300 
+ 
+ 
+300 
+ 
+ 
+300 
+ 
+ 
+300 
+
+Transfer Agent
+ 
+ 
+2,200 
+ 
+ 
+2,200 
+ 
+ 
+2,200 
+ 
+ 
+2,200 
+
+Registration fee
+ 
+ 
+15 
+ 
+ 
+15 
+ 
+ 
+15 
+ 
+ 
+15 
+
+ Total Offering and reporting expenses 
+ 
+ 
+12,515 
+ 
+ 
+12,515 
+ 
+ 
+12,515 
+ 
+ 
+12,515 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Logo development
+ 
+ 
+1,000 
+ 
+ 
+2,000 
+ 
+ 
+3,000 
+ 
+ 
+3,500 
+
+Website development & Support
+ 
+ 
+14,000 
+ 
+ 
+29,000 
+ 
+ 
+42,000 
+ 
+ 
+55,000 
+
+Office supplies and telephone
+ 
+ 
+1,000 
+ 
+ 
+2,500 
+ 
+ 
+4,000 
+ 
+ 
+5,000 
+
+Advertising & SOE costs
+ 
+ 
+6,000 
+ 
+ 
+24,000 
+ 
+ 
+44,000 
+ 
+ 
+63,000 
+
+Travel 
+ 
+ 
+3,000 
+ 
+ 
+5,000 
+ 
+ 
+7,000 
+ 
+ 
+11,000 
+
+Totals
+ 
+ 
+37,500 
+ 
+ 
+75,000 
+ 
+ 
+112,500 
+ 
+ 
+150,000 
+
+NET PROCEEDS FROM OFFERING
+ 
+$24,985 
+ 
+$62,485 
+ 
+$99,985 
+ 
+$137,485 
+
+ 
+FundThatCompany will establish a separate bank account and all proceeds will be deposited into that account. Mr. Chayut Ardwichai, our sole officer and director, has verbally agreed to loan the company funds to complete the registration process to effectiveness of this registration statement, but we will require full funding to begin to implement our complete business plan. 
+ 
+ 
+17
+
+ 
+
+ 
+DETERMINATION OF OFFERING PRICE
+ 
+The offering price of the shares has been determined arbitrarily by us. The price does not bear any relationship to our assets, book value, earnings, or other established criteria for valuing a privately held company. In determining the number of shares to be offered and the offering price, we took into consideration our cash on hand and the amount of money we would need to begin to implement our business plan. Accordingly, the offering price should not be considered an indication of the actual value of the securities.
+ 
+DILUTION
+ 
+The price of the current offering is fixed at $0.03 per share which is the price purchasers of the shares must pay. This price is significantly different than the price paid by the Company's sole director" and officer for common equity since the Company's inception on September 4, 2015. Chayut Ardwichai, the Company's sole officer and director purchased 10,000,000 (ten million) common shares at a price $0.001 per share a difference of $0.029 per share lower than the price in this offering, with $10,000 in net proceeds to the Company. The 10,000,000 shares of Mr. Ardwichai valued at $10,000 are reflected as "Capital contributions" in the table entitled, "Existing Stockholders if all of the Shares are sold." The purchase price for the shares in this offering, paid by purchasers of the shares, is reflected in the subsequent tables as, "Capital contributions." Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the offering price of the shares being offered. Dilution of the value of the shares you purchase is also a result of the lower book value of the shares held by our existing stockholders. The following table compares the differences of your investment in our shares with the investment of our existing stockholders.
+ 
+ Existing Stockholders if all of the Shares are Sold
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+Price per share
+ 
+$0.03 
+
+Net tangible book value (deficit) per share before offering
+ 
+$(0.0000)
+Potential gain to existing shareholders
+ 
+$150,000 
+
+Net tangible book value per share after offering
+ 
+$0.0093 
+
+Increase to present stockholders in net tangible book value per share after offering
+ 
+$0.0095 
+
+Capital contributions
+ 
+$150,000 
+
+Effective cash contributions of the Company's existing sole shareholder (1)
+ 
+$10,000 
+
+Number of shares outstanding before the offering
+ 
+ 
+10,000,000 
+
+Number of shares after offering held by existing stockholders
+ 
+ 
+10,000,000 
+
+Percentage of ownership after offering
+ 
+ 
+66.7%
+ 
+ 
+18
+
+ 
+ 
+ Purchasers of Shares if all of the Shares are Sold
+ 
+ 
+ 
+
+Price per share
+ 
+$0.03 
+
+Dilution per share
+ 
+$0.0207 
+
+Capital contributions
+ 
+$150,000 
+
+Percentage of capital contributions
+ 
+ 
+94.0%
+Number of shares after offering held by public investors
+ 
+ 
+5,000,000 
+
+Percentage of ownership after offering
+ 
+ 
+33.3%
+ 
+ Purchasers of Shares in this Offering if 75% of Shares Sold
+ 
+ 
+ 
+
+Price per share
+ 
+$0.03 
+
+Dilution per share
+ 
+$0.0226 
+
+Capital contributions
+ 
+$112,500 
+
+Percentage of capital contributions
+ 
+ 
+92.0%
+Number of shares after offering held by public investors
+ 
+ 
+3,750,000 
+
+Percentage of ownership after offering
+ 
+ 
+27.0%
+ 
+ Purchasers of Shares in this Offering if 50% of Shares Sold
+ 
+ 
+ 
+
+Price per share
+ 
+$0.03 
+
+Dilution per share
+ 
+$0.0249 
+
+Capital contributions
+ 
+$75,000 
+
+Percentage of capital contributions
+ 
+ 
+88.0%
+Number of shares after offering held by public investors
+ 
+ 
+2,500,000 
+
+Percentage of ownership after offering
+ 
+ 
+20%
+ 
+ Purchasers of Shares in this Offering in 25% of Shares Sold
+ 
+ 
+ 
+
+Price per share
+ 
+$0.03 
+
+Dilution per share
+ 
+$0.0276 
+
+Capital contributions
+ 
+$37,500 
+
+Percentage of capital contributions
+ 
+ 
+79.0%
+Number of shares after offering held by public investors
+ 
+ 
+1,250,000 
+
+Percentage of ownership after offering
+ 
+ 
+11.11%
+ 
+(1) Chayut Ardwichai, our sole shareholder (and President and Chief Executive Officer) acquired 10,000,000 shares of common stock at $0.001 per share for a total cost of $10,000.
+ 
+ 
+19
+
+ 
+ 
+PLAN OF DISTRIBUTION
+ 
+FundThatCompany has 10,000,000 common shares of common stock issued and outstanding as of the date of this prospectus. The Company is registering an additional 5,000,000 shares of its common stock for sale at the price of $0.03 per share. There is no arrangement to address the possible effect of the offering on the price of the stock.
+ 
+In connection with the Company's selling efforts in the offering, Chayut Ardwichai will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the "safe harbor" provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1943 as amended (the "Exchange Act"). In general Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participated in an offering of the issuer's securities. Mr. Ardwichai is not subject to any statutory disqualification, as that term is defined in Section 3(a) (39) of the Exchange Act. Mr. Ardwichai will not be compensated in connection with his participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Mr. Ardwichai is not, nor has he been within the past 12 months, a broker or dealer, and he is not, nor has he been within the past 12 month), an associated person of a broker or dealer. At the end of the offering, Mr. Ardwichai will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Mr. Ardwichai will not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii).
+ 
+FundThatCompany will receive all proceeds from the sale of the 5,000,000 shares being offered. The price per share is fixed at $0.03 for the duration of this offering. Although our common stock is not listed on a public exchange or quoted or quoted over-the-counter, we intend to seek to have our shares of common stock quoted on the Over-the Counter Bulletin Board. In order to be quoted on the OTC Bulletin Board or the OTCQB a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, nor can there be any assurance that such an application for quotation will be approved.
+ 
+The Company's shares may be sold to purchasers from time to time directly by and subject to the discretion of the Company. Further, the Company will not offer its shares for sale through underwriters, dealers, agents or anyone who may receive compensation in the form of underwriting discounts, concessions or commissions from the Company and/or the purchasers of the shares for whom they may act as agents. The shares of common stock sold by the Company may be occasionally sold in one or more transactions; all shares sold under this prospectus will be sold at a fixed price of $0.03 per share.
+ 
+In order to comply with the applicable securities law of certain states, the securities will be offered or sold in those only if they have been registered or qualified for sale; an exemption from such registration or if qualification require is available and with which FundThatCompany has complied.
+ 
+In addition and without limited the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective. FundThatCompany will pay all expenses incidental to the registration of the shares (including registration pursuant to the securities laws of certain states).
+ 
+REGULATION M
+ 
+Our officer and director, Chayut Ardwichai, who will offer and sell the shares, offered hereby, is aware that he is required to comply with the provisions of Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the officers and directors, sales agents, any broker-dealer or other person who participates in the distribution of shares in this offering from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. 
+ 
+20
+
+ 
+
+ 
+DESCRIPTION OF SECURITIES TO BE REGISTERED
+ 
+General
+ 
+Our authorized capital stock consists of 75,000,000 shares of common stock at a par value of $0.001 per share. As of September 30, 2015 there were 10,000,000 shares of our common stock issued and outstanding that was held by one registered stockholder or record.
+ 
+Common Stock
+ 
+Each share of common stock is entitled to one vote with respect to the election of any director or any other matter upon which shareholders are required or permitted to vote. Holders of our common stock representing 50.1% of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders, except as otherwise provided by statute. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.
+ 
+Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from available funds. The payment of dividends is at the discretion of our Board of Directors. We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities.
+ 
+Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
+ 
+Our Bylaws provide that at all meetings of the stockholders for the election of directors, a plurality of the votes cast shawl be sufficient to elect. On all other matters except as otherwise required by Nevada law or the Articles of Incorporation, a majority of the votes cast at a meeting of the stockholders hall be necessary to authorize any corporate action to be taken by vote of the stockholders. A "plurality" means the excess of the votes cast for one candidate over any other. When there are more than two competitors for the same office, the person who receives the greatest number of votes has a plurality.
+ 
+Please refer to the Company's Articles of Incorporation, Bylaws and the applicable statues of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company's securities.
+ 
+NEVADA ANTI-TAKEOVER LAWS
+ 
+The Nevada Business Corporation Law contains a provision governing "Acquisition of Controlling Interest." This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires "control shares" whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to 50%, (3) more than 50%. A "control share acquisition" is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the Articles of Incorporation or Bylaws of the corporation. Our Articles of Incorporation and Bylaws do not exempt our common stock from the control share acquisition act. The control share acquisition act is applicable only to shares of "Issuing Corporations" as defined by the act. An Issuing Corporation is a Nevada corporation, which (1) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada; (2) does business in Nevada directly or through an affiliated corporation. At this time, we do not have 100 stockholders of record of Nevada. Therefore, the provisions of the control share acquisition act do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisitions act may discourage companies or persons interested in acquiring a significant interest in or control of FundThatCompany, regardless of whether such acquisition may be in the interest of our stockholders. 
+ 
+21
+
+ 
+
+ 
+STOCK TRANSFER AGENT
+ 
+We have not engaged the services of a transfer agent at this time. However, within the next twelve months we anticipate doing so. Until such time a transfer agent is retained, FundThatCompany will act as its own transfer agent.
+ 
+RULE 144 AND REGISTRATION AGREEMENTS
+ 
+All 10,000,000 shares of our issued and outstanding shares of our common stock are "restricted securities" under Rule 144, promulgated pursuant to the Securities Act of 1933, as amended, but none of those 10,000,000 shares can be resold under Rule 144 or are subject to any registration agreement.
+ 
+INTERESTS OF NAMED EXPERTS AND COUNSEL
+ 
+No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock offered hereby was employed on a contingency basis, or had, or is to receive, in connection with such offering, a substantial interest, direct or indirect, in our Company, nor was any such person connected with our Company as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
+ 
+Experts
+ 
+Befumo & Schaeffer, PLLC, 1629 K Street, NW Suite 300, Washington, DC 20006 has rendered an opinion with respect to the validity of the shares of common stock covered by this prospectus.
+ 
+The financial statements included in this registration statement have been audited by PLS CPA, A Professional Corporation, 4725 Mercury Street, Suite 210, San Diego, CA 92111, to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement. The financial statements are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting. 
+DESCRIPTION OF BUSINESS
+ 
+Organization
+ 
+FundThatCompany was incorporated on September 4, 2015 under the laws of the State of Nevada. Mr. Chayut Ardwichai has served as President, Chief Executive Officer and Secretary of our company from September 4, 2015 to the current date. No person other than Mr. Ardwichai has acted as a promoter of FundThatCompany, since our inception. There are no agreements with us pursuant to which Mr. Ardwichai is to receive from us or provide to us anything of value. The Company plans to offer its Rewards-based Crowdfunding platform solely in the United States. 
+FundThatCompany is a shell company as defined in Rule 405, because it is a company with nominal operations and it has assets consisting solely of cash and cash equivalents. Accordingly, there will be illiquidity of any future trading market until the company is no longer considered a shell company, as well as restrictions imposed upon the transferability of unregistered shares outlined in Rule 144(i). Shareholders who hold privately placed shares which are not subject to a registration statement under the Securities Act often rely upon Rule 144 for their resale. Rule 144 are not available for the resale of securities initially issued by either reporting or non-reporting shell companies or an issuer that has been, at any time previously, a reporting or non-reporting shell company. This restriction may have an impact on our ability to attract additional capital and implement our business plan and sustain operations. 
+ 
+ 
+22
+
+ 
+
+ 
+General
+ 
+FundThatCompany ("FTC") proposes to establish a rewards-based on-line crowdfunding platform. According to the Oxford Dictionary Crowdfunding is, "the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet: musicians, filmmakers, and artists have successfully raised funds and fostered awareness through crowdfunding." FTC plans to offer small startup businesses or entrepreneurs to post a project available for funding on FTC's proposed reward-based crowdfunding platform. In return for backing a project, backers/pledge donors receive different rewards (defined by the business or entrepreneur) depending on the amount of funding they commit. Our platform will focus on projects that are stipulated including categories of; renewable energy, art, music, film, books, fashion, food and technologies. FTC intends to offer a wide range of tools and hints to help businesses or entrepreneurs execute a successful rewards-based funding campaign. FTC plans to offer the options of "all-or-nothing" or "keep everything" funding models. In the "all-or-nothing" model project creators choose a specific amount of money in advance (the goal/target). The project only succeeds and money only changes hands if this amount is reached within a particular time frame. In the "keep everything" model project creators keep all funds even if the crowdfunding target is not reached.
+ 
+FundThatCompany ("FTC") is an early stage company that intends to focus on a rewards-based crowdfunding model. FTC does not intend to curate the projects that it hosts. We plan to position ourselves as an inclusive community that does not decide which projects merit funding. FTC will allow a wide range of categories and whether a project gets funded is up to potential supporters. In addition FTC will not pick projects to promote on our site. That is not to say that anything goes in terms of launching projects. In order to launch a campaign on FTC's site the presenter must conform to FTC's Term on Use. These would include but not limited to things like being over the age of 18, not offering alcohol or weapons as a reward and not using the site to disparage other individuals or companies. Project creators will have a 100% control over their products and services. Our platform will not permit contributors to become investors or shareholders, nor can they qualify as accredited investors to participate in any financial returns. 
+The key to success will be the Company's ability to differentiate ourselves from all other rewards-based crowdfunding platforms. This will be a difficult task, we will need to not only gain market acceptance of our platform, but be able standout from the crowd in our brand recognition. To help we will include on our proposed platform advice, references and tools to assist project providers in; making a video; templates to summarize a campaign page; suggestions on setting a funding goal and deadline; suggestions on marketing a project to pledge donors; suggestions on rewards and perks. Offering great rewards by project providers is one of the best ways to encourage support for a project. Depending on the type of project being offered often determines the type of reward being offered. This could include copies on what the project is making, signed prints, tickets to the project show and things like T-shirts and totes. Rewards that have been offered in KickStarter and Indiegogo rewards-based projects have include bike tours, studio visits, food photography, script scraps, fifteen minutes of podcast fame, dinner for two, bumper stickers, handcrafted mugs, sheet music, backstage passes, headwear such as beanies, handwritten postcards, cool calendars to name just a few. 
+Providing tools to assist projects is important but we believe to really achieve brand recognition we will need to market our proposed platform in a distinct non-traditional way via clever streaming videos, social media and mainstream advertising within the United States. We intend to stress the excitement and fun of presenting projects on our proposed site. We plan to offer more support and guidance for our customers and pledge donors. We hope that our proposed site will eventually become a community over time. In the end the key to success of our proposed rewards-base crowdfunding platform will be the quality of projects that we attract to our site. The more successful the projects the more recognition for our platform. We have not yet begun the development of our website but have procured a web domain name of "FundThatCompany.com".
+ 
+During the next 12 months, FundThatCompany intends to continue its ongoing research and marketing plan by attending two tradeshows/conferences; The One Spark festival held once a year (in Jacksonville, Florida in April 2016). The other conference we have targeted is the Renewable Energy Conference to be held in London, UK in November of 2016. We also intend to develop a unique logo. We will also source third-party companies to assist us in social media and traditional marketing; and setting up the company's on-line platform website and begin to market our proposed rewards-based crowdfunding product.
+ 
+We have not earned any revenues to date. Our independent registered public accountant has issued an audit opinion which includes statement expressing substantial doubt as to our ability to continue as a going concern.
+ 
+There is the likelihood that we may never be able to gain acceptance of our proposed rewards-based crowdfunding platform in the marketplace that the Company would need to successfully complete its plan of operation and develop and implement the Company's web-site platform. If our company is not capable of building a market for its proposed product, all funds that we spend on development will be lost. 
+ 
+23
+
+ 
+
+ 
+Product/Service
+ 
+FundThatCompany ("FTC") intends to offer and rewards-based on-line crowd funding site. FTC plans to offer the options of "all-or-nothing" or "keep everything" funding models. In the "all-or-nothing" model project creators choose a specific amount of money in advance (the goal/target). Our platform will focus on projects that are stipulated categories including renewable energy, art, music, film, books, fashion, food and technologies. The project only succeeds and money only changes hands if this amount is reached within a particular time frame. In the "keep everything" model project creators keep all funds even if the crowdfunding target is not reached. We will also include on our proposed site information resources that provide creative crowdfunding guidance, tips and due diligence services. Project creators will have a 100% control over their products and services. Our platform will not permit contributors to become investors or shareholders, nor can they qualify as accredited investors to participate in any financial returns. 
+ 
+Fees
+ 
+We plan to generate revenues from charging a fee of 5% of funds raised on our proposed rewards-based crowdfunding site. We plan on accepting payments from pledge/donors via PayPal or credit card processing on the site. Estimate fees for those payment options are 3% to 5% of the amount.
+ 
+Crowdfunding Market Analysis 
+ 
+Crowdfunding is a new method for raising funds that combines traditional fundraising with modern technology and modern marketing techniques such as the internet, software, video and social media. The general idea of fundraising has been around forever, but never before have these capabilities converged like they have over the past few years. Billions of people around the world ("the crowd") are all within a few clicks of one another; crowdfunding brings together ideas and funding to enable collective action on a massive scale. Now almost anyone can raise money from large and potentially unlimited number of people instead of going through only 1 or 2 traditional entities such as banks, brokers or large investors. 
+ 
+Crowdfunding has been most prominent in creative areas such as film and music, where supporters received rewards or perks (often in the form of a copy of the item being crowdfunded) in exchange for their contribution/donation. However, the model has spread to dozens of other industries such as technology, fashion, charities, food, and continues to expand every day. Even more traditional industries such as banking and real estate have started to adopt some forms of crowdfunding. With the recently announced on October 30, 2015 by the Securities and Exchange Commission (the"SEC") implementation of the federal JOBS Act and similar stare-based laws, "equity" crowdfunding in the United States is set to be implemented. So instead of receiving a t-shirt, product or item for your contribution, you may be able to receive actual equity in the idea or business. Because of crowdfunding, businesses, entrepreneurs and creative minds across the globe are now able to access secure funding for ideas that previously may have never seen the light of day.
+ 
+Crowdfunding has been a big source of funds for a lot of people with various needs around the world. In the United States and in most of Europe, there is already a strong contributor to growth as they have been practicing and innovating many of the crowdfunding sites over the past years. However in South East Asia, crowdfunding is just starting to gain some much needed traction with a few countries starting to put up sites of their own. Massolutions 2015 CF Industry Report released in 2015. It states that the industry broke through to an astounding 167% grown from $6.1 billion in 2013 to $16.2 billion in 2014 and 2015 projections are projected to double again to $34.4 billion.(crowdsourcing.com April 7, 2015)
+ 
+The biggest revelation in these numbers is that the 2014 growth in crowdfunding global was due to the rise of funding sites in Asia. There are estimates of about $3.4 billion raised which is slightly more than what Europe raise in the same year. The United States still paves the way with about $9.46 billion raised through crowdfunding. 
+ 
+According to Massolutions 2015 CF Industry Report, businesses and entrepreneurship remain the most popular crowdfunding category, collection $6.7 billion in 2014, which represents 41.3% of total crowdfunding volume. Social causes ($3.06 billion), films and performing arts ($1.97 billion), real estate ($1.01 billion) and recording arts ($736 million) found out the top five categories. 
+ 
+Successful crowdfunding campaigns are not by accident. You need a great idea and some luck. FundThatCompany expects to provide potential project providers on our proposed site the resources necessary to assist in their endeavors for a successful result. 
+ 
+24
+
+ 
+
+ 
+The Different Crowdfunding Models and Formats
+ 
+1. Rewards-based (most popular model and what most people generally consider traditional crowdfunding.)
+ 
+In this model, (model which FundThisCompany proposes to launch is on-line site) entrepreneurs and businesses raise funding from the crow in exchange for rewards, perks and maybe the actual items being crowdfunded. These crowdfunding sites allow campaign creators to make a "crowdfunding page", which contains a pitch, video, photos and written information about the idea of product. There is usually a "comments" section so backers/donors can ask questions, and "updates" section so the creators can provide updates, and a "rewards/perks" section to show what supports can receive in exchange for their contribution. With reward-based platforms, backers/donors provide financial assistance and support, but are not owners or investors of the project.
+ 
+2. Equity/Investment (also known as "Equity crowdfunding" or "Investment crowdfunding")
+ 
+Equity crowdfunding is crowdfunding in the sense that businesses, companies and individuals are seeking money from the crowd via an online crowdfunding site. But they are offering actual ownership in their company or idea to ordinary investors. The idea is that normal backers have the opportunity to become investors (previously this type of early-stage investing was mostly limited by law to accredited high net worth individuals). Opening us this type of investing to everyone thus allowing startups to seek funding from everyone is what most people refer to as "equity" or "investment" crowdfunding. It is important to note that this type of crowdfunding is more complex that reward-based crowdfunding and may be heavily regulated because of it involves securities.
+ 
+3. Debt/Lending
+ 
+Loan-based crowdfunding is similar to equity crowdfunding, but instead of receiving ownership in the company, investors receive interest, revenue or their principal back. The crowd "lending" money to businesses and individuals, and may share in some of the upside if the loan is paid back or they become profitable. This is also more complex that traditional reward-based crowdfunding.
+ 
+4. Donations/Charity
+ 
+This crowdfunding model is essentially the modern version of charitable fundraising. Using the internet and online marketing techniques, charitable groups, organizations and individuals can raise crowdfunding for anything. They can reach the crowd all over the world through social media, pictures, and videos. But these are purely donations and o product or item is expected in return.
+ 
+5. Other
+ 
+There are "niche" players under each category of crowdfunding models mentioned above. For example, there are crowdfunding sites specifically for books and authors, real estate and music.
+ 
+ 
+25
+
+ 
+ 
+Competition 
+ 
+While almost all the media attention in crowdfunding goes to mega platforms like Kickstarter and Indiegogo, there are hundreds of other crowdfunding websites in the marketplace. According to Statista (statista.com -2012) there are 454 crowdfunding platforms worldwide and of those 191 were located in the United States. Other crowdfunding platforms included GoFundMe, GoGetFunding, Patreon, Tubestart, Pozible and Rockethub to name a few. 
+ 
+A comparison of the two main players (Kickstarter and Indiegogo) in the rewards-based crowding funding platforms is as follows (beebom.com 04/2015);
+ 
+ Comparison Factor
+ 
+Kickstarter
+ 
+Indiegogo
+
+ 
+ 
+ 
+Success Rate
+ 
+44%
+ 
+33%
+
+Campaign Model
+ 
+All-or-Nothing
+ 
+Flexible
+
+Boundary limitations
+ 
+USA, UK, Canada
+ 
+International
+
+Percentage Share 
+ 
+5%
+ 
+4%
+
+Successful amount raised
+ 
+$1.66 billion
+ 
+$378 million
+
+Projects launched
+ 
+224,701
+ 
+44,498
+
+Total Pledges
+ 
+21.8 million
+ 
+5 million
+
+ 
+Both of these platforms are widely respected and are arguably the leaders on the growing crowdfunding industry. A growing number of niche players are growing throughout the world, providing even more competition.
+ 
+Marketing Strategy
+ 
+Our online marketing strategy will rely on our website to provide product information and answer the questions businesses, entrepreneurs and pledge donors have about our proposed rewards-based online site and the campaigns offered on the site. We will also include on our proposed site, information resources that will help provide creative crowdfunding guidance, tips and due diligence services. The following are strategies we intend to use:
+ 
+Search Engines we will engage a firm that will assist in Search Engine Optimization ("SOE"). This will assist FundThatCompany to achieve a top search engine ranking, get traffic to its website and increase business leads. 
+ 
+26
+
+ 
+
+ 
+Social Media - we intend to have a strong presence with Facebook, LinkedIn, Instagram, Twitter, YouTube, Crowdfunding Blogs, fiver and Google Analytics.
+ 
+Traditional Advertising we will place strategic advertising in publications that provide the greatest exposure to potential project creators and backers. We will also subscribe with firms that can provide email lists for online campaigns.
+ 
+Tradeshows/Conferences We intend to attend trade shows and conferences relating to crowdfunding, these include but not limited to , One Spare 2016, Jacksonville Florida, the world's largest crowdfunding festival; Renewable Energy Conference, November, 2016 in London, UK. We intend to attend and market our platform to our technology, music, and film festivals, conferences as funds are available.
+ 
+Successful crowdfunding campaigns are not by accident. You need a great idea and some luck. FundThatCompany expects to provide potential project providers on our proposed site the resources necessary to assist in their goals for a successful result. 
+Research and Development Expenditures
+ 
+We have not incurred any research or development expenditures since our incorporation
+ 
+Patent and Trademarks
+ 
+We do not own, either legally or beneficially, any patent or trademark
+ 
+Bankruptcy or Similar Proceedings
+ 
+There has been no bankruptcy, receivership or similar proceedings
+ 
+Compliance with Government Regulations
+ 
+We propose to offer a Rewards-based Crowdfunding platform within the United States that is in compliance with all rules, regulations and directives of government authorities' agencies under the Jumpstart Our Business Startups ("JOBS") Act. There are no regulatory approvals required to launch our proposed Rewards-based Crowdfunding web-site as we are not engaging in equity or debt Crowdfunding, which requires significant compliance oversite. There are no specific costs for compliance in order to launch our proposed platform. However, the operation of our proposed business are subject to the rules, regulations as interpreted by the Securities and Exchange Commission ("SEC") and some state regulatory statutes that relate to crowdfunding and may change and effect the operations of our proposed operations in the future. In order to maintain current with any new rules and regulations we plan to join the Not-For-Profit associates; CFIRA (Crowdfund Intermediary Regulatory Advocates) and NLCFA (National Crowdfunding Association).
+ 
+27
+
+ 
+
+ 
+LEGAL PROCEEDINGS
+ 
+We are not a party to any material legal proceedings nor are we aware of any legal proceedings pending or threatened against us.
+ 
+Facilities
+ 
+We currently are supplied office space free of rent from our sole Director and President and Chief Executive Officer, Chayut Ardwichai, and do not own or rent any physical property, and do not own or rent any real property. Our current business is; 555/114 Moo, Sattahip District, Chonburi, 20180, Thailand. Our telephone number is (877) 451-0120. Our agent for service in the USA is State Agent & Transfer Syndicate, Inc., 112 North Curry Street, Carson City, Nevada, 89703. Their telephone number is (775) 882-1013.
+ 
+Management believes that current arrangement is sufficient for its needs at this time. The company intends to lease its own offices and production facilities at such time as it has sufficient financing to do so. Management believes the current premises are sufficient for its needs at this time.
+ 
+ Employees and Employment Agreements
+ 
+We have no employees as of the date of this prospectus. We have no employment or other agreement with Mr. Ardwichai our President and Chief Executive Officer or any other person. Mr. Ardwichai currently devotes approximately fifteen hours per week to company matters and after receiving funding, he plans to devote as much time as the Board of Directors determines is necessary to manage the affairs of the company. We anticipate we will conduct our business largely through consultants. 
+Available Information
+ 
+We have not previously been required to comply with the reporting requirements of the Securities Exchange Act. We have filed with the SEC a registration statement on Form S-1 to register the securities offered by this prospectus. For future information about us and the securities offered under this prospectus, you may refer to the registration statement and to the exhibits filed as part of the registration statement. In addition, after the effective date of this prospectus, we will be required to file annual, quarterly and current reports, or other information with the SEC as proved by the Securities Exchange Act. You may read and copy any reports, statements or other information we file at the SEC's public reference facility maintained by the SEC at 100F Street, N.E., Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee, by writing the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference. Our SEC filings are also available to the public through the SEC Internet site at www.sec.gov.
+ 
+ 
+28
+
+ 
+ 
+FINANCIAL STATEMENTS
+ 
+The financial statements of FundThatCompany for the fiscal years ended September 30, 2015 and related notes, included in this prospectus have been audited by PLS CPA, A Professional Corporation, 4725 Mercury Street, Suite 210, San Diego, CA 92111 and have been so included in reliance upon the opinion of such accountants given upon their authority as an expert in auditing and accounting.
+ 
+FUNDTHATCOMPANY 
+FINANCIAL STATEMENTS 
+September 30, 2015
+ 
+ 
+ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
+ 
+F-2
+ 
+
+ 
+ 
+ 
+ 
+
+BALANCE SHEET
+ 
+F-3
+ 
+
+ 
+ 
+ 
+
+STATEMENT OF OPERATIONS
+ 
+F-4
+ 
+
+ 
+ 
+ 
+
+STATEMENT OF STOCKHOLDERS' EQUITY
+ 
+F-5
+ 
+
+ 
+ 
+ 
+
+STATEMENT OF CASH FLOWS
+ 
+F-6
+ 
+
+ 
+ 
+ 
+
+NOTES TO FINANCIAL STATEMENTS
+ 
+F-7
+ 
+
+ 
+ 
+F-1
+
+ 
+
+ 
+PLS CPA, A PROFESSIONAL CORPORATION 
+u 4725 MERCURY STREET #210 u SAN DIEGO u CALIFORNIA 92111 u 
+u TELEPHONE (858)722-5953 uFAX (858) 761-0341 u FAX (858) 764-5480 
+u E-MAIL changgpark@gmail.com u 
+ 
+REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
+ 
+ 
+To the Board of Directors and Stockholders
+FundThatCompany
+ 
+
+We have audited the accompanying balance sheet of FundThatCompany September 30, 2015 and the related financial statements of operations, changes in shareholder's equity and cash flows for the period September 4, 2015 (inception) to September 30, 2015. These financial statements are the responsibility of the Company's management. 
+ 
+We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
+ 
+In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FundThatCompany as of September 30, 2015, and the results of its operation and its cash flows for the period from September 4, 2015 (inception) to September 30, 2015 in conformity with U.S. generally accepted accounting principles. 
+ 
+The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
+ /s/ PLS CPA 
+PLS CPA, A Professional Corp.
+ 
+November 20, 2015
+San Diego, CA. 92111
+ 
+ 
+Registered with the Public Company Accounting Oversight Board
+ 
+ 
+F-2
+
+ 
+
+ 
+FUNDTHATCOMPANY
+BALANCE SHEET
+ 
+ 
+September 30,
+2015
+ 
+
+ 
+ 
+ 
+
+ASSETS
+
+ 
+ 
+ 
+
+CURRENT ASSETS
+ 
+ 
+ 
+
+Cash
+ 
+$- 
+
+ 
+ 
+ 
+ 
+
+TOTAL CURRENT ASSETS
+ 
+$- 
+
+ 
+
+LIABILITIES AND STOCKHOLDER'S DEFICIT
+
+ 
+ 
+ 
+ 
+
+CURRENT LIABILITIES
+ 
+ 
+ 
+ 
+
+Due to related party
+ 
+ 
+1,832 
+
+ 
+ 
+ 
+ 
+
+TOTAL CURRENT LIABILITIES
+ 
+ 
+1,832 
+
+ 
+ 
+ 
+ 
+
+COMMITMENTS AND CONTINGENCIES 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+STOCKHOLDER'S DEFICIT
+ 
+ 
+- 
+
+Common stock Authorized 75,000,000 shares of common stock, $0.001 par value, Issued and outstanding 10,000,000 shares issued and outstanding 
+ 
+ 
+10,000 
+
+Subscription receivable
+ 
+ 
+(10,000)
+Accumulated deficit
+ 
+ 
+(1,832)
+ 
+ 
+ 
+ 
+
+TOTAL STOCKHOLDER'S DEFICIT
+ 
+ 
+(1,832)
+ 
+ 
+ 
+ 
+
+TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT
+ 
+$- 
+
+ 
+The accompanying notes are an integral part of these financial statements.
+ 
+ 
+F-3
+
+ 
+
+ 
+FUNDTHATCOMPANY 
+STATEMENT OF OPERATIONS
+ 
+ 
+From inception (September 4, 2015) to September 30, 2015
+ 
+
+ 
+ 
+ 
+
+REVENUE
+ 
+$- 
+
+ 
+ 
+ 
+ 
+
+OPERATING EXPENSES
+ 
+ 
+ 
+ 
+
+General and administrative
+ 
+$1,832 
+
+ 
+ 
+ 
+ 
+
+TOTAL OPERATING EXPENSES
+ 
+ 
+(1,832)
+ 
+ 
+ 
+ 
+
+NET LOSS
+ 
+ 
+(1,832)
+ 
+ 
+ 
+ 
+ 
+
+BASIC AND DILUTED NET LOSS PER COMMON SHARE 
+$(0.00)
+ 
+ 
+ 
+ 
+ 
+
+WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED 
+ 
+10,000,000 
+
+ 
+The accompanying notes are an integral part of these financial statements.
+ 
+ 
+F-4
+
+ 
+
+ 
+FUNDTHATCOMPANY 
+STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) 
+FOR THE PERIOD FROM SEPTEMBER 4, 2015 (INCEPTION) TO SEPTEMBER 30, 2015
+ 
+ 
+ 
+Common Stock
+ 
+ 
+Additional
+ 
+ 
+
+ 
+ 
+Number
+of shares
+ 
+ 
+Amount
+ 
+ 
+Paid-in
+Capital
+ 
+ 
+Subscription 
+Receivable
+ 
+ 
+Accumulated
+Deficit
+ 
+Total
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Balance, September 4, 2015 (inception)
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+ 
+ 
+ 
+- 
+ 
+- 
+
+Common stock issued for cash
+ 
+ 
+10,000,000 
+ 
+ 
+10,000 
+ 
+ 
+- 
+ 
+ 
+(10,000) 
+ 
+- 
+ 
+- 
+
+Net loss for period ended September 30, 2015
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+- 
+ 
+ 
+ 
+ 
+ 
+ 
+(1,832) 
+(1,832)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+Balance, September 30, 2015
+ 
+ 
+10,000,000 
+ 
+$10,000 
+ 
+$- 
+ 
+$(10,000) 
+$(1,832)$(1,832)
+
+ 
+The accompanying notes are an integral part of these financial statements.
+ 
+ 
+F-5
+
+ 
+
+ 
+FUNDTHATCOMPANY
+STATEMENT OF CASH FLOWS
+ 
+ 
+From September 4, 2015 (date of inception) to September 30,
+2015
+ 
+
+ 
+ 
+ 
+
+CASH FLOWS FROM OPERATING ACTIVITIES
+ 
+ 
+ 
+
+Net loss for the period
+ 
+$(1,832)
+Adjustments to reconcile net loss to net cash used in operating activities
+ 
+ 
+- 
+
+Expenses paid by related party
+ 
+ 
+1,832 
+
+Changes in operating assets and liabilities
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+NET CASH USED IN OPERATING ACTIVITIES
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+CASH FLOWS FROM INVESTING ACTIVITIES
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+CASH FLOWS FROM FINANCING ACTIVITIES
+ 
+ 
+ 
+ 
+
+Advances from related party
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+NET CASH PROVIDED BY FINANCING ACTIVITIES 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+NET INCREASE IN CASH 
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+CASH, BEGINNING OF PERIOD
+ 
+ 
+- 
+
+ 
+ 
+ 
+ 
+
+CASH, END OF PERIOD
+ 
+$- 
+
+ 
+SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES:
+ 
+ Cash paid during the period for:
+ 
+ 
+ 
+
+Interest
+ 
+$- 
+
+ 
+ 
+ 
+ 
+
+Income taxes
+ 
+$- 
+
+ 
+The accompanying notes are an integral part of these financial statements.
+ 
+ 
+F-6
+
+ 
+
+ 
+FUNDTHATCOMPANY
+NOTES TO FINANCIAL STATEMENTS
+SEPTEMBER 30, 2015 (Audited) 
+ NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
+ 
+FundThatCompany was incorporated in the State of Nevada as a for-profit Company on September 4, 2015 and established a fiscal year end of September 30. The Company is organized to establish a portal for Rewards-Based Crowdfunding. 
+ 
+Going concern
+ 
+To date the Company has generated no revenues from its business operations and has incurred operating losses since inception of $1,832. As at September 30, 2015, the Company has a working capital deficit of $1,832. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. As of September 30, 2015, the Company has not issued any shares. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
+ 
+NOTE 2
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001658305_getelman_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001658305_getelman_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f1f7165ac806206f4b944f5457b29935cf9fdcff
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001658305_getelman_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, WE, US, OUR, AND GETELMAN CORP. REFERS TO GETELMAN CORP. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. GETELMAN CORP. Getelman Corp. was incorporated in Nevada on July 12, 2015. We are development stage company and intend to commence operations in the business consuting with specialization in team-building activities and events in order to establish strong sense of unity between co-workers. We plan to deliver our services to recently incorporated and/ or well-established enterprises. Our company s main objective is to fulfill the need of the small and medium sized businesses to organize and carry out corporate events for team-building and entertaining purposes. We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $42,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate any revenue in the first 12 months after completion our offering or ever generate any revenue. Being a development stage company, we have very limited operating history. If we do not generate any revenue we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at 2235 E. Flamingo Rd., Suite 355, Las Vegas, NV 89119. Our phone number is 725-777-0799. From inception (July 12, 2015) until the date of this filing, we have had limited operating activities. Our financial statements from inception (July 12, 2015) through January 31, 2016, reports no revenue and a net loss of $1,616. Our independent registered public accounting firm has issued an audit opinion for Getelman Corp., which includes a statement expressing substantial doubt as to our ability to continue as a going concern. To date, we have developed our business plan and developed business-model of our company. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $42,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $42,000, our business may fail. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities. THE OFFERING The Issuer: Getelman Corp. Securities Being Offered: 10,000,000 shares of common stock. Price Per Share: $0.01 Duration of the Offering: The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 10,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 10,000,000 shares registered under the Registration Statement of which this Prospectus is part. Gross Proceeds: If 25% of the shares sold - $25,000 If 50% of the shares sold - $50,000 If 75% of the shares sold - $75,000 If 100% of the shares sold - $100,000 Securities Issued and Outstanding: There are 10,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Mark Gitelman. If we are successful at selling all the shares in this offering, we will have 20,000,000 shares issued and outstanding. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs: We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001658605_tron_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001658605_tron_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e5383baaaa63be169ada791ee6dda664cd0b90f2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001658605_tron_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY As used in this prospectus, unless the context otherwise requires, we, us, our, and Plush refers to Plush Corporation. The following summary highlights selected information contained in this prospectus. You should read the entire prospectus carefully before making an investment decision to purchase our common stock. Our company Plush Corporation was incorporated on October 20, 2015 under the laws of the State of Nevada. Our business consists of designing, marketing and selling luxury accessories for men online on our website at "www.myplushonline.com". The first product we will launch after the completion of this offering will be pocket squares, with further items being launched in the future as our business becomes profitable and grows. We anticipate as the business grows to launch ties, belts, watches, wallets, sunglasses, gloves, bow ties, tie bars, socks, cufflinks, suspenders and scarves. Our goal is to secure a position as the pinnacle one stop shop for men's luxury accessories. We are a development stage company that has not realized any revenues to date, and have a accumulated net loss of $4,641 as of December 31, 2015. Our independent auditor has issued an audit opinion for our Company which includes a statement expressing substantial doubt as to our ability to continue as a going concern. From inception until the date of this filing we have had limited operating activities, primarily consisting of the incorporation of our company, development of our business plan, opening a bank account, the initial equity funding by our officers and directors, and registering and launching our website. We received our initial funding of $5,000 through the sale of common stock from our officers and directors, who purchased 5,000,000 shares of common stock at $0.001 per share. The Company s principal offices are located at Suite 80 - 1930 Village Center Circle Las Vegas, Nevada 89134. Our telephone number is (702) 831-6550 and our fax number is (702) 831-6557. We intend to use the net proceeds from this offering to develop our business operations (See "Description of business" and "Use of proceeds"). To implement our business plan we require a minimum funding of $22,500 over the next twelve months. There is no assurance that we will generate any revenue in the first 12 months after the completion of our offering or ever generate any revenue. If we do not generate any revenue we may need a minimum of $7,500 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our financial statements from inception on October 20, 2015 through December 31, 2015 report no revenues and a net loss of $4,641. Our independent auditor has issued an audit opinion for our company which includes a statement expressing substantial doubt as to our ability to continue as a going concern. Numan Ijaz and Alexander Bains, our directors and officers did not agree to serve as officers or directors of the company at least in part due to a plan, agreement or understanding that they, respectively, would solicit, participate in, or facilitate the sale of the enterprise to (or a business combination with) a third party looking to obtain or become a public reporting entity, and Numan Ijaz and Alexander Bains also confirm that they have no such present intentions. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop or, if any market does develop, it may not be sustained. Our common stock is not traded on any exchange or on the over-the-counter market. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the Financial Industry Regulatory Authority ( FINRA ) for our common stock to be eligible for trading on the Over-the-Counter Bulletin Board. We do not yet have a market maker who has agreed to file such application. There can be no assurance that our common stock will ever be quoted on a stock exchange or a quotation service or that any market for our stock will develop. This is a direct participation offering since we are offering the stock directly to the public without the participation of an underwriter. Our officers and directors will be solely responsible for selling shares under this offering and no commission will be paid on any sales. We are an "emerging growth company" within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with the requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an emerging growth company. For a description of the qualifications and other requirements applicable to emerging growth companies and certain elections that we have made due to our status as an emerging growth company, see the risk factor on page 11. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Under U.S. federal securities legislation, our common stock will be penny stock . Penny stock is any equity that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The Offering The issuer: Plush Corporation Securities being offered: 3,000,000 shares of our common stock, par value $0.001 per share. Offering price per share: $0.01 Duration of the offering: The 3,000,000 shares of common stock are being offered for a period of 180 day from the effective date of this prospectus. Net proceeds to us: If 25% of the shares sold - $7,500 If 50% of the shares sold - $15,000 If 75% of the shares sold - $22,500 If 100% of the shares sold - $30,000 For further information on the use of proceeds, see page 14. Shares issued and outstanding prior to offering: 5,000,000 shares of our common stock are issued and outstanding as of the date of this prospectus owned by our officers and directors. Shares issued and outstanding after offering: 8,000,000 shares of our common stock issued and outstanding if we are successful at selling all the shares in this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001659207_fellazo_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001659207_fellazo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f60a390f3f391ade30baf4292036fa5b0773111d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001659207_fellazo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, "WE," "US," "OUR," AND "FELLAZO CORP." REFERS TO FELLAZO CORP. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. FELLAZO CORP. We are a development stage company, which has commenced operations in billboard, banner and large format printing in Republic of Moldova. The printing service commonly used in advertising, marketing and business areas. Our target markets are advertising agencies, sewing shops, design studios and private clients. To date we have purchase one cutting plotter from HARTLAND IMPEX LP, entered into one year Commercial Lease Agreement, signed Sale Contracts with two customers Persic-Adv, Ltd and Marat-Somp, SRL, receive revenues of $3,800 and $3,370 from these customers respectively. Fellazo Corp. was incorporated in Nevada on May 28, 2014. We intend to use the net proceeds from this offering to develop our business operations (See "Description of Business" and "Use of Proceeds"). To implement our plan of operations we require a minimum of $20,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate any revenue in the first 12 months after completion our offering or ever generate any additional revenue. Being a development stage company, we have very limited operating history. If we do not generate any revenue we may need a minimum of $8,000 of additional funding to pay for ongoing SEC filing requirements. We have an Interest-free Loan Agreement with Galina Hripcenco, our sole officer and director, which evidences that Ms. Hripcenco will loan $20,000 to Fellazo Corp. on in case if the Company needs additional financing, this agreement is filed as Exhibit 10.1 to the Registration Statement of which this Prospectus forms a part. Our principal executive office is located at str. Malina-Mica, nr 68/11- 419, Chisinau, Republic of Moldova, 2025. Our phone number is (415) 325-21-51. From (inception) May 28, 2014 until the date of this filing, we have had limited operating activities. Our financial statements from May 28, 2014 (inception) through February 29, 2016, report limited revenues of $7,170 and a net loss of $7,588. Our independent registered public accounting firm has issued an audit opinion for Fellazo Corp., which includes a statement expressing substantial doubt as to our ability to continue as a going concern. As we have limited operating history and limited revenues we are a "shell company", as applicable federal securities law defines that term. We expect that we will continue to be a "shell company" until we have more operations and have substantial revenues and assets. We anticipate that if we receive $80,000 from this offering we should have enough money to expand our business of large format printing, which will be sufficient to cause us to not be considered as a "shell company". We cannot provide any guarantee or assurance, that in the event we raise $80,000 from this offering we will have enough money to engage in profitable operations. During the time that we are a "shell company", holders of our restricted securities will not be able to rely on Rule 144 in connection with the sale of those restricted securities. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $20,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $20,000, we will utilize funds from Ms. Hripcenco in accordance to the Interest-free Loan Agreement, which is filed as Exhibit 10.1 to the Registration Statement of which this Prospectus forms a part. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities. THE OFFERING The Issuer: FELLAZO CORP. Securities Being Offered: 8,000,000 shares of common stock. Price Per Share: $0.01 Duration of the Offering: The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 8,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 8,000,000 shares registered under the Registration Statement of which this Prospectus is part. Gross Proceeds from selling 100% of shares: $80,000 Gross Proceeds from selling 75% of shares: $60,000 Gross Proceeds from selling 50% of shares: $40,000 Gross Proceeds from selling 25% of shares: $20,000 Gross Proceeds from selling 10% of shares $ 8,000 Further more, if the Company does not sell any shares from this offering, it will not receive gross proceeds accordingly. Securities Issued and Outstanding: There are 3,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Galina Hripcenco. If we are successful at selling all the shares in this offering, we will have 11,000,000 shares issued and outstanding. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs: We estimate our total offering registration costs to be approximately $7,000. Risk Factors: See "Risk Factors" and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. SUMMARY FINANCIAL INFORMATION The tables and information below are derived from our audited financial statements for the period May 28, 2014 (Inception) to August 31, 2015. FINANCIAL SUMMARY August 31, 2015 ($) ------------------- (Audited) Cash 2,284 Total Assets 7,329 Total Liabilities 9,129 Total Stockholder's Deficit (1,800) STATEMENT OF OPERATIONS Accumulated From May 28, 2014 (Inception) to August 31, 2015 ($) ------------------- (Audited) Total Expenses (5,990) Net Loss for the Period (4,621) Net Loss per Share (0.00) The tables and information below are derived from our unaudited financial statements for the six months ended February 29, 2016. FINANCIAL SUMMARY February 29, 2016 ($) --------------------- (Unaudited) Cash 279 Total Assets 4,835 Total Liabilities 9,423 Total Stockholder's Deficit (4,588) STATEMENT OF OPERATIONS February 29, 2016 ($) --------------------- (Unadited) Total Expenses (2,885) Net Loss for the Period (241) Net Loss per Share (0.00)
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001659228_bats_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001659228_bats_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001659228_bats_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001659559_jialijia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001659559_jialijia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5e15f7c305230f235f9e03513d01f609e726b2de
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001659559_jialijia_prospectus_summary.txt
@@ -0,0 +1,91 @@
+PROSPECTUS SUMMARY
+
+ 
+
+AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, WE, US, OUR, AND RIZZEN INC. REFERS TO RIZZEN INC. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK.
+
+ 
+
+RIZZEN INC.
+
+ 
+
+Rizzen Inc. was incorporated in Nevada on October 21, 2015. We are development stage company and intends to provide vending and shipping services of electronic toys of various kinds manufactured in the Republic of China. The company sees its primary goal as to distribute electronic kids toys of various price categories to both small and medium-sized vendors. We intend on selling, importing, and marketing our business to European and North American markets.
+
+We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $52,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate
+
+significant
+
+revenue in the first 12 months after completion our offering or ever generate
+
+significant
+
+revenue.
+
+Being a development stage company, we have very limited operating history. If we do not generate
+
+ sufficient revenue we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at 201-5, Xin Jia Garden, Heng Qing Village, Zhuhai, China 519000. Our phone number is +852-8191-5516. 
+
+From inception (October 21, 2015) until the date of this filing, we have had limited operating activities. Our financial statements from inception (October 21, 2015) through January 31, 2016, reports no revenue and a net loss of $982. Our independent registered public accounting firm has issued an audit opinion for Rizzen Inc., which includes a statement expressing substantial doubt as to our ability to continue as a going concern. To date, we have developed our business plan. We signed agreement with Bolleot Schpile, LLC on March 11, 2016 and received $2,100 of revenue according to the agreement. On March 20, 2016, we signed the second agreement with CranKind Parrell, LLC and as
+
+a result of this agreement we have generated revenue of $3,000.
+
+ On March 1, 2016 we entered into a Contract with our general supplier Kingshau Fingu Toys Co., Ltd.
+
+As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. 
+
+Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $52,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $52,000, our business may fail. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities.
+
+5 |
+
+THE OFFERING
+
+The Issuer:
+
+ 
+
+Rizzen Inc.
+
+Securities Being Offered:
+
+ 
+
+6,000,000 shares of common stock.
+
+Price Per Share:
+
+ 
+
+$0.02
+
+Duration of the Offering:
+
+ 
+
+The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 6,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 6,000,000 shares registered under the Registration Statement of which this Prospectus is part. 
+
+ 
+
+Gross Proceeds
+
+ 
+
+If 50% of the shares sold - $60,000
+
+If 75% of the shares sold - $90,000
+
+If 100% of the shares sold - $120,000
+
+Securities Issued and Outstanding:
+
+There are 5,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our president, treasurer and director, Shuisheng Zhu and 1,000,000 held by our secretary Aleksandr Deshin.
+
+If we are successful at selling all the shares in this offering, we will have 12,000,000 shares issued and outstanding.
+
+Subscriptions
+
+All subscriptions once accepted by us are irrevocable.
+
+Registration Costs
+
+We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001659648_gef_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001659648_gef_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a782928055524988a85d4fbae9b75d16d580f703
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001659648_gef_prospectus_summary.txt
@@ -0,0 +1 @@
+TABLE OF CONTENTS Our executive officers and directors have agreed not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within the prescribed time frame. Corporate Information Our executive offices are located at 2 Bethesda Metro Center, Suite 440, Bethesda, Maryland 20814, and our telephone number is (240) 482-8900. We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an exempted company, we have applied for and expect to receive, after the effectiveness of the registration statement of which this prospectus forms a part, a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us. We are an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to emerging growth company shall have the meaning associated with it in the JOBS Act. TABLE OF CONTENTS
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001660067_colony_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001660067_colony_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d41538705cc696847468354d2523ff51c30c638f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001660067_colony_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary only highlights the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information under Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus or the context otherwise requires, references to: we, us, company or our company are to Colony Global Acquisition Corp., a Delaware corporation; public shares are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); warrants are to our warrants sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market) and the private placement warrants; public stockholders are to the holders of our public shares, including our sponsor, officers and directors to the extent our sponsor, officers or directors purchase public shares, provided that our sponsor s status as a public stockholder shall only exist with respect to such public shares; management or our management team are to our officers and directors; sponsor are to Colony Global Acquisition, LLC, a Delaware limited liability company and an indirect subsidiary of Colony Capital; Colony Capital are to Colony Capital, Inc., a Maryland corporation (NYSE: CLNY); Colony are to Colony Capital, its affiliated entities and the historical business acquired by Colony Capital as a result of the CLNY Combination; CLNY Combination are to that certain transaction, consummated on April 2, 2015, between Colony Capital (formerly known as Colony Financial, Inc.) and Colony Capital, LLC, involving the contribution to Colony Capital of substantially all of Colony Capital, LLC s real estate and investment management business and operations; Colony Capital Operating Partnership are to Colony Capital Operating Company, LLC, a Delaware limited liability company, the operating partnership of Colony Capital and the entity through which Colony Capital holds substantially all of its assets; founder shares are to shares of our Class F common stock initially purchased by our sponsor in a private placement prior to this offering and the shares of our Class A common stock issued upon the automatic conversion thereof at the time of our initial business combination as provided herein; common stock are to our Class A common stock and our Class F common stock; and private placement warrants are to the warrants issued to our sponsor in a private placement simultaneously with the closing of this offering. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. General We are a newly organized blank check company incorporated on November 24, 2015 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any potential business combination target. Table of Contents While we may pursue an acquisition opportunity in any business industry or sector, we intend to focus on identifying a business combination opportunity in industries or sectors that complement our management team s background, and to capitalize on the ability of our management team to identify, acquire and operate a business, including in the media and entertainment, consumer and retail and financial services sectors in the United States or globally, as well as the European mid-market private equity sectors. While our management team will seek to effect an initial business combination in order to pursue a strategy of acquiring and operating a business, following our initial business combination we will evaluate all opportunities to enhance stockholder value as they arise, including but not limited to a subsequent merger or acquisition, sale of the company, capital stock exchange or other form of reorganization. We believe our management team is well-positioned to handle complexity and benefit from the inefficiency and misevaluations of others to create value for our stockholders, and that our contacts and sources, ranging from owners of private and public companies, private equity funds, investment bankers, attorneys, accountants and business brokers in our targeted sectors, will allow us to generate attractive acquisition opportunities in other sectors. Our amended and restated certificate of incorporation prohibits us from effectuating a business combination with another blank check company or similar company with nominal operations. Colony is a leading global real estate and investment management firm headquartered in Los Angeles, California with 14 offices in 10 countries and more than 300 employees. Over the past 24 years, Colony has established 53 investment vehicles, including a publicly traded real estate investment trust, or REIT, global investment funds, dedicated regional investment funds, club transactions and investment-specific co-investment vehicles, raising an aggregate of over $25 billion of equity capital. Colony s origins are rooted in distressed investing, and have spanned a broad spectrum of real estate, asset-intensive operating companies and other transactions in a myriad of sectors and geographies. On April 2, 2015, Colony Capital acquired Colony Capital, LLC s trademark name and substantially all of its real estate and investment management business and operations, which we refer to as the CLNY Combination. In connection with the CLNY Combination, Colony Capital changed its name from Colony Financial, Inc. to Colony Capital, Inc. Colony Capital reclassified its common stock as Class A common stock, which continues to be listed on the NYSE under the ticker symbol CLNY. Since inception, Colony has strived to adapt its investment strategy to capitalize on the different market opportunities that have arisen from time to time. Beginning in 1991, Colony became one of the pioneering purchasers of distressed assets from the Resolution Trust Corporation and the FDIC. In the mid-1990s, Colony identified comparable investment opportunities in Europe. As a result, Colony began to build a significant European presence with an initial investment focus on distressed real estate and asset-rich operating companies. As market opportunities again shifted in the mid- to late-1990s, Colony broadened its focus to include equity investments in real estate and real estate-related assets and businesses in the United States, Europe and Asia, and expanded its global presence by setting up operations in Asia to capitalize on opportunities arising from the Asian financial crisis of the late 1990s. Since then, Colony has established several closed-end investment funds primarily focused on equity investments in real estate and operating businesses significantly dependent on real estate. As the global economy suffered a significant downturn beginning in late 2007 and commercial real estate fundamentals began to deteriorate, Colony leveraged its prior experiences to capitalize on distressed real estate debt opportunities and single-family homes for rent, while complementing this investment activity with an increasing slate of private equity-style investments in areas such as media and entertainment, consumer and retail and financial services. At present, none of Colony s existing sources of managed capital require priority access to any investment opportunities the objectives of which overlap with ours. We believe that we will be able to continue to draw upon Colony s experience and expertise in identifying and capitalizing on further investment opportunities, including acquisitions well suited for our objectives. Table of Contents We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the units offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. TABLE OF CONTENTS Page SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001660329_rancho_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001660329_rancho_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3cac3f7bc7b1774c5aa458f43237423e3231ad56
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001660329_rancho_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights material information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the "Management s Discussion and Analysis of Financial Condition and Results of Operations" section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled "Where You Can Find More Information" in this prospectus and any amendment or supplement hereto. Unless otherwise indicated, the terms the "Company," "Rancho Santa Fe Mining," "we," "us," and "our" refer and relate to Rancho Santa Fe Mining, Inc. The Company Overview The Company was incorporated in the State of Nevada on July 24, 2015. We were incorporated and our business plan called for the Company to seek out and acquire various mining assets in the State of Nevada. Rancho Santa Fe Mining Inc. is a precious metals exploration and development company with the objective of becoming a gold producer. The Company is currently focused on the advancement of its two principal projects: the Virginia and Vanity Fair patented claims. On October 28, 2015, the Company entered into an Asset Purchase Agreement (the "Asset Purchase") with Humboldt Mining Company, Inc., a Nevada corporation ("HMCI"). Pursuant to the Asset Purchase Agreement, the Company acquired 100% of the assets owned by HMCI, including, but not limited to: (i) all the real property, leasehold improvements, fixtures, furniture, machinery and equipment owned by the HMCI and relating to or used in HMCI s operations; and, (ii) all inventory, including finished goods, raw materials and work in process as well as the right to receive inventory ordered by the HMCI for use in its operations; and, (iii) in addition to the foregoing, we acquired all the books and records of HMCI, as well as all intangible assets held, owned or controlled by HMCI (collectively, (i), (ii) and (iii) are referred to hereinafter as the "Acquired Assets"). As per the Asset Purchase we acquired various liabilities of HMCI, including: (i) the assumption of all liabilities arising out of any unfilled customer orders outstanding as of the date the Asset Purchase closed. The Company is entitled to any future payments relating to any payments made pursuant thereto; (ii) the assumption of obligations relating to a lawsuit and default judgment, including, but not limited to the obligation to pay attorneys fees of approximately $20,000.00, and, (iii) inherited HMCI s reclamation liability, if any, as it is related to the property. There are no royalties due or owing on the purchased claims. The only amounts due are local property taxes, which are assessed annually. In exchange for the Acquired Assets, the Company issued to the HMCI shareholders Thirteen Million Five Hundred Thousand (13,500,000) shares of the Company s $0.001 par value common stock, which represented fifty (50%) percent of the Company s issued and outstanding shares at the time of issuance. The Company now owns land and the patented mining rights North of Elko, Nevada, nearby the formation known as the Carlin Trend. The Company s property includes two patented claims – the Virginia and Vanity Fair patented claims - comprising what is known as the Prunty Mine Area (Vanity Fair, Virginia, 3871 Mining Survey Number). The 2 patented mining claims (Prunty Mine – Virginia and Vanity Fair Patents) total approximately 40 acres. The importance of these patented claims cannot be underestimated. We own the Patented Mining Claims and the mineral rights associated with the Patents have no expiration date, subject to property taxes being paid on the property. Operationally, the Company intends to outsource fully 100% of the exploration, site preparation and extraction operations to a third party who provides all manpower, equipment and operational expenses associated therewith. Insomuch as this work will be outsourced and the Company income will be based on profits from the sale of gold recovered by the contractors received therefrom, the Company cannot speak to the outsourced expenditures related to exploration, site preparation and extraction. As such, the proceeds will largely be utilized for payroll, outsourced consultants and asset maintenance and development. The Company plans to retain five full time staff and lease nominal executive office facilities in Nevada. All legal, accounting, shareholder relations and geology can be outsourced to consultants as needed. Business development is limited to developing and maintaining a website presence, and nominal travel and business entertainment expense. The primary additional operations entail asset development, which includes the maintenance of applicable permits and claim renewals, as well as the outsourced production of independent Reserve Reports annually. Emerging Growth Company We are an "emerging growth company" within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with certain regulatory requirements applicable to other public companies that are not emerging growth companies, including but not limited to: not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and being exempt from the requirements of holding a non-binding advisory vote on executive compensation and securing stockholder approval of golden parachute payments. We intend to take advantage of these reduced regulatory requirements until we are no longer an emerging growth company. For a description of the qualifications and other requirements applicable to emerging growth companies, and certain elections we have made due to our status as an emerging growth company, see "Risk Factors— As an , ' ': emerging growth company under applicable law, we will be subject to reduced disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies". RISK FACTORS An investment in our Common Stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this Prospectus before investing in our Common Stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. Currently, shares of our Common Stock are not publicly traded. In the event that shares of our Common Stock become publicly traded, the trading price of our Common Stock could decline due to any of these risks, and you may lose all or part of your investment. In the event our Common Stock fails to become publicly traded, you may lose all or part of your investment. RISKS RELATED TO OUR BUSINESS AND INDUSTRY We are an exploration stage company and may never be able to carry out business or achieve any revenues or profitability; at this stage, even with good faith efforts, potential investors have a high probability of losing their entire investment. We have not earned any revenues as of the date of this current report. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. We anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses in the foreseeable future. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income potential of our proposed business and operations is unproven as the lack of operating history makes it difficult to evaluate the future prospects of our business. We are dependent on our two principal projects for our future operating revenue, neither of which currently has proven or probable reserves. The Virginia and the Vanity Fair Project do not have identified proven and probable mineral reserves. The costs, timing and complexities of upgrading either property to proven and probable reserves may be greater than we anticipate. Mineral exploration and development involves a high degree of risk that even a combination of careful evaluation, experience and knowledge cannot eliminate, and few properties that are explored are ultimately developed into producing mines. There is no assurance that our mineral exploration programs will establish the presence of any proven or probable mineral reserves. The failure to establish proven or probable reserves would severely restrict our ability to implement our strategies for long-term growth. We cannot be certain that our acquisition, exploration and evaluation activities will be commercially successful. We currently have no properties that produce gold in commercial quantities. Substantial expenditures are required to acquire existing mining properties, to establish ore reserves through drilling and analysis, to develop metallurgical processes to extract metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. We cannot provide assurance that any gold or other metal reserves or mineralized material acquired or discovered will be in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis. Factors including costs, actual mineralization, consistency and reliability of ore grades and commodity prices affect successful project development, could have a material adverse effect on our future results of operations. Actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated and there are no assurances that any future development activities will result in profitable mining operations. The capital costs to take our claims into production may be significantly higher than anticipated. We may ultimately base our decisions about the development of the projects based on a feasibility study. We have not prepared a feasibility study for the either, but we may use a portion of the proceeds of the offering to produce one if we deem it necessary or appropriate to do so. Our evaluations of our business and prospects are subject to change, including after any feasibility study has been conducted, which could materially adversely affect our prospects. Historical production at either of our claims may not be indicative of the potential for future development. There is currently no commercial production at either claim and, since acquiring ownership, we have never recorded any revenues from commercial production. You should not rely on the fact that there were historical mining operations at the either claim as an indication that we will ever have future successful commercial operations. In order for us to develop new mining operations, we will be required to incur substantial operating expenses and capital expenditures to refurbish and/or replace existing infrastructure. Land reclamation and mine closure may be burdensome and costly. Land reclamation and mine closure requirements are generally imposed on mineral exploration companies, which require us to, among other things, to minimize the effects of land disturbance. Such requirements may include controlling the discharge of potentially dangerous effluents from a site and restoring a site s landscape to its pre-exploration form. The actual costs of reclamation and mine closure are uncertain and planned expenditures may differ from the actual expenditures required. Therefore, the amount that we are required to spend could be materially higher than current estimates. Any additional amounts required to be spent on reclamation and mine closure may have a material adverse effect on our financial performance, financial position and results of operations, and may cause us to alter our operations. In addition, we are required to maintain financial assurances, such as letters of credit, to secure reclamation obligations under certain laws and regulations. The failure to acquire, maintain or renew such financial assurances could subject us to fines, penalties, or suspension of our operations. Additionally, even if we cease exploration at either claim, we will be required to expend cash and other resources to satisfy ongoing care and maintenance obligations. Our operations involve significant risks and hazards inherent to the mining industry. Our operations involve the operation of large pieces of drilling and other heavy equipment. Hazards such as fire, explosion, floods, structural collapses, industrial accidents, unusual or unexpected geological conditions, ground control problems, cave-ins, flooding and mechanical equipment failure are inherent risks in our operations. Hazards inherent to the mining industry can cause injuries or death to employees, contractors or other persons at our mineral properties, severe damage to and destruction of our property, plant and equipment and mineral properties, and contamination of, or damage to, the environment, and can result in the suspension of our exploration activities and any future development and production activities. While the Company aims to maintain best safety practices as part of its culture, safety measures implemented by us may not be successful in preventing or mitigating future accidents. The mining industry is very competitive. The mining industry is very competitive. Much of our competition is from larger, established mining companies with greater liquidity, greater access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or a greater ability than us to withstand losses. Our competitors may be able to respond more quickly to new laws or regulations or emerging technologies, and devote greater resources to the expansion or efficiency of their operations. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and gain significant market share to our detriment. We may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on our business, financial condition, or results of operations. Mining exploration, development and operating activities are inherently hazardous. Mineral exploration involves many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which we have direct or indirect interests will be subject to all the hazards and risks normally incidental to exploration, development and production of gold and other metals, any of which could result in work stoppages, damage to property and possible environmental damage. The nature of these risks is such that liabilities might exceed any liability insurance policy limits. It is also possible that the liabilities and hazards might not be insurable, or, that the Company could elect not to be insured against such liabilities due to high premium costs or other reasons, in which event, significant costs could be incurred that could have a material adverse effect on our financial condition. Reserve calculations are estimates only, subject to uncertainty due to factors including metal prices, inherent variability of ore, and recoverability of metals in the mining process. There is a degree of uncertainty attributable to the calculation of reserves and corresponding grades dedicated to future production. Until reserves are actually mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of reserves and ore may vary depending on metal prices. Any material change in the quantity of reserves, mineralization, grade or stripping ratio may affect the economic viability of our properties. In addition, there can be no assurance that gold recoveries or other metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. We may be unable to raise additional capital on favorable terms. The exploration and development of our development properties will require significant capital investment to achieve commercial production. We may have to raise additional funds from external sources in order to maintain and advance our existing property positions and to acquire new gold projects. There can be no assurance that additional financing will be available at all or on acceptable terms and, if additional financing is not available, we may have to substantially reduce or cease operations. Our exploration and eventual development operations are subject to environmental regulations which could result in the incurrence of additional costs and operational delays. All phases of operations are subject to environmental regulation. Environmental legislation is evolving in some jurisdictions in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulations, if any, will not adversely affect the Company s projects. We will be subject to environmental regulations with respect to properties in Nevada, under applicable federal and state laws and regulations. Production at either claim may involve the use of sodium cyanide, which is a toxic material. Should sodium cyanide leak or otherwise be discharged from the containment system, we may become subject to liability for cleanup work that may not be insured. While appropriate steps will be taken to prevent discharges of pollutants into the ground water and the environment, we may become subject to liability for hazards that it may not be insured against. U.S. Federal Laws Under the U.S. Resource Conservation and Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste, as well as for closure and post-closure maintenance once they have completed mining activities on a property. Mining operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on the Company s production levels or create additional capital expenditures in order to comply with the rules. The U.S. Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (CERCLA), imposes strict joint and several liability on parties associated with releases or threats of releases of hazardous substances. The groups who could be found liable include, among others, the current owners and operators of facilities, which release hazardous substances into the environment and past owners and operators of properties who owned such properties at the time the disposal of the hazardous substances occurred. This liability could include the cost of removal or remediation of the release and damages for injury to the surrounding property. The Company cannot predict the potential for future CERCLA liability with respect to its properties. Increased costs could affect our financial condition. We anticipate that costs will frequently be subject to variation from one year to the next due to a number of factors, such as changing ore grade, metallurgy, and revisions to mine plans in response to the physical shape and location of the ore body. In addition, costs are affected by the price of commodities, such as fuel and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in costs at any significant location could have a significant effect on profitability. Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations. Factors such as business investment, government spending, the volatility and strength of the capital markets, and inflation all affect the business and economic environment and, ultimately, the profitability of our business. In an economic downturn characterized by higher unemployment, lower corporate earnings and lower business investment, our operations could be negatively impacted. Purchasers of gold production may delay or be unable to make timely payments. Adverse changes in the economy could affect earnings negatively and could have a material adverse effect on our business, results of operations and financial conditions. A shortage of equipment and supplies could adversely affect our ability to operate our business. We will be dependent on various supplies and equipment to carry out our mining exploration and development operations. The shortage of such supplies, equipment and parts could have a material adverse effect on our ability to carry out our operations and therefore, limit or increase the cost of production. If we lose key personnel or are unable to attract and retain additional personnel, we may be unable to establish and develop our business. Our development in the future will be highly dependent on the efforts of key management employees. We do not have and currently have no plans to obtain key man insurance with respect to any key employees. We will need to recruit and retain other qualified managerial and technical employees to build and maintain our operations. If we are unable to successfully recruit and retain such persons, then development and growth could be significantly curtailed. Principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management or the Board of Directors, possibly conflicting with the interests of other stockholders. Major shareholders and the President s position on the board of directors could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise control of our business. This control could have the effect of delaying or preventing a change in control or entrenching management or the board of directors, which could conflict with the interests of our other stockholders and, consequently, could adversely affect the market price of our common stock. Our Articles of Incorporation exculpates our officers and directors from certain liability to our Company or our stockholders. Our Articles of Incorporation contain a provision limiting the liability of our officers and directors for their acts or failures to act, except for acts involving intentional misconduct, fraud or a knowing violation of law. This limitation on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our stockholders from suing our officers and directors based upon breaches of their duties to our Company. Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision. We have a "going concern" opinion from our auditors, indicating the possibility that we may not be able to continue to operate. Our independent registered public accountants have expressed doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our proposed business. As a result, we may have to liquidate our business and investors may lose their investment. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its plan of operations described herein and eventually attain profitable operations. Investors should consider our independent registered public accountant s comments when deciding whether to invest in the Company. RISKS RELATED
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001661125_yintech_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001661125_yintech_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..262635a7278c4f3ccaa361730dfa92b8ead8881d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001661125_yintech_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information appearing elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. You should carefully read this entire prospectus, including the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the related notes, before deciding whether to invest in our ADSs. Our Business We are the largest online provider of spot commodity trading services in China by customer trading volume in both 2014 and 2015, according to Euromonitor. We currently facilitate the trading by individual customers of silver, gold and other precious metals and commodities on three leading exchanges in China, namely the Shanghai Gold Exchange, the Tianjin Precious Metals Exchange and the Guangdong Precious Metals Exchange, which were the three largest exchanges for online spot commodity trading in China in terms of trading volume in 2015, respectively. We were the largest service provider by customer trading volume on the Tianjin Precious Metals Exchange from 2012 to 2015, and the largest service provider on the Guangdong Precious Metals Exchange in the fourth quarter of 2015. We commenced our operation on the Shanghai Gold Exchange in November 2015 and our customer trading volume has been growing rapidly since then. Online spot commodity trading recently emerged as an alternative investment product in China, with aggregate trading volume growing at a CAGR of 35.4% from 2011 to 2015 and reaching RMB29.0 trillion (US$4.5 trillion) in 2015. We believe such growth is largely attributable to the distinctive features of online spot commodity trading. Its deposit-based leverage trading method offers relatively high volatility trading opportunities which appeal to a group of individual investors. Compared with other leveraged trading products such as futures, spot commodity trading enjoys the following benefits: (i) its underlying assets, primarily silver and gold, are more familiar to individual investors, (ii) the spot commodity contract is less complex, and (iii) its trading hours are longer and continuous. Compared with China's commodity futures markets, which had an aggregate trading volume of RMB136.5 trillion (US$21.1 trillion) in 2015, the spot commodity market is still small and we believe it has strong growth potential. We focus on premier customers and generally require each customer to deposit at least RMB100,000 (US$15,437) for account activation. Based on our experience, the total invested amount of a customer is often significantly higher. We believe this strategy helps us focus our resources on providing better services and build a base of customers with greater sophistication and risk tolerance, who are more suited to leveraged spot commodity trading. As of December 31, 2015, there were more than 50,000 customers who opened and activated accounts with us, among which more than 24,000 executed trades during the year ended December 31, 2015, with an aggregate trading volume of RMB659.7 billion (US$101.8 billion). We provide our customers with comprehensive services, including account opening, investor education, market information, research, live discussion boards and real-time customer support. Most services are delivered online through our proprietary client software and call center, and we do not operate physical branches. Our client software provides not only market information and analysis, but also interactive functions including live discussion boards and instant messaging with customer service representatives, which we believe enhance our customers' engagement. Internally, we collect and analyze customer behavior and communications data from our client software, customer relationship management system and the exchanges, which allow us to better understand, attract and serve our customers. We strive to minimize conflicts of interest with our customers, which we believe is essential for our long-term success. Under the trading rules of the three exchanges we operate on, we do not set, quote or influence the trading prices, and cannot access our customers' money. On the Tianjin Precious Metals Exchange and the Guangdong Precious Metals Exchange, we are required to serve as counterparty to our AMENDMENT NO. 2 TO FORM F-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents customers' trades. We entered into a risk and return transfer arrangement in 2015 to pass the risks and returns associated with such principal positions to a third party fund, which means we do not gain from our customers' losses or lose from their gains. On the Shanghai Gold Exchange, we serve as an agent and do not hold principal positions. We have achieved substantial growth since our commencement of operation in July 2011. Our revenues increased significantly from RMB629.9 million in 2013 to RMB1,157.8 million in 2014 and RMB1,245.9 million (US$192.3 million) in 2015. We recorded net income of RMB106.8 million, RMB482.0 million and RMB403.0 million (US$62.2 million) in 2013, 2014 and 2015, respectively. Our Industry Online spot commodity trading has recently emerged as an alternative investment product in China, driven by supportive government measures and the increasing demand for new investment products by Chinese investors. The aggregate volume of online spot commodity trading grew at a CAGR of 35.4% from 2011 to 2015, reaching RMB29.0 trillion (US$4.5 trillion) in 2015, and is expected to grow with a CAGR of 26.9% from 2015 to 2020, according to Euromonitor. In general, Chinese individual investors have demonstrated strong appetite for volatility. Online spot commodity trading is often conducted based on deposits and with a leverage ratio of 5 to 20 times and allows for long and short trading directions. This offers relatively high volatility trading opportunities which appeal to certain Chinese individual investors. The growth of trading volume of individual investors outpaced the overall growth in online spot commodity trading market, with a CAGR of 42.3% from 2011 to 2015, reaching RMB16.3 trillion (US$2.5 trillion) in 2015, and is expected to grow with a CAGR of 30.2% from 2015 to 2020, according to Euromonitor. In China, online spot commodity trading is primarily conducted through exchanges. By the end of 2015, there were approximately 350 exchanges for online spot commodity trading in China, which vary in scale and the types of commodities offered for trading. In terms of trading volume, the three exchanges we operate on are the top three online spot commodity exchanges in China in 2015, which in aggregate have a trading volume of RMB16.4 trillion (US$2.5 trillion) in 2015, accounting for 56.5% of the total trading volume of the online spot commodity trading market. The online spot commodity trading market is highly competitive and fragmented for trading service providers like us. As of December 31, 2015, there were over 1,000 active trading service providers that operate on various exchanges nationwide. The commodity exchanges compete against each other for service providers and customers based on factors including reputation, scale, reliability and trading models and rules. The trading service providers compete with each other for customers and trading volumes based on factors including brand, technology, research and customer services. According to Euromonitor, we were the largest online provider of spot commodity trading services in China by customer trading volume in 2015, with a market share of approximately 4.0% in terms of trading volume of individual investors. We had a market share, in terms of trading volume of individual investors, of approximately 15.5% on the Tianjin Precious Metals Exchange and approximately 10.4% on the Guangdong Precious Metals Exchange, in 2015. We believe our proprietary technology platform, our focus on premier customers, our comprehensive customer services and strong brand recognition in the industry, will enable us to compete effectively in the fast evolving online spot commodity trading industry in the PRC. Our Strengths We believe that our success to date is largely attributable to the following competitive strengths: market leader with strong brand recognition; proprietary technology enabling efficient operation; comprehensive and interactive customer services; prudent risk management system; and experienced management team. Yintech Investment Holdings Limited (Exact name of Registrant as specified in its charter) Table of Contents Our Strategies We strive to build an investment service platform that is highly trusted by individual investors. To achieve this objective, we plan to implement the following strategies: strengthen our brand and market position; introduce new investment products; explore mini-account business; selectively explore acquisition opportunities; and continue to attract, cultivate and retain talent. Our Challenges To achieve our goals and implement our strategies, we face risks and uncertainties, including the following: our ability to cope with an evolving regulatory regime of online spot commodity trading industry; our ability to adapt to changing rules of the exchanges we operate on; our ability to effectively compete against other trading service providers and new entrants; our ability to promote and maintain our reputation and brand; and our ability to manage risks associated with operations and counterparties. Please refer to "Risk Factors" and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face. History and Corporate Structure We established Tianjin Rong Jin Hui Yin Precious Metal Management Co, Ltd., or Rong Jin Hui Yin, on May 18, 2011 and commenced operation in July 2011. Rong Jin Hui Yin focuses on providing commodity trading and other related services on the Tianjin Precious Metal Exchange. We established Guangdong Jin Xiang Yin Rui Precious Metal Management Co., Ltd., or Jin Xiang Yin Rui, another major PRC subsidiary of ours, on October 24, 2012 and commenced operation on the Guangdong Precious Metals Exchange in August 2013. Its primary focus is to provide commodity trading and other related services on the Guangdong Precious Metals Exchange. We also established a number of other subsidiaries in the PRC to provide technical and other support for our online commodity trading business, and to sell software application and provide supporting services to related parties and third parties. Our company, Yintech, was incorporated on November 4, 2015 in the Cayman Islands. Yintech acquired all of the ordinary shares of Yintech Enterprise Company Limited (formerly known as Win Yin Gold Investment Company Limited), or Yintech Enterprise, from Win Yin Financial And Information Service Company Limited, or Win Yin Financial, on November 6, 2015 at par value. As a result, Yintech Enterprise's wholly owned PRC subsidiary, Shanghai Qian Zhong Su Investment Management Co., Ltd., or Qian Zhong Su, became Yintech's wholly owned PRC subsidiary. In November 2015, Qian Zhong Su initiated a series of transactions to acquire from our ultimate shareholders, Rong Jin Hui Yin, Jin Xiang Yin Rui and Shanghai Yin Tian Xia Technology Co., Ltd., or Yin Tian Xia Technology, and their subsidiaries, as its wholly owned PRC subsidiaries. The acquisitions were completed on November 18, 2015. On November 16, 2015, Qian Zhong Su acquired from third parties, Guangdong Sheng Ding Precious Metal Management Co., Ltd., or Sheng Ding, which commenced operation on the Guangdong Precious Metals Exchange in October 2015, to further expand our business on that exchange. In November and December 2015, we established Shanghai Jin Dou Information Technology Co., Ltd., or Jin Dou, and Shanghai Jin Yi Information Technology Co., Ltd., or Jin Yi, respectively, to carry out business on the Shanghai Gold Exchange. We established a PRC subsidiary, Shanghai Zu Ding Culture Communication Co., Ltd., or Zu Ding, in January 2016, to manage our advertising activities. In March 2016, we acquired 70% equity interest in Shanghai Da Xiang Ping Tai Financial Information Not Applicable (Translation of Registrant's name into English) Table of Contents Services Co., Ltd., or Da Xiang, which will serve as a platform for our mini-account business. We have also established additional BVI and Hong Kong subsidiaries under Yintech as shown in the chart below for future business activities. The following diagram illustrates our corporate structure, the places of incorporation and the ownership interests of our subsidiaries as of the date of this prospectus. Corporate Information Our corporate headquarters is located at 12th Floor, Block B, Zhenhua Enterprise Plaza, No. 3261 Dongfang Road, Pudong District, Shanghai, 200125, China. Our telephone number at this address is +86-21-2028-9009. Our registered office in the Cayman Islands is located at Floor 4, Willow House, Cricket Square, PO Box 2804, Grand Cayman KYI-1112, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, Suite 4D, New York, NY 10017. Our website can be found at www.yintech.net. The information contained on our website is not a part of this prospectus. Implications of Being an Emerging Growth Company As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable. We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the Cayman Islands (State or Other Jurisdiction of Incorporation or Organization) 6200 (Primary Standard Industrial Classification Code Number) Not Applicable (I.R.S. Employer Identification Number) 12th Floor, Block B, Zhenhua Enterprise Plaza No. 3261 Dongfang Road, Pudong District Shanghai, 200125 People's Republic of China +86-21-2028-9009 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Table of Contents previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700.0 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. Conventions that Apply to this Prospectus Except where the context otherwise indicates and for the purpose of this prospectus only: "active account" refers to a tradable account that executed at least one trade through us in a given period; "ADSs" refers to our American depositary shares, each of which represents 20 ordinary shares, and "ADRs" refers to the American depositary receipts that evidence our ADSs; "spread fee" refers to the difference, as set by the exchanges, between customers' buying and selling prices quoted by the exchanges, which can be expressed either as a fixed amount per weight unit or a fixed percentage of the notional transaction value; "BVI" refers to the British Virgin Islands; "China" or "PRC" refers to the People's Republic of China, excluding, for purposes of this prospectus, Hong Kong, Macau and Taiwan; "equity" refers to, with respect to online spot commodity trading, the value of a trading participant's account, which is the net aggregate of its deposits, withdrawals, closed positions and open positions; "Euromonitor" refers to Euromonitor International Limited; "hedge" refers to economic hedging transaction we enter into with various counterparties to manage our market risk exposure; "liquidation" refers to, with respect to online spot commodity trading, the mandatory termination and settlement of a trading participant's positions by the exchanges; "maximum leverage ratio" refers to, with respect to online spot commodity trading, the maximum ratio set by exchanges for the notional value of a position divided by the deposit required for such a position; "ordinary shares" or "shares" refers to our ordinary shares, par value US$0.00001 per share; "our company," "we," "us," "our," or "Yintech" refers to Yintech Investment Holdings Limited, a Cayman Islands company, and except where the context otherwise requires, all of its subsidiaries or where the context refers to any time prior to its incorporation, the business which its predecessors or the predecessors of its present subsidiaries were engaged in and which was subsequently assumed by it; "principal position" refers to the trading positions we have by serving as counterparty to our customers' trades; "risk ratio" refers to the real time equity of a member of the exchanges divided by its ending equity of the previous trading day; "RMB" or "Renminbi" refers to the legal currency of China; "tradable account" refers to a customer account that has been activated and has remained tradable as of the end of a given period; and "U.S. dollars," "US$" or "dollars" refers to the legal currency of the United States. This prospectus contains translations of certain RMB amounts into U.S. dollars at specified rates. For amounts not recorded in our combined and consolidated financial statements included elsewhere in this prospectus, unless otherwise stated, all translation of financial data has been made at RMB6.4778 to US$1.00, the noon buying rate in effect on December 31, 2015, as set forth in the H.10 Statistical Release of the Federal Reserve Board. We make no representation that the RMB or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. On April 15, 2016, the noon buying rate was RMB6.4730 to US$1.00. Law Debenture Corporate Services Inc. 400 Madison Avenue, Suite 4D New York, NY 10017 +1 212 750 6474 (Name, address, including zip code, and telephone number, including area code, of Agent for Service) Revenues. Our revenues for the three months ended March 31, 2016 were RMB402.9 million (US$62.2 million), compared to our revenues of RMB255.3 million for the same period in 2015. The growth was primarily attributable to our increased net commissions and fees from RMB267.2 million for the three months ended March 31, 2015 to RMB387.2 million (US$59.8 million) for the same period in 2016, due to the significant increase of 69.6% in our customer trading volume from RMB182.4 billion for the three months ended March 31, 2015 to RMB309.4 billion (US$47.8 billion) for the same period in 2016, which was the highest trading volume we have experienced in any single quarter. Our customer trading volume of RMB309.4 billion (US$47.8 billion) for the three months ended March 31, 2016 were attributable to the customer trading volume we generated from our operation on the Tianjin Precious Metals Exchange, the Guangdong Precious Metals Exchange, the Shanghai Gold Exchange and from mini-account business, which were RMB120.2 billion (US$18.6 billion), RMB142.0 billion (US$21.9 billion), RMB29.6 billion (US$4.6 billion) and RMB17.5 billion (US$2.7 billion), respectively. The significant Copies to: Li He, Esq. Davis Polk & Wardwell LLP 2201 China World Office 2 1 Jian Guo Men Wai Avenue Chao Yang District, Beijing 10004 People's Republic of China +86 10 8567 5000 David Zhang, Esq. Benjamin Su, Esq. Kirkland & Ellis International LLP c/o 26th Floor, Gloucester Tower, The Landmark 15 Queen's Road Central Hong Kong +852 3761 3300 Table of Contents increase in our trading volume for the first quarter of 2016 was largely attributable to (i) increased operational efficiency resulting from various operational adjustments made in the second half of 2015 (e.g., migration from telephone communication to online communication with customers), (ii) increased trading activities by our customers due to increased volatility in the commodities market in the first quarter of 2016 compared with the fourth quarter of 2015, (iii) the fast growth of our customer trading volume on the Shanghai Gold Exchange where we commenced operations in November 2015, and (iv) the trading volume contributed in March 2016 by Da Xiang, an online spot commodity trading service company focusing on mini-account customers, which we acquired 70% equity interest in March 2016 for a total consideration of RMB7.0 million (US$1.1 million). In the first quarter of 2016, we were the largest service provider by customer trading volume on both the Tianjin Precious Metals Exchange and the Guangdong Precious Metals Exchange. Our revenue growth in the three months ended March 31, 2016 was also attributable to a trading gain of RMB0.9 million (US$0.1 million), compared to a net trading loss of RMB17.7 million for the three months ended March 31, 2015. This was primarily due to the transfer of our net trading gains and losses on spot commodity contract to a third party fund in the first quarter of 2016 pursuant to our risk and return transfer arrangement that took effect on August 23, 2015. Since we no longer incur net gains or losses from spot commodity contracts as long as the risk and return transfer arrangement is in force, the trading gains of RMB0.9 million (US$0.1 million) resulted from our trading of physical commodities and the future commodity contracts we entered into for hedging the related market risks. Expenses. Our expenses for the three months ended March 31, 2016 were RMB227.9 million (US$35.2 million), a 42.6% increase compared to our expenses of RMB159.9 million for the same period in 2015, generally in line with the growth of our business. The increase in expenses is primarily due to (i) the increase in employee compensation and benefits expenses from RMB73.2 million for the three months ended March 31, 2015 to RMB131.4 million (US$20.3 million) for the same period in 2016, largely resulting from the increase in the number of personnel due to our operation on the Shanghai Gold Exchange launched in November 2015 and the acquisition of Da Xiang, and (ii) the increase in information technology and communications expenses from RMB7.0 million for the three months ended March 31, 2015 to RMB10.7 million (US$1.6 million) for the same period in 2016, due to various upgrades to our operational system, such as migrating from telephone communication to online communication with our customers. Net income. As a result of the foregoing, our net income increased from RMB82.9 million for the three months ended March 31, 2015 to RMB151.0 million (US$23.3 million) for the same period in 2016. Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. (1)Active accounts refer to tradable accounts that have executed at least one trade during the period. For the three months ended March 31, 2016, our effective fee rate (excluding mini-account business) is 0.129%, calculated as our commissions and fees (excluding mini-account business) divided by our total customer trading volume (excluding mini-account business). In addition, as of March 31, 2016, there were more than 87,000 mini-account customers who opened and activated accounts with Da Xiang, among which more than 42,000 executed trades in March 2016 with an aggregate customer trading volume of RMB17.5 billion (US$2.7 billion). The effective fee rate in March 2016 for the mini-account business is 0.063%. Our unaudited consolidated financial data and certain operating data for the three months ended March 31, 2016 may not be indicative of our results for future periods. Our quarterly financial and operating data have fluctuated, including a decrease in revenues on a quarter-to-quarter basis in the past, and may continue to CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to Be Registered Amount of Shares to Be Registered(1)(2) Proposed Maximum Offering Price per Share(1) Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee(4) Ordinary shares, par value US$0.00001 per share(2)(3) 172,500,000 US$0.725 US$125,062,500 US$12,594 (1)Estimated solely for the purpose of computing the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended. (2)Includes ordinary shares represented by American depositary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These ordinary shares are not being registered for the purposes of sales outside the United States. Also includes ordinary shares represented by American depositary shares that are issuable upon the exercise of the underwriters' over-allotment option to purchase additional ADSs. (3)American depositary shares issuable upon deposit of the ordinary shares registered hereby will be registered pursuant to a separate registration statement on Form F-6 (Registration No. 333-210823). Each American depositary share represents 20 ordinary shares. (4)US$12,594 has been previously paid. Table of Contents fluctuate in the future. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations Selected Quarterly Results of Operations" and "Risk Factors Risks Related to Our Business and Industry Our customer trading volume is influenced by the general trading activities in the online spot commodity trading market, which may be impacted by competing investment products, economic and market conditions and other factors that are beyond our control" for information regarding trends and other factors that may affect our results of operations. Proposed Grant of Stock Options In addition, to reward our employees and further align their interests with ours in the future, we expect to grant options to purchase 50,000,000 ordinary shares under the Third Amended and Restated 2014 Share Option Scheme to our directors, officers and key employees on the effective date of the registration statement of which this prospectus is a part, at an exercise price per share equal to the initial public offering price of our ADSs adjusted to reflect the ADS-to-ordinary share ratio, which will vest in three equal installments upon the first, second and third anniversary of the listing of our ADSs on NASDAQ. The grant is conditional upon the effectiveness of the registration statement. Among them, options to purchase 25,000,000 ordinary shares are expected to be granted to our directors and officers. These grants of options will be accounted for according to FASB ASC 718. We will measure the cost of employee services received in exchange for the options based on the grant-date fair value of these options, and recognize the cost over the vesting period. Share-based compensation expense, when recognized, will be recorded as expense with the corresponding entry to additional paid-in capital. We will start incurring share-based compensation expenses associated with these grants in the quarter ending June 30, 2016. Based upon US$13.5 per ADS, the midpoint of the estimated public offering price range set forth on the cover of this prospectus, we expect to incur share-based compensation expenses of approximately RMB4.7 million (US$0.7 million) for the year ending December 31, 2016. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001661920_lonestar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001661920_lonestar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001661920_lonestar_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001662706_trupal_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001662706_trupal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..387ae42e4020bb9233b2c4115f9d2b032354190c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001662706_trupal_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights material information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled Where You Can Find More Information in this prospectus and any amendment or supplement hereto. Company Overview Trupal Media Inc. ( Trupal or the Company ) is a social-casino-game publisher, incorporated in the State of Florida on March 14, 2014. We operate in the gaming content delivery business. The Company launched its flagship social gaming app Cleo s Casino on April 1, 2014. Cleo s Casino which is available on Facebook, is an ancient Egyptian themed app that offers 5 slot games per room, with each room being themed around the life story of Cleopatra. Users download the app and purchase virtual coins from the Company to play the various games in the app. Each user plays the first slot game of each room trying to achieve objectives in order to unlock the next slot game in a progressive fashion. A User or Player is a person who has downloaded the application, signed in and made use of the games. Playing the slots using purchased virtual coins allows users to earn additional virtual coins to extend play. Slot tournaments have been added to the app for players to compete against each other and win additional virtual coins. Trupal generates revenue as the users purchase virtual coins in order to commence and continue game play. Since inception, Trupal has integrated more than 40 slot games and slot tournaments. From inception to the period ended December 31, 2015, we have recorded cumulative gross revenues of $338,110 and expended $526,242 in marketing and advertising costs to encourage user downloads and purchases of virtual currency. Approximately 8,943 users have made at least 1 or more in app purchases to date. The Company s ability to become profitable is dependent on our ability to market to a wider audience and thereby generate continuous in app purchases from a broad user base accelerating the purchase of virtual currency for use in our games. Our founder, President and CEO, Mr. Panayis ("Peter") Palexas, has to date invested over $2.5 million both personally and through his controlled entities towards the development and launch of the Company s Facebook application framework and platform which delivers our casino style game content including slots and slot tournaments to users/players on Facebook. We intend to rely heavily on capital provided from Mr. Palexas to meet operational shortfalls as we expand our business and seek outside financing sources to complete the implementation of our business plan. In addition, prior to and following this Offering, Mr. Palexas, controls over 99% of the voting power for our Common Stock by virtue of his ownership of 1,000,000 shares of Series A Preferred Stock. Our Series A Preferred Stock has 500 votes per share, and our Common Stock, which is the stock we are offering in this Offering, has one vote per share. As a result, Mr. Palexas will continue to have significant influence over the management and affairs of the company and control over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. While we have generated revenues we are not yet able to meet our operational overhead on an annual basis. If we cannot obtain sufficient funding, we may have to delay the implementation of our business strategy and/or heighten the risk of our business failure. Trupal has not yet hired any permanent staff and as stated above, presently relies heavily on our sole officer and director, Mr. Panayis Palexas to fund and manage our day to day business. We currently outsource all professional services from third parties to maintain lower operational costs. Presently, key services such as marketing and customer support and game content are contracted with companies controlled by our sole officer and director. Trupal relies exclusively on Game Media Works Ltd., controlled by Mr. Palexas, to provide new gaming content and integration of that content, as well as ongoing maintenance that might be required for the app. In addition, we rely on Panash SAC, also controlled by Mr. Panayis, to deliver marketing and support services to the Company. These services include graphics for game ads, Facebook posting, player support and other services. Cleo s Casino has had good response from players as demonstrated through our consistent user growth and increasing retention rate. Trupal is focused on delivering high quality gaming apps, maintaining low costs and driving a rigorous marketing campaign that will ensure steady growth and value for the Company and its shareholders. In order to maintain user/player interest, ensure repeat visits and increase our user base we will look to raise funds to invest in marketing and increase unique user downloads. Through additional capital for expanded marketing activities we can also encourage revisits and expanded play from our existing user/player base. Most importantly we intend targeting marketing efforts to increase our in app purchasing/ user/player database and thereby increases to our new user downloads. Although the Company has no market for its common stock, management believes that the Company will meet all requirements to be quoted on the OTC market, and even though the Company s common stock will be a penny stock, becoming a reporting company will provide us with enhanced visibility and give us a greater possibility to provide liquidity to our shareholders. We will seek out such financing as necessary to allow the Company to continue to grow our business operations. We do not currently have sufficient revenues or cash on hand to meet our operational overhead, or planned operations. We estimate that our cash requirements for our fiscal year ending March 31, 2017 will be between $300,000 and $5,000,000 based on the success we have in raising additional capital and the marketing efforts we undertake. At a minimum we will expend $300,000 in the next twelve months to maintain our public reporting requirements, pay third party contractors and implement our most modest use of proceeds for user expansion, marketing and corporate growth at an advertising rate of $250 per day. We expect to be able to allocate gross profits from sales of approximately $132,000 to this overhead leaving a shortfall of $170,000 which amount is expected to be provided by our sole officer and director, Mr. Panayis Palexas and his related entities. We have developed use of proceeds for our gaming expansion plans for various investment amounts ranging from the minimum of $300,000 up to $5,000,000 in available capital. The speed with which we grow and achieve profitability is directly related to our initial and ongoing marketing expenditures in order to build our daily purchasing user base. Dependent on our success in raising additional capital above the minimum capital requirements, we will implement a marketing program which fits our available funds. Our president and director, Mr. Panayis Palexas, has agreed to accrue amounts payable for services provided by his controlled entities and to fund the Company s shortfalls in operational and advertising overhead until such time as additional capital can be secured to expand operations, and at a minimum for the operations of the Company to the close of fiscal 2017. The Company expects the cash shortfall during this period to be approximately $170,000 depending on the marketing budget that will be implemented under direction of Mr. Palexas. The majority of the anticipated shortfalls (approx. $138,000) represents amounts payable to service providers controlled by Mr. Palexas under licensing and marketing contracts, which amounts will be accrued until such time as the Company reaches profitable operations or is successful in raising additional capital. Our prior operating history, current purchasing user rates and new user retention projections indicate that with a minimal advertising spend of $250 per day (approx. $93,000/year) we should be able to generate revenues sufficient to meet our basic operating overhead, save amounts as set out above. We have no formal agreements in place with Mr. Palexas evidencing these commitments. We will seek to raise up to $5,000,000 in order to fully implement our business plan, including our planned future operations, which includes substantive funding for marketing and development of new product for our online apps. We will also bear other costs, excluding professional fees, associated with being a reporting Company with the Securities and Exchange Commission ("SEC"); we estimate these costs to be approximately $50,000 for 12 months following this Offering. The Company has included such costs to become a publicly reporting company in its targeted expenses for working capital expenses and intends to seek out reasonable loans from friends, family and business acquaintances, outside of amounts advanced by Mr. Palexas, if it becomes necessary. Neither the Company nor our CEO, Mr. Panayis Palexas or any other affiliated or unaffiliated entity has any plans to use the Company as a vehicle for a private company to become a reporting company once Trupal Media, Inc. becomes a reporting Company. Additionally, we do not believe the Company is a blank check company as defined in Section a(2) of Rule 419 under the Securities Act of 1933, as amended because the Company has a specific business plan and has no plans or intentions to engage in a merger or acquisition with an unidentified entity.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001664040_axeture_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001664040_axeture_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f1798740450e3c3b6535ce0c147d40e44df426d1
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001664040_axeture_prospectus_summary.txt
@@ -0,0 +1 @@
+PART I INFORMATION REQUIRED IN PROSPECTUS The information in this prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where an offer or sale is not permitted. PRELIMINARY PROSPECTUS Axeture, Corp. Subject to Completion dated March 31, 2016 $100,000 Up To 10,000,000 Shares of Common Stock Offered By the Company The name of our company is Axeture, Corp., and we were incorporated in the State of Nevada on November 13, 2015. This is our initial public offering. Our securities are not listed on any national securities exchange or the Nasdaq Stock Market. Our sole Officer and Director will offer and sell, on our behalf, up to 10,000,000 shares of our common stock at $.01 per share on a best efforts basis that will not utilize a third party underwriter or broker-dealer (the Offering ). Our sole Officer and Director will not receive any compensation for selling Shares in the Offering. Our sole Officer and Director will solicit investments in the Shares from friends, family and those persons with which he has a prior business relationship and that he reasonably believes would have an interest in investing in the Company. Our sole Officer and Director will distribute to all interested investors a copy of the Company s then effective Prospectus. Completion of this Offering is not subject to us raising a minimum amount of money. The Offering is intended to be a self-underwritten public offering, with no minimum purchase requirement. We may receive no proceeds from this Offering and potential investors may end up holding shares in a company that has not received enough proceeds to fully begin its operations and has no market for its shares. Shares will be offered on a best efforts basis and we do not intend to use an underwriter for this Offering. This Offering will terminate 180 days from the effective date of this Prospectus (the Termination Date ), unless extended by the Board of Directors for an additional 90 days, although we may close the Offering on any date prior to the Termination Date, if the Offering is fully subscribed or upon the vote of the Board of Directors. Reasons the Board may consider in determining whether to extend or terminate the Offering may include, but are not limited to: amount of funds raised, potential to raise additional capital, and response to the Offering as of that date. There is currently no established public trading market for our securities and an active trading market in our securities may not develop or, if it is developed, may not be sustained. A market maker is needed to file an application with the Financial Industry Regulatory Authority ( FINRA ) on our behalf so that the shares of our common stock may be quoted on an inter-dealer quotation system such as the OTC Markets or the Nasdaq OMX. Commencing upon the effectiveness of our registration statement of which this Prospectus is a part, we will seek out a market maker. There can be no assurance that the market maker s application will be accepted by FINRA, nor can we estimate as to the time period that the application will require to be completed, submitted or approved, if at all. We are currently a shell company as defined by Rule 12b-2 of the Exchange Act. This Offering involves a high degree of risk. Please see Risk Factors starting on page 7 to read about factors you should consider before buying any of the Shares pursuant to this Offering. Offering Price ($) Offering Expenses ($)(1) Net Proceeds to Us if 25% of Shares Sold (2,500,000 Shares) ($) Net Proceeds to Us if 50% of Shares Sold (5,000,000 Shares) ($) Net Proceeds to Us if 75% of Shares Sold (7,500,000 Shares) ($) Net Proceeds to Us if 100% of Shares Sold (10,000,000 Shares) ($) Per Share 0.01 0.01 0.01 0.01 0.01 0.01 Total (3) 100,000 12,600(2) 12,400 37,400 62,400 87,400 (1) The total amount of offering expenses is estimated to be $12,600. See Use of Proceeds for additional information. (2) There are no underwriting discounts or commissions being paid in connection with this offering. Our Director will not receive any compensation for his role in offering or selling the shares in this offering. (3) Net Proceeds includes the deduction of offering expenses estimated to be $12,600. There is no public trading market for our securities, and if a market develops for our securities, it will most likely be limited, sporadic and highly volatile. If no market develops, you will not be able to resell your shares publicly. We are an emerging growth company under the federal securities laws and will therefore be subject to reduced public company reporting requirements. Investment in the common stock offered by this prospectus involves a high degree of risk. You may lose your entire investment. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. The date of this Prospectus is March 31, 2016 1/48 ITEM 3. PROSPECTUS SUMMARY Axeture, Corp. This summary contains material information about us and the offering which is described in detail elsewhere in the Prospectus. Since it may not include all of the information you may consider important or relevant to your investment decision, you should read the entire Prospectus carefully, including the more detailed information regarding our company, the risks of purchasing our common stock discussed under Risk Factors on page 6, and our financial statements and the accompanying notes. Unless the context otherwise requires, the terms we, our, us, the Company, Axeture, and AXTU refer to Axeture, Corp., a Nevada corporation. Our Business Axeture, Corp., was incorporated in the State of Nevada on November 13, 2015 under the same name. Since inception, Axeture has not generated revenues and has accumulated losses in the amount of $4,947 from inception through November 30, 2015. Our strategy is to develop and create a mobile application that will allow the mobile phone user to find and access all their favorite applications in an easy to use interface that is highly customizable by the user, which will also allow advertisers to directly target our customers based on their specific interests and the content they place on our mobile application. We will also build a website that will assist us in marketing our mobile application and help educate the public as to what our mobile application can do for them. We believe that there is a niche in this area as currently, mobile phone users are limited in their choice of display and access of their applications by the type of mobile phone that they use and also because advertisers are similarly limited in their ability to send targeted advertisements to the users of applications on mobile phones. Axeture is a development stage company that does not currently have any business operations and has not generated any revenues. The Company will not be profitable until it derives sufficient revenues and cash flows from the marketing of its products. Axeture believes that, if it obtains the proceeds from this offering, it will be able to implement its business plan and conduct business pursuant to the business plan for the next twelve months. Axeture, Corp. s operations to date have been devoted primarily to start-up and development activities, which include the following: 1. Development of the Axeture, Corp., business plan. 2. Defining initial short-term and long-term marketing efforts including app versions and targeted markets. 3. Research of potential programmers for developing our app. This included hourly rates and the number of hours required to develop our app. We have incorporated these numbers and fees into our Use of Proceeds budget. 4. Completed due diligence on initial planned geographic region to market our app. Axeture has never been party to any bankruptcy, receivership or similar proceeding, nor has it undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business. The voting control of our common stock is possessed by William Webber, our sole Officer and Director, who was issued 15,000,000 shares, or 100%, of our common stock for $15,000 in the year 2015. After this Offering, assuming all of the shares in this Offering are sold, which there can be no guarantee, Mr. Webber will still retain 66.7% ownership and control in the Company. We currently do not have patents on our Axeture mobile applications or concepts. Please refer to Description of Our Business. We have no revenues since inception, have sustained losses since inception, do not have any employees, our CEO has little experience in mobile applications design, we have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. Mr. Webber, will dedicate at least twenty-five hours per week towards Axeture and its business affairs. We may not generate sufficient revenues even if we are able to gain market acceptance of our mobile applications. Accordingly, we will be dependent on future financings in order to maintain our operations and continue our research and development. Please refer to Risk Factors. 3/48 The minimum amount of proceeds required to have an operating business for the next 12 months is $25,000, the sum of the professional, legal fees, accounting, auditing, filing fees and our Plan of Operations based on minimal operations. We will not be capable of going on if we do not raise at least 25% of the offering. If we raise less than 25% of our offering, we plan to proceed with our business plan as stated. We will resort to borrowing funds from our Director or selling additional common stock. We have no commitments from our Director or any other source to provide additional financing, and if we are unable to sell stock in this Offering we may not be able to raise money after this Offering through the sale of additional common stock. If we are unable to raise a minimum of $25,000 from this offering and/or obtain such minimum amount in combination with other potential sources of equity and/or debt financing on a timely basis, we will not be able to complete our operations based on our estimated expenditures of raising at least 25% of the offering, and will not be able to expand our business. We do not have any arrangements to sell additional shares at this time other than the proceeds from this offering. In the event that we raise at least $50,000 from the sale of shares in this offering (i.e., 50% of the shares being offered are sold), during the next 12 months, we will be able to have an operating business as well as meet our minimum public company reporting requirements, allow for marketing of our Company, including developing our mobile application and website, and hiring of contractors. At this level the Company would be able to significantly develop our mobile application as well as implement a sales and marketing campaign. We would not be able to implement the ongoing development of our mobile application, nor would we be able to fully initialize our sales and marketing campaign or pay salaries or hire as many contractors as we need, as further discussed in our Plan of Operations. If 100% of the offered Shares are sold the Company will receive the maximum proceeds of $87,400 after paying the Company s offering expenses. The Company plans to allocate the net proceeds from this Offering as follows: $27,500 to our Sales and Marketing Budget, $21,000 to Salaries for employees and independent contractors, $15,000 for the development of our Mobile Application, $6,000 for the construction of our website, $5,000 to the ongoing development and optimization of our mobile application, $9,600 to accounting and legal fees, $1,700 to Edgar fees and $1,600 office supplies. If we raise the full amount from this Offering we will be able to implement all of expenditures listed in our Plan of Operations. If 75% of the offered Shares are sold the Company will receive $62,400, after paying offering expenses. In this case, the Company plans to allocate the net proceeds from this Offering as follows: $18,500 to our Sales and Marketing Budget, $12,000 to Salaries for employees and independent contractors, $13,000 for the development of our Mobile Application, $4,000 to the construction of our website, $2,400 to the ongoing development and optimization of our mobile application, $9,600 to accounting and legal fees, $1,700 to Edgar fees and $1,200 in office supplies. If we sell 75% of the offered Shares we will still be able to build our website and have sufficient marketing budget that we will have the ability to get our application out in the market; though to a lesser extent than if we raised the full 100%. If we raise 75% of the Offering the Company would be able to most of our Plan of Operations by further developing our mobile application, and we would be able to hire more contractors. We would not be able to fully implement all of our Plan of Operations, as we would not be able to initiate as strong of a sales and marketing campaign or hire as many contractors as we plan to. If 50% of the offered Shares are sold the Company would receive $37,400, after paying offering expenses. The Company would further cut the funding to its use of proceeds as follows: $9,000 to our Sales and Marketing Budget, $2,800 to Salaries for employees and independent contractors, $12,000 for the development of our Mobile Application, $1,500 to the construction of our website, $9,600 to accounting and legal fees, $1,700 to Edgar fees and $800 to office supplies. At this level the Company would be still be able to complete our mobile application and initiate a smaller sales and marketing campaign. We would still be able to hire a contractor, but at a lesser extent than if we were fully funded. At this level of financial raise, we would be constrained in hiring contractors, or paying salaries, also we would not have sufficient funds to pay for any ongoing mobile application development. If the Company sells 25% of the Shares under the Offering it would be severely restricted in its operating plans and only have sufficient proceeds to cover offering expenses, operate the Company for the year, and it will have to pay the remainder of the expenses out of additional financing which it has not yet received. The Company will still spend $1,100 on Mobile Application, and $9,600 to accounting and legal fees and we would not have sufficient proceeds to develop our application, build our website or hire any employees or contractors. In this 4/48 instance, it will have to seek out additional capital from alternate sources to fully execute the plan of operations. If such funds are not available, the business would likely fail and any investment would be lost. If we only raise 25% of the Offering, we will only be able to partially implement our Plan of Operations. We would be able to start to develop a basic mobile application and have enough money to pay for 12 months of operations. See Use of Proceeds Description of Business - The Company - Plan of Operations and Management s Discussion and Analysis of Financial Condition and Results of Operations for additional information. Since there is no minimum amount of shares that must be sold by the company, we may receive no proceeds or very minimal proceeds from the offering and potential investors may end up holding shares in a company that has not received enough proceeds from the offering to begin operations and has no market for its shares. The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act (the JOBS Act ). The Company s fiscal year end is November 30. Where You Can Find Us Our office is located at 76508 Sweet Pea Way, Palm Desert, CA 92211. The telephone number is (360) 224 5416. Our website address is www.axeturecorp.com. Currently our website is under development and not operational. Our History We were incorporated under the laws of the State of Nevada on November 13, 2015. On November 13, 2015, we appointed William Webber to be the President, Chief Executive Officer, Treasurer, Chief Financial Officer, and Director of the Company. We received our initial funding of $15,000 through the sale of common stock to our President, William Webber, who purchased 15,000,000 shares of our common stock at $0.001 per share on December 3, 2015. About this offering This Prospectus relates to a total of 10,000,000 shares of common stock of Axeture, Corp., a Nevada corporation. Shares being Registered by the Company This is the Company s initial public offering. The Company is offering 10,000,000 Shares of its common stock for sale in a self-underwritten, best-efforts offering. The Company will receive up to $87,400 (after offering expenses) in the event that all the 10,000,000 shares of common stock are sold, of which there can be no assurance. The proceeds, if any, will be used for general working capital purposes. This offering will terminate on the earlier of the sale of all of the shares offered or 180 days after the date of the prospectus, unless extended an additional 90 days by the Board of Directors. The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act (the JOBS Act ). We intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Our election 5/48 allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until they apply to private companies. Therefore, as a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001664487_royal_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001664487_royal_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c7a94d3142f982d875378b137abbea49ce46fd4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001664487_royal_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY For the sake of clarity, this prospectus follows English naming convention of first name followed by last name, regardless of whether a person s name is Chinese or English. For example, the name of our president is specified as Fun-Ming Lo, even though, in Chinese, his name would be presented as Lo Fun-Ming. All references in this prospectus to NT$ are to New Taiwan Dollars, which are the legal currency of Taiwan. In Taiwan there are two phonetic writings, which are Pin Yins. Pursuant to one phonetic writing, Yao-Teh International Development Co., Ltd., a Taiwanese corporation, is referred to as Yao-De International Development Co., Ltd., a Taiwanese corporation. The Company Our Business The Company was incorporated in the State of Nevada on January 27, 2015. We are a development stage company, and our plan of operations contemplates the management and operation of golf properties located in Asia. In that regard, effective January 1, 2016, we entered into a Golf Course Management and Marketing Agreement with Yao-Teh International Development Co., Ltd., a Taiwanese corporation ( Yao-Teh ), pursuant to which we will promote, market, manage and operate a golf property known as The Royal Country Club, located in Miaoli county, Taiwan (the Initial Property ). A copy of the Management Agreement is attached as Exhibit 10.1 to the registration statement of which this prospectus is a part. Yao-Teh is our affiliate, as Fun-Ming Lo, our president, owns the majority of the issued and outstanding capital stock of Yao-Teh and, additionally, he is the chairman of the board of directors of Yao-Teh. We will promote, market, manage and operate golf properties located in Asia with the intent to (i) develop player loyalty and capture a greater share of the players in those locations where those golf properties are located and (ii) obtain revenue from that promotion, marketing, management and operation of those golf properties. We anticipate that those golf properties may include recreational facilities and social programming, which should enhance our ability to attract and retain players across a number of demographic groups. Given the nature of the products, services and amenities offered at the golf properties we will manage and operate, we believe that we will offer compelling value to golfers. The Initial Property is a challenging course designed by Robert T. Jones, Jr., and its fairways are not long, but the undulating terrain and various hazards make it a challenging course. In addition to golfing, players can experience local culture, including food, customs and the hospitality of the local people in Miaoli county. The Initial Property is open for play to the general public; provided, however, the general public has the option to become member, which provides certain benefits, including, but not limited to, reduced fees. Fun-Ming Lo, our president, has more than 20 years in the golf course and recreation business in Taiwan. We believe that Mr. Lo s experience in the golf course and recreation business should benefit us in connection with establishing relationships with golf properties in Taiwan and other parts of Asia which are appropriate for our services. Our operations to date have been devoted primarily to organizational and development activities. Our officers have performed all of those activities to date, which include the following: Formation of the Company Development of our business plan Our officers will be responsible for our operations until such time as we hire additional personnel, which we intend to do at such time as we have sufficient funds. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. Table of Contents Our principal executive offices are located at Room E, 4F., No. 106, Zhouzi Street, Neihu District, Taipei City, 114, Taiwan (Republic of China). Our phone number is 886226582502. Our fiscal year ends on December 31. As of the date of this prospectus, we have 143,118,061 shares of our $.01 par value common stock issued and outstanding and held by 53 shareholders. We are registering for sale 16,000,000 shares of our common stock pursuant to the Securities Act of 1933. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements included in the registration statement of which this prospectus is a part do not include any adjustments that might result from the uncertainty about our ability to continue in business. As of March 31, 2016, our cash and cash equivalents were $116,032. As of March 31, 2016, we had $1,021,955 in current assets and $28,129 in current liabilities. Accordingly, our working capital as of March 31, 2016 was $993,826. As of May 31, 2016, the amount of our cash and cash equivalents on hand were $116,032. For the first three months of 2016, our operations were limited to seeking business opportunities in connection with the marketing and management of the Initial Property. Those operations did not require us to spend any funds. We anticipate that for the three months beginning in April and continuing through June 2016, our operations will be limited to those same activities; and, therefore, we will spend little, if any, funds for operations. Accordingly, for the second quarter of 2016, we believe we will need little, if any, funds to finance our operations each month. We believe that beginning in the third quarter of 2016, we will have established sufficient business relationships which will enable us to market, manage and operate the Initial Property. Additionally, we believe that beginning in the third quarter of 2016, we will have enough cash to finance our operations for approximately 6 months. As of the date of this prospectus, we have not received any revenue from operations. We estimate that we need approximately $400,000 to support our operations during the next twelve months. This amount includes $20,000, which is our estimated cost necessary to comply with our reporting requirements during the next 12 months. We have a written commitment from Mr. Lo for a 12 month line of credit in the amount of $400,000 at no interest. All funds lent by Mr. Lo pursuant to that commitment shall be due and payable on demand; provided, however, such demand will not be made prior to the expiration of 12 months from the date of that commitment, which date is October 1, 2015. A copy of that commitment is attached as Exhibit 10.3 to that registration statement of which this prospectus is a part. As of May 31, 2016, we do not owe Mr. Lo any money pursuant to that funding commitment. On March 6, 2015, we entered a loan agreement with Yao-Teh International Development Company Co., Ltd., ( Yao-Teh ), pursuant to which we will provide funds to Yao-Teh in an amount not to exceed Two Million Dollars ($2,000,000) to provide Yao-Teh will funds necessary to pay for the services of a design third-party firm to design a master plan relating to the development of the hotel on certain real property owned by Yao-Teh. Yao-Teh was incorporated on May 30, 1988, in Taiwan (Republic of China) and it is in the business of developing, constructing, and operating hotel properties and recreational parks. Mr. Fun-Ming Lo, the Company s president, is also the chairman and president of Yao-Teh. On March 5, 2016, we entered into a written Extension of Terms of Loan Agreement with Yao-Teh pursuant to which the term of that loan has been extended one year to March 5, 2017. The loan accrues a fixed interest rate of 2% per annum. The principal and interest amount of the loan shall be repaid by Yao-Teh no later than on March 5, 2017. As of March 31, 2016, the outstanding principal balance was $893,000 and the accrued interest was $12,922. As of May 31, 2016, the outstanding principal balance was $893,000 and the accrued interest was approximately $15,906. Presently, we have no employees. Our officers are responsible for all planning, development and operational duties and will continue to do so throughout the early stages of our growth. Human resource planning will be a part of an ongoing process that will include regular evaluation of our operations. We intend to hire employees at such time as we determine it is appropriate. We can provide no assurance or guarantee on the date on which we will hire employees. We have no present plans to be acquired by or to merge with another company, nor do our shareholders have plans to enter into a change of control or similar transaction. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE COMPANY MAY NOT SELL ITS SECURITIES UNTIL THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE OF THESE SECURITIES IS NOT PERMITTED. PRELIMINARY PROSPECTUS Dated June ____ , 2016 THE ROYAL COUNTRY CLUB AND RECREATION HOLDINGS, INC. 16,000,000 Shares of Common Stock $.025 per share The Royal Country Club and Recreation Holdings, Inc. ( our , we , us the Company) is offering on a best-efforts basis of as many as 16,000,000 shares of its common stock at a price of $.025 per share. This is the initial offering of our common stock, and no public market exists for the securities being offered. The Company is offering those shares on a self-underwritten, best-efforts, basis directly by our sole officer and director. There is no minimum number of shares required to be purchased by any investor. Fun-Ming Lo, our president, intends to sell those shares directly. No commission or other compensation related to the sale of those shares will be paid to Mr. Lo or any other person. The intended methods of communication regarding the offer and sale of those shares include, without limitation, telephone and personal contact. Our selling efforts will not include any mass media methods, such as Internet or print media. There can be no assurance that all, or any, of the shares offered will be sold. The offering shall terminate on the earlier of (i) the date when the sale of all 16,000,000 shares is completed or (ii) two hundred seventy (270) days from the effective date the registration statement of which this prospectus is a part. We are a development stage, start-up company. Any investment in the shares offered herein involves significant risks. You should only purchase shares if you can afford a complete loss of your investment. We may not sell all 16,000,000 shares offered. There is no minimum number of shares we must sell before we can utilize the proceeds from the purchase of shares. If we do not sell all 16,000,000 shares within the offering period (270 days), we will close the offering and subscription funds will not be returned to subscribers. In the event we do not sell all 16,000,000 shares offered, the amount of money we receive from the sale of those shares which are, in fact, purchased be minimal and may not be enough to even pay the costs of this offering. We have not made any arrangements to deposit in an escrow, trust, or similar account the funds we receive from the sale of the shares offered by this prospectus. Rather, funds from this offering will be deposited in our corporate bank account in our name. As a result, if we are sued for any reason and a judgment is rendered against us, investors subscriptions could be seized in a garnishment proceeding and investors could lose their investments. Investors do not have the right to withdraw invested funds. For more information, see the sections titled PLAN OF DISTRIBUTION and USE OF PROCEEDS herein. We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, which became law in April, 2012 and will be subject to reduced public company reporting requirements. See Jumpstart Our Business Startups Act specified herein. We are considered a shell company under applicable securities rules and subject to additional regulatory requirements as a result, including the inability of our shareholders to sell our shares in reliance on Rule 144 promulgated pursuant to the Securities Act of 1933, as well as additional restrictions. Accordingly, investors should consider our shares to be significantly risky and illiquid investments. Refer to the section entitled RISK FACTORS beginning on Page 5. As of the date of this prospectus, we have not developed or sold any of our products nor have we generated any revenue from operations. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY, THE RISK FACTORS SECTION, BEGINNING ON PAGE 5. NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Our common stock is not traded on any public market and, although we intend to apply to have the prices of our common stock quoted on the Over-The-Counter Bulletin Board ( OTCBB ) maintained by the Financial Industry Regulatory Authority ( FINRA ) when the registration statement of which this prospectus is a part is declared effective, there can be no assurance that a market marker will agree to file the necessary documents with FINRA to enable us to participate on the OTCBB, nor can there be any assurance that any application filed by any such market maker for quotation on the OTCBB will be approved. Table of Contents Jumpstart Our Business Startups Act We are electing to not opt out of the JOBS Act of 2012 extended accounting transition period. This may make our financial statements more difficult to compare to other companies. Pursuant to the JOBS Act of 2012, as an emerging growth company, we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board ( PCAOB ) or the Securities and Exchange Commission (the SEC ). We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the standard for a private company. This may make comparison of our financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible, as possible different or revised standards may be used. Emerging Growth Company: The JOBS Act of 2012 is intended to reduce the regulatory burden on emerging growth companies. We meet the definition of an emerging growth company, and as long as we qualify as an emerging growth company, we will, among other things: be temporarily exempted from the internal control audit requirements Section 404(b) of the Sarbanes-Oxley Act; be temporarily exempted from various existing and forthcoming executive compensation-related disclosures, for example: say-on-pay , pay-for- performance , and CEO pay ratio ; be temporarily exempted from any rules that might be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or supplemental auditor discussion and analysis reporting; be temporarily exempted from having to solicit advisory say-on-pay, say- on-frequency and say-on-golden-parachute shareholder votes regarding executive compensation pursuant to Section 14A of the Securities Exchange Act of 1934, as amended; be permitted to comply with the SEC s detailed executive compensation disclosure requirements on the same basis as a smaller reporting company; and be permitted to adopt any new or revised accounting standards using the same timeframe as private companies (if the standard applies to private companies). We will continue to be an emerging growth company until the earliest of: the last day of the fiscal year during which we have annual total gross revenues of $1 billion or more; the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered pursuant to the Securities Act of 1933, as amended; the date on which we issue more than $1 billion in non-convertible debt securities during a previous three-year period; or the date on which we become a large accelerated filer, which generally is a company with a public float of at least $700 million (Securities Exchange Act Rule 12b-2). Table of Contents The Offering The following is a brief summary of this offering. Please see the PLAN OF DISTRIBUTION section for a more detailed description of the terms of the offering. Number of Shares Being Offered: The Company is offering as many as 16,000,000 shares of common stock, par value $0.01 Offering Price per share: $.025 Offering Period: The shares are being offered for a period not to exceed 270 days from the effective date of the registration statement of which this prospectus is a part. Proceeds to Company: If 16,000,000 shares (100%) are sold: $400,000 If 12,000,000 shares (75%) are sold: $300,000 If 8,000,000 shares (50%) are sold: $200,000 If 4,000,000 shares (25%) are sold: $100,000 Use of Proceeds: We intend to use the proceeds to expand our business operations. Number of Shares of our Common Stock Outstanding Before the Offering: 143,118,061 shares Number of Shares of our Common Stock Outstanding After the Offering: If 16,000,000 shares (100%) are sold: 159,118,061 shares If 12,000,000 shares (75%) are sold: 155,118,061 shares If 8,000,000 shares (50%) are sold: 151,118,061 shares If 4,000,000 shares (25%) are sold: 147,118,061 shares Offering Expenses: The expenses associated with this offering total approximately $23,000 (excluding filing fees). We may not sell all 16,000,000 shares offered. There is no minimum number of shares we must sell before we can utilize the proceeds from the purchase of shares. If we do not sell all 16,000,000 shares within the offering period (270 days), we will close this offering and subscription funds will not be returned to subscribers. In the event we do not sell all 16,000,000 shares offered, the amount of money we receive from the sale of those shares which are, in fact, purchased may be minimal and not be enough to even pay the costs of this offering. The offering price of the common stock has no relationship to any objective criterion of value and has been arbitrarily determined. The offering price does not have any relationship to our assets, book value, historical earnings, or net worth. We will use the proceeds from the offering to pay for accounting fees, legal and professional fees, product design and development, and general working capital. The Company has not presently engaged an independent stock transfer agent. We have identified several agents to facilitate the processing of stock certificates upon closing of this offering. The purchase of the common stock in this offering involves significant risks. The common stock offered in this prospectus is for investment purposes only and, currently, no market for our common stock exists. Please refer to the sections herein titled RISK FACTORS and DILUTION before making an investment in our stock. Table of Contents Summary Financial Information The following table sets forth summary financial data derived from our financial statements. The accompanying notes are an integral part of those financial statements and should be read in conjunction with the financial statements, related notes and other financial information included in this prospectus. There is no trading market for our common stock. We intend to apply for participation on the Over-the-Counter Bulletin Board ( OTCBB ), and we hope that thereafter such trading market will develop. We intend to enter into an agreement with a broker-dealer registered with the SEC and a member in good standing of FINRA to assist us in connection with causing the prices of our common stock to be quoted on the OTCBB. There can be no assurance that any application filed by any sponsoring marker maker for such quotation on the OTCBB will be approved. As of the date of this prospectus, we have not any revenue from operations. January 1, 2016 through March 31, 2016 (unaudited) January 27, 2015 (inception) through December 31, 2015 Revenue: $ -0- $ -0- Interest Income: $ 4,452 8,612 Operating Expenses: General & administrative $ 129 450,290 Total operating expenses $ 129 450,290 Net Income (Loss) $ 4,323 $ (441,678 ) Net loss per common share, basic and diluted $ 0.00 $ (0.00 ) Weighted average number of common shares, basic and diluted, outstanding 143,118,061 140,289,857
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001665421_high_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001665421_high_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001665421_high_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001665503_nutritiona_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001665503_nutritiona_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c94f474cb4de1bfe2e12e7c91b3828241949fd6b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001665503_nutritiona_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements, before making an investment decision. Certain statements in this summary are forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements." All references to "we," "us," "our," "SPLIF" and the "Company" mean Nutritional High International Inc. All dollar amounts in this prospectus are expressed in Canadian dollars unless otherwise indicated. The Company's accounts are maintained in Canadian dollars and the Company's financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All reference to "U.S. dollars", "USD", or to "US$" are to United States dollars. Overview The Company mainly conducts its business in the medical marijuana, retail marijuana and hemp infused products sectors in the United States, where such activity is permitted and regulated by applicable laws, through entities that hold a valid license, which we refer to as licensed operators, to produce and distribute such products in accordance with applicable regulations. The Company also pursues similar opportunities in Canada; however, it does not expect to invest significant resources in Canada due to regulatory uncertainty. Marijuana, for the purposes of this prospectus, is referred to herein as all parts of the plant of the genus cannabis, the seeds thereof, the resin extracted from any part of the plant, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or its resin, but does not include industrial hemp, nor does it include fiber produced from stalks, oil, or cake made from the seeds of the plant, sterilized seed of the plant which is incapable of germination, or the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product. Traditionally, the female marijuana or cannabis plant was consumed by smoking. The flower of the plant is dried and smoked either through a pipe, a cigarette or a filtration device/apparatus such as a water pipe or a vaporizer. Leafs, nodes and stems are not typically utilized for consuming cannabis through smoking, but are used in production of other products such as oil extracts, referring to hereinafter as marijuana concentrate, which are produced by extracting cannabinoids from marijuana by a method including, but not limited to use of solvent, water, ice, dry ice or propylene glycol, glycerin, butter, olive oil or other typical cooking fats. The marijuana concentrate is then used to manufacture a products, referring to hereinafter as marijuana-infused products, for medical or recreational adult use in jurisdictions where permitted by the applicable regulatory authorities that are intended for use or consumption other than by smoking. Regulations differ significantly amongst the U.S. states. Some U.S. states only cultivation, processing and distribution of marijuana for medical purposes only, which we refer as medical marijuana, and may also include marijuana-infused products, which we refer as medical marijuana-infused products. Some U.S. states may also permit cultivation, processing and distribution of marijuana for recreational purposes, which we refer as retail marijuana or recreational marijuana, and may also include marijuana-infused products, which we refer as retail marijuana-infused products. Most U.S. states that have legalized medical marijuana or retail marijuana impose a range of requirements on the business operators, including obtaining a license from state governmental authorities. Some states (such as Colorado) require licensed operators (or their shareholders) to be residents of that U.S. State, which we refer as residency requirement. Other states (such as Illinois, Nevada, Maryland and Arizona) do not impose a residency requirement. The State of Oregon permits out-state ownership, however, such ownership is subject to a number of restrictions. For the marijuana related products, the Company's strategy in the states with residency requirements is focused on providing products or services to the industry rather than directly owning production or retail operations. The Company is currently actively pursuing the opportunities in the State of Colorado and Illinois. The State of Colorado permits the sale, possession, use, production, distribution and personal cultivation of marijuana, however, that the Colorado Supreme Court has held that even workers who use marijuana for medical reasons may be discharged for violation of federal law. On the other hand, the State of Illinois currently allows only the medical use of marijuana under very controlled circumstances. In addition, pursuant to federal regulations, hemp-infused products (also refer to as hemp stalk oil-infused products) are excluded from the definition of "marihuana", as long as the product does not contain active levels of tetrahydrocannabinol ("THC"), the psychoactive compound of the cannabis plant. It is generally accepted that products with less than 0.3% THC do not contain active levels of THC. Changes in related state and federal regulation could have a material positive or negative impact on the Company's operations. The Company has two distinct objectives as a part of the separate business units: Marijuana-Infused Products Segment. The Company is focused on developing, acquiring and designing marijuana-infused products and marijuana concentrate products and brands for use by licensed operators entering into royalty or raw materials and packaging agreements with the Company in jurisdictions where permitted; and Hemp-Infused Products Segment. The Company is focused on developing, acquiring, manufacturing and distributing products infused with non-psychoactive constituent of the industrial hemp plant (less than 0.3% THC or otherwise as permitted by applicable law), which may be distributed in all 50 states. The Company is pursuing a retail distribution strategy through networks of retail dispensaries where THC products are sold, head shops, vitamin stores and independent grocers via direct sales and distributors and is considering online sales, and multi-level marketing. The two segments we described above are operating segments only and that for financial reporting purposes we combine them and report our results as one segment. The Company will establish operations only in U.S. states which have implemented adequate licensing frameworks and are in compliance with the Cole Memo as hereinafter described below. We are a holding company and we conduct our business through our operating subsidiaries as follows: NHC Edibles LLC ("NHC") and Nutritional High (Colorado) Inc. ("NHCI") carry out the Company's operations in the Marijuana Infused Products Segment. NHC's activities in the State of Colorado includes but not limited to acquiring and leasing real estate to licensed operators and entering into raw materials and packaging agreements and financing agreements with licensed operators who are focused in the retail market and subject to residency requirements, that do not require it to obtain a licence. NH Medicinal Dispensaries Inc ("NHMDI") and Small's Mill Holdings Inc. ("SMHI") carry out the Company's operations in the Marijuana Sector in the State of Illinois. NHMDI has submitted an application for a dispensary license with the State of Illinois and has received an authorization to register a medical marijuana dispensary. SMHI has taken possession of the Lawrenceville Property under the Lawrenceville PSA. Nutritional Traditions Inc. carries out the Company's operations in the Hemp-Infused Product Segment. See "Our Corporate History and Background Our Subsidiaries" Marijuana-Infused Products Segment In its Marijuana-Infused Products Segment, the Company is focused on developing, acquiring and designing marijuana-infused products and marijuana concentrate products and brands for use by licensed operators who enter into raw materials and packaging agreements or royalty agreements with the Company in respect to the Company's brands, recipes and know-how ("NH Licensed Operators") or sell packaging to licensed operators with the Company's branding, as permitted by the applicable regulation. The Marijuana-Infused Products Segment is solely focused on the U.S. states where marijuana-infused products are permitted by law and regulation. We have no current agreements with licensed operators other than the agreement with an Illinois cannabis cultivation and extraction facility to develop a framework under which the extraction facility will manufacture and distribute our oils and edibles in Illinois. The agreement provides for a right to negotiate an agreement to negotiate the framework in good faith, but provides for no financial terms in this regard. As such, the Company considers the agreement not material to its operations at this time. We currently have no commercial products. The Company's business model in its Marijuana-Infused Products Segment differs depending on the residency requirements of the applicable jurisdiction. Most U.S. states that have legalized marijuana for medical or recreational use require the businesses or individuals to hold a valid license under applicable regulation in the respective U.S. state issued by the applicable state authorities. In some U.S. states, for a licensed operator to be eligible to be granted a license, the owners of the licensed operator must be residents of such U.S. state. As such, listed companies or other widely held enterprises are ineligible to obtain a license in those U.S. states where a licensed operator must be a state resident. In such U.S. states, the Company will work with a licensed operator to provide them with financing, licensing of its products, recipes and brands, know how, consulting services and may purchase the facilities where such license operators operate or intend to operate. In U.S. states where there are no residency requirements and where the Company may acquire licensing on its own, the Company may apply to become a license operator. The Company will not operate in jurisdictions which have not legalized marijuana, and does not intend on operating in jurisdictions which have legalized marijuana but have not developed and imposed a licensing regime for licensed operators. In certain jurisdictions, and more specifically in the states with the residency requirements, the Company may conduct business in the value chain segments, which do not require a license from the requisite regulatory authorities. Such ancillary value chain segments do not directly handle, process, manufacture, cultivate or distribute cannabis products, and may include: unsecured lending, providing real estate to licensed operators, equipment leasing and providing non-cannabis raw materials (such as packaging, food ingredients, etc.) The focus of this strategy is to provide the services to licensed operators that are focused on extraction and processing of cannabis to enable them to attain a stronger competitive advantage in the market, while proving an acceptable economic return to the Company. In certain circumstances the Company may pursue other value chain segments, such as operating a dispensary, in the states where the regulatory environment is unsuitable to earn an economic rate of return in the extraction/processing segment, given the Company's assessment. This aim of this strategy is to secure a foothold in such markets, through obtaining a license to operate a business that is not directly related to extraction/processing and then partner with another licensed operator who is able to operate in the extraction/processing space. The Company has employed this type of strategy in the State of Illinois, where it is working to obtain a dispensary license, but has also partnered with another licensed operator to be in a position to sell its products in Illinois. Hemp-Infused Products Segment In its Hemp-Infused Products Segment, the Company is focused on developing, acquiring, manufacturing and distributing products infused with non-psychoactive constituent of the industrial hemp plant (less than 0.3% THC or as otherwise permitted by applicable law), which may be distributed in all 50 U.S. states. The Company is pursuing a retail distribution strategy through networks of retail dispensaries where THC products are sold, head shops, vitamin stores and independent grocers via direct sales and distributors and is considering online sales, and multi-level marketing. Having access to the Company's expertise in manufacturing products from cannabis, these hemp-infused products are expected to have a competitive edge in the market. The products are being sold under the "Nutritional Traditions" brand name and initially available to California retail customers. Distribution will be expanded outside of California beginning in 2016. U.S. Federal Law and Cole Memo Compliance The use, possession, sale, cultivation and transportation of cannabis remains illegal under U.S. federal law. The concepts of "medical marijuana" and "retail marijuana" do not exist under U.S. federal law. The Federal Controlled Substances Act classifies "marihuana" as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision. As such, marijuana-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of marijuana are illegal under U.S. federal law. Strict compliance with state laws with respect to marijuana will neither absolve the Company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. In a memorandum dated August 29, 2013, addressed to "All United States Attorneys" from James M. Cole, Deputy Attorney General (the "Cole Memo"), the U.S. Department of Justice acknowledged that certain U.S. states had enacted laws relating to the use of marijuana and outlined the U.S. federal government's enforcement priorities with respect to marijuana notwithstanding the fact that certain U.S. states have legalized or decriminalized the use, sale and manufacture of marijuana: Preventing the distribution of marijuana to minors; Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; Preventing the diversion of marijuana from U.S. states where it is legal under state law in some form to other U.S. states; Preventing U.S. State-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; Preventing violence and the use of firearms in the cultivation and distribution of marijuana; Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and Preventing marijuana possession or use on U.S. federal property. There is no guarantee that the current presidential administration will not change its stated policy regarding the low-priority enforcement of U.S. federal laws that conflict with state laws. Additionally, any new U.S. federal government administration that follows could change this policy and decide to enforce the U.S. federal laws vigorously. The Company's operations are compliant with the Cole Memo. Recent Developments Key Board and Management Changes On April 28, 2016 the Company announced key management changes. Jim (Vernon) Frazier has replaced Gary Margolin as Chief Operating Officer of the Company; and Given Mr. Frazier's extensive operational capabilities and past product development experience in the food and confectionary industry, the Company has elected to not renew its consulting agreement with Anne Marie Youhana as VP Product Development and Quality Control. The Company's board has approved for issuance of 2,500,000 stock options to Mr. Frazier. Each Stock Option is exercisable into Common Shares at a price of $0.07 per Common Share for a period of five years from the date of issuance, vesting every 6 months over a three year period. On June 14, 2016 the board of directors of the Company appointed Amy Stephenson as a Chief Financial Officer, replacing Al Quong. On June 16, 2016 the board of directors of the Company appointed Robert Keeler as an independent director. Listing on Frankfurt Stock Exchange On May 21, 2016 the Company announced that common shares now trade on the Frankfurt Stock Exchange under the symbol "2NU". European investors can now find quotes for the Company on: www.en.boerse-frankfurt.de/. Moving of the Illinois Dispensary On June 17, 2016 the Company announced that NHMD has received approval to relocate its planned dispensary to Effingham, Ill. Effingham county is located in the middle of Illinois State Police district 12 and has approximately twice the population of Lawrenceville county. The Effingham location will provide significant additional patient access and is situated next door to a veteran's affairs clinic. Closing of US$800,000 Pueblo Property Refinancing On April 19th, 2016, the Company has completed a US$800,000 refinancing of its Pueblo, Colorado, property (the "Refinancing") with a Florida-based institutional investor ("Lender"). Under the terms of the Refinancing, the Lender has provided an initial advance of US$600,000 earmarked to fund the completion of certain construction and improvements at the Pueblo facility to enable Palo Verde LLC (the Company's licensed tenant) to commence the production of cannabis extracts and cannabis derivative products. A portion of the proceeds was used to pay out the previous first mortgagee on the facility in the amount of CN$127,000. Upon completion of the build-out of the marijuana oil extraction facility, the Lender will disburse a subsequent advance of US$200,000 to be used to complete the build out of the commercial kitchen to enable Palo Verde to commence production of marijuana-infused edibles. In connection with the Refinancing, the Company has also granted the Lender 3,333,334 share purchase warrants exercisable into Common Shares at an exercise price of $0.06 per Share, which shall expire 18 months after issuance. The Company and the Lender have entered into a Registration Rights Agreement, which provides the Lender with piggyback registration rights for the warrants issued to the Lender, if the Company proposed to register a public offering solely of its Common Shares. The Lender has acknowledged that the Company has this pending registration statement at the time of issuance, and agreed that this registration statement will be exempted from granting the Lender piggyback registration rights. Illinois Joint-Venture, Oils and Edibles Relationship and Conditional Approval for Registration of the Dispensary The Company has significant developments in Illinois, which include: Entered into joint-venture agreement ("JV Agreement") with ILDISP LLC, which has ties to the Illinois medical marijuana industry, to build and assist in operating the Company's planned dispensary in Lawrenceville, Illinois; Been granted conditional approval ("Conditional Approval") by the Illinois Department of Financial and Professional Regulation ("IDFPR") to establish the Lawrenceville Dispensary; Commenced renovations at the Lawrenceville Dispensary property; and Entered into an agreement with an Illinois cannabis cultivation and extraction facility to develop a framework under which the extraction facility will manufacture and distribute Nutritional High's oils and edibles in Illinois. Under the terms of the JV Agreement ILDISP LLC will fund up to USD $300,000 of the expenses and working capital required to complete and launch the Lawrenceville Dispensary. In addition, subject to regulatory approval (as discussed below), ILDISP LLC will provide the Company with a guarantee for half the Seller Take-Back Mortgage. If ILDISP LLC makes its full contribution, in exchange for its contribution, ILDISP LLC shall receive a 50% interest in NHMD, the Company's wholly owned subsidiary which holds the Conditional Approval for the Lawrenceville Dispensary, and a 50% interest in SMHI, the Company's wholly owned subsidiary which holds the Company's interest in the Dispensary real estate property located in Lawrenceville, IL. The joint venture might require a need for additional capital infusions in excess of $300,000, which would require the Company to make additional contributions, failing to do which may result in reduction of the Company's interest in NHMDI and SMHI. In addition, ILDISP's failure to contribute may create an greater need for the Company to contribute additional capital, which may not be available to the Company on favorable terms or at all. ILDISP LLC has already made initial advances to fund the Lawrenceville Dispensary renovations and property mortgage payments. The joint venture is subject to the approval of the IDFPR. Furthermore, it is contemplated that ILDISP LLC will contribute to the management of the Lawrenceville Dispensary and its relationships in the surrounding community will help accelerate the growth and development of the Dispensary. Upon securing IDFRP approval, it is expected that a shareholders agreement, in a form and substance acceptable to the Company and ILDISP LLC, will be entered into. While the form of shareholders agreement will not be finalized until IDFRP approval has been secured, the shareholders agreement will contain customary provisions such as governance of the rights and responsibilities of the shareholders, respective share ownership and dilution mechanism if additional capital is required, corporate governance protection and various other checks and balances as between the shareholders. The Board of Directors of both NHMD and SMHI shall be composed of an equal number of directors appointed by both ILDISP and Nutritional High, once the requisite approvals are obtained. In addition, NHMD has been advised by the IDFPR that it has been awarded Conditional Approval to register the Lawrenceville Dispensary under the Compassionate Use of Medical Cannabis Pilot Program Act (Illinois) ("CUMCPPA"). The Conditional Approval sets out the requirements that NHMD must fulfill prior to IDFPR approving the registration of the dispensary, which includes completing the renovations and passing the final inspection to the satisfaction of IDFPR. Upon meeting IDFRP's conditions, it is expected that NHMD will be granted a final license to operate the Lawrenceville Dispensary. The Company also has entered into an agreement with an Illinois cannabis cultivation and extraction facility to develop a framework under which the extraction facility will manufacture and distribute Nutritional High's oils and edibles in Illinois. The cultivation and extraction facility is licensed with Illinois Department of Agriculture and was amongst the first of the companies to commence commercial cultivation and processing of cannabis products under the CUMCPPA. The Company will develop its business framework with the extraction facility over the next 18 months and will provide updates as this business initiative develops. The agreement provides for a right to negotiate an agreement to negotiate the framework in good faith, but provides for no financial terms in this regard. As such, the Company considers the agreement not material to its operations at this time. Lawrenceville Dispensary Application and Lawrenceville Property Acquisition The Company has taken possession of the real estate property in Lawrenceville, Illinois ("Lawrenceville Property") on November 25, 2015, under a purchase and sale agreement between NHMDI and the vendor of the Lawrenceville Property ("Lawrenceville PSA"). The final acquisition price for the Lawrenceville property was USD $350,000. The Company has also negotiated a seller take-back mortgage ("Seller Take-Back Mortgage"), which will have a 15 year amortization period, bearing an interest at the rate of 6% and be due in two years from the date of issuance as a balloon payment. Upon payment of the Seller Take-Back Mortgage, title to the Lawrenceville Property will automatically transfer SMHI (as hereinafter defined). Private Placement On December 2, 2015, the Company completed a non-brokered private placement of 4,200,000 units at $0.05 per unit for gross proceeds of $210,000. Each unit consisted of one common share and one half of one share purchase warrant, with each warrant exercisable into one common share at a price of $0.07 per share for a period of 18 months from the date of issuance. Hemp Product Launch The Company has rolled out of the first three products in its Hemp-Infused Products Segment. Initial products are being made available to consumers in California include capsules, push caps for water bottles, and a push cap formulation for post-exercise recovery called "Rapid Recovery". In addition, the Company intends to commenced sales of these products in Colorado in 2016, targeting sales to marijuana dispensaries in Colorado, further developing sales channels for the Company's marijuana oil and edible brands. Equity Purchase Agreement with Kodiak Capital On December 23, 2015, we entered into the Purchase Agreement with Kodiak Capital, which was subsequently amendment on March 4, 2016, May 5, 2016 and June 21, 2016. Pursuant to the terms of the Purchase Agreement, Kodiak Capital committed to purchase up to $1,000,000 of our common stock over a period until the earlier of (i) the date on which Kodiak Capital shall have purchased put shares pursuant to the Purchase Agreement for an aggregate purchase price of $1,000,000, or (ii) December 31, 2016. The purchase price of the shares that may be sold to Kodiak Capital under the Purchase Agreement will be equal to 25% discount to the closing bid price for the Company's common stock as reported by Bloomberg Finance, L.P., of the 5th trading day immediately following the date in which the Put Shares (as defined in the Purchase Agreement) have been deposited into the Kodiak Capital's brokerage account. However, there is a minimum purchase price for the Put Shares of the less of (i) $0.05 CAD per share, or (ii) the volume weighted average trading price of the shares for the preceding 20 days of trading on the CSE immediately prior to the date of the put notice. If during the Valuation Period, the purchase price falls below the floor price, the investor may elect to purchase all, or any portion thereof, of the Put Shares for the floor price. We do not have the right to commence any sales to Kodiak Capital under the Purchase Agreement until the SEC has declared effective the registration statement of which this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct Kodiak Capital to purchase shares of our common stock, but we would be unable to sell shares to them if such purchase would result in their respective beneficial ownership equaling more than 9.99% of the outstanding common stock. Except as described in this prospectus, there are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Kodiak Capital. We may at any time in our sole discretion terminate the Purchase Agreement without fee, penalty or cost upon one business day notice. Kodiak Capital is not permitted to engage in any short shales of our common stock during the period covered by the Purchase Agreement. In connection with the Purchase Agreement, we also entered into the Registration Rights Agreement, pursuant to which we are obligated to file a registration statement with the SEC by January 30, 2016. Kodiak Capital agreed to extend the filing deadline to February 10, 2016. At an assumed purchase price of $0.0225 (equal to 75% of the closing price of our common stock of $0.03 on June 24, 2016), we will be able to receive $855,000 in gross proceeds, assuming the sale of the entire 38,000,000 common shares being registered hereunder pursuant to the Purchase Agreement. We will be required to register additional 6,444,445 shares to received the entire $1,000,000 under the Purchase Agreement at the assumed purchase price. In addition, we may be required to register more shares in order to receive the full amount of the investment amount if the purchase price decreases. Risk Factors We face certain risks, challenges and uncertainties that may materially affect our business, financial condition, results of operations and prospects. The primary ones include: Funding from our Purchase Agreement with Kodiak Capital may be limited or be insufficient to fund our operations or to implement our strategy; The Company has limited operating history and encounters risks and uncertainties which might significantly harm the Company's business if those where not addressed properly. In addition, there is substantial doubt upon the Company's ability to continue as a going concern. At January 31, 2016 the Company had working capital (deficiency) of $(327,988) (July 31, 2015 - $116,439), had not yet achieved profitable operations, has accumulated losses of $3,393,225 (July 31, 2015 - $2,740,442) and expects to incur further losses in the development of its business; Our business is dependent on laws pertaining to the marijuana industry; Marijuana-related practices or activities are illegal under U.S. federal laws. Strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan; We face an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury; The Company may need to raise significant additional funds in order to support its growth, however, the Company cannot be sure that this additional financing, if needed, will be available on acceptable terms, or at all; The success of the Company is dependent on the performance of its senior management. The loss of the services of these persons would have a material adverse effect on the Company's business and its prospects; Exchange rate fluctuations may adversely affect the Company's financial position and results; You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under Canadian law, a substantial portion of our assets are in Canada and most of our directors and executive officers reside outside the United States; If the selling shareholder sells a large number of shares all at once or in blocks, the market price of our shares would most likely decline; The sale of our common stock to Kodiak Capital may cause dilution, and the sale of the shares of common stock acquired by Kodiak Capital, or the perception that such sales may occur, could cause the price of our common stock to fall; Kodiak Capital will pay less than the then-prevailing market price for our common stock; The Company's put right may convert into a greater number of shares than we have assumed in this prospectus; The market price of our common stock may fluctuate significantly; We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors; Our common stock is subject to the "penny stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock; and Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them. You should consider the risks discussed in the "Risk Factors" section and elsewhere in this prospectus before investing in our common stock. Emerging Growth Company We are an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of all of these exemptions. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, and delay compliance with new or revised accounting standards until those standards are applicable to private companies. We have elected to take advantage of the benefits of this extended transition period. We could be an emerging growth company until the last day of the first fiscal year following the fifth anniversary of our first common equity offering, although circumstances could cause us to lose that status earlier if our annual revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in any three-year period or if we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Corporate Information Our principal executive offices are located at 77 King Street West, Suite 2905 P. O. Box 121, Toronto Ontario M5K 1H1 and our telephone number is (416) 840-3798. Our website address is www.nutritionalhigh.com. The information contained therein or connected thereto shall not be deemed to be incorporated into this preliminary prospectus or the registration statement of which it forms a part. The information on our website is not part of this preliminary prospectus. The Offering Common stock offered for resale: 38,000,000 shares of common stock Common Stock outstanding after this offering: 180,192,514 shares of common stock(1) Use of proceeds: We will not receive any proceeds from the sale of shares by the selling stockholder. However, we will receive proceeds from the sale of shares to Kodiak Capital pursuant to the Purchase Agreement. We intend to use the net proceeds received from any such sales of shares to Kodiak Capital under the Purchase Agreement for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company. Risk factors: There are significant risks involved in investing in the Company. For a discussion of risk factors you should consider before buying our common stock, see "Risk Factors" beginning on page 11. Ticker symbol: OTCQB: "SPLIF" CSE: "EAT" Underwriter: Kodiak Capital Group, LLC is considered an underwriter of the Company. An underwriter must make public disclosure similar to disclosure made by an issuer in the event of purchases and sales of securities. (1) The number of shares of our common stock outstanding after this offering is based on 142,192,514 shares of common stock outstanding as of June 28, 2016 and excludes shares of common stock issuable upon exercise of warrants and conversion of convertible notes prior to this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001665598_rc-1-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001665598_rc-1-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001665598_rc-1-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001665840_natural_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001665840_natural_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..66410581d4a0bf3bd9abafe01d62b16186923822
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001665840_natural_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including our financial statements and related notes, and especially the risks described under "Risk Factors" beginning at page 5. We note that our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus. All references to "we," "us," "our," "Natural Destiny," "Company," or similar terms used in this prospectus refer to Natural Destiny Inc., a Nevada corporation, including its consolidated subsidiaries and variable interest entity ("VIE"), unless the context otherwise requires. We conduct our business through an operating entity, Hangzhou Yezhiyuan Agriculture Development Co., Ltd., a PRC limited liability company ("Hangzhou Yezhiyuan"), which is a VIE controlled by a wholly-owned subsidiary of ours through a series of contractual arrangements. "PRC" or "China" refers to the People s Republic of China, excluding, for the purpose of this prospectus, Taiwan, Hong Kong and Macau. "RMB" or "Renminbi" refers to the legal currency of China and "$", "US$" or "U.S. Dollars" refers to the legal currency of the United States. Our Company Overview Natural Destiny Inc. was incorporated in the State of Nevada on October 21, 2015 as a holding company. Through our subsidiaries in China, we are engaged in the business of distributing foods and beverages in China. Our executive offices are located in Jiande City, Zhejiang Province, China. We do not grow, produce or manufacture any products. Instead, we act as a distributor for our products primarily based on client or market demands. Our principal distributed products include fruits, juices, wine and nutritional supplement products such as tablets and condensed drinks made out of traditional Chinese herbs such as ginseng and edible bird s nest. At the present time, our principal supplier and principal customer are controlled by a related party, Mr. Jianrong Xia, our sole officer and director. Over time, we hope to expand to work with other suppliers and service other customers. We are currently focusing our resources on the marketing and sale of the XinshuiTM cherry plum drink and other cherry plum based products including cherry plum wine. The XinshuiTM cherry plum drink is a concentrated drink that contains mainly cherry plum extract, supplemented by a variety of natural foods and herbs and is a natural anti-aging drink. Due to the health benefits of cherry plum, our current consumers for the cherry plum based products will be primarily mid-aged and elderly people. We plan to market and sell the cherry plum based products initially through our distribution channels and network in Zhejiang and Jiangsu Provinces. Competitive Strengths We believe that the following competitive strengths will allow our business to grow: We purchased high quality products from reliable and stable sources. We place significant emphasis on product quality safety and have established relationship with reliable suppliers. We have established sales channels in Zhejiang and Jiangsu Provinces and plan to expand our sales network in other geographic areas of China. We sell our products in Jiangsu and Zhejiang Provinces through our own sales and distribution network. As our business continues to grow, we plan to expand our sales network into other regions of the PRC. CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered(1) Proposed maximum offering price per share Proposed maximum aggregate offering price Amount of registration fee common stock, par value $0.0001 per share, offered by certain selling stockholders 229,775 shares (3) $ 0.10 (2) $ 22,977.50 $ 2.31 (4) (1) Pursuant to Rule 416 of the Securities Act of 1933, as amended (the "Securities Act"), also registered hereby are such additional and indeterminable number of shares of common stock of the registrant as may be issuable due to adjustments for changes resulting from stock dividends, stock splits and similar changes. (2) Estimated pursuant to Rule 457 under the Securities Act solely for the purpose of calculating the amount of the registration fee, based the price of the registrant s common stock sold in a private placement which closed on May 1, 2016. Currently, there is no trading market for the registrant s common stock. (3) The 229,775 shares of common stock are being registered for resale by certain selling stockholders named in this registration statement, which shares were issued by the registrant in connection with a private placement of its common stock at an offering price of $0.10 per share. (4) Previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a) may determine. Table of Contents Growth Strategy We are focused on leveraging industry opportunities and our competitive strengths to become China s leading brand for foods and beverages through the following initiatives: Expand our domestic sales and distribution network and enter new markets. We are focused on expanding our sales and distribution channels in the domestic China market, and maintaining existing customers. To support our future growth, we intend to further expand our domestic sales and distribution channels to farmers markets, supermarkets, restaurants and retailers. Launch our online retail platform. In order to capitalize on e-commerce opportunities in China and increase our presence in a larger geographic area, we plan to launch our own online retail platform to sell our products over the internet. Improve our profitability by continuously introducing new high value added products. We constantly evaluate our products and adapt to changes in market conditions by updating our products to reflect new trends in consumer preferences. Further enhance our brand recognition. We have been gaining brand recognition in China, especially in Zhejiang and Jiangsu Provinces. We seek to expand our customer base and enhance brand recognition by seeking to penetrate a variety of sales channels such as well-known supermarkets to promote our products and attending various food exhibitions and organizing nutrition training sessions for distributors to promote our products. Our Corporate Structure On April 13, 2016, the Company executed a share exchange agreement to acquire all of the issued and outstanding ordinary shares of Natural Destiny (BVI) Company Limited, a corporation incorporated under the laws of the British Virgin Islands ("ND BVI"), from the shareholder of ND BVI (the "ND BVI Shareholder") in exchange for the issuance to the ND BVI Shareholder of 250,000,000 shares of its common stock, par value $0.0001 per share (the "Common Stock"), representing 100% of its then issued and outstanding shares of Common Stock (the transaction, hereinafter referred to as the "Share Exchange"). Upon completion of the Share Exchange, ND BVI became the Company s wholly owned subsidiary. ND BVI is a holding company, which in turn, holds 100% of the capital stock of Natural Destiny (HK) Co., Limited ("ND HK"), a Hong Kong corporation which was incorporated on November 16, 2015. ND HK is the parent company of Shanghai You Yue Trading Co., Ltd. (the "WFOE"), a wholly foreign owned entity established under the laws of the PRC, which is engaged in the sale and distribution of foods and beverages in the PRC through a series of contractual arrangements (the "VIE Agreements") with Hangzhou Yezhiyuan Agriculture Development Co., Ltd. ("Hangzhou Yezhiyuan"), a PRC limited liability company which was established on November 27, 2012 with a registered capital of RMB 10,000,000, of which RMB 9,000,000 has been paid to date. Pursuant to the VIE Agreements, the WFOE effectively assumed management of the business activities of Hangzhou Yezhiyuan and has the right to appoint all executives and senior management and the members of the board of directors of Hangzhou Yezhiyuan. The VIE Agreements are comprised of a series of agreements, including an Exclusive Business Cooperation Agreement, Share Pledge Agreement, Exclusive Option Agreement, Power of Attorney and Timely Reporting Agreement, through which the WFOE has the right to advise, consult, manage and operate Hangzhou Yezhiyuan in return for a service fee approximately equal to 100% of Hangzhou Yezhiyuan s annual net income. Mr. Jianrong Xia, who is the only equity holder of Hangzhou Yezhiyuan ("Mr. Xia") has pledged his right, title and equity interests in Hangzhou Yezhiyuan as security for WFOE to collect consulting services fees provided to Hangzhou Yezhiyuan through a Share Pledge Agreement. In order to further reinforce WFOE s rights to control and operate Hangzhou Yezhiyuan, Mr. Xia has granted WFOE an exclusive right and option to acquire all of their equity interests in Hangzhou Yezhiyuan through an Exclusive Option Agreement. A more detailed description of these VIE Agreements is provided under "Business – VIE Agreements" on page 31. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission ("SEC") is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Preliminary Prospectus Subject to Completion, dated October 14, 2016 NATURAL DESTINY INC. 229,775 Shares Common Stock This prospectus relates to the sale of up to a total of 229,775 shares of common stock, par value $0.0001 per share, of Natural Destiny Inc., a Nevada corporation, that may be sold from time to time by the selling stockholders named in this prospectus and their successors and assigns. The shares of common stock subject to this prospectus were issued to the selling stockholders in a private placement which closed on May 1, 2016. Our common stock is not presently traded on any market or securities exchange, and we have not applied for listing or quotation on any exchange. We will seek sponsorship for the trading of our common stock on the OTCQB Market operated by OTC Markets Group, Inc. (which we refer to here as the OTCQB Market) upon the effectiveness of the registration statement of which this prospectus forms a part. The 229,775 shares of common stock registered hereby can be sold by selling stockholders at a fixed price of $0.10 per share until our shares are quoted on the OTCQB Market and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority (referred to herein as FINRA), nor can we provide assurance that our shares will actually be quoted on the OTCQB Market or, if quoted, that a viable public market will materialize or be sustained. Information regarding the selling stockholders and the times and manner in which they may offer and sell the shares under this prospectus is provided under "Selling Stockholders" and "Plan of Distribution" in this prospectus. We have agreed to pay all the costs and expenses of this registration. We will not receive any proceeds from the sale of shares by the selling stockholders. We are an "emerging growth company" under the federal securities laws and are subject to reduced public company reporting requirements. An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See "Risk Factors" beginning on page 5 of this prospectus. Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2016. Table of Contents Company Information Our executive office is located at Room 902, Unit 1, Pearl Business Building, Jiande City, Zhejiang Province, PRC. Our telephone number is +86 571-64197788 and our website address is www.yzyny.com. The information contained in, or that can be accessed through, our website is not incorporated into and is not part of this prospectus. Implications of Being an Emerging Growth Company As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to: being permitted to present only two years of audited financial statements and only two years of related Management s Discussion and Analysis of Financial Condition and Results of Operations in our SEC filings; not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended. However, if certain events occur before the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period. In addition, Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act. Going Concern As described in auditor s report on our financial statements, our auditors have included a "going concern" provision in their opinion on our financial statements, expressing substantial doubt that we can continue as an ongoing business for the next twelve months. Table of Contents THE OFFERING Common Stock Outstanding before the Offering 250,229,775 shares Common Stock Offered by Selling Stockholders Up to 229,775 shares of Common Stock held by the selling stockholders Common Stock to be Outstanding After the offering 250,229,775 shares Use of proceeds We will not receive any proceeds from the sale of the Common Stock offered hereby. Quotation of Common Stock Our Common Stock is not presently traded on any market or securities exchange, and we have not applied for listing or quotation on any exchange. We will sponsorship for the trading of our Common Stock on the OTCQB Market upon the effectiveness of the registration statement of which this prospectus forms a part. The 229,775 shares of our Common Stock can be sold by selling security holders at a fixed price of $0.10 per share until our shares are quoted on the OTCQB Market and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, nor can we provide any assurance that our shares will actually be quoted on the OTCQB Market or, if quoted, that a viable public market will materialize. Rick Factors An investment in our company is highly speculative and involves a significant degree of risk. You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the "Risk Factors" section beginning on page 5 of this prospectus before deciding whether or not to invest in shares of our Common Stock. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001666114_unleashed_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001666114_unleashed_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..05f2714a82b3825b7b22be7a11c7d40c04e0ba73
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001666114_unleashed_prospectus_summary.txt
@@ -0,0 +1 @@
+Table of Contents Offering Summary Unleashed Inc. The Company We were incorporated as Unleashed Inc. on March 5, 2015 in the State of Nevada for the purpose of designing, distributing and selling swim, surf and open water related products to customers. Commencing in December 2014, Mr. Anthony Ridding, our founder and Chief Executive Officer, initially operated the business as a sole proprietor under the dba "Unleashed Hardware Inc." Thereafter, on or about March 5, 2015, he contributed the business assets and liabilities of his sole proprietorship to the Company. Prior to this Offering, our available funds combined with revenues will not be sufficient fund our proposed activities for the next twelve months. In order to fund our operations, we believe that we need the $250,000 in gross proceeds (maximum offering amount) from this offering. We believe the $250,000 would allow us to implement our business plan to the full extent that we envision. We further believe that $62,500 in gross proceeds will be sufficient to pay for the expenses of this offering and conduct our proposed business activities for the next twelve months on a limited basis (see "Use of Proceeds"). As of December 31, 2015, our current cash on hand is approximately $2,588. Our current monthly burn rate is approximately $4,250 per month. Based on our current burn rate, we will run out of funds by April 2016 without additional capital and assuming revenues based on past performance during that period. As of December 31, 2015, we had $9,536 in current assets and current liabilities in the amount of $Nil. Accordingly, we had a working capital surplus of $9,536 as of December 31, 2015. Our current working capital is not sufficient to enable us to implement our business plan as set forth in this prospectus. Our expenses in this offering are estimated at $10,000, and we will need a minimum of approximately $52,500. We will need to sell a minimum of 25% of the shares offering in this prospectus for net proceeds of $52,500 in order to meet our financial obligations. Our ability to remain in business with less than $52,500 in this offering is questionable. For these and other reasons, our independent auditors have raised substantial doubt about our ability to continue as a going concern. Accordingly, we will require additional financing, including the equity funding sought in this prospectus. We are offering for sale to investors a maximum of 50,000,000 shares of our common stock at an offering price of $0.005 per share. Our business plan is to use the proceeds of this offering for the development of additional product designs, the purchase of additional inventory, and marketing of our products. However, our management has retained discretion to use the proceeds of the offering for other uses. The minimum investment amount for a single investor is $400 for 80,000 shares. Subscriptions for less than the minimum investment will automatically be rejected. The shares are being offered by us on a "best efforts" basis and there can be no assurance that all or any of the shares offered will be subscribed. If less than the maximum proceeds are available to us, our development and prospects could be adversely affected. There is no minimum offering required for this offering to close. The proceeds of this offering will be immediately available to us for our general business purposes. The maximum offering amount is 50,000,000 shares ($250,000). Our address is Rastislavova 12, 949 01 Nitra, Slovakia. Our phone number is +42 123 6760. Our fiscal year end is March 31. Table of Contents CALCULATION OF REGISTRATION FEE TITLE OF EACH CLASS OF SECURITIES TO BE REGISTRATION AMOUNT TO BE REGISTERED(1) PROPOSED MAXIMUM OFFERING PRICE PER SHARE(2) PROPOSED MAXIMUM AGGREGATE OFFERING PRICE AMOUNT OF REGISTERED FEE(3) Common Stock, par value $0.001 50,000,000 $0.005 $250,000 $25.18 (1) This registration statement covers the sale by us of up to an aggregate of 50,000,000 shares of our common stock. Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement also covers any additional securities that may be offered or issued in connection with any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of our common stock. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act. (3) Previously paid. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. Table of Contents The Offering Securities Being Offered Up to 50,000,000 shares of our common stock. Offering Price The offering price of the common stock is $0.005 per share. There is no public market for our common stock. We cannot give any assurance that the shares offered will have a market value, or that they can be resold at the offered price if and when an active secondary market might develop, or that a public market for our securities may be sustained even if developed. The absence of a public market for our stock will make it difficult to sell your shares in our stock. We will issue you a paper stock certificate. It may be difficult depositing your paper stock certificates stock into your brokerage account. Many brokers restrict or deny paper certificate deposits. At the same time, most penny stocks are not eligible for electronic (DWAC or DRS) deposit through DTC, so you will not be able to electronically deposit your shares. As such, you may find it difficult to liquidate your shares in our company. Upon the effectiveness of the registration statement of which this prospectus is a part, we intend to apply to FINRA for quotation on the OTC OTCQB, through a market maker that is a licensed broker dealer, to allow the trading of our common stock upon our becoming a reporting entity under the Securities Exchange Act of 1934. There is no guarantee, however, that our common stock will ever be quoted on the OTC OTCQB. Minimum Number of Shares To Be Sold in This Offering n/a Maximum Number of Shares To Be Sold in This Offering 50,000,000 Securities Issued and to be Issued 15,000,000 shares of our common stock are issued and outstanding as of the date of this prospectus. Our officer and director, Anthony Ridding owns an aggregate of 100% of the common shares of our company and therefore have substantial control. Upon the completion of this offering, Mr. Ridding will own an aggregate of approximately 23.08% of the issued and outstanding shares of our common stock if the maximum number of shares is sold. Number of Shares Outstanding After The Offering If All The Shares Are Sold 65,000,000 Use of Proceeds If we are successful at selling all the shares we are offering, our net proceeds from this offering will be approximately $240,000. We intend to use these proceeds to execute our business plan. Offering Period This offering will be open until the earlier of: (i) the maximum amount of shares have been sold; or (ii) twelve months from the date of effectiveness of this registration statement of which this prospectus forms a part. In our sole discretion, we have the right to terminate the offering at any time, even before we have sold the 50,000,000 shares. There are no specific events which might trigger our decision to terminate the offering. Table of Contents PROSPECTUS UNLEASHED INC. 50,000,000 SHARES OF COMMON STOCK INITIAL PUBLIC OFFERING ___________________ SUBJECT TO COMPLETION, Dated: , 2016 This prospectus relates to our offering of 50,000,000 shares of our common stock at a fixed offering price of $0.005 per share. There is no minimum number of shares that must be sold by us for the offering to proceed, and we will retain the proceeds from the sale of any of the offered shares. We have not made any arrangements to place funds raised in this offering in an escrow, trust or similar account. Any investor who purchases shares in this offering will have no assurance that other purchasers will invest in this offering. The offering is being conducted on a self-underwritten, best efforts basis, which means our officers and directors will attempt to sell the shares with no commission or other remuneration payable to them for any shares they may sell. In our sole discretion, we have the right to terminate the offering at any time, even before we have sold the 50,000,000 shares. There are no specific events which might trigger our decision to terminate the offering. There is no established public market for our common stock, and the offering price has been arbitrarily determined. Our common stock is not currently listed or quoted on any quotation service. Although we intend to apply for quotation on the OTCQB tier of the OTC Markets through a market maker, there can be no assurance that our common stock will ever be quoted on any quotation service or that any market for our stock will ever develop. This offering will be open until the earlier of: (i) the maximum amount of shares have been sold; or (ii) twelve months from the date of effectiveness of this registration statement of which this prospectus forms a part. Offering Price Underwriting Discounts and Commissions(1) Proceeds to Company Assuming 100% Subscribed Proceeds to Company Assuming 75% Subscribed Proceeds to Company Assuming 50% Subscribed Proceeds to Company Assuming 25% Subscribed Per Share $0.005 0 $0.005 $0.005 $0.005 $0.005 Gross Proceeds 0 $250,000 $187,500 $125,000 $62,500 Net Proceeds(2) 0 $240,000 $177,500 $115,000 $52,500 (1) There are no arrangements or plans to use underwriters or broker/dealers to offer our common stock. However, we reserve the right to utilize the services of licensed broker/dealers and compensate these broker/dealers with a commission not to exceed 10% of the proceeds raised. (2) The net proceeds estimates offering expenses of $10,000. We are an "emerging growth company" as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements. The purchase of the securities offered through this prospectus involves a high degree of risk. See section entitled "
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001666487_stemcell_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001666487_stemcell_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b7155810480234cb4c892f3c30401ca361240631
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001666487_stemcell_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY In this Prospectus, "Stemcell Holdings,"the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to Stemcell Holdings, Inc., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending December 31. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 8, and the financial statements in their entirety, before making an investment decision. All dollar amounts refer to US dollars unless otherwise indicated. All currency conversion(s) of JPY to USD are as of May 31, 2016. The Company The Company was originally incorporated with the name Perfect Acquisition, Inc., under the laws of the State of Delaware on December 31, 2015, with an objective to acquire, or merge with, an operating business. On January 27, 2016, Jeffrey DeNunzio of 780 Reservoir Avenue, #123, Cranston, RI 02910, the sole shareholder of the Company, entered into a Share Purchase Agreement with Takaaki Matsuoka with an address at 3-18-17-6F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. Pursuant to the Agreement, Mr. DeNunzio transferred to Dr. Matsuoka, 20,000,000 shares of our common stock which represents all of our issued and outstanding shares. Following the closing of the share purchase transaction, Dr. Matsuoka gained a 100% interest in the issued and outstanding shares of our common stock and became the controlling shareholder of the Company. The sale of shares between Jeffrey DeNunzio and Takaaki Matsuoka was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Dr. Matsuoka is a Japanese Citizen. On January 27, 2016, the Company changed its name to Stemcell Holdings, Inc. and filed with the Delaware Secretary of State, a Certificate of Amendment. On January 27, 2016, Jeffrey DeNunzio resigned as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. The resignation was not the result of any disagreement with us on any matter relating to our operations, policies or practices. On January 27, 2016, Mr. Takaaki Matsuoka was appointed as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. On March 23, 2016, Stemcell Holdings, Inc., a Delaware corporation (the "Company"), entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Takaaki Matsuoka, our President, CEO and Director. Pursuant to this Agreement, on March 24, 2016 Takaaki Matsuoka transferred to Stemcell Holdings, Inc., 500 shares of the common stock of Stemcell Co., Ltd., a Japan corporation ("Stemcell"), which represents all of its issued and outstanding shares, in consideration of 5,000,000 JPY ($44,476 USD). Following the effective date of the share purchase transaction above on March 24, 2016, Stemcell Holdings, Inc. gained a 100% interest in the issued and outstanding shares of Stemcell s common stock and Stemcell became a wholly owned subsidiary of the Company. On May 2, 2016, Takaaki Matsuoka entered into a Stock Purchase Agreement with Primavera Singa Pte Ltd, a Singapore corporation ("Primavera Singa") with an address at 60 Paya Lebar Rd #09-25, Paya Lebar Square 409051, Singapore. Pursuant to the Agreement, Dr. Matsuoka transferred to Primavera Singa, 17,299,533 shares of our common stock which represents 86.5% of our issued and outstanding shares. Shiho Matsuoka, the wife of our sole officer and director Takaaki Matsuoka, owns and controls 100% of Primavera Singa Pte., Ltd. Following the closing of the share purchase transaction, Primavera Singa Pte., Ltd. became the controlling shareholder of the Company. The sale of shares between Takaaki Matsuoka and Primavera Singa was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Dr. Matsuoka is a Japanese Citizen. *Currently, we operate through our wholly owned subsidiary, Stemcell Co., Ltd., of which is engaged in the regenerative medicine-related business which includes but is not limited to the culturing, storing and delivery of stem cells. Our principal executive offices are located at C/O Omotesando Helene Clinic, 3-18-17-6F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. Our phone number is +81-3-6432-9977. Table of Contents Our Offering We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.0001 par value per share ("Common Stock") and 20,000,000 shares of preferred stock, $0.0001 par value per share ("Preferred Stock"). We have 20,000,000 shares of Common Stock and no shares of Preferred Stock issued and outstanding. Through this offering we will register a total of 5,295,397 shares. These shares represent 5,295,397 shares of common stock held by our selling stockholders. The selling stockholders will sell shares at a fixed price of $0.50 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will not receive any proceeds from the selling stockholders. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Selling Stockholders 5,295,397 shares of common stock, at a fixed price of $0.50 offered by selling stockholders in a resale offering. As previously mentioned this fixed price applies at all times for the duration of this offering. This offering will automatically terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may however, at our discretion terminate the offering at any time. Offering price per share The selling shareholders will sell the shares at a fixed price per share of $0.50 for the duration of this Offering. Number of shares outstanding before the offering of common stock 20,000,000 common shares are currently issued and outstanding. Number of shares outstanding after the offering of common shares 20,000,000 common shares will be issued and outstanding. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $0.50. We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. Termination of the Offering This offering will automatically terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 5,295,397 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days or terminate the offering at any time. Registration Costs We estimate our total offering registration costs to be approximately $20,000. Risk Factors: See "Risk Factors" and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. *Currently, Primavera Singa Pte., Ltd. is our controlling shareholder. Primavera Singa Ptd., Ltd. currently owns 86.50% of the total issued and outstanding shares of our common stock. Shiho Matsuoka, the wife of our sole officer and director Takaaki Matsuoka, owns and controls 100% of Primavera Singa Pte., Ltd. You should rely only upon the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. We are offering to sell common stock and seeking offers to common stock only in jurisdictions where offers and sales are permitted. The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001666961_precious_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001666961_precious_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a2fef7b3f087ee02a418a7273d84d6cc232eba64
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001666961_precious_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary provides an overview of selected information contained elsewhere in this prospectus. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the following summary together with the more detailed information in this prospectus and review our financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Company" refer to Precious Metals Exploration Corp. As of the date of our most recent audit, December 31, 2015, we had $3,516 in total assets. PRECIOUS METALS EXPLORATION CORP. Organization We were incorporated in the State of Nevada as a for-profit company on March 27, 2015, under the name Precious Metals Exploration Corp. and our incorporator appointed Robert Russell, our sole director. On March 27, 2016, Mr. Russell was appointed as the Company s Chief Executive Officer, President, Treasurer and Chief Financial Officer. Mr. Russell appointed Sean Meadon, to fill a vacancy on the board and Mr. Meadon was appointed as the Company s Chief Operating Officer and Secretary. To date, we have limited operations and are implementing our business plan to set up a surface clean-up and retreatment operation to set up a primary washing and screening plant in South Africa in order to process surface and near surface mineral deposits which will minimize the capital mining companies require to commence mining operations. The target minerals are the gold and platinum group metals ("PGM"). We have established a fiscal year end of December 31. On March 31, 2015, we acquired a 74% interest in Anganna Investments 143 (Pty) Ltd., a South African corporation, which is our subsidiary. On March 17, 2016, we amended our Articles of Incorporation to add additional provisions to them. On March 27, 2015, we issued 40,000,000 shares of our $0.0000001 par value common stock, valued at $0.0001 per share, to our 2 initial shareholders, which includes 20,000,000 common shares to Robert Russell, in exchange for organizational services incurred in our formation, which our sole director valued at $0.0001 per share, or $2,000 for preformation services rendered to develop our organization, and business model. On March 27, 2015, we also issued 20,000,000 shares of our $0.0000001 par value common shares to our other initial shareholder, Sean Meadon, our chief operating officer and secretary, in exchange for organizational services incurred in our formation, which our sole director valued at $0.0001 per share, or $2,000 for preformation services rendered to us for assisting in our organization. As of December 31, 2015, we have incurred $30,308 in operational expenses. We anticipate our burn rate will be approximately $1,000 per month. We believe that our present capital is insufficient to cover our monthly burn rate for the next 12 months. We believe that we will require approximately $150,000 in cash to accomplish the goals set out in our plan of operation, which is to develop our mine surface clean-up and retreatment operation. To the extent we are unable to accomplish our goals with the proceeds from the issuance of our common stock, then we intend to raise additional capital from investors through the sale of our common stock or from loans or advances from our majority shareholders. Our principal business, executive and registered statutory office is located at 6 Rietfontein Road, Edenburg, Rivonia, Sandton, 2128, Republic of South Africa and our telephone number is (27-11) 234-7976, fax is (27-11) 234-7976 and email contact is robert@preciousmetalsexploration.com. Our URL address is www.preciousmetalsexploration.com. Business We are a newly formed company that commenced operations on March 27, 2015. Our activities have been limited to organizational and business development activities. On December 12, 2014, Oelofsen Anna Catharina established Anganna Investments 143 (Proprietary) Limited ("Anganna"), a South African corporation under section 14 of the Companies Act, 2008. Ms. Catharina was Anganna s incorporator and its initial director. On January 30, 2015, Ms. Catharina appointed Robert Russell, one of our director and chief executive officer as Anganna s sole director and Ms. Catharina resigned. On January 20, 2015, Mr. Russell issued 26 shares of Anganna s stock to The Magwe Trust IT: 8009/02 ("The Magwe Trust"), which is a Black Economic Empowerment partner for $26. On March 31, 2015, Anganna issued 74 shares to us representing 74% of Anganna s ownership for $74. Under South African law, we are required to have a Black Economic Empowerment partner to conduct our operations. Anganna has applied for a South African precious metals deposit with the South African Department of Mineral Resources. Other than the formation and issuance of its shares, Anganna does not have an operating history or any assets. Anganna Investments 143 (Proprietary) Limited has applied for a South African surface mining permit with the South African Department of Mineral Resources. We are currently focused on setting up a surface clean-up and retreatment operation, targeting both in-house and third party surface deposits. We intend to raise capital to set up a primary washing and screening plant and then plan to add on a crushing and gravity recovering circuit. We intend to fund the application phase, exploration phase and working capital needs through the sale of our common stock. The Market Opportunity We intend, through our surface clean up, retreatment plant and allied services, to exploit the demise of Johannesburg s 125 year old gold mining industry by tapping into the mine dumps or surface tailings that scar much of the city s East and West Rand and intend to extract their leftover bullion. South African s gold industry in its current form is declining and we believe the next logical step is for mines to close. Tailings consist of ground rock and process effluents that are generated in a mine processing plant. Mechanical and chemical processes are used to extract the desired product from the run of the mine ore and produce a waste stream known as tailings. This process of product extraction is never 100% efficient, nor is it possible to reclaim all reusable and expended processing reagents and chemicals. The unrecoverable and uneconomic metals, minerals, chemicals, organics and process water are discharged, normally as slurry, to a final storage area commonly known as a Tailings Management Facility (TMF) or Tailings Storage Facility (TSF). Tailings are generally stored on the surface either within retaining structures or in the form of piles (dry stacks) but can also be stored underground in mined out voids by a process commonly referred to as backfill. South African surface tailings typically contain around 0.3g/ton of leftover gold, which has become profitable to mine thanks to improved technology, low overheads and a gold price that is currently near $1,228/oz. The commercial incentive for extracting this gold from South Africa s mine dumps, many of which are more than 60-years old, is one way to mitigate job losses at deep-level mines where the cost of mining as deep as 3km below surface is fast becoming prohibitive. We believe that we can play an important role in reducing the likelihood that the cost of rehabilitating surface tailings could one day be shifted to the tax payer if traditional mining companies disappear. We are currently in negotiations for a surface mining permit which will give us the rights to surface tailings for gold and other associated metals at a property located at Boksburg, (Greater Johannesburg) where previously existing mines are on the Witwatersrand East Rand in South Africa. There are additional platinum group metals ("PGM") located on the Western and Northern Limbs of the Bushveld Igneous Complex. These deposits consist of surface and shallow deposits which are available and within the scope of our business plan. As of the date of this registration statement, we have not applied for the gold mining permits. As of the date of this Prospectus, we have 40,00,000 shares of $0.0000001 par value common stock issued and outstanding, which is owned by 2 shareholders. The aggregate market value of our common stock based on the offering price of $0.05 per share is $2,000,000. Our stockholders deficit as of our most recent audit is ($30,308). Competition We compete for industry participants with other companies that offer similar services. While there is no clear leader or one distinct competitor in the South African marketplace that provides turnkey solutions to the surface mining and tailings rehabilitation industry We intend to continue to develop services that we believe will be valuable to clients. We believe that we can become a market dominant brand, but there can be no assurance that we will be successful in accomplishing our business initiatives, or that we will be able to maintain significant levels of revenues, or recognize net income for providing our services. THE OFFERING We are offering for sale a total of 3,000,000 shares of common stock at a fixed price of $0.05 per share. There is no minimum number of shares that must be sold by us for the offering to proceed, and we will retain the proceeds from the sale of any of the offered shares. The proceeds from the sale of the offered shares will not be placed in escrow or a trust account and will be immediately available to us. The offering is being conducted on a self-underwritten, best efforts, basis, which means our chief executive officer and director, Robert Russell and our chief operating office and secretary, Sean Meadon, will attempt to sell the shares. This prospectus will permit them to sell the shares directly to the public, with no commission or other remuneration payable to them for any shares they may sell. Robert Russell and and Sean Meadon will sell the shares and intend to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, they will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934 (the "Exchange Act"). The intended methods of communication include, without limitations, telephone and personal contact. The following is a brief summary of this offering. Please see the "Plan of Distribution" section for a more detailed
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001667161_randolph_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001667161_randolph_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fdea962e19af41e682ec1f601d1e2c98f2a00dac
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001667161_randolph_prospectus_summary.txt
@@ -0,0 +1 @@
+The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information before making an investment decision, you should read this entire prospectus carefully, including the consolidated financial statements and the notes to the consolidated financial statements, and the section of this
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001667489_liberated_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001667489_liberated_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fe5a4fc03fc7e7d89c1353db4b4163517136d2bd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001667489_liberated_prospectus_summary.txt
@@ -0,0 +1 @@
+along with increases in requests for podcast episodes demonstrates the evolution of the industry and opportunities for revenue generation. Management believes that opportunity remains for podcasting growth and revenue generation. A good indication of the potential for podcasting is the announcement by Google in 2015 that it planned to start offering podcasts to millions of new listeners on Android phones and tablets through Google Play Music. Spotify also moved to include podcasts within its music app last year to create a deeper, richer and immersive experience. Both platforms will connect new listeners with podcasts based on what they are doing or what they are interested in, improving discovery and increasing consumption. Additionally, correlating podcast content (along with music and news) to the interests and activities of listeners creates a strong target profile for advertisers. In the past, brand advertisers utilized demographic targeting focused on age, gender and income among other factors to make podcast ad buys. Recently, psychographic segmentation by advertisers is being used to identify targets based on personality, interests, attitudes and lifestyles. While both are well suited to the highly engaged and targeted podcast audiences, psychographics defines what buyers want. This can be more highly correlated with podcast show topics and those audiences that consume them. As a result, smaller ad impression volumes than demographic buys can yield positive ROIs. Companies that advertise on podcasts do so to reach very niche audiences that they are unable to reach through other channels. Advertisers know that the ads work by tracking the codes in the ad reads and can gauge ROI against sales. Additionally, these mid-sized companies feel that the endorsement styles of the podcast hosts help to soften the hard-sell message by keeping it authentic and not forced. Some in the advertising industry feel that podcast advertising will remain a niche but that there is opportunity to drive higher advertising rates because of the successful endorsement style. Producers have highly engaged audiences and create relationships with them through the show. Crafting the message in a way that resonates with the particular psychographic for the show leads to positive ROI for advertisers. With higher ad pricing, you don t need as much volume and shows can earn money through advertising by securing sponsorships and flat rate ad buys. Online advertising is expected to overtake television advertising in 2019, reaching $83.9 billion. Mobile advertising is forecast to increase from 30% share this year to a predicted 46% share or nearly $40 billion in 2019. Management believes that potential opportunities in the podcast segment are also clearly evident based on the number of players that are capitalizing on this medium. Competition As podcasts continue to rise in popularity, there have been a variety of market entrants within the ecosystem and industry. These include podcast networks, aggregators, distribution platforms, social media sharing, monetization technologies, pre and post production tools, and consulting services. These players see the opportunities in market share and revenue arising from continued growth in podcasting. Apple has been the market leader in mobile devices, driving the discovery of music, podcasts, movies and Apps through iTunes. To compete with Apple, Google, Amazon and Windows have launched App stores to support Android and Microsoft Phone8 devices. These App stores also include podcast apps. iTunes is still the dominant directory for discovery of podcasts and podcast apps. But players like Google and Spotify are syndicating podcast content and distributing it alongside news and music. None of these players offer podcast hosting and distribution services and each has served in a synergistic role to compliment Libsyn s business model. But unlike Apple, Google and Spotify are serving as distributors by delivering copies of podcast episodes that are hosted on their site with other music and audio files. They could become direct competitors, leveraging larger content offerings to generate advertising revenues. Several other existing and new podcast networks, distribution platforms and monetization technologies present direct competition to Libsyn. Libsyn could face competition from free or lower cost podcast hosting services that hope to make money exclusively from advertising sales. Downward pricing pressure in advertising may result from competitors leveraging large economies of scale to sell quantity over quality audience targets. Additionally, competitors may undercut advertising rates to attract advertisers. Both will effectively lower advertising rates and provide lower performing results for advertisers which may harm the medium s viability for campaign renewal or new advertisers. Growth of the Libsyn network and revenue could be negatively affected by loss of podcast shows to competitors or downward pricing pressure. Libsyn Overview Libsyn was on the forefront of the podcast trend when it was founded in 2004, launching the first Podcast Service Provider (Host), offering storage, bandwidth and RSS creation tools. Today, Libsyn is a worldwide leader of podcast hosting, distribution and monetization. Hosting over 28,000 podcast shows, Libsyn delivered 3.3 billion podcast requests to audiences worldwide in 2015. The Libsyn brand has built a reputation for reliable service, world-class podcast statistics and exceptional customer service. This has allowed Libsyn to grow into one of the market leaders in the industry. The Libsyn business has also experienced upward trends in the areas of podcast creation, consumption and audience growth. Podcast shows on the Libsyn platform increased to over 28,000 in 2015 from 22,000 in 2014 and 16,000 in 2013. This resulted in 2,572,295 active episodes in 2015 versus 2,145,840 in 2014 and 1,688,057 in 2013. Annual podcast download requests on the Libsyn platform exceeded 3.33 billion in 2015, up from 2.6 billion in 2014 and 1.9 billion in 2013. Additionally, the Libsyn network now reaches 55 million audience members monthly, an increase from 41 million in 2014 and 34 million in 2013. In 2015, Libsyn generated 60% of its $7.2 million in revenue from Podcast hosting fees paid by Libsyn4 Producers. Advertising revenue is 14% of overall revenues, and LibsynPro, which includes hosting, along with bandwidth charges and other professional level add-ons, makes up 17% of revenues. App subscriptions make up 9% of total Libsyn revenues. Podcast Hosting and Distribution Libsyn is a Podcast Service Provider offering hosting and distribution tools which include storage, bandwidth, RSS creation, distribution and statistics tracking. Podcast producers can chose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn offers a basic, getting started plan for $5 per month and more advanced plans that include more storage, advanced stats and podcast apps. Plans are designed to provide full-featured podcast tools with generous storage and bandwidth transfer. LibsynPRO service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support. Libsyn supports both audio and video podcasts, allowing producers to upload podcast episodes through the Libsyn interface or via FTP to manage publishing to online directories, web portals, content aggregators, App marketplaces and social media platforms for both download and streaming. Approximately 70% of the shows that Libsyn distributes reach audiences using Apple s iTunes platform which includes iTunes on the computer, iPods, iPads, iPhones, iPad, Apple Watch, Apple TV and Apple s Podcasts App on iOS devices. Libsyn also enables distribution to destinations like Google Play Music and aggregators such as Spotify. The OnPublish feature enables podcast episodes to be posted to social media sites such as Facebook, Twitter, Linked-In and blogging platforms like WordPress, Blogger. Libsyn also launched a newly redesigned podcast player that can be embedded on websites or shared via social media. Libsyn s podcast platform architecture allows for expansion of distribution destinations and OnPublish capabilities. Using the Libsyn service, podcast producers can more broadly distribute and promote their shows to attract larger audiences. Mobile Podcast Apps Each month, more than 1.5 billion people download apps for the Apps stores versus approximately 75 million who download podcasts. In order to grow audience for a podcast, producers seek to distribute the show everywhere. After the iTunes podcast directory, the next largest and most readily used marketplaces are App stores. Libsyn provides the ability for producers to have their own customized apps or be included in the Libsyn PodSource app, across all of the major App Stores. This includes Apple, Google, Amazon and Windows Phone8 App Stores. This allows podcasts to be discovered by those new to podcasts but familiar with Apps and more importantly, enables a simple way to consume podcasts and share them with friends. Additionally, podcast apps open podcast consumption to users who are not Apple-centric and do not require listeners to subscribe or download podcasts. Once the App has been downloaded to a mobile device, the podcast episodes can be played directly from the App. Advertising The Libsyn Ad Sales team has ongoing relationships with agencies and advertisers and works directly with podcast producers on advertising and sponsorship opportunities. Producers shows earn revenue share from advertising campaigns. Additionally, Campaign Management services which include automated ad insertion tools are integrated into the Libsyn platform. These tools are used by the Libsyn Ad Operations team and enterprise customers to schedule and track ad impressions that are dynamically inserted into podcasts. Libsyn statistics show that over 50% of podcast downloads come from the back catalog of content. With dynamic ad insertion, ads are included only during the campaign which allows the entire show catalog to be available for future campaigns. Host-read ads are permanently included in the episode limiting future advertising opportunities across a show s entire inventory but benefiting advertisers with episodic lifetime advertising. Advertisers and agencies run renewal campaigns and add new campaigns based on the ROI performance and working experience with Libsyn s Ad Operations team. Based on management s experience, advertisers prefer to deal with a company like Libsyn when it comes to podcast advertising, which has a larger audience reach. We are able to leverage our relationship with our producers and simplify the coordination of advertising buys and campaign tracking. Management believes that the value of targeted audiences will continue to drive higher-value CPMs (cost per million advertising rates) and sponsorship rates based on successful results, positive ROIs and relationships with the producers. Premium Podcast Content Premium podcast content is a monetization strategy for producers to lock down show episodes and offer them to their audience on a paid subscription basis. Through MyLibsyn, podcast shows get a custom App and a podcast website where listeners can access their show, login to purchase a subscription and get access to premium content. Subscriptions are offered on a one month, six month or annual basis and revenue is shared with the show s producer. With over 50% of podcast downloads coming from the back catalog of content, the Premium offering enables shows to make their most recent episodes available for free in order to continue to build audiences but charge for their back catalog to generate revenue from the subscriptions. The Premium offering is also available to LibsynPro customers to create private podcasts. Private Premium is ideal for large organizations and companies that want to distribute audio and video information internally through mobile apps. Access to Private Premium content is controlled and managed by an access list through the LibsynPro interface. The organizations pay monthly for the private subscribers so users are only required to download the App from one of the App stores and login. This provides an easy solution for organization to distribute information to employees, partners and affiliates by utilizing smartphone apps. Libsyn s Strategy Following the completion of the Spin-Off, Libsyn plans to grow the company through organic growth. Management believes that there are several market and economic conditions that make this strategy timely and with substantial potential upside. Operations Plan Libsyn intends to operate a centralized, scalable administrative operation at its Pittsburgh, Pennsylvania headquarters to take advantage of operational efficiencies and facilitate billing and compliance efforts. Libsyn believes that centralized administrative functions will allow it to better understand and respond to our customers needs and to better control expenses. Employees. Libsyn does not conduct any material operations of its own. Its operations are conducted through its wholly-owned subsidiary, Webmayhem. We currently have a total of approximately 18 employees, of which 16 are full time employees. None of such employees are represented by employee union(s). Management believes its relations with all of its employees are good. Property. Libsyn s principal executive offices consist of approximately 3,100 square feet of office space located at 5001 Baum Boulevard, Suite 770, Pittsburgh, Pennsylvania 15213. Our telephone number is (412) 621-0902. Litigation. There are no material civil, administrative or criminal proceedings concluded, pending or on appeal against Libsyn, or Webmayhem. Directors and Executive Officers. The following table reflects the names, ages and positions of Libsyn s executive officers and directors. Name Position Age 1st Elected Term Expiration Christopher J. Spencer CEO and Chairman of the Board 46 2015 Sept. 2016 John Busshaus Chief Financial Officer 53 2015 N/A Douglas Polinsky Director 56 2015 Sept. 2016 Denis Yevstifeyev Director 34 2015 Sept. 2016 J. Gregory Smith Director 46 2015 Sept. 2016 Key Corporate Management. Christopher Spencer has served as our Chief Executive Officer, President and as a director of Libsyn since its inceptions on September 29, 2015. Mr. Spencer has served as Chief Executive Officer, President and a director of Future Healthcare of America since June 22, 2012. Mr. Spencer has served as Chief Executive Officer, President and a director of FAB Universal Corp. since February 7, 2001. From 1994 until 1996, Mr. Spencer founded and worked for ChinaWire, Inc., a high-technology company engaged in financial remittance between international locations and China. Mr. Spencer worked for Lotto USA, Inc. from 1992-1994, where he was founder and Chief Executive Officer for the Pennsylvania computer networking company. From 1990 until 1992, Mr. Spencer worked for John Valiant, Inc., and was responsible for business concept development and obtaining financing. John Busshaus has served Chief Financial Officer of Libsyn since its inceptions on September 29, 2015. Mr. Busshaus has served as Chief Financial Officer of Future Healthcare of America since June 22, 2012. Mr. Busshaus has served as the Chief Financial Officer of FAB Universal Corp. since January 29, 2007. From 2004 to 2006, Mr. Busshaus was an independent business consultant. Mr. Busshaus efforts were assisting organizations with the implementation of Sarbanes Oxley, filing of SEC reports, and taking a company through an IPO. Mr. Busshaus worked for Talanga International from 2001 to 2004, where he was the Chief Financial Officer for the company. From 1999 to 2000, Mr. Busshaus worked for Mellon Bank as Controller and Vice President, and was responsible for strategic planning and managing the annual and monthly budgeting within Global Security Services. From 1994 to 1998, Mr. Busshaus worked for PepsiCo as Senior Business Planner, and was responsible for annual and quarterly budgets planning, as well as weekly, monthly and quarterly reporting of results. As a member of management, Mr. Busshaus' efforts contributed to the revenue growth and market share increases in a market that was categorized as saturated. Douglas Polinsky has served as a Director of Libsyn since its inceptions on September 29, 2015. Mr. Polinsky has served as a Director of Future Healthcare of America since June 22, 2012. Mr. Polinsky has served as a Director of FAB Universal Corp. since October 2007. Mr. Polinsky serves as the President of Great North Capital Corp., a Minnesota-based financial services company he founded in 1995. Great North advises corporate clients on capital formation and other transaction-related financial matters. Mr. Polinsky earned a Bachelor of Science degree in Hotel Administration at the University of Nevada at Las Vegas. Greg Smith has as a Director of Libsyn since its inceptions on September 29, 2015. Mr. Smith has served as a Director of Future Healthcare of America since on June 22, 2012. Mr. Smith has served as a Director of FAB Universal Corp. since October 2007. Mr. Smith is an award-winning producer and entrepreneur with over 10 years of experience in Non-Fiction Television. In 2000, Mr. Smith established The Solution Film Group, LLC and acts as the Company s President. Mr. Smith provides professional production and editorial support for various forms of non-fiction television entertainment, including the direction of media projects from development through production and post-production. His clients include Discovery Channel, Science Channel, Discovery HD Theater, Animal Planet, The Military Channel, PBS, and Discovery Networks International. Mr. Smith most recently won an Emmy in 2006 for the Discovery Channel s animated special Before the Dinosaurs. His other awards for excellence in production and editing include Emmys for the Discovery Channel s Walking with Prehistoric Beasts and Allosaurus: A Walking with Dinosaurs Special. From 1997 to 2000, Mr. Smith worked for Discovery Communications, Inc. in the capacity of Supervising Producer from January 1998 to November 2000, and Producer/Editor from October 1997 to January 1998. From 1995 to 1996, Mr. Smith worked for Discovery Channel Pictures serving as Assistant Editor from March 1996 to October 1997, and Production Assistant from September 1995 to March 1996. From 1994 to 1995, Mr. Smith worked for Crawford Communications in Atlanta, Georgia as a Manager of Satellite Services for The Learning Channel. Denis Yevstifeyev has served as a Director of Libsyn since its inceptions on September 29, 2015. Mr. Yevstifeyev has served as a Director of Future Healthcare of America since June 22, 2012. Mr. Yevstifeyev has served as a Director of FAB Universal Corp since October 2007. From 2009 to 2012, and from 2015 to present, Mr. Yevstifeyev served as the Director of Financial Planning & Analysis for Education Management Corporation Online Higher Education. From 2012 to 2015, Mr. Yevstifeyev owned and operated his commercial printing company. From 2007 to 2008, Mr. Yevstifeyev served as Sr. Financial Reporting Analyst for American Eagle Outfitters, Inc., in Pittsburgh. His duties included: preparing and analyzing various internal and external financial reports; researching new accounting pronouncements and evaluating any impact on the financial statements. He also reviewed accounting workpapers and prepared the company s SEC filings for forms 8-K, 10-Q and 10-K. From 2005 to 2007, Mr. Yevstifeyev worked for Schneider Downs, Inc., where he worked on Sarbanes-Oxley compliance engagements. In 2005, Mr. Yevstifeyev graduated with a Bachelor of Science degree in Business from Washington and Jefferson College. He also graduated with honors from the Moscow Bank College of the Central Bank of Russia in Moscow with a degree in Finance in 2000. From 2002 to 2003, Mr. Yevstifeyev served as the Settlement Department Manager for SDM BANK in Moscow, where he dealt with domestic and international corresponding banks, among other responsibilities. EXECUTIVE COMPENSATION Background We currently operate as a business segment of FAB and will continue to do so until the completion of the Distribution. As a result, FAB has determined the compensation of our employees, including our named executive officers, or NEOs, and will continue to do so until the completion of the Spin-Off. Accordingly, except as otherwise indicated, the compensation arrangements discussed in this section are those of FAB. Summary Compensation Table The following sets forth the compensation of FAB s Chief Executive Officer during fiscal 2015, and the other persons who served as executive officers during fiscal 2015. Unless otherwise noted, the amounts shown represent what was earned in fiscal 2015. SUMMARY COMPENSATION TABLE FISCAL 2015 Name and principal position Salary ($) Bonus ($) Stock awards ($) Non-equity incentive plan compensation ($) All other compensation ($) Total ($) Christopher Spencer Chief Executive Officer 2015 400,000 400,000 - - - 800,000 2014 400,000 - - - - 400,000 2013 400,000 - - - - 400,000 John Busshaus Chief Financial Officer 2015 350,000 350,000 - - - 700,000 2014 350,000 - - - - 350,000 2013 350,000 - - - - 350,000 Employment Agreements The Officers are employed under the terms of their employment agreement. The term of the Officers employment was for three years beginning on October 1, 2012 and ending September 30, 2015. On October 1, 2015 and on each October 1st thereafter, the term of the Executives employment is automatically extended for one year, unless the Company notifies the Executive in writing at lease ninety (90) days prior that the Company does not wish to extend the Employment Agreement. Under the agreements, the officers are compensated at the base salary. At the end of the initial three year term of the employment agreement, the Executive shall receive a bonus equal to the Executive s highest annual salary. Restricted Stock Awards There were no issuances of restricted stock award during fiscal 2015 to any named executive. Outstanding Equity Awards at Fiscal Year End The following table sets forth information concerning outstanding equity awards for the named executives as of December 31, 2015. OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2015 Option awards Stock awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested ($) Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) John L. Busshaus 0 0 0 0 0 0 0 0 Chris Spencer 0 0 0 0 0 0 0 0 Grants of Plan-Based Awards for 2015 There were no plan-based equity awards made to our executive officers during fiscal 2015. Option Exercises and Stock Vested The following table sets forth information concerning fiscal 2015 option exercises and restricted stock that vested during fiscal 2014 for the named executives. OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2015 Option awards Stock awards Name Number of shares acquired on exercise (#) Value realized on exercise ($) Number of shares acquired on vesting (#) Value realized on vesting ($) Christopher Spencer 0 0 0 0 John L. Busshaus 0 0 0 0 Pension Benefits FAB does not have any plans that provide for payments or other benefits at, following, or in connection with retirement. Nonqualified Deferred Compensation FAB does not have a Deferred Compensation Plan for its executive officers. Other Potential Post-Employment Payments As of December 31, 2015, there were no named executives with employment contracts that require or required severance or other post-employment payments. Summary Information about Equity Compensation Plans As of December 31, 2015, FAB does not have any Stock Option Compensation Plans. No Loans for Option Exercises. It is FAB s policy to not make loans to employees or officers for the purpose of paying for the exercise of stock options. Stockholder Approval of Equity Compensation Plans. The following table presents information as of December 31, 2015, about FAB s common stock that may be issued upon the exercise of options granted to employees, consultants or members of the Board of Directors under all of our existing equity compensation plans and individual arrangements. As described above, FAB does not have any stock option plans under which options have been granted. Plan Category Maximum shares to be issued upon exercise of options Weighted-average exercise price of outstanding options Shares remaining available for future issuance under existing equity compensation plans (excluding shares reflected in first column) Plans approved by stockholders 0 $ 0 5,038,667 Plans not approved by stockholders 0 0 0 Total 0 $ 0 5,038,667 DIRECTOR COMPENSATION In 2016, the Board of Directors will consider stock options or other appropriate equity incentive grants to the outside directors. FAB reimburses directors for out-of-pocket expenses they incur when attending meetings of the Board. Salaried executives who serve as directors are not paid for their services as directors and accordingly, Christopher Spencer is not included in the director compensation table below. The following table sets forth the compensation FAB paid its non-employee directors in 2015. Unless otherwise noted, the amounts shown represent what was earned in fiscal 2015. DIRECTOR COMPENSATION TABLE FISCAL 2015 Name Fees earned or paid in cash ($) Stock awards ($) Option awards ($) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Doug Polinsky 24,000 0 0 0 0 0 24,000 J. Gregory Smith 24,000 0 0 0 0 0 24,000 Denis Yevstifeyev 24,000 0 0 0 0 0 24,000 All outside directors will receive a base annual cash compensation of $24,000, which will be paid monthly. PRO FORMA FINANCIAL INFORMATION LIBERATED SYNDICATION CORP. UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined balance sheet of FAB Universal Corp., ("PARENT, FAB"), and the balance sheet of Liberated Syndication, Inc. as of March 31, 2016 ("Libsyn"), accounting for the transaction as a dividend of FAB Universal Corp, through the distribution of 20,805,860 common shares of the FAB (a reverse spinoff for accounting purposes) using the assumptions described in the following notes, giving effect to the transaction, as if the transaction had occurred as of January 1, 2016. The transaction is estimated to be completed on August 1, 2016. The Unaudited Consolidated Balance Sheet and Statement of Operations of FAB Universal Corp. and Subsidiaries presented in this pro forma are the financial results of the U.S. based operations as the business in China appears to be abandoned. The preparation of financial statements was completed in conformity with generally accepted accounting principles. All inter-company transactions have been eliminated in consolidation. The following unaudited pro forma condensed combined statement of operations reflects the results of operations of FAB for the twelve months ended December 31, 2015 and the three month period ended March 31, 2016 and the results of operations of Liberated Syndication Inc. as if the transaction had occurred as of the January 1, 2015. The pro forma condensed combined financial statements should be read in conjunction with the separate financial statements and related notes thereto of Liberated Syndication Inc. These pro forma condensed combined financial statements are not necessarily indicative of the combined financial position, had the acquisition occurred on the date indicated above, or the combined results of operations which might have existed for the periods indicated or the results of operations as they may be in the future. LIBERATED SYNDICATION INC. UNAUDITED PROFORMA COMBINED BALANCE SHEET As of March 31, 2016 Historical Consolidated FAB Universal Corp and Subsidiaries March 31, 2016 Pro forma adjustments(a) Reverse Spin-Off of FAB Universal Corp. Consolidated Liberated Syndication Inc. and Subsidiary March 31, 2016 Pro forma adjustments Pro forma Combined As of March 31, 2016 Cash $ 2,878,978 $ 8,251 $ 2,887,229 - $ 2,887,229 Accounts receivable, net 411,689 - 411,689 - 411,689 Prepaid expenses 160,679 (679) 160,000 - 160,000 Total current assets 3,451,346 7,572 3,458,918 - 3,458,918 PP&E, net 16,291 - 16,291 - 16,291 Goodwill 11,484,251 - 11,484,251 - 11,484,251 Other assets 3,582 (3,582) 3,582 - - Total assets $ 14,955,470 $ 3,990 $ 14,959,460 - $ 14,959,460 Accounts payable 476,138 4,976 481,114 - 481,114 Accrued expenses 204,371 (174,800) 29,571 - 29,571 Deferred revenue 155,689 - 155,689 - 155,689 Total current liabilities 836,198 (169,824) 666,374 - 666,374 Total liabilities $ 836,198 $ (169,824) $ 666,374 - $ 666,374 Common stock 20,806 (20,805) 1 20,805 (b) 20,806 APIC 89,921,257 (64,233,355) 25,687,902 82,195 (b,d) 25,770,097 Accumulated deficit (75,822,791) 64,427,974 (11,394,817) (103,000) (d) (11,497,817) Total shareholders equity 14,119,272 173,814 14,293,086 - 14,293,086 Total liabilities & shareholder s equity $ 14,955,470 $ 3,990 $ 14,959,460 - $ 14,959,460 See Notes To Unaudited Proforma Condensed Combined Financial Statements. LIBERATED SYNDICATION INC. UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the three months ended March 31, 2016 Historical Consolidate FAB Universal Corp. and Subsidiaries March 31, 2016 (unaudited) Pro forma adjustments(a) Reverse Spin-Off of FAB Universal Corp. Consolidated Liberated Syndication Inc. and Subsidiary March 31, 2015 Pro forma adjustments Pro forma Combined Total revenues $ 2,065,277 $ - $ 2,065,277 $ - $ 2,065,277 Cost of services 655,196 - 655,196 - 655,196 Operating Expenses 922,078 (106,290) 815,788 103,000 (d) 918,788 Income taxes - - - - - Net income $ 488,003 $ (106,290) 594,293 $ (103,000) $ 491,293 Earnings per share: Basic $ 0.02 $ 0.02 Diluted $ 0.02 $ 0.02 Weighted-average common shares outstanding: Basic 20,805,860 (b) 20,805,860 Diluted 20,805,860 (b) 20,805,860 See Notes To Unaudited Proforma Condensed Combined Financial Statements. LIBERATED SYNDICATION INC. UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the year ended December 31, 2015 Historical Consolidated FAB Universal Corp. and Subsidiaries December 31, 2015 (unaudited) Pro forma adjustments (a) Reverse Spin-Off of FAB Universal Corp. Consolidated Liberated Syndication Inc. and Subsidiary December 31, 2015 Pro forma adjustments Pro forma Combined Total revenues $ 7,213,088 $ - $ 7,213,088 $ - $ 7,213,088 Cost of services 2,106,937 - 2,106,937 - 2,106,937 Operating Expenses 3,621,729 (1,496,584) 2,125,145 157,000 (d) 2,282,145 Other income (loss) (3,366) 2,971 (395) - (395) Income taxes - - - - 0 Net income $ 1,481,056 $ (1,499,555) 2,980,611 $ (157,000) $ 2,,823,611 Earnings per share: Basic $ 0.07 $ 0.14 Diluted $ 0.07 $ 0.14 Weighted-average common shares outstanding: Basic 20,805,860 (b) 20,805,860 Diluted 20,805,860 (b) 20,805,860 See Notes To Unaudited Proforma Condensed Combined Financial Statements. LIBERATED SYNDICATION INC. NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS NOTE 1 Liberated Syndication Inc. FAB Universal Corp., ( Parent, FAB") was incorporated under the laws of the State of Colorado. FAB is the Parent of Liberated Syndication Inc. (Libsyn). As Libsyn is larger than FAB, this transaction will be a reverse spinoff for accounting purposes. NOTE 2 Liberated Syndication, Inc. Liberated Syndication Inc., ( Libsyn") was incorporated under the laws of the State of Nevada on September 30, 2015 as a wholly owned subsidiary of FAB Universal Corp. to facilitate the spin-off of FAB Universal Corp. s podcast hosting operations. Webmayhem, Inc. ("Subsidiary"), a Pennsylvania corporation, organized on January 1, 2001 and a wholly owned subsidiary of FAB until being transferred to Liberated Syndication, Inc. to facilitate the spin-off from FAB. Webmayhem operates in the podcast hosting services business. NOTE 3 PROFORMA ADJUSTMENTS On September 29, 2015, the Board of Directors of FAB resolved to spin-off the operations of Subsidiary, wherein FAB ownership of the Subsidiary was transferred to Libsyn and FAB s Board of Directors declared a stock dividend of 1 share of common stock of Libsyn to each common shareholder of FAB that is payable on a date to be determined to each of FAB s shareholders of record on the relevant record date. The dividend will effectively spin-off the operations of Libsyn and Subsidiary to the shareholders of FAB. Libsyn will assume and agree to pay, perform, fulfill and discharge, and FAB will have no responsibility for, (i) all liabilities under any Employee Arrangements (as defined), (ii) all employment or service-related liabilities with respect to (A) all Parent employees (and their dependents and beneficiaries), (B) former Parent employees (and their dependents and beneficiaries) whose last employment with FAB related primarily to the podcast hosting business and (C) any individual who is, or was, an independent contractor, temporary employee, consultant, leased employee, or non-payroll worker. FAB and Libsyn will each be responsibility for its payroll tax obligations and for the proper reporting to the appropriate Governmental Authorities of compensation earned by their respective employees after the Distribution Date, including compensation related to the exercise of options. These arrangements require FAB to assume and/or indemnify Parent for, among other things, all past, present and future liabilities related to our business. Parent shall indemnify, defend and hold harmless FAB and their respective successors and assigns from, against and in respect of any and all Indemnifiable losses arising out of, relating to or resulting from, directly or indirectly: (1) the failure of Libsyn or any other person to pay, perform, satisfy or otherwise promptly discharge any Libsyn liabilities in accordance with their respective terms, whether prior to or after the Distribution Date or the date hereof; (2) Libsyn, any Libsyn liability, and any Libsyn asset; (3) Any and all Liabilities arising out of or relating to the reverse Spin-Off, and/or the Registration Statement including, without limitation, any amounts it is required to pay to the Indemnified Parties and (ii) all amounts FAB is required to pay to directors of FAB (c) but only to the extent not arising out of or relating to a FAB Indemnified Party s failure to perform its obligations; (4) Liabilities arising out of or relating to the oversight and/or management of the businesses and affairs of FAB prior to the Distribution Date; provided, that Parent s responsibility for any such Liabilities will be based on an equitable allocation of such Liabilities between Parent and FAB, based on the extent to which, as applicable: (i) such Liabilities arose out of or relate to the Parent business, Parent assets, and/or Parent liabilities prior to the Distribution Date, and the FAB business, the FAB assets, and/or the FAB liabilities prior to the Distribution Date, and/or (ii) Parent or FAB, as the case may be, benefited from the relevant FAB activities prior to the Distribution Date. Proforma adjustments on the attached financial statements include the following: (a) To give effect to the reverse spinoff of FAB Universal Corp. Operating expenses that are the Parents responsibility that are unique to the FAB operations that would not be incurred by Libsyn, and include items such as wages, bonuses, legal fees, insurance, travel, and consulting fees. (b) To record the dividend and issuance of 20,805,860 common shares of Liberated Syndication Inc. in payment and distribution of a dividend by FAB Universal Corp. of 20,805,860 common shares of Liberated Syndication Inc. inclusive of the 1,000 common shares of Liberated Syndication Inc. held by FAB Universal Corp. resulting in a dividend of 1 share of Common Stock for every share of FAB Common Stock. FAB will not retain a non-controlling interest in Libsyn. (c) To reflect FAB Universal Corp s ownership in Libsyn prior to the spin-off. (d) To record the estimated cost of being publicly traded including audit, legal, board fees, SEC and listing fees. LIBERATED SYNDICATION INC. NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS NOTE 4 - PROFORMA EARNINGS PER SHARE The proforma earnings per share is computed based on the weighted average number of common shares outstanding during the period plus the estimated shares issued in connection with the dividend (spinoff) had the dividend been distributed at the beginning of the periods presented. For the Year Ended December 31, 2015 For the Three Months Ended March 31, 2016 Weight average number of common shares outstanding upon incorporation 1,000 1,000 Additional share issued and distributed as a dividend 20,804,860 20,804,860 Pro forma weighted average number of common shares outstanding during the period used in income per share after dividend(denominator) 20,805,860 20,805,860 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONA ND RESULTS OF OPERATIONS Audited financial statements as of December 31, 2015 and 2014 are provided in this Prospectus. Current Operational Overview FAB has operated the subsidiaries, Liberated Syndication Inc. and Webmayhem Inc. (collectively Libsyn ), with the oversight of management. FAB s activity has been principally devoted to organizational activities, raising capital, evaluating operational opportunities and fulfilling regulatory requirements. FACTORS AFFECTING RESULTS OF OPERATIONS: Libsyn s business correlates with Pew Research s findings in that the medium has been growing its audience over the past two years. Expansion of the number of podcast shows on the Libsyn network, along with increases in requests for podcast episodes demonstrates the evolution of the industry and opportunities for revenue generation. Management believes that opportunity remains for podcasting growth and revenue generation. Libsyn s business has also experienced upward trends in the areas of podcast creation, consumption and audience growth. Podcast shows on the Libsyn platform increased to over 28,000 in 2015 from 22,000 in 2014 and 16,000 in 2013. This resulted in 2,572,295 active episodes in 2015 versus 2,145,840 in 2014 and 1,688,057 in 2013. Annual podcast download requests on the Libsyn platform exceeded 3.33 billion in 2015, up from 2.6 billion in 2014 and 1.9 billion in 2013. Additionally, the Libsyn network now reaches 55 million audience members monthly, an increase from 41 million in 2014 and 34 million in 2013. The Libsyn4 product offering is a podcast hosting and distribution service which includes storage, bandwidth, RSS creation, distribution and statistics tracking. Podcast producers can chose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn s standard plans range for $5 to $75 per month. LibsynPRO service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support. LibsynPro revenue consists primarily of monthly hosting fees and bandwidth usage charges. Other professional level add-ons, such as set-up fees and custom features, represent a small portion of LibsynPro revenue. Trends in the number of podcast shows on the Libsyn network and podcast consumption affect our revenue and financial results as they are directly related to cash flow and cost of revenue. Management believes that over the next 12 months growth in the podcasting industry and Libsyn s market leadership will continue to fuel expansion of the Libsyn network and revenue. The company expects to see year-over-year cost of revenue continue to grow in 2016. With the level of bandwidth usage currently incurred, the company has Content Delivery Network (CDN) and storage solution contracts that leverage economies of scale over the next 12 months to continue to help manage cost of revenue. In 2015, Libsyn generated 60% of its $7.2 million in revenue from Podcast hosting fees paid by Libsyn4 Producers. LibsynPro revenue is 17% of overall revenues, and Advertising revenue makes up 14% revenues. App subscriptions make up 8% of total Libsyn revenues. In 2014, those revenues contributions were 59% for Libsyn4, 15%, for LibsynPro, 19% for Advertising and 7% for App subscriptions. RESULTS OF OPERATIONS: Three Months Ended March 31, 2016 and 2015: During the three months ended March 31, 2016, Libsyn recorded revenues of $2,065,277, a 40% increase over revenues of $1,474,852 for the same period in 2015. The increase for 2016 reflects an increase in Libsyn 4 hosting revenue as well as LibsynPro and Advertising revenue. Libsyn4 hosting revenue increased due to the 28% growth in the number of podcasts on the network when comparing the first quarter of 2016 versus 2015. LibsynPro revenue increased as a result of additional LibsynPro networks using our platform in 2016 with increased bandwidth usage fees for delivery of podcasts contributing to the majority of the revenue gain. Advertising revenue increased 154% in the first quarter of 2016 versus 2015. The increase resulted from an uptick in the campaign budgets from existing advertisers, show sponsorships from new and existing advertisers and the addition of new advertising campaigns. Premium subscription revenue decreased due the loss of a large premium subscription customers. During the three months ended March 31, 2016, cost of revenue totaled $654,196, a 42% increase as compared to $461,749 for the same period in 2015. This is a reflection of the increase in bandwidth usage during 2016 due to the growth in the number of podcasts and increased podcast consumption on the Libsyn Platform. Cost of revenue is made up of bandwidth transfer charges from Libsyn s CDNs, server collocation fees, and wages for the Research and Development team. Libsyn posted gross profit of $1,410,081 during the three months ended March 31, 2016, versus gross profit of $1,013,103 for the same period in 2015, an increase of 39%. Libsyn recorded total operating expenses of $815,788 during the three months ended March 31, 2016, a 64% increase as compared to operating expenses of $496,538 in the same period of 2015. The increase is principally due to a bonus and related taxes and legal fees paid during the first quarter of 2016. General and administrative expenses totaled $745,382 in 2016 versus $428,685 in 2015, an increase of 74%. Selling expenses in 2016 were $70,406 versus $67,853 in 2015. Libsyn s net income was $594,293 for the three months ended March 31, 2016. This represents a $77,728 increase from our net income of $516,565 for the three months ended March 31, 2015. Fiscal year ended December 31, 2015 compared to fiscal year ended December 31, 2014: During 2015, Libsyn recorded revenues of $7,213,018, a 37% increase over revenues of $5,274,608 for the same period in 2014. The increase for 2015 reflects an increase in Libsyn 4 hosting revenue as well as LibsynPro and Premium subscription revenue. Libsyn4 hosting revenue increased due to the 29% growth in the number of podcasts on the network between 2014 and 2015. LibsynPro revenue increased as a result of additional LibsynPro networks using our platform in 2015 with increased bandwidth usage fees for delivery of podcasts contributing to the majority of the revenue gain. Advertisers and agencies continued to renew and add new campaigns in 2015 based on positive performance and experience with Libsyn s Ad Operations team leading to a 4.5% increase in advertising revenue. Premium subscription revenue increased due the addition of new shows offering premium subscriptions and the increase in individuals signing up for subscriptions to premium content. In 2015, cost of revenue totaled $2,106,937, a 9% increase as compared to $1,928,934 in 2014. This is a reflection of the increase in bandwidth usage during 2015 due to the growth in the number of podcasts and increased podcast consumption on the Libsyn Platform. Cost of revenue is made up of bandwidth transfer charges from Libsyn s CDNs, server collocation fees, and wages for the Research and Development team. Libsyn posted gross profit of $5,106,081 during 2015, versus gross profit of $3,345,674 for 2014, an increase of 53%. Libsyn recorded total operating expenses of $2,125,145 during 2015, a 9% increase as compared to operating expenses of $1,947,726 in the same period of 2014. The increase is principally due to an increase in wages during 2015. General and administrative expenses totaled $1,826,994 in 2015 versus $1,709,511 in 2014, an increase of 7%, due to increases in wages. Selling expenses in 2015 were $298,151 versus $238,215 in 2014 due to increase participation in trade shows and advertising and an increase in wages. Wage increases were primarily due to salary adjustments, cost of living increases and new hires resulting from normal employee turnover. Libsyn s net income was $2,980,611 in 2015. This represents a $1,582,356 increase from our net income of $1,398,255 in 2014. Inflation and seasonality: Libsyn does not believe that inflation or seasonality will significantly affect its results of operation. Liquidity and Capital Resources Three Months ended March 31, 2016 compared to Three Months ended March 31, 2015 Cash on hand was $2,887,229 at March 31, 2016, an increase of $416,535 over the $2,470,694 on hand at December 31, 2015. Cash provided by operations for the three months ended March 31, 2016, was $443,950, a decrease of $73,082 over the $517,032 cash provided by operations for the three months ended March 31, 2015. This decrease was from our operating results driven by an increase in revenue offset by the cost of revenue and increase wages paid during the first three months of 2016. Cash used in financing activities was $27,415 for distributions to FAB Universal Corp. during the three months ended March 31, 2016 and $255,707 in 2015. This is a standard practice between FAB Universal Corp. and Libsyn to transfer cash from the subsidiary to the Parent. Each month, the cash balance of each subsidiary is reviewed and the cash used for maintaining normal operations is transferred to the Parent. A review of upcoming expenditures and the accounts receivable and accounts payable balances is also considered in determining the amount to transfer. 2015 compared to 2014 Cash on hand was $2,470,694 at December 31, 2015, an increase of $1,413,895 over the $1,056,799 on hand at December 31, 2014. Cash provided by operations for 2015, was $2,910,317, an increase of $1,312,921 over the $1,597,396 cash provided by operations for 2014. This increase was from our operating results driven by increase in revenue without having to incur expenses in the same proportion. During 2015, there was no cash used in investing activities versus $16,598 used in 2014 for the purchase of equipment. Cash used in financing activities was $1,496,422 for distributions to FAB Universal Corp. during 2015 and $1,227,254 in 2014. This is a standard practice between FAB Universal Corp. and Libsyn to transfer cash from the subsidiary to the Parent. Each month, the cash balance of each subsidiary is reviewed and the cash in excess of the amount used for maintaining normal operations is transferred to the Parent. A review of upcoming expenditures and the accounts receivable balance is also considered in determining the amount to transfer. Debt and Contractual Obligations Libsyn will be responsible for the financial obligation for the office space in Los Angeles, California. The lease arrangement is for $27,099 a month though February 2016, $27,872 a month through February 2017, $28,710 a month through February 2018, $29,581 a month through February 2019 and $30,573 a month through June 2019. Critical Accounting Policies Our discussion and analysis of our financial condition and the results of our operations are based upon our financial statements and the data used to prepare them. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. On an ongoing basis we re-evaluate our judgments and estimates including those related to bad debts, investments, long-lived intangible assets, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies. Goodwill Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets of acquired companies. Goodwill is not amortized, but rather is tested at least annually for impairment or more frequently if triggering events or changes in circumstances indicate impairment. The Company adopted the new guidance of Accounting Standards Update No. 2010-28, Intangibles Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (ASU 2010-28), which simplifies the goodwill impairment test by allowing the option to first assess qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Some of these qualitative factors may include macroeconomic conditions, industry and market considerations, a change in financial performance, entity-specific events, a sustained decrease in share price, and consideration of the difference between the fair value and carrying amount of a reporting unit as determined in the most recent quantitative assessment. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit's fair value is less than its carrying amount, a two-step impairment analysis is performed to estimate the fair value of goodwill. The first step involves comparing the fair value of a reporting unit to its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves comparing the implied fair value to the carrying amount of the goodwill of that reporting unit. If the carrying amount of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Leases The Company accounts for leases in accordance with Accounting Standards Codification ( ASC ) Topic 840. Leases that meet one or more of the capital lease criteria of standard are recorded as a capital lease, all other leases are operating leases. Revenue The Company recognizes revenue when earned. The Company recognized revenue in accordance with Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) Topic 605, Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided, the price of services is fixed or determinable, and collection is reasonably assured. We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when we are primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. We generally record the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. Such amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two. Income taxes Libsyn accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company anticipates earnings in the near future and the realization of the benefit of the deferred tax assets. For a description of accounting changes and recent enacted accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see Note 1: Recently Enacted Accounting Standards in the financial statements included elsewhere in this prospectus. MARKET PRICE OF COMMON STOCK AND RELATED MATTERS Market Information While there has been a trading market for the shares of FAB, there has been no public trading market for the shares of Libsyn prior to the Spin-Off. Libsyn expects that trading in the Common Stock may commence in the over-the-counter market upon the filing of a Form 211 with FINRA by one market maker and, 30 days after such market maker commences publishing quotations for the Common Stock, the use of the piggyback exemption by other market makers Holders As of January 31, 2016, there were approximately 7,000 shareholders of record of FAB common stock. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT All of our Common Stock is currently beneficially owned by FAB. After the Spin-Off, FAB will not own any of our Common Stock. The following table sets forth, as of January 31, 2016, information concerning expected beneficial ownership of our common stock after giving effect to the Spin-Off by: Each person or entity known to us who will beneficially own more than five percent of the outstanding shares of Libsyn s common stock; Each person who we currently know will be one of Libsyn s directors or NEO at the time of the Spin-Off; and As a group, all persons who Libsyn currently knows will be Libsyn directors and executive officers at the time of the Spin-Off. The actual number of shares of common stock outstanding as of the Distribution Date may differ to the extent that new FAB common shares are issued or repurchased between June 30, 2016 and the Record Date. If the number of outstanding shares of FAB common stock increases to more than 20,805,860 shares as of the record date, the number of shares to be issued to the FAB stockholders in connection with the Spin-Off will increase accordingly, and Libsyn will amend the registration statement of which this Prospectus is a part to increase the number of shares registered thereunder. Based on information furnished to us or on filings made under the Exchange Act by or on behalf of such person or entity, except as otherwise indicated in the footnotes below, Libsyn believes that each person or entity has sole voting and investment power with respect to the shares of common stock set forth opposite such person s or entity s name. Beneficial ownership is determined in accordance with the rules of the SEC and generally attributes beneficial ownership of securities to persons who possess sole or shared voting or investment power with respect to such shares. Except as otherwise noted below, the address for each person listed in the following table is 5001 Baum Boulevard -- Suite 770, Pittsburgh, Pennsylvania 15213. The following table summarizes certain information with respect to the beneficial ownership of Libsyn s shares, immediately after the Spin-Off: Name of Beneficial Owner (1) Amount and Nature of Beneficial Ownership Owner % 10% Stockholders: Zhang Hongcheng 2,332,200 11.2% Directors: Douglas Polinsky 4,241 * J. Gregory Smith 41,000 * Executive Officers: Christopher Spencer, Chief Executive Officer 234,392 1.1% John L. Busshaus 57,524 * All directors and executive officers as a group (5 persons) 2,669,357 12.8% * Less than 1% (1) The address of each director and officer is c/o Libsyn, 5001 Baum Blvd. Suite 770, Pittsburgh, Pennsylvania 15213. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On December 22, 2015, FAB Universal, Corp. (the Company ) engaged Gregory & Associates, LLC. ( GA ), as the principal accountant for Liberated Syndication Inc. a wholly owned subsidiary of the Company and on the same date dismissed KCCW Accountancy Corp. ( KCCW ). During the years ended December 31, 2015 and 2014, when KCCW was still the auditor of record, (i) there were no disagreements with KCCW on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KCCW s satisfaction, would have caused KCCW to make reference in connection with its opinion to the subject matter of the disagreement, and (ii) there were no reportable events, as that term is described in Item 304(a)(1)(v) of Regulation S-K. The report of KCCW on the Company s financial statements as of and for the fiscal year ended December 31, 2013 did not contain an adverse opinion or a disclaimer of an opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the Company s two most recent fiscal years, the Company did not consult with GA regarding (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company s consolidated financial statements and no written or oral advice was provided by GA that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a disagreement or event, as set forth in Item 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K. Attached as Exhibit 16.1 is a copy of KCCW s letter addressed to the SEC relating to the statements made by the Company. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Relationship with FAB Following the Spin-Off, we and FAB will operate independently, and neither will have any ownership interest in the other. FAB was the guarantor on a lease agreement for office space in Los Angeles, CA, which was originally entered into by a US based company held by a Chinese entity with which FAB had a Variable Interest Entity agreement. The US based company held by the Chinese entity has no business purpose or relationship with Libsyn. As the guarantor, FAB has assumed the liability of the lease obligation. Effective with the spin-off, Libsyn will assume the responsibility of the lease obligation as the guarantor. The lease obligation for the space in Los Angeles, California is $27,099 a month though February 2016, $27,872 a month through February 2017, $28,710 a month through February 2018, $29,581 a month through February 2019 and $30,573 a month through June 2019. Separation At the time of the Spin-Off, Libsyn will transfer to FAB that number of shares of Common Stock equal to the number of shares of common stock outstanding on the Record Date less 1,000 as a dividend. FAB will then distribute all the outstanding shares of Libsyn Common Stock held by it on a pro rata basis to holders of FAB s common stock on the Distribution date. Following the Spin-Off, all right, title and interest to the assets of Libsyn held on the Distribution Date will belong solely to Libsyn and FAB and Libsyn will eliminate all intercompany accounts between the two companies. FAB will prepare and mail to all holders of its common stock, a notice of dividend promptly following the Distribution Date. Pursuant to an indemnity agreement to be entered into immediately prior to the Distribution Date, FAB and Libsyn will jointly and severally indemnify, defend and hold harmless each of the officers, directors, employees, agents and advisors of FAB and Libsyn against any and all indemnifiable losses resulting from, directly or indirectly, the Spin-Off. Tax Matters Arrangement The Tax Matters Agreement was entered into on January 31, 2016, between FAB and Libsyn for the purpose of completing the Spin-Off of Libsyn, and will govern FAB s and Libsyn s respective rights, responsibilities and obligations after the Spin-Off with respect to taxes. Below is a summary of the material terms of the agreement. Preparation and Filing of Tax Returns FAB has the responsibility for the preparation and filing of: (a) all Consolidated Returns (as defined) and all Combined Returns (as defined) for any taxable period up to and including the Distribution Date; (b) all Income Tax Returns (other than Consolidated Returns and Combined Returns) with respect to FAB and/or any FAB subsidiary other than Libsyn (as defined) for any taxable period; (c) all Non-Income Tax Returns (as defined) with respect to FAB and/or FAB subsidiary other than libsyn for any taxable period; and (d) all Non-Income Tax Returns with respect to Libsyn, or the Libsyn Business (as defined), that are required to be filed on or prior to the Distribution Date. Libsyn has the responsibility for the preparation and filing of: (a) all Income Tax Returns (other than Consolidated Returns and Combined Returns) with respect to Libsyn for any taxable period that are required to be filed after the Distribution Date; and (b) all Non-Income Tax Returns with respect to Libsyn that is required to be filed after the Distribution Date. Liability for Ordinary Course Taxes FAB will be liable for the following Taxes, and will be entitled to receive and retain all refunds of: (a) all Taxes (as defined) attributable to FAB and/or FAB subsidiary other than libsyn, in each case for any and all periods, (b) all Taxes attributable to Libsyn, the Libsyn Business, for all taxable periods (or portions thereof) ending on or prior to the Distribution Date, (c) all Taxes for which Libsyn may be liable by virtue of any agreement or arrangement with respect to Taxes entered into on or prior to the Distribution Date. Libsyn is liable for all Taxes attributable to Libsyn or the Libsyn Business, taxable periods (or portions thereof) beginning after the Distribution Date. Related Party Transactions We believe that the transactions and agreements discussed below (including renewals of any existing agreements) between us and related third parties are at least as favorable to us as could have been obtained from unrelated parties at the time they were entered into. FAB was the guarantor on a lease agreement for office space in Los Angeles, CA, which was originally entered into by a US based company held by our Chinese subsidiary. As the guarantor, FAB has assumed the liability of the lease obligation. Effective with the spin-off, Libsyn will assume the responsibility of the lease obligation as the guarantor. Policy and Procedures Governing Related Person Transactions Following the Spin-Off, our newly-appointed Board of Directors will utilize procedures in evaluating the terms and provisions of proposed related party transactions or agreements in accordance with the fiduciary duties of directors under Nevada law. Our related party transaction procedures contemplate independent director review and approval of all new agreements, transactions or courses of dealing with related parties, including any modifications, waivers or amendments to existing related party transactions. We will test to ensure that the terms of related party transactions are at least as favorable to us as could have been obtained from unrelated parties at the time of the transaction. The independent directors will consider, at a minimum, the nature of the relationship between us and the related party, the history of the transaction (in the case of modifications, waivers or amendments), the terms of the proposed transaction, our rationale for entering into the transaction and the terms of comparable transactions with unrelated third parties. In addition, management and internal audit will annually analyze all existing related party agreements and transactions and review them with the independent directors. DESCRIPTION OF CAPITAL STOCK Libsyn was incorporated on September 29, 2015 in the State of Nevada. Copies of its Articles of Incorporation and Bylaws have been filed as exhibits to the registration statement of which this Prospectus forms a part. The following information reflects FAB s Articles of Incorporation and Bylaws as these documents will be in effect at the time of the consummation of the Spin-Off. Authorized Capital Stock Libsyn s authorized capital stock consists of 210,000,000 shares, all of which have a par value of $0.001 per share. Of the total authorized shares, 200,000,000 are designated as common stock, and 10,000,000 are designated as preferred stock. Immediately following the Spin-Off, Libsyn will have approximately 20,805,860 shares of common stock issued and outstanding, based upon the number of shares of FAB s common stock outstanding as of June 30, 2016. As of the date hereof, Libsyn has no outstanding shares of preferred stock and we do not expect that any such shares will be outstanding at the time that the Spin-Off is completed. Common Stock of Libsyn Voting Rights. The holders of Libsyn s common stock will be entitled to one vote for each share held, on all matters voted on by Libsyn s stockholders, including elections of directors. Libsyn s Articles of Incorporation do not provide for cumulative voting in the election of directors. Generally, all matters to be voted on by Libsyn s stockholders must be approved by a majority of the votes entitled to be cast by all shares of common stock present or represented by proxy. Dividends. Holders of Libsyn s common stock are entitled to receive dividends as, when and if dividends are declared by the respective Boards of Directors out of assets legally available for the payment of dividends. It is not the current expectation of either of the companies to pay dividends. Liquidation. In the event of a liquidation, dissolution or winding up of Libsyn s respective affairs, whether voluntary or involuntary, after payment of liabilities and obligations to creditors, the remaining assets will be distributed ratably among the holders of shares of common stock on a per share basis. If there exist any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either case, the affected company would need to pay the applicable distribution to its holders of preferred stock before distributions are paid to the holders of the associated common stock. Rights and preferences. Libsyn s common stock has no preemptive, redemption, conversion or subscription rights. The rights, powers, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that may be designated and issued in the future. Preferred Stock of Libsyn Libsyn s Articles of Incorporation provide that its Board of Directors has the authority, without action by the stockholders, to designate and issue up to 10,000,000 shares of preferred stock in one or more classes or series and to fix the powers, rights, preferences and privileges of each class or series of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any class or series, which may be greater than the rights of the holders of the common stock. Any issuance of shares of preferred stock could adversely affect the voting power of holders of common stock, and the likelihood that the holders will receive dividend payments and payments upon liquidation could have the effect of delaying, deferring or preventing a change in control. As of the date of this Prospectus, Libsyn s Board of Directors has not designated any series of preferred stock and no shares of preferred stock will be issued in connection with the Spin-Off. Anti-Takeover Effects of Certain Provisions of the Companies Articles of Incorporation and Bylaws Board of Directors. Libsyn s Bylaws provide that, subject to the rights of the holders of any class or series of preferred stock to elect additional directors under specified circumstances, the number of directors will be fixed from time to time exclusively by a resolution adopted by Libsyn s Board of Directors, but will not be less than one director. The current number of directors currently serving on each company s Board of Directors is four. The Libsyn s Bylaws further provide that, subject to the rights of the holders of any class or series of preferred stock to elect directors under specified circumstances, any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring on the respective Board of Directors may be filled by a majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class will hold office for a term that coincides with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors will have the same remaining term as that of his or her predecessor. Subject to the rights, if any, of the holders of any outstanding class or series of preferred stock, any or all of Libsyn s directors may be removed from office at any time by the affirmative vote of the holders of at least a majority of the voting power of their then outstanding capital stock entitled to vote generally in the election of directors. Authorized Shares. Libsyn s Articles of Incorporation provide that each may from time to time issue shares of preferred stock in one or more series, the terms of which will be determined by the respective Boards of Directors, and common stock. The companies will not solicit approval of their stockholders unless such Board of Directors believes that approval is advisable or is required by stock exchange regulations or the applicable corporation law. This could enable the respective Board of Directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of the affected company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of its management. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of the affected company. Special Meetings. The Bylaws of each company authorize special meetings of stockholders to be called by the Board of Directors, the Chairman of the Board or the President, or at the request of holders of at least 10% of the stock of each company. Advance Notice Procedures. Libsyn s amended and restated By-laws establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of stockholders. These stockholder notice procedures provide that only persons who are nominated by Libsyn s Board of Directors, a committee thereof, or by a stockholder whose notice has been delivered to the company not less than 60 nor more than 90 days prior to the meeting. For nominations to be properly brought before an annual meeting by a stockholder, such stockholder s notice must set forth: The name, age, business address and residence address of such nominee; the principal occupation or employment of such person The number of shares of common stock of the applicable company which are owned beneficially by the nominee; Any
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001667840_best_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001667840_best_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1edd28c2c2ca741779a19e00713a9a0b3c7a523a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001667840_best_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 t1601289_s1a.htm AMENDMENT NO. 2 TO FORM S-1 As filed with the Securities and Exchange Commission on May 10 , 2016 Registration No. 333-210109 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 2 TO THE FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Best Hometown Bancorp, Inc. (Exact Name of Registrant as Specified in Its Charter) Maryland 6035 81-1959486 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number) 100 East Clay Street Collinsville, Illinois 62234 (618) 345-1121 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant s Principal Executive Offices) Mr. Ronnie R. Shambaugh President and Chief Executive Officer 100 East Clay Street Collinsville, Illinois 62234 (618) 345-1121 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copies to: Lawrence M.F. Spaccasi, Esq. Michael J. Brown, Esq. Luse Gorman, PC 5335 Wisconsin Avenue, N.W., Suite 780 Washington, D.C. 20015 (202) 274-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x 7 If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company x (Do not check if a smaller reporting company) CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be registered Proposed maximum offering price per share Proposed maximum aggregate offering price Amount of registration fee Common Stock, $0.01 par value per share 859,625 shares $10.00 $8,596,250(1) $866(2) (1)Estimated solely for the purpose of calculating the registration fee. (2)Previously paid. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. TABLE OF CONTENTS Page SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001667944_wcf_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001667944_wcf_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..76e6ab4fc853d2417c78a966cebaef1e738084fd
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001667944_wcf_prospectus_summary.txt
@@ -0,0 +1 @@
+Table of Contents PROSPECTUS WCF BANCORP, INC. (Proposed Holding Company for WCF Financial Bank) Up to 1,868,750 Shares of Common Stock (Subject to Increase to up to 2,149,063 Shares) WCF Bancorp, Inc., an Iowa corporation, is offering up to 1,868,750 shares of common stock for sale at $8.00 per share on a best efforts basis in connection with the conversion of WCF Financial, M.H.C. from the mutual holding company to the stock holding company form of organization. The shares we are offering represent the ownership interest in Webster City Federal Bancorp, a federal corporation, currently owned by the mutual holding company, WCF Financial, M.H.C. In this prospectus, we refer to WCF Bancorp, Inc. as WCF Bancorp. Webster City Federal Bancorp s common stock is currently quoted on the OTC Pink Marketplace (OTCPK) operated by the OTC Market Group under the symbol WCFB, and we expect the common stock of WCF Bancorp will also be quoted on the OTCPK under the symbol WCFB. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012. The shares of common stock are first being offered in a subscription offering to eligible depositors and borrowers and to tax-qualified employee benefit plans of WCF Financial Bank. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given first to residents of the communities served by WCF Financial Bank and then to existing stockholders of Webster City Federal Bancorp. Any shares of common stock not purchased in the subscription or community offerings may be offered to the public through a syndicate of broker-dealers, referred to in this prospectus as the syndicated offering. The syndicated offering may commence before the subscription and community offerings (including any extensions) have expired. However, no shares purchased in the subscription offering or the community offering will be issued until the completion of any syndicated offering. We may sell up to 2,149,063 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting subscribers. We must sell a minimum of 1,381,250 shares to complete the offering. In addition to the shares we are selling in the offering, the shares of Webster City Federal Bancorp currently held by the public will be exchanged for shares of common stock of WCF Bancorp based on an exchange ratio that will result in existing public stockholders of Webster City Federal Bancorp owning approximately the same percentage of WCF Bancorp common stock as they owned in Webster City Federal Bancorp common stock immediately prior to the completion of the conversion. We will issue up to 360,140 shares in the exchange, which may be increased to up to 414,161 shares if we sell 2,149,063 shares of common stock in the offering. The minimum order is 25 shares. The subscription offering will expire at 1:00 p.m., Central Time, on June 14, 2016. The community offering, if held, will terminate at the same time. We may extend the expiration date of the subscription and/or community offerings without notice to you until July 29, 2016, or longer if the Federal Reserve Board approves a later date. No single extension may exceed 90 days and the offering must be completed by June 29, 2018. Once submitted, orders are irrevocable unless the subscription and community offerings are terminated or extended, with regulatory approval, beyond July 29, 2016, or the number of shares of common stock to be sold is increased to more than 2,149,063 shares or decreased to less than 1,381,250 shares. If the subscription and community offerings are extended past July 29, 2016, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 2,149,063 shares or decreased to less than 1,381,250 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds received in the subscription and the community offerings will be held in a segregated account at WCF Financial Bank and will earn interest at 0.10% per annum until completion or termination of the offering. Keefe, Bruyette & Woods, Inc. will assist us in selling the shares on a best efforts basis in the subscription and community offerings, and will serve as sole manager for any syndicated offering. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of common stock that are sold in the offering. OFFERING SUMMARY Price: $8.00 per Share Minimum Midpoint Maximum Adjusted Maximum Number of shares 1,381,250 1,625,000 1,868,750 2,149,063 Gross offering proceeds $ 11,050,000 $ 13,000,000 $ 14,950,000 $ 17,192,504 Estimated offering expenses, excluding selling agent and underwriters commissions $ 920,000 $ 920,000 $ 920,000 $ 920,000 Selling agent and underwriters commissions (1) $ 330,000 $ 330,000 $ 330,000 $ 330,000 Estimated net proceeds $ 9,800,000 $ 11,750,000 $ 13,700,000 $ 15,942,504 Estimated net proceeds per share $ 7.10 $ 7.23 $ 7.33 $ 7.42 (1) The amounts shown assume that all of the shares are sold in the subscription and community offerings, and excludes reimbursable expenses and conversion agent fees, which are included in estimated offering expenses. See Pro Forma Data and The Conversion and Offering Plan of Distribution; Selling Agent and Underwriter Compensation for information regarding compensation to be received by Keefe, Bruyette & Woods, Inc. in the subscription and community offerings and the compensation to be received by Keefe, Bruyette & Woods, Inc. and the other broker-dealers that may participate in the syndicated offering. If all shares of common stock were sold in the syndicated offering, excluding insider purchases and shares purchased by our employee stock ownership plan for which no selling agent fee will be paid, the selling agent fees would be approximately $574,000, $681,000, $789,000 and $913,000 at the minimum, midpoint, maximum and adjusted maximum levels of the offering, respectively. This investment involves a degree of risk, including the possible loss of principal. Please read Risk Factors beginning on page 20. These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. None of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, nor any state securities regulator has passed on or endorsed the merits of this offering or approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. Keefe, Bruyette & Woods A Stifel Company For assistance, please contact the Stock Information Center at (877) 643-8217. The date of this prospectus is [Prospectus date]. Table of Contents SUMMARY The following summary explains the significant aspects of the conversion, the offering and the exchange of existing shares of Webster City Federal Bancorp common stock for shares of WCF Bancorp common stock. It may not contain all of the information that is important to you. Before making an investment decision, you should read this entire document carefully, including the consolidated
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001668523_gsg-group_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001668523_gsg-group_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9f30f3d10ad8eedb3fae1cd7b9a4359fc190f6d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001668523_gsg-group_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, WE, US, OUR, AND WIKE CORP. REFERS TO WIKE CORP. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. WIKE CORP. We are a development stage company and intend to commence operations in printing business area, particularly in printing on ribbons. We are currently working with one vendor for supplying ribbons and printing inks for our printing service. The ribbons can be different size and facture, various colors and design. The main factor is an ongoing event, for each event will be designed several printed ribbons and the customer can choose from our range of samples or create his own design of ribbons. Wike Corp. was incorporated in Nevada on November 11, 2014. We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $25,000 for the next twelve month as described in our Plan of Operations. Our sole officer and director, Corina Safaler has verbally agreed to loan needed amount for the Company on demand of registration and production process. There is no assurance that we will generate any revenue in the first twelve months after completion our offering or ever generate any revenue. Being a development stage company, we have very limited operating history. As of March 31, 2016 we have developed our business plan for a period of twelve months, register the domain name for our website and fill it with initial information about the Company, signed lease agreement for a period of one year with the option of expansion and signed sales contract for distribution of printed ribbons. In accordance to our Plan of Operations if we are unable to raise a minimum funding of $25,000 required conducting our business over the next twelve months, our business will be harmed. After twelve-month period we may need additional financing to continue our operations. Our principal executive offices are located at Via Arno, 8, 40139 Bologna, Italy. Our phone number is 003-907-341980011. From inception until the date of this filing, we have had limited operating activities. Our financial statements from inception (November 11, 2014) through March 31, 2016, report revenues of $7,700 and a net loss of $2,747. Our independent registered public accounting firm has issued an audit opinion for Wike Corp., which includes a statement expressing a doubt as to our ability to continue as a going concern. To date, we have formed the Company, developed our business plan, developed models of our business card and booklets, set up our web site, and we have purchased our printing machine and raw materials, singed lease agreement for a period of one year with the option of expansion and signed sales contract for distribution of printed ribbons. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. The company is publicly offering its shares to raise funds in order for our business to develop its operations and increase its likelihood of commercial success. As we have limited operating history and limited revenues we are a shell company, as applicable federal securities law defines that term. We expect that we will continue to be a shell company until we have more operations and have substantial revenues and assets. We anticipate that if we receive $50,000 from this offering we should have enough money to expand our business of printed ribbons production that it will be sufficient to cause us to not be considered as a shell company . We cannot provide any guarantee or assurance, however, that in the event we raise $50,000 from this offering we will have enough money to engage in profitable operations. During the time that we are a shell company , holders of our restricted securities will not be able to rely on Rule 144 in connection with the sale of those restricted securities. We have no plans, arrangements, commitments or understandings to engage in a merger with or acquisition of another company or an unidentified company or companies, or other entity or person. As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. The Company is publicly offering its shares to raise funds in order for our business to develop its operations and increase its likelihood of commercial success. Our sole officer and director, Ms. Safaler will be devoting approximately twenty hours a week to our operations, because we do not need to devote more time at the current stage of our business. As far as we will increase the number of customers, our sole officer and director will devote more time on Wike Corp. As a result, our operations may be sporadic and occur at times, which are convenient to our sole officer and director Ms. Safaler. THE OFFERING The Offering: This is a self-underwritten, direct primary offering with no minimum purchase requirement. The Issuer: Wike Corp. Securities Being Offered: 5,000,000 shares of common stock. Shares outstanding prior to offering: 4,500,000 shares. Shares outstanding after (assuming all the shares are sold) offering: 9,500,000 shares. Price Per Share: $0.01 Duration of the Offering: The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 5,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 5,000,000 shares registered under the Registration Statement of which this Prospectus is part. Gross Proceeds from selling 100% of shares: $50,000 Gross Proceeds from selling 75% of shares: $37,500 Gross Proceeds from selling 50% of shares: $25,000 Gross Proceeds from selling 25% of shares: $12,500 Gross Proceeds from selling 10% of shares: $5,000 Further more, if the Company does not sell any shares from this offering, it will not receive gross proceeds accordingly. Securities Issued and Outstanding: There are 4,500,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Corina Safaler. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001669368_asi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001669368_asi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2f07c0a33cd62eb202e7d3830daf3de19d66771e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001669368_asi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY INFORMATION As used in this prospectus, references to the Company, we, our , us , ASI or ASI Aviation refer to ASI Aviation, Inc. unless the context otherwise indicated. You should carefully read all information in the prospectus, including the financial statements and their explanatory notes, under the Financial Statements prior to making an investment decision. The Company Organization: We were incorporated under the laws of the State of Nevada on December 29, 2015. Our principal office is located at 8521 Leesburg Pike Suite 175, Vienna, VA 22182. Our telephone number is (703) 657-9909. Capitalization: Our articles of incorporation provide for the issuance of up to 100,000,000 shares of common stock, par value $0.0001. As of the date of this Prospectus there are 10,000,000 shares of our common stock issued and outstanding. Management: Our CEO, Chairman of the Board, and sole Director is Dr. B.B. Sahay. Our President is James P. Flynn. Our Vice President of Administration is Dr. Carl Jacobsen. Our Chief Financial Officer is Dr. James Silvester. Dr. Sahay is full time with the Company. Mr. Flynn is full time with the Company. Dr. Jacobsen is part time with the Company; Dr. Jacobsen devotes 20-30 hours per week to the Company. Controlling Shareholders: Our Chief Executive Officer, Chairman and sole Director, Dr. B.B. Sahay, is our majority shareholder. Dr. Sahay owns 10,000,000 shares of our common stock, for which he paid $1,000. As such, Dr. Sahay is able to exert significant influence over the affairs of the Company at the present time. Shell Company Status: We are a shell company within the meaning of Rule 405, promulgated pursuant to Securities Act, because we have nominal assets and nominal operations. Accordingly, the securities sold in this offering can only be resold through registration under Section 5 the Securities Act of 1933, Section 4(1), if available, for non-affiliates or by meeting the conditions of Rule 144(i). A holder of our securities may not rely on the safe harbor from being deemed statutory underwriter under Section 2(11) of the Securities Act, as provided by Rule 144, to resell his or her securities. Only after we (i) are not a shell company, and (ii) have filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that we may be required to file such reports and materials, other than Form 8-K reports); and have filed current Form 10 information with the SEC reflecting our status as an entity that is no longer a shell company for a period of not less than 12 months, can our securities be resold pursuant to Rule 144. Form 10 information is, generally speaking, the same type of information as we are required to disclose in this prospectus, but without an offering of securities. These circumstances regarding how Rule 144 applies to shell companies may hinder your resale of your shares of the Company. Going Concern: Our independent auditor has expressed substantial doubt about our ability to continue as a going concern given our lack of operating history and the fact to date have had no significant revenues. Potential investors should be aware that there are difficulties associated with being a new venture, and the high rate of failure associated with this fact. We have an accumulated deficit of $4,474 and have had no significant revenues as of March 31, 2016. Our future is dependent upon our ability to obtain financing and upon future profitable operations from our operations. These factors raise substantial doubt that we will be able to continue as a going concern. Our Business Description of Operations: ASI Aviation is a development stage technology company focusing on the development of our aircraft and aircraft spare parts sales and leasing operation, as well as exploring potential acquisitions in this or similar aviation- related industries. The Company is also actively developing its aviation management consulting services offerings. Historical Operations: From our inception through March 31, 2016, the Company has generated an accumulated deficit in the amount of $4,474. We have not generated any revenues to date. Current Operations: The Company is currently focusing on the further development of its aviation management consulting services as well as researching potential companies to acquire to further its goal of entering the aircraft and aircraft spare parts sales and leasing sector. We are currently in negotiations with an aircraft spare parts company that we intend to acquire as our first acquisition. Growth Strategy: The Company will seek to acquire, consolidate and grow businesses in the general aviation industry and develop these businesses to their commercial potential. These potential acquisitions will allow the Company to quickly expand its profile in the industry.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001669513_app_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001669513_app_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..682b04476418307a3951026fa1ba1eaeea30d0db
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001669513_app_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights material information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled Where You Can Find More Information in this prospectus and any amendment or supplement hereto. Company Overview APP Incline Corporation ( AIC or the Company ) was incorporated in the State of Nevada on June 29, 2015. We are a development stage company that engages in the purchase of mobile applications, and subsequent managing of their hosting, operations and advertising. We plan to both offer free, ad-supported apps, which have an option to purchase to avoid ads and receive more features. Our business model is based on our belief that the future of mobile app monetization will be profitable in an ad-supported model. Our revenue will be therefore based primarily on our advertisers and secondarily on the sale of the paid for app option. Our website is www.appincline.com. Adam Elmquist, who is currently our sole officer and director, has been with our Company since inception in a management role. Our headquarters are located at 1510 Longbranch Ave, Grover Beach, CA 93433. Although Apple was the first to provide apps for sale in 2008, since then, Google play, Amazon App Store, Blackberry World, Nokia, Windows Phone Store, Windows Store, and Samsung apps have subsequently launched apps for sale (Source "Mobile App." Wikipedia. Wikimedia Foundation, n.d. Web. 27 Apr. 2016.). Our business model is based on our belief that the mobile app market will continue to grow. App Incline s business plan includes purchasing existing mobile applications that have been created, launched, and are generating low revenue to date. We plan to purchase applications we research and believe to have potential for growth and ad revenue. We find the applications to purchase on www.flippa.com as well as through private sellers. We do not plan to change an application s name once we purchase it, or change any of the programming. App Incline does not intend to pay programmers to create and code new applications. We intend to spend marketing dollars to market our apps to increase revenue. We were only recently incorporated in June of 2015, and have begun operations. We have launched our website, purchased our first application, called SoundVine, and are generating minimal revenues to date. We have not commenced advertising or substantive operations, thus we believe that conducting this Offering will allow the Company added flexibility to raise capital in today's financial climate. There can be no assurance that we will be successful in our attempt to sell 100% of the shares being registered hereunder; however, we believe that investors in today's markets demand more transparency and by our registering this Offering and becoming a reporting company, we will be able to capitalize on this fact. While we believe that our limited reporting requirements will satisfy most investors seeking transparency in any potential investment, we still caution that simply because we have a registration statement declared effective the Company will not become a fully reporting company, but rather, we will be only subject to the reporting requirements of Section 15(d) of the Securities Exchange Act of 1934. Accordingly, except during the year that our registration statement becomes effective, these reporting obligations may be automatically suspended under Section 15(d) if we have less than 300 shareholders at the beginning of our fiscal year and our required disclosure is less extensive than the disclosures required of fully reporting companies. For example, we are not subject to disclose in our Form 10K risk factors, unresolved staff comments, or selected financial data, pursuant to Items 1A, 1B, 6, respectively. Since inception, our operations have consisted of incorporating our Company, opening a bank account, formulating our business plan, launching our website, researching and purchasing our first application, opening the Apple Developer account in which the app will run, organizing the hosting and operations of the app, and its ad account. The Company intends to begin substantive operations within 3-6 months after we obtain a Notice of Effectiveness of this Offering and our initial plan of operations calls for the Company to begin marketing our purchased applications, and buying new applications. We hope to realize our full plan of operations by raising money through the sale of our securities, as contemplated within this Offering. We believe that if we are able to raise the full amount of funds contemplated herein, we would be able to fully launch our Company and properly market our applications. We will design a full marketing strategy to gain awareness, and ultimately obtain a larger audience. Although our sole officer and director has only recently become interested in the mobile application industry, and does not have any professional training or technical credentials in the development and maintenance of such a company, he does have the experience of being a part of a small team of account managers who were responsible for over 1000 companies throughout North America. There Mr. Elmquist helped expand the company s user base through research and development, create databases of companies in the electrical, HVAC, green energy audit, and renewable energy fields, and created and distribute email marketing campaigns through email blasts. We have retained one qualified website/software developer who has built and is maintaining our website and is occupying himself with the details of the hosting accounts and operations and ad accounts for our applications. We also plan to hire 1 qualified marketing person if we are successful in raising capital through this Offering. We do not have any verbal or written agreements regarding the retention of any qualified personnel to date. Although the Company has no market for its common stock, management believes that the Company will meet all requirements to be quoted on the OTC market, and even though the Company s common stock will likely be a penny stock, becoming a reporting company will provide us with enhanced visibility and give us a greater possibility to provide liquidity to our shareholders. We are currently a development stage company and to date have low recorded revenues. Accordingly, our independent registered public accountants have issued a comment regarding our ability to continue as a going concern (please refer to the footnotes to the financial statements). Until such time that we are able to establish a consistent flow of revenues from our operations which is sufficient to sustain our operating needs, management intends to rely primarily upon debt financing to supplement cash flows, if any, generated by our products. We will seek out such financing as necessary to allow the Company to continue to grow our business operations, and to cover such cost, including professional fees, associated with being a reporting Company with the Securities and Exchange Commission ("SEC"); we estimate such costs to be approximately $25,000 for 12 months following this Offering. These do not include estimated costs of this Offering of $33,010 which will be borne by the Company. The Company has included such costs to become a publicly reporting company in its targeted expenses for working capital expenses and intends to seek out reasonable loans from friends, family and business acquaintances if it becomes necessary. At this point we have been funded by our sole officer and director, and have not received any firm commitments or indications from any family, friends or business acquaintances regarding any potential investment in the Company. Our current cash and working capital is not sufficient to cover our current estimated offering expenses of $33,010, which include those fees associated with obtaining a Notice of Effectiveness from the SEC for this Registration Statement. We hope that we will be able to secure additional financing, and complete this Offering within the coming months. Upon obtaining effectiveness, we will conduct the Offering contemplated hereby, and anticipate raising sufficient capital from this Offering to market and grow our Company. We believe that the maximum amount of funds generated from the Offering will provide us with enough proceeds to fund our plan of operations for up to twelve months after the completion of this Offering. Assuming we generate nominal revenues, we may still require additional financing to fund our operations past the twelve-month period following the completion of this Offering if the maximum amount of funds is not raised. While our ability to generate revenue is not correlated directly to the amount of shares sold by us under this Offering, our potential to generate revenue can be affected by our marketing and advertising strategies and the amount of personnel the Company employs. These factors are directly related to the amount of proceeds we receive from this Offering, which corresponds to the number of shares we are successful in selling under this Offering (see Use of Proceeds chart). We believe we can begin generating higher revenues within the first three months following the successful completion of this Offering. As we are a start-up company, it is unclear how much revenue our operations will generate; however, it is our hope that our revenues will exceed our costs. Our revenues will be impacted by how successful and well targeted the execution of our marketing campaign, the general condition of the economy, and the number of users we will attract. For a further discussion of our initial operations, plan of operations, growth strategy and marketing strategy see the below section entitled Description of Business . Neither the Company nor Mr. Elmquist or any other affiliated or unaffiliated entity has any plans to use the Company as a vehicle for a private company to become a reporting company once APP Incline becomes a reporting Company. Additionally, we do not believe the Company is a blank check company as defined in Section a(2) of Rule 419 under the Securities Act of 1933, as amended because the Company has a specific business plan and has no plans or intentions to engage in a merger or acquisition with an unidentified entity. Emerging Growth Company Status The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act, or JOBS Act. For as long as the Company is an emerging growth company, unlike other public companies, it will not be required to: provide an auditor s attestation report on management s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002; comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise; provide certain disclosure regarding executive compensation required of larger public companies; or obtain shareholder approval of any golden parachute payments not previously approved. The Company will cease to be an emerging growth company upon the earliest of (i) when it has $1.0 billion or more in annual revenues, (ii) when it has at least $700 million in market value of Shares held by non-affiliates, (iii) when it issues more than $1.0 billion of non-convertible debt over a three-year period, or (iv) the last day of the fiscal year following the fifth anniversary of its initial public offering. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies; however, the Company is choosing to opt out of such extended transition period, and as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that the Company s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. SUMMARY OF THIS OFFERING The Issuer APP Incline, Corporation Securities being offered Up to 10,000,000 shares of Common Stock; our Common Stock is described in further detail in the section of this prospectus titled DESCRIPTION OF SECURITIES Common Stock. Offering Type
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001669600_liberty_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001669600_liberty_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a8ba29ca470a128b60177168ed8e0d7179a664a5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001669600_liberty_prospectus_summary.txt
@@ -0,0 +1 @@
+The following is a summary of material information discussed in this prospectus. It is included for convenience only and should not be considered complete. You should carefully review this entire prospectus, including the risk factors, to better understand the Spin-Off and our business and financial position.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001670171_united_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001670171_united_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001670171_united_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001670538_mon-space_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001670538_mon-space_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..b73e6d685db2f76186358ee6c15c6a00af44bc66
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001670538_mon-space_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the Common Stock. You should carefully read the entire prospectus, including "Risk Factors", "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements, before making an investment decision. In this prospectus, the terms "Mon Space," "Company," "we," "us" and "our", "our company" refer to Mon Space Net Inc. For the sake of clarity, this prospectus follows Malaysian naming convention of last name followed by first name. For example, the name of our chief executive officer will be presented as "Lai Chai Suang," even though, in the United States, Ms. Lai s name is presented as "Chai Suang Lai." Overview Incorporated on December 31, 2015 under the laws of the State of Nevada, Mon Space Net Inc. ("Mon Space") plans to build an online marketplace that will be created to sell product and services to its members using a business to business to consumer model ("B2B2C"). With respect to our business, we plan to build an online platform that allows the users to be "merchants" as well as "shopper" at the same time. Through the features, products and services offered in our platform, the platform is expected to create interaction among the users and encourage them to promote and advertise their products on our platform. In the meantime, the users could purchase products and services from other users who sell such products and services at a discounted price. Our platform, when completed, will also be designed and built to encourage users to return and refer new users. It is our objective to develop a large base of users so that the merchant users on our platform could offer their products and services at a discount that is not available through any other channels and our shopper users will choose our platform as their primary destination for purchasing products and services. We have not generated any revenues to date, neither do we currently engage in any business activities that provide cash flow. Our cash at hand is limited to the investments we raised during our initial round of financing. less our expenses to date. Despite of our plan, we currently have no commitments for any financing and cannot provide assurance that we will realize this goal. In February 2016, we closed a Regulation S offering in which thirty-seven (37) investors subscribed to the aggregate purchase of 208,330,000 shares of Common Stock, at a purchase price of $0.001 per share for an aggregate offering price of $208,330. In February 2016, we received $8,330 for 8,330,000 shares that were issued in February 2016. In August 2016, we received the remaining $200,000 and issued the remaining 200,000,000 shares. Where You Can Find Us The Company's principal executive office and mailing address is 100.3.041, 129 Offices, Block J, Jaya One, No. 72A, Jalan University, Section 13, 46200, Petaling Jaya, Malaysia. Our telephone number is 60322820888. Implications of Being an Emerging Growth Company We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include: A requirement to have only two years of audited financial statements and only two years of related MD Exemption from the auditor attestation requirement in the assessment of the emerging growth company s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; Reduced disclosure about the emerging growth company s executive compensation arrangements; and No non-binding advisory votes on executive compensation or golden parachute arrangements. We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. The Offering Common stock offered by selling security holders 380,000 shares of Common Stock. This number represents 0.18% of our current outstanding Common Stock. Common stock outstanding before the offering 213,330,000 shares of Common Stock. Common stock outstanding after the offering 213,330,000 shares of Common Stock. Terms of the Offering The selling security holders will determine when and how they will sell the common stock offered in this prospectus. The selling security holders will sell at a fixed price of $0.10 per share for the duration of the offering. Termination of the Offering The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act (iii) or we decide at any time to terminate the registration of the shares at our sole discretion. Trading Market There is currently no trading market for our Common Stock. We plan to apply for quotation on OTCQB. We will require the assistance of a market-maker to apply for quotation and there is no guarantee that a market-maker will agree to assist us. Use of proceeds We are not selling any shares of the Common Stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of Common Stock covered by this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001671077_med-spa_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001671077_med-spa_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..068cb7ab71194d0375a79bcf1db121d9ee863625
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001671077_med-spa_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this Prospectus. In this Prospectus, unless the context otherwise denotes, references to "we," "us," "our", "Med Spa Vacations", "MedSpa", and "the Company" are to Med Spa Vacation Inc.. We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements. A Cautionary Note on Forward-Looking Statements This Prospectus contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors," that may cause our industry's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. General Information about Our Company Med Spa Vacations Inc. was incorporated in the State of Nevada on October 5, 2015. Med Spa Vacations plans to develop a business that specializes in marketing health and wellness vacations to both individuals and corporate groups that are looking to revitalize and develop a fuller day-to-day life. The Company is looking to establish a niche in the travel market that caters to sustained wellness and rejuvenation, recognizing the ever-increasing social trend toward finding of a more holistic balance in life. We are a small early stage company. To date, the Company s activities have been limited to the sourcing of its advertising channels, initial branding efforts, its formation, and in the raising of equity capital. We will require the funds from this offering in order to construct our website and grow our current operations. Our auditors issued a "substantial doubt" going concern opinion. Our only assets since inception (October 5, 2015) are our cash and cash equivalents at June 30, 2016, consisting of approximately $7,989 in cash generated from the issuance of shares of Company common stock to our founders after accounting for expenses paid since inception. Our monthly expense rate is approximately $1,000 per month. Our funds on hand will only provide us with the ability to pay for the expenses related to this Offering. Currently we do not have sufficient capital to fund our business development. As per the Use of Proceeds section, we are attempting to raise $100,000 from this Offering. However, if we raise $75,000, we feel this is sufficient to develop the business for the next 12 months. If we are only able to raise $20,000, from the Offering, then we feel this will be sufficient for the next 12 months to cover professional fees for our reporting needs to the SEC, and no additional funds will be available for business development. Our business and corporate address is 745 Silver St. La Jolla, CA, 92037. Our telephone number is 1-888-512-5554 and our registered agent for service of process is Nevada Corporate Headquarters, Inc., 4730 S. Fort Apache Rd Suite 300. Our fiscal year end is December 31. We received our initial funding of $20,000 through the sale of common stock to our two officers and directors, who purchased 5,000,000 each of our common stock at $0.002 on October 6, 2015, for $10,000 and at $0.002 on December 15, 2015, for $10,000, respectively. Our financial statements from inception (October 5, 2015) through the period ended June 30, 2016, report no revenues and accumulated losses of $15,282. Table of Contents This is our initial public offering. We are registering a total of 10,000,000 shares of our common stock. All of the shares being registered for sale by the Company will be sold at a price per share of $0.01 for the duration of this Offering. We will sell those 10,000,000 shares of common stock as a self-underwritten offering. There is no minimum amount we are required to raise in this Offering, and any funds received will be immediately available to us. This Offering will terminate on the earlier of the sale of all of the shares offered, or 270 days after the effective date of the registration statement of which this Prospectus is a part, unless extended an additional 90 days by our board of directors. There is no current public market for our securities. As our stock is not publicly traded, investors should be aware they probably will be unable to sell their shares and their investments in our securities are not liquid. Emerging Growth Company We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of: 1. The last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; 2. The last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement; 3. The date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or 4. The date on which such issuer is deemed to be a 'large accelerated filer', as defined in section 240.12b-2 of title 46, Code of Federal Regulations, or any successor thereto. As an emerging growth company, we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company, we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934, which require the shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Shell Company Status We are a shell company within the meaning of Rule 405, promulgated pursuant to Securities Act, because we have nominal assets and nominal operations. Accordingly, the securities sold in this offering can only be resold through registration under Section 5 of the Securities Act of 1933, Section 4(1), if available, for non-affiliates or by meeting the conditions of Rule 144(i). A holder of our securities may not rely on the safe harbor from being deemed a statutory underwriter under Section 2(11) of the Securities Act, as provided by Rule 144, to resell his or her securities. Only after we (i) are not a shell company, and (ii) have filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that we may be required to file such reports and materials, other than Form 8-K reports); and have filed current Form 10 information with the SEC reflecting our status as an entity that is no longer a shell company for a period of not less than 12 months can our securities be resold pursuant to Rule 144. Form 10 information is, generally speaking, the same type of information as we are required to disclose in this prospectus, but without an offering of securities. These circumstances regarding how Rule 144 applies to shell companies may hinder your resale of your shares of the Company. Table of Contents The Offering Following is a brief summary of this Offering. Please see the PLAN OF DISTRIBUTION and TERMS OF THE OFFERING sections for a more detailed description of the terms of the Offering. Securities being Offered by the Company 10,000,000 shares of common stock. Offering price $0.01 per share for the duration of the Offering. Offering period This Offering will terminate on the earlier of the sale of all of the shares offered by the Company or 270 days after the effective date of the registration statement of which this Prospectus is a part, unless extended by our board of directors for an additional 90 days Securities Issued and outstanding 10,000,000 shares of common stock are issued and outstanding before the offering and 20,000,000 shares will be outstanding after the Offering, assuming all shares are sold. However, if only 75%, 50%, or 25% of the shares being offered are sold, there will be 17,500,000, 15,000,000, or 12,500,000 shares outstanding, respectively. Offering Proceeds $100,000 assuming 100% of the shares being sold. However, if only 75%, 50%, or 25% of the shares being offered are sold, the proceeds will be $75,000, $50,000, or $25,000, respectively. See Use of Proceeds for more information on how we intend to use the proceeds from this offering. Registration costs We estimate our total offering registration costs to be $16,000, and will be paid from cash on hand and not from offering proceeds. If we experience a shortage of funds prior to funding, our directors may advance funds to allow us to pay for offering costs, filing fees and correspondence with our shareholders; however, our directors have no formal commitment or legal obligation to advance or lend funds to the Company. Listing We intend to apply to have our common stock traded on the OTCMarkets OTCQB. Our officers, directors, control persons and/or affiliates do not intend to purchase any shares in this Offering. If all the shares in this Offering are sold, our executive officers and directors will own 50% of our common stock. However, if only 75%, 50%, or 25% of the shares in this Offering are sold, our executive officers and directors will own 57.1%, 66.7%, or 80%, respectively. Regulation M Our officers and directors will offer and sell the shares offered hereby and are aware that they are required to comply with the provisions of Regulation M promulgated under the Securities Exchange Act of 1934. With certain exceptions, Regulation M precludes the officers and directors, sales agents, any broker-dealer or other person who participates in the distribution of shares in this Offering from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Securities and Exchange Commission ( SEC ) encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This prospectus contains these types of statements. Words such as may, expect, believe, anticipate, estimate, project, or continue or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this prospectus. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The factors listed in the Risk Factors section of this prospectus, as well as any cautionary language in this prospectus, provide examples of these risks and uncertainties. The safe harbor for forward-looking statements is not applicable to this offering pursuant to Section 27A of the Securities Act of 1933.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001671679_next-gen_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001671679_next-gen_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001671679_next-gen_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001672255_asia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001672255_asia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae82e25f3782eefc29b9b52c1644fb17b6f97747
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001672255_asia_prospectus_summary.txt
@@ -0,0 +1 @@
+PRELIMINARY PROSPECTUS Asia Training Institute US, Inc. 9,800,000 SHARES OF COMMON STOCK $0.0001 PAR VALUE PER SHARE Prior to this Offering, no public market has existed for the common stock of Asia Training Institute US, Inc. Upon completion of this Offering, we will attempt to have the shares quoted on the OTCQB operated by OTC Markets Group, Inc. There is no assurance that the Shares will ever be quoted on the OTCQB. To be quoted on the OTCQB, a market maker must apply to make a market in our common stock. As of the date of this Prospectus, we have not made any arrangement with any market makers to quote our shares. As of the date of this registration statement it should be noted that our company is currently a shell company. We are not however, a blank check company. In this public offering our selling shareholders are offering 9,800,000 shares of our common stock. We will not receive any of the proceeds from the sale of shares by the selling shareholders. The funds will be available to the respective shareholders who sell their shares to investors. The offering is being made on a best efforts basis by each shareholder. There is no minimum number of shares required to be purchased by each investor. All of the shares being registered for sale will be sold at a fixed price of $0.01 per share for the duration of the Offering. There is no guarantee that any of the securities being offered in this offering will be sold. The Company s selling shareholders listed on page 18 are deemed to be underwriters of this offering. This offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this Prospectus, unless extended by our directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Currently, our Chief Executive Officer Chun-Han Lin and our Chief Financial Officer Chien-Heng Chiang, together own approximately 66.67% of the voting power of our outstanding capital stock. After the offering, assuming all of their personal shares that are being registered herein are sold, both Mr. Lin and Mr Chiang will together have the ability to control approximately 60.00% of the voting power of our outstanding capital stock. The Company estimates the costs of this offering at $52,000. All expenses incurred in this offering are being paid for by the Company. There has been no public trading market for the common stock of Asia Training Institute US, Inc. Any investor who purchases shares will have no assurance that any monies, beside their own, will be subscribed to the prospectus. All proceeds from the sale of the securities are non-refundable, except as may be required by applicable laws. The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, which became law in April 2012 and will be subject to reduced public company reporting requirements. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE REFER TO , ' ': RISK FACTORS BEGINNING ON PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. You should rely only on the information contained in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included in this Prospectus. If anyone provides you with different information, you should not rely on it. The date of this prospectus is __________________. - 1 - The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. TABLE OF CONTENTS PART I PROSPECTUS PAGE PROSPECTUS SUMMARY 2 RISK FACTORS 5 SUMMARY OF FINANCIAL INFORMATION 13 MANAGEMENT S DISCUSSION AND ANALYSIS 14 INDUSTRY OVERVIEW 14 FORWARD-LOOKING STATEMENTS 15 DESCRIPTION OF BUSINESS 15 DETERMINATION OF OFFERING PRICE 17 DILUTION 17 SELLING SHAREHOLDERS 18 PLAN OF DISTRIBUTION 19 DESCRIPTION OF SECURITIES 20 INTERESTS OF NAMED EXPERTS AND COUNSEL 21 REPORTS TO SECURITIES HOLDERS 21 DESCRIPTION OF FACILITIES 21 LEGAL PROCEEDINGS 22 PATENTS AND TRADEMARKS 22 DIRECTORS AND EXECUTIVE OFFICERS 22 EXECUTIVE COMPENSATION 24 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 26 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 26 PRINCIPAL ACCOUNTING FEES AND SERVICES 26 MATERIAL CHANGES 26 FINANCIAL STATEMENTS F1-F15 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 27 INDEMNIFICATION OF OFFICERS AND DIRECTORS 27 RECENT SALES OF UNREGISTERED SECURITIES 28 EXHIBITS TO FINANCIAL STATEMENTS 28 UNDERTAKINGS 29 SIGNATURES 30 You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. Table of Contents PROSPECTUS SUMMARY In this Prospectus, , ' ': , ' ': Asia Training Institute US, the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to Asia Training Institute US, Inc., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending November 30th. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 5, and the financial statements, before making an investment decision. The Company Asia Training Institute US, Inc., a Delaware corporation ("the Company") was originally incorporated under the laws of the State of Delaware on November 10, 2015 with the name Asia Training Institute, Inc. Following a unanimous vote by the board of directors on April 5, 2016, on April 6, 2016 the Company changed its name to Asia Training Institute US, Inc. and filed with the Delaware Secretary of State, a Certificate of Amendment. The Company intends to offers informative business seminars on varying topics to attendees through the United States. The Company s executive offices are located at 8152 Villaverde Drive, Whittier CA 90605. The Company's office space is provided rent free by the Company's Chief Financial Officer Chien-Heng Chiang. Our activities have been limited to developing our business and financial plans. *Rule 405 of the Securities Act defines the term "shell company" as a registrant, other than an asset-backed issuer, that has: (1) No or nominal operations; and (2) Either: (i) No or nominal assets; (ii) Assets consisting solely of cash and cash equivalents; or (iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets. For purposes of this definition, the determination of a registrant s assets (including cash and cash equivalents) is based solely on the amount of assets that would be reflected on the registrant s balance sheet prepared in accordance with generally accepted accounting principles on the date of that determination. The Company has no or nominal operations and has assets consisting solely of cash and cash equivalents and is, therefore, a shell company as defined under Rule 405. -The Company s shell company status results in the following consequences: -The Company is ineligible to file a registration of securities using Form S-8; and -Rule 144 is unavailable for transfers of our securities until we have ceased to be a shell company, are subject to the reporting requirements of the Exchange Act; we have filed Exchange Reports for 12 months and a minimum of one year has elapsed since the filing of Form 10 information on Form 8-K changing our status from a shell company to a non-shell company. *There is the possibility, due to our status as a shell company, we may be unable to fully fulfill or carry out our intended business operations and that you may lose your entire investment if this should occur. There are a substantial number of steps that need to be taken to fulfill our business plan. We will not receive any of the proceeds from the sale of the 9,800,000 shares of our common stock being registered herein. At this time our operations have been and will continue to be funded by our officers and directors. Our officers and directors have no legal obligation however, to fund our operations. If our officers and directors decide to cut off funding our operations would be negatively affected and we may have to curtail operations. - 2 - Table of Contents The Offering We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.0001 par value per share ("Common Stock") and 20,000,000 shares of preferred stock, $0.0001 par value per share ("Preferred Stock"). We have 105,000,000 shares of Common Stock and no shares of Preferred Stock issued and outstanding. Through this offering we will register a total of 9,800,000 shares of common stock, which are all of the shares being offered herein by our selling shareholders. Our selling shareholders may endeavor to sell all 9,800,000 shares of common stock after this registration becomes effective. The shares being offered herein by the selling stockholders are to be sold at a fixed price of $0.01 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. All of the proceeds from this offering will go to the respective shareholder who sells shares. We will not receive any of these proceeds. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Selling Stockholders 9,800,000 shares of common stock, at a fixed price of $0.01 offered by the selling stockholders in a resale offering. As previously mentioned this fixed price applies at all times for the duration of the offering. The offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus, unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Offering price per share All of the shares being registered herein will be sold at a fixed price per share of $0.01 for the duration of this Offering. Number of shares of common stock outstanding before the offering of common stock 105,000,000 common shares are currently issued and outstanding. Number of shares of common stock outstanding after the offering of common stock 105,000,000 common shares will be issued and outstanding following the offering. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $0.01. We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. The offering price for the shares will remain at $0.01 per share for the duration of the offering. - 3 - Table of Contents Termination of the Offering This offering will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 9,800,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days. At any time and for any reason we may also terminate the offering. Terms of the Offering Following effectiveness of this registration statement, our selling shareholders will sell the 9,800,000 shares of common stock being registered herein, on a BEST EFFORTS basis. Registration Costs We estimate our total offering registration costs to be approximately $52,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001672985_conyers_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001672985_conyers_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..33cfcf458a6db6472cd759ebae8863d0fa43476b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001672985_conyers_prospectus_summary.txt
@@ -0,0 +1 @@
+appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under the section of this prospectus entitled "Risk Factors" and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus, references to: "we," "us," "company" or "our company" are to Conyers Park Acquisition Corp.; "public shares" are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); "public stockholders" are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder s and member of our management team s status as a "public stockholder" shall only exist with respect to such public shares; "management" or our "management team" are to our off cers and directors; "sponsor" are to Conyers Park Sponsor LLC, a Delaware limited liability company and an affiliate of Centerview Capital; "initial stockholders" are to holders of our founder shares prior to this offering; "Centerview Capital" are to Centerview Capital Holdings LLC, a Delaware limited liability company and its affiliates; "Centerview Capital Consumer" are collectively to (i) the consumer private equity investment business sponsored by Centerview Capital, and (ii) the various entities and funds that are engaged in such business; "common stock" are to our Class A common stock and our Class B common stock, collectively; "founder shares" are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to this offering, and the shares of our Class A common stock issued upon the conversion thereof as provided herein; "private placement warrants" are to the warrants issued to our sponsor in a private placement simultaneously with the closing of this offering; and "specified future issuance" are to an issuance of a class of equity or equity-linked securities to specified purchasers, which may include affiliates of Centerview Capital, that we may determine to make in connection with financing our initial business combination. Each unit consists of one share of Class A common stock and one-third of one warrant for each unit purchased. Each whole warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as described in this prospectus, and only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a whole warrant. Registered trademarks referred to in this prospectus are the property of their respective owners. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. 1 Our Company We are a newly organized blank check company incorporated as a Delaware corporation on April 20, 2016 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not identified any potential business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any potential business combination target. While we may pursue an acquisition opportunity in any industry or sector, we intend to focus on the consumer sector and consumer-related businesses, which complements our management team s expertise and which will benefit from our operational value add. We believe that the experience and capabilities of our management team will make us an attractive partner to potential target businesses, enhance our ability to complete a successful business combination, and bring value to the business post-business combination. Not only does our management team bring a combination of operating, investing, financial and transaction experience, but also has worked closely together in the past at multiple consumer companies, creating value for shareholders. Our management team is led by James M. Kilts, our Executive Chairman, and David J. West, our Chief Executive Officer. Mr. Kilts and Mr. West s careers have centered on identifying and implementing value creation initiatives within the consumer industry. They have collectively created approximately $50 billion in shareholder value throughout their combined 70+ year careers in the consumer industry by relying on what we believe to be tried-and-true management strategies: cost management and productivity enhancement, and reinvesting the savings behind product innovation, marketing, and brand building. Mr. Kilts is a renowned leader in the consumer industry, with over 40 years of experience leading a range of companies and iconic brands. Mr. Kilts served as Chairman of the Board, Chief Executive Officer and President of Gillette from 2001 until it merged with The Procter & Gamble Company in 2005; at that time he became Vice Chairman of the Board of The Procter & Gamble Company. Before Mr. Kilts joined Gillette, the company s sales had been flat for 4 years, and it had missed earnings estimates for 14 consecutive quarters. Mr. Kilts took steps to rebuild the management team, cut costs and reinvest the savings in innovation and marketing. During his tenure as Chief Executive Officer, Mr. Kilts oversaw the creation of approximately $30 billion in equity value for Gillette s public shareholders, with Gillette s share price appreciating 110% while the S&P 500 declined 3% over the same time period. Under Mr. Kilts leadership, Gillette rejoined the top ranks of consumer products companies as sales increased an average of 9% each year. The Harvard Business Review cited Mr. Kilts leadership as the driving force behind Gillette s turnaround. Prior to Gillette, Mr. Kilts served as President and Chief Executive Officer of Nabisco from 1998 until its acquisition by The Philip Morris Companies in 2000. Before joining Nabisco, Mr. Kilts was an Executive Vice President of The Philip Morris Companies from 1994 to 1997 and headed the Worldwide Food group. In that role, Mr. Kilts was responsible for integrating Kraft and General Foods and for shaping the group s domestic and international strategy. Mr. Kilts had previously served as President of Kraft USA and Oscar Mayer. More recently, Mr. Kilts served as Chairman of the Board of Nielsen Holdings N.V. from 2009 to 2014, during which time Mr. Kilts worked closely with management to defend key existing customers and win new business. During their investment period, the investor group s equity value creation was nearly $7 billion. Mr. West is an established leader in the consumer industry, with nearly 30 years of experience leading a range of companies and well-known brands. Mr. West served as Chief Executive Officer and President of Big Heart Pet Brands (formerly Del Monte Foods) from 2011 to 2015. Mr. West worked closely with Mr. Kilts during this time period, as Mr. Kilts was Chairman of the Board of Big Heart Pet Brands. Mr. West repositioned the business to focus on growth and innovation, enhance distribution, and develop a marketing culture to focus on brands and products. The J. M. Smucker Company purchased Big Heart Pet Brands in March 2015. During his tenure as Chief Executive Officer of Big Heart Pet Brands, Mr. West oversaw the creation of approximately $2 billion of equity 2 value for investors. Prior to joining Big Heart Pet Brands, Mr. West served as the Chief Executive Officer, President and a director of Hershey from 2007 to 2011. Under Mr. West s leadership, Hershey enjoyed net sales and profit growth and strong shareholder returns, and was recognized as one of the World s 100 Most Innovative Companies by Forbes Magazine in 2011. The success created by Mr. West s leadership led to public shareholders of Hershey experiencing more than $5 billion of equity value creation during his tenure. Hershey s share price appreciated 68% during this time period, while the S&P 500 grew 0%. Prior to joining Hershey in 2001, Mr. West spent 14 years with Nabisco, where he worked closely with Mr. Kilts during Mr. Kilts tenure as Chief Executive Officer. Our sponsor is an affiliate of Centerview Capital. Founded in 2006, Centerview Capital sponsors multiple investment funds, including consumer (also known as Centerview Capital Consumer) and technology funds. Our management team, including James M. Kilts, David J. West and Brian K. Ratzan, are all partners at Centerview Capital Consumer. Mr. Ratzan, our Chief Financial Officer, brings over 20 years of private equity investing experience. The deep operating experience of Mr. Kilts and Mr. West complement Mr. Ratzan s financial and transactional expertise to create a team capable of identifying attractive investments and executing deals in the consumer sector. Centerview Capital Consumer has made investments across the consumer industry spectrum, including the food and beverage, household/personal care, and consumer services sectors. Centerview Capital Consumer has a track record of identifying high-quality assets, businesses and management teams. Centerview Capital is associated with Centerview Partners. Certain partners of Centerview Partners are partners (either directly or indirectly) in the ultimate general partner and the manager of Centerview Capital Consumer s investment funds, and serve on Centerview Capital Consumer s investment committee. Centerview Partners is a leading independent investment banking and advisory firm which provides advice on mergers and acquisitions, financial restructurings, valuation, and capital structure to companies, institutions and governments. Since the founding of Centerview Partners in 2006, the firm has advised on over $1 trillion of transactions. Centerview Partners clients include over 20% of the 50 largest companies in the world by market capitalization, including many of the world s most influential consumer companies, which we believe further broaden our reach and network of deal contacts. We believe that companies operating in the consumer sector have characteristics which make them attractive investments. Many companies in the consumer industry generate high margins and strong free cash flow, maintain operational stability throughout economic cycles, and serve as good platforms for future acquisitions. Furthermore, these companies can create significant value by introducing new products and/or services to the marketplace, growing distribution, and building brands that resonate in households worldwide. Our management team has executed on these growth strategies throughout their careers. Recently, many large consumer companies have announced plans to cut costs and divest non-core brands, which is expected to result in the sale of assets. All members of our management team have had extensive experience undertaking mergers and acquisitions and overseeing business integration and synergy realization. We believe that our management team of consumer industry veterans is uniquely capable of identifying attractive businesses, executing acquisitions, and adding value post deal completion. Our management team s proprietary deal sourcing network, ranging from industry executives, private owners, private equity funds, and investment bankers, in addition to the extensive global industry and geographical reach of Centerview Capital Consumer and Centerview Partners, will enable us to pursue a broad range of opportunities across the entire consumer sector. Our management believes that its ability to identify and implement operational value creation initiatives will remain central to its differentiated acquisition strategy. Additionally, our network and current affiliations will allow us to lean heavily on an existing infrastructure of resources that will assist in due diligence and ultimately structuring an acquisition. With respect to the foregoing examples, past performance by our management team or Centerview Capital Consumer is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical record of our management s 3 or Centerview Capital Consumer s performance as indicative of our future performance. None of our officers or directors have had experience with blank check companies or special purpose acquisition corporations in the past. In addition, for a list of our executive officers and entities for which a conflict of interest may or does exist between such officers and the company, as well as the priority and preference that such entity has with respect to performance of obligations and presentation of business opportunities to us, please refer to the table and subsequent explanatory paragraph on page 111. Business Strategy Our acquisition and value creation strategy will be to identify, acquire and build a company in the consumer sector that complements the experience of our management team and can benefit from its operational expertise. After our initial business combination, we envision our strategy may include additional mergers and acquisitions with a focus on generating attractive risk adjusted returns for our stockholders. We will leverage our management team s network of potential proprietary and public transaction sources where we believe a combination of our relationships, knowledge and experience in the consumer sector could effect a positive transformation or augmentation of existing businesses to improve their overall value. We plan to utilize the network and industry experience of Mr. Kilts, Mr. West, Mr. Ratzan, our sponsor and their affiliates, and our association with Centerview Partners in seeking an initial business combination and employing our acquisition strategy. Over the course of their careers, the members of our management team and their affiliates have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. This network has been developed through our management team s: extensive experience in both investing in and operating across the consumer sector; experience in sourcing, structuring, acquiring, operating, developing, growing, financing and selling businesses; relationships with sellers, financing providers and target management teams; and experience in executing transactions in the consumer sector under varying economic and financial market conditions. We expect these networks will provide our management team with a robust flow of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, which may include investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Upon completion of this offering, members of our management team will communicate with their networks of relationships to articulate the parameters for our search for a target company and a potential business combination and begin the process of pursuing and reviewing potentially interesting leads. Acquisition Criteria Consistent with this strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to acquire companies that we believe: have market and/or cost leadership positions in their respective consumer niches and would benefit from our extensive networks and insights within the consumer sector; provide enduring products or services, with the potential for revenue, market share and/or distribution improvements; are fundamentally sound companies that are not operating at their full potential but offer compelling value; 4 offer the opportunity for our management team to partner with established management teams or business owners to achieve long-term strategic and operational excellence; exhibit unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company s growth strategy, that we believe have been misevaluated by the marketplace based on our analysis and due diligence review; and will offer an attractive risk-adjusted return for our shareholders. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC. Our Acquisition Process In evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial and other information that will be made available to us. We will also utilize our operational and capital allocation experience. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Members of our management team and our independent directors will directly or indirectly own founder shares and/or private placement warrants following this offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. We currently do not have any specific transaction under consideration with a target business with which to consummate our initial business combination. All of the members of our management team are employed by Centerview Capital Consumer. Centerview Capital Consumer is continuously made aware of potential business opportunities, one or more of which we may desire to pursue for a business combination, but we have not (nor has anyone on our behalf) contacted any prospective target business with respect to a business combination transaction with us. Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination. In addition, we may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional 5 proceeds to complete the acquisition by making a specified future issuance to any such entity. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. In addition to the above, all of our executive officers have fiduciary and contractual duties to Centerview Capital Consumer and to certain companies in which Centerview Capital Consumer has invested. As a result, our officers will have a duty to offer acquisition opportunities to certain Centerview Capital Consumer funds before we can pursue such opportunities. However, we do not expect these duties to present a significant conflict of interest with our search for an initial business combination. In addition, our executive officers are not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. Moreover, our executive officers have time and attention requirements for private investment funds of which affiliates of Centerview Capital Consumer are the investment managers. Our officers and directors have agreed not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within the required timeframe. Initial Business Combination Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, or an independent accounting firm with respect to the satisfaction of such criteria. We may, at our option, pursue an acquisition opportunity jointly with one or more entities affiliated with Centerview Capital and/or one or more investors in funds managed by Centerview Capital, which we refer to as an "Affiliated Joint Acquisition." Any such parties may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by issuing to such parties a class of equity or equity-linked securities. We refer to this potential future issuance, or a similar issuance to other specified purchasers, as a "specified future issuance" throughout this prospectus. The amount and other terms and conditions of any such specified future issuance would be determined at the time thereof. We are not obligated to make any specified future issuance and may determine not to do so. This is not an offer for any specified future issuance. Pursuant to the anti-dilution provisions of our Class B common stock, any such specified future issuance would result in an adjustment to the conversion ratio such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of this offering plus all shares issued in the specified future issuance, unless the holders of a majority of the then-outstanding shares of Class B common stock agreed to waive such adjustment with respect to the specified future issuance at the time thereof. They may waive such specified future issuance due to (but not limited to) the following: (i) closing conditions which are part of the initial business combination; (ii) during negotiations with Class A stockholders on structuring an initial business combination; (iii) during negotiations with parties providing financing which would trigger the anti-dilution provisions of the Class B common stock; or (iv) as part of the Affiliated Joint Acquisition. We cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any 6 such specified future issuance would agree to waive such adjustment to the conversion ratio. If such adjustment is not waived, the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. If such adjustment is waived, the specified future issuance would reduce the percentage ownership of holders of both classes of our common stock. We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, including an Affiliated Joint Acquisition as described above. However, we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable. Corporate Information Our executive offices are located at 3 Greenwich Office Park, 2nd Floor, Greenwich, CT 06831, and our telephone number is (212) 429-2211. We are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. 7 We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to "emerging growth company" shall have the meaning associated with it in the JOBS Act. 8 The Offering In making your decision on whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section of this prospectus entitled "Risk Factors." Securities offered 35,000,000 units, at $10.00 per unit, or $350,000,000 in the aggregate, each unit consisting of: one share of Class A common stock; and one-third of one warrant. Proposed NASDAQ symbols Units: "CPAA.U" Class A Common Stock: "CPAA" Warrants: "CPAA.W" Trading commencement and separation of Class A common stock and warrants The units will begin trading on or promptly after the date of this prospectus. The Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Deutsche Bank Securities Inc. and Goldman, Sachs & Co. inform us of their decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a whole warrant. Separate trading of the Class A common stock and warrants is prohibited until we have filed a Current Report on Form 8-K In no event will the Class A common stock and warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. No fractional shares will be issued upon separation of the Units. 9 Units: Number outstanding before this offering 0 Number outstanding after this offering 35,000,000(1) Common stock: Number outstanding before this offering 10,062,500 shares of Class B common stock(2)(3) Number outstanding after this offering 43,750,000 shares of Class A common stock and Class B common stock(1)(3) Warrants: Number of private placement warrants to be sold in a private placement simultaneously with this offering 6,000,000(1) Number of warrants to be outstanding after this offering and the private placement 17,666,667(1) ____________ (1) Assumes no exercise of the underwriters over-allotment option and the forfeiture by our sponsor of 1,312,500 founder shares. (2) Includes up to 1,312,500 founder shares that are subject to forfeiture by our sponsor depending on the extent to which the underwriters over-allotment option is exercised. (3) The shares of common stock included in the units are 35,000,000 shares of Class A common stock. The remaining 8,750,000 are founder shares and are classified as shares of Class B common stock, which shares are convertible into shares of our Class A common stock on a one-for-one basis, subject to adjustment as described below adjacent to the caption "Founder shares conversion and anti-dilution." 10 Exercisability Each whole warrant is exercisable to purchase one share of our Class A common stock and only whole warrants are exercisable. Exercise price $11.50 per share, subject to adjustment as described herein. Exercise period The warrants will become exercisable on the later of: 30 days after the completion of our initial business combination, or 12 months from the closing of this offering; provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file, and within 60 business days following our initial business combination to have declared effective, a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed; provided, that if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement. The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. No fractional shares will be issued upon exercise of the warrants, and only whole warrants will trade. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Class A common stock to be issued to the warrant holder. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account. Redemption of warrants Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants): in whole and not in part; at a price of $0.01 per warrant; 11 upon a minimum of 30 days prior written notice of redemption, which we refer to as the 30-day redemption period; and if, and only if, the last sale price of our Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. We will not redeem the warrants unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a "cashless basis." In determining whether to require all holders to exercise their warrants on a "cashless basis," our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Please see the section of this prospectus entitled "Description of Securities — Warrants — Public Stockholders Warrants" for additional information. None of the private placement warrants will be redeemable by us so long as they are held by the sponsor or its permitted transferees. 12 Founder shares In April 2016, our sponsor purchased 10,062,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. In June 2016, our sponsor transferred 25,000 founder shares to each of Ms. Ghez and Messrs. Daley, Healey and Montgomery, our independent directors. These 100,000 shares shall not be subject to forfeiture in the event the underwriters overallotment option is not exercised. Prior to the initial investment in the company of $25,000 by our sponsor, the company had no assets, tangible or intangible. The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares after this offering. As such, our initial stockholders will collectively own 20% of our issued and outstanding shares after this offering (assuming they do not purchase any units in this offering). If we increase or decrease the size of the offering, we will effect a stock dividend or share contribution back to capital, as applicable, with respect to our Class B common stock immediately prior to the consummation of this offering in such amount as to maintain the ownership of our initial stockholders prior to this offering at 20% of the issued and outstanding shares of our common stock upon the consummation of this offering. Up to 1,312,500 founder shares will be subject to forfeiture by our sponsor depending on the extent to which the underwriters over-allotment option is exercised so that our initial stockholders will maintain ownership of 20% of our common stock after this offering. The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, except that: the founder shares are shares of Class B common stock that automatically convert into shares of our Class A common stock at the time of our initial business combination, or at any time prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein; the founder shares are subject to certain transfer restrictions, as described in more detail below; 13 our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 24 months from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our business combination within the prescribed time frame. If we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. Our initial stockholders have agreed to vote any founder shares held by them and any public shares purchased during or after this offering in favor of our initial business combination. As a result, in addition to our initial stockholders founder shares, we would need 13,125,001, or 30.0%, of the 35,000,000 public shares sold in this offering to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised); and the founder shares are subject to registration rights. Transfer restrictions on founder shares Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property (except as described herein under the section of this prospectus entitled "Principal Stockholders—Restrictions on Transfers of Founder Shares and Private Placement Warrants"). We refer to such transfer restrictions throughout this prospectus as the lock-up. 14 Founder shares conversion and anti-dilution rights The shares of Class B common stock will automatically convert into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, including pursuant to a specified future issuance, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of this offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination). Holders of founder shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time. Voting Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders, except as required by law. Each share of common stock will have one vote on all such matters. Private placement warrants Our sponsor will, pursuant to a written agreement, purchase an aggregate of 6,000,000 private placement warrants (or 6,700,000 if the over-allotment option is exercised in full), each exercisable to purchase one share of our Class A common stock at $11.50 per share, at a price of $1.50 per whole warrant (approximately $9,000,000 in the aggregate or $10,050,000 in the aggregate if the over-allotment option is exercised in full) in a private placement that will occur simultaneously with the closing of this offering. Each whole private placement warrant is exercisable for one whole share of our Class A common stock at $11.50 per share. A portion of the purchase price of the private placement warrants will be added to the proceeds from this offering to be held in the trust account such that at the time of closing $350.0 million (or $402.5 million if the underwriters exercise their over-allotment option in full) will be held in the trust account. If we do not complete our initial business combination within 24 months from the closing of this offering, the proceeds from the sale of the private placement warrants held in the trust account will be used to fund the redemption of our public shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless. 15 The private placement warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor or its permitted transferees. If the private placement warrants are held by holders other than the sponsor or its permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Transfer restrictions on private placement warrants The private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or saleable until 30 days after the completion of our initial business combination (except as described under the section of this prospectus entitled "Principal Stockholders — Restrictions on Transfers of Founder Shares and Private Placement Warrants"). Cashless exercise of private placement warrants If holders of private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by the sponsor or its permitted transferees is because it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could sell the shares of Class A common stock issuable upon exercise of the warrants freely in the open market, the insiders could be significantly restricted from doing so. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate. Proceeds to be held in trust account Of the net proceeds of this offering and the sale of the private placement warrants, $350,000,000, or $10.00 per unit ($402,500,000, or $10.00 per unit, if the underwriters over-allotment option is exercised in full) will be placed into a U.S.-based trust account at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee. These proceeds include $12,250,000 (or $14,087,500 if the underwriters over-allotment option is exercised in full) in deferred underwriting commissions. 16 Except with respect to up to $1,000,000 of interest earned on the funds held in the trust account that may be released to us to fund working capital requirements, as well as amounts released to us to pay our franchise and income tax obligations, the proceeds from this offering and the sale of the private placement warrants will not be released from the trust account until the earliest of (a) the completion of our initial business combination, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering and (c) the redemption of our public shares if we are unable to complete our business combination within 24 months from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders. Anticipated expenses and funding sources Except as described above with respect to the payment of working capital and taxes, unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use. Based upon current interest rates, we expect the trust account to generate approximately $70,000 of interest annually. Unless and until we complete our initial business combination, we may pay our expenses only from: the net proceeds of this offering and the sale of the private placement warrants not held in the trust account, which will be approximately $1,200,000 in working capital after the payment of approximately $800,000 in expenses relating to this offering; and any loans or additional investments from our sponsor, members of our management team or their affiliates or other third parties, although they are under no obligation to advance funds or invest in us, and provided that any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of a business combination. Conditions to completing our initial business combination There is no limitation on our ability to raise funds privately, including pursuant to any specified future issuance, or through loans in connection with our initial business combination. Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. 17 If our board is not able to independently determine the fair market value of the target business or businesses or we are considering an initial business combination with an affiliated entity, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm. We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, including an Affiliated Joint Acquisition. However, we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test, provided that in the event that the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable. 18 Permitted purchases of public shares by our affiliates If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial stockholders, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Subsequent to the consummation of this offering, we will adopt an insider trading policy which will require insiders to refrain from purchasing shares during certain blackout periods and when they are in possession of any material nonpublic information and to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as such purchases will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary. Redemption rights for public stockholders upon completion of our initial business combination We will provide our stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay up to $1,000,000 of our working capital requirements as well as to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares held by them and any public shares they may acquire during or after this offering in connection with the completion of our business combination or otherwise. 19 Manner of conducting redemptions We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirements. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation: conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. Upon the public announcement of our business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act. 20 In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (so that we are not subject to the SEC s "penny stock" rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination. If, however, stockholder approval of the transaction is required by law or stock exchange listing requirements, or we decide to obtain stockholder approval for business or other legal reasons, we will: conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and file proxy materials with the SEC. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count towards this quorum and have agreed to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders founder shares, we would need 13,125,001, or 30.0%, of the 35,000,000 public shares sold in this offering to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised). We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction. 21 We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in "street name," to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. We believe that this will allow our transfer agent to efficiently process any redemptions without the need for further communication or action from the redeeming public stockholders, which could delay redemptions and result in additional administrative cost. If the proposed business combination is not approved and we continue to search for a target company, we will promptly return any certificates delivered, or shares tendered electronically, by public stockholders who elected to redeem their shares. Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (so that we are not subject to the SEC s "penny stock" rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof. 22 Limitation on redemption rights of stockholders holding 10% or more of the shares sold in this offering if we hold stockholder vote Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a "group" (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 10% of the shares sold in this offering. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 10% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders ability to redeem to no more than 10% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders ability to vote all of their shares (including all shares held by those stockholders that hold more than 10% of the shares sold in this offering) for or against our business combination. 23 Redemption rights in connection with proposed amendments to our certificate of incorporation Some other blank check companies have a provision in their charter which prohibits the amendment of certain charter provisions. Our amended and restated certificate of incorporation will provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of this offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the Delaware General Corporation Law, or DGCL, or applicable stock exchange rules. Our initial stockholders, who will collectively beneficially own 20% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. Our initial stockholders have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination. 24 Release of funds in trust account on closing of our initial business combination On the completion of our initial business combination, all amounts held in the trust account will be released to us. We will use these funds to pay amounts due to any public stockholders who exercise their redemption rights as described above under "Redemption rights for public stockholders upon completion of our initial business combination," to pay the underwriters their deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. Redemption of public shares and distribution and liquidation if no initial business combination Our sponsor, officers and directors have agreed that we will have only 24 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay up to $1,000,000 of our working capital requirements as well as to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination within the 24-month time period. Our initial stockholders have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 24 months from the closing of this offering. However, if our initial stockholders acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time period. 25 The underwriters have agreed to waive their rights to their deferred underwriting commission held in the trust account in the event we do not complete our initial business combination and subsequently liquidate and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. Limited payments to insiders There will be no finder s fees, reimbursements or cash payments made by us to our sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination. However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: Repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses; Payment to an affiliate of our sponsor of $10,000 per month, for up to 24 months, for office space, utilities and secretarial and administrative support; Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Audit Committee We will establish and maintain an audit committee, which will be composed entirely of independent directors to, among other things, monitor compliance with the terms described above and the other terms relating to this offering. If any noncompliance is identified, then the audit committee will be charged with the responsibility to immediately take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section of this prospectus entitled "Management — Committees of the Board of Directors—Audit Committee." 26 Conflicts of Interest Centerview Capital sponsors several investment vehicles. Funds managed by Centerview Capital Consumer or its affiliates may compete with us for acquisition opportunities. If these funds decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within Centerview Capital Consumer may be suitable for both us and for a current or future Centerview Capital Consumer fund and may be directed to such investment vehicle rather than to us. Neither Centerview Capital Consumer nor members of our management team who are also employed by Centerview Capital Consumer have any obligation to present us with any opportunity for a potential business combination of which they become aware, unless presented to such member solely in his or her capacity as an officer or director of the company. Centerview Capital Consumer and/or our management, in their capacities as employees of Centerview Capital Consumer or in their other endeavors, may be required to present potential business combinations to the related entities described above, current or future Centerview Capital Consumer investment vehicles, or third parties, before they present such opportunities to us. Notwithstanding the foregoing, we may, at our option, pursue an Affiliated Joint Acquisition opportunity with any such fund or other investment vehicle. Such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by making a specified future issuance to any such fund or vehicle. Indemnity Our sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or by a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, then our sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor s only assets are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. None of our officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses. 27 Risks We are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see the section of this prospectus entitled "Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419." You should carefully consider these and the other risks set forth in the section of this prospectus entitled "Risk Factors." 28 Summary Financial Data The following table summarizes the relevant financial data for our business and should be read with our financial statements, which are included in this prospectus. We have not had any significant operations to date, so only balance sheet data is presented. April 29, 2016 Actual As Adjusted Balance Sheet Data: Working capital (deficiency) $ (17,500 ) 338,973,000 (1) Total assets 165,500 351,223,000 (2) Total liabilities 142,500 12,250,000 (3) Value of Class A common stock that may be redeemed in connection with our initial business combination ($10.00 per share) — 333,972,990 (4) Stockholders equity $ 23,000 5,000,010 (5) ____________ (1) The "as adjusted" calculation includes $350,000,000 cash held in trust from the proceeds of this offering and the sale of the private placement warrants, plus $1,200,000 in cash held outside the trust account, plus $23,000 of actual stockholder s equity as of April 29, 2016, less $12,250,000 of deferred underwriting commissions. (2) The "as adjusted" calculation equals $350,000,000 cash held in trust from the proceeds of this offering and the sale of the private placement warrants, plus $1,200,000 in cash held outside the trust account plus $23,000 of actual stockholder s equity as of April 29, 2016. (3) The "as adjusted" calculation includes $12,250,000 of deferred underwriting commissions. (4) The "as adjusted" calculation equals the "as adjusted" total assets, less the "as adjusted" total liabilities, less the "as adjusted" stockholders equity, which is set to approximate the minimum net tangible assets threshold of at least $5,000,001 upon consummation of our initial business combination. (5) Excludes 33,397,299 shares of Class A common stock purchased in the public market which are subject to redemption in connection with our initial business combination. The "as adjusted" calculation equals the "as adjusted" total assets, less the "as adjusted" total liabilities, less the value of Class A common stock that may be redeemed in connection with our initial business combination (approximately $10.00 per share). If no business combination is completed within 24 months from the closing of this offering, the proceeds then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay up to $1,000,000 of our working capital requirements as well as to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), will be used to fund the redemption of our public shares. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within such 24 month time period. 29
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001673193_tglt-s-a_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001673193_tglt-s-a_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ed6f68a7e465296c810c3c4bdac8ca8dbb45f02f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001673193_tglt-s-a_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in the ADSs. You should read this entire prospectus carefully, especially the section in this prospectus entitled Risk Factors beginning on page 23 and our financial statements and the related notes thereto appearing at the end of this prospectus, before making an investment decision. As used in this prospectus, references to TGLT, the company, we, us and our refer to TGLT S.A. and its consolidated subsidiaries, except where the context otherwise requires. Overview We are one of the fastest growing integrated real estate companies in Argentina in terms of developed area, with substantial focus in Argentina. Since our establishment in 2005, we have focused on the development of residential properties, and are currently expanding our commercial real estate operations, particularly in the office and logistics sectors. We have a proven track record of implementing our integrated business model to achieve substantial growth, in particular since our initial share offering, or IPO, on the MERVAL on November 5, 2010, through which we raised approximately Ps.220 million to fund our aggressive growth plan in the residential real estate sector. We have also developed mixed-use residential and commercial projects since 2010. By successfully deploying the capital we raised through our MERVAL IPO, despite the economic challenges facing Argentina since the crisis in 2001-2002, we have achieved significant growth, with our contracted sales increasing from US$41.3 million (Ps.161.5 million) for the fiscal year ended December 31, 2010 the year of our IPO on the MERVAL to US$113.6 million (Ps.1.052,4 million) for the fiscal year ended December 31, 2015, at the average exchange rate for the applicable year, achieving a compound growth rate in U.S. dollars of 22.4%. for this period. We are now one of the largest residential real estate companies in Argentina in terms of total GSA, with more than 596,000 square meters (including our Forum Puerto del Buceo project in Montevideo, Uruguay) in different stages of development, across 11 large projects comprising 94 buildings. In developing our residential projects, we have primarily focused on the high income purchasers who can typically afford to purchase properties in cash. However, we have also developed several projects that target the middle income segment, which we believe is poised for significant growth, as mortgage financing once again becomes available to Argentine purchasers, which we believe will occur as a result of expected political, regulatory and economic developments in Argentina. As an integrated real estate company, we control all aspects of the real estate development process with a management team experienced in all key areas of real estate development and operations, including land identification and acquisition, government licensing and relations, project management, commercialization and sales. During the development process, while we retain the decisions and control of these functions, we entrust the actual execution of certain functions, such as architecture and construction, to specialized companies under our close supervision. We also provide specialized value-added services that seek to maintain or increase the value of real estate properties owned by us and our clients. We believe that our integrated business model will (i) allow us to capture value throughout the business cycle, as we are able to focus on different market segments at different points in the cycle, (ii) provide flexibility to take advantage of different opportunities that arise in Argentina s rapidly evolving real estate market, (iii) give us the ability to match our cash flows and our risk exposure across different business lines with the different cash requirements and return profiles of our business lines, and (iv) generate critical mass as we combine operations, realize synergies and take advantage of cross selling opportunities through our brokerage business and with our corporate clients. Through this integrated business model and our experience in developing mixed-use projects, we plan to take advantage of current market opportunities to grow more aggressively in two core areas of commercial real estate: for-lease Class A office buildings which are buildings with above average rents for the area in which they are located, high quality standard finishes and systems, exceptional locations and a recognized market presence; and premium logistics centers, or PLCs which are integrated warehouses, built with advanced features, including dock levers, high resistance floors, climate control and support offices, in the Buenos Aires metropolitan area. (1) Includes common shares that the international underwriters may purchase solely pursuant to their option to purchase additional shares and common shares which are to be offered outside the United States but which may be resold from time to time in the United States in transactions requiring registration under the Securities Act, including common shares which the registrant may sell to current shareholders pursuant to preemptive rights and accretion rights. Offers and sales of shares outside the United States are being made pursuant to Regulation S under the Securities Act of 1933 and are not covered by this Registration Statement. (2) A separate registration statement on Form F-6 will be filed for the registration of American depositary shares issuable upon deposit of the common shares registered hereby. (3) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act. (4) Fee previously paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Statements We maintain our financial books and records in Pesos and prepare our consolidated financial statements in Argentina in accordance with IFRS, as issued by the IASB, and all financial information included in this prospectus is presented in accordance with IFRS, except as otherwise indicated. In particular, this prospectus contains certain non-IFRS financial measures which are defined under Summary of Selected Consolidated Financial Data. Our consolidated financial statements at December 31, 2015 and 2014 and for each of the two years ended December 31, 2015 and December 31, 2014 have been audited, as stated in the report appearing herein, and are included in this prospectus and referred to as our audited consolidated financial statements. Financial information as of June 30, 2016 and 2015 and for the six months ended June 30, 2016 and 2015 has been derived from our unaudited interim consolidated financial statements as of and for the six months ended June 30, 2016 and 2015, included in this prospectus and referred to as our unaudited interim consolidated financial statements . Currencies and Rounding The terms U.S. dollar and U.S. dollars and the symbol US$ refer to the legal currency of the United States. The terms Peso and Pesos and the symbol Ps. refer to the legal currency of Argentina. Within the financial statements contained in this prospectus, $ means Pesos. We have translated certain of the Peso amounts contained in this prospectus into U.S. dollars for convenience purposes only using rates published by the Central Bank and Banco de la Naci n Argentina, or the National Bank of Argentina. Unless otherwise indicated, financial information extracted or derived from our consolidated financial statements and contained in this prospectus has been translated into U.S. dollars at the bid closing rate as of June 30, 2016 and June 30, 2015, which was Ps.14.94 and Ps.8.99 per one U.S. dollar respectively, as published by the National Bank of Argentina for the six months ended June 30, 2016 and June 30, 2015, and at the bid closing rate as of December 31, 2015, which was Ps.12.94 per one U.S. dollar, as published the National Bank of Argentina for the fiscal year 2015. For non-financial information contained in this prospectus, the rate used to translate such amounts (i) as of June 30, 2016, which was Ps.14.9200 per one U.S. dollar, (ii) as of December 31, 2015 was Ps.13.0050 per one U.S. dollar, which was the Tipo de Cambio de Referencia, or reference exchange rate reported by the Central Bank for U.S. dollars and (iii) as of December 31, 2014 was Ps.8.5520 per one U.S. dollar, which was the reference exchange rate reported by the Central Bank for U.S. dollars. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. The U.S. dollar equivalent information presented in this prospectus is provided solely for the convenience of investors and should not be construed as implying that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See Exchange Rates for more detailed information regarding the translation of Pesos into U.S. dollars. All as adjusted amounts contained in this prospectus have been adjusted to reflect the receipt by us of the estimated net proceeds at an assumed public offering price of US$ per common share (or US$ per ADS), the midpoint of the price range set forth on the cover page of this prospectus. Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. Market Share and Other Information We make statements in this prospectus about our competitive position and market share in, and the market size of, the Argentine and Uruguayan real estate industry. We have made these statements on the basis of statistics and other information derived from industry publications and other third-party sources that we believe are reliable. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, neither we, the international underwriters, the Argentine placement agent nor any of our or their affiliates have independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications. (1) Percentage of total saleable units Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED , 2016 PROSPECTUS Common Shares TGLT S.A. which may be represented by American depositary shares This is the initial public offering in the United States of our shares of common stock, par value Ps.1.00 per share and one vote per share. We are offering common shares in a global offering, which consists of an international offering in the United States and other countries outside Argentina and a concurrent offering in Argentina. In the aggregate, common shares, which may be represented by American depositary shares, or ADSs, are being offered by us in the global offering. Each ADS represents 15 common shares. The international offering of the ADSs in the United States and other countries outside Argentina is being underwritten by the international underwriters named in this prospectus. In the Argentine offering, common shares are being offered to investors in Argentina through the Argentine placement agent named in this prospectus. The closings of the international and Argentine offerings are conditioned upon each other. The initial public offering price of the ADSs in the international offering is expected to be between US$ and US$ per ADS, and the offering price of the common shares in the Argentine offering is expected to be between US$ and US$ per common share. After the pricing of this offering, we expect the ADSs to trade on the New York Stock Exchange, or the NYSE, under the symbol TGLT. Prior to this offering our common shares have traded, and subsequent to this offering will continue to trade, on the Mercado de Valores de Buenos Aires, or MERVAL, under the symbol TGLT. The latest reported closing sale price of our common shares on the MERVAL on September 9, 2016 was Ps.17.50 per share, or US$1.16 per share (equivalent to a price of US$17.43 per ADS) based on the rate of exchange on that day.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001674158_jbs-foods_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001674158_jbs-foods_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9642ef1138273f9733090cb93c294307e1f89b9f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001674158_jbs-foods_prospectus_summary.txt
@@ -0,0 +1 @@
+The following is a summary of some of the information contained in this prospectus. It does not contain all the details concerning JBS Foods International or the transaction, including information that may be important to you. We urge you to read this entire document carefully, including Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and the notes thereto included elsewhere in this prospectus. Overview of JBS Foods International General We are one of the world s largest food companies and the world s largest protein company in terms of revenue. Our consolidated net revenue for the three-month period ended March 31, 2016 and the years ended December 31, 2015 and 2014 was R$43,911.9 million (US$12,338.3 million), R$162,914.5 million (US$45,775.4 million) and R$120,469.7 million (US$33,849.3 million). Through strategic acquisitions in new geographies, primarily in the United States, Australia, Brazil and Europe, we have created a diversified global platform that allows us to prepare, package and deliver fresh, processed and value-added beef, poultry, pork, lamb and sheep products and animal by-products from our facilities located around the world. In 2015, we sold our products in approximately 190 countries on five continents, and for the three-month period ended March 31, 2016 and the years ended December 31, 2015 and 2014, we generated 85.1%, 84.2% and 80.7%, respectively, of our consolidated gross revenue from sales outside of Brazil. Our protein products are recognized through our well-known brands, including Swift, Swift Premium, 1855, Pilgrim s Pride, Pierce, Gold Kist Farms and Del Dia in North America, Friboi, Seara, Maturatta and Caba a Las Lilas in South America, Primo and Beehive in Australia and New Zealand and Moy Park and O Kane in Europe. We believe that, as of March 31, 2016, we were one of the largest: beef producers and exporters in the world in terms of capacity, with operations in the United States, Brazil, Argentina, Paraguay, Uruguay, Australia and Canada and a total daily slaughtering capacity of approximately 82,400 head of cattle; poultry producers in the world in terms of capacity, with operations in the United States, Mexico, Puerto Rico, Brazil and the United Kingdom and a total daily slaughtering capacity of approximately 13.8 million chickens; pork producers in the United States and Brazil in terms of capacity, with total daily slaughtering capacities of approximately 89,700 hogs and 20,800 hogs, respectively. We also operate one pork facility in Australia with a daily slaughtering capacity of approximately 4,000 hogs; lamb and sheep producers and exporters in the world in terms of capacity, with operations in Australia and a total daily slaughtering capacity of approximately 23,100 lambs; and leather tanners in the world in terms of capacity, with operations in Brazil, the United States, Australia, Argentina, Mexico, China, Uruguay, Italy, Germany and Vietnam and a total daily production capacity of approximately 95,000 hides. We also believe that we are a significant producer of further processed and value-added meat products in the world, with a total monthly production capacity of approximately 204,100 tons as of March 31, 2016. Our fresh products include fresh and frozen cuts of beef, pork, lamb and sheep, whole chickens and chicken parts. Our processed and value-added meat products include products that are cut, ground and packaged in a customized manner for specific orders and include frozen, cooked, canned, seasoned, marinated and consumer-ready products. In addition, we produce and sell animal by-products that are derived from our beef processing Table of Contents EXPLANATORY NOTE JBS Foods International Designated Activity Company, a private limited company incorporated under the laws of the Republic of Ireland ( Ireland ), is filing this registration statement on Form F-1 to register the distribution (as defined below) that is part of a proposed global reorganization (the Global Reorganization ) of JBS S.A., a corporation (sociedade an nima) incorporated under the laws of the Federative Republic of Brazil ( Brazil ), and its subsidiaries (collectively, the JBS Group ). Upon the completion of the Global Reorganization, JBS Foods International plc (as JBS Foods International Designated Activity Company is expected to be known upon its re-registration as a public limited company in Ireland, or JBS Foods International ) will be the ultimate parent company of the JBS Group. JBS Foods International intends to apply to have its ordinary shares, par value US$0.001 per ordinary share (the JBS Foods International ordinary shares ), listed for trading on the New York Stock Exchange. JBS Foods International also intends to sponsor a Brazilian Depositary Receipt ( BDR ) program to permit JBS Foods International ordinary shares represented by BDRs (the JBS Foods International BDRs ) to be listed for trading on the S o Paulo Stock Exchange (BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias & Futuros) ( BM&FBOVESPA ). Asset contribution. As the first step in the Global Reorganization, JBS S.A. intends to contribute substantially all of its assets, other than the assets of JBS S.A. associated with its Brazilian beef business and related activities, including its leather business (the asset contribution ), to a new wholly-owned subsidiary holding company of JBS Foods International ( New Holdco ) in exchange for JBS Foods International issuing and delivering a letter of allotment to JBS S.A. In connection with the asset contribution, New Holdco will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. The letter of allotment to JBS S.A. will represent 100% of the total voting shares of JBS Foods International and will be equivalent to the net assets contributed to New Holdco by JBS S.A. At the time of the asset contribution, JBS Foods International will be a wholly-owned subsidiary of JBS S.A. No approval of the asset contribution is required or being sought from holders of JBS S.A. common shares or JBS S.A. ADSs. Distribution of JBS Foods International ordinary shares. Following the asset contribution, JBS S.A. plans to implement a capital reduction, pursuant to which it will distribute on a pro rata basis (the distribution ) 100% of the JBS Foods International ordinary shares allotted to it in connection with the asset contribution to all holders of shares of common stock of JBS S.A. ( JBS S.A. common shares ) (including holders of JBS S.A. common shares represented by American Depositary Shares ( JBS S.A. ADSs )). Holders of JBS S.A common shares will automatically receive JBS Foods International BDRs in their securities accounts in Brazil and will be required to cancel their JBS Foods International BDRs in accordance with the terms of the deposit agreement to be entered into between JBS Foods International and the JBS Foods International BDR Depositary (the JBS Foods International BDR Deposit Agreement ) in order to receive JBS Foods International ordinary shares, unless they deposit their JBS S.A. common shares into the JBS S.A. ADS program prior to the distribution record date. Holders of JBS S.A. ADSs will automatically receive JBS Foods International ordinary shares in the distribution. The distribution will not affect the number of JBS S.A. common shares or JBS S.A. ADSs held by holders of JBS S.A. common shares or JBS S.A. ADSs, as the case may be. This registration statement on Form F-1 is being filed to register the distribution in the United States. Approval of the distribution will require the affirmative vote of holders representing a majority of the number of issued and outstanding JBS S.A. common shares present or represented at a duly convened extraordinary general shareholders meeting (the JBS S.A. EGM ). JBS S.A. will issue a notice to call the JBS S.A. EGM Brazil at least 30 days prior to the expected date of the JBS S.A. EGM, in accordance with Brazilian law. However, at the time this registration statement on Form F-1 is declared effective, the distribution will have been approved by the JBS S.A. EGM. Therefore, holders of JBS S.A. common shares and JBS S.A. ADSs are not being asked for a proxy and are requested not to send a proxy in connection with the distribution being registered pursuant to this registration statement. JBS Foods International capital increase. To complete the Global Reorganization, following the distribution, JBS Foods International will conduct a capital increase (the JBS Foods International capital increase ), following which JBS S.A. is expected to be a consolidated subsidiary of JBS Foods International. Table of Contents Non-U.S. shareholders should consult their advisors in considering whether there are any restrictions or limitations on transactions in the JBS Foods International ordinary shares, JBS Foods International BDRs, JBS S.A. common shares and/or JBS S.A. ADSs that may apply in their home countries. Neither JBS Foods International nor JBS S.A. can provide any assurance about whether such limitations may exist. You should not assume that the information contained in this prospectus is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this prospectus may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations. JBS Foods International Designated Activity Company was incorporated in Ireland on May 9, 2016 as a private company. On , 2016, JBS Foods International Designated Activity Company re-registered in Ireland as a public limited company under the name JBS Foods International plc. In this prospectus JBS Foods International refers to JBS Foods International plc unless otherwise noted. JBS Foods International intends to be a tax resident in the U.K. We, our, us, our company or like terms, when used in a historical context, refer to JBS S.A. and its consolidated subsidiaries and when used in the present tense or prospectively, refer to JBS Foods International and its consolidated subsidiaries, assuming that the transaction has been completed as of the date of the applicable disclosure. JBS S.A. is our predecessor for accounting purposes. In addition, in this prospectus, except where otherwise indicated or where the context requires otherwise: the affiliate private capital contribution means the private transaction to be completed following the distribution, whereby each of FB, BNDESPAR and Banco Original will be entitled to contribute all or a portion of its JBS S.A. common shares in exchange for the option to receive up to: 74,814,208; 36,117,192; and 337,509 newly-issued JBS Foods International ordinary shares (or JBS Foods International BDRs), respectively; the asset contribution means the contribution by JBS S.A. of substantially all of its assets, other than the assets of JBS S.A. associated with its Brazilian beef business and related activities, including its leather business, to New Holdco in exchange for JBS Foods International issuing and delivering a letter of allotment to JBS S.A. In connection with the asset contribution, New Holdco will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. The letter of allotment to JBS S.A. will represent 100% of the total voting shares of JBS Foods International and will be equivalent to the net assets contributed to New Holdco by JBS S.A. The asset contribution is expected to take place immediately prior to the distribution; AUS$ means Australian dollars, the official currency of Australia; Australia means the Commonwealth of Australia; Banco Original means, collectively: (1) Banco Original S.A.; and (2) Banco Original do Agroneg cio S.A., each a Brazilian financial institution owned by J&F. As of August 3, 2016, Banco Original S.A. and Banco Original do Agroneg cio S.A. owned 0.14% and 0.5%, respectively, of JBS S.A. s total capital stock. For more information, see Principal Shareholders; the Batista Family means our founder, Jos Batista Sobrinho, his wife, Flora Mendon a Batista, and five of their children: Valere Batista Mendon a Ramos, Vanessa Mendon a Batista, Wesley Mendon a Batista, Joesley Mendon a Batista and Vivianne Mendon a Batista; BNDES means the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econ mico e Social BNDES); BNDESPar means BNDES Participa es S.A., a corporation (sociedade por a es) incorporated under the laws of Brazil and wholly owned by BNDES. As of August 3, 2016, BNDESPar owned 21.4% of JBS S.A. s total outstanding capital stock. For more information, see Principal Shareholders; Table of Contents operations, such as hides, to customers in the shoe, clothing and automobile industries, among others. In Brazil, we also produce and sell personal hygiene and cleaning products, collagen, biodiesel fuel and metal cans. We sell our products primarily to retailers (such as supermarkets, club stores and other retail distributors) and foodservice companies (such as restaurants, hotels, foodservice distributors and additional processors) in the countries where we operate our facilities, which we classify as domestic sales, and elsewhere, which we classify as export sales. As of March 31, 2016, we had more than 350,000 active customers in our database, including retailers and wholesalers. JBS Foods International Designated Activity Company was incorporated in Ireland on May 9, 2016 as a private limited company. On , 2016 JBS Foods International Designated Activity Company re-registered in Ireland as a public limited company under the name JBS Foods International plc. Immediately prior to the commencement of the asset contribution, JBS Foods International was a wholly-owned subsidiary of JBS S.A. However, as explained below, we expect that JBS S.A. will become a subsidiary of JBS Foods International as a result of the JBS Foods International capital increase. Our registered office is located at 25-28 North Wall Quay, I.F.S.C., Dublin 1, Ireland, and our principal executive offices are located at 2nd Floor Building 1, Imperial Place, Maxwell Road, Borehamwood, Hertfordshire, WD6 1JN United Kingdom. Our telephone number is +44 20 8369-5310. Recent Development In accordance with our financial risk management policy, in April 2016, our risk management committee decided to unwind most of our currency derivatives that were in place at March 31, 2016, effectively reducing our currency derivatives exposure to close to zero. Overview of the Transaction Key Steps JBS S.A. intends to pursue a Global Reorganization, pursuant to which it will transfer all of its businesses, other than its Brazilian beef business and related activities, including its leather business, to New Holdco. New Holdco will be a wholly-owned subsidiary of JBS Foods International, and JBS S.A. will become a consolidated subsidiary of JBS Foods International while remaining listed on the Novo Mercado segment of the BM&FBOVESPA. Following the Global Reorganization, JBS Foods International will become the new holding company of the JBS Group, and the existing shareholders of JBS S.A. will also become shareholders of JBS Foods International. JBS Foods International intends to list its ordinary shares on the NYSE and sponsor the JBS Foods International BDR Program to list its BDRs on the BM&FBOVESPA. JBS S.A. and JBS Foods International propose to implement the Global Reorganization as follows: Step 1: SEC and CVM registrations; BM&FBOVEPA listing. JBS Foods International will (i) have the registration statement of which this prospectus is a part declared effective by SEC; (ii) be registered as a foreign private issuer of listed securities with CVM; (iii) have the JBS Foods International BDR Program registered with CVM; and (iv) have its BDRs listed on the BM&FBOVESPA under the symbol JBSF. Step 2: Asset contribution. JBS S.A. intends to contribute substantially all of its assets, other than the assets of JBS S.A. associated with its Brazilian beef business and related activities, including its leather business, to New Holdco in exchange for JBS Foods International issuing and delivering a letter of allotment to JBS S.A. In connection with the asset contribution, New Holdco will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under Table of Contents JBS S.A. s common shares are expected to remain listed and trading on the Novo Mercado segment of the BM&FBOVESPA. Only holders of JBS S.A. common shares, including holders of JBS S.A. ADSs, will be entitled to participate in the JBS Foods International capital increase, as follows: (1) Affiliate private capital contribution. Following the distribution, each of FB Participa es S.A. ( FB ), BNDES Participa es S.A. ( BNDESPar ) and Banco Original S.A. and Banco Original do Agroneg cio S.A. (collectively referred to as Banco Original ), each a Brazilian shareholder of JBS S.A., will be entitled to contribute all or a portion of its JBS S.A. common shares to JBS Foods International in return for the option to receive newly-issued JBS Foods International ordinary shares or JBS Foods International BDRs. (2) Following the conclusion of the affiliate private capital contribution, JBS Foods International intends to apply to list its ordinary shares on the NYSE. JBS Foods International will then make an offer to the holders of JBS S.A. common shares (including those JBS S.A. common shares represented by JBS S.A. ADSs) at the same exchange ratio applicable to the affiliate private capital contribution but subject to proration that would allow JBS S.A. to maintain a minimum free float of at least 25% of its issued and outstanding JBS S.A. common shares (as required by the listing rules of the Novo Mercado segment of the BM&FBOVESPA in order to maintain JBS S.A. s listing on the Novo Mercado), through concurrent transactions in the United States and Brazil, as follows: a. U.S. exchange offer. JBS Foods International will launch an offer in the United States to exchange (the exchange offer ): (1) JBS S.A. common shares owned by (a) U.S. persons (as such term is defined under Regulation S under the Securities Act of 1933, as amended (the Securities Act ), (b) persons who are located in the United States or (c) persons who are residents of, or located in, jurisdictions outside of Brazil, for newly-issued JBS Foods International ordinary shares, including in certain cases JBS Foods International ordinary shares represented by JBS Foods International BDRs; and (2) JBS S.A. ADSs, for newly-issued JBS Foods International ordinary shares. Holders of JBS S.A common shares who validly tender their JBS S.A. common shares in the exchange offer will receive JBS Foods International BDRs and will be required to cancel their JBS Foods International BDRs in accordance with the terms of the JBS Foods International BDR Deposit Agreement in order to receive JBS Foods International ordinary shares, unless they deposit their JBS S.A. common shares into the JBS S.A. ADS program and tender their JBS S.A. ADSs prior to the expiration date. Holders of JBS S.A. ADSs who validly tender their JBS S.A. ADSs in the exchange offer will receive JBS Foods International ordinary shares. Concurrently with this registration statement on Form F-1, JBS Foods International has filed a registration statement on Form F-4 to register the exchange offer in the United States. b. Brazilian private capital contribution. Concurrently with the exchange offer, all holders of JBS S.A. common shares who are not (x) U.S. persons (as such term is defined under Regulation S under the Securities Act) or (y) located in the United States will be entitled to participate in the JBS Foods International capital increase through a private transaction in Brazil (the Brazilian private capital contribution ), whereby such holders may contribute their JBS S.A. common shares in consideration for newly-issued JBS Foods International BDRs. As a condition to their participation in the Brazilian private capital contribution, such holders of JBS S.A. common shares must also hold JBS Foods International ordinary shares or JBS Foods International BDRs as of the applicable record date. A separate Portuguese-language shareholders circular (aviso aos acionistas) relating to the Brazilian private capital contribution will be made available in Brazil to eligible holders of JBS S.A. common shares. Holders of JBS S.A. ADSs will not have the option to participate in the Brazilian private capital contribution. Following the JBS Foods International capital increase, JBS Foods International will transfer its JBS S.A. common shares to New Holdco. The conclusion of the Global Reorganization is subject to several conditions as described elsewhere in this registration statement, including, without limitation, the receipt of consent from holders of certain notes guaranteed by JBS S.A. and from certain creditors. No assurances can be made that the Global Reorganization will take place as outlined above or at all. This registration statement will be amended as necessary to reflect changes to the proposed structure of the Global Reorganization. Table of Contents Brazil means the Federative Republic of Brazil; the Brazilian private capital contribution means the private transaction in Brazil that will take place concurrently with the exchange offer, whereby all holders of JBS S.A. common shares who are not (x) U.S. persons (as such term is defined under Regulation S under the Securities Act) or (y) located in the United States will be entitled to participate in the JBS Foods International capital increase pari passu with participants in the exchange offer by contributing their JBS S.A. common shares to JBS Foods International in consideration for newly-issued JBS Foods International BDRs. As a condition to their participation in the Brazilian private capital contribution, such holders of JBS S.A. common shares must also hold JBS Foods International ordinary shares or JBS Foods International BDRs as of the applicable record date; a business day means any day that is not a Saturday, Sunday or a day on which banking institutions are required or authorized by law or executive order to be closed in S o Paulo, Brazil or New York, New York; Caixa means Caixa Econ mica Federal, a financial institution owned by the Brazilian federal government; the Cargill Acquisition means our acquisition of Cargill Meat Solutions Corporation s U.S. pork business. We concluded the Cargill Acquisition on October 30, 2015. For more information about the Cargill Acquisition, see Business History and Development Cargill Acquisition; Central Bank of Brazil means the Central Bank of Brazil (Banco Central do Brasil); the distribution means the pro rata distribution by JBS S.A. to all holders of JBS S.A. common shares (including holders of JBS S.A. ADSs), of 100% of the JBS Foods International ordinary shares that will be allotted to JBS S.A. by JBS Foods International in connection with the asset contribution. The registration statement on Form F-1 of which this prospectus is a part has been filed to register the distribution in the United States; dollars, U.S. dollars or US$ means United States dollars; DTC means The Depository Trust Company; EPA means the United States Environmental Protection Agency; EUR or means the Euro, the official currency of the European Economic Area; the exchange offer means JBS Foods International s offer to exchange: (1) the JBS S.A. common shares, owned by (a) U.S. persons (as such term is defined under Regulation S under the Securities Act), (b) persons who are located in the United States or (c) persons who are residents of, or located in, jurisdictions outside of Brazil, for newly-issued JBS Foods International ordinary shares, including in certain cases JBS Foods International ordinary shares represented by JBS Foods International BDRs; and (2) JBS S.A. ADSs, for newly-issued JBS Foods International ordinary shares, in each case subject to proration that would allow JBS S.A. to maintain a minimum free float of at least 25% of its issued and outstanding common shares (as required by the listing rules of the Novo Mercado segment of the BM&FBOVESPA in order to maintain JBS S.A. s listing on the Novo Mercado). Concurrently with the registration statement of which this prospectus is a part, JBS Foods International has filed a registration statement on Form F-4 to register the exchange offer in the United States; FB means FB Participa es S.A., a corporation (sociedade por a es) incorporated under the laws of Brazil. As of August 3, 2016, FB owned 44.3% of JBS S.A. s total outstanding capital stock. FB is a wholly-owned subsidiary of J&F. For more information, see Principal Shareholders; FDA means the United States Food and Drug Administration; Ireland means the Republic of Ireland; Table of Contents certain debt agreements. The letter of allotment to JBS S.A. will represent 100% of the total voting shares of JBS Foods International and will be equivalent to the net assets contributed to New Holdco by JBS S.A. For more information about the asset contribution, see The Asset Contribution. The charts below set forth our actual or anticipated simplified corporate structure (ex-treasury shares): (1) as of August 3, 2016: (a) As of August 3, 2016, JBS Foods International was wholly owned by Wesley Mendon a Batista, chief executive officer of JBS S.A. Prior to the asset contribution, Wesley Mendon a Batista will transfer all of the share capital of JBS Foods International to JBS S.A. in exchange for cash. For simplicity, this chart assumes that this transfer had occurred as of August 3, 2016. Table of Contents The information in this preliminary prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be distributed or sold prior to the time the registration statement becomes effective. This preliminary prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in any jurisdiction where such offer or solicitation is not permitted. PRELIMINARY PROSPECTUS (Subject to Completion) Dated , 2016 JBS FOODS INTERNATIONAL DESIGNATED ACTIVITY COMPANY (a private limited company incorporated under the laws of the Republic of Ireland) Ordinary Shares This prospectus is being furnished to you as a shareholder of JBS S.A., a corporation (sociedade an nima) incorporated under the laws of the Federative Republic of Brazil, or Brazil, in connection with a pro rata distribution by JBS S.A. to all holders of shares of common stock of JBS S.A., or the JBS S.A. common shares (including holders of JBS S.A. common shares represented by American Depositary Shares, or the JBS S.A. ADSs), of 100% of the ordinary shares of JBS Foods International plc, or the JBS Foods International ordinary shares, that will be allotted to JBS S.A. by JBS Foods International immediately prior to the distribution. We refer to this distribution as the distribution. JBS Foods International Designated Activity Company was incorporated in the Republic of Ireland, or Ireland, on May 9, 2016 as a private limited company. On , 2016 JBS Foods International Designated Activity Company re-registered in Ireland as a public limited company under the name JBS Foods International plc. In connection with the distribution, holders of JBS S.A. common shares and JBS S.A. ADSs (each representing two JBS S.A. common shares) as of 5:00 p.m., New York City time ( :00 p.m. S o Paulo time), on , 2016, or the distribution record date, will receive: one JBS Foods International ordinary share represented by a Brazilian Depositary Receipt, or JBS Foods International BDR, for every four JBS S.A. common shares held; and one JBS Foods International ordinary share for every two JBS S.A. ADSs held. Holders of JBS S.A common shares will automatically receive JBS Foods International BDRs in their securities accounts in Brazil and will be required to cancel their JBS Foods International BDRs in accordance with the terms of JBS Foods International BDR Deposit Agreement in order to receive JBS Foods International ordinary shares, unless they deposit their JBS S.A. common shares into the JBS S.A. ADS program prior to the distribution record date. Holders of JBS S.A. ADSs will automatically receive JBS Foods International ordinary shares in the distribution. The distribution will not affect the number of JBS S.A. common shares or JBS S.A. ADSs that you hold, and you have no appraisal rights in connection with the distribution. You are not being asked for a proxy and are requested not to send a proxy in connection with the distribution. The proposed distribution date is on or about , 2016. Currently, no public market exists for the JBS Foods International ordinary shares. We intend to apply to list the JBS Foods International ordinary shares on the New York Stock Exchange, or the NYSE, under the symbol JBS. In reviewing this prospectus, you should carefully consider the matters described under the caption Risk Factors beginning on page 19. None of the U.S. Securities and Exchange Commission, or the SEC, any state securities commission in the United States or the Central Bank of Ireland has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. For the avoidance of doubt, this document is not intended to be, and is not, a prospectus for the purposes of Part 23 of the Companies Act 2014 of Ireland (as amended), the Prospectus (Directive 2003/71/EC) Regulations 2005 of Ireland or the Prospectus Rules issued under the Companies Act 2014 of Ireland (as amended), and the Central Bank of Ireland has not approved this document. The date of this prospectus is , 2016. Table of Contents J&F means J&F Investimentos S.A. (formerly J&F Participa es S.A.), a corporation (sociedade por a es) incorporated under the laws of Brazil. J&F is controlled by the Batista Family through several holding companies and ZMF; J&F Australia means J&F Australia Pty Limited, an Australian proprietary limited company. J&F Australia is a wholly-owned subsidiary of J J&F Oklahoma means J&F Oklahoma Holdings, Inc., a Delaware corporation. J&F Oklahoma is a wholly-owned subsidiary of J J&F Ranch Canada means J&F Ranch Canada Inc., a Canadian corporation. J&F Ranch Canada is a wholly-owned subsidiary of J JBS Australia means JBS Australia Pty Limited, an Australian proprietary limited company. JBS Australia is our wholly-owned subsidiary; JBS Canada means JBS Food Canada ULC (formerly JBS Foods Canada Inc.), a Canadian unlimited company. JBS Canada is our wholly-owned subsidiary; JBS Five Rivers means JBS Five Rivers Cattle Feeding LLC, a Delaware limited liability corporation. JBS Five Rivers is our wholly-owned subsidiary and one of the largest feedlot businesses in the United States; a JBS Foods International BDR means a Brazilian Depositary Receipt representing one JBS Foods International ordinary share; the JBS Foods International BDR Depositary means , the Brazilian depositary for the JBS Foods International BDRs; the JBS Foods International BDR Program means the BDR program sponsored by JBS Foods International; the JBS Foods International capital increase means, collectively, the affiliate private capital contribution, the exchange offer and the Brazilian private capital contribution. The JBS Foods International capital increase is expected to take place following the completion of the distribution; a JBS Foods International ordinary share means an ordinary share of JBS Foods International, par value US$0.001 per ordinary share; the JBS Foods International reduction of capital means the possible reduction of capital of JBS Foods International in order to create distributable reserves; the JBS Foods International transfer agent means Computershare Trust Company, N.A.; the JBS Group means JBS S.A. and its consolidated subsidiaries. JBS S.A. is our predecessor for accounting purposes; the JBS S.A. ADS Depositary means The Bank of New York Mellon, the depositary for the JBS S.A. ADSs; JBS USA means JBS USA Lux S.A. (formerly JBS USA, LLC) JBS USA Holdings means JBS USA Holding Lux S. r.l. (formerly JBS USA Holdings, Inc.) Marfrig means Marfrig Global Foods S.A. (formerly Marfrig Alimentos S.A.); the Moy Park Acquisition means our acquisition of 100% of the total capital stock of Moy Park Holdings Europe Ltd., owner of the companies that comprised Marfrig s U.K.-based Moy Park business. We concluded the Moy Park Acquisition on September 28, 2015. For more information about the Moy Park Acquisition, see Business History and Development Moy Park Acquisition; New Holdco means a company incorporated in on , 2016. New Holdco is a wholly-owned subsidiary holding company of JBS Foods International; PPC means Pilgrim s Pride Corporation, a Delaware corporation. PPC is a poultry producer with operations in the United States, Mexico and Puerto Rico. As of March 31, 2016, we owned 76.7% of PPC s total capital stock; Table of Contents (2) immediately following the completion of the asset contribution (assuming the shareholding structure of JBS S.A. as of August 3, 2016): Step 3: Distribution. JBS S.A. will implement a capital reduction pursuant to which it will, on a pro rata basis, distribute to all holders of JBS S.A. common shares (including holders of JBS S.A. common shares represented by JBS S.A. ADSs) 100% of the JBS Foods International ordinary shares that will be allotted to JBS S.A. by JBS Foods International as a result of Step 2 above. For more information about the distribution, see The Transaction The Distribution. Holders of JBS S.A common shares will automatically receive JBS Foods International BDRs in their securities accounts in Brazil and will be required to cancel their JBS Foods International BDRs in accordance with the terms of the JBS Foods International BDR Deposit Agreement in order to receive JBS Foods International ordinary shares, unless they deposit their JBS S.A. common shares into the JBS S.A. ADS program prior to the distribution record date. Holders of JBS S.A. ADSs will automatically receive JBS Foods International ordinary shares in the distribution. The distribution will not affect the number of JBS S.A. common shares or JBS S.A. ADSs held by holders of JBS S.A. common shares or JBS S.A. ADSs, as the case may be. Table of Contents the Primo Acquisition means our acquisition of 100% of the total capital stock of Australian Consolidated Food Holdings Pty Limited, an Australian proprietary limited company. We concluded the Primo Acquisition on March 30, 2015. For more information about the Primo Acquisition, see Business History and Development Primo Acquisition; real, reais or R$ means the Brazilian real, the official currency of Brazil; the Seara Acquisition means our acquisition of the Seara Brasil poultry, pork and processed food business unit from Marfrig. We concluded the Seara Acquisition on September 30, 2013. For more information about the Seara Acquisition, see Business History and Development Seara and Zenda Acquisitions; a trading day means any day in which the NYSE or BM&FBOVESPA, as the case may be, is open for trading; the transaction means, collectively, the asset contribution, the distribution, and the JBS Foods International capital increase; U.K. means the United Kingdom; U.S. or United States means the United States of America; a U.S. business day means any day, other than a Saturday, Sunday or U.S. federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 (midnight) New York City time; the U.S. custodian means The Bank of New York Mellon, as U.S. custodian for the JBS Foods International BDR Depositary; USDA means the United States Department of Agriculture; Vigor means Vigor Alimentos S.A., corporation (sociedade por a es) incorporated under the laws of Brazil. Vigor is a Brazilian dairy and food company. As of March 31, 2016, we owned 19.43% of Vigor s total capital stock. Vigor is considered our associate for accounting purposes, and we record our investment in Vigor using the equity method; the Zenda Acquisition means our acquisition of the Uruguay-based Zenda leather business from Marfrig. We concluded the Zenda Acquisition on June 30, 2013. For more information about the Zenda Acquisition, see Business History and Development Seara and Zenda Acquisitions; and ZMF means ZMF Fundo de Investimentos em Participa es, a Brazilian investment fund. ZMF is one of the shareholders of J&F. The Batista Family (except for Jos Batista Sobrinho and Flora Mendon a Batista) owns 100% of the equity interests in ZMF. Table of Contents The chart below sets forth our anticipated simplified corporate structure immediately following the completion of the distribution (assuming the shareholding structure of JBS S.A. as of August 3, 2016): Step 4: Affiliate private capital contribution. Following the distribution, each of FB, BNDESPar and Banco Original will be entitled to participate in a private capital contribution, pursuant to which each of FB, BNDESPAR and Banco Original will be entitled to contribute all or a portion of its JBS S.A. common shares in exchange for the option to receive up to: 74,814,208; 36,117,192 and 337,509 newly-issued JBS Foods International ordinary shares (or JBS Foods International BDRs), respectively. A portion of such ordinary shares or BDRs may be redeemed by JBS Foods International pursuant to redemption deeds to be entered into between JBS Foods International and each of FB, BNDESPar and Banco Original. The amount of such ordinary shares or BDRs to be redeemed will be determined following the calculation of the final exchange ratio in order to ensure that the exchange ratio to be applied to FB, BNDESPar, Banco Original and the other shareholders of JBS S.A. common shares in the JBS Foods International capital increase will be the same. For more information about the affiliate private capital contribution, see The Transaction The JBS Foods International Capital Increase The Affiliate Private Capital Contribution. Step 5: NYSE Listing. The JBS Foods International intends to apply to list its ordinary shares for trading on the NYSE under the symbol JBS. Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION Solely for the convenience of the reader, we have translated some amounts included in Summary, Summary Historical and Pro Forma Financial Data, Risk Factors, Capitalization, Selected Historical Financial Data, Historical Per Share, Dividend and Market Price Data and Business from reais into U.S. dollars using the selling rate as reported by the Central Bank of Brazil as of March 31, 2016 of R$3.559 to US$1.00. As a result of fluctuations in the real/U.S. dollar exchange rate, the selling rate at March 31, 2016 may not be indicative of current or future exchange rates. As a result, prospective investors should not read these convenience translations as representations that any amounts have been or could be converted into U.S. dollars or reais at those or any other exchange rates. The selling rate was R$3.905 to US$1.00 as of December 31, 2015, R$2.656 to US$1.00 as of December 31, 2014 and R$2.343 to US$1.00 as of December 31, 2013, in each case, as reported by the Central Bank of Brazil. See Exchange Rate Information for information regarding exchange rates for the real since January 1, 2011. Financial Statements JBS Foods International JBS Foods International was incorporated on May 9, 2016 as a private limited company in Ireland under the name JBS Foods International DAC. It maintains its books and records in U.S. dollars. JBS Foods International s presentation currency is the real. JBS Foods International intends to be a tax resident in the U.K. Audited Historical Financial Statements This prospectus includes the audited historical financial statements of JBS Foods International as of July 12, 2016 and for the period from May 9, 2016, our date of incorporation, to July 12, 2016, and the related notes thereto, which were prepared in accordance with International Financial Reporting Standards, or IFRS, and interpretations issued by the IFRS Interpretations Committee applicable to companies reporting under IFRS, as issued by the International Accounting Standards Board, or the IASB, and audited in accordance with Public Company Accounting Oversight Board, or PCAOB, standards. These audited historical financial statements of JBS Foods International have been prepared for the purposes of this prospectus and do not constitute statutory accounts within the meaning of section 340 of the Companies Act 2014 of Ireland (as amended). JBS Foods International will prepare separate financial statements for the year ended December 31, 2016, which will be filed with the Irish Registrar of Companies when issued by its directors. Such financial statements will be the first statutory financial statements filed with the Irish Registrar of Companies by JBS Foods International. Unaudited Pro Forma Condensed and Combined Financial Statements Immediately following the distribution, the shareholders of JBS S.A. (including holders of JBS S.A. ADSs) will be entitled to participate in the JBS Foods International capital increase, as a result of which we expect that JBS S.A. will become a subsidiary of JBS Foods International. In accordance with Article 11 of Regulation S-X, this prospectus includes the unaudited pro forma condensed and combined statement of financial position of JBS Foods International as of March 31, 2016 and the unaudited pro forma condensed and combined statements of income of JBS Foods International for the three-month period ended March 31, 2016 and for the year ended December 31, 2015, which financial information, combined with the notes thereto, we refer to as the JBS Foods International pro forma financial information. The JBS Foods International pro forma financial information gives effect to the transaction as if it had taken place on March 31, 2016, in the case of the unaudited pro forma condensed and combined statement of financial Table of Contents Step 6: Following the conclusion of the affiliate private capital contribution described in Step 4 above, JBS Foods International will make an offer to the holders of JBS S.A. common shares (including those JBS S.A. common shares represented by JBS S.A. ADSs) at the same exchange ratio applicable to the affiliate private capital contribution but subject to proration that would allow JBS S.A. to maintain a minimum free float of at least 25% of its issued and outstanding JBS S.A. common shares (as required by the listing rules of the Novo Mercado segment of the BM&FBOVESPA in order to maintain JBS S.A. s listing on the Novo Mercado), through concurrent transactions in the United States and Brazil, as follows: (a) U.S. exchange offer. JBS Foods International will make an offer to exchange: (1) JBS S.A. common shares owned by (a) U.S. persons (as such term is defined under Regulation S under the Securities Act), (b) persons who are located in the United States or (c) persons who are residents of, or located in, jurisdictions outside of Brazil, for newly-issued JBS Foods International ordinary shares, including in certain cases JBS Foods International ordinary shares represented by JBS Foods International BDRs; and (2) JBS S.A. ADSs, for newly-issued JBS Foods International ordinary shares. For more information about the exchange offer, see The Transaction Following the Distribution The JBS Foods International Capital Increase The Exchange Offer. (b) Brazilian private capital contribution. Concurrently with the exchange offer, all holders of JBS S.A. common shares and who are not (x) U.S. persons (as such term is defined under Regulation S under the Securities Act) or (y) located in the United States will be entitled to participate in a private transaction in Brazil, whereby such holders may contribute their JBS S.A. common shares to JBS Foods International in consideration for newly-issued JBS Foods International BDRs. As a condition to their participation in the Brazilian private capital contribution, such holders of JBS S.A. common shares must also hold JBS Foods International ordinary shares or JBS Foods International BDRs as of the applicable record date. A separate Portuguese-language shareholders circular (aviso aos acionistas) relating to the Brazilian private capital contribution will be made available in Brazil to eligible holders of JBS S.A. common shares. Holders of JBS S.A. ADSs will not have the option to participate in the Brazilian private capital contribution. Table of Contents position and, and on January 1, 2015, in the case of the unaudited pro forma condensed and combined statements of income. The JBS Foods International pro forma financial information has been presented for informational purposes only and may not be indicative of the results that actually would have occurred if the transaction had occurred on the dates indicated, or the results that will be obtained in the future. In connection with the JBS Foods International capital increase, we have assumed that we will acquire an aggregate 75% of the then-outstanding JBS S.A. common shares (assuming that all of the shareholders of JBS S.A. and holders of JBS S.A. ADSs will participate in the JBS Foods International capital increase and will contribute the maximum number of JBS S.A. common shares or JBS S.A. ADSs, as the case may be, that they are entitled to contribute to JBS Foods International). For illustrative purposes, in the notes to the unaudited pro forma condensed and combined financial information of JBS Foods International, we also present certain pro forma financial information assuming that we will acquire an aggregate 44.50% of the then-outstanding JBS S.A. common shares (assuming that only FB and Banco Original will participate in the JBS Foods International capital increase and will contribute the maximum number of JBS S.A. common shares that they are entitled to contribute to JBS Foods International). The JBS Foods International pro forma financial information has been derived from the (1) unaudited historical interim consolidated interim financial statements of JBS S.A. (as predecessor to JBS Foods International) as of March 31, 2016 and for the three-month periods ended March 31, 2016 and 2015, and the notes thereto, and (2) audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, and the notes thereto, in each case, which are included elsewhere in this prospectus. The JBS Foods International pro forma financial information should be read in conjunction with, and is qualified in its entirety by reference to, such historical financial statements and historical financial information and the related notes contained therein. The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and actual results may differ from the pro forma adjustments. However, we believe that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transaction and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions. JBS S.A. JBS S.A., our predecessor for accounting purposes, maintains its books and records in reais, which is the currency of the primary economic environment in which it operates, or its functional currency, as well as its presentation currency. JBS S.A. s historical consolidated financial statements included in this prospectus are presented in reais. JBS S.A. fully consolidates all subsidiaries and records investments in associates and joint ventures by the equity method. The financial statements of JBS S.A. s subsidiaries located outside Brazil are prepared using each subsidiary s respective functional currency. The results and financial position of all the entities that have a functional currency different from the real are translated as follows: assets and liabilities are translated at the current rate at the date of the applicable closing period; income and expenses are translated at the average rate for the applicable period; and all resulting exchange differences are recognized in other comprehensive income. Unaudited Historical Interim Consolidated Financial Statements This prospectus includes the unaudited historical interim consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of March 31, 2016 and for the three-month periods ended March 31, 2016 and 2015, which were prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the IASB, and the related notes thereto. Table of Contents Following the JBS Foods International capital increase, JBS Foods International will transfer its JBS S.A. common shares to New Holdco. The chart below sets forth our anticipated simplified corporate structure immediately following the completion of the transaction (assuming (x) the shareholding structure (ex-treasury shares) of JBS S.A. immediately prior to the distribution is the same as its shareholding structure as of August 3, 2016 (ex-treasury shares) and (y) the maximum exchange ratio and maximum allowable participation by all of the shareholders of JBS S.A. in the transactions described in Steps 4 and 6): Rationale We believe the principal advantages of the transaction for our shareholders will be to: better reflect our global presence and diverse international operations by obtaining a NYSE listing for the JBS Foods International ordinary shares; improve our access to international equity and debt capital markets, which we expect to enhance our ability to raise financing to support our operations and fund growth, as well as lower our cost of capital; enhance our ability to participate in the expected further consolidation of the global food industry and to better compete with other global food companies for international development opportunities; raise our profile among the global institutional investor community and create greater proximity to our trading comparables; and create the JBS Foods International BDR Program and keep JBS S.A. as a listed company in Brazil, which is intended to allow the existing Brazilian shareholders of JBS S.A. to participate in our expected global growth. Table of Contents Audited Historical Consolidated Financial Statements This prospectus includes the audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013, which were prepared in accordance with IFRS, as issued by the IASB, and the related notes thereto, and audited in accordance with PCAOB standards. Unaudited Pro Forma Consolidated Financial Statements To allow you to better understand the financial position of JBS S.A. following the distribution, this prospectus includes the unaudited pro forma consolidated statement of financial position of JBS S.A. as of March 31, 2016 and the unaudited pro forma consolidated statements of income of JBS S.A. for the three-month period ended March 31, 2016 and for the year ended December 31, 2015, which financial information, combined with the notes thereto, we refer to as the JBS S.A. pro forma financial information. The JBS S.A. pro forma financial information gives effect to the asset contribution and the distribution as if they had taken place on March 31, 2016, in the case of the unaudited pro forma consolidated statement of financial position, and on January 1, 2015, in the case of the unaudited pro forma consolidated statements of income. The asset contribution will be recorded at historical cost as it is considered to be a reorganization of entities under common control. For more information about the accounting treatment of the transaction, see The Transaction Accounting Treatment. The JBS S.A. pro forma financial information has been presented for informational purposes only and may not be indicative of the results that actually would have occurred if the asset contribution and/or the distribution had occurred on the dates indicated, or the results that will be obtained in the future. The JBS S.A. pro forma financial information has been derived from the (1) unaudited historical interim consolidated interim financial statements of JBS S.A. (as predecessor to JBS Foods International) as of March 31, 2016 and for the three-month periods ended March 31, 2016 and 2015, and the notes thereto, and (2) audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, and the notes thereto, in each case, which are included elsewhere in this prospectus. The JBS S.A. pro forma financial information should be read in conjunction with, and is qualified in its entirety by reference to, such historical financial statements and historical financial information and the related notes contained therein. The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and actual results may differ from the pro forma adjustments. However, we believe that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transactions and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions. JBS Foods International is expected to own and operate the current businesses of JBS S.A., directly or indirectly, effective as of the closing of the JBS Foods International capital increase. JBS S.A. will continue to hold the assets not contributed to JBS Foods International pursuant to the asset contribution. Depending on the result of the JBS Foods International capital increase, up to 75% of the JBS S.A. common shares will be held by JBS Foods International following the transaction. The remaining JBS S.A. common shares will be held by non-controlling shareholders. As a result of the transaction, part of the non-controlling shareholders of JBS S.A. will become non-controlling shareholders of JBS Foods International. Non-IFRS Financial Measures We have disclosed our historical EBITDA and Adjusted EBITDA in this prospectus, which are non-IFRS financial measures. See Summary Historical and Pro Forma Financial Data, and Selected Historical Financial Data. EBITDA and Adjusted EBITDA are used as measures of performance by our management. They should not be considered as measures of financial performance in accordance with IFRS. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001674552_highland_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001674552_highland_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..368ff055c27e2789da2e99f22d726cbc5eea4fee
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001674552_highland_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary only highlights the more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before investing. References in this prospectus to we, us or our company refer to Highland Acquisition Corporation. References in this prospectus to our public shares are to shares of our common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market) and references to public stockholders refer to the holders of our public shares, including our sponsor (as defined below), officers, directors and other initial stockholders to the extent they purchase public shares, provided that their status as public stockholders shall only exist with respect to such public shares. References in this prospectus to our management or our management team refer to our officers and directors and references to our sponsor refer to Highland Capital Management, L.P., a company affiliated with our executive officers. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. General We are a blank check company formed under the laws of the State of Delaware on April 25, 2016. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a target business. To date, our efforts have been limited to organizational activities as well as activities related to this offering. None of our officers, directors, promoters and other affiliates has engaged in any substantive discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, capital stock exchange, asset acquisition or other similar business combination with us. We intend to focus our search on businesses in the healthcare, media, telecommunications, entertainment and energy industries located in the United States although our efforts to identify a prospective target business will not be limited to a particular industry or geographic region. Although we anticipate acquiring a target business that is an operating business, we are not obligated to do so and may determine to merge with or acquire a company with no operating history if the terms of the transaction are determined by us to be favorable to our public stockholders and the target business has a fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. We will seek to capitalize on the significant investing experience and contacts of our officers and directors in consummating an initial business combination. James D. Dondero, our Chairman of the Board, Chief Executive Officer and President, has over 15 years of experience investing in private equity, distressed debt and mezzanine lending. In addition, Mark Okada, our Executive Vice President, likewise has more than 15 years of experience in sourcing, evaluating, structuring and negotiating control investments and in owning businesses. Our sponsor and its affiliates, or the Highland Group , has its headquarters in Dallas, Texas and maintains offices in New York, New York; Singapore; S o Paulo, Brazil; and Seoul, South Korea. The Highland Group s partners, senior officers, including our executive officers, and advisors are in many cases long-time colleagues who have worked together extensively at the Highland Group and at other institutions, including private equity, distressed debt and investment banking firms. Notwithstanding the foregoing, none of our officers and directors are required to commit any specific amount of time to our affairs. See the section titled Management Conflicts of Interest for a detailed discussion of the potential conflicts of interests involved in the foregoing. As a result, we cannot assure you that our access to Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED AUGUST 8, 2016 PRELIMINARY PROSPECTUS $250,000,000 Highland Acquisition Corporation 25,000,000 Units Highland Acquisition Corporation is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a target business. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region although we intend to focus our search for target businesses in the healthcare, media, telecommunications, entertainment and energy industries located in the United States. We do not have any specific business combination under consideration and we have not (nor has anyone on our behalf), directly or indirectly, contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to such a transaction. If we are unable to consummate an initial business combination within 24 months from the closing of this offering, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account net of interest that may be used by us to pay our franchise and income taxes payable and up to $100,000 of interest that may be used to pay dissolution expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law and as further described herein. This is an initial public offering of our securities. Each unit that we are offering has a price of $10.00 and consists of one share of common stock and one half of one warrant. Each whole warrant entitles the holder to purchase one share of common stock at a price of $11.50. Each warrant will become exercisable on the later of 30 days after the completion of an initial business combination or 12 months from the closing of this offering and will expire on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption or liquidation. We have granted the underwriters a 45-day option to purchase up to an additional 3,750,000 units to cover over-allotments, if any. Highland Capital Management, L.P., which we refer to throughout this prospectus as our sponsor, has committed to purchase from us an aggregate of 6,750,000 warrants, or founders warrants, at $1.00 per warrant (for a total purchase price of $6,750,000) in a private placement that will occur simultaneously with the consummation of this offering. Our sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full or in part, it will purchase from us additional founders warrants (up to a maximum of 750,000 founders warrants) at a price of $1.00 per founders warrant in an amount that is necessary to maintain in the trust account at $10.00 per unit sold to the public in this offering. These additional founders warrants will be purchased in a private placement that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The founders warrants are identical to the warrants included in the units sold in this offering, including as to exercise price, subject to certain limited exceptions as described in this prospectus. There is presently no public market for our units, shares of common stock or warrants. We have applied to have our units listed on the Nasdaq Capital Market, or Nasdaq, under the symbol HLACU on or promptly after the date of this prospectus. The common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Ladenburg Thalmann & Co. Inc. informs us of its decision to allow earlier separate trading, subject to our filing a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds of this offering and issuing a press release announcing when such separate trading will begin. Once the securities comprising the units begin separate trading, the common stock and warrants will be traded on Nasdaq under the symbols HLAC and HLACW, respectively. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act and will therefore be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See Risk Factors beginning on page 18 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Unit Total Public Offering Price $ 10.00 $ 250,000,000 Underwriting Discount(1)(2) $ 0.55 $ 13,750,000 Proceeds to Highland Acquisition Corporation (before expenses) $ 9.45 $ 236,250,000 (1) Includes $0.35 per unit, or approximately $8.8 million in the aggregate, or approximately $10.1 million if the underwriters exercise in full the over-allotment option, payable to the underwriters for deferred underwriting discounts and commissions (which we refer to throughout this prospectus as the deferred commissions ) to be placed in the trust account described in this prospectus. The deferred commissions will be released to the underwriters only on completion of an initial business combination, as described in this prospectus. (2) The underwriters will receive compensation in addition to the underwriting discount. See Underwriting. Upon consummation of the offering, an aggregate of $250,000,000 (or $287,500,000 if the over-allotment option is exercised in full) or $10.00 per unit sold to the public in this offering will be deposited into a U.S.-based trust account at maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except as described in this prospectus, these funds will not be released to us until the earlier of the completion of a business combination and our redemption of our public shares (which may not occur until , 2018). The underwriters are offering the units on a firm commitment basis. The underwriters expect to deliver the units to purchasers on or about , 2016. Sole Book-Running Manager Ladenburg Thalmann , 2016 Table of Contents these individuals and professionals will actually assist us in consummating an initial business combination. Furthermore, investors should keep in mind that the historical track record of investing experience by our officers and directors is not indicative of future results and we cannot assure you that we will be successful in locating a target business to acquire or that if we are successful in acquiring a target business, that it will be profitable thereafter. We have identified certain criteria and guidelines that we believe are important in evaluating prospective target businesses. Below are the criteria and guidelines that we intend to use in evaluating initial business combination opportunities. These criteria and guidelines are subject to the requirement that our initial business combination must occur with one or more target businesses that have an aggregate fair market value of at least 80% of the balance in the trust account (excluding deferred underwriting discounts and commissions) at the time of such business combination. However, because our efforts in identifying a prospective target business will not be limited to a particular industry, no additional criteria or guidelines have been identified by us and we may decide to enter into an initial business combination with a target business or businesses that do not meet some of these criteria and guidelines: Established companies with positive cash flow. We will target established businesses with solid historical financial performance. We will focus on companies with a history of profitability on an operating cash flow basis. We do not currently intend to acquire start-up companies or companies with speculative business plans. A company s ability to demonstrate stable and predictable cash flow will be a fundamental investment criterion. Potential for the Highland Group to add value. We will target businesses where we believe the Highland Group, especially its in-house operations team, could add value by bringing resources to bear over and above a company s existing capabilities. Sound business fundamentals. We will target businesses with strong market positions, unique franchises, secure market niches or distinctive products or services. Experienced management team. We will target businesses that have experienced management teams with a proven track record for delivering top line growth and bottom line profits through strategic business management and effective team building. Diversified customer and supplier base. We will target businesses that have a diversified customer and supplier base. Companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changing business preferences and other factors that may negatively impact their customers, suppliers and competitors. Downside protection through asset values. We will target businesses with assets that have historically held value in downturns, thereby providing protection to our stockholders. Companies with such assets tend to find a floor in value and may provide a more stable market valuation as a result. Opportunity for spin off opportunities in target companies. We will target businesses that may present an opportunity to create value by selling or spinning-off business units which the market may not be fully valuing as a part of the larger entity. The value created as a result of the sale or spinoff can then be used for various initiatives that benefit our stockholders, including (i) stock repurchases, (ii) acquisitions, (iii) debt repayment and (iv) capital improvements. Opportunity for future bolt-on acquisitions. We will target businesses that provide opportunities for future bolt-on acquisitions as a means to deliver enhanced value. Through the use of strategic bolt-on acquisitions, we believe we may be able to create value in several ways, including (i) reducing operating costs and driving operational efficiencies; (ii) improving economies of scale; (iii) increasing valuation of the aggregate enterprise; (iv) complementing capabilities and/or management; (v) filling strategic gaps and diversifying the business; (vi) complementing organic growth initiatives and/or reducing time constraints of growing organically; (vii) improving competitive position; and (viii) applying best practices across combined entities. Table of Contents Effecting a Business Combination We will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. The decision as to whether we will seek stockholder approval of our proposed business combination or allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Unlike other blank check companies which require stockholder votes and conduct proxy solicitations in conjunction with their initial business combinations and related conversions of public shares for cash upon consummation of such initial business combinations even when a vote is not required by law, we will have the flexibility to avoid such stockholder vote and allow our stockholders to sell their shares pursuant to the tender offer rules of the Securities and Exchange Commission, or SEC. In that case, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination. We will have until 24 months from the closing of this offering to consummate an initial business combination. If we are unable to consummate an initial business combination within such time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account net of interest that may be used by us to pay our franchise and income taxes payable and up to $100,000 of interest that may be used to pay dissolution expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect the pro rata redemption price to be approximately $10.00 per share of common stock (regardless of whether or not the underwriters exercise their over-allotment option), without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders. Our initial business combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). Even though our board of directors will rely on generally accepted standards, our board of directors will have discretion to select the standards employed. In addition, the application of the standards generally involves a substantial degree of judgment. Accordingly, investors will be relying on the business judgment of the board of directors in evaluating the fair market value of the target or targets. The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations. If our board is not able independently to determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to the satisfaction of such criteria. Table of Contents We currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test. As more fully discussed in Management Conflicts of Interest , if any of our officers becomes aware of a business combination opportunity that falls within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations, he may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. All of our officers currently have certain relevant pre-existing fiduciary duties or contractual obligations. Our officers and directors have agreed not to participate in the formation of, or become an officer or director of, any other blank check company (except as a passive investor) until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within the required time period. JOBS Act We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act) and will remain such for up to five years. However, if our non-convertible debt issued within a three year period or our total revenues exceed $1 billion or the market value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we have elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Private Placements In April 2016, our sponsor purchased an aggregate of 7,187,500 shares of our common stock, which we refer to throughout this prospectus as the founders shares, for an aggregate purchase price of $25,000, or approximately $0.0035 per share. Thereafter, our sponsor transferred an aggregate of 75,000 founders shares to members of our board of directors for the same per-share purchase price that our sponsor paid for such shares. The founders shares held by our sponsor includes an aggregate of up to 937,500 shares subject to forfeiture to the extent that the underwriters over-allotment option is not exercised in full or in part, so that our initial stockholders will continue to collectively own 20.0% of our issued and outstanding shares after this offering (assuming they do not purchase units in this offering). Table of Contents In addition, our sponsor has committed to purchase an aggregate of 6,750,000 founders warrants at a price of $1.00 per warrant ($6.75 million in the aggregate) in a private placement that will occur simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full or in part, it will purchase from us at a price of $1.00 per founders warrant an additional number of founders warrants (up to a maximum of 750,000 founders warrants) in order to maintain in the trust account $10.00 per unit sold to the public in this offering. These additional founders warrants will be purchased in a private placement that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The proceeds from the private placement of the founders warrants will be added to the proceeds of this offering and placed in a U.S.-based trust account at with Continental Stock Transfer & Trust Company, as trustee. If we do not complete an initial business combination within 24 months from the closing of this offering, the proceeds from the sale of the founders warrants will be included in the liquidating distribution to our public stockholders and the founders warrants will expire worthless. Our executive offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201, and our telephone number is (972) 628-4100. Table of Contents The Offering Securities offered 25,000,000 units, at $10.00 per unit, each unit consisting of one share of common stock and one half of one warrant. This is different from other offerings similar to ours whose units include one share of common stock and one full warrant. We have established the components of the units in this way in order to alleviate the dilutive effect of the warrants and to make us a more attractive merger partner for target businesses. However, this unit structure may cause our units to be worth less than if they included one full warrant. Furthermore, no fractional warrants will be issued and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to trade a full warrant. Listing of our securities and proposed symbols We anticipate the units, and the shares of common stock and warrants once they begin separate trading, will be listed on Nasdaq under the symbols HLACU, HLAC and HLACW, respectively. Trading commencement and separation of common stock and warrants The units will begin trading on or promptly after the date of this prospectus. The common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Ladenburg Thalmann & Co. Inc. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release and filed a Current Report on Form 8-K announcing when such separate trading will begin. However, no fractional warrants will be issued and only whole warrants will trade. Once the shares of common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component pieces. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of common stock and warrants. In no event will the common stock and warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. We will also include the Form 8-K, or amendment thereto, or in a subsequent Form 8-K, information indicating if Ladenburg Thalmann & Co. Inc. has allowed separate trading of the common stock and warrants prior to the 52nd day after the date of this prospectus. Table of Contents Units: Number outstanding before this offering 0 units Number outstanding after this offering 25,000,000 units Shares of common stock: Number outstanding before this offering 7,187,500 shares(1) Number to be outstanding after this offering 31,250,000 shares(2) Warrants: Number outstanding before this offering 0 warrants Number to be sold to insiders 6,750,000 warrants Number to be outstanding after this offering and sale to insiders 19,250,000 warrants Exercisability Each whole warrant is exercisable for one share of common stock. The warrants will become exercisable on the later of 30 days after the completion of an initial business combination and 12 months from the date of this prospectus. The warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption. The period of time from the date the warrants will first become exercisable until the expiration of the warrants shall hereafter be referred to as the exercise period. Exercise price $11.50. No warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. (1) This number includes an aggregate of up to 937,500 founders shares that are subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. (2) Assumes the over-allotment option has not been exercised and an aggregate of 937,500 founders shares have been forfeited. Table of Contents Redemption We may redeem the outstanding warrants (excluding the founders warrants and any other warrants we may issue to our sponsor, officers or directors as described in this prospectus) in whole and not in part, at a price of $0.01 per warrant at any time during the exercise period, upon a minimum of 30 days prior written notice of redemption, if, and only if, the last sales price of our shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading day period ending three business days before we send the notice of redemption; and if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. If the foregoing conditions are satisfied and we issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the shares of common stock may fall below the $18.00 trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the shares of common stock for the five trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Securities purchased, or being purchased, by insiders Our initial stockholders have purchased an aggregate of 7,187,500 founders shares for an aggregate purchase price of $25,000, or approximately $0.0035 per share. The 7,187,500 founders shares includes an aggregate of up to 937,500 shares of common stock subject to forfeiture to the extent that the over-allotment option is not exercised by the underwriters in full or in part. The holders of the founders shares will be required to forfeit only a number of shares of common stock necessary to continue to maintain the 20.0% ownership interest in our shares of common stock after giving effect to the offering and exercise, if any, of the underwriters over-allotment option. The founders shares are identical to the shares of common stock included in the units being sold in this offering. However, the holders have agreed (A) to vote any shares owned by them in favor of any proposed business combination and (B) not to convert any shares in connection with a stockholder vote to approve a Table of Contents proposed initial business combination or sell any shares to us in a tender offer in connection with a proposed initial business combination. Simultaneously with the consummation of this offering, our sponsor has committed to purchase an aggregate of 6,750,000 founders warrants at $1.00 per warrant (for a total purchase price of $6,750,000) pursuant to a subscription agreement with us. Our sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full or in part, it will purchase from us an additional number of founders warrants (up to a maximum of 750,000 founders warrants) at a price of $1.00 per founders warrant necessary to maintain in the trust account $10.00 per unit sold to the public in this offering. These additional founders warrants will be purchased in a private placement that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The amounts to be paid upon consummation of the private placement will be placed in escrow with our counsel prior to the consummation of this offering. The founders warrants are identical to the warrants included in the units sold in this offering except that the founders warrants: (i) will not be redeemable by us and (ii) may be exercised for cash or on a cashless basis, as described in this prospectus, so long as they are held by the initial purchaser or any of its permitted transferees. If the founders warrants are held by holders other than the initial purchaser or any of its permitted transferees, the founders warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. In the event of a liquidation prior to our initial business combination, the founders warrants will expire worthless. Restrictions on transfer of founders shares and founders warrants On the date of this prospectus, the founders shares will be placed into an escrow account maintained in New York, New York by Continental Stock Transfer & Trust Company, acting as escrow agent. Subject to certain limited exceptions, these shares will not be transferred, assigned, sold or released from escrow until one year after the date of the consummation of our initial business combination or earlier if, subsequent to our business combination, (a) the last sales price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after our initial business combination or (b) we consummate a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. The limited exceptions include transfers, assignments or sales (i) to our officers, directors, consultants or their affiliates, (ii) to an entity s members upon its liquidation, (iii) to relatives and trusts for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value for Table of Contents cancellation in connection with the consummation of our initial business combination, or (vii) by private sales made at or prior to the consummation of a business combination at prices no greater than the price at which the shares were originally purchased, in each case (except for clause (vi)) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions. Our sponsor has also agreed not to transfer, assign or sell any of the founders warrants, including the common stock issuable upon exercise of the founders warrants (except in connection with the same limited exceptions that the founders shares may be transferred as described above), until 30 days after the completion of our initial business combination. Offering proceeds to be held in trust An aggregate of $10.00 per unit sold to the public in this offering (regardless of whether or not the over-allotment option is exercised) will be placed in a U.S.-based trust account at maintained by Continental Stock Transfer & Trust Company, acting as trustee pursuant to an agreement to be signed on the date of this prospectus. These proceeds include the deferred commissions that may be released to the underwriters only on completion of an initial business combination. Except as set forth below, the proceeds held in the trust account will not be released until the earlier of the completion of an initial business combination and our redemption of 100% of the outstanding public shares if we have not completed a business combination in the required time period. Therefore, unless and until an initial business combination is consummated, the proceeds held in the trust account will not be available for our use for any expenses related to this offering or expenses which we may incur related to the investigation and selection of a target business and the negotiation of an agreement to acquire a target business. Notwithstanding the foregoing, there can be released to us from the trust account any interest earned on the funds in the trust account that we need to pay our franchise and income taxes. With this exception, expenses incurred by us may be paid prior to a business combination only from the net proceeds of this offering not held in the trust account (initially estimated to be $1,000,000); provided, however, that in order to meet our working capital needs following the consummation of this offering if the funds not held in the trust account are insufficient, our sponsor, officers, directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the holder s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant. These warrants would be identical to the founders warrants. If we do not complete a business combination, the loans will be forgiven. Table of Contents None of the warrants may be exercised until the later of 30 days after the consummation of a business combination or 12 months from the closing of this offering and, thus, after the proceeds of the trust account have been disbursed. Accordingly, the warrant exercise price will be paid directly to us and not placed in the trust account. Limited payments to insiders There will be no fees, reimbursements or other cash payments paid to our sponsor, officers, directors or their affiliates for any services they render prior to, or in order to effectuate the consummation of, an initial business combination (regardless of the type of transaction that it is) other than the following payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: repayment at the closing of this offering of an aggregate of $150,000 of non-interest bearing loans made by our sponsor; payment of an aggregate of $10,000 per month to our sponsor for office space and related services; and reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us. Our audit committee will review and approve all reimbursements and payments made to our sponsor, officers, directors or our or their respective affiliates, with any interested director abstaining from such review and approval. Stockholder approval of, or tender offer in connection with, initial business combination In connection with any proposed initial business combination, we will either (1) seek stockholder approval of such initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender any or all of his, her or its shares rather than some pro rata portion of his, her or its shares. If enough stockholders tender their shares so that we are unable to satisfy any applicable closing condition set forth in the definitive agreement related to our initial business combination, or we are unable to maintain net tangible assets of at least $5,000,001, we will not consummate such initial business combination. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow Table of Contents stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Unlike other blank check companies which require stockholder votes and conduct proxy solicitations in conjunction with their initial business combinations and related conversions of public shares for cash upon consummation of such initial business combinations even when a vote is not required by law, we will have the flexibility to avoid such stockholder vote and allow our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Securities Exchange Act of 1934, as amended, or Exchange Act, which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination. We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible assets upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all. The holders of the founders shares have agreed (i) to vote any shares owned by them in favor of any proposed business combination, (ii) not to convert any shares in connection with a stockholder vote to approve a proposed initial business combination and (iii) not to sell any shares to us in a tender offer in connection with any proposed business combination. As a result, we would need only 9,375,001, or 37.5%, of the 25,000,000 public shares sold in this offering to be voted in favor of a transaction in order to have our initial business combination approved (assuming the over-allotment option is not exercised and all shares were present and entitled to vote at the meeting). None of our sponsor, officers, directors or their affiliates has indicated any intention to purchase units in this offering or any units or shares of common stock from persons in the open market or in Table of Contents private transactions. However, if we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention to vote, against a proposed business combination, our sponsor, officers, directors or their affiliates could make such purchases in the open market or in private transactions, either before or after we mail a proxy statement related to the proposed business combination, in order to influence any vote held to approve a proposed initial business combination. Notwithstanding the foregoing, our officers, directors, sponsor and their affiliates will not make purchases of shares of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company s stock. Conversion rights In connection with any stockholder meeting called to approve a proposed initial business combination, each public stockholder will have the right, regardless of whether he is voting for or against such proposed business combination, to demand that we convert his shares into a pro rata share of the trust account. Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a group (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in this offering without our prior written consent. We believe this restriction will prevent an individual stockholder or group from accumulating large blocks of shares before the vote held to approve a proposed business combination and attempt to use the conversion right as a means to force us or our management to purchase its shares at a significant premium to the then current market price. By limiting a stockholder s ability to convert no more than 20% of the shares of common stock sold in this offering, we believe we have limited the ability of a small group of stockholders to unreasonably attempt to block a transaction which is favored by our other public stockholders. We may also require public stockholders seeking conversion, whether they are a record holder or hold their shares in street name, to either (i) physically tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company s DWAC (Deposit/Withdrawal At Custodian) System, at the holder s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination. The requirement for physical or electronic delivery prior to the meeting ensures that a holder s election to convert his shares is irrevocable once the business combination is approved. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. Table of Contents We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation. In connection with any proposed business combination, a target business could impose a working capital closing condition or require us to have a higher minimum amount of funds available from the trust account upon consummation of such initial business combination. Furthermore, we will be obligated to pay the deferred commissions to the underwriters upon consummation of an initial business combination. As a result, the foregoing may limit the number of shares that we can have converted and still consummate such business combination. Liquidation if no business combination If we are unable to complete an initial business combination by 24 months from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account net of interest that may be used by us to pay our franchise and income taxes payable and up to $100,000 of interest that may be used to pay dissolution expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we will have funds sufficient to pay or provide for all creditors claims. Although we are required to use our reasonable best efforts to have all third parties (including any vendors or other entities we engage after this offering) and any prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements. There is also no guarantee that the third parties would not challenge the enforceability of these waivers and bring claims against the trust account for monies owed them. Our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement entered into by our sponsor specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us Table of Contents waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. The holders of the founders shares will not participate in any redemption distribution from our trust account with respect to such founders shares. If we are unable to conclude an initial business combination and we expend all of the net proceeds of this offering not deposited in the trust account, we expect that the initial per-share redemption price will be approximately $10.00 (which is equal to the anticipated aggregate amount then on deposit in the trust account including any interest earned on the funds held in the trust account net of interest that may be used by us to pay our franchise and income taxes payable and up to $100,000 of interest that may be used to pay dissolution expenses). The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of our stockholders. In addition, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. Therefore, we cannot assure you that the actual per-share redemption price will not be less than approximately $10.00. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account and up to $100,000 of interest earned on the funds held in the trust account that we are permitted to withdraw to pay such expenses. Potential amendments to charter Our sponsor, officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would stop our public stockholders from converting or selling their shares to us in connection with a business combination or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 24 months from the closing of this offering unless we provide our public stockholders with the opportunity to convert their shares of common stock upon the approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable, divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive officer, director or any other person. Table of Contents Risks In making your decision on whether to invest in our securities, you should take into account the special risks we face as a blank check company, as well as the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act, and, therefore, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see Proposed Business Comparison to offerings of blank check companies subject to Rule 419. You should carefully consider these and the other risks set forth in the section entitled Risk Factors beginning on page 18 of this prospectus. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001674657_motif-bio_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001674657_motif-bio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3146d66af608175efa8f0216e11668fe627e7d4b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001674657_motif-bio_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in the ADSs, you should read this entire prospectus carefully, including the sections titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "Motif" or the "Company," "we," "our," "ours," "us" or similar terms refer to Motif Bio plc, together with Motif BioSciences, Inc., its consolidated subsidiary, and "dollar," "U.S.$" or "$" refer to U.S. dollars. Overview We are a clinical stage biopharmaceutical company engaged in the research and development of novel antibiotics designed to be effective against serious and life-threatening infections in hospitalized patients caused by multi-drug resistant bacteria. The discovery of new antibiotics has not kept pace with the increasing incidence of resistant, difficult-to-treat bacteria. One of the biggest threats of antibiotic resistance is from MRSA (methicillin resistant Staphylococcus aureus), a leading cause of hospital-acquired infections and a growing cause of infections in healthy people in the general community. In 2013, the Centers of Disease Control (CDC) reported that at least two million people became infected with antibiotic-resistant bacteria and at least 23,000 Americans died as a direct result of these infections. Our lead product candidate, iclaprim, is being developed for the treatment of acute bacterial skin and skin structure infections (ABSSSI) and hospital acquired bacterial pneumonia (HABP), including ventilator associated bacterial pneumonia (VABP), infections which are often caused by MRSA. We are currently enrolling and dosing patients in two global Phase 3 clinical trials with an intravenous, or IV, formulation of iclaprim, for the treatment of ABSSSI. Iclaprim is a novel diaminopyrimidine antibiotic that inhibits an essential bacterial enzyme called "dihydrofolate reductase" (DHFR). Diaminopyrimidines are a class of chemical compounds that inhibit different enzymes in the production of tetrahydrofolate, a form of folic acid, which is required for the production of bacterial DNA and RNA. The inhibition of DHFR represents a differentiated and under-utilized mechanism of action compared with other antibiotics. We acquired iclaprim from Nuprim Inc., or Nuprim, following the completion of our merger with the company on April 1, 2015. Arpida AG, or Arpida, one of the previous owners of iclaprim, completed a comprehensive development program for iclaprim, including two successful Phase 3 trials in complicated skin and skin structure infections (cSSSI). Iclaprim has been administered to more than 600 patients and healthy volunteers in Phase 1, 2 and 3 clinical trials and in contrast to vancomycin, a standard of care antibiotic in hospitalized patients with "Gram-positive" infections, no evidence of nephrotoxicity (i.e., damage to the kidneys caused by exposure to a toxic chemical, toxin or medication) has been observed with iclaprim, and, therefore, therapeutic monitoring or dosage adjustment in renally impaired patients is not required with iclaprim. "Gram-positive" or "Gram-negative" refer to how bacteria react to the Gram stain test based on the outer casing of the bacteria, and the bacteria's cell wall structure. Each type of bacteria may be associated with different diseases. Iclaprim has also demonstrated rapid bactericidal activity and a low propensity for resistance development in vitro. We believe that iclaprim is an attractive potential candidate for use as a first-line empiric monotherapy, the initial therapy administered prior to the identification of the pathogen, in severely ill patients who are hospitalized with ABSSSI caused by MRSA and have comorbidities, or also suffer from other health issues, such as diabetes or renal impairment. Renal impairment affects up to an estimated 936,000 of the approximately 3.6 million patients hospitalized with ABSSSI annually in the United States. On March 2, 2016 we announced the dosing of the first patient in our two REVIVE (Randomized Evaluation intraVenous Iclaprim Vancomycin trEatment) Phase 3 clinical trials in ABSSSI. Data from the first REVIVE trial (REVIVE-1) is expected in the second quarter of 2017. AMENDMENT NO. 10 TO FORM F-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents For investors outside of the United States: Neither we nor any of the underwriters have taken any action to permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. In this prospectus, we have used industry and market data obtained from our own internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. We have compiled, extracted and reproduced industry and market data from external sources that we believe to be reliable. We caution prospective investors not to place undue reliance on the above mentioned data. Unless otherwise indicated in the prospectus, the basis for any statements regarding our competitive position is based on our own assessment and knowledge of the market in which we operate. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001675192_ottawa_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001675192_ottawa_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..47bd24d1e4877acc34a1b9cccdd7e8365621a093
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001675192_ottawa_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 d189351ds1a.htm S-1/A S-1/A Table of Contents As filed with the Securities and Exchange Commission on August 5, 2016 Registration No. 333-211860 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 PRE-EFFECTIVE AMENDMENT NO. 3 TO THE FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Ottawa Bancorp, Inc. and Ottawa Savings Bank Employees Savings & Profit Sharing Plan (Exact name of registrant as specified in its charter) Maryland 6035 81-2959182 State or other jurisdiction of incorporation or organization (Primary Standard Industrial Classification Code Number) (IRS Employer Identification No.) 925 LaSalle Street Ottawa, Illinois 61350 (815) 433-2525 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Jon Kranov President and Chief Executive Officer Ottawa Bancorp, Inc. 925 LaSalle Street Ottawa, Illinois 61350 (815) 433-2525 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Edward G. Olifer, Esq. P. Ross Bevan Stephen F. Donahoe, Esq. Silver, Freedman, Taff & Tiernan LLP Kilpatrick Townsend & Stockton LLP 3299 K Street, NW, Suite 100 607 14th Street, NW, Suite 900 Washington, DC 20007 Washington, DC 20005 (202) 295-4500 (202) 508-5800 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Calculation of Registration Fee Title of each class of securities to be registered Amount to be registered Proposed maximum offering price per unit Proposed maximum aggregate offering price(1) Amount of registration fee Common Stock, $0.01 par value 3,560,468 $10.00 $35,604,680 $3,586.00(2) Participation interests (3) $10.00 (4) (4) (1) Estimated solely for the purpose of calculating the registration fee pursuant to Regulation 457(o) under the Securities Act. (2) Previously paid. (3) In addition, pursuant to Rule 416(c) under the Securities Act, this registration statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein. (4) The securities of Ottawa Bancorp, Inc. to be purchased by the Ottawa Savings Bank Employees Savings & Profit Sharing Plan are included in the common stock. Accordingly, no separate fee is required for the participation interests pursuant to Rule 457(h)(2) of the Securities Act. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. Table of Contents SUMMARY The following summary explains the significant aspects of the conversion, the offering and the exchange of existing shares of Ottawa Savings Bancorp common stock for shares of Ottawa Bancorp common stock. It may not contain all of the information that is important to you. Before making an investment decision, you should read this entire document carefully, including the consolidated financial statements and the notes thereto, and the section entitled Risk Factors. In this prospectus, the terms we, us and our refer to Ottawa Savings Bancorp and its consolidated subsidiary or its successor Ottawa Bancorp, Inc., unless the context requires otherwise. The financial information at December 31, 2015 and 2014 and for the years then ended that is included in this prospectus is derived in part from the audited consolidated financial statements that appear in this prospectus. The financial information as of December 31, 2013, 2012 and 2011 and for the years then ended that is included in this prospectus is derived in part from the audited financial statements of Ottawa Savings Bancorp that do not appear in this prospectus. The financial information as of March 31, 2016 and 2015 and for the three months ended March 31, 2016 and 2015 that is included in this prospectus was not audited, but in the opinion of management, reflects all adjustments necessary for a fair presentation of these interim periods. Our Organizational Structure and the Proposed Conversion Since 2005, we have operated in a public two-tier mutual holding company structure. Ottawa Savings Bancorp is a federal corporation that is our publicly-traded stock holding company and the parent company of Ottawa Savings Bank. At March 31, 2016, Ottawa Savings Bancorp had consolidated assets of $216.6 million, deposits of $180.2 million and stockholders equity of $31.0 million. Ottawa Savings Bancorp s parent company is Ottawa Savings Bancorp MHC, a federally chartered mutual holding company. At March 31, 2016, Ottawa Savings Bancorp had 2,894,123 shares of common stock outstanding, of which 894,278, or 30.9%, were owned by the public, and the remaining 1,999,845, or 69.1%, were held by Ottawa Savings Bancorp MHC. Pursuant to the terms of our plan of conversion, we are converting from the mutual holding company corporate structure to the fully public stock holding company corporate structure. Upon completion of the conversion, Ottawa Savings Bancorp MHC and Ottawa Savings Bancorp will cease to exist, and Ottawa Bancorp will become the successor corporation to Ottawa Savings Bancorp. The shares of Ottawa Bancorp being offered represent the majority ownership interest in Ottawa Savings Bancorp currently held by Ottawa Savings Bancorp MHC. Public stockholders of Ottawa Savings Bancorp will receive shares of common stock of Ottawa Bancorp in exchange for their shares of Ottawa Savings Bancorp at an exchange ratio intended to preserve the same aggregate ownership interest in Ottawa Bancorp as they had in Ottawa Savings Bancorp, adjusted downward to reflect certain assets held by Ottawa Savings Bancorp MHC, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. Ottawa Savings Bancorp MHC s shares of Ottawa Savings Bancorp common stock will be cancelled. The following diagram shows our current organizational structure, reflecting ownership percentages as of March 31, 2016: Table of Contents Questions and Answers You should read this document for more information about the conversion and offering. The application including the plan of conversion described in this document has been conditionally approved by the Federal Reserve Board. The Proxy Vote Q. What am I being asked to approve? A. Ottawa Savings Bancorp stockholders as of August 2, 2016 are asked to vote on the plan of conversion. Under the plan of conversion, Ottawa Savings Bank will convert from the mutual holding company form of organization to the stock holding company form, and as part of such conversion, our newly formed stock holding company, Ottawa Bancorp, will offer for sale, in the form of shares of its common stock, Ottawa Savings Bancorp MHC s 69.1% ownership interest in Ottawa Savings Bancorp. In addition to the shares of common stock to be issued to those who purchase shares in the offering, public stockholders of Ottawa Savings Bancorp as of the completion of the conversion and offering will receive shares of Ottawa Bancorp common stock in exchange for their existing shares of Ottawa Savings Bancorp common stock. The exchange will be based on an exchange ratio that will result in Ottawa Savings Bancorp s existing public stockholders owning approximately the same percentage of Ottawa Bancorp common stock as they owned of Ottawa Savings Bancorp immediately prior to the conversion and offering. Stockholders also are asked to vote on the following informational proposals with respect to the articles of incorporation of Ottawa Bancorp: Approval of a provision in Ottawa Bancorp s articles of incorporation requiring a super-majority vote to approve certain amendments to Ottawa Bancorp s articles of incorporation; and Approval of a provision in Ottawa Bancorp s articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Ottawa Bancorp s outstanding voting stock. The provisions of Ottawa Bancorp s articles of incorporation, which are summarized as informational proposals were approved as part of the process in which the board of directors of Ottawa Savings Bancorp approved the plan of conversion. These proposals are informational in nature only, because the Federal Reserve Board s regulations governing mutual-to-stock conversions do not provide for votes on matters other than the plan of conversion. While we are asking you to vote with respect to each of the informational proposals listed above, the proposed provisions for which an informational vote is requested will become effective if stockholders approve the plan of conversion, regardless of whether stockholders vote to approve any or all of the informational proposals. The provisions of Ottawa Bancorp s articles of incorporation which are summarized as informational proposals may have the effect of deterring or rendering more difficult attempts by third parties to obtain control of Ottawa Bancorp, if such attempts are not approved by the board of directors, or may make the removal of the board of directors or management, or the appointment of new directors, more difficult. YOUR VOTE IS IMPORTANT. WE CANNOT COMPLETE THE CONVERSION AND OFFERING UNLESS THOSE PROPOSALS RECEIVES THE AFFIRMATIVE VOTE OF A MAJORITY OF SHARES HELD BY OUR PUBLIC STOCKHOLDERS. Q. What is the conversion and related stock offering? A. Ottawa Savings Bank is converting from a partially-public mutual holding company structure to a fully-public stock holding company ownership structure. Currently, Ottawa Savings Bancorp MHC owns 69.1% of Ottawa Savings Bancorp s common stock. The remaining 30.9% of Ottawa Savings Bancorp s common stock is owned by public stockholders. As a result of the conversion, Ottawa Bancorp will become the parent of Ottawa Savings Bank. Shares of common stock of Ottawa Bancorp, representing the 69.1% ownership interest of Ottawa Savings Bancorp MHC in Ottawa Savings Bancorp, are being offered for sale to eligible depositors and certain borrowers of Ottawa Savings Bank and, possibly, to the public. At the completion of the conversion and offering, public stockholders of Ottawa Savings Bancorp will exchange their shares of Ottawa Savings Bancorp common stock for shares of common stock of Ottawa Bancorp. Table of Contents Other Questions? For answers to questions about the conversion or voting, please read this proxy statement/prospectus. Questions about voting may be directed to our proxy information agent, Laurel Hill Advisory Group, by calling (888) 742-1305, Monday through Friday, from 9:00 a.m. to 5:00 p.m., Eastern time. For answers to questions about the stock offering, you may call our Stock Information Center at (815) 433-2868 from 10:00 a.m. to 4:00 p.m., Central time, Monday through Friday. A copy of the plan of conversion is available from Ottawa Savings Bank upon written request to the Corporate Secretary and is available for inspection at the offices of Ottawa Savings Bank and at the Federal Reserve Board. Table of Contents THE OFFERING Securities Offered In connection with the Ottawa Bancorp, Inc. stock offering ( stock offering ), Ottawa Bancorp is offering 401(k) Plan participants the opportunity to make a one-time election to purchase participation interests in shares of Ottawa Bancorp Common Stock through the 401(k) Plan. A participation interest represents your indirect ownership of a share of Ottawa Bancorp Common Stock that is acquired by the 401(k) Plan pursuant to your election, and is equivalent to one share of Ottawa Bancorp Common Stock. In this prospectus supplement, participation interests will be referred to as shares of Ottawa Bancorp Common Stock. At the stock offering purchase price of $10.00 per share, the 401(k) Plan may acquire up to 425,670 shares of Ottawa Bancorp Common Stock in the stock offering, based on the fair market value of the 401(k) Plan s assets as of March 31, 2016. The participation interests offered under this prospectus supplement are conditioned on the consummation of the stock offering. See Election to Purchase Ottawa Bancorp Common Stock for information on how you can use your 401(k) Plan funds to purchase Ottawa Bancorp Common Stock in the stock offering. In connection with the stock offering, shares of Ottawa Savings Bancorp common stock currently held in the 401(k) Plan will be automatically exchanged for shares of Ottawa Bancorp Common Stock pursuant to the exchange ratio as fully described in the prospectus attached to this prospectus supplement. See The Conversion and Offering Share Exchange Ratio for Current Stockholders. Any new shares of Ottawa Bancorp Common Stock purchased in the stock offering will be added to the shares of common stock you receive in the exchange described above. All of these shares will be held by Community Bank of Pleasant Hill d/b/a First Trust of Mid America, as custodian. Information with regard to the 401(k) Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of Ottawa Bancorp is contained in the accompanying prospectus. The address of the principal executive office of Ottawa Bancorp is 925 LaSalle Street, Ottawa, Illinois 61350. Election to Purchase Ottawa Bancorp Common Stock If you wish to purchase Ottawa Bancorp Common Stock in the stock offering using your 401(k) Plan funds you must: Log in to your 401(k) Plan account and transfer ONLY VESTED funds from your current 401(k) Plan investments to the John Hancock Stable Value Fund investment in the 401(k) Plan. For example, if your 401(k) Plan funds are currently invested in the DFA Small Cap Fund, Real Estate Securities Fund and the Mid Value Fund, you must decide how much of your VESTED account balance you want to invest in Ottawa Bancorp Common Stock and which funds you want to liquidate in order to generate sufficient cash to purchase shares of Ottawa Bancorp Common Stock in the stock offering. Table of Contents PROSPECTUS Ottawa Bancorp, Inc. (Proposed New Holding Company for Ottawa Savings Bank) Up to 2,383,950 Shares of Common Stock Ottawa Bancorp, Inc., a Maryland corporation that is referred to as Ottawa Bancorp throughout this prospectus, is offering up to 2,383,950 shares of common stock for sale at $10.00 per share on a best efforts basis in connection with the conversion of Ottawa Savings Bancorp MHC from the mutual holding company to the stock holding company form of organization. The shares we are offering represent the ownership interest in Ottawa Savings Bancorp, Inc., a federal corporation that is referred to as Ottawa Savings Bancorp throughout this prospectus, currently owned by the mutual holding company, Ottawa Savings Bancorp MHC. Ottawa Savings Bancorp s common stock is currently quoted on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the trading symbol OTTW, and we expect the shares of Ottawa Bancorp common stock will be listed on the Nasdaq Capital Market under the symbol OTTW. The shares of common stock are first being offered in a subscription offering to eligible depositors, certain borrowers and tax-qualified employee benefit plans of Ottawa Savings Bank, FSB. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given to residents of the communities served by Ottawa Savings Bank. Any shares of common stock not purchased in the subscription or community offerings may be offered to the public through a syndicate of broker-dealers, referred to in this prospectus as the syndicated offering. The syndicated offering may commence before the subscription and community offerings (including any extensions) have expired. However, no shares purchased in the subscription offering or the community offering will be issued until the completion of any syndicated offering. We must sell a minimum of 1,762,050 shares to complete the offering. In addition to the shares we are selling in the offering, the shares of Ottawa Savings Bancorp currently held by the public will be exchanged for shares of common stock of Ottawa Bancorp based on an exchange ratio that will result in existing public stockholders of Ottawa Savings Bancorp owning approximately the same percentage of Ottawa Bancorp common stock as they owned in Ottawa Savings Bancorp common stock immediately prior to the completion of the conversion. We will issue up to 1,066,050 shares in the exchange. The minimum order is 25 shares. The subscription offering will expire at 5:00 p.m., Central time, on September 12, 2016. We expect that the community offering, if held, will terminate at the same time. We may extend the expiration date of the subscription and/or community offerings without notice to you until October 27, 2016, or longer if the Board of Governors of the Federal Reserve System (the Federal Reserve Board ) approves a later date. No single extension may exceed 90 days and the offering must be completed by September 22, 2018. Once submitted, orders are irrevocable unless the subscription and community offerings are terminated or extended, with regulatory approval, beyond October 27, 2016, or if the number of shares of common stock to be sold is increased to more than 2,383,950 shares or decreased to less than 1,762,050 shares. If the subscription and community offerings are extended past October 27, 2016, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 2,383,950 shares or decreased to less than 1,762,050 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds received in the subscription and the community offerings will be held in a segregated account at Ottawa Savings Bank and will earn interest at 0.06% per annum until completion or termination of the offering. Except for Ottawa Savings Bank s employee stock ownership plan, (i) no individual may generally purchase more than 15,000 shares ($150,000) of common stock in the offerings and (ii) no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than 25,000 shares ($250,000) of common stock in the offerings. Sandler O Neill & Partners, L.P. will assist us in selling the shares on a best efforts basis in the subscription and community offerings, and will serve as sole manager for any syndicated offering. Sandler O Neill & Partners, L.P. is not required to purchase any shares of common stock that are sold in the offerings. OFFERING SUMMARY Price: $10.00 per Share Minimum Midpoint Maximum Number of shares 1,762,050 2,073,000 2,383,950 Gross offering proceeds $ 17,620,500 $ 20,730,000 $ 23,839,500 Estimated offering expenses, excluding selling agent and underwriters commissions $ 1,100,000 $ 1,100,000 $ 1,100,000 Selling agent and underwriters commissions(1) $ 317,170 $ 373,140 $ 429,115 Estimated net proceeds $ 16,203,330 $ 19,256,860 $ 22,310,385 Estimated net proceeds per share $ 9.20 $ 9.29 $ 9.36 (1) The amounts shown assume that 70% of the shares of common stock will be sold in the subscription offering and 30% of the shares of common stock will be sold in the community offering. See Pro Forma Data and The Conversion and Offering Plan of Distribution; Selling Agent and Underwriter Compensation for information regarding compensation to be received by Sandler O Neill & Partners, L.P. in the subscription and community offerings and the compensation to be received by Sandler O Neill & Partners, L.P. and the other broker-dealers that may participate in the syndicated offering. If all the shares of common stock were sold in the syndicated offering, the selling agent fees would be approximately $1.1 million, $1.2 million and $1.4 million at the minimum, midpoint and maximum levels of the offering, respectively, and our net proceeds and net proceeds per share from the offering would be $15.5 million and $8.78 at the minimum of the offering range, $18.4 million and $8.87 at the midpoint of the offering range and $21.3 million and $8.94 at the maximum of the offering range. This investment involves a degree of risk, including the possible loss of principal. Please read Risk Factors beginning on page 14. These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. None of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. For assistance, please contact the Stock Information Center at (815) 433-2868. The date of this prospectus is , 2016. Table of Contents After the conversion and offering are completed, we will be organized as a fully public stock holding company, with the stock of Ottawa Bancorp held as follows: Our Business Our business activities are primarily conducted through Ottawa Savings Bank, a federally chartered savings bank headquartered in Ottawa, Illinois, which is located in north-central Illinois approximately 80 miles southwest of Chicago. Ottawa Savings Bank conducts business from its main office in Ottawa and through its branch offices located in Marseilles and Morris, Illinois and loan production office located in Joliet, Illinois. Ottawa Savings Bank s market area includes parts of LaSalle County and all of Grundy County in Illinois. On December 31, 2014, Ottawa Savings Bancorp acquired Twin Oaks Savings Bank and merged Twin Oaks Savings Bank with and into Ottawa Savings Bank, which facilitated Ottawa Savings Bank s expansion into Grundy County. Ottawa Savings Bank s principal business consists of originating one-to-four family residential real estate mortgage loans and home equity lines of credit, and to a lesser extent, non-residential real estate, multi-family and construction loans. We also offer commercial and industrial loans and other consumer loans. We offer a variety of retail deposits to the general public in the areas surrounding our main office and our branch offices. We offer our customers a variety of deposit products with interest rates that are competitive with those of similar products offered by other financial institutions in our market area. We also utilize borrowings as a source of funds. Our revenues are derived primarily from interest on loans and, to a lesser extent, interest on investment securities and mortgage-backed securities. We also generate revenues from other income including realized gains on sales of loans associated with loan production, deposit fees and service charges, realized gains on sales of other real estate owned, realized gains on sales of securities and loan fees. Our principal executive offices are located at 925 LaSalle Street, Ottawa, Illinois 61350 and our telephone number is (815) 433-2525. Our web site address is www.ottawasavings.com. Information on our web site should not be considered a part of this prospectus. Business Strategy Our business strategy is to operate a well-capitalized and profitable community savings bank dedicated to providing high quality customer service and innovative new products. Highlights of our business strategy are as follows: Continuing to emphasize the origination of one-to-four family mortgage loans, including investor-owned (e.g., non-owner occupied) one-to-four family mortgage loans; Aggressively marketing core deposits; Offering a broad range of financial products and services to both retail and commercial customers in our market area; Table of Contents After the conversion and offering are completed, Ottawa Savings Bank will be a wholly-owned subsidiary of Ottawa Bancorp, and 100% of the common stock of Ottawa Bancorp will be owned by public stockholders. Our organization will have completed the transition from partial to fully-public ownership. As a result of the conversion and offering, Ottawa Savings Bancorp and Ottawa Savings Bancorp MHC will cease to exist. See Proposal 1 Approval of the Plan of Conversion for more information about the conversion and offering. Q. What are reasons for the conversion and offering? A. The primary reasons for the conversion and offering are to eliminate the uncertainties associated with the mutual holding company structure under financial reform legislation, transition us to a more familiar and flexible organizational structure, facilitate future mergers and acquisitions and improve the liquidity of our shares of common stock. Q. Why should I vote? A. You are not required to vote, but your vote is very important. For us to implement the plan of conversion, we must receive the affirmative vote of (1) the holders of at least two-thirds of the outstanding shares of Ottawa Savings Bancorp common stock, including shares held by Ottawa Savings Bancorp MHC and (2) the holders of a majority of the outstanding shares of Ottawa Savings Bancorp common stock entitled to vote at the special meeting, excluding shares held by Ottawa Savings Bancorp MHC. Your board of directors recommends that you vote FOR the plan of conversion. Q. What happens if I don t vote? A. Your prompt vote is very important. Not voting will have the same effect as voting Against the plan of conversion. Without sufficient favorable votes FOR the plan of conversion, we cannot complete the conversion and offering. Q. How do I vote? A. You should mark your vote, sign your proxy card and return it in the enclosed proxy reply envelope. Alternatively, you may vote by telephone or via the Internet, by following instructions on your proxy card. PLEASE VOTE PROMPTLY. NOT VOTING HAS THE SAME EFFECT AS VOTING AGAINST THE PLAN OF CONVERSION. Q. If my shares are held in street name, will my broker automatically vote on my behalf? A. No. Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares, using the directions that your broker provides to you. Q. What if I do not give voting instructions to my broker? A. Your vote is important. If you do not instruct your broker to vote your shares, the unvoted proxy will have the same effect as a vote against the plan of conversion. Q. How can I revoke my proxy? A. You may revoke your proxy at any time before the vote is taken at the meeting. To revoke your proxy, you must either advise the Corporate Secretary of Ottawa Savings Bancorp in writing before your common stock has been voted at the special meeting, deliver a later-dated proxy or attend the special meeting and vote your shares in person. Attendance at the special meeting will not in itself constitute revocation of your proxy. The Exchange Q. I currently own shares of Ottawa Savings Bancorp common stock. What will happen to my shares as a result of the conversion? Table of Contents Summary This summary highlights material information from this document and may not contain all the information that is important to you. To understand the conversion and offering fully, you should read this entire document carefully. Special Meeting of Stockholders Date, Time and Place; Record Date The special meeting of Ottawa Savings Bancorp stockholders is scheduled to be held at Ottawa Savings Bank, 925 Lasalle Street, Ottawa, Illinois at 2:00 p.m., Central time, on September 22, 2016. Only Ottawa Savings Bancorp stockholders of record as of the close of business on August 2, 2016 are entitled to notice of, and to vote at, the special meeting of stockholders and any adjournments or postponements of the meeting. Purpose of the Meeting Stockholders will be voting on the following proposals at the special meeting: 1. Approval of the plan of conversion; 2. An informational proposal regarding approval of a provision in Ottawa Bancorp s articles of incorporation requiring a super-majority vote to approve certain amendments to Ottawa Bancorp s articles of incorporation. 3. An informational proposal regarding approval of a provision in Ottawa Bancorp s articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Ottawa Bancorp s outstanding voting stock. 4. The approval of the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the plan of conversion. The provisions of Ottawa Bancorp s articles of incorporation, which are summarized as informational proposals 2 and 3 were approved as part of the process in which the board of directors of Ottawa Savings Bancorp approved the plan of conversion. These proposals are informational in nature only, because the Federal Reserve Board s regulations governing mutual-to-stock conversions do not provide for votes on matters other than the plan of conversion. While we are asking you to vote with respect to each of the informational proposals listed above, the proposed provisions for which an informational vote is requested will become effective if stockholders approve the plan of conversion, regardless of whether stockholders vote to approve any or all of the informational proposals. The provisions of Ottawa Bancorp s articles of incorporation, which are summarized as informational proposals may have the effect of deterring or rendering more difficult attempts by third parties to obtain control of Ottawa Bancorp, if such attempts are not approved by the board of directors, or may make the removal of the board of directors or management, or the appointment of new directors, more difficult. Vote Required Proposal 1: Approval of the Plan of Conversion. Approval of the plan of conversion requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Ottawa Savings Bancorp, including the shares held by Ottawa Savings Bancorp MHC and a majority of the outstanding shares of Ottawa Savings Bancorp, excluding the shares held by Ottawa Savings Bancorp MHC. Informational Proposals 2 and 3. While we are asking you to vote with respect to each of the informational proposals listed above, the proposed provisions for which an informational vote is requested will become effective if stockholders approve the plan of conversion, regardless of whether stockholders vote to approve any or all of the informational proposals. Proposal 4: Approval of the Adjournment of the Special Meeting. We must obtain the affirmative vote of the majority of the shares represented at the special meeting and entitled to vote to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the proposal to approve the plan of conversion. Table of Contents NOTE: Only amounts divisible by $10 (the purchase price for a share of Ottawa Bancorp Common Stock in the stock offering) will be used to purchase shares of Ottawa Bancorp Common Stock. Once you have transferred your funds to the John Hancock Stable Value Fund you will need to complete and sign an Investment Direction Form. The Investment Direction Form will note the amount of money you want invested in Ottawa Bancorp Common Stock in the stock offering. The investment directions you provide in your Investment Direction Form will be subject to the purchase priorities and stock limitations of the stock offering. See Purchase Priorities and Minimum and Maximum Investment. If you are eligible to purchase Ottawa Bancorp Common Stock in the stock offering, your requested funds will be liquidated from the Stable Value Fund and used by the 401(k) Plan Trustee to purchase shares in the stock offering on your behalf. See Purchase Priorities in the Subscription Offering to determine if you are eligible to purchase shares of Ottawa Bancorp Common Stock in the stock offering. Purchase Priorities in the Subscription Offering Ottawa Savings Bank has granted subscription rights to the following person s in descending order of priority: (1) To depositors with accounts at Ottawa Savings Bank with aggregate balances of at least $50 at the close of business on May 31, 2015. (2) To our tax-qualified employee benefit plans (including Ottawa Savings Bank s employee stock ownership plan), which may subscribe for, in the aggregate, up to 10% of the shares of common stock sold in the offering. We expect our employee stock ownership plan to purchase up to 8% of the shares of common stock sold in the stock offering. (3) To depositors with accounts at Ottawa Savings Bank with aggregate balances of at least $50 at the close of business on June 30, 2016. (4) To depositors of Ottawa Savings Bank at the close of business on August 2, 2016 and each former borrower of Twin Oaks Savings Bank as of December 31, 2014 whose loan remained outstanding at Ottawa Savings Bank as of the close of business on August 2, 2016. Purchase Priorities in Community Offering If you wish to purchase Ottawa Bancorp Common Stock in the stock offering through the 401(k) Plan, your purchase will be Table of Contents Table of Contents Pursuing opportunities to increase non-residential real estate lending, which we consider to be comprised of commercial real estate, land and multi-family loans in our market area; Continuing to utilize conservative underwriting guidelines to limit credit risk in our loan portfolio to achieve a high level of asset quality; Implementing a stockholder-focused strategy for management of our capital; and Considering judicious expansion into new market areas to grow our business through the addition of new branch locations and/or through possible acquisitions. Reasons for the Conversion and Offering Our primary reasons for converting to the fully public stock form of ownership and undertaking the stock offering are to: Strengthen our regulatory capital position with the additional capital we will raise in the stock offering. A strong capital position is essential to achieving our long-term objectives of growing Ottawa Savings Bank and building stockholder value. While Ottawa Savings Bank exceeds all regulatory capital requirements, the proceeds from the offering will greatly strengthen our capital position and enable us to support our planned growth. Minimum regulatory capital requirements have also increased under recently adopted regulations. Compliance with these new requirements will be essential to the continued implementation of our business strategy. Transition our organization to a more common and flexible stock holding company structure from our existing mutual holding company structure. The stock holding company structure is a more common and flexible form of organization, and will give us greater flexibility to access the capital markets through possible equity and debt offerings to support our long-term growth. The stock holding company structure will also provide us greater flexibility to structure an acquisition of other financial businesses or institutions if opportunities arise. We do not currently have any understandings or agreements regarding any specific capital raising or acquisition transaction. In addition, although we intend to remain an independent financial institution, the stock holding company structure may make us a more attractive acquisition candidate to other institutions. Applicable regulations prohibit the acquisition of Ottawa Bancorp for three years following completion of the conversion, and also prohibit anyone from acquiring or offering to acquire more than 10% of our stock without prior regulatory approval. Enable our stock holding company the ability to pay dividends to our public stockholders without diluting their stock ownership interest. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, the Federal Reserve Board became the federal regulator of all savings and loan holding companies and mutual holding companies, which resulted in changes in regulations with respect to the payment of dividends applicable to Ottawa Savings Bancorp MHC and Ottawa Savings Bancorp. Under the Dodd-Frank Act, Ottawa Savings Bancorp may not pay a dividend to its public stockholders without also paying a dividend to Ottawa Savings Bancorp MHC. Ottawa Savings Bancorp MHC may obtain an annual approval of its members to waive its right to dividends paid by Ottawa Savings Bancorp. However, any paid or waived dividends would increase Ottawa Savings Bancorp MHC s ownership interest in Ottawa Savings Bancorp which, in turn, would decrease the exchange ratio for public stockholders in the event of the subsequent conversion of Ottawa Savings Bank from the mutual holding company to the stock holding company form of organization. As a result, any paid or waived dividends would dilute the relative ownership of public stockholders when the mutual holding company undertakes a full conversion. Among other things, these changes have adversely affected our ability to pay cash dividends to our public stockholders without diluting their stock ownership interest. The conversion will eliminate our mutual holding company structure and will enhance our ability to pay dividends to our public stockholders, subject to the customary legal, regulatory and financial considerations applicable to all financial institutions. See Our Dividend Policy. Terms of the Offering We are offering between 1,762,050 and 2,383,950 shares of common stock to eligible depositors and certain borrowers of Ottawa Savings Bank, to our tax-qualified employee benefit plans and, to the extent shares remain available, in a community offering to the general public, with a preference given first to natural persons (including trusts of natural persons) residing in LaSalle and Grundy Counties in Illinois and second to public stockholders of Ottawa Savings Bancorp as of Table of Contents A. At the completion of the conversion, your shares of Ottawa Savings Bancorp common stock will be canceled and exchanged for shares of common stock of Ottawa Bancorp, a newly formed Maryland corporation. The number of shares you will receive will be based on an exchange ratio, determined as of the completion of the conversion and offering, that is intended to result in Ottawa Savings Bancorp s existing public stockholders owning approximately 30.9% of Ottawa Bancorp s common stock, which is the same percentage of Ottawa Savings Bancorp common stock currently owned by existing public stockholders as adjusted to reflect the assets of Ottawa Savings Bancorp MHC. Q. Does the exchange ratio depend on the market price of Ottawa Savings Bancorp common stock? A. No, the exchange ratio will not be based on the market price of Ottawa Savings Bancorp common stock. Therefore, changes in the price of Ottawa Savings Bancorp common stock between now and the completion of the conversion and offering will not affect the calculation of the exchange ratio. Q. How will the actual exchange ratio be determined? A. Because the purpose of the exchange ratio is to maintain the ownership percentage of the existing public stockholders of Ottawa Savings Bancorp, the actual exchange ratio will depend on the number of shares of Ottawa Bancorp s common stock sold in the offering and, therefore, cannot be determined until the completion of the conversion and offering. Q. How many shares will I receive in the exchange? A. You will receive between 0.8811 and 1.1921 shares of Ottawa Bancorp common stock for each share of Ottawa Savings Bancorp common stock you own on the date of the completion of the conversion and offering. For example, if you own 100 shares of Ottawa Savings Bancorp common stock, and the exchange ratio is 1.0366 (at the midpoint of the offering range), you will receive 103 shares of Ottawa Bancorp common stock and $6.60 in cash, the value of the fractional share, based on the $10.00 per share purchase price in the offering. Stockholders who hold shares in street name at a brokerage firm or are held in book-entry form by our transfer agent will receive these funds in their accounts. Stockholders who hold stock certificates will receive a check in the mail. Q. Should I submit my stock certificates now? A. No. If you hold a stock certificate for Ottawa Savings Bancorp common stock, instructions for exchanging your certificate will be sent to you after completion of the conversion and offering. Until you submit the transmittal form and certificate, you will not receive your new certificate and check for cash in lieu of fractional shares, if any. If your shares are held in street name at a brokerage firm, the share exchange will occur automatically upon completion of the conversion and offering, without any action on your part. Please do not send in your stock certificate until you receive a transmittal form and instructions. Q. Do I have dissenters and appraisal rights? A. No. Stockholders of Ottawa Savings Bancorp do not have dissenters rights in connection with the conversion and offering. Stock Offering Q. May I place an order to purchase shares in the offering, in addition to the shares that I will receive in the exchange? A. Eligible depositors and certain borrowers of Ottawa Savings Bank have priority subscription rights allowing them to purchase common stock in the subscription offering. Shares not purchased in the subscription offering may be made available for sale to the public in a community offering. Ottawa Savings Bancorp stockholders have a preference in the community offering after orders submitted by residents of our communities. If you would like to receive a prospectus and stock order form, please call our Stock Information Center at (815) 433-2868 from 10:00 a.m. to 4:00 p.m., Central time, Monday through Friday. The Stock Information Center will be closed weekends and bank holidays. Order forms, along with full payment, must be received (not postmarked) no later than 5:00 p.m., Central time on September 12, 2016. Table of Contents As of the record date, there were 2,894,123 shares of Ottawa Savings Bancorp common stock outstanding, of which Ottawa Savings Bancorp MHC owned 1,999,845. The directors and executive officers of Ottawa Savings Bancorp (and their affiliates), as a group, beneficially owned 133,471 shares of Ottawa Savings Bancorp common stock, representing 4.6% of the outstanding shares of Ottawa Savings Bancorp common stock and 15.0% of the shares held by persons other than Ottawa Savings Bancorp MHC as of such date. Ottawa Savings Bancorp MHC and our directors and executive officers intend to vote their shares in favor of the plan of conversion. Our Company Ottawa Savings Bancorp is, and Ottawa Bancorp following the completion of the conversion and offering will be, the unitary savings and loan holding company for Ottawa Savings Bank, a federally chartered savings bank. Ottawa Savings Bank conducts business from its main office in Ottawa and through its branch offices located in Marseilles and Morris, Illinois and loan production office in Joliet, Illinois. Ottawa Savings Bank s market area includes all of LaSalle County and parts of Grundy County in Illinois. On December 31, 2014, Ottawa Savings Bancorp acquired Twin Oaks Savings Bank and merged Twin Oaks Savings Bank with and into Ottawa Savings Bank, which facilitated Ottawa Savings Bank s expansion into Grundy County. Ottawa Savings Bank s principal business consists of originating one-to-four family residential real estate mortgage loans and home equity lines of credit, and to a lesser extent, non-residential real estate, multi-family and construction loans. We also offer commercial and industrial loans and other consumer loans. We offer a variety of retail deposits to the general public in the areas surrounding our main office and our branch offices. We offer our customers a variety of deposit products with interest rates that are competitive with those of similar products offered by other financial institutions in our market area. We also utilize borrowings as a source of funds. Our revenues are derived primarily from interest on loans and, to a lesser extent, interest on investment securities and mortgage-backed securities. We also generate revenues from other income including realized gains on sales of loans associated with loan production, deposit fees and service charges, realized gains on sales of other real estate owned, realized gains on sales of securities and loan fees. Our principal executive offices are located at 925 LaSalle Street, Ottawa, Illinois 61350 and our telephone number is (815) 433-2525. Our web site address is www.ottawasavings.com. Information on our web site should not be considered a part of this prospectus. The Conversion Our Organizational Structure and the Proposed Conversion [SAME AS OFFERING PROSPECTUS] Reasons for the Conversion [SAME AS OFFERING PROSPECTUS] Conditions to Completion of the Conversion [SAME AS OFFERING PROSPECTUS] The Exchange of Existing Shares of Ottawa Savings Bancorp Common Stock [SAME AS OFFERING PROSPECTUS] Table of Contents subject to the above limitations. Shares of Ottawa Bancorp Common Stock not purchased in the subscription offering will be offered for sale to the general public in a community offering, with a preference given first to natural persons (including trusts of natural persons) residing in LaSalle and Grundy Counties in Illinois and second to stockholders of Ottawa Savings Bancorp (other than Ottawa Savings Bancorp MHC) as of August 2, 2016. The community offering may begin concurrently with, during or promptly after the subscription offering. We also may offer for sale shares of common stock not purchased in the subscription offering and the community offering through a syndicated offering. Sandler O Neill & Partners, L.P. will act as sole manager for the syndicated offering. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated offering, and our interpretation of the terms and conditions of the plan of conversion will be final. Any determination to accept or reject stock orders in the community offering or syndicated offering will be based on the facts and circumstances available to management at the time of the determination. If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. A detailed description of the subscription offering, the community offering and the syndicated offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled The Conversion and Offering. Purchases in the Stock Offering and Oversubscriptions The 401(k) Plan Trustee will purchase shares of Ottawa Bancorp Common Stock in the stock offering in accordance with your investment directions. Once you make your election, the dollar amount that you elect to liquidate from the John Hancock Stable Value Fund to purchase Ottawa Bancorp Common Stock will be transferred to Community Bank of Pleasant Hill d/b/a First Trust of Mid America, as custodian. At the close of the stock offering period the custodian will transfer the cash to Ottawa Bancorp as payment for the shares of Ottawa Bancorp common stock purchased by 401(k) Plan participants. After the end of the stock offering period, we will determine whether all or any portion of your request to purchase Ottawa Bancorp Common Stock will be filled (if the stock offering is oversubscribed you may not receive any or all of your order, depending on your purchase priority, as described above). The amount that can be used toward your order will be applied to the purchase of Ottawa Bancorp Common Stock. Following the closing of the stock offering, your purchased shares of Ottawa Bancorp Common Stock will be transferred to Community Bank of Pleasant Hill d/b/a First Trust of Mid America and will be reflected in your 401(k) Plan balance account as soon as practicable thereafter. Table of Contents August 2, 2016. If necessary, we will also offer shares to the general public in a syndicated offering. Unless the number of shares of common stock to be offered is increased to more than 2,383,950 shares or decreased to fewer than 1,762,050 shares, or the subscription and community offerings are extended beyond October 27, 2016, subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the subscription and community offerings are extended past October 27, 2016, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to this notice, your order will be cancelled and we will promptly return your funds with interest at 0.06% per annum or cancel your deposit account withdrawal authorization. If the number of shares to be sold is increased to more than 2,383,950 shares or decreased to less than 1,762,050 shares, all subscribers stock orders will be canceled, their withdrawal authorizations will be canceled and funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest at 0.06% per annum. We will then resolicit subscribers, giving them an opportunity to place new orders for a period of time. No shares purchased in the subscription and/or community offerings will be issued until the completion of any syndicated offering. The purchase price of each share of common stock offered for sale in the offering is $10.00. All investors will pay the same purchase price per share, regardless of whether the shares are purchased in the subscription offering, the community offering or a syndicated offering. Investors will not be charged a commission to purchase shares of common stock in the offering. Sandler O Neill & Partners, L.P., our marketing agent in the offering, will use its best efforts to assist us in selling shares of our common stock in the offering but is not obligated to purchase any shares of common stock in the offering. Important Risks in Owning Ottawa Bancorp s Common Stock Before you purchase shares of our common stock, you should read the Risk Factors section beginning on page of this prospectus. How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Stock Price The amount of common stock we are offering for sale and the exchange ratio for the exchange of shares of Ottawa Bancorp for shares of Ottawa Savings Bancorp are based on an independent appraisal of the estimated market value of Ottawa Bancorp, assuming the offering has been completed. Keller and Company, our independent appraiser, has estimated that, as of May 16, 2016, this market value was $30.0 million. Based on federal regulations, this market value forms the midpoint of a valuation range with a minimum of $25.5 million and a maximum of $34.5 million. Based on this valuation range, the 69.1% ownership interest of Ottawa Savings Bancorp MHC in Ottawa Savings Bancorp as of March 31, 2016 being sold in the offering, certain assets held by Ottawa Savings Bancorp MHC and the $10.00 per share price, the number of shares of common stock being offered for sale by Ottawa Bancorp ranges from 1,762,050 shares to 2,383,950 shares. The purchase price of $10.00 per share was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio ranges from 0.8811 shares at the minimum of the offering range to 1.1921 shares at the maximum of the offering range, and will generally preserve the existing percentage ownership of public stockholders. Keller and Company will update its appraisal before we complete the conversion and offering. If our pro forma market value at that time is either below $25.5 million or above $34.5 million, then, after consulting with the Federal Reserve Board, we may: terminate the offering and promptly return all funds with interest; set a new offering range and give all subscribers the opportunity to place a new order; or take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission. The appraisal is based in part on Ottawa Bancorp s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of ten publicly traded savings and loan and bank holding companies that Keller and Company considers comparable to Ottawa Savings Bancorp. The appraisal peer group consists of the companies listed below. Total assets are as of March 31, 2016. Company Name and Ticker Symbol Exchange Headquarters Total Assets (In millions) Bay Bancorp, Inc. (BYBK) Nasdaq Columbia, Maryland $ 491 Central Federal Corp. (CFBK) Nasdaq Fairlawn, Ohio 348 Elmira Savings Bank (ESBK) Nasdaq Elmira, New York 561 Equitable Financial Corp. (EQFN) Nasdaq Grand Island, Nebraska 223 HMN Financial, Inc. (HMNF) Nasdaq Rochester, Minnesota 642 Table of Contents How We Determined the Offering Range and Exchange Ratio [SAME AS OFFERING PROSPECTUS] How We Intend to Use the Proceeds of the Offering [SAME AS OFFERING PROSPECTUS] Purchases by Executive Officers and Directors [SAME AS OFFERING PROSPECTUS] Market for Common Stock [SAME AS OFFERING PROSPECTUS] Our Dividend Policy [SAME AS OFFERING PROSPECTUS] Benefits of the Conversion to Management [SAME AS OFFERING PROSPECTUS] Dissenters Rights Stockholders of Ottawa Savings Bancorp do not have dissenters rights in connection with the conversion and offering. Differences in Stockholder Rights As a result of the conversion, existing stockholders of Ottawa Savings Bancorp will become stockholders of Ottawa Bancorp. The rights of stockholders of Ottawa Bancorp will be less than the rights stockholders currently have. The decrease in stockholder rights results from differences between the articles of incorporation and bylaws of Ottawa Bancorp and the charter and bylaws of Ottawa Savings Bancorp and from distinctions between Maryland and federal law. The differences in stockholder rights under the articles of incorporation and bylaws of Ottawa Bancorp are not mandated by Maryland law but have been chosen by management as being in the best interests of the corporation and all of its stockholders. However, the provisions in Ottawa Bancorp s articles of incorporation and bylaws may make it more difficult to pursue a takeover attempt that management opposes. These provisions will also make the removal of the board of directors or management, or the appointment of new directors, more difficult. Table of Contents In the event the offering is oversubscribed, i.e., there are more orders for Ottawa Bancorp Common Stock than shares available for sale in the stock offering, and the trustee is unable to use the full amount allocated by you to purchase Ottawa Bancorp Common Stock in the stock offering, the amount that cannot be invested in Ottawa Bancorp Common Stock will be transferred to the John Hancock Stable Value Fund funds in accordance with the terms of the 401(k) Plan. The prospectus describes the allocation procedures in the event of an oversubscription. If you choose not to direct the investment of your account balances towards the purchase of any Ottawa Bancorp Common Stock in connection with the stock offering, your account balances will remain in the investment funds of the 401(k) Plan as previously directed by you. Minimum and Maximum Investment In connection with the stock offering, the 401(k) Plan will permit you to use up to 100% of your 401(k) Plan account balance that is not currently invested in the Ottawa Savings Bancorp Common Stock for the purchase of Ottawa Bancorp Common Stock. The 401(k) Plan Trustee will subscribe for shares of Ottawa Bancorp Common Stock offered for sale in the stock offering, in accordance with each participant s investment direction. The Trustee will pay $10.00 per share, which will be the same price paid by all other persons who purchase shares in the stock offering. In order to purchase Ottawa Bancorp Common Stock through the 401(k) Plan, the minimum investment is $250, which will purchase 25 shares. No person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than $250,000 (25,000 shares) of Ottawa Bancorp Common Stock in all categories of the stock offering combined. Please see the prospectus for further details regarding additional maximum purchase limits for investors in the stock offering. Value of 401(k) Plan Assets As of March 31, 2016, the market value of the assets of the 401(k) Plan was approximately $4,256,700, all of which is eligible to purchase or acquire Ottawa Bancorp Common Stock in the stock offering. How to Order Common Stock in the Stock Offering Through the 401(k) Plan The purchase period for the 401(k) Plan purchases begins on , 2016 and ends at 5:00 p.m., Eastern Time, on , 2016 (the 401(k) Plan Purchase Period ). Once you transfer the VESTED funds you want to use to purchase Ottawa Bancorp Common Stock in the stock offering to the John Hancock Stable Value Fund, you will be asked to complete an Investment Direction Form. Your Investment Direction Form must be received no later than . Please remember to request a dollar amount that is divisible by $10.00 on your Investment Direction Form. Dollar amounts that are not divisible by $10.00, will be rounded down to the closest dollar amount divisible by $10.00. Table of Contents Company Name and Ticker Symbol Exchange Headquarters Total Assets (In millions) Poage Bankshares, Inc. (PBSK) Nasdaq Ashland, Kentucky 435 Severn Bancorp, Inc. (SVBI) Nasdaq Annapolis, Maryland 762 United Community Bancorp (UCBA) Nasdaq Lawrenceburg, Indiana 508 Wayne Savings Bancshares, Inc. (WAYN) Nasdaq Wooster, Ohio 434 Wolverine Bancorp, Inc. (WBKC) Nasdaq Midland, Michigan 418 The following table presents a summary of selected pricing ratios for Ottawa Bancorp (on a pro forma basis) as of and for the twelve months ended March 31, 2016, and for the peer group companies based on earnings and other information as of and for the twelve months ended March 31, 2016 or the latest date available at the time of the appraisal, with stock prices as of May 16, 2016, as reflected in the appraisal report. Compared to the average pricing of the peer group, our pro forma pricing ratios at the midpoint of the offering range indicated a discount of 27.27% on a price-to-book value basis, a discount of 30.25% on a price-to-tangible book value basis, and a premium of 135.15% on a price-to-earnings basis. Price-to-earnings multiple (1) Price-to-book value ratio Price-to-tangible book value ratio Ottawa Bancorp (on a pro forma basis, assuming completion of the conversion) Maximum 51.69x 68.12 % 69.59 % Midpoint 43.31x 62.58 % 64.02 % Minimum 35.59x 56.37 % 57.74 % Valuation of peer group companies, all of which are fully converted (on an historical basis) Averages 16.64x 86.04 % 91.78 % Medians 17.39x 90.45 % 94.80 % (1) Price-to-earnings multiples calculated by Keller and Company in the independent appraisal are based on an estimate of core or recurring earnings for Ottawa Savings Bancorp and the companies comprising the peer group. These ratios are different than those presented in Pro Forma Data. For purposes of the independent appraisal, Keller and Company utilized an estimate of core earnings to show a more normal earnings base and resultant earnings multiple that excludes nonrecurring income and expense items. Core earnings is defined as net income before taxes excluding nonrecurring income and expense items, such as a gain or loss resulting from a one-time event or an activity that is not a part of a company s normal business operations, assuming the application of a normal tax rate of 34.0%. The independent appraisal does not indicate trading market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, the pricing ratios presented in the appraisal were used by Keller and Company to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location. For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see The Conversion and Offering Stock Pricing and Number of Shares to be Issued. Effect of Ottawa Savings Bancorp MHC s Assets on Minority Stock Ownership In the exchange, the public stockholders of Ottawa Savings Bancorp will receive shares of common stock of Ottawa Bancorp in exchange for their shares of common stock of Ottawa Savings Bancorp pursuant to an exchange ratio that is designed to provide, subject to adjustment, existing public stockholders with the same ownership percentage of the common stock of Ottawa Bancorp after the conversion as their ownership percentage in Ottawa Savings Bancorp immediately prior to the conversion, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. However, the exchange ratio will be adjusted downward to reflect assets held by Ottawa Savings Bancorp MHC (other than shares of stock of Ottawa Savings Bancorp) at the completion of the conversion, which currently consists of cash. Ottawa Savings Bancorp MHC had net assets of $128,000 as of March 31, 2016, not including shares of Ottawa Savings Bancorp Table of Contents The differences in stockholder rights include the following: supermajority voting requirements for certain business combinations and changes to some provisions of the articles of incorporation and bylaws; limitation on the right to vote shares; a majority of stockholders required to call special meetings of stockholders; and greater lead time required for stockholders to submit business proposals or director nominations. Tax Consequences [SAME AS OFFERING PROSPECTUS] Table of Contents The funds you elect to invest in Ottawa Bancorp Common Stock will be held separately from your other 401(k) Plan assets until the completion of the stock offering. Therefore, this money is not available for distributions, loans, or withdrawals until the stock offering is completed, which is expected to be several weeks after the closing of the 401(k) Plan Purchase Period. Investment in Ottawa Bancorp Common Stock involves special risks common to investment in shares of employer stock. For a discussion of the material risks you should consider, see Risk Factors section of the accompanying prospectus and the section of this prospectus supplement called Notice of Your Rights Concerning Employer Securities (see below). Your ability to sell your purchased Ottawa Bancorp Common Stock may be restricted. Please see the section of this prospectus supplement called Future Direction to Purchase and Sell Common Stock for further information. Order Deadline [to be determined] Table of Contents common stock. This adjustment will not result in a change in Ottawa Savings Bancorp s public stockholders ownership interest in Ottawa Bancorp from 30.9% and will not change the ownership interest of persons who purchase stock in the offering from 69.1% (the amount of Ottawa Savings Bancorp s outstanding common stock held by Ottawa Savings Bancorp MHC). The Exchange of Existing Shares of Ottawa Savings Bancorp Common Stock If you are a stockholder of Ottawa Savings Bancorp at the completion of the conversion, your shares will be exchanged for shares of common stock of Ottawa Bancorp. The number of shares of common stock you will receive will be based on the exchange ratio, which will depend upon our final appraised value and the percentage of outstanding shares of Ottawa Savings Bancorp common stock owned by public stockholders immediately prior to the completion of the conversion. The following table shows how the exchange ratio will adjust, based on the appraised value of Ottawa Bancorp as of May 16, 2016, assuming public stockholders of Ottawa Savings Bancorp own 30.9% of Ottawa Savings Bancorp common stock and Ottawa Savings Bancorp MHC had net assets of $128,000 immediately prior to the completion of the conversion. The table also shows the number of shares of Ottawa Bancorp common stock a hypothetical owner of Ottawa Savings Bancorp common stock would receive in exchange for 100 shares of Ottawa Bancorp common stock owned at the completion of the conversion, depending on the number of shares of common stock issued in the offering. Shares to be Sold in This Offering Shares of Ottawa Bancorp to be Issued for Shares of Ottawa Savings Bancorp Total Shares of Common Stock to be Issued in Exchange and Offering Exchange Ratio Equivalent Value of Shares Based Upon Offering Price (1) Equivalent Pro Forma Tangible Book Value Per Exchanged Share (2) Shares to be Received for 100 Existing Shares (3) Amount Percent Amount Percent Minimum 1,762,050 69.1 % 787,950 30.9 % 2,550,000 0.8811 $ 8.81 $ 17.32 88 Midpoint 2,073,000 69.1 927,000 30.9 3,000,000 1.0366 10.36 15.62 103 Maximum 2,383,950 69.1 1,066,050 30.9 3,450,000 1.1921 11.92 14.37 119 (1) Represents the value of shares of Ottawa Bancorp common stock to be received in the conversion by a holder of one share of Ottawa Savings Bancorp, pursuant to the exchange ratio, based upon the $10.00 per share purchase price. (2) Represents the pro forma tangible book value per share at each level of the offering range multiplied by the respective exchange ratio. (3) Cash will be paid in lieu of fractional shares. No fractional shares of Ottawa Bancorp common stock will be issued to any public stockholder of Ottawa Savings Bancorp. For each fractional share that otherwise would be issued, Ottawa Bancorp will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder otherwise would be entitled by the $10.00 per share offering price. We will also convert options previously awarded under the Ottawa Savings Bancorp 2006 Equity Incentive Plan into options to purchase Ottawa Bancorp common stock. At March 31, 2016, there were outstanding options to purchase 92,666 shares of Ottawa Savings Bancorp common stock. The number of outstanding options and related per share exercise price will be adjusted based on the exchange ratio. The aggregate exercise price, term and vesting period of the outstanding options will remain unchanged. If any options are exercised before we complete the offering, the number of shares of Ottawa Savings Bancorp common stock will increase and the exchange ratio would be adjusted downward. How We Intend to Use the Proceeds from the Offering We intend to invest 50% of the net proceeds from the stock offering in Ottawa Savings Bank, fund the loan to our employee stock ownership plan to finance its purchase of shares of common stock in the stock offering and retain the remainder of the net proceeds, from the offering at Ottawa Bancorp. Therefore, assuming we sell 2,073,000 shares of common stock in the stock offering at the midpoint of the offering range, and we have net proceeds of $19.3 million, we intend to invest $9.6 million in Ottawa Savings Bank, loan $1.7 million to our employee stock ownership plan to fund its purchase of shares of common stock, and retain the remaining $8.0 million of the net proceeds at Ottawa Bancorp. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001675776_eagleline_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001675776_eagleline_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..cf86dc8e68e24c14b9419f7103e0324c175b1238
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001675776_eagleline_prospectus_summary.txt
@@ -0,0 +1 @@
+summary only highlights the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information under "Risk Factors" and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus, or the context otherwise requires, references to: "we," "us," "company" or "our company" are to Eagleline Acquisition Corp., a Delaware corporation; "public shares" are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); "public warrants" are to our warrants sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); "warrants" are to our public and private placement warrants; "public stockholders" are to the holders of our public shares, including our sponsor, officers and directors to the extent our sponsor, officers or directors purchase public shares, provided that our sponsor s status as a "public stockholder" shall only exist with respect to such public shares; "management" or our "management team" are to our executive officers and directors; "sponsor" is to Eagle Acquisition Sponsor, LLC, a Delaware limited liability company managed by our founders, Steven Fishman, Arnold Whitman and Joseph Fox; "initial stockholder" are to the holder of our founder shares prior to this offering; "founder shares" are to shares of our Class F common stock initially purchased by our sponsor in a private placement prior to this offering and the shares of our Class A common stock issued upon the automatic conversion thereof at the time of our initial business combination as provided herein; "common stock" are to our Class A common stock and our Class F common stock; and "private placement warrants" are to the warrants issued to our sponsor in a private placement simultaneously with the closing of this offering. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. Introduction We are a newly organized blank check company incorporated on May 9, 2016 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We refer to such a business combination throughout this prospectus as our initial business combination. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We have not identified any acquisition target. We have not, nor has anyone on our behalf, initiated any discussions, directly or indirectly, with respect to identifying any acquisition target. We have generated no operating revenues to date and we do not expect that we will generate operating revenues until we consummate our initial business combination. 1 We currently intend to concentrate our efforts in identifying businesses which provide services to the healthcare industry, with particular emphasis on businesses that align with several key themes: the aging of America and the growing need for better, more efficient care for the elderly; the shift from fee-for-service to value based care payment models; and the increasing importance and involvement of consumers in healthcare. We are not, however, required to complete our initial business combination with a healthcare services business and, as a result, we may pursue a business combination outside of that industry. We will seek to acquire established businesses that we believe are fundamentally sound but potentially in need of financial, operational, strategic or managerial redirection to maximize value. We do not intend to acquire start-up companies or companies that are not profitable. We will seek to capitalize on the significant healthcare industry investing and operating experience and contacts of Steve Fishman, our Chief Executive Officer and a director, Joseph Fox, our President and a director, and Arnold Whitman, our Chairman of the Board, and other members of our board of directors to identify, evaluate, acquire and operate a healthcare business. Since 1999, as principals of Formation Capital, LLC ("Formation Capital"), Steve Fishman and Arnold Whitman have sponsored investments of approximately $2.2 billion of equity in 36 transactions in healthcare services companies and senior housing real estate, including seven platform healthcare services companies. In addition to Formation Capital s principal investing activities, its subsidiary Formation Healthcare Group provides consulting services to long-term care and senior housing operators. Since 2009, as principal of Shelbourne Capital LLC ("Shelbourne Capital"), Joseph Fox has invested in 25 transactions representing over $700 million of total capitalization, most of which were undertaken in partnership with the principals of Formation Capital. Of these transactions, ten were senior living development projects with a total development capitalization of over $250 million. Additionally, over the last two years, members of our management team have evaluated over 100 healthcare transactions and have invested more than $300 million of equity annually. Over the course of their careers, each with over 30 years of experience, the members of our management team and their affiliates have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities including transactions that are not broadly marketed. We believe our management team has the skills and experience to identify, evaluate and consummate a business combination and is positioned to assist businesses we acquire. However, our management team s network and investing and operating experience do not guarantee a successful initial business combination. The members of our management team are not required to devote any significant amount of time to our business and are concurrently involved with other businesses. There is no guarantee that our current officers and directors will continue in their respective roles, or in any other role, after our initial business combination, and their expertise may only be of benefit to us until our initial business combination is completed. Past performance by our management team is not a guarantee of success with respect to any business combination we may consummate or that we will be able to locate a suitable candidate for our initial business combination. Business Strategy Our acquisition and value creation strategy will be to identify, acquire and, after our initial business combination, assist in building a company in the healthcare industry that complements the investment and operational experience of our management team. Our acquisition strategy will leverage our team s network of potential transaction sources where we believe a combination of our relationships, knowledge and experience in the healthcare industry could enhance a target business prospects and value. Healthcare is one of the largest segments of the United States economy and healthcare spending represents a significant and growing portion of the U.S. gross domestic product, or GDP. According to National Health Expenditures data reported by the Centers for Medicare & Medicaid Services ("CMS"), the United States spent $3.0 trillion on healthcare in 2014, accounting for 17.5% of GDP. According to CMS, the projected average annual growth of healthcare spending from 2014 through 2024 is 5.8%, which is 1.1% greater than the expected average annual GDP growth per year over the same period. By 2024, overall U.S. healthcare spending is expected to reach $5.4 trillion and represent 19.6% of GDP. 2 Our management believes that, as a result of rapid transformation and continued growth in the healthcare industry, there will be attractive acquisition targets within the healthcare sector. We believe that the growth and opportunity in the healthcare industry is driven by several key trends, including: Expanding and Aging Population — The size of the U.S. elderly population, the segment with the largest per capita usage of healthcare services, is increasing more rapidly than the rest of the population. Americans are living longer as life expectancy in the U.S. has increased from 73.7 years in 1980 to 78.8 years in 2011, according to the Centers for Disease Control ("CDC") and Prevention s Health, United States, 2015 report. In addition, the baby boomer generation (born 1946 to 1964) began to reach age 65 starting in 2011, such that now an estimated 10,000 Americans will turn 65 every day through 2029. According to the Federal Interagency Forum on Aging-Related Statistics, citing the U.S. Census Bureau, in 1970 approximately 10% of the U.S. population was aged 65 and older. This number rose to approximately 14.1% of the population by 2013; and by the year 2040, the over-65 segment is expected to account for approximately 21.7% of the population. Seniors disproportionately consume healthcare relative to other age brackets. In 2010, U.S. seniors age 65 and older represented just 13.1% of the population, but accounted for 33.9% of national health expenditures. According to the Congressional Budget Office ("CBO"), medical care for someone over 65 is three to five times more costly than providing care for someone under 65. In addition, the number of prescription medications individuals are using in the U.S. is increasing as the number of medication therapies rise, the population ages and chronic diseases become more prevalent. According to the CDC, the percentage of seniors taking three or more prescriptions increased from 51.8% in the period of 1999 to 2002 to 64.8% in the period from 2009 to 2012. The growth of the elderly population is expected to be a major contributor to increasing levels of expenditures for healthcare products and services. We intend to target companies that may benefit from this trend. Changes in Healthcare Laws and Regulations — Our management believes significant business opportunities have been created by recent legislation, chiefly the Patient Protection and Affordable Care Act ("ACA"), which have greatly expanded access to care and fueled innovation and change by driving a shift from fee-for-service to a value-based care reimbursement model. According to HHS, 17.6 million uninsured people have gained health insurance coverage since the passage of the ACA, as of September 2015. The CBO estimates there were approximately 301 million people with some form of health insurance coverage (Medicare, Medicaid or commercial) in 2014 and that number is expected to reach 351 million by 2020. In January 2015 the U.S. Department of Health and Human Services ("HHS") set a goal of tying 90% of all traditional Medicare payments to quality or value by 2018, which has driven the shift to value-based healthcare. Both federal and state governments are actively promoting value-based payment models through government-sponsored programs such as Medicare Advantage, Medicare Shared Savings Program, Accountable Care Organizations ("ACOs"), managed Medicaid plans and bundled payment models. These models shift the incentives of healthcare organizations away from volume and utilization, toward quality and value, increasing the importance and relevance of data on clinical and quality outcomes, resource utilization and individualized patient information. Additional recent laws have made further key changes to the U.S. healthcare industry and their impact is increasingly felt across a shifting landscape. The HITECH Act, an element of the American Recovery and Reinvestment Act ("ARRA") or stimulus program in 2009, devoted $25 billion to the adoption of electronic health records ("EHR") and digitization of patient data, a key driver of analytics and data management platforms today. The HITECH Act helped accelerate EHR adoption for office-based physicians, which nearly doubled from 42.0% in 2008 to 82.8% in 2014. The ARRA also included an additional $130 billion to support health research, 3 promote prevention and wellness initiatives and build hospitals and community health centers; the Deficit Reduction Act of 2005 required the Office of Inspector General to identify medical conditions that are high cost or high value, or both; and the American Taxpayer Relief Act of 2012 funded the $30 billion "doc-fix" by reducing hospital spending and made several coding and documentation changes. As a result of these and other changes in regulation, there is an increasing pressure on healthcare organizations to reduce costs and increase quality, which our management believes will help increase the demand for healthcare services and reward the most efficient service providers. We intend to target companies which may benefit from these trends. Fragmentation — Healthcare services are locally delivered and locally focused, which makes the industry very fragmented by definition. There are more than 780,000 healthcare companies in the United States alone, employing more than 16.7 million people, according to the U.S. Census Bureau. Our management believes the fragmentation of the healthcare industry provides significant opportunities for industry consolidation. Aggregating smaller companies offers the potential to leverage economies of scale, distribution capabilities, corporate efficiency and increased capital resources. We believe that fragmentation in the healthcare industry may provide us with attractive platform acquisition targets with significant future consolidation opportunities. Rise of Consumerism in Healthcare — Consumers today are challenged to make better-informed healthcare decisions and healthier lifestyle choices as they increasingly bear more personal financial responsibility for their healthcare costs under increasingly restricted networks and high-deductible health plans. According to the Kaiser Family Foundation, health insurance deductibles rose more than six times faster than wage increases from 2010 to 2015. We believe this shift in financial responsibility has made direct consumer spending the fastest-growing segment of healthcare costs in the United States. As consumers shoulder more financial responsibility for their care, they also gain the benefit of having more control over their healthcare purchasing decisions. In this context, the availability and reliability of cost and quality information has become increasingly important. We believe that this trend will drive growth in certain sectors of healthcare and may provide for attractive potential acquisition targets. Competitive Strengths We believe we have the following competitive strengths: Management Operating and Investing Experience. Our executive officers have significant experience in sourcing, acquiring and selling private and public companies in a number of businesses in various industries and particular expertise in healthcare services. Furthermore, our management team has extensive experience working together closely. We believe that the combination of experience and background of our management team, as described below, will enable us to identify, attract, and then significantly improve the value of potential target businesses. Further background on our executive officers is included in this prospectus under "Management." Steve Fishman, CEO Over 30 years of experience in the healthcare industry in the areas of operations, health insurance programs, managed care solutions, business development and investments Co-Founder, Co-Chairman and President of Formation Capital since 1999, during which time Formation Capital has sponsored investments of over $2.2 billion equity in transactions valued at over $5.6 billion, comprising approximately 50,000 seniors housing beds, in healthcare services and senior housing companies 4 In April 2011, led the sale of the real estate assets of Genesis HealthCare to Health Care REIT for $2.4 billion In 2014, led Formation Capital and partner efforts to acquire the third largest senior housing company in the UK, HC-One Chairman of Genesis HealthCare (NYSE: GEN) since February 2015 Prior to founding Formation Capital, spent 20 years as a CPA and management consultant serving the healthcare and real estate industries Joseph Fox, President Over 30 years of experience in real estate acquisitions and asset management, having completed nearly $1.5 billion of real estate transactions Co-Founding and Managing Partner of Shelbourne Capital. As head of Shelbourne Capital, has partnered with affiliates of Formation Capital in over $250 million of healthcare real estate transactions as a principal since April 2009 Former Partner and Global Head of Real Estate at Claret Capital, a private investment firm based in Dublin, Ireland Extensive real estate owner/operator background, having built operating partner platform at Pitcairn Properties where he was responsible for all acquisition activity within the company, growing the portfolio from $300 million to nearly $1.1 billion in assets under management from 2003 to 2008 Prior to Pitcairn Properties, 17 years with CB Richard Ellis (CBRE), focusing on commercial real estate transactions Arnold Whitman, Chairman Over 30 years of experience in the healthcare and seniors housing industry Co-Founder and Co-Chairman of Formation Capital since 1999 Partner in Aging 2.0, a consortium of healthcare services and technology companies focused on innovation and technology targeting the senior market. Aging 2.0 connects, educates and supports innovators, cultivating a robust ecosystem of entrepreneurs, technologists, designers, investors, long-term care providers and seniors themselves Current board member and Chairman Emeritus of the National Investment Center for Seniors Housing and Care Industries ("NIC") Principal in Primecare Properties, one of the first providers of assisted living facilities Serves on the executive board of the American Seniors Housing Association Board member of Genesis HealthCare Inc., Care Institute Group, Inc., and Trident USA Health Services ("Trident") Executive Board, American Seniors Housing Association (ASHA) Board Member, Care Institute Group We believe that this breadth of experience provides us with a competitive advantage in evaluating businesses and acquisition opportunities in our target industry. Demonstrated Success in Healthcare Services. The experience and expertise of our executive officers has been demonstrated by multiple successful investments where they have unlocked significant value for their businesses and investors, creating market leaders in numerous sectors of healthcare services. 5 Formation Capital was founded in 1999 by Steve Fishman and Arnold Whitman with an exclusive focus on post-acute care and services and senior housing real estate. The firm has sponsored investments of approximately $2.2 billion of equity in 36 transactions since inception. Shelbourne Capital was founded in 2009 with a focus on opportunistically investing in commercial real estate transactions throughout the United States. The firm has invested in transactions representing over $700 million of total capitalization since inception. Selected notable transactions include: Genesis HealthCare Inc. (NYSE:GEN): Acquired by Formation Capital and JER Partners in 2007 for approximately $2.0 billion, Genesis HealthCare is one of the leading post-acute providers in the U.S. and currently operates 475 skilled nursing facilities (SNFs) and 56 assisted living facilities across 34 states, and provides rehabilitation and respiratory therapy to more than 1,700 locations in 45 states and the District of Columbia and China. Following the acquisition, EBITDA at Genesis grew 15% per annum between 2007 and 2011 and in 2011 Formation Capital led the sale of the real estate assets to Health Care REIT for $2.4 billion, while retaining control of the company until Genesis went public TridentUSA: Acquired by a Formation Capital affiliate and Audax Group in July 2013, TridentUSA is the leading national provider of bedside diagnostics, laboratory services and hospice care in the U.S., providing services to more than 12,000 post-acute facilities across 43 states, including more than 7,000 SNFs and 1.5 million beds Hospice Compassus: Acquired by a Formation Capital affiliate in November 2014, Hospice Compassus is one of the nation s largest private independent providers of community-based hospice and palliative care services with more than 150 locations across 31 states Extendicare Inc.: Acquired by a Formation Capital affiliate in July 2015 for $870 million, Extendicare is a senior care owner and operator, consisting of 158 senior care facilities across 12 states Senior Assisted Living Development Portfolio: Affiliates of Shelbourne Capital and Formation Capital formed a joint venture to develop upscale private pay senior assisted and independent living communities. The team developed ten communities with over 1,000 units, of which seven communities were leased up and sold to major institutions. Value Creation for Investors. We believe there are great investment opportunities in the Senior Care industry. In our opinion, the two main drivers for these opportunities are the demographic expansion and the transformation of the U.S. healthcare system from fee-for-service or episodic delivery to value-based or preventive care approach. This shift in the healthcare system has resulted in the focus on preventive approaches to chronic illness, hospitalization and end of life costs which today are dollars primarily consumed by seniors. We believe the need for new programs, products and businesses to address this new system offers an opportunity for an investment group with extraordinary experience, relationships and reaches into this specific market, which we believe we bring to the table. Our Board of Directors. We have assembled a group of independent directors who will bring us public company governance, executive leadership, operations oversight, private equity investment management and capital markets experience. Our Board members have extensive experience, having served as directors, CEOs, CFOs or in other executive and advisory capacities for numerous publicly-listed and privately-owned companies and private equity firms. Our directors have experience with acquisitions, divestitures and corporate strategy and implementation, which we believe will be of significant benefit to us as we evaluate potential acquisition or merger candidates as well as following the completion of our initial business combination. 6 Established Deal Sourcing Network. As a result of their extensive experience in the healthcare services industry, our management team members have developed a broad array of contacts in the industry. We believe that these contacts will be important in generating acquisition opportunities for us and potential targets will be attracted to our management s ability to influence a target s future growth and profitability through their network and relationships. For example, our investments in the healthcare services market represent the ability to reach more than 13,000 facilities and over 1.5 million beds throughout the United States. Potential targets may benefit by selling services or products to these or similar companies with which we have a relationship. Strong Financial Position and Flexibility. With a trust account initially in the amount of $150,000,000 and a public market for our common stock, we offer a target business a variety of options to facilitate a future business transaction and fund the growth and expansion of business operations. Because we are able to consummate an initial business transaction using our capital stock, debt, cash or a combination of the foregoing, we have the flexibility to design an acquisition structure to address the needs of the parties. We have not, however, taken any steps to secure third party financing and would only do so simultaneously with the consummation of our initial business transaction. Accordingly, our flexibility in structuring an initial business transaction may be constrained by our ability to arrange third-party financing, if required. Status as a Public Company. We believe our structure will make us an attractive business transaction partner to prospective target businesses. As an existing public company, we will offer a target business an alternative to the traditional initial public offering through a merger or other business transaction with us. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock. Once public, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders interests than it would as a private company. We believe that being a public company can also augment a company s profile among potential new customers and vendors and aid it in attracting and retaining talented employees. Acquisition Criteria We have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to seek to acquire companies that we believe: Healthcare Services Industry Targets. We will seek to acquire one or more businesses involved in the healthcare services industry. We believe our management s significant operating and deal-making experience and relationships with companies in this space will give us a number of competitive advantages and will present us with a substantial number of potential business combination targets. The factors we will consider include growth prospects, competitive dynamics, opportunities for consolidation and need for capital investment. Established Companies with Proven Revenue and Earnings Growth or Potential for Revenue and Earnings Growth. We will seek to acquire one or more established businesses that have achieved, or have the potential for, significant revenue and earnings growth through a combination of organic growth, synergistic add-on acquisitions, new markets and geographies, expense reduction and increased operating leverage. We do not intend to acquire start-up companies or companies that are not profitable. Experienced Management Team. We will seek to acquire one or more businesses with an experienced management team that provides a platform for us to further develop the acquired business s management capabilities. We will seek to partner with a potential target s management team and expect that the operating and financial abilities of our executive team and board will complement their own capabilities. 7 Strong Competitive Position. We intend to focus on acquisition targets that have a leading, growing or niche market position in their respective industries. We will analyze the strengths and weaknesses of target businesses relative to their competitors. We will seek to acquire one or more businesses that demonstrate advantages when compared to their competitors, which may help to protect their market position and profitability. Opportunities for add-on acquisitions. We will seek to acquire one or more businesses or assets that we can grow both organically and through acquisitions. In addition, we believe that our ability to source proprietary opportunities and execute transactions will help the business we acquire grow through acquisition, and thus serve as a platform for further add-on acquisitions. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC. Our Acquisition Process In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us. We will also utilize our operational and capital planning experience. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, or from an independent accounting firm, that our initial business combination is fair to our company from a financial point of view. Members of our management team may directly or indirectly own our common stock and warrants following this offering, and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. We currently do not have any specific business combination under consideration. Our officers and directors have not individually identified or considered a target business. Neither have they had any substantive discussions regarding possible target businesses among themselves or with our underwriters or other advisors. Certain members of our management team are employed by certain affiliates of our sponsor. Our sponsor and its affiliates are continuously made aware of potential business opportunities, one or more of which we may desire to pursue, for a business combination, but we have not (nor has anyone on our behalf) contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to a business combination transaction. We have not (nor have any of our agents or affiliates) been approached by any candidates (or representative of any candidates) nor had substantive discussions with respect to a possible acquisition transaction with us and we will not consider a business combination with any company with whom our sponsor has had substantive discussions on our behalf, as an acquisition candidate, prior to completion of this offering. Additionally, we have not, nor has anyone on our behalf, taken any substantive measure, directly or indirectly, to identify or locate any suitable 8 acquisition candidate, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate. Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entities, and may only decide to present it to us if such entities reject the opportunity and consummating the same would not violate any restrictive covenants to which they are subject. Such officers or directors shall also have the right in the absence of such fiduciary or contractual obligations to offer certain business opportunities to such entities before presenting them to us and, in some instances, may be required to present such opportunities, including in certain instances business opportunities in the healthcare industry, in their entirety to such other entities before having the ability to offer all or any part of such opportunities to us. In addition, it is possible that certain transactions may be precluded as a result of radius restrictions which are applicable to entities affiliated with one or more of our officers and directors. We do not believe, however, that the fiduciary duties or contractual obligations or other rights of our officers or directors will materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Our sponsor, executive officers, and directors have agreed, pursuant to a written letter agreement, not to participate in the formation of, or become an officer or director of, any other special purpose acquisition companies with a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within 24 months after the closing of this offering. None of our officers or directors has been involved with any blank check companies or special purpose acquisition companies in the past. Initial Business Combination The NASDAQ rules require that our initial business combination be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, with respect to the satisfaction of such criteria. Our stockholders may not be provided with a copy of such opinion and will not be able to rely on such opinion. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination, although there is no assurance that will be the case. We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the outstanding equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company 9 under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If our initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses. We may issue additional equity or debt securities in order to complete a business combination. The issuance of additional shares of Class A common stock or preferred stock could, among other things, dilute the interest of our stockholders, and the issuance of debt securities could, among other things, affect our leverage and financial condition and thus negatively impact our stockholders investment in us. In order to effectuate a business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified their other governing instruments. We cannot assure you that we will not seek to amend our charter or our other governing instruments in order to effectuate our initial business combination. Prior to the date of this prospectus, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination. Corporate Information We are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. We will remain an emerging growth company until the earlier of: the last day of the fiscal year: o following the fifth anniversary of the completion of this offering, o in which we have total annual gross revenue of at least $1.0 billion, or o in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th; and the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to "emerging growth company" shall have the meaning associated with it in the JOBS Act. Our executive offices are located at 595 East Lancaster Avenue, Suite 300, Radnor, PA 19087 and our telephone number is (610) 229-9070. 10 The Offering In making your decision whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section below entitled "Risk Factors" beginning on page 34 of this prospectus. Securities offered 15,000,000 units, at $10.00 per unit, each unit consisting of: one share of Class A common stock; and one-half of one warrant to purchase one share of Class A common stock. NASDAQ symbols Units: "IGLEU" Class A Common Stock: "IGLE" Warrants: "IGLEW" Trading commencement and separation of Class A common stock and warrants The units will begin trading promptly after the date of this prospectus. The Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless the representatives of the underwriters inform us of their decision to allow earlier separate trading. Separate trading will be subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant. Separate trading of the Class A common stock and warrants is prohibited until we have filed a Current Report on Form 8-K In no event will the Class A common stock and warrants be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. All units will separate immediately upon consummation of the business combination. 11 Units: Number outstanding before this offering 0 Number outstanding after this offering 15,000,000(1) Common stock: Number outstanding before this offering 4,312,500(2)(4) Number outstanding after this offering 18,750,000(1)(3)(4) Warrants: Number of private placement warrants to be sold in a private placement simultaneously with this offering 5,475,000(1) Number of warrants to be outstanding after this offering and the private placement 12,975,000(1) Exercisability Each warrant offered in this offering is exercisable to purchase one share of our Class A common stock. Only whole warrants may be exercised. No fractional warrants will be issued upon separation of the units. Only whole warrants will trade. A holder of an odd number of units will not be able to exercise any one-half of one warrant unless it is combined with another one-half of one warrant. We structured each unit to contain one-half of one warrant to purchase one whole share in order to reduce the dilutive effect of the warrants upon completion of a business combination as compared to units issued by some blank check companies that each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. ____________ (1) Assumes no exercise of the underwriters over-allotment option and the forfeiture by our initial stockholder of 562,500 founder shares. (2) Consists solely of founder shares and includes up to 562,500 shares that are subject to forfeiture by our initial stockholder depending on the extent to which the underwriters over-allotment option is exercised. Except as otherwise specified, the rest of this prospectus has been drafted to give effect to the full forfeiture of these 562,500 shares. (3) Consists of 15,000,000 public shares and 3,750,000 founder shares. (4) Founder shares are classified as shares of Class F common stock, which shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as described below adjacent to the caption "Founder shares conversion and anti-dilution rights." 12 Exercise price $11.50 per whole share, subject to adjustments as described in this prospectus. Exercise period The warrants will become exercisable on the later of: 30 days after the completion of our initial business combination, and 12 months from the closing of this offering; provided in each case that we have an effective registration statement under the Securities Act covering the issuance of shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of our initial business combination, we will use our best efforts to file with the SEC and have an effective registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the warrants. We have also agreed to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. However, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act. If we so elect to do so, we will not be required to file or maintain in effect a registration statement. The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. Upon the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account. Redemption of warrants Once the warrants become exercisable, we may redeem the outstanding warrants (except as described in this prospectus with respect to the private placement warrants): in whole and not in part; at a price of $0.01 per warrant; 13 upon a minimum of 30 days prior written notice of redemption, which we refer to as the 30-day redemption period; and if, and only if, the last reported sale price of our Class A common stock equals or exceeds $24.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. We will not redeem the warrants unless a registration statement under the Securities Act covering the issuance of shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a "cashless basis." In determining whether to require all holders to exercise their warrants on a "cashless basis," our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Please see the section entitled "Description of Securities — Warrants — Public Stockholders Warrants" for additional information. None of the private placement warrants will be redeemable by us so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. 14 Founder shares In August 2016, our sponsor purchased an aggregate of 4,312,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares of common stock upon completion of this offering. Prior to the initial investment in the company of $25,000 by our sponsor, the company had no assets, tangible or intangible. The purchase price of the founder shares was determined by dividing the amount of cash contributed to us by the number of founder shares issued. On October 28, 2016, our sponsor transferred 18,750 founder shares to each of our independent director, at their original purchase price. As such, our initial stockholder will collectively own 20% of our issued and outstanding shares of common stock after this offering (assuming it does not purchase units in this offering). If we increase or decrease the size of the offering, we will effect a stock dividend or share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class F common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of founder shares by our initial stockholder at 20% of our issued and outstanding shares of our common stock upon the consummation of this offering. Up to 562,500 founder shares are subject to forfeiture by our initial stockholder depending on the extent to which the underwriters over-allotment option is exercised. The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, except that: the founder shares are subject to certain transfer restrictions, as described in more detail below, our initial stockholder, officers, directors and director nominees have entered into letter agreements with us, pursuant to which they have agreed: o to waive their redemption rights with respect to their founder shares and public shares, as applicable, in connection with the completion of our initial business combination, and o to waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame). if we submit our initial business combination to our public stockholders for a vote, our initial stockholder has agreed to vote its founder shares and any public shares it may acquire during or after this offering in favor of our initial business combination; and 15 the founder shares are automatically convertible into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in more detail below. Transfer restrictions on founder shares Our initial stockholder has agreed not to transfer, assign or sell any of its founder shares until the earlier to occur of: one year after the completion of our initial business combination; and the date on which we complete a liquidation, merger, stock exchange or other similar transaction after our initial business combination that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property (except as described herein under "Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants"). Any permitted transferees would be subject to the same restrictions and other agreements of our initial stockholder with respect to any founder shares. We refer to such transfer restrictions throughout this prospectus as the lock-up. Notwithstanding the foregoing, if the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, the founder shares will be released from the lock-up. Founder shares conversion and anti-dilution rights We have issued 4,312,500 shares of Class F common stock, par value $0.0001 per share. The shares of Class F common stock will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as provided in this prospectus. In the case that additional shares of Class A common stock, or equity-linked securities, which are securities that are convertible into or exchangeable for equity in the company, are issued or deemed issued in excess of the amounts offered in this prospectus in connection with the closing of our initial business combination, the ratio at which shares of Class F common stock shall convert into shares of Class A common stock will be adjusted. The number of shares of Class A common stock issuable upon conversion of all shares of Class F common stock will equal, in the aggregate, on an as-converted basis, 20% of the total number of all shares of common stock outstanding upon the completion of this offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with our initial business combination. This excludes any shares or equity-linked securities issued, or to be issued, to any seller in our initial business combination or pursuant to warrants issued to our sponsor. 16 Voting Holders of the Class F common stock and holders of the Class A common stock will vote together as a single class on all matters submitted to a vote to securityholders, except as required by law. Each share of common stock shall have one vote. Private placement warrants Our sponsor has committed, pursuant to a written agreement, to purchase an aggregate of 5,475,000 private placement warrants (or 6,037,500 if the over-allotment option is exercised in full), each exercisable to purchase one share of our Class A common stock at $11.50 share, at a price of $1.00 per warrant ($5,475,000 in the aggregate or $6,037,500 in the aggregate if the over-allotment option is exercised in full) in a private placement that will occur simultaneously with the closing of this offering. The purchase price of the private placement warrants will be added to the proceeds from this offering to be held in the trust account. If we do not complete our initial business combination within 24 months from the closing of this offering, the proceeds of the sale of the private placement warrants will be used to fund the redemption of our public shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless. The private placement warrants will not be redeemable by us so long as they are held by their initial purchasers or their permitted transferees (except as described below under "Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants"). If the private placement warrants are held by holders other than their initial purchasers or their permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Our sponsor, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis. Transfer restrictions on private placement warrants The private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination. 17 Proceeds to be held in trust account The NASDAQ rules provide that at least 90% of the gross proceeds from this offering and the private placement be deposited in a trust account. Of the $155.5 million in gross proceeds we will receive from this offering and the sale of the private placement warrants described in this prospectus, or approximately $178.5 million if the underwriters over-allotment option is exercised in full, $150.0 million ($10.00 per unit), or $172.5 million ($10.00 per unit) if the underwriters over-allotment option is exercised in full, will be deposited into a segregated trust account located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and $0.75 million will be used to pay expenses in connection with the closing of this offering and for working capital following this offering. The proceeds to be placed in the trust account include $5,025,000 (or up to $5,812,500 if the underwriters over-allotment option is exercised in full) in deferred underwriting commissions. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the proceeds from this offering will not be released from the trust account until the earliest of: the completion of our initial business combination, the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, and the redemption of all of our public shares if we are unable to complete our initial business combination within 24 months from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders. Anticipated expenses and funding sources Unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use, except the withdrawal of interest to pay taxes. Based upon current interest rates, we expect the trust account to generate approximately $60,000 of interest annually (assuming an interest rate of 0.02% per year). Unless and until we complete our initial business combination, we may pay our expenses only from: the net proceeds of this offering not held in the trust account, which will be approximately $750,000 in working capital after the payment of approximately $750,000 in expenses relating to this offering; and 18 any loans or additional investments from our sponsor, members of our management team or their affiliates or other third parties, although they are under no obligation to advance funds or invest in us, and provided any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of a business combination. Conditions to completing our initial business combination There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination. The NASDAQ rules require that our initial business combination be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination, although there is no assurance that will be the case. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm. Our stockholders may not be provided with a copy of such opinion and will not be able to rely on such opinion. We will complete our initial business combination only if the post-transaction company in which our public stockholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test, provided that in the event that the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses. 19 Permitted purchases of public shares or public warrants by our affiliates If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial stockholder, directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, other than as expressly stated in this prospectus, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Subsequent to the consummation of this offering, we will adopt an insider trading policy which will require insiders to: refrain from purchasing shares or warrants during certain blackout periods and when they are in possession of any material non-public information, and to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Our initial stockholder, directors, executive officers, advisors or their affiliates will not make any purchases if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. See "Proposed Business — Permitted purchases of our securities" for a description of how our sponsor, directors, officers, advisors or any of their affiliates will select which stockholders to purchase securities from in any private transaction. 20 Redemption rights for public stockholders upon completion of our initial business combination We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination. The redemption will be at a per-share price that is payable in cash and equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described in this prospectus. The amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our initial stockholder has entered into a letter agreement with us, pursuant to which it has agreed to waive its redemption rights with respect to its founder shares and any public shares it may acquire after this offering in connection with the completion of our initial business combination. Manner of conducting redemptions We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either: in connection with a stockholder meeting called to approve the business combination, or by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirement or we choose to seek stockholder approval for business or other legal reasons. 21 If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation: conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. Upon the public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s "penny stock" rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination. If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will: conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and file proxy materials with the SEC. 22 If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. A quorum for a stockholders meeting to obtain stockholder approval will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholder will count towards this quorum and have agreed to vote its founder shares and any public shares purchased during or after this offering in favor of our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholder, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether it votes for or against the proposed transaction. Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s "penny stock" rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, our initial business combination may require: cash consideration to be paid to the target or its owners, cash to be transferred to the target for working capital or other general corporate purposes, or the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of our initial business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of common stock submitted for redemption will be returned to the holders thereof. 23 Limitation on redemption rights of stockholders holding more than 20% of the shares sold in this offering if we hold stockholder vote Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a "group" (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the shares sold in this offering. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 20% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders ability to redeem to no more than 20% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders ability to vote all of their shares (including all shares held by those stockholders that hold more than 20% of the shares sold in this offering) for or against our initial business combination. 24 Redemption rights in connection with proposed amendments to our certificate of incorporation Certain blank check companies have a provision in their charter which prohibits the amendment of certain charter provisions. Our amended and restated certificate of incorporation will provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of this offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described in this prospectus) may be amended if approved by holders of a minimum of 65% of our common stock, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of a minimum of 65% of our common stock. In all other instances, our amended and restated certificate of incorporation will provide that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholder, who will beneficially own 20% of our common stock upon the closing of this offering (assuming it does not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner it chooses. Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price which is payable in cash and equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. Our initial stockholder have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination. 25 Release of funds in trust account on closing of our initial business combination On the completion of our initial business combination, all amounts held in the trust account will be released to us. We will use these funds to pay amounts due to any public stockholders who exercise their redemption rights as described above under "Redemption rights for public stockholders upon completion of our initial business combination," to pay the underwriters their deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. Redemption of public shares and distribution and liquidation if no initial business combination Our sponsor, executive officers, and directors have agreed that we will have only 24 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial business combination within such 24-month period, we will: cease all operations except for the purpose of winding up, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price which is payable in cash and equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 24-month time period. 26 Our initial stockholder have entered into a letter agreement with us, pursuant to which it has waived its rights to liquidating distributions from the trust account with respect to its founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering. However, if our initial stockholder acquires units or public shares in or after this offering, it will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time frame. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the trust account in the event we do not complete our initial business combination within 24 months from the closing of this offering and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price which is payable in cash and equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s "penny stock" rules). Limited payments to insiders There will be no finder s fees, reimbursements or cash payments made to our sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, other than the following payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: Repayment of up to an aggregate of $150,000 in loans made to us by our sponsor to cover offering-related and organizational expenses; Payment to an affiliate of our sponsor of a total of $10,000 per month for office space, utilities and secretarial support; 27 Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Audit Committee Prior to the effectiveness of the registration statement of which this prospectus forms a part, we will have established and will maintain an audit committee, (which will be composed entirely of independent directors) to among other things, monitor compliance with the terms relating to this offering. If any noncompliance is identified, then the audit committee will be charged with the responsibility to immediately take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section entitled "Management — Committees of the Board of Directors — Audit Committee." Conflicts of Interest Affiliates of our sponsor manage several investment vehicles. Funds managed by our sponsor or its affiliates may compete with us for acquisition opportunities. If these funds or their affiliates decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within our sponsor may be suitable for both us and for a current or future fund of our sponsor or affiliates of our sponsor and may be directed to such investment vehicle rather than to us. Neither our sponsor nor members of our management team who are also employed by certain affiliates of our sponsor have any obligation to present us with any opportunity for a potential business combination of which they become aware. Our sponsor and/or our management, in their capacities as officers of our sponsor or in their other endeavors, may choose to present potential business combinations to the related entities described above, current or future investment vehicles of our sponsor or affiliates of our sponsor, or third parties, before they present such opportunities to us. 28 Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entities, and may only decide to present it to us if such entities reject the opportunity and consummating the same would not violate any restrictive covenants to which they are subject. Such officers or directors shall also have the right in the absence of such fiduciary or contractual obligations to offer certain business opportunities to such entities before presenting them to us and, in some instances, may be required to present such opportunities, including in certain instances business opportunities in the healthcare industry, in their entirety to such other entities before having the ability to offer all or any part of such opportunities to us. In addition, it is possible that certain transactions may be precluded as a result of radius restrictions which are applicable to entities affiliated with one or more of our officers and directors. We do not believe, however, that the fiduciary duties or contractual obligations or other rights of our officers or directors will materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Indemnity Our sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: $10.00 per public share, or such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under the indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. 29 Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our sponsor s only assets are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. We believe the likelihood of our sponsor having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. 30 Risks We are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see "Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419." You should carefully consider these and the other risks set forth in the section entitled "Risk Factors" beginning on page 34 of this prospectus. 31
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001676479_capstar_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001676479_capstar_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001676479_capstar_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001679629_koo-toor_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001679629_koo-toor_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7c5078404b7af8b8d63e7b8f5ad0c0e614f6f224
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001679629_koo-toor_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights material information contained in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements. You should also review the other available information referred to in the section entitled Where You Can Find More Information in this prospectus and any amendment or supplement hereto. We are a development stage company with no earnings focusing on early-stage business activities. This fact may impose some limitations on our shareholders' ability to re-sell their shares in our company. Accordingly, investors should consider our shares to be a high-risk illiquid investment (see "Risk Factors" section). We are not a blank check company and have no plans or intentions to engage in a business combination following this offering. Company Overview Koo Toor Design, Inc. (the Company ) was incorporated in the State of Nevada on May 4, 2016. We are a recently organized company that engages in the sale of furniture and home accessories. With funding we intend to sell furniture and accessories from storefront locations, but to begin, we plan to make house calls, and sell online. Our website is http://kootoor.design. Our plan is to have our first store location open in Roseville, California with plans to open up to 10 stores in California over time. On May 4, 2016, Mr. Ruben Gonzales, our Company s founder, was appointed President and Director of the Company. Mr. Gonzales is currently our sole officer and director of the Company. Our headquarters are located at 116 Grove Street Roseville, CA 95678. Ruben Gonzales, our CEO with over 25 years of furniture industry experience, has signed a contract with Z3 LLC operating as Calvin Klein Furniture, granting us the right to sell their Curator collection of furniture in California. On August 10, 2016 we signed an amendment to the original contract, revising some of the terms to reduce the required operational targets in the first twelve months after the initial storefront is opened. Mr. Gonzales will initially launch the business using his personal contacts and word of mouth to make house calls to introduce the Calvin Klein Collection. The website will also function as a point of sale. We intend to eventually open store fronts in California and sell modern contemporary furniture. Although sales of home furniture is not new, our business model is based on the premise that customers will be drawn to our products because of the modern contemporary style, as well as the fact that customers can select their fabric or leather from our assortment of upholstery and/or they can send their very own fabric or leather to the Calvin Klein factory for custom production. In addition, every piece of Calvin Klein furniture has a life time guarantee on its frame, construction, and seaming. We feel quality of service in the furniture business is lacking, and therefore one of the foundations of our business is to focus on service. We believe that by providing free in home design services, that offer a client the opportunity to purchase furniture that is the perfect size and color at a reasonable price point will draw clients to our business. We will be selling within the niche of modern contemporary furniture. We were only recently incorporated in 2016, and we have launched our website. However, we have not commenced substantive operations, thus we believe that conducting this Offering will allow the Company added flexibility to raise capital in today's financial climate. There can be no assurance that we will be successful in our attempt to sell 100% of the shares being registered hereunder; however, we believe that investors in today's markets demand more transparency and by our registering this Offering and becoming a reporting company, we will be able to capitalize on this fact. While we believe that our limited reporting requirements will satisfy most investors seeking transparency in any potential investment, we still caution that simply because we have a registration statement declared effective, the Company will not become a fully reporting company, but rather, we will be only subject to the reporting requirements of Section 15(d) of the Securities Exchange Act of 1934. Accordingly, except during the year that our registration statement becomes effective, these reporting obligations may be automatically suspended under Section 15(d) if we have less than 300 shareholders at the beginning of our fiscal year and our required disclosure is less extensive than the disclosures required of smaller reporting companies. For example, we are not subject to disclose in our Form 10-K risk factors, unresolved staff comments, or selected financial data, pursuant to Items 1A, 1B, 6, respectively. Since inception, our operations have consisted of securing our contract and an amendment thereto with Z3 LLC operating as Calvin Klein Furniture, incorporating our Company and formulating our business plan, launching our website, and reaching out to our network in Sacramento to form a potential client list we can begin to call and introduce our products. The Company intends to begin substantive operations within 2-3 months after we obtain a Notice of Effectiveness of this Offering. We hope to realize our full plan of operations by raising money through the sale of our securities, as contemplated within this Offering. We believe that if we are able to raise the full amount of funds contemplated herein, we would be able to fully launch our Company and properly market our furniture. We will design a full marketing strategy to gain store awareness. Our sole officer and director has been involved in the furniture industry for over 25 years, and has the professional experience in the start up and running of such a company. He is experienced in business development, strategic planning, management of staff and operations. He has managed several furniture business start-ups, operated numerous furniture store businesses, and has been recruited by furniture store owners to turn around their stores and sales. We have retained one qualified website developer who has built and is maintaining our website. We also plan to hire qualified designers and sales representatives if we are successful in raising capital through this Offering. We do not have any written agreements regarding the retention of any employees other than a management consulting contract with our sole officer and director, Ruben Gonzales. Although the Company has no market for its common stock, management believes that the Company will meet all requirements to be quoted on the OTC Pink, and even though the Company s common stock will likely be a penny stock, becoming a reporting company will provide us with enhanced visibility and give us a greater possibility to provide liquidity to our shareholders. We are currently a recently organized company and to date have not recorded any revenues. We have received a small order from a single customer for furnishings as at the date of this filing for which a deposit has been received and the order is in process. Accordingly, our independent registered public accountants have issued a comment regarding our ability to continue as a going concern (please refer to the footnotes to the financial statements). Until such time that we are able to establish a consistent flow of revenues from our operations which is sufficient to sustain our operating needs, management intends to rely primarily upon debt financing to supplement cash flows, if any, generated by our products. We will seek out such financing as necessary to allow the Company to continue to grow our business operations, and to cover an estimated further $35,000 in costs associated with being a reporting Company with the Securities and Exchange Commission ("SEC") for the 12 months following receipt of a Notice of Effectiveness for this Offering. All the costs of this Offering are being paid by way of issuance of 3,000,000 shares of the Company s common stock at $.02 per share . The Company has included costs of being a publicly reporting company in its targeted expenses for working capital expenses and intends to seek out reasonable loans from friends, family and business acquaintances if it becomes necessary. At this point we have been funded by our sole officer and director, and have not received any firm commitments or indications from any family, friends or business acquaintances regarding any potential investment in the Company. In addition, we have entered into a services agreement with respect to all costs associated with this Offering as more fully described below. On June 1, 2016, the Company entered into a consulting agreement with a consultant who is in the business of assisting private companies in the process of going public and getting listed on the OTC Markets through the Form S-1 Registration. Under the terms of the consulting agreement, the Consultant shall provide certain services with respect to the Form S-1 Registration Statement from commencement and preparation of the Form S-1 to receipt of Notice of Effectiveness, including retention and payment of the required legal and accounting professionals, and thereafter to work with a market maker to provide a completed and accepted Form 15c2-11 with FINRA, obtain DTC eligibility, a trading symbol and listing on OTC Markets. As compensation under the consulting agreement S-1 Services has been issued 3,000,000 shares of the Company s common stock at $0.02 per share for a value of $60,000. We expect to complete this Registration Statement in the coming months. For purposes of the information provided in this Offering we have assumed that the Offering is fully subscribed and offering costs are being settled by issuance of shares of common stock. Upon obtaining effectiveness, we will conduct the Offering contemplated hereby, and anticipate raising sufficient capital from this Offering to market and grow our Company. We believe that the funds generated from the Offering will provide us with enough proceeds to fund our plan of operations for up to twelve months after the completion of this Offering. In the event we generate nominal revenues, and the maximum amount of funds is not raised, we may still require additional financing to fund our operations past the twelve-month period following the completion of this Offering. While our ability to generate revenue is not correlated directly to the amount of shares sold by us under this Offering, our potential to generate revenue can be affected by our marketing and advertising strategies and the amount of personnel the Company employs. These factors are directly related to the amount of proceeds we receive from this Offering, which corresponds to the number of shares we are successful in selling under this Offering (see Use of Proceeds chart). We believe we can begin generating revenues within the first three months following the successful completion of this Offering. As we are a start-up company, it is unclear how much revenue our operations will generate; however, it is our hope that our revenues will exceed our costs. Our revenues will be impacted by how successful and well targeted the execution of our marketing campaign, the general condition of the economy, and the number of clients we will attract. For a further discussion of our initial operations, plan of operations, growth strategy and marketing strategy see the below section entitled Description of Business . Neither the Company nor Mr. Gonzales or any other affiliated or unaffiliated entity has any plans to use the Company as a vehicle for a private company to become a reporting company once the Company becomes a reporting Company. Additionally, we do not believe the Company is a blank check company as defined in Section a(2) of Rule 419 under the Securities Act of 1933, as amended because the Company has a specific business plan and has no plans or intentions to engage in a merger or acquisition with an unidentified entity. SUMMARY OF THIS OFFERING The Issuer Koo Toor Design, Inc. Securities being offered Up to 30,000,000 shares of Common Stock; our Common Stock is described in further detail in the section of this prospectus titled DESCRIPTION OF SECURITIES Common Stock. Offering Type
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001680228_kaskad_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001680228_kaskad_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..38a629e29e1919d5a55e57cd5c39a0502778ec1e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001680228_kaskad_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY FINANCIAL INFORMATION The tables and information below are derived from our audited financial statements for the period from June 9, 2015(Inception) to May 31, 2016 and for the three months ended August 31, 2016: May 31, 2016 ($) (Audited) Financial Summary Cash and Deposits 2,417 Total Assets 5,884 Total Liabilities 1,168 Total Stockholder s Equity 4,716 Accumulated From June 9, 2015 (Inception) to May 31, 2016 ($) (Audited) Statement of Operations Total Expenses 284 Net Loss for the Period 284 Net Loss per Share 0.00 August 31, 2016 ($) (Unaudited) Financial Summary Cash and Deposits 440 Total Assets 3,933 Total Liabilities 4,300 Total Stockholder s Deficit (367) Three months ended August 31, 2016 ($) (Unaudited) Statement of Operations Total Expenses 6,476 Net Loss for the Period 5,083 Net Loss per Share 0.00
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001680237_china_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001680237_china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..59dc3a53f7313072b73bc3b260439c58c5c00c32
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001680237_china_prospectus_summary.txt
@@ -0,0 +1 @@
+SUMMARY OF PROSPECTUS You should read the following summary together with the more detailed business information, financial statements and related notes that appear elsewhere in this Prospectus. In this Prospectus, unless the context otherwise denotes, references to we, us, our , Jasmin , and Company are to Jasmin Corp. A Cautionary Note on Forward-Looking Statements This Prospectus contains forward-looking statements, which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors, that may cause our industry s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001680525_battlers_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001680525_battlers_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..c5030dd98b3b79736fa733446ec30e6d51857c0f
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001680525_battlers_prospectus_summary.txt
@@ -0,0 +1 @@
+There are no current employment agreements between the company and its officer. Stepan Feodosiadi currently devotes approximately 75% of his time to manage the affairs of the Company. He has agreed to work with no remuneration until such time as the company receives sufficient revenues necessary to provide management salaries. At this time, we cannot accurately estimate when sufficient revenues will occur to implement this compensation, or what the amount of the compensation will be. There are no annuity, pension or retirement benefits proposed to be paid to the officer or director or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any. Director Compensation The following table sets forth director compensation as of September 30, 2016: Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Stepan Feodosiadi -0- -0- -0- -0- -0- -0- -0- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Stepan Feodosiadi is our officer, director, control person and promoter and he shall receive no compensation for the placement of the offering. There is no any promoter(s) of the company other than Mr. Feodosiadi. On July 5, 2016, we issued a total of 4,000,000 shares of restricted common stock to Stepan Feodosiadi in consideration of $4,000. Further, Stepan Feodosiadi has advanced funds to us. As of September 30, 2016, Stepan Feodosiadi advanced us $4,640. Mr. Feodosiadi will not be repaid from the proceeds of this offering. There is no due date for the repayment of the funds advanced by Mr. Feodosiadi. Stepan Feodosiadi will be repaid from revenues of operations if and when we generate significant revenues to pay the obligation. There is no assurance that we will ever generate significant revenues from our operations. The obligation to Mr. Feodosiadi does not bear interest. There is no written agreement evidencing the advancement of funds by Mr. Feodosiadi or the repayment of the funds to Mr. Feodosiadi. We have a verbal agreement with our sole officer and director that, if necessary, he will loan the company funds to complete the registration process. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information concerning the number of shares of our common stock owned beneficially from July 5, 2016 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) our director, and or (iii) our officer. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown. Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percentage Common Stock Stepan Feodosiadi 4,000,000 shares of common stock (direct) 100% 100% (1) A beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. On September 30, 2016, there were 4,000,000 shares of our common stock issued and outstanding. Future sales by existing stockholders A total of 4,000,000 shares of common stock were issued to our sole officer and director, all of which are restricted securities, as defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Securities Act. Under Rule 144, the shares can be publicly sold, subject to volume restrictions and restrictions on the manner of sale. Such shares can only be sold after six months provided that the issuer of the securities is, and has been for a period of at least 90 days immediately before the sale, subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. We are not a shell company within the meaning of Rule 405, promulgated pursuant to the Securities Act, because we do have hard assets and real business operations. Shares purchased in this offering, which will be immediately resalable, and sales of all of our other shares after applicable restrictions expire, could have a depressive effect on the market price, if any, of our common stock and the shares we are offering. There is no public trading market for our common stock. There are no outstanding options or warrants to purchase, or securities convertible into, our common stock. There is one holder of record for our common stock. The record holder is our sole officer and director who own 4,000,000 restricted shares of our common stock. PLAN OF DISTRIBUTION Battlers Corp. has 4,000,000 shares of common stock issued and outstanding as of the date of this prospectus. The Company is registering an additional of 4,000,000 shares of its common stock for sale at the price of $0.02 per share. There is no arrangement to address the possible effect of the offering on the price of the stock. The person offering the securities on your behalf may be deemed to be an underwriter of this offering within the meaning of that term as defined in Section 2(11) of the Securities Act. In connection with the Company s selling efforts in the offering, Mr. Feodosiadi will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the safe harbor provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act ). Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer s securities. Stepan Feodosiadi is not subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. Mr. Feodosiadi will not be compensated in connection with his participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Stepan Feodosiadi is not, nor has he been within the past twelve months, a broker or dealer, and he is not, nor has he been within the past 12 months, an associated person of a broker or dealer. At the end of the offering, Mr. Feodosiadi will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Stepan Feodosiadi will not participate in selling an offering of securities for any issuer more than once every twelve months other than in reliance on Exchange Act Rule 3a4-1(a) (4)(i) or (iii). Stepan Feodosiadi may solicit the investors through personal contact, by telephone or mail/email. He will identify those who might have an interest in purchasing shares among his personal friends and business associates. He will not use any supplemental materials in this regard. Battlers Corp. will receive all proceeds from the sale of the 4,000,000 shares being offered. The price per share is fixed at $0.02 for the duration of this offering. Although our common stock is not listed on a public exchange or quoted over-the-counter, we intend to seek to have our shares of common stock quoted on the Over-the Counter Bulletin Board. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that the market maker will agree to file the necessary documents with FINRA, nor can there be any assurance that such an application for quotation will be approved. However, sales by the Company must be made at the fixed price of $0.02 for up to 240 days from the effective date of this prospectus. The Company s shares may be sold to purchasers from time to time directly by and subject to the discretion of the Company. Further, the Company will not offer its shares for sale through underwriters, dealers, agents or anyone who may receive compensation in the form of underwriting discounts, concessions or commissions from the Company and/or the purchasers of the shares for whom they may act as agents. The shares of common stock sold by the Company may be occasionally sold in one or more transactions; all shares sold under this prospectus will be sold at a fixed price of $0.02 per share. In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; an exemption from such registration or if qualification requirement is available and with which Battlers Corp. has complied. In addition and without limiting the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective. We have no intention of inviting broker-dealer participation in this Offering. Battlers Corp. will pay all expenses incidental to the registration of the shares (including registration pursuant to the securities laws of certain states), which we expect to be $8,000. Procedures for Subscribing If you decide to subscribe for any shares in this offering, you must execute and deliver a subscription agreement; and deliver a check or certified funds to us for acceptance or rejection. All checks for subscriptions must be made payable to Battlers Corp. The Company will deliver stock certificates attributable to shares of common stock purchased directly to the purchasers. Right to Reject Subscriptions We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected with letter by mail within 48 hours after we receive them. Penny Stock Regulations You should note that our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. State Securities - Blue Sky Laws There is no established public market for our common stock, and there can be no assurance that any market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as "Blue Sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue-sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. Accordingly, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time. In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; an exemption from such registration or if qualification requirement is available and with which Battlers Corp. has complied. In addition and without limiting the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective. DESCRIPTION OF SECURITIES GENERAL Our authorized capital stock consists of 75,000,000 shares of common stock, par value $0.001 per share. As of September 30, 2016, there were 4,000,000 shares of our common stock issued and outstanding. Our sole officer and director, Stepan Feodosiadi owns 4,000,000 purchased on July 5, 2016. Stepan Feodosiadi, our sole officer and director will offer our securities to his personal friends and family in Greece and Cyprus and relatives and friends in neighboring countries. We will not utilize advertising or make a general solicitation for our offering, but rather, Mr. Feodosiadi will personally and individually contact each investor. Mr. Feodosiadi has no experience in selling securities to investors. Mr. Feodosiadi will not purchase securities in this offering. COMMON STOCK The following is a summary of the material rights and restrictions associated with our common stock. The holders of our common stock currently have (i) equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of common stock upon liquidation, dissolution or winding up of the affairs of the Company (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. Please refer to the Company s Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company s securities. PREFERRED STOCK We do not have an authorized class of preferred stock. WARRANTS We have not issued and do not have any outstanding warrants to purchase shares of our common stock. OPTIONS We have not issued and do not have any outstanding options to purchase shares of our common stock. CONVERTIBLE SECURITIES We have not issued and do not have any outstanding securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock. DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. INDEMNIFICATION Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify his against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada. Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable. INTERESTS OF NAMED EXPERTS AND COUNSEL No expert or counsel named in this prospectus as having prepared or certified any part of this Prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest exceeding $80,000, directly or indirectly, in the Company or any of its parents or subsidiaries. Nor was any such person connected with Battlers Corp. or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee. EXPERTS Heaton & Company, PLLC our independent registered public accounting firm, has audited our financial statements included in this prospectus and registration statement to the extent and for the periods set forth in their audit report. Heaton & Company, PLLC has presented its report with respect to our audited financial statements. LEGAL MATTERS Law Offices of Hoffman & Weigel, PLLC has opined on the validity of the shares of common stock being offered hereby. AVAILABLE INFORMATION We have not previously been required to comply with the reporting requirements of the Securities Exchange Act. We have filed with the SEC a registration statement on Form S-1 to register the securities offered by this prospectus. For future information about us and the securities offered under this prospectus, you may refer to the registration statement and to the exhibits filed as a part of the registration statement. In addition, after the effective date of this prospectus, we will be required to file annual, quarterly and current reports, or other information with the SEC as provided by the Securities Exchange Act. You may read and copy any reports, statements or other information we file at the SEC s public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Our SEC filings are available to the public through the SEC Internet site at www.sec.gov. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have had no changes in or disagreements with our independent registered public accountant. FINANCIAL STATEMENTS Our fiscal year end is June 30. We will provide audited financial statements to our stockholders on an annual basis; the statements will be prepared by us and audited by Heaton & Company, PLLC. The financial information presented is the audited financial statements for the period from Inception (February 3, 2016) to June 30, 2016 and unaudited financial statements for the three months ended September 30, 2016. BATTLERS CORP. FINANCIAL STATEMENTS JUNE 30, 2016 BATTLERS CORP. Table of contents FROM FEBRUARY 3, 2016 (INCEPTION) TO JUNE 30, 2016 Report of Independent Registered Public Accounting Firm F-1 Balance Sheet as of June 30, 2016 F-2 Statement of Operations from February 3, 2016 (inception) to June 30, 2016 F-3 Statement of Changes in Stockholder s Deficit from February 3, 2016 (inception) to June 30, 2016 F-4 Statement of Cash Flows from February 3, 2016 (inception) to June 30, 2016 F-5 Notes to the Audited Financial Statements F-6 - F-10 BATTLERS CORP. Balance Sheet AS OF JUNE 30, 2016 ASSETS June 30, 2016 Current Assets Cash and cash equivalents $ 1,989 Total Current Assets 1,989 Total Assets $ 1,989 LIABILITIES AND STOCKHOLDER S DEFICIT Liabilities Current Liabilities Loan from director $ 2,662 Total Current Liabilities 2,662 Total Liabilities 2,662 Stockholder s Deficit Common stock, par value $0.001; 75,000,000 shares authorized, 0 shares issued and outstanding - Additional paid in capital - Retained deficit (673 ) Total Stockholder s Deficit (673 ) Total Liabilities and Stockholder s Deficit $ 1,989 See accompanying notes, which are an integral part of these financial statements F-2 BATTLERS CORP. Statement of Operations FROM FEBRUARY 3, 2016 (INCEPTION) TO JUNE 30, 2016 From February 3, 2016 (Inception) to June 30, 2016 REVENUES $ - Cost of Goods Sold - Gross Profit - OPERATING EXPENSES General and Administrative Expenses 673 TOTAL OPERATING EXPENSES 673 NET INCOME (LOSS) FROM OPERATIONS 673 PROVISION FOR INCOME TAXES - NET INCOME (LOSS) $ (673 ) NET LOSS PER SHARE: BASIC AND DILUTED $ - WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED - See accompanying notes, which are an integral part of these financial statements F-3 BATTLERS CORP. Statement of Changes in Stockholder s Deficit FROM FEBRUARY 3, 2016 (INCEPTION) TO JUNE 30, 2016 Common Stock Additional Paid-in Retained Deficit Total Stockholder s Shares Amount Capital Equity Inception, February 3, 2016 - $ - $ - $ - $ - Net loss for the period ended June 30, 2016 - - - (673 ) (673 ) Balance, June 30, 2016 - $ - $ - $ (673 ) $ (673 ) See accompanying notes, which are an integral part of these financial statements F-4 BATTLERS CORP. Statement of Cash Flows FROM FEBRUARY 3, 2016 (INCEPTION) TO JUNE 30, 2016 From February 3, 2016 (Inception) to June 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (673 ) Adjustments to reconcile net loss to net cash (used in) operating activities: CASH FLOWS USED IN OPERATING ACTIVITIES (673 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from director loan 2,662 CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,662 NET INCREASE IN CASH 1,989 Cash, beginning of period - Cash, end of period $ 1,989 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ - Income taxes paid $ - See accompanying notes, which are an integral part of these financial statements F-5 BATTLERS CORP. Notes to the financial statements JUNE 30, 2016 Note 1 ORGANIZATION AND NATURE OF BUSINESS Battlers Corp. ( the Company , we , us or our ) was incorporated in the State of Nevada on February 3, 2016. Battlers Corp. is a startup company, which is going to produce videos, advertising shorts for TV and websites, wedding videos, family videos, vacation records reduction and business presentation records for marketing and other needs. The Company s registration office is located at No.1 Street, Sophora Court, 1/27, Larnaka, Cyprus, 6021. Note 2 GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company had no revenues from February 3, 2016 (inception) through June 30, 2016. The Company currently has negative working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company s ability to continue as a going concern. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of management s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. Note 3 SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES Basis of presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. The Company s yearend is June 30. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company had $1,989 of cash as of June 30, 2016. F-6 BATTLERS CORP. Notes to the financial statements JUNE 30, 2016 Inventories Inventories are stated at the lower of cost or market. Cost is principally determined using the first-in, first out (FIFO) method. The Company had $0 in inventory as of June 30, 2016. Depreciation, Amortization, and Capitalization The Company records depreciation and amortization when appropriate using the straight-line balance method over the estimated useful life of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriated accounts and the resultant gain or loss is included in net income. Fair Value of Financial Instruments AS topic 820 "Fair Value Measurements and Disclosures" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. These tiers include: Level 1: defined as observable inputs such as quoted prices in active markets; Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying value of cash and the Company s loan from shareholder approximates its fair value due to their short-term maturity. Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Revenue Recognition The Company will recognize revenue in accordance with ASC topic 605 Revenue Recognition . The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured. F-7 BATTLERS CORP. Notes to the financial statements JUNE 30, 2016 Stock-Based Compensation Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. Basic Income (Loss) Per Share The Company computes income (loss) per share in accordance with FASB ASC 260 Earnings per Share . Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the period from February 3, 2016 (inception) to June 30, 2016 there were no potentially dilutive debt or equity instruments issued or outstanding. Comprehensive Income Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. For the period from February 3, 2016 (inception) to June 30, 2016 were no differences between our comprehensive loss and net loss. Recent Accounting Pronouncements We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company. Note 4 LOAN FROM DIRECTOR During the period from February 3, 2016 (Inception) to June 30, 2016, our sole director has loaned to the Company $2,662. This loan is unsecured, non-interest bearing and due on demand. The balance due to the director was $2,662 as of June 30, 2016. Note 5 COMMON STOCK The Company has 75,000,000, $0.001 par value shares of common stock authorized. There were no shares of common stock issued and outstanding as of June 30, 2016. F-8 BATTLERS CORP. Notes to the financial statements JUNE 30, 2016 Note 6 INCOME TAXES The Company adopted the provisions of uncertain tax positions as addressed in ASC 740-10-65-1. As a result of the implementation of ASC 740-10-65-1, the Company recognized no increase in the liability for unrecognized tax benefits. As of June 30, 2016 the Company had net operating loss carry forwards of approximately $673 that may be available to reduce future years taxable income in varying amounts through 2036. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The valuation allowance at June 30, 2016 was approximately $229. The net change in valuation allowance during the year ended June 30, 2016 was $229. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of June 30, 2016. All tax years since inception remains open for examination by taxing authorities. The provision for Federal income tax consists of the following: From February 3, 2016 (Inception) to June 30, 2016 Non-current deferred tax assets: Net operating loss carry forward $ (229 ) Valuation allowance $ 229 Net deferred tax assets $ - Actual tax expense (benefit) $ - F-9 BATTLERS CORP. Notes to the financial statements JUNE 30, 2016 The actual tax benefit at the expected rate of 34% differs from the expected tax benefit for the year ended May 31, 2016 as follows: From February 3, 2016 (Inception) to June 30, 2016 Computed "expected" tax expense (benefit) $ (229 ) Change in valuation allowance $ 229 Note 9 SUBSEQUENT EVENTS In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to June 30, 2016 to the date these financial statements were issued. On July 5, 2016, we issued a total of 4,000,000 shares of restricted common stock to Stepan Feodosiadi in consideration of $4,000. It does not have any more material subsequent events to disclose in these financial statements. F-10 BATTLERS CORP. FINANCIAL STATEMENTS SEPTEMBER 30, 2016 BATTLERS CORP. Table of contents SEPTEMBER 30, 2016 Balance Sheet as of September 30, 2016 (Unaudited) and June 30, 2016 F-1 Statement of Operations for the three months ended September 30, 2016 (Unaudited) F-2 Statement of Cash Flows for the three months ended September 30, 2016 (Unaudited) F-3 Notes to the Unaudited Financial Statements F-4 - F-8 BATTLERS CORP. Balance Sheet AS OF SEPTEMBER 30, 2016 ASSETS September 30, 2016 (Unaudited) June 30, 2016 Current Assets Cash and cash equivalents Prepaid rent $ 1,279 460 $ 1,989 - Total Current Assets 1,739 1,989 Fixed Assets Equipment, net $ 5,430 - Total Fixed Assets 5,430 - Total Assets $ 7,169 $ 1,989 LIABILITIES AND STOCKHOLDER S DEFICIT Liabilities Current Liabilities Loan from director $ 4,640 2,662 Total Current Liabilities 4,640 2,662 Total Liabilities 4,640 2,662 Stockholder s Deficit Common stock, par value $0.001; 75,000,000 shares authorized, 4,000,000 shares issued and outstanding 4,000 - Additional paid in capital - - Retained deficit (1,471 ) (673 ) Total Stockholder s Deficit 2,529 (673 ) Total Liabilities and Stockholder s Deficit $ 7,169 1,989 See accompanying notes, which are an integral part of these financial statements F-1 BATTLERS CORP. Statement of Operations THREE MONTHS ENDED SEPTEMBER 30, 2016 (Unaudited) Three months ended September 30, 2016 REVENUES $ 4,454 Gross Profit 4,454 OPERATING EXPENSES General and Administrative Expenses 5,252 TOTAL OPERATING EXPENSES 5,252 NET INCOME (LOSS) FROM OPERATIONS (798 ) PROVISION FOR INCOME TAXES - NET INCOME (LOSS) $ (798 ) NET LOSS PER SHARE: BASIC AND DILUTED $ (0.00 ) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED 3,782,609 See accompanying notes, which are an integral part of these financial statements F-2 BATTLERS CORP. Statement of Cash Flows THREE MONTHS ENDED SEPTEMBER 30, 2016 (Unaudited) Three months ended September 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (798 ) Adjustments to reconcile net loss to net cash (used in) operating activities: Prepaid rent (460 ) Depreciation 138 CASH FLOWS USED IN OPERATING ACTIVITIES (1,120 ) CASH FLOWS FROM INVESTING ACTIVITIES Equipment (5,568 ) CASH FLOWS USED BY INVESTING ACTIVITIES (5,568 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from director loan 1,978 4,000 Proceeds from sale of common stock CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 5,978 NET DECREASE IN CASH (710 ) Cash, beginning of period 1,989 Cash, end of period $ 1,279 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ - Income taxes paid $ - See accompanying notes, which are an integral part of these financial statements F-3 BATTLERS CORP. Notes to the financial statements SEPTEMBER 30, 2016 (Unaudited) Note 1 ORGANIZATION AND NATURE OF BUSINESS Battlers Corp. ( the Company , we , us or our ) was incorporated in the State of Nevada on February 3, 2016. Battlers Corp. is a startup company, which is going to produce videos, advertising shorts for TV and websites, wedding videos, family videos, vacation records reduction and business presentation records for marketing and other needs. The Company s registration office is located at No.1 Street, Sophora Court, 1/27, Larnaka, Cyprus, 6021. Note 2 GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company had limited revenues as of September 30, 2016. The Company currently has negative working capital, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company s ability to continue as a going concern. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of management s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. Note 3 SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES Basis of presentation The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission ( SEC ). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as September 30, 2016 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended September 30, 2016 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included elsewhere in this filing for the period ended June 30, 2016. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-4 BATTLERS CORP. Notes to the financial statements SEPTEMBER 30, 2016 (Unaudited) Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company had $1,279 of cash as of September 30, 2016. Depreciation, Amortization, and Capitalization The Company records depreciation and amortization when appropriate using the straight-line balance method over the estimated useful life of the assets. We estimate that the useful life of Photo camera and Big screen TV and professional equipment is 5 years and software program is 2 years. Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriate accounts and the resultant gain or loss is included in net income. Fair Value of Financial Instruments AS topic 820 "Fair Value Measurements and Disclosures" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. These tiers include: Level 1: defined as observable inputs such as quoted prices in active markets; Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying value of cash and the Company s loan from shareholder approximates its fair value due to their short-term maturity. Income Taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Revenue Recognition The Company recognizes revenue in accordance with ASC topic 605 Revenue Recognition . The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured. F-5 BATTLERS CORP. Notes to the financial statements SEPTEMBER 30, 2016 (Unaudited) Stock-Based Compensation Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. Basic Income (Loss) Per Share The Company computes income (loss) per share in accordance with FASB ASC 260 Earnings per Share . Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of September 30, 2016 there were no potentially dilutive debt or equity instruments issued or outstanding. Comprehensive Income Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. As of September 30, 2016 there were no differences between our comprehensive loss and net loss. Recent Accounting Pronouncements We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company. Note 4 FIXED ASSETS Equipment Cost As at June 30, 2016 $ - Additions 5,568 Disposals - As at September 30, 2016 $ 5,568 Depreciation As at June 30, 2016 - Change for the period (138 ) As at September 30, 2016 $ (138 ) Net book value $ 5,430 F-6 BATTLERS CORP. Notes to the financial statements SEPTEMBER 30, 2016 (Unaudited) Note 5 LOAN FROM DIRECTOR For the three months ended September 30, 2016, our sole director has loaned to the Company $1,978. This loan is unsecured, non-interest bearing and due on demand. The balance due to the director was $4,640 and $2,662 as of September 30, 2016 and June 30, 2016, respectively. Note 6 COMMON STOCK The Company has 75,000,000, $0.001 par value shares of common stock authorized. On July 5, 2016 the Company issued 4,000,000 shares of common stock to a director for cash proceeds of $4,000 at $0.001 per share. There were 4,000,000 shares of common stock issued and outstanding as of September 30, 2016. Note 7 INCOME TAXES The Company adopted the provisions of uncertain tax positions as addressed in ASC 740-10-65-1. As a result of the implementation of ASC 740-10-65-1, the Company recognized no increase in the liability for unrecognized tax benefits. As of September 30, 2016 the Company had net operating loss carry forwards of approximately $1,471 that may be available to reduce future years taxable income in varying amounts through 2036. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The valuation allowance at September 30, 2016 was approximately $500. The net change in valuation allowance during the three months ended September 30, 2016 was $271. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. F-7 BATTLERS CORP. Notes to the financial statements SEPTEMBER 30, 2016 (Unaudited) Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of September 30, 2016. All tax years since inception remains open for examination by taxing authorities. The provision for Federal income tax consists of the following: As of September 30, 2016 As of June 30, 2016 Non-current deferred tax assets: Net operating loss carry forward $ (500 ) (229 ) Valuation allowance $ 500 229 Net deferred tax assets $ - - Actual tax expense (benefit) $ - - The actual tax benefit at the expected rate of 34% differs from the expected tax benefit for the year ended September 31, 2016 as follows: As of September 30, 2016 As of June 30, 2016 Computed "expected" tax expense (benefit) $ (271 ) (229 ) Change in valuation allowance $ 271 229 - - Note 8 SUBSEQUENT EVENTS In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to September 30, 2016 to the date these financial statements were issued and has determined that it does not have any more material subsequent events to disclose in these financial statements. F-8 PROSPECTUS 4,000,000 SHARES OF COMMON STOCK BATTLERS CORP. Dealer Prospectus Delivery Obligation Until _________________________ ______, 2016, all dealers that effect transactions in these securities whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated costs (assuming all shares are sold) of this offering are as follows: SEC Registration Fee $ 8.07 Auditors Fees and Expenses $ 4,500.00 Legal Fees and Expenses $ 1,500.00 EDGAR fees $ 1,000.00 Transfer Agent Fees $ 1,000.00 TOTAL $ 8,008.07 (1) All amounts are estimates, other than the SEC s registration fee. ITEM 14. INDEMNIFICATION OF DIRECTOR AND OFFICER Battlers Corp. s Bylaws allow for the indemnification of the officer and/or director in regards to each such person carrying out the duties of his or her office. The Board of Directors will make determination regarding the indemnification of the director, officer or employee as is proper under the circumstances if he has met the applicable standard of conduct set forth under the Nevada Revised Statutes. As to indemnification for liabilities arising under the Securities Act of 1933, as amended, for a director, officer and/or person controlling Battlers Corp., we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy and unenforceable. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since inception, the Registrant has sold the following securities that were not registered under the Securities Act of 1933, as amended. Name and Address Date Shares Consideration Stepan Feodosiadi July 5, 2016 4,000,000 $ 4,000 We issued the foregoing restricted shares of common stock to our sole officer and director pursuant to Section 4(2) of the Securities Act of 1933. He is a sophisticated investor, is our sole officer and director, and is in possession of all material information relating to us. Further, no commissions were paid to anyone in connection with the sale of the shares and general solicitation was not made to anyone. ITEM 16. EXHIBITS Exhibit Number Description of Exhibit 3.1* Articles of Incorporation of the Registrant 3.2* Bylaws of the Registrant 5.1* Opinion of Law Offices of Hoffman & Weigel, PLLC 10.1* 10.2* 10.3* 10.4* 10.5 Verbal Agreement Lease Agreement Sale Agreement with Focus on Peristeri ES Sale Agreement with Pocket MGZ Sale Agreement with NTI TEILS MONOPROSOPI EPE - MARKELLOU D. MARIA 23.1 23.2* 99.1* Consent of Heaton & Company, PLLC Consent of Law Offices of Hoffman & Weigel, PLLC (Contained in exhibit 5.1) Form of Subscription *- Previously filed ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a)(1) To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 100(b) ( 230.100(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001681714_brazos_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001681714_brazos_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001681714_brazos_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001682325_gty_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001682325_gty_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..395e5b70cb8ee03edd9e9669e27f2493d26b6ed5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001682325_gty_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary only highlights the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information under Risk Factors and our financial statements and the related notes included elsewhere in this prospectus, before investing. Unless otherwise stated in this prospectus or the context otherwise requires, references to: we, us, company or our company are to GTY Technology Holdings Inc., a Cayman Islands exempted company; amended and restated memorandum and articles of association are to our Second Amended and Restated Memorandum and Articles of Association; Companies Law are to the Companies Law (2016 Revision) of the Cayman Islands as the same may be amended from time to time; founders are to William D. Green, Joseph M. Tucci and Harry L. You; founder shares are to our Class B ordinary shares initially issued to our sponsor in private placements prior to this offering and the Class A ordinary shares that will be issued upon the automatic conversion of the Class B ordinary shares at the time of our initial business combination (for the avoidance of doubt, such Class A ordinary shares will not be public shares ); initial shareholders are to holders of our founder shares prior to this offering; management or our management team are to our executive officers and directors; ordinary shares are to our Class A ordinary shares and our Class B ordinary shares; private placement warrants are to the warrants to be issued to our sponsor in a private placement simultaneously with the closing of this offering and upon conversion of working capital loans, if any; public shares are to our Class A ordinary shares sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market); public shareholders are to the holders of our public shares, including our initial shareholders and management team to the extent our initial shareholders and/or members of our management team purchase public shares, provided that each initial shareholder s and member of our management team s status as a public shareholder will only exist with respect to such public shares; and sponsor are to GTY Investors, LLC, a Delaware limited liability company, which is owned and controlled by our founders. Any conversion of the Class B ordinary shares described in this prospectus will take effect as a repurchase of Class B ordinary shares and an issuance of Class A ordinary shares, as a matter of Cayman Islands law. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. General We are a newly organized blank check company incorporated as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not selected any potential business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any potential business combination target. We will seek to capitalize on the significant experience and contacts of our management team in consummating an initial business combination. We believe our management team s distinctive background can have a transformative impact on a target business. Although we may pursue a business combination target in TABLE OF CONTENTS CALCULATION OF REGISTRATION FEE Title of Each Class of Security Being Registered Amount Being Registered Proposed Maximum Offering Price per Security 1 Proposed Maximum Aggregate Offering Price 1 Amount of Registration Fee Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-third of one redeemable warrant 2 46,000,000 units $ 10.00 $ 460,000,000 $ 53,314.00 5 Class A ordinary shares included as part of the units 3 46,000,000 shares 4 Redeemable warrants included as part of the units 3 15,333,333 warrants 4 Total $ 460,000,000 $ 53,314.00 5 (1) Estimated solely for the purpose of calculating the registration fee. (2) Includes 6,000,000 units, consisting of 6,000,000 Class A ordinary shares and 2,000,000 redeemable warrants, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any. (3) Pursuant to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions. (4) No fee pursuant to Rule 457(g). (5) Calculated for illustrative purposes only based on a rate of $115.90 per $1,000,000 of the proposed maximum offering price in effect on October 1, 2016. $34,741.50 was previously paid based on a prior proposed maximum offering price of $345,000,000 and based on a rate of $100.70 per $1,000,000 of the proposed maximum offering price in effect prior to October 1, 2016. An additional fee of $13,328.50, based on a rate of $115.90 per $1,000,000 of the proposed maximum offering price in effect on October 1, 2016, is applicable to the additional $115,000,000 to be registered hereunder, or the difference between a proposed maximum offering price of $460,000,000 and $345,000,000. TABLE OF CONTENTS any business or industry, we intend to capitalize on the ability of our management team to identify, acquire and operate a business in the technology industry, including software and services, that may provide the opportunity to unlock the value of a private company and provide opportunities for an attractive risk adjusted return to our shareholders. Organizations in all industries continue to undergo rapid transformation resulting from the impact of recent technological shifts, including cloud and mobile computing, software-defined data centers (SDDC), the rise of the practice of automating the process of software delivery and infrastructure changes known as the DevOps model, heightened cybersecurity threats, the challenges of managing and maintaining big data, the growth in use of analytics and the adoption of software as a service (SaaS). We believe nearly every major organization currently faces and will continue to face massive disruption to legacy infrastructure and services that have failed to adapt to these technological shifts. The resulting demand for these solutions has created a massive opportunity for a new breed of technology companies to provide innovative products and services that help accelerate this technology transformation. A plethora of companies have developed these products and services but lack the experience or contacts necessary to navigate and accelerate the penetration of their solutions into large IT departments. Compounding the problem, large companies IT departments lack the in-house expertise to evaluate the immense number of new vendors competing for their business. We believe our management team s distinctive background and vast network of technology leaders provides them with a differentiated opportunity to source a target, validate a potential target s technology, consummate a business combination with the target and help sell the target s products and services into large enterprises. Our founder, Co-Chief Executive Officer and Co-Chairman William D. Green was previously chief executive officer and chairman of the board of Accenture PLC, or Accenture (NYSE: ACN). Mr. Green was a director of Accenture from 2001 until 2013, and assumed the role of chairman in 2006. During Mr. Green s time on the board, Accenture completed its initial public offering and Mr. Green was involved in the planning of Accenture s long-term business strategy. From 2004 through 2010, Mr. Green served as Accenture s chief executive officer, successfully navigating the company through a challenging global economic environment. During his tenure as chief executive officer, Accenture grew revenue from $13.7 billion to $21.6 billion, doubled its workforce to 211,000 employees and expanded its global footprint. Prior to serving as chief executive officer, Mr. Green was Accenture s chief operating officer client services with overall management responsibility for the company s operating groups. In addition, he served as group chief executive of the Communications & High Tech operating group from 1999 to 2003. He was also group chief executive of the Resources operating group for two years. Earlier in his career, Mr. Green led the Manufacturing industry group and was managing director for Accenture s business in the United States. Mr. Green was ranked #1 chief executive officer in the Computer Sciences & IT Consulting sector by Institutional Investor in 2007. Mr. Green has served as a director of S&P Global Inc. (NYSE: SPGI) since 2011, a director of EMC Corporation, or EMC, from 2013 to 2016, EMC s independent lead director from February 2015 to September 2016 and a director of Inovalon Holdings, Inc. (NASDAQ: INOV) since August 2016. In addition, Mr. Green has served on the board of directors of Dell Technologies, Inc., or Dell, since September 2016. Our founder, Co-Chief Executive Officer and Co-Chairman Joseph M. Tucci was chief executive officer, chairman of the board of directors and president of EMC from 2001, 2006 and 2014, respectively, until September 2016 when Dell acquired EMC. At that time, Mr. Tucci became an advisor to Dell s founder, Michael Dell, and its board of directors. Mr. Tucci led EMC through a revitalization, transforming EMC s business model from what had been a near-exclusive focus on high-end storage platforms into a federation of businesses that grew to include EMC, VMware, Inc. (NYSE: VMW), Pivotal Software, Inc., RSA Security LLC, VCE and Virtustream, Inc. Following the technology sector s bust in 2001 2002, EMC s revenues grew from $5.4 billion in 2002 to $24.7 billion in 2015. Acknowledging EMC's success under Mr. Tucci s leadership, Barron's named him one of the 30 best chief executive officers in 2011 and 2012. In 2015, his final full year at EMC, EMC was named one of the world s top 10 multinational workplaces out of 700 multinational companies surveyed by the Great Place to Work Institute, Inc. With Mr. Tucci setting strategy, EMC amassed a track record of successful acquisitions and partnerships to expand its technology portfolio, enter new market segments and enlarge the company's addressable market opportunity. Mr. Tucci expanded the company's marketplace beyond large enterprises to commercial and small-medium businesses, broadened the company's industry alliances, and established new selling, partnership and distribution channels. Mr. Tucci strengthened EMC's management team with the integration of executives from other major technology TABLE OF CONTENTS The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED OCTOBER 17, 2016 P R E L I M I N A R Y P R O S P E C T U S $400,000,000 GTY Technology Holdings Inc. 40,000,000 Units GTY Technology Holdings Inc. is a newly organized blank check company incorporated as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. While we may pursue a business combination target in any business or industry, we intend to focus our search for a business in the technology industry, including software and services. This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of one Class A ordinary share and one-third of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment as described herein. Only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. The underwriters have a 45-day option from the date of this prospectus to purchase up to 6,000,000 additional units to cover over-allotments, if any. We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial business combination at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account described below as of two business days prior to the consummation of our initial business combination, including interest earned on the trust account (net of taxes payable), divided by the number of then outstanding Class A ordinary shares that were sold as part of the units in this offering, which we refer to collectively as our public shares, subject to the limitations described herein. If we are unable to complete our initial business combination within 24 months from the closing of this offering, we will redeem 100% of the public shares at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the trust account (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding public shares, subject to applicable law and certain conditions as further described herein. Our sponsor, GTY Investors, LLC, has agreed to purchase an aggregate of 6,666,667 warrants (or 7,466,667 if the underwriters over-allotment option is exercised in full), each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.50 per warrant (approximately $10,000,000 in the aggregate or approximately $11,200,000 if the underwriters over-allotment option is exercised in full), in a private placement that will close simultaneously with the closing of this offering. Our initial shareholders currently own 11,500,000 Class B ordinary shares, up to 1,500,000 of which will be surrendered to us by our sponsor for no consideration after the closing of this offering depending on the extent to which the underwriters over-allotment option is exercised, which will automatically convert into Class A ordinary shares at the time of our initial business combination on a one-for-one basis, subject to the adjustments described herein. Holders of the Class B ordinary shares will have the right to elect all of our directors prior to our initial business combination. On any other matter submitted to a vote of our shareholders, holders of the Class B ordinary shares and holders of the Class A ordinary shares will vote together as a single class, except as required by law. Currently, there is no public market for our units, Class A ordinary shares or warrants. We have applied to have our units listed on the NASDAQ Capital Market, or NASDAQ, under the symbol GTYHU on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for listing. We expect the Class A ordinary shares and warrants comprising the units to begin separate trading on the 52nd day following the date of this prospectus unless Citigroup Global Markets Inc. informs us of its decision to allow earlier separate trading, subject to our satisfaction of certain conditions. Once the securities comprising the units begin separate trading, we expect that the Class A ordinary shares and warrants will be listed on NASDAQ under the symbols GTYH and GTYHW, respectively. We are an emerging growth company under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See Risk Factors beginning on page 27 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Unit Total Public offering price $ 10.00 $ 400,000,000 Underwriting discounts and commissions 1 $ 0.55 $ 22,000,000 Proceeds, before expenses, to us $ 9.45 $ 378,000,000 (1) Includes $0.35 per unit, or $14,000,000 in the aggregate (or $16,100,000 in the aggregate if the underwriters over-allotment option is exercised in full), payable to the underwriters for deferred underwriting commissions to be placed in a trust account in the United States as described herein and released to the underwriters only upon the completion of an initial business combination. See also Underwriting beginning on page 134 for a description of compensation and other items of value payable to the underwriters. Of the proceeds we receive from this offering and the sale of the private placement warrants described in this prospectus, $400.00 million, or $460.00 million if the underwriters over-allotment option is exercised in full ($10.00 per unit in either case), will be deposited into a trust account in the United States with Continental Stock Transfer & Trust Company acting as trustee. The underwriters are offering the units for sale on a firm commitment basis. The underwriters expect to deliver the units to the purchasers on or about , 2016. Citigroup I-Bankers Securities, Inc. , 2016 TABLE OF CONTENTS companies. And Mr. Tucci championed EMC's commitment to the total customer experience, to provide quality, service, innovation and interaction. Mr. Tucci served as chairman of the board of directors of VMware from 2007 to 2016 and as a member of the board of directors of Paychex, Inc. (NASDAQ: PAYX) since 2000. Our founder, President, Chief Financial Officer and Director Harry L. You served as the executive vice president of EMC in the office of the chairman from 2008 to 2016. Mr. You joined EMC in 2008 to oversee corporate strategy and new business development, which included mergers and acquisitions, joint ventures and venture capital activity. Mr. You served as a director of Korn/Ferry International, a global executive recruiting company, from 2004 to October 2016 and has been a trustee of the U.S. Olympic Committee Foundation since August 2016. Mr. You was chief executive officer of BearingPoint, a leading IT and management consultancy from 2005 to 2007. He also served as BearingPoint s interim chief financial officer from 2005 to 2006. From 2004 to 2005, Mr. You served as executive vice president and chief financial officer of Oracle Corporation (NYSE: ORCL), or Oracle, helping begin Oracle s acquisition run with the takeovers of Peoplesoft, Inc. and Retek in 2005, and was also a member of the board of directors of Oracle Japan. From 2001 to 2004, Mr. You served as chief financial officer of Accenture, helping take the company public and leading the company to 35% annual free cash flow growth during his tenure. Mr. You also previously spent fourteen years on Wall Street, including serving as a managing director in the Investment Banking Division of Morgan Stanley, where he headed the Computer and Business Services Group. Mr. You was a #1 ranked chief financial officer by Institutional Investor in the Computer Services & IT Consulting sector in 2004. We believe that our management team is well positioned to identify attractive businesses within the technology industry, including software and services, that would benefit from access to the public markets and the skills of our management team. Our objective is to consummate a business combination with such a business and enhance shareholder value by improving its operational performance. We believe we can achieve this objective by utilizing our founders extensive experience operating technology companies and our management team s network of contacts in the technology sector. We believe many companies in the technology industry could benefit from access to the public markets but have been unable to do so due to a number of factors, including the time it takes to conduct a traditional initial public offering, market volatility and pricing uncertainty. We will focus on established companies with a leading competitive position, a strong management team, a collaborative and collegial culture, a robust financial profile and strong long-term potential for profitability. The past performance of our founders and other members of our management team is not a guarantee that we will be able to identify a suitable candidate for our initial business combination or of success with respect to any business combination we may consummate. You should not rely on the historical record of our management s performance as indicative of our future performance. None of our officers or directors has any past experience with any blank check companies or special purpose acquisition companies. Business Strategy Our business strategy is to identify and complete our initial business combination with a company that complements the experience of our management team and can benefit from their operational expertise. Our selection process will leverage our management team s broad and deep relationship network, unique technology industry expertise and proven deal-sourcing capabilities to provide us with a number of business combination opportunities. Our management has experience: operating companies, setting and changing strategies, and identifying, mentoring and recruiting world-class talent; developing and growing companies, both organically and inorganically, and expanding the product ranges and geographic footprints of a number of target businesses; sourcing, structuring, acquiring and selling businesses; partnering with other industry-leading companies to increase our sales and improve the competitive position of our companies; TABLE OF CONTENTS fostering relationships with sellers, capital providers and target management teams; and accessing the capital markets across various business cycles, including financing businesses and assisting companies with the transition to public ownership. Following the completion of this offering, we will communicate with our management s network of relationships to articulate the parameters for our search for a target company and a potential business combination and begin the process of pursuing and reviewing potential opportunities. Business Combination Criteria Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. Focus on technology industry, including software and services. Based upon our management team s experience, we believe we will have access to deal flow and a competitive advantage in our ability to negotiate a business combination with potential targets in the technology industry. Our management team s extensive experience and vast network of technology leaders provides them with a differentiated opportunity to source a target, validate a potential target s technology, consummate a business combination with the target and help sell the target s products and services into large enterprises. Established target with a history of and/or capacity for free cash flow generation. We will target one or more businesses that have exhibited profitability historically and/or have the potential for strong cash flow generation in the future. We have a history of accelerating growth of companies with strong historical performance. Fundamentally sound companies that have the potential to further improve their performance under our guidance. We believe our experience in the sector will provide validation for the target s product and network of industry contacts will allow us to enhance sales and generate a higher return for our investors. Market-leading technology. We will seek a target that has a technology recognized as the clear leader in its subsector. Experienced and motivated management team. We will seek a target with an established management team that we intend to complement, not replace. To the extent we believe it will enhance shareholder value, we would seek to selectively supplement the existing management team of the business (including senior management) with proven leaders from our network. At an inflection point. We believe numerous technology companies lack the ability to penetrate large companies IT departments, potentially limiting their acceleration to attain the scale required to be a publicly-listed company, or lack the validation of large IT organizations. We will target a company that may require additional management expertise as it transitions to a public company, or where we believe our background can provide the validation necessary to drive improved financial performance. May benefit from capital markets access. We will seek a target that may benefit from the use of additional capital to drive growth or from a public currency to acquire competitors and grow revenue. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of proxy solicitation materials or tender offer documents that we would file with the SEC. TABLE OF CONTENTS Initial Business Combination NASDAQ rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal firm with respect to the satisfaction of such criteria. Our shareholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion. We anticipate structuring our initial business combination so that the post transaction company in which our public shareholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such business combination if the post transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to the business combination may collectively own a minority interest in the post transaction company, depending on valuations ascribed to the target and us in the business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of NASDAQ s 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions. Our Business Combination Process In evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews and inspection of facilities, as applicable, as well as a review of financial and other information that will be made available to us. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Members of our management team and our independent directors will directly or indirectly own founder shares and/or private placement warrants following this offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. TABLE OF CONTENTS Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, subject to their fiduciary duties under Cayman Islands law. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination. Our sponsor, officers and directors have agreed, pursuant to a written letter agreement, not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within 24 months after the closing of this offering. Prior to the date of this prospectus, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination. Corporate Information Our executive offices are located at 1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144, and our telephone number is (702) 945-2898. We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an exempted company, we have applied for and expect to receive, after the effectiveness of the registration statement of which this prospectus forms a part, a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us. We are an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period. TABLE OF CONTENTS We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act. TABLE OF CONTENTS The Offering In deciding whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section below entitled Risk Factors beginning on page 27 of this prospectus. Securities offered 40,000,000 units, at $10.00 per unit, each unit consisting of: one Class A ordinary share; and one-third of one redeemable warrant. Proposed NASDAQ symbols Units: GTYHU Class A Ordinary Shares: GTYH Warrants: GTYHW Trading commencement and separation of Class A ordinary shares and warrants The units are expected to begin trading on or promptly after the date of this prospectus. The Class A ordinary shares and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless Citigroup Global Markets Inc. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the Class A ordinary shares and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into Class A ordinary shares and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a whole warrant. Separate trading of the Class A ordinary shares and warrants is prohibited until we have filed a Current Report on Form 8-K In no event will the Class A ordinary shares and warrants be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters over-allotment option. TABLE OF CONTENTS Units: Number outstanding before this offering 0 Number outstanding after this offering 40,000,000(1) Ordinary shares: Number outstanding before this offering 11,500,000(2)(3) Number outstanding after this offering 50,000,000(1)(3)(4) Warrants: Number of private placement warrants to be sold in a private placement simultaneously with this offering 6,666,667(1) Number of warrants to be outstanding after this offering and the private placement 20,000,000(1) Exercisability Each whole warrant offered in this offering is exercisable to purchase one Class A ordinary share. Only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. We structured each unit to contain one-third of one warrant, with each whole warrant exercisable for one Class A ordinary share, as compared to units issued by some other similar blank check companies which contain whole warrants exercisable for one whole share, in order to reduce the dilutive effect of the warrants upon completion of a business combination as compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive business combination partner for target businesses. Exercise price $11.50 per whole share, subject to adjustments as described herein. Exercise period The warrants will become exercisable on the later of: 30 days after the completion of our initial business combination; and 12 months from the closing of this offering; provided in each case that we have an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a (1) Assumes no exercise of the underwriters over-allotment option and 1,500,000 founder shares are surrendered to us by our sponsor for no consideration. (2) Includes up to 1,500,000 founder shares that will be surrendered to us for no consideration by our sponsor depending on the extent to which the underwriters over-allotment option is exercised. (3) Founder shares are currently classified as Class B ordinary shares, which shares will automatically convert into Class A ordinary shares at the time of our initial business combination on a one-for-one basis, subject to adjustment as described below adjacent to the caption Founder shares conversion and anti-dilution rights. (4) Includes 40,000,000 public shares and 10,000,000 founder shares. TABLE OF CONTENTS current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We are not registering the Class A ordinary shares issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account. Redemption of warrants Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants): in whole and not in part; at a price of $0.01 per warrant; upon a minimum of 30 days prior written notice of redemption, which we refer to as the 30-day redemption period; and if, and only if, the closing price of our ordinary shares equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. TABLE OF CONTENTS We will not redeem the warrants unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In determining whether to require all holders to exercise their warrants on a cashless basis, our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our shareholders of issuing the maximum number of Class A ordinary shares issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value will mean the average reported closing price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Please see Description of Securities Warrants Public Shareholders Warrants for additional information. None of the private placement warrants will be redeemable by us so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. Founder shares In August through October 2016, we issued to our sponsor an aggregate of 11,500,000 founder shares in exchange for a capital contribution of $25,000, or approximately $0.002 per share. In October 2016, our sponsor transferred 25,000 founder shares to each of our independent director nominees at the same per-share purchase price paid by our sponsor. The foregoing transfers of founder shares were made in reliance upon an exemption from the registration requirements of the Securities Act pursuant to the so-called 4(a)(1)-&frac12; exemption. Prior to the initial investment in the company of $25,000 by our sponsor, the company had no assets, tangible or intangible. The per share price of the founder shares was determined by dividing the amount contributed to the company by the number of founder shares issued. The number of founder shares issued was determined based on the expectation that the total size of this offering would be a maximum of 46,000,000 units if the underwriters over-allotment option is exercised in full, and TABLE OF CONTENTS therefore that such founder shares would represent 20% of the outstanding shares after this offering. Our sponsor will surrender for no consideration up to 1,500,000 shares depending on the extent to which the underwriters over-allotment option is not exercised. If we increase or decrease the size of this offering, we will effect a share capitalization or a share repurchase or redemption or other appropriate mechanism, as applicable, with respect to our Class B ordinary shares immediately prior to the consummation of this offering in such amount as to maintain the ownership of our initial shareholders at 20.0% of our issued and outstanding ordinary shares upon the consummation of this offering. The founder shares are identical to the Class A ordinary shares included in the units being sold in this offering, except that: only holders of the founder shares have the right to vote on the election of directors prior to our initial business combination; the founder shares are subject to certain transfer restrictions, as described in more detail below; our initial shareholders have entered into an agreement with us, pursuant to which they have agreed to (i) waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months from the closing of this offering and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame). If we submit our initial business combination to our public shareholders for a vote, our initial shareholders have agreed to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. As a result, in addition to our initial shareholders founder shares, we would need 15,000,001, or 37.5%, of the TABLE OF CONTENTS 40,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming all outstanding shares are voted and the over-allotment option is not exercised). The other members of our management team have entered into agreements similar to the one entered into by our initial shareholders with respect to any public shares acquired by them in or after this offering; and the founder shares are automatically convertible into our Class A ordinary shares at the time of our initial business combination on a one-for-one basis subject to adjustment pursuant to certain anti-dilution rights, as described below adjacent to the caption Founder shares conversion and anti-dilution rights. Transfer restrictions on founder shares Our initial shareholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (i) one year after the completion of our initial business combination or (ii) the date on which we complete a liquidation, merger, share exchange or other similar transaction after our initial business combination that results in all of our shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property (except as described herein under Principal Shareholders Transfers of Founder Shares and Private Placement Warrants ). Any permitted transferees will be subject to the same restrictions and other agreements of our initial shareholders with respect to any founder shares. We refer to such transfer restrictions throughout this prospectus as the lock-up. Notwithstanding the foregoing, if the closing price of our Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, the founder shares will be released from the lock-up. Founder shares conversion and anti-dilution rights The founder shares are designated as Class B ordinary shares and will automatically convert into Class A ordinary shares on the first business day following the consummation of our initial business combination on a one-for-one basis, subject to adjustment as provided herein. In the case that additional Class A ordinary shares, or equity-linked securities convertible or exercisable for Class A ordinary shares, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of our initial business combination, the ratio at which founder shares will convert into Class A ordinary shares will be adjusted so that TABLE OF CONTENTS the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate 20% of the sum of the ordinary shares outstanding upon the completion of this offering plus the number of Class A ordinary shares and equity-linked shares issued or deemed issued in connection with our initial business combination (net of redemptions), excluding any Class A ordinary shares or equity-linked securities issued, or to be issued, to any seller in our initial business combination and any private placement warrants issued to our sponsor. Any conversion of Class B ordinary shares described herein will take effect as a repurchase of Class B ordinary shares and an issuance of Class A ordinary shares as a matter of Cayman Islands law. Election of Directors; Voting Rights Prior to our initial business combination, only holders of our founder shares will have the right to vote on the election of directors. Holders of our public shares will not be entitled to vote on the election of directors during such time. These provisions of our amended and restated memorandum and articles of association may only be amended by a special resolution passed by a majority of at least 90% of our ordinary shares voting in a general meeting. With respect to any other matter submitted to a vote of our shareholders, including any vote in connection with our initial business combination, except as required by law, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote. Private placement warrants Our sponsor has committed, pursuant to a written agreement, to purchase an aggregate of 6,666,667 private placement warrants (or 7,466,667 if the underwriters over-allotment option is exercised in full), each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.50 per warrant (approximately $10,000,000 in the aggregate or approximately $11,200,000 if the underwriters over-allotment option is exercised in full), in a private placement that will close simultaneously with the closing of this offering. If we do not complete our initial business combination within 24 months from the closing of this offering, the private placement warrants will expire worthless. The private placement warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by their initial purchasers or their permitted transferees (except as described below under Principal Shareholders Transfers of Founder Shares and Private Placement Warrants ). If the private placement warrants are held by holders other than their initial purchasers or their permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. TABLE OF CONTENTS Transfer restrictions on private placement warrants The private placement warrants (including the Class A ordinary shares issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination, except as described herein under Principal Shareholders Transfers of Founder Shares and Private Placement Warrants . Proceeds to be held in trust account Of the proceeds we will receive from this offering and the sale of the private placement warrants described in this prospectus, $400.00 million, or $460.00 million if the underwriters over-allotment option is exercised in full ($10.00 per unit in either case), will be deposited into a segregated trust account located in the United States at JP Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee and $2.0 million will be used to pay expenses in connection with the closing of this offering and for working capital following this offering. The proceeds to be placed in the trust account include $14,000,000 (or $16,100,000 if the underwriters over-allotment option is exercised in full) in deferred underwriting commissions. Except for the withdrawal of interest to pay our income taxes, if any, our amended and restated memorandum and articles of association, as discussed below and subject to the requirements of law and regulation, provides that none of the funds held in the trust account will be released from the trust account until the earliest of (i) the completion of our initial business combination, (ii) the redemption of our public shares if we are unable to complete our initial business combination within 24 months from the closing of this offering, subject to applicable law, or (iii) the redemption of our public shares properly submitted in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months from the closing of this offering. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public shareholders. Anticipated expenses and funding sources Unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use, except the withdrawal of interest to pay our income taxes, if any. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in TABLE OF CONTENTS direct U.S. government treasury obligations. We estimate the interest earned on the trust account will be approximately $80,000 per year, assuming an interest rate of 0.02% per year; however, we can provide no assurances regarding this amount. Unless and until we complete our initial business combination, we may pay our expenses only from: the net proceeds of this offering not held in the trust account, which will be approximately $1,100,000 in working capital after the payment of approximately $900,000 in expenses relating to this offering; and any loans or additional investments from our sponsor or an affiliate of our sponsor or certain of our officers and directors, although they are under no obligation to advance funds or invest in us, and provided any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of our initial business combination. Conditions to completing our initial business combination NASDAQ rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal firm. Our shareholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion. We will complete our initial business combination only if the post-transaction company in which our public shareholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to our initial business combination may collectively own a minority interest in the post-business combination company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of NASDAQ s 80% of net assets test, provided that in the event that the business combination involves more than one TABLE OF CONTENTS target business, the 80% of net assets test will be based on the aggregate value of all of the transactions and we will treat the transactions together as our initial business combination for purposes of a tender offer or for seeking shareholder approval, as applicable. Permitted purchases of public shares and public warrants by our affiliates If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial shareholders, directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. See Proposed Business Permitted purchases of our securities for a description of how our sponsor, initial shareholders, directors, executive officers, advisors or any of their affiliates will select which shareholders to purchase securities from in any private transaction. The purpose of any such purchases of shares could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining shareholder approval of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities TABLE OF CONTENTS may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public float of our Class A ordinary shares or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange. Redemption rights for public shareholders upon completion of our initial business combination We will provide our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of our initial business combination, including interest earned on the trust account (net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.00 per public share. The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our initial shareholders have entered into agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may acquire during or after this offering in connection with the completion of our initial business combination. The other members of our management team have entered into agreements similar to the one entered into by our initial shareholders with respect to any public shares acquired by them in or after this offering. Limitations on redemptions Our amended and restated memorandum and articles of association provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC s penny stock rules). However, a greater net tangible asset or cash requirement may be contained in the agreement relating to our initial business combination. For example, the proposed business combination may require (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all Class A ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business TABLE OF CONTENTS combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all Class A ordinary shares submitted for redemption will be returned to the holders thereof. Manner of conducting redemptions We will provide our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a shareholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under applicable law or stock exchange listing requirement. Asset acquisitions and share purchases would not typically require shareholder approval, while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding Class A ordinary shares or seek to amend our amended and restated memorandum and articles of association would require shareholder approval. We currently intend to conduct redemptions in connection with a shareholder vote unless shareholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other legal reasons. If we hold a shareholder vote to approve our initial business combination, we will: conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and file proxy materials with the SEC. If we seek shareholder approval, we will complete our initial business combination only if a majority of the ordinary shares voted are voted in favor of the business combination. In such case, our initial shareholders have agreed to vote their founder shares and any public shares purchased during or after this offering in favor of our initial business combination. As a result, in addition to our initial shareholders founder shares, we would need 15,000,001, or 37.5%, of the 40,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming all outstanding shares are voted and the over-allotment option is not exercised). The other members of our management team have entered into agreements similar to the one entered into by our initial shareholders TABLE OF CONTENTS with respect to any public shares acquired by them in or after this offering. Each public shareholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction or vote at all. Our amended and restated memorandum and articles of association require that at least five days notice will be given of any such shareholder meeting. If we conduct redemptions pursuant to the tender offer rules of the SEC, we will, pursuant to our amended and restated memorandum and articles of association: conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. Upon the public announcement of our initial business combination, if we elect to conduct redemption pursuant to the tender offer rules, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase our Class A ordinary shares in the open market, in order to comply with Rule 14e-5 under the Exchange Act. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public shareholders not tendering more than the number of public shares we are permitted to redeem. If public shareholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination. Limitation on redemption rights of shareholders holding 20% or more of the shares sold in this offering if we hold shareholder vote Notwithstanding the foregoing redemption rights, if we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the shares sold in this offering, TABLE OF CONTENTS without our prior consent. We believe the restriction described above will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 20% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder s shares are not purchased by us, our sponsor or our management at a premium to the then-current market price or on other undesirable terms. By limiting our shareholders ability to redeem to no more than 20% of the shares sold in this offering, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our shareholders ability to vote all of their shares (including all shares held by those shareholders that hold more than 20% of the shares sold in this offering) for or against our initial business combination. Release of funds in trust account on closing of our initial business combination On the completion of our initial business combination, the funds held in the trust account will be used to pay amounts due to any public shareholders who exercise their redemption rights as described above under Redemption rights for public shareholders upon completion of our initial business combination, to pay the underwriters their deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. Redemption of public shares and distribution and liquidation if no initial business combination Our amended and restated memorandum and articles of association provide that we will have only 24 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial TABLE OF CONTENTS business combination within such 24-month period, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the trust account (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 24-month time period. Our initial shareholders have entered into agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months from the closing of this offering. However, if our initial shareholders or management team acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time frame. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the trust account in the event we do not complete our initial business combination within 24 months from the closing of this offering and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. Our sponsor, executive officers, directors and director nominees have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of this offering, unless we provide our public shareholders with the opportunity to redeem their Class A ordinary shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, TABLE OF CONTENTS including interest earned on the trust account (net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations described above under Limitations on redemptions. For example, our board of directors may propose such an amendment if it determines that additional time is necessary to complete our initial business combination. In such event, we will conduct a proxy solicitation and distribute proxy materials pursuant to Regulation 14A of the Exchange Act seeking shareholder approval of such proposal, and in connection therewith, provide our public shareholders with the redemption rights described above upon shareholder approval of such amendment. Limited payments to insiders There will be no finder s fees, reimbursements or cash payments made by the company to our sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, other than the following payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination: Repayment of up to an aggregate of $200,000 in loans made to us by our sponsor to cover offering-related and organizational expenses; Reimbursement for office space, secretarial and administrative services provided to us by our sponsor, in an amount not to exceed $10,000 per month; Reimbursement for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination; and Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Audit Committee We will establish and maintain an audit committee, which will be composed entirely of independent directors. Among its responsibilities, the audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates and monitor compliance with the other terms relating to this offering. If any noncompliance is identified, then the audit committee TABLE OF CONTENTS will be charged with the responsibility to promptly take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section entitled Management Committees of the Board of Directors Audit Committee. TABLE OF CONTENTS Risks We are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see Proposed Business Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419. You should carefully consider these and the other risks set forth in the section entitled Risk Factors beginning on page 27 of this prospectus. SUMMARY FINANCIAL DATA The following table summarizes the relevant financial data for our business and should be read with our financial statements, which are included in this prospectus. We have not had any significant operations to date, so only balance sheet data is presented. August 17, 2016 Actual As Adjusted Balance Sheet Data: Working capital (deficiency) 1 $ (30,000 ) $ 387,120,000 Total assets 2 $ 50,000 $ 401,120,000 Total liabilities 3 $ 30,000 $ 14,000,000 Value of Class A ordinary shares that may be redeemed in connection with our initial business combination ($10.00 per share) 4 $ 382,119,990 Shareholders equity 5 $ 20,000 $ 5,000,010 (1) The as adjusted calculation includes $400,000,000 cash held in trust from the proceeds of this offering and the sale of the private placement warrants, plus $1,100,000 in cash held outside the trust account, plus $20,000 of actual shareholders equity as of August 17, 2016, less $14,000,000 of deferred underwriting commissions. (2) The as adjusted calculation equals $400,000,000 cash held in trust from the proceeds of this offering and the sale of the private placement warrants, plus $1,100,000 in cash held outside the trust account, plus $20,000 of actual shareholders equity as of August 17, 2016. (3) The as adjusted calculation includes $14,000,000 of deferred underwriting commissions. (4) The as adjusted calculation equals the as adjusted total assets, less the as adjusted total liabilities, less the as adjusted shareholders equity, which is set to approximate the minimum net tangible assets threshold of at least $5,000,001. (5) Excludes 38,211,999 public shares which are subject to redemption in connection with our initial business combination. The as adjusted calculation equals the as adjusted total assets, less the as adjusted total liabilities, less the value of Class A ordinary shares that may be redeemed in connection with our initial business combination (initially $10.00 per share). The as adjusted information gives effect to the sale of the units in this offering, the sale of the private placement warrants, repayment of up to an aggregate of $200,000 in loans made to us by our sponsor and the payment of the estimated expenses of this offering and assumes no exercise of the underwriters over-allotment option. The as adjusted total assets amount includes the $400,000,000 held in the trust account (which would be $460,000,000 if the underwriters over-allotment option is exercised in full) for the benefit of our public shareholders, which amount, less deferred underwriting commissions, will be available to us only upon the completion of our initial business combination within 24 months from the closing of this offering. The as adjusted working capital and as adjusted total assets include $14,000,000 being held in the trust account (which would be $16,100,000 if the underwriters over-allotment option is exercised in full) representing deferred underwriting commissions. The underwriters will not be entitled to any interest accrued on the deferred underwriting discounts and commissions. TABLE OF CONTENTS If no initial business combination is completed within 24 months from the closing of this offering, the proceeds then on deposit in the trust account, including interest earned on the trust account (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), will be used to fund the redemption of our public shares. Our initial shareholders have entered into agreements with us in which they have agreed to waive their rights to liquidating distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination within 24 months. TABLE OF CONTENTS
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001684508_cannis-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001684508_cannis-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..fbd6cea4f0b9836552cead6d69367e035399c9d4
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001684508_cannis-inc_prospectus_summary.txt
@@ -0,0 +1,107 @@
+PROSPECTUS SUMMARY
+
+ 
+
+AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, WE, US, OUR, AND ZARTEX INC. REFERS TO ZARTEX INC. THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK.
+
+ 
+
+ZARTEX INC.
+
+ 
+
+Zartex Inc. was incorporated in Nevada on August 17, 2016. We are development stage company and
+
+commence operations in the business of software development. We are a software company that
+
+deliver
+
+s
+
+ services for garment distribution industry. Our main service is the IT product for garment retailers. We plan to deliver a software product (to which we may refer as a program, a web-engine or an application), the visible part of which we plan to design in a form of a web catalogue. With many offers in the garment industry producers and retailers might experience difficulties in delivering their offer to their potential customers. Customers might feel insecure about how their actual size matches to the size of clothing displayed on the retailer s or producer s website. We expect that employment of our program can make it easier to advertize and sell garment items, for retailers, select and buy, for garment buyers.
+
+We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $42,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate sufficient revenue in the first 12 months after completion our offering or ever generate significant revenue.
+
+Being a development stage company, we have very limited operating history. If we do not generate sufficient revenue we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at 4760 South Pecos Rd. Suite 103, Las Vegas, NV 89121. Our phone number is (775) 391-8588. 
+
+From inception (August 17, 2016) until the date of this filing, we have had limited operating activities. Our financial statements from inception (August 17, 2016) through
+
+November 30, 2016
+
+, reports
+
+$5,000 of
+
+revenue and a net loss of $
+
+1,733
+
+. Our independent registered public accounting firm has issued an audit opinion for Zartex Inc., which includes a statement expressing substantial doubt as to our ability to continue as a going concern. To date, we have developed our business plan and developed business-model of our company
+
+, we have developed our software and started our sales
+
+. On November 1, 2016, we signed agreement with Ken Fregt Shoping, LLC. As a result of this agreement we have generated $2,800 of revenue
+
+. We sold our software called Match Me in format of application. We also provided the service of software customization. Ken Fregt Shoping, LLC plans to use our software engine in store s electronocal catalog.
+
+On November 16, 2016, we signed the second Software Acquisition Agreement and as the result of this agreement we generated $2,200 of revenue.
+
+As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. 
+
+Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $42,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $42,000, our business may fail. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities.
+
+5 | Page
+
+THE OFFERING
+
+The Issuer:
+
+ 
+
+Zartex Inc.
+
+Securities Being Offered:
+
+ 
+
+5,000,000 shares of common stock.
+
+Price Per Share:
+
+ 
+
+$0.02
+
+Duration of the Offering:
+
+ 
+
+The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 5,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 5,000,000 shares registered under the Registration Statement of which this Prospectus is part. 
+
+ 
+
+Gross Proceeds
+
+ 
+
+If 25% of the shares sold - $25,000
+
+If 50% of the shares sold - $50,000
+
+If 75% of the shares sold - $75,000
+
+If 100% of the shares sold - $100,000
+
+Securities Issued and Outstanding:
+
+There are 5,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Aleksandr Zausaev. 
+
+If we are successful at selling all the shares in this offering, we will have 10,000,000 shares issued and outstanding.
+
+Subscriptions
+
+All subscriptions once accepted by us are irrevocable.
+
+Registration Costs
+
+We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001685237_temir-corp_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001685237_temir-corp_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..69faac99bd69ccb0270e3c3eb4462422522f3d9c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001685237_temir-corp_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 5
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001686330_jwiz-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001686330_jwiz-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..30d0cd9e92d3f12e6dbb9e64bcdf6e0a91b4cc08
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001686330_jwiz-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+prospectus and does not contain all of the information that you should consider in making your investment decision. This summary is not complete and does not contain all of the information you should consider before investing in our common shares. Before purchasing any common shares in this offering, you should carefully read this entire prospectus, particularly the section entitled "Risks Factors" and any free writing prospectus that we may authorize to be delivered or made available to you, information incorporated herein by reference, our historical financial statements and the exhibits to the registration statement of which this prospectus is a part. Unless specifically provided otherwise, all of the information provided in this prospectus, as well as in any free writing prospectus that we may authorize to be delivered or made available to you, relates to us. Unless otherwise specified, all references in this prospectus to "us," "our," or "our company," are references to JWiz, Inc. and its predecessor, Jewish Marketing Solutions, LLC ("Jewish Marketing Solutions") and its subsidiaries, Dag Jewish Directories Inc. and Dag Jewish Directories - Israel Inc., both New York corporations. We offer online marketing solutions that enable small, local businesses to connect with Jewish consumers in their communities. We provide online marketing solutions, including online advertising and sales promotions, lead generation, social media networking, website design, development and hosting and search engine optimizations, to small, local businesses. Our solutions are simple, affordable and comprehensive and provide our customers with greater exposure and access to Jewish communities in the New York metropolitan area, which includes the five boroughs of New York City, Nassau, Suffolk and Westchester counties in New York State and northern New Jersey; Rochester, New York; Boca Raton and Miami, Florida; Los Angeles, California; and Minneapolis, Minnesota. Through our solutions, our customers have immediate and direct access to a highly desirable market segment. For example, in 2011, the number of Jewish households in the eight county New York area was 694,000 and 1.77 million people lived in these households, approximately 62.5% of the Jewish population was employed and 30% reported income in excess of $100,000 per year. In executing our business plan, we have created several websites that target Jewish communities in the metropolitan areas in which we operate. These websites — www.jwiz.com, www.jwizclassifieds.com, www.jewishyellow.com, www.jewishreferralservice.com and www.jewishmasterguide.com — attract visitors daily and, thus, are an effective platform for businesses who seek to promote their products and services directly to the Jewish community regardless of whether their products and services are specifically intended for that community. These sites are a destination point for the Jewish community, which, in turn, attracts additional advertisers. In addition to our principal executive offices in Kew Gardens, New York, we have independent sales offices in six other locations — Fairlawn, New Jersey; Miami and Boca Raton, Florida; Los Angeles, California; Rochester, New York; and Minneapolis, Minnesota — through which we solicit advertisers from among the local businesses. Our growth strategy contemplates establishing independent sales offices in major cities throughout the United States where there is a significant Jewish population. Longer term, we hope to expand into cities with large Jewish communities in Canada, Europe, Latin America and Asia-Pacific as well. During the last three years, we have digitalized our operations, successfully moving from print to online directories. In doing so, we have managed to efficiently maintain the in-person nature of our service, which we believe to be a key benefit our customers find attractive and an important component of our strategy, despite the demands it places on our financial and human resources. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER 1, 2016 ____________ COMMON SHARES JWIZ, INC. This is a firm commitment initial public offering of __________ common shares of JWiz, Inc. No public market currently exists for our common shares. We anticipate that the initial public offering price of our common shares will be between $____ and $______ per share. We intend to list our common shares for trading on the Nasdaq Capital Market under the symbol "JWIZ". No assurance can be given that our application will be approved. The registration statement of which this prospectus forms a part also registers warrants to be issued to the representative of the underwriters in connection with this offering as well as the ________ common shares underlying those warrants. Investing in our common shares involves a high degree of risk. See "Risk Factors" beginning on page 9 of this prospectus for a discussion of information that should be considered in connection with an investment in our common shares. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Per Share Total Public offering price $ $ Underwriting discounts and commissions (1) $ $ Proceeds to JWiz (before expenses) $ $ (1)Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering to Joseph Gunnar & Co., LLC, the representative of the underwriters. See "Underwriting" for a description of compensation payable to the underwriters. We have granted a 45-day option to the representative of the underwriters to purchase up to _______ common shares solely to cover over-allotments, if any. The underwriters expect to deliver our common shares to purchasers in the offering on or about _____ __, 2016. Joseph Gunnar & Co. ____________ __, 2016 Our Online Marketing Solutions We are addressing the needs and requirements of small, local business operators that target the local Jewish community in which they operate by offering them an array of online marketing solutions including one or more of the following: online advertising through listing in our websites; online classified listing; online sales promotions through our websites; lead generation; website design, development and hosting; social networking; and online local listings. Our Growth Strategy Our primary business objective is to become the premier provider of online marketing solutions to small, local businesses targeting local Jewish communities; to become the primary online destination for Jewish communities in the United States, Canada, Europe, Latin America and Asia-Pacific; and to bring both groups together on our various websites, creating a symbiotic relationship between the two constituencies. Our strategy is to build brand awareness using marketing strategies that focus on our principal customer base – i.e., small, local businesses – and our target market – i.e., Jewish communities in major cities. We believe that the growth of our business will be driven by the symbiotic relationship between these two constituencies. We expect growth in our user base and user engagement to encourage more businesses to advertise on our websites and growth in our customer base to drive growth in user traffic and engagement. We believe that as we attract more users and as they take advantage of the opportunities made available on our websites (i.e., sales promotions), the value proposition for our customers and potential customers increases, incentivizing them to become part of our platform. At the same time, growth in our customer base and more opportunities for user engagement, is expected to enable us to develop a more robust user base. Our plan for growth includes the following elements: continue to grow our user base; continue to grow our customer base; enhance brand awareness; focus on user loyalty and website enhancement; geographic expansion; increase operational efficiency; develop new and alternative applications to accommodate evolving technology and changing consumer preferences; continue to develop innovative and creative online marketing solutions; continue to serve our dynamic and active user community; find new sources of revenue; and acquisitions. TABLE OF CONTENTS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001687065_china_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001687065_china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e91db9ebfa37e23f200349426e099e8c09f6a92c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001687065_china_prospectus_summary.txt
@@ -0,0 +1,83 @@
+PROSPECTUS SUMMARY
+ 
+This summary provides an overview of selected information contained elsewhere in this prospectus. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the more detailed information in this prospectus and review our financial statements contained herein. 
+ 
+AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, "WE," "US," AND "OUR" REFERS TO KOKOS GROUP INC. THE FOLLOWING SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION TO PURCHASE OUR COMMON STOCK. ALL FINANCIAL INFORMATION IS STATED IN UNITED STATES DOLLARS UNLESS OTHERWISE SPECIFIED. OUR FINANCIAL STATEMENTS ARE PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPALS GENERALLY ACCEPTED IN THE UNITED STATES.
+ 
+KOKOS GROUP INC.
+ 
+We are an emerging growth stage company which intends to bottle, market, distribute and sell our own brand of organic coconut water, which we intend to name "Koos Coconut Water." We currently have no product, but we intend to identify and distinguish our prospective bottled coconut water product as being pure organic, non-concentrate, no additives and sourced from the Philippines. Kokos Group Inc. was incorporated in Nevada on July 26, 2016. We intend to use the net proceeds from this offering to operate our business only until Phase I of our Plan of Operation. Being a development stage company, we have no revenues or operating history. Our principal executive offices are located at One World Trade Center, 121 Southwest Salmon Street, Suite 1100, Portland, Oregon 97204. Our phone number is (503) 471-1332. 
+ 
+From inception until the date of this filing, we have had no operating activities. Our financial statements from inception (July 26, 2016) through the year ended August 31, 2016 reports no revenues and a net loss of $1,339. Our independent registered public accountant has issued an audit opinion for Kokos Group Inc. which includes a statement expressing substantial doubt as to our ability to continue as a going concern.
+ 
+Kokos Group Inc. anticipates that it will derive its income from the sale of its prospective bottled coconut water product. We do not anticipate earning revenues until such time as we enter into commercial operation. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully assemble, construct and sell any products or services related to our planned activities.
+ 
+As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop.
+ 
+5
+
+Table of Contents
+
+ 
+THE OFFERING
+ 
+Kokos Group Inc. has 10,000,000 of common stock issued and outstanding and is registering an additional 5,000,000 shares of common stock for offering to the public. The Company may endeavor to sell all 5,000,000 shares of common stock after the registration becomes effective. The price at which the Company offers these shares is fixed at $0.03 per share for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. Kokos Group Inc. will receive all proceeds from the sale of the common stock.
+ 
+ The Issuer:
+Kokos Group Inc.
+
+ 
+ 
+ 
+
+Securities Being Offered:
+5,000,000 shares of common stock
+
+ 
+ 
+ 
+
+Offering Price:
+$0.03 per common share
+
+ 
+ 
+ 
+
+Minimum number of shares to be sold in this offering:
+None
+
+ 
+ 
+ 
+
+Termination of the Offering:
+This offering will conclude at when all the securities offered are sold or within 120 days after the registration statement becomes effective with the Securities and Exchange Commission whichever occurs first. Kokos Group Inc. may at its discretion extend the offering for an additional 60 days. (see Plan of Distribution).
+
+ 
+ 
+ 
+
+Net Proceeds:
+$139,733 (one hundred and thirty-nine thousand seven hundred ant thirty-three). (The $139,733 is Net of the $10,267 registration costs.) 
+
+ 
+ 
+ 
+
+Use of Proceeds:
+See "Use of Proceeds" and the other information in this prospectus.
+
+ 
+ 
+ 
+
+Outstanding Shares of Common Stock:
+There are 10,000,000 shares of common stock issued and outstanding as August 31, 2016 held solely by our President and Chief Executive Officer, and Secretary, Jeoffrey Baterina. 
+
+ 
+ 
+ 
+
+Terms of the offering:
+The Company s president and sole director will sell the common stock upon the effectiveness of this registration statement.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001688647_blue-sky_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001688647_blue-sky_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..97c41dac5d6fa233820047949a374a00967696e5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001688647_blue-sky_prospectus_summary.txt
@@ -0,0 +1 @@
+Marketing Objectives Continue to establish a strong presence in among the 20 states that the Company will target from the onset of operations. Development of strategic marketing relationships with a number of mortgage brokers, attorneys, and accountants throughout the Company s targeted Southwestern and Midwestern United States markets. Continue to make substantial reinvestments into the Company s online visibility. Continue to establish a strong presence in among the 20 states that the Company will target from the onset of operations. Development of strategic marketing relationships with a number of mortgage brokers, attorneys, and accountants throughout the Company s targeted Southwestern and Midwestern United States markets. Continue to make substantial reinvestments into the Company s online visibility (via www.blueskymortgageloans.com). At the onset of operations, the Company will develop a network of affiliated mortgage brokers that are licensed within the State of Texas and other Midwestern states in order to drive business to the Company. These agents will be compensated based on loan closings. These individuals will act as independent contractors on behalf of the Company. Additionally, the business will pay for mortgage leads among companies that specialize in lead generation. The Company will use a number of businesses that have extensive experience with providing quality leads among prime borrowers. Management anticipates that each qualified loan lead will cost the business $50 to $150 depending on the verified credit quality of the potential borrower, the amount they are seeking to borrow, and how quickly they need a mortgage. The Company will use an online based marketing campaign to develop its sales. Primarily, the Company will use search engine optimization techniques that increase the Company s visibility when selected key words are used among major search engines. For instance, when a person does a Google search for mortgages in a selected market, the Company will appear on the first page of the search. This strategy is technically complicated, and the Company will use a search engine optimization firm to develop the Company s visibility on a non-paid basis. A majority of web portal and search engine companies use very complicated algorithms to determine a website s relevance in relation to a specific keyword. These website visibility strategies will be heavily implemented into the Company s website. At the onset of operations, Blue Sky will continue to use several pay methods for increasing the Company s online visibility. This strategy is expensive, but the results can be phenomenal if this marketing strategy is properly executed. These advertisements appear along the border and side of a website, and each time a person clicks on the website, a small fee ranging from fifty cents to one dollar is charged to the Company s account. An SEO firm will also manage this aspect of the Company s marketing operation. Management expects that these costs will reach approximately $15,000 per year towards the end of the first expansion year. We receive fees from both the closing of the mortgage as well as a premium from the sale of mortgages to investors in the secondary market. However, each transaction yields approximately 2.5% to 3% of the face value of the transaction. Risks and Uncertainties facing the Company As a development stage company, the Company has no operating history and is expected to continuously experience losses in the near term. The Company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the Company must build and market its development plans in order to execute the business plan of the Company on a broad scale. One of the biggest challenges facing the Company will be in securing adequate capital. Likewise, operating the Company will need to secure sufficient capital to originate and purchase prime mortgages. Secondarily, following development of its products and properties, a major challenge will be implementing effective sales, marketing and distribution strategies to reach the intended end customers. The Company has considered and devised its initial sales, marketing and advertising strategy, however, the Company will need to skillfully implement this strategy in order to achieve success in its business. Due to these and other factors, the Company s need for additional capital, the Company s independent auditors have issued a report raising substantial doubt of the Company s ability to continue as a going concern. The Offering Blue Sky Group Holdings, Inc ("Blue Sky Group Holdings, Inc," "Company," "we," or "us.") is offering for sale a maximum of 1,000,000 shares of its common stock at a fixed price of $20.00 per share. There is no minimum number of shares that must be sold by us for the offering to close, and we will retain the proceeds from the sale of any of the offered shares that are sold. The offering is being conducted on a self-underwritten, best efforts basis, which means our president and chief executive officer Chirag Patel, will attempt to sell the shares. This prospectus will permit our president and chief executive officer to sell the shares directly to the public, with no commission or other remuneration payable to him for any shares he may sell. Chirag Patel will sell the shares and intends to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, he will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934. The intended methods of communication include, without limitations, telephone and personal contact. For more information, see the section of this prospectus entitled "Plan of Distribution". The common stock offered by this prospectus is being offered by the company. The common stock may be sold or distributed from time to time by the company directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the common stock offered by this prospectus could be effected in one or more of the following methods: ordinary brokers transactions, transactions involving cross or block trades, through brokers, dealers, or underwriters who may act solely as agents, "at the market" into an existing market for the common stock, in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; in privately negotiated transactions; or any combination of the foregoing. Since there is no minimum amount of shares that must be sold by the company, you may receive no proceeds or very minimal proceeds from the offering and potential investors may end up holding shares in a company that: - Has not received enough proceeds from the offering to begin operations; and - Has no market for its shares. The proceeds from the sale of the shares in this offering will be payable to the Company. All subscription agreements and checks are irrevocable and should be delivered to the Company at the address provided in the Subscription Agreement (see Exhibit). All subscription funds will be held in a noninterest-bearing account subject to the completion of the offering. The offering will be completed 180 days from the effective date of this prospectus, unless extended by our board of directors for an additional 180 days. There is no minimum number of shares that must be sold. All subscription agreements and checks for payment of shares are irrevocable (except as to any states that require a statutory cooling-off period or rescission right). We will deliver stock certificates attributable to shares of common stock purchased directly to the purchasers approximately 30 days after the close of the offering or as soon thereafter as practicable or process them through a book entry system. The offering price of the common stock has been determined arbitrarily and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings, if any, or net worth. Shares of common stock offered by us are a maximum of 1,000,000 shares. There is no minimum number of shares that must be sold by us for the offering to close. Use of proceeds Blue Sky Group Holdings, Inc ("Blue Sky Group Holdings, Inc," "Company," "we," or "us.") will use the proceeds from the offering to pay for professional fees and other general expenses, as well as fund the development of the Company s operations. The total estimated costs of the offering ($15,974) may exceed the amount of offering proceeds. Termination of the offering The offering will conclude when all 1,000,000 shares of common stock have been sold, or 180 days after this registration statement becomes effective with the Securities and Exchange Commission. We may at our discretion extend the offering for an additional 180 days.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001689006_healing_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001689006_healing_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001689006_healing_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CIK0001691004_jbs-foods_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CIK0001691004_jbs-foods_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f4ea1e898ec6557a7c8978f46c1520fd52f9f15c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CIK0001691004_jbs-foods_prospectus_summary.txt
@@ -0,0 +1 @@
+The following is a summary of some of the information contained in this prospectus. It does not contain all the details concerning JBS Foods International or the transaction, including information that may be important to you. We urge you to read this entire document carefully, including Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International and the financial statements and the notes thereto included elsewhere in this prospectus. Overview We are one of the world s largest food companies and the world s largest protein company in terms of revenue. Our pro forma net revenue for the nine-month period ended September 30, 2016 and the year ended December 31, 2015 was R$109,422.5 million (US$33,709.9 million) and R$136,257.0 million (US$41,976.9 million), respectively. Through strategic acquisitions in new geographies, primarily in the United States, Australia, Brazil and Europe, we have created a diversified global platform that allows us to prepare, package and deliver fresh, processed and value-added beef, poultry, pork, lamb and sheep products and animal by-products. During 2015 and the nine-month period ended September 30, 2016, we sold our products in approximately 190 countries on six continents, and for the nine-month period ended September 30, 2016 and the year ended December 31, 2015, we generated 92.7% and 92.6%, respectively, of our pro forma gross revenue from sales outside of Brazil. Our protein products are recognized through our well-known brands, including Swift, Swift Premium, 1855, Pilgrim s Pride, Pierce, Gold Kist Farms and Del Dia in North America, Seara, Doriana and Caba a Las Lilas in South America, Primo, Great Southern and Beehive in Australia and New Zealand and Moy Park and O Kane in Europe. We believe that, as of September 30, 2016, we were one of the largest: beef producers in the world in terms of capacity, with operations in the United States, Canada, Australia, Argentina, Paraguay, and Uruguay and an aggregate daily processing capacity of approximately 47,800 head of cattle; poultry producers in the world in terms of capacity, with operations in the United States, Mexico, Puerto Rico, Brazil and the United Kingdom and an aggregate daily processing capacity of approximately 13.7 million chickens; pork producers in the United States and Brazil in terms of capacity, with aggregate daily processing capacities of approximately 89,700 hogs and 21,200 hogs, respectively. We also operate one pork facility in Australia with a daily processing capacity of approximately 4,000 hogs; and lamb and sheep producers in the world in terms of capacity, with operations in Australia and an aggregate daily slaughtering capacity of approximately 23,800 lambs. We also believe that we are a significant producer of further processed and value-added meat products in the world, with an aggregate monthly production capacity of approximately 189,400 tons as of September 30, 2016. Our fresh products include fresh and frozen cuts of beef, pork, lamb and sheep, whole chickens and chicken parts. Our branded processed and value-added meat products include products that are cut, ground and packaged in a customized manner for specific orders and include frozen, cooked, canned, seasoned, marinated and consumer-ready products. We sell our products primarily to retailers (such as supermarkets, club stores and other retail distributors), many of which products include our proprietary brands, and foodservice companies (such as restaurants, hotels, foodservice distributors and additional processors) in the countries where we operate our facilities, which we classify as domestic sales, and elsewhere, which we classify as export sales. As of September 30, 2016, we had more than 250,000 active customers worldwide, including retailers and wholesalers. Table of Contents The information in this preliminary prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be distributed or sold prior to the time the registration statement becomes effective. This preliminary prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in any jurisdiction where such offer or solicitation is not permitted. PRELIMINARY PROSPECTUS (Subject to Completion) Dated , 2017 Common A Shares JBS FOODS INTERNATIONAL N.V. US$ per Common A Share This is an initial public offering by JBS Foods International N.V., or JBS Foods International, of of its common A shares, with a nominal value of 0.04 per share, or the JBS Foods International common A shares. JBS Foods International anticipates that the initial public offering price will be between US$ and US$ per JBS Foods International common A share. JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name JBS Foods International B.V. On , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands. Currently, no public market exists for the JBS Foods International common A shares. JBS Foods International intends to apply to list the JBS Foods International common A shares on the New York Stock Exchange, or the NYSE, under the symbol JBS. JBS Foods International will have two types of common shares outstanding after this offering: the JBS Foods International common A shares and common B shares, with a nominal value of 0.40 per share, or the JBS Foods International common B shares. Each JBS Foods International common A share will entitle its holder to one vote on all matters presented to our shareholders generally, and each JBS Foods International common B share will entitle its holder to ten votes on all matters presented to our shareholders generally. Pursuant to the JBS Foods International articles of association, a holder of JBS Foods International common B shares is at any time entitled to request conversion of its JBS Foods International common B shares into JBS Foods International common A shares pursuant to a mechanic that results in a 1:1 ratio, while JBS Foods International common A shares are not convertible into JBS Foods International common B shares under any circumstances. Except for voting and conversion rights, the JBS Foods International common A shares and the JBS Foods International common B shares have the same dividend and other rights. For more information, see Description of Share Capital. Upon completion of this offering, all of the issued and outstanding JBS Foods International common B shares will be held solely by a subsidiary of JBS S.A. The JBS Foods International common B shares are not expected to be listed on a stock exchange. Investing in the JBS Foods International common A shares involves risks. See Risk Factors beginning on page 20 to read about certain factors you should carefully consider before deciding to invest in the JBS Foods International common A shares. Per Common A Share Total Initial public offering price US$ US$ Underwriting discounts and commissions US$ US$ Proceeds to us (before expenses) US$ US$ The JBS Foods International common A shares are expected to be delivered to purchasers on or about , 2017. None of the U.S. Securities and Exchange Commission, or the SEC, any state securities commission in the United States or any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful. This prospectus does not constitute an offer of securities to the public in the Netherlands within the meaning of article 5:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht) and is not a prospectus or an offer document within the meaning of the Prospectus Directive (2003/71/EC), as amended. The date of this prospectus is , 2017. Table of Contents This prospectus is not an offer to sell and it is not a solicitation of an offer to buy securities in any circumstances under which such offer or solicitation is unlawful or in any jurisdiction in which the offer or sale thereof is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. Neither we nor any of our affiliates have taken any action under non-U.S. regulations to facilitate a public offer of the JBS Foods International common A shares outside the United States. Non-U.S. shareholders should consult their advisors in considering whether there are any restrictions or limitations on transactions in the JBS Foods International common A shares that may apply in their home countries. Neither we nor any of our affiliates can provide any assurance about whether such limitations may exist. Through and including , 2017 (the 25th day after the date of this prospectus), all dealers effecting transactions in the JBS Foods International common A shares, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription. In this prospectus, unless otherwise noted, JBS Foods International refers to JBS Foods International N.V., and we, our, us, our company or like terms refer to JBS Foods International and its consolidated subsidiaries, assuming, where the context requires, that the asset contribution has been completed as of the date of this prospectus. JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name JBS Foods International B.V. On , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands. In addition, in this prospectus, unless otherwise noted or where the context requires otherwise: the Acquisition of Tyson Foods Assets means, collectively, our acquisition of the Brazilian and Mexican poultry assets of Tyson Foods. We concluded the Acquisition of Tyson Foods Assets in Brazil and Mexico on December 1, 2014 and June 29, 2015, respectively. For more information about the Acquisition of Tyson Foods Assets in Brazil and Mexico, see Business History and Development Acquisition of Tyson Foods Assets; the asset contribution means the contribution by JBS S.A. of substantially all of its assets, excluding the Brazil Beef Businesses, to JBS Foods International. In connection with the asset contribution, JBS Foods International will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. The asset contribution is expected to take place prior to the closing of the JBS Foods International IPO. For more information, see The Asset Contribution; AUS$ means Australian dollars, the official currency of Australia; Australia means the Commonwealth of Australia; Banco Original means, collectively: (1) Banco Original S.A.; and (2) Banco Original do Agroneg cio S.A., each a Brazilian financial institution owned by J&F. As of November 24, 2016, Banco Original S.A. and Banco Original do Agroneg cio S.A. owned 0.14% and 0.05%, respectively, of JBS S.A. s total capital stock. For more information about the shareholders of JBS S.A., see Principal Shareholders; the Batista Family means our founder, Jos Batista Sobrinho, his wife, Flora Mendon a Batista, and five of their children: Valere Batista Mendon a Ramos, Vanessa Mendon a Batista, Wesley Mendon a Batista, Joesley Mendon a Batista and Vivianne Mendon a Batista; Table of Contents The following table sets forth some of our main pro forma financial information for the periods indicated: For the nine-month period ended September 30, For the year ended December 31, 2016 (1) 2016 2015 (1) 2015 (unaudited) (in millions of U.S. dollars) (in millions of reais, except percentages) (in millions of U.S. dollars) (in millions of reais, except percentages) Pro forma net revenue 33,709.9 109,422.5 41,976.9 136,257.0 Pro forma EBITDA (2) 2,059.9 6,686.5 3,419.4 11,099.5 Pro forma Adjusted EBITDA (2) 2,067.1 6,709.7 3,471.8 11,269.6 Pro forma Adjusted EBITDA Margin (3) 6.1 % 8.3 % (1) Solely for the convenience of the reader, amounts in reais have been translated into U.S. dollars at an exchange rate of R$3.246 per US$1.00, which was the commercial selling rate for U.S. dollars in effect on September 30, 2016, as reported by the Central Bank of Brazil. These U.S. dollar amounts have not been audited. (2) EBITDA and Adjusted EBITDA are used as measures of performance by our management. We calculate EBITDA as net income plus: income taxes; finance expense (income), net; and depreciation and amortization (including amortization of biological assets). We calculate Adjusted EBITDA as EBITDA minus: share of profit of equity accounted investees, net of tax; plus: bargain purchase gain, indemnity, reorganization and restructuring expenses and other non-recurring items, net; and non-recurring tax contingencies. EBITDA and Adjusted EBITDA are useful tools for assessing financial performance but are not reliable indicators of a company s ability to generate cash to service its debt obligations because certain of the items added to net income (loss) to determine EBITDA and Adjusted EBITDA involve outlays of cash. As a result, actual cash available to service debt obligations will be different from EBITDA and Adjusted EBITDA. You should rely primarily on our IFRS results, and use EBITDA and Adjusted EBITDA in a supplemental manner in making your investment decision. For more information about the limitations of EBITDA and Adjusted EBITDA, see Presentation of Financial and Other Information Non-IFRS Financial Measures. For reconciliations of EBITDA and Adjusted EBITDA to net income for the periods indicated, see Summary Summary Historical and Pro Forma Financial Data Summary Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International Non-IFRS Financial Measures. (3) Pro forma Adjusted EBITDA margin is calculated by dividing pro forma Adjusted EBITDA by pro forma net revenue. Competitive Strengths Our competitive strengths include the following: Scale and leading market positions We are one of the world s largest food companies and the world s largest protein company in terms of revenue. In terms of daily processing capacity, we believe we are among the leading beef, pork, chicken and lamb processors in the world. We are well positioned to be a primary provider of beef, pork, chicken and lamb, in addition to branded processed and value-added products, for our customers protein needs and to capitalize on growing global demand within the food industry. We are a valued supplier for our large integrated customers due to our ability to ensure supply and provide competitive pricing. We have established a reputation for dependable quality and highly responsive service. Table of Contents BNDES means the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econ mico e Social BNDES); BNDESPar means BNDES Participa es S.A., a corporation (sociedade por a es) incorporated under the laws of Brazil and wholly owned by BNDES. As of November 24, 2016, BNDESPar owned 21.4% of JBS S.A. s total outstanding capital stock. For more information about the shareholders of JBS S.A., see Principal Shareholders; Brazil means the Federative Republic of Brazil; the Brazil Beef Businesses means the assets and liabilities associated with JBS S.A. s Brazilian beef business and related activities, including its leather business; Caixa means Caixa Econ mica Federal, a financial institution owned by the Brazilian federal government. As of November 24, 2016, Caixa owned 5.3% of JBS S.A. s total outstanding capital stock. For more information about the shareholders of JBS S.A., see Principal Shareholders; the Cargill Pork Acquisition means our acquisition of Cargill Meat Solutions Corporation s U.S. pork business. We concluded the Cargill Pork Acquisition on October 30, 2015. For more information about the Cargill Pork Acquisition, see Business History and Development Cargill Pork Acquisition; Central Bank of Brazil means the Central Bank of Brazil (Banco Central do Brasil); dollars, U.S. dollars or US$ means United States dollars; EPA means the United States Environmental Protection Agency; EUR or means the Euro, the official currency of the European Economic Area; FB means FB Participa es S.A., a corporation (sociedade por a es) incorporated under the laws of Brazil. As of November 24, 2016, FB owned 44.3% of JBS S.A. s total outstanding capital stock. FB is a wholly-owned subsidiary of J&F. For more information about the shareholders of JBS S.A., see Principal Shareholders; FDA means the United States Food and Drug Administration; Granite Holdings means Granite Holdings S. r.l. (formerly Moy Park Lux S. r.l.), a private limited liability company (soci t responsabilit limit e) incorporated and existing under the laws of the Luxembourg. Granite Holdings is a wholly-owned subsidiary of JBS S.A. Prior to the closing of the JBS Foods International IPO, JBS S.A. will contribute 100% of the share capital of JBS Foods International to Granite Holdings. For more information, see Principal Shareholders; J&F means J&F Investimentos S.A. (formerly J&F Participa es S.A.), a corporation (sociedade por a es) incorporated under the laws of Brazil. J&F is controlled by the Batista Family through several holding companies and ZMF; J&F Australia means J&F Australia Pty Limited, an Australian proprietary limited company. J&F Australia is a wholly-owned subsidiary of J&F Oklahoma; J&F Oklahoma means J&F Oklahoma Holdings, Inc., a Delaware corporation. J&F Oklahoma is a wholly-owned subsidiary of J J&F Ranch Canada means J&F Ranch Canada Inc., a Canadian corporation. J&F Ranch Canada is a wholly-owned subsidiary of J&F Oklahoma; JBS Australia means JBS Australia Pty Limited, an Australian proprietary limited company. JBS Australia is our wholly-owned subsidiary; JBS Canada means JBS Food Canada ULC (formerly JBS Foods Canada Inc.), a Canadian unlimited company. JBS Canada is our wholly-owned subsidiary; Table of Contents Our economies of scale allow us to spread our fixed costs and maintain a competitive cost position in the markets in which we operate. Furthermore, our scale provides us with leverage in negotiating vendor agreements, such as freight, packaging, maintenance suppliers and services. Diversified business model with international reach Our business is well-diversified across different types of products and all major distribution channels. Our business is also well-diversified geographically with respect to production and distribution. Diversified food products offerings: We are well positioned to be a primary protein provider to our customers. Selling multiple sources of food products grants us the opportunity to cross-sell to our customers and to diversify typical industry risks such as industry cycles, the impact of species-based diseases and outbreaks and changes in consumer preferences. As a result of our diversification of products across multiple proteins, our business is less likely to be severely impacted by issues affecting any one form of protein. Sales and distribution channel diversification: We benefit from our diversified sales and distribution channels, which include national and regional retailers (including supermarket chains, independent grocers, club stores and wholesale distributors), the foodservice industry (including foodservice distributors, which service restaurants and hotel chains and other institutional customers) and further processors (including makers of bacon, sausage and deli and luncheon meats). As of September 30, 2016, we sold our products to more than 250,000 customers worldwide, with no single customer accounting for more than 5.0% of our pro forma net sales for the nine-month period ended September 30, 2016. This diversification reduces our dependence on any one market or customer and provides multiple channels for potential growth. Geographic and export diversification: Our processing platforms in the major meat-producing countries provide us with sufficient scale and operating flexibility to satisfy demand regardless of market conditions and sanitary restrictions. We sell our products in approximately 190 countries on six continents. Our geographic diversification enables us to reduce exposure to any one market and capitalize on worldwide demand. Additionally, having access to international markets allows us to potentially generate higher returns as many of our export products, such as tongue, heart, kidney and other variety meats, garner higher demand and prices in foreign markets with diverse local customs, particularly in Asia and the Middle East. Successful integration of acquisitions: Our management has a strong track record of acquiring and successfully integrating operations, as evidenced by the more than 30 acquisitions we have made over the last 20 years, including, most recently, the Primo Acquisition, the Acquisition of Tyson Foods Assets in Mexico, the Cargill Pork Acquisition and the Moy Park Acquisition in 2015, the Acquisition of Tyson Foods Assets in Brazil in 2014 and the Seara Acquisition in 2013. Furthermore, we have leveraged this expertise to rapidly integrate and realize cost savings and margin improvement from our acquisitions. We continue to identify and develop plans to realize additional cost saving opportunities from the integration of our acquisitions. We believe that due to our leadership, global production scale, financial stability and experience in acquiring and integrating companies, we are well positioned to operate as one of the leading companies in the consolidation of the global food industry. Established customer relationships We have long-standing relationships with numerous well-established, global customers, many of whom have been doing business with us for more than 20 years. We believe our scale and footprint position us to serve large national and multinational customers (including the largest foodservice distributors, restaurants and retail chains), to whom we can provide a variety of products at locations around the world. Additionally, we are focused on developing long-term, mutually beneficial relationships with our customers, who, we believe, Table of Contents JBS Five Rivers means JBS Five Rivers Cattle Feeding LLC, a Delaware limited liability corporation. JBS Five Rivers is our wholly-owned subsidiary and one of the largest feedlot businesses in the United States; the JBS Foods International IPO or this offering means the initial public offering of JBS Foods International common A shares being registered under the registration statement of which this prospectus is a part; a JBS Foods International common A share means a common A share of JBS Foods International, with a nominal value of 0.04 per share; a JBS Foods International common B share means a common B share of JBS Foods International, with a nominal value of 0.40 per share; the JBS Foods International shares means all common A shares and common B shares of JBS Foods International; the JBS Group means JBS S.A. and its consolidated subsidiaries; JBS S.A. means JBS S.A., a corporation (sociedade an nima) incorporated under the laws of Brazil. JBS S.A. is the ultimate parent company of the JBS Group. JBS S.A. is our predecessor for accounting purposes. For more information, see Principal Shareholders; JBS USA means JBS USA Lux S.A. (formerly JBS USA, LLC), a public limited liability company (soci t anonyme) incorporated and existing under the laws of Luxembourg; JBS USA Holding means JBS USA Holding Lux S. r.l. (formerly JBS USA Holdings, Inc.), a private limited liability company (soci t responsabilit limit e) incorporated and existing under the laws of Luxembourg; Luxembourg means the Grand Duchy of Luxembourg; Marfrig means Marfrig Global Foods S.A. (formerly Marfrig Alimentos S.A.); the Moy Park Acquisition means our acquisition of 100% of the total capital stock of Moy Park Holdings (Europe) Ltd., owner of the companies that comprised Marfrig s United Kingdom-based Moy Park business. We concluded the Moy Park Acquisition on September 28, 2015. For more information about the Moy Park Acquisition, see Business History and Development Moy Park Acquisition; the Netherlands means the European part of the Kingdom of the Netherlands; PPC means Pilgrim s Pride Corporation (an SEC registrant), a Delaware corporation. PPC is a poultry producer with operations in the United States, Mexico and Puerto Rico. As of September 30, 2016, we owned 77.0% of PPC s total capital stock; the Primo Acquisition means our acquisition of 100% of the total capital stock of Australian Consolidated Food Holdings Pty Limited, an Australian proprietary limited company. We concluded the Primo Acquisition on March 30, 2015. For more information about the Primo Acquisition, see Business History and Development Primo Acquisition; real, reais or R$ means the Brazilian real, the official currency of Brazil; the Seara Acquisition means our acquisition of the Seara Brasil poultry, pork and processed food business unit from Marfrig. We concluded the Seara Acquisition on September 30, 2013. For more information about the Seara Acquisition, see Business History and Development Seara and Zenda Acquisitions; the transaction means, collectively, the asset contribution and the JBS Foods International IPO; Tyson Foods means Tyson Foods, Inc.; Table of Contents consider us to be an extension of their operations. Our high-quality, long-standing relationships provide us with greater revenue stability and forecasting transparency. Proven management team Our management team has a significant knowledge of the beef, pork and poultry industries. Certain members of our management have more than 25 years of experience in the management of our company or in the industries in which we operate. We believe that our management is one of the main factors responsible for the increase in our sales, improvement of our business and integration of our new acquisitions, transforming us into one of the leading companies in the global food industry. We also benefit from management ideas, best practices and talent shared with the seasoned management team at our parent company, JBS S.A., which has more than 50 years of experience operating beef processing plants in Brazil. Wesley Mendon a Batista, chief executive officer JBS S.A., has more than 25 years of operating experience in both the United States and Brazil, and along with the other members of the Batista Family, holds a significant stake in JBS S.A. Our Strategy Our strategy is continue our development as a leading global food company, with a focus on improving our processed, value added and branded product offerings and to seek consolidation opportunities to further enhance our diversified global production platform. Grow our prepared foods business Currently, we have established prepared foods businesses in Brazil (operating under the Seara brand) and in Australia (under the Primo and Hans brands). Prepared foods businesses allow us to integrate our activities and improve the profitability of our operations across the value chain. In addition, prepared foods generally have higher and more stable margins than our core fresh and frozen protein businesses. We intend to continue to invest in the growth of our prepared foods business through both organic growth and acquisitions in order to improve our margins and generate more stable earnings. Increase our value-added product offerings End consumers, as well retail and foodservice customers, are increasingly seeking more organic and natural protein products that are sold at premium prices. We have a number of products that have been introduced across all of our markets that offer organic, antibiotic free (ABF), vegetarian fed and/or all natural products to customers. We plan to continue to invest in the growth of these products, which are sold under the following brands: Swift, Swift Premium, 1855, Pilgrim s Pride, Pierce, Gold Kist Farms and Del Dia in North America; Seara, Doriana and Caba a Las Lilas in South America; Primo, Great Southern and Beehive in Australia and New Zealand; and Moy Park and O Kane in Europe. We continue to grow our value-added and case-ready products, which lower labor cost for our customers and offer greater convenience for consumers. Examples of our value-added product offerings include sliced, cubed, tenderized, canned, marinated and other consumer-ready products. These products are primarily offered to customers under our own brands. We intend to continue to expand our branded value-added product offerings through increased investment in our production facilities and selective acquisitions. We also intend to continue to invest in marketing to increase the awareness and consumer perception of our brands. We believe that increased sales of value-added products will significantly enhance our product margins. Table of Contents U.S. or United States means the United States of America; USDA means the United States Department of Agriculture; Vigor means Vigor Alimentos S.A., corporation (sociedade por a es) incorporated under the laws of Brazil. Vigor is a Brazilian dairy and food company. As of September 30, 2016, we owned 19.43% of Vigor s total capital stock. Vigor is considered our associate for accounting purposes, and we record our investment in Vigor using the equity method; the Zenda Acquisition means JBS S.A. s acquisition of the Uruguay-based Zenda leather business from Marfrig. JBS S.A. concluded the Zenda Acquisition on June 30, 2013. For more information about the Zenda Acquisition, see Business History and Development Seara and Zenda Acquisitions; and ZMF means ZMF Fundo de Investimentos em Participa es, a Brazilian investment fund. ZMF is one of the shareholders of J&F. The Batista Family (except for Jos Batista Sobrinho and Flora Mendon a Batista) owns 100% of the equity interests in ZMF. Table of Contents Drive operational improvement in our core business We have an established track record of reducing costs and increasing production yields. We intend to continue to be one of the most efficient food companies in the world with a focus on improving the efficiency of our production processes, logistics and distribution networks, investing in information technology and automation while continuing to benefit from gains in economies of scale and operating synergies from acquisitions. We believe we can enhance our yields through the development and implementation of modern processes and improvement of products throughout the production chain, improving carcass yield for fresh and processed meat, as well as processing hides. We will continue to focus on developing innovative processes and improving products throughout the production chain. Continue to successfully integrate acquisitions We have a successful history of acquiring and improving the operating performance of companies. We have successfully captured operational synergies, including the streamlining of managerial jobs, improvements to sales networks, consolidation of distribution networks, enhancement of freight and storage costs and the consolidation of risk and financial management systems. We have used this experience to integrate businesses such as PPC, Seara Brasil, Primo, Moy Park and Cargill Pork and will continue to apply this experience to integrate other companies that we may acquire in the future. Continue to prioritize food safety and animal welfare We prioritize food safety and animal welfare objectives in order to accomplish two principal goals. First, we focus on maintaining a high standard of food safety in order to ensure the quality of our products and attempt to avoid the potential adverse market reaction that is associated with recalls that occur from time to time in the meat processing industry. In addition, we understand our role in protecting public health requires constant research and the implementation of new and maturing best practices. We know that healthy animals produce healthy, quality products. We continually strive to improve our animal handling and husbandry efforts, working with industry leaders, academics and internal experts to ensure the well-being of the animals, which is critical to the success of our business. Recent Developments On November 29, 2016, PPC entered into a definitive agreement to acquire GNP Company, a leading provider of premium branded chicken products in the Upper Midwest of the United States, in an all cash, US$350.0 million transaction. The consummation of this acquisition is subject to customary closing conditions, including regulatory review and approval. PPC expects to close this acquisition during the first quarter of 2017. Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION Solely for the convenience of the reader, we have translated some amounts included in Summary, Summary Historical and Pro Forma Financial Data, Risk Factors, Capitalization, Dilution, Selected Historical Financial Data, Historical and Pro Forma Per Share Data and Business from reais into U.S. dollars using the selling rate as reported by the Central Bank of Brazil as of September 30, 2016 of R$3.246 to US$1.00. As a result of fluctuations in the real/U.S. dollar exchange rate, the selling rate at September 30, 2016 may not be indicative of current or future exchange rates. As a result, prospective investors should not read these convenience translations as representations that any amounts have been or could be converted into U.S. dollars or reais at those or any other exchange rates. The selling rate was R$3.905 to US$1.00 as of December 31, 2015, R$2.656 to US$1.00 as of December 31, 2014 and R$2.343 to US$1.00 as of December 31, 2013, in each case, as reported by the Central Bank of Brazil. See Exchange Rate Information for information regarding exchange rates for the real since January 1, 2011. Financial Statements JBS Foods International JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name JBS Foods International B.V. On , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands. JBS Foods International maintains its books and records in U.S. dollars, its functional currency. JBS Foods International s presentation currency is the real. Audited Historical Financial Statements This prospectus includes the audited historical financial statements of JBS Foods International as of November 25, 2016, and for the period from November 24, 2016, our date of incorporation, to November 25, 2016, and the related notes thereto, which were prepared in accordance with International Financial Reporting Standards, or IFRS, and interpretations issued by the IFRS Interpretations Committee applicable to companies reporting under IFRS, as issued by the International Accounting Standards Board, or the IASB, and audited in accordance with the Public Company Accounting Oversight Board, or PCAOB, standards. These audited historical financial statements of JBS Foods International have been prepared for the purposes of this offering and do not constitute statutory accounts prepared in accordance with the Dutch Civil Code. JBS Foods International will prepare separate financial statements in accordance with IFRS, as issued by the IASB, for the year ended December 31, 2016, which will be filed with the Trade Register of the Dutch Chamber of Commerce when issued by its directors. Such financial statements will be the first statutory financial statements filed with the Trade Register of the Dutch Chamber of Commerce. Unaudited Pro Forma Condensed and Combined Financial Statements Prior to the closing of the JBS Foods International IPO, JBS S.A. intends to contribute substantially all of its assets, excluding the Brazil Beef Businesses, to JBS Foods International. In connection with the asset contribution, JBS Foods International will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. For more information about the asset contribution, see The Asset Contribution. In accordance with Article 11 of Regulation S-X, this prospectus includes the unaudited pro forma condensed and combined statement of financial position of JBS Foods International as of September 30, 2016 Table of Contents Corporate Structure The following diagram sets forth our simplified corporate structure: (1) as of November 24, 2016 (excluding JBS S.A. treasury shares): (2) immediately following the completion of the asset contribution (assuming the shareholding structure of JBS S.A. as of November 24, 2016): Table of Contents and the unaudited pro forma condensed and combined statements of income (loss) of JBS Foods International for the nine-month period ended September 30, 2016 and for the year ended December 31, 2015, which financial information, combined with the notes thereto, we refer to as our pro forma financial information. Our pro forma financial information gives effect to the asset contribution as if it had taken place on September 30, 2016, in the case of the unaudited pro forma condensed and combined statement of financial position, and on January 1, 2015, in the case of the unaudited pro forma condensed and combined statements of income (loss). Our pro forma financial information has been presented for informational purposes only and may not be indicative of the results that actually would have occurred if the asset contribution had occurred on the dates indicated, or the results that will be obtained in the future. Our pro forma financial information has been derived from the (1) unaudited historical interim consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of September 30, 2016 and for the three- and nine-month periods ended September 30, 2016 and 2015, and the related notes thereto, and (2) audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, and the related notes thereto, in each case, which are included elsewhere in this prospectus. Our pro forma financial information should be read in conjunction with, and is qualified in its entirety by reference to, such historical financial statements and historical financial information and the related notes contained therein. The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and actual results may differ from the pro forma adjustments. However, we believe that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transaction and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions. JBS S.A. JBS S.A., our predecessor for accounting purposes, maintains its books and records in reais, which is the currency of the primary economic environment in which it operates, or its functional currency, as well as its presentation currency. JBS S.A. s historical consolidated financial statements included in this prospectus are presented in reais. JBS S.A. fully consolidates all subsidiaries and records investments in associates and joint ventures by the equity method. The financial statements of JBS S.A. s subsidiaries are prepared using each subsidiary s respective functional currency. The results and financial position of all the entities that have a functional currency different from the real are translated as follows: assets and liabilities are translated at the current rate at the date of the applicable closing period; income and expenses are translated at the average rate for the applicable period; and all resulting exchange differences are recognized in other comprehensive income. JBS S.A. s historical consolidated financial statements included in this prospectus include the historical financial information of the Brazil Beef Businesses, which is not expected to be transferred to JBS Foods International in connection with the asset contribution. For more information about the asset contribution, see The Asset Contribution. Unaudited Historical Interim Consolidated Financial Statements This prospectus includes the unaudited historical interim consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of September 30, 2016 and for the three- and nine-month periods ended September 30, 2016 and 2015, which were prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the IASB, and the related notes thereto. Table of Contents (3) immediately following the completion of the JBS Foods International IPO (assuming the shareholding structure of JBS S.A. as of November 24, 2016 and no exercise of the over-allotment option): Rationale for the Transaction We believe the principal advantages of the transaction for our shareholders will be to: better reflect our global presence and diverse international operations by obtaining a NYSE listing for the JBS Foods International common A shares; improve our access to international equity and debt capital markets, which we expect to enhance our ability to raise financing to support our operations and fund growth, as well as lower our cost of capital; enhance our ability to participate in the expected further consolidation of the global food industry and to better compete with other global food companies for international development opportunities; raise our profile among the global institutional investor community and create greater proximity to our trading comparables; and keep JBS S.A. as a listed company in Brazil, which is intended to allow the existing Brazilian shareholders of JBS S.A. to participate in our expected global growth. JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name JBS Foods International B.V. On , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands. JBS Foods International s corporate seat (statutaire zetel) is in Amsterdam, the Netherlands. Its registered office and principal place of business is located at Bankrashof 3, 5th Floor, 1183 NP Amstelveen, The Netherlands. Its telephone number is +31 20 656 4707. Table of Contents Audited Historical Consolidated Financial Statements This prospectus includes the audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013, which were prepared in accordance with IFRS, as issued by the IASB, and the related notes thereto, and audited in accordance with PCAOB standards. Acquisitions JBS S.A. s consolidated results of operations for the nine-month period ended September 30, 2016 and the year ended December 31, 2015 are of limited comparability with its consolidated results of operations for the nine-month period ended September 30, 2015 and the year ended December 31, 2014, respectively, primarily due to the Primo Acquisition, the Acquisition of Tyson Foods Assets in Mexico, the Moy Park Acquisition and the Cargill Pork Acquisition, which closed on March 30, 2015, June 29, 2015, September 28, 2015 and October 30, 2015, respectively. JBS S.A. s consolidated results of operations for the year ended December 31, 2014 are of limited comparability with its results of operations for the year ended December 31, 2013, primarily due to the Zenda Acquisition and the Seara Acquisition, which closed on June 30, 2013 and September 30, 2013, respectively. For more information about these acquisitions, see Business History and Development. Non-IFRS Financial Measures We have disclosed our historical EBITDA and Adjusted EBITDA in this prospectus, which are non-IFRS financial measures. See Summary Historical and Pro Forma Financial Data, and Selected Historical Financial Data. EBITDA and Adjusted EBITDA are used as measures of performance by our management. They should not be considered as measures of financial performance in accordance with IFRS. We calculate EBITDA as net income plus: income taxes; finance expense (income), net; and depreciation and amortization (including amortization of biological assets). We calculate Adjusted EBITDA as EBITDA minus: share of profit of equity accounted investees, net of tax; plus: bargain purchase gain, indemnity, reorganization and restructuring expenses and other non-recurring items, net; and non-recurring tax contingencies. The use of EBITDA and Adjusted EBITDA, instead of net income, has limitations as an analytical tool, including the following: EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay taxes; Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and EBITDA and Adjusted EBITDA include adjustments that represented a cash expense or that represented a non-cash charge that may relate to a future cash expense, and some of these expenses are of a type that we expect to incur in the future, although we cannot predict the amount of any such future charge. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or operating cash flow, nor should they be considered as liquidity measurements, since they do not reflect certain costs involved in Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CLF_cleveland_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CLF_cleveland_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CLF_cleveland_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CLSD_clearside_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CLSD_clearside_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6fd1b31a26ec10bc1fd1e216e073634da63e7929
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CLSD_clearside_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/COE_51talk_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/COE_51talk_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/COE_51talk_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/COLL_collegium_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/COLL_collegium_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a50d0a50c179bf0771cb762cd31fbe27ecb8c9ab
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/COLL_collegium_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information about us and this offering contained elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including "Risk Factors," "Special Note Regarding Forward-Looking Statements" and the financial statements and related notes included elsewhere in this prospectus. Unless the context indicates otherwise, as used in this prospectus, the terms "Collegium," "we," "us," "our," "our company" and "our business" refer to Collegium Pharmaceutical, Inc. Overview We are a specialty pharmaceutical company developing and planning to commercialize next-generation abuse-deterrent products that incorporate our patented DETERx platform technology for the treatment of chronic pain and other diseases. Our lead product candidate, Xtampza ER, or Xtampza, is an abuse-deterrent, extended-release, oral formulation of oxycodone, a widely prescribed opioid medication. On November 6, 2015, the U.S. Food and Drug Administration, or FDA, granted tentative approval to the new drug application, or NDA, for Xtampza for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. The FDA granted tentative approval because Xtampza met the required quality, safety and efficacy standards for approval but remains subject to an automatic stay of up to 30 months as a result of patent litigation filed by Purdue Pharma, L.P., or Purdue, in March 2015. The FDA may grant final regulatory approval upon the earliest to occur of expiration of the automatic stay, the court invalidating Purdue's patents or issuing an opinion of non-infringement, and expiration of Purdue's listed patents. In connection with the FDA's tentative approval of our NDA for Xtampza, the FDA tentatively approved a product label, product packaging, post-marketing commitments and a Risk Evaluation and Mitigation Strategy, or REMS, program, subject to change should new information become available prior to the time that the FDA considers the Xtampza NDA for final regulatory approval. The tentatively approved Xtampza label, in contrast to the product labels for all currently approved extended-release opioids, does not include a black box warning and related precautions stating that crushing, chewing or dissolving can cause rapid release and absorption of a potentially fatal dose of the active ingredient. The absence of these warnings is supported by data that is described in the tentatively approved product label to support the claim that when Xtampza is crushed or chewed, the drug release profile is bioequivalent to taking Xtampza intact, as directed. Furthermore, the tentatively approved product label contains differentiated abuse-deterrent claims for Xtampza and also states that Xtampza can be taken by sprinkling the capsule contents on soft foods or into a cup, and then directly into the mouth, or through a gastrostomy or nasogastric feeding tube. Xtampza has the same active ingredient as OxyContin OP, which is the largest selling abuse-deterrent, extended-release opioid in the United States by dollars, with $2.5 billion in U.S. sales in 2014. We conducted a comprehensive preclinical and clinical program for Xtampza consistent with FDA guidance on abuse-deterrence. These studies and clinical trials demonstrated that chewing, crushing and/or dissolving Xtampza, and then taking it orally or smoking, snorting or injecting it did not meaningfully change its drug release profile or safety characteristics. By contrast, clinical trials performed by us and others including a head-to-head clinical trial comparing Xtampza with OxyContin OP have shown that drug abusers can achieve rapid release and absorption of the active ingredient by manipulating OxyContin OP using common household tools and methods commonly available on the Internet. In addition, our preclinical studies and clinical trials have shown that the contents of the Xtampza capsule can be removed from the capsule and sprinkled on food, directly into the mouth or administered through COLLEGIUM PHARMACEUTICAL, INC. STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT (In thousands, except share data) Series A Convertible Redeemable Preferred Stock Series B Convertible Redeemable Preferred Stock Series C Convertible Redeemable Preferred Stock Common Stock Additional Paid- In Capital Treasury Stock, at cost Accumulated Deficit Total Shareholders' Deficit Shares Amount Shares Amount Shares Amount Shares Amount Balance at January 1, 2013 18,464,674 $ 23,546 27,324,237 $ 47,540 $ 1,924,845 $ 2 $ 11 $ (3 ) $ (61,414 ) $ (61,404 ) Issuance of new Series C convertible redeemable preferred stock, net of issuance costs of $45 8,658,008 12,034 Accruals of dividends and accretion to redemption value 970 1,836 120 (1 ) (2,925 ) (2,926 ) Performance Adjustment of Series A (9,232,340 ) (12,239 ) (962,962 ) (1 ) 12,240 12,239 Stock-based compensation expense 62 62 Exercise of common stock options 1,077 1 1 Net loss (16,197 ) (16,197 ) Balance at December 31, 2013 9,232,334 12,277 27,324,237 49,376 8,658,008 12,154 962,960 1 12,313 (3 ) (80,536 ) (68,225 ) Accruals of dividends and accretion to redemption value 504 1,836 960 (3,300 ) (3,300 ) Issuance of restricted stock awards to employees 10,869 Exercise of common stock options 32,390 72 72 Stock-based compensation expense 22 22 Net loss (17,917 ) (17,917 ) Balance at December 31, 2014 9,232,334 $ 12,781 27,324,237 $ 51,212 8,658,008 $ 13,114 1,006,219 $ AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents feeding tubes, without compromising their drug release profile, safety or abuse-deterrent characteristics. By contrast, OxyContin OP, which is formulated in hard tablets, has a black box warning product label stating that crushing, dissolving, or chewing can cause rapid release and absorption of a potentially fatal dose of the active ingredient. We believe that Xtampza, if it ultimately receives final regulatory approval, can address the pain management needs of the approximately 11 million patients in the United States who suffer from chronic pain and have difficulty swallowing. Our DETERx Platform Technology In our proprietary DETERx technology, we combine active ingredients such as oxycodone with fatty acid and waxes to form a molten solution which is spray-congealed into solid microspheres using a proprietary spinning disk manufacturing process. These solid wax-based microspheres are then filled into capsules. Each individual microsphere is designed to be extended-release and abuse-deterrent. In addition to our Xtampza formulation of oxycodone, DETERx technology is applicable to many other opioid active ingredients, as well as other categories of abuseable drugs, such as amphetamines and methylphenidate. Prescription Drug Abuse The U.S. Centers for Disease Control and Prevention described abuse of prescription drugs in the United States as a growing and deadly epidemic. Deaths in the United States from prescription opioid overdose have grown from approximately 4,000 in 1999 to approximately 16,000 in 2013. The American Journal of Managed Care estimated in a 2013 report that opioid abuse costs public and private healthcare payors over $72 billion annually in direct healthcare costs, including costs of emergency room visits, rehabilitation and associated health problems. In response to widespread prescription opioid abuse, the U.S. government and a number of state legislatures have introduced, and in some cases have enacted, legislation and regulations intended to encourage the development of abuse-deterrent forms of pain medications, including certain forms of extended-release opioids. The FDA has stated that addressing prescription drug abuse is a priority, and the development of abuse-deterrent opioids is a key part of that strategy. Extended-release opioids incorporate a large amount of opioid with a time-release mechanism designed to deliver steady amounts of opioid, typically over 12 to 24 hours. Drug abusers find currently approved extended-release opioid tablets desirable because of the large amount of drug payload, which they attempt to release quickly into the bloodstream to create euphoria. It is difficult for drug abusers to achieve this rapid release and absorption into the bloodstream by taking multiple intact extended-release opioid tablets or capsules because doing so often causes sleepiness and/or respiratory distress before euphoria is achieved. Instead, they attempt to defeat the extended-release properties in order to achieve rapid release of the active ingredient. In 2014, there were approximately 29 million prescriptions for extended-release and long-acting opioids in the United States. OxyContin OP accounted for approximately $2.5 billion in total U.S. sales from approximately 6 million prescriptions. Despite the introduction of OxyContin OP in 2010 as the first FDA-approved, abuse-deterrent, extended-release opioid formulation, abuse of extended-release opioids, including OxyContin OP, continues to be a major public health issue. OxyContin OP, even with its abuse-deterrent formulation, remains vulnerable to abuse using common household objects, like pill crushers. Third party studies found that abusers of OxyContin OP use various routes of abuse including snorting, injection and oral abuse despite OxyContin OP's abuse-deterrent features. In a third party study of OxyContin abusers both before and after OxyContin OP was introduced, researchers found that while the non-oral routes of abuse of OxyContin OP (i.e., injection, snorting and smoking) were used less after its introduction, oral abuse of OxyContin OP increased from approximately 52% to 75% of OxyContin abusers. Collegium Pharmaceutical, Inc. (Exact name of registrant as specified in its charter) Virginia (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) 03-0416362 (I.R.S. Employer Identification Number) Collegium Pharmaceutical, Inc. 780 Dedham Street Suite 800 Canton, MA 02021 (781) 713-3699 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) Table of Contents OxyContin OP Tablet + $6.39 Pill Crusher = Abuseable Fine Powder in 16 Seconds Chronic Pain with Dysphagia It is estimated that more than 10% of patients with chronic pain, or approximately 11 million patients, have dysphagia, or difficulty in swallowing, because they have cancer, are elderly, have other medical problems or have difficulty swallowing without a known medical cause. Our preclinical studies and clinical trials have shown, and our tentatively approved product label states, that the contents of the Xtampza capsules can be taken by sprinkling the capsule contents on soft foods or into a cup, and then directly into the mouth, or through a gastrostomy or nasogastric feeding tube, without compromising their extended-release properties. By contrast, all other FDA-approved, orally administered, extended-release opioids have a black box warning product label stating that "crushing, dissolving or chewing can cause rapid release and absorption of a potentially fatal dose of the active drug", making them unsuitable or unattractive for patients who suffer from chronic pain with dysphagia, or CPD. If Xtampza ultimately receives final regulatory approval, Xtampza could be the only abuse-deterrent extended-release opioid product with product labeling without such a black box warning. An external marketing study performed for us in 2013 estimated that Xtampza, if it receives final regulatory approval, has a peak revenue potential for U.S. patients with CPD in excess of $700 million annually. Xtampza Our lead product candidate, Xtampza, is an abuse-deterrent, extended-release, oral formulation of oxycodone tentatively approved by the FDA for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. The active ingredient in Xtampza is oxycodone, which is approved by the FDA and other regulators around the world in a number of both immediate-release and extended-release drug products. We developed Xtampza using our proprietary, DETERx abuse-deterrent technology to address common methods of abuse, including chewing, crushing and/or dissolving, and then taking it orally or snorting or injecting Xtampza. Clinical Development In January 2013, the FDA issued a draft guidance document titled "Abuse-Deterrent Opioids Evaluation and Labeling." Before this FDA draft guidance was finalized, it was followed by the FDA in the regulatory approval process for abuse-deterrent products. The FDA issued its final guidance in April 2015. Like the draft guidance, the final guidance specifically defines the studies and clinical trials required to evaluate the abuse-deterrent properties of a formulation and the associated claims that a manufacturer can make based on the results of those studies and clinical trials. This is meant to inform the development of improved abuse-deterrent products. We believe that all of our studies and clinical trials are consistent with the final FDA guidance. The Xtampza product label, if finally approved, could be the first abuse-deterrent opioid to include all three pre-marketing product label claim categories based upon in vitro, pharmacokinetic, or PK, and human abuse potential studies. Michael T. Heffernan President and Chief Executive Officer Collegium Pharmaceutical, Inc. 780 Dedham Street Suite 800 Canton, MA 02021 (781) 713-3699 (Name, address, including zip code and telephone number, including area code, of agent for service) Table of Contents We have completed numerous studies and clinical trials on Xtampza, which have demonstrated: Safety and effectiveness for treatment of chronic pain. In July 2014, we completed a prospective, randomized Phase 3 clinical trial that met its primary endpoint, demonstrating that Xtampza, compared to a placebo, was safe and effective in treating moderate-to-severe chronic lower back pain. Superior abuse-deterrent properties when compared with OxyContin OP in a head-to-head oral abuse-deterrence clinical trial. In an abuse-deterrence clinical trial, we measured the drug release of both OxyContin OP and Xtampza when intact and when subjected to the most effective method of attempting to defeat their abuse-deterrent properties. This clinical trial showed that crushing OxyContin OP caused the active ingredient (oxycodone) to be released rapidly, with drug release that was bioequivalent to immediate-release oxycodone. By contrast, this clinical trial showed that the release of oxycodone from crushed Xtampza was bioequivalent to uncrushed Xtampza. Based on this data, we believe drug abusers may find Xtampza less desirable to abuse orally than OxyContin OP after crushing. Abuse-deterrent properties in an oral human abuse potential clinical trial. Consistent with FDA guidance, we performed a human abuse potential clinical trial using the oral route of administration measuring "drug liking" in recreational drug users. We measured how well recreational drug users liked intact Xtampza (taken orally as intended) and chewed Xtampza compared with crushed immediate-release oxycodone taken orally. The clinical trial showed with statistical significance that both chewed and intact Xtampza were "liked" less than immediate-release oxycodone. The clinical trial also showed that opening our capsules and chewing the microspheres did not change the PK of Xtampza. Our tentatively approved product label includes the PK data from this human abuse potential clinical trial and also includes data showing that chewed and intact Xtampza was associated with lower drug liking than crushed immediate-release oxycodone. Abuse-deterrent properties following snorting in a human abuse potential clinical trial. Consistent with FDA guidance, we performed a human abuse potential clinical trial using the snorted route of administration. The clinical trial demonstrated that crushing and snorting Xtampza microspheres resulted in lower blood levels of oxycodone than taking intact Xtampza capsules orally. The clinical trial also demonstrated with statistical significance that crushed and snorted Xtampza microspheres were "liked" less than both intact Xtampza administered orally and snorted immediate-release oxycodone. Based on this data, we believe that drug abusers may not find it desirable to snort Xtampza. Our tentatively approved product label includes the PK data from this human abuse potential clinical trial and also includes data showing that crushed and snorted Xtampza was associated with lower drug liking than both intact Xtampza administered orally and snorted immediate-release oxycodone. Ability to sprinkle microspheres for patients with difficulty swallowing. In clinical trials we performed consistent with FDA guidance, we demonstrated that when Xtampza microspheres were removed from the capsule and chewed or crushed, or removed from the capsule and sprinkled onto soft food and administered orally, the drug release profile did not significantly change from administering intact Xtampza capsules. Additionally, in preclinical studies we showed that the drug release profile did not change when the microspheres were administered using various types of feeding tubes. Our tentatively approved product label states that Xtampza can be taken by sprinkling the capsule contents on soft foods or into a cup, and then directly into the mouth, or through a gastrostomy or nasogastric feeding tube. Copies to: Steven J. Abrams, Esq. Shirley R. Kuhlmann, Esq. Pepper Hamilton LLP 19th Floor, High Street Tower 125 High Street Boston, MA 02110 (617) 204-5100 Peter N. Handrinos, Esq. Latham & Watkins LLP John Hancock Tower 200 Clarendon Street Boston, MA 02116 (617) 948-6000 Table of Contents Competitive Abuse-Deterrent Approaches To address the potential for abuse, the pharmaceutical industry has created a number of abuse-deterrent products and product candidates, using a variety of technical strategies that fall under the following categories: Physical/Chemical Barriers: Physical barriers are formulations designed to prevent chewing, crushing, cutting, grating or grinding for oral or nasal abuse. Physical and chemical barriers can make it difficult to extract the opioid from the formulation for intravenous abuse using common solvents such as water. Agonist/Antagonist Combinations: An opioid antagonist can be co-formulated with an active opioid ingredient, or agonist, to interfere with or reduce the euphoria associated with abuse. Market research studies performed for us have shown that some physicians prefer not to use an abuse-deterrent formulation with an opioid antagonist because such formulations may be less useful in addressing chronic pain and their antagonist components may precipitate withdrawal. Prodrug approaches: A prodrug is a drug administered in an inactive, or less active, form designed to enable more effective delivery. The prodrug is then converted by the body into the active ingredient through a normal, metabolic process. In a prodrug opioid, the active ingredient is designed to be released if the drug is taken orally, but if an abuser or patient takes a large amount of the drug, the prodrug is not broken down or absorbed rapidly enough to create euphoria. If injected or snorted, the prodrug is not broken down and the active ingredient is not released. To date, the only extended-release product candidate using the prodrug approach in late-stage clinical development did not achieve its primary endpoint of demonstrating adequate pain relief compared to a placebo in a Phase 2 clinical trial. No opioids using a prodrug approach are currently marketed. We believe Xtampza represents the best-in-class approach to creating an abuse-deterrent extended-release opioid formulation. Xtampza does not incorporate an opioid antagonist, is not a prodrug, and, based on the studies and clinical trials we conducted, is resistant to abuse through physical or chemical manipulation. Patents and Proprietary Technology We regard the protection of patents, designs, trademarks and other proprietary rights that we own or license as critical to our success and competitive position. Our patent portfolio directed toward Xtampza and our DETERx technology consists of seven issued patents in the United States, two pending applications in the European Union and one issued patent in each of Canada, Japan and Australia. We also have a Notice of Allowance for a patent in the United States and Canada. In addition, we have six patent applications pending in the United States, and one pending patent application in Japan. Our issued U.S. patents are projected to expire in 2023 and 2025, and our pending patent applications in the United States, if issued, would be projected to expire in 2023, 2025 and 2030. In addition, we use a unique and proprietary process to manufacture our products that requires significant know-how, which we currently protect as trade secrets. Our technology and products are not in-licensed from any third party, and we own all of the rights to our product candidates. Patent Litigation Strategy We filed the NDA for Xtampza as a 505(b)(2) application, which allows us to reference data from an approved drug listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book), in this case OxyContin OP. The 505(b)(2) process requires that we certify to the FDA and notify Purdue as the holder of the NDA and any other Orange Book-listed patent owners, that we do not infringe any of the patents listed for OxyContin OP in the Orange Book, or that the patents are invalid. We made such certification and provided such notice on February 11, 2015, and such certification documented why Xtampza does not infringe any of the 11 Orange Book-listed patents for Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. Table of Contents OxyContin OP, five of which stand invalidated by the Federal District Court for the Southern District of New York, subject to a pending appeal. Under the Hatch-Waxman Act of 1984, Purdue had the option to sue us for infringement, and receive a stay of up to 30 months before the FDA can issue a final regulatory approval for Xtampza, unless the stay is earlier terminated. Purdue exercised its option and elected to sue us for infringement in the District of Delaware on March 24, 2015 asserting infringement of three of Purdue's Orange Book-listed patents (all of which stand invalidated, subject to a pending appeal by Purdue) and a non-Orange Book-listed patent, and, accordingly, received a stay of up to 30 months before the FDA can issue a final regulatory approval for Xtampza, unless the stay is earlier terminated. The 30-month stay only applies to the Orange Book-listed patents. On March 26, 2015, Purdue filed a second suit against us in the District of Massachusetts asserting infringement of the same four patents. On July 23, 2015, Purdue voluntarily dismissed the Massachusetts case and on August 6, 2015, Purdue filed another case in Massachusetts asserting the same four patents as in the Delaware case and the original Massachusetts case. On October 7, 2015, the Delaware case was transferred to Massachusetts and on November 4, 2015, the two cases pending in Massachusetts were consolidated. On November 9, 2015, we filed a motion for partial judgment on the pleadings in relation to three of the four patents asserted against us, which had been previously invalidated by the court in the Southern District of New York in Purdue's suit against Teva Pharmaceuticals USA, Inc., or Teva. On the same date, we moved for entry of final judgment and to expedite hearing on our motions. On November 23, 2015, Purdue filed a motion to stay proceedings until resolution of its appeal against Teva. The hearing regarding our motion for partial judgment and entry of judgment and Purdue's motion to stay was held on December 22, 2015. On December 23, 2015, the District Court of Massachusetts issued an order staying proceedings in relation to the three Orange Book-listed patents asserted against us until February 25, 2016, which is the date scheduled by the Court for a status conference. The Court reserved the decision to grant our motion for judgment on the three Orange Book-listed patents to be taken up again at the February 25th status conference, at which time the Court indicated it may grant our motion for judgment or may consider extending the stay. The Court further indicated that it will consider an earlier hearing if the Court of Appeals for the Federal Circuit issues a decision on the appeal of the New York judgment of invalidity prior to the February 25th status conference. On November 6, 2015, Purdue filed another patent infringement suit against us in Massachusetts asserting infringement of another patent that is a continuation of the three patents previously asserted by Purdue against us that were invalidated by the court in the Southern District of New York. On December 1, 2015, we filed a motion to dismiss for failure to state a claim, arguing that the patent asserted by Purdue is invalid based on collateral estoppel. Purdue filed its opposition response on December 15, 2015. That action has been consolidated into the other Massachusetts actions, and our motion remains pending. The FDA's tentative approval of Xtampza means that the product, with its product labeling, is tentatively approved based upon the information available to the FDA at the time of tentative approval. The FDA can grant final approval following the expiration of the 30-month stay period or termination of the stay. If we receive a court order that the listed patents are invalid or not infringed, or if we settle the Purdue litigation before the 30-month stay period expires, the FDA could then provide final regulatory approval of Xtampza prior to the expiration of the 30-month period, at which point the product can be marketed. DETERx Pipeline We have applied our DETERx platform technology to Xtampza as well as other product candidates in our pipeline. We recently completed formulation development work for our extended-release, abuse-deterrent hydrocodone program. Based upon an assessment of the market opportunity and the potential to differentiate from currently marketed hydrocodone products as well as programs in development, we are prioritizing our abuse-deterrent hydrocodone program as our second product in development. We filed an IND with the FDA in December 2015 and target initiating a clinical trial in the first quarter of 2016. We also have an extended-release, abuse-deterrent oxymorphone program for the treatment of chronic pain for If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents which we have filed an investigational new drug application, or IND. This program has been granted Fast Track status by the FDA. In addition, we have other extended-release, abuse-deterrent product candidates that have completed preliminary preclinical studies, including morphine for pain and methylphenidate for the treatment of attention deficit hyperactivity disorder, or ADHD. All of these product candidates share similar abuse-deterrent qualities as Xtampza and are designed to be suitable for patients with difficulty swallowing. We own all of the rights to our product candidates. Our Strategy Our goal is to become the leading marketer of abuse-deterrent extended-release opioids and other commonly abused products. Key elements of our strategy to achieve this goal are to: Establish our leadership position by obtaining final regulatory approval to market Xtampza with a best-in-class abuse-deterrent product label. Our tentatively approved product label contains differentiated abuse-deterrent claims for Xtampza. If Xtampza receives final regulatory approval, this product label may allow us to detail Xtampza to physicians and highlight its unique abuse-deterrent characteristics. Commercialize Xtampza in the United States ourselves. We are currently building our commercial organization, including our sales force and commercial manufacturing capacity, in preparation for a potential U.S. commercial launch of Xtampza in the second quarter of 2016, although the timing of a potential commercial launch is subject to whether and when we receive final regulatory approval for Xtampza. Our management team has extensive experience commercializing pharmaceutical products, and we are in the process of establishing sales, marketing and reimbursement functions to commercialize Xtampza in the United States. Initially, we plan to detail Xtampza to approximately 11,000 physicians who write approximately 55% of the branded extended-release oral opioid prescriptions in the United States with a sales team of approximately 120 sales representatives. In addition, we plan to deploy a separate, focused sales team of approximately 25 specialty sales representatives to detail Xtampza to nursing homes, hospices, and other institutions treating large populations of the elderly and other patients who need chronic pain relief and have difficulty swallowing. Establish Xtampza as the treatment of choice for patients with CPD. Xtampza has been tentatively approved with product labeling for sprinkling Xtampza microspheres on soft foods or into a cup, and then directly into the mouth, or through a gastrostomy or nasogastric feeding tube. If Xtampza receives final regulatory approval, Xtampza could be the only extended-release oxycodone product designed to be suitable for this approximately 11 million patient segment. Establish strategic collaborations to accelerate and maximize the potential of our product candidates worldwide. We intend to seek strategic collaborations with other pharmaceutical companies to commercialize our product candidates outside the United States and to develop certain of our product candidates that are outside of our core therapeutic focus. CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered(1) Proposed Maximum Offering Price Per Share(2) Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee(3) Common Stock, $0.001 par value per share 3,162,500 $27.50 $86,968,750 $8,758 (1)Includes 412,500 shares which the underwriters have the option to purchase from the registrant. (2)Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. Includes the offering price of shares that the underwriters have the option to purchase. (3)Of this amount, $8,686 was previously paid in connection with a prior filing of this Registration Statement. Table of Contents Advance other product candidates that incorporate our DETERx platform technology. We have begun advancing our development program for COL-195, an abuse-deterrent, extended-release hydrocodone for the treatment of chronic pain. We target beginning clinical trials for our second product candidate by the first quarter of 2016. We also have an IND application on file for COL-172, an abuse-deterrent, extended-release oxymorphone for the treatment of chronic pain, which has been granted Fast Track status by the FDA. In addition, we have COL-171, a proprietary preclinical DETERx extended-release, abuse-deterrent methylphenidate formulation for the treatment of ADHD. Acquire additional products and product candidates. We may identify and license, co-promote or acquire products or product candidates being developed for pain indications and other complementary products. Risk Factors Our ability to implement our business strategy is subject to numerous risks and uncertainties. As a clinical-stage biopharmaceutical company, we face many risks inherent in our business and our industry generally. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading "Risk Factors" in this prospectus prior to making an investment in our common stock. These risks include, among others, the following: our product candidates, including Xtampza, are subject to regulatory approval processes that are lengthy and unpredictable; we may not obtain final regulatory approval for Xtampza or any of our other product candidates from the FDA or foreign regulatory authorities. Despite receiving tentative approval by the FDA, additional data may emerge that could change the FDA's position on the product labeling or final regulatory approval of Xtampza; we are subject to patent infringement litigation relating to Xtampza and may, in the future, be subject to additional litigation relating to our other product candidates, which may be expensive to defend and delay the commercialization of Xtampza or our other product candidates; we currently generate no commercial revenue, may never become profitable and may incur substantial and increasing net losses for the foreseeable future as we seek final regulatory approval for, and potentially begin to commercialize, Xtampza; we currently do not employ sales representatives and, if we are unable to hire employees to provide the appropriate level of sales support, we may not be successful in commercializing Xtampza if we receive final regulatory approval; and we depend, or will depend in the future, on the performance of third parties for the supply of the active ingredient used in Xtampza, commercial manufacturing and testing of Xtampza, and the conduct of clinical trials relating to our product candidates. Our Corporate Information We are incorporated in the Commonwealth of Virginia under the name Collegium Pharmaceutical, Inc. Our executive offices are located at 780 Dedham Street, Suite 800, Canton, MA 02021 and our telephone number is (781) 713-3699. Our website address is www.collegiumpharma.com. The inclusion of our website address above and elsewhere in this prospectus is, in each case, intended to be an inactive textual reference only and not an active hyperlink to our website. The information contained in, or that can be accessed through, our website is not part of this prospectus. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents Implications of Being an Emerging Growth Company We are an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of exemptions from various disclosure and reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to: not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; being permitted to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations, in each case, instead of three years; being permitted to present the same number of years of selected financial data as the years of audited financial statements presented, instead of five years; reduced disclosure obligations regarding executive compensation, including no Compensation Disclosure and Analysis; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements; and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may choose to take advantage of some or all of the available exemptions. We have taken advantage of some of the reduced reporting burdens in this prospectus. Accordingly, the scope of the information contained herein may be different than the scope of the information you receive from other public companies in which you hold stock. We do not know if some investors will find our shares less attractive as a result of our utilization of these or other exemptions. The result may be a less active trading market for our shares and our share price may be more volatile. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies." We will remain an "emerging growth company" until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion; (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period; and (iv) December 31, 2020. Table of Contents The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JANUARY 4, 2016 PRELIMINARY PROSPECTUS 2,750,000 Shares Collegium Pharmaceutical, Inc. Common Stock We are offering 2,750,000 shares of our common stock. The offering price is $ per share of common stock. Our common stock is listed on The NASDAQ Global Select Market ("NASDAQ") under the symbol "COLL." The last reported sales price of our common stock on December 31, 2015 was $27.50 per share. We are an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, and are subject to reduced public company reporting requirements. See "Prospectus Summary Implications of Being an Emerging Growth Company." Investing in our common stock involves a high degree of risks. Please read "Risk Factors" beginning on page 14 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CRCW_crypto-co_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CRCW_crypto-co_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..85a8500b04394eb8b5fa97d38daf27b2829a966b
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CRCW_crypto-co_prospectus_summary.txt
@@ -0,0 +1,487 @@
+PROSPECTUS
+SUMMARY
+
+ 
+
+This summary
+highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may
+want to consider. You should read carefully the more detailed information set forth under "Risk Factors" and the other
+information included in this prospectus. Except where the context suggests otherwise, the terms "we," "us,"
+"our," "CROE" and the "Company" refer to CROE, Inc. We refer in this prospectus to our executive
+officers and other members of our management team, collectively, as "Management."
+
+ 
+
+Company Organization
+
+ 
+
+CROE, Inc. is
+an early stage fitness apparel company with the mission of creating supportive, protective, and innovative sports bras and
+fitness apparel. We were incorporated on December 2, 2013 in the state of Utah by our principal executive Deborah Thomas. Our
+business office and mailing address is 11650 South State Street, Suite 240, Draper, Utah 84020, and our telephone number is
+(801) 816-2522. Our website is www.croefit.com and is not part of this prospectus.
+
+ 
+
+Business
+
+ 
+
+Our operations to
+date have been devoted primarily to start-up and development activities, which include: (i) formation of the Company; (ii) development
+of our business plan; (iii) development of our water and radio-wave resistant sportsbra pocket ("CroeNest") and other
+apparel;(iv) development of our brand; (v) and marketing and sales of Croe hats and jewelry. We have not completed development
+of our CroeNest and apparel and there is no assurance that we will be successful in completing the development.
+
+ 
+
+From our inception
+on December 2, 2013, until the present, we have had limited operating activities. During the nine months ended September 30, 2016
+and 2015, we had revenues of $-0- and $308 respectively. During the fiscal years ending December 31, 2015 and 2014, we had revenues
+of $308 and $1,192, respectively.
+
+ 
+
+During the
+fiscal years ending December 31, 2015 and 2014, we received related party loans. The balance due on these loans as of
+December 31, 2015 and 2014 was $17,149 and $12,999, respectively. During 2016, we have received an aggregate of $39,000 from
+the sale of our common stock. We have used all proceeds from the loans and the offering for working capital.
+
+ 
+
+Neither management
+nor our shareholders have had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements
+or understandings with, any representatives of the owners of any business or company regarding the possibility of an acquisition
+or merger, change of control, or similar transaction.
+
+ 
+
+Emerging Growth Company
+
+ 
+
+We are an emerging
+growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:
+
+ 
+
+ 
+ 
+ The last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
+
+ 
+
+ 
+ 
+ The last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;
+
+ 
+
+ 
+ 
+ The date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
+
+ 
+
+ 
+ 
+ The date on which such issuer is deemed to be a , ' ': large accelerated filer , as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.
+
+ 
+
+ 2 
+
+ Table of Contents 
+
+ 
+
+ 
+
+As an emerging growth
+company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual
+reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement
+shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting
+firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure
+and procedures for financial reporting.
+
+ 
+
+As an emerging growth
+company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval
+of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.
+
+ 
+
+The Offering
+
+ 
+
+As of the date of
+this prospectus we had 10,915,000 shares of common stock outstanding.
+
+ 
+
+Selling
+shareholders are offering up to 850,000 shares of common stock. Our selling shareholders will sell their shares at the price of
+$.05 per share which is their purchase price until the price of our shares is quoted on the OTCQB marketplace or on the OTC Bulletin
+Board, and thereafter at prevailing market prices or privately negotiated prices..
+
+ 
+
+We will pay all
+expenses of registering the securities, estimated at approximately $42,000. We will not receive any proceeds of the sale of these
+securities.
+
+ 
+
+To be quoted on
+OTCQB marketplace or on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market
+for our common stock. The current absence of a public market for our common stock may make it more difficult for you to sell shares
+of our common stock that you own.
+
+ 
+
+Financial Summary
+
+ 
+
+The tables and information
+below are derived from our audited financial statements for the years ended December 31, 2015 and 2014, and unaudited financial
+statements for the nine months ended September 30, 2016 and 2015. Our working capital as of December 31, 2015 and
+2014, was a deficit of $16,775, and $11,265, respectively. As of November 17, 2016, we had cash on hand of $589.
+
+ 
+ At 
+ December 31, 2015
+ Audited
+ 
+ At 
+ December 31, 2014
+ Audited
+ 
+ At
+ September 30, 2016
+ Unaudited
+
+ Financial Summary 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ Cash 
+ $0 
+ $211 
+ $589 
+
+ 
+ 
+ 
+ 
+
+ Total Assets 
+ $2,013 
+ $2,502 
+ $2,602 
+
+ 
+ 
+ 
+ 
+
+ Total Liabilities 
+ $18,788 
+ $13,767 
+ $18,888 
+
+ 
+ 
+ 
+ 
+
+ Total Stockholders Equity (Deficit) 
+ $(16,775) 
+ $(11,265) 
+ $(16,286)
+
+ 
+
+ 
+ Year Ended
+ December 31, 2015
+ Audited
+ 
+ Year Ended
+ December 31, 2014
+ Audited
+ 
+ Nine Months Ended 
+ September 30, 2016
+ Unaudited
+
+ Statement of Operations 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ Revenue 
+ $308 
+ $1,192 
+ $0 
+
+ 
+ 
+ 
+ 
+
+ Cost of Sales and Operating 
+ $5,818 
+ $287 
+ $31,011 
+
+ 
+ 
+ 
+ 
+
+ Net Loss for the Period 
+ $5,510 
+ $11,265 
+ $31,011 
+
+ 
+ 
+ 
+ 
+
+ Net Loss per Share 
+ $(0.00) 
+ $(0.00) 
+ $(0.00)
+
+ 
+
+ 
+
+ 3 
+
+ Table of Contents 
+
+ 
+
+ 
+
+RISK
+FACTORS
+
+ 
+
+An investment
+in our securities involves certain risks relating to our business and operations. You should carefully consider these risks, together
+with all of the other information included in this prospectus, before you decide whether to purchase shares of our Company. If
+any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely
+affected. If that happens, the trading price of our common stock could decline and you may lose all or part of your investment.
+
+ 
+
+Risks Related to Our Business
+
+Our auditors
+have expressed substantial doubt about our ability to continue as a going concern.
+
+ 
+
+Our audited
+financial statements for the years ended December 31, 2015 and 2014, were prepared assuming that we will continue our
+operations as a going concern. We do not, however, have a history of operating profitably. Consequently, our independent
+accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Our
+continued operations are highly dependent upon our ability to increase revenues, decrease operating costs, and complete
+equity and/or debt financings. Such financings may not be available or may not be available on reasonable terms. Our
+financial statements do not include any adjustments that may result from the outcome of this uncertainty. We estimate that we
+will not be able to continue as a going concern after December 31, 2016 unless we are able to secure capital from one of
+these sources of financing. If we are unable to secure such financing, we may cease operations and investors in our common
+stock could lose all of their investment.
+
+ 
+
+We have not
+voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections
+against interested director transactions, conflicts of interest and similar matters.
+
+ 
+
+Federal legislation,
+including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote
+the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal
+requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the
+NYSE or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required
+under the rules of national securities exchanges are those that address board of directors' independence, and audit committee oversight.
+We have not yet adopted any of these corporate governance measures and, since our securities are not yet listed on a national securities
+exchange, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures,
+stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested
+directors and that policies had been implemented to define responsible conduct. Prospective investors should bear in mind our current
+lack of corporate governance measures in formulating their investment decisions.
+
+ 
+
+We are an
+"emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth
+companies will make our common stock less attractive to investors.
+
+ 
+
+We are an "emerging
+growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be
+an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other
+public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements
+of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports
+and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
+approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years,
+although we could lose that status sooner if our revenues exceed $1,000,000,000, if we issue more than $1,000,000,000 in non-convertible
+debt in a three year period, or if the market value of our common stock held by non-affiliates exceeds $100,000,000 as of any June
+30 before that time, in which case we would no longer be an emerging growth company as of the following June 30. We cannot predict
+if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common
+stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more
+volatile.
+
+ 
+
+ 4 
+
+ Table of Contents 
+
+ 
+
+ 
+
+We have elected
+to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs
+Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public
+and private companies until those standards apply to private companies. As a result of this election, our financial statements
+may not be comparable to companies that comply with public company effective dates.
+
+ 
+
+If we are
+unable to retain our staff, our business and results of operations could be harmed. 
+
+ 
+
+Our ability to compete
+with other athletic apparel companies, and develop our business is largely dependent on the services of Deborah Thomas and Elliott
+Polatoff, our Chief Executive Officer and Secretary respectively, and other employees and contractors which assist her in management
+and operation of the business. If we are unable to retain Mrs. Thomas services and to attract other qualified senior management
+and key personnel on terms satisfactory to us, our business will be adversely affected. We do not have key man life insurance covering
+the life of Mrs. Thomas and, even if we are able to afford such a key man policy, our coverage levels may not be sufficient to
+offset any losses we may suffer as a result of Mrs. Thomas death, disability, or other inability to perform services for
+us.
+
+ 
+
+We may acquire
+businesses and enter into joint ventures that will expose us to increased operating risks. 
+
+ 
+
+As part of our growth
+strategy, we intend to acquire other athletic apparel related businesses. We cannot provide any assurance that we will find attractive
+acquisition candidates in the future, that we will be able to acquire such candidates on economically acceptable terms or that
+we will be able to finance acquisitions on economically acceptable terms. Even if we are able to acquire new businesses in the
+future, they could result in the incurrence of substantial additional indebtedness and other expenses or potentially dilutive issuances
+of equity securities and may affect the market price of our common stock or restrict our operations. We have also entered into
+joint venture arrangements intended to complement or expand our business and will likely continue to do so in the future. These
+joint ventures are subject to substantial risks and liabilities associated with their operations, as well as the risk that our
+relationships with our joint venture partners do not succeed in the manner that we anticipate.
+
+ 
+
+We face intense
+competition and, if we are not able to effectively compete in our markets, our revenues may decrease.
+
+ 
+
+Competitive pressures
+in our markets could adversely affect our competitive position, leading to a possible loss of customers or a decrease in prices,
+either of which could result in decreased revenues and profits. Our competitors are numerous, ranging from large multinational
+corporations, which have significantly greater capital resources than us, to relatively small and specialized firms. We also compete
+with the major manufacturers. Our business could be adversely affected because of increased competition from these athletic apparel
+companies.
+
+ 
+
+Current and
+future litigation could adversely affect us. 
+
+ 
+
+We are not currently
+involved in any legal proceedings. However, we may become involved in other legal proceedings in our ordinary course of business.
+Lawsuits and other legal proceedings can involve substantial costs, including the costs associated with investigation, litigation
+and possible settlement, judgment, penalty or fine. As a smaller company, the collective costs of litigation proceedings can represent
+a drain on our cash resources, as well as an inordinate amount of our Management s time and addition. Moreover, an adverse
+ruling in respect of certain litigation could have a material adverse effect on our results of operation and financial condition.
+
+ 
+
+We have limited
+the liability of our board of directors and management.
+
+ 
+
+We have adopted
+provisions in our Articles of Incorporation which limit the liability of our directors and officers and have also adopted provisions
+in our bylaws which provide for indemnification by the Company of our officers and directors to the fullest extent permitted by
+Utah corporate law. Our Articles of Incorporation generally provide that our directors shall have no personal liability to the
+Company or its stockholders for monetary damages for breaches of their fiduciary duties as directors, except for breaches of their
+duties of loyalty, acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, acts
+involving unlawful payment of dividends or unlawful stock purchases or redemptions, or any transaction from which a director derives
+an improper personal benefit. Such provisions substantially limit our shareholders ability to hold directors liable for
+breaches of fiduciary duty.
+
+ 5 
+
+ Table of Contents 
+
+ 
+
+ 
+
+ 
+
+Our share
+structure could impede a non-negotiated change of control of the Company.
+
+ 
+
+On December 2,
+2013, the Company issued 10,000,000 founder s shares of the Company to Ms. Thomas, our Chief Executive Officer, in
+exchange for initial funds and services provided to the Company. As a result Mrs. Thomas holds a controlling interest in the
+Company. Consequently, any attempt to take over the Company without the consent of Mrs. Thomas would be extremely difficult
+to achieve. Because of the disproportionate voting control of Mrs. Thomas, she alone could inhibit, delay, or frustrate
+entirely an attempt by others to take over control of our Company and could prevent our shareholders from obtaining a premium
+for their shares.
+
+ 
+
+Risks Relating To This Offering and
+Our Common Stock
+
+ 
+
+If the selling
+shareholders sell a large number of shares all at once or in blocks, the market price of our shares would most likely decline.
+
+ 
+
+Holders holding
+850,000 shares of common stock may resell their shares of Common stock through this prospectus. Should the
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CRVS_corvus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CRVS_corvus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..580c5076c51b7c126031fa79dcdfc664e09a0638
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CRVS_corvus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in our common stock, you should read this entire prospectus carefully, including the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes contained elsewhere in this prospectus. Corvus Pharmaceuticals, Inc. Overview We are a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology therapies that are designed to harness the immune system to attack cancer cells. Since we began operations in November 2014, we have built a pipeline of four immuno-oncology programs, three of which focus on the adenosine-cancer axis to modulate an immune response. Our lead product candidate, CPI-444, is an oral, small molecule antagonist of the A2A receptor for adenosine, an immune checkpoint. In January 2016, we began enrolling patients in a large expansion cohort trial for CPI-444. This Phase 1/1b clinical trial is designed to examine safety, tolerability, biomarkers and preliminary efficacy of CPI-444 in several solid tumor types, both as a single agent and in combination with Genentech, Inc.'s investigational cancer immunotherapy, atezolizumab, a fully humanized monoclonal antibody targeting PDL-1. We have a lead development candidate for our second program, an anti-CD73 monoclonal antibody that inhibits the production of adenosine, and plan to select development candidates for our other two programs in 2016. We believe the breadth and status of our pipeline demonstrates our management team's expertise in understanding and developing immuno-oncology assets as well as in identifying product candidates that can be in-licensed and further developed internally to treat many types of cancer. We hold worldwide rights to all of our product candidates. Background in Immuno-oncology Immuno-oncology therapies that stimulate or enhance immune responses to tumors are a new and emerging approach with several potential benefits over existing therapies. First, the immune system exhibits immunologic diversity and selectivity, which enables it to respond to a large number of potential targets. Second, once triggered, the immune response can be amplified, offering the potential to enhance the efficacy of treatment. Third, once activated, the immune system possesses immunologic memory, potentially providing for a durable and long-lasting response. Some of the most successful types of immuno-oncology therapies are immune checkpoint inhibitors. Immune checkpoints are signaling molecules produced by or expressed on immune cells that act to shut down or block an immune response. In a healthy person, these checkpoints function to limit an immune response to ensure that the immune system does not overreact, which could lead to excessive inflammation and tissue damage, as occurs in patients with autoimmune diseases or allergies. Tumor cells have evolved to activate these checkpoints to shield the tumor from immune response attacks, but studies have shown that immune checkpoint inhibitors can counter these tumor-protective measures and unleash the immune system's cancer-destroying properties. Adenosine-Cancer Axis and Anti-tumor Immune Response Adenosine activates an immune checkpoint, the adenosine A2A receptor, that is used by the body to limit inflammation and immune responses. The production of adenosine during acute inflammatory processes is mediated by CD73, an enzyme expressed on the surface of several types of immune cells, tumor cells and cells of certain other tissues. As a self-protective maneuver, many tumor types actively sustain increased levels of extracellular adenosine by production through CD73 or by direct secretion of AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 Table of Contents adenosine. These increased levels of adenosine interact with the A2A and A2B receptors expressed on several cells of the immune system, including T-cells, natural killer (NK) cells, macrophages, dendritic cells and myeloid derived suppressor cells, as well as other cells, which has the effect of dampening the immune response to the tumors, a system known as the adenosine-cancer axis. Overall, adenosine hinders the immune response to tumors by both blocking the activation and effectiveness of immune cells capable of destroying tumor cells, and by increasing the number of immune cells that act to suppress immune cells from responding to the tumor. As tumor cells evolve and form cancerous growths, they utilize these processes to evade immune attack and promote their survival. However, several preclinical tumor model studies have shown that treatment with A2A receptor inhibitors can counter these survival mechanisms and lead to tumor regression and that this effect can be further enhanced when such treatment is administered in combination with various other checkpoint inhibitors, such as anti-programmed death 1 (PD-1) therapies and anti-cytotoxic T-lymphocyte-associated antigen-4 (CTLA-4) therapies. The following figure provides an overview of adenosine production by tumors and its effects on the immune system: Adenosine-Cancer Axis Immunosuppressive Effects of Adenosine Mediated through Multiple Pathways Our Product Pipeline We are developing novel checkpoint inhibitors and immuno-oncology therapies that we believe may overcome some of the limitations of current immuno-oncology therapies. Three of our programs are aimed at disabling cancer's ability to subvert immune attack by inhibiting adenosine in the tumor microenvironment or by blocking its production by tumors. Our fourth program is aimed at developing product candidates that regulate T-cell activation and differentiation by inhibiting interleukin-2 inducible kinase (ITK). We intend to commercialize any approved product candidates primarily in the United States and Europe for any oncology indications our product candidates are approved for. We expect cancer patients or their healthcare providers to be our primary customers for any approved product candidates and expect that our commercial sales of such product candidates will depend on the Corvus Pharmaceuticals, Inc. (Exact name of registrant as specified in its charter) Table of Contents availability of adequate coverage and reimbursement from government health administration authorities, private health insurers and other third-party payors. The following chart summarizes key information regarding our current product candidate pipeline and expected milestones: CPI-444 Adenosine A2A Receptor Antagonist. In February 2015, we in-licensed patent rights and know-how related to CPI-444 and related molecules from Vernalis (R&D) Limited (Vernalis), where it was under development for treatment of Parkinson's disease and other neurologic diseases. Vernalis and its corporate partner conducted two Phase 1 clinical trials in healthy volunteers and one Phase 1b trial in patients with attention deficit and hyperactivity disorder (ADHD), with an aggregate of approximately 75 healthy volunteers and patients dosed. These trials provided early indications of a favorable safety profile and assessed pharmacokinetics, oral bioavailability and receptor occupancy for CPI-444. We conducted further testing in in vitro and in vivo models to evaluate CPI-444's immune-enhancing and anti-tumor properties. In these studies, orally administered CPI-444 inhibited tumor growth in multiple mouse models of cancer as a single agent, in combination with anti-PD-1 agents and in combination with anti-PDL-1 agents. In October 2015, we filed an investigational new drug (IND) application for CPI-444 for treatment of several solid tumor types. In January 2016, we began enrolling patients in a large expansion cohort trial for CPI-444. This Phase 1/1b clinical trial is designed to examine safety, tolerability, biomarkers and preliminary efficacy of CPI-444, both as a single agent and in combination with Genentech's atezolizumab, and will include patients with different types of solid tumors enrolled in disease-specific cohorts. Anti-CD73 Adenosine Production Inhibitor. In December 2014, we in-licensed from The Scripps Research Institute (Scripps) a mouse hybridoma clone expressing an anti-human CD73 antibody, from which we have developed a humanized anti-CD73 monoclonal antibody. We have further modified this antibody to improve binding and inhibition of catalytic activity. CD73 is often Delaware (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) 46-4670809 (I.R.S. Employer Identification Number) 863 Mitten Road, Suite 102 Burlingame, CA 94010 (650) 900-4520 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents found on lymphocytes, tumors and other tissues, and is believed to play an important role in tumor immune suppression by catalyzing the production of extracellular adenosine. In preclinical in vitro studies, our humanized monoclonal anti-CD73 antibody has been shown to inhibit the catalytic activity of CD73, resulting in the blocking of extracellular adenosine production by tumor cells, which we believe could stimulate or enhance immune response to tumors. We are initiating IND-enabling studies for the development of this antibody for potential clinical trials in patients with advanced cancer and plan to complete these studies in 2017. Adenosine A2B Receptor Antagonist. We have in-licensed several selective and potent adenosine A2B receptor antagonists from Vernalis. In addition, we are synthesizing and have identified other A2B receptor antagonists from our internal research program. Adenosine A2B receptors have recently been found to play an important role in the immune response to tumors. Similar to adenosine A2A receptors, adenosine binds to adenosine A2B receptors, which leads to immunosuppression. We intend to further develop our A2B agents to improve potency, selectivity, pharmacokinetic behavior and immune enhancing properties. We expect to conduct preclinical studies similar to those we have conducted for CPI-444 in order to select a development candidate in 2016. Upon selection, we intend to conduct further IND-enabling studies and potential Phase 1 clinical trials. ITK Inhibitor. We are currently developing a series of selective, covalent inhibitors of ITK and are evaluating them in preclinical studies for potency, safety and efficacy. ITK, an enzyme that functions in T-cell signaling and differentiation, is expressed predominantly in T-cells, which are lymphocytes that play a vital role in immune response. One of the key survival mechanisms of tumors is believed to be the reprogramming of T-cells to create an inflammatory environment that inhibits anti-tumor immune response and favors tumor growth. We believe highly selective inhibitors of this enzyme will facilitate induction of T-cell anti-tumor immunity and also may be useful in the treatment of T-cell lymphomas. We plan to select a lead development candidate under this program in 2016 and, following selection, advance the candidate into clinical trials in patients with T-cell lymphoma and in patients with solid tumors. Our founders and management team consist of industry veterans who played significant roles in the discovery and development of successful oncology and immunology antibodies and drugs, including rituximab and ibrutinib. Since our inception, we have expanded our management team and established collaborations with leading biotechnology companies, including Genentech, and collaborative relationships with research institutions, including The Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins University. With our management team's expertise in developing both small molecule and antibody-based oncology treatments, we believe we are well positioned to identify and develop novel therapeutic agents that have diverse but complementary mechanisms of action, allowing for their potential integration into immuno-oncology treatment regimens for a broad variety of cancers. We have attracted initial funding from many leading healthcare investors and funds. Through December 31, 2015, we have raised net cash proceeds of $108.1 million in convertible preferred stock financings and as of December 31, 2015, we had cash, cash equivalents and marketable securities of $94.4 million and an accumulated deficit of $31.5 million. Our Strategy Our goal is to become a leader in the field of immuno-oncology treatments for multiple cancer indications. Specific elements of our strategy are: leverage our expertise in immunology and oncology to identify, develop and commercialize new product candidates; Richard A. Miller, M.D. President and Chief Executive Officer Corvus Pharmaceuticals, Inc. 863 Mitten Road, Suite 102 Burlingame, CA 94010 (650) 900-4520 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents utilize existing pre-clinical and clinical data to advance our lead product candidate, CPI-444, in to clinical trials for oncology; advance product candidates for use alone or in combination with other oncology treatments; identify biomarkers to select patients and monitor treatment with our product candidates; and pursue collaborative relationships, partnerships and in-licensing opportunities to help advance and expand our product candidate portfolio. Risks Associated with Our Business Our ability to implement our business strategy is subject to numerous risks of which you should be aware in making an investment decision. These risks are described more fully in the section entitled "Risk Factors" immediately following this prospectus summary. These risks include, among others: We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it. Even if this offering is successful, we will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts. Our business currently depends substantially on the success of CPI-444, which will require significant clinical testing before we can seek regulatory approval and potentially launch commercial sales. If we are unable to obtain regulatory approval for, or successfully commercialize, CPI-444, our business will be materially harmed. Any termination or suspension of, or delays in the commencement or completion of, our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. All of our product candidates are still in preclinical or early-stage clinical development. If we are unable to commercialize our product candidates or if we experience significant delays in obtaining regulatory approval for, or commercializing, any or all of our product candidates, our business will be materially and adversely affected. We rely on third parties to conduct some or all aspects of our product manufacturing, research and preclinical and clinical testing, and these third parties may not perform satisfactorily. Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by other companies. Our success depends on our ability to protect our intellectual property and our proprietary technologies. In addition, there are other risks related to our common stock and this offering that you should consider carefully before deciding whether to invest in our common stock. These risks and others are described more fully in the section entitled "Risk Factors" immediately following this prospectus summary. These risks include, among others: An active, liquid and orderly market for our common stock may not develop, and you may not be able to resell your common stock at or above the public offering price. Because a small number of our existing stockholders own a majority of our voting stock, your ability to influence corporate matters will be limited. Copies to: Alan C. Mendelson, Esq. Kathleen M. Wells, Esq. Latham & Watkins LLP 140 Scott Drive Menlo Park, CA 94025 Telephone: (650) 328-4600 Facsimile: (650) 463-2600 Leiv Lea Chief Financial Officer Corvus Pharmaceuticals, Inc. 863 Mitten Road, Suite 102 Burlingame, CA 94010 Telephone: (650) 900-4520 Bruce K. Dallas, Esq. Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, CA 94025 Telephone: (650) 752-2000 Facsimile: (650) 752-2115 Table of Contents Corporate Information We were incorporated in Delaware on January 27, 2014 and began operations in November 2014. Our principal executive offices are located at 863 Mitten Road, Suite 102, Burlingame, California 94010, and our telephone number is (650) 900-4520. Our website address is http://corvuspharma.com. The information contained on our website is not part of or incorporated by reference in this prospectus, and you should not consider the contents of our website in making an investment decision with respect to our common stock. Implications of Being an Emerging Growth Company We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, (3) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (Exchange Act), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such fiscal year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, we may present only two years of audited financial statements, plus unaudited condensed financial statements for any interim period, and related management's discussion and analysis of financial condition and results of operations; we may avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley); we may provide less extensive disclosure about our executive compensation arrangements; and we may not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements. We have chosen to opt out of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition periods for complying with new or revised accounting standards is irrevocable. Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CSBR_champions_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CSBR_champions_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CSBR_champions_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/CSUI_cannabis_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/CSUI_cannabis_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f6fe3f49dda1bda03edb64b9374617bcb51da79c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/CSUI_cannabis_prospectus_summary.txt
@@ -0,0 +1 @@
+Because we do not have an escrow or trust account for your subscription, if we file for bankruptcy protection or are forced into bankruptcy, or a creditor obtain a judgment against us and attaches the subscription, you will lose your investment. Your funds will not be placed in an escrow, trust or similar account, as Nevada law does not require that funds raised pursuant to the sale of securities be placed into an escrow account. As a result, if we file for bankruptcy protection or creditors against us file a petition for involuntary bankruptcy, your funds will become a part of the bankruptcy estate and administered according to the bankruptcy laws. If creditor sues us and obtains a judgment against us, the creditor could garnish the bank account and take possession of the subscriptions. If that happens, you will lose your investment and your funds will be used to pay creditors. You may not renounce your membership understanding once it is acknowledged by the Company or get a discount of any assets progressed regarding your acknowledged membership ascension and therefore, you may lose all or a portion of your interest in our common stock. Once your subscription agreement is accepted by the Company, you may not revoke the agreement or request a refund of any monies paid in connection with the subscription agreement, even if you subsequently learn information about the Company that you consider to be materially unfavorable. The Company reserves the right to begin using the proceeds from this offering as soon as the funds have been received and will retain broad discretion in the allocation of the net proceeds of this offering. The precise amounts and timing of the Company s use of the net proceeds will depend upon market conditions and the availability of other funds, among other factors. There can be no assurance that the Company will receive sufficient funds to execute the Company s business strategy and accomplish the Company s objectives. Additionally, you may be unable to sell your shares of our common stock at a price equal to or greater than the subscription price you paid for such shares, and you may lose all or part of your investment in our common stock. This statement does not limit investors rights to seek remedies under Section 5 of the Securities Act of 1933 in cases of material omissions or misstatements in this registration statement. Suneetha Nandana Silva Sudusinghe, our sole officer and director has lack of experience with the paper industry and distribution of paper products. The ompany's operations can be divided and may have difficulties with the speed of order execution, when and if the Company has such orders, because of our sole officer and director who has lack of experience with the paper industry and distribution of paper products. Risks Associated with our Common Stock We arbitrarily determined the price of the shares of our common stock to be sold pursuant to this prospectus, and such price does not reflect the actual market price for the securities. Consequently, there is an increased risk that you may not be able to re-sell our common stock at the price you bought it for. We determined the initial offering price of $0.04 per share of the common stock offered pursuant to this prospectus arbitrarily. The price is not based on our financial condition or prospects, on the market prices of securities of comparable publicly traded companies, on financial and operating information of companies engaged in similar activities to ours, or on general conditions of the securities market. The price may not be indicative of the market price, if any, for our common stock in the trading market after this Offering. If the market price for our stock drops below the price, which you paid, you may not be able to re-sell our common stock at the price you bought it for. Our common stock may never be quoted on the OTC Bulletin Board. To be quoted on the OTCBB a market maker must file an application on our behalf to make a market for our common stock. As of the date of this Registration Statement, we have not engaged a market maker to file such an application, and there is no guarantee that a market marker will file an application on our behalf, and that even if an application is filed, there is no guarantee that we will be accepted for quotation. Our stock may become quoted, rather than traded, on the OTCBB. When/if our shares of common stock commence trading on the OTC Bulletin Board, the trading price will fluctuate significantly and stockholders may have difficulty reselling their shares. As of the date of this Registration Statement, our common stock does not yet trade on the Over-the-Counter Bulletin Board. Our common stock may never be quoted on the OTC Bulletin Board. When/if our shares of common stock begin trading on the Bulletin Board, there is a inconstancy associated with Bulletin Board securities in general and the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock: (i) disappointing results from our development efforts; (ii) failure to meet our revenue or profit goals or operating budget; (iii) decline in demand for our common stock; (iv) downward revisions in securities analysts estimates or changes in general market conditions; (v) technological innovations by competitors or in competing technologies; (vi) lack of funding generated for operations; (vii) investor perception of our industry or our prospects; and (viii) general economic trends. Further more, stock markets have experienced price and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. As a result, investors may be unable to sell their shares at a fair price and you may lose all or part of your investment. Our shares of common stock are subject to the penny stock rules of the Securities and Exchange Commission and the trading market in our securities will be limited, which will make transactions in our stock cumbersome and may reduce the value of an investment in our stock. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks . Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise discharged from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject to the penny stock rules, and shareholders may have difficulties in selling their shares. There is no current trading market for our securities and if a trading market does not develop, purchasers of our securities may have difficulties selling their shares. There is currently no established public trading market for our securities and an active trading market in our securities may not develop or, if developed, may not be sustained. We intend to have a market maker apply for admission to quotation of our securities on the Over-the-Counter Bulletin Board after the SEC declares the Registration Statement relating to this prospectus effective. We do not yet have a market maker who has agreed to file such application. If for any reason our common stock is not quoted on the Over-the-Counter Bulletin Board or a public trading market does not otherwise develop, purchasers of the shares may have difficulty selling their common stock should they desire to do so. No market makers have committed to becoming market makers for our common stock and none may do so. We may in the future issue additional shares of common stock, which will dilute share value of investors in the offering. Our Articles of Incorporation authorize the issuance of 75,000,000 shares of common stock, par value $0.001 per share, of which 2,000,000 shares are issued and outstanding. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by investors in the offering, and might have an adverse effect on any trading market for our common stock. We intend to become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, which will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs will negatively affect our ability to earn a profit. Following the effective date of the registration statement in which this prospectus is included, we will be required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and the rules and regulations thereunder. In order to comply with such requirements, our independent registered auditors will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. Although we believe that the approximately $10,000 we have estimated for these costs should be sufficient for the 12 month period following the completion of our offering, the costs charged by these professionals for such services may vary significantly. Factors such as the number and type of transactions that we engage in and the complexity of our reports cannot accurately be determined at this time and may have a major negative affect on the cost and amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit. However, for as long as we remain an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that you become a large accelerated filer as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. After, and if ever, we are no longer an emerging growth company, we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with those requirements applicable to companies that are not emerging growth companies, including Section 404 of the Sarbanes-Oxley Act. We are not a shell company within the meaning of Rule 405, promulgated pursuant to Securities Act, because we do have hard assets and real business operations. We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an emerging growth company, as defined in the Jumpstart our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Under the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We are not a shell company within the meaning of Rule 405, promulgated pursuant to Securities Act, because we do have hard assets and real business operations. MARKET FOR OUR COMMON STOCK Market Information There is no established public market for our common stock. After the effective date of the Registration Statement of which this prospectus forms a part, we intend to try to identify a market maker to file an application with the Financial Industry Regulatory Authority, Inc., or FINRA, to have our common stock quoted on the Over-the-Counter Bulletin Board. We will have to satisfy certain criteria in order for our application to be accepted. We do not currently have a market maker that is willing to participate in this application process, and even if we identify a market maker, there can be no assurance as to whether we will meet the requisite criteria or that our application will be accepted. Our common stock may never be quoted on the Over-the-Counter Bulletin Board, or, even if quoted, a liquid or viable market may not materialize. There can be no assurance that an active trading market for our shares will develop, or, if developed, that it will be sustained. We have issued 2,000,000 shares of our common stock since our inception on February 26, 2016. There are no outstanding options or warrants or securities that are convertible into shares of common stock. Holders We have 1 holder of record of our common stock as of the date of this prospectus. Securities Authorized for Issuance under Equity Compensation Plans We have not established any compensation plans under which equity securities are authorized for issuance. USE OF PROCEEDS Our offering is being made on a self-underwritten basis: no minimum number of shares must be sold in order for the offering to proceed. The offering price per share is $0.04. The following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100% respectively of the securities offered for sale by the Company. There is no assurance that we will raise the full $80,000 as anticipated. 25% of offering the ($20,000) 50% of offering the ($40,000) 75% of offering the ($60,000) 100% of offering the ($80,000) Gross proceeds $ 20,000 $ 40,000 $ 60,000 $ 80,000 Registration Costs $ 7,000 $ 7,000 $ 7,000 $ 7,000 Net proceeds $ 13,000 $ 33,000 $ 53,000 $ 73,000 The net proceeds will be used as follows Legal and Professional fees $ 7,000 $ 7,000 $ 7,000 $ 7,000 Hollander beater machine - $ 6,000 $ 10,500 $ 15,000 Additional equipment materials $ 600 $ 2,300 $ 3,900 $ 5700 Operating supply $ 200 $ 1,000 $ 2,500 $ 5,000 Raw materials $ 4,800 $ 10,500 $ 18,800 $ 20,600 Website development - $ 400 $ 800 $ 1,500 Office set-up - $ 2,400 $ 3,800 $ 6,200 Marketing campaign $ 300 $ 1,000 $ 1,500 $ 3,000 Hire workers - $ 2,400 $ 4,200 $ 9,000 The above figures describe only exemplary costs. All receipts will be deposited into our corporate financial balance. If we rise less than 25% of the offering proceeds the only expected source of funds to commence planned business activities is a loan from our director. Suneetha Nandana Silva Sudusinghe, our sole officer and director, has agreed to loan the company funds to complete the registration process and to maintain a reporting status with the SEC. No proceeds from this offering will be used to repay Mr. Sudusinghe for any funds advanced for the purpose of completing the registration process. We will require a minimum funding of approximately $20,000 to conduct our proposed operations for a minimum period of one year including costs associated with this offering and maintaining a reporting status with the SEC. DETERMINATION OF OFFERING PRICE We have determined the offering price of the shares arbitrarily. The price does not bear any relationship to our assets, book value, earnings, or other established criteria for valuing a privately held company. In determining the number of shares to be offered and the offering price, we took into consideration our cash on hand and the amount of money we would need to implement our business plan. Accordingly, the offering price should not be considered an indication of the actual value of the securities. Among the factors considered were: Our lack of operating history; The proceeds to be raised by the offering; The amount of capital to be contributed by purchasers in this offering in proportion to the amount of stock to be retained by our existing Stockholders, and Our relative cash requirements. DILUTION The price of the current offering is fixed at $0.04 per share. This price is significantly higher than the price paid by the Company s sole officer and director, Suneetha Nandana Silva Sudusinghe, for common equity since the Company s inception on February 2, 2016. Mr. Sudusinghe paid $.001 per share for the 2,000,000 shares of common stock he purchased from the Company. Dilution represents the difference between the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the offering price of shares being offered. Dilution of the value of the shares you purchase is also a result of the lower book value of the shares held by our existing stockholders. The following tables compare the differences of your investment in our shares with the investment of our existing stockholders. As of August 31, 2016, the net tangible book value was negative $5,047 and the net tangible book value per share was $0.0025 based upon 2,000,000 shares outstanding. If 100% of shares are sold: Upon completion of this offering, in the event all of the shares are sold, the net tangible book value of the 4,000,000 shares to be outstanding will be $67,953 or approximately $0.0169 per share. The net tangible book value per share prior to the offering is $(0.0025). The net tangible book value of the shares held by our existing stockholders will be increased by $0.0194 per share without any additional investment on their part. Investors in the offering will incur an immediate dilution from $0.04 per share to $0.0231 per share. After completion of this offering, if 2,000,000 shares are sold, investors in the offering will own 50.00% of the total number of shares then outstanding for which they will have made cash investment of $80,000, or $0.04 per share. Our existing stockholders will own 50.00% of the total number of shares then outstanding, for which they have made contributions of cash totaling $2,000 or $0.001 per share. If 75% of shares are sold: Upon completion of this offering, in the event 1,500,000 shares are sold, the net tangible book value of the 3,500,000 shares to be outstanding will be $47,953 or approximately $0.0137 per share. The net tangible book value per share prior to the offering is $(0.0025). The net tangible book value of the shares held by our existing stockholders will be increased by $0.0162 per share without any additional investment on their part. Investors in the offering will incur an immediate dilution per share from $0.04 per share to $0.0263 per share. After completion of this offering investors in the offering will own 42.86% of the total number of shares then outstanding for which they will have made cash investment of $60,000, or $0.04 per share. Our existing stockholders will own 57.14% of the total number of shares then outstanding, for which they have made contributions of cash totaling $2,000 or $0.001 per share. If 50% of shares are sold: Upon completion of this offering, in the event 1,000,000 shares are sold, the net tangible book value of the 3,000,000 shares to be outstanding will be $27,953 or approximately $0.0093 per share. The net tangible book value per share prior to the offering is $(0.0025). The net tangible book value of the shares held by our existing stockholders will be increased by $0.0118 per share without any additional investment on their part. Investors in the offering will incur an immediate dilution per share from $0.04 per share to $0.0307 per share. After completion of this offering investors in the offering will own 33.33% of the total number of shares then outstanding for which they will have made cash investment of $40,000, or $0.04 per share. Our existing stockholders will own 66.67% of the total number of shares then outstanding, for which they have made contributions of cash totaling $2,000 or $0.001 per share. If 25% of shares are sold: Upon completion of this offering, in the event 500,000 shares are sold, the net tangible book value of the 2,500,000 shares to be outstanding will be $7,953 or approximately $0.0032 per share. The net tangible book value per share prior to the offering is $(0.0025). The net tangible book value of the shares held by our existing stockholders will be increased by $0.0057 per share without any additional investment on their part. Investors in the offering will incur an immediate dilution per share from $0.04 per share to $0.0368 per share. After completion of this offering investors in the offering will own 20% of the total number of shares then outstanding for which they will have made cash investment of $20,000, or $0.04 per share. Our existing stockholders will own 80% of the total number of shares then outstanding, for which they have made contributions of cash totaling $2,000 or $0.001 per share. PLAN OF DISTRIBUTION; TERMS OF THE OFFERING Geant Corp. has 2,000,000 shares of common stock issued and outstanding as of the date of this prospectus. The Company is registering an additional 2,000,000 shares of its common stock for sale at the price of $0.04 per share. There is no arrangement to address the possible effect of the offering on the price of the stock. In connection with the Company s selling efforts in the offering, Mr. Sudusinghe will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the safe harbor provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act ). Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer s securities. Mr. Sudusinghe is not subject to any statutory disqualification, as that term is defined in Section 3(a) (39) of the Exchange Act. Mr. Sudusinghe will not be compensated in connection with his participation in the offering by the payment of commissions or other remuneration based directly or indirectly on transactions in our securities. Mr. Sudusinghe is not, nor has been within the past 12 months, a broker or dealer, and he is not, nor has been within the past 12 months, an associated person of a broker or dealer. At the end of the offering, Mr. Sudusinghe will continue to perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Mr. Sudusinghe will not and has not participated in selling an offering of securities for any issuer more than once every 12 months. Geant Corp. will receive all proceeds from the sale of the 2,000,000 shares being offered. The price per share is fixed at $0.04 for the duration of this offering. Although our common stock is not listed on a public exchange or quoted over-the-counter, we intend to seek to have our shares of common stock quoted on the Over-the Counter Bulletin Board. To be quoted on the OTCBB a market maker must file an application on our behalf to make a market for our common stock. As of the date of this Registration Statement, we have not engaged a market maker to file such an application, there is no guarantee that a market marker will file an application on our behalf, and even if an application is filed; there is no guarantee that we will be accepted for quotation. Our stock may become quoted, rather than traded, on the OTCBB. The Company s shares may be sold to purchasers from time to time directly by and subject to the discretion of the Company. Further, the Company will not offer its shares for sale through underwriters, dealers, agents or anyone who may receive compensation in the form of underwriting discounts, concessions or commissions from the Company and/or the purchasers of the shares for whom they may act as agents. The shares of common stock sold by the Company may be occasionally sold in one or more transactions; all shares sold under this prospectus will be sold at a fixed price of $0.04 per share. In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; an exemption from such registration or if a qualification requirement is available and with which Geant Corp. has complied. In addition and without limiting the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective. Our shares of common stock are subject to the penny stock rules of the Securities and Exchange Commission. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks . Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject to the penny stock rules, and shareholders may have difficulty in selling their shares. The following table compares the differences of your investment in our shares with the investment of our existing stockholders. Existing Stockholders if all of the Shares are Sold: Price per share $ 0.001 Net tangible book value per share before offering $ (0.0025) Potential gain to existing shareholders $ 80,000 Net tangible book value per share after offering $ 0.0169 Increase to present stockholders in net tangible book value per share after offering $ 0.0194 Number of shares outstanding before the offering 2,000,000 Number of shares after offering assuming the sale of the maximum number of shares 4,000,000 Percentage of ownership after offering 50 % Purchasers of Shares in this Offering if all Shares Sold Price per share $ 0.04 Dilution per share $ 0.0231 Capital contributions $ 80,000 Number of shares after offering held by public investors 2,000,000 Percentage of capital contributions by existing shareholders 2.44 % Percentage of capital contributions by new investors 97.56 % Percentage of ownership after offering 50 % Purchasers of Shares in this Offering if 75% of Shares Sold Price per share $ 0.04 Dilution per share $ 0.0263 Capital contributions $ 60,000 Number of shares after offering held by public investors 1,500,000 Percentage of capital contributions by existing shareholders 3.23 % Percentage of capital contributions by new investors 96.77 % Percentage of ownership after offering 42.86 % Purchasers of Shares in this Offering if 50% of Shares Sold Price per share $ 0.04 Dilution per share $ 0.0307 Capital contributions $ 40,000 Number of shares after offering held by public investors 1,000,000 Percentage of capital contributions by existing shareholders 4.76 % Percentage of capital contributions by new investors 95.24 % Percentage of ownership after offering 33.33 % Purchasers of Shares in this Offering if 25% of Shares Sold Price per share $ 0.04 Dilution per share $ 0.0368 Capital contributions $ 20,000 Number of shares after offering held by public investors 500,000 Percentage of capital contributions by existing shareholders 9.09 % Percentage of capital contributions by new investors 90.91 % Percentage of ownership after offering Geant Corp. will pay all expenses incidental to the registration of the shares (including registration pursuant to the securities laws of certain states), which we expect to be $7,000. Offering Period and Expiration Date This offering will start on the date that this Registration Statement is declared effective by the SEC and continue for a period of one hundred and eighty (180) days. The offering shall terminate on the earlier of (i) the date when the sale of all 2,000,000 shares is completed, (ii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior to the completion of the sale of all 2,000,000 shares registered under the Registration Statement of which this Prospectus is part or (iii) the 181st day after the effective date of this prospectus. We will not accept any money until the SEC declares this Registration Statement effective. Procedures for Subscribing If you decide to subscribe for any shares in this offering, you must Execute and deliver a subscription agreement; and Deliver a check or certified funds to us for acceptance or rejection. All checks for subscriptions must be made payable to Geant Corp. The Company will deliver stock certificates attributable to shares of common stock purchased directly to the purchasers within thirty days (30) of the close of the offering. All accepted subscription agreements are irrevocable. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request a refund of monies paid. All accepted subscriptions are irrevocable, even if you subsequently learn information about us that you consider to be materially unfavorable. This statement does not limit investors rights to seek remedies under Section 5 of the Securities Act of 1933 in cases of material omissions or misstatements in this registration statement. Right to Reject Subscriptions We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them. MANAGEMENT S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This section of the prospectus includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We have only recently started our operations. Since incorporation we have generated no incomes from our business operations. Our current cash balance will not be sufficient to fund our operations for the next 12 months and to qualify our minimum cash requirements necessary to fund 12 months of operations, if we are unable to successfully raise money in this offering. We have been utilizing and may utilize funds from Suneetha Nandana Silva Sudusinghe, our sole officer and director, who has concluded a verbal agreement with Geant Corp., which is recorded as Exhibit 10.1, to allow us to pay for offering costs, filing fees, professional fees, including fees payable in connection with the filing of this registration statement and operation expenses. The amount of the verbal agreement is $50,000. From the period of inception (February 26, 2016) to August 31, 2016 Mr. Sudusinghe advanced to the Company $9,100 pursuant to the verbal agreement. Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. Our only sources for cash at this time are selling our dung paper products to the customers, proceeds from this offering or funds obtained under a verbal agreement concluded between Mr. Sudusinghe and Geant Corp., which is recorded as Exhibit 10.1. The amount of the verbal agreement is $50,000. We were incorporated in the State of Nevada on February 26, 2016. We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. Since incorporation, we have purchased Hollander beater machine ($1,185), stainless steel drum ($200), plastic barrel drums ($300) and $830 worth of subsidiary raw materials, totaling to $2,915 (transportation and VAT incl.), and a webpage (www.geantcorp.com). From February 26, 2016 (inception) to August 31, 2016, we have incurred accumulated net losses of $7,047. As of August 31, 2016, we had total assets of $6,353, and total liabilities of $11,400, respectively. Our business office is located at: Kiranthidiya road 114, Beruwala, Sri Lanka, 12070. To meet our needs for cash we are attempting to raise money from this offering and sell our dung paper products. If we are unable to successfully find additional customers who will buy our paper products from us, we may quickly use up the proceeds from Suneetha Nandana Silva Sudusinghe, our sole officer and director, who has concluded a verbal agreement with Geant Corp., which is filed as Exhibit 10.1. The amount of the verbal agreement is $50,000. Our business is the production of paper made from elephant dung for making different stationery products and distribution thereof. We are able to product dung paper for making stationery products and tourist souvenirs. We have limited revenues since incorporation and our principal business activities to date also consist of creating a business plan, developing our prospective webpage (costing between $400 - $1,500), and purchasing a Hollander beater machine ($1,185) and subsidiary raw materials ($830), totaling to $2,915 (transportation and VAT incl.) from a Chinese company, 3B Industrial Machines Ltd. We are planning to purchase our main raw material (elephant dung) from Indian Elephant Orphanage situated in Pinnawala, Sri Lanka. Elephants, which live there, will provide us with main necessary raw materials. We are planning to buy raw materials in price $600 per tonne. We think this volume of raw materials will be enough for the first several months when we will fix up our production. The process of the paper production is simple. All paper is made from a pulp mixture derived from fiber materials. The most common papers today come from wood fiber pulp from cut trees, in accordance to this fact we choose elephant dung. Firstly elephant dung fiber is collected from the Indian Elephant Orphanage. Cleaning and boiling are important stages in the dung papermaking process. All non-fiber materials are removed as much as possible at this point so that all that remains are actual fiber materials. The fibers are then boiled to a pulp for 4-6 hours. The boiling process occurs at 90-100 degrees Celsius in order to ensure that the protein based cells of any bacteria are destroyed by extreme heating. Our cleaning and boiling processes use no chemicals or other cleansing agents we use only water. The boiled pulp is then put through pulp beaters. Colors or dyes are added when the pulp is beaten in the beater. Then the pulp is mixed with water, and lifted up on flat sieves. Then paper must dry so it is poured into special molds to dry into reams of paper. After a couple of days the product is almost ready. Once the paper has been dried, it is either smoothened by stones to make it smooth and usable. In the end of our process we receive dung paper. If we will sell 25% of shares from this offering we plan to focus our efforts on the production of the paper. In this case we do not plan to spend monies for the development of our website, to set up our office or to hire additional workers to help our sole officer and director Suneetha Nandana Silva Sudusinghe with the operation of Hollander beater machines. As of the day of this filing Geant Corp. has purchased a Hollander beater machine and subsidiary raw materials from Chinese vendor under the purchase agreement filed as Exhibit 10.3 to this Registration Statement. We do not plan to buy an additional Hollander beater machine, if we sell only 25% of shares from this offering. Depending on the amount of investments raised as a result of this offering we plan to purchase additionally four, seven or ten Hollander beater machines with sufficient operating supplies for them. Upon completion of our public offering and depending on the amount of investments raised, our specific goal is profitably to sell paper dung products in Shri Lanka. Our plan of operations is as follows: Completion of our public offering We expect to complete our public offering within 180 days after the effectiveness of our Registration Statement by the Securities and Exchange Commissions. We intend to concentrate our efforts on raising capital during this period. Our operations will be limited due to the limited amount of funds and operating equipment on hand. In the twelve months, following completion of our public offering we plan to do the following activities to expand our business operations: Set up Office Time Frame: 1st-2th month The office (our director s property) is currently set up with first needed supplies and furniture, which Mr. Sudusinghe presented for the Company at no charge. Once we expand our operations and attract additional funds we will set up the office with modern necessary equipment. Suneetha Nandana Silva Sudusinghe, our sole officer and director will handle our administrative duties. If we sell 25% of offered shares from this offering we will not rent another office for our Company during the first year. If we sell 50% of shares or more we will rent another office for our production process. We believe that it will cost between $2,400 and $6,200 to rent and set up a new office and obtain the necessary office equipment. Develop Our Website Time Frame: 2rd -5th months At the point when our office is set up, we expect to start building up our site. The Company already has a webpage www.geantcorp.com filed with basic information. We do not have any composed concurrences with any web creators at the present time. We will not develop our website if we sell only 25% of shares from this offering. If we sell 50% of shares from this offering or more we will hire a web designer to help us design and develop it. We believe that it will cost between $400 and $1,500 for our webpage to be operational, depending on the amount of investments raised. We believe it will take up to 120 days to build up our site. There will be more information about our items and accessible paper plans, online orders feachers. Overhauling and enhancing our site will proceed all through the lifetime of our operations. Negotiate agreements with potential wholesale customers Time Frame: 4th -12th months On our naext step of development we will contact and begin arrangement with our potential clients. We will arrange terms and states of joint effort. Toward the starting, we plan to concentrate fundamentally on wholesale clients that make different sorts of stationery products and visitor gifts. At that point, as a last phase of business sector development, we plan to grow our objective business sector to corporate customers. Despite the fact that the transaction with potential wholesale clients will be progressing amid the life of our operations, we cannot promise that we will have the capacity to discover fruitful understandings, in which case our business might be harmed. Commence Marketing Campaign Time Frame: 6th -12th months In the meantime as we begin the transaction procedure with potential clients and our site is operational, or on the phase of creating, we will start to showcase our item. We plan to utilize promoting methodologies, for example, web commercials, direct mailing and telephone calls to secure potential clients. We trust that we ought to start to get results from our promoting effort inside 120 days from its introduction. We likewise will utilize Internet advancement apparatuses on Facebook and Twitter to publicize our items and company. Depending on the amount of investments rose as a result of this offering we plan to spend from $300 to $3,000 on showcasing endeavors amid the primary year. Advertising is a progressing matter that will keep amid the life of our operations. Regardless of the possibility that we can get an adequate number of administration understandings toward the end of the twelve-month time frame, there is no assurance that we will have the capacity to draw in and all the more essentially hold enough clients to legitimize our consumptions. Hire Workers Time Frame: 8th -12th months If we sell 25% of shares in this offering we do not plan to hire any workers, Suneetha Sudusinghe, our directore and sole officer, will operate the production by himself. If we sell at least 50% of the shares in this offering, we intend to hire four assistants, if we sell at least 75% of the shares there will be seven assistants, and ten assistants, in case if we sell 100% of the shares, to help our sole officer and director Suneetha Nandana Silva Sudusinghe with the operation of Hollander beater machines. This will help Mr. Sudusinghe to focus more on distribution, marketing and to set up agreements with wholesale customers to buy our paper dung products. The negotiation of additional agreements with potential customers will be ongoing during the life of our operations. We therefore expect to incur the following costs in the next 12 months in connection with our business operations and SEC filing requirements: 25% of offering the ($20,000) 50% of offering the ($40,000) 75% of offering the ($60,000) 100% of offering the ($80,000) Gross proceeds $ 20,000 $ 40,000 $ 60,000 $ 80,000 Registration Costs $ 7,000 $ 7,000 $ 7,000 $ 7,000 Net proceeds $ 13,000 $ 33,000 $ 53,000 $ 73,000 The net proceeds will be used as follows Legal and Professional fees $ 7,000 $ 7,000 $ 7,000 $ 7,000 Hollander beater machine - $ 6,000 $ 10,500 $ 15,000 Additional equipment materials $ 600 $ 2,300 $ 3,900 $ 5700 Operating supply $ 200 $ 1,000 $ 2,500 $ 5,000 Raw materials $ 4,800 $ 10,500 $ 18,800 $ 20,600 Website development - $ 400 $ 800 $ 1,500 Office set-up - $ 2,400 $ 3,800 $ 6,200 Marketing campaign $ 300 $ 1,000 $ 1,500 $ 3,000 Hire workers - $ 2,400 $ 4,200 $ 9,000 In summary, we expect to be in full operation and selling our product within 12 months of completing our offering. However, there is no guarantee that we will be in full operation and generate significant revenues and there is no guarantee that we will be able to raise funds through this offering. In this case in order to continue operations we plan to utilize funds from Mr. Sudusinghe. If we are unable to attract additional customers and cannot generate sufficient revenues to continue operations, we will obtain funds from Mr. Sudusinghe and Geant Corp. Suneetha Nandana Silva Sudusinghe, our sole officer and director, will be devoting approximately 75% of his time to our operations. Once we expand operations, and are able to attract more and more customers to buy our product, Mr. Sudusinghe has agreed to commit more time as required. Because Mr. Sudusinghe will only be devoting limited time to our operations at the current stage of production, our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted which could result in a lack of revenues. Limited operating history; need for additional capital There is no historical financial information about us upon which to base an evaluation of our performance. We are in a start-up stage of operations and have generated limited revenues since inception. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products. Results of operations From Inception on February 26, 2016 to August 31, 2016. During the period we incorporated the Company, and prepared a business plan. We have generated limited revenues since our inception on February 26, 2016 and incurred net losses of $7,047. Our total assets at August 31, 2016 were $6,353, consisting of one Hollander beater machine purchased from 3B Industrial Machines Ltd., subsidiary raw materials, such as HDPE Construction Debris Netting, Color powder, Scrap paper, Firewood and additionally equipment materials purchased form the same company and a purchased website (www.geantcorp.com). We currently anticipate that fees associated with reporting obligations will increase over the next 12 months as a result of becoming a reporting company with the SEC. Liquidity and capital resources As of August 31, 2016, the Company had $6,353 worth of assets and our liabilities were $11,400. As of this date Suneetha Nandana Silva Sudusinghe, our sole officer and director has loaned to the Company $9,100. The current available capital reserves of the Company are not sufficient to remain operational. We require minimum funding of $20,000 from this offering to implement our business plan. Since inception, 2,000,000 shares of common stock were outstanding and owned to our sole officer and director at the price of $0.001 per share, for aggregate proceeds of $2,000. To achieve our business plan goals we are attempting to raise money from this offering. We cannot guarantee that we will manage to sell all the shares required. If we are successful, any money raised will be applied to the items set forth in the Use of Proceeds section of this prospectus. We will attempt to raise the necessary funds to proceed with all phases of our plan of operation. As of the date of this Registration Statement, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. The Company s sole officer and director, Suneetha Nandana Silva Sudusinghe, has concluded a verbal agreement with the Geant Corp. in order to fund completion of the registration process and to maintain the reporting status with SEC. Our auditors have issued a going concern opinion, meaning that there is substantial doubt we can continue as an on-going business for the next twelve months unless we obtain additional capital. Our only sources for cash at this time are investments by others in this offering, selling our paper dung products and loans from our director. We must raise cash to implement our plan and stay in business. If 25% of shares are sold for the gross proceeds of $20,000 it will likely allow us to operate for at least one year and have the capital resources required covering the material costs with becoming a publicly reporting company. Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company s success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company s management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations. DESCRIPTION OF BUSINESS Organization within the Last Five Years We were incorporated in the State of Nevada on February 26, 2016. We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. Since incorporation, we have not made any significant purchase or sale of assets. Our business office is located at Kiranthidiya road 114, Beruwala, Sri Lanka, 12070. Our telephone number is +17027510467. In General We were incorporated in the State of Nevada on February 26, 2016. We just recently started our operations. Our business is the production of paper made from elephant dung (poo) for making different stationery products and distribution thereof primarily in Shri Lanka. We have generated limited revenues since inception and our principal business activities to date also consist of creating a business plan, purchasing a domain-name for our prospective webpage. Potential Customers Our President and Director, Suneetha Nandana Silva Sudusinghe, will showcase our item and arrange with potential clients and wholesale purchasers. We expect to create and keep up a database of potential corporate customers who might be keen on our items. We will catch up with these customers intermittently and offer them free examples, presentations and uncommon rebates now and again. Three fundamental classifications of our customers are: Wholesale exchange; speaking to expansive organizations, which are assembling diverse stationery items. It is preference for them to purchase fit dung paper instead of making it themselves. Further more they have an opportunity to concentrate on the manufacturing process of stationery items. Corporate customers, speaking to extensive, medium and little scale organizations, different affiliations and so on. This is a somewhat generous fragment of the business sector, which develops and routinely creates interest for different corporate blessings, gifts; things that advance brand mindfulness and so on. Competition We know that there are a number of obstacles to entering the market of dung paper items and the competition is rather high. There are several companies (PooPooPaper, Haathi Chaap and ecoMaximus) that offer comparative items and we will have to compete with them. We see the main competitive advantage of our competitors in the established customer base and marketing outlets. Howbeit, we arranged on a wholesale exchange, for the most part, so we will have capacity to offer our item for extensive organizations in huge amount. So our item is more extensive, and quality is better, ways to deal with business are more flexible. One of our biggest competitive advantages is that our item is raw material for different companies. So we would have a major measure of delivering item at the brief timeframe. Some of the competitive factors that may affect our business are as follows: 1. Number of Competitors Increase: different companies may follow our business model of distributing high quality paper items made from elephant dung, which will reduce our competitive edge. 2. Price: Our competitors may be selling similar product at a lower price forcing us to lower our prices as well and possibly sell our product at loss. 3. Substitute Products: ompetitors may substitute items made from elephant dung with comparable items made from dung of some other animals. We are not a shell company within the meaning of Rule 405, promulgated pursuant to Securities Act, because we do have hard assets and real business operations. We need proceeds from this offering to start our 12-month plan of operation. The total estimated minimum amount of funds required to develop our business is approximately $ 20,000. We need funds for offering costs, general administrative expenses, production equipment purchase, business development, marketing costs, support materials and costs associated with being a publicly reporting company. We have generated limited revenues from operations to date. We will disperse our items in Shri Lanka and neighboring countries. We plan to use various distribution channels for various types of customers. As a rule we arrenged for a wholesale exchange, however in future we can make some items for various traveler shops and kiosks; corporate customers and individual customers will be covered by our web page and targeted marketing exercises. Product Overview Geant Corp. s business is in making unique products to be sold to both mass-market customers and individual clients in future. We want to focus on something that is socially and environmentally responsible so we are contributing to the solution and not adding to the problem. We want to work with something that had more meaning to us, something we could be passionate about, and that possibly could have an important social statement attached to it. All of our paper products are 100% recycled. They do not have any smell. They are made up of 70% fiber from elephant dung and 30% post consumer paper. All papers everywhere are made from a pulp mixture derived from fiber materials. The most common papers today come from wood fiber pulp from cut trees. Our fibers of choice, of course, are dung fibers. We use the dung fibers from elephants to make our dung paper products. All elephants that generate the dung that we require for our process have at least two things in common: 1) All are herbivores and have highly fibrous diets of different plants and vegetation. 2) All possess inefficient digestive systems that do not completely digest and breakdown all the fibers that they eat. This results in a significant amount of fibers remaining intact when these animals dung. There are no toxic chemicals used in our paper making process. Natural vegetative binding agents, along with water-soluble salt dyes for coloring are used. Our dung papers are handmade, acid free and as organic as it gets. We are focused on the production of dung paper for mass-market customers to give them the ability of making different stationery products, souvenirs, tourist-oriented products, up-market gifts and interior design items from natural products on advanced and unique designs. It would be easier for them to buy raw materials (paper) from us to produce needed products instead of making paper. It is easier for us at the beginning to set up the production of paper instead of setting up the whole paper production and of different kinds of stationery products at the same time. In the future we have plans about production of some additional stationery items aside from paper. Geant Corp. has the ability to product handmade dung paper for making such original items as, for example: Bags Frames Photo Albums Notebooks Stationery Cards However, first, we intend to launch a mass production of inexpensive handmade dung paper for making different stationery products and various tourist souvenirs, which were made using elephant dung. Hollander Beater for Handmade Paper Beater Specifications Pulp Capacity Stainless Steel (Sh-Hydra-SS) 2.2 lbs (1 kg) Fiberglass (Sh-Hydra) 2 lbs (9 kg) Size Inches (L x W x H) cm (L x W x H) 28.5 x 48 x 48 73 x 122 x 122 cm 32 x 49 x 48 82 x 125 x 122 cm Roll 8 x 8 (20 cm x 20 cm) 304 Stainless steel 24 -3 /16 (45 mm) replaceable blades mounted on 1 (2.54 cm) shaft Laser cut and assembled on Motor 3/4 Hp TEFC (totally enclosed fan cooled) 110/ 220 volt 60 Hz Optional 1 hp TEFC 110/ 220 volts 60 hz International Motors 3/4 hp TEFC 110/220 volts 50/60 hz Optional 1 hp TEFC 110/220 volts 50/60 hz Motor Controls Air actuated on /off switch mounted on end of arm coupled to motor rated switches in isolated electrical box. Optional magnetic starter Used where required by safety codes. Lid Safety switches Included: -machine will not operate without lid in place. Adjusting mechanism Single handwheel on end of arm with lock nut. Stand Aluminum tubing and fittings with casters. OPTIONS Optional Amp Meter Shows amount of power machine is using allowing the roll to be set at the same height for each batch. Clear Plastic Lid Covers returns area, makes beater quieter. Lifting Winch A labor saving device to raise roll into cleaning position. SHIPPING WEIGHT Polyester resin tub- approx. 280 lbs (128 kg) Stainless steel tub-approx. 300 (136 kg) Marketing Our sole officer and chief, Suneetha Nandana Silva Sudusinghe, will be in charge of promoting of our company and our high quality dung paper. We intend to use such marketing strategies as web advertisements, direct mailing, and phone calls to acquire potential customers. We intend to attract traffic to our website by a variety of online marketing tactics such as registering with top search engines using selected key words and meta-tags, and utilizing link and banner exchange options. We will utilize numerous Internet showcasing instruments to direct activity to our site and distinguish potential clients. As of the date of this prospectus we have already purchased a website (www.geantcorp.com) and plan to develop it. We already have some description of our item, the procedure of production and incorporate some broad data and pictures of items companies can make from our paper. Our site portrays samples of products which company is able to produce, the production procedure, and incorporates some broad data and pictures of high quality dung paper. We plan to utilize Internet advancement apparatuses on Facebook and Twitter to publicize our company and make connections to our site. We will intend to continue our marketing efforts during the life of our operations. We intend to spend from $300 to $3,000 on marketing efforts during the first year, depending on the amount of investments raised as a result of this offering. There is no guarantee that we will be able to attract and more importantly retain enough customers to justify our expenditures. If we are unable to generate a significant amount of revenue and to successfully protect ourselves against those risks, then it would materially affect our financial condition and our business could be harmed. Description of property The Company has not signed any rental agreements. Our sole officer and director, Suneetha Nandana Silva Sudusinghe, has agreed to provide us its own premises at no charge. He will not take any fee for these premises. Insurance We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party of a products liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations. Research and Development Expenditures We have not incurred any research expenditures since our incorporation. Bankruptcy or Similar Proceedings There has been no bankruptcy, receivership or similar proceeding. Employees; Identification of Certain Significant Employees We currently have no employees, other than our sole officer and director Suneetha Nandana Silva Sudusinghe. MANAGEMENT Officers and Directors Our sole director will serve until his successor is elected and qualified. Our sole officer is elected by the board of directors to a term of one (1) year and serves until his successor is duly elected and qualified, or until he is removed from office. The board of directors has no nominating, auditing or compensation committees. The name, address, age and position of our present officers and directors are set forth below: Name and Address Age Position(s) Suneetha Nandana Silva Sudusinghe 47 President, Principal Executive Officer, Secretary, Treasurer, At Galle Road 93 Principal Financial Officer, Principal Accounting Officer Moragalla, Beruwala, 80000 And sole member of the Board of Directors. Mr. Sudusinghe has acted as our sole President, Chief Executive Officer, Treasurer, Chief Financial Officer, Chief Accounting Officer, Secretary and sole member of our board of directors since our incorporation on February 26, 2016. Mr. Sudusinghe owns 100% of the outstanding shares of our common stock. For the past five years he has been a business administrator and then a head administrator at Reschen Tex LTD (textile company), were he was working as part of a team and supporting the office administrator, he was responsible for the day-to-day tasks and administrative duties of the office including covering the reception area and as head administrator he was responsible for providing an efficient and professional administrative and clerical service to colleagues, managers and supervisors to facilitate the efficient operation of the office. Mr. Sudusinghe was employed at Reschen Tex LTD as administrator in period from March 2009 to September 2012, and as head administrator in period from October 2012 to September 2015. Mr. Sudusinghe intends to devote close to 75% of his time to planning and organizing activities of Geant Corp. In the past ten years, Mr. Sudusinghe has not been the subject to any of the following events: 1. Any bankruptcy petition filed by or against any business of which Mr. Sudusinghe was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. 2. Any conviction in a criminal proceeding or being subject to a pending criminal proceeding. 3. An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Mr. Sudusinghe s involvement in any type of business, securities or banking activities. 4. Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to violate a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. 5. Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; 6. Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; 7. Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 8. Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Term Of Office The director is appointed to hold office until the next annual meeting of our stockholders or until his respective successor is elected and qualified, or until he resigns or is removed in accordance with the provisions of the Nevada Revised Statues. Our Board of Directors and hold office until removed by the Board or until his resignation appoints our officer. Director Independence Our board of directors is currently composed of one member, Suneetha Nandana Silva Sudusinghe, who does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director s business and personal activities and relationships as they may relate to our management and us. EXECUTIVE COMPENSATION The following table sets forth the compensation paid by us for the six months ending August 31, 2016 for our sole officer and director. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid or named executive officers. EXECUTIVE OFFICER COMPENSATION TABLE Name and Principal Position Year Salary (US$) Bonus (US$) Stock Awards (US$) Option Awards (US$) Non-Equity Incentive Plan Compensation (US$) Nonqualified Deferred Compensation Earnings (US$) All Other Compensation (US$) Total (US$) Suneetha Sudusinghe 2016 0 0 0 0 0 0 0 0 President We have no work concurrences with our sole officer and executive. We do not examine going into any occupation understandings until such time as we start gainful operations. Mr. Sudusinghe will not be repaid after the offering and preceding beneficial operations. There is no affirmation that we will ever produce extra incomes from our operations. The pay examined in this delivers all remuneration recompensed to, earned by, or paid to our named official officers. There are no other investment opportunity arranges, retirement, annuity, or benefit sharing arrangements for the advantage of our officers and chiefs other than as portrayed in this. Compensation of Directors The individual from our top managerial staff is not made up for his administrations as a chief. The board has not actualized an arrangement to honor alternatives to any executives. There are no legally binding plans with any individual from the governing body. We have no executive s administration contracts. DIRECTOR S COMPENSATION TABLE Name Year Fees Earned or Paid in Cash Stock Awards Options Awards Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All Other Compensation Total (US$) (US$) (US$) (US$) (US$) (US$) (US$) Suneetha Sudusinghe 2016 0 0 0 0 0 0 0 Long-Term Incentive Plan Awards We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. Indemnification Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada. Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable. PRINCIPAL STOCKHOLDERS The following table sets forth, as of the date of this prospectus, the total number of shares owned beneficially by our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The table also reflects what their ownership will be assuming completion of the sale of all shares in this offering. The stockholders listed below have direct ownership of their shares and possesses sole voting and dispositive power with respect to the shares. Name and Address Beneficial Owner [1] Number of Shares Before the Offering Percentage of Ownership Before the Offering Number of Shares After Offering Assuming all of the Shares are Sold Percentage of Ownership After the Offering Assuming all of the Shares are Sold Suneetha Sudusinghe 2,000,000 100% 2,000,000 50% [1] The person named above may be deemed to be a parent and promoter of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct and indirect stock holdings. Mr. Sudusinghe is the only promoter of our company. Future sales by existing stockholders A total of 2,000,000 shares of common stock were issued to our sole officer and director, all of which are restricted securities, as defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Securities Act. Under Rule 144, the shares can be publicly sold, subject to volume restrictions and restrictions on the manner of sale. Such shares can only be sold after six months provided that the issuer of the securities is, and has been for a period of at least 90 days immediately before the sale, subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. Shares purchased in this offering, which will be immediately resalable, and sales of all of our other shares after applicable restrictions expire, could have a depressive effect on the market price, if any, of our common stock and the shares we are offering. There is no public trading market for our common stock. To be quoted on the OTCBB a market maker must file an application on our behalf to make a market for our common stock. As of the date of this Registration Statement, we have not engaged a market maker to file such an application; hence there is no guarantee that a market marker will file an application on our behalf. Even if an application is filed, there is no guarantee that we will be accepted for quotation. Our stock may become quoted, rather than traded, on the OTCBB. There are no outstanding options or warrants to purchase, or securities convertible into our common stock. There is one holder of record for our common stock. The record holder is our sole officer and director who owns 2,000,000 restricted shares of our common stock. DESCRIPTION OF SECURITIES Common Stock Our authorized ommon stock consists of 75,000,000 shares of common stock, par value $0.001 per share. The holders of our common stock: Have equal ratable rights to dividends from funds legally available if and when declared by our board of directors; Are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs; Do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and A holder of outstanding shares, entitled to vote at a meeting, may vote at such meeting in person or by proxy. Except as may otherwise be provided in the currently filed Articles of Incorporation, every shareholder shall be entitled to one vote for each share standing in their name on the record of shareholders. Except, as herein or in the currently filed Articles of Incorporation otherwise provided, all corporate action shall be determined by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities. Suneetha Nandana Silva Sudusinghe, our sole officer and director will offer our securities to his personal friends and family in Shri Lanka and India and relatives and friends in neighboring countries. We will not utilize advertising or make a general solicitation for our offering, but rather, Mr. Sudusinghe will personally and individually contact each investor. Mr. Sudusinghe has no experience in selling securities to investors. Mr. Sudusinghe will not purchase securities in this offering. Preferred Stock Currently no preferred shares are issued and outstanding. Share purchase warrants We have not issued and do not have any outstanding warrants to purchase shares of our common stock. Options We have not issued and do not have any outstanding options to purchase shares of our common stock. Convertible Securities We have not issued and do not have any outstanding securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock. Non-cumulative voting Holders of shares of our common stock have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors. After this offering is completed, assuming the sale of all of the shares of common stock, present stockholders will own approximately 50% of our outstanding shares. Cash dividends As of the date of this prospectus, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations. Nevada anti-takeover laws Currently, we have no Nevada shareholders and since this offering will not be made in the State of Nevada, no shares will be sold to its residents. Further, we do not do business in Nevada directly or through an affiliate corporation and we do not intend to do so. Accordingly, there are no anti-takeover provisions that have the affect of delaying or preventing a change in our control. The Nevada Business Corporation Law contains a provision governing Acquisition of Controlling Interest. This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition law provides that a person or entity acquires control shares whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to 50%, or (3) more than 50%. A control share acquisition is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or board of directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the Articles of Incorporation or Bylaws of the corporation. Our Articles of Incorporation and Bylaws do not exempt our common stock from the control share acquisition law. The control share acquisition law is applicable only to shares of Issuing Corporations as defined by the act. An Issuing Corporation is a Nevada corporation, which; (1) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada; and (2) does business in Nevada directly or through an affiliated corporation. At this time, we do not have 100 stockholders of record resident of Nevada. Therefore, the provisions of the control share acquisition law do not apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply to us, the provisions of the control share acquisition law may discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders. The Nevada Combination with Interested Stockholders Statute may also have an effect of delaying or making it more difficult to effect a change in control of the Company. This statute prevents an interested stockholder and a resident domestic Nevada corporation from entering into a combination, unless certain conditions are met. The statute defines combination to include a ny merger or consolidation with an interested stockholder, or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an interested stockholder having; (1) an aggregate market value equal to 5 percent or more of the aggregate market value of the assets of the corporation; (2) an aggregate market value equal to 5 percent or more of the aggregate market value of all outstanding shares of the corporation; or (3) representing 10 percent or more of the earning power or net income of the corporation. An interested stockholder means the beneficial owner of 10 percent or more of the voting shares of a resident domestic corporation, or an affiliate or associate thereof. A corporation affected by the statute may not engage in a combination within three years after the interested stockholder acquires its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. If approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by disinterested stockholders, or if the consideration to be paid by the interested stockholder is at least equal to the highest of: (1) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which he became an interested stockholder, whichever is higher; (2) the market value per common share on the date of announcement of the combination or the date the interested stockholder acquired the shares, whichever is higher; or (3) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock. The effect of Nevada s business combination law is to potentially discourage parties interested in taking control of the Company from doing so if it cannot obtain the approval of our board of directors. Reports We will be required to file reports with the SEC under section 15(d) of the Securities Act. The reports will be filed electronically. The reports we will be required to file are Forms 10-K, 10-Q, and 8-K. You may read copies of any materials we file with the SEC at the SEC s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports we file electronically. The address for the Internet site is www.sec.gov. Stock transfer agent We do not have a Transfer Agent. RELATED PARTY TRANSACTIONS On April 22, 2016, we issued a total of 2,000,000 shares of restricted common stock to Suneetha Nandana Silva Sudusinghe, our sole officer and director in consideration of $2,000. Mr. Sudusinghe is a sole promoter of our Company. Further, Mr. Sudusinghe has advanced funds to us under a verbal agreement concluded between Mr. Sudusinghe, and us, which is filed as Exhibit 10.1. The amount of the verbal agreement is $50,000. As of August 31, 2016, Mr. Sudusinghe advanced us $9,100. The money is due on demand and Mr. Sudusinghe will not be repaid from the proceeds of this offering. There is no due date for the repayment of the funds advanced by Mr. Sudusinghe. Mr. Sudusinghe will be repaid from revenues of operations if and when we generate significant revenues to pay the obligation. The obligation to Mr. Sudusinghe does not bear interest. INTEREST OF NAMED
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/DQWS_dswiss-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/DQWS_dswiss-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae3b8aa057910e9837e3a758f00219c1d289f7e0
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/DQWS_dswiss-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 2 RISK FACTORS 5 SUMMARY OF FINANCIAL INFORMATION 13 MANAGEMENT S DISCUSSION AND ANALYSIS 14 INDUSTRY OVERVIEW 14 FORWARD-LOOKING STATEMENTS 15 DESCRIPTION OF BUSINESS 15 USE OF PROCEEDS 17 DETERMINATION OF OFFERING PRICE 17 DILUTION 18 SELLING SHAREHOLDERS 19 PLAN OF DISTRIBUTION 20 DESCRIPTION OF SECURITIES 21 INTERESTS OF NAMED EXPERTS AND COUNSEL 22 REPORTS TO SECURITIES HOLDERS 22 DESCRIPTION OF FACILITIES 22 LEGAL PROCEEDINGS 23 PATENTS AND TRADEMARKS 23 DIRECTORS AND EXECUTIVE OFFICERS 23 EXECUTIVE COMPENSATION 23 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 26 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 26 PRINCIPAL ACCOUNTING FEES AND SERVICES 26 MATERIAL CHANGES 26 FINANCIAL STATEMENTS F1-F15 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 27 INDEMNIFICATION OF OFFICERS AND DIRECTORS 27 RECENT SALES OF UNREGISTERED SECURITIES 28 EXHIBITS TO FINANCIAL STATEMENTS 28 UNDERTAKINGS 29 SIGNATURES 30 You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. Dealer Prospectus Delivery Obligation Until January 1, 2017, or 90 days after the effective date of this registration statement, whichever is earlier, all dealers that effect transactions in these securities, whether participating in this offering or not, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. The date of this prospectus is __________________. - 1 - Table of Contents PROSPECTUS SUMMARY In this Prospectus, , ' ': , ' ': DSwiss, the "Company, , ' ': , ' ': we, , ' ': , ' ': us, and , ' ': , ' ': our, refer to DSwiss, Inc., unless the context otherwise requires. Unless otherwise indicated, the term , ' ': , ' ': fiscal year refers to our fiscal year ending December 31st. Unless otherwise indicated, the term , ' ': , ' ': common stock refers to shares of the Company s common stock. This Prospectus, and any supplement to this Prospectus include "forward-looking statements". To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the "Risk Factors" section and the "Management s Discussion and Analysis of Financial Position and Results of Operations" section in this Prospectus. This summary only highlights selected information contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including "Risk Factors" beginning on Page 5, and the financial statements, before making an investment decision. The Company DSwiss, Inc., a Nevada corporation ("the Company") was incorporated under the laws of the State of Nevada on May 28, 2015. DSwiss, Inc. is a beauty supply company that sells cosmetics and other related beauty products to consumers in Malaysia with plans to expand throughout the world. The Company s executive offices are located at A-08-06, Tropicana Avenue, Tropicana Golf & Country Resort,47410 Petaling Jaya, Selangor, Malaysia. Our activities have been limited to day to day operations pertaining to the sale of our products, and the development of our future business operations. We believe we need to raise $1,600,000 to execute our business plan over the next 12 months. The funds raised in this offering, even assuming we sell all the shares being offered, may be insufficient to carry out our intended business operations. We will receive proceeds from the sale of 2,000,000 shares of our common stock and intend to use the proceeds from this offering to further develop and market our line of beauty products. There is uncertainty that we will be able to sell any of the 2,000,000 shares being offered herein by the Company. The expenses of this offering, including the preparation of this prospectus and the filing of this registration statement, estimated at $30,000.00, are being paid for by the Company. The maximum proceeds to us from this offering ($1,600,000) will satisfy our basic subsistence level, cash requirements for up to 12 months. 75% of the possible proceeds from the offering by the company ($1,200,000) will satisfy our basic, subsistence level cash requirements for up to 9 months, while 50% of the proceeds (800,000) will sustain us for up to 6 months, and 25% of the proceeds ($400,000) will sustain us for up to 3 months. Our budgetary allocations may vary, however, depending upon the percentage of proceeds that we obtain from this offering. For example, we may determine that it is more beneficial to allocate funds toward securing potential financing and business opportunities in the short terms rather than to conserve funds to satisfy continuous disclosure requirements for a longer period. During the 12 months following the completion of this offering, we intend to continue our current business plan and increase operations. - 2 - Table of Contents We believe that if we are not able to raise additional capital within 12 months of the effective date of this registration statement, we may be adversely effected and may have to curtail operations or continue operations at a limited level that is financially suitable for the Company. Our Offering We have authorized capital stock consisting of 600,000,000 shares of common stock, $0.0001 par value per share ("Common Stock") and 200,000,000 shares of preferred stock, $0.0001 par value per share ("Preferred Stock"). We have 203,342,600 shares of Common Stock and no shares of Preferred Stock issued and outstanding. Through this offering we will register a total of 3,443,000 shares. These shares represent 2,000,000 additional shares of common stock to be issued by us and 1,443,000 shares of common stock by our selling stockholders. We may endeavor to sell all 2,000,000 shares of common stock after this registration becomes effective. Upon effectiveness of this Registration Statement, the selling stockholders may also sell their own shares. The price at which we, the company, offer these shares is at a fixed price of $0.80 per share for the duration of the offering. The selling stockholders will also sell shares at a fixed price of $0.80 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the price of the stock. We will receive all proceeds from the sale of our common stock but we will not receive any proceeds from the selling stockholders. *The primary offering on behalf of the company is separate from the secondary offering of the selling stockholders in that the proceeds from the shares of stock sold by the selling stockholder s will go directly to them, not the company. The same idea applies if the company approaches or is approached by investors who then subsequently decide to invest with the company. Those proceeds would then go to the company. Whomever the investors decide to purchase the shares from will be the beneficiary of the proceeds. None of the proceeds from the selling stockholder s will be utilized or given to the company. Mr. Leong will clarify for investors at the time of purchase whether the proceeds are going to the company or directly to himself. *Mr. Leong will be able to sell his shares at any time during the duration of this offering. Regarding the sale of Mr. Leong s shares, they will be sold at a fixed price of $0.80 for the duration of the offering. *Mr. Leong will be selling shares of common stock on behalf of the Company simultaneously to selling shares of his own personal stock from his own account. A conflict of interest may arise between Mr. Leong s interest in selling shares for his own account and in selling shares on the Company s behalf. Please note that at this time Mr. Leong intends to sell the Company s shares prior to selling his own shares, although he is under no obligation to do so. Mr. Leong will decide whether shares are being sold by the Company or by Mr. Leong himself. *We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering. Securities being offered by the Company 2,000,000 shares of common stock, at a fixed price of $0.80 offered by us in a direct offering. Our offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Securities being offered by the Selling Stockholders 1,443,000 shares of common stock, at a fixed price of $0.80 offered by selling stockholders in a resale offering. As previously mentioned this fixed price applies at all times for the duration of the offering. The offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus, unless extended by our Board of Directors for an additional 90 days. We may however, at any time and for any reason terminate the offering. Offering price per share We and the selling shareholders will sell the shares at a fixed price per share of $0.80 for the duration of this Offering. Number of shares of common stock outstanding before the offering of common stock 203,342,600 common shares are currently issued and outstanding. Number of shares of common stock outstanding after the offering of common stock 205,342,600 common shares will be issued and outstanding if we sell all of the shares we are offering. The minimum number of shares to be sold in this offering None. Market for the common shares There is no public market for the common shares. The price per share is $0.80. We may not be able to meet the requirement for a public listing or quotation of our common stock. Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop. The offering price for the shares will remain at $0.80 per share for the duration of the offering. - 3 - Table of Contents Use of Proceeds We intend to use the gross proceeds to us for working capital, marketing, development of new product lines, and increased staff. Termination of the Offering This offering will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all 3,443,000 shares registered hereunder have been sold. We may, at our discretion, extend the offering for an additional 90 days. At any time and for any reason we may also terminate the offering. Terms of the Offering Our Chief Executive Officer, Leong Ming Chia will sell the 2,000,000 shares of common stock on behalf of the company, upon effectiveness of this registration statement, on a BEST EFFORTS basis. Subscriptions: All subscriptions once accepted by us are irrevocable. Registration Costs We estimate our total offering registration costs to be approximately $30,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/DRIO_dariohealt_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/DRIO_dariohealt_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/DRIO_dariohealt_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/EDIT_editas_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/EDIT_editas_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..dd7737d8615b605463210eb25efb05f9f67c137d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/EDIT_editas_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included elsewhere in this prospectus. You should also consider, among other things, the matters described under "Risk Factors" beginning on page 11. Our Business We are a leading genome editing company dedicated to treating patients with genetically defined diseases by correcting their disease-causing genes. We believe that we have entered a new era of genomic medicine as the growth of genomic information in recent decades has significantly expanded the understanding of genetically defined diseases. A new technology known as CRISPR (clustered, regularly interspaced short palindromic repeats)/Cas9 (CRISPR associated protein 9) has the potential to achieve precise, directed changes in DNA. The confluence of these two streams of scientific endeavor, understanding genetic defects and having the tools to be able to address them, creates the opportunity for us to achieve a longstanding goal of medicine: to treat the root causes of diseases at the genetic level. While genetic defects are now recognized as the causes of many diseases, the vast majority of these diseases lack effective treatments. Of the estimated 6,000 diseases that are known to be caused by genetic mutations, we believe fewer than 5% are served by approved therapies. Our mission is to translate the promise of our science into a broad class of transformative genomic medicines to benefit the greatest number of patients. We are developing a proprietary genome editing platform based on CRISPR/Cas9 technology. CRISPR/Cas9 uses a protein-RNA complex composed of the Cas9 enzyme bound to a guide RNA molecule designed to recognize a particular DNA sequence. The RNA molecule guides the Cas9 complex to the location in the genome that requires repair. Once there, the complex makes a specific cut in the DNA, ultimately triggering the cell's DNA repair machinery to address the genetic defect. Our platform consists of four interrelated components: nuclease engineering, delivery, control and specificity, and directed editing. These components are designed to develop medicines that specifically address a wide variety of genetic targets, reach the site of disease safely and effectively, tightly and specifically control the editing process, and drive the right kind of genetic repair. Our preclinical drug discovery platform uses the flexibility of CRISPR/Cas9 technology to enable rapid reprogramming of the Cas9-guide RNA complex with the potential to direct it to almost any site in the human genome. Using this platform, we aim to develop and advance a broad range of therapies for genetically defined diseases. Our product development strategy is to target genetically defined diseases with an initial focus on debilitating illnesses where there are no approved treatments and where the genetic basis of disease is well understood. We are advancing over a dozen discovery research programs that we have selected based on our proprietary assessment criteria. Our most advanced research program is designed to address Leber Congenital Amaurosis type 10, or LCA10, a specific genetic form of progressive blindness with no available therapies or potential treatments in clinical trials in either the United States or European Union. The localization of LCA10 disease in the eye allows us to efficiently apply our technology in a context that is confined and relatively uncomplicated compared to many of the systemic illnesses we also anticipate treating over time. We have tested combinations of Cas9 and guide RNA pairs in cells that were taken from patients with a specific mutation that causes LCA10 and demonstrated restoration of normal messenger RNA and protein expression, suggesting that we successfully corrected the LCA10 gene defect in these cells. We aim to initiate a clinical trial in this Amendment No. 1 to FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 Table of Contents program in 2017. We believe achievement of proof-of-concept in a disease of the eye has the potential to validate our platform technology, including its potential application to other organs and diseases. Our additional research programs address genetic, infectious, and oncologic diseases of the liver, lung, blood, eye, and muscle. For example, we believe our genome editing technologies have the potential to improve the characteristics of cellular therapies, including engineered T cells to treat cancer. To realize this potential, in May 2015, we entered into a collaboration with Juno Therapeutics, a leader in the emerging field of immuno-oncology. We believe that our genome editing technology has the potential to improve T cell persistence and overcome signals in the tumor microenvironment that reduce T cell activity. In an in vitro study under this collaboration, Cas9-guide RNA complexes directed against what we believe is an important T cell target gene demonstrated approximately 90% editing on average. By working with Juno Therapeutics, we hope that together we will be able to discover and develop the next generation of engineered T cell therapies that have the potential to substantially advance the field of cancer immunotherapy. We believe this collaboration exemplifies our strategy of selectively establishing alliances with leaders in their fields to realize the full therapeutic potential of genome editing. Our company was founded by world leaders in genome editing who have collectively made many fundamental discoveries in the field and have enabled the translation of CRISPR from its origins in bacterial systems to its application in mammalian cells. Through their service as consultants and advisors, our founders were instrumental in defining the initial scientific vision for our company. Among our founders, Drs. Feng Zhang, George Church, David Liu, and J. Keith Joung continue to provide important scientific guidance and insights to us through ongoing consulting and advisory arrangements. Their discoveries, along with inventions by scientists at our company, have led to our broad portfolio of intellectual property, including the patent estates licensed from those founders' institutions. Our portfolio includes 21 issued U.S. and European patents and over 200 pending patent applications. We believe the breadth and depth of our patent estate is a substantial asset and has the potential to provide us with a durable competitive position in the marketplace. The lifeblood of our company is exceptional scientists and company-builders with experience across leading biopharmaceutical companies and academic research laboratories. Our company is distinguished by our leaders' substantial experience in translating groundbreaking scientific platforms into therapeutic products and product candidates at many successful biopharmaceutical companies. We believe that our team and our culture are critical to our success, and we are building a company with the values and people needed to realize the potential of our platform and develop medicines for patients with many different genetically defined diseases. Every decade over the past 40 years, an important class of medicines has emerged, such as recombinant proteins, monoclonal antibodies, and RNA-based drugs. These new categories of medicines have brought forth important therapies for previously untreated diseases. In our view, genome editing with CRISPR/Cas9 has the potential to be one of the next major new categories. At Editas Medicine, we believe we can make that potential a reality. Our Genome Editing Platform We have developed a proprietary genome editing platform consisting of four interrelated components designed to develop medicines that specifically address a wide variety of genetic targets, reach the site of disease safely and effectively, tightly and specifically control the editing process, and drive the right kind of genetic repair. Each component is underpinned by several specific technologies and capabilities. With our platform, we are able to design and optimize each element of the product configuration that we believe is necessary to create a CRISPR/Cas9-based genome editing medicine, including the Cas9 variant, the sequence and structure of the guide RNA(s), the delivery vector, and EDITAS MEDICINE, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 2836 (Primary Standard Industrial Classification Code Number) 46-4097528 (I.R.S. Employer Identification No.) 300 Third Street, First Floor Cambridge, Massachusetts 02142 (617) 401-9000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents elements to control expression in cells or to drive the desired repair mechanism. Our platform components are: Nuclease Engineering: We use our genome editing platform to identify and optimize both Cas9 enzymes and guide RNA molecules to create what we believe will be the optimal Cas9-guide RNA complex for a given disease target. We have made substantial advances in the characterization and modification of Cas9 enzymes and in the design, synthesis, modification, analysis, and characterization of guide RNAs. Delivery: An appropriate product configuration must be designed to provide efficient and tightly controlled delivery to the desired tissue or cell type. Our genome editing platform includes multiple, modular delivery modes that can be efficiently adapted to deliver different CRISPR/Cas9 genome editing components to address the specific needs of each disease targeted. Control and Specificity: Control of cellular exposure to the Cas9-guide RNA complex and specificity of the DNA cut are important to optimizing the location and duration of editing activity. We believe these features are critical to designing medicines that are both safe and effective, and we are developing and applying technologies in both areas. Directed Editing: There are different mechanisms that a cell can use to repair cuts in DNA. Each mechanism results in different kinds of genetic changes. We are developing approaches to selectively harness specific DNA repair mechanisms to be able to drive the appropriate type of repair for a given disease. We believe our systematic approach to developing medicines based on CRISPR/Cas9 technology provides opportunities across a range of different genetically defined diseases. We aim to develop and commercialize biologic medicines for patients with these types of diseases. Where appropriate or necessary, we may do so in collaboration with strategic partners. If successful, we believe our research programs have the potential to yield therapies comprising a combination of elements that may include protein, DNA, and RNA components, which are collectively often referred to as biologics, and which differ from traditional small molecule pharmaceuticals in their greater complexity of manufacturing and delivery. As shown below, as we expand the technical capabilities of our platform, we believe the number of potential patients and range of diseases that can potentially be addressed will grow. In this chart, each figure is intended to represent approximately 5,000 potential patients. Katrine S. Bosley President and Chief Executive Officer Editas Medicine, Inc. 300 Third Street, First Floor Cambridge, Massachusetts 02142 (617) 401-9000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents Our Strategy We aim to transform the treatment of a broad range of genetically defined diseases by building an integrated genomic medicine company focused on creating a novel class of therapeutics to meet patients' needs. Key elements of our strategy are to: Build the preeminent genomic medicine company through the continued assembly of world leaders in the fields of genome editing, gene therapy, nucleic acid pharmaceuticals, and orphan diseases; Advance therapeutic programs rapidly and rigorously to address patients' needs; Perfect the tools to repair any broken gene through continued investment of resources in our platform capabilities; Accelerate the science of genome editing by maintaining and extending our leadership in this field; Collaborate to realize the full potential of genome editing to create medicines; and Commercialize products to bring new medicines to patients, either alone or through selective partnerships. Risks Associated with Our Business Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include the following: We intend to identify and develop product candidates based on a novel genome editing technology, which makes it difficult to predict the time and cost of product candidate development. No products that utilize genome editing technology have been approved in the United States or in Europe, and there have only been a limited number of human clinical trials of a genome editing product candidate. Moreover, none of those trials have involved CRISPR/Cas9 technology. We have incurred significant losses since inception. We expect to incur losses and do not expect to generate any revenue from product sales for the foreseeable future and may never achieve or maintain profitability. We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce, or eliminate our research and product development programs or commercialization efforts. Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. Because genome editing is novel and the regulatory landscape that will govern any product candidates we may develop is uncertain and may change, we cannot predict the time and cost of obtaining regulatory approval, if we receive it at all, for any product candidates we may develop. Copies to: Steven D. Singer, Esq. Rosemary G. Reilly, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000 Richard D. Truesdell, Jr., Esq. Deanna L. Kirkpatrick, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000 Table of Contents Adverse public perception of genomic medicines, and genome editing in particular, may negatively impact regulatory approval of, or demand for, our potential products. If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the development of any product candidates we may develop, we may need to abandon or limit our further clinical development of those product candidates. We may not be successful in our efforts to identify, develop, or commercialize potential product candidates. The genome editing field is relatively new and is evolving rapidly. We are focusing our research and development efforts on CRISPR/Cas9, but other genome editing technologies may be discovered that provide significant advantages over CRISPR/Cas9, which could materially harm our business. Because we are developing product candidates for the treatment of diseases in which there is little clinical experience using new technologies, there is increased risk that the U.S. Food and Drug Administration, the European Medicines Agency, or other regulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results and that these results may be difficult to analyze. We expect to depend on collaborations with third parties for the research, development, and commercialization of any product candidates we may develop. If any such collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates. If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop and our technology may be adversely affected. Our rights to develop and commercialize our technology and product candidates are subject, in part, to the terms and conditions of licenses granted to us by others. Some of our owned and in-licensed patents and other intellectual property are, and may in the future become, subject to priority or inventorship disputes and similar proceedings. If we or our licensors are unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms or at all, or to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop, which could have a material adverse impact on our business. In particular, some of our in-licensed patents and patent applications are subject to priority disputes with the University of California, acting on behalf of itself and the University of Vienna, and Emmanuelle Charpentier, and ToolGen, Inc. The priority dispute involving the University of California, et al., relates in part to rights held by the University of California to the work of one of our founders, Dr. Jennifer Doudna, who is no longer involved with our company, and Emmanuelle Charpentier. Dr. Doudna is a founder of Caribou Biosciences and has been publicly identified as an advisor to Intellia Therapeutics, each of which is one of our competitors. Caribou Biosciences has reported that it has an exclusive license to patent rights from the University of California and the University of Vienna. Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Amount to be Registered(1) Proposed Maximum Offering Price Per Share(2) Proposed Maximum Aggregate Offering Price(2) Amount of Registration Fee(3)(4) Common Stock, $0.0001 par value per share 6,785,000 $18.00 $122,130,000 $12,298.50 (1)Includes 885,000 shares of common stock the underwriters have the option to purchase. (2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. (3)Calculated pursuant to Rule 457(a) based on an estimate of the proposed maximum aggregate offering price. (4)A registration fee of $10,070 was previously paid in connection with the Registration Statement, and the additional amount of $2,228.50 is being paid herewith. Table of Contents Intellia Therapeutics has reported that it has an exclusive license to such rights from Caribou Biosciences in certain fields. CRISPR Therapeutics, another of our competitors, has reported that it has an exclusive license to patent rights from Emmanuelle Charpentier. In addition, we are aware that the Rockefeller University, or Rockefeller, has independently filed a U.S. patent application as a continuation of a U.S. patent application that we have in-licensed from The Broad Institute, Inc., or Broad, which continuation patent application filed by Rockefeller lists one of its employees as a co-inventor alongside Dr. Feng Zhang, who is an employee of Broad in addition to being one of our founders. The priority dispute involving the University of California, et al., has resulted in the declaration of an interference proceeding. The priority disputes and the patents and patent applications described above may provoke the declaration of further interference proceedings or other proceedings or litigations. In addition, two of our in-licensed patents are subject to opposition proceedings in Europe. In preparation for this offering, we identified a material weakness in our internal control over financial reporting. If we are unable to remedy our material weakness, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors' confidence and our stock price. Implications of Being an Emerging Growth Company As a company with less than $1.0 billion of revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may remain an emerging growth company for up to five years from the date of the first sale in this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.0 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. However, we have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our Corporate Information We were incorporated under the name Gengine, Inc. in Delaware in September 2013, and we changed our name to Editas Medicine, Inc. in November 2013. Our executive offices are located at 300 Third Street, First Floor, Cambridge, Massachusetts, 02142, and our telephone number is (617) 401-9000. Our website address is www.editasmedicine.com. We have included our website address in this prospectus as an inactive textual reference only. Information contained on, or that can be accessed through, our website is not part of this prospectus. In this prospectus, unless otherwise stated or the context otherwise requires, references to "Editas," "we," "us," "our," and similar references refer to Editas Medicine, Inc. The Editas logo is our trademark. The other trademarks, trade names, and service marks appearing in this prospectus belong to their respective holders. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents THE OFFERING Common stock offered by us 5,900,000 shares Common stock to be outstanding after this offering 35,699,538 shares (or 36,584,538 shares if the underwriters exercise their option to purchase additional shares in full) Over-allotment option We have granted the underwriters an option for a period of 30 days to purchase up to 885,000 additional shares of our common stock to cover over-allotments. Use of proceeds We intend to use the net proceeds to us from this offering to fund preclinical studies and clinical trials for our LCA10 program, preclinical studies in our collaboration with Juno Therapeutics, continued expansion of our platform technology, preclinical studies of our other research programs, and for working capital and other general corporate purposes. See "Use of Proceeds" for more information.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/EHVVF_ehave-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/EHVVF_ehave-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f59c9e90fb2f452408b51b3262f7a3a63c9bbac3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/EHVVF_ehave-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 5
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/ELTP_elite_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/ELTP_elite_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..53d8389fc9ea7a10dbd545ffc0c47cdc5207c0bb
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/ELTP_elite_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This prospectus summary highlights certain information about our company and other information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before making an investment decision. You should carefully read the entire prospectus, any prospectus supplement, including the section entitled "Risk Factors", before making an investment decision. About Us Elite Pharmaceuticals, Inc., a Nevada corporation (the "Company", "Elite", "Elite Pharmaceuticals", the "registrant", "we", "us" or "our") was incorporated on October 1, 1997 under the laws of the State of Delaware, and its wholly-owned subsidiary, Elite Laboratories, Inc. ("Elite Labs""), was incorporated on August 23, 1990 under the laws of the State of Delaware. On January 5, 2012, Elite Pharmaceuticals was reincorporated under the laws of the State of Nevada. We are a specialty pharmaceutical company principally engaged in the development and manufacture of oral, controlled-release products, using proprietary know-how and technology, particularly as it relates to abuse resistant products and the manufacture of generic pharmaceuticals. Our strategy includes improving off-patent drug products for life cycle management, developing generic versions of controlled-release drug products with high barriers to entry and the development of branded and generic products that utilize our proprietary and patented abuse resistance technologies. We own and occupy manufacturing, warehouse, laboratory and office space at 165 Ludlow Avenue and 135 Ludlow Avenue in Northvale, NJ (the "Northvale Facility"). The Northvale Facility operates under Current Good Manufacturing Practice ("cGMP") and is a United States Drug Enforcement Agency ("DEA") registered facility for research, development and manufacturing. Strategy Elite is focusing its efforts on the following areas: (i) development of Elite s pain management products; (ii) manufacturing of a line of generic pharmaceutical products with approved ANDAs; (iii) development of additional generic pharmaceutical products; (iv) development of the other products in our pipeline including the products with our partners; (v) commercial exploitation of our products either by license and the collection of royalties, or through the manufacture of our formulations; and (vi) development of new products and the expansion of our licensing agreements with other pharmaceutical companies, including co-development projects, joint ventures and other collaborations. Elite is focusing on the development of various types of drug products, including branded drug products which require new drug applications ("NDAs") under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Drug Price Competition Act") as well as generic drug products which require ANDAs. Elite believes that its business strategy enables it to reduce its risk by having a diverse product portfolio that includes both branded and generic products in various therapeutic categories and to build collaborations and establish licensing agreements with companies with greater resources thereby allowing us to share costs of development and improve cash-flow. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "non-accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer Non-accelerated filer Smaller reporting company CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be Registered(1) Proposed Maximum Offering Price Per Security Proposed Maximum Aggregate Offering Price Amount Of Registration Fee(2) Common Stock, $0.001 par value per share 35,869,227 $11,549,891 $1,163.07 Total $1,163.07 (1) The registrant is registering for resale, from time to time, up to an additional 35,869,227 shares of its common stock, par value $0.001, that the registrant has issued and may sell and issue to Lincoln Park Capital Fund, LLC ("Lincoln Park") pursuant to a Purchase Agreement (the "Purchase Agreement"), dated as of April 10, 2014, by and between Lincoln Park and the registrant. In the event of stock splits, stock dividends, or similar transactions involving the common stock, the number of shares of common stock registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933. Based on the average of the high and low prices of the registrant's common stock on the OTCBB on June 22, 2016 Pursuant to Rule 429(a) under the Securities Act, the prospectus included in this registration statement is a combined prospectus and also relates to an aggregate of 27,130,773 shares registered and remaining unsold (the "Previously Registered Securities") under the registrant's registration statement on Form S-1 (No. 333-195265) and amendments thereto (the "Prior Registration Statement"). The Prior Registration Statement was converted into a Registration Statement on Form S-3 by Post-Effective Amendment No. 1 to Form S-1 on Form S-3 filed on July 1, 2014 and declared effective on July 8, 2014. Pursuant to Rule 429(b), this registration statement, upon effectiveness, also constitutes a post-effective amendment to the Prior Registration Statement, which post-effective amendment shall hereafter become effective concurrently with the effectiveness of this registration statement and in accordance with Section 8(c) of the Securities Act of 1933. If any Previously Registered Securities under the Prior Registration Statement are offered and sold before the effective date of this registration statement, the amount of Previously Registered Securities so sold will not be included in the prospectus hereunder. The filing fee payable in connection with the Prior Registration Statement was previously paid at the time of its initial filing. This registration statement is also being filed to convert the Prior Registration Statement from a registration statement on Form S-3 into a registration statement on Form S-1. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Commercial Products We own, license, contract manufacture or have certain rights to profits for the following products currently being sold commercially: Product Branded Product Equivalent Therapeutic Category Launch Date Phentermine HCl 37.5mg tablets Adipex-P Bariatric April 2011 ("Phentermine 37.5mg") Lodrane D Immediate Release capsules n/a OTC Allergy September 2011 ("Lodrane D") Methadone HCl 10mg tablets Dolophine Pain January 2012 ("Methadone 10mg") Hydromorphone HCl 8mg tablets Dilaudid Pain March 2012 ("Hydromorphone 8mg") Phendimetrazine Tartrate 35mg tablets Bontril Bariatric November 2012 ("Phendimetrazine 35mg") Phentermine HCl 15mg and 30mg capsules Adipex-P Bariatric April 2013 ("Phentermine 15mg" and "Phentermine 30mg") Naltrexone HCl 50mg tablets Revia Pain September 2013 ("Naltrexone 50mg") Isradipine 2.5mg and 5mg capsules n/a Cardiovascular January 2015 ("Isradipine 2.5mg" and "Isradipine 5mg") Hydroxyzine HCl 10mg, 25mg and 50mg tablets Atarax , Vistaril Antihistamine April 2015 ("Hydroxyzine 10mg" and "Hydroxyzine 25mg" and "Hydroxyzine 50mg") Oxycodone HCl Immediate Release 5mg, 10mg, 15mg, 20mg and 30mg tablets Roxycodone Pain March 2016 ("OXY IR 5mg", "Oxy IR 10mg", "Oxy IR 15mg", "OXY IR 20mg" and "Oxy IR 30mg") Note: Phentermine 15mg and Phentermine 30mg are collectively and individually referred to as "Phentermine Capsules". Isradipine 2.5mg and Isradipine 5mg are collectively and individually referred to as "Isradipine Capsules". Hydroxyzine 10mg, Hydroxyzine 25mg and Hydroxyzine 50mg are collectively and individually referred to as "Hydroxyzine". Oxy IR 5mg, Oxy IR 10mg, Oxy IR 15mg Oxy IR 20mg and Oxy IR 30mg are collectively and individually referred to as "Oxy IR". Our principal executive offices are located at 165 Ludlow Avenue, Northvale, New Jersey 07647, and our telephone number is (201) 750-2646. We maintain a website at "http://www.elitepharma.com." Information contained on our website is not considered to be a part of, nor incorporated by reference in, this Prospectus. About This Offering On April 10, 2014, we entered into a purchase agreement with Lincoln Park, which we refer to in this prospectus as the Purchase Agreement, pursuant to which Lincoln Park has agreed to purchase from us up to $40,000,000 of our common stock (subject to certain limitations) from time to time over a 36-month period. Also, on April 10, 2014, we entered into a Registration Rights Agreement, or the Registration Rights Agreement, with Lincoln Park, pursuant to which we have filed with the SEC the registration statement that includes this prospectus to register for resale under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Act, the shares that have been or may be issued to Lincoln Park under the Purchase Agreement. EXPLANATORY NOTE The registrant filed a registration statement on Form S-3 (Registration No. 333-195265) on April 15, 2014, which was subsequently converted into a registration statement on Form S-1 by pre-effective amendment thereto (as so converted, the "Initial Registration Statement"), in order to register 108,000,000 shares of its common stock, $0.001 par value per share (the "Common Stock"), that the registrant had issued and may issue to Lincoln Park Capital Fund, LLC ("Lincoln Park") pursuant to a Purchase Agreement dated as of April 10, 2014, by and between the registrant and Lincoln Park (the "Purchase Agreement"). On July 1, 2014, the registrant filed a Post-Effective Amendment No. 1 to Form S-1 on Form S-3 to convert the Original Registration Statement from a Form S-1 into a registration statement on Form S-3, which was declared effective on July 8, 2014 (the "First Post-Effective Amendment"). The Initial Registration Statement as amended by the First Post-Effective Amendment is hereinafter referred to as the "Prior Registration Statement". This registration statement is being filed by the registrant to (i) register 35,869,227 additional shares of Common Stock that the registrant may issue to Lincoln Park pursuant to the Purchase Agreement, which were not registered pursuant to the Prior Registration Statement, and (ii) convert the Prior Registration Statement from a Form S-3 into a registration statement on Form S-1. Pursuant to Rule 429(a) under the Securities Act of 1933, as amended (the "Securities Act"), the prospectus included in this registration statement is a combined prospectus relating to an aggregate of 63,000,000 shares of Common Stock that the registrant has issued and may issue to Lincoln Park, including 35,869,227 shares of Common Stock being registered hereby and 27,130,773 shares that were registered under the Prior Registration Statement and remain unsold. Pursuant to Rule 429(b) under the Securities Act, upon effectiveness, this registration statement also constitutes a post-effective amendment to the Prior Registration Statement, which post-effective amendment shall hereafter become effective concurrently with the effectiveness of this registration statement and in accordance with Section 8(c) of the Securities Act. The filing fee payable in connection with the Prior Registration Statement was previously paid at the time of filing of the Initial Registration Statement on April 15, 2014. On July 8, 2014, we registered up to 108,000,000 shares of our Common Stock that have been or may be issued to Lincoln Park under the Purchase Agreement in a registration statement (the "Prior Registration Statement"). Through June 22, 2016, we have sold an aggregate of 79,082,073 shares of Common Stock to Lincoln Park under the Purchase Agreement for aggregate gross proceeds of approximately $21,906,602. In addition, we have issued 2,984,894 shares as a commitment fee. We do not have the right to make any additional sales to Lincoln Park under the Purchase Agreement until the SEC has declared effective the registration statement of which this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct Lincoln Park to purchase up to 500,000 shares of our common stock on any business day, provided that at least one business day has passed since the most recent purchase. However, in no event shall Lincoln Park purchase more than $760,000 worth of our common stock on any single business day, plus an additional "accelerated amount" under certain circumstances. Except as described in this prospectus, there are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Lincoln Park. The purchase price of the up to 500,000 shares that may be sold to Lincoln Park under the Purchase Agreement on any business day will be based on the market price of our common stock immediately preceding the time of sale as computed under the Purchase Agreement without any fixed discount; provided that in no event will such shares be sold to Lincoln Park when our closing sale price is less than $0.10 per share, subject to adjustment as provided in the Purchase Agreement. The purchase price per share will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the business days used to compute such price. We may at any time in our sole discretion terminate the Purchase Agreement without fee, penalty or cost upon one business day s notice. Lincoln Park may not assign or transfer its rights and obligations under the Purchase Agreement. Although the Purchase Agreement provides that we may sell up to $40,000,000 of our common stock to Lincoln Park, only 63,000,000 shares of our common stock are being offered under this prospectus, which represents (i) 872,388 shares registered, remaining unissued under the Prior Registration Statement which are issuable to Lincoln Park as a commitment fee, (ii) 26,258,385 shares registered and remaining unsold under the Prior Registration Statement and issued or issuable to Lincoln Park under the Purchase Agreement and (iii) an additional 35,869,227 shares which may be issued to Lincoln Park in the future under the Purchase Agreement. If all of the 63,000,000 shares offered by Lincoln Park under this prospectus were issued and outstanding as of June 22, 2016, such shares would represent approximately 7.9% % of the total number of shares of our common stock outstanding and approximately 8.2% of the total number of outstanding shares held by non-affiliates, in each case as of June 22, 2016. If we elect to issue and sell more than the 63,000,000 shares offered under this prospectus to Lincoln Park, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares, which could cause additional substantial dilution to our shareholders. The number of shares ultimately offered for resale by Lincoln Park is dependent upon the number of shares we sell to Lincoln Park under the Purchase Agreement. Issuances of our common stock in this offering will not affect the rights or privileges of our existing shareholders, except that the economic and voting interests of each of our existing shareholders will be diluted as a result of any such issuance. Although the number of shares of common stock that our existing shareholders own will not decrease, the shares owned by our existing shareholders will represent a smaller percentage of our total outstanding shares after any such issuance to Lincoln Park. For more detailed information on the transaction with Lincoln Park, please see "The Lincoln Park Transaction" in "Selling Shareholder" below. Securities Offered Common stock offered 63,000,000 shares by the selling shareholder Common stock outstanding prior to this offering 730,971,084 shares The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JUNE 27, 2016 PROSPECTUS ELITE PHARMACEUTICALS, INC. 63,000,000 Shares of Common Stock This prospectus relates to the offer and sale of up to 63,000,000 shares of common stock, par value $0.001, of Elite Pharmaceuticals, Inc., a Nevada corporation, by Lincoln Park Capital Fund, LLC, or Lincoln Park or the selling shareholder. The shares of common stock being offered by the selling shareholder have been or may be issued pursuant to the purchase agreement dated April 10, 2014 that we entered into with Lincoln Park. See "The Lincoln Park Transaction" in "Selling Shareholder" for a description of that agreement and "Selling Shareholder" for additional information regarding Lincoln Park. The prices at which Lincoln Park may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions. We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of shares by the selling shareholder. The selling shareholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. See "Plan of Distribution" for more information about how the selling shareholder may sell the shares of common stock being registered pursuant to this prospectus. The selling shareholder is an "underwriter" within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended. We will pay the expenses incurred in registering the shares, including legal and accounting fees. See "Plan of Distribution". Our common stock is currently quoted on the Over-the-Counter Bulletin Board, or the OTCBB, under the symbol "ELTP". On June 22, 2016, the last reported sale price of our common stock on the OTCBB was $0.32. Investment in the Common Stock involves a high degree of risk. You should consider carefully the risk factors beginning on page 6 of this prospectus as well as in any prospectus supplement related to these specific offerings before purchasing any of the shares offered by this prospectus. We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is July___ , 2016. Common stock to be outstanding after giving effect to the issuance of 63,000,000 additional shares under the Purchase Agreement 792,971,084 shares Use of Proceeds We will receive no proceeds from the sale of shares of common stock by Lincoln Park in this offering. However, we may receive up to approximately an additional $18,093,398 under the Purchase Agreement with Lincoln Park. Any proceeds that we receive from sales to Lincoln Park under the Purchase Agreement will be used to fund the production development and commercial activities of the Company, for general and administrative expenses, to pay down liabilities and for working capital. See "Use of Proceeds." Risk Factors This investment involves a high degree of risk. See "Risk Factors" for a discussion of factors you should consider carefully before making an investment decision. Symbol on OTCBB ELTP
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/FLGT_fulgent_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/FLGT_fulgent_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9a6dfa79f44e5262000dfe0cda5627d238fc578e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/FLGT_fulgent_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information included in this prospectus and does not contain all of the information you should consider in making an investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including the financial statements and the related notes included in this prospectus. You should also consider, among other things, the matters described under Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations, in each case included in this prospectus. The information in this prospectus reflects the completion of the Reorganization, as defined and described below, which will occur immediately prior to closing this offering. Pursuant to the Reorganization, Fulgent Therapeutics LLC will become a wholly owned subsidiary of Fulgent Genetics, Inc., a holding company and the issuer of common stock in this offering. Unless the context otherwise requires, (i) the term Fulgent LLC refers to Fulgent Therapeutics LLC, (ii) the term Fulgent Inc. refers to Fulgent Genetics, Inc. and (iii) the terms Fulgent, the company, we, us and our refer, for periods prior to completion of the Reorganization, to Fulgent LLC and, for periods after completion of the Reorganization, to Fulgent Inc. and its consolidated subsidiary after giving effect to the Reorganization. See Pharma Split-Off and Reorganization for additional information. Overview We are a rapidly growing technology company with an initial focus on offering comprehensive genetic testing to provide physicians with clinically actionable diagnostic information they can use to improve the overall quality of patient care. We have developed a proprietary technology platform that integrates sophisticated data comparison and suppression algorithms, adaptive learning software, advanced genetic diagnostics tools and integrated laboratory processes. This platform allows us to offer a broad and flexible test menu while maintaining accessible pricing, high accuracy and competitive turnaround times. We believe our current test menu offers more genes for testing than our competitors in today s market, which enables us to provide expansive options for test customization and clinically actionable results. Our current test menu includes more than 18,000 single-gene tests and more than 200 pre-established, multi-gene, disease-specific panels that collectively test for more than 7,500 genetic conditions, including various cancers, cardiovascular diseases and neurological disorders. Genetic testing has experienced significant growth in recent years. As this trend continues, we believe genetic testing will become a more accepted part of standard medical care and the knowledge of a person s unique genetic makeup will begin to play a more important role in the practice of medicine. The advent of next generation sequencing, or NGS, technology, a relatively new genetic testing technique that enables millions of DNA fragments to be sequenced in parallel, has dramatically lowered the cost and improved the quality of genetic testing, contributing to increased adoption. According to GrandView Research, the size of the global NGS genetic testing market, which includes presequencing, sequencing and data analysis, is estimated to be approximately $4.0 billion in 2016, including approximately $1.4 billion in the United States, and is expected to reach approximately $10.5 billion by 2022, including approximately $3.6 billion in the United States. While adoption of genetic testing has increased in recent years, we believe widespread utilization has been limited in large part because of certain barriers to adoption that exist in today s market. Among these barriers are that genetic testing can be prohibitively expensive, only a limited number of genetic tests are currently reimbursable, certain genetic conditions cannot be diagnosed due to the limited scope of genetic analysis, genetic testing can be an inefficient process and the interpretation of genetic results can be cumbersome and time-consuming. We believe a significant market exists for a genetic testing option that provides broad genetic coverage and the flexibility to customize tests for individual patient needs, while maintaining accuracy and affordability. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 2016 4,200,000 Shares Common Stock This is the initial public offering of shares of common stock of Fulgent Genetics, Inc. Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price will be between $9.00 and $11.00 per share. Our common stock has been approved for listing on the NASDAQ Global Market under the symbol FLGT. We have granted the underwriters a 30-day option to purchase up to 630,000 additional shares from us at the initial public offering price, less the underwriting discounts and commissions. Ming Hsieh, our founder and Chief Executive Officer, has indicated an interest in purchasing up to 1,050,000 of the shares of our common stock to be sold in this offering at the initial public offering price and on the same terms as the other purchasers in this offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, fewer or no shares to Mr. Hsieh in this offering, or Mr. Hsieh could determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by Mr. Hsieh as they will receive on any other shares sold to the public in this offering. We are an emerging growth company as the term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. See Risk Factors beginning on page 12. Price to Public Underwriting Discounts and Commissions(1) Proceeds to Fulgent Genetics, Inc. Per Share $ $ $ Total $ $ $ (1) See Underwriting for a description of the compensation payable to the underwriters. The underwriters expect to deliver the shares to purchasers on or about , 2016. Neither the Securities and Exchange Commission, any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Credit Suisse Piper Jaffray Raymond James BTIG The date of this prospectus is , 2016. Table of Contents We have developed a proprietary technology platform that we believe enables us to overcome many of the challenges facing our industry today. Our technology platform includes proprietary gene probes, advanced database algorithms, adaptive learning software and proprietary laboratory management systems. Together, the elements of our technology platform enable us to provide tests at a low cost to us and accessible price points to our customers, offer a broad test menu and continually expand and improve our proprietary genetic reference library. In addition, our technology platform allows us to offer customers the ability to design customized tests tailored to their specifications using our expansive library of genes, and we believe this flexibility increases efficiency and the utility of the genetic data we produce. Further, our gene probes, when combined with our proprietary genetic reference library and publicly available genetic databases, support our ability to sequence DNA regions that we believe laboratories using commercial probes cannot and improve the detection rate of our test data. In turn, we believe this enables us to produce clinically actionable results physicians can use to improve care for their patients. Our existing customer base consists primarily of hospitals and medical institutions, which are frequent and high-volume users of genetic tests and which typically pay us directly for our tests. We believe our relationships with these customers provide an avenue for further growth as we seek to deepen these relationships and drive increased ordering. We believe the key to further penetrating our existing customer base and expanding into new customer markets is to continue to focus on delivering a superior test menu while maintaining affordable prices. In order to offer our customers affordable price points, we continue to enhance our technology platform to develop tests that we can perform at a low internal cost. Our headquarters are located in Temple City, California, where we have our corporate offices and a laboratory certified under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, and licensed by the State of California Department of Public Health, or CA DPH. We have assembled a highly qualified team of 55 employees as of September 1, 2016, including 26 individuals with a PhD or other advanced degree and personnel with expertise in a number of fields important to our business, such as bioinformatics, genetics, software engineering, laboratory management and sales and marketing. We have relied upon this team to develop our proprietary technology platform and differentiated business model, which we believe have driven our commercial success to date and provide us with significant opportunity for future growth. Our Technology Platform Through our technology-driven approach, we have developed a system of proprietary tools and processes that we believe enable us to overcome many of the challenges facing our industry today. The key features of our technology platform include: Proprietary gene probes. We have developed technologies to design and formulate proprietary gene probes that we produce in our laboratory and use to perform our genetic tests. Our proprietary gene probes are specifically engineered to generate genetic data that is optimized for our software, which enables us to rapidly incorporate new genes into our test menu, develop new panels of disease-specific tests, customize tests for our customers and, we believe, more effectively enrich the targeted genes to improve the quality of the sequenced data we produce. Advanced database algorithms. Our advanced data comparison algorithms measure DNA sequences from patient specimens against genetic data available from the broader scientific community and our own proprietary reference library of genetic information, which enables us to rapidly and effectively detect pathogenic mutations. Our advanced data suppression algorithms reduce irrelevant noise in the genetic data we analyze to improve the efficiency and speed of our data analysis while reducing the need for manual curation. Table of Contents TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/FUST_fuse_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/FUST_fuse_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..87cb10f2364ef988bfefa0a25ed7c9301b927c08
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/FUST_fuse_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY The following summary highlights selected information, such as the company s current operations and summary financial information contained in this Prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this Prospectus, including but not limited to, the risk factors beginning on page 8. In addition, certain statements are forward-looking statements, which involve risks and uncertainties. See Disclosure Regarding Forward-Looking Statements. References in this Prospectus to Fuse Enterprises , Company , we , our , or us refer to Fuse Enterprises Inc. unless otherwise indicated or the context otherwise requires. Forward-Looking Statements This Prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in the "Risk Factors" section and elsewhere in this Prospectus. Our Company We were formed on December 24, 2013. Fuse Enterprises Inc. is a digital marketing company. We offer a full range of web services, including online marketing services, social and viral marketing campaigns and search engine optimization (SEO) consulting, and custom web design, including CRM (customer relationship management) solutions. Our goal is to enable small businesses to outsource their marketing and advertising service needs to us. We guide the customer through the necessary steps to establish their online presence, generate traffic to their websites and increase direct consumer interaction. We provide consulting on a wide variety of issues, from selection of domain name registrars and hosting providers, to the most cost-efficient and effective marketing strategies. We generate revenue from sales of our marketing and web development services directly to small and medium-sized business. We acquire customers through direct telemarketing, referrals and our primary website that provides a description of our company and our service offerings (www.fuseenterprises.com). We have commenced our operations during the period ended September 30, 2014. As of December 31, 2015 we have generated $35,100 in revenues from consulting services related to website development, SEO consulting and online marketing services and have incurred $37,463 in operating costs since our inception on December 24, 2013. To date, we have relied upon revenues from our operations and sales of our securities in unregistered private placement transactions to fund our operations. We are a development stage company with a limited operating history. Accordingly, for the foreseeable future, we will continue to be dependent on revenues from operations and additional financing in order to maintain our operations and continue with our corporate activities. This offering and any investment in our common stock involve a high degree of risk. If our future revenues will not be sufficient to cover our operating costs we may be obliged to cease business operations due to lack of funds. If we raise only the minimum amount of proceeds from this offering, we will have limited funds available to build and grow our business. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing for us to fund our planned business activities. We may also rely on loans from our Directors; however, there are no assurances that our Directors will provide us with any additional funds. Currently, we do not have any arrangements for additional financing. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Equity financing could result in additional dilution to existing shareholders. We face many challenges to continue operations, including, but not limited to our limited operating history, competition, and general economic conditions. Please review the "Risk Factors" starting on page 8 of this offering. Our Directors collectively own 100% of the 5,500,000 outstanding shares of our common stock as of the date of this Offering. If the minimum amount of the shares will be sold, our Directors will own 61.11% of our outstanding common stock. Accordingly, they will have a significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets. The interests of our directors may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders. Our principal executive office is located at 510 Clinton Square, Rochester, NY 14604 and our telephone number is (585) 939-7588. Our primary website address is www.fuseenterprises.com. The information on, or that can be accessed through this website is not part of this prospectus. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. The Company shall continue to be deemed an emerging growth company until the earliest of: (a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; (b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title; (c) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which such issuer is deemed to be a large accelerated filer , as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto. . Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an emerging growth company , which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company , the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. Notwithstanding the above, we are also currently a smaller reporting company , meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a smaller reporting company , at such time are we cease being an emerging growth company , we will be required to provide additional disclosure in our SEC filings. However, similar to emerging growth companies , smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an emerging growth company or smaller reporting company may make it harder for investors to analyze the Company s results of operations and financial prospects. The Company has irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act. The Offering Following is a brief summary of this Offering: Securities being offered: 3,500,000 shares of common stock minimum and 40,000,000 shares of common stock maximum, par value $0.001 Offering price per share: $ 0.01 Offering period: The shares are being offered for a period not to exceed 180 days or 270 days, if extended. Net proceeds to us: Approximately $27,500 assuming the minimum number of shares is sold. Approximately $392,500 assuming the maximum number of shares is sold. Use of proceeds: We will use the proceeds to pay for the implementation of our business plan, administrative expenses and general working capital. (i) Number of shares outstanding before the offering: 5,500,000 Number of shares outstanding after the offering: 9,000,000 (if minimum number of shares are sold) 45,500,000 (if maximum number of shares are sold) (i) If the minimum amount of the shares is sold, we will use the proceeds to pay for offering expenses of $7,500. Of the $7,500, the amounts to be paid from the proceeds for expenses of the offering are: $4,000 for accounting fees; $1,000 for filing fees; $2,000 for legal fees; and $500 for transfer agent fees. We will use the rest of the funds (net of offering expenses) to pay off our current accounts payable and accrued liabilities, hire new personnel and implement our business plan. In particular, we will pay our current accounts payable totaling $2,737 that the company owes to third party vendors as of December 31, 2015. Selected Financial Data The following financial information summarizes the more complete historical financial information at the end of this Prospectus. The summary information below should be read in conjunction with Selected Historical Financial Data, Management s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included elsewhere in this Prospectus. Income Statement Data: For the Three Months For the Year For the Period from December 24, 2013 Ended Ended (Inception) through December 31, 2015 (Unaudited) September 30, 2015 (Audited) September 30, 2014 (Audited) Revenue $ 6,500 $ 28,600 $ - Cost of Revenue (1,950) (8,683) - Operating Expenses (3,694) (24,524) (9,245) Net Income (Loss) $ 856 $ (4,607) $ (9,245) Balance Sheet Data: As of As of As of December 31, September 30, September 30, 2015 2015 2014 (Unaudited) (Audited) (Audited) Total Assets $ 13,241 $ 17,300 $ 914 Total Liabilities (20,737) (25,652) (10,159) Shareholder's Equity (Deficit) $ (7,496) $ (8,352) $ (9,245) As of December 31, 2015, we had a working capital deficiency of $7,496 and accumulated deficit of $12,996 since inception.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/GDHLF_gds_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/GDHLF_gds_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/GDHLF_gds_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/GPOX_gpo-plus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/GPOX_gpo-plus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..07ded9ecbf318e7fffe5bb06becb6017d85f9aaf
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/GPOX_gpo-plus_prospectus_summary.txt
@@ -0,0 +1,175 @@
+PROSPECTUS SUMMARY
+
+ 
+
+As used in this prospectus, unless the context otherwise requires, we, us, our, and Koldeck Inc. Refers to Koldeck Inc. The following summary does not contain all of the information that may be important to you. You should read the entire prospectus before making an investment decision to purchase our common stock.
+
+ 
+
+KOLDECK INC.
+
+ 
+
+Koldeck Inc. was incorporated in Nevada on March 29, 2016. We are development stage company and intend to commence operations in the publishing business where we intend to provide services of professional ghost writers, content writers, editors and publishers. Our main business activity is content writing and editing services. We plan to deliver our services to both individuals and companies, as well as to printed or digital newspapers and magazines. Our main objective is to provide our customers with a quality service of text composing and editing of written materials. As additional services we may offer help with illustrating and designing of book covers, as we plan to hire professional designers if business turns out profitable. We plan to write the texts based on data provided by our customers by mail, by phone or directly in person during the interviews. We also plan to deliver services on writing creative texts such as pieces of fiction, poetry, blog posts, articles for magazines or newspapers. We also plan to deliver texts non related to fiction such as, business proposals, presentations, bids, customer offers and letters. We also plan to offer turning drafts of our customers into concise texts by editing or rewriting. We also plan to carry out the jobs of editing or rewriting texts to make them more appealing to the final reader, as well as to make them look professionally written. As business grows we may change our services to the needs of the markets or to the needs of the company or to meet the requirements of our customers.
+
+Our principal services may be split into the following groups:
+
+Creative writing - assistance in writing complete books, manuscripts, biographies, stage plays or screenplays, or plots, or outlines for the works mentioned; 
+
+Business writing - assistance in writing bids, proposals, letters, presentations, research papers;
+
+Editing - editing and formatting services, completing or rewriting the texts of non-professional writers;
+
+Publishing - finding a publisher, designing a book cover or illustrations.
+
+Once the customer chooses their package they agree upon the schedule of receiving and reviewing the work in progress. 
+
+We intend to use the net proceeds from this offering to develop our business operations (See Description of Business and Use of Proceeds ). To implement our plan of operations we require a minimum of $42,000 for the next twelve months as described in our Plan of Operations. There is no assurance that we will generate sufficient revenue in the first 12 months after completion our offering or ever generate sufficient revenue.
+
+The following table sets forth the uses of proceeds assuming the sale of 50%, 75% and 100%, respectively, of the securities offered for sale by the Company. 
+
+Description
+
+If 50% shares sold
+
+If 75% shares sold
+
+If 100% shares sold
+
+Fees
+
+Fees
+
+Fees
+
+Gross proceeds
+
+50,000
+
+75,000
+
+100,000
+
+Offering expenses
+
+8,000
+
+8,000
+
+8,000
+
+Net proceeds
+
+42,000
+
+67,000
+
+92,000
+
+SEC reporting and compliance
+
+10,000
+
+10,000
+
+10,000
+
+Office Leasing
+
+1,500
+
+1,500
+
+1,500
+
+Equipment
+
+4,000
+
+5,000
+
+6,000
+
+Website
+
+6,000
+
+7,000
+
+8,000
+
+Marketing
+
+15,500
+
+31,500
+
+44,500
+
+Staff
+
+5,000
+
+12,000
+
+22,000
+
+Being a development stage company, we have very limited operating history. If we do not generate additional revenue, we may need a minimum of $10,000 of additional funding to pay for ongoing SEC filing requirements. We do not currently have any arrangements for additional financing. Our principal executive offices are located at 800 North Rainbow Blvd. Ste. 208, Las Vegas, NV 89107. Our phone number is (702) 703-7133. 
+
+From inception (March 29, 2016) until the date of this filing, we have had limited operating activities. Our financial statements from inception (March 29, 2016) through July 31, 2016, reports no revenues and a net loss of $3,228. Our independent registered public accounting firm has issued an audit opinion for Koldeck Inc. which includes a statement expressing substantial doubt as to our ability to continue as a going concern. To date, we have established our company, developed our business plan and we are looking for potential clients. On September 7, 2016 we signed the Editing Service Agreement. As a result of this agreement, as of the date of this prospectus, we have generated $1,800 in revenues. On October 15, 2016 we signed the second Editing Service Agreement. As a result of this agreement we generated $2,800 in revenues.
+
+As of the date of this prospectus, there is no public trading market for our common stock and no assurance that a trading market for our securities will ever develop. 
+
+Proceeds from this offering are required for us to proceed with your business plan over the next twelve months. We require minimum funding of approximately $42,000 to conduct our proposed operations and pay all expenses for a minimum period of one year including expenses associated with this offering and maintaining a reporting status with the SEC. If we are unable to obtain minimum funding of approximately $42,000, our business may fail. We do not anticipate earning significant revenues until we enter into commercial operation. Since we are presently in the development stage of our business, we can provide no assurance that we will successfully sell any products or services related to our planned activities.
+
+We are not a blank check company because the Company and its affiliates and promoters have no plans or intentions to engage in a merger or acquisition with an unidentified company or person or, once it is a reporting company, to be used as a vehicle for a private company to become a reporting company.
+
+5 | Page
+
+THE OFFERING
+
+The Issuer:
+
+ 
+
+KOLDECK INC.
+
+Securities Being Offered:
+
+ 
+
+10,000,000 shares of common stock.
+
+Price Per Share:
+
+ 
+
+$0.01
+
+Duration of the Offering:
+
+ 
+
+The shares will be offered for a period of two hundred and forty (240) days from the effective date of this prospectus. The offering shall terminate on the earlier of (i) when the offering period ends (240 days from the effective date of this prospectus), (ii) the date when the sale of all 10,000,000 shares is completed, (iii) when the Board of Directors decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 10,000,000 shares registered under the Registration Statement of which this Prospectus is part. 
+
+ 
+
+Gross Proceeds
+
+ 
+
+$100,000
+
+Securities Issued and Outstanding:
+
+There are 10,000,000 shares of common stock issued and outstanding as of the date of this prospectus, held by our sole officer and director, Svetlana Mazur. 
+
+If we are successful at selling all the shares in this offering, we will have 20,000,000 shares issued and outstanding.
+
+Subscriptions
+
+All subscriptions once accepted by us are irrevocable.
+
+Registration Costs
+
+We estimate our total offering registration costs to be approximately $8,000.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/GSM_ferroglobe_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/GSM_ferroglobe_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..98530c01723d3fbe73853fe94c4914aaa7b92229
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/GSM_ferroglobe_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in the Ordinary Shares. Before making an investment decision, you should read this entire prospectus carefully, especially Risk Factors and the financial statements and related notes thereto, and the other documents to which this prospectus refers. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See Cautionary Note Regarding Forward-Looking Statements for more information. Our Company We are a global leader in the fast-growing silicon and specialty metals industry with an expanded geographical reach, building on Globe s footprint in North America and FerroAtl ntica s footprint in Europe. On December 23, 2015, we consummated the Business Combination. The Business Combination brought together two entrepreneurial companies, Globe and FerroAtl ntica, each as our wholly owned subsidiaries. We expect to benefit from engineering and operational expertise to improve product flows, increase production efficiency, enhance technology and upgrade products quality, thereby enabling lower costs, faster delivery times and enhanced customer service as a result of the Business Combination. Competitive Strengths and Strategy of Ferroglobe Leading Producer of Silicon Metal and Silicon Alloys We believe we are a leading global producer of silicon metal and silicon- and manganese-based alloy, serving key customers in the specialty chemical, aluminum, solar, steel and ductile iron foundry industries. We will leverage our diversified production base across five continents Africa, Asia, Europe, North America and South America and our ownership of high quality raw materials to deliver an enhanced product offering on a cost-efficient basis. Improved, Vertically Integrated Business Model As a result of our recent Business Combination, we benefit from an improved, vertically integrated business model, owning sources of hydro power generation, specialty coal, high-purity quartz, charcoal, woodchips, gravel and electrodes. We believe this will allow for lower costs and faster deliveries, reducing working capital, improving logistics and creating significant value for our customers and shareholders. Unique Geographic Reach and Diversification The operations of FerroAtl ntica and Globe are highly complementary. Globe operates 11 production facilities and three mining sites in six countries, with almost 90% of revenues coming from North America. FerroAtl ntica operates 20 facilities (15 production plants and five mining sites) in five countries and hydroelectric power assets in Spain and France, with a majority of its revenues coming from Europe. As a result of the Business Combination, we have a more diversified production base and business mix with a reduced portfolio concentration and a greater international reach. Centralized Location at Global Center of Metals and Mining Industry We are organized in the United Kingdom and headquartered in London, one of the global centers for the metals and specialized materials industry. London offers us a central location with easy access to our international factories, customers, suppliers and financial markets. Table of Contents Significant Expected Operating and Financial Synergies As a result of the Business Combination, we expect to realize operating and financial synergies and synergies from more efficient working capital management. Operational synergies include benefits from value chain optimization, including centralized raw materials procurement, materials management and reduced freight costs from improved logistics, as well as savings through the introduction of technological and operational best practices that both business divisions will share and through elimination of overlapping selling, general and administrative expenses and overhead. Financial synergies include potential savings on interest expense in the combined company based on our balance sheet and credit profile, as well as the potential for a reduced effective tax rate through expansion of the international platform of the combined company s non-U.S. subsidiaries, whether by internal growth or through strategic acquisitions, and through efficient financing structures. Recent Developments On December 23, 2015, we completed the Business Combination of Globe and FerroAtl ntica, which resulted in each of Globe and FerroAtl ntica becoming our wholly owned subsidiaries. On December 24, 2015, our Ordinary Shares were approved for listing on The NASDAQ Global Market ( NASDAQ ) trading under the symbol GSM. On February 3, 2016, our Board of Directors ( Board ) declared a quarterly dividend of $0.08 per Share payable on March 14, 2016 to shareholders of record at the close of business on February 26, 2016. On February 10, 2016, in connection with the settlement of the shareholder suit brought on behalf of Globe s former shareholders challenging the Business Combination, the Court of Chancery of the State of Delaware held a hearing on plaintiffs motion to approve the proposed settlement, including final certification of the settlement class, and plaintiffs application for an award of attorneys fees and expenses. The Court approved the settlement, including final certification of the settlement class, and awarded plaintiffs counsel $9,989,376.73 in attorneys fees and expenses. Following court approval of the settlement, Globe paid $32.5 million into a settlement fund to be held for the benefit of the settlement class. With respect to the attorneys fee and expense award, Globe s Insurers paid eighty-five percent of the award and Globe paid the remaining fifteen percent of the award. Globe anticipates further discussions with the Insurers toward reaching a final agreement with the Insurers on reimbursement for a portion of the settlement fund and a final allocation of the attorneys fee and expense award.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/GXXM_gex_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/GXXM_gex_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/GXXM_gex_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/HMDCF_hutchmed_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/HMDCF_hutchmed_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..0b3bb8ebc413abda7fc3c095125bbd7084a996e6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/HMDCF_hutchmed_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our ADSs and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially "Risk Factors," "Our Selected Consolidated Financial Data," "Selected Financial Data of our Non-consolidated Joint Ventures" along with our and our non-consolidated joint ventures' financial statements and the related notes appearing elsewhere in this prospectus, before deciding to buy our ADSs. Unless the context requires otherwise, references in this prospectus to the "company," "Chi-Med," "we," "us" and "our" refer to Hutchison China MediTech Limited and its consolidated subsidiaries and joint ventures unless otherwise stated or indicated by context. Business Overview We are an innovative biopharmaceutical company based in China aiming to become a global leader in the discovery, development and commercialization of targeted therapies for oncology and immunological diseases. We have created a broad portfolio of drug candidates targeting eight molecular targets. We have taken a chemistry-focused approach to develop highly selective small molecule tyrosine kinase inhibitors that are intended to have potentially global best-in-class efficacy and are deliberately engineered to improve drug exposure, reduce known class-related toxicities and allow different drug therapies to be combinable. Highlights of our pipeline include: seven clinical-stage drug candidates, five of which have already achieved proof-of-concept (meaning positive outcome achieved in Phase Ib/II studies), with multiple potential global first-in-class or Breakthrough Therapy opportunities, which means that such drug candidates could be eligible for accelerated approval by the U.S. Food and Drug Administration, or the FDA, out of these seven drug candidates, four are wholly owned and three are partnered with leading pharmaceutical companies, AstraZeneca AB (publ), or AstraZeneca, Eli Lilly Trading (Shanghai) Company Limited, or Eli Lilly, and Nestl Health Science S.A., or Nestl Health Science, 20 active clinical trials in various countries, with a further five planned to start during the first quarter of 2016, three Phase III clinical trials currently enrolling, with a fourth expected to start during the first quarter of 2016, and subject to favorable clinical outcomes, savolitinib has the potential to be submitted for new drug application, or NDA, approval in late 2016 in the United States, and fruquintinib has the potential to be submitted for NDA approval in late 2016 or early 2017 in China. We believe our current drug candidates, such as savolitinib (targeting c-Met) and HMPL-523 (targeting Syk), have the potential to be global first-in-class therapies, or, as in the cases of fruquintinib (targeting VEGFR1/2/3), sulfatinib (targeting VEGFR/FGFR1), epitinib (targeting EGFRm+ with brain metastasis) and HMPL-689 (targeting PI3Kd), are sufficiently differentiated to potentially be global best-in-class, next generation therapies with a superior profile compared to existing approved drugs that act against the relevant kinase targets. Kinases are a class of proteins and enzymes that function in many signaling pathways and have been shown to drive several key activities of cancer cells, including growth, survival and angiogenesis. Innovation Platform Our pipeline of drug candidates has been developed and progressed by our in-house research and development division, known as our Innovation Platform, which was launched in 2002. Since then, we have assembled a leading drug research and development team of 290 scientists and staff based in China, of which 183 have advanced technical degrees including 21 M.D.s and 48 doctorate Amendment No. 4 to FORM F-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Industry and Market Data Although we are responsible for all disclosure contained in this prospectus, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable, including Frost & Sullivan, an independent market research firm. Market estimates are calculated by using independent industry publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in this prospectus. Trademarks and Service Marks We own or have been licensed rights to trademarks, service marks and trade names for use in connection with the operation of our business, including, but not limited to, our trademark Chi-Med. All other trademarks, service marks or trade names appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the , (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks, service marks and trade names. Presentation of Financial Information Our consolidated statements of operations data for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidated financial statements included herein. Our consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, while our historical consolidated financial statements which we previously made publicly available in connection with the listing of our ordinary shares on the AIM market were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We expect that our consolidated financial statements will continue to be prepared in accordance with U.S. GAAP following this offering. We also include in this prospectus certain financial data regarding our three non-consolidated joint ventures, Shanghai Hutchison Pharmaceuticals, Hutchison Baiyunshan and Nutrition Science Partners, which are accounted for using the equity accounting method. The consolidated income statement data of each such non-consolidated joint venture presented herein for the years ended December 31, 2015, 2014 and 2013 and the consolidated statements of financial position as of December 31, 2015 and 2014 for each such non-consolidated joint venture presented herein have been derived from their respective audited consolidated financial statements, which are also included herein. These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. Conventions Used in this Prospectus Unless otherwise indicated, references in this prospectus to: "ADRs" are to the American depositary receipts, which evidence our ADSs; "ADSs" are to our American depositary shares, each of which represents one-half of one ordinary share; "China" or "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Taiwan and the special administrative regions of Hong Kong and Macau; Table of Contents degrees as of January 31, 2016. This team has created a large scale and fully-integrated drug discovery and development operation covering chemistry, biology, pharmacology, toxicology, chemistry and manufacturing controls for clinical and commercial supply, clinical and regulatory and other functions, which work seamlessly together. We intend to continue to leverage this platform to produce investigational new drug, or IND, applications on drug candidates with global potential. Commercial Platform Since 2001, we have also developed a profitable Commercial Platform, with the key element being our Prescription Drugs business which had a commercial network of over 1,900 medical sales representatives covering over 16,500 hospitals in 300 cities and towns in China as of January 31, 2016. We operate our Prescription Drugs business through our joint ventures Shanghai Hutchison Pharmaceuticals and Hutchison Sinopharm, in which we nominate management and run the day-to-day operations. The second element of our Commercial Platform is our Consumer Health business which focuses primarily on the manufacture, marketing and distribution of over-the-counter pharmaceutical products in China. Net income attributable to our company from the continuing operations of our Commercial Platform grew by 25.5% from $18.2 million in 2013 to $22.8 million in 2014 and further grew by 10.1% to $25.2 million in 2015. We intend to leverage this Commercial Platform, particularly our established Prescription Drugs business, to support the launch of products from our Innovation Platform if they are approved for use in China. Outside of China, we intend to commercialize our products, if approved, in the United States, Europe and other major markets on our own and/or through partnerships with leading biopharmaceutical companies. Our History Our company was founded in 2000 by Hutchison Whampoa Limited, which recently became a wholly owned subsidiary of CK Hutchison Holdings Limited, or CK Hutchison, which is a Hong Kong-based, multinational conglomerate with operations in over 50 countries. CK Hutchison is the ultimate parent company of Hutchison Healthcare Holdings Limited, which as of the date of this prospectus owns 64.9% of our total outstanding share capital. We have taken a multi-source approach to fund our Innovation Platform, including through equity fundraising such as our initial public offering on the AIM market of the London Stock Exchange in 2006, partnering certain of our drug candidates, utilizing cashflow generated from our Commercial Platform and bank borrowings, some of which have been guaranteed by Hutchison Whampoa Limited. A substantial portion of our revenue is generated from our operations in China, in particular from our Commercial Platform. Under China's existing foreign investment and foreign exchange laws and regulations, our PRC subsidiaries and joint ventures are able to pay dividends without prior approval from the PRC government by complying with certain procedural requirements. They are, however, required to make payments to certain statutory funds and reserve accounts which are not distributable as dividends. Other PRC regulations, including restrictions on foreign investment in specified industries, can also affect the operations of our Commercial Platform and Innovation Platform if we invest or are deemed to invest in those specified industries. For more information regarding government regulation in China and other jurisdictions, see "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources" and "Regulation" elsewhere in this prospectus. Our Innovation Platform's Pipeline Figure one on the inside front cover page of this prospectus sets forth information regarding the status of the current clinical and late-stage pre-clinical studies of our Innovation Platform's drug candidates. We refer to this chart as our pipeline chart. For convenience, each study has been labeled with a study number. Each study will be discussed in more detail within this prospectus. We have included references to this pipeline chart and the study number for the reader's convenience when discussing the corresponding studies in more detail within this prospectus. Hutchison China MediTech Limited (Exact name of registrant as specified in its charter) Not applicable (Translation of Registrant's name into English) Cayman Islands (State or other jurisdiction of incorporation or organization) 2834 (Primary Standard Industrial Classification Code Number) Not applicable (I.R.S. Employer Identification Number) Room 2108, 21/F, Hutchison House 10 Harcourt Road Hong Kong Telephone: +852 2121 8200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents "CK Hutchison" are to CK Hutchison Holdings Limited, a company incorporated in the Cayman Islands and listed on The Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, and the ultimate parent company of our majority shareholder, Hutchison Healthcare Holdings Limited; "Guangzhou Baiyunshan" are to Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited, a leading China-based pharmaceutical company listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange; "Hain Celestial" are to The Hain Celestial Group, Inc., a NASDAQ-listed, natural and organic food and personal care products company; "HK$" or "HK dollar" are to the legal currency of the Hong Kong Special Administrative Region; "Hutchison Baiyunshan" are to Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited, our non-consolidated joint venture with Guangzhou Baiyunshan in which we have a 50% interest through a holding company in which we have a 80% interest; "Hutchison Consumer Products" are to Hutchison Consumer Products Limited, our wholly owned subsidiary; "Hutchison Hain Organic" are to Hutchison Hain Organic Holdings Limited, our joint venture with Hain Celestial in which we have a 50% interest; "Hutchison Healthcare" are to Hutchison Healthcare Limited, our wholly owned subsidiary; "Hutchison MediPharma" are to Hutchison MediPharma Limited, our subsidiary through which we operate our Innovation Platform in which we have a 99.8% interest; "Hutchison Sinopharm" are to Hutchison Whampoa Sinopharm Pharmaceuticals (Shanghai) Company Limited, our joint venture with Sinopharm in which we have a 51% interest; "Nutrition Science Partners" are to Nutrition Science Partners Limited, our non-consolidated joint venture with Nestl Health Science S.A. in which we have a 50% interest; "ordinary shares" or "shares" are to our ordinary shares, par value $1.00 per share; "RMB" or "renminbi" are to the legal currency of the PRC; "Shanghai Hutchison Pharmaceuticals" are to Shanghai Hutchison Pharmaceuticals Limited, our non-consolidated joint venture with Shanghai Pharmaceuticals in which we have a 50% interest; "Shanghai Pharmaceuticals" are to Shanghai Pharmaceuticals Holding Co., Ltd., a leading pharmaceutical company in China listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange; "Sinopharm" are to Sinopharm Group Co. Ltd., a leading distributor of pharmaceutical and healthcare products and a leading supply chain service provider in China listed on the Hong Kong Stock Exchange; "United States" or "U.S." are to the United States of America; "$" or "U.S. dollars" are to the legal currency of the United States; " " or "pound sterling" are to the legal currency of the United Kingdom; and " " or "euro" are to the legal currency of the European Economic and Monetary Union. Our reporting currency is the U.S. dollar. In addition, this prospectus also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of pound sterling into U.S. dollar were made at 1.00 to $1.39, all translations of Table of Contents Overview of Our Clinical-stage Drug Candidates Savolitinib Savolitinib is a potential global first-in-class inhibitor of the mesenchymal epithelial transition factor, or c-Met, receptor tyrosine kinase, an enzyme which has been shown to function abnormally in many types of solid tumors. We developed savolitinib as a potent and highly selective oral inhibitor that was designed to address renal toxicity, the primary issue that has prevented all other selective c-Met inhibitors from gaining regulatory approval. In Phase I clinical studies, savolitinib has shown promising signs of clinical efficacy, causing tumor size reduction in patients with c-Met gene amplification in papillary renal cell carcinoma, non-small cell lung cancer, colorectal cancer and gastric cancer. We are currently testing savolitinib in partnership with AstraZeneca in nine parallel proof-of-concept studies, both as a monotherapy and in combination with other targeted therapies, such as Iressa (gefitinib) and Tagrisso (AZD9291/osimertinib) (both EGFR inhibitors developed by AstraZeneca), and chemotherapy. We and AstraZeneca plan to start three further proof-of-concept studies in savolitinib in the first quarter of 2016, two of which are combinations with immunotherapies. A global Phase II study in papillary renal cell carcinoma is expected to report interim results in 2016. If results from this study are consistent with our published Phase I data, we would consider applying for Breakthrough Therapy designation which, if granted, could enable us to use the Phase II data to support a new drug application to the FDA in late 2016. Fruquintinib Fruquintinib is a highly selective and potent oral inhibitor of the vascular endothelial growth factor receptor, or VEGFR, and consequently we believe it has the potential to be a global best-in-class VEGFR inhibitor for many types of solid tumors. Based on pre-clinical and clinical data to date, fruquintinib's kinase selectivity has been shown to reduce off-target toxicity. This allows for drug exposure that is able to fully inhibit VEGFR, a protein ligand which contributes to the growth of tumors, and use in potential combinations with other targeted therapies and chemotherapy in earlier lines of treatment with larger patient populations. We believe these are major points of differentiation compared to other small molecule VEGFR inhibitors that have already been approved, such as Sutent (sunitinib), Nexavar (sorafenib) and Stivarga (regorafenib). In partnership with Eli Lilly, we are currently enrolling Phase III registration studies of fruquintinib in China for the treatment of colorectal cancer and non-small cell lung cancer. We also expect to start a Phase II proof-of-concept study on gastric cancer in China during the second half of 2016. Sulfatinib Sulfatinib is an oral drug candidate that selectively inhibits the tyrosine kinase activity associated with VEGFR and fibroblast growth factor receptor 1, or FGFR1, a receptor for a protein which also plays a role in tumor growth. Our published expanded Phase I clinical data indicate that sulfatinib has the highest objective response rate, or the proportion of patients with tumor shrinkage of more than 30%, reported to date in patients with neuroendocrine tumors. The objective response rate of 38.1% in the intent-to-treat population observed for sulfatinib in this study compares favorably to less than 10% for Sutent and Afinitor (everolimus), the only two currently approved single agent therapies for neuroendocrine tumors. Sulfatinib is the first oncology candidate that we have taken through proof-of-concept in China, where we have one Phase III registration study currently enrolling patients and a second expected to start in the first quarter of 2016, and expanded to a U.S. clinical study. We currently retain all rights to sulfatinib worldwide. Law Debenture Corporate Services Inc. 400 Madison Avenue, 4th Floor New York, New York 10017 Telephone: 212-750-6474 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents euro into U.S. dollars were made at 1.00 to $1.09 and all translations of HK dollars into U.S. dollars were made at HK$7.77 to $1.00, the noon buying rates on February 26, 2016 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. The exchange rates used in the financial statements and related notes in this prospectus are as indicated therein. We make no representation that the pound sterling, euro, HK dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars, pounds sterling, euro or HK dollars, as the case may be, at any particular rate or at all. Table of Contents HMPL-523 We believe HMPL-523 is a potential global first-in-class oral inhibitor targeting the spleen tyrosine kinase, or Syk, a key protein involved in B-cell signaling. Modulation of the B-cell signaling system has been proven to significantly advance the treatment of certain chronic immune diseases, such as rheumatoid arthritis. To date, only monoclonal antibody modulators, which seek to use the patient's own immune system to treat the disease, have been approved. We believe HMPL-523, as an oral drug candidate, has important advantages over intravenous monoclonal antibody immune modulators in that small molecule compounds clear the system faster, thereby reducing the risk of infections from sustained suppression of the immune system. Moreover, other drug development companies have tried to design small molecule Syk inhibitors for the treatment of chronic immune diseases. However, no drug products targeting Syk have been approved to date due to severe off-target toxicity side effects, such as hypertension, as a result of poor kinase selectivity. HMPL-523 is a potent and highly selective oral inhibitor specifically designed to overcome these off-target toxicity issues. We believe the market potential for a successful Syk inhibitor is substantial. For example, the estimated size of the global market for rheumatoid arthritis drugs was approximately $36 billion in 2015 and is projected to grow to approximately $45 billion in 2020, according to Frost & Sullivan. To our knowledge, we are the only company worldwide, other than Gilead Sciences, Inc., or Gilead, developing Syk inhibitors for chronic immune diseases as well as oncology. We successfully completed a Phase I clinical study among healthy volunteers in Australia in October 2015 and are now planning Phase II proof-of-concept studies in multiple indications. We currently retain all rights to HMPL-523 worldwide. Epitinib Epidermal growth factor receptor, or EGFR, inhibitors have revolutionized the treatment of non-small cell lung cancer with EGFR activating mutations. However, existing EGFR inhibitors such as Iressa and Tarceva (erlotinib) cannot penetrate the blood-brain barrier effectively, leaving the majority of patients with brain metastasis without an effective therapy. In contrast, epitinib is a potent and highly selective oral EGFR inhibitor designed to optimize brain penetration and has demonstrated brain penetration and efficacy in pre-clinical studies. If epitinib is able to provide clinical benefit to non-small cell lung cancer patients with brain metastasis in its current proof-of-concept study in China, we believe that, subject to regulatory approval, we will be well-positioned to address a major global unmet medical need. Early results of this open label proof-of-concept study appear positive, and top-line results are expected to be reported in 2016. We currently retain all rights to epitinib worldwide. Theliatinib Current EGFR inhibitors on the market are less effective at treating solid tumors with wild-type EGFR activation, which are EGFR proteins without activating mutations. These tumors include head and neck, esophageal and non-small cell lung cancers, for which there are few effective treatments, representing a major unmet medical need. In contrast, theliatinib is a potent and highly selective oral EGFR inhibitor engineered to have significantly greater binding affinity to wild-type EGFR proteins. As a result, theliatinib more effectively inhibits EGFR wild-type activity as compared to existing EGFR targeted therapies and has demonstrated superior anti-tumor activity in our pre-clinical studies among tumors with wild-type EGFR. We expect to complete a Phase I clinical study in China in the first half of 2016. We currently retain all rights to theliatinib worldwide. For more detailed information on the pre-clinical and clinical studies of these and our other drug candidates, please see "Business Our Clinical Pipeline." Copies to: Paul W. Boltz, Jr. Marc A. Rubenstein Ropes & Gray 41st Floor, One Exchange Square 8 Connaught Place Hong Kong Telephone: +852 3664 6488 Christian Hogg Chief Executive Officer Hutchison China MediTech Limited Room 2108, 21/F, Hutchison House 10 Harcourt Road Hong Kong Telephone: +852 2121 8200 Matthew Bersani Shearman & Sterling LLP 12th Floor, Gloucester Tower The Landmark 15 Queen's Road Central Hong Kong Telephone: +852 2978 8000 Table of Contents Investment Highlights High potential clinical pipeline with seven clinical stage drug candidates and first candidates nearing NDA submissions We believe we have one of the broadest clinical pipelines among global oncology/immunology focused biotechnology companies, with seven clinical-stage drug candidates that are being investigated in a total of 20 active clinical studies in various countries and a further five clinical studies targeted to start during the first quarter of 2016. Our drug candidates have been designed to be highly differentiated and are characterized by superior kinase selectivity, leading to reduced off-target toxicity and superior potency, which has to date been supported by favorable clinical data. For example, our Phase II studies of savolitinib globally and Phase II and III studies of fruquintinib in China are underway with our partners AstraZeneca and Eli Lilly, respectively. Savolitinib has the potential for an NDA submission in the U.S. in late 2016, and fruquintinib has the potential for an NDA submission in China in late 2016 or early 2017. Productive Innovation Platform with proven track record Our experienced research and development management team members have worked at multinational pharmaceutical and biotechnology companies and have participated in the discovery and development of global blockbuster drugs, including Humira, Sutent, Zithromax, Revlimid, Zometa and Incivek. Together, they have systematically built a productive research and development organization of 290 scientists and staff as of January 31, 2016, with a proven track record in internal discovery having advanced seven differentiated drug candidates into the clinic in the past 10 years. Profitable and high growth Commercial Platform from which to launch our new drug innovations Our Commercial Platform consists of profitable and high growth specialty Prescription Drugs and Consumer Health businesses that have a significant footprint in the Chinese healthcare market. Additionally, the joint ventures that comprise our Prescription Drugs business, in which we nominate management and run the day-to-day operations, operate an extensive sales force in China, including more than 1,900 medical sales representatives. This provides us with a nationwide platform in China covering over 16,500 hospitals in 300 cities and towns through which we intend to bring our new oncology/immunology drug innovations to market if we receive regulatory approval for them. Our Vision and Strategy Our vision is to become a leading global biopharmaceutical company based in China. We intend to achieve this by leveraging our Innovation Platform to provide differentiated products in the global targeted therapy arena in oncology and immunology. We have set out to build a broad portfolio of highly selective drug candidates against multiple novel and validated molecular targets. We believe that the use of these drug candidates as monotherapies or in combinations or rotations of treatment with other oncology and immunology therapies have the potential to significantly improve patient outcomes. Key elements of our strategy are to: Design drug candidates against novel but well-characterized targets with global first-in-class potential We believe our most significant market opportunity is developing innovative drug therapies that have global first-in-class potential in areas of high unmet needs. We focus on identifying novel but well-characterized tyrosine kinase targets (proteins or enzymes) associated with the pathogenesis of cancer or inflammation, such as c-Met and Syk, and use our chemistry-focused approach to engineer our own innovative, highly selective drug candidates against these targets. We design our drug candidates to address problems encountered by earlier compounds developed by other parties. We then rapidly progress through pre-clinical studies to clinical development in order to seek potential global first-in-class status for such drug candidates. Focus our research and development efforts on kinase selectivity to generate global best-in-class products We balance risk in our research and development activities by also focusing on drug Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective. Table of Contents candidates against validated targets, generally tyrosine kinases, including VEGFR and EGFR. A primary objective of our research efforts is to develop next generation tyrosine kinase inhibitors characterized by both high selectivity and superior pharmacokinetic properties. This approach has led to favorable clinical outcomes in our clinical trials to date. As a result, we believe our portfolio has the potential to discover candidates that are global best-in-class therapies in their respective categories. Continue to invest in our fully integrated Innovation Platform We believe that implementing our strategy to create high quality drug candidates takes time, a stable and high quality discovery organization and significant financial resources. Our position as one of the leading China-based innovators in oncology and immunology is based on our continuous efforts and investments over the last 15 years, with approximately $330 million invested in our Innovation Platform as of December 31, 2015. Our strategy is to provide high levels of continuous and sustained investment in our Innovation Platform in the future, which we believe will allow us to accelerate and broaden the development programs of our current clinical and late-stage pre-clinical drug candidates, such as HMPL-453 (targeting FGFR) and HMPL-689 (targeting PI3Kd). Pursue a practical and efficient clinical and regulatory strategy We have benefited, and will look to continue to benefit, from the position of the China Food and Drug Administration, or CFDA, of supporting clinical trials for drug candidates against validated targets that can address large unmet medical needs as well as for novel targets where safety has been established in other jurisdictions. China's large patient population, combined with relatively lower clinical trial costs as compared to the United States and Europe, allows for rapid enrollment of patients in clinical trials in a cost-effective manner, resulting in more efficient proof-of-concept studies in certain high prevalence tumor types. Subject to achieving proof-of-concept in China, we plan to initiate the higher cost, mid- to late-stage global studies both by ourselves as well as with partners. Maximize economic interest in our drug candidates through in-house development and later-stage strategic partnerships Our strategic partnerships with global pharmaceutical companies have brought us significant technical expertise and global clinical, regulatory and commercial reach, as well as a necessary source of funding during the early-stage development of our company. These partnerships have supported accelerated development of a number of our drug candidates, including savolitinib and fruquintinib. As our drug candidate pipeline continues to develop, however, we will look to maintain more flexibility with respect to certain of our drug candidates for which we currently retain all rights worldwide in order to achieve enhanced economic benefits to our company. Leverage and expand our Commercial Platform While we will continue to focus the majority of our resources and available capital on our Innovation Platform, we will continue to expand our Commercial Platform and its sales and marketing infrastructure. We also intend to build an oncology focused sales team under the Prescription Drugs business to commercialize drugs developed by our Innovation Platform if they are approved for sale in China, which represents an attractive opportunity in the area of targeted therapies with significant unmet medical needs. Outside of China, we intend to commercialize our products, if approved, in the United States, Europe and other major markets on our own and/or through partnerships with leading biopharmaceutical companies. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered(1) Proposed maximum aggregate offering price(1)(2)(3) Amount of registration fee Ordinary Shares, $1.00 par value $115,000,000 $11,581 (1)American depositary shares issuable upon deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (Registration No. 333- ). Each American depositary share represents one-half of one ordinary share. (2)Includes (i) ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public and (ii) ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These ordinary shares are not being registered for the purposes of sales outside of the United States. (3)Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933. Notes: (1) Employees of Hutchison MediPharma Limited hold the remaining 0.2% shareholding. (2) Nestl Health Science S.A. is the other 50% joint venture partner. (3) Shanghai Pharmaceuticals Holding Co., Limited is the other 50% joint venture partner. (4) Sinopharm Group Co. Limited is the other 49% joint venture partner. (5) Dian Son Development Limited holds the other 20% interest. (6) Guangzhou Baiyunshan Pharmaceutical Holdings Co. Limited is the other 50% joint venture partner. (7) The Hain Celestial Group, Inc. is the other 50% joint venture partner. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents Risks Associated with Our Business Our business is subject to risks and uncertainties that may materially and adversely affect us, including the following: even if we consummate this offering, we may need substantial additional funding for our product development programs and commercialization efforts. If we are unable to raise capital on acceptable terms when needed, we could incur losses and be forced to delay, reduce or eliminate such efforts; historically, our Innovation Platform has not generated significant profits or has operated at a net loss; all of our drug candidates are still in development. If we are unable to obtain regulatory approval and ultimately commercialize our drug candidates or experience significant delays in doing so, our business will be harmed; our primary approach to the discovery and development of drug candidates focuses on the inhibition of kinases, some of which are unproven, and we do not know whether we will be able to develop any products of commercial value; we and our collaboration partners may incur additional costs or experience delays in completing our pre-clinical or clinical trials or ultimately be unable to complete the development and commercialization of our drug candidates; our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any; we face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do; as a significant portion of our Commercial Platform business is conducted through joint ventures, we are largely dependent on the success of our joint ventures and our receipt of dividends or other payments from our joint ventures for cash to fund our operations; reimbursement may not be available for the products currently sold through our Commercial Platform or our drug candidates in China, the United States or other countries, which could diminish our sales or affect our profitability; rapid changes and competition in the pharmaceutical industry may render our Commercial Platform's current products or our drug candidates obsolete; disagreements with our current or future collaboration partners, or the termination of any collaboration arrangement, could cause delays in our product development and materially and adversely affect our business; our Commercial Platform's principal products involve the cultivation or sourcing of key raw materials including botanical products, and any quality control or supply failure or price fluctuations could adversely affect our Commercial Platform's ability to manufacture our products and/or could materially and adversely affect our operating results; we rely on our collaborations with third parties for certain of our drug development activities, and, if we are unable to establish new collaborations when desired on commercially attractive terms or at all, we may have to alter our development and commercialization plans; further development and commercialization of our own drug candidates will depend, in part, on strategic alliances with our collaborators. If our collaborators do not diligently pursue product Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion Preliminary Prospectus dated March 4, 2016 P R O S P E C T U S Hutchison China MediTech Limited 6,123,698 American Depositary Shares Representing 3,061,849 Ordinary Shares Table of Contents development efforts, impeding our ability to collect milestone and royalty payments, our progress may be delayed and our revenue may be deferred; we and our collaboration partners rely, and expect to continue to rely, on third parties to conduct certain of our clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be harmed; joint ventures form an important part of our Commercial Platform business, and our ability to manage and develop the businesses conducted by these joint ventures depends in part on our relationship with our joint venture partners; we and our joint ventures may be exposed to liabilities under the Foreign Corrupt Practices Act, or the FCPA, the Bribery Act 2010 of the Parliament of the United Kingdom, or the U.K. Bribery Act, and Chinese anti-corruption laws, and any determination that we have violated these laws could have a material adverse effect on our business or our reputation; and if we or our joint ventures are unable to protect our or their products and our drug candidates through intellectual property rights, our competitors may compete directly against us or them. See
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/INND_innerscope_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/INND_innerscope_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..3c6864bfbce0e12cfff0891dc2c49bcc73bc0410
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/INND_innerscope_prospectus_summary.txt
@@ -0,0 +1,141 @@
+PROSPECTUS
+SUMMARY
+
+ 
+
+The following summary highlights
+selected information contained in this prospectus. This summary does not contain all the information you should consider before
+investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including
+the "RISK FACTORS" section, the financial statements and the notes to the financial statements. As used throughout this
+prospectus, the terms " InnerScope Advertising Agency", "InnerScope", "IAA", "Company",
+"we," "us," or "our" refer to InnerScope Advertising Agency, Inc..
+
+ 
+
+Our Company
+
+ 
+
+InnerScope Advertising Agency, Inc.
+(IAA) is a Nevada Corporation incorporated June 15, 2012, with its principal place of business in Roseville, California. On June
+20, 2012, IAA acquired InnerScope Advertising Agency, LLC. Through this Acquisition and Plan of Share Exchange with InnerScope
+Advertising Agency, LLC ("ILLC"), a commonly owned entity, IAA acquired a 100% interest of all membership interests
+in ILLC. On November 1, 2013, IAA entered into an Acquisition and Plan of Share Exchange with Intela-Hear, LLC ("Intela-Hear"),
+a commonly owned entity, whereby IAA acquired 100% of the outstanding membership interests of Intela-Hear. IAA (herein after referring
+to IAA, ILLC and Intela-Hear or "the Company") was formed to fill the gap in the advertising/marketing side of the
+hearing device industry. Both ILLC and Intela-Hear were controlled and majority owned by our Chairman. Moore Family Hearing Company
+("MFHC"), a related party, controlled by our Chairman, accounted for approximately 100% and 82% of our sales for
+the three months ended March 31, 2016 and 2015, respectively, and 83% and 92% of our sales for the years ended December 31, 2015
+and 2014, respectively.
+
+ 
+
+ 5
+
+ 
+
+ 
+
+IAA is dedicated to serving the retail
+hearing aid dispensing community through generating traffic and consumer interest for hearing aid dispensing practices. Whether
+the practice is small, medium or large, the Company has previously shown an ability to increase the total revenue without increasing
+cost. There are over 14,000 retail hearing aid dispensing practices in the United States. The company operates in a highly competitive
+and growing industry. The proliferation of media channels, including the rapid development of interactive technologies and mediums,
+along with their integration within all offerings has fragmented consumer audiences, especially the 55+ age sector which is IAA
+client s primary targeted audience. These developments make it more complex for marketers to reach their target audiences
+in a cost-effective way, causing them to turn to marketing service providers such as IAA for a customized mix of advertising and
+marketing communications services designed to make the best use of their total marketing expenditures.
+
+ 
+
+IAA has operated in many major markets
+across the United States and continues to provide a comprehensive range of services to MFHC grouped into four fundamental
+disciplines: advertising/marketing, customer relationship management (CRM), public relations and specialty communications.
+
+ 
+
+Management
+believes the acquisition of Intela-Hear provides the potential for expanding the company s business model through
+a potential value proposition to the hearing aid dispenser. Intela-Hear future plans will enable independent hearing
+aid practitioners to leverage the purchasing power of the hearing devices by grouping together and aggregating their purchases.
+This group will be managed by Intela-Hear and be known as the Intela-Hear Alliance (Alliance). The potential savings to the member
+of the Alliance may be significant and may increase their operating margin. On April 2, 2013, Intela-Hear executed a 10 Year Supply
+Agreement with GN Hearing Care Corporation, DBA as GN Resound ("GN Resound"), one of the world s leading manufacturers
+of hearing devices. This supply agreement enables the Company to offer hearing aids to independent hearing aid practitioners.
+
+ 
+
+Additionally, Intela-Hear Alliance
+members can also utilize the expertise of IAA in marketing and advertising to potentially increase the member s units
+sold per month. IAA uses Geographical and Demographical targeted Direct Mail campaigns as well as print advertising in local newspapers
+during a promotional event. The goal is for Alliance members to work with IAA to create an exclusive and time-sensitive promotion
+for buying devices without the consumer researching their local market for the same product at a cheaper price, a common problem
+for the industry and individual businesses. Oftentimes, the consumer researches the same product and compares prices with other
+local hearing device retailers on the Internet and purchases the hearing device with the cheapest, but not always the best hearing
+aid retailer. The company anticipates that the IAA approach combined with Intela-Hear Alliance may increase the efficiency of
+the promotion.
+
+ 
+
+We may raise additional capital by
+selling shares of our common stock or borrowing funds. We have no commitments from any source to provide additional funding. There
+can be no assurance that we will be able to raise any or all of the capital required. These factors indicate that we may be unable
+to continue as a going concern, particularly in the event that we cannot generate sufficient cash flow or raise sufficient capital
+to conduct our operations. Our financial statements do not include any adjustments to the value of our assets or the classification
+of our liabilities that might result if we would be unable to continue as a going concern.
+
+ 
+
+The Company s principal business
+address is 2281 Lava Ridge Court, Ste. 130, Roseville, CA 95661. The telephone number at that address is (916) 218-4100 and our
+website addresses include www.innerscopeadagency.com and www.intelahearalliance.com.
+The Company s fiscal year end is December 31.
+
+ 
+
+Implications of Being an Emerging Growth Company
+
+ 
+
+We are an "emerging growth company"
+within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to
+comply with the requirements that are applicable to other public companies that are not "emerging growth companies"
+including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
+Act, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the
+exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any
+golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer
+an emerging growth company.
+
+ 
+
+ 6
+
+ 
+
+ 
+
+Following
+this offering, we will continue to be an emerging growth company until the earliest to occur of (1) the last day of the fiscal
+year during which we had total annual gross revenues of at least $1 billion (as indexed for inflation), (2) the last day of the
+fiscal year following the fifth anniversary of the date of our initial public offering under this prospectus, (3) the
+date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt and (4) the
+date on which we are deemed to be a "large accelerated filer," as defined under the Securities Exchange Act of 1934,
+as amended (which we refer to as the "Exchange Act").
+
+ 
+
+We also qualify as a "smaller
+reporting company" under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, which is defined as a company with
+a public equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as are no
+longer an emerging growth company, we will still have reduced disclosure requirements for our public filings some of which are
+similar to those of an emerging growth company including not being required to comply with the auditor attestation requirements
+of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive compensation in our periodic
+reports and proxy statements.
+
+ 
+
+ 
+
+ 
+
+Summary of
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/IONI_i-on_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/IONI_i-on_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..ae091b01780fce35449b1034c5a9c3bcd0a05882
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/IONI_i-on_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1 RISK FACTORS 4 USE OF PROCEEDS 15 DETERMINATION OF OFFERING PRICE 15 SELLING STOCKHOLDER 15 PLAN OF DISTRIBUTION 16 PRICE RANGE OF COMMON STOCK 17 DIVIDEND POLICY 18 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 18 DESCRIPTION OF SECURITIES TO BE REGISTERED 18 DESCRIPTION OF BUSINESS 19 DESCRIPTION OF PROPERTY 22 DESCRIPTION OF LEGAL PROCEEDINGS 22 DESCRIPTION OF CAPITAL STOCK 22 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 25 LEGAL MATTERS 25 EXPERTS 25 AVAILABLE INFORMATION 26 TABLE OF CONTENTS PROSPECTUS SUMMARY This summary highlights certain information described in greater detail elsewhere or incorporated by reference in this prospectus.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/IOVA_iovance_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/IOVA_iovance_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/IOVA_iovance_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/ISCO_internatio_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/ISCO_internatio_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..4a5a4ec47f0969e9f7c09d19c8a0f5585a2cc1c3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/ISCO_internatio_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary provides an overview of selected information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in our securities. You should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our securities, including the information discussed under
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/JFIL_jubilant_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/JFIL_jubilant_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2a006c7b6e037817e9e68ed7fac435b4b08cc027
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/JFIL_jubilant_prospectus_summary.txt
@@ -0,0 +1,67 @@
+Prospectus Summary
+
+The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus, including but not limited to, the "Risk Factors" beginning on page 9. References to "we," "us," "our," "Jubilant Flame," or the "Company" refers to Jubilant Flame International Ltd. unless the context indicates another meaning. 
+ 
+Our Company
+
+Jubilant Flame International Ltd. (the "Company") was incorporated in the State of Nevada, United States of America, on September 29, 2009 under the name Liberty Vision, Inc. The Company changed its name to Jiu Feng Investment Hong Kong Ltd on December 16, 2012. The Company changed its name to Jubilant Flame International Ltd on May 18, 2015. The Company's fiscal year end is February 28. The Company's principal executive offices are located at 3150 Wilshire Blvd Suite 2215, Los Angeles CA 90010, and our telephone number is +76132523673. We are not a blank check company, and have no intentions of entering into any business combination. 
+ 
+The Company does business in the Medical and the Cosmetic business sectors. In the medical sector the Company conducts Research and Development and the planned future marketing of products under license from BioMark Technologies (Asia) Limited, a limited liability company incorporated in Hong Kong under the Companies Ordinance ("BioMark"). In the cosmetics sector the Company markets cosmetic products under license from Rubyfield Holdings LTD., a company organized under the laws of Hong Kong ("Rubyfield"). 
+ 
+Bio Medical
+ 
+On September 30, 2013 the Company entered into a License Agreement with BioMark whereby the Company holds a 5 year worldwide license to sell, market, and/or distribute certain products pertaining to the health care industry (the "Bio-Medical Products"); and to conduct research and development of BioMark's cancer detection scanning technology. In the event that the research and development of BioMark's cancer detection scanning technology provides marketable technology, the Company shall have the right of first refusal to a license to market, sell and distribute such cancer detection scanning technology. The Company's president, Ms. Yan Li, is also president of, and exercises control over BioMark. 
+ 
+Cosmetics
+ 
+On Nov 16, 2015 the Company entered into a Distribution / License Agreement with Rubyfield whereby the Company is the exclusive independent authorized Master Distributor for all of North America of certain products pertaining to the cosmetics industry (the "Cosmetics Products"). The Company's president, Ms. Yan Li, is also president of, and exercises control over Rubyfield. 
+ 
+During the nine months ended November 30, 2015, the Company realized a loss from continuing operations totaling $160,308 We rely upon the sale of our securities and loans from our officers and directors to fund operations. We do not expect to generate sufficient revenue to sustain operations during the next twelve months. Consequently, we will continue to depend on additional financing in order to maintain our operations and continue with our corporate activities. Based on these uncertainties, our independent auditors included additional comments in their report on our financial statements for the years ended February 28, 2015 and 2014, indicating substantial doubt about our ability to continue as a going concern. 
+ 
+ 
+5
+
+ 
+ 
+On June 18, 2015, we entered into the Equity Purchase Agreement with Premier Venture, a California limited liability company. Pursuant to the terms of the Equity Purchase Agreement, Premier Venture committed to purchase up to $5,000,000 of our common stock during the Open Period. From time to time during the Open Period, we may deliver a put notice (the "Put Notice") to Premier Venture which states the dollar amount that we intend to sell to Premier Venture on a date specified in the Put Notice. The maximum investment amount per notice shall not exceed the lesser of (i) 200% of the average daily trading volume of our common stock on the five trading days prior to the day the Put Notice is received by Premier Venture and (ii) 110% of any previous put amount during the maximum thirty-six (36) month period (however the amount for the preceding (ii) shall never be less than 75,000 shares). The total purchase price to be paid, in connection with each Put Notice, by shall be calculated at The Purchase Price for the Securities for each Put shall be the Put Amount multiplied by seventy percent (70%) of the lowest individual daily volume weighted average price ("VWAP") of the common stock during the five (5) consecutive trading days immediately after the applicable date of the Put Notice, less six hundred dollars ($600.00).
+ 
+In consideration of the execution and delivery of the Equity Purchase Agreement by Premier Venture, we issued to Premier Venture 178,571 shares of our common stock (the "Initial Commitment Shares").
+ 
+On the effective date of this Registration Statement, we shall issue to Premier additional commitment shares (the "Additional Commitment Shares") of its common stock representing 2.5% of $5,000,000 divided by the sum equal to the lowest of the daily VWAPs of the commonstock on the three trading days immediately preceding the effective date. The Additional Commitment Shares shall not constitute registerablesecurities and shall not be included in this Registration Statement in accordance with the terms of the Registration Agreement.In connection with the Equity Purchase Agreement, we also entered into a registration rights agreement (the "Registration Rights Agreement") with Premier Venture, pursuant to which we are obligated to file a registration statement with the SEC. We are obligated to use all commercially reasonable efforts to maintain an effective registration statement until termination of the Equity Purchase Agreement.
+ 
+The 4,200,000 shares to be registered herein represent approximately 38.18% of our common shares issued and outstanding, assuming that the Company will sell all of the 2,321,429 shares offered for sale to Premier Venture.
+ 
+At an assumed purchase price of $1.19 (representing 70% of $1.70 being the average high and low prices of our common stock as reported on the OTCBB on Oct, 2015), we will be able to receive up to $2,975,000 in gross proceeds, assuming the sale of the entire 2,321,429 shares (2,500,000 shares issuable to Premier Venture, less 178,571 shares which have previously been issued) being registered hereunder pursuant to the Equity Purchase Agreement. Accordingly, we may be required to register additional shares to obtain the balance from the $5,000,000 under the Equity Purchase Agreement.
+ 
+We are currently authorized to issue 75,000,000 shares of our common stock. Premier Venture has agreed to refrain from holding an amount of shares which would result in Premier Venture owning more than 4.99% of the then-outstanding shares of our common stock at any one time.
+ 
+There are substantial risks to investors as a result of the issuance of shares of our common stock under the Equity Purchase Agreement. These risks include dilution of stockholders' percentage ownership, significant decline in our stock price and our inability to draw sufficient funds when needed. Premier Venture will periodically purchase our common stock under the Equity Purchase Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Premier Venture to raise the same amount of funds, as our stock price declines.
+ 
+Our financial statements contain additional note disclosures describing the circumstances that led to the "going concern" disclosure by our independent auditors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
+ 
+ 
+6
+
+ 
+ 
+This Offering and any investment in our common stock involve a high degree of risk. If we are unable to generate significant revenue, we may be obliged to cease business operations due to lack of funds. We face many challenges to continue operations, including our lack of operating history, lack of revenues to date, and the losses we have incurred to date. 
+ 
+The Offering
+
+Following is a brief summary of this offering:
+ 
+ Securities being offered by the Selling Security Holders, common stock, par value $0.001
+Up to 4,200,000 shares of common stock, including:
+1. 1,700,000 shares currently held by the Current Shareholders; and
+2. 2,500,000 shares held in the name of Premier Venture Partners, LLC, of which 178,571 have been issued, and 2,321,429 are to be issued pursuant to the Equity Purchase Agreement.
+Minimum
+None.
+
+Offering price per share by the Selling Security Holders
+All shares being registered may be sold by the Selling Security Holders without our involvement. 
+
+Offering period
+36 months from the effective date to this Registration Statement.
+
+Underwriter
+Premier Venture Partners, LLC is the underwriter with respect to 2,500,000 share of common stock issuable pursuant to the Equity Purchase Agreement.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/KULR_kulr_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/KULR_kulr_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a67bcbc5f058e74e3b826b25c535d2ea15ce04d5
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/KULR_kulr_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including "Risk Factors" and the financial statements and related notes, included elsewhere in this prospectus. The Company History KT High-Tech Marketing Inc. (the "Company") is an early-stage company planning to market and distribute technology products. The Company intends to market and sell these products to end users and customers based on agreements that it plans to enter into other companies that allow the Company to distribute products. The Company was incorporated in the State of Delaware in December 2015, and was formerly known as Grant Hill Acquisition Corporation ("Grant Hill" or "Grant Hill Acquisition"). In April 2016, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company s name from Grant Hill Acquisition Corporation to KT High-Tech Marketing Inc. in April 2016. The Company is located at 14440 Big Basin Way, #12, Saratoga, California 95070. The Company s main phone number is (408) 663-5247. Business The Company plans to market and distribute technology products. The Company intends to market and sell these products to end users and customers based on agreements that it plans to enter into other companies that allow the Company to distribute products. The Company has identified three growth markets (IoT, Mobile and Energy Storage) in consumer electronics and energy markets to target initially. The Company plans to work closely with supply partners to provide the latest technology and products in these three markets to serve its customers The Company plans to focus on products that have very compact designs and come with highly efficient thermal management designs. Better thermal management designs make the product more reliable and safer to operate. A compact design is more attractive for the end user. Devices which the Company intends to distribute are the following: HD Security Cameras, Virtual Reality (VR) and Augment Reality (AR) glasses, drones accessory devices, connected car accessories and smart home devices. Marketing and sales of Internet of Things (IoT), Mobile and Energy Storage Devices will occur in the United States and the Greater China Region. Mobile devices include: Smartphone modules for consumer and industrial applications, tablet computers for business application and 3/4G modules for machine-to-machine (M2M) applications. Energy storage devices include: Lithium-Ion Battery (LiB) pack for electrical bike, LiB pack for industrial machine application and medical equipment applications. The Company believes that today s consumers value choice, not just in terms of the variety of products on offer, but also in the channels where they can buy them. Whereas the internet allows the increasingly-savvy consumer to research products from home at his/her leisure in terms of functionality, more importantly, it also allows him/her to find the best deal in terms of price. Store-based retailing, on the other hand, offers consumers expert advice; the latter is particularly important in TCG, where products are becoming increasingly complex, and the prospect of the interconnected home is resulting in increased need for installation and consumer demand for after sales care. The Company will provide both online and in-store product marketing materials for its partners and retail channels to reach and educate its customers. Risks and Uncertainties facing the Company As an early-stage company, the Company has limited operating history and is expected to continuously experience losses in the near term. The Company needs to increase its revenue or locate additional financing in order to continue its developmental plans. As a company in the early part of its life, management of the Company must build and market its initial construction and development plans in order to execute the business plan of the Company on a broad scale. The Company anticipates that it would need substantial funding in the future in order to continue as a going concern and expand its operations in accordance with its current business plan (which includes, but is not limited to, forming and maintaining relationships with partners that allow the Company to market and sell their products). One of the biggest challenges facing the Company will be in securing adequate capital to market and sell products. Likewise, the Company will need to secure sufficient capital to develop, build, and maintain relationships with those entities whose products it intends to market and sell. The Company has not yet devised its initial sales, marketing and advertising strategy, and the Company will need to skillfully design, test, implement and refine this strategy over time in order to achieve success in its business. Due to financial constraints and the early stage of the Company s life, the Company has to date conducted limited advertising and marketing to reach customers. In addition, the Company has not yet located the sources of funding to develop the Company on a broader scale. If the Company were unable to locate such financing and/or later develop strong and reliable sources of potential capital to grow and expand its business, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company s products and services (once marketed and sold) are consistently met with client satisfaction in the marketplace and exhibit steady success amongst the potential customer base, neither of which is reasonably predictable or guaranteed. Due to these and other factors, the Company s need for additional capital, the Company s independent auditors have issued a report raising substantial doubt of the Company s ability to continue as a going concern. Trading Market Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible, which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board. See "RISK FACTORS" and "DESCRIPTION OF SECURITIES". The Offering The maximum number of Shares that can be sold pursuant to the terms of this offering is 3,800,000. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier fully subscribed or terminated by the Company. This prospectus relates to the offer and sale of 3,800,000 shares ("Shares") of common stock of the Company, as follows: (a) 3,000,000 Shares offered by the Company and (b) 800,000 Shares offered by the holders thereof (the "Selling Shareholder Shares"), who are deemed to be statutory underwriters. The Company and the selling shareholders will offer their shares, respectively, at a price of $1.00 per share. Common stock outstanding before the offering 24,400,000 (1) Common stock for sale by the Company 3,000,000 Common stock for sale by selling shareholders 800,000 Common stock outstanding after the offering 27,400,000 (2) Offering Price $1.00 per share Proceeds to the Company $3,000,000 (3) (1) Based on number of shares outstanding as of the date of this prospectus. (2) Assumes the sale of the maximum number of Shares. (3) Assumes the sale of the maximum number of Shares at the Offering Price listed above. The Company will offer the Shares directly without payment to any officer or director of any commission or compensation for sale of the Shares. The Company will also attempt to locate broker-dealers or selling agents to participate in the sale of the Shares. In such cases, the Company will pay customary selling commissions and expenses of such sales which would reduce the proceeds to the Company. Any and all funds received by the Company for sales of Shares by the Company at any time in the offering will become immediately available to the Company. There is no fixed amount or number of Shares that must be reached or sold before any closing or use of any funds can occur. Summary Financial Information The statements of operations data for the period from December 11, 2015 (inception) to December 31, 2015, and the balance sheet data as of December 31, 2015 are each respectively derived from the Company s audited financial statements and related notes thereto included elsewhere in this prospectus. The statement of operations data for the period from January 1, 2016 to June 30, 2016, and the balance sheet as of June 30, 2016, provided below are each respectively derived from the unaudited financial statements and related notes thereto included elsewhere in this prospectus. January 1, 2016 December 11, 2015 to June 30, 2016 (inception) to (unaudited) December 31, 2015 Statement of operations data Revenue $ 0 $ 0 Gross profit $ 0 $ 0 Income (Loss) from operations $ (2,857 ) $ (4,062 ) Net income (loss) $ (2,857 ) $ (4,062 ) At June 30, 2016 At December 31, 2015 (unaudited) Balance sheet data Cash $ 380 $ 0 Other assets $ 380 $ 0 Total assets $ 380 $ 0 Total liabilities $ 3,500 $ 3,750 Total shareholders equity (deficit) $ (3,120 ) $ (3,750 )
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/LXU_lsb_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/LXU_lsb_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..13e73c73ed1c714f1dd44cf6f35b692b48ff6f7a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/LXU_lsb_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus, is not complete, and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the sections entitled Risk Factors and Cautionary Note Regarding Forward-Looking Statements and the consolidated financial statements and the notes thereto and other documents incorporated by reference in this prospectus before making an investment decision. Overview LSB manufactures and sells chemical products for the agricultural, mining, and industrial markets. The Company owns and operates facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operates a facility for Covestro LLC in Baytown, Texas. LSB s products are sold through distributors and directly to end customers throughout the United States. Recent Developments On May 11, 2016, the Company, Consolidated Industries L.L.C., an Oklahoma limited liability company and a direct, wholly owned subsidiary of the Company ( Consolidated ), and The Climate Control Group, Inc., an Oklahoma corporation and a direct, wholly owned subsidiary of Consolidated and an indirect subsidiary of the Company (the Climate Control Group ), entered into a Stock Purchase Agreement (the Stock Purchase Agreement ) with NIBE Industrier AB (publ), a Swedish corporation ( NIBE ), and NIBE Energy Systems Inc., a Delaware corporation and an indirect wholly owned subsidiary of NIBE (the Purchaser ) to sell the Company s Climate Control Business. Under the terms of the Stock Purchase Agreement, the Company, through Consolidated, agreed to sell to the Purchaser all of the outstanding shares of stock of the Climate Control Group for a total of approximately $364,000,000, subject to closing and post-closing adjustments (the Sale ). The closing of the Sale occurred on July 1, 2016. The terms of the Sale are described in greater detail in our Current Reports on Form 8-K filed with the SEC on May 13, 2016 and July 8, 2016, which are incorporated by reference into this prospectus, including the unaudited pro forma financial statements of the Company giving effect to the foregoing transactions. Corporate Information Our common stock is listed on the New York Stock Exchange under the ticker symbol LXU. Our principal executive offices are located at 16 South Pennsylvania, Oklahoma City, Oklahoma 73107, and our telephone number is (405) 235-4546. Our website address is www.lsbindustries.com. Neither our website nor any information contained on our website is part of this prospectus. Table of Contents THE OFFERING Common stock offered by the selling stockholder 4,069,324 shares of common stock held by the selling stockholder. Common stock outstanding 27,911,540 shares (1). Selling stockholder LSB Funding LLC. See Selling Stockholder for further discussion. Use of proceeds We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder in this offering. See Use of Proceeds. Dividend policy We have not paid cash dividends on our outstanding shares of common stock during the two most recent fiscal years but have paid cash dividends on our outstanding series of convertible preferred stock during this period. See discussion concerning dividends and restrictions in payment of dividends below under Dividend Policy.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/MEDP_medpace_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/MEDP_medpace_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/MEDP_medpace_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/MFON_mobivity_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/MFON_mobivity_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..e4ab604c40bbb3988012dc7f068794a91522951a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/MFON_mobivity_prospectus_summary.txt
@@ -0,0 +1 @@
+You should read this summary in conjunction with the more detailed information and financial statements appearing elsewhere in this prospectus. Our Company Mobivity Holdings Corp. (the Company or we ) is in the business of developing and operating proprietary platforms over which brands and enterprises can conduct national and localized, data-driven mobile marketing campaigns. Our proprietary platforms, consisting of software available to phones, tablets PCs, and Point of Sale (POS) systems, allow resellers, brands and enterprises to market their products and services to consumers through text messages sent directly to the consumers via mobile phones, mobile smartphone applications, and dynamically printed receipt content. We generate revenue by charging the resellers, brands and enterprises a per-message transactional fee, through fixed or variable software licensing fees, or via advertising fees. Our customers include national franchisers, professional sports teams and associations and other national brands such as the Subway, Sonic, Jamba Juice, Chick-Fil-A, Baskin-Robbins and others. Our executive offices are located at 55 N. Arizona Place, Suite 310, Chandler, Arizona 85225. Our phone number is (877) 282-7660. Our website address is www.mobivity.com. Information contained in, or accessible through, our website does not constitute part of this prospectus. The Offering This offering relates to the offer and sale of our common stock by the selling stockholders identified in this prospectus. The selling stockholders will offer and sell the shares of our common stock at prices related to the then-current market price or in negotiated transactions. Although we have agreed to pay the expenses related to the registration of the shares being offered, we will not receive any proceeds from the sale of the shares by the selling stockholders. Summary Financial Information The following summary financial data for the fiscal years ended December 31, 2015 and 2014 is derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary financial data as of and for the three months ended March 31, 2016 has been derived from our unaudited financial statements and the related notes thereto included elsewhere in this prospectus. This information is only a summary and does not provide all of the information contained in our financial statements and related notes. You should read Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 16 of this prospectus and our financial statements and related notes included elsewhere in this prospectus. Statement of Operations Data: Fiscal Year Ended December 31, 2014 2015 Three Months Ended March 31, 2016 (Unaudited) Net sales $ 4,000,202 $ 4,618,988 $ 1,845,240 Net loss $ 10,440,764 $ 6,133,046 $ 1,288,989 Balance Sheet Data: Fiscal Year Ended December 31, 2014 2015 March 31, 2016 (Unaudited) Total assets $ 5,368,510 $ 5,933,613 $ 8,577,416 Total liabilities $ 1,704,890 $ 1,059,446 2,034,748 Stockholders equity $ 3,663,620 $ 4,874,167 6,542,668 As filed with the Securities and Exchange Commission on July 15, 2016 Registration No. 333- 212148 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MOBIVITY HOLDINGS CORP. (Exact name of registrant as specified in its charter) Nevada 3669 26-3439095 (State or jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.) 55 N. Arizona Place, Suite 310 Chandler, Arizona 85225 (877) 282-7660 (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Dennis Becker 55 N. Arizona Place, Suite 310 Chandler, Arizona 85225 (877) 282-7660 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Daniel K. Donahue, Esq. Greenberg Traurig, LLP 3161 Michelson, Suite 1000 Irvine, CA 92612 (949) 732-6500 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/MRAM_everspin_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/MRAM_everspin_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/MRAM_everspin_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/MTNB_matinas_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/MTNB_matinas_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..5947dc104df9887982e830d941870e2dddd11d56
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/MTNB_matinas_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should read the entire prospectus carefully, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management s Discussion and Analysis of Financial Condition and Results of Operations." When used herein, unless the context requires otherwise, references to the "Company," "we," "our" and "us" refer to Matinas BioPharma Holdings, Inc., a Delaware corporation, collectively with its wholly-owned subsidiaries, Matinas BioPharma, Inc., a Delaware corporation, which we sometimes refer to herein as Matinas BioPharma, and Matinas BioPharma Nanotechnologies, Inc. (formerly, Aquarius Biotechnologies, Inc.), a Delaware corporation, which we sometimes refer to herein as Matinas Nanotechnologies. Our Company We are a clinical-stage biopharmaceutical company focused on identifying and developing safe and effective broad spectrum therapeutics for the treatment of serious and life-threatening infections. We are developing a pipeline of product and development candidates, with an initial focus on serious fungal and bacterial infections. On January 29, 2015, we completed the acquisition of Aquarius Biotechnologies Inc., whose name was subsequently changed to Matinas BioPharma Nanotechnologies, Inc. (referred to as the "2015 Merger" throughout this document), a New Jersey-based, early-stage pharmaceutical company focused on the development of differentiated and orally delivered therapeutics based on a proprietary, lipid crystal drug delivery platform called "cochleate delivery technology." Our proprietary cochleate delivery technology platform, licensed from Rutgers University on an exclusive worldwide basis, is designed specifically for the targeted and safe delivery of pharmaceuticals directly to the site of infection or inflammation. This innovative technology utilizes lipid-crystal nano-particle cochleates to nano-encapsulate existing drugs, which is designed to make them safer, more tolerable, less toxic and orally bioavailable. We believe this platform represents a significant innovation that may result in meaningful improvements to currently available therapies to treat numerous life-threatening diseases, including serious fungal infections and multi-drug resistant, or MDR, gram-negative bacterial infections. Currently, we are focused on the anti-infectives market and on drug candidates which we believe demonstrate the value and innovation associated with our unique delivery platform technology. We believe initially focusing on the anti-infectives market has distinct advantages for the development of products which meet significant unmet medical need, including: a current regulatory environment which provides small development and clinical stage companies incentives and opportunities to reduce development cost and timeline to market for anti-infective drug candidates; traditional high correlation between efficacy and safety data in preclinical animal models and the outcome of human clinical trials with these product candidates; attractive commercial opportunities for a product differentiated in its safety profile, mode of action and oral bioavailability positioned against current therapies with significant side effects, limited efficacy and intravenous delivery resulting in lack of convenience, compliance and at a significant burden to the cost of healthcare; and an ability to commercialize anti-infective products with a focused and cost-efficient sales and marketing organization We currently have two clinical-stage products designed for the treatment of infectious disease. Our lead product candidate is MAT 2203, a novel oral formulation of a broad spectrum anti-fungal drug called amphotericin B which uses our cochleate delivery technology. We are initially developing MAT2203 for the treatment of Candida infections and for the prevention of invasive fungal infections (IFIs) due to immunosuppressive therapy. A Phase 1a study has been completed and demonstrated that MAT2203 was generally well tolerated at all dosage levels with no serious adverse events reports and no laboratory or renal function abnormalities observed. We are currently screening and enrolling patient in a Phase 2a study of MAT2203 in collaboration with the National Institute of Allergy and Infectious Diseases, or NIAID, of the National Institutes of Health, or NIH. In the third quarter of 2016, the NIH commenced dosing patients in this Phase 2a study and, assuming the NIH meets the anticipated clinical timelines, we anticipate announcing results of this study during the first half of 2017. In addition to the Phase 2a study being conducted by the NIH, we will commence a second Phase 2 study in patients with vulvovaginal candidiasis during the fourth quarter of 2016, with results anticipated late in the first half of 2017. The U.S. Food and Drug Administration, or FDA, has granted MAT2203 designations for Qualified Infectious Disease Product, or QIDP, and Fast Track for the treatment of invasive candidiasis and invasive aspergillosis and for prophylactic treatment of invasive fungal infections due to immunosuppressive therapy. The QIDP designation, provided under the Generating Antibiotic Incentives Now Act, or the GAIN Act, offers certain incentives for the development of new antibacterial or antifungal drugs, including eligibility for Fast Track Designation, priority review and, if approved by the FDA, eligibility for an additional five years of marketing exclusivity. Fast Track designation enables more frequent interactions with the FDA to expedite drug development and review. Neither Fast Track designation nor QIDP designation change the standards for approval and we can provide no assurances that we can maintain QIDP or Fast Track designations for MAT2203 or that such designations will result in faster regulatory review. MAT2203 has also received designation from FDA as an Orphan Drug for the treatment of leishmaniasis and we expect to file for additional Orphan Drug designations for MAT2203. The orphan drug designation provides eligibility for seven years of market exclusivity in the United States upon FDA approval, a waiver from payment of user fees, an exemption from performing clinical studies in pediatric patients and tax credits for the cost of clinical research, if we maintain orphan drug designation. The seven-year period of marketing exclusivity provided through orphan designation combined with an additional 5 years of marketing exclusivity by the QIDP designations would position MAT2203 for eligibility of a total of 12 years of marketing exclusivity to potentially be granted at the time of FDA approval. Our second clinical stage product candidate is MAT2501, an orally administered, encochleated formulation of the broad spectrum aminoglycoside antibiotic amikacin which may be used to treat different types of multidrug-resistant bacteria, including non-tubercular mycobacterial infections (NTM), as well as various multidrug-resistant gram negative and intracellular bacterial infections. Currently, amikacin cannot be absorbed enterally and must be given by intravenous, intramuscular or nebulization routes with the significant risk of nephrotoxicity and ototoxicity, which makes it an impractical choice when treating serious infections which often require long courses of therapy, often 12 to 18 months or longer. MAT2501, taking advantage of its innovative, nano-encapsulation delivery technology, is being developed to be orally administered, and is designed to be a safer and targeted therapy for improved treatment of these serious and life-threatening bacterial infections in patients, including those who are severely immunocompromised. We are initially developing MAT2501 for the treatment of NTM. NTM causes many serious and life-threatening diseases, including pulmonary disease, skin and soft tissue disease, joint infections and, in immunocompromised individuals, disseminated infection. The most common clinical manifestation of NTM disease is pulmonary, or lung, disease. NTM lung infection occurs when a person inhales the organism from their environment. There are about 50,000 to 90,000 people with NTM pulmonary disease in the United States, with a much higher prevalence in older adults, and these numbers appear to be increasing. However, NTM can affect any age group. Without treatment, the progressive lung infection caused by NTM results in severe cough, fatigue, and often weight loss. In some people NTM infections can become chronic and require ongoing treatment. Treatment may be difficult because NTM bacteria may be resistant to many common types of antibiotics. Severe NTM lung disease can have a significant impact on quality of life and can be life-threatening. We are also exploring the development of MAT2501 for the treatment of a variety of serious and acute bacterial infections, including the treatment of gram negative bacterial infections, currently the most significant unmet medical need identified by infectious disease specialists. We recently filed an Investigational New Drug (IND) application with FDA and were clear to commence Phase 1 clinical studies in January 2016. We plan to initiate the first Phase 1 study of MAT2501 during the fourth quarter of 2016. The U.S. FDA has already granted MAT2501 designations for Orphan Drug and QIDP for the treatment of non-tuberculous mycobacteria. If we maintain orphan drug and QIDP designations, the seven-year period of marketing exclusivity provided through orphan designation combined with an additional 5 years of marketing exclusivity by the QIDP designations positions MAT2501 to be eligible for total of 12 years of marketing exclusivity which may be granted at the time of FDA approval. You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with information different from or in addition to that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. Additional risks and uncertainties not presently known or that are currently deemed immaterial may also impair our business operations. The risks and uncertainties described in this document and other risks and uncertainties which we may face in the future will have a greater impact on those who purchase our common stock. These purchasers will purchase our common stock at the market price or at a privately negotiated price and will run the risk of losing their entire investments. For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. In this prospectus, we rely on and refer to information and statistics regarding our industry. We obtained this statistical, market and other industry data and forecasts from publicly available information. We are currently exploring strategic partnering options for our legacy cardiovascular drug, MAT9001, which has been developed and targeted to date for the treatment of very high triglycerides and MAT8800, our discovery program seeking to identify product candidates derived from omega-3 fatty acids for the treatment of non-alcoholic fatty liver disease. Recent Developments In July 2016, we conducted a closing for a private placement of our Series A Preferred Stock. Subsequently in August and September 2016, we conducted additional closings of the private placement. We sold an aggregate of 1,600,000 shares of our Series A Preferred Stock for an aggregate purchase price of $8.0 million. In connection with the private placement, we filed a Certificate of Designation (the "Certificate of Designations") with the Secretary of State of the State of Delaware to designate the preferences, rights and limitations of the Series A Preferred Stock. Pursuant to the Certificate of Designations, we designated 1,600,000 shares of our previously undesignated preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock are convertible into 16,000,000 shares of our common stock based upon the current conversion price. Please see "Descripton of Capital Stock" for a description of the terms of the Series A Preferred Stock. Implications of Being an Emerging Growth Company We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, for as long as we continue to be an "emerging growth company," we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. Also, we have irrevocably elected to "opt out" of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Corporate Information We were incorporated in Delaware under the name Matinas BioPharma Holdings, Inc. in May 2013. We have two operating subsidiaries: Matinas BioPharma, Inc., a Delaware corporation, and Matinas BioPharma Nanotechnologies, Inc., a Delaware corporation. Nereus BioPharma LLC, a Delaware limited liability company (and Matinas BioPharma s predecessor) was formed on August 12, 2011. On February 29, 2012, Nereus BioPharma LLC converted from a limited liability company to a corporation and changed its name to Matinas BioPharma, Inc. In July 2013, Matinas BioPharma, Inc. entered into entered into a merger agreement (the "2013 Merger Agreement") with Matinas Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary, or Merger Sub. Pursuant to the terms of the 2013 Merger Agreement, as a condition of and contemporaneously with the initial closing of the 2013 Private Placement, Merger Sub merged (the "2013 Merger") with and into Matinas BioPharma and Matinas BioPharma became a wholly owned subsidiary of ours. After consummation of the Merger transaction, the management of Matinas BioPharma became the management of Holdings and the board representatives consisted of four former Board members of Matinas BioPharma and Mr. Adam Stern as the Aegis Capital Corp. nominee. Because Holdings was formed solely to effect the 2013 Merger and the 2013 Private Placement, with no operations, and assets consisting solely of cash and cash equivalents, we accounted for the 2013 Merger as a reverse acquisition. The legal acquirer Matinas BioPharma becomes the successor entity, and its historical results became the historical results for Holdings (the legal acquirer and the registrant). On January 29, 2015, we acquired Aquarius Biotechnologies Inc., whose name was subsequently changed to Matinas BioPharma Nanotechnologies, Inc. Our principal offices are located at 1545 Route 206 South, Suite 302, Bedminster, New Jersey 07921. Our web address is www.matinasbiopharma.com. Information contained in or accessible through our web site is not, and should not be deemed to be, part of this prospectus. You should not rely on our website or any such information in making your decision whether to purchase our common stock. We currently do not own or license any U.S. federal trademark registrations or applications. Some trademarks referred to in this prospectus are referred to without the and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. THE OFFERING Common Stock Outstanding 57,593,414 shares(1) Shares of Common Stock underlying Warrants, Offered by Selling Stockholders 10,382,500 shares(2) Use of Proceeds We will not receive any proceeds from the sale of the common stock by the selling stockholders. We would, however, receive proceeds upon the exercise of the warrants held by the selling stockholders which, if such warrants are exercised in full, would be approximately $20,765,000. Proceeds, if any, received from the exercise of such warrants will be used for working capital and general corporate purposes. No assurances can be given that any of such warrants will be exercised. Quotation of Common Stock: Our common stock is listed for quotation on the OTCQB Market operated by OTC Markets Group, Inc. (or OTCQB) under the ticker symbol "MTNB." Risk Factors An investment in our company is highly speculative and involves a significant degree of risk. See "Risk Factors" and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. (1)Excludes: (i) outstanding options to purchase up to 8,320,694 shares of our common stock, as of September 30, 2016, at a weighted average exercise price of $0.85 per share; (ii) up to 2,523,519 shares of our common stock that are available, as of September 30, 2016, for future issuance under our 2013 Equity Compensation Plan (the "2013 Plan"); (iii) up to 3,000,000 shares of our common stock issuable pursuant to the terms of the merger agreement with Matinas Nanotechnologies, (iv) outstanding warrants to purchase up to 40,517,500 shares of common stock as of September 30, 2016, at a weighted average exercise price of $ 1.16 per share, and (v) 16,000,000 shares of common stock issuable upon conversion of shares of our outstanding Series A Preferred Stock as of September 30, 2016. (2)The Warrants have an exercise price of $2.00 per share. RISK FACTORS An investment in our common stock is speculative and involves a high degree of risk, including a risk of loss of your entire investment. You should carefully consider the risks described below and the other information in this prospectus before purchasing shares of our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties may also adversely impair our business operations. If any of the events described in the risk factors below actually occur, our business, financial condition or results of operations could suffer significantly. In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you pay for our common stock. Risks Related to Our Financial Position and Need for Additional Capital We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability. We have incurred significant operating losses in every year since inception and expect to incur net operating losses for the foreseeable future. Our net loss was $5.7 million and $7.1 million for the nine months ended September 30, 2016 and 2015, respectively and $9.1 million and $10.2 million for the years ended December 31, 2015 and 2014, respectively. As of September 30, 2016, we had an accumulated deficit of $33.3 million. We do not know whether or when we will become profitable. To date, we have not generated any revenues from product sales and have financed our operations primarily through private placements of our equity securities and, to a lesser extent, through funding from the National Institutes of Health, or the NIH. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and, beginning in 2014, clinical trials. We are still in the early stages of development of our product candidates, and we have not completed development of any product candidate. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders deficit and working capital. We anticipate that our expenses will increase substantially if and as we: conduct our planned Phase 2a clinical trial of MAT2203, our lead product candidate; initiate and continue the research and development of our other product candidates and potential product candidates, including MAT2501; seek to discover and develop additional product candidates; seek regulatory approvals for any product candidates that successfully complete clinical trials; establish a sales, marketing and distribution infrastructure in the future to commercialize any products for which we may obtain regulatory approval; require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization; maintain, expand and protect our intellectual property portfolio; hire additional clinical, quality control and scientific personnel; and add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public company. Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we are able to obtain marketing approval for, and successfully commercialize, one or more of our product candidates. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, manufacturing, marketing and selling any products for which we may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. We are only in the preliminary stages of most of these activities and have not yet commenced other of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or the FDA, or comparable non-U.S. regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment. Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern. Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern, and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2015 with respect to this uncertainty. This going concern opinion, and any future going concern opinion, could materially limit our ability to raise additional capital. We have incurred significant losses since our inception and have never been profitable, and it is possible we will never achieve profitability. To date, we have devoted our resources to developing MAT9001 and our lead anti-infective product candidates, MAT2203 and MAT2501 and other product candidates developed from our cochleate delivery technology platform, but none of these product candidates can be marketed until regulatory approval has been obtained. Meaningful revenues will likely not be available until, and unless, MAT2203 or any of our other product candidate is approved by the FDA or comparable regulatory agencies in other countries and successfully marketed, either by us or a partner. The perception that we may not be able to continue as a going concern may cause potential partners or investors to choose not to deal with us due to concerns about our ability to meet our contractual and financial obligations. We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct the Phase 2a clinical trial of MAT2203 and advance MAT2501 into clinical development, continue research and development, initiate clinical trials and, if development succeeds, seek regulatory approval of our product candidates. Our expenses could further increase if we initiate new research and preclinical development efforts for other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. We believe that our existing cash and cash equivalents of approximately $6.2 million as of September 30, 2016, will enable us to fund our operating expenses and capital expenditure requirements into April 2017. We have based this estimate on assumptions that may prove to be wrong in the future, and we could use our capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements, both short-term and long-term, will depend on many factors, including: the progress, timing, costs and results of our Phase 2a clinical trial of MAT2203; the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development efforts for, other product candidates, including MAT2501, and any future product candidates; our ability to enter into and the terms and timing of any collaborations, licensing or other arrangements that we may establish; the number and development requirements of other product candidates that we pursue; the costs, timing and outcome of regulatory review of our product candidates by the FDA and comparable non-U.S. regulatory authorities; the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure; the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; the extent to which we acquire or in-license other products and technologies; the costs of operating as a public company; and the effect of competing technological and market developments. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, government or other third party funding, collaborations and licensing arrangements. We do not have any committed external source of funds other than limited grant funding from the NIH. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be materially diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management s ability to oversee the development of our product candidates. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our stockholders may be subject to substantial dilution by exercises of outstanding options and warrants, conversion of our outstanding Series A Preferred Stock and by the future issuance of common stock to the former stockholders of Matinas Nanotechnologies pursuant to the terms of the merger agreement. As of September 30, 2016, we had outstanding options to purchase an aggregate of 8,320,694 shares of our common stock at a weighted average exercise price of $0.85 per share and outstanding warrants to purchase an aggregate of 40,517,500 shares of our common stock at a weighted average exercise price of $ 1.16 per share and outstanding shares of Series A Preferred Stock which are convertible into 16,000,000 shares of our common stock. The conversion of our Series A Preferred Stock and exercise of such outstanding options and warrants will result in dilution of the value of our shares. In addition, pursuant to the terms of the merger agreement with.Matinas Nanotechnologies, we will be required to issue up to an additional 3,000,000 shares of our common stock upon the achievement of certain milestones. The milestone consideration consists of (i) 1,500,000 shares issuable upon the dosing of the first patient in a phase III trial sponsored by us for a product utilizing the cochleate delivery technology and (ii) 1,500,000 shares issuable upon FDA approval of the first NDA submitted by us for a product utilizing the cochleate delivery technology. Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. We commenced active operations in 2013 and have a limited operating history. Our product candidates are in early stages of clinical development. We have not yet demonstrated our ability to successfully obtain regulatory approvals for any of our product candidates, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. Even if we obtain regulatory approval, we will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance. Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization Our research and development of product candidates is primarily focused on the identification of product candidates for the treatment of human fungal and bacterial infections. Our approach is unproven and we do not know whether we will be successful in our efforts to use our cochleate delivery platform to build a pipeline of product candidates or if we will be able to develop any products of commercial value. Our scientific approach to the development of anti-infective medicines focuses on using our proprietary technology to deliver therapies for the treatment of human fungal and bacterial infections. Any product candidates that we develop may not be effective and we may not be successful in using our cochleate delivery platform to build a pipeline of anti-infective medications and progress these product candidates through clinical development for the treatment of any medical conditions. Even if we are successful in continuing to build our pipeline, we may not be able to develop product candidates that are safe and effective. Our research programs may initially show promise in creating potential product candidates, yet fail to yield viable product candidates for further clinical development for a number of reasons, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. Our research programs to identify new product candidates will require substantial technical, financial and human resources. In addition, we may focus our efforts and resources on one or more potential product candidates that ultimately prove to be unsuccessful. If we are unable to identify suitable additional compounds for preclinical and clinical development, our ability to develop product candidates and obtain product revenues in future periods could be compromised, which could result in significant harm to our financial position and adversely impact our stock price. We cannot be certain that MAT2203, MAT2501 or any other product candidates that we may develop will receive regulatory approval, and without regulatory approval we will not be able to market any of our product candidates. Any delay in the regulatory review or approval of any of our product candidates will materially or adversely harm our business. We expect to invest most of our capital in the development of MAT2203, MAT2501 and other product candidates derived from our cochleate delivery platform technology. Our ability to generate revenue related to product sales, which we do not expect will occur for at least the next several years, if ever, will depend on the successful development and regulatory approval of one or more of our product candidates. All of our product candidates require regulatory review and approval prior to commercialization. Any delays in the regulatory review or approval of our product candidates would delay market launch, increase our cash requirements and result in additional operating losses. This failure to obtain regulatory approvals would prevent our product candidate from being marketed and would have a material and adverse effect on our business. The process of obtaining FDA and other required regulatory approvals, including foreign approvals, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. Furthermore, this approval process is extremely complex, expensive and uncertain. We may be unable to submit any new drug application, or an NDA, in the United States or any marketing approval application in foreign jurisdictions for any of our products. If we submit an NDA including any amended NDA or supplemental NDA, to the FDA seeking marketing approval for any of our product candidates, the FDA must decide whether to accept or reject the submission for filing. We cannot be certain that any of these submissions will be accepted for filing and reviewed by the FDA, or that the marketing approval application submissions to any other regulatory authorities will be accepted for filing and review by those authorities. We cannot be certain that we will be able to respond to any regulatory requests during the review period in a timely manner, or at all, without delaying potential regulatory action. We also cannot be certain that any of our product candidates will receive favorable recommendations from any FDA advisory committee or foreign regulatory bodies or be approved for marketing by the FDA or foreign regulatory authorities. In addition, delays in approvals or rejections of marketing applications may be based upon many factors, including regulatory requests for additional analyses, reports, data and studies, regulatory questions regarding data and results, changes in regulatory policy during the period of product development and the emergence of new information regarding such product candidates. Data obtained from preclinical studies and clinical trials are subject to different interpretations, which could delay, limit or prevent regulatory review or approval of any of our product candidates. Furthermore, regulatory attitudes towards the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, policy changes and agency funding, staffing and leadership. We do not know whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects. In addition, the environment in which our regulatory submissions may be reviewed changes over time. For example, average review times at the FDA for NDAs have fluctuated over the last ten years, and we cannot predict the review time for any of our submissions with any regulatory authorities. Review times can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes. Moreover, in light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of the U.S. Government Accountability Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of REMS measures that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or may result in approval for a more limited indication than originally sought. We depend on technology owned or licensed to us by third parties, and the loss of access to this technology would terminate or delay the further development of our product candidates, injure our reputation or force us to pay higher royalties. We rely completely on the cochleate delivery platform technology that we have licensed from Rutgers. The loss of our key technologies would seriously impair our business and future viability, and could result in delays in developing, introducing or maintaining our product candidates and formulations until equivalent technology, if available, is identified, licensed and integrated. In addition, any defects in the technology we license could prevent the implementation or impair the functionality of our product candidates or formulation, delay new product or formulation introductions or injure our reputation. If we are required to enter into license agreements with third parties for replacement technology, we could be subject to higher royalty payments. Clinical drug development involves a lengthy and expensive process with uncertain outcomes that may lead to delayed timelines and increased cost, and may prevent us from being able to complete clinical trials. Clinical testing is expensive, can take many years to complete, and its outcome is inherently uncertain. The results of preclinical and clinical studies of our product candidates may not be predictive of the results of later-stage clinical trials. For example, the positive results generated to date in Phase 1 clinical studies for MAT2203 do not ensure that either of our Phase 2 trials will demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. We cannot be certain that the Phase 2 clinical trials for MAT2203 will be completed on schedule, or that any other future clinical trials for MAT2203 or any of our other product candidates, will begin on time, not need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all, or that any interim analyses with respect to such trials will be completed on schedule or support continued clinical development of the associated product candidate. The Phase 2a clinical trial for MAT2203 is being conducted in cooperation with and funded by the NIH and as a result can be delayed by the NIH for many reasons, including changing priorities in the NIH or other factors outside our control. We could also encounter delays if a clinical trial is suspended or terminated by us upon recommendation of the data monitoring committee for such trial, by the IRBs of the institutions in which such trials are being conducted, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate revenue from the sale of any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval processes, and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may significantly harm our business, financial condition and prospects significantly. Delays in the commencement, enrollment and completion of our clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for MAT2203 and our other product candidates. Delays in the commencement, enrollment and completion of clinical trials could increase our product development costs or limit the regulatory approval of our product candidates. The commencement, enrollment and completion of clinical trials can be delayed for a variety of reasons, including: inability to force the NIH to commence or complete planned clinical studies, despite the existence of contractual agreements; inability to reach agreements on acceptable terms with prospective contract research organizations (CROs) and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; inability to maintain necessary supplies of study drug and comparator to maintain predicted enrollment rates at clinical trial sites; regulatory objections to commencing a clinical trial; inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication as our product candidates; withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials; inability to obtain institutional review board approval, including that within the NIH, to conduct a clinical trial; difficulty recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including meeting the enrollment criteria for our study and competition from other clinical trial programs for the same indication as our product candidates; inability to retain subjects in clinical trials due to the treatment protocol, personal issues, side effects from the therapy or lack of efficacy; and difficulty in importing and exporting clinical trial materials and study samples. We may not have or be able to obtain sufficient quantities of our products to meet our supply and clinical studies obligations and our business, financial condition and results of operation may be adversely affected. To date, we have only developed limited in-house manufacturing capabilities for the cochleates needed for our MAT2203 and MAT2501 product candidates. If we do not develop a long term in-house manufacturing capability for the cochleates needed for our MAT2203 and MAT2501 product candidates sufficient to produce product for continued development and, if regulatory approval is obtained, then commercialization of these products, we will be dependent on a small number of third-party manufacturers for the manufacture of our product candidates. We may not have long-term agreements with any of these third parties, and if they are unable or unwilling to perform for any reason, we may not be able to locate alternative acceptable manufacturers or formulators or enter into favorable agreements with them. Any inability to acquire sufficient quantities of our products in a timely manner from these third parties could delay clinical trials and prevent us from developing our products in a cost-effective manner or on a timely basis. In addition, manufacturers of our product candidates are subject to cGMP and similar foreign standards and we would not have control over compliance with these regulations by our manufacturers. If one of our contract manufacturers fails to maintain compliance, the production of our products could be interrupted, resulting in delays and additional costs. In addition, if the facilities of such manufacturers do not pass a pre-approval or post-approval plant inspection, the FDA will not grant approval and may institute restrictions on the marketing or sale of our products. We may be reliant on third party manufactures and suppliers to meet the demands of our clinical supplies. Delays in receipt of materials, scheduling, release, custom s control, and regulatory compliance issues may adversely impact our ability to initiate, maintain, or complete clinical trials that we are sponsoring. Commercial manufacturing and supply agreements have not been established. Issues arising from scale-up, environmental controls, equipment requirements, or other factors, may have an adverse impact on our ability to manufacture our product candidates. Even if we obtain regulatory approval for our product candidates, if we are unable to successfully commercialize our products, it will limit our ability to generate revenue and will materially adversely affect our business, financial condition and results of operations. Even if we obtain regulatory approval for our product candidates, our long-term viability and growth depend on the successful commercialization of products which lead to revenue and profits. Pharmaceutical product development is an expensive, high risk, lengthy, complicated, resource intensive process. In order to succeed, among other things, we must be able to: identify potential drug product candidates; design and conduct appropriate laboratory, preclinical and other research; submit for and receive regulatory approval to perform clinical studies; design and conduct appropriate preclinical and clinical studies according to good laboratory and good clinical practices; select and recruit clinical investigators; select and recruit subjects for our studies; collect, analyze and correctly interpret the data from our studies; submit for and receive regulatory approvals for marketing; and manufacture the drug product candidates according to cGMP. The development program with respect to any given product will take many years and thus delay our ability to generate profits. In addition, potential products that appear promising at early stages of development may fail for a number of reasons, including the possibility that the products may require significant additional testing or turn out to be unsafe, ineffective, too difficult or expensive to develop or manufacture, too difficult to administer, or unstable. Failure to successfully commercialize our products will adversely affect our business, financial condition and results of operations. If our preclinical and clinical studies do not produce positive results, if our clinical trials are delayed or if serious side effects are identified during such studies or trials, we may experience delays, incur additional costs and ultimately be unable to commercialize our product candidates. Before obtaining regulatory approval for the sale of our product candidates, we must conduct, generally at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals, and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, difficult to design and implement and can take many years to complete. A failure of one or more of our preclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to obtain regulatory approval or commercialize our product candidates, including: our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or we may abandon projects that we expect to be promising; regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site; conditions imposed on us by the FDA or any non-U.S. regulatory authority regarding the scope or design of our clinical trials may require us to resubmit our clinical trial protocols to institutional review boards for re-inspection due to changes in the regulatory environment; the number of patients required for our clinical trials may be larger than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate; our third party contractors or clinical investigators may fail to comply with regulatory requirements or fail to meet their contractual obligations to us in a timely manner; we might have to suspend or terminate one or more of our clinical trials if we, the regulators or the institutional review boards determine that the participants are being exposed to unacceptable health risks; regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; the cost of our clinical trials may be greater than we anticipate; the supply or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate or we may not be able to reach agreements on acceptable terms with prospective clinical research organizations; and the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics. In addition, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may: be delayed in obtaining, or may not be able to obtain, marketing approval for one or more of our product candidates; obtain approval for indications that are not as broad as intended or entirely different than those indications for which we sought approval; or have the product removed from the market after obtaining marketing approval. Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will be initiated as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates. Such delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates. If we cannot enroll enough patients to complete our clinical trials, such failure may adversely affect our business, financial condition and results of operations. The completion rate of clinical studies of our products is dependent on, among other factors, the patient enrollment rate. Patient enrollment is a function of many factors, including: investigator identification and recruitment; regulatory approvals to initiate study sites; patient population size; the nature of the protocol to be used in the trial; patient proximity to clinical sites; eligibility criteria for the study; competition from other companies clinical studies for the same patient population; and ability to obtain comparator drug/device. We believe our procedures for enrolling patients have been appropriate; however, delays in patient enrollment would increase costs and delay ultimate commercialization and sales, if any, of our products. Such delays could materially adversely affect our business, financial condition and results of operations. If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired. A key element of our strategy is to leverage our cochleate drug delivery technology platform to discover, develop and commercialize a portfolio of product candidates. We are seeking to do so through our internal research programs and are exploring, and may also explore in the future, strategic partnerships for the development of new products. Other than MAT2203 and MAT2501, all of our other potential cochleate-related product candidates remain in the discovery and preclinical stages. Research programs to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following: the research methodology used may not be successful in identifying potential product candidates; we may be unable to identify viable product candidates in our screening campaigns; competitors may develop alternatives that render our product candidates obsolete; product candidates we develop may nevertheless be covered by third parties patents or other exclusive rights; a product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors; and the development of bacterial resistance to potential product candidates may render them ineffective against target infections. If we are unsuccessful in identifying and developing additional product candidates, our potential for growth may be impaired. Even if we receive regulatory approval for MAT2203, MAT2501 or any other product candidates we may develop, we still may not be able to successfully commercialize it and the revenue that we generate from its sales, if any, may be limited. If approved for marketing, the commercial success of MAT2203, MAT2501 or any other product candidates we may develop will depend upon its acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance of MAT2203, MAT2501 or such other product candidate will depend on a number of factors, including: demonstration of clinical safety and efficacy of such product candidate; relative convenience and ease of administration; the prevalence and severity of any adverse effects; the willingness of physicians to prescribe such product candidates and of the target patient population to try new therapies; pricing and cost-effectiveness; the inclusion or omission of such product candidate in applicable treatment guidelines; the effectiveness of our or any future collaborators sales and marketing strategies; limitations or warnings contained in FDA-approved labeling; our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors; and the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement. If MAT2203, MAT2501, or any other product candidates we may develop is approved, but does not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of such product candidate may require significant resources and may never be successful. In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize such product candidate successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render such product candidate not commercially viable. For example, regulatory authorities may approve such product candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for such product candidate, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve such product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Further, the FDA may place conditions on approvals including potential requirements or risk management plans and the requirement for a Risk Evaluation and Mitigation Strategy ("REMS") to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of such product candidate. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of such product candidate. We currently have no sales and marketing organization. If we are unable to establish satisfactory sales and marketing capabilities, we may not successfully commercialize any of our product candidates, if regulatory approval is obtained. At present, we have no sales or marketing personnel. In order to commercialize products that are approved for commercial sales, we must either develop a sales and marketing infrastructure or collaborate with third parties that have such commercial infrastructure. If we elect to develop our own sales and marketing organization, we do not intend to begin to hire sales and marketing personnel until the time of NDA submission to the FDA at the earliest, and we do not intend to establish our own sales organization in the United States until shortly prior to FDA approval of MAT2203, MAT2501 or any of our other product candidates. We may not be able to establish a direct sales force in a cost-effective manner or realize a positive return on this investment. In addition, we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize MAT2203, MAT2501 or any of our other product candidates in the United States without strategic partners or licensees include: our inability to recruit and retain adequate numbers of effective sales and marketing personnel; the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our future products; the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and unforeseen costs and expenses associated with creating an independent sales and marketing organization. If we are not successful in recruiting sales and marketing personnel or in building a sales and marketing infrastructure, or if we do not successfully enter into appropriate collaboration arrangements, we will have difficulty successfully commercializing MAT2203, MAT2501 or any other product candidates we may develop, which would adversely affect our business, operating results and financial condition. Outside the United States, we may commercialize our product candidates by entering into collaboration agreements with pharmaceutical partners. We may not be able to enter into such agreements on terms acceptable to us or at all. In addition, even if we enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively. The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make MAT2203, MAT2501 or any other product candidates we may develop obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to MAT2203, MAT2501 or any of our other product candidates. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions. We face competition with respect to our current product candidates and we will face competition with respect to any product candidates that we may seek to develop or commercialize in the future. Our current and potential competitors in the anti-fungal marketplace for which we are developing MAT2203 include Merck & Co. Inc., Astellas Pharma US, Pfizer, Inc., Novartis AG, Viamet Inc., Cidara Therapeutics, Scynexis Inc. and Sigma Tau. With respect to competition for MAT2501 in the anti-bacterial marketplace, our current and potential competitors include Insmed Incorporated, Merck & Co., Tetraphase Pharmaceuticals, Inc., Achaogen, Inc., Raptor Pharmaceuticals and The Medicines Company. Even if we obtain marketing approval for MAT2203, MAT2501 or any other product candidates that we may develop, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our future products. Even if we obtain United States regulatory approval of MAT2203, MAT2501 or any other product candidates that we may develop, the FDA may still impose significant restrictions on its indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, and post-market surveillance to monitor safety and efficacy. Our future products will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current Good Clinical Practices regulations, or cGCPs, for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continuous review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents. The FDA has the authority to require a REMS, as part of an NDA or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria or requiring patient testing, monitoring and/or enrollment in a registry. With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries. In addition, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions, including revocation of its marketing approval. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions: restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; issuance of warning letters or untitled letters; clinical holds; injunctions or the imposition of civil or criminal penalties or monetary fines; suspension or withdrawal of regulatory approval; suspension of any ongoing clinical trials; refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or product seizure or detention or refusal to permit the import or export of product. The occurrence of any event or penalty described above may inhibit our ability to commercialize MAT2203 or any of our other product candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure. Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any of our future products. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidate1, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. In the United States, the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a reimbursement methodology based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for MAT2203, MAT2501 or any other product candidates that we may develop and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 or, collectively, the Health Care Reform Law, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Effective October 1, 2010, the Health Care Reform Law revised the definition of "average manufacturer price" for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposed a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial provisions affecting compliance have also been enacted, which may require us to modify our business practices with healthcare practitioners, and incur substantial costs to ensure compliance. Although it is too early to determine the effect of the Affordable Care Act, the new law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties. Our future profitability will depend, in part, on our ability to commercialize our product candidates in foreign markets for which we intend to rely on collaborations with third parties. If we commercialize MAT 2203, MAT2501 or any other product candidates that we may develop in foreign markets, we would be subject to additional risks and uncertainties, including: our customers ability to obtain reimbursement for our product candidates in foreign markets; our inability to directly control commercial activities because we are relying on third parties; the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; different medical practices and customs in foreign countries affecting acceptance in the marketplace; import or export licensing requirements; longer accounts receivable collection times; longer lead times for shipping; language barriers for technical training; reduced protection of intellectual property rights in some foreign countries; foreign currency exchange rate fluctuations; and the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute. Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations. If we market our product candidates in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject to civil or criminal penalties. The FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved prescribing information. While physicians may prescribe an approved product for a so-called "off label" use, it is unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company which engages in such conduct can subject that company to significant liability. Similarly, industry codes in the EU and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws. The U.S. Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. Anti-Kickback Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. False Claims Act. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid. Over the past few years, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. Most states also have statutes or regulations similar to the U.S. Anti-Kickback Statute and the U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include substantial civil monetary penalties, exclusion of a manufacturer s products from reimbursement under government programs, substantial criminal fines and imprisonment. We have been and expect to be significantly dependent on our collaborative agreements for the development of our product candidates, which exposes us to the risk of reliance on the performance of third parties. In conducting our research and development activities, we currently rely, and expect to continue to rely, on collaborative agreements with third parties such as manufacturers, contract research organizations, commercial partners, universities, governmental agencies and not-for-profit organizations for both strategic and financial resources. Key among these agreements is our collaboration agreements with the NIH for the development of MAT2203 and MAT2501. The loss of, or failure to perform by us or our partners under any applicable agreements or arrangements, or our failure to secure additional agreements for our product candidates, would substantially disrupt or delay our research and development activities, including our in-process and anticipated clinical trials. Any such loss would likely increase our expenses and materially harm our business, financial condition and results of operation. We expect that we will rely on third parties to conduct clinical trials for our product candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize MAT2203, MAT2501 or any other product candidates that we may develop and our business could be substantially harmed. We expect to enter into agreements with third-party CROs, or governmental entities like the NIH, to conduct and manage our clinical programs. We rely heavily on these parties for execution of clinical studies for MAT2203, MAT2501 and our other product candidates and can control only certain and very limited aspects of their activities. Nevertheless, we would be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the NIH or CROs would not relieve us of our regulatory responsibilities. We, the NIH and our CROs would be required to comply with cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA enforces these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or the NIH or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. Our failure or the failure of the NIH or our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties. As a result, many important aspects of our drug development programs would be outside of our direct control. In addition, the NIH or the CROs may not perform all of their obligations under their arrangements with us or in compliance with regulatory requirements. If NIH or the CROs do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of MAT2203, MAT2501 or any other product candidates that we may develop may be delayed or our development program may be materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs would devote to our program or our product candidates. If we are unable to rely on the clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials, which could significantly delay commercialization and require significantly greater expenditures. If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. As a result of the foregoing, our financial results and the commercial prospects for MAT2203, MAT2501 and our other product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed. Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of MAT2203, MAT2501 or any other product candidates that we may develop. If there is not sufficient reimbursement for our future products, it is less likely that such products will be widely used. Market acceptance and sales of MAT2203, MAT2501 or any other product candidates for which we obtain regulatory approval will depend on reimbursement policies and may be affected by future healthcare reform measures in both the United States and foreign jurisdictions. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they will cover and establish payment levels. In addition, government authorities and these third-party payors are increasingly attempting to contain health care costs by demanding price discounts or rebates and limiting both the types and variety of products that they will cover and the amounts that they will pay for these products. In addition, we might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future products to such payors satisfaction. Such studies might require us to commit a significant amount of management time and financial and other resources. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare or Medicaid data used to calculate these rates. Net prices for products may be reduced by mandatory discounts or rebates required by government health care programs. Such legislation, or similar regulatory changes or relaxation of laws that restrict imports of products from other countries, could reduce the net price we receive for any future marketed products. As a result, our future products might not ultimately be considered cost-effective. We cannot be certain that reimbursement will be available for MAT2203, MAT2501 or any other product candidates that we develop. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, any future products. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize MAT2203, MAT2501 or any other product candidates that we develop. Unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives could harm our business. There is increasing pressure on biotechnology companies to reduce healthcare costs. In the U.S., these pressures come from a variety of sources, such as managed care groups, institutional, and government purchasers. Increased purchasing power of entities that negotiate on behalf of federal healthcare programs and private sector beneficiaries could increase pricing pressures in the future. Such pressures may also increase the risk of litigation or investigation by the government regarding pricing calculations. The biotechnology industry will likely face greater regulation and political and legal action in the future. The regulations that govern marketing approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain regulatory approval. Adverse pricing limitations prior to approval will also adversely affect us by reducing our commercial potential. Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these products and related treatments becomes available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with products administered under the supervision of a physician. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop. There may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or regulatory authorities in other countries. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payors for new products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. Risks Relating to Our Intellectual Property Rights and Regulatory Exclusivity We depend on certain technologies that are licensed to us. We do not control these technologies and any loss of our rights to them could prevent us from discovering, developing and commercializing our product candidates. We are highly dependent on our cochleate delivery technology platform which is licensed to us by Rutgers. We do not own the patents that underlie this technology. Our rights to use the technology we license are subject to the negotiation of, continuation of and compliance with the terms of our license agreement with Rutgers. Pursuant to the terms of our license agreement with Rutgers, we control the prosecution, maintenance, or filing of the patents to which we hold licenses, as well as the enforcement of these patents against third parties. However, some of our patents and patent applications were either acquired from another company who acquired those patents and patent applications from yet another company, or are licensed from a third party. Thus, these patents and patent applications were not written by us or our attorneys, and we did not have control over the drafting and prosecution of certain of these patents. The former patent owners and our licensors might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting and prosecution. We cannot be certain that drafting and/or prosecution of the licensed patents and patent applications by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. Our rights to use the technology we license are subject to the validity of the owner s intellectual property rights. Enforcement of our licensed patents or defense or any claims asserting the invalidity of these patents is often subject to the control or cooperation of our licensors. Legal action could be initiated against the owners of the intellectual property that we license and an adverse outcome in such legal action could harm our business because it might prevent such companies or institutions from continuing to license intellectual property that we may need to operate our business. In addition, such licensors may resolve such litigation in a way that benefits them but adversely affects our ability to use the licensed technology for our products. Certain of our licenses contained in our agreement with Rutgers contain provisions that allow the licensor to terminate the license if (i) we breach any payment obligation or other material provision under the agreement and fail to cure the breach within a fixed time following written notice of termination, (ii) we or any of our affiliates, licensees or sublicensees directly or indirectly challenge the validity, enforceability, or extension of any of the licensed patents or (iii) we declare bankruptcy or dissolve. Our rights under the licenses are subject to our continued compliance with the terms of the license, including the payment of royalties due under the license. Termination of these licenses would prevent us from discovering, developing and commercializing product candidates based on the cochleate delivery technology, including our lead anti-infective product candidate, MAT2203. Determining the scope of the license and related royalty obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from discovering, developing and commercializing product candidates based on the cochleate delivery technology, including our lead anti-infective product candidate. If we discontinue development of the cochleate delivery technology, we would be required to return such technology to the former stockholders of Matinas Nanotechnologies and we would lose the rights to our lead product candidates. Under certain circumstances, we will be required to transfer Nanotechnologies cochleate delivery technology back to the former shareholders of Matinas Nanotechnologies. This transfer would be required under the Merger Agreement in the event the following conditions are met: (i) no milestone events have occurred on or before the two-year anniversary of the effective time of the 2015 Merger (the "Transfer Date"), (ii) during such period we shall have discontinued efforts to develop or commercialize the cochleate delivery technology (as conclusively demonstrated by our omission of the cochleate delivery technology in at least two consecutive royalty, progress and payment reports delivered to Rutgers pursuant to the license agreement entered into between Matinas Nanotechnologies and Rutgers) and (iii) as of the Transfer Date, no unresolved indemnification claims for us and our indemnified parties are pending. If the foregoing conditions are met, we would transfer the cochleate delivery technology to the stockholder representative or to a newly formed entity as directed by the stockholder representative (in either case for the benefit of the former Matinas Nanotechnologies stockholders) following receipt of any necessary third party consents required for the transfer, which we shall use its commercially reasonable efforts to obtain. If we are required to transfer the cochleate delivery technology back to the former shareholders of Matinas Nanotechnologies, we would lose our rights to our lead product candidates, which would have a material and adverse effect on our business. It is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights. Our commercial success will depend, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third party competitors. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowable or enforceable in our patents (including patents owned and licensed by us). We currently own or have rights to eighteen issued patents relating to our cochleate delivery technology, as well as pending patent applications for our cochleate delivery technology that may never be approved by the United States or foreign patent offices. Furthermore, any patents which may eventually be issued from existing patent applications for any of our technologies, may be challenged, invalidated or circumvented by third parties and might not protect us against competitors with similar products or technologies. The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights, permit us to gain or keep our competitive advantage, or provide us with any competitive advantage at all. We cannot be certain that any patent application owned by a third party will not have priority over patent applications filed by us, or that we will not be involved in interference, opposition or invalidity proceedings before the United States or foreign patent offices. We also rely on trade secrets to protect technology, especially in cases where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While we require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our proprietary technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information owned by us may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts are sometimes less willing to protect trade secrets than patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. If we fail to obtain or maintain patent protection or trade secret protection for our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability. We may also develop trademarks to distinguish our products from the products of our competitors. We cannot guarantee that any trademark applications filed by us or our business partners will be approved. Third parties may also oppose such trademark applications, or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we will have adequate resources to enforce these trademarks. Our product candidates may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts. Our success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third party patent rights that may be relevant to our proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents that may be infringed by commercialization of MAT2203, MAT2501 or any future product candidate. There may be certain issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop or commercialize MAT2203 or MAT2501 and we do not know if such patents and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties against us would be time-consuming and may: result in costly litigation; divert the time and attention of our technical personnel and management; prevent us from commercializing a product until the asserted patent expires or is held finally invalid or not infringed in a court of law; require us to cease or modify our use of the technology and/or develop non-infringing technology; or require us to enter into royalty or licensing agreements. Although no third party has asserted a claim of infringement against us, others may hold proprietary rights that could prevent MAT2203 or MAT2501 from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to MAT2203 or MAT2501 or our processes could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or market our current product candidates or any future product candidates. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, we cannot be sure that we could redesign, MAT2203, MAT2501, or any future product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing MAT2203, MAT2501 or a future product candidate, which could harm our business, financial condition and operating results. We anticipate that competitors may from time to time oppose our efforts to obtain patent protection for new technologies or to submit patented technologies for regulatory approval. Competitors may seek to oppose our patent applications to delay the approval process or to challenge our granted patents, for example, by requesting a reexamination of our patent at the United States Patent and Trademark Office, or the USPTO, or by filing an opposition in a foreign patent office, even if the opposition or challenge has little or no merit. Such proceedings are generally highly technical, expensive and time consuming, and there can be no assurance that such a challenge would not result in the narrowing or complete revocation of any patent of ours that was so challenged. We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers. As is commonplace in our industry, we employ individuals who were previously employed at or retained by other pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject in the future to claims that our employees or prospective employees are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations) or claims that our employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. We may not be able to obtain or maintain orphan drug designation or exclusivity for our anti-infective product candidates. We have obtained orphan drug designation for MAT2501 for the treatment of nontuberculous mycobacteria and for MAT2203 for the treatment of leishmaniasis and will seek additional orphan drug designations for MAT2203 in the United States and other product candidates in the future. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same indication for that drug during that time period. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. We cannot assure you that the application for orphan drug designation of MAT2203, or any future application with respect to any other product candidate, will be granted. If we are unable to obtain orphan drug designation in the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Any fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify for priority review vouchers. We have received fast track designation for MAT2203 for the treatment of invasive candidiasis and the treatment of invasive aspergillosis and for prophylactic treatment of invasive fungal infections due to immunosuppressive therapy. We may seek fast track designation for some of our other product candidates or priority review of applications for approval of our product candidates for certain indications. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for priority review. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant them. Even if we do receive fast track designation or priority review, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. Any breakthrough therapy designation granted by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval. We may seek a breakthrough therapy designation for some of our product candidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs and biologics that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA may also be eligible for accelerated approval if the relevant criteria are met. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Designation of our product candidates as qualified infectious disease products is not assured and, in any event, even if granted, may not actually lead to a faster development or regulatory review, and would not assure FDA approval of our product candidates. We may be eligible for designation of certain of our product candidates as qualified infectious disease products, or QIDPs. A QIDP is "an antibacterial or antifungal drug intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens or certain "qualifying pathogens." A product designated as a QIDP will be granted priority review by the FDA and may qualify for "fast track" status. Upon the approval of an NDA for a drug product designated by the FDA as a QIDP, the product is granted a period of five years of regulatory exclusivity in addition to any other period of regulatory exclusivity for which the product is eligible. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for such designation or status, the FDA could decide not to grant it. Moreover, even if we do receive such a designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures and there is no assurance that our product candidate, even if determined to be a QIDP, will be approved by the FDA. General Company-Related Risks We will need to increase the size of our organization to grow our business, and we may experience difficulties in managing this growth. We currently have only ten employees. As our development and commercialization plans and strategies develop, we will need to expand the size of our employee base for managerial, development, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize our product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees would adversely impact our business prospects. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees, including Roelof Rongen, our President and CEO, or Jerome D. Jabbour, our President, or Raphael J. Mannino, our Chief Scientific Officer, would adversely impact our business prospects. Our ability to compete in the highly competitive pharmaceutical industry depends in large part upon our ability to attract highly qualified managerial, scientific and medical personnel. In order to induce valuable employees to remain with us, we intend to provide employees with stock options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in our stock price that we will not be able to control and may at any time be insufficient to counteract more lucrative offers from other companies. Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates would be limited. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates. We face a potential risk of product liability as a result of the clinical testing of MAT2203, MAT2501 or any future product candidates and will face an even greater risk if we commercialize MAT2203, MAT2501 or any other future product. For example, we may be sued if any product we develop or any material that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of MAT2203 or MAT2501. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in: decreased demand for MAT2203, MAT2501 or any future products that we may develop; injury to our reputation; withdrawal of clinical trial participants; costs to defend the related litigation; a diversion of management s time and our resources; substantial monetary awards to trial participants or patients; product recalls, withdrawals or labeling, marketing or promotional restrictions; loss of revenue; the inability to commercialize our product candidates; and a decline in our stock price. Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We have obtained product liability insurance covering our clinical trials in the amount of greater than or equal to $5 million in the aggregate. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs. Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage or disruption from computer viruses, software bugs, unauthorized access, natural disasters, terrorism, war, and telecommunication, equipment and electrical failures. While we have not, to our knowledge, experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure or theft of confidential or proprietary information, we could incur liability, the further development of our product candidates could be delayed, our competitive position could be compromised, or our business reputation could be harmed. We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions. We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction. Risks related to our securities Pursuant to the terms of our outstanding Series A Preferred Stock, we may be obligated to pay significant royalties. Pursuant to the terms of the Certificate of Designations for our outstanding Series A Preferred Stock, we may be required to pay royalties of up to $35 million per year. If and when we obtain FDA or EMA approval of MAT2203 and/or MAT2501, which we do not expect to occur before 2020, if ever, and/or if we generate sales of such products, or we receive any proceeds from the licensing or other disposition of MAT2203 or MAT2501, we are required pay to the holders of our Series A Preferred Stock, subject to certain vesting requirements, in aggregate, a royalty equal to (i) 4.5% of Net Sales (as defined in the Certificate of Designation), subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Certificate of Designations), subject in all cases to a cap of $10 million per calendar year. The Royalty Payment Rights will expire when the patents covering the applicable product expire, which is currently expected to be in 2033. We are obligated to pay dividends on outstanding shares of our Series A Preferred Stock. Holders of Series A Preferred Stock are entitled to receive cumulative dividends at the rate per share of 8% per annum, payable in shares of our common stock, which annual dividend will accumulate until such time as the shares of Series A Preferred Stock are converted, at which time the accumulated dividend will be satisfied by delivery of shares of common stock at a price per share of common stock equal to the conversion price of the Series A Preferred Stock then in effect. The Series A Preferred Stock will automatically convert on July 29, 2019, unless such shares are converted earlier in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock. The payment of such dividends will result in additional dilution to our holders of our common stock. Our Series A Preferred Stock has certain preference rights upon any liquidation, dissolution or winding up. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred Stock will be entitled to (i) first receive distributions out of our assets in an amount per share equal to $5.00, or the stated value, plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock and (ii) second, on an as-converted basis alongside the common stock. We do not intend to pay dividends on our common stock in the foreseeable future. The Board of Directors will determine, in its sole discretion, our dividend policy after considering our financial condition, results of operations and capital requirements, as well as other factors. No dividends may be declared or paid on our common stock, unless a dividend, payable in the same consideration or manner, is simultaneously declared or paid, as the case may be, on the shares of Series A Preferred Stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future and you should not invest in us with the anticipation of receiving dividend income. There has been a limited trading market for our common stock and there has been limited market activity to date. Currently, our common stock is available for quotation on the OTCQB under the symbol "MTNB" and there has been limited market activity to date. It is anticipated that there may continue to be a limited trading market for our common stock on the OTCQB. A lack of an active market may impair your ability to sell shares of our common stock at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using our common stock as consideration. Our share price has been and could remain volatile. The market price of our common stock has historically experienced and may continue to experience significant volatility. From January 1, 2015 through November 15, 2016, the market price of our common stock has fluctuated from a high of $2.01 per share to a low of $0.31 per share. Our progress in developing our product candidates, the impact of government regulations on our products and industry, the potential sale of a large volume of our common stock by stockholders, our quarterly operating results, changes in general conditions in the economy or the financial markets and other developments affecting us or our competitors could cause the market price of our common stock to fluctuate substantially with significant market losses. If our stockholders sell a substantial number of shares of common stock, especially if those sales are made during a short period of time, those sales could adversely affect the market price of our common stock and could impair our ability to raise capital. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has affected the market prices of securities issued by many companies for reasons unrelated to their operating performance and may adversely affect the price of our common stock. In addition, we could be subject to a securities class action litigation as a result of volatility in the price of our stock, which could result in substantial costs and diversion of management s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition. Our shares are subject to the penny stock rules, which may make it more difficult to sell our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTCQB does not meet such requirements and if the price of our common stock is less than $5.00, our common stock will be deemed penny stocks. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stock holders may have difficulty selling their shares. As an issuer of "penny stock", the protection provided by the federal securities laws relating to forward looking statements does not apply to us. Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition. FINRA sales practice requirements may also limit your ability to buy and sell our common stock, which could depress the price of our shares. FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares, and thereby depress our share price. You may face significant restrictions on the resale of your shares due to state "blue sky" laws. Each state has its own securities laws, often called "blue sky" laws, which (1) limit sales of securities to a state s residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state. We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock. We have not yet applied to have our securities registered in any state and will not do so until we receive expressions of interest from investors resident in specific states after they have viewed this Annual Report. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your Shares without the significant expense of state registration or qualification. We are an "emerging growth company," and we intend to take advantage of reduced disclosure requirements applicable to "emerging growth companies," which could make our common stock less attractive to investors. We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, for as long as we continue to be an "emerging growth company," we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an "emerging growth company" for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. We cannot predict if investors will find our common stock less attractive if we choose to continue to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile. We are incurring significantly increased costs and devote substantial management time as a result of operating as a public company particularly after we are no longer an "emerging growth company." As a public company, we are incurring significant legal, accounting and other expenses. For example, we are required to comply with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements have resulted in increased legal and financial compliance costs. In addition, our management and other personnel must divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we are incurring significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. However, for as long as we remain an "emerging growth company" as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an "emerging growth company." Under the JOBS Act, "emerging growth companies" can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies." After we are no longer an "emerging growth company" and if we are no longer a smaller reporting company at such time, we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs We have had material weaknesses in our internal control over financial reporting in the past and may be unable to maintain effective control over financial reporting. Prior to February 2014, we had not been a public reporting company and have had limited accounting personnel and systems to adequately execute accounting processes and limited other supervisory resources with which to address internal control over financial reporting. We and our independent registered public accounting firm identified material weaknesses in internal control over financial reporting for the years ended December 31, 2013 and 2012 related (i) financial closing procedures and lack of sufficient resources to maintain financial records and account for significant accounting transactions, particularly related to equity transactions and restricted stock and stock options for employees and non-employees and (ii) lack of proper segregation of duties. We have implemented and controls, which we believe have remediated these material weaknesses and underlying deficiencies. Amongst other actions, we have recently added a senior accountant to our finance team; commenced implementation of enhanced review procedures; and begun a comprehensive documentation of our accounting policies and our internal controls and procedures. We have also hired an accounting firm to provide technical accounting support and an additional level of review. Under standards established by the Public Company Accounting Oversight Board, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. We cannot assure that there will not be additional material weaknesses and significant deficiencies that our independent registered public accounting firm or we will identify. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable securities laws and listing requirements. See Item 9A for our evaluation of our disclosure controls and procedures. Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal control requirements for publicly traded companies. As a public company, we operate in an increasingly demanding regulatory environment, which requires us to comply with applicable provisions of the Sarbanes-Oxley Act, and the related rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. We rely on consultants to perform certain of our accounting and financial reporting functions. We will need to hire additional finance personnel and build our financial infrastructure as we comply with public company reporting requirements, including complying with the applicable requirements of Section 404 of the Sarbanes-Oxley Act. We may be unable to do so on a timely basis. Moreover, we do not expect that disclosure controls or internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could materially adversely impact us. Upon dissolution of our company, you may not recoup all or any portion of your investment. In the event of a liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, the proceeds and/or assets of our company remaining after giving effect to such transaction, and the payment of all of our debts and liabilities will be distributed to the stockholders of common stock on a pro rata basis. There can be no assurance that we will have available assets to pay to the holders of common stock, or any amounts, upon such a liquidation, dissolution or winding-up of our Company. In this event, you could lose some or all of your investment. Our certificate of incorporation allows for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. We anticipate that our board of directors will have the authority to issue up to 8,400,000 additional shares of our preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders. Anti-takeover provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board and management. Certain provisions of our amended and restated certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your Shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions, among other things: they provide that special meetings of stockholders may be called only by the board of directors, President or our Chairman of the Board of Directors, or at the request in writing by stockholders of record owning at least fifty (50%) percent of the issued and outstanding voting shares of common stock; they do not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority stockholders to effect changes in our board of directors; and they allow us to issue, without stockholder approval, up to 10,000,000 shares of preferred stock that could adversely affect the rights and powers of the holders of our common stock. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. As a result of the 2013 Merger (as defined herein), our ability to utilize our federal net operating loss, carryforwards and federal tax credit may be limited under Sections 382 of the Internal Revenue Code of 1986, as amended. The limitations apply if an "ownership change," as defined by Section 382, occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect "five percent shareholders" increases by more than 50 percentage points over their lowest ownership percentage at any time during the applicable testing period (typically three years). In addition, future changes in our stock ownership, which may be outside of our control, may trigger an "ownership change" and, consequently, Section 382 limitations. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements," which include information relating to future events, future financial performance, financial projections, strategies, expectations, the competitive environment and regulation. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar expressions, as well as statements in future tense. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved, if at all. Forward-looking statements are based on information we have available to us when such statements are made or on management s good faith belief as of that time with respect to such future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: our ability to raise additional capital to fund our operations and to develop our product candidates; our ability to raise additional capital, in light of the significant number of shares issuable upon conversion of our Series A Preferred Stock (including paying dividends in the form of common stock), upon exercise of outstanding warrants and options and upon achievement of certain milestones pursuant to the Matinas BioPharma Nanotechnologies, Inc. acquisition agreement; our obligation to pay royalties to holders of our Series A Preferred Stock; our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product approvals; our limited operating history; our history of operating losses in each year since inception and the expectation that we will continue to incur operating losses for the foreseeable future; our dependence on product candidates, which are still in an early development stage; our reliance on proprietary cochleate drug delivery technology, which is licensed to us by Rutgers University; our ability to manufacture GMP batches of our product candidates which are required for pre-clinical and clinical trials and, subsequently, if regulatory approval is obtained for any of our products, our ability to manufacture commercial quantities; our ability to complete required clinical trials for our lead product candidate and other product candidates and obtain approval from the FDA or other regulatory agents in different jurisdictions; our dependence on third-parties, including third-parties to manufacture and third-party CROs (including, without limitation, the National Institutes of Health (NIH) to conduct our clinical trials; our ability to maintain or protect the validity of our patents and other intellectual property; our ability to retain and recruit key personnel; our ability to internally develop new inventions and intellectual property; interpretations of current laws and the passages of future laws; our lack of a sales and marketing organization and our ability to commercialize products, if we obtain regulatory approval; acceptance of our business model by investors; the accuracy of our estimates regarding expenses and capital requirements; our ability to adequately support growth; and other factors set forth under the heading "Risk Factors" in this prospectus. The foregoing does not represent an exhaustive list of matters that may cause actual performance or results to differ materially from those expressed in or suggested by forward-looking statements contained herein. Please see "Risk Factors" for additional risks which could adversely impact our business and financial performance. Moreover, new risks regularly emerge and it is not possible for our management to predict or articulate all of the risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this prospectus. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this prospectus. Notwithstanding the above, Section 27A of the Securities Act and Section 21E of the Exchange Act expressly state that the safe harbor for forward looking statements does not apply to companies that issue penny stocks. Accordingly, the safe harbor for forward looking statements under the PSLRA is not currently available to us because we may be considered to be an issuer of penny stock. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the common stock by the selling stockholders named in this prospectus. All proceeds from the sale of the common stock will be paid directly to the selling stockholders. We would, however, receive proceeds upon the exercise of the warrants held by the selling stockholders which, if such warrants are exercised in full, would be approximately $20,765,000. Proceeds, if any, received from the exercise of such warrants will be used for working capital and general corporate purposes. No assurances can be given that any of such warrants will be exercised. Market For Registrant s Common Equity and Related Stockholder Matters Prior to July 21, 2014, no public trades occurred in our common stock. On July 21, 2014, our common stock commenced quotation on the OTCQB under the symbol "MTNB". The following table sets forth, for the periods indicated, the reported high and low bid quotations per share for our common stock based on information provided by the OTC Market Group, Inc. Such OTCQB over-the-counter market quotations reflect inter-dealer prices, without markup, markdown or commissions and, particularly because our common stock is traded infrequently, may not necessarily represent actual transactions or a liquid trading market. High Low Fiscal Year Ended December 31, 2014 Third Quarter (from July 21, 2014) $ 1.35 $ 0.59 Fourth Quarter $ 0.80 $ 0.31 Fiscal Year Ended December 31, 2015 First Quarter $ 0.72 $ 0.31 Second Quarter $ 1.46 $ 0.55 Third Quarter $ 1.15 $ 0.70 Fourth Quarter $ 0.91 $ 0.60 Fiscal Year Ended December 31, 2016 First Quarter $ 0.95 $ 0.41 Second Quarter $ 0.84 $ 0.45 Third Quarter $ 1.88 $ 0.61 Fourth Quarter (through November 15, 2016) $ 2.01 $ 1.30 Holders As of October 28, 2016, we had approximately 328 record holders of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. VStock Transfer, LLC is the transfer agent and registrar for our common stock. Dividends We have not paid any cash dividends to date, nor do we anticipate paying any cash dividends in the foreseeable future. For the foreseeable future, we intend to retain all of our earnings, if any, to finance our growth and operations and to fund the expansion of our business. Payment of any dividends will be made in the discretion of our Board of Directors, after its taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. No dividends may be declared or paid on our common stock, unless a dividend, payable in the same consideration or manner, is simultaneously declared or paid, as the case may be, on.our Series A Preferred Stock. Furthermore, holders of Series A Preferred Stock are entitled to receive cumulative dividends at the rate per share of 8% per annum, payable in shares of our common stock, which annual dividend will accumulate until such time as the outstanding shares of Series A Preferred Stock are converted, at which time the accumulated dividend will be satisfied by delivery of shares of common stock at a price per share of common stock equal to the then conversion price. The Series A Preferred Stock will automatically convert on July 29, 2019, unless such shares are converted earlier in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock. See the section titled "Descripton of Capital Stock – Preferred Stock – Series A Preferred Stock" for additional information regarding the Series A Preferred Stock. Penny Stock Considerations Our common stock will be deemed to be "penny stock" as that term is generally defined in the Exchange Act to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock. Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to: Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer s account, the account s value and information regarding the limited market in penny stocks; and Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction, prior to conducting any penny stock transaction in the customer s account. Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of the selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock even if our common stock becomes publicly traded. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and financing needs, includes forward-looking statements that involve risks and uncertainties and should be read together with the "Risk Factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus and in other reports we file with the Securities and Exchange Commission, particularly those under "Risk Factors." Dollars in tabular format are presented in thousands, except per share data, or otherwise indicated. Overview We are a clinical-stage biopharmaceutical company focused on identifying and developing safe and effective broad spectrum therapeutics for the treatment of serious and life-threatening infections. We are developing a pipeline of product and development candidates, with an initial focus on serious fungal and bacterial infections. On January 29, 2015, we completed the acquisition of Aquarius Biotechnologies Inc., whose name was subsequently changed to Matinas BioPharma Nanotechnologies, Inc. (referred to as the "2015 Merger" throughout this document), a New Jersey-based, early-stage pharmaceutical company focused on the development of differentiated and orally delivered therapeutics based on a proprietary, lipid crystal drug delivery platform called "cochleate delivery technology." Our proprietary cochleate delivery technology platform, licensed from Rutgers University on an exclusive worldwide basis, is designed specifically for the targeted and safe delivery of pharmaceuticals directly to the site of infection or inflammation. This innovative technology utilizes lipid-crystal nano-particle cochleates to nano-encapsulate existing drugs, which is designed to make them safer, more tolerable, less toxic and orally bioavailable. We believe this platform represents a significant innovation that may result in meaningful improvements to currently available therapies to treat numerous life-threatening diseases, including serious fungal infections and multi-drug resistant, or MDR, gram-negative bacterial infections. Currently, we are focused on the anti-infectives market and on drug candidates which we believe demonstrate the value and innovation associated with our unique delivery platform technology. We believe initially focusing on the anti-infectives market has distinct advantages for the development of products which meet significant unmet medical need, including: a current regulatory environment which provides small development and clinical stage companies incentives and opportunities to reduce development cost and timeline to market for anti-infective drug candidates; traditional high correlation between efficacy and safety data in preclinical animal models and the outcome of human clinical trials with these product candidates; attractive commercial opportunities for a product differentiated in its safety profile, mode of action and oral bioavailability positioned against current therapies with significant side effects, limited efficacy and intravenous delivery resulting in lack of convenience, compliance and at a significant burden to the cost of healthcare; and an ability to commercialize anti-infective products with a focused and cost-efficient sales and marketing organization We currently have two clinical-stage products designed for the treatment of infectious disease. Our lead product candidate is MAT2203, a novel oral formulation of a broad spectrum anti-fungal drug called amphotericin B which uses our cochleate delivery technology. We are initially developing MAT2203 for the treatment of Candida infections as well as the prophylaxis, or prevention, of invasive fungal infections (IFIs) due to immunosuppressive therapy. A Phase 1a study has been completed and demonstrated that MAT2203 was generally well tolerated at all dosage levels with no serious adverse events reports and no laboratory or renal function abnormalities observed. We are currently screening and enrolling patients in a Phase 2a study of MAT2203 in collaboration with the National Institute of Allergy and Infectious Diseases, or NIAID, of the National Institutes of Health, or NIH. In the third quarter of 2016, the NIH commenced dosing patients in this Phase 2a study and, assuming the NIH meets the anticipated clinical timelines, we anticipate announcing results of this study during the first half of 2017. In addition to the Phase 2a trial being conducted by the NIH, we expect to commence an additional Phase 2 study of MAT2203 in patients with vulvovaginal candidiasis in the fourth quarter of 2016, with results expected later in the first half of 2017. Our second clinical stage product candidate is MAT2501, an orally administered, encochleated formulation of the broad spectrum aminoglycoside antibiotic amikacin which may be used to treat different types of multidrug-resistant bacteria, including non-tubercular mycobacterial infections (NTM), as well as various multidrug-resistant gram negative and intracellular bacterial infections. Currently, amikacin cannot be absorbed enterally and must be given by intravenous, intramuscular or nebulization routes with the significant risk of nephrotoxicity and ototoxicity, which makes it an impractical choice when treating serious infections which often require long courses of therapy, often 12 to 18 months or longer. MAT2501, taking advantage of its innovative, nano-encapsulation delivery technology, is being developed to be orally administered, and is designed to be a safer and targeted therapy for improved treatment of these serious and life-threatening bacterial infections in patients, including those who are severely immunocompromised. We are initially developing MAT2501 for the treatment of non-tuberculous mycobacteria (NTM). NTM causes many serious and life-threatening diseases, including pulmonary disease, skin and soft tissue disease, joint infections and, in immunocompromised individuals, disseminated infection. The most common clinical manifestation of NTM disease is pulmonary, or lung, disease. NTM lung infection occurs when a person inhales the organism from their environment. There are about 50,000 to 90,000 people with NTM pulmonary disease in the United States, with a much higher prevalence in older adults, and these numbers appear to be increasing. However, NTM can affect any age group. Without treatment, the progressive lung infection caused by NTM results in severe cough, fatigue and weight loss, and ultimately can lead to death. In some people NTM infections can become chronic and require ongoing treatment. Treatment may be difficult because NTM bacteria may be resistant to many common types of antibiotics. Severe NTM lung disease can have a significant impact on quality of life and can be life-threatening. We are also developing MAT2501 for the treatment of a variety of serious and acute bacterial infections, including the treatment of gram negative bacterial infections, currently the most significant unmet medical need identified by infectious disease specialists. We recently filed an Investigational New Drug (IND) application with FDA and are cleared to commence Phase 1 clinical studies in January 2016. We plan to initiate the first Phase 1 study of MAT2501 during the fourth quarter of 2016. We are currently exploring strategic partnering options for our legacy cardiovascular drug, MAT9001, which has been developed and targeted to date for the treatment of very high triglycerides and MAT8800, our discovery program seeking to identify product candidates derived from omega-3 fatty acids for the treatment of non-alcoholic fatty liver disease. We are a clinical stage company and have generated $194,000 and $0 in contract research revenues during the nine months ended September 30, 2015 and September 30, 2016, respectively. These contract research revenues ended during 2015 and we do not anticipate any revenues during the remainder of 2016. We have incurred losses for each period from inception. Our net loss was approximately $5.7 million and $7.1 million for the nine months ended September 30, 2016 and 2015, respectively. Our net loss attributable to common shareholders was $10.1 million and $7.1 for the nine months ended September 30, 2016 and 2015, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase significantly in connection with our ongoing activities to develop, seek regulatory approval and commercialization of MAT2203 and MAT2501 and any other product candidates we choose to develop based upon our platform technology. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so. Financial Operations Overview Revenue We generated Contract Research Revenue in the amount of $194,000 for the nine months ended September 30, 2015 versus zero in the same period of 2016. This revenue is directly related to contracts which our subsidiary Aquarius had with the National Institutes of Health (NIH). These contracts were related to work being done on MAT2203 and MAT2501. These contracts ended in 2015 and we expect no additional revenue in 2016 unless we enter into a new revenue arrangement. Research and Development Expenses Research and development expenses consist of costs incurred for the development of MAT2203 and MAT2501 and, to a lesser extent, MAT9001, which include: the cost of conducting pre-clinical work; the cost of acquiring, developing and manufacturing pre-clinical and human clinical trial materials; costs for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities and regulatory operations; expenses incurred under agreements with contract research organizations, or CROs, including the National Institutes of Health (NIH), that conduct our pre-clinical or clinical trials; and employee-related expenses, including salaries and stock-based compensation expense for those employees involved in the research and development process. The table below summarizes our direct research and development expenses for our product candidates for the nine months ended September 30, 2016 and 2015. Our direct research and development expenses consist principally of external costs, such as fees paid to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically use our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol development and overseeing outside vendors. Included in "Internal Staffing, Overhead and Other" below is the cost of laboratory space, supplies, R&D employee costs (including stock option expenses), travel and medical education. Nine Months Ended September 30, 2016 2015 ($ in thousands) Direct research and development expenses: Manufacturing process development $ 74 $ 322 Preclinical trails 146 159 Clinical development 332 1,145 Regulatory 73 215 Internal staffing, overhead and other 1,775 1,841 Total research and development $ 2,400 $ 3,682 Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage human trials. We expect our R&D expenses to increase during Q4 2016 and into 2017 as we implement our additional Phase II study with MAT2203 and start our Phase I study with MAT2501. General and Administrative Expenses General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other general and administrative expenses include facility costs, communication expenses, and professional fees for legal, patent review, consulting and accounting services. General and Administrative expenses were $3.3 million as compared to $3.6 million for the nine months ended September 30, 2016 and 2015 respectively. We anticipate that our general and administrative expenses will be flat or lower for the full year 2016 compared to 2015 due to the implementation of a cost savings steps, offset by increased expenses related to our status as a publicly traded company, including expenses in support of compliance with the requirements of Section 404 of the Sarbanes Oxley Act. Other Expense, net Other expense, net is largely comprised of interest expense and franchise taxes. Deemed Dividend The deemed dividend results from the convertible preferred stock beneficial conversion feature. This entire dividend is captured in the third quarter of 2016. Application of Critical Accounting Policies Our critical accounting policies are more fully described in Note C to our financial statements included in our annual report on Form 10-K for the year ended December 31, 2015, there have been no material changes to our critical accounting policies, except for the addition of a critical accounting policy, Beneficial Conversion Feature of Convertible Preferred Stock, as described in Note C in these financial statements on Form 10-Q. Stock-Based Compensation Option Grants We account for all share-based compensation payments issued to employees, directors, and non-employees using an option pricing model for estimating fair value. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. We recognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line single option method. In accordance with authoritative guidance, we re-measure the fair value of non-employee share-based awards as the awards vest, and recognize the resulting value, if any, as expense during the period the related services are rendered. Significant Factors, Assumptions and Methodologies Used in Determining Fair Value We apply the fair value recognition provisions of ASC Topic 718, Compensation-Stock Compensation, which we refer to as ASC 718. Determining the amount of share-based compensation to be recorded required us to develop estimates of the fair value of stock options as of their grant date before operating as a public company. We recognize share-based compensation expense ratably over the requisite service period, which in most cases is the vesting period of the award. Calculating the fair value of share-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock option awards. Use of this valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock options, and the risk free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. As a publicly-held company with a limited operating history, we utilized data from a representative group of companies to estimate expected stock price volatility. We selected companies from the biopharmaceutical industry with similar characteristics to us, including those in the early stage of product development and with a therapeutic focus. We use the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term of stock option grants to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees. We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period, with the exception of options granted subject to a consulting agreement, whereby the option vesting period and the service period defined pursuant to the terms of the consulting agreement may be different. Stock options issued to consultants are revalued quarterly until fully vested, with any change in fair value expensed. For awards subject to performance conditions, the Company recognizes stock-based compensation expense using the accelerated attribution recognition method when it is probable that the performance condition will be achieved. The following range of assumptions were used to value options granted for the nine months ended September 30, 2016 and 2015 and to re-measure stock options issued to consultants. For the Nine months Ended September 30, 2016 2015 Volatility 44.72 % - 89.15% 77.1% - 77.3% Risk-free interest rate 1.14 % - 1.42% 1.56% - 1.72% Dividend yield 0.0% 0.0% Expected life 6.0 years 4.04 - 6.0 years The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the options vesting term, contractual terms, and industry peers as we did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as our stock has not been trading long enough to calculate its own volatility. We will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for our common stock becomes available. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of our stock options. The expected dividend assumption is based on our history and expectation of dividend payouts. We have never paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. Accordingly, we have assumed no dividend yield for purposes of estimating the fair value of our share-based compensation. We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised. The closing price of our stock (on the date of a grant) is used as an input in the measurement of stock-based compensation. Share-based compensation expense associated with stock options and restricted stock granted to employees and non-employees for the nine months ended September 30, 2016 and 2015 was $1.3 million and $1.2 million, respectively. As of September 30, 2016, we had $2.3 million of total unrecognized share-based compensation expense, which we expect to recognize over a weighted-average remaining vesting period of approximately 1.1 years. In future periods, our share-based compensation expense is expected to increase as a result of recognizing our existing unrecognized share-based compensation for awards that will vest and as we issue additional share-based awards to attract and retain our employees. We have included stock based compensation as part of our operating expenses in our statement of operation for the nine months ended September 30 ($ in thousands) as follows: 2016 2015 Research and development $ 483 $ 410 General and administrative 791 818 Total $ 1,274 $ 1,228 The 2013 Equity Compensation Plan, or the Plan, is the only active plan pursuant to which options to acquire common stock or restricted stock awards can be granted and are currently outstanding. As of September 30, 2016, there were 2,523,519 shares of our common stock available for issuance under the Plan. As of September 30, 2016, we had outstanding options to purchase an aggregate of 8,320,694 shares of our common stock with a weighted average exercise price of $0.85. The computation of the aggregate intrinsic value is based upon the difference between the original exercise price of the options and our estimate of the deemed fair value of our common stock at September 30, 2016. The total intrinsic value of options outstanding and vested at September 30, 2016 was $6.3 million. Emerging Growth Company Status Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Results of Operations Comparison of Nine Months Ended September 30, 2016 and 2015 Increase 2016 2015 (Decrease) Revenues $ - 194 (194 ) Cost and expenses: Research and development $ 2,400 $ 3,682 $ (1,282 ) General and administrative 3,293 3,641 (348 ) Total cost and expenses $ 5,693 $ 7,323 $ (1,630 ) Revenues. Revenue for the nine months ended September 30, 2016 was zero, compared to $194 thousand for the nine months ended September 30, 2015. Revenue consists of revenue earned under the National Institutes of Health grants for MAT2203 and MAT2501. These grants ended in 2015 we do not anticipate any revenue for the remainder of 2016. Research and Development expenses. Research and Development expense for the nine months ended September 30, 2016 decreased $1.3 million compared to the prior year period. This decrease is primarily due to a decrease in spending in clinical studies, associated with MAT9001, which were essentially completed late in 2015. In the longer term, we expect R&D expenses to increase as we implement our development programs for MAT2203 and MAT2501. General and Administrative expenses. General and Administrative expenses for the nine month period ending September 30, 2016 were $3.3 million, approximately $300 thousand lower then the prior year, due to decrease expenses in the areas of investor relations, legal and accounting costs, partially offset by an increase in marketing studies prepared for our primary development products. Comparison of Years Ended December 31, 2015 and 2014 Year Ended December 31, Increase 2015 2014 (Decrease) (In thousands) Expenses: Research and development $5,292 $5,176 $116 General and administrative 4,814 5,289 (475) Operating Expenses $10,106 $10,465 $(359) Research and Development expenses. Research and development (R&D) expense for the year ended December 31, 2015 was $5.3 million, compared to $5.2 million for the year ended December 31, 2014, an increase of $0.1 million. R&D expenses in total were comparable year over year; however, the areas in which we spent our resources changed. During 2015, we made a strategic decision to shift resources away from our legacy MAT9001 cardiovascular product and toward its two clinical stage anti-infective products, MAT2203 and MAT2501. In addition, we shifted our spending from manufacturing development to pre-clinical, clinical, regulatory and infrastructure expenses. General and Administrative expenses. General and administrative expense for the year ended December 31, 2015 was $4.8 million compared to $5.3 million for the year ended December 31, 2014, a decrease of $0.5 million. The decrease in general and administrative expense was primarily due to decreased vendor stock based compensation expenses for services. During 2015, we saw an increase in insurance costs of approximately $0.1 million, related to premiums for liability coverage. In addition, we incurred approximately $0.1 million in transaction costs associated with the 2015 Merger. Sources of Liquidity We have funded our operations since inception through private placements of our equity instruments, most recently through a preferred stock offering. As of September 30, 2016, we have raised approximately $29 million in net proceeds from sales of our equity securities. As of September 30, 2016, we had an accumulated deficit of $33.3 million, working capital of $5.2 million and cash totaling $6.2 million. 2015 and 2016 Private Placements In March and April 2015, we completed the 2015 Private Placement, under which we sold an aggregate of 20,000,000 shares of our common stock and warrants to purchase an aggregate of 20,000,000 shares of our common stock at an exercise price of $0.75 per share. The gross proceeds to us from the 2015 Private Placement were $10.0 million. In July, August and September, 2016, we conducted a closing for a private placement of our Series A preferred stock. We sold an aggregate of 1,600,000 shares of Series A Preferred Stock, which are convertible into 16,000,000 shares of common stock based on the current conversion price. The gross proceeds to us from the 2016 Private Placement were $ 8.0 million (See Note E and Note G, for additional information). Cash Flows The following table sets forth the primary sources and uses of cash for each of the period set forth below: Nine Months Ended September 30, 2016 2015 Cash used in operating activities $ (4,003 ) $ (6,698 ) Cash provided by investing activities - 18 Cash provided by financing activities 6,996 8,452 Net increase in cash $ 2,993 $ 1,772 Operating Activities We have incurred significant costs in the area of research and development, including manufacturing, analytical, regulatory and clinical development costs and costs associated with being a public company. Net cash used in operating activities was approximately $4.0 million for the nine months ended September 30, 2016 and $6.7 million for the nine months ended September 30, 2015. Investing Activities Net cash used in investing activities was $0 for the nine months ended September 30, 2016 and net cash provided by was $17,507 for the nine months ended September 30, 2015. The cash provided in investing activities in 2015 was primarily the result of equipment purchases offset by cash acquired from the acquisition of Aquarius. Financing Activities Net cash provided by financing activities was $7.0 million for the nine months ended September 30, 2016 due to net proceeds from our preferred stock private placement, the exercise of warrants and loan financing in the third quarter. The cash provided by financing activities for the nine months ended September 30, 2015 was due to net proceeds of $8.5 million received from the closing of our 2015 Private Placement. Funding Requirements and Other Liquidity Matters MAT2203 and MAT2501 are still in development stages. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we: conduct our planned Phase 2 clinical trials of MAT2203, our lead product candidate; initiate and continue the research and development of our other product candidates and potential product candidates, including MAT2501; seek to discover and develop additional product candidates using our cochleate lipid-crystal delivery technology platform; seek regulatory approvals for any product candidates that successfully complete clinical trials; establish a sales, marketing and distribution infrastructure in the future to commercialize any products for which we may obtain regulatory approval; require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization; maintain, expand and protect our intellectual property portfolio; hire additional clinical, quality control and scientific personnel; and add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public company. We expect that our existing cash will only be sufficient to fund our operating expenses and capital expenditures requirements into the April 2017 period. We will need additional financing to fund our operating expenses and to initiate and conduct our intended clinical programs, file additional patent applications and enhance our intellectual property position for lead compounds, and prepare for submission of an NDA for MAT2203 and MAT2501, and potentially conduct preclinical work in order to identify product candidates utilizing our cochleate delivery platform technology. We have based this estimate on assumptions that may prove to be wrong in the future, and we may use our available capital resources sooner than we currently expect. Unless we obtain additional financing, there is substantial doubt we can continue as a going concern. Until the time we can generate substantial product revenues from commercializing MAT2203, MAT2501 or any future product candidates, if ever, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and could increase our expenses and require that our assets secure such debt. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market any product candidates under our development that we would otherwise prefer to develop and market ourselves. Contractual Obligations and Commitments On November 1, 2013, we entered into a seven year lease for office space in Bedminster, New Jersey. The commencement date and first obligation to pay rent was June 2014, with annual rent beginning at approximately $.1 million per year, increasing to $.2 million in the final year. In December 2015, the Company renewed an agreement to lease laboratory space for one year commencing January 1, 2016 in Monmouth Junction, New Jersey. Base rent for the year ended December 31, 2016 will be approximately $27 thousand. We may enter into contracts in the normal course of business with clinical research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. Through our acquisition of Aquarius, we acquired a license from Rutgers University for the cochleate delivery technology. The Amended and Restated Exclusive License Agreement between Aquarius and Rutgers, The State University of New Jersey (successor in interest to the University of Medicine and Dentistry of New Jersey) provides for, among other things, (1) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using such licensed technology, (2) a one-time sales milestone fee of $100,000 when and if sales of products using the licensed technology reach the specified sales threshold and (3) an annual license fee of initially $10,000, increasing to $50,000 over the term of the license agreement. In July 2016, the Company entered into a Finance Agreement in the amount of $262,324, to fund the premium payments for the Director and Officer Liability policy. The term of this agreement is 10 months, ending May 30, 2017. As discussed in Note G, the Series A Preferred Stock holders have "Royalty Payment Rights" with regards to MAT2203 and/or MAT2501. Pursuant to the terms of the Certificate of Designations for our outstanding Series A Preferred Stock, we may be required to pay, subject to certain vesting requirements, in the aggregate, a royalty equal to (i) 4.5% of Net Sales (as defined in the Certificate of Designation) from MAT 2203 and/or MAT 2501, subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Certificate of Designations) from MAT2203 and/or MAT2501, subject in all cases to a cap of $10 million per calendar year. Our obligation to pay such royalty will expire when the patents covering the applicable product expire, which is currently expected to be in 2033. The Company also has employment agreements with certain employees which require the funding of a specific level of payments, if certain events, such as a change in control, termination without cause or retirement, occur. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets. Quantitative and Qualitative Disclosures about Market Risk Our exposure to market risk is limited to our cash, cash equivalents, all of which have maturities of one year or less. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We do not have any foreign currency or other derivative financial instruments. BUSINESS Company Overview We are a clinical-stage biopharmaceutical company focused on identifying and developing safe and effective broad spectrum therapeutics for the treatment of serious and life-threatening infections. We are developing a pipeline of product and development candidates, with an initial focus on serious fungal and bacterial infections. On January 29, 2015, we completed the acquisition of Aquarius Biotechnologies Inc., whose name was subsequently changed to Matinas BioPharma Nanotechnologies, Inc. (referred to as the "2015 Merger" throughout this document), a New Jersey-based, early-stage pharmaceutical company focused on the development of differentiated and orally delivered therapeutics based on a proprietary, lipid crystal drug delivery platform called "cochleate delivery technology." Our proprietary cochleate delivery technology platform, licensed from Rutgers University on an exclusive worldwide basis, is designed specifically for the targeted and safe delivery of pharmaceuticals directly to the site of infection or inflammation. This innovative technology utilizes lipid-crystal nano-particle cochleates to nano-encapsulate existing drugs, which is designed to make them safer, more tolerable, less toxic and orally bioavailable. We believe this platform represents a significant innovation that may result in meaningful improvements to currently available therapies to treat numerous life-threatening diseases, including serious fungal infections and multi-drug resistant, or MDR, gram-negative bacterial infections. Currently, we are focused on the anti-infectives market and on drug candidates which we believe demonstrate the value and innovation associated with our unique delivery platform technology. We believe initially focusing on the anti-infectives market has distinct advantages for the development of products which meet significant unmet medical need, including: a current regulatory environment which provides small development and clinical stage companies incentives and opportunities to reduce development cost and timeline to market for anti-infective drug candidates; traditional high correlation between efficacy and safety data in preclinical animal models and the outcome of human clinical trials with these product candidates; attractive commercial opportunities for a product differentiated in its safety profile, mode of action and oral bioavailability positioned against current therapies with significant side effects, limited efficacy and intravenous delivery resulting in lack of convenience, compliance and at a significant burden to the cost of healthcare; and an ability to commercialize anti-infective products with a focused and cost-efficient sales and marketing organization We currently have two clinical-stage products designed for the treatment of infectious disease. Our lead product candidate is MAT 2203, a novel oral formulation of a broad spectrum anti-fungal drug called amphotericin B which uses our cochleate delivery technology. We are initially developing MAT2203 for the treatment of Candida infections as well as prophylaxis, or prevention, of invasive fungal infections (IFIs) due to immunosuppressive therapies. A Phase 1a study has been completed and demonstrated that MAT2203 was generally well tolerated at all dosage levels with no serious adverse events reports and no laboratory or renal function abnormalities observed. We are currently screening and enrolling patient in a Phase 2a study of MAT2203 in collaboration with the National Institute of Allergy and Infectious Diseases, or NIAID, of the National Institutes of Health, or NIH. In the third quarter of 2016, the NIH commenced dosing patients in this Phase 2a study and, assuming the NIH meets the anticipated clinical timelines, we anticipate announcing results of this study during the first half of 2017. In addition to the Phase 2a study being conducted by the National Institutes of Health, we will commence a second Phase 2 study of MAT2203 in patients with vulvovaginal candidiasis during the fourth quarter of 2016, with results expected later in the first half of 2017. The U.S. Food and Drug Administration, or FDA, has granted MAT2203 designations for Qualified Infectious Disease Product, or QIDP, and Fast Track for the treatment of invasive candidiasis and invasive aspergillosis and for prophylactic treatment of invasive fungal infections due to immunosuppressive therapy. The QIDP designation, provided under the Generating Antibiotic Incentives Now Act, or the GAIN Act, offers certain incentives for the development of new antibacterial or antifungal drugs, including eligibility for Fast Track Designation, priority review and, if approved by the FDA, eligibility for an additional five years of marketing exclusivity. Fast Track designation enables more frequent interactions with the FDA to expedite drug development and review. Neither Fast Track designation nor QIDP designation change the standards for approval and we can provide no assurances that we can maintain QIDP or Fast Track designations for MAT2203 or that such designations will result in faster regulatory review. MAT2203 has also received designation from FDA as an Orphan Drug for the treatment of leishmaniasis and we expect to file for additional Orphan Drug designations for MAT2203. The orphan drug designation provides eligibility for seven years of market exclusivity in the United States upon FDA approval, a waiver from payment of user fees, an exemption from performing clinical studies in pediatric patients and tax credits for the cost of clinical research, if we maintain orphan drug designation. The seven-year period of marketing exclusivity provided through orphan designation combined with an additional 5 years of marketing exclusivity by the QIDP designations would position MAT2203 for eligibility of a total of 12 years of marketing exclusivity to potentially be granted at the time of FDA approval. Our second clinical stage product candidate is MAT2501, an orally administered, encochleated formulation of the broad spectrum aminoglycoside antibiotic amikacin which may be used to treat different types of multidrug-resistant bacteria, including non-tubercular mycobacterial infections (NTM), as well as various multidrug-resistant gram negative and intracellular bacterial infections. Currently, amikacin cannot be absorbed enterally and must be given by intravenous, intramuscular or nebulization routes with the significant risk of nephrotoxicity and ototoxicity, which makes it an impractical choice when treating serious infections which often require long courses of therapy, often 12 to 18 months or longer. MAT2501, taking advantage of its innovative, nano-encapsulation delivery technology, is being developed to be orally administered, and is designed to be a safer and targeted therapy for improved treatment of these serious and life-threatening bacterial infections in patients, including those who are severely immunocompromised. We are initially developing MAT2501 for the treatment of NTM. NTM causes many serious and life-threatening diseases, including pulmonary disease, skin and soft tissue disease, joint infections and, in immunocompromised individuals, disseminated infection. The most common clinical manifestation of NTM disease is pulmonary, or lung, disease. NTM lung infection occurs when a person inhales the organism from their environment. There are about 50,000 to 90,000 people with NTM pulmonary disease in the United States, with a much higher prevalence in older adults, and these numbers appear to be increasing. However, NTM can affect any age group. Without treatment, the progressive lung infection caused by NTM results in severe cough, fatigue, and often weight loss. In some people NTM infections can become chronic and require ongoing treatment. Treatment may be difficult because NTM bacteria may be resistant to many common types of antibiotics. Severe NTM lung disease can have a significant impact on quality of life and can be life-threatening. We are also exploring the development of MAT2501 for the treatment of a variety of serious and acute bacterial infections, including the treatment of gram negative bacterial infections, currently the most significant unmet medical need identified by infectious disease specialists. We recently filed an Investigational New Drug (IND) application with FDA and were cleared to commence. We plan to initiate the first Phase 1 study of MAT2501 during the fourth quarter of 2016, with results expected in the first half of 2017. The U.S. FDA has already granted MAT2501 designations for Orphan Drug and QIDP for the treatment of non-tuberculous mycobacteria. If we maintain orphan drug and QIDP designations, the seven-year period of marketing exclusivity provided through orphan designation Phase 1 clinical studies in January 2016. combined with an additional 5 years of marketing exclusivity by the QIDP designations positions MAT2501 to be eligible for total of 12 years of marketing exclusivity which may be granted at the time of FDA approval. We are currently exploring strategic partnering options for our legacy cardiovascular drug, MAT9001, which has been developed and targeted to date for the treatment of very high triglycerides and MAT8800, our discovery program seeking to identify product candidates derived from omega-3 fatty acids for the treatment of non-alcoholic fatty liver disease. Strategy Our goal is to become a fully integrated biopharmaceutical company that discovers, develops and commercializes novel anti-infective medicines using our proprietary delivery platform technology. Key elements of our strategy include: Focus on the continued development of our current clinical stage anti-infective product candidates, including commencing and completing the planned Phase2a clinical trial with MAT2203 conducted in cooperation with and funded by the NIH as well as the planned Phase 2 trial in VVC and advancing MAT2501 into Phase 1 clinical studies during the fourth quarter of 2016. We intend to target those indications which, if approved, would result in being able to take advantage of the 12 years of product exclusivity afforded through FDA designation as a QIDP and Orphan drug product; Build a significant portfolio of pharmaceutical products using our proprietary cochleate delivery technology platform in conjunction with pharmacologically active compounds that currently have both regulatory approval and broad market adoption, and thereby, we believe, potentially reducing development risk, regulatory approval process time and market adoption risk for our products; Identify strategic collaborations with one or more pharmaceutical partners through which we can utilize our unique and proprietary platform delivery technology to improve the clinical profile of one or more active pharmaceutical ingredients either in development or currently marketed. Identify one or more strategic or financial partners to continue the development of our legacy cardiovascular MAT9001 product; and Develop or find existing manufacturing space in order to grow our capabilities to manufacture product in a compliant, cGMP facility in order to supply products for clinical development and, ultimately, commercial production in an effort to retain exclusive knowledge of the process and intellectual property associated with our platform delivery technology. Our Anti-Infective Product Candidates MAT2203 Product Profile MAT2203 is an orally-administered, encochleated formulation of amphotericin B (a broad spectrum fungicidal agent). Little to no clinical resistance has been reported to date with amphotericin B as compared to the rapidly emerging drug resistance seen in other antifungal therapies. Because of its broad spectrum and fungicidal nature, amphotericin B is used primarily in immunocompromised patients. Importantly, amphotericin B is not metabolized in the liver, resulting in limited drug-drug interactions. Currently, IV-only administered amphotericin B is the only broad spectrum fungicidal available but its IV-delivery results in significant treatment-limiting side effects, including nephrotoxicity. The unique product profile of amphotericin B in combination with our unique ability to provide amphotericin B orally using our proprietary and novel oral formulation may offer a new and promising alternative for patients and doctors, especially for prophylaxis, or prevention, of invasive fungal infections (IFIs). In a clinical Phase 1a single-dose, double-blind, dose-escalating, pharmacokinetic study of 48 healthy volunteers, oral MAT2203 demonstrated a positive safety and tolerability profile with no serious adverse events reported, including little or no nephrotoxicity as compared to placebo. Antifungal Market According to a February 2012 article in Genetic Engineering & Biotechnology News, the world market for systemic antifungal therapies was estimated to be in excess of $6 billion in 2011 and was expected to grow by as much as 4% a year. This market for serious fungal infections is currently served by only three major drug classes: triazoles, polyenes and echinocandins. Of these, the azole class is currently dominant with voriconazole as the market leading agent. The echinocandins are the latest class of agent to be introduced to the market but mortality remains high. Increasing resistance is being seen amongst Candida and Aspergillus species, particularly to azoles. The market for systemic antifungals is driven by annual increases in the susceptible immune compromised patient population. To date, azole antifungals are the only antifungals available in oral formulations and are typically well tolerated, but resistance has developed, and toxicities that occur with prolonged use include hepatotoxicity, fluoride toxicity, and photosensitivity (with voriconazole). Echinocandins (eg, caspofungin and micafungin) are very well tolerated but are only available as IV formulations and resistance has developed. Polyene derivatives, such as amphotericin B, are sometimes administered for topical treatment of oral and esophageal candida infections as an oral suspension though it is not widely available, is not very effective, and may irritate the oral and esophageal tissues. Our lead anti-infective product candidate, MAT2203, is an application of our cochleate delivery technology to a broad spectrum anti-fungal drug called amphotericin B. Amphotericin B is an IV administered drug used as a last resort for treatment of systemic fungal infections resistant to triazoles and echinocandins, including resistant candidiasis, cryptococcal meningoencephalitis, aspergillosis and leishmaniasis. To date, there have been no reports of clinically observed drug-resistance to amphotericin B, further bolstering the use of this compound as the most likely last resort treatment for fungal infections in the foreseeable future. However, the use of amphotericin B is relatively limited because it is currently only available as an IV-administered product and has significant side effects (including nephrotoxicity, or a poisonous effect on the kidneys). Encapsulating the amphotericin B drug with our cochleate delivery technology provides a potential opportunity for the drug to be taken orally with targeted delivery to infected cells, which we believe may have fewer side effects than the currently available IV-formulations of amphotericin B. Development History of MAT2203 MAT2203 was extensively studied in animal model studies of various fungal infections including invasive candidiasis, aspergillosis, and visceral leichmaniasis. The data from animal studies for MAT 2203, our cochleate lipid-crystal nano-particle formulation of amphotericin B, indicate a significant side-effect advantage over amphotericin B formulations, which we believe is based on two phenomena: The lipid-crystal nano-particle is a solid particle, and does not "leak" its drug content while circulating. The particle releases its medication pay-load only when inside the target cells, and thus protects the kidney and other sensitive tissues from many of the amphotericin B side effects. Because of this targeted approach, the required dose level is typically lower than other formulations. The lower dose further contributes to a more beneficial side-effect profile. In addition, in the vast majority of these animal studies the MAT2203 product was administered orally; in the remainder of these animal studies the MAT2203 product was administered via IV. If confirmed in our ongoing Phase 2a human efficacy study, the oral formulation is a second major differentiator of our technology which offers significant health-economic benefit since patients do not need to stay in the hospital to receive the therapy. Because of these strong differentiators brought by the cochleate lipid-crystal nano-particle technology, we believe that MAT2203, if eventually approved by the FDA, may be able to obtain a significant market share of the fungal infection treatment market and, perhaps more importantly, positions MAT2203 to be used prophylactically. An IND application for MAT2203 was filed with the Food and Drug Administration, or FDA, in late 2006. In a clinical Phase 1a single-dose, double-blind, dose-escalating, pharmacokinetic (PK) study of 48 healthy volunteers MAT 2203 demonstrated a positive safety and tolerability profile with no serious adverse events reported. Development Plan for MAT2203 – Phase 2a The NIH is currently enrolling, screening and preparing to dose patients in a Phase 2a study of encochleated amphotericin B (CAMB) in patients with mucocutaneous (esophageal, oropharyngeal, vulvovaginal)candidiasis who are refractory or intolerant to standard non-intravenous therapies. This is an open-label, dose-titration trial in up to 16 patients to study the efficacy, safety, and pharmacokinetics of oral CAMB in the treatment of mucocutaneous candidiasis. Initially, CAMB will be administered at 200 mg/day (100 mg twice daily, or BID) for 2-weeks. In September 2016, the NIH commenced dosing patients in this Phase 2a study. If a patient experiences a meaningful clinical response after 2 weeks, then treatment will be extended for 2 more weeks. If there is limited clinical response but study drug is tolerated, then dosage will be escalated to 400 mg/day (200 mg BID). If after escalation there is a clinical response after 2 weeks, then treatment will be extended for 2 more weeks. If there is limited clinical response and study drug is tolerated, then dosage can be escalated again to 800 mg/day (400 mg BID) for an additional 2 weeks. The primary objective of the trial is to assess the clinical response to treatment of mucocutaneous candidiasis infections in patients who are refractory or intolerant to standard non-intravenous therapies after treatment for 14-days with the highest titrated dosage of CAMB per patient. Secondary objectives include pharmacokinetics, mycological response, and safety. Assuming that the NIH meets the proposed timeline for this study, we expect to release data during the first half of 2017following evaluation and discussion with the NIH. A second phase 2 study has been designed to evaluate the efficacy, safety and PK of CAMB in patients with moderate to severe vulvovaginal candidiasis. The trial will enroll approximately 75 patients into three dosing arms. One group will be randomized to 200 mg CAMB, one group will be randomized to 400 mg CAMB and the third group will be randomized to 150 mg fluconazole. The primary endpoint will be safety and tolerability of CAMB, secondary endpoints will include clinical and mycological response along with CAMB PK. The trial is expected to begin enrolling and dosing patients in the fourth quarter of 2016, with results expected later in the first half of 2017. MAT2501 – Targeting Chronic and Acute Bacterial Infections Product Profile MAT2501, an orally-administered, encochleated formulation of the broad spectrum IV-only aminoglycoside antibiotic agent amikacin, utilizes our proprietary, lipid-crystal, nanoparticle delivery technology. Amikacin is currently used to treat different types of chronic and acute bacterial infections, including NTM infections and various multidrug-resistant gram negative bacterial infections. IV-administered amikacin is associated with major side effects including nephrotoxicity and ototoxicity (permanent loss of hearing). MAT2501 is specifically designed to provide targeted delivery of the potent antibiotic amikacin while providing a significantly improved safety and tolerability profile. In preclinical studies MAT2501 demonstrated oral bioavailability and targeted delivery of amikacin directly to the site of infection in both pulmonary (lung) and disseminated NTM infections. We recently received FDA clearance to initiate a Phase 1 clinical study of MAT2501 for the treatment of NTM infections. The FDA has also designated MAT2501 as a QIDP and an Orphan Drug for the treatment of NTM infections. We intend to initially develop MAT2501 for the treatment of NTM infections and will also explore the development of MAT2501 for the treatment of a variety of multi-drug resistant, gram negative bacterial infections. If approved, we believe MAT2501 would become the first orally bioavailable aminoglycoside and represent a significant improvement over existing therapies from a treatment and health economic perspective. NTM Market Opportunity Nontuberculous mycobacteria (NTM) are naturally occurring organisms found in water, soil, plants and animals. NTM causes many serious and life-threatening diseases, including pulmonary disease, skin and soft tissue disease, joint infections and, in immunocompromised individuals, disseminated infection. The most common clinical manifestation of NTM disease is pulmonary, or lung, disease. NTM lung infection occurs when a person inhales the organism from their environment. While most people do not become ill, some individuals develop a slow, progressive and destructive disease when NTM infects the airways and lung tissue leading to inflammation in the respiratory system. Individuals susceptible to the infection often have an unknown defect in their lung structure or immune system, lung damage from a pre-existing chronic obstructive pulmonary disease (COPD), such as emphysema and bronchiectasis, cystic fibrosis, or an immune deficiency disorder, such as HIV or AIDS. There are about 50,000 to 90,000 people with NTM pulmonary disease in the United States, with a much higher prevalence in older adults, and these numbers appear to be increasing. However, NTM can affect any age group. Without treatment, the progressive lung infection caused by NTM results in severe cough, fatigue and weight loss and may ultimately lead to death. In some people NTM infections can become chronic and require ongoing and long term treatment. Treatment may be difficult because NTM bacteria may be resistant to many common types of antibiotics. Severe NTM lung disease can have a significant impact on quality of life and can be life-threatening. There are no products specifically indicated for the treatment of NTM disease in the U.S., Europe or Canada. Current guideline-based approaches involve multi-drug regimens that may cause severe side effects and treatments can be as long as two years or more. Drug-Resistant Antibiotic Market Physicians commonly prescribe antibiotics to treat patients with infectious diseases that are either known, or presumed, to be caused by bacteria. According to IMS Health, in 2011 approximately $41 billion was spent on antibiotic drugs worldwide, of which almost $9 billion was spent in the United States. The widespread use of antibiotics has resulted in a rapid increase in bacterial infections that are resistant to multiple antibacterial agents. Bacterial infections are caused by a variety of different types of bacteria and the infections they cause can range from mild to serious, life-threatening infections requiring immediate treatment. Bacteria are broadly categorized as Gram-positive, Gram-negative, atypical or anaerobic. Gram-positive bacteria possess a single membrane and a thick cell wall and turn dark-blue or violet when subjected to a laboratory staining method known as Gram s method. Common causes of Gram-positive bacterial infections include species of Staphylococcus, such as methicillin-resistant Staphylococcus aureus , or MRSA, Streptococcus and Enterococcus . Gram-negative bacteria have two membranes with a thin cell wall and, when subjected to Gram s method of staining, lose the stain or are decolorized. According to The New England Journal of Medicine, the most common cause of Gram-negative infection is Escherichia coli , or E. coli . Less prevalent Gram-negative bacteria strains include species of Acinetobacter , Klebsiella, Salmonella and Pseudomonas . Atypical bacteria, such as Mycoplasma species, have modified cell walls and are neither Gram-positive nor Gram-negative. Anaerobic bacteria, such as Bacteroides species, either cannot grow in the presence of oxygen or do not require oxygen to grow and are classified as either Gram-positive or Gram-negative. Antibiotics that treat bacterial infections can be classified as broad-spectrum or narrow-spectrum. Antibiotics that are active against a mixture of Gram-positive, Gram-negative and anaerobic bacteria are referred to as broad-spectrum. Antibiotics that are active only against a select subset of bacteria are referred to as narrow-spectrum. Because it usually takes from 24 to 72 hours from the time a specimen is received in the laboratory to definitively diagnose a particular bacterial infection, physicians may be required to prescribe antibiotics for serious infections without having identified the bacteria. As such, effective first-line treatment of serious infections requires the use of broad-spectrum antibiotics with activity against a broad range of bacteria at least until the bacterial infection can be diagnosed. Many strains of bacteria have mutated over time and have developed resistance to existing drugs, resulting in infections that are increasingly serious or more difficult to treat. These drug-resistant pathogens have become a growing menace to all people, regardless of age, gender or socioeconomic background. They endanger people in affluent, industrial societies like the United States, as well as in less-developed nations. Gram-positive bacteria that have developed resistance to existing drugs include: Streptococcus pneumoniae that cause pneumonia, ear infections, bloodstream infections and meningitis; Staphylococcus aureus that cause skin, bone, lung and bloodstream infections; and Enterococci that are responsible for infections transmitted in healthcare settings. Gram-negative bacteria that have developed resistance to existing drugs include: Escherichia coli that cause urinary tract, skin and bloodstream infections; Salmonella and Escherichia coli that cause foodborne infections; and Acinetobacter baumannii , Pseudomonas aeruginosa and Klebsiella spp. that are responsible for infections transmitted in healthcare settings. According to a September 2013 report of the CDC, each year in the United States, at least two million people acquire serious infections with bacteria that are resistant to one or more of the antibiotics designed to treat those infections. At least 23,000 people die each year as a direct result of these antibiotic-resistant infections, with many more dying from other conditions that are complicated by the occurrence of an antibiotic-resistant infection. These antibiotic-resistant infections add considerable and avoidable costs to the already overburdened U.S. healthcare system. In the same September 2013 report, the CDC noted that the total economic cost of antibiotic infections to the U.S. economy has been estimated to be as high as $20 billion in excess of direct healthcare costs. In addition, the CDC reported that, among all of the bacterial resistance problems, Gram-negative pathogens are particularly worrisome because they are becoming resistant to nearly all drugs that would be considered for treatment, with the most serious Gram-negative infections being healthcare associated and the most common pathogens being Enterobacteriaceae, Pseudomonas aeruginosa and Acinetobacter. As such, at present, there is an acute need for new drugs to treat multidrug-resistant Gram-negative bacteria. Currently approved products, such as Merrem and Levaquin, are becoming increasingly ineffective against Gram-negative bacteria due to increasing resistance, limiting patients treatment options, particularly for patients with multidrug-resistant infections, and few new therapeutic agents are in clinical development. A survey of infectious disease specialists published in the June 2012 edition of Clinical Infectious Disease rated multidrug-resistant Gram-negative infections as the most important unmet clinical need in current practice. In the survey, 63% of physicians reported treating a patient in the past year whose bacterial infection was resistant to all available antibacterial agents. As a further example of the seriousness of the threat of Gram-negative bacteria resistant to all available antibacterial agents, in 2014, the national media including The Wall Street Journal , CBS and Fox News reported on an outbreak, primarily in one suburban Chicago, Illinois hospital, of CRE with more than 40 cases reported in 2013. Additionally, in February 2015, an outbreak of CRE occurred at the Ronald Reagan UCLA Medical Center in which a total of seven people became infected and the infection was a contributing factor in the death of two patients. A similar report came from the Carolinas HealthCare System in February 2015, in which 18 people contracted CRE at a hospital in Charlotte, North Carolina and one person died. According to the CDC, CRE are a nightmare bacteria, are resistant to nearly all known antibiotics and kill up to 50% of people infected. The growing issue of antibiotic-resistant bacterial infections has been widely recognized as an increasingly urgent public health threat, including by the World Health Organization, or WHO, the CDC and the Infectious Disease Society of America, or IDSA. In April 2014, the WHO issued an antimicrobial resistance global surveillance report stating that resistance to common bacteria has reached alarming levels worldwide indicating that many available treatment options are becoming ineffective, and leading to a negative impact in patient outcomes and health-care spending. The WHO warns that unless significant measures are taken, people will start to die from common, formerly treatable infections, and medical interventions such as surgery, chemotherapy, organ transplantation and care of premature infants will become increasingly risky. The important need for new treatment options for serious bacterial infections was further highlighted by the passage in the United States in July 2012 of the Generating Antibiotic Incentives Now, or GAIN, Act, which provides regulatory incentives for the development of new antibacterial or antifungal drugs intended to treat serious or life-threatening infections that are resistant to existing treatment. In September 2014, the United States President s Council of Advisors on Science and Technology issued a report providing recommendations to combat the rise in antibiotic resistant bacteria and advising that without rapid action, the United States risks losing the tremendous progress made in antibiotic development over the last century. Their recommendations focused on three areas: improving surveillance, increasing longevity of current antibiotics and increasing the rate at which new antibiotics are discovered and developed. Additionally, legislative initiatives have recently been introduced as part of the 21st Century Cures discussion document, including the Antibiotic Development to Advance Patient Treatment, or ADAPT, Act which would provide a pathway for approval of antibiotics in limited populations of patients with few or no suitable treatment options, the Developing an Innovating Strategy for Antimicrobial Resistant Microorganisms, or DISARM, Act which would designate certain novel antibiotics used to treat serious bacterial infections to receive higher Medicare reimbursement, and an amendment to the GAIN Act which would allow successful QIDP sponsors to transfer up to one year of exclusivity to another product, including products marketed by other companies. Limitations of Available Treatment Options When confronted with a new patient suffering from a serious infection caused by an unknown pathogen, a physician may be required to quickly initiate first-line empiric antibiotic treatment to stabilize the patient prior to definitively diagnosing the particular bacterial infection. However, current antibiotics for first-line empiric treatment of serious bacterial infections suffer from significant limitations, including one or more of the following: Insufficient Coverage of Multidrug-resistant Bacteria. A physician cannot afford to be too limited in the spectrum of bacteria covered by antibiotics when initially treating a patient for a serious infection that has not yet been definitively identified. Frequently used products, such as Zyvox and Cubicin, are mostly limited to Gram-positive bacteria and thus are rarely used as a first-line empiric monotherapy if broad bacterial coverage is required. In addition, other popular antibiotics that have been used as first-line empiric monotherapies, such as Levaquin, piperacillin/tazobactam, which is marketed by Pfizer as Zosyn, carbapenems, such as Merrem, and imipenem/cilastatin, which is marketed by Merck as Primaxin, have seen their utility as first-line empiric monotherapies diminished as the number of bacterial strains resistant to these therapies has increased. Safety and Tolerability Concerns. Concerns about antibiotic safety and tolerability are among the leading reasons why patients stop treatment and fail therapy. Antibiotics on the market have been associated with adverse effects such as myelosuppression, seizures, nephrotoxicity and gastrointestinal disorders. Lack of Oral Dosage Forms to Permit Transition Therapy. When a patient comes to the emergency room or hospital for treatment of a serious infection, the patient initially receives IV treatment, which allows the drug to be delivered more rapidly and in a larger dose than oral treatment. Once the infection begins to respond to treatment and the patient is stabilized, depending on the infection, hospitals and physicians generally seek to minimize in-hospital treatment and, if possible, discharge patients from the hospital in order to reduce costs, avoid hospital-acquired infections, and improve the patients quality of life. Upon discharge, physicians typically prefer to prescribe transition therapy treatment with an oral formulation of the same antibiotic. A transition therapy to oral treatment allows for more convenient and cost-effective out-patient treatment, with the oral antibiotic providing enhanced patient comfort and mobility and avoiding the risk of infection from the IV catheter. In addition, the use of the same antibiotic allows the physician to avoid switching the patient from the antibiotic that has proven effective during IV administration to a different antibiotic that may be less effective and carries the risk of new or different side effects. Many of the antibiotics that are most commonly used as first-line empiric monotherapies are only available in an IV formulation. Very few, if any, of the antibiotics that cover or are focused on the treatment of Gram-negative bacteria, including NTM, have oral dosage forms. Given these limitations, there is an unmet medical need for a first-line empiric antibiotic treatment that has the following characteristics: Potency and effectiveness against a broad spectrum of bacteria, including NTM, multidrug-resistant Gram-negative, Gram-positive, atypical and anaerobic bacteria; Capability of being used as a monotherapy in the majority of patients in the hospital with cIAI, cUTI and other multidrug-resistant infections; A convenient dosing regimen, such as once or twice-daily; A favorable safety and tolerability profile; and Availability in an oral dosage form. Our Cochleate Delivery Technology Our core capabilities combine the use of lipids as active pharmaceutical ingredients (API) and the use of lipids in "cochleate-shaped" lipid-crystal nano-particle drug delivery vehicles. Therapeutic applications of our proprietary delivery technology are focused on the delivery of several potent and highly efficacious anti-fungal and anti-bacterial agents which, unfortunately, are currently still associated with serious side effects, including irreversible toxic effects on kidney and hearing function. Our technology may allow for the safe and targeted delivery of these agents, which positions us to be at the forefront of dealing with these very serious problems. Our lipid-based delivery technology is currently being used to encapsulate potent but dangerous anti-infective drugs in tiny lipid-crystals which are selectively picked up by macrophage cells and transported to infected cells. These tiny lipid crystals are referred to as "cochleates." Cochleates have a multilayer crystalline, spiral structure with no internal aqueous space. The structure is formed when a series of solid lipid sheets roll up and engulf drug molecules in between the sheets, a proprietary process referred to as "encochleation." The result is a lipid-crystal encochleated drug formulation made up of nano-sized particles. We believe our cochleate delivery technology provides an effective delivery mechanism without chemically bonding or otherwise altering the drug. Because the medications are locked in the particles, the sensitive-organ exposure to these medications is believed to be drastically reduced, as well as the toxic side-effects. In summary, this unique technology offers (1) targeted delivery, (2) sensitive organ protection, and (3) oral formulation (even for IV-only medications). Our cochleate delivery technology is based upon components which are believed to be non-toxic. The primary chemical components of our cochleate delivery technology are soy-derived phosphatidylserine, or "PS," and calcium, which are naturally occurring materials classified as generally recognized as safe, or GRAS, by the FDA. Our technology involves combining and mixing the soy-derived PS and calcium through a self-assembly process under carefully controlled conditions to envelop the subject drug into very small lipid-crystal particles. The result is a nano-size encochleated drug formulation. The unique cochleate structure protects the drug from degradation when it passes through the gastrointestinal (GI) tract and into the blood stream. The strong structure of the cochleate protects the drug as it travels through the GI tract. Once the cochleate, with the drug inside, is absorbed through the GI tract, it is engulfed by the target cells in the bloodstream, including cells called macrophages, and taken to the infected cells. Once the encochleated drug is engulfed by the macrophage, the lower calcium levels inside the macrophage compared to the high level of calcium outside the macrophage triggers the cochleate to open, thus releasing the drug. COCHLEATE FORMULATION * Phosphatidylserine. Multi-organ Protection: The key innovation of our cochleate delivery technology is our ability to package medication inside lipid-crystal particles without leaking. Because of their crystal nature, these particles are truly solid and hold on tightly to their medication pay-load. This is where the cochleate delivery technology differs markedly from other lipid-based delivery technology, such as liposomal delivery. Liposomes are liquid delivery systems which typically leak some of their drug content into our circulatory systems, thus still exposing our vulnerable organs and tissues to toxic effects of often potent medications. Keeping organ-toxic medications inside the lipid-crystal particles strongly differentiates our cochleate delivery technology from other drug delivery approaches. Targeted Delivery: The size of our individual cochleate lipid-crystals is typically in the range of 50-500 nm. This is very small and by comparison close to the size of a large virus or a small bacteria. Our body produces several cell-types that are designed to remove viruses and bacteria from our system. These cell types, such as macrophages, are part of our immune system and "swallow" the bacteria and viruses they encounter in order to protect us from infections. Because of the size our lipid-crystal cochleate particles and the phospholipid surface structure (the cell membranes of bacteria are also made up from phospholipids), macrophages tend to absorb these cochleate particles very well. Oral Formulation: Many drugs that are currently on the market are only effective in treating diseases when administered via IV. For example, many anti-infective drugs must be administered via IV in order to be effective. IV administration presents several challenges to care, such as risk of infection, patient discomfort from injections, and higher cost of care than anti-infective drugs that can be taken orally (IV delivery must be performed by a doctor or nurse, often within a very expensive hospital setting). Although several technologies have been used to attempt to convert IV drugs to orally delivered medications, success has been limited due to the difficulty in achieving adequate bioavailability (i.e., the amount of drug that is absorbed into the body) with oral formulation. We believe that the unique cochleate crystal-structure in our platform technology protects the drug from degradation when it passes through the gastrointestinal (GI) tract and that its lipid surface features facilitate the particle to be absorbed into the blood stream. The potential application of our cochleate delivery technology for the delivery of injectable medications offers significant clinical and commercial value if successfully demonstrated in human clinical trials. Historical Development of Cochleate Delivery Technology The cochleate delivery technology was originally developed by the University of Medicine and Dentistry of New Jersey and Albany Medical College in collaboration with BioDelivery Sciences, Inc., a company founded in 1995 by Drs. Raphael Mannino, who joined our Scientific Advisory Board in connection with Matinas Nanotechnologies acquisition, and Susan Gould-Fogerite, and others. BioDelivery Sciences International, Inc. (NASDAQ: BDSI) acquired BioDelivery Sciences, Inc. in 2002 and Drs. Mannino and Gould-Fogerite joined BDSI s management team. BDSI continued the development of the cochleate delivery technology pursuant to an exclusive license with the University of Medicine and Dentistry of New Jersey and Albany Medical College and application of such drug delivery technology to an array of established pharmaceutics, including an application of cochleate delivery technology to a broad spectrum anti-fungal drug called amphotericin B, which has developed into our MAT 2203 product candidate. BDSI filed an IND for this product at the end of 2006, performed several animal toxicology studies and performed a single dose Phase 1 study. In the animal studies conducted by BDSI, doses used in toxicology studies were shown to produce measureable tissue concentrations and efficacy against the fungal infections candidiasis and aspergillosis. In 2009, BDSI reported preliminary results from its Phase 1 study, where BDSI indicated that plasma concentrations of amphotericin B were detected in the sample of patients tested suggesting oral absorption from the cochleate delivery system. Forty-eight healthy volunteers participated in the study, with sixteen recruited for each of three dose groups. In each dose group, twelve volunteers received a single dose of cochleate amphotericin B (MAT 2203) and four received a placebo. Amphotericin B plasma concentrations were measured over a period of fourteen days. The study identified doses that were well-tolerated with no meaningful changes in laboratory safety values including those associated with renal function. The preliminary pharmacokinetic evaluation, available in February 2009, revealed that plasma concentrations were comparable to those seen in prior animal toxicology studies using the same formulation. In previous animal studies conducted by BDSI, doses used in toxicology studies were shown to produce measureable tissue concentrations and efficacy against the fungal infections candidiasis and aspergillosis. Additional Pipeline Opportunities We believe our cochleate delivery technology can be used to reformulate a wide variety of drugs which are currently only available in IV formulations. Leveraging our cochleate delivery technology, we believe we can develop a robust pipeline of product candidates. We have tested a range of pharmaceutical compounds reformulated by our cochleate delivery technology in proof-of-concept animal studies, including vaccines, curcumin, capreomycin, and atovaquone. By way of example, we recently received a patent issuance related to cochleate compositions directed against expressions of proteins. The allowed patent claims cover our proprietary methods related to the composition and the formation of encochleated siRNA for potential use as therapy for regulating gene expression. We intend to pursue opportunities to develop products, either alone or in partnership with other pharmaceutical or biotech companies, related to this technology. Our Cardiovascular Therapeutic Candidates MAT9001 Our legacy cardiovascular product candidate, MAT9001, is a proprietary prescription-only omega-3 fatty acid composition, comprised of a complex mixture of omega-3 fatty acids, including eicosapentaenoic acid, or EPA, docosapentaenoic acid, or DPA, several other omega-3 fatty acids, and relatively nominal amounts of docosahexaenoic acid, or DHA, and non-omega-3 fatty acids. We believe that based upon MAT9001 s unique composition, which includes more DPA than other known omega-3 fatty acids, it will prove to be differentiated from other existing therapies for the treatment of very high triglycerides, or severe hypertriglyceridemia, and dyslipidemia. On October 20, 2014, we submitted an IND to FDA for MAT9001 with an initial indication for the treatment of severe hypertriglyceridemia (TG>500 mg/dL). In the fourth quarter of 2014, we received feedback from FDA with respect to its IND submission for MAT9001. Although FDA did not raise any clinical hold issues, FDA provided recommendations for certain revisions to our planned four-week rat comparative bridging toxicity study as well as our planned 4-way crossover single dose Fed/Fast PK study of MAT9001 in comparison to another omega-3 product. Based on FDA s comments, during the first quarter of 2015, we submitted modified protocols for the four-week rat comparative bridging toxicity study, as well as our 4-way crossover single dose Fed/Fast PK study. In June of 2015 we announced data from a PK/PD study that showed MAT9001 demonstrated superiority versus Vascepa (icosapent ethyl) in reducing lipids, triglycerides, apolipoproteins and PCSK9 levels. The data were based on a pharmacokinetic and pharmacodynamics, open-label crossover study designed to compare the bioavailability and effects of MAT9001 versus Vascepa, ethyl ester of eicosapentaenoic acid (EPA), which was approved by the U.S. Food and Drug Administration in 2012 as an adjunct to diet to reduce triglyceride (TG) levels in adult patients with severe ( 500 mg/dL) hypertriglyceridemia. Results and Trial Design MAT9001 achieved a greater median percentage reduction from baseline to trial end in total cholesterol and a significantly greater median percentage reduction in four of six lipid measures, including total cholesterol, when compared to Vascepa: MAT9001 reduced median TG levels by 33.2 percent compared to 10.5 percent for Vascepa (P-Value <0.001); MAT9001 reduced median VLDL-C (very low density lipoprotein cholesterol) levels by 32.5 percent compared to 8.1 percent for Vascepa (P-Value <0.001); MAT9001 reduced median non-HDL-C (non-high-density cholesterol) levels by 8.8 percent compared to 4.6 percent for Vascepa (P-Value = 0.027); MAT9001 reduced median HDL-C (high-density cholesterol) levels by 11.3 percent compared to 11.1 percent for Vascepa (P-Value = 0.337); MAT9001 reduced median LDL (low-density lipoprotein cholesterol) levels by 2.4 percent compared to 4.3 percent for Vascepa (P-Value = 0.116); MAT9001 reduced median total cholesterol levels by 9 percent compared to 6.2 percent for Vascepa (P-Value = 0.013). MAT9001 also outperformed Vascepa in reductions in apolipoproteins (apo) and PCSK9 as compared to baseline: MAT9001 reduced median apolipoprotein B levels by 3.8 percent compared to 0.7 percent for Vascepa (P-Value = 0.058); MAT9001 reduced median apolipoprotein AI levels by 15.3 percent compared to 10.2 percent for Vascepa (P-value = 0.003); MAT9001 reduced median apolipoprotein CIII levels by 25.5 percent compared to 5 percent for Vascepa (P-Value = 0.006); MAT9001 reduced median PCSK9 levels by 12.3 percent compared to an 8.8 percent increase in PCSK9 levels for Vascepa (P-Value <0.001). The comparator study was conducted in 42 patients with high triglyceride levels. Study subjects had fasting TG levels of 200 to 400 mg/dL without lipid altering therapy, or fasting TG levels of 200 to 350 mg/dL if they were on a stable-dose statin monotherapy. Pre-treatment median values for lipids, triglycerides, apolipoproteins and PCSK9 levels were measured. Patients were randomized and put on MAT9001 or Vascepa for 14 days, then washed out over five weeks, and then crossed over to Vascepa or MAT9001 for 14 days. Forty patients completed the trial. MAT9001 met its primary endpoint in this study. Statistical analysis demonstrated superiority of MAT9001 over Vascepa for omega-3 bioavailability (baseline adjusted AUC and Cmax, approximately 6-fold higher with MAT9001 on day 14, with very high statistical significance). Vascepa is indicated for use with a lipid-lowering diet to reduce very high triglycerides in adult patients and is a trademark of Amarin Pharmaceuticals Ireland Ltd. Following our acquisition of Matinas Nanotechnologies in 2015, we made a strategic decision to focus our resources on the further development of our cochleate lipid-crystal nanoparticle delivery platform and products based on that technology. As a result, we are currently exploring strategic opportunities and partnerships for the continued development of MAT9001, both in the U.S. and abroad. Exclusive License Agreement with Rutgers University Through our acquisition of Matinas Nanotechnologies, we acquired a license from Rutgers University for the cochleate delivery technology. The Amended and Restated Exclusive License Agreement between Matinas Nanotechnologies and Rutgers, The State University of New Jersey (successor in interest to the University of Medicine and Dentistry of New Jersey) provides for, among other things, (1) a license issue fee of $25,000 paid upon execution, (2) an increased equity interest in the company from 5% to 7.5% of Matinas Nanotechnologies (prior to our acquisition of Matinas Nanotechnologies in the 2015 Merger), (3) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using such licensed technology, (4) a one-time sales milestone fee of $100,000 when and if sales of products using the licensed technology reach the specified sales threshold and (5) an annual license fee of initially $10,000, increasing to $50,000 over the term of the license agreement. We also agreed to assume the responsibility to pay required patent prosecution and maintenance fees covering the technology. Unless otherwise terminated by either party, the term of the license, on a country by country basis, shall be the longer of 7-1/2 years from the date of first commercial sale of a product in a country using the licensed technology or until the expiration of the last-to-expire patent rights licensed under the agreement, whichever is longer. Rutgers has the right to terminate the license agreement if we have not commenced commercial sales of at least one product using the licensed technology within nine years of the effective date of the license agreement. Intellectual Property The proprietary nature of, and protection for, our product candidates and our discovery programs, processes and know-how are important to our business. We will seek to protect our products and associated technologies for their manufacturing and development through a combination of patents, trade secrets, proprietary know-how, FDA exclusivity and contractual restrictions on disclosure. Our policy is to pursue, maintain and defend patent rights and to protect the technology, inventions and improvements that are commercially important to the development of our business. Our success will significantly depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology and inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely heavily on know-how and continuing technological innovation to develop and maintain our proprietary position. Exclusively Licensed Intellectual Property Relating to Our Proprietary Cochleate Delivery Technology Platform and MAT2203 and MAT2501 The patents and patent applications that we exclusively license from Rutgers University provide patent protection for the proprietary chemistry technology used in our process to make cochleates and formulate the active pharmaceutical ingredients delivered inside this delivery technology, as in MAT2203 and MAT2501. Pursuant to our license agreement, we have acquired rights to a portfolio of 19 issued and foreign patents, including 11 patents issued within the last 3 years, which extends patent protection until at least 2033. In addition, we have more than 20 pending patent applications filed both in the United States and in foreign jurisdictions, including 16 national phase applications filed within the past 2 years. We have chosen to file these patent applications in selected foreign markets that we consider important for our product candidates. These international markets generally include Europe, China, India, Brazil, Russia, Canada, Japan, Korea, Australia and Mexico. These pending patent applications can extend patent protection through at least 2033. The patent portfolio covering our cochleate delivery system covers a broad spectrum of technology, including amphotericin B cochleates, geodate cochleates, methods of delivering nutrients or biologically relevant molecules to a host using cochleates, cochleate vaccine compositions and protein-lipid vesicles, small interfering RNA cochleates, methods of enhancing the encochleation of hydrophilic molecules and cochleates made with low purity soy phosphatidylserine. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may own or license in the future, nor can we be sure that any of our existing patents or any patents we may own or license in the future will be useful in protecting our technology. For this and more comprehensive risks related to our intellectual property, please see "Risk Factors—Risks Relating to Our Intellectual Property." In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, significant aspects of our proprietary technology platform are based on unpatented trade secrets and know-how. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. We also plan to seek trademark protection in the United States and outside of the United States where available and when appropriate. We intend to use these registered marks in connection with our pharmaceutical research and development as well as our product candidates. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions. Many of these companies have far greater human and financial resources and may have product candidates in more advanced stages of development and many will reach the market before our product candidates. Competitors may also develop products that are more effective, safer or less expensive or that have better tolerability or convenience. Although we believe that our formulation delivery technology, experience and knowledge in our areas of focus provide us with competitive advantages, these potential competitors could reduce our commercial opportunities. For many of our product candidates, we anticipate facing competition from other products that are available on a generic basis and offered at low prices. Many of these generic products have been marketed by third parties for many years and are well accepted by physicians, patients and payors. Competition for MAT2203 for treatment of severe fungal infections We believe that our key competitors in the treatment and prevention of severe fungal infections, such as invasive candidiasis and aspergillosis, includes, but is not limited to, the following companies: Pfizer, the manufacturer of Vfend (voriconazole) and Eraxis (anidulafungin), as well as the generic manufacturers of voriconazole; Merck, the manufacturer of Noxafil (posaconazole) and Cancidas (caspofungin); Astellas, the manufacturer of Mycamine (micafungin) and the marketer of Cresemba (isavuconazonium); and Gilead, the manufacturer of AmBisome B (liposomal amphotericin B). There are also a number of smaller companies working to develop new drugs and other therapies for fungal infections that are undergoing clinical trials. These companies include Cidara Therapeutics, Viamet, Inc. and Scynexis, Inc. The key competitive factors affecting the success of all of our product candidates are likely to be their efficacy, safety, convenience and price. Competition for MAT2501 for the treatment of multi-drug resistant gram negative bacteria We intend to develop MAT2501 as a broad spectrum, oral antibiotic for the treatment of multi-drug resistant infections, including both chronic and acute bacterial infections, such as nontuberculous mycobacterium (NTM) and multi-drug resistant gram-negative infections. If approved, MAT2501 would compete with a number of drugs currently in development, including Arikayce , an inhaled version of amikacin being developed by Insmed Incorporated for the treatment of NTM; plazomycin, which is being developed by Achaogen, Inc.; eravacycline, which is being developed by Tetraphase Pharmaceuticals, Inc.; Brilacidin , being developed as a broad spectrum anti-bacterial by Cellceutix Corporation and Raptor Pharmaceuticals, Inc., which has recently announced it intends to pursue development of an inhaled version of the antibiotic levofloxacin for the treatment of NTM. Manufacturing We currently lease and operate limited in-house manufacturing capabilities for our product candidates, including MAT2203 and MAT2501. While sufficient to produce the clinical supplies of product necessary to conduct our ongoing clinical trials, these are short term arrangements and we currently do not have sufficient manufacturing facilities on a long term basis for the production of clinical or commercial quantities of any of our product candidates. If we are not able to retain our current manufacturing facilities and if we do not develop an in-house manufacturing capability for cochleates needed for our MAT2203 and MAT2501 product candidates sufficient to produce product for continued development and then commercialization of these products, we will need to develop relationships with third-party manufacturers for the manufacture of our product candidates which is likely to be time consuming and expensive. There are a number of potential third party suppliers for amphotericin B and amikacin, the generic active pharmaceutical ingredients in our lead clinical stage product candidates – MAT2203 and MAT2501, respectively. Although to date we have not entered into supply agreements to secure sufficient supply of amphotericin B and amikacin to support our clinical programs for MAT2203 and MAT2501, we believe we will be able to secure supply of amphotericin B and amikacin to support our clinical programs for MAT2203 and MAT2501 from one or more third-party suppliers. As we move through development for each of our product candidates, we expect to enter into long term supply arrangements for these key active pharmaceutical ingredients. Sales and Marketing We currently do not have any sales and marketing infrastructure. We plan to retain U.S. marketing and sales rights or co-promotion rights for our product candidates for which we receive marketing approvals, particularly in situations where it is possible to access the market through a focused, specialized sales force. For situations in which a large sales force is required to access the market, and with respect to markets outside the United States, we generally plan to commercialize our product candidates through collaborative arrangements with leading pharmaceutical and biotechnology companies. Review and Approval of Drugs in the United States In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other governmental entities. Our product candidates must be approved by the FDA through the new drug application, or NDA, or biologics license application, or BLA, in the case of biologic product candidates, process before they may be legally marketed in the United States. An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following: completion of nonclinical laboratory tests, animal studies and formulation studies in compliance with the FDA s good laboratory practice, or cGLP, regulations; submission to the FDA of an IND, which must take effect before human clinical trials may begin; approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; preparation and submission to the FDA of an NDA or BLA; review of the product by an FDA advisory committee, where appropriate or if applicable; satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product s identity, strength, quality and purity; payment of user fees and securing FDA approval of the NDA or BLA; and compliance with any post-approval requirements, including a risk evaluation and mitigation strategy, or REMS, and post-approval studies required by the FDA. Nonclinical Studies Nonclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of nonclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Companies usually must complete some long-term nonclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. Human Clinical Trials in Support of a Regulatory Approval Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence. In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA or IND so long as the clinical trial is conducted in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the greater protection to the participants in the clinical trial. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: Phase 1 : The drug is initially introduced into a small number of healthy human subjects or patients with the target disease (e.g. cancer) or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage. Phase 2 : The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Phase 3 : These clinical trials are commonly referred to as "pivotal" studies, which typically denotes a study which presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a drug. In Phase 3 clinical trials, the drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted. Submission of an NDA to the FDA Regulatory approval for most new drug or biologic products is based on two adequate and well-controlled Phase 3 clinical trials that provide evidence of the safety and efficacy of the proposed new product. Assuming successful completion of required clinical testing and other requirements, the results of the nonclinical and clinical trials, together with detailed information relating to the product s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently exceeding $2.3 million, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, currently exceeding $114,000 per product and $585,000 per establishment. These fees are typically increased annually. The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA s receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for "priority review" products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for various reasons, including for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission. Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as Active Pharmaceutical Ingredients), finished drug product manufacturing and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Fast Track, Breakthrough Therapy and Priority Review Designations The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation. Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product s NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. Second, in 2012, Congress enacted the Food and Drug Administration Safety and Improvement Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as "breakthrough therapies." A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner. Third, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA s goal for taking action on a marketing application from ten months to six months. Under Section 524 of the FDCA, the FDA is authorized to award a priority review voucher to sponsors of certain tropical disease product applications that meet the criteria specified in the Act. A priority review voucher may be used by the sponsor who obtains it or it may be transferred to another sponsor who may use it to obtain priority review for a different application. Priority review vouchers can result in the acceleration of review and approval of a product candidate by up to four months. In order to be eligible for a tropical disease priority review voucher, the application must be: for a listed tropical disease; submitted under Section 505(b)(1) of the FDCA or Section 351 of the Public Health Service Act after September 27, 2007; for a product that contains no active ingredient that has been approved in any other application under those statutory provisions; and must qualify for priority review. The FDA has identified in guidance those product applications for the prevention or treatment of tropical diseases that may qualify for a priority review voucher. Accelerated Approval Pathway The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug. The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. The accelerated approval pathway is usually contingent on a sponsor s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA. The FDA s Decision on an NDA On the basis of the FDA s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions which can materially affect the potential market and profitability of the product. In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals and elements to assure safe use, which may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Post-Approval Requirements Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; fines, warning or untitled letters or holds on post-approval clinical trials; refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; product seizure or detention, or refusal to permit the import or export of products; or injunctions or the imposition of civil or criminal penalties. The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. Abbreviated New Drug Applications for Generic Drugs In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the nonclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD. Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form and the strength of the drug. At the same time, the FDA must also determine that the generic drug is "bioequivalent" to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if "the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug." Upon approval of an ANDA, the FDA indicates whether the generic product is "therapeutically equivalent" to the RLD in its publication "Approved Drug Products with Therapeutic Equivalence Evaluations," also referred to as the "Orange Book." Physicians and pharmacists consider a therapeutically equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA s designation of therapeutic equivalence often results in automatic substitution of the generic drug by the pharmacist without the knowledge or consent of either the prescribing physician or patient. Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication. Hatch-Waxman Patent Certification and the 30 Month Stay Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant submits its application to the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that: the required patent information has not been filed; the listed patent has expired; the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or the listed patent is invalid, unenforceable or will not be infringed by the new product. A certification that the new product will not infringe the already approved product s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant. Pediatric Studies and Exclusivity Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA and the FDA s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. Orphan Designation and Exclusivity Under the Orphan Drug Act, the FDA may designate a drug product as an "orphan drug" if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product). A company must request orphan product designation before submitting a NDA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product will be entitled to orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity. Other Health Care Regulations Health Privacy Laws The Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH Act"), require health care plans, health care providers and health care clearinghouses, collectively defined under HIPAA as "Covered Entities," to comply with standards for the use and disclosure of health information within such organizations and with third parties. These include standards for: Common health care transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; Unique identifiers for providers, employers, health plans and individuals; and Security and privacy of health information. Although the obligations of HIPAA only apply directly to Covered Entities, any Covered Entity that uses third parties (referred to in HIPAA as "Business Associates") to perform functions on its behalf involving the creation or use of certain patient health information is required to have a contract with the Business Associate that limits the use and disclosure of such information by the Business Associate. Fraud and Abuse Laws In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal prosecution, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal anti-kickback statute and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Affordable Care Act In late March 2010, the Federal government enacted the comprehensive health care reform package, the Affordable Care Act (ACA). Among other provisions, the ACA imposes individual and employer health insurance requirements, provides certain insurance subsidies (e.g., premiums and cost sharing), mandates extensive insurance market reforms, creates new health insurance access points (e.g., State and federal-based health insurance exchanges), expands the Medicaid program, promotes research on comparative clinical effectiveness of different technologies and procedures, and makes a number of changes to how products and services will be reimbursed by the Medicare program. Amendments to the Federal False Claims Act under the ACA have made it easier for private parties to bring "qui tam" (whistleblower) lawsuits against companies, under which the whistleblower may be entitled to receive a percentage of any money paid to the government. Designation of and Exclusivity for Qualified Infectious Disease Products In 2012, Congress passed legislation known as the Generating Antibiotic Incentives Now Act, or GAIN Act. This legislation is designed to encourage the development of antibacterial and antifungal drug products that treat pathogens that cause serious and life-threatening infections. To that end, the new law grants an additional five years of marketing exclusivity upon the approval of an NDA for a drug product designated by FDA as a Qualified Infectious Disease Product, or QIDP. Thus, for a QIDP, the periods of five year new chemical entity exclusivity, three year new clinical investigation exclusivity and seven year orphan drug exclusivity, would become 10 years, eight years, and 12 years, respectively. A QIDP is defined in the GAIN Act to mean "an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by—(1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens;" or (2) certain "qualifying pathogens." A "qualifying pathogen" is a pathogen that has the potential to pose a serious threat to public health (e.g., resistant gram positive pathogens, multi-drug resistant gram negative bacteria, multi-drug resistant tuberculosis and Clostridium difficile) and that is included in a list established and maintained by the FDA. A drug sponsor may request the FDA to designate its product as a QIDP any time before the submission of an NDA. The FDA must make a QIDP determination within 60 days of the designation request. A product designated as a QIDP will be granted priority review by the FDA and can qualify for "fast track" status. The additional five years of market exclusivity under the GAIN Act for drug products designated by the FDA as QIDPs applies only to a drug that is first approved on or after July 9, 2012. Additionally, the five-year exclusivity extension does not apply to: a supplement to an application under Section 505(b) of the FDCA for any QIDP for which an extension is in effect or has expired; a subsequent application submitted with respect to a product approved by the FDA for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength; or a product that does not meet the definition of a QIDP under Section 505(g) based upon its approved uses. Patent Term Restoration and Extension A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of a NDA, plus the time between the submission date of a NDA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA. Review and Approval of Drug Products in the European Union In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of a European Union member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial application must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in applicable guidance documents. To obtain marketing approval of a drug under European Union regulatory systems, an applicant must submit a marketing authorization application, or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all European Union member states. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a drug. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days. The decentralized procedure is available to applicants who wish to market a product in various European Union member states where such product has not received marketing approval in any European Union member states before. The decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an application performed by one member state designated by the applicant, known as the reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application. Within 90 days of receiving the reference member state s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials. If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points are subject to a dispute resolution mechanism and may eventually be referred to the European Commission, whose decision is binding on all member states. Pharmaceutical Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of products will depend, in part, on the extent to which the costs of the products will be covered by third party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. A payor s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Third party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development. In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements. Healthcare Law and Regulation Healthcare providers, physicians and third party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with third party payors and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions under applicable federal and state healthcare laws and regulations, include the following: the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; the federal transparency requirements under the Patient Protection and Affordable Care Act requires manufacturers of drugs to report to the Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests and the reported information will be made publicly available on a searchable website; and analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Employees As of September 30, 2016, we had 10 full-time employees. Research and Development For the years ended December 31, 2014 and December 31, 2015, we spent approximately $5.2 million and $5.3 million, respectively, on research and development activities. These expenses include cash and non-cash expenses relating to the development of our clinical and pre-clinical programs, including support of our MAT9001 program which we are no longer actively pursuing and our anti-infective product candidates, MAT2203 and MAT2501. Facilities Our principal facilities consist of approximately 5,900 square feet of office space in Bedminster, NJ that we occupy under a lease that expires in May 2021. We also lease small laboratory spaces in Monmouth Junction, NJ, Somerset, NJ and Bridgewater Township, NJ. Legal Proceedings We are not currently a party to any legal proceedings and we are not aware of any claims or actions pending or threatened against us. In the future, we might from time to time become involved in litigation relating to claims arising from our ordinary course of business. MANAGEMENT All directors hold office for one-year terms until the election and qualification of their successors. Officers are appointed by our board of directors and serve at the discretion of the board, subject to applicable employment agreements. The following table sets forth information regarding our executive officers and the members of our board of directors. Name Age Position(s) Herbert Conrad 83 Chairman of the Board, Director Roelof Rongen 51 Chief Executive Officer, Director Jerome D. Jabbour 42 President Raphael J. Mannino 69 Senior Vice President and Chief Technology Officer Abdel A. Fawzy 65 Executive Vice President, Pharmaceutical Development and Supply Chain Gary Gaglione 64 Vice President of Finance and Accounting and Acting Chief Financial Officer Douglas F. Kling 43 Senior Vice President for Clinical Development and Project Management Stefano Ferrari 55 Director Adam Stern 52 Director James S. Scibetta 51 Director Management Roelof Rongen has served as our Chief Executive Officer and one of our directors since July 2013 and as President, Chief Executive Officer a co-founder and a director of Matinas BioPharma since April 2012. He is also the Founder and Chairman of Essential Fatty Acid Therapeutics LLC, a biotech company focused on the development of innovative fatty acid derivatives. Prior to Matinas BioPharma, Mr. Rongen was Executive Vice President North American Operations for Trygg Pharma AS (subsequently named EPAX AS) (2009-2012) and Vice President of Life Cycle Management and Intellectual Property at Reliant Pharmaceuticals, Inc., or Reliant (2000-2008). While at Reliant, Mr. Rongen held various earlier positions, including head of the Omacor /Lovaza launch team, Executive Director of Marketing for Lescol and Executive Director of Business Development. Prior to Reliant, Mr. Rongen was also Global Product Director for Humira at BASF Pharma (1998-2000), later acquired by Abbott Laboratories; a consultant at The Wilkerson Group in New York (1995-1998) and Arthur D. Little in Amsterdam (1990-1993), and a Research Fellow in biochemistry at Baylor University in Texas (1989-1990). Mr. Rongen earned an MBA from Kellogg GSM at Northwestern University in Evanston, IL, and a graduate degree in Molecular Sciences from Wageningen University in the Netherlands. Jerome D. Jabbour, JD became our President during March 2016. Prior to that he served as our Executive Vice President, Chief Business Officer, General Counsel and Secretary since October 2013 and as one of our directors from the July 2013 until November 2013. Mr. Jabbour is also a Co-Founder of Matinas BioPharma. Prior to joining our management team, he was the Executive Vice President and General Counsel of MediMedia USA, or MediMedia from 2012 to October 2013, a privately held/ diversified health care services company. Prior to MediMedia, he was the Senior Vice President, head of Global Legal Affairs and US General Counsel of Wockhardt Limited (2008-2012) and Senior Counsel at Reliant (2004-2008). Earlier in his career, he held positions as Commercial Counsel at Alpharma, Inc. (2003-2004) and as a Corporate Associate at Lowenstein Sandler LLP (1999-2003). Mr. Jabbour earned his J.D. from Seton Hall University School of Law in New Jersey and a B.A. in Psychology from Loyola University in Baltimore. Raphael J. Mannino has served as our Senior Vice President and Chief Scientific Officer since October 2016 and previously served as our Chief Technology Officer from September 2015 to October 2016. From 1990 until August 2015, Dr. Mannino was an Associate Professor of Pathology and Laboratory Medicine at Rutgers University, New Jersey Medical School. Dr. Mannino founded BioDelivery Sciences, Inc., and served as its President, Chief Executive Officer and Chief Scientific Officer and a member of its Board of Directors from 1995 to 2000, when it was acquired by BioDelivery Sciences International, Inc. (NASDAQ: BDSI). Dr. Mannino served as BDSI s Executive Vice President and Chief Scientific Officer from 2001 to 2009 and a member of its Board of Directors from 2000 to 2007. Dr. Mannino s previous experience includes positions as Assistant, then Associate Professor, Albany Medical College (1980 to 1990), and Instructor then Assistant Professor, Rutgers Medical School (1977 to 1980). His postdoctoral training was from 1973 to 1976 at the Biocenter in Basel, Switzerland. Dr. Mannino received his Ph.D. in Biological Chemistry in 1973 from the Johns Hopkins University, School of Medicine. Abdel A. Fawzy, PhD has served as our Executive Vice President for Pharmaceutical and Supply Chain Development since July 2013 and as Executive Vice President for Pharmaceutical and Supply Chain Development of Matinas BioPharma since August 2011. Dr. Fawzy is a Co-Founder of Matinas BioPharma. Prior to Matinas BioPharma, Dr. Fawzy was a founder of expert consulting firm DeMelle BioPharma (2008-2012) and Executive Director Pharmaceutical Development at Reliant, from 2000 to 2008. Earlier in his career, Dr. Fawzy held pharmaceutical development positions at Ascent Pharmaceuticals, Inc. (1994-2000), DuPont (1990-1994) and Squibb Marsam Pharmaceuticals (1989-1990). He is the inventor on 15 published patents and patent applications all related to the health and pharmaceutical development and manufacturing processes. Dr. Fawzy received his Ph.D. in Pharmaceutical Technology from Tuebingen University in Germany, a Pharmacy degree from Temple University in Philadelphia, PA, and a MS in Pharmaceutical Technology from the Cairo School of Pharmacy in Egypt. Gary Gaglione, CPA has served as our Acting Chief Financial Officer, Vice President of Finance & Accounting since April 2013. Prior to joining us as a full time employee, Mr. Gaglione was President of MCM Consulting LLC from 2011 until October 2013. Prior to MCM Consulting, Mr. Gaglione was Senior Director of Finance at Shionogi USA, Inc. (2011). In 2009 and 2010, he was Vice President of Finance and Controller for Phytomedics, Inc. Prior to Phytomedics, he was Controller for ProStrakan Inc. s U.S. operations. From 2001 to 2008, Mr. Gaglione was an Executive Director at Reliant, initially as head of Planning, Budgets and Analysis, then, from 2006 on, as head of Internal Audit and Sarbanes Oxley Compliance in preparation for a potential Reliant initial public offering. Before Reliant, he held numerous finance positions of increasing responsibility at the U.S. subsidiary of Hoffmann-La Roche Inc. (1976-2001), including Vice President of R&D Finance (1997-2001).. He started his finance career at KPMG LLP (1974-1976). Mr. Gaglione earned a B.S. degree in Business Administration with a major in Accounting from Villanova University and an MBA in Finance from Seton Hall University. Douglas F. Kling has served as our Senior Vice President for Clinical Development since March 12, 2015. Prior to Matinas, Mr. Kling held various positions at Omthera Pharmaceuticals, Inc. (acquired by AstraZeneca PLC in 2013) from August 2010 to December 2014, most recently as Senior Vice President of Clinical Development and Project Management. Prior to that, Mr. Kling served as Senior Director, Project Management at Shionogi USA Inc. (July 2009 to July 2010), as Senior Director, Program Management at The Medicines Company (April 2008 to July 2009) and in a variety of positions at Reliant (November 2000 to March 2008), most recently as Director, R&D Project Management. Mr. Kling earned his B.S. in biological sciences from Duke University and his M.B.A. from Rutgers Business School. Directors Herbert Conrad has served as our Chairman of the Board since July 2013 and as Chairman of the Board of Matinas BioPharma since October 2012. He also serves on the board of directors of Celldex Therapeutics, Inc. (NASDAQ: CLDX), Arbutus Biopharma Corporation (NASDAQ: ABUS) and as an Advisor to the Seaver Autism Center at Mount Sinai Hospital. Mr. Conrad was the President of the U.S. Pharmaceuticals Division of Hoffmann-La Roche, Inc. from 1982 until his retirement in 1993. Prior to that, he held many positions of increasing responsibility at Roche Pharmaceuticals in the United States. Mr. Conrad previously served on the board of directors of Pharmasset, Inc. (chairman), Savient Pharmaceuticals, Inc., (NASDAQ: SVNT) Dura Pharmaceuticals, Inc., UroCor, Inc., GenVec, Inc. (NASDAQ: GNVC) (chairman), Sicor, Inc., Bone Care International, Inc. (chairman), Sapphire Therapeutics, Inc. (chairman), the medical advisory board of Henry Schein Inc. (NASDAQ: HSIC), and he was a Director and Co-Founder of Reliant. Pharmasset was acquired by Gilead Sciences, Inc. for $11 billion in 2011. He received B.S. and M.S. degrees from the Brooklyn College of Pharmacy and an honorary Doctorate in Humane Letters from Long Island University. We believe Mr. Conrad is qualified to serve on our board of directors due to his extensive expertise and experience in the life sciences industry and his extensive board experience. Roelof Rongen. See description under "Management." Stefano Ferrari has served on our board of directors since July 2013 and as a director of Matinas BioPharma since October 2012. Mr. Ferrari is the CEO and a director of Prime Acquisition Corp., a private equity fund focusing on real estate and renewable energy, a position he has held since October 2013. He is also the founder and managing member of Chestnut Hill Sciences, LLC (2004), a human and animal health care company dedicated to the development of dietary supplements, including omega-3 based products. He is the founder of Murami Pharma, Inc. ("Murami") and has served as its CEO since its inception in 2011. Murami is a biopharmaceutical development stage company focusing on small-peptide therapeutics. Prior to Murami, Mr. Ferrari was the CEO of Bioseutica B.V. (2008-2011), a multinational holding company comprising KD-Pharma, a leading manufacturer of omega-3-concentrates, and the leading lysozyme manufacturers Fordras and Neova Technologies, amongst others. Over the last 17 years, Mr. Ferrari was founder, common shareholder and senior executive of several multinational companies operating in the pharmaceutical, food and ingredients industries. Besides Bioseutica, these companies include Prospa B.V. (1995-2002), a multinational holding company in the pharmaceutical industry, Fordras S.A. (2002-2008), ProAparts Lda (2001-2012), and Societa Prodotti Antibiotici S.p.A., the Italian pharmaceutical company that developed and marketed polyene antifungal medications. Mr. Ferrari has served on several boards, including Ikonisys Inc., Carigent Therapeutics, Inc., The Richard B. Fisher Center for Performing Arts, and St. Simeon Lda, a private family fund. He has 25 years of experience in investing in diverse industries, including real estate, pharmaceuticals, and media and entertainment. Mr. Ferrari earned his B.A. degree in International Business Administration from the University of San Francisco. We believe Mr. Ferrari is qualified to serve on our board of directors due to his extensive expertise and experience in the development and marketing of polyene antifungal medications, his extensive contacts in the manufacturing industry related to omega-3 based products and also his M&A experience. Adam Stern has served as a member of our board of directors since July 2013. Mr. Stern has been the head Private Equity Banking at Aegis Capital Corp. and CEO of SternAegis Ventures since 2012 and became one of our directors in July 2013. Prior to Aegis, from 1997 to November 2012, he was with Spencer Trask Ventures, Inc., most recently as a Senior Managing Director, where he managed the structured finance group focusing primarily on the technology and life science sectors. Mr. Stern held increasingly responsible positions from 1989 to 1997 with Josephthal & Co., Inc., members of the New York Stock Exchange, where he served as Senior Vice President and Managing Director of Private Equity Marketing. He has been a FINRA licensed securities broker since 1987 and a General Securities Principal since 1991. Mr. Stern is a director of Dance Biopharm, Inc. Mr. Stern is a former director of InVivo Therapeutics Holdings Corp. (OTCQB: NVIV), Organovo Holdings, Inc. (NYSE MKT: ONVO), LabStyle Innovations Corporation (OTCBB: DRIO) and PROLOR Biotech Ltd., which was sold to Opko Health, Inc. (NYSE: OPK) for approximately $600 million in 2013. Mr. Stern holds a Bachelor of Arts degree with honors from The University of South Florida in Tampa. We believe Mr. Stern is qualified to serve on our board of directors because of his extensive experience in corporate finance and experience in the life science industries. James S. Scibetta has served as a member of our board of directors since November 2013. He is currently President and Chief Financial Officer of Pacira Pharmaceuticals, Inc. (NASDAQ: PCRX), a position he has held since October 2015. Prior to that, Mr. Scibetta was the Chief Financial Officer of Pacira since 2008. Prior to joining Pacira in August 2008, he served as a consultant to Genzyme Corporation following the sale of Bioenvision Inc. (NASDAQ: BIVN) to Genzyme in 2007. From 2006 to 2007 Mr. Scibetta was CFO of Bioenvision. From 2001 to 2006, he was Executive Vice President and Chief Financial Officer of Merrimack Pharmaceuticals Inc. (NASDAQ: MACK). Mr. Scibetta has previously served on the board of directors at the following life sciences companies: Nephros Inc. (NASDAQ: NEPH), Merrimack Pharmaceuticals and Labopharm Inc. Prior to his executive management experience, Mr. Scibetta spent over a decade in investment banking where he was responsible for sourcing and executing transactions for a broad base of public and private healthcare and life sciences companies. Mr. Scibetta received his Bachelor of Science in Physics from Wake Forest University and an MBA from the University of Michigan. We believe Mr. Scibetta is qualified to serve on our board of directors because of his extensive management experience in the pharmaceutical industry, his investment banking experience and his experience as a chief financial officer and audit committee member of several publicly traded companies. There are no family relationships among any of our directors or executive officers. Scientific Advisory Board We believe in seeking and attracting scientific and clinical leaders in the field of infectious diseases to provide counsel and support our growth. We have established a Scientific Advisory Board which consist of individuals who are experts in their chosen fields and recipients of many academic honors and awards. Committees of the Board Our board of directors has three standing committees — an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Audit Committee . The Audit Committee oversees and monitors our financial reporting process and internal control system, review and evaluate the audit performed by our registered independent public accountants and report to the Board any substantive issues found during the audit. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our registered independent public accountants. The Audit Committee reviews and approves all transactions with affiliated parties. The Board adopted a written charter for the Audit Committee, which is available on our website. James Scibetta, Herbert Conrad and Stefano Ferrari serve as members of the Audit Committee with James Scibetta, serving as its chairman. All of the members of the Audit Committee have been determined to be financially literate and are considered independent directors as defined under The NYSE MKT S listing standards and applicable SEC rules and regulations. Mr. Scibetta qualifies as an audit committee "financial expert" as that term is defined by Commission regulations. Compensation Committee . The Compensation Committee provides advice and make recommendations to the Board in the areas of employee salaries, benefit programs and director compensation. The Compensation Committee also reviews the compensation of our President and Chief Executive Officer and makes recommendations in that regard to the Board as a whole. The Board adopted a written charter for the Compensation Committee, which is available on our website. Stefano Ferrari, Herbert Conrad, and James Scibetta serve as members of the Compensation Committee, with Stefano Ferrari serving as its chairman. All of the members of the Compensation Committee are considered independent directors as defined under The NYSE MKT s listing standards. Nominating and Corporate Governance Committee . The Nominating and Corporate Governance Committee nominates individuals to be elected to the full Board by our stockholders. The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our Bylaws and applies the same criteria to all persons being considered. The Board adopted a written charter for the Nominating and Corporate Governance Committee, which is available on our website. Herbert Conrad, Stefano Ferrari and James Scibetta serve as members of the Nominating and Corporate Governance Committee, with Herbert Conrad serving as its chairman. All of the members of the Nominating and Corporate Governance Committee are considered independent directors as defined under The NYSE MKT s listing standards. Director Independence Based on information requested from and provided by each of our directors, our board of directors has determined that Messrs. Herbert Conrad, Stefano Ferrari and James Scibetta sare "independent directors" as such term is defined in the rules of The NYSE MKT s corporate governance requirements and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial and accounting officer, or persons performing similar functions. A copy of the code is posted on the corporate governance section of our website, which is located at www.matinasbiopharma.com. If we make any substantive amendments to, or grant waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website. Section 16(a) Beneficial Ownership Reporting Compliance Since our common stock is not registered under Section 12 of the Exchange Act, our directors and executive officers and persons who beneficially own more than 10% of our common stock are not required to file with the SEC various reports as to their ownership of and activities relating to our common stock. EXECUTIVE COMPENSATION Summary Compensation Table – 2015 The following table presents information regarding the total compensation awarded to, earned by, or paid to our chief executive officer and the two most highly-compensated executive officers (other than the chief executive officer) who were serving as executive officers as of December 31, 2015 for services rendered in all capacities to us for the years ended December 31, 2015 and December 31, 2014. These individuals are our named executive officers for 2015. Name and Principal Position (1) Year Salary ($) Bonus ($) Option Awards(1) ($) All Other Compensation($) Total ($) Roelof Rongen 2015 300,000 132,000 101,638 - 533,638 Chief Executive Officer 2014 300,000 50,000 268,813 618,813 Abdel A. Fawzy 2015 250,000 60,000 33,879 - 343,879 Executive Vice President, Supply Chain Development 2014 250,000 25,000 268,813 - 543,813 Jerome D. Jabbour, President 2015 293,000 90,750 59,289 - 443,039 2014 275,000 30,000 268,813 - 573,813 (1) Amounts reflect the grant date fair value of option awards granted in 2015 and 2014 in accordance with Accounting Standards Codification Topic 718. These amounts do not correspond to the actual value that will be recognized by the named executive officers. Employment Agreements with Our Named Executive Officers On July 30, 2013, we entered into an employment agreement with Mr. Rongen for a period of three years. Under the terms of Mr. Rongen s employment agreement, he received a signing bonus of $150,000 and will receive a base salary of $300,000 per year. In addition, Mr. Rongen will also be eligible to receive an annual bonus, which is targeted at 40% of his base salary but which may be adjusted by our Compensation Committee based on his individual performance and our performance as a whole. Mr. Rongen may also be eligible to receive option grants at the discretion of our Compensation Committee. In October 2013, Mr. Rongen received a grant of 350,000 options at an exercise price of $0.94 per share. The options vest in equal monthly installments over three years from August 1, 2013. If we terminate Mr. Rongen s employment without cause or Mr. Rongen resigns with good reason, we are required to pay him a severance of up to twelve months of his base salary plus benefits. In addition, the vesting of his outstanding options will be accelerated by six months upon such termination. If we terminate Mr. Rongen s employment without cause during the 24 month period immediately following a change of control or Mr. Rongen resigns with good reason during the 24 month period immediately following a change of control, we are required to pay him a severance of up to eighteen months of his base salary and his target annual bonus plus benefits. In addition, his outstanding options would vest in full upon such termination. Mr. Rongen s employment agreement provides for an increase in base salary of $50,000 annually, upon a future closing of an additional round of financing of at least $15 million and the initiation of the first Phase III study of MAT9001. Mr. Rongen will also be subject to a customary non-disclosure agreement, pursuant to which Mr. Rongen has agreed to be subject to a non-compete during the term of his employment and for a period of eighteen months following termination of his employment. As part of our cost reduction measures, we have entered into a letter agreement with Mr. Rongen effective as of April 1, 2016 that provides for, among other things, a 10% reduction in base salary through December 31, 2016 and a requirement that the executive contribute 20% of the applicable premium cost for healthcare coverage under the Company s group health plan. The letter agreement also provides that for purposes of calculating any severance payments, the base salary will be the base salary prior to such temporary reduction and therefore the temporary reduction in base salary will not impact the amounts that would be paid to the executive if his employment was terminated. On July 30, 2013, we entered into an employment agreement with Dr. Fawzy for a period of three years. Under the terms of Dr. Fawzy s employment agreement, he received a signing bonus of $125,000 and he will receive a base salary of $250,000 per year. In addition, Dr. Fawzy will also be eligible to receive an annual bonus, which is targeted at 30% of his base salary but which may be adjusted by our Compensation Committee based on his individual performance and our performance as a whole. Dr. Fawzy will also be eligible to receive option grants at the discretion of our Compensation Committee. In October 2013, Dr. Fawzy received a grant of 350,000 options at an exercise price of $0.94 per share. The options vest in equal monthly installments over three years from August 1, 2013. If we terminate Dr. Fawzy s employment without cause or Dr. Fawzy resigns with good reason, we are required to pay him a severance of up to nine months of his base salary plus benefits. In addition, the vesting of his outstanding options will be accelerated by six months upon such termination. If we terminate Dr. Fawzy s employment without cause during the 24 month period immediately following a change of control or Dr. Fawzy resigns with good reason during the 24 month period immediately following a change of control, we are required to pay him a severance of up to eighteen months of his base salary and his target annual bonus plus benefits. In addition, his outstanding options would vest in full upon such termination. Dr. Fawzy s employment agreement provides for an increase in base salary of $50,000 annually, upon a future closing of an additional round of financing of at least $15 million and the initiation of the first Phase III study of MAT9001. Dr. Fawzy will also be subject to a customary non-disclosure agreement, pursuant to which Dr. Fawzy has agreed to be subject to a non-compete during the term of his employment and for a period of eighteen months following termination of his employment. As part of our cost reduction measures, we have entered into a letter agreement with Dr. Fawzy effective as of April 1, 2016 that provides for, among other things, a 10% reduction in base salary through December 31, 2016 and a requirement that the executive contribute 20% of the applicable premium cost for healthcare coverage under the Company s group health plan. The letter agreement also provides that for purposes of calculating any severance payments, the base salary will be the base salary prior to such temporary reduction and therefore the temporary reduction in base salary will not impact the amounts that would be paid to the executive if his employment was terminated. On September 3, 2013, we entered into an employment agreement with Mr. Jabbour for a period of three years, which was effective as of October 4, 2013. Under the terms of Mr. Jabbour s employment agreement, Mr. Jabbour received a signing bonus of $75,000 and will receive a base salary of $275,000 per year. In addition, Mr. Jabbour will also be eligible to receive an annual bonus, which is targeted at 30% of his base salary but which may be adjusted by our Compensation Committee based on his individual performance and our performance as a whole. Mr. Jabbour will also be eligible to receive option grants at the discretion of our Compensation Committee. On October 4, 2013, Mr. Jabbour received a grant of 200,000 options at an exercise of $0.94 per share. The options will vest in equal monthly installments over three years from the date of grant. Mr. Jabbour also received a grant of 150,000 at an exercise price of $0.94 per share, which vests in equal monthly installments over three years beginning on August 1, 2013. If we terminate Mr. Jabbour s employment without cause or Mr. Jabbour resigns with good reason, we are required to pay him a severance of up to nine months of his base salary plus benefits. In addition, the vesting of his outstanding options will be accelerated by six months upon such termination. If we terminate Mr. Jabbour s employment without cause during the 24 month period immediately following a change of control or Mr. Jabbour resigns with good reason during the 24 month period immediately following a change of control, we are required to pay him a severance of up to eighteen months of his base salary and his target annual bonus plus benefits. In addition, his outstanding options would vest in full upon such termination. Mr. Jabbour s employment agreement provides for an increase in base salary of $50,000 annually, upon the closing of an additional round of financing of at least $15 million and the initiation of the first Phase III study of MAT9001. Mr. Jabbour will also be subject to a customary non-disclosure agreement, pursuant to which Mr. Jabbour has agreed to be subject to a non-compete during the term of his employment and for a period of eighteen months following termination of his employment. As part of our cost reduction measures, we have entered into a letter agreement with Mr. Jabbour effective as of April 1, 2016 that provides for, among other things, a 10% reduction in base salary through December 31, 2016 and a requirement that the executive contribute 20% of the applicable premium cost for healthcare coverage under the Company s group health plan. The letter agreement also provides that for purposes of calculating any severance payments, the base salary will be the base salary prior to such temporary reduction and therefore the temporary reduction in base salary will not impact the amounts that would be paid to the executive if his employment was terminated. Outstanding Equity Awards at Fiscal Year-End Table – 2015 The following table summarizes, for each of the named executive officers, the number of shares of common stock underlying outstanding stock options held as of December 31, 2015. Option Awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Option exercise price ($) Option expiration date Roelof Rongen 100,008 199,992 $0.41 Jan. 27,2025 262,521 87,479 $1.28 July 20, 2024 281,967 68,033 $0.94 October 2,2023 Abdel A. Fawzy 33,336 66,664 $0.41 Jan. 27, 2025 262,521 87,479 $1.28 July 20, 2024 281,967 68,056 $0.94 October 2,2023 Jerome D. Jabbour 58,338 116,662 $0.41 Jan. 27, 2025 262,521 87,479 $1.28 July 20, 2024 270,855 79,145 $0.94 October 3, 2023 2013 Equity Compensation Plan General On August 2, 2013, our Board of Directors adopted the 2013 Equity Compensation Plan pursuant to the terms described herein. The 2013 Equity Compensation Plan was approved by the stockholders on August 7, 2013. Effective May 8, 2014, upon the approval of our Board of Directors and our stockholders, we amended and restated our 2013 Equity Compensation Plan, primarily to include "evergreen" provisions, which state provide that number of shares of common stock available for issuance under the Plan is subject to an automatic annual increase on January 1 of each year beginning in 2015 equal to 4% of the number of shares of common stock outstanding on December 31 of the preceding calendar year or a lesser number of shares of common stock determined by the Board of Directors; to amend the definition of "fair market value"; and to increase the limits on awards under the Plan. The 2013 Equity Compensation Plan, as amended and restated, is referred to herein as the "2013 Plan." The general purpose of the 2013 Plan is to provide an incentive to our employees, directors, consultants and advisors by enabling them to share in the future growth of our business. Our Board of Directors believes that the granting of stock options, restricted stock awards, unrestricted stock awards and similar kinds of equity-based compensation promotes continuity of management and increases incentive and personal interest in the welfare of our Company by those who are primarily responsible for shaping and carrying out our long range plans and securing our growth and financial success. Our Board of Directors believes that the 2013 Plan will advance our interests by enhancing our ability to (a) attract and retain employees, consultants, directors and advisors who are in a position to make significant contributions to our success; (b) reward our employees, consultants, directors and advisors for these contributions; and (c) encourage employees, consultants, directors and advisors to take into account our long-term interests through ownership of our shares. Description of the 2013 Equity Compensation Plan The following description of the principal terms of the 2013 Plan is a summary and is qualified in its entirety by the full text of the 2013 Plan, which is attached as Exhibit 10.6 hereto. Administration. The 2013 Plan will be administered by the Compensation Committee of our Board of Directors, provided that the entire Board of Directors may act in lieu of the Compensation Committee on any matter, subject to certain requirements set forth in the 2013 Plan. The Compensation Committee may grant options to purchase shares of our common stock, stock appreciation rights, stock units, restricted shares of our common stock, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The Compensation Committee also has broad authority to determine the terms and conditions of each option or other kind of award, and adopt, amend and rescind rules and regulations for the administration of the 2013 Plan. Subject to applicable law, the Compensation Committee may authorize one or more reporting persons (as defined in the 2013 Plan) or other officers to make awards (other than awards to reporting persons, or other officers whom the Compensation Committee has specifically authorized to make awards). No awards may be granted under the 2013 Plan on or after the ten year anniversary of the adoption of the 2013 Plan by our Board of Directors, but awards granted prior to such tenth anniversary may extend beyond that date. Eligibility. Awards may be granted under the 2013 Plan to any person who is an employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary, or any person who is determined by the Compensation Committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. Shares Subject to the 2013 Plan. The current aggregate number of shares of common stock available for issuance in connection with awards granted under the 2013 Plan is 9,541,706 shares, subject to customary adjustments for stock splits, stock dividends or similar transactions (the "Initial Limit"). Incentive Stock Options may be granted under the 2013 Plan with respect to all of those shares. The number of shares of common stock available for issuance under the 2013 Plan will automatically increase on January 1st of each year for a period of ten years, commencing on January 1, 2015, in an amount equal to four percent (4%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year (the "Annual Increase"). Notwithstanding the foregoing, the Board of Directors may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the Annual Increase in the share reserve for such calendar year shall be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. The number of shares of common stock which may be issued in respect of Incentive Stock Options is equal to the Current Limit, and will be increased on each January 1, by the Annual Increase for such calendar year. To the extent that any award under the 2013 Plan payable in shares of common stock is forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements or upon the occurrence of other forfeiture events, or otherwise terminates without payment being made thereunder, the shares of common stock covered thereby will be available for future grants under the 2013 Plan. Shares of common stock that otherwise would have been issued upon the exercise of a stock option or in payment with respect to any other form of award, that are surrendered in payment or partial payment of taxes required to be withheld with respect to the exercise of such stock option or the making of such payment, will also be available for future grants under the 2013 Plan. Terms and Conditions of Options. Options granted under the 2013 Plan may be either "incentive stock options" that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or "nonqualified stock options" that do not meet the requirements of Section 422 of the Code. The Compensation Committee will determine the exercise price of options granted under the 2013 Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of our common stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a ten-percent stockholder). If on the date of grant the common stock is listed on a stock exchange or national market system, the fair market value shall generally be the closing sale price as of such date, or if there were no trades recorded on such date, then the most recent date preceding such date on which trades were recorded. If on the date of grant the common stock is traded in an over-the-counter market, the fair market will generally be the average of the closing bid and asked prices for the shares of common stock as of such date, or, if there are no closing bid and asked prices for the shares of common stock on such date, then the average of the bid and asked prices for the shares of common stock on the most recent date preceding such date on which such closing bid and asked prices are available. If the common stock is not listed on a national securities exchange or national market system or traded in an over-the-counter market, the fair market value shall be determined by the Compensation Committee in a manner consistent with Section 409A of the Internal Revenue Code of 1986, as amended. Notwithstanding the foregoing, if on the date of grant the common stock is listed on a stock exchange or is quoted on a national market system, or is traded in an over-the-counter market, then solely for purposes of determining the exercise price of any grant of a stock option or the base price of any grant of a stock appreciation right, the Compensation Committee may, in its discretion, base fair market value on the last sale before or the first sale after the grant, the closing price on the trading day before or the trading day of the grant, the arithmetic mean of the high and low prices on the trading day before or the trading day of the grant, or any other reasonable method using actual transactions of the common stock as reported by the exchange or market on which the common stock is traded. In addition, the determination of fair market value also may be made using any other method permitted under Treasury Regulation section 1.409A-1(b)(5)(iv). No option may be exercisable for more than ten years from the date of grant (five years in the case of an incentive stock option granted to a ten-percent stockholder). Options granted under the 2013 Plan will be exercisable at such time or times as the Compensation Committee prescribes at the time of grant. No employee may receive incentive stock options that first become exercisable in any calendar year in an amount exceeding $100,000. The Compensation Committee may, in its discretion, permit a holder of a nonqualified stock option to exercise the option before it has otherwise become exercisable, in which case the shares of our common stock issued to the recipient will continue to be subject to the vesting requirements that applied to the option before exercise. Generally, the option price may be paid in cash or by bank check, or such other means as the Compensation Committee may accept. As set forth in an award agreement or otherwise determined by the Compensation Committee, in its sole discretion, at or after grant, payment in full or part of the exercise price of an option may be made (a) in the form of shares of common stock that have been held by the participant for such period as the Compensation Committee may deem appropriate for accounting purposes or otherwise, valued at the fair market value of such shares on the date of exercise; (ii) by surrendering to the Company shares of common stock otherwise receivable on exercise of the option; (iii) by a cashless exercise program implemented by the Compensation Committee in connection with the 2013 Plan; and/or (iv) by such other method as may be approved by the Compensation Committee and set forth in an award agreement. No option may be transferred other than by will or by the laws of descent and distribution, and during a recipient s lifetime an option may be exercised only by the recipient or the recipient s guardian or legal representative. However, the Compensation Committee may permit the transfer of a nonqualified stock option, share-settled stock appreciation right, restricted stock award, performance share or share-settled other stock-based award either (a) by instrument to the participant s immediate family (as defined in the 2013 Plan), (b) by instrument to an inter vivos or testamentary trust (or other entity) in which the award is to be passed to the participant s designated beneficiaries, or (c) by gift to charitable institutions. The Compensation Committee will determine the extent to which a holder of a stock option may exercise the option following termination of service. Stock Appreciation Rights. The Compensation Committee may grant stock appreciation rights independent of or in connection with an option. The Compensation Committee will determine the terms applicable to stock appreciation rights. The base price of a stock appreciation right will be determined by the Compensation Committee, but will not be less than 100% of the fair market value of a share of our common stock with respect to the date of grant of such stock appreciation right. The maximum term of any SAR granted under the 2013 Plan is ten years from the date of grant. Generally, each SAR stock appreciation right will entitle a participant upon exercise to an amount equal to: the excess of the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the base price of such stock appreciation right, multiplied by the number of shares as to which such stock appreciation right is exercised. Payment may be made in shares of our common stock, in cash, or partly in common stock and partly in cash, all as determined by the Compensation Committee. Restricted Stock and Stock Units. The Compensation Committee may award restricted common stock and/or stock units under the 2013 Plan. Restricted stock awards consist of shares of stock that are transferred to a participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. Stock units confer the right to receive shares of our common stock, cash, or a combination of shares and cash, at a future date upon or following the attainment of certain conditions specified by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of restricted stock or stock units, which may include performance-based conditions. Dividends with respect to restricted stock may be paid to the holder of the shares as and when dividends are paid to stockholders or at the times of vesting or other payment of the restricted stock award. Stock unit awards may be granted with dividend equivalent rights, which may be accumulated and may be deemed reinvested in additional stock units, as determined by the Compensation Committee in its discretion. If any dividend equivalents are paid while a stock unit award is subject to restrictions, the dividend equivalents shall be subject to the same restrictions on transferability as the underlying stock units, unless otherwise set forth in an award agreement. Unless the Compensation Committee determines otherwise, holders of restricted stock will have the right to vote the shares. Performance Shares and Performance Units. The Compensation Committee may award performance shares and/or performance units under the 2013 Plan. Performance shares and performance units are awards which are earned during a specified performance period subject to the attainment of performance criteria, as established by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of performance shares and performance units. Incentive Bonus Awards. The Compensation Committee may award Incentive Bonus Awards under the 2013 Plan. Incentive Bonus Awards may be based upon the attainment of specified levels of Company or subsidiary performance as measured by pre-established, objective performance criteria determined at the discretion of the Compensation Committee. Incentive Bonus Awards will be paid in cash or common stock, as set forth in an award agreement Other Stock-Based and Cash-Based Awards. The Compensation Committee may award other types of equity-based or cash-based awards under the 2013 Plan, including the grant or offer for sale of unrestricted shares of our common stock and payment in cash or otherwise of amounts based on the value of shares of common stock. Section 162(m) Compliance. If stock or cash-based awards are intended to satisfy the conditions for deductibility under Section 162(m) of the Code as "performance-based compensation," the performance criteria will be selected from among the following, which may be applied to our Company as a whole, any subsidiary or any division or operating unit thereof: (a) pre-tax income; (b) after-tax income; (c) net income; (d) operating income or profit; (e) cash flow, free cash flow, cash flow return on investment, net cash provided by operations, or cash flow in excess of cost of capital; (f) earnings per share; (g) return on equity; (h) return on sales or revenues; (i) return on invested capital or assets; (j) cash, funds or earnings available for distribution; (k) appreciation in the fair market value of the common stock; (l) operating expenses; (m) implementation or completion of critical projects or processes; (n) return on investment; (o) total return to stockholders; (p) dividends paid; (q) net earnings growth; (r) related return ratios; (s) increase in revenues; (t) the Company s published ranking against its peer group of pharmaceutical companies based on total stockholder return; (u) net earnings; (v) changes (or the absence of changes) in the per share or aggregate market price of the common stock; (w) number of securities sold; (x) earnings before or after any one or more of the following items: interest, taxes, depreciation or amortization, as reflected in the Company s financial reports for the applicable period; (y) total revenue growth; (z) economic value created; (aa) operating margin or profit margin; (bb) share price or total shareholder return; (cc) cost targets, reductions and savings, productivity and efficiencies; (dd) strategic business criteria, consisting of one or more objectives based on meeting objectively determinable criteria: specified market penetration, geographic business expansion, progress with research and development activities, investor satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (ee) objectively determinable personal or professional objectives, including any of the following performance goals: the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions, and (ff) any combination of, or a specified increase or improvement in, any of the foregoing. At the end of the performance period established in connection with any award, the Compensation Committee will determine the extent to which the performance goal or goals established for such award have been attained, and shall determine, on that basis, the number of performance shares or performance units included in such award that have been earned and as to which payment will be made. The Compensation Committee will certify in writing the extent to which it has determined that the performance goal or goals established by it for such award have been attained. With respect to awards intended to be performance-based compensation under Section 162(m) of the Code, no participant of the 2013 Plan may receive in any one fiscal year (a) options or stock appreciation rights relating to more than 2,500,000 shares of our common stock, and (b) stock units, restricted shares, performance shares, performance units or other stock-based awards that are denominated in shares of common stock relating to more than 2,500,000 shares of our common stock in the aggregate. The maximum dollar value payable to any participant for a fiscal year of the Company with respect to any awards under the 2013 Plan payable in cash is $2,500,000. Effect of Certain Corporate Transactions. The Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in the 2013 Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee, or (iv) such other modification or adjustment to an award as the Compensation Committee deems appropriate to maintain and protect the rights and interests of participants upon or following a change in control. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and stock appreciation rights to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or stock appreciation right in exchange for a substitute option; (d) cancel any award of restricted stock, stock units, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock, stock unit, performance share or performance unit for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or stock appreciation right in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control, and cancel any option or stock appreciation right without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; (g) cancel any stock unit or performance unit held by a participant affected by the change in control in exchange for cash and/or other substitute consideration with a value equal to the fair market value per share of common stock on the date of the change in control, or (h) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate. Amendment, Termination. The Compensation Committee may amend the terms of awards in any manner not inconsistent with the 2013 Plan, provided that no amendment shall adversely affect the rights of a participant with respect to an outstanding award without the participant s consent. In addition, our board of directors may at any time amend, suspend, or terminate the 2013 Plan, provided that (i) no such amendment, suspension or termination shall materially and adversely affect the rights of any participant under any outstanding award without the consent of such participant and (ii) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the 2013 Plan requires us to obtain stockholder consent. Stockholder approval is required for any plan amendment that increases the number of shares of common stock available for issuance under the 2013 Plan or changes the persons or classes of persons eligible to receive awards. Tax Withholding The Company has the power and right to deduct or withhold, or require a participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulations to be withheld. Director Compensation In October 2013, we adopted a compensation policy pursuant to which our non-employee directors receive annualized compensation of $20,000 per year, with an additional $10,000 per year for the Chairman of the Board and the Chair of the Audit Committee, as well as an additional $5,000 per year for the Chairs of the Compensation and Nomination & Governance Committees. In addition, our independent board members will receive an option grant of 150,000 options, with the exception of the Chairman of the Board, who will be granted 200,000 options. In August 2014, we revised our compensation policy to provide that directors will receive restricted stock in lieu of cash fees. Director Compensation Table – 2015 The following table summarizes the annual compensation for our non-employee directors during 2015. Name Stock Awards($) (1) Option Awards ($) (1) Total ($) Herbert Conrad 72,500 16,940 88,940 Stefano Ferrari 45,000 16,940 61,940 James S. Scibetta 50,000 16,940 66,940 Adam Stern 35,000 16,940 51,940 (1) Amounts reflect the grant date fair value of stock awards and option awards granted in 2015 in accordance with Accounting Standards Codification Topic 718. These amounts do not correspond to the actual value that will be recognized by the directors. On March 7, 2016, non-employee directors were awarded stock awards as compensation for 2016 in the same dollar amount as 2015 (see table above). These stock awards vest on a quarterly basis based on service during 2016. PRINCIPAL STOCKHOLDERS The following table sets forth the number of shares of common stock beneficially owned as of September 6, 2016 by: each of our stockholders who is known by us to beneficially own 5% or more of our common stock; each of our executive officers; each of our directors; and all of our directors and current executive officers as a group. Beneficial ownership is determined based on the rules and regulations of the Commission. A person has beneficial ownership of shares if such individual has the power to vote and/or dispose of shares. This power may be sole or shared and direct or indirect. Applicable percentage ownership in the following table is based on 57,593,414 shares outstanding as of September 6, 2016. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock that are subject to options or warrants held by that person and exercisable as of, or within 60 days of, September 6, 2016. These shares, however, are not counted as outstanding for the purposes of computing the percentage ownership of any other person(s). Except as may be indicated in the footnotes to this table and pursuant to applicable community property laws, each person named in the table has sole voting and dispositive power with respect to the shares of common stock set forth opposite that person s name. Unless indicated below, the address of each individual listed below is c/o Matinas BioPharma Holdings, Inc., 1545 Route 206 South, Suite 302, Bedminster, NJ 07921. Name of Beneficial Owner Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned 5% Stockholders Jennifer Lorenzo(1) 14,671,760 22.0% Laurence G. Allen(2) 4,811,250 8.0% Directors and Executive Officers Roelof Rongen(3) 4,511,578 7.7% Herbert Conrad(4) 4,529,370 7.5% Stefano Ferrari(5) 1,219,013 2.1% James Scibetta(6) 772,239 1.3% Adam Stern(7) 8,115,524 12.9% Abdel A. Fawzy, Ph.D.(8) 2,506,360 4.3% Gary Gaglione(9) 274,463 * Jerome Jabbour(10) 1,653,890 2.8% Douglas King(11) 280,016 * Raphael Mannino(12) 1,705,390 2.8% Directors and Executive Officers as a group (10 persons)(13) 27,706,205 39.0% _______________________ * Less than 1% (1) Includes 75,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 owned by Ms. Lorenzo. Also includes the following securities owned by GJG Life Sciences LLC, which are deemed beneficially-owned by Ms. Lorenzo: (i) 5,681,880 shares of common stock, (ii) 4,964,880 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and (iii) 3,950,000 shares of common stock issuable upon conversion of Series A Preferred Stock that are convertible within sixty days of September 6, 2016. (2) Includes (i) 100,000 shares of common stock and 50,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and registered in the name of Mr. Allen s individual retirement account, (ii) 50,000 shares of common stock and 25,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by ACP Partners, LP, which is beneficially-owned by Mr. Allen, (iii) 2,000,000 shares of common stock, 1,500,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and 300,000 shares of common stock issuable upon conversion of Series A Preferred Stock that are convertible within sixty days of September 6, 2016 and are owned by ACP X, LP, which is beneficially-owned by Mr. Allen, (iv) 86,250 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by NYPPEX, LLC, which is beneficially owned by Mr. Allen, and (v) 400,000 shares of common stock and 300,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by LGA Investments Family Limited Partnership, which is beneficially owned by Mr. Allen. (3) Includes (i) 50,000 shares of common stock issuable upon exercise of outstanding Warrants that ate exercisable within sixty days of September 6, 2016 and (ii) includes 977,162 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 397,839 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (4) Includes (i) 1,875,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016, (ii) 569,349 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016 and (iii) 200,000 shares of common stock issuable upon conversion of Series A Preferred Stock that are convertible within sixty days of September 6, 2016. Does not include 40,651 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (5) Includes (i) 351,563 shares of common stock and 250,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by 1010 Holdings LLC, which is beneficially owned by Mr. Ferrari and (ii) 439,409 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 43,091 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (6) Includes (i) 100,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and (ii) includes 376,626 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 45,874 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (7) Includes (i) 4,419,168 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016, (ii) 371,487 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016, (iii) 200,000 shares of common stock issuable upon conversion of Series A Preferred Stock that are convertible within sixty days of September 6, 2016; (iv) 200,000 shares of common stock and 100,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by Pavilion Capital Partners, LLC, which is wholly-owned by Mr. Stern, (v) 200,000 shares of common stock and 100,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by Piper Ventures Partners, LLC, which is wholly-owned by Mr. Stern, (vi) 250,000 shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and are owned by SternAegis Advisers LLC, which is wholly-owned by Mr. Stern, (vii) 1,000,000 shares held by AKS Family Foundation and (viii) 600,000 shares of common stock held by AKS Family Partners. Does not include 51,013 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (8) Includes 786,174 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 113,826 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (9) Includes (i) 20,000 Shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and (ii) includes 187,793 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 92,207 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (10) Includes 894,516 shares of common stock issuable upon exercise of options that are exercisable within 60 days of September 6, 2016. Does not include 330,484 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (11) Includes (i) 40,000 Shares of common stock issuable upon exercise of outstanding Warrants that are exercisable within sixty days of September 6, 2016 and (ii) includes 200,016 shares of common stock issuable upon exercise of options that are exercisable within sixty days of September 6, 2016. Does not include 249,984 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (12) Includes 285,825 shares of common stock issuable upon exercise of options that are exercisable within 60 days of September 6, 2016. Does not include 124,175 shares of common stock underlying options that are not exercisable within sixty days of September 6, 2016. (13) See notes (3) through (12) CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Other than compensation arrangements for our named executive officers and directors, we describe below each transaction or series of similar transactions, since January 1, 2014, to which we were a party or will be a party, in which: the amounts involved exceeded or will exceed $120,000; and any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. Consulting Agreement We also entered into a consulting agreement with the Placement Agent in July 2013. The consulting agreement had a term of 12 months pursuant to which we paid the Placement Agent $20,000 per month. Under the terms of the consulting agreement, the Placement Agent agreed to provide customary financial advisory services as reasonably requested by us, including consulting services for financing and capital markets activity, mergers, acquisitions, joint ventures and licensing agreements. This consulting agreement terminated on July 30, 2014. 2015 Private Placement In March and April 2015, we completed a private placement, or the 2015 Private Placement, pursuant to which we sold to accredited investors an aggregate of 20,000,000 units at a price of $0.50 per unit, with each unit consisting of: (i) one share of our common stock, and (ii) a five-year warrant to purchase one share of common stock at an exercise price of $0.75 per share (the "2015 Investor Warrants"). The gross proceeds to us from the 2015 Private Placement were $10.0 million. Certain of our officers, directors and holders of more than 5% of our capital stock purchased units in the 2015 Private Placement as set forth below. Name Number of Units Purchased Aggregate Purchase Price Paid GJG Life Sciences, LLC 3,935,880 $1,967,940 Laurence G. Allen and affiliated entities 1,200,000 600,000 Herbert Conrad 1,000,000 500,000 Adam Stern and affiliated entities 800,000 400,000 James Scibetta 100,000 50,000 Roelof Rongen 50,000 25,000 Douglas Kling 40,000 20,000 Gary Gaglione 20,000 10,000 We entered into a Placement Agency Agreement with Aegis Capital Corp. pursuant to which Aegis acted as our exclusive placement agent for the 2015 Private Placement. Immediately prior to the 2015 Private Placement, the Placement Agent and its affiliates beneficially owned an aggregate of more than 10% of our outstanding equity securities. In addition, Adam Stern, Head of Private Equity Banking at Aegis, is a member of our board of directors. Pursuant to the terms of the Placement Agency Agreement, in connection with the 2015 Private Placement, we paid the Placement Agent an aggregate cash fee of $1,000,000 and non-accountable expense allowance of $300,000 and have issued to the Placement Agent warrants (substantially similar to the 2015 Investor Warrants) to purchase 2,000,000 shares of common stock at $0.50 per share and additional warrants to purchase 2,000,000 shares of common stock at $0.75 per share. In addition, we agreed to engage the Placement Agent as our warrant solicitation agent in the event the 2015 Investor Warrants are called for redemption and shall pay a warrant solicitation fee to the Placement Agent equal to five (5%) percent of the amount of funds solicited by the Placement Agent upon the exercise of the 2015 Investor Warrants following such redemption. 2016 Private Placement In the third quarter of 2016, we completed a private placement, or the 2016 Private Placement, pursuant to which we sold to accredited investors an aggregate of 1,600,000 shares of Series A Preferred Stock at a purchase price of $5.00 per share, for aggregate gross proceeds to us of $8.0 million. Certain of our officers, directors and holders of more than 5% of our capital stock purchased shares of Series A Preferred Stock in the 2016 Private Placement as set forth below. Name Number of Series A Preferred Shares Purchased Aggregate Purchase Price Paid GJG Life Sciences, LLC 490,000 $450,000 Laurence G. Allen and affiliated entities 30,000 150,000 Herbert Conrad 20,000 100,000 Adam Stern and affiliated entities 20,000 100,000 We entered into a Placement Agency Agreement with Aegis Capital Corp. pursuant to which Aegis acted as our exclusive placement agent for the 2016 Private Placement. Immediately prior to the 2016 Private Placement, the Placement Agent and its affiliates beneficially owned an aggregate of more than 10% of our outstanding equity securities. In addition, Adam Stern, Head of Private Equity Banking at Aegis, is a member of our board of directors. Pursuant to the terms of the Placement Agency Agreement, in connection with the 2016 Private Placement, we paid the Placement Agent an aggregate cash fee of $800,000 and non-accountable expense allowance of $240,000 and have issued to the Placement Agent warrants to purchase 1,600,000 shares of common stock at $0.50 per share. The warrants provide for a cashless exercise feature and are exercisable for a period of five years from the date of closing. We have also agreed to pay the Placement Agent similar cash and warrant compensation with respect to, and based on, any individual or entity that the Placement Agent solicits interest from in connection with this Offering, excluding our existing stockholders and certain other specified investors, who subsequently invests in us at any time prior to the date that is twelve (12) months following the final Closing of this Offering. In addition, we entered into a three year, non-exclusive finder s fee agreement with the Placement Agent providing that if the Placement Agent shall introduce us to a third party that consummates certain types of transactions with our Company, such as business combinations, joint ventures and licensing arrangements, then the Placement Agent will be paid a finder s fee, payable in cash at the closing of such transaction, equal to (a) 5% of the first $1,000,000 of the consideration paid in such transaction; plus (b) 4% of the next $1,000,000 of the consideration paid in such transaction; plus (c) 3% of the next $5,000,000 of the consideration paid in the such transaction; plus (d) 2.5% of any consideration paid in such transaction in excess of $7,000,000. Further, we have granted the Placement Agent, the irrevocable preferential right of first refusal to act as co-manager for any proposed public or private offering of our securities where we utilize a third party placement agent or underwriter, which right of first refusal expires September 12, 2017. Voting Agreement In connection with the initial closing of the 2013 Private Placement, the stockholders of Matinas BioPharma, Inc. ("Matinas BioPharma") prior to the 2013 Merger (as defined below) and the 2013 Private Placement (the "Matinas Stockholders") and the stockholders of the Company prior to the Merger (the "Company Stockholders"), entered into a Voting Agreement (the "Voting Agreement"). Pursuant to the terms of the Voting Agreement, (i) the Matinas Stockholders have the right to nominate four (4) members to our Board (the "Matinas Stockholders Nominees"), (ii) the Company Stockholders will vote in favor of the election and removal of the Matinas Stockholders Nominees and (iii) the Company Stockholders shall nominate the Aegis Nominee to our Board and (iv) the Matinas Stockholders shall vote in favor of the election and removal of the Aegis Nominee. The Voting Agreement expired on July 11, 2016. Vendor Agreement Since January 1, 2011, we have submitted orders for the purchase of an omega-3 fatty acid concentrate from KD-Pharma Bexbach GmbH, or KD Pharma. For the years ended December 31, 2013, December 31, 2014 and December 31, 2015, these orders totaled $ 22 thousand, $ 258 thousand and $ 46 thousand, respectively. Mr. Ferrari, a member of our board, is the brother of a part owner of the holding company that owns KD Pharma. Indemnification Agreements We entered into indemnification agreements with our directors and executive officers. The indemnification agreements provide for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations. The indemnification agreements also provide for the advancement of expenses in connection with a proceeding prior to a final, nonappealable judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee is ultimately found not to be entitled to indemnification by us. The indemnification agreement set forth procedures for making and responding to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that apply to any dispute between us and an indemnitee arising under the Indemnification Agreements. Policies and Procedures for Related Party Transactions We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, which we refer to collectively as related parties, are not permitted to enter into a transaction with us without the prior consent of our board of directors acting through the audit committee or, in certain circumstances, the chairman of the audit committee. Any request for us to enter into a transaction with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to our audit committee, or in certain circumstances the chairman of our audit committee, for review, consideration and approval. In approving or rejecting any such proposal, our audit committee, or the chairman of our audit committee, is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable products or services and the extent of the related party s interest in the transaction. DESCRIPTION OF CAPITAL STOCK Our current Certificate of Incorporation authorizes us to issue: 250,000,000 shares of common stock, par value $0.0001 per share; and 10,000,000 shares of Preferred Stock, par value $0.0001 per share, of which 1,600,000 shares have been designated as Series A Preferred Stock. As of the date of this prospectus, there were 58,019,709 shares of our common stock and 1,600,000 shares of our preferred stock outstanding. The following statements are summaries only of provisions of our authorized capital stock and are qualified in their entirety by our Certificate of Incorporation, which is filed as an exhibit to the registration statement of which this prospectus forms a part. You should review these documents for a description of the rights, restrictions and obligations relating to our capital stock. Common Stock Voting. The holders of our common stock are entitled to one vote for each share held of record on all matters on which the holders are entitled to vote (or consent to). Dividends. The holders of our common stock are entitled to receive, ratably, dividends only if, when and as declared by our Board of Directors out of funds legally available therefor and after provision is made for each class of capital stock having preference over the common stock (including the common stock). Liquidation Rights. In the event of our liquidation, dissolution or winding-up, the holders of our common stock are entitled to share, ratably, in all assets remaining available for distribution after payment of all liabilities and after provision is made for each class of capital stock having preference over the common stock (including the common stock). Conversion Rights. The holders of our common stock have no conversion rights. Preemptive and Similar Rights. The holders of our common stock have no preemptive or similar rights. Redemption/Put Rights. There are no redemption or sinking fund provisions applicable to the common stock. All of the outstanding shares of our common stock are fully-paid and nonassessable. Preferred Stock We are authorized to issue up to 10,000,000 shares of preferred stock, par value $0.0001 per share, (of which 1,600,000 shares have been designated as Series A Preferred Stock) with such designations, rights, and preferences as may be determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock, or delaying or preventing a change in control of our company, all without further action by our stockholders. We have no shares of our preferred stock outstanding. Series A Preferred Stock In connection with the 2016 Private Placement, our Board of Directors created out of the authorized and unissued shares of our preferred stock, a series of preferred stock comprised of 1,600,000 shares of Series A Preferred Stock, which are convertible into 16,000,000 shares of our common stock based on the current conversion price. Rank. The Series A Preferred Stock ranks above all other classes of stock outstanding as of the date hereof with respect to dividend rights and liquidation preferences. Dividends. Holders of Series A Preferred Stock are entitled to receive cumulative dividends at the rate per share of 8% per annum, payable in shares of our common stock, which annual dividend will accumulate until such time as the shares of Series A Preferred Stock are converted, at which time the accumulated dividend will be satisfied by delivery of shares of common stock ("PIK Shares") at a price per share of common stock equal to the then conversion price. Each holder of shares of Series A Preferred Stock will be entitled to receive dividends equal, on an as-if-converted to shares of common stock basis, to and in the same form as dividends actually paid on shares of our common stock when, as, and if such dividends are paid on shares of our common stock. Liquidation. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred Stock will be entitled to (i) first receive distributions out of our assets in an amount per share equal to $5.00 (the "Stated Value") plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock and (ii) second, on an as-converted basis alongside the common stock. Conversion. Upon the earlier of (i) notice by us to the Holders that we have elected to convert all outstanding shares of Series A Preferred Stock; provided however that in the event we elect to force automatic conversion pursuant to this clause (i), the conversion date for purposes of calculating the accrued dividend is deemed to be July 29, 2019, which is the third anniversary of the initial closing, (ii) July 29, 2019, (iii) the approval of the MAT2203 product candidate by the U.S. Food and Drug Administration or the European Medicines Agency (the "Regulatory Approval") or (iv) the Regulatory Approval of MAT2501 product candidate, without any action on the part of the holder (each of the foregoing, a "Mandatory Conversion Date"), all of the outstanding shares of Series A Preferred Stock will automatically convert to common stock (a "Mandatory Conversion"). In addition, each share of Series A Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into that number of shares of common stock determined by dividing the Stated Value of such Series A Preferred Stock by the conversion price. The conversion price initially is $0.50 per share of common stock and is subject to adjustment described below. Stock Dividends and Stock Splits. If we pay a stock dividend or otherwise make a distribution payable in shares of common stock on shares of common stock or any other common stock equivalents, subdivide or combine outstanding common stock, or reclassify common stock, the conversion price will be adjusted by multiplying the then conversion price by a fraction, the numerator of which shall be the number of shares of common stock outstanding immediately before such event, and the denominator of which shall be the number of shares outstanding immediately after such event. Fundamental Transaction. If we effect a fundamental transaction, then upon any subsequent conversion of Series A Preferred Stock, the holder thereof shall have the right to receive, for each share of common stock that would have been issuable upon such conversion immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor s or acquiring corporation s common stock or of our common stock, if we are the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock into which shares of our Series A Preferred Stock is convertible immediately prior to such fundamental transaction. A fundamental transaction means: (i) our merger or consolidation with or into another entity, (ii) any sale of all or substantially all of our assets in one transaction or a series of related transactions, or (iii) any reclassification of our common stock or any compulsory share exchange by which common stock is effectively converted into or exchanged for other securities, cash or property. Voting Rights. Except as otherwise provided in the Certificate of Designation or required by law, shares of our Series A Preferred Stock shall have no class voting rights. The Certificate of Designations provides that each share of Series A Preferred Stock will entitle its Holder to vote with the common stock on an as-ifconverted to shares of common stock basis. Notwithstanding certain protections in the Certificate of Designations, Delaware law also provides holders of preferred stock with certain rights. The holders of the outstanding shares of Series A Convertible Preferred Stock generally will be entitled to vote as a class upon a proposed amendment to our certificate of incorporation if the amendment would: increase or decrease the aggregate number of authorized shares of our Series A Convertible Preferred Stock; increase or decrease the par value of the shares of our Series A Convertible Preferred Stock; or alter or change the powers, preferences, or special rights of the shares of our Series A Convertible Preferred Stock so as to affect them adversely. Fractional Shares. No fractional shares of common stock will be issued upon conversion of shares of our Series A Preferred Stock. Rather, we shall round up to the next whole share. Royalties. Pursuant to the terms of the Certificate of Designations for our outstanding Series A Preferred Stock, we may be required to pay, subject to certain vesting requirements, in the aggregate, a royalty equal to (i) 4.5% of Net Sales (as defined in the Certificate of Designation) from MAT 2203 and/or MAT 2501, subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Certificate of Designations) from MAT2203 and/or MAT2501, subject in all cases to a cap of $10 million per calendar year. Our obligation to pay such royalty will expire when the patents covering the applicable product expire, which is currently expected to be in 2033. Royalty Vesting. The shares of Series A Preferred Stock will vest, in equal thirds, upon each of the first, second and third vesting dates; provided however, if the Series A Preferred Stock automatically convert into common stock prior to July 29, 2019, which is the 36 month anniversary of the initial closing of the 2016 Private Placement, then the outstanding shares of Series A Preferred Stock shall be deemed to be fully vested as of the date of conversion. Once a vesting date has occurred, the portion that vested on such vesting date shall be unaffected by any conversion thereafter of such shares of our Series A Preferred Stock. Each holder is entitled to a portion of the royalty payment, if any, as determined based on the length of time that such Holder s shares of Series A Preferred Stock remain unconverted. If a Holder elects to convert all of his shares of Series A Preferred Stock into common stock prior to the first 12 month anniversary after the Initial Closing, the Holder will forfeit any rights to future royalty payments, if any. If a Holder elects to convert any portion of his Series A Preferred Stock to common stock at any time prior to the third vesting date, such Holder will forfeit any rights to future royalty payments if any, with respect to such the unvested portion of such converted shares. Allocation of Royalty Payment. Once the aggregate Royalty Payment Amount is calculated based on the criteria set forth above under "Royalties," that amount will be allocated to the holders of the Participating Royalty Interests (as defined in the Certificate of Designations) based on their pro rata ownership. The royalty payable to each holder shall be calculated as follows: (i) Prior to the third Vesting Date, the royalty payable to each holder will be equal to the aggregate Royalty Payment Amount divided by the aggregate Participating Royalty Interests on the applicable record date multiplied by the number of Participating Royalty Interests held by such holder the applicable record date. (ii) On or after the third Vesting Date, the Royalty payable to each holder will be calculated by multiplying the aggregate Royalty Payment Amount by the percentage set forth in each holder s Royalty Payment Rights certificate. The percentage set forth in each Royalty Payment Rights certificate will be calculated as follows: Number of Participating Royalty Interests Held by Investor on the Third Vesting Date Total Participating Royalty Interests on the Third Vesting Date Separability. The royalty payment rights may not be transferred separately from the Series A Preferred Stock until July 29, 2019. Prior to July 29, 2019, if a holder transfers any of its shares of Series A Preferred Stock, such holder will lose any rights to any future royalty payments with respect to the shares of Series A Preferred Stock that were transferred. After July 29, 2019, we will issue a certificate representing the royalty payment rights to (i) each Holder of Series A Preferred Stock at such 36 month anniversary date and (ii) any Holder of Series A Preferred Stock who converted its shares of Series A Preferred Stock prior to July 29, 2019 but is listed on a list of Holders as at a vesting date as a person entitled to receive royalty payments. Following the issuance of royalty payment rights certificate, such royalty payment rights may be transferred, subject to the availability of an exemption from registration under applicable state and federal securities laws, separately from the Series A Preferred Stock. Unsecured Obligations. The royalty payment rights are unsecured obligations of ours. Warrants As of September 30, 2016, we had outstanding warrants to purchase an aggregate of 40,517,500 shares of common stock at exercise prices ranging from $0.50 to $2.00 per share. The Warrants are exercisable immediately upon issuance and have a five-year term. The Warrants may be exercised at any time in whole or in part upon payment of the applicable exercise price until expiration of the Warrants. No fractional shares will be issued upon the exercise of the Warrants. The exercise price and the number of warrant shares purchasable upon the exercise of the Investor Warrants are subject to adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of our capital stock or similar "organic changes" to our equity structure. Accordingly, pursuant to ASC 815, the warrants are classified as equity in the accompanying statement of stockholder s Equity. We may call the Warrants, other than the Placement Agent Warrants, at any time the common stock trades above $5.00 (for 13 million warrants issued in 2013) or above $ 3.00 (for 20 million warrants issued in 2015) for twenty (20) consecutive days following the effectiveness of the registration statement covering the resale of the shares of common stock underlying the Warrants, provided that the Warrants can only be called if such registration statement is current and remains effective at the time of the call and provided further that we can only call the Investor Warrants for redemption, if it also calls all other Warrants for redemption on the terms described above. The Placement Agent Warrants do not have a redemption feature. Such term is a contingent feature and within our control, therefore does not require liability classification. In the 2016 Private Placement, we issued to the Placement Agent or its designees warrants (the "2016 Placement Agent Warrants") to purchase 1,600,000 shares of common stock at an exercise price of $0.50 per share. The 2016Placement Agent Warrants provide
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/NISN_nisun_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/NISN_nisun_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/NISN_nisun_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/NTLA_intellia_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/NTLA_intellia_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2b05a460444268434a6a9a520596e3a551248866
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/NTLA_intellia_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus. You should also consider, among other things, the matters described under Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations, in each case appearing elsewhere in this prospectus. On August 20, 2015, Intellia Therapeutics, LLC, a Delaware limited liability company, merged with and into Intellia Therapeutics, Inc., a Delaware corporation and the issuer of the shares of common stock offered by this prospectus, which we refer to as the Reorganization. As used in this prospectus, unless the context otherwise requires, references to the Company, Intellia, we, us and our refer to (i) prior to the date of the Reorganization, Intellia Therapeutics, LLC and its wholly owned, consolidated subsidiary, or either or both of them as the context may require, and (ii) following the date of the Reorganization, Intellia Therapeutics, Inc. Overview We are a leading gene editing company focused on the development of proprietary, potentially curative therapeutics utilizing a recently developed biological tool known as the CRISPR/Cas9 system. We believe that the CRISPR/Cas9 technology has the potential to transform medicine by permanently editing disease-associated genes in the human body with a single treatment course. We intend to leverage our leading scientific expertise, clinical development experience and intellectual property position to unlock broad therapeutic applications of CRISPR/Cas9 gene editing and develop a potential new class of therapeutic products. In 2012, one of our co-founders and current scientific advisors, Dr. Jennifer Doudna, and her colleagues published a paper in the journal Science describing the use of CRISPR/Cas9 as a gene editing tool. Gene editing is the precise and targeted modification of the genetic material of cells. Since the publication of Dr. Doudna s landmark paper, more than 2,600 research papers have been published on the CRISPR/Cas9 technology. The CRISPR/Cas9 system offers a revolutionary approach for therapeutic development due to its broad potential to precisely edit genes. This system can be used to make three general types of edits: knockouts, repairs and insertions. Each of these editing strategies takes advantage of naturally occurring biological mechanisms to effect the desired genetic alteration. This approach has the potential to provide curative therapeutic options for patients with chronic diseases by addressing the underlying genetic cause or driver of the disease. Unlike earlier-generation gene editing technologies, the CRISPR/Cas9 system is simple and involves a single protein, Cas9, that can be directed to precisely cleave a target DNA sequence by using pieces of RNA, called guide RNAs, that specifically recognize the target DNA of interest. Therefore, CRISPR/Cas9-based therapeutics have the potential to be highly efficient, selective and scalable. We believe that CRISPR/Cas9 offers significant technical advantages and broader potential to edit genes over other gene editing methods. Such advantages include: higher selectivity and cleavage efficiency; simpler tools allowing for rapid scaling and optimization; more efficient path to achieve preclinical proof-of-concept; broader applicability to in vivo and ex vivo therapies; greater potential for single curative treatment; and greater potential to address polygenic or complex genetic disorders by targeting multiple DNA sites simultaneously. Table of Contents If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Accelerated Filer Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller Reporting Company The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents We believe we are well positioned to maximize the potential of the CRISPR/Cas9 system to develop therapeutics based on the following: Strong Product Focus. We are focused on the development of potentially curative therapeutic products through the application of the CRISPR/Cas9 system for the treatment of patient populations with significant unmet needs. We are targeting both in vivo and ex vivo applications in parallel to build a pipeline across a range of indications and to generate a wealth of data that expands the potential therapeutic applications of the CRISPR/Cas9 technology across a broad range of diseases. Deep Management Expertise in Discovering and Developing New Therapeutics. We have assembled a world-class team of executives, founders and advisors who are dedicated to the development of CRISPR/Cas9-based therapeutic products for patients with significant unmet medical needs. Led by Nessan Bermingham, Ph.D., our Founder and Chief Executive Officer, John M. Leonard, M.D., our Chief Medical Officer, and Jos E. Rivera, our Chief Operating Officer and Chief Legal Officer, our team s expertise spans CRISPR/Cas9 and broader gene editing technologies, in vivo and ex vivo therapeutic delivery technologies, preclinical and clinical development, product scale-up and manufacturing, cell and molecular biology, intellectual property, finance and regulatory affairs. Strong Product-Focused Partnerships to Accelerate Path to Clinic. The potential application of CRISPR/Cas9 is extremely broad, and we plan to continue to identify partners who can contribute meaningful resources and insights to our programs and allow us to more rapidly expand our impact to broader patient populations. Our partnership focusing on chimeric antigen receptor, or CAR, T cells with Novartis Institutes for BioMedical Research, Inc., or Novartis, and our partnership with Regeneron Pharmaceuticals, Inc., or Regeneron, a leader in human genetics research, exemplify this strategy. Risk-Mitigated Approach to Accelerate Product Development Path for CRISPR/Cas9 Technology. Our selection criteria for our initial indications position us to build a risk-diversified pipeline, where we are not reliant on any single delivery technology or editing approach for success. In addition, we believe we can apply the learnings from our initial indications to inform our selection of subsequent indications and targets of interest. We believe this approach serves to increase the probabilities of success in our initial indications, generate insights that will accelerate the development of subsequent therapeutic products and broaden the opportunity for potential strategic alliances. Delivery Expertise. Our team has expertise with lipid nanoparticle, or LNP, delivery technology, which involves encapsulating therapeutic agents into microscopic lipid droplets, as well as expertise with viral delivery and experience with electroporation, an electrical charge-based technique for delivering molecules into cells. With this expertise, we expect to be able to readily translate the LNPs that we are using for our preclinical development to clinical development in humans as well as continue to explore additional delivery methods. Leading Intellectual Property Position. Our licensed patent portfolio encompasses foundational filings on the use of CRISPR/Cas9 systems for gene editing, improvements and modifications of these systems and their components, LNP technologies for delivering protein/nucleic acid complexes and RNA into cells and cell expansion technology relevant to stem cell-based therapies. Our licensed patent portfolio also includes a United States patent application owned by The Regents of the University of California, the University of Vienna and Dr. Emmanuelle Charpentier, which is subject to an interference proceeding. Although The Regents of the University of California, the University of Vienna and Dr. Emmanuelle Charpentier have been named the senior party in the interference, meaning that they are presumed to be the earlier inventor, any adverse outcome of such proceeding may affect our ability to utilize this intellectual property. Table of Contents The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED MAY 5, 2016 5,000,000 Shares Common Stock This is the initial public offering of shares of our common stock. Prior to this offering, there has been no public market for our common stock. We are selling 5,000,000 shares of our common stock. The initial public offering price of our common stock is expected to be between $16.00 and $18.00 per share. We have applied to list our common stock on The NASDAQ Global Market under the symbol NTLA. The underwriters have an option to purchase a maximum of 750,000 additional shares of common stock from us. We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in our common stock involves risks. See Risk Factors on page 13. Price to Public Underwriting Discounts and Commissions Proceeds to Intellia Therapeutics, Inc. Per Share $ $ $ Total $ $ $ (1) See Underwriting beginning on page 152 of this prospectus for additional information regarding underwriting compensation. Regeneron Pharmaceuticals, Inc. and Novartis Institutes for Biomedical Research, Inc., our collaboration partners, have agreed to purchase $50.0 million and $5.0 million, respectively, of our common stock in separate private placements concurrent with the completion of this offering at a price per share equal to the public offering price. The sale of such shares will not be registered under the Securities Act of 1933, as amended. The closing of this offering is not conditioned upon the closing of such concurrent private placements. Certain of our existing stockholders, including certain affiliates of our directors, have indicated an interest in purchasing an aggregate of approximately $30.0 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, less or no shares in this offering. Delivery of the shares of common stock will be made on or about , 2016. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Credit Suisse Jefferies Leerink Partners Wedbush PacGrow The date of this prospectus is , 2016 Table of Contents Our Pipeline We plan to use the CRISPR/Cas9 system across two broad areas: in vivo applications, in which CRISPR/Cas9 therapeutic products are delivered directly to target cells within the body, and ex vivo applications, in which cells are removed from a patient s body, modified using CRISPR/Cas9 and then returned to the patient. To maximize our opportunity to rapidly develop clinically successful products, we have applied a risk-mitigated approach to selecting our initial indications, which we refer to as our sentinel indications, that have significant unmet medical needs based on four primary axes: the type of edit knockout, repair or insertion; the delivery modality for in vivo and ex vivo applications; the presence of established therapeutic endpoints; and the potential for the CRISPR/Cas9 system to provide therapeutic benefits when compared to existing therapeutic modalities. We are targeting sentinel indications using in vivo and ex vivo approaches to demonstrate proof-of-concept of the various facets of our technology, including delivery, type of edit, and selectivity and efficiency. The learnings we gain from each indication will pave the way for rapid expansion of our pipeline by targeting subsequent indications that use the same or analogous delivery vehicles, guide structures and types of edits. The following table illustrates our current discovery programs and opportunities: In Vivo Pipeline We have chosen four sentinel in vivo liver programs employing different editing strategies to explore the scope of the gene edits through the CRISPR/Cas9 system: Transthyretin amyloidosis, or ATTR, program, which utilizes a gene knockout strategy; Alpha-1 antitrypsin deficiency, or AATD, program, which utilizes either a gene knockout strategy or a gene repair strategy; Hepatitis B virus, or HBV, program, which utilizes a knockout strategy to target covalently closed circular DNA, or cccDNA; and Table of Contents TABLE OF CONTENTS Page PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/NTNX_nutanix_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/NTNX_nutanix_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/NTNX_nutanix_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/OLLI_ollie-s_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/OLLI_ollie-s_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a48b2f895061e2a49ba55aae9fc95e87f36cd525
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/OLLI_ollie-s_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights information appearing elsewhere in this prospectus or incorporated by reference into this prospectus. This summary is not complete and does not contain all of the information that you should consider before making a decision to participate in the offering. You should carefully read the entire prospectus, including the information presented under Risk factors, Management s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes included or incorporated by reference into this prospectus, before making an investment decision. Unless the context requires otherwise, references to our company, we, us, our and Ollie s refer to Ollie s Bargain Outlet Holdings, Inc. and its subsidiaries. References to comparable store sales are to net sales of comparable stores during a fiscal period. Stores become comparable stores beginning on the first day of the sixteenth full fiscal month following the store s opening. See Management s Discussion and Analysis of Financial Condition and Results of Operations How We Assess the Performance of Our Business and Key Line Items Comparable Store Sales incorporated by reference into this prospectus from our Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (the Form 10-K ) and from our Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2016 (the Form 10-Q ). Four-wall EBITDA for our stores, as used herein, is store net income before depreciation and amortization expenses and excluding any impact for interest expense, income tax expense and general and administrative expenses. Calculations of compound annual growth rate ( CAGR ) from fiscal year 2011 to fiscal year 2015 presented herein are calculated beginning on January 2, 2011, the first day of fiscal year 2011, and ending on January 30, 2016, the last day of fiscal year 2015. Store-level cash-on-cash returns, as described herein, are calculated by dividing four-wall EBITDA for a store by our net cash investment in that store. Our company We are a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices. Known for our assortment of Good Stuff Cheap, we offer customers a broad selection of brand name products, including food, housewares, books and stationery, bed and bath, floor coverings, hardware and toys. Our differentiated go-to market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns. These attributes have driven our rapid growth and strong and consistent store performance. Mark Butler, our Chairman, President and Chief Executive Officer, co-founded Ollie s in 1982, based on the idea that everyone in America loves a bargain. Since opening our first store in Mechanicsburg, PA, we have expanded throughout the Eastern half of the United States. From the time Mr. Butler assumed his current position as President and Chief Executive Officer in 2003, we have grown from operating 28 stores in three states to 208 stores in 18 states as of April 30, 2016 and 212 stores in 18 states as of June 1, 2016. Our no-frills, semi-lovely warehouse style stores average approximately 33,000 square feet and generate consistently strong financial returns across all vintages, geographic regions, population densities, demographic groups, real estate formats and regardless of any co-tenant. Our business model has resulted in positive financial performance during strong and weak economic cycles. Since 1998, 100% of our stores have generated positive four-wall EBITDA on a trailing 12-month basis, and prior to that, we believe all of our stores were profitable in each fiscal year since opening our first store in 1982. We believe there is opportunity for more than 950 Ollie s locations across the United States based on internal estimates and third party research conducted by Jeff Green Partners, a retail real estate feasibility consultant that provides market analysis and strategic planning and consulting services. Our constantly changing merchandise assortment is procured by a highly experienced merchant team, who leverage deep, long-standing relationships with hundreds of major manufacturers, wholesalers, distributors, Table of Contents Information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 6, 2016 10,000,000 Shares Ollie s Bargain Outlet Holdings, Inc. Common stock The selling stockholders named in this prospectus are offering 10,000,000 shares of our common stock. We will not receive any proceeds from the sale of common stock to be offered by the selling stockholders. See Use of proceeds. Our common stock is listed on the Nasdaq Global Market ( NASDAQ ) under the symbol OLLI. On June 3, 2016, the last sale price of our common stock as reported on NASDAQ was $25.52 per share. We are an emerging growth company as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See Summary Implications of being an emerging growth company. Investing in our common stock involves a high degree of risk. See Risk factors beginning on page 11 of this prospectus. PER SHARE TOTAL Public offering price $ $ Underwriting discount (1) $ $ Proceeds to the selling stockholders, before expenses, $ $ (1) We refer you to Underwriting beginning on page 42 of this prospectus for additional information regarding underwriter compensation. The selling stockholders named in this prospectus have granted to the underwriters an option for a period of 30 days to purchase up to 1,500,000 additional shares of common stock from the selling stockholders at the public offering price less underwriting discounts and commissions. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders named in this prospectus, if the underwriters exercise their option to purchase additional shares of our common stock. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of Ollie s Bargain Outlet Holdings, Inc. s common stock to investors on or about , 2016. J.P. Morgan Jefferies BofA Merrill Lynch Credit Suisse Piper Jaffray RBC Capital Markets KeyBanc Capital Markets , 2016. Table of Contents Trademarks and trade names We own various trademarks, service marks and trade names referred to or incorporated by reference in this prospectus, including, among others, Ollie s , Ollie s Bargain Outlet , Ollie s Army , Real Brands! Real Bargains! , Good Stuff Cheap and their respective logos. Solely for convenience, we refer to trademarks, service marks and trade names in this prospectus without the TM, SM and symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks, service marks and trade names. Other trademarks, service marks or trade names appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other parties trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties. Presentation of financial and other information We operate on a fiscal calendar used in the retail industry which results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. Our audited financial statements incorporated by reference from our Annual Report on Form 10-K are our audited consolidated balance sheets as of January 30, 2016 and January 31, 2015 and our audited consolidated statements of income, stockholders equity and cash flows for the fiscal years ended January 30, 2016, January 31, 2015 and February 1, 2014. Our unaudited financial statements incorporated by reference from our Quarterly Report on Form 10-Q are our unaudited condensed consolidated balance sheets as of April 30, 2016 and May 2, 2015 and our unaudited condensed consolidated statements of income, stockholders equity and cash flows for the thirteen weeks ended April 30, 2016 and May 2, 2015. References to fiscal year 2015, fiscal year 2014 and fiscal year 2013 refer to the reported fiscal years ended January 30, 2016, January 31, 2015 and February 1, 2014, respectively. References to fiscal year 2016 refer to the 52-week period ending January 28, 2017. Prior to fiscal year 2012, we operated on a fiscal calendar which resulted in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31 of that year. On September 28, 2012, affiliates of CCMP Capital Advisors, LP (collectively referred to as CCMP ), along with certain members of management, acquired Ollie s Holdings, Inc. ( Ollie s Holdings ) and its sole operating subsidiary, Ollie s Bargain Outlet, Inc. ( Ollie s Bargain Outlet ) through a newly formed entity, Ollie s Bargain Outlet Holdings, Inc. (f/k/a Bargain Holdings, Inc.) (the CCMP Acquisition ). In connection with the CCMP Acquisition, as part of the purchase price allocation, assets acquired and liabilities assumed were adjusted to their estimated fair value as of the closing date of the CCMP Acquisition. Ollie s Holdings is the predecessor to Ollie s Bargain Outlet Holdings, Inc., and the periods on and prior to September 28, 2012 are referred to as the predecessor periods. The periods on and following September 29, 2012 are referred to as the successor periods. We refer to the period from January 1, 2012 through September 28, 2012 as predecessor period 2012 and the period from September 29, 2012 through February 2, 2013 as successor period 2012. References to fiscal year 2011 are to the fiscal year ended December 31, 2011. Each of fiscal years 2015, 2014, 2013 and 2011 consisted of 52-week periods. Successor period 2012 consisted of an 18-week period and predecessor period 2012 consisted of a 39-week period. As a result of the application of purchase accounting in connection with the CCMP Acquisition impacting the successor periods, fiscal years 2015, 2014 and 2013 and successor period 2012 may not be comparable to predecessor period 2012 and fiscal year 2011. Market and industry information Market data and industry information used or incorporated by reference throughout this prospectus are based on management s knowledge of the industry and the good faith estimates of management. We also relied, to Table of Contents brokers and retailers. These relationships enable our merchant team to find and select only the best buys from a broad range of brand name and closeout product offerings and to pass drastically reduced prices along to our customers. As we grow, we believe our increased scale will provide us with even greater access to brand name products because many large manufacturers favor large buyers capable of acquiring an entire deal. Our merchant team augments these deals with directly sourced products including Ollie s own private label brands and other products exclusive to Ollie s. Our business model has produced consistently strong growth and financial performance. From fiscal year 2011 to fiscal year 2015 (except as noted): Our store base expanded from 111 stores to 203 stores, a CAGR of 15.9%, and we entered seven new states. New stores opened from fiscal year 2011 to fiscal year 2014 produced average cash-on-cash returns of over 63% in their first 12 months of operations. Comparable store sales grew at an average rate of 3.2% per year. Net sales increased from $389.9 million to $762.4 million, a CAGR of 17.8%. Adjusted EBITDA increased from $47.1 million to $100.4 million, a CAGR of 20.3%. Net income increased from $16.7 million to $35.8 million, a CAGR of 20.6%. For a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, see Summary historical consolidated financial and other data. Our initial public offering On July 15, 2015, we priced our initial public offering ( IPO ) of 8,925,000 shares of our common stock. On July 16, 2015, our common stock began trading on the NASDAQ Global Market ( NASDAQ ) under the ticker symbol OLLI. In addition, on July 17, 2015, the underwriters of the IPO exercised their option to purchase an additional 1,338,750 shares of common stock from us. As a result, 10,263,750 shares of common stock were issued and sold at a price of $16.00 per share. We received net proceeds from the IPO (including the exercise of the underwriters option) of $153.1 million, after deducting the underwriting fees of $11.1 million. We used the net proceeds from the IPO to pay off outstanding borrowings under our then-existing senior secured asset-based revolving credit facility (the Revolving Credit Facility ) and a portion of the outstanding principal balance of our senior secured term loan facility (the Term Loan Facility, and, collectively with the Revolving Credit Facility, the Senior Secured Credit Facilities ). Table of Contents the extent available, upon management s review of independent industry surveys, forecasts and publications and other publicly available information prepared by a number of third party sources, as well as market analysis and reports prepared by Jeff Green Partners, a retail real estate feasibility consultant that provides market analysis and strategic planning and consulting services. All of the market data and industry information used or incorporated by reference in this prospectus involves a number of assumptions and limitations which we believe to be reasonable, and you are cautioned not to give undue weight to such estimates. Although we believe that these sources are reliable, neither we nor the underwriters can guarantee the accuracy or completeness of this information, and neither we nor the underwriters have independently verified this information. While we believe the estimated market position, market opportunity and market size information included or incorporated by reference in this prospectus are generally reliable, such information, which is derived in part from management s estimates and beliefs, is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Risk factors, Cautionary note regarding forward-looking statements and elsewhere in this prospectus and the documents incorporated by reference. These and other factors could cause results to differ materially from those expressed in our estimates and beliefs and in the estimates prepared by independent parties. Table of Contents Our recapitalization and refinancing On May 27, 2015, we amended the credit agreements governing our Revolving Credit Facility and our Term Loan Facility to, among other things, increase the size of the Revolving Credit Facility from $75.0 million to $125.0 million and to permit a dividend to holders of our outstanding common stock. We also drew $50.0 million of borrowings under our Revolving Credit Facility, the proceeds of which were used to pay an aggregate cash dividend of $48.8 million to holders of our common stock and of which the balance was used to pay $1.1 million of bank fees and $0.1 million of legal and other expenses related to the Recapitalization. We refer to these transactions collectively as the Recapitalization. On January 29, 2016, we refinanced our Revolving Credit Facility and our Term Loan Facility with the proceeds of a new $200.0 million senior secured term loan facility (the New Term Loan Facility ) and a $100.0 million senior secured asset-based revolving credit facility (the New Revolving Credit Facility, and, together with the New Term Loan Facility, the New Credit Facilities ), which includes a $25.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans. For an additional description of the New Credit Facilities, see Description of certain indebtedness New credit facilities. We refer to our entry into the New Credit Facilities and the application of proceeds therefrom as the Refinancing. The Refinancing is anticipated to generate annual interest savings in fiscal year 2016 of approximately $4.0 million on a before tax, pro forma basis. Our private equity sponsor We were acquired by affiliates of CCMP Capital Advisors, LP (collectively referred to as CCMP ) along with certain members of management in September 2012 (the CCMP Acquisition ). CCMP is a leading global private equity firm specializing in buyout and growth equity investments in companies ranging from $250 million to more than $2 billion in size. CCMP s founders have invested over $16 billion since 1984, which includes their activities at J.P. Morgan Partners, LLC (a private equity division of JPMorgan Chase & Co.) and its predecessor firms. CCMP was formed in August 2006 when the buyout and growth equity investment professionals of J.P. Morgan Partners, LLC separated from JPMorgan Chase & Co. to commence operations as an independent firm. The foundation of CCMP s investment approach is to leverage the combined strengths of its deep industry expertise and proprietary operating resources to create value by investing in four targeted industries Industrials, Consumer/Retail, Energy/Chemicals and Healthcare. After the completion of this offering, CCMP is expected to beneficially own approximately 29.5% of our outstanding common stock, or 27.0% if the underwriters exercise their option to purchase additional shares in full. CCMP will continue to be able to exert significant voting influence over fundamental and significant corporate matters and transactions. See Risk factors Risks related to our common stock and this offering CCMP and our Chief Executive Officer will continue to collectively own a substantial portion of our outstanding common stock following this offering, and their interests may be different from or conflict with those of our other stockholders and Principal and selling stockholders. Implications of being an emerging growth company As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act ). An emerging growth company may take advantage of specified reduced reporting and other regulatory requirements for up to five years that are otherwise applicable generally to public companies. These provisions include, among other matters: Table of Contents a requirement to present only two years of audited financial statements and only two years of related Management s Discussion and Analysis of Financial Condition and Results of Operations disclosure; an exemption from the auditor attestation requirement on the effectiveness of our system of internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act ); an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; an exemption from the requirement to seek non-binding advisory votes on executive compensation and golden parachute arrangements; and reduced disclosure about executive compensation arrangements. We will remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO unless, prior to that time, we (i) have more than $1.0 billion in annual revenue, (ii) have a market value for our common stock held by non-affiliates of more than $700 million as of the last day of our second fiscal quarter of the fiscal year a determination is made that we are deemed to be a large accelerated filer, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act ) or (iii) issue more than $1.0 billion of non-convertible debt over a three-year period. We have availed ourselves of the reduced reporting obligations with respect to executive compensation disclosure elsewhere in or incorporated by reference into this prospectus and we expect to continue to avail ourselves of such reduced reporting obligations in future filings with the Securities and Exchange Commission (the SEC ) for as long as we remain an emerging growth company. However, we expect that following this offering, the market value of our common stock held by non-affiliates will be greater than $700 million and as a result, we will lose emerging growth company status to the extent that the market value of our common stock held by non-affiliates remains greater than $700 million as of the last day of our second quarter in fiscal 2016. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the Securities Act ) for complying with new and revised accounting standards. An emerging growth company can, therefore, delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have elected to opt out of that extended transition period and, as a result, we plan to comply with new and revised accounting standards on the relevant dates on which adoption of those standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new and revised accounting standards is irrevocable. As a result of our decision to avail ourselves of certain provisions of the JOBS Act, the information that we provide may be different than what you may receive from other public companies in which you hold an equity interest. In addition, it is possible that some investors will find our common stock less attractive as a result of our elections, which may cause a less active trading market for our common stock and more volatility in our stock price. Table of Contents Summary risk factors Investing in our common stock involves a number of risks, including the following: We may not be able to execute our opportunistic buying, adequately manage our supply of inventory or anticipate customer demand, which could have a material adverse effect on our business, financial condition and results of operations. Our ability to generate revenues is dependent on consumer confidence and spending, which may be subject to factors beyond our control, including changes in economic and political conditions and risks associated with fluctuations in energy and gasoline prices. We face intense competition which could limit our growth opportunities and adversely impact our financial performance. If we fail to open new profitable stores on a timely basis or successfully enter new markets, our financial performance could be materially adversely affected. Our success depends on our executive officers, our merchant team and other key personnel. If we lose key personnel or are unable to hire additional qualified personnel, it could have a material adverse effect on our business, financial condition and results of operations. If we are not successful in managing our inventory balances, it could have a material adverse effect on our business, financial condition and results of operations. We may not be successful in the implementation of our long-term business strategy, which could materially adversely affect our business, results of operations, cash flows and financial condition. Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past. The loss of, or disruption in the operations of, our centralized distribution centers could materially adversely affect our business and operations. Fluctuations in comparable store sales and results of operations, including fluctuations on a quarterly basis, could cause our business performance to decline substantially. We have and will continue to incur increased costs and obligations as a result of being a public company. CCMP and our Chief Executive Officer will continue to collectively own a substantial portion of our outstanding common stock following this offering and their interests may be different from or conflict with those of our other stockholders. Corporate information We were incorporated in Delaware on August 27, 2012 under the name Bargain Holdings, Inc. On March 23, 2015, we changed our name to Ollie s Bargain Outlet Holdings, Inc. Our principal executive offices are located at 6295 Allentown Boulevard, Suite 1, Harrisburg, Pennsylvania 17112, and our telephone number is (717) 657-2300. Our corporate website address is www.ollies.us. Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase our common stock. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/PFGC_performanc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/PFGC_performanc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a30dddbab53c302412e77262b9482a57f792e7c6
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/PFGC_performanc_prospectus_summary.txt
@@ -0,0 +1 @@
+S-1/A 1 d126015ds1a.htm AMENDMENT NO.1 TO FORM S-1 Amendment No.1 to Form S-1 Table of Contents As filed with the Securities and Exchange Commission on May 16, 2016. Registration No. 333-211224 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Performance Food Group Company (Exact Name of Registrant as Specified in its Charter) Delaware 5141 43-1983182 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.) 12500 West Creek Parkway Richmond, Virginia 23238 (804) 484-7700 (Address, including zip code, and telephone number, including area code, of Registrant s principal executive offices) A. Brent King Senior Vice President, General Counsel and Secretary Performance Food Group Company 12500 West Creek Parkway Richmond, Virginia 23238 (804) 484-7700 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Igor Fert, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, NY 10017 Telephone: (212) 455-2000 Facsimile: (212) 455-2502 Marc Jaffe, Esq. Cathy Birkeland, Esq. Latham & Watkins LLP 885 Third Avenue New York, NY 10022 Telephone: (212) 906-1200 Facsimile: (212) 751-4864 Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company CALCULATION OF REGISTRATION FEE Title Of Each Class Of Securities To Be Registered Amount To Be Registered(1) Proposed Maximum Aggregate Offering Price Per Share(1) Proposed Maximum Aggregate Offering Price(1)(2) Amount of Registration Fee Common Stock, par value $0.01 per share 13,800,000 $26.05 $359,490,000 $36,200.64(3) (1) Includes shares/offering price of shares of common stock that the underwriters have the option to purchase. See Underwriting. (2) These figures are estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended, based on the average of high and low prices of the common stock on May 3, 2016 as reported on the New York Stock Exchange. (3) Previously paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents TABLE OF CONTENTS Page MARKET AND INDUSTRY DATA ii TRADEMARKS, SERVICE MARKS AND TRADENAMES ii BASIS OF PRESENTATION ii SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/PI_impinj-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/PI_impinj-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/PI_impinj-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/PLNT_planet_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/PLNT_planet_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6fd1b31a26ec10bc1fd1e216e073634da63e7929
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/PLNT_planet_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/PLSE_pulse_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/PLSE_pulse_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/PLSE_pulse_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/PRTHU_priority_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/PRTHU_priority_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/PRTHU_priority_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/QTZM_quantumzym_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/QTZM_quantumzym_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..f59c9e90fb2f452408b51b3262f7a3a63c9bbac3
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/QTZM_quantumzym_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 5
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/QURT_quarta_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/QURT_quarta_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2a73de19c72657f9575539fb9a7db0e09041e96c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/QURT_quarta_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary provides an overview of selected information contained elsewhere in this prospectus. It does not contain all the information you should consider before making a decision to purchase the shares we are offering. You should very carefully and thoroughly read the following summary together with the more detailed information in this prospectus and review our financial statements and related notes that appear elsewhere in this prospectus. In this prospectus, unless the context otherwise denotes, references to "we," "us," "our" and "Company" refer to Quarta-Rad, Inc. As of December 31, 2015, the date of our most recent audit, we had $222,822 in total assets and, as of March 31, 2016, we had $147,814 in total assets. QUARTA-RAD, INC. Organization We were incorporated in the State of Delaware as a for-profit company on November 29, 2011, under the name Quatra-Rad, Inc. and our incorporator adopted our bylaws and appointed our two directors. On February 29, 2012, we amended our Certificate of Incorporation to change our name to Quarta-Rad, Inc. On July 16, 2012, we amended and restated its Certificate of Incorporation to increase its authorized shares of common stock to 50,000,000, $0.0001 par value from 1,500, no par value and effected a 10,000 to 1 forward split. On February 4, 2015, we filed a Certificate of Correction to our Certificate of Amendment to Certificate of Incorporation to correct it for inadvertently excluding the 10,000 to 1 forward stock split, which our shareholders and directors approved on June 29, 2012. From November 29, 2011 (inception) through May 2012, we had limited operations. Commencing in May 2012, we began sales and implemented our business plan to distribute detection devices, including but not limited to Geiger counters, to homeowners and interested customers in North America by selling them on consignment on behalf of a related party owned by our majority shareholder and which are purchased from a company owned by our minority shareholder. We also purchase the products directly from the company owned by our minority shareholder and sell them to independent third party resellers. A Geiger counter is an instrument used for measuring ionizing radiation. It detects radiation such as Beta particles, Gamma rays and X-rays using the ionization produced in a Geiger–M ller tube, which gives its name to the instrument. We do not currently manufacture any of the products that we sell. We intend to continue to target homebuilders and home renovation contractors for the sale of products and resellers that market to these customers. Our business activities are now focused on expanding our Internet sales. We have established a fiscal year end of December 31. Initially we sold the products on consignment on behalf of Star Systems Corporation, a Japanese company owned by Victor Shvetsky, our majority shareholder, and purchase products from Quarta-Rad, Ltd., a Russian company owned by Alexey Golovanov, our minority shareholder, which we sell to independent third party resellers. Commencing in 2013, we began selling the products directly to third parties through Internet sales. On November 29, 2011, we issued 1,500 pre-split shares of our no par value common stock, valued at $1 per share, to our 2 founders, which includes 1,200 pre-split common shares to our chief executive officer, Victor Shvetsky and 300 pre-split common shares to our president, Alexey Golovanov in exchange for organizational services incurred in our formation valued at $1,200 and $300, respectively. From November 29, 2011 to April 30, 2012, we did not incur any operational expenses. From May 1, 2012, to December 31, 2012, our burn rate was approximately $1,488 per month and, in 2013, our month burn rate was approximately $5,525. Presently, our monthly burn rate is approximately $13,899 per month, which consists of general and administrative expenses, advertising and professional fees. We believe that our present capital is sufficient to cover our monthly burn rate for the next 12 months. We believe that we will require approximately $75,000 in cash to accomplish the goals set out in our plan of operation. To the extent we are unable to accomplish our goals with the proceeds from the issuance of our common stock, then we intend to use our existing cash or raise additional capital from investors through the sale of our common stock or from loans or advances from our majority shareholder. Our majority shareholder has orally agreed to advance us the funds without interest and has agreed to defer repayment until we are able to repay him. Our principal business, executive and registered statutory office is located at 1201 N. Orange St., Suite 700, Wilmington, DE 19801-1186 and our telephone number is (302) 887-9916 and email contact is info@quartarad.com. Our URL address is www.quartarad.com. Business We commenced operations in May 2012, by selling products on consignment from a company owned by our majority shareholder. In 2012, we purchased products from a company owned by our minority shareholder and sold them to a company owned by our majority shareholder and to third party resellers. We believe the terms of those sales were arms-length. In 2012, we began use of the Internet as well as the services of an independent sales representative to market the products to homeowners and interested customers in North America and the majority of our sales were from unrelated third parties. We market the products to homebuilders and home renovation contractors. We have had limited operations and have limited financial resources. In 2011, our operations were devoted primarily to start-up, development and operational activities as well as related party and third party sales, which included: 1. Formation of the Company; 2. Development of our business plan; 3. Evaluating various detection devices; 4. Research on marketing channels/strategies for our detection devices and the industry; 5. Secured our website domain www.quartarad.com and beginning the development of our initial online website; and 6. Research on future products to distribute. 7. Consignment sales on behalf of a related party. 8. Sales to third party resellers. In May 2012, we commenced our business operations by selling products on consignment from a related party company and developing our distribution network. In June 2012, we began to utilize our website to market the products we sell on consignment to our potential customers. We also began implementing our business plan by promoting these products for sale on various websites. We also engaged independent, third party distributors to sell the products. In 2013, increased our Internet presence and increased our sales whereby the majority of our sales were from unrelated third parties. From 2014 to the present, we have continued to sell the products through the Internet to unrelated third parties. See "Risk Factors." We believe that our principal source of revenue will continue to come from Internet sales and sales to resellers of the following products: Radiation Detection Equipment RADEX RD1503 – basic model of a hand-held radiation detector for the consumer market. RADEX RD1706 – enhanced model of a hand-held radiation detector; additional radiation counter provides for a more accurate results (confirmed by JQA – Japan Quality Assurance organization), vibration alarm and several additional functions improve on the RD1503 design specifications. RADEX RD1008 – high-end radiation detection device that provides readings for Gamma- and Beta- radiation values separately. Equivalent devices from other manufacturers cost 5-10 times more. RADEX RD1212 – new model of hand-held radiation detector for the consumer market. It includes all the functionality of RD1503 model as well as ability to store measured values in memory for later transfer to PC. This device comes with newly developed software, RadexRead, developed by Quarta-Rad Inc further enhances RADEX family of Geiger counters by combining the power of PC and Internet, allowing user to visualize and share their measurements with other RADEX consumers. RADEX RD1212-BT – upgraded version of RD1212 with Bluetooth, now capable of linking to smartphones or tablets to transfer data in real time. Also measures atmospheric pressure and air temperature. Special Android/iOS application for smartphones can be used alongside with this product. RADEX RD ONE – compact personal radiation detector, smaller and less expensive than any of the other models. Besides the size, the device has additional features such as: counts accumulative dose, can display measurements in CPMs and links via USB cord to PC for data transfer and analysis. Other standard features include audio/vibration alarm and adjustable alarm thresholds like on all other models. New analytical software was created to chart and analyze received data. Radon Detection Equipment RADEX MR106N – Radon gas detector with digital read-out of the results (in volume of air); readings calculated every 4 hours and saved in the onboard memory log. RADEX MR153N (TBD) – simple Radon gas detector that provides visual/audio alarm when a certain (or legal) threshold is reached. EMI Detection Equipment RADEX EMI50 – hand-held device that provides real-time measuring of Electric Field Strength (in kiloVolt/meter) and Electro Magnetic Field (in microTesla). Light and brightness Detection Equipment RADEX Lupin – Light Meter, Pulse meter and Lucimeter. A hand-held device that measure illumination, brightness and flicker ratio of LED screens, any type of light bulbs or monitors at work or at home. RadexLight Software allows PC connection and data transfer. Spectral sensitivity is identical to a human eye, which separates this model from the competition. Although we have commenced our marketing sales campaign with our own resources and are selling products through online retailers and through resellers, we believe that we need additional capital to increase our sales and expand our marketing program. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to cost effectively purchase and sell the products and market them through the Internet and through distributors. We intend to rely on our Chairman and President's relationships in the industry to supply us with products and introduce us to resellers. We also intend to market our website to the home renovation industry to solicit orders for the sale of products. There can be no guarantee or assurance that our Chairman or President and/or our website will enable us to purchase products on attractive terms that will allow us to resale them to independent third party distributors. No assurance can be given that the products we purchase will be sold to resellers and, if sold to them, will return an investment or make a profit. To achieve the goal of purchasing products on favorable terms, we plan to be selective in our choice of suppliers and work with our shareholders companies as well as other cost-effective suppliers. From November 29, 2011 (our inception) to December 31, 2011, we did not generate any sales. In 2012, we generated $51,405 in sales, which resulted in $29,110 in related party sales and resulted in a net profit of $25,783. In 2013, we generated $661,147 in sales, which included $37,431 in related party sales and a net profit of $112,992. In 2014, we generated $1,045,020, in net sales, which were all from third parties and incurred a loss of ($95,084). In 2015, we generated $829,032 in net sales and earned a profit of $50,463. For the three-months ended March 31, 2016, we generated $208,998 in sales and had a net loss of ($8,497). We anticipate that we will continue to generate revenues and net profits and will be able to increase our revenues after we have raised additional funds. We believe that we have sufficient working capital to continue our operations for the next 12 months; however, we believe that we need to seek additional financing to expand our sales. As of March 31, 2016, we had $36,716 in cash on hand in our corporate bank account and liabilities of $62,757, which consisted of $46,916 in related party payables. As of December 31, 2015, we have $66,390 in cash on hand in our corporate bank account and liabilities of $129,268, which consisted of $126,976 in related party payables. As of December 31, 2014, we had $101,354 cash on hand in our corporate bank account and liabilities of $223,081. In addition, we anticipate the costs associated with this offering to be approximately $44,200, which we will pay from our cash or from shareholder advances in the event the proceeds from our offering are insufficient. We currently have two officers and directors. These individuals allocate time and personal resources to us on a part-time basis and devote approximately 15 hours per week to us. From our inception through September 30, 2013, one of our shareholders, who is an officer or director and who owns 20% of our common stock, has sold us inventory to resell to a company owned by our majority shareholder. Subsequent to September 30, 2013, our sales have been to independent, third parties. Since May 2012, we have utilized the services of an independent contractor to assist us in selling the products. He is paid on a commission only basis. The following financial information summarizes the more complete historical financial information as indicated in the audited financial statements we are filing with this prospectus. As of the date of this Prospectus, we have 15,000,000 shares of $0.0001 par value common stock issued and outstanding, which is owned by 2 shareholders. We do not have any authorized shares of preferred stock. The aggregate market value of our common stock based on the offering price of $0.20 per share is $3,000,000. As of our most recent audit, which is December 31, 2015, our stockholders equity is $93,554 and, as of March 31, 2016, was $85,057. THE OFFERING We are offering for sale a total of 1,500,000 shares of common stock at a fixed price of $0.20 per share. There is no minimum number of shares that must be sold by us for the offering to proceed, and we will retain the proceeds from the sale of any of the offered shares. The offering is being conducted on a self-underwritten, best efforts, basis, which means our chief executive officer, Mr. Victor Shvetsky and our president, Mr. Golovanov, will attempt to sell the shares. This prospectus will permit them to sell the shares directly to the public, with no commission or other remuneration payable to them for any shares they may sell. Mr. Shvetsky and Mr. Golovanov will sell the shares and intend to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, they will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934 (the "Exchange Act"). The intended methods of communication include, without limitations, telephone and personal contact. The following is a brief summary of this offering. Please see the "Plan of Distribution" section for a more detailed
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/REPX_riley_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/REPX_riley_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..7ca046de4d74d4bc0eeb2e12b901b669c51483ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/REPX_riley_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you. This prospectus includes information about our business and our financial and operating data. Before making an investment decision, we encourage you to read the entire prospectus carefully, including the risks discussed in the Risk Factors section. We also encourage you to review our financial statements and the other information we provide in the reports and other documents that we file with the SEC, as described under Where You Can Find More Information. Our Company We are in the business of exploring for and producing oil and natural gas in Kansas. We lease producing and non-producing properties with a view toward exploration and development. We primarily operate oil wells in the State of Kansas. We also own and operate a facility in Tennessee for production of electricity from landfill methane gas. The Company was initially organized in Utah in 1916 under a name later changed to Onasco Companies, Inc. In 1995, the Company changed its name from Onasco Companies, Inc. by merging into Tengasco, Inc., a Tennessee corporation, formed by the Company solely for this purpose. In 2011, the stockholders of the Company approved an Agreement and Plan of Merger adopted by the Company s board of directors which provided for the merger of the Company into a wholly-owned subsidiary formed in Delaware for the purpose of changing the Company s state of incorporation from Tennessee to Delaware. The merger became effective on June 12, 2011, and the Company is now a Delaware corporation. The address of our principal executive office is 6021 South Syracuse Way, Suite 117, Greenwood Village, Colorado 80111, and our telephone number at that address is (720) 420-4460. We are a smaller reporting company under rules and regulations of the SEC. The Rights Offering The following summary describes the principal terms of the rights offering, but is not intended to be complete. See The Rights Offering in this prospectus for a more detailed description of the terms and conditions of the distribution of the subscription rights and the offering. For a more detailed description of our common stock which they represent, see Description of Our Common Stock. Securities Offered We are distributing, at no charge, to holders of our common stock nontransferable subscription rights to purchase up to an aggregate of 12,195,446 shares of our common stock. You will receive a fixed number of subscription rights for each share of common stock owned at 5:00 p.m., New York City time, as of the record date set forth below. Record Date 5:00 p.m., New York City time, on November 21, 2016. Expiration Date 5:00 p.m., New York City time, on [ ], 2017 (at least 14 days following the mailing date), unless extended by us, in our sole discretion, for up to an additional 30 days. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED DECEMBER 22, 2016 PROSPECTUS TENGASCO, INC. SUBSCRIPTION RIGHTS TO PURCHASE AN AGGREGATE OF UP TO 12,195,446 SHARES OF COMMON STOCK UP TO 12,195,446 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE SUBSCRIPTION RIGHTS We are distributing to holders of our outstanding common stock, at no charge, nontransferable subscription rights to purchase an aggregate of up to 12,195,446 shares of our common stock at a cash subscription price of $[ ] per share for maximum gross proceeds of $[ ]. You will receive for each share of our common stock you own a right to purchase two shares of our common stock at an exercise price of $[ ] for each share purchased. If you exercise your rights in full, you may oversubscribe for the purchase of additional shares that remain unsubscribed at the expiration of the rights offering, subject to availability and allocation of shares among persons exercising this oversubscription privilege and to certain other limitations described below. In no event, however, may any subscriber purchase shares of our common stock in the offering that, when aggregated with all of the shares of our common stock otherwise owned by the subscriber and his, her or its affiliates, would immediately following the closing of this rights offering represent 50% or more of our issued and outstanding shares. You will not be entitled to receive any rights unless you hold of record shares of our common stock as of the close of business on November 21, 2016. Our board of directors has determined that this rights offering is advisable under our present financial, operational and other circumstances. Our board of directors formed a three-person special committee of its members charged with, among other things, recommending to the full board of directors the terms of this rights offering. No special committee member is an employee of Tengasco or its subsidiaries nor has any personal interest in the rights offering other than his personal share ownership. Although we expect that members of our board of directors and management may participate in the rights offering, we have no agreements or understandings with any persons or entities, including members of our board of directors, our management and any brokers or dealers, with respect to their exercise of any rights offered hereby or their participation as an underwriter, broker or dealer in this offering. The rights will expire if they are not exercised by 5:00 p.m., New York City time, on [ ], 2017 (at least 14 days following the mailing date), the expected expiration date of the rights offering. We may extend the period for exercising the rights for up to an additional 30 days. Subscription amounts received will be held by the subscription agent until completion of the rights offering, during which period the right holders will not earn interest. Rights that are not exercised by the expiration date of the rights offering will expire and will have no value. Rights may not be sold or transferred except under limited circumstances described later in this prospectus. You should carefully consider whether to exercise your rights. Our board of directors makes no recommendation regarding your exercise of rights. Table of Contents Subscription Price $[ ] per share, payable in cash. To be effective, any payment related to the exercise of a subscription right must be received by the subscription agent before the expiration of the rights offering. After the date of this prospectus, our common stock may trade at prices below the subscription price. In that event, our board of directors may change the subscription price of this offering or determine to cancel or otherwise alter the terms of this offering. Basic Subscription Privilege Each subscription right includes a basic subscription privilege to purchase two shares, both of which must be purchased with each subscription right exercised. Oversubscription Privilege If a stockholder exercises all its basic subscription privileges for all shares it owns, the stockholder may exercise an oversubscription privilege to purchase at the same price, a portion of any rights offering shares not purchased by other stockholders exercising their subscription privileges in full, subject to certain limits. No Fractional Shares No rights may be exercised as to any fraction of a share owned, and no fractional shares will be issued in the rights offering. However, a stockholder may exercise its rights as to all or any portion of the number of shares it owns if the portion is stated in whole numbers. Extension or Cancellation The Company may extend the offering or cancel it. Shares of Common Stock Outstanding as of the Record Date 6,097,723 shares of our common stock are issued and outstanding as of the record date. Shares of Common Stock Outstanding After Completion of the Rights Offering We will issue approximately 12,195,446 shares of common stock in this rights offering if it is fully subscribed. Upon consummation of the rights offering, if fully subscribed, we expect to have approximately 18,293,169 shares of outstanding common stock on a fully diluted basis. Use of Proceeds We intend to use the net proceeds of this offering to pay bank debt, for working capital for exploration and development growth purposes involving certain prospects being considered by the Company in several states, and for general corporate purposes. See Use of Proceeds. Table of Contents Shares of our common stock are traded on the NYSE MKT exchange under the symbol TGC. On December 21, 2016, the closing price for our common stock was $0.73 per share. Although application has been made to list the shares of common stock offered hereby on the exchange, we cannot be sure that such listing will be granted. See Risk Factors. AN INVESTMENT IN OUR COMMON STOCK IS RISKY. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED ON PAGE 13 OF THIS PROSPECTUS BEFORE EXERCISING YOUR RIGHTS. Per Share Total (1) Subscription price $[ ] $[ ] Estimated offering expenses (2) 0.01 150,933 Net proceeds to Tengasco $[ ] $[ ] (1) Assumes the exercise of subscription rights to purchase all 12,195,446 shares of common stock in this rights offering. (2) Although we will incur certain offering expenses, no underwriting discounts or commissions will be paid in connection with this offering. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ], 2016. Table of Contents Procedure for Exercising Subscription Rights If you elect to exercise your rights being distributed in the offering, you must send certain documentation and payment to the subscription agent before the offering expires. For instructions on how your subscription documents and payment should be sent to the subscription agent, see The Rights Offering Required Forms of Payment of the Subscription Price. Nontransferability of the Rights The rights in the rights offering may not be transferred except in very limited circumstances. See The Rights Offering Nontransferability of the Rights. No Revocation Once exercised, the rights in the offering may not be revoked, even if you later learn information about us that you consider to be unfavorable or the market price of our common stock falls below the $[ ] per share subscription price, unless we amend the terms of the offering. Delivery of Shares Any shares you elect to purchase in the rights offering will be delivered to you or your broker as soon as practical following the conclusion of the offering period. No Recommendation Our board of directors makes no recommendation as to whether any stockholder should or should not exercise its rights in the rights offering. Market for Common Stock The Company s common stock is listed and trades on the NYSE MKT exchange under the ticker symbol TGC. Material U.S. Federal Income Tax Consequences It is the opinion of tax counsel that the distribution of subscription rights to a holder of shares of our common stock or of rights or warrants to acquire shares of our common stock should be treated, for U.S. federal income tax purposes, as a non-taxable distribution under Section 305(a) of the Internal Revenue Code of 1986, as amended (the Code ), and the Treasury Regulations promulgated thereunder. You should, however, seek specific tax advice from your own tax advisor in light of your own tax situation, including as to the applicability and effect of any other tax laws. See Material U.S. Federal Income Tax Consequences. Foreign Holders of Registered Common Stock Certificates The subscription agent will mail rights certificates to you if your address is outside the United States or if you have an Army Post Office or a Fleet Post Office address. To exercise your rights, you must notify the subscription agent and take all other steps which are necessary to exercise your rights on or prior to expiration of the offering. Subscription Agent Continental Stock Transfer & Trust Company Table of Contents Risk Factors Investors considering making an investment by exercising subscription rights in the rights offering should carefully read the information set forth in Risk Factors beginning on page 13 of this prospectus, the documents incorporated by reference herein, and the risks that we have highlighted in other sections of this prospectus. Questions Anticipated common questions are set out and answered beginning on page 7 below. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/RRR_red-rock_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/RRR_red-rock_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9a023c4cf6a467240620a4d326e1ce0a5c08deb9
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/RRR_red-rock_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our Class A Common Stock. Before making an investment decision, you should read this entire prospectus carefully, including the discussion under the heading "Risk Factors" and the consolidated financial statements and related notes thereto contained elsewhere in this prospectus. This prospectus includes forward looking-statements that involve risks and uncertainties. See "Forward-Looking Statements" for more information. Our Company We are a leading gaming, development and management company operating 22 strategically-located casino and entertainment properties. We have developed over $5 billion of regional gaming and entertainment destinations in multiple jurisdictions. In addition, we are an established leader in Native American gaming, managing facilities in northern California and western Michigan. We began operations in 1976 with a 5,000 square foot casino featuring 100 slot machines and have grown through development and acquisitions to become a premier provider of gaming and entertainment for residents of the Las Vegas regional market and visitors. Our Las Vegas portfolio includes ten major gaming and entertainment facilities and ten smaller casinos (three of which are 50% owned), offering approximately 20,350 slot machines, 350 table games and 4,750 hotel rooms. Our Las Vegas properties are broadly distributed throughout the market and easily accessible, with over 90% of the Las Vegas population located within five miles of one of our gaming facilities. We offer convenience and a wide variety of gaming and non-gaming entertainment options to attract guests to our properties. We also provide friendly service and exceptional value in a comfortable environment. Most of our major properties are master-planned for expansion, enabling us to incrementally expand our facilities as demand dictates. We also control seven highly desirable gaming-entitled development sites consisting of approximately 398 acres in Las Vegas and Reno, Nevada. We believe that the Las Vegas regional market is one of the most attractive gaming markets in the United States due to favorable economic and market fundamentals, a number of which drive demand for our products. The following metrics, for the most recent period available, indicate that an economic recovery is underway in the Las Vegas regional market: Population growth was approximately 2.8 times the national average in 2015; Las Vegas year-over-year employment growth was 2.9%, based on preliminary data in August 2016 from the U.S. Bureau of Labor Statistics ("BLS"), which marks the sixth consecutive year of positive growth; Home value appreciation of 8.3%, compared to the national average of 5.6% during the year ended June 2016; Las Vegas welcomed a record 42.8 million visitors for the twelve months ended August 2016; and Approximately $18.7 billion in new investments are either in the planning stages or actively under development in Las Vegas, based on public announcements. In addition to these favorable demand drivers, the Las Vegas regional market provides a stable and highly attractive tax structure, as well as legal limitations that restrict the development of additional off-Strip gaming properties. In particular: Nevada offers the lowest maximum statutory gaming tax rate in the United States at 6.75%, and has only raised gaming taxes once in the last 28 years; Nevada State Senate Bill 208 ("SB 208"), enacted in 1997, significantly limits the construction of casinos in the Las Vegas valley; and FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our Class A Common Stock. For investors outside the United States: We have not and the selling stockholders have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A Common Stock and the distribution of this prospectus outside the United States. In this prospectus, unless otherwise stated or the context otherwise requires: (1) the "Company," "we," "our," "us," "Red Rock" and similar references refer to Red Rock Resorts, Inc., a Delaware corporation, and its consolidated subsidiaries, including Station Holdco LLC and (2) "Station Holdco" refers to Station Holdco LLC, a Delaware limited liability company and its consolidated subsidiaries. See "The Reorganization of Our Corporate Structure." On January 5, 2016, Red Rock amended its certificate of incorporation to change its name from "Station Casinos Corp." to "Red Rock Resorts, Inc." References to LLC Units in this prospectus are to limited liability company interests in Station Holdco. References to our "existing owners" are to the members of Station Holdco. When we describe the exchange of LLC Units and shares of Class B Common Stock on a "one-for-one basis" we mean that (x) one LLC Unit and one share of Class B Common Stock will be exchanged for (y) one share of Class A Common Stock. References to our Principal Equityholders in this prospectus are to (i) FI Station Investor LLC ("FI Station Investor"), KVF Investments, LLC, LNA Investments, LLC and Fertitta Business Management LLC, entities that are owned by certain trusts and other entities owned or established for the benefit of Frank J. Fertitta III, our Chairman and Chief Executive Officer, and Lorenzo J. Fertitta, a member of our board of directors, and their spouses and lineal descendants, (ii) Frank J. Fertitta III and Lorenzo J. Fertitta, or any of their spouses or lineal descendants and (iii) any trust or entity, other than the Company, that is controlled by, or established for the benefit of, or the estate of Frank J. Fertitta III or Lorenzo J. Fertitta or their spouses or lineal descendants (collectively with FI Station Investor, KVF Investments, LLC, LNA Investments, LLC and Fertitta Business Management LLC, the "Fertitta Family Entities"). When we present information on a "pro forma" basis, such information gives pro forma effect to the IPO and Reorganization Transactions and such other transactions described in this prospectus under "Unaudited Pro Forma Condensed Consolidated Financial Information." Industry and Market Data Although we are responsible for all disclosure contained in this prospectus, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications and government publications in conjunction with our assumptions about our markets. Unless otherwise noted, the independent third-party sources for the economic indicators cited herein are based on the citations set forth as footnotes to the tables appearing on pages 89 and 94 in the section of this prospectus entitled "Description of Our Business Our Competitive Strengths." While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the Table of Contents No new major gaming facilities have opened in the Las Vegas regional market that cater predominantly to Las Vegas residents since 2009 and no new development of such facilities has been announced. We are intensely focused on providing the best possible guest experience and creating guest loyalty. Our "Boarding Pass" loyalty program, which allows members to earn and redeem rewards at any of our properties, has achieved high levels of guest use with a significant majority of our gaming revenue generated by Boarding Pass members. In addition, we estimate that nearly half of the adult population of the Las Vegas metropolitan area are members of our Boarding Pass program and have visited one or more of our properties during the twelve months ended September 30, 2016. The Boarding Pass also has significant brand recognition and guest value, as evidenced by being selected "Best Players Club" for each of the last 15 years by the Las Vegas Review Journal. We initially became a publicly traded company in 1993 and, following a significant period of development and expansion between 1993 and 2007, were taken private in 2007 in a management-led buyout. Impacted by the financial crisis between 2008 and 2011, we completed a restructuring in June 2011. Since that time, we have: Further strengthened our capital structure by: Reducing total debt by $350.0 million to $2.1 billion as of June 30, 2016 (excluding a $115.9 million non-recourse land loan and net of excess cash) from approximately $2.45 billion; and Significantly reducing the ratio of total debt to Adjusted EBITDA. Invested $467.0 million in capital improvements to maintain and enhance our properties, including: Adding and renovating numerous non-gaming amenities across our portfolio; Continuing to refresh our gaming floors with the latest products and technology; Creating innovative technology products such as mobile sports betting applications and interactive marketing kiosks; and Investing in information technology to improve our systems and protect our and our guests' proprietary data. Improved our profitability: For the six months ended June 30, 2016 compared to the six months ended June 30, 2015, Adjusted EBITDA increased 9.1% and Adjusted EBITDA margin improved by 150 basis points to 35.3% while income from continuing operations increased by 10.0%. See "Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial and Other Data" for the definition of Adjusted EBITDA and a reconciliation of this non-GAAP metric to the most directly comparable GAAP metric. We believe that our high-quality assets, market-wide distribution and award-winning Boarding Pass loyalty program will allow us to achieve significant benefits from improving economic conditions in Las Vegas. Further, our refined cost structure will help maximize the flow-through of net revenue to Adjusted EBITDA, as additional economic growth drives incremental revenue at our properties. These factors position us well for future growth, including expanding our existing properties, developing our strategic real estate portfolio, pursuing new management contracts, and opportunistically acquiring existing properties and pursuing new developments in other markets. RED ROCK RESORTS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State or other jurisdiction of incorporation or organization) 7990 (Primary Standard Industrial Classification Code Number) 47-5081182 (I.R.S. Employer Identification Number) 1505 South Pavilion Center Drive Las Vegas, Nevada 89135 (702) 495-3000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) headings "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors" in this prospectus. Presentation of Financial Information In May 2016, Red Rock completed an initial public offering ("IPO") of approximately 29.5 million shares of Class A Common Stock at an offering price to the public of $19.50 per share. We received net proceeds from the IPO of approximately $541.0 million, which was used to purchase newly issued limited liability company interests in Station Holdco ("LLC Units") and outstanding LLC Units from existing members of Station Holdco. Station Holdco used the proceeds from the newly issued LLC Units to pay a portion of the purchase price of Fertitta Entertainment LLC ("Fertitta Entertainment," and such purchase, the "Fertitta Entertainment Acquisition"). The reorganization transactions related to the IPO are referred to herein as the "Reorganization Transactions." As a result of the Reorganization Transactions, we manage and own an indirect equity interest in our operating company, Station Casinos LLC ("Station LLC"), through our ownership interest in Station Holdco, which holds all of the economic interests in Station LLC. Station LLC is a gaming, development and management company established in 1976 that develops and operates casino entertainment properties. Prior to the Fertitta Entertainment Acquisition, subsidiaries of Fertitta Entertainment managed properties owned by Station LLC through long-term management agreements and, other than with respect to our Wild Wild West property, such management agreements were terminated in connection with the Fertitta Entertainment Acquisition. We have no operations outside of our management of Station LLC and our Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, including the retrospective consolidation of Fertitta Entertainment, and Station Holdco for all periods presented. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest. Non-GAAP Financial Measures We have included a presentation of Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") in this prospectus that is not in accordance with generally accepted accounting principles ("GAAP"). We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to operating income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations excluding non-cash expenses, financing costs, and other non-operational items. Further, Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by GAAP and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. In addition, it should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies. See "Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial and Other Data" for definitions of the non-GAAP financial measures used in this prospectus and reconciliations thereof to the most directly comparable GAAP measures. Table of Contents Our Competitive Strengths We believe the following competitive strengths position us well for future growth and financial performance. Portfolio of highly attractive assets broadly distributed throughout Las Vegas We own and operate 20 strategically-located casino and entertainment properties in the Las Vegas regional market, and over 90% of the Las Vegas population is located within five miles of one of our casinos. All of our properties enjoy convenient access and visibility from an interstate highway or major thoroughfare. As of October 1, 2016, after giving effect to the acquisition of the Palms Casino Resort (the "Palms") that closed on October 1, 2016, our 20 Las Vegas properties offered the following gaming and non-gaming amenities: 20,347 slot and video poker machines featuring the latest technology and most popular themes in a variety of denominations; 350 table games, including blackjack, baccarat, craps, roulette and high-limit gaming salons; 4,754 hotel rooms ranging from standard rooms to one-of-a-kind luxury suites of more than 7,500 square feet and 599 condo units at the Palms; 132 food and beverage venues, including 67 restaurants ranging from fine dining to casual dining and 65 quick-serve outlets; 57 bars and lounges ranging from casual country to ultra-modern chic, featuring signature cocktails, live music and dancing; 330,000 square feet of flexible convention and meeting space ranging from boardrooms to ballrooms; 29 live entertainment venues ranging from intimate lounges to the 2,500-seat state-of-the-art Pearl Theater, and hosting a wide variety of acts from rock and country headliners to cover bands and comedians; 110 movie screens in eight theaters with IMAX 3D, private viewing boxes and the latest sound and seating technology; and 282 bowling lanes in five state-of-the-art facilities, featuring cosmic bowling, VIP lanes, private party suites and cocktail lounges. We take great pride in the appearance of our properties and have historically invested a considerable amount of capital to maintain, refresh and enhance our properties in a manner that is consistent with our high standards and to position our properties as best-in-class. The Las Vegas economy has begun to recover from the economic downturn and recent trends indicate that the recovery is ongoing. We believe the Las Vegas regional market is one of the most attractive gaming markets in the United States due to its strong economic and demographic fundamentals, a stable and supportive regulatory environment, the lowest maximum statutory gaming tax rate in the nation and significant current and announced investment. Large and Loyal Customer Base We have a large and established guest database. Our Boarding Pass loyalty rewards program has achieved high levels of guest use, with a significant majority of our gaming revenue being generated by Boarding Pass members. In addition, we estimate that nearly half of the adult population of the Las Vegas metropolitan area are members of our Boarding Pass program and have visited one or more of our properties during the twelve months ended September 30, 2016. The Boarding Pass also has significant brand recognition and guest value, as evidenced by being selected "Best Players Club" for Frank J. Fertitta III Chief Executive Officer Red Rock Resorts, Inc. 1505 South Pavilion Center Drive Las Vegas, Nevada 89135 (702) 495-3000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents each of the last 15 years by the Las Vegas Review Journal. The Boarding Pass encourages guest loyalty and allows us to provide tailored promotions, messaging and guest experience. The program links all of our properties, allowing players to earn and redeem points at any of our properties, providing unparalleled diversity of experience, which we believe provides us with a competitive advantage. We believe that our targeted marketing strategies create guest loyalty, as a significant majority of our Boarding Pass members who were in our database as of December 31, 2015 continued to visit our properties in 2016. We believe these marketing strategies will enable us to continue to grow our database and promote repeat visitation by Boarding Pass members. Well positioned for growth We believe that our uniquely positioned platform will continue to benefit from the ongoing recovery of the Las Vegas economy through increased visitation and guest spend, as population, employment and average weekly earnings growth are all critical drivers of both gaming and non-gaming revenues. Based on preliminary data from the BLS, employment and average weekly earnings in the Las Vegas area were 2.9% and 2.1% higher, respectively, in August 2016 compared to August 2015. As employment levels and average weekly earnings continue to improve, we expect continued growth in gaming revenues, which at $2.2 billion for the twelve months ended August 31, 2016 remained approximately 15.1% below peak levels experienced in the Las Vegas regional market in 2007. We believe our existing cost structure, which benefits from Nevada having the lowest maximum statutory gaming tax rate in the United States, contributes to lower variable costs and creates a scalable platform to support higher margin growth. We also believe that our capital structure provides us with the flexibility to pursue additional growth opportunities. While a number of important regional metrics that drive demand for our products such as population, employment (measured by number of jobs) and taxable sales are above or approaching pre-recession peak levels, other metrics such as home prices and gaming revenue in the Las Vegas regional market, remain well below peak levels experienced prior to the recession. Innovative management team and owner-operator alignment with shareholders We believe that one of our competitive strengths has been the ability of our highly-experienced management team, led by the Fertitta family, to identify, develop and execute innovative and value-creating opportunities. Examples include identifying the Las Vegas regional market niche in 1976, developing the regional entertainment destination concept through multiple major casino openings in the 1990's and 2000's, introducing the highly successful Boarding Pass loyalty reward program in 1999, and capitalizing on the opportunity created by Nevada's passage of SB 208 through a series of strategic acquisitions and new developments. Outside of Las Vegas, we leveraged our business model by entering into development and management agreements with several Native American tribes and developed and operated some of the most successful Native American casinos in the country. We have developed over $5 billion of gaming facilities, with each new property being designed for its market and benefiting from the experience gained from our prior projects. We have also developed proprietary data analytics which allow us to monitor revenues and operational expenses on a daily basis, benchmark results across properties, and provide real-time information for management decision-making. The application of our analytics and in-house technologies has resulted in Adjusted EBITDA margins that compare favorably to our public peers over the past several years. The Fertitta family has maintained significant ownership in the Company since it was founded in 1976 and continues to be our largest shareholder. We believe the owner-operator dynamic of the Fertitta family's continued leadership, together with its significant ownership, results in a high degree of alignment with our shareholders. Table of Contents RED ROCK RESORTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 9. Stockholders'/Members' Equity (Continued) At June 30, 2016, noncontrolling interest represented the approximate 64% ownership interest in Station Holdco not held by the Company, as well as a 50% ownership interest in MPM and ownership interests of the former mezzanine lenders and former unsecured creditors of Station Casinos, Inc. who hold warrants to purchase membership interests in CV Propco and NP Tropicana LLC. In July 2016, the Company's board of directors declared a dividend of $0.10 per share of Class A common stock to be holders of record as of August 15, 2016 which was paid on August 30, 2016. Prior to the payment of the dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including the Company, of $0.10 per unit for a total distribution of approximately $11.6 million, of which $7.5 million was paid to its noncontrolling interest holders. Changes in Accumulated Other Comprehensive Income (Loss) The following table presents changes in accumulated other comprehensive income (loss) balances by component of other comprehensive (loss) income, net of tax and noncontrolling interest, for the six months ended June 30, 2016 (amounts in thousands): Accumulated Other Comprehensive Income (Loss) Unrealized Loss on Interest Rate Swaps Unrealized (Loss) Gain on Available-for-sale Securities Total Balances, December 31, 2015 $ (5,279 ) $ (24 ) $ (5,303 ) Other comprehensive (loss) income before reclassifications(a) (2,990 ) 21 (2,969 ) Amounts reclassified from accumulated other comprehensive loss into income(b) 1,290 1,290 Net current-period other comprehensive (loss) income (1,700 ) 21 (1,679 ) Effects of the Reorganization Transactions 3,768 7 3,775 Balances, June 30, 2016 $ (3,211 ) $ with copies to: Kenneth J. Baronsky, Esq. Deborah J. Conrad, Esq. Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, California 90017 (424) 386-4000 Table of Contents Our Business Strategy Continue to provide a high quality, value-oriented gaming and entertainment experience We are committed to providing a high-value entertainment experience for our guests, as our significant level of repeat visitors demand exceptional service, variety and quality in their overall experience. We offer a broad array of gaming options, including the most popular slot and video poker products, and the latest technological innovations in slots, table games and sports wagering. We believe that providing a wide variety of entertainment options is also a significant factor in attracting guests. In particular, we feature multiple dining options at all of our major properties, which is a primary motivation for casino visits. We are dedicated to ensuring a high level of guest satisfaction and loyalty by providing attentive guest service in a convenient, friendly and casual atmosphere. As part of our commitment to providing a high value entertainment experience and to stimulate visitation, we regularly refresh and enhance our gaming and non-gaming amenities. Generate revenue growth through targeted marketing and promotional programs Our significant advertising programs generate consistent brand awareness and promotional visibility. Our ability to advertise under a single brand across our portfolio also allows us to achieve material economies of scale. While we primarily advertise through traditional media such as television, radio and newspaper, we continue to increase our focus on reaching and engaging guests through social, digital and mobile solutions. We employ an innovative marketing strategy that utilizes our frequent high-profile promotional programs to attract and retain guests, while also establishing and maintaining a high level of brand recognition. Our proprietary customer relationship management systems are highly attuned to how guests interact with our properties and products. This information allows us to focus on targeting guests based on their preferences. In addition, we are investing in technology that will be installed on all of our slot machines and will permit us to provide "on device" marketing, bonusing and guest communication, including real-time customized promotions and incentives. We believe that our focused marketing allows us to create greater guest loyalty. We continually refine our database marketing programs to drive visitation and increase profitability. We recently introduced custom kiosk games to enhance the promotional engagement and experience of our Boarding Pass members. We plan to continue developing these custom interactive games to retain and build our guest database. We have also developed progressive mobile solutions to engage our current guests and attract new guests. Maximize business profitability During our 40-year history, we have developed a culture that focuses on operational excellence and cost management. We believe that this focus has contributed to Adjusted EBITDA margins that compare favorably to our public peers over the past several years. Our internally developed proprietary systems and analytical tools provide us with the ability to closely monitor revenues and operational expenses and provide real-time information for management solutions. Detailed benchmarking across our 22 properties also allows us to create and take advantage of best practices in all functional areas of our business. We believe our existing cost structure, which has low variable costs, can support significant incremental revenue growth while maximizing the flow-through of revenue to Adjusted EBITDA. Utilize strong capital structure to drive growth and shareholder returns We maintain a flexible, low-leverage capital structure relative to our public peers that we believe will allow us to pursue a balance of new growth opportunities and a disciplined return of capital to our shareholders. We believe our scalable platform and extensive development and management expertise provide us the ability to build master-planned expansions, pursue acquisitions and/or seek new development opportunities in an effort to maximize shareholder returns. Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents Our Growth Strategy Drive same store growth As the Las Vegas economy recovers, we believe population, employment levels, average weekly earnings and consumer confidence will continue to improve. We believe we are uniquely positioned to benefit from this growth through increased guest spend and visitation. We believe our existing Las Vegas portfolio should benefit from improving economic conditions resulting in ongoing same-store growth. In addition to our existing capacity, most of our major properties and managed casinos have been master-planned for future growth. As such, we have the ability to meet demand and increase revenue by developing additional facilities at those properties, which may include additional gaming, hotel rooms, meeting and conference space, restaurants or entertainment venues. The Native American gaming facilities we manage are also positioned for same-store growth. Since opening in November 2013, Graton Resort & Casino ("Graton Resort"), the largest gaming and entertainment facility in the San Francisco Bay area, has shown steadily improving business levels. Graton Resort's recent $175.0 million expansion includes a 200-room hotel, convention space and other resort amenities that are expected to open in November 2016. Gun Lake Casino is expanding its gaming, entertainment and dining offerings which are expected to open in the summer of 2017. In addition, Graton Resort and Gun Lake Casino are both positioned to benefit from the continued improvement of the overall economy, which should yield increased management fees without our need to invest additional capital. Pursue growth opportunities We control seven highly desirable gaming-entitled development sites consisting of approximately 398 acres in Las Vegas and Reno, Nevada. As such, we believe we are well positioned to capitalize on future demand for additional gaming and entertainment facilities driven by growth in these markets. We also control and continue to pursue the development of the North Fork Rancheria's casino project. The tribe's potential casino site is located adjacent to the Golden State Highway approximately 15 miles north of Fresno, California. With over 1.1 million people in the Fresno-Madera metropolitan area and approximately 22 million vehicles per year driving past the site, we believe the tribe has one of the most favorable gaming locations in the California central valley. We also believe that we may be able to leverage our existing relationships in Native American gaming and our track record of successful development and management of Native American casinos to secure additional development opportunities. In addition, our development and operational expertise will allow us to evaluate and potentially pursue domestic and/or international development and acquisition opportunities in both existing and emerging markets. Consistent with our opportunistic acquisition strategy, we completed the acquisition of the Palms on October 1, 2016. The Palms is located adjacent to the Las Vegas strip and provides us with a leading gaming asset in one of the most under patronized areas of our Board Pass program as well as the opportunity to appeal to out of town guests. Industry and Market Opportunity Gaming continues to be a significant and growing sector of the global economy. Gaming markets can generally be categorized as either destination markets, such as the Las Vegas Strip, frequented by out-of-town visitors who travel long distances for multi-night stays, or regional markets where guests are predominantly from within 150 miles with much more frequent visitation. Regional gaming markets can be highly impacted by macroeconomic factors including population growth, unemployment, average weekly earnings growth, gas prices, consumer confidence, consumer discretionary spending, tax rates and home values. Regional gaming markets are also impacted by new supply being introduced when the CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price Per Share(1) Proposed Maximum Aggregate Offering Price(1) Amount of Registration Fee Class A Common Stock, par value $0.01 per share 37,514,810 $22.10 $829,077,301 $96,091.00 (1)Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(c) of the Securities Act of 1933, the price shown is based upon the average of the high and low sales prices of the Class A Common Stock of Red Rock Resorts, Inc. on October 19, 2016 as reported on the Nasdaq Stock Exchange ("NASDAQ"). Table of Contents state or an adjacent state legalizes or expands gaming. In addition, regional gaming markets may be impacted by regulatory changes such as a tax increase or a smoking ban, which can negatively impact gaming revenues at existing facilities. The Las Vegas Gaming Market Las Vegas is the largest and most prominent gaming market in the United States with approximately 98,000 slot machines, 4,500 table games and $9 billion in gaming revenue as of and for the year ended August 31, 2016 based on data from the Nevada Gaming Control Board covering Clark County, but excluding Laughlin and Mesquite. Las Vegas currently offers nearly 150,000 hotel rooms and enjoyed an occupancy rate of 88.8% for the twelve months ended August 31, 2016. Over the past two decades, Las Vegas resorts have focused on attracting more than just gaming patrons as operators have invested heavily in non-gaming attractions and amenities. As a result, Las Vegas has become one of the nation's most popular convention and meeting destinations and draws leisure travelers attracted to its restaurants, shopping, and entertainment, as well as its gaming amenities. Since the end of the economic recession in 2009, Las Vegas has seen a rebound in visitation, welcoming a record 42.8 million visitors for the twelve months ended August 31, 2016, up 17.7% from 2009. The Las Vegas Regional Market Although world-renowned for its destination resorts along the Las Vegas Strip, southern Nevada also hosts one of the largest and most vibrant regional gaming markets in the United States. The Las Vegas regional market, comprised primarily of the residents who live and/or work in the Las Vegas area, generated revenue of $2.2 billion for the twelve months ended August 31, 2016, which was approximately 7.7% higher than the trough that occurred during the year ended December 31, 2010, based on data from the Nevada Gaming Control Board covering Clark County, but excluding the Las Vegas Strip, Laughlin, Mesquite and Downtown. Strong Population, Employment and Average Weekly Earnings Growth The Las Vegas economy, although severely impacted by the recession and housing crisis that spanned from 2008 to 2011, began to stabilize in 2012 and, based on population and employment growth, is once again one of the fastest growing economies in the United States. In 2015, population growth in Las Vegas was approximately 2.8 times the national average. Based on preliminary data in August 2016 from the BLS, Las Vegas experienced a 2.9% year-over-year increase in employment which marked the sixth consecutive year of positive growth. Another important factor impacting the financial health of Las Vegas residents is average weekly earnings growth, which was 2.1% higher in August 2016 compared to August 2015 based on preliminary data from the BLS. In addition, a large portion of our guests are retirees, and Las Vegas continues to experience steady growth in retirees with the percentage of the population aged 65 and over increasing to 13.7% in 2015, from 10.6% in 2005. We believe workers and retirees will continue to be attracted to Las Vegas due to its economic momentum, availability of diverse jobs, lack of state income and estate taxes, relatively affordable housing, mild climate and multitude of entertainment and recreation options. Increased Spending and Improving Home Values Businesses and consumers in Las Vegas continue to increase their spending as evidenced by 37 consecutive months of year-over-year increases in taxable retail sales from July 2013 to July 2016. Home values have also improved significantly over the past several years with the median price of an existing single family home in Las Vegas up approximately 99% as of August 2016 compared to January 2012. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents Significant Capital Investment and Development This recent momentum has spurred another wave of investment in a number of sectors within the Las Vegas economy. Based on public announcements, approximately $18.7 billion in new project and infrastructure investments are either in the planning stages or under active development in the Las Vegas valley. These projects include the Las Vegas Arena (MGM & AEG joint venture), Strip destination resort Resorts World Las Vegas; major infrastructure expansion, including Project Neon, which is a multi-phase highway improvement project that will expand Interstate 15; the Las Vegas Convention and Visitors Authority's convention center district expansion; Union Village, a massive new healthcare complex; a number of major manufacturing facilities including the Faraday Future automotive production plant; and other public and private sector investments. A number of these projects will not only create construction jobs for area residents, but will also provide a significant number of full-time employment opportunities upon opening. In addition to the direct impact of these investments, new projects typically have the indirect effect of creating additional employment as a result of local spending. Limited New Casino Development Even as the Las Vegas economy continues to rebound, new casino gaming development in the Las Vegas regional market remains limited. Since 2009, there have been no new casino openings that cater predominantly to Las Vegas residents and no new development of such facilities has been announced. We also believe that the development of new casino facilities will continue to be limited due to SB 208, which limited casino gaming in the Las Vegas valley to specified gaming districts and established more restrictive criteria for the creation of new gaming districts. Stable Regulatory Environment and Lowest Maximum Statutory Gaming Tax Rate in the United States The Las Vegas regional market also benefits from local and state laws and regulations which are accommodative to business in general and, more specifically, the gaming industry, including a stable and highly favorable tax structure. Of states offering commercial gaming, Nevada has the lowest maximum statutory gaming tax rate at 6.75%. Further, the Nevada gaming tax rate has remained unchanged since 2003, when it was changed for the first time since 1987 and only increased by 50 basis points. By contrast, the highest maximum statutory gaming tax rate in the United States is 67% in Maryland. Our Structure We completed a series of reorganization transactions in connection with the completion of our IPO in May 2016, which we refer to as the "Reorganization Transactions," including the following: Amending and restating our certificate of incorporation to provide for Class A Common Stock and Class B Common Stock; Amending and restating the limited liability company agreements of both Station LLC and Station Holdco to, among other things, designate the Company as the sole managing member of Station LLC and Station Holdco; Issuing for nominal consideration one share of Class B Common Stock to LLC Unit holders for each LLC Unit held for an aggregate issuance of 80,562,666 shares of Class B Common Stock; Issuing 29,511,828 shares of Class A Common Stock and receiving proceeds of approximately $541.0 million, which is net of underwriting discount, and paying $4.9 million of offering costs; Issuing 10,137,209 shares of Class A Common Stock in connection with the merger of certain entities that owned LLC Units, of which 222,959 shares were withheld to pay withholding tax obligations of $4.1 million with respect to certain members of such merged entities; Table of Contents Subject to Completion Preliminary Prospectus dated October 26, 2016 The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted. PROSPECTUS UP TO 37,514,810 SHARES Red Rock Resorts, Inc. Class A Common Stock Table of Contents Issuing, pursuant to the Red Rock Resorts, Inc. 2016 Equity Incentive Plan, 189,568 restricted shares of Class A Common Stock and options to purchase 1,687,205 shares of Class A Common Stock to certain of the Company's executive officers, employees and members of its board of directors, and issuing 1,832,884 restricted shares of Class A Common Stock to current and former employees of Station LLC in substitution for profit units issued by Station Holdco that were held by such current and former employees; Purchasing 6,136,072 LLC Units from certain existing owners using approximately $112.5 million of the net proceeds from the IPO at a price of $18.33 per unit, which was the price paid by the underwriters to the Company for Class A Common Stock in the IPO, and retiring an equal number of shares of Class B Common Stock; Acquiring newly issued LLC Units using approximately $424.4 million of the net proceeds from the IPO; Entering into an exchange agreement (the "Exchange Agreement") with the LLC Unit holders pursuant to which they are entitled at any time to exchange LLC Units, together with an equal number of shares of Class B Common Stock, for shares of Class A Common Stock on a one-for-one basis or for cash, at the Company's election; and Entering into a tax receivable agreement with the LLC Unit holders, as described in "Certain Relationships and Related Party Transactions Tax Receivable Agreement," that requires the Company to pay 85% of the amount of benefits it realizes as a result of (i) increases in tax basis resulting from the Company's purchase or exchange of LLC Units and (ii) certain other tax benefits related to the tax receivable agreement, including tax benefits attributable to payments that the Company is required to make under the tax receivable agreement itself. As a result of these transactions, Red Rock is a holding company that has no assets other than its direct and indirect equity interest in Station Holdco and its voting interest in Station LLC. In connection with the Reorganization Transactions, Red Rock obtained an economic interest of approximately 35.8% in Station Holdco, 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and was designated as the sole managing member of both Station Holdco and Station LLC. Red Rock operates and controls all of the business and affairs of Station Holdco and its subsidiaries. Red Rock, Station Holdco and the existing owners entered into the Exchange Agreement under which the existing owners have the right to exchange their LLC Units, together with an equal number of shares of Class B Common Stock, for shares of Red Rock Class A Common Stock. Pursuant to such Exchange Agreement, the existing owners are entitled to exchange (x) one LLC Unit and one share of Class B Common Stock for (y) one share of Class A Common Stock, or, at our election, for cash, which we refer to as an exchange of LLC Units and shares of Class B Common Stock for shares of Class A Common Stock on a one-for-one basis. When LLC Units and a corresponding number of shares of Class B Common Stock are exchanged for Class A Common Stock by a holder of LLC Units pursuant to the Exchange Agreement, such shares of Class B Common Stock will be cancelled. If the selling stockholders exchange LLC Units and shares of Class B Common Stock in respect of all the shares of Class A Common Stock offered for sale pursuant to this prospectus by such holders of LLC Units, the economic interest of Red Rock in Station Holdco will be increased to 59.8%. We are not offering any shares of Class A Common Stock for sale under this prospectus and will not receive any cash proceeds from the issuance of Class A Common Stock registered hereunder, but we will receive a number of LLC Units, equal to the number of shares of Class A Common Stock issued upon exchange of LLC Units. This prospectus relates to the offer and sale from time to time by the selling stockholders identified in this prospectus of up to an aggregate of 37,514,810 shares of Class A Common Stock of Red Rock Resorts, Inc. Out of the 37,514,810 shares of Class A Common Stock that the selling stockholders may offer and sell, (i) 9,663,108 shares of Class A Common Stock previously have been issued to certain of the selling stockholders and (ii) the remaining 27,851,702 shares of Class A Common Stock will be issued by us from time to time to certain other of the selling stockholders who are also holders of LLC Units (as defined herein) upon the exchange by such stockholders of one LLC Unit and one share of Class B Common Stock of the Company held by such stockholders for one share of Class A Common Stock. The shares of Class A Common Stock offered hereby may be offered or sold by the selling stockholders through one or more underwriters, broker-dealers or agents. If the shares of Class A Common Stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of Class A Common Stock may be sold in one or more transactions, at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices, or which may involve crosses or block transactions. See "Plan of Distribution" for more information regarding sales of shares of Class A Common Stock by the selling stockholders pursuant to this prospectus, including a list of the financial institutions that may act as underwriters in offerings pursuant to this prospectus. We are not selling any shares of Class A Common Stock under this prospectus, and we will not receive any of the proceeds from the offer and sale of shares of our Class A Common Stock by the selling stockholders. This prospectus describes the general manner in which shares of Class A Common Stock may be offered and sold by any selling stockholder. When the selling stockholders sell shares of Class A Common Stock under this prospectus, we may, if necessary and required by law, provide a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add to, update, modify or replace information contained in this prospectus. We urge you to read carefully this prospectus, any accompanying prospectus supplement and any documents we incorporate by reference into this prospectus and any accompanying prospectus supplement before you make your investment decision. Our Class A Common Stock is listed on the Nasdaq Stock Market ("NASDAQ") under the symbol "RRR." The last reported sale price of our Class A Common Stock on October 24, 2016 was $22.67 per share. Investing in our Class A Common Stock involves risks. See "Risk Factors" beginning on page 19 of this prospectus. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Prospectus dated , 2016 (1)Shares of Class A Common Stock and Class B Common Stock vote as a single class. Each outstanding share of Class A Common Stock is entitled to one vote, each outstanding share of Class B Common Stock that is held by a holder that, together with its affiliates, owns at least 30% of the outstanding LLC Units and, at the applicable record date, maintains direct or indirect Table of Contents beneficial ownership of at least 10% of the outstanding shares of Class A Common Stock (determined on an as-exchanged basis assuming that all of the LLC Units were exchanged for Class A Common Stock) is entitled to ten votes and each other outstanding share of Class B Common Stock is entitled to one vote. The only holders of Class B Common Stock that satisfy the foregoing criteria are Fertitta Family Entities. Consequently, such entities are the only holders of Class B Common Stock entitled to ten votes per share of Class B Common Stock. See "Principal and Selling Stockholders." In accordance with the Exchange Agreement, holders of LLC Units are entitled to exchange LLC Units, together with an equal number of shares of Class B Common Stock, for shares of Class A Common Stock on a one-for-one basis or, at our election, for cash. (2)As part of the Reorganization Transactions, ADVSTRA SC Holdings, LLC, CAPINC SC Holdings, LLC, PAIN SC Holdings, LLC, PRTN SC Holdings, LLC, STRAINC SC Holdings, LLC, Serengeti SC Blockerco LLC, PB Investor I LLC and PB Investor II LLC, Delaware entities that elected to be taxed as a corporation for U.S. federal income tax purposes (the "Merging Blockers"), merged with newly-formed subsidiaries of Red Rock in transactions that were intended to qualify as tax-free for U.S. federal income tax purposes (referred to herein as the "Blocker Mergers"). In the Blocker Mergers, the owner(s) of each Merging Blocker collectively received one share of Class A Common Stock for each LLC Unit owned by such Merging Blocker and such number of LLC Units issuable upon a cashless exercise of the Warrants (defined below) held by such Merging Blocker. In the aggregate, 10,137,209 shares of Class A Common Stock of Red Rock were issued as consideration in the Blocker Mergers. In connection with the Blocker Mergers, the Company (i) withheld 222,959 shares of Class A Common Stock that would have otherwise been issued to certain of the members of the Merging Blockers, (ii) sold such shares in the IPO and (iii) used the net proceeds from the sale of such shares to pay withholding tax obligations with respect to such members. An aggregate of 476,531 LLC Units were issued upon exercise of warrants to purchase LLC Units (collectively, the "Warrants") promptly following the IPO. (3)Holders of profit units issued by Station Holdco, all of whom are current or former employees of Station LLC, received an aggregate of 1,832,884 restricted shares of Class A Common Stock issued pursuant to the terms of the Red Rock Resorts, Inc. 2016 Equity Incentive Plan in substitution for such profit units. (4)A portion of these LLC Units are held by subsidiaries of Red Rock. As of September 30, 2016 (i) the holders of Class A Common Stock had 7.9% of the voting power in Red Rock, (ii) holders of Class B Common Stock had 92.1% of the voting power in Red Rock, (iii) LLC Units held by existing owners constituted 64.2% of the outstanding LLC Units in Station Holdco and (iv) Red Rock owned 35.8% of the outstanding LLC Units in Station Holdco. If the selling stockholders exchange LLC Units and shares of Class B Common Stock in respect of all of the shares of Class A Common Stock offered for sale pursuant to this prospectus by such holders of LLC Units, (i) Red Rock will own 59.8% of the LLC Units by Station Holdco, (ii) holders of shares of Class B Common Stock will have 86.8% of the voting power in Red Rock and (iii) holders of Class A Common Stock will have 13.2% of the voting power in Red Rock. See "The Reorganization of Our Corporate Structure," "Certain Relationships and Related Party Transactions" and "Description of Capital Stock" for more information on the Exchange Agreement and the rights associated with our common stock and the LLC Units. Table of Contents Risks Associated with our Business An investment in shares of our Class A Common Stock involves a high degree of risk. Below is a summary of certain key risk factors that you should consider in evaluating an investment in shares of our Class A Common Stock: our reliance on the Las Vegas market; the impact of business conditions, including competitive practices, changes in customer demand and the cyclical nature of the gaming and hospitality business generally, on our business and results of operations; the impact of general economic conditions outside our control, including changes in interest rates, consumer confidence and unemployment levels, on our business and results of operations; the effects of intense competition that exists in the gaming industry; the risk that new gaming licenses or gaming activities, such as internet gaming, are approved and result in additional competition; our substantial outstanding indebtedness and the effect of our significant debt service requirements on our operations and ability to compete; the risk that we will not be able to finance our development and investment projects or refinance our outstanding indebtedness; the impact of extensive regulation from gaming and other government authorities, including anti-money laundering laws and regulations, on our ability to operate our business and the risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines or take other actions that adversely affect us; risks associated with changes to applicable gaming and tax laws that could have a material adverse effect on our financial condition; adverse outcomes of legal proceedings and the development of, and changes in, claims or litigation reserves; and risks associated with development, construction and management of new projects or the expansion of existing facilities, including cost overruns, construction delays, environmental risks and legal or political challenges. This list is not exhaustive. Please read the full discussion of these risks and other risks described under the caption "Risk Factors" beginning on page 19 of this prospectus. Corporate Information The Company's principal executive offices are located at 1505 South Pavilion Center Drive, Las Vegas, Nevada, 89135 and its telephone number is (702) 495-3000. The Company's website address is www.sclv.com. Information contained on or accessible through the Company's website is not a part of this prospectus and the inclusion of the website address in this prospectus is an inactive textual reference only. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SATT_sativus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SATT_sativus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..d239003739cd5c4930f2b2f1b4df1e7c55d7962d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SATT_sativus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including Risk Factors beginning on page 10, Management s Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements, before making an investment decision. The Company GRCR Partners Inc. (the Company , Our or We ) was formed on January 16, 2015 under the laws of the State of Delaware. We are a provider of corporate governance, risk management, compliance and regulatory reporting ( GRCR ) solutions for businesses ( GRCR Solutions ). Our offices are located at 1771 Post Rd East #178, Westport CT 06880. Our telephone number is 203.456.8088 and our website is www.grcrpartners.com Currently, we provide GRCR Solutions through professional consulting services on a project-based fee arrangement. We deliver our services following our proprietary compliance architecture methodology. The skilled application of the fundamental principles governing compliance and risk management is what we call compliance architecture. We are building-out our Compliance Architecture Platform ( CAP ) to be an automated GRCR management tool that streamlines the process of GRCR for businesses. We believe that by combining expert consulting and GRCR software tools, we will help clients cost effectively build and maintain GRCR programs that reduce day-to-day and long term risks in their work environment. The Company plans to become a public company. The reason for becoming a public company is to attract capital to fund further expansion and the development of our CAP tool. Many investors prefer to invest in public companies because they deem their investment to have more liquidity in their investment. Another reason for becoming public is to increase public awareness of the Company. The negatives for being public are the cost of compliance with regulatory requirements, audits, and investor relations can be high. We believe the additional costs associated with being public will range up to $50,000 per year. This estimate could range dramatically depending on the level of our success. The Company, the Company s officers and directors do not intend for the Company, once it is reporting, to be used as a vehicle for a private company to become a reporting company. We are a development stage company. Since inception on January 16, 2015, the Company had a retained deficit of $11,736 and a working capital surplus of $4,644 at December 31, 2015. Our monthly expenditures (burn rate) is approximately $1,000 consisting of generally of office overhead. In addition, we project the costs of being a public company to be approximately $4,000 per month. If we are unable to continue to grow our revenue and without any funding from the Offering, we estimate that we will exhaust our available capital within eight to twelve months from the date of the financial statements (December 31, 2015). For these and other reasons, our independent auditors have raised substantial doubt about our ability to continue as a going concern. Accordingly, we will require additional financing, including the equity funding sought in this prospectus. The Offering GRCR is offering for sale a maximum of 2,500,000 shares of common stock at a fixed price of $0.10 per share. There is no minimum number of shares that must be sold by us for the offering to close, and we will retain the proceeds from the sale of any of the offered shares that are sold. The offering is being conducted on a self-underwritten, best efforts basis, which means our president and chief executive officer, Mr. Conrad, will attempt to sell the shares himself. This prospectus will permit our president and chief executive officer to sell the shares directly to the public, with no commission or other remuneration payable to him for any shares he may sell. Mr. Conrad will sell the shares himself and intends to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, he will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934 (the "Exchange Act"). The intended methods of communication include, without limitation, telephone and personal contacts. Since there is no minimum amount of shares that must be sold by the company, you may receive no proceeds or very minimal proceeds from the offering and potential investors may end up holding shares in a company that: - Has not received enough proceeds from the offering to fully commence operations; and - Has no market for its shares. The proceeds from the sale of the shares in this offering will be payable to the Company. All subscription agreements and checks are irrevocable and should be delivered to the Company at the address provided in the Subscription Agreement (see Exhibit 99.1). All subscription funds will be held in a noninterest-bearing account subject to the completion of the offering. The offering will be completed 180 days from the effective date of this prospectus, unless extended by our board of directors for an additional 180 days. There is no minimum number of shares that must be sold. All subscription agreements and checks for payment of shares are irrevocable (except as to any states that require a statutory cooling-off period or rescission right). (Address, including zip code, and telephone number, including area code, of registrant s principal executive offices) Sean Conrad, CEO, 1771 Post Rd East #178, Westport CT 06880 Telephone 203.456.8088 We will deliver stock certificates attributable to shares of common stock purchased directly to the purchasers approximately 30 days after the close of the offering or as soon thereafter as practicable. The offering price of the common stock has been determined arbitrarily and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings, if any, or net worth. Shares of common stock offered by us A maximum of 2,500,000 shares. There is no minimum number of shares that must be sold by us for the offering to close. Use of proceeds GRCR will receive all of the funds from the Offering. If 2,500,000 share of common stock are sold in the Offering, we will receive total gross proceeds of $250,000. We will use the proceeds from the offering to pay offering costs and other general expenses, as well as fund the development of the Company s operations. The total estimated costs of the offering ($55,000) may exceed the amount of offering proceeds. The first proceeds of the offering will be used to pay any unpaid legal fees in connection with this Registration Statement estimated to be $15,000. Termination of the offering The offering will conclude when all 2,500,000 shares of common stock have been sold or 180 days after this registration statement becomes effective with the Securities and Exchange Commission, whichever is the first to occur. However, we may at our discretion extend the offering for an additional 180 days. Risk The purchase of our common stock involves a high degree of risk. Please refer to the sections entitled Risk Factors and Dilution before making an investment in this stock. Trading None. While we plan to find a market maker to file a Rule 211 application with the Financial Industry Regulatory Authority market ( FINRA ) in order to apply for the inclusion of our common stock in OTCQB or Pink Sheet tiers of OTC Markets ( OTCQB ), such efforts may not be successful and our shares may never be quoted and owners of our common stock may not have a market in which to sell the shares. Also, no estimate may be given as to the time that this application process will require. Even if GRCR's common stock is quoted or granted a listing, a market for the common shares may not develop.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SENS_senseonics_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SENS_senseonics_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..1f46dd839e0ae1511326022afaa4e1ebeff9fe0c
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SENS_senseonics_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights certain information about us and this offering contained elsewhere in this prospectus. Because it is only a summary, it does not contain all the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the accompanying notes included in this prospectus. Our Business We are a medical technology company focused on the design, development and commercialization of glucose monitoring systems to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy. Our first generation continuous glucose monitoring, or CGM, system, Eversense, is designed to be a reliable, long-term, implantable CGM system to continually and accurately measure glucose levels in people with diabetes for a period of up to 90 days, as compared to five to seven days for currently available CGM systems. We believe Eversense will provide people with diabetes with a more convenient method to monitor their glucose levels in comparison to the traditional method of self-monitoring of blood glucose, or SMBG, as well as currently available CGM systems. In our European pivotal clinical trial, we observed that Eversense measured glucose levels over 90 days with a degree of accuracy comparable or superior to that of other currently available CGM systems. In July 2015, we applied for a CE mark and, subject to regulatory approval, we expect to begin marketing Eversense in select European markets in the first half of 2016. We have also received approval from the U.S. Food and Drug Administration, or FDA, of an investigational device exemption, or IDE, application to initiate clinical trials of Eversense in the United States, and we initiated a single pivotal clinical trial in the United States in the first quarter of 2016. If the results of the trial are favorable, we intend to apply as promptly as possible to market Eversense in the United States. We believe that we could file for U.S. marketing approval as early as the second half of 2016 and expect that the pre-market approval, or PMA, process could take between six and 18 months. Diabetes is a chronic, life-threatening disease for which there is no known cure. The disease is caused by the body's inability to produce or effectively utilize the hormone insulin, which prevents the body from adequately regulating blood glucose levels. If diabetes is not managed properly, it can lead to serious health conditions and complications, including heart disease, limb amputations, loss of kidney function, blindness, seizures, coma and even death. According to the International Diabetes Federation, or IDF, an estimated 387 million people worldwide had diabetes in 2014. The number of people with diabetes worldwide is estimated to grow to 592 million by 2035 due to various reasons, including changes in dietary trends, an aging population and increased prevalence of the disease in younger people. Diabetes is typically classified into two primary types. Type 1 diabetes is an autoimmune disorder that usually develops during childhood and is characterized by the inability of the body to produce insulin, resulting from destruction of the insulin producing beta cells of the pancreas. Type 2 diabetes is a metabolic disorder that results when the body is unable to produce sufficient amounts of insulin or becomes insulin resistant. People with Type 1 diabetes must administer insulin, either by injection or insulin pump, to survive. People with Type 2 diabetes may require diet and nutrition management, exercise, oral medications or the administration of insulin to regulate blood glucose levels. In an attempt to maintain blood glucose levels within the normal range, many people with diabetes seek to actively monitor their blood glucose levels. The traditional SMBG method of glucose monitoring requires lancing the fingertips, commonly referred to as fingersticks, multiple times per day and night to obtain a blood drop to be applied to a test strip inside a blood glucose meter. This method of monitoring glucose levels is inconvenient and can be painful and, because each measurement AMENDMENT NO. 4 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents represents a single blood glucose value at a single point in time, it provides limited information regarding trends in blood glucose levels. In contrast, CGM systems are generally less painful and involve the insertion of sensors into the body to measure glucose levels in the interstitial fluid throughout the day and night, providing real-time data that shows trends in glucose measurements. Since CGM measurements from interstitial tissue are inherently less accurate than test-strip measurements made directly from the blood, the FDA and other device regulators require that CGMs be labeled and marketed as "adjunctive" to test-strip measurements, with instructions that patients confirm CGM measurements with test-strip measurements using blood obtained from fingersticks prior to self-medicating. However, currently available CGM systems are often inconvenient, requiring frequent sensor replacement and an extra device, called a receiver, to monitor glucose readings, and have limited safety features. We conducted our European pivotal clinical trial in Germany, the United Kingdom and the Netherlands to evaluate the accuracy of Eversense, based on the mean absolute relative difference, or MARD, when compared with reference standard measurement. The 90-day accuracy and safety data for the first 44 subjects in the trial was previously compiled and used as the basis for our CE mark application, which we submitted in July 2015 to support initial labeling for 90 days of use. The average MARD of the first 44 subjects, over 90 days, was 11.4%. There were no device-related or procedure-related serious adverse events. While the protocol for this trial was designed to produce a finding of statistical significance with 44 subjects, we followed a total of 71 subjects who received the current configuration of Eversense for 180 days in order to gather additional data for two purposes. First, we intend to use this data to make a subsequent submission to EU regulators for CE mark approval to use our sensor for 180 days. Second, we intend to use the safety data from this trial as partial support for our application for regulatory approval in the United States. The 90-day data for the 71 subjects reflected a MARD of 11.0%. We expect to report final 180-day accuracy and safety data for all subjects in the European pivotal trial in the first half of 2016. Including our European pivotal trial, we have enrolled more than 350 subjects and tested over 700 sensors as of December 31, 2015. Throughout this experience, we have observed no device-related or procedure-related serious adverse events in any of our trials. However, we have limited clinical experience with repeated use of our system in the same patient or the same insertion site, and it is possible that there could be unforeseen complications from long-term use. In the first quarter of 2016, we initiated a single pivotal clinical trial in the United States. This trial will be conducted at seven to ten sites in the United States and enroll approximately 90 subjects. In the trial, we will measure the accuracy of Eversense measurements through 90 days after insertion. We will also assess safety through the earlier of 90 days after insertion or sensor removal. If the results of the trial are favorable, we intend to apply for regulatory approval as promptly as possible to market our product in the United States. We believe that we could file for U.S. marketing approval as early as the second half of 2016 and expect that the PMA process could take between six and 18 months. Since our inception, we have incurred significant net losses, including net losses of $18.9 million and $29.9 million for the years ended December 31, 2014 and 2015, respectively. As of December 31, 2015, we had an accumulated deficit of $160.8 million. We have financed our operations primarily through sales of our equity securities and debt financings. Our principal stockholders are New Enterprise Associates, Delphi Ventures and Roche Finance, which is an affiliate of Roche Holding AG, a global pharmaceutical company that sells products, including insulin pumps and blood glucose monitoring systems, to the diabetes market. We expect our expenses to increase significantly as we complete our clinical trials in the United States, seek regulatory approval in Europe and the United States and other regions where we intend to sell our products, establish distribution relationships in Europe to enable our commercial launch, establish our sales and marketing infrastructure to initiate sales of our products in the United States and develop future generations of our CGM system, as well Senseonics Holdings, Inc. (Exact name of registrant as specified in its charter) Table of Contents as a result of being a public company. The extent of our future operating losses and the timing of profitability are highly uncertain, and we expect to continue incurring significant expenses and operating losses over the next several years. Importance of Glucose Monitoring and Benefits of CGM Clinical studies have demonstrated the benefits of maintaining blood glucose levels within the normal range to mitigate the negative effects of diabetes. More frequent and accurate testing of blood glucose levels provides people with diabetes with a greater ability to maintain their blood glucose levels within normal limits allowing them to more effectively manage their diabetes. The American Diabetes Association, or ADA, recommends that people with intensively managed diabetes test their blood glucose levels after eating, at bedtime, before exercise or critical tasks and after treating for low blood glucose. Significantly more frequent testing may be required to reach optimal blood glucose levels safely without falling into hypoglycemia. We use the term "intensively managed diabetes" to refer to people with Type 1 diabetes and those people with Type 2 diabetes who require insulin to be administered through an insulin pump or multiple daily injections, or MDI. The beneficial effects of CGM have been validated in multiple clinical trials. According to a study published in the November 2009 edition of Diabetes Care, people who intensively managed their diabetes consistently with CGM over a six-month period had lower A1C levels, a measure of the three-month average of glucose in the blood, than those who did not. More recently, two studies published in the April 2011 and January 2012 editions of Diabetes Care, showed improved glycemic control in people with Type 1 and Type 2 diabetes who use CGM systems, compared to people who use SMBG, further supporting the benefits of CGM in helping people with diabetes stay within a healthy glycemic range. The Market for CGM We estimate that, of the approximately 39 million people diagnosed with diabetes in the United States, Canada, Australia and the other select regions that we intend to target with Eversense (which include Scandinavia, Germany, the United Kingdom, Italy, Switzerland, the Netherlands, Israel, Finland and Slovenia), 35%, or approximately 13 million people, are insulin users. We believe that, of those 13 million insulin users, approximately 46%, or six million people, intensively manage their diabetes. According to estimates by Close Concerns, global sales for CGM systems and insulin pumps for people with intensively managed diabetes were $2.7 billion in 2014, of which $523 million represented sales of CGM systems, a 31% increase compared to 2013. United States sales for CGM systems and insulin pumps for people with intensively managed diabetes were $1.7 billion in 2014, of which $381 million represented sales of CGM systems, a 33% increase compared to 2013. In comparison, global SMBG sales were $6.7 billion in 2014, a decline of 7% compared to 2013, driven largely by downward pricing pressure. Based on industry sources and current industry trends, we estimate that U.S. sales of CGM systems will grow at a CAGR ranging from 35% to 40%, reaching approximately $3 billion to $3.7 billion by 2020. We also estimate that by 2020 global sales for insulin pumps will increase to $3.5 billion, while global sales for SMBG will decline to $5.8 billion. We expect the growth in sales of CGM systems to be driven primarily by increased penetration of CGM in the Type 1 diabetic population, as it potentially becomes a standard of care, reaching up to 45% penetration of the Type 1 diabetic population in the United States by 2020, compared to 8% in 2014. We believe that the increased penetration of CGM will be driven by higher awareness of the clinical benefits of CGM by people with diabetes, healthcare providers and third-party payors, insulin pump integration, an improving coverage and reimbursement environment and additional product innovation, including increased convenience, accuracy and sensor duration. Delaware (State or other jurisdiction of incorporation or organization) 3841 (Primary Standard Industrial Classification Code Number) 47-1210911 (I.R.S. Employer Identification Number) 20451 Seneca Meadows Parkway Germantown, MD 20876-7005 (301) 515-7260 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Table of Contents We are developing Eversense for marketing in Europe and the United States, as well as other international markets. However, to date we do not yet have regulatory approval to sell Eversense in these or any other markets. Our Solution As a result of the inherent limitations and inconvenience of existing SMBG and CGM systems, we believe that there is a significant unmet need among people with diabetes for an accurate, reliable, long-term, implantable CGM system. Consequently, we have focused our efforts on developing and designing a CGM system that we believe will provide people with diabetes a more convenient and discrete method of CGM, with significantly greater sensor duration, and equal or superior accuracy, than other currently available CGM systems. We believe that Eversense will allow people with diabetes to comply more effectively with their disease management therapies while living their lives with more freedom and greater peace of mind. Eversense is designed to be the first CGM system to continually and accurately measure glucose levels initially for up to 90 days and, in the future, for potentially up to 180 days. Eversense consists of three components: a small sensor inserted subcutaneously in the upper arm by a healthcare provider; an external removable smart transmitter that receives, assesses and relays the data from the sensor and also provides vibratory alerts; and a mobile app that receives data from the transmitter and provides real-time glucose readings, alerts and other data on the user's mobile device, such as a smartphone, Apple Watch or tablet. In comparison to currently available CGM systems, we believe Eversense will provide the following important advantages: Best-in-class sensor duration and long-term accuracy Eversense achieves continuous glucose readings for up to 90 days with an accuracy equal or superior to that of other currently available CGM systems while requiring fewer than four sensors per year. Currently available CGM sensors are labeled for use for five to seven days, requiring between 50 and 70 sensor insertions per year. We believe that the long-term accuracy and convenience of quarterly insertion and removal will significantly reduce the burden of glucose monitoring for people with diabetes using our system. Enhanced convenience The ability of Eversense to display glucose readings on mobile devices will allow people with diabetes to seamlessly blend the monitoring of their glucose levels with other uses of their mobile devices. People with diabetes will not need to carry a separate handheld receiver to display glucose readings, which is required by currently available CGM systems. In addition, our easily removable smart transmitter will allow people with diabetes to conveniently remove and reapply the transmitter at will without having to also remove the sensor. We believe these convenient features will greatly improve the quality of life and peace of mind for people with diabetes by enhancing their ability to effectively manage their condition across a wide range of activities, from sleeping to higher intensity activities, including sports. Essential safety features Eversense is designed to continuously and accurately monitor glucose levels and provide predictive warnings using a proprietary algorithm, based on the user's personalized alarm settings, before the occurrence of hypoglycemic or hyperglycemic events. We believe the personalized alarm will allow the user to intervene and potentially avoid these events entirely. Additionally, our smart transmitter will provide distinct on-body vibrations in a number of alarm situations, including when low or high-glucose related readings are reached or when the transmitter is unable to communicate with the receiver. Timothy T. Goodnow President and Chief Executive Officer Senseonics Holdings, Inc. 20451 Seneca Meadows Parkway Germantown, MD 20876-7005 (301) 515-7260 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents Unlike other currently available CGM systems, this vibration alert enables our system to warn users of a hypoglycemic or hyperglycemic event even when the user's mobile device is not available or nearby. Quick and easy sensor insertion and removal Our sensor is designed to be inserted and removed by a simple, relatively painless and straightforward five-minute in-office procedure performed by a trained healthcare provider. In a survey of 45 physicians and over 400 people with diabetes conducted by a prominent global strategy consulting firm that we commissioned in 2015, on average, people with diabetes rated the sensor insertion process as neutral to attractive, while a majority of physicians considered the insertion to be fairly simple or feasible. We believe that the long-term implantable nature of the sensor will also contribute to greater user compliance. Our Strategy Our goal is to be the global leader in providing long-term, accurate and reliable implantable glucose monitoring systems. The key elements of our strategy include: Obtain marketing approval of Eversense in Europe, followed by the United States. We have filed for regulatory approval for Eversense in Europe. In July 2015, we applied for a CE mark and, subject to regulatory approval, we expect to begin commercializing Eversense in select European markets in the first half of 2016. We also initiated a single pivotal clinical trial in the United States in the first quarter of 2016, and, if the results of the trial are favorable, we intend to apply for regulatory approval in the United States. We also intend to seek to commercialize our system in other international markets, including Canada, Australia and Israel. Commercialize our products in Europe and other international markets through a third-party distributor network and in the United States through our own direct sales and marketing organization. In order to ensure broad access to our products for people with diabetes and healthcare providers, we intend to establish a strong third-party distributor network in Europe and other international markets, benefiting from distributors' local market knowledge and taking advantage of local resources while minimizing our infrastructure and capital requirements. We have entered into an exclusive distribution agreement with Rubin Medical, or Rubin, to market and sell our products in the Scandinavian region. Rubin has experience in the area, including as the exclusive Scandinavian distributor for the insulin pump manufacturer Animas Corporation. For commercialization in the United States, we intend to establish our own trained, targeted sales force and marketing organization to reach as broad a section of the diabetes population as possible in the most efficient manner. We believe this strategy will ensure broader access to our products for people with diabetes and healthcare providers. Educate and train healthcare providers and people with diabetes on the benefits of CGM and Eversense. We intend to communicate with and educate healthcare providers, including physicians, certified diabetes educators and nurses, and people with diabetes about the benefits of Eversense and how it can help improve the health and lives of people with diabetes. We have developed an insertion kit that is similar to that used in existing procedures that many healthcare providers are accustomed to performing, and we also intend to develop training programs to help them become comfortable and competent performing the sensor insertion and removal procedures. Finally, we intend to communicate on a regular basis with people with diabetes and their healthcare providers so that we can continue to understand their needs and demands, which will help us to serve them better. Continuously innovate to introduce enhanced product offerings and pursue expanded indications to meet the needs of people with diabetes. Following our first approved version Copies to: Christian E. Plaza Darren K. DeStefano Cooley LLP 11951 Freedom Drive Reston, VA 20190 (703) 456-8000 R. Don Elsey Chief Financial Officer Senseonics Holdings, Inc. 20451 Seneca Meadows Parkway Germantown, MD 20876-7005 (301) 515-7260 Donald J. Murray Brian K. Rosenzweig Covington & Burling LLP 620 Eighth Avenue New York, NY 10018 (212) 841-1000 Table of Contents of Eversense, we intend to continue to expand our Eversense line of product offerings to benefit both people with diabetes and healthcare providers, including system modifications and next generation enhancements, with the goal of increasing the convenience and functionality of the Eversense system. Our planned initiatives include: extending the approved sensor life to up to 180 days; providing on-demand, swipe measurement technology that would permit people with Type 1 diabetes to perform real-time, single glucose readings by swiping their smartphone over our sensor; integrating with insulin pumps; reducing transmitter size; and improving accuracy leading to reduced, or eliminated, calibration. We intend to conduct clinical trials for pediatric indications and to seek approval to market to this part of the population. Additionally, we intend to pursue an on-demand, swipe measurement device targeted to people with Type 2 diabetes. Establish reimbursement programs for coverage of Eversense to achieve the broadest possible acceptance of our products. Currently available CGM systems are generally reimbursed by a majority of third-party payors. In addition, we will seek to establish a reimbursement program specific to Eversense insertion and removal in order to achieve reimbursement for these in-office sensor procedures. We believe that establishing such reimbursement will be important in achieving the broadest possible acceptance of our system by healthcare providers. Focus on low cost manufacturing structure to enhance our profitability. We intend to continue focusing on product design and development, as opposed to investing in manufacturing facilities, by utilizing third-party manufacturers. We intend to reduce our product costs and drive operational efficiencies by employing this scalable, flexible manufacturing approach. Risks Associated with Our Business Our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the medical device industry. An investment in our shares involves a high degree of risk. Any of the factors set forth under "Risk Factors" in this prospectus may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in our shares. Some of the principal risks relating to our business and our ability to execute our business strategy include: We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability. We have no products that are approved for commercial sale. If we are unable to successfully develop, receive regulatory approval for and commercialize Eversense, or if we experience significant delays in doing so, our business will be harmed. We are dependent on one product, Eversense. Our success depends on our ability to continue to develop, commercialize and gain market acceptance for Eversense. If we do not enhance our product offerings through our research and development efforts, or if technological breakthroughs in diabetes monitoring, treatment or prevention render Eversense less competitive or obsolete altogether, we may fail to effectively compete or become profitable. Failure to secure or retain coverage or adequate reimbursement for Eversense or future versions of Eversense systems, including the related insertion and removal procedures, by third-party payors could adversely affect our business, financial condition and operating results. Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. Table of Contents If important assumptions we have made about what people with intensively managed diabetes are seeking in a CGM system are inaccurate, our business and operating results may be adversely affected. We operate in a very competitive industry and if we fail to compete successfully against our existing or potential competitors, many of whom have greater resources than we have, our sales and operating results may be negatively affected. Our patents and other intellectual property may not provide us with meaningful protection from competitors. We have not previously performed an exhaustive review of whether third parties hold any valid patent rights that we would, or might be claimed to, infringe by commercializing our products, and we cannot be certain that an ongoing analysis we are performing will not result in our locating valid patent rights relating to our products. The size and future growth in the market for CGM systems and CGM-related products has not been established with precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the size of this market, our sales growth may be adversely affected. We are dependent on one distributor for sales of Eversense in Europe, and that distributor's sales of Eversense are limited to Norway, Sweden and Denmark. If we are unable to establish additional distribution arrangements, we may have to alter our development and commercialization plans in Europe and our sales in Europe may be negatively affected. If we are unable to establish a sales and marketing infrastructure, we may not be successful in commercializing Eversense in the United States, even if we receive regulatory approval. We contract with third parties for the manufacture of Eversense for clinical testing and expect to continue to do so for commercialization. Risks associated with the manufacturing of our products could reduce our gross margins and negatively affect our operating results. Our future capital needs are uncertain and we may need to raise substantial additional funds in the future, and these funds may not be available on acceptable terms or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, scale back or cease some or all operations. As a result, our registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this prospectus. Implications of Being an Emerging Growth Company We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include: reduced obligations with respect to financial data, including presenting only two years of audited financial statements and only two years of selected consolidated financial data in this prospectus; not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. Table of Contents exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (b) the last day of our fiscal year ending December 31, 2019; (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous six years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) not being required to provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. In addition, we intend to take advantage of the reduced reporting requirements with respect to disclosure regarding our executive compensation arrangements, have presented only two years of audited financial statements and only two years of related "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure in this prospectus. In addition, under the JOBS Act, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. Corporate Information We were originally incorporated as ASN Technologies, Inc. in Nevada on June 26, 2014. On December 7, 2015, pursuant to the Merger Agreement and the transactions contemplated thereby, or the Acquisition, we acquired Senseonics, Incorporated, a medical technology company focused on the design, development and commercialization of glucose monitoring systems to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy. From its inception in 1996 until 2010, Senseonics, Incorporated devoted substantially all of its resources to researching various sensor technologies and platforms. Beginning in 2010, the company narrowed its focus to designing, developing and refining a commercially viable glucose monitoring system. In connection with the Acquisition, we reincorporated in Delaware and changed our name to Senseonics Holdings, Inc. Upon the closing of the Acquisition, Senseonics, Incorporated merged with a wholly-owned subsidiary of ours formed solely for that purpose and became our wholly-owned subsidiary. All of the outstanding capital stock, options and warrants to purchase shares of Senseonics, Incorporated were converted into 57,739,953 shares of our common stock, options to purchase 9,251,164 shares of our common stock and warrants to purchase 5,010,604 shares of our common stock. Our principal executive offices are located at 20451 Seneca Meadows Parkway, Germantown, Maryland 20876-7005 and our telephone number is (301) 515-7260. Our website address is www.senseonics.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 under the Securities Exchange Act of 1934. (Check one): Large Accelerated Filer Accelerated Filer Non-accelerated Filer Smaller Reporting Company The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents The Offering Issuer Senseonics Holdings, Inc. Common stock offered by us 15,800,000 shares (or 18,170,000 shares if the underwriters exercise in full their option to purchase additional shares) Common stock to be outstanding immediately after this offering 91,560,061 shares (or 93,930,061 shares if the underwriters exercise in full their option to purchase additional shares) Option to purchase additional shares We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase an additional 2,370,000 shares of our common stock. Use of proceeds We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be $41.3 million, or $47.7 million if the underwriters exercise in full their option to purchase additional shares, assuming a public offering price of $2.85 per share. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents: to complete our U.S. pivotal clinical trial and to seek regulatory approval of Eversense in the United States; to fund continued research and development of future configurations of Eversense; to begin developing a direct sales force to market Eversense in the United States; to repay borrowings; and for working capital and general corporate purposes. See "Use of Proceeds" on page 56 for additional information.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SNDX_syndax_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SNDX_syndax_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SNDX_syndax_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SRTS_sensus_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SRTS_sensus_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SRTS_sensus_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/STXS_stereotaxi_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/STXS_stereotaxi_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/STXS_stereotaxi_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SUPV_grupo_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SUPV_grupo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..94edd22a3a25ad29f28bd8a72cefe6c5320852b2
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SUPV_grupo_prospectus_summary.txt
@@ -0,0 +1 @@
+This summary highlights material information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our Class B shares and the ADSs, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes beginning on page F-1. Overview We are a private domestically-owned financial group with a long-standing presence in the Argentine financial system and a leading competitive position in certain attractive market segments. We are controlled by the Supervielle family, which entered the Argentine banking sector in 1887. We own the fifth largest Argentine private domestically-owned bank in terms of assets. We maintain a strong geographic presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area, which is Argentina's most commercially significant and highly populated area, and we are leaders in terms of our banking network in some of Argentina's most dynamic regions, including Mendoza and San Luis. The Bank, which consolidated with CCF, is our main asset, comprising 97.3% of our total assets, and has a history of strong growth. Between the 2011-2015 period, our loan portfolio grew at a compound annual growth rate ("CAGR") of 34.7%, as compared to an average of 31.1% for the private financial system in Argentina for the same period according to the Central Bank. As of December 31, 2015, we served over two million customers, and our assets totaled Ps.33.0 billion (approximately US$2.5 billion), in addition to Ps.5.9 billion (approximately US$450 million) of assets managed by SAM. As of December 31, 2015, the Bank and CCF accounted for 89.3% and 8.0% of our total assets, respectively. As of December 31, 2015 and 2014, according to calculations performed based on Central Bank and other third party information, our share of the Argentine private bank market for the products or segments indicated below was: Personal loans: a 5.9% market share as of December 31, 2015, compared to a 5.0% market share as of December 31, 2014; Active Mastercard credit cards: an 8.4% market share as of December 31, 2015, compared to a 9.1% market share as of December 31, 2014; and Leasing: a 9.6% market share, and a market share greater than 11.0% when taking into account our securitized leasing portfolio as of December 31, 2015, compared to market shares of 6.3% and 10%, respectively, as of December 31, 2014. According to the most recent publicly available information based on data published by the Central Bank as of November 30, 2015, we had a 7.5% market share in factoring, compared to a 9.8% market share as of December 31, 2014; As of the nine-month period ended September 30, 2015: Deposits among private banks in the Mendoza and San Luis regions: a 19.1% and 53.1% market share, respectively; and Total loans among private banks in the Mendoza and San Luis regions: a 14.4% and 48.9% market share, respectively. In the years ended December 31, 2015 and 2014, respectively, The Bank originated 38.1% and 45.1% of all bank asset securitizations in the Argentine market; CT Corporation System 111 Eighth Avenue New York NY 10011 (212) 590-9330 (Name, address, including zip code, and telephone number, including area code, of agent for service) The offering of ADSs is being made in the United States and elsewhere outside Argentina solely on the basis of the information contained in this prospectus. We are also offering Class B shares in Argentina using a Spanish-language prospectus that will be filed with the CNV. The Argentine prospectus is in a different format than this prospectus in accordance with CNV regulations but contains substantially the same information included in this prospectus. The Argentine public offering of the Class B shares has been authorized by the CNV pursuant to Resolution No.18,023 dated April 14, 2016, as amended by Resolution No. 18,033 dated April 21, 2016, subject to certain conditions that, as of the date hereof, have not been fulfilled. Table of Contents We originated 9.6% and 16.2% of all asset securitizations in the Argentine market; and We managed 12.9% and 12.9% of all social security payments to senior citizens in Argentina. We offer diverse financial products and services that are specifically tailored to cover the different needs of our customers through a multi-brand and multi-channel platform. We have developed a multi-brand business model to differentiate the financial products and services we offer to a wide spectrum of individuals, small and medium-sized enterprises ("SMEs") and medium to large-sized companies in Argentina. Our infrastructure supports our multi-channel distribution strategy with a strategic national footprint through 325 access points, which include 110 bank branches, 67 senior citizen service centers, 11 banking payment and collection centers, 66 CCF sales points located in Walmart supermarkets, 61 consumer financing branches and other sale points, 9 microfinance branches, 491 ATMs and 158 self-service terminals. As of December 31, 2015, we had 5.0% market share in terms of branches and ATMs among private Argentine banks according to Central Bank information. In February 2016, the Central Bank approved our request to convert 35 of our 67 senior citizen service centers into full bank branches. As a result, as of the date of this prospectus, we have 145 bank branches and 32 senior citizen service centers. Building on our banking sector expertise, we identify cross-selling opportunities and offer targeted products to our customers at each point of contact, including by acting as the exclusive on-site provider of financial services to Wal-Mart Argentina S.R.L. ("Walmart Argentina") customers at each of Walmart Argentina's 108 supermarkets located in 21 provinces. As of December 31, 2015 and 2014, on a consolidated basis, we had: Over two million customers, including 1.7 million retail customers of the Bank and approximately 0.4 million retail customers of our other subsidiaries, 14,774 small businesses and 4,492 SMEs and large-sized companies as of December 31, 2015, compared to over two million customers, including 1.6 million retail customers of the Bank and approximately 0.4 million retail customers of our other subsidiaries, 12,389 small businesses and 3,957 SMEs and large-sized companies as of December 31, 2014; Ps.33.0 billion in total assets as of December 31, 2015, compared to Ps.23.2 billion in total assets as of December 31, 2014; Ps.20.0 billion in loans to the private sector and Ps.1.1 billion in financial leases as of December 31, 2015, compared to Ps.14.6 billion in loans to the private sector and Ps.584 million in financial leases as of December 31, 2014; Ps.1.3 billion in senior and subordinated bonds and participation certificates in financial trusts (which held Ps.2.8 billion in personal loans and financial leases) created in connection with our securitization transactions as of December 31, 2015, compared to Ps.1.3 billion in senior and subordinated bonds and participation certificates in financial trusts (which held Ps.3.1 billion in personal loans and financial leases) created in connection with our securitization transactions as of December 31, 2014; Ps.23.7 billion in deposits, including Ps.22.3 billion from the private sector, Ps.251.0 million from the financial sector and Ps.1.2 billion from the non-financial public sector as of December 31, 2015, compared to Ps.16.9 billion in deposits, including Ps.15.3 billion from the financial sector and Ps.1.4 billion from the non-financial public sector as of December 31, 2014; Ps.2.4 billion in shareholders' equity as of December 31, 2015, compared to Ps.1.7 billion in shareholders' equity as of December 31, 2014; and 4,843 employees as of December 31, 2015, compared to 4,579 employees as of December 31, 2014. With copies to: Andr s de la Cruz, Esq. Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 Nicholas A. Kronfeld, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amount to be Registered(1)(2) Proposed maximum aggregate offering price per share Proposed maximum aggregate offering price(3) Amount of registration fee(4) Class B shares, par value Ps.1.00 per share 119,791,667 US$2.6 US$311,458,333 US$31,364 (1)Includes Class B shares that the international underwriters may purchase solely pursuant to their option to purchase additional shares. (2)A separate registration statement on Form F-6 has been filed for the registration of American depositary shares issuable upon deposit of the Class B shares registered hereby. (3)Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act. (4)Filing fees in the amount of US$10,070 were previously paid. PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Statements We maintain our financial books and records in Pesos and prepare our consolidated financial statements in Argentina in conformity with Argentine Banking GAAP, as these are the rules and regulations applied by the Bank, our main subsidiary. Argentine Banking GAAP differs in certain significant respects from U.S. GAAP and from Argentine GAAP. Our consolidated financial statements at December 31, 2015 and 2014 and for each of the three years ended December 31, 2015, 2014 and 2013 have been audited, as stated in the report appearing herein, and are included in this prospectus and referred to as our "audited consolidated financial statements." Note 35 to our audited consolidated financial statements provides a description of the principal differences between Argentine Banking GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income and shareholders' equity as of and for the years ended December 31, 2015 and 2014. Unless otherwise indicated, all financial information of our company included in this prospectus is stated on a consolidated basis under Argentine Banking GAAP. Our consolidated financial statements at December 31, 2015 were approved by our ordinary and extraordinary shareholders' meeting held on April 19, 2016. In compliance with SEC rules, we have included in Annex A our unaudited consolidated financial statements as of March 31, 2016 and for the three-month periods ended March 31, 2016 and 2015 because we have filed such financial statements with the CNV. Currencies and Rounding The terms "U.S. dollar" and "U.S. dollars" and the symbol "US$" refer to the legal currency of the United States. The terms "Peso" and "Pesos" and the symbol "Ps." refer to the legal currency of Argentina. We have translated certain of the Peso amounts contained in this prospectus into U.S. dollars for convenience purposes only. Unless otherwise indicated, the rate used to translate such amounts as of December 31, 2015 was Ps.13.0050 to US$1.00, which was the reference exchange rate reported by the Central Bank for U.S. dollars. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. The U.S. dollar equivalent information presented in this prospectus is provided solely for the convenience of investors and should not be construed as implying that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See "Exchange Rates" for more detailed information regarding the translation of Pesos into U.S. dollars. All "as adjusted" amounts contained in this prospectus have been adjusted to reflect the receipt by us of the estimated net proceeds at an assumed public offering price of US$2.40 per Class B share (or US$12.00 per ADS), the mid-point of the price range set forth on the cover page of this prospectus. Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. Market Share and Other Information We make statements in this prospectus about our competitive position and market share in, and the market size of, the Argentine banking industry. We have made these statements on the basis of Table of Contents We have developed a segmentation strategy of our customer base to target the specific needs of each category of customers. Our business model has allowed us to deliver sustained levels of growth and profitability. Between 2013 and 2015 the Bank's loan portfolio grew at a CAGR of 31.5%, as compared to 29.7% for private banks in Argentina. The Bank's annualized return on average equity ("ROAE") was 28.5%, 35.2%, 27.7%, 27.3% and 24.9% for the fiscal years ended December 31, 2011, 2012, 2013, 2014 and 2015, respectively, compared to an average annualized ROAE of 25.6%, 26.4%, 29.1%, 32.1% and 31.2% for private banks in Argentina over the same periods. The Bank achieved net interest margins of 12.5%, 15.1%, 15.0%, 16.7% and 17.3% for the fiscal years ended December 31, 2011, 2012, 2013, 2014 and 2015, respectively, which compares favorably to averages for private banks in Argentina of 10.6%, 12.3%, 12.5%, 14.2% and 15.0% for the fiscal years ended December 31, 2011, 2012, 2013, 2014 and 2015, respectively. As of December 31, 2015, the Bank accounted for 3.7% of all loans held by private banks in Argentina and 3.1% of all deposits maintained with such banks, compared to 3.1% and 2.8%, respectively, in 2011. Our technology-based sales model enhances our ability to offer customers efficient, high quality service. The Bank has made significant investments in its ATMs and self-service terminal network, doubling the network from 2010 to 2015. We were the first bank in Argentina to use biometrics technology as part of our distribution channels. We also have technology scoring systems that allow for an efficient credit-related decision-making process. Segments We conduct our operations through the following segments: Retail Banking Corporate Banking Treasury Consumer Finance Insurance Asset Management & Other Services Products and Services We offer our products and services in Argentina's main regions and cities through our main operating subsidiaries, which include: Banco Supervielle S.A., a universal commercial banking institution, Cordial Compa a Financiera S.A., a consumer financing company, Tarjeta Autom tica S.A., a private label credit card company, Cordial Microfinanzas S.A., a company that specializes in microfinance, Supervielle Seguros S.A., an insurance company, Supervielle Asset Management Sociedad Gerente de FCI S.A., an asset management company, and Espacio Cordial Servicios S.A., a retail company selling non-financial products and services. Table of Contents risk concentration limits, limits on transactions with customers on the basis of the institution's capital and credit limits on the basis of the customer's net worth. Risk concentration: regulations include the concept of risk concentration, defined as the sum of loans that individually exceed 10% of the financial institution's RPC. Total operations may not exceed, at any time: three times the institution's RPC for the previous month, without considering the operations involving local financial institutions; five times the institution's RPC for the previous month, on total financings; and/or ten times the institution's RPC for the previous month, for second tier commercial banks when taking into account transactions with other financial institutions. The three times and five times limits listed above are increased to four times and six times the institution's RPC for the previous month, respectively, whenever increases are allocated to provide assistance to trusts or fiduciary funds from the non-financial public sector. Loans (other than inter-bank loans) that exceed 2.5% of the financial institution's RPC must be recommended by senior management and approved by the institution's board of directors or similar authority. Diversification of risk: Financial institutions must ensure that their loan portfolio is diversified among the highest possible number of individuals or companies and across all economic sectors to avoid a concentration of risk arising from a small group of individuals or companies or related to a specific sector that could significantly affect the institution's assets. Degree of risk: In the case of credit limits based on the customers' net worth, as a general rule the financial assistance cannot exceed 100% of the customer's net worth. The basic margin may be increased by an additional 200% provided such additional margin does not exceed 2.5% of the financial institution's RPC as of the last day of the second month prior to the date of the financing and the increase is approved by the board of directors of the relevant financial institution. Limits on Credit Assistance Maximum individual limits on credit assistance for non-related clients are calculated as a percentage of the financial institution's RPC. Maximum limits for credit assistance to non-financial public sector are as follows: Transactions with the non-financial public sector Maximum limit(*) i) Transactions with the national public sector 50 % ii) Transactions with each provincial jurisdiction or the City of Buenos Aires 10 % iii) Transactions with each municipal jurisdiction The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Table of Contents statistics and other information derived from the Central Bank's publications and other third-party sources that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect, neither we, the selling shareholders, the international underwriters, the Argentine placement agent nor any of our or their affiliates have independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications. In January 2007, the Instituto Nacional de Estad sticas y Censos (the National Statistics and Census Institute, or "INDEC"), which is the only institution in Argentina with the statutory authority to produce official nationwide statistics, modified the methodology used to calculate certain of its indices. On January 8, 2016, the Macri administration issued Decree No. 55/2016 declaring a state of administrative emergency with respect to the national statistical system and the INDEC until December 31, 2016. During this state of emergency, the INDEC has suspended and will suspend publication of certain statistical data until it completes a reorganization of its technical and administrative structure capable of producing sufficient and reliable statistical information. Table of Contents Market Opportunities We believe that the low penetration rates of financial services in Argentina, offer a significant opportunity for us to accelerate our growth. We highlight below the key market opportunities from which we believe we will benefit: Under-developed financial system with low levels of banking and insurance penetration. Argentina has one of the lowest market penetration rates of financial services in Latin America. According to the Central Bank and INDEC ("Instituto Nacional de Estad siticas y Censos"), loans to the private sector as a percentage of GDP were 12.1% as of December 31, 2014, which positively compares to penetration rate levels in other Latin American countries, such as 53.3% for Brazil, 75.9% for Chile, 43.6% for Colombia, 31.4% for Peru, 25.0% for Uruguay and 17.9% for Mexico as of December 31, 2014 according to the Inter-American Development Bank ("IDB"). Similarly, Argentina's insurance market also remains under-penetrated when compared to other countries in Latin America. According to each country's insurance regulator based on the most recent publicly available information insurance premiums written in Argentina as a percentage of GDP, represented 1.5%, as of September 30, 2015, positively comparing to 2.6% in Brazil, 2.4% in Colombia, 1.8% in Peru, 1.9% in Mexico and 4.3% in Chile as of December 31, 2015. Fragmented banking sector in Argentina offers the possibility for further consolidation. The Argentine banking sector, which shows high levels of profitability and maintains a strong asset quality, presents opportunities for consolidation. As of December 31, 2015, according to the respective financial regulatory agencies, there were 62 banks in Argentina, compared to 129 in Brazil, 24 in Chile, 25 in Colombia, 45 in Mexico and 17 in Peru. The relatively high number of banks in Argentina suggests that there is room for consolidation. As of December 31, 2015, the top five banks in Argentina represented 51.3% of total loans extended by banks (with the government-owned banks alone accounting for 36.5%), compared to 74.1% in Brazil, 73.2% in Chile, 63.4% in Colombia, 72.0% in Mexico and 86.5% in Peru. We believe that consolidation would improve efficiency as cost savings are materialized through optimization of infrastructure and expenses and would allow for further growth opportunities. According to information published by each relevant country's regulator, in 2015, Argentina's banking sector had an efficiency ratio of 54.3%, compared to 47.1% in Brazil, 47.4% in Chile, 42.9% in Colombia, 51.4% in Mexico and 40.0% in Peru. We believe that our track record, size and geographic reach strategically positions us to benefit in the event of consolidation in the Argentine banking sector. Solvency of Argentine financial system. Although Argentina's financial system experienced instability as a result of the 2001-2002 crisis over the last five years, the Argentine financial system has maintained high levels of profitability and strong asset quality. From 2011 to 2015, according to the Central Bank, the Argentine financial system had an average annualized ROAE of 29.1%, an average NPL ratio of 1.7% and an average deposits to loans ratio of 142.5%. As of December 31, 2015, the Argentine financial system had an annualized ROAE of 32.4%, an NPL ratio of 1.7% and deposits to loans ratio of 148.5%, indicating comfortable liquidity levels. Furthermore, assets and liabilities in the financial system are largely denominated in Pesos, which limits exposure of the financial system to foreign exchange fluctuations. The relatively short duration of loans in the Argentine financial system results in low asset-liability mismatch, protecting the system from an unexpected contraction in deposits. Table of Contents The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED MAY 10, 2016 PROSPECTUS 104,166,667 Class B Shares Grupo Supervielle S.A. which may be represented by American depositary shares (1)Lankory International S.A. is a Uruguayan sociedad an nima 100% owned by Pilar Isabel Estella Supervielle. We are controlled by the Supervielle family, which entered the Argentine banking sector in 1887 and have maintained a successful track record since then. Immediately after the global offering and assuming the placement of all shares offered and no exercise of the international underwriters' option to purchase additional shares, our controlling shareholder, Julio Patricio Supervielle, will own shares representing 62.22% of our total capital stock and 85.04% of total voting rights. We are one of few domestically-owned financial groups in Argentina that has remained under the control of the same shareholder group over time. The extensive experience and stability of our controlling group has helped us focus on increasing our market share in the core segments in which we operate and consolidate as one of the most stable financial groups in the country with a recognized reputation. Since 2001, we have acquired several businesses while consistently maintaining high levels of profitability and sustained ROAE. Our average ROAE for the 2011-2015 period was 29.5%, while the Bank posted an average ROAE of 28.7%. Since 2001, we have acquired several financial institutions such as Banco Soci t G n rale Argentina and Banco Regional de Cuyo, and we have acquired businesses such as Tarjeta, GE Compa a Financiera (now CCF) and Aseguradora de Cr dito del Mercosur (now Supervielle Seguros). We also offer consumer loans, credit cards and insurance products through an exclusive agreement with Walmart Argentina. This is the initial public offering of our Class B shares of common stock, par value Ps.1 per share and one vote per share. We and the selling shareholders named in this prospectus are offering the Class B shares in a global offering, which consists of an international offering in the United States and other countries outside Argentina and a concurrent offering in Argentina. In the aggregate, 83,333,333 Class B shares, which may be represented by American depositary shares ("ADSs"), are being offered by us in the global offering and 20,833,334 Class B shares, which may be represented by ADSs, are being offered by the selling shareholders in the global offering. Each ADS represents five Class B shares. The international offering of the ADSs is being underwritten by the international underwriters named in this prospectus. In the Argentine offering, Class B shares are being offered by us and the selling shareholders to investors in Argentina through the Argentine placement agent named in this prospectus. The closings of the international and Argentine offerings are conditioned upon each other. We will not receive any proceeds from the sale of Class B shares by the selling shareholders. Prior to this offering, no public market existed for the Class B shares and ADSs. The initial public offering price of the ADSs in the international offering is expected to be between US$11.00 and US$13.00 per ADS, and the initial public offering price of the Class B shares in the Argentine offering is expected to be between US$2.20 and US$2.60 per Class B share. After the pricing of this offering, we expect the ADSs to trade on the New York Stock Exchange (the "NYSE") under the symbol "SUPV" and our Class B shares to be listed on the Mercado de Valores de Buenos Aires (the "MERVAL") and the Mercado Abierto Electr nico S.A. ("MAE"), under the symbol "SUPV." The offering of our Class B shares in Argentina will be registered with the Argentine securities regulator (Comisi n Nacional de Valores). Neither the U.S. Securities and Exchange Commission (the "Commission") nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Investing in the Class B shares and ADSs involves risks. See "Risk Factors" beginning on page 30 of this prospectus. Table of Contents Our Competitive Strengths We have achieved a strong competitive position in our core products (personal loans, factoring, leasing and social security payments to senior citizens). We have developed a leading position in the Argentine market in a number of attractive products to different customer segments. We are leaders in the Argentine market in the following areas: Retail Customers. We maintain leading positions in attractive retail banking and consumer financing segments, offering a variety of products, from personal loans and credit cards to social security payment services to senior citizens. As of December 31, 2015, we had approximately 2.1 million retail customers, accounting for Ps.15.8 billion (approximately US$1.2 billion) in deposits. As of December 31, 2015, the Bank and CCF's loans to retail customers represented 5.9% of the Argentine private banks market for personal loans, which ranked fifth out of 49 private banks in Argentina. In 2015, the Bank managed 12.9% of all monthly social security payments to senior citizens (who collect their payments on a monthly basis), ranking first among Argentine private banks. Additionally, we are the largest private issuer of MasterCard credit cards and the exclusive on-site provider of financial services to Walmart Argentina customers, with a contract recently extended through August 2020, renewable at expiration. Corporate Customers. We are also a leading provider of specially tailored financial services and products to the corporate sector, with a particular focus on SMEs and large-sized companies. As of December 31, 2015, we had a 9.6% market share in leasing, which ranked fifth out of 49, according to our estimates based on Central Bank information. In 2015, our leasing market share was 11.8% when taking into account the securitized leasing portfolio. As of November 30, 2015, we had a 7.5% market share in factoring in terms of Argentine private banks, which ranked fifth out of 49, based on the most recent publicly available information based on data published by the Central Bank. Capital Markets. We maintain a leading position in the Argentine securitization market, which we have developed as part of the Bank's funding strategy. In 2015, we had a 38.1% share in bank asset securitization and a 9.6% share in the overall Argentine asset securitization market according to our own estimates based on Central Bank and CNV information. In 2015, we had Ps.3.4 billion (approximately US$370 million) in securitization and bond issuances for our subsidiaries, and Ps.0.5 billion (approximately US$54 million) in securitization for third parties. Access to multiple customer segments through differentiated brands and channels positions us to capture future growth in the Argentine financial system. We target a broad spectrum of socioeconomic segments and companies of varying sizes using a multi-brand model to offer a wide range of financial services. The Bank offers customized financial products and services to corporate clients, as well as to high net worth and middle-income individuals and to middle and lower-middle-income senior citizens. CCF and Tarjeta focus their products and services on the middle and lower-middle-income segments of the urban population. Through Cordial Microfinanzas, we are the main private financial group in Argentina to offer microfinance services, targeting micro-entrepreneurs that have limited access to traditional banking and financial services and families with housing infrastructure deficiencies that need financing for improvements or maintenance purposes. Our multi-brand model allows us to access segments of the population that are underserved and we believe offer growth opportunities. We consistently seek to leverage the strong cross-selling potential of our multi-brand and multi-channel business model and our stable pool of over two million customers. Through our multi-brand and multi-channel approach, we are able to cross-sell and create synergies across our segments. Bancassurance specifically allows us to cross-sell value added insurance products in compliance with the regulations of the National Superintendency of Insurance (Superintendencia de Seguros de la Naci n) and of the Central Bank, as applicable. Additionally, our 128 consumer finance points of sale offer an attractive Per ADS Total Per Class B share Total Public offering price US$ US$ US$ US$ Underwriting discounts and commissions(1) US$ US$ US$ US$ Proceeds, before expenses, to us US$ US$ US$ US$ Proceeds, before expenses, to the selling shareholders US$ US$ US$ US$ (1)See "Underwriting." We have granted the international underwriters the right for a period of 30 days from the date of this prospectus to purchase in the aggregate up to an additional 15,625,000 Class B shares represented by ADSs at the initial public offering price paid by investors minus any applicable discounts and commissions pursuant to the international underwriters option to purchase additional shares. New shareholders will not have preemptive or accretion rights with respect to the Class B shares offered pursuant to the international underwriters' option to purchase additional shares. The Class B shares and ADSs will be ready for delivery on or about , 2016. Morgan Stanley BofA Merrill Lynch Joint Bookrunner and Joint Global Coordinator Joint Bookrunner and Joint Global Coordinator Raymond James Co-Manager The date of this prospectus is , 2016. Table of Contents platform for cross-selling certain credit cards and loans. We cross-sell non-financial services and products such as insurance products and plans, tourism packages, health insurance and health services, electric appliances and furniture, and alarm systems through Espacio Cordial and our senior citizen service centers. We believe our investment in developing a strategic national footprint positions us to capture strong growth and benefit from economies of scale. We have a focused presence in Argentina's major regions and cities where the GDP per-capita is above US$12,000, through 325 access points, including branches, senior citizen service centers and sales and collection centers, 491 ATMs, 158 self-service terminals, our call center and home banking and mobile services. The Bank has an important presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area (where approximately 15.6 million or 39% of Argentina's population resides), through 57 branches and 52 senior citizen service centers and CCF has 22 sales points within Walmart locations. The Bank is also one of the most active players in the Cuyo region, which includes the Province of Mendoza, San Juan and San Luis where it operates through 44 branches, seven senior citizen service centers, nine collection centers and has been designated the exclusive paying agent for the government of the Province of San Luis through 2021. We have approximately 248,000 customers in Mendoza and approximately 188,000 in San Luis. CCF has seven sales points in the Cuyo region. Through Tarjeta, we offer consumer finance services mainly in the Patagonia region, where we rely on 15 branches and 38 sales and collection centers. Given the strength of our network in commercially significant and high-income regions in Argentina, we believe we are well positioned to benefit from economies of scale by leveraging our existing network and growing our revenues without significant investments in additional expansion of our platform. Our funding base is robust. We have access to diversified, competitive and stable sources of funding. Our low-cost demand deposit base comprises 38% of our funding base (25% of savings accounts and 13% of checking accounts as of December 31, 2015). Furthermore, we use securitization of loans and other capital markets instruments among our funding strategies. Creation of shareholder value under prudent financial risk management policies. We have generated value, strong growth and returns on capital for our shareholders that have exceeded average returns for Argentine private banks over the past five years, during which the Bank's annual average shareholders' equity growth rate was 34.7%, while managing financial risks under policies designed to protect our capital and liquidity. In addition to our organic growth, we have successfully acquired and integrated strategic businesses. We have consistently limited our exposure to the non-financial public sector and limited term, currency and other mismatches in our assets and liabilities. Those prudent financial risk policies allowed us to successfully overcome the Argentine financial crisis in 2001 and 2002 and proved equally effective during the 2008 global economic downturn. We derive our net income primarily from financial intermediation activities rather than from trading or financial investments, which has resulted in more stable sources of income and reduced the exposure of our earnings to market volatility. Long-standing presence in Argentina's financial sector, committed controlling shareholder and experienced Board of Directors and management team. Through our main subsidiary, the Bank, we trace our origins to the banking house Supervielle y C a. Banqueros, established in 1887. Our long-standing presence in Argentina's financial sector has allowed us to establish strong long-term relationships with our customer base, build a reputation for personalized customer service and establish the Supervielle brand as a recognized household name in the Argentine banking industry for both individuals and corporations, as well as in the securitization and corporate bond segments of the local capital markets. Our shareholders have a strong commitment to the Argentine financial system. Julio Patricio Supervielle is the Chairman of the Board of Directors and our CEO and has led Grupo Supervielle for over 13 years. During his tenure we have experienced growth in terms of net worth, assets, deposits and our network, and we have successfully completed some of our most significant acquisitions. We rely on a Board of Directors whose members collectively have extensive experience in retail and commercial Table of Contents banking, a deep understanding of local business sectors and strong capabilities in risk management, finance, capital markets, M&A and corporate governance. In addition, our stable senior management team is comprised of seasoned officials and experts in their fields that foster a business culture of high performance. Our Vision and Strategy We seek to become the premier bank for individuals and companies in Argentina and to provide a superior banking experience to our customers at all times. In order to achieve our objective of providing best in class customer service, we strive to continuously innovate and optimize our policies and processes by leveraging our long-standing reputation, effective customer segmentation, multi-brand strategy, extensive distribution network and strong digital footprint. We believe that our success is based on our people. We have developed a strong culture based on shared values: leadership, innovation, simplicity, efficiency, commitment and respect. The Argentine market is one of the least developed financial systems in Latin America, with a fragmented, competitive landscape. We believe that the market offers a number of growth opportunities which we are positioned to capture given our focus on a distinguished customer experience, our product offering, our extensive distribution network and our leading technology. We aim to increase our market share of the overall Argentine financial services market by delivering tailored value propositions in each of the key business segments in which we operate: Retail Banking, Corporate Banking, Treasury, Consumer Financing, Insurance and Asset Management and Other Services. The key components of our strategy are as follows: Increase our market presence in attractive customer segments and products and strengthen our value proposition through an effective customer segmentation strategy We seek to increase revenues from each of our target customer segments through cross-selling strategies and as described below: Entrepreneurs and Small Businesses: We aim to continue to expand our market share within our customer base of entrepreneurs and small businesses. We intend to leverage our branch network as a primary means of attracting business and focus on building our customized cash management services. Middle and lower-middle-income population: This segment has one of the lowest banking penetration rates in Latin America and represents an important opportunity to attract new customers. Our exclusive agreements with Walmart Argentina and Hipertehuelche supermarkets position us to reach this segment with a powerful value proposition, particularly consumer finance loans and credit cards. This customer base also offers opportunities for cross-selling of other banking products. Additionally, we continuously analyze opportunities for new product launches to serve this segment. High net worth customers: We successfully launched the Identit brand in 2014 with an attractive value proposition designed to capture and monetize the high net worth customer segment. That value proposition includes a wide range of components like premium credit cards, loyalty programs and exclusive events for customers. To reach high net worth individuals, the bank leverages three key assets: a premium, differentiated brand, a highly trained workforce and an excellent branch network in high income neighborhoods. Table of Contents Senior citizens: We intend to maintain our leadership position in the senior citizen segment, providing unique services and benefits catered to its specific needs. Leveraging our network of specialized service centers we seek to expand our credit card and personal loan business, finance travel packages and consumer goods and services, and distribute insurance products, including life, burial, health, personal accident insurance and home insurance. This segment is adopting technology rapidly, which we anticipate will increase efficiency of service delivery. SMEs and large-sized companies: Our aim is to become the premier bank for SMEs and large-sized companies by deploying outstanding transactional and cash management services. We intend to develop strategic partnerships with key industry players to provide financial services through direct lending or factoring transactions to their critical providers and suppliers along their value chains. We will target specific opportunities and customers in the agricultural, wine, energy and infrastructure sectors. With respect to the agricultural sector, we strive to deepen our existing relationships with leading industry players, providing financing to their customer base. In San Luis, C rdoba, and Tucum n, where we have a well-established distribution base, we intend to continue to target individual farmers. With respect to the wine industry, we seek to continue to develop partnerships with premium wine producers and key industry suppliers, providing industry insights and financial services, such as harvest financing and warrants backed by wine in custody. With respect to the energy and infrastructure sectors, we target SMEs and large-sized companies along the supply chains of oil and gas (exploration and production) in Vaca Muerta and medium and large construction companies, tapping into the substantial potential demand for infrastructure financing. Larger corporate customers: We intend to offer a full range of products and services, including financial advice, transactional services, treasury management, short, medium and long term financing to larger corporate customers than we have historically targeted. We aim to achieve this goal through quick decision-making with respect to our credit evaluation process, personal attention, increasing transactional services (such as check maintenance, payroll management, payments to suppliers and tax payment services) and building upon our cash management products, payroll management and other products that translate into higher balances of immediately available deposits. Leverage our proximity to customers through our extensive distribution network of branches, service centers and sales points to provide a superior customer experience We have a direct presence in Argentina's major regions and cities. The Bank has a particularly important presence in the Greater Buenos Aires metropolitan area and the Cuyo region, which includes the provinces of Mendoza, San Juan and San Luis. Given the geographical concentration of our network in commercially significant and high-income regions in Argentina, we believe we are well positioned to benefit from economies of scale by growing our revenues without significant investments in additional platform expansion. We intend to selectively expand the bank's network of branches, emphasizing services for high net worth and upper-middle-income individuals and small businesses. In order to tap the potential of Vaca Muerta, the shale oil and gas reservoir, we intend to open several branches in the Province of Neuqu n, as well as leverage our Malarg e branch in Mendoza. We intend to grow the number of hub and spoke sales units specialized in leasing, foreign trade financing and cash management services. We will build upon our leadership position in retail and corporate banking services in the provinces of Mendoza and San Luis. We plan to continue our partnerships with premium retail stores and shopping outlets to obtain differentiated discounts and benefits for our retail customers, relying on our existing network, which is the largest in the region, and leveraging our role as exclusive financial agent to the Government of San Luis. Table of Contents References to "Class B shares" refer to shares of our Class B common stock, all with a par value of Ps.1.00 per share and references to "ADSs" are to American depositary shares, each representing five Class B shares, except where the context requires otherwise. The term "Argentina" refers to the Republic of Argentina. The terms "Argentine government" or the "government" refers to the federal government of Argentina the term "Central Bank" refers to the Banco Central de la Rep blica Argentina, or the Argentine Central Bank, and the term "CNV" refers to the Argentine Comisi n Nacional de Valores, or the Argentine securities regulator. "U.S. GAAP" refers to generally accepted accounting principles in the United States of America ("United States" or "U.S."), "Argentine GAAP" refers to generally accepted accounting principles in Argentina and "Argentine Banking GAAP" refers to the accounting rules of the Central Bank. The term "GDP" refers to gross domestic product and all references in this prospectus to GDP growth are to real GDP growth, the term "CPI" refers to the consumer price index and the term "WPI" refers to the wholesale price index. The term "customers" refers to individuals or entities that have at least one of our products without any requirement of customer activity during any time period. Unless the context otherwise requires, the term "financial institutions" refers to institutions regulated by the Argentine Central Bank. The term "Argentine banks" refers to banks that operate in Argentina. The term "Argentine private banks" refers to banks that are not controlled or owned by the Argentine federal government or any Argentine provincial, municipality or city government. The term "private domestically-owned banks" refers to private banks that are controlled by Argentine shareholders. The term "small businesses" refers to individuals and businesses with annual sales of up to Ps.25.0 million. The term "SMEs and large-sized companies" refers to individuals and businesses with annual sales over Ps.25.0 million. The term "ROAE" refers to return on average shareholders' equity. ROAE is frequently used by financial institutions as a benchmark to measure profitability compared to peers but not as a benchmark to determine returns for investors, which is affected by multiple factors that ROAE does not consider. Table of Contents We aim to increase our access to non-banking customers, by developing partnerships with key retailers to provide banking services along the lines of our existing alliance with Walmart Argentina, recently extended through August 2020. We plan to continue to expand our dedicated sales force with a focus on new entrepreneurs, small businesses and payroll services, to drive revenues and cross-selling ratios. We intend to seek new strategic partnerships in the agribusiness sector to provide financial services to leading national and international players catered to their customer base. We plan to broaden our offering of commodity warrants and livestock leasing, leveraging our strong market leadership in San Luis and C rdoba, in the north of Argentina. Continue capitalizing on synergies by developing new businesses to increase our share of wallet Our two million customers provide a base from which to expand our share of wallet and increase customer loyalty. The Bancassurance business allows us to cross-sell historically profitable and low-claims products to our existing customer base. We have access through our distribution networks and aim to further develop our Bancassurance distribution model by expanding the variety of insurance products offered by Supervielle Seguros, including credit life insurance. Espacio Cordial allows us to reach our clients with a wide variety of non-financial products and services, including travel and home appliance financing and health services. Grow our balance sheet while maintaining our conservative risk management policies Over the past 15 years we have differentiated ourselves from our competition by systematically securitizing assets, becoming the leader in Argentine capital markets in this segment. With the planned expansion of our capital base, we plan to reduce securitization of our originated assets, reduce existing borrowings from other financial institutions and unsubordinated negotiable obligations and leverage our capital markets capabilities and expertise to serve corporate customers in connection with capital markets transactions. The proceeds from this offering are expected to nearly double our capacity to increase our balance sheet in two years, allowing for a significant opportunity to improve our cost-income ratios. Our conservative financial policies based on a diversified deposit base, low portfolio concentration, short term high liquidity and low interest rate, term and currency mismatches have allowed us to build a strong franchise in retail and corporate banking. We expect that the proceeds from this offering will boost our ability to increase our deposits, cross-sell to retail and consumer customers and attract cash management deposits from corporate clients. We also intend to continue to opportunistically access long-term funding from the international capital markets. Improve our efficiency by focusing on innovation and technology We will seek to increase commercial productivity by optimizing sales time using online and mobile banking, sales and collection centers, streamlining risk assessment and CRM technology. We also plan to continue working with world-class business intelligence tools to increase sales productivity and to improve relationships with clients through better predictive sales actions and communications. Our strong culture of innovation supports our constantly keeping abreast of customer needs and global trends, creating and efficiently implementing solutions focused on local customer preferences. We intend to expand our digital banking channel and online banking platform. Our goal is to offer an outstanding digital experience to our clients. We intend to continue to increase the number of active online users and to migrate our services to digital channels, which we expect will allow us to increase low-cost distribution and convert service centers into full bank branches. We also intend to continue launching mobile banking applications, which will enable "one click" payment and "one click" loan Source: Central Bank The Bank, when consolidated with CCF, ranked first among private banks in the Argentine financial system with respect to Mastercard active accounts as of December 31, 2015 as shown in the following table: As of December 31, 2015 Mastercard active accounts 1 Banco Supervielle S.A.(1) 240,792 2 Banco Macro S.A. 207,216 3 BBVA Banco Franc s S.A. 195,970 4 HSBC Bank Argentina S.A. 190,723 5 Banco de Galicia y Buenos Aires S.A. 118,403 6 Citibank N.A. 110,902 7 Banco Columbia S.A. 96,619 8 Banco Ita Argentina S.A. 93,347 9 Industrial and Commercial Bank of China (Argentina) S.A. 77,708 We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the selling shareholders, the international underwriters, the Argentine placement agent or any of our or their affiliates have not authorized any other person to provide you with different or additional information. We, the selling shareholders, the international underwriters, the Argentine placement agent, or any of our or their affiliates are not making an offer to sell the ADSs or Class B shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ADSs or Class B shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus. Table of Contents functionalities, with anytime and everywhere financial services and provide alerts and messages to customers in order to achieve cost efficiencies through low-cost social network advertising. We have significantly improved the digital experience of our factoring product line, cash management and payroll services, and introduced "iFactus," the first portal providing electronic factoring services and "e-Factoring," an electronic platform which allows for check scanning and electronic delivery to the bank for immediate deposit, custody or discounting, with deferred physical delivery. We also intend to increase our offering of transactional services, such as factoring operations, foreign trade and cash management services (check maintenance, payroll management, payments to suppliers and tax payments). Recent Developments Set forth below is certain unaudited interim financial information as of March 31, 2016 and December 31, 2015 and for the three-month periods ended March 31, 2016 and 2015. On May 10, 2016, we filed our unaudited interim financial statements as of March 31, 2016 and December 31, 2015 and for the three-month periods ended March 31, 2016 and 2015 (the "Q1 Financial Statements") with the CNV in Argentina. A translation into English of the Q1 Financial Statements can be found at Annex A of this prospectus. The following is not meant to be a comprehensive statement of our results of operation or financial condition and should be read in conjunction with Annex A and "Risk Factors" herein. Our results of operations for the first three months of 2016 are not necessarily indicative of our results of operations for the full year or any other period. Our total outstanding loans and leases (net of allowances) and deposits were Ps.23 billion and Ps.24 billion, respectively, as of March 31, 2016, compared to Ps.21 billion and Ps.24 billion as of December 31, 2015. Our gross financial margin and net service fee income (including insurance activities) were Ps.1 billion and Ps.656 million, respectively, for the three-month period ended March 31, 2016, compared to Ps.700 million and Ps.467 million for the same period in 2015. Our non-performing loan ratio was 2.7% as of March 31, 2016, compared to 3.2% as of December 31, 2015. Our net interest margin was 19.8% for the three-month period ended March 31, 2016, compared to 18.2% for the same period in 2015. Our Tier 1 ratio (Tier 1 Capital: Ps.2.53 billion / Risk weighted assets: Ps.35.16 billion) and total capital ratio (Regulatory Capital: Ps.3.26 billion / Risk weighted assets: Ps.35.16 billion) were 7.2% and 9.3%, respectively, as of March 31, 2016, compared to 6.7% and 8.7% as of December 31, 2015. Our Tier 1 capital was Ps.2.53 billion as of March 31, 2016, compared to Ps.2.31 billion as of December 31, 2015. Our net income totaled Ps.175 million for the three-month period ended March 31, 2016, compared to Ps.85 million for the three-month period ended March 31, 2015. Our return on average equity ("ROAE") and return on average assets ("ROAA") for the three-month period ended March 31, 2016 were 28.4% and 2.1%, respectively, compared to 19.3% and 1.4%, respectively, for the same period in 2015. ROAE, ROAA and net interest margin for the three-month period ended March 31, 2016 and 2015 were each calculated using the average of the beginning and end of period balances for assets and shareholders' equity, while ROAE, ROAA and net interest margin for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 were each calculated using daily average balances for assets and shareholders' equity. The Q1 Financial Statements do not include a reconciliation to U.S. GAAP of shareholders' equity as of March 31, 2016 or net income for the periods ended March 31, 2016 and 2015. There is no material difference from U.S. GAAP as it would be applied to our shareholders' equity as of March 31, 2016 or our net income for the three-month period ending March 31, 2016 and 2015 that was not Table of Contents disclosed and quantified in the reconciliation to U.S. GAAP as of and for the year ended December 31, 2015. Certain Considerations for U.S. Investors Recent tax issues On September 23, 2013, Law No. 26,893, which amended the Income Tax Law, was enacted. According to the amendments, the distribution of dividends by an Argentine corporation is subject to income tax at a rate of 10.0%, unless such dividends are distributed to Argentine corporate entities. In addition, the amended law establishes that the sale, exchange or other transfer of shares and other securities is subject to a capital gain tax at a rate of 15% for Argentine resident individuals and foreign beneficiaries. There is an exemption for Argentine resident individuals if certain requirements are met; however, there is no such exemption for non-Argentine residents. The income tax treatment of income derived from the sale of ADSs, dividends or exchanges of shares from the ADS facility may not be uniform under the revised Argentine income tax law. The possibly varying treatment of source income could impact both Argentine resident holders as well as non-Argentine resident holders. In addition, should a sale of ADSs be deemed to give rise to Argentine source income, as of the date of this prospectus no regulations have been issued regarding the mechanism for paying the Argentine capital gains tax when the sale exclusively involves non-Argentine parties. However, as of the date of this prospectus, no administrative or judicial rulings have clarified the ambiguity in the law. As of the date of this prospectus, many aspects of these new taxes remain unclear. For more information, see "Taxation Material Argentine Tax Considerations." Table of Contents No offer or sale of ADSs may be made to the public in Argentina except in circumstances that do not constitute a public offer or distribution under Argentine laws and regulations. Table of Contents Fees that may be paid by ADS investors The following table summarizes certain fees and expenses in connection with the ADSs: Persons depositing or withdrawing shares or ADS holders must pay: For: $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates $0.05 (or less) per ADS Any cash distribution to ADS holders A fee equivalent to the fee that would be payable if securities distributed to you had been Class B shares and the Class B shares had been deposited for issuance of ADSs Distribution of securities distributed to holders of deposited securities (including rights) which are distributed by the depositary to ADS holders $0.05 (or less) per ADS per calendar year Depositary services Registration or transfer fees Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares Expenses of the depositary Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars Taxes and other governmental charges the depositary or the custodian have to pay on any ADSs or shares underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes As necessary Any charges incurred by the depositary or its agents for servicing the deposited securities As necessary For more information, see "Description of American Depositary Shares Fees and Expenses." Impact of devaluation of the Peso on U.S. investors After several years of moderate variations in the nominal exchange rate, the Peso has undergone significant devaluation over the last three years. In 2010 and 2011, the devaluation of the Peso with respect to the U.S. dollar was 5% and 8%, respectively. In 2012, the Peso lost approximately 14% of its value with respect to the U.S. dollar. This was followed in 2013 and 2014 by a devaluation of the Peso with respect to the U.S. dollar that exceeded 30%, including a loss of approximately 24% in January 2014. In 2015, the Peso lost approximately 52% of its value with respect to the U.S. dollar, mainly concentrated after December 16, 2015. From January 1, 2016 to March 31, 2016, the Peso lost approximately 12% of its value with respect to the U.S. dollar. Table of Contents Any further devaluation could have an impact on U.S. investors by decreasing our shareholder equity expressed in U.S. dollars, for instance if net income fails to increase at a pace greater than the rate of devaluation. Challenges in the Argentine Market Argentina faces a number of economic, regulatory and political challenges. After recovering from the 2001-2002 crisis, the pace of growth of Argentina's economy has diminished, inflation levels have been high and the Peso has undergone devaluation in the period 2003 to 2011. In 2012, the Argentine economy grew only slightly at 0.8% according to INDEC, as domestic investment contracted primarily as a result of a decrease in construction and capital goods imports. The Argentine economy grew by 2.9% in 2013 and by 0.5% in 2014, according to INDEC. In December 2015, the Macri administration stopped publishing macroeconomic information in connection with an effort to improve INDEC's technical and administrative structure and to restore its credibility. On March 30, 2016, INDEC published preliminary GDP information for 2015, according to which GDP grew by 2.1% in 2015. In addition, according to INDEC, Argentina recorded inflation levels in 2013 and 2014 of 10.9% and 23.9%, respectively, and 11.9% in the ten-month period ended October 31, 2015. However, private sector estimates in Argentina reported higher levels of inflation than those calculated by INDEC. On January 8, 2016, Decree No. 55/2016 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of that system, the INDEC, until December 31, 2016. Following the declared emergency, the INDEC has ceased publishing statistical data until a rearrangement of its technical and administrative structure is finalized. During the implementation of these reforms, however, INDEC will use official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires. Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy and public accounts. According to the most recent publicly available information based on data from the City of Buenos Aires, CPI grew 26.6% in 2013, 38.0% in 2014 and 26.9% in 2015. After several years of moderate variations in the nominal exchange rate, in 2012 the Peso lost approximately 14.4% of its value with respect to the U.S. dollar. This was followed in 2013 and 2014 by a devaluation of the Peso with respect to the U.S. dollar that exceeded 32.5% in 2013 and 31.2% in 2014, including a loss of approximately 24% in January 2014. In 2015, the Peso was devalued by 52% of its value with respect to the U.S. dollar, including a 10% devaluation from January 1, 2015 to September 30, 2015 and a 38% devaluation during the last quarter of the year, mainly concentrated after December 16, 2015. In addition, a series of new regulations were enacted from the beginning of 2012 until President Macri assumed office, incorporating new requirements and restrictions for financial institutions, including: (i) mandatory credit lines for productive purposes, with a maximum interest rate established by regulation; (ii) rules limiting the reference interest rate for personal loans and car loans granted to retail customers that are not considered a micro, small or medium size company; (iii) a prior authorization requirement with respect to the introduction of new fees for new products and/or services offered and to increase existing fees; (iv) rules limiting minimum rates applicable to term deposits made by individuals; (v) rules limiting the ability of financial institutions to receive remuneration or profits from any insurance product that customers are obligated to purchase as a condition for accessing financial services; and (vi) rules that reduce the positive foreign currency net global position and the positive foreign currency net global position for forward transactions of financial institutions and limit the permitted open positions for net future transactions at Mercado Abierto Electr nico S.A. (OCT - MAE) with the Central Bank, among others. However, after President Macri assumed office, some of these regulations were eliminated or modified in an effort to normalize the banking system Table of Contents and foster lending. On December 17, 2015, the limits imposed on interest rates applicable to transactions referred to in items (ii) and (iv) were eliminated and financial entities and their customers may now freely agree upon such interest rates. Also, the rules that reduced the positive foreign currency net global position and the positive foreign currency net global position for forward transactions of financial institutions indicated in item (vi) were modified and are expected to gradually enable financial institutions to increase their foreign currency positions. See "Argentine Banking Regulations Interest Rate and Fee Regulations" and "Argentine Banking Regulations Foreign Currency Net Global Position." The economic and financial environment going forward in Argentina is expected to be significantly influenced by the presidential elections held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina. The Macri administration is expected to adjust longstanding fiscal and monetary policies that have resulted in recurrent public sector deficits, inflation and pervasive foreign exchange controls and limited foreign investment. Sustainable economic growth and improved employment in the short and medium term will depend upon the manner in which the above-mentioned issues are addressed and may develop adversely if the issues are not addressed adequately. Recent Regulatory Changes in Argentina Since assuming office on December 10, 2015, the Macri administration has announced several significant economic and policy reforms, including: INDEC reforms. Following the 2015 Presidential elections, the Macri administration appointed Mr. Jorge Todesca, previously a director of a private consulting firm, as head of the INDEC. It is expected that the INDEC will implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of these reforms. On January 8, 2016, Decree No. 55/2016 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, until December 31, 2016. Following the declared emergency, the INDEC has ceased publishing statistical data until a rearrangement of its technical and administrative structure is finalized. During the implementation of these reforms, however, INDEC will use official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires. Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy and public accounts. Foreign exchange reforms. In addition, the Macri administration announced certain reforms to the foreign exchange market that are expected to provide greater flexibility and easier access to the foreign exchange market. The principal measures adopted as of the date of this prospectus include (i) the elimination of the requirement to register foreign exchange transactions in the AFIP's Exchange Transactions Consultation Program (Programa de Consulta de Operaciones Cambiarias), (ii) the elimination of the requirement to transfer the proceeds of new financial indebtedness transactions into Argentina and settle such proceeds through the MULC, (iii) the reestablishment and the increase of the US$5.0 million monthly limit per resident on the creation of offshore assets, (iv) a decrease to 0% (from 30%) of the registered, non-transferable and non-interest-bearing deposit required in connection with certain transactions involving foreign currency inflows, (v) the reduction of the required period that the proceeds of any new financial indebtedness incurred by residents, held by foreign creditors and transferred through the MULC must be kept in Argentina from 365 calendar days to 120 calendar days from the date of the transfer of the relevant amount and (vi) the elimination of the requirement of a minimum holding period (72 business hours) for purchases and subsequent sales of the securities. In addition, on December 17, 2015, because certain restrictions were lifted, the Peso Our principal executive offices are located at Bartolom Mitre 434, 5th floor, Buenos Aires, Argentina. Our general telephone number is +54-11-4340-3100. Our website is http://www.gruposupervielle.com.ar/ . Information contained or accessible through our website is not incorporated by reference in, and should not be considered part of, this prospectus. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York, 10011. Table of Contents
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/SVMB_jingbo_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/SVMB_jingbo_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..bb488f06bda467cdbc2b0f485a9ffdaf92018557
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/SVMB_jingbo_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 6
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/TCMD_tactile_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/TCMD_tactile_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..9305560ad2fe430755190df81306d3527caa0f5a
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/TCMD_tactile_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider when making your investment decision. You should read this entire prospectus carefully, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes thereto included elsewhere in this prospectus, before making an investment in our common stock. As used in this prospectus, the terms "company," "we," "our," and "us" refer to Tactile Systems Technology, Inc., doing business as Tactile Medical, except as otherwise indicated herein or as the context otherwise requires. Tactile Medical We are a medical technology company that develops and provides innovative medical devices for the treatment of chronic diseases at home. We focus on advancing the standard of care in treating chronic diseases in the home setting to improve patient outcomes and quality of life and help control rising healthcare expenditures. We possess a unique, scalable platform to deliver at-home healthcare solutions throughout the United States. This evolving care delivery model is recognized by policy-makers and payers as a key for controlling rising healthcare expenditures. Our initial area of therapeutic focus is vascular disease, with a goal of advancing the standard of care in treating lymphedema and chronic venous insufficiency. Our proprietary Flexitouch System is an at-home solution for lymphedema patients. Our proprietary ACTitouch System is a home-based solution for chronic venous insufficiency patients that may be worn throughout the day. Our products deliver cost-effective, clinically proven, long-term treatment of chronic diseases. We employ a direct-to-patient and -provider model, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions to patients and train them on the proper use of our solutions in their homes. This model allows us to directly approach patients and clinicians, whereby we disintermediate the traditional durable medical equipment channel and capture both the manufacturer and distributor margins. For the year ended December 31, 2015, we generated revenues of $62.9 million and had net income of $1.4 million. Our revenues increased 32% during the year ended December 31, 2015 compared to the year ended December 31, 2014. For the nine months ended September 30, 2016, we generated revenues of $56.1 million and had a net income of $0.5 million. Our revenues increased 34% during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. A traditional treatment for lymphedema is complete decongestive therapy, consisting of manual lymphatic drainage, which is a specialized application of gentle pressure to the skin applied by a therapist that encourages drainage of lymph fluid, as well as decongestive exercises, skin care and compression with multilayered bandages, compression garments or pumps. Typically, this therapy begins with clinic visits, but eventually patients transition to self-administered home-based therapy. The standard of care treatment for chronic venous insufficiency is compression therapy. As the disease progresses, patients may develop a venous leg ulcer, which is commonly treated using multilayered bandages to minimize swelling and enhance blood flow. A clinician applies these non-removable bandages to patients at a precise pressure and patients wear the bandages between weekly visits to the wound clinic during which the bandages are removed and reapplied. Our advanced at-home Flexitouch System applies a gentle application of pressure to stimulate the movement of lymphatic fluid and direct it toward properly functioning areas of the body. The Flexitouch System provides an easy-to-use, one-hour daily, self-applied treatment solution. Peer-reviewed, published studies have shown that our Flexitouch System provides improved quality of life and clinical outcomes and delivers significant cost-savings to payers and patients, compared to traditional treatments. The predecessor version of our Flexitouch System received 510(k) clearance in FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Table of Contents Investors Outside of the United States Neither we, the selling stockholders, nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside the United States. Trademarks Flexitouch, the Flexitouch and design, ACTitouch, Entr and our logo are our trademarks and are used in this prospectus. We have a pending trademark application for Tactile Medical, which is also used in this prospectus. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective owners. Solely for convenience, our trademarks and trade names referred to in this prospectus appear without the and TM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and trade names. Additionally, we do not intend for our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us, by these other companies. Industry and Market Data Certain market and industry data and forecasts included in this prospectus were obtained from independent market research, industry publications and surveys, governmental agencies and publicly available information. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe the data from such third-party sources to be reliable. However, we have not independently verified any of such data and cannot guarantee its accuracy or completeness. Similarly, internal market research and industry forecasts, which we believe to be reliable based upon our management's knowledge of the market and the industry, have not been verified by any independent sources. While we are not aware of any misstatements regarding the market or industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors," "Special Note Regarding Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus. Table of Contents July 2002 and our current Flexitouch System received 510(k) clearance from the U.S. Food and Drug Administration, or FDA, in October 2006. In September 2016, we received 510(k) clearance from the FDA for the Flexitouch System in treating lymphedema in the head and neck. Our Flexitouch System generated $54.8 million, or 87%, of our revenues in 2015. Our ACTitouch System addresses chronic venous insufficiency and provides precise, sustained and wearable compression that a patient may apply, remove and reapply at home. This system was developed to provide maximum convenience for patients by providing them with the freedom to remain active while simultaneously receiving the benefits of both sustained and intermittent pneumatic compression, which we refer to as dual-compression therapy. In a clinical study, our ACTitouch System was shown to have comparable efficacy in healing venous leg ulcers and achieved higher patient quality of life scores as compared to multilayered bandages. Our ACTitouch System received 510(k) clearance from the FDA in June 2013 and generated $3.2 million, or 5%, of our revenues in 2015. To support the growth of our business, we invest heavily in our commercial infrastructure, consisting of our direct sales force, reimbursement capabilities and clinical expertise. We are a national, accredited provider of home medical equipment services approved for coverage by private payers, Medicare, the Veterans Administration and certain Medicaid programs in the United States. We market our products using a direct-to-patient and -provider model. Our direct sales force is focused on increasing clinician awareness of our solutions, and has grown from three representatives in March 2005 to a team of over 110 people as of September 30, 2016. We utilize over 300 licensed, independent healthcare practitioners as at-home trainers who educate patients on the proper use of our solutions. Our experienced reimbursement operations group of over 65 people focuses on verifying case-by-case benefits, obtaining prior authorization, billing and collecting payments from payers and providing customer support services. Our payer relationships group of over 25 people is responsible for developing relationships with payer decision-makers to educate them on our product efficacy, develop overall payer coverage policies and reimbursement criteria, manage Medicare patient claims and contracts with payers and serve as an advocacy liaison between patients, clinicians and payers throughout the appeals process. Our clinical team, consisting of a scientific advisory board, in-house therapists and nurses and a medical director, serves as a resource to clinicians and patients and guides our development of clinical evidence in support of our products. We believe these investments are critical to driving patient adoption of our technologies, and together with our commercial infrastructure, represent a significant competitive advantage. Health insurance coverage for our Flexitouch System and our ACTitouch System is in place with private payers, Medicare, the Veterans Administration and certain Medicaid programs. Based on our estimates, we have contracts as an in-network provider covering over 260 million lives in the United States. Over 60,000 patients have been treated with our Flexitouch System since 2002, and over 11,000 Flexitouch Systems were shipped in 2015. More than 4,100 patients were treated with our ACTitouch System since its launch in 2013, and over 2,200 ACTitouch Systems were shipped in 2015. Overview of the Lymphedema and Chronic Venous Insufficiency Markets Lymphedema The lymphatic system performs a fundamental role in maintaining health through balancing fluids and regulating immunity by removing harmful bacteria, viruses and waste products. Lymphatic structures are situated throughout the body and are comprised of a series of vessels, lymph nodes and lymphoid organs that act as a drainage system by collecting protein rich lymph fluid and sending it to the venous system. Lymph nodes are located in several areas of the body with superficial and deep lymph nodes under each arm, at the hip, in the groin, above the collar bones in the neck, in the abdomen, tonsils and spleen and in bone marrow. TACTILE SYSTEMS TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 3841 (Primary Standard Industrial Classification Code Number) 41-1801204 (I.R.S. Employer Identification No.) Tactile Systems Technology, Inc. 1331 Tyler Street NE, Suite 200 Minneapolis, MN 55413 (612) 355-5100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Gerald R. Mattys Chief Executive Officer Tactile Systems Technology, Inc. 1331 Tyler Street NE, Suite 200 Minneapolis, MN 55413 (612) 355-5100 (Name, address, including zip code, and telephone number, including area code, of agent for service) Table of Contents Lymphedema refers to a type of chronic swelling, or edema, which may occur in the arms, legs, head, neck, trunk or other body parts and causes severe and debilitating symptoms, including decreased mobility, skin breakdown, pain, increased risk of serious infection and marked psychosocial impairment, resulting in significantly negative implications for a patient's health and quality of life. The disease occurs when the lymphatic vessels are unable to adequately drain protein-rich lymph fluid from the arms, legs or other regions of the body. Any condition or procedure that damages the lymph nodes or lymphatic vessels, such as surgery or treatment for breast and other cancers, obesity, infection, scar tissue formation, trauma or chronic venous insufficiency can cause lymphedema. The disease may also be caused from congenital malformation of the lymphatic system. Lymphedema is progressive in nature, worsens over time, and has no known cure. Chronic Venous Insufficiency Chronic venous insufficiency occurs when the venous wall and/or valves in the veins are not working effectively, making it difficult for blood to return to the heart. The disease is prevalent among patients who are obese or pregnant and may also be caused by high blood pressure, trauma, lack of exercise, smoking, deep vein thrombosis and inflammation of the vein walls. As the valves deteriorate, blood leaks or flows backward, leading to increased pressure, stretched and dilated vessels and pooling of blood in the veins. As blood accumulates, swelling occurs, leading to progressive tissue breakdown and venous leg ulcers. Ulcers develop in areas where blood collects as swelling interferes with the movement of oxygen and nutrients through tissues, and if left untreated, these ulcers can quickly become infected or even gangrenous. Prolonged or untreated chronic venous insufficiency may damage the lymphatic system. Market Opportunity Lymphedema and chronic venous insufficiency are costly and lifelong conditions with debilitating physical and psychological impacts on patients. We estimate the addressable market opportunity for our solutions treating lymphedema and chronic venous insufficiency in the United States is over $4 billion. We believe that between three to five million people in the United States are living with lymphedema. Based on an analysis of claims data commissioned by us, we estimate approximately 700,000 patients were diagnosed with lymphedema during the 12 months ended June 30, 2014. Based on a separate analysis of claims data commissioned by us, we estimate approximately 820,000 patients were diagnosed with lymphedema during the 12 months ended December 31, 2015, representing a 17% growth in the number of patients diagnosed with lymphedema as compared to the immediately preceding 18-month period. We estimate that the addressable market opportunity for our Flexitouch System is approximately $4.1 billion in the United States once clinicians, payers and patients are educated on the benefits of our products. This estimate is based on the number of patients diagnosed with lymphedema and our average selling price per device. We believe that chronic venous insufficiency afflicts approximately 8% of the U.S. population, and this percentage may rise due to the growing prevalence of obesity and cancer, as well as an aging population. Based on an analysis of claims data commissioned by us, we estimate there were over 1.5 million patients diagnosed with venous leg ulcers in the United States during the 12 months ended June 30, 2014. We estimate that our immediately addressable patient population consists of the 30% to 40% of these patients, or approximately 525,000 patients, for whom we believe device reimbursement is available because their venous leg ulcers have not resolved after six months of treatment. We estimate the addressable market opportunity for our ACTitouch System is approximately $580 million in the United States, which is based on the number of patients diagnosed with unresolved venous leg ulcers and our average selling price per device. These estimates of addressable market opportunities are based on a number of internal and third-party estimates, which in turn are based on projections of current trends in the diagnosis and treatment of lymphedema and chronic venous insufficiency as well as other estimates of Copies to: Jonathan R. Zimmerman Jeffrey A Sherman Faegre Baker Daniels LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-1425 (612) 766-7000 Jonathan B. Abram Dorsey & Whitney LLP 50 South Sixth Street Suite 1500 Minneapolis, MN 55402-1498 (612) 340-2868 Table of Contents potential patient populations. These projections and estimates involve inherent uncertainties, and the conditions supporting the projections and estimates may change at any time. Current Treatment and Limitations A traditional treatment for lymphedema is complete decongestive therapy, consisting of manual lymphatic drainage, which is a specialized application of gentle pressure to the skin applied by a therapist that encourages drainage of lymph fluid, as well as decongestive exercises, skin care and compression with multilayered bandages, compression garments or pumps. Typically, this therapy begins with clinic visits three to five times per week for four to eight weeks, which is costly, inconvenient for the patient and time consuming. At that point, clinical improvement plateaus or reimbursement for the therapy ends and patients transition to self-administered home-based care. Manual lymphatic drainage is difficult for patients to self-administer due to limited range of motion and treatment techniques that are difficult to replicate, and traditional pump-based compression is uncomfortable and has not demonstrated the benefits of our advanced pneumatic pump. The standard of care treatment for chronic venous insufficiency is compression therapy. As the disease progresses, patients may develop a venous leg ulcer, which is commonly treated using multilayered bandages to minimize swelling and enhance blood flow. A clinician applies these non-removable bandages to patients at a precise pressure and patients wear the bandages between weekly visits to the wound clinic during which the bandages are removed and reapplied. Treatment typically occurs for several months and impairs patient quality of life by limiting bathing, range of motion and other activities. Treatment efficacy is inconsistent because bandages can lose their precise pressure between treatments. Our Competitive Strengths We focus on advancing the standard of care in treating chronic diseases at home to improve patient outcomes and quality of life and help control rising healthcare expenditures. Our executive team collectively has over 100 years of experience in healthcare, developing and commercializing innovative medical technology products and services. We believe that our commercialization platform and experience, combined with the following competitive strengths, should allow us to continue to grow our revenues and increase our presence in the market: Established leadership in providing therapies for at-home treatment of chronic disease. Our strategic focus is developing and providing innovative technologies for the treatment of chronic diseases at home. Our core competency, which is our direct-to-patient and -provider model, comprises a direct sales force, contract at-home trainers, reimbursement capabilities and medical expertise that we use to expand awareness, garner referrals and obtain payment for our products. Proprietary technology with unique advantages over other treatments. Our solutions leverage patented technological advancements that we believe give us a competitive advantage in the marketplace. The unique ability of our Flexitouch System to mimic manual lymphatic drainage therapy provides improved quality of life and efficacy and delivers significant cost savings to payers and patients as compared to traditional treatments. Our ACTitouch System has the unique ability to provide both sustained and intermittent pneumatic compression therapy in one wearable product, demonstrating comparable efficacy in healing venous leg ulcers, while achieving higher patient quality of life scores as compared to the current standard of care. Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Table of Contents Substantial clinical evidence and key opinion leader support for our Flexitouch System. We have developed a substantial body of peer-reviewed, published clinical evidence that our Flexitouch System reduces swelling and improves quality of life for lymphedema patients while reducing healthcare costs. In clinical studies while using our Flexitouch System, patients reported a significant increase in their ability to control their lymphedema along with an increase in activities of daily living, improvement in emotional status and reduction in limb volume, skin hardening, and pain. Our clinical evidence is primarily based on retrospective studies of a limited number of total subjects, which studies do not compare our Flexitouch System with other advanced pneumatic compression devices. In addition, we have established strong relationships with key opinion leaders within vascular and lymphedema specialties who promote market awareness of our solutions and inform our clinical efforts. We have in-house expertise that designs and manages clinical and economic studies in support of the efficacy and cost-effectiveness of our products. Significant healthcare system cost savings. Our solutions offer meaningful cost savings for the healthcare system and patients, as compared to traditional treatments. As demonstrated by a study published by the American Medical Association in JAMA Dermatology, our Flexitouch System reduces hospitalization occurrences and length of stays, costly cellulitis infections, outpatient visits and physical therapy visits. In addition, we believe that our ACTitouch System eliminates costly multilayered bandage system supplies and clinic application time, resulting in cost savings for wound clinics. Distinctive national third-party payer core competency. Our specialized reimbursement team is proficient at obtaining reimbursement from payers across the United States. We work closely with government and private payers to educate them on lymphedema diagnosis and treatment, expand coverage and negotiate competitive rates for our solutions. We also work directly with clinicians and patients to help them understand payer requirements for our products. We advocate for coverage and submit claims on behalf of our patients through patient-by-patient support and claim processing. We also engage in broader payer strategic initiatives to gain general preauthorization for our products. Our Strategy Our goal is to become a leader in the at-home treatment of chronic diseases. We intend to leverage our established platform to be a global provider of clinically proven, easy-to-use and cost-effective solutions. The key elements of our strategy include: Increase awareness of our solutions and establish them as the standards of care. We believe that many patients with lymphedema and chronic venous insufficiency are undiagnosed or undertreated, and we intend to further educate physicians, wound nurses and lymphedema therapists, patients and payers to raise awareness of these diseases, the associated health burdens of such diseases on patients and society and the clinical and economic benefits of using our products. Expand our direct sales and customer support teams. We plan to expand our direct sales and marketing organization to drive greater product adoption by patients and their clinicians. We intend to strengthen our distribution network by continuing to recruit, train and retain talented sales representatives and increasing the number of licensed home CALCULATION OF REGISTRATION FEE Title of Each Class of Securities To Be Registered Amount to be Registered(1) Proposed Maximum Offering Price(2) Proposed Maximum Aggregate Offering Price(1)(2) Amount of Registration Fee Primary Offering Common Stock, $0.001 par value per share (1)(4) (1) $17,400,000(2) $2,016.66(3) Secondary Offering Common Stock, $0.001 par value per share 1,430,000(4) 17.145(5) 24,517,350(5) 2,841.56(5) Total $4,858.22 (1)Omitted pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the "Securities Act"). (2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (3)Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. Includes offering price of any additional shares that the underwriters have the option to purchase. (4)Includes offering price of any additional shares that the underwriters have the option to purchase. (5)Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act, based on the average of the high and low prices of the registrant's common stock as reported on the NASDAQ Global Market on November 16, 2016, which is within five business days of the filing of this registration statement. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Table of Contents trainers. With an expanded sales force, we believe we could target additional clinical call points. Introduce new features and products to grow our technology platform. We intend to pursue new features for our products, and introduce new solutions to expand the number of patients using our products and allow us to enter new clinical adjacencies. We pursue internal research, design and development, and work with external collaborators to expand our product offerings. In addition, we evaluate opportunities to license or acquire additional technologies and products to expand our total addressable market opportunity. Continue the development of clinical and economic outcome data. A key part of our success is our ability to demonstrate the effectiveness of our products through clinical and economic outcome data. We intend to invest in additional studies to support peer-reviewed, published studies that evidence the clinical and economic benefits of our solutions as compared to traditional treatments. We intend to use these data to continue to educate clinicians, payers and patients on the proven advantages of our products compared to other therapies and expand our network of key opinion leader advocates. Expand third-party reimbursement. Our products are covered under existing reimbursement codes, and we have secured coverage for our solutions with private payers, Medicare, the Veterans Administration and certain Medicaid programs. Our team has experienced significant success in obtaining positive coverage policies from payers by developing direct relationships with payer decision-makers, leveraging our relationships with physician societies and key opinion leaders, providing clinical data, demonstrating the efficacy of our products and educating payers on the limitations of traditional lymphedema and venous leg ulcer treatments. We believe that reimbursement for our products could be expanded by obtaining preferred contracts with payers. Introduce our solutions outside the United States. We currently sell our products only within the United States. While our plan is to continue to focus our direct sales efforts on penetrating the U.S. market, we plan to pursue future international expansion. We have European CE Mark approval for our current Flexitouch System and plan to seek CE Mark approval for our ACTitouch System. We also have a Medical Device License in Canada for our Flexitouch System. Risks Related to Our Business Our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the medical device industry. Some of the principal risks relating to our business and our ability to execute our business strategy include: Our revenues are primarily generated from our Flexitouch System and we are therefore highly dependent on only one product. Our long-term growth depends on increasing awareness and adoption of our current products and our ability to develop and commercialize additional products. If we are unable to achieve and maintain adequate levels of coverage or reimbursement for our products, our business and results of operations will be adversely affected. Table of Contents The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to completion, dated November 22, 2016 Shares TACTILE SYSTEMS TECHNOLOGY, INC. Common Stock $ per share Table of Contents Our U.S. patents for our Flexitouch System will expire in 2017, which may subject us to increased competition and reduce our opportunity to increase or maintain our revenues from our Flexitouch System. A recent change to the criteria for Medicare coverage for our products could have an adverse effect on our business and results of operations. If we are unable to expand, manage and maintain our direct sales and marketing organizations, we may not be able to generate anticipated revenues. Increases in our operating costs could have an adverse effect on our financial condition and results of operations. We compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may harm our business. Physicians and payers may require additional clinical studies prior to prescribing our products or to providing or maintaining coverage and reimbursement for our products, particularly if the payers and physicians take issue with the design and results of the clinical studies. Any subsequent clinical studies that are conducted and published may not be positive or consistent with our existing data, which would adversely affect the rate of adoption of our products. We are subject to extensive federal and state regulation, and if we fail to comply with applicable regulations, we could suffer severe criminal or civil sanctions or be required to make significant changes to our operations that could adversely affect our business, financial condition and operating results. If we are unable to protect our intellectual property, or operate our business without infringing on the intellectual property rights of third parties, our business will be negatively affected. Implications of Being an Emerging Growth Company As a company with less than $1 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure; not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a Tactile Systems Technology, Inc. is offering shares and the selling stockholders are offering shares of our common stock in this offering. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders identified in this prospectus, including certain members of our management and Board of Directors. On , 2016, the last sale price of our common stock as reported on NASDAQ was $ per share. The NASDAQ Global Market, or NASDAQ, trading symbol is "TCMD." Table of Contents supplement to the auditor's report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation; and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenues, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, as a result, our financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable. Recent Developments Initial Public Offering On August 2, 2016, we completed our initial public offering ("IPO") of 4,120,000 shares of common stock at a public offering price of $10.00 per share. The IPO generated net proceeds of $35.4 million after deducting underwriting commissions of $2.9 million and expenses of approximately $2.9 million. The underwriting commissions and offering costs were reflected as a reduction to the IPO proceeds received in additional paid-in capital. In connection with the closing of the initial public offering, we (1) converted all outstanding convertible preferred stock into an aggregate of 5,924,453 shares of common stock; (2) issued of 2,354,323 additional shares of common stock that our Series A and Series B preferred stockholders were entitled to receive in connection with the IPO; (3) issued 956,842 shares of common stock to pay accrued dividends on our Series B convertible preferred stock; and (4) paid $8.2 million in cumulative accrued dividends to our Series A convertible preferred stockholders. Corporate Information We were incorporated in Minnesota in January 1995 and reincorporated in Delaware as Tactile Systems Technology, Inc., through a merger with a wholly-owned subsidiary in July 2006, but have been doing business as Tactile Medical. Our principal executive offices are located at 1331 Tyler Street NE, Suite 200, Minneapolis, Minnesota 55413. Our telephone number is (612) 355-5100. Our website address is www.tactilemedical.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and should not be considered to be part of this prospectus. This investment involves risk. See "Risk Factors" beginning on page 13. We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, and as such, have elected to comply with certain reduced public company reporting requirements in this prospectus and in future filings. Per Share Total Public offering price $ $ Underwriting discounts and commissions(1) $ $ Proceeds to Tactile Systems Technology, Inc., before expenses $ $ Proceeds to selling stockholders $ $ (1)See "Underwriting" for additional information regarding underwriting compensation. The underwriters have the option to purchase up to additional shares from us and certain of the selling stockholders identified in this prospectus at the public offering price, less the underwriting discounts and commissions, for 30 days after the date of this prospectus. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders, including from any exercise by the underwriters of their option to purchase additional shares. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of our common stock to investors on or about , 2016. Piper Jaffray William Blair Table of Contents THE OFFERING Issuer Tactile Systems Technology, Inc. Common stock offered by us shares Common stock offered by the selling stockholders shares Common stock to be outstanding immediately after this offering shares (or shares, if the underwriters exercise their option in full to purchase additional shares) Option to purchase additional shares The underwriters have the option to purchase up to additional shares from us or the selling stockholders. The underwriters can exercise this option at any time within 30 days of this prospectus. Use of proceeds We intend to use the net proceeds from this offering primarily to expand our sales, marketing, reimbursement, clinical, regulatory and product development activities, and the remainder for working capital, general and administrative expenses and other general corporate purposes. We may also use a portion of our net proceeds to acquire or invest in complementary products, technologies or businesses, although we have no present commitments to complete any such transaction. See "Use of Proceeds" on page 59 for a more complete description of the intended use of proceeds from this offering.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/TPB_turning_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/TPB_turning_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..a1f3e47c2af3f5be6bc3401dbc822f6821adba63
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/TPB_turning_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/TRVG_trivago-n_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/TRVG_trivago-n_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6fd1b31a26ec10bc1fd1e216e073634da63e7929
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/TRVG_trivago-n_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus summary 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/TWLO_twilio-inc_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/TWLO_twilio-inc_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/TWLO_twilio-inc_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/UNTY_unity_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/UNTY_unity_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..14f2f28cdbe09513eed1846d453fc3e8436dd62e
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/UNTY_unity_prospectus_summary.txt
@@ -0,0 +1 @@
+We summarize below some of the provisions that will apply to the warrants unless the applicable prospectus supplement provides otherwise. This summary may not contain all information that is important to you. The complete terms of the warrants will be contained in the applicable warrant certificate and warrant agreement. These documents have been or will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. You should read the warrant certificate and the warrant agreement. You should also read the prospectus supplement, which will contain additional information and which may update or change some of the information below. General We may issue, together with other securities or separately, warrants to purchase debt securities, common stock, preferred stock or other securities. We may issue the warrants under warrant agreements to be entered into between us and a bank or trust company, as warrant agent, all as set forth in the applicable prospectus supplement. The warrant agent would act solely as our agent in connection with the warrants of the series being offered and would not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The applicable prospectus supplement will describe the following terms, where applicable, of warrants in respect of which this prospectus is being delivered: the title of the warrants; the designation, amount and terms of the securities for which the warrants are exercisable and the procedures and conditions relating to the exercise of such warrants; the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each such security; the price or prices at which the warrants will be issued; the aggregate number of warrants; any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants; the price or prices at which the securities purchasable upon exercise of the warrants may be purchased; if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable; if applicable, a discussion of the material U.S. federal income tax considerations applicable to the warrants; any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants; the date on which the right to exercise the warrants shall commence and the date on which the right shall expire; if applicable, the maximum or minimum number of warrants which may be exercised at any time; the identity of the warrant agent; any mandatory or optional redemption provision; whether the warrants are to be issued in registered or bearer form; whether the warrants are extendible and the period or periods of such extendibility; information with respect to book-entry procedures, if any; and any other terms of the warrants. Before exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including the right to receive dividends, if any, or payments upon our liquidation, dissolution or winding-up or to exercise voting rights, if any. Exercise of Warrants Each warrant will entitle the holder thereof to purchase the amount of such principal amounts of debt securities or such number of shares of common stock or preferred stock or other securities at the exercise price as will in each case be set forth in, or be determinable as set forth in, the applicable prospectus supplement. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void. Warrants may be exercised as set forth in the applicable prospectus supplement relating to the warrants offered thereby. Upon receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the purchased securities. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. Enforceability of Rights of Holders of Warrants Each warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, that holder s warrant(s). Modification of the Warrant Agreement The warrant agreement will permit us and the warrant agent, without the consent of the warrant holders, to supplement or amend the agreement in the following circumstances: to cure any ambiguity; to correct or supplement any provision which may be defective or inconsistent with any other provisions; or to add new provisions regarding matters or questions that we and the warrant agent may deem necessary or desirable and which do not adversely affect the interests of the warrant holders. DESCRIPTION OF DEBT SECURITIES We summarize below some of the provisions that will apply to the debt securities unless the applicable prospectus supplement provides otherwise. This summary may not contain all information that is important to you. The complete terms of the debt securities will be contained in the applicable notes. The notes will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. You should read the provisions of the notes. You should also read the prospectus supplement, which will contain additional information and which may update or change some of the information below. General This prospectus describes certain general terms and provisions of the debt securities. The debt securities will be issued under an indenture between us and a trustee to be designated prior to the issuance of the debt securities. When we offer to sell a particular series of debt securities, we will describe the specific terms of the securities in a supplement to this prospectus. The prospectus supplement will also indicate whether the general terms and provisions described in this prospectus apply to a particular series of debt securities. We may issue, from time to time, debt securities, in one or more series, that will consist of either our senior debt ( senior debt securities ), our senior subordinated debt ( senior subordinated debt securities ), our subordinated debt ( subordinated debt securities ) or our junior subordinated debt ( junior subordinated debt securities and, together with the senior subordinated debt securities and the subordinated debt securities, the subordinated securities ). Debt securities, whether senior, senior subordinated, subordinated or junior subordinated, may be issued as convertible debt securities or exchangeable debt securities. We have summarized herein certain terms and provisions of the form of indenture (the indenture ). The summary is not complete and is qualified in its entirety by reference to the actual text of the indenture. The indenture is an exhibit to the registration statement of which this prospectus is a part. You should read the indenture for the provisions which may be important to you. The indenture is subject to and governed by the Trust Indenture Act of 1939, as amended. The indenture does not limit the amount of debt securities which we may issue. We may issue debt securities up to an aggregate principal amount as we may authorize from time to time, which securities may be in any currency or currency unit designated by us. The terms of each series of debt securities will be established by or pursuant to (a) a supplemental indenture, (b) a resolution of our board of directors, or (c) an officers certificate pursuant to authority granted under a resolution of our board of directors. The prospectus supplement will describe the terms of any debt securities being offered, including: the title of the debt securities; the limit, if any, upon the aggregate principal amount or issue price of the debt securities of a series; ranking of the specific series of debt securities relative to other outstanding indebtedness, including any debt of any of our subsidiaries; the price or prices at which the debt securities will be issued; the designation, aggregate principal amount and authorized denominations of the series of debt securities; the issue date or dates of the series and the maturity date of the series; whether the securities will be issued at par or at a premium over or a discount from their face amount; the interest rate, if any, and the method for calculating the interest rate and basis upon which interest shall be calculated; the right, if any, to extend interest payment periods and the duration of the extension; the interest payment dates and the record dates for the interest payments; any mandatory or optional redemption terms or prepayment, conversion, sinking fund or exchangeability or convertibility provisions; the currency of denomination of the securities; the place where we will pay principal, premium, if any, and interest, if any, and the place where the debt securities may be presented for transfer; if payments of principal of, premium, if any, or interest, if any, on the debt securities will be made in one or more currencies or currency units other than that or those in which the debt securities are denominated, the manner in which the exchange rate with respect to these payments will be determined; if other than denominations of $1,000 or multiples of $1,000, the denominations the debt securities will be issued in; whether the debt securities will be issued in the form of global securities or certificates; the applicability of and additional provisions, if any, relating to the defeasance of the debt securities; the portion of principal amount of the debt securities payable upon declaration of acceleration of the maturity date, if other than the entire principal amount; the currency or currencies, if other than the currency of the United States, in which principal and interest will be paid; the dates on which premium, if any, will be paid; any addition to or change in the Events of Default described in this prospectus or in the indenture with respect to the debt securities and any change in the acceleration provisions described in this prospectus or in the indenture with respect to the debt securities; any addition to or change in the covenants described in the prospectus or in the indenture with respect to the debt securities; our right, if any, to defer payment of interest and the maximum length of this deferral period; and other specific terms, including any additional events of default or covenants. We may issue debt securities at a discount below their stated principal amount. Even if we do not issue the debt securities below their stated principal amount, for United States federal income tax purposes the debt securities may be deemed to have been issued with a discount because of certain interest payment characteristics. We will describe in any applicable prospectus supplement the United States federal income tax considerations applicable to debt securities issued at a discount or deemed to be issued at a discount, and will describe any special United States federal income tax considerations that may be applicable to the particular debt securities. We may structure one or more series of subordinated securities so that they qualify as capital under federal regulations applicable to bank holding companies. We may adopt this structure whether or not those regulations may be applicable to us at the time of issuance. The debt securities will represent our general unsecured obligations. We are a holding company and Unity Bancorp s operating assets are owned by our subsidiaries. We rely primarily on dividends from such subsidiaries to meet our obligations. We are a legal entity separate and distinct from our subsidiaries. The principal sources of our income are dividends and interest from the Bank. Supplementing this income is rental income from our Clinton branch location in the amount of approximately $400,000 per year The Bank is subject to restrictions imposed by federal law on any extensions of credit to, and certain other transactions with, us and certain other affiliates, and on investments in stock or other securities thereof. In addition, payment of dividends to us by the Bank is subject to ongoing review by banking regulators. Because we are a holding company, our right to participate in any distribution of assets of any subsidiary upon the subsidiary s liquidation or reorganization or otherwise is subject to the prior claims of creditors of the subsidiary, except to the extent we may ourselves be recognized as a creditor of that subsidiary. Accordingly, the debt securities will be effectively subordinated to all existing and future liabilities, including deposits, of our subsidiaries, and holders of the debt securities should look only to our assets for payments on the debt securities. The indenture does not limit the incurrence or issuance of our secured or unsecured debt including senior indebtedness. Senior Debt Senior debt securities will rank equally and pari passu with all of our other unsecured and unsubordinated debt from time to time outstanding. Subordinated Debt The indenture does not limit our ability to issue subordinated debt securities. Any subordination provisions of a particular series of debt securities will be set forth in the supplemental indenture, board resolution or officers certificate related to that series of debt securities and will be described in the relevant prospectus supplement. If this prospectus is being delivered in connection with a series of subordinated debt securities, the accompanying prospectus supplement or the information incorporated by reference in this prospectus will set forth the approximate amount of senior indebtedness outstanding as of the end of the most recent fiscal quarter. Conversion or Exchange Rights Debt securities may be convertible into or exchangeable for our other securities or property. The terms and conditions of conversion or exchange will be set forth in the supplemental indenture, board resolution or officers certificate related to that series of debt securities and will be described in the relevant prospectus supplement. The terms will include, among others, the following: the conversion or exchange price; the conversion or exchange period; provisions regarding our ability or the ability of the holder to convert or exchange the debt securities; events requiring adjustment to the conversion or exchange price; and provisions affecting conversion or exchange in the event of our redemption of the debt securities. Merger, Consolidation or Sale of Assets The indenture prohibits us from merging into or consolidating with any other person or selling, leasing or conveying substantially all of our assets and the assets of our subsidiaries, taken as a whole, to any person, unless: either we are the continuing corporation or the successor corporation or the person which acquires by sale, lease or conveyance substantially all our or our subsidiaries assets is a corporation organized under the laws of the United States, any state thereof, or the District of Columbia, and expressly assumes the due and punctual payment of the principal of, and premium, if any, and interest, if any, on all the debt securities and the due performance of every covenant of the indenture to be performed or observed by us, by supplemental indenture satisfactory to the trustee, executed and delivered to the trustee by such corporation; immediately after giving effect to such transactions, no Event of Default described under the caption Events of Default and Remedies below or event which, after notice or lapse of time or both would become an Event of Default, has happened and is continuing; and we have delivered to the trustee an officers certificate and an opinion of counsel each stating that such transaction and such supplemental indenture comply with the indenture provisions relating to merger, consolidation and sale of assets. Upon any consolidation or merger with or into any other person or any sale, conveyance, lease, or other transfer of all or substantially all of our or our subsidiaries assets to any person, the successor person shall succeed, and be substituted for, us under the indenture and each series of outstanding debt securities, and we shall be relieved of all obligations under the indenture and each series of outstanding debt securities to the extent we were the predecessor person. Events of Default and Remedies When we use the term Event of Default in the indenture with respect to the debt securities of any series, we mean: (1) default in paying interest on the debt securities when it becomes due and the default continues for a period of 30 days or more; (2) default in paying principal, or premium, if any, on the debt securities when due; (3) default is made in the payment of any sinking or purchase fund or analogous obligation when the same becomes due, and such default continues for 30 days or more; (4) default in the performance, or breach, of any covenant or warranty in the indenture (other than defaults specified in clause (1), (2) or (3) above) and the default or breach continues for a period of 60 days or more after we receive written notice of such default from the trustee or we and the trustee receive notice from the holders of at least 25% in aggregate principal amount of the outstanding debt securities of the series; (5) certain events of bankruptcy, insolvency, reorganization, administration or similar proceedings with respect to us have occurred; and (6) any other Event of Default provided with respect to debt securities of that series that is set forth in the applicable prospectus supplement accompanying this prospectus. No Event of Default with respect to a particular series of debt securities (except as to certain events of bankruptcy, insolvency or reorganization) necessarily constitutes an Event of Default with respect to any other series of debt securities. The occurrence of certain Events of Default or an acceleration under the indenture may constitute an event of default under certain of our other indebtedness that we may have outstanding from time to time. Unless otherwise provided by the terms of an applicable series of debt securities, if an Event of Default under the indenture occurs with respect to the debt securities of any series and is continuing, then the trustee or the holders of not less than 51% of the aggregate principal amount of the outstanding debt securities of that series may by written notice require us to repay immediately the entire principal amount of the outstanding debt securities of that series (or such lesser amount as may be provided in the terms of the securities), together with all accrued and unpaid interest and premium, if any. In the case of an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) of and accrued and unpaid interest, if any, on all outstanding debt securities will become and be immediately due and payable without any declaration or other act on the part of the trustee or any holder of outstanding debt securities. We refer you to the prospectus supplement relating to any series of debt securities that are discount securities for the particular provisions relating to acceleration of a portion of the principal amount of such discount securities upon the occurrence of an Event of Default. After a declaration of acceleration, the holders of a majority in aggregate principal amount of outstanding debt securities of any series may rescind this accelerated payment requirement if all existing Events of Default, except for nonpayment of the principal on the debt securities of that series that has become due solely as a result of the accelerated payment requirement, have been cured or waived and if the rescission of acceleration would not conflict with any judgment or decree. The holders of a majority in aggregate principal amount of the outstanding debt securities of any series also have the right to waive past defaults, except a default in paying principal or interest on any outstanding debt security, or in respect of a covenant or a provision that cannot be modified or amended without the consent of all holders of the debt securities of that series. No holder of any debt security may seek to institute a proceeding with respect to the indenture unless such holder has previously given written notice to the trustee of a continuing Event of Default, the holders of not less than 51% in aggregate principal amount of the outstanding debt securities of the series have made a written request to the trustee to institute proceedings in respect of the Event of Default, the holder or holders have offered reasonable indemnity to the trustee and the trustee has failed to institute such proceeding within 60 days after it received this notice. In addition, within this 60-day period the trustee must not have received directions inconsistent with this written request by holders of a majority in aggregate principal amount of the outstanding debt securities of that series. These limitations do not apply, however, to a suit instituted by a holder of a debt security for the enforcement of the payment of principal, interest or any premium on or after the due dates for such payment. During the existence of an Event of Default actually known to a responsible officer of the trustee, the trustee is required to exercise the rights and powers vested in it under the indenture and use the same degree of care and skill in its exercise as a prudent person would under the circumstances in the conduct of that person s own affairs. If an Event of Default has occurred and is continuing, the trustee is not under any obligation to exercise any of its rights or powers at the request or direction of any of the holders unless the holders have offered to the trustee security or indemnity reasonably satisfactory to the trustee. Subject to certain provisions, the holders of a majority in aggregate principal amount of the outstanding debt securities of any series have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust, or power conferred on the trustee. The trustee will, within 90 days after receiving notice of any default, give notice of the default to the holders of the debt securities of that series, unless the default was already cured or waived. Unless there is a default in paying principal, interest or any premium when due, the trustee can withhold giving notice to the holders if it determines in good faith that the withholding of notice is in the interest of the holders. In the case of a default specified in clause (4) above describing Events of Default, no notice of default to the holders of the debt securities of that series will be given until 60 days after the occurrence of the event of default. The indenture requires us, within 120 days after the end of our fiscal year, to furnish to the trustee a statement as to compliance with the indenture. The indenture provides that the trustee may withhold notice to the holders of debt securities of any series of any Event of Default (except in payment on any debt securities of that series) with respect to debt securities of that series if it in good faith determines that withholding notice is in the interest of the holders of those debt securities. Modification and Waiver The indenture may be amended or modified without the consent of any holder of debt securities in order to: evidence a successor to the trustee; cure ambiguities, defects or inconsistencies; provide for the assumption of our obligations in the case of a merger or consolidation or transfer of all or substantially all of our assets that complies with the covenant described under Merger, Consolidation or Sale of Assets ; make any change that would provide any additional rights or benefits to the holders of the debt securities of a series; add guarantors or co-obligors with respect to the debt securities of any series; secure the debt securities of a series; establish the form or forms of debt securities of any series; add additional Events of Default with respect to the debt securities of any series; add additional provisions as may be expressly permitted by the Trust Indenture Act; maintain the qualification of the indenture under the Trust Indenture Act; or make any change that does not adversely affect in any material respect the interests of any holder. Other amendments and modifications of the indenture or the debt securities issued may be made with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding debt securities of each series affected by the amendment or modification. However, no modification or amendment may, without the consent of the holder of each outstanding debt security affected: change the maturity date or the stated payment date of any payment of premium or interest payable on the debt securities; reduce the principal amount, or extend the fixed maturity, of the debt securities; change the method of computing the amount of principal or any interest of any debt security; change or waive the redemption or repayment provisions of the debt securities; change the currency in which principal, any premium or interest is paid or the place of payment; reduce the percentage in principal amount outstanding of debt securities of any series which must consent to an amendment, supplement or waiver or consent to take any action; impair the right to institute suit for the enforcement of any payment on the debt securities; waive a payment default with respect to the debt securities; reduce the interest rate or extend the time for payment of interest on the debt securities; adversely affect the ranking or priority of the debt securities of any series; or release any guarantor or co-obligor from any of its obligations under its guarantee or the indenture, except in compliance with the terms of the indenture. Satisfaction, Discharge and Covenant Defeasance We may terminate our obligations under the indenture with respect to the outstanding debt securities of any series, when: either: all debt securities of any series issued that have been authenticated and delivered have been delivered to the trustee for cancellation; or all the debt securities of any series issued that have not been delivered to the trustee for cancellation have become due and payable, will become due and payable within one year, or are to be called for redemption within one year and we have made arrangements satisfactory to the trustee for the giving of notice of redemption by such trustee in our name and at our expense, and in each case, we have irrevocably deposited or caused to be deposited with the trustee sufficient funds to pay and discharge the entire indebtedness on the series of debt securities; and we have paid or caused to be paid all other sums then due and payable under the indenture; and we have delivered to the trustee an officers certificate and an opinion of counsel, each stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been complied with. We may elect to have our obligations under the indenture discharged with respect to the outstanding debt securities of any series ( legal defeasance ). Legal defeasance means that we will be deemed to have paid and discharged the entire indebtedness represented by the outstanding debt securities of such series under the indenture, except for: the rights of holders of the debt securities to receive principal, interest and any premium when due; our obligations with respect to the debt securities concerning issuing temporary debt securities, registration of transfer of debt securities, mutilated, destroyed, lost or stolen debt securities and the maintenance of an office or agency for payment for security payments held in trust; the rights, powers, trusts, duties and immunities of the trustee; and the defeasance provisions of the indenture. In addition, we may elect to have our obligations released with respect to certain covenants in the indenture ( covenant defeasance ). If we so elect, any failure to comply with these obligations will not constitute a default or an event of default with respect to the debt securities of any series. In the event covenant defeasance occurs, certain events, not including non-payment, bankruptcy and insolvency events, described under Events of Default and Remedies, will no longer constitute an event of default for that series. In order to exercise either legal defeasance or covenant defeasance with respect to outstanding debt securities of any series, we must irrevocably have deposited or caused to be deposited with the trustee as trust funds for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefits of the holders of the debt securities of a series: money in an amount; or U.S. government obligations (or equivalent government obligations in the case of debt securities denominated in other than U.S. dollars or a specified currency) that will provide, not later than one day before the due date of any payment, money in an amount; or a combination of money and U.S. government obligations (or equivalent government obligations, as applicable), in each case sufficient, in the written opinion (with respect to U.S. or equivalent government obligations or a combination of money and U.S. or equivalent government obligations, as applicable) of a nationally recognized firm of independent public accountants to pay and discharge, and which shall be applied by the trustee to pay and discharge, all of the principal (including mandatory sinking fund payments), interest and any premium at due date or maturity; in the case of legal defeasance, we have delivered to the trustee an opinion of counsel stating that, under then applicable federal income tax law, the holders of the debt securities of that series will not recognize income, gain or loss for federal income tax purposes as a result of the deposit, defeasance and discharge to be effected and will be subject to the same federal income tax as would be the case if the deposit, defeasance and discharge did not occur; in the case of covenant defeasance, we have delivered to the trustee an opinion of counsel to the effect that the holders of the debt securities of that series will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and covenant defeasance to be effected and will be subject to the same federal income tax as would be the case if the deposit and covenant defeasance did not occur; no event of default or default with respect to the outstanding debt securities of that series has occurred and is continuing at the time of such deposit after giving effect to the deposit or, in the case of legal defeasance, no default relating to bankruptcy or insolvency has occurred and is continuing at any time on or before the 91st day after the date of such deposit, it being understood that this condition is not deemed satisfied until after the 91st day; the legal defeasance or covenant defeasance will not cause the trustee to have a conflicting interest within the meaning of the Trust Indenture Act, assuming all debt securities of a series were in default within the meaning of such Act; the legal defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which we are a party; if prior to the stated maturity date, notice shall have been given in accordance with the provisions of the indenture; the legal defeasance or covenant defeasance will not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless the trust is registered under such Act or exempt from registration; and we have delivered to the trustee an officers certificate and an opinion of counsel stating that all conditions precedent with respect to the legal defeasance or covenant defeasance have been complied with. Covenants We will set forth in the applicable prospectus supplement any restrictive covenants applicable to any issue of debt securities. Paying Agent and Registrar The trustee will initially act as paying agent and registrar for all debt securities. We may change the paying agent or registrar for any series of debt securities without prior notice, and we or any of our subsidiaries may act as paying agent or registrar. Forms of Securities Each debt security will be represented either by a certificate issued in definitive form to a particular investor or by one or more global securities representing the entire issuance of the series of debt securities. Certificated securities will be issued in definitive form and global securities will be issued in registered form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or exchange these securities or to receive payments other than interest or other interim payments, you or your nominee must physically deliver the securities to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee as the owner of the debt securities represented by these global securities. The depositary maintains a computerized system that will reflect each investor s beneficial ownership of the securities through an account maintained by the investor with its broker/dealer, bank, trust company or other representative, as we explain more fully below. Global Securities We may issue the registered debt securities in the form of one or more fully registered global securities that will be deposited with a depositary or its custodian identified in the applicable prospectus supplement and registered in the name of that depositary or its nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal or face amount of the securities to be represented by registered global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a registered global security may not be transferred except as a whole by and among the depositary for the registered global security, the nominees of the depositary or any successors of the depositary or those nominees. If not described below, any specific terms of the depositary arrangement with respect to any securities to be represented by a registered global security will be described in the prospectus supplement relating to those securities. We anticipate that the following provisions will apply to all depositary arrangements. Ownership of beneficial interests in a registered global security will be limited to persons, called participants, that have accounts with the depositary or persons that may hold interests through participants. Upon the issuance of a registered global security, the depositary will credit, on its book-entry registration and transfer system, the participants accounts with the respective principal or face amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect to interests of participants, and on the records of participants, with respect to interests of persons holding through participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities in definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities. So long as the depositary, or its nominee, is the registered owner of a registered global security, that depositary or its nominee, as the case may be, will be considered the sole owner or holder of the securities represented by the registered global security for all purposes under the indenture. Except as described below, owners of beneficial interests in a registered global security will not be entitled to have the securities represented by the registered global security registered in their names, will not receive or be entitled to receive physical delivery of the securities in definitive form and will not be considered the owners or holders of the securities under the indenture. Accordingly, each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for that registered global security and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the indenture. We understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or take any action that a holder is entitled to give or take under the indenture, the depositary for the registered global security would authorize the participants holding the relevant beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to give or take that action or would otherwise act upon the instructions of beneficial owners holding through them. Principal, premium, if any, and interest payments on debt securities represented by a registered global security registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the registered global security. Neither we nor the trustee or any other agent of ours or the trustee will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership interests in the registered global security or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests. We expect that the depositary for any of the securities represented by a registered global security, upon receipt of any payment of principal, premium, interest or other distribution of underlying securities or other property to holders on that registered global security, will immediately credit participants accounts in amounts proportionate to their respective beneficial interests in that registered global security as shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests in a registered global security held through participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of those participants. If the depositary for any of these securities represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing agency registered under the Exchange Act, and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days, we will issue securities in definitive form in exchange for the registered global security that had been held by the depositary. Any securities issued in definitive form in exchange for a registered global security will be registered in the name or names that the depositary gives to the trustee or other relevant agent of ours or theirs. It is expected that the depositary s instructions will be based upon directions received by the depositary from participants with respect to ownership of beneficial interests in the registered global security that had been held by the depositary. Unless we state otherwise in a prospectus supplement, the Depository Trust Company ( DTC ) will act as depositary for each series of debt securities issued as global securities. DTC has advised us that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the Participants ) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the Indirect Participants ). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and the Indirect Participants. Governing Law The indenture and each series of debt securities are governed by, and construed in accordance with, the laws of the State of New York. DESCRIPTION OF DEPOSITARY SHARES We summarize below some of the provisions that will apply to depositary shares unless the applicable prospectus supplement provides otherwise. This summary may not contain all information that is important to you. The complete terms of the depositary shares will be contained in the depositary agreement and depositary receipt applicable to any depositary shares. These documents have been or will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. You should read the depositary agreement and the depositary receipt. You should also read the prospectus supplement, which will contain additional information and which may update or change some of the information below. General We may offer fractional shares of preferred stock, rather than full shares of preferred stock. If we do so, we may issue receipts for depositary shares that each represent a fraction of a share of a particular series of preferred stock. The prospectus supplement will indicate that fraction. The shares of preferred stock represented by depositary shares will be deposited under a depositary agreement between us and a bank or trust company that meets certain requirements and is selected by us, which we refer to as the bank depositary. Each owner of a depositary share will be entitled to all the rights and preferences of the preferred stock represented by the depositary share. The depositary shares will be evidenced by depositary receipts issued pursuant to the depositary agreement. Depositary receipts will be distributed to those persons purchasing the fractional shares of preferred stock in accordance with the terms of the offering. The following summary description of certain common provisions of a depositary agreement and the related depositary receipts and any summary description of the depositary agreement and depositary receipts in the applicable prospectus supplement do not purport to be complete and are qualified in their entirety by reference to all of the provisions of such depositary agreement and depositary receipts. The forms of the depositary agreement and the depositary receipts relating to any particular issue of depositary shares will be filed with the SEC each time we issue depositary shares, and you should read those documents for provisions that may be important to you. Dividends and Other Distributions If we pay a cash distribution or dividend on a series of preferred stock represented by depositary shares, the bank depositary will distribute such dividends to the record holders of such depositary shares. If the distributions are in property other than cash, the bank depositary will distribute the property to the record holders of the depositary shares. However, if the bank depositary determines that it is not feasible to make the distribution of property, the bank depositary may, with our approval, sell such property and distribute the net proceeds from such sale to the record holders of the depositary shares. Redemption of Depositary Shares If we redeem a series of preferred stock represented by depositary shares, the bank depositary will redeem the depositary shares from the proceeds received by the bank depositary in connection with the redemption. The redemption price per depositary share will equal the applicable fraction of the redemption price per share of the preferred stock. If fewer than all the depositary shares are redeemed, the depositary shares to be redeemed will be selected by lot or pro rata as the bank depositary may determine. Voting the Preferred Stock Upon receipt of notice of any meeting at which the holders of the preferred stock represented by depositary shares are entitled to vote, the bank depositary will mail the notice to the record holder of the depositary shares relating to such preferred stock. Each record holder of these depositary shares on the record date, which will be the same date as the record date for the preferred stock, may instruct the bank depositary as to how to vote the preferred stock represented by such holder s depositary shares. The bank depositary will endeavor, insofar as practicable, to vote the amount of the preferred stock represented by such depositary shares in accordance with such instructions, and we will take all action that the bank depositary deems necessary in order to enable the bank depositary to do so. The bank depositary will abstain from voting shares of the preferred stock to the extent it does not receive specific instructions from the holders of depositary shares representing such preferred stock. Amendment and Termination of the Depositary Agreement Unless otherwise provided in the applicable prospectus supplement or required by law, the form of depositary receipt evidencing the depositary shares and any provision of the depositary agreement may be amended by agreement between the bank depositary and us. The depositary agreement may be terminated by the bank depositary or us only if: all outstanding depositary shares have been redeemed, or there has been a final distribution in respect of the preferred stock in connection with the liquidation, dissolution or winding up of our company, and such distribution has been distributed to the holders of depositary receipts. Charges of Bank Depositary We will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. We will pay charges of the bank depositary in connection with the initial deposit of the preferred stock and any redemption of the preferred stock. Holders of depositary receipts will pay other transfer and other taxes and governmental charges and any other charges, including a fee for the withdrawal of shares of preferred stock upon surrender of depositary receipts, as are expressly provided in the depositary agreement for their accounts. Withdrawal of Preferred Stock Except as may be provided otherwise in the applicable prospectus supplement, upon surrender of depositary receipts at the principal office of the bank depositary, subject to the terms of the deposit agreement, the owner of the depositary shares may demand delivery of the number of whole shares of preferred stock and all money and other property, if any, represented by those depositary shares. Partial or fractional shares of preferred stock will not be issued. If the depositary receipts delivered by the holders evidence a number of depositary shares in excess of the number of depositary shares representing the number of whole shares of preferred stock to be withdrawn, the bank depositary will deliver to such holder at the same time a new depositary receipt evidencing the excess number of depositary shares. Holders of preferred stock thus withdrawn may not thereafter deposit those shares under the depositary agreement or receive depositary receipts evidencing depositary shares therefor. Miscellaneous The bank depositary will forward to holders of depositary receipts all reports and communications from us that are delivered to the bank depositary and that we are required to furnish to the holders of the preferred stock. Neither the bank depositary nor we will be liable if we are prevented or delayed by law or any circumstance beyond our control in performing our obligations under the depositary agreement. The obligations of the bank depositary and us under the depositary agreement will be limited to performance in good faith of our duties thereunder, and we will not be obligated to prosecute or defend any legal proceeding in respect of any depositary shares or preferred stock unless satisfactory indemnity is furnished. We may rely upon written advice of counsel or accountants, or upon information provided by persons presenting preferred stock for deposit, holders of depositary receipts or other persons believed to be competent and on documents believed to be genuine. Resignation and Removal of Bank Depositary The bank depositary may resign at any time by delivering to us notice of its election to do so, and we may at any time remove the bank depositary. Any such resignation or removal will take effect upon the appointment of a successor bank depositary and its acceptance of such appointment. The successor bank depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company meeting the requirements of the depositary agreement. DESCRIPTION OF UNITS We may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date. The applicable prospectus supplement may describe: the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately; any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; the terms of the unit agreement governing the units; United States federal income tax considerations relevant to the units; and whether the units will be issued in fully registered global form. This summary of certain general terms of units and any summary description of units in the applicable prospectus supplement do not purport to be complete and are qualified in their entirety by reference to all provisions of the applicable unit agreement and, if applicable, collateral arrangements and depositary arrangements relating to such units. The forms of the unit agreements and other documents relating to a particular issue of units will be filed with the SEC each time we issue units, and you should read those documents for provisions that may be important to you. DESCRIPTION OF CAPITAL STOCK We are authorized by our certificate of incorporation to issue 12,500,000 shares of common stock, no par value per share, and 500,000 shares of preferred stock, the terms, rights and features of which are determined by our Board of Directors upon issuance. As of the date hereof, we have 9,340,135 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding, as adjusted for the 10% stock dividend announced on August 26, 2016, and payable on September 30, 2016 to shareholders of records as of September 15, 2016. . All shares of common stock are entitled to share equally in dividends from funds legally available therefore, when, as and if declared by our Board of Directors, and upon liquidation or dissolution of the Company, whether voluntary or involuntary, to share equally in the assets of the Company available for distribution to shareholders, after satisfying in full the preferential liquidation rights of any series of preferred stock that may be authorized and issued in the future. Each holder of common stock is entitled to one vote for each share on all matters submitted to the shareholders. There is no cumulative voting, redemption right, sinking fund provision, or right of conversion in existence with respect to the common stock. Our certificate of incorporation does not provide for preemptive rights to acquire additional shares of common stock when issued. All of the outstanding shares of common stock are fully paid and non-assessable. Preferred Stock We have no shares of preferred stock outstanding. We currently have 500,000 shares of preferred stock authorized and available for issuance from time to time at the discretion of the Board of Directors without shareholder approval. The Board of Directors has the authority to prescribe for each series of preferred stock it establishes the number of shares in that series, the number of votes (if any) to which the shares in that series are entitled, the consideration for the shares in that series, and the designations, powers, preferences and other rights, qualifications, limitations or restrictions of the shares in that series. Depending upon the rights prescribed for a series of preferred stock, the issuance of preferred stock could have an adverse effect on the voting power of the holders of common stock and could adversely affect holders of common stock by delaying or preventing a change in control, making removal of our present management more difficult or imposing restrictions upon the payment of dividends and other distributions to the holders of common stock. Anti-Takeover Provisions The provisions of our certificate of incorporation, bylaws and the New Jersey corporation law summarized in the following paragraphs may be deemed to have anti-takeover effects and may delay, defer, or prevent a tender offer or takeover attempt that a shareholder might consider to be in such shareholder's best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders, and may make removal of management more difficult. Authorized but Unissued Stock The authorized but unissued shares of common stock and preferred stock will be available for future issuance without shareholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued and unreserved shares of common and preferred stock may enable our Board of Directors to issue shares to persons friendly to current management, which could render more difficult or discourage any attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management. Number of Directors Our current board is comprised of 12 directors. Our certificate of incorporation currently provides that the Board of Directors shall consist of not less than 1 or more than 15 directors. The number of directors may be amended only by the affirmative vote of a majority of directors then in office or the affirmative vote of shareholders owning at least two-thirds of the outstanding shares entitled to vote. Classified Board of Directors Our certificate of incorporation divides the Board of Directors into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the Board of Directors will be elected at each annual meeting of shareholders. The classification of directors will have the effect of making it more difficult for shareholders to change the composition of the Board of Directors. As a result, at least two annual meetings of shareholders may be required for the shareholders to change a majority of the directors, whether or not a change in the Board of Directors would be beneficial to the Company and its shareholders and whether or not a majority of the Company s shareholders believes that such a change would be desirable. Bank Regulatory Requirements Under the Federal Change in Bank Control Act (the Control Act ), a 60 day prior written notice must be submitted to the Board of Governors of the Federal Reserve System ( FRB ) if any person, or any group acting in concert, seeks to acquire 10% or more of any class of outstanding voting securities of a bank holding company, unless the FRB determines that the acquisition will not result in a change of control. Under the Control Act, the FRB has 60 days within which to act on such notice taking into consideration certain factors, including the financial and managerial resources of the acquirer, the convenience and needs of the community served by the bank holding company and its subsidiary banks and the antitrust effects of the acquisition. Under the Bank Holding Company Act of 1956, as amended ( BHCA ), a company is generally required to obtain prior approval of the FRB before it may obtain control of a bank holding company. Under the BHCA, control is generally described to mean the beneficial ownership of 25% or more of the outstanding voting securities of a company, although a presumption of control may exist if a party beneficially owns 10% or more of the outstanding voting securities of a company and certain other circumstances are present. New Jersey Shareholders Protection Act A provision of New Jersey law, the New Jersey Shareholders Protection Act (the SPA ), prohibits certain transactions involving an interested stockholder and a corporation. An interested stockholder is generally defined as one who is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding stock of the corporation. The SPA prohibits certain business combinations between an interested stockholder and a New Jersey corporation subject to the SPA for a period of five years after the date the interested stockholder acquired his stock, unless the transaction was approved by the corporation s board of directors prior to the time the interested stockholder acquired his stock. After the five-year period expires, the prohibition on business combinations with an interested stockholder continues unless certain conditions are met. The conditions include (i) that the business combination is approved by the board of directors of the target corporation; (ii) that the business combination is approved by a vote of two-thirds of the voting stock not owned by the interested stockholder; and (iii) that the stockholders of the corporation receive a price in accordance with the SPA. PLAN OF DISTRIBUTION Initial Offering and Sale of Securities Unless otherwise set forth in a prospectus supplement accompanying this prospectus, we, and certain holders of our securities, may sell the securities being offered hereby, from time to time, by one or more of the following methods: to or through underwriting syndicates represented by managing underwriters; through one or more underwriters without a syndicate for them to offer and sell to the public; through dealers or agents; and to investors directly in negotiated sales or in competitively bid transactions. Offerings of securities covered by this prospectus also may be made into an existing trading market for those securities in transactions at other than a fixed price, either: on or through the facilities of the NASDAQ or any other securities exchange or quotation or trading service on which those securities may be listed, quoted, or traded at the time of sale; and/or to or through a market maker otherwise than on the securities exchanges or quotation or trading services set forth above. Those at-the-market offerings, if any, will be conducted by underwriters acting as principal or agent of the Company, who may also be third-party sellers of securities as described above. The prospectus supplement with respect to the offered securities will set forth the terms of the offering of the offered securities, including: the name or names of any underwriters, dealers or agents; the purchase price of the offered securities and the proceeds to us from such sale; any underwriting discounts and commissions or agency fees and other items constituting underwriters or agents compensation, provided that such compensation shall not exceed 8% of any offering proceeds as calculated pursuant to applicable rules of the Financial Industry Regulatory Authority, or FINRA; any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers; and any securities exchange on which such offered securities may be listed. Any underwriter, agent or dealer involved in the offer and sale of any series of the securities will be named in the prospectus supplement. The distribution of the securities may be effected from time to time in one or more transactions: at fixed prices, which may be changed; at market prices prevailing at the time of the sale; at varying prices determined at the time of sale; or at negotiated prices. Each prospectus supplement will set forth the manner and terms of an offering of securities including: whether that offering is being made by us, or certain holders of our securities; whether that offering is being made to underwriters or through agents or directly; the rules and procedures for any auction or bidding process, if used; the securities purchase price or initial public offering price; and the proceeds we anticipate from the sale of the securities, if any. In addition, we may enter into derivative or hedging transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with such a transaction, the third parties may sell securities covered by and pursuant to this prospectus and an applicable prospectus supplement. If so, the third party may use securities pledged by us or borrowed from us or others to settle such sales and may use securities received from us to close out any related short positions. We may also loan or pledge securities covered by this prospectus and an applicable prospectus supplement to third parties, who may sell the loaned securities or, in an event of default in the case of a pledge, sell the pledged securities pursuant to this prospectus and the applicable prospectus supplement. Sales Through Underwriters If underwriters are used in the sale of some or all of the securities covered by this prospectus, the underwriters will acquire the securities for their own account. The underwriters may resell the securities, either directly to the public or to securities dealers, at various times in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities will be subject to certain conditions. Unless indicated otherwise in a prospectus supplement, the underwriters will be obligated to purchase all the securities of the series offered if any of the securities are purchased. Any initial public offering price and any concessions allowed or reallowed to dealers may be changed intermittently. Sales Through Agents Unless otherwise indicated in the applicable prospectus supplement, when securities are sold through an agent, the designated agent will agree, for the period of its appointment as agent, to use its best efforts to sell the securities for our account and will receive commissions from us as will be set forth in the applicable prospectus supplement. Securities bought in accordance with a redemption or repayment under their terms also may be offered and sold, if so indicated in the applicable prospectus supplement, in connection with a remarketing by one or more firms acting as principals for their own accounts or as agents for us. Any remarketing firm will be identified and the terms of its agreement, if any, with us and its compensation will be described in the prospectus supplement. Remarketing firms may be deemed to be underwriters in connection with the securities remarketed by them. If so indicated in the applicable prospectus supplement, we may authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase securities at a price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a future date specified in the prospectus supplement. These contracts will be subject only to those conditions set forth in the applicable prospectus supplement, and the prospectus supplement will set forth the commissions payable for solicitation of these contracts. Direct Sales We may also sell offered securities directly to institutional investors or others. In this case, no underwriters or agents would be involved. The terms of such sales will be described in the applicable prospectus supplement. General Information Broker-dealers, agents or underwriters may receive compensation in the form of discounts, concessions or commissions from us and/or the purchasers of securities for whom such broker-dealers, agents or underwriters may act as agents or to whom they sell as principal, or both (this compensation to a particular broker-dealer might be in excess of customary commissions). Underwriters, dealers and agents that participate in any distribution of the offered securities may be deemed underwriters within the meaning of the Securities Act, so any discounts or commissions they receive in connection with the distribution may be deemed to be underwriting compensation. Those underwriters and agents may be entitled, under their agreements with us, to indemnification by us against certain civil liabilities, including liabilities under the Securities Act, or to contribution by us to payments that they may be required to make in respect of those civil liabilities. Certain of those underwriters or agents may be customers of, engage in transactions with, or perform services for, us or our affiliates in the ordinary course of business. We will identify any underwriters or agents, and describe their compensation, in a prospectus supplement. Any institutional investors or others that purchase offered securities directly from us, and then resell the securities, may be deemed to be underwriters, and any discounts or commissions received by them from us and any profit on the resale of the securities by them may be deemed to be underwriting discounts and commissions under the Securities Act. We will file a supplement to this prospectus, if required, pursuant to Rule 424(b) under the Securities Act, if we enter into any material arrangement with a broker, dealer, agent or underwriter for the sale of securities through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer. Such prospectus supplement will disclose: the name of any participating broker, dealer, agent or underwriter; the number and type of securities involved; the price at which such securities were sold; any securities exchanges on which such securities may be listed; the commissions paid or discounts or concessions allowed to any such broker, dealer, agent or underwriter where applicable; and other facts material to the transaction. In order to facilitate the offering of certain securities under this prospectus or an applicable prospectus supplement, certain persons participating in the offering of those securities may engage in transactions that stabilize, maintain or otherwise affect the price of those securities during and after the offering of those securities. Specifically, if the applicable prospectus supplement permits, the underwriters of those securities may over-allot or otherwise create a short position in those securities for their own account by selling more of those securities than have been sold to them by us and may elect to cover any such short position by purchasing those securities in the open market. In addition, the underwriters may stabilize or maintain the price of those securities by bidding for or purchasing those securities in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the offering are reclaimed if securities previously distributed in the offering are repurchased in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of securities to the extent that it discourages resales of the securities. No representation is made as to the magnitude or effect of any such stabilization or other transactions. Such transactions, if commenced, may be discontinued at any time. In order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. Rule 15c6-1 under the Securities Exchange Act of 1934 generally requires that trades in the secondary market settle in three business days, unless the parties to any such trade expressly agree otherwise. Your prospectus supplement may provide that the original issue date for your securities may be more than three scheduled business days after the trade date for your securities. Accordingly, in such a case, if you wish to trade securities on any date prior to the third business day before the original issue date for your securities, you will be required, by virtue of the fact that your securities initially are expected to settle in more than three scheduled business days after the trade date for your securities, to make alternative settlement arrangements to prevent a failed settlement. This prospectus, the applicable prospectus supplement and any applicable pricing supplement in electronic format may be made available on the Internet sites of, or through other online services maintained by, us and/or one or more of the agents and/or dealers participating in an offering of securities, or by their affiliates. In those cases, prospective investors may be able to view offering terms online and, depending upon the particular agent or dealer, prospective investors may be allowed to place orders online. Other than this prospectus, the applicable prospectus supplement and any applicable pricing supplement in electronic format, the information on our or any agent s or dealer s website and any information contained in any other website maintained by any agent or dealer: is not part of this prospectus, the applicable prospectus supplement and any applicable pricing supplement or the registration statement of which they form a part; has not been approved or endorsed by us or by any agent or dealer in its capacity as an agent or dealer, except, in each case, with respect to the respective website maintained by such entity; and should not be relied upon by investors. There can be no assurance that we will sell all or any of the securities offered by this prospectus. This prospectus may also be used in connection with any issuance of common stock or preferred stock upon exercise of a warrant if such issuance is not exempt from the registration requirements of the Securities Act. In addition, we may issue the securities as a dividend or distribution or in a subscription rights offering to our existing security holders. In some cases, we or dealers acting with us or on our behalf may also purchase securities and reoffer them to the public by one or more of the methods described above. This prospectus may be used in connection with any offering of our securities through any of these methods or other methods described in the applicable prospectus supplement. LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon by Windels Marx Lane & Mittendorf, LLP, New Brunswick, New Jersey.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/WING_wingstop_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/WING_wingstop_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/WING_wingstop_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/WTER_alkaline_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/WTER_alkaline_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..6edfcf1c35d6ab3314741e044f80b42f8a2d990d
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/WTER_alkaline_prospectus_summary.txt
@@ -0,0 +1 @@
+Prospectus Summary The Offering Securities offered (i) Up to 9,000,000 shares of common stock; (ii) Warrants to purchase up to 4,500,000 shares of common stock; and (iii) Up to 4,500,000 shares of common stock issuable upon exercise of the warrants Common stock outstanding prior to offering 5,719,039(1) Common stock to be outstanding after the offering 14,719,039(2) Use of proceeds We expect to use the proceeds received from the offering to repay loans, fund the purchase of blending machines, slotting fees, supply chain raw material purchases, the purchase of alkaline generating electrolysis system machines and for working capital and general corporate purposes. See Use of Proceeds for more information. OTCQB Symbol WTER . There is no established trading market for the warrants and we do not expect a market to develop.
\ No newline at end of file
diff --git a/parsed_sections/prospectus_summary/2016/YUMC_yum-china_prospectus_summary.txt b/parsed_sections/prospectus_summary/2016/YUMC_yum-china_prospectus_summary.txt
new file mode 100644
index 0000000000000000000000000000000000000000..2dfd9a983891522e2ad5c30c6facd0a755c4f1ad
--- /dev/null
+++ b/parsed_sections/prospectus_summary/2016/YUMC_yum-china_prospectus_summary.txt
@@ -0,0 +1 @@
+PROSPECTUS SUMMARY 1
\ No newline at end of file